1 00:00:13,920 --> 00:00:17,320 Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast. 2 00:00:17,520 --> 00:00:20,640 Speaker 1: My name is Mike Reagan. I'm a senior editor at Bloomberg. 3 00:00:20,239 --> 00:00:23,520 Speaker 2: And I'm Aldona Hirik, Across Asset reportered with Bloomberg. 4 00:00:23,200 --> 00:00:25,919 Speaker 1: And this week on the show, Well, this year's red 5 00:00:26,000 --> 00:00:29,200 Speaker 1: hot stock market finally cooled off a bit in August. 6 00:00:29,920 --> 00:00:32,120 Speaker 1: I followed a blistering rally that saw the S and 7 00:00:32,159 --> 00:00:35,959 Speaker 1: P five hundred gain almost twenty percent and the Nasdaq 8 00:00:36,000 --> 00:00:39,960 Speaker 1: one hundred climbed forty four percent through July. So what 9 00:00:40,000 --> 00:00:41,879 Speaker 1: are we to make of the market running out of 10 00:00:41,880 --> 00:00:44,440 Speaker 1: steam late in the summer. Is it just that typical 11 00:00:44,520 --> 00:00:48,360 Speaker 1: seasonal weakness when investors were all at the beach or 12 00:00:48,400 --> 00:00:51,000 Speaker 1: is there something more going on. We'll get into it 13 00:00:51,040 --> 00:00:54,720 Speaker 1: with a veteran market strategist. First of about a summer's 14 00:00:54,720 --> 00:00:56,320 Speaker 1: almost over, do you have a good summer? 15 00:00:56,880 --> 00:01:01,920 Speaker 2: Well, we know that. You think I was gallivanting around Europe, 16 00:01:02,240 --> 00:01:04,679 Speaker 2: which I did for a little while. Yeah, that was fun. 17 00:01:05,240 --> 00:01:06,920 Speaker 2: Otherwise it just went by really fast. 18 00:01:07,560 --> 00:01:09,760 Speaker 1: I'm ready for fall. I'm ready for the cooler weather. 19 00:01:10,319 --> 00:01:13,000 Speaker 2: I heard you're a big fan of pumpkin spice lattes. 20 00:01:13,640 --> 00:01:17,479 Speaker 2: Not at all, Yeah, you love them. I heard Mike 21 00:01:17,600 --> 00:01:21,960 Speaker 2: Reagan loves pumpkin flavored stuff PSL Pumpkin spice lattes. 22 00:01:22,800 --> 00:01:24,440 Speaker 1: Not at all, Not at all. 23 00:01:25,880 --> 00:01:29,080 Speaker 2: I wonder if our guest likes pumpkin spice lattes. He might. 24 00:01:29,480 --> 00:01:31,120 Speaker 2: He's one of my favorite people to talk to. It's 25 00:01:31,240 --> 00:01:35,120 Speaker 2: Art Hogan, chief market strategist at bet Riley Wealth Art. 26 00:01:35,319 --> 00:01:37,160 Speaker 2: Thank you so much for coming back on the show. 27 00:01:37,319 --> 00:01:38,959 Speaker 3: Thanks so much for having me. I'm very excited to 28 00:01:39,000 --> 00:01:39,280 Speaker 3: do this. 29 00:01:39,600 --> 00:01:41,120 Speaker 2: Do you like pumpkin spice lattes? 30 00:01:41,280 --> 00:01:43,520 Speaker 3: Not really a fan. I like a lot of pumpkin things, 31 00:01:43,560 --> 00:01:46,319 Speaker 3: but not the coffee flavored pumpkin stuff. 32 00:01:46,400 --> 00:01:48,560 Speaker 2: I'm I'm going to spread the rumor that both of 33 00:01:48,600 --> 00:01:51,000 Speaker 2: you like pumpkin flavored stuff. I'm going to tweet it. 34 00:01:51,600 --> 00:01:54,600 Speaker 1: He can't spreading spreading rumors, Vildonna. You're a you're a 35 00:01:54,600 --> 00:01:57,160 Speaker 1: professional journalist. You've got to deal with the facts. 36 00:01:57,520 --> 00:02:00,440 Speaker 2: We need some controversy in our lives, so this, this 37 00:02:00,480 --> 00:02:04,600 Speaker 2: can be it. But Art to start, Mike mentioned at 38 00:02:04,640 --> 00:02:07,360 Speaker 2: the top of the show that we had had this 39 00:02:07,520 --> 00:02:10,120 Speaker 2: blistering rally in the market. So I'm just wondering what 40 00:02:10,160 --> 00:02:12,800 Speaker 2: you're expecting over the next couple of weeks. Do you 41 00:02:13,240 --> 00:02:15,400 Speaker 2: think that we can continue to expect the market to 42 00:02:15,840 --> 00:02:19,200 Speaker 2: digest the gains that we had seen coming into the fall. 43 00:02:19,520 --> 00:02:21,280 Speaker 3: Yeah. I think Mike made a really good point. And 44 00:02:21,320 --> 00:02:23,280 Speaker 3: I think if you look back in history and say, 45 00:02:23,280 --> 00:02:25,519 Speaker 3: what does the SP five hunder do when it gets 46 00:02:25,520 --> 00:02:27,840 Speaker 3: off to a really solid start, And if you looked 47 00:02:27,840 --> 00:02:31,560 Speaker 3: at the last twenty times that the spfif hunder was 48 00:02:31,680 --> 00:02:34,079 Speaker 3: up ten percent or more going into the mid year, 49 00:02:34,560 --> 00:02:36,679 Speaker 3: August and September I have been rough months. That's why 50 00:02:36,720 --> 00:02:39,440 Speaker 3: we call it season lead. Sometimes it takes a little 51 00:02:39,440 --> 00:02:41,440 Speaker 3: bit of a catalyst to remind us, but this year 52 00:02:41,440 --> 00:02:44,000 Speaker 3: it didn't. We just flipped the calendar and August was 53 00:02:44,080 --> 00:02:47,240 Speaker 3: just a bumpy road for all asset classes but certain 54 00:02:47,320 --> 00:02:49,680 Speaker 3: life treasuries, and I think that was part of the problem. 55 00:02:49,840 --> 00:02:52,720 Speaker 3: Yields backed up, but we saw some pretty quick draw downs. 56 00:02:52,720 --> 00:02:58,040 Speaker 3: It was more noticeable and the seven largest AI darlings, 57 00:02:58,080 --> 00:03:00,480 Speaker 3: the Magnicent seven, right, which were off a lot more 58 00:03:00,560 --> 00:03:03,560 Speaker 3: than the index was. But I think that what happens 59 00:03:03,639 --> 00:03:05,360 Speaker 3: is you do sort of look at this and say, Okay, 60 00:03:05,480 --> 00:03:08,560 Speaker 3: these gains sustainable to me. The more important thing that 61 00:03:08,680 --> 00:03:11,799 Speaker 3: happened sort of post Memorial Day and into this August 62 00:03:11,800 --> 00:03:14,040 Speaker 3: the September time frame is the market's really broadening out 63 00:03:14,360 --> 00:03:17,440 Speaker 3: and it's quietly getting some sponsorship for some of the 64 00:03:17,520 --> 00:03:20,360 Speaker 3: underperforming sectors in the first six or seven months this year, 65 00:03:20,400 --> 00:03:22,560 Speaker 3: and by that, I mean, you know, it was all 66 00:03:22,600 --> 00:03:26,000 Speaker 3: about technology, communications services, and consumer discretionary in the first 67 00:03:26,000 --> 00:03:28,440 Speaker 3: half of this year, and all of a sudden, posts 68 00:03:29,080 --> 00:03:33,840 Speaker 3: memorl Day into August, we started to see energy pick up, 69 00:03:34,160 --> 00:03:36,720 Speaker 3: which is great, right, So one of the biggest laggards 70 00:03:36,720 --> 00:03:38,960 Speaker 3: in the SP five hundred is up seven hundred basis 71 00:03:39,000 --> 00:03:42,920 Speaker 3: points over technology in the last month, right, And I 72 00:03:42,960 --> 00:03:45,520 Speaker 3: think that's helpful. Industrials are up three hundred basis points 73 00:03:45,680 --> 00:03:49,280 Speaker 3: or two hundred and seventy basis points above technology, So 74 00:03:49,440 --> 00:03:51,640 Speaker 3: that catch up trade is really important. And I set 75 00:03:51,680 --> 00:03:53,080 Speaker 3: it up that way because I think that's what the 76 00:03:53,120 --> 00:03:55,560 Speaker 3: back end of this year looks like. We can continue 77 00:03:55,600 --> 00:03:58,160 Speaker 3: to have markets grind higher. I really think the trade 78 00:03:58,160 --> 00:03:59,600 Speaker 3: is going to be about, Hey, what didn't work in 79 00:03:59,640 --> 00:04:01,920 Speaker 3: the first of this year. What should I be focusing on? 80 00:04:02,280 --> 00:04:04,120 Speaker 3: And I think investors are looking for that now. The 81 00:04:04,120 --> 00:04:06,160 Speaker 3: other piece of the puzzle that really worked well post 82 00:04:06,160 --> 00:04:08,960 Speaker 3: Memorial Day and continues to out perform is the Russell 83 00:04:08,960 --> 00:04:11,600 Speaker 3: two thousand small caps, big under performer in the front 84 00:04:11,600 --> 00:04:13,480 Speaker 3: half of the year, and I suspect they're going to 85 00:04:13,560 --> 00:04:15,080 Speaker 3: perform in the back half, you know. 86 00:04:15,400 --> 00:04:17,920 Speaker 1: Towards the end of the month. Obviously, we got Jerome 87 00:04:18,000 --> 00:04:22,560 Speaker 1: Powell's speech at Jackson Hole, and the market really seemed 88 00:04:22,560 --> 00:04:24,760 Speaker 1: to take that as a positive. You know, I'm not 89 00:04:24,839 --> 00:04:27,120 Speaker 1: exactly sure what it was. He didn't seem to really 90 00:04:27,160 --> 00:04:31,320 Speaker 1: break too much new ground. But is this sort of 91 00:04:31,760 --> 00:04:34,760 Speaker 1: nascent rebound we've seen from the August folatility is that 92 00:04:34,800 --> 00:04:37,560 Speaker 1: all due to pal Do you think just taking sort 93 00:04:37,600 --> 00:04:40,320 Speaker 1: of the worst case scenario off the table when it 94 00:04:40,320 --> 00:04:42,920 Speaker 1: comes to rates or what? Is it just a coincidence? 95 00:04:42,920 --> 00:04:45,560 Speaker 3: I think he had such an easy comp compared to 96 00:04:45,640 --> 00:04:47,760 Speaker 3: last year. Right So, last year it was Jackson Hole 97 00:04:47,839 --> 00:04:49,839 Speaker 3: j Powell who just crushed the market, came out with 98 00:04:49,920 --> 00:04:53,720 Speaker 3: a comically short speech and talked about how much more 99 00:04:53,760 --> 00:04:56,000 Speaker 3: work they had to do, right so, and looking back 100 00:04:56,040 --> 00:04:58,120 Speaker 3: and say, well, how much has changed year over year, 101 00:04:58,240 --> 00:05:00,640 Speaker 3: I think Jay Powell was a lot more comfortable. You know, 102 00:05:00,720 --> 00:05:02,000 Speaker 3: we just don't know, and we're going to have to 103 00:05:02,040 --> 00:05:04,120 Speaker 3: be careful about it because they're getting to that last 104 00:05:04,160 --> 00:05:06,839 Speaker 3: mile getting headline inflation from three percent out of two percent, 105 00:05:06,880 --> 00:05:09,040 Speaker 3: et cetera. And that's the tricky part because they don't 106 00:05:09,040 --> 00:05:10,960 Speaker 3: want to overdo it and break something, which the Fed 107 00:05:11,080 --> 00:05:12,920 Speaker 3: usually does. They don't want to underdo it and end 108 00:05:12,960 --> 00:05:15,680 Speaker 3: up in a seventy situation where inflation comes rory back. 109 00:05:15,720 --> 00:05:17,719 Speaker 3: So I think he delivered the right message. I don't 110 00:05:17,720 --> 00:05:21,560 Speaker 3: think he made any news unnecessarily. I think navigating by 111 00:05:21,600 --> 00:05:24,200 Speaker 3: the stars and the cloudy sky was kind of the 112 00:05:24,279 --> 00:05:26,920 Speaker 3: highlight for me. But I think if you combine that 113 00:05:27,480 --> 00:05:30,320 Speaker 3: with the path of economic data that we've seen of 114 00:05:30,440 --> 00:05:34,760 Speaker 3: late and yields, finally these sort of calming down a bit, right, 115 00:05:34,800 --> 00:05:37,120 Speaker 3: So if the Treasury curve calms down a bit and 116 00:05:37,320 --> 00:05:39,200 Speaker 3: stills a bit more of a risk on attitude, I 117 00:05:39,240 --> 00:05:41,080 Speaker 3: think that has been helpful for the last couple of days. 118 00:05:41,080 --> 00:05:43,279 Speaker 3: But it's only been you know, two or three days 119 00:05:43,600 --> 00:05:46,440 Speaker 3: in August where we've actually seen much of a rally, 120 00:05:46,440 --> 00:05:48,120 Speaker 3: where most of the month we couldn't put two days 121 00:05:48,120 --> 00:05:50,240 Speaker 3: together in a row. So I think it's you know, 122 00:05:50,279 --> 00:05:52,040 Speaker 3: we continue to have a bit of a bumpy road 123 00:05:52,080 --> 00:05:53,520 Speaker 3: in front of us, but I think the good news 124 00:05:53,640 --> 00:05:55,760 Speaker 3: is we're going to put August in the rear view 125 00:05:55,800 --> 00:05:58,120 Speaker 3: mirror in September is going to come around, and we'll 126 00:05:58,160 --> 00:05:59,080 Speaker 3: get through that as well. 127 00:05:59,200 --> 00:06:01,560 Speaker 2: That's such a good point about having the two days 128 00:06:01,839 --> 00:06:03,880 Speaker 2: in a row, which is a stat one of our 129 00:06:04,000 --> 00:06:06,919 Speaker 2: Bloomberg colleague, Aliena Popina, actually ended up writing about the 130 00:06:06,920 --> 00:06:08,839 Speaker 2: other day, and it was just so surprising to me 131 00:06:09,400 --> 00:06:12,760 Speaker 2: just reflecting on that. So you mentioned the seasonality factor. 132 00:06:13,040 --> 00:06:15,160 Speaker 2: I'm just wondering how much weight we really should be 133 00:06:15,240 --> 00:06:19,000 Speaker 2: putting behind something like seasonality, where people just looking back 134 00:06:19,040 --> 00:06:23,280 Speaker 2: at history say, okay, September tends to be choppy, October 135 00:06:23,320 --> 00:06:25,279 Speaker 2: tends to be choppy. How much weight do we put 136 00:06:25,279 --> 00:06:25,800 Speaker 2: behind those? 137 00:06:26,000 --> 00:06:28,240 Speaker 3: The way I think about it is, I think the 138 00:06:28,279 --> 00:06:31,359 Speaker 3: seasonality piece of the puzzle is a good it's a 139 00:06:31,360 --> 00:06:33,000 Speaker 3: good rule of thumb, but I don't think it's anything 140 00:06:33,000 --> 00:06:36,000 Speaker 3: you change an investment decision for. I think it's important 141 00:06:36,040 --> 00:06:38,440 Speaker 3: to know that historically there are months that are that 142 00:06:38,480 --> 00:06:41,039 Speaker 3: are softer than others, and there's certainly cycles like the 143 00:06:41,080 --> 00:06:43,800 Speaker 3: presidential election cycle that are important. I think in general, 144 00:06:44,120 --> 00:06:46,120 Speaker 3: it's just it's more of a it's more of a 145 00:06:46,120 --> 00:06:48,039 Speaker 3: guide post for you to say, Okay, this may be 146 00:06:48,120 --> 00:06:50,320 Speaker 3: the reason why we're seeing softest, but it's all, it's 147 00:06:50,360 --> 00:06:51,600 Speaker 3: never going to be the reason that you want to 148 00:06:51,680 --> 00:06:53,159 Speaker 3: change your long term investment ws. 149 00:06:53,400 --> 00:06:56,400 Speaker 1: You know art you mentioned earlier Magnificent seven, you know, 150 00:06:56,480 --> 00:06:59,920 Speaker 1: the big megacap text shares at the top of the 151 00:07:00,400 --> 00:07:03,480 Speaker 1: S and P five hundred US waiting top of the 152 00:07:03,560 --> 00:07:08,000 Speaker 1: Nazek one hundreds waiting to The whole frenzy towards AI 153 00:07:08,080 --> 00:07:10,880 Speaker 1: has been kind of fascinating to me because, you know, 154 00:07:10,920 --> 00:07:14,720 Speaker 1: we're used to seeing something like that built entirely on hype, 155 00:07:15,080 --> 00:07:18,200 Speaker 1: but in this case, you know, the fundamentals seem to 156 00:07:18,240 --> 00:07:21,840 Speaker 1: be coming in early, hand in hand with the hype. 157 00:07:21,840 --> 00:07:23,960 Speaker 1: You know, every time in Video puts out a forecast 158 00:07:24,040 --> 00:07:26,800 Speaker 1: or its earnings release, it's like wow, you know, it's 159 00:07:26,840 --> 00:07:31,000 Speaker 1: like this is real here and now fundamental improvement based 160 00:07:31,040 --> 00:07:33,720 Speaker 1: on this AI theme, at least for n Video, but 161 00:07:33,760 --> 00:07:36,400 Speaker 1: I'm sure for others, you know, the cloud service providers 162 00:07:36,440 --> 00:07:38,880 Speaker 1: and all that. So how are you thinking about that 163 00:07:39,040 --> 00:07:43,680 Speaker 1: sort of separating the hype from the actual fundamentals in 164 00:07:43,760 --> 00:07:46,520 Speaker 1: the AI plays and where do you see it going? 165 00:07:46,600 --> 00:07:50,440 Speaker 1: Like to me, it almost feels like with stocks that big, 166 00:07:50,640 --> 00:07:54,400 Speaker 1: market caps that big, and sort of this speculative frenzy 167 00:07:54,520 --> 00:07:57,640 Speaker 1: around AI. It seems like kind of a dangerous combination 168 00:07:57,760 --> 00:08:01,600 Speaker 1: for volatility potentially until we out the winners and losers 169 00:08:01,600 --> 00:08:05,960 Speaker 1: of AI more completely and comprehensively. But I'm curious how 170 00:08:06,000 --> 00:08:09,520 Speaker 1: you're thinking about sort of that that hype combined with 171 00:08:09,600 --> 00:08:14,400 Speaker 1: actual fundamental improvement so quickly in the cycle of something 172 00:08:14,440 --> 00:08:15,400 Speaker 1: that's being hyped. 173 00:08:15,160 --> 00:08:17,120 Speaker 3: Like this, right, such a great point, and I think 174 00:08:17,120 --> 00:08:19,120 Speaker 3: you set it up perfectly. I think when you think 175 00:08:19,120 --> 00:08:21,440 Speaker 3: about anything new, the best analog for me is going 176 00:08:21,480 --> 00:08:23,440 Speaker 3: back to ninety five to two thousand when we think 177 00:08:23,480 --> 00:08:27,160 Speaker 3: about the Internet, right, So, the Internet and dot com revolution, 178 00:08:27,240 --> 00:08:30,040 Speaker 3: and that was going to change the world. And what's 179 00:08:30,080 --> 00:08:33,440 Speaker 3: interesting to me is that going back to that timeframe 180 00:08:33,480 --> 00:08:36,680 Speaker 3: and say, yes, ninety five companies started company public and 181 00:08:36,720 --> 00:08:39,199 Speaker 3: then it really got a head of esteem into ninety seven, 182 00:08:40,000 --> 00:08:42,240 Speaker 3: eight hundred and fifty three companies came public and most 183 00:08:42,280 --> 00:08:44,200 Speaker 3: of them didn't even have business models, but they put 184 00:08:44,200 --> 00:08:45,480 Speaker 3: dot com at the end of their name, and we 185 00:08:45,480 --> 00:08:49,080 Speaker 3: can remember all of those and that virtually all of 186 00:08:49,080 --> 00:08:53,280 Speaker 3: them are gone now, right, and virtually the winners in 187 00:08:53,320 --> 00:08:55,439 Speaker 3: the Internet cycle, and you and I using it in 188 00:08:55,480 --> 00:08:57,920 Speaker 3: our daily basis really didn't happen. Is so two thousand 189 00:08:57,960 --> 00:09:00,800 Speaker 3: and five right, So that total adres market and that 190 00:09:00,880 --> 00:09:04,000 Speaker 3: opportunity took the better part of a decade. So what's 191 00:09:04,000 --> 00:09:08,000 Speaker 3: different now is, first and foremost, we haven't had just 192 00:09:08,040 --> 00:09:11,360 Speaker 3: a flood of new, newly minted companies that are AI 193 00:09:11,840 --> 00:09:16,680 Speaker 3: specific or have AI adjacency, or have AI attributes. And 194 00:09:16,760 --> 00:09:19,120 Speaker 3: that's good. So there's not that sort of speculative bubble 195 00:09:19,200 --> 00:09:21,960 Speaker 3: and newly minted companies. I think that's very powerful and 196 00:09:22,000 --> 00:09:24,000 Speaker 3: a big difference, and I think that's healthy. I also 197 00:09:24,040 --> 00:09:26,839 Speaker 3: think the time is going to be compressed between when 198 00:09:27,240 --> 00:09:30,440 Speaker 3: companies adopt an AI strategy as part of their business 199 00:09:30,480 --> 00:09:32,440 Speaker 3: model and may monetize it, So I don't think we 200 00:09:32,480 --> 00:09:35,040 Speaker 3: wait a decade to see this happen. We've certainly seen 201 00:09:35,160 --> 00:09:38,560 Speaker 3: Nvidia growing their revenues because they're making the only chip 202 00:09:38,559 --> 00:09:41,480 Speaker 3: in town that really drives enough GPUs for companies to 203 00:09:41,559 --> 00:09:44,000 Speaker 3: actually have that AI strategy. So I would say as 204 00:09:44,000 --> 00:09:46,640 Speaker 3: an investor, the two things I would say early on 205 00:09:46,800 --> 00:09:49,120 Speaker 3: here is to say, yes, this is new and exciting. 206 00:09:49,160 --> 00:09:51,800 Speaker 3: We don't know how big this gets, but who are 207 00:09:51,840 --> 00:09:55,240 Speaker 3: the obvious players? And Video is obviously the leader here 208 00:09:55,440 --> 00:09:58,800 Speaker 3: and every time they report they raise their quarterly guidance 209 00:09:58,920 --> 00:10:02,520 Speaker 3: in billions of and while there's still the only game 210 00:10:02,559 --> 00:10:04,520 Speaker 3: in town, and they are right now and they've got 211 00:10:04,559 --> 00:10:08,120 Speaker 3: the early, early lead. They will eventually get some competition, 212 00:10:08,200 --> 00:10:10,560 Speaker 3: but for now, I think that's that's a safe place 213 00:10:10,600 --> 00:10:12,000 Speaker 3: to be if you want to have some force near 214 00:10:12,000 --> 00:10:14,800 Speaker 3: your portfolio there. And then the two incumbents are obvious, 215 00:10:14,920 --> 00:10:17,200 Speaker 3: right that the you know, the hyperscalers that can actually 216 00:10:17,440 --> 00:10:20,840 Speaker 3: use this right away and afford to develop an AI strategy. 217 00:10:20,840 --> 00:10:25,360 Speaker 3: See that's obviously Google and in Microsoft right and every 218 00:10:25,360 --> 00:10:26,959 Speaker 3: week there to come out with a different announcement and 219 00:10:27,000 --> 00:10:28,920 Speaker 3: talk about about how much you're going to charge for it. 220 00:10:29,000 --> 00:10:31,160 Speaker 3: But the difference that makes in the near term for 221 00:10:31,160 --> 00:10:33,559 Speaker 3: those two companies is much smaller than the difference that 222 00:10:33,640 --> 00:10:35,600 Speaker 3: it has made for in video. So you know, to me, 223 00:10:35,920 --> 00:10:38,839 Speaker 3: there's three obvious players, but I would overweight the guys 224 00:10:38,840 --> 00:10:40,840 Speaker 3: that are selling the picks and shovels to the gold rush. 225 00:10:40,920 --> 00:10:43,960 Speaker 3: And that's in video right now, and clearly it's It's 226 00:10:44,360 --> 00:10:47,079 Speaker 3: what's amazing to me is it's a lot cheaper than 227 00:10:47,080 --> 00:10:49,880 Speaker 3: it was when they reported their earnings a week or 228 00:10:49,960 --> 00:10:52,960 Speaker 3: so ago, and and you know, you might have some 229 00:10:53,000 --> 00:10:55,360 Speaker 3: better opportunities here. So they sharpen your pencil, but don't 230 00:10:55,400 --> 00:10:57,600 Speaker 3: jump in and never put on a full position at 231 00:10:57,640 --> 00:11:01,280 Speaker 3: one time, and any of these things. But the biggest 232 00:11:01,280 --> 00:11:02,800 Speaker 3: thing I'd be concerned about is if we start to 233 00:11:02,840 --> 00:11:05,320 Speaker 3: see the capital markets open, we start to have a 234 00:11:05,360 --> 00:11:09,600 Speaker 3: flood of newly minted companies that are AI specific or adjacent. 235 00:11:09,679 --> 00:11:12,080 Speaker 3: I would avoid that at all costs because they likely 236 00:11:12,120 --> 00:11:13,679 Speaker 3: don't have models. There's gonna be a lot of hype 237 00:11:13,720 --> 00:11:16,160 Speaker 3: around them. They're going to get priced at twenty and 238 00:11:16,160 --> 00:11:19,199 Speaker 3: litle bit at sixty, and that doesn't end well for anybody. 239 00:11:19,280 --> 00:11:20,960 Speaker 2: It's like when a couple of years ago a bunch 240 00:11:20,960 --> 00:11:23,840 Speaker 2: of companies were adding just blockchain to their name. Right, 241 00:11:29,559 --> 00:11:33,199 Speaker 2: I do have another question about the big tech companies 242 00:11:33,200 --> 00:11:35,760 Speaker 2: for you. There was this really interesting report from Bloomberg 243 00:11:35,840 --> 00:11:40,560 Speaker 2: Intelligence this week that said, looking over the past five, ten, 244 00:11:40,720 --> 00:11:45,280 Speaker 2: fifteen years, there's only one equity mutual fund that has 245 00:11:45,320 --> 00:11:50,439 Speaker 2: outperformed QQQ, which is the giant NAZAQ one hundred ETF. 246 00:11:51,320 --> 00:11:55,640 Speaker 2: Just one has outperformed QQQ over that timeframe, and it's 247 00:11:55,679 --> 00:12:00,599 Speaker 2: because they had a heavyweighting towards Tesla. Wondering what you 248 00:12:00,720 --> 00:12:03,240 Speaker 2: make of something like that and just how difficult it's 249 00:12:03,320 --> 00:12:06,720 Speaker 2: been to beat these giant, giant companies that have just 250 00:12:06,760 --> 00:12:07,760 Speaker 2: been doing so well. 251 00:12:08,240 --> 00:12:10,680 Speaker 3: Yeah, anytime, friend that you look at it, you're always 252 00:12:10,720 --> 00:12:12,960 Speaker 3: going to see a high percentage of active managers, whether 253 00:12:13,000 --> 00:12:15,760 Speaker 3: they're running mutual funds or to tap asset management firms 254 00:12:15,800 --> 00:12:18,880 Speaker 3: or have their own funds, beating the market, and especially 255 00:12:18,880 --> 00:12:22,000 Speaker 3: a market that is driven at least over the course 256 00:12:22,000 --> 00:12:24,440 Speaker 3: of the last call it two or three years, by 257 00:12:24,480 --> 00:12:27,040 Speaker 3: the five or ten largest names in the SPF voter. Now, 258 00:12:27,880 --> 00:12:30,079 Speaker 3: that's nothing new to us, right If you go back 259 00:12:30,080 --> 00:12:32,400 Speaker 3: to the last fifty years or at least thirty years, 260 00:12:32,480 --> 00:12:34,120 Speaker 3: you could pick every decade and say, what were the 261 00:12:34,160 --> 00:12:36,320 Speaker 3: top five names of the SPFF voter. It's just the 262 00:12:36,400 --> 00:12:38,880 Speaker 3: names change, but the size because of the way the 263 00:12:38,960 --> 00:12:40,719 Speaker 3: SPF hutter is made up. But it's a market cap 264 00:12:40,760 --> 00:12:44,120 Speaker 3: weighted index, they always have an outsize impact on the 265 00:12:44,160 --> 00:12:46,800 Speaker 3: overall index. And it used to be companies like Exxon 266 00:12:46,880 --> 00:12:50,079 Speaker 3: Mobile and General Electric and AT and T, and over 267 00:12:50,120 --> 00:12:52,640 Speaker 3: the years, that's kind of obviously shifted over to companies 268 00:12:52,679 --> 00:12:56,160 Speaker 3: like Apple and Alphabet and Facebook. And I think that 269 00:12:56,160 --> 00:12:58,400 Speaker 3: that's going to change again, you know, ten years from now. 270 00:12:58,440 --> 00:13:01,760 Speaker 3: But I think in general that the sort of active 271 00:13:01,800 --> 00:13:06,560 Speaker 3: management versus passive management or active versus ETFs is a 272 00:13:06,679 --> 00:13:09,240 Speaker 3: very difficult game to play, and it's a very few 273 00:13:09,520 --> 00:13:12,520 Speaker 3: you know folks have had a long term record of 274 00:13:12,600 --> 00:13:17,320 Speaker 3: beating right and and I'll ask you a question. Name 275 00:13:17,400 --> 00:13:19,960 Speaker 3: for me a hero of viewers that is a long 276 00:13:20,040 --> 00:13:22,320 Speaker 3: only fund manager, because what I was your age. I'm 277 00:13:22,320 --> 00:13:23,520 Speaker 3: going to have five names for you. 278 00:13:23,720 --> 00:13:25,640 Speaker 2: This is a trick question because there aren't. 279 00:13:25,520 --> 00:13:27,640 Speaker 3: If you can't name any, then there's none in your life. 280 00:13:27,760 --> 00:13:29,839 Speaker 3: Right So, you know, when I started the business, Peter 281 00:13:29,920 --> 00:13:32,520 Speaker 3: Lynch was a rockstar type portfolio manager and had you know, 282 00:13:32,559 --> 00:13:35,680 Speaker 3: outperformed for years, but nobody was invested in the market. 283 00:13:35,720 --> 00:13:39,120 Speaker 3: Nobody could buy the Triple Cues or the Spiders. You know, 284 00:13:39,160 --> 00:13:41,480 Speaker 3: we just didn't have as much passive back then. So 285 00:13:41,520 --> 00:13:44,640 Speaker 3: it's made that role that much more difficult. Warren Buffett 286 00:13:44,640 --> 00:13:47,160 Speaker 3: I Sposh falls into that category, but different investment style. 287 00:13:47,600 --> 00:13:50,360 Speaker 3: But you know, four years and years you would you 288 00:13:50,360 --> 00:13:52,959 Speaker 3: would have your favorite long only portfolio manager at the 289 00:13:52,960 --> 00:13:55,280 Speaker 3: tip of your tongue. And right now I can't find 290 00:13:55,280 --> 00:13:57,200 Speaker 3: anybody that just has that answer for me right away. 291 00:13:57,280 --> 00:14:00,599 Speaker 1: Mike well Art, I'm glad you brought up Lynch. I 292 00:14:00,640 --> 00:14:03,800 Speaker 1: actually have a Peter Lynch related question for you, because 293 00:14:04,320 --> 00:14:06,000 Speaker 1: I was reading one of your notes and I found 294 00:14:06,040 --> 00:14:08,920 Speaker 1: this interesting. He wrote, we foresee a path to S 295 00:14:08,920 --> 00:14:11,240 Speaker 1: and P five hundred earnings of two hundred and thirty 296 00:14:11,280 --> 00:14:14,920 Speaker 1: dollars for twenty twenty three and two point fifty in 297 00:14:15,160 --> 00:14:18,320 Speaker 1: twenty twenty four. Now, this is what I found interesting. 298 00:14:18,440 --> 00:14:21,600 Speaker 1: Using a twenty multiple on the blended earnings of two 299 00:14:21,720 --> 00:14:25,440 Speaker 1: forty gets us to forty eight hundred for the SP 300 00:14:25,520 --> 00:14:28,760 Speaker 1: five hundred. I'm curious how you got to that twenty 301 00:14:28,880 --> 00:14:32,400 Speaker 1: multiple because I always think back to Peter Lynch and 302 00:14:32,480 --> 00:14:35,640 Speaker 1: his rule of twenty. You know that the multiple plus 303 00:14:35,640 --> 00:14:39,400 Speaker 1: the rate of inflation in a fair market should equal twenty. Now, 304 00:14:39,760 --> 00:14:42,840 Speaker 1: there's plenty of examples of it being below and above that, 305 00:14:43,480 --> 00:14:45,560 Speaker 1: but it does kind of average out to that interestingly. 306 00:14:45,600 --> 00:14:47,480 Speaker 3: So, unfortunately, for the last ten years, if you applied 307 00:14:47,520 --> 00:14:49,560 Speaker 3: the rule of twenty, which is a discipline that I've 308 00:14:49,560 --> 00:14:51,560 Speaker 3: always tried to use, you would have been out of 309 00:14:51,680 --> 00:14:53,280 Speaker 3: You would have been out of the market for most 310 00:14:53,320 --> 00:14:54,960 Speaker 3: of the time. Part of that was the fact that 311 00:14:54,960 --> 00:14:57,800 Speaker 3: we have very low inflation, and then we shifted the 312 00:14:57,880 --> 00:14:59,800 Speaker 3: very high inflation or a very short period of time. 313 00:15:00,080 --> 00:15:01,960 Speaker 3: I think that what I tried to do is taken 314 00:15:02,040 --> 00:15:04,480 Speaker 3: it and that twenty multiple is obviously a trailing multiple, 315 00:15:04,720 --> 00:15:07,400 Speaker 3: not a not a forward multiple, so it's a you know, 316 00:15:07,440 --> 00:15:09,400 Speaker 3: I think that makes it a little bit easier to 317 00:15:09,400 --> 00:15:11,560 Speaker 3: sort of justify. And I said, what what does that 318 00:15:11,640 --> 00:15:13,480 Speaker 3: multiple look like on the end of the year for 319 00:15:13,480 --> 00:15:15,560 Speaker 3: the last five years, And that's ad her about where 320 00:15:15,560 --> 00:15:17,720 Speaker 3: it is and my role as a strategy. You have 321 00:15:17,720 --> 00:15:18,840 Speaker 3: to come up with a number, and I was at 322 00:15:18,880 --> 00:15:21,400 Speaker 3: forty four hundred, and everyone thought I was crazy in January, 323 00:15:21,840 --> 00:15:24,160 Speaker 3: you know, having to have something in print and not 324 00:15:24,200 --> 00:15:26,280 Speaker 3: having people saying, oh, so you think the market's going down. 325 00:15:26,800 --> 00:15:28,920 Speaker 3: I just kind of rolled out to what we think 326 00:15:29,000 --> 00:15:32,920 Speaker 3: twenty four looks like. And we're confident in that estimates 327 00:15:32,960 --> 00:15:35,320 Speaker 3: we have both this year and next year because after 328 00:15:35,360 --> 00:15:38,040 Speaker 3: the second quarter earage reporting season, the estimates went up, 329 00:15:38,120 --> 00:15:41,400 Speaker 3: not down, which is you know doesn't always happen. And 330 00:15:41,520 --> 00:15:44,800 Speaker 3: we saw no degradation of the of the twenty four estimates, 331 00:15:44,920 --> 00:15:46,680 Speaker 3: which is a positive. A lot of that can change. 332 00:15:46,760 --> 00:15:48,960 Speaker 3: It is a moving target, but you're right. It's like 333 00:15:49,320 --> 00:15:51,200 Speaker 3: it was difficult to type that number when I put 334 00:15:51,240 --> 00:15:53,600 Speaker 3: it down, but I felt a little more confident was 335 00:15:53,640 --> 00:15:55,720 Speaker 3: kind of looking out a bit further and using what 336 00:15:55,760 --> 00:15:57,520 Speaker 3: the average was for the last five years. 337 00:15:57,960 --> 00:15:59,760 Speaker 1: Yeah, well that's the thing though, it does seem it 338 00:15:59,800 --> 00:16:03,560 Speaker 1: does seem like a reasonable multiple in the state and age. 339 00:16:03,600 --> 00:16:05,560 Speaker 1: You know, I guess I've been kind of surprised that 340 00:16:06,640 --> 00:16:09,680 Speaker 1: this acceleration in inflation and interest rates hasn't knocked the 341 00:16:09,760 --> 00:16:12,960 Speaker 1: multiple down further. You know, is there you know, is 342 00:16:12,960 --> 00:16:18,200 Speaker 1: the multiple just you know, signaling that the market believes 343 00:16:18,320 --> 00:16:21,200 Speaker 1: inflation and rates are going to normalize back to pre 344 00:16:21,280 --> 00:16:22,120 Speaker 1: COVID levels, do you think? 345 00:16:22,120 --> 00:16:23,320 Speaker 3: I don't know if they believe that they're going to 346 00:16:23,360 --> 00:16:25,880 Speaker 3: normalize back to pre COVID levels, but they certainly believe 347 00:16:25,920 --> 00:16:28,000 Speaker 3: they're heading in that direction. Right, So you know, we 348 00:16:28,440 --> 00:16:31,880 Speaker 3: headline CPI going from nine percent to three percent, obviously 349 00:16:31,880 --> 00:16:34,240 Speaker 3: we're heading in the right direction. So no one's going 350 00:16:34,320 --> 00:16:36,720 Speaker 3: to use, you know, what inflation was six months ago 351 00:16:36,800 --> 00:16:38,040 Speaker 3: or three months ago. They're going to use what they 352 00:16:38,080 --> 00:16:39,560 Speaker 3: think it's going to be in six months. And I 353 00:16:39,600 --> 00:16:41,920 Speaker 3: believe it's going to have a two handle, especially if 354 00:16:41,920 --> 00:16:44,920 Speaker 3: we start to get shelter costs in line with reality, 355 00:16:45,000 --> 00:16:48,040 Speaker 3: right that the government uses something owner's equivalent rent, which 356 00:16:48,080 --> 00:16:50,120 Speaker 3: has got a lag of six to twelve months because 357 00:16:50,120 --> 00:16:52,720 Speaker 3: it's kind of survey, right, But if you look at 358 00:16:52,760 --> 00:16:54,880 Speaker 3: you know, any of the other real time data, you know, 359 00:16:54,960 --> 00:16:56,960 Speaker 3: like Zilo or redfin or any of the folks that 360 00:16:57,000 --> 00:16:59,080 Speaker 3: give us that real time data, we know that that's 361 00:16:59,120 --> 00:17:00,960 Speaker 3: off by a bit. So I think that the inflation 362 00:17:01,040 --> 00:17:04,440 Speaker 3: numbers just naturally have more to come down, and I 363 00:17:04,480 --> 00:17:07,560 Speaker 3: think that helps sort of justify a bit of a 364 00:17:07,640 --> 00:17:10,080 Speaker 3: higher multiple than we normally would have if in fact 365 00:17:10,280 --> 00:17:11,920 Speaker 3: you and I were sally using the rule of twenty 366 00:17:11,920 --> 00:17:15,120 Speaker 3: and subtracting the current inflation rate. So I think it's 367 00:17:15,240 --> 00:17:17,320 Speaker 3: I think that's where the difference lies. The other thing 368 00:17:17,400 --> 00:17:19,600 Speaker 3: I think about two is, you know, we talked about 369 00:17:19,640 --> 00:17:21,560 Speaker 3: the S and P five hundred and that multiple, but 370 00:17:21,680 --> 00:17:23,520 Speaker 3: adding one of those five years, if you were to 371 00:17:23,600 --> 00:17:26,360 Speaker 3: back out the top ten stocks, the multiple has been 372 00:17:26,480 --> 00:17:28,680 Speaker 3: add or about fifteen between fifteen and fifteen and a 373 00:17:28,720 --> 00:17:31,119 Speaker 3: half and it continues to be the case. So again 374 00:17:31,240 --> 00:17:33,640 Speaker 3: that's the tricky part about having five hundred stocks where 375 00:17:33,680 --> 00:17:35,840 Speaker 3: the ten of them have the most influence and are 376 00:17:36,040 --> 00:17:38,480 Speaker 3: attributed much higher multiples because they have much higher growth 377 00:17:38,560 --> 00:17:39,479 Speaker 3: rates in general. 378 00:17:40,200 --> 00:17:42,840 Speaker 2: So speaking of different ways, to look at valuations for 379 00:17:43,040 --> 00:17:44,840 Speaker 2: the market. I actually had called you about this a 380 00:17:44,920 --> 00:17:47,000 Speaker 2: couple of days ago because I was trying to find 381 00:17:47,080 --> 00:17:50,760 Speaker 2: a different way of measuring the rally that we had 382 00:17:50,800 --> 00:17:52,680 Speaker 2: seen in the s and P five hundred so far 383 00:17:52,680 --> 00:17:55,639 Speaker 2: this year. So if we take the SMP five hundred 384 00:17:55,720 --> 00:17:59,879 Speaker 2: market cap and we divide it by nominal GDP, or 385 00:18:00,080 --> 00:18:03,200 Speaker 2: if we take it and divided by CPI, the gains 386 00:18:03,280 --> 00:18:06,560 Speaker 2: just aren't as great as you know, whatever we had 387 00:18:07,040 --> 00:18:09,120 Speaker 2: we had risen as much as twenty percent this year, 388 00:18:09,280 --> 00:18:12,159 Speaker 2: nearing those all time highs that we had seen at 389 00:18:12,160 --> 00:18:15,560 Speaker 2: the start of twenty twenty two. It's just not there's 390 00:18:15,640 --> 00:18:19,240 Speaker 2: just much further to go to reclaim those highs. 391 00:18:19,400 --> 00:18:21,480 Speaker 3: I think that's such a great exercise because what it 392 00:18:22,000 --> 00:18:23,840 Speaker 3: tells you is two things. In my mind. I forget, 393 00:18:24,000 --> 00:18:27,560 Speaker 3: it tells you that the Fed that has, you know, 394 00:18:27,640 --> 00:18:32,000 Speaker 3: a thousand economists looking at markets probably feel a whole 395 00:18:32,000 --> 00:18:34,760 Speaker 3: lot more comfortable with how far we've come during What 396 00:18:34,800 --> 00:18:37,080 Speaker 3: they've been trying to do is kind of tighten financial 397 00:18:37,080 --> 00:18:40,840 Speaker 3: conditions because they can live in a nominal world. Right 398 00:18:40,880 --> 00:18:42,959 Speaker 3: they say, Okay, the market's up, but not not when 399 00:18:43,000 --> 00:18:46,720 Speaker 3: you factor in GDP, or if you factor in inflation. Now, 400 00:18:47,280 --> 00:18:50,000 Speaker 3: you and I and the rest of the investing world 401 00:18:50,520 --> 00:18:54,000 Speaker 3: likely get our wealth effect from the notional gains that 402 00:18:54,119 --> 00:18:57,240 Speaker 3: we have. Right, So you know, if I bought Apple 403 00:18:57,320 --> 00:18:59,320 Speaker 3: at fifty dollars in the cell where it closed, I 404 00:18:59,320 --> 00:19:02,520 Speaker 3: don't factor in inflation there, right, factor in my gains 405 00:19:02,600 --> 00:19:05,040 Speaker 3: and say, okay, I feel this much more wealthy. So 406 00:19:05,080 --> 00:19:08,040 Speaker 3: the wealth effect can actually be in place for the 407 00:19:08,080 --> 00:19:10,720 Speaker 3: games that the market have had notionally, while the FED 408 00:19:10,720 --> 00:19:13,240 Speaker 3: can rest a little easier as they look at the 409 00:19:13,280 --> 00:19:16,240 Speaker 3: games nominally. And I think that's that's the difference. When 410 00:19:16,240 --> 00:19:17,919 Speaker 3: you look at that exercise, I thought, I thought it 411 00:19:17,960 --> 00:19:20,239 Speaker 3: was a great question, and and and believe me, when 412 00:19:20,280 --> 00:19:22,359 Speaker 3: I think about this more and more, I think it 413 00:19:22,440 --> 00:19:26,120 Speaker 3: helps the FED feel more comfortable. The financial conditions aren't 414 00:19:26,160 --> 00:19:29,560 Speaker 3: quite as tight as or as loose as they feel 415 00:19:29,600 --> 00:19:31,560 Speaker 3: like they are. You know, everyone has this feeling. It's 416 00:19:31,800 --> 00:19:34,040 Speaker 3: this is all make an analogy for you. So everyone 417 00:19:34,119 --> 00:19:36,320 Speaker 3: thinks the FED thinks about the stock market more than 418 00:19:36,320 --> 00:19:38,880 Speaker 3: they actually do. Right, we all believe it's like, oh, 419 00:19:38,960 --> 00:19:40,560 Speaker 3: the Fed, if the Fed sees the market go up 420 00:19:40,600 --> 00:19:42,360 Speaker 3: as much as it has, they're going to keep tightening. 421 00:19:42,600 --> 00:19:44,200 Speaker 3: I don't think they give it as much thought. And 422 00:19:44,200 --> 00:19:47,200 Speaker 3: then then I always try to equate that with I'm 423 00:19:47,240 --> 00:19:51,439 Speaker 3: a Red Sox fan, and I assume no, I assume 424 00:19:51,560 --> 00:19:54,520 Speaker 3: everyone in the York hates the Red Sox as much 425 00:19:54,520 --> 00:19:56,920 Speaker 3: as we hate the Yankees, Right, But I think that 426 00:19:57,160 --> 00:19:58,840 Speaker 3: the same way the FED looks at this, Right, So, 427 00:19:58,840 --> 00:20:00,520 Speaker 3: I think that the Feds like, yeah, whatever, that's the 428 00:20:00,520 --> 00:20:02,280 Speaker 3: market over. I think the Yankees fans are like, yeah, 429 00:20:02,280 --> 00:20:03,040 Speaker 3: it's just the Red Sox. 430 00:20:03,240 --> 00:20:04,400 Speaker 2: We don't think about you guys. 431 00:20:04,280 --> 00:20:07,119 Speaker 3: Right exactly. You're not that passionate about about how you 432 00:20:07,160 --> 00:20:08,760 Speaker 3: feel about us. And I think the I think the 433 00:20:08,800 --> 00:20:11,359 Speaker 3: FED thinks the same way as Yankee fans do about 434 00:20:11,359 --> 00:20:14,119 Speaker 3: the Red Sox about the market, and especially if they 435 00:20:14,320 --> 00:20:16,440 Speaker 3: can use that, Hey, if I compare this to inflation 436 00:20:16,600 --> 00:20:20,200 Speaker 3: or GDP, I feel like the market's actually gone up less. 437 00:20:20,680 --> 00:20:24,560 Speaker 1: You know, Art, you've written that you favor a quote 438 00:20:24,640 --> 00:20:28,040 Speaker 1: unquote Barbell approach to investing with one end focused on 439 00:20:28,119 --> 00:20:30,879 Speaker 1: things we need versus things we want. To talk to 440 00:20:30,960 --> 00:20:33,080 Speaker 1: us a little bit about what you mean by that. 441 00:20:33,080 --> 00:20:34,080 Speaker 1: That's an interesting concept. 442 00:20:34,200 --> 00:20:37,440 Speaker 3: Yeah, so things appreciate for it, the things we need healthcare, right, 443 00:20:37,480 --> 00:20:41,440 Speaker 3: things we need energy, things we need staples, right, those 444 00:20:41,480 --> 00:20:43,680 Speaker 3: types of things, and I think about that in that bucket, 445 00:20:44,080 --> 00:20:46,480 Speaker 3: and if you were to balance that off with things 446 00:20:46,520 --> 00:20:49,320 Speaker 3: that you want, typically you're going to find that in 447 00:20:49,359 --> 00:20:51,440 Speaker 3: a lot of the growthier names for a lot of reason. 448 00:20:51,960 --> 00:20:53,639 Speaker 3: And when you set this up at the beginning of 449 00:20:53,640 --> 00:20:55,080 Speaker 3: the year, it's not a set out and forget it. 450 00:20:55,119 --> 00:20:57,040 Speaker 3: So you've got an equal waiting on either side of 451 00:20:57,040 --> 00:21:02,680 Speaker 3: that barbell. And every quarter when you rebalance, you're literally 452 00:21:02,840 --> 00:21:05,240 Speaker 3: selling some of your winners and buying some of your losers. 453 00:21:05,480 --> 00:21:07,000 Speaker 3: And if you were to take that, and we did, 454 00:21:07,040 --> 00:21:09,560 Speaker 3: we ran the numbers last year and in the six 455 00:21:09,640 --> 00:21:11,199 Speaker 3: months of this year, you kind of look at us. 456 00:21:11,240 --> 00:21:14,960 Speaker 3: It's kind of a discipline way of staying diversified and balanced. 457 00:21:15,560 --> 00:21:19,400 Speaker 3: And you actually put money into energy at a great time, 458 00:21:19,440 --> 00:21:21,800 Speaker 3: and you took some profits and technology at a very 459 00:21:21,800 --> 00:21:23,600 Speaker 3: good time. So it's very much of those You know, 460 00:21:23,640 --> 00:21:26,200 Speaker 3: I want the Apple fifteen. I don't need it because 461 00:21:26,200 --> 00:21:27,800 Speaker 3: I've got an eleven right here, but I want it. 462 00:21:27,840 --> 00:21:30,160 Speaker 3: Those are the things that I want. Things that I need. 463 00:21:30,200 --> 00:21:32,440 Speaker 3: I certainly need healthcare, and I certainly need energy, and 464 00:21:33,320 --> 00:21:35,119 Speaker 3: to a certain extent, which has it worked yet, but 465 00:21:35,160 --> 00:21:36,639 Speaker 3: I believe it's going to as I look at one 466 00:21:36,680 --> 00:21:39,639 Speaker 3: of the other laggards, I think financials fall into that category. 467 00:21:40,200 --> 00:21:42,439 Speaker 3: But there's so much noise around you know, what new 468 00:21:42,440 --> 00:21:45,120 Speaker 3: regulation is going to look like, and when netager's income 469 00:21:45,160 --> 00:21:47,480 Speaker 3: improves and all of that. But I think that's probably 470 00:21:47,520 --> 00:21:49,240 Speaker 3: one of the cheapest spaces in the S and P five. 471 00:21:49,400 --> 00:21:52,280 Speaker 3: That's one of our three in that basket. It's energy, healthcare. 472 00:21:52,600 --> 00:21:55,560 Speaker 3: Financials used to be stables, but they got too expensive. 473 00:21:55,880 --> 00:21:58,160 Speaker 3: They're getting better now. But on the other side, it's 474 00:21:58,160 --> 00:22:00,159 Speaker 3: pretty obvious, you know where we be on the on 475 00:22:00,200 --> 00:22:01,639 Speaker 3: the growth of your side. 476 00:22:01,320 --> 00:22:04,480 Speaker 2: Well, how does the FED play into what we can 477 00:22:04,520 --> 00:22:10,080 Speaker 2: expect from the market going forward? Like what how high 478 00:22:10,119 --> 00:22:12,640 Speaker 2: is the bar for a September hike and what else 479 00:22:12,680 --> 00:22:13,720 Speaker 2: do you expect from the Fed. 480 00:22:13,840 --> 00:22:16,200 Speaker 3: The good news is this time of year, the Fed's 481 00:22:16,240 --> 00:22:18,399 Speaker 3: had a couple of long breaks in between meetings, right, 482 00:22:18,440 --> 00:22:23,240 Speaker 3: So you got July meeting, September meeting, no October meeting, 483 00:22:23,359 --> 00:22:25,200 Speaker 3: and a November meeting, right, So you've got that sort 484 00:22:25,200 --> 00:22:27,360 Speaker 3: of you know, on again, off again Fed. So it's 485 00:22:27,440 --> 00:22:30,359 Speaker 3: less of a concern. So we put less attention on 486 00:22:30,440 --> 00:22:33,000 Speaker 3: every single data point, which I think is always a mistake, 487 00:22:33,040 --> 00:22:36,160 Speaker 3: So nobody is going to use any one single data 488 00:22:36,160 --> 00:22:37,639 Speaker 3: point and say, oh, this means the FED has to 489 00:22:37,640 --> 00:22:40,359 Speaker 3: do this, right. I think the consensus has it about 490 00:22:40,440 --> 00:22:42,399 Speaker 3: right that there's about a twenty percent chance that they 491 00:22:42,480 --> 00:22:45,359 Speaker 3: might raise by twenty five basis points in September. I 492 00:22:45,359 --> 00:22:47,399 Speaker 3: don't think they're going to, but then they've got this 493 00:22:47,480 --> 00:22:50,760 Speaker 3: whole plethora of data that they get to see before 494 00:22:50,760 --> 00:22:52,720 Speaker 3: they meet again in November, and I think that's a 495 00:22:52,760 --> 00:22:55,280 Speaker 3: real positive. I think that there's a you know, a 496 00:22:55,359 --> 00:22:58,240 Speaker 3: chance that the path of inflation continues apace, that they 497 00:22:58,440 --> 00:23:02,280 Speaker 3: will feel that they've made significant progress towards their symmetric 498 00:23:02,320 --> 00:23:05,560 Speaker 3: two percent target, and we may have seen the last 499 00:23:05,560 --> 00:23:07,520 Speaker 3: of the rate hikes. Now another rate hike if they 500 00:23:07,560 --> 00:23:09,800 Speaker 3: do go and November, is not going to sort of 501 00:23:09,840 --> 00:23:12,120 Speaker 3: break the market. But I certainly think they've already gone 502 00:23:12,160 --> 00:23:14,879 Speaker 3: far enough. I think there's there's really long lags of 503 00:23:14,920 --> 00:23:17,680 Speaker 3: monetary policy. Typically. I think that the lags are much 504 00:23:17,720 --> 00:23:20,040 Speaker 3: longer right now in the here and now. The reason 505 00:23:20,080 --> 00:23:24,879 Speaker 3: I say that is the majority of consumer debt is 506 00:23:25,080 --> 00:23:27,160 Speaker 3: tied up in mortgages, and the majority of that's below 507 00:23:27,200 --> 00:23:30,800 Speaker 3: four percent, So nobody has felt the bite of higher 508 00:23:30,960 --> 00:23:34,600 Speaker 3: mortgage rates unless you're one of the new home buyers, right, 509 00:23:34,680 --> 00:23:38,439 Speaker 3: so you know you haven't really felt this. Of the 510 00:23:38,480 --> 00:23:43,119 Speaker 3: SP five hundred's debt doesn't have to be repaid until 511 00:23:43,160 --> 00:23:46,520 Speaker 3: twenty thirty, So Corporate America is not feeling the bite either. 512 00:23:46,560 --> 00:23:48,240 Speaker 3: I think everyone sort of looked at this, like you 513 00:23:48,560 --> 00:23:51,920 Speaker 3: refinancing lower. Corporate America looked at this and said, Okay, 514 00:23:51,960 --> 00:23:54,840 Speaker 3: I'm pushing my duration out at these low rates. So 515 00:23:55,000 --> 00:23:59,199 Speaker 3: both the consumer and Corporate America haven't really felt the 516 00:23:59,320 --> 00:24:01,800 Speaker 3: bite of all of the monetary policy that we put 517 00:24:01,800 --> 00:24:04,320 Speaker 3: in place now all around the edges. Obviously everyone has 518 00:24:04,359 --> 00:24:07,320 Speaker 3: and than a new home buyer, I said, pay seven 519 00:24:07,320 --> 00:24:09,840 Speaker 3: point four percent for a thirty year fixed. That's taking 520 00:24:09,840 --> 00:24:12,280 Speaker 3: a bite, but it's not taking a bite on the majority, right, 521 00:24:12,320 --> 00:24:14,679 Speaker 3: the majority of consumers that have debt that they're probably 522 00:24:14,720 --> 00:24:16,800 Speaker 3: not going to roll over. So I think that causes 523 00:24:16,840 --> 00:24:20,760 Speaker 3: an even longer lag in this monetary policy process. I 524 00:24:20,760 --> 00:24:22,240 Speaker 3: think we've seen the last of the hikes, and I 525 00:24:22,280 --> 00:24:24,240 Speaker 3: think the market celebrates that we can get to pause 526 00:24:24,240 --> 00:24:27,000 Speaker 3: in the September. That's consensus, that's not a surprise. If 527 00:24:27,000 --> 00:24:28,919 Speaker 3: we don't get a radio in November. I feel like 528 00:24:29,000 --> 00:24:31,679 Speaker 3: that's going to signal that they're getting closer where they 529 00:24:31,760 --> 00:24:33,960 Speaker 3: need to be. The real question won't be how high 530 00:24:34,000 --> 00:24:36,919 Speaker 3: anymore to be how long And consensus now has it 531 00:24:37,480 --> 00:24:40,600 Speaker 3: way out to the second half of next year. I 532 00:24:40,640 --> 00:24:42,879 Speaker 3: think there's a small number of people think June there 533 00:24:42,960 --> 00:24:44,840 Speaker 3: might be a cut, And I think that the talk 534 00:24:44,920 --> 00:24:47,560 Speaker 3: about when they cut really has to do more with 535 00:24:49,119 --> 00:24:50,600 Speaker 3: are they overrestrictive now? 536 00:24:50,920 --> 00:24:51,080 Speaker 1: Right? 537 00:24:51,119 --> 00:24:52,880 Speaker 3: So, if we start to see the path of inflation 538 00:24:52,960 --> 00:24:54,640 Speaker 3: come down at the pace that it's been coming down, 539 00:24:54,920 --> 00:24:56,200 Speaker 3: and they're sitting at five and a half in the 540 00:24:56,240 --> 00:24:58,320 Speaker 3: FED funds rate and there's a two hundred basis point 541 00:24:58,359 --> 00:25:00,639 Speaker 3: delta between the current inflation rate, that's going to be 542 00:25:00,640 --> 00:25:03,399 Speaker 3: overlad that's going to be overly restricted. And the reason 543 00:25:03,400 --> 00:25:04,960 Speaker 3: that they'd want to cut is to get that somewhere 544 00:25:04,960 --> 00:25:07,040 Speaker 3: between a D and fifty underd and seventy five basis points. 545 00:25:07,440 --> 00:25:09,240 Speaker 3: Doesn't have to mean the wheels are coming off the 546 00:25:09,240 --> 00:25:12,080 Speaker 3: cart because they're cutting it. It just means that, hey, 547 00:25:12,119 --> 00:25:14,240 Speaker 3: we're restricted enough. And the j Paltton was the last presser, 548 00:25:14,320 --> 00:25:16,720 Speaker 3: not Jacksonville, but at the last meeting even said we 549 00:25:16,720 --> 00:25:18,920 Speaker 3: wait till we get to two percent. We've waited too long. 550 00:25:19,080 --> 00:25:21,760 Speaker 3: We have to start adjusting policy and become less restrictive 551 00:25:21,760 --> 00:25:24,320 Speaker 3: to normalized rates. So I think that happens in the 552 00:25:24,320 --> 00:25:26,399 Speaker 3: back half of next year. The market is kind of 553 00:25:26,400 --> 00:25:29,040 Speaker 3: sniffed that out, and I think that, you know, we're 554 00:25:29,080 --> 00:25:31,880 Speaker 3: setting up in my mind, this August in September period 555 00:25:31,960 --> 00:25:34,600 Speaker 3: is really setting up nicely for a year round rally. 556 00:25:34,840 --> 00:25:36,119 Speaker 3: And why do I say that? If you look at 557 00:25:36,119 --> 00:25:40,040 Speaker 3: all the survey data, So whether it's the AAII, the 558 00:25:40,080 --> 00:25:43,200 Speaker 3: first time it's been Parish in twelve weeks was this week. 559 00:25:43,320 --> 00:25:45,439 Speaker 3: People are waking up and saying, Okay, you know something's 560 00:25:45,480 --> 00:25:49,720 Speaker 3: going on here. Is the individual Investor survey outrageously low, 561 00:25:49,800 --> 00:25:52,080 Speaker 3: the lowest we've seen it for the year. So sentiment 562 00:25:52,119 --> 00:25:53,919 Speaker 3: is starting to wind that. We're starting to wind down 563 00:25:53,960 --> 00:25:55,720 Speaker 3: a lot of the positioning, the bull is positioning that 564 00:25:55,720 --> 00:25:58,159 Speaker 3: we sort of exited July with, and the sentiment is 565 00:25:58,240 --> 00:26:01,440 Speaker 3: rolling over nicely as well. So it's it's funny how 566 00:26:01,920 --> 00:26:05,240 Speaker 3: a sloty August can kind of change that mindset and 567 00:26:05,240 --> 00:26:07,320 Speaker 3: and kind of get us reset back to, you know, 568 00:26:07,359 --> 00:26:10,400 Speaker 3: something more realistic. So the more the more these surveys 569 00:26:10,440 --> 00:26:13,199 Speaker 3: start to read Parish, the more confident I feel that 570 00:26:13,240 --> 00:26:15,520 Speaker 3: we're setting up nicely for a run into the end 571 00:26:15,520 --> 00:26:15,880 Speaker 3: of the year. 572 00:26:16,359 --> 00:26:19,680 Speaker 1: Well, or does you know? Life is full surprises? Who 573 00:26:19,680 --> 00:26:22,000 Speaker 1: would have thought we'd ever be looking at the Red 574 00:26:22,040 --> 00:26:25,560 Speaker 1: Sox and Yankees battling for last place in the allis 575 00:26:26,880 --> 00:26:28,760 Speaker 1: I hate to throw that out. You do have bragging 576 00:26:28,840 --> 00:26:30,440 Speaker 1: rights over the Yikees this year at least, though, I 577 00:26:30,440 --> 00:26:32,399 Speaker 1: think you still got about ten games up with the Yankees. 578 00:26:47,760 --> 00:26:50,479 Speaker 1: If I were to summarize your outlook, I would say 579 00:26:50,520 --> 00:26:53,399 Speaker 1: you're pretty bullish, kind of in the soft landing camp. 580 00:26:53,640 --> 00:26:55,520 Speaker 1: The market set up for a nice year end rally. 581 00:26:55,560 --> 00:26:58,680 Speaker 1: But what what worries you? You know, what's your main 582 00:26:59,680 --> 00:27:02,520 Speaker 1: risk that you would be either surprised or not by. 583 00:27:02,600 --> 00:27:05,560 Speaker 1: But we know what's sort of the surprise that would 584 00:27:05,840 --> 00:27:07,520 Speaker 1: sort of turn your sentiment around. 585 00:27:08,280 --> 00:27:11,679 Speaker 3: China becomes Japan and goes through a last decade, right, So, 586 00:27:11,760 --> 00:27:15,440 Speaker 3: China went through a different sort of pandemic experience. Most 587 00:27:15,480 --> 00:27:18,399 Speaker 3: of the developed world went through this sort of longer 588 00:27:18,400 --> 00:27:22,040 Speaker 3: than we expected, but locked down, reopening process, a lot 589 00:27:22,040 --> 00:27:25,040 Speaker 3: of stimulus, and we're able to sort of go through 590 00:27:25,080 --> 00:27:27,439 Speaker 3: a very very much of a v shape recovery. And 591 00:27:27,560 --> 00:27:30,200 Speaker 3: China just hasn't experienced that, so you know, after three 592 00:27:30,280 --> 00:27:32,600 Speaker 3: years of onig and off again, they're trying to reopen, 593 00:27:32,880 --> 00:27:35,879 Speaker 3: never stimulated the consumer, and they're really you know, turning 594 00:27:35,920 --> 00:27:38,360 Speaker 3: into a consumer driven economy. So it's not as though 595 00:27:38,400 --> 00:27:41,920 Speaker 3: there's a big savings rate by the Chinese consumer. That's important. 596 00:27:42,200 --> 00:27:45,240 Speaker 3: Their demographics are getting older. That's difficult. And what we 597 00:27:45,400 --> 00:27:48,520 Speaker 3: haven't seen yet is the typical China state government stepping 598 00:27:48,520 --> 00:27:50,320 Speaker 3: in is stimulating. We do with some things around the 599 00:27:50,400 --> 00:27:54,280 Speaker 3: edges that that aren't really effective. But without them fixing 600 00:27:54,680 --> 00:27:57,840 Speaker 3: some stimulus and driving their economy to get anywhere close 601 00:27:57,880 --> 00:28:01,359 Speaker 3: to their five percent GDP goals, the global economy's not 602 00:28:01,359 --> 00:28:03,640 Speaker 3: going to have the kind of recovery that we're anticipating. 603 00:28:03,720 --> 00:28:06,520 Speaker 3: Right The reopening of China is going to drive demand 604 00:28:06,520 --> 00:28:09,000 Speaker 3: for goods and services globally, and it just hasn't happened yet, 605 00:28:09,000 --> 00:28:11,000 Speaker 3: So that would be the biggest thing. I don't think 606 00:28:11,040 --> 00:28:12,840 Speaker 3: they have a lost decade, and I do think they 607 00:28:12,880 --> 00:28:14,440 Speaker 3: get back to the normal patterns, but they've got a 608 00:28:14,480 --> 00:28:16,680 Speaker 3: lot of things they have to deal with. Pilot debt, 609 00:28:16,760 --> 00:28:20,199 Speaker 3: really bad real estate puldings all across the board, on 610 00:28:20,280 --> 00:28:22,880 Speaker 3: again off again relationships with the United States, so we'll 611 00:28:22,920 --> 00:28:24,879 Speaker 3: have to wait and see. That's probably you know, the 612 00:28:24,920 --> 00:28:27,880 Speaker 3: closest to a black swan that kind of is out there, 613 00:28:27,920 --> 00:28:29,879 Speaker 3: I think. Yeah, And then anything else that sort of 614 00:28:30,119 --> 00:28:33,120 Speaker 3: significantly disrupts the supply of energy because the blind demand 615 00:28:33,160 --> 00:28:37,640 Speaker 3: dynamics are really pretty tight right now. Right so Russia's 616 00:28:37,640 --> 00:28:40,040 Speaker 3: pumping as much as they can and they're not sort 617 00:28:40,080 --> 00:28:42,600 Speaker 3: of operating with Opek. But Opek wants to keep prices 618 00:28:42,680 --> 00:28:44,720 Speaker 3: at are about, you know, one hundred bucks and here 619 00:28:44,760 --> 00:28:47,440 Speaker 3: we are at eighty bucks. So if Opek really gets 620 00:28:47,480 --> 00:28:51,200 Speaker 3: religion and decides to really crank it down, and we 621 00:28:51,240 --> 00:28:54,920 Speaker 3: don't see an increase in the US supply, which we are, 622 00:28:55,000 --> 00:28:57,600 Speaker 3: I mean, we're gradually pumping more every every week. We'll 623 00:28:58,080 --> 00:28:59,880 Speaker 3: probably be at a record in the first quarter this year. 624 00:28:59,920 --> 00:29:02,320 Speaker 3: But if something we're to disrupt that, you know, that'd 625 00:29:02,360 --> 00:29:04,000 Speaker 3: be the second thing that would be out there, because that, 626 00:29:04,080 --> 00:29:05,120 Speaker 3: you know, that hurts everybody. 627 00:29:05,200 --> 00:29:07,320 Speaker 1: I'm glad you brought up China. Is it surprising at 628 00:29:07,320 --> 00:29:10,800 Speaker 1: all to you to watch all these credit issues in China? 629 00:29:11,320 --> 00:29:15,920 Speaker 1: Country Garden, Evergrand All the developers are basically underwater on 630 00:29:15,960 --> 00:29:21,040 Speaker 1: all these construction projects, very aggressive development projects. They were 631 00:29:21,040 --> 00:29:24,400 Speaker 1: engaged in Is it surprising to you that that's not 632 00:29:24,480 --> 00:29:27,720 Speaker 1: a bigger theme in the US and global markets right now? 633 00:29:27,720 --> 00:29:30,600 Speaker 1: I mean, you know, not too long ago, any hint 634 00:29:30,680 --> 00:29:34,280 Speaker 1: of weakness in China would really trigger some risk off 635 00:29:34,320 --> 00:29:37,400 Speaker 1: mood in the US market. Is it surprising to you 636 00:29:37,440 --> 00:29:40,880 Speaker 1: where have we sort of decoupled enough do all the 637 00:29:40,880 --> 00:29:43,840 Speaker 1: deglobalization that's going on, that China is not as big 638 00:29:43,880 --> 00:29:45,040 Speaker 1: of a catalyst as it once was. 639 00:29:45,160 --> 00:29:47,920 Speaker 3: Yeah, I would say, yes, I am surprised. I think 640 00:29:47,920 --> 00:29:50,360 Speaker 3: that We've got a strong enough muscle memory for China 641 00:29:50,400 --> 00:29:53,160 Speaker 3: to always step in and do something that helps drive 642 00:29:53,200 --> 00:29:55,480 Speaker 3: their economy, and I think that's what we're counting on now. 643 00:29:55,680 --> 00:29:57,720 Speaker 3: So I think they got sort of a mulligan for 644 00:29:57,800 --> 00:30:01,160 Speaker 3: the pandemic for three years. It's like, okay, being hyper vigilant, 645 00:30:01,440 --> 00:30:04,240 Speaker 3: not reopening that's really hurting everybody. At the same time, 646 00:30:04,280 --> 00:30:07,000 Speaker 3: we realized how fragile our supply chains were, as did 647 00:30:07,040 --> 00:30:10,600 Speaker 3: everyone else, and started finding other places to get supplies from. 648 00:30:10,640 --> 00:30:13,080 Speaker 3: So they're losing that, but they're still in the middle 649 00:30:13,120 --> 00:30:16,760 Speaker 3: of this sort of generational change from bringing folks from 650 00:30:16,840 --> 00:30:20,360 Speaker 3: farms into cities, and they overdid what they built, right, 651 00:30:20,400 --> 00:30:23,000 Speaker 3: So that's where their real estate problems got into Imagine 652 00:30:23,000 --> 00:30:25,640 Speaker 3: moving over an eight year period, six hundred million people 653 00:30:25,960 --> 00:30:27,920 Speaker 3: into a city the size of Boston that you just 654 00:30:27,960 --> 00:30:30,200 Speaker 3: built a month ago, and I'm finding them all jobs 655 00:30:30,400 --> 00:30:33,680 Speaker 3: and then shutting the economy down but not sending them checks. Right, 656 00:30:33,720 --> 00:30:35,720 Speaker 3: So that's kind of the difference when we think about 657 00:30:35,760 --> 00:30:39,080 Speaker 3: what they're going through. I think the world is waiting 658 00:30:39,200 --> 00:30:41,640 Speaker 3: for that announcement. They're waiting for China to say, oh, 659 00:30:41,640 --> 00:30:43,080 Speaker 3: and we're going to do this, and we're going to 660 00:30:43,120 --> 00:30:45,160 Speaker 3: do this because that's just what we're used to. If 661 00:30:45,160 --> 00:30:46,840 Speaker 3: this is a different type of China and they're willing 662 00:30:46,880 --> 00:30:48,400 Speaker 3: to say, you know, we don't have a five percent 663 00:30:48,520 --> 00:30:51,600 Speaker 3: GDP growth goal and we're not going to stimulate anymore. 664 00:30:51,680 --> 00:30:53,160 Speaker 3: We are, and we try to do a workout of 665 00:30:53,160 --> 00:30:56,200 Speaker 3: all this commercial real estate. That's a disaster. Yeah, I 666 00:30:56,200 --> 00:30:58,520 Speaker 3: think that's a big dent. You can't imagine that the 667 00:30:58,520 --> 00:31:01,000 Speaker 3: second largest economy in the world doesn't have an impact 668 00:31:01,040 --> 00:31:03,080 Speaker 3: if they're going to go into a recession or have 669 00:31:03,280 --> 00:31:05,080 Speaker 3: very slow growth over the next few years. 670 00:31:05,360 --> 00:31:09,080 Speaker 1: Art Hogan, chief market strategists at b Riley Wealth, aret, 671 00:31:09,200 --> 00:31:11,520 Speaker 1: such an honor and a privilege to hear your thoughts. 672 00:31:11,600 --> 00:31:13,760 Speaker 1: Can't let you go just yet. Art. We do have 673 00:31:13,800 --> 00:31:17,480 Speaker 1: a tradition here on what goes up where we've got 674 00:31:17,520 --> 00:31:21,400 Speaker 1: to get your craziest thing of the week. Hold on, 675 00:31:21,560 --> 00:31:22,440 Speaker 1: let's start with you though. 676 00:31:23,000 --> 00:31:26,720 Speaker 2: Okay, mine is a Bloomberg. Sorry, that was I think 677 00:31:27,040 --> 00:31:31,280 Speaker 2: very well read. The headline is Citadelvet's sixty nine thousand 678 00:31:31,360 --> 00:31:36,240 Speaker 2: intern applicants to find the next math geniuses. So they 679 00:31:36,240 --> 00:31:40,200 Speaker 2: have sixty nine thousand applications and guess how many people 680 00:31:40,240 --> 00:31:44,800 Speaker 2: they actually accept per intern class two hundred it's so 681 00:31:45,000 --> 00:31:47,440 Speaker 2: tiny twenty fourteen. 682 00:31:47,720 --> 00:31:49,440 Speaker 3: We easier to get into Harvard than it is to 683 00:31:49,480 --> 00:31:50,280 Speaker 3: get into Citadel. 684 00:31:52,280 --> 00:31:54,440 Speaker 2: That was the craziest thing I saw. I mean, like 685 00:31:54,480 --> 00:31:55,920 Speaker 2: you just stand no chance. 686 00:31:56,120 --> 00:31:58,880 Speaker 1: Yeah, there's got to be some AI involved there and 687 00:31:58,920 --> 00:32:00,240 Speaker 1: stipping through all those opp. 688 00:32:00,240 --> 00:32:03,320 Speaker 3: Probably Apparently there was a story out earlier in the 689 00:32:03,360 --> 00:32:06,200 Speaker 3: week that said that they make one hundred and twenty 690 00:32:06,240 --> 00:32:09,520 Speaker 3: thousand dollars fly business class and stay and forced our 691 00:32:09,560 --> 00:32:11,400 Speaker 3: hotels not bed right out of college. 692 00:32:11,480 --> 00:32:13,800 Speaker 2: Yeah, it does sound really nice. 693 00:32:14,680 --> 00:32:16,000 Speaker 1: That's pretty good. I right, Well, that's a good one 694 00:32:16,000 --> 00:32:18,240 Speaker 1: built on a right How about you you seed anything 695 00:32:18,600 --> 00:32:19,720 Speaker 1: crazy in the last week or so? 696 00:32:19,880 --> 00:32:23,880 Speaker 3: Craziest chart that continue to float around the street this 697 00:32:23,960 --> 00:32:27,440 Speaker 3: past week and continues to bother me. A touch was 698 00:32:27,560 --> 00:32:30,520 Speaker 3: that the total credit card debt was at a record 699 00:32:30,600 --> 00:32:32,640 Speaker 3: high and no one ever put a denominator on it. 700 00:32:32,920 --> 00:32:35,840 Speaker 3: Everyone's like, okay, alarm bells, it's a trillion dollars. And 701 00:32:36,320 --> 00:32:38,720 Speaker 3: you know, we never say what the US debt is 702 00:32:38,720 --> 00:32:42,160 Speaker 3: without saying to GDP, but it's okay to say consumers 703 00:32:42,200 --> 00:32:44,520 Speaker 3: have this much step and not put a denominator on 704 00:32:44,640 --> 00:32:47,000 Speaker 3: as compared to what their total savings are. And if 705 00:32:47,040 --> 00:32:49,440 Speaker 3: you just use that, no one would ever read the 706 00:32:49,480 --> 00:32:51,440 Speaker 3: story because it sounds so much better to say there's 707 00:32:51,440 --> 00:32:53,120 Speaker 3: a trillion dollars in credit card debt. But oh, by 708 00:32:53,160 --> 00:32:55,680 Speaker 3: the way, the alinguanc's art not even back to where 709 00:32:55,680 --> 00:32:57,600 Speaker 3: they were in twenty nineteen, and as a percentage of 710 00:32:57,600 --> 00:33:01,040 Speaker 3: total savings, they are completely average. So it's just it's 711 00:33:01,080 --> 00:33:03,240 Speaker 3: the frustrating chart that comes out here. We call that 712 00:33:03,280 --> 00:33:04,960 Speaker 3: a chart crime, and it was one of the chart 713 00:33:04,960 --> 00:33:05,640 Speaker 3: crimes of the week. 714 00:33:06,160 --> 00:33:09,320 Speaker 1: Yeah, I mean that excess savings from the pandemic has 715 00:33:09,360 --> 00:33:11,560 Speaker 1: really been the story for the last few years. It 716 00:33:11,600 --> 00:33:14,600 Speaker 1: is sort of normalizing though, right, I mean, how big 717 00:33:14,640 --> 00:33:15,920 Speaker 1: of a headwind is that do you think. 718 00:33:15,760 --> 00:33:17,880 Speaker 3: Well, I'll tell you this. So just to put some 719 00:33:17,920 --> 00:33:19,560 Speaker 3: context around, if you went back for the last twenty 720 00:33:19,560 --> 00:33:22,160 Speaker 3: five years and said, what's the per capita GDP per 721 00:33:22,200 --> 00:33:25,240 Speaker 3: capita at personal savings rate, it's always similar about five percent, 722 00:33:25,280 --> 00:33:27,280 Speaker 3: between five and five and a percent twenty five year 723 00:33:27,320 --> 00:33:30,440 Speaker 3: average always has got to eighteen percent during the pandemic, 724 00:33:30,960 --> 00:33:33,120 Speaker 3: So not only are you getting money, but there was 725 00:33:33,200 --> 00:33:35,600 Speaker 3: nothing to gets fedded on. Right. There was virtually nothing 726 00:33:35,680 --> 00:33:38,320 Speaker 3: you could do, so obviously that had to work down. 727 00:33:38,600 --> 00:33:41,200 Speaker 3: And guess where it is now. It's five percent. So 728 00:33:41,520 --> 00:33:43,360 Speaker 3: the fact that we're back to normal now. If we 729 00:33:43,400 --> 00:33:46,400 Speaker 3: went from eighteen to three percent and credit card as 730 00:33:46,400 --> 00:33:49,400 Speaker 3: a as a relationship to personal savings was some percentage 731 00:33:49,400 --> 00:33:51,920 Speaker 3: that we haven't seen forever, then I'd be more concerned. 732 00:33:51,960 --> 00:33:56,320 Speaker 3: But I think we're normalizing some post pandemic abnormalities and 733 00:33:56,360 --> 00:33:58,120 Speaker 3: I think the personal savings rate is one of those. 734 00:33:58,160 --> 00:34:01,120 Speaker 3: So as a headwind is think I would focus more 735 00:34:01,160 --> 00:34:04,080 Speaker 3: on the fact that wages for the last two months 736 00:34:04,160 --> 00:34:06,560 Speaker 3: have increased more than inflation, and it took until two 737 00:34:06,560 --> 00:34:08,520 Speaker 3: months ago for that to happen, So that likely is 738 00:34:08,560 --> 00:34:11,960 Speaker 3: the silver lighting and what could otherwise be a cloud there. 739 00:34:12,080 --> 00:34:14,319 Speaker 1: It all sort of reverts back to just that job 740 00:34:14,360 --> 00:34:16,920 Speaker 1: market staying strong. It seems to me it's always the 741 00:34:16,960 --> 00:34:19,160 Speaker 1: most important variable, right, you know, as long as we're 742 00:34:19,680 --> 00:34:24,720 Speaker 1: seeing this unemployment claims, low rate of unemployment, solid growth 743 00:34:24,719 --> 00:34:27,319 Speaker 1: every month. I mean, that seems to be the whole 744 00:34:27,360 --> 00:34:29,160 Speaker 1: story these days when it comes to the economy. 745 00:34:29,239 --> 00:34:32,640 Speaker 3: Yeah, we as an Americans since World War Two, spend 746 00:34:32,680 --> 00:34:35,239 Speaker 3: our income statement, not our balance sheet, right, so if 747 00:34:35,280 --> 00:34:36,600 Speaker 3: we have a job, that's what we spend. 748 00:34:36,719 --> 00:34:36,839 Speaker 1: Right. 749 00:34:36,960 --> 00:34:38,960 Speaker 3: We don't think about necessarily value of our house, or 750 00:34:39,000 --> 00:34:40,960 Speaker 3: we don't necessarily think about those are things we put 751 00:34:41,000 --> 00:34:43,000 Speaker 3: into confidence, but we really do. I have a job, 752 00:34:43,040 --> 00:34:44,839 Speaker 3: where could I get one if I needed one? And 753 00:34:44,880 --> 00:34:47,840 Speaker 3: that still feels like a relatively high number. And you know, 754 00:34:47,880 --> 00:34:49,680 Speaker 3: when I started the business, any think low five percent 755 00:34:49,680 --> 00:34:52,200 Speaker 3: on employment was full employment. So we've ratchet that down 756 00:34:52,239 --> 00:34:54,960 Speaker 3: to four percent, I guess now, and you know, to 757 00:34:55,560 --> 00:34:57,919 Speaker 3: look at that, it's hard to predict some terrible things 758 00:34:57,920 --> 00:34:59,480 Speaker 3: happening at three and a eight percent right now? 759 00:34:59,600 --> 00:35:02,399 Speaker 1: All right, good stuff, I'll give you my crazy thing. 760 00:35:02,640 --> 00:35:06,360 Speaker 1: This is courtesy of the Independent Newspaper, the British newspaper. 761 00:35:07,680 --> 00:35:11,160 Speaker 1: In the commodities market. If you will Vildana. I think 762 00:35:11,200 --> 00:35:15,560 Speaker 1: this counts. The world record for the most expensive cheese 763 00:35:16,080 --> 00:35:21,800 Speaker 1: has been broken. Wow, the most expensive cheese is Cabrales 764 00:35:21,960 --> 00:35:24,960 Speaker 1: blue cheese from northern Spain. Well, let me tell you 765 00:35:25,000 --> 00:35:28,960 Speaker 1: a little bit about this cheese. It's aged in a cave, wow, 766 00:35:29,200 --> 00:35:32,600 Speaker 1: fourteen hundred meters for like eight months. It could be 767 00:35:32,640 --> 00:35:36,320 Speaker 1: cow's milk or a mixture of cows, sheep and goat's milk. 768 00:35:37,280 --> 00:35:39,680 Speaker 1: And they put it up in a cave at fourteen 769 00:35:39,719 --> 00:35:43,160 Speaker 1: hundred meters pretty high up there, at a temperature of 770 00:35:43,160 --> 00:35:46,320 Speaker 1: seven degrees celsius, and it needs to spend a minimum 771 00:35:46,320 --> 00:35:48,719 Speaker 1: of eight months there, and then they bring it down 772 00:35:48,760 --> 00:35:52,479 Speaker 1: and they auction it off. So you're now a game 773 00:35:52,480 --> 00:35:55,000 Speaker 1: show contestant on our little game show here. The price 774 00:35:55,080 --> 00:36:01,239 Speaker 1: is precise two point two kilogram wheel of Umbrellas blue 775 00:36:01,320 --> 00:36:06,120 Speaker 1: cheese from northern Spain. Most expensive cheese ever sold. Guy 776 00:36:06,120 --> 00:36:09,160 Speaker 1: who owns a restaurant, body, what do you suppose the 777 00:36:09,200 --> 00:36:11,439 Speaker 1: price was for two point two. 778 00:36:11,440 --> 00:36:13,680 Speaker 3: Kilograms fifteen thousand dollars. 779 00:36:14,000 --> 00:36:16,320 Speaker 1: Fifteen thousand dollars, so that would be what about twelve 780 00:36:17,000 --> 00:36:18,640 Speaker 1: Of course, this is the independence, so they give it 781 00:36:18,640 --> 00:36:21,919 Speaker 1: in British pounds, so that's like twelve thousand, stuff like that. 782 00:36:22,160 --> 00:36:23,239 Speaker 2: Twelve thousand and one. 783 00:36:23,680 --> 00:36:26,160 Speaker 1: Ah, you're going one, you're one dollar over. 784 00:36:26,360 --> 00:36:28,800 Speaker 2: Yeah, because I was gonna say twenty thousand originally. 785 00:36:28,840 --> 00:36:34,800 Speaker 1: But yeah, thirty thousand pounds for this wheel of cheese. 786 00:36:35,360 --> 00:36:38,320 Speaker 2: It's worth it. I'm sure it's worth this cheese sounds wonderful. 787 00:36:38,480 --> 00:36:40,239 Speaker 3: I did not have this on my bingo card. Mic 788 00:36:40,320 --> 00:36:40,560 Speaker 3: that was. 789 00:36:42,200 --> 00:36:46,160 Speaker 1: It's the same restaurant owner had bought the previous record 790 00:36:46,160 --> 00:36:49,719 Speaker 1: holder for most expensive cheese. Sometimes I wonder if there's 791 00:36:49,719 --> 00:36:52,920 Speaker 1: a little publicity stunt going on with some of these. Know, 792 00:36:53,840 --> 00:36:56,560 Speaker 1: I've come to my restaurant, I've got the world's most expensive. 793 00:36:56,640 --> 00:36:58,600 Speaker 3: That's a pr stunt. It's a pretty cheesy one, Mike, 794 00:36:58,640 --> 00:37:03,160 Speaker 3: I think, all. 795 00:37:03,160 --> 00:37:05,080 Speaker 1: Right, all right, gets the joke of the show. I 796 00:37:05,160 --> 00:37:08,080 Speaker 1: guess we'll see that one comment down Fifth Avenue boat 797 00:37:08,160 --> 00:37:11,439 Speaker 1: but still got me. Art Hogan from b Riley Wealth. 798 00:37:11,800 --> 00:37:14,960 Speaker 1: Such a great time as always, Art, we appreciate it 799 00:37:14,920 --> 00:37:16,359 Speaker 1: and hope we can talk to you again soon. 800 00:37:16,440 --> 00:37:17,960 Speaker 3: Sounds great, Thanks guys, Thank you. 801 00:37:18,120 --> 00:37:18,359 Speaker 2: Art. 802 00:37:26,040 --> 00:37:28,319 Speaker 1: What Goes Up will be back next week. Until then, 803 00:37:28,320 --> 00:37:30,600 Speaker 1: you can find us on the Bloomberg Terminal website and 804 00:37:30,760 --> 00:37:34,000 Speaker 1: app or wherever you get your podcasts. We'd love it 805 00:37:34,040 --> 00:37:35,800 Speaker 1: if you took the time to rate and review the 806 00:37:35,840 --> 00:37:38,799 Speaker 1: show on Apple Podcasts so more listeners can find us. 807 00:37:39,400 --> 00:37:41,600 Speaker 1: And you can find us on Twitter, follow me at 808 00:37:41,640 --> 00:37:46,200 Speaker 1: breag Anonymous. Wildna Hirich is at Bildona Hirich. You can 809 00:37:46,200 --> 00:37:50,840 Speaker 1: also follow Bloomberg Podcasts at podcasts. What Goes Up is 810 00:37:50,880 --> 00:37:54,040 Speaker 1: produced by Stacey Wong. Thanks for listening, See you next time.