Tom Keene breaks down the Single Best Idea from the latest edition of Bloomberg Surveillance Radio.
In this episode, we feature conversations with Larry McDonald and Max Kettner.
Watch Tom and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF
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Single best idea and we say good morning to you. Claims came in three days of job data ADP pretty good, claims, pretty much on track. It's a fully employed America as a generalization. And the jobs report tomorrow had a lot of good economic conversations today. We'll go beneath the headline data at eight thirty tomorrow as well. I had a number of other good conversations today. I'll make this quick. Today we're gonna get to Max Kattener optimistic on the markets, Rebecca Patterson optimistic on the markets, Omar Aguilarich, Charles Schwab optimistic on the markets. I think there's like a theme there, and we'll talk to Max Kttener about how that ties into the ten year yield. But first, Lawrence McDonald is someone that everyone reads. He has after his Lehman Brothers days. He's got a report i'll call the bear Trap Report, and like you read it once, you read like ten of his reports, and you have to read them all or skim them all because you know you're going to find one jewel in five or one jewel and ten to the point where Larry MacDonald had my Essay of the Year last year at bear Trap Report, this long, ten thousand word article on what does it mean that there's trillions and trillions and trillions of dollars of just money out there? And I mean it's all there is to it. It's codified into a new book. I'm gonna give you the whole title, this may take the whole podcast, How to Listen When Markets Speak, Risks myths and investment opportunities in a radically reshaped economy. It's a radical book and that it's in plain English with lots of appendices and little bullet points in as well. He's got a bunch of muckety bucks on the back, Mark Cuban, Jillian Ted of the fteen, now Ferguson, doctor Brenner, Ian Bremer is is there as well, and Greg Zuckerman with his wonderful work at the Journal. And the answer is McDonald's always thinking outside the box. And I really recommend to you how to listen when Markets Speak. Here's Lawrence McDonald on the Wall of Money personified by passive investing.
Think about passive investing right, and Jack bowl GOLs up and heaven God bless him. But you know, the vanguard origination of passive investing. Passive it's starting with the best of intentions, the best of intentions, but at some point passive becomes a little bit more evil because there's thirty five trillion, at least thirty five trillion tied to the index S and P. And so when you have a stock like Nvidia that's now become five percent of the S and P five five percent and it's trading eighty percent above it's two hundred day moving average. Meanwhile, you know, the energy sector as a whole is only three percent of the S ANDP. And so what happens is at some point, too much money is in passive investing. There's not a lot of thinking behind that, and it gets very crowded in what we call herdy, like a herd, and it creates more distortions on the upside, and it will create more distortions on the downside.
And my point there with Larry that it would add to is it just creates a distance. Years ago, people that were in the market were much more in it, whether they lost money or gain money, and many many people overtraded and made wrong decisions and bought at the top and all that, and I'm not saying it was a better place, but it was a different place. Is that now so many people they're just not engaged in the EBB and the flow of the market. We will become engaged. And I believe it's April twelfth here, in seven eight days with the earning season beginning. We really focus on the major banks there, JP Morgan and others coming out, and then under the tech earnings and such. But I really take pride in what Bloomberg Surveillance does in giving you the dynamics of free cash flow, the dynamics of revenue and down the income statement. And we'll do that here acting like active investors. Max Kettener is always active at HSBC. There was a point where he was a little bit cautious in the market, but he's really brought it around to a constructive optimism about what's up out there, and he folds it out to where the ten year yield is. Here's Max Kittener linking equities to the ten year yield.
What we see at the moment is a bit around actually rates volatility rather than what yields do. Per se. I don't really care whether you know the ten year is going to be at four, at five or at three. As long as intrast rate volatility goes down, that I think is the most important thing. And that's what we have been seeing, except for the last two three days. For the majority of twenty twenty four, interest rate volatility was declining quite strongly and that freed up some risk premium, both in credit spreads and also in equity markets. So, in all honesty, even if fields were to stay at these levels, or even if they do trend a little bit higher, which would be contrary to our rates, how's you as you said, Well, even if that happened, as long as it's gradual, right, as long as interest rate volatility remains subdued or perhaps goes down even further, that is still really good for equity multiples.
Max Kitten HSBC and the idea of Max Kattner in London LinkedIn with Steve Major in Hong Kong on fixed income as a very powerful duel. Look for that within HSBC literature. I know Steve Major was a very large presence out on LinkedIn as well. Our social media is LinkedIn. An ex Eric, did you know I got a bluest star over date Elon called me up. He says, I'm such a hitter. No, it was just because of the bow. Tai Elon called up. He said, I'm giving you a blue star and me and a lot of other people. So what do you have any idea what they're doing? I have no idea. Yeah, but all of a sudden, X is like throwing around blue stars, and I have no idea what that means. What I know is we are out on Twitter and we're out on LinkedIn as well, trying to give you the perspective of many of these good people like Max Kuttner and of course Larry McDonald at the bear Trap Report, that book again, how to listen when markets speak, Big day tomorrow, the Jobs Report. We are out. Then on Bloomberg Radio, Sweeny mentions we have to mention Bloomberg Radio, which we do, and also on Apple car Play. Can't say enough about it. The Bloomberg Business app downloaded for free and it gets you into Apple car Play. It's safer, it's better. It's also clearer, which is you know, good sonics and fidelity and all that. And on YouTube growing every day you go and you search Bloomberg podcasts. We're working on that. Are they going to put our ugly face on their eric and it was one day it's going to be there, but it says Bloomberg surveying. Let's you. You click on it at seven zero zero Wall Street Time and it gets you to us with a live chat, which is actually very very informative. I got run over today, folks because we were doing Beyonce's new album, and we were doing Jolene and I did Matreka Berg from nineteen ninety seven, which is great. The just iconic singer songwriter from Nashville. Oh my word, the Miley Cyrus people showed up and said, I promise I'm going to listen to myrius, Miley Cyrus, Joelene. I'll do that this weekend. Tomorrow the jobs report that will be our single best idea