1 00:00:01,960 --> 00:00:06,040 Speaker 1: This is Masters in Business with very Rid Holds on 2 00:00:06,200 --> 00:00:11,799 Speaker 1: Bloomberg Radio. This week on the podcast, I have another 3 00:00:11,920 --> 00:00:16,520 Speaker 1: extra special guest. Rich Bernstein is a legend in finance circles. 4 00:00:16,800 --> 00:00:19,840 Speaker 1: He was the chief investment strategist at Merrill Lynch, where 5 00:00:19,880 --> 00:00:22,960 Speaker 1: he worked for more than twenty years. Launched his own 6 00:00:23,040 --> 00:00:26,000 Speaker 1: firm right into the teeth of the collapse in oh nine, 7 00:00:26,360 --> 00:00:28,880 Speaker 1: which turned out to be quite a fortuitous time to 8 00:00:29,080 --> 00:00:33,200 Speaker 1: launch an asset management shop. He is a macro top 9 00:00:33,280 --> 00:00:38,239 Speaker 1: down guy with a strong quantity of background. If you're 10 00:00:38,280 --> 00:00:44,400 Speaker 1: at all interested in thinking about asset allocation top down analysis, 11 00:00:44,840 --> 00:00:47,879 Speaker 1: how to think about the world of investing, not as 12 00:00:47,920 --> 00:00:53,560 Speaker 1: a stock picker, but as a broad macro perspective, none 13 00:00:53,600 --> 00:00:57,560 Speaker 1: better than Rich Bernstein. I found this conversation to be fascinating, 14 00:00:57,640 --> 00:01:01,000 Speaker 1: and I think you will also, with no further ado. 15 00:01:01,480 --> 00:01:06,319 Speaker 1: RBA's Richard Bernstein. Let's start talking a little bit about 16 00:01:06,360 --> 00:01:10,360 Speaker 1: your career. You get a BA in economics from Hamilton's College, 17 00:01:10,360 --> 00:01:14,399 Speaker 1: you get an NBA from NYU, You go to a 18 00:01:14,400 --> 00:01:17,480 Speaker 1: few firms before you end up at Merrill Lynch in 19 00:01:17,600 --> 00:01:20,640 Speaker 1: nineteen eighty eight, not too long after the crash. Correct 20 00:01:20,840 --> 00:01:23,160 Speaker 1: tell us a little bit what mother Merrill was like 21 00:01:23,240 --> 00:01:27,480 Speaker 1: in the late eighties. So Merrill was a fantastic place 22 00:01:27,520 --> 00:01:29,880 Speaker 1: to work. I had, as you pointed out, early in 23 00:01:29,880 --> 00:01:32,319 Speaker 1: my career, I had bounced around a bunch of investment banks, 24 00:01:32,440 --> 00:01:35,600 Speaker 1: and what I learned through time was it was important 25 00:01:35,600 --> 00:01:38,000 Speaker 1: when I interviewed to interview the investment bank as it 26 00:01:38,080 --> 00:01:40,240 Speaker 1: was for them to interview me. Each investment bank had 27 00:01:40,240 --> 00:01:43,000 Speaker 1: a different corporate culture, and it was clear that some 28 00:01:43,040 --> 00:01:45,199 Speaker 1: of them I liked and someone I didn't. And Merrill 29 00:01:45,440 --> 00:01:48,600 Speaker 1: was just a fantastic corporate culture. It was Wall Street. 30 00:01:48,640 --> 00:01:50,160 Speaker 1: So I don't want to make it sound like we 31 00:01:50,160 --> 00:01:52,440 Speaker 1: were all best buddies or anything, but it was a 32 00:01:52,520 --> 00:01:56,800 Speaker 1: very collegial, a very success oriented culture. It was a 33 00:01:56,800 --> 00:01:59,960 Speaker 1: great place to work. So what was your first job? 34 00:02:00,080 --> 00:02:04,880 Speaker 1: That did you start as an analyst? So truth be told, Um, 35 00:02:04,920 --> 00:02:08,160 Speaker 1: I actually lied about my age to get my first job, 36 00:02:08,400 --> 00:02:11,320 Speaker 1: because because back then you could ask people how old 37 00:02:11,400 --> 00:02:13,920 Speaker 1: they were, and I was twenty nine, and I knew 38 00:02:13,919 --> 00:02:15,600 Speaker 1: that if I told people I was twenty nine, they 39 00:02:15,639 --> 00:02:17,760 Speaker 1: would think it was a kid. So I told him 40 00:02:17,760 --> 00:02:19,840 Speaker 1: I was thirty, you know, the twenty nine ninety nine thing. 41 00:02:20,320 --> 00:02:25,400 Speaker 1: So by the time I actually had the op, that's 42 00:02:25,560 --> 00:02:27,600 Speaker 1: very fun. Yeah. And so by the time I got there, 43 00:02:27,639 --> 00:02:30,280 Speaker 1: I was thirty. But to be honest, I mean, what 44 00:02:30,400 --> 00:02:32,800 Speaker 1: is a twenty nine year old. No, but by the 45 00:02:32,840 --> 00:02:35,280 Speaker 1: time you're thirty, you've got it all figured out exactly. 46 00:02:35,320 --> 00:02:38,840 Speaker 1: That's what I figured. So, um, so I was hired 47 00:02:38,880 --> 00:02:44,160 Speaker 1: to be, uh, the quantitative analyst. Um. This was in 48 00:02:44,200 --> 00:02:48,720 Speaker 1: the late eighties. Quantitative analysis was really starting to gain momentum, 49 00:02:49,280 --> 00:02:51,919 Speaker 1: and everybody thought they needed a quant of one form 50 00:02:52,000 --> 00:02:54,519 Speaker 1: or another. And I'm not sure Merril knew what a 51 00:02:54,600 --> 00:02:56,760 Speaker 1: quant did back then, but they knew it was a 52 00:02:57,120 --> 00:02:59,920 Speaker 1: slot that got voted on an institutional investor and they 53 00:03:00,080 --> 00:03:02,720 Speaker 1: wanted an analyst to fill the slot. And I was 54 00:03:02,720 --> 00:03:05,560 Speaker 1: probably the cheapest. And that's how I go empty seats 55 00:03:05,560 --> 00:03:07,240 Speaker 1: at the table, all right, exactly. I don't know if 56 00:03:07,280 --> 00:03:09,680 Speaker 1: we're gonna win, but let's at least get nominated. Exactly. 57 00:03:09,840 --> 00:03:12,800 Speaker 1: So you know, I figured I was there. But what 58 00:03:12,960 --> 00:03:15,840 Speaker 1: was interesting and I think, you know, for anybody who's listening, 59 00:03:15,840 --> 00:03:18,880 Speaker 1: who's who is starting as a young person in this industry, 60 00:03:18,919 --> 00:03:21,400 Speaker 1: I think what I did learn was I took some 61 00:03:21,440 --> 00:03:23,560 Speaker 1: of my experiences from business school in the business school 62 00:03:23,560 --> 00:03:26,919 Speaker 1: case studies and there were a lot of very established 63 00:03:26,919 --> 00:03:29,880 Speaker 1: senior analysts in Merrill, and the question was, how was 64 00:03:29,919 --> 00:03:31,959 Speaker 1: I going to make an impact? Right, Who's going to 65 00:03:32,040 --> 00:03:34,240 Speaker 1: listen to the twenty nine thirty year old guy. When 66 00:03:34,240 --> 00:03:37,200 Speaker 1: you've got guys that are, you know, fifty fifty five 67 00:03:37,320 --> 00:03:39,800 Speaker 1: sixty men and women that are fifty fifty five sixty, 68 00:03:39,840 --> 00:03:42,280 Speaker 1: have multiple cycles, tons of experience, some of the best 69 00:03:42,280 --> 00:03:44,440 Speaker 1: in the industry, why would they listen to me? And 70 00:03:44,520 --> 00:03:46,800 Speaker 1: so I quickly figured out I couldn't do what everybody 71 00:03:46,800 --> 00:03:49,720 Speaker 1: else was doing. I had to find something different, and 72 00:03:49,920 --> 00:03:52,960 Speaker 1: I had to find a niche. And in the eighty 73 00:03:53,000 --> 00:03:56,840 Speaker 1: nine nine recession, value managers did very, very poorly, and 74 00:03:57,000 --> 00:03:59,160 Speaker 1: I just figured if I could help those value managers, 75 00:03:59,200 --> 00:04:01,720 Speaker 1: it would solve a problem and it would create a 76 00:04:01,840 --> 00:04:04,240 Speaker 1: need for my work. And that's how I started. All Right, 77 00:04:04,280 --> 00:04:08,800 Speaker 1: so obvious question, it's nineteen ninety technology is about to explode. 78 00:04:09,520 --> 00:04:12,480 Speaker 1: How do you help a value manager? Short of saying 79 00:04:13,440 --> 00:04:16,040 Speaker 1: go by growth? Yes, Like, what do you do? Yeah? 80 00:04:16,080 --> 00:04:18,800 Speaker 1: So in what we did was we figured out the 81 00:04:18,839 --> 00:04:23,000 Speaker 1: economic rational, the macroeconomic influences about why growth and value 82 00:04:23,000 --> 00:04:25,280 Speaker 1: work at any point in time. And so even if 83 00:04:25,360 --> 00:04:28,480 Speaker 1: value managers weren't going to outperform. They could explain to 84 00:04:28,520 --> 00:04:31,440 Speaker 1: their investors what was going on and why value was 85 00:04:31,480 --> 00:04:33,039 Speaker 1: out of favor, and they could point to our work 86 00:04:33,080 --> 00:04:36,120 Speaker 1: as an independent source, not their own marketing people defending 87 00:04:36,160 --> 00:04:39,240 Speaker 1: their work. And so in the nineties, you know, the 88 00:04:39,240 --> 00:04:41,080 Speaker 1: middle part of the nineties was kind of value orient 89 00:04:41,120 --> 00:04:42,680 Speaker 1: did but you're right Berry, as we got to the 90 00:04:42,760 --> 00:04:45,560 Speaker 1: late part of the nineties, nobody cared about value. That 91 00:04:45,960 --> 00:04:49,720 Speaker 1: whole irrational exuberance era from ninety six, from the speech 92 00:04:49,720 --> 00:04:52,800 Speaker 1: to two thousand that could be the best for you 93 00:04:52,960 --> 00:04:55,719 Speaker 1: run in market history. It was crazy. It was It 94 00:04:55,760 --> 00:04:58,400 Speaker 1: was really crazy. And I think you know, the way 95 00:04:58,440 --> 00:05:02,039 Speaker 1: you can tell whenies are expensive is by the investment 96 00:05:02,040 --> 00:05:05,760 Speaker 1: banking activity, because nobody sells a company when it's cheap. 97 00:05:05,800 --> 00:05:07,400 Speaker 1: Everybody wants to sell a company when they get a 98 00:05:07,400 --> 00:05:11,920 Speaker 1: good valuation. And so the investment banking activity started to explode. 99 00:05:12,040 --> 00:05:15,840 Speaker 1: It was like mushrooming, like crazy um and people couldn't 100 00:05:15,839 --> 00:05:17,480 Speaker 1: get enough. And that was that was a pretty good 101 00:05:17,560 --> 00:05:20,240 Speaker 1: warning signed as to what we were adding for. So 102 00:05:20,320 --> 00:05:24,120 Speaker 1: you start as the head of quant a department of one, 103 00:05:24,680 --> 00:05:28,240 Speaker 1: how do you go from that to chief investment strategist? 104 00:05:28,279 --> 00:05:31,480 Speaker 1: What is that career path like? So it was, it was. 105 00:05:32,080 --> 00:05:35,000 Speaker 1: It wasn't a straight line, I can assure you. Um, 106 00:05:35,000 --> 00:05:37,960 Speaker 1: I went from being the quantitative analyst to being the 107 00:05:38,040 --> 00:05:44,280 Speaker 1: manager of quantitative analysis, to being the quantitative strategists, to 108 00:05:44,480 --> 00:05:48,760 Speaker 1: being the chief US strategist, to being the chief quantitative strategists, 109 00:05:48,800 --> 00:05:52,840 Speaker 1: and and you know, each step along the way, same office, 110 00:05:52,880 --> 00:05:56,120 Speaker 1: same department, like they just changed the business card. Now. No, 111 00:05:56,240 --> 00:05:59,400 Speaker 1: I actually fortunately I got I got more responsibility, bigger staff, 112 00:05:59,440 --> 00:06:03,000 Speaker 1: and eventually a bigger office, yes, and everything that comes 113 00:06:03,000 --> 00:06:05,000 Speaker 1: along with that. But but it took a while. That's 114 00:06:05,000 --> 00:06:08,280 Speaker 1: a twenty year career, right, I mean, And as I said, 115 00:06:08,360 --> 00:06:10,560 Speaker 1: Merril was a good place. If you worked hard and 116 00:06:10,640 --> 00:06:13,880 Speaker 1: you did well, you were definitely rewarded at a place 117 00:06:13,920 --> 00:06:18,120 Speaker 1: like Meryl. So you're there for twenty years, from nineteen 118 00:06:18,120 --> 00:06:20,920 Speaker 1: eighty eight to two thousand and nine, and you say, 119 00:06:21,040 --> 00:06:23,160 Speaker 1: you know, I think now is the time to go 120 00:06:23,240 --> 00:06:27,080 Speaker 1: hang my own shingle. Given this whole financial crisis we've 121 00:06:27,120 --> 00:06:32,200 Speaker 1: just been through. What was that experience like launching a 122 00:06:32,360 --> 00:06:35,520 Speaker 1: firm right into the teeth of that mess. Yeah, so 123 00:06:37,040 --> 00:06:39,200 Speaker 1: you know, two thousand and nine, what had happened was 124 00:06:39,240 --> 00:06:42,160 Speaker 1: I was very burnt out. I mean, being a cell 125 00:06:42,240 --> 00:06:45,320 Speaker 1: side strategist is a very, very difficult job. You're on 126 00:06:45,360 --> 00:06:47,320 Speaker 1: the road a lot. I was on the road forty 127 00:06:47,320 --> 00:06:50,480 Speaker 1: fifty sixty percent at the time, depending on what time 128 00:06:50,480 --> 00:06:52,919 Speaker 1: of year was or something like that, all around the world. 129 00:06:53,440 --> 00:06:56,359 Speaker 1: And you know, I actually remember when this kind of 130 00:06:56,400 --> 00:06:59,279 Speaker 1: hit me. I was in Taiwan for like the you know, 131 00:06:59,520 --> 00:07:03,120 Speaker 1: twentieth time or whatever it was, and a lot of 132 00:07:03,120 --> 00:07:05,000 Speaker 1: my colleagues were going out and they said, do you 133 00:07:05,000 --> 00:07:06,200 Speaker 1: want to come out with those like no, I'm just 134 00:07:06,200 --> 00:07:08,600 Speaker 1: gonna watch TV. And then I'm watching TV and I realized, 135 00:07:08,839 --> 00:07:10,600 Speaker 1: I'm one of the greatest cities of the world. I'm 136 00:07:10,640 --> 00:07:13,240 Speaker 1: in Taipei, and all I want to do is watch TV. 137 00:07:13,280 --> 00:07:15,040 Speaker 1: There's something wrong with my life. And that's when it 138 00:07:15,160 --> 00:07:17,760 Speaker 1: kind of hit that I need to do something else. 139 00:07:18,280 --> 00:07:19,880 Speaker 1: And so the question was what was I going to do? 140 00:07:20,840 --> 00:07:23,800 Speaker 1: And um, I just figured, man, let's see if this 141 00:07:23,840 --> 00:07:25,840 Speaker 1: stuff I've been telling everybody to do for all these years, 142 00:07:25,920 --> 00:07:28,720 Speaker 1: let's see if it actually works. And I figured, let's 143 00:07:28,960 --> 00:07:32,240 Speaker 1: let's start a firm. Now why why? Then? Well, I 144 00:07:32,320 --> 00:07:34,800 Speaker 1: really thought, and I think some of my associates thought 145 00:07:34,880 --> 00:07:37,360 Speaker 1: that two thousand and nine, was was a major market loan. 146 00:07:37,360 --> 00:07:38,800 Speaker 1: We were going to enter one of the biggest bull 147 00:07:38,880 --> 00:07:42,080 Speaker 1: markets of our careers, and we simply thought, if you're 148 00:07:42,080 --> 00:07:45,080 Speaker 1: going to start a firm, now's the time. Now's the times. Absolutely, 149 00:07:45,120 --> 00:07:47,560 Speaker 1: And how often in the US is down fifty six 150 00:07:47,680 --> 00:07:52,800 Speaker 1: percent in equities not a good entry? Even twenty nine, Yeah, 151 00:07:52,920 --> 00:07:55,480 Speaker 1: thirty two kind of you felt the pain, but still 152 00:07:55,800 --> 00:07:58,960 Speaker 1: anytimes was equities a cut in half? Not a bit entry? No, 153 00:07:59,160 --> 00:08:02,840 Speaker 1: And people were were not only figuratively but literally under 154 00:08:02,840 --> 00:08:06,880 Speaker 1: their desk in the fetal position. And when we started 155 00:08:06,920 --> 00:08:08,800 Speaker 1: our firm, what was very interesting and really kind of 156 00:08:08,800 --> 00:08:11,720 Speaker 1: confirmed what we were talking about was that people would 157 00:08:11,720 --> 00:08:15,200 Speaker 1: refuse to invest with us because we were too bullish. Now, 158 00:08:15,360 --> 00:08:20,080 Speaker 1: keep in mind, I know you and David Rosenberg as 159 00:08:20,160 --> 00:08:23,160 Speaker 1: the twin bears of the absolutely Right. Rosie, who's been 160 00:08:23,200 --> 00:08:25,800 Speaker 1: on the show a couple of times and now runs 161 00:08:26,200 --> 00:08:30,960 Speaker 1: Rosenberg Research, was the chief economist, you were the chief strategist, 162 00:08:31,360 --> 00:08:36,439 Speaker 1: and in the mid two thousands, right, arguably a little early, 163 00:08:36,520 --> 00:08:40,160 Speaker 1: but not that early. You guys were like uber bears, 164 00:08:40,480 --> 00:08:43,840 Speaker 1: and you were wrong, wrong, and then wildly right. Ye. 165 00:08:44,360 --> 00:08:47,719 Speaker 1: So um, it's funny to hear someone say that Rich 166 00:08:47,800 --> 00:08:51,840 Speaker 1: Bartensting guy way too bullish. Yeah, it was. It was shocking. 167 00:08:51,880 --> 00:08:54,240 Speaker 1: I mean it was something I didn't expect. But people 168 00:08:54,840 --> 00:08:57,880 Speaker 1: literally would not invest with us because we were too bullish. 169 00:08:57,960 --> 00:09:00,280 Speaker 1: They wanted to hear a Bearer's story post tooth thousand 170 00:09:00,320 --> 00:09:04,600 Speaker 1: and nine. They wanted to be cautious. And our marketing materials. 171 00:09:04,640 --> 00:09:06,040 Speaker 1: If you go back and look at all our marketing 172 00:09:06,040 --> 00:09:09,000 Speaker 1: materials from twenty nine, ten, eleven, twelve, you'll see little 173 00:09:09,000 --> 00:09:11,199 Speaker 1: things about what we call fire extinguishers that we were 174 00:09:11,240 --> 00:09:13,000 Speaker 1: put in the portfolio. Things you could pull off the 175 00:09:13,040 --> 00:09:15,559 Speaker 1: wall in case there was an emergency to put out 176 00:09:15,559 --> 00:09:17,960 Speaker 1: the fire in the portfolio. And that was a that 177 00:09:18,040 --> 00:09:20,319 Speaker 1: was a key part of our marketing back then. So 178 00:09:20,440 --> 00:09:23,679 Speaker 1: were you when you launched the firm? Obviously it was 179 00:09:23,800 --> 00:09:29,400 Speaker 1: macro focused. Also, how quantitative was it in twenty nine 180 00:09:29,440 --> 00:09:32,800 Speaker 1: and ten? You're still bringing the same tools, the same 181 00:09:32,880 --> 00:09:35,319 Speaker 1: philosophy along with correct So what we did the way 182 00:09:35,320 --> 00:09:38,680 Speaker 1: our firm works is that we are very much active managers. 183 00:09:38,679 --> 00:09:40,840 Speaker 1: We don't know anything about coke versus PEPSI. That that 184 00:09:40,840 --> 00:09:42,640 Speaker 1: that's you know, I don't want to lead anybody astray. 185 00:09:42,679 --> 00:09:47,080 Speaker 1: Who's listening your top down macro nut bottom ups completely completely. 186 00:09:47,120 --> 00:09:50,079 Speaker 1: We do no individual stock selection. When we form portfolios 187 00:09:50,120 --> 00:09:53,679 Speaker 1: of individual stocks. We're always forming baskets of stocks. Think 188 00:09:53,720 --> 00:09:55,360 Speaker 1: of it as that we're forming our own ETFs, so 189 00:09:55,400 --> 00:09:58,920 Speaker 1: to speak. That's that's what we're doing. Um And so 190 00:09:58,960 --> 00:10:02,760 Speaker 1: what we do is we combine line a process driven 191 00:10:02,840 --> 00:10:09,240 Speaker 1: macro assessment with quantitative portfolio formation. So we want to 192 00:10:09,240 --> 00:10:10,840 Speaker 1: know what the risk is we're taking. You know, it's 193 00:10:10,840 --> 00:10:12,720 Speaker 1: always good to say like, oh, you should go do 194 00:10:12,760 --> 00:10:15,240 Speaker 1: this from a macro perspective. The question then is can 195 00:10:15,280 --> 00:10:18,679 Speaker 1: you actually do it? And meaning can you express that 196 00:10:19,559 --> 00:10:23,600 Speaker 1: investment thesis in a portfolio in a portfolio without taking 197 00:10:23,679 --> 00:10:26,840 Speaker 1: ridiculous amounts of risk? And so what we do is 198 00:10:26,840 --> 00:10:29,640 Speaker 1: we balance out those macro views with the risk assessment, 199 00:10:29,640 --> 00:10:33,840 Speaker 1: the quantitative assessment to form a realistic portfolio. And how 200 00:10:33,840 --> 00:10:36,520 Speaker 1: has that been working out? Knock on wood, We've been 201 00:10:36,520 --> 00:10:41,320 Speaker 1: doing okay. I think well. Twenty twenty two clearly was 202 00:10:41,559 --> 00:10:45,600 Speaker 1: a macro investors paradise at least if you got it right. 203 00:10:45,880 --> 00:10:48,880 Speaker 1: It's no fun when you're the macro tourist in the 204 00:10:48,920 --> 00:10:55,239 Speaker 1: wrong place, but you're bringing a certain discipline and quantitative analysis. 205 00:10:56,240 --> 00:10:58,640 Speaker 1: Tell us a little bit about and we'll talk in 206 00:10:58,720 --> 00:11:02,080 Speaker 1: depth more about your process. But it's late twenty one, 207 00:11:02,920 --> 00:11:07,400 Speaker 1: SMP up twenty eight percent from the previous low, from 208 00:11:07,400 --> 00:11:10,800 Speaker 1: the COVID low. In twenty twenty, I think the SMP 209 00:11:10,920 --> 00:11:15,280 Speaker 1: gained sixty eight percent to finish the year, So up 210 00:11:15,320 --> 00:11:18,240 Speaker 1: eighteen or nineteen percent for the year. You see those 211 00:11:18,240 --> 00:11:22,240 Speaker 1: spectacular numbers. What does that do to your macro perspective 212 00:11:22,640 --> 00:11:25,920 Speaker 1: heading into twenty twenty oh end? Inflation is ticked up 213 00:11:25,960 --> 00:11:29,240 Speaker 1: through two percent in March and has begun to really 214 00:11:29,280 --> 00:11:32,440 Speaker 1: move higher in twenty one. Right, So what people forget 215 00:11:32,640 --> 00:11:37,640 Speaker 1: is going into the into the pandemic, the US economy 216 00:11:37,679 --> 00:11:40,480 Speaker 1: was actually starting to slow and slow pretty dramatically. Nobody 217 00:11:40,520 --> 00:11:42,760 Speaker 1: remembers that anymore because the pandemic, but that was starting 218 00:11:42,760 --> 00:11:46,000 Speaker 1: to happen, and so we you'l curve inverted. The curve 219 00:11:46,040 --> 00:11:49,600 Speaker 1: inverted was some definite expectations of a recession. Profits were 220 00:11:49,640 --> 00:11:52,920 Speaker 1: profits were slowing very dramatically. Employment growth was negative year 221 00:11:52,960 --> 00:11:54,600 Speaker 1: on year. I mean, there were all these things were 222 00:11:54,600 --> 00:11:56,760 Speaker 1: starting to happen. So we were calming down the risk 223 00:11:56,800 --> 00:12:00,600 Speaker 1: in our portfolios, becoming more and more defensive. Obviously, when 224 00:12:00,600 --> 00:12:03,080 Speaker 1: the pandemic hit, we did very well, not that we 225 00:12:03,080 --> 00:12:05,959 Speaker 1: saw the pandemic coming, but we saw the economy slowing, 226 00:12:06,360 --> 00:12:08,400 Speaker 1: and so we ended up doing very well, a little 227 00:12:08,400 --> 00:12:11,439 Speaker 1: bit of luck, I will readily admit on that one. Um. 228 00:12:11,559 --> 00:12:16,000 Speaker 1: Then coming out of the pandemic, we were very defensively 229 00:12:16,040 --> 00:12:18,040 Speaker 1: positioned and we weren't sure what was going to happen. 230 00:12:18,080 --> 00:12:20,640 Speaker 1: There's no playbook for a pandemic. You can't go back 231 00:12:20,640 --> 00:12:23,000 Speaker 1: and say, like, what, how does the macroeconomy respond after 232 00:12:23,000 --> 00:12:25,719 Speaker 1: a pandemic? There's no cycle. Nineteen eighteen wasn't a big 233 00:12:25,760 --> 00:12:31,440 Speaker 1: hell no, no zero guidance. So so so we we 234 00:12:31,600 --> 00:12:34,280 Speaker 1: just decided as a group, we said, look, if we're 235 00:12:34,320 --> 00:12:37,720 Speaker 1: going to be wrong, what's going to benefit the most 236 00:12:38,120 --> 00:12:40,760 Speaker 1: from that environment. What's one hundred and eighty degrees away 237 00:12:40,800 --> 00:12:43,440 Speaker 1: from where we are positioned right now, Let's own some 238 00:12:43,520 --> 00:12:46,480 Speaker 1: of that in case we're completely wrong. One hundred eighty 239 00:12:46,520 --> 00:12:49,319 Speaker 1: degrees away from what we were owning was energy to 240 00:12:49,480 --> 00:12:53,079 Speaker 1: the right, and which had a fabulous fantast last year. 241 00:12:53,120 --> 00:12:56,240 Speaker 1: I mean it was it was surprising given that oil 242 00:12:56,720 --> 00:13:00,560 Speaker 1: was negative on that year, Yeah, which always shocks people. Yeah, 243 00:13:00,600 --> 00:13:03,560 Speaker 1: it was it was you know, if you think about 244 00:13:03,840 --> 00:13:06,520 Speaker 1: twenty one to twenty two, twenty one, well, at one 245 00:13:06,520 --> 00:13:08,720 Speaker 1: point actually had a negative was priced with a negative 246 00:13:08,760 --> 00:13:10,600 Speaker 1: sign in front of it. I don't understand anything could 247 00:13:10,600 --> 00:13:13,079 Speaker 1: be priced with a negative sign, but sure enough it did. 248 00:13:13,160 --> 00:13:16,360 Speaker 1: And you know, some of the major oil companies had 249 00:13:16,720 --> 00:13:18,960 Speaker 1: you know, eight and ten percent dividend yields and things 250 00:13:19,040 --> 00:13:21,160 Speaker 1: like that. So we just figured, Okay, if we're gonna 251 00:13:21,200 --> 00:13:23,400 Speaker 1: be wrong, let's not take a lot of risks. This 252 00:13:23,440 --> 00:13:26,480 Speaker 1: seems like a good opportunity that's played out very well 253 00:13:26,480 --> 00:13:30,079 Speaker 1: over the last couple of years. But I think, um, 254 00:13:30,520 --> 00:13:33,440 Speaker 1: you know, for us, twenty twenty one in general, was 255 00:13:33,760 --> 00:13:35,640 Speaker 1: towards the end of the year got very hard, right. 256 00:13:35,679 --> 00:13:39,520 Speaker 1: We had a big speculative burst in the marketplace. Um, 257 00:13:39,880 --> 00:13:43,600 Speaker 1: you know, every it was all about tech innovation, disruption, cryptocurrencies. 258 00:13:43,640 --> 00:13:45,880 Speaker 1: It couldn't be sexier, you know, that type of thing. 259 00:13:46,320 --> 00:13:50,040 Speaker 1: And so that's not us. We're not momentum investors at all, 260 00:13:50,160 --> 00:13:53,240 Speaker 1: and so we lagged there. But then twenty twenty two, 261 00:13:53,760 --> 00:13:56,240 Speaker 1: when the momentum faded as the FED was tightening and 262 00:13:56,400 --> 00:13:59,880 Speaker 1: monetary conditions changed and profits began to slow, we did 263 00:14:00,280 --> 00:14:04,319 Speaker 1: very well. So the question I have about that environment, 264 00:14:04,880 --> 00:14:09,439 Speaker 1: you have all these conflicting crosscurrents happening. At the same time, 265 00:14:09,800 --> 00:14:13,480 Speaker 1: employment is strong but rates of going up. Margins are falling, 266 00:14:13,600 --> 00:14:15,560 Speaker 1: but lots of companies seem to be able to pass 267 00:14:15,559 --> 00:14:19,760 Speaker 1: along input costs to their end consumers, and the consumers 268 00:14:19,920 --> 00:14:23,280 Speaker 1: had plenty of stimulus money in their wallets they continue 269 00:14:23,320 --> 00:14:27,600 Speaker 1: to spend. As a macro strategist, how do you look 270 00:14:27,600 --> 00:14:34,360 Speaker 1: at all these seemingly canceling sign waves to get to 271 00:14:33,880 --> 00:14:38,440 Speaker 1: the signal amongst the noise. To paraphrase, absolutely your book. 272 00:14:38,560 --> 00:14:40,160 Speaker 1: So I think I think the first thing that one 273 00:14:40,200 --> 00:14:42,520 Speaker 1: has to do in the current environment is understand that 274 00:14:42,560 --> 00:14:46,360 Speaker 1: the central bankers in the nineteen seventies were not stupid, right. 275 00:14:46,440 --> 00:14:48,880 Speaker 1: They were faced with varying pressures. They were they were 276 00:14:49,000 --> 00:14:51,480 Speaker 1: vased with some of the conflicting data that you you're 277 00:14:51,480 --> 00:14:56,480 Speaker 1: talking about, Barry, and obviously lots of politics involved as well. 278 00:14:56,960 --> 00:14:59,080 Speaker 1: And I think the thing we all have to remember 279 00:14:59,200 --> 00:15:02,280 Speaker 1: is that fighting is not easy. There's this kind of 280 00:15:02,320 --> 00:15:05,240 Speaker 1: notion that, Okay, the FED is raised rates, the worst 281 00:15:05,320 --> 00:15:07,440 Speaker 1: is behind us, it's all over. Well, it'll be fine, 282 00:15:07,480 --> 00:15:10,120 Speaker 1: we can go right back to where we were. History 283 00:15:10,120 --> 00:15:12,880 Speaker 1: says that's not quite the way it works. And so 284 00:15:13,240 --> 00:15:15,360 Speaker 1: I think in the current environment. You have to kind 285 00:15:15,360 --> 00:15:20,120 Speaker 1: of understand that we're reliving the past to some extent, 286 00:15:20,720 --> 00:15:23,600 Speaker 1: and I'm not sure it's an evolution. I'm not sure 287 00:15:23,640 --> 00:15:26,360 Speaker 1: we're any smarter than we were in the seventies that 288 00:15:26,440 --> 00:15:28,840 Speaker 1: the same pressures and the same conflicts and all that 289 00:15:28,920 --> 00:15:32,240 Speaker 1: kind of data are still there. So I think that, 290 00:15:32,440 --> 00:15:35,320 Speaker 1: you know, our story has been that the FED will 291 00:15:35,360 --> 00:15:39,520 Speaker 1: be tighter for longer than people think that it's this 292 00:15:39,760 --> 00:15:41,800 Speaker 1: this tightening cycle is not going to end quickly and 293 00:15:41,920 --> 00:15:44,880 Speaker 1: right now. I think the biggest thorn, which you point out, Berry, 294 00:15:45,080 --> 00:15:48,280 Speaker 1: is the labor market. That is a huge thorn in 295 00:15:48,320 --> 00:15:50,920 Speaker 1: the FED side. You know, I think if we had 296 00:15:50,920 --> 00:15:53,800 Speaker 1: said this to going into this, the Federal Reserve would 297 00:15:53,840 --> 00:15:56,320 Speaker 1: raise interest rates four d seventy five basis points. What 298 00:15:56,360 --> 00:15:58,840 Speaker 1: would happen to the demand for labor? We would all 299 00:15:58,880 --> 00:16:01,440 Speaker 1: say it would fall over. Well, the demand for laborer 300 00:16:01,480 --> 00:16:04,600 Speaker 1: has actually gotten marginally stronger. I mean, it's crazy to 301 00:16:04,680 --> 00:16:06,600 Speaker 1: think that way, but that's kind of what's going on. 302 00:16:06,680 --> 00:16:09,200 Speaker 1: So that is a big thorn in the side of 303 00:16:09,200 --> 00:16:12,440 Speaker 1: the FED. And I think that if you think about 304 00:16:12,480 --> 00:16:15,240 Speaker 1: what it means to weaken the labor market and what 305 00:16:15,280 --> 00:16:17,480 Speaker 1: that means from the political side. You can then start 306 00:16:17,560 --> 00:16:20,200 Speaker 1: understanding the cross currents that are facing the FED right now, 307 00:16:20,680 --> 00:16:24,360 Speaker 1: really interesting, Let's talk a little bit about that model 308 00:16:25,080 --> 00:16:27,320 Speaker 1: kind of similar to what you did at Meryl. Tell 309 00:16:27,400 --> 00:16:29,920 Speaker 1: us about who you work with, who your clients are, right, So, 310 00:16:29,960 --> 00:16:35,480 Speaker 1: our clients are financial advisors and institutions, as you point out, 311 00:16:36,600 --> 00:16:39,760 Speaker 1: and the methodology that we use is very similar to 312 00:16:39,800 --> 00:16:42,680 Speaker 1: what we originally constructed at Meryl. I mean, the original 313 00:16:42,680 --> 00:16:45,840 Speaker 1: research was like the early nineteen nineties. We're now on 314 00:16:46,000 --> 00:16:47,840 Speaker 1: sort of, you know, the fifth or six or seventh 315 00:16:47,920 --> 00:16:51,400 Speaker 1: generation of that original research. But you know, our goal, 316 00:16:51,520 --> 00:16:54,640 Speaker 1: my goal always was as a researcher was to try 317 00:16:54,840 --> 00:16:59,760 Speaker 1: and understand what the macro influences were on the stock market. 318 00:17:00,480 --> 00:17:03,000 Speaker 1: You know, most people try to look at individual stocks 319 00:17:03,000 --> 00:17:05,320 Speaker 1: and they try to figure out why company A is 320 00:17:05,359 --> 00:17:10,120 Speaker 1: outperforming company B, and they forget about the macro influences. 321 00:17:10,200 --> 00:17:12,760 Speaker 1: And so my job has always been to try and 322 00:17:12,760 --> 00:17:16,359 Speaker 1: figure out what in the macro environment is causing things 323 00:17:16,400 --> 00:17:19,840 Speaker 1: to happen. And my attitude has always been if you 324 00:17:19,840 --> 00:17:21,960 Speaker 1: can understand that and you can identify what the macro 325 00:17:22,040 --> 00:17:25,800 Speaker 1: causes are, you can generally take advantage at in the marketplace. 326 00:17:26,119 --> 00:17:32,480 Speaker 1: So you describe your firm's quantitative approach as really having 327 00:17:32,680 --> 00:17:38,640 Speaker 1: three drivers, profits, liquidity, and sentiment. So let's talk about 328 00:17:38,680 --> 00:17:46,119 Speaker 1: all three. Obviously profits very important to company valuation, growth, metrics, growth, 329 00:17:46,160 --> 00:17:48,719 Speaker 1: all those sort of fun things. So I don't know 330 00:17:48,760 --> 00:17:52,040 Speaker 1: how much detail we have to deal into profits. Let's 331 00:17:52,080 --> 00:17:54,639 Speaker 1: talk a little bit about liquidity and sentiment. What do 332 00:17:54,680 --> 00:17:58,080 Speaker 1: you look at when you're looking at liquidity, So liquidity, Barry, 333 00:17:58,119 --> 00:18:01,280 Speaker 1: we look at at liquidity can do in roughly forty 334 00:18:01,320 --> 00:18:03,840 Speaker 1: or forty five different countries around the world. Obviously get 335 00:18:03,880 --> 00:18:06,000 Speaker 1: more detail in the United States than you would in 336 00:18:06,320 --> 00:18:08,240 Speaker 1: an emerging market, but we still look at about forty 337 00:18:08,280 --> 00:18:13,080 Speaker 1: or forty five different countries. Liquidity is really necessary for 338 00:18:13,119 --> 00:18:15,960 Speaker 1: people to take risk. And so what you want you 339 00:18:16,000 --> 00:18:18,200 Speaker 1: want to look at corporate profits because you want fundamentals 340 00:18:18,240 --> 00:18:20,399 Speaker 1: to be improving, of course, but then you want to 341 00:18:20,440 --> 00:18:22,880 Speaker 1: have liquidity so that people can take advantage of that 342 00:18:22,960 --> 00:18:26,280 Speaker 1: of those improving fundamentals. And so what do we look 343 00:18:26,280 --> 00:18:28,800 Speaker 1: at to gauge liquidity? What we look at central bank policies. 344 00:18:28,840 --> 00:18:32,240 Speaker 1: Of course, we look at slopes of yeld curves. We 345 00:18:32,320 --> 00:18:35,879 Speaker 1: look at banks willingness to lend, because you remember central 346 00:18:35,880 --> 00:18:39,840 Speaker 1: banks at least in true capitalist economies, moving not so 347 00:18:39,920 --> 00:18:42,560 Speaker 1: much in a command economy. Even in a true capitalist economy, 348 00:18:42,800 --> 00:18:45,480 Speaker 1: the central bank can only set the table, and they 349 00:18:45,520 --> 00:18:48,639 Speaker 1: can't force banks to lend or stop lending. You know, 350 00:18:48,680 --> 00:18:51,560 Speaker 1: we all hear about the lags of monetary policy. That's 351 00:18:51,600 --> 00:18:53,560 Speaker 1: one of the reasons why there are legs. So the 352 00:18:53,600 --> 00:18:56,600 Speaker 1: FED could lower interest rates, it doesn't guarantee the banks 353 00:18:56,600 --> 00:18:58,240 Speaker 1: are going to be willing to land at the moment 354 00:18:58,280 --> 00:19:00,880 Speaker 1: they lower interest rates, or they can raise interest rates. 355 00:19:00,920 --> 00:19:02,760 Speaker 1: It doesn't mean that banks are going to stop lending 356 00:19:02,960 --> 00:19:05,320 Speaker 1: the second they raise interest rates. So we look at 357 00:19:05,359 --> 00:19:08,800 Speaker 1: how banks erecting and bank the willingness of banks to 358 00:19:08,920 --> 00:19:11,960 Speaker 1: lend as well. So I have a vivid recollection. Back 359 00:19:12,000 --> 00:19:13,960 Speaker 1: in the days when I was on a trading desk, 360 00:19:14,880 --> 00:19:17,159 Speaker 1: M three would come out, money supply would come I 361 00:19:17,160 --> 00:19:18,959 Speaker 1: don't even know if we report M three any it's 362 00:19:19,119 --> 00:19:23,600 Speaker 1: two now, right, So they went to a I think 363 00:19:23,640 --> 00:19:26,040 Speaker 1: it's M one, M two, M three, M three was 364 00:19:26,119 --> 00:19:28,879 Speaker 1: the narrowest, the broadest, the broadest, the broadest, right, I 365 00:19:28,880 --> 00:19:32,919 Speaker 1: didn't remember. But nobody talks about money supply anymore in 366 00:19:32,960 --> 00:19:37,160 Speaker 1: those terms. But that theoretically was liquidity, That would find 367 00:19:37,160 --> 00:19:39,600 Speaker 1: its way into stock markets, do we When you talk 368 00:19:39,600 --> 00:19:43,760 Speaker 1: about liquidity, how do you think about the dollar and 369 00:19:43,880 --> 00:19:47,560 Speaker 1: the availability of sure free capital sure, so you know 370 00:19:47,600 --> 00:19:50,199 Speaker 1: it's it's it's kind of interesting even relative to the 371 00:19:50,240 --> 00:19:52,800 Speaker 1: last cycle where you know, money growth M two growth. 372 00:19:53,000 --> 00:19:55,440 Speaker 1: Getting back to your question, before M two growth got 373 00:19:55,480 --> 00:19:58,520 Speaker 1: up to about twenty seven twenty eight percent, which was 374 00:19:58,560 --> 00:20:01,520 Speaker 1: the highest in his story that we can find. Put 375 00:20:01,560 --> 00:20:03,679 Speaker 1: it put the United States on par with Peru at 376 00:20:03,680 --> 00:20:06,320 Speaker 1: the time, just to put it in proper perspective, and 377 00:20:06,440 --> 00:20:08,600 Speaker 1: given that during the pandemic, not a lot of business 378 00:20:08,640 --> 00:20:11,760 Speaker 1: was going on, so you had tons of liquidity going 379 00:20:11,760 --> 00:20:14,440 Speaker 1: into the economy and really no place for it to go. 380 00:20:15,160 --> 00:20:17,160 Speaker 1: So that means it's going to go to savings. If 381 00:20:17,160 --> 00:20:19,159 Speaker 1: it's going to savings, where's it going to end up. 382 00:20:19,200 --> 00:20:21,679 Speaker 1: It's going to end up in the stock market. And 383 00:20:21,920 --> 00:20:24,320 Speaker 1: I think that was one of the reasons why we 384 00:20:24,400 --> 00:20:27,720 Speaker 1: saw the bull market um developed much more quickly than 385 00:20:27,760 --> 00:20:31,119 Speaker 1: people thoughts through the pandemic. Post pandemic, YEA makes a 386 00:20:31,119 --> 00:20:35,560 Speaker 1: lot of sense. And last is sentiment. So so there's 387 00:20:35,600 --> 00:20:40,520 Speaker 1: always a challenge looking at sentiment because it's so noisy, 388 00:20:41,000 --> 00:20:47,080 Speaker 1: except that extremes. How do you use sentiment in your 389 00:20:47,160 --> 00:20:50,800 Speaker 1: your spot on on that? And we tend to fade 390 00:20:50,960 --> 00:20:54,000 Speaker 1: some of the more accepted sentiment indicators, the kind of 391 00:20:54,040 --> 00:20:56,760 Speaker 1: short term you know, put call ratios, things like that, 392 00:20:57,000 --> 00:20:59,720 Speaker 1: because call odd lots was a big deal years ago. 393 00:21:00,040 --> 00:21:03,119 Speaker 1: I mean all these things, just m three odd lots 394 00:21:03,280 --> 00:21:06,960 Speaker 1: is like a great so. And the reason why is 395 00:21:06,960 --> 00:21:09,640 Speaker 1: because exactly what you point out is that they're so volatile, 396 00:21:09,920 --> 00:21:13,040 Speaker 1: and as an investor is opposed to a short term trader, 397 00:21:13,320 --> 00:21:15,600 Speaker 1: it's questionable as to whether you get a consistent signal, 398 00:21:15,640 --> 00:21:18,399 Speaker 1: so you can actually take an investment position in that. 399 00:21:18,800 --> 00:21:20,640 Speaker 1: So we tend to look at sentiment a little more 400 00:21:21,200 --> 00:21:25,800 Speaker 1: structurally by looking at at various measures that try to 401 00:21:25,800 --> 00:21:29,240 Speaker 1: figure out how people are truly allocating their assets, not 402 00:21:29,359 --> 00:21:32,840 Speaker 1: trading their assets, but literally allocating their assets. The other 403 00:21:32,840 --> 00:21:35,439 Speaker 1: thing we do bury is we group valuation as a 404 00:21:35,480 --> 00:21:38,560 Speaker 1: sentiment indicator. So we do a lot of valuation work. 405 00:21:38,640 --> 00:21:40,920 Speaker 1: And some people say, well, why do you consider a 406 00:21:40,960 --> 00:21:44,520 Speaker 1: sentiment Well, you can't have an overvalued market that people hate, 407 00:21:45,160 --> 00:21:47,320 Speaker 1: and you can't have an undervalued market to people. So 408 00:21:47,480 --> 00:21:52,119 Speaker 1: valuation will reflect sentiment, and so we include valuation in 409 00:21:52,200 --> 00:21:56,680 Speaker 1: our sentiment work. So effectively, if you think about profits, liquidity, sentiment, 410 00:21:56,680 --> 00:22:00,119 Speaker 1: and valuation, what we're looking for places where profitability and 411 00:22:00,160 --> 00:22:03,280 Speaker 1: fundamentals are improving, there's liquidity to take advantage of it, 412 00:22:03,320 --> 00:22:07,200 Speaker 1: and nobody cares, right, that's a pretty good combination. Or 413 00:22:07,320 --> 00:22:10,399 Speaker 1: vice versa. Fundamentals are deteriorating, liquidity is drawing up and 414 00:22:10,400 --> 00:22:12,680 Speaker 1: everybody loves it. That would be a warning sign. Huh, 415 00:22:12,800 --> 00:22:17,480 Speaker 1: that's really that's really intriguing. Which raises the question which 416 00:22:17,600 --> 00:22:21,200 Speaker 1: is the harder environment to stand out from? I don't 417 00:22:21,200 --> 00:22:23,520 Speaker 1: even want to ask which is more challenging, Which is 418 00:22:23,560 --> 00:22:27,520 Speaker 1: it harder to draw a distinction in where rates are low, 419 00:22:27,680 --> 00:22:31,359 Speaker 1: capitalist free in the market is screaming higher, or where 420 00:22:31,560 --> 00:22:35,320 Speaker 1: inflation is up. Rates are going higher and people are 421 00:22:35,359 --> 00:22:39,080 Speaker 1: a little bit of cautious, right, so you know, let's 422 00:22:39,160 --> 00:22:40,800 Speaker 1: let's talk about it from an investment point of view, 423 00:22:40,800 --> 00:22:42,640 Speaker 1: in a marketing point of view for a second. From 424 00:22:42,640 --> 00:22:46,120 Speaker 1: an investment point of view, the extremes are always very intriguing, right, 425 00:22:46,240 --> 00:22:50,640 Speaker 1: And I think our firm is relatively indifferent whether it's 426 00:22:50,840 --> 00:22:53,080 Speaker 1: we should be really bullish or really bearish, but they're 427 00:22:53,080 --> 00:22:55,359 Speaker 1: they're both kind of a very interesting periods From a 428 00:22:55,440 --> 00:22:57,600 Speaker 1: marketing point of view. However, remember you you pointed out 429 00:22:57,640 --> 00:23:01,439 Speaker 1: on the CEO and the CIO right, The EO within 430 00:23:01,560 --> 00:23:05,320 Speaker 1: me doesn't like these extremes because the extremes are when 431 00:23:05,320 --> 00:23:08,600 Speaker 1: a firm like ours looks really stupid and people think 432 00:23:08,680 --> 00:23:11,800 Speaker 1: you know nothing. So it's a very difficult period for 433 00:23:11,880 --> 00:23:19,160 Speaker 1: us to market, for us to have exactly right, and 434 00:23:19,240 --> 00:23:24,000 Speaker 1: so that's when we rely more heavily on our investor 435 00:23:24,000 --> 00:23:27,040 Speaker 1: relations people, on our marketing people all that because it's 436 00:23:27,160 --> 00:23:29,680 Speaker 1: very important to be very transparent as to what you're 437 00:23:29,720 --> 00:23:32,280 Speaker 1: thinking and what you're doing. We don't expect everybody to 438 00:23:32,320 --> 00:23:34,400 Speaker 1: agree with us all the time, but we want them 439 00:23:34,440 --> 00:23:37,000 Speaker 1: to know what our thinking of is so that there's 440 00:23:37,000 --> 00:23:39,080 Speaker 1: not a surprise. There's nothing like you know, they just 441 00:23:39,080 --> 00:23:41,800 Speaker 1: don't know what they're doing. So tell us a little 442 00:23:41,800 --> 00:23:45,040 Speaker 1: bit about the sweetest services our MBA offers. How do 443 00:23:45,080 --> 00:23:49,040 Speaker 1: you work with advisors who say, hey, you know, I 444 00:23:49,160 --> 00:23:51,640 Speaker 1: have good financial planning with my clients, but I don't 445 00:23:51,640 --> 00:23:54,399 Speaker 1: want to run the portfolios. What can rich Bernstein do 446 00:23:54,480 --> 00:23:56,280 Speaker 1: for me exactly? Well, one of the one of the 447 00:23:56,320 --> 00:23:59,000 Speaker 1: greatest things that we can do for financial advisor right 448 00:23:59,000 --> 00:24:01,119 Speaker 1: now is free up their time line. There is an 449 00:24:01,119 --> 00:24:04,639 Speaker 1: immense amount of pressure on financial advisors. Rightly or wrongly, 450 00:24:04,680 --> 00:24:06,480 Speaker 1: I'm not passing judgment, but but there's a lot of 451 00:24:06,480 --> 00:24:09,480 Speaker 1: pressure on financial advisors to grow assets, and so that 452 00:24:09,520 --> 00:24:12,399 Speaker 1: makes it more difficult for them to manage portfolios like 453 00:24:12,440 --> 00:24:14,159 Speaker 1: they used to. You know, it used to be that 454 00:24:14,200 --> 00:24:17,639 Speaker 1: the financial advisor was also a portfolio manager. That's becoming 455 00:24:17,720 --> 00:24:19,679 Speaker 1: very difficult. The role that we play for a lot 456 00:24:19,720 --> 00:24:23,560 Speaker 1: of financial advisors is that kind of portfolio manager, almost 457 00:24:23,560 --> 00:24:25,760 Speaker 1: an outsourced CIO, if you will. I was about to 458 00:24:25,800 --> 00:24:28,560 Speaker 1: say that, yes, and so we can we can play 459 00:24:28,600 --> 00:24:31,080 Speaker 1: that role. Obviously there's going to be all kinds of 460 00:24:31,119 --> 00:24:33,600 Speaker 1: specialists that are going to be in that portfolio as well, 461 00:24:33,880 --> 00:24:35,760 Speaker 1: but we're kind of we played the role very often 462 00:24:35,920 --> 00:24:39,520 Speaker 1: is kind of a core of a basic portfolio. So 463 00:24:39,680 --> 00:24:42,320 Speaker 1: there's a phrase in your literature that kind of cracked 464 00:24:42,320 --> 00:24:46,360 Speaker 1: me up. Pactive management. Yes, what is that? Who came 465 00:24:46,440 --> 00:24:50,359 Speaker 1: up with? It? Is a trademarked What is pactive? To me? 466 00:24:50,440 --> 00:24:53,520 Speaker 1: It's passive active. Yeah, it is trademarked. It is trademarks. 467 00:24:53,560 --> 00:24:58,920 Speaker 1: So don't get any bright ideas dot com to give 468 00:24:59,000 --> 00:25:02,639 Speaker 1: that exactly. But pactive is for the active management of 469 00:25:02,720 --> 00:25:07,840 Speaker 1: passive investments. You know, if you go back to you know, 470 00:25:08,000 --> 00:25:11,840 Speaker 1: Jack Bogel and the whole idea, and I always to 471 00:25:11,880 --> 00:25:14,080 Speaker 1: my career, I had tremendous respect for Jack, both as 472 00:25:14,080 --> 00:25:17,199 Speaker 1: a businessman as an investor. And Jack's whole thing was 473 00:25:17,200 --> 00:25:19,159 Speaker 1: that you want to be a passive investor. Okay, we 474 00:25:19,160 --> 00:25:22,360 Speaker 1: could argue whether that's right or wrong. But what Jack 475 00:25:22,440 --> 00:25:25,960 Speaker 1: would never do, and what no true passive investor does 476 00:25:26,240 --> 00:25:28,640 Speaker 1: is they never tell you what index to buy and when. 477 00:25:29,600 --> 00:25:31,679 Speaker 1: And people can say, well, I should just hold an 478 00:25:31,720 --> 00:25:35,240 Speaker 1: index fund for the long term. Well what's your definition 479 00:25:35,240 --> 00:25:37,240 Speaker 1: of the long term? Because there are times where if 480 00:25:37,280 --> 00:25:39,760 Speaker 1: you make the wrong decision, and if you're in the 481 00:25:39,760 --> 00:25:43,200 Speaker 1: wrong index at the wrong time, it can take you five, ten, 482 00:25:43,400 --> 00:25:46,399 Speaker 1: fifteen in one case that we found seventeen years to 483 00:25:46,440 --> 00:25:50,760 Speaker 1: break even. Is that, you know, isn't that an important decision? 484 00:25:50,880 --> 00:25:54,119 Speaker 1: So pactive investing is all about, yeah, look, maybe you 485 00:25:54,160 --> 00:25:57,080 Speaker 1: want to be passive, but being passive is an active 486 00:25:57,119 --> 00:25:59,600 Speaker 1: decision in and of itself, and that you have to 487 00:25:59,600 --> 00:26:02,800 Speaker 1: decide what index to buy and when we think we're 488 00:26:02,800 --> 00:26:05,480 Speaker 1: pretty good at that at the pactive side of investing. 489 00:26:05,640 --> 00:26:08,359 Speaker 1: And I get the sense that you're an investor, not 490 00:26:08,480 --> 00:26:13,440 Speaker 1: a trader, especially given you your recent research note earlier 491 00:26:13,440 --> 00:26:18,639 Speaker 1: this year. Don't speculate on speculation, tell us, tell us 492 00:26:18,680 --> 00:26:22,399 Speaker 1: what that means. So it's it's really our view right now, Barry, 493 00:26:22,480 --> 00:26:25,840 Speaker 1: that the market is in another speculative phase, that the 494 00:26:25,960 --> 00:26:29,800 Speaker 1: rally so far this year has largely been in the 495 00:26:30,520 --> 00:26:34,480 Speaker 1: speculative stocks of technology and worse the company was the better. Yeah, 496 00:26:34,520 --> 00:26:38,080 Speaker 1: and I think of the Goldman basket of profitless stocks 497 00:26:38,200 --> 00:26:40,359 Speaker 1: exact is one of the market lead right. And now 498 00:26:40,640 --> 00:26:42,680 Speaker 1: you know, somebody could say, well, that's a that's a 499 00:26:43,760 --> 00:26:47,680 Speaker 1: fundamentally based rotation, maybe from value to growth or or 500 00:26:47,760 --> 00:26:51,760 Speaker 1: to more economically sensitive companies. I get that, except for 501 00:26:51,880 --> 00:26:55,679 Speaker 1: one thing. Cryptocurrencies are rough thirty to fifty percent. Yeah, 502 00:26:55,600 --> 00:26:58,840 Speaker 1: where we are like twenty three twenty four on bitcoin, Yeah, 503 00:26:58,840 --> 00:27:01,320 Speaker 1: from sixteen. That's a big move, it is. And now 504 00:27:01,359 --> 00:27:03,600 Speaker 1: I may offend a lot of your listeners, but I 505 00:27:03,640 --> 00:27:08,120 Speaker 1: don't believe there is anything fundamental about cryptocurrencies. So when 506 00:27:08,160 --> 00:27:10,960 Speaker 1: cryptocurrencies erupted so much at the same time that we're 507 00:27:11,000 --> 00:27:14,760 Speaker 1: seeing tech and innovation and disruption and profitless stocks and 508 00:27:14,840 --> 00:27:16,760 Speaker 1: meme stocks and everything go up at the same time, 509 00:27:17,080 --> 00:27:19,399 Speaker 1: that says to me, this is a speculative environment. This 510 00:27:19,520 --> 00:27:22,679 Speaker 1: is not fundamentally driven. And I think what that is 511 00:27:22,680 --> 00:27:26,359 Speaker 1: really relating to as people's hopes that inflation is going 512 00:27:26,440 --> 00:27:29,159 Speaker 1: to subside very quickly, the FED will go back to 513 00:27:29,200 --> 00:27:31,639 Speaker 1: a period of cheap and abundant liquidity, which is a 514 00:27:31,640 --> 00:27:36,040 Speaker 1: cornerstone of speculative investment. Right. Unfortunately, transitory is taking a 515 00:27:36,080 --> 00:27:39,240 Speaker 1: lot longer than expect it correct. Right, So, given that 516 00:27:39,600 --> 00:27:44,960 Speaker 1: since you brought up the FED, how significant is the 517 00:27:45,000 --> 00:27:48,040 Speaker 1: path of rate hikes, how high they go, how long 518 00:27:48,119 --> 00:27:52,720 Speaker 1: they stay that way relative to consensus expectations. Yeah, well, 519 00:27:52,760 --> 00:27:55,080 Speaker 1: you know, I love Barry that everybody has like a 520 00:27:55,200 --> 00:27:57,320 Speaker 1: terminal rate. They know exactly what it's going to be 521 00:27:57,359 --> 00:28:00,320 Speaker 1: and when it's exactly I mean, like, I love the decision. 522 00:28:00,400 --> 00:28:02,400 Speaker 1: I mean I wish I were that smart. I'm really 523 00:28:02,440 --> 00:28:05,400 Speaker 1: not that smart, you know, But I think that what 524 00:28:05,400 --> 00:28:07,800 Speaker 1: we're going to find is that that terminal rate will 525 00:28:07,800 --> 00:28:10,720 Speaker 1: be higher, and it'll be farther around the future than 526 00:28:10,840 --> 00:28:14,720 Speaker 1: people think right now. It's it's just very hard to 527 00:28:14,960 --> 00:28:19,480 Speaker 1: kill inflation in an economy. This is not. This inflation 528 00:28:19,480 --> 00:28:23,000 Speaker 1: in our economy right now is not because of supply 529 00:28:23,080 --> 00:28:25,760 Speaker 1: chain disruptions. That was an early story but that was 530 00:28:25,800 --> 00:28:28,040 Speaker 1: the early story in the seventies too. We just didn't 531 00:28:28,040 --> 00:28:31,240 Speaker 1: call them supply chain disruptions. We called them oil embargoes. 532 00:28:31,640 --> 00:28:34,280 Speaker 1: But they were supply chain disruptions. So let me push 533 00:28:34,320 --> 00:28:36,880 Speaker 1: back on that. Okay, sure we have the oil embargo, 534 00:28:36,960 --> 00:28:41,600 Speaker 1: and oil is the lifeblood of the economy, but dear lord, 535 00:28:41,880 --> 00:28:45,080 Speaker 1: everybody is stuck at home for a year, right, You 536 00:28:45,120 --> 00:28:48,880 Speaker 1: can't get paper towels, forget bleach or you know, lysol 537 00:28:49,000 --> 00:28:53,120 Speaker 1: or anything like that. Semiconductors are shut. There's a shortage 538 00:28:53,120 --> 00:28:57,560 Speaker 1: of homes, there's a shortage of people workers, there's a 539 00:28:57,600 --> 00:29:01,680 Speaker 1: shortage of containers for container ships about even to move goods. 540 00:29:01,840 --> 00:29:04,120 Speaker 1: You know, when everybody stuck at home, we go from 541 00:29:04,120 --> 00:29:07,720 Speaker 1: a service economy to a goods economy, and you can't 542 00:29:07,840 --> 00:29:12,320 Speaker 1: ramp up goods when demand sturges twenty now, so you 543 00:29:12,320 --> 00:29:18,680 Speaker 1: would expect some of this to legitimately be pandemic lockdown related. 544 00:29:18,720 --> 00:29:22,200 Speaker 1: Absolutely the first year. What happens in the second year. 545 00:29:22,320 --> 00:29:24,560 Speaker 1: So what happened in the seventies even was that it 546 00:29:24,640 --> 00:29:28,560 Speaker 1: moved from oil and from the embargoes into the general 547 00:29:28,560 --> 00:29:33,720 Speaker 1: economy and then into wages. So a prominent economist recently 548 00:29:34,160 --> 00:29:36,560 Speaker 1: about a year ago said to me that we don't 549 00:29:36,640 --> 00:29:39,880 Speaker 1: have a wage and price spiral because wages aren't keeping 550 00:29:40,000 --> 00:29:42,520 Speaker 1: up with prices. And my answer was, Okay, we don't 551 00:29:42,520 --> 00:29:44,200 Speaker 1: have a wage and price spurrol. Maybe we have a 552 00:29:44,240 --> 00:29:47,120 Speaker 1: price and wage spiral. I'm not sure which comes first, 553 00:29:47,160 --> 00:29:49,200 Speaker 1: the chicken or the egg, the wager the price, and 554 00:29:49,320 --> 00:29:52,280 Speaker 1: does it make any difference? And so I think that 555 00:29:52,360 --> 00:29:55,320 Speaker 1: now we're in that wage portion where wages are starting 556 00:29:55,320 --> 00:29:57,959 Speaker 1: to catch up. I mean, I'm sure you saw today 557 00:29:58,600 --> 00:30:01,040 Speaker 1: one of the airlines came out with a new agreement 558 00:30:01,080 --> 00:30:03,960 Speaker 1: with their pilots for like seven big increase, seven and 559 00:30:03,960 --> 00:30:06,560 Speaker 1: a half percent increase per year for the next four years. 560 00:30:06,640 --> 00:30:10,520 Speaker 1: But to be fair, they had been cutting, freezing pilot 561 00:30:10,560 --> 00:30:15,840 Speaker 1: wages absolutely. In fact, my big complaint about wages as 562 00:30:15,840 --> 00:30:18,400 Speaker 1: a driver of inflation. Hey, where were you for the 563 00:30:18,440 --> 00:30:22,040 Speaker 1: past thirty years, where at least the bottom half of 564 00:30:22,080 --> 00:30:26,880 Speaker 1: the wage pool was inflation? Absolutely, minimum wage legs everything 565 00:30:26,960 --> 00:30:30,640 Speaker 1: from productivity to corporate profits to c suite to inflation. 566 00:30:30,760 --> 00:30:33,440 Speaker 1: The minimum wage, if it kept up with anything, would 567 00:30:33,440 --> 00:30:37,400 Speaker 1: be fourteen sixteen box something like that. Yeah, So so 568 00:30:37,520 --> 00:30:41,240 Speaker 1: suddenly wages finally start to catch up. Oh my goodness, 569 00:30:41,240 --> 00:30:42,800 Speaker 1: this is the end of the world, says the FED. 570 00:30:43,120 --> 00:30:45,720 Speaker 1: We have to stop this. Yeah right. So so, first 571 00:30:45,720 --> 00:30:47,200 Speaker 1: of all, let me you know a little known fact 572 00:30:47,200 --> 00:30:49,880 Speaker 1: about Rich Bernstein. I'm a two time union member. Not 573 00:30:49,880 --> 00:30:52,120 Speaker 1: only have I had my entire career on Wall Street, 574 00:30:52,320 --> 00:30:54,120 Speaker 1: but I'm a two time union member. Once worked for 575 00:30:54,120 --> 00:30:58,840 Speaker 1: the International Chemical Workers Union and suing one I was. 576 00:30:59,000 --> 00:31:03,200 Speaker 1: I was a maintenance in a pharmaceutical plant, right and 577 00:31:03,200 --> 00:31:06,040 Speaker 1: and I also worked for the United Auto Workers. When 578 00:31:06,080 --> 00:31:08,920 Speaker 1: I was on the adjunct faculty at NYU, we were 579 00:31:08,960 --> 00:31:11,440 Speaker 1: represented by, of all things, the United Auto Workers. Of 580 00:31:11,520 --> 00:31:14,440 Speaker 1: a two time union member, I believe me. I'm not 581 00:31:14,520 --> 00:31:17,760 Speaker 1: anti union. I'm not anything like that, I understand. I've 582 00:31:17,760 --> 00:31:21,600 Speaker 1: always thought that unions were the comparable to like CEOs 583 00:31:21,600 --> 00:31:24,280 Speaker 1: have lawyers and agents, and whose sports people have agents. 584 00:31:24,760 --> 00:31:27,479 Speaker 1: For everyday folks, it is called the union, right, well, 585 00:31:27,520 --> 00:31:30,440 Speaker 1: at least they used to. Unions are still. Even though 586 00:31:30,440 --> 00:31:34,320 Speaker 1: people talk about the rise of Amazon this and yeah, 587 00:31:34,560 --> 00:31:37,760 Speaker 1: union membership is a fraction of what year it's very 588 00:31:37,800 --> 00:31:40,040 Speaker 1: love ye, it's very long. Now it is creeping up 589 00:31:40,520 --> 00:31:43,479 Speaker 1: because as we have a very tight labor market, power 590 00:31:43,560 --> 00:31:47,040 Speaker 1: is starting to revert back to the workers in some respect. 591 00:31:47,040 --> 00:31:48,959 Speaker 1: And I'm not. I'm not Carl Marks don almost understand 592 00:31:49,000 --> 00:31:51,440 Speaker 1: the point here. I sent my entire career on Wall Street. 593 00:31:51,440 --> 00:31:53,040 Speaker 1: But these are just some of the realities that are 594 00:31:53,040 --> 00:31:55,960 Speaker 1: going on now in a tight labor market. Analysts of 595 00:31:56,000 --> 00:32:00,960 Speaker 1: the world unite Street. I love that. But so let's 596 00:32:01,040 --> 00:32:02,920 Speaker 1: let's stick with labor a little bit because it's kind 597 00:32:02,920 --> 00:32:06,480 Speaker 1: of interesting. Was having this conversation with David Kotok of 598 00:32:06,560 --> 00:32:10,640 Speaker 1: Cumberland and he points out, you have the highest level 599 00:32:10,760 --> 00:32:15,920 Speaker 1: of disability people leaving the workforcesibility over the past twenty years. 600 00:32:16,400 --> 00:32:18,600 Speaker 1: Then you have all these people, you know, a million 601 00:32:18,640 --> 00:32:22,080 Speaker 1: plus dying of COVID and another depending on which study 602 00:32:22,080 --> 00:32:27,280 Speaker 1: you believe, ten fifteen twenty million people with long COVID immigration. 603 00:32:27,360 --> 00:32:30,360 Speaker 1: And as much as people blame Trump, it started before 604 00:32:30,440 --> 00:32:36,480 Speaker 1: him and continued after legal immigration has continues to trend downwards. 605 00:32:37,320 --> 00:32:40,239 Speaker 1: If we want there too, if we want to get um, 606 00:32:41,040 --> 00:32:44,000 Speaker 1: if we want to get wages sort of under control 607 00:32:44,200 --> 00:32:46,640 Speaker 1: in a way that works out, don't we need to 608 00:32:46,640 --> 00:32:50,040 Speaker 1: bring a whole bunch more workers and absolute labor force. Absolutely? 609 00:32:50,120 --> 00:32:52,600 Speaker 1: Why haven't. Now I'm going to ask you a policy 610 00:32:52,640 --> 00:32:55,320 Speaker 1: question which is outside of your expertise. No, no, but 611 00:32:55,960 --> 00:32:59,440 Speaker 1: why aren't we bringing in more skilled labor from outside 612 00:32:59,440 --> 00:33:01,480 Speaker 1: of the country. I think we actually have to. I 613 00:33:01,480 --> 00:33:02,960 Speaker 1: think there's been part of the story of the US 614 00:33:03,000 --> 00:33:06,560 Speaker 1: economy for decades and decades and decades, and I think 615 00:33:06,560 --> 00:33:08,560 Speaker 1: we have to. But Barry, you bring up a very 616 00:33:08,560 --> 00:33:12,040 Speaker 1: important point. When I talk about about the labor markets 617 00:33:12,040 --> 00:33:14,520 Speaker 1: and the tightness of labor markets, people always want like 618 00:33:14,640 --> 00:33:17,520 Speaker 1: one reason why it has happened. It's really a perfect 619 00:33:17,520 --> 00:33:20,360 Speaker 1: storm of about four or five or six different things 620 00:33:20,400 --> 00:33:23,480 Speaker 1: all coming together at the same time, and there's no 621 00:33:23,560 --> 00:33:26,000 Speaker 1: one reason. But the end result is that we do him. 622 00:33:26,360 --> 00:33:29,200 Speaker 1: I would argue, the tightest labor market in our lifetimes. 623 00:33:29,760 --> 00:33:33,440 Speaker 1: Isn't that always the case? Though people want Jacques one 624 00:33:33,680 --> 00:33:38,400 Speaker 1: simple here's why everything is terrible. It's always so much 625 00:33:38,440 --> 00:33:41,720 Speaker 1: more complicated, it's so much more nuanced, and that makes 626 00:33:41,720 --> 00:33:45,160 Speaker 1: people unhappy when the answer to what appears to be 627 00:33:45,160 --> 00:33:48,120 Speaker 1: a simple question is well, it's really complicated and here 628 00:33:48,120 --> 00:33:51,520 Speaker 1: are the forty seven factors that but that's just reality. 629 00:33:51,560 --> 00:33:53,720 Speaker 1: That is that is reality. But I think that makes 630 00:33:53,720 --> 00:33:56,760 Speaker 1: the fed's job very very difficult right now, because, as 631 00:33:56,760 --> 00:33:58,720 Speaker 1: I said before, if you think about that, the FED 632 00:33:58,840 --> 00:34:01,880 Speaker 1: is trying to curtail demand for labor. If they're trying 633 00:34:01,920 --> 00:34:05,400 Speaker 1: to ease up the labor market. Politically, that's not very palatable. 634 00:34:05,600 --> 00:34:07,840 Speaker 1: So let's talk a little bit about the challenges of 635 00:34:07,920 --> 00:34:14,920 Speaker 1: being a top down macro investor in a very conflicted environment. 636 00:34:15,120 --> 00:34:19,560 Speaker 1: How dependent are you on what the FED says? What 637 00:34:19,719 --> 00:34:23,480 Speaker 1: Jerome Powell questions get asked him at a conference, the 638 00:34:23,719 --> 00:34:26,640 Speaker 1: random ways people seem to misinterpret it in the morning 639 00:34:26,680 --> 00:34:29,560 Speaker 1: and then reverse it in the afternoon. How crazy is 640 00:34:29,560 --> 00:34:33,600 Speaker 1: it operating like this? So, Barry, being a macro investor, 641 00:34:33,640 --> 00:34:36,160 Speaker 1: one of the things that's important for us is that 642 00:34:36,239 --> 00:34:40,080 Speaker 1: we are not event driven. We are certainly a macro firm. 643 00:34:40,120 --> 00:34:41,719 Speaker 1: But as you point out, everybody wants to know, like 644 00:34:41,760 --> 00:34:45,080 Speaker 1: what's the FED doing, what's happening today? That's not us, 645 00:34:45,160 --> 00:34:49,160 Speaker 1: And we are very very process driven. So very often 646 00:34:49,200 --> 00:34:51,000 Speaker 1: I get calls from people that say, like, you know, 647 00:34:51,000 --> 00:34:52,520 Speaker 1: what do you think of the FED? And my answer 648 00:34:52,600 --> 00:34:54,880 Speaker 1: is I don't know, you know, And that's not satisfying 649 00:34:54,880 --> 00:34:57,640 Speaker 1: yourself in DC right, right, you're supposed to have like 650 00:34:57,800 --> 00:35:02,480 Speaker 1: a very sophisticated answer. And but for us, the problem is, 651 00:35:02,520 --> 00:35:04,640 Speaker 1: and I think if you look at macro hedge funds 652 00:35:04,719 --> 00:35:07,440 Speaker 1: and the lack of success of macro hedge funds. The 653 00:35:07,520 --> 00:35:11,040 Speaker 1: reason why is because everything has become an event. Everything 654 00:35:11,120 --> 00:35:13,480 Speaker 1: is a hair on fire event these days, and it's 655 00:35:13,520 --> 00:35:16,759 Speaker 1: hard to figure out what is true investment information and 656 00:35:16,840 --> 00:35:20,760 Speaker 1: what is pure noise. And so what we've been arguing 657 00:35:20,760 --> 00:35:22,759 Speaker 1: and what I argued through my entire career has been 658 00:35:23,040 --> 00:35:26,480 Speaker 1: the way to sift out the true investment information is 659 00:35:26,520 --> 00:35:30,000 Speaker 1: to stick to a hardcore process. No matter what happens, 660 00:35:30,080 --> 00:35:33,160 Speaker 1: come hell or high water, do not deviate from that process. 661 00:35:33,360 --> 00:35:36,000 Speaker 1: And as we were talking about before, for us, it's profits, liquidity, 662 00:35:36,000 --> 00:35:40,120 Speaker 1: sentiment evaluation. We never deviate from that. So, yes, we 663 00:35:40,200 --> 00:35:42,000 Speaker 1: know what's going on, we know what the Fed's doing, 664 00:35:42,040 --> 00:35:44,239 Speaker 1: we know what everything, and we're aware of that. But 665 00:35:44,360 --> 00:35:46,440 Speaker 1: we stick to our process and we stick to our 666 00:35:46,480 --> 00:35:49,880 Speaker 1: models and to our indicators to keep the hardcore process 667 00:35:49,920 --> 00:35:54,600 Speaker 1: and not just flail around every five seconds. So, since 668 00:35:54,600 --> 00:35:58,280 Speaker 1: we're talking about the FED and not giving a hot take, 669 00:35:59,080 --> 00:36:03,279 Speaker 1: let's take a longer term look at inflation. Where are 670 00:36:03,320 --> 00:36:06,520 Speaker 1: we in the inflation cycle? Is it safe to say 671 00:36:06,960 --> 00:36:11,239 Speaker 1: inflation peaked six or eight months ago already? Well, the 672 00:36:11,360 --> 00:36:13,880 Speaker 1: answer I'm going to give you kind of the economist answer, 673 00:36:13,880 --> 00:36:16,520 Speaker 1: On the one hand, yes, we have probably peaked in 674 00:36:16,640 --> 00:36:19,000 Speaker 1: terms of the near term inflation. But on the other hand, 675 00:36:19,000 --> 00:36:21,839 Speaker 1: and I think what's much more important for investors. I 676 00:36:21,880 --> 00:36:26,200 Speaker 1: think secular inflation has changed. I don't think we are 677 00:36:26,239 --> 00:36:29,920 Speaker 1: going back to the period that we saw for the past, 678 00:36:29,960 --> 00:36:33,040 Speaker 1: you know, thirty years or so, where we could always 679 00:36:33,080 --> 00:36:36,640 Speaker 1: count on secular disinflation. I think that now the story 680 00:36:36,800 --> 00:36:39,719 Speaker 1: is secular inflation. Now what does that mean right all 681 00:36:39,719 --> 00:36:41,319 Speaker 1: of a sudden, you know, does that mean at six 682 00:36:41,440 --> 00:36:44,239 Speaker 1: eight percent? What does that mean? Well, most forecasts of 683 00:36:44,280 --> 00:36:47,200 Speaker 1: secular inflation right now range between two and three percent, 684 00:36:47,640 --> 00:36:49,840 Speaker 1: which makes a lot of sense because long term inflation 685 00:36:49,840 --> 00:36:51,440 Speaker 1: in the United States is roughly two and a half. 686 00:36:51,760 --> 00:36:53,799 Speaker 1: So you can see how the forecaster are there. So 687 00:36:53,840 --> 00:36:56,080 Speaker 1: that means as an investor, you have to kind of 688 00:36:56,080 --> 00:36:57,960 Speaker 1: take an over UNDERBD. Is it going to be less 689 00:36:57,960 --> 00:37:00,680 Speaker 1: than two The lower end of that range were higher 690 00:37:00,719 --> 00:37:03,600 Speaker 1: than three. Above the higher end of the range. Right 691 00:37:03,640 --> 00:37:06,880 Speaker 1: now the markets are making a huge bit. It's going 692 00:37:06,880 --> 00:37:09,600 Speaker 1: to be sub two. In other words, going back to 693 00:37:09,640 --> 00:37:13,000 Speaker 1: the period of cheap and abundant liquidity. Our story is 694 00:37:13,320 --> 00:37:16,440 Speaker 1: three percent or more. That's it. We think that meaningfully 695 00:37:16,520 --> 00:37:19,120 Speaker 1: changes the way people have to manage. So let's let's 696 00:37:19,160 --> 00:37:22,359 Speaker 1: stay with that because that's so interesting. So, the key 697 00:37:22,440 --> 00:37:26,800 Speaker 1: forces that were drivers of deflation in the eighties, nineties, 698 00:37:26,840 --> 00:37:32,560 Speaker 1: two thousand, in the post Vulcar era was we had globalization, 699 00:37:32,840 --> 00:37:37,839 Speaker 1: so manufacturing went to wherever it was cheapest. We had 700 00:37:38,080 --> 00:37:43,440 Speaker 1: software and automation and technology that made everything more productive. 701 00:37:44,040 --> 00:37:49,680 Speaker 1: And then and then lastly, productivity across the board finally 702 00:37:49,760 --> 00:37:53,360 Speaker 1: started showing up in the statistics after it famously was 703 00:37:53,440 --> 00:37:57,080 Speaker 1: everywhere except in the data. Um, have any of those 704 00:37:57,120 --> 00:38:00,759 Speaker 1: things really changed materially or have we just wrung out 705 00:38:00,840 --> 00:38:05,399 Speaker 1: all of the deflationary forces from globalization, automation and productivity 706 00:38:05,640 --> 00:38:07,840 Speaker 1: that we can see in our lifetimes. So so Barry, 707 00:38:07,880 --> 00:38:10,359 Speaker 1: I would argue that the number one factor that caused 708 00:38:10,400 --> 00:38:15,080 Speaker 1: secular disinflation was globalization. That I would I would suggest 709 00:38:15,120 --> 00:38:18,719 Speaker 1: it started with NAFTA in the early nineties. And what 710 00:38:19,239 --> 00:38:22,880 Speaker 1: it did was it it consistently opened markets around the world, 711 00:38:23,160 --> 00:38:26,080 Speaker 1: and what that meant was that we were consistently increasing 712 00:38:26,320 --> 00:38:30,240 Speaker 1: competition around the world. Right, Inflation, for all the fancy 713 00:38:30,280 --> 00:38:31,799 Speaker 1: ways people think about it, I think it's very easy 714 00:38:31,840 --> 00:38:34,800 Speaker 1: to think of inflation as when demands greater than supply. 715 00:38:34,920 --> 00:38:37,280 Speaker 1: We know, prices go up when demands greater than supply 716 00:38:37,320 --> 00:38:39,840 Speaker 1: for an extended period of time, we call that inflation. 717 00:38:40,280 --> 00:38:43,360 Speaker 1: And what globalization did was it it increased the supply 718 00:38:43,760 --> 00:38:46,880 Speaker 1: of suppliers. In other words, it increased competition. So the 719 00:38:47,040 --> 00:38:49,960 Speaker 1: that's the old commodity trader joke. The cure for high 720 00:38:50,000 --> 00:38:54,520 Speaker 1: prices is high prices exactly. And so what happened was 721 00:38:54,560 --> 00:38:57,120 Speaker 1: as you had more and more and more suppliers, greater 722 00:38:57,160 --> 00:39:01,480 Speaker 1: and greater and greater competition, you had downward pressure m prices. Well, 723 00:39:01,560 --> 00:39:04,320 Speaker 1: it looks like globalizations now starting to contract. This is 724 00:39:04,360 --> 00:39:06,200 Speaker 1: not going to happen in five minutes or five months. 725 00:39:06,200 --> 00:39:10,000 Speaker 1: It's five, ten, fifteen, twenty years. As was NAFTA a 726 00:39:10,120 --> 00:39:13,239 Speaker 1: thirty year story or globalization a thirty year story, we're 727 00:39:13,280 --> 00:39:15,200 Speaker 1: now going back in the other way. Now, Look, it 728 00:39:15,239 --> 00:39:18,120 Speaker 1: could be that we're all going to sit around a 729 00:39:18,160 --> 00:39:20,880 Speaker 1: campfire and sing Kumbaya around the world, or like the 730 00:39:20,880 --> 00:39:23,239 Speaker 1: old coke commercial where we're on a hill, you know, 731 00:39:23,280 --> 00:39:26,320 Speaker 1: holding hands and teaching the world to sin. Exactly that 732 00:39:26,480 --> 00:39:29,000 Speaker 1: that could happen. I'm skeptical that that's really going to say. 733 00:39:29,200 --> 00:39:31,960 Speaker 1: So I'm glad you brought that up because I've heard 734 00:39:32,040 --> 00:39:35,920 Speaker 1: this the end of globalization story, and it smells like 735 00:39:37,040 --> 00:39:39,920 Speaker 1: a lot of a lot of political noise. All right, 736 00:39:39,960 --> 00:39:44,080 Speaker 1: we'll build a semiconductor plant in Arizona asutely. But the 737 00:39:44,360 --> 00:39:49,640 Speaker 1: massive shift in global economy where manufacturing is done here 738 00:39:49,760 --> 00:39:53,200 Speaker 1: and all these other countries are coming online, whether it 739 00:39:53,320 --> 00:39:55,880 Speaker 1: was first was Japan, and was South Korea, now it's 740 00:39:55,960 --> 00:39:59,560 Speaker 1: Vietnam and Turkey and Mexico and go around the world. 741 00:40:00,440 --> 00:40:04,439 Speaker 1: Are we really going to meaningfully reverse that? Is globalization 742 00:40:04,560 --> 00:40:09,200 Speaker 1: gonna shrink beyond low single digits? I don't think right 743 00:40:09,239 --> 00:40:12,000 Speaker 1: now we can see how that could happen. But again, 744 00:40:12,000 --> 00:40:14,759 Speaker 1: I'm talking about, you know, a ten twenty thirty year 745 00:40:14,760 --> 00:40:18,040 Speaker 1: phenomenon here. I think if we had said thirty years 746 00:40:18,080 --> 00:40:21,000 Speaker 1: ago that globalization was going to cause the environment that 747 00:40:21,040 --> 00:40:23,040 Speaker 1: we ended up with, people would have said you were nuts. 748 00:40:23,080 --> 00:40:25,319 Speaker 1: Right in the in the early nineteen nineties, you know, 749 00:40:25,440 --> 00:40:28,560 Speaker 1: Ross Perot was the one who was anti the great 750 00:40:29,719 --> 00:40:32,080 Speaker 1: sucking sound, which which which turned out to be to 751 00:40:32,120 --> 00:40:35,080 Speaker 1: some extent correct. But what he didn't allow for were 752 00:40:35,080 --> 00:40:37,640 Speaker 1: the benefits of the society, what globalization might do. Well, 753 00:40:37,680 --> 00:40:43,839 Speaker 1: you you lost the you know, hosiery and furniture manufacturing 754 00:40:44,200 --> 00:40:48,240 Speaker 1: and replaced it with software and quantitative an out correct 755 00:40:48,400 --> 00:40:51,640 Speaker 1: exactly right. And and so our argument at our firm 756 00:40:52,000 --> 00:40:54,800 Speaker 1: is that we're going to see a slow progression back 757 00:40:54,880 --> 00:40:58,400 Speaker 1: in the other direction, what we keep calling a shift 758 00:40:58,440 --> 00:41:02,400 Speaker 1: from cute wiener dogs in the metal to real productive assets. 759 00:41:02,960 --> 00:41:04,759 Speaker 1: That's not going to happen in two weeks, but we 760 00:41:04,800 --> 00:41:06,799 Speaker 1: think that's going to happen over three years, five years, 761 00:41:06,840 --> 00:41:10,200 Speaker 1: ten years, fifteen years. So so given where we are 762 00:41:10,239 --> 00:41:14,000 Speaker 1: in the in the broad world, it seems like the 763 00:41:14,080 --> 00:41:17,760 Speaker 1: stock market in twenty twenty three is hanging on every 764 00:41:17,840 --> 00:41:22,960 Speaker 1: economic report, every CPI release, every non farm payrolls, every 765 00:41:23,000 --> 00:41:27,280 Speaker 1: FOMC meaning like even when we get the FOMC notes, 766 00:41:27,640 --> 00:41:30,879 Speaker 1: they're they're always a month old, and yet people wait 767 00:41:30,920 --> 00:41:33,920 Speaker 1: with bated breath. Yes, tell us what they were thinking 768 00:41:33,960 --> 00:41:36,440 Speaker 1: a month ago, like like that really is going to 769 00:41:36,520 --> 00:41:41,440 Speaker 1: move markets, but it certainly causes some volatility. Is there 770 00:41:41,480 --> 00:41:44,600 Speaker 1: too much focus on these big macro events today? I'm 771 00:41:44,640 --> 00:41:46,600 Speaker 1: not sure there's too much focus, but I think the 772 00:41:46,640 --> 00:41:49,960 Speaker 1: minutia and the decimal point focus is not very healthy. 773 00:41:50,440 --> 00:41:51,960 Speaker 1: You know, I think if you if you think about 774 00:41:52,000 --> 00:41:55,760 Speaker 1: the the CPI report, that's you know the February CPI 775 00:41:55,840 --> 00:41:59,080 Speaker 1: report that comes out in March. I think the consensus 776 00:41:59,120 --> 00:42:02,279 Speaker 1: is for something like point four for March. If you 777 00:42:02,280 --> 00:42:04,799 Speaker 1: look at Bloomberg, I think that's the that's the consensus. 778 00:42:05,239 --> 00:42:07,720 Speaker 1: And you know, which would be under a five handle 779 00:42:07,920 --> 00:42:09,880 Speaker 1: annualized it which is not bad? Which is not it. 780 00:42:10,120 --> 00:42:13,600 Speaker 1: But if it comes in at point five instead of 781 00:42:13,640 --> 00:42:16,000 Speaker 1: point four, we know the markets are going down. If 782 00:42:16,000 --> 00:42:18,160 Speaker 1: it comes into point three instead of point four, we 783 00:42:18,160 --> 00:42:20,880 Speaker 1: know the markets are going up. Now, well, we in 784 00:42:20,880 --> 00:42:23,560 Speaker 1: this phase where bad news is good news, because does 785 00:42:23,600 --> 00:42:26,120 Speaker 1: point three mean that the FED is done? And if 786 00:42:26,120 --> 00:42:29,160 Speaker 1: the market rallies, hey hey, not so fast. It seems 787 00:42:29,160 --> 00:42:31,759 Speaker 1: like every time the market rallies in anticipation of the 788 00:42:31,800 --> 00:42:37,000 Speaker 1: FED ending their tightening regime, the FED says, slow your roll. Yeah, 789 00:42:37,040 --> 00:42:39,120 Speaker 1: I think that's I think we're definitely in that kind 790 00:42:39,160 --> 00:42:41,520 Speaker 1: of an environment. But the point that I was just 791 00:42:41,560 --> 00:42:45,080 Speaker 1: trying to make was the descal point precision, which is 792 00:42:45,120 --> 00:42:48,000 Speaker 1: so spurious if you think about it. The point three 793 00:42:48,040 --> 00:42:50,200 Speaker 1: means everything's okay, and point five means it's the end 794 00:42:50,239 --> 00:42:52,640 Speaker 1: of the free world as we know it. That's very silly. 795 00:42:52,640 --> 00:42:55,279 Speaker 1: And getting to your question, you know, what does this 796 00:42:55,320 --> 00:42:57,840 Speaker 1: mean or people looking at this too too closely. I 797 00:42:57,880 --> 00:43:00,920 Speaker 1: would say yes, I think that people should be taking 798 00:43:01,320 --> 00:43:04,640 Speaker 1: a more longer term holistic view, which is kind of 799 00:43:04,640 --> 00:43:06,520 Speaker 1: what we try to do with our firm. All right, So, 800 00:43:06,680 --> 00:43:10,439 Speaker 1: given all the focus on the FED and last year 801 00:43:10,480 --> 00:43:13,000 Speaker 1: we were talking about the end of Tina for a 802 00:43:13,040 --> 00:43:16,000 Speaker 1: long time, you know, you yield getting no yield in bonds. 803 00:43:16,640 --> 00:43:19,879 Speaker 1: Now I think the what is it, six months, nine months, 804 00:43:19,880 --> 00:43:23,920 Speaker 1: you're about five percent. You're really seeing some decent yield. 805 00:43:25,160 --> 00:43:27,439 Speaker 1: How do you look at the world of bonds when, 806 00:43:27,560 --> 00:43:31,279 Speaker 1: for the first time in a decade or longer, you're 807 00:43:31,280 --> 00:43:35,480 Speaker 1: actually getting paid to lend Uncle Sam some money. Yeah, So, Barry, 808 00:43:35,520 --> 00:43:37,920 Speaker 1: two things relative to that question. Number one is one 809 00:43:37,960 --> 00:43:39,680 Speaker 1: has to remember that that's what the FETE is trying 810 00:43:39,719 --> 00:43:42,480 Speaker 1: to do by raising short term interest rates. They are 811 00:43:42,520 --> 00:43:47,080 Speaker 1: trying to disintermediate the economy, get liquidity out of the economy, 812 00:43:47,200 --> 00:43:49,440 Speaker 1: slow the economy, and of course you're going to put 813 00:43:49,440 --> 00:43:51,200 Speaker 1: it in short term instruments. That's the whole point of 814 00:43:51,239 --> 00:43:54,040 Speaker 1: monetary policy. And so people are saying, oh, short term 815 00:43:54,120 --> 00:43:56,480 Speaker 1: rates are competitive again, Yeah, no kidding, that's what the 816 00:43:56,480 --> 00:43:58,560 Speaker 1: FETE is Watch that happened, right, That's what they're trying 817 00:43:58,600 --> 00:44:01,080 Speaker 1: to do. Second thing is is that I think that 818 00:44:01,200 --> 00:44:05,160 Speaker 1: if we're right and the secular inflation backdrop is changing, 819 00:44:05,360 --> 00:44:09,279 Speaker 1: I think fixed income money management will change dramatically over 820 00:44:09,280 --> 00:44:13,160 Speaker 1: the next five, ten, fifteen, twenty years. It's been meaning 821 00:44:13,560 --> 00:44:15,799 Speaker 1: become a whole lot more attractive. It'll be a lot 822 00:44:15,880 --> 00:44:20,880 Speaker 1: more difficult. Oh really, because look over the in our careers, 823 00:44:21,239 --> 00:44:23,560 Speaker 1: it's been pretty easy to be a fixed income money manager. 824 00:44:23,600 --> 00:44:25,680 Speaker 1: You could have been the worst fixed income money manager 825 00:44:25,719 --> 00:44:28,839 Speaker 1: and secular disinflation bailed you out. You could have been 826 00:44:28,840 --> 00:44:31,160 Speaker 1: completely wrong, but you still made money for your client. 827 00:44:31,320 --> 00:44:34,560 Speaker 1: Just just ride the wave from when Volker took rates 828 00:44:34,600 --> 00:44:38,600 Speaker 1: to a million percent and it's been a forty year 829 00:44:38,800 --> 00:44:43,759 Speaker 1: bullmarket wasn't eighty one to twenty one. Yeah, that's a 830 00:44:43,800 --> 00:44:46,320 Speaker 1: good run. That is now. If we're right and the 831 00:44:46,719 --> 00:44:50,160 Speaker 1: inflation backdrop is changing, it means that money management or 832 00:44:50,239 --> 00:44:52,359 Speaker 1: fixing come money management doesn't have the wind that they're 833 00:44:52,400 --> 00:44:54,720 Speaker 1: back anymore. It means you're gonna have to be more tactical. 834 00:44:54,760 --> 00:44:58,360 Speaker 1: You're gonna have to constantly change duration depending on what's 835 00:44:58,400 --> 00:44:59,960 Speaker 1: going on with interest rate. You're gonna have to chang 836 00:45:00,280 --> 00:45:05,160 Speaker 1: quality depending on what's going on with company fundamentals and 837 00:45:05,200 --> 00:45:08,440 Speaker 1: earnings and things like that and fixing. Company managers have 838 00:45:08,520 --> 00:45:10,920 Speaker 1: never had to be that nimble. You know, if you 839 00:45:10,960 --> 00:45:13,320 Speaker 1: look at the data, they say, oh, well, we're active managers, 840 00:45:13,320 --> 00:45:15,960 Speaker 1: but maybe they change duration from ninety two percent of 841 00:45:15,960 --> 00:45:19,520 Speaker 1: benchmark to ninety four percent of benchmark duration. Right, that's 842 00:45:19,560 --> 00:45:22,319 Speaker 1: hardly being an active planager. A lot of active bond 843 00:45:22,400 --> 00:45:26,040 Speaker 1: managers because there's so many more types of bonds than stocks, 844 00:45:26,440 --> 00:45:28,879 Speaker 1: just don't own the worst half and your way ahead 845 00:45:28,920 --> 00:45:32,399 Speaker 1: of everybody ahead. So let's let's talk about duration. If 846 00:45:32,440 --> 00:45:35,400 Speaker 1: you shorten up your duration last year, you did okay, 847 00:45:35,440 --> 00:45:37,480 Speaker 1: I'm getting into great in bonds, but you didn't do 848 00:45:37,520 --> 00:45:39,960 Speaker 1: as bad as as the benchmark. They get into as 849 00:45:39,960 --> 00:45:43,040 Speaker 1: poorly as the benchmark. So here we are, It's first 850 00:45:43,080 --> 00:45:47,240 Speaker 1: quarter of twenty twenty three. Where should our duration be set? 851 00:45:47,280 --> 00:45:50,200 Speaker 1: With an inverted yield curve and a FED that keeps 852 00:45:50,200 --> 00:45:55,720 Speaker 1: telling us, hey, guys, higher for longer, right, So Barry, 853 00:45:55,800 --> 00:45:58,719 Speaker 1: we are bar build right now on the curve. We 854 00:45:58,840 --> 00:46:01,000 Speaker 1: have very short term because the FED is raising rates, 855 00:46:01,000 --> 00:46:02,760 Speaker 1: and as you pointed out before, you can get reasonable 856 00:46:02,800 --> 00:46:05,279 Speaker 1: returns and the short reasonable yield at the short end 857 00:46:05,320 --> 00:46:07,480 Speaker 1: of the curve. But then we've also begun to extend 858 00:46:07,560 --> 00:46:10,319 Speaker 1: duration because in every cycle the fed goes too far 859 00:46:11,000 --> 00:46:12,960 Speaker 1: and the long end of the curve starts to starts 860 00:46:12,960 --> 00:46:14,560 Speaker 1: to rally. I'm not going to tell you we're smart 861 00:46:14,640 --> 00:46:16,799 Speaker 1: enough to pick that to the day, but we're at 862 00:46:16,800 --> 00:46:18,520 Speaker 1: the point in the cycle where we think it pays 863 00:46:18,560 --> 00:46:20,640 Speaker 1: to start extending duration because they are going to make 864 00:46:20,640 --> 00:46:22,960 Speaker 1: a mistake at some point. So when you say longer term, 865 00:46:23,040 --> 00:46:25,520 Speaker 1: do you mean five to seven, you mean ten to twenty, 866 00:46:25,520 --> 00:46:27,600 Speaker 1: where so we have nothing in the middle of the curve. 867 00:46:27,680 --> 00:46:29,759 Speaker 1: The belly of the curve, we're very short term, let's 868 00:46:29,760 --> 00:46:33,200 Speaker 1: say under two years, and then we're a ten years plus. Okay, 869 00:46:33,280 --> 00:46:35,120 Speaker 1: that's that's kind of how we're positioning. What's the ten 870 00:46:35,160 --> 00:46:38,320 Speaker 1: year yielding when the six month is about four and 871 00:46:38,360 --> 00:46:43,480 Speaker 1: a half five tenure right now is about three ninety four, Yeah, 872 00:46:43,640 --> 00:46:46,279 Speaker 1: something like that, all right, So you're actually it's it 873 00:46:46,360 --> 00:46:49,239 Speaker 1: always feels so weird to say, listen, I'll give you 874 00:46:49,280 --> 00:46:51,600 Speaker 1: four percent if you tie your money for either six 875 00:46:51,640 --> 00:46:54,520 Speaker 1: months or a decade, right, And that's just the nature 876 00:46:54,560 --> 00:46:56,719 Speaker 1: of an inverted curve. And but the way we think 877 00:46:56,719 --> 00:46:58,960 Speaker 1: about it is not so much for the yield. We 878 00:46:59,000 --> 00:47:02,239 Speaker 1: think it's total return investors, and maybe we're going to 879 00:47:02,320 --> 00:47:04,439 Speaker 1: get that yield, But will we get you know, five 880 00:47:04,520 --> 00:47:07,239 Speaker 1: or ten percent capital apprecation on top of that, that 881 00:47:07,280 --> 00:47:09,000 Speaker 1: would be that makes for a pretty good total return. 882 00:47:09,320 --> 00:47:12,400 Speaker 1: So let's talk a little bit about the current environment. 883 00:47:12,680 --> 00:47:17,279 Speaker 1: I've been told the sixty forty portfolio is dead. Is 884 00:47:17,280 --> 00:47:20,239 Speaker 1: that true? Or are we no longer looking at a 885 00:47:20,280 --> 00:47:25,040 Speaker 1: balanced portfolio as a viable investment thesis, or have higher 886 00:47:25,160 --> 00:47:29,520 Speaker 1: rates resurrected sixty forty back from the dead. So, Barry, 887 00:47:29,600 --> 00:47:32,879 Speaker 1: I think both the sixty and the forty, if you're 888 00:47:32,920 --> 00:47:36,920 Speaker 1: just buying indicase, probably not a good idea over the 889 00:47:36,960 --> 00:47:39,880 Speaker 1: next five to ten years. It's probably not a good deal. However, 890 00:47:40,400 --> 00:47:43,400 Speaker 1: if you're actively managing within the sixty and you're actively 891 00:47:43,440 --> 00:47:47,359 Speaker 1: managing within the forty, I think what you buy will 892 00:47:47,400 --> 00:47:51,040 Speaker 1: have a meaningful difference on performance. So I don't think 893 00:47:51,080 --> 00:47:54,120 Speaker 1: the sixty forty is dead, but I do think the 894 00:47:54,120 --> 00:47:56,879 Speaker 1: traditional passive sixty forty is going to have a very 895 00:47:56,960 --> 00:47:59,479 Speaker 1: tough time. So let's stick with that. We have rates 896 00:47:59,520 --> 00:48:03,520 Speaker 1: approach five percent from the FED, very different than where 897 00:48:03,560 --> 00:48:05,960 Speaker 1: we were just two years ago, when we were at zero. 898 00:48:06,760 --> 00:48:12,439 Speaker 1: How does that impact your tactical allocation decisions if inflations 899 00:48:12,480 --> 00:48:17,080 Speaker 1: continues moderating and rates stay high, what sectors look attractive 900 00:48:17,120 --> 00:48:21,560 Speaker 1: to Yeah, so, Barry, you know, it's it's kind of funny. 901 00:48:21,560 --> 00:48:24,600 Speaker 1: I think I mentioned this before. We're not really very bearish, 902 00:48:24,640 --> 00:48:26,719 Speaker 1: but we're we don't like three sectors. We don't like 903 00:48:26,960 --> 00:48:30,239 Speaker 1: US tech, we don't like US consumer discretionary, and we 904 00:48:30,239 --> 00:48:33,239 Speaker 1: don't like US communications. We think those are the three 905 00:48:33,360 --> 00:48:35,600 Speaker 1: very speculative bubbles. And by the way, they dominate the 906 00:48:35,680 --> 00:48:38,840 Speaker 1: US market even with their bear market, those three sectors 907 00:48:38,880 --> 00:48:41,640 Speaker 1: is still about forty five of the US If you 908 00:48:41,719 --> 00:48:44,640 Speaker 1: remove those three sectors that we think are very speculative, 909 00:48:45,280 --> 00:48:48,319 Speaker 1: everything else is basically fair game. It's almost every other 910 00:48:48,320 --> 00:48:51,920 Speaker 1: sector in the United States, and the menu of global 911 00:48:51,960 --> 00:48:55,000 Speaker 1: opportunities is big two. Because the United States is very 912 00:48:55,080 --> 00:48:57,960 Speaker 1: unique in that we are dominated by those three sectors. 913 00:48:58,160 --> 00:49:01,080 Speaker 1: Most other developed markets are not. So let's talk about that. 914 00:49:01,160 --> 00:49:03,919 Speaker 1: Because the rest of the world has lagged the US 915 00:49:04,040 --> 00:49:08,360 Speaker 1: markets for ten to fifteen years, it's the it could 916 00:49:08,360 --> 00:49:12,240 Speaker 1: be the longest period of outperformance I think in market history. 917 00:49:12,640 --> 00:49:15,520 Speaker 1: So when you look around the world, since you're active, 918 00:49:15,640 --> 00:49:18,560 Speaker 1: not passive, what parts of the world do you look at? 919 00:49:18,680 --> 00:49:22,920 Speaker 1: Are you looking at em or developed x US? And again, 920 00:49:23,040 --> 00:49:27,880 Speaker 1: since you're not passive, what particular specific countries you find appeal. 921 00:49:28,440 --> 00:49:31,359 Speaker 1: So um, first, it's it's important to start this part 922 00:49:31,360 --> 00:49:33,760 Speaker 1: of the conversation by saying that in twenty twenty two, 923 00:49:34,239 --> 00:49:38,360 Speaker 1: seventy percent seven zero seventy percent of non US markets 924 00:49:38,360 --> 00:49:41,799 Speaker 1: outperformed the United States in twenty twenty two, even even 925 00:49:41,840 --> 00:49:45,080 Speaker 1: in US dollar terms. So the fact that most people 926 00:49:45,160 --> 00:49:47,400 Speaker 1: aren't aware of that shows that investors have become a 927 00:49:47,400 --> 00:49:51,800 Speaker 1: little geographically myopic. And and why did the country bias 928 00:49:51,960 --> 00:49:56,160 Speaker 1: is absolutely huge, huge and but why did that happen? 929 00:49:56,239 --> 00:49:59,320 Speaker 1: It happened because what I said before, most other markets 930 00:49:59,320 --> 00:50:02,800 Speaker 1: aren't domin needed by those three sectors that were dominated 931 00:50:02,840 --> 00:50:06,040 Speaker 1: by the United States Tech, consumer, discretionary, and communications. So 932 00:50:06,200 --> 00:50:08,600 Speaker 1: you actually had in twenty twenty two was a global 933 00:50:08,760 --> 00:50:13,319 Speaker 1: sector event, not a country event. And one of the 934 00:50:13,320 --> 00:50:15,000 Speaker 1: things that we try to do is we look at 935 00:50:15,040 --> 00:50:18,120 Speaker 1: size and style and industries and sectors not only in 936 00:50:18,120 --> 00:50:21,280 Speaker 1: the United States but around the world. But most investors 937 00:50:21,320 --> 00:50:24,279 Speaker 1: think of global investing is what country do I invest in? 938 00:50:24,800 --> 00:50:27,160 Speaker 1: Not as they were a global sector event or global 939 00:50:27,200 --> 00:50:30,520 Speaker 1: style event going on, and I think twenty twenty two 940 00:50:30,560 --> 00:50:33,120 Speaker 1: was very much a global sector event. So let's talk 941 00:50:33,160 --> 00:50:37,120 Speaker 1: about a specific sector. Since the financial crisis and only 942 00:50:37,120 --> 00:50:41,480 Speaker 1: eight o nine since you launched rich Bernstein Associates, finance 943 00:50:41,600 --> 00:50:44,319 Speaker 1: really hasn't been much to write home about. Right. It's 944 00:50:44,320 --> 00:50:48,120 Speaker 1: been a giant laggard. When does the financial sector start 945 00:50:48,160 --> 00:50:51,319 Speaker 1: to see a little love from investors? Right? So there's 946 00:50:51,360 --> 00:50:54,640 Speaker 1: a confounding issue with the financial sector, namely the financial 947 00:50:54,640 --> 00:50:57,839 Speaker 1: crisis and the increased regulation that which kind of threw 948 00:50:57,880 --> 00:51:00,560 Speaker 1: them off for a loop and really constrain their business activity. 949 00:51:00,840 --> 00:51:03,080 Speaker 1: I mean, one of the reasons that today the financial 950 00:51:03,160 --> 00:51:05,560 Speaker 1: sector is so healthy is because of all that regulation. 951 00:51:06,000 --> 00:51:07,640 Speaker 1: But you had to give up all the growth that 952 00:51:07,760 --> 00:51:09,440 Speaker 1: maybe we're going to get from all the leverage and 953 00:51:09,440 --> 00:51:13,120 Speaker 1: everything else. But to be fair, not blowing up and 954 00:51:13,160 --> 00:51:16,919 Speaker 1: destroying the world economy. That's a fair trade. You're healthy 955 00:51:16,960 --> 00:51:19,239 Speaker 1: and you're still around, but you're only growing at five 956 00:51:19,280 --> 00:51:22,280 Speaker 1: percent instead of ten percent. Seems like a reasonable trade 957 00:51:22,280 --> 00:51:26,200 Speaker 1: off exactly. So let's let's just remove that from the discussion. Historically, 958 00:51:26,239 --> 00:51:28,880 Speaker 1: if you take out that period, you'll find that the 959 00:51:28,960 --> 00:51:31,640 Speaker 1: yel curve is a pretty good representation of when you 960 00:51:31,640 --> 00:51:33,520 Speaker 1: want to buy financials and when you don't, and when 961 00:51:33,560 --> 00:51:36,319 Speaker 1: you have a steeper Yeel curve, it says that net 962 00:51:36,400 --> 00:51:39,360 Speaker 1: lending margins are going to be higher, deposits are cheaper 963 00:51:39,719 --> 00:51:43,120 Speaker 1: than lending. What you're getting on the loans, the interest 964 00:51:43,200 --> 00:51:45,319 Speaker 1: rate you're getting on the loans, and so your profitability 965 00:51:45,360 --> 00:51:47,759 Speaker 1: goes up. And when the curve inverts, not only is 966 00:51:47,760 --> 00:51:49,879 Speaker 1: it a signal of a recession, but the inverted curve 967 00:51:49,920 --> 00:51:53,359 Speaker 1: itself starts shutting down the economy. Because the deposit rate 968 00:51:53,440 --> 00:51:55,959 Speaker 1: is higher than the lending rate, nobody wants to lend. 969 00:51:56,040 --> 00:51:58,560 Speaker 1: And so what we've got right now is an inverted 970 00:51:58,640 --> 00:52:04,520 Speaker 1: Yeel curve. Historically not a great time to overweight financial stocks. 971 00:52:04,520 --> 00:52:08,000 Speaker 1: It's too early till we have a steep garve. Correctly, 972 00:52:08,400 --> 00:52:12,080 Speaker 1: we've seen some of the utilities and defensives underperformed. Yes, 973 00:52:12,320 --> 00:52:16,040 Speaker 1: Also now some people have argued, hey, that's suggesting the 974 00:52:16,080 --> 00:52:19,799 Speaker 1: worst of the economic slowdown is behind us. How do 975 00:52:19,840 --> 00:52:24,280 Speaker 1: you look at these different sectors as a foretelling of 976 00:52:24,320 --> 00:52:26,959 Speaker 1: what might happen in the next quarter or two. Right, So, 977 00:52:27,160 --> 00:52:29,640 Speaker 1: we talked about early on about the importance of corporate 978 00:52:29,640 --> 00:52:31,719 Speaker 1: profits and the profits cycle and what we tend to 979 00:52:31,719 --> 00:52:33,880 Speaker 1: do in our firm is look a little bit more 980 00:52:33,960 --> 00:52:37,000 Speaker 1: and profit cycles as opposed to economic cycles. In the 981 00:52:37,080 --> 00:52:39,040 Speaker 1: United States, we could argue, whether we're going to an 982 00:52:39,040 --> 00:52:42,560 Speaker 1: economic recession, we are definitely falling into a profit's recession, 983 00:52:42,719 --> 00:52:47,799 Speaker 1: despite twenty twenty two having profits hold up shockingly well, 984 00:52:47,880 --> 00:52:50,879 Speaker 1: considermendously that was going on tremendously well. But now those 985 00:52:50,920 --> 00:52:54,640 Speaker 1: hard comparisons, everything are coming home to roosts, increasing labor costs, 986 00:52:54,640 --> 00:52:58,560 Speaker 1: everything that we've been a base exactly. And so when 987 00:52:58,560 --> 00:53:01,160 Speaker 1: you're going to a profit's recession, and what tends to 988 00:53:01,200 --> 00:53:05,200 Speaker 1: work defensive type sector is because there's kind of this 989 00:53:05,360 --> 00:53:07,840 Speaker 1: ridiculously obvious statement that we're going to make, but people 990 00:53:07,880 --> 00:53:11,799 Speaker 1: forget it. The cycle, by definition, is determined by cyclicals. 991 00:53:12,600 --> 00:53:15,800 Speaker 1: And so when you're in a cyclical when you're in 992 00:53:15,840 --> 00:53:18,960 Speaker 1: a cyclical downturn, you don't want to hold cyclical stocks. 993 00:53:19,239 --> 00:53:22,239 Speaker 1: When you're in a cyclical upturn, you do. And and 994 00:53:22,280 --> 00:53:24,319 Speaker 1: so we're in a position right now we think we're 995 00:53:24,400 --> 00:53:26,800 Speaker 1: entering a profit recession, which would be a cyclical downturn. 996 00:53:27,040 --> 00:53:29,000 Speaker 1: You want to be very careful about the cyclicals that 997 00:53:29,000 --> 00:53:32,000 Speaker 1: you hold. So the profit recession in a cyclical downturn. 998 00:53:32,080 --> 00:53:35,480 Speaker 1: Everybody's been focused on the landing. Is it a soft landing, 999 00:53:35,560 --> 00:53:38,080 Speaker 1: is it a hard landing? Towards than Slock of Apollo 1000 00:53:38,120 --> 00:53:42,480 Speaker 1: has been talking about a no landing um at Thanksgiving. 1001 00:53:42,520 --> 00:53:45,839 Speaker 1: The question is, hey, we can have a recession or not, right, 1002 00:53:46,160 --> 00:53:48,399 Speaker 1: So how do you look at that? Or you less 1003 00:53:48,400 --> 00:53:52,040 Speaker 1: concerned with the economic recession and more focused on the 1004 00:53:52,040 --> 00:53:54,400 Speaker 1: earning side. Well, we are more focused on the earnings. 1005 00:53:54,400 --> 00:53:56,600 Speaker 1: But to the point about about the landing, I think 1006 00:53:56,600 --> 00:54:00,200 Speaker 1: we're circling the airport. I don't think we're landing yet. 1007 00:54:00,280 --> 00:54:02,200 Speaker 1: And I don't think it's right to say there won't 1008 00:54:02,280 --> 00:54:04,160 Speaker 1: be a landing, because I don't think the fit can 1009 00:54:04,200 --> 00:54:08,879 Speaker 1: effectively fight inflation without some kind of landing. Whether it's 1010 00:54:08,920 --> 00:54:13,160 Speaker 1: hard or soft, to some extent in artwork, it doesn't matter. 1011 00:54:13,360 --> 00:54:16,080 Speaker 1: You're gonna have the same defensive strategy for a landing. 1012 00:54:16,120 --> 00:54:18,040 Speaker 1: It's just a question whether it's a single, a double, 1013 00:54:18,040 --> 00:54:20,759 Speaker 1: a triple, a homer, or grand slam as to how 1014 00:54:20,760 --> 00:54:22,560 Speaker 1: successful it's going to be. But you're not really going 1015 00:54:22,600 --> 00:54:25,600 Speaker 1: to change We're not going to change our portfolios depending 1016 00:54:25,600 --> 00:54:29,560 Speaker 1: on the type of landing. Really interesting, I got a 1017 00:54:29,600 --> 00:54:33,719 Speaker 1: curveball question for you. You have two books which we 1018 00:54:33,800 --> 00:54:38,160 Speaker 1: haven't talked about, Style Investing Unique Inside into Equity Management. 1019 00:54:38,680 --> 00:54:41,160 Speaker 1: The second one I love the title, Navigate the Noise, 1020 00:54:41,200 --> 00:54:43,880 Speaker 1: Investing in the New Age of Hype and media, media 1021 00:54:43,920 --> 00:54:47,319 Speaker 1: and Hype. You donate the profits from both of those 1022 00:54:47,360 --> 00:54:51,080 Speaker 1: books to charity. Tell us where those profits go and 1023 00:54:51,400 --> 00:54:55,120 Speaker 1: what motivated that decision. So I don't want to make 1024 00:54:55,160 --> 00:54:57,759 Speaker 1: it sound like they've been hugely profitable millions millions of 1025 00:54:58,400 --> 00:55:02,800 Speaker 1: exactly so, but with out as a realization, the profits 1026 00:55:02,880 --> 00:55:06,000 Speaker 1: have long gone. They're very small now because the books 1027 00:55:06,000 --> 00:55:07,719 Speaker 1: have been around for a long time. But originally they 1028 00:55:07,719 --> 00:55:10,279 Speaker 1: went to Doctors Without Borders. Oh that's nice. Yeah, that 1029 00:55:10,320 --> 00:55:12,640 Speaker 1: was the that was the chests really interesting. What led 1030 00:55:12,640 --> 00:55:15,000 Speaker 1: you to choose that particular chance. Well, if you think 1031 00:55:15,120 --> 00:55:16,920 Speaker 1: the first book was written in two thousand, I think 1032 00:55:16,920 --> 00:55:19,680 Speaker 1: it was in nineteen ninety nine, Doctors Without Borders won 1033 00:55:19,719 --> 00:55:23,239 Speaker 1: the Nobel Priests product. That's right, and so I, um, 1034 00:55:23,960 --> 00:55:26,359 Speaker 1: they've always I've always had a place on my heart 1035 00:55:26,400 --> 00:55:29,000 Speaker 1: for that organization because one of my when I was 1036 00:55:29,000 --> 00:55:31,680 Speaker 1: a kid, my childhood doctor took a month off to 1037 00:55:31,719 --> 00:55:34,799 Speaker 1: go ten to earthquake victims in Nicaragua. Wow. And I 1038 00:55:34,800 --> 00:55:37,560 Speaker 1: thought that was so cool, right, not golf on Wednesday, 1039 00:55:37,680 --> 00:55:39,920 Speaker 1: Not golf on Wednesday. He actually went to help people, 1040 00:55:40,000 --> 00:55:42,799 Speaker 1: and so that just stayed with me, and so my 1041 00:55:42,840 --> 00:55:45,920 Speaker 1: wife and I have consistently donated to that charity. So 1042 00:55:45,960 --> 00:55:48,440 Speaker 1: before we get to our favorite questions, I have a 1043 00:55:48,480 --> 00:55:53,040 Speaker 1: couple of other things I have to throw at you. First. 1044 00:55:53,320 --> 00:55:56,040 Speaker 1: You could be barish but still have a ten percent 1045 00:55:56,120 --> 00:55:59,840 Speaker 1: return target for the SMP five hundred every year discuss 1046 00:56:00,640 --> 00:56:03,040 Speaker 1: you could be bears but have a ten percent Well, 1047 00:56:03,360 --> 00:56:06,160 Speaker 1: you know, it's kind of funny when obviously at Merrill 1048 00:56:06,160 --> 00:56:08,600 Speaker 1: people wh would always ask me from my expected returns 1049 00:56:08,600 --> 00:56:11,000 Speaker 1: and everything on the markets, and I would always say 1050 00:56:11,000 --> 00:56:13,560 Speaker 1: eight to ten percent because that's what the market did 1051 00:56:13,600 --> 00:56:15,400 Speaker 1: over the long term, but in any one year it 1052 00:56:15,440 --> 00:56:18,680 Speaker 1: never actually did eight to ten percent. So I used 1053 00:56:18,680 --> 00:56:20,759 Speaker 1: to just throw that out and people would be satisfied, 1054 00:56:20,800 --> 00:56:24,839 Speaker 1: I think, despite your reputation as a perma bear. Yeah, yeah, yeah, 1055 00:56:25,040 --> 00:56:27,239 Speaker 1: perma bear, eight to ten percent always, I always said 1056 00:56:27,239 --> 00:56:30,560 Speaker 1: eight to ten percent. And because the odds are look, 1057 00:56:30,560 --> 00:56:33,320 Speaker 1: the market goes up about two thirds to three quarters 1058 00:56:33,320 --> 00:56:36,000 Speaker 1: of the time historically, so you know, you really don't 1059 00:56:36,040 --> 00:56:38,600 Speaker 1: want to be a perma bear. That doesn't really pay. 1060 00:56:38,160 --> 00:56:40,440 Speaker 1: But but you know, I think we don't have to 1061 00:56:40,440 --> 00:56:42,520 Speaker 1: realize the probability of a hitting eight to ten percent 1062 00:56:42,520 --> 00:56:44,719 Speaker 1: in one year is probably pretty low. This is one 1063 00:56:44,760 --> 00:56:48,840 Speaker 1: of my favorite questions. When the firm wide cell side 1064 00:56:48,840 --> 00:56:52,840 Speaker 1: indicator turns positive, it's preferable to leave the firm and 1065 00:56:52,920 --> 00:56:55,520 Speaker 1: start your own shop. Then go on the call and 1066 00:56:55,640 --> 00:57:00,520 Speaker 1: tell everybody about the cell side indicator. Tell us about that. 1067 00:57:00,960 --> 00:57:04,640 Speaker 1: By the way, I have great research. I was gonna 1068 00:57:04,719 --> 00:57:07,040 Speaker 1: say that's a good one. I'd like to know worry, 1069 00:57:07,080 --> 00:57:10,400 Speaker 1: but but no, I mean it. The sell side indicator 1070 00:57:10,440 --> 00:57:13,560 Speaker 1: to which you refer really is a gauge of Wall 1071 00:57:13,560 --> 00:57:16,720 Speaker 1: Street bullish embarrash. And what it's always shown is that 1072 00:57:16,800 --> 00:57:19,480 Speaker 1: when Wall Street doesn't like equities, it's a great time 1073 00:57:19,520 --> 00:57:22,080 Speaker 1: to buy equities. And you know, I describe it as 1074 00:57:22,080 --> 00:57:24,200 Speaker 1: people being under their desk in the fetal position. In 1075 00:57:24,200 --> 00:57:26,600 Speaker 1: two thousand and nine, I really thought we had hid 1076 00:57:26,840 --> 00:57:30,120 Speaker 1: an ultimate under your desk in the fetal position, and 1077 00:57:30,160 --> 00:57:31,680 Speaker 1: there was probably a good time to start a firm 1078 00:57:31,880 --> 00:57:35,240 Speaker 1: generational load, to say the least. And finally, our last question, 1079 00:57:35,520 --> 00:57:38,840 Speaker 1: and this will be the big reveal on Wall Street, 1080 00:57:38,920 --> 00:57:42,880 Speaker 1: a midlife crisis doesn't have to involve a ferrarian hair plugs, 1081 00:57:43,360 --> 00:57:46,600 Speaker 1: A mini cooper, a leather, rubber and metal man bracelet 1082 00:57:46,640 --> 00:57:50,440 Speaker 1: will do just fine. Does that Does that sound remotely familiar? 1083 00:57:51,120 --> 00:57:54,800 Speaker 1: I'm not quite sure about all of that. Sevita Subramanian's 1084 00:57:54,960 --> 00:57:58,680 Speaker 1: farewell speech to you when you left the firms and 1085 00:57:59,160 --> 00:58:02,880 Speaker 1: thanks to her Frankel first scaring that up. But a 1086 00:58:02,960 --> 00:58:06,280 Speaker 1: midlife prisis doesn't always have to involve a ferrarian hair plugs. 1087 00:58:06,800 --> 00:58:09,440 Speaker 1: Sounds like a good approach to life. Yeah, that was 1088 00:58:09,480 --> 00:58:11,560 Speaker 1: not me, as you can tell with people on the 1089 00:58:11,640 --> 00:58:13,360 Speaker 1: radio can't see me. But I am as bald as 1090 00:58:13,400 --> 00:58:16,400 Speaker 1: could be. And this has kind of been your look 1091 00:58:16,440 --> 00:58:18,680 Speaker 1: for a long time. It has been. It has not 1092 00:58:18,800 --> 00:58:21,919 Speaker 1: like that's why you look timeless. Like the first time 1093 00:58:21,960 --> 00:58:25,160 Speaker 1: I met you, I don't think you look very different 1094 00:58:25,200 --> 00:58:28,320 Speaker 1: than you do today. Um well, thank you for saying that. 1095 00:58:29,560 --> 00:58:31,640 Speaker 1: I think I probably do look a little different, right 1096 00:58:31,680 --> 00:58:34,880 Speaker 1: because I'm twenty years older or whatever. But um, yeah, 1097 00:58:34,960 --> 00:58:36,880 Speaker 1: you know, I mean I kind of go through My 1098 00:58:37,000 --> 00:58:41,680 Speaker 1: attitude is being um, just go with the flow. That's 1099 00:58:41,680 --> 00:58:44,440 Speaker 1: a good attitude. When when markets do what they do, 1100 00:58:44,520 --> 00:58:46,520 Speaker 1: that means you're not finding the tape, You're not finding 1101 00:58:46,600 --> 00:58:51,840 Speaker 1: the fed You're letting Price tell you, Hey, here's what's happening. Yeah, exactly. 1102 00:58:52,240 --> 00:58:55,760 Speaker 1: So I got some of those questions from ten lessons 1103 00:58:55,880 --> 00:59:01,240 Speaker 1: learned over twenty years. That was Savida's farewell speech at 1104 00:59:01,240 --> 00:59:04,200 Speaker 1: your exit. A few weeks ago, we had Neil dutta 1105 00:59:04,280 --> 00:59:08,600 Speaker 1: On who worked under David Rosenberg. You and Rosie were like, 1106 00:59:09,200 --> 00:59:12,760 Speaker 1: you know, the fearsome tusome. What was it like the 1107 00:59:12,760 --> 00:59:16,080 Speaker 1: two of you working with the reputation you guys had 1108 00:59:16,440 --> 00:59:22,320 Speaker 1: constantly on the All Star team, constantly described as bears, 1109 00:59:22,400 --> 00:59:26,000 Speaker 1: but you were fairly constructive and useful to your clients. 1110 00:59:26,000 --> 00:59:28,360 Speaker 1: It wasn't like you would just sell everything. What was 1111 00:59:28,400 --> 00:59:30,640 Speaker 1: it like working with Rosie back then? Well, I think 1112 00:59:31,040 --> 00:59:33,080 Speaker 1: we had a blast. I mean we were traveling all 1113 00:59:33,080 --> 00:59:35,560 Speaker 1: over the world together. It was it was fantastic. But 1114 00:59:35,640 --> 00:59:39,560 Speaker 1: I think, you know, our bearish views, especially when markets 1115 00:59:39,560 --> 00:59:42,680 Speaker 1: get very heady. It's a testament to Merrill that they 1116 00:59:42,840 --> 00:59:45,920 Speaker 1: allowed us to say what we really thought we were 1117 00:59:45,920 --> 00:59:49,480 Speaker 1: going to say and not trying to muzzle us to 1118 00:59:49,840 --> 00:59:52,160 Speaker 1: do better, to do more business. I think that was 1119 00:59:52,200 --> 00:59:54,880 Speaker 1: really testament to them. And I can't tell you how 1120 00:59:54,960 --> 00:59:58,840 Speaker 1: much both Rosie and I appreciated that. Really interesting. All right, 1121 00:59:58,880 --> 01:00:01,160 Speaker 1: so let's jump to our f questions that we ask 1122 01:00:01,240 --> 01:00:04,240 Speaker 1: all our guests, starting with tell us, what kept you 1123 01:00:04,440 --> 01:00:09,080 Speaker 1: entertained during lockdown? What were you streaming? What was I streaming? Well? 1124 01:00:09,080 --> 01:00:10,960 Speaker 1: What are you streaming now? When am I streaming? Now? 1125 01:00:11,320 --> 01:00:15,760 Speaker 1: Right now? I'm streaming Fauda, the Netflix Oh my God 1126 01:00:15,960 --> 01:00:20,120 Speaker 1: series about the Palestinians and Israelis. It's I have to say, 1127 01:00:20,840 --> 01:00:23,080 Speaker 1: we have a rule in my house we will not 1128 01:00:23,280 --> 01:00:27,200 Speaker 1: start that after nine o'clock because it's so gripping. You 1129 01:00:27,280 --> 01:00:28,920 Speaker 1: just won't go to sleep. You won't go to sleep 1130 01:00:29,000 --> 01:00:32,040 Speaker 1: right in heartoun it is fantastic. I mean we my 1131 01:00:32,120 --> 01:00:35,040 Speaker 1: wife and I are just about the finished series season two, 1132 01:00:35,680 --> 01:00:40,080 Speaker 1: but fantastic. The acting, everything is just wonderful and heart 1133 01:00:40,120 --> 01:00:43,120 Speaker 1: wrenching and you never figured thrilling, frightening. It's just like, 1134 01:00:43,160 --> 01:00:45,800 Speaker 1: oh my god, it's just you can't look away. No, 1135 01:00:46,440 --> 01:00:50,560 Speaker 1: it's amazing. Let's talk about mentors. Who was helped guide 1136 01:00:50,560 --> 01:00:53,200 Speaker 1: your career over the years. Ah, that's a that's an 1137 01:00:53,240 --> 01:00:55,280 Speaker 1: interesting question. Well, first and foremost, I would have to 1138 01:00:55,320 --> 01:00:58,720 Speaker 1: point to Chuck Klowd. Chuck was the chief investment strategist 1139 01:00:58,840 --> 01:01:03,000 Speaker 1: who at Merrill who fired me at Merrill, and he 1140 01:01:03,080 --> 01:01:06,040 Speaker 1: gave me two good lines of advice, which I once asked, 1141 01:01:06,120 --> 01:01:07,840 Speaker 1: Chuck if you remember he said this, and he did not. 1142 01:01:07,960 --> 01:01:10,360 Speaker 1: But line one was I went to him like my 1143 01:01:10,360 --> 01:01:11,720 Speaker 1: first day at Merrill, and I said, what do you 1144 01:01:11,800 --> 01:01:14,560 Speaker 1: think I should do? And he said, I don't really care, 1145 01:01:14,640 --> 01:01:17,680 Speaker 1: just don't make a fool of yourself. That was number one. 1146 01:01:17,720 --> 01:01:19,920 Speaker 1: And number two, the best line anybody's ever said to 1147 01:01:19,960 --> 01:01:22,200 Speaker 1: me is make sure you're a star and not a 1148 01:01:22,280 --> 01:01:27,400 Speaker 1: Roman candle. Fantastic line. Fantastic line. And I have lived 1149 01:01:27,440 --> 01:01:30,960 Speaker 1: my entire career thinking there's a big difference between being 1150 01:01:30,960 --> 01:01:34,520 Speaker 1: a star and being a Roman candle. Really interesting. Let's 1151 01:01:34,520 --> 01:01:36,480 Speaker 1: talk about books. What are some of your favorites and 1152 01:01:36,520 --> 01:01:38,560 Speaker 1: what are you reading right now? What am I read? 1153 01:01:38,760 --> 01:01:40,440 Speaker 1: I don't even know the title of the book I'm 1154 01:01:40,440 --> 01:01:43,240 Speaker 1: reading right now. I hate to say that, but it's 1155 01:01:44,000 --> 01:01:47,560 Speaker 1: I always love spy espionage, Cold War spy espionage, and 1156 01:01:47,560 --> 01:01:50,720 Speaker 1: I'm reading one right now, which is a true story 1157 01:01:51,000 --> 01:01:53,640 Speaker 1: about one of the heads of the KGB that they 1158 01:01:53,720 --> 01:01:56,560 Speaker 1: turned and became an informant for him. I six, huh, 1159 01:01:56,760 --> 01:02:00,440 Speaker 1: that's really interesting. So last two questions, what sort of 1160 01:02:00,480 --> 01:02:03,240 Speaker 1: advice would you give to a recent college grad who 1161 01:02:03,400 --> 01:02:07,760 Speaker 1: was interested in a career in finance or asset manage. Oh. 1162 01:02:07,840 --> 01:02:10,040 Speaker 1: I actually speak to a lot of college grads and 1163 01:02:10,840 --> 01:02:13,720 Speaker 1: the one thing I always tell them is keep a 1164 01:02:13,880 --> 01:02:16,760 Speaker 1: very open mind about what you want to do. When 1165 01:02:16,760 --> 01:02:20,800 Speaker 1: you're graduating college. You really don't understand what the financial 1166 01:02:20,840 --> 01:02:23,120 Speaker 1: sector is all about. You don't understand what Wall Street's 1167 01:02:23,120 --> 01:02:24,480 Speaker 1: all about as much as you might think you do. 1168 01:02:25,080 --> 01:02:27,600 Speaker 1: And don't put on blinders and say this is what 1169 01:02:27,760 --> 01:02:31,320 Speaker 1: I'm going to do. Wall Street changes so dramatically. You 1170 01:02:31,400 --> 01:02:33,440 Speaker 1: don't want to be caught saying this is what I'm 1171 01:02:33,440 --> 01:02:35,200 Speaker 1: going to do and then whatever you want it to 1172 01:02:35,240 --> 01:02:38,800 Speaker 1: do becomes obsolete. Be very flexible. As I said before, 1173 01:02:38,920 --> 01:02:42,760 Speaker 1: go with the flow. There's many different things in finance 1174 01:02:42,840 --> 01:02:46,640 Speaker 1: that people never consider. And our final question, what do 1175 01:02:46,720 --> 01:02:49,320 Speaker 1: you know about the world of investing today? You wish 1176 01:02:49,400 --> 01:02:52,440 Speaker 1: you knew forty years so years ago when you were 1177 01:02:52,640 --> 01:02:56,960 Speaker 1: first starting out. Oh, just the experience of living through cycles. 1178 01:02:57,480 --> 01:03:00,560 Speaker 1: I mean, you know you can't you can't back in time. 1179 01:03:00,600 --> 01:03:04,320 Speaker 1: There's no way to replace this, but living through cycles, remembering, 1180 01:03:04,880 --> 01:03:09,200 Speaker 1: keeping notes, living history, I think is very very important 1181 01:03:09,240 --> 01:03:12,080 Speaker 1: if you're going to be a true investor. If you're 1182 01:03:12,080 --> 01:03:13,800 Speaker 1: going to be a market observer or anything like that 1183 01:03:14,000 --> 01:03:18,000 Speaker 1: is living history. Realize you're living history and don't forget it. 1184 01:03:18,760 --> 01:03:22,040 Speaker 1: Really interesting. Thanks rich for being so generous with your time. 1185 01:03:22,600 --> 01:03:26,400 Speaker 1: We have been speaking with rich Bernstein, CEO and CIO 1186 01:03:26,640 --> 01:03:30,920 Speaker 1: of Richard Bernstein Associates. If you enjoy this conversation, well, 1187 01:03:30,920 --> 01:03:33,280 Speaker 1: I'll be sure and check out the previous four hundred 1188 01:03:33,320 --> 01:03:36,080 Speaker 1: and sixty seven we've done over the past eight or 1189 01:03:36,200 --> 01:03:40,640 Speaker 1: nine years. You can find those at iTunes, Spotify, YouTube, 1190 01:03:41,000 --> 01:03:45,000 Speaker 1: wherever you find your favorite podcasts. Check out my daily 1191 01:03:45,080 --> 01:03:48,200 Speaker 1: reading list at Ridhaltz dot com. Follow me on Twitter 1192 01:03:48,360 --> 01:03:53,280 Speaker 1: at Ridholtz, follow all of the Bloomberg podcasts at podcast 1193 01:03:54,000 --> 01:03:55,800 Speaker 1: I would be remiss if I did not thank the 1194 01:03:55,880 --> 01:03:59,480 Speaker 1: crack team that helps put these conversations together each week. 1195 01:04:00,360 --> 01:04:04,720 Speaker 1: My audio engineers were Justin Milner and Robert bragg Atico. 1196 01:04:04,760 --> 01:04:07,880 Speaker 1: Val Bron is our project manager. John Russo is my 1197 01:04:07,960 --> 01:04:12,760 Speaker 1: head of research. Paris Wold is my producer. I'm Barry Ratults. 1198 01:04:13,120 --> 01:04:16,840 Speaker 1: You've been listening to Masters in Business on Bloomberg Radio