Hello, and welcome to What Goes Up, a weekly markets podcast. My name is Mike Reagan. I'm a senior editor at Bloomberg and umbled on a higher across asset reported Bloomberg this week on the show. Well, as Yogi Barrow once said, it's tough to make predictions, especially about the future. That's the quote that leads a research report from this week's guest on what he and his team expected the markets in two And you know what, We're actually gonna listen to him and maybe even let him gloat a little bit since his predictions for last year were pretty good. Well, Bill, do I have to define pretty good in the world of predictions? And you know it's gonna sound a little bit like I sounded, you know, explaining my report card to my dad in college, that that it's it's better than it sounds. You know this this was a semester where the Grateful Dead had six tour stop within driving distance of campus. You gotta you gotta grade me on the curve here, But on his predictions, uh, is really pretty good. I mean, I'll compare that to our own Cameron Chris, I think, one of our most respected columnists who grades his predictions every year as well. He was seventy as well. Um, he said, that's the best he's ever been in making predictions. And that's a guy who had like a perfect s a T math score. Um, I think anything about fifty is in a in the predictions game, Buil Dona, what do you think in the predictions game? Probably not for when you're in high school. That's like not that good, I would say, But sevent when I read that, I also was impressed because last year was, as you know, so hard to predict given everything that was going on. But so, speaking of our guest, I want to introduce Chris Harvey. He's the head of equity strategy at Wells Fargo, and Chris, I want to welcome you back to the show. Then thank you and happy New Year and Chris, before we get to the predictions and the way, everyone, I'm I'm I'm recording this podcast in my bathroom with a blanket over my head for very complicated reasons involving a gas Maine replacement on my streets. So if you hear Vildana and Chris just first out laughing that that's that's the reason why most likely it's quite a spectacle to see something. This is a new I've I've you know, I'm no stranger to humiliation, but I gotta say this, this is uh, this is a high high water mark for me, or maybe low water mark. I don't know. But but Chris, I want to unpack some of your predictions for two. But I want to talk first about the f OMC minutes that came out this week. Uh. You know, we're recording this podcast on Wednesday, about an hour after the minutes at the tape, and we kind of a nasty reaction, you know. The tone of it seems to be that not only will the rate hikes come a little earlier than people were expecting, but also I think the bigger surprise that the Fed sounds like they're they're gonna want to wind down their balance sheet, let their balance sheet reduce a little bit, uh, you know, rather than reinvesting proceeds of their holdings like they have in the past. What's your takeaway from the minutes? Is this um? Is this a reasonable reaction to the market. You know, last time I looked SMP down more than one percent in the minutes after after the moments after the minutes, and you know, NAVSTAC was already getting hurt there down composite down a two and a half percent. I think is this a rational reaction or what do you think? Like? I think it's a reasonable reaction. So there's a couple of things that take away. For a while, people have been questioning whether the FED had had to wherewithal the will to to fight inflation. There's talk about transitory for for some period of time, actually too long a period of time. Powell recently retired that phrase or said he was going to retire that phrase. And then when you listen to the minutes, they mean business. And I think people are finally realizing that the FED will need will do what they need to do to fight inflation. And that's troubling. But more importantly, what's really happening underneath the surface and behind the scenes real rates. You have to keep a very very sharp eye on real rates. If you look at ten year real rates, they're up almost twenty five basis points from the start of the year. What we've been saying to clients and what we've noticed all of last year is as real rates go, much of the relative price in the achary market goes, so real rates go up, that cyclical trade works, real rates go down, and that long duration or that tech growth trade works. And what's happening right now is real rates are going higher. Tech in high growth of rolling over. That's a big part of the market. And so we were down earlier today this is just an acceleration. Is it the right magnitude? I think it's reasonable. Yeah. You know what's such truing to me is you know, we got this today on Wednesday. On on Tuesday, we got that blog post from Neil Cash carry uh long considered sort of the biggest of in the FED, not a voter this year, but even him expecting two hikes in two I guess that's got to be kind of the floor of of expectations. Now. You know, the market was pricing into maybe three. But I think when even the dovish, most dovish member of the FED is expecting to that boy that it's a bit of a cold water in the face to some degree. Yeah, I think that's right. And what I also think is I was a little dump fout last year, was a little dunk bounded because we were looking and we're listening to transcripts, we're looking at pricing. I had never seen in in my two decades and more than two decades on Wall Street this kind of pricing environment. At one time I had asked one of my associates, Hey, give me a handful of stocks that are raising price. He said, just pick any three, And at the end of the day I was surprised that it's taken this long for the FED to react. But now the FED is reacting and you're seeing break evens and you're seeing inflation expectations come down. The other thing that I think is also happening is there was a lot of talk about stack inflation two three, four months ago. Well you have to take stackflation off the table because the FED is fighting inflation. The other thing that's happening is we have February first coming up. February first is Chinese kicks off Chinese New Years. That's when goods start to slow into the US. Not saying that supply chain is going to be fixed, but really what the market is latching onto, or what we think it will last onto, is have we seen peak pressure or peak congestion? Are we going to be able to get rid of some of those logger heads? Will we be able to make some improvements and if so, that's really important because that has significant ramifications for pricing, multiples and margins. So, Chris, speaking of all of these expectations and everything that's coming up, you and your team come out with price targets for the SMP five Mike mentioned in your intro years was spot on for last year. So I'm hoping you can sort of walk us through your calls for and all of the factors behind it and what you're thinking is behind your price target and anything else you see coming up. Sure, sir, certainly. Maybe I'll just give you the big picture overview. One of the things we've been saying is this year, as you roll into it's really about risk first and return second. When you're looking at a peakish multiples on top of peakish growth, that's not a really bullish scenario. In addition to that, growth is decelerating, whether you're looking at us GDP or whether you're looking at earning. His growth fed as we now are are very aware of, is going to become more aggressive and accommodations coming off the table. We're lapping some very difficult comps and we may be hitting peak pricing and again peak margins, which which would put pressure downward on multiples. So we've talked about a temperacent sell off. We've talked about up and quality, down and risk. We've talked about margins multiples. Where would you like to start? Well, well, Chris Love, I'll start here. You know, I'm I'm just a guy sitting in his bathroom with a blanket over said, so, you know, far be it for me to say. But I would also great predictions on sort of the boldness of predictions. And I want to start with your prediction temper cent correction by summertime. Now, in most years, I think if you took any average years and made that prediction at the beginning of it, it's perhaps not that bold, you know. It's something that tends to happen I think more than half the time in most years, if if I'm correct, But it certainly feels like a very bold predict prediction these days, given the fact that boy, it's been so long since we've had a real teen percent prediction correction in the market. They seem to have gone extinct, you know, But it is walks through You're thinking about why, uh, we're likely to see one by summertime, And I'm assuming the FED plays a role to some degree, but uh, you know what makes you confident enough to make that you're sort of your first prediction for yea. So a couple of things. First, let me say, you're really pulling this blanket thing off very very well. It's it's people. It's impressive, it's really impressive. A lot of guys would have turned their video off. But but now back to our show ten percent pullback. Uh, there's a couple of things there, and I'm gonna be scattered, I'll be all over the place. But I want to bring you back to the late nineties, early two thousand's, late nineties, early two thousand's, Mike, you probably remember this. There's a company called c mg I. C mg I had the naming rights to Fox Burger Stadium in two thousand. Stock was one sixty at that point in time. I believe in two thousand and two the stock was sixty sixty cents and they gave back the naming rights. What just happened at the Staples Center Crypto dot com no longer the Staples Center Crypto dot com. Gosh, that's really familiar. Right. There is a whether it's the Matt and curse or whether it's the stadium curse, it's telling you we're getting close to the top in times of fraud. Those are those are signs that we use and we look at right. The the other thing that we say, we talked about a lot, and you're also absolutely repositively right. This ten percent correction in normal times not a big boat call, but here, since we haven't had a correction a long time, it is a much bigger boulder call. And that gets to the second point. The second point is there's pervasive belief that the market can bend but not break right. Market can go down five percent, we can break through the fifty day, we can break through, we can hit the hundred day, but we really can't collapse. Well, again, we're in the second year recovery. Typically in a second year recovery you have multiple compression and you have a lot of other interesting things happening. What you have is growth decelerating, you have a more aggressive bed. You you have your laughing very difficult comps, and you have the speculation and when people turn down right. So one of the things that that's helped a lot of these names is you've had money chasing performance when the performance isn't there, then the money goes away. And we think that people are going to sell weakness for the first time in a while for fundamental reasons, for technical reasons. And I think the operative another operative word for two is normalization. We're going to use this this word time and time again. We're going to get back to more normal times, whether it's consumers spending, whether it's latility, or whether it's valuation. I love the point about the stadium naming right and even before the subprime crisis. I'm trying to remember that. I think there were a few players in that who got some naming rights right before. I want to say it was three Com Stadium with play. And we also have the f t X Arena, which is uh which has been renamed It's the Miami Heat Arena down in in Miami. That was another recent rename. Yeah, yeah, great, great indicator. Who knows if it's really true? Is someone's got to do a deep dive on that foot. I I nominate you to. I'll take care of them. So all the stadium names throughout history, yeah, I'll take care of it. So, Chris, so you have this call for a ten correction. That's in the first half of the year and then for the second half of the year. I know I was reading one of your recent notes and you talked about how how important the midterm elections are, and so I actually really haven't been hearing very much about this from people I I talked to. So maybe you can walk us through your thinking there as well, and in relation to the market. So so another thing before before we get into that and we get into politics a little bit, we're going to talk about religion. No, um no, what or what we're gonna do is I want to lay the groundwork and I want to level set things. What what we're saying and what we think we need is we need a repricing of risk, the systematic risk. This is not O seven a way where systematic root risk was through the roof. What this is is we think that we need a repricing of risk to bring in new investors. Things have got a little bit too frothy. Once that occurs, the consumer still has money. What we argue is that spending is going to normalize, but balance sheets are still strong. There's some some risk there, but overall we just need a more attractive level to get aggressive. If and when we get that, we'll want to buy the more could or will want to add risk into the portfolio. How However, your possess um one of the things that we've noticed, and we were looking for a catalysts in the second half of the year. We're going to have midterm elections. One of things. One of my associates does a very nice job on the political front, and and it's done a good job over the last couple of years. Now it's kind of obvious, but not that long ago, we were talking about a shift right, a shift from from blue to red. And we've seen what happened in Virginia. I can't believe how close the race was in in New Jersey for the governorship, and it's really telling you something. And so I think it's pretty consensus at this point in time, and I think most people believe there's going to be a red wave and with that, you're going to have a split government. And typically when you have a split government, not a lot of things get done. And the lack of government is good government as far as the markets are concerned. UM Traditionally, Republicans controlling that government, controlling the Senate is a good thing as well. We can argue about why that is, why that might be, but but just say we think this is going to be midterm elections will be the catalyst that we need to pull us out of the slump or the malaise that that we expect to see over the summertime. So that call, it's based on history basically in the way the market performs with the Republican control. Because I look at this particular setup and I'm thinking, well, okay, and I you're right, you know, all the pundits seem to think there's gonna be a red sweep and and Republicans will control most likely the House and and quite possibly the Senate. Yeah, but I wonder, you know, fundamentally, uh, that seems to take stimulus completely off the off the table. I also would think, you know, any further tax reductions would be pretty unlikely, uh you know, given the Democrats still in the White House with with veto power. So that sense of history, she was enough to to overcome sort of the fundamentals that are a little bit cloudier with with the Republican controlled Congress, you know, given you know what a tail when stimulus was leading up to this year. So so what one thing I would just add to that is, and the Finn talks about this a lot. It's planning. Right. If you go back to when we had the tax cuts, If I remember correctly, M and A slowed down because people didn't know what the tax situation was going to be. When you have a situation where it's pretty placid and people people really know what the tax situation is going to be, fiscal stimulus, monetary stimulus, they can plan better and they can move back. Then well, once I wants to pay more, once I wants to pay less. But when you have a more stable type situation, the bit aspread narrows and things can get done. So I don't you know, I think about it a couple of different ways. But one way it could be positive is you just know that the tax situation is not going to change very much. And now one of the things that we keep saying is you've got a lot of cash on hand. Rates are still incredibly low. Credit markets for now are wide open, and as growth slow, as an opportunity is more selective, that pushes people into that M and A. And again, if there's not much coming out of the government regulation wise, tax wise, we can see a lot more m and A activity, and eventually that's usually a pretty good positive for the market. And then, Chris, I think for a while now you had been saying that investors have been gaining confidence in the feds um willingness to an ability to find inflation. I think that was in one of your notes a couple of weeks ago, and then earlier this week you read reiterated that you think the Fed will avoid a policy error. So I'm wondering what makes you confident in that and how you're thinking about it. Right, So, when we first started talking about it, it was a non consensus thought and one of the things that we began to seeze we began to see the curve flatten, and we also saw break evens or inflation expectations come down before the Fed even talked about retiring. You know, what we were saying back then is either the markets going to push the Fed or the Fed will eventually do what they need to do. Now, what we think is the Fed is very open to doing what they need to do, the markets believing it. The curve has flattened, break evens are coming down, our inflation expectations are coming down, and you see from the minutes that they mean business. And you know, a lot of people have brought this up. I don't know how to handicap this. I don't know what this means. But it's funny that Chairman Powell, right after it was announced who was going to be reappointed, got a lot more aggressive and a lot of people point that out and say that's really interesting, and maybe that has something to do with it. But at the end of the day, they're saying all the right things, they're doing all the right things, they're doing what they would you would expect them to do. Labor markets in a decent spot, and they really do have to fight inflation. The funny thing now for us is we're beginning to see things that we think are transitory. We think that we're either at keep pricing, were possibly very close to peak pricing. We think at the beginning of February you've got a shot at improving the supply chain, which puts downward pressure on pricing. And so as they get more aggressive, and as the market and some of the market dynamics play out, they may not have to be as aggressive as a lot of people think. Well, we will see. And the last thing I would point to and this this comes from our economics team. They did a really nice job on this. It's not all supply. One of the things they pointed out if you look at retail sales, retail sales is up from the pre pandemic peak in twenty months post grade financial crisis. It took years for that to occur. So the demand side has been off the charts. And we used to joke around with people that last year what the consumer would say is if you raise prices teen percent, we'll take two. Now they didn't actually say that, but it gives you an indication of how price. They didn't care about price at that point in time, and now we think they will be a lot more price conscious and many of these factors will lead to lower inflation. And I think again, many more people now that they see the curve flattening, break evens coming down, and things beginning to slow, more confidence in the FED and the fetacing all the things you would expect them to say as you start to a tightening cycle. Chris one prediction. I've really found interesting. Uh number eight on the list. I think we're jumping around here counting down like David Letterman style, but let me just read it to you and uh talk about this a little bit. With about one quarter of US household assets invested in equities and the FED retiring the transitory phase, the Fed's implied put is lower, while the equity markets economic real impact is higher. This that's a good one to me. I think it's you know, to some degree, you know, question one I guess would be, you know, is that time part of that time percent correction trying to sort of price figure out where the price of that put is and walk us through what you you know, what you mean about their economic real impact is higher? Um, you know what it would a really weak stock market, sort of depressed consumer spending, consumer confidence, and eventually you know, put that FED put into play, walk us through how that you see all that playing out this year. So so the first thing I'll say is that that's a savory veteran market call out, that that that is really one of the things that we've been harping on, and it's kind of you know, people aren't quite grasping it just yet, because what we're saying is, hey, balance sheets are a lot stronger, no doubt about it. Right. House prices are up, Equity prices are up, people have more cash. Balance sheets are fantastic. But what they're missing is there's a lot more equity risk on the balance sheet today than there's ever been. If you look back to the percentage of the balance sheet a decade ago is about it's now about um depending on the day, but let's just say close to a quarter. As the equity market waxes and waynes, that's going to influence sentiment a lot more today than it did a decade ago. So in any sort of equity market sell off, sentiment should get a lot heavier or not be all that attractive, and that should spill over into discretion ory spending. People don't feel as rich, and so now all of a sudden, the stock market plays a much bigger component into spending and economic growth than it did before. And there's this kind of vicious cycle. Now as far as the put, if the market falls apart, and we're not expecting the market to fall apart, we're expecting a market correction, but you wouldn't expect a lot of people always believe that the Fed will step in and save the market. We're not in that opinion. You know what, the FED tries to do. It tries to keep the liquidity flowing. It tries to keep the machine greased. But a lot of people will say, wow, the FEN is always trying to save the equity market. That's not our opinion, that's not our belief. But at the end of the day, the more conventional wisdom is the FED will not react to the equity market, or the FED will react to the more equity market later rather than sooner. And that's basically because they're heading into a tightening cycle. If the market falls apart. The market falls apart, they have a dual mandate. That dual mate is price stability and maximum employment. And we pretty much satisfied both equations. Because the equity market goes down, that's really not their problem. It becomes a bit more than problem because of this relationship and because the allocation to equities. But we really just don't think that the Fed's going to tighten raise. The Feds are going to take accommodation off. And you know, buyers beware, and everyone's a big boy or big girl. Figure out what kind of risk you're willing to sleep with or or what kind of risk you're comfortable within the portfolio. Because we're going to have a lot more volatility or to go forward in time. This is not again, this is no longer the market can bend but not break. The market will break at some point in time. We will have bigger pullbacks and it will feel a lot worse than actually is because we haven't had that in a long time. So then what do you recommend for clients or you know, when people are asking you what they should be favoring in this environment and for the remainder of this year, what do you recommend to them? Because I feel like one big question that popped up this week was like, Ken, what happens with tech if we do continue to see higher yields? And so, so what do you tell them? So what we tell them so from the five thousand foot level is what you want to do is you want to go up in quality, you want to go down and risk. And when we talk about qualities, companies with better balance sheets, you want cash on the balance sheet. You can want less leverage, you want better management teams, good stewart of capital, so companies that have higher r o I C or r o E s And then you want to stay away from the poor secular stories. So you want to focus on more attractive profit margins as far as risk, we we just want to stay away from the more risky um type type stories because we just don't think you're getting paid a year and a half ago, that was a different story. Right now, you're not getting paid for that. You can exploit this or you can institute this philosophy with this belief and I think almost any portfolio, and it really just depends on your risk tolerance and and your tax situation how you do that. We're much more focused on factors in style. And one of the things that we like about quality is one you're not paying up right, You're not paying through the nose for higher quality to your late in the cycle, and usually late in the cycle is the right time for quality. Quality does better when growth is slowing down as opposed to early in the cycle where growth is really accelerating. You hear the phrase dash for trash and and so and so forth lateness cycle, it's it's it's great, we're much better the last thing. And this is something that's that's near and to our heart. We find the return distribution. In other words, quality does much better to the downside. You can participate to the upside, but really our focus is on the downside, and quality should help you in that downtape and should help you protect that portfolio game. So, you know, however you do it, however you institute it. You know, we can talk about different ways, but really you want to take on more quality. You want to reduce the risk in the portfolio. It's time to start building up some dry powder for a rainy day. Yeah, that reminds me of Uh. One of the things we talked about the last time you were on the show about a year ago was uh, and you sort of nailed this one on the head. I think we're one is you know, you really talked about how the growth at any price type of trade is it was just done last year, and that that came true in kind of a dramatic fashion. Uh later in the year. I wonder, is that dead for good? Do you think? I mean, what would the condition we would need to see to get people talking about the high flying uh you know, longer ration sort of growthy names again? Is it is it as simple as a tighten versus loosening monetary policy? Do you think? Yeah, Yeah, there's there's a couple of things and and I'll try and PISA sinc. But it probably won't be because it's not so much about a level, but it's more about I think an event. Well, what you need to see is a couple of things, just on the monetary policy side. Again, what I think is going on is as real rates go higher, inflation expectations come down, the probability of stack flation comes off the table. Right. These high flyers do much better in a stack flationary environment than in a more benign economic compartment. The other thing is, as we pointed out, is real rates are tied to relative pricing, or have been tied to relative pricing. In the gray market, real rates were negative hundred on the tenure, negative a hundred and twenty basis points, which was historically low. Um, they're up to a five basis points from the start of the year, so I think they're in the mid eighties at this point in time. If you see real rates continue to ratch and higher, you know at some point we've got to make a call where rates are going to level out. But I don't think they get too flat this year. They could, but definitely if they get the flat, it's another conversation because if they get the flat. What that means is a fed and all life. They got very aggressive and the economy is going to slow down. And what's happened is you've probably had a bigger sell off in these names and more important and last thing that we're looking at is and I'll throw another blast from the past out there, there was a cop There was a fund called them under net Net fund. So in the late nineties, it was a high flying internet um stock portfolio. And a friend of mine and for our associate was was a trader there. And every day in the sell off, the PM would come in and give him more to Cell and more to Cell, and he would just knock things down and knock things down. And it wasn't until those Cell orders until basically that capital is rehallocated. So what happens in the equity market, whether you like it or not, money chases performance and then when performance isn't, their money leaves. So you need to see that wash out. So what we'd like to see is we'd like to see a repricing of real rates. We'd like to see us move further in time. We'd like to see another push down in valuation. Is not so much valuations, but just performance, and then we'd like to see that I'll use a very nice graphic phrase, that cathartic puke, where finally we see that the seller's exhausted and the final liquidations, you know, and it's just hard to it's hard to get. Is it's it's going to happen on this date at this time. No, we don't know, but these are the signposts that we're using. So you kind of you kind of know when you see it. You know that that that one real ugly day at the end of our correction, I guess is uh, you know, the capitulation day that that everyone waits for. That That's exactly it. And what we said this year is we think the growth at any price type UM stocks are going to have a heavy first half because real rates are gonna go higher and because of what you're seeing today. But we left the door open to the second half because you could see the slowing economy, you could see that repricing, and you could see that that cathartic up chuck, or you could see the seller's exhausted. Chris, one of the big things that we were just talking about in one of the big stories from this week is this yield spike, and I'm wondering if if the what we're seeing this week is any different from what we've seen in the past, Like, is there any reason to believe that this won't be over by next week? For instance, thought or two there um, some people were asking asking me, hey, is it is it a good time to buy growth in tech and so and so forth. Let's just talk short term, let's talk long term. The move down has been very aggressive. It wouldn't have This is not a prediction, but it wouldn't be surprising too someday or the next couple of days to see a snap back all of a sudden, raids start to fall because you know, pick a reason and we see a snap back. But at the end of the day, the FED is going to be more aggressive. I think we have a fair amount of confidence in that if the FED. Our belief is, if the FED is going to be more aggressive, then we should continue to see that lift in real rates. Now, as we look longer term, a lot of our clients are saying, well, interest rates are going to go through the roof, and this, that and the other thing. If you let look at the last two tightening cycles, the tenure actually went lower. Wants the FED or tenure yields actually went lower for at least a year once the Feds started raising rates. And so it's not clear to me that as a FED starts raising rates that that tenure nominals are going to go higher, right, they may begin to stall out, And I think that that's important to note. And then the last thing is what we think is the FED will push the front end to wherever they need to go. But eventually what's going to happen where late in the cycle the economy is already slowing down as you take stimulus off, that's going to slow things down more. I'm not sure how aggressive they can be at this point in time. And so when we get a more stable environment, when we get a slower environment, then we can start talking about moving back into those secular growth stories. But for now we think it's especially as you go out on the risk curve, it's still a little bit too risky. And we still haven't seen, you know, the events of the situations that we need to see playoffs to ship tiden up your straight jackets. It's time for the craziest things we saw in markets this week. Well that I agree with Chris. I'm not sure how aggressive the FED can get. I'm gonna tell you, Aldana, though, I'm going to get very aggressive with my craziest thing of the week, possibly a little too aggressive. I'm actually a little worried about this one. Um. So if this is the last time we talk because of the reaction to my crazy things, it's been nice knowing you guys, I will say, though, to be true to the craziest thing I saw in weeks, I gonna have to stick with it and follow through and tell you what it is. But I want to hear yours first. What do you got first? Fell down? It minus courtesy of Matt Levine, who wrote about this in one of his columns this week, and he pointed out that the UK branch of Santander Bank is trying to recover a hundred seventy five million dollars that they accidentally sent to tens of thousands of people on Christmas Day. And so Matt matt Levin's suggestion is just put out a press release and say sent in their UK just gave out a hundred seventy five million in Christmas presents to thousands of people. You know, Wow? What what? Have people say, Wow, what a good good bank this is, and I really like that. I doubt that they'll follow follow through with the suggestion, but it's a really good one. I think the assumption being that the marketing value of hundreds they earned media as they say, from exactly, that's it's in thing and he might be onto something there that's a big spend, though I don't know, we'll see regardless or not. I think I might open an account with sintender just just in case, in case it happens again. Yeah, how about you, Chris, what's the craziest thing you saw this week? You know, I've been racking my brain over this and I've come up with a whole lot of nothing. But the coolest craziest thing I have seen in recent I will say recent weeks, they've girl did a cover a Barry Manilow's Copa Cabana. So if you haven't seen it, you gotta check it out. It is fantastic. I will check that out. You can pull it up on YouTube. It's super cool, and it's something as equity markets melt or or you know, rollover. It's something that could brent you up or cheer you up. So it's pretty good. We'll leave it on that one. That's pretty good. Anything else, Chris, that that's a pretty good one. I'll let you live with that. Unless you got something better. That's that's a good one, all right, I'll give you mine. And again, you know, if this sends up getting me canceled, it was nice knowing you guys. Best of luck to the new co host of of What Goes Up. But I have to be true to revealing the craziest thing I saw in markets in the weekend. This is courtesy of The New York Post, which right there, you know, brace yourself, adjust your chin strap as they say. Um, it's about a reality TV star named Stephanie Mato or Matto, I'm not sure how you pronounced it. She was the star of a show called ninety Day Fiancee on t l C. I've never seen Have you seen the show, Bilda? I have you have seen this? Unluckily I've seen it as well. My wife has watched a few times and I've been stuck watching it. It draws you in. Okay, all right, so you guys are are familiar. So this woman, apparently after the show, gained a very strong following of fans on social media. Uh, and she started, I can't even I'm so in trouble for this, but I need to get it up. I read this story was tw Yeah. Some some fans suggested, uh that if she were to pass gas into a jar, they would just that jar of flatulence. Uh. As The York Post put it, she launched launched a guest adventure, peddling her fancy flash lence to strangers and blew awaye people on social media. When she recently announced that she makes more than blank a week doing this. So it's time to play prices, right, guys, how much do you think this woman makes per week with this business endeavor I came in by. This is a pretty high margin product. When you think about it, you know, it's it's the Uh, it's just the jar. Really, just potentially, what's your guest per per week weekly income? Yeah, not a not a per a jar basis, but but per week. They don't think they gave the per jar cost. I'll see dollars. That's that's that's not bad, fifty grand a week. But here's the problem. She did it too much. She did she the debate. The demand was so high that she had to adjust her her diet to accommodate both demands, so so she started eating it. Said her her diet included black bean salad, I mean in ham and pepper omelets. I gotta say, not that far different from my normal diet, as which tells you something. And what happened is she suddenly was overcome with chest pains and she thought she was having a heart attack. Got rushed to the hospital and the doctor said, no, it's not a heart attack. You've just been eating too many guessy foods and we recommend you you stop this and take some some gas alleviating medicine. So her it only lasted a few weeks. I think she netted two thousand dollars doing this. But here's my favorite part and what really qualifies it for the craziest thing I've seen in markets this week, she said, final quote of the story. I think everything happens for a reason. And although my fart selling days are over, I am going to save the money I made and I'll put something in the crypto perfect two story and and ending to a story Yes, yes, but I think I don't know it was a false form on that heart attack. I worry that if she puts all this money into crypto, that you may in do some actual heart attack given the volatility. I don't know. I died. Not a financial advisor here, just a guy with a blanket over his head, sipped in the bathroom. But if she's listening, I would I would advise maybe, I don't know, some quality, some quality stocks like Chris suggests, and not putting that up, that very hard earned money into crypto. Just me, Mike, this is your this is your weirdest week. You're hiding under a blanket, and your weirdest thing is the weirdest thing that you've potentially ever flagged. Something's gone wrong, very wrong in my life. Blah dada. I don't know what it is, but it can only go off from here. Let's hope we'll see anyway. Chris, great to talk, Kia. I can understand if you never want to associate with with me again after that one. So sorry. I asked you to come on. If you can look past it, we we love to be back on against it. Thanks guys, and as always, very informative and very entertaining. Much appreciated. Thank you for coming back on what goes up. We'll be back next week. Until then, you can find us on the Bloomberg Terminal website and app, or wherever you get your podcasts. We'd love it if you took the time to rate and review the show on Apple Podcasts so more listeners can find us. And you can find us on Twitter, follow me at Reaganonymous. The Dotta Hirich is at the Fildtta Hirich. You can also follow Bloomberg Podcasts at Podcasts and thank you to Charlie Paulla Bloomberg Radio. What Goes Up is produced by Laura Carlson. The head of Bloomberg Podcast is Francesco Leavy. Thanks for listening, See you next time. That n

Hello, and welcome to What Goes Up, a weekly markets podcast. My name is Mike Reagan. I'm a senior editor at Bloomberg and umbled on a higher across asset reported Bloomberg this week on the show. Well, as Yogi Barrow once said, it's tough to make predictions, especially about the future. That's the quote that leads a research report from this week's guest on what he and his team expected the markets in two And you know what, We're actually gonna listen to him and maybe even let him gloat a little bit since his predictions for last year were pretty good. Well, Bill, do I have to define pretty good in the world of predictions? And you know it's gonna sound a little bit like I sounded, you know, explaining my report card to my dad in college, that that it's it's better than it sounds. You know this this was a semester where the Grateful Dead had six tour stop within driving distance of campus. You gotta you gotta grade me on the curve here, But on his predictions, uh, is really pretty good. I mean, I'll compare that to our own Cameron Chris, I think, one of our most respected columnists who grades his predictions every year as well. He was seventy as well. Um, he said, that's the best he's ever been in making predictions. And that's a guy who had like a perfect s a T math score. Um, I think anything about fifty is in a in the predictions game, Buil Dona, what do you think in the predictions game? Probably not for when you're in high school. That's like not that good, I would say, But sevent when I read that, I also was impressed because last year was, as you know, so hard to predict given everything that was going on. But so, speaking of our guest, I want to introduce Chris Harvey. He's the head of equity strategy at Wells Fargo, and Chris, I want to welcome you back to the show. Then thank you and happy New Year and Chris, before we get to the predictions and the way, everyone, I'm I'm I'm recording this podcast in my bathroom with a blanket over my head for very complicated reasons involving a gas Maine replacement on my streets. So if you hear Vildana and Chris just first out laughing that that's that's the reason why most likely it's quite a spectacle to see something. This is a new I've I've you know, I'm no stranger to humiliation, but I gotta say this, this is uh, this is a high high water mark for me, or maybe low water mark. I don't know. But but Chris, I want to unpack some of your predictions for two. But I want to talk first about the f OMC minutes that came out this week. Uh. You know, we're recording this podcast on Wednesday, about an hour after the minutes at the tape, and we kind of a nasty reaction, you know. The tone of it seems to be that not only will the rate hikes come a little earlier than people were expecting, but also I think the bigger surprise that the Fed sounds like they're they're gonna want to wind down their balance sheet, let their balance sheet reduce a little bit, uh, you know, rather than reinvesting proceeds of their holdings like they have in the past. What's your takeaway from the minutes? Is this um? Is this a reasonable reaction to the market. You know, last time I looked SMP down more than one percent in the minutes after after the moments after the minutes, and you know, NAVSTAC was already getting hurt there down composite down a two and a half percent. I think is this a rational reaction or what do you think? Like? I think it's a reasonable reaction. So there's a couple of things that take away. For a while, people have been questioning whether the FED had had to wherewithal the will to to fight inflation. There's talk about transitory for for some period of time, actually too long a period of time. Powell recently retired that phrase or said he was going to retire that phrase. And then when you listen to the minutes, they mean business. And I think people are finally realizing that the FED will need will do what they need to do to fight inflation. And that's troubling. But more importantly, what's really happening underneath the surface and behind the scenes real rates. You have to keep a very very sharp eye on real rates. If you look at ten year real rates, they're up almost twenty five basis points from the start of the year. What we've been saying to clients and what we've noticed all of last year is as real rates go, much of the relative price in the achary market goes, so real rates go up, that cyclical trade works, real rates go down, and that long duration or that tech growth trade works. And what's happening right now is real rates are going higher. Tech in high growth of rolling over. That's a big part of the market. And so we were down earlier today this is just an acceleration. Is it the right magnitude? I think it's reasonable. Yeah. You know what's such truing to me is you know, we got this today on Wednesday. On on Tuesday, we got that blog post from Neil Cash carry uh long considered sort of the biggest of in the FED, not a voter this year, but even him expecting two hikes in two I guess that's got to be kind of the floor of of expectations. Now. You know, the market was pricing into maybe three. But I think when even the dovish, most dovish member of the FED is expecting to that boy that it's a bit of a cold water in the face to some degree. Yeah, I think that's right. And what I also think is I was a little dump fout last year, was a little dunk bounded because we were looking and we're listening to transcripts, we're looking at pricing. I had never seen in in my two decades and more than two decades on Wall Street this kind of pricing environment. At one time I had asked one of my associates, Hey, give me a handful of stocks that are raising price. He said, just pick any three, And at the end of the day I was surprised that it's taken this long for the FED to react. But now the FED is reacting and you're seeing break evens and you're seeing inflation expectations come down. The other thing that I think is also happening is there was a lot of talk about stack inflation two three, four months ago. Well you have to take stackflation off the table because the FED is fighting inflation. The other thing that's happening is we have February first coming up. February first is Chinese kicks off Chinese New Years. That's when goods start to slow into the US. Not saying that supply chain is going to be fixed, but really what the market is latching onto, or what we think it will last onto, is have we seen peak pressure or peak congestion? Are we going to be able to get rid of some of those logger heads? Will we be able to make some improvements and if so, that's really important because that has significant ramifications for pricing, multiples and margins. So, Chris, speaking of all of these expectations and everything that's coming up, you and your team come out with price targets for the SMP five Mike mentioned in your intro years was spot on for last year. So I'm hoping you can sort of walk us through your calls for and all of the factors behind it and what you're thinking is behind your price target and anything else you see coming up. Sure, sir, certainly. Maybe I'll just give you the big picture overview. One of the things we've been saying is this year, as you roll into it's really about risk first and return second. When you're looking at a peakish multiples on top of peakish growth, that's not a really bullish scenario. In addition to that, growth is decelerating, whether you're looking at us GDP or whether you're looking at earning. His growth fed as we now are are very aware of, is going to become more aggressive and accommodations coming off the table. We're lapping some very difficult comps and we may be hitting peak pricing and again peak margins, which which would put pressure downward on multiples. So we've talked about a temperacent sell off. We've talked about up and quality, down and risk. We've talked about margins multiples. Where would you like to start? Well, well, Chris Love, I'll start here. You know, I'm I'm just a guy sitting in his bathroom with a blanket over said, so, you know, far be it for me to say. But I would also great predictions on sort of the boldness of predictions. And I want to start with your prediction temper cent correction by summertime. Now, in most years, I think if you took any average years and made that prediction at the beginning of it, it's perhaps not that bold, you know. It's something that tends to happen I think more than half the time in most years, if if I'm correct, But it certainly feels like a very bold predict prediction these days, given the fact that boy, it's been so long since we've had a real teen percent prediction correction in the market. They seem to have gone extinct, you know, But it is walks through You're thinking about why, uh, we're likely to see one by summertime, And I'm assuming the FED plays a role to some degree, but uh, you know what makes you confident enough to make that you're sort of your first prediction for yea. So a couple of things. First, let me say, you're really pulling this blanket thing off very very well. It's it's people. It's impressive, it's really impressive. A lot of guys would have turned their video off. But but now back to our show ten percent pullback. Uh, there's a couple of things there, and I'm gonna be scattered, I'll be all over the place. But I want to bring you back to the late nineties, early two thousand's, late nineties, early two thousand's, Mike, you probably remember this. There's a company called c mg I. C mg I had the naming rights to Fox Burger Stadium in two thousand. Stock was one sixty at that point in time. I believe in two thousand and two the stock was sixty sixty cents and they gave back the naming rights. What just happened at the Staples Center Crypto dot com no longer the Staples Center Crypto dot com. Gosh, that's really familiar. Right. There is a whether it's the Matt and curse or whether it's the stadium curse, it's telling you we're getting close to the top in times of fraud. Those are those are signs that we use and we look at right. The the other thing that we say, we talked about a lot, and you're also absolutely repositively right. This ten percent correction in normal times not a big boat call, but here, since we haven't had a correction a long time, it is a much bigger boulder call. And that gets to the second point. The second point is there's pervasive belief that the market can bend but not break right. Market can go down five percent, we can break through the fifty day, we can break through, we can hit the hundred day, but we really can't collapse. Well, again, we're in the second year recovery. Typically in a second year recovery you have multiple compression and you have a lot of other interesting things happening. What you have is growth decelerating, you have a more aggressive bed. You you have your laughing very difficult comps, and you have the speculation and when people turn down right. So one of the things that that's helped a lot of these names is you've had money chasing performance when the performance isn't there, then the money goes away. And we think that people are going to sell weakness for the first time in a while for fundamental reasons, for technical reasons. And I think the operative another operative word for two is normalization. We're going to use this this word time and time again. We're going to get back to more normal times, whether it's consumers spending, whether it's latility, or whether it's valuation. I love the point about the stadium naming right and even before the subprime crisis. I'm trying to remember that. I think there were a few players in that who got some naming rights right before. I want to say it was three Com Stadium with play. And we also have the f t X Arena, which is uh which has been renamed It's the Miami Heat Arena down in in Miami. That was another recent rename. Yeah, yeah, great, great indicator. Who knows if it's really true? Is someone's got to do a deep dive on that foot. I I nominate you to. I'll take care of them. So all the stadium names throughout history, yeah, I'll take care of it. So, Chris, so you have this call for a ten correction. That's in the first half of the year and then for the second half of the year. I know I was reading one of your recent notes and you talked about how how important the midterm elections are, and so I actually really haven't been hearing very much about this from people I I talked to. So maybe you can walk us through your thinking there as well, and in relation to the market. So so another thing before before we get into that and we get into politics a little bit, we're going to talk about religion. No, um no, what or what we're gonna do is I want to lay the groundwork and I want to level set things. What what we're saying and what we think we need is we need a repricing of risk, the systematic risk. This is not O seven a way where systematic root risk was through the roof. What this is is we think that we need a repricing of risk to bring in new investors. Things have got a little bit too frothy. Once that occurs, the consumer still has money. What we argue is that spending is going to normalize, but balance sheets are still strong. There's some some risk there, but overall we just need a more attractive level to get aggressive. If and when we get that, we'll want to buy the more could or will want to add risk into the portfolio. How However, your possess um one of the things that we've noticed, and we were looking for a catalysts in the second half of the year. We're going to have midterm elections. One of things. One of my associates does a very nice job on the political front, and and it's done a good job over the last couple of years. Now it's kind of obvious, but not that long ago, we were talking about a shift right, a shift from from blue to red. And we've seen what happened in Virginia. I can't believe how close the race was in in New Jersey for the governorship, and it's really telling you something. And so I think it's pretty consensus at this point in time, and I think most people believe there's going to be a red wave and with that, you're going to have a split government. And typically when you have a split government, not a lot of things get done. And the lack of government is good government as far as the markets are concerned. UM Traditionally, Republicans controlling that government, controlling the Senate is a good thing as well. We can argue about why that is, why that might be, but but just say we think this is going to be midterm elections will be the catalyst that we need to pull us out of the slump or the malaise that that we expect to see over the summertime. So that call, it's based on history basically in the way the market performs with the Republican control. Because I look at this particular setup and I'm thinking, well, okay, and I you're right, you know, all the pundits seem to think there's gonna be a red sweep and and Republicans will control most likely the House and and quite possibly the Senate. Yeah, but I wonder, you know, fundamentally, uh, that seems to take stimulus completely off the off the table. I also would think, you know, any further tax reductions would be pretty unlikely, uh you know, given the Democrats still in the White House with with veto power. So that sense of history, she was enough to to overcome sort of the fundamentals that are a little bit cloudier with with the Republican controlled Congress, you know, given you know what a tail when stimulus was leading up to this year. So so what one thing I would just add to that is, and the Finn talks about this a lot. It's planning. Right. If you go back to when we had the tax cuts, If I remember correctly, M and A slowed down because people didn't know what the tax situation was going to be. When you have a situation where it's pretty placid and people people really know what the tax situation is going to be, fiscal stimulus, monetary stimulus, they can plan better and they can move back. Then well, once I wants to pay more, once I wants to pay less. But when you have a more stable type situation, the bit aspread narrows and things can get done. So I don't you know, I think about it a couple of different ways. But one way it could be positive is you just know that the tax situation is not going to change very much. And now one of the things that we keep saying is you've got a lot of cash on hand. Rates are still incredibly low. Credit markets for now are wide open, and as growth slow, as an opportunity is more selective, that pushes people into that M and A. And again, if there's not much coming out of the government regulation wise, tax wise, we can see a lot more m and A activity, and eventually that's usually a pretty good positive for the market. And then, Chris, I think for a while now you had been saying that investors have been gaining confidence in the feds um willingness to an ability to find inflation. I think that was in one of your notes a couple of weeks ago, and then earlier this week you read reiterated that you think the Fed will avoid a policy error. So I'm wondering what makes you confident in that and how you're thinking about it. Right, So, when we first started talking about it, it was a non consensus thought and one of the things that we began to seeze we began to see the curve flatten, and we also saw break evens or inflation expectations come down before the Fed even talked about retiring. You know, what we were saying back then is either the markets going to push the Fed or the Fed will eventually do what they need to do. Now, what we think is the Fed is very open to doing what they need to do, the markets believing it. The curve has flattened, break evens are coming down, our inflation expectations are coming down, and you see from the minutes that they mean business. And you know, a lot of people have brought this up. I don't know how to handicap this. I don't know what this means. But it's funny that Chairman Powell, right after it was announced who was going to be reappointed, got a lot more aggressive and a lot of people point that out and say that's really interesting, and maybe that has something to do with it. But at the end of the day, they're saying all the right things, they're doing all the right things, they're doing what they would you would expect them to do. Labor markets in a decent spot, and they really do have to fight inflation. The funny thing now for us is we're beginning to see things that we think are transitory. We think that we're either at keep pricing, were possibly very close to peak pricing. We think at the beginning of February you've got a shot at improving the supply chain, which puts downward pressure on pricing. And so as they get more aggressive, and as the market and some of the market dynamics play out, they may not have to be as aggressive as a lot of people think. Well, we will see. And the last thing I would point to and this this comes from our economics team. They did a really nice job on this. It's not all supply. One of the things they pointed out if you look at retail sales, retail sales is up from the pre pandemic peak in twenty months post grade financial crisis. It took years for that to occur. So the demand side has been off the charts. And we used to joke around with people that last year what the consumer would say is if you raise prices teen percent, we'll take two. Now they didn't actually say that, but it gives you an indication of how price. They didn't care about price at that point in time, and now we think they will be a lot more price conscious and many of these factors will lead to lower inflation. And I think again, many more people now that they see the curve flattening, break evens coming down, and things beginning to slow, more confidence in the FED and the fetacing all the things you would expect them to say as you start to a tightening cycle. Chris one prediction. I've really found interesting. Uh number eight on the list. I think we're jumping around here counting down like David Letterman style, but let me just read it to you and uh talk about this a little bit. With about one quarter of US household assets invested in equities and the FED retiring the transitory phase, the Fed's implied put is lower, while the equity markets economic real impact is higher. This that's a good one to me. I think it's you know, to some degree, you know, question one I guess would be, you know, is that time part of that time percent correction trying to sort of price figure out where the price of that put is and walk us through what you you know, what you mean about their economic real impact is higher? Um, you know what it would a really weak stock market, sort of depressed consumer spending, consumer confidence, and eventually you know, put that FED put into play, walk us through how that you see all that playing out this year. So so the first thing I'll say is that that's a savory veteran market call out, that that that is really one of the things that we've been harping on, and it's kind of you know, people aren't quite grasping it just yet, because what we're saying is, hey, balance sheets are a lot stronger, no doubt about it. Right. House prices are up, Equity prices are up, people have more cash. Balance sheets are fantastic. But what they're missing is there's a lot more equity risk on the balance sheet today than there's ever been. If you look back to the percentage of the balance sheet a decade ago is about it's now about um depending on the day, but let's just say close to a quarter. As the equity market waxes and waynes, that's going to influence sentiment a lot more today than it did a decade ago. So in any sort of equity market sell off, sentiment should get a lot heavier or not be all that attractive, and that should spill over into discretion ory spending. People don't feel as rich, and so now all of a sudden, the stock market plays a much bigger component into spending and economic growth than it did before. And there's this kind of vicious cycle. Now as far as the put, if the market falls apart, and we're not expecting the market to fall apart, we're expecting a market correction, but you wouldn't expect a lot of people always believe that the Fed will step in and save the market. We're not in that opinion. You know what, the FED tries to do. It tries to keep the liquidity flowing. It tries to keep the machine greased. But a lot of people will say, wow, the FEN is always trying to save the equity market. That's not our opinion, that's not our belief. But at the end of the day, the more conventional wisdom is the FED will not react to the equity market, or the FED will react to the more equity market later rather than sooner. And that's basically because they're heading into a tightening cycle. If the market falls apart. The market falls apart, they have a dual mandate. That dual mate is price stability and maximum employment. And we pretty much satisfied both equations. Because the equity market goes down, that's really not their problem. It becomes a bit more than problem because of this relationship and because the allocation to equities. But we really just don't think that the Fed's going to tighten raise. The Feds are going to take accommodation off. And you know, buyers beware, and everyone's a big boy or big girl. Figure out what kind of risk you're willing to sleep with or or what kind of risk you're comfortable within the portfolio. Because we're going to have a lot more volatility or to go forward in time. This is not again, this is no longer the market can bend but not break. The market will break at some point in time. We will have bigger pullbacks and it will feel a lot worse than actually is because we haven't had that in a long time. So then what do you recommend for clients or you know, when people are asking you what they should be favoring in this environment and for the remainder of this year, what do you recommend to them? Because I feel like one big question that popped up this week was like, Ken, what happens with tech if we do continue to see higher yields? And so, so what do you tell them? So what we tell them so from the five thousand foot level is what you want to do is you want to go up in quality, you want to go down and risk. And when we talk about qualities, companies with better balance sheets, you want cash on the balance sheet. You can want less leverage, you want better management teams, good stewart of capital, so companies that have higher r o I C or r o E s And then you want to stay away from the poor secular stories. So you want to focus on more attractive profit margins as far as risk, we we just want to stay away from the more risky um type type stories because we just don't think you're getting paid a year and a half ago, that was a different story. Right now, you're not getting paid for that. You can exploit this or you can institute this philosophy with this belief and I think almost any portfolio, and it really just depends on your risk tolerance and and your tax situation how you do that. We're much more focused on factors in style. And one of the things that we like about quality is one you're not paying up right, You're not paying through the nose for higher quality to your late in the cycle, and usually late in the cycle is the right time for quality. Quality does better when growth is slowing down as opposed to early in the cycle where growth is really accelerating. You hear the phrase dash for trash and and so and so forth lateness cycle, it's it's it's great, we're much better the last thing. And this is something that's that's near and to our heart. We find the return distribution. In other words, quality does much better to the downside. You can participate to the upside, but really our focus is on the downside, and quality should help you in that downtape and should help you protect that portfolio game. So, you know, however you do it, however you institute it. You know, we can talk about different ways, but really you want to take on more quality. You want to reduce the risk in the portfolio. It's time to start building up some dry powder for a rainy day. Yeah, that reminds me of Uh. One of the things we talked about the last time you were on the show about a year ago was uh, and you sort of nailed this one on the head. I think we're one is you know, you really talked about how the growth at any price type of trade is it was just done last year, and that that came true in kind of a dramatic fashion. Uh later in the year. I wonder, is that dead for good? Do you think? I mean, what would the condition we would need to see to get people talking about the high flying uh you know, longer ration sort of growthy names again? Is it is it as simple as a tighten versus loosening monetary policy? Do you think? Yeah, Yeah, there's there's a couple of things and and I'll try and PISA sinc. But it probably won't be because it's not so much about a level, but it's more about I think an event. Well, what you need to see is a couple of things, just on the monetary policy side. Again, what I think is going on is as real rates go higher, inflation expectations come down, the probability of stack flation comes off the table. Right. These high flyers do much better in a stack flationary environment than in a more benign economic compartment. The other thing is, as we pointed out, is real rates are tied to relative pricing, or have been tied to relative pricing. In the gray market, real rates were negative hundred on the tenure, negative a hundred and twenty basis points, which was historically low. Um, they're up to a five basis points from the start of the year, so I think they're in the mid eighties at this point in time. If you see real rates continue to ratch and higher, you know at some point we've got to make a call where rates are going to level out. But I don't think they get too flat this year. They could, but definitely if they get the flat, it's another conversation because if they get the flat. What that means is a fed and all life. They got very aggressive and the economy is going to slow down. And what's happened is you've probably had a bigger sell off in these names and more important and last thing that we're looking at is and I'll throw another blast from the past out there, there was a cop There was a fund called them under net Net fund. So in the late nineties, it was a high flying internet um stock portfolio. And a friend of mine and for our associate was was a trader there. And every day in the sell off, the PM would come in and give him more to Cell and more to Cell, and he would just knock things down and knock things down. And it wasn't until those Cell orders until basically that capital is rehallocated. So what happens in the equity market, whether you like it or not, money chases performance and then when performance isn't, their money leaves. So you need to see that wash out. So what we'd like to see is we'd like to see a repricing of real rates. We'd like to see us move further in time. We'd like to see another push down in valuation. Is not so much valuations, but just performance, and then we'd like to see that I'll use a very nice graphic phrase, that cathartic puke, where finally we see that the seller's exhausted and the final liquidations, you know, and it's just hard to it's hard to get. Is it's it's going to happen on this date at this time. No, we don't know, but these are the signposts that we're using. So you kind of you kind of know when you see it. You know that that that one real ugly day at the end of our correction, I guess is uh, you know, the capitulation day that that everyone waits for. That That's exactly it. And what we said this year is we think the growth at any price type UM stocks are going to have a heavy first half because real rates are gonna go higher and because of what you're seeing today. But we left the door open to the second half because you could see the slowing economy, you could see that repricing, and you could see that that cathartic up chuck, or you could see the seller's exhausted. Chris, one of the big things that we were just talking about in one of the big stories from this week is this yield spike, and I'm wondering if if the what we're seeing this week is any different from what we've seen in the past, Like, is there any reason to believe that this won't be over by next week? For instance, thought or two there um, some people were asking asking me, hey, is it is it a good time to buy growth in tech and so and so forth. Let's just talk short term, let's talk long term. The move down has been very aggressive. It wouldn't have This is not a prediction, but it wouldn't be surprising too someday or the next couple of days to see a snap back all of a sudden, raids start to fall because you know, pick a reason and we see a snap back. But at the end of the day, the FED is going to be more aggressive. I think we have a fair amount of confidence in that if the FED. Our belief is, if the FED is going to be more aggressive, then we should continue to see that lift in real rates. Now, as we look longer term, a lot of our clients are saying, well, interest rates are going to go through the roof, and this, that and the other thing. If you let look at the last two tightening cycles, the tenure actually went lower. Wants the FED or tenure yields actually went lower for at least a year once the Feds started raising rates. And so it's not clear to me that as a FED starts raising rates that that tenure nominals are going to go higher, right, they may begin to stall out, And I think that that's important to note. And then the last thing is what we think is the FED will push the front end to wherever they need to go. But eventually what's going to happen where late in the cycle the economy is already slowing down as you take stimulus off, that's going to slow things down more. I'm not sure how aggressive they can be at this point in time. And so when we get a more stable environment, when we get a slower environment, then we can start talking about moving back into those secular growth stories. But for now we think it's especially as you go out on the risk curve, it's still a little bit too risky. And we still haven't seen, you know, the events of the situations that we need to see playoffs to ship tiden up your straight jackets. It's time for the craziest things we saw in markets this week. Well that I agree with Chris. I'm not sure how aggressive the FED can get. I'm gonna tell you, Aldana, though, I'm going to get very aggressive with my craziest thing of the week, possibly a little too aggressive. I'm actually a little worried about this one. Um. So if this is the last time we talk because of the reaction to my crazy things, it's been nice knowing you guys, I will say, though, to be true to the craziest thing I saw in weeks, I gonna have to stick with it and follow through and tell you what it is. But I want to hear yours first. What do you got first? Fell down? It minus courtesy of Matt Levine, who wrote about this in one of his columns this week, and he pointed out that the UK branch of Santander Bank is trying to recover a hundred seventy five million dollars that they accidentally sent to tens of thousands of people on Christmas Day. And so Matt matt Levin's suggestion is just put out a press release and say sent in their UK just gave out a hundred seventy five million in Christmas presents to thousands of people. You know, Wow? What what? Have people say, Wow, what a good good bank this is, and I really like that. I doubt that they'll follow follow through with the suggestion, but it's a really good one. I think the assumption being that the marketing value of hundreds they earned media as they say, from exactly, that's it's in thing and he might be onto something there that's a big spend, though I don't know, we'll see regardless or not. I think I might open an account with sintender just just in case, in case it happens again. Yeah, how about you, Chris, what's the craziest thing you saw this week? You know, I've been racking my brain over this and I've come up with a whole lot of nothing. But the coolest craziest thing I have seen in recent I will say recent weeks, they've girl did a cover a Barry Manilow's Copa Cabana. So if you haven't seen it, you gotta check it out. It is fantastic. I will check that out. You can pull it up on YouTube. It's super cool, and it's something as equity markets melt or or you know, rollover. It's something that could brent you up or cheer you up. So it's pretty good. We'll leave it on that one. That's pretty good. Anything else, Chris, that that's a pretty good one. I'll let you live with that. Unless you got something better. That's that's a good one, all right, I'll give you mine. And again, you know, if this sends up getting me canceled, it was nice knowing you guys. Best of luck to the new co host of of What Goes Up. But I have to be true to revealing the craziest thing I saw in markets in the weekend. This is courtesy of The New York Post, which right there, you know, brace yourself, adjust your chin strap as they say. Um, it's about a reality TV star named Stephanie Mato or Matto, I'm not sure how you pronounced it. She was the star of a show called ninety Day Fiancee on t l C. I've never seen Have you seen the show, Bilda? I have you have seen this? Unluckily I've seen it as well. My wife has watched a few times and I've been stuck watching it. It draws you in. Okay, all right, so you guys are are familiar. So this woman, apparently after the show, gained a very strong following of fans on social media. Uh, and she started, I can't even I'm so in trouble for this, but I need to get it up. I read this story was tw Yeah. Some some fans suggested, uh that if she were to pass gas into a jar, they would just that jar of flatulence. Uh. As The York Post put it, she launched launched a guest adventure, peddling her fancy flash lence to strangers and blew awaye people on social media. When she recently announced that she makes more than blank a week doing this. So it's time to play prices, right, guys, how much do you think this woman makes per week with this business endeavor I came in by. This is a pretty high margin product. When you think about it, you know, it's it's the Uh, it's just the jar. Really, just potentially, what's your guest per per week weekly income? Yeah, not a not a per a jar basis, but but per week. They don't think they gave the per jar cost. I'll see dollars. That's that's that's not bad, fifty grand a week. But here's the problem. She did it too much. She did she the debate. The demand was so high that she had to adjust her her diet to accommodate both demands, so so she started eating it. Said her her diet included black bean salad, I mean in ham and pepper omelets. I gotta say, not that far different from my normal diet, as which tells you something. And what happened is she suddenly was overcome with chest pains and she thought she was having a heart attack. Got rushed to the hospital and the doctor said, no, it's not a heart attack. You've just been eating too many guessy foods and we recommend you you stop this and take some some gas alleviating medicine. So her it only lasted a few weeks. I think she netted two thousand dollars doing this. But here's my favorite part and what really qualifies it for the craziest thing I've seen in markets this week, she said, final quote of the story. I think everything happens for a reason. And although my fart selling days are over, I am going to save the money I made and I'll put something in the crypto perfect two story and and ending to a story Yes, yes, but I think I don't know it was a false form on that heart attack. I worry that if she puts all this money into crypto, that you may in do some actual heart attack given the volatility. I don't know. I died. Not a financial advisor here, just a guy with a blanket over his head, sipped in the bathroom. But if she's listening, I would I would advise maybe, I don't know, some quality, some quality stocks like Chris suggests, and not putting that up, that very hard earned money into crypto. Just me, Mike, this is your this is your weirdest week. You're hiding under a blanket, and your weirdest thing is the weirdest thing that you've potentially ever flagged. Something's gone wrong, very wrong in my life. Blah dada. I don't know what it is, but it can only go off from here. Let's hope we'll see anyway. Chris, great to talk, Kia. I can understand if you never want to associate with with me again after that one. So sorry. I asked you to come on. If you can look past it, we we love to be back on against it. Thanks guys, and as always, very informative and very entertaining. Much appreciated. Thank you for coming back on what goes up. We'll be back next week. Until then, you can find us on the Bloomberg Terminal website and app, or wherever you get your podcasts. We'd love it if you took the time to rate and review the show on Apple Podcasts so more listeners can find us. And you can find us on Twitter, follow me at Reaganonymous. The Dotta Hirich is at the Fildtta Hirich. You can also follow Bloomberg Podcasts at Podcasts and thank you to Charlie Paulla Bloomberg Radio. What Goes Up is produced by Laura Carlson. The head of Bloomberg Podcast is Francesco Leavy. Thanks for listening, See you next time. That n