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A Check On Commodities, Markets, The Economy · 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. Every business day, we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
• 0:11
  Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. So, Matt, I've got
• 0:21
  Speaker 1: the one year chart for gold up on my Bloomberg
• 0:25
  Speaker 1: termo here and about a year ago a u x
• 0:27
  Speaker 1: AU currency x au absolutely uh, kind of started the
• 0:31
  Speaker 1: year around nineteen fifty announced and here we are down
• 0:34
  Speaker 1: just below eighteen hundred dollars announced, so you know a
• 0:37
  Speaker 1: little bit, you know, not really showing its performance there
• 0:41
  Speaker 1: and kind of wondering kind of what the sentiment is
• 0:43
  Speaker 1: out there for gold. Let's bring in Everett Milman, Precious
• 0:46
  Speaker 1: Metal Specialists for Gainesville Coins based in Gainesville, Florida. So Gainesville,
• 0:52
  Speaker 1: Florida is University of Florida, that's right in Florida state
• 0:56
  Speaker 1: is in Gallas, Tallahassee. Okay, I got it, um, Everett,
• 0:59
  Speaker 1: they switch for joining us here. What is the sentiment
• 1:02
  Speaker 1: for gold out there right now? I think we have
• 1:07
  Speaker 1: to admit that the sentiment in the gold market has
• 1:10
  Speaker 1: been fairly poor of late UM, and we've seen gold
• 1:13
  Speaker 1: function more as a fear and sentiment trade rather than
• 1:18
  Speaker 1: a truly reliable inflation hedge. As the prices are down
• 1:22
  Speaker 1: quite a bit ear date, and in that sense, we
• 1:24
  Speaker 1: can look at the gold price as a pretty good
• 1:27
  Speaker 1: gauge of of risk appetite UM. Gold has been sensitive
• 1:30
  Speaker 1: to recent economic data, so we saw a big rally
• 1:34
  Speaker 1: on the mists and last month's non farm payrolls, and
• 1:37
  Speaker 1: yet UM earlier this morning, with the surprise of the
• 1:40
  Speaker 1: upside and the Empire State manufacturing survey, we saw gold
• 1:44
  Speaker 1: pull back. So I think it's fair to say that
• 1:48
  Speaker 1: the gold market really has ignored some of the major
• 1:51
  Speaker 1: macro drivers like US China relations and the levels of
• 1:55
  Speaker 1: global debt that normally have an impact on price. Those
• 1:58
  Speaker 1: are really faded into the background during the third quarter,
• 2:02
  Speaker 1: and so long as risk appetite remains healthy, inequity markets UM.
• 2:07
  Speaker 1: I don't think big funds and retail investors will want
• 2:10
  Speaker 1: to incur the opportunity cost of holding a nonproductive asset
• 2:14
  Speaker 1: like gold. If economies are on the world do indeed
• 2:16
  Speaker 1: recover relatively smoothly, and that makes sense, you know. Otherwise, Ever,
• 2:21
  Speaker 1: if you look at UM rates this low, coupled with
• 2:27
  Speaker 1: trillions and trillions and trillions of dollars of spending, a
• 2:30
  Speaker 1: FED balance sheet doubling, and in the course of eighteen months,
• 2:34
  Speaker 1: you would think that gold just flies on that, right,
• 2:38
  Speaker 1: you would, You would um. Certainly the case of low
• 2:41
  Speaker 1: interest rates for longer is a positive narrative for gold um.
• 2:45
  Speaker 1: But it does seem that the broader markets have a
• 2:47
  Speaker 1: conviction that the FED will be successful and threading the
• 2:51
  Speaker 1: needle and nailing the goldilocks timing between UH tapering and
• 2:57
  Speaker 1: raising rates not too soon or not too late eights
• 3:00
  Speaker 1: UM and expecting the Federal Reserve to do so amid
• 3:04
  Speaker 1: the unprecedented economic shock of a global pandemic. That does
• 3:08
  Speaker 1: seem to be expecting a lot. But as we've seen
• 3:12
  Speaker 1: with gold not taking off and setting new highs, that
• 3:15
  Speaker 1: does seem to be. The expectation is that the FED
• 3:18
  Speaker 1: will navigate a soft landing of the situation and rates
• 3:23
  Speaker 1: will normalize, bond purchases will be tapered smoothly, and that
• 3:27
  Speaker 1: will make it out of this without a scratch. But
• 3:30
  Speaker 1: gold is always there, as that fear gage. As I
• 3:34
  Speaker 1: mentioned that if all of that doesn't go according to plan,
• 3:37
  Speaker 1: UM holding some gold does function as an insurance policy.
• 3:42
  Speaker 1: So every I'm also looking at, you know, other precious
• 3:44
  Speaker 1: metals like platinum and palladium, and they're down kind of
• 3:48
  Speaker 1: you know, thirteen fourteen, fifteen, sixteen percent year to date.
• 3:52
  Speaker 1: Is that is that simply a reflection of they're not
• 3:54
  Speaker 1: making as many cars because of all the various chip
• 3:57
  Speaker 1: shortages and whatnot. Yes, UM, we finally have seen prices
• 4:02
  Speaker 1: for used cars and rental cars cool off, and there
• 4:06
  Speaker 1: are some encouraging signs that micro chip manufacturers maybe on
• 4:10
  Speaker 1: the cusp of catching up with demand UM, but the
• 4:14
  Speaker 1: production stalls with the semiconductor shortage. That really was one
• 4:18
  Speaker 1: of the main reasons that we saw palladium and platinum
• 4:21
  Speaker 1: prices searched so high. UM. Now, with a potential surplus
• 4:26
  Speaker 1: in palladium later this year, UM, we are seeing that
• 4:30
  Speaker 1: swift pullback. UM. Palladium is looking to break a streak
• 4:34
  Speaker 1: of six consecutive trading days in the red UM, but
• 4:37
  Speaker 1: it's about thirty off its peak. UM really is all
• 4:42
  Speaker 1: dependent on automobile demand and the fact that that is
• 4:45
  Speaker 1: perhaps waning UM is weighing very heavily on those two metals. Well,
• 4:49
  Speaker 1: you know, I was just at the Munich Auto Show, Everett,
• 4:51
  Speaker 1: and it seemed to me when I was there as
• 4:54
  Speaker 1: if the CEOs various CEOs were jockeying for position when
• 4:58
  Speaker 1: it came to locking own supply of the materials necessary
• 5:03
  Speaker 1: for e vs for building electric vehicles. What what do
• 5:06
  Speaker 1: you think which commodities have the best are the most
• 5:08
  Speaker 1: room to run in terms of EV production. So it
• 5:12
  Speaker 1: is true that electric vehicles would perhaps uh put some
• 5:16
  Speaker 1: damper on demand for platinum and palladium in catalytic converters.
• 5:20
  Speaker 1: So really the commodities are metals that stand to benefit
• 5:24
  Speaker 1: the most from that trend towards e vs would be
• 5:27
  Speaker 1: copper and silver. UM. The average electric vehicle uses even
• 5:31
  Speaker 1: more copper than our combustion engine or normal UM automobiles. UM,
• 5:37
  Speaker 1: and silver plays an especially important role in that UM.
• 5:40
  Speaker 1: It's the long term uses for silver in industry UM,
• 5:44
  Speaker 1: particularly in the green economy, are rather bullish. UM. I
• 5:47
  Speaker 1: think the one thing standing in the way with that
• 5:49
  Speaker 1: really are trade relations between the U S and China
• 5:52
  Speaker 1: and whether those medals will be able to get to
• 5:55
  Speaker 1: market UM. To see ev production expand. But but silver
• 6:00
  Speaker 1: really is well positioned to benefit from that if we
• 6:02
  Speaker 1: do indeed see a pretty rapid rise in adoption of
• 6:05
  Speaker 1: electric vehicles. Alright, just sconds Everett. What's the best metal?
• 6:09
  Speaker 1: Long here? From your perspective over the next six twelve months,
• 6:13
  Speaker 1: I still think silver is the best of the bunch.
• 6:16
  Speaker 1: We have seen lag gold and perhaps UM the gold
• 6:19
  Speaker 1: market has absorbed most of its gains that we're going
• 6:22
  Speaker 1: to see one. I think silver still has more room
• 6:25
  Speaker 1: to run and figures very prominently in that UM future
• 6:29
  Speaker 1: of green energy usage. Everett. Always great to get your take.
• 6:33
  Speaker 1: Thanks so much for joining us on the program, Everett Millman,
• 6:37
  Speaker 1: um there he comes to us to talk about precious
• 6:41
  Speaker 1: metals as well as sometimes crypto. We didn't hit crypto today,
• 6:45
  Speaker 1: but from Gainesville Coins. Always great to get his inside.
• 6:48
  Speaker 1: This is Bloomberg. Let's bring in Christina Hooper. She is
• 6:56
  Speaker 1: chief global market strategist at Investco. They have more than
• 7:00
  Speaker 1: one point for trillion dollars in assets under management, and
• 7:03
  Speaker 1: she joins us out of Atlanta. Christine, I'd love to
• 7:06
  Speaker 1: get your take first off on the US economy after
• 7:09
  Speaker 1: we got that um more subdued inflation data yesterday. UM,
• 7:15
  Speaker 1: how does it look to you in terms of growth
• 7:17
  Speaker 1: and prices? Well, the more subdued inflation data really wasn't
• 7:23
  Speaker 1: that impactful in a positive sense because we had gotten
• 7:27
  Speaker 1: a p p I number UM that suggested we have
• 7:31
  Speaker 1: more inflation to come. We're seeing factory gate numbers China
• 7:35
  Speaker 1: factory gate numbers that are high. So UM, the big
• 7:38
  Speaker 1: increase in inflation is not over. But I still have
• 7:42
  Speaker 1: to stress that I believe it is temporary. It's just
• 7:45
  Speaker 1: not as temporary as some would like to have it UM.
• 7:49
  Speaker 1: So all in all, the US economy is and I
• 7:52
  Speaker 1: believe good shape UM. And I don't think that what
• 7:56
  Speaker 1: we're seeing in terms of of UM good initial jobless
• 8:01
  Speaker 1: claims UM is going to stop UM is going to
• 8:06
  Speaker 1: have any kind of impact on the set. I don't
• 8:08
  Speaker 1: think the weak jobs report is going to have an
• 8:10
  Speaker 1: impact on the set. I think they're going to stick
• 8:12
  Speaker 1: with their timeline and announce the tapering the start of
• 8:15
  Speaker 1: tapering UM next next week, and hopefully commence it soon
• 8:19
  Speaker 1: after that. All right, So Christina, given that backdrop here, UM,
• 8:24
  Speaker 1: you know, Matt and I were just chatting with with
• 8:26
  Speaker 1: a guest who was suggesting that who was actually buying
• 8:29
  Speaker 1: cyclical stocks here in in recent weeks. How do you
• 8:33
  Speaker 1: think about kind of the equity markets here given your
• 8:35
  Speaker 1: economic outlook, you know, kind of cyclical stocks, maybe some
• 8:39
  Speaker 1: small cap stocks versus uh, some of the you know,
• 8:42
  Speaker 1: tried and true growth names. That is the sixty four
• 8:46
  Speaker 1: tho dollar question. What I think we will see is
• 8:50
  Speaker 1: out performance by cyclicles in the next several months, but
• 8:54
  Speaker 1: it's going to be narrow out performance because UM, we
• 8:58
  Speaker 1: certainly have seen a very strong growthsburg UM. We're likely
• 9:03
  Speaker 1: to see more strength in the economy this fall UM,
• 9:06
  Speaker 1: but at a certain point that growth is going to
• 9:09
  Speaker 1: moderate again, and so I would suspect that in advance
• 9:13
  Speaker 1: of that UM markets will start to UM favor defensive
• 9:19
  Speaker 1: secular growth UM. So, so in the shorter term, I
• 9:22
  Speaker 1: think value encyclicals win not every day, UM, but but
• 9:26
  Speaker 1: most days. I think there will be narrow out performance.
• 9:29
  Speaker 1: And then at a certain point UM we're likely to
• 9:32
  Speaker 1: see a shift UM with with UM more inclusive performance
• 9:37
  Speaker 1: or in fact, at a certain point, defensive and secular
• 9:40
  Speaker 1: growth outperforming. What do you looking for in terms of
• 9:47
  Speaker 1: you know, the monetary side has been so important to
• 9:49
  Speaker 1: investing until recently, not that it isn't anymore. But the
• 9:54
  Speaker 1: fiscal side now is so key. And yet I hear
• 9:57
  Speaker 1: so many investors saying, you know, their strategy doesn't depend
• 10:01
  Speaker 1: on an infrastructure package or lack thereof. Well, I think
• 10:06
  Speaker 1: we have to draw a distinction. I believe fiscal policy
• 10:11
  Speaker 1: matters so much from main street for the economy, but
• 10:14
  Speaker 1: in terms of markets, monetary policy, in my view, matters
• 10:18
  Speaker 1: more so. The fact that we have an extremely accommodative
• 10:21
  Speaker 1: set that even when tapering starts, the SAID will still
• 10:24
  Speaker 1: be adding to its balance sheet is very positive for stocks. Yes,
• 10:29
  Speaker 1: of course fiscal policy plays a role, but I think
• 10:32
  Speaker 1: monetary policy plays an outsized role. UM. Now, of course,
• 10:38
  Speaker 1: if we have all kinds of fiscal stimulus UM taken away,
• 10:43
  Speaker 1: that can provide some hiccups. Just like UM, the lack
• 10:47
  Speaker 1: of an infrastructure package might cause concern among investors, but
• 10:51
  Speaker 1: I think it is not UM. It's it's misplaced because
• 10:55
  Speaker 1: UM infrastructure spending would occur over time anyway. UM tends
• 11:00
  Speaker 1: to be something that that happens over year over year
• 11:03
  Speaker 1: over year. It's not like giving a one time stimulus
• 11:07
  Speaker 1: payment or multiple stimulus payments that go into people's bank accounts.
• 11:12
  Speaker 1: So I think infrastructure spending is important for other reasons.
• 11:15
  Speaker 1: I think of it as government capex, UM, but it
• 11:18
  Speaker 1: shouldn't have I don't think we should think of it
• 11:21
  Speaker 1: as primarily fiscal stimulus that would have an immediate impact
• 11:25
  Speaker 1: like other forms of of fiscal spending would. Christina, what
• 11:30
  Speaker 1: are you and the portfolio managers at Investo looking at
• 11:33
  Speaker 1: really over the next several months and quarters in terms
• 11:36
  Speaker 1: of kind of where these markets are going to go?
• 11:38
  Speaker 1: Is is it simply the pandemic, the virus or there
• 11:42
  Speaker 1: other things? Well, Um, there are a few different factors
• 11:46
  Speaker 1: at play. I would say, um that that first and foremost, UM,
• 11:51
  Speaker 1: I think you know, the outlook is positive for the
• 11:56
  Speaker 1: economy and markets, but there are some tail risks that
• 12:01
  Speaker 1: we have to be aware of, even if they're low probability,
• 12:03
  Speaker 1: because they could have a significant impact. UM. The first,
• 12:06
  Speaker 1: of course is the resurgence of the pandemic. But when
• 12:09
  Speaker 1: I say that, I mean a COVID nineteen variant that
• 12:13
  Speaker 1: is not protected against by existing vaccines, and we haven't
• 12:17
  Speaker 1: seen that yet. UM, But that to me would be
• 12:20
  Speaker 1: a worth case scenario. I don't think it would plunge
• 12:22
  Speaker 1: us into a deep recession like it did in the
• 12:24
  Speaker 1: spring of because we've learned how to adapt, but it
• 12:27
  Speaker 1: would be a real, real problem. UM. And then, of course,
• 12:29
  Speaker 1: the other tail risk scenario is the FED policy error.
• 12:33
  Speaker 1: I'm getting too aggressive because they're concerned about inflation. I
• 12:36
  Speaker 1: don't see either one happening. UM. I think the Fed
• 12:39
  Speaker 1: is is UM has taking a very measured and thoughtful approach. Christina,
• 12:44
  Speaker 1: thank you so much again for joining us. We really
• 12:46
  Speaker 1: appreciate you taking the time. Christina Hooper, chief market strategists
• 12:50
  Speaker 1: globally for Investco, love getting her thoughts on the economy
• 12:54
  Speaker 1: and on these financial markets. All right, let's talk about
• 12:59
  Speaker 1: this market here. We've had some folks talking about maybe
• 13:03
  Speaker 1: rotating into more cyclical names, perhaps, you know, sensing perhaps
• 13:07
  Speaker 1: a reopening trade that's certainly worked well at times since
• 13:11
  Speaker 1: this pandemic began. What's happening, Yeah, exactly. Let's uh check
• 13:17
  Speaker 1: in with Chance Fanuka and he's chief investment officer at
• 13:19
  Speaker 1: Oxbow Advisors based in I guess he's in Austin, Texas today.
• 13:23
  Speaker 1: We're mad. I think they have a small college or
• 13:25
  Speaker 1: university there or something. I'm not sure. Maybe play a
• 13:27
  Speaker 1: little football. So Chance, thanks so much for joining us.
• 13:29
  Speaker 1: Here talk to us about cyclical stocks and and maybe
• 13:33
  Speaker 1: how they feature in what you guys are doing today
• 13:36
  Speaker 1: at Oxbow Advisors. Sure, thanks, Paul and Matt. So what
• 13:41
  Speaker 1: we've noticed is if you're looking to add defensives or
• 13:44
  Speaker 1: growth stocks into your portfolio this year, the time to
• 13:47
  Speaker 1: do that was really in the first quarter. You saw
• 13:49
  Speaker 1: some good valuations back in March especially, but some of
• 13:52
  Speaker 1: those defensive stocks have really taken off in the last
• 13:55
  Speaker 1: six months. For instance, American Tower and Costco both appreciated
• 13:59
  Speaker 1: by fifty scent. Yeah, they're there. So what we've noticed
• 14:05
  Speaker 1: is even though the markets making record highs here in
• 14:08
  Speaker 1: recent months, last month, the average stock in the SMPRED
• 14:12
  Speaker 1: was down si from its fifty two week highs, and
• 14:15
  Speaker 1: a lot of that was coming from cyclical and value sectors.
• 14:18
  Speaker 1: As interest rates came down and the delta variants started
• 14:22
  Speaker 1: to spread around the world, and we thought that would
• 14:24
  Speaker 1: be a good time to start moving a little bit
• 14:26
  Speaker 1: more of our portfolio towards cyclicals. And the three names
• 14:30
  Speaker 1: that we came up with that we added to our
• 14:31
  Speaker 1: client's equity portfolios last month where Salesforce Booking Holdings in Berkshire,
• 14:36
  Speaker 1: Hathaway and so these aren't necessarily the kind of cyclicals
• 14:41
  Speaker 1: I would think of. At least two of them are
• 14:43
  Speaker 1: really techy, right salesforce I would considered techy. Booking is
• 14:49
  Speaker 1: one that I would think as more of a pure
• 14:52
  Speaker 1: consumer discretionary. If you've been following the online travel agencies Booking, Expedia,
• 14:58
  Speaker 1: and Airbnb, along with the hotels, they've all been moving
• 15:02
  Speaker 1: together through this pandemic. As you talked about the re
• 15:05
  Speaker 1: reopening happening, and I think as there were concerns about
• 15:09
  Speaker 1: the delta variant picking up in recent months, you saw
• 15:11
  Speaker 1: those companies shares sell off and this is the one
• 15:15
  Speaker 1: that we think is the highest quality right now, and
• 15:17
  Speaker 1: felt it was a good time to add to the portfolio.
• 15:19
  Speaker 1: So Chance and what are the When you think about bookings,
• 15:21
  Speaker 1: Holdings obviously a big play on consumer travel. How much
• 15:25
  Speaker 1: do they depend upon business travel because that seems like
• 15:28
  Speaker 1: something that from what we're hearing, is going to be slower,
• 15:31
  Speaker 1: much slower to come back here. I don't think it's
• 15:34
  Speaker 1: as big of a concern for them as the global
• 15:37
  Speaker 1: hotels that may feature more business travelers in their network.
• 15:41
  Speaker 1: I think if you think about Booking, they actually are
• 15:43
  Speaker 1: more exposed to Europe than their peers, and they have
• 15:47
  Speaker 1: a lot of independent hotels in Europe that rely on
• 15:50
  Speaker 1: Booking dot Com in order to get guests coming in
• 15:53
  Speaker 1: on a daily basis. So I think that was part
• 15:56
  Speaker 1: of the sell off was as the delta variants spread,
• 15:58
  Speaker 1: especially in Europe. There are some concern in the short term,
• 16:01
  Speaker 1: but for us, when we take a five year outlook,
• 16:03
  Speaker 1: we would expect revenue for Booking to return to its
• 16:06
  Speaker 1: twenty nineteen levels next year and then continue to ramp
• 16:09
  Speaker 1: up to record high is going into When you think
• 16:13
  Speaker 1: about sales Force, I mean, what what drives that investment?
• 16:18
  Speaker 1: Are you? Are you seeing a lot of corporate um
• 16:22
  Speaker 1: you know, capex increases. I think for us, the way
• 16:27
  Speaker 1: we think about the software of the service companies is
• 16:30
  Speaker 1: just really wanting to play along with that secular growth trend.
• 16:34
  Speaker 1: The underlying uh markets that Salesforce operates in. Our growing
• 16:38
  Speaker 1: tend to twenty a year, which is a nice starting point.
• 16:41
  Speaker 1: And then you've got one of the few remaining large
• 16:44
  Speaker 1: tech companies is still run by its founder. If you
• 16:46
  Speaker 1: think about the really large tech businesses, there's only about
• 16:49
  Speaker 1: three left along with Facebook and Nvidia, that are really
• 16:53
  Speaker 1: really still run by a founder or co founder, and
• 16:56
  Speaker 1: so you have some of with that kind of visionary mindset,
• 17:00
  Speaker 1: uh in a strong history of making smart acquisitions. We
• 17:03
  Speaker 1: like partnering up with someone like that, especially in an
• 17:06
  Speaker 1: industry that's still growing at a double digit rate. Chance,
• 17:09
  Speaker 1: when I think about Berkshire, I'm just not sure it's
• 17:13
  Speaker 1: anything more than kind of a g d P play.
• 17:15
  Speaker 1: I'm just not sure what the catalyst is out there
• 17:17
  Speaker 1: for this name, barring you know, a monstrous acquisition. Um,
• 17:22
  Speaker 1: how do you think about that in terms of catalysts. Sure,
• 17:26
  Speaker 1: I think we viewed a little bit differently in terms
• 17:28
  Speaker 1: of how it fits into our client's portfolio. So for us,
• 17:31
  Speaker 1: we always a look into some counterbalances UH in the
• 17:34
  Speaker 1: portfolio that are going to act more defensively if we
• 17:36
  Speaker 1: get a bear market. But what we've noticed is we'd
• 17:39
  Speaker 1: rather own something like Berkshire Hathaway. They can provide that
• 17:42
  Speaker 1: sort of GDP growth plus share buybacks which have picked
• 17:45
  Speaker 1: up in the last two years, compared to owning something
• 17:48
  Speaker 1: like Johnson and Johnson and nest Lee that maybe a
• 17:51
  Speaker 1: stalwart in a defensive environment, but really are not going
• 17:54
  Speaker 1: to participate in an economic reopening like we might have
• 17:58
  Speaker 1: over the next couple of years. Are you expecting real
• 18:03
  Speaker 1: fiscal stimulus? Are you expecting the infrastructure, build the passes
• 18:06
  Speaker 1: that does that play doesn't matter not so much to us.
• 18:10
  Speaker 1: I don't think we're ever trying to get ahead of
• 18:15
  Speaker 1: any sort of political dynamics in the shorter term. If
• 18:18
  Speaker 1: they happen to benefit the companies that we do own,
• 18:20
  Speaker 1: that's terrific. But we're looking more to try and own
• 18:23
  Speaker 1: anything for five even ten years, and so usually we're
• 18:27
  Speaker 1: looking for companies that are going to benefit from more
• 18:29
  Speaker 1: structural growth trends and are less reliant on political outcomes,
• 18:32
  Speaker 1: working to their to their favor. All right, Chance, thanks
• 18:36
  Speaker 1: so much for joining us. Oh, it's great to get
• 18:38
  Speaker 1: your insight. Chance for nuke In there is a chief
• 18:41
  Speaker 1: investment officer at Oxbow Advisors talking about moving into three
• 18:46
  Speaker 1: cyclical stocks that they have um bought in August, Salesforce,
• 18:50
  Speaker 1: dot Com, Booking Holdings in Berkshire, Hathaway, really really interesting moves.
• 18:56
  Speaker 1: As we saw this, the rotation kind of peter out,
• 18:59
  Speaker 1: and now we're hearing from others including Marco Marko Kolanovitch.
• 19:03
  Speaker 1: As I said from JP Morgan that it's time for
• 19:05
  Speaker 1: the re reopening trade, get back into those cyclicals. All right,
• 19:13
  Speaker 1: So as we think about these equity markets here, we
• 19:15
  Speaker 1: know folks are thinking about re reopening of the economy,
• 19:19
  Speaker 1: if you will, and do I take on some more
• 19:20
  Speaker 1: cyclical risk or do I stick with the tried and
• 19:23
  Speaker 1: true growth stories that give me both top line and
• 19:26
  Speaker 1: bottom line and growth. Let's bring in Adam Kuhn's portfolio
• 19:30
  Speaker 1: manager and trade were Winthrop Capital. They are based in Indianapolis, Indiana.
• 19:34
  Speaker 1: Talk about the heartland there outstanding. So Adam, thanks so
• 19:38
  Speaker 1: much for joining us here. What camp do you come
• 19:40
  Speaker 1: down in here? There's a lot of folks that have
• 19:42
  Speaker 1: done really well with kind of that reopening trade. Where
• 19:45
  Speaker 1: where are you guys thinking right now? Yeah? For something's
• 19:48
  Speaker 1: having me? Yeah. Really, what we're looking at is from
• 19:52
  Speaker 1: a top down approach is where is the economy heading?
• 19:55
  Speaker 1: And we're seeing a lot of signs of the slowdown
• 19:59
  Speaker 1: And um, you're gonna start to hear this word throwing
• 20:01
  Speaker 1: around quite a bit, but it absolutely looks like we're
• 20:04
  Speaker 1: seeing signs of stagflation where inflation is remaining high, yet
• 20:08
  Speaker 1: growth is beginning to slow and in some pockets dramatically.
• 20:13
  Speaker 1: And because of that, we are pulling back on the
• 20:16
  Speaker 1: you know, reflation COVID affected industry trade and moving back
• 20:21
  Speaker 1: towards the more tried and true names like Apple, Microsoft,
• 20:26
  Speaker 1: and Alphabet that you know, just have great cash flow,
• 20:31
  Speaker 1: a great business model that can sustain through you know,
• 20:34
  Speaker 1: a lot of volatility and economic headplines. The second time
• 20:38
  Speaker 1: I've heard someone talk about stagflation this week. Um, even
• 20:43
  Speaker 1: though we got a more subdued inflation number and the
• 20:47
  Speaker 1: last UH data release, are you the growth slowdown is
• 20:53
  Speaker 1: what is? What is? What? It looks scary to me?
• 20:54
  Speaker 1: Are you concerned that the growth slowdown we're seeing in
• 20:57
  Speaker 1: the third quarter is going to continue on? Yeah? So,
• 21:00
  Speaker 1: you know, while we did get a slow down in inflation,
• 21:04
  Speaker 1: if you look at UH average hourly earnings, they're still
• 21:08
  Speaker 1: above four percent. So if you're paying employees more and
• 21:12
  Speaker 1: you're still seeing a lot of jobs that are unfilled
• 21:15
  Speaker 1: total job openings, is that a record high? Um? So,
• 21:18
  Speaker 1: I think you're gonna see employees continue to be paid
• 21:21
  Speaker 1: quite a bit. So you're gonna see savings rates continue
• 21:24
  Speaker 1: to be high, and effectively, if they can spend the money,
• 21:28
  Speaker 1: they will, and that's going to keep inflation higher in
• 21:32
  Speaker 1: the short term. Um. But the problem is that that
• 21:35
  Speaker 1: where can they spend their money? And we're seeing supply
• 21:38
  Speaker 1: chain issues continue uh to pick up, and frankly, there's
• 21:44
  Speaker 1: just not a lot that consumers can spend the money
• 21:48
  Speaker 1: on um outside of just the traditional things that they buy.
• 21:51
  Speaker 1: So heading into the holiday season, it might not be
• 21:54
  Speaker 1: a story of what can consumers buy and it's what
• 21:58
  Speaker 1: what is it actually a bailable So I think what
• 22:01
  Speaker 1: we're going to see is this kind of dislocation of
• 22:03
  Speaker 1: what consumers are have the ability to buy from a
• 22:06
  Speaker 1: from a financial standpoint, and what they can physically go
• 22:09
  Speaker 1: and find in the store or online. And so I
• 22:11
  Speaker 1: think that's gonna be a reduction to growth and I
• 22:15
  Speaker 1: think that's why we're going to see the fourth quarter
• 22:16
  Speaker 1: be quite a bit slower than what we're expecting. All Right,
• 22:20
  Speaker 1: So if you're focusing on some of the higher growth,
• 22:22
  Speaker 1: you know, perhaps to the technology sector, talk to us
• 22:25
  Speaker 1: about valuation here because that's always a challenge for people
• 22:29
  Speaker 1: in that space. But what is your view of valuation
• 22:32
  Speaker 1: as you take a look at some of these uh,
• 22:34
  Speaker 1: fast growing tech names. Yeah, so we're careful not to
• 22:38
  Speaker 1: throw around, uh you know, this time is different anything
• 22:41
  Speaker 1: like that. Evaluation since then the day absolutely matters, but
• 22:44
  Speaker 1: low interest rates do help the case for higher multiples.
• 22:50
  Speaker 1: So we generally think that a lot of these technology
• 22:53
  Speaker 1: stocks that I just mentioned earlier are fairly valued. We
• 22:56
  Speaker 1: would not call them over valued in in any way.
• 22:59
  Speaker 1: When you get the growth potential in the way that
• 23:02
  Speaker 1: they're able to monetize just different businesses, we think that
• 23:06
  Speaker 1: these valuations do make sense, So that's why we're still
• 23:08
  Speaker 1: investing in them. But what we're doing is when we're
• 23:11
  Speaker 1: looking for value is we've begun to add to Chinese
• 23:15
  Speaker 1: technology companies, So companies like Buy Do, ten Cent, Ali Baba.
• 23:20
  Speaker 1: You know, they've been in the headlines recently, and obviously
• 23:23
  Speaker 1: these are stocks that have been beaten down quite a bit,
• 23:27
  Speaker 1: and for good reason with increased regulation out of China.
• 23:29
  Speaker 1: But we think right here in this spot that that
• 23:32
  Speaker 1: the valuations for those companies actually look attractive. So using
• 23:35
  Speaker 1: those alongside the traditional US counterparts we think makes sense
• 23:39
  Speaker 1: going forward. What UM industry groups do you like or
• 23:46
  Speaker 1: where do you see the most value out there that
• 23:48
  Speaker 1: that maybe is underpriced. So I'll reiterate Chinese technology absolutely
• 23:56
  Speaker 1: the place where we think that that stocks are underpriced
• 24:00
  Speaker 1: outside of that not a lot. We think that the
• 24:03
  Speaker 1: market generally speaking is fairly valued to overvalued. When you
• 24:07
  Speaker 1: look at financials and energy, we would argue those are
• 24:11
  Speaker 1: are grossly overvalued giving the prospects for for growth going forward. UM,
• 24:16
  Speaker 1: So it's more of a play of moving towards defense
• 24:20
  Speaker 1: when there's not a lot of investment opportunities, and that's
• 24:22
  Speaker 1: what we're doing across our portfolios is broadly speaking, moving
• 24:26
  Speaker 1: up in quality, moving more defensive, just kind of weather
• 24:29
  Speaker 1: this growth storm. All right, great to get your take.
• 24:34
  Speaker 1: Thanks so much, Um for joining us talking. They're about
• 24:39
  Speaker 1: what's going on in these markets from the perspective of
• 24:43
  Speaker 1: a trader. Adam Coon's there from Winthrop Capital Management. Thanks
• 24:47
  Speaker 1: for listening to the Bloomberg Markets podcast. You can subscribe
• 24:51
  Speaker 1: and listen to interviews with Apple Podcasts or whatever podcast
• 24:55
  Speaker 1: platform you prefer. I'm Matt Miller. I'm on Twitter at
• 24:58
  Speaker 1: Matt Miller nineteen seven twenty three and on false Sweeney
• 25:01
  Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you
• 25:04
  Speaker 1: can always catch us worldwide at Bloomberg Radio.