1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day, we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,600 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,439 Speaker 1: at Bloomberg dot com slash podcast. All right, let's forget 7 00:00:22,440 --> 00:00:25,079 Speaker 1: about two. That's my theme for the last few weeks. 8 00:00:25,160 --> 00:00:28,480 Speaker 1: Let's look forward to. Let's talk to some professionals who 9 00:00:28,560 --> 00:00:30,280 Speaker 1: do this stuff for living. See what we can look 10 00:00:30,320 --> 00:00:35,560 Speaker 1: forward to. Joe Gilbert, Integrity Asset Management. He's a portfolio manager. There. Uh, Joe, 11 00:00:35,560 --> 00:00:37,800 Speaker 1: it says you're based in Moreland Hills. I'm just gonna 12 00:00:37,840 --> 00:00:43,040 Speaker 1: take a guess and say that's Cleveland, correct, Faul, Good morning, 13 00:00:43,040 --> 00:00:44,839 Speaker 1: Thanks for having me on. Yeah, we're we're on. I'm 14 00:00:44,880 --> 00:00:47,280 Speaker 1: on the east side of Cleveland. All right, good stuff. Hey, Joe, 15 00:00:47,840 --> 00:00:50,239 Speaker 1: you know i'd love to get your thoughts. What are 16 00:00:50,280 --> 00:00:52,720 Speaker 1: you telling your clients right here? What's in your year 17 00:00:52,800 --> 00:00:57,560 Speaker 1: ahead outlook letter to your clients? You know? Um, Paul, 18 00:00:57,640 --> 00:01:00,520 Speaker 1: so similar to you. Um, we're just kind of thrown 19 00:01:00,520 --> 00:01:05,240 Speaker 1: away to playbook for two and looking forward to three, 20 00:01:05,240 --> 00:01:08,360 Speaker 1: and so what we're telling clients is that it pays 21 00:01:08,400 --> 00:01:11,280 Speaker 1: to being more constructive for three. I mean, I think 22 00:01:11,520 --> 00:01:15,000 Speaker 1: it's applega laid out um. You know, equity markets down 23 00:01:15,680 --> 00:01:19,480 Speaker 1: and bear market territory, even some fixed income sectors and 24 00:01:19,680 --> 00:01:23,600 Speaker 1: down bear market territory. And that end will end this year. 25 00:01:23,840 --> 00:01:26,080 Speaker 1: So we think looking forward to set up for next year, 26 00:01:26,920 --> 00:01:29,600 Speaker 1: three will be a lutch greater and we just basically 27 00:01:29,640 --> 00:01:32,880 Speaker 1: see inflation will come down, um, the Fed will stop 28 00:01:32,959 --> 00:01:35,680 Speaker 1: raising rates, um as earnings inestiments will go down, and 29 00:01:36,040 --> 00:01:38,120 Speaker 1: earnings multiples will go up, and we think that will 30 00:01:38,240 --> 00:01:41,119 Speaker 1: lead to a strong equity performance next year. What's been 31 00:01:41,160 --> 00:01:45,279 Speaker 1: interesting is the only places to hide Joe have been oil. Energy. 32 00:01:45,280 --> 00:01:47,720 Speaker 1: Commodity is actually having a really stell a year, but 33 00:01:47,840 --> 00:01:50,160 Speaker 1: also the dollar. And I'm interested is to whether that 34 00:01:50,360 --> 00:01:53,720 Speaker 1: dollar trade, whether that sort of headwind for earnings as 35 00:01:53,720 --> 00:01:56,200 Speaker 1: well if you're a global related company, is that going 36 00:01:56,240 --> 00:01:58,600 Speaker 1: to dull back in any sorts as we see perhaps 37 00:01:58,720 --> 00:02:00,840 Speaker 1: the FED tickets foot off the gas and maybe other 38 00:02:00,840 --> 00:02:04,360 Speaker 1: central banks keep on pushing by the ECB. You know, 39 00:02:04,560 --> 00:02:06,600 Speaker 1: I think that's a great point, Caroline. I think that 40 00:02:06,680 --> 00:02:10,240 Speaker 1: if as we look, the dollar is actually weekend since September. 41 00:02:10,400 --> 00:02:13,560 Speaker 1: I think we kind of hit the peak UM in September, 42 00:02:13,560 --> 00:02:15,720 Speaker 1: and so this last quarter, I think we're kind of 43 00:02:15,760 --> 00:02:17,919 Speaker 1: getting a preview of how we think the market is 44 00:02:17,919 --> 00:02:20,960 Speaker 1: going to play out next year. UM investor the starting 45 00:02:21,040 --> 00:02:23,520 Speaker 1: position that the fedtest towards the end of his his 46 00:02:23,639 --> 00:02:26,880 Speaker 1: rate hiking cycle. I think this year really has been 47 00:02:26,919 --> 00:02:29,960 Speaker 1: about the Fed UM and you sprinkle in a little 48 00:02:29,960 --> 00:02:33,920 Speaker 1: bit of a Ukraine war and UH China COVID zero 49 00:02:34,000 --> 00:02:36,400 Speaker 1: COVID policy. So I think that we get to a 50 00:02:36,440 --> 00:02:39,519 Speaker 1: point that investors are looking forward that the FED will 51 00:02:39,560 --> 00:02:41,840 Speaker 1: no longer be such a head win for the market, 52 00:02:42,080 --> 00:02:44,320 Speaker 1: and then the dollars just kind of showing you that. 53 00:02:44,320 --> 00:02:46,120 Speaker 1: Then that's why you've seen a lot of weakness here 54 00:02:46,160 --> 00:02:50,240 Speaker 1: in the last quarter. So you know, I'm an equity guy, 55 00:02:50,280 --> 00:02:53,280 Speaker 1: but I look at the UH fixed income returns this 56 00:02:53,360 --> 00:02:55,919 Speaker 1: year again, the Bloomberg aggregate total return the next off 57 00:02:55,960 --> 00:02:59,080 Speaker 1: twelve three or something like that. People and a fixed 58 00:02:59,080 --> 00:03:03,920 Speaker 1: income BIS will say that historic lost, historic performance under performance. 59 00:03:04,480 --> 00:03:06,160 Speaker 1: So being the simple guy that I am, I just 60 00:03:06,200 --> 00:03:08,040 Speaker 1: say I'm gonna jump in both feet and buy some 61 00:03:08,080 --> 00:03:12,720 Speaker 1: bonds here. What do you think about that strategy. You know, 62 00:03:12,880 --> 00:03:15,640 Speaker 1: it's hard to disagree with that. I think that there's 63 00:03:15,760 --> 00:03:17,639 Speaker 1: you know, similar as I said, the set up, it 64 00:03:17,680 --> 00:03:20,640 Speaker 1: looks good for both fixed income and for equities. But 65 00:03:20,760 --> 00:03:22,880 Speaker 1: next year, you know, as an equity guy, I'm a 66 00:03:22,880 --> 00:03:25,200 Speaker 1: little more biased because I think that UM, a lot 67 00:03:25,320 --> 00:03:28,600 Speaker 1: of the bad news for equities has definitely been priced 68 00:03:28,600 --> 00:03:30,720 Speaker 1: and UM as far as and and granted, there will 69 00:03:30,760 --> 00:03:33,720 Speaker 1: be different sectors that I'll perform at different points in 70 00:03:33,800 --> 00:03:36,840 Speaker 1: times next year. Unlike fixed income, I think fixed income 71 00:03:36,880 --> 00:03:39,840 Speaker 1: obviously will basically as soon as to fit you know, 72 00:03:40,360 --> 00:03:43,680 Speaker 1: intimates that they're going to be done or they're pausing. 73 00:03:43,880 --> 00:03:46,200 Speaker 1: I think you're gonna have a huge rally and fixed income, 74 00:03:46,200 --> 00:03:49,000 Speaker 1: but they're gonna bring equities along with them. As an 75 00:03:49,040 --> 00:03:52,440 Speaker 1: equity guy, then can you go as broad brush as 76 00:03:52,480 --> 00:03:54,880 Speaker 1: industry groups you like? Are you having to be? Look 77 00:03:54,920 --> 00:03:56,680 Speaker 1: as stock picker is kind of a market at the moment, 78 00:03:56,760 --> 00:04:01,000 Speaker 1: given as we head into you know, I think that 79 00:04:01,160 --> 00:04:04,320 Speaker 1: really that that there are some winners and losers. You know. 80 00:04:04,440 --> 00:04:06,200 Speaker 1: The way we see it is, you know, we've had 81 00:04:06,480 --> 00:04:09,160 Speaker 1: you know, the rolling corrections, and we think we're kind 82 00:04:09,160 --> 00:04:11,320 Speaker 1: of going to see the rolling recession that will come 83 00:04:11,440 --> 00:04:14,800 Speaker 1: play through next year, and so I think within that, UM, 84 00:04:15,160 --> 00:04:16,800 Speaker 1: the way we're looking at is is kind of a 85 00:04:16,839 --> 00:04:19,520 Speaker 1: first and first out Carolina. So it's more of the 86 00:04:19,720 --> 00:04:22,159 Speaker 1: way we think about it is the companies and the 87 00:04:22,240 --> 00:04:26,320 Speaker 1: sectors that have underperformed dramatically, UM, the earlier cycle companies, 88 00:04:26,320 --> 00:04:29,480 Speaker 1: those are where we're actually really looking for opportunities in. 89 00:04:29,680 --> 00:04:33,159 Speaker 1: So that looks like more of consumer discretionary names, which 90 00:04:33,160 --> 00:04:36,840 Speaker 1: are trading still pretty cheaply, pretty close to price the book. UM. 91 00:04:36,839 --> 00:04:40,480 Speaker 1: We're actually contrariantly and looking at home builders here because 92 00:04:40,520 --> 00:04:42,280 Speaker 1: we think that the one again it's a it's a 93 00:04:42,320 --> 00:04:45,679 Speaker 1: short cycle, it's early cycle, UM. And so if well, 94 00:04:45,720 --> 00:04:49,040 Speaker 1: if we're right UM, and if FED does cut start 95 00:04:49,160 --> 00:04:51,599 Speaker 1: raising rates and actually eventually we think they will probably 96 00:04:51,640 --> 00:04:53,840 Speaker 1: cut toward the end of next year, those are UM 97 00:04:53,880 --> 00:04:56,760 Speaker 1: sectors that will do well as well as industrials that 98 00:04:56,920 --> 00:05:00,880 Speaker 1: have very limited inventory. Hey, Joe of you were slash 99 00:05:00,920 --> 00:05:03,320 Speaker 1: listener just kind of message me and said, hey, how 100 00:05:03,360 --> 00:05:05,919 Speaker 1: can stocks perform this year? If we've still got some 101 00:05:06,000 --> 00:05:08,720 Speaker 1: pretty significant earnings risk out there? How do you kind 102 00:05:08,760 --> 00:05:12,440 Speaker 1: of factor that in? Well, I think that UM, the 103 00:05:12,440 --> 00:05:16,400 Speaker 1: way we think about it is stocks went down this 104 00:05:16,480 --> 00:05:19,280 Speaker 1: year or more depending on where you were, and they 105 00:05:19,320 --> 00:05:22,560 Speaker 1: went down because you know, stocks discounted forward outlook, so 106 00:05:22,839 --> 00:05:25,839 Speaker 1: they discounted earnings coming down, and so we think that 107 00:05:25,920 --> 00:05:28,240 Speaker 1: a lot of that has been pricing. We this year 108 00:05:28,320 --> 00:05:32,839 Speaker 1: was really about repricing risk and repricing expectations. So I 109 00:05:32,839 --> 00:05:35,320 Speaker 1: think that's where we really are and think and most 110 00:05:35,320 --> 00:05:38,000 Speaker 1: of the time stocks generally rally is you know, close 111 00:05:38,080 --> 00:05:40,919 Speaker 1: to the last estimate cut, and so we don't know 112 00:05:40,960 --> 00:05:43,000 Speaker 1: exactly when that will be, but we've presumed that it 113 00:05:43,000 --> 00:05:47,240 Speaker 1: will be early and early three and that will basically 114 00:05:47,320 --> 00:05:50,560 Speaker 1: be kind of the clearing event for equities to outperform. Joe, 115 00:05:51,040 --> 00:05:52,599 Speaker 1: talk to us about what you're going to be taking 116 00:05:52,600 --> 00:05:56,039 Speaker 1: your cues from. Is it fundamental data? Are you going 117 00:05:56,080 --> 00:05:58,080 Speaker 1: to be looking at the big broadbrush data dumps that 118 00:05:58,120 --> 00:06:00,520 Speaker 1: we get the jobs market, whether it's inflation, shouldn read that, 119 00:06:00,600 --> 00:06:02,600 Speaker 1: that's what's going to be dictating you. Are you going 120 00:06:02,640 --> 00:06:05,679 Speaker 1: to be looking more on the individual names, the earnings releases. 121 00:06:05,920 --> 00:06:08,000 Speaker 1: What's going to be sort of your fuel, your catalyst 122 00:06:08,120 --> 00:06:11,240 Speaker 1: to be getting in and out of market. Well, we're 123 00:06:11,320 --> 00:06:15,440 Speaker 1: fundamental investors, so first you know, firstly, we're gonna always 124 00:06:15,480 --> 00:06:18,080 Speaker 1: look at what company managements are telling us, and so 125 00:06:18,600 --> 00:06:20,920 Speaker 1: we we use that as a guide post this year. 126 00:06:21,000 --> 00:06:23,400 Speaker 1: As far as you know, companies that have been less 127 00:06:23,440 --> 00:06:27,360 Speaker 1: constructive or you know, most management teams are bullish about 128 00:06:27,360 --> 00:06:30,200 Speaker 1: their prospects, but on the margin they've gotten a little 129 00:06:30,360 --> 00:06:33,440 Speaker 1: less constructive. So we're gonna look towards that. But obviously 130 00:06:33,440 --> 00:06:36,440 Speaker 1: on a macro sense, we have to have inflation continue 131 00:06:36,480 --> 00:06:38,120 Speaker 1: to come down. So those are the CPI and the 132 00:06:38,200 --> 00:06:40,880 Speaker 1: pc reports. Next week is actually gonna be pretty big 133 00:06:40,920 --> 00:06:43,440 Speaker 1: because we have a payroll number that we think we'll 134 00:06:43,440 --> 00:06:48,719 Speaker 1: still will show average hourly earnings declining again and probably 135 00:06:48,880 --> 00:06:51,599 Speaker 1: less added to payroll. Important you know, what we think 136 00:06:51,600 --> 00:06:53,599 Speaker 1: there really is going to be. The key is that 137 00:06:53,600 --> 00:06:55,880 Speaker 1: that will probably make next year not as negative on 138 00:06:55,960 --> 00:06:58,800 Speaker 1: economics standpoint is that payrolls are probably not going to 139 00:06:58,880 --> 00:07:01,640 Speaker 1: go negative U because there's a lot of job boarding. 140 00:07:02,120 --> 00:07:04,920 Speaker 1: As far as company managements have been you know, once 141 00:07:05,000 --> 00:07:08,000 Speaker 1: been twice shy, they don't want to release workers. They're 142 00:07:08,000 --> 00:07:09,920 Speaker 1: gonna probably just trying to find a way to keep 143 00:07:09,960 --> 00:07:13,080 Speaker 1: their payrolls not um in a traditional recession where they 144 00:07:13,080 --> 00:07:15,680 Speaker 1: will reduce them, they're gonna probably try to keep on flat. 145 00:07:15,920 --> 00:07:17,400 Speaker 1: And so I think that We're going to really have 146 00:07:17,480 --> 00:07:20,080 Speaker 1: to take cues from the inflation data points that come 147 00:07:20,080 --> 00:07:24,120 Speaker 1: in our hourly earnings and service inflation. All right, Joe, 148 00:07:24,120 --> 00:07:26,520 Speaker 1: great stuff. Really appreciate you taking the time here on 149 00:07:26,640 --> 00:07:30,560 Speaker 1: New Year's Eve Eve. Joe Gilbert Integrity Asset Management. He's 150 00:07:30,560 --> 00:07:33,280 Speaker 1: a portfolio there there in Moreland Hills, Ohio. I just 151 00:07:33,320 --> 00:07:35,160 Speaker 1: google mapp that it's just kind of like and that 152 00:07:35,240 --> 00:07:37,800 Speaker 1: the eastern part is Joe saying of Cleveland right near 153 00:07:37,840 --> 00:07:40,280 Speaker 1: the lake, so pretty cool part of the country. Appreciate 154 00:07:40,360 --> 00:07:46,800 Speaker 1: checking in with Joe Gilbert. There's still a lot going 155 00:07:46,800 --> 00:07:49,880 Speaker 1: on in Washington even today, talk about a data dump 156 00:07:49,960 --> 00:07:54,480 Speaker 1: on a day before major holiday. Uh, the taxes for 157 00:07:54,480 --> 00:07:57,880 Speaker 1: former President Donald Trump have been released. We want to 158 00:07:57,920 --> 00:07:59,840 Speaker 1: get the latest with Lard Davison. It just happened just 159 00:08:00,080 --> 00:08:02,480 Speaker 1: us to tape recently. Lard Davidson from Bloomberg News joints 160 00:08:02,520 --> 00:08:05,280 Speaker 1: us here all right. I know it's early moments of 161 00:08:05,320 --> 00:08:09,040 Speaker 1: everybody sifting through, uh, the released tax reforms from former 162 00:08:09,080 --> 00:08:13,160 Speaker 1: President Donald Trump. Any takeaways at this point, yeah, really, 163 00:08:13,200 --> 00:08:16,200 Speaker 1: I mean one, he has an incredibly complex financial picture. 164 00:08:16,280 --> 00:08:19,360 Speaker 1: You know, more than a thousand pages worth of documents 165 00:08:19,360 --> 00:08:22,840 Speaker 1: that were released about an hour ago um detailing both 166 00:08:22,840 --> 00:08:25,960 Speaker 1: his personal returns as well as his businesses. The businesses 167 00:08:26,000 --> 00:08:28,360 Speaker 1: themselves were losing money for a lot of these years 168 00:08:28,360 --> 00:08:32,680 Speaker 1: from um UM. Parts of those were actual losses, but 169 00:08:32,720 --> 00:08:36,079 Speaker 1: some of those are all these tax breaks appreciation deductions 170 00:08:36,160 --> 00:08:38,319 Speaker 1: that are very favorable to real estates. Who was really 171 00:08:38,360 --> 00:08:40,800 Speaker 1: able to minimize any tax bill that he might have 172 00:08:40,840 --> 00:08:43,640 Speaker 1: to pay, including in one year when he paid no 173 00:08:43,720 --> 00:08:46,560 Speaker 1: personal income taxes, And of course we've had him same 174 00:08:46,600 --> 00:08:48,800 Speaker 1: time and time again that that's a smart thing to do, 175 00:08:48,920 --> 00:08:51,479 Speaker 1: to use the tax codes as they stand to your advantage. 176 00:08:51,520 --> 00:08:53,600 Speaker 1: What about the structure of the tax codes? What will 177 00:08:54,040 --> 00:08:56,840 Speaker 1: next year bring do you think in anyway? Yeah, so 178 00:08:56,880 --> 00:08:59,520 Speaker 1: this is the point that Democrats are really raising about this, saying, look, 179 00:08:59,559 --> 00:09:01,640 Speaker 1: you know, this shows that the tax code is broken. 180 00:09:01,679 --> 00:09:04,200 Speaker 1: The fact that there are legal tax breaks for people 181 00:09:04,200 --> 00:09:06,280 Speaker 1: who are very wealthy to be able to basically have 182 00:09:06,480 --> 00:09:09,160 Speaker 1: a separate tax code from those that you know, normal 183 00:09:09,200 --> 00:09:13,280 Speaker 1: wage earners might pay is a problem. Unfortunately for Democrats 184 00:09:13,320 --> 00:09:15,800 Speaker 1: is they're about to lose their House majority going into 185 00:09:15,840 --> 00:09:19,040 Speaker 1: next year. The Democrats will retain control of the Senate, 186 00:09:19,240 --> 00:09:21,559 Speaker 1: Republicans will control the House, which really just spells out 187 00:09:21,559 --> 00:09:24,640 Speaker 1: gridlock for any sort of tax legislation. It's it's highly 188 00:09:24,679 --> 00:09:27,880 Speaker 1: unlikely that the two parties will come together on any uh, 189 00:09:27,920 --> 00:09:31,520 Speaker 1: and any legislation that would come result in raising taxes, 190 00:09:31,559 --> 00:09:34,880 Speaker 1: particularly if this legislation were the result of some of 191 00:09:34,920 --> 00:09:38,160 Speaker 1: the findings from Trump's tax returns. So, Laura, these tax 192 00:09:38,240 --> 00:09:41,200 Speaker 1: returns being released that will provide some data on the 193 00:09:41,200 --> 00:09:45,680 Speaker 1: former president's personal income, the income of his businesses, will 194 00:09:45,840 --> 00:09:49,760 Speaker 1: give observers analysts any sense of his net worth and 195 00:09:49,800 --> 00:09:53,840 Speaker 1: maybe not really Um. The problem with tax returns is 196 00:09:53,840 --> 00:09:57,200 Speaker 1: there really just a snapshot in time of um earnings 197 00:09:57,200 --> 00:09:59,959 Speaker 1: for a particular year. Um, you know, because of Trump's 198 00:10:00,120 --> 00:10:02,280 Speaker 1: uh net worth is so tied um into real estate 199 00:10:02,280 --> 00:10:05,800 Speaker 1: and other deals that is all not really reflected on 200 00:10:05,800 --> 00:10:08,160 Speaker 1: on these tax returns in terms of valuations and things 201 00:10:08,160 --> 00:10:10,560 Speaker 1: like that. Uh, that data just isn't there. So in 202 00:10:10,679 --> 00:10:12,760 Speaker 1: terms of, you know, whether Trump is as rich as 203 00:10:12,760 --> 00:10:16,600 Speaker 1: he says he is, whether he gained or lost a 204 00:10:16,600 --> 00:10:18,439 Speaker 1: bunch of his net worth while he was in office, 205 00:10:18,559 --> 00:10:22,839 Speaker 1: we can't say from these documents. Of course, you're busy 206 00:10:22,920 --> 00:10:24,959 Speaker 1: coming on with us rather than having to pull through 207 00:10:25,000 --> 00:10:27,040 Speaker 1: the thousands of pages. But just talk to us as 208 00:10:27,040 --> 00:10:28,560 Speaker 1: a report of what you're going to be doing, where 209 00:10:28,559 --> 00:10:30,160 Speaker 1: are you going to be looking. What do you hope 210 00:10:30,160 --> 00:10:32,840 Speaker 1: to glean from all of this? Yeah, So the real 211 00:10:32,960 --> 00:10:35,320 Speaker 1: key question here, um is you know, so how much 212 00:10:35,320 --> 00:10:38,280 Speaker 1: did Trump benefit from his own tax law? Um? He 213 00:10:38,800 --> 00:10:40,760 Speaker 1: with the help of Republicans and Congress, passed a big 214 00:10:40,800 --> 00:10:43,800 Speaker 1: tax cut in seventeen. These documents give us a perfect 215 00:10:43,840 --> 00:10:45,360 Speaker 1: example to look at, you know, a couple of years 216 00:10:45,400 --> 00:10:48,120 Speaker 1: before that law change, after that law change, how we're 217 00:10:48,559 --> 00:10:51,360 Speaker 1: taxpayers like Trump able to benefit from these law What 218 00:10:51,480 --> 00:10:53,680 Speaker 1: deductions were he able to claim? And which things where 219 00:10:53,679 --> 00:10:55,280 Speaker 1: he was he not able to claim? You know, one 220 00:10:55,320 --> 00:10:58,319 Speaker 1: of the key things was this passed through deduction. Um. 221 00:10:58,320 --> 00:11:01,040 Speaker 1: That was a key centerpiece of the bill. Helped LLC's 222 00:11:01,080 --> 00:11:04,400 Speaker 1: partnerships pastors right off a bunch of their income. Trump 223 00:11:04,400 --> 00:11:06,800 Speaker 1: actually wasn't able to claim that one because he actually 224 00:11:06,880 --> 00:11:09,400 Speaker 1: lost money on his businesses those years. But you know, 225 00:11:09,480 --> 00:11:11,120 Speaker 1: going forward, if he were to make money, he would 226 00:11:11,160 --> 00:11:14,079 Speaker 1: be able to to take that deduction. Laura, great to 227 00:11:14,120 --> 00:11:15,760 Speaker 1: have some time with the Thank you so much. We'll 228 00:11:15,800 --> 00:11:18,040 Speaker 1: let you get back to the realms of documents. A 229 00:11:18,120 --> 00:11:20,760 Speaker 1: data dump. Indeed, as we have the last day of 230 00:11:20,800 --> 00:11:23,440 Speaker 1: trade here in New York. We thank Laura Davison over 231 00:11:23,480 --> 00:11:29,440 Speaker 1: there in Washington for all things Trump taxes. We dig 232 00:11:29,440 --> 00:11:31,760 Speaker 1: in a little bit more into the commodity space on 233 00:11:31,880 --> 00:11:35,200 Speaker 1: Josh Young, chief investment Officer of Decent Interests. Of course 234 00:11:35,240 --> 00:11:38,720 Speaker 1: you're focused on all on gas on public equities in particular, Josh, 235 00:11:39,160 --> 00:11:42,160 Speaker 1: just talk to us about in particular the China reopening story. 236 00:11:42,360 --> 00:11:44,600 Speaker 1: It's sort of good. Everyone scratching their heads, and in 237 00:11:44,640 --> 00:11:47,720 Speaker 1: the immediate focus, it feels that everyone's a little bit nervous. 238 00:11:47,720 --> 00:11:49,880 Speaker 1: We're worried about the spread of COVID and how they're 239 00:11:49,920 --> 00:11:52,080 Speaker 1: going to manage the short term. But in the longer term, 240 00:11:52,160 --> 00:11:55,840 Speaker 1: does this mean that commodities could out perform once again? Yeah? 241 00:11:56,000 --> 00:11:58,679 Speaker 1: I mean I think if you define longer term in 242 00:11:59,000 --> 00:12:01,080 Speaker 1: terms of more than the two or three months, it 243 00:12:01,120 --> 00:12:05,360 Speaker 1: looks great. Um. It looks like China is setting a 244 00:12:05,440 --> 00:12:08,440 Speaker 1: target for a really high return in terms of flights, 245 00:12:08,640 --> 00:12:12,640 Speaker 1: and we're starting to see congestion essentially traffic on the 246 00:12:12,640 --> 00:12:15,640 Speaker 1: streets and big cities start to rebound in cities as 247 00:12:15,679 --> 00:12:18,160 Speaker 1: they're on the tail end of their COVID waves. So yeah, 248 00:12:18,280 --> 00:12:21,160 Speaker 1: I think it looks great from a short to medium 249 00:12:21,240 --> 00:12:25,120 Speaker 1: term perspective, and as China turns back on they also 250 00:12:25,200 --> 00:12:28,800 Speaker 1: start to turn back on oil demand in other East 251 00:12:28,840 --> 00:12:31,240 Speaker 1: and Southeast Asian countries, and so there could be a 252 00:12:31,240 --> 00:12:33,640 Speaker 1: step up in terms of multiple millions of barrels a 253 00:12:33,720 --> 00:12:35,920 Speaker 1: day of demand relative to where we've been over the 254 00:12:36,000 --> 00:12:41,199 Speaker 1: last few months. Josh, you're based in Houston, as I recall, Um, 255 00:12:41,240 --> 00:12:43,440 Speaker 1: you know you've got the energy stacks up almost six 256 00:12:44,040 --> 00:12:46,520 Speaker 1: year to date. How good is life in Houston right now? 257 00:12:48,080 --> 00:12:51,520 Speaker 1: So so it's interesting, Uh, employments actually not up that 258 00:12:51,640 --> 00:12:54,640 Speaker 1: much on the oil and gas space, capital expenditures are 259 00:12:54,679 --> 00:12:56,520 Speaker 1: not up that much on the oil and gas space, 260 00:12:56,880 --> 00:13:00,360 Speaker 1: and the small cap stocks have lagged materially like in 261 00:13:00,440 --> 00:13:03,560 Speaker 1: past recoveries. So what it's setting up for is, even 262 00:13:03,559 --> 00:13:06,320 Speaker 1: though those stocks are up a lot from their lows, 263 00:13:06,360 --> 00:13:09,040 Speaker 1: it's setting up for a multi year bowl market where 264 00:13:09,280 --> 00:13:11,520 Speaker 1: we could see maybe XL E and sort of the 265 00:13:11,600 --> 00:13:14,360 Speaker 1: other like large and majors don't have as much upside 266 00:13:14,400 --> 00:13:17,320 Speaker 1: here after their significant out performance, but the small caps 267 00:13:17,320 --> 00:13:20,720 Speaker 1: and oil services stocks, I mean, there's there's real potential there, 268 00:13:21,040 --> 00:13:24,160 Speaker 1: and there's also a real potential for the revitalization of 269 00:13:24,200 --> 00:13:27,040 Speaker 1: Texas and Houston. We we're doing great, but there's real 270 00:13:27,360 --> 00:13:29,040 Speaker 1: it's not the same as it was in the sort 271 00:13:29,040 --> 00:13:32,920 Speaker 1: of time frame where Houston was booming. And a lot 272 00:13:32,960 --> 00:13:35,679 Speaker 1: of that, of course, has to do with federal policymaking, 273 00:13:35,760 --> 00:13:37,680 Speaker 1: has to do with a pivot in terms of this 274 00:13:37,720 --> 00:13:41,080 Speaker 1: economy trying to focus it on climate change there as well. 275 00:13:41,200 --> 00:13:43,880 Speaker 1: How much are we likely to see the smaller caps 276 00:13:43,920 --> 00:13:46,160 Speaker 1: that you say in particular maybe start to turn on again, 277 00:13:46,240 --> 00:13:48,600 Speaker 1: maybe we start to see all output increasing a little 278 00:13:48,640 --> 00:13:50,959 Speaker 1: bit more in the United States, because that has been 279 00:13:50,960 --> 00:13:53,959 Speaker 1: this interesting tension between the all producers in the United 280 00:13:54,000 --> 00:13:56,920 Speaker 1: States and indeed the US government. Yeah, I think we 281 00:13:57,000 --> 00:14:00,080 Speaker 1: need much higher oil prices to get oil production and 282 00:14:00,120 --> 00:14:02,840 Speaker 1: growth to be anywhere close to where people were expecting. 283 00:14:03,120 --> 00:14:05,880 Speaker 1: So coming into this year, we expected oil production to 284 00:14:05,880 --> 00:14:08,120 Speaker 1: grow by a few hundred thousand barrels a day, and 285 00:14:08,160 --> 00:14:10,280 Speaker 1: the consensus was I think it was one point two 286 00:14:10,320 --> 00:14:13,160 Speaker 1: million barrels a day. That consensus has come down a lot, 287 00:14:13,280 --> 00:14:16,040 Speaker 1: and we've gotten production a lot closer to our expectation. 288 00:14:16,400 --> 00:14:18,400 Speaker 1: And so what I think is actually going to drive 289 00:14:18,440 --> 00:14:20,280 Speaker 1: the small cap rey rate is not going to be 290 00:14:20,640 --> 00:14:23,600 Speaker 1: substantial production growth. It's going to be buyouts where we're 291 00:14:23,600 --> 00:14:27,400 Speaker 1: seeing large caps by private companies at let's say three 292 00:14:27,440 --> 00:14:30,200 Speaker 1: to four times EBITDA, and many of the small caps 293 00:14:30,200 --> 00:14:32,360 Speaker 1: are trading as low as two times EBITDA. So there's 294 00:14:32,400 --> 00:14:36,600 Speaker 1: real potential for a re rate through uh through acquisitions, 295 00:14:36,800 --> 00:14:39,280 Speaker 1: and then also just when you trade that cheap, you 296 00:14:39,320 --> 00:14:42,120 Speaker 1: have the potential to pay off debt, buy backstock, pay 297 00:14:42,120 --> 00:14:44,560 Speaker 1: a dividend, and sort of force ely rate, which is 298 00:14:44,600 --> 00:14:46,800 Speaker 1: not something you've seen from small cap oil and gas 299 00:14:46,880 --> 00:14:49,520 Speaker 1: companies in the last decade. Josh, how do you guys 300 00:14:49,600 --> 00:14:53,080 Speaker 1: in the energy business think about the big picture of 301 00:14:53,880 --> 00:14:56,440 Speaker 1: I'm in the fossil fuel business. The world seems to 302 00:14:56,440 --> 00:14:59,440 Speaker 1: be going green. It's probably gonna take a lot longer 303 00:14:59,480 --> 00:15:03,040 Speaker 1: than people thought, you know, how do you manage your business? 304 00:15:03,040 --> 00:15:04,520 Speaker 1: How when you mean, when you talk to these companies, 305 00:15:04,520 --> 00:15:07,680 Speaker 1: how do they think about the five to ten year timeframe? 306 00:15:08,840 --> 00:15:11,600 Speaker 1: So so that's a great question. And one of the 307 00:15:11,640 --> 00:15:16,000 Speaker 1: really interesting things is that institutional allocators are actually still 308 00:15:16,040 --> 00:15:18,560 Speaker 1: divesting from the oil and gas space. So even though 309 00:15:18,600 --> 00:15:20,520 Speaker 1: it's done really well over the last couple of years. 310 00:15:20,640 --> 00:15:23,440 Speaker 1: I've noted Goldman and others have talked about this as well, 311 00:15:23,520 --> 00:15:27,040 Speaker 1: there's still actually funds leaving the space from an institutional 312 00:15:27,080 --> 00:15:31,000 Speaker 1: allocation perspective, so it's very hard to see capital formation, 313 00:15:31,360 --> 00:15:35,560 Speaker 1: new companies and new projects funded and uh, you know 314 00:15:35,720 --> 00:15:39,320 Speaker 1: oil production growth when you actually see divestment, and a 315 00:15:39,360 --> 00:15:42,560 Speaker 1: lot of that divestment appears to be ideological not economic. 316 00:15:42,840 --> 00:15:44,680 Speaker 1: So what I think is going to happen is over 317 00:15:44,720 --> 00:15:47,640 Speaker 1: the next year or two Goldman's estimate is the next year, 318 00:15:47,800 --> 00:15:50,080 Speaker 1: we'll see maybe it takes two more years, money will 319 00:15:50,120 --> 00:15:54,960 Speaker 1: start to flow back into the space from institutional allocators, 320 00:15:55,000 --> 00:15:58,040 Speaker 1: who again are still pulling capital. Private equity funds are 321 00:15:58,040 --> 00:16:01,920 Speaker 1: still divesting, insurance companies are still pulling their insurance coverage. 322 00:16:01,960 --> 00:16:04,160 Speaker 1: When that flips and you start to see capital come 323 00:16:04,200 --> 00:16:06,280 Speaker 1: back in, I think that's going to be the starting 324 00:16:06,360 --> 00:16:10,280 Speaker 1: point for the recovery of production. And the really interesting 325 00:16:10,280 --> 00:16:13,480 Speaker 1: thing is it takes many years to restore the oil 326 00:16:13,560 --> 00:16:17,720 Speaker 1: services UH supply base, the ability to supply services to 327 00:16:17,840 --> 00:16:20,160 Speaker 1: then be able to go drill enough wells to get 328 00:16:20,280 --> 00:16:22,960 Speaker 1: enough supply to get into an oversupplied situation. So I 329 00:16:22,960 --> 00:16:25,440 Speaker 1: think we're set up very nicely for a multi year 330 00:16:25,480 --> 00:16:27,840 Speaker 1: oil bowl market. And it really comes back to this 331 00:16:27,880 --> 00:16:31,120 Speaker 1: investment like you're talking about from the space, partly economically 332 00:16:31,160 --> 00:16:33,760 Speaker 1: because it tasted badly over the last ten years, and 333 00:16:33,840 --> 00:16:37,040 Speaker 1: partly ideologically, where you know, it's real hard for investment 334 00:16:37,080 --> 00:16:40,880 Speaker 1: committees at endowments and foundations and family offices to allocate 335 00:16:40,920 --> 00:16:43,360 Speaker 1: even though it's profitable, and even though other sectors are 336 00:16:43,360 --> 00:16:47,120 Speaker 1: doing poorly, there's just this big ideological obstacle to investing. 337 00:16:48,000 --> 00:16:50,680 Speaker 1: Some have, of course, sort of thought the turning towards 338 00:16:50,760 --> 00:16:53,320 Speaker 1: natural gas as supply of energy in the US is 339 00:16:53,480 --> 00:16:56,560 Speaker 1: more funny towards the environment. Natural gas has just been 340 00:16:56,600 --> 00:16:59,760 Speaker 1: the most extraordinary commodity to follow this year for reasons 341 00:16:59,800 --> 00:17:01,200 Speaker 1: we well known, and a lot of it to do 342 00:17:01,240 --> 00:17:03,360 Speaker 1: with Europe and across the Atlantic. But to hit a 343 00:17:03,440 --> 00:17:05,600 Speaker 1: high and excessive nine dollars to be back down to 344 00:17:05,680 --> 00:17:09,800 Speaker 1: now four door, how do you see that part of 345 00:17:10,000 --> 00:17:14,600 Speaker 1: your world looking for Yeah, so I think I think 346 00:17:14,680 --> 00:17:18,000 Speaker 1: natural gas is oversupplied actually right now in North America 347 00:17:18,400 --> 00:17:21,399 Speaker 1: and we will see sort of more normal temperature. So 348 00:17:21,440 --> 00:17:24,920 Speaker 1: it's been a relatively warm winter so far other than 349 00:17:24,960 --> 00:17:28,040 Speaker 1: this recent winter storm um and so weather has been 350 00:17:28,119 --> 00:17:32,160 Speaker 1: uncooperating and supply has been higher than expectations. My view 351 00:17:32,200 --> 00:17:34,080 Speaker 1: has been that natural gas would stay in this sort 352 00:17:34,119 --> 00:17:36,719 Speaker 1: of four to seven dollar price range, and I think 353 00:17:36,760 --> 00:17:38,639 Speaker 1: there might be a little bit of downside to that 354 00:17:38,720 --> 00:17:42,600 Speaker 1: in three, but over time supply and demand should balance out, 355 00:17:42,840 --> 00:17:46,040 Speaker 1: and by there are a number of different elergy export 356 00:17:46,080 --> 00:17:49,920 Speaker 1: facilities that should finish construction and come on and at 357 00:17:49,960 --> 00:17:51,880 Speaker 1: that point I think we're set up for a meaningful 358 00:17:51,920 --> 00:17:54,720 Speaker 1: move higher. But again, it could be pretty rough on 359 00:17:54,760 --> 00:17:56,840 Speaker 1: the natural gas side, Josh. If I want to go 360 00:17:56,920 --> 00:18:00,640 Speaker 1: down to Corpus Corpus Christie or Galveston and build a refinery, 361 00:18:00,760 --> 00:18:03,080 Speaker 1: could I do that? Could I get regulatory approval? Could 362 00:18:03,080 --> 00:18:05,400 Speaker 1: I raise capital? Is that even possible in this day 363 00:18:05,400 --> 00:18:08,560 Speaker 1: and age. Yeah, that's a good question. Honestly. I don't 364 00:18:08,600 --> 00:18:11,720 Speaker 1: think that refineries are undersupplied, and I think that's been 365 00:18:11,760 --> 00:18:14,680 Speaker 1: one of the big stories in two where there have 366 00:18:14,760 --> 00:18:17,600 Speaker 1: been a couple of points where the crack spread so 367 00:18:17,680 --> 00:18:21,639 Speaker 1: the refiner margin has been really high, and there's been 368 00:18:21,640 --> 00:18:25,800 Speaker 1: this story about an insufficient supply of refining capacity. There 369 00:18:25,840 --> 00:18:28,199 Speaker 1: may be an insufficient supply in a few years. The 370 00:18:28,240 --> 00:18:31,520 Speaker 1: reality was that that was mostly driven by China lockdowns 371 00:18:31,720 --> 00:18:35,000 Speaker 1: and millions of barrels a day of Chinese refining capacity, 372 00:18:35,280 --> 00:18:40,480 Speaker 1: particularly the teapot, the smaller independent informal refiners going offline, 373 00:18:40,520 --> 00:18:43,520 Speaker 1: and so as those are back online, um, there's actually 374 00:18:43,600 --> 00:18:46,920 Speaker 1: plentiful refining capacity, and we see that with refining margins 375 00:18:47,200 --> 00:18:49,880 Speaker 1: getting closer to normal levels. So yeah, it's really hard 376 00:18:49,920 --> 00:18:53,480 Speaker 1: to build them. But frankly, we don't really need them 377 00:18:53,480 --> 00:18:56,800 Speaker 1: talking a lot about us supply demand dynamics in all 378 00:18:56,840 --> 00:18:58,840 Speaker 1: the natural gas. Just talk to us about OPEC plas 379 00:18:59,000 --> 00:19:00,880 Speaker 1: or what you're expecting from the next year. In terms 380 00:19:00,880 --> 00:19:05,200 Speaker 1: of the geopolitical risks around oil, yeah, I think OPEC 381 00:19:05,240 --> 00:19:09,640 Speaker 1: plus has been sort of undertold story, partly because there 382 00:19:09,640 --> 00:19:11,439 Speaker 1: have been a couple of different price wars in the 383 00:19:11,520 --> 00:19:15,000 Speaker 1: last ten years. UM, it does appear that many of 384 00:19:15,040 --> 00:19:18,800 Speaker 1: the OPEC plus countries are hitting their peak production capacity 385 00:19:18,840 --> 00:19:22,400 Speaker 1: and have actually had to produce materially less than their 386 00:19:23,080 --> 00:19:26,320 Speaker 1: than their production quotas, and so there are a few 387 00:19:26,320 --> 00:19:30,879 Speaker 1: countries that still have some excess UH production capacity versus 388 00:19:30,920 --> 00:19:33,920 Speaker 1: their quotas. But overall it does appear that there is 389 00:19:34,040 --> 00:19:37,600 Speaker 1: limited spare capacity, and so as China demand comes back 390 00:19:37,640 --> 00:19:41,159 Speaker 1: on and as Russian barrels may be restricted from the market, 391 00:19:41,640 --> 00:19:43,840 Speaker 1: we could be in a situation where there's a call 392 00:19:43,920 --> 00:19:46,800 Speaker 1: on OPEC oil and where OPEC is actually not able 393 00:19:46,840 --> 00:19:49,720 Speaker 1: to deliver. So this is a really sort of contentious call, 394 00:19:50,119 --> 00:19:52,600 Speaker 1: but it should be less contentious, I think because even 395 00:19:52,640 --> 00:19:58,600 Speaker 1: senior executives from Aramco and various OPEC countries, um, they've 396 00:19:58,640 --> 00:20:01,200 Speaker 1: talked about limited spirit coup. So you know, I think 397 00:20:01,240 --> 00:20:05,720 Speaker 1: I think this is potentially three story, potentially story, but 398 00:20:05,800 --> 00:20:07,679 Speaker 1: I think there's going to be a point where the 399 00:20:07,760 --> 00:20:11,200 Speaker 1: world wants more oil from OPEC and where OPEC is 400 00:20:11,280 --> 00:20:13,959 Speaker 1: just not able to deliver. All right, Josh, great stuff, 401 00:20:14,080 --> 00:20:16,240 Speaker 1: you know what you're talking about, Josh Young Bison interest 402 00:20:16,240 --> 00:20:19,400 Speaker 1: ce IO given us the latest on the global energy space. 403 00:20:19,440 --> 00:20:21,240 Speaker 1: I'm looking at w t A crude oil right here 404 00:20:21,280 --> 00:20:24,040 Speaker 1: as we end the year, seventy eight dollars eighty cents. 405 00:20:24,160 --> 00:20:27,760 Speaker 1: Remember earlier we're up aw abowers, so big pullback in 406 00:20:27,920 --> 00:20:30,080 Speaker 1: crude supply and demand. You have to have a call 407 00:20:30,160 --> 00:20:34,800 Speaker 1: there when you're thinking about global energy right now, Okay, 408 00:20:36,040 --> 00:20:38,119 Speaker 1: we've got one efan devil where that stiff used to 409 00:20:38,119 --> 00:20:40,920 Speaker 1: welcome Minetta, Chief Investment Officer, and we want to sort 410 00:20:40,920 --> 00:20:44,640 Speaker 1: of discuss even what an extraordinary year two has been, 411 00:20:44,640 --> 00:20:46,440 Speaker 1: but set us up into the next year. As we 412 00:20:46,560 --> 00:20:49,600 Speaker 1: put that behind us, are we going to see any 413 00:20:49,640 --> 00:20:52,080 Speaker 1: of these asset classes. Let's start with equities. Managed to 414 00:20:52,119 --> 00:20:55,240 Speaker 1: push through some of these loads, I think we will. 415 00:20:55,280 --> 00:20:58,400 Speaker 1: It's going to be very segmented um in terms of equities. 416 00:20:58,440 --> 00:21:01,840 Speaker 1: That tech contagious that we mentioned earlier that we're seeing, 417 00:21:01,880 --> 00:21:04,560 Speaker 1: not helped by all of the bitcoin to battle the 418 00:21:04,640 --> 00:21:08,040 Speaker 1: FTX investigation, that's all going to contaminate bitcoin and anything 419 00:21:08,040 --> 00:21:11,040 Speaker 1: adjacent to digital assets. So I'm not optimistic about the 420 00:21:11,320 --> 00:21:13,840 Speaker 1: the outlet protec At the moment. Of course, those innovation 421 00:21:13,880 --> 00:21:16,520 Speaker 1: trends are still continuing. Nothing is changing there, but that's 422 00:21:16,520 --> 00:21:18,679 Speaker 1: going to be very long term play. We are going 423 00:21:18,720 --> 00:21:21,159 Speaker 1: to see some recovery and equities simply because everyone's been 424 00:21:21,200 --> 00:21:24,480 Speaker 1: talking about horror versus Tina. Is there an alternative or 425 00:21:24,520 --> 00:21:26,840 Speaker 1: are there reasonable alternatives? At the end of the day, 426 00:21:26,880 --> 00:21:28,960 Speaker 1: for a high growth portfolio, you still need to be 427 00:21:29,000 --> 00:21:31,399 Speaker 1: exposed to equities. So I'll see some pick up in 428 00:21:31,400 --> 00:21:35,000 Speaker 1: those value names, healthcare industrials, and just in general, just 429 00:21:35,200 --> 00:21:38,240 Speaker 1: a very broad base of old economy stops we'll see recovering. 430 00:21:38,400 --> 00:21:41,520 Speaker 1: I look at consumer staples. The consumer is still spending 431 00:21:41,520 --> 00:21:44,680 Speaker 1: on staples very much. There's an overhang, whether it's revenge 432 00:21:44,720 --> 00:21:47,560 Speaker 1: tourism or picking up on what they couldn't do during 433 00:21:47,600 --> 00:21:50,240 Speaker 1: the COVID years. I do expect the holiday season to 434 00:21:50,320 --> 00:21:53,040 Speaker 1: have shown some very strong retail sales. Of course, when 435 00:21:53,080 --> 00:21:55,240 Speaker 1: we look though at January February, that's going to be dismal. 436 00:21:55,520 --> 00:21:57,600 Speaker 1: There will have been a lot of borrowing from this 437 00:21:57,680 --> 00:22:00,040 Speaker 1: first quarter in the fourth quarter, and we're going to 438 00:22:00,080 --> 00:22:02,120 Speaker 1: see that coming through and earnings. But if we learned 439 00:22:02,119 --> 00:22:04,840 Speaker 1: anything from two is that people are getting very good 440 00:22:04,880 --> 00:22:07,280 Speaker 1: at telegraphing bad news. They get it out of the 441 00:22:07,320 --> 00:22:10,320 Speaker 1: system early, and then they can only surprise on the upside. 442 00:22:10,560 --> 00:22:14,360 Speaker 1: We've seen the FED telegraphing its intentions, but clearly companies 443 00:22:14,359 --> 00:22:17,640 Speaker 1: are telegraphing that too. Even talk to us about earnings risk. 444 00:22:17,720 --> 00:22:19,360 Speaker 1: That is certainly a risk that a lot of people 445 00:22:19,400 --> 00:22:22,000 Speaker 1: are calling out as it relates to the three outlook, 446 00:22:22,000 --> 00:22:23,199 Speaker 1: how do you think about that? How do you how 447 00:22:23,200 --> 00:22:25,400 Speaker 1: do you quantify it? And how much is it kind 448 00:22:25,400 --> 00:22:28,280 Speaker 1: of in your calculus. Well, if you get back to 449 00:22:28,320 --> 00:22:30,639 Speaker 1: that telegraphing point I made earlier, what we saw very 450 00:22:30,720 --> 00:22:33,880 Speaker 1: much in two was actually earning surprise on the upside 451 00:22:33,880 --> 00:22:37,400 Speaker 1: because they've been worked down so much in terms of expectations. 452 00:22:37,640 --> 00:22:39,600 Speaker 1: So when the company gets the bad news out of 453 00:22:39,600 --> 00:22:42,119 Speaker 1: the way. The expectations are low. When you're on the floor, 454 00:22:42,160 --> 00:22:45,159 Speaker 1: it's not it's easy to surprise on the upside, and 455 00:22:45,280 --> 00:22:49,439 Speaker 1: we still saw companies beat expectations. So the key is 456 00:22:49,440 --> 00:22:52,520 Speaker 1: where expectations get set. So I actually am not that 457 00:22:52,920 --> 00:22:56,200 Speaker 1: pessimistic about earnings surprises on the negative side coming in 458 00:22:57,000 --> 00:22:59,880 Speaker 1: three simply because companies know how to play this game now. 459 00:23:00,480 --> 00:23:03,400 Speaker 1: There certainly will be a threat to margins though, yes, 460 00:23:03,480 --> 00:23:06,200 Speaker 1: and a lot of the price pressures maybe we see 461 00:23:06,200 --> 00:23:08,480 Speaker 1: soothing someone on the producer side of the equation. The 462 00:23:08,480 --> 00:23:10,480 Speaker 1: big data that we've been getting showing the inflation is 463 00:23:10,520 --> 00:23:12,880 Speaker 1: moving in the right direction, but the labor side still 464 00:23:12,880 --> 00:23:14,520 Speaker 1: seems to be very costly. We've got a very tight 465 00:23:14,600 --> 00:23:16,159 Speaker 1: labor market. What sort of a picture is that going 466 00:23:16,200 --> 00:23:18,200 Speaker 1: to be painting for you? And indeed what it means 467 00:23:18,240 --> 00:23:21,200 Speaker 1: for well, not just the Federal Reserve, but global central banks. 468 00:23:22,359 --> 00:23:23,879 Speaker 1: I do see the labor market is being bit of 469 00:23:23,880 --> 00:23:27,000 Speaker 1: a lagging indicator. We're seeing it working through already. Bonuses 470 00:23:27,040 --> 00:23:29,359 Speaker 1: not having been great in twenty two, we saw some 471 00:23:29,440 --> 00:23:32,440 Speaker 1: massive layoffs at the end of twenty two, certainly among 472 00:23:32,520 --> 00:23:35,159 Speaker 1: some very select sectors, primarily tech. I think some of 473 00:23:35,160 --> 00:23:37,000 Speaker 1: the froth is going to come out of the labor market. 474 00:23:37,000 --> 00:23:39,600 Speaker 1: It'll still be tight, though the participation rate remains low, 475 00:23:39,840 --> 00:23:43,280 Speaker 1: and that's going to provide a strong underpinning to inflation. 476 00:23:43,520 --> 00:23:45,080 Speaker 1: As far as far as what the FED is doing, though, 477 00:23:45,080 --> 00:23:47,680 Speaker 1: we can see all of these transmission mechanisms of its 478 00:23:47,680 --> 00:23:51,080 Speaker 1: tighter monetary policy already working their way through. We've seen 479 00:23:51,119 --> 00:23:54,600 Speaker 1: it in consumer prices, commodity prices, We've definitely seen it 480 00:23:54,600 --> 00:23:56,560 Speaker 1: when it comes to the housing market. That of course 481 00:23:56,640 --> 00:23:59,119 Speaker 1: is a strong component of people's new purse that they 482 00:23:59,119 --> 00:24:01,480 Speaker 1: would spend money on. So I think the FED will 483 00:24:01,560 --> 00:24:04,760 Speaker 1: be assured that much of the inflation that is dampening 484 00:24:04,800 --> 00:24:08,520 Speaker 1: is moderating. In three perhaps the only issue is employment. 485 00:24:08,720 --> 00:24:11,240 Speaker 1: But of course the irony is a strong employment means 486 00:24:11,240 --> 00:24:14,600 Speaker 1: a strong consumer and that's ultimately a stronger economy. So 487 00:24:14,680 --> 00:24:16,919 Speaker 1: we don't want to see the economy tanking either. We 488 00:24:16,960 --> 00:24:19,840 Speaker 1: already have all too many recessionary risks on the horizon. 489 00:24:20,560 --> 00:24:22,360 Speaker 1: Even talk to us about energy, and we've been talking 490 00:24:22,359 --> 00:24:25,280 Speaker 1: about commodities a lot today, and energy has been such 491 00:24:25,320 --> 00:24:30,680 Speaker 1: a great story for one of the you know, few 492 00:24:30,720 --> 00:24:34,280 Speaker 1: areas where investors, equity investors can make real money this year. 493 00:24:34,400 --> 00:24:36,679 Speaker 1: Is that trade kind of played out or you think 494 00:24:36,720 --> 00:24:39,240 Speaker 1: there's more room to go there, There will be a 495 00:24:39,280 --> 00:24:41,040 Speaker 1: little bit of room to go. We're still seeing quite 496 00:24:41,040 --> 00:24:43,320 Speaker 1: a bit of rhetoric around the energy complex and this 497 00:24:43,480 --> 00:24:46,320 Speaker 1: energy terrorism. We're seeing some statements coming out of Russia. 498 00:24:46,600 --> 00:24:48,760 Speaker 1: It does seem though, however, that Europe is getting its 499 00:24:48,760 --> 00:24:52,440 Speaker 1: supply in shape, at least for this winter for sure, 500 00:24:52,560 --> 00:24:55,320 Speaker 1: and equally for next winter. We're hearing about some stocks 501 00:24:55,359 --> 00:24:58,600 Speaker 1: increasing and just finding alternative sources. So we have this 502 00:24:58,720 --> 00:25:03,360 Speaker 1: energy trilema, energycing, purity, energy, pricing, energy, sustainability that all 503 00:25:03,440 --> 00:25:06,080 Speaker 1: policymakers are juggling right now. It has seemed that a 504 00:25:06,119 --> 00:25:08,440 Speaker 1: sustainability piece has been on the back burner this year 505 00:25:08,440 --> 00:25:11,479 Speaker 1: as we've been focused on pricing and security. But however, 506 00:25:11,520 --> 00:25:13,760 Speaker 1: the sustainability piece is going to continue to come to 507 00:25:13,800 --> 00:25:17,719 Speaker 1: the four. So I'm very optimistic about renewable energy sources regardless. 508 00:25:17,800 --> 00:25:19,479 Speaker 1: If the world is going to continue to grow, our 509 00:25:19,480 --> 00:25:22,080 Speaker 1: economies will need energy to grow. We'll need to get 510 00:25:22,119 --> 00:25:24,680 Speaker 1: it from everywhere we can. That mean the wind, solar 511 00:25:25,000 --> 00:25:27,520 Speaker 1: and other other sources. So I do I'm quite optimistic 512 00:25:27,600 --> 00:25:29,760 Speaker 1: for that area. It may just have not received the 513 00:25:29,800 --> 00:25:33,560 Speaker 1: fanfare that it did towards two because of security concerns, 514 00:25:33,600 --> 00:25:36,600 Speaker 1: and even of course those securities concerns primarily in Europe, 515 00:25:36,600 --> 00:25:38,560 Speaker 1: good global for us for a moment. We know that 516 00:25:38,880 --> 00:25:42,080 Speaker 1: the Dacks ended up the year down twelve percent, and 517 00:25:42,119 --> 00:25:44,560 Speaker 1: we actually saw that's closed early for lunch. The foot 518 00:25:44,560 --> 00:25:48,000 Speaker 1: See one closed and actually managed to eke out a 519 00:25:48,200 --> 00:25:51,920 Speaker 1: very small not point nine percent annual gain in dollar terms, 520 00:25:51,920 --> 00:25:54,160 Speaker 1: it was down, but overall we did managed to see 521 00:25:54,160 --> 00:25:56,320 Speaker 1: the foots in one hundred keep its head above water. 522 00:25:56,359 --> 00:25:58,959 Speaker 1: What about the rest of Europe more broadly, positive negative 523 00:25:58,960 --> 00:26:02,800 Speaker 1: in terms of negative perspect differ because again getting back 524 00:26:02,800 --> 00:26:05,280 Speaker 1: to expectations, expectations have been so low when it comes 525 00:26:05,320 --> 00:26:08,280 Speaker 1: to Europe because primarily because of this overhang we've looked at, 526 00:26:08,320 --> 00:26:10,760 Speaker 1: inflation in Europe has not been demand driven but actually 527 00:26:10,800 --> 00:26:14,280 Speaker 1: been supplied driven, primarily by energy, so suggesting that the U. 528 00:26:14,400 --> 00:26:16,840 Speaker 1: S consumer, because of its demand driven inflation, is in 529 00:26:16,880 --> 00:26:19,600 Speaker 1: a much better state than the European consumer. The Footsie 530 00:26:19,640 --> 00:26:21,480 Speaker 1: is interesting, you mentioned that because it really has bucked 531 00:26:21,480 --> 00:26:23,280 Speaker 1: the trend. Much of that it's due to the old 532 00:26:23,320 --> 00:26:25,159 Speaker 1: economy nature of the foot See as well as the 533 00:26:25,160 --> 00:26:27,960 Speaker 1: weaker sterling, which has benefited for it some time before 534 00:26:27,960 --> 00:26:29,800 Speaker 1: it started to cover towards the end of the year. 535 00:26:30,160 --> 00:26:32,960 Speaker 1: So across Europe overall, most stock takers I speak to 536 00:26:33,280 --> 00:26:37,440 Speaker 1: our seeing pockets of interesting opportunities. These multinational companies which 537 00:26:37,480 --> 00:26:40,320 Speaker 1: have benefited from a weak euro again there they have 538 00:26:40,440 --> 00:26:43,560 Speaker 1: not seen massive, massive, massive pressure in terms of the 539 00:26:43,600 --> 00:26:47,840 Speaker 1: pricing margins, and I actually am looking at good upside 540 00:26:47,840 --> 00:26:50,919 Speaker 1: for Europe also for US investors, primarily because if the 541 00:26:50,920 --> 00:26:54,080 Speaker 1: dollar starts to weaken now, that's when those non US 542 00:26:54,160 --> 00:26:56,679 Speaker 1: exposures will start to come to the four Even do 543 00:26:56,760 --> 00:26:59,600 Speaker 1: I buy bonds here? Yeah, it's such a brutal year 544 00:26:59,600 --> 00:27:04,760 Speaker 1: in they can't go any lower, can they. Well, they 545 00:27:04,760 --> 00:27:06,920 Speaker 1: certainly can't have that junk lotory that we've seen that 546 00:27:07,000 --> 00:27:10,320 Speaker 1: kind of step change. Bonds do look very interesting today, 547 00:27:10,359 --> 00:27:13,159 Speaker 1: getting back to that, there are reasonable alternatives. As acronym, 548 00:27:13,200 --> 00:27:16,080 Speaker 1: They've been interesting for some time. Cash is no longer trash. 549 00:27:16,200 --> 00:27:19,159 Speaker 1: We've heard many commentators say that we've also seen an 550 00:27:19,240 --> 00:27:22,600 Speaker 1: investment grade high grade. Investment grade bonds looking very interesting 551 00:27:22,600 --> 00:27:25,320 Speaker 1: from a yield perspective. The question is how much you 552 00:27:25,359 --> 00:27:27,159 Speaker 1: can get in which you can of your portfolio you 553 00:27:27,200 --> 00:27:29,680 Speaker 1: can leave in bonds today and a much extra pain 554 00:27:29,760 --> 00:27:31,719 Speaker 1: you're likely to take because clearly the FED is not 555 00:27:31,800 --> 00:27:34,800 Speaker 1: done yet, the ECB, the Bank of England, Bank in Japan, 556 00:27:34,840 --> 00:27:36,680 Speaker 1: nobody has done yet. So there will be a little 557 00:27:36,680 --> 00:27:38,680 Speaker 1: bit of more. It will get worse before it gets 558 00:27:38,680 --> 00:27:40,600 Speaker 1: better in terms of bonds, but in terms of the 559 00:27:40,680 --> 00:27:42,639 Speaker 1: yields and their own when we see yields at four 560 00:27:42,720 --> 00:27:46,879 Speaker 1: or after inflation um that that actually actually looks very 561 00:27:47,000 --> 00:27:50,120 Speaker 1: very meaningful, the inflation number of courses eroding what those 562 00:27:50,160 --> 00:27:53,800 Speaker 1: yields look like in real terms. But as inflation ticks down, 563 00:27:53,840 --> 00:27:57,240 Speaker 1: which we expected will those bond deals are really interesting today. 564 00:27:57,400 --> 00:28:01,000 Speaker 1: But again edging in inching in, we've very cautious because 565 00:28:01,040 --> 00:28:03,560 Speaker 1: clearly we don't see that then that that that As 566 00:28:03,560 --> 00:28:06,320 Speaker 1: I said, this tightening is done yet. Even you started 567 00:28:06,320 --> 00:28:09,119 Speaker 1: off the conversation by sort of saying how crypto and 568 00:28:09,440 --> 00:28:13,320 Speaker 1: had perhaps some correlation effects on dragging down technology. But 569 00:28:13,400 --> 00:28:15,960 Speaker 1: go more broadly cross asset for us, because you do 570 00:28:16,000 --> 00:28:18,600 Speaker 1: look at alternatives. If you're looking at a sixty that 571 00:28:18,640 --> 00:28:22,360 Speaker 1: hasn't worked, are there any areas that you're liking outside 572 00:28:22,359 --> 00:28:25,919 Speaker 1: the world of bonds and equities? For sure, those clients 573 00:28:25,960 --> 00:28:29,560 Speaker 1: who have alternatives and diversification in their portfolios have done better. 574 00:28:29,600 --> 00:28:32,200 Speaker 1: There's been some ballast there, there's been something to take 575 00:28:32,280 --> 00:28:35,280 Speaker 1: cash away from to re balance into these week equity 576 00:28:35,280 --> 00:28:37,399 Speaker 1: and bond markets. If you just have sixty four and 577 00:28:37,440 --> 00:28:40,600 Speaker 1: everything's been falling, there's nothing actually to rebalance with. What 578 00:28:40,680 --> 00:28:42,920 Speaker 1: we like is private credit again, as certainly as the 579 00:28:42,920 --> 00:28:45,960 Speaker 1: banks come under pressure, maybe credit ratings start to look 580 00:28:46,040 --> 00:28:48,400 Speaker 1: look more more severe. When it comes to the company's 581 00:28:48,560 --> 00:28:51,240 Speaker 1: the corporate side, we will see the need for this 582 00:28:51,600 --> 00:28:53,880 Speaker 1: lender of last resort and private credit to continue to 583 00:28:53,920 --> 00:28:56,479 Speaker 1: take up those private credit managers we speak to our 584 00:28:56,520 --> 00:29:00,800 Speaker 1: seeing very strong opportunity sets about anything less crowding today, 585 00:29:00,880 --> 00:29:02,720 Speaker 1: so that that suggests there'll be some nice kind of 586 00:29:02,760 --> 00:29:05,320 Speaker 1: cash flows that will come from that private equity to 587 00:29:05,440 --> 00:29:09,440 Speaker 1: venture capital. I'm optimistic across the board there. You've run 588 00:29:09,520 --> 00:29:12,760 Speaker 1: thirty eight marathons. I have no idea why anyone would 589 00:29:12,800 --> 00:29:14,800 Speaker 1: run twenty six point two miles, but there are people 590 00:29:14,840 --> 00:29:16,520 Speaker 1: that do that. What's the next one? You're gonna run? 591 00:29:17,800 --> 00:29:20,320 Speaker 1: Next one? Actually Boston. I I actually got a spot 592 00:29:20,320 --> 00:29:23,200 Speaker 1: in Boston in April, so I'm excited about that. I've 593 00:29:23,200 --> 00:29:25,200 Speaker 1: done it before, but I was a lot younger. Then 594 00:29:25,760 --> 00:29:27,680 Speaker 1: I'm looking forward to that. What's the best marathon you've 595 00:29:27,760 --> 00:29:31,520 Speaker 1: run around the world. I'm so going to say New 596 00:29:31,560 --> 00:29:34,000 Speaker 1: York City the first and the best. It is just 597 00:29:34,040 --> 00:29:37,080 Speaker 1: so diverse in terms of the boroughs that the support 598 00:29:37,120 --> 00:29:40,240 Speaker 1: from the street is electric. Um that ending in Central 599 00:29:40,240 --> 00:29:43,280 Speaker 1: Park is just really iconic. And it was my first 600 00:29:43,320 --> 00:29:45,400 Speaker 1: It wasn't my best time, but it was the first 601 00:29:45,400 --> 00:29:49,320 Speaker 1: psychological journey I made on that point two miles. That's awesome. 602 00:29:49,360 --> 00:29:52,640 Speaker 1: Thank you so much. That's good stuff. Efan Devitt Manetta, 603 00:29:52,760 --> 00:29:59,200 Speaker 1: chief investment officer in Serious marathon runner. Thanks for listening 604 00:29:59,240 --> 00:30:02,760 Speaker 1: to the Bloomberg Markets podcast. You can subscribe and listen 605 00:30:02,760 --> 00:30:07,080 Speaker 1: to interviews with Apple Podcasts or whatever podcast platform you prefer. 606 00:30:07,440 --> 00:30:11,400 Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller three. 607 00:30:12,040 --> 00:30:14,640 Speaker 1: On Fall Sweeney, I'm on Twitter at pt Sweeney. Before 608 00:30:14,680 --> 00:30:17,800 Speaker 1: the podcast, you can always catch us worldwide at Bloomberg Radio.