Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at seven am Eastern on Apple car Play or Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at seven am Eastern on Apple car Play or Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

This is really good. We got some precious timingre with Sophia Drosi's working for point seventy two in New York. But you know, we've we've got to do this. I mean, it's one of the most fractious marriages out there, Steve Cohen. Of course a point seven to two has a modest New York Mets too. You have a Red Sox Mets marriage.

This is really good. We got some precious timingre with Sophia Drosi's working for point seventy two in New York. But you know, we've we've got to do this. I mean, it's one of the most fractious marriages out there, Steve Cohen. Of course a point seven to two has a modest New York Mets too. You have a Red Sox Mets marriage.

Is that true?

Is that true?

Yes, it's a mixed marriage LEAs.

Yes, it's a mixed marriage LEAs.

Yes.

Yes.

However, I did adopt the Patriots as my football team because that was also, you know, the Michigan connection. So for me, when my husband said I'm a Patriots fan, that's a deal breaker for me. I was like Tom Brady, I knew since he was number ten.

However, I did adopt the Patriots as my football team because that was also, you know, the Michigan connection. So for me, when my husband said I'm a Patriots fan, that's a deal breaker for me. I was like Tom Brady, I knew since he was number ten.

How's your husband doing? I Soto in a Mets uniform is un American? Is he holding up? I mean the meds?

How's your husband doing? I Soto in a Mets uniform is un American? Is he holding up? I mean the meds?

You know, you know, the Mets nation is very welcoming. So when we do go to Cityfield, my husband will wear his red Sox hat. The Mets nation super welcoming.

You know, you know, the Mets nation is very welcoming. So when we do go to Cityfield, my husband will wear his red Sox hat. The Mets nation super welcoming.

Very a good update there, and of course we are ready for the baseball season. We're also ready Sophia drosis for an economy and your research note says it all. I think you use the word uncertainty forty seven times. What is the character of our economic and market uncertainty?

Very a good update there, and of course we are ready for the baseball season. We're also ready Sophia drosis for an economy and your research note says it all. I think you use the word uncertainty forty seven times. What is the character of our economic and market uncertainty?

Yes, well, uncertainty is something that we haven't had to deal with until more recently on the policy front, So last year was a year where there was fiscal spending, there was a preemptive FED easing, It was very positive tailwinds for the market, and we came into this year with the markets I think for the first time in a long time, investors were looking at the glasses half full and taking kind of the upside on economic growth. And the policy uncertainty I think has permeated that a bit. So we came into the year with a lot of expectations for deregulation and animal spirits, and the sequencing has brought perhaps the more onerous parts of policy up first, with the uncertainty over trade how it will end up how will it affect the economy? And you know, we're still looking at that April to deadline and not quite sure exactly how things are going to pan out or if that will be a clearing event.

Yes, well, uncertainty is something that we haven't had to deal with until more recently on the policy front, So last year was a year where there was fiscal spending, there was a preemptive FED easing, It was very positive tailwinds for the market, and we came into this year with the markets I think for the first time in a long time, investors were looking at the glasses half full and taking kind of the upside on economic growth. And the policy uncertainty I think has permeated that a bit. So we came into the year with a lot of expectations for deregulation and animal spirits, and the sequencing has brought perhaps the more onerous parts of policy up first, with the uncertainty over trade how it will end up how will it affect the economy? And you know, we're still looking at that April to deadline and not quite sure exactly how things are going to pan out or if that will be a clearing event.

So one of the issues coming into this year for the markets was the Fed's probably not going.

So one of the issues coming into this year for the markets was the Fed's probably not going.

To do a whole lot to help these markets. It's going to be earnings driven.

To do a whole lot to help these markets. It's going to be earnings driven.

So therefore I need my economy to be shroun How do you think about the economic outlook and how that might be it challenge potentially for the earning story.

So therefore I need my economy to be shroun How do you think about the economic outlook and how that might be it challenge potentially for the earning story.

Yes, well, on the on the earnings front, we are coming off a period of time where corporate margins have been at record highs and earnings have been quite strong. And if we're coming into a period where economic growth is expected to moderate and there is a lot of uncertainty facing corporations with regard to tariffs, their input costs, and the outlook for the US consumer, it seems more likely that we're going to see a moderation in corporate profits. And I think that this first batch of earnings reports at the end of April will be very key for the market. Directionally, I look.

Yes, well, on the on the earnings front, we are coming off a period of time where corporate margins have been at record highs and earnings have been quite strong. And if we're coming into a period where economic growth is expected to moderate and there is a lot of uncertainty facing corporations with regard to tariffs, their input costs, and the outlook for the US consumer, it seems more likely that we're going to see a moderation in corporate profits. And I think that this first batch of earnings reports at the end of April will be very key for the market. Directionally, I look.

At what you just said, clearing events folks, this is a Midwest agreed right here. Michigan and Anna Arbor was basically East Chicago. It comes back to ninety and uncertainty and the you know, it almost folds into what Friedrich Kayak would say, which is, you've got these clearing events where things clean out. So on April third, you suggest we may have enough clarity to go along.

At what you just said, clearing events folks, this is a Midwest agreed right here. Michigan and Anna Arbor was basically East Chicago. It comes back to ninety and uncertainty and the you know, it almost folds into what Friedrich Kayak would say, which is, you've got these clearing events where things clean out. So on April third, you suggest we may have enough clarity to go along.

Unfortunately, I don't think we'll have the clarity on April third. So the issue has been on April second, we are anticipating to get a sense of the blueprint on the reciprocal tariffs, but the commentary from the White House has been that there's likely to be ongoing tariff threats in terms of specific industries and products. So April on April two will know a bit about this reciprocity that will be going on, but we won't know enough about what's going to happen with specific sectors.

Unfortunately, I don't think we'll have the clarity on April third. So the issue has been on April second, we are anticipating to get a sense of the blueprint on the reciprocal tariffs, but the commentary from the White House has been that there's likely to be ongoing tariff threats in terms of specific industries and products. So April on April two will know a bit about this reciprocity that will be going on, but we won't know enough about what's going to happen with specific sectors.

Yeah, I'm not without giving away the point seven to two cards. But the basic idea here is with this colossal uncertainty is and then this is a bit off your remit, but I'm going to ask anyways and be rude. Is cash a preferred asset right now?

Yeah, I'm not without giving away the point seven to two cards. But the basic idea here is with this colossal uncertainty is and then this is a bit off your remit, but I'm going to ask anyways and be rude. Is cash a preferred asset right now?

Well? I've been looking at things like gold and cash. Gold has been performing incredibly well, and so in an environment where investors might see some risks, ask Thatt. Allocation theory would suggest trying to increase some of your safer holdings. And there are different views on treasuries and the fiscal trajectory. So investors, I think have increasingly been looking at things like cash and gold.

Well? I've been looking at things like gold and cash. Gold has been performing incredibly well, and so in an environment where investors might see some risks, ask Thatt. Allocation theory would suggest trying to increase some of your safer holdings. And there are different views on treasuries and the fiscal trajectory. So investors, I think have increasingly been looking at things like cash and gold.

Oh, I mean, I mean talk about gold. Crazy Wan Sodo seventy five million dollars signing bonus for him seven hundred and sixty five thousand guarantee. Excuse me, not off seven hundred and sixty five million guaranteed and he's underpaid fifty one million a year. Sure, he's got a base of forty six.

Oh, I mean, I mean talk about gold. Crazy Wan Sodo seventy five million dollars signing bonus for him seven hundred and sixty five thousand guarantee. Excuse me, not off seven hundred and sixty five million guaranteed and he's underpaid fifty one million a year. Sure, he's got a base of forty six.

Large I can hit.

Large I can hit.

I mean, Oh, it's correct. It's like there's a second coming of way backs over a little more in Power City.

I mean, Oh, it's correct. It's like there's a second coming of way backs over a little more in Power City.

Feel no questions, great, Sophia, what'll be different if.

Feel no questions, great, Sophia, what'll be different if.

We talk enough about the Mets, can we get back?

We talk enough about the Mets, can we get back?

We'll get six seats?

We'll get six seats?

Well, one more question, get it in there quick?

Well, one more question, get it in there quick?

Fixed income? Do I take credit risk or not? Here? Do you think?

Fixed income? Do I take credit risk or not? Here? Do you think?

So it's an environment where I think we've started to see a little bit of a pickup, I think in the delinquencies and the like, but the types of credits that are in public markets are typically relatively strong. I think the bigger question is what's going to happen with the outlook for the economy and what does that mean for all us based risk assets.

So it's an environment where I think we've started to see a little bit of a pickup, I think in the delinquencies and the like, but the types of credits that are in public markets are typically relatively strong. I think the bigger question is what's going to happen with the outlook for the economy and what does that mean for all us based risk assets.

We go to Fenway just gaze out at the Ted Williams reds yea Sophia drosis. Thank you so much, A point as seven to just fabulous over the years with the wonderful synthesis of economics and the impact on our investment.

We go to Fenway just gaze out at the Ted Williams reds yea Sophia drosis. Thank you so much, A point as seven to just fabulous over the years with the wonderful synthesis of economics and the impact on our investment.

This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple Corplay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty joining.

This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple Corplay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty joining.

Us right now, you folks. It's like I'm a Choppoliver. I mean, I mean, it's other is to it? Sweete and Tom Keane and we are after her conversation with the legend Kenny pulcarry over at the New York Stock Exchange. That's trader talk. That was yesterday Kay, what do you say to Ken Paul Caerry that you don't say to me. I mean that's like like in and out of the market, right, Yeah.

Us right now, you folks. It's like I'm a Choppoliver. I mean, I mean, it's other is to it? Sweete and Tom Keane and we are after her conversation with the legend Kenny pulcarry over at the New York Stock Exchange. That's trader talk. That was yesterday Kay, what do you say to Ken Paul Caerry that you don't say to me. I mean that's like like in and out of the market, right, Yeah.

Look, it is a good reminder that there's all these short term movements in markets that are driving the volatility that we're experiencing. But you have to keep the long term in mind, which is why we've been continuously saying to clients it's not where the S and P five hundred ends at the end of this year, it's what you do with the volatility along the way.

Look, it is a good reminder that there's all these short term movements in markets that are driving the volatility that we're experiencing. But you have to keep the long term in mind, which is why we've been continuously saying to clients it's not where the S and P five hundred ends at the end of this year, it's what you do with the volatility along the way.

We traders getting slammed as a general statement, I mean trying to gain this market right now, is anybody making money?

We traders getting slammed as a general statement, I mean trying to gain this market right now, is anybody making money?

Well, we've certainly seen traders move from being max long equities at the beginning of this year ninety eighth percentile kind of positioning to that's now fall into the twenty six percentile, So there's probably been some pain along the way.

Well, we've certainly seen traders move from being max long equities at the beginning of this year ninety eighth percentile kind of positioning to that's now fall into the twenty six percentile, So there's probably been some pain along the way.

Paul Cary looks like out of Central Casting, Game of Thrones or Outlander or one of those things. I mean, this is he retired.

Paul Cary looks like out of Central Casting, Game of Thrones or Outlander or one of those things. I mean, this is he retired.

No, he's trucking, he's trunckling.

No, he's trucking, he's trunckling.

Good morning to Ken punk Car and everybody down with the New.

Good morning to Ken punk Car and everybody down with the New.

York Salma bum this guy back in the day. Your note is the end of US exceptionalism? Is it the end of US exceptionalism? Or do we still have room to grow?

York Salma bum this guy back in the day. Your note is the end of US exceptionalism? Is it the end of US exceptionalism? Or do we still have room to grow?

What do you think?

What do you think?

So what we what we wrote about is this idea is that it's very easy to ascribe a narrative to price action. Everybody looks at the weakness in the US dollar year to date, they look at the outperformance of Europe versus the rest of the of the US, and they say it must be the end of US exceptionalism. But if you look it really is a function of the fact that we started the year with a massive, very very crowded dollar long position that has since been unwound. Traders are now slightly short the dollar, and we actually think that you could see some dollars stability here now that you've burned off all of that crowded positioning.

So what we what we wrote about is this idea is that it's very easy to ascribe a narrative to price action. Everybody looks at the weakness in the US dollar year to date, they look at the outperformance of Europe versus the rest of the of the US, and they say it must be the end of US exceptionalism. But if you look it really is a function of the fact that we started the year with a massive, very very crowded dollar long position that has since been unwound. Traders are now slightly short the dollar, and we actually think that you could see some dollars stability here now that you've burned off all of that crowded positioning.

Interesting, So what do I mean when you talk to your clients here again, we had that peaked to trough draw down in the S and P five hundred of about ten percent. Did they view that as a healthy pullback in an otherwise positive market or is.

Interesting, So what do I mean when you talk to your clients here again, we had that peaked to trough draw down in the S and P five hundred of about ten percent. Did they view that as a healthy pullback in an otherwise positive market or is.

It something else?

It something else?

We'd hope that we've talked to clients enough and set up the potential for volatility that there is a degree of calm when we see it. We often talk that volatility is a feature of being an equity investor and that we should see it as opportunity. Now we think the other reason why there's been this calm is that if you look at a seventy thirty portfolio for AQUI, so that's an international balance portfolio including the US and the AGG you're still.

We'd hope that we've talked to clients enough and set up the potential for volatility that there is a degree of calm when we see it. We often talk that volatility is a feature of being an equity investor and that we should see it as opportunity. Now we think the other reason why there's been this calm is that if you look at a seventy thirty portfolio for AQUI, so that's an international balance portfolio including the US and the AGG you're still.

Up on the year.

Up on the year.

So, yes, we've seen the US stock market pull in, but the end of the day, it's not been cataclysmic.

So, yes, we've seen the US stock market pull in, but the end of the day, it's not been cataclysmic.

Are we getting used asked Michael dart I alluded to this with Michael Data more directly with Cam Dawson. Are we needing to slot in the understanding that equities are a single digit return in our double digit return addiction?

Are we getting used asked Michael dart I alluded to this with Michael Data more directly with Cam Dawson. Are we needing to slot in the understanding that equities are a single digit return in our double digit return addiction?

Yeah, I think that that's very very likely. Is that we've been in this world a very strong double digit returns the last two years. Investors got conditioned to expecting that, which is why you saw these estimates for seven thousand plus in the S and P. Five hundred. That's very hard to do when you start the year at twenty two point six times forward earnings you start the year at the ninetieth percent tile of positioning.

Yeah, I think that that's very very likely. Is that we've been in this world a very strong double digit returns the last two years. Investors got conditioned to expecting that, which is why you saw these estimates for seven thousand plus in the S and P. Five hundred. That's very hard to do when you start the year at twenty two point six times forward earnings you start the year at the ninetieth percent tile of positioning.

So our best case.

So our best case.

Scenario for twenty twenty five is that you get growth upside that's equivalent to earnings growth. But that assumes that multiple stay constant, and we're not sure if you get multiple stay in constant in a world where you're cutting earning sestaments and there's some risk off flavor.

Scenario for twenty twenty five is that you get growth upside that's equivalent to earnings growth. But that assumes that multiple stay constant, and we're not sure if you get multiple stay in constant in a world where you're cutting earning sestaments and there's some risk off flavor.

How about Europe's had a heck of a start to the year here and that story we had heard kind of last year where European and international money coming into the US market had a little bit of a reversal of that. How do you think about the performance of European equities?

How about Europe's had a heck of a start to the year here and that story we had heard kind of last year where European and international money coming into the US market had a little bit of a reversal of that. How do you think about the performance of European equities?

We do think that the easy part is over for European equities. You started at thirteen and a half times forward, now you're training at fifteen times. Fifteen times doesn't seem like a lot when you compare it to the twenty times in the US, but it is the high of the valuation range and the pre pandemic range for Europe. So it really comes down to earnings delivering. Quite interestingly, earnings for Europe have continuously been getting cut even as we've been seeing this rally so interesting.

We do think that the easy part is over for European equities. You started at thirteen and a half times forward, now you're training at fifteen times. Fifteen times doesn't seem like a lot when you compare it to the twenty times in the US, but it is the high of the valuation range and the pre pandemic range for Europe. So it really comes down to earnings delivering. Quite interestingly, earnings for Europe have continuously been getting cut even as we've been seeing this rally so interesting.

It's a show me story right now.

It's a show me story right now.

The show me story is Cameron Dawson with us this morning with New Edge Wealthy. Welcome all of you in your commute across the nation. Good morning, ninety two nine FM in Boston, ninety nine one FM and Washington. Bloomberg eleven three to zero in New York. An ample conversation with Cam Dawson on YouTube. Subscribe to Bloomberg Podcast. Even Cam Dawson subscribed.

The show me story is Cameron Dawson with us this morning with New Edge Wealthy. Welcome all of you in your commute across the nation. Good morning, ninety two nine FM in Boston, ninety nine one FM and Washington. Bloomberg eleven three to zero in New York. An ample conversation with Cam Dawson on YouTube. Subscribe to Bloomberg Podcast. Even Cam Dawson subscribed.

It's just like savvy put us up to forty two is amazing exactly. You know, I'm looking at the relative strength index, the RSI on the Bloomberg Criminal for the S and P five hundred. Man, we kind of bottomed back just like ten days ago, but now we're moving higher here.

It's just like savvy put us up to forty two is amazing exactly. You know, I'm looking at the relative strength index, the RSI on the Bloomberg Criminal for the S and P five hundred. Man, we kind of bottomed back just like ten days ago, but now we're moving higher here.

I mean, how did these technicals feel? It feels like is the sell off? Are we done with this cell off here? Or how's that? How do you think about it?

I mean, how did these technicals feel? It feels like is the sell off? Are we done with this cell off here? Or how's that? How do you think about it?

So we certainly got over sold enough to bounce, which is why we think we're bouncing today and yesterday.

So we certainly got over sold enough to bounce, which is why we think we're bouncing today and yesterday.

What the question is what happens.

What the question is what happens.

When you hit resistance and are you having enough momentum to break through that wall of resistance which we think is around the fifty nine hundred and six thousand level that you're downward sloping fifty day moving average. You have been losing momentum in this market really for the last nine months. If you look at things like a weekly MACD. So we do think that this is an environment that you could roll at resistance, you're going to.

When you hit resistance and are you having enough momentum to break through that wall of resistance which we think is around the fifty nine hundred and six thousand level that you're downward sloping fifty day moving average. You have been losing momentum in this market really for the last nine months. If you look at things like a weekly MACD. So we do think that this is an environment that you could roll at resistance, you're going to.

Go right there because I hate it. I hate I'm not a MACD fan. Folks who won't go into the nuances of it. Sixteen hundred Pennsylvania is not looking at the weekly mac D. I mean they're not. The bottom line is we can't lift until we get political clarity right exactly.

Go right there because I hate it. I hate I'm not a MACD fan. Folks who won't go into the nuances of it. Sixteen hundred Pennsylvania is not looking at the weekly mac D. I mean they're not. The bottom line is we can't lift until we get political clarity right exactly.

Why would we trade back up to all time highs when we've cut earnings estimates since and we have valuations that would have to go to new highs to get there, Which is why we think this year at best is that wide choppy rain. Because of the degree of uncertainty and because of the potential downsides to growth, it's depressing.

Why would we trade back up to all time highs when we've cut earnings estimates since and we have valuations that would have to go to new highs to get there, Which is why we think this year at best is that wide choppy rain. Because of the degree of uncertainty and because of the potential downsides to growth, it's depressing.

MAG seven. Are they still the MAG seven? Even ex Tesla.

MAG seven. Are they still the MAG seven? Even ex Tesla.

We've been raising the question if they're more like the LAG seven we talked I think last week.

We've been raising the question if they're more like the LAG seven we talked I think last week.

Do you see a lessening of their cash flow free cash flow.

Do you see a lessening of their cash flow free cash flow.

It is happening because of the big uptick within capex. You are seeing free cash flow margins come in. Now, these free cash flow margins are still so much better than you can get in the rest of the market exactly. So do they become a safe haven when people have questions about growth o their places? Very possibly. The valuations aren't in stretches. They are, but the market cares about second derivatives. The market cares about the slow down in earnings growth, which is inevitable when they had such massive earnings growth over the past two years.

It is happening because of the big uptick within capex. You are seeing free cash flow margins come in. Now, these free cash flow margins are still so much better than you can get in the rest of the market exactly. So do they become a safe haven when people have questions about growth o their places? Very possibly. The valuations aren't in stretches. They are, but the market cares about second derivatives. The market cares about the slow down in earnings growth, which is inevitable when they had such massive earnings growth over the past two years.

But you said the free cash flow will sustain even if earnings come down, But it is. I mean, Zuckerberg is going to manage the P and L statement right.

But you said the free cash flow will sustain even if earnings come down, But it is. I mean, Zuckerberg is going to manage the P and L statement right.

And they're sitting on massive, huge cash balances as well that they could deploy to repurchase shares.

And they're sitting on massive, huge cash balances as well that they could deploy to repurchase shares.

So sore they the new Deminian Electric? You're too young to know that? Would you get me someone in here older that actually knows what D is? Are they the new utility?

So sore they the new Deminian Electric? You're too young to know that? Would you get me someone in here older that actually knows what D is? Are they the new utility?

That is an interesting question.

That is an interesting question.

If they become such monopolized businesses that they are effective utilities, then it raises the question of do they get regulated like utilities do, and do we see those free cashlow margins compress over time because of the fact that they act like utilities.

If they become such monopolized businesses that they are effective utilities, then it raises the question of do they get regulated like utilities do, and do we see those free cashlow margins compress over time because of the fact that they act like utilities.

I mean, Paul, you're the only one to extend in this building that knows what Florida Power and Light is.

I mean, Paul, you're the only one to extend in this building that knows what Florida Power and Light is.

Dominion Energy based in Richmond, Virginia.

Dominion Energy based in Richmond, Virginia.

Home dividend grow exactly.

Home dividend grow exactly.

Earnings are important for this market because I'm not sure the FED is going to give us a whole lot this year, maybe one, maybe two rate cuts, so that puts more even more pressure on earning story. And you mentioned that earnings estimates are coming down. How risk are the numbers that are out there?

Earnings are important for this market because I'm not sure the FED is going to give us a whole lot this year, maybe one, maybe two rate cuts, so that puts more even more pressure on earning story. And you mentioned that earnings estimates are coming down. How risk are the numbers that are out there?

Do you think so?

Do you think so?

We think the biggest risk is possibly within financials. You've been seeing every sector get cut. Financials have seen less, earnings revisions lower. But think about the setup for financials coming out of the LI people said a steeper yield curve. We're getting M and A, we're getting IPOs, we're getting deregulation.

We think the biggest risk is possibly within financials. You've been seeing every sector get cut. Financials have seen less, earnings revisions lower. But think about the setup for financials coming out of the LI people said a steeper yield curve. We're getting M and A, we're getting IPOs, we're getting deregulation.

We've gotten none of that.

We've gotten none of that.

So we do wonder if that's an area of risk going into first quarter earning.

So we do wonder if that's an area of risk going into first quarter earning.

Okay, Shanghai, good morning, good evening, I should say Shanghai, China this morning listening in is China the opportunity, Sophia Ross and Mike Darter, we're talking.

Okay, Shanghai, good morning, good evening, I should say Shanghai, China this morning listening in is China the opportunity, Sophia Ross and Mike Darter, we're talking.

About, well, China certainly has that valuation opportunity where it still trades such a huge discount to the US.

About, well, China certainly has that valuation opportunity where it still trades such a huge discount to the US.

It's underloved, it's been called on you're going back.

It's underloved, it's been called on you're going back.

To a textbook eight nine, twelve ten percent allocation to international.

To a textbook eight nine, twelve ten percent allocation to international.

So we are neutral international. We've said, you just can't ignore the degree of outperformance in the US underperformance and international, but we don't see signs yet that justifies going to an overweight position.

So we are neutral international. We've said, you just can't ignore the degree of outperformance in the US underperformance and international, but we don't see signs yet that justifies going to an overweight position.

What are we doing in fixed income? Here?

What are we doing in fixed income? Here?

At my two year treasuries now back above four percent?

At my two year treasuries now back above four percent?

Do I stay there? Do I take some credit risk? Where do I go?

Do I stay there? Do I take some credit risk? Where do I go?

So we don't think again that you're getting compensated for mostly high yo credit risks. So we move to reduce some positioning within high yield just to say, you know, let's write out some of the equity volatility. But we want to be able to take some risk out of portfolios in the event that these growth fears do come to pass.

So we don't think again that you're getting compensated for mostly high yo credit risks. So we move to reduce some positioning within high yield just to say, you know, let's write out some of the equity volatility. But we want to be able to take some risk out of portfolios in the event that these growth fears do come to pass.

So in the equity space, what screens well for you guys these days?

So in the equity space, what screens well for you guys these days?

So we are finding lots of opportunities within international markets, but very selectively in that big, beautiful quality world. We're finding opportunities within mid caps as well, and then value lots of opportunities where you still see areas of the market that create it, discounts that have good free cash flows, have good balance sheets, and it's just maintaining that valuation discipline.

So we are finding lots of opportunities within international markets, but very selectively in that big, beautiful quality world. We're finding opportunities within mid caps as well, and then value lots of opportunities where you still see areas of the market that create it, discounts that have good free cash flows, have good balance sheets, and it's just maintaining that valuation discipline.

Which we think is absolutely critical. At one point.

Which we think is absolutely critical. At one point.

What's the key attribute of those opportunities.

What's the key attribute of those opportunities.

The key attribute is that they are not trading at stretch valuations, and they have stable learnings through cycles, and they have good free cash flow that is potentially seeing better free cash flow margins.

The key attribute is that they are not trading at stretch valuations, and they have stable learnings through cycles, and they have good free cash flow that is potentially seeing better free cash flow margins.

So it's about being very picky.

So it's about being very picky.

We think that there's a big divert between the winners and the losers in this kind of environment.

We think that there's a big divert between the winners and the losers in this kind of environment.

This guy in Shanghai, it's child abuse. He's got his four year olds watching it. Look at that in Shanghai. Can you see it, folks, that's cruel and unusual.

This guy in Shanghai, it's child abuse. He's got his four year olds watching it. Look at that in Shanghai. Can you see it, folks, that's cruel and unusual.

Crash man blocking shalans in the morning.

Crash man blocking shalans in the morning.

Full disclosure, folks, it's my grandchildren. We send good morning to the rugrats in Shanghai this morning. But you know, agatting back to the international and Pacific rim, I got too much gloom out there. I got guest after guests read me the uncertainty act. It clears at some point. How do you prepare for the moment where the uncertainty drifts away?

Full disclosure, folks, it's my grandchildren. We send good morning to the rugrats in Shanghai this morning. But you know, agatting back to the international and Pacific rim, I got too much gloom out there. I got guest after guests read me the uncertainty act. It clears at some point. How do you prepare for the moment where the uncertainty drifts away?

Well, I don't think that you can wait for necessarily confirmation from the data. The important things is that price will lead the data, and so as we're starting to see some of these turns and trends, we have to be there, which is why we move to a neutral position within international about a year ago, saying it's going.

Well, I don't think that you can wait for necessarily confirmation from the data. The important things is that price will lead the data, and so as we're starting to see some of these turns and trends, we have to be there, which is why we move to a neutral position within international about a year ago, saying it's going.

To happen, you know maybe this time.

To happen, you know maybe this time.

So is our federal reserve to help us this year? Are you still kind of that's a question.

So is our federal reserve to help us this year? Are you still kind of that's a question.

A couple of cuts.

A couple of cuts.

All this talk, folks, Sweeny, just to ask the money.

All this talk, folks, Sweeny, just to ask the money.

Question, we're not counting on the Fed for anything. We don't think that the labor market is going to be weak enough to justify them them cutting. We don't think that inflation is going to move down fast enough to give them the degrees of freedom to cut, which means that you get used to these higher for longer rates. And that's why we think that you have this continuous pressure on weak balance sheet companies that you should fade any strength.

Question, we're not counting on the Fed for anything. We don't think that the labor market is going to be weak enough to justify them them cutting. We don't think that inflation is going to move down fast enough to give them the degrees of freedom to cut, which means that you get used to these higher for longer rates. And that's why we think that you have this continuous pressure on weak balance sheet companies that you should fade any strength.

So what's your money unemployment rate?

So what's your money unemployment rate?

So we don't think that the FED will cut unless we see mid fours on the unemployment rate four point four, four four five.

So we don't think that the FED will cut unless we see mid fours on the unemployment rate four point four, four four five.

It's not that far away.

It's not that far away.

It's not that far away.

It's not that far away.

But we don't see this sharp deterioration in the labor market happening at this point. Yes, we see the sentiment around labor deteriorating, but we've not seen companies move to full out, full force layoffs that you just to just that there still is that underlying stability for now.

But we don't see this sharp deterioration in the labor market happening at this point. Yes, we see the sentiment around labor deteriorating, but we've not seen companies move to full out, full force layoffs that you just to just that there still is that underlying stability for now.

Yeah, So, I mean it's interesting.

Yeah, So, I mean it's interesting.

I mean one of the questions is I think for a lot of people is do I take this pullback to buy stocks here or do I just more uncertainty out there, because it's just one tweet away from another pullback in the market.

I mean one of the questions is I think for a lot of people is do I take this pullback to buy stocks here or do I just more uncertainty out there, because it's just one tweet away from another pullback in the market.

If you're buying stocks because you think it's going to be a v shape recovery and is up into the right with the volatility, it's the wrong move. But if you're buying stocks to say I'm going to own this for a long time, a step into volatility, we think you can still buy weakness.

If you're buying stocks because you think it's going to be a v shape recovery and is up into the right with the volatility, it's the wrong move. But if you're buying stocks to say I'm going to own this for a long time, a step into volatility, we think you can still buy weakness.

All of China's listening this morning to Cam Dawson. The entire nation just went to cash. Cam Dawson. Thank you so much, New Edge Wealth.

All of China's listening this morning to Cam Dawson. The entire nation just went to cash. Cam Dawson. Thank you so much, New Edge Wealth.

This morning, you're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.

This morning, you're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.

Michael Darta is with Roth Capital and years ago he came out of the Wisconsin combine and got a job with one of the rock stars of linking markets into economics, Jude Waninski. And Darta just penetrated right through with brilliant research notes melding investment into economics. Michael Darta, wonderful to have you on the show today. I'm looking at Atlanta GDP. Now I've got a real GDP estimate negative. Maybe it's a little positive. I got PCE coming in with some kind of disinflation. Are we in the middle of a nominal GDP collapse?

Michael Darta is with Roth Capital and years ago he came out of the Wisconsin combine and got a job with one of the rock stars of linking markets into economics, Jude Waninski. And Darta just penetrated right through with brilliant research notes melding investment into economics. Michael Darta, wonderful to have you on the show today. I'm looking at Atlanta GDP. Now I've got a real GDP estimate negative. Maybe it's a little positive. I got PCE coming in with some kind of disinflation. Are we in the middle of a nominal GDP collapse?

Thanks for having me on, Tom. I don't think nominal GDP is collapsing. I think what we're facing here is a series of adverse supply side shocks that will slow real growth and temporarily raise inflation. And you know that is unfavorable because for any nominal growth rate. You want most of it to be real, not inflation. And you can see that embedded in the Fed's forecasts with the SEP last week, where they reduced their expectation for real GDP for the year, but they increased their expectation for inflation.

Thanks for having me on, Tom. I don't think nominal GDP is collapsing. I think what we're facing here is a series of adverse supply side shocks that will slow real growth and temporarily raise inflation. And you know that is unfavorable because for any nominal growth rate. You want most of it to be real, not inflation. And you can see that embedded in the Fed's forecasts with the SEP last week, where they reduced their expectation for real GDP for the year, but they increased their expectation for inflation.

Yeah, saw that, and they reduced the.

Yeah, saw that, and they reduced the.

Real growth expectation about twice as much as they increased the inflation expectation for the year. So nominal growth expectations didn't collapse, but they have eased implicitly. That's looking for about four point four percent nominal growth. That's certainly below the five percent rates that we've been seeing recently, consistent with the soft landing, and less of it's going to be read so it's a bit of its bag inflationary flavor there time.

Real growth expectation about twice as much as they increased the inflation expectation for the year. So nominal growth expectations didn't collapse, but they have eased implicitly. That's looking for about four point four percent nominal growth. That's certainly below the five percent rates that we've been seeing recently, consistent with the soft landing, and less of it's going to be read so it's a bit of its bag inflationary flavor there time.

So Michael, bring it right over to the investment world. Does that re mean reduced revenues where I've got operating margins coming in and all of a sudden, Sweeney's getting gray hair because earnings are coming in.

So Michael, bring it right over to the investment world. Does that re mean reduced revenues where I've got operating margins coming in and all of a sudden, Sweeney's getting gray hair because earnings are coming in.

Yeah, that's exactly what it means.

Yeah, that's exactly what it means.

So slower top line growth and higher costs, and you know that is a risk to these very elevated expectations for S and P five hundred earnings this year. At the start of the year, analysts we're expecting more than fourteen percent earnings growth. Our model that uses high yield debt spreads in the new orders index from the ISM data suggests that, you know, low single digits is more likely. And you know, unfortunately, you have pretty high evaluation still on those lofty expectations. So you know, we'll see if markets can continue to look through this uncertainty. We've rallied over the last few sessions, but you know, I think we still might have some volatility ahead.

So slower top line growth and higher costs, and you know that is a risk to these very elevated expectations for S and P five hundred earnings this year. At the start of the year, analysts we're expecting more than fourteen percent earnings growth. Our model that uses high yield debt spreads in the new orders index from the ISM data suggests that, you know, low single digits is more likely. And you know, unfortunately, you have pretty high evaluation still on those lofty expectations. So you know, we'll see if markets can continue to look through this uncertainty. We've rallied over the last few sessions, but you know, I think we still might have some volatility ahead.

So it seems like one of the key dates coming up here, Michael, is April second, when we get I guess.

So it seems like one of the key dates coming up here, Michael, is April second, when we get I guess.

A clear picture of some of these tariffs here.

A clear picture of some of these tariffs here.

Just stepping back and thinking about tariffs, is it a good thing to bring more manufacturing back to the US. Is that a realistic and a meaningful goal of tariffs?

Just stepping back and thinking about tariffs, is it a good thing to bring more manufacturing back to the US. Is that a realistic and a meaningful goal of tariffs?

Do you think?

Do you think?

Well?

Well?

The administration certainly thinks it, seems to think so. They want to do it for so called critical industry of the US as an emergency or goes to war. You know, they want those critical industries here and able to fire up at a moment's notice. But in economics, everything comes with a trade off, and so if we're deploying capital and labor into industries that were less efficient at than they would be in other places, then those same resources can't go into making other export goods. So there is a second and third order drag on efficiency productivity. So the question is, you know, is it worth it to give that up? And that's what markets are grappling with now.

The administration certainly thinks it, seems to think so. They want to do it for so called critical industry of the US as an emergency or goes to war. You know, they want those critical industries here and able to fire up at a moment's notice. But in economics, everything comes with a trade off, and so if we're deploying capital and labor into industries that were less efficient at than they would be in other places, then those same resources can't go into making other export goods. So there is a second and third order drag on efficiency productivity. So the question is, you know, is it worth it to give that up? And that's what markets are grappling with now.

One of the I guess the concerns here, I guess the media concerns Michael, this marketplace is the thoughts of stagflation where the growth is kind of slowing, inflation's kind of creeping back up, maybe due to some.

One of the I guess the concerns here, I guess the media concerns Michael, this marketplace is the thoughts of stagflation where the growth is kind of slowing, inflation's kind of creeping back up, maybe due to some.

Of these tariffs. Who knows.

Of these tariffs. Who knows.

Is stagflation something we should be worried about?

Is stagflation something we should be worried about?

Yeah, it certainly has that flavor because I think after the election there was a lot of optimism that whatever happened on trade would be offset by fiscal policy and deregulation, and so far we don't really know. You know, the deregulation piece is kind of a question mark. You know, the administration's going very hard and fast with the tariffs, a bit of an on again, off again, on again approach, But I think that really challenges some of the assumptions coming into the year, which were that the tears were simply a bluff or that would be offset by deregulation and potential tax reform. Very difficult to see any kind of a big eating a physical policy considering the constraints and deregulating crypto, I think is highly unlikely to offset Moot Hawley two point zero.

Yeah, it certainly has that flavor because I think after the election there was a lot of optimism that whatever happened on trade would be offset by fiscal policy and deregulation, and so far we don't really know. You know, the deregulation piece is kind of a question mark. You know, the administration's going very hard and fast with the tariffs, a bit of an on again, off again, on again approach, But I think that really challenges some of the assumptions coming into the year, which were that the tears were simply a bluff or that would be offset by deregulation and potential tax reform. Very difficult to see any kind of a big eating a physical policy considering the constraints and deregulating crypto, I think is highly unlikely to offset Moot Hawley two point zero.

Torsten Slack apologlobal management channeling Paul Sweeney, I say puts out a note moments ago stagflation risk rising. Michael Dharta giving us some good knowledge and good morning. An extended discussion with Michael Darda Jim Bianco coming up in at nine o'clock. Our mister Darty, are on the markets, linking in to our economy. And now, folks, the Darta rabbit hole does M one M two m O money supply monetorism Michael Darta doesn't matter anymore.

Torsten Slack apologlobal management channeling Paul Sweeney, I say puts out a note moments ago stagflation risk rising. Michael Dharta giving us some good knowledge and good morning. An extended discussion with Michael Darda Jim Bianco coming up in at nine o'clock. Our mister Darty, are on the markets, linking in to our economy. And now, folks, the Darta rabbit hole does M one M two m O money supply monetorism Michael Darta doesn't matter anymore.

Oh, I love that question, Tom. You know, I'm one of the few that still watches those indicators, right, and so we had a huge explosion in the monetary aggregates going into the high inflation period in twenty twenty one.

Oh, I love that question, Tom. You know, I'm one of the few that still watches those indicators, right, and so we had a huge explosion in the monetary aggregates going into the high inflation period in twenty twenty one.

Twenty stimulus come on, we still you.

Twenty stimulus come on, we still you.

Know, yeah, we did massive you.

Know, yeah, we did massive you.

Know, stimula was plural, Okay, Yeah, So they were good proxies for massive stimulus and a huge ramp and nominal relative to the productive capacity of the economy, which was constrained during the pandemic. Right, Productivity basically was frozen for two years, and we had double digit increases in nominal demand on the back of all that stimulus. So that's your inflation story. And in the wake of the FED tightening five hundred and thirty plus basis points, those aggregates slowed very sharply. It turns out, you know, the FED was able to preside over this once in a lifetime soft landing. So nominal slowed, but it didn't crash. This bly side of the economy picked up after twenty twenty two. That's a critical piece of the soft landing and why the slowdown in those aggregates I think did not foreshadow or recession this time. And now we're putting that at risk with apply side disturbances, which are frankly series of self inflicted blows.

Know, stimula was plural, Okay, Yeah, So they were good proxies for massive stimulus and a huge ramp and nominal relative to the productive capacity of the economy, which was constrained during the pandemic. Right, Productivity basically was frozen for two years, and we had double digit increases in nominal demand on the back of all that stimulus. So that's your inflation story. And in the wake of the FED tightening five hundred and thirty plus basis points, those aggregates slowed very sharply. It turns out, you know, the FED was able to preside over this once in a lifetime soft landing. So nominal slowed, but it didn't crash. This bly side of the economy picked up after twenty twenty two. That's a critical piece of the soft landing and why the slowdown in those aggregates I think did not foreshadow or recession this time. And now we're putting that at risk with apply side disturbances, which are frankly series of self inflicted blows.

Michael, you know we're going to get you miss sentiment data. This fraudiya.

Michael, you know we're going to get you miss sentiment data. This fraudiya.

A couple of weeks ago, the.

A couple of weeks ago, the.

University of Michigan data really suggested that people are concerned. The current sentiments are really took a hit here. Inflation expectations moved decidedly higher. When you see soft data like that, does that get your attention?

University of Michigan data really suggested that people are concerned. The current sentiments are really took a hit here. Inflation expectations moved decidedly higher. When you see soft data like that, does that get your attention?

Yeah, it's you know, the survey data is really a set of inauspicious recent outcomes, with confidence pulling back and inflation expectations shooting up. So that's not really what you want to see. Obviously, we're going to get some Conference Board data today for March, and that data has also been soft, not quite as you know weak as the you mish data. But the key question is is this soft data a harbinger of much weaker hard data coming down the pike. And we just don't have the answer to that yet, and we won't even this week. We've got some February data coming up on Friday on personal income and consumption and the deflators. The FED watch is but still a little bit stable on some of this hard data, and that's really the risk that markets face. We know the soft data doesn't always translate one for one into hard data, but obviously the risks of the hard data rolling over with this hit to confidence that increased.

Yeah, it's you know, the survey data is really a set of inauspicious recent outcomes, with confidence pulling back and inflation expectations shooting up. So that's not really what you want to see. Obviously, we're going to get some Conference Board data today for March, and that data has also been soft, not quite as you know weak as the you mish data. But the key question is is this soft data a harbinger of much weaker hard data coming down the pike. And we just don't have the answer to that yet, and we won't even this week. We've got some February data coming up on Friday on personal income and consumption and the deflators. The FED watch is but still a little bit stable on some of this hard data, and that's really the risk that markets face. We know the soft data doesn't always translate one for one into hard data, but obviously the risks of the hard data rolling over with this hit to confidence that increased.

I mean Michael. Right now we've cratered on the standard and pours five hundred. I think're down seven percent or some silly number like that. David Constant and the crew at Gold and Sacks might just splash with some fancy mathematics to put the regression trend of earnings down to be polite low single digit. Do you have an almost a data assumption of a single digit stock market forward or do you maintain double digit growth with operating leverage?

I mean Michael. Right now we've cratered on the standard and pours five hundred. I think're down seven percent or some silly number like that. David Constant and the crew at Gold and Sacks might just splash with some fancy mathematics to put the regression trend of earnings down to be polite low single digit. Do you have an almost a data assumption of a single digit stock market forward or do you maintain double digit growth with operating leverage?

I think it's going to be really hard to maintain that double digit growth. I mean, if you just do a super basic Tom Keen scatterplot regression on forward pes in ten year future returns, you know, coming into the year with the forward pe twenty two x, you know, typically that's a level where you see very weak, potentially even negative ten year forward returns. So the higher the valuations, the lower the longer term forward returns are. And you know, that's a little bit of a different game than the you know, than the chase that's been on with momentum. And then more broadly, I do think that these disruptions to the supply side eat away at the earnings expectations, and so the high valuations are pricing in good you know, good times continuing, and now we're starting to question that, which is, you know, why we've seen more volatility in this pullback, which frankly has been pretty minimal so far in the s and P five hundred, Even at the lows on the thirteen, the march was still above a twenty forward multiple, and you know that's that's still ten twelve percent above the ten year moving average, which you know, I think is very generous because the tenure moving average is well above longer term historical averages. So these this is a high valuation market still, and I think investors that are going to just jump right back in and chase what was working for most of the last two years could be a bit disappointed.

I think it's going to be really hard to maintain that double digit growth. I mean, if you just do a super basic Tom Keen scatterplot regression on forward pes in ten year future returns, you know, coming into the year with the forward pe twenty two x, you know, typically that's a level where you see very weak, potentially even negative ten year forward returns. So the higher the valuations, the lower the longer term forward returns are. And you know, that's a little bit of a different game than the you know, than the chase that's been on with momentum. And then more broadly, I do think that these disruptions to the supply side eat away at the earnings expectations, and so the high valuations are pricing in good you know, good times continuing, and now we're starting to question that, which is, you know, why we've seen more volatility in this pullback, which frankly has been pretty minimal so far in the s and P five hundred, Even at the lows on the thirteen, the march was still above a twenty forward multiple, and you know that's that's still ten twelve percent above the ten year moving average, which you know, I think is very generous because the tenure moving average is well above longer term historical averages. So these this is a high valuation market still, and I think investors that are going to just jump right back in and chase what was working for most of the last two years could be a bit disappointed.

We're hearing more and more potentially a better recession. Michael, Is that kind of in your six and twelve month forecast at all?

We're hearing more and more potentially a better recession. Michael, Is that kind of in your six and twelve month forecast at all?

Well, I mean, obviously, Paul, I think that the risks have gone up, you know, relating to the soft data really weakening. If that was not underway, then obviously the risks would be lower. It's sort of a shame because you know, the FED has been able to preside over this immaculate disinflation and soft landing that's been underway for you know, the greater part of nearly two years now, and that is a very rare historical event against all odds. And we've had, you know, we've had a lot of excitement about the AI story. Productivity has been picking up over the last two years. I don't think that's really AI, but you know, the reversal of pandemic oriented diortions, all of that could be put at risk now.

Well, I mean, obviously, Paul, I think that the risks have gone up, you know, relating to the soft data really weakening. If that was not underway, then obviously the risks would be lower. It's sort of a shame because you know, the FED has been able to preside over this immaculate disinflation and soft landing that's been underway for you know, the greater part of nearly two years now, and that is a very rare historical event against all odds. And we've had, you know, we've had a lot of excitement about the AI story. Productivity has been picking up over the last two years. I don't think that's really AI, but you know, the reversal of pandemic oriented diortions, all of that could be put at risk now.

So yeah, one final question, Michael, we're out of time. Critical is Nantucket and Martha's Vineyard real estate gonna crack?

So yeah, one final question, Michael, we're out of time. Critical is Nantucket and Martha's Vineyard real estate gonna crack?

It's softening. You know, a lot of these super hot markets are softening. But the gains that were seen from twenty twenty through twenty twenty two into twenty three we're historic. So we do have an affordability problem, and not just in those super hot markets.

It's softening. You know, a lot of these super hot markets are softening. But the gains that were seen from twenty twenty through twenty twenty two into twenty three we're historic. So we do have an affordability problem, and not just in those super hot markets.

May or Man's not fall into the Atlantic Michael Darta, thank you so much. With Roth greatly appreciate it. This warning a terrific brief there.

May or Man's not fall into the Atlantic Michael Darta, thank you so much. With Roth greatly appreciate it. This warning a terrific brief there.

This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven Eastern on Applecarplay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa, play Bloomberg eleven thirty.

This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven Eastern on Applecarplay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa, play Bloomberg eleven thirty.

Today we celebrate Phil Tazuou come in here and we would talk to him about the market, and he would mention the word uncertainty fourteen times Tay's Asset Management. Today we celebrate a really challenging book, and it's a particularly important book if you're missing the retirement Ballet, The Behavioral Portfolio, Managing portfolios and investor behavior given a complex economy. Congratulations on well timing here to have the amount of uncertainty we have. On the release of the Behavioral Portfolio, You've got a whole section on the great dilemma of a retirement undershoot. Are we investing too cautiously because we're scared stiff? Yeah?

Today we celebrate Phil Tazuou come in here and we would talk to him about the market, and he would mention the word uncertainty fourteen times Tay's Asset Management. Today we celebrate a really challenging book, and it's a particularly important book if you're missing the retirement Ballet, The Behavioral Portfolio, Managing portfolios and investor behavior given a complex economy. Congratulations on well timing here to have the amount of uncertainty we have. On the release of the Behavioral Portfolio, You've got a whole section on the great dilemma of a retirement undershoot. Are we investing too cautiously because we're scared stiff? Yeah?

So what we're doing is we're ignoring a significant chunk of history, Tom. I mean the two episodes I point out, number one, the thirty six year bond bear market that happened between forty five and eighty one. It's completely not excluded from people's planning when they're planning for portfolios. But obviously the big one is the Great Depression. And what I do in the book is I do a visual is what I call it visualization of what a balanced portfolio would look like during the Great Depression. In the first three years, it's down seventy two percent. If you're taking distributions, then we have a five year bowl market, but then another five year bear market.

So what we're doing is we're ignoring a significant chunk of history, Tom. I mean the two episodes I point out, number one, the thirty six year bond bear market that happened between forty five and eighty one. It's completely not excluded from people's planning when they're planning for portfolios. But obviously the big one is the Great Depression. And what I do in the book is I do a visual is what I call it visualization of what a balanced portfolio would look like during the Great Depression. In the first three years, it's down seventy two percent. If you're taking distributions, then we have a five year bowl market, but then another five year bear market.

It's unnavigable.

It's unnavigable.

So what the entire investment community is doing, as brilliant as it is, and it is brilliant, is deciding we're going to look back fifty years and we're going to base all of our planning based on that, and we're going to exclude anything before that that looks like it might be a nuclear.

So what the entire investment community is doing, as brilliant as it is, and it is brilliant, is deciding we're going to look back fifty years and we're going to base all of our planning based on that, and we're going to exclude anything before that that looks like it might be a nuclear.

My mother and my father classic depression babies kept waiting every five years for the next depression. That's, as a general sense, say it didn't come because of credit expansion, whatever the reason. Maybe World War two. Who knows? Are you predicting a nineteen thirties We're not predicting it.

My mother and my father classic depression babies kept waiting every five years for the next depression. That's, as a general sense, say it didn't come because of credit expansion, whatever the reason. Maybe World War two. Who knows? Are you predicting a nineteen thirties We're not predicting it.

But the one thing I'll say is that if you look at certain elements, so for example, when's the last time we had one hundred percent death of the GDP and every developed nation in the world. Essentially, when's the last time we had a declining demographic population in every developed country in the world. And also, you know when we've been at sort of record price to book like we were in the Internet bubble burst. So I think what you need to do is like say, look, we're going to go ahead and include this history, and instead of making a prediction for down markets, we're going to say this could happen again. And by the way, based on where all the data is right now, it might actually be more probable than not.

But the one thing I'll say is that if you look at certain elements, so for example, when's the last time we had one hundred percent death of the GDP and every developed nation in the world. Essentially, when's the last time we had a declining demographic population in every developed country in the world. And also, you know when we've been at sort of record price to book like we were in the Internet bubble burst. So I think what you need to do is like say, look, we're going to go ahead and include this history, and instead of making a prediction for down markets, we're going to say this could happen again. And by the way, based on where all the data is right now, it might actually be more probable than not.

Talk to us about the sixty forty portfolio.

Talk to us about the sixty forty portfolio.

I'm teeing up here, bro.

I'm teeing up here, bro.

Well, so you know the sixty forty portfolio is in historical accident. Bonds were created to fund governments and later fund companies. Stocks were created to share ownership. At some point someone came along and said, let's put these two things together. And sometimes it's an effective diversifier. Sometimes it's not. But I think what's interesting is that, you know, Warren Buffett said derivatives were a weapon of mass financial destruction. Actually you can use derivatives, option contracts and things like that to create real negative diversification. So our strategy is what we call a behavioral portfolio. It's what I lay out in the book. And what it does is it says, take half of your equities and put it into hedge equity strategies so that it can uncorrelate from negative economic activity like the Great Depression. Yeah, and for the fixed income side, be adaptive.

Well, so you know the sixty forty portfolio is in historical accident. Bonds were created to fund governments and later fund companies. Stocks were created to share ownership. At some point someone came along and said, let's put these two things together. And sometimes it's an effective diversifier. Sometimes it's not. But I think what's interesting is that, you know, Warren Buffett said derivatives were a weapon of mass financial destruction. Actually you can use derivatives, option contracts and things like that to create real negative diversification. So our strategy is what we call a behavioral portfolio. It's what I lay out in the book. And what it does is it says, take half of your equities and put it into hedge equity strategies so that it can uncorrelate from negative economic activity like the Great Depression. Yeah, and for the fixed income side, be adaptive.

Everyone listening worldwide is saying, okay, So this is the fill T's gold exercise where I got right now a linear extrapolation and gold, which is eighty ish nineteen eighty ish, is gold part of the behavioral portfolio. It's not.

Everyone listening worldwide is saying, okay, So this is the fill T's gold exercise where I got right now a linear extrapolation and gold, which is eighty ish nineteen eighty ish, is gold part of the behavioral portfolio. It's not.

You know, gold can be a great diverse fire.

You know, gold can be a great diverse fire.

The problem is over the very long term it just produces uh, you know CPI right, So you can have moments in time when you get some appreciation, but if what you need to have are instruments in the portfolio that can produce verifiable, reliable, long term above inflation.

The problem is over the very long term it just produces uh, you know CPI right, So you can have moments in time when you get some appreciation, but if what you need to have are instruments in the portfolio that can produce verifiable, reliable, long term above inflation.

Is that Apple? Is that Apple? I mean I got a use of cash and free cash flow with Apple that at least x X depression. I mean, Paul, if we have a depression, we're still buying six toys a year. But our big free cash flow quality stocks appropriate and in a portfolio of gloom yeah.

Is that Apple? Is that Apple? I mean I got a use of cash and free cash flow with Apple that at least x X depression. I mean, Paul, if we have a depression, we're still buying six toys a year. But our big free cash flow quality stocks appropriate and in a portfolio of gloom yeah.

Absolutely, so I by the way, I'm not a doom in gloomer.

Absolutely, so I by the way, I'm not a doom in gloomer.

I'm a boom boom kaboomer. So you got to embrace the boom A boom boom kaboomer. You embrace the boom, you acknowledge the possibility of the kaboom.

I'm a boom boom kaboomer. So you got to embrace the boom A boom boom kaboomer. You embrace the boom, you acknowledge the possibility of the kaboom.

I want to create a kaboomometer boometer.

I want to create a kaboomometer boometer.

But look, half of the equity's portfolio needs to be in conventional stuff, and so the things that have done so well, if you're positioned in that, plus your position in it hedges on the other side too, you've still got your sixty percent equity allocation just half of its hedge in case.

But look, half of the equity's portfolio needs to be in conventional stuff, and so the things that have done so well, if you're positioned in that, plus your position in it hedges on the other side too, you've still got your sixty percent equity allocation just half of its hedge in case.

Things move down. But absolutely you need companies like Apple.

Things move down. But absolutely you need companies like Apple.

How about alternatives?

How about alternatives?

Where does where do alternatives fit into an investor's SPORTFOLI is so one.

Where does where do alternatives fit into an investor's SPORTFOLI is so one.

Of the criteria in the book that I lay out is what I said before. It needs to be a reliable provider of growth or inflation. So think about one alternative, which is managed futures. Managed futures is essentially just a zero less than zero sum game with a group potentially really good manager. So I would say that would not qualify. So if you look under the hood and see what's the engine of growth. If it could be something like stocks or some other source of reliable growth, then you go there, Phil.

Of the criteria in the book that I lay out is what I said before. It needs to be a reliable provider of growth or inflation. So think about one alternative, which is managed futures. Managed futures is essentially just a zero less than zero sum game with a group potentially really good manager. So I would say that would not qualify. So if you look under the hood and see what's the engine of growth. If it could be something like stocks or some other source of reliable growth, then you go there, Phil.

Thank you so much. Congratulations Phil, Tas there a lot of work Tas asset management, the behavioral portfolio. I'll put it out on Twitter and LinkedIn a very nice concise read on something that I've talked about enough, which is what if.

Thank you so much. Congratulations Phil, Tas there a lot of work Tas asset management, the behavioral portfolio. I'll put it out on Twitter and LinkedIn a very nice concise read on something that I've talked about enough, which is what if.

This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.

This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.

The newspapers this morning just too much. What can we say here? It goes on and on. What's going to be a twenty five minute block, but we'll do it right now, too quick. Lisa Manteo, what do you have?

The newspapers this morning just too much. What can we say here? It goes on and on. What's going to be a twenty five minute block, but we'll do it right now, too quick. Lisa Manteo, what do you have?

We have the condensed version for you. Okay, We've been talking about retailers right bulking up their inventory so to get ahead of President Trump's tariffs. So imagine companies like Mike Beloved, Costco, Yes, Williams Sonoma. They are stockpiling goods. But here's the difference to Wall Street Journal talk to a couple experts, and they're saying, you know what, this is risky because consumer spending has slowed, and now your risk getting stuck with a ton of goods that are just stocking up in an inventory. The ports in Los Angeles, Long Beach, California. They're starting to see the influx already from this. But the thing is, it's not just the tariffs. They were all ready stocking up on the merchandise because you had them, you know, worrying about the strike at the at the port. Yes, and they were also worried about, you know, trying to get ahead of the lunar New Year before the factories closed across aged for like two weeks. So it's this continuing like stockpile of things.