1 00:00:00,040 --> 00:00:02,120 Speaker 1: Eight minutes here past the hour, Let's get to our guest, 2 00:00:02,160 --> 00:00:06,359 Speaker 1: Michael Cogino, President and portfolio manager at the Permanent Portfolio 3 00:00:06,480 --> 00:00:11,119 Speaker 1: family of funds. Michael, for the hard boiled among us, 4 00:00:11,360 --> 00:00:13,480 Speaker 1: it's just a bounce off of oversold levels, as I 5 00:00:13,560 --> 00:00:17,440 Speaker 1: mentioned in our our data update there and some shortcovering. 6 00:00:18,079 --> 00:00:22,360 Speaker 1: For the optimists. Perhaps it's it's hope that central banks 7 00:00:22,640 --> 00:00:25,680 Speaker 1: can be more patient here and not in h in 8 00:00:25,760 --> 00:00:30,520 Speaker 1: such a hurry. Call it more realism than idealism. Where 9 00:00:30,560 --> 00:00:32,440 Speaker 1: are you along the spectrum? And of course you can 10 00:00:32,440 --> 00:00:37,320 Speaker 1: believe in both two? Yeah, Hi Brian, Um, the answer 11 00:00:37,360 --> 00:00:40,680 Speaker 1: is yes, all things you said would be accurate. I 12 00:00:40,680 --> 00:00:43,680 Speaker 1: guess depending on where you said. Our view is that 13 00:00:43,720 --> 00:00:47,320 Speaker 1: this is a bear market rally. Um. I haven't seen 14 00:00:47,360 --> 00:00:50,480 Speaker 1: anything fundamentally change in the last week. What I've seen 15 00:00:50,640 --> 00:00:54,400 Speaker 1: change is that the Bank of England decided to pivot 16 00:00:54,440 --> 00:00:57,520 Speaker 1: to some degree. Ultimately don't know how much they will, 17 00:00:57,600 --> 00:01:02,360 Speaker 1: but they it was a directional change. Saw Australia raising 18 00:01:02,440 --> 00:01:05,240 Speaker 1: rates a little less than expected. I think the belief 19 00:01:05,560 --> 00:01:08,880 Speaker 1: is that, you know, we've had a long term belief 20 00:01:09,000 --> 00:01:12,640 Speaker 1: that's been supported by behavior that whenever we get into trouble, 21 00:01:13,240 --> 00:01:16,040 Speaker 1: central banks will bail everybody out, and I think there's 22 00:01:16,040 --> 00:01:20,080 Speaker 1: an underlying bias to the upside for equities with that 23 00:01:20,080 --> 00:01:23,200 Speaker 1: that when push comes to shove for real UM, the 24 00:01:23,280 --> 00:01:25,640 Speaker 1: central banks will roll over. And we saw some of 25 00:01:25,680 --> 00:01:29,679 Speaker 1: that last week, and that provided with an overstoled condition 26 00:01:29,720 --> 00:01:33,680 Speaker 1: and equities in the short term UM has resulted uh 27 00:01:33,720 --> 00:01:36,679 Speaker 1: in in the bounce we've seen a weakening dollar. Slightly 28 00:01:36,720 --> 00:01:39,199 Speaker 1: weakening dollar has also helped, So there's been a number 29 00:01:39,240 --> 00:01:44,920 Speaker 1: of factors UM. But adding to that. Adding to that 30 00:01:45,080 --> 00:01:47,319 Speaker 1: is if the FED were to pause, or if central 31 00:01:47,360 --> 00:01:51,280 Speaker 1: banks are pausing because of financial instability concerns, that wouldn't 32 00:01:51,320 --> 00:01:54,160 Speaker 1: be a reason to be bullish. And if you know, 33 00:01:54,200 --> 00:01:56,680 Speaker 1: if you're hurtling towards your session and it causes central 34 00:01:56,680 --> 00:01:59,240 Speaker 1: banks to to steady a little bit, that's not really 35 00:01:59,280 --> 00:02:03,320 Speaker 1: positive news either. Now, the trick is to is to 36 00:02:03,400 --> 00:02:07,320 Speaker 1: walk that tight rope between getting interest rates and the 37 00:02:07,400 --> 00:02:10,040 Speaker 1: cost of money enough to choke off inflation where it 38 00:02:10,120 --> 00:02:13,079 Speaker 1: ultimately ends up, we don't know, but also not throwing 39 00:02:13,160 --> 00:02:15,440 Speaker 1: us into a deep recession. I would argue at the 40 00:02:15,480 --> 00:02:18,239 Speaker 1: moment we're in a shallow recession. But the only thing 41 00:02:18,280 --> 00:02:22,040 Speaker 1: probably holding us up is is the strong employment figures, 42 00:02:22,240 --> 00:02:24,880 Speaker 1: and we're beginning to see some signs that maybe there's 43 00:02:25,280 --> 00:02:28,720 Speaker 1: cracks in that strong economic growth story. So I do 44 00:02:28,840 --> 00:02:30,840 Speaker 1: worry about that. And the higher rates go up, the 45 00:02:30,880 --> 00:02:33,160 Speaker 1: more likely you're gonna have a deeper recession, especially for 46 00:02:33,160 --> 00:02:36,639 Speaker 1: employment rolls over. But you're absolutely right, you can't kill 47 00:02:36,680 --> 00:02:39,360 Speaker 1: the economy. But just because you're focused on inflation and 48 00:02:39,440 --> 00:02:42,760 Speaker 1: race right on the positive side, it's kind of re 49 00:02:42,800 --> 00:02:47,480 Speaker 1: embracing soft landing. Um, you know, ideals, you know, it's 50 00:02:47,520 --> 00:02:52,040 Speaker 1: a process, a fed pivot, not a day that's the hope. 51 00:02:53,360 --> 00:02:56,200 Speaker 1: So Michael, in looking at the breakdown of the games today, 52 00:02:56,760 --> 00:02:59,839 Speaker 1: if a lot of us would have exposure here, even 53 00:02:59,840 --> 00:03:02,800 Speaker 1: if you're not buying in newly today, you're you're happy 54 00:03:02,800 --> 00:03:05,280 Speaker 1: to see some gains, and we're seeing some the gains 55 00:03:05,320 --> 00:03:08,840 Speaker 1: in cyclicals and in value a little bit more than 56 00:03:08,960 --> 00:03:12,359 Speaker 1: say in information technology, although you have to admit it's 57 00:03:12,360 --> 00:03:14,600 Speaker 1: a rally right across the board. Do you feel better 58 00:03:14,639 --> 00:03:19,240 Speaker 1: going forward about the cyclicals you own or some of 59 00:03:19,240 --> 00:03:22,560 Speaker 1: the other areas. Yeah, I would put us from that category. 60 00:03:22,639 --> 00:03:25,440 Speaker 1: We're not particularly negative on equities. We run a very 61 00:03:25,440 --> 00:03:28,880 Speaker 1: balanced diversified fund and so we've benefited from that without 62 00:03:28,880 --> 00:03:31,800 Speaker 1: having to increase exposure. Here. The areas that we would 63 00:03:31,800 --> 00:03:36,000 Speaker 1: like are in those areas, um, the cyclicals, the industrials, 64 00:03:36,040 --> 00:03:39,360 Speaker 1: the materials, the commodities. A weaker dollar helps that. We 65 00:03:39,400 --> 00:03:41,240 Speaker 1: do think that the dollar is going to get weaker 66 00:03:41,320 --> 00:03:45,120 Speaker 1: over time, whether it's due to other countries raising their rates, 67 00:03:45,440 --> 00:03:48,120 Speaker 1: currency interventions, if the rate, if the dollar continues to 68 00:03:48,120 --> 00:03:52,880 Speaker 1: be too strong, or federal you know, central banks changing direction, um, 69 00:03:52,920 --> 00:03:56,440 Speaker 1: and that would benefit commodities. Here's the nature of something. 70 00:03:57,160 --> 00:03:59,760 Speaker 1: Something interesting is that financials were the biggest performer and 71 00:03:59,800 --> 00:04:03,600 Speaker 1: yet have yields coming down. Why that's another area. I 72 00:04:03,640 --> 00:04:06,520 Speaker 1: think at least US financials the balance sheets are strong, 73 00:04:07,000 --> 00:04:09,440 Speaker 1: um with interest rates going up. That that is, interest 74 00:04:09,520 --> 00:04:11,320 Speaker 1: margins are good. I think you do have to be 75 00:04:11,320 --> 00:04:14,560 Speaker 1: a little bit selective in terms of which banks you're picking, 76 00:04:14,960 --> 00:04:17,840 Speaker 1: but I think US financials actually look pretty good. That's 77 00:04:17,839 --> 00:04:19,919 Speaker 1: another area that we're in and we would like going 78 00:04:19,920 --> 00:04:22,839 Speaker 1: forward long term. And for those people who are thinking 79 00:04:22,880 --> 00:04:26,200 Speaker 1: about the central banks kind of cooling their jets a 80 00:04:26,240 --> 00:04:29,840 Speaker 1: little bit, uh many say that that you can't read 81 00:04:29,880 --> 00:04:33,160 Speaker 1: too much into the rb A decision because they are 82 00:04:33,200 --> 00:04:35,919 Speaker 1: in a completely different situation. They don't have inflation anywhere 83 00:04:35,960 --> 00:04:39,200 Speaker 1: near the levels of the US, and they got started earlier. 84 00:04:39,320 --> 00:04:42,520 Speaker 1: And then the UK is a very separate situation based 85 00:04:42,600 --> 00:04:45,400 Speaker 1: upon what the what the fiscal side came up with. 86 00:04:45,920 --> 00:04:50,200 Speaker 1: Your thoughts um on that as well. Yeah, well every 87 00:04:50,240 --> 00:04:53,719 Speaker 1: every country situation is different, So I would agree with that. 88 00:04:54,160 --> 00:04:56,600 Speaker 1: I think, you know, when you look at when I 89 00:04:56,720 --> 00:04:58,840 Speaker 1: say I didn't see any change in fundamentals, I mean 90 00:04:58,920 --> 00:05:02,360 Speaker 1: I still see inflation is being stubborn. I see nothing 91 00:05:02,839 --> 00:05:05,960 Speaker 1: indicating it's coming down quickly. At the moment you mentioned 92 00:05:06,080 --> 00:05:09,000 Speaker 1: rising gas prices in the news segment. Um, you know, 93 00:05:09,160 --> 00:05:11,719 Speaker 1: and I've seen it in California. Gas prices are trending 94 00:05:11,800 --> 00:05:14,440 Speaker 1: up again. You marry it up with OPEC production cuts, 95 00:05:14,440 --> 00:05:17,560 Speaker 1: you marry it up with strategic PATROLLINGM reserved draw downs. 96 00:05:17,600 --> 00:05:21,040 Speaker 1: That's higher energy prices. And I don't see rapidly declining 97 00:05:21,080 --> 00:05:24,240 Speaker 1: inflation if you have energy prices going up, um, you know, 98 00:05:24,360 --> 00:05:27,640 Speaker 1: absent a huge demand destruction caused by a severe recession. 99 00:05:28,040 --> 00:05:30,600 Speaker 1: So I mean, I do think that you do have 100 00:05:30,640 --> 00:05:33,640 Speaker 1: to be careful in terms of you know, not killing 101 00:05:33,680 --> 00:05:37,479 Speaker 1: the golden goose by having rising interest rates. B the 102 00:05:37,560 --> 00:05:40,040 Speaker 1: end all be all at the yet, you know, at 103 00:05:40,040 --> 00:05:42,440 Speaker 1: the risk of killing the economy, but you do have 104 00:05:42,520 --> 00:05:45,239 Speaker 1: to worry about that as a risk factor to killing 105 00:05:45,279 --> 00:05:47,440 Speaker 1: the economy. And and that's where I think the fine 106 00:05:47,480 --> 00:05:50,120 Speaker 1: line exists, that the feed has to walk and the 107 00:05:50,200 --> 00:05:53,240 Speaker 1: soft landing is what we all want, um, but achieving 108 00:05:53,279 --> 00:05:55,599 Speaker 1: it is going to be very, very difficult. You mentioned 109 00:05:55,600 --> 00:05:58,719 Speaker 1: you're not particularly negative on on equity. So where do 110 00:05:58,760 --> 00:06:03,200 Speaker 1: you sit on say, the corporate bond space, the credit space? Uh? 111 00:06:03,240 --> 00:06:06,440 Speaker 1: And would you look at a mix there of of 112 00:06:06,600 --> 00:06:09,400 Speaker 1: munis and short term treasuries and then some of the 113 00:06:09,600 --> 00:06:12,480 Speaker 1: higher grade uh, you know, corporate debt? What what what are 114 00:06:12,480 --> 00:06:16,920 Speaker 1: you looking at? Yeah, we we actually like a low duration, 115 00:06:17,120 --> 00:06:20,159 Speaker 1: high quality corporate debt. Actually, we run a fund that's 116 00:06:20,200 --> 00:06:21,800 Speaker 1: doing quite a bit of that right now, our first 117 00:06:21,800 --> 00:06:24,120 Speaker 1: of the bond portfolio, and we're also doing it in 118 00:06:24,160 --> 00:06:27,400 Speaker 1: permanent portfolio. I think that's an area where you can 119 00:06:27,440 --> 00:06:31,240 Speaker 1: achieve rising yields with good balance sheets that tends to 120 00:06:31,279 --> 00:06:35,800 Speaker 1: help offset the inflation erosion um that you're getting with 121 00:06:35,800 --> 00:06:39,160 Speaker 1: the inflation rate where it is, and you've got principal protection. 122 00:06:39,240 --> 00:06:41,520 Speaker 1: So that's an area in the fixed income market that 123 00:06:41,600 --> 00:06:43,640 Speaker 1: we're looking at and have done quite a bit of 124 00:06:43,680 --> 00:06:46,760 Speaker 1: investing in UM and will continue to do so as 125 00:06:46,800 --> 00:06:49,680 Speaker 1: the bond side of our house. I think it's dangerous 126 00:06:49,720 --> 00:06:52,479 Speaker 1: to UM to get too far out in the duration 127 00:06:52,520 --> 00:06:54,400 Speaker 1: curve right now because I think there's just too many 128 00:06:54,560 --> 00:06:57,240 Speaker 1: question marks UM. But at some point you're gonna want 129 00:06:57,240 --> 00:07:00,400 Speaker 1: to lengthen duration at some level. I just think we 130 00:07:00,480 --> 00:07:02,960 Speaker 1: know where that is yet, and at the peatime short 131 00:07:03,040 --> 00:07:06,120 Speaker 1: term rates given the inverted Yilker, the spreads on corporate 132 00:07:06,120 --> 00:07:08,640 Speaker 1: so it's a very attractive area right now. And Michael, 133 00:07:08,680 --> 00:07:11,160 Speaker 1: thank you very much for joining us. Michael Cogino, President 134 00:07:11,200 --> 00:07:14,360 Speaker 1: portfolio manager at the Permanent Portfolio family of funds.