# 'Barbell' Investing Strategies With Jurrien Timmer

An episode of [Masters in Business](https://invisiblenetwork.ai/podcast/730188152), 10 Oct 2025, 1 h 29 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/4e4cd910-40a1-4619-a5f3-ae2b0012ffff/81660678-c52e-45fb-a384-b372012727da/audio.mp3?utm_source=Podcast&in_playlist=5873a3cb-298f-40bc-b71f-ae2b0013000d

Barry Ritholtz speaks with Jurrien Timmer, director of global macro at Fidelity investments. They discuss his career path, key market charts and Timmer's "barbell approach" to investing in both high-flying tech stocks and equities outside of the US. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Masters in
[0:11] Speaker 1: Business with Barry Ritholts on Bloomberg Radio on the.
[0:17] Speaker 2: Latest Masters in Business podcast. An amazing conversation. I sit
[0:21] Speaker 2: down with Uri and Timer. He's the director of Global
[0:25] Speaker 2: Macro at Fidelity. They touch about fifty million separate clients.
[0:30] Speaker 2: What an amazing conversation. Urian has been started out in
[0:34] Speaker 2: fixed income before he became a market technician. Now Global
[0:38] Speaker 2: Macro is his beat, which means he covers everything the
[0:41] Speaker 2: US overseas, equity, bonds, commodities, economic data. I thought this
[0:48] Speaker 2: conversation was fascinating and I think you will also. What
[0:52] Speaker 2: a depth and breadth of knowledge. With no further ado
[0:55] Speaker 2: my conversation with Fidelities Urian timor ur Tim Welcome to Bloomberg.
[1:01] Speaker 3: Thank you very much, Arry.
[1:03] Speaker 2: I've been looking forward to this. I'd been consuming your
[1:06] Speaker 2: stuff for it feels like forever. I'm a big fan
[1:09] Speaker 2: of what you do. But before we get to your
[1:12] Speaker 2: work at Fidelity for the past three decades, let's talk
[1:15] Speaker 2: a little bit about your background. You get a bachelor's
[1:18] Speaker 2: and finance from BAPS in college. What was the original
[1:22] Speaker 2: career plan?
[1:24] Speaker 3: Well, so I was born and raised on the island
[1:26] Speaker 3: of Aruba in nineteen sixty two when Aruba was still
[1:30] Speaker 3: very small and sheltered, and as a Dutch citizen now
[1:35] Speaker 3: also an American citizen. But you know, generally the Dutch
[1:40] Speaker 3: kids would go to Holland to go to higher education.
[1:43] Speaker 3: But I was in love with the American culture. I
[1:46] Speaker 3: met many tourists on the Beach Show, and so I
[1:50] Speaker 3: wanted to go to the States and do the American thing.
[1:53] Speaker 3: And then my father, who was an importer of construction materials, etc.
[1:59] Speaker 3: He had contact in Boston. They said, okay, well you
[2:01] Speaker 3: should send your kid to BABSM because it's small, it
[2:04] Speaker 3: won't be overwhelmed as an international student. And I've always
[2:09] Speaker 3: wanted to be an architect. But then in the last
[2:11] Speaker 3: year before finishing high school, I'm like, I don't think
[2:15] Speaker 3: I'm good enough to be an architect, so let me
[2:17] Speaker 3: do business. And I figured, you know, there's always something
[2:20] Speaker 3: you can do with a business degree, and so I
[2:22] Speaker 3: studied finance with a minor in investments. And then you know,
[2:27] Speaker 3: I graduated with no work permit, right, So I was
[2:31] Speaker 3: in that place where you need to have obviously a
[2:34] Speaker 3: work permit. So back then I don't know if it's
[2:36] Speaker 3: still the case, but back then you got one year
[2:38] Speaker 3: practical training visa and then you had to go, you know,
[2:41] Speaker 3: get a real visa. And so I took literally the
[2:46] Speaker 3: only job that was offered to me in the United States.
[2:50] Speaker 3: So I applied to every Dutch company. I figured, at
[2:52] Speaker 3: least they'll have maybe some sentimental reasons to hire a
[2:55] Speaker 3: Dutch person. I could have worked in Holland, of course,
[2:58] Speaker 3: but I wanted to be in the States. So the
[3:00] Speaker 3: Dutch bank ABN, which later became ab and am Ro,
[3:03] Speaker 3: hired me. I went to New York into their corporate
[3:07] Speaker 3: banking credit program, in which I had zero interest. But
[3:13] Speaker 3: it's like, you know, this is the job.
[3:15] Speaker 2: But you eventually become pretty senior in the fixed income
[3:19] Speaker 2: group at ABM.
[3:20] Speaker 3: Yeah, so I was very lucky. And again, you know,
[3:22] Speaker 3: it's sort of if you take the job that's offered
[3:24] Speaker 3: to you and you make the best of it, you know,
[3:25] Speaker 3: you played a hand that's dealt And literally within a
[3:29] Speaker 3: few months, ABN set up a capital markets group because
[3:33] Speaker 3: you know, we were the primary dealer in New York,
[3:36] Speaker 3: together with Lacelle National Bank in Chicago for the HQ
[3:40] Speaker 3: in Amsterdam, which of course, was one of the world's
[3:42] Speaker 3: largest banks at the time and a very large treasury book,
[3:46] Speaker 3: and so I was the person who would execute the
[3:49] Speaker 3: trades for HQ. So I became a client of like
[3:53] Speaker 3: Solomon Brothers and Smith Varney and you know, you know, Goldman, Sachs,
[3:58] Speaker 3: et cetera. And so I got in to the Wall
[4:00] Speaker 3: Street game and I learned everything about fixed income, and
[4:04] Speaker 3: to this day, i'm you know, like, if you're either
[4:08] Speaker 3: a stock market person or a global macro person, having
[4:11] Speaker 3: a foundation in fixed income is so important.
[4:14] Speaker 2: It's so true. You say that some of my favorite
[4:17] Speaker 2: stock analysts began as bond analysts because they're concerned about
[4:21] Speaker 2: return of capital, not return on capital, and it focuses
[4:25] Speaker 2: them very much on staying away from the speculative nonsense.
[4:29] Speaker 2: And really it's been very consistent over the years. I
[4:32] Speaker 2: have a list of some favorite people in that space. So,
[4:35] Speaker 2: so you start out in fixed income, when did technical
[4:38] Speaker 2: analysis and becoming a CMT arise in your journey.
[4:43] Speaker 3: So I was at ABMM in New York for ten
[4:46] Speaker 3: years and so i'm you know, I'm there executing trades,
[4:49] Speaker 3: learning about the markets, watching my teller eighth and the
[4:52] Speaker 3: Bloombergs were still there were the quad screens with the
[4:55] Speaker 3: amber right, and you know, I just I've always been
[4:59] Speaker 3: a visual person, and so I started gravitating towards charts.
[5:03] Speaker 3: And you know, charts are kind of the mainstay of
[5:05] Speaker 3: what I do even now forty years later, forty years later.
[5:09] Speaker 3: And I like to write. I think I get that
[5:11] Speaker 3: from my dad, who's a great writer. And so I
[5:14] Speaker 3: always had this kind of urge to put pen to
[5:16] Speaker 3: paper and to show charts. And so I just started
[5:20] Speaker 3: writing a newsletter for the people in my universe at
[5:25] Speaker 3: the time, and you know, it would be like charts
[5:28] Speaker 3: from CQG cut out, taped onto a type report and
[5:34] Speaker 3: then facts to people like that's what the technology was
[5:37] Speaker 3: back then, and so it was al So that's how
[5:41] Speaker 3: it started. And then I ended up, you know, getting
[5:44] Speaker 3: the chart at Market Technician, although that may have been
[5:47] Speaker 3: during the Fidelity years.
[5:48] Speaker 2: So how did you go from ab and m RO
[5:50] Speaker 2: to Fidelity? When was that?
[5:52] Speaker 3: So the culture AB and m ROW. Not not to
[5:57] Speaker 3: spill any beans, but this is a long time thirty
[5:59] Speaker 3: years ago, thirty years ago, I didn't like where it
[6:01] Speaker 3: was going. So we ABN had a bank in Chicago,
[6:06] Speaker 3: and they saw what a profit center in New York was,
[6:08] Speaker 3: so they wanted to They wanted me to work for them,
[6:11] Speaker 3: become a commissioned salesman. And I'm like, it's like, not
[6:14] Speaker 3: what I do. And just coincidentally, at that time, Fidelity
[6:19] Speaker 3: came looking around looking for the most obscure job in
[6:23] Speaker 3: the world, a fixed income technical analyst. I mean, talk
[6:28] Speaker 3: about a narrow field, right. So that was in nineteen
[6:31] Speaker 3: ninety four. Around that time, you know, I was kind
[6:34] Speaker 3: of looking around and I had two major career highlights
[6:39] Speaker 3: within six months of each other, because in ninety four
[6:42] Speaker 3: I was approached by Paul Truder Jones's company, really and
[6:45] Speaker 3: so I had a meeting with Paul in his office
[6:48] Speaker 3: downtown New York with his giant Tolerate on the screen,
[6:51] Speaker 3: and we were looking at the bomb chart ninety four
[6:53] Speaker 3: to the bear market and.
[6:55] Speaker 2: He very famously had called the eighty seven crash before.
[6:58] Speaker 3: It was like, is that do you think that's a
[6:59] Speaker 3: fourth win? And we were having that conversation that was great,
[7:03] Speaker 3: and then you know, I was approached by Fidelity, and
[7:05] Speaker 3: I ended up going with Fidelity. But the last interview
[7:08] Speaker 3: of that process was with Ned Johnson.
[7:11] Speaker 2: Oh really, and so I was spent the founder.
[7:13] Speaker 3: I spent an hour with him in his office talking
[7:16] Speaker 3: about pokers, because I was hired to go into the
[7:19] Speaker 3: chart room. And at Fideliti, nobody got into the chart
[7:22] Speaker 3: room without Ned's blessing, right because.
[7:24] Speaker 2: And back then were they still doing charts by hand?
[7:27] Speaker 3: Yep. Amazing and so that so that anyway, so that's
[7:32] Speaker 3: how the fidelity career started, and it was it was
[7:35] Speaker 3: interesting because this is now early ninety five, and of
[7:38] Speaker 3: course ninety four was that bear market. We had the
[7:41] Speaker 3: so called tequila crisis in Mexico, and so the new
[7:46] Speaker 3: mandate from upstairs in ninety five was, we're not making
[7:49] Speaker 3: any duration bets. You just stick to your bottom up.
[7:53] Speaker 3: You know, you look at credits and like, I'm coming
[7:55] Speaker 3: in there as a technician and like, what am I
[7:58] Speaker 3: supposed to do? Now? Is nothing for me to do?
[8:02] Speaker 3: And so at that point I kind of reinvented myself
[8:04] Speaker 3: and became a multi multi asset and I went to
[8:07] Speaker 3: the equity side. And anyway, so that was the one.
[8:10] Speaker 2: When you say multi asset, I think you're the only
[8:13] Speaker 2: person in all of finance with the title director of
[8:16] Speaker 2: Global Macro Global means around the world macro means thirty
[8:22] Speaker 2: thousand foot view is everything out there in your jurisdiction
[8:27] Speaker 2: pretty much.
[8:28] Speaker 3: So I don't do security selection. You know, we have
[8:30] Speaker 3: armies of very downs up.
[8:32] Speaker 2: But you do stocks, bonds, all scrypto, commodities, gold.
[8:37] Speaker 3: You name it everything, but it's top down.
[8:39] Speaker 2: As well as economic data, interest rates, employment, etc.
[8:44] Speaker 3: And that's how I transitioned from being a technical strategist
[8:48] Speaker 3: to being more kind of multidisciplinary because I quickly learned
[8:53] Speaker 3: at Fidelity as I was roaming the halls pitching ideas
[8:57] Speaker 3: to portfolio marriage who generally are fundamentally oriented, right, I'm like,
[9:04] Speaker 3: you know, it's like I'm speaking a different language, right.
[9:06] Speaker 3: So Finelle has always had a lot of technical analysts
[9:09] Speaker 3: and the chart room, but I had to like reinvent
[9:12] Speaker 3: myself again and pivot towards at least speaking their language.
[9:16] Speaker 3: And like, you know, a chart is a chart, right.
[9:18] Speaker 3: It can just be a bar chart of the S
[9:20] Speaker 3: and P, or it could be of the pe ratio
[9:23] Speaker 3: or earnings or monetary policy. So I figured a chart
[9:26] Speaker 3: is a chart. I'm going to like weave a broader
[9:29] Speaker 3: approach to this, and that's where kind of I came
[9:32] Speaker 3: up with the title.
[9:32] Speaker 2: So whenever I see a technician and a fundamental analyst
[9:37] Speaker 2: having a discussion, somewhere along the line, someone says, look,
[9:42] Speaker 2: I'm a techno analyst. I'm just telling you what's going
[9:46] Speaker 2: on in the battle between supply and demand. It's up
[9:49] Speaker 2: to you to create a narrative around that. You tell
[9:51] Speaker 2: us what's going on. Fundamentally, I don't know, but I
[9:53] Speaker 2: could tell you who's winning the buyers or the sellas.
[9:56] Speaker 3: So the fundamentals tell you kind of the why, maybe
[10:03] Speaker 3: the what and the why, and the technicals tell you
[10:06] Speaker 3: kind of the when and the how much It helps
[10:08] Speaker 3: give you conviction. And generally speaking, we use technical analysis
[10:12] Speaker 3: like our equity pms do. Like they're obviously going to
[10:16] Speaker 3: have an idea about a company and what their long
[10:19] Speaker 3: term prospects are. But then our technical analysts will will say, okay,
[10:23] Speaker 3: well you've rated this stock a one, meaning strong buy,
[10:27] Speaker 3: but the chart looks like hell, Like you should be
[10:30] Speaker 3: aware that what's in what's happening is not the same
[10:34] Speaker 3: as what should be happening, and maybe it takes time,
[10:37] Speaker 3: but it's like it's a it's a second opinion, which
[10:40] Speaker 3: can be very helpful. And the other way around as well,
[10:42] Speaker 3: Like a chart looks amazing, but it gets a really
[10:45] Speaker 3: poor fundamental ranking. And we also have a quantitative team
[10:48] Speaker 3: that does a quant overlay as well.
[10:50] Speaker 2: So so we talked about global macro. I'm curious, you're
[10:55] Speaker 2: a Dutch citizen, originally born and raised in Aruba, now
[10:59] Speaker 2: a citizen in the US for the past twenty five years.
[11:02] Speaker 2: How does that international upbringing affect how you see the
[11:07] Speaker 2: entire world of assets.
[11:09] Speaker 3: Yeah, it's a great question. I do think that I've
[11:14] Speaker 3: been privileged to grow up in a very diverse environment.
[11:20] Speaker 3: Like if you look at old high school pictures, I'm
[11:23] Speaker 3: like maybe one of two white kids in there. Everyone
[11:26] Speaker 3: else is different shades, but so very very diverse. And
[11:31] Speaker 3: so I think and also just going to different countries
[11:33] Speaker 3: and learning different cultures or being exposed to them, I
[11:36] Speaker 3: think it's helped me, Like I view myself sort of
[11:38] Speaker 3: as a global citizen.
[11:40] Speaker 2: Well, you're a globe trotter. You're you're in the US,
[11:42] Speaker 2: you are in California, you're in New York, Boston, you're
[11:46] Speaker 2: going to where what's your next few stops? London?
[11:48] Speaker 3: I'm flying to London on Saturday. I'll be in Geneva
[11:51] Speaker 3: after that, and then.
[11:53] Speaker 2: We were just in late Geneva a year ago, spectacular.
[11:57] Speaker 3: And then actually we're going to Holland because my parents
[12:00] Speaker 3: are they live in the Hague. They're celebrating their seventieth
[12:04] Speaker 3: wedding out of vers so they're ninety one and ninety seven.
[12:08] Speaker 3: So we got three generations of Timor descending on the
[12:11] Speaker 3: Hague in about a week and a half. And I think,
[12:14] Speaker 3: what I feel at home in almost any place really
[12:18] Speaker 3: in the world. And you know, when it's hard to
[12:21] Speaker 3: understand what someone says because the English is not their
[12:24] Speaker 3: first language, you can kind of like you figure it
[12:28] Speaker 3: out because you just kind of used to this, you know,
[12:32] Speaker 3: this environment where everyone's coming from different places and and
[12:35] Speaker 3: like you know even now, like I run and a
[12:37] Speaker 3: totally separate topic, but I run a food camp at
[12:41] Speaker 3: burning Man and it's a very global camp. We have
[12:44] Speaker 3: ninety people. We're all cooked meals that we gift away
[12:47] Speaker 3: to the artists there. But we have like thirty Brazilians,
[12:50] Speaker 3: and we have like French and Swiss and Mexican people
[12:54] Speaker 3: and obviously Americans and that, like it's it's easy to
[13:00] Speaker 3: do because you're just used to having all these different
[13:02] Speaker 3: cultures in the same space.
[13:04] Speaker 2: So I'm kind of fascinated by the new I don't
[13:07] Speaker 2: love the earbuds that not comfortable in my ear, but
[13:09] Speaker 2: the new AI enabled instant translation that is star Trek
[13:15] Speaker 2: next level futuristic. I can see that saying, oh you
[13:19] Speaker 2: want to go to Japan or Korea or China, here
[13:21] Speaker 2: you go knock yourself out. That sort of technological innovation
[13:25] Speaker 2: is that turns that into a must have technology for sure?
[13:29] Speaker 2: How many languages do you speak?
[13:31] Speaker 3: I speak? Obviously, Dutch is my native language. English. I
[13:34] Speaker 3: used to be totally fluent in Spanish, but I've kind
[13:37] Speaker 3: of lost that. And then of course there is the
[13:39] Speaker 3: world language called Papiamento, which is what they speak in Aruba,
[13:43] Speaker 3: which is essentially kind of a Spanish Portuguese blend. But
[13:50] Speaker 3: if you don't know a word, you can just say
[13:52] Speaker 3: it in Dutch or English and it's completely acceptable.
[13:56] Speaker 2: Really fascinating. Coming up, we continue our conversation with you
[14:00] Speaker 2: and Temor, director of Global Macro at Fidelity, discussing various
[14:05] Speaker 2: asset classes, equities, bonds, commodities, alternatives. You're listening to Masters
[14:11] Speaker 2: in Business on Bloomberg Radio. I'm Barry Ridults. You're listening
[14:27] Speaker 2: to Masters in Business on Bloomberg Radio. My guest this
[14:30] Speaker 2: week Urian Temor, director of Global Macro at Fidelity. They
[14:35] Speaker 2: touch about sixteen trillion dollars in assets and have discretion
[14:39] Speaker 2: over six point four trillion. So we were talking about
[14:45] Speaker 2: what a globe trotter you are. Let let's trot around
[14:47] Speaker 2: the world and talk about various asset classes. Since you
[14:52] Speaker 2: began your career with bonds, let's let's start with bonds.
[14:55] Speaker 2: How do you see what's been going on with treasury
[14:59] Speaker 2: yields and anticipating not only the twenty five basis cut
[15:03] Speaker 2: point we had in September, but perhaps a couple more
[15:07] Speaker 2: this year and next.
[15:08] Speaker 3: Yeah, So treasury yields such an interesting market right now.
[15:13] Speaker 3: We've been stuck sort of between four and five percent
[15:16] Speaker 3: for a while for a while, and when we go
[15:18] Speaker 3: above four and a half, it's like nothing good happens,
[15:21] Speaker 3: Like the old fed model from the Greenspan Das comes
[15:24] Speaker 3: lurking back and it starts to wabble the stock market
[15:28] Speaker 3: because the bond yield and the equity yield are about
[15:31] Speaker 3: the same right now, And so that takes you back
[15:34] Speaker 3: to the eighties and and you know, mid nineties and
[15:38] Speaker 3: even the seventies and sixties where bonds to stocks were
[15:42] Speaker 3: positively correlated instead of negatively correlated. That happened that that began,
[15:46] Speaker 3: you know, during the Great Moderation era late nineties until
[15:50] Speaker 3: COVID basically, and so then in twenty twenty two, of
[15:53] Speaker 3: course the correlation flipped back to positive. It was rising
[15:56] Speaker 3: yields that caused the problem in the stock market. And
[16:00] Speaker 3: so there's a whole broader conversation about the sixty forty,
[16:05] Speaker 3: but just dealing with treasuries right now. So as you
[16:08] Speaker 3: get close to five, it really starts to freak the
[16:11] Speaker 3: stock market out, but also the bond buyers start to
[16:13] Speaker 3: emerge because there's value, right, I mean real.
[16:16] Speaker 2: Real ch yields over two and a half percent inflation.
[16:19] Speaker 3: The income is back into fixed income, right, but down
[16:23] Speaker 3: at four when you have a growth scare kind of
[16:25] Speaker 3: like I mean, I wouldn't say it's a growth scare, but.
[16:27] Speaker 2: There's more some nervousness and some life I hate the
[16:29] Speaker 2: word uncertainty, but there's a lack of clarity as to
[16:32] Speaker 2: how all these things taraffs, yield FMC plays out.
[16:36] Speaker 3: Yeah, so at four, generally I would be a better
[16:40] Speaker 3: seller than a buyer. But this question of you know,
[16:44] Speaker 3: fiscal dominance, you know clearly the administration wants to grow
[16:49] Speaker 3: out of the debt. I think that's the very overt
[16:52] Speaker 3: plan if you've listened to good Bessant.
[16:55] Speaker 2: Or they're pretty explicit about it.
[16:57] Speaker 3: And so they're trying to goose the economy and outrun
[17:00] Speaker 3: the debt because everyone knows you can't really cut the
[17:03] Speaker 3: debt very much because too much of the budget is
[17:07] Speaker 3: is not discretionary. And so that's the plan, and I
[17:10] Speaker 3: think it's basically it's a good plan because what are
[17:13] Speaker 3: the alternatives.
[17:14] Speaker 2: Right raising taxes and spending, which we know what the
[17:17] Speaker 2: odds of that.
[17:18] Speaker 3: Are, yes, But running kind of that fiscal train means
[17:23] Speaker 3: deficit spending, or at least that's part of it, and
[17:25] Speaker 3: that means more supply, and that could mean hire term
[17:28] Speaker 3: premium for long treasuries and we saw we've seen that,
[17:32] Speaker 3: right the term premium during the qa QE financial repression
[17:36] Speaker 3: days was like minus one fifty, which makes no sense,
[17:38] Speaker 3: right term a risk premium should always be positive, and
[17:41] Speaker 3: now it's plus sixty plus seventy, but historically it's been
[17:45] Speaker 3: plus one hundred and fifty or even more. And so
[17:49] Speaker 3: if the term premium mean reverts back to a normal
[17:53] Speaker 3: level positive level, because deficit spending and debt levels are rising,
[17:59] Speaker 3: you could easily least see a five handle on treasuries,
[18:02] Speaker 3: and a five handle on treasuries are not going to
[18:04] Speaker 3: sit well with equities. Like the equity marketing can go up,
[18:08] Speaker 3: earnings can drive the bus, but the pe gets under
[18:12] Speaker 3: pressure because the risk free acid is now competing with
[18:14] Speaker 3: the risky acid and they're offering the same yield.
[18:17] Speaker 2: So quick question on that. In the twenty tens, or
[18:21] Speaker 2: at least towards the end of the twenty tens, we
[18:22] Speaker 2: had an inverted yield curve for a while. What's the
[18:25] Speaker 2: impact of that on that term premium or lack thereof.
[18:29] Speaker 3: Yeah, so we had that very inverted yield curve. Obviously
[18:34] Speaker 3: it shouted recession and it didn't happen. And I think
[18:37] Speaker 3: the reason in hindsight was that the economy is just
[18:41] Speaker 3: less interest rates sensitive than it used to be. Right,
[18:43] Speaker 3: so everyone refired their mortgage in twenty twenty and twenty
[18:46] Speaker 3: one at sub three percent. That's also why the housing
[18:49] Speaker 3: market is frozen. But also if you look at the
[18:52] Speaker 3: big banks, right, why is a yield curve inversion. Typically
[18:55] Speaker 3: bad is because banks net interest margins goes upside down.
[19:00] Speaker 3: They borrow short land long, and so banks stopped lending
[19:03] Speaker 3: and you get a credit crunch and you get a recession.
[19:06] Speaker 3: But in this case, the large banks. You know, if
[19:09] Speaker 3: you notice your your deposit rate at the large megacenter
[19:14] Speaker 3: banks has not really gone up commensurate with the yield
[19:18] Speaker 3: on money market funds, right, So that deposit rate went
[19:21] Speaker 3: up to half a percent and is now coming back
[19:23] Speaker 3: down again. So for a large bank, the yield curve
[19:27] Speaker 3: not only was never inverted, it was extremely steep half
[19:31] Speaker 3: a percent funding. Right, If you're funding your loans on
[19:35] Speaker 3: deposits and you're paying half a percent on those deposits
[19:38] Speaker 3: and you can lend at seven or eight percent, you'll
[19:41] Speaker 3: do that all day long.
[19:42] Speaker 2: And yet at the same time, we've watched money markets
[19:45] Speaker 2: go five trillion, six trillion, seven trillion. It's become so
[19:49] Speaker 2: easy with your app to move money from Hey, I'm
[19:52] Speaker 2: going from Chase to swab, I'm going from city to Fidelity,
[19:56] Speaker 2: where I'm getting real yield. I wonder how much technology
[20:00] Speaker 2: plays a role in people. It used to be pain
[20:02] Speaker 2: in the neck. I'm getting quarter percent in my checking account.
[20:06] Speaker 2: But do I really want to write a check and
[20:08] Speaker 2: mail it out and wait.
[20:09] Speaker 3: For the Yeah, So you leave money at the bank
[20:12] Speaker 3: for convenience. You know, you got bills to pay. But
[20:15] Speaker 3: if you have extra cash, you're buying a CD or
[20:19] Speaker 3: money market fund or buying T deal, so what have you.
[20:22] Speaker 3: And it's a lot easier than it used to be.
[20:23] Speaker 3: And so now you've got seven trillion in money market funds,
[20:26] Speaker 3: which a lot of people actually think is money waiting
[20:28] Speaker 3: to be invested in the stock market. But I don't
[20:32] Speaker 3: think there's really a signal there because I think that
[20:34] Speaker 3: money came out of the banks and probably we'll go
[20:36] Speaker 3: back to the bank.
[20:36] Speaker 2: So some people have said, hey, as soon as the
[20:39] Speaker 2: Fed starts cutting rates, it'll a make the cost of
[20:43] Speaker 2: borrowing cheaper for corporate America as well as American households.
[20:47] Speaker 2: And b is going to scare some of that money away.
[20:49] Speaker 2: And it's got nowhere to go about equity fair narrative
[20:52] Speaker 2: for kind of a lot of wishful thinking.
[20:56] Speaker 3: It could be a combination of both. But if you
[20:58] Speaker 3: typically look at when money market fund assets swell like
[21:02] Speaker 3: it did during the pandemic, it's money coming out of
[21:05] Speaker 3: the stock market seeking a safe haven, and then when
[21:08] Speaker 3: the stock market recovers, the money goes back in the
[21:10] Speaker 3: stock market. That's not the pattern this year. The money
[21:13] Speaker 3: came out of the banks in part because of like
[21:15] Speaker 3: the Silicon Valley tobaccle.
[21:18] Speaker 2: Fhoe years, but also five hundred basis points of rate
[21:20] Speaker 2: hikes ex. Twenty twenty two.
[21:22] Speaker 3: So money markets went from zero to five and a
[21:24] Speaker 3: half and suddenly attracted and deposits went from zero to half.
[21:27] Speaker 3: You know, so money markets yielded ten x the bank deposit,
[21:31] Speaker 3: and so some of that may go to the stock market,
[21:34] Speaker 3: but I think, but it didn't come from the stock market.
[21:36] Speaker 3: Let me put it out.
[21:37] Speaker 2: So you noted something really interesting. I remember you wrote
[21:40] Speaker 2: in twenty twenty two bonds went from being a port
[21:44] Speaker 2: in the storm to the storm itself. Yes, so normally
[21:49] Speaker 2: we think of money leaving equity and going in the
[21:51] Speaker 2: safe harbor of money markets. Were we seeing money exiting
[21:55] Speaker 2: bonds and going to money markets? Is that what happened?
[21:58] Speaker 2: Was it a duration play.
[22:00] Speaker 3: From among sort of the typical investors. We have not
[22:04] Speaker 3: really seen an exodus at all, and I think part
[22:07] Speaker 3: of that is just the demographics of you know, the
[22:10] Speaker 3: baby boom, solving for income more so than growth. So
[22:14] Speaker 3: when you look at fun flows into fixed income, they've
[22:17] Speaker 3: remained strong, and they were strong at you know, one percent,
[22:21] Speaker 3: and they're strong at four percent. So I think that
[22:24] Speaker 3: is more of a structural trend than playing the markets,
[22:28] Speaker 3: if you will, Like I think the average investor is
[22:30] Speaker 3: not looking at okay, well real rates are now positive,
[22:33] Speaker 3: so let me do this. But they're solving for outcomes.
[22:35] Speaker 3: They're buying solutions based funds, like like our target date,
[22:39] Speaker 3: we'll have a certain amount of fixed.
[22:41] Speaker 2: I've just attracted so much money in four o one
[22:43] Speaker 2: k's over the past twenty years. It's amazing. So let's
[22:46] Speaker 2: talk a little bit about equities. I keep hearing people
[22:50] Speaker 2: complain about valuations, but if you stayed out of equities
[22:54] Speaker 2: due to elevated valuation, you miss most of this run
[22:57] Speaker 2: from the twenty thirteen breakout.
[23:00] Speaker 3: Yes, so, so the market obviously is very bifurcated. We
[23:05] Speaker 3: got the MAC seven, the cap weighted PE is you know,
[23:09] Speaker 3: twenty three twenty four. The equal weighted PE is eighteen.
[23:13] Speaker 3: So there's a very large gap there. You know, if
[23:18] Speaker 3: you look back at the mid to late nineties, which
[23:21] Speaker 3: is a kind of an analogous period to today. Right,
[23:24] Speaker 3: we had the ninety four stealth bear market when green
[23:28] Speaker 3: Span raised race three hundred basis points. Then he gave
[23:31] Speaker 3: back seventy five and we had a huge rally. And
[23:34] Speaker 3: it was also the start of the Internet boom, you know,
[23:37] Speaker 3: the Netscape IPO and it was like in ninety six.
[23:40] Speaker 3: So the post twenty twenty two period very analogous to
[23:43] Speaker 3: post nineteen ninety four, you know, soft landing, ease off,
[23:47] Speaker 3: the brakes, markets, markets rip, and then the post ninety
[23:52] Speaker 3: eight long term capital that you know, twenty two percent decline,
[23:56] Speaker 3: very robust recovery, and then green Span eases three times
[24:00] Speaker 3: into that recovery. We're seeing the same thing now. We
[24:03] Speaker 3: had a twenty one percent tariff tantrum, no recession, you know,
[24:07] Speaker 3: the kind of administration backed off very very strong, one
[24:10] Speaker 3: of the strongest ever recoveries from a twenty percent decline
[24:14] Speaker 3: other than nineteen ninety eight. And then now Powell's easing
[24:18] Speaker 3: into that. And so but the point is that that
[24:20] Speaker 3: period saw almost NonStop multiple expansion and that's what we've
[24:26] Speaker 3: seen since twenty twenty two. And you know, pees are
[24:31] Speaker 3: they have they are strong predictors of long term return.
[24:35] Speaker 3: So if you take a ten year cape ratio and
[24:39] Speaker 3: you regress that against ten year forward returns, you see
[24:42] Speaker 3: a very high you know, it explains the forward returns
[24:46] Speaker 3: very well. But over the near term, a high pe
[24:51] Speaker 3: has very little to say about the next year or two.
[24:54] Speaker 3: And this is because the market tends to be in
[24:58] Speaker 3: a rising trend. Momentum begins, that's momentum, and that's what
[25:03] Speaker 3: we're in. So it's it's a you know, it's a
[25:05] Speaker 3: tough game to time on the mean reversion of pees,
[25:11] Speaker 3: even though we know that historically it's between ten and
[25:14] Speaker 3: thirty and it does mean revert, but when the mean
[25:17] Speaker 3: reverse reversion starts and from what level, it's very very
[25:21] Speaker 3: difficult to do, especially during secular trends, which I think
[25:24] Speaker 3: we're very clearly in.
[25:26] Speaker 2: So so many different places to go with this. I
[25:29] Speaker 2: have a dozen questions. Maybe we'll go a little along
[25:32] Speaker 2: the segment and delve deeper into equities. I love the
[25:36] Speaker 2: concept of a secular bull market as opposed to a
[25:40] Speaker 2: cyclical but I think a lot of people don't really
[25:43] Speaker 2: understand the difference. Give us your definition of what is
[25:47] Speaker 2: a secular bull market. When this one began and why.
[25:51] Speaker 3: Yeah, So we have the market cycle, which is generally
[25:54] Speaker 3: driven by the business cycle. So you have a recession
[25:57] Speaker 3: and you have the early cycle recovery where things get
[26:00] Speaker 3: less bad, and of course the market is always anticipating that, right.
[26:04] Speaker 3: The market's always in price discovery, and this is why
[26:07] Speaker 3: at bottom's price will lead earnings, which is why the
[26:10] Speaker 3: pe always goes up in the first year of a
[26:13] Speaker 3: bull market, like it always does. And it doesn't make
[26:16] Speaker 3: sense on the surface. People are like, oh, this can't
[26:18] Speaker 3: be real. It's all pe driven. Where are the earnings all?
[26:21] Speaker 3: The market's just from running the earnings. Yeah, But then
[26:24] Speaker 3: there are the secular trends, and you know, if you
[26:27] Speaker 3: go back one hundred years, you can see them. You
[26:31] Speaker 3: can spot them very easily because the market has a
[26:34] Speaker 3: kind of central trend line plus ten percent nomenal plus
[26:38] Speaker 3: seven six and three quarters real. And if you run
[26:41] Speaker 3: a regression trend line against the total real return of
[26:45] Speaker 3: the SMP or some basket of stocks going back one
[26:48] Speaker 3: hundred and fifty years, it's like perfect. And then you
[26:51] Speaker 3: have the pendulum swinging above it and below it, so you.
[26:54] Speaker 2: Have very noisy but still the overall trend is being made.
[26:57] Speaker 3: But you have these supercycles where you're outperforming the trend line.
[27:02] Speaker 3: So the eighties and nineties was one of those. So
[27:05] Speaker 3: instead of a ten percent return, we got eighteen percent
[27:07] Speaker 3: returns for like eighteen years, the fifties and sixties, after
[27:11] Speaker 3: World War Two, the twenties, that was a truncated one.
[27:14] Speaker 3: But from twenty to twenty nine, boy, to that thing go.
[27:18] Speaker 3: And since nine is where I put it, other technicians
[27:21] Speaker 3: generally disagree with me. They think it was twenty thirteen.
[27:25] Speaker 3: When you look at the CAPE model, you look at
[27:27] Speaker 3: deviation from trend, you look at the slope of those
[27:31] Speaker 3: early trend lines. For me, it's nine, which puts it
[27:34] Speaker 3: a sixteen. And of course, and then you have the
[27:36] Speaker 3: secular bear markets, right, so the two thousand's was one,
[27:40] Speaker 3: the nineteen seventies very famous. Of course, nineteen thirties doesn't
[27:43] Speaker 3: mean it market necessarily goes down, but it's underperforming that
[27:47] Speaker 3: ten percent trend line, and generally, in real terms, it's
[27:50] Speaker 3: probably going down. And so that's kind of how I
[27:53] Speaker 3: define the secular trend.
[27:55] Speaker 2: So we are in agreement on so much stuff. I'm
[27:58] Speaker 2: going to circle back to nine and push back a
[28:00] Speaker 2: little bit. But you mentioned that first year, you get
[28:04] Speaker 2: a pe spike as the market anticipates improving earnings. One
[28:08] Speaker 2: of the things that's kind of fascinating is to see
[28:12] Speaker 2: how much of a bull mark it's gains are attributable
[28:17] Speaker 2: to not improving fundamentals, but multiple expansion. From eighty two
[28:21] Speaker 2: to two thousand, what was it, three quarters of the
[28:24] Speaker 2: games where multiple expansion. How much of that is psychology
[28:28] Speaker 2: and how much of that is just people getting on
[28:31] Speaker 2: board late as the market rallies.
[28:34] Speaker 3: It's it's both. But yeah, for instance, eighty two, the
[28:37] Speaker 3: PE was like seven, and in two thousand.
[28:39] Speaker 2: And what was the yield in eighty two.
[28:41] Speaker 3: It is double ditches almost twenty percent competition And then
[28:45] Speaker 3: in two thousand, yes, exactly, And in two thousand the
[28:48] Speaker 3: PE was thirty five using operating earnings. That was the
[28:52] Speaker 3: forward pe. Actually the trailing p was like forty five.
[28:56] Speaker 3: So that's a hell of a pendulum swing. Yeah, and
[28:58] Speaker 3: you know, obviously nineteen eighty two inflation was very high.
[29:02] Speaker 3: They yet the malaise of in the economy, bonds were
[29:06] Speaker 3: very competitive. Nobody wanted to pay for earnings.
[29:10] Speaker 2: The death of equities the years earlier on death business.
[29:13] Speaker 3: Death of equities, Yes, for sure, and then people become
[29:16] Speaker 3: more comfortable, and then they go from comfortable to confident,
[29:20] Speaker 3: and then it's like, yeah, I'm going to pay I'm
[29:22] Speaker 3: going to pay twenty or twenty five times these earnings.
[29:26] Speaker 3: And then of course then you have the growth the
[29:28] Speaker 3: growth stocks. So the late nineties obviously, where you know,
[29:31] Speaker 3: I used to call them the Janus twenty there was
[29:34] Speaker 3: a fund that was just the most docks and so.
[29:36] Speaker 2: I remember the Ryan net net An exactly.
[29:40] Speaker 3: And of course right now it's the mag seven formerly
[29:42] Speaker 3: known as the as the Thangs, and those are secular growers, right,
[29:47] Speaker 3: And there's a theme, right, it was Internet back then,
[29:49] Speaker 3: it's AI now, and people get onto the onto the
[29:53] Speaker 3: bandwagon and it's like, yeah, you know, I'll pay thirty
[29:55] Speaker 3: five times earnings for a company that is in this
[29:58] Speaker 3: space and is going to grow, so their earnings in
[30:01] Speaker 3: a secular way, not a cyclical way. And so it's
[30:05] Speaker 3: totally plausible and understandable. But at the end it goes
[30:10] Speaker 3: too far and I don't think we're anywhere close to that,
[30:13] Speaker 3: But then you start looking for signs of frost. But yeah,
[30:16] Speaker 3: but that's that's the pensulum swing.
[30:17] Speaker 2: So let's talk about nine and why so many of
[30:21] Speaker 2: your technical brethrens dated to twenty thirteen, which was when
[30:26] Speaker 2: all of the major industries broke out over their prior
[30:29] Speaker 2: training range. So the pushback IY here to nine is, well,
[30:34] Speaker 2: that's like dating the eighty two to two thousand bull
[30:37] Speaker 2: market to the lows in seventy three seventy four, and
[30:41] Speaker 2: you're still All you're doing over that period is recovering
[30:45] Speaker 2: the selloff twenty thirty. What we were down fifty six
[30:48] Speaker 2: to fifty seven percent from October seven to March o nine,
[30:53] Speaker 2: and then to get back to where you were in seven,
[30:56] Speaker 2: it took till twenty thirteen. So why nine as opposed
[30:59] Speaker 2: to thirty?
[31:00] Speaker 3: It's totally a legit argument. But I would say a
[31:06] Speaker 3: couple of things. One is this is not an exact science, right,
[31:09] Speaker 3: There's only been two or three or four secular.
[31:13] Speaker 2: Bull markets, right, small data sets.
[31:15] Speaker 3: Small data set, it's not a quant model. You have
[31:19] Speaker 3: to look at the chart at the slope. So I
[31:22] Speaker 3: date the secondar bull market from the fifties. I date
[31:26] Speaker 3: at forty nine, even though forty nine was not the low, right.
[31:29] Speaker 2: The low was six forty six.
[31:33] Speaker 3: But in forty nine something changed and the slope started
[31:38] Speaker 3: to you know, like the market found itself and that
[31:42] Speaker 3: trajectory started to really compound at double digits and you
[31:45] Speaker 3: broke out of that big shelf that was really from
[31:48] Speaker 3: twenty nine all the way to forty nine seventies. The
[31:52] Speaker 3: low was of course in seventy four October seventy four,
[31:55] Speaker 3: after forty eight percent bear market. We had some other
[31:59] Speaker 3: little cycles, but then in eighty two it took off.
[32:02] Speaker 3: There was a change in the fundamentals. You know, Vulcar
[32:06] Speaker 3: broke inflation. So and then you look at the case,
[32:10] Speaker 3: so then I get verification from the fundamentals. Then so
[32:13] Speaker 3: I look at the charts, and yes, I see the argument,
[32:17] Speaker 3: and I agreed it's a good point. But in nine
[32:22] Speaker 3: the market just went straight up after a decade of sideways.
[32:26] Speaker 3: In eighty two the market went straight up after a
[32:28] Speaker 3: decade of sideways. In forty nine, same thing, whether the
[32:32] Speaker 3: low was in or not. And of course, in real terms,
[32:35] Speaker 3: the eighty two low was below the seventy four low.
[32:38] Speaker 2: So course of inflation, you really felt.
[32:39] Speaker 3: So I want to get second opinions from the real
[32:45] Speaker 3: chart and from the fundamental So the cape model again
[32:48] Speaker 3: where you compare the ten year pe to the ten
[32:50] Speaker 3: year forward return looks very similar at the nine and
[32:55] Speaker 3: not similar at the thirteen when the market already had
[32:58] Speaker 3: a lot of momentum. And then the other thing. I
[33:01] Speaker 3: look at again that one hundred and fifty year regression
[33:04] Speaker 3: trend line of the real SMP, and so at the
[33:08] Speaker 3: at secular peaks, the market is about one hundred percent
[33:13] Speaker 3: above the trend line, and at secular troughs it's about
[33:16] Speaker 3: fifty percent below. So that point was in nine, it
[33:20] Speaker 3: was not in thirteen. So I look at like the
[33:23] Speaker 3: weight of the evidence from a multitude of indicators, and
[33:27] Speaker 3: again it's it's not an exact science. I'm not saying
[33:30] Speaker 3: I'm right there wrong, but that's for me. That's where
[33:33] Speaker 3: I get.
[33:34] Speaker 2: But you've been a whole lot more right than many
[33:36] Speaker 2: other pieples.
[33:37] Speaker 3: And it's interesting. So in nine, you know, I was
[33:42] Speaker 3: actually running a fund back then, kind of a global
[33:45] Speaker 3: micro fund, and I was like, the market was so depressed, right,
[33:50] Speaker 3: so remember March of nine, Sure of course, and I'm like,
[33:53] Speaker 3: you know, I want to be long, but what if
[33:57] Speaker 3: I'm wrong? And I'm like, at this point, if I'm wrong.
[34:00] Speaker 2: So what you're already down fifty cut in half?
[34:02] Speaker 3: Well, but at that point, the whole system is going
[34:04] Speaker 3: to collapse. So it's like, why not bet at that point?
[34:10] Speaker 3: And so, yeah, when is.
[34:13] Speaker 2: Down more than fifty percent in US market, it's not
[34:16] Speaker 2: a great entry point. I mean, that's one thing. But
[34:19] Speaker 2: I have to ask you a question about nine. So
[34:23] Speaker 2: I was looking through some of my old notes as
[34:25] Speaker 2: I was preparing for this, and I have I'm curious
[34:29] Speaker 2: as to your thoughts on some of the behavioral aspects,
[34:33] Speaker 2: including sentiment and bulbear ratios. I wrote something up in
[34:38] Speaker 2: October nine calling that recovery the most hated bull market
[34:44] Speaker 2: in market history. Markets went straight up. Everybody was miserable.
[34:49] Speaker 2: It's a headfake, it's a false breakout. This is all
[34:52] Speaker 2: going to be a disaster. And if you listen to
[34:54] Speaker 2: those people, you left a ton of money on the table.
[34:57] Speaker 2: What's your thought on that extra dam sentiment in one
[35:01] Speaker 2: direction or the other, and just what it means when
[35:04] Speaker 2: everybody hates a particular asset class.
[35:06] Speaker 3: It's obviously an opportunity because that means that everyone is
[35:09] Speaker 3: not on the same side of the boat, right And actually,
[35:13] Speaker 3: and what I.
[35:13] Speaker 2: Want, well, they're all on the room side.
[35:16] Speaker 3: But before I answered the rest of that, I want
[35:18] Speaker 3: what I was going to say earlier was when you
[35:21] Speaker 3: run the regression of the nine to present SMP, either
[35:25] Speaker 3: in real or nominal terms, and you run the same
[35:29] Speaker 3: regression from eighty two to two thousand, from forty nine
[35:33] Speaker 3: to sixty eight, it's exactly the same slope. And so
[35:37] Speaker 3: if in O nine I got bullish and in thirteen,
[35:40] Speaker 3: I'm like, yeah, now we've taken out the high. So
[35:43] Speaker 3: now we can say this bull market is confirmed. So
[35:46] Speaker 3: the thirteen for me is not the start, but it's confirmation.
[35:50] Speaker 3: But if I had looked at nothing else for the last,
[35:54] Speaker 3: for the next, you know, twelve years today, I would
[35:58] Speaker 3: be within ten percent of that slope having materialized. And
[36:03] Speaker 3: so again you're never going to do that on a
[36:06] Speaker 3: secular chart. You want to have weight of the evidence.
[36:09] Speaker 3: But it shows you how powerful that context can be
[36:13] Speaker 3: to just look at those different time frames and see
[36:17] Speaker 3: where they are, because it will keep you on the
[36:19] Speaker 3: right side of the market.
[36:20] Speaker 2: So last question on equities, given the forty nine to
[36:26] Speaker 2: sixty six rally, eighty two to two thousand and then
[36:29] Speaker 2: the nine forward, how much legs does this secular bull
[36:35] Speaker 2: market have? Can can this go another five, six, seven years?
[36:40] Speaker 2: And the other related question is how much of a
[36:42] Speaker 2: reset does that giant fiscal stimulus of twenty twenty one
[36:47] Speaker 2: twenty two build into into markets.
[36:51] Speaker 3: It's it's a great question. And so on the surface
[36:54] Speaker 3: of it, we're sixteen years in the last two were
[36:57] Speaker 3: eighteen years, but again sample size of two, like, you
[37:01] Speaker 3: can't go with that, right, But the CAPE model, again
[37:05] Speaker 3: which has been a very good long term model in
[37:09] Speaker 3: terms of the ten year Kagar for the Market, suggests
[37:13] Speaker 3: that the so the PE, the growth rate in the
[37:17] Speaker 3: PE peaked in nineteen for obvious reasons because it's a
[37:21] Speaker 3: ten year model. So nine rolls off and then you know,
[37:24] Speaker 3: you have that peak, and we've been holding steady at
[37:26] Speaker 3: around you know, fourteen fifteen percent ten year cagers. That
[37:31] Speaker 3: actually has another peak in about like twenty twenty six,
[37:34] Speaker 3: seven eight. My guess is that that acceleration will be
[37:39] Speaker 3: an AI bubble, or it could be where it's just
[37:42] Speaker 3: like you know, the AI boom, the mag seven, like
[37:44] Speaker 3: all of a sudden, everyone's buying companies with no earnings
[37:47] Speaker 3: because they're promising to be the next.
[37:48] Speaker 2: Killer app and that sort of things.
[37:51] Speaker 3: Yes, and my guess is that if we are heading
[37:55] Speaker 3: into a fiscally dominant era or we're in it already.
[37:58] Speaker 3: So we had five billion of helicopter money in twenty twenty,
[38:03] Speaker 3: we now have another five trillion dollar fiscal bill. If
[38:06] Speaker 3: the next Fed post Powell is going to be just
[38:10] Speaker 3: more doubvish than the economics suggest in order to fund
[38:15] Speaker 3: that help fund that debt, then you could see inflation
[38:19] Speaker 3: be structurally higher than two percent, maybe three to four.
[38:23] Speaker 3: And if that, and if the ten year yield at
[38:26] Speaker 3: that point goes to a five handle because the term
[38:28] Speaker 3: premium is back, you can easily see a scenario where
[38:32] Speaker 3: in a few years that FED model principle of rising
[38:36] Speaker 3: yiels bringing down the pe is going to be the
[38:41] Speaker 3: thing that flattens that secular slope. That doesn't mean like
[38:44] Speaker 3: a two thousands like bear market. It doesn't have to
[38:47] Speaker 3: mean that, but it could just be a flattening. Instead
[38:49] Speaker 3: of running at two x the ten year rate of change,
[38:53] Speaker 3: maybe you're at half x or something like that.
[38:55] Speaker 2: So generally speaking, when you see an elevated cape, it's
[38:59] Speaker 2: not a signal. It's really a signal lower your future
[39:03] Speaker 2: return expectations. Thing is going to be a little more,
[39:05] Speaker 2: a little less easy sledding.
[39:07] Speaker 3: Yes, I think the next ten years will be less
[39:09] Speaker 3: less robust than the last, but it doesn't mean they
[39:12] Speaker 3: have to be negative at all.
[39:14] Speaker 2: You mentioned the eighties into the nineties in the post
[39:17] Speaker 2: World War two era. It's kind of fascinated to look
[39:20] Speaker 2: at rolling fifteen year periods. The fifteen years following nine
[39:25] Speaker 2: is the third best fifteen year period in history. It's
[39:28] Speaker 2: really amazing. Coming up, we continue our conversation with Urian Timmor,
[39:33] Speaker 2: director of Global Macro at Fidelity, talking about crypto, gold,
[39:39] Speaker 2: commodity alternatives, and the state of the economy. I'm Barry Rihults.
[39:44] Speaker 2: You're listening to Masters in Business on Bloomberg Radio. I'm
[40:01] Speaker 2: Barry Rdults. You're listening to Masters in Business on Bloomberg Radio.
[40:04] Speaker 2: My extra special guests this week is uriean Temor. He
[40:08] Speaker 2: is the director of Global Macro at Fidelity Investments, the
[40:12] Speaker 2: giant firm helping to manage over sixteen trillion dollars in
[40:18] Speaker 2: client assets. So let's talk a little bit about the
[40:21] Speaker 2: current environment. You look at more than just stocks and bonds.
[40:26] Speaker 2: You look at a lot of economic data as well
[40:29] Speaker 2: and chart that. So how do you think where we
[40:33] Speaker 2: are in the current economic cycle? How do you describe
[40:36] Speaker 2: our location in the business cycle.
[40:39] Speaker 3: So generally speaking, the economy remains pretty solid. People are employed,
[40:46] Speaker 3: their wages are exceeding the inflation rate. At this point,
[40:51] Speaker 3: debt levels are not high, at least as a percent
[40:53] Speaker 3: of GDP. Right, So the household debt to GDP ratio
[40:57] Speaker 3: peaked during a financial.
[40:58] Speaker 2: Crisis, pretty modest.
[41:00] Speaker 3: It's yeah, it was one hundred percent of GDP. It's
[41:02] Speaker 3: now seventy. So there's a debt issue on the government's
[41:05] Speaker 3: balance sheet, but not in the household or even the
[41:08] Speaker 3: corporate balance sheet.
[41:09] Speaker 2: Even the government side. Isn't our debt to GDP ratio
[41:13] Speaker 2: like half of Japan something like that.
[41:15] Speaker 3: So about one hundred and twenty percent if it's just
[41:18] Speaker 3: the federal debt. If you add all other debt, it's
[41:22] Speaker 3: about two hundred and fifty. But it's comparable to other regions.
[41:27] Speaker 3: But certainly Japan gets the prize, and China as well,
[41:30] Speaker 3: just in terms of the growth rate of the debt.
[41:32] Speaker 2: China, oh, okay, not total, but yeah, China has been
[41:34] Speaker 2: growing debt and the Chinese provinces have been growing debt
[41:37] Speaker 2: at yeah.
[41:38] Speaker 3: And the Chinese numbers, of course, are can be a
[41:41] Speaker 3: little vague because the federal debt in China is not high,
[41:45] Speaker 3: but they have the four big policy banks that are
[41:48] Speaker 3: essentially providing liquidity, and so you have to add that,
[41:51] Speaker 3: and so China and Japan are the worst offenders. The
[41:54] Speaker 3: US is is on par with most kind of European
[41:58] Speaker 3: and other countries. But so anyway, so the economy looks
[42:04] Speaker 3: pretty good. But you know, one of the things that
[42:07] Speaker 3: COVID did was it sort of up ended a lot
[42:10] Speaker 3: of the things we think about when we look at
[42:13] Speaker 3: the at the economic cycle, at the business cycle. So
[42:16] Speaker 3: you know, of course we know what happened. The economy froze,
[42:19] Speaker 3: people got laid off, and then at least in the US,
[42:22] Speaker 3: the economy came back really fast, faster than in other places.
[42:27] Speaker 3: And the labor wasn't there right Baby boomers had checked out,
[42:30] Speaker 3: they left the labor force. Of course, the borders were closed,
[42:33] Speaker 3: and I remember, like I was doing a lot of
[42:35] Speaker 3: flying back to la at the time because I was
[42:38] Speaker 3: hiding in Santa Barbara because the office was closed. And
[42:42] Speaker 3: it's like like the counter at Jet Blue in Boston
[42:46] Speaker 3: was like they just did not have enough people. People
[42:50] Speaker 3: were coming back, like everyone was like, Okay, we're back,
[42:53] Speaker 3: but there wasn't The supply chains weren't there, and so
[42:57] Speaker 3: we had this very tight labor market that of course
[43:00] Speaker 3: we would hear about all the time here from the
[43:01] Speaker 3: jolt support to job openings for every job seeker, that
[43:05] Speaker 3: sort of thing, and that has been worked off over
[43:08] Speaker 3: the last few years. I think that was the goal
[43:10] Speaker 3: of the tightening policy, or part of the goal. So
[43:13] Speaker 3: when you look at the JOLT support or you look
[43:15] Speaker 3: at the U three jobless rate relative to NAHRUD, the
[43:19] Speaker 3: non accelerating rate of employment, everything is in balance, like
[43:23] Speaker 3: it's right at that zero line.
[43:25] Speaker 2: So they supply is that why we've kind of been
[43:27] Speaker 2: hanging around four to three four to two unemployment.
[43:30] Speaker 3: So no one's hiring, but not many people are looking for.
[43:33] Speaker 2: Jobs and not a lot of people getting laid off.
[43:35] Speaker 3: No, And so there's balance, right the job seekers versus
[43:39] Speaker 3: the job providers. But you look at that chart over
[43:43] Speaker 3: fifty years and you can see that there's a pendulum
[43:46] Speaker 3: swing of that business cycle. So we went from very
[43:49] Speaker 3: tight to neutral, and you know, like the inclination is
[43:53] Speaker 3: to look at that and it's like, well, every other
[43:55] Speaker 3: time that's happened. The next phase is contraction, and I
[43:59] Speaker 3: think that's what the market is saying. That's I think
[44:01] Speaker 3: what where the Fed's coming from now that they did
[44:04] Speaker 3: the twenty five. They're looking at the jobs dated, They're
[44:08] Speaker 3: looking at the revision, right the jobs report revisions eleven
[44:13] Speaker 3: thousand jobs, and they're like, Okay, you know, we should
[44:16] Speaker 3: we should build in some some cushion for that. And
[44:19] Speaker 3: so I think that's generally the vibe. But other than that, uh,
[44:23] Speaker 3: you know, we have a whole economics team that looks
[44:25] Speaker 3: at the business cycle and we're not really seeing a
[44:28] Speaker 3: lot of red flags other than that yellow flag.
[44:30] Speaker 2: If you how closely does the market cycle track the
[44:34] Speaker 2: business cycle? Because you know, I've heard it said so
[44:37] Speaker 2: many times the market is not the economy and vice versa.
[44:40] Speaker 2: And the old joke is the stock market is forecast
[44:43] Speaker 2: nine to the last four recessions. How do you see
[44:47] Speaker 2: that overlay?
[44:49] Speaker 3: There is of course a connection, right you look at
[44:52] Speaker 3: GDP growth and inventories. I mean, it's less about that
[44:55] Speaker 3: now than it was decades ago, the impact of monetary policy.
[45:00] Speaker 3: But you know, the markets are not the economy. There
[45:03] Speaker 3: is a reflection because if the economy grows, earnings are
[45:06] Speaker 3: going to grow, and then uh, you know, the market's
[45:09] Speaker 3: going to go up because price follows earnings. But there's
[45:12] Speaker 3: a sentiment equation in the stock market that of course
[45:16] Speaker 3: you don't have so much in the in the economic cycle,
[45:19] Speaker 3: and and you have the timing right, so the market
[45:23] Speaker 3: is always going to anticipate future changes.
[45:25] Speaker 2: So if you have a chart showing market's bottom eight
[45:28] Speaker 2: months below profits, so you can that's a huge lead
[45:32] Speaker 2: time eight months.
[45:33] Speaker 3: So you can be one hundred percent correct about the
[45:36] Speaker 3: economic cycle and be one hundred percent wrong about the
[45:40] Speaker 3: market because if it's already been reflected, and if it's
[45:44] Speaker 3: already has even over earned against that future signal, then
[45:48] Speaker 3: you're buying yesterday's news. But yeah, so the market generally
[45:53] Speaker 3: at bottoms will bottom two three quarters before earnings. That
[45:57] Speaker 3: happened during COVID, And I remember like it was yesterday,
[46:00] Speaker 3: because during COVID, you know, the market felt thirty five
[46:03] Speaker 3: percent February and March, then like late March at bottomed,
[46:07] Speaker 3: and I think and I think my June it was
[46:10] Speaker 3: at new.
[46:10] Speaker 2: Highs and sixty for the year from the lows, and
[46:15] Speaker 2: people like.
[46:15] Speaker 3: The economists had a cover saying this is divorced from
[46:18] Speaker 3: reality and everyone and so it's my job a to
[46:22] Speaker 3: have people not sell in the first place, to be
[46:25] Speaker 3: to be the long term investor. You know, the way
[46:27] Speaker 3: I always describe it is you're getting a really juicy
[46:31] Speaker 3: ten to eleven percent returned by investing in stocks. But
[46:34] Speaker 3: the price of admission is you got to endure some
[46:38] Speaker 3: volatility and if you can't stand the price, then you
[46:41] Speaker 3: don't get the reward.
[46:42] Speaker 2: How do you explain to clients? And I got a
[46:45] Speaker 2: million calls, man, this market has become disconnected from reality.
[46:50] Speaker 2: What's your explanation to that?
[46:51] Speaker 3: So that's what what happened. Happened after the financial crisis.
[46:55] Speaker 3: So price bottoms, the market bets on recovery, and it
[46:58] Speaker 3: could be wrong, right prices recovery doesn't mean the market
[47:01] Speaker 3: knows everything. And that's one thing where I sometimes disagree
[47:04] Speaker 3: with technicians who say market's always right. Well, the market's
[47:07] Speaker 3: not always right, but the market's always right in discounting
[47:10] Speaker 3: everything that's knowable. So it's right in that, But it
[47:13] Speaker 3: doesn't mean that that what it's discounting can't change, right,
[47:17] Speaker 3: And we saw this during the tariff tantrum in April.
[47:20] Speaker 3: Market was pricing in a left tail that never arrived
[47:23] Speaker 3: and now and then it had to unprice it. So
[47:26] Speaker 3: but so the market looks ahead and the market bottomed
[47:29] Speaker 3: in March of nine. Earnings didn't bottom until the third
[47:34] Speaker 3: or fourth quarter. Same thing during COVID March bottomed in
[47:37] Speaker 3: March of twenty twenty, earnings recovered third or fourth quarter.
[47:41] Speaker 3: And so you have so you can't look at the
[47:45] Speaker 3: news and say, how can the market be here when
[47:47] Speaker 3: the earnings or like people are dying.
[47:49] Speaker 2: So how did you explain this to clients? I'm curious.
[47:52] Speaker 3: I explained it exactly that way, that the price always
[47:55] Speaker 3: leads and you can't look at it in sort of
[47:58] Speaker 3: a linear way. Have to just you have to know
[48:03] Speaker 3: that at inflection points, the price action is going to
[48:09] Speaker 3: make no sense. And this is why people sell at
[48:12] Speaker 3: bottoms and buy a tops because they are they're trying
[48:15] Speaker 3: to understand the narrative, and the narrative is not the
[48:18] Speaker 3: one that is ruling the roost at the time.
[48:21] Speaker 2: One of the things that we found was useful was
[48:24] Speaker 2: explaining to clients that their life experience isn't market cap
[48:28] Speaker 2: weighted when you look at what's driving the big indexes.
[48:32] Speaker 2: It was back then it was the fang. Now we
[48:34] Speaker 2: call it the magnificent seven. But we did a calculation
[48:37] Speaker 2: and found out that if all the airlines, all the hotels,
[48:40] Speaker 2: all the local retailers, like just a run of the
[48:43] Speaker 2: worst businesses during the pandemic, if they just disappeared tomorrow,
[48:48] Speaker 2: was six percent of the S and P five hundred
[48:52] Speaker 2: and you know, or Apple or Microsoft. It's like, it's
[48:55] Speaker 2: amazing how our daily experience is so from what markets
[49:01] Speaker 2: are like.
[49:01] Speaker 3: And we had that during Brexit in twenty sixteen. I mean,
[49:04] Speaker 3: that was constantly the headlines, what about Brexit? Why is
[49:07] Speaker 3: the US market ignoring it? Well, because it's so realm
[49:11] Speaker 3: because the UK is three percent of SMP revenues, that's why.
[49:16] Speaker 2: So that raises really interesting question about the US versus
[49:22] Speaker 2: the rest of the world in terms of economic activities.
[49:25] Speaker 2: So the S and P five hundred just gets just
[49:27] Speaker 2: about half of its revenue from overseas. For most of
[49:32] Speaker 2: the past fifteen years, the US side of consumer spending,
[49:36] Speaker 2: business spending, government spending has been very supportive of the
[49:41] Speaker 2: domestic side of the S and P five hundred. Kind
[49:43] Speaker 2: of feels like that shifting a little bit. We're seeing
[49:46] Speaker 2: a little slow down on consumer spending, a little slow
[49:49] Speaker 2: down on economic activity here as Europe and Asia seem
[49:54] Speaker 2: to be starting to finding their footing after bad ten years.
[49:58] Speaker 2: Can we just pass off the without the SMP stumbling?
[50:02] Speaker 2: Is that? Is that possible?
[50:04] Speaker 3: It's possible, and it's actually happening right now. And this
[50:07] Speaker 3: is one of the areas that I'm most excited about
[50:09] Speaker 3: right now, is that this US bull market has become
[50:13] Speaker 3: a global bullmarket. You look at EM stocks, Chinese stocks, Europe, Japan,
[50:19] Speaker 3: and it's very exciting because you know, for many years,
[50:22] Speaker 3: right the US exceptionalism train has been running since twenty
[50:25] Speaker 3: fourteen fifteen, and the rest of the world was always
[50:30] Speaker 3: so tempting with its lower valuation. And I've had conversations,
[50:35] Speaker 3: you know, with our asset allocation pms for years saying
[50:39] Speaker 3: like yeah, I can, I can buy EPHO or EM
[50:41] Speaker 3: at fourteen times like Chief for a reason, though it's
[50:45] Speaker 3: Chief for a reason. The market's very efficient, but for
[50:50] Speaker 3: the but so the catalyst. So you need a catalyst
[50:53] Speaker 3: to make the mean reversion invaluation to trigger that. And
[50:57] Speaker 3: the catalyst is always going to be related to earnings.
[51:00] Speaker 3: Like if you look at the real to performance US
[51:02] Speaker 3: versus non US over the past ten years, it's exactly
[51:06] Speaker 3: the same as the reld of earning slide like it's
[51:08] Speaker 3: the same thing. So you need something to change on
[51:11] Speaker 3: the earning side, and that's changing. So we have, of
[51:14] Speaker 3: course a very concentrated market in the US and that
[51:17] Speaker 3: does pose risks, right, I mean, if those seven stocks
[51:21] Speaker 3: go down, guess what the SMP is going to go down.
[51:24] Speaker 3: Even if seventy percent of the stocks in the SMP
[51:27] Speaker 3: are going up. If you're an indexer, are you buying
[51:30] Speaker 3: an et an sby? You're not going to feel those
[51:33] Speaker 3: gains because those top seven stocks are taking the index down.
[51:38] Speaker 3: And so it was so for the last year or
[51:40] Speaker 3: so it was a question of how do you diversify
[51:43] Speaker 3: against concentration risk? Do you go down cap do you
[51:46] Speaker 3: buy the Russell two thousand? But now the answer is
[51:49] Speaker 3: easier because now you have a catalyst, a fundamental catalyst
[51:53] Speaker 3: that is causing the mean reversion to happen between US
[51:56] Speaker 3: and non US stocks. And where that's coming is that
[52:01] Speaker 3: So I'm a big fan of the discount cashlow model,
[52:04] Speaker 3: the DCF, which looks at not so much earnings but
[52:07] Speaker 3: the payout of earnings. So if you have earnings growth
[52:10] Speaker 3: at ten percent and seventy percent of those earnings are
[52:14] Speaker 3: being returned to shareholders as dividends or buybacks. The payout
[52:18] Speaker 3: is that seventy percent, and the payout ratio is seventy percent.
[52:22] Speaker 3: And for the US, it's always been a very dominating
[52:25] Speaker 3: scenario where the payout in the US is very strong
[52:29] Speaker 3: because of all the share buybacks we have here.
[52:31] Speaker 2: Where are we today with that? Are we still seeing
[52:34] Speaker 2: the same sort of share buybacks because it seems like
[52:36] Speaker 2: we haven't been hearing a lot of announcements, but that
[52:39] Speaker 2: doesn't mean it's not happen.
[52:40] Speaker 3: We don't hear a lot, but the buybacks are at
[52:43] Speaker 3: record HIGHS three hundred billion over the last twelve months,
[52:47] Speaker 3: and the payout ratio is seventy five percent for the
[52:50] Speaker 3: S and P. But guess what the payout for IFA,
[52:54] Speaker 3: which is non US developed stocks, the payout ratio is
[52:58] Speaker 3: also seventy five percent. It always used to be lower
[53:00] Speaker 3: because they don't do buybacks over there, they do dividends.
[53:03] Speaker 3: But now they're doing more buybacks, and the growth rate
[53:07] Speaker 3: in the payout itself over the last five years is
[53:10] Speaker 3: now higher in EFA than in the US, So you're
[53:13] Speaker 3: getting equal or superior or at least competitive fundamentals at
[53:19] Speaker 3: at a fraction of devaluation and that that is a
[53:22] Speaker 3: good that's a good deal. And so that's so finally
[53:25] Speaker 3: that that part is working where the pond that we're
[53:29] Speaker 3: fishing from is now broader, and for me, it kind
[53:31] Speaker 3: of it's it's a Barbell strategy. I don't want to
[53:35] Speaker 3: be short the Max seven because they can get bigger
[53:37] Speaker 3: and you don't want to miss out on that. But
[53:39] Speaker 3: rather than going down cap in the US, do a
[53:44] Speaker 3: barbelle of Max seven and non US stocks. Then you
[53:48] Speaker 3: can play the dollar with dollar weekening story. You can
[53:51] Speaker 3: get equally good fundamentals for a fifteen pe instead of
[53:55] Speaker 3: a twenty four pe. And to me, that's that's that's
[53:58] Speaker 3: a good that's a good thing right now.
[54:00] Speaker 2: So the last two things I want to talk to
[54:02] Speaker 2: you about in terms of the current environment are inflation
[54:06] Speaker 2: and sentiment. And I'm not sure how much of this
[54:09] Speaker 2: is related. You know, when we see the Michigan sentiment data,
[54:13] Speaker 2: it seems to be so awful and it just doesn't
[54:16] Speaker 2: feel like, is this really worse than the financial crisis,
[54:20] Speaker 2: worse than COVID, worse than the dot com implosion in
[54:23] Speaker 2: nine to eleven or worse than the eighty seven crash.
[54:26] Speaker 2: If you follow the sentiment data, it's saying, yes, just
[54:30] Speaker 2: doesn't feel that way.
[54:31] Speaker 3: No, it doesn't. And I think the sentiment data, obviously,
[54:35] Speaker 3: they're very bifurcated by political belief right, you know, And I've.
[54:40] Speaker 2: Seen those charts are really useful.
[54:42] Speaker 3: And I spend time on both coasts, and you know,
[54:44] Speaker 3: I was in at a dinner party in Montecito, California
[54:48] Speaker 3: a few weeks ago, and people were like, how can
[54:51] Speaker 3: everything look so good when we're like at the end
[54:54] Speaker 3: of the world type of thing? And then I'll be,
[54:57] Speaker 3: you know, in some other place and It'll be the
[54:59] Speaker 3: total opposite. But I think a lot of the sentiment
[55:02] Speaker 3: data are still driven by the inflation data. Like obviously
[55:06] Speaker 3: the inflation rate has come down to two point eight percent.
[55:10] Speaker 2: But everything remains more expensive that that.
[55:12] Speaker 3: You know, that COVID spike, you know, that has not
[55:15] Speaker 3: been unwound, and one of and that's one of the
[55:17] Speaker 3: things I worry about because not not to make a
[55:20] Speaker 3: comparison to the nineteen seventies, which obviously was the great
[55:24] Speaker 3: inflation long term, but during the fifties and sixties, inflation
[55:28] Speaker 3: was super low two percent, and then you to the
[55:31] Speaker 3: second half of the sixties, it started to creep up
[55:34] Speaker 3: and then it came back down. But in order to
[55:37] Speaker 3: for the average to be at two percent, if you
[55:40] Speaker 3: go to six percent, you then need to go below
[55:42] Speaker 3: too for the average to be two and we haven't
[55:45] Speaker 3: done that. We went from two to nine to two
[55:49] Speaker 3: point eight, and we're we never went below too. And
[55:53] Speaker 3: if we, for some reason get another upswing and we're
[55:57] Speaker 3: at three and four like that, five, your number is
[56:00] Speaker 3: now going to be at four or five percent. And
[56:03] Speaker 3: I think that's what's driving a lot of it is
[56:05] Speaker 3: it certainly did during COVID, and it's things like food,
[56:08] Speaker 3: right so you know, like the.
[56:10] Speaker 2: Top beef prices are up. Egg prices have come back down,
[56:13] Speaker 2: but beef prices have run away.
[56:15] Speaker 3: So I think a lot of it has to do
[56:17] Speaker 3: with that, because you know, people are employed, wages are
[56:20] Speaker 3: are competitive right now, you know, employment rates four point
[56:25] Speaker 3: three percent. But I think it's just that that cost
[56:28] Speaker 3: of living. It just kind of like grinds and it's
[56:32] Speaker 3: been grinding for five years now.
[56:33] Speaker 2: So let's talk about that two percent target. You know,
[56:37] Speaker 2: in the twenty tens, an era of concerns about deflation
[56:43] Speaker 2: and monetary stimulus. Two percent seemed like a reasonable number.
[56:46] Speaker 2: Is that still a reasonable number? Now? That and that
[56:49] Speaker 2: was an upside target, right, You are at one percent
[56:52] Speaker 2: aiming for two. Now we're at two and a half three,
[56:55] Speaker 2: aiming back at two. Maybe in an era of fiscal stimulus,
[57:00] Speaker 2: two and a half three percent makes more sense. I mean,
[57:02] Speaker 2: I'm not a monetariust, but I don't know why the
[57:05] Speaker 2: whole world changes except for our inflation.
[57:08] Speaker 3: Yeah, there's nothing magical about two. Like if you go
[57:13] Speaker 3: back one hundred and fifty years, again, the average inflation
[57:17] Speaker 3: rate is like three percent two point eight. If you
[57:20] Speaker 3: look at a distribution of equity pees and the inflation rate,
[57:25] Speaker 3: the sweet spot is sort of one to four. So
[57:29] Speaker 3: whether you're at three or two, like for the stock market,
[57:31] Speaker 3: doesn't matter, like ten, ten to two.
[57:34] Speaker 2: Like that, that that matters.
[57:37] Speaker 3: And that distribution is interesting because obviously the higher the
[57:42] Speaker 3: inflation rate goes, the lower the pe, which makes perfect
[57:45] Speaker 3: sense because the inflation goes up, bond you'lls go up.
[57:47] Speaker 3: Then the safe asset is very competitive with the risky asset.
[57:51] Speaker 3: So why take the risk.
[57:52] Speaker 2: Plus the cost of capitals up?
[57:55] Speaker 3: If you go to the left tail deflation. There is
[57:57] Speaker 3: really no correlation. Nobody likes deflation. So from that angle,
[58:04] Speaker 3: two and a half is not a problem. Even three
[58:07] Speaker 3: is not a problem. I think the Fed worries that
[58:10] Speaker 3: if they were to ever admit that, you know, inflation
[58:14] Speaker 3: expectations could get unanchored. But they went to the AIIT thing, right,
[58:18] Speaker 3: the average inflation targeting, and actually that actually prevented them
[58:23] Speaker 3: from raising rates when they should have back in twenty
[58:27] Speaker 3: twenty one and two.
[58:28] Speaker 2: They relate to the party to raise and they seem
[58:30] Speaker 2: like they will relate to the party to cut it.
[58:32] Speaker 3: Yeah, so their policy was we need to see the
[58:34] Speaker 3: whites in the eyes of inflation before we raised rates,
[58:39] Speaker 3: and by the time the whites of the eyes were visible,
[58:42] Speaker 3: it was like too late. You know, inflation was at
[58:44] Speaker 3: five going to nine. But so you know, it's a
[58:48] Speaker 3: nuanced thing. But again, three percent is not going to
[58:52] Speaker 3: be the end of the world. It just means bombs
[58:54] Speaker 3: have a term premium and stock market is still fine.
[58:58] Speaker 3: Maybe the pe is like seventeen and seid of nineteen,
[59:00] Speaker 3: but like you know, if earnings are doing the heavy lifting,
[59:03] Speaker 3: it doesn't matter. But again it's like, what will it
[59:05] Speaker 3: take for the Fed to actually say that, or will
[59:10] Speaker 3: they ever say it, or will we just have a
[59:11] Speaker 3: post Powell FED that says, you know, instead of neutral
[59:15] Speaker 3: being inflation plus one hundred, neutral is inflation. And you know,
[59:19] Speaker 3: so there are three instead of four or something.
[59:22] Speaker 2: So I see your charts everywhere. Not only are they
[59:25] Speaker 2: all over social media, but you do regular chart packs.
[59:28] Speaker 2: I love your monthly chart pack. I'm gonna flip open
[59:32] Speaker 2: my laptop and let's look at some of your favorite
[59:36] Speaker 2: charts and I'll make these available on YouTube and on
[59:40] Speaker 2: the website when this posts. Let's start with market cycles,
[59:45] Speaker 2: and what we see going back to around our birth
[59:49] Speaker 2: date is just a series of long bull markets followed
[59:55] Speaker 2: by shorter, shallower bear markets. Tell us about out this
[1:00:01] Speaker 2: market cycle chart and what are the different shading means
[1:00:04] Speaker 2: in blue and red? What's the significance of that?
[1:00:07] Speaker 3: Yeah, So the shadings are is the valuation the five
[1:00:12] Speaker 3: year cape ratio.
[1:00:13] Speaker 2: When it has to get priced, it turns red, it
[1:00:15] Speaker 2: turns red.
[1:00:15] Speaker 3: Yeah, And so what the top part of the chart
[1:00:17] Speaker 3: shows are the market cycles. So the green are you know,
[1:00:21] Speaker 3: the bull markets, of course, cyclical bull markets. The red
[1:00:23] Speaker 3: are the bear markets. And you can see as we
[1:00:26] Speaker 3: as we talked about earlier, they're really it's pretty rare
[1:00:29] Speaker 3: for a fifty percent draw down. There's only been really
[1:00:31] Speaker 3: a couple of them. And so what this shows is
[1:00:34] Speaker 3: that the current bull market, as strange as it or
[1:00:37] Speaker 3: as unusual as it has felt for many people, actually
[1:00:40] Speaker 3: is pretty garden variety, right. Eighty eight percent gain over
[1:00:46] Speaker 3: thirty five months, so it's pretty pretty average. But then
[1:00:49] Speaker 3: when you look at the bottom panel, it shows the
[1:00:52] Speaker 3: relative the percentage of stocks out performing the index, and
[1:00:57] Speaker 3: now you see something pretty unusual, some we've only seen
[1:01:01] Speaker 3: a few times in history, and that is, of course
[1:01:04] Speaker 3: the concentration effect of the mag seven than before that
[1:01:07] Speaker 3: the thanks and it is the market is as concentrated
[1:01:11] Speaker 3: as it was in the late nineties and the early
[1:01:14] Speaker 3: to mid seventies, which was the original nifty to fifties period.
[1:01:19] Speaker 3: And so you know, for an indexer, I guess it
[1:01:24] Speaker 3: doesn't matter. For an active manager, active investor, it does,
[1:01:27] Speaker 3: But even for an indexer it does because the largest
[1:01:30] Speaker 3: stocks are getting bid up, whether they deserve it or not.
[1:01:33] Speaker 3: Of course they're large because they deserve to be generally,
[1:01:35] Speaker 3: but it shows you how narrow the market has been
[1:01:39] Speaker 3: during this cycle. And so it's it's just a way
[1:01:43] Speaker 3: of describing kind of where we are. So you get
[1:01:46] Speaker 3: the cyclical on the top and the bottom speaks more
[1:01:48] Speaker 3: to the secular.
[1:01:49] Speaker 2: Huh. Really interesting. So let's talk about debt dynamics, which
[1:01:53] Speaker 2: shows the change in federal debt versus what.
[1:01:58] Speaker 3: So what this charge show and it's a very simple chart,
[1:02:02] Speaker 3: but I think it speaks volumes. Is that during COVID
[1:02:06] Speaker 3: we kind of, I think, entered the fiscal lead dominant
[1:02:09] Speaker 3: era where debt financing or deficit spending becomes a very
[1:02:14] Speaker 3: major tool, which is definitely different from the financial crisis,
[1:02:18] Speaker 3: when we actually had austerity. After the financial crisis with
[1:02:21] Speaker 3: the Tea party movement, now we have the opposite. And
[1:02:25] Speaker 3: in the initial years after that fiscal expansion started, the
[1:02:30] Speaker 3: FED was actually doing a lot of the heavy lifting
[1:02:32] Speaker 3: by putting those bonds, or not those bonds, but putting
[1:02:36] Speaker 3: bonds on its balance sheet, so you could see the
[1:02:38] Speaker 3: rise in debt is largely accommodated by an expanding balance sheet.
[1:02:44] Speaker 3: Since that time, since twenty twenty two, the fed's gone
[1:02:46] Speaker 3: into quantitative tightening mode where it's drinking its balance sheet,
[1:02:50] Speaker 3: but the debt just keeps going up. So the debt
[1:02:52] Speaker 3: is now up about fourteen trillion in the last five years,
[1:02:57] Speaker 3: and only about two and a half of that is
[1:02:59] Speaker 3: sort of been absorbed by the FED. So I put
[1:03:03] Speaker 3: two and two together and say, Okay, if that purple
[1:03:06] Speaker 3: eye at the top just keeps going up, who's going
[1:03:09] Speaker 3: to buy this? Right? Who's going to buy the debt?
[1:03:12] Speaker 3: And will the FED be forced back into playing a
[1:03:17] Speaker 3: bigger role in kind of mopping up that supply? And
[1:03:20] Speaker 3: that's the fiscal dominance.
[1:03:22] Speaker 2: Then that's a little bit of modern monetary theory, is
[1:03:25] Speaker 2: that the FED can just buy up all the debt
[1:03:27] Speaker 2: and there's no constraints whatsoever. SOMA stands for.
[1:03:30] Speaker 3: What system open market account.
[1:03:32] Speaker 2: So that's what the FED has on its balance sheet.
[1:03:35] Speaker 2: So that went up since the financial crisis, and it's
[1:03:38] Speaker 2: come down since twenty eight.
[1:03:39] Speaker 3: It's the part of the Fed's balance sheet that is
[1:03:42] Speaker 3: sort of the quy part, if you will.
[1:03:44] Speaker 2: So let's talk a little bit about equity, supply and demand.
[1:03:47] Speaker 2: What are we looking at this chart back to nineteen
[1:03:49] Speaker 2: eighty six? Is this simply liquidity driven or what's going
[1:03:54] Speaker 2: on here? So?
[1:03:55] Speaker 3: I think this is and not a lot of people
[1:03:58] Speaker 3: talk about this, but I think This is one of
[1:04:00] Speaker 3: the fundamental drivers of the current secular bullmarket era. And
[1:04:06] Speaker 3: so you can see on the chart I started the
[1:04:09] Speaker 3: clock at the bottom in O nine, which again I
[1:04:12] Speaker 3: believe is the start of the secular bullmarket. And I
[1:04:15] Speaker 3: look at just the supply and demand of equities just
[1:04:19] Speaker 3: from within the corporate America structure, so not investor flows,
[1:04:24] Speaker 3: but how much were there in IPOs and secondary issues
[1:04:28] Speaker 3: and it's a couple of trillion. How much was share
[1:04:31] Speaker 3: buybacks and how much was M and A and share
[1:04:34] Speaker 3: buybacks and M and A have something in common in
[1:04:36] Speaker 3: that it's corporates buying shares of other corporates and those
[1:04:40] Speaker 3: shares get retired, right, So that's the demand for shares.
[1:04:44] Speaker 3: And what you see is if you look at the
[1:04:46] Speaker 3: supply demand ratio like it's very unbalanced, like it's the
[1:04:51] Speaker 3: demand far exceeds the supply. And to me, this has
[1:04:54] Speaker 3: been one of the important drivers for driving returns in
[1:04:59] Speaker 3: the secular bowl market. And there's no signs that this
[1:05:02] Speaker 3: is this is letting up. And so when when when
[1:05:05] Speaker 3: we think about what inning is the secular bull market in,
[1:05:08] Speaker 3: when is it going to end? And why? This is
[1:05:10] Speaker 3: one of the things I look at It's just you know,
[1:05:12] Speaker 3: when when you're retiring far more shares and you're issuing,
[1:05:16] Speaker 3: it's like the you know, markets are going to go up,
[1:05:18] Speaker 3: all else being equal.
[1:05:19] Speaker 2: What's so surprising about this is how relatively insignificant the
[1:05:24] Speaker 2: retail flows us there. It's it's just the opposite of
[1:05:27] Speaker 2: how so many people describe it. Coming up, we continue
[1:05:31] Speaker 2: our conversation with Urie and Timor, director of Global Macro
[1:05:35] Speaker 2: at Fidelity, discussing various asset classes equities, bonds, commodities, alternatives.
[1:05:42] Speaker 2: You're listening to Masters in Business on Bloomberg Radio. I'm
[1:05:59] Speaker 2: Barry Redult. You're listening to Masters in Business on Bloomberg Radio.
[1:06:03] Speaker 2: My extra special guest this week is Urian Timor. He
[1:06:06] Speaker 2: is the director of Global Macro at Fidelity Investments, the
[1:06:11] Speaker 2: giant firm helping to manage over sixteen trillion dollars in
[1:06:16] Speaker 2: client assets. Let's talk about US fundamentals versus EFA fundamentals.
[1:06:22] Speaker 2: So this looks at various market data, buybacks, dividends, et cetera.
[1:06:28] Speaker 2: Tell us what this jart is showing us.
[1:06:29] Speaker 3: Yes, So we were talking about earlier about there finally
[1:06:32] Speaker 3: being a catalyst for non US stocks to compete with
[1:06:36] Speaker 3: the with the MAC seven driven US stock market and
[1:06:39] Speaker 3: so on the left, I show the earnings line for
[1:06:42] Speaker 3: the SMP the payout so that the share of earnings
[1:06:46] Speaker 3: being returned quote unquote to shareholders shareholder yield as dividends
[1:06:51] Speaker 3: and buybacks. And then at the bottom you see the
[1:06:55] Speaker 3: payout ratio again either as dividends in the yellow buybacks
[1:06:59] Speaker 3: in the purple, and you can see the payout has
[1:07:02] Speaker 3: risen very nicely, almost a double since five years ago.
[1:07:07] Speaker 3: Payout ratio is about seventy five percent, so very bullish
[1:07:10] Speaker 3: fundamentals like you. You know, those fundamentals deserve a high
[1:07:15] Speaker 3: pe right because not only is the earnings growing, but
[1:07:19] Speaker 3: they're being returned to shareholders, which of course is worth
[1:07:22] Speaker 3: more than if you're not getting them back. It's just
[1:07:25] Speaker 3: the present value of future cash flows. But what's changed
[1:07:28] Speaker 3: just in the last few years is that for IFA
[1:07:31] Speaker 3: again which is the MSCI Non US Developed Index, you
[1:07:36] Speaker 3: see an even better growth rate in the payout and
[1:07:39] Speaker 3: you see a more than double yeah, and you see
[1:07:41] Speaker 3: an equally robust payout ratio again of about seventy five percent.
[1:07:45] Speaker 3: So the rest of the world is really competitive now,
[1:07:49] Speaker 3: despite the fact that this is such a Max seven
[1:07:51] Speaker 3: heavy market, and so this is just a very exciting
[1:07:55] Speaker 3: time because you can actually you don't have to make
[1:07:59] Speaker 3: that make or break binary decision like you're either in
[1:08:02] Speaker 3: these big stocks or you're left behind. There are other
[1:08:05] Speaker 3: places to get those returns down.
[1:08:07] Speaker 2: What's so fascinating about this chart is how inverted the
[1:08:12] Speaker 2: ratio of buybacks to dividends is. In the US forty
[1:08:15] Speaker 2: five percent a shareholder yield as buybacks thirty percent or
[1:08:18] Speaker 2: divinends that flips. In Europe it's forty seven percent, or
[1:08:22] Speaker 2: divinends only twenty seven percent or buybacks or I should say, epha,
[1:08:26] Speaker 2: not just Europe, although a lot of it seems to
[1:08:28] Speaker 2: be concentrated in Europe. How much of that is just
[1:08:32] Speaker 2: driven by tax policy and regulations.
[1:08:36] Speaker 3: I think it's largely culture. It's just you know, and
[1:08:39] Speaker 3: Europe is more of a value market, right so it's
[1:08:43] Speaker 3: really like the banks are really running the show right now,
[1:08:47] Speaker 3: and so the US it's more the growthy stocks, so
[1:08:50] Speaker 3: they don't want to so, you know, dividends are kind
[1:08:52] Speaker 3: of like a sacred contract, if you will, like it
[1:08:54] Speaker 3: takes a lot for dividends to be cut. So I
[1:08:58] Speaker 3: think Europe and Japan is just generally been more of
[1:09:01] Speaker 3: a value driven and the culture has been more Okay,
[1:09:04] Speaker 3: we're going to earn so much and you're going to
[1:09:06] Speaker 3: get that back as dividends. But especially the Japanese and
[1:09:09] Speaker 3: also the Europeans are getting much more with the shareholder
[1:09:14] Speaker 3: culture now in terms of unlocking value and returning those
[1:09:19] Speaker 3: as buyback. So it's they're getting there. They're starting to
[1:09:23] Speaker 3: play the game.
[1:09:24] Speaker 2: Last few questions before we get to our favorite questions.
[1:09:29] Speaker 2: You have a section in the chart book about the
[1:09:32] Speaker 2: post sixty forty world. I've heard people say the old
[1:09:37] Speaker 2: sixty forty is now fifty thirty twenty or fifty thirty ten,
[1:09:42] Speaker 2: five five tell us what you think of as the
[1:09:46] Speaker 2: post sixty forty world.
[1:09:48] Speaker 3: So I look at it. I call it the sixty
[1:09:50] Speaker 3: twenty twenty. So the sixty forty paradigm worked like a
[1:09:56] Speaker 3: charm right from the late nineties until the early twenty twenties.
[1:10:01] Speaker 3: And you know, sixty percent s and p forty percent
[1:10:04] Speaker 3: Bloomberg AG so the investment grade bond index and you
[1:10:08] Speaker 3: got a nine percent CAGAR against the nine percent vault,
[1:10:13] Speaker 3: and like, what's not the like about that? Right during
[1:10:15] Speaker 3: that time, inflation was like two and a half, so
[1:10:17] Speaker 3: you've got a very attractive real return with really moderate volatility.
[1:10:23] Speaker 3: But the whole premise of that paradigm was that the
[1:10:27] Speaker 3: forty was insurance against the sixty. So the sixty, of
[1:10:31] Speaker 3: course is always the anchor, that's where the compounding is,
[1:10:35] Speaker 3: and the forty would be your port in the storm.
[1:10:39] Speaker 3: I think that's now changed. So twenty twenty two obviously
[1:10:42] Speaker 3: was a return to the old FED model days where
[1:10:45] Speaker 3: rising yields uh take you know, take take the mojo
[1:10:49] Speaker 3: out of the stock market. To put it mildly, the
[1:10:52] Speaker 3: good news is that bonds, of course now are a
[1:10:55] Speaker 3: viable asset. They generate a positive real yield, but their
[1:11:00] Speaker 3: correlation is now positive against equities instead of negative. So
[1:11:04] Speaker 3: when I think about the post sixty to forty world,
[1:11:07] Speaker 3: I'm less worried about the sixty, Like we can add
[1:11:10] Speaker 3: more international in the sixty, and like we were just discussing,
[1:11:13] Speaker 3: but what do we do about the forty? If the
[1:11:16] Speaker 3: forty can be the cause of problems rather than the
[1:11:18] Speaker 3: solution to problems, and especially if we end up with
[1:11:22] Speaker 3: a higher term premium, then bonds are not going to
[1:11:26] Speaker 3: be as safe as they used to be. So then
[1:11:29] Speaker 3: I get into kind of okay, I'm going to take
[1:11:31] Speaker 3: some share from the bonds. It doesn't have to be
[1:11:33] Speaker 3: twenty like. Again, this is not investment advice, but back
[1:11:36] Speaker 3: at the envelope stuff, and you know, maybe some cash
[1:11:40] Speaker 3: strategies are more competitive if we're not going to go
[1:11:42] Speaker 3: back to the zero interest rate days, which I don't
[1:11:45] Speaker 3: think we are. Gold are the proven anti bond over history, right.
[1:11:50] Speaker 3: They don't produce a cash.
[1:11:51] Speaker 2: Flow thirty seven hundred bucks as we speak.
[1:11:53] Speaker 3: But when bonds do poorly, gold really shines no pun intended.
[1:11:58] Speaker 3: And then you got to throw bitcoin in there is
[1:12:00] Speaker 3: kind of the wanna be exponential gold. And then other
[1:12:04] Speaker 3: strategies like alternatives, right, managed futures, equity, long short, private credit,
[1:12:11] Speaker 3: you know, all of those kind of alpha rather than
[1:12:14] Speaker 3: beta strategies you have.
[1:12:15] Speaker 2: You have tips in there as well.
[1:12:17] Speaker 3: Yeah, tips high yield. Uh. You know markets or asset
[1:12:22] Speaker 3: classes that are not negatively correlated, but they're not positively
[1:12:26] Speaker 3: correlated as well. So when you look at kind of
[1:12:29] Speaker 3: the sharp ratios versus the correlation not just to the sixty,
[1:12:34] Speaker 3: but especially to the forty, right, because I want to
[1:12:36] Speaker 3: hedge more against the forty than the sixties.
[1:12:38] Speaker 2: I was going to say, this doesn't look like a
[1:12:40] Speaker 2: yield chase, This looks like a diversifier. Is that the thinking?
[1:12:43] Speaker 3: Yeah? Yeah, And actually, if you go down one chart,
[1:12:46] Speaker 3: I think, yeah, right there, look at that. So I
[1:12:49] Speaker 3: want high sharp ratios or high sortino ratios, and and
[1:12:54] Speaker 3: and assets that are uncorrelated. Then you get into you
[1:12:57] Speaker 3: get into the BCom commodities, you get into gold. Bitcoin
[1:13:01] Speaker 3: is not quite uncorrelated, but all the old strategies are uncorrelated.
[1:13:06] Speaker 3: And so to me that is sort of the next
[1:13:09] Speaker 3: sixty forty.
[1:13:11] Speaker 2: Really really fascinating. Last question before we get to our favorites.
[1:13:15] Speaker 2: You look at so many charts each week. You identify
[1:13:18] Speaker 2: trends before a lot of people do. What are investors
[1:13:22] Speaker 2: not talking about but perhaps should be? What topics? Assets, geographies,
[1:13:27] Speaker 2: data points? What do you think is getting overlooked? But
[1:13:30] Speaker 2: it's really worth investors time to pay attention.
[1:13:33] Speaker 3: To one ass a class, and we just talked about
[1:13:36] Speaker 3: it that I think generally is seen as a side
[1:13:40] Speaker 3: show the way bitcoin used to be. It's no longer
[1:13:44] Speaker 3: a side show. For sure is actually gold because.
[1:13:47] Speaker 2: For even at thirty seven hundred bucks, it's well, people
[1:13:51] Speaker 2: still think of it as a sideshow.
[1:13:53] Speaker 3: I think institutions do. Right, So regular retail investors as
[1:13:58] Speaker 3: I call them, you know, you can buy gold or
[1:14:01] Speaker 3: some other gold etf and like you know, I own
[1:14:03] Speaker 3: it in my portfolio, and so there, I think. There
[1:14:06] Speaker 3: it's part of the conversation. But when you think about
[1:14:09] Speaker 3: like large endowments, institutional investors, even mutual funds, like you
[1:14:15] Speaker 3: need a special wrapper in your mutual fund to own
[1:14:18] Speaker 3: physical gold, like you need to go to the SEC
[1:14:20] Speaker 3: and get approval, and so you know, gold has been
[1:14:24] Speaker 3: sort of dormant for so long until recently that is like, yeah,
[1:14:28] Speaker 3: I don't really want to go through this trouble to
[1:14:30] Speaker 3: buy something that doesn't have a cash flow, can't be valued,
[1:14:33] Speaker 3: requires special regulatory approvals, and then all of a sudden
[1:14:37] Speaker 3: it starts to run like it is now everybody. And
[1:14:41] Speaker 3: so so I think that's the story. So in ironically,
[1:14:45] Speaker 3: because bitcoin as has obviously come well after gold as
[1:14:49] Speaker 3: a kind of a store value hard money asset. In
[1:14:53] Speaker 3: a way, gold is kind of like where bitcoin was
[1:14:56] Speaker 3: ten years ago or five years ago, where okay, Bitcoin's interesting,
[1:15:00] Speaker 3: but I don't understand it. I don't feel like spending
[1:15:02] Speaker 3: one hundred hours on this. It's a bubble, it's a scam,
[1:15:05] Speaker 3: it's a pet rock. And gold is like if it
[1:15:08] Speaker 3: keeps going the way it is, and I suspect it will,
[1:15:11] Speaker 3: like the endowments are like okay, Like people are asking
[1:15:16] Speaker 3: me about this. I need to like really like figure
[1:15:19] Speaker 3: out how do we not how do we buy it?
[1:15:21] Speaker 3: You can buy it, of course, but it's always been
[1:15:24] Speaker 3: a dismissed asset. Let me put it that way.
[1:15:27] Speaker 2: Among I mean, that's what I grew up with. It
[1:15:29] Speaker 2: was kind of mocked by the equity people. Depends on
[1:15:32] Speaker 2: the length of the chart you look at. You could
[1:15:34] Speaker 2: show a trailing multi decade period where gold has outperformed
[1:15:39] Speaker 2: the S and P. So if you look at gold
[1:15:42] Speaker 2: as in a secular bull market, I'm not asking for
[1:15:46] Speaker 2: a forecast, but what's within the range of possible numbers
[1:15:50] Speaker 2: gold could run to from thirty seven hundred up from
[1:15:53] Speaker 2: the low two thousands in early what do we peak
[1:15:57] Speaker 2: in like twenty fourteen and then twenty nineteen.
[1:16:00] Speaker 3: Something and it was like two hundred and sixty that
[1:16:03] Speaker 3: I remember.
[1:16:04] Speaker 2: In the nineteen y when GLD first came out, I
[1:16:07] Speaker 2: want to say gold was about four to thirty four
[1:16:09] Speaker 2: forty I remember talking about it on TV and getting
[1:16:12] Speaker 2: laughed at by it ankers.
[1:16:13] Speaker 3: So I once saw a chart that actually Paul Too
[1:16:16] Speaker 3: or Jones created a streaking of fall where he compared
[1:16:20] Speaker 3: the above ground value of gold or the value of
[1:16:25] Speaker 3: above ground gold and compared it to the value of
[1:16:30] Speaker 3: M two, and they're.
[1:16:32] Speaker 2: Trying to track each other.
[1:16:34] Speaker 3: The chart concluded that when the money supply grows too fast,
[1:16:39] Speaker 3: gold takes market share. So hard money takes market share
[1:16:43] Speaker 3: from soft money, from fiat money, and at certain extremes,
[1:16:47] Speaker 3: like in the seventies and other periods of thirties gold
[1:16:51] Speaker 3: the value gold would go all the way up or
[1:16:54] Speaker 3: beyond the value of M two. And so right now
[1:16:57] Speaker 3: M two is about twenty three trillion gold plus bitcoin
[1:17:03] Speaker 3: is also about twenty three trillion, So in that sense,
[1:17:06] Speaker 3: it's come a long way to take that market share.
[1:17:11] Speaker 3: And now it's a question of does M two, either
[1:17:14] Speaker 3: globally or in the US continue to grow at an
[1:17:17] Speaker 3: above average pace. So the average pace is about six
[1:17:20] Speaker 3: percent nominal, about two three percent real. So I do
[1:17:24] Speaker 3: think a lot of the gains are in already, but
[1:17:29] Speaker 3: it will it will naturally overshoot, as these cycles always do.
[1:17:32] Speaker 3: So That's kind of how I would how I would
[1:17:35] Speaker 3: measure it. So if the money supply goes the thirty
[1:17:37] Speaker 3: trillion gold and bitcoin could be thirty five trillion, and
[1:17:40] Speaker 3: obviously gold is a large part of that, Bitcoin is
[1:17:43] Speaker 3: about two trillion, and then you convert that to a price.
[1:17:46] Speaker 3: But that's kind of how I think about the valuation
[1:17:49] Speaker 3: signe really fascinating.
[1:17:51] Speaker 2: Tell us about your mentors who helped shape your career.
[1:17:56] Speaker 3: Definitely Net Johnson, because when I came in to Fideli
[1:18:02] Speaker 3: in ninety five, I'd been in you know, in New
[1:18:04] Speaker 3: York for ten years, didn't really have mentors, and so he,
[1:18:12] Speaker 3: you know, Fideli has a very strong corporate culture, let's
[1:18:15] Speaker 3: put it that way, and especially around uh, you know,
[1:18:20] Speaker 3: the way we approach long term investments. We're obviously a
[1:18:23] Speaker 3: long term investor, but so he he was like the
[1:18:26] Speaker 3: last person I spoke to before I got hired. And
[1:18:29] Speaker 3: then in those formative years, I worked in the chart
[1:18:32] Speaker 3: room and I would spend hours per week with with Ned,
[1:18:35] Speaker 3: like he would just come down really and uh and
[1:18:38] Speaker 3: hours per week and we would just pour over charts,
[1:18:41] Speaker 3: like we have these huge charts on the wall Florida ceiling.
[1:18:44] Speaker 3: You know, like forty foot wide, like a daily chart
[1:18:47] Speaker 3: of the of whatever the dow and it would be
[1:18:52] Speaker 3: computer generated. But then because we don't want to print
[1:18:55] Speaker 3: a whole new forty foot sheet every week, just you
[1:18:57] Speaker 3: fill it in by hand, and and you know, just
[1:19:00] Speaker 3: the oral tradition, the oral history. So he was looking
[1:19:04] Speaker 3: at the chart and none he was say okay, well
[1:19:06] Speaker 3: like and he would go from right to left and
[1:19:09] Speaker 3: say okay, you know then and we'd end up like
[1:19:12] Speaker 3: in nineteen sixty eight and he's telling me about the
[1:19:14] Speaker 3: glamour stocks and this and that, and I'm like, wow,
[1:19:17] Speaker 3: this is like gold right, like you don't you know,
[1:19:20] Speaker 3: And so he would have this encyclopedic memory. But also
[1:19:24] Speaker 3: just the way the information was displayed semilog skills. The
[1:19:30] Speaker 3: chart room has like museum quality lighting, how you display,
[1:19:34] Speaker 3: how you visualize you know, data, And so that he
[1:19:39] Speaker 3: instilled that culture, you know, we call it kaizen kind
[1:19:43] Speaker 3: of just gradually improving and having you know, compounding isn't
[1:19:47] Speaker 3: just for investing, right, it's just in our day to
[1:19:50] Speaker 3: day stuff. You do something consistently right, it's going to
[1:19:54] Speaker 3: make an impact. And when I look back at my
[1:19:56] Speaker 3: forty years and I'm not going anywhere. But like to
[1:19:59] Speaker 3: me that that Kaisen has has really played a role
[1:20:03] Speaker 3: in my relationships in my work, and and I think
[1:20:08] Speaker 3: a lot of that just came from him.
[1:20:10] Speaker 2: Really really interesting. Let's talk about books. What are some
[1:20:13] Speaker 2: of your favorites? What are you reading now?
[1:20:16] Speaker 3: So, I I hate to admit it, but i don't
[1:20:19] Speaker 3: read a lot of finance books because I'm very interested
[1:20:22] Speaker 3: in having.
[1:20:24] Speaker 2: Balanced between right and left. Bright I've all read Reminiscence
[1:20:28] Speaker 2: of a Stock Operator. I'm more curious as to what
[1:20:31] Speaker 2: else you're reading.
[1:20:32] Speaker 3: I will say that during COVID I read, uh, this
[1:20:38] Speaker 3: huge tomb called The History of the Federal Reserve by
[1:20:41] Speaker 3: Alan Meltzer. Because you know, I've looked at so many charts,
[1:20:45] Speaker 3: you've read the reports of like you know, financials, but
[1:20:50] Speaker 3: I went like that book. It was like this blow
[1:20:54] Speaker 3: by blow using the FED minutes and all these you know,
[1:20:58] Speaker 3: correspondence to see how the FED handled the financial repression
[1:21:02] Speaker 3: of the forties. And so that was fascinating. Although most
[1:21:06] Speaker 3: people would say, well that sounds really boring, but as
[1:21:09] Speaker 3: a as a consumer of the data, just to see, okay,
[1:21:14] Speaker 3: you know, like wherever it was at the FED would
[1:21:16] Speaker 3: go to the Treasury, and they were playing games like
[1:21:19] Speaker 3: the Treasury would issue bonds below market and then the
[1:21:22] Speaker 3: auction would fill and then knowing that the FED would
[1:21:25] Speaker 3: have to mop up the supply. Like all of that
[1:21:27] Speaker 3: stuff was just really really fascinating. And you know, and
[1:21:30] Speaker 3: we see the interference with politics and money monetary policy today,
[1:21:37] Speaker 3: but it's nothing new. Like in the sixties, both Nixon
[1:21:39] Speaker 3: and Kennedy were equally guilty.
[1:21:41] Speaker 2: It seems a little more overt it's public today. It
[1:21:44] Speaker 2: used to be sort of cloak room sort of thing.
[1:21:47] Speaker 3: Yes, So that was one but the most interesting recent
[1:21:52] Speaker 3: book I've read was it's called rock Me on the Water,
[1:21:56] Speaker 3: and it's a book about music, TV and movies during
[1:22:01] Speaker 3: the early seventies and how la was like the epicenter
[1:22:06] Speaker 3: of American culture. So you had like the Laurel Canyon
[1:22:10] Speaker 3: folks of modern musicians, and he had these groundbreaking TV shows,
[1:22:15] Speaker 3: right because we were coming out of the straight jacket
[1:22:17] Speaker 3: of the sixties conformists, like no one dared to make
[1:22:20] Speaker 3: a show that that like challenged the status quo. And
[1:22:24] Speaker 3: then you had like Mash and you know, Mary Tyler
[1:22:27] Speaker 3: Moore owned the Family, and then the movies like Taxi Driver,
[1:22:32] Speaker 3: and as a you know, as a I think I'm
[1:22:35] Speaker 3: kind of gen X but on the border of gen
[1:22:37] Speaker 3: X and baby boom. Yeah. And so growing up, you know,
[1:22:42] Speaker 3: formative years in the seventies in Aruba, but consuming American
[1:22:46] Speaker 3: pop culture, right, we would sit down every night watching like,
[1:22:49] Speaker 3: you know, Wide World of Sports and Mary Tyler Moore
[1:22:52] Speaker 3: and and although show Rocked Me on the Water, Rocked
[1:22:55] Speaker 3: Me on the Water, and it's just like, so it's
[1:22:58] Speaker 3: fascinating to read about the things that we lived through
[1:23:02] Speaker 3: as kids, as teenagers.
[1:23:03] Speaker 2: But then like, yeah, you know that was so amazing.
[1:23:08] Speaker 2: Let's talk about streaming. What are you watching or listening
[1:23:11] Speaker 2: to right now?
[1:23:12] Speaker 3: We are binge watching The Bear. So I'm a I'm
[1:23:16] Speaker 3: an avid cook, you know, like I said, I run
[1:23:18] Speaker 3: a food camp at burning Man and that's that's and
[1:23:22] Speaker 3: we tend to be late to shows. And then we
[1:23:24] Speaker 3: we just watched like.
[1:23:25] Speaker 2: Four seasons cook worked in restaurants. It just rings so true.
[1:23:34] Speaker 2: I got to ask you a crazy question. You're a cook,
[1:23:38] Speaker 2: What pots do you like? What knives do you like?
[1:23:41] Speaker 3: I use the all clad I have. I have two places.
[1:23:46] Speaker 3: I have a gas stove in Santa Barbara and an
[1:23:49] Speaker 3: induction stove in Boston.
[1:23:50] Speaker 2: You know, I came this close to putting an induction
[1:23:53] Speaker 2: stove in my primary residence, but we had just gotten gas,
[1:23:58] Speaker 2: and so of course we ran with gas.
[1:24:00] Speaker 3: Yeah. I will run with gas anytime. Induction is good.
[1:24:03] Speaker 3: It's very precise, yes, but I like the organic, kind
[1:24:09] Speaker 3: of tactile dimension of gas. But so all clad and
[1:24:15] Speaker 3: the German knives, what's it called Gusdorff, I forget, And
[1:24:22] Speaker 3: my go to knife is a tenant chef's knife, not
[1:24:26] Speaker 3: the really high one, but the medium one. So the
[1:24:28] Speaker 3: medium one is thick enough to like smash on garlic,
[1:24:33] Speaker 3: but not so thick that you don't feel connected, you
[1:24:35] Speaker 3: don't have the road field of the knife on the
[1:24:38] Speaker 3: cutting board.
[1:24:39] Speaker 2: So so I'm jonesing for this shun knife. I keep
[1:24:44] Speaker 2: seeing and they're just exorbitant. And we gave someone a
[1:24:49] Speaker 2: gift of the Stanley Tucci healthy nonstick, supposedly the old
[1:24:56] Speaker 2: nonstick is not good, and she loves it. She's been
[1:24:59] Speaker 2: wo baiting going out and getting a set for it.
[1:25:02] Speaker 2: Like it's rare you give someone a gift and they're like,
[1:25:04] Speaker 2: oh my god, this is amazing. The only to choose
[1:25:06] Speaker 2: one of my heroes really have you watched this show
[1:25:09] Speaker 2: in Italy? I had to stop because it just makes
[1:25:12] Speaker 2: me want to eat even after dinner. You want to go,
[1:25:15] Speaker 2: you want to go eat that.
[1:25:16] Speaker 3: That's my my guilty pleasure. On TikTok's Little Food Clips.
[1:25:21] Speaker 3: And I don't even have to have the sound on.
[1:25:23] Speaker 3: It's just, you know, because I kind of know what
[1:25:26] Speaker 3: works with recipes, so I don't need a recipe, but
[1:25:29] Speaker 3: I just need someone to visualize an approach. And so
[1:25:33] Speaker 3: a lot of the things I cook today are from TikTok.
[1:25:36] Speaker 2: Oh, no kidding, Oh that's amazing. All right? Our final
[1:25:39] Speaker 2: two questions, what sort of advice would you give a
[1:25:43] Speaker 2: recent college grad interested in a career in technical analysis,
[1:25:48] Speaker 2: fixed income or just investing?
[1:25:51] Speaker 3: Generally, be open minded, be humble. You know the true
[1:25:57] Speaker 3: heroes of mine in our business, including that job. You
[1:26:00] Speaker 3: know he's no longer with us, of course? Was that
[1:26:03] Speaker 3: just humility? Right? I'll talk to Will dan Off, who
[1:26:06] Speaker 3: runs three hundred billion.
[1:26:07] Speaker 2: I love Will.
[1:26:08] Speaker 3: He's the humblest guy you'll ez you'll ever meet, And
[1:26:12] Speaker 3: there's no room for big egos, like no matter how
[1:26:15] Speaker 3: important you are, like I have no time for that, right,
[1:26:17] Speaker 3: So stay humble, don't figure out. Don't think you've or
[1:26:21] Speaker 3: you've figured it all out when at the age of
[1:26:23] Speaker 3: twenty five, you know, be a learner and be ready
[1:26:26] Speaker 3: to reinvent yourself. I've had to do it a number
[1:26:29] Speaker 3: of times at Fidelity, either as planned or as not planned,
[1:26:33] Speaker 3: and you just got to roll with the punches. And
[1:26:36] Speaker 3: like I said, the first job I had I was
[1:26:39] Speaker 3: like the last job I was interested, but I took
[1:26:41] Speaker 3: it because it was the only job.
[1:26:42] Speaker 2: You know, And our final question, what do you know
[1:26:45] Speaker 2: about the world of investing today? You wish you knew
[1:26:48] Speaker 2: forty years ago or so when you were first getting started.
[1:26:52] Speaker 3: That markets go through cycles and it always comes back,
[1:26:56] Speaker 3: not always quickly, but you know, every time the market
[1:27:00] Speaker 3: was down twenty plus percent, it's like the end of
[1:27:02] Speaker 3: the world, and it's like totally different from every other time,
[1:27:06] Speaker 3: and this is like such a crisis. But then you know,
[1:27:10] Speaker 3: I've now been through like twelve bear markets in my
[1:27:13] Speaker 3: career and it's like, yeah, whatever, like nothing shocks me anymore.
[1:27:16] Speaker 3: Of course, I'm maybe in a better place because I've
[1:27:19] Speaker 3: earned my wealth. I'm not still building it, but it's
[1:27:24] Speaker 3: just you know, take take take a step back, look
[1:27:27] Speaker 3: at the bigger picture, make sure your portfolio is where
[1:27:30] Speaker 3: it should be in terms of risk and goals. And
[1:27:33] Speaker 3: don't be your own worst enemy by selling at the bottom.
[1:27:36] Speaker 3: You know, call someone like have them talk you off
[1:27:39] Speaker 3: the ledge first.
[1:27:40] Speaker 2: You know, thank you Urian for being so generous with
[1:27:43] Speaker 2: your time. We have been speaking with Urian Timor, Director
[1:27:47] Speaker 2: of Global Macro at Fidelity Investments. If you enjoy this conversation,
[1:27:52] Speaker 2: well check out any of the five hundred and sixty
[1:27:54] Speaker 2: three we've done over the past eleven and a half years.
[1:27:58] Speaker 2: You can find those that Bloomberg iTunes, Spotify, YouTube, or
[1:28:03] Speaker 2: wherever you get your favorite podcasts. Be sure to check
[1:28:06] Speaker 2: out my new book How Not to Invest The ideas,
[1:28:09] Speaker 2: numbers and behavior that destroy wealth and how to avoid
[1:28:13] Speaker 2: them How Not to Invest at your favorite bookstore. I'd
[1:28:17] Speaker 2: be remiss if I did not thank the Crack team
[1:28:19] Speaker 2: that helps put these conversations together each week. Alexis Noriega
[1:28:24] Speaker 2: and Anna Luke are my producers. Sean Russo is my researcher.
[1:28:28] Speaker 2: Sage Bauman is the head of podcasts. I'm Barry Ridholts.
[1:28:33] Speaker 2: You're listening to Masters in Business on Bloomberg Radio.

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