WEBVTT - Surveillance: Tech Stalling, says Verrone 0:00:05.160 --> 0:00:08.480 This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:08.520 --> 0:00:12.319 with Jonathan Farrow and Lisa Abramowitz. Join us each day 0:00:12.400 --> 0:00:16.880 for insight from the best and economics, geopolitics, finance and investment. 0:00:17.280 --> 0:00:22.119 Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 0:00:22.320 --> 0:00:26.600 anywhere you get your podcasts, and always on Bloomberg dot com, 0:00:26.640 --> 0:00:30.760 the Bloomberg Terminal and the Bloomberg Business App. Christopher Erwon 0:00:30.840 --> 0:00:33.760 joins us now had a technical and macro strategy. It's 0:00:33.760 --> 0:00:36.559 strtigas it is a Baird company. Christopher own, thank you 0:00:36.560 --> 0:00:38.920 so much for joining us. Which chart matters right now? 0:00:39.600 --> 0:00:41.760 I think there's nothing more important in the world right 0:00:41.800 --> 0:00:44.640 now in terms of what bon yields do over the 0:00:44.720 --> 0:00:46.920 next number of weeks here I mean ten years. Yields 0:00:46.920 --> 0:00:50.320 have been chopping basically since last October. This is going 0:00:50.400 --> 0:00:53.040 to resolve itself very soon. We're simply running out of 0:00:53.120 --> 0:00:55.600 real estate on the chart. And think you start pushing 0:00:55.640 --> 0:00:58.680 above three ninety three ninety five on tens, that's a 0:00:58.680 --> 0:01:00.600 big deal. I think it's a big deal multiples. I 0:01:00.600 --> 0:01:03.800 think it's a big deal for the growth value equation. 0:01:04.560 --> 0:01:07.320 And Lisa, as you point out very quietly the last 0:01:07.360 --> 0:01:09.520 week or so, there's been some stalling in tech and 0:01:09.600 --> 0:01:12.720 I wonder if that's some reflection in where rates go 0:01:12.760 --> 0:01:15.479 from here. I also think the weakness and utilities might 0:01:15.480 --> 0:01:17.800 be a reflection of where rates may go from here. 0:01:18.280 --> 0:01:22.640 And the move in UK has been absolutely explosive. Here 0:01:22.720 --> 0:01:24.880 you have two year guilts and ten year guildts basically 0:01:24.920 --> 0:01:27.839 back to where they were when all these revelations about 0:01:27.920 --> 0:01:30.840 LDI and British pensions were revealed last fall. 0:01:30.959 --> 0:01:33.600 Can you judge technically? And I we had a guest 0:01:33.640 --> 0:01:34.840 yesterday that talked about this. 0:01:35.360 --> 0:01:38.080 What we really need to see is the high two 0:01:38.160 --> 0:01:41.760 year yields come out to a high five year yield. 0:01:42.200 --> 0:01:46.000 Do you see within the charts of spreads, the charts 0:01:46.040 --> 0:01:49.960 of an actual single yield where we're going to broaden. 0:01:49.640 --> 0:01:52.240 Out these high yields into a higher yield regime. 0:01:52.840 --> 0:01:54.960 You know what's interesting we always look at this relationship 0:01:54.960 --> 0:01:58.160 between twos and FED funds right and twos have largely 0:01:58.280 --> 0:02:02.080 traded south of FED fund on since call it February 0:02:02.160 --> 0:02:04.440 or March of this year. They're starting to creep back 0:02:04.520 --> 0:02:08.200 up there in terms of reclaiming the bar of FED 0:02:08.240 --> 0:02:11.400 funds here and if you look at who's raised rates recently, 0:02:11.520 --> 0:02:15.960 the OSS's, the CADS and UK. What's happened in all 0:02:16.000 --> 0:02:19.080 those markets they've softened, And what's happened with the banks 0:02:19.240 --> 0:02:22.840 in those industries they've softened as well. Canadian banks, OSC banks, 0:02:22.880 --> 0:02:25.560 UK banks are all pretty soft here, as those central 0:02:25.560 --> 0:02:27.520 banks have hiked over the last several weeks. 0:02:27.560 --> 0:02:29.880 There's a real tension heading into this nine thirty AM 0:02:29.960 --> 0:02:32.520 panel of how important the central bankers are and determining 0:02:32.560 --> 0:02:35.519 what happens next in markets. There was a brief second 0:02:35.600 --> 0:02:38.320 where people thought maybe we have moved beyond central banks 0:02:38.440 --> 0:02:41.400 and we're moving to fundamentals. God Willing, are you saying 0:02:41.400 --> 0:02:42.480 that that's not the case. 0:02:42.840 --> 0:02:45.519 I don't think it's the case yet, or at a minimum, 0:02:45.600 --> 0:02:48.000 I think the message or the interpretation of the bond 0:02:48.120 --> 0:02:51.040 market to all of this is still paramount in our 0:02:51.080 --> 0:02:53.280 thinking about what the second half of the year looks like. 0:02:53.320 --> 0:02:56.000 But a Lisa, as you point out, the trend here 0:02:56.080 --> 0:02:57.520 is still the trend, and the trend is in the 0:02:57.560 --> 0:03:01.600 trend in stocks are still up. There are areas of weakness, 0:03:01.639 --> 0:03:04.119 and there are pockets that may get weak, but in 0:03:05.080 --> 0:03:07.560 basically broad aggregate here the Trendon's dock is up. What 0:03:07.720 --> 0:03:09.320 I want to watch as we think about the second 0:03:09.320 --> 0:03:12.000 half of the year. We've seen some modest broadening over 0:03:12.040 --> 0:03:14.480 the last two or three weeks. Does that stall or 0:03:14.520 --> 0:03:17.680 does that continue? We're sitting here today with about sixty 0:03:17.720 --> 0:03:19.320 percent of the S and P above the two HUNDREDAY 0:03:19.320 --> 0:03:23.160 moving average. That's a reading that ordinarily wouldn't worry me 0:03:23.240 --> 0:03:27.280 that much. It's just unusual in a first year off 0:03:27.320 --> 0:03:30.680 below that were not broader. Narrow markets are common, but 0:03:30.720 --> 0:03:32.799 they're common late, they're not common early. 0:03:32.840 --> 0:03:33.520 In a new advance. 0:03:33.680 --> 0:03:36.040 You mentioned that we have seen this stalling out in 0:03:36.080 --> 0:03:38.480 the tech trade. There have been a number of downgrades 0:03:38.480 --> 0:03:41.240 from banks saying perhaps it's gone a little bit too far. 0:03:41.760 --> 0:03:44.560 Are you saying it's more related to the yield story 0:03:44.720 --> 0:03:47.920 and the waking up to an old paradigm that we 0:03:47.960 --> 0:03:50.600 saw a whole six months ago that people had abandoned 0:03:50.640 --> 0:03:52.480 when we had the no landing, the soft landing, and 0:03:52.520 --> 0:03:55.000 the maculate disinflation of say February. 0:03:55.080 --> 0:03:56.840 You know, it feels like a different world ago. We 0:03:57.240 --> 0:04:00.520 spent basically twenty one and twenty two thinking the world 0:04:00.560 --> 0:04:02.520 to change, and we were on the cusp of some 0:04:02.560 --> 0:04:05.560 big regime change for that view to be massively challenged 0:04:05.560 --> 0:04:08.480 over the last three or four months. My suspicion is, 0:04:08.760 --> 0:04:10.800 if we really get rates up here, and I'm talking 0:04:10.800 --> 0:04:13.280 to say, above four on tens, maybe above four to 0:04:13.320 --> 0:04:16.560 ten on thirty's new highs on twos, you're going to 0:04:16.640 --> 0:04:18.720 really begin to question some of the valuations that are 0:04:18.720 --> 0:04:20.880 put on these tech names. And I wonder if that's 0:04:20.920 --> 0:04:22.920 why there's a hint of them starting to stall here. 0:04:22.960 --> 0:04:25.159 It's not everywhere. Apple made a new high yesterday, but 0:04:25.600 --> 0:04:29.440 quietly Google's come in here, AMD's come in here, Microsoft 0:04:29.480 --> 0:04:32.080 has softened a touch. They've all ridden their fifty day 0:04:32.120 --> 0:04:34.279 averages all year. I think those would be very big 0:04:34.360 --> 0:04:36.720 levels moving forward. And if you want to look at 0:04:36.720 --> 0:04:39.039 a test, this is a different sector, but use this 0:04:39.080 --> 0:04:43.479 as a test. The European luxury names, HERMEZ, LVMAH, etc. 0:04:44.160 --> 0:04:47.160 They've all been very tech like this year. Those that 0:04:47.279 --> 0:04:49.600 actually started to stall the last two weeks, I think 0:04:49.600 --> 0:04:53.119 we're going to learn about other corners of the world 0:04:53.200 --> 0:04:55.120 from how those stocks respond going forward. 0:04:55.200 --> 0:04:59.320 Bloomberg with a great story to dan is it Lewis 0:04:59.320 --> 0:05:04.039 Futon the stock yet as well. 0:05:04.279 --> 0:05:06.719 You know, a technical analysis is about looking at the 0:05:06.760 --> 0:05:09.600 past and learning lessons. We came off the mat seventy three, 0:05:09.680 --> 0:05:12.080 seventy four, we had a nice leg up, and then 0:05:12.120 --> 0:05:15.520 in December of nineteen seventy five we discovered a second 0:05:15.600 --> 0:05:18.560 leg up in the market. Can people like Chris Vorone 0:05:18.720 --> 0:05:21.120 discover a second leg before it happens? 0:05:22.560 --> 0:05:25.560 You know, when I think about markets, I don't really 0:05:25.960 --> 0:05:28.599 operate in the world of levels. I operate in the 0:05:28.640 --> 0:05:31.239 world of what is the characteristics of a certain advance? 0:05:31.839 --> 0:05:33.919 And I think, on balance, when you look at this 0:05:34.080 --> 0:05:38.080 current advance, the leadership is still pretty risk seeking. We 0:05:38.120 --> 0:05:40.320 see it with industrials, We see it with discretionary better 0:05:40.360 --> 0:05:42.680 than staple. So I would use those characteristics and say, 0:05:42.720 --> 0:05:46.400 nothing really meaningful has changed yet. I think a shift 0:05:46.440 --> 0:05:49.080 there would cause alarm, but I'm not seeing that here yet. 0:05:49.080 --> 0:05:52.560 And Tom, you bring up this nineteen seventies period. It's 0:05:52.640 --> 0:05:55.800 often referred to as this ten year range. I kind 0:05:55.800 --> 0:06:00.040 of reject that. It was periods of bull. 0:05:59.800 --> 0:06:02.200 A bear markets. Yeah, it was two years. 0:06:02.080 --> 0:06:04.400 Up, two years down, two years It wasn't two weeks 0:06:04.480 --> 0:06:07.600 up two weeks down. So this idea of the seventies 0:06:07.640 --> 0:06:10.000 being a range I actually don't think is very accurate 0:06:10.360 --> 0:06:11.920 if you want to look for a range. I think 0:06:11.920 --> 0:06:14.600 there's some parallels to this market kind of post World 0:06:14.600 --> 0:06:17.599 War two forty five to fifty, I think is very interesting. 0:06:17.600 --> 0:06:20.159 Also a period where all the economists kept thinking recession 0:06:20.200 --> 0:06:23.360 was coming, recession was coming, and it never came. Interesting there. 0:06:23.640 --> 0:06:27.160 Given that fact check, do you reject this idea that 0:06:27.200 --> 0:06:30.160 the past indicators are no longer working, that the models 0:06:30.160 --> 0:06:34.040 are broken, and the technical analysis doesn't hold the same 0:06:34.120 --> 0:06:34.640 kind of cloud. 0:06:34.760 --> 0:06:37.440 You know, it's funny. I suppose it's your definition of 0:06:37.440 --> 0:06:38.440 what technicals is. 0:06:38.680 --> 0:06:39.320 We wake up. 0:06:39.279 --> 0:06:41.800 Every morning and we ask ourselves the simple question, does 0:06:41.880 --> 0:06:44.560 the market agree with the consensus? That's my definition of 0:06:44.560 --> 0:06:48.760 what technical analysis is. Anytime in my career where I've 0:06:48.920 --> 0:06:52.400 begun to question whether the indicators are valid anymore, in 0:06:52.480 --> 0:06:55.359 new regimes, they're about to become very valid. So I 0:06:55.360 --> 0:06:57.560 would just keep that in mind here, you know, put 0:06:57.560 --> 0:07:00.240 that in contact of some of the tech names. Four 0:07:00.279 --> 0:07:03.560 weeks ago we got what I would only characterize is 0:07:03.680 --> 0:07:06.440 blow off like volume in a lot of these semis. 0:07:06.480 --> 0:07:09.039 And what do we know historically about blow off like volume? 0:07:09.480 --> 0:07:12.440 It very rarely marks the top, but it can begin 0:07:12.520 --> 0:07:15.000 the sequence of putting in the top and you were 0:07:15.040 --> 0:07:17.120 doing about a month ago, you were doing four or 0:07:17.120 --> 0:07:19.880 five average weekly four or five times average weekly volume 0:07:19.880 --> 0:07:23.320 in Nvidia amd Avago. So some of those makings, they 0:07:23.320 --> 0:07:25.080 are a very blowoff e type volume. 0:07:25.440 --> 0:07:27.960 With all your study of charts and the in and 0:07:28.000 --> 0:07:31.040 out and being bullish, being embarrassed, does market timing work? 0:07:32.520 --> 0:07:33.720 Okay? If I mean cash? 0:07:33.840 --> 0:07:37.720 Can I figure out when to get in efficiently, productively effectively? 0:07:37.840 --> 0:07:40.720 I might replace the phrase market timing with trend following. 0:07:41.160 --> 0:07:43.960 I think trend following works. I think we can do 0:07:44.000 --> 0:07:45.360 a pretty good job. I think all of us can 0:07:45.400 --> 0:07:48.440 do a pretty good job of getting that middle seventy 0:07:48.520 --> 0:07:51.280 or seventy five percent of a move. I haven't yet 0:07:51.320 --> 0:07:55.360 any I haven't met anyone yet who's particularly good at 0:07:55.360 --> 0:07:59.600 the turns that that middle chunk. We can know all 0:07:59.640 --> 0:08:02.000 the money in this business is made in the trend 0:08:02.000 --> 0:08:04.840 and not at the pulse, right, we can, I think, 0:08:04.920 --> 0:08:06.760 play trends, and that's what we've tri to do. 0:08:06.960 --> 0:08:09.040 I set them up with that question. I knew what 0:08:09.120 --> 0:08:10.040 the answer would. 0:08:09.920 --> 0:08:11.200 Be, and I think. 0:08:12.880 --> 0:08:13.960 I think everyone knew that. 0:08:14.960 --> 0:08:17.000 This is the gospel, the gospel of her own. 0:08:17.720 --> 0:08:20.440 I mean, there's no other way to put it, Christopher, 0:08:20.520 --> 0:08:22.680 and thank you so much for I came out of that. 0:08:22.720 --> 0:08:23.240 You're a bull. 0:08:24.600 --> 0:08:26.400 I think it's too early to back away from the 0:08:26.440 --> 0:08:30.119 trend with your guard on for some things to change. 0:08:30.160 --> 0:08:32.920 But watch rates here, Rachel decide the second half of 0:08:32.920 --> 0:08:33.160 the year. 0:08:33.280 --> 0:08:35.200 Chris, thank you so much, greatly appreciate. 0:08:39.440 --> 0:08:42.920 We are heading toward the midyear level. We are two 0:08:43.040 --> 0:08:45.960 days away from that reset. And joining us now to 0:08:45.960 --> 0:08:49.480 help us reset is someone who is resetting in a 0:08:49.520 --> 0:08:52.360 material way. Joseph Amato, President and Chief investment Officer for 0:08:52.400 --> 0:08:55.840 Equities and Newberberger Berman and joining us here on set. 0:08:56.559 --> 0:09:00.319 How are you, Joe changing your view head into the 0:09:00.360 --> 0:09:01.400 second half of this year. 0:09:02.320 --> 0:09:04.640 Well, we've had an intense debate, like there's going on 0:09:04.720 --> 0:09:07.080 in the market, and you know, our debate within our 0:09:07.080 --> 0:09:10.160 asset Allocation committee probably reflects a lot of the dispersion 0:09:10.200 --> 0:09:12.280 that exists out there in the marketplace. We've got folks 0:09:12.280 --> 0:09:13.760 that are quite bullish and we've got folks that are 0:09:13.840 --> 0:09:16.480 quite verish. But we went into the year expecting the 0:09:16.520 --> 0:09:19.640 economy to slow down at a more significant pace and 0:09:19.800 --> 0:09:22.720 earnings to be more on the disappointing side, and that 0:09:22.760 --> 0:09:25.880 really hasn't played out necessarily, so we went in underweight 0:09:26.640 --> 0:09:29.480 equities and risk assets. We moved up in quality, and 0:09:29.520 --> 0:09:31.400 that's been, you know, so far the wrong call, because 0:09:31.440 --> 0:09:33.960 markets have been pretty good first half of the year, as. 0:09:33.800 --> 0:09:34.840 You guys have talked about. 0:09:35.120 --> 0:09:37.559 But as we debated the issues, and as it looks 0:09:37.640 --> 0:09:41.199 like any slow down is probably extended and pushed out further, 0:09:41.679 --> 0:09:46.520 the earnings decline pushed out further, we felt neutralize our bet, 0:09:47.040 --> 0:09:48.839 sort of lived to fight another day and see, we 0:09:48.840 --> 0:09:50.720 always have a chance to make that a change if 0:09:50.760 --> 0:09:54.440 we see earnings disappoint But right now, you know, we 0:09:54.480 --> 0:09:57.679 took that underweight off and still have a bias toward. 0:09:57.320 --> 0:09:59.120 Quality for sure, So there's going to be more of 0:09:59.120 --> 0:10:01.760 an aggressive shift, albeit on the margins, heading into the 0:10:01.800 --> 0:10:05.480 second half. We've been debating all morning what's more important 0:10:05.800 --> 0:10:08.680 what happens with the individual corporations or what happening and 0:10:08.720 --> 0:10:12.000 what happens today at nine thirty am Eastern in Centro 0:10:12.160 --> 0:10:14.679 with central bankers taking a hawkish tone, how much are 0:10:14.720 --> 0:10:17.439 they still in the driver's seat of what happens next? 0:10:18.000 --> 0:10:20.640 Central bankers are certainly still very much in the center 0:10:20.679 --> 0:10:23.560 of debate around around what's going to happen in the 0:10:23.600 --> 0:10:26.720 economy given the challenges that they have in inflation, and 0:10:27.160 --> 0:10:29.200 you look at across the range of central banks, you 0:10:29.240 --> 0:10:31.080 have a pretty wide dispersion there as well. You have 0:10:31.120 --> 0:10:33.960 the US, which was more aggressive earlier on inflation, has 0:10:34.000 --> 0:10:36.520 come down at a more rapid pace, although still we 0:10:36.600 --> 0:10:38.480 think will be a challenge to get down to the 0:10:38.520 --> 0:10:41.400 FEDCE target. On the other extreme, you've got Japan which 0:10:41.440 --> 0:10:45.520 maintains a quite permissive, if you will, monetary policy, and 0:10:45.559 --> 0:10:47.960 then the UK has got a real inflation problem, so 0:10:47.960 --> 0:10:50.160 they've got to be more hawkish and there used to 0:10:50.200 --> 0:10:52.319 be somewhere in the middle. So that's going to be 0:10:52.360 --> 0:10:54.520 an important issue that we continue to watch over the 0:10:54.559 --> 0:10:55.280 course of the second off. 0:10:55.200 --> 0:10:56.760 Of the year. What matters right now? 0:10:56.800 --> 0:10:59.920 I mean Newburger Berman is priding itself on active management, 0:11:00.000 --> 0:11:01.240 and I want to go into the history of what 0:11:01.280 --> 0:11:04.320 you'd accomplished with Lehman Brothers in a bit, but the 0:11:04.360 --> 0:11:08.120 basic idea here away from passive active is factor analysis. 0:11:08.240 --> 0:11:10.680 Right now. What factors matter into the end. 0:11:10.559 --> 0:11:14.400 Of the year, Well, I think I think quality matters 0:11:14.880 --> 0:11:19.760 for sure, and profitability because if we're in our broad allocations, 0:11:19.800 --> 0:11:22.040 think more up in quality. Whether you're on the credit 0:11:22.080 --> 0:11:23.920 side or the equity side. I think you want you 0:11:24.000 --> 0:11:28.800 want to certainly be overweight that factor and beta. You probably, 0:11:29.080 --> 0:11:31.240 in our view, you want to be underweight beta in 0:11:31.280 --> 0:11:33.000 that sense, you know, again with a bit of a 0:11:33.000 --> 0:11:36.080 more defensive posture. Even though we've neutralized our equity bet again, 0:11:36.120 --> 0:11:39.120 we still lean toward lower beta, higher quality. 0:11:40.320 --> 0:11:44.439 I look at where we are and a bullmarket unloved. 0:11:44.840 --> 0:11:47.520 Can you calibrate and see you on a second leg 0:11:47.520 --> 0:11:51.199 of a bullmarket clicks in? I mean, there was seventy 0:11:51.280 --> 0:11:54.240 six seventy seven, which no one expected after the moon 0:11:54.320 --> 0:11:57.079 shut off of seventy four. Can you find a second 0:11:57.120 --> 0:11:58.800 leg of a bull market or do you just have 0:11:58.880 --> 0:12:01.400 to go back to core fundamental analysis. 0:12:02.240 --> 0:12:06.600 I think the level of dispersion that exists within the 0:12:06.640 --> 0:12:08.800 economy I think to suggest we still need to do 0:12:08.840 --> 0:12:11.360 a lot of bottom up analysis as it relates to 0:12:11.679 --> 0:12:14.320 a bull market. Where we are, it's been you know, 0:12:14.360 --> 0:12:17.000 the equity markets have been quite perplexing over the first 0:12:17.000 --> 0:12:19.520 half of the year because you've had a group of 0:12:19.800 --> 0:12:23.360 seven extraordinary stocks that are up fifty sixty percent that 0:12:23.440 --> 0:12:26.880 dominate the US large cap index. As again, you guys 0:12:26.880 --> 0:12:28.600 talk a lot about and then you've got everything else 0:12:28.880 --> 0:12:32.920 and that everything else has been flatished up modestly. So 0:12:33.000 --> 0:12:35.160 that's been you know, that's been a challenge if you're 0:12:35.200 --> 0:12:38.000 trying to invest and you see the index perform so well, 0:12:38.600 --> 0:12:40.800 yet some of these you know, very few active managers 0:12:40.840 --> 0:12:43.120 are going to put forty percent of their portfolio in 0:12:43.200 --> 0:12:45.719 seven stocks right to be overweight the megacap. So it's 0:12:45.720 --> 0:12:47.760 been you feel, as an active manager, you've been just 0:12:47.840 --> 0:12:48.760 chasing your tail over. 0:12:48.640 --> 0:12:49.400 The first half of the year. 0:12:49.440 --> 0:12:52.000 We're speaking with Joe Motto of Neuberger Berman CIO for 0:12:52.040 --> 0:12:55.440 Equities over there at a time we are resetting into 0:12:55.480 --> 0:12:57.400 the new year and into the new half of the year, 0:12:57.440 --> 0:12:59.800 it feels like a new year. We've been talking a 0:12:59.800 --> 0:13:01.640 lot about some of the trends, and you said that 0:13:01.679 --> 0:13:03.440 there are a number of stocks that have dominated with 0:13:03.559 --> 0:13:07.040 forty fifty sixty percent gains. I think chip makers, and 0:13:07.080 --> 0:13:09.480 then I think geopolitical risk and what we see this 0:13:09.600 --> 0:13:14.439 morning with a proposed plan by the Biden administration. Are 0:13:14.480 --> 0:13:17.480 you going all in on AI. Are you seeing this 0:13:17.559 --> 0:13:21.320 as a lasting trend that can withstand any geopolitical tensions, 0:13:21.760 --> 0:13:24.280 or are you kind of being more tepid about it. 0:13:24.840 --> 0:13:25.520 I think AA is. 0:13:25.520 --> 0:13:27.720 Going to be an incredible long term trend for sure. 0:13:27.800 --> 0:13:29.320 I mean that's going to be as profound as some 0:13:29.360 --> 0:13:31.000 of the things we've seen over the last twenty twenty 0:13:31.000 --> 0:13:35.880 five years. Similar to the Internet broadly broadly defined, but 0:13:35.960 --> 0:13:39.719 as we have seen with different technological innovations, you have 0:13:39.840 --> 0:13:42.679 sort of a boom bust period, things consolidate, and then 0:13:42.720 --> 0:13:44.319 you have long term growth. So I think AI is 0:13:44.320 --> 0:13:45.959 probably going to go through that, but it's going to 0:13:45.960 --> 0:13:48.280 be quite profound. I know, from our firm standpoint, we're 0:13:48.320 --> 0:13:50.960 all in. We're diving in deeply in terms of how 0:13:50.960 --> 0:13:54.160 it can enhance our productivity and our investment insights. So 0:13:54.800 --> 0:13:57.880 it's quite quite important. At the same time, you raise 0:13:57.920 --> 0:14:02.120 the geopolitical issues, which, having just been in China, you know, 0:14:02.160 --> 0:14:04.320 it's an issue that we're very focused on. It's an 0:14:04.360 --> 0:14:07.240 issue that Chinese are very focused on, and I think 0:14:07.240 --> 0:14:09.520 as it relates to AI, that's probably one of the 0:14:09.520 --> 0:14:13.160 most sensitive issues in the transfer of technology between the 0:14:13.240 --> 0:14:15.000 US and China. I think it's going to continue to 0:14:15.000 --> 0:14:16.600 be an issue you guys talked about this morning in 0:14:16.640 --> 0:14:20.720 terms of potential restrictions on selling chips. 0:14:20.480 --> 0:14:24.120 And now, folks, the most important conversation with the global 0:14:24.120 --> 0:14:28.360 Wall Street to the place is of the Lehman Brothers. 0:14:28.880 --> 0:14:30.080 I'm going to cut to the chase. 0:14:30.120 --> 0:14:33.360 There's blood in the street. Credit SUEEE is throwing thousands out. 0:14:33.400 --> 0:14:37.000 Every other firm is throwing those fancy ib bankers out 0:14:37.000 --> 0:14:40.360 the door that you can't stand. You and Jack Riffkin 0:14:41.040 --> 0:14:44.400 build Lehman Brothers from nineteen ninety seven to two thousand 0:14:44.440 --> 0:14:47.600 and three. I remember looking at the cell side analyst, 0:14:47.800 --> 0:14:50.640 is the sheets rather, Lisa, this is when we had 0:14:50.720 --> 0:14:55.400 printed research reports. They got better every year until Lehman 0:14:55.480 --> 0:14:59.160 dominated the business in Newburger Burman involved with that and 0:14:59.280 --> 0:15:02.320 all that is that a history of the past. Are 0:15:02.360 --> 0:15:05.320 we at a point now where we're taking the intellectual 0:15:05.440 --> 0:15:08.480 capital out of the business with all these layoffs, all 0:15:08.520 --> 0:15:10.840 this uproar that's going on in the street right now. 0:15:12.280 --> 0:15:15.680 I don't think so, Tom. I think the fundamental bottom 0:15:15.800 --> 0:15:19.640 up analytical work that helped propel us back in the 0:15:19.720 --> 0:15:23.040 day in terms of our own research rankings or the 0:15:23.080 --> 0:15:26.760 work that we do today at Newburger Burman is still 0:15:26.880 --> 0:15:30.640 hugely important. You have different tools that you use, right 0:15:30.680 --> 0:15:34.680 the bar is higher, for sure. I think the cell 0:15:34.760 --> 0:15:37.600 side has underinvested in research over the course of the 0:15:37.680 --> 0:15:39.320 past decade or so. 0:15:39.320 --> 0:15:41.480 What do you what do you want to see from 0:15:41.520 --> 0:15:43.440 the big banks. If we were having a conversation right 0:15:43.440 --> 0:15:45.400 now with Brian moynhan in the future of Bank of 0:15:45.440 --> 0:15:48.720 America securities research, what would be your counsel to mister 0:15:48.800 --> 0:15:50.640 moynhand Oh. 0:15:51.240 --> 0:15:54.800 I think the breadth of global research that these firms 0:15:54.840 --> 0:15:56.680 are committed to is important to us. We're a global 0:15:56.720 --> 0:15:58.920 investment manager, so there are a lot of parts of 0:15:58.960 --> 0:16:02.760 the globe, whether it's the small cap space or large 0:16:02.800 --> 0:16:04.800 cap for that matter, that have less coverage. Now in 0:16:04.800 --> 0:16:08.240 some respects that's advantageous to active managers because we've invested 0:16:08.280 --> 0:16:11.320 a huge amount research. So the more inefficient the cell 0:16:11.400 --> 0:16:13.320 side is, if you will, the more advantage we have 0:16:13.400 --> 0:16:16.200 as a byside firm if we're committed to research. But 0:16:16.280 --> 0:16:19.400 that said, we value quality research and if it's provided 0:16:19.400 --> 0:16:22.880 by whether it's Brian Mornhance firm or other large firms, 0:16:23.640 --> 0:16:24.720 that's super valuable to us. 0:16:24.760 --> 0:16:26.600 I don't want the dust break with the credit sweets 0:16:26.680 --> 0:16:30.240 resumes coming in. Joseph Amato is at Newburger. 0:16:29.880 --> 0:16:41.160 Burman right now. 0:16:41.240 --> 0:16:45.040 Joining us is Way lead Global chief investment strategist at 0:16:45.080 --> 0:16:48.160 black Rock, and there's always fourteen things to talk about. 0:16:48.200 --> 0:16:50.720 I really want to lead with Secretary Yellen into China 0:16:50.720 --> 0:16:54.240 and what China means within an investment strategy, but I 0:16:54.280 --> 0:16:55.960 got to rip up the script here. There's a guy 0:16:56.040 --> 0:16:59.640 named Fink who's talking about something black Rock has led on. 0:17:00.120 --> 0:17:01.960 You've been directly involved. 0:17:01.480 --> 0:17:06.040 With this, which is the value, the efficacy, the usefulness 0:17:06.080 --> 0:17:07.040 of ESG. 0:17:08.200 --> 0:17:11.320 Larry's come out as a real proponent of talking about 0:17:11.320 --> 0:17:12.560 it inside. 0:17:12.600 --> 0:17:15.440 It's been a challenging time out of the pandemic a 0:17:15.560 --> 0:17:19.960 color force. How you are reinterpreting ESG right now within 0:17:20.000 --> 0:17:21.800 your investment strategy. 0:17:21.840 --> 0:17:27.520 Well, sustainable investing is investing right. We're incorporating considerations around 0:17:27.600 --> 0:17:32.000 the impact of climate in our capitol market assumption. We're 0:17:32.040 --> 0:17:35.879 also thinking about how the transition could look like and 0:17:35.920 --> 0:17:40.520 really thinking about how that then is reflected in portfolio construction. 0:17:40.920 --> 0:17:45.480 Toward extent, it is really in the price. So as 0:17:45.480 --> 0:17:51.000 we think about transition as one example of mega forces, 0:17:51.119 --> 0:17:54.840 what we're doing actually in this media outlook that we're 0:17:54.880 --> 0:18:00.000 releasing today is that we're prominently highlighting a few mega forces, 0:18:00.280 --> 0:18:04.920 including sustainability and transition to net zero, but also including 0:18:05.000 --> 0:18:11.399 gropolitical fragmentation, including aging demographics, including AI to really incorporate 0:18:11.480 --> 0:18:13.880 those mega forces in portfolio construction. 0:18:13.960 --> 0:18:16.040 As you put the review out two days left in 0:18:16.080 --> 0:18:18.400 the first half of the year, what changes for you 0:18:18.520 --> 0:18:21.000 in terms of your positioning after six months of being 0:18:21.040 --> 0:18:22.119 really cautious. 0:18:23.040 --> 0:18:26.320 Well, I think the biggest change is as we think 0:18:26.359 --> 0:18:30.199 about kind of the environment where yields have reason is 0:18:30.240 --> 0:18:35.160 that we're actually within fixed income excited about opportunities across 0:18:35.200 --> 0:18:37.440 the spectrum. So we have been talking a lot about 0:18:37.480 --> 0:18:39.639 front end of the curve, which we still like, but 0:18:39.720 --> 0:18:43.360 we're actually also putting cash to work across the broader 0:18:43.560 --> 0:18:49.200 exposures in a fix income, including MBS mortgage backed securities, 0:18:49.320 --> 0:18:53.720 including inflation linked bonds, especially in the US, and also 0:18:53.800 --> 0:18:57.400 including high grade credit and local currency, emergent market debt, 0:18:57.600 --> 0:18:59.840 and more broadly, as we think about what has changed, 0:19:00.080 --> 0:19:03.520 we're rolling out the new investment playbook, where the first 0:19:03.640 --> 0:19:07.879 layer is around macro based as a location, but macro 0:19:07.960 --> 0:19:10.679 can only take us this far in this environment of 0:19:10.680 --> 0:19:14.240 supply constraint, so we're also thinking about having the second 0:19:14.280 --> 0:19:22.639 layer of very granular, uncorrelated individual investment opportunities to overlay 0:19:22.840 --> 0:19:24.760 on top of the first layer, and then the third 0:19:24.800 --> 0:19:26.120 layer is the megaphosis diet. 0:19:26.160 --> 0:19:30.119 It is talked about where is the idiosyncrasy of artificial 0:19:30.119 --> 0:19:32.520 intelligence in the overlay that you talk about? 0:19:33.119 --> 0:19:36.120 Well, so far, if you look at markets this year, 0:19:36.240 --> 0:19:40.600 it's been a very narrow thematic markets, right, So that 0:19:40.640 --> 0:19:44.639 has taught us that just base as a location a 0:19:44.840 --> 0:19:49.480 macro assessment along is not enough anymore. So far, we 0:19:49.560 --> 0:19:53.600 have talked about bias towards quality, a tute towards quality 0:19:53.760 --> 0:19:57.760 in our US equity allocation. But what we're doing differently 0:19:57.840 --> 0:20:00.159 at this media outlook is to break that out and 0:20:00.280 --> 0:20:05.200 explicitly call out a conviction in develop market AI which 0:20:05.240 --> 0:20:08.120