WEBVTT - Bloomberg Businessweek Weekend - November 29th, 2024 0:00:00.160 --> 0:00:07.400 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.400 --> 0:00:12.799 This is Bloomberg business Week inside from the reporters and 0:00:12.960 --> 0:00:16.760 editors who bring you America's most trusted business magazine. 0:00:16.200 --> 0:00:19.080 Plus global business, finance and tech news. 0:00:19.239 --> 0:00:23.360 The Bloomberg Business Week Podcast with Carol Messer and Tim 0:00:23.400 --> 0:00:25.880 Stenebek from Bloomberg Radio. 0:00:27.120 --> 0:00:29.920 Hi, everyone, Welcome to the Bloomberg Business Week Weekend podcast. 0:00:30.320 --> 0:00:33.680 So we were recently in San Francisco broadcasting from Schwab 0:00:33.720 --> 0:00:36.239 Impact twenty twenty four. It was just over a week 0:00:36.280 --> 0:00:38.120 week and a half ago. We were surrounded by some 0:00:38.200 --> 0:00:41.879 forty five hundred attendees. This is Schwab's annual conference for 0:00:41.920 --> 0:00:45.440 independent registered investment advisors, you know rias, and also the 0:00:45.560 --> 0:00:48.680 independent record keepers of Charles Schwab. What it does is 0:00:48.680 --> 0:00:51.560 it brings together advisors from around the country and those 0:00:51.600 --> 0:00:54.000 in the industry that support them with services and tools. 0:00:54.040 --> 0:00:55.440 It was a lot of folks, a. 0:00:55.360 --> 0:00:57.080 Lot of people there, and for the next two hours 0:00:57.080 --> 0:01:00.320 we're serving up highlights from the event in interviews withvarious 0:01:00.360 --> 0:01:03.680 members of the Schwab universe, including the company's top strategists 0:01:03.720 --> 0:01:07.800 on USN, international markets, also fixed income. We're also going 0:01:07.840 --> 0:01:11.040 to hear about growth in the wealth management and ETF businesses. 0:01:11.160 --> 0:01:12.839 Now, we just want to point out at the time 0:01:12.959 --> 0:01:14.800 president like Donald Trump had yet to name his pick 0:01:14.840 --> 0:01:18.800 for US Treasury Secretary, his choice Wall Street veteran Scott Bessant. 0:01:18.959 --> 0:01:21.480 It came after Schwab impact was over. We're pointing this 0:01:21.520 --> 0:01:23.960 out because we know this is one of the top 0:01:24.080 --> 0:01:27.920 jobs in an administration that is closely watched by global 0:01:27.920 --> 0:01:31.000 investors in Wall Street alike. Who is the US Treasury Secretary? 0:01:31.000 --> 0:01:33.880 Folks, It matters, and so it wasn't a choice yet 0:01:33.920 --> 0:01:36.479 public when we sat down with the president of Charles Schwab, 0:01:36.480 --> 0:01:38.959 who also happens to be the incoming CEO of the 0:01:39.000 --> 0:01:42.039 company as well. We're talking about Rick Worster, who takes 0:01:42.040 --> 0:01:44.279 over the top spot on January first. 0:01:44.400 --> 0:01:46.040 Even so, we had a lot to talk about as 0:01:46.120 --> 0:01:48.960 Charles Schwab recently reported earnings. The stock, by the way, 0:01:49.000 --> 0:01:51.600 did rally on that earnings release and even had a 0:01:51.600 --> 0:01:53.960 couple of analysts raising their price targets on the company. 0:01:54.400 --> 0:01:57.400 This as core net new assets brought to Schwab by 0:01:57.440 --> 0:01:59.560 new and existing clients came in at twenty four point 0:01:59.600 --> 0:02:03.440 six plosillion dollars. Total client assets are now approaching ten 0:02:03.480 --> 0:02:04.280 trillion dollars. 0:02:04.480 --> 0:02:06.960 We kick things off with Rick Wurster looking at the 0:02:06.960 --> 0:02:09.000 big themes he's hearing about at the event. 0:02:09.280 --> 0:02:11.760 The big theme to me is always what can we 0:02:11.880 --> 0:02:14.600 collectively do to make a difference in the lives of 0:02:14.680 --> 0:02:17.680 every day investors. You mentioned the number ten trillion dollars. 0:02:18.000 --> 0:02:21.399 It's an overwhelming number, but behind every one of those dollars, 0:02:21.200 --> 0:02:25.280 it's a grandparent who's trying to help contribute to their grandkids' education. 0:02:25.440 --> 0:02:27.560 It's a it's a family that's trying to take a 0:02:27.639 --> 0:02:30.400 nice vacation that they've been saving for. That's what matters 0:02:30.400 --> 0:02:30.720 to us. 0:02:30.880 --> 0:02:32.280 I love that you say that because as I walk 0:02:32.280 --> 0:02:34.240 around and talk to some of the advisors, you know, 0:02:34.280 --> 0:02:36.640 they're maybe a billion dollar shop, a two billion, maybe 0:02:36.639 --> 0:02:39.040 even smaller, and they're always kind of apologizing. I'm like, no, 0:02:39.200 --> 0:02:42.120 you're the guys who are managing everybody's money. I kind 0:02:42.120 --> 0:02:43.960 of love that perspective absolutely. 0:02:44.000 --> 0:02:47.480 And the thing about this community. We serve fifteen thousand advisors. 0:02:47.840 --> 0:02:50.880 They're in most communities across our countries, sitting down the 0:02:50.919 --> 0:02:54.040 table to the table with people helping them understand how 0:02:54.040 --> 0:02:56.760 to live their best financial life and the power of 0:02:56.800 --> 0:02:58.800 that is so impressive. 0:02:58.440 --> 0:03:00.280 Rick, no doubt about it. The elections continue you to 0:03:00.280 --> 0:03:02.920 come up. How are you thinking about the elections the 0:03:03.720 --> 0:03:07.840 impact that a new administration, new people running different regulatory bodies, 0:03:07.919 --> 0:03:10.480 certainly that plant to the financial industry. How it might 0:03:10.520 --> 0:03:11.640 impact Schwap, Well. 0:03:11.560 --> 0:03:13.960 There's a lot of potential change at play. We've heard 0:03:13.960 --> 0:03:16.320 a lot of proposals. It will be really interesting and 0:03:16.360 --> 0:03:19.440 important to watch how those play out, and we stand 0:03:19.480 --> 0:03:23.800 ready to do whatever we can to help the everyday investor. 0:03:24.080 --> 0:03:25.000 That's our focus. 0:03:25.160 --> 0:03:29.080 And all things change much because of a new White 0:03:29.120 --> 0:03:31.680 House and a new team. Do you anticipate from what 0:03:31.720 --> 0:03:34.040 we've heard on the campaign trail and some of the 0:03:34.040 --> 0:03:35.800 people that are being considered for positions. 0:03:36.880 --> 0:03:38.760 I certainly think that there will be change. 0:03:38.800 --> 0:03:39.280 Absolutely. 0:03:39.320 --> 0:03:41.360 I think with any administration there's change, and we've been 0:03:41.400 --> 0:03:45.200 through all sorts of presidential cycles and election cycles, and 0:03:45.200 --> 0:03:46.800 at the end of the day, what it means for 0:03:46.920 --> 0:03:49.120 us is we adapt and we do whatever we can 0:03:49.200 --> 0:03:50.680 to help the the end client. 0:03:50.920 --> 0:03:53.120 Why are you thinking about this from a regulatory perspective? 0:03:53.200 --> 0:03:55.440 We did hear that SEC chair Gary Gensler is going 0:03:55.480 --> 0:03:58.120 to step down by January twenty. It's certainly the crypto 0:03:58.160 --> 0:04:00.800 community cheering that. How do you look at a change 0:04:00.840 --> 0:04:01.960 in leadership at the SEC. 0:04:02.760 --> 0:04:05.320 Well, for us, our company is built on trust and 0:04:05.480 --> 0:04:07.920 has been for fifty years. Our entire industry is built 0:04:07.920 --> 0:04:10.960 on trust. If people can't trust their financial institution, the 0:04:11.000 --> 0:04:13.240 whole premise of what we do goes away. And so 0:04:13.520 --> 0:04:16.360 I think regulators play a really important role in that, 0:04:16.440 --> 0:04:19.159 and we've always had a great relationship with regulators. I 0:04:19.160 --> 0:04:23.000 think from our perspective, we want regulation that is thoughtful 0:04:23.400 --> 0:04:25.760 and makes sense for the end investor. And when that's 0:04:25.800 --> 0:04:30.120 the case, we'll do anything to support it. And we're 0:04:30.160 --> 0:04:32.880 looking we're looking forward to, you know, to seeing who 0:04:32.880 --> 0:04:34.280 the next chairman is going to be. 0:04:34.360 --> 0:04:36.000 Rick what does it mean for crypto? And I'm curious 0:04:36.000 --> 0:04:37.919 if you guys see yourself getting into the crypto business. 0:04:37.920 --> 0:04:40.279 Here we are approaching one hundred thousand dollars. We have 0:04:40.360 --> 0:04:42.920 a president who initially maybe or president elect who maybe 0:04:43.000 --> 0:04:45.040 wasn't so into crypto is now very interesting. 0:04:45.279 --> 0:04:46.839 He got his own crypto company. 0:04:47.120 --> 0:04:49.440 What about for Schwab what's the play here? Do you 0:04:49.760 --> 0:04:51.280 see yourself getting into it? 0:04:51.520 --> 0:04:54.320 Well, we're in the crypto business to press, we have 0:04:54.680 --> 0:04:56.920 lots of different ways for clients to participate. They can 0:04:56.960 --> 0:05:00.919 buy ets today, they can buy big coin futures, they 0:05:00.960 --> 0:05:03.600 can buy closed end funds. I think we will get 0:05:03.640 --> 0:05:07.200 into this, into spot crypto when the regulatory environment changes, 0:05:07.640 --> 0:05:10.520 and we do anticipate that it will change, and we're 0:05:10.520 --> 0:05:12.120 getting ready for that eventuality. 0:05:12.320 --> 0:05:14.440 Is there some I don't know? Has crypto? Is it 0:05:14.440 --> 0:05:15.440 growing up in your view? 0:05:16.240 --> 0:05:18.719 I don't know. You know, it's an interesting asset class 0:05:18.760 --> 0:05:21.719 and people have really gravitated towards it, and you know, 0:05:21.760 --> 0:05:24.520 we never like to judge what people want to invest in. 0:05:25.120 --> 0:05:27.800 People on our platform, we think are very thoughtful investors, 0:05:27.880 --> 0:05:30.400 very sharp. They make decisions about what they want to 0:05:30.400 --> 0:05:34.400 invest in, and crypto has certainly caught many's attention and 0:05:35.839 --> 0:05:37.320 they've made a lot of money doing it. I have 0:05:37.400 --> 0:05:39.880 not bought crypto, and now I feel silly. So they've 0:05:39.920 --> 0:05:41.560 been the ones making all this money. 0:05:41.279 --> 0:05:43.440 On crypto thinking about buying it now. 0:05:45.160 --> 0:05:47.960 Me personally know, but we certainly support our clients that 0:05:48.000 --> 0:05:48.480 want to do that. 0:05:48.560 --> 0:05:50.040 You know what, you answered my next question, which is 0:05:50.080 --> 0:05:52.280 going to be do you own any crypto? But talk 0:05:52.279 --> 0:05:54.159 a little bit about that, because it's always interesting hearing 0:05:54.240 --> 0:05:58.120 from somebody in your space about their views on something. 0:05:58.800 --> 0:05:59.680 What's holding you back? 0:06:00.320 --> 0:06:02.479 Well, I think what's holding me back is just a 0:06:02.560 --> 0:06:05.279 question around the true value of crypto. You know, I 0:06:05.360 --> 0:06:07.479 like to invest in stocks, and with stocks, you there's 0:06:07.800 --> 0:06:10.720 cash flows you can rely upon. There there's dividends that 0:06:11.320 --> 0:06:14.560 accrue to you. With crypto, it's less certain what that 0:06:14.600 --> 0:06:16.680 will be, and it's it's less certain how to value it. 0:06:16.800 --> 0:06:20.080 So to me, on a personal level, that's what makes 0:06:20.680 --> 0:06:23.839 crypto not something that I invest in. At the same time, 0:06:24.040 --> 0:06:27.120 we encourage our investors to invest in what matters for them, 0:06:27.160 --> 0:06:29.680 and I've talked to a lot of our investors who 0:06:29.720 --> 0:06:32.200 tell me I'm completely missing the boat, and they tell 0:06:32.200 --> 0:06:34.240 me all the great things about crypto, And you know what, 0:06:34.760 --> 0:06:37.600 they've been right, not me, because so far keeps going up. 0:06:37.760 --> 0:06:39.839 So far they've been right. We'll see. 0:06:39.920 --> 0:06:41.640 It's one we're going to continue to follow. It moves 0:06:41.680 --> 0:06:44.560 around a lot. It is a competitive space. Just this week, 0:06:44.640 --> 0:06:45.640 I just want to look up my I know it's 0:06:45.680 --> 0:06:48.760 Robin Hood announcing they're moving to the RIA space. I'm 0:06:48.800 --> 0:06:51.279 curious about how you were thinking about Schwab for the 0:06:51.320 --> 0:06:53.479 next fifty years. As you get ready to take over 0:06:53.520 --> 0:06:57.719 as CEO and you know, not a new thing traditional investors. 0:06:57.760 --> 0:07:00.559 They're getting older, younger investors how they want to play 0:07:00.600 --> 0:07:03.440 and have more options. So what are your thoughts about 0:07:03.480 --> 0:07:06.200 Robinhood's move and maybe what you guys need to continue 0:07:06.200 --> 0:07:09.360 to do to attract younger investors who want those more options. 0:07:09.600 --> 0:07:12.840 Well, for fifty years, our central theme has been to 0:07:12.880 --> 0:07:15.760 see through client size and do right by them, and 0:07:15.800 --> 0:07:18.280 we attract a lot of young investors to Schwab. In fact, 0:07:18.320 --> 0:07:21.280 sixty percent of our new to firm clients every year 0:07:21.440 --> 0:07:22.120 are under the. 0:07:22.120 --> 0:07:22.880 Age of forty. 0:07:23.240 --> 0:07:26.720 Our client base actually gets younger every year, so it's 0:07:27.080 --> 0:07:28.800 sometimes we're not thought of as that way, but we 0:07:28.840 --> 0:07:30.880 attract a lot of young investors because we have what 0:07:30.920 --> 0:07:33.000 we think is the best trading platform in the industry, 0:07:33.320 --> 0:07:35.400 and it also comes along with what we think is 0:07:35.400 --> 0:07:38.440 the best educational and training platform in the industry, and 0:07:38.480 --> 0:07:40.920 that aspect has really appealed to some of our younger 0:07:41.000 --> 0:07:41.720 newer investors. 0:07:41.840 --> 0:07:43.559 Got to ask you about the training side and talking 0:07:43.560 --> 0:07:45.720 with advisors here. I was up on the stage doing 0:07:45.720 --> 0:07:48.520 a panel on artificial intelligence, and so many people came 0:07:48.560 --> 0:07:50.160 up to me afterwards and they're like, we got to 0:07:50.160 --> 0:07:52.800 talk to Schwab because I think we need a schwab chatbot. 0:07:53.840 --> 0:07:59.680 AI though, is impacting everything? How are you also, I 0:07:59.680 --> 0:08:02.240 don't know, acknowledging thinking about how that needs to be 0:08:02.280 --> 0:08:06.280 incorporated into what you offer up the advisory space. 0:08:06.600 --> 0:08:09.040 Yes, so that comment about wanting an AI chatbot, what 0:08:09.080 --> 0:08:11.520 they don't recognize is that actually, behind the scenes, we 0:08:11.600 --> 0:08:14.920 have built one for our client facing professionals. And so 0:08:14.960 --> 0:08:18.400 it used to be that sixty thousand times a month 0:08:18.760 --> 0:08:20.720 we would have a phone rep spend more than three 0:08:20.760 --> 0:08:23.680 minutes searching for a piece of information to answer a 0:08:23.720 --> 0:08:27.240 client question, and now we have built an AI capability 0:08:27.400 --> 0:08:29.760 that finds that information in seconds, and so it makes 0:08:29.760 --> 0:08:32.040 a better use of the client's time and allows them 0:08:32.040 --> 0:08:34.520 to focus and go deeper on wealth issues that we 0:08:34.559 --> 0:08:35.679 could potentially help them with. 0:08:35.720 --> 0:08:38.160 But is there another level that you continue to think about? Okay, 0:08:38.160 --> 0:08:40.800 where does this go in helping advisors in terms of 0:08:40.880 --> 0:08:43.839 portfolio management are building out their businesses. 0:08:44.440 --> 0:08:46.760 I think AI will have a really big impact on 0:08:46.800 --> 0:08:49.480 our industry. I think it will do a lot to 0:08:49.600 --> 0:08:53.400 help us better serve clients, to empower our professionals to 0:08:53.400 --> 0:08:55.880 give them the right information at the right time. I 0:08:55.880 --> 0:08:59.160 think it will also allow us collectively to help serve 0:08:59.200 --> 0:09:04.360 clients that we Otherwise we have fifteen million retail clients, 0:09:04.760 --> 0:09:08.720 we can only have a person to person relationship with 0:09:08.760 --> 0:09:11.360 about ten to twenty percent of that client base. There's 0:09:11.400 --> 0:09:14.120 eighty percent that we don't get to to have that 0:09:14.160 --> 0:09:18.240 in person dialogue with and I think AI could bridge 0:09:18.280 --> 0:09:20.840 that gap and allow us to reach more clients. 0:09:20.920 --> 0:09:22.240 Hey, before we let you go, I want to talk 0:09:22.240 --> 0:09:24.600 a little bit about the balance sheet, because you basically 0:09:24.640 --> 0:09:27.080 said you're trying to shrink the bank's balance sheet and 0:09:27.120 --> 0:09:29.800 not hold as many loans on the balance sheet. Given 0:09:29.800 --> 0:09:31.400 what happened a couple of years ago, close to two 0:09:31.440 --> 0:09:33.280 years ago with the regional banking crisis in the way 0:09:33.520 --> 0:09:35.080 you guys were brought into that, just give us an 0:09:35.120 --> 0:09:37.080 update there on what you're going to do when you 0:09:37.120 --> 0:09:37.679 become CEO. 0:09:38.120 --> 0:09:40.199 Well, I want to clarify, we never said we wanted 0:09:40.200 --> 0:09:42.440 to shrink our balance sheet. What we did allude to, 0:09:42.480 --> 0:09:43.880 and I think what you're referring to is on an 0:09:43.920 --> 0:09:47.800 earnings call, we said, as our balance sheet grows, we 0:09:47.800 --> 0:09:50.560 would consider using a third party bank to take on 0:09:50.679 --> 0:09:53.360 some of those deposits. That's something that could make sense 0:09:53.400 --> 0:09:55.679 for us because of the way the economics work, we 0:09:55.720 --> 0:09:59.200 have to hold capital against deposits. We can send some 0:09:59.240 --> 0:10:02.720 of those deposits to another bank and earn a better 0:10:02.760 --> 0:10:06.199 return relative to capital when we do so. So it's 0:10:06.240 --> 0:10:08.560 a tool to have in our toolbox. It's not something 0:10:08.600 --> 0:10:12.000 we're going out and doing immediately, something we're considering. We'd 0:10:12.000 --> 0:10:14.040 only do it as our balance sheet grows and when 0:10:14.040 --> 0:10:14.880 it makes sense to do. 0:10:15.200 --> 0:10:18.800 Challenging here, certainly for Schwab with the regional bank crisis 0:10:18.800 --> 0:10:20.160 and so on and so forth. We talked about a 0:10:20.160 --> 0:10:23.559 lot on Bloomberg. Are we past it? Do you feel 0:10:23.559 --> 0:10:26.200 confident or what's more to be done? In terms of 0:10:26.200 --> 0:10:27.680 the impact that we've seen in the past year. 0:10:27.880 --> 0:10:30.480 I've never been more optimistic about our business than we 0:10:30.520 --> 0:10:33.080 are today. We're number one or number two and the 0:10:33.120 --> 0:10:37.440 two fastest growing segments of the financial services landscape, and 0:10:37.600 --> 0:10:40.080 our client satisfaction scores have never been higher than they 0:10:40.080 --> 0:10:42.520 are today. So we're hitting on all cylinders as we 0:10:42.600 --> 0:10:44.640 roll into twenty twenty five, and I couldn't be more 0:10:44.920 --> 0:10:45.640 excited about it. 0:10:45.720 --> 0:10:47.439 What's the most interesting thing in the investment space do 0:10:47.480 --> 0:10:48.240 you think right now? 0:10:48.679 --> 0:10:51.360 I think the engagement among clients. It's just wonderful to 0:10:51.400 --> 0:10:54.000 see how engaged they are in markets in their financial life. 0:10:54.000 --> 0:10:56.480 When people own their tomorrow, they tend to have great 0:10:56.480 --> 0:10:57.400 financial outcomes. 0:10:57.520 --> 0:10:59.000 Rick, thank you so much. I know there's a lot 0:10:59.000 --> 0:10:59.280 going on. 0:10:59.320 --> 0:10:59.800 I know this is a. 0:10:59.800 --> 0:11:01.720 Big event, but I'm carving out some space for us. 0:11:01.720 --> 0:11:02.360 We really appreciate it. 0:11:02.400 --> 0:11:03.960 Well. Thanks for making a commitment to be here. We 0:11:04.000 --> 0:11:04.760 love having you here. 0:11:04.800 --> 0:11:06.600 It's a great perspective that we get to come and 0:11:06.640 --> 0:11:08.200 take back to New York and kind of share with 0:11:08.280 --> 0:11:10.840 us some of our other guests. Rick Worster, current president 0:11:10.840 --> 0:11:13.960 of Charles Schwab taking over CEO on January first. This 0:11:14.080 --> 0:11:15.400 is Bloomberg from Impact. 0:11:21.080 --> 0:11:24.640 You're listening to the Bloomberg Business Week podcast. Catch us 0:11:24.679 --> 0:11:28.119 live weekday afternoons from three to six Eastern Listen. 0:11:27.920 --> 0:11:30.840 On Bloomberg dot com, the iHeartRadio app. 0:11:30.640 --> 0:11:34.720 And the Bloomberg Business App, or watch us live on YouTube. 0:11:35.640 --> 0:11:38.000 Time now for a strategy deep dive courtesy of the 0:11:38.040 --> 0:11:41.959 team at Charles Schwab. Everything from global equities and macroeconomics 0:11:41.960 --> 0:11:45.920 and presidential politics to fixed income and US domestic stocks. 0:11:46.160 --> 0:11:48.560 It all happened recently when we broadcast from the Schwab 0:11:48.640 --> 0:11:50.400 Impact Conference in San Francisco. 0:11:50.760 --> 0:11:53.640 At the event, two very familiar voices to investors and 0:11:53.679 --> 0:11:57.640 the Bloomberg world from Charles Schwab, Lizanne Saunders, Managing director, 0:11:57.720 --> 0:12:01.480 Chief Investment Strategists also along with Kevin Gordon, Director and 0:12:01.640 --> 0:12:02.920 senior investment strategist. 0:12:03.120 --> 0:12:05.480 We want to note that this conversation happened before President 0:12:05.480 --> 0:12:09.280 elect Trump vowed additional tariffs on Mexico, Canada, and China 0:12:09.320 --> 0:12:10.680 that'll happen this past week. 0:12:10.880 --> 0:12:13.839 We began by asking about the conversations they're having between 0:12:13.880 --> 0:12:16.200 each other about what's going on in the market. 0:12:16.280 --> 0:12:19.000 It's just such a unique period of uncertainty because of 0:12:19.160 --> 0:12:23.600 the different directions policy can go. And one way we've 0:12:23.600 --> 0:12:26.440 been talking about is we're all always mindful of of 0:12:26.480 --> 0:12:29.320 sort of tail risks. I think the tails are fatter 0:12:30.520 --> 0:12:35.199 because of not just the uncertainty associated with tariffs, immigration policy, 0:12:35.720 --> 0:12:38.000 but the fact that much of what appears to be 0:12:38.040 --> 0:12:40.840 the priority of the administration could be done by executive 0:12:40.920 --> 0:12:43.000 order and doesn't have to go through that congressional And 0:12:43.040 --> 0:12:45.880 we learned in twenty eighteen that you know, a lot 0:12:45.920 --> 0:12:51.120 of the tariff announcements were done by Twitter, so it's unconventional. 0:12:51.520 --> 0:12:54.400 So then how do you think about what can you 0:12:54.520 --> 0:12:56.120 kind of hang your hat on. Kevin, come on in 0:12:56.120 --> 0:12:56.720 on the conversation. 0:12:56.800 --> 0:12:58.240 Well, I think you know, one of the hard parts 0:12:58.320 --> 0:13:01.319 about going back to twenty eighteen two nineteen is what 0:13:01.480 --> 0:13:03.840 you know as humans. It's natural to go back to 0:13:03.880 --> 0:13:05.680 a period of time and say, yeah, you can bring 0:13:05.679 --> 0:13:07.440 out that playbookdusted off, especially from. 0:13:07.320 --> 0:13:08.240 A tariff perspective. 0:13:08.360 --> 0:13:10.360 What's harder this time is that we're in a totally 0:13:10.360 --> 0:13:14.920 different macroeconomic environment where you're still dealing with ripple effects 0:13:14.960 --> 0:13:17.640 from the pandemic. You're still dealing with a bond market 0:13:17.679 --> 0:13:19.520 that is a little bit more unruly this time than 0:13:19.559 --> 0:13:22.160 it was going into the first administration for Trump. So 0:13:22.520 --> 0:13:24.200 I think that, you know, to Lazand's point about what 0:13:24.240 --> 0:13:27.120 can be done unilaterally versus what can be done with 0:13:27.240 --> 0:13:29.959 congressional approval, really needs to be looked at here, especially 0:13:29.960 --> 0:13:33.440 from an immigration policy perspective, because most of the labor 0:13:33.440 --> 0:13:35.360 force growth we've had over the past four years has 0:13:35.400 --> 0:13:38.280 been from the foreign born you know, work force, so 0:13:38.320 --> 0:13:41.280 that if it gets restricted, I think could be more 0:13:41.320 --> 0:13:42.280 of a more of a problem. 0:13:42.320 --> 0:13:42.920 Talk a little bit. 0:13:43.000 --> 0:13:45.440 The FED comes into the mix because the combination of 0:13:45.440 --> 0:13:48.640 immigration policies and tariff policies, it's hard to argue against 0:13:48.720 --> 0:13:52.920 them being inflationary. So then you have what's the FED 0:13:52.960 --> 0:13:56.160 reaction function if it's policy driven inflation. 0:13:56.640 --> 0:14:00.240 I I based on the first Trump administration, I believe, 0:14:01.520 --> 0:14:04.320 and I'm not getting political here, I'm just stating sort 0:14:04.320 --> 0:14:08.000 of a theory. The president elect loves to look at 0:14:08.000 --> 0:14:09.560 the S and P five hundred and talk about the 0:14:09.559 --> 0:14:11.240 S and P five hundred. That's like his report card 0:14:11.520 --> 0:14:14.640 for how he's doing. If there is an adverse market 0:14:14.679 --> 0:14:18.360 reaction to one of his policies, I think that would 0:14:18.360 --> 0:14:19.880 be enough for him to change his too. 0:14:20.160 --> 0:14:22.520 I think not just the S and P five hundred. 0:14:22.560 --> 0:14:26.240 I think markets could be the decider, not just the 0:14:26.280 --> 0:14:29.240 equity side of things, but the bond markets, the bond vigilances. 0:14:29.400 --> 0:14:30.120 Yeah. 0:14:30.200 --> 0:14:32.360 I think the other thing to keep in mind is 0:14:32.880 --> 0:14:34.920 it's not as if, because you know, we know that 0:14:35.000 --> 0:14:37.600 President elect Trump is very focused on markets, that doesn't 0:14:37.600 --> 0:14:40.160 mean that you don't get downturns and you don't get volatility. 0:14:40.200 --> 0:14:42.240 I mean, if you just use twenty seventeen as a 0:14:42.280 --> 0:14:44.120 case study, if I came from the future and we 0:14:44.120 --> 0:14:45.800 were in twenty seventeen and told you we were going 0:14:45.840 --> 0:14:48.320 to get this massive fiscal stimulus in the form of 0:14:48.320 --> 0:14:50.800 tax cuts at the corporate and the individual level. You'd 0:14:50.800 --> 0:14:53.480 probably think that's Neirvada for risk assets. But the reality 0:14:53.560 --> 0:14:55.480 is we had the shortfall implosion in twenty eighteen. You 0:14:55.520 --> 0:14:57.680 had a near bear market almost by a tenth of 0:14:57.680 --> 0:14:59.120 a percentage point for the S and P in the 0:14:59.120 --> 0:15:01.720 fourth quarter of that year. And yeah, you bounced back 0:15:01.720 --> 0:15:03.920 in twenty nineteen, was choppy but ended up being okay. 0:15:04.000 --> 0:15:06.280 But it doesn't mean that you eliminate all of this 0:15:06.440 --> 0:15:10.040 downside risk, especially if it's driven more by teriff related news. 0:15:10.080 --> 0:15:12.400 And you know the hits to manufacturing in the US that. 0:15:12.400 --> 0:15:14.360 Are so speaking of the hits to manufacturing, if you 0:15:14.520 --> 0:15:17.280 if you look at the ISM manufacturing index and put 0:15:17.280 --> 0:15:19.400 a vertical line at the start of the trade war 0:15:19.440 --> 0:15:23.240 in twenty eighteen, it went straight down. Now we're at 0:15:23.560 --> 0:15:26.360 lows in manufacturing. So I don't know that we have 0:15:26.440 --> 0:15:30.160 a potential implosion from these lows, but it could be 0:15:30.480 --> 0:15:34.560 something that prevents what was the hope for pickback. 0:15:34.160 --> 0:15:35.120 Up and manufacturing. 0:15:35.160 --> 0:15:37.240 I guess I keep thinking about. You know, there's the 0:15:37.360 --> 0:15:41.040 fundamental stories of companies and profits, right that really matters. 0:15:41.040 --> 0:15:42.680 But then you've got a layer on top of that 0:15:42.960 --> 0:15:45.160 the politics that's going to play out, and that's going 0:15:45.240 --> 0:15:47.320 to kind of kick investors around. I mean, how are 0:15:47.360 --> 0:15:50.000 you guys squaring when you're going to have a client 0:15:50.240 --> 0:15:53.920 call up and say, listen, fundamentally, earnings growth is happening, but. 0:15:54.120 --> 0:15:58.720 You know, keep it if you're proxying or earning's growth 0:15:58.720 --> 0:16:01.200 at the S and P level, that it's obviously biased 0:16:01.240 --> 0:16:04.120 up the cap spectrum. You've got forty three percent of 0:16:04.120 --> 0:16:07.080 the Rustle two thousand or nonprofitable companies, you've got a 0:16:07.160 --> 0:16:09.040 similar share that zombie companies. 0:16:09.440 --> 0:16:11.320 So I think there's a there's a much. 0:16:11.280 --> 0:16:15.640 Wider spread, especially when looking on the cap spectrum, but 0:16:15.840 --> 0:16:19.200 it often gets masked by virtue of there's so much 0:16:19.520 --> 0:16:21.960 focus on the large cap indexes. 0:16:22.160 --> 0:16:23.800 Well, funny that you say that, because I feel like 0:16:23.800 --> 0:16:25.760 the last two weeks everybody keeps coming on and said, 0:16:25.760 --> 0:16:28.880 guess what, it's small caps turn again, So. 0:16:28.800 --> 0:16:30.960 What is it not monolithically Okay? 0:16:31.400 --> 0:16:33.280 Again, when you look at an index as large as 0:16:33.280 --> 0:16:36.680 the Russell two thousand to to sort of just blanketly 0:16:36.720 --> 0:16:38.120 say yeah, small caps look good. 0:16:38.160 --> 0:16:41.440 I think that there is there are interesting zombie companies 0:16:41.600 --> 0:16:42.200 that you say. 0:16:42.120 --> 0:16:44.440 Yeah, those are not those with not sufficient cash flows 0:16:44.440 --> 0:16:46.640 to pay e an interest on their debts. So I think, 0:16:46.840 --> 0:16:50.800 you know, our our thesis around factors has been, Yeah, 0:16:50.840 --> 0:16:53.360 there's opportunities down the cap spectrum, but you don't want 0:16:53.360 --> 0:16:54.400 to sacrifice quality. 0:16:54.480 --> 0:16:56.960 Yeah, And to that point about quality, I mean, if 0:16:56.960 --> 0:17:00.880 you just used positive earnings on a trailer twelve month basis, 0:17:00.880 --> 0:17:04.040 so earnings of EPs above zero as your your you know, 0:17:04.200 --> 0:17:07.040 only criterion for the Rustle two thousand, and you took 0:17:07.080 --> 0:17:09.320 all of those companies, you know, it's about eight hundred 0:17:09.359 --> 0:17:12.880 nine hundred change as a group. On average, they're up 0:17:12.880 --> 0:17:15.159 by almost forty five percent over the past year. So 0:17:15.160 --> 0:17:17.920 there are pockets of small caps that have worked. It's 0:17:17.960 --> 0:17:20.560 just not equally distributed because of the interest rate environment 0:17:20.560 --> 0:17:22.560 we've been in also the growth environment. And by the way, 0:17:23.040 --> 0:17:24.760 all of these pops that you've had in the Wrestle 0:17:24.840 --> 0:17:26.800 two thousand from time to time over the past couple 0:17:26.840 --> 0:17:28.320 of years, every time they get a little bit of 0:17:28.320 --> 0:17:31.240 momentum and everyone thinks it's changing for them, it hasn't 0:17:31.280 --> 0:17:34.200 been consistent with the turn in forward earnings growth and expectations. 0:17:34.240 --> 0:17:37.120 So until I think you see that actual move where 0:17:37.160 --> 0:17:40.280 conviction starts to build. From an earning standpoint, it's tough 0:17:40.280 --> 0:17:42.359 to get bullish on the on the index as a whole. 0:17:42.359 --> 0:17:43.680 But to Lezan's point about. 0:17:43.520 --> 0:17:45.400