WEBVTT - Melt-Up Time? 0:00:13.760 --> 0:00:17.439 Hello, and welcome to What Goes Up, a weekly markets podcast. 0:00:17.560 --> 0:00:20.360 My name is Mike Reagan, I'm a senior editor at Bloomberg, 0:00:21.040 --> 0:00:24.160 and I'm vil Donna hick Cross ASID report at Bloomberg. 0:00:24.720 --> 0:00:27.080 And this week on the show, Well, the good news 0:00:27.160 --> 0:00:30.280 is the SMP five hundred is trading near record highs again. 0:00:30.680 --> 0:00:33.760 But the bad news, well, there's some clouds gathering on 0:00:33.800 --> 0:00:37.000 the horizon. US economic growth came in lower than expected 0:00:37.040 --> 0:00:40.080 at two percent for the third quarter, and the inflation 0:00:40.159 --> 0:00:43.600 fueling supply chain bottlenecks don't seem to be easing any 0:00:43.720 --> 0:00:47.720 time soon. Meanwhile, the Federal Reserve appears poised to finally 0:00:47.760 --> 0:00:52.040 announce plants to taper its asset purchases next week. So 0:00:52.080 --> 0:00:54.920 it's this rally on borrow time. We'll get into it 0:00:55.000 --> 0:00:58.400 with a veteran fund manager. But well, donta first, I 0:00:58.440 --> 0:01:00.440 need to issue I don't know if you would call 0:01:00.480 --> 0:01:05.600 it a correction or retraction to last week's podcast. Remember 0:01:05.640 --> 0:01:08.520 we were talking about how our friend Sarah has cooled 0:01:08.600 --> 0:01:12.399 seats in her car down in Florida. Yeah, of course, 0:01:12.440 --> 0:01:16.240 I remember. It's like the coolest thing I've never heard of. 0:01:16.280 --> 0:01:18.080 Such a thing I thought, is the coolest thing in 0:01:18.080 --> 0:01:20.759 the world. Anyway. I'm at my kids field hockey game 0:01:20.800 --> 0:01:23.240 the other night and a friend who's an avid listener 0:01:23.240 --> 0:01:26.800 of the show, shout out to John Midler comes up 0:01:26.840 --> 0:01:28.880 and he says, I can't believe you've never heard of 0:01:29.000 --> 0:01:31.640 cold seats. I've got to pick up truck that's eleven 0:01:31.680 --> 0:01:33.760 years old. It's got cold seats in them. And I'm like, 0:01:33.840 --> 0:01:38.000 what right, And then it gets worse, and then my 0:01:38.040 --> 0:01:42.280 wife goes, you, dummy, Our cheap Cherokee has cooled seats 0:01:42.280 --> 0:01:46.840 in them. I had no idea. What apologies to listeners, 0:01:46.840 --> 0:01:50.160 just the first ever retraction. Can I say that that 0:01:50.240 --> 0:01:55.640 makes you supremely fancy? As fancy as Sarah. That's pretty fancy. Yeah, 0:01:56.360 --> 0:01:59.240 I'm not quite as fancy as Sarah. You took a 0:01:59.240 --> 0:02:02.400 big step towards it. Well. I know that our guest 0:02:02.440 --> 0:02:04.560 comes from a really cold area of the country, so 0:02:04.600 --> 0:02:07.160 I don't know if he has cool cooling seats. We'll 0:02:07.200 --> 0:02:09.400 find out. But I want to bring in Doug Ramsey. 0:02:09.480 --> 0:02:12.720 He's the chief investment officer and co manager of the 0:02:12.960 --> 0:02:17.640 looth Oled Core Fund. Doug, Welcome to the show. Thanks 0:02:17.680 --> 0:02:19.640 so much, it's great to be on you know as 0:02:19.680 --> 0:02:24.720 a longtime fund manager, and is especially in our space, 0:02:24.840 --> 0:02:28.080 which is tactical asset management. It's been a hot seat 0:02:28.160 --> 0:02:30.840 here for a while, and I don't know when it 0:02:30.919 --> 0:02:33.760 was ever cool. That's a that's a really good transition, 0:02:34.440 --> 0:02:36.600 you know. We we tend to do well during more 0:02:36.639 --> 0:02:40.280 difficult markets. Uh, so it was a cool seat for 0:02:40.320 --> 0:02:45.000 about twenty five days in March of but then back 0:02:45.040 --> 0:02:49.040 off to the races and uh, yeah, the seat feels 0:02:49.040 --> 0:02:53.280 pretty hot from the perspective of I guess those who 0:02:53.760 --> 0:02:58.760 who own US equities. But we're faring pretty well within 0:02:58.800 --> 0:03:01.760 our tactical peer group, which is I mean that pier 0:03:01.840 --> 0:03:05.520 group has been under pressure, as you might imagine, for 0:03:05.560 --> 0:03:09.080 a long period here with you know what, what you 0:03:09.120 --> 0:03:12.760 could almost argue is now a twelve and a half 0:03:12.840 --> 0:03:16.239 year bull market rather than a one and a half 0:03:16.320 --> 0:03:19.320 year bull market, depending on how you score things at home, 0:03:20.720 --> 0:03:23.080 you know, talk as you put out, talk about a 0:03:23.080 --> 0:03:26.160 hot stock market again. Uh, we're talking before the show, 0:03:26.320 --> 0:03:30.760 and you use the word that I think always raises eyebrows, Uh, 0:03:31.120 --> 0:03:33.240 melt up. You think we're we're kind of been a 0:03:33.280 --> 0:03:36.680 melt up right now. Um, And obviously that makes you 0:03:36.800 --> 0:03:39.960 wonder if a meltdown is in the cards too. But 0:03:39.960 --> 0:03:42.560 but explain how why you're thinking that and sort of 0:03:42.560 --> 0:03:46.120 what what are the what's the evidence of a melt 0:03:46.120 --> 0:03:48.720 top in most cases, and why do you think we're 0:03:48.760 --> 0:03:52.320 having one now? Well, it's just got that feel to it. 0:03:52.320 --> 0:03:54.960 It's sort of the the time of the year here 0:03:54.960 --> 0:04:01.760 where seasonality turns positive. Uh. And you know, despite this, uh, 0:04:01.840 --> 0:04:06.480 this resurrection of the Nasdaq stocks, I mean, this thing 0:04:06.760 --> 0:04:09.680 is is still very broad. I mean, we wrote, you know, 0:04:09.760 --> 0:04:13.360 throughout the summer and early fall about just some you know, 0:04:13.400 --> 0:04:15.960 anomalies that we were seeing in terms of the market 0:04:16.000 --> 0:04:18.880 breadth data. You know, we're still seeing some of those. 0:04:19.279 --> 0:04:22.280 But it's really hard to argue that the market has 0:04:22.400 --> 0:04:27.280 narrowed when you've got New York Stock Exchange breadth at 0:04:27.279 --> 0:04:31.320 a new all time high as recently as Tuesday October, 0:04:33.040 --> 0:04:37.160 when you had the value line arithmetic composite, which is 0:04:37.320 --> 0:04:40.520 an equal weighted index of about stocks that made an 0:04:40.520 --> 0:04:43.640 all time high on the same day after having been 0:04:43.800 --> 0:04:47.880 rangebound for a lot of months. So it is very broad. 0:04:48.000 --> 0:04:51.039 And then it's just its ability to just shrug off 0:04:51.640 --> 0:04:57.599 this looming tapering, which we would construe as tightening. As 0:04:57.600 --> 0:05:03.880 we did in h and then uh, you know, the 0:05:04.080 --> 0:05:07.720 likelihood that we're going to see elevated inflation numbers well 0:05:07.760 --> 0:05:14.080 into two. I mean we've moved from the transitory narrative. 0:05:15.000 --> 0:05:20.279 You know, the definition of transitory has been warped. Uh. 0:05:20.279 --> 0:05:22.920 And and now we're almost beyond that to where it's 0:05:22.960 --> 0:05:27.280 accepted that we're going to have elevated inflation for a while. 0:05:27.640 --> 0:05:31.200 And now, um, and remember a lot of times the 0:05:31.240 --> 0:05:35.240 market narrative morphs to fit the price action. Well, now, 0:05:35.279 --> 0:05:38.800 because the market has been so strong coming off of 0:05:38.880 --> 0:05:43.160 early October lows, the new narrative is well yet inflation 0:05:43.240 --> 0:05:47.080 is going to be elevated, but it's gonna lift earnings 0:05:47.600 --> 0:05:52.599 and will not impact PE multiples. So it's been interesting 0:05:52.640 --> 0:05:55.560 to watch that narrative on inflation evolved over the last 0:05:55.560 --> 0:05:58.520 six or seven months. So do if we can take 0:05:58.560 --> 0:06:02.159 a really big step back. I noticed in a recent 0:06:02.200 --> 0:06:04.760 note of yours you had said, Um, there's plenty of 0:06:04.760 --> 0:06:08.120 fundamental misgivings about this market, but the shorter term work 0:06:08.200 --> 0:06:12.559 still cautions against hedging two aggressively. And so I'm wondering 0:06:12.640 --> 0:06:14.279 what you mean by that, and if that's a really 0:06:14.279 --> 0:06:18.040 good way to characterize what's going on right now, meaning 0:06:18.080 --> 0:06:24.039 people are worried, but that they're staying invested. Well. Part 0:06:24.080 --> 0:06:29.919 of our concern in the shorter term, I mean in 0:06:30.040 --> 0:06:35.680 terms of, you know, trying to to hedge against this market. 0:06:35.680 --> 0:06:38.760 As you know, as I mentioned earlier, this this move 0:06:38.920 --> 0:06:43.320 is very broad. Again, You've got so many bellweathers breaking 0:06:43.320 --> 0:06:48.039 out two new highs. The Dow Transports, which were lagging 0:06:48.160 --> 0:06:51.000 for much of the year, are on the verge of 0:06:51.040 --> 0:06:53.560 breaking out to a new all time high. I mentioned 0:06:53.600 --> 0:06:58.440 this measure of stocks equal weighted at a new high, 0:06:58.480 --> 0:07:01.080 New York Stock Exchange breath at a new high. It's 0:07:01.080 --> 0:07:03.279 just it would be very rare for the market to 0:07:03.279 --> 0:07:06.960 put in a major top. I mean, regardless of how 0:07:07.000 --> 0:07:11.520 expensive it might be, and regardless of how the FED 0:07:11.600 --> 0:07:16.040 may be moving into the less accombinative mode. Just history 0:07:16.080 --> 0:07:19.480 shows that generally there is some sort of narrowing that 0:07:19.600 --> 0:07:24.160 happens before you reach a definitive top in the market. 0:07:24.200 --> 0:07:28.600 And that's why while we're we're cautious in terms certainly 0:07:28.600 --> 0:07:31.080 in terms of evaluations and what the FED is likely 0:07:31.160 --> 0:07:34.720 to do now here over the next several months, the 0:07:34.800 --> 0:07:38.080 market probably deserves the benefit of the doubt because of 0:07:38.360 --> 0:07:42.840 its very strong internal momentum. You know, Doug, I want 0:07:42.880 --> 0:07:47.120 to get unpack a little bit. Uh, that notion of 0:07:47.680 --> 0:07:52.040 inflation and valuations. You know, as you put out historically, 0:07:52.080 --> 0:07:58.200 you always think of higher inflation really depressing stock stock 0:07:58.240 --> 0:08:01.720 market multiples. UM. I always think back of that rule 0:08:01.720 --> 0:08:03.600 of twenty I think it was Peter Lynch who who 0:08:03.600 --> 0:08:06.320 came up with that, where you know, the market wide 0:08:06.320 --> 0:08:09.120 p plus the rate of inflation should equal about twenty 0:08:09.160 --> 0:08:12.400 two to be a fairly valued market. Well, well here 0:08:12.440 --> 0:08:15.360 we've got peas way about twenty on a forward and 0:08:15.480 --> 0:08:20.960 trailing basis, inflation like we've never seen before. Um. Is 0:08:20.960 --> 0:08:24.560 it inevitable to to sort of see that valuation uh 0:08:25.200 --> 0:08:28.000 come back down? Or is this is there a case 0:08:28.040 --> 0:08:29.680 to be made at this time? Is different? You know, 0:08:29.720 --> 0:08:32.560 the regular listeners of the show will sort of think 0:08:32.559 --> 0:08:34.560 I'm a broken record on this. But I keep thinking 0:08:34.559 --> 0:08:37.439 of of all the cash that's just sitting around. How 0:08:37.480 --> 0:08:42.240 the savings, the consumer savings rate blew out during the pandemic. Uh, 0:08:42.480 --> 0:08:47.320 corporations cash levels are really high. UH, money market funds 0:08:47.320 --> 0:08:50.880 are are really high. Back balance sheets are really high. 0:08:51.120 --> 0:08:53.360 Is there just enough kind of dry powder on the 0:08:53.440 --> 0:08:57.560 side sidelines to to sort of break that historical relationship 0:08:57.800 --> 0:09:01.920 between inflation in multi suppolser is that something you wouldn't 0:09:01.960 --> 0:09:05.000 mess with? Uh So I think about it more in 0:09:05.000 --> 0:09:08.480 just terms of this this excess liquidity, I mean, keeping 0:09:08.520 --> 0:09:13.000 them the money supply growth rate, and let's set QE 0:09:13.040 --> 0:09:16.640 aside right for the moment. But you know, we are 0:09:16.679 --> 0:09:22.959 still growing mto money supply in this country at I mean, 0:09:23.000 --> 0:09:25.839 now that's down from a peak. I think we peaked 0:09:26.280 --> 0:09:32.199 post collapse at earlier this year. It's fallen in half, 0:09:32.200 --> 0:09:36.880 but it's stayed around that level for the last three 0:09:36.920 --> 0:09:40.080 or four months. I have no idea why the money 0:09:40.120 --> 0:09:44.000 supply still needs to be growing that rapidly, with with 0:09:44.679 --> 0:09:49.680 fiscal outlays growing much more slowly than they were during 0:09:49.720 --> 0:09:53.400 the height of the emergency assistance. But but there we are. 0:09:53.559 --> 0:09:57.439 And so part of me looks at this looming tapering 0:09:57.800 --> 0:10:01.960 and says, well, that's that's it. An incremental that's a 0:10:02.040 --> 0:10:06.040 that's an important change at the margin, you know, taking 0:10:07.600 --> 0:10:11.160 Huey purchases from a hundred and twenty billion dollars a 0:10:11.240 --> 0:10:15.760 month down to zero next summer, which is what's sort 0:10:15.800 --> 0:10:19.720 of being a trial balloons out there among the various 0:10:19.800 --> 0:10:24.160 FED talking heads. I mean, I'll believe that when I 0:10:24.160 --> 0:10:27.640 see it, quite frankly. But we're still growing the money supply. 0:10:28.720 --> 0:10:33.080 There's still excess liquidity available to flow into financial assets. 0:10:41.840 --> 0:10:44.160 So that obviously we have the FED meeting coming up 0:10:44.600 --> 0:10:47.199 really soon and a lot of people are expecting them 0:10:47.240 --> 0:10:49.880 to announce that they will start taping. So how do 0:10:49.920 --> 0:10:52.480 you invest around that? And I know a lot of 0:10:52.480 --> 0:10:55.880 investors are pulling forward their expectations for when the FED 0:10:56.000 --> 0:11:00.640 might start hiking interest rates to maybe the earlier parts 0:11:00.640 --> 0:11:03.800 of next year, even I was reading in some Bloomark stories. 0:11:03.840 --> 0:11:06.400 So how do you invest around that? What do you 0:11:06.440 --> 0:11:10.200 tell clients? Well, the first step I think is to 0:11:10.280 --> 0:11:17.160 acknowledge that, uh, timing this thing is extraordinarily difficult. I mean, 0:11:17.240 --> 0:11:23.120 we look at a raft of technical and sentiment and 0:11:23.320 --> 0:11:32.400 monetary data. Uh, but the fact is that in a 0:11:32.520 --> 0:11:36.679 market with this kind of momentum, uh, not a lot 0:11:36.679 --> 0:11:40.000 of that work is all that timely. And of course 0:11:41.400 --> 0:11:46.640 valuations get a bad rap as a poor timing tool, 0:11:47.120 --> 0:11:50.280 and I get that, but they are a very good 0:11:50.640 --> 0:11:58.040 risk management tool. So to start with, we have a 0:11:58.080 --> 0:12:03.400 lower equity allocation in our tactical funds then we would 0:12:03.800 --> 0:12:09.000 if valuations were average or even even on the high 0:12:09.160 --> 0:12:12.400 end of their fair values. Though, I mean, even with 0:12:12.480 --> 0:12:17.560 the dramatically improved fundamental picture, and even with estimates for 0:12:17.880 --> 0:12:21.319 next year which are still trending higher, we are still 0:12:21.360 --> 0:12:24.520 on a lot of measures. UH for the S and 0:12:24.559 --> 0:12:29.800 P five hundred pretty close to numbers that were last 0:12:29.840 --> 0:12:36.560 seen in late early two thousand, near the tech bubble peak. 0:12:36.880 --> 0:12:39.839 What's different and what makes it so much more difficult 0:12:40.000 --> 0:12:43.880 I think for go anywhere managers, so to speak, is 0:12:43.920 --> 0:12:46.760 that the rest of the market is so much more 0:12:46.840 --> 0:12:50.600 expensive than it ever got during the tech bubble. I mean, 0:12:50.640 --> 0:12:54.520 the one thing about the tech bubble was that, uh, 0:12:54.640 --> 0:12:58.400 during the last couple innings of that move into the 0:12:58.480 --> 0:13:02.480 early two thousand, a lot of stuff was left in 0:13:02.520 --> 0:13:05.040 the dust. So you could find a lot of good 0:13:05.080 --> 0:13:09.720 industrial and financial and what they were, classically value sectors 0:13:09.760 --> 0:13:12.920 that were really left in the dust, mid caps, small 0:13:13.000 --> 0:13:17.280 caps that just had very middle of the range pees. 0:13:17.440 --> 0:13:21.000 As long as you were willing to stay away from 0:13:21.600 --> 0:13:25.680 where the action was in those last couple of needs, 0:13:25.720 --> 0:13:32.400 you came through that downturn just fine. Whereas uh, I mean, 0:13:32.480 --> 0:13:36.280 just because of this monetary tsunami, we have everything now 0:13:36.679 --> 0:13:42.959 mid caps, small caps, and really almost across the span 0:13:43.040 --> 0:13:47.240 of sectors, we have valuations well above anything that we 0:13:47.320 --> 0:13:49.920 saw in the late nineties, and at the two thousand 0:13:50.200 --> 0:13:56.359 top so um, there's not not a lot of alternative 0:13:56.400 --> 0:13:58.520 if you'd want to be more defensive. So that's why 0:13:58.520 --> 0:14:02.079 our equity reality asian is more moderate than it otherwise 0:14:02.280 --> 0:14:07.720 would be with this kind of strong uh technical market action. 0:14:08.320 --> 0:14:10.240 So I wanted to ask you, with us coming into 0:14:10.320 --> 0:14:13.760 the year end, how true it is that active managers 0:14:13.760 --> 0:14:17.000 are potentially going to be facing some pressures to chase 0:14:17.080 --> 0:14:20.720 performance given how well the market's done so far this year, 0:14:20.760 --> 0:14:25.880 and what does that mean overall for the market. It's interesting, 0:14:25.920 --> 0:14:29.200 Bill Donna, because I can certainly see there are some 0:14:29.280 --> 0:14:35.040 strange developments uh going on that would suggest some degree 0:14:35.040 --> 0:14:38.680 of narrowing. But when when you see an index as 0:14:38.680 --> 0:14:42.760 broad as the value line breaking out to a new high, 0:14:42.800 --> 0:14:46.240 you know that's that's really a signal that we're not 0:14:46.360 --> 0:14:50.840 quite there yet in terms of the market narrowing. So uh, 0:14:50.960 --> 0:14:53.760 I don't know. I mean, well, what's been interesting here 0:14:53.880 --> 0:14:58.160 this year is it's been sort of a rotational market 0:14:58.240 --> 0:15:03.040 in terms of groups at you know, had a tremendous 0:15:03.040 --> 0:15:10.280 surge beginning around election time, stalling out a year ago, uh, 0:15:10.480 --> 0:15:13.960 stalling out in the spring, and then working sideways for 0:15:14.040 --> 0:15:16.080 several months. So that would be the small caps. The 0:15:16.160 --> 0:15:19.480 Russell two thousand is still below the high that it 0:15:19.560 --> 0:15:22.560 made back in in mid March, which was right around 0:15:23.120 --> 0:15:27.080 when yields unentertain your treasury peaked out. I don't think 0:15:27.120 --> 0:15:32.080 that's probably um, I mean, that's probably not a coincidence. 0:15:33.280 --> 0:15:37.560 H And as I mentioned, you know, the transports have 0:15:37.720 --> 0:15:39.880 been lagging for several months, and all of a sudden, 0:15:39.920 --> 0:15:44.480 just a tremendous surge in in October, so things have 0:15:44.600 --> 0:15:48.320 broadened out. But yeah, I think and again maybe I'm 0:15:48.360 --> 0:15:51.960 biased a little bit by the space in which we compete. UM. 0:15:52.600 --> 0:15:55.440 I certainly think that, you know, the tactical fund space 0:15:56.560 --> 0:15:59.400 that tends to take a more cautious view on things, 0:15:59.640 --> 0:16:03.680 especial stually in expensive markets. I just feel like, you know, 0:16:03.720 --> 0:16:07.320 the bigger fear, UM is the fear of missing out 0:16:07.560 --> 0:16:12.880 radin and the fear of losing significant money. Despite evaluations 0:16:12.960 --> 0:16:16.400 being almost as elevated as they were at the tech 0:16:16.480 --> 0:16:22.040 bubble peak, there's still steems to be more fear over 0:16:22.080 --> 0:16:25.480 missing out than there is over losing serious money. That's 0:16:25.520 --> 0:16:45.040 that's just sort of my sense, and I'm glad you 0:16:45.120 --> 0:16:48.120 brought up the comparisons to the tech bubble, Doug. I 0:16:48.160 --> 0:16:50.680 think the last time we spoke a few years ago, 0:16:50.880 --> 0:16:56.640 pre pandemic obviously, UH we talked about used to do 0:16:56.680 --> 0:17:00.440 a thing basically saying okay, comparing the rally since the 0:17:00.480 --> 0:17:04.440 financial crisis to the dot com rallying saying okay, where 0:17:04.480 --> 0:17:10.440 are we in the dot com bubble calendar? Our our boss, 0:17:10.520 --> 0:17:13.280 Chris neg loved that. That's all you get, you put 0:17:13.320 --> 0:17:15.919 together to sort of track that. So where are we 0:17:15.960 --> 0:17:18.800 now to the the pandemic kind of blow up? That 0:17:18.800 --> 0:17:23.240 that comparison, uh, you know that tool that that when 0:17:23.240 --> 0:17:25.680 you look at the market or is it still valid? 0:17:25.720 --> 0:17:28.160 You know, I remember early on in the conversation, you say, 0:17:28.520 --> 0:17:31.199 you consider this a twelve year bull market, you know, 0:17:31.240 --> 0:17:36.080 the last year's bear market being sort of not counting. Um, 0:17:36.440 --> 0:17:38.600 can you can you still kind of make the the 0:17:38.640 --> 0:17:41.760 parallel to the dot com market given everything that's happened. 0:17:43.000 --> 0:17:48.359 We've introduced some some new valuation techniques since uh I 0:17:48.400 --> 0:17:52.639 first did that work several years ago, basically looking at, okay, 0:17:52.640 --> 0:17:56.040 if this were the late nineties. Where are we based 0:17:56.200 --> 0:18:02.119 on you know, forward pe and normalize pe and price 0:18:02.200 --> 0:18:05.879 to sales and things of that nature. Uh, you know, 0:18:05.960 --> 0:18:09.240 one that we've favored in the last couple of years, 0:18:09.240 --> 0:18:15.040 and it's been helpful with this unusually rapid earnings rebound 0:18:15.280 --> 0:18:19.480 is the concept of looking at price to any trailing 0:18:19.600 --> 0:18:23.040 peak and earnings. And of course we're back at a 0:18:23.040 --> 0:18:30.240 new peak now through second quarter numbers, which is pretty remarkable. Uh. 0:18:30.600 --> 0:18:36.920 But the difference between the current rebound and let's say 0:18:36.920 --> 0:18:39.800 the two thousand peak is that margins are so much higher. 0:18:40.840 --> 0:18:44.520 The SMP five operating margin in the second quarter was 0:18:44.560 --> 0:18:49.000 at twelve all time record, took out the previous record 0:18:49.080 --> 0:18:51.280 of eleven point three, which I believe was in the 0:18:51.320 --> 0:18:56.680 third quarter. If the current forward estimates for the third 0:18:56.760 --> 0:18:59.320 quarter are correct, we're gonna go to twelve and a half. 0:19:00.359 --> 0:19:04.600 I mean, the margins that we were printing back in 0:19:04.760 --> 0:19:09.159 late and early two thousand were between seven and seven 0:19:09.160 --> 0:19:12.080 and a half percent. We are just an entirely different 0:19:12.240 --> 0:19:15.959 zip code when it comes to profitability. Now. The issue 0:19:16.080 --> 0:19:20.159 is that was bound to happen when you dumped five 0:19:20.280 --> 0:19:25.000 trillion dollars of incremental federal spending above and beyond what 0:19:25.320 --> 0:19:27.760 likely would have been spent if there had been no 0:19:28.000 --> 0:19:33.760 pandemic interruption. And of course, UH you monetized about that. 0:19:33.840 --> 0:19:38.120 You monetize four point three out of that five trillion incremental, 0:19:38.280 --> 0:19:42.040 so the operating leverage was just enormous. The issue now 0:19:42.240 --> 0:19:46.879 is you spent that five trillion over a period of 0:19:46.920 --> 0:19:52.560 eighteen months, and now as you're seeing the new uh 0:19:52.720 --> 0:19:59.320 Biden Economic Build, Build Better Plan being whittled down, you're 0:19:59.359 --> 0:20:06.240 talking about eighty two trillion over ten years, so two 0:20:06.359 --> 0:20:10.080 hundred billion dollars a year after you dumped five trillion 0:20:10.160 --> 0:20:13.399 on the thing in eighteen months. So that's why I 0:20:13.440 --> 0:20:18.640 am just you know, when I look at estimates for two, 0:20:18.840 --> 0:20:21.439 it's just very hard for me to join in the 0:20:21.480 --> 0:20:24.479 fray and to throw a number out there, because I 0:20:24.560 --> 0:20:28.920 just I don't have a good idea on what impact 0:20:28.960 --> 0:20:32.280 this fiscal cliff and it will be a cliff on 0:20:32.320 --> 0:20:35.280 a rate of change basis is going to have on 0:20:35.520 --> 0:20:42.000 SMP five journeys. UM just very poor visibility there stand 0:20:42.080 --> 0:20:45.920 clear of the craziest things we saw in markets this week. 0:20:46.600 --> 0:20:50.280 I think that lack of visibility is the theme of 0:20:50.920 --> 0:20:52.520 at least this part of the year, especially with all 0:20:52.560 --> 0:20:57.280 the supply chain issues and everything else. Um and no 0:20:57.320 --> 0:21:01.639 one really knowing how long transitory is is gonna last. 0:21:02.240 --> 0:21:05.399 But the one thing we do have some visibility into 0:21:05.600 --> 0:21:08.680 is the craziest things we've seen in markets this week. Um, 0:21:08.920 --> 0:21:10.600 I'm gonna start with you. What's the craziest thing you 0:21:10.640 --> 0:21:12.800 saw this week? Oh my gosh, you're catching me off guard. 0:21:14.000 --> 0:21:15.800 You had no idea and I had a few more minutes, 0:21:15.880 --> 0:21:19.600 yeah to prepare. Um. Well, as you know, Katie Rifle 0:21:19.680 --> 0:21:21.760 and I have been covering what's been going on with 0:21:21.760 --> 0:21:25.360 the crypto market so extensively, and the launches of the 0:21:25.640 --> 0:21:28.280 future spiitcoin, e TF and and all of that, and 0:21:28.320 --> 0:21:31.920 there's so much happening in the crypto market that's really interesting. 0:21:32.440 --> 0:21:34.240 I think this week she but you knew, I don't 0:21:34.240 --> 0:21:38.000 know if you were keeping track of what was going 0:21:38.080 --> 0:21:41.080 on there, that that was one of the craziest things. However, 0:21:41.280 --> 0:21:45.679 it's been really extensively talked about already. So my craziest 0:21:45.720 --> 0:21:50.400 thing is this Bloomberg story about how Chinese authorities are 0:21:50.480 --> 0:21:53.600 asking the founder of Ever Ever Grand Ever Grande. I'm 0:21:53.720 --> 0:21:58.480 still not sure how to pronounce it. The founder to 0:21:58.640 --> 0:22:02.199 use his personal well to help alleviate some of these uh, 0:22:02.359 --> 0:22:05.040 the some of the crisis that the company is seeing, 0:22:06.320 --> 0:22:08.960 which is just crazy. They're asking him to use his 0:22:09.000 --> 0:22:10.840 own money. To me, it's it's a it's a really 0:22:10.880 --> 0:22:15.119 crazy story. Probably only happened in China. Yeah, I'm not 0:22:15.160 --> 0:22:18.399 sure how that would go over overwhelluh in the US. 0:22:18.520 --> 0:22:21.959 If I don't know, you never know. I don't know, Doug. 0:22:22.400 --> 0:22:26.240 How about you? You You seen anything crazy this week? Uh? 0:22:26.480 --> 0:22:32.480 I did? Bill Donna alluded to it, and uh, you 0:22:32.520 --> 0:22:36.720 know when something I can't even pronounce nor had never 0:22:36.840 --> 0:22:42.880 heard of, uh can take an account a coin base? Uh? 0:22:43.160 --> 0:22:51.199 Billful from an eight thousand dollar total investment up to 0:22:51.520 --> 0:22:55.120 five point six billion? I think is the latest I've read. Yeah. 0:22:56.520 --> 0:23:01.520 Uh and Bill Donna, you had the name, can you? Uh? 0:23:01.680 --> 0:23:08.400 Oh very good? I saw that story. But I mean 0:23:08.440 --> 0:23:11.119 what gets me is I hadn't heard of that until 0:23:12.280 --> 0:23:17.280 last night. Uh. Not big on at least the you know, 0:23:17.600 --> 0:23:22.240 secondary and tertiary cryptos. I mean this is a spoof 0:23:22.320 --> 0:23:25.280 of a spoof, right, it's a spoof on doage coin. 0:23:26.680 --> 0:23:31.080 But just I mean, think about the wealth amassed relative 0:23:31.240 --> 0:23:36.560 to and I was trying to brush up on the 0:23:36.640 --> 0:23:41.920 two thousand eight short of the Housing Market by John Paulson. 0:23:42.080 --> 0:23:45.800 I think that personally netted him four billion. It was 0:23:45.840 --> 0:23:49.480 the greatest trade of all time. Um, you know it was. 0:23:50.880 --> 0:23:54.879 The whole theme was made into a movie, The Big Short. 0:23:55.000 --> 0:23:58.480 But uh, think of all that had to gone go 0:23:58.720 --> 0:24:03.160 right and the intricate structuring of that trade that paid off. 0:24:04.119 --> 0:24:06.280 And now you've got someone that just puts a little 0:24:06.280 --> 0:24:08.680 bit of money out of his or her checking account 0:24:09.560 --> 0:24:13.920 into a spoof and and out does the greatest trade 0:24:13.920 --> 0:24:17.280 of all time in a matter of was it since 0:24:17.359 --> 0:24:22.159 last summer? I can't even remember? But uh, And the 0:24:22.240 --> 0:24:28.240 fact so the weirdest thing is not that itself, but 0:24:28.320 --> 0:24:31.320 the fact that it didn't even qualify as the weirdest 0:24:31.359 --> 0:24:35.280 thing that Bill Donna saw all week. That's weird. That's 0:24:35.480 --> 0:24:38.680 that's her too, immersed. Bill Donna's got her eye on 0:24:38.720 --> 0:24:42.000 a lot of weird things. I saw that story and 0:24:42.119 --> 0:24:45.840 it was fascinating to Mike, do you know what this means? Me? 0:24:45.920 --> 0:24:49.240 And you have to start a derivative of a derivative 0:24:49.400 --> 0:24:52.440 of a derivative. We have to do the third iteration. 0:24:53.400 --> 0:24:57.159 Oh right, like a golden doodle coin. Yeah, a golden 0:24:57.200 --> 0:24:59.639 doodle point would kill it. Is a golden doodle here, 0:24:59.840 --> 0:25:02.959 a golden doodle coin would just kill it all all 0:25:03.000 --> 0:25:06.760 the Golden doodle owners out there, Well, this is a 0:25:06.920 --> 0:25:11.399 rare stars are all lined because because Siba knew if 0:25:11.440 --> 0:25:13.840 I am pronouncing a correct is also by my craziest 0:25:13.840 --> 0:25:17.400 thing of the week. But I'm gonna add the prices 0:25:17.480 --> 0:25:20.640 right element to it. Okay, can either of you tell 0:25:20.640 --> 0:25:24.080 me what the year today percentage gain of this coin 0:25:24.200 --> 0:25:30.719 is seven million or something? Doug, what's your what's your guess? 0:25:31.320 --> 0:25:34.240 I'm gonna say three, three millions something like that per 0:25:34.240 --> 0:25:38.080 cent So I had to. I did this math like 0:25:38.119 --> 0:25:40.920 three times because it's it's not the easiest math to do. 0:25:41.600 --> 0:25:44.399 The start of the year might do this coin still 0:25:44.480 --> 0:25:47.760 is way in the fractions of a penny per coin. 0:25:48.640 --> 0:25:53.639 Start of the year it was dollar sign zero decimal 0:25:54.560 --> 0:25:59.480 ten zeros. See the last time I checked its dollar 0:25:59.640 --> 0:26:04.040 sign zero decimal four zero sixty. That gets you a 0:26:04.200 --> 0:26:08.679 ninety one million percent year to date gain and achieve it. 0:26:08.840 --> 0:26:10.639 You know, does it make you think like, what are 0:26:10.680 --> 0:26:13.959 we doing with our lives? It does? And then just 0:26:14.920 --> 0:26:18.040 you know, I'm sort of a market historian, just all 0:26:18.119 --> 0:26:22.080 the good stories you would hear about, like anecdotal sentiment 0:26:22.119 --> 0:26:27.399 tip offs. I mean one being Joe Kennedy supposedly sold 0:26:27.440 --> 0:26:31.440 his stocks in ninete because the shoe sharing boy gave 0:26:31.480 --> 0:26:34.600 him a stock tips. I mean, that is so weak 0:26:34.720 --> 0:26:38.400 by today's standards. I mean, we were, we were far 0:26:38.480 --> 0:26:43.600 beyond that a year ago, and here we are still 0:26:43.760 --> 0:26:48.040 powering higher. And that's uh, you know, that's what I 0:26:48.080 --> 0:26:50.560 talked about. Even you know, some of these sentiment tools, 0:26:50.680 --> 0:26:53.600 I mean a lot of our sentiment work has been 0:26:54.640 --> 0:26:58.720 through the roof now for months on end. But you know, 0:26:58.760 --> 0:27:02.639 the Hueshine Boy tips haven't been helpful in terms of 0:27:02.680 --> 0:27:06.200 negotiating an exit to this market. So sometimes I joke, 0:27:06.280 --> 0:27:11.280 you know, evaluation has deservedly a bad rap for how 0:27:11.320 --> 0:27:13.840 inept it is at helping you time the market. But 0:27:13.880 --> 0:27:19.359