WEBVTT - Surveillance: Bonds In Bubble, Says Cooperman 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along 0:00:09.240 --> 0:00:13.080 with Jonathan Ferrell and Lisa Brownwitz Jay Leye. We bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment, and 0:00:17.280 --> 0:00:23.280 international relations. Find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg 0:00:23.360 --> 0:00:29.680 dot com, and of course on the Bloomberg terminal. Belisa 0:00:29.760 --> 0:00:32.280 bramw it's Mr Cooperman. I believe as a caution on 0:00:32.360 --> 0:00:35.159 the market out one year, state the case as you 0:00:35.200 --> 0:00:37.640 see it. Well, the idea is where else are you 0:00:37.720 --> 0:00:39.880 going to go? Are you going to go into bonds? 0:00:39.920 --> 0:00:41.680 You're going to go into anything else. You're not going 0:00:41.720 --> 0:00:44.519 to see a massive crash necessarily in stocks. At the 0:00:44.560 --> 0:00:47.559 same time you're getting inflation, you're getting these cost pressures 0:00:47.560 --> 0:00:49.680 that we heard out from General Motors. I will just 0:00:49.720 --> 0:00:52.320 say that he himself in a recent interview so that 0:00:52.360 --> 0:00:54.640 he did get a new car among others, although he 0:00:54.680 --> 0:00:57.000 treated it at two thousand and two Lexis for a Hyundai. 0:00:57.480 --> 0:00:59.840 So Leonne Cooperman, I'm sure I can talk all of that. 0:01:00.200 --> 0:01:02.480 The supplied to me. We's got a twelve car garage, 0:01:02.520 --> 0:01:07.520 so we know that's I look at the debate here 0:01:07.560 --> 0:01:10.119 that we've got here on the equity markets right now, 0:01:10.160 --> 0:01:12.240 and it's what everybody's looking at. And I think we 0:01:12.400 --> 0:01:15.640 forget John, it's expecting out six months, nine months, a 0:01:15.720 --> 0:01:18.520 year out. What does twenty two look like? A deceleration? 0:01:18.680 --> 0:01:21.800 How big is that deceleration? We're still working our way 0:01:21.800 --> 0:01:25.039 through so many huge distortions. And the analogy that I've 0:01:25.160 --> 0:01:27.160 used right now for the American economy, and others have 0:01:27.200 --> 0:01:29.360 shared that view too, is that it's like holding a 0:01:29.400 --> 0:01:32.479 beach ball beneath the surface. This was a mandated recession. 0:01:32.720 --> 0:01:34.920 Now the policy has changed. The beach ball is searching 0:01:34.920 --> 0:01:37.640 to the surface again and going even higher. We've got 0:01:37.640 --> 0:01:39.720 to work out what it looks like in twenty three 0:01:39.760 --> 0:01:41.880 is a return to trend growth? And what is normal 0:01:41.880 --> 0:01:43.640 actually look like? You how many people come on the show, 0:01:43.920 --> 0:01:45.880 on other shows on networks like this and talk about 0:01:45.920 --> 0:01:49.320 the return to normal? What is normal? Oh? That's true? 0:01:49.360 --> 0:01:51.480 And that well, that's better said than when I said, 0:01:51.560 --> 0:01:55.320 John about February pre pandemic. Was that normal? And we 0:01:55.360 --> 0:01:58.880 really don't know in the hindsight of this natural disaster, John, 0:01:58.920 --> 0:02:00.960 Let's start with the oil. Seven many dollars a barrel. 0:02:01.000 --> 0:02:04.280 Good morning, Brent, flying year today and over the last 0:02:04.280 --> 0:02:06.920 twelve months to create doing okay, right now, it's w 0:02:07.000 --> 0:02:09.679 T I sixty six handle Bongio tie by a couple 0:02:09.720 --> 0:02:13.520 of basis points. Tom want You're a dollar once Swenzi muted, 0:02:13.560 --> 0:02:16.239 price action unchanged on the day, and futures bounced back 0:02:16.360 --> 0:02:18.800 about full tents on the SMP up six tenths on 0:02:18.800 --> 0:02:21.480 the NASTAG one hundred. Very good. Now, just get right 0:02:21.520 --> 0:02:23.880 to it, because I know you're widely anticipate this. Leon 0:02:23.960 --> 0:02:27.639 Cooperman joins us with decades of experience on Wall Street 0:02:27.680 --> 0:02:29.919 and the guys and his building of a certain wing 0:02:30.000 --> 0:02:33.560 of golden sex ages ago, someone that people hang on 0:02:33.680 --> 0:02:38.320 every word. Leon Cooperman with Omega and their family office 0:02:38.520 --> 0:02:42.680 chairman and CEO, Leah Cooperman, we want to talk about 0:02:42.680 --> 0:02:46.120 the markets front and center. But I've got to ask 0:02:46.160 --> 0:02:49.320 you once and for all, as we have seen time 0:02:49.480 --> 0:02:54.359 after time after time, the hiding of leverage on Wall 0:02:54.400 --> 0:02:57.959 Street to get to some form of point of greed, 0:02:58.040 --> 0:03:02.040 and it always ends ugly and shakes market confidence. His 0:03:02.280 --> 0:03:05.240 arcer ghosts and all that that secret leverage that no 0:03:05.280 --> 0:03:09.919 one knew was there. Is it harmed permanently our market confidence? 0:03:10.960 --> 0:03:15.160 I think it's permanent. Everything is cyclical, you know. Uh, 0:03:15.280 --> 0:03:18.760 it's just the evidents of greed basically. I mean the 0:03:18.800 --> 0:03:22.560 fact that after long term capital the industry would get 0:03:22.600 --> 0:03:26.000 into this kind of predicament again. I don't know what 0:03:26.160 --> 0:03:28.280 I would say so quickly, but get into the same 0:03:28.320 --> 0:03:31.560 predicament again. It's kind of surprising. And I guess they 0:03:31.600 --> 0:03:34.040 wanted to make a margin on what they lent this fellow. 0:03:34.720 --> 0:03:37.480 And uh, you know, I was saying that the more 0:03:37.520 --> 0:03:39.960 things change and more than remain the same. Late John, 0:03:40.000 --> 0:03:41.680 Hey got to catch up as always going to see 0:03:41.680 --> 0:03:43.600 you again. What do you make of the increased demands 0:03:43.600 --> 0:03:46.400 for transparency disclosures of the hedge fund community and maybe 0:03:46.480 --> 0:03:49.119 even family offices as well off the back of that incidents. 0:03:49.560 --> 0:03:51.720 I don't get the idea of the family office, you know. 0:03:52.240 --> 0:03:55.280 I can tell everybody. I'm like Hyman Roth and Godfather too. 0:03:55.800 --> 0:03:58.040 I've only seen a hundred times. I never get tired 0:03:58.080 --> 0:04:00.200 of it. Is a scene at the airport where right 0:04:00.200 --> 0:04:02.280 before they shoot him in Ruth he said, I'm a 0:04:02.320 --> 0:04:05.400 retired executive living on a pension, and I think of myself, 0:04:05.400 --> 0:04:08.160 I'm a retired money manager living on investment income. The 0:04:08.200 --> 0:04:10.520 bad news I no longer have this giant income I 0:04:10.600 --> 0:04:12.440 used to have when I ran a hedge fund. The 0:04:12.520 --> 0:04:14.520 good news, I have no pressure. I run my own money, 0:04:14.880 --> 0:04:17.960 So why they have the right to regulate me, uh 0:04:18.240 --> 0:04:20.280 is beyond my wildest dreams. But look, we're in a 0:04:20.400 --> 0:04:23.320 very strange environment. A lot of crazy things are going on. 0:04:23.720 --> 0:04:27.520 I think the market structure has been destroyed by a 0:04:27.600 --> 0:04:31.359 number of moves made by government, and we'll have to 0:04:31.400 --> 0:04:34.360 just work our salves through it. In terms of the market, 0:04:34.440 --> 0:04:38.359 you know, I describe myself as a reasonably fully invested bear. 0:04:39.400 --> 0:04:43.680 The fully invested part is all cyclical, you know, given 0:04:43.800 --> 0:04:46.760 all those decades of experience that Tom attributed to me, 0:04:47.320 --> 0:04:49.440 I've said that, you know, bear markets don't come about 0:04:49.480 --> 0:04:52.080 because of maculate conception. They come about because of certain 0:04:52.360 --> 0:04:56.200 fundamental factors accelerating inflation. We don't have that hotstyle FED 0:04:56.240 --> 0:04:57.760 and we don't have that. In fact, I'd say the 0:04:57.800 --> 0:05:02.279 FED is too accommodative. Um, you know, it comes about 0:05:02.320 --> 0:05:06.240 because we are the market smells an oncoming recession. The 0:05:06.279 --> 0:05:09.479 factors we're coming out of recession, corporate propers a terrific 0:05:09.880 --> 0:05:13.640 you know, and so uh, the normal conditions that cause 0:05:13.680 --> 0:05:16.839 the bare market are not present, and I uh. The 0:05:16.880 --> 0:05:18.640 other one I would mention is, you know, a significant 0:05:18.640 --> 0:05:21.679 geopolitical event which you can forecast, but we have plenty 0:05:21.680 --> 0:05:25.400 to worry about China, Ran Taiwan, etcetera. But and I 0:05:25.480 --> 0:05:28.320 think the biggest plus out there is the fetest creative environment, 0:05:28.360 --> 0:05:31.640 where is there's an absence of alternatives. You know, you've 0:05:31.800 --> 0:05:34.560 you reference this when you were chatting before, but essentially 0:05:34.560 --> 0:05:37.520 there's an absence of alternatives. And what's happening is everybody's 0:05:37.560 --> 0:05:40.560 being pushed out in the risk curve. The investor that 0:05:40.680 --> 0:05:43.560 used to buy tea bills, he concluded or she concluded, 0:05:43.839 --> 0:05:46.680 I can't survive on zero, so I'm gonna take duration 0:05:46.720 --> 0:05:49.120 and inflation risk and I'll buy tea bonds. The team 0:05:49.160 --> 0:05:51.039 bond buyers that I can't get by on one point 0:05:51.040 --> 0:05:54.120 six percent, so I'm gonna buy industrial credits. The industrial 0:05:54.120 --> 0:05:56.400 credit buyers says, I can't get buy in three percent. 0:05:56.600 --> 0:05:59.120 I'm gonna buy high yield. The high yield buyer there's 0:05:59.160 --> 0:06:01.520 no the thing as yield anymore, but the high yield 0:06:01.520 --> 0:06:03.760 biases I can't get buying five or six percent. I'm 0:06:03.800 --> 0:06:06.720 gonna buy structure credit, cellos and stuff. Like that, which 0:06:06.760 --> 0:06:08.599 tend to have a higher yield is their moort opaque 0:06:08.960 --> 0:06:11.400 and the and then the bond guy who buys cello 0:06:11.720 --> 0:06:13.840 or a lady basically says, well, I'll tell you what 0:06:13.880 --> 0:06:17.080 the markets are hid my money and equities, and the 0:06:17.120 --> 0:06:19.120 equity person is I'm gonna put two percent in bitcoin. 0:06:19.720 --> 0:06:22.080 So everybody, everybody has been moving on the risk curve. 0:06:22.440 --> 0:06:25.719 That will change. I have to say, well, I'm reasonably 0:06:25.760 --> 0:06:28.800 heavily invested. I'm having a very good year that I 0:06:28.520 --> 0:06:31.880 I am more focused on the longer term issues. Since 0:06:31.880 --> 0:06:34.000 I'm running my own money, I don't compete against the 0:06:34.080 --> 0:06:36.960 SMP five hundred. I'm an absolute return guy. But it 0:06:37.000 --> 0:06:39.360 seems to me if you step back and think about 0:06:39.400 --> 0:06:43.040 what's going on, it's very very clear we are barring 0:06:43.320 --> 0:06:46.360 from the future. We are barring from the future. If 0:06:46.400 --> 0:06:49.159 you had a hundred economists on your show and you 0:06:49.200 --> 0:06:51.599 asked him what is the potential real growth of the U. 0:06:51.720 --> 0:06:54.679 S economy over time? The answer would be centered around 0:06:54.680 --> 0:06:57.280 two percent real and that you get there because one 0:06:57.480 --> 0:07:00.840 percent productivity growth, half one percent a a force growth 0:07:01.000 --> 0:07:03.520 that determines real growth. That's two percent. You speak to 0:07:03.520 --> 0:07:05.520 a bear, they'll say one and a half percent. You 0:07:05.560 --> 0:07:07.520 speak to a boat, they might say two and a percent, 0:07:07.720 --> 0:07:10.440 but the response is sent around two percent. This year, 0:07:10.480 --> 0:07:13.600 the economy in real terms, are gonna grow three to 0:07:13.720 --> 0:07:17.360 four times potential, Yet we're persistent in trying to hold 0:07:17.400 --> 0:07:20.240 interest rates in zero. Makes no sense to me. I 0:07:20.320 --> 0:07:23.880 understand that. I'll explain why in a second. Secondly, prior 0:07:23.920 --> 0:07:26.400 to the one point nine trillion package, prior to the 0:07:26.400 --> 0:07:29.360 two trillion dollar package, prior to less ten days four 0:07:29.400 --> 0:07:33.840 trillion dollars of infrastructure spending, we've already injected into the 0:07:33.920 --> 0:07:38.679 economy a trillion dollars more of transfer payments than income 0:07:38.720 --> 0:07:41.680 that was lost. So what's really going on is very simple. 0:07:42.000 --> 0:07:44.440 Prior to the virus hitting, we had about a five 0:07:44.520 --> 0:07:48.120 and a a half million people unemployed. That balloon to twenty 0:07:48.160 --> 0:07:50.480 three million people. It's now down to about nine and 0:07:50.480 --> 0:07:53.240 a half million people, and monetary and fiscal policy to 0:07:53.280 --> 0:07:55.920 be conducted the manner to get the unemployed back down 0:07:56.360 --> 0:07:59.360 to the five and a half million pre COVID, and 0:07:59.520 --> 0:08:02.880 they're less concerned about the long term issues with damage 0:08:03.120 --> 0:08:05.840 they might be created. So that's one thing I think 0:08:05.840 --> 0:08:08.720 we're buying from the future. That's number one it's very clear. 0:08:09.040 --> 0:08:12.000 You know, the debt that we're racking up will have 0:08:12.160 --> 0:08:14.200 to be paid. And unless you're into m M T, 0:08:14.360 --> 0:08:16.680 which I'm not, Uh, this is going to create a 0:08:16.680 --> 0:08:20.600 long term issue. Second point I would make is there's 0:08:20.640 --> 0:08:23.200 a shift taking place to the left of government. The 0:08:23.240 --> 0:08:27.280 people in charge now are going to go for higher taxes. 0:08:28.080 --> 0:08:31.000 We're gonna have higher inflation, higher interest rates, which I 0:08:31.000 --> 0:08:34.280 think will be a straining influence on multiples. Okay, I 0:08:34.280 --> 0:08:38.040 think inflation is will be worse than Mr Powell. Secretary 0:08:38.080 --> 0:08:42.280 Powell is assuming every company I talked to in every 0:08:42.360 --> 0:08:45.800 business I came back to New Jersey from Florida. I'm 0:08:45.840 --> 0:08:48.720 a Florida resident. I came back in New Jersey. Uh, 0:08:48.720 --> 0:08:51.600 And I had the lunch the other day at the 0:08:51.679 --> 0:08:55.720 local place called the Milburne Dinner. I asked the owner, 0:08:55.800 --> 0:09:00.280 how's businesses coming back? But I can't find labor. I can't. Finally, 0:09:00.520 --> 0:09:02.480 we're saying that again and again. We sit in the earnings, 0:09:02.480 --> 0:09:04.920 you're hearing the reports, you're hearing the coals too. So 0:09:04.960 --> 0:09:10.520 you invested there. Let's take this conversation a little bit further. 0:09:10.640 --> 0:09:12.640 Why fully invested if you've just gone through all the 0:09:12.679 --> 0:09:16.320 issues you've just gone through well, because you know, uh, 0:09:16.720 --> 0:09:19.520 the near term outlook, the conditions that would lead to 0:09:19.520 --> 0:09:23.360 a mid decline. Like I said, you know it's accelerating inflation. 0:09:23.400 --> 0:09:25.880 We don't have that. You know, most importantly, we have 0:09:25.920 --> 0:09:29.080 a hostile FED. When you go into a beer market, 0:09:29.120 --> 0:09:31.760 we have a fedness extremely friendly. They tell you they're 0:09:31.760 --> 0:09:34.599 gonna keep interest raised low, not only this year, but 0:09:34.640 --> 0:09:37.800 we're gonna keep below next year. I'm assuming, I'm assuming 0:09:37.800 --> 0:09:40.599 they're gonna be surprised by inflation has been more intractable, 0:09:40.800 --> 0:09:42.440 and the market is canna be surprised if the Fed 0:09:42.480 --> 0:09:45.600 will raise rates sometime in twenty two, will be forced 0:09:45.840 --> 0:09:50.640 by inflation. So that's my view, the cyclical versus secular 0:09:50.640 --> 0:09:54.120 outlook the long term ballot. Let me explain. I got 0:09:54.160 --> 0:09:57.280 my NBA from Columbia Business School in January thirty one, 0:09:57.520 --> 0:10:00.760 sixty seven. I was broke at a loan, had a 0:10:00.800 --> 0:10:04.640 six month old child is now approaching fifty five. Okay, 0:10:04.640 --> 0:10:06.600 I had no money in the bank and I couldn't 0:10:06.600 --> 0:10:09.360 afford a vacation, so I went to work the next day. 0:10:09.679 --> 0:10:12.760 I started my career at Goldman on February first, sixty seven. 0:10:13.000 --> 0:10:17.480 The dad was roughly a thousand. Fourteen years later it 0:10:17.559 --> 0:10:20.120 was roughly a thousand, So I I think we borrowed 0:10:20.120 --> 0:10:22.640 for the future. I expect very little action from the SMP. 0:10:23.920 --> 0:10:28.439 Everything I look at would suggests to me caution intermediate 0:10:28.440 --> 0:10:30.560 to longer term would be the rule of the day. 0:10:30.600 --> 0:10:33.200 But leon, how do you remain cautious if it's not 0:10:33.320 --> 0:10:36.839 bonds right, if cash perhaps is losing value because of inflation, 0:10:37.160 --> 0:10:39.880 if equities perhaps have borrowed from the future, Are you 0:10:40.080 --> 0:10:44.040 going more into bitcoin? No? I don't know the only 0:10:44.040 --> 0:10:47.000 bitcoin I owned. Let me just say this on n 0:10:47.080 --> 0:10:50.560 f T bitcoin stuff like that you talked to somebody else, 0:10:50.600 --> 0:10:55.200 because I tell people that I turned seventy eight a 0:10:55.200 --> 0:10:58.360 week ago, and basically I'm too old. I don't understand 0:10:58.400 --> 0:11:01.040 that stuff. It's crazy to me. It makes no sense. 0:11:01.320 --> 0:11:03.120 I own a little bit of goal, but compared to 0:11:03.120 --> 0:11:06.800 my net worth, I owned very little. Basically, I'm basically 0:11:06.880 --> 0:11:09.079 a stock you know, a meat and potatoes guy. I'm 0:11:09.080 --> 0:11:12.040 a stock guy. Stocks make more sense than anything else 0:11:12.280 --> 0:11:15.680 because of FED policy. But when the FED policy changes, 0:11:16.120 --> 0:11:18.000 I think the market is going to have a response 0:11:18.040 --> 0:11:19.839 to that. So when you say though that you've got 0:11:19.840 --> 0:11:22.760 your eye on the exit. What is your eye? How 0:11:22.800 --> 0:11:24.760 are you going to exit? What does that mean? Does 0:11:24.760 --> 0:11:27.719 it mean more cash? Yeah? I would say, Look in 0:11:27.800 --> 0:11:31.200 the bear market, the winner is he who loses least winds. 0:11:31.920 --> 0:11:34.040 So you know, when the market goes down, I'm gonna 0:11:34.040 --> 0:11:37.520 lose money. I'll be worthless. I understand that every asset 0:11:37.559 --> 0:11:41.400 has been inflated by monetary policy, every asset, whether it's 0:11:41.440 --> 0:11:46.520 real estate, et cetera. You know, stocks, bonds, for sure. 0:11:46.920 --> 0:11:49.600 I think the bubble is not so much the stock market. 0:11:49.600 --> 0:11:52.240 The bubble, I think is the bondom market. And I 0:11:52.280 --> 0:11:54.400 would say this event it turns out to be wrong. 0:11:54.520 --> 0:11:56.400 You know, I've had a negative of bonds for for 0:11:56.480 --> 0:11:58.800 quite a long time. If the view turns out to 0:11:58.840 --> 0:12:02.000 be wrong and interest rates belong where they are, you 0:12:02.080 --> 0:12:04.600 don't make double digit returns in the stock market. I 0:12:04.600 --> 0:12:07.160 believe in the capital market line where you're earning a 0:12:07.240 --> 0:12:09.720 bond has relevancy for what you should earn the stock market. 0:12:09.960 --> 0:12:12.280 So bonds belong to one a half percent, you probably 0:12:12.280 --> 0:12:14.320 earned four or five percent a year in the stock market. 0:12:14.800 --> 0:12:18.280 But what I'm looking at for the exit or traditional things, 0:12:18.520 --> 0:12:21.200 I'm looking for change and fed speak. I'm looking for 0:12:21.320 --> 0:12:25.719 change in the posture of the Fed. I'm looking for uh, inflation, 0:12:26.040 --> 0:12:29.120 I'm looking at gold I'm looking at the overall economic activity. 0:12:29.360 --> 0:12:31.200 Let me say this, if I had to give you 0:12:31.240 --> 0:12:33.880 a list of positive and negatives, I'm more impressed by 0:12:33.880 --> 0:12:37.240 the negatives. Long ago at Golden Secs Asset Management, Leon 0:12:37.360 --> 0:12:40.440 Cooperman sat there and said, you've gotta be kidding me. 0:12:40.520 --> 0:12:43.400 We don't own enough Apple. Leon Cooperman, I want you 0:12:43.440 --> 0:12:45.720 to talk about what Michael Mobison, one of the great 0:12:45.760 --> 0:12:48.640 thinkers on Wall Street, a credit Sueez and leg Mason, 0:12:48.679 --> 0:12:52.840 has always said, is we're gonna see this massive concentration 0:12:53.400 --> 0:12:58.719 of digital success stories. Can I be overweighted Apple or Amazon? 0:12:58.920 --> 0:13:01.559 Are they so much the fabric of this nation that 0:13:02.040 --> 0:13:05.600 you've got to own them? Well? I own them. Uh. 0:13:05.760 --> 0:13:08.959 They're not cheap stocks, but they're not expensive stocks. Nothing 0:13:09.040 --> 0:13:12.000 is expensive if interest rates that stay here. I went 0:13:12.080 --> 0:13:13.880 back by the way and I look at the nifty 0:13:13.920 --> 0:13:18.360 fifty nineteen seventy two. In nineteen seventy two, when JP 0:13:18.520 --> 0:13:21.600 morgan Us Trust was ruling the roost, they had the 0:13:21.600 --> 0:13:24.640 philosophy only the right stock at any price. They don't 0:13:24.640 --> 0:13:27.280 care what evaluation they've paid as long as they were 0:13:27.320 --> 0:13:31.880 world class growth companies. Avon sixty five times earnings, Polaroid 0:13:32.000 --> 0:13:35.680 ninety times earnings, SiZ Roebucks thirty five times earnings, so 0:13:35.840 --> 0:13:38.640 and so forth. The Tenua US government in nineteen seventy 0:13:38.640 --> 0:13:41.000 two or six and a half percent, the Tenua governors 0:13:41.040 --> 0:13:43.880 now one sixty Google thirty three times earnings is not 0:13:43.920 --> 0:13:48.120 an expensive stock. This is but the card of the matter, 0:13:48.240 --> 0:13:51.400 Leon Cooperman, and you are what I would call intellectually 0:13:51.440 --> 0:13:56.120 extremely constructive in your caution. You know that the financial 0:13:56.200 --> 0:14:00.040 media is overwhelmed by the gloom crew every Friday to 0:14:00.160 --> 0:14:02.280 come out the world's coming to an end. And to 0:14:02.400 --> 0:14:06.240 their point, they're trying to avoid a polaroid or an 0:14:06.280 --> 0:14:10.680 Eastman Kodak. How do you sidestep the polaroids that won't 0:14:10.760 --> 0:14:15.240 make it? Well, that's the function of your discipline and 0:14:15.280 --> 0:14:18.600 your approach. I look at the stock market. I see 0:14:18.600 --> 0:14:21.280 three stock market. I don't see one stock market. The 0:14:21.320 --> 0:14:25.240 first stock market I see is the Fang market. And uh, 0:14:25.320 --> 0:14:29.200 you know, the market has been extraordinarily disciplined, I might add. 0:14:29.720 --> 0:14:33.040 You know, for somebody that's cautious like I am, I 0:14:33.120 --> 0:14:35.400 have to say I'm impressed by the market action. Who's 0:14:35.440 --> 0:14:39.280 the big correction has come in the so called fangs 0:14:39.320 --> 0:14:42.720 that have no earnings, very little in the way of revenues, 0:14:42.760 --> 0:14:49.160 and they have their long on promise things like Amazon, Facebook, Microsoft, Google. 0:14:49.600 --> 0:14:52.560 They've held in very well. And then that expensive against 0:14:52.600 --> 0:14:57.640 interest rates. Okay, the secondary so they're nifty fifty today, 0:14:57.760 --> 0:14:59.640 there'll be a high failure rate, Like there was a 0:14:59.720 --> 0:15:02.440 high failure rate in nineteen seventy two. But what ended 0:15:02.480 --> 0:15:05.640 in fifty fifty nineteen seventy two was a tenfold increase 0:15:05.680 --> 0:15:08.360 in the price of oil led to a global recession. 0:15:08.840 --> 0:15:11.120 You know, we need a recession or we need to 0:15:11.240 --> 0:15:14.400 change and FED policy to change the attitude. Until we 0:15:14.480 --> 0:15:17.120 have that, the market will play. Well. That's not gonna 0:15:17.120 --> 0:15:18.800 happen for a number of years. Maybe we're talking about 0:15:18.800 --> 0:15:22.280 an interest I don't know. I don't know what's gonna happen. Uh, 0:15:22.320 --> 0:15:24.000 that's what the FED tells you. But I think that 0:15:24.120 --> 0:15:27.720 Mr Powell, I think he's doing a disservice frankly when 0:15:27.760 --> 0:15:29.960 he says the market is not expensive because of your 0:15:29.960 --> 0:15:33.360 interest rates are If interest rates are, we belong where 0:15:33.360 --> 0:15:36.200 they are. You don't make big returns in the stock market. 0:15:36.360 --> 0:15:40.080 You basically, you know, the world's turned upside down. Okay, 0:15:40.280 --> 0:15:42.680 So what I was saying before. The long term issues 0:15:42.720 --> 0:15:44.760 to me are number one, we're clearly barring from the 0:15:44.800 --> 0:15:49.840 future the economy growing. Six, Real interest rates shouldn't be 0:15:49.840 --> 0:15:51.840 where they are, and we should not be injecting so 0:15:51.920 --> 0:15:54.760 much fiscal stimuluts into the economy. Whe the economy is 0:15:54.840 --> 0:15:58.400 growing off the charts. Okay. Secondly, we have a government 0:15:58.480 --> 0:16:00.680 charge and I voted for Mr Buy because I thought 0:16:00.680 --> 0:16:02.720 we need to change. Uh, you know, I voted. My 0:16:02.800 --> 0:16:04.640 value is not my pocket book. But the truth is, 0:16:05.080 --> 0:16:06.640 if you look over the next twelve months, we have 0:16:06.680 --> 0:16:10.600 more inflation, higher interest rates, you know, and higher taxes. 0:16:11.000 --> 0:16:15.360 Not particularly bullish. Third, poem makers do we have a 0:16:15.400 --> 0:16:18.280 massive growth in debt. This nation was found in two 0:16:18.480 --> 0:16:20.960 five years ago. We had no national debt. Three years 0:16:21.000 --> 0:16:23.320 ago we had twenty trillion dollars and national debt and 0:16:23.320 --> 0:16:25.320 that's going up at the rate of like three trillion 0:16:25.320 --> 0:16:27.760 dollars a year, and that that has to be serviced, 0:16:27.760 --> 0:16:30.280 and it's going to reduce the long term growth potentially. 0:16:30.400 --> 0:16:32.520 Suddenly I hear all these concerns and you're going through 0:16:32.560 --> 0:16:34.760 them point by point, and I think it resonates with 0:16:34.800 --> 0:16:36.840 a lot of our audience. But this falls into the 0:16:36.840 --> 0:16:38.600 should shouldn't debate a lot of the time. This is 0:16:38.600 --> 0:16:40.680 what they should do, it's what they shouldn't do. It's 0:16:40.680 --> 0:16:42.960 what they've done. And we've got to accept that, nat Lee. 0:16:43.040 --> 0:16:44.680 And you've gotta put money to work, as you always do. 0:16:44.720 --> 0:16:47.080 So the question I've got for you, it's one, are 0:16:47.080 --> 0:16:49.680 the signposts you're looking for ultimately to get you to 0:16:49.800 --> 0:16:52.480 d risk if you're fully invested now and here's a 0:16:52.520 --> 0:16:54.680 whole long list of things you worried about. What are 0:16:54.680 --> 0:16:57.480 the signposts you're actually looking for to materialize that actually 0:16:57.560 --> 0:16:59.200 leads you to d risk to take some money off 0:16:59.240 --> 0:17:04.639 the table. I I'm listening to FED speak. Uh you 0:17:04.720 --> 0:17:07.840 know see how they when they change, you start to change. 0:17:08.240 --> 0:17:10.120 I look at the stock market, and the stock marks 0:17:10.119 --> 0:17:13.159 a high quality, leading indicator. You know, there's no indication. 0:17:13.400 --> 0:17:15.480 I mean, the market has been very disciplined in its action. 0:17:15.840 --> 0:17:17.679 I'm looking at the price of gold, which has been 0:17:17.760 --> 0:17:20.879 undermined by bitcoin. I'm looking at inflation. I'm looking at 0:17:20.920 --> 0:17:23.920 economic growth. Lean you mentioned earlier, you're looking at the 0:17:23.960 --> 0:17:26.760 Apple is one of the stocks you own. Cast writes 0:17:26.800 --> 0:17:29.880 in he's listening down in Florida. Good morning, Mr Cass, 0:17:29.920 --> 0:17:34.880 and he wants to talk about the post pandemic softness 0:17:34.920 --> 0:17:37.800 that we will see an Apple in Amazon and the others. 0:17:38.040 --> 0:17:41.679 Are you adjusting for an Apple that stumbles after the 0:17:41.720 --> 0:17:45.160 pandemics over, I have no credentials in Apple. I sold 0:17:45.200 --> 0:17:47.679 Apple much lower. I had a nice profit. I got 0:17:47.720 --> 0:17:53.040 out much too early. I do own uh you know, Microsoft. 0:17:53.080 --> 0:17:55.600 I do own Google. I do own some Facebook, I 0:17:55.600 --> 0:17:58.520 do own some Amazon. But I would say this another 0:17:58.560 --> 0:18:01.320 point on the cautious side for my days back as 0:18:01.359 --> 0:18:04.879 a strategist at Goldman, I recall that the stock market 0:18:04.960 --> 0:18:07.639 normally peaks in line with the peak rate of change 0:18:07.640 --> 0:18:10.359 in corporate profits. That's the second quarter. In the June 0:18:10.680 --> 0:18:14.160 profits this quarter will be up fifty. For the third 0:18:14.240 --> 0:18:15.960 quarter and fourth quarre will be up much less. They'll 0:18:15.960 --> 0:18:18.800 be up up much less. So I'm watching a lot 0:18:18.880 --> 0:18:21.600 of a host of indicators as to when they get out, 0:18:21.960 --> 0:18:25.760 and I'm prepared to lose money because frankly, in bear markets, 0:18:26.040 --> 0:18:27.720 the winner is he will lose his lease. I'm not 0:18:27.760 --> 0:18:30.200 a big short seller. I believe in the long term 0:18:30.200 --> 0:18:32.719 outlook for what I own. I own a theene at 0:18:32.760 --> 0:18:35.000 seven point six times earnings. I owned Signal twelve and 0:18:35.000 --> 0:18:37.240 a half times earnings. I owned Mr Cooper at five 0:18:37.320 --> 0:18:41.320 times earnings. I own Google nine times earnings. So bad. 0:18:41.480 --> 0:18:44.720 I own Navigant four and a half times earnings. You know, 0:18:44.760 --> 0:18:47.199 I'm a great believe in the capitalistic system. You know, 0:18:48.440 --> 0:18:52.159 when companies earn access returns, it attracts capacity and capital 0:18:52.240 --> 0:18:55.080 and kills returns. The energy industry is the best example. 0:18:55.359 --> 0:18:58.240 I came in to this year overweighted energy and everybody 0:18:58.280 --> 0:19:00.760 hated it was three percent the SMP. You've crushed it, 0:19:01.000 --> 0:19:02.800 and you absolutely crushed it leon when it came to 0:19:02.920 --> 0:19:06.280 energy stocks, just real quick here there. You're talking about 0:19:06.320 --> 0:19:09.040 the fundamentals, and yet today we see that a downside 0:19:09.040 --> 0:19:12.720 surprise was met with buying action. Has a dovish fed 0:19:12.960 --> 0:19:17.119 become more important to stock valuations than fundamental growth in 0:19:17.160 --> 0:19:22.639 the economy. I think that the market structure has been destroyed. 0:19:23.119 --> 0:19:25.520 And I say that for a few reasons. When I 0:19:25.600 --> 0:19:29.119 came to Wall Street fifty odd years ago, the commissions 0:19:29.119 --> 0:19:32.679 with fifty cents of share and the vocal rule didn't exist. 0:19:33.119 --> 0:19:35.480 So the Bob Monutions of the world, the Stanley Shop 0:19:35.520 --> 0:19:37.959 corns of the world made markets. They carried inventory, they 0:19:38.000 --> 0:19:40.040 took risk. You can't do that in the more business 0:19:40.080 --> 0:19:42.960 commissions any zero and there's no vigorous and there's no 0:19:43.160 --> 0:19:47.159 there's no reward for risk taking. So the brokerage industry 0:19:47.160 --> 0:19:51.199 don't stabilize anymore. Secondly, eight percent of the vibe used 0:19:51.240 --> 0:19:53.399 to be done in the New York Stock Exchange of 0:19:53.400 --> 0:19:55.679 the volume today has done off board and dock polls. 0:19:55.920 --> 0:19:58.800 So the special as system doesn't stabilize. And Thirdly, for 0:19:58.840 --> 0:20:01.239 some unexplained reason, and I've written to the SEC, they 0:20:01.280 --> 0:20:06.160 ignored me, and like my wife basically really I told them, 0:20:06.400 --> 0:20:09.680 you know, in ninety eight they enacted the uptick rule 0:20:09.760 --> 0:20:12.080 to deal with abuses of the twenty nine. It have 0:20:12.160 --> 0:20:15.000 worked effectively for seventy years. Then in two thousand and 0:20:15.080 --> 0:20:17.440 seven they elimited the uptick rule, and they gave rise 0:20:17.480 --> 0:20:19.760 to a lot of these quantitative trading systems which know 0:20:19.960 --> 0:20:22.680 nothing about value. They know everything about price. So they 0:20:22.720 --> 0:20:25.680 buy strength, they sell weakness. And when this market has 0:20:25.680 --> 0:20:27.359 a reason to go down right now, it does not 0:20:27.440 --> 0:20:29.560 have a good reason to go down. When this market 0:20:29.560 --> 0:20:31.080 has a reason to go down, to go down so 0:20:31.119 --> 0:20:33.720 fast your head's gonna spend and then you're gonna be 0:20:33.720 --> 0:20:35.520 on the following daily so we can talk about it. 0:20:35.560 --> 0:20:36.880