Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene. Along
Speaker 1: with Jonathan Ferroll and Lisa Brownwitz. Daily we bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot com,
Speaker 1: and of course, on the Bloomberg Terminal. No one has
Speaker 1: been more articulate about value than Grantham, Mayo and Van Otterloo.
Speaker 1: Benninker joins us this morning and supported Jeremy Grantham in
Speaker 1: the need to consider value among raging tech growth. Ben,
Speaker 1: thank you for joining us. You've got a quarterly letter out.
Speaker 1: I love the detail you go into. There's no consultants
Speaker 1: here telling you what to do. What is the number
Speaker 1: one message that we get wrong? As we put in
Speaker 1: the next buy ticket for Apple and Amazon. Uh, the
Speaker 1: number one thing that I think people get wrong is
Speaker 1: if you buy a market, if you buy a company,
Speaker 1: if you buy a situation where things are about as
Speaker 1: good as they have ever been, Uh, You're probably not
Speaker 1: going to get a great return going forward. Uh. You
Speaker 1: get the best returns when you're buying at not the
Speaker 1: best times. This has been a wonderful time for big tech.
Speaker 1: This has been a wonderful time for the S and P.
Speaker 1: You really want to be looking for the places where
Speaker 1: this hasn't been quite as wonderful. Where are they? Where
Speaker 1: where is the mean reversion going constructively back to the mean?
Speaker 1: So what we see is value stocks generally, and I
Speaker 1: think you want to be smart about how you're defining
Speaker 1: value stocks, but honestly, any way you define value stocks,
Speaker 1: they look really cheap relative to history um. And what
Speaker 1: we think is, if you're looking intelligently at the valuations
Speaker 1: of the stocks that have been left behind, they're training
Speaker 1: at some of the biggest discounts to the market we
Speaker 1: have ever seen. Uh, And there doesn't seem to be
Speaker 1: a really good economic reason for it. So sooner or
Speaker 1: later you're gonna get a really good return out. And
Speaker 1: there's a reason why some of the big tech stocks
Speaker 1: have done so well, and it comes from the cash
Speaker 1: that they are generated. It comes from the fact that
Speaker 1: they are somewhat independent of some of the price pressures
Speaker 1: because they don't have as many employees relative to their
Speaker 1: overall cash flow. It also comes from the fact that
Speaker 1: they are on the vanguard of a shift technological shift
Speaker 1: in the community that was frankly accelerated during the pandemic.
Speaker 1: How do you sort of counteract all of those forces
Speaker 1: and say, look, that's all baked in. These other stocks
Speaker 1: are going to benefit as we revert to a normal economy. Well,
Speaker 1: I'd say a couple of things. One is, there's a
Speaker 1: lot of craziness going on in the economy. We do
Speaker 1: see some stocks trading and utterly looney valuations. Big tech
Speaker 1: is not the core of that. Right. You can say, hey,
Speaker 1: Google has been on a great run. You can say
Speaker 1: Apple has been on a great run. They don't look cheap,
Speaker 1: but they don't look stupid. Um, there's any of stuff
Speaker 1: in the market that does look pretty stupid like and
Speaker 1: the um you know, the the Tesla's, the a m
Speaker 1: c s, the meme. Stocks are trading at valuations where
Speaker 1: you have to assume utterly extraordinary things to get a
Speaker 1: decent return. A quarter of the market right now is
Speaker 1: trading at more than ten times sales, which is utterly crazy.
Speaker 1: Stocks trading at ten times sales or more historically have
Speaker 1: underperformed the market profoundly. Um And today a quarter of
Speaker 1: the market is trading at that huge multiple. But ben
Speaker 1: some people would argue if you try to go to,
Speaker 1: say the Russell two thousand as a value proposition, because
Speaker 1: they tend to be less loved, you end up buying
Speaker 1: a lot of AMC, a lot of Game Stop, which
Speaker 1: suddenly account for a big proportion of these indexes. How
Speaker 1: do you get around that? Well, I think buying buying
Speaker 1: the industries right now is a tough thing, right, because
Speaker 1: whenever you're buying the industries, you are buying those stocks
Speaker 1: which have very high market caps. In the case of
Speaker 1: you know, Apple and Amazon and stuff, they are legitimately
Speaker 1: huge companies. For some of these companies, a mc is
Speaker 1: is a wonderful example. The company isn't huge, just the
Speaker 1: market cap has exploded, um, And I think you want
Speaker 1: to be careful doing anything that assumes that that market
Speaker 1: cap is correct. Right. The Russell has had a heck
Speaker 1: of a run since the lows of last year. It
Speaker 1: is not cheap either. I'm not making the argument that
Speaker 1: the S and D is expensive by the Russell too.
Speaker 1: I'm saying growth has been on a great run. Growth
Speaker 1: is expensive by value, Benn and Kurt. Value is founded
Speaker 1: on certain bibles. One of them is Graham, Dot and Coddle.
Speaker 1: You and I read it cover to cover ages ago.
Speaker 1: You guys have led the charge on growth. The growthiness
Speaker 1: that we've got now is unusual. All of that is
Speaker 1: based UNFED and central banks blowing out their balance sheets.
Speaker 1: How do you perceive market it's reacting when they finally
Speaker 1: have to pull in their balance sheets or at least
Speaker 1: stabilize them. You know, I really wish I knew. You know,
Speaker 1: it's not just that what the FED has done in
Speaker 1: the aftermath of of COVID has been unprecedented, and even
Speaker 1: insofar as we have precedents, we saw what happened in
Speaker 1: the GFC. Man, it's really hard to truly disentangle the
Speaker 1: impact of quantitative using from the impact of very low
Speaker 1: interest rates. I mean, yes, we had a taper tantrum,
Speaker 1: but it was a pretty short term phenomenon. The FED
Speaker 1: has this belief that balance sheet expansion is the equivalent
Speaker 1: of of a of a further drop in interest rates.
Speaker 1: Um that belief is not really backed by strong empirical evidence.
Speaker 1: I don't know what impact the FED balance sheet and
Speaker 1: the expansion of the FED balance sheet has had um
Speaker 1: it it seems it would be the kind of thing
Speaker 1: that would push people more into risky assets. But when
Speaker 1: we've tried to crunch the data, we don't see an
Speaker 1: obvious smoking gun. For Here's how that that impacted the
Speaker 1: market before, Here's how undoing it is going to impact
Speaker 1: the market now. Ben valuable inside this morning. We appreciate it.
Speaker 1: Ben into that f g M the head of US
Speaker 1: Allocation right now to continue our discussion of now what
Speaker 1: for Central Asia? Robert Harmatz joins us. He's the title
Speaker 1: and advisors that barely describes a cross party public service
Speaker 1: to this nation. Yes, working with Secretary Clinton, but long
Speaker 1: ago and far away, working for others and driving the
Speaker 1: hundred and forty eight miles from Cobble to the Khaiber Pass.
Speaker 1: Bob Hormetts, you're one of the few people with real
Speaker 1: boots on the ground experience over there. How does the
Speaker 1: United States now manage the Western Pakistan tribal regions? How
Speaker 1: does the United States manage a new relationship with Pakistan? Well,
Speaker 1: it's going to be a challenge because we've seen the
Speaker 1: Taliban as our enemy for so long, and now we
Speaker 1: find that we're working with them to help get people
Speaker 1: out of the country. And I suspect that over a
Speaker 1: period of time we're gonna have to have something of
Speaker 1: a dialogue with the Caliban. The other point is that
Speaker 1: the bigger threat of the United States is really ISIS
Speaker 1: or isis K, and the Caliban is their arch enemies.
Speaker 1: So it may turn out that if isis K starts
Speaker 1: threatening its neighbors or US over the longer run, we're
Speaker 1: gonna have to work with the Taliban who try to
Speaker 1: suppress them. In fact, in the earlier agreement they said
Speaker 1: that they would not allow terrorists to operate from their territory.
Speaker 1: But I want you to take a broader picture here,
Speaker 1: which only you can do. You know, you're darkened the
Speaker 1: door toughs a few years ago. You can do this.
Speaker 1: I want you to take us back to John Kenneth
Speaker 1: Galbraith is Ambassador to India, and we had to manage India,
Speaker 1: Pakistan and Afghanistan. What do we do now. We don't
Speaker 1: have Robert Hormats, we don't have j KG. What do
Speaker 1: we do now to manage that that strange relationship. Well,
Speaker 1: it is gonna be difficult. The Indians themselves now, who
Speaker 1: have regarded Pakistan of course as a threat, are worried
Speaker 1: about several things. They're worried about the fact that there
Speaker 1: may be Johadas elements based in Afghanistan who move over
Speaker 1: into Pakistan or the disputed territories or Kashmir and UH
Speaker 1: pose threats to India. So what India is now doing
Speaker 1: already we've just learned, is they been having UH secret
Speaker 1: meetings with Taliban authorities to try to make sure that
Speaker 1: the Taliban can control these forces in the country and elsewhere. Bob,
Speaker 1: you know we talked to John Bolton about this yesterday. Bob,
Speaker 1: you're the expert at this. Should Lincoln be on the
Speaker 1: next plane to Delhi? Well, I do think we need
Speaker 1: to have a lot of cooperation with Deli, and I
Speaker 1: would certainly if I were Tony b Lincoln be working
Speaker 1: with the with the Indians UM on how we deal
Speaker 1: with the Taliban and how we controlled ISIS and ISIS
Speaker 1: groups that are in that are in Pakistan that could
Speaker 1: cause lots of destructions both in India, UH and UH
Speaker 1: and the areas around it, and certainly could play a
Speaker 1: disruptive role in Kashmir. The other interesting thing is that
Speaker 1: we may have a lot of interests in common with
Speaker 1: the Chinese and the Russians. They're concerned about ISIS and ISIS,
Speaker 1: and they want to be able to work with in China,
Speaker 1: of course as a border with Afghanistan, so they want
Speaker 1: to work with the Afghanis to try to control these
Speaker 1: movements that could base themselves in Afghanistan but could be
Speaker 1: disruptive to the region itself. Bob taking a step back,
Speaker 1: there is a concern that President Biden talks in a
Speaker 1: much nicer tone toward the Allies, toward Europe in particular,
Speaker 1: but doesn't necessarily act that differently than the Trump administration
Speaker 1: when it comes to policies and the way that things
Speaker 1: are carried out. And that's one thing that people have
Speaker 1: argued has just been perpetuated with the Afghanistani exit. How
Speaker 1: much do you think that they are actually changing the
Speaker 1: dynamic post Trump versus just continuing it. Well, this particular
Speaker 1: incident is going to have an impact because the Allies
Speaker 1: were concerned, they work consulted in advance, and now, of
Speaker 1: course the Germans are having elections and ref of Geez
Speaker 1: from Afghanistan are going to be one issue. Do the
Speaker 1: Germans take them? Do they how much they trust the
Speaker 1: United States. I think we're gonna see, in part as
Speaker 1: a result of this, a much closer set of ties
Speaker 1: and consultations between the United States and many of our
Speaker 1: allies in many countries that are not allies about how
Speaker 1: to deal with the Taliban, and particularly how to deal
Speaker 1: with this refugee issue. This is going to be a
Speaker 1: very big issue in American politics, and we have just
Speaker 1: begun to recognize this there now in temporary quarters. But
Speaker 1: we've got to find long term homes for a lot
Speaker 1: of these people, and we're gonna have to work with
Speaker 1: the allies to do it. So I think the lack
Speaker 1: of real preconsultations in the eyes of some of these
Speaker 1: countries is going to mean we're gonna spend a lot
Speaker 1: more time working with the allies on a multitude of
Speaker 1: post um takeover Taliban issues. Ambassador hermits, thank you so
Speaker 1: much for joining us today with Taman advisors. It is
Speaker 1: not to be understood that we invented this out of
Speaker 1: thin air. Long ago, Paul and far away, there was
Speaker 1: a plan, and off the back of an envelope. The plan,
Speaker 1: I had a beverage of my choice at my left hand,
Speaker 1: was well, wait a minute, Richard Edelman says this, and
Speaker 1: I can't convey to all listening nationwide and around the
Speaker 1: world the importance of the Edelman Trust Barometer and launching me.
Speaker 1: It's breathtaking. Richard Edelman joins us four years on through
Speaker 1: a Pandemic to tell us about the trust barometer of
Speaker 1: our institutions. As always, Richard Edelman, thank you so much
Speaker 1: for joining. What have you learned in the pandemic? Tom?
Speaker 1: The most important finding of this study is the rise
Speaker 1: of belief driven employees. And the employee is no longer
Speaker 1: willing just to work for pay and advancement. He or
Speaker 1: she wants flexible work hours and also wants to work
Speaker 1: for a company that is dedicated to improving society. And
Speaker 1: the amazing thing, Tom is somewhere between. Depending on the
Speaker 1: country of employees say that they're going to quit in
Speaker 1: the next six months. They've gotten through the pandemic and
Speaker 1: they want something new. By two to one, the reason
Speaker 1: for quitting is societal ambition of their employer. They don't
Speaker 1: agree with the values of the company. Said that only
Speaker 1: say it's because of cash, compensation or advancement. Come on,
Speaker 1: you're not Tony, I mean, I get what you're saying, Richard.
Speaker 1: The bottom the bottom line is is they want to
Speaker 1: be paid more and find a social belief in their CEO.
Speaker 1: You're telling me, No, I'm telling you that table stakes
Speaker 1: is the wages and upside in their career and the
Speaker 1: additional aspects of flexibility on hybrid work or um you know,
Speaker 1: for example, a staggered ship for a manufacturing company so
Speaker 1: that you don't have to be there at seven am
Speaker 1: on the GM line. You could be there at eight
Speaker 1: if you're a mom or dad dropping a kid at school,
Speaker 1: but then you still could work the eight hours. We
Speaker 1: were going to have to figure this out, that there's
Speaker 1: a new social contract that we're going to have to create,
Speaker 1: and it can't just be for the white collar worker.
Speaker 1: And well, that's the unfairness of it all. What's so important, Paul,
Speaker 1: I gotta paint the picture for you. I mean, Davos
Speaker 1: and Lionel Barber would have as Wednesday opening Ft Edelman
Speaker 1: Trust Barometers soire and they would invite me and you know,
Speaker 1: be Richard Edelman in my Moses and you know, Julie
Speaker 1: Andrews singing in the background. Richard, You've done this year
Speaker 1: after year. Is this about corporations and the new belief?
Speaker 1: Or is it about the failure of government? Is an institution?
Speaker 1: As always, Tom, it's a little of both. Government has
Speaker 1: disappointed us. I mean the most recent is what are
Speaker 1: we supposed to be doing about vaccinations as employers were
Speaker 1: left on our own? You know, do we mandate them?
Speaker 1: Do we say you have to have a vaccine before
Speaker 1: you come to the office, Do we wear masks? I mean,
Speaker 1: all of this has a bitten limbo. So business is
Speaker 1: stepping into the void left by government, and that's increasingly
Speaker 1: true on pay, on benefits, on even vaccination. So it
Speaker 1: is true, though, interestingly, that if a employer has high
Speaker 1: trust from its employees, it drags up all the institutions
Speaker 1: and trust. It's one of the shockers in this study is,
Speaker 1: you know, if you have an nine or above on
Speaker 1: a sent scale level of trust in your employer, all
Speaker 1: the other institutions um from media to business get much
Speaker 1: higher scores. And if it's only a level five, then
Speaker 1: we're in trouble of trust in institutions. Richard, I wonder
Speaker 1: how much of this is a function of the fact
Speaker 1: that pre pandemic, we're at full employment now coming out
Speaker 1: of the pandemic, despite the delta variant. You know, there's
Speaker 1: a lots of employers that need lots of employees, so
Speaker 1: there's some leverage for the employee. How much it is
Speaker 1: that or how much is it again? Like as you're
Speaker 1: suggesting a real fundamental change in the construct between employer
Speaker 1: and employee, I think in the back of every employee's
Speaker 1: head is still I'm afraid of being fired on the
Speaker 1: basis of UH artificial intelligence or or other attack. Um
Speaker 1: people say that still today, and so there is thinking. Look, also,
Speaker 1: I've just seen my mom die. Americans actually had a
Speaker 1: person they knew passed away or be sick from COVID.
Speaker 1: That that that's a big shock to the system. So, um,
Speaker 1: you know, we're having traumatic stress syndrome a little bit,
Speaker 1: and we're reevaluating who we are and what we want
Speaker 1: to be. And that's why I think it's a tripod.
Speaker 1: Now it's pay and upside, it's flexible work conditions, and
Speaker 1: I want to work for an employer. I want to succeed.
Speaker 1: You know, it's really important to have all three. Richard Edleman,
Speaker 1: thank you so much for your support of our effort
Speaker 1: over the years. And folks, I can't say enough about
Speaker 1: the Edelman Trust parameter and the other social studies that
Speaker 1: Edelman and company do. Richard Edelman, the founder of Edelman
Speaker 1: and Company. Let's catch up with Roadleshawi Capital you can
Speaker 1: always found it and Shairman and the author of a
Speaker 1: book The Death of Inflation that was the mid niceties.
Speaker 1: Rogie joined us. Now it's one And Roger, if you
Speaker 1: wrote that book today, what would the title be. I'm
Speaker 1: not sure. I think I might be tempted to call
Speaker 1: it the Rebirth of Inflation. I probably adopt a completely
Speaker 1: different title. The title, you know, at the time n
Speaker 1: I published it caused fantastic argument the Bundas Bank, in particular,
Speaker 1: We're very angry with me inflation, they said, comp possibly,
Speaker 1: I'm worried about inflation researching now, Roger Buda. We had
Speaker 1: Jeff Lacker on the other day, the former president Richmond
Speaker 1: fed and he was extremely articulate about a need for
Speaker 1: preemptive central banks. And I asked him where the inflation
Speaker 1: east has got wrong? And at the same time I
Speaker 1: talked to Geea gopinath Off Jackson Hall about modern monetary theory.
Speaker 1: In the last ten years, have we simply moved our
Speaker 1: inflation dynamic, our price dynamic over to a balance sheet dynamic,
Speaker 1: whether it's fiscal policy or it's all this debt build
Speaker 1: up we see out there. I don't think either of
Speaker 1: those things really. I think what's happened is a combination
Speaker 1: of two things. First of all, we've continued to have
Speaker 1: various supply factors which have been bearing down on inflation,
Speaker 1: and those are the things that I identified in the
Speaker 1: middle Night is they've been continuing. And then, of course,
Speaker 1: for a variety of reasons, we've had a relatively weak demand.
Speaker 1: And in key countries like the US, I think those
Speaker 1: two conditions are now are now changing, and the US
Speaker 1: economy is surging. You've got this massive stimulus from policy
Speaker 1: at a time when I don't think there's quite the
Speaker 1: same downward pressure on prices from various supply factors, and
Speaker 1: in many cases, of course there's upward pressure on prices.
Speaker 1: As for M M T, I think it's just quite frankly,
Speaker 1: profoundly misguided. Roger. Can we get sustained increases in inflation
Speaker 1: without more wage inflation? And and b somewhere we are
Speaker 1: wage inflation that we're not seeing. Well, you can in
Speaker 1: some circumstances, and I think a pretty unlikely. I mean,
Speaker 1: you've got to have either a very very marked shift
Speaker 1: towards profits or big increases in external costs which are
Speaker 1: pushing inflation for a considerable time. In the end, of course,
Speaker 1: that will come to an end. No, I think you know,
Speaker 1: in really to continue with high inflation for quite a while,
Speaker 1: we're gonna need wage inflation. At the moment. There are
Speaker 1: some signs of that depends where you look, but in
Speaker 1: some countries wages and going up quite a lot. But
Speaker 1: you know, the whole thing about inflationary process. This is
Speaker 1: what makes it so difficult to forecast, to set policy
Speaker 1: is the answers aren't always obvious to you. Aren't given
Speaker 1: you on a plate. You don't suddenly see the whole
Speaker 1: process and form immediately. It happens over time, gradually. Right,
Speaker 1: You're one final question very important here. You can literally
Speaker 1: be lined up right now working at the Bank of
Speaker 1: England helping Governor Bailey. Do you do you presume smooth
Speaker 1: curves in smooth reaction functions when we're finally over with
Speaker 1: the stimulus already, or do you have an angst out
Speaker 1: there about jump conditions we don't see coming. Well, I'm
Speaker 1: worried about a jump and this is one of the
Speaker 1: reasons why I would act on policy sooner rather than
Speaker 1: later in both the States actually and the UK. These
Speaker 1: current levels of interest rates are absurdly low. The monetary
Speaker 1: stimulus is extraordinary in the course of history. We've got
Speaker 1: to move back to some sort of normality, and I
Speaker 1: would do it sooner rather than later, and do it
Speaker 1: gradually in order to avoid the thing you're referring to. Tom.
Speaker 1: That's to say that at some point or other we
Speaker 1: get a shock and the policy mat makers will react. Roger,
Speaker 1: thank you, sir. It's going to hear from you as
Speaker 1: always rot a good or their Capital Economics founder and chairman,
Speaker 1: or perhaps the rebirth the rebirth inflation. Right now, I
Speaker 1: want to rationalize to the year end, and we do
Speaker 1: that with James Ay of Standard Charter thrill that he
Speaker 1: could join his standard investors everytheen Standard Investments, I should say, James, Ah,
Speaker 1: thank you so much for joining us. James, it's September one.
Speaker 1: Guys like you have to rerationalize till twelve one one.
Speaker 1: How much rationalization is going on right now? How much
Speaker 1: of institutional money is behind the benchmark. I mean that's
Speaker 1: a good question. Yeah, I mean the fourth quarter brings
Speaker 1: with it it's a special set of dynamics normally, summer
Speaker 1: has tended to be a quiet period and certainly in
Speaker 1: terms of primary market activity, it's generally pretty dead. And
Speaker 1: then as we get towards the end of August, we
Speaker 1: look into the fourth quarter and think, well, there's still
Speaker 1: a heck of a lot of companies and governments out
Speaker 1: there with funding needs. They're going to come to market,
Speaker 1: So you get this kind of concession events into the
Speaker 1: fourth quarter supply. This year it's a bit more complicated
Speaker 1: because we've got the potential for some some relatively major
Speaker 1: monetary policy changes as well. Both of those have the
Speaker 1: potential to drive bondial it's higher. But as you guys
Speaker 1: were talking about in your previous section there, thinking about
Speaker 1: bond jeals in isolation doesn't get you very far. You
Speaker 1: have to think about what's going to happen to bondels,
Speaker 1: what's gonna happen to yield curve, what's going to happen
Speaker 1: to the dollar, and what does that mean for risk assets?
Speaker 1: And that's where it gets a bit more complicated. I'm
Speaker 1: still off the opinion that fourth quarter is going to
Speaker 1: be about flattery. You're curve in the US John Standard
Speaker 1: pours five twelve months trailing up twenty eight percent year
Speaker 1: to day. Johanet's terrible, it's up twenty It's not bad,
Speaker 1: is It's people are behind a lot of people, And James,
Speaker 1: I think the big question right now is what dense
Speaker 1: risk appetite. We know that the equity market can go
Speaker 1: higher in a rising rate regime over the federal reserve.
Speaker 1: We know that the equity market can rally even as
Speaker 1: they pull back on QUEI what will hit risk appetite? Yeah,
Speaker 1: I mean we know all of these things until we don't. Now.
Speaker 1: I try really hard to avoid foiling into sort of
Speaker 1: some of the basic cognitive bias traps, and the status
Speaker 1: quo bias, I think is one of the one of
Speaker 1: the strong, as we have a tendency to believe that
Speaker 1: what is true today will continue to be true tomorrow
Speaker 1: by the same token. I can see here in front
Speaker 1: of you guys week after week saying I think the
Speaker 1: equity market is fragile, and I'll end up with egg
Speaker 1: on my face more often than not. But I think
Speaker 1: the kind of equity market that we live in now
Speaker 1: is one where you know, you get such long periods
Speaker 1: of this grinding, low volatility rally, but when it does
Speaker 1: crack it you get all of the volatility in one go.
Speaker 1: And I still think we're headed for that sort of episode.
Speaker 1: But what the phrase we use is vulnerabilities, not triggers
Speaker 1: x ANTI. It's almost always impossible to point out a
Speaker 1: specific event or data point or or you know, happening
Speaker 1: which is going to be the trigger for things to
Speaker 1: turn around. But what you can do is you can
Speaker 1: look at the market and say, well, how vulnerable is
Speaker 1: this market, how expensive is it, how much our investors
Speaker 1: already positioned? What is investor sentiment like when you look
Speaker 1: at the equity market, how many people are buying on margin,
Speaker 1: what sort of investors participating, what's breadth like? You know,
Speaker 1: what's the median stock doing relative to of the index itself?
Speaker 1: And when you look at beneath the hood in all
Speaker 1: of these metrics, I just see weakness and vulnerability and
Speaker 1: unsustainable drivers. So I have no idea when the equity
Speaker 1: market will crack, but I strongly believe that the fundamentals
Speaker 1: which are supposedly supporting equity prices up here on that
Speaker 1: anywhere near as supportive as as many are making out.
Speaker 1: James getting an idea for what you don't want to
Speaker 1: own what do you want to own? Really difficult. People
Speaker 1: ask me that question, you know, outside of the industry,
Speaker 1: and say what should I do with my money? And
Speaker 1: give a big sigh and say, it's very difficult. Everything
Speaker 1: is expensive, not even just financial assets, alternative assets across
Speaker 1: the board. Some of the crazies going on in alternative
Speaker 1: places to park one's money I find terrifying in the extreme.
Speaker 1: But for most investors, he's still owning a diversified portfolio
Speaker 1: of you know, the basic financial asset types is very sensible.
Speaker 1: What do I particularly want to own in my space?
Speaker 1: I still think that duration it has value because yes
Speaker 1: it's expensive, but it's not as expensive relative to the
Speaker 1: economic outlook as most other assets are. I think that's
Speaker 1: the biggest the biggest James, are you buying bonds right now?
Speaker 1: Are you buying you know, the longest dated notes and
Speaker 1: developed markets? Is that basically the way that you're getting
Speaker 1: some confidence in the US? Yeah? Absolutely, that's exactly where
Speaker 1: we're positioned. So we like five sirties flatness. We like
Speaker 1: own in the long end because ultimately the long end
Speaker 1: should be the clearest and cleanest expression of the potential
Speaker 1: output of the US economy and My observation, and this
Speaker 1: goes back to again a conversation you guys are having
Speaker 1: before about the labor market. My observation is that when
Speaker 1: policy and it's various guys steps away from the US,
Speaker 1: from any major economy, the economy literally has an art attack.
Speaker 1: So without temporary inputs from policy makers, the state, the
Speaker 1: current state of the economy is unsustainable. Therefore, we all
Speaker 1: tend to negative growth until we find some equilibrium. And
Speaker 1: the policy that we're engaging in is completely unsustainable. And
Speaker 1: that tells me that we're still living in this unhealthy, imbalanced,
Speaker 1: over indebted economy with lots of structural weaknesses which people
Speaker 1: are trying to deal with with cyclical policy, and that
Speaker 1: really does cap that the extent to which yields can
Speaker 1: rise before it causes some sort of incident or accident.
Speaker 1: I think we've seen a little, you know, a little
Speaker 1: episode of that already this year. But I continue to
Speaker 1: believe that that long term duration has better value than alternatives.
Speaker 1: James Athy of Aberdeen Standard Investment, Senior investment manager. This
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