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Speaker 1: Let's get to our guest, Chuck Cumello, president and CEO

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Speaker 1: at Essex Financial Services. Chuck, you may have seen the

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Speaker 1: comments from the former New York Fed President William Dudley.

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Speaker 1: He told Bloomberg that optimistic markets could only make this

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Speaker 1: central bank tighten even more. So I have a question

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Speaker 1: for you or those comments. Does the stock market cause inflation?

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Speaker 1: You know, when you have an illness, you don't cure

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Speaker 1: the symptoms. You cure the disease. And and markets are

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Speaker 1: kind of the symptoms of people's gauging of how the

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Speaker 1: Fed is dealing with inflation. It's inflation that's the disease, right,

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Speaker 1: not the markets. Does that make sense? It does? It's

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Speaker 1: thank you so much for having me. Yeah. Look, so

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Speaker 1: I do not think the market causes inflation. I think

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Speaker 1: the market and access returns, especially in such a low

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Speaker 1: slash free money environment, led to what we're dealing with

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Speaker 1: right now, and throw in you know, the government literally

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Speaker 1: you know, throwing money at people. Um. But the market

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Speaker 1: is always sort of a symptom of where or an

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Speaker 1: indicator where the economy is, where the some of the

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Speaker 1: average person thinks and feels, and you know, when that's

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Speaker 1: euphoric um, if you have people sort of spending and

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Speaker 1: the old the old example of the roaring twenty type environment.

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Speaker 1: And but no, I did not think the stock part

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Speaker 1: causes inflation. I think Nolton Freeman said it best. Your

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Speaker 1: inflation is always a monetary phenomenon. Thank you wise words

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Speaker 1: of course, yes, not tooler to autology anyway, Chuck, what

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Speaker 1: about the whole notion here? Also that you know, if

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Speaker 1: you go looking for trouble and statistics, you're going to

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Speaker 1: find it somewhere or the other. At the point being

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Speaker 1: that you know, depending on Bryan and I interview so

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Speaker 1: many people that depending where you're coming from, you you

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Speaker 1: know and what you believe, and you find something to

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Speaker 1: back it up. Now you know, you may be looking at,

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Speaker 1: you know, some very strange high frequency data which really

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Speaker 1: readforces your point. Another person might actually pooh pooh that.

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Speaker 1: How do you look at data yourself, Chuck? And what

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Speaker 1: are you seeing? Yeah, that's that's a great point. I mean,

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Speaker 1: you can always find something to but stress any particular

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Speaker 1: argument you're looking to make, especially nowadays. But I think

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Speaker 1: we're the best advisors And where I would certainly think

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Speaker 1: our firm does well by our clients is trying to

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Speaker 1: cut through the noise, right, I mean, it's it's always

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Speaker 1: noisiest at the extremes, and and that's where all the

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Speaker 1: attention gets. It's dull and boring towards the middle, but

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Speaker 1: that's where most people are, and I think that's what

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Speaker 1: the type of advice they want to hear from a

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Speaker 1: trusted advisor. So it's really trying to be objective and

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Speaker 1: focus on the things that drives the market, and what

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Speaker 1: are the most important things driving the market historically always earnings,

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Speaker 1: interest rates, and obviously geopolitical events and things going on

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Speaker 1: in the world. But I think if we can try

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Speaker 1: to navigate those and give our best estimates of what

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Speaker 1: we think is going to happen, how we can position

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Speaker 1: client portfolios for those things, then at least you're in

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Speaker 1: the right ballpark. You know, nobody's a magician, nobody can

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Speaker 1: foretell the future, none of us can time the market.

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Speaker 1: It's just a matter of trying to gauge what is

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Speaker 1: out there, cut through the noise, cut through quite usi

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Speaker 1: the hype that that's out there, and trying to try

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Speaker 1: to boil it down to the things that we can

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Speaker 1: then explain to our clients that helps them navigate and

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Speaker 1: especially this year, an extremely challenging year where literally nothing

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Speaker 1: is working, and so that that really is where a

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Speaker 1: true financial professional earns is her money. We understand the

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Speaker 1: FEDS predicament, it's really trying to figure out, you know,

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Speaker 1: what is the cause of of wages being as as

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Speaker 1: high and moving up as much as they have. They've

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Speaker 1: been going up now for the past eighteen months. So

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Speaker 1: my question for you is the same one that they're

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Speaker 1: wrestling with. Is it a one time bump because of

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Speaker 1: the pandemic or is there some kind of structural thing

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Speaker 1: that suggests a feedback loop, which means you're going to

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Speaker 1: have prices and wages driving each other up and then

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Speaker 1: you've got a real problem. You do listen, and I

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Speaker 1: think that the wage side of this is the biggest

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Speaker 1: issue right now. I mean goods, commodities. You're starting to

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Speaker 1: see that kind of stuff roll over it and you're

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Speaker 1: seeing in the CPI data, But the wage inflation is

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Speaker 1: the big challenge. And look, it's sticky and it's you know,

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Speaker 1: there would the average hourly earnings month over months are

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Speaker 1: up across every industry. But I think one of the

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Speaker 1: really just confounding things is that the labor force participation

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Speaker 1: rate is still is below pre COVID levels and actually

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Speaker 1: dropped in November, meaning there are less people looking for work,

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Speaker 1: less people in the workforce, which again puts upward pressure

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Speaker 1: on wages, whether that's hiring new people or increasing the

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Speaker 1: compensation of the people that you most certainly don't want

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Speaker 1: to lose. Um And and I wish I had the

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Speaker 1: answer from where these folks are. But the U S

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Speaker 1: consumers critical to the U S economy two thirds two

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Speaker 1: thirds being of their actions driving in the U S economy.

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Speaker 1: And there are cracks there. Your credit card debt is

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Speaker 1: back above pre pre COVID levels, and the savings rate,

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Speaker 1: the U S savings rate for the average consumer is

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Speaker 1: at the lowest point at two point one per in

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Speaker 1: and that goes back to July of two thousand and five.

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Speaker 1: Right now, in October we were at two point three percent.

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Speaker 1: So there are cracks there. Um And and it is

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Speaker 1: concerning what are you recommending, what are you buying, what

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Speaker 1: are you're staying clear of? Well, so I think what

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Speaker 1: I'm not sure I'm gonna be bringing any new ground here,

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Speaker 1: but I think you know, technology and any type of

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Speaker 1: company that needs external funding, and it is not going

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Speaker 1: to be profitable till God knows when. Is something that

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Speaker 1: I think you have to be very very careful of

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Speaker 1: where we are spending times this and I think we're

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Speaker 1: with where rates are. Some fixed income is becoming pretty interesting,

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Speaker 1: especially in the municipal market. On the equity side, I've

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Speaker 1: mentioned this before. You know, strong free cash flow, strong

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Speaker 1: balance sheet. UM. You know, dividend dividend growers, the dividend

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Speaker 1: aristocrat type stocks. UM. You know that type of dividend

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Speaker 1: yield of two three four percent when you can get

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Speaker 1: it really helps offset. UM. You know the sell up

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Speaker 1: we're having in this market to some extent, and at

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Speaker 1: this kind of market, the fact the factor that dividends

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Speaker 1: play in long term total return of an equity portfolio

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Speaker 1: or huge. Yeah. I don't know how you know, though,

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Speaker 1: that the dividends won't get cut unless you really know

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Speaker 1: the management. I suppose you look at the history and

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Speaker 1: and the kind of culture of the company. That's that's

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Speaker 1: very important. Look, we don't have all that much time left, Chuck,

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Speaker 1: Let's pivot quickly to Asia. Anything that you like at

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Speaker 1: the moment, either in China, Hong Kong or somewhere else

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Speaker 1: in this region, well, you know, not particularly. I mean,

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Speaker 1: I think, you know, China is going to be going

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Speaker 1: through a heck of a time in my opinion, but

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Speaker 1: for the next few weeks, you know, the month or

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Speaker 1: two as they open up, and you know, people forgive

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Speaker 1: me and that that even their elderly population is not

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Speaker 1: vaccinated to the extent anywhere near the extent of the

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Speaker 1: United States or where Europe or other places in the world. So,

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Speaker 1: you know, I think the intent there is solid um,

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Speaker 1: you know, but I think you're looking at some pretty

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Speaker 1: scary times there. And at this point, I think there's

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Speaker 1: a lot other more compelling opportunities for the average investor,

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Speaker 1: you know, institutional money, things of that nature. And sure,

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Speaker 1: but for the average investor in the United States, you know,

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Speaker 1: I would would maybe rather buy Murk or Johnson, the

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Speaker 1: Johnson before I'd be going and looking overseas. Frankly, bonds

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Speaker 1: still weather punt, the short energy bonds, sovereign buns. Uh yeah,

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Speaker 1: I mean, certainly in fixed income we we are looking

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Speaker 1: because if you think about where we are right eventually,

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Speaker 1: we don't know when when the FED eventually does cut rates.

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Speaker 1: If you're a little bit further out of the curve

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Speaker 1: and you're a little further in narration. You're going to

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Speaker 1: reap the benefit of that, rather than staying short, which

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Speaker 1: is very very overbought. UM and municipals in particular, I

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Speaker 1: think to provide a pretty compelling value. Yeah, excellent, Chuck,

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Speaker 1: Thank you very much for joining us. We always enjoy

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Speaker 1: having you on the program. Chuck Camello, President CEO at

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Speaker 1: Essex Financial Services,