WEBVTT - Surveillance: Expect Others to Follow Apple, Campling Says 0:00:09.880 --> 0:00:13.840 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene, Jay Leye. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.479 Bloomberg dot Com, and of course on the Bloomberg Yes 0:00:27.520 --> 0:00:29.680 Front and Cents. For me this week, the big data 0:00:29.760 --> 0:00:31.520 point of the week, I think p M is out 0:00:31.520 --> 0:00:34.080 of Europe. This coming Friday will be a big focus 0:00:34.080 --> 0:00:35.839 on this market looking ahead to it all. I'm really 0:00:35.880 --> 0:00:38.280 pleased to say David Kelly joins US now JP Morgan 0:00:38.320 --> 0:00:41.879 Aid Management, Chief Global Strategist. David, fantastic to have you 0:00:41.920 --> 0:00:43.640 with us. Talked to me about the message that you 0:00:43.720 --> 0:00:47.600 have for clients this Tuesday morning. Well, yeah, I think 0:00:47.680 --> 0:00:50.000 the messages you've You've got to look at the sort 0:00:50.000 --> 0:00:52.920 of different paths that markets and the economy have taken. 0:00:53.080 --> 0:00:55.200 I think we've gotten a little complacent. You know, this 0:00:55.320 --> 0:00:58.120 is eleven years into an expansion, not much it seemed 0:00:58.160 --> 0:01:00.000 to go on. So the markets keep on drifting high 0:01:00.000 --> 0:01:02.800 iron in terms of equity markets, rates keep on drifting lower. 0:01:03.080 --> 0:01:05.000 But the main story is really the one that you 0:01:05.040 --> 0:01:06.959 and Tom have been talking about, which is there are 0:01:06.959 --> 0:01:09.560 plenty of signs of the global economies slowing down. Very 0:01:09.600 --> 0:01:12.200 weak numbers out of Japan, week numbers out of Europe 0:01:12.200 --> 0:01:15.120 and China obviously in some trouble here. And in the 0:01:15.240 --> 0:01:18.880 US we're looking at about one percent growth maybe even 0:01:18.959 --> 0:01:20.800 less for the first quarter, and that brings US down 0:01:20.800 --> 0:01:24.240 to about one point seven percent year over year. So 0:01:24.280 --> 0:01:26.720 there is this slowdown. We're not seeing recession yet, but 0:01:26.840 --> 0:01:28.760 given these slowdown and the troubles in the in the 0:01:28.800 --> 0:01:31.200 global economy, it does seem like the market is a 0:01:31.240 --> 0:01:33.920 little too exuberant here. Let's take the analysis and take 0:01:33.920 --> 0:01:36.399 it a step further. What's the capital annocation decision? What 0:01:36.440 --> 0:01:40.840 are the decisions for captain allocation that supplement your worldview? Well, 0:01:40.840 --> 0:01:44.479 I you really if you start with the notion that 0:01:44.560 --> 0:01:46.920 valuations have just become a little unhinged from each other. 0:01:46.959 --> 0:01:49.480 What's expense if your bonds expensive? US equities are a 0:01:49.520 --> 0:01:53.800 bit expensive, what's cheap um? Global equities are cheap um? 0:01:53.880 --> 0:01:56.120 And so I've been a little overweight global equity, international 0:01:56.200 --> 0:01:59.240 equities well to the US notwithstanding their short term problems. 0:01:59.360 --> 0:02:01.720 And then also with in the US market, um, if 0:02:01.720 --> 0:02:03.640 you look at the things like utilities and reads above 0:02:03.640 --> 0:02:06.120 twenty times earnings. To look at financials damage about thirteen 0:02:06.160 --> 0:02:10.160 times earnings. So there are pockets of value within the 0:02:10.240 --> 0:02:13.959 US market, but generally speaking, I'd look carefully at evaluations, 0:02:14.240 --> 0:02:15.919 and this is a kind of market in which I 0:02:15.919 --> 0:02:17.400 would want to make sure I load up on the 0:02:17.600 --> 0:02:20.240 on the cheap stuff and make sure I'm not overweight 0:02:20.280 --> 0:02:22.880 the expense of stuff. And a profit warning from Apple 0:02:23.080 --> 0:02:25.320 twelve months ago and then the stock double David, The 0:02:25.360 --> 0:02:27.760 problem is going into that profit warning, the stock was 0:02:27.800 --> 0:02:30.960 down by about a third or one percent from the high. 0:02:31.320 --> 0:02:33.880 This is a stock that's near all time highs as 0:02:33.880 --> 0:02:36.440 the company issues of revenue warning. Just in terms of 0:02:36.520 --> 0:02:38.480 how we set up now versus twelve months ago, it 0:02:38.520 --> 0:02:42.120 just feels like night and day. David. Yeah, well, and 0:02:42.160 --> 0:02:44.840 I think the key is if you're a long term investor, 0:02:44.960 --> 0:02:46.639 and what I mean is you're not going to be 0:02:46.720 --> 0:02:48.880 spending the money in the next four or five six years, 0:02:49.280 --> 0:02:51.440 You've got to stop trying to make a timing decision. 0:02:51.480 --> 0:02:54.320 The real question is never when it is what and 0:02:54.360 --> 0:02:56.520 you and you just are not going to be able 0:02:56.520 --> 0:02:59.120 to time the way markets behave in terms of bad 0:02:59.160 --> 0:03:02.440 news good news, I mean market market is gonna work 0:03:02.440 --> 0:03:04.800 in very perverse ways in the short run, but in 0:03:04.800 --> 0:03:06.480 the long run, the economy does really matter, and the 0:03:06.480 --> 0:03:09.240 long run is about earnings and interest rates, and so 0:03:09.520 --> 0:03:11.120 you just go to you know, try and to take 0:03:11.200 --> 0:03:13.680 that long term. You recognize what happens is you have 0:03:13.760 --> 0:03:16.919 this this spread and evaluation, somethings get very cheap, something 0:03:16.960 --> 0:03:19.160 to get very expensive, and then you have something some 0:03:19.280 --> 0:03:21.959 sort of shock, and everybody has to pay attention again. 0:03:21.960 --> 0:03:24.280 And when they pay attention, the stuff that's most expensive 0:03:24.600 --> 0:03:27.320 tends to get hit the hardest. Um. So, you know, 0:03:27.400 --> 0:03:30.160 I would not try to time this very much, but 0:03:30.240 --> 0:03:32.440 just recognize there's some areas of the market, some areas 0:03:32.440 --> 0:03:35.120 of global markets which are cheaper than others. Let's get 0:03:35.120 --> 0:03:37.800 a little more specific. In the Bank of America Maryland 0:03:37.840 --> 0:03:40.640 February fund manager survey that came out today, over half 0:03:40.680 --> 0:03:44.360 of those who responded said that the most crowded trade 0:03:44.680 --> 0:03:47.680 was the long US tech growth stocks, but they also 0:03:47.720 --> 0:03:50.360 said that growth stocks are expected to outperform value talks 0:03:50.360 --> 0:03:53.720 over the next twelve months. Attention here, they're overcrowded, yet 0:03:53.760 --> 0:03:56.480 will continue to outperform. Do you view this as an 0:03:56.480 --> 0:04:00.200 area that is particularly expensive and worth perhaps lightning up 0:04:00.200 --> 0:04:04.360 on Well, yeah, I think that that's a fair fair point. 0:04:04.440 --> 0:04:06.760 And and the key is that if you have not rebalanced, 0:04:06.760 --> 0:04:10.320 you're probably overweight anyway. And that's really the most important 0:04:10.320 --> 0:04:12.200 thing to to look at because of the outperforms of 0:04:12.280 --> 0:04:14.960 large cap growth stocks. But as of you know, the 0:04:15.040 --> 0:04:18.760 end of last week, the large cap growth sector overall 0:04:18.839 --> 0:04:23.760 broad sector was about thirty percent above its average PE 0:04:23.920 --> 0:04:26.720 ratio of the last twenty years. Small cap value is 0:04:26.720 --> 0:04:29.760 about five below UM. So you know, I think this 0:04:29.920 --> 0:04:32.040 is a time if you can to move a little 0:04:32.040 --> 0:04:34.240 bit of money out of large cup growth into small 0:04:34.279 --> 0:04:37.000 cap value to try to, you know, be a little 0:04:37.000 --> 0:04:40.839 bit more normal in what is increasingly abnormal market. David 0:04:41.360 --> 0:04:44.719 ten years assume means it's thirty year bond with handle 0:04:44.800 --> 0:04:46.920 goal is going to edge up to six d here 0:04:46.920 --> 0:04:50.600 in two cups of coffee? Is well? Is the market 0:04:50.920 --> 0:04:54.800 getting out front of the FED? Or does the FED 0:04:54.920 --> 0:04:57.919 have control of the situation where they can wait for 0:04:57.960 --> 0:05:00.520 the March meeting and the meetings after that decide to 0:05:00.560 --> 0:05:04.280 cut rates. I don't really think this is about the FED, 0:05:04.360 --> 0:05:06.279 or should be about the FED, because the said there's 0:05:06.360 --> 0:05:08.240 really no point in the FED cutting rates. If the 0:05:08.279 --> 0:05:10.800 FED cuts raised in March um, it is not going 0:05:10.839 --> 0:05:13.040 to estimate any economic growth and will simply leave them 0:05:13.040 --> 0:05:15.160 with less ammunition if we actually face a recession. I 0:05:15.200 --> 0:05:17.440 don't see a recession right now. But I think the 0:05:17.480 --> 0:05:21.599 bigger point is money is funneling towards richer and richer Americans, 0:05:21.760 --> 0:05:23.960 and you know, the gap between rich and poor is increasing. 0:05:24.200 --> 0:05:26.320 What that's doing is it's leaving a huge fund of 0:05:26.360 --> 0:05:29.159 money to be invested in market. So you know, the 0:05:29.279 --> 0:05:31.839 average person might spend some money. Richer people tend to 0:05:31.880 --> 0:05:35.359 invest money, and that's pushing down yields, pushing up stock prices, 0:05:35.520 --> 0:05:37.440 and I think, what's really go You know what's fascinating 0:05:37.440 --> 0:05:39.680 to me. It's not about inflation or even the economy. 0:05:40.000 --> 0:05:42.080 It is that there's so much money pushing into the 0:05:42.120 --> 0:05:44.760 bond market that you know, for example, tip seals are 0:05:44.760 --> 0:05:48.560 now running at about ten basis points negative on the 0:05:48.960 --> 0:05:51.840 ten year tip and that's that's crazy. You're locking in 0:05:52.080 --> 0:05:54.560 negative real return for ten years. This is really important. 0:05:54.600 --> 0:05:57.080 Back up David and explain that's a little I think 0:05:57.160 --> 0:06:01.279 jargon laced for our listeners, including me. The tips yield, 0:06:01.360 --> 0:06:03.760 what's the tips yield? And what's it mean that it's 0:06:03.760 --> 0:06:07.280 a negative by a little teen sweens amount? Well, what 0:06:07.279 --> 0:06:10.280 what it is? That these are treasury inflation protective securities? 0:06:10.320 --> 0:06:13.120 So what the government does. They give you a yield 0:06:13.160 --> 0:06:15.080 and then they say, but we'll give you whatever inflation is, 0:06:15.080 --> 0:06:17.360 so basically takes inflation out of the picture. This is 0:06:17.720 --> 0:06:20.080 what you get after inflation. But the point is that 0:06:20.200 --> 0:06:23.080 number has now turned negative. So so essentially they say, 0:06:23.120 --> 0:06:26.440 whatever inflation turns out to be your we will reward 0:06:26.520 --> 0:06:28.880 you for that. But apart from that we will give 0:06:28.920 --> 0:06:31.920 you we will give you actually a negative return. Now, 0:06:31.920 --> 0:06:33.640 well you know, I mean think about it when when 0:06:33.680 --> 0:06:36.200 you save money, the ideas you save money, you're disciplined 0:06:36.279 --> 0:06:38.440 enough to save because you want to have eleven apples 0:06:38.440 --> 0:06:40.719 in the year instead of ten apples. What this says 0:06:40.760 --> 0:06:42.320 is we'll give you nine apples in a year. And 0:06:42.320 --> 0:06:45.000 people are still willing to do that. That's called German 0:06:45.040 --> 0:06:47.640 negative rights. David Kelly, thank you so much. That JP 0:06:51.960 --> 0:06:56.520 right now an Apple, we've a show of of of Switzerland. 0:06:56.839 --> 0:07:00.159 Neil Campling joins us right now, uh with a the 0:07:00.200 --> 0:07:03.679 brighter thematic view on Apple. Neil, how do you take 0:07:04.240 --> 0:07:08.520 Apple over to other tech companies in China. Is that 0:07:08.600 --> 0:07:13.000 a legitimate exercise or is it just too much guessing? Well? 0:07:13.040 --> 0:07:15.760 I think for one thing, Apple is the first major 0:07:16.120 --> 0:07:19.040 who have explicitly come out where they're warning for the 0:07:19.120 --> 0:07:21.400 Q one to say they will be impacted, even though 0:07:21.400 --> 0:07:24.560 they haven't actually given us the quantifiable of how big 0:07:24.600 --> 0:07:27.400 the impact is, and we would expect many others to 0:07:27.400 --> 0:07:30.880 to follow. Um. You know, there are the supply chain 0:07:31.000 --> 0:07:33.960 risks or Apple itself given an Apple is twelve of 0:07:34.000 --> 0:07:38.480 global semiconductor demand purchases. There is also the fact that 0:07:38.520 --> 0:07:42.040 if we look at the SMP five hundred in totality, 0:07:42.160 --> 0:07:44.920 to date, we've had earnings calls from three hundred and 0:07:44.960 --> 0:07:48.640 sixty four companies of the SMP five hundred. Of those, 0:07:49.040 --> 0:07:53.120 only thirty four have said that there will be an 0:07:53.120 --> 0:07:58.000 impact from coronavirus in their guidance or modified guidance in 0:07:58.200 --> 0:08:01.800 some capacity due to the virus. So the vast majority 0:08:02.040 --> 0:08:05.000 have not mentioned the virus, either because they just do 0:08:05.080 --> 0:08:08.280 not know yet or in a few instances because there 0:08:08.320 --> 0:08:11.520 won't be an impact because perhaps there are a utility company. 0:08:11.520 --> 0:08:14.920 But the majority, i think it's fair to say, just 0:08:15.000 --> 0:08:17.800 don't yet know how big the impact will be. But 0:08:18.120 --> 0:08:22.280 this is an ongoing, dynamic situation which is still to 0:08:22.320 --> 0:08:24.240 play out, I think for many companies and near I've 0:08:24.240 --> 0:08:26.560 been surprised that for many companies we haven't seen the 0:08:26.640 --> 0:08:29.360 kind of news that was dropped by Apple yesterday. But 0:08:29.360 --> 0:08:31.000 I guess to your point, they just can't get their 0:08:31.000 --> 0:08:33.720 hands around this year. What's been amazing for many of 0:08:33.800 --> 0:08:36.160 us reading through the south Side research, No, it's getting 0:08:36.200 --> 0:08:38.959 our hands around the analyst community and their views is 0:08:39.000 --> 0:08:41.360 the T word just keeps coming up again and again 0:08:41.400 --> 0:08:45.319 and again. Transitory, temporary, transitory, temporary, nil. At what point 0:08:45.360 --> 0:08:47.000 do you look at things and say, perhaps this one 0:08:47.040 --> 0:08:50.640 be as transitory as some people think. I think that's 0:08:50.679 --> 0:08:53.240 when we have to start thinking that if you think 0:08:53.240 --> 0:08:56.640 that in China specifically, given the size of the economy, 0:08:56.679 --> 0:09:01.800 there is effectively no no red envelope season for this year. UM. 0:09:01.920 --> 0:09:06.360 There Now we're seeing some data such as the germanw 0:09:06.520 --> 0:09:09.680 data this morning, UM, such as the Beer of a 0:09:10.120 --> 0:09:13.160 Fun manager surveys. They're all now being impacted in terms 0:09:13.200 --> 0:09:16.920 of lower confidence. We are seeing issues in terms of 0:09:16.960 --> 0:09:20.400 hitting European confidence and that the risk, I think is 0:09:20.440 --> 0:09:23.079 that there won't be this snap back potentially in Q 0:09:23.280 --> 0:09:26.520 two because of this kind of hangover effect that affects 0:09:26.559 --> 0:09:31.120 many industries and it's not just specific to pure Chinese demand. 0:09:31.720 --> 0:09:35.080 Um so the risks of five G smartphones in the 0:09:35.120 --> 0:09:38.920 second half of the year could be impacted. Travel, tourism, 0:09:39.600 --> 0:09:42.560 retail is obviously having having the bront of some issues 0:09:42.600 --> 0:09:45.400 as well. If we've heard from we've heard from the 0:09:45.440 --> 0:09:48.360 likes of under Armor last week and Ralph Lauren as well, 0:09:48.800 --> 0:09:53.839 trying to give some sort of qualification around how risky 0:09:53.920 --> 0:09:56.240 this could be going forward. Now if you think that 0:09:56.280 --> 0:09:58.680 we haven't impacted that yet, but it will be an issue. Neil, 0:09:58.960 --> 0:10:01.240 with all your experience at mirror buz securities as you 0:10:01.440 --> 0:10:05.120 look at the broader effects and implications in response to 0:10:05.160 --> 0:10:07.720 the coronavirus and wondering what you're seeing in some of 0:10:07.760 --> 0:10:11.000 the emerging Asian economies. A lot of people saying that 0:10:11.120 --> 0:10:14.080 China is responding with more stimulus, that they'll be able 0:10:14.120 --> 0:10:16.720 to stave off some of the economic slowdown, some of 0:10:16.760 --> 0:10:20.720 these other economies less prepared to do. So what type 0:10:20.720 --> 0:10:24.080 of demand cannibalization, what kind of loss in demand are 0:10:24.080 --> 0:10:27.840 we going to see from those nations. It's a great question. 0:10:27.880 --> 0:10:31.959 I think that we're already I'm seeing, for example, visions 0:10:31.960 --> 0:10:36.120 down to Singapore GDP. For example, we've had South Korea 0:10:36.520 --> 0:10:39.720 UM politicians coming out just this morning and talking about 0:10:39.720 --> 0:10:44.160 a risk of an existential crisis is not controlled. UM. 0:10:44.240 --> 0:10:48.240 You know you're seeing impacts on auto vendors in South Korea. 0:10:49.200 --> 0:10:52.079 You would naturally expect some fall out into other countries 0:10:52.120 --> 0:10:56.079 such as Vietnam. So supply chain that exists around China 0:10:56.160 --> 0:10:59.520 is essential for the whole of the UH, the economic region. 0:10:59.640 --> 0:11:03.240 What your study or and they say, respect your guestimate 0:11:03.840 --> 0:11:08.000 of the elasticity of cutting expenses for industrial and tech 0:11:08.080 --> 0:11:11.160 and TMT, can they do they have the wiggle room 0:11:11.200 --> 0:11:16.080 to cut cross fast given revenue prospects that are slower. 0:11:17.440 --> 0:11:19.880 I think what we generally generally see if you're if 0:11:19.920 --> 0:11:23.439 you're a company that's reliant on industrial or your you're 0:11:23.520 --> 0:11:26.800 tech heavy's very difficult to reduce that. If you think 0:11:26.840 --> 0:11:31.679 of if you're a capacity utilization focused semiconduct to fab, 0:11:32.240 --> 0:11:34.079 you might not need the people that you would need 0:11:34.120 --> 0:11:37.480 a hon highst iPhone city, but you have to keep 0:11:37.480 --> 0:11:42.120 those fabs at plus capacity utilization rates otherwise your margins 0:11:42.160 --> 0:11:46.520 get negatively impacted very quickly and it's also very slow 0:11:46.640 --> 0:11:50.640 to to increase capacity and once it's been cut, so 0:11:50.880 --> 0:11:53.320 it's often not something you can just dial down for 0:11:53.360 --> 0:11:56.560 two weeks and not have an impact thereafter. And I'd 0:11:56.600 --> 0:11:58.800 like to turn to something else just to wrap things up. 0:11:58.840 --> 0:12:02.240 And that's the Trump administer ration, according to several reports, 0:12:02.280 --> 0:12:05.800 considering new restrictions on exports to kind of get technology 0:12:05.960 --> 0:12:08.560 into China. This is something that over the last month 0:12:08.640 --> 0:12:10.600 or so has been increasing the overlook because of what 0:12:10.640 --> 0:12:13.600 has been happening with the coronavirus. How closely are looking 0:12:13.640 --> 0:12:16.280 at those kind of moves potentially coming up this year? Neil, 0:12:17.400 --> 0:12:20.400 I think it's it's something which we described as an 0:12:20.400 --> 0:12:22.920 ongoing I P war between China and the U S 0:12:22.960 --> 0:12:26.120 which is very concerning for supply chains. For one thing, 0:12:26.160 --> 0:12:29.320 I think that we've had obviously the blacklisting of Harway 0:12:29.440 --> 0:12:32.920 last year, but actually what what it ended up happening 0:12:33.080 --> 0:12:36.640 was that Hallway just supply got components supplies from other 0:12:36.679 --> 0:12:40.360 countries outside of the US and displacing the US component companies. 0:12:40.720 --> 0:12:43.640 So the US is now looking at other tactics. If 0:12:43.679 --> 0:12:46.920 you basically banned equipment being shipped out to China and 0:12:46.920 --> 0:12:50.400 not giving those licenses. It has rumsfications for for many 0:12:50.400 --> 0:12:53.360 companies around the world. And I think basically what is 0:12:53.400 --> 0:12:56.880 happening here is we have a superpower battle to which 0:12:57.000 --> 0:13:01.559 which superpower nation becomes the lead for five G technologies 0:13:01.880 --> 0:13:06.520 because many reports suggestive fourteen trillion dollars of economic gains 0:13:06.520 --> 0:13:09.920 potential between now and twenties thirty five from five G 0:13:10.160 --> 0:13:12.120 and that I think is the heart of what's going 0:13:12.120 --> 0:13:15.400 on in this battle. A huge, huge issue right now 0:13:15.440 --> 0:13:19.040 between the United States and China and Europe Toime Europe, 0:13:19.040 --> 0:13:22.559 funny At somebody stuck somewhere in between, and Prime Minister 0:13:22.640 --> 0:13:25.439 Johnson maybe more in between than the others in between, 0:13:26.120 --> 0:13:28.840 you know, I mean his trip is canceled or somebody's 0:13:28.840 --> 0:13:31.080 trip is canceled. I haven't seen that. Yeah, I think 0:13:31.120 --> 0:13:33.720 we saw that over the weekend. He's not getting along 0:13:33.720 --> 0:13:41.160 with the President of the United States. Right now, we're 0:13:41.160 --> 0:13:43.360 going to touch on the politics story for a moment. 0:13:43.520 --> 0:13:46.120 Is of course reigned supreme. This morning we had two poles, 0:13:46.160 --> 0:13:50.440 Emerist Paul More of a national poll in the Nevada 0:13:50.480 --> 0:13:53.760 and South Carolina and then a month university pol which 0:13:53.800 --> 0:13:57.760 was very specifically on Virginia as well, a land America 0:13:57.800 --> 0:14:00.679 has been very good to join us from Brookings. She's 0:14:00.720 --> 0:14:05.400 a senior fellow. There was some important books on presidents. Elena, 0:14:05.400 --> 0:14:07.959 I believe we have a debate and our Kevin SURREALI 0:14:08.000 --> 0:14:12.520 would suggested debate will be contentious, raucous, particularly if Mr 0:14:12.559 --> 0:14:16.600 Bloomberg uh shows up and is part of that debate 0:14:16.640 --> 0:14:20.320 as well. How does a grizzled pro like you look 0:14:20.360 --> 0:14:23.200 at one of these debates? What do you look for 0:14:23.520 --> 0:14:27.720 that we miss? Well? I think what you look for 0:14:28.000 --> 0:14:31.480 is who is going to have the greatest effect on 0:14:31.680 --> 0:14:36.720 the upcoming contest. So it's not necessarily who quote wins 0:14:36.840 --> 0:14:40.600 the evening, but what the momentum is coming out of 0:14:40.640 --> 0:14:44.320 the debate into the contest, because we are now in 0:14:44.400 --> 0:14:47.640 the real thing. So for instance, in the New Hampshire 0:14:47.680 --> 0:14:51.240 debate a couple of weeks ago, we saw a stellar 0:14:51.320 --> 0:14:57.120 performance by Senator Amy Globachar and that translated immediately into 0:14:57.480 --> 0:15:01.840 support from uncommitted, previously uncommitted voters in New Hampshire. And 0:15:01.960 --> 0:15:04.720 your study of these elections, are there too many candidates 0:15:04.720 --> 0:15:07.440 for the debate tomorrow? Like like you should somebody fall 0:15:07.480 --> 0:15:10.280 on the sword here before the debate to clear it 0:15:10.400 --> 0:15:14.480 up for the either the liberals or the moderates. Well, 0:15:14.520 --> 0:15:18.920 actually the field is cut down considerably for this debate. 0:15:19.040 --> 0:15:22.360 It's a much smaller field than we have had, and 0:15:22.560 --> 0:15:26.240 it's a very interesting field because we have two strong 0:15:26.600 --> 0:15:30.680 left of center candidates, especially senator standards, And of course 0:15:30.680 --> 0:15:34.560 the introduction of Michael Bloomberg into this mix is going 0:15:34.600 --> 0:15:37.920 to really shake things up, and we will see if 0:15:37.920 --> 0:15:41.480 he has actual voter appeal when he's on his own 0:15:42.120 --> 0:15:45.320 as opposed to in a package, um, you know, setting 0:15:45.480 --> 0:15:48.440 like a TV commercial. So when you mentioned Mike, so 0:15:48.520 --> 0:15:50.960 let's talk about him. The found a majority onder of Bloomberg. 0:15:50.960 --> 0:15:53.640 I'll pay the parent company of Bloomberg News. As we've 0:15:53.640 --> 0:15:55.640 seen in the previous debates, if you make a search 0:15:55.640 --> 0:15:58.560 in the polls, you'll become the focus of attention. Happen 0:15:58.640 --> 0:16:01.120 to Mattie put a judge just a couple of weeks back, 0:16:01.160 --> 0:16:03.720 and most people assume it what happened to Mr Bloomberg 0:16:03.960 --> 0:16:06.680 this coming Wednesday? And then how willing will they be 0:16:06.840 --> 0:16:10.160 to make that pivot to shopping that shopping that sword, 0:16:10.200 --> 0:16:14.560 so to speak, and aim at Mr Bloomberg himself. Well, 0:16:14.600 --> 0:16:17.800 that's going to be very interesting because I think that 0:16:17.960 --> 0:16:20.120 We have a little bit of precedent that in that 0:16:20.280 --> 0:16:25.640 in Tom stire Um, people are reluctant to be too 0:16:25.760 --> 0:16:30.240 mean to these front running billionaires because in fact stire 0:16:30.520 --> 0:16:33.640 and Bloomberg have been very generous with their money all 0:16:33.640 --> 0:16:36.360 the way across the board to the Democrats. So a 0:16:36.480 --> 0:16:40.640 Democratic uh candidate up there, on the one hand, would 0:16:40.680 --> 0:16:43.560 like to take down Michael Bloomberg a couple of notches. 0:16:43.920 --> 0:16:46.120 On the other hand, doesn't want to make them too mad, 0:16:46.280 --> 0:16:50.840 because we, the we and the Democrats, everybody needs his 0:16:50.960 --> 0:16:55.280 money going into the fall. There's also a question about 0:16:55.440 --> 0:16:57.240 how much people are going to be looking for some 0:16:57.240 --> 0:16:59.920 sort of message which is being given by the pot 0:17:00.040 --> 0:17:04.480 pulists versus the electability argument that the Canada could actually 0:17:04.520 --> 0:17:07.600 beat President Trump in an election. How much do you 0:17:07.640 --> 0:17:10.199 think where where do you think the Democratic Party is 0:17:10.240 --> 0:17:13.359 tipping at this point in terms of the importance of 0:17:13.400 --> 0:17:16.919 both of those things, a sort of driving message versus 0:17:16.960 --> 0:17:21.439 just beating Trump. Well, I think it's still mostly on 0:17:21.560 --> 0:17:27.440 the beating Trump page. However, Bernie Sanders has a very 0:17:27.560 --> 0:17:31.479 very coherent message. It's been a constant message and he 0:17:31.600 --> 0:17:36.080 has a very devoted core in the Democratic Party. What 0:17:36.240 --> 0:17:39.919 we're going to see probably not um in Nevada or 0:17:39.960 --> 0:17:43.160 South Carolina, at least for the first time on Super Tuesday. 0:17:43.560 --> 0:17:47.120 Is whether or not he can expand his base. Some 0:17:47.160 --> 0:17:51.200 people say it is both the ceiling um and the floor. Well, 0:17:51.200 --> 0:17:53.119 where are you on that? I mean, that was my question. 0:17:53.160 --> 0:17:55.679 You just answer my question. But but where are you 0:17:55.800 --> 0:17:58.359 on that? Is there any evidence that the senator from 0:17:58.480 --> 0:18:02.840 Vermont can quote unquot would expand his base? Um? There's 0:18:02.880 --> 0:18:07.360 a little bit of evidence absolutely, um, Um, but not 0:18:07.520 --> 0:18:11.879 much in New Hampshire. He um seems to have done 0:18:12.280 --> 0:18:14.600 not really as well as he did four years ago. 0:18:15.000 --> 0:18:19.240 On the other hand, Um, he is moving slightly among 0:18:19.400 --> 0:18:22.639 African American voters, which is something he hasn't done in 0:18:22.640 --> 0:18:25.360 the past. So there's a little bit of evidence that 0:18:25.480 --> 0:18:29.920 he's getting some traction beyond his traditional base. Ellen, thank 0:18:29.920 --> 0:18:32.080 you so much. Ellenne kimberk with Brookings this morning in 0:18:32.160 --> 0:18:35.520 Harvard joining us here and particularly where they're important books 0:18:35.520 --> 0:18:44.760 on presidential history as well. I'm Mark Paul swinging slide 0:18:44.800 --> 0:18:49.920 into our esteem guest. Michael Holland has been so entrenched 0:18:50.000 --> 0:18:54.600 in our equity cadence are equity discourse for decades that 0:18:54.680 --> 0:18:58.120 we forget his accomplishments not only with Oppenheimer Company years 0:18:58.119 --> 0:19:01.080 ago in a small shop called black Stone, but his 0:19:01.200 --> 0:19:04.960 worked for his Harvard uh College and also the Winston 0:19:05.080 --> 0:19:08.960 Churchill Foundation of the United States. This is not Michael 0:19:09.000 --> 0:19:11.320 Holland's first rodeo, is it, Tom, No, it's not his 0:19:11.480 --> 0:19:15.879 first great bullmarket. Michael Holland, Chairman of Holland and Company. 0:19:16.040 --> 0:19:18.320 Thanks so much for joining us. Michael. So, you know, 0:19:18.320 --> 0:19:20.840 as we step back here and look at the market, 0:19:20.840 --> 0:19:23.600 the performance we had in twenty nineteen, the uh, you know, 0:19:23.720 --> 0:19:27.280 pretty solid start here to you know, to the extent 0:19:27.320 --> 0:19:29.440 that there are some concerns out there. One of them 0:19:29.520 --> 0:19:33.560 is the concentration of the performance. And you know, roughly 0:19:33.600 --> 0:19:36.080 a handful of names, some some tech names that we 0:19:36.119 --> 0:19:38.720 all know. The Amazons are, the Microsoft's are the Apples 0:19:38.840 --> 0:19:42.280 of the world. How concerned are you about that aspect 0:19:42.320 --> 0:19:47.679 of the market's overall performance. Well, concerned, Paul, is a word. 0:19:47.359 --> 0:19:51.920 I would just move back from that and say, mindful 0:19:52.119 --> 0:19:55.600 that when these things get crazed. And I was born 0:19:55.640 --> 0:19:58.840 into the business. Tom knows in something called the nifty 0:19:58.880 --> 0:20:01.399 fifty or a handful of stocks back in the seventies 0:20:02.000 --> 0:20:07.000 was doing what we're seeing today. But it's it's different 0:20:07.119 --> 0:20:10.320 in that the valuations of the big names, for the 0:20:10.359 --> 0:20:14.480 Microsoft's and the Apples, the valuations are not as egrageous 0:20:14.560 --> 0:20:17.800 as they were back then. Some friends have recently asked me, 0:20:18.280 --> 0:20:21.160 as they want to do, uh, when would you sell 0:20:21.200 --> 0:20:23.879 all of your stocks, which is a variation on some 0:20:23.920 --> 0:20:26.679 of the things Tom King has asked me over the years. 0:20:26.720 --> 0:20:29.159 And I would sell all my stocks if they became 0:20:29.200 --> 0:20:33.320 egrageously priced, as I observed pain Fleet in the nine 0:20:33.600 --> 0:20:36.359 seventies when I broke into the business, because the crash 0:20:36.440 --> 0:20:40.239 of those nifty fifty stocks was was breathtaking, and how 0:20:40.359 --> 0:20:44.880 much capital was was was destroyed, And so I think 0:20:45.160 --> 0:20:47.240 at this point it's it's something to be mindful of. 0:20:47.320 --> 0:20:49.800 I would actually say, you've actually actually asked a great question, 0:20:49.840 --> 0:20:54.240 because the coronavirus may actually cause it has the possibility 0:20:54.280 --> 0:20:56.720 of causing something like that to happen again if the 0:20:56.760 --> 0:21:00.280 world liquidity spigots go wide open sometime in the next 0:21:00.320 --> 0:21:03.280 six or twelve months. But but what's so interesting, Michael, 0:21:03.560 --> 0:21:08.199 is the backdrop are stunningly negative real yields and in 0:21:08.280 --> 0:21:12.160 some places in the world truenominal yields negative thirty year 0:21:12.240 --> 0:21:17.600 bond with the handle three cups of coffee. Ago is 0:21:17.880 --> 0:21:20.280 almost a negative yield that we saw in oh eight 0:21:20.359 --> 0:21:23.600 oh nine. What is that signal to you to see 0:21:23.640 --> 0:21:28.800 bond prices bid up and yields ever lower. Uh, it's 0:21:28.880 --> 0:21:33.719 it's something that we've never seen in our lifetimes in business. 0:21:33.800 --> 0:21:39.159 It makes all the economics of minds go go crazy 0:21:39.160 --> 0:21:40.720 when they talk about how do you how do you 0:21:41.240 --> 0:21:44.520 get real pricing in all of the world's markets when 0:21:44.520 --> 0:21:47.280 you have negative yields? There's a there's just a an 0:21:47.359 --> 0:21:50.680 inherent contradiction and and all of this so that risk 0:21:50.720 --> 0:21:53.360 free rates of return no longer have any meaning. So 0:21:53.800 --> 0:21:56.879 what But Tom, it's it's actually interesting because you and 0:21:57.040 --> 0:21:59.000 I hope are not talking about this a year from now. 0:21:59.359 --> 0:22:02.320 But it's possible that because of what you just described, 0:22:02.359 --> 0:22:05.119 as well as uh, the possibility that we have a 0:22:05.200 --> 0:22:08.680