WEBVTT - Bloomberg Intelligence: Berkshire Earnings Jump 0:00:02.960 --> 0:00:08.560 Bloomberg Audio Studios, Podcasts, radio news. 0:00:09.960 --> 0:00:13.840 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:00:13.920 --> 0:00:17.000 weekdays at ten am Eastern on Apple Card playing Android 0:00:17.040 --> 0:00:20.120 otto with the Bloomberg Business App. Listen on demand wherever 0:00:20.200 --> 0:00:24.480 you get your podcasts, or watch us live on YouTube. 0:00:25.079 --> 0:00:27.680 Berkshire Hathaway people talking about this scene getting close to 0:00:27.680 --> 0:00:29.120 a one trillion dollar valuation. 0:00:29.240 --> 0:00:30.680 Find all I care about it? 0:00:30.720 --> 0:00:33.040 What are they gonna do with their cash? Matthew Palozola, 0:00:33.360 --> 0:00:36.280 he joins us here. He's from Bloomberg Intelligence. He covers 0:00:36.320 --> 0:00:40.279 all the insurance comes, including Berkshire. So, Matthew, how much 0:00:40.320 --> 0:00:42.760 cash do they really have on their balance sheet? And 0:00:43.720 --> 0:00:46.080 we've been asking the same question for years? What do 0:00:46.159 --> 0:00:49.199 they do with it? Anything new coming out of Omaha? 0:00:49.800 --> 0:00:54.520 No, So about one hundred and sixty eight billion of cash. 0:00:54.840 --> 0:00:56.920 We've been talking about this for a long time. They 0:00:56.920 --> 0:00:59.240 haven't had a ton to do with the cash. Buffett 0:00:59.280 --> 0:01:03.880 had said there's almost no targets outside of the US 0:01:03.880 --> 0:01:06.319 that he would be interested in, and the ones inside 0:01:06.360 --> 0:01:09.000 the US, the prices are getting driven up on competition. 0:01:09.200 --> 0:01:11.600 So it was it was a real I thought a 0:01:12.200 --> 0:01:15.160 kind of negative tone in the letter not only on 0:01:15.200 --> 0:01:16.840 that but on some of their operations as well. 0:01:17.240 --> 0:01:19.840 So a walkers through that, like, what were raised concerns 0:01:19.840 --> 0:01:20.039 for you? 0:01:20.160 --> 0:01:23.119 Yeah, So the beginning of last year at the annual meeting, 0:01:23.160 --> 0:01:25.080 Buffett had said, we think the energy business, in the 0:01:25.160 --> 0:01:28.559 railroad business, they're going to be he's gonna be lower 0:01:28.880 --> 0:01:32.400 in twenty twenty three versus twenty two. What happened was 0:01:32.480 --> 0:01:34.280 they were lower, but there was actually a couple of 0:01:34.319 --> 0:01:37.560 externalities as well that made them even worse and their 0:01:37.640 --> 0:01:41.640 their go forward concerns. The first one was labor costs 0:01:41.680 --> 0:01:44.680 in the railroad that they were having a labor shortage 0:01:45.160 --> 0:01:47.720 and they were paying their people more so the margins 0:01:47.760 --> 0:01:50.760 in that Burlington Northern Santa Fe seemed to be like 0:01:50.800 --> 0:01:54.240 they're going to underperform peers on a go forward basis. 0:01:54.480 --> 0:01:58.000 The second was in energy in the West Coast. There's 0:01:58.040 --> 0:02:01.440 a lot of litigation on wildfire, there's a lot of 0:02:01.800 --> 0:02:04.560 regulation on their profits, and the outlook there didn't look 0:02:04.560 --> 0:02:04.960 at you either. 0:02:05.640 --> 0:02:07.800 So but to that point, what I find interesting is 0:02:07.800 --> 0:02:10.880 that for the railroad, for example, that's why there's the 0:02:10.880 --> 0:02:13.760 cash pile, right because you make the argument that I 0:02:13.760 --> 0:02:16.040 have one hundred and sixty seven billion dollars in cash 0:02:16.080 --> 0:02:17.920 because when things don't go well, I don't have to 0:02:17.919 --> 0:02:18.440 go to a bank. 0:02:18.480 --> 0:02:20.240 I don't have to get a loan. I can manage that. 0:02:20.720 --> 0:02:24.000 So their cash pile is far in excess of what 0:02:24.040 --> 0:02:26.440 they would need, right, So they they want to keep 0:02:26.480 --> 0:02:28.760 a buffer of like twenty billion, and they have one 0:02:28.840 --> 0:02:33.520 hundred and sixty seven right, So they're not keeping it 0:02:34.480 --> 0:02:37.680 to support the businesses. They're keeping it because there's just 0:02:37.680 --> 0:02:39.079 nothing good to do with it. 0:02:39.280 --> 0:02:43.919 Historically, what is warrant said about dividends or lack their own? 0:02:44.200 --> 0:02:47.080 So he likes getting them, and he will and he'll 0:02:47.080 --> 0:02:50.600 never pay them, right, So I think in a post 0:02:50.600 --> 0:02:54.040 buffet Berkshire, maybe that's something that happens with greg Abel. 0:02:54.080 --> 0:02:57.440 I'm not one hundred percent sure, but it's never going 0:02:57.520 --> 0:02:59.600 to happen when he's in charge. 0:03:00.320 --> 0:03:02.280 That's just a philosophical thing with him. 0:03:02.360 --> 0:03:06.000 Yeah, he thinks we can do better with the cash 0:03:06.080 --> 0:03:08.119 than giving it back to you and letting you take 0:03:08.160 --> 0:03:08.720 the alternative. 0:03:08.800 --> 0:03:11.000 Ask a really down question, where is that cash? 0:03:11.000 --> 0:03:11.080 Like? 0:03:11.240 --> 0:03:12.400 Is it in a money market fund? 0:03:12.560 --> 0:03:12.680 Like? 0:03:12.800 --> 0:03:13.480 Is it in bomb? 0:03:13.800 --> 0:03:16.480 It's in money markets, bonds, short term securities? And what 0:03:16.560 --> 0:03:20.079 happened last year was the short term rates went up 0:03:20.120 --> 0:03:22.520 so much that they were earning a ton of money 0:03:22.560 --> 0:03:24.640 on it. I think that actually took they were they 0:03:24.680 --> 0:03:27.600 went from something earning like fifty million to like five 0:03:27.639 --> 0:03:30.600 billion or something just just on the cash. And I 0:03:30.639 --> 0:03:33.360 actually think that took a lot of pressure off, even 0:03:33.400 --> 0:03:34.920 them investing in equities. 0:03:35.720 --> 0:03:38.400 So how do people I mean, you're an insurance sannel, 0:03:38.440 --> 0:03:39.840 so you're an odd duct to begin with. 0:03:39.880 --> 0:03:43.480 Right, No, it's crazy accounting. You don't know what's going on. 0:03:43.960 --> 0:03:46.840 How do you how do you and other analysts really 0:03:46.920 --> 0:03:49.720 analyze this conglomerate or do you just say, hey, it's 0:03:49.720 --> 0:03:51.640 a GDP growth company and that's it a slap a 0:03:51.680 --> 0:03:52.400 GDP mop. 0:03:52.240 --> 0:03:54.560 But on it, I mean, I wouldn't say that it's tough. 0:03:55.560 --> 0:03:57.080 We try to look at it, you know, some of 0:03:57.120 --> 0:04:00.280 the parts you can value the company looking at the float. 0:04:00.280 --> 0:04:02.440 In the insurance business, there's there's a couple of different 0:04:02.800 --> 0:04:05.840 methods to do it, you know, even just on a 0:04:05.880 --> 0:04:09.280 simple pe right and what they're earning. It seems like 0:04:09.520 --> 0:04:13.400 generally the values of the businesses kind of fall in 0:04:13.480 --> 0:04:15.800 line with with peers. Like, I don't think there's a 0:04:15.840 --> 0:04:21.240 conglomerate discount me anymore. I would consistently argue that it's 0:04:21.320 --> 0:04:24.680 not a GDP company, that it's got best in class businesses, 0:04:25.400 --> 0:04:28.880 pricing power businesses. So you're not going to just see 0:04:28.880 --> 0:04:30.960 them growing, you know, two to three percent a year. 0:04:31.640 --> 0:04:35.080 But you know a ton of the the emphasis goes 0:04:35.080 --> 0:04:37.640 on their investments and you know what they can buy. 0:04:38.120 --> 0:04:39.960 What do you think they should buy? 0:04:40.080 --> 0:04:42.640 You know, something I was thinking of over the weekend. 0:04:42.800 --> 0:04:44.760 I was thinking they were gonna buy Occidental, right, and 0:04:44.920 --> 0:04:47.520 they threw cold water on that last year. He said 0:04:47.520 --> 0:04:50.800 it again in the letter this year they wasn't gonna 0:04:50.800 --> 0:04:55.440 buy it. But something I thought find fits into his 0:04:55.600 --> 0:04:59.240 niche would be maybe entertainment. Right, So if you think 0:04:59.240 --> 0:05:02.880 about the thing lot, you know, maybe you're. 0:05:03.000 --> 0:05:04.200 You're not looking at right now. 0:05:04.880 --> 0:05:07.719 I think that because look what does he look at. 0:05:07.920 --> 0:05:10.279 He looks at stuff that there's going to be consistent 0:05:10.320 --> 0:05:10.960 demand for. 0:05:11.120 --> 0:05:11.320 Right. 0:05:11.720 --> 0:05:15.240 Maybe it's a little old school like he still thinks that. 0:05:15.240 --> 0:05:17.960 He says Cole's not going anywhere anytime soon. You know, 0:05:18.560 --> 0:05:22.640 it's not He bought these Japanese trading houses, right. The 0:05:23.200 --> 0:05:26.520 investment there is around nineteen billion dollars in value, and 0:05:26.600 --> 0:05:28.960 if you look at them, they're not AYI they're not flashy, 0:05:29.000 --> 0:05:32.880 they're not tech, but they are steeply involved in these 0:05:32.880 --> 0:05:35.400 things that are just not going away. And I think that, 0:05:35.920 --> 0:05:38.400 you know, I don't cover entertainment, but I think you know, 0:05:38.600 --> 0:05:40.760 there you go, Paul, Maybe you have an idea going up, 0:05:41.640 --> 0:05:44.279 but the whole town's for sale. There's always going to 0:05:44.279 --> 0:05:45.239 be a market for entertainment. 0:05:45.240 --> 0:05:46.440 We always need to be entertained. 0:05:46.520 --> 0:05:48.360 So I don't know, maybe there's something in there. 0:05:48.400 --> 0:05:50.840 Well, I mean to your Oxy point, I mean it's 0:05:50.839 --> 0:05:53.479 not that he was he was offered a really good deal, 0:05:53.839 --> 0:05:56.040 Like he got a really good deal on some shares 0:05:56.080 --> 0:05:57.880 when Oxy was looking to buy In and Darko and 0:05:57.880 --> 0:06:00.160 they needed cash. They needed cash quickly because Chevron was 0:06:00.200 --> 0:06:03.400 also making a bid. So like, will things get dramatic 0:06:03.480 --> 0:06:05.520 enough or distressed enough for there to be a really 0:06:05.520 --> 0:06:07.800 good deal? Might not be buy the whole company, but 0:06:07.839 --> 0:06:08.520 get that good deal. 0:06:08.560 --> 0:06:09.040 What do you think? 0:06:09.480 --> 0:06:09.680 You know? 0:06:09.800 --> 0:06:12.400 He always says he buys he would love to own 0:06:12.640 --> 0:06:14.680 all of the companies he owns, like he would love 0:06:14.720 --> 0:06:17.320 to own Apple, right, but he can own the whole company. 0:06:18.200 --> 0:06:22.280 I mean, just say, we're not interested in necessarily running Occidental, right, 0:06:22.320 --> 0:06:24.800 So I could see them buying up more of it. 0:06:24.920 --> 0:06:27.560 I mean, they have the warrants that will increase their 0:06:27.600 --> 0:06:32.080 ownership given the strike price. But I don't again like 0:06:32.120 --> 0:06:33.880 they're not going they don't want to run it, but 0:06:33.920 --> 0:06:35.240 I think they would own as much. 0:06:35.120 --> 0:06:35.839 Of it as they could. 0:06:36.400 --> 0:06:36.840 Step back. 0:06:36.880 --> 0:06:40.160 Your P and C property and Casualty's what's the call here? 0:06:40.160 --> 0:06:41.280 Do we like it? Do we not like them? 0:06:41.440 --> 0:06:47.839 So for Berkshire's businesses specifically, they leaned into the Florida 0:06:47.880 --> 0:06:52.640 reinsurance market heavily last year. Okay, and that worked out well. 0:06:52.800 --> 0:06:55.000 And you know, I've been guilty of saying this, and 0:06:55.040 --> 0:06:56.680 you see it sometimes in the press that they quote 0:06:56.720 --> 0:06:59.840 bet on the market, right. They didn't bet on it. 0:07:00.000 --> 0:07:02.559 They didn't like place their chips on black and hope 0:07:02.560 --> 0:07:06.480 that it worked out right. It was a risk adjusted play. 0:07:06.760 --> 0:07:09.920 They said, if we have an average hurricane season in Florida, 0:07:10.320 --> 0:07:13.080 we'll still make a nice return. What happened is we 0:07:13.120 --> 0:07:15.040 had a far below average, so they made a lot 0:07:15.080 --> 0:07:18.320 of money. The other business for them that's kind of 0:07:18.320 --> 0:07:21.400 turning around is Geico. So if anyone here drives a car, 0:07:21.520 --> 0:07:24.560 has a car, you've probably seen auto insurance costs going 0:07:24.640 --> 0:07:28.600 up dramatically. You've probably also seen a lot less advertising, 0:07:29.040 --> 0:07:31.320 so they spent it. Did some back of the envelope 0:07:31.360 --> 0:07:36.200 calculations about one point five billion dollars less on advertising 0:07:36.280 --> 0:07:40.400 this year just in Geico. Then they wouldn't on a 0:07:40.480 --> 0:07:41.960 run rate basis, And why was it. They did that 0:07:41.960 --> 0:07:45.360 to protect the profitability of the business. So the combined 0:07:45.440 --> 0:07:47.520 ratio of the business is kind of the inverse of 0:07:47.560 --> 0:07:50.880 their profit margin. Right, they hoped to make about a 0:07:50.880 --> 0:07:55.080 four percent profit margin underwriting insurance. They were probably gonna 0:07:55.080 --> 0:07:57.960 make zero if they didn't cut their ads spend dramatically. 0:07:58.040 --> 0:08:00.560 So they cut the ad spend. They've cut policies to 0:08:00.800 --> 0:08:04.880 specifically on the West Coast, to kind of pair that down. 0:08:05.360 --> 0:08:08.160 So that business was actually a nice performer this year, 0:08:08.200 --> 0:08:10.720 but because they spend a lot less money on advertising. 0:08:11.200 --> 0:08:13.440 Really interesting, that's money on my companies. 0:08:13.600 --> 0:08:15.520 Yeah, that's dope. Sorry about that. 0:08:16.080 --> 0:08:19.320 Matt Halizoa, We appreciate it. Thank you very much. Joining 0:08:19.400 --> 0:08:22.480 us from Bloomberg Intelligence. He's the P and C Insurance 0:08:22.560 --> 0:08:26.480 senior analyst there and also covers all things of Berkshire Hathaway. 0:08:28.320 --> 0:08:32.199 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:08:32.280 --> 0:08:34.120 weekdays at ten am Eastern on. 0:08:34.160 --> 0:08:36.320 Applecar Play and Android Auto with. 0:08:36.360 --> 0:08:39.200 The Bloomberg Business at You can also listen live on 0:08:39.280 --> 0:08:42.560 Amazon Alexa from our flagship New York station. Just say 0:08:42.640 --> 0:08:44.959 Alexa play Bloomberg eleven thirty. 0:08:46.320 --> 0:08:49.720 Stocks are definitely still going up. Everyone's really confused about 0:08:49.760 --> 0:08:53.160 it and scratching their head. Yet no one's actually selling necessarily, 0:08:53.160 --> 0:08:56.040 like you cannot get a sell off in this rally. 0:08:56.559 --> 0:08:59.360 Kathy and Whistle is managing director at Morgan Stanley Private 0:08:59.400 --> 0:09:02.920 Wealth Management, and she joins us, Now, Kathy, why won't 0:09:02.920 --> 0:09:03.760 markets go down? 0:09:05.400 --> 0:09:07.760 That's a great question, Alex, You're always throwing those tricky 0:09:07.760 --> 0:09:11.280 ones at me. I would say basically that everyone is 0:09:11.360 --> 0:09:16.520 still enthusiastic about the opportunity of interest rates coming down eventually. 0:09:16.800 --> 0:09:20.120 So there was a little bit of a pullback a 0:09:20.160 --> 0:09:23.200 couple of weeks ago when we all realized that the 0:09:23.240 --> 0:09:25.200 Fed was not going to start cutting rates as soon 0:09:25.240 --> 0:09:28.680 as they had originally thought. But now we know they're 0:09:28.720 --> 0:09:30.440 going to cut eventually, so we want to get our 0:09:30.480 --> 0:09:33.080 money in and have a long term view and get 0:09:33.080 --> 0:09:34.640 some of the growth that's been going on. A little 0:09:34.640 --> 0:09:36.160 bit of its FOMO, a little bit of it is 0:09:36.240 --> 0:09:37.040 long term thinking. 0:09:37.720 --> 0:09:40.920 So Kathy, we're pretty much through the earning season here. 0:09:41.600 --> 0:09:43.880 I'm not sure I've seen earnings rise as much as 0:09:43.880 --> 0:09:46.080 the market has. So what did you take away from 0:09:46.160 --> 0:09:47.680 this earnings cycle here? 0:09:48.920 --> 0:09:53.560 Yeah, we were expecting earnings to get hit somewhat because 0:09:53.679 --> 0:09:57.120 over the last year or so, companies have been still 0:09:57.559 --> 0:10:01.080 very positive with their expectation, and at some point they 0:10:01.360 --> 0:10:03.800 we're going to have to pull in because there are 0:10:03.880 --> 0:10:06.320 sales that are going down, the cost of goods is 0:10:06.360 --> 0:10:09.760 getting more expensive, and it's harder and harder to get 0:10:09.760 --> 0:10:12.800 that earnings number that they want in order to impress 0:10:12.880 --> 0:10:15.719 their shareholders. At the end of the day, there's only 0:10:15.800 --> 0:10:18.680 two ways to get the earnings to look good, and 0:10:18.720 --> 0:10:22.320 that's either to increase your sales and your revenue or 0:10:22.360 --> 0:10:26.319 to decrease your expenses. And a lot of companies are 0:10:26.320 --> 0:10:29.160 starting to decrease expenses. We're seeing that with the layoffs, 0:10:29.880 --> 0:10:33.280 and this is what we're thinking about of why companies 0:10:33.280 --> 0:10:35.960 are trying to reach those numbers by making those cuts 0:10:35.960 --> 0:10:38.200 and laying people off. And it's not necessarily the most 0:10:38.200 --> 0:10:39.439 healthy way to meet numbers. 0:10:40.160 --> 0:10:44.320 So, Kathy, what do you do? Then? Golden Sachs had 0:10:44.320 --> 0:10:44.640 a noubt. 0:10:44.640 --> 0:10:47.200 They talked about how hedge funds are selling tech last 0:10:47.240 --> 0:10:49.600 week and they're buying consumer staples for example. 0:10:50.200 --> 0:10:51.640 What do you do in this environment. 0:10:52.760 --> 0:10:55.000 Yeah, one of the things that I'm doing with clients 0:10:55.080 --> 0:10:58.720 actually is a very simple basic concept of asset allocation, right, 0:10:58.760 --> 0:11:01.480 which where you're starting with how much is the percentage 0:11:01.520 --> 0:11:05.480 you have in equities versus fixed income versus alternative investing, 0:11:06.080 --> 0:11:08.640 And I'm peeling back a little bit. For those clients 0:11:08.679 --> 0:11:10.800 that have stayed in the markets and have you done 0:11:10.880 --> 0:11:13.240 quite well, you can peel back a little bit from 0:11:13.280 --> 0:11:15.400 those names that have had a big run up and 0:11:15.520 --> 0:11:18.360 start going more into that whole fixed income arena because 0:11:18.520 --> 0:11:21.280 you are getting paid now for fixed income, which we 0:11:21.400 --> 0:11:23.640 haven't gotten paid in years for fixed income. So there's 0:11:23.640 --> 0:11:27.320 opportunities there. If the FED does go ahead and reduce 0:11:27.440 --> 0:11:29.280 rates at some point in the future, there's a chance 0:11:29.320 --> 0:11:31.079 for a little bit of a pop up too. So 0:11:31.240 --> 0:11:33.520 I think just looking at allocation is the first step, 0:11:34.200 --> 0:11:36.360 and the second step is looking at different areas of 0:11:36.400 --> 0:11:39.000 the market that we think will do well. We've liked 0:11:39.160 --> 0:11:42.560 consumer staples, We've liked you know, everyone has to buy toothpaste, right, 0:11:42.640 --> 0:11:46.240 everybody's got to buy the basic products. So you can 0:11:46.320 --> 0:11:50.440 still go there. You can go healthcare. Healthcare should do well. 0:11:50.559 --> 0:11:53.880 We've seen some good numbers over this last earning season 0:11:53.960 --> 0:11:55.760 two with healthcare, and we think we'll do, you know, 0:11:55.840 --> 0:11:58.439 continue to do well there. And I think the financials 0:11:58.520 --> 0:12:02.199 still have a nice opportunity to recover in this market 0:12:02.240 --> 0:12:04.079 as well. So those are some of the areas that 0:12:04.120 --> 0:12:04.720 we're looking at. 0:12:05.120 --> 0:12:05.400 Kathy. 0:12:05.480 --> 0:12:07.719 On the fixed income side, how much credit risk are 0:12:07.760 --> 0:12:09.599 you suggesting your clients take. Do they stick with the 0:12:09.640 --> 0:12:12.360 treasures where you can still get very nice yields or 0:12:12.800 --> 0:12:15.120 do you go out into the credit space and maybe 0:12:15.160 --> 0:12:16.480 take a little bit more risk for a little bit 0:12:16.480 --> 0:12:16.920 more return. 0:12:17.640 --> 0:12:19.400 Well, that's a great question, and it's something I've been 0:12:19.440 --> 0:12:22.800 having a conversation with my clients about. I don't think 0:12:23.080 --> 0:12:26.320 if we're going to have, you know, the Fed raise 0:12:26.400 --> 0:12:29.880 rates sometime this year, these higher short term rates are 0:12:29.920 --> 0:12:32.559 going to eventually go away and then it's going to 0:12:32.600 --> 0:12:35.079 be too late to lock into the longer higher rates. 0:12:35.559 --> 0:12:38.120 So I've been slowly legging clients out of these short 0:12:38.200 --> 0:12:40.559 term rates the Treasury bills and things like that, and 0:12:40.679 --> 0:12:43.360 going a little bit longer. If it's a taxable account 0:12:43.400 --> 0:12:45.480 and they're in a higher tax bracket. We're looking at 0:12:45.559 --> 0:12:48.840 municipal bonds. I really like municipal bonds for those clients, 0:12:48.960 --> 0:12:54.040 so does Paul. Great, Thanks Alex. So the second piece 0:12:54.120 --> 0:12:57.440 of that is where are taxes going? They are definitely 0:12:57.520 --> 0:12:59.640 not going down. I don't know if they'll go up, 0:12:59.760 --> 0:13:01.800 maybe they'll stay the same, but they are definitely not 0:13:01.920 --> 0:13:05.439 going down. The chances with a deficit and different things 0:13:05.440 --> 0:13:07.880 that are going on, we may see taxes at some 0:13:07.960 --> 0:13:08.640 point go up. 0:13:09.080 --> 0:13:09.200 There. 0:13:09.679 --> 0:13:12.480 It wasn't that many years ago or decades ago that 0:13:12.640 --> 0:13:15.240 we were in a much higher tax bracket in this 0:13:15.400 --> 0:13:18.800 country for the highest earners. And if that happens, municipals 0:13:18.840 --> 0:13:21.360 will be extremely valuable in your portfolio as well. 0:13:22.440 --> 0:13:24.880 This is also sort of a basic but yet silly question. 0:13:25.320 --> 0:13:27.080 So when you're taking a look at your asset allocation, 0:13:27.320 --> 0:13:29.679 your barbells and all of that, what do you pay 0:13:29.679 --> 0:13:32.439 attention to, Like, is it when the earnings cross the tape? 0:13:32.559 --> 0:13:35.079 Is it going to be the PCE on Thursday? Is 0:13:35.120 --> 0:13:35.920 it going to be the Fed? 0:13:36.000 --> 0:13:36.040 Like? 0:13:36.080 --> 0:13:38.160 We all know where this is going, right, So do 0:13:38.160 --> 0:13:39.840 you just kind of like do your thing and check 0:13:39.880 --> 0:13:40.880 back in six months later? 0:13:42.240 --> 0:13:45.040 I try, you know, I do look at the different 0:13:45.160 --> 0:13:47.959 data that comes across, you know, whether it's you know, 0:13:48.120 --> 0:13:51.840 PMI or housing starts or things like that. I think 0:13:51.880 --> 0:13:54.079 it's interesting that we're starting to see the numbers look 0:13:54.080 --> 0:13:57.800 a little bit more positive for home buyers, right And 0:13:58.080 --> 0:14:01.480 it's probably because sometimes when when people are waiting too long, 0:14:01.559 --> 0:14:04.760 it kind of compresses that demand up, so then eventually 0:14:04.840 --> 0:14:08.720 they have to start I know a lot of investors 0:14:08.880 --> 0:14:11.120 are starting to think about purchasing because they just can't 0:14:11.160 --> 0:14:13.480 wait any longer. And there's also the idea that you 0:14:13.559 --> 0:14:16.079 can always refinance in a few years if rates to 0:14:16.240 --> 0:14:18.679 go down. So I think that you have to look 0:14:18.679 --> 0:14:20.480 at what your priorities are when it comes to your 0:14:20.560 --> 0:14:22.360 values and goals and how you want to live your life, 0:14:22.480 --> 0:14:24.680 and then try to find the best way possible to 0:14:24.840 --> 0:14:27.920 do that. In terms of looking at all these different numbers. 0:14:27.960 --> 0:14:30.440 When I think about clients, it's a little bit easier 0:14:30.480 --> 0:14:31.920 for me in the sense that we have a longer 0:14:32.040 --> 0:14:33.760 term view. We don't have a day to day We're 0:14:33.800 --> 0:14:37.480 not traders, you know. I don't have institutional clients. I 0:14:37.600 --> 0:14:42.560 have private wealth clients, individual clients, business owners, entrepreneurs, c 0:14:42.720 --> 0:14:44.720 SPIT executives that are trying to figure out what to 0:14:44.800 --> 0:14:46.880 do with their money and how to make it, you know, 0:14:47.000 --> 0:14:49.520 build and last. I've had conversations with a lot of 0:14:49.640 --> 0:14:52.800 clients in their late fifties. Their whole life, they've been 0:14:52.800 --> 0:14:55.680 in the accumulation phase, right, They're growing, they're adding money 0:14:55.720 --> 0:14:59.720 to their portfolio, and it's pretty you know, pretty low key. 0:15:00.320 --> 0:15:02.600 Now they're starting to think about retirement, and I can 0:15:02.720 --> 0:15:05.440 tell you people get stressed when they start thinking about, oh, 0:15:05.520 --> 0:15:07.320 now I have to take this money and put put 0:15:07.400 --> 0:15:09.800 you know, I'm in the distribution phase, like how am 0:15:09.840 --> 0:15:11.880 I going to start using that money for the rest 0:15:11.920 --> 0:15:14.000 of my life? And it's a little scary, which is 0:15:14.000 --> 0:15:15.920 why I also think, you know, clients can do a 0:15:16.000 --> 0:15:19.120 financial plan which gives you a really great roadmap year 0:15:19.160 --> 0:15:21.120 to year about what kind of money you'll come in 0:15:21.520 --> 0:15:24.560 into your portfolio and how to you know, spend it 0:15:24.600 --> 0:15:26.120 throughout each year so that you have it for the 0:15:26.200 --> 0:15:28.640 rest of your life. So these are like the longer 0:15:28.720 --> 0:15:30.960 term themes and topics I'm thinking about when I think 0:15:31.000 --> 0:15:34.920 about clients, and I'm also looking for you know, earlier 0:15:34.920 --> 0:15:37.840 people were talking about how you know, there's a strategy. 0:15:37.960 --> 0:15:39.880 You know, Buffett takes the strategy of trying to find 0:15:39.920 --> 0:15:42.960 dislocations in the market. I've always thought that that is 0:15:43.080 --> 0:15:48.320 the best way to think about clients' portfolios, their individual portfolios, 0:15:48.440 --> 0:15:51.000 like when is there a dislocation in the market, and 0:15:51.200 --> 0:15:55.400 can we take advantage of that. So when we see 0:15:55.560 --> 0:15:59.560 the interest rates change favorably for individual investors and their 0:15:59.680 --> 0:16:01.840 yields are getting higher, that's a great time to say that, 0:16:01.880 --> 0:16:03.320 you know, we have a little money on the sidelines, 0:16:03.360 --> 0:16:04.600 let's start putting that to work. 0:16:05.440 --> 0:16:08.200 Kathy, to what extent do you guide your clients into 0:16:08.240 --> 0:16:13.120 alternative investments, whether that's private equity, private credit, hedge funds. 0:16:13.240 --> 0:16:13.880 How does that work? 0:16:14.560 --> 0:16:14.760 Yeah? 0:16:14.840 --> 0:16:18.360 Absolutely so. Of course alternative investments, you know, you need 0:16:18.440 --> 0:16:19.680 to qualify for it, so you have to be like 0:16:19.720 --> 0:16:23.600 a certain level of investor. However, they're becoming more and 0:16:23.680 --> 0:16:29.120 more democratized and becoming more available to more investors than 0:16:29.160 --> 0:16:30.960 in the past. So the way I think about it 0:16:31.120 --> 0:16:34.240 is this equities they've had a run. We had like 0:16:34.520 --> 0:16:37.680 a ten year you know, double digit return. I think 0:16:37.720 --> 0:16:39.840 it was like, what was it, twenty ten or so 0:16:40.000 --> 0:16:44.040 to twenty twenty, something like that. We think alternatives are 0:16:44.040 --> 0:16:46.200 an area where we can see double returns for the 0:16:46.280 --> 0:16:48.320 next ten years, so we definitely want our clients in there. 0:16:48.680 --> 0:16:51.040 And so I'm looking at an asset allocation of anywhere 0:16:51.040 --> 0:16:53.760 on equities from like fifty to sixty. Now that fixed 0:16:53.800 --> 0:16:56.040 income is back in the game, we can peel back 0:16:56.080 --> 0:16:58.480 from the equities and add more to fixed InCom because 0:16:58.480 --> 0:17:00.720 we were kind of avoiding a fixed income for a 0:17:00.840 --> 0:17:03.080 larger portion of the portfolio in the last So you know, 0:17:03.080 --> 0:17:05.520 a few years, so you've got like fifty to sixty 0:17:05.520 --> 0:17:08.200 percent equities, maybe you've got like twenty to thirty percent 0:17:08.280 --> 0:17:11.560 fixed income, and fifteen to twenty. You know, you can 0:17:11.640 --> 0:17:13.640 go depending on the size of the clients net worth. 0:17:13.680 --> 0:17:16.600 He goes high as thirty percent and alternatives, but fifteen 0:17:16.640 --> 0:17:19.800 to twenty is really like a good number, and when 0:17:19.800 --> 0:17:22.560 we're looking at it, we're looking at trying to level up, 0:17:22.880 --> 0:17:24.520 you know, sort of what the client is looking for 0:17:24.840 --> 0:17:28.880 versus their time frame, the liquidity needs and all those 0:17:28.960 --> 0:17:30.320 things that need to be considered. 0:17:31.119 --> 0:17:33.720 Really interesting. Yep, that's a lot though. Fifteen to twenty. 0:17:33.920 --> 0:17:35.760 Yeah, that's what I hear. I mean, we I hear 0:17:35.800 --> 0:17:37.280 that from the retail it's very typical. 0:17:37.400 --> 0:17:40.399 Now it's like I would say, that's what's typical for 0:17:40.760 --> 0:17:42.680 the you know, the high networth investor. 0:17:43.280 --> 0:17:44.879 All Right, Kathy, thank you so much for joining us. 0:17:44.920 --> 0:17:47.760 Really appreciate that as always, Kathy at and Twistle Managing 0:17:47.800 --> 0:17:51.000 Director Morgan Stanley Private Wealth and Management joining us on 0:17:51.080 --> 0:17:52.679 a zoom calf from lovely. 0:17:52.480 --> 0:17:54.840 Ridgewood to New Jersey. They love me and Ridgewood. That's 0:17:54.880 --> 0:17:55.360 a great tent. 0:17:55.480 --> 0:17:56.560 They love you, Eymer in Jersey. 0:17:57.520 --> 0:17:58.640 They let you go to Ridgewood. 0:17:58.800 --> 0:17:59.520 Yeah, I know exactly. 0:18:00.880 --> 0:18:03.040 I slipped in there the country club. You know, I 0:18:03.160 --> 0:18:05.720 made it once a Ridgewood country club. Lost many golf 0:18:05.760 --> 0:18:07.800 balls there. It's a great, great old course. 0:18:08.200 --> 0:18:09.280 I love it there, you know. 0:18:09.359 --> 0:18:11.840 But we were at a remote for one of our 0:18:13.000 --> 0:18:16.680 ria folks, retro investment advisors, And that's what the advisors 0:18:16.680 --> 0:18:18.800 are saying. They have a ton of demand from their 0:18:18.800 --> 0:18:20.120 clients for alternative investments. 0:18:20.359 --> 0:18:21.280 Is much harder than I thought. 0:18:21.600 --> 0:18:23.640 Yeah, it's like with bitcoin, it's like is it gonna 0:18:23.640 --> 0:18:25.520