Speaker 1: This is Masters in Business with Barry Ridholes on Bloomberg Radio.
Speaker 1: This week on the podcast, I sit down with Gina
Speaker 1: Martin Adams. She is the head of equity strategy at
Speaker 1: Wells Fargo, a giant bank here in the United States,
Speaker 1: and she's really a very very interesting person, a very
Speaker 1: senior woman in the position of equity strategy. You don't
Speaker 1: you know, for for most of the past few centuries
Speaker 1: that has very much been a male dominated position, and
Speaker 1: it's interesting to see somebody who is so smart and
Speaker 1: and experienced and articulate about how she approaches the business
Speaker 1: of dealing with institutional clients who are um looking to
Speaker 1: deploy their capital a way that makes sense relative to
Speaker 1: the amount of risk they want to assume. I found
Speaker 1: her to be quite fascinating and quite knowledgeable, and if
Speaker 1: you're at all interested in equity investing institutional trading, this
Speaker 1: is a person that you should probably listen to. So,
Speaker 1: with no further ado, here is my conversation with Gina
Speaker 1: Martin Adams. This is Masters in Business with Barry Ridholts
Speaker 1: on Bloomberg Radio. My guest today is Gina Martin Adams.
Speaker 1: She is the head of equity strategy for Wells Fargo Security,
Speaker 1: which is headquartered here in New York, at least the
Speaker 1: securities half of it. A little background about Gina. She
Speaker 1: is both a Chartered Financial Analyst and a Chartered market Technician.
Speaker 1: Not a lot of c f A slash c MT
Speaker 1: s around uh. She UH is also a member of
Speaker 1: the Financial Woman's Association and the Association of Professional Technical
Speaker 1: Analysts and a member of the Institutional Investors all amor
Speaker 1: A research team. Gina, welcome to Bloomberg. Thank you, thank
Speaker 1: you for having me, my pleasure. Um. So, you're kind
Speaker 1: of a unique analyst in the world. Um not only
Speaker 1: because of the path your your career took in the
Speaker 1: various places you've worked. But the only other person I
Speaker 1: know of who's both the cf A and a CMT
Speaker 1: is Jeff de Graf. Okay, they're I think they're about
Speaker 1: a hundred of us in the world now, maybe getting
Speaker 1: closer to and how many are there? Of thousands? Thousands
Speaker 1: and thousands. So let's jump right into this. Tell us
Speaker 1: a little bit about your background. How did you work
Speaker 1: your way into the financial services in Okay? So, I
Speaker 1: actually joined the company known as First Union right out
Speaker 1: of college. I went to the University of Florida. I
Speaker 1: thought I was going to be a marketing major, took
Speaker 1: my first finance course and literally fell in love. Added
Speaker 1: that to my UM to my docket. First Union, Now
Speaker 1: that wasn't isn't Tennessee, is it? No, it was in Charlotte,
Speaker 1: North Carol Charlotte. Yeah, it was in Charlotte, North Carolina.
Speaker 1: So they did a big recruiting down at the university.
Speaker 1: I ended up in a program called the Capital Management
Speaker 1: Groups Training Program. So where the securities business the investment
Speaker 1: banks all have their two year training program for bringing
Speaker 1: analysts into the investment bank. We had one for capital
Speaker 1: management investment management, and I joined that, rotated around UM,
Speaker 1: got to know the various divisions of capital management, and
Speaker 1: ended up on the in the Investments group. Yeah. Very interesting.
Speaker 1: So you mentioned First Union. I know of them through
Speaker 1: Wheat First Union, and that eventually down the road got
Speaker 1: taken over by Wacovia. I don't remember how many steps
Speaker 1: that were in between, and then many many steps there was,
Speaker 1: so there were a number of different things. Ultimately, UM,
Speaker 1: during the Great Recession, Wells Fargo took over. I think
Speaker 1: that turned out to be a pretty uh a pretty
Speaker 1: good fit. Yes, So what is a day in the
Speaker 1: life like for a strategist at at Will's Fargo. I
Speaker 1: don't think there is any day, to be honest with you,
Speaker 1: So it's different from day to day. Every day is different. Um,
Speaker 1: you know, the basics are you break my job into research,
Speaker 1: so coming up with an idea, researching those ideas, then
Speaker 1: writing those ideas into a report, and then communicating those
Speaker 1: ideas to the world. So you think of it in
Speaker 1: sort of three parts. Researching an idea, writing an idea,
Speaker 1: and communicating that idea. Getting that idea out is really
Speaker 1: what we're I'm focused on. So some days are very
Speaker 1: research intensive, some days are very communications intensive. It sort
Speaker 1: of depends, but what what sort of clients do you
Speaker 1: typically work with? So I'm dedicated to the institutional clients,
Speaker 1: So the portfolio managers of the world, the hedge fund
Speaker 1: managers of the world, the pension funds of the world
Speaker 1: as well. Um, professional investors are my audience. And there's
Speaker 1: been a lot of changes going on in the changes, yes,
Speaker 1: which must make your work pretty interesting. It does. It's
Speaker 1: you know, it's not interesting just because of the content,
Speaker 1: which I think is always interesting. You know, where is
Speaker 1: the equity market headed and how do we take advantage
Speaker 1: of different trends um in the macro economy in stocks.
Speaker 1: But it's also interesting in the client base and the
Speaker 1: struggles that they've gone through and the changes in the
Speaker 1: client base have been pretty phenomenal. I've been doing equity
Speaker 1: strategy now for nine years and my product has changed
Speaker 1: a lot, but also the client has changed a lot
Speaker 1: over the last nine years. So so let's work backwards
Speaker 1: nine years would put us at two thousand and seven. Yes,
Speaker 1: so you moved into equity strategy did just before just
Speaker 1: a small crash, small change in the charts. So what
Speaker 1: was it like starting this new position just as the
Speaker 1: world was going to help? So in two thousand and
Speaker 1: seven it was great. I actually worked as an economist
Speaker 1: for John Sylvia ar chief economist for several years before
Speaker 1: two thousand seven, and then moved in two thousand seven
Speaker 1: from Charlotte to New York to start this equity strategy product.
Speaker 1: Our entire equity trading businesses in New York, so it
Speaker 1: made a lot of sense for me to be here.
Speaker 1: So the move to New York was fantastic. You know,
Speaker 1: a lot of big changes we got. We had about
Speaker 1: six months to design a product and start putting it out.
Speaker 1: We were putting it out in two thousand seven to
Speaker 1: early two thousand and eight when things started to get
Speaker 1: a bit rocky, and then the summer of two thousand
Speaker 1: eight hit and we had really just gotten comfortable with
Speaker 1: getting the product out there, understanding the client base, and
Speaker 1: then it just went bananas. So what was it like
Speaker 1: at Wells Fargo when everything was just going or at
Speaker 1: the time when everything was going crazy? What what was
Speaker 1: that like? It was tough. You know. I can remember
Speaker 1: many days, especially over that summer after bear Um, many
Speaker 1: days of a lot of question marks is to where
Speaker 1: we were headed. There was one weekends you may recall,
Speaker 1: when it was who's going to buy Yes, who's going
Speaker 1: to buy wa Covia or take over Wacovia. Will it
Speaker 1: be City Bank or Wells Fargo, And it's kind of
Speaker 1: ironic that City Bank actually thought they could take anybody.
Speaker 1: They were on the verge of their own billot. It's yeah.
Speaker 1: In fact, it was a wild time period if memory serves.
Speaker 1: There was negotiation with the fd i C sort of
Speaker 1: managing it talking to City and when Wells Fargo stepped up,
Speaker 1: it was like Hey, thanks for coming by, but now
Speaker 1: a real buyers. Yeah, I mean I'm not overstating that,
Speaker 1: am I. Uh, you know, I don't know all the
Speaker 1: details of everything that happened. I can say internally there
Speaker 1: was a lot of rooting for Wells Fargo. Because Wells
Speaker 1: Fargo didn't have an investment bank, there would have been
Speaker 1: instant department, better capital, all sorts of better adjustments in
Speaker 1: terms of it was just easier on us. So from
Speaker 1: a personal perspective, you know, and for my colleagues as well,
Speaker 1: there weren't any competitors internally within Wells Fargo, so there
Speaker 1: was a chance that we could survive as opposed to
Speaker 1: going to somebody. They had. City had Solomon Brothers, they
Speaker 1: had all these other things. That sounds very big equity
Speaker 1: business at City. I'm Barry Ridhults. You're listening to Masters
Speaker 1: in Business on Bloomberg Radio. My special guest today is
Speaker 1: Gina Martin Adams. She is the equity strategist at Wells Fargo,
Speaker 1: and let's talk a little bit about what it's like
Speaker 1: to be a woman working in the world of finance.
Speaker 1: We've had other women's strategists like Liz Anne Saunders, Kelly
Speaker 1: Coffee is the head of the private banquet at JP Morgan.
Speaker 1: But something that Michelle Meyer said, she's one of the
Speaker 1: economists at Meryl Lynch, really really stayed with me, which was,
Speaker 1: and this is a quote, the lack of women at
Speaker 1: the top of the industry serves as a real challenge
Speaker 1: for women in finance. Do you agree with that? What
Speaker 1: do you think about that? Uh? You know, the way
Speaker 1: that I see it is being a woman on Wall
Speaker 1: Street is both a blessing and a curse. I mean,
Speaker 1: I think that there are a lot of blessings that
Speaker 1: come come along with being a woman on Wall Street.
Speaker 1: You are immediately recognizable right there are off with a
Speaker 1: white shirt and red tar, right, So you know, on
Speaker 1: on that hand, it's a blessing. It's a curse because
Speaker 1: you don't fit in still. But I think, you know,
Speaker 1: I have to admit there have been remarkable changes just
Speaker 1: in my career, and I meet a lot more women
Speaker 1: doing what I do, and a lot more women that
Speaker 1: sit across the table as clients today than I did
Speaker 1: even nine years ago when I started any strategy, and
Speaker 1: certainly more than I did twenty years ago when I
Speaker 1: started this business. So I started on a trading desk,
Speaker 1: and I remember the days of the boom boom rooms
Speaker 1: and the sexism on Wall Street was it was pretty
Speaker 1: much a frat house. That seems to have really matured dramatically, absolutely,
Speaker 1: and I had. I didn't see that in my career
Speaker 1: because I was on the buy side for the first
Speaker 1: several years of my career, and then I was an economist.
Speaker 1: So you know, I've only been in the equity business
Speaker 1: specifically for the last ten and I didn't see that
Speaker 1: in and certainly don't see that today. Well, it's completely different,
Speaker 1: it's completely change. What other changes have you seen that
Speaker 1: have taken place, whether it's on the equity side, I
Speaker 1: don't just mean as a woman, but what have you
Speaker 1: seen change over the course of your career. The most
Speaker 1: dramatic change, I think is the regulatory environment. It's post
Speaker 1: Dodd Frank, post financial crisis, post financial crisis, but also
Speaker 1: post tech bubble bursting. You know, I go back to
Speaker 1: the late nineties, and I did have a few years
Speaker 1: of experience in the nineties in the absolute boom years,
Speaker 1: you know, in the years when the investment bank was
Speaker 1: not entirely separate from the research division. While I was
Speaker 1: on the BI side and only peripherally noting these things.
Speaker 1: The changes from two thousand two to two thousand and four,
Speaker 1: I think we're very profound for the investment banking industry.
Speaker 1: And now the changes post financial crisis have been very
Speaker 1: profound for the banking industry at large. So you had
Speaker 1: to cris post crisis periods of regulatory change, and that's
Speaker 1: I think been the most profound change the citial services business.
Speaker 1: Then the analysts um the crisis that we saw on
Speaker 1: the the end ron Jack Grubman that that whole run
Speaker 1: of stuff was really those were enormous changes that took
Speaker 1: place because at one point in time, I think the
Speaker 1: retail investor thought the analyst community worked for them, and
Speaker 1: it was kind of a wake up call when they realized, no,
Speaker 1: it's part of investment banking. They're here to generate m
Speaker 1: and A and underwriting, not actually tell you what to
Speaker 1: buy and sell. I think that was a huge shock
Speaker 1: to people, very very big change. And so tell us
Speaker 1: about what you've observed firsthand post financial crisis, mostly due
Speaker 1: to the Dodd Frank changes. Well, you know, the first
Speaker 1: thing you observe is that the fastest growing divisions of
Speaker 1: banks are the regulatory and compliance departments. Really that's fascinating,
Speaker 1: but it's very account budget. Absolutely. Just keeping up with
Speaker 1: these compliance regulations is a tremendous allane. You also have
Speaker 1: a level of conservatism, and Wells Fargo has always been
Speaker 1: a very conservative organization, so I think, you know, there
Speaker 1: you were certainly unique in that in that aspect, but
Speaker 1: there's a level of conservatism across banks, and especially in
Speaker 1: investment banks that maybe didn't exist. The risk taking is
Speaker 1: not as extreme. Um, you know, there's always risk taking
Speaker 1: it is an investment bank, but I think the decision
Speaker 1: process is a little bit different considering the regulatory angle.
Speaker 1: I mean, obviously that there's been a shift in even
Speaker 1: the capacity to trade in these divisions is pretty much gone.
Speaker 1: So I think, you know, there have been a lot
Speaker 1: of changes, but a lot of them are related to
Speaker 1: regulatory pressures. The other big change that I see is,
Speaker 1: you know, there are really two. One is technological advancement
Speaker 1: is obviously changing the way in which we do business,
Speaker 1: and that's changed from when I started in this business.
Speaker 1: To make a trade in a mutual fund, you had
Speaker 1: to call a company, right, I mean, it wasn't It
Speaker 1: was very different. End of day trading at four oh
Speaker 1: one exactly, megaphone callet. Sometimes you wouldn't get a price
Speaker 1: till four or fifteen exactly. It took a while while
Speaker 1: we're waiting for some subtly accounts every night. I mean,
Speaker 1: just a totally different business model. Um. And I was
Speaker 1: fortunate enough in my rotational training program that we referenced
Speaker 1: earlier in the program, I was fortunate enough to sit
Speaker 1: on a desk where we designed the automated trading in
Speaker 1: mutual funds on the investment side of the business. Yeah,
Speaker 1: so that was in the late nineties. Um. The technology
Speaker 1: has been there for a long time. Yes, just building
Speaker 1: it and implementing right exactly. Think about there was no
Speaker 1: BlackBerry also right in the late nineties, nobody carried around
Speaker 1: a BlackBerry until right around two thousands your cell phone
Speaker 1: was voice exactly, a very big change. You could barely
Speaker 1: SMS that barely existed short messaging not at all, not
Speaker 1: at all. So that's just an example of how different
Speaker 1: it is so technology. And then what was the other
Speaker 1: thing I think is investor appetite for risk And this
Speaker 1: sort of speaks to what the retail investor is doing
Speaker 1: with their capital. You go all the way back to
Speaker 1: two thousand. That was pretty much the peak of household
Speaker 1: ownership of equity, right, and we have yet to recover
Speaker 1: from the two thousand and two thousand bubble. And then
Speaker 1: on top of that the two thousand two nine crash,
Speaker 1: and you you have the housing collapse in the middle
Speaker 1: of that, and then after that you have the commodities call.
Speaker 1: So that's four major booms that that the individual investor
Speaker 1: has lived through. And the investors today think very differently
Speaker 1: than the generation of investors prior to that. If you
Speaker 1: think about how the baby boomer generation sort of came
Speaker 1: up um in the workforce, they went through the two
Speaker 1: thousand biggest bull market, right, it was just incredible environment
Speaker 1: where obviously you owned stocks for the long haul, and
Speaker 1: obviously you put money to work in stocks, and you
Speaker 1: know your pension was clearly going to be there for you.
Speaker 1: Because the equity market was constantly rising, bonds were in
Speaker 1: a bull market at the same time. And then in
Speaker 1: two thousand, really starting in two thousand, those assumptions started
Speaker 1: to break um. And I think that that's a huge
Speaker 1: change for the industry at large, is what does the
Speaker 1: investor want out of us? What do they command out
Speaker 1: of us, and what is their perception of assets in
Speaker 1: general and their willingness to tolerate the risk that comes
Speaker 1: along with ownership. I'm Barry rid Halts. You're listening to
Speaker 1: Masters in Business on Bloomberg Radio. My special guest today
Speaker 1: is Gina Martin Adams. She is the head of Equity
Speaker 1: Strategy for Wills Fargo Security, which is located here in
Speaker 1: uh New York. In addition to being a member of
Speaker 1: the Institutional Investors All America Research team, she is both
Speaker 1: a chartered financial analyst and a chartered market technician, which
Speaker 1: is a unique and interesting combination. And prior to working
Speaker 1: at Wells Fargo, she was at Wacovia in the economics department,
Speaker 1: which was acquired by Will's RGO. During the financial collapse,
Speaker 1: Let's talk a little bit about that summer, which was
Speaker 1: a fun period of Wall Street history. Um, even though
Speaker 1: there was so much um, in hindsight, it's a fascinating era.
Speaker 1: At the time, it was pretty frightening. People were genuinely
Speaker 1: afraid that the system itself was going to break the
Speaker 1: entire financial system. Yeah, it was. It was brutal, to
Speaker 1: say the least. I mean, what was amazing about that
Speaker 1: summer is if you look back at what the market
Speaker 1: did between the Bear Stearns collapse, which was let's call
Speaker 1: that March spring, the spring of sometime, and then the
Speaker 1: big moment for us, obviously was the acquisition of Wacovia
Speaker 1: by Wells Fargo in September from the city. All Right,
Speaker 1: the markets were actually remarkably stable during that period. They
Speaker 1: were bouncing up and down, they were bouncing up and down,
Speaker 1: but they were range bound. And then September happened and
Speaker 1: it was an absolute crash. But I distinctly recall sitting
Speaker 1: in my office during that summer and thinking, why is
Speaker 1: the market so ridiculously stable? What does the market know
Speaker 1: that I don't know? And you think back to that
Speaker 1: period and there were a lot of people saying Bear
Speaker 1: was the big moment, for the big moment, and that
Speaker 1: was going to be it. And then suddenly you had
Speaker 1: this just wave of trouble that occurred in the in
Speaker 1: the fall. So even though that summer we think of
Speaker 1: it as you know, that was when everything happened, it
Speaker 1: was really the fall when everything happened, because the summer
Speaker 1: was a quiet period. It was, oh, you know, things
Speaker 1: really don't seem stable, but the market seems somewhat stable.
Speaker 1: What's going on here? And then it just absolutely fell, um,
Speaker 1: you know, through the floor. People forget if if you're
Speaker 1: if you're not looking at the charts, if you're not
Speaker 1: looking at the timeline housing prices. I want to say,
Speaker 1: housing volumes peaked in OH five, and then prices peaked
Speaker 1: in and then when housing began to roll over and
Speaker 1: everything associated with mortgages. So first you have the banks,
Speaker 1: and then you have the securities firm, and then you
Speaker 1: have the home builders. As home prices fell, that started
Speaker 1: a cascade. I've argued that Lehman was just the first
Speaker 1: trailer to get taken out by the tornado. It didn't
Speaker 1: cause everything. As home prices were falling, that storm was
Speaker 1: going to take everything in its path. So so you're
Speaker 1: at withall Covia. What is it like when when you
Speaker 1: you're hearing internally, hey we might get brought by city.
Speaker 1: Here's what's going on? What? What? What did that feel like? Uh?
Speaker 1: It was pretty awful. I mean, I don't want to
Speaker 1: say it was debilitating. We still were producing research and
Speaker 1: kind of wondering what the point was. But nonetheless, week
Speaker 1: I was in New York. I was in New York
Speaker 1: and had just for a year been doing equity strategy
Speaker 1: at that point, So it was it was tricky because
Speaker 1: you kind of wondered, you know, where are we going
Speaker 1: to end up? What are the On a daily basis,
Speaker 1: your color, my colleagues and I would discuss what are
Speaker 1: what are What's going to happen to us? Right? It
Speaker 1: was as much as we wanted to do business as usual,
Speaker 1: so much of your day was dedicated to following what's
Speaker 1: happening in the financial news, what's happening in the financial stocks?
Speaker 1: You know who's crashing today? Um, you know where where's
Speaker 1: the next crisis? And how are we going to survive this? Uh?
Speaker 1: So it was it was really tough. Is the best
Speaker 1: the best word that I can can use to describe it,
Speaker 1: because it was in a lot of ways, because somewhat
Speaker 1: indescribable because it was such a unique experience. And I
Speaker 1: recall having conversations with people walking down the streets of
Speaker 1: Manhattan and saying, you can feel the tension in the
Speaker 1: as It wasn't just me projecting. There was a genuine
Speaker 1: angst throughout the entire city, and I imagined throughout any
Speaker 1: other financial center in the world, right, And so when
Speaker 1: did you guys find out? Oh, by the way, Wills
Speaker 1: Fargo was our white night, everything is fantastic. Well, it
Speaker 1: was a weekend. It happened over a weekend, as all
Speaker 1: great news does. I remember it was a weekend, and
Speaker 1: I remember the exact day, but I remember it was
Speaker 1: a weekend. We knew that Wells Fargo had bought us,
Speaker 1: but there was still a big question mark in our minds,
Speaker 1: and that was Wells Fargo historically had not, you know,
Speaker 1: been interested in taking the risk of having an investment bank.
Speaker 1: It's a very dedicated, very conservative, large bank, but having
Speaker 1: an investment bank was not something they historically had been
Speaker 1: interested in. So in the investment bank, we wondered, you know,
Speaker 1: are they actually going to be interested in the investment bank.
Speaker 1: And as much as they told us yes, everything's fine,
Speaker 1: I don't think anyone felt fine with it really until
Speaker 1: the end of two thousand eight, early two thousand nine,
Speaker 1: when we've got much more communication about you know, this
Speaker 1: is happening, you really are part of this bank. So
Speaker 1: there was a period of time where, you know, the
Speaker 1: markets were imploding, and that implosion itself made you question
Speaker 1: how much risk this giant institution was willing to take
Speaker 1: on with its investment bank. Um, but I think we really,
Speaker 1: we all started to feel a lot better late two
Speaker 1: thousand early two thousand nine that at the very least,
Speaker 1: what Covia in its former self would survive as a
Speaker 1: you know what Covia's investment bank would survive as a
Speaker 1: portion of Wells Fargo. I'm Barry Ridholts. You're listening to
Speaker 1: Masters in Business on Bloomberg Radio. My special guest today
Speaker 1: is Gina Martin Adams. She is the head equity strategist
Speaker 1: at Wells Fargo Securities located here in New York. And
Speaker 1: let's talk a little bit about your unusual background. Both
Speaker 1: a Chartered market technician meaning you look at charts, your technician,
Speaker 1: and a cf A meaning you can do the full
Speaker 1: fundamental analysis. UM, we had Jeff degraph On. He is
Speaker 1: really the only other person I know of personally who's
Speaker 1: both a A, a c MT and a c f A.
Speaker 1: I think you mentioned there there are a hundred or
Speaker 1: so of you folks. What motivated you to to go
Speaker 1: that route and get both designations? Yeah, it's it's a
Speaker 1: great question. I actually started as a fundamental analyst. UM.
Speaker 1: I think every university in the country in the if
Speaker 1: you were taking taking finance courses, you were taught a
Speaker 1: fundamental way to look at the market right and and
Speaker 1: ultimately you have to take the three part exam in
Speaker 1: investment management. It was very promoted, you know, going to
Speaker 1: do the c f A. It's it's your next step.
Speaker 1: So I definitely did that and found it very valuable.
Speaker 1: But when I was working as an economist, UM, we
Speaker 1: really struggled to explain things like oil prices and where
Speaker 1: oil prices were going at the time. Remember between two
Speaker 1: thousand one and two thousand eight, oil prices just soared.
Speaker 1: We we struggled to explain oil prices where went pretty
Speaker 1: went out of control, right. And we also really struggled
Speaker 1: and I think most shops have struggled with forecasting the
Speaker 1: tenure treasury bund the famous Greenspan's famous conundrum. Why is
Speaker 1: the tenure treasury staying low despite short rates moving higher?
Speaker 1: And what's happening here? So I started to develop a
Speaker 1: lot more respect for what, you know, what the market
Speaker 1: was actually telling me what and wanted to look at
Speaker 1: the charts and wanted to explore other options because sometimes
Speaker 1: the price trend goes beyond the fundament what fundamentals can justify.
Speaker 1: And so I started looking into the technicians designation. UM
Speaker 1: went through that process and I didn't take a course.
Speaker 1: I did it all on my own. Really. Yeah, it's
Speaker 1: very similar to the CFA where you read, you know,
Speaker 1: I don't know, eight different textbooks and you get a
Speaker 1: test at three different tests to pass the test. And
Speaker 1: so I didn't exactly do a course, but I will
Speaker 1: say there were some figures that really there's some um,
Speaker 1: you know, practitioners of technical analysis that really made a
Speaker 1: big impression on me. And one is John Murphy did
Speaker 1: a lot of work on inner market analysis, which you know,
Speaker 1: I think it really speaks to fundamental investors in a
Speaker 1: lot of way. You know, we all know that there's
Speaker 1: an economic cycle. It's a very fundamental tenant. But here
Speaker 1: is a technician talking about how to describe that economic
Speaker 1: cycle and charts and relative sector performance and the like. UM,
Speaker 1: here's the technician talking about bonds versus stocks, versus commodities
Speaker 1: and different cycles that occur through time. There thing, it's
Speaker 1: a lot of crossover, I think between fundamentals and technicals UM.
Speaker 1: In some of Mercy's Murphy's work, and I really appreciated that.
Speaker 1: And then you know, I think on the technicals, there's
Speaker 1: no better explanation for market sentiment than the price itself. Right,
Speaker 1: and say that again, there's no better explanation for sentiment
Speaker 1: than meaning people are affected by whether their portfolios are
Speaker 1: going up or down exactly. Well, just price is representative
Speaker 1: of sentiment, right, It's what stocks are doing is in
Speaker 1: and of itself sentiment. If stocks are rising, you've got
Speaker 1: buyers willing to bid up prices. If stocks are falling,
Speaker 1: you've got sellers willing to take less. Right. So there's
Speaker 1: there's a psychological component that is completely and totally described
Speaker 1: through price that I absolutely appreciate. So so let's talk
Speaker 1: about that because I sense a bit of a chicken
Speaker 1: and egg conundrum. Are buyers bullish and are driving prices higher?
Speaker 1: Or do buyers having just bought feel bullish, because now
Speaker 1: that represents I think there's a little bit of both.
Speaker 1: I think there's a little bit of both, And again
Speaker 1: it's sentiments, so it's a fuzzy measure, but I do
Speaker 1: think there's a little bit of both. And what we've done,
Speaker 1: some of our work is has focused along even describing valuation,
Speaker 1: which is a fundamental concept in technical terms. So if
Speaker 1: you look over a long period of history and you
Speaker 1: look at the market valuation and how it moves. A
Speaker 1: lot of people look at valuation and they say, okay,
Speaker 1: relative to a mean, whereas valuation, assuming the valuation is
Speaker 1: always mean, revert. And that may be true over long
Speaker 1: periods of time. But if you really look at the
Speaker 1: chart of the market pe it actually trends. Valuations go
Speaker 1: through periods of time where they're rising, and they go
Speaker 1: through periods of time where they're falling. I could not
Speaker 1: possibly agree more. I've argued that people misunderstand what a
Speaker 1: bull market is. A bull market isn't just a rise
Speaker 1: in price. A bull market is an increasing willingness by
Speaker 1: buyers to pay more for the same share of stock, absolutely,
Speaker 1: and that's represented in valuations, which ultimately drive prices high. Right,
Speaker 1: And you see valuations peak at the end of a
Speaker 1: bull market and bottom at the end of a bear market,
Speaker 1: more or less. So there's there's a great chart. I'll
Speaker 1: fold it to you. I'm trying to remember who put
Speaker 1: it out that literally breaks bull and bear markets into
Speaker 1: the top half of the charters. Price the bottom half
Speaker 1: of the charters valuation, and if you look at it,
Speaker 1: it's pretty clear they trend together and not not a
Speaker 1: big surprise. So so given that which is more significant
Speaker 1: for your market calls. Is it the valuation or is
Speaker 1: it the charts um? It's completely dependent on time period, Okay, right,
Speaker 1: so we use we use technicals a lot more in
Speaker 1: describing short term trends in the market right where we're
Speaker 1: talking about you, where is the market likely to go
Speaker 1: over the next three to six months? We oftentimes will
Speaker 1: reference things like what's breath doing, is breath expanding or contracting?
Speaker 1: What's momentum doing? Is it confirming or diverging from price?
Speaker 1: And what does that mean for the short term outlook
Speaker 1: for stocks? I'll use technicals for long term trends. When
Speaker 1: major crossovers occur in moving averages, then you get a
Speaker 1: better sense of whether you're in your entering a longer
Speaker 1: term bear or or exiting a longer term bowl or
Speaker 1: vice versa. Um. When we look at sort of valuing
Speaker 1: the market, it's a fundamental concept, right what is a
Speaker 1: fair value for stocks right now is a completely fundamental concept.
Speaker 1: And when we look at sort of forward twelve month
Speaker 1: ideas for where should stocks trade. It's a fundamental concept,
Speaker 1: but I don't think that they're completely I don't. I
Speaker 1: don't think you should detach fundamentals from technicals. I think
Speaker 1: that technicals describe the market and can be incredibly additive
Speaker 1: to a fundamental process us as well. I mean, there
Speaker 1: are a lot of fundamental analysts who I call closet technicians.
Speaker 1: There are a lot of that's for sure, fundamental analysts
Speaker 1: who don't they they'll tell you they don't believe in technicals.
Speaker 1: But what fundamental analysts doesn't look at a price chart?
Speaker 1: You know? Ralph what technicals are? Ralph Akampora, who um
Speaker 1: pretty much created the Market Technicians Association way back when
Speaker 1: used to say fundamentals tell you what to buy and
Speaker 1: technicals tell you when to buy. And I think that's
Speaker 1: significant for people who are wondering why we talk about
Speaker 1: charts versus listeners who, maybe hearing well, don't the fundamentals.
Speaker 1: Isn't that what matters? Yes, but sometimes the stock has
Speaker 1: already run up and you want to know about that
Speaker 1: before before you put money to work. So so um,
Speaker 1: between the two of them, which is the more significant
Speaker 1: when it comes to making a buy or cell decision. Again,
Speaker 1: I use technicals more for timing and fundamentals more for
Speaker 1: long term. But if you look at my model, for instance,
Speaker 1: for sector selection, which is what we spend the vast
Speaker 1: majority of our time on his sector and industry selection
Speaker 1: allocation recommendations, Um, it's equal parts technicals and fundamentals. It's
Speaker 1: equal parts price momentum, learning through vision momentum as the
Speaker 1: more technical concepts, and valuation and learning's estimate achievability, which
Speaker 1: are the more fundamental concepts. So I literally use them
Speaker 1: in equal parts for the vast majority of my work.
Speaker 1: So I'm going to ask you the same question, but
Speaker 1: I asked the inverse of it, between technicals and fundamentals.
Speaker 1: Which impact of those forces do you get more grief
Speaker 1: about from from customers? Meaning when you make a technical
Speaker 1: call and and customers push, what generates more pushback? The
Speaker 1: technical calls are the fundamental technical real zero on the
Speaker 1: fund Well, the fundamental side is a narrative, and people
Speaker 1: can wrap their head around that the technicals are well,
Speaker 1: this is what the chart says in some people obviously
Speaker 1: have a hard time. Yeah, well, and somebody very much
Speaker 1: more brilliant than me, stated Um, you put this idea
Speaker 1: in my head years ago that one of the sort
Speaker 1: of you know, more disappointing aspects of our community of
Speaker 1: investment investment professionals is we have this tendency to water
Speaker 1: our weeds and pull our flowers, right instead of watering
Speaker 1: our flowers and pulling our weeds, and technicals help you
Speaker 1: not to do that. They help you to continue to
Speaker 1: write a price trend that's still moving higher, even if
Speaker 1: valuations are getting a bit stretched and every fundamental part
Speaker 1: of your body is saying, maybe I don't necessarily want
Speaker 1: to continue to own this stock. The technicals helped help
Speaker 1: you to stay in that trade. On the other on
Speaker 1: the other end, if the fundamentals are still great but
Speaker 1: the price trend is turned, the technicals tell you to
Speaker 1: get out of that idea. Right. But on in this business,
Speaker 1: we have this tendency to want to ignore the technicals
Speaker 1: and really focus on what we truly believe, which is
Speaker 1: our sort of fundamental basis for why I bought that
Speaker 1: stock or why I'm selling that stock. And sometimes the
Speaker 1: technicals tell you that you're wrong, and we need to
Speaker 1: respect that. The narrative is very reassuring. Look, everybody, whoever
Speaker 1: started on a trading desk in this business as I did,
Speaker 1: or pretty much any other part of the of the
Speaker 1: financial industry is always told uh, cut your losers short
Speaker 1: and let you winners run. Understanding that and actually doing
Speaker 1: it are two completely different things. So for listeners who
Speaker 1: might want to find any of your research or writing,
Speaker 1: where's the best place for them to go? Well, it's
Speaker 1: pretty restricted, actually. The I am the institutionally designated equity strategies,
Speaker 1: so my work is as I send it out on
Speaker 1: a distribution list, so they can contact me at Gina
Speaker 1: dot Martin Adams at Wells Fargo dot com and I
Speaker 1: can get them on the distribution. But generally, if you
Speaker 1: want to get access to my research, you have to
Speaker 1: be able to get through to our website, which means
Speaker 1: you have to be an institutional investor. If you have
Speaker 1: enjoyed this conversation, be sure and check out our podcast AFTRAS,
Speaker 1: where we keep the tape rolling and continue chatting about
Speaker 1: all things equity. Be sure and check out my daily
Speaker 1: column on Bloomberg View dot com or follow me on
Speaker 1: Twitter at Rid Halts. We love your comments, feedbacks and suggestions.
Speaker 1: Be sure and right to us at m IB podcast
Speaker 1: at Bloomberg dot net. I'm Barry Ridlts. You've been listening
Speaker 1: to Masters in Business on Bloomberg Radio. Welcome to the podcast.
Speaker 1: I'm here with Gina Martin Adams, who I keep saying
Speaker 1: her name faster and faster, and that's why I stopped
Speaker 1: during the broadcast to say Gina Martin Adams, because Sunday
Speaker 1: became Gina Martin Adams. UM. So you were talking during
Speaker 1: the broadcast portion about um the change that technology has
Speaker 1: wrought to the industry. So I have just it happened
Speaker 1: today is the only reason why the story is so
Speaker 1: fresh in my mind. So as is often it's ilk
Speaker 1: the long On Railroad had had the whole system is
Speaker 1: closed this morning, not actually not for anything they did wrong.
Speaker 1: Somebody was struck by a train and anytime there's a
Speaker 1: you know, one of those events, everything freezes. I don't know,
Speaker 1: it's it's terrible and I want to go into the details.
Speaker 1: But so a bunch of people at my train station
Speaker 1: we all jump in a cab and we head over
Speaker 1: to Manhasset, which is the adjacent train line, which is
Speaker 1: unaffected by this because it's where the accident was is
Speaker 1: bypassed one of the gentlemen um isn't. One of the
Speaker 1: people in the in the cab is an older gentleman.
Speaker 1: And we were all talking about, you know, what we
Speaker 1: were doing, and and he was going in for a
Speaker 1: board meeting. And he worked in the industry years ago,
Speaker 1: and he was telling the story that in the nineties,
Speaker 1: sixties and seventies, clients would come into their office not
Speaker 1: only with stock certificates, but with cash. And he had
Speaker 1: to get a carry permit for a handgun because he
Speaker 1: was the manager of the office. And he had a
Speaker 1: walk around the block often carrying hundreds of thousands of
Speaker 1: dollars worth of certificates Bearraman's cash. I'm like, what, what
Speaker 1: sort of a caveman industry? So I said, so let
Speaker 1: me And he's been sort of out of the business
Speaker 1: for a few years. He's on some boards. He's in
Speaker 1: the city, I guess once a month or something like that.
Speaker 1: Let me tell you how the technology has changed. We
Speaker 1: have a scanner for our local bank account, and we
Speaker 1: have a scanner for our custodian And when checks come in,
Speaker 1: we don't even take them to the bank. They get scanned,
Speaker 1: a photo copy gets uploaded to I shouldn't even call
Speaker 1: it a photo copy. A scan of of the of
Speaker 1: the check gets uploaded to our cloud, and after we
Speaker 1: get the confirm thirty seconds later that the deposit has accepted,
Speaker 1: the check gets shredded. It's not like you even have
Speaker 1: to walk around the corner to the bank to make
Speaker 1: a deposit. And this guy's telling stories about having to
Speaker 1: carry a handgun because New York was not the safest place,
Speaker 1: and so you you were telling the story about how
Speaker 1: technology has changed stuff. All I can think of is
Speaker 1: this poor guy literally is packing heat because he has
Speaker 1: bonds and sirs, and he said he goes he occasionally
Speaker 1: would get a big pile of cash, but just for
Speaker 1: the certificates. And you know, you take a bear of bonds,
Speaker 1: that's as good as cash if you could take if
Speaker 1: you're sophisticated enough thief back in the nineteen seventies. So
Speaker 1: that's how much technology. Imagine you're working in a brokerage
Speaker 1: from and you have to get a gun so you
Speaker 1: could deposit client assets. Just just insane. So you talked
Speaker 1: about technology. One of the things we didn't get to
Speaker 1: is there's been a bit of a shift. It's it's
Speaker 1: not everybody but there's a big shift away from active
Speaker 1: to passive. How does that impact what you do? What
Speaker 1: do you what do you see from from your perch
Speaker 1: looking at institutional trading. Um, So it's definitely impacted my
Speaker 1: client base. I'd say that's the biggest impact is in
Speaker 1: the client base. How money has managed and the products
Speaker 1: that they offered at customers are very different. So you know,
Speaker 1: it doesn't impact my work as much because I'm still
Speaker 1: making sector and industry allocations, recommendations that's still ultimately is
Speaker 1: relevant for if I'm going to buy, for instance, if
Speaker 1: I'm going to go along a healthcare et F or
Speaker 1: a technology e t F, It's still relevant there. But
Speaker 1: for clients it's it's changed a lot. Our clients are
Speaker 1: the institutional investors. What are the products that they're their
Speaker 1: clients are asking them for. It's passive products in a
Speaker 1: lot of ways. So you know, my client may want
Speaker 1: something very different than they would have wanted in the past,
Speaker 1: and we've all had to adjust as a result of that.
Speaker 1: So let me double down with the same question that
Speaker 1: we're doubled down as uh political season is in my head, Um,
Speaker 1: how does the rise of past of and indexes in etfe.
Speaker 1: How does that impact the way you do market analysis?
Speaker 1: Or does it not matter if money is flowing into equities,
Speaker 1: if it flows into passive indexes, or if it flows
Speaker 1: into individual stocks or mutual funds. Does that actually have
Speaker 1: an impact? The reason I ask is there are people
Speaker 1: who are insisting all this money flowing a passive is bubble.
Speaker 1: I've heard that phrase, which seems a little curious, and
Speaker 1: then I've had other people say all this passive investing
Speaker 1: is impacting my ability to figure out what's going on
Speaker 1: in the market. I don't think it necessarily has impacted
Speaker 1: our ability to figure out what's going on in the market.
Speaker 1: I mean, you know, prices are prices, Earnings are earnings,
Speaker 1: regardless of who's buying stocks. Somebody's buying stocks at most
Speaker 1: points in time. What has impacted us in the sort
Speaker 1: of shift to passive versus active um Part of it
Speaker 1: is a measurement issue, right, because when you look at
Speaker 1: mutual fund flows through this cycle and you look at
Speaker 1: what's gone into the US equity market, we're still actually
Speaker 1: sitting on net negative inflows to the US equity market
Speaker 1: from two thousand nine to date. If you look at
Speaker 1: the official now that's a fascinating data point because the
Speaker 1: market has done nothing but go up and mine. So
Speaker 1: how significant our outflows if the market drugs it off
Speaker 1: and just keeps going, It's hard to imagine. It's hard
Speaker 1: to tell. So that's what's important. That's what's tricky is
Speaker 1: maybe something's gone awry in the measurement because the measurement
Speaker 1: is based on the idea that you have these sort
Speaker 1: of actively managed funds and they're easily measured, they report
Speaker 1: their assets right. There's clearly something going on with passive investment.
Speaker 1: That's where all the dollars have gone so far this cycle,
Speaker 1: and maybe we're under measuring what's going into the equity market.
Speaker 1: So if you were basing a methodology and methodology at
Speaker 1: all on flows, and we dropped sector flows from our
Speaker 1: methodology years ago because we were not able to prove
Speaker 1: a relationship between flows into sector based funds and sector
Speaker 1: per formants. There was a firm trip Tabs years ago
Speaker 1: that used to track that stuff, and it seems dark
Speaker 1: pools and and all sorts of other things kind of
Speaker 1: blinded that flow analysis. I don't know if that's really
Speaker 1: what what caused it, but the ability to track where
Speaker 1: money was going seems to have been a little obscure. Yeah,
Speaker 1: I think it's very very difficult. It also moves so
Speaker 1: quickly with a high frequency trading and whatnot, So I
Speaker 1: think it's it's difficult to capture flows to the extent
Speaker 1: that we used to feel. And maybe part of that
Speaker 1: is active. Maybe it's maybe I'm just maybe part of
Speaker 1: that as active versus passive, maybe just finding a scapegoat
Speaker 1: because it's so difficult now. I don't know, UM, but
Speaker 1: I think it's it's definitely changed the way that investors
Speaker 1: approach markets. So the other the other thing I think
Speaker 1: is that it's done is made access to non domestic stocks,
Speaker 1: emerging markets, Developed X, North America much easier to do.
Speaker 1: It's just easier to access and opportunities outside of the US.
Speaker 1: It used to be if you wanted to invest overseas,
Speaker 1: you can invest in a mutual fund, but they were
Speaker 1: very pricy. Yes, they've become very reasonable. Change the dynamic, no,
Speaker 1: no doubt about that. So you mentioned something during the
Speaker 1: broadcast portion about um the two thousand dot com crash,
Speaker 1: the financial crisis, and I brought up housing and commodities crashing.
Speaker 1: So how important is that psyche psychologically to the shift
Speaker 1: towards passive. Have people just thrown up their hands and say,
Speaker 1: you know what, I give up, I'm just gonna index
Speaker 1: and not even think twice about it. I think that's
Speaker 1: part of it. I think more importantly it's been investors
Speaker 1: have just shunned the equity market altogether. And if you
Speaker 1: look at household ownership of equities, and this comes from
Speaker 1: this FED survey of consumer finances, which they do every
Speaker 1: three years, you go back to the financial crisis in
Speaker 1: two thousand and eight to the most recent survey, which
Speaker 1: was as believe and three years. Yeah, that's quarterly. But
Speaker 1: this is uh that does detail. This survey of consumer
Speaker 1: finances shows that all segments of consumer income classes have
Speaker 1: actually seen their holdings in equity markets shrink over that
Speaker 1: even as the market has gone up. Yeah, except for
Speaker 1: the top five percent. Only the top five percent of
Speaker 1: income earners are actually still actively investing in the equity market,
Speaker 1: whether it be active or passive. They're putting money to
Speaker 1: work in stocks, and the rest of the income groups
Speaker 1: at least yeah, and I'm gonna guess that's half, maybe
Speaker 1: even more, of the total equity ownership at least Yeah,
Speaker 1: so it's always been skewed, but now we're saying it's
Speaker 1: even more skews. Yeah. So the bottom of income earning
Speaker 1: households have largely not participated at all in this massive
Speaker 1: bull run that we've had from percent. So that's the
Speaker 1: bigger impact. I do think that there is something to
Speaker 1: be said for you know, investors also moving into passive
Speaker 1: because and this goes back to the two thousand crisis,
Speaker 1: like going back there, because I think that's when all
Speaker 1: of this really shifted. The two thousand eight exacerbated the trouble,
Speaker 1: But in two thousand and two thousand two there was
Speaker 1: definitely a shift in investor sentiment towards equities. And a
Speaker 1: lot of that is all the accounting scandals that came up,
Speaker 1: the research and banking scandals that were uncovered, um and
Speaker 1: it investors, yes, exactly lost a lot of faith in
Speaker 1: the institution of investment itself and the financial markets themselves.
Speaker 1: UM and I think that started back in the two
Speaker 1: thousand and two thousand two periods. So you reference price
Speaker 1: as a key driver of sentiment, let me let me
Speaker 1: share a little price data with you that confirms what
Speaker 1: you're saying. Um. When we look at the democrazation of investing.
Speaker 1: Someone in the eighties put a lot in the nineties,
Speaker 1: if you look at where the drumbeat of financial television
Speaker 1: and press was, it was all technology. Yes, I think
Speaker 1: if you look at the average portfolio, and I've looked
Speaker 1: at a ton of portfolios over the years of vigial investors,
Speaker 1: you like, I was at one point I could look
Speaker 1: at a portfolio two oh three, oh four and say, oh,
Speaker 1: American line dell, I go through the list. I know, oh,
Speaker 1: this is a Merrill Lynch portfolio, and this is a
Speaker 1: Morgan Stanley portfolio, and this is so it's a whole
Speaker 1: run of different things. Not that they were bad portfolios,
Speaker 1: but it was a lot of the same names, a lot.
Speaker 1: And if you think about the technology sector, she'll lacked
Speaker 1: almost from peak to trough. Hey, if you're holdings are
Speaker 1: concentrating the technology and that sector gets whacked, that might change.
Speaker 1: You might take your bowl and go home. You might
Speaker 1: not be as inclined to play in that same space again.
Speaker 1: So your comment that price drive sentiment. It might have
Speaker 1: driven sentiment to the point where people said, okay, I
Speaker 1: give up. Well, and we saw that, right, I mean
Speaker 1: you saw technology relative performance really from two thousand into
Speaker 1: the two thousand seven peak was pretty terrible. I mean,
Speaker 1: nobody was doing more money to work and tech stocks
Speaker 1: after that blow up. And it's been the same with financials.
Speaker 1: I mean, I think financials A lot of what's happened
Speaker 1: with the financial sector relative performance in the SMP five
Speaker 1: foundered over this cycle is legacy. What happened in two
Speaker 1: thou amazing parallel. If you look at the two thousand peak,
Speaker 1: you broach that peak and the SMP in the TAO
Speaker 1: two thousand seven or so something like that, you didn't
Speaker 1: do it back until you know, until you got back over,
Speaker 1: which is that that's it was even. That was a
Speaker 1: long long time to wait to get back to break even.
Speaker 1: Not a whole lot of dividends in that space either.
Speaker 1: So now the financials, how parallel is the financial sector
Speaker 1: a key lubricant of economic growth? How how parallel are
Speaker 1: the financials to technology? Well, the one big difference is
Speaker 1: the financial stocks never achieved the excessive valuation in this
Speaker 1: extraordinarily positive market sentiment in the bubble status that tected
Speaker 1: financials as a share of the economy got very big. Housing,
Speaker 1: specifically as a share of the economy was double its
Speaker 1: historical average share by its peak in two thousand six,
Speaker 1: So it was that again double its historical average share
Speaker 1: of the economy. Yeah, so some people have called that
Speaker 1: the financialization of the economy. Other people have used the
Speaker 1: phrase fire, financial insurance, and real estate yet as real
Speaker 1: estate obviously so mortgage driven. How much have we normalized
Speaker 1: finance as an overall part of the economy. It's back
Speaker 1: to actually just below its historical So is that going
Speaker 1: to keep going? And I know I never asked for
Speaker 1: forecast on the show. Is it going to keep getting lower?
Speaker 1: What is the trend? Is the trend that it's a
Speaker 1: small increasingly small portion of the overall economy or are
Speaker 1: we starting to see a bottoming out process. We've started
Speaker 1: to see a bottoming out process really starting in and
Speaker 1: how exceller it again, we started to see a bottoming
Speaker 1: process and now it's growing as a share of the
Speaker 1: economy again. But we still see the big bank stocks,
Speaker 1: the big brokerage firms not exactly lighting the world on fire.
Speaker 1: How much of that is they're still carrying a lot
Speaker 1: of bit debt and bed paper or is it just
Speaker 1: people are a little skittish of the entire sector, and
Speaker 1: it's a sentiment. Then I think a very little of
Speaker 1: it is bad debt, at least for the US banks.
Speaker 1: I mean it next to nothing is bad debt. There
Speaker 1: have been some scares, and this year's scare was the
Speaker 1: energy complex, and what does that really mean for bank
Speaker 1: balance sheets? But when you look at energy as a
Speaker 1: share of the debt on the assets on bank balance sheets,
Speaker 1: it's tiny. So it's funny you bring that up, because
Speaker 1: first we heard, oh look they did it again, it's
Speaker 1: the energy sector. Here comes into the crisis. After that
Speaker 1: we heard sub primortal, this is the new subprime mortgage,
Speaker 1: and somewhere in the middle of it is student loans.
Speaker 1: That's the next thing that's going to destroy us all.
Speaker 1: But meanwhile, none of these things have turned out to
Speaker 1: be remotely like subprimary. And that's the big psychological difference
Speaker 1: between today versus two thousand five to two thousand seven. Right,
Speaker 1: two thousand five to two thousand seven, you did have
Speaker 1: some people suggesting subprime is a problem, and everyone was
Speaker 1: a massively denying this as an underlying issue. Today, anything
Speaker 1: is a massive problem for the banks. So I think
Speaker 1: a lot of what's holding financials back is this psychological impediment.
Speaker 1: It's when's the next crisis coming? You know? Is it
Speaker 1: going to generate out of Europe? Is it going to
Speaker 1: come out of China? Is it the energy complex, is
Speaker 1: its student loan debt. You can name a gazillion things
Speaker 1: that are going to quote unquote bring the banks under
Speaker 1: the next So unlikely, but the psychology is set up
Speaker 1: to expect that. It's classic recency effect. Every general is
Speaker 1: finding the last war, every investor is thinking about, here
Speaker 1: comes the next credit crisis. It's never what just happened.
Speaker 1: It's always something different, which is probably why post tech bubble,
Speaker 1: when you looked at the home builders, when you looked
Speaker 1: at banks, when you looked at brokerage firms, there were
Speaker 1: reason we priced oh five or six o seven, as
Speaker 1: each of them also had their collapse. Good rule of
Speaker 1: thumb a sector outside of leather belts and steam engines
Speaker 1: that drops typically a good a good bye signal. All right,
Speaker 1: so I know I only have you for another ten
Speaker 1: fifteen minutes. Let me get to some of my favorite questions,
Speaker 1: the standard questions I asked all my guests. You told
Speaker 1: us about your background, tell us a little bit about
Speaker 1: some of your early mentors. Who are the people who
Speaker 1: were deeply influential to you? Wow? Um Well, I had
Speaker 1: a number of really really great colleagues in the first
Speaker 1: Union Wells Fargo or Wacovia. Early Wells Fargo days, I
Speaker 1: worked for John Sylvia, who's our chief economy time. He's
Speaker 1: a fishing boat with mine. He was very influential. Um
Speaker 1: I worked with By the way, before you move off
Speaker 1: of John Sylvia, is there like a nicer person on
Speaker 1: the world now. He's fantastic And he when I was
Speaker 1: in my late twenties, you know, threw me out into
Speaker 1: things that I never thought I could do. So he
Speaker 1: was really sort of pushed me forward to try new
Speaker 1: things and and really stretch my boundaries. And I will
Speaker 1: always appreciate that. And he's still a mentor today. And John,
Speaker 1: if you're listening, you know, we have to get you
Speaker 1: in here at one of these so we will. He's
Speaker 1: not in New York, He's in uh, he's in Charlotte.
Speaker 1: Um So, in the earlier on in my career, I
Speaker 1: worked with John Lynch, who is a market strategist for
Speaker 1: Wells Fargo as well, but he's on the buy side
Speaker 1: of the firm. He had a number of years in
Speaker 1: New York working with d l J. He's got a
Speaker 1: lot of you know, great historical understanding of markets and
Speaker 1: really sorted forming my interest in strategy as a function. Um.
Speaker 1: Great technicians out there. Charlie Kirkpatrick is a current fantastic
Speaker 1: mentor of mine. Charlie does a lot of amazing work
Speaker 1: on price and momentum um and has written a number
Speaker 1: of books. Uh, and he's he's a fantastic mentor as well.
Speaker 1: Give his book. Oh it's very technically oriented, so I'll
Speaker 1: have to look it up for you, but you just
Speaker 1: search on Charlie Kirkpatrick. He writes with the Julie Daalquist
Speaker 1: out of Texas um on price and momentum signals and
Speaker 1: and there I think very very useful and very helpful. Um.
Speaker 1: He's helped me bring an understanding of sort of back
Speaker 1: testing and optimization that I didn't really have, you know,
Speaker 1: five years ago. So you mentioned books. What are some
Speaker 1: of your favorite books, be they investing books, fiction or nonfiction? Oh? Yeah,
Speaker 1: so I talked a lot about investing books already with
Speaker 1: Kirkpatrick and John Murphy. So in terms of you know,
Speaker 1: personal more fiction oriented books, I'm a huge Steinbeck fan.
Speaker 1: I don't know where this came from. If it's because
Speaker 1: we went, yes exactly, which is it sounds so boring,
Speaker 1: but I think when we went they become classics. It's
Speaker 1: not just let's randomly pick a Daniel Steele novel. The
Speaker 1: Steinbeck survives for great lessons as to what a real
Speaker 1: depression looks like, right, I mean it helps those Does
Speaker 1: it make you crazy when people say, you know, this
Speaker 1: isn't a recession, this is a depression. Well not if
Speaker 1: you look at the data. If you understand what it's
Speaker 1: like when one in five houses going to foreclosure and
Speaker 1: the unemployment rate is that's there is no real technical
Speaker 1: definition of a depression. This was a bad recession. It's
Speaker 1: kind of hard to say it's it's pretty crazy when
Speaker 1: you look at our standard of living and you know,
Speaker 1: I understand that there are still a lot of households
Speaker 1: that are struggling to make ends meet, But you look
Speaker 1: at our broad standard of living and you compare that
Speaker 1: to what happened in the depression, and there's nobody better
Speaker 1: at doing that than Steinbeck. The look the bottom half
Speaker 1: of the country is certainly not seeing income gains. The
Speaker 1: bottom of incomes, but the standard of living. You know,
Speaker 1: people are not going through what they went through, right,
Speaker 1: I mean there when you actually look at the data,
Speaker 1: the Great DEPRESSI is horrifying. Yeah, I mean it's not
Speaker 1: genus is inconvenient. It's people died. It led to wars,
Speaker 1: it led to civil unrest. It was really horrific. Yeah.
Speaker 1: I think I think a lot of people don't realize
Speaker 1: how bad things got in the late twenties and early thirties. Um.
Speaker 1: So what other on the nonfiction side, I actually love
Speaker 1: Milton Friedman's work. I mean I've I've devoured those books
Speaker 1: over time. Now he's kind of fallen, from which surprised.
Speaker 1: But if you look at some of his work. He
Speaker 1: did the Monetary History of the United States, which have
Speaker 1: all the way back in time, and I've referenced to
Speaker 1: that piece um on a number of occasions, looking at
Speaker 1: what banks did, for example, and the Great Depression versus
Speaker 1: what they're doing today. You can look at some of
Speaker 1: his work and it shows it has great historical perspective.
Speaker 1: You can find little nuggets of information and that's so
Speaker 1: very useful. That ultimately led to Ben Bernanke saying to him, Hey,
Speaker 1: we messed up last time and we won't do it again.
Speaker 1: That was pretty Uh, that was pretty interesting. Yeah. Um,
Speaker 1: have a one nonfiction that's not that's not finance related
Speaker 1: or not almost impossible. Everything I read in a nonfiction
Speaker 1: universe is either finance or economics, economics but finance. What
Speaker 1: what have you read that you like that's that's not
Speaker 1: finance but economy, no other way around. That's not economics
Speaker 1: but is just finance. Probably Moneyball, Okay, Yeah, Michael Lewis
Speaker 1: is pretty fun. He has a book coming out. I
Speaker 1: think it's December on a kaniment in Travarsity, and I'm
Speaker 1: sure that's going to be spectum definitely. I'm going away
Speaker 1: in February and I already have that book tied up. Yeah,
Speaker 1: it's ready to go. Yeah. For it's not even published yet,
Speaker 1: and I know I'm reading that on a beach somewhere. Um.
Speaker 1: All right, so let me get to my um last
Speaker 1: few questions before I have to send you or have
Speaker 1: to let you go on your way. Um. So, if
Speaker 1: you had some millennial or a recent college graduate come
Speaker 1: to you and say I'm thinking about finance as a career,
Speaker 1: what sort of advice would you give them? Go for it.
Speaker 1: I mean, you know, just like that. Yeah, if you
Speaker 1: love finance, there is a home for you. Um. I
Speaker 1: think that this generation is very different than past generations
Speaker 1: in that they have sort of a different standard for
Speaker 1: what they want out of a work life balance. You know,
Speaker 1: when I got out of school, the goal was to
Speaker 1: work a hundred and twenty hours a week for two
Speaker 1: years so that you could be in an investment bank. Right,
Speaker 1: So this is a little bit different. But I think
Speaker 1: that there are a lot of opportunities in finance, within,
Speaker 1: within and without you do. I think, you know, if
Speaker 1: you have a passion for this business, you will find
Speaker 1: a home. But you have to have the passion. And
Speaker 1: my final question, what is it that you know about
Speaker 1: investing in equity markets today that you wish you knew
Speaker 1: when you began twenty years ago? Oh my gosh, I
Speaker 1: should have looked at this question more carefully. I've warned you.
Speaker 1: I said, look at sex five. It requires a little Um.
Speaker 1: What do I know? The price trend matters? Absolutely? When
Speaker 1: I started out, I was fully fundamentally biased, you know,
Speaker 1: I had my I had my fundamental hat on and
Speaker 1: I held to it and I've held to it too.
Speaker 1: Strongly on a number of occasions. I mean the times
Speaker 1: that I regret most in my career and in my
Speaker 1: investing life for the times when I ignored what the
Speaker 1: market was telling me. Everybody says that, everybody says, you know,
Speaker 1: I had a story, the price told me something else,
Speaker 1: ignored the price that listened to story. To my do
Speaker 1: not get caught in the the idea that you know
Speaker 1: better than the millions of investors out there that make
Speaker 1: a market. Gina, thank you so much for for doing this.
Speaker 1: This has been absolutely fascinating. UH. For those of you
Speaker 1: listening at home, if you enjoy this conversation, be sure
Speaker 1: and take a look on Apple iTunes and you could
Speaker 1: look up an Intra Down an Inch and see any
Speaker 1: of the other I want to say hundred and three
Speaker 1: or so episodes that we've done in the past. You
Speaker 1: can check out my daily column on Bloomberg View dot
Speaker 1: com and follow me on Twitter at rid Alts. We
Speaker 1: love your comments, suggestions and feedback. Our email address is
Speaker 1: am i B, which stands for Masters in Business m
Speaker 1: I B Podcast at Bloomberg dot net. I would be
Speaker 1: remiss if I did not thank Michael bat Nick, my
Speaker 1: head of research Cholie Ulmar a producer, and Tail Riggs
Speaker 1: are booker. You've been listening to Masters in Business on
Speaker 1: Bloomberg Radio.