WEBVTT - The Fed, Markets, And Cybersecurity (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find a Bloomberg Markets podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.320 at Bloomberg dot com slash podcast. I want to bring 0:00:22.360 --> 0:00:24.279 in our next guest, Matt, because he's got a lot 0:00:24.360 --> 0:00:28.680 of explaining to do. Steve Matthews, US economy reporter Flood 0:00:28.680 --> 0:00:31.639 Bloomberg News. Steve, I want to start with this balance 0:00:31.680 --> 0:00:33.839 sheet thing. It's June one. People are telling me this 0:00:33.920 --> 0:00:36.400 is an important day. The Fed's gonna been shrinking the 0:00:36.400 --> 0:00:39.519 balance sheet. How did they do that? What does it 0:00:39.600 --> 0:00:43.000 mean and what should we be looking out for? So, yes, 0:00:43.080 --> 0:00:48.560 today is the official start of QT, or quantitative tightening, 0:00:48.680 --> 0:00:54.680 and UH, the Fed basically since UH, since COVID happened, 0:00:55.040 --> 0:00:59.920 started increasing the size of the balance sheet by buying treasuries, 0:01:00.000 --> 0:01:05.319 securities and mortgage backed securities and essentially doubled the size 0:01:05.360 --> 0:01:08.959 of the balance sheet to nine trillion dollars. And now 0:01:09.440 --> 0:01:12.920 they've realized that all of this money slashing around in 0:01:12.920 --> 0:01:17.560 the system. Plus low interest rates has created inflation and 0:01:17.600 --> 0:01:20.560 they've got to get that under control. So they're cutting 0:01:20.560 --> 0:01:23.880 the size of the balance sheet by about a trillion 0:01:24.840 --> 0:01:29.199 dollars a year. And they're not selling assets, but as 0:01:29.280 --> 0:01:34.480 the assets mature, as treasury bills or treasury notes uh 0:01:35.240 --> 0:01:39.600 come do, or mortgage back securities when they mature, they 0:01:39.720 --> 0:01:43.959 are not reinvesting the money that matures, and by that, 0:01:44.480 --> 0:01:48.120 by that means they will gradually shrink the balance sheet. 0:01:48.200 --> 0:01:51.240 Thank goodness, they were buying mortgage bonds for the past 0:01:51.280 --> 0:01:53.520 couple of years because I was able to get my 0:01:53.560 --> 0:01:55.840 house at only twice what it costs the last time 0:01:55.880 --> 0:02:00.000 it's sold. You know, Yeah, that that's right, super healthful. 0:02:00.280 --> 0:02:02.600 They may have overdone it a little bit on the 0:02:02.680 --> 0:02:05.320 housing side, and in fact, that is one of the 0:02:05.320 --> 0:02:07.920 big debates at the FED right now is what to 0:02:08.000 --> 0:02:11.840 do with all of the mortgage backed securities because they're 0:02:11.880 --> 0:02:15.640 not maturing. I mean, these mortgage backed securities are you know, 0:02:15.760 --> 0:02:19.520 ten years, thirty years? Uh. You know, people don't when 0:02:19.520 --> 0:02:23.519 you sell your house, the MBS that's associated with it, well, 0:02:23.880 --> 0:02:27.040 the mortgage is paid off, but people don't sell their 0:02:27.040 --> 0:02:31.399 houses that frequently. So getting down getting rid of the 0:02:31.520 --> 0:02:34.120 MBS on their balance sheet. It's going to take a 0:02:34.160 --> 0:02:37.080 long time, which is why they're thinking about selling mbs 0:02:37.160 --> 0:02:39.520 as well. It's crazy that they even thought it was 0:02:39.880 --> 0:02:42.680 necessary at the time, like when we get into the 0:02:42.680 --> 0:02:45.639 pandemic that they say, we better make sure that people 0:02:45.760 --> 0:02:50.520 can and buy houses. I mean they already had houses. 0:02:51.120 --> 0:02:55.080 I mean the house market. There was a great deal 0:02:55.120 --> 0:02:58.160 of fear you had, you know, you had the unemployment 0:02:58.240 --> 0:03:01.400 rate went up to around that there were predictions that 0:03:01.480 --> 0:03:04.360 it could go to I mean Jim Bullard was saying, 0:03:04.600 --> 0:03:09.280 you could have just historically high unemployment. The whole economy 0:03:09.360 --> 0:03:13.120 was shutdown, there were problems with the financial system. So 0:03:13.160 --> 0:03:15.880 I think that you know, they get a pass for 0:03:15.960 --> 0:03:20.919 their initial response, but where you can criticize them fairly 0:03:21.480 --> 0:03:25.720 is they were not very fast and in realizing Okay, 0:03:25.760 --> 0:03:29.760 things have changed now and they need to start and 0:03:29.800 --> 0:03:32.200 now the White House reality and now the White House 0:03:32.240 --> 0:03:36.560 wants us to believe that they're solely responsible for inflation. 0:03:36.720 --> 0:03:38.839 This is fascinating. The last couple of days we've seen 0:03:38.880 --> 0:03:41.680 President by and really passed the book um a couple 0:03:41.760 --> 0:03:45.240 on a couple of occasions. Now he's saying like you 0:03:45.400 --> 0:03:49.920 fix it right, Well, is the FED really the only 0:03:51.320 --> 0:03:53.760 body in the US that has anything to do with 0:03:53.920 --> 0:03:58.280 prices and price stability? I mean, did the influx of 0:03:58.480 --> 0:04:02.640 trillions of dollars in fiscal spending not have anything to 0:04:02.680 --> 0:04:08.920 do with it? Clearly the fiscal spending, fiscal and regulatory 0:04:09.040 --> 0:04:13.560 policy feed into inflation and what's happening. You know, a 0:04:13.640 --> 0:04:17.160 lot of what has happened was initially out of the 0:04:17.200 --> 0:04:21.240 FEDS control. However, the fair point is from the FED 0:04:21.320 --> 0:04:25.479 standpoint is they accepted, they accept the idea that the 0:04:25.560 --> 0:04:28.680 central bank is responsible for inflation, maybe not in the 0:04:28.839 --> 0:04:31.760 very short term, but in the medium and long term. 0:04:32.320 --> 0:04:36.040 And you know, they think that's right that you know, 0:04:36.400 --> 0:04:40.000 it's their job to have price stability. You know, it's 0:04:40.000 --> 0:04:43.120 in the law. They have the tools to bring that about. 0:04:43.640 --> 0:04:46.320 They are supposed to look at what's happening with fiscal 0:04:46.360 --> 0:04:49.760 policy and you know, make a judgment of how that's 0:04:49.760 --> 0:04:53.320 going to feed into inflation. And they got that wrong. So, 0:04:53.520 --> 0:04:56.720 I mean, they take responsibility for kind of screwing it up. 0:04:57.120 --> 0:04:59.960 And it was interesting to hear Janet Yellow. That's why 0:05:00.000 --> 0:05:04.640 I want to go what she's saying. She was wrong 0:05:04.680 --> 0:05:07.920 about inflation. Does that mean the FED also believes it 0:05:07.960 --> 0:05:10.200 was wrong about inflation. What do you take away from 0:05:10.200 --> 0:05:12.479 the admitted it already, she was just a little bit 0:05:12.560 --> 0:05:16.239 late to the party. Yeah, Powell has said that in 0:05:16.279 --> 0:05:19.640 so many words. He has not said that, perhaps with 0:05:20.120 --> 0:05:23.000 the clarity of Janet Yell and saying, hey, we just 0:05:23.160 --> 0:05:26.240 we just blew it, but he has said that in 0:05:26.279 --> 0:05:30.400 so many words that they totally missed the boat. And 0:05:30.600 --> 0:05:34.240 you know that's why we're recovering so quickly now to 0:05:34.400 --> 0:05:38.320 do these fifty basis points hikes which are going to 0:05:38.720 --> 0:05:43.279 happen in June and July and maybe in September as well. Yeah, 0:05:43.279 --> 0:05:46.359 if you if you believe Waller, every single meeting until 0:05:46.400 --> 0:05:49.200 they get inflation back down to the FEDS two percent level, 0:05:49.279 --> 0:05:52.599 right well, until they see clear and convincing evidence, is 0:05:52.720 --> 0:05:57.480 what Powell said, uh, the other day. So you know, 0:05:58.000 --> 0:06:02.000 the real debate at the FOMC right now is on September. 0:06:02.040 --> 0:06:04.359 It's pretty well locked in that we're gonna get a 0:06:04.400 --> 0:06:08.440 half point increase in June and July. And you know, 0:06:08.640 --> 0:06:13.279 you've had Waller come out basically endorsing fifty basis points 0:06:13.279 --> 0:06:16.600 for September. But the flip side is you have like 0:06:16.760 --> 0:06:21.159 Raffael Bostick, the Atlanta head FED head saying maybe we'll pause. 0:06:21.240 --> 0:06:23.600 Then that's what the markets liked earlier in the week, 0:06:23.600 --> 0:06:27.159 all right. Steve Matthews, US economy reporter for Bloomberg News. 0:06:27.200 --> 0:06:29.839 He is based on in Atlantic. With him, we could 0:06:29.839 --> 0:06:31.560 do a whole show with him, and he covers everything. 0:06:31.680 --> 0:06:33.880 He's been doing it for a long time, and uh, 0:06:33.920 --> 0:06:35.720 he knows what's going on, so we love getting a 0:06:35.720 --> 0:06:38.599 few minutes of his time. He got the FED rolling 0:06:38.600 --> 0:06:46.359 off this balance sheet coming into this year and reading 0:06:46.360 --> 0:06:49.200 a lot of preview notes for one of the themes 0:06:49.440 --> 0:06:54.240 was volatility. Get ready and get comfortable with volatility. Employ 0:06:54.320 --> 0:06:58.040 where they right. And that applies to today because just 0:06:58.320 --> 0:07:01.240 earlier this morning, that's he was up thirty thirty two 0:07:01.279 --> 0:07:04.240 points an hour down twenty eight points. I don't know 0:07:04.279 --> 0:07:06.679 why I'm looking at my Bloomberg terminal, but maybe Jess Metton, 0:07:07.240 --> 0:07:09.279 she joins us here in our Bloomberg radio studio, maybe 0:07:09.320 --> 0:07:12.600 she can tell she's a Bloomberg Markets reporter. Jes, I 0:07:12.680 --> 0:07:15.280 know things are moving around here. We saw the yields 0:07:15.280 --> 0:07:16.600 pop up. I mean, what have you seen in the 0:07:16.720 --> 0:07:19.320 equity trading this morning? And maybe over the last week 0:07:19.400 --> 0:07:22.920 or so. A big thing is yields again and having 0:07:22.920 --> 0:07:24.440 them spike, and a lot of it has to do 0:07:24.480 --> 0:07:29.280 with investors recalibrating and pricing in potentially more aggressive moves 0:07:29.360 --> 0:07:33.320 after the next two Federal Reserve meetings. Jerome Palell FED 0:07:33.400 --> 0:07:36.760 chair had signaled that there would be two fifty basis 0:07:36.760 --> 0:07:39.400 point moves at the next two meetings, but investors were hopeful, 0:07:39.520 --> 0:07:42.040 especially because a number of FED speakers have come out 0:07:42.120 --> 0:07:45.920 recently suggesting that potentially they could maybe debate whether there 0:07:45.960 --> 0:07:48.560 could be a pause in reason rates, especially since now 0:07:48.920 --> 0:07:52.920 we have the FED balance sheet runoff starting today. But 0:07:53.120 --> 0:07:57.360 now because a lot of these inflation indicators still very elevated, 0:07:57.400 --> 0:07:59.720 and even outside of the US looking at what's happening 0:07:59.720 --> 0:08:02.440 in your up that's causing those concerns that central banks 0:08:02.440 --> 0:08:04.800 potentially have to be even more aggressive, And now we're 0:08:04.800 --> 0:08:08.120 seeing them trying to bake in potentially bigger reed hikes 0:08:08.160 --> 0:08:11.720 coming up after those two meetings. So we also have 0:08:11.920 --> 0:08:15.960 today's the first day of reducing the balance sheet, and 0:08:16.640 --> 0:08:19.000 are we going to feel the effects immediately? I mean, 0:08:19.760 --> 0:08:22.400 obviously we're seeing a jump in rates right now, but 0:08:22.760 --> 0:08:25.160 that's unlikely that all of us. It kicked in at 0:08:25.160 --> 0:08:29.800 like ten nine, right, But are we going to start 0:08:30.040 --> 0:08:33.280 um hearing about this right away? Our market participants gonna 0:08:33.320 --> 0:08:37.080 say there's no liquidity and great question. And this has 0:08:37.120 --> 0:08:40.600 been telegraphed so much, and FEED chair Jerome Palace tried 0:08:40.679 --> 0:08:43.920 to be careful with his language and FED speakers in 0:08:44.000 --> 0:08:47.079 recent months, just signaling that this would be coming. So 0:08:47.200 --> 0:08:49.600 investors have known for months now and a lot of 0:08:49.640 --> 0:08:52.080 it potentially has some of it been priced in, But 0:08:52.080 --> 0:08:54.280 there's not a ton of historical precedents to go on 0:08:54.360 --> 0:08:57.000 because if you remember did the last time we were 0:08:57.040 --> 0:08:59.560 going through this, the FED was much more patient and 0:08:59.600 --> 0:09:02.640 caution is during that time period, even when it first 0:09:02.720 --> 0:09:05.680 began started trying to raise raids after the financial crisis 0:09:05.720 --> 0:09:09.280 in the December of fifteen, and then obviously a couple 0:09:09.240 --> 0:09:11.680 of years later once we got to that's when the 0:09:11.679 --> 0:09:14.880 FED eventually started their balance shoot runoff. And as you know, 0:09:15.120 --> 0:09:18.000 in the fall of that's when there was obviously less 0:09:18.000 --> 0:09:21.080 liquidity in the system, and there was a big bout 0:09:21.120 --> 0:09:23.640 of volatility that we saw in with the SMP five 0:09:23.679 --> 0:09:26.959 hundred teetering on the brink of a correction that December. 0:09:26.960 --> 0:09:30.280 But the FED did reverse course and stopped hiking rates, 0:09:30.280 --> 0:09:33.120 and then eventually six months later they began cutting rates. 0:09:33.160 --> 0:09:35.720 But it's tough to see if that could even be 0:09:35.840 --> 0:09:39.040 the case this time around, just given how high inflation 0:09:39.120 --> 0:09:41.280 is right now, and so that doesn't really give investors 0:09:41.320 --> 0:09:43.679 conviction that you would see in about phase like that 0:09:43.760 --> 0:09:46.559 with a central bank. You know, you look at the SMP, 0:09:46.720 --> 0:09:49.839 the chart of the SMP, We're beginning June right where 0:09:49.880 --> 0:09:52.480 it started May. Why did we go through all of 0:09:52.520 --> 0:09:55.439 that rigamarole of the month of May when we're back 0:09:55.440 --> 0:09:58.280 to the same place we were before. That's volatility we are, 0:09:58.440 --> 0:10:01.319 and it's it's if a lot of the seasonality indicators. 0:10:01.360 --> 0:10:04.319 If you think of, say, for instance, April historically supposed 0:10:04.320 --> 0:10:07.440 to be a strong month was not for the SMP 0:10:07.559 --> 0:10:09.600 five hundred. You look at May sell the main go 0:10:09.640 --> 0:10:12.120 away that did not follow the case, and June historically 0:10:12.160 --> 0:10:14.960 that June swoon that actually hasn't been the case over 0:10:15.000 --> 0:10:16.760 the past decades. So you look at some of these 0:10:16.760 --> 0:10:19.640 seasonality indicators, it's almost as if they haven't followed the pattern. 0:10:19.720 --> 0:10:21.480 But one of the key things is when I talk 0:10:21.520 --> 0:10:23.840 to strategist, they always bring up the midterm election years. 0:10:23.840 --> 0:10:25.880 So if you look at that seasonality indicator, we are 0:10:25.920 --> 0:10:28.960 actually following that and the second quarter is typically the 0:10:29.080 --> 0:10:32.400 weakest on average, so LPL Financial Crunch the numbers going 0:10:32.440 --> 0:10:34.920 back to nineteen fifty and on average, the second quarter 0:10:35.000 --> 0:10:37.080 usually has a drop of about a little over two 0:10:37.080 --> 0:10:39.280 percent for the SMP five hundred in June is the 0:10:39.320 --> 0:10:41.920 weakest month in the in the midterm election years and 0:10:41.920 --> 0:10:44.600 in the presidential cycle. So in that case it could 0:10:44.600 --> 0:10:47.560 potentially not vote that well for equity markets. But again, 0:10:47.679 --> 0:10:49.960 the SMP five hundreds off to its worst start two 0:10:50.040 --> 0:10:52.680 years since nineteen seventies, so so it's because it's dropped 0:10:52.720 --> 0:10:55.200 so much that could potentially give it some room to 0:10:55.320 --> 0:10:58.480 move higher. But it's tricky to see, especially now that 0:10:58.520 --> 0:11:00.400 we have that balance sheet run off star if that's 0:11:00.400 --> 0:11:02.880 going to ignite another jolt of volatility and market? Do 0:11:02.880 --> 0:11:06.640 you use S E A G. The Bloomberg terminal it's 0:11:06.840 --> 0:11:09.679 called the seasonality chart? Is so cool to use? What 0:11:09.760 --> 0:11:13.240 is it that well? Put in any index or any stock? 0:11:13.400 --> 0:11:16.160 So I have the SMPN and then you type s 0:11:16.200 --> 0:11:20.720 E A G go and the pro tip is on 0:11:20.760 --> 0:11:24.240 the toolbar you click heat map instead of line. Okay, 0:11:24.360 --> 0:11:27.800 got it here right there, you go heat map and 0:11:27.800 --> 0:11:30.160 then you can see the seasonality. You could bring it 0:11:30.160 --> 0:11:33.040 out like twenty years and it just tells you like 0:11:33.200 --> 0:11:35.280 historically this is a good month or a bad month. 0:11:35.360 --> 0:11:40.520 Long have you been in Bloomberg two years? Just the 0:11:40.520 --> 0:11:45.200 I mean you are the function I well two years. 0:11:45.400 --> 0:11:49.200 I love this machine. Um no, So I just think 0:11:49.240 --> 0:11:54.320 it's a fascinating tool. Now in terms of um, you know, 0:11:54.360 --> 0:11:58.120 bottoms up analysis. We thought that there was gonna be 0:11:59.400 --> 0:12:02.439 that that that profits we're gonna continue, that margins were 0:12:02.440 --> 0:12:05.320 gonna stay wide, that things were gonna still be awesome 0:12:05.320 --> 0:12:08.320 this year, and um now it looks like analysts are 0:12:08.360 --> 0:12:13.199 bringing down their expectations of awesomeness due to inflation, right 0:12:13.400 --> 0:12:16.640 they are, so Bloomberg Intelligence crunch these numbers and the 0:12:16.720 --> 0:12:19.520 Ford earnings per share forecast revisions for the SMP five 0:12:19.559 --> 0:12:24.280 hundred are trending lower for each quarter until three now. 0:12:24.320 --> 0:12:26.800 And especially that has a lot to do with what's 0:12:26.840 --> 0:12:31.200 happening with margin pressures and really tied to inflation. And 0:12:31.200 --> 0:12:34.319 and Gina Martin Adams her team at Bloomberg Intelligence, they 0:12:34.320 --> 0:12:38.520 crunched the inflation discussions in earnings calls for the first 0:12:38.600 --> 0:12:41.240 quarter in those discussions for on inflation. They continue to 0:12:41.360 --> 0:12:44.359 rise in those calls more than five mentions on average, 0:12:44.600 --> 0:12:47.520 and they increased more than from the fourth quarter and 0:12:47.559 --> 0:12:50.120 over twenty three times from their loan the first three 0:12:50.120 --> 0:12:54.840 months of one optimistic sign. Supply chain concerns did ease 0:12:54.880 --> 0:12:57.880 for a second quarter, however, they still remained ninety percent 0:12:58.040 --> 0:13:01.600 higher from a year ago. So those are two issues 0:13:01.679 --> 0:13:04.720 that companies are still battling, and especially depending on the 0:13:04.760 --> 0:13:07.959 types of companies that we've had, when you're looking at retailers, 0:13:08.080 --> 0:13:11.640 not necessarily all equal. Right now, you had Target Walmart 0:13:12.360 --> 0:13:15.199 in ending up lowering their profit forecast for the year, 0:13:15.240 --> 0:13:17.400 But then you had Macy's come in and raised their 0:13:17.440 --> 0:13:20.720 sales guidance. And then you had on the discount retailers 0:13:21.280 --> 0:13:24.679 General A Dollar General and Dollar Tree also doing much 0:13:24.720 --> 0:13:27.520 better than expected. And then you have Williams Sonoma that 0:13:27.640 --> 0:13:29.920 ended up doing much better than expected. So depending on 0:13:30.520 --> 0:13:32.959 where you are in the retail space and in looking 0:13:32.960 --> 0:13:37.680 at that discretionary companies, it's it hasn't necessarily been equal, 0:13:37.760 --> 0:13:39.600 and some of the higher end has held up a 0:13:39.600 --> 0:13:41.840 bit better than on the lower end. All right, So 0:13:42.000 --> 0:13:46.320 before you got to Bloomberg News, you were at USA 0:13:46.440 --> 0:13:49.480 Today Wall Street Journal. Before that, she was an Aggie 0:13:50.880 --> 0:13:54.400 and M now Texas A and M is in College Station, Texas. 0:13:54.480 --> 0:13:57.080 I've never been, and there's a reasonable likelihood that I 0:13:57.080 --> 0:13:59.760 will never get the College Station. In thirty seconds, tell 0:13:59.760 --> 0:14:03.200 me abou college Station, Texas. So it's a great place. 0:14:03.280 --> 0:14:05.960 It's in College Station, Texas, obviously, and it's a school 0:14:06.000 --> 0:14:08.000 that has more than fifty students, so you're in a 0:14:08.040 --> 0:14:12.200 small town, but there's more than fifty thou And I mean, 0:14:12.240 --> 0:14:14.079 it's been a while since I graduated. I was a 0:14:14.080 --> 0:14:16.760 class of two thousand tents, so I've been out for 0:14:16.800 --> 0:14:19.560 a while though. But it's one of those definitely tradition 0:14:19.600 --> 0:14:22.800 based type schools. Football was your ten year reunion ruined 0:14:22.840 --> 0:14:25.600 by the pandemic. Did not go to Unfortunately, no ten 0:14:25.680 --> 0:14:28.520 year reunion for me because of the pandemic that happened. 0:14:28.640 --> 0:14:31.480 But you know, I will make it back down there. 0:14:31.760 --> 0:14:35.080 You go to football games. Football, Football's religion down there, 0:14:35.160 --> 0:14:39.120 and especially even high school football is Friday night exactly. 0:14:39.160 --> 0:14:42.239 That's the worst thing ever when I moved to Westchester, 0:14:42.320 --> 0:14:45.280 as I realized they played football on Saturday afternoons. What 0:14:45.400 --> 0:14:50.440 a stupid yea Friday night games. Good stuff. Jess Jess Met, 0:14:50.440 --> 0:14:53.040 an equities reporter for Bloomberg News and a proud Texas 0:14:53.080 --> 0:14:56.400 A and m Aggie getting the latest on College Station Texas. 0:14:59.480 --> 0:15:02.760 Let's check in David Kat's, president and CEO of Matrix 0:15:02.800 --> 0:15:06.160 Asset Advisors. David, you just heard Tim Fury from I 0:15:06.440 --> 0:15:09.240 M talking about some pretty good manufacturing numbers. How does 0:15:09.280 --> 0:15:11.880 that dovetail in with kind of how you guys are 0:15:11.960 --> 0:15:16.360 thinking about this economy as you think about your portfolio. Well, 0:15:16.400 --> 0:15:18.520 we think that this is going to be a difficult 0:15:18.600 --> 0:15:21.360 year for the FED too slow inflation yet keep the 0:15:21.360 --> 0:15:24.600 economy going, but we think they likely will be able 0:15:24.640 --> 0:15:27.000 to pull it off. And the data that you were 0:15:27.040 --> 0:15:29.240 just giving in the conversation you just had sort of 0:15:29.240 --> 0:15:33.040 supports that, Um, the economy is still strong. You just 0:15:33.120 --> 0:15:35.760 had a few banks speaking the last week or two 0:15:35.840 --> 0:15:38.840 that talked about consumers being good and business is being 0:15:38.840 --> 0:15:41.720 good and loans being up. So we think the economy 0:15:41.840 --> 0:15:45.160 is hanging in. Uh. Psychologically, it's a tough environment with 0:15:45.200 --> 0:15:47.520 the FED talking about raising rates as much as they are, 0:15:48.240 --> 0:15:51.040 but we're hopeful that will be able to walk across 0:15:51.080 --> 0:15:54.320 that type ro So even if the Fed raises rates 0:15:54.360 --> 0:15:59.960 another fifty fifty, fifty and fifty is it gonna be okay? 0:16:00.760 --> 0:16:03.920 But we think the FED is talking a very hawkish game, 0:16:04.080 --> 0:16:06.280 so it's set the expectation for a fifty and a 0:16:06.360 --> 0:16:09.080 fifty UM. We think that we're going to start to 0:16:09.080 --> 0:16:13.160 get some inflation relief by the late summer early fall, 0:16:13.640 --> 0:16:15.680 and as that takes hold, we think that by the 0:16:15.760 --> 0:16:17.680 year end, the FED might be able to be a 0:16:17.680 --> 0:16:21.880 little bit less aggressive than currently feared. Uh. It's easier 0:16:21.920 --> 0:16:24.360 for them to talk a hawkish game than to actually 0:16:24.480 --> 0:16:27.400 execute a hawk is game. So we're hoping that that's 0:16:27.400 --> 0:16:30.480 what's going on right now. The market originally thought the 0:16:30.480 --> 0:16:33.240 FED was behind the curve. You don't hear them talking 0:16:33.240 --> 0:16:36.680 about that too much. Right now. People understand that the 0:16:36.720 --> 0:16:39.960 FED is going to break the inflation psychology and the 0:16:40.000 --> 0:16:42.920 inflation cycle. It's just a question can they keep the 0:16:42.960 --> 0:16:46.200 economy going in the meantime, And from where we sit, 0:16:46.360 --> 0:16:49.360 we definitely think that's going to be the case in two, 0:16:49.760 --> 0:16:53.640 but we also think that three still can be a 0:16:53.840 --> 0:16:56.680 reasonably good year in terms of the economy. All right, 0:16:56.720 --> 0:16:58.320 So if I do have that kind of you know, 0:16:58.400 --> 0:17:03.360 twelve month plus horizon, what sectors or what names are 0:17:03.440 --> 0:17:06.679 you guys looking at these days? So, so that's a 0:17:06.680 --> 0:17:09.160 great question. We think the best way to navigate this 0:17:09.200 --> 0:17:11.320 market is to have that twelve month time arising. There 0:17:11.359 --> 0:17:12.639 are a lot of stocks that have a lot of 0:17:12.640 --> 0:17:15.960 short term uncertainty, but on twelve months they should be 0:17:15.960 --> 0:17:18.760 a lot higher. So sectors that we like, uh, first 0:17:18.800 --> 0:17:21.399 and foremost, we think that the financials are going to 0:17:21.480 --> 0:17:23.640 be a very good place to be over the next year. 0:17:24.240 --> 0:17:26.359 We think you can get involved right now with a 0:17:26.359 --> 0:17:30.199 lot of beaten down technology. So we went into two 0:17:30.240 --> 0:17:33.320 a little bit wary about technology. Uh, they've got beaten 0:17:33.359 --> 0:17:37.400 down enough that there are many opportunities right there. Um, 0:17:37.480 --> 0:17:39.480 you know, with the megacap tech we think is a 0:17:39.480 --> 0:17:41.520 good place to be. And then sort of one off 0:17:41.920 --> 0:17:44.199 type of stocks like we like Starbucks here, we like 0:17:44.280 --> 0:17:50.600 air products here. Uh. Paramount Um is a solid business 0:17:50.720 --> 0:17:53.760 at a very attractive valuation. The CEO just brought fifteen 0:17:53.760 --> 0:17:57.000 million dollars worth at the stock or twenty million dollars 0:17:57.000 --> 0:17:59.920 worth at the stock. Excuse me, Starbucks. The CEO bought 0:18:00.040 --> 0:18:02.480 fifteen million dollars rot the stock. Five sir. If you 0:18:02.560 --> 0:18:06.320 had some fairly significant insider buying, so we would take 0:18:06.320 --> 0:18:09.240 our queue from companies that are buying backstock from insiders 0:18:09.240 --> 0:18:11.920 that are buying stock. UM, and if you can buy 0:18:12.119 --> 0:18:15.840 a great company like Google at sixteen seventeen times earnings, 0:18:15.880 --> 0:18:18.160 we think you're gonna do real well. All right, David, 0:18:18.160 --> 0:18:20.240 good stuff. Appreciate yes, sharing some of the names you 0:18:20.240 --> 0:18:23.720 guys are working on. David Kat's president and chief investment 0:18:23.720 --> 0:18:29.960 officer of Matrix Asset Advisers. I guess you know what 0:18:30.040 --> 0:18:32.440 we've all probably experienced over the last couple of years 0:18:32.480 --> 0:18:35.440 during this pandemic is we're doing more and more stuff 0:18:35.440 --> 0:18:38.760 from home. We're working from home, we're going to school 0:18:38.760 --> 0:18:41.720 at home. Thankfully those days are over for most of us. 0:18:42.320 --> 0:18:43.879 But it just kind of goes to the issue of 0:18:43.920 --> 0:18:47.400 identity security, data security, all that stuff. It just really 0:18:47.440 --> 0:18:49.639 comes down and puts it really front and center for 0:18:49.640 --> 0:18:52.960 a lot of folks. Fran Rosh, he's the CEO Forge Rock. 0:18:53.680 --> 0:18:57.640 They are a company that focuses on identity security. So 0:18:57.680 --> 0:18:59.480 it's a good person to check in with. Fran. Thanks 0:18:59.480 --> 0:19:02.439 so much for Joe warning us. UM. Please tell me 0:19:02.520 --> 0:19:05.560 you've got a better mouse trap for identity security. I mean, 0:19:05.560 --> 0:19:08.000 I've got a million user names and passwords out there. 0:19:08.280 --> 0:19:10.800 I've got thumb prints, I got facial recognition. Where do 0:19:10.840 --> 0:19:13.840 you think we're going here? Great? Thanks for having me, 0:19:13.920 --> 0:19:15.480 and I think we do have a better mouse trap. 0:19:15.960 --> 0:19:18.920 And I think what we've seen is this industry evolved. 0:19:19.119 --> 0:19:22.920 I think people used to think about identities of security solution, 0:19:23.000 --> 0:19:25.800 how do I block the bad guys from getting access 0:19:25.840 --> 0:19:29.680 to account data or company information? And we've seen an 0:19:29.680 --> 0:19:34.119 evolution where our c I O and CCO customers are 0:19:34.560 --> 0:19:38.800 increasing demand from the business line. The guy's gall's responsive 0:19:38.840 --> 0:19:42.879 for revenue to create better experiences because identities with the 0:19:42.920 --> 0:19:46.639 front door of the business, whether it's banking, healthcare, e commerce, 0:19:47.320 --> 0:19:50.840 digital streaming, everything is really going digital. So at Board 0:19:50.880 --> 0:19:56.000 Drock we really kind of uh been a revolution revolutionizing 0:19:56.000 --> 0:19:58.680 in a couple of different areas. Helping our customers create 0:19:58.720 --> 0:20:03.240 identity experiences are frictional, it's and easy, well out compromising 0:20:03.280 --> 0:20:06.960 on security and that's our objective. But how how does 0:20:07.000 --> 0:20:09.560 it work? I mean, much like Paul said, you know, 0:20:09.600 --> 0:20:13.040 I have a million different passwords for things. I'm constantly 0:20:13.080 --> 0:20:15.960 clicking to forgot your password button because I have no 0:20:16.080 --> 0:20:21.600 idea what I entered last time? Is there away across 0:20:21.680 --> 0:20:24.800 all accounts and all devices to figure this out in 0:20:24.840 --> 0:20:28.199 a simple with a simple solution, I think there is 0:20:28.200 --> 0:20:31.120 a better way. And and you know, usually and passwords 0:20:31.119 --> 0:20:33.560 have been around for like fifty or sixty years, and 0:20:33.600 --> 0:20:36.080 we look at them as like a lose lose situation 0:20:36.359 --> 0:20:39.359 to both the bad experience and they're bad security because 0:20:39.359 --> 0:20:42.080 everybody uses the same one. So we're working on a 0:20:42.119 --> 0:20:45.880 better way to identify who you are than that static approach. 0:20:46.200 --> 0:20:48.320 And a lot of that comes down to bringing AI 0:20:48.520 --> 0:20:52.120 capability into the identity solution. We can look at your 0:20:52.359 --> 0:20:56.080 user behavior, device behavior. We partner with companies like Apple 0:20:56.119 --> 0:20:59.240 and Google and Microsoft who can serve up certain information 0:20:59.280 --> 0:21:01.760 from your device to find a much more kind of 0:21:01.760 --> 0:21:06.280 behind the scenes, frictionalists and more secure way to recognize 0:21:06.280 --> 0:21:09.159 you and eventually eliminate the user name and password. And 0:21:09.200 --> 0:21:11.560 this is a great application for AI. So how do 0:21:11.600 --> 0:21:14.320 we get there? I mean, what we're sold, right, Paul, 0:21:14.880 --> 0:21:18.080 So what do we do so that Ford Drock can 0:21:18.440 --> 0:21:20.800 get rid of user names and passwords across all of 0:21:20.800 --> 0:21:24.280 our things. A lot of it is change management. So 0:21:24.400 --> 0:21:27.000 many of the organizations that you create those user names 0:21:27.000 --> 0:21:30.240 and passwords with have been around for decades. They've got 0:21:30.240 --> 0:21:33.720 a let of legacy systems and applications and infrastructure, and 0:21:33.760 --> 0:21:37.040 this requires change change on their behalf to kind of 0:21:37.080 --> 0:21:40.879 make that replacement of legacy technology with something modern like 0:21:40.920 --> 0:21:43.920 Ford Drock. And it also means change for the consumer. 0:21:44.320 --> 0:21:46.320 And a lot of consumers we say we want to 0:21:46.359 --> 0:21:49.159 get rid of us name, password, but it's still we 0:21:49.160 --> 0:21:52.120 were comfortable with it. So it's a lot about change management, 0:21:52.119 --> 0:21:56.200 which is why we're getting out there and engaging with enterprises, banks, healthcare, 0:21:56.560 --> 0:21:58.800 e commerce to tell them there is something better and 0:21:58.840 --> 0:22:02.000 to get out and let to know that consumer that changes. Okay, 0:22:02.080 --> 0:22:05.359 you can ditch that old approach, get better experiences and 0:22:05.440 --> 0:22:10.520 better security. How about fingerprint UH and facial recognition? How 0:22:10.520 --> 0:22:15.440