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Weary Market Eager To Look Beyond Trump Chaos: Ritholtz · Bloomberg Intelligence

• 0:00
  Speaker 1: All right, let's bring in a very Riddles Spoomberg opinion,
• 0:02
  Speaker 1: host of Masters in Business and of course founder of
• 0:04
  Speaker 1: Riddle's Wealth Management. Very great to have you on the
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  Speaker 1: first time since we got an election results, and really
• 0:12
  Speaker 1: the first time since that long long count, and we've
• 0:14
  Speaker 1: seen markets churn both on that and of course fiser news.
• 0:18
  Speaker 1: How are you supposed to read these markets? What are
• 0:20
  Speaker 1: they pricing in? That's a really good Welcome to the
• 0:24
  Speaker 1: Bloomer Markets Podcast. I'm All Sweeney, along with my co
• 0:27
  Speaker 1: host of Quiz. Every business day we bring you interviews
• 0:29
  Speaker 1: from CEOs, market rows, and Bloomberg experts, along with essential
• 0:33
  Speaker 1: marketing news. Kind the Bloomberg Markets Podcast on Apple podcast
• 0:37
  Speaker 1: or wherever you on the podcast and on Bloomer dot com.
• 0:41
  Speaker 1: The Democrats ruining both well. The tradeoff is we're likely
• 0:45
  Speaker 1: to see much more fiscal stimulus, but we're also likely
• 0:49
  Speaker 1: to see somewhat higher taxes and and that's quite a
• 0:53
  Speaker 1: that's quite a challenge. Um right now, the assumption seems
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  Speaker 1: to be that we're going to have some form of
• 0:59
  Speaker 1: DIVI I did government and arguably that's not the worst
• 1:04
  Speaker 1: situation under normal times for the markets. I will say
• 1:08
  Speaker 1: in the midst of an emergency or a crisis like
• 1:11
  Speaker 1: a pandemic. You do want to see cooperation across the all.
• 1:16
  Speaker 1: You do want to see both parties try and working together.
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  Speaker 1: I have said on the show before, I am shocked
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  Speaker 1: that we have not gotten a follow through to the
• 1:25
  Speaker 1: stimulus from the first quarter heading into the election, and
• 1:31
  Speaker 1: now we've been hearing noise that the Trump administration has
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  Speaker 1: no interest in pursuing it between now and and the
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  Speaker 1: formal inauguration on January, So the economy could get a
• 1:44
  Speaker 1: little dicey over the next two months. Right. In fact,
• 1:48
  Speaker 1: the latest just out for Marcella Wilson saying that the
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  Speaker 1: Trump administration is actually stepping back, according to people familiar
• 1:54
  Speaker 1: with the situation, and that's leaving it up to you know,
• 1:56
  Speaker 1: Mitch McConnell and Nancy Pelosi, which really is not are
• 2:00
  Speaker 1: you consoling at all? Nancy Pelosi wanting you know, something
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  Speaker 1: like two point four trillion dollars and Ms McConnell doesn't
• 2:07
  Speaker 1: even want a trillion. Really, that's a huge, huge difference. Barry, Yes, yeah,
• 2:12
  Speaker 1: well a trillion dollars, go figure, it's a lot of money.
• 2:15
  Speaker 1: And so it makes those two races in Georgia really
• 2:20
  Speaker 1: really significant. I think while everybody is looking in the
• 2:24
  Speaker 1: wrong direction, we're all looking at this this all the
• 2:28
  Speaker 1: silly litigation trying to fight the uh the results. I
• 2:33
  Speaker 1: think the legal team of the Trump administration is now
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  Speaker 1: over twelve um or arguably one for thirteen if you
• 2:41
  Speaker 1: count moving ten feet away to six ft away as
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  Speaker 1: a victory. But other than that, you know, courts don't
• 2:49
  Speaker 1: fool around you when you're there as an officer of
• 2:51
  Speaker 1: the court, as an attorney on either side, and there
• 2:54
  Speaker 1: are all sorts of rules. You can't what you could
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  Speaker 1: get away with on Fox News, you can't get away
• 3:00
  Speaker 1: with in front of a judge and say there was fraud,
• 3:02
  Speaker 1: and they ask you for evidence, and if you don't
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  Speaker 1: have any, you're putting your license in your career at risk.
• 3:10
  Speaker 1: And so the track record has been pretty weak for
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  Speaker 1: for all these broad claims of nationwide fraud. So far
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  Speaker 1: there's no evidence, and the companies involved, some of the
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  Speaker 1: law firms involved, to putting themselves at risk. Yeah, I
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  Speaker 1: mean I guess, um, I guess they're taking the business
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  Speaker 1: for now. Barry. When you talk to you know, your
• 3:32
  Speaker 1: clients and also some of your wealthy investor friends, What
• 3:36
  Speaker 1: are they saying to you about the situation. I presume
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  Speaker 1: that they're pretty happy with everything, and except obviously for
• 3:41
  Speaker 1: the coronavirus still raging around the world. Well, those who
• 3:45
  Speaker 1: have sort of stepped away from the markets are are
• 3:47
  Speaker 1: not exactly happy. And we've seen a number of hedge
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  Speaker 1: funds and others sort of take the let's wait until
• 3:53
  Speaker 1: the dust clears, which is turns out not to be
• 3:58
  Speaker 1: a great decision at least this time around. Generally speaking,
• 4:02
  Speaker 1: the expectation is that markets are going to continue doing
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  Speaker 1: what they're doing regardless of what happens with the election.
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  Speaker 1: We we've noticed this, you know, throughout history, whether it
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  Speaker 1: was Pearl Harbor or JFK assassination or you know, go
• 4:19
  Speaker 1: go down the list of of earth shaking events, markets
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  Speaker 1: have a tendency to wobble for a little bit and
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  Speaker 1: then just go right back to what they were doing.
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  Speaker 1: So personally, I'm looking forward to the noise levels coming down.
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  Speaker 1: I was kind of rooting in after that election for Okay,
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  Speaker 1: now we're done with politics, can we get back to
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  Speaker 1: our normal life. The I think people are somewhat shocked
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  Speaker 1: that post we really never returned to normal. It it
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  Speaker 1: it was like a continuous campaign for twenty four years.
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  Speaker 1: For four years, right, I would love to just put
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  Speaker 1: politics on the back burner and focus a little it
• 5:00
  Speaker 1: on other things in life. It would be nice to
• 5:03
  Speaker 1: see my Twitter feed just sort of calm down a bit. Yeah,
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  Speaker 1: those notifications were very definitely, very grueling, and we won't
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  Speaker 1: have that from the Biden team, that's for sure. So
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  Speaker 1: very you know, now that the dust is settling a
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  Speaker 1: little bit, we still have everything else out there, right,
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  Speaker 1: lack of stimulus, coronavirus just going exponential in the United
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  Speaker 1: States and across the world, and markets still keep, you know,
• 5:29
  Speaker 1: pumping away. I mean, what's going to burst the bubble
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  Speaker 1: in this market? I'm not suggesting it's it's a bubble
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  Speaker 1: in the traditional sense, but there's very definitely some exuberance
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  Speaker 1: in there, isn't there. You know, things that are unsustainable
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  Speaker 1: eventually run out of steam, eventually stopped running. It's arguable
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  Speaker 1: that this market is uh is getting tired. There. There
• 5:51
  Speaker 1: are some signs that the stock market has been pricey,
• 5:56
  Speaker 1: but just look around at some of the earnings that
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  Speaker 1: have had to come out. We we may end up
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  Speaker 1: being surprised by how quickly the profit side of this recovers,
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  Speaker 1: and to me, that's what that's what is going to
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  Speaker 1: drive this That there are two factors that we look at.
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  Speaker 1: One is multiple expansion, and that's certainly responsible for a
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  Speaker 1: big part of the games people wanting to pay more
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  Speaker 1: and more to own the same stock. But increasing profits
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  Speaker 1: is something we should not underestimate. And let me just
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  Speaker 1: remind everybody, over the course of the next year, all
• 6:31
  Speaker 1: these companies are going to have really really easy comparables.
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  Speaker 1: Profits were way low and the market was looking past them.
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  Speaker 1: And so when we're in Q two of of or
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  Speaker 1: Q three, we're looking back at an environment where profits
• 6:48
  Speaker 1: were either tiny or non existent. And so maybe that's
• 6:53
  Speaker 1: part of what the market is looking at and seeing
• 6:55
  Speaker 1: over the next four quarters. But comps can doors, can
• 6:58
  Speaker 1: they barry? I mean sure, there's a baseline of economic
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  Speaker 1: activity that the market needs in order to be you know,
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  Speaker 1: happy with particular stalks. Yeah, um, no doubt about it.
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  Speaker 1: And the I would you know, we all tend to
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  Speaker 1: create these narratives after the fact. I'm wondering if some
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  Speaker 1: of the market enthusiasm is the thought that, hey, the
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  Speaker 1: new White House is gonna you know, nobody wants to
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  Speaker 1: do the difficult decisions up front, the painful decisions, so
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  Speaker 1: that you can thrive in the future. I think the
• 7:30
  Speaker 1: Biden administration is going to do all of the difficult
• 7:34
  Speaker 1: COVID nineteen related things, a national mask mandate, a temporary
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  Speaker 1: lockdown um, some form of a CARES Act, to some
• 7:43
  Speaker 1: form of a stimulus, maybe even invoking the Defense Authorization
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  Speaker 1: Act to get more PPE where it has to go.
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  Speaker 1: And so that had we done that a year ago,
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  Speaker 1: the economy would be much better off. Had we done
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  Speaker 1: that in the beginning of we would probably not be
• 8:01
  Speaker 1: dealing with as much of a spike as we're seeing.
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  Speaker 1: We're going to have to get through the next three
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  Speaker 1: or four months. It's not going to be easy, but
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  Speaker 1: the expectation is on the other side, will all be
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  Speaker 1: closer to getting back to normal under this administration, then
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  Speaker 1: the sort of lais ay fair, don't worry about the
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  Speaker 1: coronavirus will take care of itself. Approach of the current administration.
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  Speaker 1: We're waiting FED Chair J Powell, ECB President Christine Lagarde,
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  Speaker 1: and BOE Governor Andrew Bailey to address the CBS Annual
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  Speaker 1: Forum that they'll be discussing central banks in a shifting world.
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  Speaker 1: While we wait for the start of that, we can
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  Speaker 1: ask Barry Riddles about central banks in a shifting world.
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  Speaker 1: Barry Riddles, of course, Master's in Business podcast host, among
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  Speaker 1: other things. Barry, you know, the world shifted twelve years
• 8:47
  Speaker 1: ago when we have the financial crisis and central banks
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  Speaker 1: got on board, and they sort of feel like they
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  Speaker 1: stretched that elastic band, right. Where can they go to
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  Speaker 1: from here? Well, I think if we learned anything from
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  Speaker 1: the first core or of it's it's time to pass
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  Speaker 1: the baton to the fiscal side of things, not the
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  Speaker 1: monetary side of things. When when you're at the zero
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  Speaker 1: bound um, what do we somewhere something like in of
• 9:15
  Speaker 1: um of sovereign bonds are now yielding negative rates. I
• 9:20
  Speaker 1: mean that is a quite quite a statistic, and there
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  Speaker 1: are all sorts of problems with negative rates or potential problems.
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  Speaker 1: I don't know how much more we can ask of
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  Speaker 1: our central banks. Um. I don't want to say they're
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  Speaker 1: out of AMMO, but you're at a certain point you're
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  Speaker 1: you're just asking. You're using the wrong tool for the job.
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  Speaker 1: And I think we've been asking too much of our
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  Speaker 1: of our central bankers around the world. Yeah, I mean
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  Speaker 1: I was speaking with distress to investor Whoose Richards yesterday,
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  Speaker 1: and you know, he talked about after month of the
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  Speaker 1: financial crisis and how it took a couple of years
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  Speaker 1: to get four trillion dollars you know, through the federals
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  Speaker 1: are system and into the economy. It happened in five
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  Speaker 1: weeks after the pandemic, after the FED went to action
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  Speaker 1: this time around. I mean, that's some crazy acceleration right there. Berry, Well,
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  Speaker 1: keep in mind, it was it was the one to
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  Speaker 1: punch the combination of monetary policy and a three trillion
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  Speaker 1: dollar fiscal stimulus. You know, what the FED does has
• 10:22
  Speaker 1: to work its way through a series of mechanisms typically
• 10:26
  Speaker 1: associated with credit and borrowing, and that doesn't happen instantly,
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  Speaker 1: especially in the midst of a pandemic. If you recall,
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  Speaker 1: lots and lots of small businesses and and households were
• 10:41
  Speaker 1: complaining that in the middle of the pandemic, the credit
• 10:45
  Speaker 1: market had tightened up so much and banks really weren't
• 10:48
  Speaker 1: lending so so that really hamstrings the Fed's ability to
• 10:53
  Speaker 1: affect a lot of the local economies. On the other hand,
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  Speaker 1: the fiscal stimulus, the direct lending to small business companies,
• 11:03
  Speaker 1: that promised not to uh layoff staff. Um uh, that
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  Speaker 1: that has an immediate impact, so too, uh, it does
• 11:12
  Speaker 1: the proposal to use federal funds to steer money to
• 11:17
  Speaker 1: states and municipalities that, unlike the federal government, are unable
• 11:22
  Speaker 1: to deficit spend and so were there in a genuine
• 11:26
  Speaker 1: danger of running out of money before the year ends.
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  Speaker 1: And that includes things like police and fire and and
• 11:33
  Speaker 1: ambulance and teachers and hospitals. They're in a bad way.
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  Speaker 1: And the hope was that the new fiscal stimulus would
• 11:42
  Speaker 1: steer a trillion dollars or so to local states and cities.
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  Speaker 1: Um Uh. There was some back and forth that this
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  Speaker 1: was a blue state phenomena, and therefore the Trump administration
• 11:56
  Speaker 1: was very much against it. But when you look at
• 12:00
  Speaker 1: where the pandemic is now running amuck, it's as many
• 12:03
  Speaker 1: red states, if not more, than blue states. And I
• 12:08
  Speaker 1: wouldn't be surprised if as this gets worse and worse,
• 12:12
  Speaker 1: the tone amongst whoever is running the Senate starts to
• 12:16
  Speaker 1: soften because some of the projections are pretty horrific. Over
• 12:20
  Speaker 1: the next three or four months, Yeah, for sure, Barry,
• 12:22
  Speaker 1: you're about to go to the panel. But who is
• 12:24
  Speaker 1: your guest for Master's in Business next Oh, this week
• 12:27
  Speaker 1: Penny Pennington one of the highest ranking women in finance.
• 12:30
  Speaker 1: She's they call it managing partner, but she's really the
• 12:33
  Speaker 1: CEO of ed Jones. With Edward Jones, they manage one
• 12:37
  Speaker 1: point three trillion dollars. Yes, indeed, Barry, how do you
• 12:40
  Speaker 1: always get to my guests before I do? I'll be
• 12:42
  Speaker 1: tuning in. Thanks for that, Barry. You at alls time
• 12:47
  Speaker 1: to bring in Ty Lopez now executive chairman of retail
• 12:50
  Speaker 1: e commerce Ventures and Tight deals with basically distressed retailed brands.
• 12:57
  Speaker 1: So Ty, what what exactly do you do and and
• 12:59
  Speaker 1: sort of how much choice do you have these days? Hey,
• 13:04
  Speaker 1: thanks for having me on. Yeah, there's a lot of
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  Speaker 1: choice choices growing here. You know, we've got to interesting
• 13:12
  Speaker 1: environment with COVID. We started buying before covid. We bought
• 13:15
  Speaker 1: Dress Barn last year in November nineteen, so the opportunity
• 13:21
  Speaker 1: has been there, but it's certainly there's more choice and
• 13:25
  Speaker 1: more attractive valuations that we can purchase at. You now
• 13:29
  Speaker 1: tell us exactly what you're buying, because so some of
• 13:31
  Speaker 1: the brands that you bought our Dress Barn as you said,
• 13:34
  Speaker 1: also U Pure One Models, also Linens and things. So
• 13:38
  Speaker 1: these were bankruptcies that we sort of watched happen in
• 13:41
  Speaker 1: front of our very eyes. Did you just buy the names,
• 13:43
  Speaker 1: did you buy the assets, did you buy the intellectual property?
• 13:46
  Speaker 1: And how much for? Yeah? So each deal has been different.
• 13:51
  Speaker 1: Some of the brands were off market, like Franklin Men
• 13:54
  Speaker 1: and Linens and things. Those weren't bankruptcies when we bought them.
• 13:57
  Speaker 1: They have been, you know, in the past. Franklin Mint
• 14:00
  Speaker 1: was never bankrupt, so everyone was different. Pure One we
• 14:03
  Speaker 1: bought it an auction in July for thirty one million.
• 14:06
  Speaker 1: We bought the I P, the intellectual property. I mean
• 14:10
  Speaker 1: pretty much, you get the whole brand and you get
• 14:13
  Speaker 1: the all that that includes. But we've chosen, because we're
• 14:17
  Speaker 1: e commerce specialists, to let the stores for the most
• 14:22
  Speaker 1: part closed. The stores are already closing. We still have
• 14:25
  Speaker 1: the option to open back brick and mortar, but obviously
• 14:29
  Speaker 1: we want to see how COVID shakes out before we start,
• 14:32
  Speaker 1: you know, opening a whole bunch of stores. These stores
• 14:35
  Speaker 1: are kind of worked out. These brands in trouble not
• 14:37
  Speaker 1: just because of COVID, but because they signed leases assuming
• 14:42
  Speaker 1: a certain amount of people were would visit brick and mortar,
• 14:45
  Speaker 1: but every day Amazon and e cooms take a stronger
• 14:48
  Speaker 1: place exactly, So what is your plan? Why even but
• 14:52
  Speaker 1: I mean thirty one million dollars doesn't sound like a
• 14:54
  Speaker 1: lot for pure one, let's put it that way. But
• 14:56
  Speaker 1: why even spend that if you know the business? It
• 15:00
  Speaker 1: just doesn't work anymore. Yeah, So it takes Pier one
• 15:05
  Speaker 1: or dress Bar, and these brands are beloved. Um if
• 15:08
  Speaker 1: you watch the social media, you know, and when Pierre
• 15:11
  Speaker 1: one was going out, people were sad and people have
• 15:14
  Speaker 1: been shopping there. It's a sixty year old brand. So
• 15:16
  Speaker 1: we don't actually think that the brands are broken. We
• 15:20
  Speaker 1: think that the trust uh is there as strong as
• 15:24
  Speaker 1: ever with the brand. People have a white pier One
• 15:27
  Speaker 1: and it's hard if you try to you know, a
• 15:29
  Speaker 1: lot of entrepreneurs try to build businesses from scratch. I've
• 15:32
  Speaker 1: done that before. My business partner and I have done
• 15:34
  Speaker 1: that before. But it takes a long time to build
• 15:38
  Speaker 1: um what we call branded awareness. So if you look
• 15:40
  Speaker 1: at Pier one has over branded awareness out of ten Americans.
• 15:45
  Speaker 1: If you say do you know pier One, nine say yes.
• 15:48
  Speaker 1: And it's really hard to do that. If you start
• 15:51
  Speaker 1: a brand from scratch, it's almost impossible. I mean Google
• 15:55
  Speaker 1: did it obviously, But for the most part, I think
• 15:58
  Speaker 1: that piggybacking off the trust that's already there and bringing
• 16:02
  Speaker 1: the brands into the new e commerce world is a
• 16:04
  Speaker 1: very viable and it's going very well with dress More
• 16:07
  Speaker 1: and in the brands we've been doing so far. Are
• 16:10
  Speaker 1: you trying to put everything you buy in in one
• 16:13
  Speaker 1: retail marketplace or what will be the future for for
• 16:17
  Speaker 1: these brands? Me my business part, we're just talking about that. Certainly,
• 16:22
  Speaker 1: there's an option to create, you know, and you have
• 16:27
  Speaker 1: all the brands there right now. Each brand has its
• 16:30
  Speaker 1: own website, but we are switching more to a marketplace model,
• 16:34
  Speaker 1: which was Amazon Jeff Bezos kind of thesis. So, for example,
• 16:38
  Speaker 1: on Pier one, we're not only selling Pier one branded products.
• 16:44
  Speaker 1: If you look at Wayfair, which has gone from a
• 16:46
  Speaker 1: nine billion valuation earlier this year to they allow other people,
• 16:53
  Speaker 1: any vendor to sell. So we're kind of hybridizing the
• 16:56
  Speaker 1: old Pier One with the newer business model like Amazon
• 17:00
  Speaker 1: and Wayfair. Yeah, that's fascinating. Now, will you continue to
• 17:04
  Speaker 1: sort of buy willy nilly sort of? So you know, clothes, furniture, sports,
• 17:11
  Speaker 1: Linen's or will you try to specialize in one area.
• 17:17
  Speaker 1: I don't mean that, no, No, it's there's a little
• 17:20
  Speaker 1: method to our madness. But I think we like the
• 17:24
  Speaker 1: thought of going into different verticals, different industries. So we've
• 17:28
  Speaker 1: done that on purpose. So for example, instead of buying
• 17:31
  Speaker 1: five clothing brands, we'd like to buy one strong one
• 17:36
  Speaker 1: and then buy one home goods, and then we bought
• 17:38
  Speaker 1: models as Sportings and Franklin men Is collectibles, and so
• 17:42
  Speaker 1: we like, we like branching out. You know, there's last
• 17:46
  Speaker 1: I counted, there's about thirteen trilli thirteen industries that do that.
• 17:51
  Speaker 1: I have over a trillion of revenue. We'd like to
• 17:54
  Speaker 1: be an all thirteen of those. My kind of mentor
• 17:58
  Speaker 1: that I've never met is Warren Buffett In. I like
• 18:00
  Speaker 1: his approach to building a real diversified holding company. We're
• 18:04
  Speaker 1: holding company, We're not a fund, so we actually own
• 18:07
  Speaker 1: the majority of the assets, you know, so we like
• 18:09
  Speaker 1: the diversity. So ty we're out of time, But what
• 18:13
  Speaker 1: what will be next? I mean, where do you go
• 18:14
  Speaker 1: to look for these auctions? How do they pop up
• 18:16
  Speaker 1: for you? We're looking more at off market deals. The
• 18:20
  Speaker 1: auction space is getting more crowded and more competitive. We
• 18:24
  Speaker 1: have a new acquisition that I'll be able to announce
• 18:28
  Speaker 1: in a week. So it's a bigger it's the biggest
• 18:33
  Speaker 1: brand we've ever bought. And oh my gosh, we have
• 18:35
  Speaker 1: to do a competition for our listeners to write in
• 18:37
  Speaker 1: and whoever gets it right gets chanced to Alright, well
• 18:43
  Speaker 1: it's out there now you know how to reach us. Ty,
• 18:45
  Speaker 1: thanks for joining Ti Lopez, Executive Chairman of Retail e
• 18:48
  Speaker 1: Commerce Venture. Is a fascinating conversation and it is time
• 18:54
  Speaker 1: to bring in Sarah Pons, like now class a reporter
• 18:56
  Speaker 1: here at Bloomberg. So we were looking at equities with
• 18:59
  Speaker 1: Dave Wilson earlier, Sarah. What we didn't really talk about
• 19:02
  Speaker 1: is the Domar Index, for example, which is been very,
• 19:05
  Speaker 1: very volatile. We're down below again. Some of this of
• 19:08
  Speaker 1: course on euro and Sterling, because that's they're the two
• 19:12
  Speaker 1: biggest components for the d X Y. But what else
• 19:15
  Speaker 1: is going on? There was some discussion that we would
• 19:17
  Speaker 1: see the safe haven trade of the dollar return, but
• 19:19
  Speaker 1: like you said, we have seen fluctuations lately, volatility. If
• 19:22
  Speaker 1: I look at the Bloomberg Dollar Spot Index for example,
• 19:25
  Speaker 1: higher on Monday, lower on Tuesday, higher yesterday, and today
• 19:29
  Speaker 1: we are just about flat. It's really difficult to disseminate
• 19:32
  Speaker 1: any direct trend here. It is notable, though, to point
• 19:36
  Speaker 1: out the fact that if you zoom out and you
• 19:38
  Speaker 1: look at a more historical perspective, we're still hovering just
• 19:41
  Speaker 1: around this lowest level since eighteen so still dealing with
• 19:45
  Speaker 1: a depressed dollar, not seeing too much reaction or change
• 19:49
  Speaker 1: that would change the trend any which way. But also
• 19:52
  Speaker 1: very notable today is just the bond market. Yes, tenure
• 19:55
  Speaker 1: treasury yield still above ninety basis points. I look at
• 19:57
  Speaker 1: my screen right now point three percent. However, that is
• 20:02
  Speaker 1: down from above ninety seven basis points just yesterday and
• 20:05
  Speaker 1: this morning as well earlier overnight. So we are seeing
• 20:09
  Speaker 1: this change take hold, albeit a relatively small one, but
• 20:13
  Speaker 1: still down six basis points or so on the day
• 20:15
  Speaker 1: this after that cp I print came in lighter than expected.
• 20:19
  Speaker 1: Some economists are now starting to wonder if it's true that, yes,
• 20:23
  Speaker 1: we had seen inflation start to pick up after those
• 20:26
  Speaker 1: immediate initial lockdowns. Well, are we going to get to
• 20:29
  Speaker 1: a point now where it's going to start fading? We
• 20:31
  Speaker 1: might see the trend even trend downwards if we start
• 20:34
  Speaker 1: to see worries restrictions over rising COVID nineteen case take
• 20:38
  Speaker 1: hold as well, and at that point we have restrictions
• 20:41
  Speaker 1: coming through from governments. Being here in New York City,
• 20:43
  Speaker 1: we know what we are about to phase starting tomorrow
• 20:46
  Speaker 1: with relatively light restrictions, but we don't know what's going
• 20:49
  Speaker 1: to be coming down the pipeline. At the same time,
• 20:51
  Speaker 1: you have to wonder if people are going to self
• 20:53
  Speaker 1: govern and self restricts, self police, get worried themselves and
• 20:56
  Speaker 1: start pulling back on economic activity, and then the impact
• 20:59
  Speaker 1: that has inflation and the expectations for the reflation trade
• 21:02
  Speaker 1: going forwards. I mean, that's what the FED would say,
• 21:04
  Speaker 1: right The FED doesn't see any inflation anywhere in the future,
• 21:08
  Speaker 1: absolutely not. We know the FED would like to be
• 21:10
  Speaker 1: on hold for the next couple of years. They have
• 21:12
  Speaker 1: baked it into their forecast. They don't expect inflation to
• 21:14
  Speaker 1: get above two percent. Even if inflation does get above
• 21:17
  Speaker 1: two percent, we know that they have now changed their
• 21:19
  Speaker 1: outlook their ways of governing to fate the flexible average
• 21:23
  Speaker 1: inflation targeting methods, so they're likely not to increase interest
• 21:27
  Speaker 1: rates even if we are just above two percent for
• 21:29
  Speaker 1: some time now, we have not seen how this is
• 21:32
  Speaker 1: going to work. Actually, in practice, we're not entirely sure,
• 21:37
  Speaker 1: and we're going to have to pay attention to the
• 21:38
  Speaker 1: Fed's words going forwards. But the feds promise and wall
• 21:42
  Speaker 1: Streets take of the Fed's promise is that we are
• 21:45
  Speaker 1: not going to see interest rates rise for some time.
• 21:47
  Speaker 1: So that begs the question, even if we are seeing
• 21:49
  Speaker 1: nominal rates rise, how high can nominal rates go if
• 21:53
  Speaker 1: we know that the FED is not going to step
• 21:55
  Speaker 1: off the old curve. Oil today is a big story.
• 21:59
  Speaker 1: We're seeing the barrel of w t iBOT two dollars
• 22:02
  Speaker 1: of borrow, which you know, in the face of it
• 22:03
  Speaker 1: doesn't sound like much, but it's been a long time
• 22:05
  Speaker 1: since we've seen forty two dollars plus this because OPEC
• 22:08
  Speaker 1: is sort of trying to face reality as opposed to
• 22:11
  Speaker 1: what it would like the world look like. Right, it's
• 22:13
  Speaker 1: all reality, all relative when you when you talk about
• 22:16
  Speaker 1: oil prices, we were stuck around forty dollars for so
• 22:18
  Speaker 1: long when it comes to W t I crude oil.
• 22:20
  Speaker 1: The fact that we are now nearing it on forty
• 22:22
  Speaker 1: two dollars a barrel. Well, it seems like maybe you're
• 22:24
  Speaker 1: getting a little bit of a breakout. This is the
• 22:26
  Speaker 1: highest in September. Back then prices were forty two seventy
• 22:29
  Speaker 1: six a barrel, So we do see prices trending higher.
• 22:32
  Speaker 1: It does help with OPEC on the supply side of
• 22:34
  Speaker 1: the equation. You also just have to factor in the
• 22:36
  Speaker 1: positive news that we got from Fiser on the vaccine front.
• 22:39
  Speaker 1: That certainly helps oil prices as well, because if you
• 22:42
  Speaker 1: think about if we do get a vaccine sooner rather
• 22:44
  Speaker 1: than later, what is that going to help. What is
• 22:47
  Speaker 1: that going to inspire. Well, maybe it will reintroduce airline travel,
• 22:50
  Speaker 1: will reintroduce cruise line travel. People maybe getting in their
• 22:53
  Speaker 1: cars more often. Well, that means we need more gasoline,
• 22:56
  Speaker 1: we need more oil. So therefore we could see oil
• 22:58
  Speaker 1: prices rise off of the ack of not just supply
• 23:01
  Speaker 1: but also the demand picture too. That also just filtering
• 23:04
  Speaker 1: into energy prices pretty unbelievable. If you look through the
• 23:07
  Speaker 1: closes yesterday, the SMP five hundred energy sector the best
• 23:10
  Speaker 1: performing sector up. That's on track for the best week
• 23:13
  Speaker 1: on record ever for the energy sector. Interestingly, gold which
• 23:17
  Speaker 1: did gain when we were waiting for the five years old,
• 23:20
  Speaker 1: is way down now at below an eighteen hundred and
• 23:26
  Speaker 1: eighty dollars and ounce right there. Right. So I was
• 23:29
  Speaker 1: speaking with a strategist over at Manned Solutions yesterday who
• 23:33
  Speaker 1: works in their multi asset solutions group, and I was
• 23:35
  Speaker 1: asking him about gold because it has been a little
• 23:38
  Speaker 1: bit wonky lately, considering the fact that earlier in the
• 23:42
  Speaker 1: year the story was that gold was acting as a
• 23:45
  Speaker 1: hedge against inflation. Well, what happened earlier this week? It
• 23:49
  Speaker 1: was that we got the positive vaccine news, the reflation
• 23:52
  Speaker 1: trade took hold, We saw yields rise, we saw inflation
• 23:54
  Speaker 1: expectations rise, yet gold moved lower, So it wasn't necessarily
• 23:59
  Speaker 1: acting as that inflation hedge. It was acting as the opposite.
• 24:03
  Speaker 1: And he said, gold has an interesting one, and it's
• 24:05
  Speaker 1: been really difficult when you look at cross asset correlations
• 24:09
  Speaker 1: this year, gold has been correlated to both bonds and
• 24:12
  Speaker 1: stocks in different ways and at different times. So really
• 24:15
  Speaker 1: nailing down the gold trade, uh is a hard one
• 24:19
  Speaker 1: over the short term because it still acts as a
• 24:21
  Speaker 1: short term hedge against inflation, but also it's a safe
• 24:25
  Speaker 1: haven asset, so those are two different stories. The inflation
• 24:28
  Speaker 1: bed is a positive one, one of growth, one of reflation,
• 24:32
  Speaker 1: Whereas if you are looking for a safe haven and gold,
• 24:34
  Speaker 1: that's not necessarily the same story. So interesting takes on
• 24:38
  Speaker 1: gold there and investors are saying it's it's kind of
• 24:41
  Speaker 1: been a difficult one to play as of light real quick.
• 24:44
  Speaker 1: What will you be working on today? Sarah working on today?
• 24:48
  Speaker 1: So I'm actually working on a story about retail investors.
• 24:50
  Speaker 1: It will be for the weekend, so keep an eye
• 24:52
  Speaker 1: on it. Basically, the moral of the story is have
• 24:55
  Speaker 1: retail investor has been lucky this year? Or are they skillful? Wow?
• 25:00
  Speaker 1: Are a great story account? Wait to read your conclusions
• 25:02
  Speaker 1: and the conclusions of those who speak to that is
• 25:04
  Speaker 1: Sarah Ponza, chief costs asset reporter here at Bloomberg, and
• 25:09
  Speaker 1: she's chief cause as a reporter in the studio anyway,
• 25:11
  Speaker 1: and she'll be acted us later on what are you
• 25:16
  Speaker 1: supposed to do with these markets? One day of one
• 25:18
  Speaker 1: day down, vaccine news sending markets higher, and then market
• 25:22
  Speaker 1: sort of getting a dose of reality the next day.
• 25:24
  Speaker 1: Hans Olsen is chief investment officer for Fiduciary Trust in
• 25:27
  Speaker 1: Boston and joins US now with hopefully some advice. Hans
• 25:30
  Speaker 1: thanks for joining. What are we supposed to make of
• 25:33
  Speaker 1: these markets and whether they're correctly priced and what exactly
• 25:37
  Speaker 1: is priced in Yeah, yeah, good morning, Vanni. I think
• 25:40
  Speaker 1: we're what we're seeing is sort of the the inevitable
• 25:43
  Speaker 1: churn after a very nice move over the last month,
• 25:47
  Speaker 1: and I think you have to step back in and
• 25:49
  Speaker 1: first look at the path of the economy, and then
• 25:52
  Speaker 1: from there then you can adjust your portfolio accordingly. From
• 25:57
  Speaker 1: that perspective, our base case continue used to be that
• 26:00
  Speaker 1: we're going to see a W shaped type of recovery.
• 26:03
  Speaker 1: So we've seen the first V and that was pretty pronounced,
• 26:07
  Speaker 1: and we are in the beginning stages of I think
• 26:09
  Speaker 1: what the second V. And the question is whether it
• 26:13
  Speaker 1: will be severe or not. I don't tend to think so,
• 26:16
  Speaker 1: but it was certainly is going to be impacted by
• 26:18
  Speaker 1: the winter wave of COVID infections and then of course
• 26:21
  Speaker 1: that next round of stimulus that we've all been waiting for.
• 26:24
  Speaker 1: Uh and and once we start to see that, I
• 26:27
  Speaker 1: think markets can stage a more convincing rally. From here,
• 26:32
  Speaker 1: without a doubt, markets appear to be pricing a recovery.
• 26:36
  Speaker 1: You're seeing it in the broadening and the deepening of stocks.
• 26:39
  Speaker 1: You're seeing it in the shape of the yield curve
• 26:41
  Speaker 1: and indeed even in the in the price action or
• 26:44
  Speaker 1: the yield of the yield on the ten year treasury. UM.
• 26:47
  Speaker 1: All are very encouraging signs, UM. But it's still a
• 26:50
  Speaker 1: bit early. How can you have a recovery with the
• 26:53
  Speaker 1: six point unemployment rate? Well, you know, that's that's the thing, right,
• 26:57
  Speaker 1: I mean, it's where it's coming down from, and we
• 27:00
  Speaker 1: would hopefully continue to see unemployment fall. The numbers that
• 27:04
  Speaker 1: we had this morning are encouraging, UM. But we're not
• 27:07
  Speaker 1: there yet, and you know, by all accounts, we're probably
• 27:10
  Speaker 1: another year away from um, you know, getting to where
• 27:14
  Speaker 1: we would really like to be in all of this.
• 27:15
  Speaker 1: And again it's all going to be depended upon do
• 27:18
  Speaker 1: we get a vaccine, is it distributed at scale and
• 27:21
  Speaker 1: its effectiveness? Um so. And of course the companion to
• 27:25
  Speaker 1: that is, do we get another round of stimulus to
• 27:27
  Speaker 1: help the economy along until we get to resolution of
• 27:32
  Speaker 1: the pandemic? Does that come up payback time haunts for
• 27:36
  Speaker 1: all the stimulus? Well, that's the problem, right. So we
• 27:40
  Speaker 1: have spent in an enormous amount of money in the
• 27:43
  Speaker 1: service of supporting the economy during the pandemic. The budget
• 27:46
  Speaker 1: deficits has exploded. We're going to have to finance uh,
• 27:50
  Speaker 1: somewhere between another what two to three trillion dollars this year,
• 27:55
  Speaker 1: depending upon what the stimulus looks like supporting. Remember, even
• 27:59
  Speaker 1: before this happened, Vonnie, the pandemic broke out, we were
• 28:03
  Speaker 1: running a trillion dollar deficit, which is pretty unusual at
• 28:07
  Speaker 1: that point in the at the point that we were
• 28:09
  Speaker 1: in the economic cycle, when things were really quite good. Um.
• 28:13
  Speaker 1: So that does have to get financed, and the price
• 28:15
  Speaker 1: at which that gets financed remains an open question. How
• 28:18
  Speaker 1: much the Fed is going to have to buy versus
• 28:20
  Speaker 1: the price at which um, you know, the private investor
• 28:23
  Speaker 1: will buy treasury debt will will have to be seen
• 28:25
  Speaker 1: at this point. So, Hans, you know, if you have
• 28:28
  Speaker 1: been a retail investor and you decided you didn't know
• 28:30
  Speaker 1: what was going on, so we're just going to sort
• 28:31
  Speaker 1: of leave everything where it was, you probably wouldn't have
• 28:34
  Speaker 1: done too badly, right, But is that continuing to be
• 28:37
  Speaker 1: the advice from from somebody like you? Well, I think
• 28:40
  Speaker 1: I think the notion of not trying to trade an
• 28:43
  Speaker 1: election is a very good notion. Indeed, and we saw
• 28:46
  Speaker 1: that the exactly the case in this election, given all
• 28:50
  Speaker 1: the sturm and drawing around uh, the election and the
• 28:53
  Speaker 1: run up to it. Um, you know, from some clients
• 28:56
  Speaker 1: I've heard I heard from you know, one would have
• 28:59
  Speaker 1: thought that it was the end of the world, and
• 29:01
  Speaker 1: clearly it wasn't. Right. Everything is going to work out fine.
• 29:04
  Speaker 1: I think the larger question is is the market ready
• 29:07
  Speaker 1: to rotate um from the covid led stocks of the
• 29:10
  Speaker 1: last nine months or so into a broader market participation.
• 29:14
  Speaker 1: And I think the answer there is yes, We're starting
• 29:16
  Speaker 1: to see efforts at that. It's never linear, right, It
• 29:20
  Speaker 1: never happens overnight. It takes time for that that that
• 29:23
  Speaker 1: that sort of rotation wave to form. But I think
• 29:27
  Speaker 1: that's going to play out over the next four to
• 29:30
  Speaker 1: six months that we should start to see some of
• 29:33
  Speaker 1: the out of favorite names start to participate, and indeed
• 29:36
  Speaker 1: we might even see some of the you know, the
• 29:39
  Speaker 1: terrible laggards in the international markets finally begin to perk up.
• 29:44
  Speaker 1: So I'm cautiously optimistic on that is still the way
• 29:49
  Speaker 1: to go. Yeah, that's that's going to be the sixty
• 29:55
  Speaker 1: four million dollar question, right, Um, I think it is
• 29:59
  Speaker 1: of evolving. Yes for for the most part, but I
• 30:03
  Speaker 1: think in order to maintain um uh, you're spending power,
• 30:08
  Speaker 1: you're going to have to spend total return, which is
• 30:09
  Speaker 1: going to force fawnie, I think higher portfolio turnover than
• 30:14
  Speaker 1: it has in the past, which is which is going
• 30:16
  Speaker 1: to be a bit of a mindset on the part
• 30:18
  Speaker 1: of some investors. So yes for now, but um with
• 30:23
  Speaker 1: the qualifications that you're going to have to realize some
• 30:26
  Speaker 1: of your capital appreciation in order to maintain your spending power.
• 30:29
  Speaker 1: So if you are going to stay sixty forty, be
• 30:31
  Speaker 1: a little bit more active than you might normally be exactly,
• 30:34
  Speaker 1: and with the way you get that forty and how
• 30:36
  Speaker 1: you invest that forty is going to be very different
• 30:38
  Speaker 1: than the way you've done in the past. So you know,
• 30:40
  Speaker 1: whether it's mortgages, credit, different types of credit and the like.
• 30:44
  Speaker 1: It can no longer be simply sovereign debt or munies. Finally, Hans,
• 30:48
  Speaker 1: and briefly, are you invested or would you? I mean
• 30:51
  Speaker 1: your finishing we trust, So you're invested everywhere, I guess,
• 30:53
  Speaker 1: But how much outside the US would you be looking? Yeah, well,
• 30:57
  Speaker 1: we've been underweight the US of our equity expos're we're
• 31:00
  Speaker 1: probably about thirty of that right now outside the US.
• 31:05
  Speaker 1: I would love an opportunity to to bring some of
• 31:07
  Speaker 1: that money abroad again, um, but not quite yet. That
• 31:13
  Speaker 1: is fascinating. That is a good chunk of the portfolio. Hans.
• 31:15
  Speaker 1: We'll have to get you back soon to talk about
• 31:17
  Speaker 1: what exactly is in their Hans Olsen is chief investment
• 31:21
  Speaker 1: officer for Fiduciary Trust in Boston, and we appreciate his
• 31:24
  Speaker 1: time today. Some sage advice there, and of course everybody
• 31:28
  Speaker 1: doing their best to try to figure out what is
• 31:30
  Speaker 1: exactly going on in the world and how long it's
• 31:32
  Speaker 1: going to continue on for Thanks for listening to Bloomberg
• 31:36
  Speaker 1: Markets podcast. You can subscribe and listen to interviews at
• 31:39
  Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Bonnie Quinn.
• 31:44
  Speaker 1: I'm on Twitter at Bonnie Quinn, and I'm Paul Sweeney.
• 31:47
  Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you
• 31:49
  Speaker 1: can always catch us worldwide at Bloomberg Radio.