WEBVTT - We Are Starting to Use Up Capacity, Ablin Says 0:00:00.080 --> 0:00:13.040 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Leye. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.559 Bloomberg dot Com, and of course, on the Bloomberg. It 0:00:33.680 --> 0:00:37.040 is a massive week of issuance. Over the next three days, 0:00:37.080 --> 0:00:40.040 we will have two hundred and fifty eight billion dollars 0:00:40.080 --> 0:00:43.320 worth of supply from the Treasury, record issuance of three 0:00:43.720 --> 0:00:47.879 and six month bills. Three month bills worth fifty one 0:00:47.880 --> 0:00:51.080 billion dollars, six month bills for forty five billion dollars, 0:00:51.120 --> 0:00:55.440 both unprecedented in their size. So let's ask what price 0:00:55.840 --> 0:00:57.960 will the tready get for them? Joe, I guess now 0:00:58.000 --> 0:01:00.800 is Jack Alvin Here is Crescent found ending partner and 0:01:00.960 --> 0:01:05.240 chief investment officer. Jack Great cant shop with you on 0:01:05.280 --> 0:01:07.960 a on a newly founded firm as well, So congratulations 0:01:07.959 --> 0:01:10.040 to that, Jack Caplin. Let's just get to the bond 0:01:10.040 --> 0:01:13.240 market if we can, first a huge week of issuance. 0:01:13.520 --> 0:01:15.640 What price is the Treasury're gonna have to cough up 0:01:15.920 --> 0:01:19.240 for that much supply They've already had to suffer with 0:01:19.880 --> 0:01:22.400 a higher than expected yield on the tenure when they 0:01:22.440 --> 0:01:25.640 came a week or two ago. Uh. Supply is an 0:01:25.640 --> 0:01:28.880 issue at least near term. Longer term, however, and I 0:01:28.920 --> 0:01:31.560 think that you know, remember we have to keep in 0:01:31.600 --> 0:01:34.440 mind that the European Central Bank and Bank of Japan 0:01:34.480 --> 0:01:38.440 are still pedal the metal monetary policy. UH. And it's remarkable, 0:01:38.480 --> 0:01:41.600 but over two trillion dollars of printed money has found 0:01:41.600 --> 0:01:44.000 its way in the financial system over the last twelve months, 0:01:44.040 --> 0:01:47.160 so there's still a tailwind of buying going on from 0:01:47.400 --> 0:01:50.240 the central Bank. It's two ninety enough on a US 0:01:50.320 --> 0:01:52.720 tenure to attract foreign capital at a time when the 0:01:52.760 --> 0:01:56.800 budget deficit is seemingly getting wider and wide. To Jack Um, 0:01:56.840 --> 0:01:59.640 I'm not sure. I think if you look at the 0:01:59.720 --> 0:02:02.200 ten your treasury, it tends to track at least over 0:02:02.240 --> 0:02:05.720 time before two thousand nine, tends to track nominal GDP. 0:02:05.880 --> 0:02:08.240 If I take a snapshot of nominal GDP right now, 0:02:08.280 --> 0:02:11.040 it's about four percent. So I think fair value on 0:02:11.120 --> 0:02:14.200 the ten years four not two point nine. UM. So 0:02:14.800 --> 0:02:18.160 we at some point, I think we have to migrate 0:02:18.200 --> 0:02:21.000 our way back to four. And if that happens, then 0:02:21.080 --> 0:02:25.840 the premium that equities have enjoyed over that bond. UH 0:02:26.639 --> 0:02:29.520 price has has has to come down. So the big 0:02:29.639 --> 0:02:31.920 night that came from Andrew Sheets over a Morgan Stanley 0:02:31.960 --> 0:02:34.079 that is one of the most red stories on the Bloomberg. 0:02:34.280 --> 0:02:36.720 He's basically with you. We've had the appet size, with 0:02:36.800 --> 0:02:38.720 the potential damage that high yields can do to the 0:02:38.760 --> 0:02:41.600 equity market, the main course is still to come. What's 0:02:41.639 --> 0:02:43.840 your base case of what the main course looks like, 0:02:43.960 --> 0:02:46.840 Jack Well, I would say a lot of it just 0:02:46.880 --> 0:02:49.240 depends on what the European Central Bank and the Bank 0:02:49.280 --> 0:02:52.200 of Japan ultimately do. E c B has said they're 0:02:52.240 --> 0:02:54.480 going to continue its current policy through the end of 0:02:54.520 --> 0:02:58.520 the year. Bank in Japan hasn't really articulated any specific 0:02:58.560 --> 0:03:02.560 plan UH and as they start to pull back, I 0:03:02.919 --> 0:03:05.440 quite honestly, I also think that the tenure treasury is 0:03:05.480 --> 0:03:09.240 probably more closely linked to the German bond than it 0:03:09.360 --> 0:03:12.040 is to the Fed funds rate. So I do think 0:03:12.080 --> 0:03:15.720 that um that as that Fed funds rate rises, if 0:03:15.760 --> 0:03:19.400 we don't see a concombinant rise in the bond, we 0:03:19.440 --> 0:03:22.000 could invert the yield curve in inadvertently, and I think 0:03:22.000 --> 0:03:24.000 that's something power has to pay attention what I keep 0:03:24.000 --> 0:03:26.120 hearing again and again, Jack, is this is okay so 0:03:26.240 --> 0:03:28.640 long as the move higher is slow and gradual and 0:03:28.639 --> 0:03:31.399 treasury yields. Would you say a doubling at the front 0:03:31.480 --> 0:03:33.640 end on a two year note over just five months 0:03:33.960 --> 0:03:36.280 it's slow and gradual, because that's probably not what I 0:03:36.320 --> 0:03:38.400 would define as slow and gradual. This has actually been 0:03:38.480 --> 0:03:41.920 quite quick through September, from around two percent on a 0:03:41.960 --> 0:03:44.160 ten year through to two ninety where we are now 0:03:44.440 --> 0:03:46.280 and at doubling on a two year note yielding just 0:03:46.320 --> 0:03:49.000 five months. That ain't slow and grandtual. No. I mean 0:03:49.240 --> 0:03:53.160 the fact that even the tenure was was pushing two percent, 0:03:53.440 --> 0:03:57.480 uh you know, six not more than six months ago. Um, 0:03:57.560 --> 0:03:59.920 so we have a spike there. You know. It reminds 0:04:02.240 --> 0:04:06.000 when the Fed doubled the overnight right from three to 0:04:06.080 --> 0:04:09.120 six percent in a period of of twelve months. And 0:04:09.160 --> 0:04:12.840 of course we had Orange County, California, we had some 0:04:13.040 --> 0:04:17.640 mortgage problems. It was too too much, too fast, Jack, Kevin, 0:04:17.760 --> 0:04:20.120 let's fold in the news right now. We have a 0:04:20.120 --> 0:04:23.680 mega merger in retail in America. This morning, the Wall 0:04:23.680 --> 0:04:27.760 Street Journal reporting that Albertson's, which you and I know 0:04:27.960 --> 0:04:35.040 is a iconic Western Grocer Private owned by Cerberus among others, 0:04:35.720 --> 0:04:37.840 is going to do a bolt on with right aid, 0:04:38.040 --> 0:04:41.080 right age. Shareholders will own twenty eight to twenty nine 0:04:41.120 --> 0:04:44.880 point six percent of the new company the dominant company 0:04:44.880 --> 0:04:48.560 buys in the publicly traded small company. We've seen this 0:04:48.680 --> 0:04:53.400 before and what it amounts to is corporations desperate for 0:04:53.480 --> 0:04:57.520 revenue growth in this word scale. You're expert of this. 0:04:57.640 --> 0:05:01.479 You you know, you've been known for decades to have 0:05:01.600 --> 0:05:05.280 the idea of folding our economics into where we are 0:05:05.360 --> 0:05:09.119 right now. Is this a scale decade? I think it is. Tom. 0:05:09.480 --> 0:05:13.720 The fact is that the pie is not growing fast enough, uh, 0:05:13.880 --> 0:05:20.200 to um satisfy shareholders, to satisfy management, to satisfy anybody, 0:05:20.240 --> 0:05:24.159 and so um, you know, the next best thing is 0:05:24.200 --> 0:05:27.280 to increase the pie slice. Um. Best way to do 0:05:27.320 --> 0:05:30.200 it is to grow faster than than what the pie 0:05:30.279 --> 0:05:34.520 is allowing. Is is acquisition, I mean within the press release, John, 0:05:34.520 --> 0:05:36.640 and it goes on forever and ever. Ever. This is 0:05:36.680 --> 0:05:40.840 a well thought up plan of synergy, which is again, 0:05:41.279 --> 0:05:44.400 we can't make it the way we are. We've got 0:05:44.400 --> 0:05:46.640 a mate. We you know, forget about the names. We've 0:05:46.640 --> 0:05:50.680 got a mate. We've got a bond to get revenue 0:05:50.720 --> 0:05:55.320 growth that's six seven, eight nine, and then work down 0:05:55.320 --> 0:05:58.440 the income statement from there. That's all this is about. Yeah, 0:05:58.480 --> 0:06:01.720 and it's a first of all, a very thinly margin 0:06:01.839 --> 0:06:05.560 business to begin with. And so uh you know that 0:06:05.800 --> 0:06:09.560 that that's problematic too, of course, right a wider margins 0:06:09.680 --> 0:06:13.039 uh than a grocer. But uh still, and I will 0:06:13.080 --> 0:06:18.840 say that it also had the Amazon effect that created problems. John, 0:06:18.920 --> 0:06:21.760 it's some eighty billion, eighty three billion, and is is 0:06:22.200 --> 0:06:26.800 Jack mentions they come down to about eight nine. But 0:06:27.440 --> 0:06:30.680 of the three point seven billion, is I love this John, 0:06:31.120 --> 0:06:35.600 run rate cost synergy. I thought we had a rule 0:06:35.640 --> 0:06:39.960 on Bloomberg's surveilance that we didn't use the word corporate 0:06:40.000 --> 0:06:44.000 spaces one of job cuts and slashing costs. So we 0:06:44.080 --> 0:06:48.479 staid in the cost stripping business in twenty eight Saint Jack, No, 0:06:48.640 --> 0:06:51.720 I think we I I will say that companies have 0:06:51.960 --> 0:06:55.640 a scene a remarkable amount of pricing power, much more 0:06:55.720 --> 0:06:58.560 so than I would have expected recently. You know, of 0:06:58.560 --> 0:07:00.640 course we're starting that's the pricing how a chat that's 0:07:00.640 --> 0:07:02.799 gonna be surprising to a lot of paper well pricing 0:07:02.839 --> 0:07:05.840 path it's gonna come around where we start running out 0:07:05.839 --> 0:07:10.560 of capacity trucking, for example, we're running out of trucking capacity. Uh, 0:07:10.720 --> 0:07:13.840 Shipping prices are are rising. Amazon is gonna try to 0:07:13.880 --> 0:07:17.040 fight back with its own aircraft and infrastructure. Well, I understand, Jack. 0:07:17.040 --> 0:07:19.360 Can I apologize to jump in that supply constraints, I 0:07:19.440 --> 0:07:22.400 get that, But pricing power usually assumes this tolerance on 0:07:22.440 --> 0:07:24.680 the other side. I don't see where the tolerance is 0:07:24.680 --> 0:07:27.000 on the other side, it's the tolerance for higher prices, 0:07:28.160 --> 0:07:30.360 don't I'm not sure. I mean, I do think that 0:07:30.480 --> 0:07:35.440 consumers and businesses are are used to continually lower prices, 0:07:35.480 --> 0:07:38.440 but we also haven't been in an environment where we 0:07:38.440 --> 0:07:42.360 we are bumping against supply constraints. So uh, in in 0:07:42.400 --> 0:07:45.520 a world where we're now growing faster than potential GDP 0:07:45.720 --> 0:07:49.360 is probably the third quarter where we're outstripping our our 0:07:49.520 --> 0:07:53.040 potential run rate, we are starting to use up capacity. 0:07:53.080 --> 0:07:56.080 And that's really what I'm on the lookout for. The 0:07:56.120 --> 0:07:58.520 fact is that if we do start running out of 0:07:58.560 --> 0:08:02.080 capacity in certain parts of the market, Yeah, maybe labor 0:08:02.760 --> 0:08:06.320 um maybe its certainly as as I mentioned trucking, but 0:08:06.520 --> 0:08:10.320 other productive capacity we could see higher prices and so 0:08:10.680 --> 0:08:12.840 so a question we usually lean on in this program, 0:08:12.840 --> 0:08:15.440 and others are on Bloomberg is the optimal cool option 0:08:15.520 --> 0:08:17.520 on inflation this year? What is it? Is it something 0:08:17.600 --> 0:08:19.480 as vanilla as tips or is there something else you 0:08:19.520 --> 0:08:21.680 need to do? Jack to already hedge that exposure. The 0:08:21.720 --> 0:08:24.600 potential that you do get a pop pie in prices 0:08:24.640 --> 0:08:27.920 this year, Well, I think it all depends on how 0:08:28.000 --> 0:08:32.720 bonds react, if if if bonds overshoot inflation, which I 0:08:32.760 --> 0:08:36.320 expect they will, unless the central banks continue to hold 0:08:36.400 --> 0:08:40.440 rates lower than they should, Um, we will see real 0:08:40.520 --> 0:08:45.080 rates rise. We will say, well, we will see uh, 0:08:45.400 --> 0:08:49.920 potentially equity premium fall uh. And so in an environment 0:08:49.960 --> 0:08:53.640 like that, you want to own, you know, things related 0:08:53.640 --> 0:08:57.640 to commodities like master limited partnerships. Remarkably, of all the 0:08:57.679 --> 0:09:03.040 incomasca classes, master partnerships actually have a positive correlation to 0:09:03.480 --> 0:09:06.800 interest rates. Interesting. Jack Amplerman is the Crescent founding partner 0:09:07.120 --> 0:09:21.920 and chief investment officer. Let's not guess in the politics 0:09:21.920 --> 0:09:24.520 of our nation. He knows that it's February twelfth. In 0:09:24.600 --> 0:09:28.680 February two, Greg val joins us with Horizon, and that's 0:09:28.679 --> 0:09:30.960 what's right now. Greg, We've got to go to jerrymandering. 0:09:31.240 --> 0:09:37.320 Mr Jerry of Salem Massachusetts. We all understand it's nationwide, 0:09:37.559 --> 0:09:41.640 it's Pennsylvania unique and it's jerrymandering. Or will there be 0:09:41.800 --> 0:09:45.400 other Pennsylvania's where the courts say you've got to redraw 0:09:45.440 --> 0:09:49.120 the map. Well, Pennsylvania, Tom was uniquely blatant with their 0:09:49.200 --> 0:09:52.800 jerryman Just look at the map and it's like it's crazy. 0:09:52.920 --> 0:09:55.760 So I do think they stand out, but there will 0:09:55.800 --> 0:09:59.120 be other states. And in general, this trend of maybe 0:10:00.040 --> 0:10:03.760 dealing with jerry mandering will help the Democrats. Within your 0:10:03.800 --> 0:10:06.320 note today, and you don't talk specifically about this, but 0:10:06.360 --> 0:10:08.680 you're so up to speed, we're gonna do it. Lay 0:10:08.679 --> 0:10:13.200 out the special elections is we get to summer when 0:10:13.240 --> 0:10:18.640 the campaigns really heat up for November of two thousand eighteen. Well, 0:10:18.679 --> 0:10:21.720 first of all, the big story is Republican retirements. They're 0:10:21.760 --> 0:10:25.480 up to about thirty now, which is very unusually high, 0:10:25.800 --> 0:10:28.319 indicating there's a lot of House Republicans who do not 0:10:28.440 --> 0:10:32.199 want to serve under Nancy Pelosi if she returns as speaker. 0:10:32.559 --> 0:10:34.400 So you do see a lot of retirements, and you 0:10:34.440 --> 0:10:38.000 do see some special elections, and so far, in general, 0:10:38.360 --> 0:10:41.480 the special elections have broken for the party that has 0:10:41.520 --> 0:10:44.880 the most motivated voters in that party is a Democrat. 0:10:45.000 --> 0:10:47.120 That's right where I wanted to go. I put out 0:10:47.120 --> 0:10:50.280 a tweet this weekend about turnout, and you know where 0:10:50.320 --> 0:10:53.000 we want to be a political here at Bloomberg Surveillance, 0:10:53.080 --> 0:10:57.280 we try and full disclosure. We fail at that sometimes, folks. 0:10:57.320 --> 0:11:01.160 But but but within this is the turnout? What is 0:11:01.200 --> 0:11:05.040 the turnout dynamic you see in your research? Greg, Well, 0:11:05.080 --> 0:11:08.600 you certainly start in Virginia the goobernatorial race. Alabama's Senate 0:11:08.679 --> 0:11:11.560 race was kind of flukey. That judge was pretty weird. 0:11:11.880 --> 0:11:14.480 But I think in most races we've seen so far 0:11:14.559 --> 0:11:17.679 show there are a lot of angry women, angry people 0:11:17.720 --> 0:11:20.560 of color, angry young people as we're seeing with guns, 0:11:20.880 --> 0:11:23.840 and they tend to break for the Democrats. Some would 0:11:23.880 --> 0:11:27.520 suggest our president is angry. Maybe all would suggest that 0:11:27.960 --> 0:11:32.280 how is his advice this week, General Kelly have any 0:11:32.400 --> 0:11:36.280 impact with an angry president. I think the General has 0:11:36.880 --> 0:11:41.280 had decreased clout is halo has slipped, and I think 0:11:41.320 --> 0:11:44.800 Trump was almost unsupervised this weekend where he went on 0:11:45.000 --> 0:11:49.160 just a rant, a Twitter storm rant for the entire weekend. Uh, 0:11:49.200 --> 0:11:52.880 he has to show some sign. I talked to Republicans 0:11:53.080 --> 0:11:55.719 who say, he's got to show some sign of displeasure 0:11:56.000 --> 0:11:58.920 over what the Russians have done. He blames everybody, but 0:11:59.000 --> 0:12:02.840 doesn't blame Russia for hacking into our election last fall. So, Greg, 0:12:03.000 --> 0:12:05.760 big question, when is the gip with the president? If 0:12:05.760 --> 0:12:09.200 it's home, they're too chicken, Jonathan, I think that they 0:12:09.360 --> 0:12:11.920 talked to their voters back home, and we all have 0:12:12.000 --> 0:12:16.440 to remember Trump has about approval among Republicans, so a 0:12:16.480 --> 0:12:19.000 lot of Republicans are scared to do anything. And to 0:12:19.080 --> 0:12:22.120 be fair, they're also hoping that by Labor Day this 0:12:22.160 --> 0:12:25.360 economy will look even stronger because people have more money 0:12:25.360 --> 0:12:27.520 in their pockets. And are you going to see that 0:12:27.640 --> 0:12:30.320 tax cup in the mid terms. You're going to see 0:12:30.320 --> 0:12:33.199 them come up in the numbers. Absolutely. There's a new 0:12:33.240 --> 0:12:35.920 poll out now showing a slim majority of Americans now 0:12:36.200 --> 0:12:38.680 support the tax cup. The number has been going straight 0:12:38.760 --> 0:12:41.640 up for the last few weeks. I think the White 0:12:41.640 --> 0:12:45.559 House is counting on GDP of three or better, unemployment 0:12:45.679 --> 0:12:49.320 under under four, and I think that could help them 0:12:49.320 --> 0:12:52.640 in the fall. Despite all of these motivated voters for 0:12:52.679 --> 0:12:57.880 the Democrats you mentioned earlier, did the House Democrat would 0:12:57.920 --> 0:13:00.760 you explain to our global audience why this Senate isn't 0:13:00.840 --> 0:13:03.960 part of the VILLI a mass. Sure, it's sort of 0:13:04.000 --> 0:13:06.400 a fluke. As we all know, one third of the 0:13:06.400 --> 0:13:09.160 Senate is up every two years. It just so happens 0:13:09.320 --> 0:13:11.960 that the third three seats that are up this time 0:13:12.440 --> 0:13:16.480 have our twenty five Democrats, including ten in states that 0:13:16.520 --> 0:13:19.679 Trump carried, including five and states that Trump won in 0:13:19.760 --> 0:13:23.439 a landslide. So just based on who's up, the Republicans 0:13:23.520 --> 0:13:26.200 have a decent chance. Then does that mean the Senate 0:13:26.440 --> 0:13:31.320 is more in play in two thousand twenty? Is it's 0:13:29.679 --> 0:13:35.400 one in twenty, there would be an opportunity for the Democrats. 0:13:35.440 --> 0:13:38.080 But it's just a it's a weird break right now, 0:13:38.520 --> 0:13:40.520 greg I. One, you're insight on one thing and it 0:13:40.600 --> 0:13:42.200 came up at the back end of last week and 0:13:42.240 --> 0:13:44.520 it it breads some life into this week as well. 0:13:44.880 --> 0:13:47.640 Mitt Romney, how does that change things if it's all 0:13:48.000 --> 0:13:50.320 and what you'll read on what's going going on there? 0:13:50.720 --> 0:13:53.200 You know we've all been to weddings where people at 0:13:53.240 --> 0:13:55.280 the reception have looked at the bride groom and said 0:13:55.400 --> 0:13:57.680 this is not going to last. This is one that 0:13:57.760 --> 0:14:01.600 will not last. I think it's it's just a matter 0:14:01.640 --> 0:14:06.600 of time. Guys, before Romney and Trump get into a 0:14:06.600 --> 0:14:09.040 big tweet storm. You can just see that one coming. 0:14:09.160 --> 0:14:14.240 Oh my word, therapy with Dr Greg this morning, Bob John, 0:14:14.320 --> 0:14:16.719 Please so Greg, if it's not gonna last, I just 0:14:16.760 --> 0:14:18.800 wonder what it means. Does it change the calculus on 0:14:19.040 --> 0:14:21.280 what they can and can't get done if Romney gets 0:14:21.280 --> 0:14:23.280 in I don't think so. Let me make two really 0:14:23.360 --> 0:14:27.320 quick points. Even if the Republicans lose both houses, Trump 0:14:27.360 --> 0:14:30.200 still has his zto. That's why the market shouldn't worry 0:14:30.240 --> 0:14:33.080 too much if the Democrats have a big, big election. 0:14:33.400 --> 0:14:36.520 You know. The other thing is that I think when 0:14:36.520 --> 0:14:40.160 you've got someone like Romney as maybe a lightning rod, 0:14:40.840 --> 0:14:44.080 the chances that he could take out Trump, I mean 0:14:44.200 --> 0:14:46.520 the same as the chances for k Sake or Flake. 0:14:46.920 --> 0:14:49.720 The base would never go along with Mitt. Romney has 0:14:49.760 --> 0:14:52.240 a replacement for Trump, and I think everybody in the 0:14:52.280 --> 0:14:56.280 party knows that. But John's a good question on the 0:14:56.320 --> 0:15:00.160 governor of the Commonwealth of Massachusetts and the Olympian from Utah. Uh. 0:15:00.680 --> 0:15:04.239 Where are the moderate Republicans now? I mean, Mitt Romney's 0:15:04.440 --> 0:15:07.560 got a certain cachet, do what he wants. What are 0:15:07.560 --> 0:15:11.880 the mere mortals of the moderate Republican Party do. They're adrift, 0:15:12.440 --> 0:15:14.760 and you know, there's no place for them to go. 0:15:15.240 --> 0:15:19.680 The Chamber of Commerce, pro business, pro free trade program 0:15:19.760 --> 0:15:24.520 controlled moderate Republicans are becoming an anachronism. There aren't enough 0:15:24.560 --> 0:15:27.360 of them. The base of the party hates them. So 0:15:27.400 --> 0:15:29.680 where do they go? I mean, I could be after 0:15:29.760 --> 0:15:32.720 three glasses of wine, I could be persuaded that we 0:15:32.840 --> 0:15:36.640 might get a third party. But you know, Michael Bloomberg 0:15:36.720 --> 0:15:39.640 is probably too old. He's seventy four. We can't comment 0:15:39.640 --> 0:15:44.720 on that. This program, we can't do that. Surveillance trap door. 0:15:47.640 --> 0:15:49.880 I got you, I got you, Greg. Yeah, let's get 0:15:49.880 --> 0:15:52.280 out of trouble quickly and move on to to what 0:15:52.320 --> 0:15:54.800 we could get in terms of policy. Who's going to 0:15:54.880 --> 0:15:58.560 inherit the fiscal discipline position? And does the fiscal discipline 0:15:58.600 --> 0:16:02.520 position win you any budge these dice? No, it really doesn't. 0:16:02.560 --> 0:16:04.640 I mean, no one can see what bad things the 0:16:04.680 --> 0:16:07.280 deficit can do. I would argue in two or three years, 0:16:07.480 --> 0:16:10.560 but be crowding out bond markets, vigilantes all that stuff. 0:16:10.720 --> 0:16:13.280 But for right now, everybody says, hey, the stock and 0:16:13.320 --> 0:16:16.240 bond markets look pretty good. They're fat and happy. Why 0:16:16.320 --> 0:16:19.000 should we care? So who was to take on that 0:16:19.160 --> 0:16:24.240 thankless task being the prescriptions we all know are curves, security, curb, medicare. 0:16:24.480 --> 0:16:27.440 Nobody wants to do that, Greg, Thank you for the briefing. Greg, 0:16:27.520 --> 0:16:32.480 alright with us today and Bloomberg, it's just a huge yeah. 0:16:32.960 --> 0:16:35.480 We can. We can have him back, We can want exception. 0:16:45.160 --> 0:16:48.480 It is good after the uproar of the last eleven 0:16:48.560 --> 0:16:51.360 days to have a modest quiet and we do that 0:16:51.440 --> 0:16:54.360 with Sam Stovill of c f A. Sam, would you 0:16:54.400 --> 0:16:58.640 learn in the last week and a half? Good morning, Tom, Well, 0:16:58.640 --> 0:17:00.840 what I learned is at the mark it does tend 0:17:00.880 --> 0:17:05.520 to look forward bottoms um. Sometimes they're simply relief rallies, 0:17:05.560 --> 0:17:08.480 as we might have gotten last week. But then typically 0:17:08.520 --> 0:17:11.520 what we do is retest those loaves to see if 0:17:11.520 --> 0:17:14.480 they indeed are the lows for this correction. Do you 0:17:14.520 --> 0:17:18.160 believe in technical analysis, I mean your standardum Poor's heritage 0:17:18.160 --> 0:17:22.160 is fundamental based, outlook based, five star based, and that 0:17:22.560 --> 0:17:26.479 the charts matter. To Sam stoval yes they do. I 0:17:26.560 --> 0:17:30.239 think that fundamentals tell you what, but technicals tell you 0:17:30.280 --> 0:17:33.520 when and how far. So the combination of the two, 0:17:33.840 --> 0:17:36.000 and I also like to add history as a third 0:17:36.040 --> 0:17:38.879 element to help to sort of read the tea leaves 0:17:38.880 --> 0:17:44.639 of the market. Mr Fox agree with what Mr Stovall 0:17:44.760 --> 0:17:47.240 said there with the wisdom he learned from his father, 0:17:47.920 --> 0:17:52.840 I would say fundamentals, technicals, history, maybe adding a little 0:17:52.880 --> 0:17:56.199 economics to that's a Himan way. Okay, I was going 0:17:56.280 --> 0:18:00.520 to add in behavioral sam because I'm just I'm trying 0:18:00.520 --> 0:18:03.920 to understand why we're not hearing more calls to sell 0:18:03.960 --> 0:18:08.119 into the rally in equities. Well, I think because people 0:18:08.119 --> 0:18:10.880 have been convincing themselves for so long that we are 0:18:10.920 --> 0:18:13.639 in need of a correction, and indeed we were. We 0:18:13.680 --> 0:18:17.000 went the longest stretch since World War Two, five hundred 0:18:17.040 --> 0:18:21.159 and sixty four calendar days without a decline of five 0:18:21.640 --> 0:18:24.240 or more, and it was just a matter of time. 0:18:24.640 --> 0:18:27.040 But I think most people say we don't see a 0:18:27.119 --> 0:18:30.040 recession on the horizon, and we are among those. So 0:18:30.119 --> 0:18:32.240 as a result of the feeling, is you want to 0:18:32.240 --> 0:18:35.639 be buying into this kind of a decline? Uh? The 0:18:35.680 --> 0:18:38.399 real question is how low will it go? No? But 0:18:38.400 --> 0:18:40.639 I want to know, Okay, buy into the decline. I 0:18:40.680 --> 0:18:42.600 get that you know you buy the dips. I've heard 0:18:42.640 --> 0:18:44.720 that you know a bazillion times, But I'm just trying 0:18:44.720 --> 0:18:46.560 to understand how come you don't hear the calls for 0:18:47.040 --> 0:18:51.359 sell into the rally and come back and play another day. Well, 0:18:51.400 --> 0:18:53.960 I guess it all depends on what your overall approaches. 0:18:54.080 --> 0:18:56.160 As Tom had mentioned. You know, I've come from an 0:18:56.200 --> 0:18:59.200 S ANDP heritage which looks a year out. We don't 0:18:59.200 --> 0:19:01.840 look a week out, so we're not going to be 0:19:01.920 --> 0:19:05.160 able to time when to get out one to get 0:19:05.200 --> 0:19:07.600 in in simply a matter of days. I mean, you've 0:19:07.600 --> 0:19:10.359 got your traders who can do that, but that's not 0:19:10.440 --> 0:19:13.359 our forte Okay, But I guess what I'm trying to 0:19:13.400 --> 0:19:15.960 understand is it always seems time to buy, it never 0:19:16.000 --> 0:19:19.719 seems time to sell. And that might be great if 0:19:19.760 --> 0:19:22.600 your time horizon is indefinite, but if you're looking to 0:19:22.640 --> 0:19:25.760 actually pay for things like tuition or retirement or a home, 0:19:26.560 --> 0:19:30.520 you need cash at those moments where you've got to 0:19:30.520 --> 0:19:33.320 write the big check in particularly if you're buying something 0:19:33.400 --> 0:19:36.159 like a house, you want to take advantage. Unfortunately, if 0:19:36.160 --> 0:19:38.639 someone else is misfortune and you want to make your 0:19:38.640 --> 0:19:41.280 money when you make the purchase, not when you sell it. 0:19:42.400 --> 0:19:44.639 All right, Well, that's a good point. As Tom had 0:19:44.640 --> 0:19:47.800 mentioned before about technical analysis, I learned a lot from 0:19:48.240 --> 0:19:50.920 Mark Arbiter, somebody who used to work at S and P, 0:19:51.560 --> 0:19:54.840 and he likes to look at moving averages that tend 0:19:54.880 --> 0:19:58.680 to cross one another. Seventeen three in particular, the seventeen 0:19:58.720 --> 0:20:02.639 week moving average breaking below the forty three week moving average. 0:20:02.720 --> 0:20:06.120 That gave him a longer term perspective as to our 0:20:06.200 --> 0:20:11.119 heading into very challenge. We had did not see that 0:20:11.240 --> 0:20:13.640 this time. We did see that in January of two 0:20:13.680 --> 0:20:16.240 thousand and eight, however, so it did give you a 0:20:16.280 --> 0:20:21.600 pretty good lead time into the financial mega meltdown. So 0:20:21.680 --> 0:20:23.439 what are you looking at right now? What are the 0:20:23.520 --> 0:20:27.760 areas of the market that you think of the most underpriced? Well, 0:20:28.080 --> 0:20:29.920 I wrote an article a couple of weeks ago that 0:20:30.040 --> 0:20:32.600 talked about, UM, what you want to do as you 0:20:32.720 --> 0:20:37.000 go for those areas that actually lost the most UH 0:20:37.040 --> 0:20:43.639 in the overall decline. UH areas such as technology, consumer discretionary, 0:20:43.680 --> 0:20:46.440 which were beaten up the most because investors had the 0:20:46.480 --> 0:20:50.000 greatest number of profits that they could take from those groups. 0:20:50.080 --> 0:20:52.040 And as a result, I think you want to be 0:20:52.119 --> 0:20:56.639 buying into those companies. So areas where we have favorable 0:20:56.640 --> 0:21:00.760 stock recommendations, and these are companies with consistent track records 0:21:00.760 --> 0:21:04.639 of raising earnings and dividends would include companies like um 0:21:04.720 --> 0:21:11.560 Walt Disney, would also include Comcast foot Locker, UM Window Worldwide. 0:21:11.840 --> 0:21:15.480 So our belief is that you can take advantage of 0:21:15.520 --> 0:21:19.000 some cyclical sectors at this point, uh and buy into them, 0:21:19.119 --> 0:21:22.600 especially when they offer lower beta and higher quality of earnings. 0:21:23.040 --> 0:21:26.639 And just quickly, Sam, what about rebalancing the portfolio? Do 0:21:26.640 --> 0:21:30.400 you find that people have been doing that consistently? Um? 0:21:30.800 --> 0:21:32.960 I think that it's one of those things that if 0:21:33.000 --> 0:21:36.840 you are too afraid to buy, but you also realize 0:21:36.880 --> 0:21:39.640 you don't want to be selling, by engaging and rebalancing, 0:21:39.680 --> 0:21:43.080 you're sort of forcing yourself to to do that. Uh. 0:21:43.119 --> 0:21:46.439 And if nothing else, it's a behavioral thing because it 0:21:46.480 --> 0:21:49.960 helps an investor to say, say, I'm actually doing something 0:21:50.040 --> 0:21:54.320 during this decline, but I'm not really messing up my portfolio. Sam, So, well, 0:21:54.359 --> 0:21:56.320 thank you so much, greatly appreciate that up to here 0:21:56.320 --> 0:21:58.280 eleven days and it's been very kind of him to 0:21:58.320 --> 0:22:15.560 join us here we roop up the script and migrate 0:22:15.560 --> 0:22:19.720 to Washington or Chief Washington correspondent Kevin so really is 0:22:19.880 --> 0:22:24.200 within Mike Ellen's note this morning, Mr Mueller works fast. Kevin, 0:22:24.240 --> 0:22:27.159 what does it say that Mr Mueller seems to be 0:22:27.280 --> 0:22:32.640 doing an indictment or an allegation charges every other day 0:22:32.720 --> 0:22:36.200 or maybe every third day. What is that signal? Who 0:22:36.440 --> 0:22:39.920 signals that they have essentially build a case. Look headline's 0:22:39.920 --> 0:22:43.280 crossing terminal down that Rick Gates. You'll remember the deputy 0:22:43.640 --> 0:22:46.639 the Paul mana FOURT Trump campaign manager, charge of inspiring 0:22:47.119 --> 0:22:49.560 against the United States. His right hand man, Rick Gates 0:22:49.600 --> 0:22:52.280 is also charged and that round of charges he's gonna 0:22:52.280 --> 0:22:55.480 plead guilty in the next couple of days. That suggests 0:22:55.480 --> 0:22:58.720 that Rick Gates is totally cooperating with the authorities, with 0:22:58.840 --> 0:23:02.680 Thought Mueller's team and could potentially, you know, provide information 0:23:02.720 --> 0:23:06.639 against Palm Maniport or against the administration officials. There's also 0:23:06.760 --> 0:23:12.120 another associate names in this latest round of charges who 0:23:12.280 --> 0:23:15.960 essentially is gonna be wrapped up in the Ukraine money 0:23:16.040 --> 0:23:20.639 laundering connected to Paul Maniport. So it appears, based on 0:23:20.680 --> 0:23:24.440 these latest round of charges that the Mollo probe is 0:23:24.560 --> 0:23:28.840 really intensifying and building a case against Manifoard, which from 0:23:28.840 --> 0:23:32.240 a political standpoint, if you're the Trump administration, still doesn't 0:23:32.240 --> 0:23:36.720 penetrate the inner circle as a now and on Friday, 0:23:37.080 --> 0:23:39.399 you know, we all we all remember that of the 0:23:39.480 --> 0:23:44.439