Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul swing you,
Speaker 1: along with my co host Lisa Brahma wits. Each day
Speaker 1: we bring you the most noteworthy and useful interviews for
Speaker 1: you and your money, whether at the grocery store or
Speaker 1: the trading floor. Find a Bloomberg Penil podcast on Apple
Speaker 1: podcast or wherever you listen to podcasts, as well as
Speaker 1: at Bloomberg dot com. Well, we are eagerly awaiting the
Speaker 1: FED announcement of their policy tomorrow when we talk. When
Speaker 1: we talk FED and all the intricacies of the FED
Speaker 1: and what it means for the rates market, there is
Speaker 1: absolutely no one better to speak to than Ira Jersey.
Speaker 1: Ira is a b I rate strategist for Bloomberg Intelligence.
Speaker 1: He joined us on the phone. Ira, thanks so much
Speaker 1: for joining us. Okay, we're gonna get let's say we
Speaker 1: get that twenty five basis point cut tomorrow. Then everybody's
Speaker 1: gonna really focus on the language of chairman Pal. What
Speaker 1: do you expect to hear from the chairman? Yeah, I
Speaker 1: think the chairman is Yeah, it's gonna be tricky for him,
Speaker 1: and you know, trying to discount what he's gonna say
Speaker 1: is going to be difficult, primarily because a lot of
Speaker 1: the data that we've had the last three weeks or
Speaker 1: so has been relatively good, where some people are even
Speaker 1: questioning whether or not they should be cutting rates at all,
Speaker 1: and they and they will cut interest rates basis points
Speaker 1: that would be that the real shock would be if
Speaker 1: they didn't. So so the question is are they gonna
Speaker 1: Are they going to hike more? And the answer is probably,
Speaker 1: excuse me, cut more? Like more that would be that
Speaker 1: would be amazing, But um that you know, are they
Speaker 1: going to cut more? And uh, and what's the magnitude
Speaker 1: and the pace of that? So you know, if it's
Speaker 1: starting in June, we thought maybe they'd cut a couple
Speaker 1: of times and then wait a little while and then
Speaker 1: and then um, cut a bit more if they had to, say,
Speaker 1: in early. But but at this point it's it's not
Speaker 1: obvious that they're going to have to. So I think
Speaker 1: that he's going to need to be pretty neutral in
Speaker 1: his statement, saying basically like we're going to be very
Speaker 1: data dependent, and that might not be enough for risk
Speaker 1: assets to really um to really be upbeat after that,
Speaker 1: because I think a lot of risk asset markets, whether
Speaker 1: it's at his in equities have really been reliant on
Speaker 1: the idea that the FED is going to cut you know,
Speaker 1: three or four times, which is what the market has
Speaker 1: has continued to price. Well, that's exactly my question, is
Speaker 1: it it feels like the markets set up to take
Speaker 1: anything that j. Powell does or says is hawkish because
Speaker 1: it's not going to be a fifty or seventy five
Speaker 1: basis point cut. Yeah, I think that's right, Alex. You
Speaker 1: know that. So if they cut twenty five now and
Speaker 1: then he hints it they're going to cut in again
Speaker 1: in September October, but don't necessarily expect there to be
Speaker 1: a prolonged easing cycle. So say, you know, as much
Speaker 1: as the market is currently priced, which is basically for
Speaker 1: four cuts by the middle of next year, Um, I
Speaker 1: think that risk assets take that badly. Now do they
Speaker 1: take it badly in that they reprice a couple of
Speaker 1: percent and then you know, find a new equilibrium or
Speaker 1: it doesn't wind up being a prolonged down trend because
Speaker 1: I think, you know, ironically, if the FED hints like
Speaker 1: I just mentioned that they're going to cut twice and
Speaker 1: then and then stop for a while, if that means
Speaker 1: a two percent or three percent repricing in the SMP five.
Speaker 1: I don't think that the FED cares. I think that
Speaker 1: that maybe is actually good right from from the FED standpoint,
Speaker 1: and that's what kind of what they would hope for.
Speaker 1: But if it winds up starting a downtrend in risk assets,
Speaker 1: you know, wider credit, lower equities, that's the type of
Speaker 1: thing that then you wind up pricing it back in.
Speaker 1: So there's weird feedback loop that the markets might actually
Speaker 1: generate for the FED, which, um, you know, in an
Speaker 1: environment where the the economy is modeling along that the
Speaker 1: Feds looking at the markets for some semblance of what
Speaker 1: expectations are for the future, and right now, you know,
Speaker 1: expectations for the future isn't okay, but not great economy.
Speaker 1: So you know, in that environment, UM, little changes can
Speaker 1: mean a lot to monetary policy makers. So are we
Speaker 1: We had a guest on earlier today who was suggesting
Speaker 1: that the FED should bring quantitative easoning back onto the table.
Speaker 1: Do you think that is an option that they would consider?
Speaker 1: It is? I I think that they won't really consider
Speaker 1: that until after they cut you know, four or five times,
Speaker 1: so basically until the FED funds y it's closer to
Speaker 1: one percent. I don't think QUI is an option now.
Speaker 1: Something that they could do and something they will do
Speaker 1: starting the middle of next year at the latest, if
Speaker 1: not even a little bit earlier, is they'll start to
Speaker 1: increase your balance sheet just to keep reserve levels constant.
Speaker 1: So there's this very technical thing that goes on where
Speaker 1: currency in circulation is usually rising, and as it's rising,
Speaker 1: that means that some other liability that the FED has,
Speaker 1: such as reserves, continually go down, and they the FED
Speaker 1: has stated that they have a policy of keeping ample
Speaker 1: reserves in the system, and in order to keep ample
Speaker 1: bank reserves in the system, eventually they're going to have
Speaker 1: to start increasing their balance sheet again to do that
Speaker 1: um and I think that they have to do that
Speaker 1: sometime in the third quarter of next year, and they
Speaker 1: might even do it a little bit earlier. So that
Speaker 1: is kind of a dovish ish thing, which I think
Speaker 1: will you know, make the markets happy, particularly risk asset markets,
Speaker 1: because I kind of don't understand the dynamics. It's it's
Speaker 1: a it's an optics issue I think more than anything.
Speaker 1: But that could be something that's helpful that's not really QUI.
Speaker 1: Some people are gonna call it QUI. It's not que though,
Speaker 1: And you know, we have a lot of work that
Speaker 1: we've done, so terminal users can check out b I
Speaker 1: rates and find some of our information on on the
Speaker 1: FED balance sheet and how we think that will develop
Speaker 1: over the next year and a half. We love the
Speaker 1: shameless plugs era. We do it all the time. Um.
Speaker 1: So when you say it's not que like than than than,
Speaker 1: what is it? I mean, in essence is providing the
Speaker 1: more immity in the market. It's standard monetary policy. I
Speaker 1: mean people don't realize, but prior to the two thousand
Speaker 1: seven financial crisis, the Fed's balance sheet increased by about
Speaker 1: three to five percent every year. So going back to
Speaker 1: that same type of environment where the Fed's increasing its
Speaker 1: balance sheet incrementally every single month in order to keep
Speaker 1: reserve balances constant, would not be that Dutch, just typical
Speaker 1: monetary policy. It's not que right, the FEDS balance sheet.
Speaker 1: You know, everyone says, oh, it's so big now, and
Speaker 1: it was a trillion dollars before the before the crisis. Yes,
Speaker 1: before the crisis it was a trillion, but it was
Speaker 1: only four billion. So the thing is is like over that,
Speaker 1: over that twelve year period more than doubled. Right, So
Speaker 1: it's not a that's right, and that wasn't called quantitative easing, right.
Speaker 1: Quantitative easing is large scale ass of purchases that are
Speaker 1: a large portion of both the market and also the
Speaker 1: size of the fed's balance sheet, where you're actively increasing
Speaker 1: the amount of reserves that are in the system, not
Speaker 1: keeping them confident, which is what we're talking about. Our Jersey,
Speaker 1: thank you so much. As always, when we talk Fed,
Speaker 1: we need to talk to Ira Jersey. We will wait
Speaker 1: to see what the FED does tomorrow. Clearly we will
Speaker 1: be all over that that Bloomberg Radio. Ira Jersey, senior
Speaker 1: rate strategist for Bloomberg Intelligence, joining us on the phone.
Speaker 1: Time to check in with Bloomberg Opinion. We're join by
Speaker 1: Bloomberg Opinion columnust Shira over Day, who's giving us a
Speaker 1: little preview of what we might see from Apple. So
Speaker 1: again kind of you know these quarters for Apple, they're
Speaker 1: really interesting for investors trying to get a sense of
Speaker 1: how well this company is making the transition from really
Speaker 1: a a phone and iPad company to maybe something a
Speaker 1: little bit more in terms of the services and so on.
Speaker 1: What are you gonna be looking for Shure when the
Speaker 1: company reports tonight. Yeah, I think that those are important
Speaker 1: details about revenue has been declining and is expected to
Speaker 1: continue to decline for Apple's iPhone business in this quarter.
Speaker 1: And I think what investors are watching is both how
Speaker 1: much can they fill in at least some of the
Speaker 1: gap from other products things like you know, Apple watching
Speaker 1: air pods and also that services business, as you said,
Speaker 1: which includes things like App Store downloads and Apple Care warranties, uh,
Speaker 1: and the revenue that the revenue sharing payments that they
Speaker 1: get from Google and things like that. The other thing
Speaker 1: that investors are looking for is anything about China. That
Speaker 1: revenue from China has been declining significantly the first half
Speaker 1: of Apple's fiscal year, and the question is will it
Speaker 1: get slightly better going forward? And the commentary about China
Speaker 1: is going to be very closely watched, as will anything
Speaker 1: that Apple says about moving bits of their supply chain
Speaker 1: out of China and what the impact of that is
Speaker 1: going to be on the company's costs. So what are
Speaker 1: the chances that Apple says any of those things, meaning
Speaker 1: that they're gonna be like, look look at all the
Speaker 1: pretty service revenue, Look at how much that jump by
Speaker 1: double digits. Blah blah blah. Oh iPhone sales, Yeah, they're
Speaker 1: gonna be really strong in the replacement cycle. Was Apple
Speaker 1: actually gonna say? You basically just channeled Tim Cook that
Speaker 1: is yeah, that is exactly what they say is yeah, yeah,
Speaker 1: iPhones blah blah blah, the foundation of our billion dollars
Speaker 1: in annual revenue. Look at this, look at this beautiful
Speaker 1: services revenue. And that is the message that they're sending.
Speaker 1: But look, I've said this before and I'll say it
Speaker 1: again that there's no way for things like you know,
Speaker 1: App Store downloads and Apple Music subscriptions and and the
Speaker 1: upcoming television service. There's no way that can fill the
Speaker 1: gap from declining iPhone revenue if that continues to decline.
Speaker 1: And if you look at the smartphone market at large,
Speaker 1: that is the trajectory of the smartphone market. It's unit
Speaker 1: sales of smartphones are expected to decline globally for the
Speaker 1: third straight year in two thousand nineteen. This is a
Speaker 1: trend that it seems, at least in the near future,
Speaker 1: to continue. Uh. And Apple has not really addressed those
Speaker 1: broad trends in the smartphone industry and whether it can
Speaker 1: kind of buck those. It's interesting the timing of this
Speaker 1: earnings call is very coincidental, I guess, with the U
Speaker 1: S trade to get delegation over in Shanghai negotiating potential
Speaker 1: trade deal. And no company arguably is more exposed or
Speaker 1: certainly a poster child for good or bed trade relationships
Speaker 1: between the US and China than Apple. What do you
Speaker 1: expect Apple to say about what they're doing to kind
Speaker 1: of deal with the uncertainty with China? You know, at
Speaker 1: least so far in the in the last few earnings calls,
Speaker 1: Apple has been pretty optimistic about the US and China
Speaker 1: resolving their trade disagreements in some sort of amicable way. Um,
Speaker 1: we'll see if that happens. Right. Apple so far has
Speaker 1: been relatively immune from some of the tariffs that the
Speaker 1: US has imposed on goods coming from China. So there
Speaker 1: are not yet tariffs on smartphones, for example, which is
Speaker 1: at least by units, very important for Apple. We'll see
Speaker 1: if that changes. Um, and yeah, I agree that it
Speaker 1: will be interesting to see what Tim Cook in particular
Speaker 1: says about those trade talks and whether he sees some
Speaker 1: resolution and how what is in the stock and that, like,
Speaker 1: who's the marginal buyer that's going to come into this
Speaker 1: equity tomorrow. It's it's really hard to know that Apple
Speaker 1: has been I think it is now at or near
Speaker 1: it's all time high in terms of pevaluation. So this stock,
Speaker 1: like many box in two thousand nineteen, is pretty expensive,
Speaker 1: and I do wonder, right, people who aren't already in
Speaker 1: the stock, what do they need to see from the
Speaker 1: company that will change their mind. I mean, the story
Speaker 1: is not changing. That iPhone revenue is probably going to
Speaker 1: continue to decline or maybe increase marginally, and so I
Speaker 1: think the question is if you get in, it's a belief,
Speaker 1: a bet that they can find some new product or
Speaker 1: service that's gonna fill in the gap more from that
Speaker 1: declining iPhone revenue. How about use of cash? I know, uh,
Speaker 1: they have dollars of cash and marketuple securities on the
Speaker 1: balance sheet. What are they doing with the cash? They're
Speaker 1: going to give it to a SoftBank? The vision seriously,
Speaker 1: they have so much cash that they can give some
Speaker 1: of it to SoftBank and have plenty leftover to do
Speaker 1: lots of things. I think Apple's made clear they have
Speaker 1: two hundred plus billion dollars in gross cash. They've made
Speaker 1: clear for some time that eventually they want to get
Speaker 1: to some sort of cash neutral position, and that means
Speaker 1: they're probably gonna give a lot of it back to
Speaker 1: shareholders in the forms of dividend and particularly share buy backs,
Speaker 1: which they've already been pretty aggressive on. So I assume
Speaker 1: that that will continue. Thanks very much, Bloomberg Opinion, Thomas
Speaker 1: Shira over Day, Thank you so much again giving us
Speaker 1: your thoughts on Apple. I'm sure we'll be talking to
Speaker 1: you after they report this week. We have a whole
Speaker 1: host of economics data, um you know, coming out, probably
Speaker 1: highlighted by the jobs report we will get on Friday.
Speaker 1: One question is how strong is the consumer? We know
Speaker 1: the consumer has really been driving this economy. How much
Speaker 1: is left for the U. S. Consumer? To get a
Speaker 1: sense of that, we turned to Lynn Franco. Lynn is
Speaker 1: a senior director of Economic Indicators and Surveys at the
Speaker 1: Conference Board, and our own ulnas Ulieteva from Bloomberg Economics
Speaker 1: joins us as well. Lynn, what did your data show
Speaker 1: you today for the latest report. We had a nice
Speaker 1: rebound in July following June's decline, so it seems that
Speaker 1: consumers have put that escalation and trade and Tower of
Speaker 1: tensions behind them, and they're focusing back on the fundamentals,
Speaker 1: which is really employment. We had a pretty good report
Speaker 1: and I think we're expecting another strong report this week.
Speaker 1: How does a consumer factor in things like trade or
Speaker 1: the debate over the dollar for example, or things like
Speaker 1: that we talked about all the time in the financial markets.
Speaker 1: It doesn't seem to impact the consumer that much. It's
Speaker 1: really the fundamentals, you know, wage growth, employment growth, that's
Speaker 1: really what's driving confidence. And what we're seeing here is there.
Speaker 1: You know, they're assessing both current conditions very favorably, and
Speaker 1: they're very optimistic that the economy is going to continue expanding,
Speaker 1: So that should translate into strong spending in the next
Speaker 1: two quarters. So, Julian, we know that how strong the
Speaker 1: how important the consumer is to the economy. What is
Speaker 1: your sense of bloomerk economy as it relates to can
Speaker 1: the consumer continue to drive this economy given where we're
Speaker 1: seeing maybe some weakness in manufacture, not just in US,
Speaker 1: but more so outside of the US. Is a consumers
Speaker 1: still strong enough to continue to drive this economy forward? Absolutely.
Speaker 1: I think today's reports both on consumer confidence and earlier
Speaker 1: on personal income and spending really support this notion that
Speaker 1: consumers will continue to drive economic growth in the second
Speaker 1: half of the year. So if you look at the
Speaker 1: profile of personal income and particularly wage and salaries growth
Speaker 1: in the second quarter, we saw continued acceleration in that profile.
Speaker 1: And the July reading on consumer confidence that is, you know,
Speaker 1: basically the best reading this year, UH, suggests that we
Speaker 1: will continue to see personal income and consumer confidence driving
Speaker 1: personal spending higher. Lynn, what are the elements that go
Speaker 1: into the higher consumer confidence number? But you guys measure well,
Speaker 1: take a look at current business conditions and employment conditions
Speaker 1: and those are coming in very strong. And then we
Speaker 1: took take a look at consumers expectations six months down
Speaker 1: the road in terms of business conditions, employment and their
Speaker 1: income prospects there and it's just very strong across the board. So,
Speaker 1: as Elena said, it's the highest reading this year, and
Speaker 1: we think that the in terms of growth and consumer
Speaker 1: is going to continue to be a very strong pillar
Speaker 1: despite other pockets of weakness. And looking at the details, Lynn,
Speaker 1: if you look at the jobs plentiful and jobs hard
Speaker 1: to get, UH, that actually suggests that we might see
Speaker 1: a decline in the unemployment rate in the upcoming report
Speaker 1: on Friday. So jobs hard to get increased a little
Speaker 1: bit in June, but they fell again in July, and
Speaker 1: that tells me that maybe there was something about like
Speaker 1: some temporary hiring and just hard hard to get jobs
Speaker 1: in such tight labor market. But it seems like it's
Speaker 1: abating and we can see another decline in the end
Speaker 1: of limit rate. Eleen, I can't let you come into
Speaker 1: the studio without asking you about the FED tomorrow. How
Speaker 1: important is lower interest rates or the prospect of lower
Speaker 1: interest rates for the consumer and consumer confidence? Is that
Speaker 1: a big factor? I think we already see a lot um.
Speaker 1: You know, the interest rates have been very low, and
Speaker 1: you already see that in mortgage rates for example. So
Speaker 1: mortgage rates already declined quite a bit, but unfortunately didn't
Speaker 1: really left home sales that much. But you know, it's
Speaker 1: supporting consumer spending like auto sales and things like that.
Speaker 1: I think that's where you see the impact of lower
Speaker 1: interest rates. So Lynn, going forward, you said that you
Speaker 1: know you feel like the consumer can continue on this path.
Speaker 1: Does it get better though, because I'm wondering, like what
Speaker 1: the incremental gain can really be from this point, and
Speaker 1: if we be tied into GDP growth that's going to
Speaker 1: be steady as she goes versus better well, in terms
Speaker 1: of GDP, we're probably expecting the economy to grow somewhere
Speaker 1: around two or a little above two cent um. You know,
Speaker 1: we just had spending coming at four point three. I
Speaker 1: don't think we're going to get much stronger than that um,
Speaker 1: but I think we can stay around those strong levels
Speaker 1: maybe you know, two and a half three and a
Speaker 1: half percent in terms of spending UM. And and also
Speaker 1: in terms of you know, getting back to the Fed
Speaker 1: and interest rates, the percent of consumers who expect interest
Speaker 1: rates to get higher was the lowest reading we've seen
Speaker 1: since uh, you know, two thousand and twelve. So it's
Speaker 1: already baked in that the Fed is likely to cut rates.
Speaker 1: Lin Franco, thank you so much. Lynn Franco is a
Speaker 1: senior director of Economic Indicators and Surveys at the Conference Board,
Speaker 1: joining us as she does regularly with that data from
Speaker 1: the Conference Board and Elena Estulia Tieva Bloomberg Economics always
Speaker 1: uh welcome in this studio to get the sense that
Speaker 1: get the latest on kind of you know, what's going
Speaker 1: on in the economy. How strong is the economy. How
Speaker 1: long can the economy continue to go? We have the
Speaker 1: SMP up about this year. The question is where do
Speaker 1: we go from here to get some clarification, get some guidance.
Speaker 1: We turned to Matt Malee, equity strategist at Miller Tabak. Uh, Matt,
Speaker 1: thanks so much for joining us. Start off real quick,
Speaker 1: what do you think we're gonna get from the Fed tomorrow? Uh? Yeah,
Speaker 1: I'm kind of with the consensus twenty five basis points.
Speaker 1: I don't think we'll get the big fifty uh anything.
Speaker 1: It's not out of the question, of course. Um. But
Speaker 1: the big question is going to be the big thing
Speaker 1: we're gonna look for, of course, is in the uh
Speaker 1: uh in the press conference, when Charon Powell will get
Speaker 1: a little more in accordant with guidance. And we've been
Speaker 1: talking about earnings reports recently, and the more important thing
Speaker 1: has been the guidance. I think that's gonna be the
Speaker 1: same for the Fed. If they signal, you know, if
Speaker 1: they signal is kind of a one and done thing,
Speaker 1: especially if it's only twenty five basis points, that's gonna
Speaker 1: be I think kind of get some investors off guard. However,
Speaker 1: if they do indicate that they're gonna uh do it
Speaker 1: another time and maybe even a third time this year
Speaker 1: that would be viewed as positive. So how you position then? Well,
Speaker 1: right now, it's it's so weird because we're at this
Speaker 1: key uh level in the in the stock market. I mean,
Speaker 1: we we're talking about, hey, we make a new records
Speaker 1: and it seems like, oh my gosh, the stock market
Speaker 1: has been unbelievable. Well, I mean it is or has been,
Speaker 1: but for the last eighteen nineteen months, we keep getting
Speaker 1: up near this three thousand level and then we break
Speaker 1: to a new high, but only a slight new high,
Speaker 1: and then roll back over. This is basically the fourth
Speaker 1: time we've done it, uh, and it's still only a
Speaker 1: slight new high. So uh, if we can get further
Speaker 1: mind kind of magic numbers thirteen sorry, three thousand thirty
Speaker 1: on the SMP because I would give it a three
Speaker 1: percent uh move above it's so high. But you know,
Speaker 1: it's it's if we fail again, it's going to be
Speaker 1: a big concern. So I guess my way I plan
Speaker 1: it right now. It's kind of weight on the sidelines
Speaker 1: to see what happens. I'm you know, uh, the one thing,
Speaker 1: it's two things the number one. Still looking at some
Speaker 1: of the defensive names in case it doesn't, in case
Speaker 1: some market rolls over. But also look at gold because
Speaker 1: it's already broken out key a resistance level. And uh,
Speaker 1: if we can move above fourteen fifty, it's going to
Speaker 1: be a real breakout for the for the for the
Speaker 1: yellow metal sometat. I was reading some of your recent
Speaker 1: research and uh, I see your noting that, in your opinion,
Speaker 1: you think there's a meaningful decline in the stock market
Speaker 1: over the next over the near future. It's much more
Speaker 1: possible than most people are thinking right now. What kind
Speaker 1: of gives you that thought, Well, there's a couple of things. Well,
Speaker 1: two things that stand out to me is I worry
Speaker 1: about why why the FED is really getting involved in
Speaker 1: this an insurance rate cut, what you know, interest rate cut.
Speaker 1: Why would they need to feel the need to do that.
Speaker 1: Is there's something that they're seeing. And the thing that
Speaker 1: really concerns me most of all is the action in
Speaker 1: the European banks. There's been a huge divergence in the
Speaker 1: European banks, especially over the last few months. I mean,
Speaker 1: we have the you know, this big sell off in
Speaker 1: the fourth quarter of last year, throughout the throughout the world,
Speaker 1: and of course we've all rallied uh strongly off those
Speaker 1: levels of the US market stuff. Uh uh, I'm sorry, uh,
Speaker 1: from those lows. The European market is up seventent from
Speaker 1: those lows. And yet the European banks are unchanged, and
Speaker 1: over the last few months they've sold off in a
Speaker 1: severe way and they're testing those lows from back in December.
Speaker 1: What's going on there? We know about the situation with
Speaker 1: Deutsche Banker, but we don't know all the details there.
Speaker 1: And I just when you get that kind of major
Speaker 1: divergence between the bank stocks in Europe and not just
Speaker 1: the the US stock market, but the European stock market overall,
Speaker 1: it tells me something's wrong out there. And uh, I'm
Speaker 1: worried that that kind of surprise could cause the market
Speaker 1: to pull back in a in a in a meaningful way.
Speaker 1: I'm not calling for a major bear market, but uh,
Speaker 1: it's just something out there that concerns me. So the
Speaker 1: trade has been like by utilities, by those dividend proxy
Speaker 1: stocks like reads et cetera. Um, have you seen the
Speaker 1: earnings that back up paying up for those defensive sectors. Now,
Speaker 1: that's that's the one one concern that I have, especially
Speaker 1: for like the utility stocks, which are you know, a
Speaker 1: very very expensive on historic basis. The one thing with
Speaker 1: some of the on the dividend paying stocks, it depends
Speaker 1: on of course what you see, but you get a
Speaker 1: Procter and Gamble that comes out with some pretty good earnings.
Speaker 1: And the thing on the dividend paying stocks, I believe
Speaker 1: with the market. So you know, whether you think the
Speaker 1: market's going higher or not, it is still we'd all
Speaker 1: agree as the least extended to a degree on a
Speaker 1: valuation basis. And if you get some of these stocks
Speaker 1: not just to pay a good dividend, but have a
Speaker 1: record of increase in their dividend on a consistent basis
Speaker 1: for many years, uh, you're in pretty good shapes be
Speaker 1: In other words, they should be able to participate on
Speaker 1: the way up if I'm wrong. Uh, and yet but
Speaker 1: protecting nicely and pay you to wait, uh if if
Speaker 1: the market comes back in. However, having said that, the
Speaker 1: key area to watch right now and in terms of
Speaker 1: groups of the technology stocks, we've seen this great rally
Speaker 1: in the semi conductor stocks. Uh, they're bumping up, are
Speaker 1: actually broke to a slight new high. If they can
Speaker 1: follow through more, that's going to be very, very bullish,
Speaker 1: and it'll mean my concerns about a short term pullback
Speaker 1: are long. Uh, really keep an eye on the semi
Speaker 1: because there's been a great leadership group for for decades,
Speaker 1: but particularly in the last year or two. So that
Speaker 1: we're about halfway through this earning season. Here would have
Speaker 1: been your takeaways both from the earnings, maybe some of
Speaker 1: the outlook that we've had from some of these reporting companies. Well,
Speaker 1: the one thing is that I've really found is that
Speaker 1: as much as it some of the you know, the
Speaker 1: high profile names have done have some great earnings reports
Speaker 1: and some and some good guidance. Overall, however, it's been
Speaker 1: a you know, an okay earning season. I mean, the
Speaker 1: thing is, as it always happens, in the estimates were
Speaker 1: lowered so much that of course we're they're being beaten
Speaker 1: and that's great, but it happens every quarter. I mean,
Speaker 1: I don't care how good the earnings are. They they
Speaker 1: always beat expectations. The question is what are we going
Speaker 1: to get for the full year? And the full year
Speaker 1: guidance has been coming down all year long. Fourth quarter
Speaker 1: people were looking for a big pick up on the
Speaker 1: fourth quarter of ten or eleven percent. That's now down
Speaker 1: to about five percent five point three. Uh So, the
Speaker 1: and as we've halfway through this uh earning season, those
Speaker 1: that for I'm sorrying future guidance hasn't come up at
Speaker 1: off anything has actually come down slightly. So as good
Speaker 1: as the headline numbers are, I'm sorry for the big
Speaker 1: profile names, the overall earning things has been only okay.
Speaker 1: And it concerns me that, you know, the valuation levels
Speaker 1: are tough. I mean, everybody talks about what don't fight
Speaker 1: the FED because they can create a good multiple expansion.
Speaker 1: The problems you still need good earnings. Uh multiple expansion
Speaker 1: can't do it by itself so quickly. Just just to
Speaker 1: round it out here, Um, what sector is most vulnerable? Well,
Speaker 1: it's funny I mentioned that one of the things that
Speaker 1: could be the most beneficial here would be the technology stocks.
Speaker 1: The problem is it could also be the most vulnerable
Speaker 1: if they don't fall through. And uh so, it's it's
Speaker 1: kind of a That's why I say you gotta step
Speaker 1: Sometimes it's good to just sit there and wait to
Speaker 1: see what happens. You need, you don't need to you know,
Speaker 1: you can miss the first couple of percentage point moves
Speaker 1: because if the technology stocks roll over in a meaningful
Speaker 1: way anytime in the near future, they're most vulnerable because,
Speaker 1: especially in the semi conductor area, they don't have the
Speaker 1: big underlying fundamental growth that some of the other groups have.
Speaker 1: So uh and I said talking about kind of both
Speaker 1: sides of my mouth. But that's why it's such a
Speaker 1: vital point or critical point, uh in the star market
Speaker 1: right now. And that's why it's also critical for this
Speaker 1: the technology stocks. Matt Millie, thanks so much for joining us.
Speaker 1: Matt as an equity strategist at Miller Tabac, joining us
Speaker 1: on the phone. Thanks for listening to the Bloomberg P
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Speaker 1: I'm on Twitter at pt Sweeney. I'm Lisa bram Woyit's
Speaker 1: I'm on Twitter at Lisa bram Woyds one before the podcast.
Speaker 1: You can always catch us worldwide on Bloomberg Radio.