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Speaker 1: Let's get to our guest David Ko, talk c io

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Speaker 1: and chairman of Cumberland Advisers. David, these are pretty uh

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Speaker 1: pretty interesting times. One of our our guests on the

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Speaker 1: show last week, Ellen Hazen, created this interesting image of

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Speaker 1: of the of the Fed's job in trying to achieve

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Speaker 1: a soft landing. She said it was akin to landing

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Speaker 1: a seven forty seven on an aircraft carrier. That job

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Speaker 1: is too tough. Sell. My goodness, I don't know what

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Speaker 1: it's like to land a seven forty seven on an

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Speaker 1: aircraft carrier. Well I can. I can tell you this.

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Speaker 1: It's you need seventy feet of runway and you know

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Speaker 1: most aircraft carriers only around a thousand feet. I would

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Speaker 1: say the metaphor certainly is worthwhile to consider. My gosh,

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Speaker 1: look at the lineup for the FED, and to me,

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Speaker 1: the FED has moved to diminished forward guidance. They say

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Speaker 1: they'll fight inflation, bring it down. They say they have

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Speaker 1: to do that. You quoted earlier in the show. You

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Speaker 1: quoted j Pal. The question is this two percent target,

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Speaker 1: which you don't hear about very much anymore, because a

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Speaker 1: two percent target would require a really rough go on

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Speaker 1: interest rates and economic pain, and one you might have

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Speaker 1: Larry Summers saying we have to do it. It's easy

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Speaker 1: for him to do. It's a heck of a lot

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Speaker 1: harder for the FIT. In the face of the turmoil

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Speaker 1: in the world. Brian Stephen, the world is upside down

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Speaker 1: and backwards with food and fire, war and the FEDS

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Speaker 1: not responsible for any of those things. Well, David Steve,

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Speaker 1: here does is I mean, does J. Powell have enough

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Speaker 1: ammunition if we want to continue the aircraft carrier metaphor? Here?

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Speaker 1: Do they have enough weapons to kind of counter pricing

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Speaker 1: increases caused by those shocks you're talking about it, Well,

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Speaker 1: he's got the weapons. The FED has a weapon. It

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Speaker 1: can raise the short term interest rate, it can force

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Speaker 1: the adjustment of other factors, it can shrink its balance sheet,

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Speaker 1: and essentially it's doing those things. It has to maintain

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Speaker 1: financial stability. That is critical now in a global financial

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Speaker 1: sanctions and payments war, and we're in it in the

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Speaker 1: United States is the leading player in the global financial

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Speaker 1: sanctions and payments war versus Russia and their allies. So

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Speaker 1: that's a role the FED cannot diminish. David doing you

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Speaker 1: think that even if the FED could be nuanced and

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Speaker 1: nimble to try to do this. It just won't have

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Speaker 1: the luxury because it it cannot risk not succeeding. So

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Speaker 1: as a result, it's kind of virtually guaranteed the FED

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Speaker 1: will overshoot. It will overshoot the mark, and so you

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Speaker 1: know you're looking at a tough, tough sledding ahead. I

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Speaker 1: think so, um, I agree with you. The FED faces

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Speaker 1: the classic definition of a Hobson's choice. It can't win

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Speaker 1: no matter what it does, and it's trying to find

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Speaker 1: some way to mitigate the damage which it cannot do.

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Speaker 1: It the recognition of inflation having to be squashed, so

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Speaker 1: ex expectations are reduced. So, David, you evoked Hobson's choice.

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Speaker 1: Obviously what Doug just mentioned about the dilemma, if you

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Speaker 1: will that J. Powell and company have you know, on

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Speaker 1: top of course of another possible seventy five basis point

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Speaker 1: rate hike, we have softening housing market. I just came

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Speaker 1: back from the States. I've seen it even soften in hot,

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Speaker 1: red hot Seattle tech companies. They're curbing hiring, unemployment claims

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Speaker 1: inching up. Can J. Powell avoid of recession even though

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Speaker 1: they say they're going to execute or likely to execute

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Speaker 1: us off landing. I don't think so. I don't see

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Speaker 1: how the Fed will not say we're going to have

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Speaker 1: a severe recession. My gosh, that would put so much turmoil.

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Speaker 1: So the conversations will always say, maybe a little mild,

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Speaker 1: maybe a little slow down. I don't see how we

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Speaker 1: don't have a serious slowdown. They're gonna raise rates. The

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Speaker 1: forecasts and estimates are certainly seventy five and after that

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Speaker 1: maybe twice more before the end of the year. We're

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Speaker 1: going above three in the FED funds rate by the

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Speaker 1: end of this year. And we're slowing, as you just described.

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Speaker 1: The only thing with that's working is the one mile

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Speaker 1: swim in the Hudson River that Denise talked about. Well,

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Speaker 1: a little slowing, a little slowing is okay as long

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Speaker 1: as you don't, you know, go too far over edge.

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Speaker 1: Right now, we've got earnings, which is a little distracting.

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Speaker 1: I mean, it's a pleasant distraction, but the earning season

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Speaker 1: once it passes, investors will refocus on the macro and

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Speaker 1: and so you know, you have to look at whether

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Speaker 1: or not growth is slowing faster than inflation, or inflation

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Speaker 1: is slowing faster, and how do you measure it? Oh

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Speaker 1: my gosh, this is a tough race because no matter

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Speaker 1: who wins, you don't like it. And my estimates are

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Speaker 1: we're going to be disappointed in the earnings. You listed

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Speaker 1: some of the big ones, Amazon, Apple, Microsoft, I mean

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Speaker 1: we got a hundred and seventy companies coming this week.

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Speaker 1: I suspect we're not going to like them as a group.

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Speaker 1: And number two, we're going to look at them and say, gee,

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Speaker 1: that was the second quarter and the second quarter portens

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Speaker 1: continuing weakness in the third quarter. Are we going to

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Speaker 1: have three negative GDP quarters in a row? And I'm

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Speaker 1: really worried about proff margins because we're coming off this

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Speaker 1: widening of profit margins. We're in our portfolio, in the

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Speaker 1: US equity E T S portfolio, we are twenty eight

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Speaker 1: percent cash today. That is very high for US. And

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Speaker 1: we have focused on sectors. Were overweighted in aerospace, defense,

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Speaker 1: were overweighted healthcare. We are underweight the banks. There's reason

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Speaker 1: to be very cautious here, we think, David, what's your

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Speaker 1: take on whether China can contribute even within the next

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Speaker 1: year to global growth. I just came from bustling Seattle,

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Speaker 1: as I said, arriving into Hong Kong last night to

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Speaker 1: has Matt Dystopia. It's it's a complete opposite picture on

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Speaker 1: the COVID front here in this part of the world.

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Speaker 1: We do know, of course COVID zero added to inflation

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Speaker 1: because of the supply chain constraints, but growth it's very

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Speaker 1: hard to find right now in China. Would you agree?

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Speaker 1: I absolutely agree, and I really think the questions, thank you,

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Speaker 1: it's profound because the engine of turnaround will come out

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Speaker 1: of Asia, China and other economies. And when it happens,

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Speaker 1: I believe we can become very bullish and optimistic on

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Speaker 1: world recovery. But we're not there yet. Uh. There's lots

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Speaker 1: of potential Korea, Vietnam. Uh, if Japan can get past

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Speaker 1: another COVID surge and start to adjust its monetary policy,

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Speaker 1: I don't see how that happens so after Corona retires,

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Speaker 1: but that's what it's gonna take. Well, that's what makes

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Speaker 1: city groups called kind of interesting saying that the Chinese

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Speaker 1: economy bottomed in May and they're turning bullish on Chinese equities.

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Speaker 1: It seems like you disagree. No, No, I think I

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Speaker 1: think if you're forward looking at six to nine months

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Speaker 1: and you want to poss aition position in China because

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Speaker 1: the likelihood is you're going to get a bounce in

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Speaker 1: Asia and China is to beg engine in Asia. So

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Speaker 1: I believe that's a risk worth taking. All right. It's

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Speaker 1: great to finish on a positive note, David, thanks so

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Speaker 1: much for joining us on a Sunday evening for you,

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Speaker 1: David co Talks, CEO and chairman of Cumberland Advisors,