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Speaker 2: Lorid Cavalcina Drench.
Speaker 3: She's said of US equity strategy for RBC Capital Markets, Larie,
Speaker 3: what have you seen so far in earnings that you
Speaker 3: like maybe.
Speaker 4: Don't like it?
Speaker 2: How's the guide in shaping up for you?
Speaker 5: It's a great question. I'm going to get over the
Speaker 5: fact that you said it's only been three hundred and
Speaker 5: thirty five companies, which means we still have ways to go.
Speaker 5: That's our depressing thought for the morning. But now look,
Speaker 5: I think the tagline we've been using is fine but
Speaker 5: not fabulous, and I might put a comma after that.
Speaker 5: Now after having gone through last week where I think
Speaker 5: we had one hundred and fifty five companies, and I
Speaker 5: would say, comma starting to look messy? Okay, And you know,
Speaker 5: I think the overall headline stats are fine. The rate
Speaker 5: of upward revisions to F y one and f y
Speaker 5: two is like sixty one sixty two percent. That's moved
Speaker 5: up from the mid fifties. That's all well and good.
Speaker 5: You know, we watch very closely the Bloomberg Intelligence data
Speaker 5: where they track the bottom up consensus estimates, and those
Speaker 5: have crept up for both twenty twenty five and twenty
Speaker 5: twenty six. If you think about guidance, we've also been
Speaker 5: looking at some Bloomberg data for this as well, and
Speaker 5: so the guidance stats look pretty good. The problem is,
Speaker 5: I think a lot of this was well anticipated, and
Speaker 5: so you know, coming into reporting season, I heard clients
Speaker 5: talking about FX tailwinds. Guess what stocks aren't reacting all
Speaker 5: that well to beats on FX. I've been hearing that
Speaker 5: from my analysts. And if you think about, you know,
Speaker 5: some of these adjustments to guidance, because hey, the tariff
Speaker 5: rate isn't as bad as we initially baked in. Clients
Speaker 5: knew that was coming as well. So you know, I
Speaker 5: think some of this is falling flat. And when we're
Speaker 5: looking at you know, the demand discussion, frankly, was their
Speaker 5: push in, was their you know pull forward? Were their delays?
Speaker 5: I mean, it still sort of seems to be all
Speaker 5: of the above. The tech companies sound pretty good. I
Speaker 5: don't think there's been too much interruption on the AI story.
Speaker 5: But outside of that, it seems like there's a lot
Speaker 5: of confusion as to how much you know, kind of
Speaker 5: pull in actually happened. You're seeing some companies say there's
Speaker 5: a little bit, you know, of improvement. You know, some
Speaker 5: of that paralysis is alleviating. But frankly, Paul, I mean,
Speaker 5: the level of uncertainty still seems very, very high, and
Speaker 5: that that is concerning me right now.
Speaker 6: Well, even though we've had roughly forty percent of the
Speaker 6: market cap by the S and P five hundred reporting,
Speaker 6: now that we're past most of the tech earnings, we
Speaker 6: still have Nvidia on August twenty seventh. But of course,
Speaker 6: I mean you've noted in your notes declinents. We still
Speaker 6: have a number of consumer names coming in the next
Speaker 6: few weeks. So obviously Paul and I were talking about
Speaker 6: earlier when it comes to McDonald's, Disney, but then you
Speaker 6: still have in a few weeks Walmart and Targets. So
Speaker 6: what are you expecting when it comes to the consumer front,
Speaker 6: and specifically what you might hear about tariffs from them?
Speaker 5: So look, I don't think it's going to be awful,
Speaker 5: but it might be a little bit of cold water.
Speaker 5: And the reason I say that is if you think
Speaker 5: about sort of how reporting sea and unfold. We always
Speaker 5: start out with the financials, and we even saw a
Speaker 5: couple of the credit card companies, you know, I think
Speaker 5: last week and the week before echoed this as well.
Speaker 5: The financial like, hey, everything's fine. Spending is still good,
Speaker 5: and you know, like the delinquencies are low, and people
Speaker 5: are still paying their credit card bills, and you know,
Speaker 5: we're just not seeing anything wrong.
Speaker 7: And then you go and.
Speaker 5: Actually listen to the consumer companies that watch what the
Speaker 5: consumer is actually doing, and you know, maybe the word
Speaker 5: cracks is too strong, but I would say the composition
Speaker 5: of the spend is reflecting a concerned behavior. You know,
Speaker 5: one of the food companies last week actually referred to
Speaker 5: the idea of people stress eating chocolate, right that, which
Speaker 5: was probably one of my favorite quotes from last week.
Speaker 5: But you know, we saw other companies say the consumer
Speaker 5: is under stress and that doesn't result in a collapse
Speaker 5: in consumer spending, but there are some concerning things going on,
Speaker 5: not just from the high end, but the low end
Speaker 5: as well. And the Michigan survey on Friday actually showed
Speaker 5: a downtick and consumer sentiment for low end and lowly
Speaker 5: educated consumers. So there is something amiss We're going to
Speaker 5: hear more about, that is my guess.
Speaker 6: And also promotions, because consumer package good companies, especially coming
Speaker 6: into this year, we're talking so much about those types
Speaker 6: of at the grocery store, buy one, get one fifty
Speaker 6: percent off. What are you hearing so far with any
Speaker 6: of that?
Speaker 5: So I haven't been paying quite as much attention to
Speaker 5: the promotion conversation. But this whole idea of the value
Speaker 5: seeking consumer ranging from like the high end to the
Speaker 5: low end is still very much, you know, present, and
Speaker 5: you know, I've noticed some of the food companies have
Speaker 5: been talking about things like smaller pack sizes. I mean,
Speaker 5: this is sort of going with my own lived experience
Speaker 5: as the model like two little boys to just eat
Speaker 5: and eat and eat. So I think that that value
Speaker 5: consciousness is still translating into behavior and you're seeing it,
Speaker 5: you know, especially for these food companies. There's another company
Speaker 5: I forget who it was, but they were talking about
Speaker 5: how food has just become so much more expensive that
Speaker 5: it's radiating in terms of other purchase decisions, and so
Speaker 5: they can really see where consumers are prioritizing their.
Speaker 2: Spend small bit stocks, what's the call these days?
Speaker 5: So, you know, it's interesting with all these developments in
Speaker 5: the last like forty eight trading hours. You know, I
Speaker 5: think the FED meeting last week through some cold water
Speaker 5: on the small cap trade and Friday was a little
Speaker 5: bit of a mix, right because on the one hand,
Speaker 5: you know, we got this jobs report that said, Okay,
Speaker 5: there may be some deterioration in the labor market that's
Speaker 5: beyond what people had assumed. That is bad for small caps.
Speaker 5: You needs, you need jobs growth to be ramping, to
Speaker 5: be getting better for small caps to outperform. Typically flat
Speaker 5: to decelerating jobs growth doesn't work for them. That being said,
Speaker 5: small caps have become the hedge fund communities one of
Speaker 5: their favorite ways to express FED bets. And so you know,
Speaker 5: when people sort of settled down, you know, and started
Speaker 5: to think about, you know, okay, maybe the cuts are
Speaker 5: coming sooner. That feels we'll see how they trade today,
Speaker 5: but that feels like it should breathe a little bit
Speaker 5: of life into markets and a little bit of life
Speaker 5: into small caps. So I would not be short small caps,
Speaker 5: but I'm not I don't have enough conviction to go
Speaker 5: a long yet either, I'd be neutral.
Speaker 6: If you go to the S and P five hundred
Speaker 6: and then the A our function in the terminal, you
Speaker 6: can see where those consensus estimates are for cell site targets.
Speaker 6: And I know, LORI yours is a sixty two to
Speaker 6: fifty for year end right now. That actually just in
Speaker 6: play about a two tenths of a percent increase from
Speaker 6: where the S and P five hundred closed on Friday.
Speaker 6: So what's your view for the second half of the
Speaker 6: year when we're in what's historically the most seasonally weak
Speaker 6: time period in August and September for equities.
Speaker 5: Yeah, so look, we you know, targets have been tough
Speaker 5: this year, right And I think for us it's designed
Speaker 5: to articulate the path that we think the market is on,
Speaker 5: and the path that we think the market is on.
Speaker 5: We feel like it's a fairly neutral one. We see
Speaker 5: risks on both sides. I do think the sentiment rally
Speaker 5: we've seen since April eighth, that's been consistently our most
Speaker 5: bullish modeling, and that feels like it's kind of done
Speaker 5: at the recent highs about what it's supposed to do.
Speaker 5: It feels like we're ahead of twenty twenty five fundamentals,
Speaker 5: and it feels like we've already priced in a lot
Speaker 5: of good news from twenty twenty six. And my concern
Speaker 5: is that maybe twenty twenty six, while not terrible, ends
Speaker 5: up not being crie as rosy as everybody thinks. So
Speaker 5: that could create some volatility. And as you mentioned, Jess,
Speaker 5: I mean, this is seasonal. If you even just look
Speaker 5: the last five years, August is kind of mixed, September
Speaker 5: and October tend to be bad. And if you went
Speaker 5: back and looked at the twenty eighteen trade war, that
Speaker 5: post Labor Day period was when investors really started to
Speaker 5: get concerned based on what they were hearing from companies
Speaker 5: about the ripple effects of that trade war. So I've
Speaker 5: got all that in the back of my head. I
Speaker 5: don't feel bearish. I know, when you're not as bullish
Speaker 5: as everybody else, that's the box people want to put
Speaker 5: you in. But I feel very neutral, and so that's
Speaker 5: really what the target's trying to express.
Speaker 2: Lloyd, thank you so.
Speaker 3: Much for joining us.
Speaker 2: Really appreciate you coming in to our studio.
Speaker 3: Lori Cavacina, head of US equity strategy at RBC Capital Markets.
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Speaker 2: You know what he wanted to talk to, fixing come people,
Speaker 2: cockpit parties. I mean the one in the corner. Nobody
Speaker 2: would be talking to them, no yield, no return. Now
Speaker 2: there's some of the cool kids.
Speaker 6: Now everybody wants to talk to that.
Speaker 3: One of the cool kids is Kathy Jones, chief fixed
Speaker 3: income strategists at Charles Schwab. Kathy, what's the overall called
Speaker 3: here in fixed again? What's Charles Schwab saying these days
Speaker 3: about getting how we should have some exposure to fixed income?
Speaker 4: Good morning, Paul, And no I'm not one of the
Speaker 4: cool kids yet, but I'm trying. How's sad? You know?
Speaker 4: I think that we have been in the camp since
Speaker 4: late last year keeping an intermediate term duration on average,
Speaker 4: meaning somewhere in that five to seven year area for
Speaker 4: an average duration in higher credit quality bonds. We've now
Speaker 4: considered going a little bit longer term. We think that
Speaker 4: these jobs numbers, combined with some of the other numbers
Speaker 4: we've seen lately, do suggest to slow down and activity
Speaker 4: the greater likelihood of FED ray cuts coming, and that
Speaker 4: suggests us that it's not too risky now to extend
Speaker 4: duration a little bit. For I'm here a ten year yield,
Speaker 4: probably not going back to four and a half five
Speaker 4: percent area, probably staying under that four and a half
Speaker 4: And if the FED does end up cutting rates, which
Speaker 4: we think they will in September, then you'll see the
Speaker 4: whole curve shift down, but you probably do a little
Speaker 4: bit better in the intermediate to longer term duration because
Speaker 4: it will be a cut as a result of slower
Speaker 4: economic growth.
Speaker 6: When you're looking at the ten year treasury yield, are
Speaker 6: we in a world we're four and a half percent?
Speaker 6: Maybe the new normal for that?
Speaker 4: Well, I think it's probably at this moment in time,
Speaker 4: the upper end of normal. But yeah, I think you know,
Speaker 4: when we look at where rates were for that long
Speaker 4: period of time, when you know, we couldn't get a
Speaker 4: conversation at a cocktail party because there were so low.
Speaker 4: Now we're going back to you know, what is considered
Speaker 4: more normal. If our normal growth rate is between one
Speaker 4: and a half and two percent. Then a more and
Speaker 4: a half percent ten year yield given two percent inflation, say,
Speaker 4: is probably a more normal kind of standard really yield
Speaker 4: that you would get relative to history. So I think
Speaker 4: that four and a half probably the upper bound for
Speaker 4: the time being, but somewhere around four percent and a
Speaker 4: ten year is probably the new normal.
Speaker 2: Katy, I got credit risk here.
Speaker 3: I'm looking at then GO function on the Bloomberg terminal,
Speaker 3: and I see that the best performance in US fixed
Speaker 3: income has been US corporate high yield. So it looks
Speaker 3: like the market's okay taking some credit risk.
Speaker 2: How do you think about that?
Speaker 4: Yeah, you know, we're a little bit wary of going
Speaker 4: too far down the risk spectrum, the credit spectrum and
Speaker 4: fixing inkin just because you don't get paid for it.
Speaker 4: It doesn't you know, it doesn't give you much spread.
Speaker 4: And the economic fundamentals showing softness means that will probably
Speaker 4: see those default rates go up on the lowest credit
Speaker 4: quality bonds. They're a little bit careful of that. But
Speaker 4: look high yield. As long as there's no recession, you
Speaker 4: get a lot of yield in that yield is what
Speaker 4: gives you the total return. It's been a very calm market,
Speaker 4: and that's a lot of people to hang in there
Speaker 4: in high yield. So our perspective is it's okay to
Speaker 4: have some allocation to high yield. We wouldn't over allocate
Speaker 4: to it, but you have to be ready to ride
Speaker 4: the ups and downs in that. From a long term perspective,
Speaker 4: those yields are pretty attractive and you compound them over
Speaker 4: time and that that gives you a decent total return.
Speaker 4: But you're going to have a lot more volatility there
Speaker 4: and a lot more correlation with equities, So allocation matter,
Speaker 4: Sizing the position in high yield is really important.
Speaker 6: What's top of mind for you on the economic calendar
Speaker 6: this week? I know we have durable goods orders coming
Speaker 6: out at ten a m. New York time later this morning.
Speaker 4: Oh, jobless claims, you know, anything to do with the
Speaker 4: labor market right now is really top of mind for
Speaker 4: us because we've seen such big revisions. We've seen so
Speaker 4: much attention now to the job market. It is a
Speaker 4: bell weather for the FAD obviously because it's part of
Speaker 4: their mandate. So we'll really those weekly jobless claims take
Speaker 4: on a lot more importance now.
Speaker 3: Hey, Kathy, as a bond investor, what's this week dollar
Speaker 3: mean for you guys. I mean, we've seen the stocks
Speaker 3: bounce back, a lot of other risk assets that bounced
Speaker 3: back after the sell off earlier in the year from Liberation.
Speaker 2: Day, but the dollar really hasn't still down.
Speaker 3: The Bloomberg dollar in next is still down about eight
Speaker 3: and a half percent this year.
Speaker 2: What does that mean for bond investors?
Speaker 4: Well, I think it's a good I mean, it's a
Speaker 4: good indication that the market expects those interest rate differentials
Speaker 4: to narrow visa the say Europe and some of the
Speaker 4: other major countries. It makes international investing in bonds a
Speaker 4: bit more attractive. It's been a good ten fifteen years
Speaker 4: since that's really been an attractive option for a lot
Speaker 4: of investors, particularly in developed markets. But now if we're
Speaker 4: going to see the dollar go down, it's a big
Speaker 4: component of return when you invest in international developed market bonds,
Speaker 4: So it means diversification actually is an opportunity. Now you
Speaker 4: still still get somewhat lower yield, but the play on
Speaker 4: the currency side, if we're right that it continues to
Speaker 4: go down, can give you pretty good returns. And actually
Speaker 4: year to date, the strongest performing sub asset class in
Speaker 4: fixed income is international developed market bonds. Because of that
Speaker 4: dropping the.
Speaker 6: Dollar, where do you see the long end of the
Speaker 6: treasury yield curve headed and do you think that will
Speaker 6: remain more stable when you're thinking compared with the short
Speaker 6: end that could potentially rally the Fed does begin to
Speaker 6: lean more dubbish into year end.
Speaker 4: Yeah, we're still looking for a steeper yield curve with
Speaker 4: a short end kind of leaning leading rates down and
Speaker 4: the long end kind of hanging in there coming down.
Speaker 4: Seeing yields come down at the long end, But I
Speaker 4: think given that inflation is still elevated, we have components
Speaker 4: of policy that are bearish for long term bonds or
Speaker 4: at least limit the decline and yields in long term bonds.
Speaker 4: So between deficit financing that's coming up and the inflationary
Speaker 4: impact of tariffs, most likely what we'll see is that
Speaker 4: steeper yield curve, so the whole thing shifts down, but
Speaker 4: much more at the short end that at the longer end.
Speaker 2: Kathy, thank you so much for joining us. Appreciate it
Speaker 2: as always.
Speaker 3: Kathy Jones, chief fixed income strategist at Charles Schwab.
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Speaker 3: Kara Murphy joins is she's a CIO of Kestrip Investment Management. Caar,
Speaker 3: what's the call to your clients these days? Here we've
Speaker 3: got the earning coming in. We've got to fed that
Speaker 3: I guess is going to cut once or twice this year.
Speaker 3: Is that enough to be supportive of risk assets these days?
Speaker 7: I think that's the That's the important question. And what
Speaker 7: we've seen is this like battling narrative between policy uncertainty
Speaker 7: and big changes when it comes to things like tariffs.
Speaker 7: But then underlying, when you look at companies earning potential,
Speaker 7: it continues to come in quite strong. So obviously we've
Speaker 7: seen a lot of noise from tariffs coming into you know,
Speaker 7: you saw GDP much weaker in the second quarter. You've
Speaker 7: seen earnings take a slow down in the second quarter.
Speaker 7: Late last week we had their revised jobs numbers coming down.
Speaker 7: So it's definitely taking an impact. But then when you
Speaker 7: hear companies talk about their outlooks for the second half,
Speaker 7: those are still coming in pretty good, and so those
Speaker 7: will continue to support stock prices.
Speaker 4: Well.
Speaker 6: City Group was pointing out Stukeiser how they're crunching some
Speaker 6: of the numbers here. The S and P five hundred
Speaker 6: average stock has moved about five point two percent in
Speaker 6: either direction for the second quarter earning season, and that's
Speaker 6: the and their data history going back to twenty twelve
Speaker 6: at this point in the earning season cycle. So I'm
Speaker 6: actually curious when you're looking at these kind of names, Kara,
Speaker 6: as far as when you're having more volatility within some
Speaker 6: of these single stocks, where are you seeing those types
Speaker 6: of opportunities and what are you buying?
Speaker 8: What are you selling?
Speaker 7: Yeah, And I think it's very interesting to point to that,
Speaker 7: because when you look at, say, like the percentage of
Speaker 7: companies who are beating estimates relative to what you typically
Speaker 7: see in history, we're pretty much on the nose with
Speaker 7: long term averages. So in terms of like the overall
Speaker 7: earnings power of the S and P five hundred companies,
Speaker 7: they are about like where we had expected them to be.
Speaker 7: But you're right, and that what we've seen that's different
Speaker 7: this particular season is that investors are rewarding those who
Speaker 7: beat and punishing more those who miss. So I think
Speaker 7: part of this is that as you think about the
Speaker 7: rebound that we had off of the low in the
Speaker 7: market in late April, it was sort of a buy
Speaker 7: everything type of rally. Now, as we're seeing numbers or
Speaker 7: under standing a little bit more how individual companies are impacted,
Speaker 7: you're seeing the market really differentiate between those who can
Speaker 7: earn and those who are struggling.
Speaker 5: Parah.
Speaker 3: This is an equity market that increasingly is concentrated in
Speaker 3: you know, a handful a dozen names, big tech names,
Speaker 3: and I don't know, I learned in business school that's
Speaker 3: not necessarily a good thing. How do you think about
Speaker 3: that as a risk, maybe as an opportunity, I'm not sure.
Speaker 7: I think this is definitely a risk for broad market investors.
Speaker 7: And this is one of the main risks that we
Speaker 7: had pointed to at the beginning of the year. So
Speaker 7: this high valuations and policy uncertainty. So we saw policy
Speaker 7: on uncertainty rear its ugly head in the second quarter.
Speaker 7: But then with this rebound in the market, we are
Speaker 7: back to like a super concentrated market, and as long
Speaker 7: as those like Magnificent seven names or whatever's leading the market,
Speaker 7: as long as those names continue to be able to
Speaker 7: show earning's power, I think we're okay. That said, that
Speaker 7: concentration combined with really high valuations make a market more vulnerable.
Speaker 7: That doesn't mean it's going to turn down, but if
Speaker 7: that earnings picture starts to change, then the whole index
Speaker 7: is really at risk. So we've been, you know, big advocates.
Speaker 7: We think twenty twenty five is the year of the
Speaker 7: diversification trade, which hasn't been a very sort of sexy
Speaker 7: thing to talk about, but we've seen it actually work.
Speaker 7: So bonds suddenly matter, Owning things outside the US suddenly matters.
Speaker 7: We think it's important to own things outside of those
Speaker 7: big names, and that's going to provide you the cushion
Speaker 7: that you need over the next couple of years.
Speaker 6: Of course, we have Palenteer reporting after the Bell today,
Speaker 6: another big name that has moved markets and especially had
Speaker 6: been added to the S and P five hundred most
Speaker 6: recently too. When you're thinking about some of these names
Speaker 6: that are coming up, what's the most important company names
Speaker 6: to you that you're going to be keeping a close
Speaker 6: eye on as far as waitings and what could move
Speaker 6: markets more so so.
Speaker 7: I think, you know, we've talked a lot about the
Speaker 7: AI trade, and obviously that's been a really important mover
Speaker 7: of the markets over the last couple of years, and
Speaker 7: it's important not just for those individual companies, but what
Speaker 7: it means for things like productivity of the US economy,
Speaker 7: you know, for the foreseeable future. Think that's going to
Speaker 7: continue to be a trend. So being able to hear
Speaker 7: not just about the capital investments being made there that's
Speaker 7: almost easy to do, but what are the actual returns
Speaker 7: on those capital investments?
Speaker 3: Ker fixed income? What's the play here for you? Because
Speaker 3: I look at the returns on the Bloomberg Total Return
Speaker 3: in next I see corporate high yield has been the
Speaker 3: best returner this year.
Speaker 7: Yeah, and typically that's like the most correlated with equity returns.
Speaker 7: So it kind of makes sense is you have a
Speaker 7: big rallying market that that's going to perform well. That said,
Speaker 7: we have some of the same issues in that asset
Speaker 7: class that we do in some of the really large
Speaker 7: equities in that there's not a lot of risk priced
Speaker 7: into those markets. So you have extremely tight credit spreads.
Speaker 7: That said, when we look at like corporate America overall,
Speaker 7: we think it's fairly healthy, and so we be biased
Speaker 7: towards more higher grade corporates where you can get a
Speaker 7: little bit more absolute yield, but you're not as vulnerable
Speaker 7: to say it turned down in credit.
Speaker 6: So when you're speaking with clients, what are their top
Speaker 6: concerns whenever they're speaking with you right now.
Speaker 7: Well, it often depends what side of the aisle they're on.
Speaker 7: So folks on the left of the aisle are very
Speaker 7: concerned about policy risk, political encroachment of you know, sort
Speaker 7: of economic institutions. If you're on the right side of
Speaker 7: the market, I think you feel or sorry, right side
Speaker 7: of the political isle, I think you feel a lot
Speaker 7: better generally about the market. And they're focusing more on
Speaker 7: some of the things like the policy changes that we
Speaker 7: got with the one big beautiful bill, accelerating capital investments,
Speaker 7: that sort of thing.
Speaker 2: Karen, thanks so much for joining us.
Speaker 3: Appreciate it as always, Kara Murphy, cio of Kestre Investment Management.
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Speaker 3: S a best day All office CEO O Wes Advisory.
Speaker 3: She's in our studio here, which is a very good thing.
Speaker 3: What are you doing with these markets here? I mean, boy,
Speaker 3: we've had an unbelievable volatility to get to hear the
Speaker 3: early parts of August. Now we're up eight nine percent.
Speaker 3: It's like nothing happened. But it's obviously been a very challenging,
Speaker 3: volatile year to date.
Speaker 2: How do you reset for your clients here in August.
Speaker 9: We're having lots of conversations, but to be honest, we're optimistic.
Speaker 9: We're excited about the markets moving forward. They are vulnerable, right,
Speaker 9: so we're paying attention to that. But we're having a
Speaker 9: lot of conversations with clients. For clients that don't need
Speaker 9: to have as much stock exposure, we're rebalancing, we're pulling back.
Speaker 9: We have our cash set asides. First things first, what's
Speaker 9: your cash flow need for the next twelve eighteen months,
Speaker 9: So we have that cash aside, But for the rest
Speaker 9: of it, we're excited on equities, not only public equities,
Speaker 9: but private markets as well.
Speaker 6: When we last spoke in June, you were neutral weight equities.
Speaker 6: Are you still neutral?
Speaker 8: Still neutral weight?
Speaker 9: We still have the same mix of public equity exposure,
Speaker 9: quality growth companies and some dividend stocks. That's the primary
Speaker 9: focus of our portfolio. We did increase also our international
Speaker 9: exposure slightly since then, but for the most part, our portfolio,
Speaker 9: our public equity portfolios are intact.
Speaker 8: Over the last few.
Speaker 6: Months, we're internationally, do you see opportunities mainly Europe?
Speaker 9: It's mostly Europe exposure. That we have a little bit
Speaker 9: of emerging markets, but it's mainly Europe that we added
Speaker 9: to that.
Speaker 8: You know, the defense spending that the German Germans or
Speaker 8: were committed to.
Speaker 9: That takes some time to play in, but we expect
Speaker 9: that going forward. So you're is the biggest international exposure.
Speaker 3: How much cash are you holding now versus maybe, I
Speaker 3: don't know, kind of an average for you.
Speaker 9: Guys, we're pretty fully invested for the clients that don't
Speaker 9: need cash, Okay, okay, So for anyone that doesn't need
Speaker 9: cash or doesn't expect.
Speaker 8: To need cash, we're pretty fully invested.
Speaker 9: Having said that, we do have some fixed income set
Speaker 9: asides because life happens, and of course unexpected cash needs
Speaker 9: come up.
Speaker 8: But for those that have.
Speaker 9: A monthly or annual distribution, I have twelve to eighteen
Speaker 9: months of cash aside. For everybody else, I want to
Speaker 9: be fully invested. And you know that doesn't mean we
Speaker 9: can't take advantage of the dips with our fixed income exposure,
Speaker 9: but I want to be fully invested.
Speaker 6: One of the defensive names that you had brought up
Speaker 6: the last time we were speaking was Lockheed Martin. When
Speaker 6: you're looking more specifically in the US, how are you
Speaker 6: viewing that stock now?
Speaker 9: So you know, going back to the European theme, the
Speaker 9: European defense spending that I think will play out, Lockheed
Speaker 9: Martin has a good percentage of their of their revenues
Speaker 9: coming from overseas. So still positive on that name. Even
Speaker 9: more so, I'll say, you know that's a defense company,
Speaker 9: of course, Defense.
Speaker 8: Tech shield AIE. So I'm looking more so in the
Speaker 8: private market.
Speaker 9: So we have our public exposure with Lockheed, but looking
Speaker 9: at some private markets as well, So and or Ill
Speaker 9: you may have heard of Defense Tex Shield AI. That's
Speaker 9: another exciting one. So again looking at defense not only
Speaker 9: in public but private market's more interesting.
Speaker 7: It's kind of where I.
Speaker 3: Want to go because in your notes you say you
Speaker 3: like venture growth. What is venture growth and how do
Speaker 3: you get your client's exposure to venture growth?
Speaker 9: Yes, great question. So venture growth private companies. They're not
Speaker 9: early stage venture. These are companies that are closed to
Speaker 9: profitability or at profitability or in line of sight of
Speaker 9: profitability two to three years out from an IPO or
Speaker 9: an M and a liquidity event. But venture growth companies
Speaker 9: have been you know, we saw the peak of venture
Speaker 9: bubble in twenty twenty one. Since then, valuations have been
Speaker 9: pretty muted, so posed to public markets where valuations are
Speaker 9: on the higher end. And we have a concentration in
Speaker 9: the SNP right, forty percent of the s and P
Speaker 9: made up of ten names looking at private markets. So
Speaker 9: how do we get access It's it's a lot of work.
Speaker 9: We do have a fund set up. That first fund
Speaker 9: is closed. I mentioned Andreil shield Ai that fund is closed,
Speaker 9: but we have a fund. We bring investors together and
Speaker 9: we do a lot of networking, deal making, talking to
Speaker 9: a lot of different people to get access to some
Speaker 9: of these private companies.
Speaker 6: And speaking of those private companies, something you brought up
Speaker 6: in recent months was Recess when it comes to those
Speaker 6: alternative soft drink makers, talk to us more about that
Speaker 6: for people who might not know enough about that and
Speaker 6: why you see those types of opportunities there.
Speaker 8: Sure, So Recess is a beverage company.
Speaker 9: You may have heard magnesium helps us sleep that night,
Speaker 9: makes us calm down, relax, So maybe you want to
Speaker 9: try some Recess drinks. What's been interesting is the growth
Speaker 9: rate of beverages Better for You beverages and all non
Speaker 9: alcoholic beverages. That growth rate has been faster than alcoholic beverages.
Speaker 9: So Recess is one of those companies that that has
Speaker 9: that magnesem and more calming effects. So if you don't
Speaker 9: want an alcoholic beverage because you don't want the effects
Speaker 9: the next day, this is a healthier.
Speaker 8: And you know a lot of the younger generation looking
Speaker 8: at you.
Speaker 9: Know, wellness and health care. How are we more healthy?
Speaker 9: So this plays right into that space.
Speaker 2: It's like when I'm thirsty, I get some water to drink.
Speaker 2: The kids hydrate. That's the difference.
Speaker 3: I'm like, why are you filling up a jug of
Speaker 3: water when I need to get back to the studio
Speaker 3: in thirty seconds to fill up my little cup of water.
Speaker 5: You're never draating.
Speaker 2: They are okay, all right, very good alternatives. So ASTI,
Speaker 2: how do you guys think about alternatives?
Speaker 3: Like as an allocation? Is it five percent, is it
Speaker 3: zero or is it something more?
Speaker 9: It's more so alternatives broad category. So there are different
Speaker 9: kinds of alternatives. But let's say in our typical portfolio
Speaker 9: of a seventy percent equity or what was thought of
Speaker 9: as a typical seventy thirty portfolio, we have a good
Speaker 9: ten to fifteen percent of alternative investments, not only private
Speaker 9: equity and venture growth, but structures as well.
Speaker 2: Interesting.
Speaker 3: I mean, there's a lot of ways to go out there, folks,
Speaker 3: and smart people like Sevesti Balafas they figure it out
Speaker 3: for you. Sevesti Balafas, CEO of Goal West Advisory, joining
Speaker 3: us here in our Bloomberg Arrecti Broker studio. We appreciate
Speaker 3: getting a few minutes of time here.
Speaker 2: Up.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Apple Corplay and Android
Speaker 1: Auto with the Bloomberg Business app. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station.
Speaker 1: Just say Alexa Play Bloomberg eleven thirty.
Speaker 2: Newspapers, Lisa Miteo, what do you have for us today?
Speaker 2: This one?
Speaker 10: Actually I want to ask you a question before I
Speaker 10: get this, because this one is have any of you
Speaker 10: how many of your kids have gone to grad school?
Speaker 10: Have they gone?
Speaker 8: None?
Speaker 2: They're all working? Okay, Okay, I have one more to go.
Speaker 2: So that's it.
Speaker 10: Yeah, so that ties into like this next story. That's
Speaker 10: why I want to ask you about it. So this
Speaker 10: is in the Wall Street Journal. It's talking about how
Speaker 10: the tough job market, like a good case for college
Speaker 10: grads is to do that so that it makes you
Speaker 10: stand out. But now they're saying, is the extra debt
Speaker 10: worth it? And that's what these kids are facing. So
Speaker 10: you know, they had the unemployment rate for graduates fell
Speaker 10: in May. AI is taking out some roles, uncertainty around
Speaker 10: the impact of higher tariff so companies cutting back or
Speaker 10: slowing hiring, those are the things that they're facing. So
Speaker 10: now experts are telling the Wall Street Journal, here's what
Speaker 10: you need to do. You have to look at how
Speaker 10: much of a salary boost you can expect to get
Speaker 10: from that advanced degree, and then how much of a
Speaker 10: burden that total debt load is going to be, and
Speaker 10: that's what they should be asking themselves.
Speaker 2: I don't know.
Speaker 3: My dad told me I'll pay through undergrad and then
Speaker 3: anything after that, you guys pay.
Speaker 2: So my sister went to law school, she paid. I
Speaker 2: went to business school. I paid. I thought that was
Speaker 2: a pretty good deal. That's to my kids, Okay. But
Speaker 2: if number four comes up to me and says, hey,
Speaker 2: I want to do something, I might, I might.
Speaker 6: You might feeling this cost for a master's degree is skyrocketing.
Speaker 10: Well, that's what changes in the in the spending and
Speaker 10: the spending.
Speaker 2: So for a lot of people like I get. I
Speaker 2: was on the board of the Duke Business School for
Speaker 2: twelve years. For still a lot of kids today, if
Speaker 2: you want to make a career change, it's still a
Speaker 2: good way to go. There you go. Okay.
Speaker 10: This one was from the New York Times. So Curtis
Speaker 10: leewall right, you know, the Republican nominee from mayor.
Speaker 2: He's been sporting.
Speaker 10: This new look lately. He's been ditching that Guardian Angels
Speaker 10: red beret. You know, he's known for wearing it the
Speaker 10: red jacket for a suit, especially when he meets with
Speaker 10: like business leaders. Union officials things like that. He's also
Speaker 10: said he will keep it off permanently if he is
Speaker 10: elected in November. So he's telling The New York Times
Speaker 10: that some people are turned off by it because they
Speaker 10: say it has this revolutionary look to it. So if
Speaker 10: it takes you know, him taking it off to have
Speaker 10: people listen to him, he wants to do.
Speaker 3: We interviewed him three weeks ago here at Bloomberg in
Speaker 3: this studio.
Speaker 2: I interviewed him. He had he had it on, Yeah,
Speaker 2: but had the suit on. I don't know. It's just
Speaker 2: to me, I've always known him with it. It's just
Speaker 2: like his trademark shown him.
Speaker 10: It's like up Tom he always has the bow type,
Speaker 10: but sometimes he has And it's funny because people are saying, Oh,
Speaker 10: didn't recognize.
Speaker 4: Him right without the bridge wearing. So that's a different sector.
Speaker 10: And so this one is up your alley Wall Street Journal.
Speaker 10: This is the AI struggles for Hollywood studios. So what
Speaker 10: they're doing, especially Disney as an example of they give
Speaker 10: it says bounce over how to use AI in the
Speaker 10: filmmaking process and then how to protect themselves.
Speaker 4: Against it at the same time.
Speaker 10: So Disney, I didn't even realize this when it began
Speaker 10: working on that live action version of Mowana, they actually
Speaker 10: considered whether to clone Dwayne Johnson for it. So apparently
Speaker 10: Johnson has a cousin who.
Speaker 8: Looks just like him.
Speaker 10: He's six foot three, he's two hundred and fifty pounds, Okay,
Speaker 10: so yeah, so he would fill in as this body
Speaker 10: double for a few shots. Disney would work with like
Speaker 10: this AI company to make these like deep fakes of
Speaker 10: his face that would be layered on top of his
Speaker 10: cousin's body.
Speaker 4: So, but the problem that.
Speaker 10: Disney attorneys were like, I don't know about this because
Speaker 10: they can't claim ownership over every element of that that
Speaker 10: the firm if it's AI generated in part. So this
Speaker 10: is like that struggle they're dealing with. We want to
Speaker 10: do this technology, but you know, do we still own
Speaker 10: it or what are the repercussions from using it? And
Speaker 10: what are the fans going to say? You know, like
Speaker 10: that's not the real rock. I mean, come on, you
Speaker 10: would know.
Speaker 2: No, I don't know.
Speaker 3: I mean this whole AI and the content creation thing,
Speaker 3: I don't know how that's all gonna.
Speaker 4: Work movie studios.
Speaker 2: It's going to be a change.
Speaker 10: But it's this back and forth struggle for that.
Speaker 2: Very good lisha mateo with the newspapers.
Speaker 1: This is the Bloomberg Surveillance Podcast, available on Apple, Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,
Speaker 1: seven to ten am Easter and on Bloomberg dot Com,
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