WEBVTT - CPI, Markets, and Telecom (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.720 at Bloomberg dot com slash podcast. Look who just darkened 0:00:22.720 --> 0:00:25.960 the Door? Tim Craighead. He is a director of research 0:00:26.000 --> 0:00:29.280 for Bloomberg Intelligence. He's based in London. Uh. He's been 0:00:29.360 --> 0:00:33.680 a Bloomberg Intelligence for thirteen years. Uh, since the absolute 0:00:33.720 --> 0:00:35.800 beginning of Bloomberg Intelligence. Prior to that, he was a 0:00:35.840 --> 0:00:38.320 Goldman Sachs for like twenty years, a managing director doing 0:00:38.320 --> 0:00:41.800 god knows what over there um. But he's been picking 0:00:41.800 --> 0:00:44.240 stocks for a long time. He's seen some good names, 0:00:44.240 --> 0:00:46.600 some bad names. Tim is joints us here in a 0:00:46.600 --> 0:00:50.519 Bloomberg in Actor Brooker Studio. Tim Europe, we think of 0:00:50.560 --> 0:00:53.680 the US market, Oh my goodness, at SMP five PC 0:00:53.920 --> 0:00:55.680 last year it was just a brutal year. Talk to 0:00:55.720 --> 0:00:58.880 us about European stocks last year and kind of what 0:00:58.880 --> 0:01:01.320 the alok is for this year. Absolutely, thanks for having 0:01:01.360 --> 0:01:05.360 me on Um, Matt, you look great. Thank you. I 0:01:05.560 --> 0:01:08.640 love the beard. Thank you. You're one of the few. 0:01:09.959 --> 0:01:14.520 So they they Europe certainly was under pressure last year, 0:01:14.600 --> 0:01:17.000 but it wasn't under nearly the pressure that the SMP 0:01:17.120 --> 0:01:21.920 five was UM, and obviously NAZAC was even worse. UM, 0:01:22.000 --> 0:01:25.679 so you're ape out performed interestingly from the bottom of 0:01:25.840 --> 0:01:29.200 last October where there was a trading low in Europe. 0:01:29.240 --> 0:01:32.160 It's like over here, uh, European markets are up six 0:01:33.560 --> 0:01:37.800 UM the foot see as the biggest market within the 0:01:38.000 --> 0:01:43.280 within Europe is up. So there's there's been a nice 0:01:43.319 --> 0:01:47.760 move there. And you know, there's been this battle evaluation 0:01:47.960 --> 0:01:53.520 versus earnings UM. Last year, evaluation one earning state really high. 0:01:53.720 --> 0:01:58.800 Surprisingly so UM evaluation just got crushed with rising interest rates. 0:02:00.120 --> 0:02:04.320 Since October, we've actually seen earnings roll over. We've had 0:02:04.520 --> 0:02:08.000 five percent negative revision in two thousand twenty three earnings 0:02:08.120 --> 0:02:11.840 estimates for the stock six hundred. But the market's risen 0:02:12.520 --> 0:02:15.480 because evaluation is now looking out towards the two thousand 0:02:15.560 --> 0:02:19.440 twenty four recovery, and valuations also in Europe are much 0:02:19.480 --> 0:02:22.639 lower than valuations here. Right on the S and P 0:02:22.800 --> 0:02:24.400 five hundred. The other day, I was looking at it 0:02:24.480 --> 0:02:30.120 was almost nineteen percent again right, nineteen times earnings excuse me, 0:02:30.240 --> 0:02:33.840 and UM Europe was more like twelve. It's twelve twelve 0:02:33.880 --> 0:02:38.160 and a half times forward UM currently for the stock 0:02:38.200 --> 0:02:40.960 six hundred, the foot seas at ten point four. Now, 0:02:40.960 --> 0:02:43.960 the issue for is you've have explained to me over 0:02:44.000 --> 0:02:45.640 the years and as I read your research from you 0:02:45.680 --> 0:02:49.079 and your team, is Europe the UK have a much 0:02:49.320 --> 0:02:52.480 lower weighting and technology versus the US markets, and that 0:02:52.520 --> 0:02:56.640 accounts for the valuation differential and the performance. Yeah. Absolutely so. 0:02:56.720 --> 0:03:00.280 We we put out a note last week. Two things 0:03:00.280 --> 0:03:03.720 I think of note relative to to this UM. One 0:03:03.760 --> 0:03:08.680 was on valuation specifically and and oriented towards the foot 0:03:08.680 --> 0:03:11.120 Sea given that it trades at such a low multiple. 0:03:11.320 --> 0:03:14.079 And you know, the comment was essentially you can find 0:03:14.080 --> 0:03:16.240 it on the terminal. You know, it's it's cheap for 0:03:16.280 --> 0:03:19.680 a reason. And you know you've got big components of 0:03:19.840 --> 0:03:23.280 energy and materials and banks which trade at lower multiples. 0:03:23.400 --> 0:03:26.720 Especially with the energy and materials, it essentially peak earnings 0:03:26.760 --> 0:03:31.200 and so therefore multiples UM and it's got zero tech 0:03:31.240 --> 0:03:35.000 will one percent tech UM. So it's just a dramatically 0:03:35.120 --> 0:03:39.360 different proposition. And that whole idea that we've talked about 0:03:39.360 --> 0:03:43.720 in terms of value investing versus growth investing. Europe broadly, 0:03:44.240 --> 0:03:48.440 the foot See specifically, is more value oriented than say 0:03:48.440 --> 0:03:52.120 the US, and it plays into an environment where interest 0:03:52.200 --> 0:03:55.560 rates and inflation, even if they're coming off peak, are 0:03:55.600 --> 0:03:58.720 still at relatively elevated levels. And I tend to think 0:03:58.760 --> 0:04:01.640 of the U s as as heavy and Europe as 0:04:01.680 --> 0:04:05.040 oil heavy. And I guess if you're heavy in any 0:04:05.040 --> 0:04:09.840 one sector, that would lead to more volatility, right, less diversity, UM. 0:04:10.080 --> 0:04:13.320 But I don't think Europe is really as it's really 0:04:13.320 --> 0:04:16.719 the Footsie that's oil heavy, right, because they have a 0:04:16.800 --> 0:04:20.080 roll up shell British Petroleum UM, and it's the rest 0:04:20.120 --> 0:04:23.000 of York just has like Total well it's Total and 0:04:23.279 --> 0:04:26.400 and and SAL and and E and I. But it's 0:04:26.600 --> 0:04:30.520 it's five of the market for the stock six hundred, 0:04:30.600 --> 0:04:36.680 even including the UK UM, where the Footsie is about ten, 0:04:36.960 --> 0:04:39.240 so it's it's definitely heavier there. I would say that 0:04:39.279 --> 0:04:45.120 Europe is still commodity heavy relative to your relative to 0:04:45.160 --> 0:04:48.680 the US, but there it's it's part metals and mining, 0:04:48.760 --> 0:04:51.440 which again is heavy in the UK, but in Europe 0:04:51.520 --> 0:04:54.359 broadly the continent it's chemicals and Yeah, that's one of 0:04:54.400 --> 0:04:57.120 those things where right now that's a question is to 0:04:57.160 --> 0:05:00.760 whether that's pressure point or an opportunity becau as you know, 0:05:00.880 --> 0:05:03.240 our energy prices higher or low, which is an input 0:05:03.279 --> 0:05:06.240 cost by the US is I mean, how much of 0:05:06.279 --> 0:05:09.120 the S of the S and P is tech? It's 0:05:09.160 --> 0:05:12.920 like fifercent right, Well, it's more than that. And if 0:05:12.960 --> 0:05:16.440 you include e commerce is tech. And if you include 0:05:16.480 --> 0:05:18.640 the Internet which is in media, and you take that 0:05:18.720 --> 0:05:22.000 whole conglomeration, it's still call it three percent of the 0:05:22.040 --> 0:05:24.240 mark all right? For for all our listeners, I'll point out, 0:05:24.320 --> 0:05:26.839 just as an aside that Tim and Matt obviously go 0:05:26.880 --> 0:05:29.160 to the same barber, and we'll just leave it at that. 0:05:29.760 --> 0:05:33.600 Um So, Tim, as we look ahead to what are 0:05:33.600 --> 0:05:36.960 your end you know, to the ribbing bald men get 0:05:37.520 --> 0:05:41.560 we're people to Paul, people to exactly Tam, what are 0:05:41.600 --> 0:05:44.039 our things here? As we look to the UK and 0:05:44.080 --> 0:05:49.279 your Yeah, I think you know, a big issue for 0:05:49.279 --> 0:05:53.640 for the region is going to be no no surprise 0:05:53.920 --> 0:05:57.000 what happens to energy where it was a much bigger 0:05:57.040 --> 0:06:02.040 shock than it was over here. And thank god we've 0:06:02.040 --> 0:06:04.800 had a warm winter so far. It's not good for 0:06:04.839 --> 0:06:08.520 skiing in the Alps. What there's no snow right now? 0:06:09.920 --> 0:06:12.680 It's horrible. Didn't you just go skiing there was snow 0:06:13.560 --> 0:06:17.120 when in the US we're just delu California cannot dig 0:06:17.120 --> 0:06:19.320 out from all this. Although I was in Vermont for 0:06:19.400 --> 0:06:23.599 New Year's and that wasn't so hot, never never was. 0:06:24.000 --> 0:06:28.159 But nonetheless, so I think energy rolling over is a huge, 0:06:28.200 --> 0:06:30.720 big deal from the standpoint of reducing some of that 0:06:31.360 --> 0:06:36.679 um threat um that could have really put a spanner 0:06:36.680 --> 0:06:40.119 in the work, so to speak, for the economy. And 0:06:40.360 --> 0:06:43.640 you know, that's lifting you know, the opportunities we can 0:06:43.800 --> 0:06:47.640 look towards two thousand twenty four unless something stupid happens 0:06:47.839 --> 0:06:50.880 between Russian Tchin to reopening. Like when I think of 0:06:50.880 --> 0:06:53.680 some of the European companies that I think of Semens, 0:06:53.520 --> 0:06:56.679 it's the big german manufacturing, I say, I was that 0:06:56.680 --> 0:06:59.440 that's a second one, that is a it's I think 0:06:59.480 --> 0:07:03.799 it is more leverage to Europe because of its industrial, consumer, 0:07:03.839 --> 0:07:08.960 discretionary um commodity base that feeds into a China reopening. 0:07:10.040 --> 0:07:13.800 And the Europeans have just gotten along with miracle. Will 0:07:13.840 --> 0:07:16.160 hold a call with Shiji and Ping and they're nice 0:07:16.200 --> 0:07:20.080 to each other. It's different than the Trump China relationship. Now, 0:07:20.080 --> 0:07:25.960 the Biden China relationship has been very adversary, uh and adversarial. 0:07:26.120 --> 0:07:28.720 I think that's that's that's where you go, thank you uh. 0:07:28.840 --> 0:07:33.600 And the Europeans have been courting China, you know, um, 0:07:33.720 --> 0:07:36.280 we have been angry at them for that, but now 0:07:36.360 --> 0:07:39.040 they're going to reap the benefits of both their relationships 0:07:39.040 --> 0:07:41.560 with China and global warning. Both of those things turn 0:07:41.600 --> 0:07:44.400 out to be good for democracy. It's kind of crazy. 0:07:44.440 --> 0:07:47.000 I do think that we've had lots of discussions about 0:07:47.000 --> 0:07:49.880 this that it pushed came to shove and you had 0:07:49.880 --> 0:07:55.080 two spheres of influence. Germany will leg in with Europe 0:07:55.120 --> 0:07:58.280 and will leg into the US sphere as opposed to 0:07:58.280 --> 0:08:02.760 the Chinese sphere. But there's definitely plane both sides where possible. 0:08:02.960 --> 0:08:05.680 I think another big theme is just you know, talking 0:08:05.720 --> 0:08:09.160 to climate change and whatever else. It's just what happens 0:08:09.280 --> 0:08:12.320 on the whole sort of infrastructure green approach. It's a 0:08:12.360 --> 0:08:15.160 big issue within the energy market, not only because there 0:08:15.200 --> 0:08:18.720 are pure plays there, but you've got the big energy 0:08:18.760 --> 0:08:21.760 exposure and what are they doing from the recycling of 0:08:21.800 --> 0:08:24.680 their capital. They're not they're not digging new holes in 0:08:24.720 --> 0:08:28.800 the ground for oil. They're putting it into renewables in 0:08:28.960 --> 0:08:31.720 various ways, and it's a pretty interesting theme. Good stuff 0:08:32.240 --> 0:08:34.000 coming out of Europe, coming out of the UK. Tim 0:08:34.000 --> 0:08:37.560 Craig Headies Director Research and Senior European strategist for Bloomberg Intelligence. 0:08:37.559 --> 0:08:41.600 He's based in London, Queen Victoria Street. Just an awesome, 0:08:41.640 --> 0:08:45.200 awesome building, uh, that we have in Bloomberg in London. 0:08:45.240 --> 0:08:46.880 But he's here in New York this week. How cool 0:08:46.960 --> 0:08:53.200 is that. Robert Teeter, head of Investment policy and Strategy 0:08:53.200 --> 0:08:55.920 at Silver Crest Asset Managers, joins us here in studio, 0:08:56.000 --> 0:08:59.920 as does Jay Hatfield, CEO of Infrastructural Capital Advisors. So, Jake, 0:09:00.240 --> 0:09:03.160 we saw the inflation data today. It looks like it's moderating. 0:09:03.559 --> 0:09:06.400 What does that mean to you, Well, we're far more 0:09:06.480 --> 0:09:11.040 bullish than um certainly the Federal Reserve on inflation and 0:09:11.240 --> 0:09:15.439 some market participants, because we really look at CPI dash R, 0:09:16.720 --> 0:09:20.640 which is our own index for inflation, which sounds exotic, 0:09:20.720 --> 0:09:23.600 but all it really is is just the way cp 0:09:23.840 --> 0:09:27.880 was calculated before. So instead of using the BLS is 0:09:28.120 --> 0:09:32.840 highly lagged shelter component, we use case shoulder and that 0:09:33.280 --> 0:09:36.400 index and you can verify this on the terminal leads 0:09:36.640 --> 0:09:40.560 the shelter component by twelve months with a sevent correlation. 0:09:40.880 --> 0:09:45.840 I'd like that chart. I'll make the charge. Yet, that's 0:09:45.840 --> 0:09:49.520 that's interesting, Bob. What do you think I mean? Um, 0:09:49.640 --> 0:09:53.440 inflation seems to be In hindsight, it looks like inflation 0:09:53.600 --> 0:09:56.280 was transitory, and maybe I'm too early to say that, 0:09:56.320 --> 0:09:58.240 but just a year later, well, I think there's been 0:09:58.280 --> 0:10:01.760 a few different cycles within inflation. Certainly energies one, shelters one, 0:10:01.800 --> 0:10:04.320 the goods components one, services as another. They're all in 0:10:04.360 --> 0:10:07.000 their own cycles, all a little bit different in terms 0:10:07.000 --> 0:10:09.360 of their transitory nature. To me, the key thing is 0:10:09.400 --> 0:10:11.640 that the past few months, the month over month figures 0:10:11.640 --> 0:10:14.000 have been coming down significantly. I think that gives the 0:10:14.000 --> 0:10:16.880 FED a little more flexibility. So while they'll continue hiking, 0:10:16.880 --> 0:10:19.640 it's in smaller amounts. They might then proceed to a pause, 0:10:19.679 --> 0:10:21.400 and then I think they have a bit more flexibility 0:10:21.400 --> 0:10:24.440 if the economy weakens to change policy, because they're able 0:10:24.480 --> 0:10:27.080 to point to those metrics that improvements have been coming. 0:10:27.120 --> 0:10:29.320 And so I think when we see them acknowledge that publicly, 0:10:29.520 --> 0:10:31.360 that'll be a signal that their mindset is we have 0:10:31.440 --> 0:10:35.120 started to hear speakers come out. Bostick the other day 0:10:35.200 --> 0:10:37.880 was like, wait until CP I maybe I'd be down 0:10:37.880 --> 0:10:41.160 with five. Then yesterday I think Susan Collins came out 0:10:41.200 --> 0:10:44.520 and said I'm feeling twenty five, and today Harker was like, 0:10:44.559 --> 0:10:48.360 twenty five looks good. So I guess they're trying to 0:10:48.400 --> 0:10:52.040 tell us, not all voting members obviously, but that you know, 0:10:52.200 --> 0:10:55.720 February first could be twenty five rather than fifty. But 0:10:55.760 --> 0:10:58.760 they're definitely not going to pivot and cut right because 0:10:59.200 --> 0:11:01.760 then they would lose credibility all over again. That's right. 0:11:01.800 --> 0:11:03.840 I think they've earned a lot of credibility. They've they've 0:11:03.880 --> 0:11:06.520 clearly indicated that they would prefer to be tougher rather 0:11:06.559 --> 0:11:08.760 than weaker. They'd rather make the mistake of hiking too 0:11:08.840 --> 0:11:11.280 much for too long. So I do think the basis 0:11:11.280 --> 0:11:13.360 point hikes will continue, although I thought the comments today 0:11:13.360 --> 0:11:15.960 from Parker acknowledging that the days of seventy five are 0:11:16.000 --> 0:11:18.160 long behind us, we're also encouraging. I think in the 0:11:18.200 --> 0:11:20.600 past there had maybe been some fear that those type 0:11:20.640 --> 0:11:22.400 of hikes might continue, and I think that's starting to 0:11:22.440 --> 0:11:24.480 fade into the background. But by the way, isn't that 0:11:24.559 --> 0:11:27.640 a better mistake to make. Ja I mean, I heard 0:11:27.679 --> 0:11:30.360 someone this morning say the FED made a mistake, you know, 0:11:30.840 --> 0:11:33.160 by not raising rates early, and now they're making another 0:11:33.200 --> 0:11:37.000 mistake by raising rates for too long. But um, making 0:11:37.000 --> 0:11:40.319 a mistake and allowing inflation into the picture, real inflation, 0:11:40.360 --> 0:11:43.959 that's a big mistake, whereas making a mistake that causes 0:11:44.000 --> 0:11:46.160 a recession tightening a little too much, it's not a 0:11:46.240 --> 0:11:50.480 huge mistake. Well, that's a great representation of the Fed's view. 0:11:50.520 --> 0:11:55.000 We don't agree with it, okay, because no, Matt, you're wrong. 0:11:55.880 --> 0:11:58.360 Just say the Fed, I mean, it's incredible entity. But 0:11:58.800 --> 0:12:02.440 the reason we don't believe in that theory is that 0:12:02.520 --> 0:12:04.559 the FED, we think, is too focused on the labor 0:12:04.600 --> 0:12:08.040 market and expectations, and we don't think that there's a 0:12:08.120 --> 0:12:10.679 risk of a wage price spiral. We really look at 0:12:10.720 --> 0:12:14.959 as a price wage downward spiral. So in other words, 0:12:15.120 --> 0:12:18.400 goods prices really drive wages, and if you really look 0:12:18.400 --> 0:12:21.360 in this cycle, wages real wages of declining. So we 0:12:21.360 --> 0:12:23.880 don't think it's a problem, but we recognize the FED does, 0:12:24.400 --> 0:12:27.600 and that's why we're bullish on the market for the year, 0:12:28.280 --> 0:12:30.920 but cautious for this first six months. Because of exactly 0:12:30.920 --> 0:12:35.040 this debate where the market really thinks inflation is cooling 0:12:35.120 --> 0:12:39.080 or negative. Jeremy Siegal says that our index printed negative 0:12:39.080 --> 0:12:41.720 point two, So you have that camp and then the 0:12:41.800 --> 0:12:44.320 FED and they get to talk every day doing open 0:12:44.360 --> 0:12:47.840 market operations. So if you're trading the market, that's always 0:12:47.840 --> 0:12:51.840 a risk factor. So we're thinking for six months volatile, 0:12:52.360 --> 0:12:55.559 second six months should be more bullish, Bob, what's what's 0:12:55.559 --> 0:12:57.760 your calling your shop? What are you guys thinking about 0:12:57.760 --> 0:13:01.280 as we head into after just a brewo, no matter 0:13:01.320 --> 0:13:05.000 where you were. So we're modestly optimistic on the course 0:13:05.000 --> 0:13:07.320 of the year. The timeline is difficult to predict, I 0:13:07.320 --> 0:13:09.280 think because I think I have two influences going on, 0:13:09.280 --> 0:13:11.400 one which is earnings, which we think will be perhaps 0:13:11.440 --> 0:13:14.160 a bit better than than feared, maybe around flat, a 0:13:14.200 --> 0:13:16.840 little bit positive, I think, with a lot of dispersion 0:13:16.840 --> 0:13:19.240 beneath the surface, because the same cycles that are going 0:13:19.240 --> 0:13:21.960 on within inflation are playing out across revenue and cost 0:13:22.000 --> 0:13:24.480 structures of companies, So a lot of dispersion and earnings. 0:13:24.480 --> 0:13:26.640 But we think that decline in inflation throughout the year, 0:13:26.720 --> 0:13:28.800 that change in FED tone will improve valuation. So I 0:13:28.800 --> 0:13:30.400 think I'll get a little bit of a lift from 0:13:30.520 --> 0:13:35.280 improved valuations as we navigate the year. All right, so, uh, 0:13:35.440 --> 0:13:38.480 the valuation picture I think has been really interesting, and 0:13:39.360 --> 0:13:43.840 in terms of price earnings it's still we're still valued, 0:13:43.880 --> 0:13:47.440 I think too high. It feels like right nineteen times earnings. 0:13:47.640 --> 0:13:49.760 If you look at the S and P, where should 0:13:49.800 --> 0:13:53.960 we be? And you know, um, are there better metrics 0:13:54.240 --> 0:13:56.559 for you than P? Well, I think there are a 0:13:56.600 --> 0:13:58.360 lot of different metrics. Of course, the one that that 0:13:58.440 --> 0:14:00.280 we pay a lot of attention to is looking at 0:14:00.360 --> 0:14:03.120 PE relative to where rates and inflation are, and that's 0:14:03.120 --> 0:14:04.800 where I think we might get some of the upside 0:14:04.800 --> 0:14:07.320 boost on PE. So I agree with you point in time. 0:14:07.360 --> 0:14:10.280 Today it seems like stocks are certainly fairly valued and 0:14:10.800 --> 0:14:14.040 not cheap. But as we see this turning and inflation, 0:14:14.120 --> 0:14:17.040 and as we see interest rates stabilize and potentially decline 0:14:17.080 --> 0:14:19.160 over the course of the next year, then I think 0:14:19.160 --> 0:14:21.120 that gives you room to boost PES by a bit, 0:14:21.200 --> 0:14:22.680 not a lot, but I think there is a little 0:14:22.680 --> 0:14:25.320 bit of upside there. So we're not looking for massive gains, 0:14:25.360 --> 0:14:26.960 but a little bit from the earning side, a little 0:14:26.960 --> 0:14:29.320 bit from valuation puts you into pretty decent place certainly 0:14:29.320 --> 0:14:31.720 a lot better than last year. Hey, j I, you 0:14:31.760 --> 0:14:37.520 know energy is just ripped in that I missed that trade, 0:14:37.760 --> 0:14:41.520 Am I done? I don't think that energy stocks are 0:14:41.520 --> 0:14:44.520 going to lead the market this year. We're projecting that 0:14:44.640 --> 0:14:47.840 oil trades in a pretty tight range e D two hundred. 0:14:48.560 --> 0:14:50.880 But I will say that this is a very very 0:14:50.880 --> 0:14:52.760 warm winter, as you can tell if you live in 0:14:52.760 --> 0:14:55.760 New York City and in Europe as well, and that 0:14:56.000 --> 0:14:59.160 was really the core of our both thesis. And having 0:14:59.160 --> 0:15:01.520 said that, China's opening, so we're sticking to our eighty 0:15:01.520 --> 0:15:04.480 two hundred, but that doesn't really argue for a rip 0:15:04.560 --> 0:15:08.160 roaring energy market, so we're looking to more interest sensitive. 0:15:08.200 --> 0:15:12.080 We are projecting a three tenure, which by the way, 0:15:12.160 --> 0:15:17.600 does increase the fair multiple. Attend at a three yield 0:15:17.640 --> 0:15:19.840 on the treasury, that implies an eighteen and a half 0:15:19.840 --> 0:15:22.160 fair multiple, So you should really always look at them 0:15:22.160 --> 0:15:24.560 to see so you can accept to higher pe when 0:15:24.640 --> 0:15:27.160 yields are when rates are lower, right, that's the output 0:15:27.200 --> 0:15:30.000 of a d CF. We run a constant DCF. But 0:15:30.000 --> 0:15:32.800 but our bullish thesis requires rates to go lower because 0:15:32.840 --> 0:15:34.800 right now our fair values thirty eight hundred on the 0:15:34.960 --> 0:15:37.400 SMP so it doesn't go lower, we're in trouble. What 0:15:37.480 --> 0:15:40.760 does what does the interest rate environment mean for you 0:15:40.840 --> 0:15:44.440 for your businesses right now? You know, not your investment outlook, 0:15:44.960 --> 0:15:50.360 but for the companies that you're running well, the companies. 0:15:50.360 --> 0:15:53.080 There are certain companies that have exposure to short rate 0:15:53.280 --> 0:15:56.040 to floating rate, and that is a headwind for some companies. 0:15:56.240 --> 0:15:58.960 A lot of them swap it out or buy caps. 0:15:59.520 --> 0:16:02.480 But that's something that we're changing our models and reducing 0:16:02.600 --> 0:16:04.840 estimates for and that's a problem. I don't mean to 0:16:04.880 --> 0:16:08.440 call it your specific companies. I'm just saying no for business, 0:16:08.600 --> 0:16:10.800 you know, for for industry. Yeah, we fought. We have 0:16:10.840 --> 0:16:12.800 models on all the companies and we follow a lot 0:16:12.840 --> 0:16:15.240 of companies and they're all have headwinds and that is 0:16:15.240 --> 0:16:18.000 a risk. But we don't think the Feds. We think 0:16:18.040 --> 0:16:20.240 three more increases are pretty much in the bag. We 0:16:20.280 --> 0:16:22.120 don't think that's going to hurt the economy that much 0:16:22.120 --> 0:16:24.560 because long rates are likely to be going down, because 0:16:24.600 --> 0:16:28.960 that's what's normal when the Feds overtight and most consumers 0:16:28.960 --> 0:16:31.080 are exposed to long rates and not short rates. In 0:16:31.080 --> 0:16:33.360 the United States, Canada they have more floating right then 0:16:34.400 --> 0:16:36.920 I might be going some long term debt coming up 0:16:36.960 --> 0:16:39.560 here soon. So I'll be your consumer who's in very 0:16:39.560 --> 0:16:42.080 good shape. And actually it looks like most US consumers 0:16:42.080 --> 0:16:44.000 are in pretty good shape. Even though savings rates have 0:16:44.040 --> 0:16:48.320 come down substantially looking at this on the Bloomberg bank 0:16:49.480 --> 0:16:54.120 balances are still very high historically. UM now we're starting 0:16:54.160 --> 0:16:56.720 to see that rollover and we're starting to see credit 0:16:56.800 --> 0:16:59.920 card UH people start to leverage up a little bit, 0:17:00.200 --> 0:17:02.240 but not too much. What do you think about, Robert 0:17:02.280 --> 0:17:04.640 the U S consumer? I think there's still some room 0:17:04.720 --> 0:17:06.800 left for the consumer. It will be mixed across goods 0:17:06.800 --> 0:17:08.880 and services. But what we've seen so far in terms 0:17:08.920 --> 0:17:11.800 of the early comments from banks Jamie Diamond the other day, 0:17:12.000 --> 0:17:14.879 looking at what happened with regard to airline reporting today, 0:17:14.920 --> 0:17:17.760 looking across consumer discretionary earnings, they've all been pretty good 0:17:17.840 --> 0:17:20.159 so far. It's very early days, but that indicates that 0:17:20.200 --> 0:17:22.200 the consumers still got some runway in front of them. 0:17:22.359 --> 0:17:25.439 Job market remains very strong, also mixed a lot. There 0:17:25.440 --> 0:17:27.199 are a lot of jobs on offer, but there's certainly 0:17:27.200 --> 0:17:29.680 places like tech and finance where there have been some layoffs. 0:17:29.720 --> 0:17:32.760 So we think inaggregate, consumers still has some runway but 0:17:32.800 --> 0:17:34.400 a lot of noise beneath the surface. By the way, 0:17:34.400 --> 0:17:37.440 I was talking with my financial my personal financial advisor 0:17:37.560 --> 0:17:41.360 yesterday and I was like financial advisor, I was like, dude, 0:17:41.400 --> 0:17:45.760 can we I've got a little bit of cash that's 0:17:45.800 --> 0:17:47.840 just in a savings accounting said, can I put this 0:17:47.880 --> 0:17:51.200 in some high interest rate like hips. We were talking yesterday, 0:17:51.880 --> 0:17:57.040 UM about the high income passed throughs this e t 0:17:57.240 --> 0:17:59.679 F and he said, listen, that's can you give you 0:17:59.720 --> 0:18:01.960 ten sent but we need for you to meet your goals, 0:18:02.000 --> 0:18:04.280 you need to quadruple your wealth and then multiply that 0:18:04.320 --> 0:18:09.720 by ten. So we need to get a lot more aggressive. Um. 0:18:09.760 --> 0:18:13.119 I had a lot of other people must be in that. 0:18:13.640 --> 0:18:16.240 That's not where you are. I mean, I'm almost fifty. 0:18:16.800 --> 0:18:19.200 Uh no, I should have been here twenty years ago. 0:18:19.640 --> 0:18:21.639 But nonetheless, I think a lot of other people are 0:18:21.640 --> 0:18:24.440 in that position where they can't necessarily. Yes, you get 0:18:24.440 --> 0:18:28.879 some juicy yields. We hear um people advising institutions saying, hey, 0:18:28.960 --> 0:18:31.040 yield to worse for I g is five and a 0:18:31.080 --> 0:18:33.880 half percent. That's great, but for me it's not enough. 0:18:34.119 --> 0:18:35.960 What do you see out there in terms of opportunities 0:18:36.000 --> 0:18:37.800 for people that need to amp it up. I think 0:18:37.800 --> 0:18:39.879 it's all about time horizon, but I do think there 0:18:39.920 --> 0:18:42.679 are some interesting tail winds developing in some portions of 0:18:42.680 --> 0:18:44.960 the equity market. So one of the themes that we've 0:18:44.960 --> 0:18:46.800 been looking to that's been kind of buried beneath the 0:18:46.840 --> 0:18:48.680 surface the last few years, there's been this re on 0:18:48.760 --> 0:18:51.000 shoring theme. So it became very prominent in the early 0:18:51.080 --> 0:18:53.480 days of COVID with supply chain problems, sort of got 0:18:53.480 --> 0:18:55.560 breast beneath the carpet, and it's back. If you look 0:18:55.560 --> 0:18:57.720 in the chemical industry, there's been big job gains. You 0:18:57.720 --> 0:19:00.000 look at these big announcements in terms of chip companies, 0:19:00.240 --> 0:19:02.480 we think there's some interesting opportunities there in terms of 0:19:02.520 --> 0:19:05.240 industrial and manufacturing. The second theme we're looking at as 0:19:05.280 --> 0:19:07.960 the migration of technology into business. That's something that's been 0:19:08.040 --> 0:19:10.000 unfolding a bit. We think it will accelerate with some 0:19:10.080 --> 0:19:12.399 of the decline and employment in the tech sector and 0:19:12.400 --> 0:19:14.480 those folks moving out into real industry. So we think 0:19:14.480 --> 0:19:17.200 there are some exciting things happening where wealth can compound 0:19:17.240 --> 0:19:19.520 over time. All Right, we're still waiting to hear from 0:19:19.520 --> 0:19:21.800 President Biden. We have this live shot of the White 0:19:21.840 --> 0:19:24.440 House and uh, Um, he's supposed to come on at ten. 0:19:24.720 --> 0:19:27.440 Here we are at ten thirty three, still no sign 0:19:27.440 --> 0:19:30.119 of him. But when he comes, we'll bring you live comments. 0:19:30.119 --> 0:19:32.880 Series has some comments on the economy and inflation. Uh 0:19:33.000 --> 0:19:36.840 print today. Um. You know, the definition of insanity is 0:19:36.840 --> 0:19:39.760 continuing to do the same thing and expecting a different outcome. Right, 0:19:40.520 --> 0:19:43.479 I don't know why we expect President Biden to come 0:19:43.520 --> 0:19:45.280 out on time, and then we had a White House 0:19:45.320 --> 0:19:47.800 give us the two minute warning like five minutes ago. 0:19:47.960 --> 0:19:51.400 But that happens all the time, and he's constantly late. 0:19:51.440 --> 0:19:53.520 No offense to him, and he's got a lot to do. 0:19:53.680 --> 0:19:56.679 It's a busy guy. He's very busy. But I'm just 0:19:56.720 --> 0:19:59.440 saying for us, as we're lining the shows, we're producing this, 0:19:59.520 --> 0:20:04.280 you know, as we're planning things, Eric, we should note 0:20:04.440 --> 0:20:07.440 that President Biden is always like thirty to forty minutes 0:20:07.520 --> 0:20:09.960 late at least. And that's why Eric keeps us. He 0:20:10.040 --> 0:20:12.000 just says, keep going, keep going. I want to talk 0:20:12.040 --> 0:20:15.600 about reets, Jay, I know you guys have an in 0:20:15.680 --> 0:20:18.440 for CAP preferred E t F. Talk to us about 0:20:18.440 --> 0:20:21.480 the reach space and just kind of as we walk 0:20:21.520 --> 0:20:25.240 in hands on the energy sector. Right, what's up? That's 0:20:25.280 --> 0:20:28.480 a ret that leans on the energy set you are 0:20:29.040 --> 0:20:32.440 preferred stock stock. Now as I walk through Midtown Manhattan 0:20:32.520 --> 0:20:35.440 and I look at all these beautiful buildings, they're empty. 0:20:35.480 --> 0:20:36.959 What am I doing with reats? What am I doing 0:20:37.000 --> 0:20:40.439 with real estate? Well, the exposure and that fund is 0:20:40.440 --> 0:20:44.560 pretty limited on office. Having said that, um surprisingly a 0:20:44.760 --> 0:20:48.240 office even in Manhattan is going upward doing well. It's 0:20:48.240 --> 0:20:50.920 really the B offices they're getting smashed. This is in 0:20:50.960 --> 0:20:53.960 my office here, I'm sitting in right. Everything else on 0:20:54.000 --> 0:20:56.879 the Lexington Avenue corridor is B is it if not 0:20:57.040 --> 0:20:59.680 C or D right, So that's going to get redeveloped. 0:21:00.160 --> 0:21:02.479 But the good thing about reads is that they're not 0:21:02.640 --> 0:21:05.640 very levered and they have long term leases. So by 0:21:05.640 --> 0:21:08.680 the time all those leases expired, there will have been 0:21:08.920 --> 0:21:13.199 movement out of the B space and conversions to probably residential. 0:21:13.720 --> 0:21:19.080 So they're under levered credits that survived well during cycles. 0:21:19.119 --> 0:21:21.760 And that's really the investment bankers rarely what I give 0:21:21.800 --> 0:21:24.760 them credit. But they didn't want to sell, which formally 0:21:24.880 --> 0:21:30.040