WEBVTT - Surveillance: Forward-Looking Data Is Up, Achuthan Says 0:00:09.880 --> 0:00:13.840 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 0:00:14.000 --> 0:00:17.599 We bring you insight from the best in economics, finance, investment, 0:00:18.040 --> 0:00:23.560 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.640 --> 0:00:27.440 Bloomberg dot Com, and of course on the Bloomberg I 0:00:27.520 --> 0:00:29.720 speak at George Bowie. Shall we well. Funcer Security has 0:00:29.720 --> 0:00:31.880 had a fixed income research George, Great to see you, 0:00:32.120 --> 0:00:33.919 Good morning. Trying to work out what's going on here 0:00:33.960 --> 0:00:36.640 in global markets, trade risk diminishing, but a tip to say, 0:00:36.680 --> 0:00:39.280 three months ago global growth bottom and gout. To what 0:00:39.360 --> 0:00:42.400 degree is the latter exclusive from the former. I'm trying 0:00:42.400 --> 0:00:44.040 to get my head around that. Many other people out 0:00:44.080 --> 0:00:46.360 as well. Now. I think what we're seeing, at least 0:00:46.360 --> 0:00:48.880 in the fixed income markets, it's it's a little bit 0:00:49.080 --> 0:00:51.080 closer to sort of what you'd consider more of a 0:00:51.600 --> 0:00:54.440 normal market in the sense that I've seen a pretty 0:00:54.440 --> 0:00:58.040 material adjustment across the yield curve. Yield curve was was 0:00:58.040 --> 0:01:01.320 was was was inverted earlier this year, we've seen that 0:01:01.400 --> 0:01:04.440 steeping out as ten ure yields and longer dated yields 0:01:04.440 --> 0:01:06.920 have moved up, while the feed is cut rates and 0:01:07.280 --> 0:01:10.680 a positively sloped upward sloping yield curve is a very 0:01:10.680 --> 0:01:14.440 good indicator, UH, certainly for future economic growth. It takes 0:01:14.480 --> 0:01:17.480 this sting, if you will, out of things like tail risks. UH. 0:01:17.520 --> 0:01:20.640 There's still some concerns obviously about trade, but trade seems 0:01:20.640 --> 0:01:23.000 to be moving in the right direction, and the data 0:01:23.040 --> 0:01:25.360 is getting a little bit better. The date is really better. 0:01:25.440 --> 0:01:28.479 For those brave enough to go into long duration, long 0:01:28.520 --> 0:01:31.759 ago and far away, they're up solid double digits, if 0:01:31.800 --> 0:01:36.200 not more. What do you do now, or into yurine planning? 0:01:36.800 --> 0:01:40.960 If you've got that big double digit gain in a ten, 0:01:41.120 --> 0:01:44.320 twenty or even longer bet, whether it's munis or others, 0:01:44.360 --> 0:01:46.640 what do you do? I think you move away away 0:01:46.720 --> 0:01:48.800 from what we would call it sort of a duration bet, 0:01:48.920 --> 0:01:52.920 so long long maturity bonds, and then you focus more 0:01:52.960 --> 0:01:56.360 on bonds or our companies that are more cyclically exposed. 0:01:56.640 --> 0:01:58.600 That if you're if you're willing to bet that there's 0:01:58.600 --> 0:02:02.480 an economic soft landing, which we think is underway, then 0:02:02.800 --> 0:02:06.160 parts of the bond market like high yield should do okay. 0:02:06.200 --> 0:02:09.040 These are companies with a little bit more leverage, but 0:02:09.160 --> 0:02:13.480 with higher yielding UH securities, higher yielding opportunities, A blended 0:02:13.520 --> 0:02:16.600 portfolio is gonna have a yield of roughly about five 0:02:16.680 --> 0:02:20.240 point six five five point seven five with not a 0:02:20.240 --> 0:02:23.639 lot of duration. There's been a shift in sentiment over 0:02:23.680 --> 0:02:26.520 the past couple of weeks from inflation will never pick 0:02:26.600 --> 0:02:30.200 up again to we're seeing the beginnings of reflation and 0:02:30.240 --> 0:02:33.840 inflation is underpriced in the market. Do you agree with 0:02:33.880 --> 0:02:36.920 that sentiment shift? I think as we kind of move, 0:02:37.160 --> 0:02:38.960 I think people are looking forward to the beginning of 0:02:39.040 --> 0:02:41.200 next year and the data is getting a little bit better. 0:02:41.360 --> 0:02:43.440 The economic data is better, and there is a little 0:02:43.440 --> 0:02:46.280 bit of an upward lift on the inflationary front. But 0:02:46.400 --> 0:02:49.480 in addition to that, the technicalities of how inflation is 0:02:49.520 --> 0:02:53.440 calculated is likely to deliver a lift early next year 0:02:54.040 --> 0:02:57.519 as the linked effects of last year start to roll 0:02:57.560 --> 0:03:00.920 off the numbers. This is all very technical, not wildly exciting, 0:03:01.120 --> 0:03:04.480 but it will show optically that the headline inflation numbers 0:03:04.480 --> 0:03:06.440 are gonna start to rise as we get into the 0:03:06.480 --> 0:03:08.680 beginning of next year, and you're starting to see that 0:03:08.720 --> 0:03:11.240 getting priced in now in some of the securities. What 0:03:11.280 --> 0:03:13.520 do I do if I'm a saver, I got a 0:03:13.560 --> 0:03:16.040 pot of money. It's not a lot of money, but 0:03:16.080 --> 0:03:19.400 I got a pot of money, and I just don't 0:03:19.680 --> 0:03:23.200 want to be in equities. So you buy dominion, you know, 0:03:23.280 --> 0:03:26.040 you buys a couple of utilities from the old days, 0:03:26.080 --> 0:03:30.960 Florida power and light, and then you buy coupon. What 0:03:31.040 --> 0:03:33.880 do you buy right now? So you know, I think 0:03:33.880 --> 0:03:36.040 what you I think? You have to calibrate your return 0:03:36.120 --> 0:03:40.080 expectations of fixed income. That's well's far ago talk John 0:03:40.400 --> 0:03:44.600 for lower yields, lower yields, and how much expecting more 0:03:44.680 --> 0:03:49.720 than a full like a three percent full yield is optimistic. Uh, 0:03:49.760 --> 0:03:53.200 And it's challenging if you're a saver anywhere in the world. 0:03:53.600 --> 0:03:56.720 Anywhere in the world, it is very difficult to generate 0:03:56.880 --> 0:04:01.000 significant coupon income. So if you're you know, a mom 0:04:01.040 --> 0:04:04.600 and pop saver out there, an investment grade relatively low 0:04:04.720 --> 0:04:07.800 risk portfolio is in this sort of three percent kind 0:04:07.840 --> 0:04:09.680 of range. If you want to take a little bit 0:04:09.680 --> 0:04:12.480 more risk and you go into high yield you know, 0:04:12.520 --> 0:04:16.440 now we're talking five and three quarters percent type of yields. 0:04:16.480 --> 0:04:19.640 Beyond that, you're now going into the depths of emerging markets. 0:04:19.680 --> 0:04:22.320 You're going overseas, you're going into corners of the market. 0:04:22.520 --> 0:04:25.720 We're gonna pick up a significant amount of risks. So 0:04:26.200 --> 0:04:28.600 I think a three percent kind of yield, maybe a 0:04:28.600 --> 0:04:31.479 little bit higher depending on how you blend your portfolio. 0:04:31.800 --> 0:04:33.760 It's about the best you can hope for. And I 0:04:33.800 --> 0:04:37.240 think you have to be realistic about your fixed income portfolio. 0:04:37.640 --> 0:04:42.480 It's an anchor. It it's an anchor to your overall portfolio. 0:04:42.560 --> 0:04:44.720 But it's but but the but the yield on it 0:04:44.760 --> 0:04:48.160 is gonna be gonna be relatively low. Is the best 0:04:48.200 --> 0:04:50.320 that you can hope for in the world of fixed 0:04:50.360 --> 0:04:53.680 income that's gonna be tough gun at into for many 0:04:53.720 --> 0:04:55.400 if you out there on now. It's just a final 0:04:55.480 --> 0:04:59.040 question on the regional boss. You mentioned emerging markets. Many 0:04:59.040 --> 0:05:01.599 people thinking about that high bite a trade to the 0:05:01.640 --> 0:05:04.600 trade story. I want to buy the foreign assets Europe. 0:05:04.960 --> 0:05:07.120 Even though fixed income has araut it really hard on 0:05:07.240 --> 0:05:09.839 the last couple of years, I'm thinking more about emerging markets. 0:05:09.880 --> 0:05:12.200 What's your advice to those people? So on the emerging 0:05:12.240 --> 0:05:14.680 markets front, I think you have to tread cautiously, especially 0:05:14.760 --> 0:05:17.560 as it relates to fixed income. You've mentioned a few earlier, 0:05:17.839 --> 0:05:19.400 and I think you're gonna talk about it later in 0:05:19.440 --> 0:05:22.400 the show. You know, there's a variety of meaningful geopolitical 0:05:22.520 --> 0:05:26.599 issues around the world, which maybe makes emerging markets look 0:05:26.600 --> 0:05:29.359 optically cheap, but they're cheap for a reason. You have 0:05:29.400 --> 0:05:32.000 a lot of political unrest in different parts of the market. 0:05:32.200 --> 0:05:34.200 The thing we would look for is um you know, 0:05:34.400 --> 0:05:38.359 if the dollars is getting stronger, that sometimes kind of 0:05:38.360 --> 0:05:40.839 can weigh a little bit on on EM. We'd sort 0:05:40.839 --> 0:05:43.040 of take an up and quality type of trade for 0:05:43.040 --> 0:05:45.400 for e M that's gonna have a yield sort of 0:05:45.520 --> 0:05:47.719 roughly equivalent to high yields, so you can use it 0:05:47.760 --> 0:05:51.080 as a diversification, but not a real sort of material 0:05:51.200 --> 0:05:54.800 yield pickups. So we would use em as a more selective, 0:05:55.320 --> 0:05:59.000 selective type of of of allocation for fixed income portfolio. 0:05:59.080 --> 0:06:00.840 Juge BORI, thank you big week I had for you. 0:06:00.880 --> 0:06:02.960 We appreciate your time this morning. George Boy Then West 0:06:02.960 --> 0:06:20.960 Founca Securities had a fixed income research right now in 0:06:21.120 --> 0:06:24.600 Hong Kong, providing great leadership to Bloomberg Television and to 0:06:24.680 --> 0:06:27.520 Bloomberg Newsy Von Man joins us as well. Von this 0:06:27.560 --> 0:06:32.200 weekend was different. Quickly here describe why this weekend was 0:06:32.279 --> 0:06:37.320 so different for the chief executive Carry Lamb. Well, Tom, 0:06:37.320 --> 0:06:40.920 this the protest right now have reached another level here 0:06:41.160 --> 0:06:44.279 after the death of a student last week. This man 0:06:44.720 --> 0:06:47.520 was a twenty two year old student, the university student 0:06:47.560 --> 0:06:51.080 who fell off a car park near during a demonstration 0:06:51.200 --> 0:06:53.719 where police used tear gas disperse a crowd, and that 0:06:53.920 --> 0:06:57.400 is what sparked the violence over the weekend and what 0:06:57.600 --> 0:07:01.920 has really transpired here this evening riot police right now 0:07:02.000 --> 0:07:06.120 are still in the streets territory wide trying to stop 0:07:06.160 --> 0:07:08.840 these protesters, but we haven't seen any kind of site 0:07:08.880 --> 0:07:11.320 at this point. And and more violence here this morning. 0:07:11.440 --> 0:07:15.280 Those two incidents of of a man that was set 0:07:15.320 --> 0:07:18.760 on fire by a protester after there were some verbal clashes, 0:07:18.800 --> 0:07:21.520 and of course that police officer that shot a protester 0:07:21.640 --> 0:07:25.080 at point blanks this morning. Yvonne on the ground there 0:07:25.600 --> 0:07:27.800 is this is the mood different have you Can you 0:07:27.800 --> 0:07:33.160 actually feel the shift? Yeah, I mean we have felt 0:07:33.160 --> 0:07:36.080 the shift. And there was a while the last couple 0:07:36.080 --> 0:07:38.360 of weeks where things were stimmering down a little bit, 0:07:38.760 --> 0:07:41.720 and now we've reached another type of fever pitch, I 0:07:41.760 --> 0:07:44.960 would say, because the death of the student is what 0:07:45.040 --> 0:07:48.239 really sparked more people on the streets over the weekend. 0:07:48.280 --> 0:07:52.680 We had already ninety arrest on Saturday and Sunday. Dozens 0:07:52.720 --> 0:07:56.960 injured already. Today, school was canceled for some universities and 0:07:57.040 --> 0:08:00.800 some secondary schools, and a hundred and seventy flights were canceled. 0:08:00.840 --> 0:08:03.559 So we're kind of back into this more violent type 0:08:03.560 --> 0:08:06.960 of wave that we've seen, uh, and the crowds have 0:08:07.080 --> 0:08:09.360 really it hasn't just been one area now, it's it's 0:08:09.360 --> 0:08:13.240 the Central Business business district where we saw traffic was disrupted. 0:08:13.720 --> 0:08:17.880 Police refined tear gas near Central Landmark, one of the 0:08:18.320 --> 0:08:20.880 close to the business district here where many people are 0:08:20.880 --> 0:08:23.320 going to work. They had to hide and take covers 0:08:23.320 --> 0:08:25.720 in the luxury malls here as they were pure gas 0:08:25.760 --> 0:08:28.320 and washing washing their eyes with water. And that was 0:08:28.360 --> 0:08:30.920 something that we hadn't seen in some time. And so 0:08:31.000 --> 0:08:33.720 you feel it and you certainly feel it, especially with 0:08:33.760 --> 0:08:37.080 the closures around the retail malls, the banks, and of 0:08:37.120 --> 0:08:39.280 course the vandalism that we've seen all across the city. 0:08:39.679 --> 0:08:43.599 How explosive was President Ji Jim Ping's explanation that he 0:08:43.640 --> 0:08:47.319 would like to see a patriot ruling Hong Kong regardless 0:08:47.320 --> 0:08:51.800 of people. Better get used to Ceo lamb, right. I 0:08:51.800 --> 0:08:54.760 mean that was another China just digging their heels saying 0:08:54.760 --> 0:08:57.080 that they're not going to give in to any of 0:08:57.120 --> 0:09:00.200 these demands. But the police, Hong Kong Police spoke mean 0:09:00.280 --> 0:09:02.720 today during a press conference did say that they that 0:09:02.800 --> 0:09:05.760 he believes that there is no chance at this point 0:09:05.760 --> 0:09:07.880 of the p l a W will be deployed in 0:09:07.920 --> 0:09:11.440 the city. So they're still sticking by police, Hong Kong 0:09:11.480 --> 0:09:14.640 Police at the moment and defending their actions, especially with 0:09:14.760 --> 0:09:18.120 this morning with that shooting. But it is once again 0:09:18.440 --> 0:09:21.920 carry Lamb talking today saying that these actions from the 0:09:21.960 --> 0:09:25.400 writers that she called them go far beyond just demands 0:09:25.520 --> 0:09:29.160 right now. Now they're treating citizens, as she says, as enemies. 0:09:29.240 --> 0:09:32.720 So you know, she's still calling for a doctor the violence, 0:09:32.760 --> 0:09:34.840 but we haven't seen any of that yet. Even man, 0:09:34.880 --> 0:09:37.400 thank you so much. On the Monday evening of Hong 0:09:37.480 --> 0:09:51.880 Kong with us here in the studio in place to say, 0:09:51.880 --> 0:09:54.960 is Sarah Manic moving global equity seat I oh, good 0:09:54.960 --> 0:09:57.920 morning to Sarah. Morning. Within the equity market at all 0:09:57.960 --> 0:10:00.400 time high, there is this rotation that many people are 0:10:00.400 --> 0:10:04.120 focused on two cyclicals from defensives to value from growth. 0:10:04.400 --> 0:10:06.840 Your thoughts on what is underpinning that move and where 0:10:06.840 --> 0:10:08.679 it's heading in the months to come so a couple 0:10:08.679 --> 0:10:10.839 of things on value which we think can lead for 0:10:10.880 --> 0:10:13.079 the next couple of quarters. So, first of all, this 0:10:13.200 --> 0:10:15.760 rally and value the encyclicals that we've seen has been 0:10:15.800 --> 0:10:18.760 about the strongest that's happened since late two thousand and sixteen, 0:10:18.800 --> 0:10:21.240 which is when the election occurred. And also it's been 0:10:21.320 --> 0:10:23.679 less fits and starts and more sustainable, so we do 0:10:23.760 --> 0:10:26.400 think it has legs. Basically, what we've seen is the 0:10:26.400 --> 0:10:29.160 economy is less bad than we thought, Earnings came in 0:10:29.240 --> 0:10:32.440 better than expected. We're seeing some progress on tariffs, but 0:10:32.640 --> 0:10:35.280 definitely that's in kind of fits and starts itself. All 0:10:35.400 --> 0:10:38.360 that should lead to value continuing to be the leader 0:10:38.360 --> 0:10:40.520 in the market for a quarter or two, but after 0:10:40.600 --> 0:10:43.360 that earnings growth load of mid single digits next year, 0:10:43.480 --> 0:10:45.800 we probably will go back to this quality growth kind 0:10:45.800 --> 0:10:49.160 of environment less bad. Sounds like the conditions to generate 0:10:49.200 --> 0:10:52.480 a squeeze, not a sustainable rally, not a sustainable rotation. 0:10:52.600 --> 0:10:54.920 Is that essentially what you're communicates into clients. Yeah, I'm 0:10:54.960 --> 0:10:56.880 seeing more of a reversion to the mean. Value has 0:10:56.880 --> 0:10:59.199 been undervalued for a while, and we think it will 0:10:59.240 --> 0:11:00.920 go back to the mean. But then after that, not 0:11:01.040 --> 0:11:03.559 traded a premium because what you need in place or 0:11:03.640 --> 0:11:06.040 value to really work is strong earnings growth and a 0:11:06.160 --> 0:11:09.439 stronger economy, which we're not going to see that going forward. 0:11:09.480 --> 0:11:12.400 Earlier this morning, Tom came made a really good point 0:11:12.480 --> 0:11:16.280 that five stocks account for of the S and P 0:11:16.480 --> 0:11:20.040 five hundred. Those stocks are tech. What will drive tech 0:11:20.400 --> 0:11:22.800 further up at this point? I think that's going to 0:11:22.880 --> 0:11:25.959 be challenging the old world of where investors. You know, 0:11:26.040 --> 0:11:28.080 what we saw this narrow market for most of this 0:11:28.200 --> 0:11:30.520 cycle of the past decade was investors were willing to 0:11:30.559 --> 0:11:33.920 pay pretty high premiums for these high structural growth companies. 0:11:34.040 --> 0:11:35.480 We think it's going to be more of a garp 0:11:35.640 --> 0:11:38.640 environment growth a reasonable price. People won't pay these premiums 0:11:38.640 --> 0:11:41.280 for these tech comes. So does that mean that another 0:11:41.400 --> 0:11:44.040 sector will get leadership here or that we'll just sort 0:11:44.080 --> 0:11:46.960 of uh, not see very much by way of gains here. 0:11:47.360 --> 0:11:50.160 We think that other sectors will get leadership like quality 0:11:50.160 --> 0:11:53.000 growth with more defensive characteristics that are less dependent on 0:11:53.040 --> 0:11:55.480 the economy. But people are going to be careful about 0:11:55.520 --> 0:11:57.440 how much they pay for that growth. So you can 0:11:57.480 --> 0:12:01.120 see pockets of healthcare where pipelines are strong payments, companies 0:12:01.120 --> 0:12:03.400 with a good tail win on global payments areas such 0:12:03.400 --> 0:12:08.319 as that. The the acclaim of nouvene over decades is 0:12:08.400 --> 0:12:11.240 you knew what you owned. That was the whole nouvene racket. 0:12:11.240 --> 0:12:13.520 Way back. Instead of buying a mutual fun you bought 0:12:13.520 --> 0:12:16.280 a fixed portfolio of bonds and it was a great 0:12:16.280 --> 0:12:19.760 and beautiful thing, particularly when priced down yield up. Now 0:12:19.880 --> 0:12:23.440 you're in the equity area of it. But I'm fascinated 0:12:23.640 --> 0:12:29.720 how Nouvine is structured to protect people when we finally normalize, 0:12:29.800 --> 0:12:32.600 there's a belief out there somewhere in the future will 0:12:32.640 --> 0:12:35.360 get somewhat higher rates. Somewhere in the future, we may 0:12:35.360 --> 0:12:38.760 actually get a correction. Heaven forbid a bear market. How 0:12:38.800 --> 0:12:41.800 does Nuvine protect against that like you did a zillion 0:12:41.880 --> 0:12:44.560 years ago. Well, we think of Nuvine today. It's a 0:12:44.600 --> 0:12:46.640 lot different than it used to be. It's a trillion 0:12:46.679 --> 0:12:50.520 dollar asset manager, multi asset class firm, offerings across publics 0:12:50.559 --> 0:12:53.160 and private so we can provide any kind of solution 0:12:53.240 --> 0:12:56.600 for investors. The equity business is a three billion assets 0:12:56.559 --> 0:13:00.560 center management business, deep specialist movement doing it for sixty 0:13:00.600 --> 0:13:04.160 five years. And domestic equities, so you very deep history 0:13:04.160 --> 0:13:05.880 and investing that we think that you're part of t 0:13:06.000 --> 0:13:07.720 I a Kreft. I mean you were there before, but 0:13:07.760 --> 0:13:09.800 now you're part of TI a Creft, right, that's right. 0:13:09.880 --> 0:13:13.360 T I acquired Nuvine. Yeah, they acquired Okay, what's your 0:13:13.440 --> 0:13:16.440 ex real assumption? I mean, you know, we're just the 0:13:16.480 --> 0:13:19.160 four of us. Nobody's listening. But what you know, what's 0:13:19.160 --> 0:13:22.480 your actual assumption you're working with right now with all 0:13:22.520 --> 0:13:25.959 the heritage of Nwvine's bond view. I mean, you know, 0:13:26.040 --> 0:13:28.000 I'm on the equity side, so no, but I still 0:13:28.120 --> 0:13:30.280 got to have an actual assumption. What is it? I 0:13:30.320 --> 0:13:32.400 mean I don't personally have one. I don't think that's 0:13:32.440 --> 0:13:34.640 my area of expertise. And what we're thinking about right 0:13:34.679 --> 0:13:37.040 now with the equity business, what we're thinking about is 0:13:37.080 --> 0:13:40.120 how do we position our client portfolios around the world 0:13:40.320 --> 0:13:42.840 so that we can offer them diversification. Make sure that 0:13:43.040 --> 0:13:46.839 you know, we're able to UM diversify, not have large 0:13:46.880 --> 0:13:50.600 factor bets, so that we can own quality companies UM 0:13:50.640 --> 0:13:52.360 you know, around the world, and make sure they are 0:13:52.360 --> 0:13:55.719 a client portfolios are diversified within equities. So let's talk 0:13:55.720 --> 0:13:58.680 about that regional diversification. At the moment, many people are 0:13:58.760 --> 0:14:00.960 thinking about going GEP brought from outside the United States 0:14:01.000 --> 0:14:04.520 into places like Europe, into emerging markets, what your advice 0:14:04.600 --> 0:14:07.040 for them at the moment. So with this value rebound 0:14:07.040 --> 0:14:09.040 that we've seeing, we actually think it's positive for Europe, 0:14:09.080 --> 0:14:11.360 which has been a huge la rate over the past decade, 0:14:11.440 --> 0:14:13.959 so your tends to be more cyclical. We actually think 0:14:13.960 --> 0:14:17.120 that Germany may be starting to stabilize this brexit may 0:14:17.120 --> 0:14:19.320 make some progress, So Europe in general, we're a little 0:14:19.320 --> 0:14:22.120 bit more positive on emerging markets. We like those a lot, 0:14:22.160 --> 0:14:24.560 particularly Brazil, which is a little bit out of the 0:14:24.600 --> 0:14:28.240 trade cross hairs. Nice reform story in place, and China 0:14:28.360 --> 0:14:30.400 if tariffs can continue to make progress, we think that 0:14:30.480 --> 0:14:33.080 China should continue to rebound. From here, let's start with Europe. 0:14:33.080 --> 0:14:35.040 If I go in at the index level and end 0:14:35.080 --> 0:14:37.520 up owning a load of financials, do I want them? 0:14:37.720 --> 0:14:41.120 Donnot want them? We kind of generally like financials from here. 0:14:41.200 --> 0:14:43.040 We think that they can continue to do well as 0:14:43.080 --> 0:14:46.000 a ten year creeps up. European financials we think could 0:14:46.040 --> 0:14:49.280 look reasonably attractive if Europe does start to stabilize the 0:14:49.320 --> 0:14:52.920 European financials, European industrials could be a nice sector that 0:14:53.000 --> 0:14:55.760 it's nice sectors to own going forward. I'm trying to 0:14:55.840 --> 0:14:58.800 understand how you price geopolitical risk, and I'm thinking of 0:14:58.840 --> 0:15:02.520 Hong Kong uh the Hang Sang Index losing almost three 0:15:02.600 --> 0:15:05.240 percent on the heels of the violence that we saw 0:15:05.600 --> 0:15:09.120 overnight in the region. How do you view that in 0:15:09.240 --> 0:15:14.880 terms of specific momentary risk versus larger systemic issues. I mean, 0:15:14.920 --> 0:15:17.360 geo political risk has been an issue around the world 0:15:17.440 --> 0:15:19.920 for a long time, ranging from Brexit to the protests 0:15:19.920 --> 0:15:22.720 in Hong Kong. Typically, what we've seen is it remains 0:15:23.000 --> 0:15:25.760 somewhat localized and has not become a global problem like 0:15:25.800 --> 0:15:28.040 it has in the past. So for us, it's been 0:15:28.280 --> 0:15:30.720 making sure that you avoid that local area while these 0:15:30.880 --> 0:15:33.120 very hard to predict events are taking place. So not 0:15:33.200 --> 0:15:36.280 buying the dip, not buying the dip Right now, I 0:15:36.360 --> 0:15:38.360 want to give you a massive shout out. Maybe it's 0:15:38.360 --> 0:15:41.760 because you're in Chicago with Morning Star leaning over your shoulder, 0:15:41.840 --> 0:15:44.360 but the way on your website you display your funds 0:15:44.400 --> 0:15:46.520 track record as an act of God, I just wish 0:15:46.600 --> 0:15:49.200 everybody did this, where you just say look, this is 0:15:49.280 --> 0:15:51.600 year to date. That's what people want to know. And 0:15:51.600 --> 0:15:53.600 it's great that the new ven e s G Large 0:15:53.640 --> 0:15:57.239 cap value fund. You know it's three beeps under SPX, 0:15:57.240 --> 0:16:00.880 but it's not bad at all this year. We'll take it. 0:16:01.200 --> 0:16:04.840 How do you respond to so many people in funds 0:16:04.880 --> 0:16:09.000 through well intentioned reasons, that are enjoying single digit returns 0:16:09.040 --> 0:16:11.200 this year? They're looking at the cross heres of the 0:16:11.240 --> 0:16:13.240 year end and they're going, wait a minute, what am 0:16:13.280 --> 0:16:15.640 I doing? Yeah? I mean I think you know the 0:16:15.720 --> 0:16:18.880 job of the active managers to lead by performance. So 0:16:19.000 --> 0:16:20.680 you know two goals here. One is you want to 0:16:20.680 --> 0:16:22.800 make sure that you can beat your benchmark and also 0:16:22.960 --> 0:16:25.280 that you can't perform relative to your peers that you 0:16:25.320 --> 0:16:27.800 can justify the fees that you're charging. So I mean, 0:16:27.840 --> 0:16:30.160 I think you know, if you have funds that are struggling, 0:16:30.160 --> 0:16:32.360 you need to be looking closely at them and figuring out, 0:16:32.520 --> 0:16:35.000 you know, what we need to do better, because if 0:16:35.040 --> 0:16:37.960 you're going to be an active manager with the infiltration 0:16:37.960 --> 0:16:39.680 of passive, you need to make sure that you cannot 0:16:39.680 --> 0:16:43.320 beat your benchmark and deserve the fee that you're you're charging. Sarah, 0:16:43.360 --> 0:16:45.000 thank you, it's great to say this morning. We're gonna 0:16:45.000 --> 0:16:46.040 have to get you back. I know you've got to 0:16:46.080 --> 0:16:48.760 run out of the studio for another employment some michalled 0:16:48.760 --> 0:16:50.880 bloom Black TV. I think Sarah Manic has to go 0:16:50.960 --> 0:16:53.360 to She's gonna run out of one studio to another 0:16:53.520 --> 0:16:55.120 because she has to leave a little bit early. Sarah, 0:16:55.200 --> 0:17:11.680 thank you. John. Let's get right to it with our guests, 0:17:11.720 --> 0:17:13.679 because this is like a road show. You got your 0:17:13.720 --> 0:17:16.440 rubber Chicken, and you're all set up here right now 0:17:16.800 --> 0:17:20.560 for your road show for the Saudi Arabian Oil Company. 0:17:21.320 --> 0:17:23.880 Doing it with the Ritz with Steven Short. Who's gonna 0:17:23.960 --> 0:17:26.359 stand up and tell them what oil is gonna be 0:17:26.600 --> 0:17:30.639 from the Short Report with the most insanely hyper detailed 0:17:30.720 --> 0:17:35.000 view of American hydrocarbon Stephen Short, and we're through. Design's 0:17:35.040 --> 0:17:38.040 been way too long, Stephen, good morning. Can you tell 0:17:38.040 --> 0:17:41.200 a ram Co that they need to settle on fifty 0:17:41.240 --> 0:17:44.240 dollar oil or sixty dollar oil? Which way is that 0:17:44.280 --> 0:17:47.119 gonna cut? I think at this point, Tom, with what 0:17:47.160 --> 0:17:49.879 we're seeing in the market, with regard to economic growth 0:17:50.119 --> 0:17:53.639 demand to k going out into the future, that lower 0:17:53.680 --> 0:17:57.320 for longer would certainly be the mantra. I think even 0:17:57.359 --> 0:18:00.399 at that sixty dollar range, I think that is clearly 0:18:01.280 --> 0:18:05.080 excuse me, a a realistic range. But for all intents 0:18:05.080 --> 0:18:07.879 and purposes. It is well below what a ramco is 0:18:07.920 --> 0:18:10.359 planning on and what it's trying to sell its investors on. 0:18:10.520 --> 0:18:13.639 So I think that there's a good degree of hopium 0:18:13.880 --> 0:18:17.199 that um that Saudi Aramco is hoping the market is 0:18:17.200 --> 0:18:20.800 smoking on on this idea that will see higher prices. 0:18:20.960 --> 0:18:23.360 Is that the New York giants here this weekend hope? Yeah, 0:18:26.320 --> 0:18:29.520 you're going to rub that in a little bit. Lincoln 0:18:30.160 --> 0:18:32.879 one point five trillion dollar valuation potentially would yield a 0:18:32.960 --> 0:18:37.760 five dividend yield based on an initial seventy five billion 0:18:38.000 --> 0:18:40.880 dollar dividend. Stephen doesn't get it done versus the all 0:18:40.960 --> 0:18:45.920 majors in Europe in the United States five uh five percent. 0:18:46.080 --> 0:18:50.199 I think I'm highly skeptical on a percentage and on 0:18:50.280 --> 0:18:54.119 the assumptions going into that that percentage, we're we're dealing 0:18:54.280 --> 0:18:58.280 with the market that's undergoing a tectonic shift with regard 0:18:58.359 --> 0:19:00.760 to the future prospects of growth. We'll see. What's so 0:19:00.800 --> 0:19:04.520 important here is you are the king of calculating the 0:19:04.640 --> 0:19:08.399 flows the first second derivative of all these barrels. Do 0:19:08.480 --> 0:19:12.399 we have any clue what Saudi Aramco has? Do we 0:19:12.680 --> 0:19:16.760 have any understanding of the underlying assets or their Shorky 0:19:16.840 --> 0:19:21.000 and derivatives. Yes, no, not that we can we can 0:19:21.040 --> 0:19:25.560 tell UH ascortaining with any sort of significant confidence. It's 0:19:25.560 --> 0:19:29.880 almost similar akin to the economic numbers that we get 0:19:29.880 --> 0:19:31.760 out of China. You just have to kind of go 0:19:31.840 --> 0:19:35.639 along and trust the process and hope the oil is there. 0:19:36.480 --> 0:19:40.400 We certainly have have a mechanism UH in the market 0:19:40.560 --> 0:19:43.320 of a balancing act and looking at the spread markets. 0:19:43.400 --> 0:19:47.480 But but certainly I think there is a degree of skepticism. 0:19:47.520 --> 0:19:51.440 But that said, Tom, I think this is a demand 0:19:51.520 --> 0:19:55.560 size sized market rather than supply side. We just had 0:19:55.920 --> 0:20:00.960 the Iranians just announced the fifty billion barrel discovery of 0:20:01.119 --> 0:20:04.679 new oil. And when we consider that this market demand 0:20:04.760 --> 0:20:09.560 decay or demand peaking within the next twenty years. Really, 0:20:09.760 --> 0:20:12.600 you know, the question is how long can demand last 0:20:12.760 --> 0:20:15.400 rather that how much supply is still in the ground? Yeah, 0:20:15.440 --> 0:20:18.040 demand peaking in the next twenty years. One of the 0:20:18.040 --> 0:20:22.359 potential details in the six hundred page Hairsale prospectus that 0:20:22.440 --> 0:20:26.840 was released on Saturday, giving more insight into Aramco's financials, 0:20:26.880 --> 0:20:29.320 which is unusual. It was reversal in course for them 0:20:29.840 --> 0:20:32.640 having denied that in the past as being a possibility 0:20:32.800 --> 0:20:36.560 also though, revealing a sharp drop in profit related to 0:20:36.560 --> 0:20:39.080 the attacks on its facilities in September. How big of 0:20:39.080 --> 0:20:42.280 a concern was that for you? Uh? Well, certainly, I 0:20:42.320 --> 0:20:46.600 think that it is with with with any of that region. 0:20:46.960 --> 0:20:50.440 When you have a one one source that is your 0:20:50.440 --> 0:20:53.200 primary source of income, whether it is for Iraq or 0:20:53.359 --> 0:20:56.280 in Saudi Arabia and so forth, when you see that 0:20:56.359 --> 0:20:59.639 kind of vulnerability in the supply chain. Uh. In the 0:20:59.640 --> 0:21:04.439 process spects of the the younger generation of people around 0:21:04.440 --> 0:21:08.920 the world and their view on fossil fuels, it's not positive. Uh. 0:21:09.000 --> 0:21:11.840 And so my my biggest concern going forward and spend 0:21:11.880 --> 0:21:14.080 my biggest concern because I always thought it was kind 0:21:14.080 --> 0:21:18.119 of odd and worrisome that people were looking at the 0:21:18.160 --> 0:21:21.560 demise of oil as as a as a weapon, as 0:21:21.600 --> 0:21:23.920 a as a price weapon, and they were looking at 0:21:23.960 --> 0:21:26.600 as some kind of with some kind of glee. And 0:21:26.680 --> 0:21:29.879 my concern and this will I am confident, well it 0:21:29.960 --> 0:21:32.960 is bearing out and will only escalate in the years 0:21:33.000 --> 0:21:36.120