1 00:00:13,320 --> 00:00:16,720 Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast. 2 00:00:16,800 --> 00:00:20,079 Speaker 1: I'm Mike Reagan, senior editor at Bloomberg, and this week 3 00:00:20,120 --> 00:00:22,080 Speaker 1: on the show, Well, you've heard it a million times. 4 00:00:22,160 --> 00:00:25,319 Speaker 1: If you're an investor, you need to diversify. But what 5 00:00:25,440 --> 00:00:28,240 Speaker 1: exactly does that mean? Can you just buy the entire 6 00:00:28,360 --> 00:00:30,880 Speaker 1: SMP five hundred and maybe some treasuries and call it 7 00:00:30,920 --> 00:00:33,239 Speaker 1: a day, or should you really put a little bit 8 00:00:33,280 --> 00:00:35,800 Speaker 1: more work into within that. We'll get into that and 9 00:00:35,840 --> 00:00:39,080 Speaker 1: other issues with the chief investment officer of a firm 10 00:00:39,159 --> 00:00:43,280 Speaker 1: that oversees about one trillion dollars under management or administration? 11 00:00:43,800 --> 00:00:46,640 Speaker 1: What first? Charlie Pellett tell us who this week's mystery 12 00:00:46,640 --> 00:00:51,760 Speaker 1: co host is. This week's mystery co host is Christine Kino. 13 00:00:52,080 --> 00:00:56,560 Speaker 1: Christine's the European team leader from Bloomberg's Bonds and Foreign 14 00:00:56,560 --> 00:01:00,880 Speaker 1: exchange coverage. She also pleads guilty to being, in her words, 15 00:01:01,440 --> 00:01:05,399 Speaker 1: a crazy cat lady. How much does she love cats, 16 00:01:05,400 --> 00:01:09,400 Speaker 1: you ask? She once flew her kitty in business class 17 00:01:09,480 --> 00:01:13,160 Speaker 1: from Singapore to Paris and then took the feeline on 18 00:01:13,200 --> 00:01:19,000 Speaker 1: a six hour cab ride from Paris to London. Okay, Christine, 19 00:01:19,160 --> 00:01:21,800 Speaker 1: you know this is a very serious buttoned up podcast here, 20 00:01:21,800 --> 00:01:23,720 Speaker 1: and I wanted to get right to the market's chat, 21 00:01:23,840 --> 00:01:26,080 Speaker 1: but I first I need to hear this cat story 22 00:01:26,120 --> 00:01:31,279 Speaker 1: that Charlie just told us about. Listen. Um, my cat 23 00:01:31,360 --> 00:01:34,440 Speaker 1: is basically my child, and there was no way that 24 00:01:34,480 --> 00:01:36,640 Speaker 1: she was going to come or she wasn't gonna come 25 00:01:36,680 --> 00:01:38,720 Speaker 1: with me when I was going to move from Singapore 26 00:01:38,760 --> 00:01:42,240 Speaker 1: to London. And of course if I was traveling business classes, 27 00:01:42,240 --> 00:01:46,160 Speaker 1: and she had to travel business class too obviously, so yeah, 28 00:01:46,560 --> 00:01:49,200 Speaker 1: it was a bit of a journey. She she wrote 29 00:01:49,280 --> 00:01:53,840 Speaker 1: in her fancy cat carrier. Uh in the business class, Um, 30 00:01:53,920 --> 00:01:57,720 Speaker 1: cavin on my foot rest in the plane. She was 31 00:01:57,760 --> 00:02:01,760 Speaker 1: actually a trooper because she only me owd once and 32 00:02:01,800 --> 00:02:04,720 Speaker 1: that was when we were landing. Um. But the entire 33 00:02:04,800 --> 00:02:08,320 Speaker 1: time she was quiet as a mouse. Um. We had 34 00:02:08,320 --> 00:02:12,520 Speaker 1: no accidents and it was a fairly uneventful flight. But then, yeah, 35 00:02:12,600 --> 00:02:15,120 Speaker 1: we had to take the six hour taxi right from 36 00:02:15,120 --> 00:02:17,760 Speaker 1: Paris to London, so that was another leg of the journey. 37 00:02:17,760 --> 00:02:19,400 Speaker 1: But she made it. We we all made it in 38 00:02:19,440 --> 00:02:21,880 Speaker 1: one piece. No one was a too grumpy at the 39 00:02:21,960 --> 00:02:25,560 Speaker 1: end of it. Charlie had some questions about how much 40 00:02:25,600 --> 00:02:28,639 Speaker 1: a cab ride from Paris to London cost and why 41 00:02:28,639 --> 00:02:30,919 Speaker 1: you didn't take the train. I suspect a corporate card 42 00:02:31,000 --> 00:02:33,480 Speaker 1: was involved, So you complete the fifth if you want 43 00:02:33,480 --> 00:02:38,519 Speaker 1: to on that issue, let me let me just say 44 00:02:38,680 --> 00:02:41,440 Speaker 1: that it probably ate up half of my moving allowance 45 00:02:42,240 --> 00:02:44,680 Speaker 1: that cab ride alone. That sounds about right. That sounds 46 00:02:44,720 --> 00:02:46,880 Speaker 1: about right. Well, let's get to that markets chat and 47 00:02:46,919 --> 00:02:49,600 Speaker 1: bring in our guest, Christie. I'm gonna warn you, UM 48 00:02:49,760 --> 00:02:52,919 Speaker 1: like me, he's a Philly guy. So if we lapsed 49 00:02:52,919 --> 00:02:55,720 Speaker 1: into some strange dialect that you don't understand and start 50 00:02:55,760 --> 00:02:59,040 Speaker 1: talking about winter ice and Hogi's just just go with it, Okay. 51 00:02:59,120 --> 00:03:02,800 Speaker 1: I'll try my best to a lifer. Yes, your best anyway. 52 00:03:03,080 --> 00:03:08,079 Speaker 1: He is the chief investment officer for SEI Investments in 53 00:03:08,120 --> 00:03:11,399 Speaker 1: the suburbs of Philadelphia. His name is Jim Smgell. Jim, 54 00:03:11,440 --> 00:03:14,639 Speaker 1: Welcome to the show. Thanks, Mike, happy too, uh happy 55 00:03:14,639 --> 00:03:18,760 Speaker 1: to be here, Jeff. I wanted to start talking first 56 00:03:18,760 --> 00:03:20,840 Speaker 1: of all about UM. Yeah. I was looking up some 57 00:03:20,880 --> 00:03:23,640 Speaker 1: of the funds that you're part of the management committee 58 00:03:23,720 --> 00:03:26,680 Speaker 1: on UM and one really popped out at me, just 59 00:03:26,760 --> 00:03:29,120 Speaker 1: because it's it's really been on a great streak the 60 00:03:29,200 --> 00:03:33,120 Speaker 1: last few years. I'm talking about the SEI institutional managed 61 00:03:33,120 --> 00:03:37,800 Speaker 1: trust dynamic asset allocation fund beaten something like ninety percent 62 00:03:37,840 --> 00:03:40,320 Speaker 1: of its peers over the last one three five years. 63 00:03:40,360 --> 00:03:42,920 Speaker 1: I think it is um So I want to just 64 00:03:43,200 --> 00:03:45,560 Speaker 1: kind of start talking about that. What's the secret sauce 65 00:03:45,600 --> 00:03:47,760 Speaker 1: for that fund? What are you doing right? That sort 66 00:03:47,760 --> 00:03:51,160 Speaker 1: of other funds in that category aren't doing as well. Okay, 67 00:03:51,640 --> 00:03:53,040 Speaker 1: give me a moment to get my thoughts together. I'm 68 00:03:53,080 --> 00:03:55,080 Speaker 1: still reeling from the from the cat story out of that. 69 00:03:56,160 --> 00:03:57,760 Speaker 1: It's a shocking tale. I don't I don't know who 70 00:03:57,840 --> 00:04:01,840 Speaker 1: signs the expense reports at Bloomberg, but it was all 71 00:04:01,880 --> 00:04:06,440 Speaker 1: above board. Let me share you, uh does it is 72 00:04:06,480 --> 00:04:08,480 Speaker 1: a It's an interesting fund. It is a unique fund. 73 00:04:08,480 --> 00:04:11,480 Speaker 1: I'm glad. I'm glad we're able to talk about it. 74 00:04:11,600 --> 00:04:13,360 Speaker 1: If you know, we're trying to We were trying to solve, 75 00:04:13,960 --> 00:04:17,720 Speaker 1: you know, pretty basic problem, which is we wanted to diversify. 76 00:04:17,760 --> 00:04:19,840 Speaker 1: You talked about diversification in your opening. We wanted to 77 00:04:19,839 --> 00:04:24,279 Speaker 1: diversify the active risks that our clients were we're getting 78 00:04:24,320 --> 00:04:27,320 Speaker 1: in their portfolio, so not necessarily the portfolio that may have, 79 00:04:27,640 --> 00:04:29,760 Speaker 1: you know, stocks and bonds, maybe some alts, maybe a 80 00:04:29,760 --> 00:04:34,880 Speaker 1: little commodity exposure, but really how they're producing excess returns um. 81 00:04:34,960 --> 00:04:37,640 Speaker 1: We we have a tactical ass allocation program, and the 82 00:04:37,800 --> 00:04:41,720 Speaker 1: struggle with bringing UH T A A or into a 83 00:04:41,760 --> 00:04:44,800 Speaker 1: client's portfolio is what do you funded with? What's the vehicle? 84 00:04:44,839 --> 00:04:46,360 Speaker 1: How do you how do you get it in there? 85 00:04:47,000 --> 00:04:48,839 Speaker 1: Uh And that's where the D A A fund was 86 00:04:48,880 --> 00:04:51,720 Speaker 1: kind of born. So what makes it so unique is 87 00:04:51,720 --> 00:04:53,560 Speaker 1: that it does have an underlying beta to It is 88 00:04:53,680 --> 00:04:57,880 Speaker 1: essentially an SMP five index fund, but instead of adding 89 00:04:58,000 --> 00:05:01,720 Speaker 1: value by picking Microsoft or this Apple, we had value 90 00:05:01,720 --> 00:05:06,320 Speaker 1: by porting our macro themes and macro ideas on top 91 00:05:06,360 --> 00:05:08,760 Speaker 1: of the SMP. So from client perspective, it makes it 92 00:05:08,760 --> 00:05:11,400 Speaker 1: pretty easy. You don't think about your funding source, right you. 93 00:05:11,640 --> 00:05:15,800 Speaker 1: Everybody has SMP exposure. Everybody tends to have it in size. 94 00:05:16,360 --> 00:05:19,000 Speaker 1: So you can just take out part of your SMP funds, 95 00:05:19,400 --> 00:05:21,480 Speaker 1: maybe it's an e t F, maybe it's an index fondent. 96 00:05:21,560 --> 00:05:23,400 Speaker 1: You can replace it with the D A A fund 97 00:05:23,800 --> 00:05:28,040 Speaker 1: and your underlying strategic asset allocation has not changed at all. 98 00:05:28,200 --> 00:05:31,560 Speaker 1: The only thing that's changes you're now diversifying a bit 99 00:05:31,600 --> 00:05:35,480 Speaker 1: of your active exposures and how you size it. Can 100 00:05:35,680 --> 00:05:38,479 Speaker 1: you know you can adjust how much you want to 101 00:05:38,520 --> 00:05:40,960 Speaker 1: change those active exposures. You can take on a lot, 102 00:05:41,040 --> 00:05:43,080 Speaker 1: you can take on a little bit. So we found 103 00:05:43,080 --> 00:05:46,400 Speaker 1: it to be a pretty useful implementation idea for the 104 00:05:46,520 --> 00:05:48,400 Speaker 1: end client. And and you know, we've put on a 105 00:05:48,400 --> 00:05:50,480 Speaker 1: good run. For sure, We've had a good couple of years. 106 00:05:51,080 --> 00:05:53,200 Speaker 1: But clients seem to not just to be happy obviously 107 00:05:53,240 --> 00:05:55,599 Speaker 1: with our performance, but also just with how the fund 108 00:05:55,640 --> 00:05:57,600 Speaker 1: is set up. It gives them a little flexibility and 109 00:05:57,680 --> 00:06:01,600 Speaker 1: kind of changing their portfolios around. So yeah, tell me, Jim. 110 00:06:01,640 --> 00:06:05,120 Speaker 1: I mean, I know that you know, diversification, that's the 111 00:06:05,760 --> 00:06:09,480 Speaker 1: main key word here, right, But I think these days 112 00:06:09,720 --> 00:06:14,320 Speaker 1: UM investors are facing so many risks and variables UM 113 00:06:14,400 --> 00:06:17,120 Speaker 1: in markets, and obviously one of them the hot topic 114 00:06:17,360 --> 00:06:19,760 Speaker 1: these day seems to be inflation. And I know that 115 00:06:20,040 --> 00:06:23,480 Speaker 1: you have some pretty recent views around it, and I 116 00:06:23,520 --> 00:06:26,800 Speaker 1: believe you're actually in camp that UM things that inflation 117 00:06:27,240 --> 00:06:32,559 Speaker 1: pressures are UM less transitory than maybe central banks would imply. 118 00:06:32,760 --> 00:06:35,920 Speaker 1: Is that right? UM? But you know they keep insisting 119 00:06:36,000 --> 00:06:39,119 Speaker 1: that it's it's transitory, it's not gonna last very long. 120 00:06:39,320 --> 00:06:41,960 Speaker 1: You seem to think otherwise. Tell us what are we 121 00:06:42,080 --> 00:06:44,960 Speaker 1: missing here? Is there someplace that we should be looking 122 00:06:45,240 --> 00:06:49,200 Speaker 1: where these pressures are actually becoming a bit more entrenched 123 00:06:49,400 --> 00:06:52,560 Speaker 1: than maybe central bankers would like to admit. I think, 124 00:06:52,760 --> 00:06:54,760 Speaker 1: you know, I think you're you're right. I mean, broadly, 125 00:06:54,920 --> 00:06:58,600 Speaker 1: our view is that we're entering into a really unique 126 00:06:59,200 --> 00:07:02,600 Speaker 1: environment given the stimulus and the type of stimulus, notably 127 00:07:03,080 --> 00:07:05,160 Speaker 1: the level of fiscal stimulus that we've had, which is 128 00:07:05,200 --> 00:07:09,480 Speaker 1: not coordinated with the monetary which is which is relatively unusual. Uh, 129 00:07:09,520 --> 00:07:12,080 Speaker 1: you know, we we think this is a different enough 130 00:07:12,200 --> 00:07:16,360 Speaker 1: environment where the precision you know that the that the 131 00:07:16,400 --> 00:07:20,080 Speaker 1: Fed seems to you know, have around this notion of 132 00:07:20,160 --> 00:07:22,600 Speaker 1: how long these inflationary pressures are going to be. With us, 133 00:07:22,920 --> 00:07:26,400 Speaker 1: we're just we're just taking the opposite side of the precision, right. 134 00:07:26,400 --> 00:07:29,000 Speaker 1: We don't have any grandiose model where we're looking at 135 00:07:29,000 --> 00:07:30,800 Speaker 1: this and saying, well, you know, the Fed thinks that 136 00:07:31,160 --> 00:07:33,160 Speaker 1: you know, inflation is going to be a two quarter event. 137 00:07:33,240 --> 00:07:34,920 Speaker 1: We think it's going to be a three quarter event. 138 00:07:35,400 --> 00:07:38,000 Speaker 1: You know, I don't even know what transitory means. What 139 00:07:38,000 --> 00:07:40,320 Speaker 1: what is is that a three year thing? Is that 140 00:07:40,400 --> 00:07:42,840 Speaker 1: a four year thing? So you know, our view is 141 00:07:42,880 --> 00:07:46,160 Speaker 1: we're just kind of looking at how the markets are 142 00:07:46,200 --> 00:07:49,280 Speaker 1: pricing in inflation, which seems to be very very subdued, 143 00:07:49,720 --> 00:07:51,480 Speaker 1: you know, a little pop here, but then kind of 144 00:07:51,480 --> 00:07:53,240 Speaker 1: a recovery from there. And we're just gonna take the 145 00:07:53,280 --> 00:07:56,200 Speaker 1: other side of that. We think there's enough stimulus in place, 146 00:07:57,160 --> 00:08:00,800 Speaker 1: both on the monetary side and on the fiscal side. Uh, 147 00:08:01,000 --> 00:08:03,000 Speaker 1: you know that we think this can kind of surprise 148 00:08:03,080 --> 00:08:05,560 Speaker 1: a lot of people. And we're also look, i mean behaviorally, 149 00:08:05,600 --> 00:08:08,280 Speaker 1: we're getting through a period of time where inflation, you know, 150 00:08:08,440 --> 00:08:10,440 Speaker 1: was was hard and feathered. I mean, it was dead 151 00:08:10,520 --> 00:08:13,720 Speaker 1: and it was never coming back. Um, you know, the 152 00:08:13,760 --> 00:08:18,960 Speaker 1: client portfolios, the classic sixty. Interestingly enough, there is an 153 00:08:18,960 --> 00:08:21,840 Speaker 1: inflation bed in a sixty portfolio. It just happens to 154 00:08:21,840 --> 00:08:24,920 Speaker 1: be on deflation, right. So you know, our view is 155 00:08:24,960 --> 00:08:27,920 Speaker 1: that adding some inflation exposure to a client's portfolio, even 156 00:08:27,960 --> 00:08:30,360 Speaker 1: in general, is probably a good idea just to get 157 00:08:30,360 --> 00:08:33,400 Speaker 1: you back to normal. But in this environment that we 158 00:08:33,440 --> 00:08:36,480 Speaker 1: find ourselves in today, you know, we're happy, We're happy 159 00:08:36,520 --> 00:08:38,880 Speaker 1: to take the side of an overshoot. We're happy to 160 00:08:38,880 --> 00:08:41,199 Speaker 1: take the side that the Fed doesn't have, you know, 161 00:08:41,320 --> 00:08:44,160 Speaker 1: kind of the precision and execution that maybe the market 162 00:08:44,200 --> 00:08:47,880 Speaker 1: is giving them kind of credit for. So what does 163 00:08:47,920 --> 00:08:50,640 Speaker 1: that means from sort of allocation standpoint, to take the 164 00:08:50,640 --> 00:08:53,000 Speaker 1: other side of that, that bed on inflation, is it, 165 00:08:53,120 --> 00:08:56,440 Speaker 1: you know, load up more on tips, Is it find 166 00:08:56,440 --> 00:08:59,320 Speaker 1: the equities that are most you know, likely to benefit 167 00:08:59,320 --> 00:09:02,240 Speaker 1: from inflation? A combo both. I imagine, how would we 168 00:09:02,360 --> 00:09:04,280 Speaker 1: sort of wrap our heads around how to how to 169 00:09:04,360 --> 00:09:07,559 Speaker 1: execute on what you're talking about or well, from a 170 00:09:07,600 --> 00:09:10,120 Speaker 1: strategic perspective, let's just start there for a moment, and 171 00:09:10,160 --> 00:09:12,120 Speaker 1: I think it all investors should take a look at 172 00:09:12,120 --> 00:09:15,120 Speaker 1: their portfolio and see do they really have any inflation 173 00:09:15,160 --> 00:09:18,960 Speaker 1: sensitive assets in their portfolio, and if they don't, a 174 00:09:19,000 --> 00:09:20,960 Speaker 1: lot of the things that you mentioned we think are 175 00:09:21,000 --> 00:09:23,480 Speaker 1: worth looking at. Add some tips to your portfolio, add 176 00:09:23,559 --> 00:09:26,680 Speaker 1: some strategic commodity exposure up to you to your book. 177 00:09:27,400 --> 00:09:30,240 Speaker 1: But from a tactical perspective, it really is a bit 178 00:09:30,280 --> 00:09:33,559 Speaker 1: of an all of the above implementation. From from our perspective, 179 00:09:33,640 --> 00:09:37,040 Speaker 1: so we are directionally overweight commodities relative to what we 180 00:09:37,040 --> 00:09:39,520 Speaker 1: would consider to be a model portfolio right now. In 181 00:09:39,559 --> 00:09:43,520 Speaker 1: the Dynamic Acid Allocation Fund, that's our largest exposure. It's 182 00:09:43,840 --> 00:09:47,560 Speaker 1: directionally long broad commodities. We also have what we would 183 00:09:47,600 --> 00:09:52,400 Speaker 1: call some value equity exposure that takes a few forms, right, so, uh, 184 00:09:52,600 --> 00:09:55,199 Speaker 1: and very easy way to get value equity exposure is 185 00:09:55,240 --> 00:09:58,640 Speaker 1: actually look outside the United States. So in disease in 186 00:09:58,679 --> 00:10:01,880 Speaker 1: the UK, indicease, and Japan, even in the season Europe, 187 00:10:02,160 --> 00:10:06,160 Speaker 1: the sectors that make up those stock markets tend to 188 00:10:06,160 --> 00:10:09,200 Speaker 1: be more value oriented. You're not gonna see the dominating 189 00:10:09,320 --> 00:10:12,120 Speaker 1: big tech names they'll see in the United States. In 190 00:10:12,160 --> 00:10:15,319 Speaker 1: the United States. Outside of of outright investing in something 191 00:10:15,360 --> 00:10:18,079 Speaker 1: like a value index or outright investing in a smart 192 00:10:18,200 --> 00:10:22,080 Speaker 1: data value factor, you could even take strides like we're 193 00:10:22,080 --> 00:10:24,559 Speaker 1: doing in in the d A A fund, which is 194 00:10:24,600 --> 00:10:27,440 Speaker 1: an equal weight SMPAID. Right, So, once you get rid 195 00:10:27,480 --> 00:10:30,120 Speaker 1: of the high concentration in the mega tech, all of 196 00:10:30,160 --> 00:10:33,400 Speaker 1: a sudden, you're looking and feeling a lot more like value, 197 00:10:33,400 --> 00:10:37,440 Speaker 1: which has these kind of reflationary characteristics to it, and 198 00:10:37,520 --> 00:10:40,520 Speaker 1: we would expect to benefit from that. You know. Outside 199 00:10:40,520 --> 00:10:43,280 Speaker 1: of that, uh, you know, short bonds is not something 200 00:10:43,280 --> 00:10:46,160 Speaker 1: we necessarily recommend. We happen to be tactically short on 201 00:10:46,200 --> 00:10:48,720 Speaker 1: the long end of the curve, right now, that's not 202 00:10:48,800 --> 00:10:51,120 Speaker 1: something that we would recommend on a strategic basis. Fixed 203 00:10:51,120 --> 00:10:54,000 Speaker 1: income still plays a role in your portfolio, but we 204 00:10:54,080 --> 00:10:55,960 Speaker 1: think you know, the pressure is going to be there 205 00:10:56,280 --> 00:10:58,720 Speaker 1: if if we're if we're of the of the view 206 00:10:58,760 --> 00:11:02,000 Speaker 1: that inflation is going to surprise so much of the upside. Uh, 207 00:11:02,040 --> 00:11:05,880 Speaker 1: you know despite the you know, the feeds proclamations. Um, 208 00:11:06,000 --> 00:11:07,920 Speaker 1: we want to be a little bit sure here. As 209 00:11:08,000 --> 00:11:20,000 Speaker 1: also as a tactical play, So, Jim, I wanna hone 210 00:11:20,040 --> 00:11:24,320 Speaker 1: in on your point on commodity specifically because I just 211 00:11:24,400 --> 00:11:27,679 Speaker 1: finished reading The World for Sale, which is a terrific 212 00:11:27,679 --> 00:11:31,120 Speaker 1: book by our colleagues Heavier bloss In Jack Fargie's all 213 00:11:31,120 --> 00:11:34,880 Speaker 1: about the history of how commodity trading houses came to be, 214 00:11:35,000 --> 00:11:38,680 Speaker 1: from their inception to the modern day trading house. And 215 00:11:38,760 --> 00:11:41,400 Speaker 1: I gotta tell you that is not a market for 216 00:11:41,520 --> 00:11:45,440 Speaker 1: the faint hearted. It's not something that your regular mom 217 00:11:45,480 --> 00:11:49,319 Speaker 1: and pop investor can just very easily dive into without 218 00:11:50,080 --> 00:11:53,640 Speaker 1: suffering some growing pain. So would you have any sort 219 00:11:53,640 --> 00:11:57,120 Speaker 1: of advice for the novice investor who may want to 220 00:11:57,200 --> 00:12:01,240 Speaker 1: dip their toes into the commodity space? Ace, How would they? 221 00:12:01,280 --> 00:12:05,199 Speaker 1: How would you advise they get started in that? It's 222 00:12:05,280 --> 00:12:07,679 Speaker 1: it's it's a great point. It's a that sounds like 223 00:12:07,679 --> 00:12:09,480 Speaker 1: a book I should probably pick up and put on 224 00:12:09,520 --> 00:12:12,640 Speaker 1: the summer reading list. Um, but it's exactly right. I mean, 225 00:12:12,640 --> 00:12:16,679 Speaker 1: commodities are this is a trading oriented asset class, right, 226 00:12:16,679 --> 00:12:19,439 Speaker 1: I mean then that's you know, that's you know, everyone's 227 00:12:19,640 --> 00:12:21,679 Speaker 1: you know the you know, if you're if you're as 228 00:12:21,679 --> 00:12:23,800 Speaker 1: old as I am and maybe as old as Michael, 229 00:12:24,280 --> 00:12:27,800 Speaker 1: remember trading trading spaces and you're in the commodity pits, 230 00:12:27,880 --> 00:12:32,160 Speaker 1: and um, Christina's probably has no idea what we're talking about. 231 00:12:32,320 --> 00:12:35,880 Speaker 1: I have no idea what you're talking about. But I'm 232 00:12:35,960 --> 00:12:39,080 Speaker 1: thinking of a spitoff podcast that's just old man referenced 233 00:12:39,160 --> 00:12:42,959 Speaker 1: movie references Jim for for people like Christine, so they 234 00:12:42,960 --> 00:12:45,040 Speaker 1: know what we're talking about when we get together. You know, 235 00:12:45,080 --> 00:12:47,000 Speaker 1: maybe maybe follow up with a link for Christine. You 236 00:12:47,040 --> 00:12:50,640 Speaker 1: can catch up Eddie Murphy. You gotta you gotta watch 237 00:12:50,800 --> 00:12:53,840 Speaker 1: on Christine. It's a classic and sett in Philadelphia by 238 00:12:54,120 --> 00:12:57,480 Speaker 1: said in Philadelphia that's exactly right. Um, So, so you 239 00:12:57,520 --> 00:13:00,200 Speaker 1: know you're right. Commodities are not you know they it 240 00:13:00,320 --> 00:13:04,240 Speaker 1: is much much more difficult. The implementation from the portfolio 241 00:13:04,280 --> 00:13:07,760 Speaker 1: perspective is not going to be obviously hard commodities you're 242 00:13:07,800 --> 00:13:10,520 Speaker 1: gonna be doing this is all futures contract based, which 243 00:13:10,520 --> 00:13:12,439 Speaker 1: also makes a little bit more difficult because we're talking 244 00:13:12,480 --> 00:13:14,720 Speaker 1: about derivatives, and we have talked about things like you know, 245 00:13:14,760 --> 00:13:18,119 Speaker 1: the roll down and whether we're in cantangula or backwardation. 246 00:13:18,160 --> 00:13:21,120 Speaker 1: But there are, thankfully, just given how the market is evolved, 247 00:13:21,800 --> 00:13:24,840 Speaker 1: very very easy ways to get broad based commodity exposure. 248 00:13:25,120 --> 00:13:28,000 Speaker 1: Just look in the E t F space. There's commodity 249 00:13:28,320 --> 00:13:30,160 Speaker 1: e t s that are broad based. They're based on 250 00:13:30,200 --> 00:13:33,320 Speaker 1: the b Comm Index, which is the more diversified as 251 00:13:33,320 --> 00:13:36,800 Speaker 1: opposed to the to the Goldman Index, um doesn't have 252 00:13:36,840 --> 00:13:40,640 Speaker 1: as much asn't as heavy into energy crosses over all 253 00:13:40,679 --> 00:13:43,079 Speaker 1: of the different sectors, and two base metals and precious 254 00:13:43,080 --> 00:13:47,120 Speaker 1: and eggs and of course into the energy components as well. 255 00:13:47,600 --> 00:13:50,760 Speaker 1: So really easy, they're relatively they're relatively cheap, you don't 256 00:13:50,800 --> 00:13:53,120 Speaker 1: have to and and many of them are even K 257 00:13:53,360 --> 00:13:56,040 Speaker 1: one free. So for those investors that hear futures and 258 00:13:56,080 --> 00:13:58,360 Speaker 1: ETFs in the same sentence and immediately like, I don't 259 00:13:58,400 --> 00:14:00,000 Speaker 1: want to deal with the K one for my account, 260 00:14:00,520 --> 00:14:03,480 Speaker 1: Gonna charge me more for it. Plenty of ways around 261 00:14:03,520 --> 00:14:06,920 Speaker 1: that in commodity space, so it has become a relatively 262 00:14:07,600 --> 00:14:12,840 Speaker 1: easy addition to client portfolios just by looking at ETF space. Now, 263 00:14:12,920 --> 00:14:15,439 Speaker 1: I want to go back to what you said earlier 264 00:14:15,640 --> 00:14:18,959 Speaker 1: about sixty forty UM. It's interesting that you mentioned that 265 00:14:19,080 --> 00:14:22,120 Speaker 1: because it's such a divisive sort of topic these days. 266 00:14:22,160 --> 00:14:24,640 Speaker 1: We have a number of prominent people calling the death 267 00:14:24,720 --> 00:14:28,720 Speaker 1: of this investment approach, right, but um, are you still 268 00:14:28,800 --> 00:14:30,800 Speaker 1: a believer in that? And how do you think that 269 00:14:31,000 --> 00:14:35,440 Speaker 1: kind of profile has changed when we're an environment where um, 270 00:14:35,560 --> 00:14:38,600 Speaker 1: the ten year treasuries are yielding what one and a 271 00:14:38,640 --> 00:14:42,920 Speaker 1: half percent? Uh, those in Europe are barely above zero 272 00:14:43,360 --> 00:14:47,040 Speaker 1: UM and there's just not a lot of yield to 273 00:14:47,200 --> 00:14:52,840 Speaker 1: go when when you're talking about your traditional UM bond destinations, 274 00:14:52,920 --> 00:14:55,360 Speaker 1: you know, so how how what does that look like 275 00:14:55,520 --> 00:14:58,600 Speaker 1: for you these days? You know, the sixty forty split, Like, 276 00:14:59,360 --> 00:15:04,040 Speaker 1: where where could we be looking beyond the traditional UM 277 00:15:04,360 --> 00:15:07,680 Speaker 1: fixed income markets for a bit more yield than you 278 00:15:07,760 --> 00:15:10,040 Speaker 1: know what we're getting now. That's you know, it's it's 279 00:15:10,040 --> 00:15:11,840 Speaker 1: a great question. It's when we get a lot um 280 00:15:12,040 --> 00:15:15,560 Speaker 1: you know, we we've actually been of the mind that is, 281 00:15:15,840 --> 00:15:19,880 Speaker 1: you know, quite frankly, never really been a great diversified portfolio. 282 00:15:20,000 --> 00:15:22,280 Speaker 1: I mean you've you know, you've had many folks on 283 00:15:22,480 --> 00:15:24,640 Speaker 1: on this podcast in the past that would probably tell 284 00:15:24,640 --> 00:15:27,960 Speaker 1: you that the similar story. But a sixty forty portfolio 285 00:15:28,160 --> 00:15:31,880 Speaker 1: is is essentially a deluded equity portfolio. Right. The vall 286 00:15:32,040 --> 00:15:35,440 Speaker 1: differential between your equity investments and your fixing co investments 287 00:15:35,520 --> 00:15:39,640 Speaker 1: are such that the bonds don't really matter all that much. Right, 288 00:15:39,720 --> 00:15:43,280 Speaker 1: You're you're your sixty of your capital is invested in equities, 289 00:15:43,520 --> 00:15:47,640 Speaker 1: but of your risk is an equity. So it's not 290 00:15:47,840 --> 00:15:51,320 Speaker 1: a terribly diversified portfolio. So we've always been we always 291 00:15:51,320 --> 00:15:54,920 Speaker 1: push our clients in the direction of thinking about diversification, 292 00:15:55,360 --> 00:15:57,360 Speaker 1: even outside of where we are today, which is, you know, 293 00:15:57,440 --> 00:16:01,000 Speaker 1: low yields and people actually, you know, catching this idea 294 00:16:01,040 --> 00:16:03,280 Speaker 1: that inflation might might be a problem, and what might 295 00:16:03,320 --> 00:16:06,520 Speaker 1: that do with yields. Let's answer your question directly. I 296 00:16:06,560 --> 00:16:09,680 Speaker 1: mean it is, you know, from a strategic perspective, you 297 00:16:09,760 --> 00:16:12,840 Speaker 1: do want to think about diversification through multiple lenses, right, 298 00:16:12,880 --> 00:16:15,000 Speaker 1: So we've already talked about one of those lenses, which 299 00:16:15,040 --> 00:16:18,160 Speaker 1: is risk. So a sixfolio from a risk perspective isn't 300 00:16:18,160 --> 00:16:20,560 Speaker 1: gonna look terribly diversified. We already talked about another one 301 00:16:20,560 --> 00:16:22,960 Speaker 1: of those lenses, which is why does it relate to 302 00:16:23,080 --> 00:16:26,280 Speaker 1: the macro environment like growth and inflation. We know that, 303 00:16:26,680 --> 00:16:29,120 Speaker 1: you know, rising above trend glow growth, which we think 304 00:16:29,680 --> 00:16:32,080 Speaker 1: is probably the situation we're in in the near term here. 305 00:16:32,120 --> 00:16:34,920 Speaker 1: That's gonna benefit equities, that's gonna benefit things like credit, 306 00:16:34,960 --> 00:16:38,440 Speaker 1: which are highly correlated to equities. But a rising inflation 307 00:16:38,480 --> 00:16:41,400 Speaker 1: and above trend inflation, you know that probably is not 308 00:16:41,440 --> 00:16:44,760 Speaker 1: going to benefit your your fixed income assets, assuming that 309 00:16:44,800 --> 00:16:48,080 Speaker 1: their nominal bonds and with equities they have a love 310 00:16:48,160 --> 00:16:50,840 Speaker 1: hate relationship right when we're coming from a low base 311 00:16:51,160 --> 00:16:54,960 Speaker 1: like so when you move from deflation to inflation, inflation 312 00:16:55,080 --> 00:16:58,000 Speaker 1: is hugely positive for equities. But when you move from 313 00:16:58,160 --> 00:17:03,600 Speaker 1: somewhat trend inflation to above trend or more importantly unexpected inflation, 314 00:17:04,040 --> 00:17:06,359 Speaker 1: that's what that's what equities tend to roll over. So 315 00:17:06,800 --> 00:17:08,719 Speaker 1: there's a lot of things that I think clients can 316 00:17:08,760 --> 00:17:11,560 Speaker 1: do right away, you know, to make to sit there 317 00:17:11,600 --> 00:17:15,840 Speaker 1: at sixty forty portfolio better and we've we've talked about 318 00:17:15,880 --> 00:17:19,640 Speaker 1: them already. Tips replace some of your nominal bonds with tips. 319 00:17:19,720 --> 00:17:21,440 Speaker 1: We do think that makes a lot of sense. There's 320 00:17:21,480 --> 00:17:25,440 Speaker 1: the inherent adjustment to two c p I. It's regardless 321 00:17:25,480 --> 00:17:29,479 Speaker 1: of what your view is transitory or not transitory. Uh, 322 00:17:29,680 --> 00:17:32,880 Speaker 1: that's going to make your portfolio from a strategic strategic 323 00:17:32,920 --> 00:17:36,679 Speaker 1: perspective more robust. We would also suggest things like gold 324 00:17:37,640 --> 00:17:42,119 Speaker 1: or in a broader commodity complex, a broader commodity exposure. Again, 325 00:17:42,160 --> 00:17:45,680 Speaker 1: it's going to make your portfolio more robust because the 326 00:17:45,760 --> 00:17:49,800 Speaker 1: characteristics of broad based commodities will differ at certain times 327 00:17:50,320 --> 00:17:54,440 Speaker 1: from equities and from nominal bonds. So you know, what 328 00:17:54,600 --> 00:17:58,120 Speaker 1: we wouldn't suggest is to go from one portfolio sixty forty, 329 00:17:58,160 --> 00:18:00,480 Speaker 1: which we view is not not necessarily being to versified, 330 00:18:00,880 --> 00:18:04,280 Speaker 1: to something like you know, eighty equity and even less 331 00:18:04,359 --> 00:18:08,440 Speaker 1: fixed income, which is even less diversified. Don't abandon all 332 00:18:08,640 --> 00:18:12,119 Speaker 1: semblance of an interest rate sensitivity because look, we're all 333 00:18:12,160 --> 00:18:15,040 Speaker 1: in the prediction business, and that's a really difficult business 334 00:18:15,080 --> 00:18:17,160 Speaker 1: to be in, and no one has a crystal wall. 335 00:18:17,760 --> 00:18:19,879 Speaker 1: And can I come up with a few different scenarios 336 00:18:19,920 --> 00:18:23,000 Speaker 1: where rates stay exactly where they are, or rates fall 337 00:18:23,119 --> 00:18:27,119 Speaker 1: from here, or rates rise but in a very calm 338 00:18:27,240 --> 00:18:30,760 Speaker 1: and measured way, which would actually benefit in some ways 339 00:18:30,800 --> 00:18:33,360 Speaker 1: your nomenal boston, your portfolio. I can come up with those, 340 00:18:33,400 --> 00:18:36,000 Speaker 1: and we just we just don't know, so diversification isn't 341 00:18:36,000 --> 00:18:39,359 Speaker 1: about from your strategic portfolio. You know, It's not about 342 00:18:39,400 --> 00:18:41,680 Speaker 1: making short term bets. It's it's looking over the long 343 00:18:41,920 --> 00:18:44,280 Speaker 1: term and deciding, how can I make this the most 344 00:18:44,520 --> 00:18:49,040 Speaker 1: robust portfolio for any outcome that may come down the pike. Yeah, Jim, 345 00:18:49,040 --> 00:18:51,439 Speaker 1: when it comes to I think all our listeners are 346 00:18:51,560 --> 00:19:13,880 Speaker 1: are six game stop smart such a Before you were 347 00:19:14,320 --> 00:19:16,640 Speaker 1: named c I O of s c I, you were 348 00:19:16,800 --> 00:19:20,200 Speaker 1: c I O of non traditional Strategies, and Uh, I 349 00:19:20,320 --> 00:19:22,840 Speaker 1: was laughing about that concept earlier, thinking like, boy, we've 350 00:19:22,880 --> 00:19:25,480 Speaker 1: seen some non traditional strategies this year. You've got Dave 351 00:19:25,560 --> 00:19:28,680 Speaker 1: Portnoy picking letters out of a scrabble bag to figure 352 00:19:28,680 --> 00:19:31,359 Speaker 1: out what stock trickers he wants to buy it, and 353 00:19:31,440 --> 00:19:34,399 Speaker 1: the whole Reddit phenomenon. And don't worry, I know, I 354 00:19:34,520 --> 00:19:36,560 Speaker 1: know that's not what you're talking about. But I wanted 355 00:19:36,600 --> 00:19:39,919 Speaker 1: to sort of get your sense of the alternative asset 356 00:19:40,000 --> 00:19:43,879 Speaker 1: classes now, especially as they fit into that notion of diversification, 357 00:19:43,960 --> 00:19:46,000 Speaker 1: because I was watching some of the videos on the 358 00:19:46,160 --> 00:19:49,520 Speaker 1: SEI website. Uh, You've had some really interesting chats with 359 00:19:49,640 --> 00:19:52,399 Speaker 1: a colleague there, and you brought up some stuff that 360 00:19:52,480 --> 00:19:55,120 Speaker 1: I think not a lot of people think about especially 361 00:19:55,160 --> 00:19:59,280 Speaker 1: home country bias, and you know, there's a bias towards 362 00:19:59,720 --> 00:20:02,200 Speaker 1: these mega caps that are dominating the market today. So 363 00:20:02,240 --> 00:20:06,000 Speaker 1: if you buy an SP five fund these days, you know, 364 00:20:06,800 --> 00:20:08,720 Speaker 1: as U S investor, you, hey, you're you've got that 365 00:20:08,800 --> 00:20:11,880 Speaker 1: home country bias and you're really loading up on these 366 00:20:11,960 --> 00:20:15,240 Speaker 1: mega cap you know, Amazons and Apples of the world. 367 00:20:15,800 --> 00:20:17,680 Speaker 1: So how do the alts fit into that space? And 368 00:20:18,000 --> 00:20:21,440 Speaker 1: what alts um sort of look attractive these days to you? 369 00:20:21,560 --> 00:20:24,080 Speaker 1: You know, you mentioned commodities obviously being sort of a 370 00:20:24,160 --> 00:20:26,520 Speaker 1: real asset type of way to diversify. What else is 371 00:20:26,600 --> 00:20:29,520 Speaker 1: sort of you know, catching your interest as a way 372 00:20:29,560 --> 00:20:32,760 Speaker 1: to get away from some of these uh inherent biases 373 00:20:32,840 --> 00:20:36,080 Speaker 1: that h SMP five fund holder might have. Sure, and 374 00:20:36,600 --> 00:20:38,560 Speaker 1: I think it's it's it's a great question because it's 375 00:20:38,600 --> 00:20:41,080 Speaker 1: even a bit of a misnomer. You know when people 376 00:20:41,119 --> 00:20:44,800 Speaker 1: talk about, well, I'm allocated to equities, fixed income, and alts. 377 00:20:45,720 --> 00:20:47,640 Speaker 1: You know, I don't know what what does alts even mean? 378 00:20:47,680 --> 00:20:50,640 Speaker 1: I mean, that's like saying I'm allocated to equities, fixed 379 00:20:50,680 --> 00:20:55,320 Speaker 1: income and mutual funds. It doesn't it doesn't tell me anything. 380 00:20:55,359 --> 00:20:59,520 Speaker 1: You've just described a rapper. You haven't described anything that 381 00:20:59,640 --> 00:21:01,840 Speaker 1: I can actually you know, sink my teeth into as 382 00:21:01,880 --> 00:21:04,879 Speaker 1: it relates to the exposures from a return perspective or 383 00:21:04,880 --> 00:21:09,320 Speaker 1: a risk perspective that you're bringing to your portfolio. So obviously, 384 00:21:09,400 --> 00:21:11,399 Speaker 1: like everything that we do, we're trying to our our 385 00:21:11,440 --> 00:21:14,879 Speaker 1: alternative book of business is trying to be as diversifying 386 00:21:15,359 --> 00:21:18,359 Speaker 1: as we can. So, yes, that's going to be more 387 00:21:18,440 --> 00:21:21,720 Speaker 1: relative value trading, so long shorts which allow us to 388 00:21:21,840 --> 00:21:24,280 Speaker 1: kind of lower the correlation profile. So even if we're 389 00:21:24,359 --> 00:21:28,359 Speaker 1: utilizing you know, what are even just basic US equity exposure, 390 00:21:28,840 --> 00:21:31,399 Speaker 1: we can change that correlation profile by making sure that 391 00:21:31,520 --> 00:21:35,639 Speaker 1: it's very low net beta UH and long short so 392 00:21:35,840 --> 00:21:39,280 Speaker 1: it's you're you're you're exploiting the differences between two sectors, 393 00:21:39,400 --> 00:21:42,640 Speaker 1: or two names, or or two countries, whatever the case 394 00:21:42,680 --> 00:21:44,960 Speaker 1: may be. UH, and that gives you that kind of 395 00:21:45,000 --> 00:21:48,920 Speaker 1: diversifying profile. Right now, we really like global macro. Probably 396 00:21:49,000 --> 00:21:51,240 Speaker 1: not surprising this has been a part of the alternative 397 00:21:51,320 --> 00:21:55,480 Speaker 1: universe that is that has been very unloved because it's 398 00:21:55,520 --> 00:21:59,360 Speaker 1: been somewhat challenged. Um, you know this is UH can 399 00:21:59,480 --> 00:22:03,200 Speaker 1: be somewhat of a long volatility of strategy as well. 400 00:22:03,359 --> 00:22:07,200 Speaker 1: Typically deals a lot in futures, which gives it commodities 401 00:22:07,280 --> 00:22:10,480 Speaker 1: and rates and inflation as kind of its kind of 402 00:22:10,560 --> 00:22:13,119 Speaker 1: its basis, A little bit a little bit of momentum 403 00:22:13,160 --> 00:22:15,280 Speaker 1: attached to that as well, but we tended to emphasize 404 00:22:15,280 --> 00:22:17,320 Speaker 1: that a little bit. But so this kind of notion 405 00:22:17,359 --> 00:22:21,000 Speaker 1: of global macro we think fits very very nicely into 406 00:22:21,080 --> 00:22:24,159 Speaker 1: a broader portfolio, which tends to be dominated as I 407 00:22:24,280 --> 00:22:28,240 Speaker 1: mentioned with equity risk already, UH, and even credit on 408 00:22:28,320 --> 00:22:31,200 Speaker 1: the fixed income side, which is of course highly correlated 409 00:22:31,240 --> 00:22:33,840 Speaker 1: with with the equity side of the business. So you're 410 00:22:33,840 --> 00:22:36,080 Speaker 1: seeing in our book of business, you're seeing a little 411 00:22:36,080 --> 00:22:37,919 Speaker 1: bit more of an emphasis right now on the global 412 00:22:37,960 --> 00:22:41,000 Speaker 1: macro side of things, uh, given where we are in 413 00:22:41,040 --> 00:22:45,000 Speaker 1: the cycle, but also because of US diversification properties CHIP 414 00:22:45,080 --> 00:22:49,640 Speaker 1: too quick questions, um, before we get to the crazy things. UM. 415 00:22:50,240 --> 00:22:51,840 Speaker 1: First one is I know what se s c I. 416 00:22:51,920 --> 00:22:53,680 Speaker 1: You guys were kind of early to the notion of 417 00:22:53,840 --> 00:22:57,719 Speaker 1: low volatility stocks UM, and then last year we had 418 00:22:57,800 --> 00:23:00,440 Speaker 1: one of these episodes where they kind of we're in 419 00:23:00,520 --> 00:23:02,360 Speaker 1: the wrong place at the right time or or wrong 420 00:23:02,400 --> 00:23:04,720 Speaker 1: place at the wrong time. I guess you could call it. 421 00:23:05,119 --> 00:23:07,159 Speaker 1: You know, a lot of that cohort happened to be 422 00:23:07,520 --> 00:23:12,119 Speaker 1: names that really got hurt by the COVID lockdowns. Now 423 00:23:12,200 --> 00:23:14,600 Speaker 1: on the other side of it, UM, a lot of 424 00:23:14,640 --> 00:23:17,520 Speaker 1: low vultility stocks tend to be high dividend players, high 425 00:23:17,600 --> 00:23:21,720 Speaker 1: yielding stocks, which might not perform as well in a 426 00:23:21,880 --> 00:23:24,760 Speaker 1: rising interest rate environment if you're right about the inflation 427 00:23:24,840 --> 00:23:27,439 Speaker 1: being you know, hot for a couple of years now. 428 00:23:27,920 --> 00:23:29,760 Speaker 1: So it was one of those strategies that you're kind 429 00:23:29,760 --> 00:23:32,960 Speaker 1: of would would uh put on the bench for a while, 430 00:23:33,119 --> 00:23:36,280 Speaker 1: on the sidelines, um in times like this. And the 431 00:23:36,320 --> 00:23:38,800 Speaker 1: second question is I I asked us of all Philadelphia people, 432 00:23:38,840 --> 00:23:43,000 Speaker 1: but it's it's uh, Genos, Genos or Pats. Well, the 433 00:23:43,080 --> 00:23:47,040 Speaker 1: second question is the easier one, and that's Geno's. Okay, 434 00:23:47,200 --> 00:23:49,320 Speaker 1: we'll start there, all right, Okay, you know, if you 435 00:23:49,359 --> 00:23:51,920 Speaker 1: want to get tactically, it would be Jim's, but Jim's Okay, 436 00:23:52,400 --> 00:23:55,480 Speaker 1: the binary choice, we'll go. This is one of those 437 00:23:55,520 --> 00:23:58,359 Speaker 1: parts where Christine's lost here. But these are the famous 438 00:23:58,440 --> 00:24:02,080 Speaker 1: cheese steak restaurant to yes, yeah, I was going to ask, 439 00:24:02,200 --> 00:24:03,800 Speaker 1: is there a way to get that over here in 440 00:24:03,960 --> 00:24:07,920 Speaker 1: London because we're desperate for any kind of Philly tee 441 00:24:07,960 --> 00:24:11,000 Speaker 1: steak offering here. I'll see what I can do. I'll 442 00:24:11,000 --> 00:24:13,200 Speaker 1: see it again. Personally, I'm a I'm a shorter line guy. 443 00:24:13,240 --> 00:24:15,639 Speaker 1: Which who's ever got the shorter line? Bloomberg spares no 444 00:24:15,760 --> 00:24:17,640 Speaker 1: expense to I mean, if you can get a cat, 445 00:24:19,400 --> 00:24:22,159 Speaker 1: I'm sure you can get a Philly cheese steak. I mean, 446 00:24:22,200 --> 00:24:23,640 Speaker 1: you can't tell me you can't get a cheese steak 447 00:24:23,720 --> 00:24:25,879 Speaker 1: over there, and you don't have a point. Don't disappoint me. 448 00:24:25,960 --> 00:24:31,399 Speaker 1: People cheese love all. Great, I mean, great question, and 449 00:24:31,480 --> 00:24:34,320 Speaker 1: you're exactly right. I mean, well, what a aligning of 450 00:24:34,480 --> 00:24:37,359 Speaker 1: stars in the wrong direction for low ball. So you 451 00:24:37,440 --> 00:24:39,120 Speaker 1: know we have this, you know, we have this big 452 00:24:39,280 --> 00:24:43,000 Speaker 1: market dip and what does well you know is stay 453 00:24:43,040 --> 00:24:46,720 Speaker 1: at home stock. So yes, you know, Peloton not a 454 00:24:46,840 --> 00:24:50,320 Speaker 1: low vall stock. So, uh, you know it is it 455 00:24:50,400 --> 00:24:54,320 Speaker 1: has taken some time really to educate investors about Wait 456 00:24:54,359 --> 00:24:57,040 Speaker 1: a minute, you know the appeal the biggest appeal of 457 00:24:57,080 --> 00:24:59,399 Speaker 1: the strategy is is just that is that is that's 458 00:24:59,440 --> 00:25:02,359 Speaker 1: going to rest you mean and blunt some I mean 459 00:25:02,440 --> 00:25:05,480 Speaker 1: not all, but some of the draw down, uh and 460 00:25:05,680 --> 00:25:07,600 Speaker 1: certainly in in COVID times that is that is not 461 00:25:07,640 --> 00:25:10,280 Speaker 1: going to be the case. Just how unusual that draw 462 00:25:10,359 --> 00:25:13,600 Speaker 1: down was and what benefited from it? Uh, I think 463 00:25:13,600 --> 00:25:15,680 Speaker 1: you're you're you're also right, these do tend to be 464 00:25:16,800 --> 00:25:19,760 Speaker 1: uh interest rate some more interest rate sensitive stocks. I 465 00:25:19,800 --> 00:25:22,399 Speaker 1: mean sometimes when we'll model this exposure, it will be 466 00:25:22,800 --> 00:25:24,600 Speaker 1: kind of an eight twenty you know, it's an eight 467 00:25:24,680 --> 00:25:28,720 Speaker 1: percent equity exposure, kind kind of fixed income exposure. Um. 468 00:25:28,920 --> 00:25:30,680 Speaker 1: But you know, so we we still think it plays 469 00:25:30,680 --> 00:25:34,159 Speaker 1: a role in a in a client's portfolio because we 470 00:25:34,280 --> 00:25:39,520 Speaker 1: still remain confident in its ability to dampen, to damp 471 00:25:39,600 --> 00:25:42,280 Speaker 1: and draw down. So it may have a bit more 472 00:25:42,320 --> 00:25:44,959 Speaker 1: of a head when and remember what the overarching purposes 473 00:25:45,119 --> 00:25:47,399 Speaker 1: of kind of a low ball equity strategy, which is, 474 00:25:47,960 --> 00:25:51,159 Speaker 1: you know, you are taking a lower risk position, but 475 00:25:51,359 --> 00:25:54,119 Speaker 1: your lower risk position isn't going to translate into that 476 00:25:54,240 --> 00:25:58,080 Speaker 1: exact same lower return position, So you're going to outperform 477 00:25:59,080 --> 00:26:02,400 Speaker 1: the mark at beta that you're taking. And we still 478 00:26:02,520 --> 00:26:05,560 Speaker 1: believe that to be the case. So in years past, 479 00:26:05,720 --> 00:26:07,680 Speaker 1: you know, you've taken a point eight beta and you've 480 00:26:08,040 --> 00:26:12,120 Speaker 1: you've basically outperformed the index, which is highly highly unusual. 481 00:26:12,440 --> 00:26:15,720 Speaker 1: We don't expect that to be happening going forward, but 482 00:26:15,840 --> 00:26:19,520 Speaker 1: we still think that the anomaly remains uh, and that 483 00:26:19,720 --> 00:26:23,080 Speaker 1: a position in low all equities will outperform the beta 484 00:26:23,160 --> 00:26:26,919 Speaker 1: that you're taking by investing in that sector. So it's 485 00:26:26,960 --> 00:26:29,679 Speaker 1: not it's not something that you know unless you are 486 00:26:29,720 --> 00:26:33,679 Speaker 1: an ultra conservative investor. We were not recommending a hundercent 487 00:26:33,720 --> 00:26:37,440 Speaker 1: allocations to low ball equities, but in many cases, even 488 00:26:37,640 --> 00:26:40,359 Speaker 1: even very aggressive investors, I mean, think about it from 489 00:26:40,400 --> 00:26:45,680 Speaker 1: this perspective. We talked about a sixty its risk in equities, 490 00:26:46,160 --> 00:26:49,440 Speaker 1: even a very aggressive investor having some low ball is 491 00:26:49,480 --> 00:26:53,000 Speaker 1: actually a really good way of increasing your interest rate 492 00:26:53,080 --> 00:26:57,520 Speaker 1: sensitivity and therefore diversifying your portfolio and reducing your alliance 493 00:26:57,560 --> 00:27:00,239 Speaker 1: on equity beta. So we think it does have it's 494 00:27:00,280 --> 00:27:03,119 Speaker 1: definitely a tool. It should be a tool in the 495 00:27:03,240 --> 00:27:05,879 Speaker 1: investors uh, you know, tool shed, and it kind of 496 00:27:06,000 --> 00:27:08,040 Speaker 1: it can really apply to all different kinds of investors, 497 00:27:08,119 --> 00:27:10,320 Speaker 1: not just what you typically think about it when you 498 00:27:10,320 --> 00:27:12,399 Speaker 1: think about low ball, this is oh, this is really conservative. 499 00:27:12,440 --> 00:27:14,919 Speaker 1: These are folks that are focused on income. It can 500 00:27:14,960 --> 00:27:17,760 Speaker 1: also play a nice role for very aggressive investors kind 501 00:27:17,760 --> 00:27:21,639 Speaker 1: of dampen the overall up beta and their portfolio and 502 00:27:21,720 --> 00:27:26,040 Speaker 1: further diversify um their exposures. Christine, I think that was 503 00:27:26,160 --> 00:27:29,760 Speaker 1: code language for old old guys like me. They're those uh, 504 00:27:30,680 --> 00:27:36,119 Speaker 1: those those conservative scared to death portfolio as opposed to 505 00:27:36,600 --> 00:27:42,800 Speaker 1: Christine's portfolio. Two different, two different risk appetites, but the 506 00:27:42,880 --> 00:27:45,200 Speaker 1: same cheese take appetite. I'll say, Christine, we will work 507 00:27:45,240 --> 00:27:48,240 Speaker 1: on getting you one, uh, one of these days. I 508 00:27:48,240 --> 00:27:50,639 Speaker 1: don't know how how well it will travel. It might 509 00:27:50,720 --> 00:27:53,480 Speaker 1: not travel as well as your cat, but I'll do 510 00:27:53,640 --> 00:27:56,399 Speaker 1: my best. If you fly in business class, it has 511 00:27:56,440 --> 00:27:58,520 Speaker 1: a better chance of surviving. All right, all right, if 512 00:27:58,560 --> 00:28:00,320 Speaker 1: I can get this on the expense account, I'll be 513 00:28:00,359 --> 00:28:03,040 Speaker 1: a legend, I think, uh, an all time legend of 514 00:28:03,240 --> 00:28:05,560 Speaker 1: of the of the game. But with that said, I 515 00:28:05,600 --> 00:28:08,080 Speaker 1: think that's our perfect segue to Jim. We have a 516 00:28:08,119 --> 00:28:10,760 Speaker 1: tradition here we call the craziest thing we saw in 517 00:28:10,880 --> 00:28:14,280 Speaker 1: markets this week. Stand clear of the craziest things we 518 00:28:14,400 --> 00:28:17,720 Speaker 1: saw in markets this week, and it's it's been a 519 00:28:17,760 --> 00:28:19,920 Speaker 1: bowl market for crazy things the last couple of years, 520 00:28:20,119 --> 00:28:22,320 Speaker 1: I think. So I'm excited to hear what you guys 521 00:28:22,400 --> 00:28:24,760 Speaker 1: all have. Christine. Let's start with you, what's the craziest 522 00:28:24,800 --> 00:28:27,560 Speaker 1: thing you saw this week? Well, the craziest thing that 523 00:28:27,760 --> 00:28:33,000 Speaker 1: I saw this week was the sale in non fungible 524 00:28:33,080 --> 00:28:37,840 Speaker 1: token form of the original world Wide Web source code 525 00:28:38,040 --> 00:28:42,480 Speaker 1: for over five million dollars. And frankly, I'm surprised it 526 00:28:42,600 --> 00:28:47,320 Speaker 1: took sir Tim berners Lee this long to capitalize on this, 527 00:28:47,640 --> 00:28:51,800 Speaker 1: because of course he probably didn't realize just the astounding 528 00:28:52,000 --> 00:28:56,280 Speaker 1: impact of his invention right thirty two years ago, um 529 00:28:56,480 --> 00:28:59,600 Speaker 1: now and when he essentially created a worldwide Web, and 530 00:29:00,000 --> 00:29:03,240 Speaker 1: I don't think he's really ever kind of profited much 531 00:29:03,400 --> 00:29:07,240 Speaker 1: from that creation. And so I think over five million 532 00:29:07,320 --> 00:29:13,240 Speaker 1: dollars that's probably a fair price. That's probably actually cheap. This. Yeah, 533 00:29:13,440 --> 00:29:16,000 Speaker 1: I'm just gonna every other single n f T I've 534 00:29:16,040 --> 00:29:19,800 Speaker 1: ever heard about seemed about over price. But the entire 535 00:29:19,880 --> 00:29:23,600 Speaker 1: code of the web, maybe that's fair. I mean there's 536 00:29:23,640 --> 00:29:26,840 Speaker 1: some n f T artists that were sold some things 537 00:29:26,880 --> 00:29:29,960 Speaker 1: for sixty million dollars, I mean original source code of 538 00:29:30,040 --> 00:29:33,440 Speaker 1: the Worldwide Yeah, that seems that's a that's that's cheap 539 00:29:33,520 --> 00:29:36,960 Speaker 1: right there, that's a bargain. That's a downright steel. That's 540 00:29:37,000 --> 00:29:39,200 Speaker 1: in the value cohort of of n f T s 541 00:29:39,320 --> 00:29:41,760 Speaker 1: right there. I think for sure, what's the n f T. 542 00:29:41,880 --> 00:29:47,440 Speaker 1: We're all rotates in the value that things canna, how 543 00:29:47,440 --> 00:29:49,120 Speaker 1: about you Jim, what's the craziest thing you So, so 544 00:29:49,400 --> 00:29:52,440 Speaker 1: here's here's my contribution. And so again not to pick 545 00:29:52,480 --> 00:29:54,880 Speaker 1: on Christine too much, but this might not resonate with her. 546 00:29:54,920 --> 00:29:56,680 Speaker 1: I don't know how. I don't know how your generation 547 00:29:56,760 --> 00:29:59,040 Speaker 1: buys cars. You know, maybe you guys just fight online 548 00:29:59,080 --> 00:30:02,360 Speaker 1: and get it delivered. Ah, Michael and myself when we 549 00:30:02,480 --> 00:30:05,800 Speaker 1: buy a new car. Uh, you enjoy the process, right, 550 00:30:05,840 --> 00:30:08,200 Speaker 1: and part of the process is the haggle. You go in, 551 00:30:09,560 --> 00:30:13,400 Speaker 1: you sit down and talk to the sales guy. He 552 00:30:13,520 --> 00:30:15,400 Speaker 1: goes and has to go talk to his manager and 553 00:30:15,480 --> 00:30:20,040 Speaker 1: he just goes and you know, exactly gets the trade 554 00:30:20,040 --> 00:30:22,560 Speaker 1: of water or something, goes to the bathroom, comes back. 555 00:30:23,640 --> 00:30:26,840 Speaker 1: So JD Power comes out this week and uh, the 556 00:30:27,080 --> 00:30:30,960 Speaker 1: here's the number. So the number of new cars that 557 00:30:31,200 --> 00:30:36,360 Speaker 1: are selling at or above their uh M s r 558 00:30:36,440 --> 00:30:39,320 Speaker 1: P prior to the crisis was a third and I 559 00:30:39,400 --> 00:30:41,400 Speaker 1: was surprised. I thought that was even a bit high. 560 00:30:41,520 --> 00:30:46,000 Speaker 1: So thirt of the cars prior to COVID actually would 561 00:30:46,000 --> 00:30:48,080 Speaker 1: sell above their m s r P or at their 562 00:30:48,200 --> 00:30:53,240 Speaker 1: m s r P today of new cars, so you 563 00:30:53,360 --> 00:30:56,960 Speaker 1: can't even enjoy kind of going into a to a 564 00:30:57,120 --> 00:31:00,200 Speaker 1: to a show room and haggling over new car. So 565 00:31:00,320 --> 00:31:02,840 Speaker 1: the crazy thing that is going up apparently is all 566 00:31:03,080 --> 00:31:06,280 Speaker 1: new car prices. You're you're you're bidding them like they're 567 00:31:06,800 --> 00:31:10,520 Speaker 1: there their shorehouses for forgettness sake. What's what's what's going 568 00:31:10,560 --> 00:31:13,800 Speaker 1: on out there? It's crazy. That is pretty. That's unbelievable. 569 00:31:13,800 --> 00:31:16,160 Speaker 1: I hadn't seen that. That's a good one though. Wow. Wow, 570 00:31:16,800 --> 00:31:19,240 Speaker 1: that's why I don't know. I'm happy to walk to 571 00:31:19,280 --> 00:31:21,640 Speaker 1: the train until so that all works its way through. 572 00:31:21,840 --> 00:31:23,640 Speaker 1: I got a daughter who's dying for a new car, 573 00:31:23,760 --> 00:31:26,640 Speaker 1: just got her license to But now I'm gonna explain. 574 00:31:26,720 --> 00:31:29,600 Speaker 1: Now I have more ammunition to explain to her why 575 00:31:29,680 --> 00:31:32,360 Speaker 1: that's not gonna be happening in this Uh. All right, 576 00:31:32,880 --> 00:31:35,000 Speaker 1: very both of these are very good. I I you 577 00:31:35,040 --> 00:31:37,160 Speaker 1: guys brought it. I've got a lot of competition this week, 578 00:31:37,240 --> 00:31:40,240 Speaker 1: but I'll give you mine. Finds a story this week 579 00:31:40,920 --> 00:31:45,560 Speaker 1: from Bloomberg about investors who are looking a group of investors, 580 00:31:45,760 --> 00:31:47,840 Speaker 1: a couple of guys from private equity you want had 581 00:31:47,880 --> 00:31:51,680 Speaker 1: a VC background. Two They're looking to raise a hundred 582 00:31:51,720 --> 00:31:56,400 Speaker 1: million dollars for a new fund, uh to buy antiques 583 00:31:57,280 --> 00:32:00,160 Speaker 1: and apparently the antique market and I know, I don't 584 00:32:00,200 --> 00:32:02,320 Speaker 1: really know anything about this, but it's really been in 585 00:32:02,360 --> 00:32:04,560 Speaker 1: the dull drums ever since the two thousand and eight 586 00:32:04,680 --> 00:32:08,120 Speaker 1: financial crisis that there's apparently some pieces that are selling 587 00:32:08,400 --> 00:32:13,400 Speaker 1: for what they would sell for. So I guess in 588 00:32:13,480 --> 00:32:16,080 Speaker 1: the in the dot com Heyday antiques, we're in a 589 00:32:16,160 --> 00:32:19,240 Speaker 1: bull market too, So they're called the Tangible Assets Group. 590 00:32:19,920 --> 00:32:22,960 Speaker 1: Guy named Gary Sargeant is the He's the antique dealer 591 00:32:23,040 --> 00:32:24,920 Speaker 1: who's kind of in charge of it all. But then 592 00:32:25,320 --> 00:32:27,800 Speaker 1: he's got some private equity guys who got named John 593 00:32:27,840 --> 00:32:31,200 Speaker 1: French and a guy named Tom tom Berg Glund And 594 00:32:31,320 --> 00:32:34,160 Speaker 1: this is uh, Jim, this is where I love it. 595 00:32:34,200 --> 00:32:37,600 Speaker 1: The quote from the story UH fits in well with 596 00:32:38,240 --> 00:32:41,880 Speaker 1: the inflation discussion we had. Uh tom Berg one said, 597 00:32:41,920 --> 00:32:43,680 Speaker 1: as we move into a period of higher inflation and 598 00:32:43,720 --> 00:32:46,640 Speaker 1: greater uncertainty, these alternative assets will be a great store 599 00:32:46,680 --> 00:32:49,640 Speaker 1: of valley and an inflation heade. So they're going around 600 00:32:49,680 --> 00:32:52,200 Speaker 1: by it a hundred million dollars worth of antiques. That's 601 00:32:52,240 --> 00:32:55,240 Speaker 1: gonna take a while, I think. Um. And and one 602 00:32:55,280 --> 00:32:57,600 Speaker 1: more thing fore, Jim, this is one of my favorite 603 00:32:57,600 --> 00:33:00,680 Speaker 1: parts of the story. Apparently one there's a uh an 604 00:33:00,720 --> 00:33:03,239 Speaker 1: old chest of drawers that's really tall, and it's got 605 00:33:03,280 --> 00:33:06,440 Speaker 1: a real fancy ornament on the top. I've never heard 606 00:33:06,440 --> 00:33:09,080 Speaker 1: about before, but it's it's hot and antique markets. It's 607 00:33:09,120 --> 00:33:13,360 Speaker 1: called the Philadelphia High Boy. So I don't know. I 608 00:33:13,400 --> 00:33:15,360 Speaker 1: don't know why I got. I Google did, I can't 609 00:33:15,400 --> 00:33:17,920 Speaker 1: find any explanation of what the Philadelphia High Boy is. 610 00:33:17,960 --> 00:33:19,640 Speaker 1: It sounds like a guy you'd run into it the 611 00:33:19,720 --> 00:33:23,400 Speaker 1: parking lot of Veteran Stadium. But there's a few of them. 612 00:33:23,440 --> 00:33:29,920 Speaker 1: There's a whole section of those guys the yellow seats. 613 00:33:32,280 --> 00:33:34,680 Speaker 1: So Christine, Uh, that's the craziest thing I got. But 614 00:33:34,720 --> 00:33:36,920 Speaker 1: I I one of these rare weeks where I think 615 00:33:36,960 --> 00:33:38,880 Speaker 1: I come in third place. I think you guys both 616 00:33:38,960 --> 00:33:41,160 Speaker 1: beat me. I'm I'm happy to take the bronze. It 617 00:33:41,240 --> 00:33:44,760 Speaker 1: was stiff competition. Uh. And I appreciate you guys bringing 618 00:33:44,800 --> 00:33:46,880 Speaker 1: your a game with your crazy things, and really for 619 00:33:47,160 --> 00:33:50,760 Speaker 1: for all your time this week. Fascinating conversation. Jim, great 620 00:33:50,800 --> 00:33:52,040 Speaker 1: to me. You're great to talk to you. I hope 621 00:33:52,040 --> 00:33:53,480 Speaker 1: we can do it again. That would be great. I 622 00:33:53,520 --> 00:33:56,760 Speaker 1: appreciate it. Thanks for all the time today. And Christine, 623 00:33:57,040 --> 00:33:59,320 Speaker 1: I'll be talking to you soon, I'm sure. Uh. And 624 00:34:00,120 --> 00:34:02,960 Speaker 1: Christine before we leave. What's the scene in London right now? 625 00:34:03,000 --> 00:34:05,280 Speaker 1: I always like to catch up on London. I've been 626 00:34:05,280 --> 00:34:07,880 Speaker 1: worried about London ever since I heard the pubs were closed. 627 00:34:07,960 --> 00:34:10,800 Speaker 1: I was just worried about everyone's mental mental health. The 628 00:34:10,840 --> 00:34:14,040 Speaker 1: pubs are back open and everyone's happy again in London. Well, 629 00:34:14,239 --> 00:34:18,160 Speaker 1: it's what we call Thursty Thursday today. And so I 630 00:34:18,280 --> 00:34:22,200 Speaker 1: had just come back from the h The Bloomberg office 631 00:34:22,239 --> 00:34:26,600 Speaker 1: in London is surrounded by pubs in restaurants and uh, 632 00:34:26,680 --> 00:34:31,040 Speaker 1: it's basically like lockdown never happened. Everyone. The streets are 633 00:34:31,120 --> 00:34:34,920 Speaker 1: full of people enjoying their pints and some of them 634 00:34:34,960 --> 00:34:38,000 Speaker 1: are probably going to be stumbling home tonight. But it's 635 00:34:38,040 --> 00:34:43,400 Speaker 1: all good. And also England one their match against Germany 636 00:34:43,600 --> 00:34:46,600 Speaker 1: earlier this week, so there's a lot to celebrate in 637 00:34:46,600 --> 00:34:49,080 Speaker 1: the city of London. We're We're also enjoying a rare 638 00:34:49,160 --> 00:34:52,000 Speaker 1: sunny day. So yeah, I think there's gonna be a 639 00:34:52,040 --> 00:34:57,840 Speaker 1: lot of hungover people on Friday morning. Alright, alright, soccer 640 00:35:00,600 --> 00:35:03,839 Speaker 1: in case it wasn't clear, Yes, that's a soccer game. 641 00:35:04,040 --> 00:35:07,560 Speaker 1: Oh yeah, I believe me. I would never imagine England 642 00:35:07,640 --> 00:35:12,040 Speaker 1: winning an actual football game, although it is getting popularity 643 00:35:12,040 --> 00:35:14,200 Speaker 1: over there from I don't understand theo's NFL and London 644 00:35:14,239 --> 00:35:18,799 Speaker 1: games are really spreading the Oh yeah, the Jacksonville Jaguars 645 00:35:18,840 --> 00:35:22,160 Speaker 1: are the unofficial London team because they are the only 646 00:35:22,360 --> 00:35:26,640 Speaker 1: NFL team that has had a London game ever since 647 00:35:26,719 --> 00:35:29,839 Speaker 1: its inception many years ago. Now every year they're there, 648 00:35:29,880 --> 00:35:32,000 Speaker 1: I think, right, I think there's some connection right the owners, 649 00:35:32,200 --> 00:35:35,320 Speaker 1: uh British football guy or something. I don't know, you 650 00:35:35,400 --> 00:35:38,440 Speaker 1: google that. I'm probably getting that wrong. Jacksonville, London. I 651 00:35:38,520 --> 00:35:41,920 Speaker 1: mean it's really the same, right right, right, you're all Florida, 652 00:35:42,080 --> 00:35:45,080 Speaker 1: Florida men, Christine, I'm not gonna keep you anymore. I'm 653 00:35:45,120 --> 00:35:47,239 Speaker 1: sure you're thirsty. Get out there and enjoy the rest 654 00:35:47,320 --> 00:35:49,880 Speaker 1: of that beautiful night. And Jim, thanks again. Uh, and 655 00:35:49,960 --> 00:36:01,719 Speaker 1: that's all the time we have. Thanks those pleasure. What 656 00:36:01,880 --> 00:36:04,040 Speaker 1: goes up. We'll be back next week. Until then, you 657 00:36:04,080 --> 00:36:06,680 Speaker 1: can find us on the Bloomberg Terminal website and app 658 00:36:07,080 --> 00:36:09,680 Speaker 1: or wherever you get your podcasts. We'd love it if 659 00:36:09,719 --> 00:36:11,719 Speaker 1: you took the time to rate and review the show 660 00:36:11,880 --> 00:36:15,440 Speaker 1: on Apple podcast so more listeners can find us. And 661 00:36:15,600 --> 00:36:18,560 Speaker 1: you can find us on Twitter, follow me at Reaganonymous. 662 00:36:19,120 --> 00:36:23,000 Speaker 1: Christina Kino is at Chris a Q News. You can 663 00:36:23,040 --> 00:36:27,239 Speaker 1: also follow Bloomberg Podcasts at podcast I Think. Get to 664 00:36:27,320 --> 00:36:29,319 Speaker 1: Charlie Pealder, Bloomberg Radio in the voice of the New 665 00:36:29,400 --> 00:36:32,319 Speaker 1: York City subway system. What Goes Up is produced by 666 00:36:32,360 --> 00:36:35,920 Speaker 1: tofor for Has. The head of Bloomberg Podcasts is Francesco Levie. 667 00:36:36,239 --> 00:36:37,960 Speaker 1: Thanks for listening. To see you next time.