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Wealthy Investing, Market Outlook · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
• 0:04
  Speaker 1: my co host Matt Miller.
• 0:05
  Speaker 2: Every business day we bring you interviews from CEOs, market pros,
• 0:09
  Speaker 2: and Bloomberg experts, along with essential market moving news.
• 0:14
  Speaker 1: Find the Bloomberg Markets podcast called Apple Podcasts or wherever
• 0:17
  Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.
• 0:21
  Speaker 3: Let's bring in our next guest. My question is for you, Molly,
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  Speaker 3: do the rich invest differently than Schmoe's like me?
• 0:29
  Speaker 4: Well, you have to define the rich as our next
• 0:32
  Speaker 4: guest is going to, because there are the mere mortal millionaires,
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  Speaker 4: and then there are billionaires, and then there's a nice
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  Speaker 4: group in between called the cent to millionaires. A lot
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  Speaker 4: more about them.
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  Speaker 3: Barbara Goodstein is the CEO at R three sixty, catering
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  Speaker 3: to the investment needs of high net worth individuals. Thanks
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  Speaker 3: for stopping buying the studio. What does R three sixty do?
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  Speaker 5: First of all, it's a community for ultra high net
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  Speaker 5: worth wealth creators and their fan families who are trying
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  Speaker 5: to navigate the challenges of having these very large family enterprises.
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  Speaker 5: And so we bring this community together and people meet
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  Speaker 5: and talk about opportunities and challenges.
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  Speaker 3: Why do they need to come together, Because when I
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  Speaker 3: become an ultra high net worth industry center, I don't
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  Speaker 3: want to talk to anybody.
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  Speaker 5: Well, you would be surprised you actually would want to
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  Speaker 5: talk to people because, first of all, that level of
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  Speaker 5: wealth can be isolating, but even more importantly, people are
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  Speaker 5: getting ideas from each other. We have some of the
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  Speaker 5: most successful people in the country and they're sharing ideas
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  Speaker 5: on macro global trends with each other, and then they're
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  Speaker 5: all benefiting from hearing those different ideas.
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  Speaker 4: So tell us about who some of these quote cent
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  Speaker 4: to millionaires are, and those are people that have at
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  Speaker 4: least one hundred million dollars in wealth, that's right.
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  Speaker 5: So one of the people that we have in our
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  Speaker 5: network is one of the largest hedge fund managers in
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  Speaker 5: the country, and he has been very vocal educating our
• 1:58
  Speaker 5: group about the benefits of investing in bitcoin. And had
• 2:01
  Speaker 5: I listened to him, I would have tripled my money.
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  Speaker 5: He told us that three things are going to happen.
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  Speaker 5: That bitcoin is going to be marked to market, and
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  Speaker 5: it was in January that ETFs were going to come
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  Speaker 5: out and they just did. And now we have a
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  Speaker 5: phenomena called having and that's going to happen in April
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  Speaker 5: of this year, and he told the group that this
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  Speaker 5: is going to generate enormous growth and opportunity in bitcoin.
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  Speaker 5: So that's the type of person that we have in
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  Speaker 5: the group.
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  Speaker 3: These are people who inherited their wealth or they actually
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  Speaker 3: made the money with hard work and starting a business.
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  Speaker 6: So it's actually both.
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  Speaker 5: We have a lot of wealth creators. We also have
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  Speaker 5: some people who have inherited the wealth and now they're
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  Speaker 5: extending the business that they inherited through the next generation.
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  Speaker 4: So we have both and these are so a lot
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  Speaker 4: of this is what they're talking about with each other.
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  Speaker 6: You said, like macro ideas.
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  Speaker 4: I don't think though that these people really want to
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  Speaker 4: share where their money's being invested though, right, Like does
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  Speaker 4: that all? Well?
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  Speaker 5: They actually are happy to share with each other. And
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  Speaker 5: that's the fascinating part about this community. Everybody sharing lots
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  Speaker 5: of information, personal information as well as investment information. And
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  Speaker 5: so again we've got another member who has written six
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  Speaker 5: books on theoretical physics and he's got a PhD in
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  Speaker 5: quantum computing.
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  Speaker 3: And I think I know who this is, and.
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  Speaker 5: He's been advising everybody to invest in quantum computing, that
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  Speaker 5: there's going to be an enormous rise there. Russia and
• 3:34
  Speaker 5: China are creating something called hack proof quantum computing, and
• 3:38
  Speaker 5: so we're now looking at investing in South Korea. Telecom
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  Speaker 5: has built an alternative to that.
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  Speaker 3: Okay, So as an individual investor myself, what can I
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  Speaker 3: learn from them?
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  Speaker 5: So I think you could learn about again macro global
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  Speaker 5: economic trends, things that are coming. So we are very
• 3:58
  Speaker 5: focused on the defense area. We think that there's going
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  Speaker 5: to be an enormous increase in defense spending across the world,
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  Speaker 5: and we've already seen it. Poland just bought a thousand
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  Speaker 5: tanks from South Korea. That's more than Germany, France, and
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  Speaker 5: the UK combined, and that is small compared to what's
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  Speaker 5: about to happen in the United States and Russia. So
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  Speaker 5: if you're interested in global defense spending, there are a
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  Speaker 5: lot of opportunities in that space.
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  Speaker 4: What happens, Barbara, if your net worth changes so substantially
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  Speaker 4: that either you've been now minted as a billionaire or
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  Speaker 4: maybe you're less fortunate and fall into the low single
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  Speaker 4: digits of just millionaire status, can you still be in
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  Speaker 4: this club?
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  Speaker 5: So We actually have a lot of billionaires in the club.
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  Speaker 5: So the average networth is four hundred million dollars. The
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  Speaker 5: minimum requirement is one hundred million dollars, so we have
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  Speaker 5: a number of billionaires. And the priority in this group
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  Speaker 5: is to find people that share the same values. These
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  Speaker 5: are people who want to go from prosperity to purpose.
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  Speaker 5: They're going from having built extraordinary lives to building extraordinary legacies.
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  Speaker 5: So that's the priority, is finding people with the same
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  Speaker 5: values and the same interests.
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  Speaker 3: You're talking about philanthropic endeavors.
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  Speaker 5: Yes, many of these people are uniquely philanthropic. We have
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  Speaker 5: people that one couple is building the largest foundation to
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  Speaker 5: support cochleate ear implants in their states. We have another
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  Speaker 5: person who's the largest employer of people with disabilities in
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  Speaker 5: her state. So tremendous philanthropy. And one of the requirements
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  Speaker 5: is that people have the same values that they're not
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  Speaker 5: coming there to use each other. They're coming there to
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  Speaker 5: build this community and share with each other.
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  Speaker 3: Barbara, I wish we had more time. Barbara Goudstein, the
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  Speaker 3: CEO at R three sixty catering to the investment needs
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  Speaker 3: of high net worth individuals. Thanks for stumming by the studio.
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  Speaker 7: You're listening to the Team Ken's live program Bloomberg Markets
• 5:53
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• 5:56
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• 5:59
  Speaker 7: to that and wherever you get your podcast.
• 6:03
  Speaker 3: Well, traders seem to be grappling with the timing of
• 6:06
  Speaker 3: right cuts, Mollie even how many, And that's making for
• 6:10
  Speaker 3: I'm gett a guess, a pretty bumpy road ahead for it's.
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  Speaker 4: A real toss up this year. Who the heck knows.
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  Speaker 3: James Denvert is chief investment officer at main Street Research,
• 6:20
  Speaker 3: and it looks like he's in a loft in San
• 6:22
  Speaker 3: Francisco somewhere. Do I have that right, James?
• 6:25
  Speaker 8: That's a cool look office?
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  Speaker 3: All right, Do you have any Do you have any
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  Speaker 3: clarity for investors on the path forward? What's in the
• 6:32
  Speaker 3: driver's seat?
• 6:34
  Speaker 9: Yeah?
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  Speaker 10: I think the investors should stop fretting about the FED.
• 6:38
  Speaker 10: I mean, that's that's over with and this economy is
• 6:41
  Speaker 10: very resilient and in our view, we're entering an AI
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  Speaker 10: led super cycle and we sort of a lot of
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  Speaker 10: logic that we bake into that is that we're going
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  Speaker 10: into the era of a very different in the sense
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  Speaker 10: of enhanced productivity growth, something we haven't seen in a cycle,
• 7:00
  Speaker 10: but we did see in the nineties, and so we
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  Speaker 10: see the opportunity here in a resilient economy with stocks cheap,
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  Speaker 10: that it's most likely a new business cycle, a new
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  Speaker 10: ball market. And of course, as I mentioned, AI tech
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  Speaker 10: led and so I think, you know, the FED will
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  Speaker 10: probably cut. I'm not sure they need to cut as
• 7:20
  Speaker 10: much as people think they do, and I think that's
• 7:24
  Speaker 10: because earnings are going to probably be better than expected this
• 7:28
  Speaker 10: order and for the rest of the year. So I
• 7:30
  Speaker 10: think people should maybe just stop so much with the
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  Speaker 10: FED talk, which has been really obviously consuming us all
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  Speaker 10: for the last two years. I think it's going to
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  Speaker 10: be more about earnings and prices of stocks.
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  Speaker 4: Very refreshing to hear you say that as somebody who
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  Speaker 4: is my job it is to hang onto every word
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  Speaker 4: the FED says, so covering the economy and the FED.
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  Speaker 4: So I appreciate your perspective there for us, James, But
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  Speaker 4: this is really interesting, this AI led super cycle. I mean,
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  Speaker 4: take us through that and how like people are really
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  Speaker 4: going to get, you know, behind the idea that AI
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  Speaker 4: seems to be what you're saying, here will be the
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  Speaker 4: primary market driver.
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  Speaker 6: Rather than the FED.
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  Speaker 4: That's a kind of revolutionary idea.
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  Speaker 10: Well, it seems revolutionary because in the last two years
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  Speaker 10: that's all we hear about. But if you think about
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  Speaker 10: the longer term, I've been doing this for thirty five years,
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  Speaker 10: the FED is usually not the focus of the conversation
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  Speaker 10: all the time. It really is more about corporate profits
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  Speaker 10: or how what's the health of the economy. And that's
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  Speaker 10: why we think we're going to sort of move towards that,
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  Speaker 10: you know, the AI sort of supercycle that we envision.
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  Speaker 10: You know, you think about how companies and it's not
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  Speaker 10: just tech companies getting more productive with tech and AI.
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  Speaker 9: I think it's really going to go across all sectors.
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  Speaker 10: I mean, at the JP Morgan Healthcare conference last week,
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  Speaker 10: I am in San Francisco right now, even though I'm
• 8:50
  Speaker 10: based in Manhattan, but last week the buzzword across the
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  Speaker 10: healthcare companies was AI. And I think investors should recognize
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  Speaker 10: AI is going to be crossing lots of different sectors
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  Speaker 10: and it's going to make these companies much more productive.
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  Speaker 10: And we think that earnings over the next five to
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  Speaker 10: seven years possibly triple and you know that that's what
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  Speaker 10: leads us to these large index focus points we have,
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  Speaker 10: like where the Dow will be seven to ten years
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  Speaker 10: from now. We think it's a triple one hundred thousand,
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  Speaker 10: one hundred thousand dow.
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  Speaker 3: Okay, we're going to hold you to that, believe.
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  Speaker 9: Well, yeah, I'll be back in ten years.
• 9:30
  Speaker 3: Having lived through the dot com bubble, Yeah, there was
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  Speaker 3: a lot of flotsam and jetsam, uh, but eventually, yeah,
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  Speaker 3: it was a revolutionary the Internet for all of us.
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  Speaker 3: When does AI really start to jail in terms of
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  Speaker 3: productivity and in terms of sales for the companies that
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  Speaker 3: are doing AI? I guess, you know, in Nvidia one
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  Speaker 3: of the obvious choices there.
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  Speaker 10: Yeah, and I would like to say that today's a
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  Speaker 10: microcost of what I view over the next three to
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  Speaker 10: five years. You know, you see this big nastac move
• 10:05
  Speaker 10: on Taiwan Semi's numbers, and you know, how long does
• 10:09
  Speaker 10: it take for AI to really show up in the
• 10:11
  Speaker 10: earnings and the profitability and productivity. It's a very good question.
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  Speaker 10: Now some places it's already showing up, and we've seen
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  Speaker 10: that in the earnings reports of the early adapters in technology.
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  Speaker 10: I'm talking about technology companies using the Nvidia chips, like
• 10:26
  Speaker 10: a Microsoft or at Google, you're already seeing that, you know,
• 10:29
  Speaker 10: affecting their bottom line. But you know, I think for
• 10:34
  Speaker 10: it to be seen across a lot of the other
• 10:36
  Speaker 10: sectors that we envision it affecting, investors are going to
• 10:40
  Speaker 10: need to be patient. But you know one thing about
• 10:42
  Speaker 10: the stock market that you both know, it's a discount mechanism.
• 10:46
  Speaker 9: So you know, the stock market's not going to.
• 10:48
  Speaker 10: Wait for the earnings to get a creative because of AI.
• 10:52
  Speaker 10: It's going to discount that before it happens. So I
• 10:54
  Speaker 10: think investors should be really careful here about being too bearish,
• 10:57
  Speaker 10: too fed centric, and just be like, okay, wait a minute,
• 11:01
  Speaker 10: if this is real, if this is going to lead
• 11:03
  Speaker 10: to productivity growth, higher margins, and in corporate profits, you
• 11:07
  Speaker 10: want to kind of buy dips here. And even those
• 11:10
  Speaker 10: dips might be shallow, as a recent one has been.
• 11:14
  Speaker 10: So I think we should be really careful about being
• 11:16
  Speaker 10: too bearish.
• 11:17
  Speaker 3: You gave the doll for kit. What about the Nasdaq
• 11:19
  Speaker 3: one hundred, Well, I.
• 11:21
  Speaker 9: Think that's really where you as an investor.
• 11:24
  Speaker 10: You can't ignore the magnificent seven in the Nasdaq one hundred.
• 11:28
  Speaker 9: It's very important. I know people think, oh gosh, it's
• 11:30
  Speaker 9: said nosed.
• 11:31
  Speaker 3: Leaves just had like ten seconds left there leaed leaves.
• 11:34
  Speaker 10: But these stocks are cheap relative through their growth, and
• 11:38
  Speaker 10: video has gotten lower pe as the earnings.
• 11:40
  Speaker 9: Have gone up this year.
• 11:41
  Speaker 3: All right, that's I'm going to say. That's the San Francisco.
• 11:43
  Speaker 4: View, the San Francisco loft view.
• 11:46
  Speaker 3: That is James Stammerd, Chief investment officer at main Street Research,
• 11:50
  Speaker 3: joining us from San Francisco.
• 11:52
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• 11:55
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• 11:59
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• 12:02
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• 12:12
  Speaker 3: Well, a FED pivot seems to be underway, but the
• 12:15
  Speaker 3: timing that's under question right now, how does this change
• 12:19
  Speaker 3: your investment strategy? Let's put that question to our next
• 12:23
  Speaker 3: guest this morning, Karen Murphy, chief investment officer with Castra
• 12:26
  Speaker 3: Investment Management. Good to see you again. So this back
• 12:30
  Speaker 3: and forth, you know, March now maybe June two cuts,
• 12:34
  Speaker 3: six cuts. Who knows, I can't keep track? What does
• 12:38
  Speaker 3: it do to your investment strategy?
• 12:40
  Speaker 6: We're all having a little trouble keeping track. You know.
• 12:43
  Speaker 11: The market has been all over the place on this one.
• 12:45
  Speaker 11: You know, in December, as the Fed started to get
• 12:48
  Speaker 11: more dubvish futures, markets started to price in five to
• 12:51
  Speaker 11: six cuts for next year. You know, anybody who's been
• 12:54
  Speaker 11: a FED watcher for a long time had to be
• 12:56
  Speaker 11: a little suspicious about that prediction. And then, of course,
• 12:59
  Speaker 11: more recently we've had jobs data come in a little
• 13:01
  Speaker 11: bit more bullish, Retail spending today looked a little bit better.
• 13:05
  Speaker 11: So there continues to be a remarkable amount of momentum
• 13:08
  Speaker 11: on the services side of the economy, which has to
• 13:11
  Speaker 11: give FED policy makers pause. So no surprise really that
• 13:16
  Speaker 11: that cut for March is starting to be priced out
• 13:18
  Speaker 11: of markets.
• 13:19
  Speaker 6: And I think in.
• 13:20
  Speaker 11: General what we're going to see is fewer cuts and
• 13:23
  Speaker 11: later in the year than what the market had been
• 13:25
  Speaker 11: predicting in December.
• 13:26
  Speaker 4: You think that the momentum then is going to continue
• 13:28
  Speaker 4: into later this year as well. Is that essentially the
• 13:31
  Speaker 4: read through.
• 13:32
  Speaker 6: On that we do.
• 13:34
  Speaker 11: I mean, in general, we think that there's a fair
• 13:35
  Speaker 11: amount of momentum in the economy and in the markets
• 13:38
  Speaker 11: in general, so it's still a pretty good environment for investors.
• 13:42
  Speaker 6: Probably not a repeat of what we saw twenty twenty.
• 13:44
  Speaker 11: Three, but we are starting to see underlying momentum within
• 13:48
  Speaker 11: the manufacturing sector, right that's been really beaten up last year.
• 13:52
  Speaker 11: It seems to me maybe stabilizing, So that's potential tailwind
• 13:55
  Speaker 11: heading into next year. And then of course, if you
• 13:58
  Speaker 11: look at areas in the market outside you know, the
• 14:00
  Speaker 11: mag seven, the ones that really drove returns last year,
• 14:03
  Speaker 11: there are a lot of pretty interesting opportunities.
• 14:05
  Speaker 6: So we think that there are some nice.
• 14:07
  Speaker 11: You know, sort of tailwinds heading into the rest of
• 14:10
  Speaker 11: twenty twenty four.
• 14:11
  Speaker 3: Okay, so are you extending that outlook into smaller mid caps?
• 14:17
  Speaker 11: Yeah, I mean that's an easy place to kind of look.
• 14:20
  Speaker 11: You can look elsewhere in the SMP, even outside those
• 14:22
  Speaker 11: core group of names that have done remarkably well. But
• 14:25
  Speaker 11: like small caps are a really great example in that
• 14:28
  Speaker 11: if you look at the Russell two thousand versus S
• 14:30
  Speaker 11: and P five hundred, we're really extreme levels of underperformance,
• 14:35
  Speaker 11: extreme levels of lower evaluations relative to large caps.
• 14:39
  Speaker 6: So you know, we have really really negative.
• 14:43
  Speaker 11: Sentiment that's built into these small cap names. And even
• 14:46
  Speaker 11: if you do have headwinds for there, you know how
• 14:49
  Speaker 11: much is too much? How much pessimism is too much?
• 14:52
  Speaker 11: And so we think over the medium term those small
• 14:54
  Speaker 11: caps can actually offer some really nice re terms.
• 14:57
  Speaker 3: Is there like a magnificent seven in the Russell two thousand?
• 15:01
  Speaker 3: I'm sure?
• 15:04
  Speaker 6: Yeah, who's out there that I don't know?
• 15:05
  Speaker 5: Like that?
• 15:06
  Speaker 6: He's not yet? Who knows?
• 15:07
  Speaker 4: Who knows? They haven't announced themselves yet. Maybe you're crafts
• 15:11
  Speaker 4: making business or whatever you're doing because you're so hand
• 15:14
  Speaker 4: each John was just telling us that I'm not I
• 15:18
  Speaker 4: really Anyways, we're going to ask Ka this smart question.
• 15:20
  Speaker 4: So so Caar tell us that call in small caps?
• 15:23
  Speaker 4: Would you say that's your highest conviction view for this year?
• 15:27
  Speaker 11: So, I mean, we see opportunities in a number of
• 15:29
  Speaker 11: different places, and that's sort of what I like about
• 15:31
  Speaker 11: twenty twenty four and how it's setting up. Certainly, small
• 15:34
  Speaker 11: caps look attractive, mid caps look attractive. Outside the US,
• 15:38
  Speaker 11: you have similar issues right where non US versus US
• 15:42
  Speaker 11: has had remarkable underperformance, remarkable low valuations. They're also you
• 15:48
  Speaker 11: have the buffer of higher dividend yields, and then in
• 15:52
  Speaker 11: fixed income as well. You know, we talked about maybe
• 15:55
  Speaker 11: needing to get a little bit more cautious on when
• 15:57
  Speaker 11: the FED starts to cut rates, but the fact is
• 16:00
  Speaker 11: most asset classes within fixed income are starting at higher
• 16:03
  Speaker 11: yields than we've seen in ten years. So even without
• 16:07
  Speaker 11: FED rate cuts, I think you can have a pretty
• 16:09
  Speaker 11: nice return on the fixed income side as well. So
• 16:11
  Speaker 11: I think there are a number of areas where investors
• 16:13
  Speaker 11: can play.
• 16:13
  Speaker 3: I think I put this question to every guest that
• 16:15
  Speaker 3: we say, but in a disinflationary environment or a deflationary environment,
• 16:21
  Speaker 3: what does that do to earnings especially company sales?
• 16:26
  Speaker 11: Yeah, so certainly as we start to see inflation levels
• 16:29
  Speaker 11: come down, deflation is always a little bit of a
• 16:32
  Speaker 11: dangerous monster. But let's assume we're in disinflation, those rates
• 16:36
  Speaker 11: are coming down, it should slow top line. But what
• 16:40
  Speaker 11: also typically happens is that valuations then do better, right,
• 16:43
  Speaker 11: because you have more certainty about what those earnings levels
• 16:45
  Speaker 11: are going to be further out. So even if earnings
• 16:48
  Speaker 11: levels sort of come down a little bit, valuations then
• 16:50
  Speaker 11: have more room to go on the upside.
• 16:52
  Speaker 4: So we're only really just starting to knock on the
• 16:54
  Speaker 4: door of earning season. Just had the big US Banks
• 16:57
  Speaker 4: report in the past week, any know, big calls you
• 17:01
  Speaker 4: know for this quarter in terms of themes to look
• 17:04
  Speaker 4: out for, and you know, just generally where the momentum
• 17:08
  Speaker 4: is heading into the new year.
• 17:10
  Speaker 6: Yeah.
• 17:11
  Speaker 11: So, you know, roun about the third quarter of last year,
• 17:13
  Speaker 11: we started to see corporate earnings really bottom. So number one,
• 17:17
  Speaker 11: in general, we want to make sure that those earnings
• 17:19
  Speaker 11: are continuing to lift off of the bottom. I think
• 17:22
  Speaker 11: another thing that we'll be looking for is being able
• 17:25
  Speaker 11: to hear companies talk specifically help clear out some of
• 17:28
  Speaker 11: the noise and the economic data that we've had. You know,
• 17:30
  Speaker 11: we talked about labor, we talked about retail sales. Home builders'
• 17:34
  Speaker 11: confidence has been increasing, but there's a ton of seasonal
• 17:37
  Speaker 11: volatility in those numbers, both because of COVID and because
• 17:41
  Speaker 11: of the holidays and whatnot. So hearing companies specifically talk
• 17:44
  Speaker 11: about what they're seeing on the floors of their stores
• 17:46
  Speaker 11: and whatnot is going to be really important.
• 17:47
  Speaker 4: You know. That kind of reminds me of a lot
• 17:49
  Speaker 4: of what Michelle Bowman at the FES been saying of
• 17:51
  Speaker 4: like just you know, being a bit cautious about the
• 17:54
  Speaker 4: hard data and what the revisions might show. You think
• 17:56
  Speaker 4: that's maybe something investors are also a bit wary of
• 18:00
  Speaker 4: if this data is really maybe not as strong as
• 18:02
  Speaker 4: it's been made out to be.
• 18:05
  Speaker 11: I think investors should always be a little weary, particularly
• 18:08
  Speaker 11: around this time of the year. And then we also
• 18:10
  Speaker 11: have this issue that's been pretty consistent over the last
• 18:13
  Speaker 11: couple of years about fewer and fewer people and businesses
• 18:16
  Speaker 11: participating in these surveys.
• 18:18
  Speaker 6: So just by.
• 18:19
  Speaker 11: That alone, the quality of the data that we get
• 18:21
  Speaker 11: today is lower than what it might have been a
• 18:23
  Speaker 11: couple of years ago.
• 18:24
  Speaker 3: Well, she's harping on the revisions.
• 18:27
  Speaker 4: Now the response rates there, that's something that's been really
• 18:29
  Speaker 4: poor with jolts in particular, which you know, that's what
• 18:33
  Speaker 4: that one We really look at a ton for those
• 18:34
  Speaker 4: job openings, and that one's already a bit difficult to
• 18:38
  Speaker 4: interpret because it's reported with a month lag, so a
• 18:41
  Speaker 4: lot of yeah, I mean, yeah, it's really more been
• 18:44
  Speaker 4: the labor ones, though they're right. Care you think response rates.
• 18:47
  Speaker 6: Cons confidence as well?
• 18:48
  Speaker 11: Yeah, so consumer confidence, and again we've seen some weird
• 18:52
  Speaker 11: responses in general.
• 18:53
  Speaker 6: Some surveys are telling us that consumers remain very low
• 18:57
  Speaker 6: in terms of confidence.
• 18:58
  Speaker 11: Other ones are looking okay, but then if you look
• 19:01
  Speaker 11: at the response rates within each of those are much
• 19:03
  Speaker 11: lower than what they used to be, so it's hard
• 19:05
  Speaker 11: to know how much stake to put in those. So
• 19:08
  Speaker 11: it's consistent across a lot of different economic data.
• 19:11
  Speaker 3: Before you go, can you give us name individual names,
• 19:13
  Speaker 3: I don't if you do that, or just sectors or
• 19:16
  Speaker 3: I don't know, let's do energy in general sectors.
• 19:20
  Speaker 11: Yeah, Well, we actually think over the medium term energy
• 19:23
  Speaker 11: is actually fairly interesting. You know, the underlying commodities have
• 19:28
  Speaker 11: kind of have their own cycle, but if we look
• 19:30
  Speaker 11: at investment levels in those companies, they've been remarkably low,
• 19:34
  Speaker 11: which often presages a pretty good kind of medium term
• 19:37
  Speaker 11: return environment. Valuation levels are half of what their historic
• 19:41
  Speaker 11: levels are. So again, over a couple of year period,
• 19:43
  Speaker 11: we think you can find a lot of interesting opportunities there.
• 19:46
  Speaker 4: I was hoping you might say some names and we
• 19:48
  Speaker 4: would hear with the magnificent seven Russell are.
• 19:56
  Speaker 7: Yes, yes, we'll all right.
• 19:58
  Speaker 3: Karen, thanks a lot, appreciate it. Arah Murphy, good to
• 20:00
  Speaker 3: see again, Chief investment officer with Castra Investment Management.
• 20:05
  Speaker 7: You're listening to the tape, can't our live program Bloomberg
• 20:08
  Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 20:12
  Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
• 20:15
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• 20:18
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• 20:25
  Speaker 3: We'll Mascaviz as CEO and portfolio manager at Heartland Advisors.
• 20:29
  Speaker 3: So what is what is your method for valuing stocks?
• 20:34
  Speaker 3: Let's start there, because I think I know what your
• 20:36
  Speaker 3: answer is.
• 20:37
  Speaker 8: Well, thanks for the opportunity to be here.
• 20:39
  Speaker 12: Our process is our ten principles of value invested, and
• 20:42
  Speaker 12: we utilize it to keep our exposures and check. There's
• 20:46
  Speaker 12: a lot of uncertain in the marketplace today, the election, geopolitical, hardsoft, no.
• 20:51
  Speaker 8: Landing, et cetera.
• 20:52
  Speaker 12: So we want to be mindful of where we're exposed, overweight, underweight,
• 20:56
  Speaker 12: given the uncertainties out there, then use our process, our
• 20:58
  Speaker 12: ten principles of value to keep those at check.
• 21:02
  Speaker 4: So you know something that John's been wanting to ask
• 21:04
  Speaker 4: a lot of our guests here is who is the
• 21:07
  Speaker 4: Magnificent seven. I'm just saying I think if John wants
• 21:10
  Speaker 4: to know, then someone else does do you were a
• 21:13
  Speaker 4: man of the people. So if anyways, the question for
• 21:16
  Speaker 4: you then will what is the magnificent seven of the
• 21:19
  Speaker 4: Russell two thousand. We'd all love to know.
• 21:22
  Speaker 12: Well, that's a great question. I'm not sure that there
• 21:25
  Speaker 12: is a mag seven within the rust of two thousand.
• 21:27
  Speaker 12: It's a benchmark that's populated with a significant chunk of
• 21:30
  Speaker 12: companies that are unprofitable. I think that creates lots of
• 21:33
  Speaker 12: opportunities that said, too, for active investors to pick off
• 21:37
  Speaker 12: those businesses that are high quality that are getting caught
• 21:39
  Speaker 12: up in the near term uncertainty and create value through
• 21:42
  Speaker 12: for our client's longer term.
• 21:44
  Speaker 3: Okay, let's get more into the differentiation between the smaller caps,
• 21:48
  Speaker 3: the mids and the mega camps at this and the
• 21:52
  Speaker 3: advantages to investors at this point.
• 21:56
  Speaker 8: Well, I think that's the make has had some big
• 21:59
  Speaker 8: ex ecues.
• 21:59
  Speaker 12: We have some wonderful companies within it, but there's also
• 22:01
  Speaker 12: wonderful companies in MidCap and small cap places. You know,
• 22:04
  Speaker 12: we're optimistic on JBI Hunt they report later today. It's
• 22:08
  Speaker 12: in the industrial space. It's a leader in the intermodal offering.
• 22:12
  Speaker 12: Their scale and their relationship with Berlin General, and it
• 22:15
  Speaker 12: is second to none, and we see this as a
• 22:18
  Speaker 12: classic self help opportunity or catalyty.
• 22:21
  Speaker 3: And I see their trucks on the road on the turnpike.
• 22:23
  Speaker 3: They're a shipper or what are they do again?
• 22:25
  Speaker 12: They provide that container on the back of that tractor.
• 22:28
  Speaker 12: They're the leader in that space. They have a long
• 22:31
  Speaker 12: term agreement with Berlinton Northernd that container that goes on
• 22:33
  Speaker 12: a rail. The cost advantages of intermodal relative truckloader are
• 22:37
  Speaker 12: very significant. The broader space has been challenged because of
• 22:41
  Speaker 12: rail service issues. We think that's in the rear mirror,
• 22:44
  Speaker 12: and we think that intermodal in general is going to
• 22:48
  Speaker 12: continue to take share away from truckle That I would
• 22:50
  Speaker 12: obviously be very positive for Jbhunt, which we think is
• 22:53
  Speaker 12: in the cards.
• 22:54
  Speaker 4: So would you say you're pretty bullish on that sector
• 22:57
  Speaker 4: more broadly or it's really just this name and if so,
• 23:00
  Speaker 4: where maybe some other areas you're looking at too well.
• 23:03
  Speaker 12: I think it's important for investors, back to that earlier
• 23:05
  Speaker 12: commentary of understanding your exposures. Everyone wants to talk about
• 23:08
  Speaker 12: what they're overweight, what the opportunity is. It's equally important
• 23:12
  Speaker 12: all maybe even more so, to understand that downside. Are
• 23:15
  Speaker 12: you comfortable with those underweights?
• 23:17
  Speaker 8: JB.
• 23:17
  Speaker 12: Hunt falls within industrials. We actually have an active underweight
• 23:21
  Speaker 12: there that's unique for us. We've historically added value there,
• 23:26
  Speaker 12: but right now that universe in terms of the risk
• 23:28
  Speaker 12: reward of the broader big cap industrial space is not
• 23:31
  Speaker 12: super compelling. We do find opportunities Bill or if I
• 23:35
  Speaker 12: think there's an opportunity in JA behind another active underweight
• 23:37
  Speaker 12: we have has been with financials. That's a big component
• 23:40
  Speaker 12: of both the big cap and small cap. Russell Indsy's
• 23:44
  Speaker 12: our benchmarks.
• 23:44
  Speaker 8: If you will.
• 23:45
  Speaker 12: One name that we're excited about, it's down today and
• 23:47
  Speaker 12: report is Northern Trust. That's a duration catalyst. Expectations we
• 23:51
  Speaker 12: believe are very low and we think we don't know
• 23:54
  Speaker 12: what the Fed's going to do, we don't know where
• 23:56
  Speaker 12: the economy is going to go, but all likeli that
• 23:58
  Speaker 12: we're probably going to see some cret deteriorate here in
• 24:01
  Speaker 12: the cores at Northern Trust should be a relative winner
• 24:05
  Speaker 12: within the financial space that also have a significant degree
• 24:08
  Speaker 12: of higher fee based revenue. And we see a cell
• 24:11
  Speaker 12: self help story here too, as they're addressing perhaps some
• 24:14
  Speaker 12: cost float associated with the significant wage pressure. We're there
• 24:18
  Speaker 12: right now they are prey tax margins or somewhere on
• 24:21
  Speaker 12: the mid twenty percent range. We see a pathway to
• 24:25
  Speaker 12: thirty percent or guys their long term guidance and we
• 24:27
  Speaker 12: think that is that is byside and sales side expectations
• 24:31
  Speaker 12: adopt that that should be very positive for Northern Trust.
• 24:33
  Speaker 3: It's safe to say these are more domestically oriented stocks
• 24:37
  Speaker 3: because they are smaller cap as such, does that mean
• 24:40
  Speaker 3: they're immune from some of the concerns that we see
• 24:43
  Speaker 3: with the larger cap stocks, whether it be geopolitical or
• 24:46
  Speaker 3: I don't know whatever.
• 24:49
  Speaker 12: I think the reality is we're an intertwined world of
• 24:51
  Speaker 12: every business in some shape or form is going to
• 24:53
  Speaker 12: be impacted from higher commodity prices. Obviously, which was an
• 24:56
  Speaker 12: occurrence associated with the Rusher who came conflict. Now we're
• 24:59
  Speaker 12: having challenges with the container rates, with the issues that
• 25:02
  Speaker 12: we're seeing in the Red Sea, et cetera. So you
• 25:04
  Speaker 12: just have to be aware of those exposures, understand them,
• 25:08
  Speaker 12: and make sure you're comfortable with them in terms of
• 25:10
  Speaker 12: that over and underweight and balancing it out with your process.
• 25:13
  Speaker 4: Tell us then about maybe the risk from election perspectives,
• 25:17
  Speaker 4: That certainly got to be a domestic one on your mind.
• 25:21
  Speaker 8: That's a great question.
• 25:22
  Speaker 12: If I think, if you sticking with the two names
• 25:24
  Speaker 12: that we talked about, if Trump wins, I suspect that
• 25:27
  Speaker 12: would be good for Hunt. I think we'll continue to
• 25:30
  Speaker 12: see this reshoring trend. He was obviously big on tariffs,
• 25:34
  Speaker 12: discussing trade, You're going to continue to see businesses invest
• 25:37
  Speaker 12: back at here in the United States.
• 25:38
  Speaker 8: That should be good for HUNT.
• 25:41
  Speaker 12: I don't know this for certain, but I think his
• 25:43
  Speaker 12: victory would probably lift CEO confidence, high net worth confidence
• 25:47
  Speaker 12: because there'd be thinking that there'd be less regulation coming
• 25:50
  Speaker 12: out of the Beltway.
• 25:51
  Speaker 8: That should be good for Northern Trust.
• 25:53
  Speaker 12: If Biden gets re elected, I'm not sure what the
• 25:55
  Speaker 12: headwinds would be for JAB in the near term. Northern
• 25:58
  Speaker 12: Trust being a financial suspect that there'd be continued regulatory
• 26:02
  Speaker 12: screwtiny across the broader financial space, although I don't think
• 26:06
  Speaker 12: Northern Trust would be you know, under the microscope.
• 26:09
  Speaker 3: All right, where do you see your benchmarks? Time to
• 26:12
  Speaker 3: put you on the spot. Year end. I mean, everybody's
• 26:16
  Speaker 3: told us what they think about the S and P
• 26:18
  Speaker 3: five hundred five thousand. This year benchmark is what the Russell?
• 26:22
  Speaker 12: Yeah, the Russell two thousand value for our small cat
• 26:24
  Speaker 12: products and the Russell MidCap value for our MidCat product.
• 26:28
  Speaker 8: We don't have a long.
• 26:29
  Speaker 12: Term target for either of those, but we're going to
• 26:31
  Speaker 12: continue to focus on taking what the market gives us.
• 26:34
  Speaker 12: A good example of this, you know, we're talking about
• 26:36
  Speaker 12: the FED a little bit here too. If you rewind
• 26:38
  Speaker 12: the clock back to August of twenty twenty two, hol
• 26:41
  Speaker 12: had a very aggressive, intense presentation in Jackson Hold early
• 26:46
  Speaker 12: cyclical stocks sold off into the vault. We pounced on
• 26:49
  Speaker 12: that opportunity in our shareholders of benefit. I suspect whether
• 26:53
  Speaker 12: the FED raises, folds or cuts rates, there's going to
• 26:56
  Speaker 12: be volatility. So stick to your process, understand how your
• 26:58
  Speaker 12: portfolio is exposed, capitalize on those opportunities that can present
• 27:02
  Speaker 12: it to you.
• 27:02
  Speaker 3: All Right, Thanks, well, nice to talk to you. A
• 27:04
  Speaker 3: great discussion. Will Nascovitzi's the CEO portfolio manager at Heartline Heartlam,
• 27:10
  Speaker 3: the advisors making the case for MIA and smaller cap stocks.
• 27:14
  Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can
• 27:18
  Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever
• 27:21
  Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
• 27:25
  Speaker 2: at Matt Miller nineteen seventy three, and I'm fall Sweeney.
• 27:29
  Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you
• 27:31
  Speaker 1: can always catch us worldwide at Bloomberg Radio