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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Always

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Speaker 1: with Michael McKee. Daily we bring you insight from the

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Speaker 1: best in economics, finance, investment, and international relations. Find Bloomberg

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Speaker 1: Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and of course

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Speaker 1: on the Bloomberg Adam Parker with us with Morgan Stanley.

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Speaker 1: Thrilled to have him here. We've been talking through the

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Speaker 1: morning on television and Bloomberg Surveillance, and he continues with

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Speaker 1: us on radio selling May and go Away. That worked out? Yeah,

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Speaker 1: once again a little bunch of bologna. Yeah, those things

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Speaker 1: need like ten thousand more years to get statistical significance.

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Speaker 1: I think that's the problem. But come on, two people

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Speaker 1: to take it seriously. Summer dold rooms, you get out

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Speaker 1: of the way. We just saw the decks hit a

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Speaker 1: bullmark it I s andp is, I'm fired. Dowt is

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Speaker 1: a eighteen thousand to fix us visiting lows. How do

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Speaker 1: you respond across Morgan Stanley's platform two people saying selling

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Speaker 1: May and go away with a straight face. You know,

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Speaker 1: I think you've got to own something right and so

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Speaker 1: when you look at you've been leading on that all

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Speaker 1: the way. Yeah, when you look across the world, I

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Speaker 1: I think it's hard to allocate assets and not own

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Speaker 1: a chunk of high quality US equities. I think that

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Speaker 1: you've got too much buy back, too much dividend, and

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Speaker 1: too much call option on growth to to avoid what

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Speaker 1: do you mean by that call option and growth? Like

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Speaker 1: that idea? Right now, we're forecasting three and a half

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Speaker 1: percent earnings growth. I don't know if it's going to

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Speaker 1: be too high or too low, but I think you've

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Speaker 1: got the potential for businesses in there and tech and

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Speaker 1: healthcare and discretionary to have double digit earys growth underneath there,

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Speaker 1: and so that that that seems better than me than

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Speaker 1: Japan or Europe or em or certainly the major message

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Speaker 1: of that is the idea the corporations and what they

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Speaker 1: do within our investment meal. You are separate from the

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Speaker 1: greater American experience started their multinationals. But even if they're not, Dannahr,

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Speaker 1: I'll take us an example. I always use that within

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Speaker 1: an industrial perfection, they're outside our normal economic kills. Something.

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Speaker 1: I talk about this with our economist Ellen Center all

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Speaker 1: the time. So she talks about the jobs report. It's

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Speaker 1: roughly a hundred eighty million people right top fifteen hundred

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Speaker 1: public US equities that I focus on as a stragist,

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Speaker 1: they have around thirty eight million employees on US soil.

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Speaker 1: So I'm talking about only the report. So they can

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Speaker 1: be a huge disconnect between the broader economy and what

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Speaker 1: I love. That stock market. Your world, you know, big

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Speaker 1: house equity, blue chip MidCap skewed. Clearly, your world is

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Speaker 1: about none from hundred US are only So You've got

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Speaker 1: small meeting businesses and and a lot of the policies

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Speaker 1: don't apply to the big that you're talking about. You

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Speaker 1: have tattoos your brain, standard deviations, You've got three degrees

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Speaker 1: and statistics of PhD from Boston University, hugely prestigious effort

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Speaker 1: there in statistics. Are we outside our deviations? Now? Can

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Speaker 1: you use normal statistics within the probabilistic structure you set up? Look,

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Speaker 1: I think the challenge with all the work we do,

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Speaker 1: when you do quantitative work is that you're making some

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Speaker 1: assumptions that history will unfold. Uh as sorry, if the

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Speaker 1: future unfold somewhat like history. Did you analyze history like crazy?

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Speaker 1: And you say what period of history applies to the future?

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Speaker 1: And I think you're right that in this world where

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Speaker 1: we've created what four trillion dollars on a computer to

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Speaker 1: vira own securities, maybe not all of the history will

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Speaker 1: apply perfectly going forward. And that's a that's a real

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Speaker 1: criticism of of doing things very regular how corporate I

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Speaker 1: know you don't talk about individual stocks, but you're very

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Speaker 1: aware of the leadership and the failures within the sectors.

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Speaker 1: You look at. How are corporate officers adapting to the

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Speaker 1: great distortion? So I think it's they're really focused on

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Speaker 1: what to do with the capital and what the consequences

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Speaker 1: of those movements will be. In Historically, you can do

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Speaker 1: you know caffex or R and D that remains muted

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Speaker 1: for a lot of businesses because their word about putting

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Speaker 1: access capacity in place right, you can, you can lever up.

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Speaker 1: A lot of companies have done that. You can paid

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Speaker 1: bound debt, very few have just given the rate environment.

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Speaker 1: So then the other obsences you know, are are going

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Speaker 1: to continue to be either M and A, which we've

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Speaker 1: seen quite a lot of and in in in certain areas.

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Speaker 1: And then of course by backtividends, I want to go

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Speaker 1: there with M and A Adam Parker, where this with

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Speaker 1: Morgan Stanley is we look at this most interesting market,

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Speaker 1: the vix eleven point three eight. Right now, the M

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Speaker 1: and A has been what I would call trophy m

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Speaker 1: and A in Boltons. There's been a real I hate

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Speaker 1: to use the word, but I'm to use its synergistic,

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Speaker 1: tactical acquisition. What's the next iteration? Is it more of

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Speaker 1: the same or is there a new kind of M

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Speaker 1: and A given the mix of cheap money and the

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Speaker 1: high valuations we've got. Yeah, I think there's so much

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Speaker 1: ash on the sidelines. I mean, there's just a quantum

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Speaker 1: of cash and that that combined with deals that I

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Speaker 1: think are largely still a creative when you do the

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Speaker 1: accretion math, means you're still gonna be uh in a

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Speaker 1: pretty pretty robust and probably growing him any cycle. I mean,

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Speaker 1: historically I would have said, hey, if we get to

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Speaker 1: all time highs in the market, that'd be enough. But right,

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Speaker 1: but it's not the case yet. There's so much cash

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Speaker 1: and the barway cost is so low, So I think

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Speaker 1: you're gonna continue to look for cost synergies. You're gonna

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Speaker 1: look for uh, you know, revenue contingencies and those kind

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Speaker 1: of things. As you know, the government has been involved

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Speaker 1: in in a lot of deals as well, and so

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Speaker 1: there's been some that have been tabled due to some

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Speaker 1: potential anthemy. The other thing I get, Adam Parker is

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Speaker 1: this idea of what CFOs chief financial officers will do.

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Speaker 1: I get constantly the question will they level up? Chris

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Speaker 1: Ellen Sanders heated about the debt expansion across all of

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Speaker 1: the American economy. But I look at a given blue

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Speaker 1: chip in nine or eleven or thirteen percent that debt.

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Speaker 1: You and I go back to Medigliani and Merton, and

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Speaker 1: we know they're all the same. Come on, they're not.

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Speaker 1: I mean, it's a model. I get that. Are we

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Speaker 1: going to see a debt expansion by CFOs because they

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Speaker 1: got a gun to their heads saying do it. So

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Speaker 1: we've already seen, you know, a gross debt go up

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Speaker 1: a lot. I think we'll continue to see it go

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Speaker 1: up and turn it out. But ship debt, I think so,

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Speaker 1: particularly those companies you've seen that are borrowing against cash

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Speaker 1: that's not on US soil. You know, you've had that

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Speaker 1: problem where the repatriation holiday has been what'since two thousand

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Speaker 1: and four, So they're waiting for another one to try

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Speaker 1: to bring it back into discount because they don't have

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Speaker 1: that option. They're doing, you know, uh, borrowing money and

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Speaker 1: doing five backs against that. You've seen it from some

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Speaker 1: of the very big blue chip companies. About a third

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Speaker 1: of the whole debt stack that's been at it has

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Speaker 1: been from blue chips. I mean, I bring it up

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Speaker 1: on Bloomberg, and you know, we we have a nice model.

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Speaker 1: Excuse me, let me rephrase that, folks, we have a

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Speaker 1: fabulous model on the Bloomberg of waited average cost to capital.

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Speaker 1: I'll usually pick on Colgate just because it's toothpaste and

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Speaker 1: I don't own it. The idea of cost nine point

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Speaker 1: one weight, cost one point zero percent. You and I

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Speaker 1: when we studied this stuff never thought we'd see that, right, Yeah,

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Speaker 1: I think honestly, it's another way of saying you probably

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Speaker 1: should buy some more stocks, you know, just because the

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Speaker 1: attractiveness of most of the credit market seems pretty pretty

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Speaker 1: challenged to me. So look, if cost the capital is low,

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Speaker 1: you can make some investments. You can you know, buy

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Speaker 1: back your stock, you can increase your dividends. I don't

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Speaker 1: want to be too cynical, but I know you love

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Speaker 1: this stuff, But I think some of it, particularly below

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Speaker 1: the blue chips for companies two hundred three thousand. Some

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Speaker 1: of it comes down to the variable compensation of the

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Speaker 1: c suite. Right, If you have restricted stock units and

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Speaker 1: you get dividends on that UNVEI you love the debby.

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Speaker 1: If you have options, you hate dividends because it mathematically

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Speaker 1: devalues them by definition. So I think you know it

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Speaker 1: can be a lot of factors. Tie goes to the

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Speaker 1: runner on what you do that? Right? No, I agree,

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Speaker 1: and I applaud your cynicism because it actually happens to

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Speaker 1: be true, and that that people learn managing their flow

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Speaker 1: of cash based off their compensation. Some people would say

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Speaker 1: that's part of the game, and everybody knew that going

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Speaker 1: into these compensation agreements. But the general question, and we'll

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Speaker 1: talk to Barry Ridholds about this in a bit, The

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Speaker 1: general question to me is what do you do in

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Speaker 1: a portfolio given a twenty five multiple land? So ye know,

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Speaker 1: what I've been doing is really trying to paar trade

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Speaker 1: the portfolio around the big macro bat so on rates. Look,

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Speaker 1: if you if you say to yourself, hey, every defensive stocks,

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Speaker 1: expensive utilities, reads Teleco's and you say I'm out and

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Speaker 1: then I like financials because they're cheap, and so you're

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Speaker 1: overweight banks, your underweight utes, telecos and reads and staples.

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Speaker 1: All you're really doing is gambling in the interest rates

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Speaker 1: back up. If they don't, you're gonna be a bottom.

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Speaker 1: You know. That's so this is critical. Your equity strategy

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Speaker 1: is hinged to Ellen Zentner. And is it hardbocks? Yeah,

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Speaker 1: I don't. I don't have. What I do is I

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Speaker 1: go rate neutral. I say, okay, I'm overweight utilities, I'm

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Speaker 1: underweight staples, or I'm overweight biotech because I like the

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Speaker 1: growth therare, but I'm underweight software. I try to find

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Speaker 1: some growth that looks attractive, and growth looks unattractive, some

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Speaker 1: rate sensitive looks attractive, rate sensitive looks unattractive. So I

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Speaker 1: don't propagate a massive rate bet or a man. It's

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Speaker 1: not that certainly their views influence mine or we you know,

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Speaker 1: we certainly influence each other. But I don't think you

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Speaker 1: can propagate that bed as a portfolio manager, because you know,

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Speaker 1: I think you've seen a lot of bodybags in the

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Speaker 1: last five years trying to make the rate call back.

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Speaker 1: In all it has been it has been brutal. Tom

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Speaker 1: keene and Michael McKee mckehoff today joining me today Barry Ritholtz,

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Speaker 1: writing for Bloomberg View, among other things, is Berry, are

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Speaker 1: you long the market right here? Are you buying into

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Speaker 1: the twenty five multiple world? Well, you know, if if

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Speaker 1: we rely solely on pe multiple to make investment decisions,

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Speaker 1: it means half the time you're you're more or less

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Speaker 1: out of the market. Fair fair value is something we

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Speaker 1: stopped at briefly while swinging to wildly undervalued to wildly overvalued,

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Speaker 1: So that's not determinative we are along the market. We

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Speaker 1: have been fans of emerging markets, which was a painful

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Speaker 1: trade up until a short period of time. And our

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Speaker 1: asset allocation approaches own everything, hope for the best, plan

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Speaker 1: for the worst, and don't try and guess. I love that.

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Speaker 1: It sounds like the red Sex approach. Barry Ridholtz. Why

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Speaker 1: don't you jump in here with Adam Park? Sure? So

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Speaker 1: I know, Adam, you are in a different side of

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Speaker 1: of the investment world from what we do, and I'm

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Speaker 1: really curious as to what you're hearing from clients. You

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Speaker 1: wrote something that I thought was fabulous not too long

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Speaker 1: ago about when everybody's a contrarian. Nobody's a contrarian. What

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Speaker 1: are you hearing from your clients these days? Look, I

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Speaker 1: think what Tom said is right. You know, people are

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Speaker 1: not particularly enthused about this bull market. You don't see

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Speaker 1: positioning uh in futures or in uh You know, if

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Speaker 1: I look at our prime brokerage business, the hedge fund

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Speaker 1: exposures don't look that robost in terms of grossers or nets.

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Speaker 1: So I think this is a sort of a hated,

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Speaker 1: hated rally of since February lows, to be honest with you,

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Speaker 1: and we've had a run of of billionaires coming out

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Speaker 1: everybody from Jeff Gunlocked to druck and Miller to Suros

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Speaker 1: to to Bill Gross sell everything they seem to be saying.

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Speaker 1: But do we really see market tops associated with the

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Speaker 1: sort of sentiment you're describing. Look, I don't believe anybody

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Speaker 1: uh can forecast the price learnings ratio for the market

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Speaker 1: in short time frames. And so I agree with how

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Speaker 1: you you you sort of positioned it. You know. One

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Speaker 1: of the things we did I thought was the most

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Speaker 1: of the more interesting notes we've ever written, and I've

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Speaker 1: been doing this for twenty years, is I got a

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Speaker 1: room full of smart people like you guys together, and

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Speaker 1: I said, what do you want to know a year

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Speaker 1: from now? And you guys listed off, you know, a

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Speaker 1: jobs report and two sten as, an oil and housing

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Speaker 1: starts and all the facts. And then I pretended that

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Speaker 1: I had all that information a year before everyone else,

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Speaker 1: and I just backward did the market and had the data,

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Speaker 1: and I still only had a fifty fifty chance of

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Speaker 1: knowing if the price during his ratio even expanded or contracted.

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Speaker 1: So I think it's very tough to call. I think

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Speaker 1: you've always got a UH. I think you've got to

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Speaker 1: have very high conviction to get completely out of the market.

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Speaker 1: That's that's gonna my view. That's a that's a pretty

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Speaker 1: rational approach saying, well, you really have to have a

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Speaker 1: deep and strong belief UH to get completely in the market.

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Speaker 1: But this bull market since since the crisis lows, we've

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Speaker 1: seen those sort of post conviction post crisis convictions amongst

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Speaker 1: people who were convinced we were heading back to those lows,

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Speaker 1: and fairly quickly I'm sitting here with Adam Parker, Morgan Stanley,

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Speaker 1: Barry Riholtz. You're two of the people I think a

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Speaker 1: Tony Dwyer and a few others who threw out thick

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Speaker 1: and thin have said, go to cash is stupid. I

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Speaker 1: mean I get the idea of a little bit cash

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Speaker 1: and bury. No, you've done the metric there. David Kotok

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Speaker 1: has done that as well. I mean it has been

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Speaker 1: a wallet warry market. Where would you be on cash

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Speaker 1: right now with an institutional portfolio. I think it's tough.

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Speaker 1: I think it's really tough. I mean, uh, there's enough

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Speaker 1: other gray hairs in this room that you guys all

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Speaker 1: realized that we started this because I started. You know,

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Speaker 1: I feel like, you know, I'm forty seven. I feel

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Speaker 1: like I'm older than most of people I meet with

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Speaker 1: these days. And but when I started working, I got

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Speaker 1: eight percent in my cash account at at my firm,

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Speaker 1: and I think you get zero spot zero four today.

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Speaker 1: So uh, you know, um, we used to all have

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Speaker 1: your number. You gotta make a certain amount of money

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Speaker 1: and then you live off the interstry good that numbers

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Speaker 1: like numbers trillion. Where you want cash, you know, we

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Speaker 1: always run one We always run a one percent cash

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Speaker 1: just so you have a little a little room to

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Speaker 1: maneuver when it comes time to balance. That's for your

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Speaker 1: case of Jenny Cream on Friday, the Terrible, Terrible. Yeah. Look,

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Speaker 1: you know, history is replete with examples of people trying

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Speaker 1: to get out of the market at the right time,

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Speaker 1: avoid some sort of collapse and then make the one

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Speaker 1: E D and get back in. And which are which

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Speaker 1: is harder to get out of the market to get

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Speaker 1: back in? Um, I'm a little different than most people.

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Speaker 1: I find bottoms are a big flashing red light. It's

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Speaker 1: a screaming you know, everybody hates everything that's the time,

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Speaker 1: and march O nine was one of those generational opportunities.

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Speaker 1: Getting out at the top requires you to sell when

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Speaker 1: everything is still looking pretty good. So I think it's

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Speaker 1: a tougher call to get out. I find I find

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Speaker 1: everything difficult myself, you know, because I'm not saying it's easy,

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Speaker 1: you know, I'm saying it. I think a lot of

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Speaker 1: people that I know that have you made hundreds of

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Speaker 1: millions or billions of dollars personally investing, have told me

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Speaker 1: that they're not afraid to buy things when they're up

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Speaker 1: a lot, that they can buy stocks going two to ten,

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Speaker 1: they buy a ten and goes to twenty. They're totally happy.

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Speaker 1: So I I kind of I guess have a small

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Speaker 1: bias toward to an agreeing because you know you sometimes

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Speaker 1: want to ride it a long time. Have been more

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Speaker 1: than generous with your time. Adam Parker with Morgan Stanley.

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Speaker 1: Next time he's on, we will speak on Curtosis, Berry

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Speaker 1: rid Holts, Tom King. Globally this is Bloomberg Berry rid

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Speaker 1: Holes here. I want to carve out some time across

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Speaker 1: all of surveillance this morning to really go one on

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Speaker 1: one with Barry. Barry, you write different kinds of columns.

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Speaker 1: You right equity columns, you write compendiums of mustard columns,

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Speaker 1: and then every once in a while you write something

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Speaker 1: that borders on public service where you ought to be

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Speaker 1: paid by the US government. You just did that on

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Speaker 1: something you and I have observed for years. Investor education

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Speaker 1: slips into reverse. Barry, I'm sorry, it's not news forever.

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Speaker 1: Investor education has slipped into reverse. Yeah. The fascin anything

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Speaker 1: about this is there have been a number of attempts

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Speaker 1: to make the investing public smarter, better educated, have a

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Speaker 1: better grasp of what is going on with their investment capital,

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Speaker 1: and pretty much study after study shows that we that

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Speaker 1: is a Sisyphian task. We are rolling the boulder uphill,

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Speaker 1: and every time we feel like we've made a little

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Speaker 1: bit of progress in educating investors as to what to

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Speaker 1: do with their money, back downhill rolls the boulder and

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Speaker 1: we learned this surreality. My experience with this first is

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Speaker 1: a name from the past, Vanita van Caspel, who wrote

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Speaker 1: a brilliant book years ago about common sense investing. And

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Speaker 1: I was like eager. I was way younger, folks, I

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Speaker 1: think younger, and I bought a million books to get

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Speaker 1: people smarter. Because of anta, nobody nobody read it ali

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Speaker 1: at any They say, I need to get smarter, tell

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Speaker 1: me what to do, and so I tell them what

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Speaker 1: to do when they wouldn't do it. The my favor

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Speaker 1: read book that actually affects the way people behave and

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Speaker 1: investing is Charlie ellis Is Winning the Losers Game, who

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Speaker 1: uses the metaphor of tennis. If you're a professional player

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Speaker 1: in tennis, you win by scoring points. But most of

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Speaker 1: us are not professionals. Most of us are amateurs, and

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Speaker 1: amateurs lose due to unforced errors, and the parallel between

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Speaker 1: investing in tennis is surprisingly easy to grasp. Most investors

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Speaker 1: lose money by unforced errors. We talked before about every

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Speaker 1: some billionaires are saying sell everything. The average going in

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Speaker 1: the street is not going to be able to do that,

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Speaker 1: is not to be able to get back in, and

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Speaker 1: the taxes are going to kill them. Fold this over

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Speaker 1: to the disaster known as the American Retirement Program. What

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Speaker 1: do I need to know to do a smarter for

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Speaker 1: a one k uh? It's really very straightforward and very simple.

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Speaker 1: You want to be invested for the long term. You

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Speaker 1: want to have a global asset allocation, meaning you're not

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Speaker 1: gonna guess US stocks or bonds or emerging You own

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Speaker 1: everything and some years the US will do better than

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Speaker 1: emerging markets are developed at US. You want to go

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Speaker 1: low cost indexing where possible, and the most important thing

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Speaker 1: is keeping those internal expansion ratios as low as possible.

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Speaker 1: How do the people doing that quickly here? How do

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Speaker 1: they want listen to Bloomberg surveillance or watch Bloomberg surveillance,

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Speaker 1: religiously use that information but not let it impinge on

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Speaker 1: a more responsible adult approach instead of panicking every time

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Speaker 1: I say something stupid. Well, we've actually been seeing some people,

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Speaker 1: many people following up that advice and acting responsibly, and

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Speaker 1: we see it in the flows to firms like black

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Speaker 1: Rock and Vanguard and dimensional funds that are very strong

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Speaker 1: in either factor investing, which is a whole another discussion,

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Speaker 1: but let's just call it basic index investing. You know,

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Speaker 1: before the crisis, Vanguard, no slouch, was nearly a trillion

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Speaker 1: dollar company. Well here it is. Less than a decade later,

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Speaker 1: we're coming up on four trillion dollars, two thirds of

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Speaker 1: which are passive in debt. I am going to be

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Speaker 1: sure that this conversation with one b Ridholts gets out

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Speaker 1: on our iTunes podcast because Barry Ridholts is the podcast giant,

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Speaker 1: and I want to just steal some of the thunder

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Speaker 1: Barry Riholts with us. And I really want to touch

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Speaker 1: upon a wonderful thing that Barry did. His Market Wizards, uh,

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Speaker 1: his mark, his Master's in Business podcast is superb. And

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Speaker 1: you just had one of my favorite people on Barry

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Speaker 1: for your hundredth episode, Jack Schwager. When he came out,

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Speaker 1: people thought it was a joke. This guy's not gonna

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Speaker 1: give me any wisdom. And then you o comen up

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Speaker 1: the first edition of Market Wizards and every page was

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Speaker 1: a jewel of not what to do? Berry rid Holts

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Speaker 1: but Jack Schweger owned what not to do from person

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Speaker 1: to person to person. It helped me so much when

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Speaker 1: I started in this career. I began on a on

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Speaker 1: a trading desk, and trading they pretty much throw you

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Speaker 1: in the deep end to the pool, and whoever doesn't

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Speaker 1: drown becomes a trader. One of the first books I

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Speaker 1: was given, in fact, the first book I was given

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Speaker 1: was Market Wizards, and it impressed upon me a number

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Speaker 1: of things, Probably more than anything else, is the importance

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Speaker 1: of process over out. Yes, well, they're called set up.

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Speaker 1: That's right. If you, if you, you know, the worst

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Speaker 1: thing that could happen to any human being who who

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Speaker 1: who likes to speculate is to walk into a casino

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Speaker 1: and win. They spend the next forty years going back

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Speaker 1: for that dopamine hit and at free money. Trading is

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Speaker 1: about process, is about setting up and doing the same

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Speaker 1: things correctly over and over again. What's so important in

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Speaker 1: Dennis Cartman with us later on this is brilliant as well.

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Speaker 1: Trading is a a process or thing that can be

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Speaker 1: done over various time frames. Trading doesn't mean Monday to Friday.

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Speaker 1: That that's exactly right. It's it's you have to. You know,

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Speaker 1: it's funny when we watch people debate. We see these

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Speaker 1: arguments on Twitter and elsewhere. Very often people are just

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Speaker 1: having time frame debate. So you do this, this and this. No,

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Speaker 1: that's a terrible idea. You do that. Well, if you're

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Speaker 1: holding time is an hour and my holding time is

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Speaker 1: a decade, we're looking at different things. The process is

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Speaker 1: very different, the as well as the things that you

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Speaker 1: have to emphasize or d m. Exactly within my setup,

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Speaker 1: I had fundamentals, um, technicals, and economics, and depending on

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Speaker 1: the time frame you waited those three general statements differently

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Speaker 1: that right, My time frame is I look at valuation,

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Speaker 1: I look at market cap size, and I look at

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Speaker 1: quality uh traditional factor investing, because thanks to the work

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Speaker 1: of Eugene faman Ken French, we know those things, amongst others,

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Speaker 1: will outperform over the long How do you use technical analysis?

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Speaker 1: I use it not so much to say do this,

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Speaker 1: but I use technical analysis to tell me when there's

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Speaker 1: a froth there, or it's over bought, or deputy which

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Speaker 1: way you're going where. Technical analysis helps me to say,

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Speaker 1: don't do this. You know, history has shown us that

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Speaker 1: there is never any one thing that will tell you

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Speaker 1: to buy this or sell that. So I use charts,

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Speaker 1: I use momentum and trend in technicals in combination with sentiment.

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Speaker 1: So when everything starts to line up, when the when

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Speaker 1: the board starts turning red, when all the warning signs

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Speaker 1: are flashing at once, that's when you know to pay

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Speaker 1: close attention. Using any one thing can lead to a

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Speaker 1: lot of false positives. And and that's how we sometimes

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Speaker 1: get this. Sell everything we saw it in, we're seeing

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Speaker 1: it again. Eventually it'll be right. But if you're you've

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Speaker 1: missed five years of a move higher in whatever the

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Speaker 1: asset classes, the early calls just didn't do you anything.

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Speaker 1: Where do you focus most an individual stock selection on

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Speaker 1: a sector, whether a narrow sector or a broader sector,

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Speaker 1: or you try to look at we're the foot few

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Speaker 1: where the asset allocators. The thing that we focus most

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Speaker 1: on is trying to identify what vehicles will let us

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Speaker 1: express an investment thesis most efficiently at the lowest cost,

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Speaker 1: with the greatest diversification, without over diversifying. I mean, we're

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Speaker 1: really in the weeds here now, but ultimately, if I'm

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Speaker 1: investing for ten or twenty years, sometimes a dumb index

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Speaker 1: works well, sometimes a little more sophisticated index with with

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Speaker 1: a little little spice on it can generate a better

427
00:24:07,560 --> 00:24:21,160
Speaker 1: return at a lower course. Very ridle sometime, Kie Michael

428
00:24:21,200 --> 00:24:24,639
Speaker 1: mckehof this week and now joining us, d Gartman. We

429
00:24:24,720 --> 00:24:27,959
Speaker 1: like Dennis Gartman because he is eclectic. We like Dennis

430
00:24:27,960 --> 00:24:30,800
Speaker 1: Gartman because he has a courage to put his trades

431
00:24:30,800 --> 00:24:33,920
Speaker 1: in the back of his newsletter right or wrong. I

432
00:24:34,040 --> 00:24:38,960
Speaker 1: like Dennis Gartman because he is an inherent optimist. Dennis,

433
00:24:39,320 --> 00:24:43,720
Speaker 1: your long cotton? Are you long cotton? Is that right?

434
00:24:43,840 --> 00:24:47,000
Speaker 1: He is long of cotton, long of cotton. Thank you,

435
00:24:47,400 --> 00:24:51,480
Speaker 1: Thank you berry, and and very good good to to

436
00:24:51,840 --> 00:24:54,080
Speaker 1: talk with you this morning. It's like an A. G.

437
00:24:54,320 --> 00:24:58,639
Speaker 1: Becker Redux from a million years ago. Inform our audience

438
00:24:58,680 --> 00:25:01,639
Speaker 1: why cotton was going to from the lower left to

439
00:25:01,680 --> 00:25:05,000
Speaker 1: the upper right. Well, cotton has been already going from

440
00:25:05,000 --> 00:25:07,439
Speaker 1: the lower left of the upper right, although today it

441
00:25:07,560 --> 00:25:10,720
Speaker 1: is going down rather harshly. Um, and I want I've

442
00:25:10,720 --> 00:25:12,760
Speaker 1: been waiting to buy this sort of break gets down

443
00:25:12,760 --> 00:25:16,359
Speaker 1: today because of a decision, well actually a continuation of

444
00:25:16,400 --> 00:25:20,200
Speaker 1: a series of decisions by the reserve authorities in China too,

445
00:25:20,800 --> 00:25:23,280
Speaker 1: to offload a great good deal of the cotton that

446
00:25:23,320 --> 00:25:25,879
Speaker 1: they hold in reserves that the spinners over there have

447
00:25:25,880 --> 00:25:30,040
Speaker 1: have noticed a very sharp increase in demand for cotton.

448
00:25:30,080 --> 00:25:32,400
Speaker 1: They are in demand for their yarn. They need cotton,

449
00:25:32,920 --> 00:25:35,440
Speaker 1: And the authorities have held a lot of cotton in

450
00:25:35,440 --> 00:25:38,399
Speaker 1: the reserve. They've released some of that. They've done it

451
00:25:38,440 --> 00:25:40,400
Speaker 1: in the past before, over the course of the past

452
00:25:40,400 --> 00:25:43,720
Speaker 1: several months, and every time they've done it, cotton closed

453
00:25:43,720 --> 00:25:46,160
Speaker 1: the lower for the day and two or three days

454
00:25:46,200 --> 00:25:48,720
Speaker 1: later was trading substantially higher. The cotton crop here in

455
00:25:48,720 --> 00:25:52,600
Speaker 1: the United States is a little bit behind the way

456
00:25:52,640 --> 00:25:55,840
Speaker 1: it has been in history compared to how great the

457
00:25:55,920 --> 00:25:58,679
Speaker 1: corn and soybean crops are doing. And I think that

458
00:25:58,760 --> 00:26:01,160
Speaker 1: what you're seeing is a arrowing also of the term

459
00:26:01,200 --> 00:26:03,679
Speaker 1: structures in the cotton market. I think it's time to

460
00:26:03,720 --> 00:26:07,159
Speaker 1: be bullish of cotton. I grew up in the cotton business.

461
00:26:07,400 --> 00:26:09,520
Speaker 1: It was my first job out of graduate school back

462
00:26:09,520 --> 00:26:13,760
Speaker 1: in yearly nineteen seventies. And here at at these prices

463
00:26:13,800 --> 00:26:16,240
Speaker 1: for cotton, when you've got them down into the to

464
00:26:16,400 --> 00:26:19,840
Speaker 1: the low sixty seven center area or so, compared to

465
00:26:19,880 --> 00:26:21,720
Speaker 1: where cotton has been over the course of course of

466
00:26:21,760 --> 00:26:24,720
Speaker 1: the past several years, and having built what appears to

467
00:26:24,760 --> 00:26:27,280
Speaker 1: me to be about a two year base. I think

468
00:26:27,280 --> 00:26:29,720
Speaker 1: the risk reward is relatively minimal. I think you're risking

469
00:26:29,760 --> 00:26:32,000
Speaker 1: two or three cents on the downside. I think you're

470
00:26:32,000 --> 00:26:35,120
Speaker 1: looking at fifteen cents on the upside, and I think

471
00:26:35,160 --> 00:26:39,120
Speaker 1: it's a bet on economic strength basically around the world.

472
00:26:39,240 --> 00:26:41,240
Speaker 1: So yes, I'm bullish of cotton, and I've waited for

473
00:26:41,280 --> 00:26:43,359
Speaker 1: this sort of break to put out a recommendation to

474
00:26:43,359 --> 00:26:45,680
Speaker 1: buy it. So so let's talk a little bit about

475
00:26:45,800 --> 00:26:49,080
Speaker 1: other things that might not have as clear a risk

476
00:26:49,160 --> 00:26:54,320
Speaker 1: reward trade. I have to immediately go to oil. Where

477
00:26:54,320 --> 00:26:58,280
Speaker 1: are we and what's going on with crude? Barry, Barry.

478
00:26:58,280 --> 00:26:59,920
Speaker 1: I think it's still a bear market in the crude

479
00:27:00,000 --> 00:27:03,960
Speaker 1: all market. Uh, crude is bouncing the duffs far in

480
00:27:03,960 --> 00:27:05,760
Speaker 1: the course of the past several days. I think we've

481
00:27:05,760 --> 00:27:07,760
Speaker 1: been up four or five days in a row. But

482
00:27:07,840 --> 00:27:10,200
Speaker 1: if you look at a chart, and if more importantly,

483
00:27:10,240 --> 00:27:12,199
Speaker 1: if you look at what I termed the contango, the

484
00:27:12,280 --> 00:27:16,320
Speaker 1: carrying charge in crude oil, the contangos are still wide.

485
00:27:16,800 --> 00:27:20,520
Speaker 1: Contagos widened up during bear markets. I think we've been

486
00:27:20,560 --> 00:27:22,680
Speaker 1: in a protracted bear market now for the course of

487
00:27:22,680 --> 00:27:25,880
Speaker 1: the past year, and a half rallies have consistently failed,

488
00:27:26,160 --> 00:27:28,760
Speaker 1: and I think the ability for Crewde to sustain anything

489
00:27:28,760 --> 00:27:30,920
Speaker 1: more than another dollar and a half of the upside

490
00:27:31,920 --> 00:27:36,040
Speaker 1: is almost unimaginable. Yes, it could, UH, and you've got

491
00:27:36,040 --> 00:27:39,080
Speaker 1: a good rally yesterday, predicated upon the announcement by the

492
00:27:39,119 --> 00:27:42,159
Speaker 1: Qatari oil Minister that they that OPEC was going to

493
00:27:42,240 --> 00:27:48,880
Speaker 1: have an a rather surprising meeting alongside a long established

494
00:27:49,040 --> 00:27:54,359
Speaker 1: UH group meeting in September to discuss the possibilities of

495
00:27:54,440 --> 00:27:57,920
Speaker 1: a freeze in production. But will that will that happen?

496
00:27:58,000 --> 00:28:00,600
Speaker 1: Will they actually freeze production? I think not are fearful

497
00:28:00,640 --> 00:28:03,840
Speaker 1: the other the OPEC members are fearful that Iran will

498
00:28:03,840 --> 00:28:07,080
Speaker 1: continue to expand its supply of crude oil. And the

499
00:28:07,119 --> 00:28:09,960
Speaker 1: only reason you're getting any rally and crude is two things.

500
00:28:10,080 --> 00:28:12,720
Speaker 1: One a heavy short position on the part of money

501
00:28:12,720 --> 00:28:17,119
Speaker 1: and manage money and to the continued deterioration in Venezuela

502
00:28:17,160 --> 00:28:20,600
Speaker 1: and Nigeria their production. But the Uranians intend to fulfill

503
00:28:21,000 --> 00:28:23,959
Speaker 1: or take the place of anything that the that the

504
00:28:24,040 --> 00:28:27,280
Speaker 1: Nigerians and the Venezuelans cannot supply. I think it's still

505
00:28:27,280 --> 00:28:30,359
Speaker 1: a bear market. Contangles continue on balance to widen and

506
00:28:30,359 --> 00:28:33,080
Speaker 1: as long as that occurs, you sell strength, you don't

507
00:28:33,080 --> 00:28:36,440
Speaker 1: buy weakness. So in other words, even as demands has

508
00:28:36,480 --> 00:28:40,400
Speaker 1: slowly improved over the past few years, the overwhelming rush

509
00:28:40,440 --> 00:28:43,960
Speaker 1: of supply continues to be driving price. I think that's

510
00:28:43,960 --> 00:28:46,880
Speaker 1: exactly what's going on. We continue. Yes, production here in

511
00:28:46,880 --> 00:28:49,400
Speaker 1: the United States is down a little bit, down half

512
00:28:49,400 --> 00:28:51,680
Speaker 1: a million barrels from from half a million to six

513
00:28:51,760 --> 00:28:53,880
Speaker 1: hundred thousand barrels from where it was a year ago.

514
00:28:54,480 --> 00:28:56,400
Speaker 1: But the amount of crewde that can come back to

515
00:28:56,440 --> 00:28:59,480
Speaker 1: the market on any further two or three dollar rally

516
00:29:00,200 --> 00:29:03,000
Speaker 1: here in the United States from frackers who have closed

517
00:29:03,000 --> 00:29:05,040
Speaker 1: some of their wells. I think they call them ducks

518
00:29:05,520 --> 00:29:09,280
Speaker 1: drilled but uncompleted. The amount of ducks that can be

519
00:29:09,400 --> 00:29:14,080
Speaker 1: quickly expanded is rather enormous. And and the Uranians clearly

520
00:29:14,120 --> 00:29:16,920
Speaker 1: and to ramp up their production. So yes, it's a

521
00:29:17,000 --> 00:29:20,400
Speaker 1: supply concern, yeah, and and not that much of a

522
00:29:20,520 --> 00:29:23,800
Speaker 1: demand concern. And I mentioned folks with great cheer at

523
00:29:23,800 --> 00:29:27,160
Speaker 1: Bloomberg Surveillance. We like different opinions, and there is no

524
00:29:27,280 --> 00:29:30,920
Speaker 1: greater disparity now than on the discussion of where oil

525
00:29:31,160 --> 00:29:34,320
Speaker 1: will go. Dennis, let's talk about the equity markets will

526
00:29:34,360 --> 00:29:36,880
Speaker 1: have you back here in our next section is well,

527
00:29:36,960 --> 00:29:39,280
Speaker 1: you are one of the pinadas on this because you're

528
00:29:39,320 --> 00:29:44,000
Speaker 1: so visible and so clear on long or short. What

529
00:29:44,040 --> 00:29:47,400
Speaker 1: do you do is a grizzled pro when your whipsod

530
00:29:47,720 --> 00:29:51,120
Speaker 1: like it's been recently, You've puts. If you're a law

531
00:29:51,200 --> 00:29:53,800
Speaker 1: if you're buying stock and I own some, I own

532
00:29:54,280 --> 00:29:56,480
Speaker 1: an aluminum company here in the United States, but I

533
00:29:56,520 --> 00:29:58,840
Speaker 1: own it with puts underneath it. I think that's the

534
00:29:58,880 --> 00:30:00,720
Speaker 1: only way that one could trade. Idea. If you're long,

535
00:30:00,800 --> 00:30:04,040
Speaker 1: you buy puts to protect yourself because volatility is very

536
00:30:04,080 --> 00:30:07,080
Speaker 1: low and insurance is very cheap. If you're short, you

537
00:30:07,200 --> 00:30:10,240
Speaker 1: buy calls against it because volatility is very low and

538
00:30:10,280 --> 00:30:12,320
Speaker 1: insurance is cheap. I think that's the only way that

539
00:30:12,360 --> 00:30:15,240
Speaker 1: one can trade. What do you do, then, Dennis, with

540
00:30:15,360 --> 00:30:19,280
Speaker 1: a comfort of dividend growth in pees twenty to twenty five,

541
00:30:19,400 --> 00:30:25,200
Speaker 1: how do you handle this? This this religion on American multinationals, I,

542
00:30:26,280 --> 00:30:28,200
Speaker 1: for one, will avoid anything with a price to earning

543
00:30:28,200 --> 00:30:30,160
Speaker 1: is multiple above twenty. I'm not going to buy that,

544
00:30:30,200 --> 00:30:34,000
Speaker 1: no matter what happens to me. Dividends are important. People

545
00:30:34,000 --> 00:30:37,160
Speaker 1: forget how important dividends are. Although I guess the importance

546
00:30:37,160 --> 00:30:39,000
Speaker 1: of dividends is getting ramped up here in the course

547
00:30:39,040 --> 00:30:41,840
Speaker 1: of the past one or two years. As I and

548
00:30:41,920 --> 00:30:45,200
Speaker 1: others of my age are are are nearing retirement, dividends

549
00:30:45,240 --> 00:30:47,720
Speaker 1: suddenly become far more important. But am I going to

550
00:30:47,800 --> 00:30:49,800
Speaker 1: buy any stock that has a price to earnings multiple

551
00:30:49,840 --> 00:30:53,720
Speaker 1: of more than twenty? Somebody else can? I won't. As

552
00:30:53,760 --> 00:30:57,000
Speaker 1: I said, I I like to own the things very prosaic.

553
00:30:57,040 --> 00:30:58,680
Speaker 1: I like to own the things that if I drop

554
00:30:58,720 --> 00:31:02,840
Speaker 1: them on my foot will hurt feel the coal, ships, trains,

555
00:31:03,040 --> 00:31:05,040
Speaker 1: that sort of thing. One of the jewels of market

556
00:31:05,080 --> 00:31:09,600
Speaker 1: economics resides at Morgan Stanley working with Ellen Zetner, Adam

557
00:31:09,640 --> 00:31:12,320
Speaker 1: Parker and the others. His name is Ted Weisman, and

558
00:31:12,400 --> 00:31:15,720
Speaker 1: he has just written, without question, the research report of

559
00:31:15,720 --> 00:31:18,520
Speaker 1: the day. I'm not going to send it out contact

560
00:31:18,560 --> 00:31:22,960
Speaker 1: Morgan Stanley. We protect the copyright of our guests. On productivity,

561
00:31:23,320 --> 00:31:27,240
Speaker 1: as bad as expectations for productivity have become, Q two

562
00:31:27,320 --> 00:31:33,160
Speaker 1: still managed to significantly disappoint. He goes on in minute

563
00:31:33,240 --> 00:31:38,480
Speaker 1: detail to frame a different America, and it is a

564
00:31:38,640 --> 00:31:43,200
Speaker 1: subpar America. Dennis Gartment with us of the Gartment letter, Dennis,

565
00:31:43,240 --> 00:31:47,320
Speaker 1: you and I know this productivity conundrum is a huge,

566
00:31:47,720 --> 00:31:53,040
Speaker 1: huge deal, and it wanders down to the certitude of

567
00:31:53,240 --> 00:31:57,960
Speaker 1: sub g d P and all that goes with that,

568
00:31:58,040 --> 00:32:02,160
Speaker 1: and wages and labor. Can the politicians in Washington deal

569
00:32:02,200 --> 00:32:06,880
Speaker 1: with that? It's it's unacceptable to political America, isn't it they?

570
00:32:07,680 --> 00:32:10,920
Speaker 1: It should be unacceptable political to political America. It should

571
00:32:10,960 --> 00:32:14,640
Speaker 1: be unacceptable to middle America. It should be unacceptable to

572
00:32:14,720 --> 00:32:18,120
Speaker 1: lower class America. It should be unacceptable to everyone. The

573
00:32:18,240 --> 00:32:21,800
Speaker 1: problem is that in in the great book by Mr Gordon,

574
00:32:21,840 --> 00:32:24,640
Speaker 1: The Rise and Fall of the American Growth, we we

575
00:32:24,840 --> 00:32:28,920
Speaker 1: have changed and and things are changing. The great ability

576
00:32:28,960 --> 00:32:33,520
Speaker 1: to become more productive through the the entire part of

577
00:32:33,520 --> 00:32:36,160
Speaker 1: the century and into the early part of the twenty

578
00:32:36,160 --> 00:32:38,880
Speaker 1: one century may well be behind us. I would like

579
00:32:38,960 --> 00:32:41,280
Speaker 1: to be as optimistic as I can be, but I'm

580
00:32:41,320 --> 00:32:46,200
Speaker 1: afraid I can't be. We have replaced people with machinery,

581
00:32:46,240 --> 00:32:49,560
Speaker 1: we have replaced machinery with computers, and we're going to

582
00:32:49,600 --> 00:32:53,280
Speaker 1: replace more and more people with more machinery and more computers.

583
00:32:53,320 --> 00:32:57,360
Speaker 1: But as we leaves, as baby boomers leave the job market,

584
00:32:57,840 --> 00:33:02,680
Speaker 1: you're losing expertise, you're losing capabilities. You're replacing older workers

585
00:33:02,680 --> 00:33:05,920
Speaker 1: with experience with newer workers without and you always have

586
00:33:06,000 --> 00:33:08,480
Speaker 1: a problem with productivity. Let us hope that that Jay

587
00:33:08,560 --> 00:33:11,240
Speaker 1: Kerve moves the other direction over the course of the

588
00:33:11,280 --> 00:33:13,680
Speaker 1: next several years. But I must tell you I have

589
00:33:13,840 --> 00:33:16,960
Speaker 1: my doubts, and I'm afraid that the political arena, the

590
00:33:17,000 --> 00:33:19,880
Speaker 1: political leaders, have no idea how to deal with the problem.

591
00:33:19,960 --> 00:33:24,280
Speaker 1: Today's number was I thought terribly dismaying. Everybody had hoped

592
00:33:24,280 --> 00:33:26,920
Speaker 1: that the productivity numbers would increase in the second quarter,

593
00:33:27,280 --> 00:33:29,480
Speaker 1: and instead they decreased. And if there's a number that

594
00:33:29,560 --> 00:33:31,720
Speaker 1: bothered me that we have seen economically in the course

595
00:33:31,760 --> 00:33:35,320
Speaker 1: the past several weeks, that's the worst. So so, Dennis,

596
00:33:35,360 --> 00:33:38,200
Speaker 1: are you a believer that we are actually getting an

597
00:33:38,240 --> 00:33:45,840
Speaker 1: accurate and complete measure of productivity gains amongst American workers? Well, no,

598
00:33:46,040 --> 00:33:48,240
Speaker 1: I'm not. I'm not a great believer that the data

599
00:33:48,320 --> 00:33:50,240
Speaker 1: is as good as it can be because it's hard

600
00:33:50,280 --> 00:33:55,040
Speaker 1: to measure. Everybody knows how much better we are with computers,

601
00:33:55,040 --> 00:33:58,240
Speaker 1: but how do you how do you measure productivity? For example,

602
00:33:59,040 --> 00:34:01,719
Speaker 1: I write a daily newsletter every day on economics and

603
00:34:01,760 --> 00:34:04,960
Speaker 1: political developments around the world. Fifteen and twenty years ago,

604
00:34:05,040 --> 00:34:06,920
Speaker 1: I was ahead of the the I was ahead of

605
00:34:06,960 --> 00:34:10,120
Speaker 1: everybody because I read the China People's Daily three days

606
00:34:10,239 --> 00:34:12,520
Speaker 1: late that I got in hard company, but nobody else

607
00:34:12,560 --> 00:34:15,600
Speaker 1: even read it at all. I read it three days late.

608
00:34:15,719 --> 00:34:20,280
Speaker 1: Now you can read it online within moments of its release.

609
00:34:20,400 --> 00:34:23,160
Speaker 1: That is an increase in productivity. But how does one

610
00:34:23,200 --> 00:34:26,359
Speaker 1: measure that? Today? I spent time talking about how good

611
00:34:26,400 --> 00:34:30,520
Speaker 1: automobiles are compared to older automobiles. My first automobile that

612
00:34:30,560 --> 00:34:33,520
Speaker 1: I owned in nineteen sixty seven was the nineteen sixty

613
00:34:33,560 --> 00:34:36,560
Speaker 1: six Plummeth Valiant, which was a wonderful car, and it

614
00:34:36,640 --> 00:34:40,000
Speaker 1: was a great money saver, getting thirteen miles to the

615
00:34:40,040 --> 00:34:45,440
Speaker 1: gallon automobiles now they did you ever put an increase

616
00:34:45,440 --> 00:34:48,520
Speaker 1: in productivity? Did you ever put the screw in the

617
00:34:48,560 --> 00:34:52,160
Speaker 1: distributor to blow out the distributor cap and all? That?

618
00:34:52,280 --> 00:34:55,239
Speaker 1: I did that twice. I had an Austin Healy that

619
00:34:55,280 --> 00:34:57,120
Speaker 1: I had to that I had to take the distributor

620
00:34:57,200 --> 00:35:00,600
Speaker 1: cap off and and and use a hair dryer when

621
00:35:00,640 --> 00:35:03,760
Speaker 1: it was even slightly nifty in order to get it started.

622
00:35:04,160 --> 00:35:05,880
Speaker 1: But God, it sounded so good when it did the

623
00:35:05,960 --> 00:35:07,960
Speaker 1: start that I was happy to do. It must have

624
00:35:07,960 --> 00:35:10,560
Speaker 1: been a girl magnet with a Can I tell you

625
00:35:10,600 --> 00:35:14,279
Speaker 1: if you want to talk about productivity destruction. We could

626
00:35:14,320 --> 00:35:17,399
Speaker 1: talk about just about any British sports car. Those were

627
00:35:17,480 --> 00:35:20,680
Speaker 1: productivity killers. So let me let me change it up

628
00:35:20,680 --> 00:35:24,200
Speaker 1: on you a little bit and move from productivity to gold.

629
00:35:24,320 --> 00:35:27,200
Speaker 1: We we saw a gold peak five years ago. It

630
00:35:27,280 --> 00:35:31,160
Speaker 1: suffered a thirty five or collapse. But if you were

631
00:35:31,239 --> 00:35:33,799
Speaker 1: invested this year in gold, or if you invested in

632
00:35:34,200 --> 00:35:37,759
Speaker 1: the gold miners, it's done very very well. Is this

633
00:35:37,840 --> 00:35:40,560
Speaker 1: the start of something new or is this just a

634
00:35:40,640 --> 00:35:43,680
Speaker 1: bounce after been down so long? It looks like up

635
00:35:43,680 --> 00:35:46,919
Speaker 1: to me what a great book that was by Joan

636
00:35:47,000 --> 00:35:49,160
Speaker 1: Bayez's brother in law. Been down so long that it

637
00:35:49,160 --> 00:35:51,640
Speaker 1: looks like up to me. Um, trying to remember who

638
00:35:51,640 --> 00:35:54,240
Speaker 1: it was it wrote that, but it was a wonderful book. Um.

639
00:35:54,640 --> 00:35:56,960
Speaker 1: And I think I'm not a gold bug. Let's begin

640
00:35:57,080 --> 00:35:59,000
Speaker 1: by saying that I'm not a gold bug. I'm not

641
00:35:59,280 --> 00:36:01,120
Speaker 1: the believer that the world is coming to an end.

642
00:36:01,560 --> 00:36:04,279
Speaker 1: I think gold is nothing more than another currency. And

643
00:36:04,320 --> 00:36:07,279
Speaker 1: as an ex falling currency trader, I was always taught

644
00:36:07,320 --> 00:36:10,400
Speaker 1: to trade one currency relative to another. I trade gold

645
00:36:10,560 --> 00:36:12,680
Speaker 1: relative to the currencies that I think are going to

646
00:36:12,719 --> 00:36:15,360
Speaker 1: be weaker than the others. I think the euro is

647
00:36:15,400 --> 00:36:18,680
Speaker 1: in very dire straits, and I think that owning gold

648
00:36:18,840 --> 00:36:22,759
Speaker 1: relative to the Euro, or predicated in euro, or denominated

649
00:36:22,760 --> 00:36:25,840
Speaker 1: in euro, is the proper course of action. Gold in

650
00:36:25,920 --> 00:36:27,960
Speaker 1: euro terms has been going up now for two and

651
00:36:27,960 --> 00:36:31,000
Speaker 1: a half years. Gold in dollar terms has only been

652
00:36:31,000 --> 00:36:33,919
Speaker 1: going up for six months. It may well still be

653
00:36:33,960 --> 00:36:37,080
Speaker 1: a bear market in gold in dollar terms. It is

654
00:36:37,200 --> 00:36:41,200
Speaker 1: clearly a bull market for gold predicated in euro terms.

655
00:36:41,239 --> 00:36:43,279
Speaker 1: And I think the Europeans have no choice but to

656
00:36:43,320 --> 00:36:46,640
Speaker 1: continue to be far more expansionary as far as monetary

657
00:36:46,640 --> 00:36:49,279
Speaker 1: policy is concerned, then shall be the Federal Reserve Bank.

658
00:36:49,840 --> 00:36:52,160
Speaker 1: That's true, and I think that is true. Gold is

659
00:36:52,160 --> 00:36:55,520
Speaker 1: going to be higher in euros than in dollars. I'd

660
00:36:55,560 --> 00:36:58,120
Speaker 1: like to own gold. I'd like to be short euros. Dennis,

661
00:36:58,160 --> 00:37:00,080
Speaker 1: have you been asked by Mr Trump to be it

662
00:37:00,120 --> 00:37:03,560
Speaker 1: of his economic policy team? I hope not. I have not.

663
00:37:03,800 --> 00:37:06,640
Speaker 1: I would not serve. If called upon, I will not serve.

664
00:37:08,280 --> 00:37:10,880
Speaker 1: Let's finish up, Dennis Gartman, before we get back to

665
00:37:10,960 --> 00:37:14,919
Speaker 1: Barry with your view on the European banks. Somebody said

666
00:37:14,920 --> 00:37:18,160
Speaker 1: to me yesterday, what's the one thing you're watching. It's

667
00:37:18,160 --> 00:37:21,240
Speaker 1: still the European banks. I mean, when do they clear,

668
00:37:21,280 --> 00:37:23,880
Speaker 1: how do they clear? I don't think they clear for

669
00:37:24,000 --> 00:37:26,440
Speaker 1: years and years into the future. They can try to

670
00:37:26,440 --> 00:37:30,239
Speaker 1: throw what they can. They will continuously push reserves at them.

671
00:37:30,280 --> 00:37:32,000
Speaker 1: They will try to bail them out. But I think

672
00:37:32,000 --> 00:37:34,680
Speaker 1: they are unavailable, and therefore I think the only thing

673
00:37:34,680 --> 00:37:38,359
Speaker 1: that the European monetary community can do, the leaders can do,

674
00:37:38,880 --> 00:37:41,719
Speaker 1: is continue to expand reserves into the system. I think

675
00:37:41,719 --> 00:37:44,439
Speaker 1: it's a very bleak black hole that will only get

676
00:37:44,480 --> 00:37:47,560
Speaker 1: worse as we go forward. New banks will take their place,

677
00:37:48,000 --> 00:37:50,000
Speaker 1: and it is sad to see great banks such as

678
00:37:50,239 --> 00:37:53,960
Speaker 1: Monte Dapachi, the world's oldest bank, UH and a former

679
00:37:54,000 --> 00:37:56,279
Speaker 1: and one time fully paid up subscriber to them to

680
00:37:56,360 --> 00:37:59,239
Speaker 1: the Garment Letter, I will will say, because I love

681
00:37:59,320 --> 00:38:03,279
Speaker 1: the name, will probably fall into oblivion. I don't think

682
00:38:03,280 --> 00:38:05,120
Speaker 1: there's anything that can be done to save the banks,

683
00:38:05,200 --> 00:38:08,439
Speaker 1: most of them that exist right now. Sure, Deutsche Bank

684
00:38:08,480 --> 00:38:11,879
Speaker 1: will continue, the other majors will continue, but there's going

685
00:38:11,920 --> 00:38:13,239
Speaker 1: to be a number of them that they have to

686
00:38:13,280 --> 00:38:16,000
Speaker 1: be let go. They can't be salvage. I'm afraid to say,

687
00:38:16,200 --> 00:38:18,480
Speaker 1: Dennis Carban, thank you so much the Gartment letter. Be

688
00:38:18,520 --> 00:38:22,200
Speaker 1: careful out there, Dennis, always brave and again with a

689
00:38:22,239 --> 00:38:25,680
Speaker 1: trading cotton. Cotton is what the Three Stooges would say, Cotton,

690
00:38:26,680 --> 00:38:32,799
Speaker 1: very cotton. Thanks for listening to the Bloomberg Surveillance podcast.

691
00:38:33,160 --> 00:38:38,240
Speaker 1: Subscribe and listen to interviews on iTunes, SoundCloud, or whichever

692
00:38:38,400 --> 00:38:42,320
Speaker 1: podcast platform you prefer. I'm on Twitter at Tom Keane,

693
00:38:42,719 --> 00:38:46,680
Speaker 1: Michael McKee is at Economy Before the podcast. You can

694
00:38:46,719 --> 00:38:49,960
Speaker 1: always catch us worldwide. I'm Bloomberg Radio