WEBVTT - Senate Votes, Stagflation and Dividends 0:00:01.760 --> 0:00:04.400 This is Bloomberg Business Week. I'm Karl Masser and I'm 0:00:04.440 --> 0:00:07.280 Bloomberg Quick Takes Tim Stanavak. We're here every day bringing 0:00:07.280 --> 0:00:09.800 you the latest news from the world to business and finance, 0:00:09.800 --> 0:00:13.640 plus technology, politics, economics, all partnising the power of Business 0:00:13.640 --> 0:00:17.119 Week reporters and editors, not to mention our journalists and 0:00:17.120 --> 0:00:19.960 analyst in more than one twenty countries. You can download 0:00:20.000 --> 0:00:23.200 Bloomberg Business Week and iTunes, SoundCloud, or Bloomberg dot Com. 0:00:23.360 --> 0:00:25.160 You can also listen to our radio show at two 0:00:25.160 --> 0:00:27.840 pm Eastern Time on Bloomberg Radio, or watch us on 0:00:27.880 --> 0:00:34.720 YouTube search Bloomberg Global News. The ys are fifty, the 0:00:34.800 --> 0:00:38.440 names are fifty, the Senate being equally divided, the Vice 0:00:38.479 --> 0:00:42.280 President votes in the affirmative, and the bill as amended 0:00:42.600 --> 0:00:46.519 is past. All right, of course, you can hear the 0:00:46.560 --> 0:00:50.640 clapping after Vice President Kamala Harris taking that vote, and 0:00:50.880 --> 0:00:54.880 after a weekend marathon legislative session, the US Senate passing 0:00:54.880 --> 0:00:58.080 a tax, climate and energy bill. This is a big 0:00:58.360 --> 0:01:01.280 piece of the Democratic economic agenda and a big win 0:01:01.680 --> 0:01:03.400 for them as well. So let's get to it. What 0:01:03.480 --> 0:01:05.440 does it mean? What does it mean for the mid terms. 0:01:05.800 --> 0:01:08.960 Let's bring in Joe Matthew. He's Bloomberg Washington correspondent, host 0:01:08.959 --> 0:01:11.520 of Bloomberg Sound On at five pm Wall Street Time 0:01:11.560 --> 0:01:13.640 right here on Bloomberg Radio. Joe joining us from our 0:01:13.680 --> 0:01:17.080 Bloomberg nine and I One studio in Washington, d C. Joe, 0:01:17.120 --> 0:01:19.600 I always want to say, it's nothing like an August 0:01:19.640 --> 0:01:22.720 recess deadline to perhaps get the U. S. Congress to 0:01:22.760 --> 0:01:25.240 get something done legislatively. But I feel like there were 0:01:25.280 --> 0:01:28.240 a lot of forces at work. As you kind of 0:01:28.400 --> 0:01:31.800 think about what happened this weekend, what are your big takeaways? Well, 0:01:31.840 --> 0:01:34.360 I mean, look, Chuck Schumer called it a long and 0:01:34.440 --> 0:01:37.760 winding road, and I've been I've been humming Paul McCartney 0:01:37.800 --> 0:01:40.080 all day today, even though we're not quite done yet. 0:01:40.120 --> 0:01:41.720 The House votes at the end of this week. But 0:01:41.840 --> 0:01:44.360 I mean, really, if you stop and think about, uh, 0:01:44.560 --> 0:01:47.319 the the evolution this is goes back over a year. 0:01:47.520 --> 0:01:50.000 This is back what we called build back Better. There 0:01:50.040 --> 0:01:53.200 were this was a five trillion dollars something or other 0:01:53.520 --> 0:01:55.600 idea when it first emerged. Then it was three, then 0:01:55.640 --> 0:01:57.640 it was one and a half, then it was child 0:01:57.720 --> 0:02:00.200 tax credits. There were so many different version of this, 0:02:00.280 --> 0:02:04.640 different names, different contents, but Yeah, this has been just remarkable, 0:02:04.680 --> 0:02:06.360 and it had been left for dead of course at 0:02:06.360 --> 0:02:09.000 the end of last year, left for dead multiple times, 0:02:09.000 --> 0:02:11.160 even this year when Joe Manchin saw the most recent 0:02:11.200 --> 0:02:14.880 CPI UH numbers. So you know, frankly, it seemed to 0:02:15.040 --> 0:02:18.240 defy gravity. To be honest with you, the question about 0:02:18.280 --> 0:02:21.480 whether this helps anyone on the mid terms, you know, 0:02:21.520 --> 0:02:23.720 ask me on Halloween what the price of gases? That's 0:02:23.760 --> 0:02:26.160 the best answer I think I have for you. Well, Joe, 0:02:26.240 --> 0:02:28.480 you stole my question. That's what I wanted to ask. 0:02:28.480 --> 0:02:30.880 Whether this is do it again any bearing on the 0:02:30.919 --> 0:02:33.639 midterm elections or like you said, is this all about 0:02:33.760 --> 0:02:36.320 the price of gas and the cost of living right now? Yeah, 0:02:36.360 --> 0:02:38.600 inflation is it's it's gonna be pretty hard to beat 0:02:38.639 --> 0:02:40.960 as issue number one. But then again, look at Kansas 0:02:41.080 --> 0:02:44.600 last week. You know, we saw this this abortion vote 0:02:44.639 --> 0:02:48.160 that blew people out of the water. It defied all expectations. 0:02:48.200 --> 0:02:52.240 So there are some unquantifiable UH factors in this mid 0:02:52.400 --> 0:02:57.120 term election that may or may not mobilize Democrats to 0:02:57.200 --> 0:03:01.040 hit the polls. For instance, will will progressives reward Democrats 0:03:01.080 --> 0:03:04.160 for the biggest climate spend in history? This bill has that. 0:03:04.800 --> 0:03:07.839 It also extends Obamacare and keeps several million people from 0:03:07.840 --> 0:03:11.160 losing their coverage. So, you know, there are different ways 0:03:11.200 --> 0:03:13.600 to look at this, but the history is still on 0:03:13.639 --> 0:03:15.920 the side of the Republicans. One of the questions that 0:03:15.960 --> 0:03:17.960 we've had, if I can get a little bit more geeky, 0:03:18.040 --> 0:03:20.480 is you know, is this gonna be a washout for 0:03:20.560 --> 0:03:22.720 Dems or can they in fact hold the Senate or 0:03:22.760 --> 0:03:26.520 even gain a seat. That conversation is becoming a lot 0:03:26.520 --> 0:03:29.040 more real right now. It's likely they will lose the House, 0:03:29.080 --> 0:03:31.160 but it's not likely at this point at least that 0:03:31.200 --> 0:03:34.160 they lose both. That is really interesting. I guess what 0:03:34.320 --> 0:03:37.680 I find also interesting? Maybe I just don't understand politics. 0:03:38.120 --> 0:03:42.200 It's just, you know, it seemed like nothing could get done. 0:03:42.240 --> 0:03:45.640 What what happened on the Republicans. I mean, although Kamala 0:03:45.720 --> 0:03:48.440 Harris had to really do the deciding vote. But is 0:03:48.440 --> 0:03:51.360 there a change in tone at all in terms of 0:03:51.360 --> 0:03:54.440 the Republicans? Okay, or the or the influence of of 0:03:54.800 --> 0:03:59.120 Donald Trump. It's really incredible to hear the talking points, Carol. 0:03:59.160 --> 0:04:01.560 I mean, I don't know what people who don't follow 0:04:01.600 --> 0:04:04.840 us every day must think. It's called They called it 0:04:04.920 --> 0:04:08.800 the inflation Reduction Act, and every Republican who has spoken 0:04:09.000 --> 0:04:11.400 around it, including on the Sunday morning shows yesterday, said 0:04:11.480 --> 0:04:14.760 it'll in fact make inflation worse. So wait a minute, 0:04:15.040 --> 0:04:17.159 someone's lying to me here. I mean to be that 0:04:17.279 --> 0:04:20.480 far apart on talking points is partly why people hate Washington. 0:04:20.560 --> 0:04:22.479 It's also why they don't understand what goes on here. 0:04:22.920 --> 0:04:25.159 And Republicans will try to hang this around the next 0:04:25.160 --> 0:04:27.680 of Democrats saying that you know, we had inflation, they 0:04:27.760 --> 0:04:30.719 just spent another seven hundred and fifty billion dollars, even 0:04:30.720 --> 0:04:34.239 though that's not accurate. Rick Scott, the Senator from Florida Republican, 0:04:34.279 --> 0:04:38.640 yesterday said it should be renamed the War on Seniors Act. 0:04:39.360 --> 0:04:42.599 Even though we're lowering. This bill lowers the price of 0:04:42.680 --> 0:04:46.120 prescription drugs for those on Medicare. So just got about 0:04:46.160 --> 0:04:52.080 thirty seconds here. Is is this a movement forward for Americans? 0:04:52.160 --> 0:04:57.320 For citizens? I let others make that determination. But look, 0:04:57.360 --> 0:04:59.720 there is deficit reduction in here we were supposed to 0:04:59.800 --> 0:05:03.440 like at right, there will be lower drug prices. Whether 0:05:03.480 --> 0:05:05.799 you think that eats into the R and D accounts 0:05:05.800 --> 0:05:08.080 of major pharma that has yet to be determined. I 0:05:08.120 --> 0:05:11.160 guess having several million people not lose their health insurance 0:05:11.240 --> 0:05:15.040 is probably a good thing. Doing it with only one party, though, 0:05:15.160 --> 0:05:17.720 is pretty tough, and it really reinforces the divisions in 0:05:17.760 --> 0:05:20.040 this country. Well, bottom line, I heard somebody I think, 0:05:20.080 --> 0:05:23.000 talking with David Weston earlier on Bloomberg TV talking about 0:05:23.040 --> 0:05:26.800 this is another trillion dollars that gets essentially pumped into 0:05:26.839 --> 0:05:29.760 the economy. I mean, right, this is more money that 0:05:29.880 --> 0:05:32.560 gets pumped in, and so you do wonder what impact 0:05:32.560 --> 0:05:35.560 that will have on kind of our pricing. Just to 0:05:35.640 --> 0:05:37.800 keep in mind though, it does pay for itself. That 0:05:37.920 --> 0:05:40.080 we know from the CBO. It raises enough money to 0:05:40.120 --> 0:05:42.400 cover the programs and to lower the deficits. So this 0:05:42.560 --> 0:05:45.160 is not as opposed to, for instance, the tax bill 0:05:45.160 --> 0:05:49.080 in seventeen we keep hearing about that was entirely deficit spending. 0:05:49.520 --> 0:05:52.400 So if this lowers the deficit, you know, the econ 0:05:52.480 --> 0:05:54.560 one on one guy in my head would tell me 0:05:54.600 --> 0:05:56.839 that's good. Okay, I'm gonna leave it there. Jill Matthew, 0:05:56.880 --> 0:05:59.400 thank you so much. Hosted Bloomberg Sound On. This is 0:05:59.440 --> 0:06:03.400 Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes. 0:06:03.480 --> 0:06:08.400 Tim Stinovic on Bloomberg Radio on Bloomberg Radio. As Carol 0:06:08.440 --> 0:06:11.880 said earlier, we're really at the tail end of earning season, 0:06:12.120 --> 0:06:13.880 and I want to talk about that with Brendan Case. 0:06:13.920 --> 0:06:17.120 He's a big box retail reporter for Bloomberg News. He 0:06:17.200 --> 0:06:19.800 joins us on the phone from Dallas, and Brendan the 0:06:19.839 --> 0:06:23.360 words stagflation. Sometimes. I used to tweet about it and 0:06:23.440 --> 0:06:25.520 I'd get a lot of snarky replies. It used to 0:06:25.520 --> 0:06:28.520 be sort of a taboo sort of word. But in 0:06:28.600 --> 0:06:30.919 your latest piece for Bloomberg Business Week, you write that 0:06:30.960 --> 0:06:35.479 stagflation puts stamp on earnings of US consumer giants. What 0:06:35.560 --> 0:06:40.159 did we learn this past reporting season? Yeah, you know, 0:06:40.240 --> 0:06:43.800 one of the big lessons coming out of the earning 0:06:43.800 --> 0:06:46.720 season for consumer goods companies is that a lot of 0:06:46.760 --> 0:06:51.560 them are starting to report declines in unit volumes, and 0:06:51.640 --> 0:06:55.360 so their sales typically you know, in dollar terms, are 0:06:55.400 --> 0:06:59.760 going up, uh, fairly moderately. Um. Their prices are going 0:06:59.839 --> 0:07:03.280 up lot, but their volumes are going down. Um. And 0:07:03.320 --> 0:07:06.040 what I think you're starting to see there is just 0:07:06.240 --> 0:07:10.600 the kind of demand destruction from rising prices, with consumers 0:07:10.600 --> 0:07:13.640 starting to say, you know, what can't happen anymore? I 0:07:13.720 --> 0:07:15.760 got to spend more on food and fuel and I'm 0:07:15.800 --> 0:07:18.440 just going to have to buy less stuff. So bottom line, 0:07:18.480 --> 0:07:21.600 it's the dollar amount of stuff being sold is going out, 0:07:21.640 --> 0:07:24.920 but that's because of higher prices, but the individual units 0:07:24.960 --> 0:07:27.360 being sold are going down, which is an indication of 0:07:27.400 --> 0:07:31.760 consumers backing off. Is that fair? Yeah, that's fair. And 0:07:31.760 --> 0:07:35.160 if you take a look at a company like let's say, 0:07:35.280 --> 0:07:39.200 canagraa craft hinds um, you know, they don't break it 0:07:39.240 --> 0:07:43.600 out by product line, but what could be the case, 0:07:43.680 --> 0:07:47.320 just to take hypothetical example of the product is that 0:07:47.440 --> 0:07:51.720 maybe um, you know, a box of mac and cheese 0:07:51.720 --> 0:07:53.760 mix costs more than it did a year ago by 0:07:53.840 --> 0:07:57.120 quite a lot, and some customers are saying, I'm gonna 0:07:57.160 --> 0:07:59.119 have to buy a little bit less of that because 0:07:59.160 --> 0:08:02.600 of the price increase. And so Brendon earning season is 0:08:02.600 --> 0:08:05.080 so important, not just because we get the numbers, but 0:08:05.160 --> 0:08:09.360 we also hear from the executives themselves, the c suites, 0:08:09.920 --> 0:08:14.040 uh sort of voices And when it comes to stagflation 0:08:14.040 --> 0:08:16.520 in this dynamic you're describing where you know the dollar 0:08:16.560 --> 0:08:18.920 amount is going up, but you know the actual number 0:08:18.920 --> 0:08:21.840 of units sold as going down. What has the messaging 0:08:21.920 --> 0:08:27.480 been like, Well, the messaging so far is not it? 0:08:28.240 --> 0:08:30.480 You don't you don't hear many people hitting the panic. 0:08:30.520 --> 0:08:33.400 But let's let's let's say that these are all companies 0:08:33.480 --> 0:08:39.200 that recorded big gains in sales during the pandemic. You know, 0:08:39.280 --> 0:08:42.680 people staying at home, buying a lot more stuff, a 0:08:42.679 --> 0:08:46.959 lot more consumer goods, UM, and you know, many cases. 0:08:47.000 --> 0:08:49.280 The last couple of years, the challenge for the companies 0:08:49.600 --> 0:08:52.640 was just to keep up with demand. Now that you 0:08:52.720 --> 0:08:57.120 see demand coming down, UM, you're not quite at the 0:08:57.160 --> 0:08:59.240 point yet where companies are saying this is gonna be 0:08:59.280 --> 0:09:02.319 a huge problem for us, because they can still raise prices. 0:09:02.360 --> 0:09:05.080 You know, for twenty years, there was almost kind of 0:09:05.080 --> 0:09:09.120 a taboo against raising prices, and now that's long gone. Um, 0:09:09.160 --> 0:09:11.880 and a company can pretty easily raise prices right now. 0:09:12.160 --> 0:09:16.720 And the decline in the unit volumes is not really 0:09:16.960 --> 0:09:21.000 serious enough yet for companies to start saying, wow, this 0:09:21.080 --> 0:09:22.640 is gonna be a big problem for us. You could 0:09:22.720 --> 0:09:25.880 start seeing that next year, but for now, they that 0:09:26.000 --> 0:09:29.720 they seem pretty content, and investors seem pretty content accepting 0:09:29.720 --> 0:09:31.720 that these companies are just going to pull the pricing 0:09:31.800 --> 0:09:34.800 lever a little bit. Even if that means volumes will 0:09:34.840 --> 0:09:37.959 come down, it does don't feel like um Brendan And 0:09:38.080 --> 0:09:42.360 it's a tale of two retail sectors because it does 0:09:42.400 --> 0:09:44.520 seem at the lower end. We've seen some of this, 0:09:44.600 --> 0:09:46.200 and maybe it's not fair to say lower end, but 0:09:46.600 --> 0:09:50.720 Walmart certainly plays to a certain you know, economic um 0:09:50.800 --> 0:09:55.640 spectrum in our world. Target to like they have both 0:09:56.040 --> 0:09:59.319 you know, cut some of their prices, slash prices if 0:09:59.320 --> 0:10:01.440 you would, as you say in your story for some 0:10:01.520 --> 0:10:05.760 of their product lines. So that's not not everybody, Not 0:10:05.920 --> 0:10:10.920 every retailer is able to kind of keeping raising prices. Yeah, 0:10:11.040 --> 0:10:12.839 and you know what, we'll we'll get a little more 0:10:12.840 --> 0:10:16.120 insight next week because Walmart and Target will report their 0:10:16.200 --> 0:10:18.960 full results. Um, sort of at the very tail end 0:10:19.080 --> 0:10:22.360 of the earning season. UM. I think what you're seeing 0:10:22.360 --> 0:10:26.839 with them is that they're very busily raising a lot 0:10:26.880 --> 0:10:30.840 of prices throughout the store. However, there are some particular 0:10:30.920 --> 0:10:35.600 areas Walmart cited apparel, Target cited kitchen appliances and patio furniture, 0:10:35.840 --> 0:10:38.440 some areas where they have had to be aggressive, a 0:10:38.520 --> 0:10:41.160 lot more aggressive than they wanted to be in in 0:10:41.240 --> 0:10:44.600 cutting prices. UM. It's hard to figure out exactly how 0:10:44.640 --> 0:10:48.440 that all nets out. UM. I do think that you know, 0:10:48.600 --> 0:10:52.720 probably when it comes to grocery, UM, you know, consumers 0:10:52.720 --> 0:10:55.320 are paying more than they were, and those companies are 0:10:55.360 --> 0:10:58.959 able to raise prices more than has typical UM in 0:10:59.559 --> 0:11:01.679 the past. Will probably learn a little bit more about 0:11:01.679 --> 0:11:04.559 it next week, But I do think that your characterization 0:11:04.640 --> 0:11:08.600 is very accurate. UM. Walmart, you know, says that it 0:11:08.679 --> 0:11:11.559 serves basically a broad cross section of the US population. 0:11:11.720 --> 0:11:14.120 I take that to be true, but I do think 0:11:14.160 --> 0:11:17.400 that their clientele skews a little towards the lower end 0:11:17.440 --> 0:11:21.160 of the spectrum, and they've been pretty candid about how 0:11:21.760 --> 0:11:25.360 general merchandise sales especially are really starting to suffer. And 0:11:25.360 --> 0:11:28.840 Brendon talk about sort of the other end of the spectrum, 0:11:29.000 --> 0:11:32.640 the wealthier customers, because you do write that there is 0:11:32.679 --> 0:11:34.960 a rare breed of consumer companies that have been able 0:11:35.000 --> 0:11:39.120 to boost both prices and their unit sales. That's right. 0:11:39.160 --> 0:11:42.640 You know, you're seeing you're seeing some luxury retailers that 0:11:42.720 --> 0:11:47.760 are doing fine, if not quite well in many cases, UM, 0:11:47.840 --> 0:11:51.080 and even you see that, UM, you know, outside of 0:11:51.080 --> 0:11:54.880 of of luxury. But if you take a company like Costco, UM, 0:11:54.880 --> 0:11:58.640 you know, Costco's clientele very definitely skews a little more 0:11:58.679 --> 0:12:02.320 towards the higher end of respect drum. They up until 0:12:03.360 --> 0:12:08.520 July had been reporting double digit gains in comparable sales 0:12:09.120 --> 0:12:12.719 excluding gasoline, and so clearly they're you know, selling a 0:12:12.760 --> 0:12:16.880 lot of stuff and able to to to raise prices 0:12:16.920 --> 0:12:18.960 for it. It was in a costco parkinglat I did 0:12:18.960 --> 0:12:22.960 not go in, but it was a little hectic. Um. Hey, Brendon, Sue, Okay, 0:12:23.000 --> 0:12:26.079 we have a really smart audience, investor audience who's listening 0:12:26.080 --> 0:12:29.360 to what you're saying. So I'm trying to figure out 0:12:29.440 --> 0:12:32.920 what does this mean for these consumer based companies potentially 0:12:32.920 --> 0:12:36.040 going forward, and what does it, if anything, kind of 0:12:36.040 --> 0:12:39.080 tell us more broadly about the US consumer and the 0:12:39.160 --> 0:12:43.240 US economy. Yeah, fact, And I think when you think 0:12:43.240 --> 0:12:46.080 about it in in broad terms, I think what it 0:12:46.160 --> 0:12:50.640 tells us is that many consumers, certainly at the lower 0:12:50.720 --> 0:12:54.720 end but really throughout the entire income spectrum, are starting 0:12:54.720 --> 0:12:59.120 to notice price increases and starting to um to take 0:12:59.160 --> 0:13:01.200 action their start and to pull back a little bit. 0:13:01.320 --> 0:13:04.880 That is probably more and more true the lower that 0:13:05.000 --> 0:13:07.240 you get on the income scale, where people you know, 0:13:07.400 --> 0:13:11.920 just don't have the funds to keep buying the way 0:13:11.960 --> 0:13:15.360 they did during the pandemic. What it means for the 0:13:15.360 --> 0:13:18.080 company's Well, you know, that's going to be something that 0:13:18.640 --> 0:13:20.760 we'll have to see because that just sort of feeds 0:13:20.760 --> 0:13:23.280 into the whole debate on what kind of a you know, 0:13:23.360 --> 0:13:25.520 could you get a soft landing, what's going to happen 0:13:25.559 --> 0:13:29.560 with the economy. Job creation is so robust that if 0:13:30.360 --> 0:13:33.800 you know, you could imagine a scenario where price increases 0:13:33.840 --> 0:13:37.920 start to start to moderate and get a situation where 0:13:38.440 --> 0:13:42.080 maybe you get stable volumes as opposed to declining volumes 0:13:42.120 --> 0:13:45.360 with a little less price infection. Great story among the 0:13:45.400 --> 0:13:47.839 most right on the Bloomberg Today. Brendan Kase, big box 0:13:47.840 --> 0:13:50.800 retail reporter up Bloomberg News on the phone from Dallas. 0:13:51.120 --> 0:13:52.640 It's also a story you can find in the current 0:13:52.720 --> 0:14:02.360 issue of Bloomberg Business Week. This is Bloomberg Journal. Yeah, 0:14:02.440 --> 0:14:06.280 but you let me drive? No, no, no, who's home? 0:14:06.600 --> 0:14:10.400 Oh right, please, I'll do the riding gravels. I want 0:14:10.400 --> 0:14:18.480 to drive. It's good question to drive. This is the 0:14:18.640 --> 0:14:22.520 drive to the Clothes to think Well Drier up down 0:14:22.920 --> 0:14:25.440 on Bluebird Radio, and we've got just about ten and 0:14:25.440 --> 0:14:28.240 a half minutes left to end the Monday trading session. 0:14:28.240 --> 0:14:30.200 It is time for the Drive to the close. David 0:14:30.240 --> 0:14:34.040 Deet's managing principal and senior portfolio strategist at Peapack Private 0:14:34.040 --> 0:14:37.400 Wealth Management, roughly not in a half billion of assets 0:14:37.440 --> 0:14:40.360 under management. He joined us on the phone from Summit, 0:14:40.440 --> 0:14:43.000 New Jersey. David, nice to have you here with Katie 0:14:43.000 --> 0:14:48.040 and myself on this Monday. Interesting trade tech really under 0:14:48.080 --> 0:14:50.520 some pressure, although I should even say that right now 0:14:50.520 --> 0:14:53.560 it's just little change. Um, what's on your mind on 0:14:53.600 --> 0:14:57.400 this Monday? Well, Carol, good to be with you and 0:14:57.480 --> 0:14:59.840 Katie this afternoon. Gee. You know I still think in 0:15:00.000 --> 0:15:04.000 inflation and the Fed is issue number one. Um. We 0:15:04.000 --> 0:15:06.160 were looking at, of course that second quarter in a 0:15:06.280 --> 0:15:10.000 row of week GDP growth or negative GDP growth, and 0:15:10.080 --> 0:15:13.960 some indicators showed that the economy was slowing. But then 0:15:13.960 --> 0:15:17.160 of course everything changed on Friday when we had the 0:15:17.160 --> 0:15:23.320 lowest joblessness in nine and very strong um increases in 0:15:23.440 --> 0:15:26.160 earnings and so forth, which has put inflation back in 0:15:26.200 --> 0:15:28.880 the forefront. It doesn't seem that we were seating, and 0:15:28.960 --> 0:15:30.880 that means what does the FED do? And now of 0:15:30.920 --> 0:15:34.320 course people are ramping up bets that we'll see another 0:15:34.440 --> 0:15:39.160 three quarter uh point increase UM in the FED fund 0:15:39.200 --> 0:15:42.240 trate come September one bank is to talk about one percent. 0:15:42.320 --> 0:15:45.520 And so we're in this period where you know, you 0:15:45.520 --> 0:15:48.200 still have a very aggressive FED and that puts a 0:15:48.200 --> 0:15:50.280 lot of uncertainty as to where interest rates are going 0:15:50.280 --> 0:15:53.480 and therefore what valuation should be on stocks. Yeah, and 0:15:53.560 --> 0:15:55.640 I mean I was going to ask, within that environment, 0:15:55.960 --> 0:15:59.240 all of that uncertainty and just watching every data point, 0:15:59.560 --> 0:16:02.520 how do you structure portfolio around that? Where do you 0:16:02.520 --> 0:16:06.800 find opportunity? Right now? So we're you know, what we're 0:16:06.840 --> 0:16:09.600 trying to you know, on a monthly basis here rebounds 0:16:09.680 --> 0:16:11.800 to our longer term targets. Were not trying to make 0:16:11.840 --> 0:16:15.120 a short term bet last month, of course, with the 0:16:15.480 --> 0:16:19.960 big sell off UH following some very strong metrics on 0:16:20.000 --> 0:16:23.600 inflation the prior month, we added to equities. Right now, 0:16:23.760 --> 0:16:26.560 we're pulling back where we're a little cautious here. I mean, 0:16:26.560 --> 0:16:30.920 we've seen the SMP five rio just since mid June. 0:16:31.080 --> 0:16:33.680 I think the NASTAC one at one point today was 0:16:33.760 --> 0:16:36.320 up twenty from that low. So this is the time 0:16:36.320 --> 0:16:39.400 to probably take some chips off the table. I think 0:16:39.560 --> 0:16:42.640 all eyes are going to be on Wednesday's inflation report. 0:16:42.840 --> 0:16:46.680 If that's hotter that expected, expect to pull back, particularly 0:16:46.720 --> 0:16:50.680 amongst on those megacaph tech socks, and maybe a rotation 0:16:50.760 --> 0:16:53.600 back into some of those materials energy names which have 0:16:53.680 --> 0:16:56.960 not participated as much in July. So you said, so 0:16:57.440 --> 0:16:59.720 you would recommend investors do some selling when it comes 0:16:59.720 --> 0:17:03.160 to the pretty trade right now, we would take some 0:17:03.320 --> 0:17:07.800 chips off the table. Yeah, yeah, that that that means 0:17:07.800 --> 0:17:10.240 selling rebalanced. I mean, we had one of the best 0:17:10.280 --> 0:17:13.320 months we've seen in many, many years in July. To 0:17:13.440 --> 0:17:17.720 take advantage of that, because these uncertainties are still here. 0:17:18.119 --> 0:17:20.320 I mean, you know, for example, in Video, which is 0:17:20.359 --> 0:17:23.679 our largest chip maker, came in with a big warning 0:17:23.720 --> 0:17:26.840 in terms of expectations, taking down the whole chip sector. 0:17:27.000 --> 0:17:29.359 That's a major component of tech, which is a major 0:17:29.400 --> 0:17:32.439 component of the economy. So therefore, I think investors have 0:17:32.680 --> 0:17:34.800 to be cautious. It sounds like you need to be 0:17:34.840 --> 0:17:37.040 a pretty active trader. So when do you, David, I 0:17:37.359 --> 0:17:40.639 get back to, okay, long term fundamentals. I mean, you know, 0:17:40.800 --> 0:17:42.840 most of you guys say, if you're you're investing for 0:17:42.840 --> 0:17:45.439 the long term, so ride out these bumps. Why is 0:17:45.480 --> 0:17:47.760 it now not a time to ride out the bumps? 0:17:48.240 --> 0:17:50.160 And as you said, take some chips off the table 0:17:50.280 --> 0:17:53.520 versus if you believe in these long term strategies, just 0:17:54.040 --> 0:18:00.160 you know, kind of hold it. Yeah, well, I mean, uh, 0:18:00.200 --> 0:18:04.880 you know, certainly we're looking for excessive swings in terms 0:18:04.920 --> 0:18:09.320 of sentiment up and down. I think I appreciate what 0:18:09.440 --> 0:18:11.800 you're you're saying. We're very long term. We're not talking 0:18:11.800 --> 0:18:14.800 about selling out an entire portfolio or jumping in with 0:18:14.840 --> 0:18:17.480 all of our cash. We're just trimming on the edges 0:18:17.600 --> 0:18:20.840 here that gives ourselves just a little bit of dry powder. 0:18:21.320 --> 0:18:23.800 We have a number of names in for example, energy, 0:18:24.160 --> 0:18:27.439 in financial services, even some gold companies that we'd like, 0:18:27.720 --> 0:18:29.479 we'd like to build up just a little bit of 0:18:29.480 --> 0:18:31.320 cash there so we can take advantage of it. If 0:18:31.359 --> 0:18:34.199 we remain fully invested at all times. Uh, you know, 0:18:34.280 --> 0:18:36.680 how do we take advantage of opportunities? And there will 0:18:36.760 --> 0:18:40.480 be you know, we're August in September historically have been 0:18:40.520 --> 0:18:43.800 tough months, so you know, we'll probably see stock prices 0:18:43.880 --> 0:18:46.080 lower than they are today at some point over the 0:18:46.080 --> 0:18:49.240 next sixty days. And I'm suious. So when you're you know, 0:18:49.440 --> 0:18:53.040 taking chips off the table, keeping powder dry to maybe 0:18:53.040 --> 0:18:56.679 sees on some opportunities, are you sitting in cash? I mean, 0:18:56.720 --> 0:18:58.719 what does the other side of maybe you know, selling 0:18:58.720 --> 0:19:01.760 out of the margins of your port folio looked like yes, 0:19:01.840 --> 0:19:04.879 so that's a that's a great question. You know, typically 0:19:04.920 --> 0:19:08.800 not cash because it's yielding so little, although that's changed 0:19:08.880 --> 0:19:11.520 dramatically over the last twelve months. But I think short 0:19:11.640 --> 0:19:14.440 term dated fixed income. I mean, we know the headline 0:19:14.480 --> 0:19:17.800 here is that the two year treasury is yielding substantially 0:19:17.800 --> 0:19:19.919 more than the ten year treasury, So why would you 0:19:19.920 --> 0:19:22.080 go out to the ten year if you're taking chips 0:19:22.080 --> 0:19:25.000 off the table to ultimately read deploy. So depending on 0:19:25.080 --> 0:19:26.960 the amount of cash you're talking about, to make sure 0:19:26.960 --> 0:19:29.760 the transaction costs aren't excessive, you might be going into 0:19:29.760 --> 0:19:32.920 the into the twelve month or twenty four month treasury 0:19:33.320 --> 0:19:35.720 um waging things out. We don't want to take a 0:19:35.720 --> 0:19:38.439 lot of risk in our bond portfolio because we like 0:19:38.520 --> 0:19:40.840 to be taking that risk in stocks when the opportunities 0:19:40.880 --> 0:19:43.639 present themselves. We don't want all of a sudden say hey, 0:19:43.680 --> 0:19:46.000 the stock markets down, let's do something, and then have 0:19:46.040 --> 0:19:48.679 a bunch of junkie bombs that are also under pressure 0:19:48.720 --> 0:19:50.959 for the same reasons. All right, So the names that 0:19:51.000 --> 0:19:52.720 you do like and you you kind of refer to 0:19:52.760 --> 0:19:56.520 them more broadly. I think before um capital one, Newmont, 0:19:56.600 --> 0:19:59.560 and Heuser Busch. Intel is our common theme among these 0:19:59.640 --> 0:20:03.080 names dividends. Hey, you know, let's take a look. Let's 0:20:03.240 --> 0:20:05.479 let's take a look at Numon here. You know, it's 0:20:05.560 --> 0:20:07.680 basically a gold investment, is the only one. The s 0:20:09.000 --> 0:20:11.200 is down about half from its high. You know, everyone 0:20:11.240 --> 0:20:14.960 says gold doesn't pay a dividend. True, Newmon pays close 0:20:15.000 --> 0:20:18.040 to five and they have almost no debt. I mean, 0:20:18.200 --> 0:20:21.080 goal's been out of favor for so long. Why there's 0:20:21.080 --> 0:20:23.640 been no inflation, and now you have cryptos that take 0:20:23.680 --> 0:20:27.200 the place of fiat curtsies. Guess what we have inflation? 0:20:27.320 --> 0:20:30.160 Guess what cryptos aren't doing so well? So people could 0:20:30.240 --> 0:20:33.240 come back to gold and collect that four point nine 0:20:33.240 --> 0:20:35.960 percent dividend while you're weighing their diverse side over four comes. 0:20:36.040 --> 0:20:38.359 And of course they also have exposure to other base 0:20:38.480 --> 0:20:42.240 materials like copper, which could uh seem to be playing 0:20:42.240 --> 0:20:44.240 a role in evs and so forth. So that's from 0:20:44.240 --> 0:20:47.920 one example. And I you said, you're not really taking 0:20:48.000 --> 0:20:50.440 risks in your bond portfolio. We only have about thirty 0:20:50.480 --> 0:20:52.960 seconds left foot. What does that look like? Is that 0:20:53.040 --> 0:20:58.840 just treasuries. Yeah, So first of all, we like to 0:20:58.840 --> 0:21:01.639 put the fixed income and the tax sheltered portfolios so 0:21:01.680 --> 0:21:04.359 that we don't have to deal with lesser yielding muties. 0:21:04.760 --> 0:21:08.359 We like taxable muties a lot because they give more 0:21:08.480 --> 0:21:10.600 yield than taxis have ones because you have to pay 0:21:10.640 --> 0:21:12.520 tax down if we hold in the I RA s, 0:21:12.920 --> 0:21:18.000 no taxes, um and so um. That's that's a favorite agencies. 0:21:18.200 --> 0:21:21.000 Some treasuries. We do own some corporates, but guess what 0:21:21.200 --> 0:21:24.280 stocks are all issued by corporations. So to get into 0:21:24.720 --> 0:21:28.600 enhanced diversification, we take a lighter touch in terms of 0:21:28.840 --> 0:21:31.359 corporate bombs in our portfolios. All right, Can I leave 0:21:31.359 --> 0:21:33.399 it on that note, Hey, David, thanks so much. David 0:21:33.440 --> 0:21:37.080 Deeds he senior Portfolio Strategies at Pepack Private Wealth Management, 0:21:37.160 --> 0:21:40.199 joining us once again on the phone from Summit, New Jersey. 0:21:40.680 --> 0:21:43.520 Thanks for listening to Bloomberg Business Week. Download the podcast 0:21:43.560 --> 0:21:46.520