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Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along

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Speaker 1: with Jonathan Farrow and Lisa Abramowitz. Join us each day

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Speaker 1: for insight from the best and economics, geopolitics, finance and investment.

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Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and

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Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com,

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Speaker 1: the Bloomberg Terminal and the Bloomberg Business App. Short introduction

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Speaker 1: Because every word matters, Jeffy you joins us, will be

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Speaker 1: n Y Melon Yes. Off their twelve page I'll look

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Speaker 1: see forward of twenty twenty four, but far more on

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Speaker 1: where we are, the interdependencies of everything that we're doing

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Speaker 1: right now. How is our stability, Jeff you to get started?

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Speaker 1: Are you worried about glide pass being stable forward? Or

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Speaker 1: is there instabilities jump conditions out there?

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Speaker 2: I'm actually compared to a few months ago, you know,

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Speaker 2: probably I am less worried about the instabilities. You look

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Speaker 2: at how markets are reacting to geopolitics and other facets,

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Speaker 2: and I think things are being handled pretty well.

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Speaker 3: I think we should be thankful.

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Speaker 2: That there was a nice loosing of financial conditions over

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Speaker 2: the last few weeks.

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Speaker 3: Now, some correction is needed.

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Speaker 2: The question in the short term, the tactical play is

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Speaker 2: do you play the correction of the correction that I

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Speaker 2: think is going to be something markets need to deal with.

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Speaker 1: What's interesting in Damien is what I think doesn't matter

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Speaker 1: because Damien says are is going time? Shut up. We

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Speaker 1: got to talk to jeff you about higher.

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Speaker 4: Yields, about real stuff. I mean, look, Jeffy, you know

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Speaker 4: your iflow macro investor themes piece is just it's required

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Speaker 4: reading for anybody in the market. But I'm looking at

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Speaker 4: two of your views here, the first being a view

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Speaker 4: of the US Treasury tenure yield at five percent or higher.

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Speaker 4: Obviously that's a steeper curve, but more importantly to me,

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Speaker 4: you're a dollar down to parody before stabilizing. I mean,

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Speaker 4: talk to us about that. That seems quite out of consensus.

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Speaker 3: It is out of consensus.

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Speaker 2: But if you look at what the euro curve is

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Speaker 2: pricing right now, you're surprisingly so people ask me, okay,

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Speaker 2: you see you're a dollar at parity. Do you see

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Speaker 2: very aggressive ECB cards? I said, well, yes, but relative

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Speaker 2: to what markets have been pricing towards era and no,

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Speaker 2: I thought markets were adequately priced we were at one

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Speaker 2: hundred and fifty basis points for the UCB. I thought

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Speaker 2: that was perfectly fine. But if you believe it one

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Speaker 2: hundred and fifty basis points from the UCB, then what

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Speaker 2: was zero dollar doing up here?

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Speaker 3: Right?

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Speaker 2: So I think that needs to be reconciled. Even if

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Speaker 2: we meet halfway. I don't think parity actually is is

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Speaker 2: quite a bold call at all.

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Speaker 4: Well, what's a bit of this way in fax? I

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Speaker 4: mean the big heavy lifting models, those you know, relative value,

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Speaker 4: those great differential relative rate differential models are doing a

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Speaker 4: lot of the explaining in terms of, you know, how

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Speaker 4: currencies are performed over the better part of not just

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Speaker 4: the last year, but the last two years. Talked to

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Speaker 4: us about carry in foreign exchange markets, Jeff, is it

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Speaker 4: still going to be the driver performance in.

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Speaker 2: The short term? Not really, I think because things are

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Speaker 2: starting to come off. You know, I look at our

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Speaker 2: carry indecks. Are people buying Latin not as much as

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Speaker 2: last year? If are they buying Central and Eastern Europe? Yes,

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Speaker 2: over the last month, but that's coming off as well.

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Speaker 2: We saw the news out of Hungary this morning. How

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Speaker 2: but the dollar's role is very interesting. Last year it

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Speaker 2: was a carry currency. So you own dollar yield against

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Speaker 2: CNY against the en, but you funded out of dollars

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Speaker 2: against Brazilian real and Mexican pay so it was a

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Speaker 2: funder and it was a carry name. This year, however,

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Speaker 2: we think on balance dollar strength, you know, again it

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Speaker 2: will depend on what you play against. Maybe Asia can

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Speaker 2: come back a bit, but against the rest like Latin

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Speaker 2: for example, I think the dollar can actually hold well.

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Speaker 1: Jeff you on a strong dollar in a parody hero,

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Speaker 1: What does that do to the stock market and particularly

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Speaker 1: what does that do to the Magnificent seven? Is long

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Speaker 1: duration assets?

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Speaker 2: Well, I'll always say for the US, thankfully, especially for

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Speaker 2: US equity markets, you know, the lowest proportion of foreign

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Speaker 2: earnings exposure compared to the rest of the major economies,

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Speaker 2: so it shouldn't worry them too much if there is

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Speaker 2: a global.

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Speaker 3: Demand story or an earning story.

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Speaker 2: And on the external side, what if China starts to

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Speaker 2: export deflation disinflation again, that's where the things for US

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Speaker 2: tech we'll have to worry about.

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Speaker 1: And that's a wheelhouse of Jeffrey, you Damien to talk

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Speaker 1: about this, this exporting of price change.

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Speaker 4: That's exactly right China, and it's the Asian currencies. I mean,

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Speaker 4: all the talk this morning, Jeffrey is about you know,

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Speaker 4: the dollar dominance and how it's triggering intervention fears across

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Speaker 4: some of those more developed Asian markets. You know, I'm

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Speaker 4: talking China, South Korea, Taiwan and perhaps even Japan. I mean,

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Speaker 4: talk to us about that. What do you what are

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Speaker 4: your thoughts about official buying of of currencies and equities

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Speaker 4: in Asia?

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Speaker 2: I think most Asian central banks are you know, much

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Speaker 2: more neutral these days. Know, they're happy to let the

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Speaker 2: markets do its job. You know, they don't want misalignments.

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Speaker 2: And if there's there are moves. And it's always about pace.

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Speaker 2: It's never really about levels, right, It's about pace if

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Speaker 2: it goes too much too soon. You've heard the Swiss

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Speaker 2: National Bank come president here talk about this as well, so.

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Speaker 3: They could start to push back a bit.

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Speaker 2: But the fact is, you know, China's numbers are the

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Speaker 2: inflation numbers. They need a bit of a lift, and

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Speaker 2: so the central banking and may say, come on, stronger

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Speaker 2: dollar right now may not be a bad thing.

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Speaker 1: Your report, folks, we've protected the copyright of being mel

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Speaker 1: go to by Melon to get the Jeffrey you report

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Speaker 1: with mister Savage. But there, Damien, it's just simple three

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Speaker 1: or five percent GDP growth in China. Right, that's the way,

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Speaker 1: Jeff Well.

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Speaker 4: I mean, Jeff, you know the other thing I'm really

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Speaker 4: curious to hear your thoughts about is geopolitical risk. Right,

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Speaker 4: I mean, if you just think about performance since Israel

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Speaker 4: Hamas began in early October. I mean, we have equities up,

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Speaker 4: we have oil down, spreads, you're tighter. I mean we've

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Speaker 4: been saying this over and over again. Does geopolitical risk

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Speaker 4: even matter? And in an election year, I mean, forget

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Speaker 4: about the US. We have a lot of other countries

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Speaker 4: in an election year. I mean, I think two out

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Speaker 4: of three individuals in the democratic world are going to

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Speaker 4: be voting for a new leader in twenty twenty four.

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Speaker 4: How does that kind of resonate with you?

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Speaker 2: I think it will always matter. But people want to

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Speaker 2: wait these days rather than preempt and policy outcomes.

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Speaker 3: Right, it doesn't matter where you are.

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Speaker 2: You want to just look at policy proposals with a

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Speaker 2: fine toothcomb and then identify what could be a risk.

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Speaker 2: If now there's a sudden geopolitical event that comes through,

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Speaker 2: we can deal with accordingly. But the fact that we

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Speaker 2: have been able to respond on markets being able to

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Speaker 2: one in a much more obviously calm manner. I think

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Speaker 2: you can read this two ways. One we have the

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Speaker 2: tools available to deal with risks. Or is there still

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Speaker 2: too much liquidity? And that's an argument, you know, for

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Speaker 2: more financial conditions tightening.

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Speaker 3: Is needed as well, maybe that they need to do more.

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Speaker 1: Jeffro quickly, here are you worried about the United States

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Speaker 1: ginormous debt?

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Speaker 2: So two things there there is no replacement or the

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Speaker 2: dollars dominance, you know as the world's funding assets.

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Speaker 3: You know, this has been talked about for twenty years.

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Speaker 2: Is it going to be them? Be the euro crypto dollars?

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Speaker 2: Press prominence is not going to be challenged. Alternatives always

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Speaker 2: come through, So it's about a decline in share, but

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Speaker 2: from a very high level. So yes, people will worry

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Speaker 2: about that. We always ask the counter question, Okay, we

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Speaker 2: agree there is a risk, what is the alternative? And

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Speaker 2: if there's still a lack of alternatives at this pace,

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Speaker 2: I don't see that challenging the status.

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Speaker 1: Quote a briefing from Jeffrey You terrific kickoff report from

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Speaker 1: bny Mel and Jeffrey You there their lead strategists. This

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Speaker 1: is a really important conversation and at Dovetail's perfectly office

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Speaker 1: work is incredible carefulness about measuring the American economy. Shree

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Speaker 1: Kamar out on the left coast just iconic it doing

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Speaker 1: this so well in Shre Bob Burgess, who's legendary at Bloomberg,

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Speaker 1: Robert Burgess driving all of our bond coverage for year

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Speaker 1: had arguably could be the chart of the year in

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Speaker 1: January and basically it shows the linear growth, the straight

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Speaker 1: line growth of American retail and then we enjoyed one

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Speaker 1: two and the final Damien Sassar stimulus and retail has

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Speaker 1: boomed off the projection the trajectory that it was supposed

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Speaker 1: to be on. Shree Kamar is our GDP of fiction

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Speaker 1: because we've got a consumer pop as we saw yesterday

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Speaker 1: retail simply because of the COVID stimulus.

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Speaker 5: I think Bob is correct in this analysis. It's a

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Speaker 5: good one, Tom, and I would mention, yes, GDP growth

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Speaker 5: as well as the retail sales increase being so substantial

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Speaker 5: is a large measure due to both the fiscal and

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Speaker 5: monetary stimulus that we have had nine hundred billion dollars

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Speaker 5: in the final months of the Biden about the Trump administration,

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Speaker 5: and another one point nine trillion in the initial months

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Speaker 5: of the Biden administration. That is along with the Federal

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Speaker 5: Reserve keeping zero interest rates much longer than the economic

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Speaker 5: recovery required, and also the fact that the interest rates

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Speaker 5: not only were kept zero, but the balance sheet was

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Speaker 5: doubled from the beginning of twenty twenty to twenty twenty two.

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Speaker 5: That was That's what you're seeing in consumer hands. More

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Speaker 5: than one trillion dollars of stimulus is estimated to be

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Speaker 5: with them, and that is what is giving rise to

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Speaker 5: what you see the postponement of the recession tom rather

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Speaker 5: than an abandonment of it. And that's how it put it.

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Speaker 1: Forget about the parlor game of like what the Fed

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Speaker 1: is going to do January March whenever the next meeting

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Speaker 1: is our twenty four month tree thirty six months where

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Speaker 1: you really work. Are you optimistic our federal reserve can

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Speaker 1: get us there with stability?

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Speaker 5: I think despite the Federal Reserve, we are going to

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Speaker 5: get there to economic growth and we are going to

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Speaker 5: get to recovery. That because the Federal Reserve is present,

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Speaker 5: we are going to get there with a lot of

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Speaker 5: volatility a lot more than it's needed. Example, you have

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Speaker 5: Jerome Power telling us in his December thirteenth press conference

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Speaker 5: essentially indicating the next move is downward and suggesting several

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Speaker 5: rate cuts. The markets took off after his speech. Then

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Speaker 5: we hit people like John Williams of the New York

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Speaker 5: FED who had to do the clean up pat and

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Speaker 5: they essentially contradict the chairman. That provides volatility. But I

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Speaker 5: think the US economy is strong enough, as Bob mentioned

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Speaker 5: in this article, that you really will have a good

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Speaker 5: result two to three years from now, which is the

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Speaker 5: timeframe you suggested.

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Speaker 1: I can't say enough Damian about how Shriek Kamars he

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Speaker 1: always does explains this and this is Stiglitz one O

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Speaker 1: one and that all the worries out there, and shre

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Speaker 1: frames it beautifully. But if you have this miracle, which

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Speaker 1: is American economic growth, it can solve the debt, the

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Speaker 1: deficit problem.

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Speaker 4: Things of the Past by Shriek Kumar three. I have

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Speaker 4: to ask you this. I read your work religiously. You're

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Speaker 4: talking about the mention of a slowing of QT and

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Speaker 4: the read through into how that might mean that the

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Speaker 4: FED is thinking about perhaps something breaking in the market.

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Speaker 4: It's a credit event as opposed to you know, PC

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Speaker 4: below two percent is clearing the way for the FED

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Speaker 4: the cut I mean, talk to us about that. What

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Speaker 4: does that mean for financial markets?

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Speaker 5: And as the prices very timely questioned Damien. Look back

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Speaker 5: to September twenty nineteen, QT, or quantitative tightening, had been

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Speaker 5: in effect for two years. At that time. The FED

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Speaker 5: had been reducing its balance sheet from twenty seventeen until

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Speaker 5: September twenty nineteen and was fined one fine day the

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Speaker 5: week of September sixteenth. The short term interest rate shot

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Speaker 5: up as the FED had not anticipated, so they had

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Speaker 5: to give up on the quantitative tightening switch over to

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Speaker 5: provide liquidity in order to bring the interest rate down.

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Speaker 5: We are, I think, in an exactly same situation today.

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Speaker 5: We have quantitative tightening, which resumed in mid March after

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Speaker 5: the regional banking crisis, and having done that and reached

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Speaker 5: where we are, Damiene, we are finding out that the

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Speaker 5: amount of reserves in the hands of the banks the

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Speaker 5: reverse repurchase agreements have fallen off a cliff in the

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Speaker 5: last few days. That is what I think the FED

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Speaker 5: is reacting to. That's where the Wall Street Journal article

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Speaker 5: in the last two days about the resumption of a

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Speaker 5: slowdown of the QT is coming from so stree.

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Speaker 4: I just have to cut in here. I mean, so

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Speaker 4: let me ask you this. Do we want something to break?

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Speaker 4: Is that the way we get that egg your Denny

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Speaker 4: six thousand in the S and P only after something breaks?

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Speaker 4: Or are we trying to avoid that with a soft landing?

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Speaker 4: I mean, what's better for the US economy?

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Speaker 5: Off landing would be better for the US economy. But

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Speaker 5: I don't think you reach a six thousand on the

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Speaker 5: SNP without a break.

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Speaker 4: And there it is. I agree completely straight.

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Speaker 5: Please, thank you and thank you, and then again once

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Speaker 5: something breaks. I would say, you are in the September

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Speaker 5: two thousand and eight situation. Lehman Brothers has just gone bankrupt,

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Speaker 5: but the stock market continues to decline for the next

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Speaker 5: three or four months. An end of two thousand and eight,

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Speaker 5: the Fed says they are going to increase the balance sheet,

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Speaker 5: keep the interest rate at zero. We reach the S

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Speaker 5: and P five hundred bottom in March of two thousand

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Speaker 5: and nine, so wait for three months after a breakage,

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Speaker 5: and then you will have the rally starting.

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Speaker 1: In stre Thank you so much, so you comar with

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Speaker 1: us from Santa Monica.

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Speaker 5: Thank you very much this one.

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Speaker 1: I really really appreciate joining us now with PNC Bank

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Speaker 1: with a look to your portfolio. Amanda A. Gotti joins

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Speaker 1: his PNC's the chief investment Officer asset Management. Amanda, thank

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Speaker 1: you so much for joining today.

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Speaker 3: I get the.

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Speaker 1: Memo that sixty forty worked last year. Can the theory

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Speaker 1: of sixty forty work in twenty twenty four.

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Speaker 6: Well, I'm delighted to be with both of you. By

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Speaker 6: the way, I can't compete with those pirates tickets, but

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Speaker 6: I have knit Neilon for tickets. Maybe we can go

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Speaker 6: to a game sometime. Look, but to get yeah, to

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Speaker 6: get there, you go, there you go. We're going to

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Speaker 6: have a big year next year. I have no doubt.

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Speaker 6: To get to your question, absolutely, sixty forty will be

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Speaker 6: alive and well in twenty twenty four. A lot of

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Speaker 6: calls for the death of sixty forty previously, and that

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Speaker 6: was effectively the case when we were in a different

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Speaker 6: interest rate, you know, regime and environment. But given all

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Speaker 6: of the FED policy action, given where yields are sitting today,

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Speaker 6: it's breathing a lot of new life into fixed income markets,

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Speaker 6: and so we do think that that sixty forty portfolio

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Speaker 6: does make a lot of sense, not for everybody, but

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Speaker 6: certainly does make sense, make good sense in this environment.

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Speaker 1: How do you at P and C take a measured

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Speaker 1: approach when you see the growth the revenue growth modeling

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Speaker 1: of say Magnificent seven or Luxury Goods Reachmunk today out

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Speaker 1: with a nine percent pop in revenue surprising with some

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Speaker 1: good China growth. What do you do with the super

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Speaker 1: growers after a bang up year.

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Speaker 6: Well, we're certainly not backing up the truck and adding

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Speaker 6: to positions, but we're very grateful that we have had

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Speaker 6: a pretty broad based exposure to them in addition to

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Speaker 6: the rest of the market over the course of the

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Speaker 6: rally last year. I do think, though, given where valuations are,

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Speaker 6: and even though the fundamental story continues to be pretty strong,

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Speaker 6: we can't hang our hat on seven stocks to carry

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Speaker 6: the day in twenty twenty four, and so we really

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Speaker 6: need to see broader based reacceleration from the bottom four

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Speaker 6: hundred and ninety three. And so that's one of my

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Speaker 6: biggest wish list items for twenty twenty four. We'll see

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Speaker 6: whether that wish is delivered by the time we get

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Speaker 6: to the end of.

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Speaker 4: The year, Amanda. You know, I'm a fixed income guy,

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Speaker 4: but we've had a lot of stock jocks on in

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Speaker 4: the past few days, and they're talking about beats beats

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Speaker 4: over concerning consensus estimates. How that's going to be a

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Speaker 4: big driver of equity market performance. But would you write

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Speaker 4: in your note here it's not so much the beats,

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Speaker 4: it's the missus. And I'd like you to expand on

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Speaker 4: that a little bit. I mean, if you miss your

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Speaker 4: earnings here in twenty twenty four, given this kind of

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Speaker 4: positive undertone, the soft landing scenario that's being painted here,

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Speaker 4: what do you think that will do to valuations and

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Speaker 4: to total returns?

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Speaker 6: Well, I think it's a challenging, if not fragile environment

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Speaker 6: that we start twenty twenty four here with such a

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Speaker 6: torrid rally and the lion's share of market returns last

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Speaker 6: year being driven by valuation multiple expansion. We really need

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Speaker 6: to see the earnings deliver to justify those valuations. And

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Speaker 6: so I think this is the scenario in particular here

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Speaker 6: for Q four earning season, where the misses can be

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Speaker 6: pretty punishing, and so the beats or the inlines may

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Speaker 6: be more muted in terms of reaction, but I think

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Speaker 6: it's going to be a tough slog out there for

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Speaker 6: those who miss, particularly given that we've had this really

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Speaker 6: negative revisionary period is one of the worst in the

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Speaker 6: last ten years, and so the bar has been set

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Speaker 6: lower from an earnings perspective. But that valuations, I think

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Speaker 6: is going to be a tough one to achieve here

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Speaker 6: with Q four results.

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Speaker 4: Yeah, and all the while, we see the VIX involved

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Speaker 4: just kind of hanging in here at some very low levels.

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Speaker 4: I mean, what are your thoughts there? I mean, should

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Speaker 4: we be buying protection, should be looking at options markets,

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Speaker 4: It's a way to hedge.

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Speaker 6: The VIX has been in hibernation mode, certainly in a

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Speaker 6: winter slumber here. I do think we're set for a

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Speaker 6: bit of a resurgence in terms of volatility. Historically, though

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Speaker 6: I've been very focused on a higher volatility regime or

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Speaker 6: high volatility regime. I'm not sure we're going to see

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Speaker 6: that kind of environment here in twenty twenty four. I

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Speaker 6: do think things are going to be choppy. The start

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Speaker 6: of the year has been pretty choppy, but it doesn't

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Speaker 6: mean that it's going to be an extreme volatility environment

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Speaker 6: like what we've seen really since the onset of the pandemic.

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Speaker 1: State the dynamic as fields come down of what all

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Speaker 1: that cash does. We popped six trillion a couple days

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Speaker 1: ago in money market funds. It's a huge Pennsylvania heritage,

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Speaker 1: folks of money market development, a federated at PNC is

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Speaker 1: as well. If the yield comes down, what happens to

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Speaker 1: our listeners portfolio?

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Speaker 6: Well, I don't know that I'm particularly worried about yields

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Speaker 6: coming down. Materially, there is quite a bit of cash

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Speaker 6: sitting on the sidelines. I think a function of that

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Speaker 6: is really locking in many of the games that we've

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Speaker 6: enjoyed over the last year plus, and so I think

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Speaker 6: there is definitely a yearning to put that capital to

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Speaker 6: work again. But I think it's really hard to pound

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Speaker 6: the table and back up the truck here given where

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Speaker 6: equity valuations are, and so I think I would probably

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Speaker 6: see more room and fixed income markets for some of

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Speaker 6: that cash to be put to work, even if yields

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Speaker 6: do start to come down ever so slightly.

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Speaker 1: Thank you so much, yeadye whatever it is eighty listening

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Speaker 1: in Altuna, Pennsylvania, where the Pennsylvania Railroad makes a tight

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Speaker 1: turn with Miszagatti and Penn State football guy emails in

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Speaker 1: from Altuna, Amanda, and he says, like Franklin can't get

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Speaker 1: it done in the middle of the game. I mean,

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Speaker 1: what do you do with your coach, James Franklin with

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Speaker 1: always you know, game day coach and all that. I mean,

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Speaker 1: where's the improvement got to be next year for the

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Speaker 1: Nitney Lions.

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Speaker 6: Oh my god, that is such a horrible question to

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Speaker 6: end on here. I am not going to bet against Franklin.

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Speaker 6: We've had just a tremendous recruiting history here these last

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Speaker 6: couple of years, and I think next year is our year,

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Speaker 6: and so I'm not going to bet against him. I

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Speaker 6: think it's going to be fix.

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Speaker 1: We'll take the odds. It's like the Fed. Let's take

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Speaker 1: you think Amanda Gotty is going to come back again, Davey.

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Speaker 4: You know, well Franklin used to coach the The mandible

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Speaker 4: commodore is Maya. He's a andy guy, you know. I mean,

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Speaker 4: we we're sorry to see him go.

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Speaker 1: Yeah, James Franklin out of Penn State. Amanda Gotty never

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Speaker 1: to appear again. Amanda, thank you so much. With P

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Speaker 1: and C Banking, this is a Joy for a first

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Speaker 1: conversation in twenty twenty four and the bankdrop here to

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Speaker 1: talk to Marghi Patel of Allspring is wonderful. Torsen slock

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Speaker 1: at Apollo out with a wonderful note which I'm in

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Speaker 1: very strong agreement on, and his question is will twenty

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Speaker 1: twenty four be a repeat of twenty twenty three. I've

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Speaker 1: been suggesting that that's an outside non consensus call of

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Speaker 1: the boredom. It will be just the same, Margie, after

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Speaker 1: the oddities of twenty twenty three. Will this year be

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Speaker 1: the same?

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Speaker 7: No, I think it'll be a little different. I think

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Speaker 7: the first half of the year will be choppy, probably

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Speaker 7: down a bit, and after midyear the album for eurnings

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Speaker 7: will look better, and also the run up with the

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Speaker 7: presidential election. I think we'll all rally in the second

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Speaker 7: half and finish say mid single digits or low double digits,

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Speaker 7: so a little different.

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Speaker 1: Let me get to the money question, always with Margui Patel,

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Speaker 1: and that's the use of cash. Is dividend growth part

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Speaker 1: of a good equity return?

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Speaker 7: This year, I think it'll still be that. I think

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Speaker 7: the hurdle rate was traders or they are still favors

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Speaker 7: stocks especially those a little bit of a dividend. But

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Speaker 7: at the end of the day still we have to

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Speaker 7: see earnings growth, not just the dividend. That's not how stock.

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Speaker 4: So, Mark, we're looking for S and P target for

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Speaker 4: your No, I'm just kidding. I'm joking. I would never

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Speaker 4: ask you for your year end target. But in seriousness,

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Speaker 4: let's talk about some of the sectors within the S

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Speaker 4: and P and which ones are projected to perform this year.

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Speaker 4: I mean energy stands out to me. Energy, you know,

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Speaker 4: it's kind of been the laggard if you look back

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Speaker 4: to twenty twenty three. What's your thoughts on the outlook

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Speaker 4: for energy? Do you think oil prices are going to

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Speaker 4: be you know, skew to the upside.

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Speaker 7: Here, No, I'm not expecting a lot. I think energy

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Speaker 7: is going to stay at a relatively lower trading range.

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Speaker 7: I think there's some opportunities in the energy space. We've

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Speaker 7: seen some recent M and A activity, and actually that's

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Speaker 7: a pretty good indicator of what those in the industry see.

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Speaker 7: That says there's a little bit of optimism, especially because

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Speaker 7: it's sector that's really not very well liked.

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Speaker 4: To well, MARKI you mentioned them, an activity seem could

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Speaker 4: be said for healthcare right, which I do know is

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Speaker 4: one of your selected sector, and talk to us about

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Speaker 4: where in healthcare investors want to position.

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Speaker 7: Well, we think healthcare is still coming to the end

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Speaker 7: of the day period where all the macro things are

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Speaker 7: pretty negative, you know, pricing, COVID, drop off in demand

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Speaker 7: from China and so forth, and we think that still

437
00:22:24,000 --> 00:22:26,520
Speaker 7: has to play out a little bit before we see

438
00:22:26,520 --> 00:22:28,879
Speaker 7: an uptiket earnings, which we don't think will really occur

439
00:22:29,040 --> 00:22:31,280
Speaker 7: probably till next year. So we think there are a

440
00:22:31,320 --> 00:22:33,840
Speaker 7: few opportunities. Problem with healthcare is a lot of the

441
00:22:33,920 --> 00:22:37,359
Speaker 7: names are very highly priced and modern, and then you

442
00:22:37,400 --> 00:22:39,359
Speaker 7: still have some pitfalls like you see in the managed

443
00:22:39,359 --> 00:22:39,919
Speaker 7: care today.

444
00:22:40,240 --> 00:22:43,600
Speaker 1: Margie is an amateur. I have a gut feeling that

445
00:22:43,800 --> 00:22:46,399
Speaker 1: CFOs like Lemmings off a Cliff are going to go

446
00:22:46,480 --> 00:22:50,720
Speaker 1: through a massive issuance this year. What is the underpinning

447
00:22:50,760 --> 00:22:53,679
Speaker 1: of your call about issuance? How do you approach that?

448
00:22:55,520 --> 00:22:58,159
Speaker 7: Well, when you look at at bonds, really it's been

449
00:22:58,240 --> 00:23:00,639
Speaker 7: pretty muted last year, and I think it's going to

450
00:23:00,680 --> 00:23:03,960
Speaker 7: be pretty muted this year, if only because companies raise

451
00:23:04,040 --> 00:23:06,760
Speaker 7: so much money during the period of zero interest rates.

452
00:23:06,840 --> 00:23:09,320
Speaker 7: They really don't need to raise more cash sitting on

453
00:23:09,359 --> 00:23:12,400
Speaker 7: their books, So we're not looking for any big upcheck,

454
00:23:12,600 --> 00:23:15,280
Speaker 7: and I don't think companies really have the aquetite to

455
00:23:15,400 --> 00:23:16,600
Speaker 7: increase their leverage.

456
00:23:16,840 --> 00:23:17,159
Speaker 1: Margie.

457
00:23:17,480 --> 00:23:19,000
Speaker 4: When I think of all Spring, one of the things

458
00:23:19,040 --> 00:23:22,439
Speaker 4: I often think of is your exposure internationally outside of

459
00:23:22,560 --> 00:23:25,960
Speaker 4: US dollar equities. I mean, talk to us about international equities,

460
00:23:25,960 --> 00:23:28,800
Speaker 4: international fixed income. What are your thoughts there, I mean,

461
00:23:28,840 --> 00:23:31,159
Speaker 4: what sort of you know, place does it have in

462
00:23:31,200 --> 00:23:32,359
Speaker 4: a diversified portfolio.

463
00:23:33,600 --> 00:23:35,680
Speaker 7: Well, we all have our biases, and I think we're

464
00:23:35,680 --> 00:23:39,480
Speaker 7: all entitled to our biases, and my biases, US is best.

465
00:23:39,800 --> 00:23:41,840
Speaker 7: That's a country that I can understand that has the

466
00:23:41,920 --> 00:23:47,760
Speaker 7: most transparency, the most highest quality market, and so I

467
00:23:47,840 --> 00:23:51,200
Speaker 7: don't have a lot of interest in overseas, either emerging

468
00:23:51,240 --> 00:23:53,960
Speaker 7: market or development. And honestly, you really don't see the

469
00:23:54,119 --> 00:23:57,639
Speaker 7: higher growth rates that made those sectors supposedly attracted. So

470
00:23:57,680 --> 00:23:58,840
Speaker 7: we think US is the best.

471
00:23:58,880 --> 00:24:00,840
Speaker 4: You know, that's interesting because you know, I was always

472
00:24:01,160 --> 00:24:04,159
Speaker 4: trained that, you know, these emerging developing markets are going

473
00:24:04,200 --> 00:24:05,879
Speaker 4: to grow at a faster pace, but I think we've

474
00:24:06,080 --> 00:24:08,800
Speaker 4: turned that on its head in recent years. I agree

475
00:24:08,800 --> 00:24:10,760
Speaker 4: with you completely. Margie talked to us about the growth

476
00:24:10,760 --> 00:24:13,239
Speaker 4: differential between the US and some of the other G

477
00:24:13,400 --> 00:24:17,080
Speaker 4: ten economies. What are your thoughts there, Well, again.

478
00:24:16,880 --> 00:24:19,680
Speaker 7: It's pretty mixed, and really I think overall you're looking

479
00:24:19,720 --> 00:24:24,159
Speaker 7: at pretty low slightly negative to slightly positive. They have

480
00:24:24,280 --> 00:24:26,159
Speaker 7: some of the same issues we did. They spend a

481
00:24:26,200 --> 00:24:29,080
Speaker 7: lot during COVID, so they have a lot of difference

482
00:24:29,480 --> 00:24:31,879
Speaker 7: too that they have to do to cover the deficits

483
00:24:31,880 --> 00:24:35,560
Speaker 7: of it. For deficit spending and particular, you don't see

484
00:24:35,600 --> 00:24:38,920
Speaker 7: a lot of avenues for accelerating growth because again we're

485
00:24:38,960 --> 00:24:41,399
Speaker 7: not looking for China to have very very high growth.

486
00:24:41,560 --> 00:24:44,480
Speaker 7: The other emerging markets tied to China and also have growth,

487
00:24:44,720 --> 00:24:46,920
Speaker 7: so it's really more very modest growth.

488
00:24:47,960 --> 00:24:51,159
Speaker 1: Is cash here? I mean I keep asking this interview

489
00:24:51,160 --> 00:24:53,760
Speaker 1: to interview. We have six trillion in cash and the sideline.

490
00:24:53,920 --> 00:24:56,040
Speaker 1: Most of that's at all spring by the way, Damien,

491
00:24:56,640 --> 00:24:58,960
Speaker 1: but we've got all the trillions of dollars of cash

492
00:24:59,040 --> 00:25:03,040
Speaker 1: market Patell and that is a Marguie Patel opportunity. Where

493
00:25:03,119 --> 00:25:05,040
Speaker 1: is the opportunity if yields.

494
00:25:04,720 --> 00:25:08,760
Speaker 7: Come down, Well, I'm not really looking for gels to

495
00:25:08,800 --> 00:25:11,480
Speaker 7: come down. I think yields at four percentage and treasures

496
00:25:11,520 --> 00:25:14,120
Speaker 7: are pretty low. So We're not looking for a big

497
00:25:14,200 --> 00:25:18,159
Speaker 7: rally there. I think that high yell bonds continue to

498
00:25:18,160 --> 00:25:22,080
Speaker 7: look relatively attractive in the investment in the corporate bomb space.

499
00:25:22,560 --> 00:25:24,760
Speaker 7: You're looking at yields to say, six and a half

500
00:25:24,800 --> 00:25:27,560
Speaker 7: to seven and three quarters down from where they were,

501
00:25:27,600 --> 00:25:30,760
Speaker 7: but still pretty good premier over say four percent. And

502
00:25:30,800 --> 00:25:33,720
Speaker 7: it's true the short term are high, but I don't

503
00:25:33,720 --> 00:25:35,920
Speaker 7: think they're going to stay up to five percent that much.

504
00:25:36,200 --> 00:25:38,520
Speaker 1: Yeah, I mean, Damian, I use a WACC the work

505
00:25:38,720 --> 00:25:41,320
Speaker 1: way to the average cost of capital function in the Bloomberg.

506
00:25:41,359 --> 00:25:44,040
Speaker 1: It's really really lovely. I get a quick snapshot. I mean,

507
00:25:44,160 --> 00:25:47,879
Speaker 1: Apple burdened with four point four percent debt? Are you

508
00:25:48,000 --> 00:25:48,480
Speaker 1: kidding me?

509
00:25:48,680 --> 00:25:50,359
Speaker 4: You know this just in from one of our listeners

510
00:25:50,359 --> 00:25:52,800
Speaker 4: in Red Bank in New Jersey, Anthony Young, asking about

511
00:25:52,800 --> 00:25:56,160
Speaker 4: the way that average cross the capital for consumer staples pretzels.

512
00:25:56,280 --> 00:25:58,840
Speaker 4: Talk to us about you know, the demand for pretzels,

513
00:25:58,920 --> 00:26:00,960
Speaker 4: I mean for consumer staate ap is writ large across

514
00:26:00,960 --> 00:26:02,800
Speaker 4: the whole of the US economy. You know, Is that

515
00:26:02,840 --> 00:26:04,119
Speaker 4: a place we want to hide out here in the

516
00:26:04,119 --> 00:26:04,800
Speaker 4: equity market.

517
00:26:06,320 --> 00:26:09,680
Speaker 7: Well, I think it's actually an interesting safe space. Those

518
00:26:09,680 --> 00:26:13,560
Speaker 7: companies really did very badly in the market last year,

519
00:26:13,800 --> 00:26:16,560
Speaker 7: although their results are not terrible, so we see those

520
00:26:16,600 --> 00:26:20,359
Speaker 7: as a middle of the road opportunity in place conservative

521
00:26:20,400 --> 00:26:23,240
Speaker 7: probably better than us, say investment great bonds, where you

522
00:26:23,280 --> 00:26:26,000
Speaker 7: get in most cases a dividend. We already know the

523
00:26:26,119 --> 00:26:28,840
Speaker 7: slower out look for consumers, a little bit of pricing pressure,

524
00:26:28,880 --> 00:26:31,440
Speaker 7: but you know, altogether, I think that was a dividend

525
00:26:31,720 --> 00:26:35,080
Speaker 7: and very modest growth two to four percent in earns

526
00:26:35,240 --> 00:26:38,760
Speaker 7: will be enough to make them reasonable for a conservative investor.

527
00:26:39,040 --> 00:26:41,919
Speaker 1: Margy, thank you so much. With ulstoing Margy Patil there.

528
00:26:41,920 --> 00:26:45,760
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529
00:26:45,920 --> 00:26:50,080
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530
00:26:50,359 --> 00:26:54,960
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531
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