WEBVTT - When the Fever Breaks 0:00:12.880 --> 0:00:16.040 Hello, and welcomes to What Goes Up a weekly markets podcast. 0:00:16.079 --> 0:00:18.800 My name is Mike Reagan. I'm a senior editor at Bloomberg, 0:00:19.600 --> 0:00:22.480 and I'm well donna higher across Asset report at Bloomberg. 0:00:23.480 --> 0:00:25.680 This week on the show, Well, it was actually pretty 0:00:25.680 --> 0:00:27.800 easy to make money in the stock market last year, 0:00:27.960 --> 0:00:32.559 what with the SMP five hundred up about in the year. However, 0:00:32.600 --> 0:00:36.640 it wasn't necessarily easy to beat it by seven percentage points. 0:00:37.159 --> 0:00:39.239 But our guests this week did exactly that with a 0:00:39.280 --> 0:00:42.320 core mutual fund he co manages, ranking it in the 0:00:42.360 --> 0:00:47.360 top two or three percent of pure funds. It is 0:00:47.400 --> 0:00:49.720 a different story, and the market is off to an 0:00:49.800 --> 0:00:52.639 ugly start to the year, So we're gonna find out 0:00:52.640 --> 0:00:55.160 what a winning fund manager does at a time of 0:00:55.240 --> 0:00:58.600 turbulence like this. But philled out Before we get to that, 0:00:58.680 --> 0:01:01.640 I gotta say, um, my teenage daughters have a new 0:01:01.720 --> 0:01:04.480 favorite word in that That word is suss. Are you 0:01:04.520 --> 0:01:07.920 Are you familiar with that word suss like suss out? No, 0:01:08.080 --> 0:01:11.920 it's suss. I think it's like suspicious. No, I'm not, 0:01:12.000 --> 0:01:14.960 I'm not familiar with it. What is it? Well, I 0:01:14.959 --> 0:01:18.000 gotta say, uh, your a little suss to me, and 0:01:18.040 --> 0:01:20.240 I'll tell you why. You want to know why? Yeah, 0:01:20.240 --> 0:01:24.160 I do. You're from Trenton, right near the border of Pennsylvania, 0:01:24.680 --> 0:01:26.880 less than an hour from Philadelphia. You should be an 0:01:26.880 --> 0:01:30.920 Eagles fan and should be somehow you're a Buffalo Bills fan. 0:01:31.160 --> 0:01:34.959 That's that's sussed to me. I see, okay, now makes sense. 0:01:35.080 --> 0:01:37.520 I am. I've been to Eagles games, so forgive me 0:01:37.600 --> 0:01:40.279 because I know you like the Eagles. Admit you admit 0:01:40.319 --> 0:01:43.400 to be in suss Yeah, I admit to it. But 0:01:43.600 --> 0:01:46.640 it's so easy to like the Bills because they've been 0:01:46.680 --> 0:01:49.280 so great this year, and they have another game coming 0:01:49.360 --> 0:01:52.760 up this weekend, and if any of them are listening, 0:01:52.880 --> 0:01:55.240 I really need them to be at their very best. 0:01:55.440 --> 0:01:59.080 So all the Buffalo Bills out there, don't eat pizza 0:01:59.120 --> 0:02:02.920 the night before, go to sleep early. I have a 0:02:02.920 --> 0:02:07.680 little Josh Allen statue that we like. No pizza for them, No, no, no, no, 0:02:07.720 --> 0:02:09.440 I need them to be tip top shape. How about 0:02:09.440 --> 0:02:12.640 buffalo wings? Can they eat buffalo wings as long as 0:02:12.680 --> 0:02:16.120 it doesn't give them heartburn? All right? Well, I gotta 0:02:16.120 --> 0:02:18.679 say this, This market this year has given a lot 0:02:18.720 --> 0:02:22.120 of heartburn left and right, and uh, hopefully our guest 0:02:22.160 --> 0:02:24.320 has had his tumbs. Let's let's see what he has 0:02:24.360 --> 0:02:27.160 to say about this ugly starts of the year. Yeah. 0:02:27.160 --> 0:02:29.480 I want to welcome back Andrew Slimmon. He is a 0:02:29.639 --> 0:02:33.640 senior portfolio manager at Morgan Stanley Investment Management. And Andrew, 0:02:33.680 --> 0:02:35.000 I want to thank you for coming back on the 0:02:35.040 --> 0:02:37.920 show again. Thanks for having me. And I did go 0:02:37.960 --> 0:02:40.400 to University of Pennsylvania, so I spent a few daimes 0:02:40.400 --> 0:02:43.919 going to see the Eagles play. That's good. That's that's 0:02:43.919 --> 0:02:45.840 why we like him here. I know we already got 0:02:46.240 --> 0:02:49.280 you're making Mike's hearts, already got his cheese steak recommendation too. 0:02:49.320 --> 0:02:52.280 I think last time and it was it was Abner's right, 0:02:52.400 --> 0:02:55.480 is alright? You have a good memory, I'd say, well 0:02:55.520 --> 0:02:57.560 for for certain things like cheese steaks. You know you 0:02:57.639 --> 0:03:01.440 gotta see the important things. Well, Andrew, I know you 0:03:01.440 --> 0:03:04.400 you had said recently that two is going to be 0:03:04.560 --> 0:03:07.320 a tug of war between two things. One is the 0:03:07.360 --> 0:03:10.880 removal of fed accommodation, which is parished, and then continued 0:03:10.960 --> 0:03:14.120 strength of the economy as earnings continued to surprise to 0:03:14.160 --> 0:03:16.760 the upside. It's been a few months since the last 0:03:16.760 --> 0:03:18.240 time you were on the show. So I was hoping 0:03:18.240 --> 0:03:21.200 you could walk us through what you're anticipating for this 0:03:21.280 --> 0:03:23.639 year and tell us whether or not the first few 0:03:23.680 --> 0:03:26.079 weeks of the year are going to be a bit 0:03:26.160 --> 0:03:28.919 emblematic of what's to come, because that's something I hear 0:03:28.960 --> 0:03:31.160 a lot from people, and that you know, we've seen 0:03:31.160 --> 0:03:33.679 this choppiness and it's something we can continue to see 0:03:33.720 --> 0:03:37.720 throughout the year. Yeah, So I always cringe when I 0:03:37.800 --> 0:03:40.400 hear someone say, hey, I think the market is going 0:03:40.440 --> 0:03:42.040 to be a you know, kind of five to ten 0:03:42.880 --> 0:03:49.320 because on the surface, that's like it's reasonable, but it's optimistic, 0:03:49.440 --> 0:03:52.840 so it's like it checks all the nice little pretty boxes, right. 0:03:52.840 --> 0:03:56.600 So five. The reality is, if you go back to 0:03:56.680 --> 0:04:01.240 nineteen since nine, there's only been all eleven times the 0:04:01.280 --> 0:04:04.000 market has been up zero to ten percent, So it's rare, 0:04:04.160 --> 0:04:08.120 very rare, even though more times enough people kind of 0:04:08.160 --> 0:04:11.680 predict single digit, high single digit returns. So I'm all, like, 0:04:11.760 --> 0:04:16.880 I'm squeamish even saying that. But having said that, now 0:04:16.880 --> 0:04:20.080 I'm going to counterdict. I felt there seems to be 0:04:20.360 --> 0:04:25.360 precedent for this type of return in this year, and 0:04:25.520 --> 0:04:29.400 you know, if you go back to last year two 0:04:29.480 --> 0:04:34.560 thousand and twenty one last year, the return was very 0:04:34.680 --> 0:04:39.239 consistent with what I would call the second year coming 0:04:39.279 --> 0:04:42.880 out of a bear market low. So if twenty was 0:04:43.000 --> 0:04:45.680 the first year and we had a very strong year 0:04:45.800 --> 0:04:50.240 off below, if you look at that second year, whether 0:04:50.320 --> 0:04:54.080 it was last year or two thousand ten or two 0:04:54.120 --> 0:04:59.560 thousand three or those years are always very very strong. 0:05:00.040 --> 0:05:02.599 And I think there's two and I'm getting to your question. 0:05:02.680 --> 0:05:06.120 There's two reasons for that. Number One is, obviously you 0:05:06.200 --> 0:05:10.040 have very accommodative FED policy because they're still in the 0:05:10.080 --> 0:05:13.520 mode of trying to fix the problem that caused the recession, 0:05:13.560 --> 0:05:15.960 so you have very commonive FED policy. But then you 0:05:16.080 --> 0:05:21.560 also have a combination of a situation where corporate earnings 0:05:22.080 --> 0:05:26.400 are very strong because corporations tighten their belt cut expenses 0:05:26.440 --> 0:05:29.480 into recession. So you have this big explosion in margins 0:05:29.760 --> 0:05:33.880 to the upside and earnings growth, and Wall Street unfortunately 0:05:34.240 --> 0:05:37.320 gets too pessimistic during recession, so they're kind of behind 0:05:37.400 --> 0:05:40.320 the curve and so they have to revise up. And 0:05:40.360 --> 0:05:42.920 so that's the whole story of last year, is that 0:05:43.240 --> 0:05:46.919 the stock market was up as much as earnings revisions, 0:05:46.960 --> 0:05:48.720 so to the extent that we had a very good 0:05:48.800 --> 0:05:52.599 year we followed earnings revisions. Now when you move into 0:05:52.640 --> 0:05:55.280 getting to this this year, then if last year was 0:05:55.320 --> 0:05:58.400 so consistent, then what what kind of happens in the 0:05:58.600 --> 0:06:02.640 third year after a you know, kind of that low 0:06:02.880 --> 0:06:06.920 and in the third year, whether it was ninety two, 0:06:07.400 --> 0:06:11.400 two thousand four, two thousand eleven, you see these kind 0:06:11.400 --> 0:06:17.400 of this single digit type returns. They're not negative, but 0:06:17.480 --> 0:06:20.559 they're not better than that, because, as you said with Donna, 0:06:20.680 --> 0:06:24.080 you have a battle. The battle is is that you 0:06:24.120 --> 0:06:28.200 continue to have strong earnings and revisions. And I think 0:06:28.200 --> 0:06:31.960 corporate bounciets are very strong. Consumer bounciets are very strong. 0:06:32.240 --> 0:06:37.800 So I'm very confident in this this continued strong corporate fundamentals. 0:06:38.600 --> 0:06:40.720 But the Fed's not as much as your friend. And 0:06:40.720 --> 0:06:43.520 so i'd like to say the FEDS pivoting from they're 0:06:43.560 --> 0:06:46.320 not your enemy, but they're not their friend. You're they're 0:06:46.360 --> 0:06:48.800 not your friend anymore, they're more your acquaintance. And so 0:06:48.880 --> 0:06:51.920 that's kind of the battle, and that's why you get 0:06:52.000 --> 0:06:55.600 kind of single digit returns. The other thing that is 0:06:55.640 --> 0:06:59.120 consistent is that we're going into a mid term election year, 0:06:59.200 --> 0:07:02.640 and if you look at the four year election cycle, 0:07:03.279 --> 0:07:06.760 the mid term year is a single digit year. So 0:07:07.240 --> 0:07:09.960 this leads me to believe that it's a you know, 0:07:10.040 --> 0:07:14.960 it's gonna be okay year. But the problem is the 0:07:15.000 --> 0:07:17.960 problem is, I mean, how many days in the market's open, 0:07:18.160 --> 0:07:21.040 you know what, two fifty plus days a year. In 0:07:21.080 --> 0:07:25.040 any one day, it could swing one or two. But 0:07:25.080 --> 0:07:27.800 you know, that's a lot of volatility around a single 0:07:27.880 --> 0:07:30.520 digit year. And so we're not gonna We're gonna be 0:07:30.800 --> 0:07:34.400 too far above it and too far behind behind that. 0:07:34.920 --> 0:07:36.880 I just think when we get to December thirty one, 0:07:37.040 --> 0:07:40.680 if we're talking on December thirty one, it's gonna be like, Wow, 0:07:40.920 --> 0:07:44.320 it wasn't as bad as it felt at times. I 0:07:44.440 --> 0:07:47.560 just and that, And so so that leads me to say, 0:07:47.840 --> 0:07:50.520 don't get too optimistic when things are really good, and 0:07:50.560 --> 0:07:52.960 don't get too pessimistic when things are kind of bad. 0:07:53.240 --> 0:07:55.680 Right now, I'm not sure it's real bad yet, but 0:07:55.680 --> 0:07:59.440 we're you know, we're down a little bit. Yeah, you know, 0:07:59.520 --> 0:08:02.200 Andre uh, you know, Danna mentioned the sort of the 0:08:02.240 --> 0:08:04.040 talking points you said to us, and I want to 0:08:04.080 --> 0:08:05.880 seize on one a little bit too, because I think 0:08:05.920 --> 0:08:08.240 it really gets to the heart of what's on a 0:08:08.280 --> 0:08:10.960 lot of people's minds, right now, and I'm just gonna 0:08:11.040 --> 0:08:13.240 quote what you wrote to us. He said, avoid the 0:08:13.280 --> 0:08:15.880 temptation to step in and buy into the sell off 0:08:15.920 --> 0:08:19.720 in high growth stocks. And you say, my experience is 0:08:19.960 --> 0:08:22.800 once the fever breaks, it's done for quite a while. 0:08:23.400 --> 0:08:27.160 And you know, boy, the fever shure has broken, uh, 0:08:27.720 --> 0:08:29.800 you know, in that space. But I want to I 0:08:29.840 --> 0:08:34.120 want to dissect that that statement in a few different ways, 0:08:34.120 --> 0:08:36.360 if if Phildonna will indulge me some follow ups, I 0:08:36.360 --> 0:08:39.040 won't hit you with eight questions at once, but the 0:08:39.080 --> 0:08:41.960 first one being, you know, historically, are there any sort 0:08:41.960 --> 0:08:43.480 of precedence you could point to? Who I mean, is 0:08:43.480 --> 0:08:46.200 it too simple to point at the dot Com deflation 0:08:46.640 --> 0:08:48.959 of that bubble as as something to expect in the 0:08:49.040 --> 0:08:52.080 high growth area this year? Or is that sort of 0:08:52.520 --> 0:08:55.440 you know, a fair comparison, if not quite the peak 0:08:55.520 --> 0:08:58.320 to trough type of of dip that we saw, uh 0:08:58.440 --> 0:09:02.480 something perhaps that long and that sort of dramatic uh 0:09:03.160 --> 0:09:05.440 where with you know, you know, the high growth stocks 0:09:05.480 --> 0:09:07.960 really just get taken as the woodshed for longer than 0:09:08.000 --> 0:09:12.440 anyone really saw coming. Yeah. So first of all, I 0:09:12.480 --> 0:09:14.200 just want to make sure it's understood I'm not a 0:09:14.280 --> 0:09:16.240 value manager or a growth manager. So I got No, 0:09:16.520 --> 0:09:19.080 I'm not trying to you know, spin you know, kind 0:09:19.080 --> 0:09:24.320 of what works or where my my investment philosophy at 0:09:24.320 --> 0:09:26.360 all times. I'm just I'm just looking at what the 0:09:26.360 --> 0:09:29.200 fat pitches and as it pertains this group. The reason 0:09:29.240 --> 0:09:33.000 why I believe once the fever breaks, it lasts a 0:09:33.000 --> 0:09:36.760 long time is if you wind the clock back, you know, 0:09:36.800 --> 0:09:39.160 if you look at some of these uber growth funds, 0:09:39.679 --> 0:09:43.679 they're back to where they were in early fall of 0:09:43.840 --> 0:09:48.120 two thousand twenty, and that means a lot of people 0:09:48.559 --> 0:09:53.960 haven't made money, right because they chased into them after 0:09:54.840 --> 0:09:59.760 they peaked. And the reason why the dot com anal 0:10:00.040 --> 0:10:06.200 g is correct is that that means that every time 0:10:06.240 --> 0:10:08.840 they start to go up, there's someone that can get 0:10:08.880 --> 0:10:14.040 out even and so there's tremendous selling resistance at higher 0:10:14.160 --> 0:10:19.680 levels because so many people have lost money. And that 0:10:19.720 --> 0:10:22.960 to me is very similar to you know, the dot 0:10:23.000 --> 0:10:26.720 com bubble, but other bubbles, is that once a very 0:10:26.760 --> 0:10:32.839 speculative bubble breaks, it doesn't it's not a v bottom 0:10:32.880 --> 0:10:36.600 because there's too many people looking to get out and 0:10:36.640 --> 0:10:39.240 want to get out. So I think that that's you know, 0:10:39.320 --> 0:10:42.880 that's that's the point. There is that I and you said, well, 0:10:43.120 --> 0:10:45.880 maybe not analogous because it hasn't gone down as much. 0:10:46.000 --> 0:10:51.280 And I would say yet, but now at what cohort 0:10:51.280 --> 0:10:52.560 would you look at? You? I mean, could you see 0:10:52.559 --> 0:10:55.040 the NASTAC one hundred going going down as much as it? 0:10:55.280 --> 0:10:59.640 Then we're more like catty Wood type of fund, uh something. 0:10:59.679 --> 0:11:02.719 I think there's a yeah, that's the big difference to 0:11:02.800 --> 0:11:07.400 two thousand. In two thousand, the NASDACK was trading at 0:11:07.920 --> 0:11:10.199 you know, you had you had obscene prices, but you 0:11:10.320 --> 0:11:13.800 also had some of these very big cap tech stocks. 0:11:13.880 --> 0:11:19.280 They're trading at triple digit multiples. And when I look 0:11:19.320 --> 0:11:22.480 at these uber bro stocks, they're as expensive as they 0:11:22.480 --> 0:11:25.880 were in two thousands. But the megacap tech stocks, the 0:11:26.000 --> 0:11:29.880 Nasdaq one hundred, the big stocks, they're not as expensive. 0:11:30.320 --> 0:11:33.520 So I I don't think the you know, the NAZAC 0:11:33.600 --> 0:11:38.000 break up two thousand is quite accurate because I don't 0:11:38.040 --> 0:11:41.000 think the really big tech stocks are as vulnerable. They're 0:11:41.080 --> 0:11:45.280 multiples are not you know, not as expensive. So I 0:11:45.320 --> 0:11:48.840 don't think you'll see you know, those stocks, you know, 0:11:48.880 --> 0:12:00.640 they're not as vulnerable. Once the guy we stink along 0:12:00.679 --> 0:12:04.560 these lines though, is that there's something in human nature. 0:12:04.600 --> 0:12:07.160 I think that is always going to make that instinct 0:12:07.200 --> 0:12:10.800 to chase the high flyers come back at some point. Uh, 0:12:10.960 --> 0:12:14.320 you agree, right, as simple as that, But is there? 0:12:14.440 --> 0:12:17.360 I mean, what would the conditions you would look for 0:12:17.480 --> 0:12:20.280 to be in place to sort of bring that trade back, 0:12:21.080 --> 0:12:23.920 you know, whether it be the sort of high flyers 0:12:23.960 --> 0:12:25.920 of the past couple of years or whatever. We're on 0:12:26.000 --> 0:12:28.559 two by the time that that sentiment comes back, is 0:12:28.600 --> 0:12:31.040 it is as simple as sort of a economic growth 0:12:31.080 --> 0:12:36.480 normalization and or and or the FED being done tightening. Uh, 0:12:36.760 --> 0:12:39.000 we'll take more than that, you think, Well, I think 0:12:39.000 --> 0:12:44.480 it's first selling exhaustion, where stocks stop going down on 0:12:44.640 --> 0:12:48.720 bad news because there's no one left about them, right, 0:12:49.120 --> 0:12:52.560 there's no one left to sell them. And I'm just 0:12:52.720 --> 0:12:56.360 not sure we're there yet. I don't. I haven't seen 0:12:56.440 --> 0:12:59.480 big capitulation. I mean, the stocks are down a lot, 0:12:59.520 --> 0:13:02.880 but but there hasn't been big capitulation these socks. And 0:13:03.480 --> 0:13:06.040 I get too many people like. The other way I 0:13:06.040 --> 0:13:10.160 think about it, Mike, is when no one believes that 0:13:10.240 --> 0:13:13.720 they can buy the dip anymore. That's when the bottom happens. 0:13:13.840 --> 0:13:16.559 Right when people say I don't want to touch them. 0:13:16.600 --> 0:13:19.800 You know, these are these are these are you know, uninvestable. 0:13:20.880 --> 0:13:23.319 That's what I get interested. But when people are just saying, hey, 0:13:23.320 --> 0:13:26.679 what do you think? You know, because the memory of 0:13:26.880 --> 0:13:31.760 making a lot of money is too recent, and that 0:13:32.000 --> 0:13:35.520 leads people to try to bottom fish. And so I've 0:13:35.520 --> 0:13:39.160 been in this business a long time. Human behavior doesn't change. 0:13:39.520 --> 0:13:42.640 And so always when you when this type of bubble breaks, 0:13:42.760 --> 0:13:46.080 you get counter trend rallies and they go up a 0:13:46.080 --> 0:13:48.160 little bit and then they go down low, and then 0:13:48.200 --> 0:13:50.240 they go up and then they go down and tell 0:13:50.280 --> 0:13:53.640 people say, don't ask me any more thing more about it. 0:13:53.720 --> 0:13:56.120 I don't want to talk about it. I'm moving on. 0:13:56.360 --> 0:13:58.679 And then I got, oh, that's kind of interesting. That 0:13:58.720 --> 0:14:01.520 means maybe they're they're getting to a bottom. So I 0:14:01.520 --> 0:14:05.480 think that's the first thing. And yeah, when the FED 0:14:05.880 --> 0:14:09.680 pivots the way we're there, pivoting grows stocks don't do 0:14:09.760 --> 0:14:14.200 as well. The FED is moving off ultra accomminative and 0:14:14.440 --> 0:14:18.120 grows stocks in general, you know, struggle, And so I 0:14:18.160 --> 0:14:23.280 think that also is an issue. Um, could could the 0:14:23.360 --> 0:14:27.040 FED take a breather? I think we've gone from no 0:14:27.080 --> 0:14:29.840 one believing rates to go up in inflation to now 0:14:30.000 --> 0:14:32.760 inflation and higher rates seems to be consensus, which leads 0:14:32.800 --> 0:14:35.240 me to believe, well, maybe later this year the FED 0:14:35.280 --> 0:14:38.000 will pause and maybe gross stocks will come back. I'm 0:14:38.000 --> 0:14:41.560 just not sure these these high, very high octane gross 0:14:41.600 --> 0:14:44.000 socks will will come back, but I wouldn't be surprised 0:14:44.000 --> 0:14:47.240 as some of the you know, these NAZAC hundred stocks, 0:14:47.440 --> 0:14:49.600 they could come back to life if in fact the 0:14:49.640 --> 0:14:51.960 FED pauses. I wasn't sure if I can jump in 0:14:52.120 --> 0:14:56.000 with a question of Mike had ten more. But Mike 0:14:56.040 --> 0:14:58.240 did mention at the top of the show that one 0:14:58.280 --> 0:15:01.120 of your funds was up year, and I think everybody 0:15:01.120 --> 0:15:04.760 at home is just wondering what exactly you might be 0:15:04.800 --> 0:15:07.080 favoring this year, what you might recommend to them, and 0:15:07.280 --> 0:15:10.280 where they should be and how they should be positioning 0:15:10.440 --> 0:15:14.600 as the year unfolds. So the reason why we had 0:15:14.600 --> 0:15:18.040 a good year last year is simply that we played 0:15:18.080 --> 0:15:20.920 the playbook. The playbook is is that when you're coming 0:15:21.000 --> 0:15:27.080 out of recessions, cyclical stocks do well, right because in recessions, 0:15:27.560 --> 0:15:31.040 people you know, sell anything that's economically sensitive and they 0:15:31.080 --> 0:15:34.200 hold on the things that they perceive is not economically sensors. 0:15:34.280 --> 0:15:37.240 So the spread between the cyclical stocks and the non 0:15:37.280 --> 0:15:40.040 cyclical stocks gets extreme and boil boy, did it really 0:15:40.040 --> 0:15:43.640 get extreme? Allah all our conversations so far by the 0:15:43.680 --> 0:15:46.240 second half of two thousand twenty. So it was kind 0:15:46.240 --> 0:15:47.960 of a fat pitch to own, you know, kind of 0:15:47.960 --> 0:15:52.760 financials in energy stocks. This you know in two thousand, 0:15:53.080 --> 0:15:56.240 in in twenty one, and so that, you know work. 0:15:56.280 --> 0:15:59.520 The other thing that really worked is just listening to 0:15:59.560 --> 0:16:05.120 company and follow earnings. Now, just to be clear, earnings 0:16:05.160 --> 0:16:10.240 growth doesn't drive stock prices, it's surprises, right. A stock 0:16:10.280 --> 0:16:15.280 price embeds all future expectations. So if companies are doing 0:16:15.320 --> 0:16:18.440 better than what is expected, they go up, and if 0:16:18.480 --> 0:16:21.720 they if they don't, then they're not doing as well, 0:16:21.760 --> 0:16:23.880 they go down, you know. And that's a very simple rule. 0:16:23.960 --> 0:16:28.360 But so I believe in okay, company reports, what is 0:16:28.680 --> 0:16:31.720 what was there the outlook? Did they exceeded or beat it? 0:16:31.720 --> 0:16:34.280 And I don't mean just quarter lits quarter because that's 0:16:34.320 --> 0:16:36.720 too short term, but over time. And so I think 0:16:36.720 --> 0:16:39.840 that that really work last year, and I think it'll 0:16:39.840 --> 0:16:42.960 work this year as well, And so I think we're 0:16:43.040 --> 0:16:46.960 into an environment So going into this year, I think 0:16:47.000 --> 0:16:52.000 we're an environment where central bank policy is willing to 0:16:52.120 --> 0:16:59.120 accept higher levels of inflation for faster growth that will 0:16:59.200 --> 0:17:01.720 lead to more age growth. Now, right now, the FED 0:17:01.960 --> 0:17:04.800 is starting to pivot a little bit because real wages 0:17:04.800 --> 0:17:08.680 aren't going up. Real wages so after you know, that's 0:17:09.119 --> 0:17:12.240 after inflation, So I think they're gonna make a move 0:17:12.280 --> 0:17:15.240 to kind of bring down inflation. But I think we're 0:17:15.280 --> 0:17:19.479 moving into an environment we're gonna have higher growth at 0:17:19.480 --> 0:17:22.840 the expense of higher inflation, and that's an environment where 0:17:23.160 --> 0:17:25.439 you want to own some value stacks. Again, I'm not 0:17:25.520 --> 0:17:28.639 saying throw away all your growth socks and buy all value, 0:17:28.640 --> 0:17:33.239 because I believe in technology long term, but I do 0:17:33.440 --> 0:17:35.879 think that we're we've come out of a decade of 0:17:36.160 --> 0:17:41.720 slow growth and we're moving into a faster growth environment, 0:17:41.760 --> 0:17:43.400 and I think you want to own a few more 0:17:43.480 --> 0:17:45.679 value socks. And I don't think this year will be 0:17:45.720 --> 0:17:48.439 any different than last year. Andrew, you sent us a 0:17:48.520 --> 0:17:50.199 list of a couple of stocks that you really like, 0:17:50.320 --> 0:17:53.879 and I think it was Google, Microsoft, and Danahert. I 0:17:53.920 --> 0:17:55.760 was wondering if you could maybe walk us through why 0:17:55.840 --> 0:17:59.719 you like these picks in particular. Yeah, our biggest overweights 0:17:59.800 --> 0:18:04.160 are financials, reads, and energy stocks. The however of that 0:18:05.080 --> 0:18:08.560 is those stocks are red hot right now. They're really hot. 0:18:08.920 --> 0:18:12.760 Their financials and energy have done really well this year. 0:18:13.200 --> 0:18:18.159 So I think we're into an environment where you have 0:18:18.240 --> 0:18:21.960 to be careful going into earning season, given how strong 0:18:22.000 --> 0:18:24.840 they've been. And so I'm just a little bit wary 0:18:24.880 --> 0:18:28.960 of owning those stocks, you know, or or or buying 0:18:29.000 --> 0:18:33.920 those stocks right here. And again, those growth stocks haven't 0:18:33.960 --> 0:18:36.199 done as well. Microsoft, Google Data they have done as 0:18:36.240 --> 0:18:38.439 well because they're not the hot stocks right now, and 0:18:38.480 --> 0:18:42.320 those companies are reporting very good earnings. Yeah, and I 0:18:42.320 --> 0:18:45.080 wanted to ask you also about sort of the other 0:18:45.440 --> 0:18:48.280 debate that always comes up this time of years, you know, 0:18:48.600 --> 0:18:51.439 US versus the rest of the world. Correct me if 0:18:51.480 --> 0:18:53.880 I'm being too simplistic about this, but you know, you say, 0:18:53.920 --> 0:18:56.280 you're not a value where a growth guy. I tend 0:18:56.320 --> 0:18:59.440 to think of the US market is relatively a growth index, 0:18:59.640 --> 0:19:01.840 as a is more of a growth index. The rest 0:19:01.880 --> 0:19:04.680 of the world as more of a value index, which 0:19:04.920 --> 0:19:07.240 you know, and perhaps more of a cyclical index too, 0:19:07.760 --> 0:19:09.960 you know. Is that too simplistic to think about it, 0:19:10.040 --> 0:19:11.960 or is you know, and especially to make the leap 0:19:12.040 --> 0:19:14.679 to think that rest of the world might outperform the 0:19:14.760 --> 0:19:18.440 US this year. No, I think well, as it pertains 0:19:18.440 --> 0:19:20.800 to Europe and Japan, You're dead on right, Mike. They 0:19:20.840 --> 0:19:26.240 are more cyclical in nature. So to make a big 0:19:26.280 --> 0:19:29.679 allocation to those markets, you have to believe that they 0:19:29.720 --> 0:19:36.200 are cyclically economically going to see real acceleration, or at 0:19:36.280 --> 0:19:40.160 my juncture, I think about in terms of our cyclical 0:19:40.240 --> 0:19:43.320 stocks in Europe going to be a better investment than 0:19:43.560 --> 0:19:47.880 you know, cyclical value stocks in the US. And I've 0:19:47.920 --> 0:19:50.760 always come back to the fact that I'd rather own 0:19:50.800 --> 0:19:53.720 banks in the US than in Europe. I'd rather own 0:19:53.800 --> 0:19:57.600 industrial socks in the U in US than in Europe. 0:19:57.680 --> 0:20:01.080 So that's always led me to have a little bit 0:20:01.080 --> 0:20:06.600 more of a US bias globally. Now having said that, 0:20:06.600 --> 0:20:11.080 that's not the case in Asia. Okay, Asia, ex Japan. 0:20:11.520 --> 0:20:15.000 You've got a lot of growth stocks e m did 0:20:15.080 --> 0:20:19.280 not do well last year, right, and it's because of China, 0:20:19.840 --> 0:20:22.679 It's because of the dollar, and I think some of 0:20:22.720 --> 0:20:26.520 that might actually reverse this year. So I think growth 0:20:26.560 --> 0:20:30.200 stocks in Asia might be the big winners this year. 0:20:30.240 --> 0:20:32.760 So it's not just but your right to accept the 0:20:32.800 --> 0:20:36.240 Europe and Japan are cyclical in nature. Well, I think 0:20:36.520 --> 0:20:40.040 what he's saying is European banks are susus. I'll have 0:20:40.080 --> 0:20:42.960 to incorporate that one into my Dy've long been sus 0:20:43.240 --> 0:20:47.040 that their sus since I've proven otherwise, I think probably Mike, 0:20:47.080 --> 0:20:49.040 you and I aren't cool enough to make that word. 0:20:49.480 --> 0:20:52.520 I know I'm trying. I'm trying hard, but yeah, I 0:20:52.560 --> 0:20:57.000 can tell well I and I'll say this without listing names, 0:20:57.040 --> 0:20:59.680 but whenever it as well. I like Europe more than US. 0:20:59.720 --> 0:21:03.120 I said it, would you sell your US bank and buy, 0:21:03.440 --> 0:21:05.600 you know, a French bank or are you gonna sell 0:21:05.640 --> 0:21:08.560 your U s acid management firm? And bias with I'm 0:21:08.600 --> 0:21:11.800 just not you know when it let's send me the 0:21:11.960 --> 0:21:16.840 personal trade confirmation when I've done that in your personal account, 0:21:16.880 --> 0:21:19.120 And I think because I just think it sounds really 0:21:19.560 --> 0:21:23.040 great at the high level, but I'm not a strategis 0:21:23.080 --> 0:21:25.040 I have a portfolio manager. I'd have to actually pull 0:21:25.160 --> 0:21:27.920 the trigger and do that, and I just think that's 0:21:27.920 --> 0:21:31.200 tough to do. Yeah. Yeah, when you can't find the 0:21:31.240 --> 0:21:33.679 actual names execute a theme on, I guess is the 0:21:33.920 --> 0:21:38.239 you know it's the problem. And angel what about the 0:21:38.280 --> 0:21:42.520 small cap space because another bank earlier this week actually 0:21:42.520 --> 0:21:45.320 gave up their call on small caps all performing. I 0:21:45.359 --> 0:21:48.280 was looking at the Russell two thousand, it's down something 0:21:48.320 --> 0:21:51.000 like seven. A bunch of the names in the Russell 0:21:51.000 --> 0:21:55.399 two thousand are down like thirty forty or more. So 0:21:55.400 --> 0:21:57.800 I'm wondering what you make of the small cap space, 0:21:58.680 --> 0:22:00.520 you know looks. First of all, I'm not you know, 0:22:00.720 --> 0:22:03.640 my benchmarks are SMP and mc I world, So I'm 0:22:03.720 --> 0:22:06.919 not a small cap manager. I'm not the right person 0:22:06.960 --> 0:22:09.840 to ask about that, and I don't. We don't delve 0:22:09.880 --> 0:22:12.560 into that, not only because it's the off benchmark, but also, 0:22:13.000 --> 0:22:16.159 and this gets more you know, philosophical. I don't have 0:22:16.200 --> 0:22:19.960 a problem with passive investing. I really don't, because my 0:22:20.080 --> 0:22:22.720 response is, hey, if you want to get market exposure, 0:22:23.320 --> 0:22:26.159 go for it. But what I have a real problem 0:22:26.240 --> 0:22:30.640 with is active management that owns lots of stocks. So 0:22:30.880 --> 0:22:34.400 I am a believer in a limited number of stocks 0:22:34.880 --> 0:22:37.280 if you're going to hire active managers. So I that's 0:22:37.400 --> 0:22:39.199 the other reason I don't own small caps is just 0:22:39.760 --> 0:22:42.639 it's risky to own, you know, twenty thirty stocks and 0:22:42.680 --> 0:22:45.119 have small caps in your portfolio. So that's that's the 0:22:45.160 --> 0:22:49.160 reason why I avoid it. But that kind of carnage 0:22:49.240 --> 0:22:53.439 leads me to believe that that's attractive. But you know, 0:22:53.600 --> 0:22:56.359 I still think US value is going to outperform that 0:22:56.560 --> 0:22:59.280 because I think these companies are doing very very well, 0:22:59.320 --> 0:23:01.080 and so that would be my top pick, and then 0:23:01.080 --> 0:23:19.320 my second pick would be emerging markets. You know, I try. 0:23:19.400 --> 0:23:22.639