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Speaker 1: Our guest is Carol Schlife ce IO at BIMO Family Office. Carol,

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Speaker 1: we have these days where we turn positive like today,

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Speaker 1: and then we had a couple of really tough days.

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Speaker 1: So we go back and forth a lot. The one

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Speaker 1: thing that I'll note is that until the FED starts

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Speaker 1: talking about trying to achieve a soft landing, I can't

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Speaker 1: get too excited excited for the longside. Uh. That's That's

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Speaker 1: one of my keys is that I don't feel that

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Speaker 1: the FED is really auguring at all towards achieving a

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Speaker 1: soft landing. They really want to crush inflation, and that

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Speaker 1: is job one. How do you look at things when

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Speaker 1: you try to simplify them as I've just tried to do.

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Speaker 1: I think it's tough to read anything into the markets

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Speaker 1: of the final two weeks of the year. And in

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Speaker 1: the best of years, but especially after a year like

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Speaker 1: this year. I think a lot of people wrote it

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Speaker 1: off a week or so ago and and so volumes late.

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Speaker 1: It's hard to trust anything trend wise that you're seeing

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Speaker 1: in the markets in these final two weeks. But as

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Speaker 1: it relates to the FED, I don't think the FED

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Speaker 1: necessarily wants to trash the employment market. And I think

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Speaker 1: they would love to achieve a soft landing. They're just

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Speaker 1: pointing out how very difficult that is, because you do

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Speaker 1: have a lot of optimism in the employment market. You've

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Speaker 1: seen it comes through in the consumer spending numbers, and

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Speaker 1: you've seen it comes through in the fact that consumers

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Speaker 1: are spending on credit, which you don't tend to run

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Speaker 1: up your credit cards if you think you're going to

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Speaker 1: lose your job. But I suspect once we start getting

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Speaker 1: some of those bills come in January, that you'll see

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Speaker 1: more softening in some of the consumer numbers, and there'll

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Speaker 1: be some nervousness around employment numbers as well. So maybe

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Speaker 1: the Fed can achieve the soft lending piece, but they're

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Speaker 1: definitely They've tried to communicate to the market all year

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Speaker 1: that they are focused on that inflation piece and they

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Speaker 1: want it down and they want the trend out. M M. Yeah,

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Speaker 1: this is it, isn't it. So we look at three

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Speaker 1: also be more of the same to begin with at least,

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Speaker 1: But are we at the moment seeing the effective quantitative

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Speaker 1: tightening right now in terms of liquidity and any action

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Speaker 1: on the credit markets as well. Yeah, I think you're

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Speaker 1: starting to see some of that. At the margin, you're

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Speaker 1: hearing deals are taking longer to get done. People are

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Speaker 1: looking for alternative methods of financing. I know our commercial

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Speaker 1: bankers and our middle market bankers are saying that some

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Speaker 1: of the medium sized strategic deals are still really good

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Speaker 1: balance sheets on these companies. They're able to get them done,

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Speaker 1: but it's a tougher slog to do that, and so

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Speaker 1: I think that's one of the things factoring in. Even

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Speaker 1: just looking at the M two numbers and the way

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Speaker 1: they've come down, there's quantitative tightening around the globe, and

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Speaker 1: yeahs had that in decades. It's got to be a factor.

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Speaker 1: I mean, it's funny that you mentioned that I just

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Speaker 1: have my M to chart up and I was kind

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Speaker 1: of amusing that it's turned down after a big run up.

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Speaker 1: We all know that, and that was a consequence of

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Speaker 1: and the pandemic um. So it's coming down the slope

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Speaker 1: looks kind of gradual. But then if you actually think

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Speaker 1: about in terms of GDP, which has gone up, it's

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Speaker 1: even more pronounced to the downside. It has to have

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Speaker 1: an effect. And if you also take the better yields

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Speaker 1: that you get with a bond market doesn't that have

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Speaker 1: to suck money out of equities. One would think that

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Speaker 1: then on the other side, we haven't had the level

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Speaker 1: of of fiscal stimulus coming into the market that we

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Speaker 1: potentially have, and that's one of the other factors waiting

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Speaker 1: the other side of the scale, because we have over

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Speaker 1: one point three trillion in in various packages, the semi

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Speaker 1: package and the green energy package, and then we just

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Speaker 1: passed to one point seven trillion appropriation spill that puts

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Speaker 1: ten percent more into um defense spending and other things,

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Speaker 1: so that will mitigate some of it, not all of

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Speaker 1: it potentially, but you've got manufactured spending coming in if

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Speaker 1: you will, on some of that, and some of that

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Speaker 1: will be municipal that issuance and some other things like that.

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Speaker 1: So it'll be interesting to see how it washes out.

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Speaker 1: But I do think it means a lot of back

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Speaker 1: and forth in the first part of the year. Will

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Speaker 1: participants I'll try to find their footing. Well, I suppose

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Speaker 1: we got to also get the earnings picture, don't we,

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Speaker 1: And you know that's also going to be very important

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Speaker 1: with regards to how we are seeing the average shop

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Speaker 1: on main street and on the internet as well, and

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Speaker 1: how they're behaving during this time of the holidays and

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Speaker 1: how important will that be? Yeah, that'll be important, and

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Speaker 1: we'll get earnings and it'll be interesting because you saw

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Speaker 1: the consumer spending numbers. We're up even a little bit

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Speaker 1: above inflation. But at what costs to the retailers. And

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Speaker 1: that will see when they because most of them are

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Speaker 1: in January your in so we'll see that starting in

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Speaker 1: February for retail, but we'll see it in some of

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Speaker 1: the consumer goods stocks in January when they start to

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Speaker 1: report numbers, and the margins will probably be pinched because

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Speaker 1: there's an awful lot of sales that want to entice

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Speaker 1: people into that level of spending. And as we all know,

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Speaker 1: a lot of that spending was shifted towards services and

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Speaker 1: and thanks even if they couldn't get the flights that

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Speaker 1: they needed, and that got all messed up in the

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Speaker 1: last week. But lots of restaurants lest lots of ticket sales,

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Speaker 1: lots of trips planned for the spring. So consumer spending

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Speaker 1: is obviously a vital part to the economy. It's two

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Speaker 1: thirds of or more of the economy. But and consumers

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Speaker 1: are feeling relatively good about that. But businesses too are

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Speaker 1: going to be an important lift going forward in terms

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Speaker 1: of capital expenditures and semi plants and things like that. Well,

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Speaker 1: and if we look at the global economy, Chinese consumers

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Speaker 1: even out number American consumers. Uh, the spending powers maybe

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Speaker 1: not quite up there at par yet, but uh there

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Speaker 1: there's been a big change. And we thought for most

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Speaker 1: of this year in two that you had two major obstacles,

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Speaker 1: the lockdowns in China and a very aggressive FED. The FED.

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Speaker 1: We can argue over whether or not it's rolling over.

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Speaker 1: Most people think not yet, but for sure China has

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Speaker 1: made a big change. How much does that increase the

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Speaker 1: chance that growth expands, It could be huge, especially with

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Speaker 1: them doing it right before the Chinese Lunar New Year,

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Speaker 1: to the extent that they free up travel inside and

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Speaker 1: outside that country, even if people are putting COVID test

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Speaker 1: restrictions on incoming, You've already seen a massive increase in

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Speaker 1: the number of Chinese trying to travel because they that

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Speaker 1: revenge spending that we saw the rest of the globe

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Speaker 1: do over the last two years, it's all pent up

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Speaker 1: in China yet, so you could see a lot of

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Speaker 1: stabilization in emerging markets emanating from the Chinese restrictions being loosened. Well,

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Speaker 1: you know that's also not forget that the geopolitical side

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Speaker 1: of things is been alluding to. Perhaps it's going to

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Speaker 1: be hugely important here as well, with regards not just

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Speaker 1: of course to what's going on with Russia the Ukraine,

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Speaker 1: but you know, further save rattling between China and Taiwan,

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Speaker 1: and of course logically the US with reports today that

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Speaker 1: we had a Chinese plane come within twenty feet of

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Speaker 1: a of a US reconnaissance aircraft, and that's something likely

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Speaker 1: to continue. Don't forget we's got other wild cards out

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Speaker 1: there too. Yeah, there's always plenty of wild cards half

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Speaker 1: way through. But the way twenty two was, I mean

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Speaker 1: we hit the market high, all time high on January

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Speaker 1: three of twenty two, so we had the high and

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Speaker 1: then the worst. Yeah. Um, well, let's let's talk about

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Speaker 1: one trend that can be My very good friend, Ine,

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Speaker 1: is there something you particularly like that you see happening

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Speaker 1: in the coming year. I think just the contrarian trend

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Speaker 1: of when you've got seventy percent of economist calling for

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Speaker 1: a recession and eighty or nine of this this leader's

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Speaker 1: calling for recession. My suspicion is having been in the

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Speaker 1: market for many decades that perhaps we don't see recession

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Speaker 1: and we were able to skirt it. So the trend

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Speaker 1: i'd continue to focus on as consumers and how happy

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Speaker 1: they are unwilling to spend, and I think they moderate

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Speaker 1: some of that spending, so it levels off to a

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Speaker 1: really nice simmer into the rapid boil it's been at. Yeah,

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Speaker 1: I mean the rapid boil that it's been out certainly.

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Speaker 1: So overall, can you give us your top prediction, what

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Speaker 1: you are most convinced about what is going to happen

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Speaker 1: in three here? Um, I think our biggest house conviction

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Speaker 1: is that we will see a more normalized return on

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Speaker 1: both stocks and bonds coming year, where it was very

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Speaker 1: unusual to have both decline in the same year. It's

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Speaker 1: also very unusual to have two SMP declines in consecutive

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Speaker 1: to back years without a major financial bubble bursting, and

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Speaker 1: so we do suspect that you'll see modest, moderate loaded

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Speaker 1: load upper or mid to upper single digit returns on

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Speaker 1: both stocks and bonds this year. That's probably our favorite.

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Speaker 1: All right, Carol, go ahead, Okay, go ahead, finish the

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Speaker 1: thought I was just going to say, and I do

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Speaker 1: think that there'll be a new focus on on shifting

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Speaker 1: up where the growth comes, and it will come in

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Speaker 1: a lot of those construction and industrial spending kinds of this,

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Speaker 1: we rebuild infrastructure. Excellent, Okay, so that gives us something

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Speaker 1: that's you want. Thanks very much, Carol, Carol Schliffe, CEO

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Speaker 1: at BEIMO Family Office,