1 00:00:00,080 --> 00:00:12,960 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Ley. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:32,520 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Charles 5 00:00:32,560 --> 00:00:36,760 Speaker 1: Canton New Burger Berman Sr. Portfolio Manager, Good morning to you, Charles. 6 00:00:36,760 --> 00:00:39,600 Speaker 1: Good morning Jonathan. Here's the quote in your blog. And 7 00:00:39,600 --> 00:00:41,760 Speaker 1: I noticed that you only write blogs when I'm we 8 00:00:41,880 --> 00:00:45,040 Speaker 1: get vicious draw downs and February and then once again 9 00:00:45,080 --> 00:00:48,400 Speaker 1: in October. The more things change, the more things stay 10 00:00:48,440 --> 00:00:51,000 Speaker 1: the same. Why is that true for the market, Because 11 00:00:51,000 --> 00:00:55,320 Speaker 1: we think this correction is one where where it's it's 12 00:00:55,560 --> 00:00:58,960 Speaker 1: it's normal within the context of of of markets. Markets 13 00:00:59,000 --> 00:01:02,200 Speaker 1: go down UM, and they go down increasingly quickly in 14 00:01:02,240 --> 00:01:05,959 Speaker 1: a in a globally inconnected, interconnected world. We think the 15 00:01:06,000 --> 00:01:08,400 Speaker 1: fundamentals are still strong. I think we find it hard 16 00:01:08,440 --> 00:01:12,600 Speaker 1: to ignore the earnings yield versus tenure bondy yield as 17 00:01:12,640 --> 00:01:16,280 Speaker 1: an indicator of of of attraction UM. And we think 18 00:01:16,319 --> 00:01:19,040 Speaker 1: the forward multiple on the market is one way where 19 00:01:19,040 --> 00:01:22,520 Speaker 1: where one shouldn't ignore either. People look for reasons to 20 00:01:22,600 --> 00:01:26,280 Speaker 1: try and explain draw downs in the market. We stay 21 00:01:26,319 --> 00:01:28,960 Speaker 1: focused on the fundamentals. You're going to have a busy 22 00:01:29,000 --> 00:01:31,560 Speaker 1: week this week because you have a vast number of 23 00:01:31,600 --> 00:01:35,080 Speaker 1: companies in in in the technology sector are going to 24 00:01:35,160 --> 00:01:37,000 Speaker 1: give you an update on on on the state of 25 00:01:37,040 --> 00:01:40,640 Speaker 1: business um and as go those as go the fundamentals, 26 00:01:40,680 --> 00:01:42,399 Speaker 1: we think, go the market, you're in a bit of 27 00:01:42,440 --> 00:01:44,720 Speaker 1: a dad I say, you're in a bit of a 28 00:01:44,800 --> 00:01:48,120 Speaker 1: mark a news vacuum right now as it relates to fundamentals. 29 00:01:48,120 --> 00:01:50,720 Speaker 1: You certainly not in a news vacuum as it relates 30 00:01:50,720 --> 00:01:54,360 Speaker 1: to to the globals going on UM. But but we 31 00:01:54,400 --> 00:01:57,000 Speaker 1: think this is just a traditional draw down within the 32 00:01:57,080 --> 00:02:02,480 Speaker 1: context of of of already attractive of market um and 33 00:02:02,480 --> 00:02:05,080 Speaker 1: and we wouldn't be rushing to judgment. We find it 34 00:02:05,120 --> 00:02:08,840 Speaker 1: really hard to guess to guess market direction um and, 35 00:02:08,880 --> 00:02:10,720 Speaker 1: so we rely on what the companies are saying and 36 00:02:10,840 --> 00:02:13,960 Speaker 1: and and the value underlying the piece of paper. So 37 00:02:14,040 --> 00:02:16,359 Speaker 1: let's talk about what the companies are saying. United Technologies 38 00:02:16,360 --> 00:02:19,079 Speaker 1: out this morning with decent earnings boosting their guidance. The 39 00:02:19,120 --> 00:02:21,200 Speaker 1: earnings are okay, I mean it certainly days in the 40 00:02:21,200 --> 00:02:24,760 Speaker 1: earning season, but the earning season certainly seems okay so far. Look, 41 00:02:24,760 --> 00:02:27,840 Speaker 1: I think the markets worried about this idea that corporate 42 00:02:27,880 --> 00:02:30,720 Speaker 1: profits are going to grow twenty percent this year and 43 00:02:30,840 --> 00:02:33,720 Speaker 1: only grow ten percent next year, only only grow ten 44 00:02:33,800 --> 00:02:36,960 Speaker 1: percent next year. So it's the second derivative argument that 45 00:02:36,960 --> 00:02:40,080 Speaker 1: that that earnings growth is slow, in which which factually 46 00:02:40,120 --> 00:02:43,160 Speaker 1: it is um. And then there's this worry about interest 47 00:02:43,280 --> 00:02:46,080 Speaker 1: rates and you know tenure bond yields. Is that a 48 00:02:46,120 --> 00:02:52,040 Speaker 1: headwind to valuation UM UM So so, but the story 49 00:02:52,240 --> 00:02:56,360 Speaker 1: so far with the earning cycle hasn't been about beating earnings. 50 00:02:56,960 --> 00:02:59,720 Speaker 1: Beating earnings hasn't been enough. You've actually had to beat 51 00:02:59,760 --> 00:03:04,880 Speaker 1: on the top line. UM. Sales growth versus expectations has 52 00:03:04,919 --> 00:03:09,400 Speaker 1: been the determinant on how securities have traded. UM. Top 53 00:03:09,440 --> 00:03:12,240 Speaker 1: line misses and bottom line beats has not got the 54 00:03:12,320 --> 00:03:15,120 Speaker 1: job done. And that's a little different candidly than while 55 00:03:15,120 --> 00:03:18,160 Speaker 1: we saw in in in the first and second quarter. 56 00:03:18,600 --> 00:03:21,480 Speaker 1: The story, by the way of the second quarter was 57 00:03:21,520 --> 00:03:24,519 Speaker 1: that was that the over twenty five percent growth you 58 00:03:24,560 --> 00:03:27,359 Speaker 1: saw in the earnings, two thirds of that was driven 59 00:03:27,360 --> 00:03:30,680 Speaker 1: by better fundamentals by revenue growth and margin expansion, and 60 00:03:30,760 --> 00:03:33,240 Speaker 1: only one third was this idea that it was all 61 00:03:33,360 --> 00:03:36,800 Speaker 1: tax driven and buy back driven um and I think 62 00:03:36,840 --> 00:03:39,440 Speaker 1: the market responded well to that. The market responded well 63 00:03:39,480 --> 00:03:42,520 Speaker 1: again to to getting a better sense of of how 64 00:03:42,600 --> 00:03:48,520 Speaker 1: businesses opposition for the rest of the year. John wants 65 00:03:48,520 --> 00:03:52,480 Speaker 1: me to jump in here, but I can't concentrate. There's 66 00:03:52,480 --> 00:03:55,320 Speaker 1: a baseball game tonight and you're already sort of losing, 67 00:03:55,880 --> 00:03:58,560 Speaker 1: you know. I talked to Haley Coffects here at Bloomberg 68 00:03:58,680 --> 00:04:01,560 Speaker 1: was like a dire Dodgers and this is a big 69 00:04:01,600 --> 00:04:05,840 Speaker 1: deal hundred and two years. You know, over time, the 70 00:04:05,920 --> 00:04:08,400 Speaker 1: Dodgers haven't played there since two thousand ten. I didn't 71 00:04:08,400 --> 00:04:10,800 Speaker 1: know that. I didn't have been that long. Yeah, so 72 00:04:11,320 --> 00:04:16,680 Speaker 1: you're an expert on base He's been picking out a 73 00:04:16,720 --> 00:04:19,000 Speaker 1: Premier League team for me for the last six weeks. 74 00:04:19,839 --> 00:04:23,520 Speaker 1: That's been torture. Is well, Charles, You talking about baseball 75 00:04:23,560 --> 00:04:26,320 Speaker 1: in the length of time as well in the sequity market. 76 00:04:26,320 --> 00:04:29,360 Speaker 1: Have we lost perspective with a great ball market now, 77 00:04:29,360 --> 00:04:33,320 Speaker 1: there's just too many players and participants across all time 78 00:04:33,440 --> 00:04:36,680 Speaker 1: zones of investment who have lost perspective. I don't know 79 00:04:36,760 --> 00:04:39,599 Speaker 1: if they've lost perspective, but but one of the characteristics 80 00:04:39,600 --> 00:04:42,200 Speaker 1: of what's they can place since since since the bottom 81 00:04:42,200 --> 00:04:45,919 Speaker 1: in the market has been unusually high annualized returns for 82 00:04:45,920 --> 00:04:49,520 Speaker 1: for risk assets with unusually low volatility. If you look 83 00:04:49,560 --> 00:04:54,560 Speaker 1: at the relationship between return and volatility, it's astonishing the 84 00:04:54,680 --> 00:04:58,039 Speaker 1: upside down of the long periods of time equity returns 85 00:04:58,040 --> 00:05:00,919 Speaker 1: have generally been, you know, half that of volatility, and 86 00:05:01,040 --> 00:05:03,560 Speaker 1: right now they're sitting at two times volatility, which is 87 00:05:03,560 --> 00:05:07,400 Speaker 1: a statement around we we've lost a sense of grounding 88 00:05:07,440 --> 00:05:12,720 Speaker 1: around what volatility to give us that grounding, I don't 89 00:05:12,760 --> 00:05:17,480 Speaker 1: think no individual will give you that grounding. It complacency 90 00:05:17,560 --> 00:05:20,640 Speaker 1: breeds complacency, and all of a sudden people wake up 91 00:05:20,680 --> 00:05:23,320 Speaker 1: and feel shocked to their boots with the idea that 92 00:05:23,360 --> 00:05:25,960 Speaker 1: the futures market could be down to percent. What happened 93 00:05:26,000 --> 00:05:29,640 Speaker 1: from from February to to to early October was the 94 00:05:29,800 --> 00:05:33,919 Speaker 1: slow and boring four percent move up with no volatility. 95 00:05:34,000 --> 00:05:36,680 Speaker 1: So I think when you make the transition from the 96 00:05:36,720 --> 00:05:39,800 Speaker 1: monetary lead world to the fiscally lead world, you're going 97 00:05:39,839 --> 00:05:42,760 Speaker 1: to make a transition in volatility as well. And it 98 00:05:42,880 --> 00:05:45,960 Speaker 1: and it and it should benefit folks like us. Where 99 00:05:45,720 --> 00:05:49,320 Speaker 1: where where The idea around investing centers on the fundamentals 100 00:05:49,720 --> 00:05:52,960 Speaker 1: um and you'll have much more bifurcated outcomes when when 101 00:05:53,000 --> 00:05:56,760 Speaker 1: fiscal policy takes over versus monetary policy. Let's talk about that. 102 00:05:56,800 --> 00:05:58,480 Speaker 1: We've had a couple of false dawns over the last 103 00:05:58,480 --> 00:06:00,160 Speaker 1: couple of years, but certainly every time we at a 104 00:06:00,200 --> 00:06:03,480 Speaker 1: draw down, there's a conversation about regime change breaking out 105 00:06:03,480 --> 00:06:05,480 Speaker 1: of this goldilocks story and the economy and this low 106 00:06:05,560 --> 00:06:08,600 Speaker 1: volatility regime. Are we seeing regime change charts and what 107 00:06:08,720 --> 00:06:11,960 Speaker 1: kind of regime are we entering into? I'm not It 108 00:06:12,040 --> 00:06:17,039 Speaker 1: depends how you think about regime change, the the the 109 00:06:17,080 --> 00:06:19,520 Speaker 1: Another observation about the market this year has been the 110 00:06:19,520 --> 00:06:23,919 Speaker 1: tremendous bifurcation between companies that are thought of as growth 111 00:06:23,920 --> 00:06:26,680 Speaker 1: companies versus companies that are thought of as value companies. 112 00:06:26,920 --> 00:06:30,159 Speaker 1: I mean, I think that the medium the average security 113 00:06:30,160 --> 00:06:32,240 Speaker 1: in the SMP as of this morning, I think on 114 00:06:32,240 --> 00:06:34,719 Speaker 1: a one year basis or on a year to date basis, 115 00:06:34,960 --> 00:06:38,560 Speaker 1: was basically flat, while the the SMP itself was up 116 00:06:38,600 --> 00:06:41,560 Speaker 1: a few percent. Because of the influence of megacap technology 117 00:06:41,560 --> 00:06:44,640 Speaker 1: on the market. The average stock is flat on this year. 118 00:06:45,080 --> 00:06:49,640 Speaker 1: Um the regime change, I think, I think the one 119 00:06:49,680 --> 00:06:53,120 Speaker 1: area where you haven't seen regime change is is people's 120 00:06:53,200 --> 00:06:58,920 Speaker 1: exuberant in prospective equity returns. People UM and investors broadly 121 00:06:59,120 --> 00:07:03,880 Speaker 1: remain very be balanced in how they think about reward 122 00:07:03,960 --> 00:07:07,320 Speaker 1: and risk. In fact, they still tilt more towards risk 123 00:07:07,360 --> 00:07:11,160 Speaker 1: than reward, which to me is an unusual outcome given 124 00:07:11,360 --> 00:07:13,840 Speaker 1: the comments are made about how high returns of being 125 00:07:13,960 --> 00:07:18,560 Speaker 1: and hollow volatility of has been UM. So it depends 126 00:07:18,600 --> 00:07:21,160 Speaker 1: how you think about regime change. There's a hope out 127 00:07:21,160 --> 00:07:25,240 Speaker 1: there that that companies that that that simply grow in 128 00:07:25,280 --> 00:07:29,520 Speaker 1: sectors that aren't technology can get a benefit of the valuation. 129 00:07:30,040 --> 00:07:34,640 Speaker 1: The other regime change that hasn't taken places is valuations 130 00:07:34,880 --> 00:07:39,040 Speaker 1: UM have remained very contained um UM, and again I 131 00:07:39,040 --> 00:07:42,000 Speaker 1: think that's against the idea that that there hasn't been 132 00:07:42,160 --> 00:07:47,240 Speaker 1: excessive um exuberance of optimism in the equity market. I 133 00:07:47,240 --> 00:07:51,680 Speaker 1: think there's possibly exuberance of optimism in other markets UM, 134 00:07:51,720 --> 00:07:54,880 Speaker 1: whether those be private markets or bond markets, but certainly 135 00:07:54,920 --> 00:07:58,200 Speaker 1: not in equity markets. Some people would say the exuberance 136 00:07:58,280 --> 00:08:00,680 Speaker 1: is a prerequisite to call the markets up. I mean, 137 00:08:00,680 --> 00:08:02,800 Speaker 1: if you're saying we haven't been conditioned by some of 138 00:08:02,800 --> 00:08:04,680 Speaker 1: these big returns over the last few years and you're 139 00:08:04,720 --> 00:08:07,080 Speaker 1: also saying that the end of this bull market is 140 00:08:07,080 --> 00:08:10,440 Speaker 1: an insight. I think that's right. I think as God 141 00:08:10,520 --> 00:08:14,640 Speaker 1: profits um UM so goes the market from where were 142 00:08:14,680 --> 00:08:17,720 Speaker 1: trading today. If you think about the earnings yield in 143 00:08:17,960 --> 00:08:22,200 Speaker 1: SMP today, it's over six percent tenure treasuries or three 144 00:08:22,240 --> 00:08:25,120 Speaker 1: percent UM. There's a variety of ways of course, that 145 00:08:25,200 --> 00:08:29,120 Speaker 1: gap can close. Value stock pricing go up, or treasury 146 00:08:29,160 --> 00:08:32,959 Speaker 1: yields can go up to close that gap UM. But 147 00:08:32,960 --> 00:08:36,200 Speaker 1: but I don't think you lose a lot of money 148 00:08:36,240 --> 00:08:38,480 Speaker 1: on a on a three to five year basis. But 149 00:08:38,679 --> 00:08:42,360 Speaker 1: buying the market um at fifteen times forward earnings, I 150 00:08:43,080 --> 00:08:45,400 Speaker 1: find that a hard concept to wrap my arms around. 151 00:08:45,559 --> 00:08:47,120 Speaker 1: Charles Cancer, great to catch you out with your new 152 00:08:47,120 --> 00:08:50,679 Speaker 1: Burger Berman, Senior portfolio Manager on a morning where SMP 153 00:08:50,760 --> 00:09:05,840 Speaker 1: five features tom and negative one point two. I've really 154 00:09:05,840 --> 00:09:08,400 Speaker 1: been looking forward to this interview. Frank Newport has decades 155 00:09:08,440 --> 00:09:13,320 Speaker 1: of experience with Gallup, of looking at the foibles of polls, 156 00:09:13,640 --> 00:09:17,640 Speaker 1: the value of poles as well. Frank Newport, when you 157 00:09:17,840 --> 00:09:22,920 Speaker 1: see a congressional election in a set of Senate elections, 158 00:09:23,640 --> 00:09:28,880 Speaker 1: in polls our nationwide, all in Democrat nationwide, all in 159 00:09:29,000 --> 00:09:32,679 Speaker 1: Republican What do they capture? Do they have any value 160 00:09:32,760 --> 00:09:37,800 Speaker 1: at all national polls? You mean, yeah, all, they do 161 00:09:37,920 --> 00:09:41,200 Speaker 1: absolutely too. In particular, the job approval rating of the 162 00:09:41,240 --> 00:09:45,240 Speaker 1: incumbent president is correlated with the outcome of in term elections. 163 00:09:45,320 --> 00:09:49,320 Speaker 1: And second, the so called generic ballots, which ask people 164 00:09:49,400 --> 00:09:52,000 Speaker 1: in your district will developed the Democratic the Republican candidate 165 00:09:52,080 --> 00:09:55,360 Speaker 1: also are correlated with outcomes. So both of those right 166 00:09:55,400 --> 00:09:58,760 Speaker 1: now are still positive for Democrats, although they've been eroding 167 00:09:58,840 --> 00:10:02,080 Speaker 1: some from a Democrat a perspective in recent days. Can 168 00:10:02,200 --> 00:10:08,120 Speaker 1: people like you, animals, statistical beasts like Frank Newport, can 169 00:10:08,200 --> 00:10:13,439 Speaker 1: you pull for turnout? Well, we try. We ask a 170 00:10:13,520 --> 00:10:16,640 Speaker 1: number of questions including are you more or less enthusiastic 171 00:10:16,679 --> 00:10:18,800 Speaker 1: about voting? And we have a series of other questions 172 00:10:18,800 --> 00:10:21,880 Speaker 1: were actually in the field now asking about how likely 173 00:10:21,960 --> 00:10:24,080 Speaker 1: are you to vote? How interested you in the election? 174 00:10:24,480 --> 00:10:27,840 Speaker 1: So you can try to do turn out, but that's tricky. 175 00:10:28,440 --> 00:10:30,040 Speaker 1: I think that was one of the problems with some 176 00:10:30,080 --> 00:10:33,560 Speaker 1: of the stateholds in they didn't capture the right turnout 177 00:10:33,960 --> 00:10:37,040 Speaker 1: metrics among certain voters for Trump. But we can certainly 178 00:10:37,080 --> 00:10:39,160 Speaker 1: ask the questions and try to put them in context 179 00:10:39,240 --> 00:10:41,720 Speaker 1: based on history. Frank, we love having you on because 180 00:10:41,720 --> 00:10:44,680 Speaker 1: your humility in all this game. Are you any smarter 181 00:10:44,760 --> 00:10:48,720 Speaker 1: than you were twenty four months ago? You mean in general, 182 00:10:49,080 --> 00:10:53,240 Speaker 1: as I age and as you age, well, it depends 183 00:10:53,240 --> 00:10:56,200 Speaker 1: if you're talking to the youngest child in the family. 184 00:10:56,520 --> 00:10:59,160 Speaker 1: Let me rephrase the question, Mr Newport, what did you 185 00:10:59,240 --> 00:11:02,440 Speaker 1: learn in truth in sixteen in polling that you're trying 186 00:11:02,480 --> 00:11:06,920 Speaker 1: to avoid now? Well, actually, as you know, the national 187 00:11:06,960 --> 00:11:10,400 Speaker 1: polls are pretty accurate, so we don't change. But this 188 00:11:10,440 --> 00:11:14,040 Speaker 1: is in the national election. What I learned is and 189 00:11:14,080 --> 00:11:16,559 Speaker 1: I'll be probably what I say in this response. I 190 00:11:16,600 --> 00:11:18,600 Speaker 1: think this is very important is be careful of models. 191 00:11:18,679 --> 00:11:20,840 Speaker 1: Be careful of people who try to give you a 192 00:11:21,080 --> 00:11:23,719 Speaker 1: overall probability estment of what's going to happen. Polls are 193 00:11:23,720 --> 00:11:27,520 Speaker 1: fragile in small congressional districts and in some states, and 194 00:11:27,600 --> 00:11:30,120 Speaker 1: these models all depend on poles in these districts or 195 00:11:30,160 --> 00:11:32,280 Speaker 1: other kind of estimates, and you have to be cautious. 196 00:11:32,320 --> 00:11:35,000 Speaker 1: You have to be had some humility and trying to 197 00:11:35,120 --> 00:11:38,640 Speaker 1: estimate what's going on. And part of this, Frank is 198 00:11:38,720 --> 00:11:41,600 Speaker 1: in our Kevin surreally, I thought zero did on Michigan 199 00:11:41,920 --> 00:11:45,200 Speaker 1: Michigan in two thousands sixteen a big deal. What does 200 00:11:45,240 --> 00:11:48,480 Speaker 1: Gallup say about individual states? And let's pick on Michigan. 201 00:11:48,800 --> 00:11:52,400 Speaker 1: What does Gallop see in a state like Michigan. Well, 202 00:11:52,440 --> 00:11:54,760 Speaker 1: we're not pulling at the state level, so I can't 203 00:11:54,760 --> 00:11:57,520 Speaker 1: get you what do you see within the industry? What 204 00:11:57,559 --> 00:12:00,079 Speaker 1: do you see? Well, I think that you have to 205 00:12:00,160 --> 00:12:03,640 Speaker 1: be uh, I don't know you know whether the who's 206 00:12:03,679 --> 00:12:05,520 Speaker 1: gonna win in Michigan. I think you have to be 207 00:12:05,600 --> 00:12:07,760 Speaker 1: very cautious at this point there two weeks and two 208 00:12:07,800 --> 00:12:09,720 Speaker 1: weeks as an eternity, so I can't give you an 209 00:12:09,720 --> 00:12:11,959 Speaker 1: answer to that. I would not estimate who's going to 210 00:12:12,040 --> 00:12:14,480 Speaker 1: win in that state. So the president just, you know, 211 00:12:14,559 --> 00:12:18,600 Speaker 1: the guy that's most visible, certainly using the caravan and 212 00:12:19,080 --> 00:12:23,400 Speaker 1: the people from Honduras and Guatemala moving north into Mexico. 213 00:12:23,600 --> 00:12:27,800 Speaker 1: I mean, obviously that shifts things two weeks out when 214 00:12:27,840 --> 00:12:31,880 Speaker 1: the polls in a mid term lock in, UM, I 215 00:12:31,920 --> 00:12:34,040 Speaker 1: don't think they really lock in until the thing before 216 00:12:34,040 --> 00:12:37,040 Speaker 1: the election. People really haven't been focusing and as you 217 00:12:37,120 --> 00:12:39,880 Speaker 1: just said, we've had the Kavanaugh situation, We've had now 218 00:12:39,960 --> 00:12:44,040 Speaker 1: the Republican focus on this caravan. We've had Trump himself 219 00:12:44,080 --> 00:12:46,600 Speaker 1: going to rallies almost every night. All of those are 220 00:12:46,640 --> 00:12:49,520 Speaker 1: recent developments and therefore could change how things are happening. 221 00:12:49,559 --> 00:12:51,640 Speaker 1: So I think we have to still monitor what's happening 222 00:12:51,640 --> 00:12:54,960 Speaker 1: over the next two weeks. We cannot be complacent and say, well, 223 00:12:54,960 --> 00:12:56,880 Speaker 1: we know what's going to happen and nothing's going to change. 224 00:12:56,880 --> 00:12:59,200 Speaker 1: Things are going to change. These last two weeks are 225 00:12:59,280 --> 00:13:02,680 Speaker 1: vital for both sides. What do you see among the Democrats? 226 00:13:02,800 --> 00:13:06,400 Speaker 1: Bernie Sanders out overnight, nice effort by the New York 227 00:13:06,440 --> 00:13:09,959 Speaker 1: Times this morning to get his angst about democratic turnout. 228 00:13:10,000 --> 00:13:12,680 Speaker 1: The president is focused, as you mentioned, Do you see 229 00:13:12,720 --> 00:13:17,520 Speaker 1: a coherent Democrat message? Uh? No, And that's part of 230 00:13:17,559 --> 00:13:20,560 Speaker 1: the problem. Trump, I think history will show has a 231 00:13:20,600 --> 00:13:25,720 Speaker 1: real genius uh for correctly or incorrectly truthful or not truthful, 232 00:13:25,800 --> 00:13:29,240 Speaker 1: stoking up his base with some very simple messages like immigration, 233 00:13:29,559 --> 00:13:32,079 Speaker 1: which he had created as a major issue for Republicans 234 00:13:32,120 --> 00:13:34,240 Speaker 1: where it didn't used to be. I don't think the 235 00:13:34,240 --> 00:13:37,880 Speaker 1: Democrats have a comparable kind of shrewdness on their part, 236 00:13:37,920 --> 00:13:40,640 Speaker 1: which is which is a problem for the Democrats. They're 237 00:13:40,880 --> 00:13:45,080 Speaker 1: they're diffuse, they're nice in some ways, and they're just 238 00:13:45,200 --> 00:13:47,640 Speaker 1: not getting the same kind of single female that I 239 00:13:47,679 --> 00:13:50,080 Speaker 1: think the Republicans and Trump are able to do just 240 00:13:50,200 --> 00:13:53,440 Speaker 1: joining us. Frank Newport, would gallop Paul thrilled that he's 241 00:13:53,480 --> 00:13:56,040 Speaker 1: on with us this morning, and yeah, we're focused on 242 00:13:56,080 --> 00:13:58,400 Speaker 1: the mid terms, but there's a lot of other issues 243 00:13:58,440 --> 00:14:00,199 Speaker 1: as well. Frank, you've done a lot of work. Could 244 00:14:00,240 --> 00:14:05,760 Speaker 1: gallop on Working America? You do these special almost philosophical 245 00:14:05,840 --> 00:14:09,760 Speaker 1: polls about the place we are within society. Is the 246 00:14:09,800 --> 00:14:13,240 Speaker 1: ankst that was there in the fall of two thousand 247 00:14:13,280 --> 00:14:16,719 Speaker 1: and sixteen, is it really been replaced by a four 248 00:14:16,800 --> 00:14:20,440 Speaker 1: percent make America Great Again economy? Or is the inkst 249 00:14:20,480 --> 00:14:24,400 Speaker 1: still there? We still see angst in the data clearly. 250 00:14:24,440 --> 00:14:26,800 Speaker 1: When we ask about the national economy, we've seen a 251 00:14:26,920 --> 00:14:30,440 Speaker 1: continuing positive rise on the consumer competence type indicators for 252 00:14:30,520 --> 00:14:33,760 Speaker 1: Americans say, yes, the economy is doing well, um, but 253 00:14:33,920 --> 00:14:36,720 Speaker 1: we do see some signs of anxiety. Not huge, mind you. 254 00:14:36,800 --> 00:14:39,760 Speaker 1: But when we ask about artificial intelligence and robots taking 255 00:14:39,760 --> 00:14:42,640 Speaker 1: over your jobs, we've got large for sense of Americans 256 00:14:42,640 --> 00:14:44,720 Speaker 1: are saying, yeah, that's actually going to affect jobs in 257 00:14:44,760 --> 00:14:47,720 Speaker 1: the future. So underneath it all, I think there is 258 00:14:47,720 --> 00:14:50,480 Speaker 1: some anxiety there, But when you look at the broad measures, 259 00:14:50,520 --> 00:14:54,920 Speaker 1: Americans are recognizing the reality at least unless the market 260 00:14:55,000 --> 00:14:57,320 Speaker 1: continues to crash. You know over the months to come 261 00:14:57,360 --> 00:15:00,320 Speaker 1: that that the economy is doing well, Frank, But then 262 00:15:00,520 --> 00:15:02,440 Speaker 1: this what do you look at election night? I mean 263 00:15:02,480 --> 00:15:05,240 Speaker 1: in mid term election? And I was shocked at the 264 00:15:05,280 --> 00:15:10,520 Speaker 1: turnout in previous midterm elections. What is it roughly last election? 265 00:15:10,600 --> 00:15:12,880 Speaker 1: I just looked that up was a little under thirty 266 00:15:12,920 --> 00:15:15,160 Speaker 1: seven percent of eligible voters and that would have been 267 00:15:15,160 --> 00:15:18,720 Speaker 1: the last mid term, which was so that's terrible, that's terrible. Well, 268 00:15:18,800 --> 00:15:23,720 Speaker 1: let's two thirds two thirds of Americans didn't vote in 269 00:15:23,760 --> 00:15:26,960 Speaker 1: the last mid term, right, roughly a little under that, 270 00:15:26,960 --> 00:15:29,960 Speaker 1: but that's absolutely a clear majority of eligible voters did 271 00:15:29,960 --> 00:15:32,680 Speaker 1: not vote. Is that going to change this time? I 272 00:15:32,720 --> 00:15:35,160 Speaker 1: think it might edge up a few points, but history 273 00:15:35,200 --> 00:15:37,680 Speaker 1: shows that it's hard to move the needle considerably now 274 00:15:37,720 --> 00:15:40,480 Speaker 1: that we're not going to see over voting. Absolutely not. 275 00:15:40,560 --> 00:15:42,720 Speaker 1: Maybe it'll edge up a little depending on what happens 276 00:15:42,720 --> 00:15:44,800 Speaker 1: among Democrats, but it's going to be low. And that's 277 00:15:44,800 --> 00:15:47,520 Speaker 1: a tragedy. I'm almost in favor now in my old age, 278 00:15:47,520 --> 00:15:50,400 Speaker 1: of a national voting law, like they have another country. 279 00:15:50,440 --> 00:15:52,080 Speaker 1: We need to get people out to vote, and they 280 00:15:52,120 --> 00:15:54,280 Speaker 1: just don't. They sit on their rear ends and don't vote, 281 00:15:54,320 --> 00:15:58,560 Speaker 1: and that's bad. Within this is the money spent. You know, 282 00:15:58,600 --> 00:16:01,760 Speaker 1: I'll let you pick the district. Maybe our Kevin's really 283 00:16:01,800 --> 00:16:04,480 Speaker 1: would have a better idea, but I'm gonna pick folks 284 00:16:04,480 --> 00:16:06,760 Speaker 1: a given district in Ohio, I don't have it in 285 00:16:06,800 --> 00:16:11,640 Speaker 1: front of me. And they're spending jillions of dollars on 286 00:16:12,120 --> 00:16:16,880 Speaker 1: endless TV ads simply replaced by a single sports moment 287 00:16:16,880 --> 00:16:20,080 Speaker 1: where Purdue beat Ohio State. Okay, that's the color that 288 00:16:20,120 --> 00:16:23,640 Speaker 1: we've got now, Purdue beat Ohio State. And the rest 289 00:16:23,760 --> 00:16:27,000 Speaker 1: is adds is that money well spent? Does that actually 290 00:16:27,040 --> 00:16:31,800 Speaker 1: move voters? Well, you know, Bloomberg's the business oriented network, 291 00:16:32,040 --> 00:16:35,440 Speaker 1: and these people who spend the dollars our business oriented, 292 00:16:35,520 --> 00:16:37,880 Speaker 1: and they would claim it does work. People tell us 293 00:16:37,880 --> 00:16:40,080 Speaker 1: in polls they hate the negative ads that they're being 294 00:16:40,120 --> 00:16:43,600 Speaker 1: bombarded with in these areas where there are competitive races. 295 00:16:43,840 --> 00:16:45,680 Speaker 1: They say, they don't affect me. I hate him. I 296 00:16:45,680 --> 00:16:48,080 Speaker 1: wish they wouldn't do it. The data show they can 297 00:16:48,160 --> 00:16:51,000 Speaker 1: move the needle, though, and that's why these consultants. Of course, 298 00:16:51,040 --> 00:16:53,080 Speaker 1: consultans make money on them, so they have a vested 299 00:16:53,120 --> 00:16:55,520 Speaker 1: interest in you can and consultants who look at it 300 00:16:55,600 --> 00:16:59,920 Speaker 1: claim that whether you like him or not, loathsome though 301 00:17:00,040 --> 00:17:03,000 Speaker 1: these negative ads, maybe they do move the needle. Frank Newport, 302 00:17:03,040 --> 00:17:05,760 Speaker 1: thank you for the update. Greatly appreciate it. Dr Newport 303 00:17:06,320 --> 00:17:09,320 Speaker 1: getting it done with gallop always with, and again and again. 304 00:17:09,359 --> 00:17:12,000 Speaker 1: What I love about Frank Newport is he realizes the 305 00:17:12,040 --> 00:17:27,399 Speaker 1: foibles of plus or minus truly history made today in Istanbul. 306 00:17:27,440 --> 00:17:30,400 Speaker 1: There's no other way to uh say. A Snamba kill 307 00:17:30,480 --> 00:17:33,960 Speaker 1: gave us wonderful perspective off of the Urdawan speech, and 308 00:17:34,000 --> 00:17:36,960 Speaker 1: she's kind enough to join us in her London afternoon 309 00:17:37,000 --> 00:17:41,240 Speaker 1: with Chatham House and their senior consulting research fellow Sonam. 310 00:17:41,280 --> 00:17:45,800 Speaker 1: We're waiting for responses. There have been grizzly unsourced report 311 00:17:45,800 --> 00:17:49,679 Speaker 1: you should say unreported sourcing in the last couple hours. 312 00:17:49,680 --> 00:17:54,439 Speaker 1: Some Sky News forget about that. I would assume any nation, 313 00:17:54,520 --> 00:17:57,840 Speaker 1: including a royal family, has to have a cogent response. 314 00:17:58,440 --> 00:18:05,639 Speaker 1: What's the cogent response appropriate for Saudi Arabia. That's a 315 00:18:05,760 --> 00:18:08,320 Speaker 1: very good question. I think that right now the reason 316 00:18:08,359 --> 00:18:11,639 Speaker 1: why they're not coming out with a cogent response is 317 00:18:11,760 --> 00:18:17,000 Speaker 1: because they are trying to game the expectations of the 318 00:18:17,119 --> 00:18:21,000 Speaker 1: US government, particularly the President This is a relationship that 319 00:18:21,640 --> 00:18:24,320 Speaker 1: they worked very hard to develop and they want to 320 00:18:24,359 --> 00:18:28,119 Speaker 1: preserve it at all costs without at the same time 321 00:18:28,560 --> 00:18:32,000 Speaker 1: seeing a demotion or seeing any loss of power for 322 00:18:32,160 --> 00:18:36,480 Speaker 1: the young Crown Prince Mohammed bin Selman. Dr Vikill, can 323 00:18:36,520 --> 00:18:40,679 Speaker 1: you speak about the relationship that exists or doesn't exist 324 00:18:40,800 --> 00:18:45,919 Speaker 1: between Iran, Turkey and Saudi Arabia and why Iran is 325 00:18:46,040 --> 00:18:52,320 Speaker 1: important to this conversation. Uh, this is a triangular relationship 326 00:18:52,440 --> 00:18:57,919 Speaker 1: that is fraught with tensions more than friendly relationships. Iran 327 00:18:57,960 --> 00:19:02,760 Speaker 1: inside Arabia in particular have had a longstanding regional rivalry. 328 00:19:02,880 --> 00:19:08,000 Speaker 1: Turkey is the third regional power of great influence around 329 00:19:08,160 --> 00:19:12,200 Speaker 1: UM the Middle East, and the three compete UM in 330 00:19:12,680 --> 00:19:15,119 Speaker 1: very different ways. And this would probably take hours to 331 00:19:15,240 --> 00:19:18,480 Speaker 1: really a pack and explain, but in brief, Iran matters 332 00:19:18,520 --> 00:19:23,920 Speaker 1: because the Trump administration worked very hard UM and alongside 333 00:19:23,960 --> 00:19:29,160 Speaker 1: Saudi Arabia, the UA and Israel to develop a very 334 00:19:29,200 --> 00:19:34,920 Speaker 1: comprehensive strategy to contain Iran's influence in the region. And UH, 335 00:19:34,960 --> 00:19:39,680 Speaker 1: this crisis with Mohammed bin Salman and the brutal murder 336 00:19:39,720 --> 00:19:44,199 Speaker 1: of Jamaica Shogi is weakening Saudi Arabia's influence perhaps even 337 00:19:44,400 --> 00:19:48,040 Speaker 1: will lead to our fracturing, um to a certain degree 338 00:19:48,080 --> 00:19:51,320 Speaker 1: of fracturing of US Saudi relationship, and that in turn 339 00:19:51,359 --> 00:19:53,840 Speaker 1: will have knock on effects in the U s ability 340 00:19:53,960 --> 00:19:57,480 Speaker 1: maybe to contain Iran in the region. At the same time, 341 00:19:57,520 --> 00:20:01,360 Speaker 1: it could also have the reverse outcome in that UH, 342 00:20:01,480 --> 00:20:04,720 Speaker 1: the United States can put greater pressure on Saudi Arabia 343 00:20:04,960 --> 00:20:11,560 Speaker 1: to perhaps be UH the swing producer for oil because 344 00:20:11,680 --> 00:20:14,520 Speaker 1: the US government is going to put sanctions on Iran's 345 00:20:14,560 --> 00:20:18,440 Speaker 1: oil exports on November five, right now, a lot of 346 00:20:18,520 --> 00:20:21,920 Speaker 1: dynamics here, clearly, and I appreciate you're trying to set 347 00:20:21,920 --> 00:20:24,800 Speaker 1: them out for US. I'm wondering if if maybe you know, 348 00:20:24,800 --> 00:20:28,160 Speaker 1: when you talk about pressure, they're all different types of pressure. 349 00:20:28,240 --> 00:20:31,960 Speaker 1: And now we can get me specific because Jamal Kashogi, 350 00:20:32,040 --> 00:20:36,680 Speaker 1: as I understand, it, was the nephew of odd Non Koshogi, 351 00:20:37,520 --> 00:20:44,120 Speaker 1: who made a career as an arms and weapons dealer. Indeed, 352 00:20:44,280 --> 00:20:48,720 Speaker 1: the yacht that he owned was eventually purchased by Donald 353 00:20:48,840 --> 00:20:53,280 Speaker 1: by President Donald Trump. Do you believe that Jamal Kashogi 354 00:20:53,359 --> 00:20:58,600 Speaker 1: has had files or information that is wide ranging in 355 00:20:58,640 --> 00:21:05,560 Speaker 1: its implications for the leadership of the Saudi government. Well, Jamaica. 356 00:21:05,640 --> 00:21:09,399 Speaker 1: Shogi was very close to different individuals in the Saudi 357 00:21:09,440 --> 00:21:11,919 Speaker 1: government and have had a long had a long career 358 00:21:12,200 --> 00:21:17,320 Speaker 1: of providing advice and guidance um to pass kings and advisors. 359 00:21:17,480 --> 00:21:19,399 Speaker 1: I don't know if he had files on everyone, but 360 00:21:19,480 --> 00:21:23,320 Speaker 1: he was a person of influence really because he cared 361 00:21:23,320 --> 00:21:26,280 Speaker 1: about Saudi Arabia and he wanted to see Saudi Arabia 362 00:21:26,560 --> 00:21:32,320 Speaker 1: not just promote economic reform but also pursue political and 363 00:21:32,400 --> 00:21:35,480 Speaker 1: social reform. Uh And I think that that wasn't just 364 00:21:35,880 --> 00:21:38,879 Speaker 1: the hope that Jamaica Shogi had. Many people would like 365 00:21:38,960 --> 00:21:45,480 Speaker 1: to see Saudi Arabia liberalized and provide political openings for 366 00:21:45,600 --> 00:21:52,280 Speaker 1: their very young population. Within that is an idea of 367 00:21:52,359 --> 00:21:56,480 Speaker 1: a royal family. I mean, they have to move forward 368 00:21:56,600 --> 00:21:59,800 Speaker 1: out of this. Where would you assume the royal family 369 00:22:00,119 --> 00:22:06,040 Speaker 1: be in six months? Well, I can't predict exactly how 370 00:22:06,080 --> 00:22:09,080 Speaker 1: they're going to necessarily play this, but I do think 371 00:22:09,119 --> 00:22:14,320 Speaker 1: that the royal family, despite this crisis, is is stable. 372 00:22:14,400 --> 00:22:17,520 Speaker 1: The royal family is quite large. King Salmon U has 373 00:22:17,640 --> 00:22:22,760 Speaker 1: authority and support. The question is does Muhammad bin Salmon 374 00:22:22,920 --> 00:22:27,040 Speaker 1: have that authority and support. Over the past year a 375 00:22:27,119 --> 00:22:31,760 Speaker 1: year and a half, he has pursued some UM dubious policies, 376 00:22:31,840 --> 00:22:35,959 Speaker 1: made some UM moves that we've all been questioning and 377 00:22:35,960 --> 00:22:40,600 Speaker 1: wondering UM about, including the warren Yemen, including the kidnapping 378 00:22:40,760 --> 00:22:45,240 Speaker 1: of the Lebanese Prime Minister Sadhiri, including the downgrading of 379 00:22:45,280 --> 00:22:48,800 Speaker 1: diplomatic relations with Canada. UM So he does now have 380 00:22:48,960 --> 00:22:55,000 Speaker 1: a track record of UH overstepping and maybe making mistakes 381 00:22:55,000 --> 00:22:59,520 Speaker 1: in his decision making. Are there could be a shuffling 382 00:23:00,119 --> 00:23:02,240 Speaker 1: of the card some and now we'd like to talk more. 383 00:23:02,280 --> 00:23:04,920 Speaker 1: We've got to run with markets moving Saddamba kill Chato 384 00:23:05,000 --> 00:23:08,840 Speaker 1: Mouse giving us wonderful perspective earlier this morning and again 385 00:23:08,960 --> 00:23:23,520 Speaker 1: here in her London afternoon. She's coming to medicate us. 386 00:23:23,520 --> 00:23:26,200 Speaker 1: She'll be medicating pim Fox remote at the Build America 387 00:23:27,000 --> 00:23:30,320 Speaker 1: UH studios to Built American Mutual. So Gina Martin Adams here, 388 00:23:30,840 --> 00:23:33,800 Speaker 1: who has been wonderful and courageous from the lemon lows 389 00:23:33,800 --> 00:23:36,360 Speaker 1: of two thousand nine of being in the market. UH. 390 00:23:36,520 --> 00:23:40,119 Speaker 1: My fractured math to two decimal points is negative seven 391 00:23:40,560 --> 00:23:45,240 Speaker 1: point eight percent roughly is how far we're down from 392 00:23:45,280 --> 00:23:50,560 Speaker 1: the vicinity of early October. That's not a correction, is it? Not? Quite? 393 00:23:50,720 --> 00:23:53,200 Speaker 1: Technically you have to get to ten for a correction. Though, 394 00:23:53,240 --> 00:23:56,080 Speaker 1: I will say that this sell off that we're in 395 00:23:56,240 --> 00:23:59,240 Speaker 1: has all the characteristics of a correction um and I 396 00:23:59,240 --> 00:24:02,159 Speaker 1: think if you look back to eleven when we had 397 00:24:02,160 --> 00:24:05,000 Speaker 1: a twenty percent correction, or when we had a fifteen 398 00:24:05,000 --> 00:24:08,840 Speaker 1: percent correction, there are signals this time that we're in 399 00:24:08,960 --> 00:24:13,879 Speaker 1: for something similar. Though there is no recession imminent on 400 00:24:13,920 --> 00:24:16,920 Speaker 1: the horizon, there's no big breakdown in corporate credit to 401 00:24:17,000 --> 00:24:20,440 Speaker 1: suggest this is a strong turn, and fundamentals, we are 402 00:24:20,480 --> 00:24:25,320 Speaker 1: absolutely repricing our expectations. What we're repricing here is the 403 00:24:25,359 --> 00:24:27,960 Speaker 1: good morning John Maggie and his classic textbook of the 404 00:24:28,080 --> 00:24:34,400 Speaker 1: nineteen forties is a set of lower highs going back 405 00:24:34,400 --> 00:24:40,800 Speaker 1: to early October, counting on a daily basis pim fox one, two, three, four, 406 00:24:41,160 --> 00:24:44,800 Speaker 1: and then five, six, seven, eight, nine in now ten. 407 00:24:45,080 --> 00:24:49,960 Speaker 1: What does a series of lower highs mean to a fundamentalist, Uh, 408 00:24:50,119 --> 00:24:52,359 Speaker 1: it might not mean a ton to a fundamentalist, but 409 00:24:52,400 --> 00:24:55,879 Speaker 1: to a technician, it's a very very negative signal. Really yeah, 410 00:24:55,960 --> 00:24:58,119 Speaker 1: And it's a series of lower it's a series of 411 00:24:58,119 --> 00:25:01,440 Speaker 1: lower highs and lower lows. We're breaking through some pretty 412 00:25:01,800 --> 00:25:04,560 Speaker 1: critical support levels. We've broken down beyond the two hun 413 00:25:04,720 --> 00:25:07,159 Speaker 1: day moving average. This week, it looks like we're going 414 00:25:07,200 --> 00:25:09,639 Speaker 1: to break the fifty week moving average, which has served 415 00:25:09,640 --> 00:25:13,719 Speaker 1: as a fundamental technical support level. I think the fundamental 416 00:25:13,720 --> 00:25:17,920 Speaker 1: analysts right now are worried about the earnings outlook, worried 417 00:25:17,960 --> 00:25:21,360 Speaker 1: about margins for SMP five companies which have come under 418 00:25:21,400 --> 00:25:23,920 Speaker 1: some correction. There are a lot of headlines out there 419 00:25:23,920 --> 00:25:26,680 Speaker 1: today that investors are worried about peak earnings. I don't 420 00:25:26,720 --> 00:25:28,840 Speaker 1: think that's true at all. I think investors are worried 421 00:25:28,840 --> 00:25:32,760 Speaker 1: about peak earnings growth rates and are reducing their expectations 422 00:25:32,760 --> 00:25:36,600 Speaker 1: for earnings growth going forward, But we're not concerned about 423 00:25:36,600 --> 00:25:39,800 Speaker 1: peak earnings as a general level. I do think earnings 424 00:25:39,840 --> 00:25:41,639 Speaker 1: are going to continue to go higher, but not at 425 00:25:41,640 --> 00:25:48,280 Speaker 1: the pace that may become accustomed to. Like three quarters 426 00:25:48,320 --> 00:25:51,960 Speaker 1: of the SMP companies that have reported so far have 427 00:25:52,119 --> 00:25:57,439 Speaker 1: exceeded their earnings targets correct right, they have, and I 428 00:25:57,480 --> 00:26:00,520 Speaker 1: think when it comes to absolute third quarter earnings, you're 429 00:26:00,560 --> 00:26:04,440 Speaker 1: on pace for somewhere around earnings growth, maybe even a 430 00:26:04,520 --> 00:26:07,240 Speaker 1: little bit stronger as we see the series of earners 431 00:26:07,280 --> 00:26:10,119 Speaker 1: come in. And this speaks right to my point, PIM. 432 00:26:10,160 --> 00:26:14,520 Speaker 1: We're not experiencing and earning shortfall. Uh, we're merely reassessing 433 00:26:14,520 --> 00:26:17,520 Speaker 1: our expectations going forward. I think the key is companies 434 00:26:17,560 --> 00:26:21,480 Speaker 1: are beating earnings, but not giving investors the confidence that 435 00:26:21,520 --> 00:26:24,280 Speaker 1: they're going to see faster and faster earnings growth going forward. 436 00:26:24,320 --> 00:26:26,000 Speaker 1: As a matter of fact, over the last month, we've 437 00:26:26,040 --> 00:26:31,960 Speaker 1: seen S and SP earnings estimates for PS deteriorate come 438 00:26:32,000 --> 00:26:34,560 Speaker 1: off about zero point two percent. This is the first 439 00:26:34,560 --> 00:26:36,680 Speaker 1: time we've seen this this year, So it's a it's 440 00:26:36,680 --> 00:26:40,240 Speaker 1: a difference in fundamental environment that we're trying to price, 441 00:26:40,840 --> 00:26:44,959 Speaker 1: where maybe the earnings outlook isn't completely impenetrable. It's not 442 00:26:45,040 --> 00:26:48,119 Speaker 1: that we're trying to price for earnings deterioration. We're simply 443 00:26:48,119 --> 00:26:51,520 Speaker 1: trying to price a slower period of growth and earnings 444 00:26:51,560 --> 00:26:55,040 Speaker 1: going forward. Okay, that makes sense. But does it make 445 00:26:55,119 --> 00:26:59,919 Speaker 1: sense then that with the Dow at and the smping 446 00:27:00,000 --> 00:27:04,399 Speaker 1: at eighteen, that you're up only one and a half 447 00:27:04,520 --> 00:27:07,399 Speaker 1: percent year to date on both of those index of 448 00:27:07,680 --> 00:27:11,240 Speaker 1: him go to cash. Well, I think you have to 449 00:27:11,280 --> 00:27:15,520 Speaker 1: consider that stocks are generally forward looking entities, So I understand. 450 00:27:15,560 --> 00:27:19,760 Speaker 1: But but you talked about the earnings pop right for 451 00:27:19,800 --> 00:27:24,160 Speaker 1: the third quarter, Well, what happened to the previous three quarters. 452 00:27:24,240 --> 00:27:26,800 Speaker 1: If we're only up one and a half percent, well, 453 00:27:26,840 --> 00:27:28,679 Speaker 1: we're up only up one and a half percent on 454 00:27:28,720 --> 00:27:31,760 Speaker 1: the year, but we're up significantly over the full year 455 00:27:31,840 --> 00:27:33,959 Speaker 1: from a year ago. Right, And when we're if you're 456 00:27:34,000 --> 00:27:36,280 Speaker 1: talking year to date eighteen, we're only up one and 457 00:27:36,320 --> 00:27:38,080 Speaker 1: a half percent, but from where we were this time 458 00:27:38,160 --> 00:27:42,159 Speaker 1: last year, we're still up significantly five you're only not 459 00:27:42,200 --> 00:27:44,919 Speaker 1: even up six percent. And a lot of this is 460 00:27:44,960 --> 00:27:46,439 Speaker 1: coming out of the multiple. I mean, the thing we 461 00:27:46,480 --> 00:27:49,359 Speaker 1: haven't talked about yet is this is not just an 462 00:27:49,400 --> 00:27:52,880 Speaker 1: earning story. It's also a story of markets pricing real 463 00:27:52,920 --> 00:27:56,560 Speaker 1: interest rates for the first time cycle, and that's taking 464 00:27:56,800 --> 00:27:58,640 Speaker 1: taking some wind out of the sales of the equity 465 00:27:58,640 --> 00:28:01,520 Speaker 1: market multiple. That is all so creating a down draft. 466 00:28:01,600 --> 00:28:05,520 Speaker 1: Describe that choice set not only for institutional shareholders, but 467 00:28:05,600 --> 00:28:09,600 Speaker 1: retail hasn't felt it since um I was younger, which 468 00:28:09,640 --> 00:28:13,000 Speaker 1: is a basic idea. I'm in stocks, but I'm looking 469 00:28:13,119 --> 00:28:17,320 Speaker 1: at dot dot dot dot dot. That's a good yield alternative. 470 00:28:17,560 --> 00:28:19,320 Speaker 1: What is that? Is it used to be a five 471 00:28:19,400 --> 00:28:22,880 Speaker 1: year c D That's not true? What is that competition 472 00:28:22,920 --> 00:28:25,640 Speaker 1: now for the equity bid? You know, with all due 473 00:28:25,640 --> 00:28:27,359 Speaker 1: respect to the five year c D. I think it 474 00:28:27,400 --> 00:28:31,119 Speaker 1: actually is increasingly cash all of a sudden. Investors do 475 00:28:31,240 --> 00:28:34,960 Speaker 1: have positive rates on cash. There is a climate out 476 00:28:35,000 --> 00:28:40,520 Speaker 1: there where individuals are very risk intolerant. As a general rule, 477 00:28:40,560 --> 00:28:43,240 Speaker 1: they're willing to take two to three percent as a 478 00:28:43,320 --> 00:28:46,680 Speaker 1: reasonable return coming off of zero. You can get over. 479 00:28:47,560 --> 00:28:49,960 Speaker 1: You can get over three percent, Tom in a in 480 00:28:50,000 --> 00:28:54,360 Speaker 1: a five year CD. Okay, well, I'm in the double 481 00:28:54,440 --> 00:28:56,920 Speaker 1: leverage all cash fund, so you know I'm not. This 482 00:28:57,000 --> 00:28:59,440 Speaker 1: is not my abay. Pim Fox and Built America Mutual 483 00:28:59,720 --> 00:29:02,000 Speaker 1: Time Ken in New York with Gina Martin Adams of Bloomberg, 484 00:29:02,040 --> 00:29:05,560 Speaker 1: thrilled that she's with us negative four forty maybe on 485 00:29:05,600 --> 00:29:09,120 Speaker 1: the down now negative three to two twenty four thousand 486 00:29:10,000 --> 00:29:13,000 Speaker 1: with the VIX four print comes in with a vengeance, 487 00:29:13,000 --> 00:29:15,840 Speaker 1: a better VIX over the last twenty minutes twenty two 488 00:29:15,880 --> 00:29:20,560 Speaker 1: point five zero. I'm watching yen slightly weaker off fear 489 00:29:20,680 --> 00:29:25,000 Speaker 1: and strength one twelve fourteen on yend. So that's sort 490 00:29:25,000 --> 00:29:27,479 Speaker 1: of the framework of the market with yields in seven 491 00:29:28,000 --> 00:29:32,400 Speaker 1: basis points lower yield three point one on the tenure yield. 492 00:29:32,800 --> 00:29:39,520 Speaker 1: John Templeton a great a giant availue investing lived for corrections. 493 00:29:40,120 --> 00:29:43,960 Speaker 1: So how do you rationalize acquiring shares somewhere in the 494 00:29:44,040 --> 00:29:47,480 Speaker 1: vicinity of a correction and then once every x number 495 00:29:47,480 --> 00:29:50,880 Speaker 1: of times it becomes a true bear market. Yeah. I 496 00:29:50,920 --> 00:29:53,080 Speaker 1: think you look for a couple of signals. I you know, 497 00:29:53,160 --> 00:29:56,080 Speaker 1: when you really want to flee stocks is when you 498 00:29:56,160 --> 00:30:00,120 Speaker 1: see an economic recession as imminent. Because economic recession and 499 00:30:00,600 --> 00:30:03,040 Speaker 1: have proven, especially over the last two to be very 500 00:30:03,080 --> 00:30:07,520 Speaker 1: devastating for equities, that is not the case today. Instead, 501 00:30:07,680 --> 00:30:11,680 Speaker 1: you're looking at an equity market correction absent economic recession. 502 00:30:12,320 --> 00:30:15,000 Speaker 1: The result of that is it's really all about your 503 00:30:15,000 --> 00:30:17,200 Speaker 1: time horizon. If you're an investor that wants to get 504 00:30:17,200 --> 00:30:20,200 Speaker 1: a return over the next quarter six months, you probably 505 00:30:20,280 --> 00:30:22,360 Speaker 1: do want to shave some of your risk. You probably 506 00:30:22,400 --> 00:30:24,360 Speaker 1: do want to add a little bit of cash to 507 00:30:24,400 --> 00:30:26,640 Speaker 1: your portfolio. If you're an investor that has a twelve 508 00:30:26,640 --> 00:30:28,880 Speaker 1: to twenty four month horizon and you don't see recession 509 00:30:28,880 --> 00:30:31,920 Speaker 1: in the future, this is an opportunity to add um 510 00:30:31,960 --> 00:30:34,480 Speaker 1: And I think if you have a very long term horizon, 511 00:30:34,880 --> 00:30:37,880 Speaker 1: I love ten percent corrections. Any ten percent correction for 512 00:30:38,000 --> 00:30:43,160 Speaker 1: me with Central College is fantastic. Uh. And you're looking 513 00:30:43,200 --> 00:30:45,440 Speaker 1: at an equity risk premium right now that's still well 514 00:30:45,480 --> 00:30:51,400 Speaker 1: above long term average, even though bond rates have repriced. Well. No, 515 00:30:51,520 --> 00:30:53,680 Speaker 1: I just wanted to know, Okay, if you like ten 516 00:30:53,720 --> 00:30:59,280 Speaker 1: percent corrections, what industry groups. Yeah, I think you look 517 00:30:59,360 --> 00:31:03,760 Speaker 1: for all cyclicals, but you look especially towards later cycles cyclicals. 518 00:31:04,160 --> 00:31:05,920 Speaker 1: You know, the cats of the world that are getting 519 00:31:05,960 --> 00:31:09,360 Speaker 1: beaten up today. Uh on the offsetting story there that 520 00:31:09,400 --> 00:31:14,280 Speaker 1: nobody's talking about as U t X, which actually beat expectations. Nonetheless, 521 00:31:14,320 --> 00:31:17,920 Speaker 1: industrials are a classic late cycle sector that's getting beaten down. 522 00:31:18,520 --> 00:31:24,200 Speaker 1: Energy stocks are late cycle sector that's getting beaten down. Materials. Yeah, 523 00:31:24,240 --> 00:31:25,800 Speaker 1: I think those are the ones you start to look 524 00:31:25,840 --> 00:31:29,280 Speaker 1: for ideas, and they're the value oriented sectors that are 525 00:31:29,320 --> 00:31:33,560 Speaker 1: extremely discounted relative to their long term history. Also have 526 00:31:33,680 --> 00:31:36,920 Speaker 1: the greatest potential for recovery once we get through this 527 00:31:36,960 --> 00:31:40,600 Speaker 1: corrective process and will come back again. Jena Martin Adams, 528 00:31:40,640 --> 00:31:43,960 Speaker 1: thank you so much. Out of our equities at Bloomberg Intelligence. 529 00:31:50,040 --> 00:31:54,240 Speaker 1: Thanks for listening to the Bloomberg Saveillas podcast. Subscribe and 530 00:31:54,320 --> 00:31:59,560 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 531 00:31:59,640 --> 00:32:03,040 Speaker 1: plat form you prefer. I'm on Twitter at Tom Keane. 532 00:32:03,560 --> 00:32:07,240 Speaker 1: Before the podcast. You can always catch us worldwide. I'm 533 00:32:07,280 --> 00:32:08,160 Speaker 1: Bloomberg Radio.