WEBVTT - Why Millions of People Have Dived Into Day Trading 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.240 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:09.200 we bring you interviews from CEOs, A, market pros, and 0:00:09.400 --> 0:00:12.799 Bloomberg experts, along with essential market moving news. Find the 0:00:12.800 --> 0:00:16.320 Bloomberg Markets Podcast on Apple Podcasts or wherever you listen 0:00:16.360 --> 0:00:20.880 to podcasts, and on Bloomberg dot com. It is time 0:00:20.920 --> 0:00:24.560 for Bloomberg Opinion. We welcome Bloomberg Opinion columns. Jared Dillion. 0:00:25.200 --> 0:00:27.960 He's also an editor and publisher of the Daily Dirton 0:00:27.960 --> 0:00:32.080 app and investment strategists at Malden Economics based in Myrtle Beach, 0:00:32.120 --> 0:00:34.480 South Carolina. Jared, thanks so much for joining us here. 0:00:34.840 --> 0:00:38.159 Interesting column you had about mom and pop trading, this 0:00:38.320 --> 0:00:41.239 robin Hood app. This reminded me of kind of the 0:00:41.360 --> 0:00:44.960 late nineties when we had a lot of individual retail 0:00:45.000 --> 0:00:48.600 investors get in there really speculating at what turned out 0:00:48.600 --> 0:00:50.760 in hindsight in March of two thousand to be the 0:00:50.840 --> 0:00:54.160 peak and the bubble, particularly the dot com boom. Give 0:00:54.240 --> 0:00:56.040 us a sense of kind of what's happening now with 0:00:56.080 --> 0:00:58.400 these mom and pop investors and all the trading apps 0:00:58.400 --> 0:01:01.080 that are out there. Yeah, I wouldn't even say it's 0:01:01.080 --> 0:01:03.319 really modern pop. I mean these are young people. I mean, 0:01:03.360 --> 0:01:07.240 these are people in their twenties and early thirties, and 0:01:07.560 --> 0:01:13.040 I think people underestimate the scale of what is happening. 0:01:13.040 --> 0:01:16.280 I mean, you saw that robin Hood had three million 0:01:16.400 --> 0:01:19.360 accounts opened in the first quarter of a loan. You're 0:01:19.400 --> 0:01:22.560 talking about You're talking about just millions of people that 0:01:22.600 --> 0:01:25.600 have dived into day trading. And the interesting thing about 0:01:25.680 --> 0:01:28.480 this is that you know, for the last ten years 0:01:28.520 --> 0:01:32.320 there were a lot of retail investors that um jumped 0:01:32.360 --> 0:01:34.160 into the market, but they did it the right way. 0:01:34.200 --> 0:01:37.120 They did it slow, they did it with index funds, 0:01:37.120 --> 0:01:41.200 they paid low fees, and just over the last six months, 0:01:41.240 --> 0:01:45.000 everything has gone out the window. Jared, before we get 0:01:45.000 --> 0:01:47.440 to why no one should blame the FED for robin 0:01:47.480 --> 0:01:50.520 Hood and it's its sins and the sins thative emanated 0:01:50.560 --> 0:01:53.080 promis users, talk to us about what you can actually 0:01:53.160 --> 0:01:55.640 do on robin hood financials up because it seems like 0:01:55.720 --> 0:01:59.360 you can do some really sophisticated financial trades. You're not 0:01:59.360 --> 0:02:03.760 talking about just buying stocks and not even just shorting stocks. 0:02:03.800 --> 0:02:06.559 There's plenty of other things that you can do, and 0:02:06.760 --> 0:02:09.240 there doesn't appear to be a limit to the amount 0:02:09.240 --> 0:02:13.239 of leverage you can take. Yeah, I mean, robin Hood 0:02:13.760 --> 0:02:17.080 is a platform that allows options trading, and you know, 0:02:17.080 --> 0:02:19.000 I used to work in the options industry, That's where 0:02:19.000 --> 0:02:22.399 I started my career. And if you look back at 0:02:23.000 --> 0:02:26.400 you know, back then, total options volume in a given 0:02:26.440 --> 0:02:30.000 day across the Fork exchanges would be about two million contracts. 0:02:30.480 --> 0:02:34.200 Now it's up to about twelve million contracts. And these 0:02:34.200 --> 0:02:38.280 people are, you know, very uneddicated when it comes to options. Uh, 0:02:38.320 --> 0:02:40.720 they don't really know anything about option pricing at all, 0:02:40.760 --> 0:02:44.960 and they're just buying upside calls in stocks just for 0:02:45.120 --> 0:02:49.120 extreme amounts of leverage, just under the idea that stocks 0:02:49.240 --> 0:02:53.040 always go up. So, um, I think this is not 0:02:53.080 --> 0:02:56.280 going to end too well. Jared. I'm trying to get 0:02:56.280 --> 0:02:59.320 a sense of kind of what's driving this move into 0:02:59.360 --> 0:03:02.320 this retail trading in the in the you know, the 0:03:02.400 --> 0:03:04.640 robin Hood apps and all of that, and a lot 0:03:04.639 --> 0:03:06.680 of these young folks coming in into the market. And 0:03:06.720 --> 0:03:09.639 I've read it might be simply the fact that we're 0:03:09.680 --> 0:03:13.000 all stuck at home, we're all quarantined. Uh, there's no 0:03:13.320 --> 0:03:16.280 sports to bet on, there's no casinos to go to 0:03:16.520 --> 0:03:20.280 and to satisfy that speculative urge. Maybe folks are turning 0:03:20.320 --> 0:03:23.000 to the stock market, particularly the options market. Does that 0:03:23.160 --> 0:03:27.760 have value in your opinion? Now, that's that's absolutely what's 0:03:27.760 --> 0:03:30.440 going on. People are at home and board you know. 0:03:30.480 --> 0:03:34.000 I actually, um, you know, for five years I taught 0:03:34.040 --> 0:03:37.080 at the local university and I checked in with one 0:03:37.120 --> 0:03:40.560 of my former students and he's, you know, living in 0:03:40.640 --> 0:03:46.520 his mom's basement, quarantined and he's trading you know. Um, 0:03:46.600 --> 0:03:49.320 So it's a it's a function of it's a function 0:03:49.360 --> 0:03:52.560 of boredom. It's a function of getting no action on 0:03:52.640 --> 0:03:56.920 sports betting. I think it's also partially a function of 0:03:57.120 --> 0:04:00.440 the stimulus and unemployment money that's been going out because 0:04:00.480 --> 0:04:04.480 people are speculating with very small amounts of money. You know, 0:04:04.600 --> 0:04:07.480 I get questions about people with you know, they have 0:04:07.560 --> 0:04:10.520 a thousand dollars to put the work, and they're asking 0:04:10.520 --> 0:04:14.800 about how to trade stocks. And this goes to the 0:04:14.880 --> 0:04:18.760 kernel of your column because you say that rather than 0:04:18.800 --> 0:04:21.839 it brings with liquidity out there and thanks to the Fed, 0:04:22.279 --> 0:04:24.719 the real villains here are the discount brokers who have 0:04:24.760 --> 0:04:29.800 caught trading commissions to zero. Explained that Jared, Yeah, I mean, 0:04:30.200 --> 0:04:33.839 you know, commissions were never a huge portion of the 0:04:33.880 --> 0:04:37.919 discount brokers revenue. They were about or less. Uh, And 0:04:38.000 --> 0:04:41.280 these were competitive forces that drove commissions lower. I mean, 0:04:41.320 --> 0:04:45.000 it wasn't anything finister, It wasn't really a marketing employ 0:04:45.160 --> 0:04:47.479 to try to get more people to trade. It was 0:04:47.520 --> 0:04:52.200 just competitive pressures that drove commissions lower. So that's really 0:04:52.520 --> 0:04:55.719 you know, it's it's just like supply and demand. You know, 0:04:55.760 --> 0:04:57.800 if you lower the price of something, there's going to 0:04:57.839 --> 0:05:01.640 be more demand for it. And you've seen trading volumes 0:05:01.680 --> 0:05:05.440 just absolutely explode since there's no commission. Now, I've always 0:05:05.440 --> 0:05:08.720 been of the view that commissions and fees are not 0:05:08.839 --> 0:05:13.000 necessarily a bad thing because they shape investor behavior and 0:05:13.040 --> 0:05:17.280 then encourage buy and hold strategy. Just briefly, Jared, how 0:05:17.400 --> 0:05:20.000 much has this to do with Dave Portnoy, whose course 0:05:20.040 --> 0:05:24.640 Barstool Sports is founder and really hyped Robin Hood Financial 0:05:24.640 --> 0:05:28.120 and his day trading. I think it has quite a 0:05:28.160 --> 0:05:29.760 bit to do with it, actually, I mean, he has 0:05:29.800 --> 0:05:33.000 a pretty large following, and I think, you know, I 0:05:33.000 --> 0:05:34.880 think people take him a bit too literally and a 0:05:34.920 --> 0:05:38.000 bit too seriously. You know, he's gone after people like 0:05:38.080 --> 0:05:40.960 Warren Buffett, and Jim Simons and stuff like that, and 0:05:41.000 --> 0:05:43.000 he says he's the greatest day trader in the world. 0:05:43.040 --> 0:05:45.359 But you know, he's given confidence to a lot of 0:05:45.360 --> 0:05:48.160 people that they can do the same thing. Yeah. Man, 0:05:48.160 --> 0:05:51.200 it's just not that easy. As of course anyone who's 0:05:51.240 --> 0:05:53.839 done it for a living it can attest to Jared Dillion, 0:05:53.960 --> 0:05:56.280 his columnist for Bloomberg Opinion. He's editor and publisher of 0:05:56.320 --> 0:05:59.720 The Daily Dirt Nap also investment Strategists Add Mold than Economics, 0:06:00.040 --> 0:06:01.760 And of course he's the author of that book that 0:06:01.800 --> 0:06:03.960 I'm sure you've all read, Street Freak, Money and man 0:06:03.960 --> 0:06:07.800 as At Lehman Brothers, and another novel, All The Evil 0:06:08.000 --> 0:06:11.599 of This World. Jar Dileona, thank you for joining Paul. 0:06:11.920 --> 0:06:14.920 Can I ask you if you have a robin Hood 0:06:15.080 --> 0:06:18.440 trading account. I do not, absolutely do not. I wouldn't 0:06:18.440 --> 0:06:21.400 be allowed to. I'm not like Tom Keene. I'm not 0:06:21.520 --> 0:06:24.240 long the triple leverage all cash fund. But I'm also 0:06:24.279 --> 0:06:27.440 not day trading. I'm also not a gamer, which doesn't help. Apparently, 0:06:27.440 --> 0:06:32.760 if you're a trainer, you've got faster fingers. Some of 0:06:32.760 --> 0:06:36.800 the stocks that has performed exceptionally well during this pandemic 0:06:37.080 --> 0:06:39.680 is Amazon dot Com. The stock is up forty five 0:06:39.800 --> 0:06:42.240 percent year to date. It sports a market cap of 0:06:42.320 --> 0:06:47.320 one point three four trillion dollars. With a t company 0:06:47.400 --> 0:06:50.200 got and the stock got a new supporter this week 0:06:50.240 --> 0:06:52.760 on Wall Street. Law Martin senior analysts that need him, 0:06:52.760 --> 0:06:55.599 a company based in Los Angeles, initiated coverage this week 0:06:55.640 --> 0:06:59.200 with a by rating a thirty price target. Stocks currently 0:06:59.200 --> 0:07:02.480 trading at HUDD eighty three. Laura, thanks so much for 0:07:02.560 --> 0:07:08.400 joining us here. Give us your thesis on Amazon right here. So, 0:07:08.440 --> 0:07:11.000 I think the most important thing we're saying that's new 0:07:11.120 --> 0:07:13.880 on this name fall is that this is really a 0:07:13.880 --> 0:07:17.080 services company and not a product company, which is to say, 0:07:17.080 --> 0:07:21.679 because consumers relationships with with Amazon is from a consumer 0:07:21.680 --> 0:07:23.720 pacing where they think of it as an e commerce company. 0:07:23.760 --> 0:07:28.080 But today of his company's revenue comes from services, and 0:07:28.080 --> 0:07:30.880 they have an eight percent profit margins compared to e 0:07:30.920 --> 0:07:33.640 commerce which is a three percent profit margin. So when 0:07:33.680 --> 0:07:38.200 you look at contributions to actually operating profits, it really 0:07:38.240 --> 0:07:42.680 comes from services like prime video, like music, like advertising 0:07:42.680 --> 0:07:45.000 a huge here. We think they do eight billion of advertising. 0:07:45.160 --> 0:07:48.040 So together we value what we call the media businesses 0:07:48.040 --> 0:07:51.120 at five billion, which is about the same size as aws, 0:07:51.400 --> 0:07:53.920 which together means it's about eight services are about eight 0:07:54.040 --> 0:07:57.040 percent of the value here at Amacle, Laura, this is 0:07:57.080 --> 0:08:01.000 something that's an Amazon's DNA. You talk about Amazon having 0:08:01.000 --> 0:08:05.760 a track record of expanding total addressable market decisions, so 0:08:05.840 --> 0:08:09.440 it's just constantly, constantly expanding the people that it reaches, 0:08:09.920 --> 0:08:12.680 and all of those decisions are driving higher profitability and 0:08:12.720 --> 0:08:16.120 lower shareholder risk. So it feels like this may never end. 0:08:17.640 --> 0:08:19.840 I think that's possible. I think one of these things 0:08:19.880 --> 0:08:21.960 I cover oppur as well, and I think both Apple 0:08:22.040 --> 0:08:24.240 and Amazon they're about the same size of company, two 0:08:24.720 --> 0:08:27.960 seventy billion dollars a year of revenue. I think they 0:08:28.040 --> 0:08:31.040 both generate sixty billion dollars a free cash flow a year. 0:08:31.080 --> 0:08:33.400 Apple turns around and buys and shares and so it 0:08:33.520 --> 0:08:36.720 drives higher earnings for share growth with that. I think 0:08:36.720 --> 0:08:40.200 what Amazon does, by contrast, it takes creean of that 0:08:40.320 --> 0:08:42.560 and invest in what you just characterize as these can 0:08:42.679 --> 0:08:46.360 expanding you know, new verticals that are non visible, and 0:08:46.440 --> 0:08:50.360 it turns them into a WUS or advertising or groceries 0:08:50.520 --> 0:08:54.800 or delivery last mile delivery innovations, and then it reports 0:08:54.800 --> 0:08:57.520 out much lower free cash flow and much lower margins 0:08:57.559 --> 0:09:00.520 to apprentices of the incometry. So I think might never 0:09:00.640 --> 0:09:03.320 end because this is how Basis is wired. They have 0:09:03.480 --> 0:09:05.720 grown in these ways that for the last twenty years 0:09:05.800 --> 0:09:08.920 under the CEO Jeff Basis. So Laura talked to us 0:09:08.920 --> 0:09:11.960 a little bit about the uh cloud business that's really 0:09:11.960 --> 0:09:15.560 been a you know, a profit driver for Amazon for 0:09:15.640 --> 0:09:18.200 years and years. Investors were, I guess used to our 0:09:18.240 --> 0:09:20.880 conditioned to little to no profitability coming out of the 0:09:20.920 --> 0:09:23.840 core e commerce business, but once they really started building 0:09:23.840 --> 0:09:26.440 out the cloud business, it's been a real profit generator 0:09:26.480 --> 0:09:28.120 for them. How do you view the growth and the 0:09:28.160 --> 0:09:31.839 profitability of that business? You know, I think that it's 0:09:31.880 --> 0:09:35.479 important they break out the cloud business is separately financially, 0:09:35.520 --> 0:09:38.240 so there's been a lot of good financial analysis. What 0:09:38.360 --> 0:09:40.800 we would say of our value added in this messaging 0:09:41.040 --> 0:09:43.120 is that we think this is a playbook that you 0:09:43.120 --> 0:09:45.240 should look at Amazon repeat they're doing it now and 0:09:45.280 --> 0:09:48.600 advertising and what happens is when Amazon gets big enough 0:09:48.679 --> 0:09:51.840 it's something they're successful at, they break it out separately 0:09:51.920 --> 0:09:55.400 so you can value it separately. So um, we think 0:09:55.440 --> 0:09:58.280 that they do about eighteen billion dollars of advertising today, 0:09:58.480 --> 0:10:02.040 which has a profit margin and that business is soon 0:10:02.120 --> 0:10:04.760 going to get big enough. We think it is. Together 0:10:04.880 --> 0:10:08.240 the services businesses are almost as large as a WS. 0:10:08.240 --> 0:10:10.480 So we think at some point in the next two 0:10:10.520 --> 0:10:12.960 years they will break out these what I would call 0:10:13.000 --> 0:10:15.800 their media businesses or their media revenue streams into a 0:10:15.840 --> 0:10:17.600 separate business, and you will be able to value it 0:10:17.800 --> 0:10:20.319 and it will be more profitable than a WS. But 0:10:20.480 --> 0:10:24.280 right now it's hidden in this massive, you know, conglomerate. 0:10:24.640 --> 0:10:27.320 So I always call that. What's important about AWS is 0:10:27.320 --> 0:10:30.600 it is a playbook for how Amazon runs businesses and 0:10:30.640 --> 0:10:34.240 then uncovers it's hidden value over time so that Wall 0:10:34.280 --> 0:10:37.199 Street can more easily value it. You know, you talk 0:10:37.240 --> 0:10:41.320 about Amazon also having media asset values about five billion dollars. 0:10:41.440 --> 0:10:46.120 What happens there where a dollars going Laura, So there's 0:10:46.160 --> 0:10:49.640 advertising in their subscription. That prime subscription product has a 0:10:50.440 --> 0:10:54.040 profit margin. Let's remember that Netflix decieted at nine times revenue, 0:10:54.040 --> 0:10:57.480 and it loses money prime which is mostly for shipping, 0:10:57.520 --> 0:11:00.760 but twenty of prime subscribers stay there. There for the media, 0:11:01.160 --> 0:11:04.560 which is Twitch, which is really important, music and video. 0:11:05.000 --> 0:11:08.440 All of those assets are bundled in that prime subscription 0:11:08.800 --> 0:11:12.439 and that makes turn lower. It breaks the average revenue 0:11:12.480 --> 0:11:15.280 for user of the lifetime values higher UM and then 0:11:15.280 --> 0:11:18.679 they have advertising as well. So all of those businesses 0:11:18.720 --> 0:11:21.720 have much higher margins than the average, even higher than 0:11:21.760 --> 0:11:24.319 clouds by a lot, a much higher margin than cloud 0:11:24.679 --> 0:11:27.440 and that's you know, three times as higher margin as 0:11:27.480 --> 0:11:31.120 the e commerce business. So these media businesses, I think 0:11:31.160 --> 0:11:34.600 not only are they growing faster, they're helping churn fall 0:11:34.720 --> 0:11:38.120 for the commerce part of the Amazon's and they have 0:11:38.200 --> 0:11:41.280 much higher profitability in which was on capital. So, Laura, 0:11:41.360 --> 0:11:44.200 what does this mean for the i'll call them traditional 0:11:44.200 --> 0:11:46.680 media companies that you and I grew up covering. There's 0:11:46.679 --> 0:11:49.120 been a lot of consolidation. Is that enough or is 0:11:49.160 --> 0:11:51.160 there really not a boolk case to be made for 0:11:51.200 --> 0:11:56.760 some of these traditional vertically integrated media companies. UM, So 0:11:56.800 --> 0:11:59.680 I think Amazon is trying to Amazon is doing something, 0:11:59.760 --> 0:12:01.960 dear prints in our traditional media companies with you and 0:12:01.960 --> 0:12:05.000 I started in the world covering, And what I would 0:12:05.040 --> 0:12:07.560 say is they have a bigger they have a bigger 0:12:08.480 --> 0:12:12.079 they're thinking globally for one thing, um and and their 0:12:12.120 --> 0:12:16.240 margin structure is different. They're very much data and technology driven. UM. 0:12:16.280 --> 0:12:17.960 As you and I have seen from the past. You know, 0:12:18.040 --> 0:12:22.080 data alone does not good content make UM, So I 0:12:22.160 --> 0:12:25.199 don't necessarily think of Amazon as a core competitor. I 0:12:25.200 --> 0:12:27.319 think it is much more likely that if they decide 0:12:27.360 --> 0:12:29.599 to really go into the media business, they buy the 0:12:29.640 --> 0:12:32.800 Walt Disney Company or they buy Fox. They can buy 0:12:32.840 --> 0:12:36.160 these traditional media companies because their margin profile is globally 0:12:36.200 --> 0:12:39.240 scale much more profitable. But I gotta tell you, Paul, 0:12:39.640 --> 0:12:42.920 I think this man, this this company really thinks that 0:12:43.080 --> 0:12:46.040 much bigger total addressable market like we think he's going 0:12:46.080 --> 0:12:49.560 after the logistics market next. That's this one point six 0:12:49.800 --> 0:12:53.440 trillion dollar total addressable market like media is too small 0:12:53.520 --> 0:12:57.040 for him. But I don't think he's going to look backwards. 0:12:57.280 --> 0:13:01.959 A go ahead, Paul, Sorry, no, no, no, that was good. Uh. 0:13:02.200 --> 0:13:04.120 I guess we should ask a really about Apple on 0:13:04.280 --> 0:13:06.680 Monday as well, because it's the first virtual w WDC 0:13:06.840 --> 0:13:11.679 conference in in ever. Is there anything that you're anticipating 0:13:11.679 --> 0:13:15.400 that will blow us away? I think the most important 0:13:15.400 --> 0:13:17.520 thing we're waiting to hear from Apple is what's going 0:13:17.559 --> 0:13:20.160 on with the five get phone, because I think the 0:13:20.200 --> 0:13:21.880 stock has been running on the hopes that we have 0:13:21.920 --> 0:13:24.360 a five get phone this year. Um, it's going to 0:13:24.440 --> 0:13:26.120 be late. All of their products. We're going to be 0:13:26.200 --> 0:13:29.720 late because of the COVID pandemic shutting down factories, um, 0:13:29.840 --> 0:13:32.920 And so we're waiting to hear what's the new five 0:13:32.960 --> 0:13:35.080 get phone going to be? And I think I think 0:13:35.120 --> 0:13:37.600 then our next step is after we know what their 0:13:37.679 --> 0:13:40.200 product mix is gonna be and when it's coming out, 0:13:40.320 --> 0:13:42.600 when it's gonna they also usually announced when things are 0:13:42.600 --> 0:13:46.040 going to be hitting the market, shelves available for purchase, um, 0:13:46.200 --> 0:13:48.240 then we're gonna all have to go do surveys about 0:13:48.480 --> 0:13:51.199 does any consumer care? Is anyone buying a new Apple 0:13:51.240 --> 0:13:53.560 phone this year? I mean, I think that's a separate question. 0:13:53.600 --> 0:13:56.079 But first we need the data on what is Apple 0:13:56.200 --> 0:14:00.360 delivering to the marketplace and when all right, Laura's thank you, 0:14:00.440 --> 0:14:03.440 We will eagerly await that on Monday. But also just 0:14:03.480 --> 0:14:06.239 a very happy to chat with you about your initiation 0:14:06.320 --> 0:14:09.360 of coverage of Amazon. The company's a hidden value multiplier 0:14:09.360 --> 0:14:13.360 and so on. Looking for Amazon to hit thirty two 0:14:13.440 --> 0:14:16.160 hundred dollars in the next twelve months and obviously has 0:14:16.200 --> 0:14:18.400 a by rating on it. That's Laura Martin there, senior 0:14:18.480 --> 0:14:21.560 media analyst at Needham and Company, and of course Paul 0:14:21.600 --> 0:14:24.440 as soon as she said Disney, I I heard you 0:14:24.520 --> 0:14:28.280 park up exactly. Yeah, you have to just really think 0:14:28.320 --> 0:14:31.800 about the future of these traditional media companies, including Disney. Exactly. 0:14:34.520 --> 0:14:36.760 Let's get back to our market coverage now. We have 0:14:36.840 --> 0:14:40.040 Dave Pudla joining us and David Couldla of course as founder, 0:14:40.080 --> 0:14:42.960 CEO and chief investment strategist of Mainstay Capital about two 0:14:42.960 --> 0:14:47.040 point seven billion dollars in assets under management and named 0:14:47.200 --> 0:14:51.720 my Baron as Barons as one of the top financial advisors, 0:14:51.720 --> 0:14:54.880 one of the top twenty five over the past six years. David, 0:14:55.040 --> 0:14:59.359 great to speak with you again. We've been asking participants 0:14:59.400 --> 0:15:03.520 here of show to tell us why exactly stocks continue 0:15:03.560 --> 0:15:05.960 to reach new highs even if we see some volatility, 0:15:06.040 --> 0:15:09.520 and even if today is quotruple witching, it's a bit 0:15:09.560 --> 0:15:15.440 of a bit of an exception. Well, we've been in 0:15:16.280 --> 0:15:21.600 Good Morning, Bonnie. The mantra that I think all investors 0:15:21.640 --> 0:15:26.400 need to heed all professionals, uh, that somehow I think 0:15:26.400 --> 0:15:31.560 have forgotten and are remembering now is that the mantra 0:15:31.640 --> 0:15:35.840 of don't fight the Fed. And we've seen some professionals, 0:15:35.840 --> 0:15:38.080 some bears that have thrown in the town recently and 0:15:38.280 --> 0:15:40.960 come back to a bullish dance. But This has been 0:15:40.960 --> 0:15:43.040 our mantra on this rally all the way back up, 0:15:43.720 --> 0:15:46.160 and I think that it continues to push stocks higher. 0:15:46.240 --> 0:15:50.240 You can't. It's just very difficult to justify these levels 0:15:50.240 --> 0:15:54.680 and even certainly continued advance on fundamentals of uh some 0:15:54.800 --> 0:15:59.800 of these companies, fundamentals of the market and the economic reality. 0:16:00.680 --> 0:16:04.320 But it's it's essentially fed stimulus and central bank stimulus. 0:16:04.800 --> 0:16:08.520 Um this continued continuing to put push asset prices higher 0:16:08.520 --> 0:16:13.440 and specifically stocks higher. So, David, you know, it's kind 0:16:13.440 --> 0:16:15.520 of my thought here and what what I read in 0:16:15.560 --> 0:16:17.360 here and talk to folks like you, that a lot 0:16:17.400 --> 0:16:20.440 of this market movement, particularly the rally off the bottom, 0:16:20.480 --> 0:16:22.680 which we're you know, roughly four off the bottom, has 0:16:22.680 --> 0:16:25.200 been driven literally by a handful of stocks, the fang 0:16:25.240 --> 0:16:28.120 plus kind of names. How broad based is this? And 0:16:28.160 --> 0:16:30.320 if to the extent it's not broad based and the 0:16:30.400 --> 0:16:32.960 depth is not there, the breath is not there, how 0:16:32.960 --> 0:16:37.880 concerning is that to you? It's not concerning At this point. 0:16:38.000 --> 0:16:40.440 We've seen, really, we've seen that kind of advance for 0:16:40.560 --> 0:16:43.280 that kind of narrow leadership for quite a while. We 0:16:43.280 --> 0:16:48.040 were seeing that in ten and early before we had 0:16:48.320 --> 0:16:51.320 the bear market decline, and I think a lot of 0:16:51.360 --> 0:16:53.160 that is a function of, you know that there was 0:16:53.200 --> 0:16:55.920 this a lot of concern about the fang stocks, a 0:16:55.960 --> 0:16:58.920 lot of concern about big cap tech that you know, 0:16:59.000 --> 0:17:02.800 and specifically the fang stocks either you know, those stocks 0:17:02.880 --> 0:17:06.600 that are big cap tech or retail stocks that are 0:17:06.600 --> 0:17:10.199 being enabled by technology, that it was a house of 0:17:10.240 --> 0:17:15.720 cards that was eminently going too far, eventually going to crumble. 0:17:16.400 --> 0:17:20.320 And you know, our our school of thought on that 0:17:20.359 --> 0:17:24.040 has been that, you know, technology is changing the world, 0:17:24.119 --> 0:17:26.879 technology is eating the world. And if you look at 0:17:27.000 --> 0:17:32.280 what happened, what's happened through the pandemic, some of these um, 0:17:32.320 --> 0:17:35.000 the cloud stocks, I T stocks, you know, those have 0:17:35.040 --> 0:17:39.000 been the enablers for uh, the different businesses that have 0:17:39.080 --> 0:17:44.160 done quite well through the pandemic. It's just another another 0:17:45.119 --> 0:17:48.119 scenario where we've seen how technology has mattered. And so 0:17:48.200 --> 0:17:51.600 we think that, uh, it's it's a secular grows story 0:17:51.680 --> 0:17:54.840 that remains and that these stocks are going to continue 0:17:54.840 --> 0:17:57.000 to trade at high multiples, are going to continue to 0:17:57.040 --> 0:18:00.159 do well, and we're continued well, we will continue to 0:18:00.200 --> 0:18:03.680 see that leadership. We saw a rotation back into value 0:18:03.720 --> 0:18:06.920 stocks here recently, and it was just another head fake, 0:18:07.560 --> 0:18:11.440 the the tech stocks I t cloud, all those came 0:18:11.640 --> 0:18:15.199 right back into leadership positions, and you know, we we 0:18:15.280 --> 0:18:19.720 have been uh overweight growth stocks. We continue to be. 0:18:20.240 --> 0:18:23.600 We don't fall for those value stock head fakes. And 0:18:23.720 --> 0:18:27.240 except for we've taken a Barbell approach in our portfolios 0:18:27.280 --> 0:18:30.080 here more recently over the past couple of months because 0:18:30.200 --> 0:18:34.359 the we call it the lockdown rebound plays. But basically 0:18:34.400 --> 0:18:44.080 some of these cyclical areas, whether it's the airlines, travel, leisure, uh, energy, construction, housing, 0:18:44.240 --> 0:18:46.960 you know, there's been some some good plays on those 0:18:47.040 --> 0:18:50.160 on the rebound, but we're staying with these secular growth stories, 0:18:50.200 --> 0:18:55.520 specifically technology. Dave, how long does this narrative play out for? Though? 0:18:55.560 --> 0:18:58.439 I mean it seems like nothing can go wrong for 0:18:58.480 --> 0:19:01.560 these companies. I mean Amazon put on a four hundred 0:19:01.680 --> 0:19:05.880 billion dollars worth of market capitalization during the pandemic. Well 0:19:07.160 --> 0:19:09.399 that's just it. I mean, we we say that nothing 0:19:09.400 --> 0:19:11.800 can go wrong, and I think it's that they're just 0:19:11.880 --> 0:19:15.639 in a place where, you know, everything is right for them. Amazon, 0:19:16.320 --> 0:19:21.080 you know, Amazons being a category killer for years and 0:19:21.119 --> 0:19:24.520 will continue to be, you know, coming back to what's 0:19:24.520 --> 0:19:28.320 happened during the pandemic, Um, there was an e t 0:19:28.440 --> 0:19:32.600 F that we invested in called Clicks that was it 0:19:32.680 --> 0:19:35.000 was just it was a slam dunk. It is an 0:19:35.040 --> 0:19:37.520 e t F along short et F that is, it 0:19:37.640 --> 0:19:41.119 was long uh, e commerce and short brick and mortar. 0:19:41.760 --> 0:19:45.440 The government was closing down brick and mortar stores. Even 0:19:45.480 --> 0:19:50.080 people that weren't accustomed to shopping online. We're being compelled 0:19:50.160 --> 0:19:53.080 or almost forced to do so. So that was a 0:19:53.080 --> 0:19:57.639 boost to Amazon and other online retailers. But in some 0:19:57.720 --> 0:20:01.080 of those habits have changed forever um and and so 0:20:01.200 --> 0:20:05.719 people are continuing to move more and more to shopping online. Uh. 0:20:05.760 --> 0:20:09.600 That trend will continue, So the Amazons of the world, 0:20:09.600 --> 0:20:14.520 and specifically Amazon will continue to do well. So, David, 0:20:14.560 --> 0:20:17.240 if I believe that the economy is going to slowly 0:20:16.960 --> 0:20:18.919 rebound in the back half of this year, then have 0:20:18.960 --> 0:20:23.000 a much stronger I want to go along some cyclicals. 0:20:23.000 --> 0:20:25.520 Do I want to go along some transportations? Something in 0:20:25.560 --> 0:20:28.800 the rails, the truckers, the you know, the cargo ships 0:20:28.800 --> 0:20:31.000 that are gonna be shipping all that cargo around the globe? 0:20:31.040 --> 0:20:35.359 Is that a play? If I believe in a stronger yeah, 0:20:35.400 --> 0:20:37.480 I think so. You know, I think you need to 0:20:37.480 --> 0:20:40.120 be careful. You know, you need to look at the charts. Uh. 0:20:40.160 --> 0:20:42.880 You know when we look at the airlines, for instance, 0:20:42.920 --> 0:20:46.200 you know there is an opportunity because they took such 0:20:46.240 --> 0:20:49.320 a plunge down as much as sixty on the downside, 0:20:49.840 --> 0:20:53.200 you know when they come back to their pre COVID levels. Um. 0:20:53.400 --> 0:20:55.040 You know, we look at the chart of the airlines 0:20:55.119 --> 0:20:57.560 and it's it's like an e KG with noise in it. 0:20:58.040 --> 0:21:00.400 And you know that's an industry that operates and razor 0:21:00.480 --> 0:21:04.680 thin margins with an airline going out of business every 0:21:04.880 --> 0:21:07.479 filing for bankruptcy every year or two. We look at 0:21:07.520 --> 0:21:10.720 construction and housing that was on a nice upward slope 0:21:10.720 --> 0:21:14.360 that got interrupted. It's had a nice rally back. All 0:21:14.359 --> 0:21:17.720 those other cyclicals you're talking about though, um, some of 0:21:17.800 --> 0:21:21.119 them have a long runway left in this in this rebound, 0:21:21.160 --> 0:21:24.080 and I think that you, you know, investors need to 0:21:24.080 --> 0:21:27.879 look at those areas to include in portfolios as we 0:21:27.960 --> 0:21:30.359 moved through this recovery in the economy, but not just 0:21:30.440 --> 0:21:33.919 here but globally. David couldla thank you so much for 0:21:34.200 --> 0:21:37.399 joining us. David's the CEO and chief investment strategist at 0:21:37.440 --> 0:21:40.280 main Stake Capital Management. About two point seven billion dollars 0:21:40.320 --> 0:21:43.640 under management. We always love speaking to David, very thoughtful 0:21:43.680 --> 0:21:45.840 analysis of the market and Vannie. You know, I love 0:21:45.880 --> 0:21:48.320 how he talked about don't fight the FED. That was 0:21:48.480 --> 0:21:51.000 literally the first lesson I learned on Wallstreet. When I 0:21:51.000 --> 0:21:53.080 was on the pain Warber block trading desk back in 0:21:53.119 --> 0:21:56.159 the mid to late eighties, managing director came up to 0:21:56.160 --> 0:21:58.120 me and said, why are you selling stocks here? Said, well, 0:21:58.160 --> 0:21:59.679 you know, and I said, he said, the rates are 0:21:59.720 --> 0:22:02.800 going down, kid, buy stocks, you know. So that's one 0:22:02.840 --> 0:22:04.960 that is stuck with me. And well, do you have 0:22:05.000 --> 0:22:09.760 a photograph of that time? No, I do not, thankfully. Yeah. 0:22:09.760 --> 0:22:11.720 It was a lot of fun, but so but it's 0:22:11.760 --> 0:22:14.280