WEBVTT - Surveillance: High Returns Over, says Tangen 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jaily. We bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment and international relations. 0:00:18.840 --> 0:00:23.560 To find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot 0:00:23.560 --> 0:00:31.000 Com and of course on the Bloomberg Terminent. This moment 0:00:31.080 --> 0:00:33.879 is a joy for us because this guy is really different. 0:00:34.280 --> 0:00:37.519 His boring title is he's Chief executive officer of Norangist 0:00:37.520 --> 0:00:41.519 Bank Investment Management. Forget about it. This guy is steered 0:00:41.520 --> 0:00:46.280 the aircraft carrier of Norway's prodigious oil wealth. Forward through 0:00:46.360 --> 0:00:49.760 the Storm is Nikolake Tangan and what you should know 0:00:50.320 --> 0:00:54.240 is he's the most interesting portfolio guy out there, including 0:00:54.240 --> 0:00:57.040 his support of a Sterling Munch show at the British 0:00:57.160 --> 0:01:00.520 Museum a few years ago. Nikolaion, want to go to 0:01:00.560 --> 0:01:04.160 the success of your show and obviously the classic painting 0:01:04.319 --> 0:01:08.959 the scream. It seems everyone now is screaming, how did 0:01:08.959 --> 0:01:14.800 you do fo blended and not screamed this year? Well, um, 0:01:14.840 --> 0:01:16.800 I would say we're screaming, but we are. We are 0:01:16.800 --> 0:01:19.399 pleased with the results and the funds up fourteen and 0:01:19.440 --> 0:01:22.920 a half present last year and in absolute numbers is 0:01:22.959 --> 0:01:25.600 the second best year we have had in the twenty 0:01:25.600 --> 0:01:27.600 five year history. I want to talk to you and 0:01:27.720 --> 0:01:31.319 quiz you closely on the uproar right now on the 0:01:31.440 --> 0:01:34.639 value of E S G investing. You've got a number 0:01:34.640 --> 0:01:37.760 of companies that you you stepped aside from and in 0:01:37.920 --> 0:01:40.200 nine thousand holdings you say we're not going to mention 0:01:40.240 --> 0:01:42.760 who they are, blah blah blah. I want you to 0:01:42.800 --> 0:01:45.840 give us a primer now on the plus, the minus, 0:01:45.920 --> 0:01:52.440 the pros and cons of E S G Alsa mcclearly plus. 0:01:52.600 --> 0:01:55.000 And you know, perhaps in the old days there was 0:01:55.000 --> 0:01:57.560 a bit of a trade off between uh, you know 0:01:57.680 --> 0:01:59.720 E S G and returns. Now I really think they 0:01:59.760 --> 0:02:02.040 go hand in hand. The thing is, if you if 0:02:02.080 --> 0:02:04.560 you own a company now which is not sustainable, doesn't 0:02:04.560 --> 0:02:07.760 have a sustainable business model, you know, not only will 0:02:07.800 --> 0:02:10.880 you not get finance, you not get insurance, nobody would 0:02:10.880 --> 0:02:13.000 want to work with you, and you will have no clients. 0:02:13.360 --> 0:02:16.639 So it just really goes together to a degree we 0:02:16.680 --> 0:02:19.679 haven't seen before. Tell me about a sharp ratio analysis 0:02:19.680 --> 0:02:22.200 of what you do. You are the aircraft carry You 0:02:22.200 --> 0:02:25.000 can barely move the needle with any individual stock or 0:02:25.040 --> 0:02:29.160 even sector selection as well in the firmaent we're in, 0:02:29.160 --> 0:02:33.200 including what we saw from the American Central Bank yesterday. 0:02:33.240 --> 0:02:36.120 How do you find alpha? How do you find a 0:02:36.240 --> 0:02:41.359 sharp ratio return? That's constructive? You're absolutely right. We are 0:02:41.360 --> 0:02:43.799 a very large fund and so there aren't that many 0:02:43.800 --> 0:02:45.880 places we can hide it, and we are quite index 0:02:45.960 --> 0:02:48.000 nearing what we do. But at the same time, there 0:02:48.040 --> 0:02:49.720 are a lot of smaller tweaks we can do in 0:02:49.840 --> 0:02:53.359 terms of give us an exaction, give us an example. Well, 0:02:53.440 --> 0:02:56.399 there are companies we can choose not to own. For instance, 0:02:56.520 --> 0:02:59.160 um uh, you know wire Card in Germany, we did 0:02:59.200 --> 0:03:01.880 not own that it collapsed. He saved us, you know, 0:03:01.919 --> 0:03:04.280 a huge amount of money. So we can do this 0:03:04.440 --> 0:03:07.079 negative selection, which is which has been good for us 0:03:07.080 --> 0:03:09.679 over the years. Um so we do have some means. 0:03:09.720 --> 0:03:13.880 Actually last year we have we had access returns of 0:03:13.880 --> 0:03:18.040 of point seventy five, which you know was like eighty 0:03:18.080 --> 0:03:20.280 billion Norwegian growner. So we can do things even though 0:03:20.320 --> 0:03:22.560 we are in next year. Lisa, what he just said 0:03:22.600 --> 0:03:27.079 there is absolutely fundamental to the mathematics of management. It's 0:03:27.120 --> 0:03:30.560 not what you do, it's what you don't do that 0:03:30.680 --> 0:03:33.400 adds alpha, which you don't buy. And we were talking 0:03:33.480 --> 0:03:35.520 about E s G and how you're moving into E 0:03:35.640 --> 0:03:36.760 S G and I just want to sit on that 0:03:36.840 --> 0:03:39.320 for a minute, Nikolai, because I know your fund has 0:03:39.360 --> 0:03:42.160 been really forward on this at a time when oil 0:03:42.240 --> 0:03:45.080 is outperforming, and we see that this transition has been 0:03:45.120 --> 0:03:48.640 incredibly difficult and in an era of inflation, it is 0:03:48.640 --> 0:03:51.400 the energy stocks that are doing the best. How do 0:03:51.440 --> 0:03:55.120 you arrange around that? Well, we are we owned the 0:03:55.160 --> 0:03:57.880 big integrated old companies, and you know, there are two 0:03:57.920 --> 0:04:00.520 ways so handled kind of navigating these towtory. You can 0:04:00.520 --> 0:04:02.560 either sell out of the companies and just run away 0:04:02.600 --> 0:04:05.560 from the problems, or you can stay in the companies 0:04:05.560 --> 0:04:08.440 and be a constructive and long term shareholder and actually 0:04:08.440 --> 0:04:10.520 help the transition. And that is what we are doing. 0:04:10.840 --> 0:04:12.880 So we are there. We've got clear expectation when it 0:04:12.920 --> 0:04:16.240 comes to how we want these companies to behave and 0:04:16.240 --> 0:04:18.800 and to do their business and um, and we own 0:04:18.839 --> 0:04:21.520 them and you know we have made money in these Nikola. 0:04:21.640 --> 0:04:25.000 Can you add to that portfolio holding in tandem with 0:04:25.080 --> 0:04:27.360 your expectation that oil will continue to rally or does 0:04:27.400 --> 0:04:30.279 that go against sort of the fundamental ethos of the 0:04:30.320 --> 0:04:33.800 fund no, there is no there is no contradiction here. 0:04:33.839 --> 0:04:36.120 We can own the integrated oil companies. We think they 0:04:36.200 --> 0:04:38.080 have a very very important part to play in the 0:04:38.720 --> 0:04:41.600 in the in the green transition. Indeed, it's interesting when 0:04:41.600 --> 0:04:45.720 you look at the various um uh you know, uh 0:04:46.160 --> 0:04:51.680 ways that that they do. This is uh the yeah, 0:04:51.839 --> 0:04:54.279 you know, they're really on top of the technology and 0:04:54.279 --> 0:04:56.720 and very very important players. So we we really want 0:04:56.720 --> 0:04:59.719 to be the owner here, Nikolai. At a time of 0:04:59.760 --> 0:05:01.880 such great inflation, you've come out and you've talked about 0:05:01.880 --> 0:05:04.480 how you expect returns to be a lot lower in 0:05:04.520 --> 0:05:07.240 the years to come. How much lower and what are 0:05:07.279 --> 0:05:10.040 you doing to offset some of the obligations that you're 0:05:10.040 --> 0:05:12.760 gonna have to cover with the returns that you previously 0:05:12.800 --> 0:05:15.160 enjoyed but are not going to be getting. Yeah, well, 0:05:15.160 --> 0:05:17.200 first of all, we are very very long term owner, right. 0:05:17.240 --> 0:05:20.080 We have an investment horizon of you know, thirty to 0:05:20.320 --> 0:05:22.520 two hundred years, so we're looking at this in the 0:05:22.560 --> 0:05:24.440 long term. But it's it's clear that we are now 0:05:24.480 --> 0:05:26.600 starting at a at a point where interest rates are 0:05:26.640 --> 0:05:31.400 extremely low, markets are very very high, Inflation is rampant 0:05:31.800 --> 0:05:34.640 across across the world, across sectors and so on. So 0:05:34.720 --> 0:05:37.200 this is not a great starting point. So therefore we 0:05:37.279 --> 0:05:41.559 do tell people and Norwegian people that they should expect 0:05:41.640 --> 0:05:45.120 lower returns going forward. I want to ask some more questions, Nikola. 0:05:45.120 --> 0:05:47.480 I want off script, but you just mentioned the word rampant, 0:05:47.520 --> 0:05:51.520 which the Financial Times headlines today is rampant inflation. Do 0:05:51.560 --> 0:05:53.960 you have an optimism that inflation will come in as 0:05:54.000 --> 0:05:56.360 we move on from the pandemic and we get our 0:05:56.360 --> 0:06:01.040 supply and demand dynamics globally straightened out. No, I think 0:06:01.040 --> 0:06:05.120 it would remain high for a long time. One more question, 0:06:05.160 --> 0:06:07.760 if I may, and this goes to your philanthropy. You're 0:06:07.800 --> 0:06:10.640 the largest collector of Nordic ard essentially in the world. 0:06:10.760 --> 0:06:13.560 With your vast wealth that you've garnered, you do have 0:06:13.640 --> 0:06:17.880 what I'm gonna call a Norwegian and Scandinavian perspective. Nikola. 0:06:18.040 --> 0:06:20.440 You have a hundred and twenty some mile border with 0:06:20.520 --> 0:06:23.599 Russia and Norway, and of course all eyes are to 0:06:23.640 --> 0:06:27.760 the east in Finland. What should be the Scandinavian response 0:06:27.839 --> 0:06:33.240 to the new Russia. Hey, that's a that's a tough question. 0:06:33.560 --> 0:06:36.920 I think that's beyond my level of expertise. I think 0:06:36.920 --> 0:06:38.960 you should ask you know all the people in NATO 0:06:39.080 --> 0:06:42.719 about that and uh and not me. Lay I guess 0:06:42.720 --> 0:06:45.320 that might be your answer. Thank you, sir for joining us. 0:06:45.360 --> 0:06:55.080 Nikola Tangan that of the Norwegian Wealth Fund. He is 0:06:55.120 --> 0:06:57.479 one of the great philanthropists of New York City. And 0:06:57.520 --> 0:07:00.800 of course Blackstone Front and center now and the debate 0:07:00.880 --> 0:07:05.080 on investment in real estate here Arsenal Bass, thank you, 0:07:05.160 --> 0:07:07.680 Tom John Gray, thank you so much for joining us. 0:07:07.680 --> 0:07:11.280 Of course black Stones President and CEO. Oh John, you 0:07:11.440 --> 0:07:13.720 just have come off of a quarter in which you 0:07:13.840 --> 0:07:17.400 brought more money in in three months than you often 0:07:17.440 --> 0:07:21.040 do in a single year. How does this continue into 0:07:21.080 --> 0:07:22.920 the new year with all the troubles we're seeing in 0:07:22.960 --> 0:07:26.760 the economy. Well, Shinali, it's great to be here. I 0:07:26.840 --> 0:07:29.000 just want to take a moment and talk about this 0:07:29.080 --> 0:07:31.440 quarter in the year we had which were amazing and 0:07:31.440 --> 0:07:34.960 the best in our firm's history. We had a hundred 0:07:34.960 --> 0:07:38.320 and fifty five billion of inflows, as you noted, in 0:07:38.440 --> 0:07:42.760 terms of record levels a U m up fort and 0:07:42.800 --> 0:07:45.440 it just reflects the fact that we continue to deliver 0:07:45.560 --> 0:07:48.880 for our clients. We had our best performance in our history, 0:07:49.440 --> 0:07:53.920 and we continue UH to broaden our platform investing with 0:07:54.240 --> 0:07:58.200 retail investors, insurance and so forth. And that's giving us 0:07:58.240 --> 0:08:04.440 powerful momentum and record results. How does this yeah continue? Yeah? 0:08:04.480 --> 0:08:08.840 With what with record results have also come record pay 0:08:08.840 --> 0:08:12.120 I mean the amount that you have risen your compensation 0:08:12.160 --> 0:08:15.560 and benefits has outpaced most of Wall Street. There's a 0:08:15.560 --> 0:08:17.960 war on talent going on out there, and I want 0:08:18.000 --> 0:08:21.680 to know how that positions you moving forward. Yes, So 0:08:21.880 --> 0:08:25.000 two things I'd say as it relates to talent. One 0:08:25.000 --> 0:08:27.440 of the great things about our business is we have 0:08:27.600 --> 0:08:32.800 this long term alignment where our investment professionals benefit from 0:08:32.920 --> 0:08:36.600 rising incentive fees and performance fees. So when we deliver 0:08:36.720 --> 0:08:41.040 for our customers, their compensation goes up. Obviously on a 0:08:41.160 --> 0:08:44.920 year like one. That bodes well for our individuals, and 0:08:44.960 --> 0:08:48.440 it creates variability in our comp structure if things head 0:08:48.440 --> 0:08:51.400 in the other direction. So we've got I think, a 0:08:51.480 --> 0:08:54.200 special position, and we've been able to pay our people 0:08:54.240 --> 0:08:57.360 well and still grow our margins. So we feel really 0:08:57.440 --> 0:09:01.920 good about that. You also asked about fundraising continuing, and 0:09:02.040 --> 0:09:04.600 on that point, what I'd say is, even with the 0:09:04.640 --> 0:09:08.760 markets off, the SNP is still up from where it 0:09:08.880 --> 0:09:12.520 was two years ago. And we're also seeing the fact 0:09:12.559 --> 0:09:14.520 that I think a lot of investors are gonna be 0:09:14.520 --> 0:09:17.200 looking to move out of fixed income, and we think 0:09:17.240 --> 0:09:20.280 alternatives in our firm will be a beneficiary. So on 0:09:20.800 --> 0:09:24.000 multiple fronts, we feel pretty good. Now. A lot of 0:09:24.000 --> 0:09:26.560 people are worried about the market today, but you're investing 0:09:26.559 --> 0:09:30.000 in firms for ten fifteen years down the road. So 0:09:30.120 --> 0:09:33.600 are you taking advantage of this opportunity to deploy more 0:09:33.640 --> 0:09:39.680 money in any case? Well, we certainly, as investors with 0:09:39.800 --> 0:09:42.079 new capital we have a hundred and thirty five billion 0:09:42.120 --> 0:09:46.360 of dry powder, recognize that prices, particularly in public markets 0:09:46.679 --> 0:09:51.360 and in sectors like technology, can create new opportunities for us. 0:09:51.480 --> 0:09:54.800 So yes, our teams are on the ground. We're looking 0:09:54.880 --> 0:10:00.000 for markets that have gotten potentially dislocated at times like this, Uh, 0:10:00.080 --> 0:10:04.040 investors can sort of throw the baby out with the bathwater, 0:10:04.200 --> 0:10:07.600 and that creates opportunities. So yeah, we're looking at things 0:10:07.679 --> 0:10:12.920 and it's helpful for new capital. On the entirety of 0:10:13.000 --> 0:10:15.680 small business. You have a real bird's eye view on 0:10:15.920 --> 0:10:18.480 small business America as some of these medium sized firms 0:10:18.480 --> 0:10:22.200 through your investments. How significant is the inflationary pressure at 0:10:22.200 --> 0:10:24.760 a time where we've been talking significantly about how big 0:10:24.800 --> 0:10:29.280 companies are able to withstand it a lot better. Look, 0:10:29.320 --> 0:10:34.360 I think inflationary pressures hitting everybody. It's hitting small businesses, 0:10:34.400 --> 0:10:37.520 it's hitting consumers, and it's hitting big businesses as well. 0:10:37.600 --> 0:10:41.479 I would say, stepping back, what's happening to the economy 0:10:41.720 --> 0:10:46.040 is really a series of shock, both demand and supply shock. 0:10:46.440 --> 0:10:50.040 On the demand side, the ten trillion of stimulus fiscal 0:10:50.120 --> 0:10:54.560 and monetary um has led everybody to have more consumption power, 0:10:54.920 --> 0:10:59.920 so you see people buying appliances and cars traveling. That's 0:11:00.040 --> 0:11:03.920 creating a huge demand pull shock. And on the supply side, 0:11:04.240 --> 0:11:09.319 you know, we've got shortages and energy and commodities, labor, housing, 0:11:09.440 --> 0:11:12.560 all those areas, and that's driving prices up. And so 0:11:13.000 --> 0:11:17.400 this definitely feels like it will be persistent. It's certainly pervasive, 0:11:17.840 --> 0:11:20.640 and companies have to alter to that. The companies that 0:11:20.679 --> 0:11:23.160 are most vulnerable are those who have a lot of 0:11:23.240 --> 0:11:25.960 input costs. So if you think about a business that 0:11:26.120 --> 0:11:29.079 has a lot of labor costs, or business that has 0:11:29.120 --> 0:11:31.560 a lot of raw materials and they don't have the 0:11:31.600 --> 0:11:35.040 ability to pass on price, maybe like a food manufacturer, 0:11:35.640 --> 0:11:39.439 that's those are businesses that are vulnerable. There are other businesses, 0:11:39.480 --> 0:11:42.319 of course, that have more pricing power and less exposure 0:11:42.360 --> 0:11:45.839 to those input costs. Fortunately, a lot of our portfolios 0:11:45.960 --> 0:11:49.440 oriented that way because we've been worried about inflation and 0:11:49.559 --> 0:11:53.679 ultimately the normalization of rates as well. John Jonathan, there 0:11:53.760 --> 0:11:57.520 is a concern here about a repricing in public markets, 0:11:57.559 --> 0:12:00.079 how far it has to go, and yet we have 0:12:00.200 --> 0:12:02.120 heard that we really have not seen that repricing and 0:12:02.160 --> 0:12:04.679 private markets people aren't selling, so you're not seeing that 0:12:04.800 --> 0:12:08.520 real time adjustment to this higher inflationary outlook. And frankly, 0:12:08.559 --> 0:12:11.680 a FED with a very different tone, do you expect 0:12:11.679 --> 0:12:14.280 the private markets to materially correct in the next six 0:12:14.280 --> 0:12:19.600 to twelve months. I think the private markets and public 0:12:19.720 --> 0:12:24.680 markets clearly correlate and and I would say sometimes there 0:12:24.760 --> 0:12:27.840 is a lag to your point, but oftentimes what you'll 0:12:27.880 --> 0:12:31.320 see as a slow down in private market activity, so 0:12:31.760 --> 0:12:35.599 you could see less companies being sold as people reprice 0:12:35.800 --> 0:12:38.280 assets a little bit. That can be the case. I 0:12:38.320 --> 0:12:42.160 think where it's probably most pronounced is in the technology 0:12:42.360 --> 0:12:46.600 and growth areas where the public markets have pulled back, 0:12:47.120 --> 0:12:49.080 and so I think on some of the rounds of 0:12:49.160 --> 0:12:52.040 some of the private companies, fast growing companies will be 0:12:52.080 --> 0:12:54.640 a reset that takes a little bit of time. But 0:12:54.720 --> 0:12:57.480 I would point out not all markets have pulled back. 0:12:57.600 --> 0:13:00.800 The real estate market, for instance, because the fundamentals are 0:13:00.920 --> 0:13:04.679 very strong, particularly the sectors were focused on. We're seeing 0:13:04.679 --> 0:13:07.680 pretty robust sales, and I think some sellers are thinking 0:13:07.720 --> 0:13:11.760 about selling. They're worried about rates. Um. So I'm not 0:13:11.800 --> 0:13:14.320 sure all markets have pulled back in the same way. 0:13:14.679 --> 0:13:16.760 But to your point, there is a lag at times 0:13:16.760 --> 0:13:19.800 in the private market. John, you mentioned a worry about 0:13:19.880 --> 0:13:23.480 rates twice in the last couple of minutes. I'm wondering 0:13:23.559 --> 0:13:26.520 what you think about what John waldron Over at Goldman 0:13:26.600 --> 0:13:29.160 Zachs had to say about what's gone on in the 0:13:29.240 --> 0:13:32.040 last couple of years, bringing into question the independence of 0:13:32.040 --> 0:13:35.280 the FED and its ability to really control the trajectory 0:13:35.280 --> 0:13:40.360 going forward. Well, there are lots of FED pundits. Um, 0:13:40.400 --> 0:13:42.960 I'm happy I've got my job. I'm not the FED chair. 0:13:43.120 --> 0:13:46.280 What I would say is, I'll focus on the future, 0:13:46.320 --> 0:13:49.680 because that's what really matters as investors, and I think 0:13:49.720 --> 0:13:53.960 the future is pretty clear that the FED realizes inflation 0:13:54.040 --> 0:13:57.280 has become elevated and they've got to modulate what they've 0:13:57.320 --> 0:14:00.480 been doing, and so they're gonna shrink the sides of 0:14:00.480 --> 0:14:03.720 their balance sheet. They're gonna raise rates and that's the 0:14:03.720 --> 0:14:07.160 new environment we're in, and as investors, I think you 0:14:07.240 --> 0:14:09.000 want to be thinking about that. You want to be 0:14:09.080 --> 0:14:11.280 thinking about an environment at least in the near to 0:14:11.360 --> 0:14:16.080 intermediate term where growth is actually pretty good, but inflation 0:14:16.240 --> 0:14:19.120 is running higher and the feed is raising rates, and 0:14:19.200 --> 0:14:22.000 you want to buy assets that can do better in 0:14:22.040 --> 0:14:24.800 that kind of environment. Jonathan Gray, thank you so much. 0:14:24.880 --> 0:14:28.000 With Blackstone their chief executive officer, and Sanela Basta, thank 0:14:28.040 --> 0:14:33.920 you so much jointing us. Now it's Markie pit Town 0:14:34.120 --> 0:14:37.240 Cidia poll folio managed at old Spring Global Investments. Markie 0:14:37.520 --> 0:14:40.280 your line, we think the recent sell off and volatility 0:14:40.440 --> 0:14:43.520 is not indicative of the market direction for the year. 0:14:43.640 --> 0:14:45.320 I read your notes and then I check the time 0:14:45.600 --> 0:14:47.920 you send that at once twenty Eastern time yesterday, So 0:14:47.960 --> 0:14:50.080 I wonder whether you changed your mind after you heard 0:14:50.080 --> 0:14:54.160 from Chairman pal uh No. I haven't. And I think 0:14:54.720 --> 0:14:57.040 once again the hallmark of the ft is they talk 0:14:57.080 --> 0:15:00.280 a lot tougher than their actions to talk about four 0:15:00.400 --> 0:15:03.400 rate increases, but at the same time the fedestal buying 0:15:03.520 --> 0:15:07.000 securities adding to its portfolio. So to me, you're really 0:15:07.080 --> 0:15:09.840 seeing mixed actions. We're not seeing the FED that's looking 0:15:09.880 --> 0:15:13.680 to tighten, and to see the FED aggressively tightened five 0:15:13.760 --> 0:15:16.320 times this year, I think is completely out of the 0:15:16.440 --> 0:15:18.920 question from the m O that the FED has been using, 0:15:19.000 --> 0:15:21.080 where they're just as focused on the economy and on 0:15:21.200 --> 0:15:25.360 unemployment and not as focused as as maybe market participants 0:15:25.440 --> 0:15:29.400 on slamming down inflation. Margie, you are a definitive student 0:15:29.600 --> 0:15:33.040 of how the financial system incorporations adapt and adjust to 0:15:33.120 --> 0:15:37.720 all this FED blather. Two ideas. Bill Ackman goes out, 0:15:38.040 --> 0:15:41.680 does the Treasury play, and then buys Netflix large. Let's 0:15:41.680 --> 0:15:44.840 call that the Akman gambit. And then this afternoon it's 0:15:44.840 --> 0:15:47.560 going to be what's it mean for Apple? What does 0:15:47.600 --> 0:15:51.720 all this FED guessing and the guessing of inflation, what's 0:15:51.720 --> 0:15:54.040 it mean for real people out in the real world. 0:15:54.160 --> 0:15:58.440 Like Bill Ackman, Well, I think we really once again 0:15:58.520 --> 0:16:00.440 have to look at earnings, and I think earnings are 0:16:00.480 --> 0:16:03.120 going to be pretty good. I think margins, the early 0:16:03.240 --> 0:16:06.640 leads margins by companies have been maintaining at these high 0:16:06.720 --> 0:16:10.160 historic levels, and I think that's key to stock pricing. Yes, 0:16:10.240 --> 0:16:13.440 we've seen some areas of the market, the more speculative, 0:16:13.560 --> 0:16:17.120 some of the overly popular names have a big cratering 0:16:17.160 --> 0:16:19.520 here in the last several months, but I don't think 0:16:19.560 --> 0:16:22.840 that's indicative of the total market and the ability generator earnings. 0:16:22.840 --> 0:16:24.560 So I think it will be pretty pretty good earning 0:16:24.640 --> 0:16:27.640 season and the markets vastly overreacting to what the earnings 0:16:27.680 --> 0:16:30.200 are going. To say, Margie, going back to the FED though, 0:16:30.240 --> 0:16:33.360 the fact that you can really struggle off the rhetoric 0:16:33.440 --> 0:16:35.360 that we heard that most people took a hawk ish 0:16:35.760 --> 0:16:37.960 You got some message from the fact that they didn't 0:16:38.040 --> 0:16:41.480 stop upond purchases at this meeting. Why is that so 0:16:41.640 --> 0:16:45.840 important to you? Well, I think it's important because that's 0:16:45.920 --> 0:16:48.880 been one of the things they've done to keep rates low, 0:16:49.120 --> 0:16:52.240 if you remember, that was the idea. And yet they're 0:16:52.240 --> 0:16:55.480 still continue with this buying program, even though they're also 0:16:55.600 --> 0:16:58.480 talking about we're going to be tough on raising rates. 0:16:58.520 --> 0:17:00.960 So to me, there's a real dichottic me there. Uh, 0:17:01.080 --> 0:17:03.920 they're not going to start to to taper really till 0:17:04.359 --> 0:17:06.919 till after March, and it seems to me that if 0:17:06.960 --> 0:17:08.920 they really were going to do something, we would see 0:17:08.960 --> 0:17:11.520 it now. And also I think that it's it's one 0:17:11.560 --> 0:17:13.840 thing to think that FED needs to slam on the brakes, 0:17:14.200 --> 0:17:17.960 crash inflation, therefore slow the economy and raise unemployment, and 0:17:18.040 --> 0:17:20.359 that would go against their other mandate, which is trying 0:17:20.400 --> 0:17:23.119 to maintain full employment. So I think to see wayes 0:17:23.200 --> 0:17:26.879 going up employment unemployment rates being very low. They're not 0:17:27.040 --> 0:17:29.959 too unhappy with what they're seeing, and they've never, uh 0:17:30.560 --> 0:17:34.119 at least recently, tried to overreact and anticipate the way 0:17:34.160 --> 0:17:36.880 the market would like to see them. Amount. We've seen 0:17:36.960 --> 0:17:39.639 some big moves at the index level in the security market, 0:17:39.720 --> 0:17:42.399 even bigger ones beneath the surface. What have you been 0:17:42.440 --> 0:17:44.480 doing to start the year. What have you've been doing 0:17:44.520 --> 0:17:49.359 in the portfolio? Well, actually, I've been looking to add 0:17:49.560 --> 0:17:52.000 incrementally where some names have gotten hit. There are a 0:17:52.000 --> 0:17:54.600 lot of great names that peaked maybe in the fall, 0:17:54.680 --> 0:17:57.560 say November, even December, and a lot of those names 0:17:57.640 --> 0:18:01.919 are down. Maybe over that period. Maybe You're to day 0:18:01.960 --> 0:18:04.440 came down say five, But I think that's the reasonable 0:18:04.480 --> 0:18:08.560 price discount for companies that look pretty attractive long term. John, 0:18:08.600 --> 0:18:11.120 it's the highlight of the day to see someone who's 0:18:11.119 --> 0:18:16.040 August as Margie Patel embraced the modern language of cratering, 0:18:16.760 --> 0:18:19.800 Never did I think I would hear that you claimed, 0:18:19.920 --> 0:18:26.520 Markie patell say something was greater. That's great, Sprint Global 0:18:26.560 --> 0:18:38.000 Investments mark out with you. Thank you. How do we 0:18:38.119 --> 0:18:40.760 adapt to China GDP? Come on, that's a that's from 0:18:41.080 --> 0:18:43.000 that's a China statistic. I mean, we're going to put 0:18:43.040 --> 0:18:45.680 Johns on this in a moment. That's a China statistic 0:18:45.800 --> 0:18:49.040 from fifteen years ago. Well, it's you got to subtract 0:18:49.080 --> 0:18:52.200 the inflation rate out of that, so that that's not 0:18:52.400 --> 0:18:56.359 as good as news, but six is pretty good. We 0:18:56.400 --> 0:19:00.080 can't really compare our GDP numbers to China's only a 0:19:00.200 --> 0:19:02.639 whole lot. Only Kathleen Best Johnson can do that. She 0:19:02.760 --> 0:19:06.880 joins us down Chief US Financial Economists, Actor and economics. Kathleen, 0:19:07.040 --> 0:19:10.679 how do we go from the oddities of this moment 0:19:11.119 --> 0:19:14.120 and the look back to fourth quarter to the slamming 0:19:14.200 --> 0:19:17.920 on the brakes that's predicted. How do we affect that 0:19:18.280 --> 0:19:22.439 as an economy as a nation. Well, we we've had 0:19:22.480 --> 0:19:25.879 a bumpy ride here with the pandemic. We've had outside 0:19:25.960 --> 0:19:28.119 gains in any given quarter and then we see a 0:19:28.200 --> 0:19:31.320 pull back and and this is no exception. Um, you know, 0:19:31.400 --> 0:19:34.680 I think the Amicron variant, while it was less virulent 0:19:35.359 --> 0:19:39.000 certainly still tamped down on economic activity, and you know, 0:19:39.119 --> 0:19:41.960 beneath those numbers, you know, typically I would just comment that, 0:19:42.040 --> 0:19:45.480 you know, typically when inventories are up as much as 0:19:45.520 --> 0:19:48.040 they are contributing four point nine percent, that would be 0:19:48.119 --> 0:19:50.520 bad and it would weigh on growth. But this time 0:19:50.600 --> 0:19:53.120 I think Mike's right, it's actually a positive sign. Maybe 0:19:53.240 --> 0:19:56.080 supply chains are easy and we'll actually have some goods 0:19:56.160 --> 0:19:58.920 for consumers to purchase once we get past this winter. 0:19:59.040 --> 0:20:01.440 Low Kath, Hey, we gotta jump straight to the FED. 0:20:01.920 --> 0:20:04.600 I just wouldn't you initial thoughts after that news conference yesterday, 0:20:04.680 --> 0:20:07.399 which just got so many people's attention. I was more 0:20:07.480 --> 0:20:12.240 surprised by how much you revealed. I didn't expect that yesterday. Yeah, 0:20:12.359 --> 0:20:15.160 I I would agree. I was also surprised we didn't 0:20:15.160 --> 0:20:17.480 get a little bit of a pushback when asked whether 0:20:17.960 --> 0:20:20.560 the FED would would be comfortable, you know, going every 0:20:20.680 --> 0:20:23.960 meeting in his fifty basis points on the table um, 0:20:24.119 --> 0:20:25.920 he really steered away from that, said, well, we have 0:20:26.000 --> 0:20:28.560 no plans. We gave no guidance, but in a sense 0:20:28.600 --> 0:20:31.520 he gave us guided saying that's quite possible. It's not 0:20:31.680 --> 0:20:34.800 maybe their base case, um, but but you can't deny 0:20:34.880 --> 0:20:38.320 that that's at least them something considering, and inflation is 0:20:38.400 --> 0:20:41.680 the number one thing that they're aiming at right now. Cathy, 0:20:41.720 --> 0:20:43.880 do agree with Matt Lazettie over at Deutsche Bank Asan 0:20:44.000 --> 0:20:46.880 was highlighting earlier, who talked about front loading the rate 0:20:46.960 --> 0:20:49.760 hikes and then seeing what effect, if any, that has 0:20:50.040 --> 0:20:53.360 on inflation in the back half of the year. Yeah, 0:20:53.400 --> 0:20:55.680 I think the one concern that I have, it is 0:20:55.680 --> 0:20:58.840 a big concern, is as the fallout in the financial markets, 0:20:58.840 --> 0:21:02.359 because we know that actually feeds into financial conditions. So 0:21:02.480 --> 0:21:06.080 you could have an unwanted, really choking of economic activity 0:21:06.160 --> 0:21:08.359 where we're so trying to get the full employment right, 0:21:08.560 --> 0:21:11.480 maximum and inclusive employment. So I think that's the risk 0:21:11.560 --> 0:21:13.960 for the Fed. Guess they want to tame inflation, but 0:21:14.320 --> 0:21:16.440 you don't want to kill off the expansion while you're 0:21:16.440 --> 0:21:18.440 doing it. So the market is not the economy. That's 0:21:18.480 --> 0:21:22.080 the common trope out of Wall Street. So from your perspective, 0:21:22.160 --> 0:21:24.080 how much of a selloff would it take for it 0:21:24.160 --> 0:21:28.080 to actually trickle into the real economy. Well, we look, 0:21:28.359 --> 0:21:29.879 I guess it would have sound like Gairman poal, We 0:21:29.880 --> 0:21:32.120 look at the broad financial conditions, so we have our 0:21:32.160 --> 0:21:34.119 own index. Others do too, so it would be more 0:21:34.200 --> 0:21:36.680 than just the equity market. But it does figure prominently 0:21:36.800 --> 0:21:39.760 the VIX index, the move index in the bond market 0:21:39.880 --> 0:21:42.680 that the spread right in the intends to TuS and 0:21:42.920 --> 0:21:46.000 the corporate bond your curve. So you know, if we 0:21:46.119 --> 0:21:49.800 see meaningfully tightening um, one sense of FED would be 0:21:49.840 --> 0:21:52.119 happy with that. I guess it can't be disorderly. If 0:21:52.160 --> 0:21:55.080 it starts to be to go borderline disorderly, then then 0:21:55.160 --> 0:21:56.720 that's going to be a real signal for the FED 0:21:56.800 --> 0:21:59.520 that they need to be careful and slow down. Cathy, 0:21:59.760 --> 0:22:01.399 this is a difficult one to answer I now, so 0:22:01.600 --> 0:22:03.359 take as much time as you need. But the difference 0:22:03.400 --> 0:22:06.640