WEBVTT - Markets, Trade Negotiations, & Uber 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel podcast. I'm Paul swing you. 0:00:05.360 --> 0:00:07.760 Along with my co host Lisa Brahmas. Each day we 0:00:07.880 --> 0:00:10.440 bring you the most noteworthy and useful interviews for you 0:00:10.520 --> 0:00:12.640 and your money, whether at the grocery store or the 0:00:12.640 --> 0:00:15.960 trading floor. Find a Bloomberg Penl podcast on Apple podcast 0:00:16.120 --> 0:00:18.040 or wherever you listen to podcasts, as well as at 0:00:18.079 --> 0:00:21.239 Bloomberg dot com. There was a minute there when a 0:00:21.480 --> 0:00:24.720 reflation trade was taking hold and people were expecting a 0:00:24.840 --> 0:00:29.600 steepening of the yield curve an increase in future inflation expectations. 0:00:30.040 --> 0:00:32.400 What happened because we are seeing right now the ninth 0:00:32.440 --> 0:00:36.480 straight day of yield curve flattening. Drewmatics, chief market strategist 0:00:36.479 --> 0:00:39.640 for MetLife Investment Management, joining us right now, Um from Whippany, 0:00:39.680 --> 0:00:41.760 New Jersey. Drew, thank you so much for being here. 0:00:41.760 --> 0:00:44.000 I want to start with the flattening yield curve and 0:00:44.040 --> 0:00:46.159 get your sense of how important it is to keep 0:00:46.200 --> 0:00:49.840 track of nine straight days, the longest stretch since November 0:00:49.880 --> 0:00:53.720 two thousand, fifteen of yield curve flattening in the US. Well, 0:00:53.720 --> 0:00:56.520 I don't think it's a coincidence. When you know the 0:00:56.680 --> 0:00:58.840 good days or days and the curve steepening, and you 0:00:58.840 --> 0:01:02.240 can see that US markets, and you can see people's 0:01:02.240 --> 0:01:04.959 optimism begin to rise and people begin to think, hey, 0:01:05.000 --> 0:01:08.000 we're heading towards a more normal environment. Um. And then 0:01:08.040 --> 0:01:10.120 you have the days of flattening, where you know, you 0:01:10.160 --> 0:01:13.160 can have updates in the market despite that, UM, but 0:01:13.240 --> 0:01:16.200 people become a little more concerned about what the future 0:01:16.280 --> 0:01:18.680 might hold UM. And of course you can you can 0:01:18.760 --> 0:01:22.200 argue the causations working one way or the other. But 0:01:22.280 --> 0:01:24.680 I think broadly speaking, what we want to see is 0:01:24.720 --> 0:01:26.640 a steepening Yol curve. I think what the FED wants 0:01:26.640 --> 0:01:29.280 to see is a steepening Yol curve. What they want 0:01:29.319 --> 0:01:31.480 is a curve that's steep enough that if they want to, 0:01:31.600 --> 0:01:34.360 they could actually hike rates again. Not that that's on 0:01:34.400 --> 0:01:37.720 their mindset for something near term, but longer term, they'd 0:01:37.760 --> 0:01:39.880 like to see things normalized enough where they could push 0:01:39.959 --> 0:01:42.800 rates higher. Again. Do you think the we even have 0:01:42.880 --> 0:01:45.759 any green shoots of that as it relates to the 0:01:45.840 --> 0:01:49.760 underlying economy. Uh? Well, I think if you're the FED 0:01:49.880 --> 0:01:53.120 and you've been blaming kind of uncertainty on on kind 0:01:53.120 --> 0:01:56.040 of why you were cutting to begin with, uh, you know, 0:01:56.080 --> 0:01:59.200 we have seen some movement on trade, We're seeing some 0:01:59.320 --> 0:02:02.840 movement in your or UM. Lots of areas of uncertainty 0:02:02.880 --> 0:02:08.160 are becoming UM, we're beginning to see pathways towards less uncertainty, 0:02:08.240 --> 0:02:12.800 so a conclusion being reached UM or moving towards that conclusion. 0:02:13.320 --> 0:02:15.200 The problem we have now is that there's so many 0:02:15.240 --> 0:02:19.400 different things, and there's so many potential outcomes from trade 0:02:19.800 --> 0:02:26.079 and from politics and from the European story, that because 0:02:26.120 --> 0:02:29.120 there's so such complexity there, you can't figure out how 0:02:29.120 --> 0:02:31.960 to price everything, and so people then default to I'm 0:02:32.000 --> 0:02:33.560 going to be risk on or I'm going to be 0:02:33.639 --> 0:02:37.080 risk off, because they really can't put a value on 0:02:37.120 --> 0:02:39.400 all the things that are going on right now. That said, 0:02:39.440 --> 0:02:42.919 you've seen a steady decline or at least remaining stable 0:02:43.440 --> 0:02:45.840 of five year five year of break even rate. It's, 0:02:45.840 --> 0:02:48.399 in other word, as another gauge of future inflation. You're 0:02:48.440 --> 0:02:53.200 not seeing a concept of reflation taking hold in broader 0:02:53.240 --> 0:02:56.679 derivative and bond markets. And I'm just wondering whether that 0:02:56.880 --> 0:03:01.360 signals that they've fed really ought to cut rates again. Well, 0:03:01.440 --> 0:03:03.680 I you know, I don't think so. I think you know, 0:03:03.919 --> 0:03:06.600 first of all, you know, the headline of or current 0:03:06.639 --> 0:03:09.800 inflation that the FED follows, it's actually very close to 0:03:09.840 --> 0:03:12.360 their target. So even when they were cutting rates and 0:03:12.400 --> 0:03:14.919 saying inflation is not high enough, they were actually very 0:03:14.960 --> 0:03:17.400 close to their target. I think any other federal reserve 0:03:17.440 --> 0:03:19.799 that hadn't been through the financial crisis would have been 0:03:19.800 --> 0:03:23.360 saying we're close enough and we're happy with that. UM. 0:03:23.480 --> 0:03:28.240 So there's this fixation on pushing inflation, you know, significantly 0:03:28.320 --> 0:03:31.560 higher or higher to the target and above, as opposed 0:03:31.600 --> 0:03:34.800 to just being nearer the target UH. And I think 0:03:34.840 --> 0:03:38.160 that could end up backfiring on the Fed UH simply 0:03:38.240 --> 0:03:40.880 because you know, really, if you're going to focus on 0:03:40.920 --> 0:03:43.480 that last twenty basis points are so of kind of 0:03:43.560 --> 0:03:46.280 inflation that you want to achieve, you might lose sight 0:03:46.320 --> 0:03:47.720 of the fact that, you know, the rest of the 0:03:47.720 --> 0:03:50.160 economy seems to be doing well, and if there is 0:03:50.160 --> 0:03:52.320 an inflation surprise, it's going to put you well above 0:03:52.360 --> 0:03:55.400 a target that you're happy with. UM. So you know, 0:03:55.480 --> 0:03:58.160 maybe a grind higher is better when you're approaching your 0:03:58.160 --> 0:04:01.480 target than a than our sharp move higher. So Drew, 0:04:01.520 --> 0:04:04.840 given the strong performance we've had across many asset classes 0:04:04.880 --> 0:04:07.720 here in and even comparing it from the lows of 0:04:08.200 --> 0:04:10.480 the fourth quarter of last year. As you look at 0:04:10.480 --> 0:04:16.359 the where do you see the most opportunity? Uh? You 0:04:16.400 --> 0:04:19.080 know the problem is with evaluations where they are you 0:04:19.120 --> 0:04:21.200 know that there aren't a great number. You know, there 0:04:21.360 --> 0:04:23.400 there isn't a lot of opportunities. So I would I 0:04:23.520 --> 0:04:25.560 kind of take it and and and put it in 0:04:25.560 --> 0:04:28.240 this way. UM. You know, if you're going to be 0:04:28.279 --> 0:04:30.480 investing in the current environment, you want to be aware 0:04:30.480 --> 0:04:32.440 of the risk that you're taking, and you want to 0:04:32.480 --> 0:04:36.280 know how those risks could evolve. UH. And I think 0:04:36.320 --> 0:04:38.920 you know, often times, you know, people think they're taking 0:04:38.960 --> 0:04:40.880 one kind of risk and and they find out that, 0:04:40.920 --> 0:04:43.800 in fact, they were taking a different kind of risk. Um. 0:04:43.920 --> 0:04:47.680 And and so I think you know, as we're looking ahead, 0:04:48.040 --> 0:04:50.280 you know, our view is that you know, the next 0:04:50.360 --> 0:04:54.840 year looks good. The year after though one, UH is 0:04:54.880 --> 0:04:58.320 are likely timing for a recession. UM. So you know, 0:04:58.600 --> 0:05:00.960 when we're thinking about things, were thinking about, you know, 0:05:01.040 --> 0:05:03.800 when's the NEXTRA session coming, and how do you prepare 0:05:03.839 --> 0:05:06.680 for that? Um? And you know, I think a lot 0:05:06.680 --> 0:05:08.320 of people and there are a lot of forecasts out 0:05:08.360 --> 0:05:11.679 there now where people have very high probabilities of recession. UH. 0:05:11.760 --> 0:05:13.800 You know, banks are saying that there's a high probility 0:05:13.800 --> 0:05:16.159 of recession, but then you look at their forecasts and 0:05:16.160 --> 0:05:19.359 there's and there's no recession within their forecast. Um, And 0:05:19.400 --> 0:05:21.320 I think that's something people have to be on the 0:05:21.320 --> 0:05:24.880 watch out for. So just quickly here, Drew, recession, how 0:05:24.880 --> 0:05:27.440 do you trade that? Now? Well, you begin to make 0:05:27.480 --> 0:05:30.599 sure that you're comfortable with all the exposure you have, um, 0:05:30.920 --> 0:05:34.560 and that you know you're you you know, in the 0:05:34.600 --> 0:05:36.960 near term at least you know there's still some opportunities, 0:05:37.720 --> 0:05:40.400 but you don't necessarily want to you know, um, you 0:05:40.680 --> 0:05:44.440 might want to date those opportunities instead of marrying them. So, Drew, 0:05:44.560 --> 0:05:48.880 interesting one call. I mean, it's interesting right here. Did 0:05:48.880 --> 0:05:51.120 that suggests to you that maybe the FED doesn't have 0:05:51.200 --> 0:05:55.280 as much MS they think that they do, Uh, you know, yes. 0:05:55.640 --> 0:05:58.200 So you know, I think if we're thinking about where 0:05:58.200 --> 0:06:00.240 the FED is going to head from this point, they're 0:06:00.240 --> 0:06:02.400 not going to be hiking rates next That's not our view. 0:06:02.400 --> 0:06:04.240 Our view is that the next move will be lower. 0:06:05.000 --> 0:06:07.160 But at the same point, we don't think they're gonna 0:06:07.160 --> 0:06:09.640 be moving at all next year. Truemattus, thanks so much 0:06:09.680 --> 0:06:12.360 for joining us. We appreciate your commentary. Drew as the 0:06:12.440 --> 0:06:15.840 chief market strategist for MetLife Investment Manages, joining us on 0:06:15.880 --> 0:06:33.159 the phone. China is agreeing to take a harder stance 0:06:33.279 --> 0:06:37.039 on intellectual property theft as part of the ongoing trade war. 0:06:37.160 --> 0:06:40.200 Is hard to know exactly how to frame this though, 0:06:40.720 --> 0:06:42.960 given that there are not that many more details. But 0:06:43.040 --> 0:06:46.000 luckily we have Henrietta Trees joining us now to help 0:06:46.080 --> 0:06:48.720 us do that, director of Economic Policy Research at Beta 0:06:48.760 --> 0:06:52.480 Partners joining us from New Orleans. Um, Henrietta, what don't 0:06:52.520 --> 0:06:55.919 you make of the IP theft news that was coming 0:06:55.920 --> 0:06:59.800 out overnight? How seriously should markets be taking this? I 0:07:00.000 --> 0:07:02.880 think it's at first glance good news. What we've seen 0:07:02.920 --> 0:07:06.560 from President she in the past is when they are 0:07:06.640 --> 0:07:10.440 making concessions or doing things that the Americans have been 0:07:10.480 --> 0:07:14.400 asking of Beijing, they tend to announce it separately or 0:07:14.640 --> 0:07:17.040 um in advance of any kind of deal being reached 0:07:17.040 --> 0:07:21.320 that they can present as though they've just independently decided 0:07:21.360 --> 0:07:23.040 to make this movie. We saw that on the Financial 0:07:23.080 --> 0:07:26.080 Markets Access opening up. Um. They've done this I P 0:07:26.360 --> 0:07:30.800 theft type of extractions several times in the last few years. 0:07:31.160 --> 0:07:33.440 So on the one hand, it bodes well for Hey, 0:07:33.440 --> 0:07:36.160 maybe there's something that could be announced in the coming 0:07:36.240 --> 0:07:38.200 days in terms of the Phase one deal, and they're 0:07:38.200 --> 0:07:39.840 trying to get out in front of that and appear 0:07:39.880 --> 0:07:42.600 more autonomous than doing it of their own volition. But 0:07:42.640 --> 0:07:45.320 at the same time, there's not very many details. Um 0:07:45.320 --> 0:07:47.320 One of the things that concerns me is that this 0:07:47.400 --> 0:07:49.880 is happening apps in a Phase one deal being announced 0:07:49.960 --> 0:07:54.440 or even uh deadline or set meeting for Vice Premier 0:07:54.520 --> 0:07:58.760 Lucha and USTR Life Heiser to even meet um let alone, 0:07:58.760 --> 0:08:01.720 Presidents Trump and President she meeting to ink a deal. 0:08:01.840 --> 0:08:04.680 So a lot of this is happening outside of any 0:08:05.000 --> 0:08:08.640 comprehensive details on Phase one, and of course enforcement remains 0:08:08.920 --> 0:08:11.640 the number one issue for me. So Henrietta, can you 0:08:11.680 --> 0:08:14.600 just give us a reset kind of where we are 0:08:14.680 --> 0:08:17.240 or really where the Chinese are in terms of they're 0:08:17.280 --> 0:08:21.080 thinking about how incentive are they to get a Phase 0:08:21.280 --> 0:08:25.600 one deal. I think right now the goal is to 0:08:25.760 --> 0:08:28.400 avert List four B tariffs, which is about a hundred 0:08:28.440 --> 0:08:31.440 and sixty billion dollars of consumer facing goods set for 0:08:31.520 --> 0:08:33.840 the summer fifteenth, And what I'd encourage investors to do 0:08:33.920 --> 0:08:36.720 is sort of separate out the ability of the United 0:08:36.760 --> 0:08:39.080 States and China to come to an agreement that staves 0:08:39.080 --> 0:08:43.280 off at the summer fifteenth escalation from necessarily reaching a 0:08:43.320 --> 0:08:47.840 Phase one deal. Um in my view, we are already delayed. 0:08:47.880 --> 0:08:50.720 We've already moved the goldmost. We're entering into week seven 0:08:51.200 --> 0:08:53.880 of the Phase one trade deal being announced, which was 0:08:53.920 --> 0:08:56.040 set to be a three to five week you know, 0:08:56.120 --> 0:08:59.600 wrapping up final negotiations period. So we've already delayed since 0:08:59.600 --> 0:09:02.160 stance rely, and based on what we've seen from the 0:09:02.160 --> 0:09:05.480 administration of the last two years, they're pretty comfortable pushing 0:09:05.520 --> 0:09:10.680 out deadlines um, so December fifteenth moving to let's say January, February, 0:09:10.720 --> 0:09:13.800 March fifteenth, or even being suspended altogether, as was the 0:09:13.880 --> 0:09:17.000 case with the escalation on Lists one, two, and three 0:09:17.440 --> 0:09:21.040 rising in their tariff rights from I think it is 0:09:21.120 --> 0:09:23.839 distinctly possible and doesn't necessarily have to be a Phase 0:09:23.880 --> 0:09:26.920 one deal. The problem is the longer this takes to work, 0:09:27.280 --> 0:09:30.640 the more other components are happening in the ether, like 0:09:30.679 --> 0:09:33.960 the Hong Kong protests or the impeachment proceedings in the 0:09:34.040 --> 0:09:36.000 United States. The lack of a U s m c 0:09:36.200 --> 0:09:39.520 A vote time continues to pick by and Phase one 0:09:39.559 --> 0:09:42.440 deals are not being reached into vacuum. So I'm hopeful 0:09:42.480 --> 0:09:44.199 that we won't see the tariffs, but that doesn't mean 0:09:44.240 --> 0:09:46.199 we have to see a phase one deal. So Phase 0:09:46.240 --> 0:09:50.319 one was supposedly soybeans AGG purchases the easy stuff that 0:09:50.360 --> 0:09:53.840 has run into roadblocks. We're hearing with questions about enforcement 0:09:53.880 --> 0:09:56.199 and just how much as far as a number figure goes. 0:09:56.440 --> 0:10:00.160 China's agreeing to buy intellectual property theft was suppos to 0:10:00.160 --> 0:10:02.440 be phased two, according to my understanding, because I thought 0:10:02.440 --> 0:10:04.080 that this was one of the harrier things. So can 0:10:04.120 --> 0:10:06.400 you try to square the idea that we're running into 0:10:06.440 --> 0:10:09.320 issues with soybean purchases, which was supposed to be the 0:10:09.320 --> 0:10:11.480 easy stuff, and we seemed to be getting something an 0:10:11.480 --> 0:10:14.880 IP theft, which was the tough stuff. That's such a 0:10:14.880 --> 0:10:17.080 good way to phrase it, if I'm not mistaken. The 0:10:17.440 --> 0:10:20.040 September of the most recent orders were three month lows 0:10:20.040 --> 0:10:24.120 on soybeans as China's getting just out today, right, So 0:10:24.480 --> 0:10:26.600 really interesting development. And you I think that's a great 0:10:26.640 --> 0:10:30.880 point that you make. Um when it comes to AGG purchases, 0:10:30.960 --> 0:10:34.280 I think we should maybe think about the diversification that 0:10:34.320 --> 0:10:37.480 we've seen from China, So the most prominent I think 0:10:37.520 --> 0:10:40.959 would be in terms of protein sources. Having them signed 0:10:40.960 --> 0:10:43.480 that poultry deal a week or two back. That was 0:10:43.520 --> 0:10:48.360 a really tremendous development that I think constitutes systemic reform, 0:10:48.480 --> 0:10:51.040 Like the administration has been trying to seek out in 0:10:51.200 --> 0:10:54.200 as you suggest, I P theft or any kind of 0:10:54.520 --> 0:10:58.000 major significant uptaking agriculture purchases. So we're seeing it on 0:10:58.120 --> 0:11:01.360 some areas but not on others. Are importing pork to 0:11:02.040 --> 0:11:04.760 at least some extent, and then the the poultry component 0:11:04.800 --> 0:11:07.440 could be a billion dollar industry once they get those 0:11:08.120 --> 0:11:12.800 trade lines reopen. The soy piece is an unfortunate decline, 0:11:12.920 --> 0:11:17.800 but if you are dealing with what less pork in China, 0:11:18.160 --> 0:11:20.560 they need less soy to feed them, So I guess 0:11:20.600 --> 0:11:23.440 it does track the I p ST component, though, just 0:11:23.480 --> 0:11:26.559 like with everything else is you really need technical details 0:11:26.600 --> 0:11:29.520 and we have none of those. So Persident Trump alluded 0:11:29.559 --> 0:11:31.800 to I P theft in some way, shape or form 0:11:31.840 --> 0:11:35.280 being included in a Phase one deal, and if this 0:11:35.360 --> 0:11:37.760 is the extent of it, then it's not nearly enough 0:11:37.800 --> 0:11:41.040 to constitute systemic reform. And I think, and just to 0:11:41.320 --> 0:11:44.079 sort of sound like a broken record, it comes down 0:11:44.120 --> 0:11:47.679 to enforcement. If China is agreeing to make changes and 0:11:47.720 --> 0:11:50.040 they're hoping that the United States will back up, back 0:11:50.080 --> 0:11:53.720 off on further tariffs or take off whole baskets the tariffs, 0:11:53.760 --> 0:11:55.600 which is what I think a lot of investors are 0:11:55.640 --> 0:11:58.800 hoping for and the Chinese absolutely want. UM. This is 0:11:58.800 --> 0:12:01.960 a way to incentivize the United States to get more 0:12:02.000 --> 0:12:05.240 comfortable with easing the enforcement components and taking tarifs off 0:12:05.320 --> 0:12:08.400 before they reach any kind of final agreement you know, 0:12:08.480 --> 0:12:10.320 on phase two or phase three or what have you. 0:12:10.640 --> 0:12:12.760 UM And unfortunately, just don't see US t R Lifehiser 0:12:12.800 --> 0:12:16.880 agreeing to take off tremendous amounts of tariffs. One of 0:12:16.880 --> 0:12:18.920 the things that I try to advise our clients about 0:12:18.920 --> 0:12:21.080 all the time is to say, look, before tariffs come 0:12:21.120 --> 0:12:24.800 off on entire product lines and huge you know list 0:12:24.920 --> 0:12:29.280 for a baskets are lifted entirely, recognize that the usc 0:12:29.440 --> 0:12:33.120 R has a comprehensive one, two and six month enforcement 0:12:33.200 --> 0:12:35.880 strategy that he has already laid out for us that 0:12:35.960 --> 0:12:38.240 I think will more likely results in the initial step 0:12:38.240 --> 0:12:41.480 being to reduce tariff rates, not to reduce the overall 0:12:41.520 --> 0:12:43.720 basket of goods that are our tariffs. So for instance, 0:12:43.960 --> 0:12:46.200 the list for a tariffs, which are a hundred and 0:12:46.200 --> 0:12:49.960 twelve billion dollars worth of goods. Instead of taking all 0:12:50.000 --> 0:12:52.319 that add and twelve billion dollars off, you drop the 0:12:52.400 --> 0:12:54.840 rate from fift to ten percent and then maybe six 0:12:54.840 --> 0:12:58.560 months later reassess and and that's how lifehiser will allow 0:12:58.679 --> 0:13:01.120 for enforcement of ever trying to commit to on I 0:13:01.200 --> 0:13:04.360 p or ADD purchases for that matter. So Henrietta just 0:13:04.360 --> 0:13:07.880 about thirty seconds. What happened to the feeling maybe six 0:13:07.880 --> 0:13:10.760 months ago that the Chinese We're just gonna wait and 0:13:10.960 --> 0:13:13.480 take their bets with whoever's in the White House. Then 0:13:14.200 --> 0:13:16.520 my understanding is that the US Hawks in China really 0:13:16.559 --> 0:13:21.559 got spooked by the Administration's decision to dramatically escalate cariffs 0:13:21.559 --> 0:13:24.640 in mid August. The White House has been walking that 0:13:24.679 --> 0:13:27.960 back ever since, as we've seen um, but that was 0:13:28.000 --> 0:13:31.640 the big game changer in that the administration and specifically 0:13:31.679 --> 0:13:34.800 President Trump acted way outside the bounds of what US 0:13:34.840 --> 0:13:38.800 Hawks and China expected, and they might be better off 0:13:38.840 --> 0:13:42.120 reaching a Phase one deal now and hitting the pause button, 0:13:42.200 --> 0:13:44.040 which I think is really what a Phase one deal is, 0:13:44.040 --> 0:13:46.760 just an opportunity to hit pause through the elections. So 0:13:46.800 --> 0:13:49.440 hopefully we get to that. Henrietta Trades, thank you so 0:13:49.520 --> 0:13:52.480 much for joining us. Some really smart commentary there on 0:13:52.520 --> 0:13:56.360 the ongoing U S. China trade negotiations. Henrietta is the 0:13:56.480 --> 0:14:00.160 director of Economic Policy Research for Veta Partners. During us 0:14:00.160 --> 0:14:02.160 on the phone from New Orleans with some you know, 0:14:02.240 --> 0:14:05.280 some really interesting commentary as it relates to the tariffs, 0:14:05.320 --> 0:14:08.920 and that's one we got to really focus on the Crofts. 0:14:08.920 --> 0:14:11.480 I thought what she said was really telling the idea 0:14:11.559 --> 0:14:16.000 that China's that we can expect China to announce concessions 0:14:16.040 --> 0:14:19.360 that they make ahead of any deal that gets reached, 0:14:19.680 --> 0:14:38.560 so that it seems like it's coming from their own volition. Well, 0:14:38.600 --> 0:14:43.000 another risk on day today in the markets, some optimism 0:14:43.000 --> 0:14:44.760 about China trade and what a year it's been in 0:14:44.800 --> 0:14:47.920 the smp fient year to date. A lot of folks 0:14:47.960 --> 0:14:51.200 are starting to look forward to seem about how they 0:14:51.240 --> 0:14:53.960 should position our portfolio. We can get some good color 0:14:54.000 --> 0:14:56.840 from our next guest, Clark Kendall, President CEO of Kendall Capital, 0:14:56.920 --> 0:14:59.760 joining us on the phone. Clark, thanks much for joining us. 0:15:00.120 --> 0:15:02.160 You know a lot of folks dealt with the pain 0:15:02.160 --> 0:15:04.800 and experience the pain of the fourth quarter last year, 0:15:05.360 --> 0:15:08.360 but then we're more than rewarded by the upside here 0:15:08.400 --> 0:15:13.040 in SMP up about year to date. What are your 0:15:13.040 --> 0:15:16.200 thoughts for the remainder of the year and heading Yeah, 0:15:16.400 --> 0:15:19.280 so far this has been a great year. Um, we 0:15:19.400 --> 0:15:22.440 are the investment managers for the middle class millionaire in 0:15:22.480 --> 0:15:26.040 the in the Washington, d C. Area. I think, you know, 0:15:26.600 --> 0:15:28.880 we've got to try to get away from just predicting 0:15:28.880 --> 0:15:33.280 the market but looking for opportunities within the market. Okay, 0:15:33.320 --> 0:15:36.480 so where do you see opportunities? Well, as I always say, 0:15:36.600 --> 0:15:39.520 it's sometimes it's easiest to know where not to invest. 0:15:39.600 --> 0:15:41.920 I think the ten year Treasury at one point nine 0:15:42.400 --> 0:15:46.040 is not attractive to me. The I p o s basically, 0:15:46.040 --> 0:15:47.720 the I p o s have come to market this 0:15:47.840 --> 0:15:50.920 year have come to market because they're starving for cash 0:15:51.840 --> 0:15:54.840 on the opposite side of the coin. And on top 0:15:54.880 --> 0:15:57.040 of that, the nifty fifty, the top fifty stocks of 0:15:57.080 --> 0:16:00.560 the SMP, are at huge value shoes, So I think 0:16:00.600 --> 0:16:04.600 the other four fifty stocks create great opportunities in today's market. 0:16:04.840 --> 0:16:07.640 Are there certain sectors, Clark that you think maybe have 0:16:07.760 --> 0:16:10.920 been left behind? Some people were suggesting maybe some international stocks. 0:16:10.960 --> 0:16:13.360 Maybe even maybe I'm going to the risk curve for 0:16:13.560 --> 0:16:16.080 emerging markets. What are your thoughts on where there might 0:16:16.120 --> 0:16:19.480 be some value. I think there's some great value. I 0:16:19.600 --> 0:16:21.720 like to look at things of price to cash flow. 0:16:22.200 --> 0:16:24.800 I think the fact that Schwab's buying t D and 0:16:24.880 --> 0:16:27.720 merrit Trade is a great example of a company looking 0:16:28.240 --> 0:16:30.360 in that foreign and fifty looking for cash flow. The 0:16:30.400 --> 0:16:33.840 fact that Walgreens is looking to go private, Why are 0:16:33.880 --> 0:16:35.880 they looking to go private because the cash flow is 0:16:35.880 --> 0:16:38.400 so strong. So I think there's some great companies out 0:16:38.440 --> 0:16:40.720 there in that four hundred and fifty where the cash 0:16:40.760 --> 0:16:43.720 flow is quite strong. So going into a lot of 0:16:43.720 --> 0:16:47.560 people are expecting a bit of a resurgeons in economic prospects, 0:16:47.560 --> 0:16:49.120 at least in the first half of the year, and 0:16:49.160 --> 0:16:51.400 then for that to sour in the second half. That 0:16:51.440 --> 0:16:54.680 seems to be the consensus. What are you advising your 0:16:54.720 --> 0:16:58.560 clients do heading into next year? Well, I think kind 0:16:58.600 --> 0:17:01.880 of predicting how fast the GDP will grow, where interest 0:17:01.960 --> 0:17:04.400 rates will go the short term, that's very hard to predict. 0:17:04.760 --> 0:17:08.160 Jeremy Pal basically pointed out we're in a good spot. 0:17:08.320 --> 0:17:10.879 We have low inflation, we have low interest rates, we 0:17:10.920 --> 0:17:13.919 have low GDP, we have all low unemployment, and I 0:17:13.920 --> 0:17:16.480 think we take advantage of that. We look at things 0:17:16.560 --> 0:17:19.840 like Norwegian Cruise Lines a great example of a company 0:17:19.880 --> 0:17:23.199 having strong cash flow with low unemployment people. It's a 0:17:23.240 --> 0:17:28.240 relatively cheap, cheap vacation. Things like United Rental. I mean, 0:17:28.280 --> 0:17:31.360 we're the economy is still growing and you know they 0:17:31.359 --> 0:17:34.320 have a great profit margin, great cash flows. So I 0:17:34.359 --> 0:17:38.000 think there's continues to be great opportunities in our economy. 0:17:38.080 --> 0:17:40.080 So Clark one of the areas that has really been 0:17:40.480 --> 0:17:42.480 the driver both on the downside. Do you think about 0:17:42.480 --> 0:17:44.880 the fourth quarter last year than the upside? Uh? This 0:17:44.960 --> 0:17:48.360 year has been technology and particularly some of the Fang stocks. 0:17:48.440 --> 0:17:51.159 Is that a group that is attractive to you or 0:17:51.160 --> 0:17:54.320 do you think it's just just too rich? I think 0:17:54.359 --> 0:17:56.399 I think we need to be very cautious with the 0:17:56.440 --> 0:17:59.440 Fang stocks and all the stocks in the nifty fifty. 0:17:59.480 --> 0:18:02.760 Well remember at the turn of the century. Um everyone 0:18:02.800 --> 0:18:05.280 at the turn of the century head Cisco and Dell 0:18:06.160 --> 0:18:09.080 qual Calm in their portfolios. Qual Calm has you know, 0:18:09.760 --> 0:18:13.160 revenue and earnings are up seventeen times at the stock 0:18:13.240 --> 0:18:16.760 prices two thirds the value was nineteen years ago. So 0:18:16.800 --> 0:18:18.760 I think we need to be cautious and That's why 0:18:18.760 --> 0:18:21.680 I'm saying go back to the fundamentals. Price to cash 0:18:21.720 --> 0:18:25.680 fell everyone's index thing. But I think there's great opportunities 0:18:26.040 --> 0:18:29.879 for the portfolio managers that pay attention to valuations. Clark Kendall, 0:18:29.920 --> 0:18:31.680 thank you so much for being with us. Clark Kendall, 0:18:31.720 --> 0:18:35.600 President and Chief executive Officer of Kendall Capital, joining us 0:18:35.840 --> 0:18:53.640 from Maryland. Well, it looks like Uber has run into 0:18:53.680 --> 0:18:58.280 another roadblock in London, losing their license over rider safety concerns. 0:18:58.280 --> 0:19:01.959 The stock is off about one point three percent today, 0:19:02.000 --> 0:19:04.720 off about from its I p O. We should say 0:19:04.760 --> 0:19:07.359 they have appealed that, so it's not a completely final 0:19:07.440 --> 0:19:10.880 thing yet. Absolutely, let's get the latest. Nate Langston, European 0:19:10.920 --> 0:19:14.399 technology editor for Bloomberg News, joining us from our London 0:19:14.600 --> 0:19:18.040 radio studios. So Nate, give us the latest on what's 0:19:18.080 --> 0:19:21.760 going on with Uber and the city of London. Yeah, well, 0:19:22.160 --> 0:19:24.040 a couple of It's just it's probably worth stepping back, 0:19:24.080 --> 0:19:26.440 just very briefly, because a couple of years ago, when 0:19:26.560 --> 0:19:31.679 Uber's previous full license M was refused a renewal, it 0:19:31.880 --> 0:19:36.040 immediately had to appeal and was allowed to continue operating 0:19:36.119 --> 0:19:39.520 for several months while that appeal took place, and to 0:19:39.920 --> 0:19:42.560 just over two years on from that, the same thing 0:19:42.840 --> 0:19:46.640 has happened again. It was applying for a new license 0:19:46.880 --> 0:19:50.080 and it was refused, and now Uber is appealing that 0:19:50.160 --> 0:19:53.320 license and is able to carry on operating at least 0:19:53.560 --> 0:19:58.400 while the appeals process goes through, so cars aren't being 0:19:58.400 --> 0:20:02.440 pulled off the road. Drivers can will accept new rides. Um, 0:20:02.480 --> 0:20:05.040 But obviously it's a huge blow in in one of 0:20:05.080 --> 0:20:08.320 the biggest markets that Uber has outside of the US. 0:20:08.520 --> 0:20:10.760 How do we view this? Is this a political issue 0:20:11.280 --> 0:20:14.280 with some of the other cab drivers in the city 0:20:14.280 --> 0:20:18.639 of London winning a political battle here versus a legitimate 0:20:18.680 --> 0:20:22.800 complaint that regulators have against Uber. There is a legitimate 0:20:22.920 --> 0:20:26.239 reason for complaint here. They did TfL who's our our 0:20:26.359 --> 0:20:31.479 transit authority? Here did find evidence of many journeys fourteen 0:20:31.520 --> 0:20:36.400 thousand journeys at least being being made by drivers who 0:20:36.480 --> 0:20:39.320 either didn't have a license or even had had their 0:20:39.359 --> 0:20:42.000 license revoked in the past. And I think that that 0:20:42.040 --> 0:20:45.480 speaks for itself as to the political angle. Um, if 0:20:45.480 --> 0:20:48.320 you ask any black cab driver here in London whether 0:20:48.359 --> 0:20:51.840 they like Uber, you'll get a pretty unanimous response that 0:20:51.920 --> 0:20:55.880 they do not. And Siddik Khan, who's the Mayor of London, 0:20:56.400 --> 0:21:00.000 is on the Labor party side of the political spectrum 0:21:00.080 --> 0:21:04.280 here and he's come out in support for what TfL 0:21:04.400 --> 0:21:06.840 has done as well. And there's a very big union 0:21:06.880 --> 0:21:10.520 support on the labor side for for the black cab industry. 0:21:10.640 --> 0:21:12.680 So it's it is easy to think that there's a 0:21:12.800 --> 0:21:16.840 there's an element of political motivation here, but fundamentally, the 0:21:16.920 --> 0:21:21.480 decision is for the regulator, which is a political and 0:21:21.560 --> 0:21:24.480 that's the that's the body that's made this decision and 0:21:24.520 --> 0:21:26.720 had the final say. So, Nate, give us a sense 0:21:26.720 --> 0:21:29.919 of how the good people of London view their black 0:21:29.960 --> 0:21:32.760 taxi cab fleet. I mean, when I'm in London, I 0:21:32.800 --> 0:21:35.160 just think it's a joy to use. It's a great, 0:21:35.200 --> 0:21:37.440 great service, it's a great experience and I can trust 0:21:37.480 --> 0:21:39.360 it with what we have had to deal with here 0:21:39.400 --> 0:21:43.280