WEBVTT - Omicron Tape Bombs 0:00:12.360 --> 0:00:16.040 Hello, and welcome to What Goes Up, a weekly markets podcast. 0:00:16.079 --> 0:00:18.960 My name is Mike Reagan. I'm a senior editor at Bloomberg, 0:00:19.480 --> 0:00:22.080 and I'm Ldonna Hick, a crosshouse at report at Bloomberg. 0:00:22.680 --> 0:00:25.119 At This week on the show, well, the markets have 0:00:25.320 --> 0:00:28.120 gotten hit with a one to punch, a hawkish pivot 0:00:28.120 --> 0:00:31.240 from the Federal Reserve Chair Jerome pal and a new 0:00:31.320 --> 0:00:34.560 sort of alarming variant of the coronavirus that's spreading around 0:00:34.560 --> 0:00:37.800 the world. Will these two combined to form the Grinch 0:00:37.840 --> 0:00:40.839 who stole the Santa Claus Rally. We'll get into it 0:00:40.880 --> 0:00:43.200 with a Goldman alum who is now the chief investment 0:00:43.240 --> 0:00:47.640 officer at Kestra Investment Management. But first, vil Donna, I 0:00:47.840 --> 0:00:50.240 I wanted to thank you for holding down the fort 0:00:50.360 --> 0:00:52.080 for the last couple of weeks while I was out. 0:00:52.200 --> 0:00:55.959 I was actually first my wife got COVID and then 0:00:56.000 --> 0:00:58.680 I got COVID, and um, as you know, I'm not 0:00:58.840 --> 0:01:01.160 usually on time with things like COVID. You know that 0:01:01.280 --> 0:01:04.640 the early adopters got it almost two years ago, and 0:01:04.680 --> 0:01:09.280 here I'm finally getting it now. You know it's it's 0:01:09.360 --> 0:01:11.559 it's right on brand for me. Like I'm I'm still 0:01:11.600 --> 0:01:15.800 listening to Taylor Swift songs, the scooter versions, you know, 0:01:15.920 --> 0:01:19.080 to give you an idea. Oh my gosh, don't say 0:01:19.120 --> 0:01:21.520 that you're going to fend a lot of podcast listeners. 0:01:21.840 --> 0:01:24.399 I'm trying to. I'm trying to recalibrate the jokes to 0:01:24.400 --> 0:01:27.759 to your generation. But anyway, Danna tell us about this 0:01:27.959 --> 0:01:29.800 week's guest. I just met her for the first time. 0:01:29.840 --> 0:01:32.240 I'm I'm excited. What do we know about? What's your 0:01:32.280 --> 0:01:34.800 intel on this guest? Well, first, I want to say 0:01:34.800 --> 0:01:37.200 welcome back, and we really missed you on the podcast. 0:01:37.720 --> 0:01:40.200 I don't believe. I don't believe that. In fact, I 0:01:40.240 --> 0:01:43.200 haven't even listened because I assumed you spent the whole 0:01:43.240 --> 0:01:45.800 time roasting me on on the last two episodes a 0:01:45.840 --> 0:01:48.400 little bit, so maybe don't really listen to them. But 0:01:48.640 --> 0:01:50.760 I did miss you. I'm glad to have you back, 0:01:51.000 --> 0:01:53.240 and I want to thank everybody who helped fill in 0:01:53.280 --> 0:01:55.960 over the last couple of weeks. But then let's bring 0:01:55.960 --> 0:01:57.960 in our guest. Her name is Kara Murphy. She's the 0:01:58.000 --> 0:02:01.400 chief investment officer of Quesh and S Management. Kara, I 0:02:01.400 --> 0:02:03.240 spoke with you recently. I had so much fun talking 0:02:03.280 --> 0:02:05.160 to you, and I want to thank you for joining 0:02:05.240 --> 0:02:07.960 us on the podcast. Well, thanks for having me, and 0:02:08.040 --> 0:02:10.519 you guys promised me it would be fun, so it 0:02:10.600 --> 0:02:14.000 was an easy yet it's supposed to be fun. It's 0:02:14.000 --> 0:02:18.080 a really high bar. Well care tell us a little 0:02:18.080 --> 0:02:20.440 bit about Kestra. I don't know a lot about the firms, 0:02:20.480 --> 0:02:23.200 so just give us sort of the the overview about 0:02:23.280 --> 0:02:25.679 Kestra and how you ended up there. It's it's only 0:02:25.720 --> 0:02:27.839 been a few months you've been there, right, That's right, 0:02:27.960 --> 0:02:31.800 that's right. So we are a wealth management firm with 0:02:31.919 --> 0:02:36.320 a number of different UM channels. So there's Kester Financial 0:02:36.520 --> 0:02:40.919 which has UM advisors all throughout the country, Grove Point. 0:02:41.320 --> 0:02:44.200 We also work with Art and Trust Company and then 0:02:44.240 --> 0:02:46.360 Blue Spring, so we have a number of different channels 0:02:46.360 --> 0:02:49.359 and ways in which we work with financial advisors. As 0:02:49.400 --> 0:02:51.160 you said, I joined a number of months ago to 0:02:51.240 --> 0:02:55.080 build out Kester Investment Management and so my remit is 0:02:55.120 --> 0:03:01.040 really to build out investment resources, research commentary strategies to 0:03:01.080 --> 0:03:04.120 be able to assist advisors in managing their client's wealth. 0:03:04.520 --> 0:03:07.960 So it's been a wonderful opportunity for me to kind 0:03:07.960 --> 0:03:10.680 of have a blank sheet of paper and build something 0:03:10.720 --> 0:03:12.760 that we think is going to be really helpful and 0:03:12.880 --> 0:03:15.280 valuable to advisors, and I want to get into some 0:03:15.360 --> 0:03:17.440 of your strategy and how you're thinking about things. But 0:03:17.560 --> 0:03:20.320 just to start things off with the big events that 0:03:20.360 --> 0:03:21.920 we had this week, because it was a really, really 0:03:21.919 --> 0:03:24.880 busy week. Because Mike mentioned, we had these pet winds 0:03:24.919 --> 0:03:27.000 that really weren't here a couple of days ago, with 0:03:27.120 --> 0:03:30.160 a new variant, plus a federal reserve that potentially could 0:03:30.200 --> 0:03:32.400 be withdrawing stimulus at a much faster pace than we 0:03:32.440 --> 0:03:35.000 had previously thought. So how are you thinking about this 0:03:35.040 --> 0:03:38.640 and how are some of these developments impacting your strategy. Yeah, 0:03:39.000 --> 0:03:41.040 as you said, it's been a very interesting week. You know, 0:03:41.080 --> 0:03:42.839 you kind of come back from a holiday and hope 0:03:42.840 --> 0:03:44.960 it will be a little quiet, but it never quite 0:03:45.000 --> 0:03:47.640 works out that way. UM. But it's not too dissimilar 0:03:48.000 --> 0:03:50.640 um to where we were over the summer. UM. So, 0:03:50.760 --> 0:03:53.040 just as the delta variant was getting going, we were 0:03:53.040 --> 0:03:55.520 starting to understand that it was much more contagious and 0:03:55.560 --> 0:03:58.680 we were starting to see rapid um case increases in 0:03:58.680 --> 0:04:01.960 the US, and that happened just at a time when 0:04:02.000 --> 0:04:05.839 the Fed was gearing up to start withdrawing some stimulus. UM. 0:04:05.920 --> 0:04:08.560 So as those two things unfolded Around the same time, 0:04:09.000 --> 0:04:12.200 UM delta ended up becoming more of a head one 0:04:12.320 --> 0:04:15.520 that maybe some had initially thought, and that actually got 0:04:15.520 --> 0:04:18.120 the FED to hit the pause button a bit and 0:04:18.120 --> 0:04:20.960 and pushed out expectations for tapering and for FED rate. 0:04:21.040 --> 0:04:25.480 Kites now roll forward a couple of months more and 0:04:25.680 --> 0:04:28.080 the kind of steaks on both sides have increased a 0:04:28.080 --> 0:04:31.239 little bit where we have another kind of unknown variant. 0:04:31.400 --> 0:04:34.479 We know that the market hates unknowns, so in the 0:04:34.520 --> 0:04:38.520 absence of information, people often go to dark places, right, 0:04:38.560 --> 0:04:41.239 So so the market is sometimes assuming the worst about 0:04:41.240 --> 0:04:43.679 this new variant at the same time that we're seeing 0:04:43.839 --> 0:04:47.960 more evidence of inflationary pressures. And and I think we 0:04:47.960 --> 0:04:50.760 should break down kind of what's driving some of these 0:04:50.800 --> 0:04:53.919 inflationary pressures. But clearly the stakes have gotten higher for 0:04:53.960 --> 0:04:56.520 the FED. And so we've seen a big change in 0:04:56.600 --> 0:04:59.560 language from Powell and the markets starting to pull forward 0:04:59.600 --> 0:05:04.440 expect patitions for tapering and FED rate increases. Well. Carry 0:05:04.640 --> 0:05:07.200 my colleague Cameron Christ has a sort of a jokey 0:05:07.240 --> 0:05:10.480 line that he puts in columns, and that's uh that 0:05:10.520 --> 0:05:13.960 you know, everyone got a master's in epidemiology from Google. 0:05:14.000 --> 0:05:16.880 Your you know, I know as a as a chief 0:05:16.920 --> 0:05:21.520 investment officer, I'm I'm sure you you've you've got that too. So, um, 0:05:21.560 --> 0:05:24.200 there is this sort of echo of the frightening nous 0:05:24.200 --> 0:05:27.440 of the delta variant with this omicron variant. What have 0:05:27.520 --> 0:05:30.839 you learned about it? How are you thinking about it specifically? 0:05:31.080 --> 0:05:33.520 I mean, is it potentially a false alarm? Do you 0:05:33.520 --> 0:05:35.960 think that that everyone's sort of freaking out about this? 0:05:36.160 --> 0:05:39.000 I look at this is me speaking as an investor 0:05:39.040 --> 0:05:43.200 and not an epidemiologist, but there is definitely a chance 0:05:43.240 --> 0:05:46.200 that this is a false alarm. And again i'd like, 0:05:46.240 --> 0:05:48.719 I don't mean to downplay like the very real human 0:05:48.800 --> 0:05:53.880 impact of this, but when we think about how businesses, individuals, 0:05:53.920 --> 0:05:58.000 economies have been able to react in previous periods, we've 0:05:58.000 --> 0:06:00.760 gotten better and better with every that goes by in 0:06:00.800 --> 0:06:04.760 this COVID environment. So, assuming that this new variant is 0:06:04.800 --> 0:06:09.360 not a wholly new kind of type of disease, we 0:06:09.440 --> 0:06:12.720 have better therapeutics, we have people being more careful in 0:06:12.760 --> 0:06:15.640 their behavior, we have you know, a large portion of 0:06:15.680 --> 0:06:18.880 the population vaccinated. So so there are we have a 0:06:18.920 --> 0:06:21.680 lot more tools today, um to be able to manage 0:06:21.680 --> 0:06:23.600 through this than we did before. And then put on 0:06:23.640 --> 0:06:25.560 top of that, we all know how to use our zoom. 0:06:25.760 --> 0:06:28.960 We've all gotten used to working remotely, we know how 0:06:28.960 --> 0:06:32.359 to order things online. So I think the economy and 0:06:32.400 --> 0:06:34.240 people are in much better position to be able to 0:06:34.279 --> 0:06:37.680 handle a setback, even if it isn't setback. Yeah, I 0:06:37.680 --> 0:06:39.520 still mess off the zoom from time to time, but 0:06:39.680 --> 0:06:44.960 I know I do too. Yeah, we all do. And 0:06:45.000 --> 0:06:47.839 then karat the other part of this, obviously is the FED. 0:06:47.960 --> 0:06:51.000 I know before we started taping the podcast, Mike and 0:06:51.040 --> 0:06:53.760 I have this conversation where I told him I had 0:06:53.800 --> 0:06:56.560 written this story, saying that this is the most hawkish 0:06:56.640 --> 0:06:59.240 j Powell has been in about three years. I got 0:06:59.320 --> 0:07:03.240 some mails from Bloomberg users terminal users saying, actually, you 0:07:03.240 --> 0:07:06.440 can't really use that word to describe him. So how 0:07:06.520 --> 0:07:09.080 much of what's happened this week? How big of a 0:07:09.160 --> 0:07:12.160 rule does Powell play in the sell off that we 0:07:12.400 --> 0:07:14.640 saw over the last couple of days, And do you 0:07:14.680 --> 0:07:18.800 think that the reaction was rational? So I I do 0:07:18.920 --> 0:07:21.440 think that the market had a bit of an overreaction, 0:07:21.600 --> 0:07:23.800 which is not uncommon. Right when you see a big 0:07:23.840 --> 0:07:26.720 pivot in in a viewpoint with somebody like Powell who 0:07:26.840 --> 0:07:29.360 is very influential, you can often see the market kind 0:07:29.360 --> 0:07:31.960 of overreact in the short term. And and remember that 0:07:32.000 --> 0:07:35.720 we only just recently had renomination of Powell, so his 0:07:36.120 --> 0:07:40.120 sort of level of authority has been reinforced because of 0:07:40.160 --> 0:07:43.239 that nomination. So I think his word carries very heavy weight. 0:07:43.560 --> 0:07:46.880 He was also very clearly associated with the devish camp 0:07:46.960 --> 0:07:48.960 within the FED, and so to see him move a 0:07:48.960 --> 0:07:51.320 little bit more toward that hawk ish end, I think 0:07:51.480 --> 0:07:54.280 is quite significant. But you know, I might agree with 0:07:54.320 --> 0:07:56.880 some of those terminal users who reached out were like, 0:07:56.920 --> 0:07:59.120 I don't know that I'd call him a hawk. He's 0:07:59.200 --> 0:08:02.320 just a little bit more hawkish than he had been before. Yeah, 0:08:02.440 --> 0:08:05.040 I think that's fair. And I my guess is he 0:08:05.080 --> 0:08:08.280 reserves the right to go be going up back to 0:08:08.320 --> 0:08:10.000 a dove in the in the spring of this summer, 0:08:10.040 --> 0:08:13.160 if right. I mean, all we need are a couple 0:08:13.160 --> 0:08:15.240 of data points in the other direction, and he could 0:08:15.320 --> 0:08:17.640 very easily move back to the other side. Care One 0:08:17.640 --> 0:08:20.040 thing I know you you keep an eye on is 0:08:20.240 --> 0:08:24.360 the credit markets and and credit spreads. Um reading some 0:08:24.400 --> 0:08:26.840 of the notes you sent over to us with some 0:08:26.880 --> 0:08:29.320 of your thoughts, and you know pointing out that you 0:08:29.320 --> 0:08:31.480 know that the credit markets haven't really sort of freaked 0:08:31.480 --> 0:08:35.559 out over these developments. I mean, spreads are widening out 0:08:35.559 --> 0:08:38.040 a little bit, but boy, historically if you zoom out 0:08:38.080 --> 0:08:40.400 on the chart, you can't even notice it. To me, 0:08:40.480 --> 0:08:42.840 it's fascinating. I mean you you certainly, I'm sure have 0:08:42.920 --> 0:08:47.160 clients who are actively engaged in credit markets or at 0:08:47.240 --> 0:08:49.760 least dipping their toes in it, you know, for people 0:08:50.280 --> 0:08:52.360 sort of just looking at the stock market, though, there's 0:08:52.400 --> 0:08:56.480 this tendency you know, for stock investors always seek a 0:08:56.520 --> 0:08:59.120 second opinion from someone they think is smarter. In the 0:08:59.160 --> 0:09:02.319 fixed income mark gets um and that the temptation is 0:09:02.360 --> 0:09:04.200 look at to look at credit markets and say, well, 0:09:04.200 --> 0:09:07.000 they're not really freaking out. This is a false alarm, 0:09:07.200 --> 0:09:09.360 you know. To me, I think about it as I 0:09:09.840 --> 0:09:12.280 the participants in credit and fixed income tend to be 0:09:12.520 --> 0:09:17.520 h entirely professional investing class, whereas in the stock market 0:09:17.600 --> 0:09:20.080 you've got read It and Robin Hood and everything else 0:09:20.120 --> 0:09:23.640 and and and not entirely driven by you know, the 0:09:23.640 --> 0:09:26.600 CFAs of the world. But I'm curious how you are 0:09:26.720 --> 0:09:30.040 looking at credit markets as sort of the signal for 0:09:30.080 --> 0:09:32.959 the stock market, you know, the FED. While how's a 0:09:33.000 --> 0:09:36.080 little bit more hawkish. Now, I feel like, you know, 0:09:36.360 --> 0:09:39.160 the FED really sort of changed the game with their 0:09:39.200 --> 0:09:44.000 credit facilities during the pandemic actually being willing to go 0:09:44.040 --> 0:09:46.480 out and buy corporate credit. Um And I know they 0:09:46.480 --> 0:09:49.600 didn't really end up buying a whole ton, but sort 0:09:49.640 --> 0:09:52.080 of the symbolism of it, of of the FED sort 0:09:52.080 --> 0:09:55.880 of breaking that glass and breaking that seal. Does that 0:09:56.160 --> 0:09:59.360 does that at all? Sort of sort of break that 0:09:59.480 --> 0:10:02.480 signal for credit markets that that we rely on in 0:10:02.520 --> 0:10:06.320 your opinion, Well, it's so interesting that you mentioned about 0:10:06.360 --> 0:10:09.679 like stock investors looking to the bond market for confirmation, 0:10:09.880 --> 0:10:12.640 and like I often think of stock investors versus bond 0:10:12.679 --> 0:10:16.400 investors almost like Griffin Door versus s blitz Lytherin. You know, 0:10:16.440 --> 0:10:20.160 there's this like healthy level of competition between the two, 0:10:20.200 --> 0:10:22.600 and there's always this like real fealty to wherever it 0:10:22.679 --> 0:10:24.840 is that you came from. I won't say whether like 0:10:24.920 --> 0:10:28.360 who's the slitherin house, but but but there is like 0:10:28.400 --> 0:10:31.600 a fair amount of um of sort of like loyalty 0:10:31.720 --> 0:10:33.520 saying like if you're a stock investor, no, no no, no, 0:10:33.640 --> 0:10:36.439 the stock market is the one that's giving the real signals. 0:10:36.800 --> 0:10:38.480 But but I think any investor is going to look 0:10:38.520 --> 0:10:41.480 for more than one single data point to confirm, right, 0:10:41.600 --> 0:10:44.720 especially in very fast moving markets, you know, Like I 0:10:44.760 --> 0:10:47.719 think back to the global financial crisis. I was then 0:10:47.720 --> 0:10:50.440 a stock analyst covering financial companies, and we would use 0:10:50.480 --> 0:10:53.280 the credit markets a lot because they were often picking 0:10:53.360 --> 0:10:56.360 up signals, particularly like short term funding markets, that the 0:10:56.400 --> 0:10:59.679 equity markets were missing. So so there are times when 0:10:59.720 --> 0:11:01.439 there's one part of the market that's a little bit 0:11:01.440 --> 0:11:04.760 closer to this story. I think in this particular instance, 0:11:04.840 --> 0:11:07.680 like we really aren't. We're not like looking at a 0:11:07.679 --> 0:11:10.599 lot of stress in general in credit and so I 0:11:10.600 --> 0:11:13.320 wouldn't say that like credit markets are necessarily closer to 0:11:13.360 --> 0:11:16.440 the locus of the issue. It's just yet another kind 0:11:16.440 --> 0:11:19.480 of UM signal to be able to put alongside these 0:11:19.480 --> 0:11:22.040 other ones. UM. So in this case, you know, you're 0:11:22.040 --> 0:11:24.800 gonna look at the full set of data that you 0:11:24.840 --> 0:11:27.480 can UM and what that's telling us is that there's 0:11:27.480 --> 0:11:29.800 nobody there who's raising the red flag. Mike, I feel 0:11:29.800 --> 0:11:32.760 like you'd be in raven Claw or huffle Pop. Those 0:11:32.760 --> 0:11:38.720 are Harry Potter. Oh oh my god, Okay, you'll probably 0:11:38.720 --> 0:11:43.080 watch Harry Potter and like twenty years the way you're trending. Yeah, 0:11:43.360 --> 0:11:53.600 I'll catch up with that eventually. Yeah, yeah, yeah, Karen, 0:11:53.840 --> 0:11:56.000 I promise. We talked about your strategy, can you talk 0:11:56.000 --> 0:11:59.320 a little bit about what you're expecting for I think 0:11:59.320 --> 0:12:01.320 in one of your no to had said it would 0:12:01.360 --> 0:12:03.960 be really healthy for the market to turn sideways for 0:12:04.000 --> 0:12:07.040 a bit, which struck me a little bit because that 0:12:07.120 --> 0:12:10.200 might sound a little bit disappointing to somebody who was 0:12:10.360 --> 0:12:14.280 expecting a rally into year end. And so, how are 0:12:14.280 --> 0:12:15.960 you thinking about the next couple of weeks, what are 0:12:15.960 --> 0:12:18.520 you expecting? And then looking into two what are you 0:12:18.559 --> 0:12:21.880 expecting there as well? Yeah. So, so if we roll 0:12:22.000 --> 0:12:24.520 back briefly to like two thousand twenty, where we had 0:12:24.600 --> 0:12:27.840 this massive air pocket in the economy, corporate earnings took 0:12:27.840 --> 0:12:30.800 a really quick dip down, and then as the market 0:12:30.880 --> 0:12:34.120 started to recover, you had prices that were covered recovering 0:12:34.200 --> 0:12:37.880 way before earnings did. Right, So all of the increase 0:12:37.960 --> 0:12:39.960 in stock prices that we had in two thousand twenty 0:12:40.080 --> 0:12:43.240 was really driven by an increase in valuation. And when 0:12:43.240 --> 0:12:46.360 we roll forward to two thousand twenty two one, then 0:12:46.400 --> 0:12:49.320 we had a really big rebound in corporate earnings, profits 0:12:49.360 --> 0:12:53.040 and some compression and valuation and that's a healthy thing, 0:12:53.120 --> 0:12:56.760 and that's typically what we'll see coming out of a downturn, 0:12:57.200 --> 0:12:59.000 and so I would expect to see more of the 0:12:59.040 --> 0:13:01.400 same into two thousan in twenty two. We already have 0:13:01.440 --> 0:13:04.840 corporate profits that are at or near historic highs. We've 0:13:04.960 --> 0:13:08.320 really really strong corporate earnings growth. We think corporate earnings 0:13:08.320 --> 0:13:10.920 growth will remain strong in two thousand and twenty two, 0:13:10.920 --> 0:13:13.840 but not as strong. But if we have a market 0:13:13.880 --> 0:13:16.240 that's just turning sideways for a little bit, it just 0:13:16.360 --> 0:13:18.520 gives time for those earnings to catch up with the 0:13:18.559 --> 0:13:20.720 prices that we have right now. Yeah, I just think 0:13:20.720 --> 0:13:22.920 of it as a correction on the other axis, you know, 0:13:23.000 --> 0:13:25.040 not on the price axis, but the but the time 0:13:25.080 --> 0:13:28.520 access And I mean, you know, yes, as far as 0:13:28.600 --> 0:13:32.199 valuations go, do you think that that top has been set? Uh? 0:13:33.000 --> 0:13:36.400 Do you think? Never? Say never? Right? I? I you know, 0:13:36.480 --> 0:13:38.840 I've I've learned that it's very hard to call like 0:13:38.920 --> 0:13:43.960 specific turning points UM and and so valuations typically are 0:13:44.000 --> 0:13:48.559 are a very bad indicator UM from market turns because 0:13:48.559 --> 0:13:50.600 we can stay expensive for a long time, we can 0:13:50.600 --> 0:13:52.880 stay cheap for a long time. But what they are 0:13:53.000 --> 0:13:56.360 good at doing is forecasting forward returns over like a 0:13:56.400 --> 0:14:00.000 medium term time period. Right now, valuations are high relative 0:14:00.160 --> 0:14:03.040 to historical measures. That doesn't mean that the market is 0:14:03.040 --> 0:14:05.199 going to turn down, but it does mean it should 0:14:05.280 --> 0:14:08.320 keep a lid on returns over the medium term. And 0:14:08.360 --> 0:14:11.079 then another one of your notes said, and correct me 0:14:11.080 --> 0:14:12.839 if I'm wrong. I think it's aid that it's sort 0:14:12.880 --> 0:14:16.360 of a contrarian call that once inflation turns, we'll see 0:14:16.360 --> 0:14:18.679 a swift reversal. So I'm wondering if you can lay 0:14:18.679 --> 0:14:21.640 out the timeframe around that and you're thinking around that 0:14:21.800 --> 0:14:27.040 and how it potentially affects markets. Yeah, and so this 0:14:27.120 --> 0:14:29.040 is I don't know if you guys have had this experience, 0:14:29.040 --> 0:14:32.040 but like we we order we had some new cabinets 0:14:32.160 --> 0:14:34.560 in our house and we ordered new polls, right like 0:14:34.600 --> 0:14:37.920 simply like pretty like basic thing. But we ordered them 0:14:37.960 --> 0:14:44.640 about like fourteen months ago, and we've reordered them multiple times, right, 0:14:44.720 --> 0:14:46.840 So they're sitting on side like they were sitting on 0:14:46.880 --> 0:14:49.640 some ships, you know, off the off the port um. 0:14:49.720 --> 0:14:52.000 So we ended up ordering three different sets, not knowing 0:14:52.040 --> 0:14:54.240 which one was going to arrive when, and in fact 0:14:54.240 --> 0:14:57.720 we ended up getting two partial orders. So it was good, right, 0:14:57.840 --> 0:14:59.680 but someday that third order and the rest of the 0:14:59.760 --> 0:15:01.480 order are going to arrive, and we're gonna have a 0:15:01.520 --> 0:15:04.040 bunch of polls that we don't really need. So think 0:15:04.080 --> 0:15:08.120 about that replicating all over the economy where you have 0:15:08.360 --> 0:15:09.960 and in fact that there was just an article the 0:15:09.960 --> 0:15:13.200 other day about store owners that we're starting to order 0:15:13.240 --> 0:15:15.960 additional amounts of inventory just to be prepared and have 0:15:16.080 --> 0:15:19.640 stuff on their shelves. So once all of those ships 0:15:19.680 --> 0:15:22.760 get unloaded, once that inventory gets on trucks and it 0:15:22.840 --> 0:15:25.360 gets the stores, there are going to be certain types 0:15:25.400 --> 0:15:27.680 of goods where we end up having more inventory than 0:15:27.760 --> 0:15:30.680 what we had originally forecast. And that's the challenge in 0:15:30.760 --> 0:15:33.720 managing this inventory at a time when like demand and 0:15:33.760 --> 0:15:37.280 supply are changing so rapidly. So you know, it's you 0:15:37.640 --> 0:15:40.560 asked about a specific timing, and I think it will 0:15:40.640 --> 0:15:43.800 depend on the specific good that we're talking about. So, 0:15:43.880 --> 0:15:46.680 for instance, like lumber was one of those commodities that 0:15:46.760 --> 0:15:50.200 started to shoot up fairly early in this cycle um 0:15:50.240 --> 0:15:52.200 and you started to see people who were reaching out 0:15:52.200 --> 0:15:54.280 and buying lumber ahead of time because they were worried 0:15:54.320 --> 0:15:56.600 that the price would keep going up. Well, sure enough, 0:15:56.600 --> 0:15:59.200 those prices are down like six percent or so from 0:15:59.280 --> 0:16:02.840 that peak, so that reversal came very very quickly. So 0:16:03.120 --> 0:16:05.680 ones that went up more rapidly are likely to decline 0:16:05.680 --> 0:16:08.120 more rapidly. Um and it won't all happen at the 0:16:08.120 --> 0:16:10.680 same time. It will be kind of sequenced out. We 0:16:10.760 --> 0:16:14.280 had the exact same experience, you know, stuck in the house. 0:16:14.360 --> 0:16:17.280 My wife decided it's the perfect time to redecorate, and 0:16:17.800 --> 0:16:20.760 you know, ordered guiding room chairs. We got a new 0:16:20.760 --> 0:16:23.200 front door. I mean, we never got the first thing 0:16:23.200 --> 0:16:26.200 you wanted, right, It's so frustrating, it's such a nightmare. 0:16:26.240 --> 0:16:28.840 But Carol, I think I always picture some of our 0:16:28.880 --> 0:16:32.600 listeners sitting there sort of you know, rolling their fingers 0:16:32.640 --> 0:16:34.400 on the desk, saying, just tell me what to buy? 0:16:34.480 --> 0:16:36.360 Have this person tell me what to buy right now? 0:16:36.360 --> 0:16:38.920 So can you kind of break it down? It was 0:16:39.000 --> 0:16:42.880 sort of what's attractive to you both from uh, you know, 0:16:42.920 --> 0:16:46.040 sort of an allocation standpoint at this point in the cycle, 0:16:46.080 --> 0:16:49.120 and also you know what you like in each bucket 0:16:49.120 --> 0:16:52.200 of allocation. So like one word of warning that I 0:16:52.240 --> 0:16:56.520 would have is make sure that your overall portfolio allocations 0:16:56.520 --> 0:17:00.680 are aligned with your risk level and your strategic goal, right, 0:17:00.720 --> 0:17:03.880 so so you know when you think about the incredible 0:17:03.960 --> 0:17:06.440 growth and stocks that we've had over the last year 0:17:06.520 --> 0:17:10.200 or two, it's very likely that folks have portfolios that 0:17:10.240 --> 0:17:12.760 are out of whack, right, where the equities have just 0:17:12.880 --> 0:17:16.639 become a disproportionately large portion of their overall portfolio. And 0:17:16.720 --> 0:17:19.159 so this is part of just being disciplined, right, And 0:17:19.400 --> 0:17:21.040 it doesn't matter where you are on the cycle. You 0:17:21.080 --> 0:17:23.760 should you should be just like looking at that portfolio 0:17:23.800 --> 0:17:26.240 and confirming, yes, you know, I am comfortable with this 0:17:26.320 --> 0:17:28.879 level of risk. Make sure you're honest with yourself, right. 0:17:28.920 --> 0:17:30.359 You don't want to get over your skis and have 0:17:30.400 --> 0:17:32.399 too much risk. Then the market tirns down and then 0:17:32.400 --> 0:17:35.040 you're unhappy. So so that's very important, and that just 0:17:35.040 --> 0:17:38.280 goes to like the good hygiene habits of being an investor. 0:17:38.840 --> 0:17:41.119 And then when I think about, you know, our expectation 0:17:41.200 --> 0:17:43.600 for returns going forward for both stocks and bonds are 0:17:43.640 --> 0:17:45.720 more muted than what we've seen over the last couple 0:17:45.760 --> 0:17:48.800 of years, no surprise, UM. And as I said, that's 0:17:48.880 --> 0:17:51.720 part of you know, earnings catching up with prices. Bond 0:17:51.760 --> 0:17:54.560 yields are incredibly low. There's only so much lower that 0:17:54.600 --> 0:17:57.920 they can go. UM, So it indicates more moderate returns 0:17:57.920 --> 0:18:01.520 going forward. Within the stock market, we talked about valuation, 0:18:01.840 --> 0:18:04.119 and this reflects my bias generally is more of a 0:18:04.200 --> 0:18:07.240 value type investor. UM, but we would have a preference 0:18:07.240 --> 0:18:10.160 for the types of companies that have, you know, strong growth, 0:18:10.240 --> 0:18:13.760 characteristic strong balance sheets, have the opportunity to start to 0:18:13.760 --> 0:18:17.480 return capital or increase their capital return to shareholders. And 0:18:17.520 --> 0:18:20.119 you can find stocks like that in pretty much any sector. 0:18:20.200 --> 0:18:23.080 So it's not necessarily a sector, but UM, but having 0:18:23.119 --> 0:18:26.320 a higher preference or quality in general, I'm like six 0:18:26.960 --> 0:18:31.960 game stop Sheba. You know, I got a mixture rebalanced. 0:18:32.119 --> 0:18:35.280 That's that's a good mix. It's a really good mix. Actually, 0:18:35.280 --> 0:18:36.960 she but you it was down earlier this week, even 0:18:36.960 --> 0:18:40.800 though it had some really high profile around announcements around it, 0:18:40.880 --> 0:18:44.840 and oh my, oh my goodness, but can you talk 0:18:44.880 --> 0:18:47.760 about where tech fits in with what you were just saying, 0:18:47.800 --> 0:18:50.960 because it struck me a little bit by earlier this 0:18:51.040 --> 0:18:53.560 week we had expected some of the bigger names to 0:18:53.600 --> 0:18:55.880 maybe hold up really well during the sell off days 0:18:55.920 --> 0:18:58.120 that we saw. I remember looking at the Nicety thing 0:18:58.440 --> 0:19:01.000 in Next I think it was on one saying it 0:19:01.080 --> 0:19:03.840 was down something like two point seven percent, which really 0:19:03.840 --> 0:19:06.040 struck me. So how are you thinking about where tech 0:19:06.119 --> 0:19:10.000 fits in with your strategy and are you expecting some 0:19:10.040 --> 0:19:13.560 of the names to be a performers going forward. Yeah, Now, 0:19:13.720 --> 0:19:17.680 tech is a good example where you can find those 0:19:17.800 --> 0:19:21.679 really go go stocks with super high aggressive evaluations, and 0:19:21.680 --> 0:19:24.800 then you can also find some more mature companies who 0:19:24.880 --> 0:19:28.560 have like very solid earnings growth. So so you you 0:19:28.600 --> 0:19:32.080 can kind of find good examples of both types of stocks. 0:19:32.240 --> 0:19:34.880 And so you know in the cellf that you're talking about. 0:19:35.680 --> 0:19:38.440 So typically when you get later in an economic cycle, 0:19:39.040 --> 0:19:42.000 the market tends to start to shift towards growth, right 0:19:42.040 --> 0:19:44.359 because overall growth is harder to come by, so we're 0:19:44.359 --> 0:19:46.440 going to pay more of a premium for those companies 0:19:46.440 --> 0:19:50.520 who actually can deliver repeatable growth. But then contrast that 0:19:50.560 --> 0:19:53.320 with where we are right now, which is that a 0:19:53.359 --> 0:19:57.080 lot of those um valuations are quite stretched relative to 0:19:57.160 --> 0:20:00.000 historic levels. So I think when you have that risk 0:20:00.040 --> 0:20:03.560 goff environment like we saw earlier this week, the market 0:20:03.600 --> 0:20:06.760 is punishing those that have the more lofty valuations and 0:20:06.800 --> 0:20:09.359 the less reliable earnings. So I think what the market 0:20:09.400 --> 0:20:11.640 is telling us that in a risk off environment, when 0:20:11.640 --> 0:20:13.960 we're worried, we're going to go back to that safety 0:20:14.440 --> 0:20:18.480 rather than looking for growth. One bullet point in your notes, 0:20:18.520 --> 0:20:20.760 I wanted to discuss a little bit. You say, once 0:20:20.800 --> 0:20:23.560 inflation turns, we will we will see a swift reversal. 0:20:24.480 --> 0:20:27.120 Do you mean a reversal in that this recent dip 0:20:27.200 --> 0:20:31.000