Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Lisa Abramwoyd's along
Speaker 1: with Tom Keane and Jonathan Farrow, join us each day
Speaker 1: for insight from the best in economics, geopolitics, finance and investment.
Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and
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Speaker 1: the Bloomberg Terminal, and the Bloomberg Business app. Data Peterson
Speaker 1: joining us now chief economist at the conference Board Data.
Speaker 1: I want to start by just asking how much has
Speaker 1: your outlook for the US economy changed over the past
Speaker 1: two weeks. It really hasn't. We have been calling for
Speaker 1: a recession starting in the second quarter and extending through
Speaker 1: the fourth quarter. If anything, this might accelerate things. Certainly,
Speaker 1: consumers have already dialed back spending on goods, businesses are
Speaker 1: not spending on investments, and also the housing market has
Speaker 1: really folded in on itself. And really the last jew
Speaker 1: to fall is services. Now, a credit crunch really doesn't
Speaker 1: affect services because people don't tend to finance restaurant and
Speaker 1: visits other than using their credit cards. But certainly we
Speaker 1: think that in terms of durable goods and certainly the
Speaker 1: ability for businesses to invest that tighter credit conditions are
Speaker 1: not a good thing for them, and that will potentially
Speaker 1: cause the economy to have maybe a little bit worse
Speaker 1: recession than we're expecting. So that's what a lot of
Speaker 1: people are saying is that this brings forward the recession.
Speaker 1: But you ring another specter to the table here, this
Speaker 1: idea of a potentially deeper recession. At what point do
Speaker 1: liquidity concerns at banks become a credit problem for the
Speaker 1: consumer a credit problem for the economy akin to what
Speaker 1: we have seen in history when there are liquidity issues. Well,
Speaker 1: if you're a bank and you're concerned about your deposit
Speaker 1: levels dropping, you're less likely to lend money. But the
Speaker 1: things that consumers are already pulling back, they're not going
Speaker 1: out and buying cars and homes because interest rates have
Speaker 1: risen significantly, almost five percentage points and roughly a year.
Speaker 1: So there may not be a much effect on the consumer,
Speaker 1: but certainly I think there's a risk for businesses who
Speaker 1: tend to need cash, especially to pay their workers and
Speaker 1: to invest in and in short term and long term venture.
Speaker 1: So I think the pressures will probably be more on
Speaker 1: businesses relative to consumers. Does this also shift your view
Speaker 1: on how much unemployment could go up or do you
Speaker 1: think that we could get this downturn without some sort
Speaker 1: of structural increase in joblessness just simply because of the
Speaker 1: mismatch right now in the labor market, well, the industries
Speaker 1: that are letting people go or the former pandemic darlings. Again,
Speaker 1: it's tech, it's financed, it's real estate, it's construction, it's transportation, warehousing,
Speaker 1: which were linked to the strong demand for good. So
Speaker 1: that's what we're still seeing in terms of layoffs and weakness.
Speaker 1: But you still have these huge labor shortages and areas
Speaker 1: that are less sensitive to interest rates, such as healthcare
Speaker 1: and restaurants and hotels, and so what we really need
Speaker 1: to see is consumers turn that dour sentiment that we're
Speaker 1: seeing in our consumer confidence gage, which we've seen over
Speaker 1: the last year, into Okay, I no longer want to
Speaker 1: purchase services. And certainly higher interest rates may not get
Speaker 1: at that issue. But if consumers think, well, I might
Speaker 1: be next in terms of layoffs, then they'll pull back
Speaker 1: on spending. But all in all, we still think that
Speaker 1: the unemployment rate's probably going to rise to about four
Speaker 1: point four percent next year. That's roughly a million jobs loss.
Speaker 1: I would not want to be in that number, but
Speaker 1: certainly not as bad as what it could be. We're
Speaker 1: speaking with Dana Peterson, chief economist at the Conference Board,
Speaker 1: as we look forward to another week, another month, potentially
Speaker 1: a rate cuts in the face of what some people
Speaker 1: are expecting is a decline in economic momentum. Dana here
Speaker 1: comes sort of the rub on the whole issue as
Speaker 1: we talk about perhaps the sooner recession, a deeper recession,
Speaker 1: and FED cutting rates in response to that. Have we
Speaker 1: dealt with the inflation problem, especially given the stickiness that
Speaker 1: we've seen in recent data. I don't think we have. Certainly,
Speaker 1: when we see the stickiness, it's linked to wages through
Speaker 1: well services through wages and very strong demand for services,
Speaker 1: also food prices, which are being influenced by outside effects,
Speaker 1: certainly the declines that we expect in rent inflation. It's
Speaker 1: in the pipeline. We just have to wait for it
Speaker 1: to happen. Maybe it'll start in the springtime or early summer.
Speaker 1: But I don't think we've licked the inflation problem, and
Speaker 1: so that's why we're not anticipated that the Fed's going
Speaker 1: to cut rates this year even if there is a
Speaker 1: mild recession. If you still have prices that are so
Speaker 1: far above the two percent target, why would the FED
Speaker 1: be cutting interest rates, especially if they also think that
Speaker 1: if there is a recession that it's not going to
Speaker 1: be that bad. Well, and this isn't just an interest
Speaker 1: rate story. It's also a balance sheet story. And we
Speaker 1: saw the balance sheet increase traumatic lay over the past
Speaker 1: two weeks in terms of the Federal Reserve and its holdings,
Speaker 1: and part of this is not necessarily stimulative. Some people
Speaker 1: will point out these are emergency loans to certain banks.
Speaker 1: At the same time, Can this central bank kill inflation
Speaker 1: if it keeps going back to the same crisis area
Speaker 1: tools to try to solve financial instability? Well, I think
Speaker 1: the FEED is trying to say that it can do
Speaker 1: two things at once. Right, It can address inflation through
Speaker 1: the credit channel by raising interest rates and also the
Speaker 1: continue dialing down of its balance sheet. But it can
Speaker 1: also provide liquidity, which yes, does hit the balance sheet,
Speaker 1: but you can think about it as two different wallets
Speaker 1: that the FET is working with here, and so the
Speaker 1: FET is saying we can provide liquidity to banks, and
Speaker 1: it's not stimulative because banks are taking this money because
Speaker 1: they needed to make sure that they remain stable. But
Speaker 1: they're also probably not going to lend this money, so
Speaker 1: that doesn't so that prevents it from being stimulative or inflationary.
Speaker 1: So I think that's the key thing we have to
Speaker 1: understand that has many different tools, it's using these different
Speaker 1: tools in different ways, and that it can address inflation
Speaker 1: and providing liquidity at the same time. How much do
Speaker 1: you think that the Fed can cut rates? Well, again,
Speaker 1: we think there's there are no rate cuts for this year,
Speaker 1: but we'll probably start seeing consideration of rate cuts maybe
Speaker 1: in the second quarter of next year. But we think
Speaker 1: that we're not going to go back down to the
Speaker 1: low levels that we saw even before the pandemic, because
Speaker 1: inflation may be structurally higher and it may be more
Speaker 1: difficult for the FED to maintain that two percent target.
Speaker 1: So we think that maybe the federal funds rate next
Speaker 1: year goes down to around three quarter four percent, but
Speaker 1: certainly not back to two or one or even zero
Speaker 1: unless we have some major crisis or very deep procession.
Speaker 1: Dana Peterson, thank you so much for being with us
Speaker 1: of the conference board, joining us now as Patrick Compstrong,
Speaker 1: CEO of Plurimi Wealth. Patrick, You've usually got a ridly
Speaker 1: intestinct trade. I know you were sure Credit sways and
Speaker 1: you how some of the jet let's start there. Want
Speaker 1: me through how that worked out? Um, so our story
Speaker 1: Credit swayed all of last year. I actually closed my
Speaker 1: sort unfortunately at the beginning of March, so I thought
Speaker 1: it covered in a two nineties two point nine Swiss
Speaker 1: pranks are there, so made about a seventy percent return
Speaker 1: on the tourt thesis. Was not much upside in the equity,
Speaker 1: even though it's incredibly cheap. But bonds are going to
Speaker 1: be safe. It's a systemically important company. Bonds couldn't fail.
Speaker 1: So I had a bit of a scary ride over
Speaker 1: the weekend. Sure you did some of the bonds. I
Speaker 1: own our senior bonds, all senior bonds, but at the
Speaker 1: group level, and there are were scenarios where if it
Speaker 1: was a forced acid sale and UBS didn't buy the group,
Speaker 1: those bonds would have come under pressure and potentially even
Speaker 1: been worthless. But it turned out to be a good
Speaker 1: trade on both sides of those. Since we've pulled closed
Speaker 1: Credit Swiss, so we're actually short Bank of Nova Scotia
Speaker 1: in Canada now and the Adian banks became the biggest
Speaker 1: banks in the world in the financial crisis. They weren't
Speaker 1: impaired basically by the same issues that all the other
Speaker 1: banks plummet and value, and I think they're viewed as
Speaker 1: a beacon of safety. But Canadian banks have a property
Speaker 1: bubble to deal with, and they've got rising rates to
Speaker 1: deal with, and they're very expensive. You look at every
Speaker 1: other bank in the world and they're trading at frank
Speaker 1: practions of tangible book value. In Canada they're still trading
Speaker 1: at multiples of tangible book values. So very expensive banks,
Speaker 1: very well run banks, but with a property bubble that
Speaker 1: creates some risks. Well, let's put some numbers on that
Speaker 1: property bubble, Patrick, how about is that situation? Well, property
Speaker 1: it's always very hard to exactly quantify, but affordability index
Speaker 1: Canada is right near the bottom of the world. Property
Speaker 1: prices have gone up four hundred percent incomes a rising
Speaker 1: in line with the rest of the world. So zero
Speaker 1: interest rate policy that led to property price jumps everywhere.
Speaker 1: Just we're really magnified in Canada. Canada has been commodity
Speaker 1: the exporter as well. So in high old prices, the
Speaker 1: economy was relatively resilient, and zero interest rate policies have
Speaker 1: led to incredibly strong property market, especially in the big cities. Patrick,
Speaker 1: I'm going to help you out disclosure. You're from Canada, right,
Speaker 1: so this is something coming from a place where you
Speaker 1: can you can criticize your own home more easily. I
Speaker 1: am curious of whether this is just a symptom of
Speaker 1: liquidity being drawn out of the system that is exposing
Speaker 1: other areas is overly inflated that have not gotten repriced down,
Speaker 1: or you see a potential trade. What's a combination with
Speaker 1: bank lover expensive versus other banks very high on book value,
Speaker 1: higher on earnings, and you are going to see impairments
Speaker 1: on its loan book because banks their business model is
Speaker 1: you lend money to people to buy houses. If those
Speaker 1: house prices come back to normal on any measure versus history,
Speaker 1: you're going to have bad dents in Canada. But it's
Speaker 1: not just a Canadian story. I mean aside from just
Speaker 1: real estate, and there are issues or pockets of issues
Speaker 1: in the Scandinavian countries and other areas where there also
Speaker 1: is an affordability problem. It's also in private equity. It's
Speaker 1: also in private debt. We have seen this. We've heard
Speaker 1: this from a number of different people, and then others
Speaker 1: push back and say, well, it's either repriced or won't
Speaker 1: have to reprice because the assets will return to their
Speaker 1: value later on. Do you think that that's fair or
Speaker 1: do you think that there are pockets nodes of potential contagents.
Speaker 1: Should there be some forced sale, some price discovery in
Speaker 1: some of these assets. Yeah, private equity investors are generally
Speaker 1: not forced in to sell. But if you mark to
Speaker 1: market properly, there's no way private equity dodge to sell
Speaker 1: off in treasuries, to sell off in equities, to sell
Speaker 1: off in every asset. In twenty twenty two, but private
Speaker 1: equity funds mark their assets down six percent some of
Speaker 1: them things like that, But those aren't realizable levels. So
Speaker 1: actually I don't want to talk about but I'm sort equt,
Speaker 1: which is a private equity a lot of private equity assets.
Speaker 1: I'm sort soft bank, which was a play on higher
Speaker 1: interest rates and companies that have no path to profitability.
Speaker 1: But it is also tying into what you just said
Speaker 1: about marking to market versus marking to what you wanted
Speaker 1: to market out So Patrick, tell me about the lungs.
Speaker 1: Since you don't want to talk about the shorts too
Speaker 1: much anymore. What's your favorite long run? Now? My favorite
Speaker 1: long I like BBVA. If we're talking about banks, especially,
Speaker 1: that's a company that's going to grow its revenue probably
Speaker 1: at fifteen percent minimum this year. They've told the regulator
Speaker 1: they expect to grow revenue at twenty five percent. Interest
Speaker 1: rates on zero anymore, that was a big headwind to
Speaker 1: their profitability. So I'm not anti bank. I think some
Speaker 1: of the banks makes sense. I like to pair longs
Speaker 1: with shorts. BBVA I think is very attractive value. Right now,
Speaker 1: the ECPs coming out swinging talking about more hikes. You
Speaker 1: heard the German Central Bank governor saying the same thing,
Speaker 1: maybe even speeding up QT in three Q. You think
Speaker 1: that's achievable, Well, you've got to measure price stability, which
Speaker 1: they're worried about. But financial stability I think is first
Speaker 1: and foremost in all the central banks as to be
Speaker 1: right now, and I actually think we probably aren't going
Speaker 1: to get as hawks responses we probably would have otherwise,
Speaker 1: and it's going to soil the seeds for future inflation
Speaker 1: down the line because central banks playbook when there is
Speaker 1: financial press still liquidity at it, and you've got conditions
Speaker 1: tightening that are offset by the liquidity is they're throwing
Speaker 1: right now. So it's not in placemary right now, but
Speaker 1: they have a tendency to leave those policies in place
Speaker 1: a little bit longer than they could. So I think
Speaker 1: inflation is really dying out quick right now, but I
Speaker 1: think it's probably got another leg up in response to
Speaker 1: what's going to be happening from central banks in the
Speaker 1: coming month. What's the growth profile associated with that inflation? Kilpatrick? Well, so,
Speaker 1: I think the US is probably going to fall into
Speaker 1: a technical recession, probably just based on the tighter financial conditions,
Speaker 1: less access to credit. My view was a month ago
Speaker 1: it wouldn't and my view is now that it probably will,
Speaker 1: but I think it's going to be relatively minor. The
Speaker 1: employment situation is still robust. Employments always a lagging indicator,
Speaker 1: but one point six job openings for every unemployed person.
Speaker 1: That's got to change a lot before you see a
Speaker 1: meaningful disdropt into the US consumer Patra fascinating to catch
Speaker 1: up great cold on credit Swaice as well, Patrick Armstrong.
Speaker 1: There of plurimi wealth. I'm sure he hoped he'd held
Speaker 1: on for another two weeks onto that short but seventy
Speaker 1: percent move. Yeah, that's a pretty big move. Yeah, he
Speaker 1: did pretty well for himself. Henrita Trace joins us now
Speaker 1: the managing partner and director of Economic Research at FADA Partners.
Speaker 1: What a moment, Henrietta. I wouldn't subscribe it that way.
Speaker 1: I don't think spying is the right way to describe it.
Speaker 1: What were your thoughts when you heard that? Look, please stop.
Speaker 1: I mean that was so terrible to watch. That was
Speaker 1: really tough, and it was definitely one of the most
Speaker 1: aggressive hearings that I can remember watching, and I've seen
Speaker 1: quite a few of them. But I agree with your point.
Speaker 1: I think he did as great of a job as
Speaker 1: you could have done. The members knew what they wanted
Speaker 1: to get out of that moment, out of that five
Speaker 1: hour hearing, and it was some of the members were saying,
Speaker 1: the most bipartisan committee and the most bipartisan hearing that
Speaker 1: we've seen in a very long time. And I think
Speaker 1: that is really what drove the attention yesterday, and they
Speaker 1: got the SoundBite they wanted. As he pointed out, Lisa well,
Speaker 1: but Henrietta, how quickly can they actually get something done?
Speaker 1: Where is the actual political will to do something that
Speaker 1: could make some serious ripple effects, particularly among younger Americans.
Speaker 1: I'm really glad you asked. I don't think that there
Speaker 1: will be material legislation targeting TikTok specifically, and I do
Speaker 1: not think that there will be a national ban. I
Speaker 1: understand that yesterday's hearing was very explosive, got a lot
Speaker 1: of attention. It was the banner headline across all media
Speaker 1: platforms yesterday. But the Congress is not in a position
Speaker 1: to pass legislation to ban TikTok right now, even constitutionally
Speaker 1: if they could. What I think is happening, and I
Speaker 1: would encourage investors to do, is watch Katherine Tie, the
Speaker 1: US Trade Representative, today when she's up on the help
Speaker 1: for the second hearing in front of the House Ways
Speaker 1: and Means Committee. That's where you're writing a big, comprehensive
Speaker 1: China Bille, and we saw her give a preview of
Speaker 1: that yesterday. It state finance. They were dueling here at
Speaker 1: the exact same time. But if you didn't want as
Speaker 1: much fireworks, and you were more interested in policy, you
Speaker 1: would have watched the Setate Finance Committee hearing and that's
Speaker 1: what I was doing. So I would encourage people to
Speaker 1: watch Katherine Tye today Master Tie at nine am because
Speaker 1: they have issues about China's expansion into Latin America, Brazil, Russia,
Speaker 1: ip theft, human rights, climate issues. This is the TikTok issue,
Speaker 1: is one that effectively brings everybody to the yard, gets
Speaker 1: the bipartisan support we're looking for that allows them to
Speaker 1: craft a comprehensive China bill, which the Biden administration is
Speaker 1: hoping to do after the debt ceiling standoff is resolved
Speaker 1: or worst case scenario, in his next term if he
Speaker 1: gets reelected. When it comes to the consequences of this,
Speaker 1: how much are you watching TikTok and how much are
Speaker 1: you watching Apple and other big tech companies that have
Speaker 1: substantial businesses over in China. This is exactly what's in
Speaker 1: the restrict Act. That is the one bill that I
Speaker 1: do think could pass on TikTok. It's really about all
Speaker 1: emerging technologies, all social media, and it doesn't just target China.
Speaker 1: It also targets around Russia, Venezuela, Cuba. It's most it's
Speaker 1: the most comprehensive and it could theoretically put every social
Speaker 1: media company on the front of the table and allow
Speaker 1: the Department of Commerce, obviously run by an extraordinarily competent
Speaker 1: Secretary Raymondo, to see what they want to do, study
Speaker 1: the issue, and then restrict and ban if they see
Speaker 1: fit they takes CEO had a tough day. Secretary has
Speaker 1: had a tough two weeks, Henrietta. Let's talk about policy.
Speaker 1: Where is this policy effort going on the bank in front?
Speaker 1: Nowhere fast. I have spoken with Democrats and Republicans House
Speaker 1: Senate for the last two weeks or two years, however
Speaker 1: it's been since SAB collapsed. The reality on Capitol Hill
Speaker 1: is that the House Republican Conference is not prepared to
Speaker 1: move legislation on banking at this time. There are many
Speaker 1: ideas floating around, but there is no path to two
Speaker 1: hundred and eighteen votes from a majority of the Republican
Speaker 1: call friends in the House on any legislation. And what
Speaker 1: I hear time and time again is that you need
Speaker 1: to see the impact of this banking crisis and the
Speaker 1: collapse of a couple sort of bespoke boutique firms, which
Speaker 1: is how a lot of House Republicans think about this
Speaker 1: really start to hit the heartland. You need to see
Speaker 1: farming banks, farming state impacts. You know, it can't just
Speaker 1: be commercial real estate that is reeling from this collapse
Speaker 1: and potentially seeing their lending ability squeezed. You need to
Speaker 1: see real heartland impact that's not just in a certain
Speaker 1: couple of places. Most of the Republican conference, I would
Speaker 1: say about eighty percent was not in office during the
Speaker 1: Great Recession, and they were not here during the banking collapse,
Speaker 1: and many of them ran on the campaign of we
Speaker 1: are against bailouts, were against heart and when they look at,
Speaker 1: you know, ensuring all deposits and passing legislation to hike
Speaker 1: the two hundred fifty thousand dollars cap, all they see
Speaker 1: is bailout and that's not going to pass in this conference.
Speaker 1: Do you see and can you identify a mechanism for
Speaker 1: the trade ye to move forward and temporarily suspend the
Speaker 1: limit on deposits. It's to a mechanism that exists in
Speaker 1: your mind. Yes, absolutely. And one thing that I recall,
Speaker 1: you know, I was in the Senate during the banking crisis.
Speaker 1: The ability regulators to act is unparalleled, and the things
Speaker 1: that they can pull out of a hat are really impressive.
Speaker 1: So I think the most focused right now. What I've
Speaker 1: spoken with Senate Banking Committee staff on, and I know
Speaker 1: Treasury is working on, is shoring up all the things
Speaker 1: that we would think of for extraordinary measures on the
Speaker 1: debt ceiling. I would encourage folks to look at Secretary
Speaker 1: Geitner's letters sent back in twenty twelve, where he lays
Speaker 1: out like five different baskets of funding that the Treasury
Speaker 1: has exclusive authority over that they can tap into in
Speaker 1: the event of a crisis. This circumstance I'm referencing was
Speaker 1: the debt ceiling, but they can use that here as well.
Speaker 1: The ESG Fund in particular, is getting a lot of attention.
Speaker 1: Treasury Secretary Yellen, once President Biden gives her the sign off,
Speaker 1: is authorized to use the funds there, which were two
Speaker 1: hundred and sixteen billion dollars as of January thirty first
Speaker 1: of this year, to deploy as she sees it. So
Speaker 1: I think that's where a lot of the focus should be.
Speaker 1: It's on the regulators importantly. I think the regulators know
Speaker 1: that Congress is incapable of action, and so they are
Speaker 1: already prepared to move and they have experienced if the
Speaker 1: members of the House do not just to finish on
Speaker 1: Secretary Yellen, she was asked whether she discussed some of
Speaker 1: these issues, and she said she hadn't discussed them. And
Speaker 1: I struggled to believe that Henrietta just struggled to believe
Speaker 1: that the Treasury hadn't had a discussion about doing away
Speaker 1: with the cap on deposity deposit insurance through the mechanisms
Speaker 1: which you've identified. Were surprised that she used that language.
Speaker 1: I do think that there's been some maybe back and
Speaker 1: forth in terms of what they're telegraphing. But I also
Speaker 1: get the sense the Treasury is trying to you know,
Speaker 1: exude calm and stress as the followers are to help
Speaker 1: them do earlier this week that there's not a systemic
Speaker 1: banking crisis. So I do think that acting unila early
Speaker 1: to you know, provide unlimited backstop would have gotten a
Speaker 1: lot of blowback. Yeah, she'd committed that. Just think about
Speaker 1: how quickly that sounds like a bailout, especially when you've
Speaker 1: got guys like Gary Cohn throwing out ten million dollars numbers.
Speaker 1: It's just too high. So I do think that there
Speaker 1: was some strategy involved there, which was the worst scenario
Speaker 1: saying that you are considering it an unlimited basis, or
Speaker 1: maybe just say, hey, we haven't had that conversation. I
Speaker 1: think she picked the least bad option. What a tough
Speaker 1: spot hemerer trace their faded partners. Who would you prefer
Speaker 1: to be this week? Framo TikTok ceo? Second, Psach, you
Speaker 1: pick TikTok ceo because you had nothing to lose. Who
Speaker 1: are already working to be exactly lose it lost already exactly?
Speaker 1: Patrick calm Strong flimy Wealth coming up. Chris Marangue joins
Speaker 1: US now coc iok Belly Funds. Chris, your words, the
Speaker 1: bank crisis a feature, not a bug of FED policy, Chris,
Speaker 1: what do you mean by that? Well, listen, I think
Speaker 1: we've talked for a long time about Cherry Powell pushing rates.
Speaker 1: Something breaks, and clearly something's broken. He's made no he
Speaker 1: hasn't been shy about about talking about the fact that
Speaker 1: this credit crisis is going to be disinflationary. It helps
Speaker 1: them attack inflation. So as long as we can manage
Speaker 1: through this, it probably helps that part of the equation.
Speaker 1: If we can manage through it, if we can avoid
Speaker 1: a deeper crisis, one that spreads even more. Chris, is
Speaker 1: this sector attractive to you in any way, shape or form. Well, thankfully,
Speaker 1: we have generally avoided cyclical and sorry, we've generally avoided
Speaker 1: commoditized businesses, and the borrow short lived long business is
Speaker 1: somewhat commoditized. And it's become less attractive recently, in part
Speaker 1: because funding costs are going to go up, Banks are
Speaker 1: gonna have to pay more for deposits. Credit quality is
Speaker 1: likely deteriorating. There could be fewer loans, a fewer revenue opportunities,
Speaker 1: and almost certainly more regulation, including higher credit standards, higher
Speaker 1: ratios acquired. And that's going to impact both the P
Speaker 1: and the E for these stocks, and so they're less attractive.
Speaker 1: Not something I'd want to get involved with today. I
Speaker 1: feel like this market has been exerting the maximal pain
Speaker 1: on the maximal number of traders at all times. Heading
Speaker 1: into this year, people were talking about value stocks and
Speaker 1: how banks fit into that, and how big tech was
Speaker 1: going to be left for dead. Big tech has ripped,
Speaker 1: banks are having trouble at this point. Do you still
Speaker 1: think that big tech can lead given the concerns around growth,
Speaker 1: given the concerns that perhaps the cost cutting and the
Speaker 1: potential right sizing of the businesses is not over. Yeah,
Speaker 1: I would make a distinction about Obviously there's been this
Speaker 1: rotation back to tech, back to growth. I think much
Speaker 1: of that is related to safe haven trade investors looking
Speaker 1: for these big nation state type companies with big credit balances,
Speaker 1: cash flowing businesses as a as a safe place to
Speaker 1: be Small tech, profitless tech has not shared in as
Speaker 1: much in this rotation and the higher interest rate environment,
Speaker 1: A recessionary environment is not going to be good for
Speaker 1: those companies. So you know, we're still looking for the
Speaker 1: cash flow generators, companies with pricing power, and that's been
Speaker 1: the formula for recessionary environment, for an invitationary environment. We
Speaker 1: started this conversation Chris talking about the FED hiking rates
Speaker 1: until something breaks, and something clearly has broken. As you said,
Speaker 1: I'm curious what that means about the way you invest
Speaker 1: in terms of do you go for diversification or do
Speaker 1: you go for further concentration and the companies that you
Speaker 1: know best. Yeah, I mean, we're obviously looking for diversification
Speaker 1: across both industries and companies, but you know, it's to
Speaker 1: a certain extent. We want to focus on our core competencies.
Speaker 1: We want to put our eggs in a basket and
Speaker 1: watch that basket. And that's basically what we've been doing,
Speaker 1: unchanged for forty years. Chris. So we sleep walking into
Speaker 1: a crisis, a much bigger one. I don't think. I'm
Speaker 1: certainly not sleepwalking, and I don't think the market is
Speaker 1: as well. The market is well aware of what's going on,
Speaker 1: and maybe a little bit too nervous given the recency
Speaker 1: for many of us of the seven crisis. Obviously, lots
Speaker 1: of lots of risks out there, and that's where we
Speaker 1: get paid to manage. She's in our breed's complacency. Though,
Speaker 1: those that experienced O seven who always sit there and
Speaker 1: say it's not oh seven way, Chris, it's always a
Speaker 1: little bit different, and clearly this time is different. I
Speaker 1: don't think we have quite the systemic issues in the
Speaker 1: banking system that we did back then. Obviously, you know,
Speaker 1: the BE now having raised rates so aggressively, does have
Speaker 1: some ammunition, some dry powder u to uh copcy cut
Speaker 1: rates and improve the situation. But you know, it's what
Speaker 1: you don't know that you're worried about totally and as
Speaker 1: so much we don't know, Chris, We've got to leave
Speaker 1: it there. Thank you, sir, Chris Marangi there a cabelly Funds.
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