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A Closer Look At Markets, Focus On The Fed · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
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Speaker 1: my co host Matt Miller. Every business day we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. Let's bring in Tom
0:22
Speaker 1: string Fellow, chief investment strategist for Argent Trust Company. Tom,
0:25
Speaker 1: what do you make of this market this week? It
0:28
Speaker 1: feels it looks like a by the dip? Should we
0:30
Speaker 1: read anything more into that? I think she was headed
0:33
Speaker 1: right there. And you know, just going back and looking
0:36
Speaker 1: at what's happening in last oh year or so, since
0:39
Speaker 1: about this time last year, buying the dip, it made
0:42
Speaker 1: a lot of sense. You know, the market dropped down
0:44
Speaker 1: about the fifty day moving average and you'd see support
0:47
Speaker 1: coming right in and then all of a sudden, you know,
0:50
Speaker 1: we started hearing about a contagion, uh that you know,
0:53
Speaker 1: for many it seemed to come out of nowhere. You know,
0:55
Speaker 1: that really started look hitting the markets on Monday and
1:00
Speaker 1: the question of buying the dip of you know, people
1:03
Speaker 1: started you know, scratching their head. But you know today
1:06
Speaker 1: it looks like it might be another reversal and and uh,
1:10
Speaker 1: you know, I'll say by the dip until it's proven otherwise.
1:14
Speaker 1: And right now, I'd say markets are kind of excited
1:18
Speaker 1: about you know, it's kind of a stealth day for investors,
1:21
Speaker 1: but it's a pretty big day for the markets. We
1:24
Speaker 1: have had a number of um, big market commentators come
1:29
Speaker 1: out and say this dip could be could get bigger.
1:33
Speaker 1: Scott Minored, for example, was telling me yesterday from Guggenheim
1:36
Speaker 1: he thinks we could go down ten maybe. And that
1:40
Speaker 1: isn't dramatic compared to what we've heard from a lot
1:43
Speaker 1: of the big banks on Wall Street. So what what
1:46
Speaker 1: what do you think a correction will look like here? Yeah,
1:50
Speaker 1: corrections are inevitable, you know, we we talked about them.
1:53
Speaker 1: They're healthy for the market. It it gives investors time
1:57
Speaker 1: to kind of reassess where you knowings make sense and
2:00
Speaker 1: we're realocate But the fact is when it happens, you know,
2:03
Speaker 1: we all cringe and you know, scrambled from monitors and
2:06
Speaker 1: talk two clients. But yeah, we always talk about you know,
2:11
Speaker 1: what's normal and what's healthy is in that ten correction
2:15
Speaker 1: where you get into problems when you start realizing that
2:18
Speaker 1: ten percent on a market level of day is a
2:20
Speaker 1: little more significant than you know a few years back.
2:24
Speaker 1: Uh But I still think that you know, there's going
2:27
Speaker 1: to be something that it's going to be an outlier event.
2:31
Speaker 1: It's not going to be something expected that's going to
2:33
Speaker 1: cause market nervousness, and it's not going to be a
2:36
Speaker 1: one or two day events. You know, there will be
2:39
Speaker 1: selloffs and that will give us an opportunity to to
2:43
Speaker 1: really look at the markets. But you know, when you
2:45
Speaker 1: still look at what the underlying and support for the
2:47
Speaker 1: market is, we still have you know, strong earnings growth.
2:51
Speaker 1: It's slowing down, but you know it's certainly above trend
2:55
Speaker 1: from what we have seen over the last several years.
2:57
Speaker 1: We've still got uh fed that's giving us liquidity, which
3:02
Speaker 1: you know, we'll find out what it really means, you
3:05
Speaker 1: know in a few more hours, you know from you
3:08
Speaker 1: know what German Powell says, and you know, you know,
3:10
Speaker 1: let's just not forget that. You know, when we're sitting
3:12
Speaker 1: at rates near zero, investors are looking for places to
3:16
Speaker 1: park cash with some upside opportunities. So you know, corrections inevitable.
3:22
Speaker 1: You know, we're going to scramble and trying to understand
3:24
Speaker 1: what it means this time. But you know, I don't
3:27
Speaker 1: look for you know, that recessionary impact anytime since. All right, Tom, So,
3:33
Speaker 1: to the extent that people have what Tom Keene will
3:35
Speaker 1: call the courage to be in the market, are you
3:37
Speaker 1: more inclined on the equity side to be in kind
3:39
Speaker 1: of the cyclical maybe a reopening type scenario, or are
3:44
Speaker 1: you comfortable with what has worked for better part of
3:47
Speaker 1: a decade, the big top line growth text stories. You know,
3:50
Speaker 1: I think it's it's really is a combination both. And
3:53
Speaker 1: the reason is that, you know, when you look at
3:55
Speaker 1: what has been you know, sustainable over the last several months,
3:59
Speaker 1: you know, once we got past the pandemic clearance and
4:03
Speaker 1: we solve you know, stay at home, work at home
4:05
Speaker 1: stocks really moving. A number of those stocks still have
4:08
Speaker 1: good growth prospects and they're changing the way we work
4:11
Speaker 1: and we live and we play. Those are good quality stocks.
4:15
Speaker 1: But meanwhile, those cycnical stocks are starting to come back. Uh.
4:19
Speaker 1: Just jumping on a plane over the weekend, looked around,
4:23
Speaker 1: flights were full, airplanes are full, and lo and behold
4:26
Speaker 1: everybody's wearing masks, so there's kind of a new normal.
4:28
Speaker 1: Their cynicles are coming in. You just talked about the
4:31
Speaker 1: energy markets on a rally. I think, you know, that's
4:34
Speaker 1: really reading and the fact that economies are coming back.
4:38
Speaker 1: But it's going to be looking a little bit different
4:41
Speaker 1: now as we adjust to you know, whatever COVID variant
4:45
Speaker 1: looks like. You know, we're starting to see still manufacturing,
4:48
Speaker 1: you know, coming up to all time high, so the
4:51
Speaker 1: economies are building up to you know, what looks like
4:55
Speaker 1: traction in the economy. I think that looks a little
4:58
Speaker 1: bit different than saw a year ago, but it's going
5:01
Speaker 1: to be kind of I think a bifurcated of both
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Speaker 1: good quality growth and followed by good quality value stocks
5:08
Speaker 1: that have you know, like a growth factor in them.
5:11
Speaker 1: That's going to really explain how this economy is going
5:14
Speaker 1: to pull out and you know, start maintaining its traction
5:17
Speaker 1: that we've seen for the last several months. Tom, thanks
5:21
Speaker 1: so much for joining us. Tom string Fellow there he
5:23
Speaker 1: is chief investment strategist at Argent Trust Company, talking to
5:28
Speaker 1: us about his outlook ahead of the Federal Reserve finishing
5:32
Speaker 1: their two day meeting today and we are going to
5:34
Speaker 1: hear from Jerome Powell m a little bit later on.
5:37
Speaker 1: I guess it is. What's just about four hours from now, Well,
5:43
Speaker 1: it is FED Day, and that's a big day here
5:46
Speaker 1: at Bloomberg Television or radio. So we're gonna be all
5:49
Speaker 1: over that said on this side, it's big. It's big.
5:52
Speaker 1: It's kind of like you know, playoff day for ESPN
5:55
Speaker 1: or something. So it's a big day here. We certainly can.
5:58
Speaker 1: It comes once a month though, I know, and that's
6:00
Speaker 1: what we love about it. Once a month. All right,
6:03
Speaker 1: let's bring in an expert that kind of help us
6:05
Speaker 1: kind of preview what we might hear and see and read.
6:07
Speaker 1: Danielle di Martino, Booth CEO of Quill CEEO on Director
6:11
Speaker 1: of Intelligence for Quill Intelligence, also former advisor at the
6:15
Speaker 1: Dallas Federal Reserve, in a Bloomberg Opinion contributor. And the
6:17
Speaker 1: highlight is she's actually in the Bloomberg Interactor Broker studio today.
6:21
Speaker 1: It's great. Yes, it's so cool. And I know on
6:26
Speaker 1: Bloomberg Television, Matt Jeff Curry from Goldman Sax He's also
6:29
Speaker 1: in the Bloomberg Television studio. So people are coming out
6:32
Speaker 1: and their count coming into our offices, coming into our studios,
6:35
Speaker 1: which makes it so much better. Uh So, Danielle, great
6:37
Speaker 1: to see you give us a sense of what we
6:40
Speaker 1: should be looking for today. It feels like the tapering
6:43
Speaker 1: discussion has been so well telegraphed. What should I be
6:46
Speaker 1: looking for? It has been so well telegraphed. But on
6:50
Speaker 1: the other hand, and I'm starting I sound like an economist.
6:53
Speaker 1: But on the other hand, J. Powell's got a lot
6:56
Speaker 1: of reasons to be reticent, and I don't think that
6:58
Speaker 1: there's a great enough appreciated ation for that right now.
7:01
Speaker 1: Uh you know, in the post COVID world, we've forgotten
7:04
Speaker 1: what FED traditions are. And there are certain things that
7:08
Speaker 1: the FED does not do, regardless of where we are
7:12
Speaker 1: in economic cycles and before or after pandemics. They don't
7:16
Speaker 1: step into the in the middle of any type of
7:18
Speaker 1: political event or political morass, the debt ceiling, the budget resolution,
7:23
Speaker 1: the drama that's being played out in the Beltway. The
7:26
Speaker 1: FED does not make major policy shifts in the midst
7:30
Speaker 1: That is the tradition. And the FED also, if you
7:33
Speaker 1: look back through history, does not make big moves in
7:36
Speaker 1: the month of December. So I understand the telegraphing, the
7:40
Speaker 1: broadcasting the fact that the market is ready, the appearance
7:44
Speaker 1: that we're not going to get a taper tantrum, because
7:46
Speaker 1: if we were going to get a tape taper tantrum,
7:48
Speaker 1: we would have gotten that when J. Powell first acknowledged
7:51
Speaker 1: that the discussion had started, and that really didn't happen.
7:55
Speaker 1: But again, the flip side of it is, there are
7:57
Speaker 1: certain traditions and we're starting to see foreclosures rise. Right
8:01
Speaker 1: before I stepped into this into the studio, Cox Automotive
8:04
Speaker 1: came out with a report and said that of potential
8:08
Speaker 1: auto buyers are now going to pull back and wait
8:10
Speaker 1: because of prices, not low supply. We're hearing the same
8:14
Speaker 1: thing coming out on housing, that prices are becoming a deterrent,
8:19
Speaker 1: not just low supply. So there's a different narrative that
8:22
Speaker 1: started to emerge, and J Pal will be paying attention
8:25
Speaker 1: to that, especially as you hear one company after another
8:29
Speaker 1: talk about the labor pool refilling and more applicants um
8:33
Speaker 1: putting in, putting in for some of these job openings.
8:36
Speaker 1: He'll be looking for wage inflation to fall. Yeah, we
8:39
Speaker 1: we actually just had a headline Cross that existing home
8:43
Speaker 1: sales fell um two percent. And just this morning I
8:47
Speaker 1: was talking to a friend who decided not to buy
8:49
Speaker 1: a Kia because the dealer wanted ten grand over ms
8:54
Speaker 1: RP and wouldn't budge a Kia Akia. And what do
8:58
Speaker 1: they say? What do they say? That the cure for
9:00
Speaker 1: high prices is high prices? Yeah, well, I guess that's
9:04
Speaker 1: the case here. Um. You know, you've got so many
9:07
Speaker 1: other issues. Uh, You've got the China, the common prosperity crackdown. Um.
9:15
Speaker 1: You've got the supply chain snarl ups, which I guess
9:18
Speaker 1: are are are part of that high prices issue. Um,
9:22
Speaker 1: and you've got, um, the labor shortage. I wonder if
9:26
Speaker 1: especially the latter, what what's your take on the labor shortage?
9:29
Speaker 1: Now that we see extended unemployment benefits coming off, are
9:33
Speaker 1: we going to see the labor shortage ease again? Just
9:38
Speaker 1: this morning I read a laundry list of companies that
9:41
Speaker 1: have come out on calls and said that the shortage
9:44
Speaker 1: is alleviating before their very eyes, now that all fifty
9:48
Speaker 1: states UM have indeed stepped away from these programs. I
9:52
Speaker 1: live in Texas, where the supplemental benefits went away in July,
9:57
Speaker 1: and I can tell you just by driving around the
9:59
Speaker 1: Warren buff fit fashion and kicking the tires. I don't
10:01
Speaker 1: see as many help wanted signs as I want said.
10:04
Speaker 1: I'm not waiting as long in restaurants. I don't have
10:06
Speaker 1: to wait as long to get an uber or a lift.
10:09
Speaker 1: There are certain things that are just said. They had
10:11
Speaker 1: a huge spike in new drivers, so they've really added
10:14
Speaker 1: a ton and plus. But uber rates are up. Why not? Um?
10:19
Speaker 1: Sometimes that I've spent in Florida with my family, for example,
10:22
Speaker 1: I've heard people say I'm not going back to my
10:24
Speaker 1: job at Disney because I can make double that as
10:26
Speaker 1: a lift or an uber driver. Yeah. Well again far.
10:31
Speaker 1: But but to your question about Disney would be a
10:34
Speaker 1: lot more fun. I feel like Disney would be so fun,
10:36
Speaker 1: especially if you get to dressed up as the mouse.
10:38
Speaker 1: Okay when it's a hundred degrees in humit, Okay, let
10:41
Speaker 1: me get back to me on that. Um. But But
10:44
Speaker 1: the point is, this is what j. Powell has been
10:46
Speaker 1: waiting for. This is why he keeps saying, let me
10:49
Speaker 1: see September and October, let me see those non farm
10:53
Speaker 1: payroll reports come out before we make any big decisions.
10:56
Speaker 1: And again I will bring back to you the debt ceiling,
11:00
Speaker 1: and there are major implications we've just had come to
11:04
Speaker 1: light meeting minutes from an emergency Federal Open Market Committee
11:08
Speaker 1: from October two thousand thirteen. There is actually a blueprint
11:13
Speaker 1: for what the Fed can do to alleviate a potential
11:16
Speaker 1: debt default if extraordinary measures that Treasury Secretary Yellen is
11:21
Speaker 1: implementing or exhausted. You can, in theory but default on
11:25
Speaker 1: the treasuries that the FED owns, and really not it's
11:29
Speaker 1: called a strategic default, and and and and not technically default.
11:33
Speaker 1: Fitch and Moodies won't like it, though. What are the
11:35
Speaker 1: chances I was talking with Matt Winkler, or editor in
11:38
Speaker 1: chief emeritus about this this morning. What are the chances
11:41
Speaker 1: that the United States might, you know, not because we
11:45
Speaker 1: can't afford to, but for political reasons, miss an interest
11:50
Speaker 1: payment on its debt. Well, that was exactly what I
11:53
Speaker 1: was just describing. And again there is a blueprint that
11:56
Speaker 1: has been drawn up between the Treasury and the FED
11:59
Speaker 1: that ex blains how we would go about doing that.
12:03
Speaker 1: Because the first debt first default in the Fed's debt
12:06
Speaker 1: and then defaulted everyone else, just the Feds. It's just
12:10
Speaker 1: a quarter of the Treasury mark. They own a big
12:12
Speaker 1: chunk of it, so you can theoretically buy a lot
12:14
Speaker 1: of time. And you have to remember their accounting maneuvers.
12:18
Speaker 1: The FEDA Reserve remits treasury interest back to the Treasury
12:22
Speaker 1: once a year. That's how accounting it at the FED works.
12:25
Speaker 1: So as far as they're concerned, they're just moving money
12:27
Speaker 1: around on a ledger until the debt ceiling is resolved.
12:31
Speaker 1: All right. So one of the things I'm wondering if
12:33
Speaker 1: the FED is looking at the FED Chairman Pal's looking at,
12:36
Speaker 1: is we're hearing from many sectors of the economy in
12:38
Speaker 1: many companies, that's the supply chain. It's not getting better
12:41
Speaker 1: and it may even be getting worse. We take a
12:43
Speaker 1: look at the number of ships stopped off the coast
12:45
Speaker 1: of Los Angeles and Long Beach, and it's get it's growing,
12:49
Speaker 1: and we're getting into that killer, you know, kind of
12:52
Speaker 1: season of you know, shopping and Christmas and Holidays and
12:55
Speaker 1: a lot kind of stuff. Is that on their radar? Uh?
12:58
Speaker 1: It really is. And just listening to a lot of
13:02
Speaker 1: of manufacturers in the Texas area, the Houston port is
13:06
Speaker 1: hopping other ports companies are trying to get around that
13:10
Speaker 1: the three big West Coast port log jam because it's historic,
13:14
Speaker 1: it's it's it's as bad as it's ever been. And
13:18
Speaker 1: freight costs have become you know, comed about if they
13:20
Speaker 1: used to be a small line item, but they're enormous.
13:23
Speaker 1: So even though we're seeing iron ore prices come down,
13:25
Speaker 1: and obviously we've talked about lumber and corn, little bits
13:29
Speaker 1: and pieces here of input costs coming down, but freight
13:33
Speaker 1: searcharges and you can I'm hearing anecdotes of freight surviving
13:38
Speaker 1: and companies saying, if you want the merchandise, by the way,
13:42
Speaker 1: you're gonna have to pay up. It will be another
13:43
Speaker 1: fifty dollars. And some of these sitting there right Paul,
13:46
Speaker 1: weren't you saying, yes, yes, somebody had a shipment come
13:49
Speaker 1: in and it just sat in the port for two weeks. Yeah,
13:51
Speaker 1: it just sat in the port. It just sounds like
13:53
Speaker 1: something I guess we thought about this. Yeah, Okay, there's
13:56
Speaker 1: a supply chain, but it will work itself out as
13:58
Speaker 1: the world reopens. It seems to be a bigger issue,
14:01
Speaker 1: and again we're hearing it from more and more and
14:03
Speaker 1: more companies. Well, and I think on a broader level,
14:08
Speaker 1: I think that companies are also kind of starting to
14:11
Speaker 1: hide behind, for lack of a better term, the ability
14:14
Speaker 1: to really ramp up pricing, behind the auspices of this
14:19
Speaker 1: supply chain distruction. But again, pay attention to what's happening
14:22
Speaker 1: underneath the surface. Pay attention to things like Cox Automotives
14:25
Speaker 1: saying it ain't a supply issue. People, fifty percent of
14:30
Speaker 1: is a big percent. Fifty percent of buyers. And you're
14:32
Speaker 1: seeing this in the University of Michigan buying conditions for
14:35
Speaker 1: cars and houses. They're saying, Bosta, this is too much.
14:39
Speaker 1: I'm stepping back because of the price shock. Yeah. Interesting, alright,
14:42
Speaker 1: so much to look at there. Danielle di Martino, Booth
14:44
Speaker 1: CEO and Director of Intelligence for quill And Intelligence and
14:47
Speaker 1: former advisor of the Dallas Fota Reserve and a bloomerket
14:49
Speaker 1: opinion and contributor, thank you so much for joining us. Well,
14:54
Speaker 1: I guess the folks that were, you know, by the
14:57
Speaker 1: dip type of people, they were right again, the markets
15:01
Speaker 1: up over one percent here in the SMP and DOW.
15:04
Speaker 1: So there you go. Let's check in with Alan Adleman,
15:07
Speaker 1: Senior fund manager and senior Research annels for Frost Investment
15:10
Speaker 1: advisors have about five point one billion dollars in assets
15:13
Speaker 1: under management. Alan, it seems like to buy the dip.
15:16
Speaker 1: Folks were right again, is that your take, Paul, thank you,
15:22
Speaker 1: good morning. And I'm still not convinced. Frankly, Uh, the
15:30
Speaker 1: market to us feels a bit fatigued, just kind of
15:34
Speaker 1: given the rapid pace that we've seen over the last
15:37
Speaker 1: year or so. So a lot of our smart money
15:41
Speaker 1: investors and you know, we're engaged with a lot of investors,
15:45
Speaker 1: both institutional as well as individuals in Texas are actually
15:51
Speaker 1: looking to buy the dips. But the expectations are that
15:56
Speaker 1: the market is a bit fatigued, and we could see
15:59
Speaker 1: it Isptember going on October, and we could see a
16:02
Speaker 1: little bit more of a pullback we have seen looking
16:07
Speaker 1: back at the SMP five moves about there were a
16:11
Speaker 1: hundred and ten one moves in and so far we've
16:15
Speaker 1: only seen thirty five. So it's definitely a market that
16:19
Speaker 1: has lost some energy in terms of um you know,
16:23
Speaker 1: the size of of moves here. And we've heard a
16:26
Speaker 1: lot more people Alan's calling for a pullback, calling for
16:29
Speaker 1: a correction, not saying you know that they're bears, but
16:32
Speaker 1: saying we expect a ten percent drop or even a drop.
16:37
Speaker 1: What do you think about the possibility of the ladder?
16:41
Speaker 1: I think, well, first off, I would say that we're
16:45
Speaker 1: still very constructive on the on the US large camp
16:48
Speaker 1: equity market. We're fully invested at this choke er. You know,
16:52
Speaker 1: we've looked for further opportunities, but we're fully invested, which
16:59
Speaker 1: should should show you where you know, where we're at
17:02
Speaker 1: from a market perspective. But your constructive, and you put
17:07
Speaker 1: your money where your mouth is now, and well, I mean,
17:11
Speaker 1: I'm not trying to be a wise guy, but we
17:12
Speaker 1: put our clients money where our mouth is. And that's
17:16
Speaker 1: even more of a conviction from a Frost perspective. So
17:21
Speaker 1: do we expect some kind of correction, We would welcome it.
17:25
Speaker 1: We think that right now we're kind of in a
17:27
Speaker 1: purgatory period, Paul, relative to you know, we're not yet
17:31
Speaker 1: an earning season. We've got all sorts of exogenous types
17:35
Speaker 1: of activities going on. You know, evergrand Is seems to
17:39
Speaker 1: not be quite as the topic to Jore, but nonetheless,
17:43
Speaker 1: you know, you've got you've got situations like that, You've
17:46
Speaker 1: got the congressional circus going on in Washington. Relative to
17:50
Speaker 1: the death ceiling. So there are are non corporate events
17:54
Speaker 1: that really could trigger investors at this particular um juncture.
18:01
Speaker 1: And we're looking forward to earning seasons, but you know,
18:04
Speaker 1: we've got realistically, we've got a month ago before we
18:07
Speaker 1: get back into that. So, Alan you're fully invested in
18:10
Speaker 1: the market, are you invested for a reopening type of trade,
18:13
Speaker 1: i e. Some more cyclical parts of the market, or
18:18
Speaker 1: are you uh kind of in that camp where I'm
18:20
Speaker 1: sticking with the tried and true top line growth stories, tech,
18:24
Speaker 1: healthcare things like that. Well, the short answer, Paul is both,
18:28
Speaker 1: and we take a blend approach, so to speak, in
18:32
Speaker 1: terms of the ladder the names that you are referring
18:36
Speaker 1: to on the growth side technology, um, you know some
18:41
Speaker 1: of the healthcare names for sure, um. But we're also
18:45
Speaker 1: invested in the cyclical names. And if you think about
18:47
Speaker 1: it from a portfolio construction waiting perspective, UM, we're probably,
18:53
Speaker 1: we're not. Probably we are more heavily weighted to the
18:56
Speaker 1: growth segment than we are to the sick of sick
18:59
Speaker 1: of learn um exposure perspective. So that's you know, that's
19:06
Speaker 1: that's where we're at today. What do you think about
19:10
Speaker 1: or how much does it matter to you that we
19:12
Speaker 1: get more fiscal uh spending in terms of for example,
19:18
Speaker 1: the infrastructure bill. It looks difficult right now, but it's
19:21
Speaker 1: it's a huge number. How much does it matter to
19:23
Speaker 1: you to you for your clients, I would say, well,
19:28
Speaker 1: for our clients, it's a broader topic. For us specifically.
19:32
Speaker 1: You know, we really pay attention Paul uh To. I mean,
19:36
Speaker 1: you're an analyst, so I mean we take a very
19:39
Speaker 1: much of a bottom up approach, and we talk to
19:41
Speaker 1: our companies and we listen to them all all the time.
19:45
Speaker 1: We do channel checks, we do all of the things
19:47
Speaker 1: that are fundamental equity manager we do. We're managing portfolios,
19:52
Speaker 1: diversified portfolios where we're we're investing in literally every economic
19:57
Speaker 1: sector in the S and p um or our benchmark,
20:01
Speaker 1: So we do take that approach. Having said that, I
20:05
Speaker 1: would say that the infrastructure built over the long term
20:08
Speaker 1: would have positive ramifications for for the economy at large.
20:13
Speaker 1: These are things that are required, are necessary. Whether we
20:18
Speaker 1: get into some of the softer things time will tell.
20:21
Speaker 1: But but I think our client base and where we're
20:24
Speaker 1: coming from is we have a high level of confidence
20:27
Speaker 1: that ultimately will get at least the hard infrastructure build past,
20:32
Speaker 1: you know, sometime in the near future, and that will
20:35
Speaker 1: bode well as we get into two and twenty three
20:40
Speaker 1: and beyond. But I'm repeating myself, which I guess I'd
20:44
Speaker 1: like to do. But having said that, the whole atmosphere
20:48
Speaker 1: in Washington is still problematic in terms of not being
20:53
Speaker 1: able to make a decision, not being able to come together. Alan,
20:58
Speaker 1: thanks so much for joining us. All Adelman there from
21:01
Speaker 1: Frost Investment Advisors. I want to get over to the
21:08
Speaker 1: chief investment Officer of Global Equities at invest Go. George
21:13
Speaker 1: Evan joins us. George Evans joins us now, and we're
21:17
Speaker 1: gonna hear about your market views, but I want you
21:19
Speaker 1: to first, George, explain your Mantra investment themes to us.
21:25
Speaker 1: So certainly, so good morning and what everyone, um, So
21:28
Speaker 1: we we run I've been running an international strategy uh
21:33
Speaker 1: at Investco. It was often time before since so we're
21:37
Speaker 1: just over twenty five years and we've followed the same
21:41
Speaker 1: four themes over the entire art of that time. So
21:45
Speaker 1: there's MANTRA stands for the four themes, which is mass affluents,
21:50
Speaker 1: new technology, restructuring and aging. So we want to be
21:55
Speaker 1: focused on areas of the global economy that we think
21:58
Speaker 1: are set to grow structurally over many, many years, and
22:03
Speaker 1: to find the winning companies and invest in those stocks accordingly.
22:09
Speaker 1: So they're connected. So mass affluence is basically about the
22:13
Speaker 1: world getting getting rich, and particularly after the fall of
22:18
Speaker 1: the Berlin Wall, the massive increment to growth and wealth,
22:22
Speaker 1: both of wealth in the emerging markets. I mean we
22:27
Speaker 1: see it. We all see it in the number of
22:29
Speaker 1: millionaires and billionaires just soaring everywhere in the Western world
22:33
Speaker 1: and in well in China as well. What what's led
22:35
Speaker 1: to that? Well, I think the biggest thing is the
22:39
Speaker 1: way that the whole world more or less embraced a
22:43
Speaker 1: greater orientation towards market economies after the collapse of the
22:47
Speaker 1: Berlin Wall. So if we look at pre Berlin War,
22:50
Speaker 1: you're looking at really only about fifteen percent of the
22:53
Speaker 1: global population that lived in countries that had market oriented economies.
23:00
Speaker 1: After the collapse of communism, we saw more and more
23:04
Speaker 1: of the world embraced market economies and that's been the
23:06
Speaker 1: principal driver to wealth creation. So you know, China's gotten
23:11
Speaker 1: grown staggeringly fast over the last thirty forty years. We've
23:17
Speaker 1: seen huge increments to growth from many other emerging markets.
23:20
Speaker 1: So it's really gone from a small proportion of the
23:24
Speaker 1: global population engaged in sort of living in market economies too,
23:29
Speaker 1: you know, probably now well over well over half engaging it.
23:33
Speaker 1: So that's so now a lot more people need to
23:35
Speaker 1: buy German cars, stay at five star hotels, and drink
23:39
Speaker 1: Johnny Walker blue label. Absolutely everyone, um, you know, like
23:44
Speaker 1: you know, people to people go from you know, riding
23:48
Speaker 1: bicy walking or riding bicycles to motorcycles to cars. They
23:52
Speaker 1: get bank accounts, they get credit cards, they like to
23:55
Speaker 1: go on fancy holidays, and as you might be pointed out,
23:58
Speaker 1: people like to drink beer and wine and spirits. So George,
24:03
Speaker 1: give us, you know, maybe a practical example or two
24:06
Speaker 1: where this mantra has taken you into some sectors that
24:11
Speaker 1: have been good for your fun over the last twenty
24:13
Speaker 1: five years. Okay, so let's pick luxury goods. So we
24:18
Speaker 1: luxury goods. This is one of the you know, in
24:21
Speaker 1: talking about luxury goods, it's an area where you must
24:24
Speaker 1: be invested internationally because all of the big brands are
24:29
Speaker 1: mostly based in Europe. So we've things like Louis Viteloy
24:33
Speaker 1: Hennessey UM. We there's airm Airs which we own UM
24:39
Speaker 1: and there are several other big brands that are all
24:42
Speaker 1: pretty much European based. The well over fifty of luxury
24:48
Speaker 1: good sales now go to people that are from emerging markets,
24:54
Speaker 1: and the Chinese have been a major driver of this
24:59
Speaker 1: growth over the last over the last ten twenty years.
25:03
Speaker 1: So as people get wealthier, they like to signal where
25:05
Speaker 1: they are, you know, in terms of relative wealth, and
25:08
Speaker 1: one of the ways that they principally do that is
25:10
Speaker 1: by buying UM a lot of luxury goods, whether it's handbags, clothes, jewelry,
25:18
Speaker 1: fancy watches, etcetera, etcetera, etcetera. So this has been a
25:23
Speaker 1: you know, a relentless structural growth over the last ten
25:28
Speaker 1: twenty years, and it's got to the point where earlier
25:31
Speaker 1: this year there was a period I think of a
25:33
Speaker 1: couple of weeks where uh Benna Arno, who is the
25:39
Speaker 1: majority owner, what he's got the biggest steak in Louis
25:42
Speaker 1: Vutan nuer of weeks, the richest man in the world.
25:46
Speaker 1: I mean, this is a very very powerful sector. There's
25:50
Speaker 1: very very good long term structural growth. We tend to
25:53
Speaker 1: prefer true luxury rather than just sort of expensive fashion
25:58
Speaker 1: products because the we believe that the that the demand
26:02
Speaker 1: is a lot more sort of robust and less variable
26:04
Speaker 1: for that. So that's an example in in in mass affluence.
26:09
Speaker 1: We've also, you know, whilst the US has prepositions, but
26:16
Speaker 1: across the beach front in much of technology, there are
26:20
Speaker 1: a number of companies um in the international opportunities set
26:26
Speaker 1: that have been extraordinarily well positioned. So a large holly
26:32
Speaker 1: for us in the Dutch company a s mL. It
26:35
Speaker 1: is effectively a monopoly at the leading edge of semiconductive
26:39
Speaker 1: production equipment with the latest EUV equipment that will allows
26:45
Speaker 1: the etching of extremely sort of find diameter h I
26:51
Speaker 1: find diameter chips. So that's that's been a share that
26:55
Speaker 1: has done extraordinary well over the last one three and
26:59
Speaker 1: five years. And then a course, the largest foundry company
27:02
Speaker 1: check boundary company in the world is based in Taiwan.
27:05
Speaker 1: That's t S seven CE Taiwan seven Conductor. So I
27:10
Speaker 1: think that one of the most important things in thinking
27:13
Speaker 1: about international is that there are first of all a
27:17
Speaker 1: lot of extraordinarily good world leading companies based abroad, but
27:25
Speaker 1: it is extraordinarily important to be a stock that because
27:28
Speaker 1: would be highly highly selective, because a lot of people
27:31
Speaker 1: point at the point to the the the outperformance of
27:37
Speaker 1: the S and T versus any international all the collective
27:40
Speaker 1: of international industries over particularly the last twelve years UM.
27:45
Speaker 1: And part of that is because a lot of the
27:48
Speaker 1: international industries are not as well constructed as the SMP.
27:51
Speaker 1: They are not populated with companies of such sort of
27:56
Speaker 1: uniform or not uniform but such excellences as as populates
27:59
Speaker 1: all of the S and P. So there are clearly
28:02
Speaker 1: sectors you know with our theme approach that we have
28:05
Speaker 1: totally avoided structurally over ten and twenty years. So we
28:09
Speaker 1: are very low on financials, with very low on industrial materials,
28:13
Speaker 1: were very low on energy, and these areas have all
28:15
Speaker 1: been structurally well represented in the non US indices, but
28:20
Speaker 1: are areas where there hasn't been a tremendous amount of
28:24
Speaker 1: wealth creation. All right, George, thank you so much for
28:26
Speaker 1: joining us and sharing their your mantra strategy for twenty
28:30
Speaker 1: five years. George Evans, chief of Chief Investment Officer of
28:33
Speaker 1: Global Equities for Investco, Thanks for listening to the Bloomberg
28:36
Speaker 1: Markets podcast. You can subscribe and listen to interviews of
28:40
Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller.
28:45
Speaker 1: I'm on Twitter at Matt Miller, Three Ball Sweeney I'm
28:49
Speaker 1: on Twitter at pt Sweeney. Before the podcast, you can
28:52
Speaker 1: always catch us worldwide at Bloomberg Radio