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Speaker 1: This is Bloomberg surveillance. The length of the moving average

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Speaker 1: is irrelevant, but the ratio between the short term moving

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Speaker 1: average and the long term moving average is absolutely critical. Japan,

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Speaker 1: from a point of view of an equity investor, is

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Speaker 1: in deep doo doo am. I allowed to say that

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Speaker 1: we had growth from the first quota of going five ten,

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Speaker 1: and yet the labor market seem to remain fairly strong,

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Speaker 1: and we're not quite sure how that square. Bloomberg Surveillance

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Speaker 1: your link to the world of economics, finance, and investment

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Speaker 1: on Bloomberg Radio. Good morning, it is seven am on

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Speaker 1: Wall Street. Fid AM in Mexico City. Happy Sinco de Mayo.

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Speaker 1: No walls around this program. Mexico gives me is it

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Speaker 1: made the fifth be with you? Tom finally figured that out.

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Speaker 1: End of the day yesterday, Oh yeah, Star Wars day.

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Speaker 1: Mexico finished lower yesterday. We'll see what happens today. The

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Speaker 1: rest of the world not so bad this morning. We

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Speaker 1: have less oil than feared. It appears. US inventory is

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Speaker 1: reported down yesterday, so the price is up today. West

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Speaker 1: Texas nine is up three point two percent, Branch two

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Speaker 1: point six percent. And if oil is higher, so were

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Speaker 1: stocks miners in Europe even though they're not pumping more oil, uh,

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Speaker 1: still driving. The index is higher there. The stock six

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Speaker 1: hunted up by a point, is three tents of eight percent,

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Speaker 1: the docks forty two points higher four tenths of eight percent.

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Speaker 1: The dollar is stronger again today. D X y nine

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Speaker 1: point six three is up a half a percent. That

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Speaker 1: means the en is down one oh seven seven euro

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Speaker 1: is down seven pound two also lower on the day.

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Speaker 1: And we're keeping an eye on Turkey, where Prime Minister

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Speaker 1: Davaoklu is expected to resign, or at least it's the bed.

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Speaker 1: The lira is falling now significantly down dollar of a

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Speaker 1: percent against it bond market right now, lower yields, the

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Speaker 1: basis point higher basically across the current tenure one two

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Speaker 1: year is basis points. Uh So, well, that's where we

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Speaker 1: are this morning on Singco to Mayo tom As. As

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Speaker 1: to where we're going, four FED speakers today, Bullard, Kaplan, Lockhart,

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Speaker 1: and Williams. The latter three already said they would likely

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Speaker 1: support a radio increase in June if the data come

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Speaker 1: in as expected, and of course we do have big

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Speaker 1: data tomorrow. The jobs report expected two hundred thousand four

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Speaker 1: point nine percent on the unemployment rate. So if we

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Speaker 1: get that given the FED speak, what happens to markets

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Speaker 1: that don't seem to have priced in a June move.

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Speaker 1: Bryan Belski his chief investment strategist at BMO Capital, and

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Speaker 1: he has brought the margarite is on the sinco to Mayow. Yesterday,

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Speaker 1: the FED funds futures were pricing in a twelve chance

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Speaker 1: of a June move. We have a bunch of FED

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Speaker 1: speakers come out and say we're thinking June is a

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Speaker 1: live meeting, and the odds went down to ten percent

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Speaker 1: this morning. Uh, they speak, Wall Street doesn't listen. Well.

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Speaker 1: I think the easy trade though, has been that the

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Speaker 1: Fed's going to remain debbish and until proven otherwise. It's

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Speaker 1: not what you say, it's what you do. And at

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Speaker 1: the end of the day, the data is from our

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Speaker 1: lens improving. Then, not to say that the FED is

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Speaker 1: going to be political, but it is the political season

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Speaker 1: and we would venture to guess that they would rather

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Speaker 1: get a FED great increase out of the way a

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Speaker 1: few months away from the general election than than not.

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Speaker 1: So again, things are improving, and if if they want

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Speaker 1: to see an opportunity or provide an opportunity for the U.

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Speaker 1: S economy and the stock market to kind of digest

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Speaker 1: a potential move. We think June would would be a

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Speaker 1: likely outcome at this point. You uh, you think the

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Speaker 1: economy is going the data are going to come in

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Speaker 1: as the Central inc Is forecasting, Yeah, we do. We

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Speaker 1: we believe that you see economic surprise continue to recover. Uh.

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Speaker 1: You're starting to see some some productivity and industrial numbers

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Speaker 1: and come in. Clearly, the best data point of all

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Speaker 1: is with respect to jobbels claims, and and we think

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Speaker 1: wages are slowly coming back. So at the end of

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Speaker 1: the day, we do think it's it's time, and it

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Speaker 1: would be a very good time, especially given the fact

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Speaker 1: that we've had a nice recovery uh in equity prices. Uh.

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Speaker 1: And it would really show the rest of the world

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Speaker 1: that America can go alone for a while. Good morning everyone,

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Speaker 1: Bloomberg Surveillance Michael McKee and Tom Keene Bloomberg Surveillance this

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Speaker 1: morning brought you by Investco. Investco believes it's time to

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Speaker 1: bench to benchmarks to consider active management and factor based strategies.

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Speaker 1: Find out more and investco dot com Slash high Conviction.

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Speaker 1: Ryan Belski with us. As we look at it, it's

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Speaker 1: a great day because the news slow is not that great,

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Speaker 1: which is we can actually step back and think about

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Speaker 1: the bigger picture. You open your comments with this first

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Speaker 1: thing this morning and you said, look, passive is great,

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Speaker 1: Active is better? Describe it? Why is active management? Stock selection?

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Speaker 1: Sector selection? Why does that work? Now? Well, I think

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Speaker 1: that there's been such a focus on e T fs

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Speaker 1: UH and indexing, and for the most part, we believe

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Speaker 1: people have gotten away from real investing. So say if

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Speaker 1: you uh, say if you are looking at it a

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Speaker 1: drug or a healthcare ETF and you really like the

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Speaker 1: fundamental attributes of Mercan fightser versus Lily or the other

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Speaker 1: way around, Lily versus Mercan Fighter or abbott uh and

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Speaker 1: and those stocks are not going to be as correlated

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Speaker 1: from a fundamental basis. You're gonna be stealing from returns

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Speaker 1: uh and dilute the returns about from others. So we

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Speaker 1: think that we're going back into and actively traded bottoms up.

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Speaker 1: You buy thirty five to forty stocks. As the market

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Speaker 1: goes up, and your stock goes up, you peel a

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Speaker 1: little bit off. As the market goes down, your stock

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Speaker 1: goes down, you buy a little bit more. I'm not

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Speaker 1: trying to price myself out of a job. I mean,

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Speaker 1: I think there's been too much of a focus on

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Speaker 1: macro investing and quantitative investing in the last ten or

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Speaker 1: fifty years. And we're gonna go back to basics again.

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Speaker 1: What's the mean for hedge funds. I mean they're under

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Speaker 1: threat now. Another year of challenges too, and twenty colisters

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Speaker 1: and kelpers saying no, no, no, how to hedge funds

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Speaker 1: do stock selection in the new era? Well, they're gonna

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Speaker 1: have to do uh some some good bottoms up research. Now.

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Speaker 1: They always say that they're deep in the weeds and

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Speaker 1: and they do all this great individual stock research, but

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Speaker 1: at the end of the day, they remain so reactive,

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Speaker 1: and they're still reactive to macro. They have to stop

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Speaker 1: reacting to macro and kind of look out a little

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Speaker 1: bit more, which the investment time horizon. Of course, as

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Speaker 1: you know what the hedge fund is much sure from

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Speaker 1: a d n A perspective, they have to start thinking

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Speaker 1: about holding these positions longer term, in building positions, not

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Speaker 1: just not just the shock and on binary decisions. I'm

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Speaker 1: on the other side of the studio. So um, you

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Speaker 1: can't hit me. I get to answer some rude question,

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Speaker 1: how much more and you make for me? Uh by

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Speaker 1: active management, so I can pay your fee compared to

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Speaker 1: the minimal basis point fee I'm gonna pay to the

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Speaker 1: e t s Oh, that's a great question. You walked

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Speaker 1: right into the trap. You've seen t F fees actually

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Speaker 1: start to wither higher and active fees uh come down.

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Speaker 1: So there's been a bit of a convergence. Number one.

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Speaker 1: Number two, you know, clients and investors are gonna pay

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Speaker 1: for performance. Okay, at the end of the day, when

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Speaker 1: you take a look at your portfolio and you've been underperforming,

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Speaker 1: they're gonna look at those types of strategies and in

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Speaker 1: um product that's been outperforming, And what's been outperforming is

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Speaker 1: the active value bottoms up divining growth, big brand name

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Speaker 1: quality investments that that are really the the spoke of

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Speaker 1: what investing from a bottoms of basis is all about

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Speaker 1: right now in the recovery with the equity market, just

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Speaker 1: I was remissing that getting into this on television. Let's

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Speaker 1: do it in do you the big banks? You've clearly

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Speaker 1: made a statement that they're undervalued. What will be the

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Speaker 1: catalyst for a strategist like you to see the big

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Speaker 1: banks move. Charles Peabody if or tell Us is adamant

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Speaker 1: they will have a golden era out a couple of years.

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Speaker 1: How did they get to that golden era? Well, you know,

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Speaker 1: at the end of the day, everyone's waiting for net

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Speaker 1: interest margins to expand you know, we think, we think

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Speaker 1: the golden era of banks is all about wealth management, Tommy.

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Speaker 1: And this is a big, giant, big gen a nuity

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Speaker 1: and you think about the trillions of dollars and everybody

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Speaker 1: win at that though now there's gonna be losers and

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Speaker 1: um at the end of the day those I think

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Speaker 1: they'll scan those those banks with with scale right that

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Speaker 1: have that have been able to demonstrate over time great

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Speaker 1: wealth management practices across the entire business spectrum of the

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Speaker 1: bank will benefit. And again there's trillions of reasons why,

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Speaker 1: tom and those trillions of reasons. Why is that mom

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Speaker 1: pop in North America are sitting on a bunch of

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Speaker 1: bonds and when they begin to peel out of those bonds,

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Speaker 1: that's a really attractive business for those wealth management juggernauts

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Speaker 1: to put these investors in the right places. And we

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Speaker 1: think that we're going back to good old fashioned investing.

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Speaker 1: When when does that happen? Because I mean Ubs, credit,

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Speaker 1: Swee Sparklay. Is all the big wealth managers losing money

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Speaker 1: right now? Well? Well will Mr Lippy. The thing is

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Speaker 1: the part of the story that I don't understand is

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Speaker 1: that what you just said is did you mention in

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Speaker 1: the US banks? Who did you just mentioned? Oh yeah,

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Speaker 1: they're not from America? Here? Well here Our call has

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Speaker 1: been along well before Mr Trump talked about, is that

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Speaker 1: we're gonna believe in America again because the corporate fundamentals

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Speaker 1: of our country, with respect to our our companies, are

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Speaker 1: the best in the world. And that includes the financial system.

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Speaker 1: And so what we believe is the most feared, hated,

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Speaker 1: dreaded financial system is going to have a spectacular rebound

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Speaker 1: based on fundamentals and based on this rotation back into investing. Well,

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Speaker 1: it still didn't answer my question at thirty seconds. Win. Well,

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Speaker 1: the best part of it is that when interest rates

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Speaker 1: start going up and the ecomomy starts to improve your

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Speaker 1: interesteed bond yields go up, total return with respect to

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Speaker 1: bonds go down, these investors are gonna start to rotate

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Speaker 1: back in equities. Okay, I just looked at the Minnesota

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Speaker 1: Vikings draft picks. Oh you're not going there, are you.

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Speaker 1: I don't think we can do that. It's a family program.

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Speaker 1: We'll talk you advise on this. No active management, there's

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Speaker 1: no active manage picks. There you go, Brian Belski, party

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Speaker 1: guy with the team from Minneapolis. Well then we'll come

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Speaker 1: back with Brian Beilski and look much more at the

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Speaker 1: equity markets this morning. All right, let's check in with

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Speaker 1: Michael and get the latest world in national headlines. Mind Tom,

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Speaker 1: thank you very much. In a reversal, Donald Trump will

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Speaker 1: now seek donations to find this campaign for the general election.

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Speaker 1: Speaking to the Wall Street Journal, Trump says he will

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Speaker 1: be putting up money, but won't be completely self funding

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Speaker 1: as I did during the primaries. Top Aid suggested Trump

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Speaker 1: would need about a billion dollars to take on Hillary Clinton.

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Speaker 1: A wind fueled wildfire continues to burn in Alberta, Canada.

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Speaker 1: The fire has forced about eighty thousand people to flee

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Speaker 1: the oil town of Fort McMurray. The fire has burned

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Speaker 1: about sixteen hundred structures and has disrupted oil output. A

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Speaker 1: woman has been found alive in a rebble six days

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Speaker 1: after a building collapse in Kenya. The collapse killed at

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Speaker 1: least thirty three people. Another eighty are missing. Global News

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Speaker 1: twenty four hours a day, powered by our twenty four

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Speaker 1: hundred journalists and more than a hundred fifty news bureaus

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Speaker 1: from around the world. Michael bar and Michael thanks so much.

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Speaker 1: Gold announce a number of days ago off a bit

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Speaker 1: twenty one up seven dollars if that multi day yesterday.

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Speaker 1: We are Brian Belski of Bemo Cap Markets on the

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Speaker 1: equity markets, Bloombark Surveillance spot by Willoughby since New York Cities,

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Speaker 1: but Decamera store for precision, craft and Hustle Blood like

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Speaker 1: a cameras plus a full selection of go pro action

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Speaker 1: adventure cameras Willoughby's corner Fifth Avenue and thirty first Street.

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Speaker 1: This is a Bloomberg Business Flash and I'm Karen Moscow.

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Speaker 1: This updates brought to you by Sector Spider e t

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Speaker 1: f S. Why buy a single stock when you can

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Speaker 1: dot Com are called six sector et f Ali Baba

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Speaker 1: Group Holdings fourth quarter revenue beat analysts estimates, as China's

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Speaker 1: biggest e commerce company sold more advertising to merchants on

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Speaker 1: its platforms, and Murk reported first quarter profit than also

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Speaker 1: beat analysts estimates. SNP Emni futures are up six points now,

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Speaker 1: emitty futures of five d one and NASA documitty futures

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Speaker 1: of fourteen decks. In Germany's up three tenths per cent.

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Speaker 1: Ten Your treasury down four thirty seconds. The yel at

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Speaker 1: one point seven nine percent, nine x scrud oil of

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Speaker 1: two point nine percent or a dollar twenty seven to

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Speaker 1: forty five oh five a barrel comex goold up half

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Speaker 1: percent or six dollars fifty cents to twelve eighty eight.

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Speaker 1: Announced the euro a dollar fourteen twenty five, the n

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Speaker 1: one oh seven point to seven. That's a Bloomberg business flash,

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Speaker 1: Tom and Mike Karen, I thank you so much. Brian

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Speaker 1: Belski with us through much of the morning, very generousive

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Speaker 1: to be with his chief investment strategist Female Capital Markets,

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Speaker 1: Brian um I want you to educate me in our

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Speaker 1: audience on what we get wrong in earnings analysis. I

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Speaker 1: go nuts over the media focus the narrowness of the

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Speaker 1: analysis of earnings give us a bigger broader view. Do

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Speaker 1: we care about earnings decline? Should we be at the

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Speaker 1: operating income line? Should we be at the revenue line? Gap? Nine? Gap?

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Speaker 1: What matters? What should we do in our earnings analysis? Well,

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Speaker 1: thanks for asking me. I think that I where I

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Speaker 1: began my career was a place called William o'nial and

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Speaker 1: company Investors Business Daily a long long time ago, and

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Speaker 1: what we learned there from bills always look at operating

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Speaker 1: earnings and continuing operations. Go up the income statement from

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Speaker 1: net income to a line less adjusted. Correct, that's number one.

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Speaker 1: But then also kind of see what the continuing operations

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Speaker 1: of the company is after sometimes what we saw, especially

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Speaker 1: in the early nineties, these silly charges and non recurring

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Speaker 1: charges in the like. So you have to have a

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Speaker 1: bit of an accounting background to know how your ins

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Speaker 1: and out of financial statement, especially income statement. That's that's

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Speaker 1: kind of number one. From a trend perspective, we would

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Speaker 1: agree that there's way too much focus on quarterly earnings.

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Speaker 1: You want to look at at the business trends and

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Speaker 1: what's happening fundamentally with the company. But in terms of

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Speaker 1: overall earnings trends time, we've always for years in our

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Speaker 1: process and in terms of looking at sectors and markets

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Speaker 1: in are in Dustin Strategy product looked at earnings revisions,

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Speaker 1: and the way that we look at earnings revisions might

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Speaker 1: be a little bit different than most, meaning we like

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Speaker 1: to see big trend changes when all the earnings are

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Speaker 1: coming down at the same time, that's usually a good

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Speaker 1: time to start working at a sector. And then opposite,

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Speaker 1: with respect everyone raising their numbers and might to put

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Speaker 1: this in perspective, and and Brian doesn't talk about individual stocks,

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Speaker 1: and Lessie wants to correct me the upward over Apple.

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Speaker 1: I don't know what they're gonna do. I have no idea,

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Speaker 1: and I understand they're going down to single digit growth,

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Speaker 1: and everybody's all leathered up about that. They take thirty

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Speaker 1: four cents down to EBITDA, they take a multi twenty

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Speaker 1: two cents down to the bottom line, and their free

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Speaker 1: cash flow is only gonna be fifty five billion dollars.

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Speaker 1: They're a deeply troubled company. Are they a deeply troubled company?

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Speaker 1: Brian no, come on at the end of the day. Um,

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Speaker 1: we believe this entire bowl market is about the redistribution

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Speaker 1: of corporate cash and Apple with the kind of cash

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Speaker 1: flow that it continues to generate. If you take a

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Speaker 1: look at how the company has done post an s product, okay,

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Speaker 1: right now, dealing with the success and the second quarter

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Speaker 1: out from that. Now the company again had issues with

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Speaker 1: respect about what they're saying in terms of earnings, and

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Speaker 1: Tom quoted the numbers. At the end of the day,

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Speaker 1: this remains a cash flow uh juggernaut and an innovation jugger.

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Speaker 1: Not I was just in China two weeks ago. You

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Speaker 1: take a look at the saturation rate of mobile phones

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Speaker 1: over there, I think it's about four or five percent.

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Speaker 1: I know it's single digits in terms of the Apple

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Speaker 1: um the impact and over there they're all Samsung users.

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Speaker 1: And so there's still you, there's still time on this company.

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Speaker 1: Apple is a microcosm for the United States stock market.

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Speaker 1: We can't wait for that stock to fail. We can't

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Speaker 1: wait for that stock to fail. Everyone. It's the easiest

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Speaker 1: stock to underweight in the index because it's the biggest

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Speaker 1: re or dividend Growth's only twenty three percent a year.

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Speaker 1: That's outrageous. How do you feel about you You're you

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Speaker 1: make that case there you talk about, you know, money

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Speaker 1: back to shareholders. Uh, and yet you say there's too

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Speaker 1: much focus on short term quarter to quarter. How do

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Speaker 1: you feel about activist investors and what they're doing on

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Speaker 1: behalf of individual stocks? Well, it's a it's another great question, Mike.

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Speaker 1: I would say it's on a case by case basis.

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Speaker 1: It depends upon what the activism is about. Is it

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Speaker 1: about uh, that investor having an ego talking thinking that

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Speaker 1: they know more than the market. The market always knows

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Speaker 1: more than everybody. That's number one, number two. Um, we

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Speaker 1: think this whole issue with active investment. It's it's interesting,

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Speaker 1: but at the end of the day, we can still

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Speaker 1: find good companies that are throwing off great cash, that

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Speaker 1: have an opportunity to continue to grow. And I think

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Speaker 1: that's where we should be looking, uh, in terms of

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Speaker 1: looking for opportunities, that's for sure. Where else do you

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Speaker 1: see opportunities at this point? Given the political uh the

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Speaker 1: political climate these days? Uh, is it easy to pick

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Speaker 1: a sector that's going to to be good or do

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Speaker 1: you need to wait till November? Well, I mean, at

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Speaker 1: the end of the day, six month moves are are

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Speaker 1: hard to dissect. All I would say is this is

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Speaker 1: that we're overweight consumer staples in both Canada and the

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Speaker 1: United States. And the reason being is, you know, I

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Speaker 1: think liquor sales and popcorn sales are gonna be going

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Speaker 1: up this summer because we're gonna have great theater. With

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Speaker 1: respect of what's happening on the political front in America,

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Speaker 1: there's gonna be a lot of uncertainty. Americans don't like

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Speaker 1: when there's uncertainty. Americans don't like when America looks weak.

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Speaker 1: And so that's why we've been writing more and more

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Speaker 1: about When remained very comfortable with our price target on

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Speaker 1: the SMP, we wrote a piece entitled Rinse and Repeat.

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Speaker 1: We see the same things kind of occurring over the

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Speaker 1: next few months. Worries about international, worries about the FED,

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Speaker 1: worries about the economy, Procter and Gamble eleven point six

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Speaker 1: per in, Coca Cola nine point four percent, m O

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Speaker 1: eight point To excuse me, p M, I I should say,

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Speaker 1: Philip Morrison International eight point two percent, PepsiCo eight percent,

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Speaker 1: but their price to perfection, and that's still what you like.

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Speaker 1: Horrible companies, right, horrible right? We still we're still gonna

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Speaker 1: drink pepsi Max, we're still gonna smoke cigarettes, we're still

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Speaker 1: gonna drink booze, and we're still gonna eat popcorn. And

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Speaker 1: so that's not gonna change. And in fact, I think

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Speaker 1: Senior see more of that this summer. Thank you so

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Speaker 1: much for coming by a great country. It's a great country.

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Speaker 1: Well it's it's it. May the fifth be with you.

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Speaker 1: I guess that's what he's what he's talking about, Like

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Speaker 1: I just said, that is you know, it's fifth. Completely,

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Speaker 1: miss John Tucker, thank you for educating me yesterday and

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Speaker 1: May the fourth I was completely clueless about that. Just

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Speaker 1: dorks story in on that, which is surprising that you

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Speaker 1: missed it. All right, the Turkish Prime Minister speaking, Now,

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Speaker 1: keep an eye on that. Good morning. Every Bloomberg surveillance

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Speaker 1: surveillance is coming. Bloomberg surveillance is brought to you by

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Speaker 1: nobody right now, who will be back in a moment

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Speaker 1: and talk about political risk ahead.