1 00:00:02,520 --> 00:00:09,200 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. The market is lower 2 00:00:09,240 --> 00:00:13,280 Speaker 1: than the futures at nine twenty nine, the Vix, Paul, please, 3 00:00:13,440 --> 00:00:16,079 Speaker 1: I can't do it, Paul, quote the Vix, it's too 4 00:00:16,160 --> 00:00:16,680 Speaker 1: much pain. 5 00:00:16,800 --> 00:00:19,400 Speaker 2: Well, I'm just ninety s and P five technically got 6 00:00:19,480 --> 00:00:22,040 Speaker 2: bear market right there at that low here, but we've 7 00:00:22,040 --> 00:00:25,720 Speaker 2: got the vics here fifty how about that Tom five zero. 8 00:00:25,680 --> 00:00:28,120 Speaker 1: Five zero point sixty four. And I did a standard 9 00:00:28,120 --> 00:00:31,600 Speaker 1: deviation study. Lauri Kelvicina said she wouldn't come on if 10 00:00:31,640 --> 00:00:33,920 Speaker 1: I didn't do bear market bull market calls. I gotta 11 00:00:33,960 --> 00:00:37,200 Speaker 1: do standard deviation calls. And we're out at three point 12 00:00:37,240 --> 00:00:41,880 Speaker 1: three standard deviations down, standard imports five hundred, one step down, 13 00:00:41,920 --> 00:00:45,279 Speaker 1: two steps down, and this morning, three steps down. We 14 00:00:45,320 --> 00:00:48,159 Speaker 1: are honored the Lori Kelvicina would join us here in 15 00:00:48,159 --> 00:00:51,400 Speaker 1: this hour, Lord, your observation as you speak to your 16 00:00:51,400 --> 00:00:52,400 Speaker 1: clients this morning. 17 00:00:53,360 --> 00:00:55,720 Speaker 3: Look, I think people are trying to make sense of 18 00:00:55,760 --> 00:00:59,120 Speaker 3: what's going on. How far we could go down? You know, 19 00:00:59,240 --> 00:01:01,560 Speaker 3: just a few minutes to go, I had an email 20 00:01:01,680 --> 00:01:03,600 Speaker 3: with someone who was talking to me about my four 21 00:01:03,640 --> 00:01:05,760 Speaker 3: Tiers of Fear framework, and so there's a lot of 22 00:01:05,800 --> 00:01:08,520 Speaker 3: sympathy among my clients for your thirty one hundred, which 23 00:01:08,520 --> 00:01:11,640 Speaker 3: is the fourth tier where you have a major crisis 24 00:01:11,640 --> 00:01:13,280 Speaker 3: and lose half the market value. I'm not going to 25 00:01:13,280 --> 00:01:15,039 Speaker 3: sit here, Tom and tell you everybody saying that, but 26 00:01:15,080 --> 00:01:18,160 Speaker 3: that was one email that came across, whereas other people 27 00:01:18,200 --> 00:01:20,200 Speaker 3: have sort of resonated to the idea that we said, 28 00:01:20,240 --> 00:01:21,640 Speaker 3: you know, we've been in a growth scare. Of the 29 00:01:21,760 --> 00:01:25,320 Speaker 3: risk now is we're pricing in recession. And it sounds 30 00:01:25,360 --> 00:01:27,160 Speaker 3: to me like just based on where we open, we're 31 00:01:27,200 --> 00:01:30,480 Speaker 3: headed straight for that. So I think that people are 32 00:01:30,600 --> 00:01:33,280 Speaker 3: doing what we do when we have these events in 33 00:01:33,360 --> 00:01:37,319 Speaker 3: markets where there is a fear that is cascading very rapidly. 34 00:01:37,480 --> 00:01:39,120 Speaker 1: What we're going to do here now with an equity 35 00:01:39,200 --> 00:01:43,600 Speaker 1: strategist is take all over wonderful abilities, particularly with less 36 00:01:43,640 --> 00:01:48,120 Speaker 1: profitable non Apple, non Microsoft companies, and bring it over 37 00:01:48,160 --> 00:01:51,680 Speaker 1: to what people are talking about with the DOWBT negative 38 00:01:51,720 --> 00:01:56,920 Speaker 1: fourteen hundred. Laurie Calvicina, take the equity market and what 39 00:01:57,000 --> 00:02:01,520 Speaker 1: it will bounce off in a credit mark. The deteriorates. 40 00:02:01,920 --> 00:02:06,800 Speaker 1: The jargon that Paul Sweeney uses is spreads deteriorate. That's 41 00:02:06,840 --> 00:02:10,200 Speaker 1: the yield of a garbage bond versus a full faith 42 00:02:10,240 --> 00:02:13,320 Speaker 1: in credit and the yield goes higher. Are we to 43 00:02:13,480 --> 00:02:18,800 Speaker 1: tipping point in credit that affects the equity market. 44 00:02:20,240 --> 00:02:22,120 Speaker 3: It's a great question. I'm certainly not an expert on 45 00:02:22,160 --> 00:02:24,919 Speaker 3: the credit market, tom, so I'm gonna deflect on that one. 46 00:02:25,200 --> 00:02:27,799 Speaker 3: But what I will say is that, you know, maybe 47 00:02:27,880 --> 00:02:30,359 Speaker 3: up until about a week ago, and it was a 48 00:02:30,400 --> 00:02:32,799 Speaker 3: little bit before the Rose Garden ceremony, to be honest, 49 00:02:32,800 --> 00:02:35,320 Speaker 3: but we had actually been seeing small caps starting to 50 00:02:35,320 --> 00:02:37,600 Speaker 3: outperform large caps, and like on the big down days 51 00:02:37,600 --> 00:02:39,600 Speaker 3: in the market, small caps weren't doing quite as bad, 52 00:02:39,960 --> 00:02:42,000 Speaker 3: and I thought that was interesting. That was making me 53 00:02:42,040 --> 00:02:44,160 Speaker 3: feel a little bit better because they had already been 54 00:02:44,240 --> 00:02:47,440 Speaker 3: so de risk, they were so cheap, and we felt 55 00:02:47,480 --> 00:02:49,480 Speaker 3: like there was this rotation going on that was hitting 56 00:02:49,520 --> 00:02:51,520 Speaker 3: the bigger caps harder than the small caps. But that's 57 00:02:51,560 --> 00:02:54,200 Speaker 3: all changed. So we've seen that attempt that small caps 58 00:02:54,200 --> 00:02:56,880 Speaker 3: were making to bottom now fail posts the Rose Garden, 59 00:02:57,240 --> 00:03:00,320 Speaker 3: and that's going to be very you know, similar right 60 00:03:00,360 --> 00:03:03,600 Speaker 3: to that high high yield cohort of the market. And 61 00:03:03,720 --> 00:03:06,120 Speaker 3: what that's been telling me over the past few days 62 00:03:06,480 --> 00:03:09,400 Speaker 3: is that those recession risks are getting priced in rapidly 63 00:03:09,440 --> 00:03:12,920 Speaker 3: because as cheap as they are. And honestly, tom My 64 00:03:13,000 --> 00:03:16,639 Speaker 3: valuation pe for the My valuation model, the market cap 65 00:03:16,639 --> 00:03:18,239 Speaker 3: way to pe for the Russell two thousand, was it 66 00:03:18,320 --> 00:03:20,560 Speaker 3: thirteen and a half times on the Thursday close In 67 00:03:20,720 --> 00:03:23,240 Speaker 3: recession it tends to go to eleven to thirteen times, 68 00:03:23,280 --> 00:03:26,240 Speaker 3: even before you clean up the excess earning's optimism. So 69 00:03:26,280 --> 00:03:29,080 Speaker 3: these things have been acting pretty pretty bad. But I 70 00:03:29,120 --> 00:03:33,480 Speaker 3: do think that credit markets holding off, not deteriorating, you know, 71 00:03:33,600 --> 00:03:35,440 Speaker 3: that's been sort of the thing that's kind of kept 72 00:03:35,480 --> 00:03:37,320 Speaker 3: people out. And I hate to use the word panic 73 00:03:37,360 --> 00:03:38,960 Speaker 3: in markets like these, but that's been kind of the 74 00:03:39,000 --> 00:03:41,320 Speaker 3: thing that's kept people calm. But they can't be a 75 00:03:41,360 --> 00:03:43,720 Speaker 3: necessary part of the bonding process we have to go 76 00:03:43,800 --> 00:03:44,320 Speaker 3: through in here. 77 00:03:44,520 --> 00:03:47,360 Speaker 1: Let me uncom you right now, Paul the Vicks fifty 78 00:03:47,440 --> 00:03:48,640 Speaker 1: two point zero. 79 00:03:48,520 --> 00:03:53,120 Speaker 2: Seven exactly, Laurie, what's the earnings risk still out there 80 00:03:53,120 --> 00:03:54,640 Speaker 2: in the marketplace do you think? I mean, is it 81 00:03:54,680 --> 00:03:57,880 Speaker 2: a flat earnings year in twenty five or maybe something 82 00:03:57,880 --> 00:03:58,280 Speaker 2: more than that. 83 00:03:59,280 --> 00:04:01,800 Speaker 3: You know, what we've got modeled is is you know, 84 00:04:01,920 --> 00:04:05,280 Speaker 3: kind of a stagflationary scenario right now for two fifty eight, 85 00:04:05,280 --> 00:04:07,560 Speaker 3: which is well below the bottom up consensus which last 86 00:04:07,600 --> 00:04:09,520 Speaker 3: I checked was two sixty nine. Who knows what it 87 00:04:09,560 --> 00:04:11,840 Speaker 3: is now because things are starting to change. But what 88 00:04:11,960 --> 00:04:14,120 Speaker 3: we have found is an interesting question you asked Paul, 89 00:04:14,200 --> 00:04:16,400 Speaker 3: because if you kind of go back and look at 90 00:04:16,560 --> 00:04:20,200 Speaker 3: bad earnings years, what we often find is that, you know, 91 00:04:20,440 --> 00:04:23,240 Speaker 3: in kind of big crises, big recessions, you're seeing earnings 92 00:04:23,279 --> 00:04:25,280 Speaker 3: year Earnie's growth on a year over year basis going 93 00:04:25,320 --> 00:04:28,440 Speaker 3: down like thirteen percent or something worse. Right, So some big, 94 00:04:28,520 --> 00:04:31,240 Speaker 3: ugly numbers, but they're actually a lot of years where 95 00:04:31,279 --> 00:04:33,920 Speaker 3: earnings are just flat year to year, and when we 96 00:04:34,279 --> 00:04:36,880 Speaker 3: see companies, you know, sort of being able to muddle through, 97 00:04:36,960 --> 00:04:39,960 Speaker 3: that's often what's happened. So we when we recently changed 98 00:04:39,960 --> 00:04:41,880 Speaker 3: our Arni's number to two fifty eight, we said, you know, 99 00:04:42,000 --> 00:04:44,480 Speaker 3: kind of the downside scenario, if we want to kind 100 00:04:44,480 --> 00:04:46,800 Speaker 3: of put in a barricase, We're thinking a lot about 101 00:04:46,839 --> 00:04:48,760 Speaker 3: kind of that two forty six number for now. That 102 00:04:48,800 --> 00:04:50,800 Speaker 3: could change if we go into a full on recession. 103 00:04:51,080 --> 00:04:54,120 Speaker 3: But outside of that, that's not a bad assumption to make, 104 00:04:54,200 --> 00:04:55,360 Speaker 3: just that earnings go nowhere. 105 00:04:55,520 --> 00:04:58,000 Speaker 1: Laurie's staying with us. We're going to continue Lori Kelevisina 106 00:04:58,200 --> 00:05:00,520 Speaker 1: wec with this yere on the equity market. Eric belt 107 00:05:00,560 --> 00:05:03,159 Speaker 1: Chuonis made it up from Philadelphia. They didn't cut the 108 00:05:03,160 --> 00:05:06,200 Speaker 1: funding on the A Cell Express. Get the bell chunis 109 00:05:06,240 --> 00:05:09,000 Speaker 1: here in a moment. I just had a negative fifteen 110 00:05:09,040 --> 00:05:11,839 Speaker 1: hundred print on the Dow, negative two thirteen. I want 111 00:05:11,839 --> 00:05:16,080 Speaker 1: to emphasize futures at eight. At nine twenty nine, we're 112 00:05:16,120 --> 00:05:19,520 Speaker 1: about negative one forty. We're now negative two ten on 113 00:05:19,560 --> 00:05:22,880 Speaker 1: the equity market. The vics explodes out. That's the right word. 114 00:05:23,360 --> 00:05:27,120 Speaker 1: Forty seven forty eight out to fifty two point seventy six. 115 00:05:27,400 --> 00:05:29,799 Speaker 1: I never used this phrase. I'm going to use it, Paul. 116 00:05:30,279 --> 00:05:33,800 Speaker 1: On a half hour to half hour basis to the 117 00:05:34,080 --> 00:05:39,719 Speaker 1: Asia opening. We're sort of in uncharted territory. It's different 118 00:05:40,120 --> 00:05:44,400 Speaker 1: in Paul. The yields go up. There's a fear trade 119 00:05:44,640 --> 00:05:49,680 Speaker 1: into bond's price. Excuse me, priced down, yield up, and 120 00:05:49,800 --> 00:05:53,080 Speaker 1: the whole margin call. I'm sorry, I'm going where Dennis 121 00:05:53,120 --> 00:05:56,720 Speaker 1: Gartman was earlier this morning. You wonder, Paul, what's going 122 00:05:56,760 --> 00:05:57,400 Speaker 1: on out there? 123 00:05:57,920 --> 00:06:02,160 Speaker 2: Of course, and I think I was just asking where 124 00:06:02,160 --> 00:06:04,160 Speaker 2: do we go from here? In terms of policy? I'm 125 00:06:04,200 --> 00:06:06,640 Speaker 2: not sure anybody really knows. And that kind of goes 126 00:06:06,640 --> 00:06:08,800 Speaker 2: to the earnings question, like, I don't know how bad 127 00:06:08,839 --> 00:06:11,080 Speaker 2: earnings could get because I'm not sure how far this 128 00:06:11,160 --> 00:06:13,120 Speaker 2: policy is going to go. And I think that reflects 129 00:06:13,279 --> 00:06:16,160 Speaker 2: a lot of what the market's doing. So, Laurie, I 130 00:06:16,200 --> 00:06:19,840 Speaker 2: think most of us listening watching here would say, you 131 00:06:19,880 --> 00:06:22,479 Speaker 2: know what, twelve twenty four to thirty six months from now, 132 00:06:22,760 --> 00:06:24,400 Speaker 2: this market's going to be higher than where we are 133 00:06:24,480 --> 00:06:28,359 Speaker 2: right here, probably meaningfully higher. So I should probably be 134 00:06:28,800 --> 00:06:31,839 Speaker 2: doing some buying here. How does that conversation do with you? 135 00:06:33,480 --> 00:06:35,200 Speaker 3: Well, look, look, I'll tell you it's sort of the 136 00:06:35,200 --> 00:06:37,400 Speaker 3: fly and the ointment for the strategists right now. And 137 00:06:37,920 --> 00:06:40,039 Speaker 3: I see this in my own modeling, Paul. We have 138 00:06:40,120 --> 00:06:41,880 Speaker 3: five different models that we used to come up with 139 00:06:41,880 --> 00:06:44,039 Speaker 3: our price targets. And look, I know everything is scary 140 00:06:44,040 --> 00:06:46,080 Speaker 3: if people are like math, Oh my god, you're doing math, 141 00:06:46,480 --> 00:06:48,480 Speaker 3: But that's what we have to do right to keep 142 00:06:48,480 --> 00:06:50,400 Speaker 3: ourselves grounded. And when I go through and look at 143 00:06:50,400 --> 00:06:53,760 Speaker 3: my modeling, the one model that's still pretty constructive is 144 00:06:53,800 --> 00:06:57,000 Speaker 3: actually the sentiment model, and it's basically looking at aaii 145 00:06:57,120 --> 00:07:00,640 Speaker 3: net bulls that are down around GFC lows twenty two lows, 146 00:07:01,080 --> 00:07:04,120 Speaker 3: nineteen ninety one recession lows, and that is a good 147 00:07:04,200 --> 00:07:08,359 Speaker 3: reminder that as quickly as things cascade onto the downside, 148 00:07:08,760 --> 00:07:10,960 Speaker 3: they come, they tend to come roaring back when you 149 00:07:11,000 --> 00:07:14,720 Speaker 3: get some resolution, And so I think that's you know that, 150 00:07:14,720 --> 00:07:16,960 Speaker 3: that's something a lot of you know, us forecasters, we 151 00:07:17,040 --> 00:07:18,880 Speaker 3: had in the back of our heads as we've tried 152 00:07:18,880 --> 00:07:20,040 Speaker 3: to navigate this environment. 153 00:07:20,040 --> 00:07:20,520 Speaker 2: It's hard. 154 00:07:20,720 --> 00:07:23,320 Speaker 3: So that's impossible, right to say, what is that trigger? 155 00:07:24,080 --> 00:07:25,800 Speaker 3: But it is something we have to watch, and it's 156 00:07:25,840 --> 00:07:28,080 Speaker 3: a necessary condition for a bottom that's already been put 157 00:07:28,120 --> 00:07:28,520 Speaker 3: in place. 158 00:07:28,760 --> 00:07:31,560 Speaker 1: Tesla not to a two hundred and ninety nine. We're 159 00:07:31,600 --> 00:07:33,160 Speaker 1: not there yet. I don't want to be too gloomy, 160 00:07:33,440 --> 00:07:35,320 Speaker 1: but I'm going to go over here, Laurie to something 161 00:07:35,400 --> 00:07:37,760 Speaker 1: nobody talks about. And of course we're on a Canadian 162 00:07:37,800 --> 00:07:43,280 Speaker 1: border on this Ford Motor under ten dollars nine dollars 163 00:07:43,320 --> 00:07:47,440 Speaker 1: eleven cents right down on lows for twenty twenty five, 164 00:07:48,120 --> 00:07:52,000 Speaker 1: and they got a pe multiple on Ford of five 165 00:07:52,960 --> 00:07:55,520 Speaker 1: and maybe the forward multiple, which we're going to blow up. 166 00:07:55,520 --> 00:08:00,000 Speaker 1: We know that is seven. Are we in value territory 167 00:08:00,440 --> 00:08:04,240 Speaker 1: medium and small cap stocks like we clearly are with 168 00:08:04,320 --> 00:08:06,440 Speaker 1: the Ford Motor Company. 169 00:08:06,800 --> 00:08:08,600 Speaker 3: So you know, I was having an argument with someone 170 00:08:08,680 --> 00:08:12,520 Speaker 3: about that this morning, talking about not my husband. I'm 171 00:08:12,680 --> 00:08:14,440 Speaker 3: I'm on a trip, I'm in a hotel room. So 172 00:08:14,480 --> 00:08:15,480 Speaker 3: I believe that he ardues with. 173 00:08:15,480 --> 00:08:17,720 Speaker 1: The marriage survives. 174 00:08:18,760 --> 00:08:21,000 Speaker 3: Yeah, but not. He's very scared of my tears of 175 00:08:21,040 --> 00:08:23,240 Speaker 3: fear chart. I had to take some passwords away from him. 176 00:08:23,280 --> 00:08:26,880 Speaker 3: But the reality is is that you know, when I 177 00:08:26,960 --> 00:08:29,360 Speaker 3: highlight this small cap chart and that we're at thirteen times, 178 00:08:29,400 --> 00:08:31,440 Speaker 3: or at least we were as a Thursday, people say, well, 179 00:08:31,440 --> 00:08:33,640 Speaker 3: we have to adjust the earnings, and I say, I know, 180 00:08:33,720 --> 00:08:35,920 Speaker 3: we have to adjust the earnings. That's the separate thing 181 00:08:36,040 --> 00:08:38,880 Speaker 3: though if you look at you know, sort of historically 182 00:08:38,920 --> 00:08:42,440 Speaker 3: my forward pe data, eleven to thirteen times is where 183 00:08:42,440 --> 00:08:44,679 Speaker 3: small caps tend to bottom out even when the E 184 00:08:44,840 --> 00:08:47,120 Speaker 3: is too high, and people just can't mentally wrap their 185 00:08:47,120 --> 00:08:49,840 Speaker 3: heads around that. But it is something important you have 186 00:08:49,920 --> 00:08:51,680 Speaker 3: to keep in mind because it's one of those things 187 00:08:51,679 --> 00:08:53,319 Speaker 3: again that you have to see. It's not going to 188 00:08:53,400 --> 00:08:56,000 Speaker 3: peg a bottom on its own, but it's still a 189 00:08:56,040 --> 00:08:59,040 Speaker 3: signal even though there's some problems with the E. Now, 190 00:08:59,360 --> 00:09:01,680 Speaker 3: I do think with earnings, we have to get the 191 00:09:01,760 --> 00:09:04,840 Speaker 3: numbers down before anybody is going to have faith to 192 00:09:04,920 --> 00:09:07,400 Speaker 3: come in and buy here. Forty percent of the revisions 193 00:09:07,720 --> 00:09:09,800 Speaker 3: and the rote, the Russell and SMP are still to 194 00:09:09,840 --> 00:09:12,679 Speaker 3: the upside. Nobody's cutting numbers because they don't you know 195 00:09:12,679 --> 00:09:14,480 Speaker 3: they I don't know a lot of different reasons, but 196 00:09:14,520 --> 00:09:15,800 Speaker 3: nobody's been cutting the numbers. 197 00:09:15,880 --> 00:09:17,679 Speaker 1: You're a trooper to come on. Lori back to her 198 00:09:17,720 --> 00:09:22,280 Speaker 1: clients at RBC Capital, Marcus Lori, Kelvisenior. Hug the children 199 00:09:22,360 --> 00:09:23,320 Speaker 1: is all I can say.