1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul Swinge. You, 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma wits each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg penl podcast on Apple 6 00:00:15,520 --> 00:00:17,959 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:21,280 Speaker 1: at Bloomberg dot com. Well, the everything rally that investors 8 00:00:21,360 --> 00:00:24,560 Speaker 1: enjoyed in nineteen appears to be continuing here in the 9 00:00:24,640 --> 00:00:27,040 Speaker 1: early parts of To get a sense of what the 10 00:00:27,160 --> 00:00:30,040 Speaker 1: risk rewards scenario is for investors right now, we welcome 11 00:00:30,240 --> 00:00:33,600 Speaker 1: Mark hepp Install, chief investment officer of pen Mutual Asset Management. 12 00:00:33,600 --> 00:00:35,519 Speaker 1: They have about twenty eight and a half billion dollars 13 00:00:35,800 --> 00:00:38,280 Speaker 1: under management based in Philadelphia, but Mark joins us here 14 00:00:38,280 --> 00:00:41,240 Speaker 1: on our Bloomberg Interactive Broker studio. So Mark, again, a 15 00:00:41,640 --> 00:00:44,960 Speaker 1: fantastic performance in financial markets last year, A good start 16 00:00:45,000 --> 00:00:47,000 Speaker 1: to the year. What are the risk to the market 17 00:00:47,080 --> 00:00:50,680 Speaker 1: from your perspective? Well, you know, I do think that, um, 18 00:00:50,800 --> 00:00:53,760 Speaker 1: the geopolitical risks um, certainly with what's going on with 19 00:00:53,800 --> 00:00:58,440 Speaker 1: the RAND attentions there. Um, Clearly the coronavirus is front 20 00:00:58,440 --> 00:01:00,240 Speaker 1: and center, and it seems as though the second case 21 00:01:00,320 --> 00:01:03,080 Speaker 1: arriving here in the United States is enough to pressure 22 00:01:03,440 --> 00:01:06,480 Speaker 1: equity markets some today and lower interest rates. So um, 23 00:01:06,520 --> 00:01:09,040 Speaker 1: but you know, generally our outlook is for a more 24 00:01:09,120 --> 00:01:11,880 Speaker 1: stable market both equities and interest rates this year, and 25 00:01:11,880 --> 00:01:15,360 Speaker 1: I think that's really resulting from the veed honestly wanting 26 00:01:15,400 --> 00:01:17,479 Speaker 1: to get out of the spotlight, move to the side, 27 00:01:17,880 --> 00:01:19,920 Speaker 1: keep interest rates where they are, and we think that's 28 00:01:19,959 --> 00:01:23,319 Speaker 1: going to be uh, really an outcome where both equities 29 00:01:23,319 --> 00:01:25,399 Speaker 1: and interest rates are more range bound this year as 30 00:01:25,440 --> 00:01:28,000 Speaker 1: opposed to dramatic moves like we've seen the previous two years. 31 00:01:28,080 --> 00:01:31,959 Speaker 1: There's been a common theme where people say that bonds 32 00:01:31,959 --> 00:01:35,280 Speaker 1: and stocks are sending different messages, with bonds rallying typically 33 00:01:35,280 --> 00:01:42,040 Speaker 1: indicating some negativity, pessimism about global growth, stocks rallying indicating optimism. 34 00:01:42,120 --> 00:01:44,959 Speaker 1: You said you disagree, You don't think that these narratives 35 00:01:45,000 --> 00:01:48,480 Speaker 1: are inconsistent. Why well, I would say, on the short term, 36 00:01:48,520 --> 00:01:49,840 Speaker 1: like you get a day like the day where fear 37 00:01:49,920 --> 00:01:52,640 Speaker 1: enders and market you can you're gonna see a situation 38 00:01:52,680 --> 00:01:56,160 Speaker 1: where bonds and stocks act differently. However, over the long term, 39 00:01:56,160 --> 00:01:58,840 Speaker 1: I do think that the fact interest rates are so low, 40 00:01:59,200 --> 00:02:02,480 Speaker 1: they are so on a tractive versus other alternatives. UM 41 00:02:02,520 --> 00:02:04,840 Speaker 1: inequities I think are a big part of that equation. 42 00:02:05,160 --> 00:02:07,880 Speaker 1: UM it really forces investors to take more risk when 43 00:02:07,880 --> 00:02:10,800 Speaker 1: interest rates really sit where they do today. So I 44 00:02:10,800 --> 00:02:13,800 Speaker 1: think over the long term that's supportive evaluations. And I 45 00:02:13,840 --> 00:02:15,920 Speaker 1: do think that you know and clearly that you know 46 00:02:15,960 --> 00:02:18,600 Speaker 1: that the mantra don't fight. The Fed worked um in 47 00:02:18,680 --> 00:02:20,520 Speaker 1: late two thousand and eighteen and then worked in two 48 00:02:20,600 --> 00:02:23,880 Speaker 1: thousand nineteen, So I think that's also part of the equation. 49 00:02:23,919 --> 00:02:26,400 Speaker 1: And last year, you know, the FED at the beginning 50 00:02:26,400 --> 00:02:28,720 Speaker 1: of the year was expected to really move interest rates higher. 51 00:02:29,000 --> 00:02:31,680 Speaker 1: So the fact that everything rallied last year in response 52 00:02:31,720 --> 00:02:33,919 Speaker 1: to lower FED interest rates, you know, I think makes 53 00:02:33,919 --> 00:02:38,000 Speaker 1: sense markets an election year this year, how do you 54 00:02:38,040 --> 00:02:41,560 Speaker 1: typically think about your portfolio and positioning in in a 55 00:02:41,680 --> 00:02:45,560 Speaker 1: presidential election year? Well, I will say the pull from 56 00:02:45,560 --> 00:02:48,720 Speaker 1: the middle, um from I would say both parties, really, 57 00:02:49,040 --> 00:02:51,680 Speaker 1: I think means the outcome for the election is going 58 00:02:51,720 --> 00:02:55,480 Speaker 1: to have significance for markets. And it doesn't necessarily mean 59 00:02:55,480 --> 00:02:58,440 Speaker 1: that stocks are gonna scream higher scream lower depending on 60 00:02:58,480 --> 00:03:00,680 Speaker 1: which party wins. But I do think in terms of 61 00:03:00,960 --> 00:03:04,160 Speaker 1: winners and losers will be quite different, um depending on 62 00:03:04,560 --> 00:03:07,320 Speaker 1: the outcome of this year's presidential elections. So and we've 63 00:03:07,360 --> 00:03:10,639 Speaker 1: been involved heavily in the fixed income markets. That's where 64 00:03:10,639 --> 00:03:13,840 Speaker 1: we tend to focus our investment activity. And so you know, 65 00:03:13,880 --> 00:03:16,280 Speaker 1: certainly healthcare is an area that has been under some 66 00:03:16,320 --> 00:03:18,600 Speaker 1: pressure there for fear that you know, there could be 67 00:03:18,680 --> 00:03:21,920 Speaker 1: dramatic changes for the health insurance in the United States, 68 00:03:21,960 --> 00:03:24,360 Speaker 1: so that you know, is against something that the outcome 69 00:03:24,400 --> 00:03:28,239 Speaker 1: I think will deliver different winners and losers next year. 70 00:03:28,720 --> 00:03:32,200 Speaker 1: HILED bonds, they've been on a tear at least through 71 00:03:32,280 --> 00:03:34,160 Speaker 1: the last couple of days when we saw the price 72 00:03:34,200 --> 00:03:37,000 Speaker 1: of oil really tank. Wow. Crew trading on the imax 73 00:03:37,040 --> 00:03:39,760 Speaker 1: now fifty four dollars and forty eight cents on a barrel. 74 00:03:39,800 --> 00:03:41,680 Speaker 1: That's down from the end of the year when it 75 00:03:41,760 --> 00:03:43,960 Speaker 1: was sixty three. It's almost now ten dollars since the 76 00:03:44,040 --> 00:03:47,240 Speaker 1: end of last year. Amazing. Uh. And you are seeing 77 00:03:47,320 --> 00:03:51,680 Speaker 1: HIL debt underperform other types of credit as a result 78 00:03:51,760 --> 00:03:54,240 Speaker 1: of this due to their energy component. What's your view 79 00:03:54,720 --> 00:03:57,960 Speaker 1: on this space, Well, I do think when the double 80 00:03:58,000 --> 00:04:00,960 Speaker 1: B universe is trading sub for scent where it sits 81 00:04:01,120 --> 00:04:03,280 Speaker 1: or close to it today. You know, it's hard to 82 00:04:03,320 --> 00:04:06,280 Speaker 1: make a case that UM, I would say, high quality, 83 00:04:06,360 --> 00:04:08,360 Speaker 1: high yield makes a lot of sense. So you know, 84 00:04:08,440 --> 00:04:11,240 Speaker 1: I do think there are better opportunities for total return 85 00:04:11,360 --> 00:04:14,400 Speaker 1: within uh the investment grade corporate bomb market and also 86 00:04:14,480 --> 00:04:18,039 Speaker 1: within certain parts of the securities securities markets. So you know, 87 00:04:18,200 --> 00:04:20,840 Speaker 1: I will say I think generally consumer balance sheets are 88 00:04:20,920 --> 00:04:23,640 Speaker 1: in better condition than corporate balance sheets. So I think 89 00:04:23,640 --> 00:04:26,039 Speaker 1: if you're gonna take credit risk, you much more UM 90 00:04:26,160 --> 00:04:29,000 Speaker 1: paid well to do it and rewarded in consumer credit 91 00:04:29,040 --> 00:04:31,360 Speaker 1: as opposed to corporate credits. So are you underweaiting how 92 00:04:31,480 --> 00:04:34,840 Speaker 1: yield right now? We are, Yeah, We're looking for opportunities 93 00:04:34,880 --> 00:04:38,120 Speaker 1: to lighten UM our high you would exposure and upgrade 94 00:04:38,160 --> 00:04:42,240 Speaker 1: to UM investment grade into securitized, in particular for our 95 00:04:42,279 --> 00:04:45,360 Speaker 1: Strategic Income Fund, which is really a go anywhere fixed 96 00:04:45,400 --> 00:04:49,280 Speaker 1: income strategy. When did you start doing that, Well, probably 97 00:04:49,360 --> 00:04:52,240 Speaker 1: towards the second half of last year. UM. You know 98 00:04:52,279 --> 00:04:54,479 Speaker 1: when we generally, you know, at the high end, we 99 00:04:54,560 --> 00:04:56,840 Speaker 1: may have ten to fifteen percent of how you would 100 00:04:56,839 --> 00:05:00,600 Speaker 1: exposure within our Strategic Income fund, but we've been gradually 101 00:05:00,640 --> 00:05:03,440 Speaker 1: reducing that. And again, you know, we we're finding similar 102 00:05:03,480 --> 00:05:07,200 Speaker 1: types of spreads for highly rated securitized products. The residential 103 00:05:07,240 --> 00:05:10,640 Speaker 1: mortgage backed securities market in particular, last year they underperformed 104 00:05:10,880 --> 00:05:13,720 Speaker 1: partly as a result of higher prepayment field as h 105 00:05:13,880 --> 00:05:17,120 Speaker 1: fears as mortgage rates declined. So that's an opportunity where 106 00:05:17,120 --> 00:05:19,240 Speaker 1: if our outlook is for more stable rates this year, 107 00:05:19,279 --> 00:05:22,320 Speaker 1: that should outperform corporate credit for example, how about credit 108 00:05:22,400 --> 00:05:25,120 Speaker 1: quality in your portfolio. We're ten eleven years into this 109 00:05:25,400 --> 00:05:29,120 Speaker 1: economic cycle. People are concerned perhaps about credit quality. What 110 00:05:29,160 --> 00:05:31,320 Speaker 1: do you see in your portfolio? Well, we you know, 111 00:05:31,400 --> 00:05:34,880 Speaker 1: we do think that UM. You know, good solid credit research, 112 00:05:35,000 --> 00:05:38,880 Speaker 1: especially UM on the corporate credit side is critical today 113 00:05:38,960 --> 00:05:42,440 Speaker 1: given where UM valuations sits. So you know, our corporate 114 00:05:42,480 --> 00:05:45,599 Speaker 1: credit team, you know, they really focus across the credit spectrum, 115 00:05:45,640 --> 00:05:47,560 Speaker 1: both investment grade and high yield, and they've done a 116 00:05:47,640 --> 00:05:50,719 Speaker 1: terrific job in terms of of navigating these markets. And 117 00:05:50,760 --> 00:05:53,240 Speaker 1: I will say last year, even though generally it wasn't 118 00:05:53,240 --> 00:05:56,960 Speaker 1: everything rally, there were pockets of weakened weakness, especially among 119 00:05:57,080 --> 00:06:00,320 Speaker 1: lower rated high yield credit so energy, some certain triple 120 00:06:00,400 --> 00:06:04,080 Speaker 1: C rated securities last year really underperformed. So that's been 121 00:06:04,120 --> 00:06:07,120 Speaker 1: an area where we have been underweight. What kind of 122 00:06:07,160 --> 00:06:11,400 Speaker 1: returns can people expect from a credit portfolio right now 123 00:06:11,800 --> 00:06:15,400 Speaker 1: that takes a bit of risk. Uh, it doesn't go crazy, 124 00:06:15,480 --> 00:06:18,880 Speaker 1: but is trying to operate and getting a little carry 125 00:06:18,920 --> 00:06:22,279 Speaker 1: in this environment. Well, you know, the starting point really 126 00:06:22,360 --> 00:06:25,000 Speaker 1: for all financial asset pricing is the resk free rate. 127 00:06:25,080 --> 00:06:27,440 Speaker 1: So when you have the ten year yield trading now 128 00:06:27,480 --> 00:06:31,160 Speaker 1: below one point seven percent, you know, to me, it's 129 00:06:31,200 --> 00:06:32,720 Speaker 1: it's hard to make a case that you're going to 130 00:06:32,839 --> 00:06:36,040 Speaker 1: get much more than you know, mid twos to three 131 00:06:36,040 --> 00:06:39,800 Speaker 1: percent for a reasonably high quality investment grade corporate bond 132 00:06:39,800 --> 00:06:42,680 Speaker 1: portfolio today. So you know, again we think it's time 133 00:06:42,720 --> 00:06:44,520 Speaker 1: to be cautious, and we do want to make sure 134 00:06:44,560 --> 00:06:46,280 Speaker 1: that you know, if do if we do get in 135 00:06:46,320 --> 00:06:49,400 Speaker 1: a circumstance similar to the December of two thousand eighteen, 136 00:06:49,400 --> 00:06:52,160 Speaker 1: when really the credit markets were on sale, equities were 137 00:06:52,200 --> 00:06:54,279 Speaker 1: under pressure, you know, we want to have dry powder 138 00:06:54,320 --> 00:06:56,680 Speaker 1: to take advantage of those opportunities. How about new issues 139 00:06:56,680 --> 00:06:58,440 Speaker 1: at least? And I we keep saying Bloomberg News stories 140 00:06:58,480 --> 00:07:00,880 Speaker 1: about all the new issues coming into estment grade market, 141 00:07:01,240 --> 00:07:04,640 Speaker 1: Well there has been, Yeah, there's been incredible demand. And 142 00:07:04,640 --> 00:07:07,960 Speaker 1: I will say there are certain um securities, especially within 143 00:07:08,600 --> 00:07:11,800 Speaker 1: the banking space. Some perpetual preferred securities are getting done 144 00:07:11,800 --> 00:07:14,360 Speaker 1: in that low four percent zip code. So you know 145 00:07:14,440 --> 00:07:18,240 Speaker 1: that was levels of issuance that were unthinkable twelve months ago. 146 00:07:18,320 --> 00:07:21,040 Speaker 1: But you know, again, I do think the negative interest 147 00:07:21,160 --> 00:07:26,160 Speaker 1: rates abroad um really are steering foreign investors to US 148 00:07:26,240 --> 00:07:30,400 Speaker 1: financial assets. Low treasury yield, steering investors to to yield 149 00:07:30,440 --> 00:07:32,480 Speaker 1: where they can get it anywhere. So even though we 150 00:07:32,560 --> 00:07:35,320 Speaker 1: generally think bank credit quality is good, you know some 151 00:07:35,400 --> 00:07:38,320 Speaker 1: of some of the opportunities, they are definitely uh less 152 00:07:38,320 --> 00:07:41,680 Speaker 1: attractive today. That's actually what's distracting me right now is 153 00:07:41,720 --> 00:07:45,840 Speaker 1: the gap between two year bonds in the US and Germany. 154 00:07:46,080 --> 00:07:49,520 Speaker 1: It's just absolutely blown my mind. It's the lowest since 155 00:07:50,040 --> 00:07:55,200 Speaker 1: September seventeen. I'm actually completely serious. But it's exactly your point, Mark, 156 00:07:55,240 --> 00:07:58,960 Speaker 1: which is that basically, uh, this is confirmation in my view, 157 00:07:59,440 --> 00:08:02,000 Speaker 1: I mean take it as you well to me, this 158 00:08:02,120 --> 00:08:04,840 Speaker 1: means that investors are coming over from Europe and coming 159 00:08:04,840 --> 00:08:07,080 Speaker 1: into the US and trying to take advantage of that gap. 160 00:08:07,200 --> 00:08:09,640 Speaker 1: I could be wrong by email address if you want 161 00:08:09,640 --> 00:08:11,600 Speaker 1: to right to me to tell me I'm wrong, Lebrono. 162 00:08:11,720 --> 00:08:13,960 Speaker 1: It's at Bloomberg dot Net. Mark Happens Style, chief investment 163 00:08:13,960 --> 00:08:28,800 Speaker 1: officer of Pen Mutual Asset Management. Well, much of the 164 00:08:28,840 --> 00:08:31,680 Speaker 1: focus on international trade has between between the U S 165 00:08:31,720 --> 00:08:34,160 Speaker 1: and China, but there's also been rising rhetoric between the 166 00:08:34,200 --> 00:08:37,920 Speaker 1: US and France on a whole host of items, including wine. 167 00:08:37,960 --> 00:08:40,120 Speaker 1: We have to figure out what's going on there. Nobody 168 00:08:40,160 --> 00:08:42,760 Speaker 1: better to do that than with Tom Gearing. He's a 169 00:08:42,840 --> 00:08:46,120 Speaker 1: chief executive officer and co founder of Cult Wines Asset 170 00:08:46,200 --> 00:08:49,680 Speaker 1: Management based in London. Tom, thanks so much for joining us. 171 00:08:49,760 --> 00:08:53,520 Speaker 1: Tell us what's going on potentially with the French wine 172 00:08:53,559 --> 00:08:58,240 Speaker 1: market and tariffs? Yeah, good morning, Thanks so much for 173 00:08:58,240 --> 00:09:01,200 Speaker 1: having me. Well, I mean, obviously the current sort of 174 00:09:01,520 --> 00:09:04,199 Speaker 1: impass between the France and US over the digital service 175 00:09:04,240 --> 00:09:06,760 Speaker 1: attacks was in one way you had going to have 176 00:09:06,800 --> 00:09:10,520 Speaker 1: a huge implication potentially on the French wine industry, and 177 00:09:10,960 --> 00:09:13,920 Speaker 1: one particular region that I think would have suffered significantly 178 00:09:13,960 --> 00:09:17,640 Speaker 1: would have been a Champagne region. The Champagne, for example, 179 00:09:18,280 --> 00:09:22,280 Speaker 1: US represents the biggest export market for at four five 180 00:09:22,320 --> 00:09:25,520 Speaker 1: million euros, and the potential ents tariffs that they were 181 00:09:25,520 --> 00:09:28,920 Speaker 1: looking to impose on French goods would have included Champagne 182 00:09:28,920 --> 00:09:31,840 Speaker 1: could have been quite a catastrophic really for the for 183 00:09:31,920 --> 00:09:34,360 Speaker 1: the for the Champagne region, and would have been I mean, 184 00:09:34,400 --> 00:09:37,079 Speaker 1: I don't think you can underestimate the seismic impact that 185 00:09:37,080 --> 00:09:40,320 Speaker 1: would have had on the global wine marketing, in particular um, 186 00:09:40,559 --> 00:09:42,480 Speaker 1: you know, the French wine market. But now that that 187 00:09:42,760 --> 00:09:46,319 Speaker 1: sort of ceasefire has um has been established seen the 188 00:09:46,440 --> 00:09:48,760 Speaker 1: two sides, I think what people have sort of forgotten 189 00:09:48,760 --> 00:09:51,680 Speaker 1: about is that there already are tariffs imposed on e wines, 190 00:09:51,720 --> 00:09:54,840 Speaker 1: in particular French wines, and these were imposed back in 191 00:09:54,880 --> 00:09:58,120 Speaker 1: October as a result of the dispute over airbus. So 192 00:09:58,160 --> 00:10:00,199 Speaker 1: if you actually look at the European wines in take 193 00:10:00,200 --> 00:10:01,959 Speaker 1: a French wines, you know that they've been under fire 194 00:10:02,000 --> 00:10:05,200 Speaker 1: considerably over the last few months. And we've already started 195 00:10:05,240 --> 00:10:08,679 Speaker 1: to see the impact um those tariffs have had on 196 00:10:08,920 --> 00:10:11,720 Speaker 1: French wines in the in the global marketplace, and and 197 00:10:11,720 --> 00:10:15,560 Speaker 1: in particular the impact it's had with US importers canceling 198 00:10:15,640 --> 00:10:18,640 Speaker 1: orders UM that they had placed canceling on from a 199 00:10:18,760 --> 00:10:21,600 Speaker 1: futures contracts they had in place UM. And you know 200 00:10:21,679 --> 00:10:25,720 Speaker 1: a lot of the wine owners, wineries, distributors you know 201 00:10:25,760 --> 00:10:30,200 Speaker 1: in Europe understandably worried and Similarly in the US. You know, 202 00:10:30,240 --> 00:10:33,360 Speaker 1: a lot of the importers, merchants, distributors again are very 203 00:10:33,400 --> 00:10:35,920 Speaker 1: concerned about what's going to happen over over the next 204 00:10:35,920 --> 00:10:38,160 Speaker 1: few months. So I think even though this is a 205 00:10:38,200 --> 00:10:39,760 Speaker 1: this is a good sign for the market, you know 206 00:10:39,800 --> 00:10:42,480 Speaker 1: that they've decided to hold fire. Um, you know, we're 207 00:10:42,520 --> 00:10:44,120 Speaker 1: not out of the woods yet, and it's it's very 208 00:10:44,120 --> 00:10:47,160 Speaker 1: finely poised. I have to ask the burning question in 209 00:10:47,200 --> 00:10:51,079 Speaker 1: the room, Tom Gearing, how does one get into wine 210 00:10:51,120 --> 00:10:56,200 Speaker 1: asset management? So, I mean, my my my background, my 211 00:10:56,240 --> 00:10:59,360 Speaker 1: family we were were passionate wine collectors. It's something that 212 00:10:59,400 --> 00:11:01,240 Speaker 1: I've known about for a long time. But I really 213 00:11:01,240 --> 00:11:04,200 Speaker 1: believe in in the financial viability of wine as a 214 00:11:04,240 --> 00:11:07,199 Speaker 1: as a diversification for an investment portfolio. You know, wine 215 00:11:07,280 --> 00:11:10,120 Speaker 1: is it as an asset. Classes is a tangible product. 216 00:11:10,240 --> 00:11:15,079 Speaker 1: It's something that is um fundamentally based on unique characteristics 217 00:11:15,080 --> 00:11:17,000 Speaker 1: in that the greatest wines in the world are produced 218 00:11:17,000 --> 00:11:20,800 Speaker 1: in very small quantities and they're consumed. So wine has 219 00:11:20,800 --> 00:11:23,560 Speaker 1: a perfectly inverse affly curve. So there's you know, there's 220 00:11:23,600 --> 00:11:25,880 Speaker 1: there's a lot of history and romance around the product. 221 00:11:25,960 --> 00:11:28,480 Speaker 1: But if you take some of that romanticism away and 222 00:11:28,480 --> 00:11:30,319 Speaker 1: treat it as a financial asset. You know, it has 223 00:11:30,360 --> 00:11:33,640 Speaker 1: a lot of potential benefits to anyone investing it. So 224 00:11:33,760 --> 00:11:37,600 Speaker 1: fine wine as an as as as an asset management concept. 225 00:11:37,679 --> 00:11:39,160 Speaker 1: I think it's something that's going to become more and 226 00:11:39,160 --> 00:11:42,400 Speaker 1: more mainstream. Um. You know, over the years, Paul I 227 00:11:42,440 --> 00:11:45,000 Speaker 1: will say that I treated as a viable asset in 228 00:11:45,040 --> 00:11:48,600 Speaker 1: the evening. It does work. It does work. So town, 229 00:11:48,920 --> 00:11:51,480 Speaker 1: what are you buying right now? What are the wines 230 00:11:51,520 --> 00:11:54,959 Speaker 1: that are promising the value right now? Well, I mean 231 00:11:55,000 --> 00:11:56,880 Speaker 1: look to keep it in the context of the conversation 232 00:11:56,920 --> 00:11:59,440 Speaker 1: about the terrorists. Um, you know, it's Italian wines. The 233 00:11:59,440 --> 00:12:01,480 Speaker 1: best Italian wines that have done extremely well. You know, 234 00:12:01,480 --> 00:12:03,840 Speaker 1: they were the best performing subregion last year in terms 235 00:12:03,840 --> 00:12:06,520 Speaker 1: of price performance. Um. If you look at some of 236 00:12:06,520 --> 00:12:08,440 Speaker 1: the best wines that are produced in northern Italy in 237 00:12:08,440 --> 00:12:11,680 Speaker 1: particular and Pierre Mont where the Nebuola grape is uh, 238 00:12:11,800 --> 00:12:15,640 Speaker 1: you know, the grape that's grown more than most the 239 00:12:15,679 --> 00:12:18,440 Speaker 1: wines in that region have gone up significantly in value. 240 00:12:18,480 --> 00:12:20,319 Speaker 1: There's demand that's increasing because if you look at the 241 00:12:20,400 --> 00:12:23,280 Speaker 1: quality the wines are being produced there. In comparison to 242 00:12:23,360 --> 00:12:26,200 Speaker 1: say that the equivalent of Grand Crew Burgundy. There's quite 243 00:12:26,200 --> 00:12:29,079 Speaker 1: a significant price gap, and there's quite a significant price disparity. 244 00:12:29,120 --> 00:12:31,719 Speaker 1: And I think that globally, consumers, especially at the top 245 00:12:31,800 --> 00:12:35,040 Speaker 1: end of the market, um where prices have increased, in 246 00:12:35,080 --> 00:12:39,200 Speaker 1: particular for French wines, in particular Burgundy Groan Crew for example, 247 00:12:39,480 --> 00:12:41,640 Speaker 1: People on our something to look outside that for value, 248 00:12:41,640 --> 00:12:42,839 Speaker 1: you know where, kind of whe where else in the 249 00:12:42,880 --> 00:12:44,360 Speaker 1: wh Where else in the world can I buy into 250 00:12:44,480 --> 00:12:47,439 Speaker 1: really really high quality, um small production wines, but that 251 00:12:47,520 --> 00:12:51,640 Speaker 1: can still deliver um, you know, outstanding experience. Well, I 252 00:12:51,640 --> 00:12:54,560 Speaker 1: guess that there's a question about wine. When you say 253 00:12:54,559 --> 00:12:56,520 Speaker 1: that it's a financial asset, I mean it is, but 254 00:12:56,559 --> 00:12:58,880 Speaker 1: you can consume it. And there's a question are people 255 00:12:58,920 --> 00:13:03,000 Speaker 1: buying these mainly as an investment vehicle? Do they expect 256 00:13:03,040 --> 00:13:05,000 Speaker 1: them to be drunk at some point? I mean, is 257 00:13:05,040 --> 00:13:07,680 Speaker 1: there sort of that end goal or is it that 258 00:13:07,800 --> 00:13:13,040 Speaker 1: they are being increasingly treated as financial assets. Well, I mean, look, 259 00:13:13,080 --> 00:13:15,040 Speaker 1: if you look at wine from a very basic expective 260 00:13:15,080 --> 00:13:16,720 Speaker 1: that you know, the great wines in the world are 261 00:13:16,760 --> 00:13:19,079 Speaker 1: actually made to be drunk in ten, fifty, twenty years. 262 00:13:19,120 --> 00:13:22,360 Speaker 1: So they need someone to carry that cost um. They 263 00:13:22,400 --> 00:13:24,480 Speaker 1: need someone to carry the cost of storage, of insurance 264 00:13:24,520 --> 00:13:25,959 Speaker 1: of the wines and making sure that they're kept in 265 00:13:26,000 --> 00:13:28,960 Speaker 1: the opten conditions. So the fact that wine as an asset, 266 00:13:29,040 --> 00:13:31,680 Speaker 1: as a as a product sorry, um, you know, increases 267 00:13:31,760 --> 00:13:36,040 Speaker 1: over time and value in most cases provides the holder, 268 00:13:36,120 --> 00:13:39,560 Speaker 1: the person who's carrying the costum, a financial incentive to 269 00:13:39,600 --> 00:13:42,920 Speaker 1: do so. So regardless of whether your intentions on day 270 00:13:42,920 --> 00:13:45,920 Speaker 1: one are to buy for purely collection purposes or whether 271 00:13:45,960 --> 00:13:48,800 Speaker 1: you're buying purely for drinking purposes, the fact that wine 272 00:13:48,800 --> 00:13:51,720 Speaker 1: increases in value gives you the financial incentive to actually 273 00:13:51,760 --> 00:13:53,760 Speaker 1: hold and store these wines, which can be quite a 274 00:13:53,760 --> 00:13:56,760 Speaker 1: costly exercise. Um. So what I think is, you know, 275 00:13:56,920 --> 00:13:59,760 Speaker 1: as altruistic is you could be as a wine connoisseur. 276 00:14:00,360 --> 00:14:03,840 Speaker 1: Sometimes you don't know how much your preferences or objectives 277 00:14:03,840 --> 00:14:07,160 Speaker 1: in life might change over time. So with wine, it's 278 00:14:07,520 --> 00:14:10,040 Speaker 1: of course first and foremost product that should be consumed, 279 00:14:10,080 --> 00:14:11,720 Speaker 1: and a lot of people in the world are consuming 280 00:14:11,760 --> 00:14:14,560 Speaker 1: these wines. But from a secondary perspective, if you're if 281 00:14:14,559 --> 00:14:16,520 Speaker 1: you're a collector and you can get a financial benefit 282 00:14:16,559 --> 00:14:18,160 Speaker 1: from doing so and end up drinking the wines for 283 00:14:18,280 --> 00:14:20,440 Speaker 1: less in the future, or you can resell them and 284 00:14:20,480 --> 00:14:22,840 Speaker 1: generate a profit. Or you can come into the markets 285 00:14:22,840 --> 00:14:26,360 Speaker 1: a pure investor and generate a very low risk adjusted turns. 286 00:14:26,400 --> 00:14:28,920 Speaker 1: Then I forget all adds to the overall greatness of 287 00:14:28,960 --> 00:14:30,880 Speaker 1: the asset. Tom Gearing, thank you so much for being 288 00:14:30,880 --> 00:14:33,720 Speaker 1: where us. Tom Geary, chief executive Officer of cult Wines 289 00:14:33,800 --> 00:14:50,480 Speaker 1: Asset Management, joining us by phone. I want to get 290 00:14:50,480 --> 00:14:53,480 Speaker 1: to a fascinating story here. President Donald Trump is again 291 00:14:53,520 --> 00:14:57,000 Speaker 1: facing questions about his relationship with Mohammed been Salmon if 292 00:14:57,080 --> 00:15:00,360 Speaker 1: the Sudi Crown Prince was accused of spying on Amazon 293 00:15:00,400 --> 00:15:02,760 Speaker 1: dot Com chief Jeff Bezos. To get some more on 294 00:15:02,760 --> 00:15:05,680 Speaker 1: this story, we welcome Justin Sinc. Justin covers the White 295 00:15:05,680 --> 00:15:08,560 Speaker 1: House for Bloomberg News. Justin, thanks so much for joining us. 296 00:15:09,000 --> 00:15:11,400 Speaker 1: Talk to us about how this story is expanding from 297 00:15:11,440 --> 00:15:14,360 Speaker 1: what it was originally reported. Jeff Bezos and the Saudi 298 00:15:14,400 --> 00:15:17,360 Speaker 1: Crown Prince. Yeah, I mean what we're seeing now is 299 00:15:17,600 --> 00:15:19,400 Speaker 1: I think a lot of pressure on the US government 300 00:15:19,960 --> 00:15:24,640 Speaker 1: to respond. Obviously, President Trump is still sort of facing 301 00:15:24,720 --> 00:15:27,840 Speaker 1: the fallout from the killing of Jamalika Shogi, who was 302 00:15:27,920 --> 00:15:32,200 Speaker 1: the Washington Post columnist who was murdered in inside a 303 00:15:32,240 --> 00:15:36,320 Speaker 1: diplomatic facility. Uh, and this again has gone back in 304 00:15:36,400 --> 00:15:40,359 Speaker 1: some ways. This uh latest controversy is like an amalgamation 305 00:15:40,440 --> 00:15:43,440 Speaker 1: of all the sort of controversies of President Trump's tenure. 306 00:15:43,560 --> 00:15:48,000 Speaker 1: So you've got, uh, these concerns over you know, closeness 307 00:15:48,000 --> 00:15:52,600 Speaker 1: with Saudi Arabia despite UM human rights violations. He've got 308 00:15:52,640 --> 00:15:55,840 Speaker 1: his back and forth with Jeff Bezos and Amazon, who 309 00:15:56,160 --> 00:15:59,720 Speaker 1: President Trump himself has been frustrated with because of the 310 00:15:59,720 --> 00:16:02,920 Speaker 1: owner ship of the Washington Post. You've got this ongoing 311 00:16:02,960 --> 00:16:08,960 Speaker 1: court case over whether you know, the Pentagon violated UM 312 00:16:09,440 --> 00:16:12,160 Speaker 1: kind of a fair competition by giving Microsoft rather than 313 00:16:12,160 --> 00:16:16,120 Speaker 1: Amazon this huge ten billion dollar contract. And so I 314 00:16:16,120 --> 00:16:17,960 Speaker 1: think a lot of attention is now turning into how 315 00:16:18,000 --> 00:16:19,880 Speaker 1: President Trump is going to handle this, because you would 316 00:16:19,880 --> 00:16:25,160 Speaker 1: think under normal circumstances of foreign government hacking the richest 317 00:16:25,200 --> 00:16:29,320 Speaker 1: man in the United States the head of a prominent 318 00:16:29,320 --> 00:16:31,840 Speaker 1: American company would be something that the US government would 319 00:16:31,880 --> 00:16:35,160 Speaker 1: respond to. Justin there's also a question of cybersecurity. So, 320 00:16:35,200 --> 00:16:38,920 Speaker 1: putting aside the politics of whether President Trump responds to this, UH, 321 00:16:38,960 --> 00:16:42,760 Speaker 1: there is a question of Saudi Arabia's capabilities in any 322 00:16:42,760 --> 00:16:46,840 Speaker 1: potential friendship or contact from people close to the administration. 323 00:16:46,920 --> 00:16:49,800 Speaker 1: We know that, for example, President Trump's son in law 324 00:16:49,880 --> 00:16:53,600 Speaker 1: had some direct contact with Mohammed bin Salmon. Uh. So, 325 00:16:53,680 --> 00:16:56,960 Speaker 1: I'm wondering do we have any sense or better surveillance 326 00:16:57,360 --> 00:17:01,040 Speaker 1: into knowing that other members apps of the government were 327 00:17:01,080 --> 00:17:03,280 Speaker 1: not hacked by the Saudi Arabians in the same kind 328 00:17:03,280 --> 00:17:05,720 Speaker 1: of way that they are suspected of doing so with 329 00:17:05,800 --> 00:17:08,359 Speaker 1: the richest man in America. Yeah, I mean, this is 330 00:17:08,359 --> 00:17:11,000 Speaker 1: a real question here on the White House, is you 331 00:17:11,040 --> 00:17:15,040 Speaker 1: know they're they're Is all that's reporting about Jared Kushner 332 00:17:15,080 --> 00:17:20,000 Speaker 1: and an MBS speaking with each other over WhatsApp? Obviously 333 00:17:20,040 --> 00:17:23,879 Speaker 1: the Saudius have been sort of brazen, at least allegedly. 334 00:17:23,960 --> 00:17:27,600 Speaker 1: But the one kind of point of caution that that 335 00:17:27,800 --> 00:17:30,600 Speaker 1: some people have said during this is that the investigation 336 00:17:30,640 --> 00:17:34,600 Speaker 1: into Jeff bezos phone was done by an independent firm. 337 00:17:34,680 --> 00:17:39,240 Speaker 1: It hasn't yet been reviewed by outside government sources. We're 338 00:17:39,280 --> 00:17:41,360 Speaker 1: not sure if the U. S. Intelligence community has made 339 00:17:41,400 --> 00:17:44,800 Speaker 1: the same determination, and that that could explain some of 340 00:17:44,840 --> 00:17:46,639 Speaker 1: the reticents so far by the White House in the 341 00:17:46,640 --> 00:17:49,840 Speaker 1: administration to to publicly say anything about this. But my 342 00:17:49,960 --> 00:17:53,560 Speaker 1: guess is that they are undertaking a security review, not 343 00:17:53,600 --> 00:17:55,719 Speaker 1: just what happened in the basis case, but if anything 344 00:17:55,760 --> 00:17:58,720 Speaker 1: had happened that could potentially compromise the US security here 345 00:17:59,359 --> 00:18:02,840 Speaker 1: Um the way else it said previously that that Jared's 346 00:18:02,880 --> 00:18:07,320 Speaker 1: PHONN conversations were all properly documented and security measures were taken. 347 00:18:07,359 --> 00:18:10,439 Speaker 1: But I'm sure that this this case has sort of 348 00:18:10,480 --> 00:18:13,320 Speaker 1: prompted a new look at all. That what's interesting, I 349 00:18:13,320 --> 00:18:15,840 Speaker 1: think the is there any sense that the US government 350 00:18:16,080 --> 00:18:19,200 Speaker 1: plans to launch an investigation or are they just going 351 00:18:19,240 --> 00:18:21,480 Speaker 1: to sit on the sidelines and hope this maybe pu 352 00:18:21,600 --> 00:18:25,480 Speaker 1: bose over. Yeah, I mean, certainly the public indications is 353 00:18:25,520 --> 00:18:29,280 Speaker 1: the second. UM. White House spokesman Hogan Ghibley was asked 354 00:18:29,280 --> 00:18:32,520 Speaker 1: about this yesterday. Uh, he said, you know, the while 355 00:18:32,560 --> 00:18:35,720 Speaker 1: the administration takes it seriously that Saudis are an important ally, 356 00:18:36,160 --> 00:18:38,840 Speaker 1: the President himself said he wasn't really familiar with the case, 357 00:18:38,920 --> 00:18:43,080 Speaker 1: and Treasury Secretary Ammunition uh said it shouldn't stop American 358 00:18:43,119 --> 00:18:47,320 Speaker 1: companies from continuing to work with and invest in Saudi Arabia. 359 00:18:47,480 --> 00:18:50,359 Speaker 1: So there's not yet kind of an indication that the 360 00:18:51,200 --> 00:18:54,000 Speaker 1: US is launching kind of a full scale investigation or 361 00:18:54,600 --> 00:18:57,200 Speaker 1: raising red flags in the way that the Obama administration, 362 00:18:57,200 --> 00:19:00,520 Speaker 1: for instance, did after the sort of famous ony hack 363 00:19:00,880 --> 00:19:05,120 Speaker 1: um by North Korea, which ended up, you know, releasing 364 00:19:05,160 --> 00:19:09,080 Speaker 1: a lot of embarrassing internal documents and emails justin sink 365 00:19:09,280 --> 00:19:11,600 Speaker 1: of Flaver News. Thank you so much for bringing us that. 366 00:19:11,720 --> 00:19:12,960 Speaker 1: I do want to just give you an update and 367 00:19:13,000 --> 00:19:15,040 Speaker 1: what's going on in markets right now? You're saying oil 368 00:19:15,080 --> 00:19:18,840 Speaker 1: prices fall, uh, it's actually down now, crede on the 369 00:19:18,920 --> 00:19:24,399 Speaker 1: imax cents, that's down almost ten dollars from the end 370 00:19:24,440 --> 00:19:27,280 Speaker 1: of last year. Meanwhile, you're seeing tenure into your treasury. 371 00:19:27,320 --> 00:19:31,040 Speaker 1: Yields fall to their lowest since October. And there is 372 00:19:31,080 --> 00:19:33,240 Speaker 1: a question of why you've seen it right, you know, 373 00:19:33,359 --> 00:19:36,560 Speaker 1: seen the equities rebound, certainly led by tech. You aren't 374 00:19:36,600 --> 00:19:40,280 Speaker 1: seeing necessarily a massive bid in gold, and there is 375 00:19:40,320 --> 00:19:43,359 Speaker 1: a question of why yields are constantly being pressed lower 376 00:19:43,400 --> 00:19:45,920 Speaker 1: in the US. I do just have to say, I 377 00:19:46,359 --> 00:19:48,800 Speaker 1: do find this interesting. The foreign bid, how much is that? 378 00:19:48,920 --> 00:19:51,760 Speaker 1: What's driving it given the fact that the ECB is 379 00:19:51,840 --> 00:19:55,600 Speaker 1: on hold, possibly looking at more ways to stimulate inflation 380 00:20:08,240 --> 00:20:10,200 Speaker 1: in the rearview mirror, and what a year it was 381 00:20:10,520 --> 00:20:14,720 Speaker 1: starting off, and generally similar type of fashion, broad strength 382 00:20:14,760 --> 00:20:17,240 Speaker 1: of financial markets across the board. Let's see kind of 383 00:20:17,320 --> 00:20:20,960 Speaker 1: what the big drivers are for going forward. Welcome Mark Lusheni, 384 00:20:21,040 --> 00:20:24,960 Speaker 1: Chief investment strategist A Johnny Montgomery Scott Basin, Philadelphia. They 385 00:20:25,000 --> 00:20:28,200 Speaker 1: have ninety billion dollars under management, so lots of money 386 00:20:28,240 --> 00:20:30,440 Speaker 1: putting to work there. Mark, thanks so much for joining 387 00:20:30,560 --> 00:20:32,960 Speaker 1: us on the phone again. We started out the year 388 00:20:33,119 --> 00:20:35,119 Speaker 1: kind of like we ended in some pretty good strength 389 00:20:35,200 --> 00:20:40,720 Speaker 1: across the financial markets. How are you framing outlook? Sure? Well, 390 00:20:40,920 --> 00:20:43,560 Speaker 1: I don't expect a repeat in what we had in 391 00:20:43,600 --> 00:20:47,520 Speaker 1: twenty the least by way of order magnitude, but directionally similar. 392 00:20:47,640 --> 00:20:50,640 Speaker 1: And that is to say, I think that US economy 393 00:20:50,720 --> 00:20:54,480 Speaker 1: is going to remain on sound footing. There are now, 394 00:20:54,640 --> 00:20:59,760 Speaker 1: I think increasingly evidence of better economic growth abroad. We 395 00:21:00,000 --> 00:21:03,600 Speaker 1: a slew of manufacturing numbers that came out from the 396 00:21:03,720 --> 00:21:06,280 Speaker 1: European area this morning, and they were all indicative of 397 00:21:06,720 --> 00:21:09,920 Speaker 1: a month over month sequential improvement. And I think that 398 00:21:10,200 --> 00:21:12,960 Speaker 1: is going to largely play out in a fashion that 399 00:21:13,160 --> 00:21:17,960 Speaker 1: allows investors and business leaders alike to see those better conditions, 400 00:21:18,040 --> 00:21:21,960 Speaker 1: framing an outlook for corporate earnings in twenty to improve, 401 00:21:22,560 --> 00:21:24,920 Speaker 1: and that should set the setting for risk assets to 402 00:21:25,000 --> 00:21:30,280 Speaker 1: continue to march higher um. Although recognizing that nine plus 403 00:21:30,320 --> 00:21:32,760 Speaker 1: of the move last year in the U S stock 404 00:21:32,840 --> 00:21:36,200 Speaker 1: market was a result of multiple expansion rather than earnings growth. 405 00:21:36,240 --> 00:21:39,240 Speaker 1: So it's really going to think be heavily reliant on 406 00:21:39,320 --> 00:21:42,400 Speaker 1: that earnings picture to improve, because without it, I don't 407 00:21:42,440 --> 00:21:44,720 Speaker 1: expect we're going to see that kind of multiple expansion 408 00:21:44,800 --> 00:21:47,640 Speaker 1: repeated this year. I'm old enough to remember when people 409 00:21:47,680 --> 00:21:52,320 Speaker 1: said we were late cycle. Are we still late cycle? Well, 410 00:21:52,400 --> 00:21:54,880 Speaker 1: we're later in the cycle than we were ten years ago, 411 00:21:55,440 --> 00:21:57,479 Speaker 1: are we Some people are actually saying that we've had 412 00:21:57,520 --> 00:22:00,560 Speaker 1: other cycles, their micro cycles, that have cycled with cycles, 413 00:22:00,560 --> 00:22:02,600 Speaker 1: and therefore we're totally fine, and now we're starting a 414 00:22:02,680 --> 00:22:07,399 Speaker 1: news cycle. Well, I mean there is actually some oscillation 415 00:22:07,440 --> 00:22:09,840 Speaker 1: that you can see in, for instance, the manufacturing cycle, 416 00:22:09,920 --> 00:22:12,040 Speaker 1: where they tend to ebb and flow in three year 417 00:22:12,119 --> 00:22:15,600 Speaker 1: periods where you have about eighteen months of manufacturing activity 418 00:22:15,640 --> 00:22:19,080 Speaker 1: advancing and then eighteen months of slowing manufacturing activity. And 419 00:22:19,160 --> 00:22:22,320 Speaker 1: so actually, what worries think we're seeing right now is 420 00:22:22,440 --> 00:22:24,879 Speaker 1: that nater being formed in that eighteen months of a 421 00:22:24,920 --> 00:22:27,879 Speaker 1: slow down in manufacturing that should lead to improving numbers. 422 00:22:28,160 --> 00:22:31,000 Speaker 1: And therefore, I think work up towards catching up to 423 00:22:31,080 --> 00:22:33,159 Speaker 1: the data we've been getting out of the service society 424 00:22:33,160 --> 00:22:36,720 Speaker 1: of the economy, which is much larger, much less volatile 425 00:22:36,760 --> 00:22:39,440 Speaker 1: than the manufacturing side. But together that should lead to 426 00:22:39,760 --> 00:22:43,200 Speaker 1: once again an improved outlook for economic bacteria or the 427 00:22:43,240 --> 00:22:45,719 Speaker 1: balance of this year. Well, Mark, I'm enough to remember 428 00:22:45,800 --> 00:22:49,280 Speaker 1: when valuations matter, and I think about the equity performance 429 00:22:49,400 --> 00:22:52,240 Speaker 1: up nearly thirty percent last year, I don't recall a 430 00:22:52,280 --> 00:22:54,840 Speaker 1: lot of earnings growth accompanying that. So how should we 431 00:22:54,920 --> 00:22:58,840 Speaker 1: be thinking about valuation and the equity markets right now? Well, 432 00:22:58,880 --> 00:23:00,600 Speaker 1: there's a number of ways. One and look at it 433 00:23:01,119 --> 00:23:03,399 Speaker 1: if you just simply look at the price to earnings multiple. 434 00:23:03,520 --> 00:23:07,240 Speaker 1: We started this week with the SMP five hundred trading 435 00:23:07,280 --> 00:23:10,760 Speaker 1: at a precisely nineteen point zero times forward earnings for 436 00:23:10,920 --> 00:23:13,080 Speaker 1: facts at s and P five hundred estimates of a 437 00:23:13,119 --> 00:23:16,240 Speaker 1: little over a hundred seventy five dollars for SMP five 438 00:23:16,320 --> 00:23:21,080 Speaker 1: hundred companies we use consensus. Well, it's probably not a 439 00:23:21,160 --> 00:23:23,760 Speaker 1: number that's all that dissimilar, and as a consequence, it 440 00:23:23,880 --> 00:23:27,080 Speaker 1: suggests that equity markets certainly aren't cheap in here. But 441 00:23:27,440 --> 00:23:30,320 Speaker 1: you know, we've seen multiple expansion even up into the 442 00:23:30,400 --> 00:23:33,879 Speaker 1: mid twenties in the midst of a bull market. Uh, 443 00:23:34,040 --> 00:23:36,360 Speaker 1: and then you when you take it into the context 444 00:23:36,400 --> 00:23:39,440 Speaker 1: of also UH kind of the once again the extension 445 00:23:39,480 --> 00:23:41,760 Speaker 1: of the team to principle, there is no alternative when 446 00:23:41,800 --> 00:23:43,919 Speaker 1: you look at bond yields again pressing lower than one 447 00:23:44,000 --> 00:23:47,520 Speaker 1: seven on the tape, assuming that, I think what's concerning 448 00:23:47,560 --> 00:23:50,800 Speaker 1: investors at the moment is the coronavirus UH tends to 449 00:23:52,119 --> 00:23:56,960 Speaker 1: wane over some period of time without it obviously infesting 450 00:23:57,320 --> 00:24:00,440 Speaker 1: conditions to the point where equity markets need to sell 451 00:24:00,480 --> 00:24:04,280 Speaker 1: off more to reconcile two concerns that this will impact 452 00:24:04,720 --> 00:24:08,240 Speaker 1: on a more permanent basis global growth. UM, then I 453 00:24:08,359 --> 00:24:11,359 Speaker 1: think that the market can sustain this multiple, if not 454 00:24:11,560 --> 00:24:15,400 Speaker 1: even again expand somewhat mark what's your most contrarian call 455 00:24:15,480 --> 00:24:20,040 Speaker 1: for Well, I think obviously one would be the emergence 456 00:24:20,080 --> 00:24:23,800 Speaker 1: of inflation. UM. You know, it's been hibernating now for 457 00:24:23,880 --> 00:24:26,520 Speaker 1: the better part of a decade, and it's probably the 458 00:24:26,600 --> 00:24:30,040 Speaker 1: one thing that has the least consensus around the expectation 459 00:24:30,119 --> 00:24:32,560 Speaker 1: that will ever see it again. You can look at 460 00:24:32,600 --> 00:24:35,600 Speaker 1: that by way of the tips yields at one point 461 00:24:35,680 --> 00:24:38,479 Speaker 1: six one point seven on the tenure um. You can 462 00:24:38,520 --> 00:24:40,639 Speaker 1: look at it by way of Fed policy. You know, 463 00:24:41,080 --> 00:24:44,919 Speaker 1: with their ear markting risks to UM the downside rather 464 00:24:45,000 --> 00:24:48,200 Speaker 1: than the upside, and there are obviously lengthy pause in 465 00:24:48,480 --> 00:24:51,680 Speaker 1: any kind of rate adjustments UM, and so I think 466 00:24:51,760 --> 00:24:54,000 Speaker 1: that would be the one thing that given the tightness 467 00:24:54,040 --> 00:24:57,720 Speaker 1: in the labor markets and any improvement economically UM that 468 00:24:57,880 --> 00:25:01,399 Speaker 1: we could see potentially emerges, certainly not in the near future, 469 00:25:01,520 --> 00:25:06,760 Speaker 1: but maybe out over the balance of So Marc, as 470 00:25:06,840 --> 00:25:08,359 Speaker 1: I think about, as you know, Lisa and I were 471 00:25:08,359 --> 00:25:11,479 Speaker 1: talking about, we're late in what is typically you know, uh, 472 00:25:12,240 --> 00:25:13,800 Speaker 1: late in the cycle. If you think about ten or 473 00:25:13,800 --> 00:25:16,720 Speaker 1: eleven years of this economic cycle, are there sectors that 474 00:25:16,920 --> 00:25:19,960 Speaker 1: you like here more than others? Maybe given where we 475 00:25:20,000 --> 00:25:21,879 Speaker 1: are in the economic cycle, maybe where we are in 476 00:25:22,000 --> 00:25:25,280 Speaker 1: terms of evaluation, Well, I think if you look at 477 00:25:25,320 --> 00:25:29,720 Speaker 1: the sectors that had recently shown some signs of life, again, 478 00:25:30,160 --> 00:25:34,159 Speaker 1: they're indicative of this provement that we're recognizing here that 479 00:25:34,320 --> 00:25:37,919 Speaker 1: I think is still less than convincing among market participants. 480 00:25:38,000 --> 00:25:40,200 Speaker 1: But I think evolving in a way that says that 481 00:25:40,320 --> 00:25:42,960 Speaker 1: one would want to have a more pro growth, more 482 00:25:43,080 --> 00:25:47,640 Speaker 1: procyclical stance. So sectors like industrials, for instance, look appealing 483 00:25:47,720 --> 00:25:51,080 Speaker 1: to US energy would also fall into that camp. But 484 00:25:51,119 --> 00:25:55,160 Speaker 1: has got his own idiosyncratic issues. Material stocks would fall 485 00:25:55,240 --> 00:25:58,600 Speaker 1: into that campus, well, it would financials um those that 486 00:25:58,680 --> 00:26:00,720 Speaker 1: are winning on a day like today, when you have this, 487 00:26:01,080 --> 00:26:04,040 Speaker 1: you know, rather violent rotation from risk on the risk 488 00:26:04,119 --> 00:26:08,480 Speaker 1: off the utilities, consumer staples. Real estate investment trust makes 489 00:26:08,560 --> 00:26:10,879 Speaker 1: sense as a risk caven if you're going to be 490 00:26:11,000 --> 00:26:13,080 Speaker 1: long equities at the moment, but at the same time 491 00:26:13,359 --> 00:26:16,160 Speaker 1: their valuations have expanded to the point where they look 492 00:26:16,240 --> 00:26:19,439 Speaker 1: exceedingly rich to us. And unless this environment is going 493 00:26:19,520 --> 00:26:22,200 Speaker 1: to stay once again, where investors are on their heels 494 00:26:22,720 --> 00:26:25,680 Speaker 1: um from an investment standpoint, they look the least appealing 495 00:26:25,720 --> 00:26:27,960 Speaker 1: among all the sectors in the S and P five hundred. 496 00:26:28,320 --> 00:26:32,280 Speaker 1: Mark Lashni, chief investment strategist, to Jenny Montgomery Scott joining us, 497 00:26:32,400 --> 00:26:35,000 Speaker 1: thank you so much for being with us. Jenny Montgomery 498 00:26:35,040 --> 00:26:39,520 Speaker 1: Scott with ninety billion dollars of assets under management from Philadelphia. 499 00:26:39,920 --> 00:26:42,520 Speaker 1: Thanks for listening to the Bloomberg Penl podcast. You can 500 00:26:42,560 --> 00:26:45,359 Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever 501 00:26:45,440 --> 00:26:48,600 Speaker 1: podcast platform you prefer. Paul Sweeney, I'm on Twitter at 502 00:26:48,640 --> 00:26:51,280 Speaker 1: pt Sweeney. And Lisa bram Woods I'm on Twitter at 503 00:26:51,359 --> 00:26:54,119 Speaker 1: Lisa bramwo wits one before the podcast. You can always 504 00:26:54,160 --> 00:26:56,200 Speaker 1: catch us worldwide on Bloomberg Radio