Fund Steers HBCU Endowments Into VC

Bloomberg Business Weekend iTunes, SoundCloud, or Bloomberg dot Com. You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube search Bloomberg Global News. So Tim got to say a favorite event where we get to check in with what's on the minds of investment professionals, the trends they care about, that their clients want to know about, the voices they want to hear from, and just kind of how to get it all done. It usually happens at the annual

bny Mail and Pershing Inside event. It's being held virtual this year, getting underway next Tuesday. So great to have with us and to be talking again with B and Y Mail and Pershing's CEO Jim Crowley. He's with us on the phone in New Jersey. Also with us is the company CEO, Emily Schlosser. She's on the phone in New York City, Jim, Emily, great to have you here with Tim and myself. Jim, I want to kick it off with you. How are you and what's the past

year been like for you folks? Well, Carol, Tim, first, thanks for having us. It's a great pleasure to be back, and wish we were in person. It has been yeah, well two will be there. Um, it has been. You know, obviously the last fifteen months fifteen months have been quite a challenge, and you know, two priorities really. First was obviously the safeguarding, you know, the health and the well being of all of our people. That was priority one.

And then, you know, the second thing, Carol, that really became clear to us is that there really is no substitute for business continuity planning and testing of your business continuity processing. Because it became clear in March when we left the office on March thirteenth, literally overnight, we were virtual working from home, and thankfully we didn't miss a true what was really tremendous volume and volatility. Emily, come on in here and talk a little bit about what

it's been like for you as as chief operating officer. UM, what are the changes that you've made and how are you thinking that some of those changes are going to be permanent on the other side of this, Thanks him, Yeah, and thanks thanks to bilth to you for having us. Uh, it's been it's been quite a ride. As Jim pointed out, So I joined the company as chief operating officer last

July in a fully virtual environment, which is interesting. UM. I did have the privilege of meeting Jim briefly before I started, but otherwise I've worked largely for the last year virtually with all of my new colleagues. UM. But it's been great. Like we we have adopted very quickly to the virtual environment, UH, and we are thinking very

carefully about what does this mean for the future. And I think we're you know, we're seeing employees that are really getting accustomed to working from home and having that flexibility, and then also people who are a chained to get back in and and interact with people in person. So we're looking at options for how we continue with a hybrid work environment to achieve both of those needs, while you know, building the best environment to serve our clients.

I just want to dive right into that because men Tim and I every day there are stories on the Bloomberg, especially within the financial community, that you are seeing a lot of. It feels like we've got to be back in the office. Uh. And it feels like the tone of the conversation Jim has changed a little bit from maybe a year ago we were like, well, maybe this

hybrid stuff makes sense. Remember James Gorman thinking about maybe we give up some real estate space um to where everybody now says, way, we got to be back in the in the environment your financial community, you guys are working with folks that are dealing with you know, millions and millions of investor accounts globally on a daily basis. What are they saying? Are they hybrid or they back in the office? What what do they anticipate? Well, many

of our clients, Carol, are back in the office. I can't say though, that there is any one client that is back in the office full time UM with their full staff. I think most people are still sort of working through this environment and trying to figure out how to be hybrid. Who really is essential in office and who really isn't necessary to be an office. And in fact, you know, for our clients, the most important thing for them is being in front of investors, being in front

of their clients. And that's a lot more virtual going on with that, and people are clients comfortable with that, Jim, much more virtual though, I have to say though, clients, you know, particularly when you're talking about their investments and their life planning, they really do want to have a personal relationship. And having a personal relationship through a WebEx serve any other sort of form of video conferencing isn't the same as sitting across the table or meeting in

the restaurant. And you know, I've actually myself and Emily we've been on a couple of business trips now where we've actually met with clients in offices and it's it's the energy so much better and the opportunity to communicate clearly and sort of get a sense for what the other person is feeling and thinking. It's much more valuable. Suddenly.

What does that mean for well, yeah, jumping jump in, go ahead now, I was just gonna say, and we have seen their investors coming in and out of their their offices to write, so so we are seeing that

interpersonal interaction happening again in their offices too with their clients. Hey, Emily, we only have about a minute left here and we're going to talk more about this on the other side of the break after we do some news, but talk a little bit about how programming for Insight twenty one is different this year, given the different needs and what you're hearing from clients. Yeah, so having a virtual conferences here actually gives us an awesome opportunity to reach a

much broader range of participants. I think we will have attendance from well across the globe, and we are anticipating having many more people. Uh. We are focusing our topics on growth, driving technology and innovation. What does this new digital virtual world mean? Of course, we will hit topics like we always have, on market insights and investment solutions, and how we're thinking differently about organizational constructs in light

of everything that's changed over the last fifteen months. Let's get back to our guests, B and Y, Melons Pershing CEO Jim Crowley. He's with us on the phone in New Jersey. Still with us also is being why Melons Pershing CEO Emily Schloss er. She's on the phone in New York City. It's all about being why Melon Pershing inside held virtually this year. It gets underway next Tuesday. Um, Jim, something we talk about on a daily basis here at Bloomberg.

Even today we're looking at a MC. It's just kind of off the charts, these meme stocks and the right eyes of alternative investing platforms, whether it's Reddit, whether it's Robin Hood. Uh, we are really kind of watching this and how it's upending what seems to be kind of the mainstay financial community. What are your members, what are your you know, the groups that the folks that come to insight, what do they want to know about this? Yeah,

so it's been quite quite interesting, Carol. You know, thankfully, Um, you know, our platform has through all the Reddit and beame stock. You know, volume volatility has performed quite well

our clients. Interestingly enough, while we see elevated transaction volumes in these names, the overall dollar value notional value of the of the transactions and things that we're doing for our clients, it's relatively small because our clients are much more what I would call financial planning based, wealth based, and so while there may be some transaction activity in these names on all the basis is really it's a fraction of their overall what they're dealing with when they

talk about the wealth of their clients. Jim, what about when it comes to SPACs. We interviewed Anthony Nodo yesterday. Here's the CEO of so far they went public vs back yesterday. If we're talking talking about this, you know, at the beginning of the pandemic last year, we probably wouldn't even have asked you about SPACs. Yeah, yeah, another

another sort of rebirth. Rebirth, that's a good way of putting it, because it's not These are not new, right, We've seen them before and again I would say that if you were to talk to any one of our clients or a number of our clients, they would they have an interest obviously. I mean, this is it's an interesting vehicle for which clients are coming in public and coming to market and some very innovative companies and so um. You know, it's it's something that our clients have an

interest in. But if you were to take again take a look at their overall portfolio, it's very small at what they're putting into portfolios, which is an interesting and that's good to get that perspective. Hey, Emily, come on back in on our conversation. You know you worked at Goldman. You were in charge of their global markets division. You operationally have had to look at b and Y, MAL and Pershing and you know, look at what the needs

are for clients and your team around the globe. How do things look in terms of us getting on the other side of the pandemic. Yeah, you know, I think UM for I thought I could come from Goldman. I was in charge of change management there at their globle Markets division, and so I'm excited to bring much of

my transformation expertise to Pershing. You know, some of the things that clients are looking for really around some digital capabilities, which not surprising and has certainly been accelerated by what we've seen through the course of pandemic. I think the clients are really looking for enhanced usability. I mean really, their expectations are being set by the ease with which they can do anything else in the digital world, from personal banking to ordering a new word and getting food

and groceries delivered. Right, So we're seeing an elevated expectation around the ultimate UM usability and experience, and as such, we are uplifting our advisory and investment platforms to improve the way that our advisors can help their clients move money so they can onboard new accounts. UM. We're providing new modern look and field streamline navigation. So we're really excited about what we can bring to bear in terms of our our digital platforms. UM just got about thirty

seconds left here, Jim or Emily. You guys have Dr Gupta, Sanjay Gupta, CNN, Leslie Autam Jr. I've met him at the Boston Pops. Really nice guy. I haven't even seen Hamiltons.

I'm excited for you. I wish we were there, Jim, any thoughts on some of the speakers and just quickly, oh, okay, well look, one of the speakers I've been talking about is Adam Grant and m his his book that he got out, and Emily and I've been rethinking everything that we've been doing around around the company really to this topic of transformation and not assuming that we know what our clients are expecting. So it's been UM, it's been a great ride for the last fifteen months getting through

this pandemic. Looking forward to getting to the other side. Yeah, and and and seeing you all hopefully in Dallas with us in June next year. Fingers crossed all of them. Uh So, looking forward to guys, have a great event. Good luck with it all. Jim Crowley, CEO at B and Y Malon's Pershing and Emily Schlosser, she's the chief operating officer at B and Y Melons pershing. You're listening to Bloomberg Business Week with Carol Masser and Bloomberg Quick

Takes Tim Stinovic on Bloomberg Radio. In the current issue of Bloomberg business Week magazine is a story about the million dollar initiative Tim that is on a mi isssue to help less prosperous schools bridge the wealth gap through investments in late stage startups. We're really talking about accessing the venture scene. Yeah, and for a good reason, because HBCUs have a tiny fraction of the endowments of colleges and universities in the United States. Joining us as Janet Lauren,

higher education finance reporter at Bloomberg News. She joins us on the phone from New York. Janet, before we get into into what HBCUs are doing right now, hystorically black colleges and universities. Yes, um, take us into the finances of higher education and who has the endowments and why they're so concentrated at the top. So the richest schools also happened to be some of the oldest school Harvard, Yale, and Princeton, for example, And they've been pretty sophisticated investors

for a long time. Yale, for example, got into venture capital in nineteen seventy six, and some of their early investments in you know, VC firms have been quite fruitful. For example, if you look at their investment in LinkedIn of a few million dollars turned into about eighty five million dollars when Lincoln went public. And you know, you have to have money to make these out locations in in venture capital. UM. And these HBCUs, their their endowments

are quite small. Um. You know, we mentioned a few in the story. Howard is the largest with about seven hundred million, but more more averages about is Florida A and M with about a hundred million. And you know, you can't make money in some ways if you don't have money, and it's hard to get access to some of the best funds if you can't if you don't have the money to invact. Well, before we get into the well, before we get into whether it's a good idea,

because you do wonder about the exposure. If you're kind of a smaller school or school with a smaller endowment, you know, risk reward, but if things don't turn out well, it could really impact your endowment. But one thing that you make, Janet, that's so important. I think the point in your story why this matters, is that the difference in these endowments and the size of them, you know, impacts the ability to offer student aid, to attract students,

top professors, build facilities. I mean there is a trickle down, trickle up, trickle across the side impact as a result. Absolutely,

And you know a lot of these HBCUs. You look at the shaff students who are recipients of TELL grants for the lowest income students, and the shares are very high, and these schools would like to be able to offer a lot more financial aid, but you know, they're just trying to make the lights go on, and they don't have a lot of money for you know, not only building glorious stem buildings, but you know, making repairs to

their you know, often hundred year old buildings. So for them, you know, they're operating on very same margins to function, you know, to give the aid they can to try to attract professors UM and they just don't have a lot of risk room to loose. So what are HBCUs doing or or what is Based ten partners doing to try to alleviate this. So they're trying to UM to entice h species to to to invest in a new fund.

And what a unusual is they're not charging fees, which as you know, you know they're students could be quite high, especially when UM private equity and venturing are successful. You're paying fees UM and then they're giving some of the carry to create scholarships for these students, but also trying to help build the pipeline of recruiting intern tiring practice with job interviews for some of these students in the

portfolio companies that they can UM invest. The mean they're also very interested in improving diversity and having assets to sudents that they tifically may not be recruiting from. Well. One issue though with venture capital is that you have to be in a position in order to be comfortable losing your entire investment, because that's what venture capital is for every Facebook or linked In, there are dozens of

of bets that don't end up working out. Um, what are they doing to to try to offset some of that risk. Well, we're talking about later stage companies, not early stage companies that you know may likely fail. And I think that's part of the part of the a little bit of alleviating the risk, because if you are an endowment of about a hundred million, you often just don't have a lot of options. You know, if you were, you might put it in an index fun you know.

We had a comment from part the former Carthage College CEO in Wisconsin who beat the pants off of Harvard his tenure average because he had a very simple formula of vanilla funds or if you could invest in some fund of funds but you're still paying sees. So, so tell us about this two and a fifty million dollar fund and the individual behind it all um So. He is a Stanford alum he um you know, has been successful um Aud and a Joe and he was really interested in moved by the death of George Floyd to

try to help these companies these these schools. You know, as he said, systematic inequality is really about wealth inequality. UM. You know his he was born in Spain, he didn't have the typical UM experience growing up as an African American in the United States. He went to Stanford and made some connections and decided this was something that he wanted to do. How have HBCUs reacted and how have

they embraced or not embraced the strategy. So some HBCUs have invested, including the schools we included in the story Howard and Florida, A and M. But you know, not everybody, if you're a small fifty million dollar in Diamond or a hundred million dollar Damon, you may not be familiar with the idea of venture capital UM, and you just may think it's too risky. You still have to turn

the lights on every year of the school. Yeah, I mean, but you do think about you know, the conversation in many ways over the past year, right, tim has evolved from you know, we've learned it's not just about income gaps, it's about wealth gaps, and that can be generational and and and I do feel like, you know, don't you get to that in your story that you do think about these schools that maybe don't have the same access to the funds that some of the really wealthier schools do,

that tend to be predominantly white, you know, and it just perpetuates a cycle that somehow it's gotta it's gotta change, all right. And if you look at say gale Um heard a lot of c i os, really big schools, Crinceton, m I T, Stanford, and they tend to invest together on the same deal. So again it's very it becomes very clubby and very insular. And if you didn't work in the Dale investment opportunity may not be invited to participate in these deals that you know, one of the

other very wealthy schools found out about. But then again then you can't even make you can't write the test because you're endowment is so small. You know, what's the time horizon for an investment like this and when do we find out and when do they find out if this was a successful way to to grow their endowment? Um, you know, in some ways, it could be a couple of years or could be Kenny, It's in the typical

life of a of a uh private equity fund. Yeah, but this is a really kind of thoughtful story and just thinking how you change the dynamics and the trends that we've seen for such a long time. Genal Lauren, thank you so much. Higher Education Finance Report at Bloomberg News on the phone from New York City too. Maybe it's because my daughter has gone through, you know, the college application process, and we've learned about a lot of schools.

But you know, there's so much money involved in these endowments, and you do wonder about the advantages for those really really rich schools versus some other ones. Yeah, it was shocking to reading this story, the concentration of endowments of just the top ten schools. I mean, in some ways it really mimics the ultra wealthy in the United States and individuals. You control the vast majority of the welcoming country, a lot of wealth in the hands of a very few,

whether you're talking about colleges, universities or individuals. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovik on Bloomberg Radio. All right, folks, we like to do a daily check on the virus and the vaccine rollout and one headline that just crossed catching our attention. We are seeing that New Jersey planning to shut some of the mega sites UH and New York City planning some school vaccines. So there's a lot still going on here,

certainly in the US and on a global basis. One of our go to people. I don't know that he's gotten any sleep in the last twelve, thirteen, fourteen months, but he's back in our student He did the virus tracker. He and his team did the vaccine tracker. You saw his tweets each and every day. We created five vaccines. The man, the myth, the legend. Drew Armstrong is senior editor for US Healthcare for Bloomberg News. Didn't create the vaccines. I'm going to get in trouble, but I think he

probably cut off. I think I think people know you were joking, UM, but we do love him anyway. He is senior editor for Your Southcare. Bloomberg News joins us from Bloomberg Interactive Broker Studios. Um, Drew, you mentioned that this is your first day back in the office. It is, it is since the fall September, but I feel like that symbolizes something so big for where we are as a city. Yeah, I think that's exactly right. I mean, you know, I was I got my second dose of

maderna vaccine about a month ago. My wife and I immediately booked a trip to Mexico for exactly two weeks after my land does UM and and left our lovely children who we've seen so much of UM at home with Art Annie. And you know, here I am back in the office, and I've been talking to a lot of other people who's their first day back again UM as well. Yeah, I mean, you know, you look at some of the stats where you know, there's certainly a

strong downward trend in cases, hospitalizations, deaths all around the country. UM. Certainly some underlying things to be worried about. And if you look around the globe, it's a very different picture

in UM a lot of places. But you know, a lot of my attention, just as a as a news editor is really now focused elsewhere outside the United States in terms of where the story is and where the where the crisis is, and things are beginning to feel much much different here personally, and from everybody I I speak to and run across um UH and talking to

people in some recent travels. Yeah, it's funny because we're gonna do the bigs Take story, the Blueboard Big Take, and it's about real estate investments office and basically where people are investing is like lab space because of what happened during the pandemic. So it's interesting to see where where we're going forward when you look around the globe for a while, Drew, we were thinking about whatever is going on in China kind of tells us to some extent,

what's next for us. Um, what do you look towards to kind of get an idea of what's next and whether or not a new wave is kind of gum or what have you. Yeah, I think one of the things that we're really keeping a close eye on is, you know, some of these outbreaks in South America where you're seeing very significant, you know, COVID numbers and in some places despite quite real efforts to vaccine people, and

you look at what's happening in Chile. They've got a better vaccination coverage in the United States, and yet they still have a pretty heinous outbreak that they're dealing with. You know, come, I think everybody's trying to figure that out. Isn't you know, certain subsets of the population. Is it

an issue of you know, variant versus vaccine um. You know, likewise, go around the globe to places in Asia where they have far fewer cases than we have in the US, and yet are still kind of on on total lockdown in in some of these countries, or you know, you look at other places, some of our amazing reporters out in Hong Kong, we're just noting, you know, about how people aren't getting the vaccine there and it's been hard for you know, nightclubs and bars to open back up.

So so much of what's going on in the globe right now is you know, as much about risk perception and risk tolerance as it is about the epidemic. When I think we when we look at how people are, how people are acting, how they're approaching vaccines, how they're approaching you know, the inevitable some level of existing disease in the community, um where they are, Uh, it's as

much culture as it is science, I think at this point. Well, speaking of the science, and I'm curious as to how well the vaccines have proven to work, the MR and A vaccines specifically, because a big part of the conversation try over the last few months was Okay, well, this pandemic is not over until the world is vaccinated, and that's because there could be strains that develop in certain parts of the world that could be get through and

get past vaccines. Is there any indication that some variants and mutations at this point can do that, not with the mRNA vaccines in a meaningful way. I think, you know, you are always going to see variants. We've there've been a bunch of them identified and some of you know, variants of concern um and it's not that they don't cause disease, because they do. I think what you're seeing though, is that they are not causing severe disease, at least

in the cases of these. You know, mRNA vaccines have been proven highly highly effective. It's worth remembering that. You know, if you take covid and you turn it into a cold, that's a pretty good solution. You know, you can still have cases if they're old cases. You know, yeah, exactly, I mean, you know that's that is a manageable thing. It's still not great, but you know, the problem is more or less, you know, at that point it starts to go away. What I am thinking a lot about

is do I need a booster? And do I need to mark my cal And we had doctor William Hazeltinea on and he's like, I've marked my calendar. You know, this is the guy who understands biotech and science in a big way. Do I need to be Do all of us need to be marking our calendar six months from our last shot to plan for a booster? I think it's a great question. I think the answers we

don't know. Um you know, there's these vaccines are not old enough for us to really really really know how effective they will be in the real world, you know, at nine months, at a year, things like that. We just don't have a lot of great data on that. We have people from early on in the trials. I'm sure they're following very closely to see, you know, what are their antibody levels, what are their infection risks, on and so forth, But we really, frankly, you know, do

not know yet. I'm sure. I mean, we have a you know, when we see mutations, when we see viruses that change the flu which is highly highly highly um uh that has a high rate of mutation, that's just why we get new flu shots every year, you know. But with this, I think we just don't honestly know yet, you know what exactly those boot ssters are going to

look like. Will it be something more like they're you know, tailored to new mutations in a way, if that's if those end up being very problematic for the MR and a vaccines um, are they tailored? Are they done as a booster shot? I really think that's still gonna be up in there. I think a lot of people are very smartly betting that yes, we will need and get booster shots. But I wouldn't be surprised to see that dynamic and rollout look very very different than the kind

of initial campaign has. So is it like we swing by the CBS or Walgreens and describe it or from our doctors, or is it like do we need these mega sites to be able to quickly ramp up again and just got about twenty seconds. I have a feeling it will be a lot more like getting the flu shot every year. You'll lower uptake and you know, people you know, kind of uptake faiths away as as the as the virus does until the next virus hits us right, because they're gonna come right. Oh yeah, we'll be doing

this again at some point or other. Unfortunately that happy Wednesday's true go home. No, I'm just kidding. I'm just kidding. Yours to your arms during true Armstrong, he's senior editor for US Healthcare. He has really kept us on the straight and narrow, uh really throughout this pandemic here at Bloomberg News. So I must read his whole team. I'm ROMC a journal Yeah, but you let me drive? No, no, no, drive home please, I'll do the riding drivel. I want

to drive. Just drive baby. The question dry, This is the drive to the globe. Thanks well, un on Bloomberg Radio. Yeah, we've got just about ten a half minutes left in today's trading session. Been an interesting day. It feels like the overall markets definitely some of the wind being kicked out of them, because we're definitely off our highs of the session, still just slightly. But nonetheless, if you look at one of the meme stocks, your AMC, it's just

off the charts. So trying to make sense of it all. Great to have back with us. Been looking forward to a Doug Ramsey ch Chief investment officer of the Luthole Group. Uh, their core investment fund beating most of its peers year to date, up just about twelve or so in the past twelve months. Tug back with us from Minneapolis. Good to have you here. How are you? I'm doing well?

How about you doing okay? Hanging in there, trying to make sense out of some of the uh kind of wackiness that continues to invade our markets while trying to focus on fundamentals. What are the fundamentals you're you're focusing on, especially because I know you just trimmed backed, uh your equity exposure a little bit. Well, you know, we've been concerned and this has been a long running concern and quite frankly a little bit of a premature concern on evaluations,

especially US large caps. I mean, um, you know, whether you base it on forward earnings. You know, we do a lot with normalized earnings, you know, sort of the approach that Robert Schiller has popularized. We've been doing that here for decades. Uh. We're very close to the valuation peaks that we made back at the tech bubble heights twenty one years ago. Uh, and in the average stock

so to speak. I mean, if you look at mid large and UH small is far more expensive than it ever was in the late nineties, So it's a very broadly expensive market. That's made it difficult. And now UH, you know, we've got inflation ticking up, which one would expect at some point might lift bond yields, but that's that's not been the case here in the past few months. So you've still got that very low discount, right that bullish investors can argue you support this valuation structure, but

we're obviously skeptical. So if you're skeptical, what do you do in a situation like this? Do you go to a little bit of cash and sort of sit on the sidelines and wait for a pullback where you can get in at a less expensive price. Yeah, that's our thinking as a matter of fact. Rather than moving to cash, we've got a hedging strategy we've been managing for thirty years. Somehow we've been able to stay in the market shorting for thirty years, but that's because it's used as a hedge.

Are our grizzly strategy UH targets vulnerable stocks, evaluation momentum, earnings estimate revision, earnings quality perspective, so we use that as a hedge, and that's that's how we uh, that's how we pulled back to I do expect a pretty good correction later this summer. Uh, part of the ten percent correction you're yeah, you know, certainly, I think it carried deeper than that, especially when you look at, you know, how far we've come off of those lows from last March.

I mean, the normal first correction in a bowl market retraces a pretty good piece of that. And because that moment is so large, I'm not sure I want to talk about percentages just because we look at you know, we would then be looking for bottoming conditions. But the reason we cut back now is just because, um, you know, obviously it's difficult the time. But technicals still I think

are very good. I think it's more a question of, you know, when our market's going to respond to this inflation pick up, and when might they conclude that it's a little bit more than than a transitory thing. Listen, So investors dealing with things like, Okay, is inflation transitory or not? Uh, and looking at the outlook. At the

same time, you continue to have the administration making moves. Um, we just had a headline crossing present Biden planning to amend a US ban on investments and companies linked to China's military this week after the Trump eraor policy was challenged in court and left investors confused kind of about the extent of its reach to subsidiary from this according to people with the matter, So again amending President Trump's

China blacklist. But uh, and that targeted key industry. So it's just a reminder that things continue to come out of this administration tim too that can impact investments. Thought, you know, investors thoughts about the outlook. Yeah, I'm wondering what it is. What is that signal that the market gets that really shows that inflation is here to stay? Is it wage growth? I certainly think that would be

a piece of it. But I think, you know, the housing market remaining strong and house prices continuing to escalate. I mean you're talking about you know, extreme underbuilding in uh, the US housing market for the better part of a decade. UM. As a matter of fact, we've been in the home builders, I mean, we don't believe there's a housing bubble. We're also in another sector that's been undersupplied of late and the situation that's going to continue probably for a couple

of years, and that semiconductor equipment. So I do think of the uh some of these areas is sort of you know, chronic, you know, not just the temporary uh COVID related supply shortages. I mean, they're just things that they're going to take a while to address. So I think the issue is, I mean, we will uh see that the five and maybe even six CPI inflation numbers we see in the next couple of months will be transitory. The issue is what if we settled down to three

or three and a half. I mean, that's just clearly too high for the current level of bond yields and also the current level of most equity evaluations. Hey, I want to go back to just some what you said about the housing market. You said we're not in a housing bubble? Um? Why not? I mean, we're seeing that prices remain out of reach for many at the same time we see that homes are selling for significantly above asking prices. What tells you we're not in a bubble?

That the undersupply of the last decade, I mean, we are still at a very low rate of housing starts just on a raw basis, let alone accounting for all the population growth in the last couple of decades. And actually the low that we made a year ago was right about in line with the average recession low in housing starts we've seen over all the recessions going back the last sixty years. And again that's not accounting for

the expansion in in household formations that's occurred over that period. Hey, so just real quickly on inflation, because I think it's interesting what you said about we may not keep stay at five or six percent, right, um, but three and a half percent would be problematic. Larry Fink of Black Rock, we have a story out on the Bloomberg says that investors may be underestimating the potential for a spike inflation. Three and a half percent Is it problematic, especially if

we see continued um fiscal policy that is stimulative. Absolutely. I mean, just considering I'm talking about from a market's perspective, Yes, I mean, the old rule of thumb used to be that the forward pe on the stock market should approximate a level of twenty minus the inflation rate. The old rule of twenty. I mean this was commonplace thirty years ago, back when inflat was less considered to be a problem, sort of disappeared from the lexicon because it's not been

a problem until now. But even with the dramatic ratcheting up of forward earnings on the SMP, we're still at twenty two times forward earnings. So you know, if we're going to hit three and a half percent inflation, I mean that would uh, I mean that would imply him more than just a correction, right, I mean a bearer market.

But again, and I think investors have become so convinced, I mean needed by FED speak that this is transitory, that there is waiting for the right the whites of the eyes of that three three and a half percent inflation to stick. So it could yet be a while. Hope springs eternal, listen, love having you on. Always do

come back soon please, UM really appreciate it. Doug Ramsey, he is the chief investment officer at the Luthhole Group on the phone for Minneapolis, just really kind of has seen a lot of market cycles and understands when it comes to valuations and uh, you know, the different metrics to really kind of figure where the market goes from here.

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