WEBVTT - Waiting on Santa Claus 0:00:01.840 --> 0:00:04.440 This is Bloomberg Business Week. I'm Carole Masser and I'm 0:00:04.440 --> 0:00:06.800 Tim Snanevik. We're here every day bringing you the latest 0:00:06.840 --> 0:00:11.000 news from the world's of business and finance, clus technology, politics, economics, 0:00:11.039 --> 0:00:14.000 all harnessing the power of Business Week reporters and editors, 0:00:14.160 --> 0:00:17.000 not to mention our journalists and analysts in more than 0:00:17.040 --> 0:00:21.160 one twenty countries. You can download Bloomberg Business weekend iTunes, SoundCloud, 0:00:21.239 --> 0:00:23.279 or Bloomberg dot com. You can also listen to our 0:00:23.360 --> 0:00:26.119 radio show at two pm Eastern Time on Bloomberg Radio 0:00:26.280 --> 0:00:29.880 or stream us live on YouTube and Bloomberg dot com. Alright, 0:00:29.960 --> 0:00:31.680 let's take a little bit deeper into the markets. You've 0:00:31.680 --> 0:00:33.400 got a good guest to do that. Lorene Gilbert is 0:00:33.440 --> 0:00:36.520 with us. She is the CEO Wealthwise Financial Services, joining 0:00:36.600 --> 0:00:40.080 us via zoom Lorene, So, you know, how do you 0:00:40.120 --> 0:00:42.440 assess this market? Is it a technical thing that you 0:00:42.479 --> 0:00:46.000 look at the technical indicators? Is it fundamentally how do 0:00:46.080 --> 0:00:49.400 you view kind of where we go from here? I 0:00:49.400 --> 0:00:52.680 think we're still seeing right now tax less harvesting. It's 0:00:52.680 --> 0:00:54.680 people have been doing it all during the year, and 0:00:54.720 --> 0:00:57.960 now once again we have another opportunity to do some 0:00:58.040 --> 0:01:00.360 tax loss harvesting. So I think that's what's how opening. 0:01:00.600 --> 0:01:02.920 I'm not giving up on the Santa Claus rally. It 0:01:03.000 --> 0:01:06.600 could still happen. Uh, that's why people say Tesla people 0:01:06.680 --> 0:01:09.280 were messaging us on the Bloomberg as to why Tesla 0:01:09.400 --> 0:01:11.360 was down, and that was kind of end of year 0:01:11.480 --> 0:01:13.640 tax law selling. I mean, is that some of what 0:01:13.959 --> 0:01:17.479 is going on? Yeah, it definitely could be, although that's 0:01:17.520 --> 0:01:21.319 also a sentiment that has changed with regard to Tesla stock. 0:01:21.600 --> 0:01:25.399 But I would say, looking at three it's very unlikely 0:01:25.680 --> 0:01:30.600 that we have another negative in the SMP since so 0:01:30.680 --> 0:01:34.120 that's ninety four years. That has only happened four times. 0:01:34.160 --> 0:01:37.759 So what I say to investors is typically after this 0:01:37.880 --> 0:01:40.759 kind of market that we've seen this year, we tend 0:01:40.760 --> 0:01:44.200 to see a much better spople hundred market in the 0:01:44.240 --> 0:01:47.280 following year, unless it's the Great Depression, the start of 0:01:47.280 --> 0:01:50.520 World War two, the nine seventies oil crisis, or what 0:01:50.600 --> 0:01:53.720 the dot com bust of the late nineties early two thousands. 0:01:53.800 --> 0:01:56.280 So you don't think we're in any sort of situation 0:01:56.360 --> 0:01:58.560 or scenario or on the precipice of any scenario that 0:01:58.680 --> 0:02:02.400 is that could be that bad brain. No, I think 0:02:02.400 --> 0:02:04.480 when we look at what the n b e R 0:02:04.600 --> 0:02:07.600 looks at as far as a recession is concerned. We 0:02:07.840 --> 0:02:11.600 see some softening most definitely, but the only area that's 0:02:11.639 --> 0:02:15.320 negative year over year is industrial production. So while we 0:02:15.440 --> 0:02:19.280 do see and we look at the leading economic indicators 0:02:19.320 --> 0:02:22.200 are negative, so we have to know that a recession 0:02:22.440 --> 0:02:26.360 is probable, but it's not here yet. And I would 0:02:26.400 --> 0:02:29.760 say to investors that remember that the market goes ahead 0:02:29.760 --> 0:02:33.440 of a recession, so most likely a recession in three, 0:02:33.680 --> 0:02:36.120 but the market will be ahead of that, and we 0:02:36.160 --> 0:02:39.320 think that we still have optimism in three as far 0:02:39.320 --> 0:02:40.960 as the markets are concerned. Talk a little bit more 0:02:40.960 --> 0:02:43.120 about that forward outlook, because I've talked to a few 0:02:43.120 --> 0:02:46.600 people who have basically said, the recession that's basically yesterday's story. 0:02:46.639 --> 0:02:49.200 Whether it happens or not, the sort of immaterial because 0:02:49.200 --> 0:02:51.440 it was already priced in. And now everyone's sort of 0:02:51.440 --> 0:02:54.280 looking past, or at least past the first half of 0:02:54.320 --> 0:02:57.920 the year and maybe even deeper into. Let's assume we 0:02:57.960 --> 0:03:00.520 get to that without a major recession or at least 0:03:00.639 --> 0:03:02.880 anything that really sort of just drives us off the cliff. 0:03:03.160 --> 0:03:05.000 What does sort of the new normal look like on 0:03:05.040 --> 0:03:09.040 the back end of that, What is investable right, Well, 0:03:09.360 --> 0:03:13.680 we still like value most definitely overgrowth, and sentiment would 0:03:13.800 --> 0:03:16.519 concur with that as well. So I'd say to investors 0:03:16.560 --> 0:03:20.359 to be leaning towards value stocks. Um, they're paying dividends, 0:03:20.440 --> 0:03:24.800 that's that's good. And then also looking at international again, 0:03:25.400 --> 0:03:28.760 when we look at the dollar kind of rolling over now, 0:03:29.040 --> 0:03:33.560 we see opportunities both developed markets as well as emerging markets, 0:03:33.840 --> 0:03:36.800 and especially emerging markets. As we now see it looks 0:03:36.800 --> 0:03:39.240 like China is reopening, and of course we want to 0:03:39.240 --> 0:03:41.800 wait and see if that's more permanent or not, but 0:03:41.880 --> 0:03:44.600 we do see opportunities in emerging markets. How do you 0:03:44.640 --> 0:03:49.640 determine if China is really reopened permanently. I think we 0:03:49.680 --> 0:03:52.840 have to wait and see most definitely. And then now 0:03:52.880 --> 0:03:55.120 with the news about the US and letting people in 0:03:55.560 --> 0:03:58.880 with COVID tests, so all of that has put a 0:03:59.040 --> 0:04:02.360 negative slam it. But the positive side of it is 0:04:02.640 --> 0:04:05.840 China does in factory open, the consumer will have more 0:04:05.880 --> 0:04:09.680 of an ability to spend. Okay, well, if the consumer 0:04:09.720 --> 0:04:11.920 has more of an ability to spend, obviously a good thing. 0:04:12.040 --> 0:04:16.039 But concerns about what the Federal Reserve does. In response 0:04:16.080 --> 0:04:17.359 to to what you're saying, I mean, what do you 0:04:17.360 --> 0:04:20.440 anticipate the feed is going to do. I think we 0:04:20.520 --> 0:04:23.719 still have more rates to come at least one, perhaps 0:04:23.760 --> 0:04:28.840 two basis points. What are you thinking? I think, I mean, 0:04:29.160 --> 0:04:31.880 I think what we'll see in February. I think it's 0:04:31.880 --> 0:04:35.839 gonna be twenty five. It will be, But I think 0:04:35.880 --> 0:04:38.320 the feed at this point is seeing that slow down. 0:04:38.480 --> 0:04:41.839 When we look at inflation expectations going forward, they've come 0:04:41.880 --> 0:04:46.040 way down to below three pent. So we're looking at 0:04:46.120 --> 0:04:49.760 good things going forward as far as inflation coming down. However, 0:04:50.080 --> 0:04:53.960 we haven't seen demand slow down enough yet, and so 0:04:54.400 --> 0:04:58.440 that the pain that they're talking about is to slow 0:04:58.480 --> 0:05:00.960 down demand at this point, and so there's still more 0:05:01.000 --> 0:05:03.200 work to do there. And I do think we're going 0:05:03.240 --> 0:05:06.160 to see unemployment continue to go up as we hear 0:05:06.200 --> 0:05:08.960 more and more companies laying off people, so that will 0:05:08.960 --> 0:05:12.400 slow down employment. Lorine, Technology, are you touching at all 0:05:12.440 --> 0:05:15.919 and if so, what specifically? Yeah? I think you know, 0:05:16.160 --> 0:05:20.200 we were just talking about Tesla, and Tesla is really 0:05:20.240 --> 0:05:24.160 a technology stock, and when we look at it in 0:05:24.279 --> 0:05:27.719 that regard as far as technology, we think that they 0:05:27.800 --> 0:05:31.800 have promising, promising future ahead, even though there are concerns 0:05:31.839 --> 0:05:35.320 about demand next year from China and the US and 0:05:35.680 --> 0:05:40.599 their quarterly earnings and then negative sentiment about UH specifically 0:05:40.640 --> 0:05:43.320 what's going on there and is Elon Musk paying attention. 0:05:43.839 --> 0:05:47.680 I think we still can see opportunities and companies like that. 0:05:47.920 --> 0:05:51.039 So we're looking to companies that are innovative, companies that 0:05:51.080 --> 0:05:54.840 are using AI and implementing AI. I think those are 0:05:54.839 --> 0:05:57.920 some good opportunities on the technology side. So I've got 0:05:57.920 --> 0:05:59.920 to ask you you do deal with you know, well, 0:06:00.040 --> 0:06:02.320 fear clients. I think a minimum of a million dollars 0:06:02.320 --> 0:06:04.760 and investable assets. So a new client comes in says, 0:06:04.760 --> 0:06:07.039 I've got a million dollars. Do you put it in 0:06:07.040 --> 0:06:08.960 the public markets? Are you putting in the private markets? 0:06:08.960 --> 0:06:10.400 Where do you put it? And just got about thirty 0:06:10.480 --> 0:06:15.200 forty seconds right, Well, definitely a diversified portfolio. Most people 0:06:15.240 --> 0:06:18.919 have fixed income and equities and balance that out and 0:06:19.000 --> 0:06:21.280 it depends on their risk tolerance and that how long 0:06:21.320 --> 0:06:24.320 they're going to be invested. But with that, certainly we 0:06:24.440 --> 0:06:28.200 do see opportunities. And the time is now, even though 0:06:28.200 --> 0:06:30.400 we might see some more downside if we do go 0:06:30.440 --> 0:06:34.680 into recession, going in now and looking out, if somebody 0:06:34.680 --> 0:06:37.920 has a three year time horizon or longer. I think 0:06:37.920 --> 0:06:41.560 that it's definitely investible. All right, Lauren A great to 0:06:41.560 --> 0:06:44.320 catch up with you. Laurene Gilbert there, founder of Wealthwise 0:06:44.360 --> 0:06:48.080 Financial Services. All right, that's on our radar, so too 0:06:48.279 --> 0:06:51.000 is the continuation of carnage when it comes to the 0:06:51.040 --> 0:06:54.159 crypto space. We're focusing today and Salana, although I should 0:06:54.160 --> 0:06:57.080 say that there's a flurry of headlines, uh Slona of course, 0:06:57.120 --> 0:07:00.440 the cryptocurrency back by Sam Bankman Freed tell Link today 0:07:00.440 --> 0:07:03.159 and made concerns that large holders may be about to 0:07:03.200 --> 0:07:05.960 offload the token. So let's bring it all down with 0:07:06.000 --> 0:07:09.039 Limbricks Hanna Miller. She covers crypto for us, so kind 0:07:09.040 --> 0:07:10.720 of good to have you here with the team. Let's 0:07:10.760 --> 0:07:15.000 start with Salana. What's the latest? What are you hearing? Yeah? 0:07:15.040 --> 0:07:19.240 So Salona has close ties to Sam Bankman Freed. He 0:07:19.440 --> 0:07:23.680 was a huge champion of the cryptocurrency prior to his arrest. 0:07:24.160 --> 0:07:28.320 Um He also helped build platforms on Salana like f 0:07:28.440 --> 0:07:32.680 t x is and f t Marketplace, So they've had 0:07:32.720 --> 0:07:36.760 these close ties. I think investors are getting nervous whether 0:07:37.280 --> 0:07:40.920 you know, maybe this blockchain network can overcome this association 0:07:41.000 --> 0:07:44.080 with Sam Bankman Freed and the Salauna network itself has 0:07:44.120 --> 0:07:47.680 also experienced multiple outages in the past year. So this 0:07:47.720 --> 0:07:50.960 has kind of created a perfect storm where, you know, 0:07:51.000 --> 0:07:53.600 projects and investors are getting a little bit nervous about 0:07:53.600 --> 0:07:56.320 this blockchain. Yeah. I mean that nervousness has been there 0:07:56.320 --> 0:07:58.920 for quite some time, I think, even before the collapse 0:07:58.960 --> 0:08:01.440 of f t X and and Alameda. I am curious 0:08:01.440 --> 0:08:04.560 here about the general crisis of competence we have right now, 0:08:04.840 --> 0:08:07.000 the true believers who are still left here in this 0:08:07.120 --> 0:08:10.320 space right now, Hannah, and what they they think. I 0:08:10.320 --> 0:08:12.640 guess this world will look like when we finally sort 0:08:12.680 --> 0:08:15.760 of uh, I guess to get done with this shakeout. Yeah, 0:08:15.800 --> 0:08:19.160 So there are definitely people who are still having huge 0:08:19.160 --> 0:08:22.600 amounts of faith in blockchain. Uh. They believe that the 0:08:22.680 --> 0:08:26.680 collapse of f t X shows the importance of decentralized finance, 0:08:26.960 --> 0:08:29.640 where you wouldn't have a centralized entity like f t 0:08:29.920 --> 0:08:34.240 X managing transactions. So some advocates believe that this just 0:08:34.280 --> 0:08:37.760 shows the importance of defied that there actually is an 0:08:37.800 --> 0:08:41.200 important use case for blockchain. Well, we'll go ahead, right Well, 0:08:41.240 --> 0:08:42.679 I just I mean, just to push back though, I mean, 0:08:42.679 --> 0:08:45.040 there was also an important case for that centralization with 0:08:45.080 --> 0:08:47.440 the guards to trying to scale up this industry. Wasn't 0:08:47.440 --> 0:08:50.280 that Wasn't that sort of the argument as well? Yes, 0:08:50.400 --> 0:08:52.920 So there are definitely a lot of people, you know, 0:08:53.040 --> 0:08:57.640 calling for more oversight for this industry, especially for regulators. 0:08:57.679 --> 0:09:01.040 So I think regulars are still figuring out how they 0:09:01.080 --> 0:09:05.240 can manage defy and that does put people on edge 0:09:05.240 --> 0:09:07.000 a bit in terms of like what do you think 0:09:07.040 --> 0:09:09.520 can do in the future. All Right, Hannah, I want 0:09:09.520 --> 0:09:11.679 to talk a little bit more about Sam Bateman Freed 0:09:11.800 --> 0:09:14.960 because right now there's some questions about where he exactly 0:09:14.960 --> 0:09:18.600 got the money for investing in robin Hood earlier this year. 0:09:19.320 --> 0:09:22.200 New report that we came out yesterday based on court documents, 0:09:22.200 --> 0:09:24.160 says that he actually got the money loaned to him 0:09:24.200 --> 0:09:27.040 from Alameda, and that money is kind of up in 0:09:27.040 --> 0:09:28.680 the air right now because there are lots of different 0:09:28.720 --> 0:09:32.240 parties that want claim to it and claimed to those shares. 0:09:32.520 --> 0:09:34.480 Give us the latest on what's going on with SPF 0:09:34.480 --> 0:09:37.840 and and those robin Hood shares that he brought into. Yeah, So, 0:09:37.880 --> 0:09:41.040 Bateman Freed's alleged that he and his f t X 0:09:41.080 --> 0:09:44.520 co founder Gary Wang borrowed more than five hundred million 0:09:44.520 --> 0:09:47.480 dollars from Alameda to purchase an eight percent stake in 0:09:47.600 --> 0:09:50.760 robin Hood, and those shares are up in the air 0:09:50.880 --> 0:09:53.440 right now in terms of who actually owns them. We 0:09:53.559 --> 0:09:56.840 have the crypto under Block five, which foiled from bankruptcy 0:09:56.880 --> 0:09:59.240 and the wake of ft x's collapse. Lane Klane to 0:09:59.320 --> 0:10:02.240 those block By shares um you know, they were pledged 0:10:02.280 --> 0:10:05.760 as collateral in loans that blocked By gave to Alameda. 0:10:06.160 --> 0:10:08.120 So there is a lot of uncertainty here, and it 0:10:08.200 --> 0:10:10.520 just shows how this case is still unfolding and how 0:10:10.559 --> 0:10:12.800 there are still many questions that we need answered. Yes, 0:10:12.920 --> 0:10:15.120 so many different questions that need to be answered. I 0:10:15.160 --> 0:10:18.000 do wonder too, you know, as you think about this story, Hanna, 0:10:18.000 --> 0:10:20.480 and how it's come out just the last year in 0:10:20.600 --> 0:10:24.240 terms of the crypto universe, I mean, how are investors, 0:10:24.280 --> 0:10:27.720 not investors, but regulators kind of evolving their thinking about 0:10:27.960 --> 0:10:29.839 what needs to be done in this space? Have they 0:10:29.920 --> 0:10:32.880 moved forward and gotten more specific in terms of what 0:10:32.920 --> 0:10:37.239 needs to be done. Yeah, we already have regulators and lawmakers, 0:10:37.320 --> 0:10:40.040 you know, calling for more oversight in this of the 0:10:40.080 --> 0:10:42.800 space following ft X. But that sounds so easy, you 0:10:42.800 --> 0:10:44.440 know what I mean? Like, yeah, we all know that 0:10:44.520 --> 0:10:47.160 it needs oversight, but what specifically needs to be done 0:10:47.160 --> 0:10:49.200 when we still have a debate about what kind of 0:10:49.200 --> 0:10:53.280 cryptocurrencies really are. Yeah, I think the big question here 0:10:53.559 --> 0:10:56.640 is putting better protections in place for consumers. And the 0:10:56.679 --> 0:11:00.280 collapse of ft X just shows how people are risk 0:11:00.440 --> 0:11:04.000 in this industry, that investors might not have the wherewithal 0:11:04.200 --> 0:11:06.760 or the knowledge or even or just outright being taken 0:11:06.760 --> 0:11:09.200 advantage of in this space. So I think that's the 0:11:09.200 --> 0:11:11.920 first area focus. And and to Carol's point though too, 0:11:11.960 --> 0:11:13.880 I mean it's almost mood right. I mean, I mean 0:11:13.960 --> 0:11:15.600 even when you talk to some of the regulators, they 0:11:15.679 --> 0:11:17.040 kind of point out that at the end of the day, 0:11:17.080 --> 0:11:20.079 fraud is fraud, and uh and and other sort of mauthfeasances, 0:11:20.120 --> 0:11:22.760 mauthfeasance as sell falls under their umbrella, even if you 0:11:22.800 --> 0:11:26.200 don't have a clear cut definition of what crypto is, 0:11:26.200 --> 0:11:29.320 whether it's you know, security or commodity or whatever it else. 0:11:29.320 --> 0:11:31.559 And these guys had to know what they were doing 0:11:31.960 --> 0:11:33.960 was not open, didn't it doesn't matter what it was 0:11:33.960 --> 0:11:36.080 treated as. What they were doing, what they were alleged 0:11:36.080 --> 0:11:38.680 to have been doing, was fraudulent. Yeah, And I mean, Tim, 0:11:38.720 --> 0:11:40.640 I know you used to host the Crypto show that 0:11:40.720 --> 0:11:43.400 went off the air after the eight episodes? Is that 0:11:43.520 --> 0:11:46.800 one it's seasonal romance. We got seasons. Well, we'll give 0:11:46.880 --> 0:11:48.280 us a preview of what's coming up in the next 0:11:48.280 --> 0:11:50.680 season because in all serious is I mean and to Hannah, 0:11:50.880 --> 0:11:53.200 what handle has been reporting on? I mean, it's not 0:11:53.280 --> 0:11:56.080 just crypto. You had a huge collapse in other markets 0:11:56.080 --> 0:11:57.800 that are tied to this n f T market is 0:11:57.840 --> 0:12:00.640 just nothing now right, It's actually it is nothing yet. 0:12:00.679 --> 0:12:03.720 Hannah's reported on this. It's down or something Hannah so 0:12:03.720 --> 0:12:05.440 far this year. But I think that's a perfect segue 0:12:05.480 --> 0:12:07.240 to my next question for Hannah, because we did start 0:12:07.280 --> 0:12:09.360 our Crypto I r L show kind of unpacking what 0:12:09.440 --> 0:12:12.320 happened with Three Arrows Capital and the contagion related to 0:12:12.480 --> 0:12:15.040 this cryptohedge fund. And you're laughing now because up until 0:12:15.200 --> 0:12:17.720 f t X collapse in November, that was the biggest 0:12:17.760 --> 0:12:20.600 story in crypto, but that was blown out of the 0:12:20.600 --> 0:12:23.160 water by f t X and the contagion there. And 0:12:23.200 --> 0:12:25.120 I referred to this earlier in the program. Hannah, it 0:12:25.200 --> 0:12:28.320 seems like there's this fundamental shift in crypto, like the 0:12:28.400 --> 0:12:32.000 before SPF collapse and after you know, SPF f t 0:12:32.240 --> 0:12:37.400 X collapse. What does look like if this is the aftermath? Yeah, 0:12:37.480 --> 0:12:39.640 I mean the collapse of f t X is monumental 0:12:39.679 --> 0:12:42.480 for the industry. People aren't going to forget this anytime soon. 0:12:42.760 --> 0:12:45.480 So I think is all going to be about recovery, 0:12:45.880 --> 0:12:49.319 how products are going to move forward, how regulators are 0:12:49.320 --> 0:12:52.680 looking at the space, and whether you know, the industry 0:12:52.720 --> 0:12:55.120 can get investors back on board, can they regain that 0:12:55.200 --> 0:12:59.320 trust um and is there any way forward for you know, 0:12:59.480 --> 0:13:03.360 box chain gaining traction among mainstream users. Okay, I just 0:13:03.400 --> 0:13:05.080 want to end Hannah talking a little bit about micro 0:13:05.120 --> 0:13:07.280 Strategy here, because for the first time ever you had 0:13:07.320 --> 0:13:10.520 micro Strategy. It's so called enterprise software company, but really 0:13:10.600 --> 0:13:13.840 it's gone to it for bitcoin. I can hear you laughing, 0:13:14.000 --> 0:13:15.400 Romain and see you out of the corner of my 0:13:15.440 --> 0:13:18.400 eye laughing. But you did see micro Strategy actually sell 0:13:18.440 --> 0:13:21.280 bitcoin for the first time ever. What can you tell 0:13:21.360 --> 0:13:25.000 us about what's going on there? Yeah, this is a 0:13:25.040 --> 0:13:29.760 pretty insane because micro Strategy and UH has been one 0:13:29.760 --> 0:13:33.960 of Bitcoin's biggest bowls and has very much promoted the 0:13:33.960 --> 0:13:38.240 cryptocurrency over the past few years. And you know Michael Sailor, 0:13:39.240 --> 0:13:42.520 who helped found. The company is also just a major 0:13:42.559 --> 0:13:45.040 bitcoin bowl, so the fact that they have sold part 0:13:45.040 --> 0:13:49.120 of their holdings isn't necessarily a good sign for bitcoin 0:13:49.200 --> 0:13:51.120 and the broader digital asset. And they do say it's 0:13:51.120 --> 0:13:53.800 for tax loss harvesting purposes or for tax purposes, but 0:13:53.920 --> 0:13:55.800 you know, and they bought more too, so we'll see. 0:13:55.840 --> 0:14:02.079 They coin really danced extensive evercent only today. Alright, a 0:14:02.120 --> 0:14:03.800 little ways to go before it gets a million, I 0:14:03.880 --> 0:14:06.120 thinks there to Hannah Miller. Well, let's get more on 0:14:06.200 --> 0:14:09.040 markets overall. We're pleased to have with us now. Jonathan Gala, 0:14:09.120 --> 0:14:11.840 the chief US equity strategist and head of quantitative research 0:14:11.880 --> 0:14:14.960 at Credit Suites. Jonathan, good to have you with us 0:14:15.200 --> 0:14:17.880 this afternoon. I just want to start with the recession 0:14:17.880 --> 0:14:21.600 outlook for three and what you're forecasting, because I don't 0:14:21.600 --> 0:14:23.200 know about you with you know, the smp F I 0:14:23.200 --> 0:14:25.960 founder down more than so far this year. I'm ready 0:14:26.000 --> 0:14:31.040 to look ahead to Yeah, and the data actually looks 0:14:31.200 --> 0:14:35.200 a lot less recessionary than it did, you know, three 0:14:35.280 --> 0:14:37.640 or four months ago. I mean, the big story here 0:14:37.760 --> 0:14:41.840 is that inflation expectations are falling, which means people are 0:14:41.840 --> 0:14:45.040 gonna spend less money on the things they want to buy, 0:14:45.120 --> 0:14:47.720 but wages don't look like they're gonna fall as much. 0:14:47.800 --> 0:14:50.840 So for the average consumer, they're gonna get a stronger 0:14:51.320 --> 0:14:54.280 um wage increase. The things they buy are gonna be 0:14:54.360 --> 0:14:56.800 going down in price, not going down to price, but 0:14:56.880 --> 0:14:58.920 aren't going to go up as much as their wages. 0:14:59.320 --> 0:15:02.920 And yet jobs are really plentiful. And when you add 0:15:02.920 --> 0:15:05.880 that all together, it means a consumer is stronger. And 0:15:05.920 --> 0:15:09.560 if the consumer is stronger, the likelihood of recession in 0:15:09.600 --> 0:15:13.440 the next six months or so is less than everybody 0:15:13.440 --> 0:15:16.160 thought it would be. And and you know it's and 0:15:16.200 --> 0:15:19.200 that ultimately is why we had this big jump of 0:15:19.440 --> 0:15:23.840 a stock market rally since early October obviously December it's 0:15:23.920 --> 0:15:27.440 rolled over a little bit. What what What explained that? Though? Uh, Jonathan, 0:15:27.480 --> 0:15:30.160 I mean, why why do you think sentiment shifted so 0:15:30.280 --> 0:15:32.200 much coming out of that rally that we saw a 0:15:32.280 --> 0:15:36.080 late summer early fall into where we are now. Well, 0:15:36.400 --> 0:15:39.120 it's it's more than anything else. It's as like I said, 0:15:39.120 --> 0:15:42.320 it's this this twin issue of the job market being 0:15:42.480 --> 0:15:45.280 so strong that people are feeling really confident in their 0:15:45.320 --> 0:15:48.760 ability to um to make a you know, a capital purchase, 0:15:48.840 --> 0:15:51.720 whether that's you know, remodeling their kitchen or buying a 0:15:51.720 --> 0:15:54.120 new home or whatever it is. And then the second 0:15:54.200 --> 0:15:57.960 thing is CPI is expected to fall to two percent 0:15:58.640 --> 0:16:02.400 UM roughly this time next year, And that means the 0:16:02.480 --> 0:16:05.120 market is is of the belief that no matter what 0:16:05.160 --> 0:16:08.400 the FED says, the likelihood is that the Fed is 0:16:08.440 --> 0:16:11.440 going to ultimately getting close to get closer to their 0:16:11.480 --> 0:16:15.840 inflation target when we leave twenty three. And that's a positive, 0:16:15.840 --> 0:16:18.880 and that's what the market is ultimately fixated on, and 0:16:18.920 --> 0:16:21.800 I think that's why stocks are gonna do pretty pretty well. 0:16:22.040 --> 0:16:24.360 But over the next you know, you know, over the 0:16:24.440 --> 0:16:27.120 next several months, Jonathan to do you have a forecast 0:16:27.160 --> 0:16:32.480 after the SNP. We do. We have a forty fifty forecast, Carol. 0:16:32.800 --> 0:16:36.000 But I think the I think the more interesting story 0:16:36.200 --> 0:16:40.680 is that while initially there's going to be this optimism 0:16:40.760 --> 0:16:45.640 um that I just talked about, ultimately, if wages stay high, 0:16:45.680 --> 0:16:48.000 which is what I also said, the FED is gonna 0:16:48.000 --> 0:16:51.480 eventually have to get involved and and bring that down. 0:16:51.760 --> 0:16:54.720 So the you know, the general public, even investors on 0:16:54.800 --> 0:16:57.040 Wall Street, I think, are gonna be really happy with 0:16:57.120 --> 0:17:00.480 falling inflation. But the FED has a longer term issue 0:17:00.800 --> 0:17:03.560 with sticky wages, which ultimately is gonna prove to be 0:17:03.600 --> 0:17:09.040 a problem, but probably later in rather than earlier. Okay, So, 0:17:09.200 --> 0:17:11.320 how given what you've told us and the research that 0:17:11.320 --> 0:17:14.000 you've done at Credit Suite of late, give us a 0:17:14.040 --> 0:17:17.040 understanding of how this kind of translates into what happens 0:17:17.080 --> 0:17:20.760 to tech stocks because two has been a brutal year, 0:17:21.119 --> 0:17:23.280 and look, if right to stay high, that could be 0:17:23.320 --> 0:17:26.520 tough for growth stocks. Yeah. You know, I think a 0:17:26.560 --> 0:17:29.399 lot of people tim are are focused on the idea 0:17:29.480 --> 0:17:32.879 that that tech was down because of interest rates or 0:17:32.880 --> 0:17:35.080 a sentiment, and I don't think it's at at all. 0:17:35.160 --> 0:17:39.080 They're really having a hard time um on the earnings front. 0:17:39.160 --> 0:17:42.720 I mean, and the story there is pretty simple. When 0:17:42.760 --> 0:17:46.080 we were, you know, all staying at home because the pandemic, 0:17:46.600 --> 0:17:49.680 what do we do. We bought laptops, and we bought tablets, 0:17:49.720 --> 0:17:53.640 and we bought streaming services, and we bought home exercise equipment, 0:17:53.640 --> 0:17:56.560 and we did all these things. But when we pulled 0:17:56.640 --> 0:17:59.440 forward all that activity, what you're left with once the 0:17:59.480 --> 0:18:03.960 economy opens up, that we start going on vacation and 0:18:04.000 --> 0:18:08.720 doing other things, and those purchases have a shortfall and 0:18:08.760 --> 0:18:14.000 then and you've seen a real softening in demand for technology, 0:18:14.080 --> 0:18:16.399 and that has ultimately and you're seeing that in the 0:18:16.480 --> 0:18:19.960 chip market, you're seeing that elsewhere, And I think, what 0:18:20.160 --> 0:18:23.960 what's gonna happen is it probably has another several quarters 0:18:24.000 --> 0:18:27.399 to go before it runs its course. And that means 0:18:27.440 --> 0:18:30.320 that earnings are gonna be rough again for the next 0:18:30.400 --> 0:18:33.280 several quarters per Tech and that and which is one 0:18:33.320 --> 0:18:35.520 of the reasons why I'm not upgrading the group. We 0:18:35.600 --> 0:18:38.400 up we downgraded in early two and we're gonna leave 0:18:38.400 --> 0:18:41.640 it there. Okay, Well, so where are the overweight positions? 0:18:41.640 --> 0:18:44.040 I mean, where do you think people might actually find 0:18:44.240 --> 0:18:48.600 better opportunities for that price return. Well, so let's go flow. 0:18:48.680 --> 0:18:50.320 Me start with what we what we don't want to do. 0:18:50.400 --> 0:18:52.719 So I would love to buy tech, but the earnings, 0:18:52.760 --> 0:18:55.000 like I said, are a problem. And if I don't 0:18:55.000 --> 0:18:57.560 think there's a recession, you don't want to buy defensive 0:18:57.600 --> 0:19:00.000 share See what do you You don't want to buy 0:19:00.040 --> 0:19:03.360 summer staples or healthcare or utilities because they do well 0:19:03.400 --> 0:19:05.480 if you're going into a session. So the first thing 0:19:05.520 --> 0:19:08.679 is it forces you into more cyclical parts of the market. 0:19:08.800 --> 0:19:12.879 My favorite by far is the energy sector. Um even 0:19:13.000 --> 0:19:18.560 even after two years of crazy gains and way out performance. Johnathan, 0:19:18.560 --> 0:19:21.119 do you think that's still a play? Yeah, And Carol, 0:19:21.320 --> 0:19:23.600 it's not a look at what the what were there? 0:19:23.640 --> 0:19:27.000 You know, what was the stock price movement moment? Take 0:19:27.040 --> 0:19:30.399 a look at what the pe is on these these 0:19:30.520 --> 0:19:33.800 energy companies. The reason the stocks are up is because 0:19:33.840 --> 0:19:36.639 their earnings have been insanely strong. And what's probably the 0:19:36.640 --> 0:19:40.800 most interesting, in the last two months, when oil prices 0:19:40.840 --> 0:19:46.040 have generally been falling, the earnings expectations for oil companies 0:19:46.320 --> 0:19:49.400 have actually been rising. So there's there's I think there's 0:19:49.440 --> 0:19:51.600 a lot of good news on the energy side. And 0:19:51.680 --> 0:19:54.720 the second area, like I mentioned you before, was the 0:19:54.760 --> 0:19:58.119 consumer we think actually holds up pretty well. So I 0:19:58.160 --> 0:20:01.800 like the cyclical group in general would include industrials, but 0:20:01.960 --> 0:20:05.160 my two favorite in that area would be energy and consumer. 0:20:05.520 --> 0:20:08.120 Hey just quickly, um, would you buy airlines? You even 0:20:08.160 --> 0:20:10.119 talk a lot about airlines and Romayne was, you know, 0:20:10.200 --> 0:20:13.600 highlighting that despite everybody's saying we're all flying, those stocks 0:20:13.640 --> 0:20:15.720 are really beaten down. Would you be a buyer of 0:20:15.760 --> 0:20:19.120 airline stocks? I would be. I would be a buyer 0:20:19.160 --> 0:20:21.560 in general of travel companies. I mean there's a there's 0:20:21.600 --> 0:20:24.520 a very different dynamic in airlines. You know, one of 0:20:24.560 --> 0:20:27.000 them um which you know you folks are saying, is 0:20:27.040 --> 0:20:30.320 why have hotels and so much um better And there's 0:20:30.320 --> 0:20:33.679 different issues with capacity. But if oil prices do go up, 0:20:33.760 --> 0:20:36.080 that is a drag on the airlines in a way 0:20:36.080 --> 0:20:38.520 that it wouldn't be a drag on a hotel. So 0:20:38.600 --> 0:20:41.040 I'm not sure. I'm you know, not being a consumer analyst. 0:20:41.040 --> 0:20:43.560 I'm not sure that I have the ability to say 0:20:43.920 --> 0:20:47.960 is it restaurants, is it hotels? Is it cruises, casinos? Airlines? 0:20:48.080 --> 0:20:50.320 But I like the group in general. Yes, all right, well, 0:20:50.320 --> 0:20:52.239 always great to check in with you and catch up. 0:20:52.320 --> 0:20:55.679 Jonathan galab He is the chief US equity strategist over 0:20:55.720 --> 0:20:58.720