Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Tom Keene along
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Speaker 2: the Bloomberg Terminal, and the Bloomberg Business App. Tina Fordam
Speaker 2: we can talk about. She populates Mayfair and the fancy
Speaker 2: climes of London. She joins us now for Fordham Global Insight,
Speaker 2: and far more importantly, as a visceral understanding of where
Speaker 2: the Vice president came from.
Speaker 3: When you come out of San.
Speaker 2: Francisco State, you understand San Francisco, Tina, from where you
Speaker 2: sit in the wild liberal progressive hell of California. Where
Speaker 2: does Vice President Harris fit in?
Speaker 4: Well, she's a hometown girl.
Speaker 5: I'm a San Francisco Bay Area native, but in London
Speaker 5: for twenty two years. So I think the first thought
Speaker 5: I have is that she's definitely not going to be
Speaker 5: choosing Gavin Newsom, the California governor, as her running mate,
Speaker 5: So that's off the table. She is going to try
Speaker 5: to work hard to strengthen her bona fides as a
Speaker 5: prosecutor and as a California district attorney.
Speaker 4: She's going to try to be tough on law and order,
Speaker 4: I think.
Speaker 5: But I think what's most important here is that what
Speaker 5: we've seen with the momentum since Biden's announcement is the
Speaker 5: huge appetite for just some energy in this race.
Speaker 6: So is that energy? How can Vice President Hires take
Speaker 6: that energy and form a real coherent message. What do
Speaker 6: you expect to hear from her as a presidential candidate, Well, it.
Speaker 5: Certainly looks like her operation has hit the ground running.
Speaker 5: It's if you're not online or on what we now
Speaker 5: call X, you're missing out because you can see in
Speaker 5: real time how her campaign headquarters, you know, virtually been
Speaker 5: set up with some branding echoes.
Speaker 4: That are very familiar to gen Z and younger people.
Speaker 5: There are a lot of you know, politically homeless people,
Speaker 5: disenfranchised constituencies, you know, never trumpers people who are who
Speaker 5: are open to ideas, and I wonder if the pressed
Speaker 5: time frame doesn't actually work a little bit to her advantage.
Speaker 6: So what do you think I mean? I guess one
Speaker 6: of the first decisions she needs to make as a
Speaker 6: candidate is to select a vice presidential candidate. How do
Speaker 6: you think she'll go there?
Speaker 5: Midwestern white guy. I think that that has to be
Speaker 5: the choice. I don't think it'll be Pete Bootage Edge.
Speaker 5: That's too much change, too much, you know, perceived progressiveness
Speaker 5: on one ticket. But Tom mentioned Mark Kelly, a senator
Speaker 5: from Arizona, NASA astronaut, naval officer, pilot, husband of Gabby Gifford's.
Speaker 5: He would be an interesting choice, and obviously Arizona is
Speaker 5: a key battleground state. Beasher is another interesting candidate, could
Speaker 5: go head to head with Vance on Appalachia. There are
Speaker 5: some good names in the mix, but that's the kind
Speaker 5: of ticket that I would expect to see. Someone who
Speaker 5: would compliment Harris and ideally could deliver a big swing state.
Speaker 3: Tina Fordham.
Speaker 2: We are advantaged at Bloomberg with Wendy Benjaminson, who is
Speaker 2: in Washington, d C. She Folks is the definitive old
Speaker 2: school newspaper editor, supporting young reporters, nurturing people.
Speaker 3: And I asked you this question yesterday.
Speaker 2: Tina, you are without question the most qualified Transatlantic voice
Speaker 2: on this. In England, nobody's sweating that there's Prime Minister
Speaker 2: may or even the train wreck that was Prime Minister Trusts.
Speaker 3: No one's sweating.
Speaker 2: Marie La penn is a fixture within French politics or
Speaker 2: the reality of Anglo America. Paul, what was it fourteen years?
Speaker 2: I think ye is Chancellor Tina Fordham. Why does America
Speaker 2: have so much trouble electing a woman president from both
Speaker 2: party persuasions?
Speaker 5: It's remarkable and I'm not sure guys that Americans really
Speaker 5: appreciate what an outlier we are in being seemingly unable
Speaker 5: to elect a female head of state.
Speaker 4: As you say, the UK has had.
Speaker 5: Three female prime ministers, one one only for a few minutes,
Speaker 5: but nevertheless, and numerous OECU D countries have.
Speaker 4: Had so the US is an outlier.
Speaker 5: But again, I do think the wrong question is is
Speaker 5: America ready for a black female president.
Speaker 4: I think the question has to be in this, you.
Speaker 5: Know, fairly high stakes race, whether the United States wants
Speaker 5: to re elect Donald Trump or wants broad political continuity,
Speaker 5: which a Harris plus Midwestern guy ticket would bring.
Speaker 6: Tina, do you how do you think Kamala Harris will
Speaker 6: stack up against one on one against former President Trump,
Speaker 6: whether it be in debates or just the day to
Speaker 6: day messaging.
Speaker 5: Well, the first thing is that as a former prosecutor,
Speaker 5: she's tough. You know, watch the replays of her questioning
Speaker 5: on during these Supreme Court hearings for Brett Kavanaugh. She's
Speaker 5: you know, she's perhaps not as smooth and slick as
Speaker 5: of Bill Clinton, but she's a tough questioner and respondent.
Speaker 5: What is her messaging going to be? You know, I'm
Speaker 5: not Donald Trump? Does it need to be much more
Speaker 5: advanced than that? She's the continuity candidate? Interesting to me though,
Speaker 5: was that Trump seemed to be you know, back peddling
Speaker 5: from the next debate September tenth. Did you see that
Speaker 5: and also complaining that they want their money back?
Speaker 4: Is they prepared for a campaign against a different guy?
Speaker 2: This is just so important. My theme that I focus
Speaker 2: is a turnout. It's not my opinion, it's a fancy
Speaker 2: people like Tina Fordham saying turnout it really matters. Tina Fordham,
Speaker 2: how do you suggest the former president and the senator
Speaker 2: from Ohio enhance their turnout after what we saw on
Speaker 2: a ninety minute convention speech, and after all the emotion
Speaker 2: of the assassination, attempting that how do they enhance their
Speaker 2: turnout against the vice.
Speaker 5: President, probably by stoking fear about what she might do.
Speaker 5: The difficulty for them is that they are going to
Speaker 5: have to resort to some pretty unpleasant language and tactics
Speaker 5: to do so. Do their supporters care It's hard to say,
Speaker 5: but it can't be underestimated how they will have been
Speaker 5: somewhat blindsided about this change.
Speaker 4: In the ticket.
Speaker 5: Now Donald Trump's the old guy in the race, and
Speaker 5: you know, can Trump continue with the momentum he's had
Speaker 5: in attracting you know, black.
Speaker 4: Men and others.
Speaker 5: The constituencies that were pro Obama, that came out for Obama,
Speaker 5: we're coming.
Speaker 4: Out for Biden. Will they turn up for Harris?
Speaker 5: That's what the next you know, six weeks in particular,
Speaker 5: is going to be about. It's also why I think
Speaker 5: the shorter time frame just helps less time for everyone
Speaker 5: to get bored.
Speaker 3: This is this, I agree with this.
Speaker 2: It's very British, okay, and only Tina Fordham in London.
Speaker 2: Good say that, Tina, fabulous, Thank you so much. Tina Fordham,
Speaker 2: of course, the iconic and city group Fordham Global Insights
Speaker 2: out of London, less of Benjamina, out of the Welseyon
Speaker 2: Complex is a Chatta house in London, hugely prestigious when
Speaker 2: she speaks on America, the United Kingdom and the continent.
Speaker 2: Stop or thrilled that doctor Vinja Marie could join us
Speaker 2: this morning, Leslie, the market really hasn't moved across equities, bonds,
Speaker 2: currency's commodities. What does that signal of our political system?
Speaker 7: Well, I guess some sense that this is going to
Speaker 7: be continuity, that there's a sort of weight and see attitude.
Speaker 7: Probably also it doesn't feel like continuity to those of
Speaker 7: us who are looking at the political world. It seems
Speaker 7: like a rather significant moment of change. But I guess
Speaker 7: you know, if you're trying to gain this out from
Speaker 7: the markets, you know that really, whether it's Joe Biden
Speaker 7: or likely Kamala Harris, the economic policy is likely to
Speaker 7: be one that's continuous.
Speaker 2: Lord O'Neil, Jim o'neilla Goldman Sachs, with his contribution to
Speaker 2: Chatham Mouse, told me that people like you and Chathamouse
Speaker 2: are still dipping a quill in the ink pot to
Speaker 2: write when you can. And the answer, Leslie Vigemri is
Speaker 2: Trump and Harris have to.
Speaker 3: Deal with the modern media.
Speaker 2: This isn't Eisenhower Stevenson of nineteen fifty two. How do
Speaker 2: they deal with the speed of news today?
Speaker 7: Now this is extraordinary. I mean in every single time
Speaker 7: somebody endorses or uses a specific word, it's on the media.
Speaker 7: And people will now be watching every move that Kamala
Speaker 7: Harris makes as she takes her campaign forward and looking
Speaker 7: to see whether the Democrats unify behind her. And they're
Speaker 7: going to do that all not only on national television,
Speaker 7: but on world television. And people are also looking to
Speaker 7: see how Donald Trump will signal his response. Clearly they're
Speaker 7: going to have to shift their campaign strategy. I think
Speaker 7: for many people, they will be trying to get a
Speaker 7: sense of who the vice presidential candidate will be for
Speaker 7: Kamala Harris, assuming she moves forward, which certainly looks likely,
Speaker 7: and also what kind of leader she would be. What
Speaker 7: would her poly not only at home, which I think
Speaker 7: is more well known, but especially on the global stage,
Speaker 7: and here she's relatively unknown and has relatively little experience.
Speaker 7: That said, she's had a very strong voice with some
Speaker 7: difficult moments, not least in those early days of her
Speaker 7: role as vice president when it came to immigration and
Speaker 7: the southern border.
Speaker 3: Leslie.
Speaker 6: Was this a good weekend for the Democratic Party? Was
Speaker 6: it a weekend where they turned the page or was
Speaker 6: it a weekend showing the disarray of the party. How
Speaker 6: do you view this past weekend? What happened?
Speaker 7: I think the disarray for the Democratic Party played out
Speaker 7: over the last three weeks since that very difficult presidential debate,
Speaker 7: and yesterday was really a moment of clarity where President
Speaker 7: Biden made a decision that people had been waiting for
Speaker 7: and wondering about for quite some time, and where he
Speaker 7: quickly thereafter endorsed Kamala Harris. And then we saw many
Speaker 7: leading figures, including some of those who would have run
Speaker 7: against her, saying that they supported her. And so I
Speaker 7: think people are breathing, you know, tentatively, a sigh of relief,
Speaker 7: knowing that that moment is over, understanding that there's still
Speaker 7: great certainty ahead as to whether or not she can
Speaker 7: actually compete. And you know, we watched the Republican National
Speaker 7: Convention we watched former President Trump and Jade Vance double
Speaker 7: down on a very powerful but actually a very narrow
Speaker 7: agenda and speak really primarily to their base, and broadening
Speaker 7: that out will be the Essentially That's exactly where.
Speaker 3: I wanted to go.
Speaker 2: I mean, I'm playing off of fabulous research on who votes,
Speaker 2: how we vote, when we vote, from pure research and
Speaker 2: doctor vin Ja Murray. Everything's focused on Harris.
Speaker 3: Now.
Speaker 2: I get that, it's in the news, it's new, it's fresh,
Speaker 2: you know, ratings and all that.
Speaker 3: Forget about it.
Speaker 2: How does President Trump and Senator Vance move You've center
Speaker 2: off the message of Milwaukee to get the marginal vote,
Speaker 2: or do you perceive they have absolutely no interest in
Speaker 2: doing that.
Speaker 7: I think they actually do have some interest. If you've
Speaker 7: watched President Trump move his position sort of dial it
Speaker 7: down a little bit on abortion, for example, he's tried
Speaker 7: to distance himself from a Project twenty twenty five, which
Speaker 7: many people have viewed as very radical or extreme, and
Speaker 7: so there's already signs that he recognizes. You know, Donald
Speaker 7: Trump is always looking to see where he can make
Speaker 7: something stick and where he can get a win. He
Speaker 7: likes to think of himself as doing deals, and I
Speaker 7: suspect that they are really, you know, recalibrating in a
Speaker 7: very significant way. If they're smart, they will recognize the
Speaker 7: diversity that Jade Vance's wife brings to the broader platform.
Speaker 7: Not a of course, but that's a very significant female
Speaker 7: presence in the platform. They're low on female presence at
Speaker 7: the top, and now with Kamala Harris on the ticket,
Speaker 7: that is a significant point of a difference between the
Speaker 7: two parties. So there's a lot of things, but they
Speaker 7: are going to be recalibrating. They clearly chose JD events
Speaker 7: in part in contrast to President Biden's age leslie.
Speaker 6: Should voters read anything into the fact that we have
Speaker 6: not yet heard from former President Obama.
Speaker 3: No, not at all.
Speaker 7: President Obama is wise to know that he shouldn't get
Speaker 7: out in front of the party. He has a very
Speaker 7: specific role to play. He's tended to come in on
Speaker 7: these major decisions once he can read the room and
Speaker 7: then try to shift it subtly. He has said that
Speaker 7: he believes that the Democrats should have a process for
Speaker 7: the next candidate, but he hasn't said an open process,
Speaker 7: and that's a very important distinction for a former president
Speaker 7: who uses his words with great care is very meticulous
Speaker 7: and a detail oriented, so I think he is waiting
Speaker 7: to see where the party goes. The one thing that
Speaker 7: all Democrats at that level, certainly there aren't many at
Speaker 7: that level, but all Democrats know is that the most
Speaker 7: important thing, the single most important thing for the party
Speaker 7: is to choose a candidate and to be absolutely unified
Speaker 7: behind that candidate. People have watched the party disintegrate. It's
Speaker 7: looked in coherent for three weeks, and now they really
Speaker 7: need momentum if they're going to stand a chance of
Speaker 7: victory in November.
Speaker 2: Leslie, thank you so much, doctor Vigiluary with the Chathamhouse
Speaker 2: Edward yard Denny your Denny research, and I'm not going
Speaker 2: to mince words, folks. He writes like it's still CJ.
Speaker 2: Lawrence of a few years ago, and you are advantaged
Speaker 2: with the yard Denny report that comes out. He's even
Speaker 2: got some people help with him out now he was
Speaker 2: like doing it by himself, and we're thrilled to ed
Speaker 2: jar Denny could join us now with this optimism on
Speaker 2: the American experiment. I reframe that to begin with, Right now,
Speaker 2: do you actually model out if I extrapolate a dow Jones
Speaker 2: industrial average over fifty thousand a number of years out.
Speaker 8: Yeah, I think we could get to sixty thousand by
Speaker 8: the end of the year that we're at forty thousand.
Speaker 8: It's not a stretch to believe that over the remaining
Speaker 8: decade we could get to sixty thousand. And I've got
Speaker 8: the S and P five hundred going to eight thousand
Speaker 8: by the end of the decades, So it's a bull market.
Speaker 8: Look just take a look at a long term chart
Speaker 8: of the S and P five hundred, and what you
Speaker 8: see is that bear markets occur every now and then,
Speaker 8: but they don't last very long, and that the fundamental
Speaker 8: trend of the market is upwards along with the economy.
Speaker 6: So you had to get to those kind of levels
Speaker 6: that you're talking about. Does it have to be a
Speaker 6: tech led US stock market.
Speaker 3: No, No, it doesn't.
Speaker 8: Though since the beginning of the decade, I've noted that
Speaker 8: there's a certain rhyming between the twenty twenties and the
Speaker 8: nineteen twenties, and I do think that there are similarities.
Speaker 8: Hopefully it doesn't end as badly as it did in
Speaker 8: the nineteen twenties, but for now I think we're in
Speaker 8: the Roaring twenty twenties. The technology and environment is very
Speaker 8: conducive to that. But look, I think every company now
Speaker 8: is a technology company that you either make it or
Speaker 8: you use it.
Speaker 3: If you don't use it, you lose it.
Speaker 8: So I think technology is a major driver of the economy,
Speaker 8: but it doesn't have to be the technology companies are
Speaker 8: the only ones that benefit.
Speaker 6: We had a little bit of a I think a
Speaker 6: lot of folks are calling a rotation maybe out of
Speaker 6: some of those tech names into some other sectors, maybe
Speaker 6: even some small caps had some real strong out performance
Speaker 6: over the past couple of weeks. What did you make
Speaker 6: of that?
Speaker 8: Yeah, well, it's been a very fusing a couple of weeks.
Speaker 8: It really started, I think on July eleventh with the
Speaker 8: better than expected CPI convincing everybody, including the Fed that
Speaker 8: they were going to lower interest rates probably in September.
Speaker 8: And so instead of just kind of debating how many
Speaker 8: rate cuts will eventually occur, now there's almost one hundred
Speaker 8: percent probability agreement that they're going to start cutting in September.
Speaker 8: And that led to a tremendous rotation out of the
Speaker 8: Magnificent seven and into some of the smaller cap stocks.
Speaker 8: But I think the other event that occurred is the
Speaker 8: Biden administration announced that they were going to take some
Speaker 8: draconian measures against companies that sell semiconductor equipment to China.
Speaker 8: So it's been a whole mix of things going on here.
Speaker 2: Jo Jenny, I want to go back to introductory economics
Speaker 2: at YEL. You get there and you got to toss
Speaker 2: out a core equation. Why equals C plus I plus
Speaker 2: G and you throw on international exports minus imports. You
Speaker 2: have been a multi decade optimist, There's no question about that.
Speaker 3: You found your moments of gloom. But they're rare, rare, rare.
Speaker 2: Once again, Atlanta GDP now a present indicator. She tells the.
Speaker 3: Gloom crew they're wrong.
Speaker 2: Where in that core economic function did the gloom crew
Speaker 2: get growth wrong?
Speaker 8: Well, look, I think that it really started in twenty
Speaker 8: twenty two when the Fed started raising interest rates. March
Speaker 8: twenty two through the summer of the twenty twenty three
Speaker 8: the FED raised the Fed funds rate by five hundred
Speaker 8: and twenty five basis points from zero to five point
Speaker 8: two five percent. I think where the gloom crew was
Speaker 8: perfectly logical, wasn't expecting that that would cause a recession.
Speaker 8: It kind of makes sense. You get that kind of tightening,
Speaker 8: you get a recession. I think what they missed, though,
Speaker 8: is that we started at zero. In other words, sure,
Speaker 8: the FED tightening, but they also normalized. I mean it
Speaker 8: was zero though, was the abnormality not five? And are
Speaker 8: quarter percent? And the economy has proven to be remarkably
Speaker 8: resilient notwithstanding that tightening.
Speaker 3: Did you ever teach econ one O eight Yale?
Speaker 2: I mean, Yelle has three different levels of economics. They
Speaker 2: got econ one fifteen for nerds, they got econ one ten,
Speaker 2: which is for PhD track yard Denny types, and then
Speaker 2: they got econ one O eight for theater majors.
Speaker 3: Did you ever teach that at your Denny? Well?
Speaker 8: What I what I would teach if they if they
Speaker 8: took me back there as a professor, is common sense.
Speaker 8: I think there's too much math being taught to economists
Speaker 8: and not enough common sense, and certainly not they don't
Speaker 8: get their hands dirty enough with the data. So much
Speaker 8: data out there that just they don't have really a
Speaker 8: real sense of it. So I think you've got to
Speaker 8: start out with the raw material, which is data. So
Speaker 8: start out with the data and then come up with
Speaker 8: the theories and the models the other way around.
Speaker 2: And Paul's shout out here on someone that really helped
Speaker 2: form Bloomberg on the economy. In Bloomberg Surveillance, Tim Besley
Speaker 2: at Yale, before Les single handedly turned around common sense
Speaker 2: study of economic history in America. Besley at Yale was
Speaker 2: a curcible who said stop with the mathemambo jumbo and
Speaker 2: teach Jevins of the nineteenth century.
Speaker 6: So, ed, what do you make of this this economy here?
Speaker 6: I mean, I you know, as Tom's pointing out, the
Speaker 6: Atlantic GDP number looks pretty solid, Inflation seems to be
Speaker 6: coming down. We have a FED it's probably can be
Speaker 6: cutting rates at some point. What do you tell your
Speaker 6: clients these days?
Speaker 8: Well, I tell them that we're in a bullmarket. You know,
Speaker 8: we had a bear market back in twenty twenty two
Speaker 8: as there was widespread expectations of a recession. It turned
Speaker 8: out to be the good dough recession.
Speaker 3: It was a no show.
Speaker 8: And typically, you know, we get sell offs as we
Speaker 8: had last week, And the question is whether they become corrections,
Speaker 8: and they become corrections when there's peers that a recession's
Speaker 8: coming and then it doesn't show up, and then we
Speaker 8: get bear markets typically when recession does show up. What
Speaker 8: was unique about twenty twenty two is we had a
Speaker 8: bear market without the recession is showing up, and I
Speaker 8: think we're in a bull market. I think this bull market. Look,
Speaker 8: I can't guarantee there won't be some corrections or even
Speaker 8: another bear market along the way, but yeah, I'm sort
Speaker 8: of in the Warren Buffett and Jeremy Siegeal camp that
Speaker 8: stocks are meant to be held for the long run.
Speaker 2: Ed your Durney whether us We're going to continue an
Speaker 2: entire half hour with Edge Jenney, Paul, get one more
Speaker 2: question in with doctor your Donny.
Speaker 3: I want to come back and talk.
Speaker 2: About the new model of these big tech companies.
Speaker 6: I'd love to just have your opinion on valuation. What
Speaker 6: are you telling your clients these days about the valuation
Speaker 6: of this market.
Speaker 8: Well, I've been doing this for a while and I feel,
Speaker 8: you know, one of these biggest strategists, it's easy. You
Speaker 8: only have to predict two variables, their earnings and the
Speaker 8: valuation multiple pe and you know, getting them right, of
Speaker 8: course is the challenge. But earning seems to be easier
Speaker 8: than the pepes, like beauty is in the eyes of
Speaker 8: the beholder. I guess these days of political correctness, we
Speaker 8: should cite a talent contest. But the reality is that
Speaker 8: the valuation multiple can be elevated as long as there's
Speaker 8: no recession up ahead here, and it's particularly elevated for
Speaker 8: the magnificence. Take them out you get something more reasonable,
Speaker 8: like eighteen or nineteen for the S and P. Four
Speaker 8: hundred and ninety three.
Speaker 2: I am going edjar Denny Beck is a lesson, and
Speaker 2: I'm reading Michael Mobison from leg Mason and credit sueezs
Speaker 2: forward now at Morgan Stanley on our world torn asunder
Speaker 2: in finance and investment and part of that ed Yardnny
Speaker 2: and you've been brilliant at this of moving on from
Speaker 2: the conventional wisdom, say railroad stocks and Graham Dot and Coddle.
Speaker 2: And one of the things Michael Mobison talks about is
Speaker 2: the new network effect, which is Robert Metcalf who invented
Speaker 2: the ethernet, in that the network effect of what Apple does,
Speaker 2: what Google does, what tech does is radically different than
Speaker 2: what Johnson and Johnson does, or Colgate, palm olaver Indocona
Speaker 2: copper from another time and place. Do we understand in
Speaker 2: our fear and gloom the new network effect over the
Speaker 2: last twenty thirty years.
Speaker 8: Well, I think what the technology companies do better than
Speaker 8: anyone else's what Joseph Schumpeter called the creative destruction. They
Speaker 8: are constantly innovating, They're constantly bringing out new technologies, and
Speaker 8: as soon as they become hits that are working on
Speaker 8: destroying them by creating something new or the next version
Speaker 8: of that technology. So frealingly competitive industry, the margins are
Speaker 8: great initially, and the margins kind of evaporate very quickly
Speaker 8: as they move on to the next iteration of the innovation.
Speaker 8: AI we all benefit from that.
Speaker 3: Will AI creatively destruct? Well?
Speaker 8: Artificial intelligence is certainly artificial, but I'm not convinced it's
Speaker 8: all that intelligent. But I want to be very precise
Speaker 8: about that. I think there's two versions of AI that
Speaker 8: we need to consider. One is so called open AI
Speaker 8: and the other one is something that I would call
Speaker 8: closed AI. Open AI basically is open to all the
Speaker 8: information available on the end Internet. And as we know,
Speaker 8: there's a lot of junk on the Internet, and open
Speaker 8: AI is going to contribute to it. It's going to
Speaker 8: kind of start making up some stories and some sources,
Speaker 8: and you know, I mean, we can fact check the
Speaker 8: fact check it along the way, but it's still going
Speaker 8: to be making a lot of mistakes. Closed the eye
Speaker 8: is basically big data on steroids and speed using GPU
Speaker 8: chips as supercomputers. Elon Musk is a genius and he
Speaker 8: figured out that maybe we don't need quantum computers. Maybe
Speaker 8: we can do fast computing supercomputing with just the video
Speaker 8: chips that in video makes. Just slap them all together
Speaker 8: and you get a supercomputer. So I think a combination
Speaker 8: of a massive amount of data placed on these supercomputers
Speaker 8: is in fact going to be a major productivity enhancser
Speaker 8: For every company that has a lot of.
Speaker 6: Data forecast for the indexes, how much of that is
Speaker 6: earning driven versus fed driven. A lot of investors are
Speaker 6: not sure what to really focus on as we get
Speaker 6: into the meat of this earning season.
Speaker 8: Well, I think at this point it's got to be
Speaker 8: earnings driven. It's hard to imagine that valuation multiples over
Speaker 8: time can get a lot higher than where they are already.
Speaker 8: You know, we're talking about the Magnificent seven are at
Speaker 8: a thirty forward pe.
Speaker 3: We're talking about the s and P.
Speaker 8: Five hundred at a twenty two forward pe and excluding
Speaker 8: the Magnificent seven, we're at about eighteen forward pe. So
Speaker 8: evaluation is already pretty rich. I don't think it necessarily
Speaker 8: has to take a dive, but I think I'm looking
Speaker 8: at earnings as being the driver of the bullmarket from
Speaker 8: here on.
Speaker 6: Does this market for the longer term pull need a
Speaker 6: pullback here of five, ten, fifteen percent? Is that something
Speaker 6: that you expect in the I don't know, six to
Speaker 6: nine month time frame.
Speaker 8: Yeah, well, you know, if you look at the long
Speaker 8: history of the stock market, bear markets don't happen that often,
Speaker 8: and corrections don't happen that often. I guess just over
Speaker 8: the past several years, we got used to the idea
Speaker 8: that corrections occur on a regular basis, but they're not inevitable.
Speaker 8: History shows that some bull markets had one or two
Speaker 8: they didn't have, you know, five, corrections along the way.
Speaker 8: So it's not inevitable that we have to have a
Speaker 8: bear market. We have to have corrections, but you have
Speaker 8: to be realistic. They do happen along the way, and
Speaker 8: they're hard to forecast. The geniuses who tell you when
Speaker 8: to get out at the top more often than not,
Speaker 8: we get to tell you to get back in at
Speaker 8: the bottom.
Speaker 2: I got to get back to the one final question answer, Donny,
Speaker 2: I got to get back to the trenches called everybody's
Speaker 2: in the trenches on this. Everybody's got a different prism,
Speaker 2: different view. And then Friday happens, and Lisa Miteo's told
Speaker 2: me this Fridays when the gloom Crew shows up, they
Speaker 2: published for the weekend, et cetera. How do you synthesize
Speaker 2: intelligent discussion from those cautious How do you read the
Speaker 2: cautious fear crew in a constructive way?
Speaker 8: Well, I think they do a great job. The problem
Speaker 8: is they just have this bias towards being perma bears.
Speaker 8: And I guess I've been accused of being a perma bull.
Speaker 8: But I think that's a consequence of reading what the
Speaker 8: perma bears are saying and just trying to provide some balance.
Speaker 8: So if you provide some balance, you come out as
Speaker 8: a perma bull. And again, if you look at the
Speaker 8: long history of the stock market, makes more sense to
Speaker 8: be bullish on a more often than bearish. But the crew,
Speaker 8: I think provides some very good intelligent analysis of what
Speaker 8: could possibly go wrong. And then I step in and say, okay,
Speaker 8: well where might they be wrong?
Speaker 3: And you're Doney, Thank you so much.
Speaker 2: Congratulations on your call from October of twenty twenty two.
Speaker 3: I call it our Denny and Kompor.
Speaker 2: I couldn't just say you are Denny, and it's really
Speaker 2: Andrew Slimmy who join us from Chicago this morning. Andrew,
Speaker 2: I'm gonna take a well known portfolio. You know, fifty
Speaker 2: six percent is in their top ten holdings. I'm gonna
Speaker 2: round up and down folks. Facebook fourteen percent, Nvidia eight percent,
Speaker 2: Microsoft six percent, Amazon six percent of zempic Eli Lilly
Speaker 2: three percent, Apple three percent, except they got nine percent
Speaker 2: in Berkshire Hathaway, so Apple's easily out with the Berkshire
Speaker 2: Hathaway piece. It's six percent. Andrew, is this anyway to
Speaker 2: run a portfolio? Or do we need to get used
Speaker 2: to large cap concentration?
Speaker 3: Good morning? Yes and no.
Speaker 1: On the one hand, the reason for yes, this is
Speaker 1: a way to run a portfolio is I mean, a
Speaker 1: simple statistic is the Magnificent seven stocks comprise thirty percent
Speaker 1: of the SMP. But if I look at their earnings
Speaker 1: growth over the last year, they of the SMP those
Speaker 1: seven socks have comprised eighty nine percent of the earnings growth.
Speaker 1: So the point I'm trying to make is, hey, the
Speaker 1: fundamentals of these companies validate big positions. And then because
Speaker 1: they are some of the best performing fundamentally driven socks.
Speaker 1: And so it's really tough to say, oh, you know,
Speaker 1: I should sell these socks just because they're big weights
Speaker 1: when you know, I look at what's you know, my
Speaker 1: success and over time in this business has always been
Speaker 1: focused on what companies are doing less so than you know,
Speaker 1: kind of top down. That's the yes, the know of
Speaker 1: it is no to the extent that these stocks are
Speaker 1: all highly highly correlated to each other. They move together,
Speaker 1: and we have learned in the last week and a
Speaker 1: half that when there is a rotation, you better own
Speaker 1: stocks in your portfolio beyond just megacap Tech because you're
Speaker 1: going to hurt your investors. So yes, fundamentally, but you
Speaker 1: better go find some other good, fundamentally driven companies that
Speaker 1: are not all correlated to megacap Tech.
Speaker 6: So you bring up the correlation, Andrew, and that brings
Speaker 6: up a risk that a lot of investors talk about,
Speaker 6: which is, well, if any of these big names whether
Speaker 6: it's an Nvidia or Microsoft disappoints, either on earnings or guidance,
Speaker 6: that could bring not only that particular security down, but
Speaker 6: also of the broader market. Is that a value concern?
Speaker 1: Absolutely, we've learned that. I'm dating myself. I've been this
Speaker 1: business a long time. But that's what That's what caused
Speaker 1: the end of the dot com bubble is stocks. It
Speaker 1: was great and greater concentration. Socks got expensive, but most importantly,
Speaker 1: they started missing sales estimates. They weren't that the expectation
Speaker 1: of the capex spend in the late nineties ran out
Speaker 1: of steam, and that because those stocks had such big
Speaker 1: waiting in the S and P, it brought down the
Speaker 1: S and P. Although you know, the value part of
Speaker 1: the S and P did just fine. So yes, I
Speaker 1: think fundamentals matter, but pay attention if in fact, these
Speaker 1: companies start to say, hey, you know what, our customers
Speaker 1: aren't spending as quickly as Wall Street expected on this
Speaker 1: tech buildout, that's going to be a problem for the market.
Speaker 2: Well, in the pandemic, terrible revenue growth thirteen percent. They
Speaker 2: rebounded in twenty twenty one forty one percent revenue growth,
Speaker 2: then ten percent, then nine percent, then twelve percent, modeling
Speaker 2: out twenty twenty five, eleven percent.
Speaker 3: I'm sorry.
Speaker 9: It's it's double GDP double nominal GDP revenue growth, and
Speaker 9: it accumulates over a number of years, and that's how
Speaker 9: Andrew can buy the Chicago Cubs.
Speaker 6: That's exactly right. It's compounding and it's YouTube.
Speaker 3: Tom.
Speaker 1: There you go, So Andrew, it might be on sale
Speaker 1: right now, Tom, Andrew.
Speaker 6: If I want some non tech correlated exposure and some
Speaker 6: strong earnings behind it, where.
Speaker 3: Do I look?
Speaker 1: Well, I mean, look at just all you have to do,
Speaker 1: very simple. Go look at what's worked, what's out before
Speaker 1: in the market since since the CPI print came out
Speaker 1: at Thursday when the market said, oh wait maybe the
Speaker 1: Fed will cut in se it is financials uh, it
Speaker 1: is industrials, right, I think following the Infrastructure Act, because
Speaker 1: I don't think it merely matters. He's president, We're gon,
Speaker 1: we're gonna, We're going to fulfill the Infrastructure Act. Those
Speaker 1: sacks have all worked. So I sit back, Oh, thank
Speaker 1: God for our portfolios. We have understood that these megacap
Speaker 1: tech socks are doing great. But when there is a rotation,
Speaker 1: you better make sure you own some other things, and
Speaker 1: I've said for a long time I think the industrials
Speaker 1: are a great balance versus megacap tech.
Speaker 3: How much cash in a portfolio ander right now?
Speaker 1: Well, you know, look, I run long equity portfolios. If
Speaker 1: Tom Kem allocates to my portfolios, he's not allocating for
Speaker 1: me to carry, you know, thirty percent cash. I'm opposed
Speaker 1: to be your equity guy. I think they're I think
Speaker 1: the market is going to continue to rally until we
Speaker 1: get through the second quarter earnings, because I do think
Speaker 1: they're going to be good, but that I get nervous
Speaker 1: as we get into August because there's kind of a
Speaker 1: lot of fundamental news. The other thing that I would
Speaker 1: tell you is at a time when seasonally it makes
Speaker 1: sense to kind of get a little bit more conservative.
Speaker 1: If you look at what's worked, not only value, but
Speaker 1: it's the highest of the high beta spots. Doesn't seem
Speaker 1: to me in the time of year you want to
Speaker 1: chase high risk thoncts.
Speaker 2: One final question thirty seconds, how come the white socks
Speaker 2: are so much fun to watch and the cubs it's.
Speaker 3: Like pulling teeth? What is going because of.
Speaker 1: Cognations, because of expectations, the Cubs are ex No one
Speaker 1: expects the White Sox to do well.
Speaker 3: It right, Andrew Sivin, thank you so much.
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