WEBVTT - Boeing's CEO Resigns and Bullish Takes 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.960 --> 0:00:15.560 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.600 --> 0:00:18.960 with Paul Sweeney. Join us each day for insight from 0:00:18.960 --> 0:00:23.160 the best in economics, finance, investment, and international relations. You 0:00:23.160 --> 0:00:26.520 can also watch the show live on YouTube. Visit the 0:00:26.520 --> 0:00:31.280 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:31.280 --> 0:00:34.320 mornings from seven to ten am Eastern from our global 0:00:34.360 --> 0:00:39.000 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.360 --> 0:00:42.920 or anywhere else you listen and always I'm Bloomberg Radio, 0:00:43.080 --> 0:00:46.280 the Bloomberg Terminal, and the Bloomberg Business app. 0:00:46.440 --> 0:00:49.559 Brook Sutherland she is a Bloomberg Opinion the Colm. She 0:00:49.640 --> 0:00:54.560 covers the industrials for Bloomberg Opinion. So, Brooke, this feels 0:00:54.560 --> 0:00:57.960 like really big news for our friends at boeen What 0:00:58.000 --> 0:00:59.360 does it mean to you when you see such a 0:00:59.400 --> 0:01:01.880 management shape pick up here for Boeing? 0:01:03.040 --> 0:01:05.800 It's definitely big news. I mean, I would say perhaps 0:01:05.880 --> 0:01:09.039 overdue big news, but it's important that they're making the 0:01:09.120 --> 0:01:12.520 change now, and it signals that I think they're giving 0:01:12.520 --> 0:01:15.679 the message that this needs to be deeper rooted cultural 0:01:15.800 --> 0:01:18.480 change at Boeing and really get to the bottom of 0:01:18.480 --> 0:01:21.840 what's been driving these manufacturing glitches, a series of problems 0:01:21.840 --> 0:01:24.520 that have been plaguing the Commercial Airplanes division. And to 0:01:24.560 --> 0:01:26.399 see them make it change not just at the top, 0:01:26.720 --> 0:01:29.280 but also at the head of the commercial Airplane division 0:01:29.400 --> 0:01:32.560 signals that they're really trying to do an overhaul here 0:01:33.160 --> 0:01:34.800 and it's about time, but they're doing it now. 0:01:35.280 --> 0:01:38.240 So Brooke, is there a feeling again this story here, 0:01:38.319 --> 0:01:41.320 this quality story has we're now several months into this year, 0:01:41.400 --> 0:01:43.959 with a little bit of hindsight, do we have any 0:01:44.000 --> 0:01:47.360 sense to what changed over the last maybe six to 0:01:47.360 --> 0:01:49.520 twelve months of this company versus the last, oh, I 0:01:49.560 --> 0:01:50.760 don't know, fifty years. 0:01:52.960 --> 0:01:55.920 I mean, I do think it's been notable the public 0:01:56.440 --> 0:01:59.560 criticism that's been coming out of their airline customers. I mean, 0:01:59.600 --> 0:02:02.240 certainly there was a lot of that in the wake 0:02:02.320 --> 0:02:06.080 of the seven thirty seven Max crashes in the grounding 0:02:06.120 --> 0:02:08.320 of that airplane, but not to the degree that we 0:02:08.360 --> 0:02:11.359 have seen in the wake of these recent quality control issues. 0:02:11.560 --> 0:02:14.520 And I think it's just been striking the level of 0:02:14.560 --> 0:02:17.000 criticism that we've seen directed at Boeing ME and its 0:02:17.000 --> 0:02:19.480 management team. And there were reports late last week that 0:02:19.560 --> 0:02:23.000 those airlines customers that actually asked for a meeting with 0:02:23.120 --> 0:02:26.320 the Bowing Board directly without CEO Dave Calhoun, and I 0:02:26.360 --> 0:02:28.359 think that that was an important Sigma R. 0:02:28.560 --> 0:02:31.919 How do you color a finance person with three decades 0:02:31.919 --> 0:02:35.680 of experienced Stephanie Pope coming in but critically to me, 0:02:35.800 --> 0:02:40.680 the key announcement Brooke is Steve Malinkoff of Qualcom with 0:02:40.800 --> 0:02:44.600 an electrical engineering background Virginia Tech. You know he's steeped 0:02:44.600 --> 0:02:49.239 in the engineering processes that are discussed here. What will 0:02:49.280 --> 0:02:53.160 he do? What's not day one for Steve Malincamp as 0:02:53.160 --> 0:02:57.560 the new chairman, but what the tone that he has 0:02:57.600 --> 0:02:58.120 to shift? 0:02:59.360 --> 0:03:01.960 I think, I mean job number one is figuring out 0:03:02.000 --> 0:03:04.920 who you hire to be the ultimate CEO, and I 0:03:04.960 --> 0:03:07.799 think it has to be somebody with, you know, an 0:03:07.840 --> 0:03:12.000 engineer's mindset towards manufacturing, and you really need somebody who's 0:03:12.000 --> 0:03:15.760 going to drill into every single process and root out 0:03:16.040 --> 0:03:18.680 defects and just improve the way that Boeing works. And 0:03:18.720 --> 0:03:20.800 I don't think this is a situation where you bring in, 0:03:21.280 --> 0:03:24.200 you know, a complete outsider CEO from the auto industry 0:03:24.280 --> 0:03:25.880 or healthcare or whatever it might be. It needs to 0:03:25.880 --> 0:03:28.840 be somebody who really knows manufacturing and frankly, you need 0:03:28.880 --> 0:03:31.880 somebody like Larry Colp a GE. But I don't know, Okay, 0:03:32.040 --> 0:03:32.799 he would want to. 0:03:32.720 --> 0:03:36.160 Take it, Okay, Loving and Paul, And I mean, it's 0:03:36.200 --> 0:03:38.560 teasing Brook here because I got to go to Kansas here. 0:03:39.000 --> 0:03:43.920 This job was built for Alan Malally, Kansas Aeronautics. Brooke 0:03:44.040 --> 0:03:48.120 knows this that Lawrence called Alan Malally or the kind 0:03:48.120 --> 0:03:51.880 of engineering process guys that this job begs for. 0:03:52.760 --> 0:03:57.360 So Brooke, is there a sense that Boeing can to 0:03:57.480 --> 0:04:00.400 lack of a better word, fix their weakness. Is their 0:04:00.400 --> 0:04:04.720 deficiencies in the manufacturing process within any reasonable amount of time? 0:04:04.840 --> 0:04:06.240 Or is this kind of a I don't know, a 0:04:06.320 --> 0:04:08.600 multi quarter, maybe multi year kind of thing. Do we 0:04:08.640 --> 0:04:10.520 have any sense as to the magnitude? 0:04:11.840 --> 0:04:14.640 I mean, I think it probably does take a while. 0:04:14.680 --> 0:04:16.360 I mean, and I just I always go back to 0:04:16.400 --> 0:04:18.960 gees an example, just because you know, it's a company 0:04:18.960 --> 0:04:20.520 close to my heart, but also there's a lot of 0:04:20.520 --> 0:04:24.160 similarities between these two companies and their cultures. Be given 0:04:24.240 --> 0:04:26.719 that a lot of former GE executives we're in the 0:04:26.760 --> 0:04:29.200 top ranks of management at GOING and I think, you know, 0:04:29.320 --> 0:04:31.719 to really drill down into every single detail of the 0:04:31.760 --> 0:04:34.559 manufacturing process, and to do it right does take time, 0:04:35.120 --> 0:04:38.840 and you need to completely rewire how you work and 0:04:38.920 --> 0:04:41.840 train the staff there. It's a cultural shift. You need 0:04:41.839 --> 0:04:45.400 to teach people to feel comfortable, to feel transparent about 0:04:45.400 --> 0:04:48.000 pointing out defects, you know, before you have a situation 0:04:48.200 --> 0:04:51.120 like a mid air blowout on Alaska Airlines, and that 0:04:51.240 --> 0:04:53.160 does take time. It's not just a switch that you 0:04:53.200 --> 0:04:55.240 can flip. It's not a switch that gets slipped just 0:04:55.240 --> 0:04:56.800 by the CEO stepping right when. 0:04:56.720 --> 0:04:58.680 You write your phone and page book on this book, 0:04:58.720 --> 0:05:01.400 I know the movie writes have already been sold. Did 0:05:01.400 --> 0:05:04.760 the pandemic cause this was there a pandemic breakdown as 0:05:04.800 --> 0:05:08.640 with other manufacturing companies because of the illness, people in, 0:05:08.760 --> 0:05:11.800 people out whatever. You've alluded to this before. Is there 0:05:11.800 --> 0:05:14.880 a big asterisk next to all this? It's not Calhoun's fault. 0:05:15.080 --> 0:05:16.480 It was a pandemic's fault. 0:05:18.000 --> 0:05:21.200 No. I mean, I think the pandemic is exacerbated things. 0:05:21.200 --> 0:05:23.800 But I mean the seven thirty seven Max crisis happened 0:05:23.839 --> 0:05:27.360 before the pandemic, and I think that, you know, if 0:05:27.400 --> 0:05:30.159 you want to talk about cultural issues that a bowling, 0:05:30.200 --> 0:05:31.640 you've got to go back, I mean almost to the 0:05:31.920 --> 0:05:34.800 late nineteen nineties and the merger with McDonald douglas. But 0:05:34.880 --> 0:05:38.040 also you know the Partnering for Success program where they 0:05:38.040 --> 0:05:40.599 squeezed margins out of their suppliers. And I mean, I 0:05:40.600 --> 0:05:44.320 think this is sort of a long running cultural issue 0:05:44.400 --> 0:05:47.160 at Boeing, But I do think, you know, COVID certainly 0:05:47.160 --> 0:05:49.440 took its toll, and probably more so on the supply 0:05:49.520 --> 0:05:52.400 chain who already had their profit margins squeeze to then 0:05:52.640 --> 0:05:55.400 have to go through the volatility of the pandemic and the. 0:05:55.440 --> 0:05:59.520 Lay Julie Johnson extra Chicago Tribune giving us great leadership 0:05:59.560 --> 0:06:03.040 out of Sicago here on aviation Brook Sutherland did Julie 0:06:03.120 --> 0:06:07.160 Johnson's heritage here? Did this company never make the leap 0:06:07.200 --> 0:06:08.880 from Seattle to Chicago? 0:06:11.640 --> 0:06:14.640 I think that, you know, it certainly didn't help to 0:06:14.760 --> 0:06:18.839 have management not be in the same vicinity as the 0:06:18.880 --> 0:06:22.479 manufacturing factory. And they since even moved the factory again 0:06:22.640 --> 0:06:25.440 to Arlington, Virginia, or so I moved the headquarters again 0:06:25.480 --> 0:06:28.800 to Arlington, Virginia, which is even further away from Seattle, 0:06:28.800 --> 0:06:31.839 which I don't think was the right message to send 0:06:31.960 --> 0:06:34.520 or the right mindset to have when you know your 0:06:34.800 --> 0:06:37.320 bread and butter is this Commercial Airplanes Division. That's that's 0:06:37.360 --> 0:06:38.200 having manufacturing. 0:06:38.279 --> 0:06:40.000 I think the brook Sutherland book here is up to 0:06:40.040 --> 0:06:44.760 five hundred pages. I mean, I'm here, we got We've 0:06:44.800 --> 0:06:47.280 got brooks got a schedule. We got to leave her now, 0:06:47.279 --> 0:06:50.120 brook Sutherland, thank you so much from Boston. Joining us 0:06:50.560 --> 0:06:55.000 today are in our true expertise on America's manufacturing process. 0:07:05.600 --> 0:07:08.159 One of the great truisms of Bloomberg Surveillance. Paul and 0:07:08.200 --> 0:07:11.240 I will steal from anyone we can, and we do 0:07:11.360 --> 0:07:13.760 that all the time. And right now with liz Anne Saunders, 0:07:13.840 --> 0:07:17.440 Chief Investment Strategies that Charles Schwab. It's an over our 0:07:17.640 --> 0:07:21.160 conversation one b rid Holts Berry Rid Holts Masters in 0:07:21.280 --> 0:07:25.160 Business with liz Anne Saunders, and all I got to say, folks, 0:07:25.720 --> 0:07:27.880 if you want to know where you need to be 0:07:27.960 --> 0:07:32.200 in the market, just trust me get incredible perspective that 0:07:32.240 --> 0:07:35.640 only Barry red Holts can bring to it. Miss Saunders 0:07:35.840 --> 0:07:39.040 and Liz aenne Berry had one question which I just 0:07:39.120 --> 0:07:42.040 thought was ALLEGI it was just brilliant tears on it. 0:07:42.160 --> 0:07:44.520 Oh my god, this is a question I would never ask. 0:07:44.800 --> 0:07:47.760 So I'm stealing from rid Holts Liz enne And it's 0:07:47.800 --> 0:07:53.000 simple you've been at Schwab forever. You and I saw 0:07:53.160 --> 0:07:59.600 what Schwab invented. He's older, he's moving on. But the 0:07:59.680 --> 0:08:04.360 answer Schwab continues with core values. What are those core 0:08:04.480 --> 0:08:07.520 values that have kept you at Schwab all these years? 0:08:09.000 --> 0:08:10.760 Well, we have it, as I guess, for lack of 0:08:10.760 --> 0:08:13.920 a better word, our tagline, but it's what we live 0:08:14.000 --> 0:08:17.360 breathe every day, which is through client size and having 0:08:17.520 --> 0:08:22.400 almost nine trillion dollars essentially all individual investors. What is 0:08:22.440 --> 0:08:25.760 important to them is quite different from what is important, 0:08:25.880 --> 0:08:29.960 say to an institutional community. So we always think of 0:08:30.000 --> 0:08:33.840 everything we do from the perspective of the individual investor. 0:08:34.200 --> 0:08:38.280 Did the individual investors show exuberance right now? 0:08:40.080 --> 0:08:45.240 A little bit yes, I'd say. The sentiment data more broadly, 0:08:45.600 --> 0:08:51.000 is I guess, on the frauthier end of the spectrum. Certainly, 0:08:51.040 --> 0:08:54.160 attitudinal measures of sentiment, maybe a little bit less so 0:08:54.280 --> 0:08:57.679 behavioral measures of sentiment. I think it's important to understand 0:08:57.720 --> 0:09:03.119 which indicators fall in which bucket, and it's almost necessity 0:09:03.160 --> 0:09:06.440 for it to be a contrarian indicator to see it 0:09:06.480 --> 0:09:12.120 in both categories, which were not quite seeing it in 0:09:12.160 --> 0:09:14.839 both of those. But it's on the frauthier end of 0:09:14.880 --> 0:09:17.160 the spectrum. The most important thing I would say, though, 0:09:17.200 --> 0:09:20.360 is sentiment, not that anything's a good market timing indicator. 0:09:20.440 --> 0:09:23.080 Sentiment is a terrible market timing indicator. We can get 0:09:23.120 --> 0:09:25.360 fraughthy sentiment and it can stay there for years, as 0:09:25.360 --> 0:09:27.400 we all learned in the late nineteen nineties. So it's 0:09:27.400 --> 0:09:28.280 more of a backdrop. 0:09:29.040 --> 0:09:32.320 Luzcyne. We had a bunch of central banks speaking and 0:09:32.600 --> 0:09:35.840 issuing announcements last week, and let's start with the Federal Reserve. 0:09:36.440 --> 0:09:39.080 Probably came out a little bit less hawkish. I guess 0:09:39.040 --> 0:09:40.920 this is a right way to frame it than maybe 0:09:41.120 --> 0:09:43.719 investors were discount of going into it. What did you 0:09:43.760 --> 0:09:45.480 take away? 0:09:45.679 --> 0:09:49.040 So it was definitely on the more dubbish end of 0:09:49.040 --> 0:09:51.920 the spectrum, particularly as it relates to the dots and 0:09:51.960 --> 0:09:54.520 the expectation heading into the meeting that we might see 0:09:54.559 --> 0:09:57.920 one of the three rate cuts come out of expectations 0:09:57.960 --> 0:09:59.920 per the dots. But I think what's more important is 0:10:00.760 --> 0:10:03.440 Powell continuing to push back on the notion that the 0:10:03.440 --> 0:10:06.920 dots represent some sort of policy path. They don't. They 0:10:06.960 --> 0:10:09.600 never have, and certainly in an environment where the FED 0:10:09.679 --> 0:10:13.240 is data dependent and not on any kind of preset. Course, 0:10:14.120 --> 0:10:16.880 if the data changes, I think their perspective and things 0:10:16.920 --> 0:10:19.600 like probabilities in terms of the FED fund's future market 0:10:19.679 --> 0:10:24.120 could change. So at that moment in time it was 0:10:24.360 --> 0:10:28.119 slightly more dubbish. But the combination of their dual mandates 0:10:29.080 --> 0:10:31.400 I think has to continue to behave or in the 0:10:31.400 --> 0:10:34.880 case of inflation, actually roll back over and start moving 0:10:34.920 --> 0:10:38.960 down again for rate cuts to start as soon as 0:10:39.440 --> 0:10:41.280 the June FOMAC meeting. 0:10:41.920 --> 0:10:45.000 So given that backdrop, litt lezande of you have you 0:10:45.040 --> 0:10:50.040 guys altered kind of your allocation here? Stocks, bonds, maybe alternatives? 0:10:50.040 --> 0:10:52.360 What's the Schwab call these days? Maybe how has it 0:10:52.440 --> 0:10:53.600 changed over the last several months. 0:10:53.640 --> 0:10:57.080 So we don't play the short term sort of tactical 0:10:57.080 --> 0:11:00.320 asset allocation game by saying, you know, abobveer blow low 0:11:00.559 --> 0:11:04.320 or percentages, because again, almost nine trillion dollars of client assets. 0:11:04.880 --> 0:11:07.600 What might be right for you know, some twenty five 0:11:07.679 --> 0:11:10.800 year old aggressive investor that inherited ten million dollars from 0:11:10.840 --> 0:11:14.000 the grandparents and doesn't need the money, versus say, a 0:11:14.040 --> 0:11:16.560 you know, seventy five year old who is retired and 0:11:16.640 --> 0:11:19.360 needs to earn income on an est egg that they 0:11:19.400 --> 0:11:24.880 can't afford to lose any component of so two different, entirely, 0:11:24.880 --> 0:11:28.600 two different messages there. What we have continued to do, though, 0:11:28.640 --> 0:11:31.760 is focus on factors, even a little bit more than sectors, 0:11:31.800 --> 0:11:34.800 and we still think you want to stay up in quality. 0:11:35.160 --> 0:11:37.880 A momentum has been a dominant factor. But what's interesting 0:11:38.000 --> 0:11:40.800 is that's more of a concept than a factor. Momentum 0:11:41.000 --> 0:11:43.760 says thank you. It just says these shocks that have 0:11:43.840 --> 0:11:46.280 been working, continue to work. What you can do though, 0:11:46.360 --> 0:11:48.280 because a lot of comparisons are being made to the 0:11:48.360 --> 0:11:51.720 late nineties, Uh oh, momentum as a factor is doing 0:11:51.920 --> 0:11:54.240 well right now, that's the same thing happened in the nineties. 0:11:54.480 --> 0:11:57.640 But the actual fundamental factor that was most highly correlated 0:11:57.679 --> 0:12:01.120 to momentum in the late nineties was negative earnings. The 0:12:01.440 --> 0:12:05.880 factor right now most positively correlated to momentum is are 0:12:05.960 --> 0:12:08.679 factors like high return on equity, strong free cash low 0:12:08.880 --> 0:12:12.200 and a negative correlation right now is negative earning. So 0:12:12.760 --> 0:12:14.880 momentum is just a concept. But you then have to 0:12:14.880 --> 0:12:18.200 look at what are the fundamentals of the types of 0:12:18.200 --> 0:12:20.959 stocks that continue to do well, And I think that's 0:12:20.960 --> 0:12:25.680 an important differentiation, But in essence, it's high quality. Other 0:12:25.840 --> 0:12:29.280 factors that are dominating in terms of momentum, and that 0:12:29.440 --> 0:12:31.360 is what we say you want to stick with right now, 0:12:31.440 --> 0:12:33.320 stay up in quality. This is not the time to 0:12:33.320 --> 0:12:35.359 go down the quality spectrum. 0:12:35.440 --> 0:12:39.080 What you just heard there, folks, as far as I'm concerned, 0:12:39.240 --> 0:12:43.120 is gospel. I don't even know where to go with this, 0:12:43.120 --> 0:12:47.439 this momentum stuff, Lezan. I'm aging listening to the certitude 0:12:47.480 --> 0:12:50.920 of young turks telling me momentum is a Steve Ross 0:12:50.920 --> 0:12:55.480 factor concept. You say quality matters. Are we going to 0:12:55.480 --> 0:12:58.560 get earnings to deliver Q one, Q two, Q three 0:12:59.000 --> 0:13:01.560 to develop that cash flow of quality. 0:13:02.840 --> 0:13:06.480 I think earnings estimates on a forward looking basis maybe 0:13:06.559 --> 0:13:10.080 have some legitimacy, but probably only out a quarter or two. 0:13:10.120 --> 0:13:12.200 What we've seen in this sort of pandemic era not 0:13:12.240 --> 0:13:14.160 as extreme as the case a couple of years ago, 0:13:14.160 --> 0:13:17.160 when you had a record percentage of companies that just 0:13:17.200 --> 0:13:21.320 withdrew guidens altogether. So estimates just became a total, you know, 0:13:21.480 --> 0:13:24.200 dart throw because companies were saying, we have no idea, 0:13:24.280 --> 0:13:25.960 We're not going to try to guide. I think a 0:13:25.960 --> 0:13:28.880 lot of companies are using the environment as an excuse 0:13:29.000 --> 0:13:31.080 not to go back to the kind of precise quarter 0:13:31.160 --> 0:13:34.760 league guidance. What that's left analysts to do is go 0:13:34.800 --> 0:13:38.319 into earning season, where lately they've been setting the bar 0:13:38.440 --> 0:13:41.600 too low, listening to what companies are saying, maybe make 0:13:41.640 --> 0:13:45.040 adjustments out a quarter or two, but then sort of leave, 0:13:45.160 --> 0:13:47.840 you know, three quarters, four quarters the following calendar year 0:13:48.640 --> 0:13:52.360 aside until they get more concrete information. So I think 0:13:52.400 --> 0:13:55.880 there's probably some validity to first half estimates. I'm not 0:13:55.920 --> 0:14:00.440 sure how much is based in reality on later out stimates. 0:14:00.880 --> 0:14:02.959 This is brilliant Lizzie in too short a visit, Thank 0:14:03.000 --> 0:14:05.920 you so much, Lizzie Sanders a Charles Schwab there on 0:14:06.440 --> 0:14:15.199 factors and maybe an overwrought comment on momentum, joining us 0:14:15.240 --> 0:14:18.959 now with leadership, on courage to stay in the market, 0:14:19.080 --> 0:14:21.640 and with an upgrade on his earnings in S and P. 0:14:21.800 --> 0:14:27.000 Call John Stulfus from Oppenheimer Today in the fearedom of 0:14:27.080 --> 0:14:30.960 two Octobers ago, the affeared moment of an October ago, 0:14:31.200 --> 0:14:35.880 John Stulfus, how did you not go to cash? 0:14:36.520 --> 0:14:39.720 Simple reason is Tom that when when we looked at things, 0:14:39.760 --> 0:14:43.480 we looked at the the overall friends, and we thought 0:14:43.560 --> 0:14:46.880 that the calls that were essentially a bearish pitch book 0:14:47.680 --> 0:14:51.880 were just not accurate. They were based on near term trading. 0:14:52.640 --> 0:14:56.040 When we saw what the situation was in terms of 0:14:56.080 --> 0:15:02.080 the corporate resilience, the the the consumers stance, and where 0:15:02.200 --> 0:15:09.200 FENN was being effectively very much sensitive to applying its 0:15:09.280 --> 0:15:14.920 mandate to inflation that was at untoward levels, we couldn't 0:15:14.920 --> 0:15:18.440 help but think we rather stay in the market rather 0:15:18.520 --> 0:15:21.720 than try to time the market. Recognizing the time in 0:15:21.840 --> 0:15:25.440 the market historically has shown to be a good way 0:15:25.560 --> 0:15:29.480 to get better returns over the intermediate to longer term. 0:15:30.200 --> 0:15:32.760 So the Bloomberg reporting of your call here this morning, 0:15:33.080 --> 0:15:36.760 John Oppenheimer Asset mentioned list s and P five hundred 0:15:36.760 --> 0:15:39.800 target to Wall Street high of fifty five hundred. What's 0:15:39.880 --> 0:15:42.080 driving that? Is that earning's driven? 0:15:42.160 --> 0:15:42.400 Is that? 0:15:45.000 --> 0:15:48.280 But it's certainly it's a mix of both that it 0:15:48.360 --> 0:15:51.480 certainly is earning's driven. If you consider third quarter and 0:15:51.600 --> 0:15:56.240 fourth quarter s and P five hundred earnings really surprised 0:15:56.400 --> 0:15:59.680 very nicely to the upside. In addition, if you look 0:15:59.720 --> 0:16:02.760 at a d P and you reflect on Fed policy, 0:16:03.200 --> 0:16:06.480 the Fed has been remarkable with eleven hikes and what 0:16:06.640 --> 0:16:10.320 is it six pauses or skips as they call them now, 0:16:11.040 --> 0:16:14.600 has not pushed the economy into a recession. And then 0:16:14.680 --> 0:16:17.440 beyond that, the fact that what we believe is that 0:16:17.520 --> 0:16:20.680 it's interesting. You just had George ball on and you 0:16:20.800 --> 0:16:26.640 all spoke about investors and retirement and things like that. 0:16:26.720 --> 0:16:31.200 At one point, it's it's today two generations and more 0:16:31.240 --> 0:16:36.440 than that, the younger ones that follow the millennials, with 0:16:36.480 --> 0:16:41.520 the millennials and the boomers recognize the fact that social 0:16:41.560 --> 0:16:45.040 security is likely not to be what it once was 0:16:45.680 --> 0:16:50.920 as a core to retirement for prior generations over the decades, 0:16:51.560 --> 0:16:55.080 and in addition to that, the recognition that they will 0:16:55.280 --> 0:17:00.920 likely live longer, and so whether preparing for retirement or retirement, 0:17:01.840 --> 0:17:05.959 there's a need for equities. Equities historically, again, you know, 0:17:06.040 --> 0:17:09.199 with past performance no guarantee of future results, as we 0:17:09.240 --> 0:17:12.840 always say, but equities tend to be a better place 0:17:12.840 --> 0:17:17.720 for intermediate to long term investing and diversification in Paul's 0:17:17.720 --> 0:17:18.280 and our view. 0:17:18.440 --> 0:17:21.240 I mean, Paul's living this representative John, you and I 0:17:21.280 --> 0:17:23.760 have to work every day. Sweeney could have retired fourteen 0:17:23.840 --> 0:17:27.240 years ago. But the bottom line here, Paul Sweeney is 0:17:27.280 --> 0:17:29.480 when was the last time bonds made a return? 0:17:29.920 --> 0:17:30.200 Yeah? 0:17:30.240 --> 0:17:33.000 And I mean I'm talking you're back five years, seven 0:17:33.080 --> 0:17:34.200 years or whatever. 0:17:34.200 --> 0:17:37.199 That I mean. John, It's interesting. It's you know, Thomas 0:17:37.240 --> 0:17:39.280 is mentioning you think about the fixed income space just 0:17:39.320 --> 0:17:44.800 got crushed in twenty twenty two, and thanks to miraculous 0:17:44.840 --> 0:17:48.080 November December, they eked out some games last year. But 0:17:48.920 --> 0:17:51.199 in the equity markets, I guess the question for a 0:17:51.200 --> 0:17:53.879 lot of folks is where do I go here? Do 0:17:54.000 --> 0:17:56.840 I follow the Magnificent seven or five or whatever they 0:17:56.840 --> 0:17:59.920 are today, or do I try to find some value 0:18:00.520 --> 0:18:02.600 in other parts of the market. Where are you at 0:18:02.600 --> 0:18:03.840 this part of the stage? 0:18:05.680 --> 0:18:08.639 Great question, Paul. We think you have to mix and match, 0:18:08.800 --> 0:18:14.239 which really means diversification, and by that we mean we 0:18:14.320 --> 0:18:18.520 emphasize cyclicals over defensives, but still want some defensive in 0:18:18.600 --> 0:18:24.760 there for the higher yielding dividends. Growthier value for companies 0:18:24.800 --> 0:18:27.840 that grow their dividends and still want growth because the 0:18:27.880 --> 0:18:31.080 innovation points to the very clear fact that much more 0:18:31.119 --> 0:18:36.920 sophisticated technology that we have today versus where the where 0:18:36.920 --> 0:18:40.000 we were when the tech bubble happened, And being forty 0:18:40.080 --> 0:18:42.600 years of this business, I can well remember the tech bubble, 0:18:42.600 --> 0:18:46.040 which is not that long ago. This is an environment 0:18:46.080 --> 0:18:50.280 where technology keeps morphing, and it can very well help 0:18:50.920 --> 0:18:56.520 all the sectors, including both itself technology and communication services, 0:18:56.560 --> 0:19:00.560 which is over fifty percent about sixty to seventy percent technology, 0:19:00.840 --> 0:19:04.920 but all the others help companies become more efficient, help 0:19:05.040 --> 0:19:11.480 consumers be more efficient in the relationship business as well 0:19:11.480 --> 0:19:12.000 as each other. 0:19:12.440 --> 0:19:15.199 I mean the question here in a broader question, folks, 0:19:15.200 --> 0:19:18.160 and I'm showing my age. We're talking to. George Ball 0:19:18.680 --> 0:19:21.760 was iconic, and so is John st John Stulfus was 0:19:21.800 --> 0:19:29.359 in Tykondergus Securities. I remember that the romance Securities. And 0:19:29.440 --> 0:19:32.040 what I really remember John Stulfis is a guy named 0:19:32.080 --> 0:19:35.919 Myron Pico who was at OpCo and literally taught me 0:19:36.280 --> 0:19:41.280 individual line item for accounting statements securities analysis. I mean, 0:19:41.359 --> 0:19:44.520 Myron like own the high ground. Can we get as 0:19:44.560 --> 0:19:46.600 I said to mister Ball, can we get back to 0:19:46.640 --> 0:19:51.800 where people actually are riveted by individual security ownership? Or 0:19:51.840 --> 0:19:53.160 is that just the time gone by? 0:19:54.720 --> 0:19:58.480 I think? I think, if anything, ironically, et apps bring 0:19:58.600 --> 0:20:02.960 them back to the thought of the need for diversification 0:20:03.160 --> 0:20:07.520 and approach. We like alpha beta for example, so alpha 0:20:07.560 --> 0:20:13.280 would be individual security selection or individual stock selection. Looking 0:20:13.320 --> 0:20:17.840 for alpha piics in combination with a strategically allocated and 0:20:17.920 --> 0:20:24.760 tactically weighted ETFs that track passive indices, and that way, 0:20:24.760 --> 0:20:27.160 if you're in the right church but in the wrong pew, 0:20:27.280 --> 0:20:29.720 you're okay. Or if you're in the wrong church but 0:20:29.800 --> 0:20:32.439 at the right pew, you can also be okay. It 0:20:32.480 --> 0:20:38.040 gives you more opportunity, we think via diversification of approach 0:20:38.160 --> 0:20:41.439 to the markets, and we think people want to be 0:20:41.520 --> 0:20:47.080 that thoughtful, and we think the financial media calls for 0:20:47.119 --> 0:20:50.600 that many ways because most of the day spent highlighting 0:20:50.640 --> 0:20:56.440 individual stocks and not ETFs. But the benchmarks are looked 0:20:56.480 --> 0:21:00.639 at certain for certain but alpha beta. We think you 0:21:00.680 --> 0:21:02.480 don't have to be a kid to have to know 0:21:02.560 --> 0:21:03.280 your alphabet. 0:21:03.720 --> 0:21:06.399 What would like to say from five thousand to fifty 0:21:06.400 --> 0:21:09.040 two hundred, John Sulphus lifting up here on earnings, and 0:21:09.080 --> 0:21:12.120 you wonder where he'll be six months out or eight 0:21:12.160 --> 0:21:14.840 months out. John Stulfus, folks, I'm just simple as I can. 0:21:14.920 --> 0:21:17.439 I said, this is Gina Martin Adams. You got to 0:21:17.440 --> 0:21:19.680 be in the market. You can't time it, you can't 0:21:19.720 --> 0:21:22.520 go to cash, You'll never make it. I've lived it. 0:21:22.920 --> 0:21:25.760 John Stulphus, with a courage to be in the market. 0:21:25.800 --> 0:21:27.640 He is with OpCo. 0:21:38.160 --> 0:21:39.040 You're doing a look at. 0:21:38.920 --> 0:21:41.040 The front pages around the world at LISTA. 0:21:41.080 --> 0:21:41.560 I missed this. 0:21:41.720 --> 0:21:45.320 I was reading I was reading Lemonne as Jitan in 0:21:45.359 --> 0:21:45.920 a beret. 0:21:46.040 --> 0:21:47.320 I'm in a cafe. 0:21:47.560 --> 0:21:50.399 Okay, I'm reading Lamant English. I'm sorry, I'm not reading 0:21:50.480 --> 0:21:54.040 Laman French. And I'm thinking all the newspapers were to 0:21:54.119 --> 0:21:55.840 have out of France. What do you got today? 0:21:56.200 --> 0:21:58.560 All right, this is the big debate in the housing 0:21:58.600 --> 0:22:01.879 market because you remember the National Association of Realtors that 0:22:02.000 --> 0:22:05.200 class action settlement. Well you had President Biden who said 0:22:05.200 --> 0:22:07.520 the deal could save home buyers sellers as much as 0:22:07.560 --> 0:22:10.440 ten thousand dollars. But experts are saying that the true 0:22:10.480 --> 0:22:14.000 benefits they're really not clear, especially those first. 0:22:13.680 --> 0:22:15.679 Time buyers who need help the most. 0:22:16.040 --> 0:22:18.320 So this is that back and forth kind of a 0:22:18.400 --> 0:22:20.280 discussion being going on right now. 0:22:20.320 --> 0:22:24.240 It was amazing, Paul to see the government support of 0:22:24.359 --> 0:22:28.960 housing in France versus the mess we have here. All 0:22:29.000 --> 0:22:31.880 the houses look the same. I mean, it's scary, how 0:22:31.920 --> 0:22:35.480 it's just you know, there's one contractor one look, miles 0:22:35.480 --> 0:22:38.040 of mos took to train up to Rue. The whole 0:22:38.119 --> 0:22:41.400 thing is build out houses supported by the government. They 0:22:41.440 --> 0:22:43.760 do it exactly opposite of the chaos we have. 0:22:45.240 --> 0:22:47.439 But then okay, so we are going to get some savings, 0:22:47.440 --> 0:22:48.680 but we're just not sure how much it went. 0:22:48.800 --> 0:22:49.199 That's the thing. 0:22:49.280 --> 0:22:50.720 Yeah, because they're saying, oh, it could be up to 0:22:50.760 --> 0:22:53.800