WEBVTT - Surveillance: Golden Age for Security Selection With Kantor 0:00:09.840 --> 0:00:13.880 Welcome to the Bloomberg Surveillance Podcast. I'm term Keene jay Leie. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.760 Bloomberg dot Com, and of course on the Bloomber So 0:00:27.840 --> 0:00:30.720 the Persian Gulf into the Straight of Homer's into the 0:00:30.760 --> 0:00:32.239 Gulf of a Man, and it's in the Gulf of 0:00:32.240 --> 0:00:34.120 a Man going into the Straight of Homer's that we've 0:00:34.120 --> 0:00:36.920 heard from two tankers who were reportedly damaged in a 0:00:36.960 --> 0:00:39.640 suspected attack just in the Gulf of a Man, just 0:00:39.720 --> 0:00:42.280 weeks after a previous incident in the region. One of 0:00:42.280 --> 0:00:44.000 the owners, So we've got a Japanese owner of one 0:00:44.040 --> 0:00:46.720 of these vessels telling local media it had been hit 0:00:46.800 --> 0:00:49.840 by a shell. The second tanker, this tanker is owned 0:00:49.840 --> 0:00:53.760 by Norway's Frontline, suffered three detonations. This is according to 0:00:53.800 --> 0:00:58.640 the Norway Maritime Authority. Both ships have been evacuated. Crude 0:00:58.720 --> 0:01:02.320 yesterday had a really sessions. We bounced aggressively off a 0:01:02.440 --> 0:01:05.200 five month low this morning, up around about three percentage 0:01:05.200 --> 0:01:07.880 points on both Brent and w C. I to get 0:01:07.880 --> 0:01:09.800 some more insight and clarity as to what is happening 0:01:09.800 --> 0:01:11.399 in the region. I want to bring in from Dubai. 0:01:11.680 --> 0:01:15.760 Anthony Di Paola Bloomberg Middle East Energy Markets Reporter, Anthony, 0:01:15.800 --> 0:01:17.520 Good morning to you, sir. Just walk us through what 0:01:17.560 --> 0:01:20.080 we know so far and what we're learning is the 0:01:20.080 --> 0:01:23.520 as progress. Good morning to you there. Well, what we're 0:01:23.520 --> 0:01:26.880 really looking to learn still is what the exact cause 0:01:26.920 --> 0:01:29.600 of these attacks was. We we don't know. In the 0:01:29.600 --> 0:01:31.880 case of either ships. There were explosions, there were fires 0:01:31.880 --> 0:01:34.640 on both ships, but you don't know what caused those, 0:01:35.000 --> 0:01:38.800 and then we will be looking for some responsibility. UM. 0:01:38.920 --> 0:01:42.280 The attacks that you mentioned that took place in the 0:01:42.280 --> 0:01:47.160 Portafu Gerra just last month. UM, people there, the US, 0:01:47.319 --> 0:01:50.600 the saluities pointed the figure at the finger at Iran. 0:01:51.240 --> 0:01:53.840 The UA itself hasn't yet a signed to blame. They 0:01:53.840 --> 0:01:56.600 said it was a state actor involved, so we'll be 0:01:56.640 --> 0:02:00.360 looking to see where the blame is pointed here. We 0:02:00.400 --> 0:02:03.400 do know that the cruise have been taken off those vessels. UM. 0:02:03.760 --> 0:02:09.079 There are, as you've mentioned, rescue and and and retrieval 0:02:09.120 --> 0:02:13.240 operations going on there to try to secure these vessels 0:02:13.560 --> 0:02:15.520 and and and luckily that the cruiser are safe. But 0:02:15.560 --> 0:02:19.040 we will be seeing a lot of additional mayhem in 0:02:19.080 --> 0:02:21.640 the markets, both oil and shipping as we go forward 0:02:21.639 --> 0:02:24.600 and see what the follow from this is. In your world, 0:02:24.639 --> 0:02:27.680 there's Abu Dhabi, and then you go up to Dubai, 0:02:27.760 --> 0:02:30.120 and then you go up to russ alcame if I'm 0:02:30.160 --> 0:02:36.120 pronouncing that right, how far or close emotionally is a 0:02:36.160 --> 0:02:39.560 strait of Hormuz for the United Air Memorates and for 0:02:39.639 --> 0:02:42.080 that matter, for all the oil producers. Is this like 0:02:42.120 --> 0:02:47.320 an event right next door or is it removed? No, 0:02:47.440 --> 0:02:50.480 this is this is clearly next door. Uh fuj Eira, 0:02:50.600 --> 0:02:52.880 the port where the attacks took place last month is 0:02:52.960 --> 0:02:56.520 an hour by car from Dubai, just cutting across the mountains. 0:02:56.960 --> 0:03:00.440 Abu Dhabi, Dubai, Russell Kinma, they're all on the US there. 0:03:00.919 --> 0:03:03.120 You didn't mention where the one of the other emirates, 0:03:03.120 --> 0:03:06.120 Sharjah Uh that's one of the emirates that had several 0:03:06.160 --> 0:03:10.560 islands taken by Iran just when the UA declared independence 0:03:10.600 --> 0:03:14.280 in one Uh. It was that that weekend that that 0:03:14.320 --> 0:03:16.520 the u A formed as a country and Iran seized 0:03:17.040 --> 0:03:21.000 three islands in the Gulf. So you know, these tensions 0:03:21.040 --> 0:03:23.680 go go way back uh, and they are coming back. 0:03:23.720 --> 0:03:27.760 But this is really um right in this neighborhood right here. Uh. 0:03:27.840 --> 0:03:30.680 The you mentioned one of the tankers had filled up 0:03:30.680 --> 0:03:33.120 in in Abu Dhabi in the port of Ruwyte. The 0:03:33.160 --> 0:03:35.880 other tanker co loaded a cargo of methanol that's another 0:03:35.960 --> 0:03:38.960 royal product uh in uh Katar and then went to 0:03:38.960 --> 0:03:41.840 Saudi Arabia. So the last ports of call ports of 0:03:41.840 --> 0:03:44.000 call for these two vessels were Saudi Arabia and the 0:03:44.120 --> 0:03:47.560 U E. And they were hit just outside the straight 0:03:47.600 --> 0:03:49.800 of four moves, the choke point that leads into the 0:03:49.800 --> 0:03:51.800 Persian Gulf. Anthony rites to cant help with me this 0:03:51.840 --> 0:03:53.840 morning to get some more insight on this. That's Anthony 0:03:53.880 --> 0:03:56.680 de Pounder that Bloomberg's Middle East Energy Markets reported joint 0:03:56.720 --> 0:04:12.440 to get sat At Baby. Now to Jason Gammon, now 0:04:12.560 --> 0:04:15.280 Jeffrey's Energy Research unless he joins us out of the 0:04:15.320 --> 0:04:17.240 city of London. Jason, good day to you. Let's talk 0:04:17.240 --> 0:04:20.200 about the price action. This kind of incident took place 0:04:20.279 --> 0:04:23.000 a number of weeks ago. Crude rolled over by one 0:04:23.200 --> 0:04:26.240 ten since then, how do you frame this just in 0:04:26.400 --> 0:04:29.240 terms of the price action and crude right now, Jason, 0:04:30.440 --> 0:04:32.040 Jonathan I think we have a real tug at war 0:04:32.200 --> 0:04:37.360 between extreme concerns around the demand side and UH that's 0:04:37.400 --> 0:04:41.000 been corroborated by a large inventory builds in the US. 0:04:41.560 --> 0:04:46.000 Relative to all these potential disruptions to supply. We know 0:04:46.160 --> 0:04:50.120 that the UH the Iranian sanctions are starting to really 0:04:50.160 --> 0:04:53.160 bite into their exports. Even more. We know Venezuelan exports 0:04:53.200 --> 0:04:55.160 are down. I would have thought that the supply of 0:04:55.240 --> 0:04:57.880 tide concerns would have been really driving the price action. 0:04:58.200 --> 0:04:59.880 I've been dead wrong. It's really been more than con 0:05:00.000 --> 0:05:03.080 turns on the demand side. So when you have these 0:05:03.160 --> 0:05:06.080 two factors that are both potentially extreme, that's what leads 0:05:06.080 --> 0:05:08.240 to this high volatility and price. Let me cut to 0:05:08.279 --> 0:05:10.400 the chase. You got a high volatility in price, but 0:05:10.480 --> 0:05:13.240 I got a vector down. Many others are telling us 0:05:13.279 --> 0:05:16.760 stability or vector down an oil price. Is this tanker 0:05:16.800 --> 0:05:22.080 attacked an opportunity to short the market. Well, Tom, I 0:05:22.240 --> 0:05:24.280 I think the other big event that is coming up 0:05:24.520 --> 0:05:28.000 is the the OPEC Plus meeting, which could be on June, 0:05:28.600 --> 0:05:31.120 could be delayed into July. I think that that is 0:05:31.880 --> 0:05:34.920 a relatively critical event. I would see that as an 0:05:34.960 --> 0:05:38.280 event that probably has more downside than upside. To it. Uh, 0:05:38.560 --> 0:05:41.400 simply because I think the markets already pricing in and 0:05:41.480 --> 0:05:44.560 extension enough cuts into the back half. So you know 0:05:44.680 --> 0:05:46.520 that that might actually be a real catalyst if you 0:05:46.640 --> 0:05:48.240 if you want to short the market. And I want 0:05:48.240 --> 0:05:50.840 to explain that Mr Gamble, My question is what we 0:05:50.960 --> 0:05:54.880 call rude and Mr Gamble had answered that question John 0:05:54.960 --> 0:05:57.960 in a graceful way. Is any gentleman from the sales 0:05:58.040 --> 0:06:01.240 side would and I do apologize for saying should we 0:06:01.279 --> 0:06:04.440 short the market? Like in the next hour, Grates have 0:06:04.600 --> 0:06:06.320 Jason with us because Jason didn't just come with the 0:06:06.320 --> 0:06:09.320 commodity also covers the names the energy producers. So Jason, 0:06:09.400 --> 0:06:11.400 talk to me about what on earth people should be 0:06:11.440 --> 0:06:13.719 doing right now the companies that fall under your coverage 0:06:13.720 --> 0:06:16.799 because so many people have been burnt by the energy 0:06:16.839 --> 0:06:22.120 players as they start to see crude inflec higher. Well, 0:06:22.440 --> 0:06:24.679 you know, I think when it comes to actually investing 0:06:24.760 --> 0:06:27.160 in the equities, Jonathan, it's it's important to remember that 0:06:27.240 --> 0:06:30.080 these companies have really restructured their businesses to be able 0:06:30.120 --> 0:06:34.800 to fund their capital and dividends down to fifty and barrel. Uh, 0:06:35.160 --> 0:06:39.400 we we fit that Sprendt. That is, we are actually 0:06:39.440 --> 0:06:43.880 seeing pretty good valuation in these names. Uh. We believe 0:06:43.920 --> 0:06:46.359 that the market is now just discounting about fifty one 0:06:46.400 --> 0:06:49.120 dollar oil into the price they're playing. They're training at 0:06:49.160 --> 0:06:53.000 standard deviation below U. There are historic pe relative to 0:06:53.040 --> 0:06:56.240 the market, So I think there are good investment opportunities 0:06:56.240 --> 0:06:58.200 in the equities. I would say that if you think 0:06:58.240 --> 0:07:01.200 oil prices are going down, we probably want to wait 0:07:01.279 --> 0:07:02.960 to put on those equity trades. But we think there's 0:07:02.960 --> 0:07:05.320 a good die you here, Jason, thank you for the briefing. Jason, 0:07:05.400 --> 0:07:21.840 Kamba and Jeffreys Quickly. We had Paul Tutor Jones in 0:07:21.920 --> 0:07:24.680 yesterday and Charles cantre joins us from new Berger. Berman 0:07:24.680 --> 0:07:26.160 Pharall is going to bring him in and beat him 0:07:26.160 --> 0:07:28.960 to death because this is the global Wall Street discussion 0:07:29.000 --> 0:07:31.840 of the day. We're not going to talk about Whole 0:07:31.920 --> 0:07:34.840 Foods and Amazon. John. I can go to the Bloomberg 0:07:34.880 --> 0:07:39.040 and see that avocados are two point four standard deviations higher. 0:07:39.480 --> 0:07:42.400 Nobody cares. Let's talk about the courage in the market. 0:07:42.480 --> 0:07:44.520 I think it's really really difficult right now on a 0:07:44.560 --> 0:07:46.920 sector basis to position your portfolio. And what I'd love 0:07:46.960 --> 0:07:49.280 to talk to you about, Charles. The conversation had yesterday 0:07:49.600 --> 0:07:52.120 with Henry people in Advanced and he said, look, if 0:07:52.160 --> 0:07:54.920 you want to slip strip out the trade story from 0:07:55.000 --> 0:07:59.400 your portfolio and focus on sensitives that are less focused 0:07:59.400 --> 0:08:02.160 on sectors that are less sensitive to trade, you'll effectively 0:08:02.280 --> 0:08:06.360 end up exposing yourself to a really really domestic cyclical portfolio. 0:08:06.400 --> 0:08:08.640 And vice adversity be trying to strip out the cyclicality, 0:08:09.040 --> 0:08:11.679 you'll end up with the portfolio really really exposed to trade. 0:08:11.960 --> 0:08:15.600 So on a sector bast basis, it's really tough right now, Charles, Yes, 0:08:15.760 --> 0:08:18.520 and it's it's a stock picker's dream right now. John, 0:08:18.680 --> 0:08:21.520 it's um and and and you see that in the 0:08:21.600 --> 0:08:24.680 results of of of just those that are focused on 0:08:24.880 --> 0:08:27.960 on the individual securities and and and can manage and 0:08:28.120 --> 0:08:33.160 understand valuations and volatility. You can't strip out global trade 0:08:33.320 --> 0:08:37.480 because because our companies thankfully have become global and they've 0:08:37.559 --> 0:08:39.920 taken their products to the global stage to grow their 0:08:39.960 --> 0:08:43.760 earnings and cash flow. And so those moments where where 0:08:43.840 --> 0:08:48.319 people where the factors are driving underlying securities becomes the 0:08:48.400 --> 0:08:51.760 golden age of stock picking. And for us, we were 0:08:51.840 --> 0:08:55.160 fortunate because I don't think of us as radioactive. I 0:08:55.200 --> 0:08:57.480 think of us as double active because we get to 0:08:57.559 --> 0:09:00.760 take advantage of that opportunity on on both sides of 0:09:00.800 --> 0:09:03.240 the book, both being long and short. And so we 0:09:03.520 --> 0:09:06.280 we love opportunity set right now in in in in 0:09:06.640 --> 0:09:11.040 loving in in running a fundamentally driven long short equity strategy. 0:09:11.240 --> 0:09:15.000 And and it's super exciting because the factor stuff um 0:09:15.559 --> 0:09:18.920 is breaking down and and and the underlying security analysis 0:09:19.080 --> 0:09:20.920 is working again in a big way. So walk us 0:09:20.920 --> 0:09:22.800 through the process. Just help us understand a little bit 0:09:22.800 --> 0:09:26.240 how you're approaching these securities at the moment. Look, look, 0:09:26.320 --> 0:09:29.240 we've we own securities that went down forty five percent 0:09:29.400 --> 0:09:32.079 in the fourth quarter and went up forty five in 0:09:32.160 --> 0:09:34.760 the first quarter. And I'll tell you nothing changed other 0:09:34.840 --> 0:09:37.080 than someone decided that was a fact that they didn't 0:09:37.120 --> 0:09:38.920 want or it was a factor that they did one 0:09:39.200 --> 0:09:41.240 and so on the long side of the book, it's 0:09:41.320 --> 0:09:44.960 all about understanding marginal safety and being an owner of businesses. 0:09:45.000 --> 0:09:48.079 And on the short side, it's it's rapid five, take 0:09:48.120 --> 0:09:51.319 advantage of the volatility, make make ten or twelve percent 0:09:51.760 --> 0:09:55.160 and move on and and and stocks stocks are reacting 0:09:55.240 --> 0:09:58.360 to news and fundamentals, And I think it will be 0:09:58.600 --> 0:10:01.040 very interesting from here for the next couple of quotas, 0:10:01.120 --> 0:10:04.360 because you know the stock markets were rebounded five percent. 0:10:04.559 --> 0:10:06.880 Yes it's two percent off, it's high. Yes, it's up 0:10:06.920 --> 0:10:11.040 a lot since since Christmas. But but but, but the fundamentals, 0:10:11.120 --> 0:10:13.040 I think given the global trade, I think you'll see 0:10:13.360 --> 0:10:16.079 a weaker earnings outlook as the numbers come through, and 0:10:16.120 --> 0:10:18.400 that will create more volatility as well. Tell us the 0:10:18.520 --> 0:10:21.880 physics of not the growth of revenues, the growth of 0:10:22.000 --> 0:10:25.319 operating income, the growth of free cash flow, but the 0:10:25.520 --> 0:10:30.480 persistency or or inertial force of one of those given metrics. 0:10:30.600 --> 0:10:34.679 To me, I look at consumer stocks, what evaluation and 0:10:34.800 --> 0:10:37.959 their ability to do it every day. Look on the 0:10:38.000 --> 0:10:41.560 consumer side, it you have retailers out there that will 0:10:41.960 --> 0:10:46.160 remain nameless for now that are trading at three times earning, 0:10:46.400 --> 0:10:50.319 three times ibada um and and the view there is 0:10:50.520 --> 0:10:54.680 Amazon and others, Um I'll putting you out of business 0:10:54.720 --> 0:10:56.600 each of them every day. And you have a real 0:10:56.760 --> 0:10:59.960 estate footprint that is way too large UM. For the side, 0:11:02.080 --> 0:11:05.400 we would be very reluctant to own those despite the valuation, 0:11:05.440 --> 0:11:07.679 because I think investings about thinking about the future, not 0:11:07.800 --> 0:11:11.680 thinking about where we've come from. UM. And so it's 0:11:11.840 --> 0:11:14.640 it's The big debate right now is is we are 0:11:14.760 --> 0:11:17.040 late cycle. And the question is what do you want 0:11:17.080 --> 0:11:19.959 to own when you laid cycle? You want to change 0:11:20.080 --> 0:11:24.599 and and I think my experiences in a recession, the 0:11:24.760 --> 0:11:28.000 value stocks actually get murdered because they are the most 0:11:28.080 --> 0:11:31.839 cyclical and low PE be comes infinitive pe because the 0:11:31.880 --> 0:11:35.560 earnings evaporate. And and and I think we stay focused 0:11:35.600 --> 0:11:39.640 on those businesses that, because of their secular dynamics, can 0:11:39.720 --> 0:11:43.880 continue to grow. And revenue growth solves all other problems 0:11:43.960 --> 0:11:48.400 because with it just does and and and it allows 0:11:48.440 --> 0:11:52.439 you the flexibility to to to to ride through um 0:11:53.080 --> 0:11:55.440 a cyclical slowdown. So you said it's the golden age 0:11:55.640 --> 0:11:58.040 for security selection, but you sudden wouldn't go as far 0:11:58.080 --> 0:12:00.520 as it's the time to begin picking up the value. 0:12:00.880 --> 0:12:02.520 I mean you think it's dangerous to start going down 0:12:02.559 --> 0:12:05.160 the value I wouldn't be going down the value chain. 0:12:05.280 --> 0:12:07.920 I would stay focused. I think you have to understand 0:12:08.000 --> 0:12:10.360 value and values in the eye of the beholder of course, 0:12:10.920 --> 0:12:13.199 um um. I mean look on the other side of 0:12:13.200 --> 0:12:16.640 the equation, you have software software companies that have unbelievably 0:12:16.760 --> 0:12:21.880 clear revenue growth prospects trading at ten eleven twelve times revenue. 0:12:22.120 --> 0:12:24.640 I'm not sure i'd go there either, UM, And I 0:12:24.720 --> 0:12:27.960 think I think the goal of us is to squarely 0:12:28.000 --> 0:12:30.360 in the middle. But we we were staying away from 0:12:30.400 --> 0:12:33.120 the cyclical stuff on the long side. Much more likely 0:12:33.160 --> 0:12:35.800 to find that on the short side. UM. Just given 0:12:35.840 --> 0:12:38.520 where we are in in in you know, at the 0:12:38.600 --> 0:12:40.960 back end, not the end of the cycle. I don't 0:12:40.960 --> 0:12:43.040 think we anywhere near the end of the cycle. But 0:12:43.160 --> 0:12:45.280 we're much closer to the end of the cycle than 0:12:45.320 --> 0:12:47.520 the beginning. And I think the debate we have at 0:12:47.520 --> 0:12:50.439 our firm is will value work better than growth? And 0:12:51.120 --> 0:12:55.800 I think growth just works better because because despite low valuations, 0:12:56.160 --> 0:13:00.920 the earnings um of a cyclical company evaporate. UM. In 0:13:01.160 --> 0:13:03.559 in a down to really smart shoves and great to 0:13:03.600 --> 0:13:06.160 see you as always. There's change cancer their new burger Berman, 0:13:18.760 --> 0:13:20.719 what do you have? It's gonna bring a Cathy James 0:13:20.800 --> 0:13:24.360 falls Okay, fringing, but please insist swap sense for financial 0:13:24.400 --> 0:13:27.040 Research Chief Fixed Income Strategies, Cathy. Great to have you 0:13:27.080 --> 0:13:28.600 with us on the program. Tom and are talking about 0:13:28.600 --> 0:13:32.520 the demand for sovereign paper is quite remarkable, isn't it. Yeah, 0:13:32.559 --> 0:13:34.360 it is, but you know, when you think about it, 0:13:34.480 --> 0:13:38.160 there's just so little yield out there, particularly in sovereign 0:13:38.240 --> 0:13:42.880 paper that UM. If your pension fund, insurance company's sovereign 0:13:42.920 --> 0:13:45.600 wealth fund, you need, you need to buy something with yield, 0:13:45.679 --> 0:13:48.079 and you're gonna go. Okay, wherever you can find it 0:13:48.320 --> 0:13:52.559 is dividend growth, your new yield. Well, it's part of it. 0:13:52.800 --> 0:13:55.079 You know. When we talked to our m clients, what 0:13:55.240 --> 0:13:58.360 we talked about is, you know, getting yield in UM 0:13:58.600 --> 0:14:01.400 wherever you can get it right now, balancing that against 0:14:01.440 --> 0:14:03.760 the risk that you're taking. So, Cathy, let's talk about 0:14:03.800 --> 0:14:07.240 the risks. Nomura coming out with the really interesting survey 0:14:07.320 --> 0:14:09.040 and it's from the team in Asia, so this is 0:14:09.080 --> 0:14:10.880 an Asian audience to think about that. There's a bit 0:14:10.920 --> 0:14:13.119 of a regional bus here, but I still find it fascinating. 0:14:13.480 --> 0:14:18.240 The following quote. Around seventy of the participants expect Trump 0:14:18.320 --> 0:14:21.600 policies to be the most important determinant of risk sentiment 0:14:21.640 --> 0:14:24.560 in the next three to six months, followed by China stimulus. 0:14:24.920 --> 0:14:28.640 Less than ten percent viewed the US FED as an 0:14:28.680 --> 0:14:33.080 important driver. Just ten percent in the survey saw the 0:14:33.160 --> 0:14:36.440 FED and FED policy as the most important determinant of 0:14:36.560 --> 0:14:38.760 risk sentiment in the next three to six months. Kathy, 0:14:39.560 --> 0:14:41.880 what do you think about that? Well, I think they 0:14:41.960 --> 0:14:44.720 might be underestimating the influence of the FED. But I 0:14:44.880 --> 0:14:48.320 do think, you know, it makes sense because the you know, 0:14:48.440 --> 0:14:53.120 the administration's policies towards trade are really contributing to what's 0:14:53.160 --> 0:14:55.200 going on in the market. So if you look at 0:14:55.600 --> 0:14:58.440 what's slowing down manufacturing in the world, well, certainly a 0:14:59.040 --> 0:15:02.720 big contributor to that is this trade conflict and what's 0:15:02.800 --> 0:15:06.720 weighing on sentiment in certain areas, you know, the trade conflicts. 0:15:06.800 --> 0:15:09.720 So to some extent, that makes sense. But I wouldn't 0:15:09.800 --> 0:15:12.600 underestimate the Fez influence on the market. If you did 0:15:12.600 --> 0:15:17.960 an efficient market analysis. Let's say it's right, now, what's 0:15:17.960 --> 0:15:22.560 your waiting to fixed income? It's actually it actually well 0:15:22.600 --> 0:15:25.120 it depends on the person obviously, But you know, we're 0:15:25.160 --> 0:15:27.960 still pretty much in a sixty forty world because we're 0:15:28.360 --> 0:15:32.440 we're relatively cautious about the equity market because of this 0:15:32.960 --> 0:15:36.520 slowdown growth of that we're anticipating, and so we're we'd 0:15:36.600 --> 0:15:40.960 still be probably sixty forty maybe you know, in cash. 0:15:41.240 --> 0:15:43.680 So if I got this right, I mean, forget about 0:15:43.720 --> 0:15:45.720 the equity market, folks, go look at the double digit 0:15:45.760 --> 0:15:50.120 returns you've seen there. If I'm priced up in fixed income, 0:15:51.120 --> 0:15:54.840 how do I lock in that gain and adjust to 0:15:55.000 --> 0:15:59.600 your new reality of equity caution? Yeah, so it's been 0:15:59.640 --> 0:16:02.280 a you're to date has been fantastic in the fixed 0:16:02.320 --> 0:16:05.600 income So what do I do? Fantastic? Yeah, people don't 0:16:05.640 --> 0:16:08.760 realize how much total return has gone up. Well, we 0:16:08.880 --> 0:16:12.080 think you you have to shift up in credit quality. 0:16:12.440 --> 0:16:16.320 So hild had a eight percent total return I think 0:16:16.360 --> 0:16:18.080 here to date on the end of date or nine. 0:16:18.320 --> 0:16:21.560 That's six a year, folks. Just for those keeping score 0:16:21.560 --> 0:16:24.600 at home. Yeah, we're not multiplying by two. Oh well, 0:16:24.720 --> 0:16:29.920 I can do that because it's show biz. But our 0:16:30.000 --> 0:16:32.360 expectation is, you know, second half of the year at best, 0:16:32.440 --> 0:16:35.120 you probably earned the coupon. So we'd shift up in 0:16:35.200 --> 0:16:37.680 credit quality here, and that allows you to lock in 0:16:37.800 --> 0:16:39.640 some of the games that you might have gotten on 0:16:39.680 --> 0:16:42.400 the right gear part, Kathy. For a more adult view 0:16:42.440 --> 0:16:44.920 of the fixed income market, I recommend The Real Yield 0:16:45.000 --> 0:16:48.960 Fridays one pm a Bloomberg Television because John Farrell doesn't 0:16:49.040 --> 0:16:55.240 multiply by two. Kathy was on it recently appearance she 0:16:55.360 --> 0:16:59.440 had hire an ento uge just to look important. Said Kathy, 0:16:59.480 --> 0:17:01.640 pissing me on that statement going up in quality? What 0:17:01.720 --> 0:17:04.760 does that actually mean? So that means if you're and 0:17:04.880 --> 0:17:08.200 say the corporate bond sector, we would limit the exposure 0:17:08.440 --> 0:17:11.840 in high yield and in even an investment grade, we 0:17:11.880 --> 0:17:15.440 wouldn't get too concentrated at the lower tier, particularly the 0:17:15.520 --> 0:17:18.320 triple B area, which you know everybody knows is expanded 0:17:18.400 --> 0:17:20.880 in size and is now half of half the universe. 0:17:21.000 --> 0:17:23.359 So we try to work in some of those single 0:17:23.440 --> 0:17:26.600 A names and a little higher so that you're cushioned 0:17:26.640 --> 0:17:29.960 if we do hit um, a downturn in the economy, 0:17:30.400 --> 0:17:32.320 you don't want to have too much exposure to the 0:17:32.760 --> 0:17:35.560 weaker credits. Does this work both ways, Cathy? If you 0:17:35.600 --> 0:17:38.240 avoid the triple bes in investment grade and avoid the 0:17:38.280 --> 0:17:40.639 triple seas and say hi yield, but you want the 0:17:40.680 --> 0:17:42.680 single aiser investment grade, do you want the double bees 0:17:42.680 --> 0:17:46.400 in high yield or you just avoiding high yield altogether? Um? 0:17:46.760 --> 0:17:48.840 You know, I don't know that you'd get a tremendous 0:17:48.840 --> 0:17:51.280 amount of safety in the double bees. Um. If we 0:17:51.359 --> 0:17:53.959 go into a downturn, I think high yield will probably 0:17:54.000 --> 0:17:58.119 all moved together. So avoid some of these situations in 0:17:58.160 --> 0:18:00.280 the credit market, it's and the self renmark. I think 0:18:00.320 --> 0:18:02.520 we also need to have a conversation as well. We've 0:18:02.560 --> 0:18:04.960 had a big move in ten years, in thirty years, 0:18:05.680 --> 0:18:07.440 if you want to pick up some duration on the 0:18:07.560 --> 0:18:09.320 U S side of things, because you think that's going 0:18:09.400 --> 0:18:12.440 to be an effective hedge into a downturn given the 0:18:12.520 --> 0:18:16.480 move we've already had, Kathy, does that make sense? You know, 0:18:16.720 --> 0:18:19.760 you always need something because it's your single best Treasuries 0:18:19.760 --> 0:18:22.520 tend to be your single best diversifier versus stock. So 0:18:22.640 --> 0:18:24.760 if you're worried about the stock market, you want to hedge, 0:18:24.800 --> 0:18:27.080 you don't really have a lot of other options. But 0:18:27.200 --> 0:18:29.440 I would say, given the move that we've had a 0:18:29.560 --> 0:18:32.119 little bit, I'm a little reluctant to say now is 0:18:32.200 --> 0:18:34.320 the moment to add a lot of duration. You know, 0:18:34.440 --> 0:18:37.479 it goes a great idea six months ago. Right now, 0:18:37.560 --> 0:18:39.280 I think we could probably bounce. And I think the 0:18:39.320 --> 0:18:41.159 market is built in a little too much in the 0:18:41.200 --> 0:18:43.040 way of fat easing in the near term and a 0:18:43.119 --> 0:18:46.960 little too much on the downturn that everyone's expecting to 0:18:47.040 --> 0:18:50.119 come to the reality. And I just bring up Caterpillar 0:18:50.119 --> 0:18:53.800 because I just interviewed the Darren Hood the congressman from 0:18:53.880 --> 0:18:59.119 pure Illinois. Get a Caterpillar piece out nine years with 0:18:59.280 --> 0:19:03.480 a big fat coupon, is trading at one way over 0:19:03.640 --> 0:19:08.440 premium way out there to yield three point one percent. 0:19:08.960 --> 0:19:11.600 I mean even you know, in the old days of 0:19:11.680 --> 0:19:14.560 the SMP bond ledger, you know Pim Fox would bring 0:19:14.600 --> 0:19:17.000 it in for him and I look at how do 0:19:17.119 --> 0:19:19.360 you do this in corporate bonds right now with those 0:19:19.440 --> 0:19:24.240 low yields? Yeah, that's what trouble. The spreads are so tight, 0:19:24.760 --> 0:19:27.560 um and so far below average. So what does someone 0:19:27.640 --> 0:19:29.879 do a swap? I mean, what what are you buying 0:19:30.320 --> 0:19:34.800 fixed income given price up? Yeah, well we're you know, 0:19:34.880 --> 0:19:38.280 we're staying. Actually we're suggesting barbells, some short term paper 0:19:38.320 --> 0:19:40.879 and some longer term paper up and credit quality. We 0:19:40.960 --> 0:19:44.240 actually like municipal bonds because the yield curve is actually 0:19:44.320 --> 0:19:46.760 normally sloped in the municipal So you're the thing to say, 0:19:46.800 --> 0:19:50.639 for a taxable investor owned munis, it just depends on 0:19:50.720 --> 0:19:54.160 your tax bracket. It could make sense um, and particularly 0:19:54.320 --> 0:19:57.320 in in a higher tax state, it may actually make 0:19:57.400 --> 0:20:01.440 sense over corporate or treasury. I mean, Kathy Johns think 0:20:01.480 --> 0:20:19.240 of so much with Schwab's off hormos Hong Kong protests, 0:20:20.080 --> 0:20:22.320 they yield, the world's coming to an end. None of 0:20:22.440 --> 0:20:27.520 it matters. There is only one story today, particularly among 0:20:27.640 --> 0:20:30.800 the ut of America, in the ute of Wall Street, 0:20:31.640 --> 0:20:35.840 and that is you are with child and how many 0:20:35.920 --> 0:20:37.920 weeks do you get off? And of course I come 0:20:37.960 --> 0:20:40.920 with us with the ancient view of you were like 0:20:41.160 --> 0:20:43.920 back to work in two days. Rebecca Greenfield and a 0:20:43.960 --> 0:20:47.679 guy named x Abelson Wright the read on Wall Street Today, 0:20:48.320 --> 0:20:53.080 Wall Street Dad's find parental leave easier to get than 0:20:53.200 --> 0:20:56.159 to take Maxiet the ball out of the park. This 0:20:56.440 --> 0:21:01.399 is so so true. I'm given ex as or x 0:21:01.520 --> 0:21:04.520 weeks and I'm glued to the phone at home. Well, 0:21:05.200 --> 0:21:07.320 your listeners know that you're very hard to impress, so 0:21:07.760 --> 0:21:09.680 I'm really glad you feel that way. What do you do? 0:21:09.920 --> 0:21:11.800 Don't give me that, Rebecca, let me talk to you. 0:21:12.480 --> 0:21:15.359 Do you are you of child? Do you know? I don't, 0:21:15.400 --> 0:21:17.679 I don't have This is a huge deal. I mean 0:21:18.000 --> 0:21:21.400 we're getting there with women Dad's. I think it's really 0:21:21.440 --> 0:21:24.240 cool they take X amount of weeks off, But there's 0:21:24.400 --> 0:21:27.840 massive guilt the whole way. Is Jamie Diamond upset that 0:21:27.920 --> 0:21:31.080 somebody at JP Morgan is off for X number of weeks. 0:21:31.840 --> 0:21:33.639 I don't think you would say that. I think the 0:21:33.800 --> 0:21:37.000 banks are happy to be offering more and more time 0:21:37.720 --> 0:21:40.879 two people. UM they offer. They keep upping the amount 0:21:40.880 --> 0:21:43.760 of leaves that they are offering. UM. They offer up 0:21:43.840 --> 0:21:46.920 to sixteen weeks for primary caregivers and then a varying 0:21:46.960 --> 0:21:50.000 amount of time for secondary caregivers. But what we're finding 0:21:50.160 --> 0:21:53.040 is that by that time they're ready for s a prop. 0:21:54.119 --> 0:21:57.600 I disagree. I don't know about your kids. Evidently you've 0:21:57.640 --> 0:22:02.040 got supercocious little ones. Um. I. I think a lot 0:22:02.119 --> 0:22:05.280 of dads want to be home for that amount of time, 0:22:05.800 --> 0:22:08.399 and I think a lot of moms would appreciate them 0:22:08.440 --> 0:22:14.200 being confident. Okay, Max, I have to ask is this 0:22:15.280 --> 0:22:18.080 Are people finding it difficult to take this time off 0:22:18.280 --> 0:22:21.200 because their bosses are telling them that they can't, or 0:22:21.320 --> 0:22:25.520 because they feel guilty and they feel like their careers 0:22:25.600 --> 0:22:28.600 are going to suffer and they have not adjusted yet 0:22:29.040 --> 0:22:31.920