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This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Let's get to one of the key data points really before next week's FED meeting. I feel like Tim, we just keep counting down, you know, jobs report, inflation reports, just different things.
We kept kind of making our way through.
T minus seven days.
Welllock, I'm kind of excited.
What we got this morning, though, was another readout inflation data that showed underlying US inflation unexpectedly picked up in the month of August, higher prices.
For housing and travel.
So maybe that fifty basis point rate cut that some have been banking on not going to happen.
Let's ask Bloomberg News International Economics and Policy correspondent Michael McKee.
He's here in the studio, So.
Headline numbers, Mike, what everyone is talking about the so called CPI. Does it rule out fifty basis points come next week?
No, it doesn't rule it out, But I think the fatas default position was always twenty five basis points and the fifty with sort of a wish on Wall Street that they.
Are now ruling out for themselves.
If you look at the overall numbers, we saw the headline CPI come down to two and a half percent, and we saw the core at three point two percent, But those include twelve months ago. Well, it's an annual rate and that's irrelevant.
Now. If you look at it on a six month.
Basis, the headline is at one point nine percent and the core is at one point eight percent. If you look at it at a three month basis, the three most recent months, you're at one point one five percent for the headline and two point four percent for the core, So you're you'd be especially on the headline, thinking well, maybe we're too low.
So you know, with the Fed think it's too low.
Do they look at that a month or I don't think they would look at it that way, but they are. If they wanted to do fifty, there would be an excuse in that they could say that the economy may be slowing too.
Do they need to do fifty? Mic In your view, when you look at the rest.
Of and I think That's why the consensus has merged around the idea of twenty five is because the economy is not falling apart. We're still seeing strong consumer spending and we're seeing jobs reasonable. We didn't get quite as many last week.
But we saw the unemployment rate fall.
So there's not a flashing red light out there that says we got to move quickly.
There is a flashing red headline that I do want to bring to your attention. It's kind of perfect that we have you in here. The Fed Inspector General releases a report on Bostic's investments. The Fed Inspector General didn't find evidence that Bostick traded on confidential information. Mike remind everyone what was going on here.
Well, it's kind of a an offshoot of the earlier FED issues about whether they properly properly disclosed.
It was a Boston Fed and the Dallas Fed. Even J. Powell got caught up in it.
I had forgotten that did they disclose accurately what trades had been done? And so the FED, after the initial round, tightened the rules. And the way this story went there was Bostick had to refile his financial forms because it turned out that he had that there had been trades made during a time period when there shouldn't have been trades made, which brought up the question of whether there
was a confidential conflict of interest. And what Bostick said at the time was that this was a mistake by his trustee who's running his keeping track of his money because they didn't realize that the rules had changed. And I guess the Inspector General says, yes, you know, the trades created the appearance of the conflict of interest, but it wasn't him doing something based on confidential information.
So just remind us going forward, and then we'll go back to the inflation data. So things though have changed in terms of oversight of FED officials in terms of trading.
Is it what we came out of all of this.
Well, they completely changed the disclosure rules and they have to disclose any trades. They can't make trades at certain times now, and there are some things that.
Are not allowed to trade.
So it's a much tighter regime and we get the financial disclosure forms every year and they haven't suggested anything bad in a while.
All right, all right, good to know, because you're right, it's been a while since we've got a headline.
I mean, reporters just pour over those.
As we do, and as we also pour over, you know, these economic data points, especially because we've got a FED meeting next week and we know this is going to be probably a big one right where the Fed actually starts to cut rates. Having said that, the economic risks right now, Mike, in the US economy, is it more on the labor market side of things?
Like where are the risks?
Because I do feel like with this political election, the economy is still front and center. I was away and I was talking to somebody and I was making a purchase and it was under a hundred dollars, and I said, oh my god, it's so nice to make a purchase that's under a hundred dollars because it doesn't feel like you get away with groceries or was it food at home?
It was the things we're going to talk to Mike about in thirty seconds.
It was not baking our food. But what she said to me is, you know, I get my paycheck, I deposit it and it's gone right away. And it just speaks to how many Americans are struggling right now.
I think you probably would have heard that prior to the pandemic too. What people tend to forget the idea that, yes, the price level's gone up for a lot of things. Input prices went up and so that fed through and now they've basically sort of stopped rising, but the level of prices is higher than it was. The one thing everybody leaves out when they come out with those statistics, though, is the level of incomes has also risen and in the last year been higher than the inflation rate. So
you're really still ahead of inflation. But what sticks in your head is when you go to the grocery store and the price is higher, You're not thinking about, well, I made a little bit more of my paycheck this month, because that was me. I'm so great, I get more money. But I'm getting screwed because the prices.
Have gone up.
But as you reminded us on Bloomberg TV this morning, some prices are actually coming down, including grocery prices.
This came up.
Last night the day yeah they asked me about the financial aspects of the debate. Last night, I pointed out that grocery prices were a big deal. They were down where they were flat this month, they were down by a tenth last month, and basically they've been flat for a couple of months.
And I think Trump brought up bacon.
Bacon prices have been down big for two months now, down one point seven percent this past month. And then I noted that if you had to replace a pet, pet prices were lower, you had.
To go there.
Huh, had to go there.
And if you don't understand that, just you know, Google, watch the boot.
Just watch the debate, which you all shid as good Americans.
Mike, thank you so much.
As always, Bloomberg News International Economics and Policy correspondent.
You're listening to the Bloomberg Business Week podcast. Catch US Live weekday afternoons from two to five pm Eastern. Listen on Apple car Play and then brought auto with a Bloomberg Business app, or watch US Live on YouTube to.
Continuing their coverage of last night's debate.
As you know, Democratic Vice President Kamala Harris and Republican Donald Trump former president Donald Trump's barring through their first debate with the former president, often on the defensive of abortion rights, the January sixth Insurrection, on foreign policy and sometimes trade.
Well, let's be clear that the Trump administration resulted in a trade deficit, one of the highest we've ever seen in the history of America. He invited trade wars. You want to talk about his deal with China. What he ended up doing is under Donald Trump's presidency, he ended up selling American chips to China to help them improve and modernize their military.
And that, of course was Vice President Kamala Harris talking trade with former President Donald Trump. Her views on the Trump trade policy. Let's get more on the debate in the political conversation that is, and that maybe needs to be back with us. A Stefan sila Key has worked in leadership roles in both the private and public sectors, including a nearly thirty year on Wall Street. Former Undersecretary of Commerce for International Trade at the US Department of Commerce.
During the Obama administration, he also headed the International Trade Administration. His background is so rich, which is why we lean on him a lot. He is also managing partner and founder Bridge Park Advisors, the financing advisory firm. He's back here in our Bloomberg Interactive Broker studio. He also, last time he was on with Us, said that President Biden would step down from the race. So first of all congratulations and will you buy me a lottery ticket? Why
did you think that so much? Because he had no choice?
Remind us?
And why you were thinking about that because it was before he did it obviously.
Yeah.
I mean, if you recall, Carol, this was right after the former president was shot, and I thought that, you know, that opportunity for him to look so presidential frankly, was going to give him a real bump, and I thought
it was going to force President Biden's hand. And fundamentally, what I told you is when I believe that when he was convinced and his closest advisors and confidence was were convinced that he was going to lose, he was going to do the right thing and be a patriot and do the right thing for the country and for the party.
And that's ended up being he did. That's what he did.
So your thoughts on last night and what the race is now? Did we get enough when it comes to economics and policy and things that Americans care about?
You know, I was actually surprised about how little of the debate actually covered economic topics. Where you look at all of the polling, it says economic issues are the most important things that are going to drive undecided voters votes in the election. One is the economy, and two is inflation. I'm not sure not part of the economy. But I think we got, you know, far less of a real substance of dialogue on those topics, and I
would have hoped and expected. And I also thought that, you know, there was really very peripheral conversation around China, which I also might have expected given the important issues that our country faces with its greatest competitor.
We did get some conversation on tariffs, and Donald Trump did push back on what we heard from Kamala Harris in that clip just now by saying that the Biden administration did leave attack some of the tariffs that the Trump and ggustration had put on China. What are your thoughts around those types of protectionist trade policies.
You know, it's interesting, Tim, actually both parties are really largely aligned on tariffs and trade. Actually, there are, of course some nuances. Former President Trump is doubling down on his reasonably aggressive, you know, trade stance. What he's said at least was he would implement tariffs of ten to twenty percent across the board and sixty percent of goods coming in from China with a broad brush. I don't
think that's particularly effective. You know, to be sure, tariffs have a important place to protect industry, US industry, where those industries are critical to our national security interest. But when you do it on a broad brushed basis, at least, it's my view that the light's not worth the candle because clearly it's inflationary. I think it actually costs you more jobs than it saves you, and costs get passed
on to the consumer. And frankly, there are a lot of industries where we are just not competing effectively on a global basis, and as a result, taxing those goods coming in is just you know, bad for US consumers and is inflation.
So it's not apples to apples in terms of what Donald Trump is proposing now stuff in terms of more Chinese goods that are coming in versus what we've seen during the Trump administration, what continued into the Biden administration, specifically on high tech and chips in particular.
So it's not the same thing.
Well, the tariffs, I mean, let's separate. One of the things the Biden administration did was export controls as it relates to chips and critical technology, but specifically as it relates to tariffs. You know, this started with steel production and the issue around state owned enterprises in China, which controls steel production and now are by far the leading producer of steel around the world and have flooded the market. The fact is President Trump put on tariffs for imported
steel from China. The fact is the Biden administration kept those tariffs. But the fact is China's behavior has not changed, and so the question always should become in these circumstances, was it effective and at least so far in changing Chinese behavior as it relates to steel. It hasn't been effective, and in fact it's gotten in many ways worse because the Chinese economy has slowed and as a result, their domestic consumption of steel has gone down. And what's happened
to all that steel that continues to be produced. It's being sent overseas, driving down prices and creating real global instability in that steel in the steel market.
You did mention the economy and inflation, two things that we know thanks to pull after pollar on the top of mind for voters, we learned a little bit more about Kamala Harris last night. But still, since she's relatively new as a candidate and it doesn't have a full policy position out there, we don't know everything about how
she feels about this stuff. Some of her other policies that she's unveiled in recent weeks include not no taxing tips she's come out with that first time home buyers getting some sort of home buying credit, expansion of the child tax credit, supporting small businesses we learned in recent weeks with tax cuts there. But let's go through a couple of those tips when you talk specifically about the home the home buying, the home buying.
One, to me is interesting, and you didn't mention, obviously the whole price gouging price issue that she raised, because you know, to me, these both reflect a fundamental misunderstanding of reasonably simple economics, right, which is, if you give somebody twenty five thousand dollars to go buy a first home, and there is frankly a not a demand issue, but a supply issue, let me tell you what's going to happen that curve goes up and houses are going to cost twenty five thousand dollars.
More basic economics.
Basic economics I just don't see how that works and does what she wants to do, which is to actually assist new home buyers in affording their first terms. What it's going to do is just increase the prices of homes and so to me, this is very similar with the whole price gouging issue which you talked about in groceries and in food retail. As we all know, when you don't let the market set prices, let that leads to inefficiencies and in this particular case, would lead to
shortages in certain goods. You know, again, the supply and demand does Carol suggested, it sets prices, and when government artificially sets prices, you lose the signaling impact of what supply and demand leads to and as a result, you get market inefficiencies, which is going to be bad ultimately for consumers because when they go buy macaroni and cheese, it it's not going to be on the shelf because companies aren't going to be able to make enough money.
I would also observe that it's not like the food retailing industry is such a profitable business. I mean, at the height of the pandemic, the best grossers were making what five ish percent margins, right, And so as a result of that, the notion that they're price gouging is a little bit of a head scratcher.
One thing that's stuck with me, or stayed with me from our last conversation is, you know, the stock market isn't Main Street, right, and so there are a lot of Americans that are struggling. So I'm trying to understand because you know, this race is a close one no matter what, and these are two people who stand for
very different things and a very different candidate. Why is it in such a rich country and in a market where companies seem to get richer and richer, that we're not able to pass that wealth on to more workers. I know wages are starting to go up, but how do we fix that?
Well, look, I mean they're that's a big one. That is a big one, and it's you know, it relates, at least in my view, to education to opportunity, which
you know, which touches a whole host of policies. But I think very narrowly as it relates to what is causing the dissatisfaction with the economy today, it is because prices are elevated and prices are elevated because of what happened in COVID and what's happened after where both administrations, frankly, you know, have a lot to answer for because of the increase in the deficits, in the deficit that both parties policies caused, and until they tackle that, I think
the conversation about the stock market is high, interest rates are low, inflation is under control, is fine. But as your last guest or commentator suggested, inflation is interesting, but it's a point to point measure. It has nothing to do with prices.
Prices are high, right, right, and come down.
With I think the problem is Americans, whom most of whom have not experienced inflation, don't understand that about inflation. They think of inflation as what they pay at the gas pump, and they see those prices fluctuate, So they do see gas prices come down, and maybe that's what they expect, other.
Than gas prices are now at a three or low. Former President Trump is very fixated on oil and gas and gas prices because he thinks there's a direct linkage between gas and prices and inflation. I don't get that economics either. In fact, you know there is no more of a global commodity than oil and gas, and those
prices are not set narrowly based on US production. And so I think that's another example of especially given the importance of energy in Pennsylvania, another example of campaign rhetoric as opposed to you know, real economics and real math.
Every time we wrap up with you, I'm like, wait, I have a million more questions, so you have to come back again.
We're always happy to join you guys.
So we so much appreciated.
I'm Stefan Seek, Thank you so much, maaging partner over at Bridge Park Advisors, as we say, former Undersecretary of Commerce for International Trade at the used Department of Commerce that was during the Obama administration, but really looks at things from, as we say, the public and private sectors. All right, folks, you are listening and watching Bloomberg Business Week.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on Apple car Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station just Say Alexa playing Bloomberg eleven thirty.
Jennie Brook is the founder of Genoa Ventures.
It's a venture capital firm that invests in, as she says, the quote, next generation of companies at the convergence of technology and biology. Jenny Rook has invested in such companies as Entabio.
I'm saying it correctly.
You got a lot of on the list, right spec I will say, biotech is not easy when it comes to the can we.
Just talk deal with that?
Where's the consultant to say, all right, let's just call them Smith and Company or something?
Well, then they would all be called Smith and Company.
All right, But you know what I mean.
I mean, I guess they do do a lot of work and there's something connect connected with it. We said, you're from the Bay Area. You're here in our studio, so welcome, welcome.
Thanks for having me.
Tell us a little bit about first of all, your sailor, right, I am a hence the name of your company.
That's true. When I found at Genoa almost seven years ago, it was really important to me if I was going to start yet another venture firm, that we were known for something distinctive, and I wanted that to be about our culture of really supporting founders. And part of the way we recognize that is recognizing we're not the captains of the ship. It's not our show. Yeah, the captains, we're not even the boat. At most, we're the sale.
So the Genua, as you know, Carol, because you're a sailor, is a sale, and that's where we take our name from.
It's really I love it. I love it.
So wait, how does that also then? Think about you know, there are so many startup companies out there right, especially you know, ones at the very early stage.
And fewer in the current environment.
Well, because there hasn't been as much money, right, it's correct, all right, So how do you pick and choose that? Well, first of all, that's interesting. If it's not as many out there, is that more frustrating for you? Or is it that then the companies that are actually getting the money are pure and kind of more ready to go.
I think that's what we're going to see coming out of this sort of crucible of the last couple of years, is clearing out a lot of the chaff from the hype of twenty twenty.
And twenty twenty one.
Now we go really early at Genoa, and so we had the I would say advantage of picking our bets and being really disciplined about pricing. I think it was a little harder for later stage investors who were just had a deluge of a lot of companies that maybe were not particularly selected. Well, there wasn't a lot of selection pressure. So coming out of that, I think this is a healthy reset. It's obviously very difficult for a lot of people, and I don't want to trivialize that.
But as far as kind of the math, how the math works and venture, yeah, you need to have a little bit more balance between who gets the money and who gets to keep going.
But is the math inventure different than this than say, like a consumer tech company, or like the or like consumer tech sector or ad tech for example. It's hard to talk about this in the context of what's going on in tech because there are just a small number of really huge companies that control so many of these spaces. But with biotech, is the bet different?
I love this question. We think it is, particularly our biotech. So often when people say biotech, you're thinking about drug companies, Yeah, which are very important and have been have demonstrated that you can invest in fundamental innovation and biology and not only change the world would make a lot of money.
So we think that's true much more broadly with biology based companies that include other ways to participate in healthcare like diagnostics, precision medicine, but also other bio based verticals that aren't even about healthcare, like what did you eat this morning? That was biology?
Right, Carol, You weren't here for this, and hopefully you weren't paying attention because you're on vacation. But Apple unveil this new suite of devices end of Monday, and one thing that interested me was the focus on health. What did you make of their move into hearing health with this idea of using air air pods as a hearing aid, and then also the sleep apnea stuff with the Apple Watch.
What's your view on that.
I think the broad theme is exactly what we're saying, which is companies coming from tech and investors coming from tech are seeing that it's very important to get information about what's going on with a person before they become a patient, right, and that's where we can really intervene
in better wellness outcomes. Now, Genoa invests in more really fundamental biology with the understanding that you probably can't get everything you need to know about say cancer or drug selection from sound, So you are going to have to take a biological sample. You are going to have to analyze that one way. That's where we get into genomics and proteomics in those kinds of terms to get kind of the advanced information that's going to help patients and doctors.
What would you think I'm thinking about the Bloomberg and audience who's listening In terms of biotech? What aren't we talking about a lot?
You know what I mean?
Like, I feel like when it comes to we think about technology and healthcare space or something, it's like, all right, so I don't have to go in and fill out the forms anymore.
But what are you seeing?
That's just kind of really innovation next step when it comes to biotech.
I love this question because we think it comes down to broadening the definition of technology. And you already kind of alluded to it because it included in your example the hardware. So sometimes when people say tech, they're thinking about software so data AI. Yes, lots of great stuff going on there.
I'm tired of counting my steps. I've like got back to your normal lives.
You count yourself you know, their devices.
I kind of know at the end of the day, have I walked, I helped you right exctly?
Sorry, But if you.
Get improvements in those kind of hardware innovations and chemistry and things that we can't even see, like at the microscopic level, it can really change how you think about impacting healthcare in a way that goes well beyond the current tech.
So carry it out for us. So tell me, like in five years, you know, I don't know, tell us where this might all go.
Yeah, Well, one of the things I would say Genoa were very early stage investors. We like to be that first round capital partner in venture. So we're thinking seven to ten years at the earliest, and then kind of the one hundred year thesis about how can biology change all of our lives again, not just tell health care, but the food that we eat, the things that we make, that chemicals, the manufacturing, How can we do that in a way that's more sustainable and beneficial to the planet.
So get so go where does it go?
So it goes to more efficient uses of inputs to make better crops that people want to eat, that are healthy for them and healthy for the planet. That's also biotech.
Does it get rid of plastics.
Ultimately or turns them into something that isn't a dirty.
Word such as.
Bioplastics would be the kind of the immediate next step. Can we make the materials that we associate with plastics, like your water bottle, something that isn't It doesn't come from those same chemicals, but does the same job.
What's a concept to you that's most exciting about the future. What's the world that you imagine that realistically we could be living in.
Yeah, So what I've seen I got my phon genetics in the late nineties, and what I've seen in just a couple of decades is we've gone from knowing that DNA is important to being able to read it and now write it and also change it. So the things that we can do in software, we can actually write programs that do things for us with the data. We're going to maybe not over our lifetimes. It's hard. It's
going to take time. Have more and more of those same capabilities when it comes to reading and understanding the book of life, and how do we use that irresponsible ways to make the products that we need for day to day.
Why has the DNA, like I, you know, go to DNA.
Yet for Jurassic Park, there is o go on, can we do this?
Yeah? I mean that little I love that little video of mister DNA.
Right.
Yeah, it's not wrong.
You can get smaller and smaller samples of DNA and find out what was going on in there, and not only that, actually start to use that information more and more to program say cells or other things.
Less directors just around the court.
But let's not make the loss ractors.
Yeah, but I do.
Think about DNA and the mapping and how much time and money was spent, and I remember, you know, reporting like okay, we just you know, we get this and there'd be a finding and so on and so forth. But in terms of figuring out how to make us healthier or deal with ailments and catch them and change them and alter the deal like that seems to be still a bit elusive or longer term.
I do think it's important to set expectations correctly. I think we can get wrapped up in the potential, but then need to recognize that it does take a long time to figure out how to do it well and safely and responsibly. So that's part of what's going on is let's let's not make velociraptors as we go on the path the things that actually help humankind.
Hey, Jenny, I got a question coming from a member of our audience who is curious about how small investors, people who aren't necessarily venture capitalists, can can play in this space.
Yeah. Yeah, I think that that's an interesting opportunity as well. It's obviously the private markets and the accessibility of private market investing is a place where you know better than I do. There's been some really interesting innovations, and so you have areas like angel lists or why Combinator, other kind of platforms. It's possible to access those kinds of innovations, but it can be really challenging, I think for the individual investor because to your point, this takes a lot
of expertise to do well. So I think finding managers who have that expertise kind of in their particular areas, and then matching that to things like some groups or investors who try to make those connections. You have wonderful groups like Rays and the Bridge who are elevating emerging managers in specific sectors that can help connect them to individual investors.
So your companies, as you say, seven to ten year runways.
Just like venture. We're just like venture reinvent venture here trying to use best practices.
And in terms of attracting new money to put to work.
What's that environment like just before we go?
It's always been challenging too, Well, it's just challenging to attract money to early stage startups, right, it kind of should be, right, It's challenging, and part of why I started Genua is I saw that it was particularly difficult to do it for these companies that are biotech but not quote biotech, not drugs, and yet so much explosive
opportunity fueling innovation in the spaces. What's exciting to see is more and more, i would say, later stage investors getting excited about the opportunities there and being interested in funding these companies when they get to, for example, revenues or profitability. But there's still an opportunity in the earliest stages for that kind of technology and product development investing.
That we're doing at GENERA onon pent foods.
Fond pet foods is an interesting exams pet food It's a way to use technologies that already exist to make the things that we eat like we use yeasts to make beer and bread, for example, but to put into it the nutrients that you might want in your.
Pet food feed my dog's carrots.
I'm just gonna say, why not.
I'm coming over for dinner.
One over, Jenny Rock, Thank you so much, Look forward to next time. Already, founder and managing director at Genoadventures joining us right here in our interactive Brokers studio.
I'm brother Marco, a journal How about you let me drive?
Oh no, no, no, no, honey, please, I'll do the gravel LEAs mate.
I want to try it.
It's a good question.
This is the drive to the globe.
Doing well, Young Don on Bloomberg Radio.
All right, everybody got about eighteen minutes left in today's trading session. Carol Masser along with Tim Stanevik life here on Bloomberg busin this week. Man, you know we're up on the Nasdaq, as you just heard from Charlie breaking down those numbers one point seven percent, so well off our lows of the session, and we are just at our highs.
Well, let's up.
See what Jimmy Lee thinks about. He's founder and CEO of the Wealth Consulting Group, joining us from Minnesota, not from Las Vegas. No, not from the Bloomberg Interactive Broker's studio where we found out.
Do you minnesot What are you doing on the road?
I am on the road.
I do a quarterly business coaching meeting, and this is where the meeting is this time.
What's on the mind of you know, you know, when you think about when you talk to business owners, what is top of mind? I think it's kind of interesting coming off the debate last night. We got a little bit on policy, a little bit on the economy, But what are you hearing?
You know?
I think I think some of it is just interest rates, access to capital, looking forward to possibly rates going down, maybe maybe being able to borrow money to do deals at a lower interest rates, which will make you know, those products look better, performing better. Also looking forward to, you know, what's going to happen in the election here, because we could have some, you know, fairly substantial changes in the text policy depending on who gets in and
how the Congress sets up. So I think business own are a little bit anxious to see what happens there.
But overall I'd say.
That, you know, most most people I talk to are still fairly optimistic about what's going on, and with lower rates and the FED cutting rates here soon, I think that's a you know, they have signed, they have something to look forward to in terms of optimism.
So, in terms of investing at this point, would you suggest investors commit money to the equity market, and if so, where would you do so? What about on the fixed income side of things? As we are just about a week away from the next FED meeting and that FED decision where we are expected to get a quarter of a point cut, what's your advice?
Well, Carol, you know, I still believe that we've got some upside inequities. Even though we came into this week with S and P five hundred up over twenty two percent. That is a very good year so far for the index anyways, and so a correction of five to ten percent is something that would be very typical or normal for me after a run up of that of that.
You know magnitude so quickly.
And so I think if we get some volatility, I would put cash to work on those dips into equities. But if you want to have a safer play, I think bonds represent a nice opportunity for investors, right now with yields definitely coming down, bond investors will will get a nice coupon from the interest that the bonds pay, but also maybe a little bit of a pickup on the ascid value of those bonds as rates come down.
And so I think you'd be you know, in a diverse sied portfolio as as many people on both stocks and bonds and do well going into the end of the year and beyond, and as we start to focus on next year, of course, we have the election ahead of us to really, you know, help help I think investors decide how aggresive they want to be.
Jimmy, which bonds are you talking about? I mean, were you we're on the curve, are you talking about or are you talking about? I don't know, Muni's what do you what do you think that?
Yeah?
Well, I like a little bit duration.
So as you guys know, we've had a duration to our bond portfolios, so somewhere between like the seven to ten year type maturities, even just the ag I think represents a good opportunity for a lot of investors today as yields come down. So I would expect that the tenure treasury yields come down, as I've been saying, closer
to three and a half percent. I think it's three point six five ish today, kind of we're hovering around, and so we're getting close to that already before we even have a rate cut, And I think today's a CPI number kind of makes it a fairly high certainty, now high probability that we're going to get a twenty five basis point cut this month, which I think is fine to get started, but I think the FED really needs to keep a eye on inflation and on the economy and make sure that if we see, you know,
signs of a weakening economy more than expected after this huge adjustment in the you know, jobs numbers this year, you know, I think the FED could be more aggressive down the road here.
Jimmy, you shared some notes with our producer Paul Brennan, and you say, my biggest piece of advice is for investors who are in indexing into the S and P five one hundred are loaded up in their mutual funds and the big tech names is to remember twenty twenty two, and you talk about whether it was Meta or Netflix and some of the other big fang stocks and how much they were down.
Why is it important to remember that?
Well, you know, the top ten companies and S and P five hundred now represent well over thirty percent of that index, and so a lot of investors buy index products, and so that'suld be five hundred if you think you're diversified across five hundred of the largest companies evenly, that's just not the way it is, right because of the
market cap weighted index that it is. And so investors could suffer some pretty large declines if you have, you know, your money tied up in a lot of the index products, maybe more than you think concentrated in those few names. And so, and we also have a lot of investors that are loaded up in the names that have gone up the most. We're having a nice rally in tech today, but right now, Carol, we're underweight tech, and we're overweight
to the cyclical sectors. We're overweight some of the sectors we think will do well when rates go down, like real estate, you know, dividend paying sectors. We've seen a nice reversal in some of these areas over the last thirty days, seen a trend starting to perform to form in areas like staples healthcare, some dividends. I'm sorry, defensive type sectors that pay dividends, but you know, bracing for rates coming down.
Jimmy, I know you're underweight tech. You just told us that. But where do you want not want to be? What do you want to avoid?
Well, I just don't, Tim, I think you don't don't want too much money in those high growth names that have gone up so much so quickly.
Are you saying.
I really don't want to I really want to throw those out there, but we all know which ones they are. If you've gone over you know fifty percent returns or to date, you know who you are, and so I just be careful not to get too greedy, and you know, we could see some fairly steep declines. I mean, I thought that Navidia earning support, for example, was fantastic, but
a stock went down. It's up today a lot, but when down a lot after that, So that means to me there's a lot of investors in names like that that are momentum investors.
Maybe even the shorter term traders.
And so when companies stock price is price for perfection, I think it's to be careful. Although I think that that specific company, you could be a buyer on the dips. I think there's some more opportunity there, But just make sure that your portfolio doesn't have too much of it as a percentage, and just try to not be too greedy.
Hey, before we go, I think we'd be remiss if not asking you about the debate last night. Just got about forty seconds left here. Anything of note for you in terms of what we are getting from the candidates. Be it last night that make you think I don't know something when it comes to the investment environment going forward, or that is making you adjust some of your strategy as a result.
Well, I'm not really sure about adjusting our strategies. And I would really caution investors to not get too focused on the rhetoric because what they're campaigning on might not be exactly what ends up happening. Really, what happens in congresses is what I think matters as well, And so you know, I think investors like a split government so that you've got some checks and balances there. I thought
last night's debate was very interesting. I thought that the moderators seem like they were kind of gigging up on the one candidate, and so I don't know.
I hope to see another debate.
I would.
I'd love to see another one, and you know, continue to focus on the issues and see where policy really changes for people that are concerned about the economy in the market.
Well, and Don Trumpess said you would participate in a second debate on either NBC or Fox, so we'll see what happens. Jimmy Lee, thank you so much, Founder and chief executive officer, Wealth Consulting Group from Minnesota.
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