1 00:00:05,080 --> 00:00:08,520 Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Lisa A. Bram 2 00:00:08,560 --> 00:00:11,600 Speaker 1: Woyd's along with Tom Kane and Jonathan Farrow, join us 3 00:00:11,680 --> 00:00:15,240 Speaker 1: each day for insight from the best in economics, geopolitics, 4 00:00:15,280 --> 00:00:19,480 Speaker 1: finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 5 00:00:19,560 --> 00:00:22,759 Speaker 1: Spotify and anywhere you get your podcasts, and always on 6 00:00:22,840 --> 00:00:26,360 Speaker 1: Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business App. 7 00:00:26,720 --> 00:00:29,080 Speaker 1: Steve Chevron joins us. Now they had a multiss Solutions 8 00:00:29,080 --> 00:00:31,000 Speaker 1: that federated at her as Steve. Wonderful to catch up 9 00:00:31,000 --> 00:00:33,720 Speaker 1: with you bearish for so long, Steve. If I asked 10 00:00:33,720 --> 00:00:36,120 Speaker 1: you this question this morning, do you chase this rally 11 00:00:36,240 --> 00:00:39,040 Speaker 1: or thank this rally? How do you answer it? Yeah, 12 00:00:39,040 --> 00:00:40,879 Speaker 1: we got on the other side of it right at 13 00:00:40,880 --> 00:00:43,919 Speaker 1: the beginning of the year. I think there are opportunities 14 00:00:43,960 --> 00:00:46,120 Speaker 1: for this rally to go longer and fire than you 15 00:00:46,120 --> 00:00:49,040 Speaker 1: would expect. And you've got inflation it's likely to come down. 16 00:00:49,159 --> 00:00:53,240 Speaker 1: Given the year your comps earning season expectations were so poor. 17 00:00:53,920 --> 00:00:56,920 Speaker 1: The market was looking for this kind of first half procession. 18 00:00:56,960 --> 00:00:58,760 Speaker 1: But the labor market is going to take a much 19 00:00:58,800 --> 00:01:02,440 Speaker 1: longer time to to kind of decelerate, so you know, 20 00:01:02,520 --> 00:01:05,320 Speaker 1: we think that this strength can go higher. You traditionally 21 00:01:05,319 --> 00:01:10,039 Speaker 1: have rallies when you have fed pauses, those are usually suckers. 22 00:01:10,120 --> 00:01:14,160 Speaker 1: Rallies usually um and so I think it's premature to 23 00:01:14,200 --> 00:01:17,160 Speaker 1: cancel the recession. I think there's so many signs that 24 00:01:17,240 --> 00:01:20,039 Speaker 1: the economy is likely to head into recession, but it's 25 00:01:20,080 --> 00:01:22,440 Speaker 1: going to take a while. And that's been the hallmark 26 00:01:22,480 --> 00:01:25,480 Speaker 1: of this whole cycle. Every stage has taken longer and 27 00:01:25,560 --> 00:01:28,280 Speaker 1: gone farther than you expect. We think this rally could 28 00:01:28,360 --> 00:01:32,160 Speaker 1: last us through mid year, but ultimately we still do 29 00:01:32,240 --> 00:01:34,800 Speaker 1: have those concerns about recession. We just think that's a 30 00:01:34,880 --> 00:01:36,880 Speaker 1: kind of second half story. And in the meantime, you've 31 00:01:36,880 --> 00:01:38,560 Speaker 1: got to play this. So stay told to me about 32 00:01:38,560 --> 00:01:41,320 Speaker 1: how you playing games through international? Is it through US tech? 33 00:01:41,480 --> 00:01:44,160 Speaker 1: A combination of both. It's exactly what we did. We 34 00:01:44,160 --> 00:01:45,560 Speaker 1: didn't want to jump on the tech train at the 35 00:01:45,560 --> 00:01:47,920 Speaker 1: beginning of the year. We think earnings they're still vulnerable. 36 00:01:48,160 --> 00:01:51,040 Speaker 1: We think valuations are still very much too expensive. We 37 00:01:51,160 --> 00:01:53,560 Speaker 1: get that they're gonna run on this kind of rally, 38 00:01:53,600 --> 00:01:56,000 Speaker 1: but we decided to do it internationally. We did it 39 00:01:56,080 --> 00:01:59,800 Speaker 1: both and developed and e m international. But again, this 40 00:01:59,880 --> 00:02:02,160 Speaker 1: is a rally that we're dating. It's not necessarily one 41 00:02:02,160 --> 00:02:04,320 Speaker 1: that we're marrying, at least not yet. So how do 42 00:02:04,360 --> 00:02:06,320 Speaker 1: you know that the dates over and to break up? 43 00:02:07,160 --> 00:02:10,240 Speaker 1: You gotta keep following the fundamental the fundamentals. If it 44 00:02:10,280 --> 00:02:12,560 Speaker 1: turns out that the market is moving higher or in 45 00:02:12,600 --> 00:02:15,760 Speaker 1: the you know, four thousands, let's say, by midyear, yet 46 00:02:15,760 --> 00:02:18,680 Speaker 1: earnings are still coming down, yield curves are still inverted, 47 00:02:19,000 --> 00:02:22,440 Speaker 1: the labor market is continuing to slow. You know, people 48 00:02:22,440 --> 00:02:25,000 Speaker 1: look at this and they're confounded by the labor market. 49 00:02:25,760 --> 00:02:29,000 Speaker 1: Unemployment doesn't rise before a recession. It rises in one. 50 00:02:29,120 --> 00:02:31,240 Speaker 1: And in fact, it takes usually six months to go 51 00:02:31,320 --> 00:02:34,080 Speaker 1: from the low and unemployment which we just hit, to 52 00:02:34,160 --> 00:02:36,800 Speaker 1: the start of a recession, over which time the unemployment 53 00:02:36,880 --> 00:02:39,480 Speaker 1: rate really barely rises, maybe by two tenths of a percent. 54 00:02:40,040 --> 00:02:41,880 Speaker 1: And so I think you have to look at those 55 00:02:41,880 --> 00:02:45,560 Speaker 1: emerging layoff announcements see if the labor market continues to weaken, 56 00:02:45,600 --> 00:02:48,080 Speaker 1: and if it does, you're gonna need to fade this 57 00:02:48,160 --> 00:02:50,160 Speaker 1: when you go into it, it doesn't the different story. 58 00:02:50,280 --> 00:02:52,280 Speaker 1: But when you when you go into emerging market Steeve, 59 00:02:52,320 --> 00:02:53,960 Speaker 1: how much is this really a story about China and 60 00:02:53,960 --> 00:02:56,640 Speaker 1: the reopening there, and just entirely riding that until we 61 00:02:56,680 --> 00:02:59,520 Speaker 1: get more concrete data on just the contours of what 62 00:02:59,600 --> 00:03:02,640 Speaker 1: that looks. I mean, it's certainly a big part of it, 63 00:03:02,680 --> 00:03:04,880 Speaker 1: but it's not it's not the entirety of it. I'd 64 00:03:04,880 --> 00:03:07,320 Speaker 1: say the other key factors here. You know, you do 65 00:03:07,360 --> 00:03:09,760 Speaker 1: have a FED that's likely to pause. Emerging markets in 66 00:03:09,760 --> 00:03:12,040 Speaker 1: general tend to do better when the Feds not hiking. 67 00:03:12,400 --> 00:03:14,400 Speaker 1: You've got a dollar that's weekending, and I think it 68 00:03:14,440 --> 00:03:17,280 Speaker 1: may weaken right where you were just talking about, maybe 69 00:03:17,280 --> 00:03:19,280 Speaker 1: the ECB is gonna be a little bit more aggressive 70 00:03:19,320 --> 00:03:21,000 Speaker 1: than the Fed this year in terms of rate hikes. 71 00:03:21,320 --> 00:03:23,920 Speaker 1: You have to expect at some point Japan might have 72 00:03:23,960 --> 00:03:26,880 Speaker 1: to abandon yield curve controls, and so you may have 73 00:03:27,040 --> 00:03:29,880 Speaker 1: this scenario where a weaker dollar, no more rate hikes, 74 00:03:29,919 --> 00:03:32,600 Speaker 1: plus a China reopening gives you, you know, a decent 75 00:03:32,600 --> 00:03:35,440 Speaker 1: window here. The stocks are certainly reacting to that safe 76 00:03:35,480 --> 00:03:37,480 Speaker 1: Let's get to the Fed on Wednesday. If I'm in 77 00:03:37,520 --> 00:03:39,560 Speaker 1: that news conference and I was a journalist, this is 78 00:03:39,560 --> 00:03:41,560 Speaker 1: the question I would ask, do you believe we've seen 79 00:03:41,560 --> 00:03:45,560 Speaker 1: an unwarranted aising of financial conditions? Very simple let's see 80 00:03:45,600 --> 00:03:47,040 Speaker 1: how he answers it. How do you think he will 81 00:03:47,080 --> 00:03:49,760 Speaker 1: approach that question, because it's very likely to be host 82 00:03:50,600 --> 00:03:53,120 Speaker 1: I mean, I think they've got to be frustrated, John. 83 00:03:53,120 --> 00:03:54,839 Speaker 1: I mean, if you look relative to a year ago, 84 00:03:54,880 --> 00:03:57,240 Speaker 1: not not necessarily the peaks mid year, but one full 85 00:03:57,320 --> 00:03:59,880 Speaker 1: year ago, the labor markets incrementally hotter than it was 86 00:04:00,000 --> 00:04:03,080 Speaker 1: faelve months ago. Inflation is as hot, if not as hot, 87 00:04:03,080 --> 00:04:05,080 Speaker 1: as it was twelve months ago. Now it's it's coming down. 88 00:04:05,120 --> 00:04:07,080 Speaker 1: So I don't I don't want to discount that. But 89 00:04:07,160 --> 00:04:10,480 Speaker 1: financial conditions are much looser um, and they've spent so 90 00:04:10,560 --> 00:04:14,120 Speaker 1: much political capital trying to defend this median dot, you 91 00:04:14,160 --> 00:04:16,440 Speaker 1: would think that they're going to have to see it through. 92 00:04:16,440 --> 00:04:19,080 Speaker 1: I don't think that you're going to have a recession 93 00:04:19,200 --> 00:04:22,119 Speaker 1: or not because of you know, an extra five basis points. 94 00:04:22,120 --> 00:04:24,440 Speaker 1: So my guess is if they go to year, they 95 00:04:24,520 --> 00:04:27,480 Speaker 1: might do two more at least get to that median dot. 96 00:04:27,880 --> 00:04:30,040 Speaker 1: And I would expect that he would push back against 97 00:04:30,040 --> 00:04:33,000 Speaker 1: these financial conditions. Some that being said, I have not 98 00:04:33,160 --> 00:04:35,480 Speaker 1: had the best luck at predicting what Pal is going 99 00:04:35,520 --> 00:04:37,640 Speaker 1: to say. I've had a much better job predicting what 100 00:04:37,680 --> 00:04:40,320 Speaker 1: he's going to do. UM, So we'll say, I'll be 101 00:04:40,360 --> 00:04:42,640 Speaker 1: watching along with you, and we'll see how he responds. 102 00:04:42,680 --> 00:04:44,839 Speaker 1: But you know he's gonna get that question. See if 103 00:04:44,839 --> 00:04:47,440 Speaker 1: can you pair that idea with your bullishness right now? 104 00:04:47,560 --> 00:04:49,960 Speaker 1: The riding of the rally? Why is it not going 105 00:04:50,000 --> 00:04:52,560 Speaker 1: to be successful if the FED does try to job 106 00:04:52,560 --> 00:04:57,560 Speaker 1: bone down this market? Why? Well, because I think that 107 00:04:57,640 --> 00:05:00,320 Speaker 1: the data is going to look encouraging, and the data 108 00:05:00,400 --> 00:05:02,800 Speaker 1: on the road to a soft landing doesn't look very 109 00:05:02,839 --> 00:05:04,960 Speaker 1: different than the data on the road to recession. Right. 110 00:05:05,240 --> 00:05:07,960 Speaker 1: Inflation is going to come down. You know, earnings are 111 00:05:07,960 --> 00:05:10,599 Speaker 1: gonna come down. You would expect that in a soft landing, 112 00:05:10,600 --> 00:05:14,839 Speaker 1: but maybe not catastrophically. You expect the labor market too slow. 113 00:05:14,960 --> 00:05:17,400 Speaker 1: And so you've had a market that for the better 114 00:05:17,440 --> 00:05:19,560 Speaker 1: part of a year has wanted a rally on any 115 00:05:19,600 --> 00:05:21,800 Speaker 1: sign of good news. I think they're going to get 116 00:05:21,880 --> 00:05:24,880 Speaker 1: data that that can be construed that way. Um. Ultimately, 117 00:05:24,920 --> 00:05:27,040 Speaker 1: I think that is on the road to recession. It 118 00:05:27,080 --> 00:05:29,960 Speaker 1: would be a historical anomaly to have this much of 119 00:05:29,960 --> 00:05:32,000 Speaker 1: the yield curve and birded. And but I could go 120 00:05:32,040 --> 00:05:34,960 Speaker 1: through all the various different statistics and not have a recession. 121 00:05:35,000 --> 00:05:38,000 Speaker 1: But if you go back every cycle the market has 122 00:05:38,000 --> 00:05:40,880 Speaker 1: a big hurrah rally like that. It did it in nineteen, 123 00:05:41,160 --> 00:05:43,680 Speaker 1: it did it in two thousand and six, and so 124 00:05:43,880 --> 00:05:46,600 Speaker 1: I think that that's those are the powerful forces. The 125 00:05:46,640 --> 00:05:48,240 Speaker 1: market's going to see what they want in this rare 126 00:05:48,279 --> 00:05:50,720 Speaker 1: stark test, and there's been a bullish lean for the 127 00:05:50,800 --> 00:05:53,920 Speaker 1: last year, and usually the last one is the biggest one. 128 00:05:53,960 --> 00:05:56,200 Speaker 1: And I think that's you know, at least what we're 129 00:05:56,200 --> 00:05:59,600 Speaker 1: in it can last six months, it could, and so 130 00:06:00,000 --> 00:06:01,479 Speaker 1: you know, if you're a long term investor, you might 131 00:06:01,480 --> 00:06:03,560 Speaker 1: be able to ignore that. But if you're trying to manage, 132 00:06:04,000 --> 00:06:07,280 Speaker 1: you know, through the markets is our charge, I think 133 00:06:07,320 --> 00:06:08,880 Speaker 1: you have to be cognizant of that risk. Right here, 134 00:06:09,080 --> 00:06:11,400 Speaker 1: it's lasted four weeks so far this year and twenty three. 135 00:06:11,400 --> 00:06:13,480 Speaker 1: Steve gads catch up, but he has always Steve Chevron 136 00:06:13,520 --> 00:06:15,600 Speaker 1: there a federated is getting you set up for the 137 00:06:15,640 --> 00:06:28,920 Speaker 1: Federal Reserve this coming Wednesday. Pay rolls, the FED, the 138 00:06:28,960 --> 00:06:30,800 Speaker 1: e c B, the Bank of England and learnings in 139 00:06:30,800 --> 00:06:33,040 Speaker 1: between joining us now to discuss I'm really pleased to say, 140 00:06:33,360 --> 00:06:35,000 Speaker 1: is Ken trope In, the founder and chairman of Graham 141 00:06:35,080 --> 00:06:39,240 Speaker 1: Capital Hedge Fund with eighteen billion dollars under management. Can 142 00:06:39,400 --> 00:06:41,479 Speaker 1: fantastic to catch up with you, sir, Thanks for being 143 00:06:41,520 --> 00:06:44,640 Speaker 1: with us. Let's start the amount of central bank tighting 144 00:06:44,640 --> 00:06:46,480 Speaker 1: we've seen over the last twelve months. There is a 145 00:06:46,560 --> 00:06:49,680 Speaker 1: feeling that we can get away with something mild, something short, 146 00:06:49,720 --> 00:06:51,719 Speaker 1: and then just move on. Can do you share that 147 00:06:51,760 --> 00:06:55,920 Speaker 1: feeling that view? I think that's too optimistic personally. Um. 148 00:06:55,960 --> 00:06:59,640 Speaker 1: You know, if you think about how the nineteen to 149 00:06:59,760 --> 00:07:03,599 Speaker 1: that twenty two compared to the previous decade. UH In 150 00:07:03,640 --> 00:07:06,160 Speaker 1: the period between the end of the financial crisis two 151 00:07:06,160 --> 00:07:09,920 Speaker 1: thousands ten two thousand twenty one, we saw a total 152 00:07:10,080 --> 00:07:15,080 Speaker 1: of thirteen bases point equivalent rate hikes between the ECB, 153 00:07:15,720 --> 00:07:19,080 Speaker 1: the Bank of England and the FEED. In two thousand 154 00:07:19,200 --> 00:07:24,440 Speaker 1: twenty two, one year, we saw forty basis point rate moves. 155 00:07:24,440 --> 00:07:26,920 Speaker 1: Obviously some of them came in fifty or seventy five 156 00:07:26,920 --> 00:07:30,600 Speaker 1: at a crack. So you've seen an enormous sea change 157 00:07:30,680 --> 00:07:34,560 Speaker 1: in financial conditions and I don't really think the market 158 00:07:34,600 --> 00:07:39,520 Speaker 1: reflects that necessarily um in epuity valuations, So how would 159 00:07:39,520 --> 00:07:41,960 Speaker 1: you lean against it? But would you basically move against 160 00:07:42,040 --> 00:07:44,480 Speaker 1: some of the tech rally? Would you just go more 161 00:07:44,480 --> 00:07:48,160 Speaker 1: into bonds um, you know, I think it's a good 162 00:07:48,200 --> 00:07:53,680 Speaker 1: time to be um very conservative. I think one of 163 00:07:53,720 --> 00:07:57,640 Speaker 1: the things that I think about is that for the 164 00:07:57,760 --> 00:08:00,440 Speaker 1: last eleven years prior to twenty two, you were sort 165 00:08:00,480 --> 00:08:03,960 Speaker 1: of rewarded for buying every dip in equities. I think 166 00:08:04,000 --> 00:08:07,200 Speaker 1: that is the psychology of investors broadly. I think that 167 00:08:07,280 --> 00:08:11,600 Speaker 1: psychology probably needs to shift. I think good ten percent 168 00:08:11,680 --> 00:08:15,600 Speaker 1: rally so far this year in equities seems um like Okay. 169 00:08:15,600 --> 00:08:17,400 Speaker 1: There was a big sell off last year and people 170 00:08:17,440 --> 00:08:20,080 Speaker 1: wanted to get back in with the sense that the 171 00:08:20,160 --> 00:08:22,640 Speaker 1: Fed was gonna start easing in the second half of 172 00:08:22,680 --> 00:08:24,880 Speaker 1: the year. We're not so convinced that they're going to 173 00:08:24,960 --> 00:08:26,840 Speaker 1: ease in the second half of this year. And there's 174 00:08:26,840 --> 00:08:29,240 Speaker 1: still a lot of eight hikes price then between the 175 00:08:29,280 --> 00:08:30,880 Speaker 1: Fed the e c BE in the Bank of England. 176 00:08:30,920 --> 00:08:33,520 Speaker 1: So I would be really cautious personally. What does it 177 00:08:33,559 --> 00:08:36,240 Speaker 1: mean to be cautious Canada time? When last year the 178 00:08:36,679 --> 00:08:40,800 Speaker 1: fort didn't work and frankly the bonders proponent, a component 179 00:08:40,840 --> 00:08:44,040 Speaker 1: of the portfolio, had the worst year on record if 180 00:08:44,080 --> 00:08:47,120 Speaker 1: you look at certain denominations. Is this a new time 181 00:08:47,240 --> 00:08:50,400 Speaker 1: of that being haven trade or is that still really 182 00:08:50,440 --> 00:08:53,320 Speaker 1: a difficult area. I think that's a difficult area. I 183 00:08:53,360 --> 00:08:55,760 Speaker 1: like the two year you know, you've got the yield 184 00:08:55,760 --> 00:08:59,480 Speaker 1: cerve really inverted here, and so I think to be 185 00:09:00,200 --> 00:09:04,280 Speaker 1: in one year notes and and and be patient makes 186 00:09:04,280 --> 00:09:06,520 Speaker 1: a lot of sense. As you said, last year was 187 00:09:06,559 --> 00:09:10,440 Speaker 1: the worst year for a sixty forty portfolio since in 188 00:09:10,520 --> 00:09:13,439 Speaker 1: thirty seven years. I mean, it's crazy kind of you 189 00:09:13,520 --> 00:09:16,439 Speaker 1: thinking inflation is going to be stick here then people anticipate. 190 00:09:16,520 --> 00:09:20,280 Speaker 1: Is that what your position? Somewhat stickier? Yes, I mean 191 00:09:20,320 --> 00:09:24,000 Speaker 1: it is definitely cooling. But you know, uh, energy prices 192 00:09:24,440 --> 00:09:27,360 Speaker 1: haven't gone down that much. They've come off the highs. 193 00:09:27,400 --> 00:09:30,200 Speaker 1: But if you think about the world where in uh, 194 00:09:30,400 --> 00:09:33,240 Speaker 1: you know, there's not any energy development in the United States, 195 00:09:33,480 --> 00:09:36,480 Speaker 1: green policies, which we probably need because of global warming, 196 00:09:37,000 --> 00:09:40,760 Speaker 1: really discourage more energy to development. So resources are tight 197 00:09:41,000 --> 00:09:45,000 Speaker 1: in inflation. Uh. If you look at labor, certainly their 198 00:09:45,120 --> 00:09:49,280 Speaker 1: softness and tech and finance. On the other hand, CBS 199 00:09:49,400 --> 00:09:54,920 Speaker 1: and Walgreens are limiting hours because they can't get enough employees. So, UM, 200 00:09:54,960 --> 00:09:58,520 Speaker 1: I'm not convinced that we're gonna see inflation get anywhere 201 00:09:58,520 --> 00:10:02,400 Speaker 1: near target. UH, as soon as the market would like. Again, 202 00:10:02,440 --> 00:10:05,200 Speaker 1: what does that leave for you curve right now deeply inverted. 203 00:10:05,280 --> 00:10:07,040 Speaker 1: Some people think we can get that return of the 204 00:10:07,080 --> 00:10:09,080 Speaker 1: bull statement because the Federal Reserve is going to cut 205 00:10:09,360 --> 00:10:12,120 Speaker 1: safe the day deliver that statement that we traditionally get. 206 00:10:12,200 --> 00:10:13,800 Speaker 1: Can of you push them back against that too? Then 207 00:10:14,679 --> 00:10:17,480 Speaker 1: I think that your curves moved a little too much. Uh. 208 00:10:18,040 --> 00:10:21,040 Speaker 1: You know, for all of the years I've been in finance, UH, 209 00:10:21,640 --> 00:10:25,480 Speaker 1: there was term premium and duration risk priced in the bombs. 210 00:10:25,720 --> 00:10:28,360 Speaker 1: There is none today. It's the opposite. That doesn't make 211 00:10:28,360 --> 00:10:30,480 Speaker 1: a lot of sense to me. Uh. If you think 212 00:10:30,480 --> 00:10:33,640 Speaker 1: we have some inflation that may be around longer than 213 00:10:33,679 --> 00:10:36,120 Speaker 1: another six or twelve months. Can We've been talking a 214 00:10:36,160 --> 00:10:38,679 Speaker 1: lot about anecdotal science of weakness in the labor market, 215 00:10:38,679 --> 00:10:40,840 Speaker 1: whether it's big tech or even the big banks that 216 00:10:40,920 --> 00:10:43,760 Speaker 1: have been cutting jobs on the margin. From your experience, 217 00:10:44,120 --> 00:10:47,000 Speaker 1: do you think that those anecdotes reflect a real softening 218 00:10:47,000 --> 00:10:48,600 Speaker 1: in the labor picture or do you think that there 219 00:10:48,720 --> 00:10:53,199 Speaker 1: is more sustained strength than people realize. I think it's bifurcated. 220 00:10:53,240 --> 00:10:58,000 Speaker 1: I think UM and high income UH and in UH 221 00:10:58,400 --> 00:11:00,720 Speaker 1: jobs such as tech and finance ans and what have you, 222 00:11:00,960 --> 00:11:04,240 Speaker 1: there's definitely softness. And I think in the service sector 223 00:11:04,360 --> 00:11:08,600 Speaker 1: or uh, you know, in more blue collar jobs not 224 00:11:08,679 --> 00:11:12,199 Speaker 1: so much. And I also think we have the psychology 225 00:11:12,200 --> 00:11:15,440 Speaker 1: of a lot of employees who are younger who have 226 00:11:15,520 --> 00:11:19,480 Speaker 1: never uh you know, endured a recession, and so they're 227 00:11:19,480 --> 00:11:22,840 Speaker 1: being very patient about looking for jobs if they're laid off. 228 00:11:22,880 --> 00:11:25,160 Speaker 1: That's a new phenomenon. I think you can just to 229 00:11:25,160 --> 00:11:27,720 Speaker 1: find a word from you your favorite trade this year, 230 00:11:27,760 --> 00:11:29,160 Speaker 1: and you do not get to say the two year 231 00:11:29,240 --> 00:11:32,080 Speaker 1: because you've said that already. What is it, kent, Well, 232 00:11:32,120 --> 00:11:33,679 Speaker 1: the two years not a trade, It's just a good 233 00:11:33,679 --> 00:11:37,040 Speaker 1: place to be consecutive. Uh. I think if I had 234 00:11:37,080 --> 00:11:40,520 Speaker 1: to pick one thing after stocks have got up ten percent, 235 00:11:41,280 --> 00:11:44,200 Speaker 1: I probably would lean short. You've gotta shot right now. 236 00:11:46,000 --> 00:11:51,079 Speaker 1: We're mixed are Some of our quant systems are long equities, 237 00:11:51,400 --> 00:11:54,079 Speaker 1: while our discustiony traders are basically short. It's a part 238 00:11:54,120 --> 00:11:55,679 Speaker 1: of the equity market can that you think needs to 239 00:11:55,679 --> 00:12:00,320 Speaker 1: be shorted more than most. Um. I think, well, if 240 00:12:00,360 --> 00:12:03,240 Speaker 1: you look at the Hank Sing that's gone up an 241 00:12:03,400 --> 00:12:06,800 Speaker 1: enormous amount in the last three months, that looks really 242 00:12:06,880 --> 00:12:10,720 Speaker 1: expensive to me. And I think broadly, uh, in the US, 243 00:12:11,120 --> 00:12:14,160 Speaker 1: if we are going to see a recession, sometime this year. 244 00:12:14,480 --> 00:12:16,400 Speaker 1: I don't think that's pricedons to the SMP at all. 245 00:12:16,840 --> 00:12:19,280 Speaker 1: Can this was great? Is it nice to mac Rows back? Ken? 246 00:12:19,760 --> 00:12:22,439 Speaker 1: Don't you agree it was the most exciting time to 247 00:12:22,520 --> 00:12:25,720 Speaker 1: be in macro in fifteen years. There's so much going 248 00:12:25,760 --> 00:12:29,280 Speaker 1: on between what's happening uh in the Ukraine, what's happening 249 00:12:29,360 --> 00:12:32,880 Speaker 1: in inflation, all of these rate hikes. Um, you know, 250 00:12:33,679 --> 00:12:37,679 Speaker 1: it's kind of h a lifetime opportunity or who knows, 251 00:12:37,840 --> 00:12:40,200 Speaker 1: You never know exactly what happens, but it's really exciting 252 00:12:40,240 --> 00:12:42,000 Speaker 1: to be in Macro. Well, Can is exciting to talk 253 00:12:42,000 --> 00:12:44,400 Speaker 1: to you, and let's do this more often. Fantastic as always. 254 00:12:44,440 --> 00:12:46,679 Speaker 1: Kentrop in the of Graham Capital, a hedge fund with 255 00:12:46,800 --> 00:12:54,800 Speaker 1: eighteen billion a u M. Laura Raim, the chief US 256 00:12:54,800 --> 00:12:57,640 Speaker 1: Economists FS Investments Joints US right now, So, Laura, this 257 00:12:57,840 --> 00:13:01,160 Speaker 1: is the question going into Wednesday in that news conference, 258 00:13:01,200 --> 00:13:04,320 Speaker 1: if it's not addressed in a statement, the recent easing, 259 00:13:04,559 --> 00:13:08,600 Speaker 1: the recent easing of financial conditions warranted or not? And Laura, 260 00:13:08,720 --> 00:13:11,360 Speaker 1: I wonder how you think one he'll answer that question 261 00:13:11,480 --> 00:13:14,760 Speaker 1: and to whether this market and market participants will actually 262 00:13:14,800 --> 00:13:18,960 Speaker 1: listen to him, you know, whether they're warranted is really 263 00:13:19,280 --> 00:13:23,040 Speaker 1: a reflection of the fact that the markets have been trained, 264 00:13:23,360 --> 00:13:26,800 Speaker 1: in part by the FED to look so far ahead 265 00:13:27,000 --> 00:13:29,840 Speaker 1: of the curve on the economy that I think they 266 00:13:29,880 --> 00:13:32,319 Speaker 1: can be too hasty. And in this case, there was 267 00:13:32,400 --> 00:13:35,280 Speaker 1: so much talk about a recession at the beginning of 268 00:13:35,400 --> 00:13:38,000 Speaker 1: last year, recession at the beginning of this year. To me, 269 00:13:38,280 --> 00:13:40,360 Speaker 1: you know, you really need to look for the timing 270 00:13:40,440 --> 00:13:44,559 Speaker 1: of this almost a year after the FED stops raising rates, 271 00:13:44,880 --> 00:13:49,520 Speaker 1: which is why I've penciled in late for an economic slowdown. 272 00:13:50,000 --> 00:13:53,600 Speaker 1: And it means that at earliest the FED would really 273 00:13:53,679 --> 00:13:58,800 Speaker 1: not consider sort of lowering the head curve and cutting 274 00:13:58,920 --> 00:14:01,800 Speaker 1: rates until much later in the year. And for all 275 00:14:01,880 --> 00:14:04,760 Speaker 1: of those you sort of paint that macro backdrop, and 276 00:14:04,920 --> 00:14:08,040 Speaker 1: it means that markets who are pricing in three rate 277 00:14:08,120 --> 00:14:11,280 Speaker 1: cuts this year are have just gotten too aggressive. That's 278 00:14:11,400 --> 00:14:14,439 Speaker 1: pulled down the front end. And look at what we've had. 279 00:14:15,000 --> 00:14:18,760 Speaker 1: Mortgage refinancings have reignited again. We're about to see the 280 00:14:18,880 --> 00:14:22,360 Speaker 1: housing market come back to life. The set hasn't really 281 00:14:22,640 --> 00:14:25,480 Speaker 1: broken anything. They have put a pin in all of 282 00:14:25,560 --> 00:14:28,200 Speaker 1: these interest rate sensitive sectors of the economy. And guess 283 00:14:28,240 --> 00:14:30,680 Speaker 1: what when raids come down, those all reflare, and I 284 00:14:30,760 --> 00:14:33,000 Speaker 1: think that's what the push and pull we're going to 285 00:14:33,080 --> 00:14:36,840 Speaker 1: see over the next year, and really it's going to 286 00:14:36,960 --> 00:14:39,480 Speaker 1: start this Wednesday. Lots to unpank that, Laura. Can I 287 00:14:39,600 --> 00:14:41,040 Speaker 1: just pick up on your call that you don't think 288 00:14:41,080 --> 00:14:44,440 Speaker 1: the waitness comes until the year end? Laura, what guides 289 00:14:44,520 --> 00:14:49,000 Speaker 1: that view? Okay, you have to take out a microscope 290 00:14:49,240 --> 00:14:53,280 Speaker 1: to find weakness in the labor market. We've had upsetting 291 00:14:53,440 --> 00:14:57,520 Speaker 1: headlines on in some key industries like the tech sector, 292 00:14:58,080 --> 00:15:00,320 Speaker 1: but the reality is these are set or is that 293 00:15:00,480 --> 00:15:03,680 Speaker 1: over higher during the pandemic. They're trying to right size 294 00:15:03,720 --> 00:15:06,120 Speaker 1: that right now. And to me, when you look at 295 00:15:06,240 --> 00:15:09,600 Speaker 1: the broader initial claims, the unemployed rate and three point 296 00:15:09,720 --> 00:15:13,000 Speaker 1: five percent jold state of the vacancy rate, I mean, 297 00:15:13,360 --> 00:15:16,520 Speaker 1: go down the list, Jonathan, pick anything. It is just 298 00:15:17,080 --> 00:15:21,480 Speaker 1: very difficult to find any signs of outright weakness, normalization, cooling, 299 00:15:22,000 --> 00:15:24,560 Speaker 1: all of that is actually healthy. And then on the 300 00:15:24,640 --> 00:15:28,440 Speaker 1: consumer side, I would argue there's a similar situation. There's 301 00:15:28,440 --> 00:15:31,040 Speaker 1: a been a lot of talk about delinquencies picking up 302 00:15:31,120 --> 00:15:35,040 Speaker 1: and consumer banks are being cautious. That is their job. 303 00:15:35,600 --> 00:15:37,040 Speaker 1: I think at the end of the day, when you 304 00:15:37,200 --> 00:15:42,120 Speaker 1: saw the earnings from MasterCard, from all from American Express. 305 00:15:42,200 --> 00:15:45,480 Speaker 1: The consumer is healthy with jobs where they are. I 306 00:15:45,600 --> 00:15:49,080 Speaker 1: think the household can continue to spend and lower inflation 307 00:15:49,200 --> 00:15:51,080 Speaker 1: has a role to play in that too. It's not 308 00:15:51,200 --> 00:15:54,640 Speaker 1: a strong growth picture, it's a grind, but I think 309 00:15:54,680 --> 00:15:57,720 Speaker 1: it stays positive. Laura, you said the FEN hasn't broken anything, 310 00:15:57,760 --> 00:15:59,760 Speaker 1: and then you talk about all these pockets of strength 311 00:16:00,040 --> 00:16:02,240 Speaker 1: that could keep inflation hotter than the FED would like. 312 00:16:02,680 --> 00:16:04,960 Speaker 1: Is the implication here that the FED has to break 313 00:16:05,080 --> 00:16:08,320 Speaker 1: something and then what is it that they have to break? Well, 314 00:16:08,480 --> 00:16:10,520 Speaker 1: that's what a recession is at the end of the day. 315 00:16:10,600 --> 00:16:13,320 Speaker 1: It means that they have taken something and pushed it 316 00:16:13,440 --> 00:16:16,640 Speaker 1: too far. Our economy doesn't like to contract, so it 317 00:16:16,760 --> 00:16:20,760 Speaker 1: needs something to be not working right to to really 318 00:16:21,640 --> 00:16:25,480 Speaker 1: fall into contraction. So you know, they have talked a 319 00:16:25,520 --> 00:16:29,520 Speaker 1: lot about the labor market. They've talked a lot about wages, 320 00:16:29,800 --> 00:16:33,320 Speaker 1: and you know, we need wages to come down pretty significantly, 321 00:16:33,400 --> 00:16:35,720 Speaker 1: and I'm just not sure that's going to happen given 322 00:16:36,440 --> 00:16:41,040 Speaker 1: the limited number of job availability. That at the end 323 00:16:41,080 --> 00:16:43,840 Speaker 1: of I think when they think about targeting something to 324 00:16:43,960 --> 00:16:47,160 Speaker 1: really slow the economy at a broader level, it often 325 00:16:47,480 --> 00:16:51,760 Speaker 1: is the labor market. But I think right now they're 326 00:16:51,840 --> 00:16:56,520 Speaker 1: content with some broader slowing. They just see the need 327 00:16:56,600 --> 00:16:58,680 Speaker 1: to continue to raise rates. I don't think that's going 328 00:16:58,760 --> 00:17:01,240 Speaker 1: to change. It's time for them to slow down, no 329 00:17:01,440 --> 00:17:03,120 Speaker 1: doubt about it. I think they're doing the right thing 330 00:17:03,160 --> 00:17:05,680 Speaker 1: over the next several meetings. So a lot of people 331 00:17:05,720 --> 00:17:07,600 Speaker 1: took us some signal from the Bank of Canada, which 332 00:17:07,600 --> 00:17:09,200 Speaker 1: has been on the front foot when it comes to 333 00:17:10,040 --> 00:17:12,640 Speaker 1: their moves in their central bank, and they just indicated 334 00:17:12,680 --> 00:17:14,320 Speaker 1: they're going to go twenty five basis points. They went 335 00:17:14,359 --> 00:17:17,560 Speaker 1: twenty five basis points and they potentially will hold indefinitely. 336 00:17:17,880 --> 00:17:20,160 Speaker 1: Why is the Fed not going to do that since 337 00:17:20,200 --> 00:17:22,440 Speaker 1: it doesn't seem to bother them that much the financial 338 00:17:22,440 --> 00:17:25,800 Speaker 1: conditions keep easy, I would I would push back that 339 00:17:25,880 --> 00:17:28,199 Speaker 1: it may bother them somewhat. I mean, I think they 340 00:17:28,320 --> 00:17:32,000 Speaker 1: see it. I think they recognize that UM, when long 341 00:17:32,119 --> 00:17:36,600 Speaker 1: term magistrates come down, it undoes some of their rate 342 00:17:36,680 --> 00:17:40,959 Speaker 1: hike activity. And UM, while I think that they're going 343 00:17:41,040 --> 00:17:44,440 Speaker 1: to continue to monitor this, I think they recognize that 344 00:17:44,560 --> 00:17:46,840 Speaker 1: they can't only focus on it because it's not their 345 00:17:47,320 --> 00:17:50,920 Speaker 1: main mandate. Their mandate is inflation, and until we see it, 346 00:17:51,040 --> 00:17:55,160 Speaker 1: not just hit two percent, but hit inflation persistently at 347 00:17:55,200 --> 00:17:59,440 Speaker 1: two percent, they have wiggle room to manage expectations, and 348 00:17:59,560 --> 00:18:01,480 Speaker 1: finance conditions are going to be a big part of that. 349 00:18:01,840 --> 00:18:04,600 Speaker 1: I think they are going to keep watching financial conditions 350 00:18:04,720 --> 00:18:07,520 Speaker 1: very closely, especially over the next six months. We catching 351 00:18:07,600 --> 00:18:10,520 Speaker 1: up with Gimpianco Bianco Research a little bit later this morning, 352 00:18:11,000 --> 00:18:12,480 Speaker 1: and in this recent note he said, I think the 353 00:18:12,560 --> 00:18:14,880 Speaker 1: narrative and attention should now turn to how far down 354 00:18:14,960 --> 00:18:17,879 Speaker 1: we're going to go, not whether inflation has paid a 355 00:18:17,920 --> 00:18:20,080 Speaker 1: lot of Can you speak to that? Are we coming 356 00:18:20,119 --> 00:18:23,000 Speaker 1: down to four Are we going to find it difficult 357 00:18:23,240 --> 00:18:26,199 Speaker 1: to get down toitude? Yeah, the inflation numbers are going 358 00:18:26,280 --> 00:18:29,440 Speaker 1: to look so choppy. This is just because year on 359 00:18:29,600 --> 00:18:33,359 Speaker 1: your base effects are going to make the headline number 360 00:18:33,840 --> 00:18:37,359 Speaker 1: just really come down very fast. I think, you know, 361 00:18:37,520 --> 00:18:42,000 Speaker 1: we've now sort of contorted ourselves in the monthly CPI 362 00:18:42,160 --> 00:18:46,920 Speaker 1: numbers of looking at you know, services wages that are 363 00:18:47,160 --> 00:18:50,600 Speaker 1: excluding shelter. I mean we've gotten I think to micro 364 00:18:50,760 --> 00:18:53,159 Speaker 1: on the CPI data. We need to step back and 365 00:18:53,240 --> 00:18:56,119 Speaker 1: we need to include wages in that conversation. We need 366 00:18:56,240 --> 00:18:59,640 Speaker 1: to include sort of numbers that are in the medium term, 367 00:18:59,720 --> 00:19:02,680 Speaker 1: for is just the near term inflation expectations are part 368 00:19:02,720 --> 00:19:05,879 Speaker 1: of that too, and those have been stickier. So to me, 369 00:19:06,080 --> 00:19:09,160 Speaker 1: it's really a more holistic inflation picture, and I think 370 00:19:09,240 --> 00:19:11,480 Speaker 1: the FED is going to be very focused on more 371 00:19:12,000 --> 00:19:16,080 Speaker 1: than just one piece of cp I, and the labor 372 00:19:16,520 --> 00:19:19,359 Speaker 1: dynamics are very critical to that. That's what their medium 373 00:19:19,440 --> 00:19:21,520 Speaker 1: term models key off of, Laura, what are you watching 374 00:19:21,560 --> 00:19:24,000 Speaker 1: most closely this week in terms of the economic data 375 00:19:24,280 --> 00:19:27,080 Speaker 1: the FED meeting as well as earnings. I mean, nothing 376 00:19:27,160 --> 00:19:29,359 Speaker 1: beats the payroll reports, Lisa. You have to pay a 377 00:19:29,480 --> 00:19:31,960 Speaker 1: ton of attention to those, so to me that we're 378 00:19:32,000 --> 00:19:33,680 Speaker 1: really going to end with the bang on that. I 379 00:19:33,720 --> 00:19:35,840 Speaker 1: think the employment cost index numbers are going to be 380 00:19:35,920 --> 00:19:48,800 Speaker 1: really important this week as well. It's fascinating joint to 381 00:19:48,840 --> 00:19:50,680 Speaker 1: us not to talk about the earnings. Tom Fort, the 382 00:19:50,720 --> 00:19:53,480 Speaker 1: City of Research analyst at DA Davidson, not to I 383 00:19:53,560 --> 00:19:56,000 Speaker 1: have some sympathy for you, sir, because the earnings camenda 384 00:19:56,320 --> 00:19:58,840 Speaker 1: for big tech, the big names in the space of 385 00:19:58,880 --> 00:20:01,480 Speaker 1: what fortun Now, Tom, I won't ask you to pick 386 00:20:01,520 --> 00:20:04,159 Speaker 1: your favorite babybe Bob. If you had to pick one 387 00:20:04,240 --> 00:20:06,160 Speaker 1: endings report right now that I could give to your tomb, 388 00:20:06,200 --> 00:20:08,880 Speaker 1: what would it make So if I had to see 389 00:20:09,200 --> 00:20:10,920 Speaker 1: ear news report right now, the one that I want 390 00:20:10,920 --> 00:20:14,200 Speaker 1: to see is Amazon. So I'm curious. The term I 391 00:20:14,240 --> 00:20:16,640 Speaker 1: think that you're going to see this quarter is beaten layoff. 392 00:20:17,080 --> 00:20:20,880 Speaker 1: So to what extent are these big technology companies laying 393 00:20:20,920 --> 00:20:25,160 Speaker 1: off employees but still outperforming against expectations? So I think 394 00:20:25,200 --> 00:20:28,280 Speaker 1: that these layoffs put these companies in a position where 395 00:20:28,280 --> 00:20:31,280 Speaker 1: it's more difficult for them to show better than expected 396 00:20:31,359 --> 00:20:34,119 Speaker 1: sales and profits. Because if they had better than expected 397 00:20:34,160 --> 00:20:37,200 Speaker 1: sales and profits, why are they cutting head council significantly. 398 00:20:37,520 --> 00:20:39,840 Speaker 1: It's a really important question, tom, So let's ask the 399 00:20:39,880 --> 00:20:44,040 Speaker 1: question as to why Apple isn't cutting head count. So 400 00:20:44,200 --> 00:20:46,719 Speaker 1: Apple will cut head count, they'll do it in one 401 00:20:46,760 --> 00:20:49,879 Speaker 1: of two ways. If you look back to Amazon between 402 00:20:49,920 --> 00:20:52,080 Speaker 1: the first quarter and second quarter of last year, they 403 00:20:52,160 --> 00:20:55,200 Speaker 1: cut about a hundred thousand heads, mostly at the fulfillment 404 00:20:55,240 --> 00:20:58,119 Speaker 1: center level when they acknowledge that they were overbuilt for 405 00:20:58,200 --> 00:21:01,240 Speaker 1: the current level of demand. So Apple could cut by 406 00:21:01,240 --> 00:21:04,320 Speaker 1: attrition much like Amazon did. They've been one of the 407 00:21:04,400 --> 00:21:07,560 Speaker 1: companies who's been in the news for wanting their employees 408 00:21:07,600 --> 00:21:10,879 Speaker 1: to return to the headquarters, um to return to office 409 00:21:10,920 --> 00:21:13,040 Speaker 1: for a greater period of time. They could assist on 410 00:21:13,160 --> 00:21:15,480 Speaker 1: that and then have some attrition there. They could also 411 00:21:15,640 --> 00:21:19,119 Speaker 1: layoff their employees at the retail level. So I do 412 00:21:19,280 --> 00:21:22,399 Speaker 1: believe that Apple, while they haven't done so yet, like 413 00:21:22,560 --> 00:21:25,359 Speaker 1: everyone else, they will adjust their headcount for the current 414 00:21:25,480 --> 00:21:28,560 Speaker 1: level of demand. So far this year, tom any kinds 415 00:21:28,600 --> 00:21:32,159 Speaker 1: of announcements of layoffs has been met, usually with a 416 00:21:32,280 --> 00:21:34,440 Speaker 1: rally in the shares of the company. With this feeling 417 00:21:34,520 --> 00:21:37,720 Speaker 1: of cost cutting that would allow growth to continue to accelerate. 418 00:21:37,760 --> 00:21:40,440 Speaker 1: At what point is that not true anymore? For the 419 00:21:40,480 --> 00:21:44,400 Speaker 1: tech complex? So the question is are they cutting fat? 420 00:21:44,520 --> 00:21:47,359 Speaker 1: Are they cutting muscle? And I think to some degree 421 00:21:47,480 --> 00:21:50,760 Speaker 1: a lot of the cuts have been fat. These companies 422 00:21:50,800 --> 00:21:53,840 Speaker 1: were bloated in terms of headcount, especially bloated given the 423 00:21:53,920 --> 00:21:57,000 Speaker 1: low level of demand for e commerce today for digital advertising. 424 00:21:57,560 --> 00:21:59,560 Speaker 1: So the question is at some point are they cutting 425 00:21:59,640 --> 00:22:02,359 Speaker 1: muscle and not fat. That remains to be seen, but 426 00:22:02,480 --> 00:22:05,679 Speaker 1: I think that the reason you're seeing the starch react 427 00:22:05,760 --> 00:22:09,760 Speaker 1: favorably to the head count moves is on the expectation 428 00:22:09,840 --> 00:22:12,840 Speaker 1: that on a near term basis, it will results in 429 00:22:12,920 --> 00:22:16,879 Speaker 1: higher margins on lower expenses. There are a couple different 430 00:22:16,960 --> 00:22:20,280 Speaker 1: strains of ideas for the economy. Within these tech earnings. 431 00:22:20,320 --> 00:22:22,639 Speaker 1: There's a business side, particularly with cloud computing and the 432 00:22:22,680 --> 00:22:25,320 Speaker 1: spending that you've seen or not with a disappointed tank 433 00:22:25,320 --> 00:22:27,919 Speaker 1: outlook for Microsoft, which potentially we might see repeated by 434 00:22:27,960 --> 00:22:31,440 Speaker 1: Amazon's a WS. And then there's a consumer side, the 435 00:22:31,480 --> 00:22:34,639 Speaker 1: consumer still buying and the Apple continuing to be strong 436 00:22:34,760 --> 00:22:37,399 Speaker 1: on that level, Which prong do you think has the 437 00:22:37,440 --> 00:22:41,840 Speaker 1: greatest weakness? Are we seeing some of the bigger softening? Yeah. 438 00:22:42,200 --> 00:22:45,719 Speaker 1: The greater concern, and this pertains to Amazon from their 439 00:22:45,800 --> 00:22:49,359 Speaker 1: third quarter results. Wasn't that their mature e commerce business 440 00:22:49,600 --> 00:22:52,919 Speaker 1: was slow growing? Is that they're faster, higher margin units 441 00:22:53,200 --> 00:22:56,320 Speaker 1: cloud computing and advertising. We're starting to feel the negative 442 00:22:56,320 --> 00:23:00,359 Speaker 1: impacts of an increasingly challenged macro economic environment. So to 443 00:23:00,440 --> 00:23:03,000 Speaker 1: the extent we see more signs of that when Amazon reports. 444 00:23:03,320 --> 00:23:06,600 Speaker 1: I think that's the greater concern, given that it's higher revenue, 445 00:23:07,040 --> 00:23:10,439 Speaker 1: higher margin for Amazon. Let's build on that um variants 446 00:23:10,520 --> 00:23:12,680 Speaker 1: right about this this weekend. I think it's the question 447 00:23:12,760 --> 00:23:14,879 Speaker 1: to ask for these tech names right now, are we 448 00:23:15,040 --> 00:23:17,000 Speaker 1: seeing some of these names face just a little bit 449 00:23:17,000 --> 00:23:19,200 Speaker 1: of a cyclical test. Are we seeing some of the 450 00:23:19,240 --> 00:23:23,120 Speaker 1: structural story that's dominated these names and delivered monster gains 451 00:23:23,160 --> 00:23:25,440 Speaker 1: over the last five years or so, are we seeing 452 00:23:25,520 --> 00:23:28,440 Speaker 1: that structural shift, a change in the underlying trend tom 453 00:23:28,520 --> 00:23:30,119 Speaker 1: that could be with us for years to come to 454 00:23:30,200 --> 00:23:33,720 Speaker 1: gardless of the cycle. I'll go at the structural shift. 455 00:23:34,080 --> 00:23:35,840 Speaker 1: I think that gone are the days where you can 456 00:23:35,880 --> 00:23:40,800 Speaker 1: get up and expect Amazon, Apple, Alphabet Meta platforms to 457 00:23:40,840 --> 00:23:44,200 Speaker 1: out perform against NASDA automatically. I think you need to 458 00:23:44,200 --> 00:23:47,240 Speaker 1: see some company specific initiatives or in the case of 459 00:23:47,440 --> 00:23:51,280 Speaker 1: Alphabet and Meta, a rebound in digital advertising on a 460 00:23:51,320 --> 00:23:55,480 Speaker 1: strengthening economy, so those shares to outperform the NAZA even 461 00:23:55,520 --> 00:23:57,720 Speaker 1: over short goods of time. So I would say it's 462 00:23:57,760 --> 00:24:01,000 Speaker 1: more structural. I think it's a change in dynamics, and 463 00:24:01,119 --> 00:24:02,720 Speaker 1: I think it's something that's going to continue to play 464 00:24:02,720 --> 00:24:04,280 Speaker 1: out over the next cold months. I tell him, how 465 00:24:04,320 --> 00:24:06,560 Speaker 1: does that influence your thoughts somehow we should be thinking 466 00:24:06,560 --> 00:24:10,320 Speaker 1: about valuing these companies with that in mind. Well, the 467 00:24:10,440 --> 00:24:14,560 Speaker 1: channels for Amazon long term is in order to maintain 468 00:24:14,640 --> 00:24:20,080 Speaker 1: its premium multiple, they essentially have to outgrow the contraction 469 00:24:20,680 --> 00:24:24,320 Speaker 1: in their multiple from an earning standpoint, which is why 470 00:24:24,400 --> 00:24:27,680 Speaker 1: you're seeing such a significant shift in focus to services 471 00:24:27,800 --> 00:24:30,920 Speaker 1: to hire margin efforts for Amazon. But The question for 472 00:24:31,000 --> 00:24:35,160 Speaker 1: all these companies and big tech is can they outpace 473 00:24:35,480 --> 00:24:40,280 Speaker 1: the contraction in their multiple perhaps by having their profits 474 00:24:40,320 --> 00:24:42,400 Speaker 1: grow to higher an expected rate. And I think it's 475 00:24:42,400 --> 00:24:44,879 Speaker 1: gonna be a challenge across the board. What's going to 476 00:24:44,960 --> 00:24:47,359 Speaker 1: happen to the unprofitable tech companies? And I think about 477 00:24:47,400 --> 00:24:50,960 Speaker 1: snap for example, as they report earnings tomorrow, is this 478 00:24:51,080 --> 00:24:53,960 Speaker 1: going to be the beginning of the end? All? Right? 479 00:24:54,160 --> 00:24:55,920 Speaker 1: To two things. One of the good news is that 480 00:24:56,600 --> 00:24:58,959 Speaker 1: you're seeing a bid so a lot of the companies 481 00:24:59,000 --> 00:25:02,560 Speaker 1: this year are getting positive performance in their share price, 482 00:25:02,920 --> 00:25:05,720 Speaker 1: even if you're seeing a pullback in some of their 483 00:25:07,440 --> 00:25:11,399 Speaker 1: projections for earnings. But for the company's like Snapchat, for 484 00:25:11,520 --> 00:25:14,080 Speaker 1: companies that are losing money today and maybe you don't 485 00:25:14,119 --> 00:25:17,120 Speaker 1: have a great balance sheet, they're basically an embrace against time. 486 00:25:17,400 --> 00:25:20,240 Speaker 1: Can they get incremental capital well as the capital markets 487 00:25:20,280 --> 00:25:23,920 Speaker 1: reopened before they run out of money? And in many 488 00:25:23,960 --> 00:25:26,840 Speaker 1: instances is to be determined. I tell them this was great, 489 00:25:26,920 --> 00:25:28,439 Speaker 1: Hopefully we can do this again, like to this way. 490 00:25:28,480 --> 00:25:30,320 Speaker 1: When these numbers start to drop up some Florida there 491 00:25:30,600 --> 00:25:34,840 Speaker 1: of da Davidson. Subscribe to the Bloomberg Surveillance podcast on Apple, 492 00:25:34,920 --> 00:25:38,280 Speaker 1: Spotify and anywhere else you get your podcasts. Listen live 493 00:25:38,440 --> 00:25:41,480 Speaker 1: every weekday, starting at seven am Eastern on Bloomberg dot Com, 494 00:25:41,600 --> 00:25:44,480 Speaker 1: the I Heart Radio app, tune In, and the Bloomberg 495 00:25:44,520 --> 00:25:47,720 Speaker 1: Business app. You can watch us live on Bloomberg Television 496 00:25:48,040 --> 00:25:51,120 Speaker 1: and always on the Bloomberg Terminal. Thanks for listening. I'm 497 00:25:51,160 --> 00:25:53,280 Speaker 1: Lisa Abravo. It's and this is Bloomberg