1 00:00:13,840 --> 00:00:17,360 Speaker 1: Hello, and welcome to What Goes Up, a Bloomberg weekly 2 00:00:17,440 --> 00:00:21,239 Speaker 1: market podcast. I'm Sarah Ponzek, a reporter on the Cross 3 00:00:21,320 --> 00:00:24,279 Speaker 1: Asset team, and I'm Mike Reagan, a senior editor on 4 00:00:24,320 --> 00:00:26,640 Speaker 1: the Markets team. This week on the show, we all 5 00:00:26,680 --> 00:00:30,440 Speaker 1: have burning questions, so for a few examples, I grabbed 6 00:00:30,440 --> 00:00:33,479 Speaker 1: some from Google's most asked list. A few of the 7 00:00:33,479 --> 00:00:37,320 Speaker 1: top ones were is water wet? Can dogs eat apples? 8 00:00:37,479 --> 00:00:40,319 Speaker 1: And my personal favorite, does he like me? Because I'm 9 00:00:40,320 --> 00:00:42,400 Speaker 1: sure if you ask Google if he or she likes you, 10 00:00:42,440 --> 00:00:45,680 Speaker 1: Google will have the answer for you. But likely the 11 00:00:45,720 --> 00:00:49,319 Speaker 1: most burning question facing investors right now is what does 12 00:00:50,200 --> 00:00:53,840 Speaker 1: hold for global financial markets? So thankfully our two guests 13 00:00:53,840 --> 00:00:56,200 Speaker 1: will try to answer that for us. Wait a minute, 14 00:00:56,200 --> 00:00:59,240 Speaker 1: Can dogs eat apples? That's one of the top search 15 00:01:00,080 --> 00:01:03,760 Speaker 1: singular enough, Can dogs eat apples? And his water? What? 16 00:01:03,960 --> 00:01:06,840 Speaker 1: Because that's a heavily debated question. You know you're kind 17 00:01:06,840 --> 00:01:09,280 Speaker 1: of leaving us hanging with the answer. Can dogs eat apples? 18 00:01:09,319 --> 00:01:11,040 Speaker 1: I think they can. I don't see why not. I'm 19 00:01:11,080 --> 00:01:15,640 Speaker 1: pretty sure my dog has eaten apples a few times. Alright, alright, mistakenly, 20 00:01:15,760 --> 00:01:19,960 Speaker 1: But listeners, dogs suffer problems for meeting apples you can 21 00:01:19,959 --> 00:01:23,160 Speaker 1: blame here. He's lived a fifteen so an apple a 22 00:01:23,240 --> 00:01:26,600 Speaker 1: day keeps the bed away. And of course we'll close 23 00:01:26,600 --> 00:01:29,679 Speaker 1: out this week's episode with our tradition the craziest thing 24 00:01:29,800 --> 00:01:33,160 Speaker 1: I saw in markets this week, Sarah, I don't want 25 00:01:33,160 --> 00:01:36,440 Speaker 1: to put undue pressure on you, but I've come very 26 00:01:36,520 --> 00:01:38,920 Speaker 1: well stocked with I think not only the craziest thing 27 00:01:39,000 --> 00:01:41,600 Speaker 1: I've seen in markets this week, possibly all year. Look, 28 00:01:41,640 --> 00:01:44,600 Speaker 1: I've got to say that I come under pressure every week, 29 00:01:44,720 --> 00:01:47,400 Speaker 1: especially in recent weeks, because I feel like you have 30 00:01:47,560 --> 00:01:53,200 Speaker 1: been spending your entire weeks preparing moment guilty, guilty, at 31 00:01:53,240 --> 00:01:56,800 Speaker 1: least you admit it. But I also I vaguely feel 32 00:01:56,840 --> 00:01:59,360 Speaker 1: sorry for our guest this week, because we're going to 33 00:01:59,440 --> 00:02:02,600 Speaker 1: force them to make predictions about and I just want 34 00:02:02,640 --> 00:02:04,640 Speaker 1: to tell them upfront. This was all Sarah's ideas. She 35 00:02:04,680 --> 00:02:07,120 Speaker 1: wrote the script. She's the bad cop in the situation 36 00:02:07,720 --> 00:02:11,919 Speaker 1: on the but let's introduce him now the first time 37 00:02:12,040 --> 00:02:16,440 Speaker 1: on the show, we have an investment strategist from Edward Jones. 38 00:02:16,760 --> 00:02:19,400 Speaker 1: She also has a very distinguished resume. She was chief 39 00:02:19,400 --> 00:02:24,440 Speaker 1: economist at redfinn She held positions at the CFTC at Harvard. 40 00:02:25,040 --> 00:02:26,640 Speaker 1: I will go out on a limbow and say the 41 00:02:26,639 --> 00:02:31,040 Speaker 1: most prestigious entry on her resumes sometime as a senior 42 00:02:31,080 --> 00:02:38,000 Speaker 1: economist at Bloomberg LP. That's right, right, but that is 43 00:02:38,040 --> 00:02:41,040 Speaker 1: her voice that her name is Nila Richardson. Neila, welcome 44 00:02:41,040 --> 00:02:42,600 Speaker 1: to the show. Thank you. It's great to be here. 45 00:02:42,600 --> 00:02:45,000 Speaker 1: And let me just start off with one thing. If 46 00:02:45,000 --> 00:02:48,160 Speaker 1: you have to ask if he likes you over Google, 47 00:02:48,520 --> 00:02:53,440 Speaker 1: the answer is probably no. I'm just gonna be here 48 00:02:53,480 --> 00:02:56,000 Speaker 1: with sadly typing on your computer. I'm gonna set up 49 00:02:56,000 --> 00:02:58,200 Speaker 1: a web page that just returns no for that one 50 00:02:58,880 --> 00:03:02,120 Speaker 1: triggers that search. Uh and someone I know who doesn't 51 00:03:02,120 --> 00:03:05,040 Speaker 1: like me. A guest, a frequent guest on the show, 52 00:03:05,440 --> 00:03:09,120 Speaker 1: our own Macroman calumnists, Markets Live blogger and strategist Cameron 53 00:03:09,200 --> 00:03:14,080 Speaker 1: Christ Welcome back. Always a pleasure to be Well. No, 54 00:03:14,360 --> 00:03:15,880 Speaker 1: let's start with you. I know you gave us a 55 00:03:15,919 --> 00:03:19,000 Speaker 1: list of some of uh, your sort of I don't 56 00:03:19,040 --> 00:03:20,839 Speaker 1: I hate to use the word predictions, but what you're 57 00:03:20,840 --> 00:03:24,760 Speaker 1: looking out for in could you just boil it down? 58 00:03:24,960 --> 00:03:27,320 Speaker 1: Whenever I see lists like this, my first question is 59 00:03:27,400 --> 00:03:30,639 Speaker 1: what are you most confident in? On this list? What 60 00:03:30,880 --> 00:03:35,640 Speaker 1: is the thing you're most confident about? Markets in no recession, 61 00:03:36,480 --> 00:03:39,400 Speaker 1: and and that's for a variety of reasons. If you 62 00:03:39,480 --> 00:03:41,480 Speaker 1: think about where we were this time last year, we 63 00:03:41,480 --> 00:03:45,800 Speaker 1: were looking at the tail end of a rate hike, 64 00:03:46,480 --> 00:03:50,160 Speaker 1: and now we've done a complete U turn uh three 65 00:03:50,240 --> 00:03:53,920 Speaker 1: rate cuts this year and going into next year looks 66 00:03:53,960 --> 00:03:57,120 Speaker 1: like no movement, and the markets are expecting the Federal 67 00:03:57,240 --> 00:03:59,880 Speaker 1: Reserve to stay pad on rates. We have a consumer, 68 00:04:00,040 --> 00:04:03,440 Speaker 1: it's still in good shape, a blowout labor market report 69 00:04:03,520 --> 00:04:07,840 Speaker 1: showing really strong job growth. So the economy has one 70 00:04:07,920 --> 00:04:10,680 Speaker 1: tool in its toolbox. It's the consumer, and the consumer 71 00:04:10,680 --> 00:04:13,640 Speaker 1: looks very strong right now. Would be helpful if the 72 00:04:13,680 --> 00:04:16,479 Speaker 1: consumer got a little help. So we don't think there's 73 00:04:16,480 --> 00:04:19,640 Speaker 1: a recession. We think it's avoided. The economy has this 74 00:04:19,880 --> 00:04:23,240 Speaker 1: really great power to grow during an election year. I 75 00:04:23,279 --> 00:04:27,400 Speaker 1: don't know why that happens, but we do think actually 76 00:04:27,400 --> 00:04:29,479 Speaker 1: growth will be slower next year than this year. So 77 00:04:29,560 --> 00:04:32,000 Speaker 1: that's the one caveat. I don't know why, maybe something 78 00:04:32,040 --> 00:04:35,680 Speaker 1: like a re election pressure, who knows, but Cameron, you 79 00:04:35,720 --> 00:04:39,840 Speaker 1: put out a list of non predictions and one that 80 00:04:39,960 --> 00:04:42,360 Speaker 1: was related to the idea of no recession was that 81 00:04:42,400 --> 00:04:44,720 Speaker 1: we won't see another in version of the two tense curve. 82 00:04:45,200 --> 00:04:48,159 Speaker 1: Why well, I would take a slightly different tack. You 83 00:04:48,160 --> 00:04:51,160 Speaker 1: could argue that a steepening of the curve from here 84 00:04:51,160 --> 00:04:54,520 Speaker 1: would actually be consistent with a recession in so far 85 00:04:54,560 --> 00:04:57,360 Speaker 1: as the front end would rally harder, yields would come 86 00:04:57,400 --> 00:05:01,440 Speaker 1: lower than UH than than the bad can. But like 87 00:05:01,560 --> 00:05:04,000 Speaker 1: most of the stuff I do, UH, that view was 88 00:05:04,040 --> 00:05:09,320 Speaker 1: predicated on some sort of quantitative model. UH. The drivers 89 00:05:09,600 --> 00:05:14,560 Speaker 1: of the yield curve, or basically UM the real Fed 90 00:05:14,600 --> 00:05:18,840 Speaker 1: Funds rate, which has gone from slightly positive to to 91 00:05:18,960 --> 00:05:21,719 Speaker 1: now negative. A negative real Fed funds rates consistent with 92 00:05:21,720 --> 00:05:24,520 Speaker 1: a relatively steep curve. The level of the Fed Funds 93 00:05:24,600 --> 00:05:27,160 Speaker 1: rate relative to some norm I'd like to use a 94 00:05:27,160 --> 00:05:30,400 Speaker 1: ten year average UH. This time last year, as Neil 95 00:05:30,480 --> 00:05:32,880 Speaker 1: was alluding to, we were at the tail end of 96 00:05:32,880 --> 00:05:36,400 Speaker 1: a tightening cycle, so rates relative to history were very 97 00:05:36,480 --> 00:05:38,800 Speaker 1: very high. That's come a bit lower now with those 98 00:05:38,800 --> 00:05:42,320 Speaker 1: three rate cuts. Again, that's consistent with steepening. The one 99 00:05:42,760 --> 00:05:46,760 Speaker 1: major pressure for flattening is the labor market. Because it 100 00:05:46,839 --> 00:05:49,560 Speaker 1: may surprise you, but it's it's a It's a true 101 00:05:49,600 --> 00:05:51,720 Speaker 1: fact that for a given level the Fed funds rate, 102 00:05:51,960 --> 00:05:55,120 Speaker 1: the lower the unemployment rate, the lower the tenure yield. 103 00:05:55,520 --> 00:05:58,599 Speaker 1: Uh So, if the labor market remains strong, that is 104 00:05:59,080 --> 00:06:02,720 Speaker 1: something that could act keep the curve relatively flat. But 105 00:06:02,839 --> 00:06:05,760 Speaker 1: my framework suggests the two s tends curve should be 106 00:06:05,800 --> 00:06:08,800 Speaker 1: about fifty basis points. And we're like twenty seven now, 107 00:06:08,839 --> 00:06:11,120 Speaker 1: we were twenty three when I wrote the piece. I'm 108 00:06:11,120 --> 00:06:14,520 Speaker 1: already four basis points. Uh more and more more margin 109 00:06:14,720 --> 00:06:17,960 Speaker 1: moving in your direction exactly. And so none of your 110 00:06:18,600 --> 00:06:20,520 Speaker 1: thesis about the yield curve has to do with the 111 00:06:20,520 --> 00:06:23,320 Speaker 1: Fed buying up huge amounts of the front end of 112 00:06:23,320 --> 00:06:26,279 Speaker 1: the curve. Well, they're buying treasury bills. So three month 113 00:06:26,360 --> 00:06:29,720 Speaker 1: bill is not the same as a two year um 114 00:06:29,880 --> 00:06:34,080 Speaker 1: a two year two tends. Yeah, so there's a there's 115 00:06:34,080 --> 00:06:37,359 Speaker 1: a more four. Basically, treasury bills are anchored to the 116 00:06:37,360 --> 00:06:40,000 Speaker 1: Fed funds right plus or minus, whereas twos. There's a 117 00:06:40,040 --> 00:06:44,160 Speaker 1: lot more volatility because you can essentially embed future rate 118 00:06:44,200 --> 00:06:47,320 Speaker 1: cuts if they are required, into a two year note 119 00:06:47,320 --> 00:06:49,280 Speaker 1: that you couldn't necessarily do in a in a three 120 00:06:49,279 --> 00:06:53,719 Speaker 1: month bill. Sonila, Another one of yours that is related 121 00:06:53,760 --> 00:06:57,320 Speaker 1: to the conversation we're currently having was where will rates 122 00:06:57,320 --> 00:06:59,280 Speaker 1: go as it possible rates go lower? And I thought 123 00:06:59,279 --> 00:07:01,320 Speaker 1: it was very interest saying that you laid out a 124 00:07:01,440 --> 00:07:03,520 Speaker 1: range and that range was two to three percent, So 125 00:07:03,839 --> 00:07:07,719 Speaker 1: at the higher end of different ranges that I've personally 126 00:07:07,720 --> 00:07:11,320 Speaker 1: heard from different strategists, different investors, how would we potentially 127 00:07:11,520 --> 00:07:13,800 Speaker 1: get there? Yes, we're not that far away from two 128 00:07:13,800 --> 00:07:16,480 Speaker 1: percent on the tenure yield right now. But if you 129 00:07:16,520 --> 00:07:19,000 Speaker 1: have a range of three percent at the higher end, 130 00:07:19,120 --> 00:07:21,400 Speaker 1: what would it actually be What would have to happen 131 00:07:21,720 --> 00:07:23,640 Speaker 1: for us to get to the higher end To be fair, 132 00:07:23,720 --> 00:07:25,640 Speaker 1: we think that will be at the lower end of 133 00:07:25,680 --> 00:07:28,560 Speaker 1: that range, So we've added a lot of cushion there. 134 00:07:28,800 --> 00:07:31,320 Speaker 1: I actually disagree with Cameron, though I'm a big fan 135 00:07:31,400 --> 00:07:33,640 Speaker 1: of his writing on the terminal. I do think there 136 00:07:33,760 --> 00:07:36,960 Speaker 1: is there could be a short lived inversion because the 137 00:07:37,040 --> 00:07:39,960 Speaker 1: yield curve is so flat. But what we're seeing is 138 00:07:40,000 --> 00:07:43,480 Speaker 1: consistent with growth in the economy. We think that growth 139 00:07:43,520 --> 00:07:46,720 Speaker 1: and that strong labor market actually adds a little inflation 140 00:07:46,760 --> 00:07:49,280 Speaker 1: to the mix, which will lead to a bit of 141 00:07:49,320 --> 00:07:53,080 Speaker 1: an increase in interest rates overall. That is also in 142 00:07:53,120 --> 00:07:57,200 Speaker 1: this context though, of a global economy that we think 143 00:07:57,320 --> 00:08:00,680 Speaker 1: is also going to be improving over next year. So uh, 144 00:08:00,720 --> 00:08:03,720 Speaker 1: in your role at Edward Jones, you presumably speak to 145 00:08:03,760 --> 00:08:06,680 Speaker 1: a lot of individual sort of what we would call 146 00:08:06,720 --> 00:08:10,240 Speaker 1: mom and pop investors. Uh, maybe a well healed mom 147 00:08:10,240 --> 00:08:13,920 Speaker 1: and pop investors. I guess what, uh, what's on their 148 00:08:13,960 --> 00:08:17,720 Speaker 1: minds these days, and what sort of yield would start 149 00:08:17,760 --> 00:08:20,080 Speaker 1: to catch their attention in the bond market to move 150 00:08:20,120 --> 00:08:23,200 Speaker 1: them out of equities. You know. Uh, we have seven 151 00:08:23,200 --> 00:08:26,360 Speaker 1: million clients across North America. A lot of them are 152 00:08:26,440 --> 00:08:29,840 Speaker 1: either in or heading towards retirement. And so while this 153 00:08:29,880 --> 00:08:33,440 Speaker 1: has been a great market for equities and bonds this year, 154 00:08:33,600 --> 00:08:37,439 Speaker 1: we're expecting lower returns next year. And as they transition 155 00:08:37,679 --> 00:08:43,480 Speaker 1: from accumulating assets to disperse disbursement of assets in retirement, 156 00:08:43,720 --> 00:08:46,960 Speaker 1: they're really concerned about the very low interest rate environment 157 00:08:47,000 --> 00:08:49,280 Speaker 1: that we're in now and the high price of bonds. 158 00:08:49,280 --> 00:08:51,960 Speaker 1: Where is that entry point? A lot of them are 159 00:08:52,120 --> 00:08:56,320 Speaker 1: over invested in equities for their risk profile. You know, 160 00:08:56,360 --> 00:09:00,200 Speaker 1: if you're sixty seventy five years old, noah for but 161 00:09:00,240 --> 00:09:02,680 Speaker 1: you should probably be taking some risk out of the 162 00:09:02,720 --> 00:09:06,680 Speaker 1: market and rebalancing your portfolio. You've done well, maybe in 163 00:09:06,760 --> 00:09:09,760 Speaker 1: tech stocks are there up forty six percent year today? 164 00:09:09,840 --> 00:09:13,000 Speaker 1: You've been doing well for the past decade. Now it's 165 00:09:13,040 --> 00:09:16,560 Speaker 1: time to rethink what you need going into the future, 166 00:09:16,840 --> 00:09:20,160 Speaker 1: and that is a hard transition when bond prices have 167 00:09:20,400 --> 00:09:23,120 Speaker 1: risen so much this year really quickly. I want to 168 00:09:23,120 --> 00:09:26,200 Speaker 1: rewind a bit just because you said you disagreed with Cameron, 169 00:09:26,240 --> 00:09:27,720 Speaker 1: and we all know that we love a little bit 170 00:09:27,720 --> 00:09:31,400 Speaker 1: of disagreement. It always makes through some good discussion. So 171 00:09:31,679 --> 00:09:33,880 Speaker 1: why why do you think, yes, the old curve is 172 00:09:33,880 --> 00:09:37,480 Speaker 1: relatively flat, could be easy to invert once again. But 173 00:09:37,760 --> 00:09:39,800 Speaker 1: why do you actually believe that we could see that? 174 00:09:39,880 --> 00:09:43,960 Speaker 1: Because it's such a muddy signal. It's just muddy. It's 175 00:09:44,000 --> 00:09:46,679 Speaker 1: not a clip. It was never a perfect signal. It 176 00:09:46,920 --> 00:09:51,920 Speaker 1: is uh predictive of recessions. It's reliable in some sense, 177 00:09:52,160 --> 00:09:56,240 Speaker 1: but it's not flaw flawless, especially that twos tends portion 178 00:09:56,280 --> 00:09:59,360 Speaker 1: of the curve. We prefer the three month tenure yield, 179 00:09:59,520 --> 00:10:02,320 Speaker 1: but if you look around the world, you see so 180 00:10:02,520 --> 00:10:07,080 Speaker 1: much of sovereign debt had returning negative yields. That's added 181 00:10:07,160 --> 00:10:10,040 Speaker 1: pressure in terms of foreign demand for the long end 182 00:10:10,080 --> 00:10:13,160 Speaker 1: of the curve, and that long end demand is actually 183 00:10:13,200 --> 00:10:16,679 Speaker 1: what's suppressing long term rates, and so it is there 184 00:10:16,760 --> 00:10:19,120 Speaker 1: is a tendency, I think too, when you look at 185 00:10:19,120 --> 00:10:21,240 Speaker 1: a flat you'ld curve to read into it that this 186 00:10:21,280 --> 00:10:25,200 Speaker 1: is something substantive about the economy. We don't think that 187 00:10:25,240 --> 00:10:28,679 Speaker 1: it's saying the same signal that it did in previous 188 00:10:28,920 --> 00:10:35,200 Speaker 1: UH market cycles. That's the context in which I might disagree, 189 00:10:35,240 --> 00:10:38,960 Speaker 1: But I haven't seen his math, so I could be 190 00:10:39,000 --> 00:10:43,000 Speaker 1: convinced otherwise. Math matters, math matter. I've watched a lot 191 00:10:43,000 --> 00:10:45,680 Speaker 1: of these debates. Do we give Karmen a thirty second rebottle? 192 00:10:45,720 --> 00:10:47,720 Speaker 1: And he would like to, as long as you don't 193 00:10:47,720 --> 00:10:53,160 Speaker 1: talk about healthcare, just I would actually say your worldview 194 00:10:53,240 --> 00:10:55,760 Speaker 1: is actually consistent with a steeper curve. In so far 195 00:10:56,080 --> 00:10:58,520 Speaker 1: as I think we can probably all agree that the 196 00:10:58,520 --> 00:11:01,199 Speaker 1: Fed isn't gonna high rates this year. Are they've basically 197 00:11:01,840 --> 00:11:05,520 Speaker 1: more or less promised that UH and frankly Trump would 198 00:11:05,559 --> 00:11:08,800 Speaker 1: probably sack J. Powell if he tried. So if you're 199 00:11:08,880 --> 00:11:12,760 Speaker 1: right that growth is okay, then that an inflation comes back, 200 00:11:12,760 --> 00:11:14,920 Speaker 1: then you should see more of a risk premium built 201 00:11:14,920 --> 00:11:17,240 Speaker 1: in to the back end of the curve because the 202 00:11:17,280 --> 00:11:20,200 Speaker 1: front end will be relatively well anchored, and that's actually 203 00:11:20,200 --> 00:11:23,120 Speaker 1: consistent with a steep ning and hey, hey listen, of course, 204 00:11:23,160 --> 00:11:26,400 Speaker 1: the old curve could invert temporarily. But it's no fun 205 00:11:26,480 --> 00:11:30,960 Speaker 1: saying it could invert. It's much better stick your stick 206 00:11:31,000 --> 00:11:34,960 Speaker 1: your neck out. I will say. Cameron goes out on 207 00:11:35,000 --> 00:11:37,840 Speaker 1: a limb with his non predictions. I've always suggested to 208 00:11:37,960 --> 00:11:40,240 Speaker 1: him just pat it with some really easy stuff, like say, 209 00:11:40,520 --> 00:11:43,000 Speaker 1: Mike Reagan will not lose twenty pounds this year, no 210 00:11:43,040 --> 00:11:46,200 Speaker 1: matter no matter how much he promises he will. But 211 00:11:46,920 --> 00:11:48,920 Speaker 1: let's get to another one of yours, Cameron and Neil, 212 00:11:48,960 --> 00:11:50,520 Speaker 1: and maybe you can weigh in on this too. But 213 00:11:50,760 --> 00:11:54,000 Speaker 1: um U S equities will not outperform the rest of 214 00:11:54,040 --> 00:11:56,000 Speaker 1: the world. And as you write, this is kind of 215 00:11:56,040 --> 00:11:59,800 Speaker 1: a consensus call. A lot of people believe that it's time. 216 00:12:00,240 --> 00:12:04,680 Speaker 1: It's finally time for international equities to outperform, partly perhaps 217 00:12:04,840 --> 00:12:07,600 Speaker 1: a value play. The similar to the value rotation going 218 00:12:07,640 --> 00:12:10,600 Speaker 1: in within the US market itself, is that is that 219 00:12:10,640 --> 00:12:13,120 Speaker 1: basically it that it's sort of happy days are here again. 220 00:12:13,200 --> 00:12:15,640 Speaker 1: Let's buy those cyclical value stocks. Well, I think there's 221 00:12:15,640 --> 00:12:18,520 Speaker 1: a few issues. One is just the principle of mean reversion. 222 00:12:19,120 --> 00:12:22,400 Speaker 1: Um US equities outperformed the rest of the world dramatically 223 00:12:23,200 --> 00:12:27,480 Speaker 1: over the last decade. US equities in terms of the 224 00:12:27,520 --> 00:12:30,559 Speaker 1: longer term value propositions, say going out five or ten 225 00:12:30,640 --> 00:12:34,920 Speaker 1: years look pretty dreadful. Uh, they're pretty fully priced. So 226 00:12:35,120 --> 00:12:37,720 Speaker 1: just from a from a from a value perspective, you 227 00:12:37,720 --> 00:12:40,400 Speaker 1: could argue, yes, the U should underperform. From a mean 228 00:12:40,440 --> 00:12:44,320 Speaker 1: reversion perspective, you could argue the U s should underperform. 229 00:12:44,360 --> 00:12:48,720 Speaker 1: And if Neil is right and global growth kind of 230 00:12:48,760 --> 00:12:50,840 Speaker 1: starts ticking higher, well, it was the rest of the 231 00:12:50,840 --> 00:12:54,320 Speaker 1: world that took the biggest hit over the last eighteen 232 00:12:54,360 --> 00:12:57,960 Speaker 1: to twenty four months on on growth, So it's presumably 233 00:12:58,000 --> 00:13:00,559 Speaker 1: the rest of the world that will enjoy the biggest 234 00:13:00,559 --> 00:13:03,400 Speaker 1: bound and not should be consistent with a better performance 235 00:13:03,400 --> 00:13:05,760 Speaker 1: and risk assets in the rest of the world. And 236 00:13:05,880 --> 00:13:08,560 Speaker 1: if you look at something like the chart of the 237 00:13:08,559 --> 00:13:11,760 Speaker 1: stock six D in Europe, it bounced off of the 238 00:13:11,760 --> 00:13:15,480 Speaker 1: same level. It's roughly four fifteen three times since the 239 00:13:15,559 --> 00:13:19,199 Speaker 1: year two thousand and we finally sort of have broken 240 00:13:19,200 --> 00:13:21,640 Speaker 1: through that level. And if we get a monthly close, 241 00:13:21,800 --> 00:13:24,559 Speaker 1: if you're a chart monkey, it's gonna look hyper bullish. 242 00:13:24,760 --> 00:13:27,320 Speaker 1: So that's something else to consider. Would you agree, I 243 00:13:27,360 --> 00:13:32,000 Speaker 1: agree partially, I should say I mostly agree, but you know, 244 00:13:32,120 --> 00:13:37,920 Speaker 1: Cameron says this year, so I actually have right, right, 245 00:13:38,200 --> 00:13:42,920 Speaker 1: But we are actually overweight international equities relative to US equities. 246 00:13:42,920 --> 00:13:45,280 Speaker 1: So we put our money and our client's money where 247 00:13:45,360 --> 00:13:47,680 Speaker 1: Cameron's mouth is that we do think that this is 248 00:13:48,040 --> 00:13:52,080 Speaker 1: a good opportunity for long term investors because of valuations 249 00:13:52,160 --> 00:13:56,679 Speaker 1: international developed or trading at about discount to large cap 250 00:13:56,840 --> 00:14:00,480 Speaker 1: US and emerging market stocks about a thirty percent discount, 251 00:14:00,559 --> 00:14:04,160 Speaker 1: so they're attractively priced. We also see higher yields in 252 00:14:04,240 --> 00:14:07,400 Speaker 1: international equities, which is great for a long term investor. 253 00:14:07,800 --> 00:14:12,200 Speaker 1: And and so we're seeing also some stabilization in global 254 00:14:12,200 --> 00:14:16,600 Speaker 1: manufacturing and that will be helpful along with some coordinated 255 00:14:16,600 --> 00:14:19,560 Speaker 1: central bank stimulus. So for all of these reasons, we 256 00:14:19,600 --> 00:14:23,359 Speaker 1: agree with Cameron and the international equities, whether they outperform 257 00:14:23,440 --> 00:14:26,480 Speaker 1: in or maybe a little later or a good place 258 00:14:26,520 --> 00:14:28,840 Speaker 1: if you are investing for the long term. So and 259 00:14:28,920 --> 00:14:31,560 Speaker 1: yet I look at the companies in the US that 260 00:14:31,560 --> 00:14:35,760 Speaker 1: that captivate the imagination your Amazon, your Apple, your Facebook, 261 00:14:35,960 --> 00:14:38,720 Speaker 1: your Google, you know, on and on. I mean, it 262 00:14:38,800 --> 00:14:41,520 Speaker 1: seems like in the equity market, the innovation, that that 263 00:14:41,600 --> 00:14:45,520 Speaker 1: growth has really been centered for whatever reason, in the 264 00:14:45,640 --> 00:14:49,200 Speaker 1: US over say the last you know, decade, really since 265 00:14:49,240 --> 00:14:52,400 Speaker 1: the financial crisis, I mean or what you both saying 266 00:14:52,520 --> 00:14:56,440 Speaker 1: kind of uh that this this craze for growth stocks 267 00:14:56,680 --> 00:14:59,160 Speaker 1: is is dying out a little bit, and that you know, 268 00:14:59,160 --> 00:15:01,000 Speaker 1: because I look at Europe and I don't I don't 269 00:15:01,000 --> 00:15:03,920 Speaker 1: get excited about any single individual companies like I do 270 00:15:04,000 --> 00:15:07,760 Speaker 1: in the US. We think overall equities will returns will 271 00:15:07,760 --> 00:15:12,200 Speaker 1: be lower this this coming year in UM right now, 272 00:15:12,680 --> 00:15:16,640 Speaker 1: valuations if you look at US equities there above historical averages. 273 00:15:17,000 --> 00:15:19,560 Speaker 1: So we don't think that there's going to be a 274 00:15:19,720 --> 00:15:23,600 Speaker 1: big lift from multiple expansion. That what growth we see 275 00:15:23,600 --> 00:15:27,920 Speaker 1: in stock prices will come from earnings, and earnings have slowed. 276 00:15:28,160 --> 00:15:31,920 Speaker 1: We can't expect that plus year over year growth that 277 00:15:31,960 --> 00:15:36,760 Speaker 1: we saw in twenty seventeen or eighteen. We're talking single digits, 278 00:15:37,000 --> 00:15:39,400 Speaker 1: low single digits in the third quarter of this year. 279 00:15:39,760 --> 00:15:42,120 Speaker 1: We think that rebounds a little bit to mid single 280 00:15:42,200 --> 00:15:44,920 Speaker 1: digits next year. And the other thing to consider UM 281 00:15:44,960 --> 00:15:46,840 Speaker 1: it's difficult to quantify, is there's a sort of a 282 00:15:46,880 --> 00:15:49,760 Speaker 1: regulatory tail risk with a lot of these tech names 283 00:15:51,000 --> 00:15:54,240 Speaker 1: as well. You know you've seen friend fipartisan risks. Yeah, well, 284 00:15:54,280 --> 00:15:56,360 Speaker 1: you know, and it's not just in the United States, 285 00:15:56,440 --> 00:15:59,400 Speaker 1: right You've seen friends start to slap the digital tax 286 00:16:00,080 --> 00:16:03,440 Speaker 1: um on US tech. Yeah, we don't need to talk 287 00:16:03,440 --> 00:16:06,880 Speaker 1: about politics here, but various of the presidential Canadas have 288 00:16:06,960 --> 00:16:09,680 Speaker 1: spoken of some of these tech giants and shall we say, 289 00:16:09,800 --> 00:16:13,680 Speaker 1: less than glowing terms, which could could pose some risk 290 00:16:14,080 --> 00:16:16,200 Speaker 1: again moving forward for some of these guys. I really 291 00:16:16,200 --> 00:16:19,240 Speaker 1: think the tech sector is where banks were about ten 292 00:16:19,320 --> 00:16:22,000 Speaker 1: years ago coming out of the financial crisis. There was 293 00:16:22,040 --> 00:16:24,840 Speaker 1: a lot of regulation on banks, but they were made 294 00:16:24,920 --> 00:16:28,120 Speaker 1: stronger for it, but you did see some consolidation in 295 00:16:28,160 --> 00:16:32,480 Speaker 1: the industry going forward. Tech is now in that position. 296 00:16:32,760 --> 00:16:37,440 Speaker 1: Hopefully the outcome means regulation that protects consumer privacy and 297 00:16:37,520 --> 00:16:41,400 Speaker 1: data that ultimately makes the tech company stronger. But there's 298 00:16:41,440 --> 00:16:44,040 Speaker 1: a little pain in that growth process. I will add. 299 00:16:44,280 --> 00:16:49,240 Speaker 1: In trying to read as many outlooks as possible, Goldman 300 00:16:49,320 --> 00:16:51,480 Speaker 1: seems to be the only one that does have the 301 00:16:51,560 --> 00:16:53,520 Speaker 1: out of consensus view here or the one that really 302 00:16:53,560 --> 00:16:55,800 Speaker 1: jumps out. They're sticking with the U S call. And 303 00:16:55,800 --> 00:16:58,720 Speaker 1: the reason behind that, Mike, is because they do continue 304 00:16:58,720 --> 00:17:01,920 Speaker 1: to see growth and tech outperforming. So that really does 305 00:17:02,000 --> 00:17:04,920 Speaker 1: inform the geographic call too, because it's hard to move 306 00:17:04,960 --> 00:17:08,040 Speaker 1: away from US if you still see tech growth. Those 307 00:17:08,080 --> 00:17:10,960 Speaker 1: companies being the ones that lead Goldman may feel comfortable 308 00:17:11,040 --> 00:17:15,200 Speaker 1: doing that in um Uh, not everyone is making such 309 00:17:15,240 --> 00:17:36,920 Speaker 1: a bold one year now. Both of you also touched 310 00:17:37,040 --> 00:17:40,200 Speaker 1: on is the basically the theme of is the trade 311 00:17:40,200 --> 00:17:42,479 Speaker 1: war over and capern I'll just read one of your 312 00:17:42,480 --> 00:17:44,920 Speaker 1: lines is a pretty good one. You said, you can't 313 00:17:44,960 --> 00:17:48,120 Speaker 1: stop tiff men, you can only hope to contain him. Uh. 314 00:17:48,560 --> 00:17:50,440 Speaker 1: Does that sort of jibe with what you're thinking that 315 00:17:50,920 --> 00:17:53,119 Speaker 1: the trade war is not a risk that's been completely 316 00:17:53,160 --> 00:17:57,280 Speaker 1: wiped off. The absolutely trade uncertainty is here to stay. 317 00:17:57,320 --> 00:18:00,520 Speaker 1: I think even if you get a phase one trade deal. UM. 318 00:18:00,840 --> 00:18:03,320 Speaker 1: No one seen in the terms of this deal. We 319 00:18:03,440 --> 00:18:05,959 Speaker 1: hope that it means that we can roll back some 320 00:18:06,040 --> 00:18:09,679 Speaker 1: of those existing tariffs, but that's not clear yet. But 321 00:18:09,760 --> 00:18:12,800 Speaker 1: we have seen a pick up in tariffs and unexpected 322 00:18:12,840 --> 00:18:16,800 Speaker 1: places like Brazil and Argentina just a couple of weeks ago, 323 00:18:16,960 --> 00:18:22,280 Speaker 1: based on uh some charges of currency manipulation that seemed 324 00:18:22,359 --> 00:18:26,840 Speaker 1: somewhat unfounded given what the economies are looking at a 325 00:18:27,200 --> 00:18:31,199 Speaker 1: like in those countries. And then discussion about tariffs on 326 00:18:31,400 --> 00:18:35,359 Speaker 1: French imports, which was also surprising given that it's almost 327 00:18:35,440 --> 00:18:38,760 Speaker 1: New Year's even those are really valuable products in terms 328 00:18:38,760 --> 00:18:42,479 Speaker 1: of champagne for for US consumers. So my my larger 329 00:18:42,520 --> 00:18:46,200 Speaker 1: point is is that terrorists have been used to get 330 00:18:46,240 --> 00:18:50,880 Speaker 1: both economic and policy outcomes by this administration, which means 331 00:18:50,880 --> 00:18:53,440 Speaker 1: there's a bit of uncertainty of when they will roll 332 00:18:53,480 --> 00:18:56,480 Speaker 1: on and when they'll be rolled back, and that uncertainty 333 00:18:56,640 --> 00:19:01,800 Speaker 1: has influenced market sentiment without I have a follow up question, Cameron, 334 00:19:01,920 --> 00:19:05,040 Speaker 1: if this is allowed for your non prediction number eight. Um, 335 00:19:05,119 --> 00:19:07,720 Speaker 1: so you say before that fantastic line that Mike read 336 00:19:08,119 --> 00:19:11,000 Speaker 1: US tariff levels on China will not stay at current 337 00:19:11,080 --> 00:19:14,720 Speaker 1: levels throughout the entirety of So my follow up to 338 00:19:14,720 --> 00:19:16,000 Speaker 1: you is, if they're not going to stay at the 339 00:19:16,040 --> 00:19:18,280 Speaker 1: same level, are they going to go higher? Are they 340 00:19:18,280 --> 00:19:19,920 Speaker 1: going to go lower? Well? Yeah, I think the risk 341 00:19:20,040 --> 00:19:22,919 Speaker 1: is that, uh, you know, even if there is an 342 00:19:22,960 --> 00:19:26,760 Speaker 1: initial agreement, which we seem to have that the US 343 00:19:26,840 --> 00:19:29,359 Speaker 1: will use tariffs as a sort of an enforcement mechanism, 344 00:19:29,640 --> 00:19:31,920 Speaker 1: and you know, the issue with the way this whole 345 00:19:32,640 --> 00:19:36,080 Speaker 1: um process has been executed is that you sort of 346 00:19:36,080 --> 00:19:38,800 Speaker 1: you're on your train home, uh, you know, six pm 347 00:19:38,880 --> 00:19:41,919 Speaker 1: or whenever you go home on a random Thursday, and 348 00:19:41,960 --> 00:19:44,120 Speaker 1: all of a sudden, there's a tweet. You know, I've 349 00:19:44,119 --> 00:19:46,919 Speaker 1: decided to put tariffs on China because they're not playing 350 00:19:46,960 --> 00:19:50,359 Speaker 1: ball or whatever. And that's that's that's clearly you know, 351 00:19:50,480 --> 00:19:53,320 Speaker 1: a risk or you know, maybe even I've given the 352 00:19:53,320 --> 00:19:55,399 Speaker 1: evidence of the last twelve months probably the base case 353 00:19:55,960 --> 00:19:57,800 Speaker 1: about how this is going to play out. Yeah, And 354 00:19:57,880 --> 00:20:00,359 Speaker 1: the Big Bowl prediction that I don't think is actually 355 00:20:00,359 --> 00:20:02,800 Speaker 1: that bold is that there will be no comprehensive trade 356 00:20:02,800 --> 00:20:08,240 Speaker 1: deal between the US and China. Next year there will 357 00:20:08,320 --> 00:20:12,000 Speaker 1: be one. There will be one, yeah, you know, Cameron. 358 00:20:12,000 --> 00:20:15,720 Speaker 1: And it sort of gets to the um the problem 359 00:20:15,720 --> 00:20:17,880 Speaker 1: with the predictions like this when we're in such an 360 00:20:17,960 --> 00:20:20,919 Speaker 1: unpredictable environment. I'm curious, you know, if you could go 361 00:20:20,960 --> 00:20:23,280 Speaker 1: back to your days as a trader at a portfolio 362 00:20:23,320 --> 00:20:27,600 Speaker 1: manager when the calendar turned didn't mean anything to like, 363 00:20:27,640 --> 00:20:29,879 Speaker 1: I know, in this business, we're sort of forced to 364 00:20:30,240 --> 00:20:33,119 Speaker 1: have these outlooks. Everyone on Wall Street who's a strategist 365 00:20:33,119 --> 00:20:37,120 Speaker 1: has to provide one. Would you even think about twenty 366 00:20:37,240 --> 00:20:40,439 Speaker 1: as a year? Absolutely? Because and then the primary reason 367 00:20:40,600 --> 00:20:43,159 Speaker 1: is that that number next to the Y T D 368 00:20:43,359 --> 00:20:46,520 Speaker 1: column goes from whatever it was on December thirty one 369 00:20:46,600 --> 00:20:52,480 Speaker 1: to zero. So if you're up, say uh in December, yeah, okay, 370 00:20:52,600 --> 00:20:54,199 Speaker 1: you don't want to lose it, but you can afford 371 00:20:54,240 --> 00:20:56,960 Speaker 1: to swing the bat a little bit and uh, maybe 372 00:20:57,000 --> 00:21:00,159 Speaker 1: lose three or four percent on January one. But us 373 00:21:00,160 --> 00:21:01,840 Speaker 1: thing you want to do is to have a big 374 00:21:01,840 --> 00:21:05,120 Speaker 1: position that that runs you over and be down three 375 00:21:05,240 --> 00:21:10,080 Speaker 1: or four percent by January, because that essentially crimpshur risk 376 00:21:10,080 --> 00:21:13,960 Speaker 1: taking for the entire year, at least until you climb 377 00:21:14,320 --> 00:21:15,880 Speaker 1: out of the whole. Now, back in the good old 378 00:21:15,960 --> 00:21:19,879 Speaker 1: days before the crisis, for macro products, she always had 379 00:21:19,960 --> 00:21:22,160 Speaker 1: kind of a tail wind because the U S. Investment 380 00:21:22,160 --> 00:21:25,119 Speaker 1: banks would start their financial year on December one, So 381 00:21:25,280 --> 00:21:28,200 Speaker 1: those guys had these brand new, spanking p and l's 382 00:21:28,800 --> 00:21:31,160 Speaker 1: when everyone else was sort of being a little circumspect 383 00:21:31,160 --> 00:21:34,399 Speaker 1: in December, and they would rush into piling into their 384 00:21:34,440 --> 00:21:37,479 Speaker 1: favorite trades and you would see stuff move a lot, 385 00:21:38,000 --> 00:21:40,920 Speaker 1: which would then give some momentum into into January. Well, 386 00:21:40,920 --> 00:21:43,840 Speaker 1: now they're all sort of commercial banks like everybody else, 387 00:21:44,200 --> 00:21:47,399 Speaker 1: so were we all have to start on January one, 388 00:21:47,560 --> 00:21:51,640 Speaker 1: and we all have this sort of same the tyranny 389 00:21:51,640 --> 00:21:53,399 Speaker 1: of the P and L, the tyranny of the flat 390 00:21:53,400 --> 00:21:55,119 Speaker 1: P n L at the beginning of the year, and 391 00:21:55,119 --> 00:21:58,280 Speaker 1: that definitely informs how you approach taking risks Yeah, I'm 392 00:21:58,320 --> 00:22:02,280 Speaker 1: curious if the Edward Jones individual investors think in in 393 00:22:02,440 --> 00:22:05,040 Speaker 1: counter year terms. And the one reason I asked, um, 394 00:22:05,080 --> 00:22:06,919 Speaker 1: I was reading I think it was a Wells Fargo 395 00:22:07,000 --> 00:22:10,560 Speaker 1: Institute had a no doubt to clients, SAYE, remember to 396 00:22:10,840 --> 00:22:14,879 Speaker 1: rebalance your portfolio. I mean, we think of institution institutional 397 00:22:14,920 --> 00:22:18,359 Speaker 1: portfolio is rebouncing on a monthly or quitterly basis that 398 00:22:18,440 --> 00:22:21,920 Speaker 1: individual though, UM, I'm curious how they think about it. 399 00:22:22,119 --> 00:22:23,919 Speaker 1: I did. I actually looked into this a little bit 400 00:22:23,960 --> 00:22:25,800 Speaker 1: on our blog, and I noticed that when you have 401 00:22:25,880 --> 00:22:30,480 Speaker 1: a year like we had where equities outperform uh, fixed 402 00:22:30,480 --> 00:22:33,000 Speaker 1: income by such a wide margin, I can't I forget 403 00:22:33,040 --> 00:22:36,840 Speaker 1: what it is. It's it's almost like that you do 404 00:22:37,000 --> 00:22:39,600 Speaker 1: tend to see a little bit of softness in equities 405 00:22:40,040 --> 00:22:43,439 Speaker 1: into January and February in the following year, almost like 406 00:22:43,480 --> 00:22:46,720 Speaker 1: they rebounce in the new year. How big of a 407 00:22:46,720 --> 00:22:49,760 Speaker 1: deal is rebalancing to two individual investors? Do they listen 408 00:22:49,760 --> 00:22:51,000 Speaker 1: to you when you tell them to do it? And 409 00:22:51,000 --> 00:22:53,480 Speaker 1: do they do it on a sort of set schedule? Yes, 410 00:22:53,600 --> 00:22:57,639 Speaker 1: we hope so, and we do advise it. It's really important, 411 00:22:57,760 --> 00:23:01,400 Speaker 1: especially as you're getting into the end of your investment horizon. 412 00:23:01,520 --> 00:23:05,160 Speaker 1: You don't want to be overweight equities if you expect 413 00:23:05,200 --> 00:23:08,159 Speaker 1: more volatility, and that is another prediction that we have. 414 00:23:08,280 --> 00:23:11,320 Speaker 1: We expect more volatility ahead, and so we want to 415 00:23:11,359 --> 00:23:15,360 Speaker 1: make sure that our retirees are our families, and our 416 00:23:15,359 --> 00:23:19,400 Speaker 1: clients are prepared for the volatility. And that means rebalancing 417 00:23:19,400 --> 00:23:21,760 Speaker 1: into bonds. Now, how do you do it? Sometimes you 418 00:23:21,800 --> 00:23:24,520 Speaker 1: have to tie it in with other behaviors, like it's 419 00:23:24,560 --> 00:23:27,520 Speaker 1: the end of the year, you're starting your new year's resolutions. 420 00:23:27,720 --> 00:23:31,080 Speaker 1: Don't forget to rebalance. So that's a messaging trick that 421 00:23:31,480 --> 00:23:34,280 Speaker 1: may be used. And maybe that's why you see behaviorally 422 00:23:35,040 --> 00:23:38,800 Speaker 1: clients doing that or retail investors doing that towards the end. Yeah, 423 00:23:39,000 --> 00:23:42,080 Speaker 1: you know, you were mentioning before the the taping here 424 00:23:42,320 --> 00:23:45,040 Speaker 1: about how a lot of clients are talking a lot 425 00:23:45,080 --> 00:23:49,639 Speaker 1: of older clients, which surprised me asking you about bitcoin 426 00:23:50,040 --> 00:23:52,920 Speaker 1: and pot stock. So I'm curious your advice is it's 427 00:23:52,960 --> 00:23:59,560 Speaker 1: six bitcoin stock allocations. But tell us about that, because 428 00:23:59,600 --> 00:24:02,000 Speaker 1: I'm sur prise that this sort of the older generation 429 00:24:02,080 --> 00:24:05,240 Speaker 1: is curious about this, you know, are I think investors 430 00:24:05,240 --> 00:24:08,320 Speaker 1: are very alert to headlines and they're very alert to 431 00:24:08,480 --> 00:24:12,800 Speaker 1: trends in investing. But I think it tells you two things. One, uh, 432 00:24:12,960 --> 00:24:16,040 Speaker 1: clients have a tendency in a low interest rate environment 433 00:24:16,080 --> 00:24:18,720 Speaker 1: to search free yield, and we're that's one of the 434 00:24:18,800 --> 00:24:22,080 Speaker 1: risks we're seeing at the portfolio level that because the 435 00:24:22,160 --> 00:24:24,720 Speaker 1: returns on bonds is so low, it's like, can I 436 00:24:24,760 --> 00:24:28,679 Speaker 1: move into high yield? Can I substitute bonds for utilities 437 00:24:28,760 --> 00:24:31,720 Speaker 1: or other defensive stocks? And so we're very cautious in 438 00:24:31,880 --> 00:24:34,919 Speaker 1: making sure that they understand that bonds server a particular 439 00:24:35,040 --> 00:24:37,520 Speaker 1: place on the other end of the spectrum. There is 440 00:24:37,560 --> 00:24:40,880 Speaker 1: some kind of safety and security when you've seen returns 441 00:24:41,280 --> 00:24:44,720 Speaker 1: like this and you've seen the market be relatively calm 442 00:24:44,760 --> 00:24:47,000 Speaker 1: this year. I mean, we haven't had a correction at 443 00:24:47,040 --> 00:24:50,200 Speaker 1: all this year, which on average, historically speaking, we should 444 00:24:50,240 --> 00:24:54,400 Speaker 1: have at least had one. So clients are frillings exactly. 445 00:24:54,440 --> 00:24:56,760 Speaker 1: They're feeling pretty good about the market. They've had some 446 00:24:56,840 --> 00:24:59,560 Speaker 1: good returns, and so they're saying, Okay, what else is 447 00:24:59,560 --> 00:25:01,400 Speaker 1: out there? Can I pay attention to you? I don't 448 00:25:01,400 --> 00:25:05,320 Speaker 1: have to worry about my portfolio. What is this bitcoin 449 00:25:05,880 --> 00:25:10,959 Speaker 1: I've been thinking about? But for the record or our potstocks? 450 00:25:10,960 --> 00:25:14,160 Speaker 1: Are those my my nephew was telling me about those, 451 00:25:15,119 --> 00:25:19,200 Speaker 1: but we we obviously caution heavily against. If we could 452 00:25:19,200 --> 00:25:22,639 Speaker 1: have a negative allocation to the bitcoin and pot stocks, 453 00:25:22,920 --> 00:25:26,440 Speaker 1: we would probably encourage that. We don't think that they 454 00:25:26,520 --> 00:25:29,720 Speaker 1: have a place in an investment portfolio because they haven't 455 00:25:29,760 --> 00:25:32,800 Speaker 1: been through a market cycle, and that is our criteria 456 00:25:32,840 --> 00:25:36,000 Speaker 1: when we think about long term quality assets. We want 457 00:25:36,040 --> 00:25:38,639 Speaker 1: to see that they've gone through a cycle. Pot stocks 458 00:25:38,720 --> 00:25:41,760 Speaker 1: have not. Before we get to the craziest thing, because 459 00:25:41,920 --> 00:25:44,119 Speaker 1: I'm waiting to hear what miss since he hyped it 460 00:25:44,240 --> 00:25:46,680 Speaker 1: up so much earlier in the show, I'm curious, does 461 00:25:46,680 --> 00:25:49,879 Speaker 1: that make either of you a bit nervous because in 462 00:25:49,960 --> 00:25:51,240 Speaker 1: the run up that we've seen at the end of 463 00:25:51,240 --> 00:25:54,600 Speaker 1: the year, keep hearing there's no euphoria, there's no euphoria. 464 00:25:55,119 --> 00:25:58,240 Speaker 1: People are still very skeptical. People are nervous. That means 465 00:25:58,320 --> 00:26:00,640 Speaker 1: that we can go on for quite a while. But 466 00:26:00,680 --> 00:26:03,960 Speaker 1: if older clients are truly comfortable enough to ask about 467 00:26:04,000 --> 00:26:07,920 Speaker 1: pot stocks and bitcoin, that makes me wonder if that 468 00:26:08,680 --> 00:26:11,840 Speaker 1: rings a bell for either of you. Well, And on 469 00:26:11,880 --> 00:26:15,880 Speaker 1: the one hand, and I'll answer quickly and give Cameron 470 00:26:15,880 --> 00:26:19,160 Speaker 1: a his his swing, But on the one hand, our 471 00:26:19,240 --> 00:26:23,240 Speaker 1: clients portfolios are on the outset intended to go through 472 00:26:23,280 --> 00:26:26,399 Speaker 1: several market cycles. So we are talking about a select 473 00:26:26,400 --> 00:26:30,400 Speaker 1: group of people who have a balanced portfolio and are 474 00:26:30,520 --> 00:26:33,919 Speaker 1: interested in other asset classes, and we have recommendations that 475 00:26:34,000 --> 00:26:37,520 Speaker 1: they can follow up on. Uh. But at the same time, 476 00:26:37,760 --> 00:26:41,280 Speaker 1: the markets have been quite calm, and though we've seen 477 00:26:41,440 --> 00:26:44,440 Speaker 1: stocks hitting new fresh highs over even over the last 478 00:26:44,480 --> 00:26:47,880 Speaker 1: couple of weeks, they've only inched along, right, So we're 479 00:26:47,920 --> 00:26:51,760 Speaker 1: not seeing big movements in the stock market. Yet, you're 480 00:26:51,800 --> 00:26:54,359 Speaker 1: not seeing the kind of euphoria that I saw in 481 00:26:54,400 --> 00:26:57,280 Speaker 1: the housing market at Freddie Mac as a housing economists 482 00:26:57,280 --> 00:26:59,560 Speaker 1: in two thousand five and two thousand eight. This is 483 00:26:59,600 --> 00:27:02,399 Speaker 1: a different market, and so I think that's important to 484 00:27:03,160 --> 00:27:05,879 Speaker 1: articulate to our clients. We're not seeing asset bubbles in 485 00:27:05,920 --> 00:27:10,040 Speaker 1: this market. Yeah, I'm not sure if we should expect 486 00:27:10,080 --> 00:27:12,879 Speaker 1: to see the sort of euphoria that we saw twenty 487 00:27:12,960 --> 00:27:16,399 Speaker 1: years ago, just because of demographics. UM, the people with 488 00:27:16,440 --> 00:27:22,120 Speaker 1: all the money are there, the older generation whom are 489 00:27:22,160 --> 00:27:27,520 Speaker 1: being advised to switch in the bond UM and the UM. 490 00:27:27,560 --> 00:27:32,000 Speaker 1: The younger generation, the millennial UM generation, doesn't have the 491 00:27:32,040 --> 00:27:36,040 Speaker 1: same financial wherewithal that say, the boomers did at the 492 00:27:36,080 --> 00:27:39,040 Speaker 1: same point. In their generational life cycle. And it it 493 00:27:39,480 --> 00:27:42,760 Speaker 1: seems as if the last several years, if you look 494 00:27:42,800 --> 00:27:46,320 Speaker 1: at the the ass allocation of the millennial generation through 495 00:27:46,320 --> 00:27:50,160 Speaker 1: some of the FED data, that they've been pretty risk averse. Um. 496 00:27:50,240 --> 00:27:53,000 Speaker 1: So you could argue that there's perhaps some pent up 497 00:27:53,040 --> 00:27:57,600 Speaker 1: demand for both real and financial assets from from that generation. 498 00:27:57,640 --> 00:27:59,000 Speaker 1: But I guess they would say they need to pay 499 00:27:59,000 --> 00:28:01,480 Speaker 1: off their student loans or have them have them magic 500 00:28:01,600 --> 00:28:05,080 Speaker 1: away before before they can do so. Cameron raises a 501 00:28:05,119 --> 00:28:09,000 Speaker 1: really important point that is actually supported anecdotally by our 502 00:28:09,000 --> 00:28:12,280 Speaker 1: financial advisors at Edward Jones. Younger clients tend to be 503 00:28:12,600 --> 00:28:15,840 Speaker 1: more risk averse than their parents or their grandparents because 504 00:28:15,880 --> 00:28:19,040 Speaker 1: they've seen their parents struggle through a financial crisis, they 505 00:28:19,080 --> 00:28:21,760 Speaker 1: have a lot of student debt, they are faced with 506 00:28:22,040 --> 00:28:24,600 Speaker 1: very high home prices, and so they tend to not 507 00:28:25,000 --> 00:28:28,320 Speaker 1: put on risk risky assets in the same degree as 508 00:28:28,400 --> 00:28:32,119 Speaker 1: other generations. And that's interesting for net wealth and family 509 00:28:32,160 --> 00:28:35,160 Speaker 1: wealth going forward. Right, and it's the time of their 510 00:28:35,200 --> 00:28:39,040 Speaker 1: life when they should be embracing restaurant exactly, Well, sir, 511 00:28:39,200 --> 00:28:41,600 Speaker 1: let's embrace some crazy things. I think it's time. It 512 00:28:41,720 --> 00:28:44,440 Speaker 1: was that a good segue. Great, you always come up 513 00:28:44,480 --> 00:28:50,040 Speaker 1: with wonderful fluid. I'm saving mine for last because it's 514 00:28:50,040 --> 00:28:52,880 Speaker 1: that good. Does that mean I have to go first? Well, 515 00:28:52,960 --> 00:28:54,800 Speaker 1: who wants to go first? Nila? Did they tell us? 516 00:28:54,880 --> 00:28:57,520 Speaker 1: Tell you about our gimmick? Here the craziest thing they did, 517 00:28:57,560 --> 00:28:59,280 Speaker 1: and I'm going to take the fat pitch. I think 518 00:28:59,360 --> 00:29:02,960 Speaker 1: the impete mint vote this week UH is a crazy thing, 519 00:29:03,240 --> 00:29:05,760 Speaker 1: especially if you tie that to a week where we 520 00:29:05,800 --> 00:29:08,840 Speaker 1: saw another record high met so it really shows you 521 00:29:08,920 --> 00:29:13,400 Speaker 1: the disconnect between politics and economic and corporate fundamentals, which 522 00:29:13,480 --> 00:29:17,880 Speaker 1: matter more to investors. It's the fundamentals that matter more. So. 523 00:29:18,080 --> 00:29:20,680 Speaker 1: The punch line to me in this crazy time period 524 00:29:20,680 --> 00:29:23,560 Speaker 1: that we are in politically is don't play politics with 525 00:29:23,600 --> 00:29:27,240 Speaker 1: your portfolio. It is pretty crazy that we can impeach 526 00:29:27,240 --> 00:29:30,000 Speaker 1: your president and and have equity markets closed our record 527 00:29:30,120 --> 00:29:32,840 Speaker 1: UH in the same week. That's not that alright? Well, 528 00:29:32,920 --> 00:29:37,479 Speaker 1: Donnela Cameron, you got any crazy things first? Absolutely? My 529 00:29:37,600 --> 00:29:41,000 Speaker 1: crazy thing is that the repo market was completely well 530 00:29:41,040 --> 00:29:44,160 Speaker 1: behaved this week. If you read some of the research 531 00:29:44,200 --> 00:29:47,840 Speaker 1: floating around the street over the prior couple of weeks, 532 00:29:47,880 --> 00:29:51,920 Speaker 1: sounded like there was short end liquidity armageddon. The world 533 00:29:52,000 --> 00:29:56,080 Speaker 1: was ending on on on route and that the Zoltan 534 00:29:56,240 --> 00:29:58,760 Speaker 1: from Credit Swiss said the FED would have to buy 535 00:29:58,760 --> 00:30:02,600 Speaker 1: coupon securities by the end of the month UH to 536 00:30:02,600 --> 00:30:07,240 Speaker 1: to to tame the dragon of unruly money markets. UH. 537 00:30:07,280 --> 00:30:10,160 Speaker 1: This week was a particularly important week because you had 538 00:30:10,160 --> 00:30:13,960 Speaker 1: the settlement of last week's treasury auctions and UH the 539 00:30:14,000 --> 00:30:17,600 Speaker 1: seventeen is typically the peak for corporate tax payments, where 540 00:30:17,640 --> 00:30:19,680 Speaker 1: they take money out of banks and give them to 541 00:30:19,760 --> 00:30:23,640 Speaker 1: the Treasury. Both of those events passed with nary a 542 00:30:23,640 --> 00:30:27,520 Speaker 1: whiff of any dislocation in the repo market. So that 543 00:30:27,680 --> 00:30:30,760 Speaker 1: was crazy. Also crazy that that research that you brought 544 00:30:30,840 --> 00:30:33,400 Speaker 1: up was also brought up at the press conference with 545 00:30:34,000 --> 00:30:40,200 Speaker 1: the chair Powell, which was pretty interesting moment. Yes, all right, sorry, 546 00:30:40,200 --> 00:30:43,320 Speaker 1: the competition is only getting stronger and stronger. Al Right, 547 00:30:43,440 --> 00:30:46,120 Speaker 1: can you top these two? So this is a story 548 00:30:46,200 --> 00:30:49,520 Speaker 1: that's pretty crazy. It's also a little bit scary. So 549 00:30:49,800 --> 00:30:52,120 Speaker 1: if you still have some shopping to do for the 550 00:30:52,160 --> 00:30:55,840 Speaker 1: holidays and you're buying things on Amazon, maybe pay attention. 551 00:30:55,920 --> 00:30:57,400 Speaker 1: So this was actually a story out of the Wall 552 00:30:57,400 --> 00:31:01,000 Speaker 1: Street Journal and the headline was you might be buying 553 00:31:01,080 --> 00:31:05,600 Speaker 1: trash on Amazon literally, And what they did was a 554 00:31:05,800 --> 00:31:09,520 Speaker 1: team over there had noticed that there were some sellers 555 00:31:09,520 --> 00:31:11,960 Speaker 1: on Amazon created shops, and what they would do is 556 00:31:11,960 --> 00:31:15,800 Speaker 1: they would literally go dumpster diving. Uh. They would find items, 557 00:31:16,000 --> 00:31:19,400 Speaker 1: they would refurnish them, do whatever they may with them, 558 00:31:19,480 --> 00:31:21,520 Speaker 1: and they would sell them on Amazon and they would 559 00:31:21,560 --> 00:31:25,040 Speaker 1: even post videos of them on YouTube. So the reporters 560 00:31:25,080 --> 00:31:26,960 Speaker 1: over there decided that they would try to do the 561 00:31:27,000 --> 00:31:30,480 Speaker 1: same and see how hard it was. Uh. So, really 562 00:31:30,520 --> 00:31:33,520 Speaker 1: quickly reading you one short segment, it said, the journal 563 00:31:33,520 --> 00:31:35,920 Speaker 1: set out to test whether these claims are true. Reporters 564 00:31:35,920 --> 00:31:38,479 Speaker 1: went dumpster diving in several New Jersey towns and are 565 00:31:38,520 --> 00:31:42,400 Speaker 1: treated dozens of discards from the trash, including a stencil set, 566 00:31:42,600 --> 00:31:45,840 Speaker 1: scrap book paper, and a sealed jar of Trader Joe's 567 00:31:45,960 --> 00:31:50,160 Speaker 1: lemon curve. Uh. They set up a star. Yeah, they 568 00:31:50,200 --> 00:31:51,880 Speaker 1: set up a store on Amazon to see if they 569 00:31:51,920 --> 00:31:53,680 Speaker 1: would be able to sell them, and they said it 570 00:31:53,680 --> 00:31:58,200 Speaker 1: turned out to be very easy. Um So, long story short, 571 00:31:58,200 --> 00:32:00,440 Speaker 1: what it comes down to is amaz On and how 572 00:32:00,480 --> 00:32:03,520 Speaker 1: much power they have over their third party sellers to 573 00:32:03,520 --> 00:32:07,800 Speaker 1: control what they're actually selling. But yeah, be careful out there. 574 00:32:07,960 --> 00:32:10,720 Speaker 1: That's pretty good. That's pretty good, especially the New Jersey 575 00:32:10,800 --> 00:32:12,720 Speaker 1: dumpster angle as as a New Jersey and you know 576 00:32:12,800 --> 00:32:14,400 Speaker 1: I'm interested in that. It reminds me of a story. 577 00:32:14,400 --> 00:32:16,400 Speaker 1: I was working out a newspaper in Trent and like 578 00:32:16,480 --> 00:32:19,520 Speaker 1: twenty five years ago, and a big story we had 579 00:32:19,840 --> 00:32:22,880 Speaker 1: was a guy's arm was found in the dumpster and 580 00:32:22,920 --> 00:32:26,680 Speaker 1: it had his name tattooed on. It's Steve and uh 581 00:32:26,760 --> 00:32:29,200 Speaker 1: and so hopefully that does not show upon Amazon anything 582 00:32:29,240 --> 00:32:34,400 Speaker 1: like that. I don't anyway. Now, these were all good, 583 00:32:34,400 --> 00:32:36,000 Speaker 1: by the way, thank you all, but it's time for 584 00:32:36,040 --> 00:32:38,120 Speaker 1: the one. It's time for the winning entry of the 585 00:32:38,160 --> 00:32:41,800 Speaker 1: craziest thing in markets this week. So Neil, this goes 586 00:32:41,840 --> 00:32:46,360 Speaker 1: out to all your older investors interested in bitcoin UM. 587 00:32:47,240 --> 00:32:49,680 Speaker 1: As we all know, these bitcoin exchanges used to get 588 00:32:49,680 --> 00:32:53,040 Speaker 1: hacked all the time, and the solution that people would 589 00:32:53,040 --> 00:32:56,960 Speaker 1: do is literally take the coins offline onto what's known 590 00:32:57,000 --> 00:32:59,360 Speaker 1: as cold storage, would basically be a hard drive that's 591 00:32:59,400 --> 00:33:04,320 Speaker 1: not connected to the internet. So fast forward to last 592 00:33:04,360 --> 00:33:08,200 Speaker 1: year and we have this fellow named Gerald Cotton. He 593 00:33:08,360 --> 00:33:14,840 Speaker 1: started a Canadian crypto exchange called Quadriga UM and apparently 594 00:33:15,200 --> 00:33:18,440 Speaker 1: UM he died. He was traveling in India's only thirty 595 00:33:18,520 --> 00:33:23,280 Speaker 1: years old and he died mysteriously in India of complications. 596 00:33:23,320 --> 00:33:27,120 Speaker 1: What they said from Crohn's disease. The problem is he 597 00:33:27,200 --> 00:33:31,560 Speaker 1: had about roughly two hundred million dollars in bitcoin they 598 00:33:31,560 --> 00:33:34,360 Speaker 1: think was in cold storage. Now, the way cold storage 599 00:33:34,360 --> 00:33:38,000 Speaker 1: works is only one person knows the password, right, So 600 00:33:38,040 --> 00:33:41,160 Speaker 1: this guy had all the clients of this exchange, all 601 00:33:41,200 --> 00:33:44,080 Speaker 1: their money was either on they're not. I don't think 602 00:33:44,080 --> 00:33:46,720 Speaker 1: they're quite true of his on his laptop. He ran 603 00:33:46,760 --> 00:33:50,040 Speaker 1: the whole exchange from his personal laptop, and a lot 604 00:33:50,120 --> 00:33:52,800 Speaker 1: of it, some of it in cold storage. They think, uh, 605 00:33:52,960 --> 00:33:55,880 Speaker 1: some of it like the old South Park, it's gone. 606 00:33:56,160 --> 00:33:59,760 Speaker 1: It's gone. So the guy dies, right, and and you know, 607 00:34:00,560 --> 00:34:03,360 Speaker 1: users of this exchange are out in the neighborhood of 608 00:34:03,400 --> 00:34:07,960 Speaker 1: two hundred million in crypto. Some lawyers get involved and 609 00:34:08,000 --> 00:34:09,799 Speaker 1: they don't beleave this guy really died. They think he 610 00:34:09,880 --> 00:34:12,520 Speaker 1: faked his own death. So they go to the Royal 611 00:34:13,000 --> 00:34:16,719 Speaker 1: Mounted Wait, was it the our CMP, the Royal Canadian 612 00:34:16,840 --> 00:34:19,120 Speaker 1: Mounted Police in the mounts, the Mounties. Yeah, the guys 613 00:34:19,160 --> 00:34:22,880 Speaker 1: with the red coats on horses. That It makes it 614 00:34:22,960 --> 00:34:24,759 Speaker 1: even crazier when you get these guys in bomb think 615 00:34:25,080 --> 00:34:26,879 Speaker 1: and they go to them and they say, we want 616 00:34:26,880 --> 00:34:29,799 Speaker 1: to dig up this guy's grave because we don't think 617 00:34:29,800 --> 00:34:32,800 Speaker 1: he's really buried in it. We think it's a scam. 618 00:34:32,960 --> 00:34:35,200 Speaker 1: He faked his own death and he made off with 619 00:34:35,800 --> 00:34:38,759 Speaker 1: two million in bitcoin. Sarah's jaws like on the floor. 620 00:34:38,800 --> 00:34:41,759 Speaker 1: I really did well. I don't think they've ruled yet, 621 00:34:42,000 --> 00:34:44,920 Speaker 1: uh whether they will exhume the body or not. But 622 00:34:45,080 --> 00:34:50,800 Speaker 1: the there's a rush because of quote unquote decomposition effects. 623 00:34:50,800 --> 00:34:53,440 Speaker 1: They're afraid if they leave him down there long enough, uh, 624 00:34:53,480 --> 00:34:57,720 Speaker 1: they won't be able to identify him or not. So um. Yeah, 625 00:34:57,760 --> 00:35:00,600 Speaker 1: the craziest thing I saw this week. I'm speechless. You win, 626 00:35:03,120 --> 00:35:06,759 Speaker 1: and I really need the follow ups from I want 627 00:35:06,760 --> 00:35:09,400 Speaker 1: to know. I think we should send Mike on assignment. 628 00:35:11,120 --> 00:35:13,880 Speaker 1: And you've added another risk that I will pass along 629 00:35:14,440 --> 00:35:18,960 Speaker 1: in terms of bitcoin to our clients. You can't take 630 00:35:18,960 --> 00:35:20,759 Speaker 1: it with you, where can you? If you're this guy? 631 00:35:20,840 --> 00:35:23,920 Speaker 1: May and shout out to Matt Lavine. That was in 632 00:35:24,000 --> 00:35:28,080 Speaker 1: his excellent daily newsletter money Stuff on Bloomberg that presumably 633 00:35:28,120 --> 00:35:30,080 Speaker 1: everyone in the world already subscribes to. But if not, 634 00:35:30,160 --> 00:35:33,600 Speaker 1: check it up. And that's Neela Richardson. Cameron Christ, thank 635 00:35:33,600 --> 00:35:35,600 Speaker 1: you so much for joining and happy holidays. Thank you, 636 00:35:35,640 --> 00:35:45,400 Speaker 1: happy holidays. It's been a pleasure. Same to you. What 637 00:35:45,600 --> 00:35:48,560 Speaker 1: Goes Up. We'll be back next week. Until then, you 638 00:35:48,600 --> 00:35:51,200 Speaker 1: can find us on the Bloomberg Terminal website and app, 639 00:35:51,560 --> 00:35:54,480 Speaker 1: or wherever you get your podcasts. We'd love it if 640 00:35:54,480 --> 00:35:56,440 Speaker 1: you took the time to rate interview the show on 641 00:35:56,480 --> 00:35:59,840 Speaker 1: Apple Podcasts so more listeners can find us and you 642 00:36:00,000 --> 00:36:02,880 Speaker 1: and find us on Twitter. Follow me at at Sarah 643 00:36:02,880 --> 00:36:06,680 Speaker 1: pont Seck, Mike is at Reaganonymous, our guest Cameron christ 644 00:36:06,800 --> 00:36:10,840 Speaker 1: is at Fifth Rule, and Nila Richardson is at Nila Richardson. 645 00:36:11,200 --> 00:36:15,200 Speaker 1: You can also follow Bloomberg Podcasts at podcasts. What Goes 646 00:36:15,280 --> 00:36:17,880 Speaker 1: Up is produced by Tobrah Foreheads, the head of Bloomberg 647 00:36:17,920 --> 00:36:21,279 Speaker 1: podcast as Francesco Levie. Thanks for listening, See you next time.