Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along
Speaker 1: with Jonathan Farrow and Lisa Abramowitz. Join us each day
Speaker 1: for insight from the best and economics, geopolitics, finance and investment.
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Speaker 1: Because every word matters, Jeffy you joins us, will be
Speaker 1: n Y Melon Yes. Off their twelve page I'll look
Speaker 1: see forward of twenty twenty four, but far more on
Speaker 1: where we are, the interdependencies of everything that we're doing
Speaker 1: right now. How is our stability, Jeff you to get started?
Speaker 1: Are you worried about glide pass being stable forward? Or
Speaker 1: is there instabilities jump conditions out there?
Speaker 2: I'm actually compared to a few months ago, you know,
Speaker 2: probably I am less worried about the instabilities. You look
Speaker 2: at how markets are reacting to geopolitics and other facets,
Speaker 2: and I think things are being handled pretty well.
Speaker 3: I think we should be thankful.
Speaker 2: That there was a nice loosing of financial conditions over
Speaker 2: the last few weeks.
Speaker 3: Now, some correction is needed.
Speaker 2: The question in the short term, the tactical play is
Speaker 2: do you play the correction of the correction that I
Speaker 2: think is going to be something markets need to deal with.
Speaker 1: What's interesting in Damien is what I think doesn't matter
Speaker 1: because Damien says are is going time? Shut up. We
Speaker 1: got to talk to jeff you about higher.
Speaker 4: Yields, about real stuff. I mean, look, Jeffy, you know
Speaker 4: your iflow macro investor themes piece is just it's required
Speaker 4: reading for anybody in the market. But I'm looking at
Speaker 4: two of your views here, the first being a view
Speaker 4: of the US Treasury tenure yield at five percent or higher.
Speaker 4: Obviously that's a steeper curve, but more importantly to me,
Speaker 4: you're a dollar down to parody before stabilizing. I mean,
Speaker 4: talk to us about that. That seems quite out of consensus.
Speaker 3: It is out of consensus.
Speaker 2: But if you look at what the euro curve is
Speaker 2: pricing right now, you're surprisingly so people ask me, okay,
Speaker 2: you see you're a dollar at parity. Do you see
Speaker 2: very aggressive ECB cards? I said, well, yes, but relative
Speaker 2: to what markets have been pricing towards era and no,
Speaker 2: I thought markets were adequately priced we were at one
Speaker 2: hundred and fifty basis points for the UCB. I thought
Speaker 2: that was perfectly fine. But if you believe it one
Speaker 2: hundred and fifty basis points from the UCB, then what
Speaker 2: was zero dollar doing up here?
Speaker 3: Right?
Speaker 2: So I think that needs to be reconciled. Even if
Speaker 2: we meet halfway. I don't think parity actually is is
Speaker 2: quite a bold call at all.
Speaker 4: Well, what's a bit of this way in fax? I
Speaker 4: mean the big heavy lifting models, those you know, relative value,
Speaker 4: those great differential relative rate differential models are doing a
Speaker 4: lot of the explaining in terms of, you know, how
Speaker 4: currencies are performed over the better part of not just
Speaker 4: the last year, but the last two years. Talked to
Speaker 4: us about carry in foreign exchange markets, Jeff, is it
Speaker 4: still going to be the driver performance in.
Speaker 2: The short term? Not really, I think because things are
Speaker 2: starting to come off. You know, I look at our
Speaker 2: carry indecks. Are people buying Latin not as much as
Speaker 2: last year? If are they buying Central and Eastern Europe? Yes,
Speaker 2: over the last month, but that's coming off as well.
Speaker 2: We saw the news out of Hungary this morning. How
Speaker 2: but the dollar's role is very interesting. Last year it
Speaker 2: was a carry currency. So you own dollar yield against
Speaker 2: CNY against the en, but you funded out of dollars
Speaker 2: against Brazilian real and Mexican pay so it was a
Speaker 2: funder and it was a carry name. This year, however,
Speaker 2: we think on balance dollar strength, you know, again it
Speaker 2: will depend on what you play against. Maybe Asia can
Speaker 2: come back a bit, but against the rest like Latin
Speaker 2: for example, I think the dollar can actually hold well.
Speaker 1: Jeff you on a strong dollar in a parody hero,
Speaker 1: What does that do to the stock market and particularly
Speaker 1: what does that do to the Magnificent seven? Is long
Speaker 1: duration assets?
Speaker 2: Well, I'll always say for the US, thankfully, especially for
Speaker 2: US equity markets, you know, the lowest proportion of foreign
Speaker 2: earnings exposure compared to the rest of the major economies,
Speaker 2: so it shouldn't worry them too much if there is
Speaker 2: a global.
Speaker 3: Demand story or an earning story.
Speaker 2: And on the external side, what if China starts to
Speaker 2: export deflation disinflation again, that's where the things for US
Speaker 2: tech we'll have to worry about.
Speaker 1: And that's a wheelhouse of Jeffrey, you Damien to talk
Speaker 1: about this, this exporting of price change.
Speaker 4: That's exactly right China, and it's the Asian currencies. I mean,
Speaker 4: all the talk this morning, Jeffrey is about you know,
Speaker 4: the dollar dominance and how it's triggering intervention fears across
Speaker 4: some of those more developed Asian markets. You know, I'm
Speaker 4: talking China, South Korea, Taiwan and perhaps even Japan. I mean,
Speaker 4: talk to us about that. What do you what are
Speaker 4: your thoughts about official buying of of currencies and equities
Speaker 4: in Asia?
Speaker 2: I think most Asian central banks are you know, much
Speaker 2: more neutral these days. Know, they're happy to let the
Speaker 2: markets do its job. You know, they don't want misalignments.
Speaker 2: And if there's there are moves. And it's always about pace.
Speaker 2: It's never really about levels, right, It's about pace if
Speaker 2: it goes too much too soon. You've heard the Swiss
Speaker 2: National Bank come president here talk about this as well, so.
Speaker 3: They could start to push back a bit.
Speaker 2: But the fact is, you know, China's numbers are the
Speaker 2: inflation numbers. They need a bit of a lift, and
Speaker 2: so the central banking and may say, come on, stronger
Speaker 2: dollar right now may not be a bad thing.
Speaker 1: Your report, folks, we've protected the copyright of being mel
Speaker 1: go to by Melon to get the Jeffrey you report
Speaker 1: with mister Savage. But there, Damien, it's just simple three
Speaker 1: or five percent GDP growth in China. Right, that's the way,
Speaker 1: Jeff Well.
Speaker 4: I mean, Jeff, you know the other thing I'm really
Speaker 4: curious to hear your thoughts about is geopolitical risk. Right,
Speaker 4: I mean, if you just think about performance since Israel
Speaker 4: Hamas began in early October. I mean, we have equities up,
Speaker 4: we have oil down, spreads, you're tighter. I mean we've
Speaker 4: been saying this over and over again. Does geopolitical risk
Speaker 4: even matter? And in an election year, I mean, forget
Speaker 4: about the US. We have a lot of other countries
Speaker 4: in an election year. I mean, I think two out
Speaker 4: of three individuals in the democratic world are going to
Speaker 4: be voting for a new leader in twenty twenty four.
Speaker 4: How does that kind of resonate with you?
Speaker 2: I think it will always matter. But people want to
Speaker 2: wait these days rather than preempt and policy outcomes.
Speaker 3: Right, it doesn't matter where you are.
Speaker 2: You want to just look at policy proposals with a
Speaker 2: fine toothcomb and then identify what could be a risk.
Speaker 2: If now there's a sudden geopolitical event that comes through,
Speaker 2: we can deal with accordingly. But the fact that we
Speaker 2: have been able to respond on markets being able to
Speaker 2: one in a much more obviously calm manner. I think
Speaker 2: you can read this two ways. One we have the
Speaker 2: tools available to deal with risks. Or is there still
Speaker 2: too much liquidity? And that's an argument, you know, for
Speaker 2: more financial conditions tightening.
Speaker 3: Is needed as well, maybe that they need to do more.
Speaker 1: Jeffro quickly, here are you worried about the United States
Speaker 1: ginormous debt?
Speaker 2: So two things there there is no replacement or the
Speaker 2: dollars dominance, you know as the world's funding assets.
Speaker 3: You know, this has been talked about for twenty years.
Speaker 2: Is it going to be them? Be the euro crypto dollars?
Speaker 2: Press prominence is not going to be challenged. Alternatives always
Speaker 2: come through, So it's about a decline in share, but
Speaker 2: from a very high level. So yes, people will worry
Speaker 2: about that. We always ask the counter question, Okay, we
Speaker 2: agree there is a risk, what is the alternative? And
Speaker 2: if there's still a lack of alternatives at this pace,
Speaker 2: I don't see that challenging the status.
Speaker 1: Quote a briefing from Jeffrey You terrific kickoff report from
Speaker 1: bny Mel and Jeffrey You there their lead strategists. This
Speaker 1: is a really important conversation and at Dovetail's perfectly office
Speaker 1: work is incredible carefulness about measuring the American economy. Shree
Speaker 1: Kamar out on the left coast just iconic it doing
Speaker 1: this so well in Shre Bob Burgess, who's legendary at Bloomberg,
Speaker 1: Robert Burgess driving all of our bond coverage for year
Speaker 1: had arguably could be the chart of the year in
Speaker 1: January and basically it shows the linear growth, the straight
Speaker 1: line growth of American retail and then we enjoyed one
Speaker 1: two and the final Damien Sassar stimulus and retail has
Speaker 1: boomed off the projection the trajectory that it was supposed
Speaker 1: to be on. Shree Kamar is our GDP of fiction
Speaker 1: because we've got a consumer pop as we saw yesterday
Speaker 1: retail simply because of the COVID stimulus.
Speaker 5: I think Bob is correct in this analysis. It's a
Speaker 5: good one, Tom, and I would mention, yes, GDP growth
Speaker 5: as well as the retail sales increase being so substantial
Speaker 5: is a large measure due to both the fiscal and
Speaker 5: monetary stimulus that we have had nine hundred billion dollars
Speaker 5: in the final months of the Biden about the Trump administration,
Speaker 5: and another one point nine trillion in the initial months
Speaker 5: of the Biden administration. That is along with the Federal
Speaker 5: Reserve keeping zero interest rates much longer than the economic
Speaker 5: recovery required, and also the fact that the interest rates
Speaker 5: not only were kept zero, but the balance sheet was
Speaker 5: doubled from the beginning of twenty twenty to twenty twenty two.
Speaker 5: That was That's what you're seeing in consumer hands. More
Speaker 5: than one trillion dollars of stimulus is estimated to be
Speaker 5: with them, and that is what is giving rise to
Speaker 5: what you see the postponement of the recession tom rather
Speaker 5: than an abandonment of it. And that's how it put it.
Speaker 1: Forget about the parlor game of like what the Fed
Speaker 1: is going to do January March whenever the next meeting
Speaker 1: is our twenty four month tree thirty six months where
Speaker 1: you really work. Are you optimistic our federal reserve can
Speaker 1: get us there with stability?
Speaker 5: I think despite the Federal Reserve, we are going to
Speaker 5: get there to economic growth and we are going to
Speaker 5: get to recovery. That because the Federal Reserve is present,
Speaker 5: we are going to get there with a lot of
Speaker 5: volatility a lot more than it's needed. Example, you have
Speaker 5: Jerome Power telling us in his December thirteenth press conference
Speaker 5: essentially indicating the next move is downward and suggesting several
Speaker 5: rate cuts. The markets took off after his speech. Then
Speaker 5: we hit people like John Williams of the New York
Speaker 5: FED who had to do the clean up pat and
Speaker 5: they essentially contradict the chairman. That provides volatility. But I
Speaker 5: think the US economy is strong enough, as Bob mentioned
Speaker 5: in this article, that you really will have a good
Speaker 5: result two to three years from now, which is the
Speaker 5: timeframe you suggested.
Speaker 1: I can't say enough Damian about how Shriek Kamars he
Speaker 1: always does explains this and this is Stiglitz one O
Speaker 1: one and that all the worries out there, and shre
Speaker 1: frames it beautifully. But if you have this miracle, which
Speaker 1: is American economic growth, it can solve the debt, the
Speaker 1: deficit problem.
Speaker 4: Things of the Past by Shriek Kumar three. I have
Speaker 4: to ask you this. I read your work religiously. You're
Speaker 4: talking about the mention of a slowing of QT and
Speaker 4: the read through into how that might mean that the
Speaker 4: FED is thinking about perhaps something breaking in the market.
Speaker 4: It's a credit event as opposed to you know, PC
Speaker 4: below two percent is clearing the way for the FED
Speaker 4: the cut I mean, talk to us about that. What
Speaker 4: does that mean for financial markets?
Speaker 5: And as the prices very timely questioned Damien. Look back
Speaker 5: to September twenty nineteen, QT, or quantitative tightening, had been
Speaker 5: in effect for two years. At that time. The FED
Speaker 5: had been reducing its balance sheet from twenty seventeen until
Speaker 5: September twenty nineteen and was fined one fine day the
Speaker 5: week of September sixteenth. The short term interest rate shot
Speaker 5: up as the FED had not anticipated, so they had
Speaker 5: to give up on the quantitative tightening switch over to
Speaker 5: provide liquidity in order to bring the interest rate down.
Speaker 5: We are, I think, in an exactly same situation today.
Speaker 5: We have quantitative tightening, which resumed in mid March after
Speaker 5: the regional banking crisis, and having done that and reached
Speaker 5: where we are, Damiene, we are finding out that the
Speaker 5: amount of reserves in the hands of the banks the
Speaker 5: reverse repurchase agreements have fallen off a cliff in the
Speaker 5: last few days. That is what I think the FED
Speaker 5: is reacting to. That's where the Wall Street Journal article
Speaker 5: in the last two days about the resumption of a
Speaker 5: slowdown of the QT is coming from so stree.
Speaker 4: I just have to cut in here. I mean, so
Speaker 4: let me ask you this. Do we want something to break?
Speaker 4: Is that the way we get that egg your Denny
Speaker 4: six thousand in the S and P only after something breaks?
Speaker 4: Or are we trying to avoid that with a soft landing?
Speaker 4: I mean, what's better for the US economy?
Speaker 5: Off landing would be better for the US economy. But
Speaker 5: I don't think you reach a six thousand on the
Speaker 5: SNP without a break.
Speaker 4: And there it is. I agree completely straight.
Speaker 5: Please, thank you and thank you, and then again once
Speaker 5: something breaks. I would say, you are in the September
Speaker 5: two thousand and eight situation. Lehman Brothers has just gone bankrupt,
Speaker 5: but the stock market continues to decline for the next
Speaker 5: three or four months. An end of two thousand and eight,
Speaker 5: the Fed says they are going to increase the balance sheet,
Speaker 5: keep the interest rate at zero. We reach the S
Speaker 5: and P five hundred bottom in March of two thousand
Speaker 5: and nine, so wait for three months after a breakage,
Speaker 5: and then you will have the rally starting.
Speaker 1: In stre Thank you so much, so you comar with
Speaker 1: us from Santa Monica.
Speaker 5: Thank you very much this one.
Speaker 1: I really really appreciate joining us now with PNC Bank
Speaker 1: with a look to your portfolio. Amanda A. Gotti joins
Speaker 1: his PNC's the chief investment Officer asset Management. Amanda, thank
Speaker 1: you so much for joining today.
Speaker 3: I get the.
Speaker 1: Memo that sixty forty worked last year. Can the theory
Speaker 1: of sixty forty work in twenty twenty four.
Speaker 6: Well, I'm delighted to be with both of you. By
Speaker 6: the way, I can't compete with those pirates tickets, but
Speaker 6: I have knit Neilon for tickets. Maybe we can go
Speaker 6: to a game sometime. Look, but to get yeah, to
Speaker 6: get there, you go, there you go. We're going to
Speaker 6: have a big year next year. I have no doubt.
Speaker 6: To get to your question, absolutely, sixty forty will be
Speaker 6: alive and well in twenty twenty four. A lot of
Speaker 6: calls for the death of sixty forty previously, and that
Speaker 6: was effectively the case when we were in a different
Speaker 6: interest rate, you know, regime and environment. But given all
Speaker 6: of the FED policy action, given where yields are sitting today,
Speaker 6: it's breathing a lot of new life into fixed income markets,
Speaker 6: and so we do think that that sixty forty portfolio
Speaker 6: does make a lot of sense, not for everybody, but
Speaker 6: certainly does make sense, make good sense in this environment.
Speaker 1: How do you at P and C take a measured
Speaker 1: approach when you see the growth the revenue growth modeling
Speaker 1: of say Magnificent seven or Luxury Goods Reachmunk today out
Speaker 1: with a nine percent pop in revenue surprising with some
Speaker 1: good China growth. What do you do with the super
Speaker 1: growers after a bang up year.
Speaker 6: Well, we're certainly not backing up the truck and adding
Speaker 6: to positions, but we're very grateful that we have had
Speaker 6: a pretty broad based exposure to them in addition to
Speaker 6: the rest of the market over the course of the
Speaker 6: rally last year. I do think, though, given where valuations are,
Speaker 6: and even though the fundamental story continues to be pretty strong,
Speaker 6: we can't hang our hat on seven stocks to carry
Speaker 6: the day in twenty twenty four, and so we really
Speaker 6: need to see broader based reacceleration from the bottom four
Speaker 6: hundred and ninety three. And so that's one of my
Speaker 6: biggest wish list items for twenty twenty four. We'll see
Speaker 6: whether that wish is delivered by the time we get
Speaker 6: to the end of.
Speaker 4: The year, Amanda. You know, I'm a fixed income guy,
Speaker 4: but we've had a lot of stock jocks on in
Speaker 4: the past few days, and they're talking about beats beats
Speaker 4: over concerning consensus estimates. How that's going to be a
Speaker 4: big driver of equity market performance. But would you write
Speaker 4: in your note here it's not so much the beats,
Speaker 4: it's the missus. And I'd like you to expand on
Speaker 4: that a little bit. I mean, if you miss your
Speaker 4: earnings here in twenty twenty four, given this kind of
Speaker 4: positive undertone, the soft landing scenario that's being painted here,
Speaker 4: what do you think that will do to valuations and
Speaker 4: to total returns?
Speaker 6: Well, I think it's a challenging, if not fragile environment
Speaker 6: that we start twenty twenty four here with such a
Speaker 6: torrid rally and the lion's share of market returns last
Speaker 6: year being driven by valuation multiple expansion. We really need
Speaker 6: to see the earnings deliver to justify those valuations. And
Speaker 6: so I think this is the scenario in particular here
Speaker 6: for Q four earning season, where the misses can be
Speaker 6: pretty punishing, and so the beats or the inlines may
Speaker 6: be more muted in terms of reaction, but I think
Speaker 6: it's going to be a tough slog out there for
Speaker 6: those who miss, particularly given that we've had this really
Speaker 6: negative revisionary period is one of the worst in the
Speaker 6: last ten years, and so the bar has been set
Speaker 6: lower from an earnings perspective. But that valuations, I think
Speaker 6: is going to be a tough one to achieve here
Speaker 6: with Q four results.
Speaker 4: Yeah, and all the while, we see the VIX involved
Speaker 4: just kind of hanging in here at some very low levels.
Speaker 4: I mean, what are your thoughts there? I mean, should
Speaker 4: we be buying protection, should be looking at options markets,
Speaker 4: It's a way to hedge.
Speaker 6: The VIX has been in hibernation mode, certainly in a
Speaker 6: winter slumber here. I do think we're set for a
Speaker 6: bit of a resurgence in terms of volatility. Historically, though
Speaker 6: I've been very focused on a higher volatility regime or
Speaker 6: high volatility regime. I'm not sure we're going to see
Speaker 6: that kind of environment here in twenty twenty four. I
Speaker 6: do think things are going to be choppy. The start
Speaker 6: of the year has been pretty choppy, but it doesn't
Speaker 6: mean that it's going to be an extreme volatility environment
Speaker 6: like what we've seen really since the onset of the pandemic.
Speaker 1: State the dynamic as fields come down of what all
Speaker 1: that cash does. We popped six trillion a couple days
Speaker 1: ago in money market funds. It's a huge Pennsylvania heritage,
Speaker 1: folks of money market development, a federated at PNC is
Speaker 1: as well. If the yield comes down, what happens to
Speaker 1: our listeners portfolio?
Speaker 6: Well, I don't know that I'm particularly worried about yields
Speaker 6: coming down. Materially, there is quite a bit of cash
Speaker 6: sitting on the sidelines. I think a function of that
Speaker 6: is really locking in many of the games that we've
Speaker 6: enjoyed over the last year plus, and so I think
Speaker 6: there is definitely a yearning to put that capital to
Speaker 6: work again. But I think it's really hard to pound
Speaker 6: the table and back up the truck here given where
Speaker 6: equity valuations are, and so I think I would probably
Speaker 6: see more room and fixed income markets for some of
Speaker 6: that cash to be put to work, even if yields
Speaker 6: do start to come down ever so slightly.
Speaker 1: Thank you so much, yeadye whatever it is eighty listening
Speaker 1: in Altuna, Pennsylvania, where the Pennsylvania Railroad makes a tight
Speaker 1: turn with Miszagatti and Penn State football guy emails in
Speaker 1: from Altuna, Amanda, and he says, like Franklin can't get
Speaker 1: it done in the middle of the game. I mean,
Speaker 1: what do you do with your coach, James Franklin with
Speaker 1: always you know, game day coach and all that. I mean,
Speaker 1: where's the improvement got to be next year for the
Speaker 1: Nitney Lions.
Speaker 6: Oh my god, that is such a horrible question to
Speaker 6: end on here. I am not going to bet against Franklin.
Speaker 6: We've had just a tremendous recruiting history here these last
Speaker 6: couple of years, and I think next year is our year,
Speaker 6: and so I'm not going to bet against him. I
Speaker 6: think it's going to be fix.
Speaker 1: We'll take the odds. It's like the Fed. Let's take
Speaker 1: you think Amanda Gotty is going to come back again, Davey.
Speaker 4: You know, well Franklin used to coach the The mandible
Speaker 4: commodore is Maya. He's a andy guy, you know. I mean,
Speaker 4: we we're sorry to see him go.
Speaker 1: Yeah, James Franklin out of Penn State. Amanda Gotty never
Speaker 1: to appear again. Amanda, thank you so much. With P
Speaker 1: and C Banking, this is a Joy for a first
Speaker 1: conversation in twenty twenty four and the bankdrop here to
Speaker 1: talk to Marghi Patel of Allspring is wonderful. Torsen slock
Speaker 1: at Apollo out with a wonderful note which I'm in
Speaker 1: very strong agreement on, and his question is will twenty
Speaker 1: twenty four be a repeat of twenty twenty three. I've
Speaker 1: been suggesting that that's an outside non consensus call of
Speaker 1: the boredom. It will be just the same, Margie, after
Speaker 1: the oddities of twenty twenty three. Will this year be
Speaker 1: the same?
Speaker 7: No, I think it'll be a little different. I think
Speaker 7: the first half of the year will be choppy, probably
Speaker 7: down a bit, and after midyear the album for eurnings
Speaker 7: will look better, and also the run up with the
Speaker 7: presidential election. I think we'll all rally in the second
Speaker 7: half and finish say mid single digits or low double digits,
Speaker 7: so a little different.
Speaker 1: Let me get to the money question, always with Margui Patel,
Speaker 1: and that's the use of cash. Is dividend growth part
Speaker 1: of a good equity return?
Speaker 7: This year, I think it'll still be that. I think
Speaker 7: the hurdle rate was traders or they are still favors
Speaker 7: stocks especially those a little bit of a dividend. But
Speaker 7: at the end of the day still we have to
Speaker 7: see earnings growth, not just the dividend. That's not how stock.
Speaker 4: So, Mark, we're looking for S and P target for
Speaker 4: your No, I'm just kidding. I'm joking. I would never
Speaker 4: ask you for your year end target. But in seriousness,
Speaker 4: let's talk about some of the sectors within the S
Speaker 4: and P and which ones are projected to perform this year.
Speaker 4: I mean energy stands out to me. Energy, you know,
Speaker 4: it's kind of been the laggard if you look back
Speaker 4: to twenty twenty three. What's your thoughts on the outlook
Speaker 4: for energy? Do you think oil prices are going to
Speaker 4: be you know, skew to the upside.
Speaker 7: Here, No, I'm not expecting a lot. I think energy
Speaker 7: is going to stay at a relatively lower trading range.
Speaker 7: I think there's some opportunities in the energy space. We've
Speaker 7: seen some recent M and A activity, and actually that's
Speaker 7: a pretty good indicator of what those in the industry see.
Speaker 7: That says there's a little bit of optimism, especially because
Speaker 7: it's sector that's really not very well liked.
Speaker 4: To well, MARKI you mentioned them, an activity seem could
Speaker 4: be said for healthcare right, which I do know is
Speaker 4: one of your selected sector, and talk to us about
Speaker 4: where in healthcare investors want to position.
Speaker 7: Well, we think healthcare is still coming to the end
Speaker 7: of the day period where all the macro things are
Speaker 7: pretty negative, you know, pricing, COVID, drop off in demand
Speaker 7: from China and so forth, and we think that still
Speaker 7: has to play out a little bit before we see
Speaker 7: an uptiket earnings, which we don't think will really occur
Speaker 7: probably till next year. So we think there are a
Speaker 7: few opportunities. Problem with healthcare is a lot of the
Speaker 7: names are very highly priced and modern, and then you
Speaker 7: still have some pitfalls like you see in the managed
Speaker 7: care today.
Speaker 1: Margie is an amateur. I have a gut feeling that
Speaker 1: CFOs like Lemmings off a Cliff are going to go
Speaker 1: through a massive issuance this year. What is the underpinning
Speaker 1: of your call about issuance? How do you approach that?
Speaker 7: Well, when you look at at bonds, really it's been
Speaker 7: pretty muted last year, and I think it's going to
Speaker 7: be pretty muted this year, if only because companies raise
Speaker 7: so much money during the period of zero interest rates.
Speaker 7: They really don't need to raise more cash sitting on
Speaker 7: their books, So we're not looking for any big upcheck,
Speaker 7: and I don't think companies really have the aquetite to
Speaker 7: increase their leverage.
Speaker 1: Margie.
Speaker 4: When I think of all Spring, one of the things
Speaker 4: I often think of is your exposure internationally outside of
Speaker 4: US dollar equities. I mean, talk to us about international equities,
Speaker 4: international fixed income. What are your thoughts there, I mean,
Speaker 4: what sort of you know, place does it have in
Speaker 4: a diversified portfolio.
Speaker 7: Well, we all have our biases, and I think we're
Speaker 7: all entitled to our biases, and my biases, US is best.
Speaker 7: That's a country that I can understand that has the
Speaker 7: most transparency, the most highest quality market, and so I
Speaker 7: don't have a lot of interest in overseas, either emerging
Speaker 7: market or development. And honestly, you really don't see the
Speaker 7: higher growth rates that made those sectors supposedly attracted. So
Speaker 7: we think US is the best.
Speaker 4: You know, that's interesting because you know, I was always
Speaker 4: trained that, you know, these emerging developing markets are going
Speaker 4: to grow at a faster pace, but I think we've
Speaker 4: turned that on its head in recent years. I agree
Speaker 4: with you completely. Margie talked to us about the growth
Speaker 4: differential between the US and some of the other G
Speaker 4: ten economies. What are your thoughts there, Well, again.
Speaker 7: It's pretty mixed, and really I think overall you're looking
Speaker 7: at pretty low slightly negative to slightly positive. They have
Speaker 7: some of the same issues we did. They spend a
Speaker 7: lot during COVID, so they have a lot of difference
Speaker 7: too that they have to do to cover the deficits
Speaker 7: of it. For deficit spending and particular, you don't see
Speaker 7: a lot of avenues for accelerating growth because again we're
Speaker 7: not looking for China to have very very high growth.
Speaker 7: The other emerging markets tied to China and also have growth,
Speaker 7: so it's really more very modest growth.
Speaker 1: Is cash here? I mean I keep asking this interview
Speaker 1: to interview. We have six trillion in cash and the sideline.
Speaker 1: Most of that's at all spring by the way, Damien,
Speaker 1: but we've got all the trillions of dollars of cash
Speaker 1: market Patell and that is a Marguie Patel opportunity. Where
Speaker 1: is the opportunity if yields.
Speaker 7: Come down, Well, I'm not really looking for gels to
Speaker 7: come down. I think yields at four percentage and treasures
Speaker 7: are pretty low. So We're not looking for a big
Speaker 7: rally there. I think that high yell bonds continue to
Speaker 7: look relatively attractive in the investment in the corporate bomb space.
Speaker 7: You're looking at yields to say, six and a half
Speaker 7: to seven and three quarters down from where they were,
Speaker 7: but still pretty good premier over say four percent. And
Speaker 7: it's true the short term are high, but I don't
Speaker 7: think they're going to stay up to five percent that much.
Speaker 1: Yeah, I mean, Damian, I use a WACC the work
Speaker 1: way to the average cost of capital function in the Bloomberg.
Speaker 1: It's really really lovely. I get a quick snapshot. I mean,
Speaker 1: Apple burdened with four point four percent debt? Are you
Speaker 1: kidding me?
Speaker 4: You know this just in from one of our listeners
Speaker 4: in Red Bank in New Jersey, Anthony Young, asking about
Speaker 4: the way that average cross the capital for consumer staples pretzels.
Speaker 4: Talk to us about you know, the demand for pretzels,
Speaker 4: I mean for consumer staate ap is writ large across
Speaker 4: the whole of the US economy. You know, Is that
Speaker 4: a place we want to hide out here in the
Speaker 4: equity market.
Speaker 7: Well, I think it's actually an interesting safe space. Those
Speaker 7: companies really did very badly in the market last year,
Speaker 7: although their results are not terrible, so we see those
Speaker 7: as a middle of the road opportunity in place conservative
Speaker 7: probably better than us, say investment great bonds, where you
Speaker 7: get in most cases a dividend. We already know the
Speaker 7: slower out look for consumers, a little bit of pricing pressure,
Speaker 7: but you know, altogether, I think that was a dividend
Speaker 7: and very modest growth two to four percent in earns
Speaker 7: will be enough to make them reasonable for a conservative investor.
Speaker 1: Margy, thank you so much. With ulstoing Margy Patil there.
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