WEBVTT - A Check On Commodities, Markets, The Economy 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.640 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.840 at Bloomberg dot com slash podcast. So, Matt, I've got 0:00:21.920 --> 0:00:25.480 the one year chart for gold up on my Bloomberg 0:00:25.520 --> 0:00:27.800 termo here and about a year ago a u x 0:00:27.840 --> 0:00:31.240 AU currency x au absolutely uh, kind of started the 0:00:31.320 --> 0:00:34.280 year around nineteen fifty announced and here we are down 0:00:34.360 --> 0:00:37.159 just below eighteen hundred dollars announced, so you know a 0:00:37.159 --> 0:00:41.200 little bit, you know, not really showing its performance there 0:00:41.440 --> 0:00:43.800 and kind of wondering kind of what the sentiment is 0:00:43.880 --> 0:00:46.879 out there for gold. Let's bring in Everett Milman, Precious 0:00:46.880 --> 0:00:52.800 Metal Specialists for Gainesville Coins based in Gainesville, Florida. So Gainesville, 0:00:52.840 --> 0:00:56.080 Florida is University of Florida, that's right in Florida state 0:00:56.120 --> 0:00:59.840 is in Gallas, Tallahassee. Okay, I got it, um, Everett, 0:00:59.880 --> 0:01:02.840 they switch for joining us here. What is the sentiment 0:01:02.920 --> 0:01:07.840 for gold out there right now? I think we have 0:01:07.920 --> 0:01:10.120 to admit that the sentiment in the gold market has 0:01:10.160 --> 0:01:13.520 been fairly poor of late UM, and we've seen gold 0:01:13.600 --> 0:01:18.280 function more as a fear and sentiment trade rather than 0:01:18.319 --> 0:01:22.240 a truly reliable inflation hedge. As the prices are down 0:01:22.319 --> 0:01:24.880 quite a bit ear date, and in that sense, we 0:01:24.920 --> 0:01:27.080 can look at the gold price as a pretty good 0:01:27.120 --> 0:01:30.640 gauge of of risk appetite UM. Gold has been sensitive 0:01:30.680 --> 0:01:34.760 to recent economic data, so we saw a big rally 0:01:34.800 --> 0:01:37.480 on the mists and last month's non farm payrolls, and 0:01:37.560 --> 0:01:40.440 yet UM earlier this morning, with the surprise of the 0:01:40.520 --> 0:01:44.480 upside and the Empire State manufacturing survey, we saw gold 0:01:44.560 --> 0:01:47.520 pull back. So I think it's fair to say that 0:01:48.400 --> 0:01:50.920 the gold market really has ignored some of the major 0:01:51.000 --> 0:01:55.360 macro drivers like US China relations and the levels of 0:01:55.400 --> 0:01:58.520 global debt that normally have an impact on price. Those 0:01:58.520 --> 0:02:02.080 are really faded into the background during the third quarter, 0:02:02.240 --> 0:02:07.320 and so long as risk appetite remains healthy, inequity markets UM. 0:02:07.360 --> 0:02:10.160 I don't think big funds and retail investors will want 0:02:10.200 --> 0:02:14.120 to incur the opportunity cost of holding a nonproductive asset 0:02:14.200 --> 0:02:16.720 like gold. If economies are on the world do indeed 0:02:16.760 --> 0:02:21.760 recover relatively smoothly, and that makes sense, you know. Otherwise, Ever, 0:02:21.880 --> 0:02:26.720 if you look at UM rates this low, coupled with 0:02:27.000 --> 0:02:30.840 trillions and trillions and trillions of dollars of spending, a 0:02:30.919 --> 0:02:34.440 FED balance sheet doubling, and in the course of eighteen months, 0:02:34.480 --> 0:02:37.079 you would think that gold just flies on that, right, 0:02:38.639 --> 0:02:41.440 you would, You would um. Certainly the case of low 0:02:41.520 --> 0:02:45.320 interest rates for longer is a positive narrative for gold um. 0:02:45.360 --> 0:02:47.800 But it does seem that the broader markets have a 0:02:47.840 --> 0:02:51.520 conviction that the FED will be successful and threading the 0:02:51.560 --> 0:02:57.360 needle and nailing the goldilocks timing between UH tapering and 0:02:57.480 --> 0:03:00.200 raising rates not too soon or not too late eights 0:03:00.800 --> 0:03:04.239 UM and expecting the Federal Reserve to do so amid 0:03:04.280 --> 0:03:08.760 the unprecedented economic shock of a global pandemic. That does 0:03:08.880 --> 0:03:12.200 seem to be expecting a lot. But as we've seen 0:03:12.240 --> 0:03:15.200 with gold not taking off and setting new highs, that 0:03:15.240 --> 0:03:18.520 does seem to be. The expectation is that the FED 0:03:18.560 --> 0:03:23.239 will navigate a soft landing of the situation and rates 0:03:23.320 --> 0:03:27.360 will normalize, bond purchases will be tapered smoothly, and that 0:03:27.400 --> 0:03:30.000 will make it out of this without a scratch. But 0:03:30.880 --> 0:03:34.000 gold is always there, as that fear gage. As I 0:03:34.080 --> 0:03:37.040 mentioned that if all of that doesn't go according to plan, 0:03:37.560 --> 0:03:41.160 UM holding some gold does function as an insurance policy. 0:03:42.040 --> 0:03:44.560 So every I'm also looking at, you know, other precious 0:03:44.560 --> 0:03:48.240 metals like platinum and palladium, and they're down kind of 0:03:48.360 --> 0:03:51.880 you know, thirteen fourteen, fifteen, sixteen percent year to date. 0:03:52.000 --> 0:03:54.920 Is that is that simply a reflection of they're not 0:03:54.960 --> 0:03:57.960 making as many cars because of all the various chip 0:03:57.960 --> 0:04:02.880 shortages and whatnot. Yes, UM, we finally have seen prices 0:04:02.920 --> 0:04:06.360 for used cars and rental cars cool off, and there 0:04:06.360 --> 0:04:10.760 are some encouraging signs that micro chip manufacturers maybe on 0:04:10.800 --> 0:04:14.440 the cusp of catching up with demand UM, but the 0:04:14.480 --> 0:04:18.040 production stalls with the semiconductor shortage. That really was one 0:04:18.080 --> 0:04:21.560 of the main reasons that we saw palladium and platinum 0:04:21.560 --> 0:04:26.240 prices searched so high. UM. Now, with a potential surplus 0:04:26.279 --> 0:04:30.200 in palladium later this year, UM, we are seeing that 0:04:30.680 --> 0:04:33.919 swift pullback. UM. Palladium is looking to break a streak 0:04:34.000 --> 0:04:37.200 of six consecutive trading days in the red UM, but 0:04:37.279 --> 0:04:42.040 it's about thirty off its peak. UM really is all 0:04:42.080 --> 0:04:45.080 dependent on automobile demand and the fact that that is 0:04:45.120 --> 0:04:48.960 perhaps waning UM is weighing very heavily on those two metals. Well, 0:04:49.000 --> 0:04:51.760 you know, I was just at the Munich Auto Show, Everett, 0:04:51.880 --> 0:04:54.440 and it seemed to me when I was there as 0:04:54.480 --> 0:04:58.120 if the CEOs various CEOs were jockeying for position when 0:04:58.160 --> 0:05:03.080 it came to locking own supply of the materials necessary 0:05:03.160 --> 0:05:06.000 for e vs for building electric vehicles. What what do 0:05:06.000 --> 0:05:08.280 you think which commodities have the best are the most 0:05:08.360 --> 0:05:12.120 room to run in terms of EV production. So it 0:05:12.240 --> 0:05:16.479 is true that electric vehicles would perhaps uh put some 0:05:16.600 --> 0:05:20.679 damper on demand for platinum and palladium in catalytic converters. 0:05:20.680 --> 0:05:24.000 So really the commodities are metals that stand to benefit 0:05:24.120 --> 0:05:26.960 the most from that trend towards e vs would be 0:05:27.080 --> 0:05:31.200 copper and silver. UM. The average electric vehicle uses even 0:05:31.240 --> 0:05:36.960 more copper than our combustion engine or normal UM automobiles. UM, 0:05:37.040 --> 0:05:40.400 and silver plays an especially important role in that UM. 0:05:40.440 --> 0:05:44.040 It's the long term uses for silver in industry UM, 0:05:44.080 --> 0:05:47.560 particularly in the green economy, are rather bullish. UM. I 0:05:47.600 --> 0:05:49.479 think the one thing standing in the way with that 0:05:49.560 --> 0:05:52.400 really are trade relations between the U S and China 0:05:52.440 --> 0:05:55.200 and whether those medals will be able to get to 0:05:55.279 --> 0:05:59.839 market UM. To see ev production expand. But but silver 0:06:00.040 --> 0:06:02.359 really is well positioned to benefit from that if we 0:06:02.440 --> 0:06:05.200 do indeed see a pretty rapid rise in adoption of 0:06:05.240 --> 0:06:09.440 electric vehicles. Alright, just sconds Everett. What's the best metal? 0:06:09.560 --> 0:06:12.080 Long here? From your perspective over the next six twelve months, 0:06:13.600 --> 0:06:16.000 I still think silver is the best of the bunch. 0:06:16.120 --> 0:06:19.839 We have seen lag gold and perhaps UM the gold 0:06:19.839 --> 0:06:22.680 market has absorbed most of its gains that we're going 0:06:22.720 --> 0:06:25.520 to see one. I think silver still has more room 0:06:25.560 --> 0:06:29.200 to run and figures very prominently in that UM future 0:06:29.240 --> 0:06:33.120 of green energy usage. Everett. Always great to get your take. 0:06:33.160 --> 0:06:36.919 Thanks so much for joining us on the program, Everett Millman, 0:06:37.520 --> 0:06:41.760 um there he comes to us to talk about precious 0:06:41.760 --> 0:06:45.000 metals as well as sometimes crypto. We didn't hit crypto today, 0:06:45.000 --> 0:06:48.760 but from Gainesville Coins. Always great to get his inside. 0:06:48.839 --> 0:06:56.040 This is Bloomberg. Let's bring in Christina Hooper. She is 0:06:56.120 --> 0:06:59.520 chief global market strategist at Investco. They have more than 0:07:00.000 --> 0:07:03.560 one point for trillion dollars in assets under management, and 0:07:03.560 --> 0:07:06.640 she joins us out of Atlanta. Christine, I'd love to 0:07:06.640 --> 0:07:09.840 get your take first off on the US economy after 0:07:09.880 --> 0:07:15.360 we got that um more subdued inflation data yesterday. UM, 0:07:15.400 --> 0:07:17.600 how does it look to you in terms of growth 0:07:17.640 --> 0:07:23.320 and prices? Well, the more subdued inflation data really wasn't 0:07:23.360 --> 0:07:27.720 that impactful in a positive sense because we had gotten 0:07:27.960 --> 0:07:31.000 a p p I number UM that suggested we have 0:07:31.160 --> 0:07:35.320 more inflation to come. We're seeing factory gate numbers China 0:07:35.360 --> 0:07:38.440 factory gate numbers that are high. So UM, the big 0:07:38.560 --> 0:07:42.120 increase in inflation is not over. But I still have 0:07:42.360 --> 0:07:45.680 to stress that I believe it is temporary. It's just 0:07:45.800 --> 0:07:49.200 not as temporary as some would like to have it UM. 0:07:49.320 --> 0:07:52.600 So all in all, the US economy is and I 0:07:52.640 --> 0:07:56.640 believe good shape UM. And I don't think that what 0:07:56.680 --> 0:08:01.480 we're seeing in terms of of UM good initial jobless 0:08:01.600 --> 0:08:06.720 claims UM is going to stop UM is going to 0:08:06.760 --> 0:08:08.640 have any kind of impact on the set. I don't 0:08:08.640 --> 0:08:10.440 think the weak jobs report is going to have an 0:08:10.480 --> 0:08:12.200 impact on the set. I think they're going to stick 0:08:12.240 --> 0:08:15.160 with their timeline and announce the tapering the start of 0:08:15.200 --> 0:08:19.600 tapering UM next next week, and hopefully commence it soon 0:08:19.640 --> 0:08:24.440 after that. All right, So Christina, given that backdrop here, UM, 0:08:24.520 --> 0:08:26.440 you know, Matt and I were just chatting with with 0:08:26.480 --> 0:08:29.440 a guest who was suggesting that who was actually buying 0:08:29.520 --> 0:08:33.160 cyclical stocks here in in recent weeks. How do you 0:08:33.200 --> 0:08:35.920 think about kind of the equity markets here given your 0:08:35.920 --> 0:08:39.360 economic outlook, you know, kind of cyclical stocks, maybe some 0:08:39.400 --> 0:08:42.360 small cap stocks versus uh, some of the you know, 0:08:42.440 --> 0:08:46.040 tried and true growth names. That is the sixty four 0:08:46.120 --> 0:08:49.840 tho dollar question. What I think we will see is 0:08:50.400 --> 0:08:54.360 out performance by cyclicles in the next several months, but 0:08:54.400 --> 0:08:58.640 it's going to be narrow out performance because UM, we 0:08:58.760 --> 0:09:03.520 certainly have seen a very strong growthsburg UM. We're likely 0:09:03.559 --> 0:09:06.760 to see more strength in the economy this fall UM, 0:09:06.800 --> 0:09:09.400 but at a certain point that growth is going to 0:09:09.480 --> 0:09:13.439 moderate again, and so I would suspect that in advance 0:09:13.480 --> 0:09:18.960 of that UM markets will start to UM favor defensive 0:09:19.440 --> 0:09:22.840 secular growth UM. So, so in the shorter term, I 0:09:22.880 --> 0:09:26.480 think value encyclicals win not every day, UM, but but 0:09:26.720 --> 0:09:29.479 most days. I think there will be narrow out performance. 0:09:29.640 --> 0:09:32.280 And then at a certain point UM we're likely to 0:09:32.320 --> 0:09:37.040 see a shift UM with with UM more inclusive performance 0:09:37.520 --> 0:09:40.760 or in fact, at a certain point, defensive and secular 0:09:40.800 --> 0:09:46.760 growth outperforming. What do you looking for in terms of 0:09:47.080 --> 0:09:49.600 you know, the monetary side has been so important to 0:09:49.679 --> 0:09:54.120 investing until recently, not that it isn't anymore. But the 0:09:54.120 --> 0:09:57.440 fiscal side now is so key. And yet I hear 0:09:57.480 --> 0:10:01.360 so many investors saying, you know, their strategy doesn't depend 0:10:01.600 --> 0:10:06.440 on an infrastructure package or lack thereof. Well, I think 0:10:06.480 --> 0:10:10.920 we have to draw a distinction. I believe fiscal policy 0:10:11.120 --> 0:10:14.280 matters so much from main street for the economy, but 0:10:14.320 --> 0:10:18.600 in terms of markets, monetary policy, in my view, matters 0:10:18.640 --> 0:10:21.959 more so. The fact that we have an extremely accommodative 0:10:21.960 --> 0:10:24.920 set that even when tapering starts, the SAID will still 0:10:24.960 --> 0:10:29.360 be adding to its balance sheet is very positive for stocks. Yes, 0:10:29.440 --> 0:10:32.520 of course fiscal policy plays a role, but I think 0:10:32.679 --> 0:10:37.520 monetary policy plays an outsized role. UM. Now, of course, 0:10:38.040 --> 0:10:43.199 if we have all kinds of fiscal stimulus UM taken away, 0:10:43.360 --> 0:10:47.280 that can provide some hiccups. Just like UM, the lack 0:10:47.320 --> 0:10:51.280 of an infrastructure package might cause concern among investors, but 0:10:51.320 --> 0:10:55.320 I think it is not UM. It's it's misplaced because 0:10:55.800 --> 0:11:00.480 UM infrastructure spending would occur over time anyway. UM tends 0:11:00.520 --> 0:11:03.800 to be something that that happens over year over year 0:11:03.840 --> 0:11:07.679 over year. It's not like giving a one time stimulus 0:11:07.720 --> 0:11:12.560 payment or multiple stimulus payments that go into people's bank accounts. 0:11:12.600 --> 0:11:15.720 So I think infrastructure spending is important for other reasons. 0:11:15.720 --> 0:11:18.800 I think of it as government capex, UM, but it 0:11:18.920 --> 0:11:21.280 shouldn't have I don't think we should think of it 0:11:21.360 --> 0:11:25.080 as primarily fiscal stimulus that would have an immediate impact 0:11:25.160 --> 0:11:30.360 like other forms of of fiscal spending would. Christina, what 0:11:30.440 --> 0:11:33.240 are you and the portfolio managers at Investo looking at 0:11:33.280 --> 0:11:36.200 really over the next several months and quarters in terms 0:11:36.240 --> 0:11:38.440 of kind of where these markets are going to go? 0:11:38.559 --> 0:11:42.240 Is is it simply the pandemic, the virus or there 0:11:42.240 --> 0:11:46.959 other things? Well, Um, there are a few different factors 0:11:46.960 --> 0:11:51.520 at play. I would say, um that that first and foremost, UM, 0:11:51.800 --> 0:11:56.400 I think you know, the outlook is positive for the 0:11:56.440 --> 0:12:00.960 economy and markets, but there are some tail risks that 0:12:01.080 --> 0:12:03.760 we have to be aware of, even if they're low probability, 0:12:03.800 --> 0:12:06.959 because they could have a significant impact. UM. The first, 0:12:06.960 --> 0:12:09.480 of course is the resurgence of the pandemic. But when 0:12:09.520 --> 0:12:13.560 I say that, I mean a COVID nineteen variant that 0:12:13.720 --> 0:12:17.160 is not protected against by existing vaccines, and we haven't 0:12:17.200 --> 0:12:19.640 seen that yet. UM, But that to me would be 0:12:20.000 --> 0:12:22.400 a worth case scenario. I don't think it would plunge 0:12:22.440 --> 0:12:24.920 us into a deep recession like it did in the 0:12:24.960 --> 0:12:27.200 spring of because we've learned how to adapt, but it 0:12:27.200 --> 0:12:29.720 would be a real, real problem. UM. And then, of course, 0:12:29.760 --> 0:12:33.079 the other tail risk scenario is the FED policy error. 0:12:33.280 --> 0:12:36.360 I'm getting too aggressive because they're concerned about inflation. I 0:12:36.400 --> 0:12:39.400 don't see either one happening. UM. I think the Fed 0:12:39.559 --> 0:12:44.199 is is UM has taking a very measured and thoughtful approach. Christina, 0:12:44.280 --> 0:12:46.240 thank you so much again for joining us. We really 0:12:46.240 --> 0:12:50.080 appreciate you taking the time. Christina Hooper, chief market strategists 0:12:50.160 --> 0:12:54.480 globally for Investco, love getting her thoughts on the economy 0:12:54.640 --> 0:12:59.440 and on these financial markets. All right, let's talk about 0:12:59.440 --> 0:13:02.520 this market here. We've had some folks talking about maybe 0:13:03.440 --> 0:13:07.440 rotating into more cyclical names, perhaps, you know, sensing perhaps 0:13:07.440 --> 0:13:11.280 a reopening trade that's certainly worked well at times since 0:13:11.360 --> 0:13:17.400 this pandemic began. What's happening, Yeah, exactly. Let's uh check 0:13:17.440 --> 0:13:19.800 in with Chance Fanuka and he's chief investment officer at 0:13:19.840 --> 0:13:23.720 Oxbow Advisors based in I guess he's in Austin, Texas today. 0:13:23.720 --> 0:13:25.400 We're mad. I think they have a small college or 0:13:25.520 --> 0:13:27.839 university there or something. I'm not sure. Maybe play a 0:13:27.840 --> 0:13:29.880 little football. So Chance, thanks so much for joining us. 0:13:29.880 --> 0:13:33.240 Here talk to us about cyclical stocks and and maybe 0:13:33.240 --> 0:13:36.320 how they feature in what you guys are doing today 0:13:36.360 --> 0:13:41.040 at Oxbow Advisors. Sure, thanks, Paul and Matt. So what 0:13:41.080 --> 0:13:44.480 we've noticed is if you're looking to add defensives or 0:13:44.480 --> 0:13:46.960 growth stocks into your portfolio this year, the time to 0:13:47.000 --> 0:13:49.480 do that was really in the first quarter. You saw 0:13:49.679 --> 0:13:52.800 some good valuations back in March especially, but some of 0:13:52.800 --> 0:13:55.440 those defensive stocks have really taken off in the last 0:13:55.480 --> 0:13:59.319 six months. For instance, American Tower and Costco both appreciated 0:13:59.320 --> 0:14:05.040 by fifty scent. Yeah, they're there. So what we've noticed 0:14:05.160 --> 0:14:07.960 is even though the markets making record highs here in 0:14:08.000 --> 0:14:12.640 recent months, last month, the average stock in the SMPRED 0:14:12.679 --> 0:14:15.600 was down si from its fifty two week highs, and 0:14:15.640 --> 0:14:18.480 a lot of that was coming from cyclical and value sectors. 0:14:18.520 --> 0:14:22.040 As interest rates came down and the delta variants started 0:14:22.040 --> 0:14:24.400 to spread around the world, and we thought that would 0:14:24.440 --> 0:14:26.560 be a good time to start moving a little bit 0:14:26.600 --> 0:14:30.040 more of our portfolio towards cyclicals. And the three names 0:14:30.040 --> 0:14:31.680 that we came up with that we added to our 0:14:31.720 --> 0:14:36.840 client's equity portfolios last month where Salesforce Booking Holdings in Berkshire, 0:14:36.840 --> 0:14:41.760 Hathaway and so these aren't necessarily the kind of cyclicals 0:14:41.800 --> 0:14:43.680 I would think of. At least two of them are 0:14:43.720 --> 0:14:49.880 really techy, right salesforce I would considered techy. Booking is 0:14:49.920 --> 0:14:52.280 one that I would think as more of a pure 0:14:52.320 --> 0:14:58.520 consumer discretionary. If you've been following the online travel agencies Booking, Expedia, 0:14:58.560 --> 0:15:02.160 and Airbnb, along with the hotels, they've all been moving 0:15:02.200 --> 0:15:05.640 together through this pandemic. As you talked about the re 0:15:05.640 --> 0:15:09.200 reopening happening, and I think as there were concerns about 0:15:09.200 --> 0:15:11.640 the delta variant picking up in recent months, you saw 0:15:11.760 --> 0:15:15.360 those companies shares sell off and this is the one 0:15:15.360 --> 0:15:17.160 that we think is the highest quality right now, and 0:15:17.200 --> 0:15:19.040 felt it was a good time to add to the portfolio. 0:15:19.400 --> 0:15:21.840 So Chance and what are the When you think about bookings, 0:15:21.880 --> 0:15:25.520 Holdings obviously a big play on consumer travel. How much 0:15:25.800 --> 0:15:28.200 do they depend upon business travel because that seems like 0:15:28.240 --> 0:15:30.960 something that from what we're hearing, is going to be slower, 0:15:31.080 --> 0:15:34.840 much slower to come back here. I don't think it's 0:15:34.840 --> 0:15:37.000 as big of a concern for them as the global 0:15:37.080 --> 0:15:41.360 hotels that may feature more business travelers in their network. 0:15:41.840 --> 0:15:43.920 I think if you think about Booking, they actually are 0:15:43.920 --> 0:15:47.640 more exposed to Europe than their peers, and they have 0:15:47.680 --> 0:15:50.280 a lot of independent hotels in Europe that rely on 0:15:50.400 --> 0:15:53.440 Booking dot Com in order to get guests coming in 0:15:53.520 --> 0:15:56.040 on a daily basis. So I think that was part 0:15:56.040 --> 0:15:58.120 of the sell off was as the delta variants spread, 0:15:58.200 --> 0:16:01.280 especially in Europe. There are some concern in the short term, 0:16:01.360 --> 0:16:03.360 but for us, when we take a five year outlook, 0:16:03.560 --> 0:16:06.120 we would expect revenue for Booking to return to its 0:16:06.120 --> 0:16:09.040 twenty nineteen levels next year and then continue to ramp 0:16:09.120 --> 0:16:13.680 up to record high is going into When you think 0:16:13.720 --> 0:16:18.120 about sales Force, I mean, what what drives that investment? 0:16:18.600 --> 0:16:22.200 Are you? Are you seeing a lot of corporate um 0:16:22.640 --> 0:16:27.120 you know, capex increases. I think for us, the way 0:16:27.160 --> 0:16:30.280 we think about the software of the service companies is 0:16:30.360 --> 0:16:33.840 just really wanting to play along with that secular growth trend. 0:16:34.280 --> 0:16:38.320 The underlying uh markets that Salesforce operates in. Our growing 0:16:38.400 --> 0:16:41.280 tend to twenty a year, which is a nice starting point. 0:16:41.640 --> 0:16:43.960 And then you've got one of the few remaining large 0:16:44.000 --> 0:16:46.920 tech companies is still run by its founder. If you 0:16:46.920 --> 0:16:49.120 think about the really large tech businesses, there's only about 0:16:49.160 --> 0:16:53.520 three left along with Facebook and Nvidia, that are really 0:16:53.560 --> 0:16:56.760 really still run by a founder or co founder, and 0:16:56.800 --> 0:16:59.640 so you have some of with that kind of visionary mindset, 0:17:00.160 --> 0:17:03.480 uh in a strong history of making smart acquisitions. We 0:17:03.600 --> 0:17:06.359 like partnering up with someone like that, especially in an 0:17:06.359 --> 0:17:09.840 industry that's still growing at a double digit rate. Chance, 0:17:09.840 --> 0:17:13.280 when I think about Berkshire, I'm just not sure it's 0:17:13.320 --> 0:17:15.400 anything more than kind of a g d P play. 0:17:15.480 --> 0:17:17.560 I'm just not sure what the catalyst is out there 0:17:17.840 --> 0:17:22.000 for this name, barring you know, a monstrous acquisition. Um, 0:17:22.040 --> 0:17:25.879 how do you think about that in terms of catalysts. Sure, 0:17:26.119 --> 0:17:28.200 I think we viewed a little bit differently in terms 0:17:28.200 --> 0:17:31.120 of how it fits into our client's portfolio. So for us, 0:17:31.520 --> 0:17:34.399 we always a look into some counterbalances UH in the 0:17:34.440 --> 0:17:36.760 portfolio that are going to act more defensively if we 0:17:36.800 --> 0:17:39.720 get a bear market. But what we've noticed is we'd 0:17:39.800 --> 0:17:42.359 rather own something like Berkshire Hathaway. They can provide that 0:17:42.400 --> 0:17:45.760 sort of GDP growth plus share buybacks which have picked 0:17:45.840 --> 0:17:48.000 up in the last two years, compared to owning something 0:17:48.080 --> 0:17:51.080 like Johnson and Johnson and nest Lee that maybe a 0:17:51.160 --> 0:17:54.679 stalwart in a defensive environment, but really are not going 0:17:54.720 --> 0:17:58.159 to participate in an economic reopening like we might have 0:17:58.200 --> 0:18:03.800 over the next couple of years. Are you expecting real 0:18:03.840 --> 0:18:06.840 fiscal stimulus? Are you expecting the infrastructure, build the passes 0:18:06.880 --> 0:18:10.720 that does that play doesn't matter not so much to us. 0:18:10.760 --> 0:18:15.080 I don't think we're ever trying to get ahead of 0:18:15.119 --> 0:18:18.960 any sort of political dynamics in the shorter term. If 0:18:18.960 --> 0:18:20.840 they happen to benefit the companies that we do own, 0:18:20.880 --> 0:18:23.720 that's terrific. But we're looking more to try and own 0:18:23.760 --> 0:18:27.120 anything for five even ten years, and so usually we're 0:18:27.119 --> 0:18:29.320 looking for companies that are going to benefit from more 0:18:29.440 --> 0:18:32.800 structural growth trends and are less reliant on political outcomes, 0:18:32.880 --> 0:18:36.560 working to their to their favor. All right, Chance, thanks 0:18:36.560 --> 0:18:38.880 so much for joining us. Oh, it's great to get 0:18:38.920 --> 0:18:41.760 your insight. Chance for nuke In there is a chief 0:18:41.760 --> 0:18:46.399 investment officer at Oxbow Advisors talking about moving into three 0:18:46.440 --> 0:18:50.800 cyclical stocks that they have um bought in August, Salesforce, 0:18:50.920 --> 0:18:55.879 dot Com, Booking Holdings in Berkshire, Hathaway, really really interesting moves. 0:18:56.000 --> 0:18:59.720 As we saw this, the rotation kind of peter out, 0:18:59.760 --> 0:19:03.639 and now we're hearing from others including Marco Marko Kolanovitch. 0:19:03.840 --> 0:19:05.639 As I said from JP Morgan that it's time for 0:19:05.680 --> 0:19:13.119 the re reopening trade, get back into those cyclicals. All right, 0:19:13.160 --> 0:19:15.399 So as we think about these equity markets here, we 0:19:15.440 --> 0:19:18.960 know folks are thinking about re reopening of the economy, 0:19:19.000 --> 0:19:20.560 if you will, and do I take on some more 0:19:20.960 --> 0:19:23.199 cyclical risk or do I stick with the tried and 0:19:23.280 --> 0:19:26.760 true growth stories that give me both top line and 0:19:26.920 --> 0:19:30.000 bottom line and growth. Let's bring in Adam Kuhn's portfolio 0:19:30.040 --> 0:19:34.840 manager and trade were Winthrop Capital. They are based in Indianapolis, Indiana. 0:19:34.960 --> 0:19:38.399 Talk about the heartland there outstanding. So Adam, thanks so 0:19:38.480 --> 0:19:40.920 much for joining us here. What camp do you come 0:19:40.960 --> 0:19:42.399 down in here? There's a lot of folks that have 0:19:42.520 --> 0:19:45.640 done really well with kind of that reopening trade. Where 0:19:45.640 --> 0:19:48.880 where are you guys thinking right now? Yeah? For something's 0:19:48.920 --> 0:19:52.240 having me? Yeah. Really, what we're looking at is from 0:19:52.240 --> 0:19:55.439 a top down approach is where is the economy heading? 0:19:55.480 --> 0:19:58.840 And we're seeing a lot of signs of the slowdown 0:19:59.000 --> 0:20:01.320 And um, you're gonna start to hear this word throwing 0:20:01.320 --> 0:20:04.000 around quite a bit, but it absolutely looks like we're 0:20:04.040 --> 0:20:08.600 seeing signs of stagflation where inflation is remaining high, yet 0:20:08.680 --> 0:20:12.480 growth is beginning to slow and in some pockets dramatically. 0:20:13.240 --> 0:20:16.320 And because of that, we are pulling back on the 0:20:16.520 --> 0:20:21.440 you know, reflation COVID affected industry trade and moving back 0:20:21.480 --> 0:20:26.000 towards the more tried and true names like Apple, Microsoft, 0:20:26.040 --> 0:20:30.679 and Alphabet that you know, just have great cash flow, 0:20:31.080 --> 0:20:34.240 a great business model that can sustain through you know, 0:20:34.280 --> 0:20:38.600 a lot of volatility and economic headplines. The second time 0:20:38.600 --> 0:20:43.240 I've heard someone talk about stagflation this week. Um, even 0:20:43.280 --> 0:20:47.560 though we got a more subdued inflation number and the 0:20:47.680 --> 0:20:53.280 last UH data release, are you the growth slowdown is 0:20:53.280 --> 0:20:54.920 what is? What is? What? It looks scary to me? 0:20:54.960 --> 0:20:57.000 Are you concerned that the growth slowdown we're seeing in 0:20:57.000 --> 0:21:00.640 the third quarter is going to continue on? Yeah? So, 0:21:00.760 --> 0:21:04.760 you know, while we did get a slow down in inflation, 0:21:04.800 --> 0:21:08.840 if you look at UH average hourly earnings, they're still 0:21:08.880 --> 0:21:12.280 above four percent. So if you're paying employees more and 0:21:12.320 --> 0:21:15.159 you're still seeing a lot of jobs that are unfilled 0:21:15.720 --> 0:21:18.720 total job openings, is that a record high? Um? So, 0:21:18.760 --> 0:21:21.119 I think you're gonna see employees continue to be paid 0:21:21.400 --> 0:21:24.240 quite a bit. So you're gonna see savings rates continue 0:21:24.280 --> 0:21:28.760 to be high, and effectively, if they can spend the money, 0:21:28.920 --> 0:21:32.040 they will, and that's going to keep inflation higher in 0:21:32.080 --> 0:21:35.760 the short term. Um. But the problem is that that 0:21:35.960 --> 0:21:38.000 where can they spend their money? And we're seeing supply 0:21:38.080 --> 0:21:44.160 chain issues continue uh to pick up, and frankly, there's 0:21:44.200 --> 0:21:48.040 just not a lot that consumers can spend the money 0:21:48.080 --> 0:21:51.400 on um outside of just the traditional things that they buy. 0:21:51.520 --> 0:21:54.639 So heading into the holiday season, it might not be 0:21:54.680 --> 0:21:58.800 a story of what can consumers buy and it's what 0:21:58.800 --> 0:22:01.200 what is it actually a bailable So I think what 0:22:01.240 --> 0:22:03.280 we're going to see is this kind of dislocation of 0:22:03.320 --> 0:22:05.879 what consumers are have the ability to buy from a 0:22:06.480 --> 0:22:09.520 from a financial standpoint, and what they can physically go 0:22:09.600 --> 0:22:11.879 and find in the store or online. And so I 0:22:11.880 --> 0:22:15.040 think that's gonna be a reduction to growth and I 0:22:15.040 --> 0:22:16.760 think that's why we're going to see the fourth quarter 0:22:16.920 --> 0:22:20.399 be quite a bit slower than what we're expecting. All Right, 0:22:20.440 --> 0:22:22.520 So if you're focusing on some of the higher growth, 0:22:22.600 --> 0:22:25.359 you know, perhaps to the technology sector, talk to us 0:22:25.359 --> 0:22:29.359 about valuation here because that's always a challenge for people 0:22:29.480 --> 0:22:32.640 in that space. But what is your view of valuation 0:22:32.680 --> 0:22:34.359 as you take a look at some of these uh, 0:22:34.520 --> 0:22:38.160 fast growing tech names. Yeah, so we're careful not to 0:22:38.200 --> 0:22:41.159 throw around, uh you know, this time is different anything 0:22:41.200 --> 0:22:44.439 like that. Evaluation since then the day absolutely matters, but 0:22:44.880 --> 0:22:49.600 low interest rates do help the case for higher multiples. 0:22:50.280 --> 0:22:53.200 So we generally think that a lot of these technology 0:22:53.240 --> 0:22:56.879 stocks that I just mentioned earlier are fairly valued. We 0:22:56.920 --> 0:22:59.040 would not call them over valued in in any way. 0:22:59.520 --> 0:23:02.080 When you get the growth potential in the way that 0:23:02.080 --> 0:23:06.240 they're able to monetize just different businesses, we think that 0:23:06.320 --> 0:23:08.880 these valuations do make sense, So that's why we're still 0:23:08.880 --> 0:23:11.760 investing in them. But what we're doing is when we're 0:23:11.800 --> 0:23:15.120 looking for value is we've begun to add to Chinese 0:23:15.200 --> 0:23:20.680 technology companies, So companies like Buy Do, ten Cent, Ali Baba. 0:23:20.760 --> 0:23:23.720 You know, they've been in the headlines recently, and obviously 0:23:23.920 --> 0:23:26.720 these are stocks that have been beaten down quite a bit, 0:23:27.200 --> 0:23:29.680 and for good reason with increased regulation out of China. 0:23:29.800 --> 0:23:32.480 But we think right here in this spot that that 0:23:32.560 --> 0:23:35.920