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Speaker 3: Joining us now.
Speaker 4: From Morgan Stanley Mike Wilson, their CEO and chief US
Speaker 4: equity strategist, thrilled that he will be with us for
Speaker 4: this extensive half hour, and say good morning to Global
Speaker 4: Wall Street. Mike Wilson, I'm going to do this in
Speaker 4: a classy way and I'm not going to mince words
Speaker 4: about it.
Speaker 3: I'm death on.
Speaker 4: Fan distribution analysis where you So I've talked to Dominic
Speaker 4: Constant and Credit Sweee and Amozoa about this. You set
Speaker 4: up a single point now and you do a set
Speaker 4: of what ifs three years out, five years obtained years,
Speaker 4: and you come up with a pretty little fan of
Speaker 4: what ifs. I don't see that in Mike Wilson research.
Speaker 4: I see guestimates, the rigor of an Excel spreadsheet. I
Speaker 4: see single points, scattered dot charts. Can fam distributions like
Speaker 4: one of your competitors came up with this week to
Speaker 4: give us a three percent SPX. Can fan distributions work.
Speaker 3: Well?
Speaker 5: I think it depends on how you utilize them. I
Speaker 5: mean we we do a bullbear based case. We've done
Speaker 5: that for you know, the duration of as long as
Speaker 5: we've had this job, and I think every investor does that.
Speaker 5: It's called a risk reward. It's what's my upside, what's
Speaker 5: my downside? And then you basically skew your you know,
Speaker 5: your positioning based on whether you think the downside or
Speaker 5: upside case is more likely. Whether we're talking about a
Speaker 5: single stock or the S and P five hundred, So
Speaker 5: it's no different.
Speaker 6: I don't think that's a unique approach.
Speaker 5: I think that's the way most investors think about how
Speaker 5: to put money to work, and so I think I
Speaker 5: think it works.
Speaker 6: But I mean doesn't mean you're going to be right.
Speaker 6: That's the That's the thing.
Speaker 5: Like like do you bet on the bull case or
Speaker 5: you've been on the barcase at any given time?
Speaker 6: Depends on how they go out. Is it play out
Speaker 6: the way you think it plays out?
Speaker 4: Paul, you live this it credits suite where Dominique was
Speaker 4: sitting there trying to do extrapolations in future forecasts of
Speaker 4: interest rates, and he and Irid Jersey have these wispy
Speaker 4: little charts that they.
Speaker 3: Enjoyed being wrong on for over a decade.
Speaker 7: Exactly right. And so, Mike, you know, one of the
Speaker 7: things I think a lot of investors are thinking about
Speaker 7: here is we think about it kind of what's the
Speaker 7: next leg to this market in any direction? Is what's
Speaker 7: going to lead us? There is you know, kind of
Speaker 7: for most of our listeners and viewers, technology has been
Speaker 7: the sector that's led this market for you know, positive
Speaker 7: or negative. How do you think about technology and the
Speaker 7: tech sector? And I don't know if that that's just
Speaker 7: AI or broader in terms of a leadership position for
Speaker 7: this market.
Speaker 5: Well, I think that's a little bit of of a
Speaker 5: mistake to say it's just been tech, because the reality
Speaker 5: is that if you look at the technology sector in
Speaker 5: an equal weight basis, or just look at the average
Speaker 5: technology stock, it's actually underperformed the S and P five hundred,
Speaker 5: which really worked in the last i'd.
Speaker 6: Say two years and really the last ten years.
Speaker 5: Is high quality, large cap stocks that can operate in
Speaker 5: the environment that we're been given and the environment we've
Speaker 5: described this very clearly, which is we're in a situation
Speaker 5: where you're in a fiscal dominance where the government is
Speaker 5: just getting bigger and bigger every year, and in doing so,
Speaker 5: they're essentially crowding out a good chunk of the private economy.
Speaker 5: And so who benefits in the world that we live
Speaker 5: in Large cap companies with scale, who can operate in
Speaker 5: this environment, and that's what's working.
Speaker 6: So it's not just tech companies.
Speaker 5: I mean, it's consumer discretionary companies, it's healthcare companies, it's
Speaker 5: even some energy companies. Okay, Like, if you have scale
Speaker 5: and you're operating well, that's what's driving the index Hired,
Speaker 5: that's what has been driving the index higher. That's starting
Speaker 5: to change a little bit here recently with the mag
Speaker 5: seven underperforming since July and there's a bit of a
Speaker 5: broadening out going on. But the broadening out is still
Speaker 5: happening at the kind of quality level, meaning the market
Speaker 5: still doesn't really want to go down the quality curve
Speaker 5: or two companies that have bad balance sheets, etc. They're
Speaker 5: still they're just going into different high quality stocks across
Speaker 5: the complex.
Speaker 7: Mike, we're kind of just starting to get into the
Speaker 7: teeth of this earning season. We've had some really good
Speaker 7: numbers coming out of global wall streets so far. What
Speaker 7: do you think the market needs to see out of
Speaker 7: corporate America over the next couple of weeks in terms.
Speaker 5: Of earnings, Well, you're right, I mean, like as usual,
Speaker 5: companies have managed the numbers lower going into the quarter.
Speaker 6: That's not unusual.
Speaker 5: This quarter was a little bit more negative in terms
Speaker 5: of the revision. So that the bar has been lowered,
Speaker 5: they're going to jump over the bar and with the market,
Speaker 5: like what investors are going to what they're going to
Speaker 5: buy or companies that not only beat the lower bar,
Speaker 5: but then give you some confidence that there's actually some
Speaker 5: acceleration coming. The thing that's been missing in the last
Speaker 5: three or four quarters is we don't have any broad
Speaker 5: acceleration and order growth or or you know, where's the
Speaker 5: exogenous positive gross shock going to come that's going to
Speaker 5: ride you know, lift all rising boats. And so that's
Speaker 5: why it's become very idiosyncratic, right that there's a lot
Speaker 5: of winners and there's a lot of losers right now,
Speaker 5: and if there's share gains going on, and those are
Speaker 5: the things that investors are keying off of. Who's operating
Speaker 5: well in this environment? And I think that's going to
Speaker 5: continue to be the game it's played.
Speaker 4: I mean, I mean, you know, I look at Mike Wilson,
Speaker 4: like in video you got Joe Moore, Joseph Moore covering.
Speaker 4: I know you guys are not speaking terms, but when
Speaker 4: you listen to a guy like Joseph Moore on Nvidia,
Speaker 4: you're more than Stantley. How far out is your terminal
Speaker 4: value on megs seven and on the rocket stock?
Speaker 3: In Vidia?
Speaker 4: Do you have to justify its existence by going out
Speaker 4: not three years but seven? Or dare I say a decade?
Speaker 6: Actually, Joe and I had dinner last night with some clients,
Speaker 6: so we are speaking.
Speaker 4: Okay, Well, tell us about the dinner. Stop stop, this
Speaker 4: is too much. Tell us about the dinner. Mike will
Speaker 4: soon give.
Speaker 6: Us something very enjoyable.
Speaker 5: It's a very enjoyable dinner with about twenty clients. It's
Speaker 5: excellent food and great conversation. But Joe, I mean, look,
Speaker 5: Joe has had the right view. He's been very bullish
Speaker 5: on the AI winners, and he hasn't been very bullish
Speaker 5: on the broader semi conductor complex.
Speaker 6: Right, and this this is a perfect.
Speaker 5: Microcosm what we're just talking about. Even within semiconductors. Okay,
Speaker 5: you have the big winners, which everybody knows, and then
Speaker 5: you have a bunch of companies that really just aren't
Speaker 5: seeing any acceleration in their business because the global economy
Speaker 5: is kind of and that's what we got. And so
Speaker 5: in the case of a video, I mean, Joe's had
Speaker 5: a great call. I mean, he's not looking seven years out,
Speaker 5: because it's silly to try and predict that, but he
Speaker 5: is looking out probably several years. We talked about that
Speaker 5: last night, which is there's a lot of visibility for
Speaker 5: twenty five and then twenty six is when the visibility
Speaker 5: starts to come down. So at the stock we'll start
Speaker 5: to discount that at some point. Right now, you know,
Speaker 5: the momentum is quite good.
Speaker 4: I mean, Mike Wilson, I got to ask this question.
Speaker 4: We got to go to break and we're ready to
Speaker 4: come back with mister Wilson Teams two. Mike Wilson, when
Speaker 4: you heard that James Gorman was going to Disney you know,
Speaker 4: were you like, you know, like the football player leaving
Speaker 4: the field, We're going to Disneyland. I mean, what were
Speaker 4: your thoughts when your fearless leader who changed your company
Speaker 4: announced he's going to wander over and help mister Eiger
Speaker 4: at Disney.
Speaker 5: Well that was a while ago, and he's now the
Speaker 5: chairman of the board. It doesn't surprise me at all, James.
Speaker 5: It's really really good at this, you know, managing companies.
Speaker 5: He did a great job here. I wish him the
Speaker 5: best and I think it's exciting for him. So it's
Speaker 5: the next great chapter for him.
Speaker 4: Mike Wilson, Morgan Stanley with us. Mike, the clearest memories
Speaker 4: of the right of passage of Ready Graham Dodd where
Speaker 4: they started with railroad stocks in the nineteen thirties. And
Speaker 4: the one thing that has not changed from Graham, Dodd
Speaker 4: and Coddle is ratio analysis. So whether it's pe P,
Speaker 4: d ebadah P to this P this, the answer is
Speaker 4: there's movement of the numerator and movement of the denominator.
Speaker 4: Let us begin the discussion. Mike Wilson, is the market rich?
Speaker 4: Is the market overpriced?
Speaker 5: Well, that's an easy question and it's definitely rich. The
Speaker 5: better question is isn't overpriced? And that is in the
Speaker 5: eye of the beholder.
Speaker 6: I mean, who am I to say that it's overpriced?
Speaker 5: If something happens in the future that we don't expect, however,
Speaker 5: your odds of success. And here's one thing about valuation,
Speaker 5: tom As you well know, valuation in the short term
Speaker 5: is useless, okay, but valuation in the long term, meaning
Speaker 5: seven plus years, is perfect.
Speaker 6: So it's pretty easy to sit.
Speaker 5: Back and say that stocks are overpriced and rich and
Speaker 5: your expected returns over seven to ten year period are
Speaker 5: probably pretty modest, but.
Speaker 6: That doesn't mean you shouldn't be invested.
Speaker 5: And there are many stocks within the stock market that
Speaker 5: are not expensive. So you know, it's like I said,
Speaker 5: it's a market of stocks, not a stock market. And
Speaker 5: that's the way we've been approaching it for the last year.
Speaker 5: As you know, we've been less focused on the index
Speaker 5: level and much more focused on trying to be in
Speaker 5: the right places and try to help people outperform the index,
Speaker 5: which is really our job.
Speaker 7: And Mike, you recently upgraded the financials and we saw
Speaker 7: some good earnings just a few days ago from some
Speaker 7: of the big financial players. What's the call there on
Speaker 7: financials these days?
Speaker 6: Well, that was definitely part of it.
Speaker 5: So, you know, we noticed that going into earning season,
Speaker 5: expectations had come down a lot of the bigger institutions
Speaker 5: had lowered expectations.
Speaker 6: So it was an easy bar to jump over, easier.
Speaker 5: Than others even and you know, with the bull steepener
Speaker 5: just going on in rates since the labor market came out,
Speaker 5: that's actually quite positive for big banks, and so just
Speaker 5: that was an easy call in many ways, it's worked
Speaker 5: out so far, knock on wood. We do think there's
Speaker 5: follow through because from our data it shows anyways that
Speaker 5: most institutional investors are still underweight to sector, and I
Speaker 5: think so financials, at least large cap quality financials look
Speaker 5: to be a good place to be.
Speaker 6: Still.
Speaker 7: You may have noticed we've got an election coming up
Speaker 7: in two weeks. When you talk to your clients, how
Speaker 7: do you kind of frame that in in the short
Speaker 7: term here and maybe even intermediate term.
Speaker 5: Yeah, I mean the election has definitely taken a lot
Speaker 5: of the era out of the room, as it usually
Speaker 5: does at this time of the contest. It's you know,
Speaker 5: it's very closely measured by the polls, not as closely
Speaker 5: measured by the bending sites. As you know, it's sort
Speaker 5: of sixty sixty five percent Trump now, and the market
Speaker 5: has kind of taken notice to that.
Speaker 6: So what I would say is that the market has
Speaker 6: definitely moved.
Speaker 5: Into sort of a Trump victory, if not a Republican
Speaker 5: sweep victory, and the stocks and areas of the market
Speaker 5: that would do better, and financials is part of that,
Speaker 5: by the way, under a Trump win has started to perform.
Speaker 6: And so I think the setup now is.
Speaker 5: Such that if the market plays out, or if the
Speaker 5: election plays out the way the market's expecting, there's probably
Speaker 5: limited upside in those areas that will do well under
Speaker 5: a Trump victory. And I think the surprise would be
Speaker 5: as the Paris wins and some of these trades are
Speaker 5: going to have to unwind. So this is really front
Speaker 5: and center right now for the next two to three weeks.
Speaker 5: I think this is probably fifty to six percent of
Speaker 5: the conversations we have. People are trying to just manage this,
Speaker 5: and then once the election's over, I think then the
Speaker 5: market will look forward to, Okay, what should I be
Speaker 5: owning now now that this event is behind us into
Speaker 5: twenty twenty five.
Speaker 4: Mike Wilson, the heart of the matter, which is you
Speaker 4: were cautious on the market while we had a leg
Speaker 4: up in this two year whatever it is bullmarket. But
Speaker 4: the great Mike Wilson reality is you were invested. I
Speaker 4: didn't see Mike Wilson timing the market in this bull market.
Speaker 4: Forget about shorts. I mean, trust me, folks, I've been
Speaker 4: short and wrong. I've enjoyed that feeling. Good morning, Jim Chanos,
Speaker 4: the giant of all this. But Mike Wilson on market timing.
Speaker 4: If one thing we've seen here, Mike, it's just a
Speaker 4: brutal exercise, isn't it.
Speaker 5: Oh yeah, there's you know, there's a whole graveyard of
Speaker 5: people of market timers. You know, we we do it
Speaker 5: as part of our job.
Speaker 6: We have to.
Speaker 5: We asked, we're asked by clients that kind of you know,
Speaker 5: whether it's the S and P five hundred or or
Speaker 5: sectors or stocks. I mean, that's our job, and that's
Speaker 5: it's most you know, asset manager's job is to try
Speaker 5: and time when to buy certain stocks or do certain
Speaker 5: things with their investments. And I mean, look, sometimes we
Speaker 5: get to right, sometimes we get it wrong. I would
Speaker 5: say we had a stretch where I felt like we
Speaker 5: got everything right, and of course that never lasts. The
Speaker 5: good news about investing is you can always change your mind,
Speaker 5: which we've done, and we've you know, raised our targets,
Speaker 5: and we've changed our strategy to to deal with what
Speaker 5: the market's giving us. And that's really the game is
Speaker 5: just take what the market gives you. Don't fight what
Speaker 5: the market's telling you. That's the best analyst in the
Speaker 5: world is what the market internals are saying. We use
Speaker 5: it as part of our process, actually, and I think
Speaker 5: that's that's the best way to be. Just be humble
Speaker 5: about it, and and you know, don't don't be afraid
Speaker 5: to say, hey, we're wrong. I mean, like I think
Speaker 5: some of you are expected to be right all the
Speaker 5: time and nobody is. And being wrong is not a sin.
Speaker 5: It's just you know, staying on the wrong side of
Speaker 5: things for too long as it is a problem.
Speaker 3: But Paul, the heart of this is Wilson's playing.
Speaker 4: He's participating in the market with Gina mar and Adams
Speaker 4: and Brian Belski coming up in all these people that
Speaker 4: are going to go to cash, I mean, come on,
Speaker 4: in this.
Speaker 3: Bull market, they've been wiped out, yeah.
Speaker 7: I absolutely, And don't try to time the markets. What
Speaker 7: we've heard from the pros, including Mike Mike Wilson, Mike,
Speaker 7: as we think about, you know, going into twenty twenty
Speaker 7: five should we be focusing I mean, what's going to
Speaker 7: drive this market? Is it going to be the fed
Speaker 7: in the parlor game to Tom hates the play, or
Speaker 7: is it going to be good old fundamental earnings and
Speaker 7: fundamentals and that kind of thing.
Speaker 6: Well, it's all the above.
Speaker 5: But I think the thing that we're going to focus,
Speaker 5: that we're focused on right now anyways, is Look, we've
Speaker 5: been in this world of fiscal dominance for a while.
Speaker 5: We've gotten that right from twenty twenty one. We traded
Speaker 5: it really well at the beginning. We didn't trade it
Speaker 5: well so so to speak, in twenty two, twenty three,
Speaker 5: or in twenty three in particular and even into this year.
Speaker 5: But I think the consequences of that now are going
Speaker 5: to come front and center. And what I mean by
Speaker 5: that is what we're focused on is, you know, the
Speaker 5: dollar and rates. Does that come back into the picture again,
Speaker 5: which then makes equities you know, vulnerable to a.
Speaker 6: Correction at the at the macro level.
Speaker 5: We'll see, but I think that's going to be like
Speaker 5: right now, what we saw in the last couple of
Speaker 5: days is rates are breaking out about the two in
Speaker 5: or day moving average.
Speaker 6: We're seeing actually turn premium come back.
Speaker 5: Into the market. The dollar has been very strong, and
Speaker 5: that's a governor on liquidity. So I think that's the
Speaker 5: thing we're going to be watching going in twenty twenty five.
Speaker 5: And of course what we've been waiting for is this reacceleration.
Speaker 5: It seems to be elusive, and so what we need
Speaker 5: to see is we need to see growth accelerate next year.
Speaker 5: We have acceleration in our forecast twelve percent urach growth
Speaker 5: for next year after about probably seven or eight this year.
Speaker 6: So that is good, but that's price.
Speaker 5: I think we need to see more than twelve percent
Speaker 5: aries growth next year to get this market to really
Speaker 5: power higher at the index level.
Speaker 4: Yeah, Mike, I'm supposed to ask now Dodgers or Yankees,
Speaker 4: but I realize for you that's a secondary effort. Michigan
Speaker 4: State or Michigan. I mean, what do you think there
Speaker 4: in a rebuilding year at ann Arbor.
Speaker 5: Yeah, I mean, this is this is one that's more
Speaker 5: important to Michigan fans than than than you might think.
Speaker 5: I mean, house state of Michigan State. You cannot lose
Speaker 5: those games. It doesn't matter, no excuses. You got to
Speaker 5: show up. And I'm confident that Big Blue will show
Speaker 5: up this weekend.
Speaker 3: Nice, oh Big Blue. See you got the Dodgers in there.
Speaker 4: You know, we got the Dodgers in Mike Wilson, thank
Speaker 4: you so much with Morgan Stanley.
Speaker 3: Huge response from mister Wilson.
Speaker 2: You're listening to the Bloomberg Surveillance podcast. Catch us live
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Speaker 7: Neither you nor Alex Steele will go Lulu Lemmon right now.
Speaker 8: Now.
Speaker 7: It's a little bit, a little bit too much.
Speaker 3: I was so old. We had, you know, for our socks.
Speaker 4: We had garter straps, you know, like the garter beilt things.
Speaker 3: And then they went away from that.
Speaker 4: I wonder are they doing Lululemon now, you know the
Speaker 4: hold the shin pads on them. I don't know.
Speaker 3: There are you duneks Bloomberg Savannahs. This morning.
Speaker 4: All of our economic coverage just brought you by Commonwealth,
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Speaker 4: their consultative support in technology. When we invented this act
Speaker 4: years ago we knew it was singularly the conversation of
Speaker 4: our guests and the honor of going from Mike Wilson
Speaker 4: of Morgan Stanley to Brian Belski of BEMO Capital Markets
Speaker 4: is what the show is all about. We welcome all
Speaker 4: of you across the nation and we'll get the Minnesota
Speaker 4: in a moment. Brian, you have killed it on this
Speaker 4: bull market. Let's get back to first principles. What's a
Speaker 4: gloom crew get wrong?
Speaker 3: Stay invested? You know, going back to the hockey thing.
Speaker 9: Do you remember the silver things that we connected to
Speaker 9: your sock that sometimes you got get them wet they
Speaker 9: bring or they'd rust that I'm not old.
Speaker 3: Or they broke off and you'd have to get a
Speaker 3: dime exactly to do it exactly, and.
Speaker 1: You hoped it wasn't so, you know, at least it's
Speaker 1: like blushing. I mean, it's hockey talk. We're not going
Speaker 1: to talk about taking showers and six no no, no, no, no, no,
Speaker 1: no, no road game. What does a gloom crew get wrong?
Speaker 3: I think stay invested.
Speaker 9: I think trying not to time. I think people have
Speaker 9: become so afraid to be wrong they don't want to
Speaker 9: be right. I think part of this is a function
Speaker 9: of what happened during the tech wreck that was exacerbated
Speaker 9: during the Great Financial Crisis, which created the generational buying opportunity.
Speaker 9: In two thousand and nine, when we came out with
Speaker 9: our twenty five year Secular Bowl, Maarkt called twenty ten.
Speaker 9: So we remain resolute on this. We're entering year three
Speaker 9: of the Bowl, and I think you know, going forward,
Speaker 9: our longer term trend has been normalization. We've been talking
Speaker 9: about it for three years.
Speaker 3: But I've been dying to get you on. I'm so happy,
Speaker 3: Thank you so much from Europe.
Speaker 4: And Paul's got a million questions. Let me go right here.
Speaker 4: You're a research note. Is one of hyper acuity. A
Speaker 4: competitive firm is just done a fan distribution exercise out
Speaker 4: ten years. I look at it with my math knowledge
Speaker 4: and I'm like, Okay, I get it's a marketing exercise.
Speaker 4: But what is the value of a ten year fan
Speaker 4: distribution extrapolation? Your Denny's on the top of the green line.
Speaker 4: It's seven percent. Roaring twenties. I just I lost Brian acuity.
Speaker 4: Tell us about.
Speaker 3: Fan distributions of ten years. We're on radio, keep it clean.
Speaker 9: We're on the radio, keep it clean, you know, listen
Speaker 9: the ten year spectrum and any anytime when you're talking
Speaker 9: about those kind of things, I think people all of
Speaker 9: a sudden get glossy eyed, because it's really more about
Speaker 9: ten days now right now or ten weeks and the
Speaker 9: ten year thing. If you look at just the compounding
Speaker 9: and your growthry of the stock market just historically, let's
Speaker 9: say it's let's just give it thirteen percent, twelve to
Speaker 9: thirteen percent, I think we're heading back into that. What
Speaker 9: we see recently is out of the norm. So I
Speaker 9: think over the next ten years we can clearly get
Speaker 9: up to that seven percent line easy with a dividend,
Speaker 9: and then with just cash flow appreciation, I think we
Speaker 9: can get low double digits, which also will be in
Speaker 9: line with where we're going to see earnings growth as well.
Speaker 3: And so I think there's several.
Speaker 9: Areas of the US market that are understated and earnings
Speaker 9: that people are kind of missing right now, and so
Speaker 9: I think that's what's really going to drive us for
Speaker 9: at least the next three to five years.
Speaker 7: What do we need sector leadership here? Do we need
Speaker 7: tech to lead this market? Because I think a lot
Speaker 7: of investors have become accustomed to tech leading. Yes, whether
Speaker 7: it's just broadly tech or AI, this technique to lead
Speaker 7: us over the next several years.
Speaker 9: I think tech needs to perform. And what we've said
Speaker 9: for about a decade now, we come up with these
Speaker 9: kind of themes that people hopefully remember, and we've said
Speaker 9: that there's a certain sample of the technology sector, Paul,
Speaker 9: that is now the new consumer staples. And so I
Speaker 9: go back to nineteen ninety five ninety six on my
Speaker 9: old Dame Bosworth days, and I think that you know,
Speaker 9: we're heading back into those type of nifty to fifty goldilocks,
Speaker 9: strong earnings growth, steady performance, cutting interest rates. In the
Speaker 9: new consumer staples, quite frankly, are Microsoft, Nvidia, Apple, Amazon,
Speaker 9: the Google machine, the Netflix machine, and I think they
Speaker 9: need to continue to perform with the market. But the
Speaker 9: new leadership in tech is going to be qualcomm AMD,
Speaker 9: those types of names.
Speaker 7: So what do you kind of getting into the teeth
Speaker 7: of earnings right now? We had some pretty good numbers
Speaker 7: out of the Wall Street so far. What do you
Speaker 7: need to see from corporate America going forward?
Speaker 9: I think corporate America, I think you've seen such a
Speaker 9: such a great, great secular change in terms of cash flow, distribution,
Speaker 9: balance sheet management, discernibility of earnings. I think that's what
Speaker 9: people are missing, Paul, and I think Corporate America has
Speaker 9: done a great job kind of on the cost side
Speaker 9: of things. Now we need to see more revenue growth.
Speaker 9: We're going to see cap x from technology. And here's
Speaker 9: the kicker, Tom.
Speaker 4: Here.
Speaker 9: I think where people are missing, and I said this before,
Speaker 9: is at financials. If you look at the average financial
Speaker 9: section earning's growth, it's way understated. Most analysts are very negative,
Speaker 9: and I think that's where the biggest kick is going
Speaker 9: to come the next few years.
Speaker 4: Hey, it was fitzit mean And to give David Cushing credit,
Speaker 4: you did a great capex use of cash expansion in
Speaker 4: the last forty eight hours.
Speaker 3: Sure buybacks lead the way.
Speaker 4: I get that, But use of cash doesn't end into
Speaker 4: your gloom comments. Earlier of ninety nine, two thousand and
Speaker 4: two thousand and one, there wasn't use of cash going
Speaker 4: on then.
Speaker 9: There wasn't if you think about that market. In that
Speaker 9: market quote unquote bubble, it was really led by chasing
Speaker 9: these deals and the majority of those deals were done
Speaker 9: with stock not cash. Where we had another M and
Speaker 9: a cycle in two thousand and seven, which was also credit.
Speaker 9: But we haven't had a big M and A cycle
Speaker 9: or a consolidation cycle. So I think that's where the
Speaker 9: use of cash going forward is going to be about dividends.
Speaker 9: Look at I mean, look at Meta, Google, Microsoft, The're
Speaker 9: paying dividends. Apple's pain dividends, and so I think that's
Speaker 9: going to continue. But I think the key thing from
Speaker 9: a perspective of stock picking is you don't have to
Speaker 9: own the index. You want to be more concentrated. And
Speaker 9: we think stockpicking and fundamental themes are gonna win.
Speaker 3: Is active funds gonna have their data, yes, index. Yeah.
Speaker 3: If I walk into it.
Speaker 9: If i walk into a big account here in town,
Speaker 9: and I'm talking to these people that have been in
Speaker 9: the business less than ten or fifteen years, I talk
Speaker 9: about stockpicking.
Speaker 3: They look scared.
Speaker 9: I mean their eyes are glossed over because all they
Speaker 9: do is they own two hundred and fifty stocks and
Speaker 9: they're trying to They're trying to benchmark that they don't
Speaker 9: know about a company theme or management or roe or
Speaker 9: roe ROI. All they're doing is kind of swiping and
Speaker 9: reading bullet points and doing what the hedge funds are
Speaker 9: doing and that's why. Oh, by the way, the majority
Speaker 9: of active management's underperforming.
Speaker 4: Okay, one more question we we gotta get. I want
Speaker 4: you to stay with us, Brian. I think it's important.
Speaker 4: But the basic idea of Brian is our industrials are
Speaker 4: all gonna act more tech like. That's a story I
Speaker 4: don't think is being told.
Speaker 9: There's parts of it, especially the ones that are manufacturing
Speaker 9: more here in the United States. But from a domestic
Speaker 9: side of things, there's things.
Speaker 3: I mean, look at Lockheed.
Speaker 9: Martin earnings this morning. I mean, come on, I mean,
Speaker 9: this is a company twenty five straight years of increase
Speaker 9: the dividend, great cashualield. So you're gonna see some technological
Speaker 9: advancement there. But I think that's where the capex will
Speaker 9: come in.
Speaker 4: So I'm at luck Campanna down by the Tyger River,
Speaker 4: oldest restaurant in the world, five hundred years old, and.
Speaker 3: They having the Roman art. It chokes nice.
Speaker 4: And we're watching the Minnesota Vikings try to do a
Speaker 4: two point play late in the game.
Speaker 3: Brian Belski, What in God's name were the Vikings thinking
Speaker 3: it was a coaching era.
Speaker 9: I mean, they choked, They choked on that play. I mean,
Speaker 9: you know, Minnesota, we're five and one on the way
Speaker 9: to six and eleven.
Speaker 6: I mean, it's just.
Speaker 9: If they're in Minnesota. Sportsman, you know what I'm talking about.
Speaker 9: So there's been a rumor, by the way that twins
Speaker 9: are for sale, the poll that family selling the twins,
Speaker 9: and there's been a remember that buffet might sound by it. Wow,
Speaker 9: Please God, if there's a God above, Lord Jesus, please.
Speaker 4: Fifteen seconds left of the game. Jake Bate's forty four yards.
Speaker 4: Michael Barr Lions, am I even lyons Vikings.
Speaker 3: It's glory for the essential to the North.
Speaker 9: Is now the best division in football.
Speaker 3: Think about that, Michael Barr, would you care to comment? Wow?
Speaker 10: I mean, but you got a point, all seriousness, it's
Speaker 10: you know, there are other divisions out there that are tougher.
Speaker 10: But I will admit that the Vikings turned out way
Speaker 10: tougher than I thought they were going to be because
Speaker 10: they were undefeated and then we showed up.
Speaker 3: And he's not talking about.
Speaker 9: So that if you think about the defense of the
Speaker 9: Vikings and just I think that Campbell's done such an
Speaker 9: amazing job with the Lions. I think the Bears are
Speaker 9: way over their skis. But the Packers too, they just
Speaker 9: keep I hate the Packers for the record, and a
Speaker 9: man with a good friend of mine later today, that's
Speaker 9: a huge Packers fan. But I despise. I love people
Speaker 9: from Wisconsin, but I hate Wisconsin sports fans. I mean
Speaker 9: when they whenever the whenever the puck drops or the
Speaker 9: ball gets thrown, their crazy, lovely people. But when it
Speaker 9: comes to sports crazy. But I think those three teams
Speaker 9: are way understated. There's smash mouth football. It's kind of
Speaker 9: like the Olden I mean, they're all winning.
Speaker 4: It's like a huge skew to excellence if they But
Speaker 4: the thing is, the Dodgers Yankees are big cities, big
Speaker 4: money and all that.
Speaker 3: How does NFC Central do it the North? How do
Speaker 3: they do it rather well?
Speaker 9: I think, first and foremost the Vikings they really scored
Speaker 9: with Kevin as a coach, just like the Packers did
Speaker 9: a great job of the floor in Campbell in the lines.
Speaker 9: All three understated coaches when they came in, and they've
Speaker 9: done a wonderful job. I think it's scheming. With Brian
Speaker 9: Flores running the defense too, it's all that scheming.
Speaker 2: Brian Belski, thank you so much, coming This is the
Speaker 2: Bloomberg Surveillance Podcast. Listen live each weekday starting at seven
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Speaker 2: playing Bloomberg eleven thirty.
Speaker 3: We're gonna do something different here. Are you pulled out?
Speaker 3: Paul sure?
Speaker 4: I am lucky completely and Bloomberg, I'm sure we'll have
Speaker 4: a world class high count poll right now.
Speaker 3: Yeah, my head is spinning.
Speaker 4: I'm like completely completely pulled out joining us.
Speaker 3: Now we're not going to talk about polls.
Speaker 4: Professor Schiller Wendy Schiller Definitive Civics Book for America of
Speaker 4: course at Brown University with all her work there and
Speaker 4: international relations. Wendy, I want to go back to Andrew Jackson, banners,
Speaker 4: Badger's parades, barbecues if I'm elected, free beer.
Speaker 3: And while we're at a Kissing Babies, I saw President
Speaker 3: Obama kissing a baby.
Speaker 4: Is McDonald's French Fries the new Kissing Babies?
Speaker 11: Well, I mean, I think I'm looking forward to seeing
Speaker 11: this Madison Square Garden event. I think that former President
Speaker 11: Trump is hosting as if it's sort of a pre
Speaker 11: inaugural party and you know, sort of saying, hey, listen,
Speaker 11: I'm a winner and I'm going to win, and let's
Speaker 11: start partying and celebrating. It's really, I think, a fairly
Speaker 11: brilliant campaign move because it tells his base you know,
Speaker 11: I'm gonna win, and then it also helps fuel any
Speaker 11: objections he has to the outcome. So so he's starting to,
Speaker 11: you know, return to that Andrew Jackson populism.
Speaker 12: You know, you know very well that Andrew.
Speaker 11: Jackson threw the equivalent of a keg party for his
Speaker 11: inauguration and they trashed.
Speaker 12: The White House. They had kick everybody out.
Speaker 4: And we miss Robert Remeny every day. I read all
Speaker 4: three volumes of his definitive work. And Jackson folks visit
Speaker 4: the Hermitage if you can Eastern Nashville. It is just
Speaker 4: you walk out the beck door the Hermitage and there's
Speaker 4: the slave cottage right there, and you just stop. Wendy Schiller,
Speaker 4: how was the vice president campaigning? Is she kissing babies?
Speaker 11: Well, she's basically trying to plot all the stops in
Speaker 11: what will be, you know, an extraordinarily close election. It
Speaker 11: reminds me of Bush Gore, we really didn't know who
Speaker 11: was gonna win, and it turns out after election day
Speaker 11: we didn't know who's gonna win either. So I think
Speaker 11: this is where you know, you're no stone turned, no voter,
Speaker 11: lie left out, you know, the opposite sort of what
Speaker 11: Hillary Clinton did in twenty sixteen.
Speaker 12: And I think the Harris campaign is counting on the
Speaker 12: fact that Donald.
Speaker 11: Trump did not win in twenty twenty that in fact,
Speaker 11: you know, the last time he.
Speaker 12: Ran, he did lose.
Speaker 11: So they're you know, keeping the faith the polls are
Speaker 11: going in the opposite direction. I don't want to talk
Speaker 11: about that, but there are hidden things that could change
Speaker 11: things up. Like in Arizona, there is abortion on the ballot,
Speaker 11: and you know, not everybody is always truthful with a
Speaker 11: pollster when that kind of subject is on the ballot
Speaker 11: about who they're going to vote for.
Speaker 12: So and the same thing is true Florida.
Speaker 11: But it looks like Arizona may have a hidden surprise
Speaker 11: at the end of the day. So that's what I'm
Speaker 11: looking at, sort of where could we see a surprise
Speaker 11: outcome in one of these states that it looks like Trump.
Speaker 7: Is doing very well In Wendy at eleven PM on
Speaker 7: election night, we know who the new president is.
Speaker 11: Unless there is just a really big sweep tilt towards Trump,
Speaker 11: I don't think so. I mean, if Harris is going
Speaker 11: to win this election, we're not going to know that,
Speaker 11: partially because mail in ballots in some states like Pennsylvania
Speaker 11: are not opened and certified and count did fully until
Speaker 11: all of the in person balloting is counted. So that's
Speaker 11: going to take us a couple of days, as it
Speaker 11: did before. We know George is going to be very tight.
Speaker 11: We're seeing massive early voting in person. The vast majority
Speaker 11: of early voting in North Carolina George has been in person,
Speaker 11: so those votes are counted easily. So you know, it
Speaker 11: could be that those results come in earlier than they
Speaker 11: did in twenty twenty.
Speaker 7: So given that backdrop, is there any strategy for either
Speaker 7: candidate either then to just simply spend time in these
Speaker 7: swing states?
Speaker 11: Well, I mean, the Democrats do have a very strong
Speaker 11: turnout game. And the one thing that we haven't been
Speaker 11: looking at enough in the last couple of weeks the
Speaker 11: election are how Senate campaigns.
Speaker 12: In swing states will affect turnout and voter choice.
Speaker 11: You know, are you really going to go into the
Speaker 11: ballot booth and vote for you know, women diego in Arizona.
Speaker 12: And then vote for Donald Trump.
Speaker 11: Are you going to vote for you know, Tammy Baldwin
Speaker 11: Wisconsin and Donald Trump.
Speaker 12: You know, we're seeing those Democrats holding.
Speaker 11: Their ground by a couple of points, doing better than
Speaker 11: Kamala Harris. So how many of those voters just don't
Speaker 11: vote in the presidential election which costs Harris a vote,
Speaker 11: or do they actually ultimately say, well, I'm just going
Speaker 11: to vote for Harris too.
Speaker 12: We just don't know they're going to tilt.
Speaker 11: But those Senate Democrats are holding It's pretty steady in
Speaker 11: swing states, and that's a curiosity.
Speaker 12: We haven't seen that in a couple of years.
Speaker 7: So I guess the key issues here are down ballid
Speaker 7: as well. I mean, in addition to the presidential election,
Speaker 7: is there what's the feeling now? Is it relates to
Speaker 7: the House and the Senate?
Speaker 11: Well, I mean, I think you know, people are saying
Speaker 11: that if Trump wins and he tells these states can
Speaker 11: be a trifecta the democ Republicans, you know, they have
Speaker 11: to win fewer seats to keep the House than the
Speaker 11: Democrats have to win to take the House and the
Speaker 11: Senate will go Republican.
Speaker 12: The question is what's the margin. So you're looking at
Speaker 12: a trifecta.
Speaker 11: You're looking at, you know, unified party government under Trump,
Speaker 11: that's what you're looking at. You know, if people decide
Speaker 11: they want Trump back, and I mean independent voters, disaffected Republicans,
Speaker 11: and they really don't want Harris, then you're probably going
Speaker 11: to see a trifecta.
Speaker 12: And we'll probably see some changes.
Speaker 11: In twenty twenty six in response to that trifecta. So
Speaker 11: it could be just a repeat of twenty sixteen and
Speaker 11: twenty eighteen what we're looking at down the road. But
Speaker 11: people should be prepared for Donald Trump presidency and unified
Speaker 11: government and a Kama Harris presidency with divided government. So
Speaker 11: there are two very different scenarios that we're facing at
Speaker 11: the pwal level.
Speaker 4: And now, folks, And I was thinking to Wendy, you know,
Speaker 4: flying back, folks.
Speaker 3: All of a sudden and suddenly.
Speaker 4: It's the topic no one's really talking about. And for
Speaker 4: some of us of a certain vintage, it was the
Speaker 4: topic fifty years ago.
Speaker 3: The gender gap.
Speaker 4: Professor Schiller, the gender gap today, how is it distinctive
Speaker 4: from what I knew years ago with the editor at Cosmopopan.
Speaker 11: Well, the gender gap differs by generation now, so we're
Speaker 11: seeing a bigger gender gap in older voters than we
Speaker 11: used to see, and we're seeing in very young voters
Speaker 11: a bigger gender gap.
Speaker 12: In the opposite judge. And men are leaning towards.
Speaker 11: The Republican Party and bigger numbers younger men than they
Speaker 11: used to And younger women have always sort of leaned democratic.
Speaker 11: Older women have been more up for grabs, and now
Speaker 11: we're seeing in some really interesting polling older women meeting
Speaker 11: over the age of sixty five are leaning more strongly Democratic.
Speaker 11: So this is just a really a change. And we're
Speaker 11: seeing the older vote, usually leaned Republican by about eight
Speaker 11: points in polling, we're seeing that's diminished a bit.
Speaker 12: So this is just a.
Speaker 11: Little bit of autopsy turvy demographic change in the gender gap.
Speaker 11: And remember the gender gap can be also hidden in
Speaker 11: states where abortion is controversial. We saw that in twenty
Speaker 11: twenty two in the Senate elections. We may still see
Speaker 11: that in states like Arizona. So this is really important.
Speaker 11: And then we're going to see what the Republicans do
Speaker 11: on policies that affect women. After you know, obviously word
Speaker 11: view Wade's overturned. We have the Dobb's decision. What do
Speaker 11: they do going forward? And can they maintain any kind
Speaker 11: of legiance among women if they continue down a path
Speaker 11: of policies that do not necessarily favor women.
Speaker 4: When do we really appreciate your commitment to Bloomberg Surveillance.
Speaker 4: She'll be with us now through and after the election
Speaker 4: is well. Wendy Schiller of Brown University can't say enough,
Speaker 4: folks about the planning for the election.
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 2: starting at seven am Eastern on applecar Play and Android
Speaker 2: Auto with the Bloomberg Business app. You can also watch
Speaker 2: us live every weekday on YouTube and always on the
Speaker 2: Bloomberg terminal.
Speaker 3: This is a thrill.
Speaker 4: Incredibly busy. Francisco Blanche joins US now driving commodities at
Speaker 4: Bank of American. What's great about him is it's not
Speaker 4: just Brent. What's Brent Crude going to do? Move on
Speaker 4: Francisco Blanche here now with an essay a number of
Speaker 4: days ago. Is gold a safer investment than full faith?
Speaker 3: Think credit? The United States?
Speaker 4: From the cash room at the treasury, treasuries, Francisco, blanche
Speaker 4: and gold. Is it going to three thousand Francisco.
Speaker 8: That's our target for next year, tom So we expected
Speaker 8: to get there over the next fulve months.
Speaker 4: What does it signal in particularly versus full faith and
Speaker 4: credit American debt.
Speaker 8: Well, there's there's a few things going on. First, I
Speaker 8: would say that, as you know, two and a half
Speaker 8: years ago, the US and the European governments decided to
Speaker 8: freeze Russian center bank assets. And as you're Julio ware,
Speaker 8: central bank assets are essentially are you know, a rainy
Speaker 8: day fund, so to speak, for nations and for financial systems.
Speaker 8: So I think as a result of that decision to
Speaker 8: freeze those assets, about again, about half of the Russian
Speaker 8: center bank acids, we've seen a big rotation away from
Speaker 8: from treasuries and and European government bonds into gold across
Speaker 8: the global center bank community. Remember, these chaps don't care
Speaker 8: so much about return, well, they really care about his safety.
Speaker 8: And by virtue of freezing those assets, we made them
Speaker 8: unsafe or a little unsafe for some. Again, not unsafe
Speaker 8: for you or for me, but definitely unsafe if you
Speaker 8: are outside the US, Europe, sphere, and there's many center
Speaker 8: banks that feel a little bit trapped between this kind
Speaker 8: of US Europe and Russia China dynamic, so that's been.
Speaker 6: A big factor.
Speaker 8: And then of course we've also seen interest rate cuts
Speaker 8: which have finally started to grow some interest from investors
Speaker 8: as on.
Speaker 7: One of the many reasons I like Francisco's research is
Speaker 7: he has an exhibit Exhibit six point one acronym list
Speaker 7: for all the acronyms and what they mean in his research.
Speaker 7: So thank you for that, Francisco. It helps reading your research.
Speaker 7: Talk to us about global energy here, Francisco, we've had
Speaker 7: a big risk premium put into Brent crew w TIA crud.
Speaker 7: That part of that risk premium came out, but now
Speaker 7: it's kind of creeping back. How do you think about
Speaker 7: the cost of global oil these days?
Speaker 8: Well, so when it comes to Brent, we have a
Speaker 8: seventy five dollar average for next year, which is right
Speaker 8: around with the spot prices and a little below where
Speaker 8: for markets are, so we're not teroughly bearish. We are
Speaker 8: more in the rangebound camp. There's there's a number of
Speaker 8: number of analysts and agencies out there talking about this
Speaker 8: massive surplus evolving into twenty twenty five, particularly as we
Speaker 8: see open plus returning barrels to the market. But in reality,
Speaker 8: we have a very very tense geo vertical situation in
Speaker 8: the Middle East. And remember, part of the reason we've
Speaker 8: seen a reversal imbalances is because from the White House
Speaker 8: we've seen a very concentrated effort to push more energy
Speaker 8: into the system after we hit ten percent of a
Speaker 8: couple of years ago in the back of the Russia
Speaker 8: Ukraine invasion, so we've seen effectively the release of the
Speaker 8: spr forty percent of it. We've seen a big rump
Speaker 8: up in US supply, and then we've seen really Russia
Speaker 8: but also Iran and Venezuela moving up on their exports
Speaker 8: throughout the last three three and a half years. So
Speaker 8: I think once we go past the US election, that
Speaker 8: pressure to keep oil prices lower or bring them, you know,
Speaker 8: keep them below eighty or something, it kind of goes
Speaker 8: away a little bit. I think I think the focus
Speaker 8: comes to a politics really for the next government, whoever
Speaker 8: that is Harris or Trump.
Speaker 4: Francisco on gold of three thousand, thank you out on
Speaker 4: YouTube the live chat. They're really discussing gold of three
Speaker 4: thousand Francisco Blanche. Two ideas here. One is the ETF
Speaker 4: Salisa Matteo is in the gold ETF fund where they
Speaker 4: insist on taking physical delivery. It's like bitcoin, Paul, I mean,
Speaker 4: Francisco Blanche, are we way behind in ETF's taking gold
Speaker 4: for physical delivery and that will support the price.
Speaker 8: Well. So, so there's plenty of ETFs that take gold
Speaker 8: and physical delivery, and and that's definitely a price support point.
Speaker 8: We've we've actually run Fairmata analysis on this. We found
Speaker 8: this physically backed commater ETFs which are mostly on gold
Speaker 8: and silver, and to positively impact prices when flows go
Speaker 8: in and and the reverse is also true. And again,
Speaker 8: the way I think about this is you take you're
Speaker 8: essentially taking ounces out of circulation that would otherwise go
Speaker 8: into jewelry or other uses. And that's why ETFs physically
Speaker 8: tfs have an impact on prices and and and again
Speaker 8: because interest rates went up so much in the last
Speaker 8: couple of years, and we were trained to get paid
Speaker 8: zero on our bank deposits and and on our safe
Speaker 8: assets like our articles. The ramp up in in in
Speaker 8: interest rates essentially encouraged investors in the West, in Europe
Speaker 8: and the US to sell their gold and buy buy
Speaker 8: texted income securities or bank.
Speaker 4: I get you this question in Francisco. We've got time
Speaker 4: for one more and that is emerging markets. You've got
Speaker 4: a hockey stick chart of emerging markets buying gold. Will
Speaker 4: that continue six percent of value? Now up to ten
Speaker 4: percent of value? Will that vector just keep climbing?
Speaker 8: I think I'll keep climbing over time. The biggest risk
Speaker 8: to the goal market is and we're starting to see
Speaker 8: a little bit already, if there is a move up,
Speaker 8: a very sharp move up and interest rates in the
Speaker 8: US because there's a there's a clean sweep in the election,
Speaker 8: either on the red side or on the blue side,
Speaker 8: We're likely going to see tax cuts, and again we
Speaker 8: only have a very large budget deficit. I'm afraid that
Speaker 8: may push up longer term yields and that would be
Speaker 8: a negative on goal prices. Will be also quite a
Speaker 8: positive turn of events for the bar. And then the
Speaker 8: other issue is what happens to Russian Central bank assets
Speaker 8: if the Russian war with Ukraine ends for one reason
Speaker 8: or the other. Will Russia get their money back? This
Speaker 8: question really matters for the goal marketing.
Speaker 7: Might view Francisco thirty seconds left. Best value in the
Speaker 7: global commodity space that you see right now.
Speaker 8: I think in terms of upside potential, we still like copper,
Speaker 8: and we still like the industrial metals. We think China's
Speaker 8: going to put some stamas in place, and we also
Speaker 8: need the energy transition. We'll drive those markets. And we
Speaker 8: also like silver. By the way, we think silver is
Speaker 8: a really good play on both the precious theme but
Speaker 8: also on the energy transition. The best electricity conductor out
Speaker 8: there is still.
Speaker 4: The encyclopedic Francisco watch never enough time from Madrid. Thank
Speaker 4: you so much, he said, commodities for Bank of America.
Speaker 2: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
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