WEBVTT - Strategas Research Partners CEO Talks Financial Services 0:00:02.520 --> 0:00:07.080 Bloomberg Audio Studios, podcasts, radio news. 0:00:07.440 --> 0:00:09.799 So what you do you know if you're a nineteen 0:00:09.840 --> 0:00:12.479 year old kid, Yeah, I mean, you know, it was 0:00:13.400 --> 0:00:17.919 a difficult child. Jason Trenner with this right now, and 0:00:18.000 --> 0:00:21.800 he summed up up in a book recently. We're Strtigua's 0:00:21.840 --> 0:00:25.280 working with Edheimen years ago, and this is a book 0:00:25.320 --> 0:00:27.920 from like, you know, ages back my side. 0:00:27.720 --> 0:00:28.240 Of the Street. 0:00:28.360 --> 0:00:32.080 Why Wolves, flashboys, quants and Masters of the Universe don't 0:00:32.120 --> 0:00:32.800 represent the. 0:00:32.840 --> 0:00:35.600 Real Wall Street? What is the real Wall Street? 0:00:36.280 --> 0:00:38.479 Well, you know the point of that book is that 0:00:39.440 --> 0:00:42.440 you have about six million people in the financial services 0:00:42.479 --> 0:00:45.720 in this country, and I truly believe financial services serve 0:00:46.320 --> 0:00:51.919 a social purpose, an important social purpose to raise capital, 0:00:52.000 --> 0:00:56.600 breed life into dreams, and raise capital for research and development, 0:00:56.720 --> 0:00:59.440 all the rest of it. Unfortunately, the headlines tend to 0:00:59.440 --> 0:01:04.800 get hijacked by so the bad behavior of Wall Street. 0:01:04.920 --> 0:01:07.440 And I just wanted to give a very human, you know, 0:01:09.680 --> 0:01:12.479 approach to the way I grew up. And I grew 0:01:12.560 --> 0:01:15.679 up in any sort of you know, Wall Street family. 0:01:15.760 --> 0:01:18.600 But I love the financial markets and I think they're important. 0:01:18.680 --> 0:01:21.880 You have led the way on this of almost it's. 0:01:21.720 --> 0:01:25.080 Almost like Robert Schuller, you know, leading on a social 0:01:25.200 --> 0:01:26.600 mandate of it. 0:01:26.640 --> 0:01:28.240 Once again, Paul's lead on this. 0:01:28.360 --> 0:01:32.040 Frankly, we have the joy of private credit, private equity, 0:01:32.080 --> 0:01:34.800 and some would say the greed to make another two 0:01:34.880 --> 0:01:38.480 hundred beeps on yield. Did you perceive it's strateiguous that 0:01:38.640 --> 0:01:41.160 private credit is a challenge to our future? 0:01:42.200 --> 0:01:44.039 I do, I mean, I you know, and this is 0:01:44.160 --> 0:01:46.679 just based on experience. I think the problem with the 0:01:46.720 --> 0:01:50.280 private assets, of course, is the opacity, which also tends 0:01:50.320 --> 0:01:52.760 to be the attraction for a lot of pensions, endowments 0:01:52.840 --> 0:01:57.440 and foundations because it seems less voliible, although it's not. 0:01:58.640 --> 0:02:02.080 But based on experience, I would say that there's probably 0:02:02.080 --> 0:02:05.480 going to be more problems, and that's only because Wall 0:02:05.520 --> 0:02:10.240 Street is great at finding ways, very creative ways to 0:02:10.280 --> 0:02:14.800 extend credit to marginal, marginal players, and it usually works 0:02:14.840 --> 0:02:16.520 that worse than people thought. 0:02:16.720 --> 0:02:19.400 Jason, what's the conversation you're having with your clients these days? 0:02:19.680 --> 0:02:22.760 We've got geopolitical risk front and center seemingly for a 0:02:22.800 --> 0:02:24.799 long time now now with what's going on in Iran? 0:02:25.480 --> 0:02:27.240 How do you put that in context of kind of 0:02:27.320 --> 0:02:29.040 just the conversation you have you with clients. 0:02:29.120 --> 0:02:31.200 Yeah, no, it's good quite The three big things we're 0:02:31.200 --> 0:02:34.640 talking about with clients obviously the war, private credit, and 0:02:34.720 --> 0:02:40.120 the sustainability of the infrastructure spend on artificial intelligence, and 0:02:40.440 --> 0:02:43.280 the way the way we're looking at it is, as 0:02:43.320 --> 0:02:45.200 we discussed, we think private credit is going to stick 0:02:45.240 --> 0:02:48.480 around for a while. I don't think it's we don't 0:02:48.480 --> 0:02:51.400 think it's systemic. We think the war is a big deal. 0:02:51.720 --> 0:02:54.120 The long the longer it lasts long. You know, people 0:02:54.160 --> 0:02:56.240 forget we've had a fifty percent increase in the price 0:02:56.280 --> 0:02:59.480 of oil and three it's only two weeks. You know, 0:02:59.639 --> 0:03:02.120 this last another couple of weeks. It's going to be 0:03:02.200 --> 0:03:06.760 real problems. Ironically, the infrastructure spend, it's really hard to 0:03:06.760 --> 0:03:09.480 fade that. I just have to say, we look at 0:03:09.520 --> 0:03:10.960 the cash flow, as we look at the fact that 0:03:10.960 --> 0:03:14.320 these companies are issuing debt ye and we look at 0:03:14.400 --> 0:03:18.640 Jensen Wang's comments last night. I mean, it's pretty stunning. 0:03:19.000 --> 0:03:21.520 And he's been you know, he hasn't been. I'll try 0:03:21.600 --> 0:03:26.720 to clean this up. He hasn't been. Uh, he's been 0:03:26.760 --> 0:03:28.760 lying to us, let's put it that way. 0:03:29.120 --> 0:03:30.160 And promotional. 0:03:30.240 --> 0:03:32.760 Some people will say, of course, maybe, but a boy, 0:03:32.800 --> 0:03:33.440 he's been right there. 0:03:33.520 --> 0:03:35.520 Yeah, he's been you know, it's it's again hard to 0:03:35.560 --> 0:03:38.840 fade what he said because he's largely been correct. 0:03:38.920 --> 0:03:41.680 So so I mean, I guess the you know, before 0:03:41.720 --> 0:03:44.840 Iran erupted, I guess the AI trade was really the 0:03:44.960 --> 0:03:46.800 driver for these markets really for the last two or 0:03:46.840 --> 0:03:48.920 three years on the way up. I mean, you probably 0:03:48.920 --> 0:03:51.600 spend enough on AI and now it's coming to the 0:03:51.600 --> 0:03:53.640 point where we want to see use cases, we want 0:03:53.680 --> 0:03:56.280 to see returns on investment, and that's where we've seen 0:03:56.320 --> 0:03:58.600 it spin to another direction. If you're a software company, 0:03:58.600 --> 0:03:59.760 you've got a lot of explaining to do. 0:04:00.080 --> 0:04:03.240 Yeah. Absolutely, And we actually in our piece this morning, 0:04:03.280 --> 0:04:07.280 we have a chart from the Census Department that's also 0:04:07.320 --> 0:04:11.440 based on the Anthropic Study, where you look at the 0:04:12.000 --> 0:04:17.960 companies that and industries that are using AI. It's actually 0:04:18.040 --> 0:04:20.480 quite small. I mean, if you according to the Census here, 0:04:20.520 --> 0:04:23.279 it's only five percent of companies on a on a 0:04:23.480 --> 0:04:27.640 labor weighted basis, it's maybe twenty percent. So there's a 0:04:27.680 --> 0:04:30.679 long way to go. Although I will say to someone 0:04:30.760 --> 0:04:36.120 runs a business, you know, it's it's expensive and it's 0:04:36.160 --> 0:04:39.040 not always easier or obvious what you need to do 0:04:39.160 --> 0:04:41.479 to incorporate into your business. 0:04:41.080 --> 0:04:44.440 An extended discussion with Jason Trent. It's strtiguous research with 0:04:44.560 --> 0:04:47.680 us to help me here with the meat and potatoes 0:04:47.720 --> 0:04:50.800 of retail, which is growth. Stocks always work. I fear 0:04:50.880 --> 0:04:54.640 missing out step in by seven, ten, twelve, fifteen stocks. 0:04:55.000 --> 0:04:56.960 You know, years ago you'd put this up front and 0:04:57.000 --> 0:04:59.720 linked into Ed Hyman's economic call. Now you do it 0:04:59.760 --> 0:05:02.120 with your great stream statigue as you put up with 0:05:02.200 --> 0:05:03.200 Dan Clifton, which. 0:05:03.040 --> 0:05:04.840 Itself is a challenge. 0:05:05.040 --> 0:05:08.479 Recapitulate the value of growth right now? 0:05:08.560 --> 0:05:11.520 Yeah, I mean the funny thing is tom uh you know, 0:05:11.560 --> 0:05:14.159 I started maybe thirty five years ago. Graham and Dodd 0:05:14.279 --> 0:05:16.520 was like a it was important, you know. Now it's 0:05:16.560 --> 0:05:19.640 a book. Now it's like a doorstop, you know, valuation 0:05:19.800 --> 0:05:21.800 basically since the TAF it's tragic. 0:05:21.839 --> 0:05:25.240 I legally have Graham and Dodd folks on my desk here. 0:05:25.720 --> 0:05:27.919 Alexis told me to clean my desk, but underneath it 0:05:27.920 --> 0:05:29.200 there's a Grammy. 0:05:28.760 --> 0:05:29.640 Yeah, no discussed. 0:05:29.680 --> 0:05:32.520 It's kind of sad because well, if it's kind of 0:05:32.520 --> 0:05:35.200 saying if you've been trained, and this is because you 0:05:35.240 --> 0:05:37.200 almost throw out a lot of your training and you 0:05:37.279 --> 0:05:39.800 have to you have to really focus on the liquidity 0:05:39.800 --> 0:05:43.839 in the markets, and you have to focus on obviously growth, 0:05:43.960 --> 0:05:47.400 top line growth as opposed to necessarily bottom line growth. 0:05:47.640 --> 0:05:51.240 But I do think Tom that the going into this year, 0:05:51.279 --> 0:05:52.800 we were very much of the view that you wanted 0:05:52.800 --> 0:05:54.360 to be an equal weight S and P, you wanted 0:05:54.400 --> 0:05:56.640 to be more in value sectors, and you wanted to 0:05:56.640 --> 0:05:59.640 be more in international mainly because they were more value 0:05:59.680 --> 0:06:02.680 orient and growth oriented. What you see, though, when you 0:06:02.720 --> 0:06:06.000 have this locations is it's really hard to get away 0:06:06.040 --> 0:06:08.560 from the US because it's the only country in the 0:06:08.560 --> 0:06:12.359 world that really has this kind of innovation. Sadly, but 0:06:12.560 --> 0:06:13.320 it's the way it is. 0:06:13.600 --> 0:06:17.240 How about alternative investment alts as the kids out to 0:06:17.279 --> 0:06:19.160 call them, I mean the sixty to forty portfolio of 0:06:19.200 --> 0:06:22.840 equities and fixed income. It really increasingly, particularly with the 0:06:22.880 --> 0:06:27.400 biggest endowments and pension funds in increasingly increasing their allocations 0:06:27.400 --> 0:06:29.800 to alternatives. How do you think about that, because a 0:06:29.800 --> 0:06:31.360 lot of folks are starting to question that now. 0:06:31.279 --> 0:06:33.760 Yeah, I think they should question it. And as we 0:06:33.760 --> 0:06:37.719 were talking about before, people are conflating the idea of 0:06:38.040 --> 0:06:41.560 risk and volatility. The thing is, the observe volatility of 0:06:41.600 --> 0:06:44.280 private assets is very low, and that's because they don't 0:06:44.440 --> 0:06:47.760 transact very often, but if you actually had to sell it, 0:06:47.760 --> 0:06:50.680 it would the volatility you're do very high. And so 0:06:51.240 --> 0:06:54.960 again the opacity is that is the feature in many ways. 0:06:54.960 --> 0:06:57.680 But I think what a lot of endowments and foundations 0:06:57.720 --> 0:07:02.360 are finding pensions too, is that liquidity has a significant price. 0:07:02.400 --> 0:07:05.680 When the markets get in trouble and if you have 0:07:05.760 --> 0:07:08.839 trouble meeting the actual real assumptions, or you have trouble 0:07:08.880 --> 0:07:13.280 meeting the spending requirements that you have, the liquidity has 0:07:13.280 --> 0:07:16.200 a significant price. So liquidity's always there until you need it, 0:07:16.240 --> 0:07:17.800 and then it's then it's an issue. 0:07:17.880 --> 0:07:21.640 What's a trendard exuberance meter look like? Right now? Are 0:07:21.680 --> 0:07:24.160 we in the silly season? I mean, Paul helped me here. 0:07:24.320 --> 0:07:27.200 How many square feed I mean Hampton's is up like 0:07:27.200 --> 0:07:28.680 twenty five percent or something. 0:07:29.320 --> 0:07:31.680 You know, there are we in the silly season? 0:07:31.720 --> 0:07:34.680 I think for wealthy people we're very much in the 0:07:34.720 --> 0:07:37.280 silly season. I think it's gotten kind of out of 0:07:37.280 --> 0:07:40.120 control and there's a lot of signs of conspicuous consumption. 0:07:40.280 --> 0:07:42.160 I don't want to make normal the judgments, but it's 0:07:42.200 --> 0:07:47.239 not kind of my thing. But by the same token, 0:07:47.280 --> 0:07:50.160 I think for the average person it's nowhere near the 0:07:50.200 --> 0:07:54.360 silly season. And I do think mercifully a lot of 0:07:54.600 --> 0:07:57.160 individual investors are investing in the market, which I think 0:07:57.240 --> 0:07:59.800 is there's more of a conception now that's an important 0:07:59.800 --> 0:08:02.960 thing for even middle class people, which wasn't the case. 0:08:03.040 --> 0:08:06.440 But let's say for my parents, young are absolutely I. 0:08:06.360 --> 0:08:08.520 Think the younger people have learned from us and they're 0:08:08.560 --> 0:08:09.520 more serious about it. 0:08:09.640 --> 0:08:12.920 Yeah, which is great, and you know there's there will 0:08:12.960 --> 0:08:15.760 be some bruises along the way, of course, but but 0:08:15.800 --> 0:08:18.560 it's much better than burying it in the savings account. 0:08:19.040 --> 0:08:23.320 Most people when they get sick, they hyatt. You wrote 0:08:23.360 --> 0:08:26.040 it up with Charlie Gasberno on the New York Post. 0:08:26.200 --> 0:08:27.840 How do you check in the Sloan? 0:08:28.880 --> 0:08:32.480 Well, it's a that's a long story, but the bottom line, 0:08:32.520 --> 0:08:34.720 I wasn't feeling well. I was about to, as you know, 0:08:34.720 --> 0:08:38.600 it's about to enter the Treasure Department as Assistant Secretary 0:08:38.640 --> 0:08:42.599 of the Treasury for Financial Markets, and I wanted to 0:08:42.600 --> 0:08:45.240 get checked out before I moved down to Washington. And 0:08:46.640 --> 0:08:51.160 they discovered multiple dilmam and so the you know, there's 0:08:51.160 --> 0:08:53.120 not great news in that. The good news and multiple 0:08:53.120 --> 0:08:58.160 dilumas it's not usually not fatal. It's cancer, right, It's 0:08:58.240 --> 0:09:03.520 just it's just chronic and it's treatable. But last nine 0:09:03.559 --> 0:09:06.199 months was was was something else. 0:09:06.280 --> 0:09:06.800 I'll just say. 0:09:06.840 --> 0:09:10.320 I'll just say that unlike anything I've ever experienced. 0:09:10.360 --> 0:09:13.360 But right, you know, he get through it. Speak to 0:09:14.480 --> 0:09:16.000 the people that don't. 0:09:16.160 --> 0:09:19.720 They ignore, they ignore the pain in the elbow, you know, 0:09:20.280 --> 0:09:24.680 colon cancer, more serious cancer. Frankly, what's the trigger where 0:09:24.720 --> 0:09:27.760 you say, I've got to go to Sloan, I gotta 0:09:27.800 --> 0:09:28.920 go to Walcorn. 0:09:28.480 --> 0:09:32.040 Now, you know, Tom, I don't know, because before this happened, 0:09:32.080 --> 0:09:34.720 I was going in about one thousand miles an hour, okay, 0:09:34.720 --> 0:09:37.040 I was traveling seventy eighty days a year. 0:09:37.360 --> 0:09:38.800 I would go to the doctor maybe. 0:09:38.600 --> 0:09:40.560 Once a year, and I would ignore a lot of 0:09:40.600 --> 0:09:44.600 things and familiar, you know, so you would just go 0:09:44.679 --> 0:09:46.760 kind of just in time, and that type of thing. 0:09:47.640 --> 0:09:52.840 I really would stress to people that it sounds corny, 0:09:52.960 --> 0:09:55.880 but you've got to focus on your health because you 0:09:55.880 --> 0:09:58.240 can't do all the other things, you know, being a father, 0:09:58.400 --> 0:10:01.000 being a husband. But you know, it sounds very corny, 0:10:01.080 --> 0:10:03.560 but when you're in a situation where you're dealing with 0:10:03.600 --> 0:10:08.000 the treatments, you really are incapable of doing all the 0:10:08.080 --> 0:10:10.880 things that you love to do. So it's it's it's 0:10:10.920 --> 0:10:12.480 important that you catch this stuff early. 0:10:12.880 --> 0:10:15.599 Are you back at strtigas there's Dan Clifton running the 0:10:15.640 --> 0:10:16.080 whole thing. 0:10:17.240 --> 0:10:20.040 Kidding me now, Dan is of course one of the 0:10:20.080 --> 0:10:23.640 great great, oh of the great analysts. But I'm back 0:10:23.679 --> 0:10:28.040 every day, every morning, and so that's the best medicine 0:10:28.080 --> 0:10:29.800 FORMUTA fantastic. 0:10:29.800 --> 0:10:32.720 So what's what are you telling your clients? 0:10:33.360 --> 0:10:33.520 Uh? 0:10:33.760 --> 0:10:34.480 These days? 0:10:34.520 --> 0:10:38.280 Just about investing going forward here because it seems like 0:10:38.440 --> 0:10:42.240 there's more options than ever there's that's blown up in 0:10:42.280 --> 0:10:45.000 our lifetime to become such a huge asset class. What 0:10:45.000 --> 0:10:48.320 are you telling your clients here? Is it the diversification story? 0:10:48.480 --> 0:10:50.599 Is it the courage to be in the market? Is 0:10:50.640 --> 0:10:51.280 all of above? 0:10:51.440 --> 0:10:54.280 Yeah? So, I mean our clients are institutional investors, so 0:10:55.240 --> 0:10:59.440 sometimes they must be fully invested. Other times they don't 0:10:59.440 --> 0:11:02.960 have a lot of leeway in terms of let's say cash. 0:11:03.320 --> 0:11:05.520 But I'm very much of the view that you have 0:11:05.600 --> 0:11:07.040 to and I've been saying this for a while, but 0:11:07.120 --> 0:11:09.600 I think people have to matter as their expectations about 0:11:10.040 --> 0:11:13.520 returns moving forward because you're starting at let's a used 0:11:13.559 --> 0:11:17.800 round numbers twenty two times earnings and about what a 0:11:17.840 --> 0:11:20.079 little less than twenty five times earnings for the ten 0:11:20.160 --> 0:11:24.160 year treasure yield. So there's not a lot of room. 0:11:24.760 --> 0:11:27.680 You have to really find idiosyncratic bets, or you have 0:11:27.720 --> 0:11:30.200 to find things to really get big returns. Doesn't mean 0:11:30.200 --> 0:11:33.040 you shouldn't be invested, but it also means that, as 0:11:33.080 --> 0:11:36.239 we were talking about before, you can't rely on outsized 0:11:36.520 --> 0:11:38.880 returns from the public markets to sustain you. 0:11:39.160 --> 0:11:43.880 One final question, a sea change on Fifth Avenue. Archbishop 0:11:43.960 --> 0:11:46.680 Ronald Hicks. Boy, does he have big shoes for you? 0:11:46.840 --> 0:11:48.600 Bet discuss that shift. 0:11:49.120 --> 0:11:52.520 Yeah, well it's I'm a big fan. I'm a big 0:11:52.520 --> 0:11:55.280 fan of Cardinal Dolan and big you know, big fan 0:11:55.360 --> 0:11:58.480 of Cardinal Hicks. Cardinal Dolan is a character. I was 0:11:58.480 --> 0:12:01.840 seated next to him at the Museum of American Finances 0:12:01.880 --> 0:12:06.080 gala and he's eating a chocolate bar and he looked 0:12:06.080 --> 0:12:08.080 at me and he said, it's good for the kidneys. 0:12:09.120 --> 0:12:12.000 So this guy, you know, this guy's ready to give 0:12:12.000 --> 0:12:14.520 you a hard time. He's very funny and I'm so 0:12:14.720 --> 0:12:17.520 thrilled that he'll be sticking around in the city as 0:12:17.640 --> 0:12:21.480 chaplain for the new police department. I think Hicks obviously 0:12:21.559 --> 0:12:24.800 will benefit from the fact, although some people question that 0:12:24.840 --> 0:12:27.800 he'll benefit from the fact that Cardinal Dolan is around. 0:12:28.000 --> 0:12:31.440 In any event, we're blessed to have those two gentlemen 0:12:32.840 --> 0:12:33.560 leading the flock. 0:12:34.400 --> 0:12:35.920 Jason Trynick, thank you so much.