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Speaker 2: Joining us right now.
Speaker 3: Terry Wise, from Director Global Currencies Interest Rate Strategy at
Speaker 3: mcquarie Terio.
Speaker 2: I feel like we're at bear Stearns years ago.
Speaker 3: I get right to the dollar and once again consensus
Speaker 3: is hammered.
Speaker 2: What happens in.
Speaker 3: The foreign exchange market when everybody gets it wrong, Well,
Speaker 3: it depends how they're positioned.
Speaker 4: I suppose if a lot.
Speaker 2: Of people were betting week.
Speaker 4: Dollar, absolutely, as have we been betting in the medium.
Speaker 2: In long term. Absolutely, you're going to stop the show.
Speaker 3: We have the Harvard football coach on Yesterday to night
Speaker 3: Friday Night Football, Harvard Cornell Big Read, Bloomberg ninety two
Speaker 3: nine FM, Boston Weisman years This anta where the yell
Speaker 3: at just straight. I guess an offsprings at yell or
Speaker 3: something good morning offspring of Terry Weisman killing it at yell,
Speaker 3: and biology continue on the bet.
Speaker 2: That was made in weekness. The bet that was made
Speaker 2: in the well.
Speaker 4: The bet that was made in the strong dollar throughout
Speaker 4: most of this year was a bet made on the
Speaker 4: premise that policy uncertainty would continue in the US, that
Speaker 4: you would see reserve managers rotate out of the dollar,
Speaker 4: that this would be followed by private asset allo cators,
Speaker 4: including fixed income allocators with out of a dollar. It
Speaker 4: was also predicated on the richness of the dollar. We've
Speaker 4: seen a real appreciation of the dollar for the past
Speaker 4: thirteen years, and that was a great story, and I
Speaker 4: think people made a lot of money betting on that
Speaker 4: weakness and the dollar until until the last few weeks.
Speaker 4: What's happened in the last few weeks I think is
Speaker 4: not unusual. I think what has happened is that people
Speaker 4: have realized, traders have realized, Hey, there's just as much
Speaker 4: political uncertainty and policy uncertainty in the rest of the
Speaker 4: world in some of these key markets as there is
Speaker 4: in the US. And the case in point of.
Speaker 2: Course has been Europe.
Speaker 4: With these with this, with this, the prospect that we
Speaker 4: may see a socialist become the Prime Minister of France,
Speaker 4: that we may see delay to pension reform, that we
Speaker 4: will see France not solve its its deficit and debt issue,
Speaker 4: and of course now Japan as well, with concerns over
Speaker 4: whether or not this ruling coalition will will will maintain
Speaker 4: power and whether we go to early elections there potentially
Speaker 4: all the mental elections. So look, as long as the
Speaker 4: US look to be the only source of uncertainty, it
Speaker 4: was a week dollar story. Now that the US is
Speaker 4: not the only source of uncertainty, it becomes a strong
Speaker 4: dollar story.
Speaker 5: Because a US dollar retrace that eight nine percent declients.
Speaker 2: I don't think so.
Speaker 4: Although it's hard to predict the headlines coming out out
Speaker 4: of the rest of the world, in part because the
Speaker 4: nature of uncertainty is that it becomes hard to predict.
Speaker 4: But I will tell you that the dollar had gotten
Speaker 4: so rich over the last thirteen years, and had gotten
Speaker 4: to a point nine months ago where it was probably
Speaker 4: a level on sustainability in its valuation. I just don't
Speaker 4: see it getting back levels of February in March of
Speaker 4: this year.
Speaker 3: Explain to those across America listening and watching, why would
Speaker 3: we should care about Japanese yet? And I saw a
Speaker 3: couple of really good essays on this yesterday, But I
Speaker 3: think it needs to be repeated.
Speaker 4: Yes, Look, if you're a stock market investor, and let's
Speaker 4: take its perspective, not a policy maker, but an investor,
Speaker 4: because I want to appeal to the readership here. If
Speaker 4: you are invested in Japanese stocks, and a lot of
Speaker 4: these stocks are multinational stocks, they sell, you know, very
Speaker 4: high value added industrial products of the rest of the world.
Speaker 4: Their margins, they're operating margins benefit from a weekend. So
Speaker 4: that's one reason why you need to pay attention to this.
Speaker 4: In fact, with the weakness of the sorry, with the
Speaker 4: weakness of the end that we've seen in the last
Speaker 4: few few days since the political turmoil, the stock market's
Speaker 4: done fantastically, which which seems to suggest to me that
Speaker 4: the weakness in the end is not so much a
Speaker 4: fundamental thing as much as it is a predilection on
Speaker 4: the part of the investors to wonder what is the
Speaker 4: central bank going to do? It's not about a weakning
Speaker 4: of the of the Japanese economy.
Speaker 3: I was tackled by a Morgan Stanley guy yesterday and
Speaker 3: we were talking about this Dan Skelley. He's a big
Speaker 3: Van Dan Skelley fan. I thought Dan was on last
Speaker 3: time was great and the guy said to me, he said,
Speaker 3: this yen is hugely distabling. In the heart of the matter,
Speaker 3: their wages have disappeared. They're like England in nineteen thirty
Speaker 3: in terms of.
Speaker 5: Real way terry. We got a government shutdown here in
Speaker 5: the United States. Is that going to affect our Federal
Speaker 5: Reserve here over the next several meetings?
Speaker 3: Do you think? Yeah?
Speaker 2: I don't think so.
Speaker 4: I mean, if what you're referring to is the premise
Speaker 4: that because of a lack of official data, the Federal
Speaker 4: Reserve will not know what to do, I would take
Speaker 4: issue with that. There's plenty of third party data. The
Speaker 4: Federal Reserve itself conduct surveys, it collects data. It will
Speaker 4: have that at hand when the meeting takes place in
Speaker 4: October twenty eighth and twenty ninth to make an informed
Speaker 4: decision about where the economy is going. It doesn't rely
Speaker 4: just on official data. To say that you're a data
Speaker 4: dependant does not mean that you're officially data dependent. It
Speaker 4: means that you're just data dependent. So I think they'll
Speaker 4: have enough data. Look, my view on the FED is
Speaker 4: that there is a sufficient reason to believe that interest
Speaker 4: rate policy in the US right now is not overly restrictive.
Speaker 4: If it were, we wouldn't be seeing the stock market
Speaker 4: at new highs. We wouldn't be seeing gold ripping, we
Speaker 4: wouldn't be seeing corporate bond spreads as narrow as they've gotten.
Speaker 4: I think the Fed needs to take all of that
Speaker 4: into consideration. If they do cut, it will be a
Speaker 4: very reluctant cut. I think, in view what the financial
Speaker 4: markets have been doing.
Speaker 5: So, I mean, is the cadence here of the Fed?
Speaker 5: Is it meeting by meeting? Do they you think they
Speaker 5: have a strategy of let's cut a couple times this year,
Speaker 5: then cut early next year, then we'll sit back.
Speaker 4: If that I mean, Jay Powell said on September seventeenth,
Speaker 4: I mean practically admitted that the cut they made in
Speaker 4: September was an insurance cut. That seems to suggest that
Speaker 4: they're not necessarily on a path cut two or three
Speaker 4: more times in wait. It really does suggest that the
Speaker 4: cut was only intended to strike a balance between the
Speaker 4: two mandates within the dual mandates a little bit better,
Speaker 4: and it does not imply a long and profound series
Speaker 4: of right cuts.
Speaker 3: We are fortunate at Bloomberg Surveillan staff Terry Weisman with
Speaker 3: this this morning from Acquary with all of his experience,
Speaker 3: these headlines out. This is CNBC driving the story for
Speaker 3: the President's FED chair candidates list. It's narrowed down to
Speaker 3: five by the Secretary of Treasury.
Speaker 2: The list here is it sounds like these guys are good.
Speaker 3: They played Crossby Stills in Nash Great Bowman, Waller, Hassett,
Speaker 3: Wassh writer of Blackrock in the final five, and I
Speaker 3: would suggest none of those are surprise within the fed.
Speaker 2: Derby zeite guys. I defer to Mike McKeon.
Speaker 3: That Terry Weisman, is this the way to pick a
Speaker 3: chairman bye by headlines and interviews?
Speaker 2: No, no, you don't.
Speaker 4: You don't need these trial balloons. I don't think that's right.
Speaker 4: I think that that's because disconcerning for the market, especially
Speaker 4: when there's so many choices that they are looking at.
Speaker 4: Look personally, I think that Chris Waller would be a
Speaker 4: great choice, not because he's ideologically aligned with the administration.
Speaker 4: In fact, he's not, which is one reason why I
Speaker 4: think it would be a good choice. He is dubvish,
Speaker 4: and I think that aligns him temporarily or short term
Speaker 4: with the administration. But Chris Waller has had a long
Speaker 4: history of publications in which he espoused and exhorted the
Speaker 4: autonomy of the Federal Reserve, so he prevent He provides
Speaker 4: a very good balance. I think willing to be dubbish
Speaker 4: right now because he has his eye on the job
Speaker 4: market and the prospect that employment gains are diminishing, but
Speaker 4: at the same time not willing to be structurally dubbish.
Speaker 4: I think that's what's needed right now in a FED
Speaker 4: Chairman Love it.
Speaker 2: Has taken notes, Terry.
Speaker 3: I'm going to be speaking with Governor Waller at the
Speaker 3: Council on Foreign Relations October sixteenth.
Speaker 2: Can you be in the front row so I can
Speaker 2: have you ask a smarter question. I'd love to enjoin you, Tom,
Speaker 2: just to see a call with McCarry. We'll have to
Speaker 2: see on that. Stay with us.
Speaker 3: More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
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Speaker 2: Joining us in now.
Speaker 3: Kati Kaminski, Chief first her strategist Alpha Simplex for an
Speaker 3: ample discussion here.
Speaker 2: The mathematics is.
Speaker 3: Just prodigious, all of it based on the trend of
Speaker 3: the moment. The late Martin's wig over to FED policy
Speaker 3: and economics would say, the trend is your friend in
Speaker 3: the stock market right now with the I would say
Speaker 3: weekend panic, AI, we're all going to die. CAPEX, We're
Speaker 3: all going to die in that define the equity trend right.
Speaker 6: Now, Katie, the equity trend is very strong. Signals have
Speaker 6: continued to strengthen, especially since the summer, and there's really
Speaker 6: no and what's challenging as a trend foiler, you need
Speaker 6: to see that resistance to pull back and all systems
Speaker 6: seem to be going right now.
Speaker 3: Well, Paul allowed me to go NERD twice in this interview.
Speaker 3: I'm going to do that right now and then shut
Speaker 3: up and let Paul drive it. Okay, So you have
Speaker 3: a setup, folks, and I'm going to take SPX, take
Speaker 3: what NDX, whatever you want, and I'm going to take
Speaker 3: out a two standard deviation trading envelope and then I'm
Speaker 3: going to run it logarhythmic on the y axis to
Speaker 3: show percentage change, not an arithmetic access. And then I
Speaker 3: have exponential moving averages, and I look at the curve
Speaker 3: of them, the first derivative and even second derivative. And
Speaker 3: when you hear me say log convexity, that's what we're
Speaker 3: talking about. The equity market has not giving up a
Speaker 3: bull market. Log convexity has it.
Speaker 7: No, not at all.
Speaker 6: And I think depending on if you use exponential moving averages,
Speaker 6: I mean that is going to get rid of some
Speaker 6: of that ball that you're seeing in the first part
Speaker 6: of the year, So you're seeing signal strengthening and you're
Speaker 6: losing some of the concern.
Speaker 3: Pro to Paul, I do this on a weekly chart.
Speaker 3: Is a rule of thumb. Of course, it goes daily,
Speaker 3: and I go to a week ago.
Speaker 4: Week with no question about that.
Speaker 5: Lisa's nodding her head. She knows. She goes log on
Speaker 5: on a weekly basis, Gold up fifty one percent, spots,
Speaker 5: silver up seventy three percent year to date commodities. That's
Speaker 5: a trend.
Speaker 6: Are you guys on that exactly? I mean, that is
Speaker 6: the other really interesting big trend. And we're getting a
Speaker 6: lot of questions from investors about it because from both
Speaker 6: a fundamental perspective, buying gold. It seems to be your
Speaker 6: any precious metals seems to be that go to safe
Speaker 6: haven trade.
Speaker 7: When the dollar's been weaker. You're looking at the yen now.
Speaker 6: Weakening, so the precious so it's buy gold and buy
Speaker 6: the stock market.
Speaker 7: I mean, that's kind of an interesting combo.
Speaker 5: But how about the dollar. The dollar again, it folks
Speaker 5: that traded off about eight nine percent from that early
Speaker 5: early twenty twenty five levels. Now what's kind of stabilized?
Speaker 5: It seems like, so is the sell off over? Is
Speaker 5: the trend? Is that self trend kind of over for
Speaker 5: the dollar?
Speaker 7: That is an interesting question.
Speaker 6: We have seen some idiosyncratic movements in the dollar, so
Speaker 6: you're seeing certain currencies like the Swedish kroner, the Turkish
Speaker 6: lira kind of gaining some ground on the dollar. My
Speaker 6: view on this is it's a trend that is sort
Speaker 6: of petering out, so it's losing some of its strength.
Speaker 6: And part of this is there's been so much, so
Speaker 6: much backing for that weaker dollar, so much hedging demand
Speaker 6: against the dollar that has built up. We also have
Speaker 6: rate cuts on the horizon, which is also very negative
Speaker 6: for the dollar. So I'm not saying that I'm positive
Speaker 6: on the dollar yet because of that. But it is
Speaker 6: a trend that, as Tom would say, losing some of
Speaker 6: its convexity.
Speaker 5: He's in steam, I would put.
Speaker 2: It, but he's lost convexity.
Speaker 4: That's right exactly.
Speaker 5: So what's the What are the trades you guys are
Speaker 5: looking at these days?
Speaker 7: So the biggest.
Speaker 6: Trades that you're seeing in the market is clearly equities
Speaker 6: and precious metals. But interestingly enough, you haven't seen a
Speaker 6: lot of movement at fixed income. It's been long and short,
Speaker 6: and it feels like that's an area we're going to
Speaker 6: have some change in the next few months, but the signals.
Speaker 7: Are really weak.
Speaker 5: You guys short in the market right now.
Speaker 7: We're not short in the US.
Speaker 6: We're seeing short positions in Europe, so you're seeing things
Speaker 6: like jgb's also and and.
Speaker 7: You know the UK, but the US has remained long.
Speaker 2: To be clear on your short JGB, your short price.
Speaker 7: Yes, price down, yield up, correct.
Speaker 3: More worse, worser, as they say. Katie Comminsky with us
Speaker 3: for a good chat. This is for Global Wall Street.
Speaker 3: We welcome all of you across America around the world
Speaker 3: on YouTube. Subscribe to Bloomberg Podcast Paul.
Speaker 5: So governments shut down people like you. Do you care
Speaker 5: about that?
Speaker 7: I mean, I obviously care about.
Speaker 6: It because I got to fly home today, you know
Speaker 6: what I mean. But you know, but what's really interesting
Speaker 6: is the markets are seeing through it, and they're focus
Speaker 6: on growth, and they're focused on let's not miss out
Speaker 6: on this AI bubble or potential rally, whichever you want
Speaker 6: to call it.
Speaker 7: So it's not moving on that.
Speaker 2: Okay, what we're gonna do.
Speaker 3: Now, folks, it's my second dose of nerd Friday Nerds Show.
Speaker 2: We welcome all of you.
Speaker 3: What a privilege years ago to interview at length Ed Thorpe, who.
Speaker 2: Invented so much of this.
Speaker 3: He basically, folks, took Las Vegas into the classroom, which
Speaker 3: was at the time scandalous, and brought Las Vegas. How
Speaker 3: do I not lose money over to the stock market?
Speaker 3: How do I not lose money? Katie Kaminski, My religion
Speaker 3: is anti Martingale theory. Folks, the stock you buy it
Speaker 3: at one hundred, it goes to ninety. I think I'll
Speaker 3: double up. That's what most people do. At Thorpe saying
Speaker 3: by it at one hundred and only add to the
Speaker 3: portfolio if it goes up anti Martin gill a policy
Speaker 3: out of COVID and forward.
Speaker 2: How has it been working?
Speaker 7: So it's had its moments.
Speaker 6: I think what's really exciting about that is he talks
Speaker 6: a lot at Thorpe talked a lot about Kelly betting,
Speaker 6: and this is the idea that your conviction is a
Speaker 6: function of the strength of the trend of your position,
Speaker 6: and it works very well in poker and in other
Speaker 6: areas as well, and for people who are not familiar
Speaker 6: with Kelly betting, it's about this idea that you measure
Speaker 6: the strength of the.
Speaker 7: Probability of your bet, and when.
Speaker 6: Your bet strength is stronger than you take more risk.
Speaker 6: And that's sort of what trend falling is really trying
Speaker 6: to do, is trying to adjust positions as a function
Speaker 6: of the conviction of the markets and how they move.
Speaker 6: And it works very well in a world where the
Speaker 6: headline risks don't run the show.
Speaker 7: So the fact that government shutdown is not causing noise.
Speaker 6: You're seeing those trends being quite profitable for trend falling
Speaker 6: in the last two to three months because that consistent
Speaker 6: approach of measuring and adjusting is working pretty well.
Speaker 5: One of those trends slash potentially bubble risk for a
Speaker 5: lot of people is just this whole AI narrative in
Speaker 5: the market. And it got maybe to a fever pitch
Speaker 5: over the last week to two weeks when we saw
Speaker 5: investments by these big tech companies like Nvidia into these
Speaker 5: private companies platforms like open Ai, and then they would
Speaker 5: then commit to buy chips and this circular trade. People said, boy,
Speaker 5: this doesn't feel right or it feels a little fishy,
Speaker 5: but boats are rising on this trade. How do you
Speaker 5: guys think about that?
Speaker 6: So the way we think about bubbles as a trend
Speaker 6: follower is it's really about measuring. It's very hard to
Speaker 6: pick tops and bottoms of any sort of trend, and
Speaker 6: so what you want to think about is a trend
Speaker 6: can actually go much longer than you would expect. And
Speaker 6: that's this idea that Tom was talking about about the
Speaker 6: Kelly wedding. So you continue to trade into it and
Speaker 6: sometimes it could take months. I mean, just because we
Speaker 6: are worried, it doesn't mean that the market will react.
Speaker 6: We wait till the market reacts to confirm that hey,
Speaker 6: this is actually you know, something that's going against us.
Speaker 3: What's the biggest let me make this personal. What's the
Speaker 3: biggest mistake Lisa Matteo's kids make sitting on a couch.
Speaker 2: Trading through Robin Hood.
Speaker 3: I want you to speak to our audience, and particularly
Speaker 3: our audience with kids that are learning. They don't have
Speaker 3: your mathiness. They don't know who Andrew Lowe is. Okay,
Speaker 3: what's the biggest mistake the trading crew is making today?
Speaker 6: I think, and this is a personal view, emotions and
Speaker 6: moving on your emotions.
Speaker 7: That's why we have a diligent process. Is where you
Speaker 7: make the biggest mistakes.
Speaker 6: And actually some of the research that Andrew low did
Speaker 6: looking at investor behavior, they find that it's precisely those
Speaker 6: panic cells, those sort of emotions where you kind of say,
Speaker 6: you know, things go down and panic that actually costs
Speaker 6: you the most. So I think this idea that your
Speaker 6: emotions connected to what you decide is actually the dangerous part.
Speaker 5: Of a line. A lot of the math, A lot
Speaker 5: of the research shows returns are generated over a longer
Speaker 5: period of time and a relatively few discrete time periods.
Speaker 5: So it goes to Tom's point, you need to be
Speaker 5: in the market if you try to time the market.
Speaker 5: I don't know that just seems like a way tough game.
Speaker 5: It's just you kind of have to just be in
Speaker 5: the market, you know, otherwise you're just going to miss it.
Speaker 6: I think, yeah, I mean who knows. I mean, look
Speaker 6: at the equity markets now, it could be months.
Speaker 2: Jim Kramer and I've talked about this.
Speaker 3: Jim has been very good about it in speeches and
Speaker 3: that there's a huge baseball analog here and that if
Speaker 3: you line up, you know, to keep it conversational. Ten trades,
Speaker 3: all of your alpha comes out of two or three winners.
Speaker 3: Let's expand that out to a lifetime of trade. You've
Speaker 3: got to retirement plan. Folks, you're wick a conservative and
Speaker 3: you're playing a speculative portfolio.
Speaker 2: If you do one hundred events, how many of those
Speaker 2: really create alpha? I'm going to say eighteen out of one.
Speaker 6: Hundred, So it depends for trend falling, it's much more
Speaker 6: of like a fifty to fifty ratio where your hits
Speaker 6: and the hit rate and the win is higher on
Speaker 6: that fifty to fifty. So that actually shows you that
Speaker 6: trading in the markets, it's very difficult and the edge
Speaker 6: is small, and so it's the diligence that actually matters.
Speaker 7: As opposed to kind of picking that specific winner.
Speaker 2: You can't be there the winner.
Speaker 3: You can pick a set of winners. But I think
Speaker 3: the industry is weaned that everything can be a winner.
Speaker 3: You can win sixty.
Speaker 2: Paul sixty percent, seventy.
Speaker 3: This is there's no evidence of that within the Vanderbilt
Speaker 3: is lead on this.
Speaker 2: That's why Damien's nuts like.
Speaker 3: Issue is they did great research at Vanderbilt, but I mean,
Speaker 3: you just don't have that. It's not Munger's brilliant on this,
Speaker 3: the late Charles Munger. Yeah, absolutely brilliant on.
Speaker 2: This, Katie.
Speaker 5: How do you guys decide to sell a winner?
Speaker 7: So the way that we think.
Speaker 2: About it's like winners philosophical.
Speaker 6: So the way to think about winners is when winners
Speaker 6: are becoming losers, you know what I mean. So we're
Speaker 6: always thinking about the sizing. So for example, if you
Speaker 6: see a pullback, so if you see something like what
Speaker 6: happened in Gold, it creates some noise on your signal.
Speaker 6: So that's an indication that you're kind of hitting some
Speaker 6: of the top and that you're kind of seeing that resistance.
Speaker 5: Because if something pulls back ten percent, you sell half
Speaker 5: your position. It pulls back another ten percent, you sell
Speaker 5: it all.
Speaker 7: It depends on the time horizon.
Speaker 6: I mean, I think where it gets tricky is in
Speaker 6: these big, huge sell off moments where it's very hard
Speaker 6: to ascertain, you know, is this an environment where the
Speaker 6: trend is actually changed or is their noise?
Speaker 7: And so we tend to use.
Speaker 6: Multiple different horizons and measurements to kind of aggregate the
Speaker 6: have a view that's maybe more of a voting mechanism.
Speaker 2: So it's a traditional rule.
Speaker 3: I mean, I mean everybody used to have three hundred
Speaker 3: stock portfolios and then they became one hundred, and then
Speaker 3: Immersing and the crew over at Fidelity invented Fidelity fifty.
Speaker 2: Sequoia had a lot do with that.
Speaker 3: What's the optimal stock portfolio for your mortals?
Speaker 2: Listening here?
Speaker 6: So I'd say, I mean for stocks, they're pretty highly correlated,
Speaker 6: so you want a relatively diverse portfolio.
Speaker 7: We tend to trade multi assets, so that actually.
Speaker 6: Gives you a lot more diversification because you can add
Speaker 6: gold to your equity positions.
Speaker 2: Did you add gold to your positions?
Speaker 6: Yes, we've been in gold. Yeah, it's been the right call.
Speaker 6: And it's been like that for about a year and
Speaker 6: a half now. So gold is an example of a
Speaker 6: perfect trend. I can't tell you why, but it's doing it.
Speaker 3: One more question here to Paul's great question on AI,
Speaker 3: what do you do with a MAG seven here into
Speaker 3: earning season?
Speaker 6: Well, this is tricky because if you look at the
Speaker 6: mag seven, it's such a large proportion. And that's what
Speaker 6: makes me and most people nervous is you have such
Speaker 6: a concentrated exposure to them. But most reports are showing
Speaker 6: that earnings are still looking good. So like I said before,
Speaker 6: well the train's still going.
Speaker 7: Yeah, it could go for a while before we have
Speaker 7: any sort of disruption.
Speaker 3: To all of you in the stock market as you
Speaker 3: prepare to read your barons here Saturday morning, Katie Kaminski
Speaker 3: said something that is religion, position sizing.
Speaker 2: Go out to perplexity, go out to.
Speaker 3: Whatever AI you have, type in the phrase position sizing,
Speaker 3: and just read everything you can about It is a
Speaker 3: heart and soul of the game.
Speaker 2: Katie Kiminski, that was just absolutely fabulous. Thank you so much.
Speaker 3: Really appreciate that. Chief Research Strategies at Alpha.
Speaker 2: Simplex stay with us.
Speaker 3: More from Bloomberg Surveillance coming up after this.
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Speaker 1: Say Alexa Pay Bloomberg eleven thirty.
Speaker 5: There's been so many AI driven stories out there.
Speaker 3: Yeah. I saw a map and it's like three or
Speaker 3: four states like Virginia, right, you know, I.
Speaker 2: Just just I'm learning as I go. Who do I
Speaker 2: learn from? I learned from.
Speaker 3: Urine Timmer has been way way too long since he's
Speaker 3: been on Pro Tip. This weekend, your head is spinning.
Speaker 3: Go out the LinkedIn and subscribed to Urine Timmer. Timmy
Speaker 3: ours director Global Macro at Fidelity. He is beyond generous
Speaker 3: and sending you at Fidelity charts as well.
Speaker 2: What are you up?
Speaker 5: And also, Urine will be on the latest edition of
Speaker 5: Masters in Business with One Barry Ridholds. Podcast drops tom
Speaker 5: this afternoon and airs on radio at seven pm Wall
Speaker 5: Street Time and all weekend long. I don't know how
Speaker 5: he I mean, Master's in Business. You've got to be
Speaker 5: a player to get on Masters.
Speaker 2: You do well. Urine Timber is a player. Let's have
Speaker 2: dovetails the two together.
Speaker 3: Red Holts Urine Timer has a phenomenal type two constructs
Speaker 3: how not to invest when you look at all your
Speaker 3: abilities and fidelities? What should you not do?
Speaker 2: Now?
Speaker 8: Well, good morning. You know, as you're a very great
Speaker 8: previous guest mentioned you know, having a system is very important.
Speaker 8: And you know, the market goes up ten eleven percent
Speaker 8: per year, it rises sixty seventy percent of the time,
Speaker 8: but it has it's volatile and thirty to forty percent
Speaker 8: of the time the market drops and nobody likes that
Speaker 8: unless you're a short seller. And so having a plan
Speaker 8: for those times is really what separates the investors who
Speaker 8: compound from the ones who don't. So I like to
Speaker 8: think of it as the price of admission for that
Speaker 8: juicy return is to not lose your stuff when the
Speaker 8: market doesn't go the way you want it. And so
Speaker 8: I think that's really the most important thing in investing
Speaker 8: for all.
Speaker 2: Of you worldwide. This is the way we rolled the
Speaker 2: Charles River. We go from the north shore of the South.
Speaker 3: Short for ninety two nine FM in Boston Katie Kaminski
Speaker 3: out of m I t over Devonshire Street in buildings
Speaker 3: in the back Bay with your in timor.
Speaker 5: Exactly here, and you sit back there at Fidelity as
Speaker 5: director of Global Macro from a global perspective, what looks
Speaker 5: attractive to you these days?
Speaker 8: What really gets me excited these days is the how
Speaker 8: the rest of the world. So we know, you know,
Speaker 8: the US has been exceptional. The Max seven have dominated
Speaker 8: really for the last you know decade. It was the
Speaker 8: Fangs before the Max seven, and so we know about this,
Speaker 8: you know, supremacy premium that US assets have always enjoyed
Speaker 8: and they still obviously continue to enjoy. And we've got
Speaker 8: the AI story overlaying that. And for many many years,
Speaker 8: you know, value oriented investors would say, well, look at
Speaker 8: look at EA or EM or just you know MSCI
Speaker 8: x US index. It's trading at you know, a PE
Speaker 8: that is so much lower than the US. Why don't
Speaker 8: we do the whole mean reversion trade and go there
Speaker 8: and sell the expensive US. And you know, that doesn't
Speaker 8: really work until you have an actual catalyst that drives
Speaker 8: value into the shareholder's pocket. And so for many years
Speaker 8: we did not have that. But in the last year
Speaker 8: or two, or really last year or so, that's finally happening.
Speaker 8: So especially for the MSCI EFA, which is the Non
Speaker 8: US Developed Markets Index. They are companies there. So mostly
Speaker 8: Europe and Japan have really started to unlock shareholder value.
Speaker 8: You know, even like regional banks in Japan are now
Speaker 8: buying back shares. And that might sound trivial, but when
Speaker 8: you look at a discounted cash flow model, you obviously
Speaker 8: look at long term earnings projections, but almost as importantly
Speaker 8: you look at the share of those earnings that get
Speaker 8: reached turned back to shareholders in the form of dividends
Speaker 8: and buybacks, and so the growth rate of the PO,
Speaker 8: of the payout and the payout ratio, so the percentage
Speaker 8: of earnings that are returned is very important. And for EFA,
Speaker 8: over the last five years, the PO has actually grown
Speaker 8: faster than in the US, and the payout ratio, which
Speaker 8: always used to be lower in the rest of the world,
Speaker 8: is now at seventy five percent for EFA, and it's
Speaker 8: at seventy five percent for the US only the composition
Speaker 8: is different. For non US markets, it's two thirds dividends
Speaker 8: one third buyback and in the US it's the opposite.
Speaker 8: But you have now very competitive fundamentals, and non US
Speaker 8: stocs are trading at fifteen sixteen, the US is trading
Speaker 8: at twenty five. So finally, for the first time in
Speaker 8: a very long time, we're now in a global bull
Speaker 8: market where the pond has gotten bigger, which is good,
Speaker 8: right because we all have to deal with the concentration
Speaker 8: risk of the MAC seven. But there are other places
Speaker 8: to go, which which is good for an investor.
Speaker 5: You're in earnings start in earnest next week with the banks.
Speaker 5: I know your team's at Fideli, all the annals, the
Speaker 5: army you've got there will be pouring over the earnings releases.
Speaker 5: What are you looking for for this earning season.
Speaker 8: Well, what we had in the last couple of quarters
Speaker 8: was earnings beats that were well north of what we
Speaker 8: typically see. So we all know this is the oldest
Speaker 8: game when the world ride companies guide lower and then
Speaker 8: they under promise and over deliver, and then during earning season,
Speaker 8: you know they beat by three four hundred basis points,
Speaker 8: and that's fairly typical. Earlier this year, of course, we
Speaker 8: had the tariff Tan triff earnings revisions were were being
Speaker 8: cut down and then they were sort of you know,
Speaker 8: brought back up again. When when the when the worst
Speaker 8: case tariff situation did not develop, and then we had
Speaker 8: the one big, beautiful bill. And so right now the
Speaker 8: earnings growth rate, the expected growth rate for Q three
Speaker 8: is at seven percent, and if recent history is any guide,
Speaker 8: will go well into the double digits. And that will
Speaker 8: then be three quarters in a row of double digit
Speaker 8: earnings growth.
Speaker 2: And what more do you want?
Speaker 8: Right in a market that is expensive and now about
Speaker 8: to enter its fourth year of the.
Speaker 3: Secure war on I got ninety seconds, and this single
Speaker 3: sentence in your report is too important.
Speaker 2: You cannot see a bubble coming.
Speaker 3: You can only discuss a bubble after the fact. Give
Speaker 3: me one attribute that gets you out front of a
Speaker 3: quote unquote bubble.
Speaker 8: They always last longer than people think. I've done the
Speaker 8: analogs all the way back to the tulipmania, and they
Speaker 8: are by definition they are chaotic patterns. They're parabolas, and
Speaker 8: those are not rational linear patterns. So this is why
Speaker 8: bubb will suck everybody in, because otherwise they would not
Speaker 8: be a bude.
Speaker 2: I can't say enough about that. Folks.
Speaker 3: You're in tim or any X axis, everything takes longer.
Speaker 3: And if you're betting against a big time in out
Speaker 3: in out, as mister Maynard Kine said, guess what, Paul,
Speaker 3: you run out of money? You're in timor thank you
Speaker 3: so much at Fidelity, Director Global Macrowth.
Speaker 2: Stay with us.
Speaker 3: More from Bloomberg Surveillance coming up after this.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business app. You can also watch us
Speaker 1: live every weekday on YouTube and always on the Bloomberg Terminal.
Speaker 2: Now back to regular newspapers. The I'm afraid to ask?
Speaker 2: What do you got?
Speaker 4: Okay?
Speaker 9: We touched upon this yesterday with PepsiCo earnings, but the
Speaker 9: Wall Street Journal has this deeper look into the makeover
Speaker 9: of Lays potato chips. Okay, because health contests consumers. You
Speaker 9: did look Okay, let's start with the bag. Okay, this
Speaker 9: is it. Okay, we're watching on YouTube. This is what
Speaker 9: the bag looked like before, So they're going to be
Speaker 9: changing it. You have this shiny yellow bag with a
Speaker 9: little potato on the bottom.
Speaker 4: Okay, so what it's going to be.
Speaker 9: It's going to have a phrase it says made with
Speaker 9: real potatoes and more shiny asopos to the ingredients on
Speaker 9: the bag. I'm not sure, but the Shining bags are
Speaker 9: going to have this matt finish. It's going to have
Speaker 9: pictures of potatoes and chips and more kind of natural
Speaker 9: look to it, okay, And it's going to have wordings
Speaker 9: that say no artificial.
Speaker 7: Colors, no artificial dyes, flavors.
Speaker 9: It's going to have that on the front and on
Speaker 9: the back it's going to have the original chip recipe
Speaker 9: from herman Ze himself.
Speaker 5: Nice.
Speaker 9: So a lot of ingredient changes, it's all because of
Speaker 9: what's going on, you.
Speaker 4: Know today through industry.
Speaker 9: It's through the whole food industry. We always hear about
Speaker 9: different companies kind of taking out these dyes.
Speaker 4: A dumb question, please.
Speaker 2: Is French is mustard really yellow?
Speaker 3: His hinz ketchup really red.
Speaker 9: I'm sure it's not as red as but that's the
Speaker 9: problem is that these colors, like the barbecue potato chips,
Speaker 9: they're this red color. But it's because of you know,
Speaker 9: the artificial color.
Speaker 3: Is a dumb question. You got to get the next story.
Speaker 3: Who cares what the color is? If the bag if
Speaker 3: chips has a pound of salt in.
Speaker 4: The right we're talking about it.
Speaker 3: We're like missing what we're really talking about how many
Speaker 3: bags did you have this morning?
Speaker 4: I had a bag this morning. I had that, like
Speaker 4: a bag like that, And I'm just fine.
Speaker 9: Forty milligrams of sodium.
Speaker 3: I can. I'm sure that mister Bloomberg's listening. His p
Speaker 3: and L has gotten shaken. Every day when I walk
Speaker 3: out of here, I sneak out a bag of cheese sorts. Yeah,
Speaker 3: it doesn't just yeah, just because it hurts the blue
Speaker 3: And what do you got next?
Speaker 9: Okay, what else we have in the blueberry pantry? That
Speaker 9: would be macha? Yes, okay, have my macha here. It's
Speaker 9: a look into macha media. But this is serious, this
Speaker 9: is financial times. They're saying, can Japan sustain the demand
Speaker 9: because the demand has gotten so great, not just for
Speaker 9: like Macha lattes, but for things like Macha flavored kit kats,
Speaker 9: matcha flavored cookies, Macha flavored you know, ice cream.
Speaker 2: All this.
Speaker 5: I mean, it's a stapless ste's a maaf It's.
Speaker 9: Yes, it's the from the green tea leaves. It's a
Speaker 9: powder made.
Speaker 5: From Okay, okay, so it's green tea tea leaves.
Speaker 9: Yes, it's crushed into a powder, and the powder is
Speaker 9: what you use in the macha, but.
Speaker 4: You have to put something in the mancha to make
Speaker 4: it even drinkable. I actually take milk and I put
Speaker 4: a little stup in here, sugar.
Speaker 9: All right, but it's becoming this, this big thing. I mean,
Speaker 9: Japan's exports of powdered green teas were up seventy.
Speaker 4: Twenty twenty four.
Speaker 9: So it goes to show you how much this is.
Speaker 5: On the rise.
Speaker 9: So it can become a problem.
Speaker 2: Eno squeeze in one. Make it something I please with.
Speaker 5: Yes, okay?
Speaker 9: This one also, well, there was a lot of talk
Speaker 9: right over whether trimming down the New York City mayor
Speaker 9: oal race would trim Zor Mundami's lead. And there's a
Speaker 9: new Quinnipiac poll that shows it's starting to happen. Mandammi's
Speaker 9: lead over forming anomb Andrew Cuomo. It's narrowed after Mayor
Speaker 9: Eric Adams exited. So here's what they show in their
Speaker 9: latest poll. He leads a race forty six percent back
Speaker 9: to him, followed by Cuomo with thirty three percent, Curtis
Speaker 9: Slieva fifteen percent. Now, when you look before, when it
Speaker 9: was a four way race, it showed that Mandami had
Speaker 9: forty five percent to support, twenty three percent for Cuomo,
Speaker 9: fifteen percent for Sleeve. So it's looking like, you know,
Speaker 9: nearly all of Adam's supporters are turning to Cuomo at
Speaker 9: this point.
Speaker 3: To the mayoral staffs listening on Bloomberg eleven threeh we
Speaker 3: are honored to have your candidates come in and talk
Speaker 3: to us, mister Sleeve in this week and to get
Speaker 3: all the rest of him. Frankly, numerous times before the.
Speaker 5: First, mister Ammos, so we have not I explained, Miss
Speaker 5: Bani wants a leave.
Speaker 2: Very good newspapers with Lisa Matteo.
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,
Speaker 1: seven to ten am Eastern on Bloomberg dot com, the
Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You
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