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Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane.

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Speaker 1: Always with Michael McKee daily we bring you insight from

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Speaker 1: the best in economics, finance, investment, and international relations. Find

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Speaker 1: Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and of

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Speaker 1: course on the Bloomberg Joe Quelin with this Bank of

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Speaker 1: America and US trust Joe on the basic idea here

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Speaker 1: correct me if I'm wrong, is Google and Facebook crush Yahoo.

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Speaker 1: Can you set up a portfolio where your own number

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Speaker 1: one and number two, your own hurts and your own

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Speaker 1: avis in every sector that you're in. I mean you could, Tom,

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Speaker 1: but I'd be very careful in that because you have

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Speaker 1: to overlay. If you're gonna do automobiles, you have to

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Speaker 1: overlay from Japanese companies, German companies. Same with capital goods.

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Speaker 1: Um you have to start sprinkling in when it comes

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Speaker 1: to technology, some of the Chinese internet stocks, because they're

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Speaker 1: doing pretty well, uh in terms of capability. So you

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Speaker 1: can do that, but you know you're looking large cap.

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Speaker 1: You might you know, buying more value than growth. You

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Speaker 1: want the growth, You've gotta go small, MidCap. Well. The

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Speaker 1: other thing too is if you're buying those companies. You're

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Speaker 1: talking about the biggest companies, so you're not going to

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Speaker 1: necessarily get much return because of the law of large numbers.

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Speaker 1: I mean, their share prices aren't going to move dramatically,

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Speaker 1: not not dramatically, but um and you could also you know,

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Speaker 1: I mean Microsoft, I mean, they're they're back, but there

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Speaker 1: was a time when they were they were quite the

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Speaker 1: laggard for relative to the rest of the industry, so

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Speaker 1: that that that could happen again at some point. You

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Speaker 1: just made me think though, because if you if, if

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Speaker 1: you're buying those companies, you're probably not gonna lose a

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Speaker 1: lot of money. You're not gonna gain a lot of money.

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Speaker 1: It's a little bit like investing in defensive stocks in

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Speaker 1: the tech sector. Are there any dividend paying stocks that

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Speaker 1: are worth having just for their the dividend appreciation at

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Speaker 1: least you're getting something out of it, because we always

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Speaker 1: talk about dividends. Okay, gonna buy an industry, you're gonna

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Speaker 1: buy a utility, But is there anything like that? Not

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Speaker 1: really like I mean, I mean, if you're if you're

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Speaker 1: looking for dividend, you're looking for income. You know, stay traditionally,

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Speaker 1: whether it's the pharmaceuticals, the capital goods, the industrials, the transports.

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Speaker 1: But you know technology you want, you want more growth.

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Speaker 1: That's your that's your bent in that sense, doesn't mean

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Speaker 1: you can't get it once in a while. One off

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Speaker 1: diving in pairs um, but you know, if you're looking

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Speaker 1: for income now, you gotta PlayStation. I'm looking here at

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Speaker 1: the press release which is is almost a parody of

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Speaker 1: NBA speak from good people. Mr Armstrong, who folks full disclosure,

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Speaker 1: I consider to be the transaction of a few years back,

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Speaker 1: the Verizon a O L transaction. Armstrong looked like a

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Speaker 1: genius and of course Ms Mayor with comments as well

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Speaker 1: Lol McAdam of Hoverizon is well. But the word that

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Speaker 1: permeates this discussion is scale. Help our listeners worldwide, the

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Speaker 1: sophisticated cf A types and people that maybe have never

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Speaker 1: heard that word. What is scale and why do we care?

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Speaker 1: You need scale? Time that you know, they drive the demand,

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Speaker 1: drive the top line growth, help reduce the costs, pull

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Speaker 1: in from different competencies. So you know, any company that

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Speaker 1: has scale, not just the United States, but globally, has

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Speaker 1: that competitive advantage when it comes to reaching new consumers,

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Speaker 1: driving organic growth and leveraging lowering ears. Then how does

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Speaker 1: that work? And what I'm gonna collegiately call it Triopoli

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Speaker 1: of Google, Facebook, and what's it gonna be, Mike Verhu,

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Speaker 1: they're going to change their name, but they don't tell

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Speaker 1: us to what. Let's you know, there's some talk that

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Speaker 1: Mondale might become available if they change their name. I'm

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Speaker 1: not you know, Tom, I'm not sure how they all

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Speaker 1: that all works out in that sense. But you know,

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Speaker 1: you're seeing a lot of the technology companies kind of

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Speaker 1: step into each other's space. And I think that's what's

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Speaker 1: becoming more interesting is Apple healthcare company? Is Google going

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Speaker 1: to be a car company? Um, it's very interesting, It's

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Speaker 1: very disruptive, and it's gonna be interesting the old line

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Speaker 1: players that they're still here. We're direct Christiansen into this.

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Speaker 1: I mean my word, if I look at right now, Mike,

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Speaker 1: just to help everybody here with yah, who's first of all,

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Speaker 1: it's a tiny company can where we remind ourselves, but

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Speaker 1: they only are like five billion or maybe four billion

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Speaker 1: of revenue. So basically they sold this dog at you know,

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Speaker 1: one point whatever times revenue. I stand corrected if I'm wrong.

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Speaker 1: They do under a billion in ibadat folks. That's when

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Speaker 1: you go down the income statement and you bring over

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Speaker 1: a little bit of a balance sheet adjustment their net income.

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Speaker 1: Mike is like, you know, the income of the New

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Speaker 1: York Rangers. Yeah, well, I mean that's not the reason

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Speaker 1: for the deal, obviously. I'm just wondering, Joe, do you

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Speaker 1: think it basically what Verizon is getting is the ad platform,

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Speaker 1: you know, the metrics of the patents, the way they

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Speaker 1: can sell advertising. Uh does that add enough to Verizon?

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Speaker 1: I mean, I assume that's such a small deal that

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Speaker 1: you've it's a rounding era for them in terms of

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Speaker 1: their cash. But but well, Mike, I'm not sure. I

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Speaker 1: didn't looked at the numbers. I don't follow the industry

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Speaker 1: or the company, but it does you know, companies are

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Speaker 1: paying for that that that sliver or of a core

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Speaker 1: competency that they don't have, rather than developing it. You

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Speaker 1: can buy it if you if it's the prices right,

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Speaker 1: and it sounds I don't know where the pricing is,

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Speaker 1: but that's what they're doing. They're buying a specific core

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Speaker 1: competency that fits into their portfolio. Yeah, I mean four

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Speaker 1: point eight three billion. Um, it's not a lot of money,

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Speaker 1: like you said, I mean, it's one of those smaller

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Speaker 1: deals of the year. But if they get the advertising,

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Speaker 1: maybe that helps now and they're paying cash and the

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Speaker 1: paying cash yeah. Uh. The interesting thing then is that

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Speaker 1: they leave behind the Ali Baba estimate, the Ali Baba part,

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Speaker 1: and that I mean maybe you want to own that

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Speaker 1: company as as opposed to verize of it. At this point,

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Speaker 1: I think, you know, Ali Baba is I think one

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Speaker 1: of those up and coming that we're not. They're not upcoming,

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Speaker 1: they've already arrived. Chinese internet stock that's going global, that

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Speaker 1: they have a very good global presence that's building out.

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Speaker 1: Reminds me of some of these Chinese stocks now that

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Speaker 1: when in Japan to nineteen sixties and seventies, where they

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Speaker 1: started small, they got some traction and became big players

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Speaker 1: later on. At this point, do you have any idea

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Speaker 1: what would happen to a Marissa Mayer or is it

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Speaker 1: too early to speculaut I have no idea. Um. I mean,

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Speaker 1: as I understand it, Tom, there was some report she's

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Speaker 1: going to get a fifty seven million dollar golden parachute,

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Speaker 1: So I guess she's not going to be in any

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Speaker 1: hurry to come back to work. I said, what you know,

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Speaker 1: I said to Alex Sherman twenty minutes ago with a

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Speaker 1: charter ya, look where the price of the stock was

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Speaker 1: when she walked in the door, and look where the

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Speaker 1: price is now. And I just don't get it. I mean,

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Speaker 1: the job of a CEO is to create shareholder value.

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Speaker 1: Was it ugly along the way, yes, but not that ugly.

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Speaker 1: I mean, I'm you know, she created I don't know

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Speaker 1: if she earned these large pay packages that people are

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Speaker 1: talking about, but but the fact is a lot was created,

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Speaker 1: A lot of value was created. Are we looking Joe

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Speaker 1: at h at em and as any kind of significant

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Speaker 1: driver for what you want to invest in right now?

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Speaker 1: I mean, obviously this deal captures everybody's attention, but as

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Speaker 1: we mentioned, it's a small one. Are you looking to

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Speaker 1: em and a where is it in the in the

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Speaker 1: spectrum of things you're looking at these days? Mike? Want

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Speaker 1: one area's energy in the sense that we've got some

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Speaker 1: companies that are pretty going valioup distressed assets. We're looking

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Speaker 1: for companies to stronger companies to kind of buy some

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Speaker 1: distressed assets at very cheap prices and it adds to

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Speaker 1: their portfolio and future earnings. Uh so that's number one.

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Speaker 1: Maybe in the capital goods sector as well, you know,

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Speaker 1: the larger companies buying that one core competency, so that

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Speaker 1: those two in particular some maybe some merchan's acquisition transportation, um,

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Speaker 1: you know where the's see airlines, trucking. So what we're

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Speaker 1: looking for, like companies that have the cash need to

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Speaker 1: that specific core company that helps drive their earnings. But

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Speaker 1: energy number one. We went through a period where everybody

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Speaker 1: was looking at em and A as a way to

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Speaker 1: try to make money, and it does seem to have

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Speaker 1: kind of faded a little bit. Yeah, it makes money

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Speaker 1: for the fine nanciers and the lawyers in that sense.

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Speaker 1: You know when it comes to like the ultimate results,

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Speaker 1: well that takes time so in in some cases now

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Speaker 1: in some cases yes, and but you know it is

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Speaker 1: a time factor. What we try to do here, folks,

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Speaker 1: is slice through the bs within the message, and there's

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Speaker 1: a little bit of that out there. I again, Michael McKee,

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Speaker 1: go back to the idea of the train wreck that

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Speaker 1: she inherited and it was years in years used to

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Speaker 1: sit there and awe, I mean twenty two years twenty

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Speaker 1: four years old. Maybe when the two guys at Stanford

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Speaker 1: invented this thing and it was gangbusters for a while,

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Speaker 1: and then you'd sit in awe, absolutely awe. Here's how

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Speaker 1: they turned They blew it up. Here's a for what

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Speaker 1: It's worth headline. Um, it's just a few words, but

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Speaker 1: it says yahoo Meyer plans to stay. What she's going

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Speaker 1: to do, I don't know part of that company she

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Speaker 1: doesn't have to run anymore, So maybe she'll run this

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Speaker 1: investment house that there talking about. The remainder, which is

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Speaker 1: basically the the Ali Baba shares and the patents, the

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Speaker 1: non core patents. They say, Um, the stuff that doesn't run.

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Speaker 1: The advertising that they had to sell to let's from

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Speaker 1: us trust. Uh is there anything to buy in housing

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Speaker 1: these days? Uh? It's it's been mixing all of a sudden.

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Speaker 1: Now it's getting better. It's getting better. I mean, you

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Speaker 1: know the housing I think of like lows and home Depot,

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Speaker 1: you know that, the traditional I think you know we're

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Speaker 1: looking at good housings. I mean, look where the interest

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Speaker 1: rates cost capital millennials. I do think millennials are gonna

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Speaker 1: like buy homes at some point here in the United states.

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Speaker 1: It's a relatively young population. We create over one million

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Speaker 1: new households every year. So but it's I think it's

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Speaker 1: kind of steady as you go. I kind of like

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Speaker 1: Morey kind of the home depots and lows in that

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Speaker 1: space fix up the house rather than Yeah, I mean

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Speaker 1: and that that's that's that's a trade that's been out

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Speaker 1: there for some time. But you know that. I think

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Speaker 1: that's the space you want to be in. And you know,

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Speaker 1: the appliance makers are doing better the our ports. But yeah,

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Speaker 1: I think it continues. I get a lot of pushback

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Speaker 1: and we're old aging, We're not buying home. That's not true.

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Speaker 1: This is a young population, a lot of household formulae.

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Speaker 1: Where what are you avoiding right now? I mean, it's

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Speaker 1: it's an odd market. Yeah, it's it's I mean avoiding obviously.

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Speaker 1: I mean, you know, ironically to utilities, telecom, I mean,

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Speaker 1: I know, we like the dividend payers and we've got

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Speaker 1: to get paid while we wait, but you know, they're

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Speaker 1: just too expensive. We can find better dividend paying stocks

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Speaker 1: in capital goods, transportation and other places. Mike, I'm trying

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Speaker 1: to get up here. The dividend for Verizon um four

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Speaker 1: point zero three percent with the next to no growth rate,

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Speaker 1: and the stock is enjoining forty five to fifty six.

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Speaker 1: So just this year, you've picked up eleven dollars of

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Speaker 1: share price, captured a snapowl of divid dividend with no

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Speaker 1: prospects of dividend growth. I wonder if what we're seeing

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Speaker 1: with rising stock Joe is what we've seen maybe with

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Speaker 1: some other stocks like this. People are betting on the

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Speaker 1: possibilities of the Internet and these things as opposed to

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Speaker 1: certainly actual revenues. Well I think so, Michael. But at

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Speaker 1: the same time, maybe they're looking at their bills that

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Speaker 1: they get to from the cable companies and and you know,

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Speaker 1: they think like, wow, I'm paying that much, and it's

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Speaker 1: this cost for the service, and it might be falling

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Speaker 1: to the bottom line. So it's a little bit of both.

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Speaker 1: But the earnings backdrop, it's going to have to be

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Speaker 1: pretty supportive to create maintain those dividends. Now joining us

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Speaker 1: Scott Galloway, executive vice president and critique of Yahoo at

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Speaker 1: New York University. Scott, good morning, Good morning, Town. Thanks

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Speaker 1: for having me. You know, you've been way out front

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Speaker 1: on this in what I would call respectful and constructive

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Speaker 1: criticism we just heard from Tim Armstrong and Marty Walden

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Speaker 1: is they rationalize this transaction. Our basic theme with our

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Speaker 1: Alex Sherman is why is Verising doing this? What's the

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Speaker 1: desperation behind this transaction? Tom? I think this is a

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Speaker 1: good thing. I think this is piece with the honor

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Speaker 1: for a great company that's gone from of all digital

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Speaker 1: marketing in two thousand nine to three and a half percent.

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Speaker 1: But as digital marketing continues to grow and there's a duopoly,

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Speaker 1: Verizon sees a hundred million asset, hundred million hands at handsets,

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Speaker 1: excuse me, they see a great leader and Tim Armstrong,

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Speaker 1: they see a market that's growing, and they see a

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Speaker 1: company they can pick up for about five billion bucks.

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Speaker 1: I usually don't like most acquisitions, but I like this one.

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Speaker 1: I think it's a good idea. I think it's I

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Speaker 1: think this is good for Yahoo employees. I think it's

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Speaker 1: good for Verizon. I think it's good for the ecosystem,

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Speaker 1: good for the planet. Does Verizon keep all of what

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Speaker 1: there is of Yahoo now? I mean they clearly want

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Speaker 1: the advertising algorithms. Do they want all the content and

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Speaker 1: the search functions and that sort of stuff? I doubt it.

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Speaker 1: I think they will put more management discipline on the

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Speaker 1: company than has previously been applied. You know, the whole

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Speaker 1: people would probably say that disease, it's afflicted Yeah Who.

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Speaker 1: Over the last ten years was was dancing in too

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Speaker 1: many parties. And Verizon is an incredibly well run company.

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Speaker 1: Tim Armstrong has ended up being kind of the most

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Speaker 1: talented managerial ex googler. My guess is that they're gonna

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Speaker 1: They're gonna streamline this thing and focus on bri roll video,

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Speaker 1: some of the programmatic media and the fact that yeah

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Speaker 1: Who still gets the billion people and the population of Europe,

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Speaker 1: the US, and add in Latin America show up to

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Speaker 1: a yeah whose site every two million email subscribers. Yeah

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Speaker 1: Who finance is a fantastic product. So I think they'll

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Speaker 1: pair some stuff. But there's there's a lot of assets here.

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Speaker 1: This is Verizon billion other company. This is a rounding

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Speaker 1: error for them in terms of this is the change

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Speaker 1: in the couch for them to pay for this. So

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Speaker 1: we've talked a lot about what it will do for

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Speaker 1: for Yahoo. What what does it end up mattering? You know,

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Speaker 1: how much does it end up mattering to Verizon in

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Speaker 1: the long run. Well, if you look at what's growing

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Speaker 1: in digital marketing or in general, where is the growth

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Speaker 1: and all of media and advertising, it's it's really two words.

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Speaker 1: It's it's we're talking about mobile and we're talking about

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Speaker 1: digital marketing. And Verizon with a O, L and L

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Speaker 1: Yahoo has those assets and is now technically a viable

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Speaker 1: competitor to Facebook and Yeahoo, who have excuse me, Facebook

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Speaker 1: and Googles who have FI share, and now with the acquisition,

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Speaker 1: Verizon has five and it's no longer it's no longer duopoly.

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Speaker 1: There is a third player here with some heft and

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Speaker 1: you know, some assets. So I think Verizon gets, as

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Speaker 1: he said, for not an incredibly loot of acquisition, an

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Speaker 1: opportunity to go toe to toe with two players in

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Speaker 1: an ecosystem that's growing, and they have some outstanding att

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Speaker 1: We're staring at our phone screen now more than any

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Speaker 1: other screen, and Verizon knows where you are, has the handsets,

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Speaker 1: and now have some great assets and some great leadership

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Speaker 1: to take a run at the duopoli. I think it's

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Speaker 1: I think it's a good strategy. Let me let me

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Speaker 1: just point out quickly tell him that when Yahoo hit

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Speaker 1: its peak market cap, of a billion. At the start

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Speaker 1: of two thousand, Verizon didn't exist still Bell Atlantic. Six

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Speaker 1: months later they bought GT and formed Verizon Scott. You know,

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Speaker 1: I I look at this and I think, again, your

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Speaker 1: perspective has been really, really wonderful. I'm looking at ad

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Speaker 1: blocking just as you know, to use a Clay Christiansen phrase,

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Speaker 1: the ultimate disruptive force. Do you have a legitimate confidence

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Speaker 1: that a no name Verizon, Yahoo, Rah, who whatever it's

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Speaker 1: going to be can compete with Facebook in far more

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Speaker 1: can compete with Google? I just don't buy it for

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Speaker 1: a minute. I mean, I get it's a triopoli, but

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Speaker 1: they are I mean, this is not Kurtz and Avis.

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Speaker 1: They are massively a third round player. Yeah, it's a

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Speaker 1: fair point, Tom. There they are ARTI, Coola, COCOMPEPSI right,

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Speaker 1: So ad blocking. You know, I generally believe that in general,

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Speaker 1: advertising has become a tax that poor people pay. To

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Speaker 1: your point, well, technological letter people are opting advertising. But

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Speaker 1: there are some assets here that people do want people

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Speaker 1: do like yeah, who content Verizon does have your a

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Speaker 1: screen and a hundred million people's pockets. We call it

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Speaker 1: privacy invasion. Millennials call it relevance as long as you

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Speaker 1: can serve them ads that are relevant to them. And

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Speaker 1: with these assets specifically GEO targeting a hundred million phones

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Speaker 1: and some really good yeah who content, annual content they have,

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Speaker 1: they have a fighting chance or Tom And personally, I

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Speaker 1: have a blast towards this deal because I think when

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Speaker 1: two players are getting ninety cents on every dollar incremental

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Speaker 1: digital spending and Google, it's good to see a third player.

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Speaker 1: So I'm hoping this works. It's also good news for

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Speaker 1: the Yahoo employees. Yeahoo has continued to get great people

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Speaker 1: and they've had very poor leadership and they're about to

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Speaker 1: get great leadership. So I think it's a good thing

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Speaker 1: for the employees of Yahoo who have been through you know,

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Speaker 1: been through heck and back now Tim Arms Joint it

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Speaker 1: was great credit mentioned sk g n A in the

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Speaker 1: dreaded synergy What will be the synergy? What's your experience

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Speaker 1: on the synergy path of someone like Yoh synergy mean

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Speaker 1: in terms of nine thousand foundered bodies, how many go

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Speaker 1: out the door? Well, I know one that's gonna lead,

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Speaker 1: But I don't you gotta think, let me put it

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Speaker 1: this way, you gotta think there's gonna be fewer. Uh.

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Speaker 1: The most of the strategies proposed by the by the

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Speaker 1: private equity guys was what I call a slashing Burman,

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Speaker 1: a recognition this was a mature company and it could

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Speaker 1: it could. Probably I saw one deck of a potential

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Speaker 1: acquire saying that you could take this company down to

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Speaker 1: two thousand people and hold on to the revenues. So

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Speaker 1: I don't know the exact number, but I'm comfortable saying

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Speaker 1: it's going to be less. Scott, thank you so much.

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Speaker 1: We greatly value your perspective and technology and media and

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Speaker 1: particularly your good work over the excuse me, recent number

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Speaker 1: of months on yeah, this day where Verizon will take

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Speaker 1: out You know, Scott Galloway is at New York University.

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Speaker 1: We make a hard rite a Segui over to technical

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Speaker 1: analysis with one of our most popular guests, Louise Yamada

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Speaker 1: Luisia Mata technical research. Louise, the hallmark of Yama on

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Speaker 1: a chart analysis is a long term X axis. You

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Speaker 1: love to look at long charts. If you take a

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Speaker 1: bull market back to can you confirm we're still in

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Speaker 1: a bull market? Well, we certainly have tried to follow

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Speaker 1: what we're seeing in terms of any changes that take place.

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Speaker 1: We had been pretty much concerned about a bear market

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Speaker 1: and we saw down on so many areas um. But

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Speaker 1: over the past couple of months some of the patterns

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Speaker 1: started to turn up and suggest that maybe the market

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Speaker 1: could go higher. And we have seen breakouts through these

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Speaker 1: year plus consolidations, now we could call them rather than

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Speaker 1: tops um, and we have to acknowledge that there's an

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Speaker 1: extension here to the bull market. Yeah, there is technical

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Speaker 1: improvement in folks, this is going to be a little

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Speaker 1: bit geeky charts on radio or sport. And the way

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Speaker 1: I would do this, Louise, is to use a word

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Speaker 1: that you want to use, which is distribution, which is

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Speaker 1: the back and forth within a pattern. What does the

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Speaker 1: distribution tell you now about all those blue chip stocks

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Speaker 1: all of us love to own right now? Well, the

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Speaker 1: distribution pattern took place from lateen to and as we

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Speaker 1: moved into the end of the first quarter of we

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Speaker 1: started to see an evaporation of some of that distribution

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Speaker 1: and more a pattern of accumulation there. For the New

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Speaker 1: York Stock Exchange in particular, you've seen the distribution pattern

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Speaker 1: and then you started to see the beginnings of what

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Speaker 1: looked like a potential reverse head and show bottom, which

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Speaker 1: means that you've had accumulation coming into place over the

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Speaker 1: past month. Can you be comfortable in the market now?

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Speaker 1: People that don't do charts are dying to know from

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Speaker 1: Louisia Mata. Can they have comfort in holding things that

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Speaker 1: have been good for them over the last well five years?

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Speaker 1: Back to the bullmarket? Oh sure, I think that if

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Speaker 1: something is continued up, and there are quite a few

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Speaker 1: stocks that barely recognize the period of distribution and continued

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Speaker 1: to go higher without a blip. But I think that

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Speaker 1: one of the rules of some is always to have

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Speaker 1: a move up a mental stop loss to protect your

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Speaker 1: profits and recognize it and respect it. If the pattern

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Speaker 1: reverses and that stop loss is taken out, you are

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Speaker 1: a wonderful pure technician. Can you see Janet Yellen in

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Speaker 1: your charts? I wish we could. I think maybe the

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Speaker 1: only one that suggests something might be coming is the

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Speaker 1: two year note, which broke the up trend very briefly

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Speaker 1: and has bounced back up above it. We had another

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Speaker 1: breach of the uptrend a little bit earlier, but you

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Speaker 1: have an uptrend that's in place for the two year note.

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Speaker 1: The ten years been a little bit more disappointing. But

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Speaker 1: the two year might be suggesting here that there could

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Speaker 1: be something coming down the line. Well, what would you

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Speaker 1: like to suggest that would be we need to get

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Speaker 1: you in trouble and the world today, what would that be? Well,

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Speaker 1: I'm inclined to think that we should be raising once again,

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Speaker 1: but that's my personal opinion. Like maybe thence with the

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Speaker 1: two years saying we like your personal opinion. Luisia Matta

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Speaker 1: with this, folks, Luisia Matta technical research. I've already had emails. Yes,

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Speaker 1: we will speak to Missa Mata about oil and gold

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Speaker 1: as well. Particularly oil, which is the word I use,

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Speaker 1: folks when it's a technical jumble, is soup. And there's

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Speaker 1: a lot of soupy charts out there not giving me

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Speaker 1: that's cf A level four. You get that soup. Luisia

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Speaker 1: Matta with US and charts. David Rosenberg coming up here

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Speaker 1: in a bit. That's good as well. Rosenberg after your Maana,

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Speaker 1: that's a very cool thing, Louise. Oil to me, it

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Speaker 1: is massive soup. It's massively indeterminate. Can you make a

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Speaker 1: directional call on oil? Well, over the past year, um

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Speaker 1: more and more, the development of a potential reverse head

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Speaker 1: and shoulders bottom. So we've been looking here for the

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Speaker 1: potential for a pull back towards forty two forty to

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Speaker 1: complete a right shoulder. Uh. If forty doesn't hold, then

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Speaker 1: all bets are off and perhaps the formation is aborted.

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Speaker 1: But at the moment, I think that we're looking at

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Speaker 1: the possibility for a bit more of a pullback for

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Speaker 1: the price. If it wholes forty and starts turning up,

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Speaker 1: then perhaps the consolidation will continue in a breakout through

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Speaker 1: fifty would suggest higher prices. But if forty doesn't hold,

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Speaker 1: then maybe you're going to have to go back and

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Speaker 1: test the low. At the moment, we're constructive, the low

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Speaker 1: was in the high twenties. Do we go that far?

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Speaker 1: If we break through forty, um, it's a possibility. That's

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Speaker 1: a possibility. We're not looking for forty to break. You've

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Speaker 1: got a strong moving average right there at forty. UM.

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Speaker 1: It could slip just a little bit lower. But at

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Speaker 1: the moment, we're following this potential constructive pad and we'll

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Speaker 1: see how it forms. Mike, we had a potential constructive

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Speaker 1: pattern this weekend. One of the children actually did the dishes.

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Speaker 1: That's what today I'm curious. Uh. We We've been talking

426
00:24:35,640 --> 00:24:38,560
Speaker 1: to a lot of strategists lately and asking them in

427
00:24:38,720 --> 00:24:43,119
Speaker 1: this world where everything seems to be breaking down and

428
00:24:43,240 --> 00:24:46,800
Speaker 1: models seem to be breaking down, you know, do your

429
00:24:46,840 --> 00:24:49,199
Speaker 1: models work? How do you how do you figure out

430
00:24:49,320 --> 00:24:51,880
Speaker 1: the value of something? And almost all I'm saying it's

431
00:24:52,000 --> 00:24:55,159
Speaker 1: really hard. And I'm wondering if it has affected the

432
00:24:55,320 --> 00:24:57,920
Speaker 1: charts in the same way that we seem to have

433
00:24:59,080 --> 00:25:02,720
Speaker 1: gone into a different kind of environment, maybe a secular

434
00:25:02,840 --> 00:25:06,520
Speaker 1: change in somethings, as the same thing happens for you

435
00:25:06,600 --> 00:25:10,200
Speaker 1: when you're looking at the charts. Well, since we follow price,

436
00:25:10,359 --> 00:25:13,680
Speaker 1: we just take what is given to us and adjust

437
00:25:13,760 --> 00:25:17,040
Speaker 1: our opinions accordingly. But I think that there is certainly

438
00:25:17,640 --> 00:25:21,600
Speaker 1: a once in a lifetime or century problem in the

439
00:25:21,720 --> 00:25:24,200
Speaker 1: fact that we've got so much with negative interest rates.

440
00:25:24,240 --> 00:25:26,480
Speaker 1: I'm I'm not comfortable with that at all, and I

441
00:25:26,560 --> 00:25:28,880
Speaker 1: think it's shifting the way people think. And we've been

442
00:25:29,440 --> 00:25:32,840
Speaker 1: suggesting and it did a little editorial last months suggesting

443
00:25:32,920 --> 00:25:37,119
Speaker 1: whether the stock market isn't where we're experiencing inflation with

444
00:25:37,280 --> 00:25:41,440
Speaker 1: these breakouts, um, and it's not being factored into the

445
00:25:41,480 --> 00:25:45,879
Speaker 1: inflation quotient, so to speak. And uh, we're seeing the

446
00:25:46,520 --> 00:25:50,840
Speaker 1: utilities and the telecoms and the consumer staples doing well,

447
00:25:51,000 --> 00:25:54,160
Speaker 1: breaking out giving us monthly momentum by signals, and you've

448
00:25:54,160 --> 00:25:56,399
Speaker 1: got to ask the question, are we looking at something

449
00:25:56,520 --> 00:25:59,920
Speaker 1: with them that's offensive rather than defensive this time? Because

450
00:26:00,160 --> 00:26:04,480
Speaker 1: of the unique situation, What is it like trying to

451
00:26:05,600 --> 00:26:09,960
Speaker 1: figure out what's going on in in a Fed worlds

452
00:26:10,320 --> 00:26:13,360
Speaker 1: central bank world? Put it that way, where nobody quite

453
00:26:13,400 --> 00:26:14,920
Speaker 1: knows what the central banks are going to do, so

454
00:26:15,040 --> 00:26:17,679
Speaker 1: that influence isn't as easy to figure out. I mean,

455
00:26:17,720 --> 00:26:18,840
Speaker 1: it used to be the Fed would tell you what

456
00:26:18,880 --> 00:26:20,080
Speaker 1: they were going to do and did it. Now they

457
00:26:20,160 --> 00:26:21,320
Speaker 1: tell you what they're going to do, and then they

458
00:26:21,359 --> 00:26:25,359
Speaker 1: don't do it well. I don't think we have a

459
00:26:25,480 --> 00:26:28,760
Speaker 1: chart for the Fed, unfortunately. But in terms of the

460
00:26:29,280 --> 00:26:33,040
Speaker 1: influence of interest rates on stock prices, oh, I think

461
00:26:33,119 --> 00:26:35,840
Speaker 1: that because the interest rates are so low and even negative,

462
00:26:35,920 --> 00:26:38,920
Speaker 1: you're probably getting foreign money coming into as a safety

463
00:26:39,240 --> 00:26:43,880
Speaker 1: safety factor here, and that's possible behind what's happening with gold, Louise.

464
00:26:44,119 --> 00:26:48,720
Speaker 1: What do you do with overpriced blue chip stocks? We

465
00:26:48,840 --> 00:26:53,240
Speaker 1: all know the story dividend growth. An eighteen multiple became

466
00:26:53,280 --> 00:26:57,639
Speaker 1: a multiple. They're either rich, rich, rich, get out of

467
00:26:57,680 --> 00:27:00,600
Speaker 1: the way. They're gonna go down or they're You hold

468
00:27:00,680 --> 00:27:03,360
Speaker 1: them because they're growing their dividend and there's nothing else

469
00:27:03,440 --> 00:27:06,440
Speaker 1: to buy. What do the charts of you know, you

470
00:27:06,520 --> 00:27:10,200
Speaker 1: can name the companies rather than me those name brand

471
00:27:10,400 --> 00:27:14,240
Speaker 1: dividend growing blue chips. What does Luisia Monta do with them?

472
00:27:14,960 --> 00:27:17,479
Speaker 1: We have to follow what the price is giving us.

473
00:27:17,600 --> 00:27:20,320
Speaker 1: And as you mentioned, I think you mentioned Colgate before

474
00:27:20,480 --> 00:27:25,040
Speaker 1: breakout through, you know, extended consolidation. You keep going with

475
00:27:25,160 --> 00:27:28,600
Speaker 1: it and raising your stop loss. That's the only advice

476
00:27:28,680 --> 00:27:32,000
Speaker 1: we can give for the individual investors is to protect

477
00:27:32,040 --> 00:27:35,080
Speaker 1: your capital, keep moving it up until the story isn't

478
00:27:35,119 --> 00:27:38,080
Speaker 1: there anymore. Who is your motta thank you so much,

479
00:27:38,119 --> 00:27:51,000
Speaker 1: greatly appreciate it. David Roseberg is chief economists and chief

480
00:27:51,040 --> 00:27:54,200
Speaker 1: strategists at Lusk and Cheff. He joins us, now we

481
00:27:54,240 --> 00:27:55,920
Speaker 1: don't have any numbers to talk about. What we do

482
00:27:56,040 --> 00:27:58,200
Speaker 1: have a FED meaning to talk about, David, and the

483
00:27:58,280 --> 00:28:01,040
Speaker 1: numbers that we have seen in recent week have started

484
00:28:01,080 --> 00:28:04,320
Speaker 1: to come in better than forecasts of surprise indexes are

485
00:28:04,359 --> 00:28:08,200
Speaker 1: all higher. Does the FED get through this meeting without

486
00:28:08,280 --> 00:28:11,800
Speaker 1: suggesting maybe we raise rates sooner rather than later? Well,

487
00:28:11,960 --> 00:28:13,119
Speaker 1: you know, I think we have to put it in

488
00:28:13,240 --> 00:28:17,280
Speaker 1: the perspective. The data has certainly come in UM above expected,

489
00:28:17,440 --> 00:28:20,159
Speaker 1: but the expectations were pretty low to begin with. So

490
00:28:20,440 --> 00:28:21,639
Speaker 1: you know, look, when you take a look at the

491
00:28:21,680 --> 00:28:25,480
Speaker 1: Atlanta Fed UM model, it's pointing to two point four

492
00:28:25,560 --> 00:28:28,720
Speaker 1: percent growth after call it around one percent in the

493
00:28:28,760 --> 00:28:33,479
Speaker 1: first quarters. So we're still averaging out very tepid growth rates. UH.

494
00:28:33,720 --> 00:28:35,840
Speaker 1: As far as I'm concerned, I think that you know,

495
00:28:35,920 --> 00:28:40,320
Speaker 1: the last FED meeting was a week before Brexit. Uh,

496
00:28:40,560 --> 00:28:45,080
Speaker 1: there was heightened global political concerns. UH. Marcus were certainly

497
00:28:45,120 --> 00:28:47,479
Speaker 1: a lot more jittery than than the they are now.

498
00:28:47,560 --> 00:28:51,280
Speaker 1: With the major averages, you know, testing, they're they're all

499
00:28:51,320 --> 00:28:54,240
Speaker 1: time highs. I think that the one sentence that comes

500
00:28:54,280 --> 00:28:56,360
Speaker 1: out of the statements, of course, the one that talked

501
00:28:56,400 --> 00:29:00,360
Speaker 1: about job growth diminishing, especially after the last non farm

502
00:29:00,440 --> 00:29:02,920
Speaker 1: payroll report. UM. The consent seems to be that the

503
00:29:02,920 --> 00:29:06,640
Speaker 1: Fed's gonna tip its hat towards signaling UM a rate hike,

504
00:29:06,920 --> 00:29:10,040
Speaker 1: you know, as early as September. I'm not so sure

505
00:29:10,080 --> 00:29:12,040
Speaker 1: about that, but you know, if you're gonna ask me,

506
00:29:12,120 --> 00:29:14,720
Speaker 1: do I think that this particular statement will be more

507
00:29:14,920 --> 00:29:18,000
Speaker 1: upbeat on a macro basis, and certainly in terms of

508
00:29:18,080 --> 00:29:20,800
Speaker 1: what financial conditions have done benchmarked against what we had

509
00:29:21,440 --> 00:29:23,719
Speaker 1: in mid June. Um. You know that I'm full square

510
00:29:23,800 --> 00:29:27,600
Speaker 1: with But the Fed, I think the core uh FED

511
00:29:27,680 --> 00:29:31,040
Speaker 1: policy makers signaling that they've got a niche finger right now,

512
00:29:31,400 --> 00:29:33,120
Speaker 1: I'm not so sure. And if they do, I think

513
00:29:33,160 --> 00:29:36,840
Speaker 1: it will be it'll be caveated with so many other

514
00:29:36,920 --> 00:29:39,000
Speaker 1: items that have to happen that I don't think that

515
00:29:39,000 --> 00:29:41,040
Speaker 1: it's going to really spend a dial that much in

516
00:29:41,200 --> 00:29:44,000
Speaker 1: terms of ted futures contracts or the bond market in

517
00:29:44,120 --> 00:29:46,080
Speaker 1: terms of where it's priced right now, well, you think

518
00:29:46,600 --> 00:29:49,400
Speaker 1: maybe they just kind of want to give themselves optionality

519
00:29:49,440 --> 00:29:52,280
Speaker 1: and not have the markets pricing in a first quarter

520
00:29:52,320 --> 00:29:54,680
Speaker 1: of two thousand seven. Team. They're not going to say

521
00:29:54,680 --> 00:29:58,040
Speaker 1: the word September in their statement, no, but they can

522
00:29:58,080 --> 00:30:00,920
Speaker 1: always find some sort of language. My sense is that,

523
00:30:02,320 --> 00:30:05,160
Speaker 1: you know, is it is it the tail or, is

524
00:30:05,200 --> 00:30:08,440
Speaker 1: it um uh you know? Or is it the head

525
00:30:08,480 --> 00:30:11,480
Speaker 1: of the dog here in terms of chasing what uh

526
00:30:11,680 --> 00:30:13,880
Speaker 1: you know? Everybody talks about that the FED now has

527
00:30:13,960 --> 00:30:17,360
Speaker 1: to become less stubblished for more hawkish, But the reality

528
00:30:17,360 --> 00:30:19,680
Speaker 1: has had a good part of what the markets have

529
00:30:19,800 --> 00:30:23,280
Speaker 1: done as partly because you know, the FED, after pledging

530
00:30:23,800 --> 00:30:26,040
Speaker 1: apparently the raise rates four times this year at the

531
00:30:26,120 --> 00:30:29,080
Speaker 1: beginning of the year, um has uh, you know, has

532
00:30:29,320 --> 00:30:31,920
Speaker 1: has gone back on that, and the markets appropably have

533
00:30:32,000 --> 00:30:34,480
Speaker 1: taken out those those tightenings. So you can't have it

534
00:30:34,520 --> 00:30:36,600
Speaker 1: both ways. If the market, for whatever reason starts to

535
00:30:36,680 --> 00:30:39,120
Speaker 1: price in UH, that the FED is going to raise rates,

536
00:30:39,120 --> 00:30:40,960
Speaker 1: and of course it's just rhetoric right now by some

537
00:30:41,240 --> 00:30:44,400
Speaker 1: Wall Street economists and strategists. The futures have priced in

538
00:30:44,480 --> 00:30:48,080
Speaker 1: more but but certainly nowhere close to better than fifty

539
00:30:48,120 --> 00:30:50,360
Speaker 1: on a move this year. But if the market starts

540
00:30:50,360 --> 00:30:52,640
Speaker 1: to price in the FED, what happens next? The US

541
00:30:52,720 --> 00:30:55,360
Speaker 1: dollar starts to strengthen. And if you remember to go

542
00:30:55,400 --> 00:30:57,680
Speaker 1: back to the beginning of the year, um, that was

543
00:30:57,800 --> 00:31:00,200
Speaker 1: one of the factors that was under my need the

544
00:31:00,200 --> 00:31:02,120
Speaker 1: outlook for corporate earning. So it was causing the I

545
00:31:02,320 --> 00:31:05,560
Speaker 1: S M to retreat. And so my sense is that, um,

546
00:31:06,000 --> 00:31:09,680
Speaker 1: you know, the the economy is certainly doing better than

547
00:31:09,760 --> 00:31:11,800
Speaker 1: it was, it's still not doing great, and I think

548
00:31:11,840 --> 00:31:14,360
Speaker 1: the big surprise actually is where inflation is going to

549
00:31:14,520 --> 00:31:17,440
Speaker 1: end up. Yeah, that's right where I wanted to go, David,

550
00:31:17,480 --> 00:31:19,120
Speaker 1: I thought you've been brilliant on this, and of course

551
00:31:19,160 --> 00:31:22,720
Speaker 1: of famous Rosenberg line, inflation is just a forecast, not

552
00:31:22,840 --> 00:31:25,680
Speaker 1: a reality. And then you go over to an idea

553
00:31:25,840 --> 00:31:29,600
Speaker 1: of reflation. If if we don't have inflation and worried

554
00:31:29,600 --> 00:31:35,240
Speaker 1: about importing into our country disinflation and deflation, is it

555
00:31:35,440 --> 00:31:41,680
Speaker 1: possible for any government to truly reflate their economy. Well,

556
00:31:42,240 --> 00:31:45,800
Speaker 1: there is certainly room to reflate, uh, you know, through

557
00:31:45,880 --> 00:31:50,960
Speaker 1: fiscal policy, which hasn't been done really any outside of

558
00:31:50,960 --> 00:31:54,160
Speaker 1: stay China. I guess you could also say Japan. Japan's

559
00:31:54,200 --> 00:31:57,680
Speaker 1: running a fiscal deficit of seven percent of GDP um.

560
00:31:57,800 --> 00:31:59,560
Speaker 1: But you know, when you have a debt to GDP

561
00:31:59,720 --> 00:32:04,480
Speaker 1: of two, you get to what's called Recardian equivalence, where

562
00:32:04,480 --> 00:32:07,040
Speaker 1: the additional fiscal stimulus just get saved and doesn't get

563
00:32:07,080 --> 00:32:11,000
Speaker 1: spent um. Lots of talk obviously among the two candidates

564
00:32:11,040 --> 00:32:14,040
Speaker 1: in the US, as to how far fiscal policy will

565
00:32:14,520 --> 00:32:17,640
Speaker 1: get stimulated next year, but again that's next year's story,

566
00:32:17,720 --> 00:32:19,960
Speaker 1: and who knows how much stimulus we end up getting

567
00:32:20,120 --> 00:32:23,040
Speaker 1: through the House no matter who wins. So you know,

568
00:32:23,120 --> 00:32:25,760
Speaker 1: my sense is this just looking at the data, you know,

569
00:32:25,840 --> 00:32:29,080
Speaker 1: here we've had, UM. You know, oil prices double off

570
00:32:29,120 --> 00:32:32,440
Speaker 1: the lows and the headline inflation rate is one percent.

571
00:32:32,800 --> 00:32:34,760
Speaker 1: I mean, seriously, is that is that all you get

572
00:32:34,920 --> 00:32:38,080
Speaker 1: from old prices doubling from the lows. And what's happening

573
00:32:38,120 --> 00:32:40,840
Speaker 1: now is you're getting the vigorous response UM in terms

574
00:32:40,880 --> 00:32:44,000
Speaker 1: of multiple unit construction. Rental rates are starting to peek out,

575
00:32:44,120 --> 00:32:48,000
Speaker 1: vacancy rates in the apartment sector starting to bottom out

576
00:32:48,040 --> 00:32:51,240
Speaker 1: and hook higher. And the whole inflation story in the

577
00:32:51,280 --> 00:32:54,000
Speaker 1: past year has only been really it's been imputed rent

578
00:32:54,680 --> 00:32:57,040
Speaker 1: UH and actual rents in the CPI data, which is

579
00:32:57,080 --> 00:33:00,320
Speaker 1: what the index you strip out the rental part of

580
00:33:00,480 --> 00:33:04,560
Speaker 1: this inflation story, and the CPI is running negative point

581
00:33:04,640 --> 00:33:06,960
Speaker 1: two on a year of a year basis UM. I

582
00:33:07,040 --> 00:33:09,400
Speaker 1: think that becomes a lot more apparent UM in the

583
00:33:09,520 --> 00:33:12,160
Speaker 1: next several months. And uh, you know, so people be

584
00:33:12,240 --> 00:33:14,200
Speaker 1: talking about, well, the Fed we not have reached its

585
00:33:14,400 --> 00:33:18,920
Speaker 1: unemployment goal, but meanwhile, you know, inflation again. David Rosenberg

586
00:33:19,000 --> 00:33:20,600
Speaker 1: with US, and I really urge you folks to hear

587
00:33:20,600 --> 00:33:24,280
Speaker 1: our podcast with Yacoum Fells of PIMCO as well, who's

588
00:33:24,360 --> 00:33:27,600
Speaker 1: like Mr Rosenberg, speaks of shadow rates which are way

589
00:33:27,680 --> 00:33:33,920
Speaker 1: below way below where the actual visible inflation rate is. Um, David,

590
00:33:34,000 --> 00:33:37,640
Speaker 1: you are the ultimate just the facts economists. What facts

591
00:33:37,680 --> 00:33:41,800
Speaker 1: have you learned about negative interest rates? Well? I think

592
00:33:41,800 --> 00:33:45,120
Speaker 1: what we learned about negative interest rates is that ultimately

593
00:33:45,160 --> 00:33:48,360
Speaker 1: all the end up doing is putting a tax on

594
00:33:48,480 --> 00:33:53,040
Speaker 1: the banks. And if you're ultimately wanting to generate healthy economy,

595
00:33:53,560 --> 00:33:55,360
Speaker 1: I think you need to have a healthy banking sector.

596
00:33:55,560 --> 00:33:59,640
Speaker 1: So I'm actually happy that this is not a policy

597
00:33:59,760 --> 00:34:01,880
Speaker 1: that has been transmitted to North America in or do

598
00:34:01,960 --> 00:34:05,000
Speaker 1: I think it will be, And so far I don't

599
00:34:05,000 --> 00:34:08,880
Speaker 1: see any evidence that it's done anything to recreate a

600
00:34:09,040 --> 00:34:14,240
Speaker 1: confidence or economic acceleration. Um, you know, within the broader

601
00:34:14,320 --> 00:34:19,560
Speaker 1: European economy, especially the Eurozone. So to me, it's a uh.

602
00:34:19,680 --> 00:34:22,320
Speaker 1: If you're going to stimulate policy again, I'd rather that

603
00:34:22,480 --> 00:34:25,800
Speaker 1: that we moved away from strictly monetary towards us some

604
00:34:25,960 --> 00:34:28,800
Speaker 1: fiscal response that ultimately will lie with Germany, which actually

605
00:34:28,880 --> 00:34:32,279
Speaker 1: is running budgetary surpluses right now. But negative interest rates

606
00:34:32,360 --> 00:34:34,800
Speaker 1: right now, to me, is a flawed plot Entrey policy.

607
00:34:35,440 --> 00:34:38,640
Speaker 1: The FED doesn't like it, it's extremely unlikely that they

608
00:34:38,680 --> 00:34:41,960
Speaker 1: would ever adopt it. But is it possible that the

609
00:34:42,040 --> 00:34:47,359
Speaker 1: markets could push negative interest rates upon us. Well, I'm

610
00:34:47,360 --> 00:34:51,120
Speaker 1: not so sure that it's something that the markets are pushing.

611
00:34:51,560 --> 00:34:53,800
Speaker 1: You know. One of the reasons why I suppose that

612
00:34:55,080 --> 00:34:59,279
Speaker 1: you haven't moved to a situation here in the US

613
00:34:59,440 --> 00:35:01,839
Speaker 1: or Canada where rates have got negative is because, um,

614
00:35:02,120 --> 00:35:03,880
Speaker 1: you know, central banks are no longer in the q

615
00:35:04,040 --> 00:35:07,399
Speaker 1: E game. Uh. You a situation where the two parts

616
00:35:07,440 --> 00:35:11,239
Speaker 1: of the world that have negative yields are the two

617
00:35:11,320 --> 00:35:14,400
Speaker 1: areas of the world Japan and stay of your area

618
00:35:14,520 --> 00:35:17,640
Speaker 1: where the central banks there are still aggressively involved in

619
00:35:17,760 --> 00:35:20,600
Speaker 1: quantitative ething, in fact to a point where he'll needs

620
00:35:20,600 --> 00:35:22,479
Speaker 1: to be is so aggressive now in the corporate bond

621
00:35:22,520 --> 00:35:24,640
Speaker 1: market that you have in some cases short from corporate

622
00:35:24,640 --> 00:35:27,880
Speaker 1: credit training and negative yield. Uh So, if you're going

623
00:35:27,920 --> 00:35:30,000
Speaker 1: to convince me that things gonna get so bad in

624
00:35:30,040 --> 00:35:32,240
Speaker 1: the US that the FED is going to re embark

625
00:35:32,360 --> 00:35:35,000
Speaker 1: on quantitative e thing take out more duration and safety

626
00:35:35,000 --> 00:35:36,680
Speaker 1: out of the marketplace at a time when you have

627
00:35:36,840 --> 00:35:40,160
Speaker 1: ongoing captive demand for fixed income out of insurance companies

628
00:35:40,239 --> 00:35:42,920
Speaker 1: and pension funds. Um. Yeah, I suppose you can get

629
00:35:42,920 --> 00:35:45,520
Speaker 1: to that situation where the markets push you, but it's

630
00:35:45,560 --> 00:35:46,960
Speaker 1: not going to just be suck going to be a

631
00:35:47,040 --> 00:35:48,839
Speaker 1: demand issue. It's going to be at the Central Bank

632
00:35:49,640 --> 00:35:52,799
Speaker 1: here follows what they're doing abroad and taking so much

633
00:35:52,840 --> 00:35:55,360
Speaker 1: fixed income product out of the marketplace. Um, you know,

634
00:35:55,480 --> 00:35:58,759
Speaker 1: I don't exactly have a very bullish prognosis for the

635
00:35:58,840 --> 00:36:01,600
Speaker 1: US economy, but I don't exactly believe that things are

636
00:36:01,640 --> 00:36:03,040
Speaker 1: gonna get that bad that if it's going to have

637
00:36:03,080 --> 00:36:06,000
Speaker 1: to reenact quantitative easy to that extent. Well, I'm just

638
00:36:06,080 --> 00:36:09,359
Speaker 1: wondering if you know, the kind of buying pressure from

639
00:36:09,400 --> 00:36:12,279
Speaker 1: overseas that we have seen keeps the pressure on. And

640
00:36:12,320 --> 00:36:14,200
Speaker 1: you've got a call from the folks at City Group

641
00:36:14,280 --> 00:36:19,920
Speaker 1: that we get to a rate on a ten year

642
00:36:20,200 --> 00:36:23,320
Speaker 1: by the first quarter next year, Well that's uh, you

643
00:36:23,400 --> 00:36:26,840
Speaker 1: know again, I wouldn't rule that out entirely. Uh you know,

644
00:36:26,960 --> 00:36:30,120
Speaker 1: we did. We did something I wasn't even anticipating. I

645
00:36:30,280 --> 00:36:32,719
Speaker 1: thought that the lows and the tenure yield were put

646
00:36:32,760 --> 00:36:34,480
Speaker 1: in in July to the Thousan follows when we got

647
00:36:34,520 --> 00:36:36,560
Speaker 1: two around one forty, And of course we broke through

648
00:36:36,600 --> 00:36:38,520
Speaker 1: that a few weeks ago. So I think we're in

649
00:36:38,560 --> 00:36:40,600
Speaker 1: a new and lower range on the tenure no yield.

650
00:36:40,920 --> 00:36:43,400
Speaker 1: And uh, you know, if we do get to one percent,

651
00:36:43,719 --> 00:36:46,160
Speaker 1: which again I wouldn't rule out, it's not my base case,

652
00:36:46,280 --> 00:36:49,080
Speaker 1: but they would take I think more than what you're

653
00:36:49,080 --> 00:36:51,320
Speaker 1: talking about right now, would take more than just the

654
00:36:51,400 --> 00:36:53,600
Speaker 1: pull of lower global bond heels. It would take a

655
00:36:53,680 --> 00:36:56,000
Speaker 1: relapse in news economy to get to those sorts of levels.

656
00:36:56,040 --> 00:36:57,520
Speaker 1: Take a look at what it took to get to

657
00:36:58,239 --> 00:37:00,120
Speaker 1: UM one forty and we've got took one fo. You

658
00:37:00,200 --> 00:37:04,360
Speaker 1: took our sessionary scare from a very poor may payroll number,

659
00:37:04,640 --> 00:37:07,080
Speaker 1: and of course did you political risk coming right out

660
00:37:07,080 --> 00:37:09,520
Speaker 1: of the Brexit. So you'd have to have really a

661
00:37:09,560 --> 00:37:12,120
Speaker 1: combination of things go awry to get yields all the

662
00:37:12,160 --> 00:37:15,240
Speaker 1: way down to one percent UM. You know that said

663
00:37:15,719 --> 00:37:19,680
Speaker 1: one percent isn't isn't negative. And look you go back

664
00:37:19,719 --> 00:37:22,160
Speaker 1: to that whole period for about a decade in the

665
00:37:22,800 --> 00:37:25,759
Speaker 1: early forties to the early fifties. Uh. You know, the

666
00:37:25,840 --> 00:37:29,840
Speaker 1: Fed pegged um uh the long bond deal at that

667
00:37:29,880 --> 00:37:32,719
Speaker 1: point for a decade UM at at two and a

668
00:37:32,719 --> 00:37:35,480
Speaker 1: half percent UM. You know, if the Fed ever wanted

669
00:37:35,520 --> 00:37:39,879
Speaker 1: to abandon, say it's policy of targeting balance sheet, which

670
00:37:39,960 --> 00:37:42,160
Speaker 1: is what it was doing under two weed, the targeting

671
00:37:42,760 --> 00:37:44,799
Speaker 1: long term rates, it could easily do that as well.

672
00:37:44,920 --> 00:37:47,359
Speaker 1: But let's us call it for what it is. If

673
00:37:47,400 --> 00:37:53,719
Speaker 1: interest rates were really um the pennasea for accelerating economic growth, well,

674
00:37:53,920 --> 00:37:56,120
Speaker 1: I mean you've had that in Japan now for a

675
00:37:56,239 --> 00:38:02,600
Speaker 1: quarter century, where the acceleration um. You've had unbelievably easy

676
00:38:02,719 --> 00:38:06,959
Speaker 1: montery conditions. In the Eurozone, where's the acceleration and economic growth,

677
00:38:07,120 --> 00:38:09,560
Speaker 1: or for that matter, in the United States. So we

678
00:38:09,640 --> 00:38:12,239
Speaker 1: have to really think about something else, which is going

679
00:38:12,280 --> 00:38:15,960
Speaker 1: to be through either regulatory policy or through tax and

680
00:38:16,040 --> 00:38:18,840
Speaker 1: spending policy. To me, the answer really lies in fiscal policy.

681
00:38:18,960 --> 00:38:21,920
Speaker 1: So we can talk here theoretically and academically about negative

682
00:38:21,960 --> 00:38:24,520
Speaker 1: interest rates, but the provendent is in the pudding. The

683
00:38:24,560 --> 00:38:29,560
Speaker 1: European economy is still not going anywhere despite uh president

684
00:38:29,680 --> 00:38:32,600
Speaker 1: montery relief. So the answer is gonna lie with fiscal policy. David,

685
00:38:32,640 --> 00:38:36,120
Speaker 1: you you synthesize economics and equities. We've got a number

686
00:38:36,120 --> 00:38:39,120
Speaker 1: of people did. Joe Quinlin and earlier does much the

687
00:38:39,239 --> 00:38:46,040
Speaker 1: same thing. Are you comfortable owning dividend growing big US companies? Uh? Well,

688
00:38:46,120 --> 00:38:48,160
Speaker 1: I think that that theme is going to remain in

689
00:38:48,239 --> 00:38:52,840
Speaker 1: tax you know, until until bond yields rise on a

690
00:38:53,680 --> 00:38:56,280
Speaker 1: on a sustained basis. So look, we have an unusual

691
00:38:56,320 --> 00:38:58,800
Speaker 1: situation now where it's not just where the dividend yield

692
00:38:59,400 --> 00:39:02,880
Speaker 1: the SMP is above the tenure note, it's above the

693
00:39:02,960 --> 00:39:04,680
Speaker 1: long bond yield that I don't know all the time

694
00:39:04,760 --> 00:39:07,719
Speaker 1: that it's happened before. I think the utility stocks are

695
00:39:07,840 --> 00:39:11,120
Speaker 1: way over priced, and you can argue that maybe stables

696
00:39:11,200 --> 00:39:14,839
Speaker 1: telecom to lesser extent um. But yeah, I mean, if

697
00:39:14,880 --> 00:39:19,120
Speaker 1: we're talking about areas of the stock market that generate

698
00:39:19,560 --> 00:39:22,839
Speaker 1: stable cash flows, well that's what the baby boomers want.

699
00:39:22,920 --> 00:39:24,480
Speaker 1: That's not going to go away. You know, we have

700
00:39:24,600 --> 00:39:26,440
Speaker 1: one and a half million people that are going to

701
00:39:26,520 --> 00:39:29,200
Speaker 1: be turning the age of seventy for the next fifteen years. Uh,

702
00:39:29,520 --> 00:39:32,040
Speaker 1: they're gonna they have a fifty chance and making it

703
00:39:32,440 --> 00:39:35,040
Speaker 1: to eighty five or ninety, and they're gonna need to

704
00:39:35,120 --> 00:39:37,640
Speaker 1: have an income flow that the ball market doesn't provide.

705
00:39:37,719 --> 00:39:40,319
Speaker 1: So yeah, the answers in the stock market doesn't mean

706
00:39:40,360 --> 00:39:42,560
Speaker 1: you've got to be in utilities. Um, you know, you

707
00:39:42,640 --> 00:39:46,279
Speaker 1: could be in regional banks, you could be uh in

708
00:39:46,360 --> 00:39:49,759
Speaker 1: the reets, you could be in the MLPs. There are

709
00:39:50,239 --> 00:39:53,200
Speaker 1: vast areas of the market beyond just the traditional safe

710
00:39:53,239 --> 00:39:55,799
Speaker 1: areas like utilities that you can spend off a cash flow,

711
00:39:55,880 --> 00:39:58,040
Speaker 1: even some tech names that didn't even have a dividend

712
00:39:58,120 --> 00:40:02,320
Speaker 1: policy fifteen years ago, or paying out yields of of

713
00:40:02,440 --> 00:40:03,960
Speaker 1: two and a half of three and a half percent.

714
00:40:04,640 --> 00:40:06,879
Speaker 1: So the answer is yes, I think the dividend theme

715
00:40:07,120 --> 00:40:09,000
Speaker 1: doesn't mean you've got to stay in one sector for

716
00:40:10,880 --> 00:40:13,080
Speaker 1: the dividend in the equity market is going to be

717
00:40:13,120 --> 00:40:15,840
Speaker 1: a pervasive one for some time to come. David, thank you,

718
00:40:15,960 --> 00:40:18,200
Speaker 1: thank you, thank you so much. Just fascinating to talk

719
00:40:18,280 --> 00:40:22,200
Speaker 1: to Mr Roseberg Michael about the parsing of price change

720
00:40:22,440 --> 00:40:27,880
Speaker 1: to review inflation. We all get disinflation is not down.

721
00:40:28,719 --> 00:40:35,440
Speaker 1: Disinflation is less inflation, Deflation is priced down and honest

722
00:40:35,480 --> 00:40:41,880
Speaker 1: to god, Michael, reflation is essentially undefined. There isn't really

723
00:40:42,080 --> 00:40:48,120
Speaker 1: a formal description of what societies end up needing to do. Yeah,

724
00:40:48,640 --> 00:40:51,399
Speaker 1: which is interesting. There's a few other things odd things

725
00:40:51,520 --> 00:40:56,480
Speaker 1: like that. Yeah, but after all these years, you still

726
00:40:56,520 --> 00:41:02,320
Speaker 1: got to walk through inflation, disinflation, deflation, reflation. How do

727
00:41:02,400 --> 00:41:07,200
Speaker 1: you define stag inflation? Stagflation is with the economy not

728
00:41:07,360 --> 00:41:10,719
Speaker 1: growing very fast and inflation, right my answers, is a

729
00:41:10,800 --> 00:41:14,759
Speaker 1: recession without the NB are involved. I just want to

730
00:41:14,840 --> 00:41:21,040
Speaker 1: pick Thanks for listening to the Bloomberg Surveillance podcast. Subscribe

731
00:41:21,120 --> 00:41:26,120
Speaker 1: and listen to interviews on iTunes, SoundCloud, or whichever podcast

732
00:41:26,280 --> 00:41:30,240
Speaker 1: platform you prefer. I'm on Twitter at Tom Keane, Michael

733
00:41:30,320 --> 00:41:34,280
Speaker 1: McKee is at Economy Before the podcast. You can always

734
00:41:34,320 --> 00:41:37,200
Speaker 1: catch us worldwide. I'm Bloomberg Radio