Waiting on Santa Claus

or Bloomberg dot com. You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or stream us live on YouTube and Bloomberg dot com. Alright, let's take a little bit deeper into the markets. You've got a good guest to do that. Lorene Gilbert is with us. She is the CEO Wealthwise Financial Services, joining us via zoom Lorene, So, you know, how do you assess this market? Is it a technical thing that you look at the technical indicators? Is it fundamentally how do

you view kind of where we go from here? I think we're still seeing right now tax less harvesting. It's people have been doing it all during the year, and now once again we have another opportunity to do some tax loss harvesting. So I think that's what's how opening. I'm not giving up on the Santa Claus rally. It could still happen. Uh, that's why people say Tesla people were messaging us on the Bloomberg as to why Tesla was down, and that was kind of end of year

tax law selling. I mean, is that some of what is going on? Yeah, it definitely could be, although that's also a sentiment that has changed with regard to Tesla stock. But I would say, looking at three it's very unlikely that we have another negative in the SMP since so that's ninety four years. That has only happened four times.

So what I say to investors is typically after this kind of market that we've seen this year, we tend to see a much better spople hundred market in the following year, unless it's the Great Depression, the start of World War two, the nine seventies oil crisis, or what the dot com bust of the late nineties early two thousands. So you don't think we're in any sort of situation or scenario or on the precipice of any scenario that

is that could be that bad brain. No, I think when we look at what the n b e R looks at as far as a recession is concerned. We see some softening most definitely, but the only area that's negative year over year is industrial production. So while we do see and we look at the leading economic indicators are negative, so we have to know that a recession

is probable, but it's not here yet. And I would say to investors that remember that the market goes ahead of a recession, so most likely a recession in three, but the market will be ahead of that, and we think that we still have optimism in three as far as the markets are concerned. Talk a little bit more about that forward outlook, because I've talked to a few people who have basically said, the recession that's basically yesterday's story.

Whether it happens or not, the sort of immaterial because it was already priced in. And now everyone's sort of looking past, or at least past the first half of the year and maybe even deeper into. Let's assume we get to that without a major recession or at least anything that really sort of just drives us off the cliff. What does sort of the new normal look like on the back end of that, What is investable right, Well, we still like value most definitely overgrowth, and sentiment would

concur with that as well. So I'd say to investors to be leaning towards value stocks. Um, they're paying dividends, that's that's good. And then also looking at international again, when we look at the dollar kind of rolling over now, we see opportunities both developed markets as well as emerging markets, and especially emerging markets. As we now see it looks like China is reopening, and of course we want to wait and see if that's more permanent or not, but

we do see opportunities in emerging markets. How do you determine if China is really reopened permanently. I think we have to wait and see most definitely. And then now with the news about the US and letting people in with COVID tests, so all of that has put a negative slam it. But the positive side of it is China does in factory open, the consumer will have more of an ability to spend. Okay, well, if the consumer has more of an ability to spend, obviously a good thing.

But concerns about what the Federal Reserve does. In response to to what you're saying, I mean, what do you anticipate the feed is going to do. I think we still have more rates to come at least one, perhaps two basis points. What are you thinking? I think, I mean, I think what we'll see in February. I think it's gonna be twenty five. It will be, But I think the feed at this point is seeing that slow down. When we look at inflation expectations going forward, they've come

way down to below three pent. So we're looking at good things going forward as far as inflation coming down. However, we haven't seen demand slow down enough yet, and so that the pain that they're talking about is to slow down demand at this point, and so there's still more work to do there. And I do think we're going to see unemployment continue to go up as we hear more and more companies laying off people, so that will slow down employment. Lorine, Technology, are you touching at all

and if so, what specifically? Yeah? I think you know, we were just talking about Tesla, and Tesla is really a technology stock, and when we look at it in that regard as far as technology, we think that they have promising, promising future ahead, even though there are concerns about demand next year from China and the US and their quarterly earnings and then negative sentiment about UH specifically what's going on there and is Elon Musk paying attention.

I think we still can see opportunities and companies like that. So we're looking to companies that are innovative, companies that are using AI and implementing AI. I think those are some good opportunities on the technology side. So I've got to ask you you do deal with you know, well, fear clients. I think a minimum of a million dollars and investable assets. So a new client comes in says, I've got a million dollars. Do you put it in the public markets? Are you putting in the private markets?

Where do you put it? And just got about thirty forty seconds right, Well, definitely a diversified portfolio. Most people have fixed income and equities and balance that out and it depends on their risk tolerance and that how long they're going to be invested. But with that, certainly we do see opportunities. And the time is now, even though we might see some more downside if we do go into recession, going in now and looking out, if somebody has a three year time horizon or longer. I think

that it's definitely investible. All right, Lauren A great to catch up with you. Laurene Gilbert there, founder of Wealthwise Financial Services. All right, that's on our radar, so too is the continuation of carnage when it comes to the crypto space. We're focusing today and Salana, although I should say that there's a flurry of headlines, uh Slona of course, the cryptocurrency back by Sam Bankman Freed tell Link today and made concerns that large holders may be about to

offload the token. So let's bring it all down with Limbricks Hanna Miller. She covers crypto for us, so kind of good to have you here with the team. Let's start with Salana. What's the latest? What are you hearing? Yeah? So Salona has close ties to Sam Bankman Freed. He was a huge champion of the cryptocurrency prior to his arrest. Um He also helped build platforms on Salana like f t x is and f t Marketplace, So they've had

these close ties. I think investors are getting nervous whether you know, maybe this blockchain network can overcome this association with Sam Bankman Freed and the Salauna network itself has also experienced multiple outages in the past year. So this has kind of created a perfect storm where, you know, projects and investors are getting a little bit nervous about this blockchain. Yeah. I mean that nervousness has been there for quite some time, I think, even before the collapse

of f t X and and Alameda. I am curious here about the general crisis of competence we have right now, the true believers who are still left here in this space right now, Hannah, and what they they think. I guess this world will look like when we finally sort of uh, I guess to get done with this shakeout. Yeah, So there are definitely people who are still having huge

amounts of faith in blockchain. Uh. They believe that the collapse of f t X shows the importance of decentralized finance, where you wouldn't have a centralized entity like f t X managing transactions. So some advocates believe that this just shows the importance of defied that there actually is an important use case for blockchain. Well, we'll go ahead, right Well, I just I mean, just to push back though, I mean, there was also an important case for that centralization with

the guards to trying to scale up this industry. Wasn't that Wasn't that sort of the argument as well? Yes, So there are definitely a lot of people, you know, calling for more oversight for this industry, especially for regulators. So I think regulars are still figuring out how they can manage defy and that does put people on edge a bit in terms of like what do you think

can do in the future. All Right, Hannah, I want to talk a little bit more about Sam Bateman Freed because right now there's some questions about where he exactly got the money for investing in robin Hood earlier this year. New report that we came out yesterday based on court documents, says that he actually got the money loaned to him from Alameda, and that money is kind of up in the air right now because there are lots of different parties that want claim to it and claimed to those shares.

Give us the latest on what's going on with SPF and and those robin Hood shares that he brought into. Yeah, So, Bateman Freed's alleged that he and his f t X co founder Gary Wang borrowed more than five hundred million dollars from Alameda to purchase an eight percent stake in robin Hood, and those shares are up in the air right now in terms of who actually owns them. We have the crypto under Block five, which foiled from bankruptcy

and the wake of ft x's collapse. Lane Klane to those block By shares um you know, they were pledged as collateral in loans that blocked By gave to Alameda. So there is a lot of uncertainty here, and it just shows how this case is still unfolding and how there are still many questions that we need answered. Yes,

so many different questions that need to be answered. I do wonder too, you know, as you think about this story, Hanna, and how it's come out just the last year in terms of the crypto universe, I mean, how are investors, not investors, but regulators kind of evolving their thinking about what needs to be done in this space? Have they moved forward and gotten more specific in terms of what

needs to be done. Yeah, we already have regulators and lawmakers, you know, calling for more oversight in this of the space following ft X. But that sounds so easy, you know what I mean? Like, yeah, we all know that it needs oversight, but what specifically needs to be done when we still have a debate about what kind of cryptocurrencies really are. Yeah, I think the big question here

is putting better protections in place for consumers. And the collapse of ft X just shows how people are risk in this industry, that investors might not have the wherewithal or the knowledge or even or just outright being taken advantage of in this space. So I think that's the first area focus. And and to Carol's point though too,

I mean it's almost mood right. I mean, I mean even when you talk to some of the regulators, they kind of point out that at the end of the day, fraud is fraud, and uh and and other sort of mauthfeasances, mauthfeasance as sell falls under their umbrella, even if you don't have a clear cut definition of what crypto is, whether it's you know, security or commodity or whatever it else. And these guys had to know what they were doing was not open, didn't it doesn't matter what it was

treated as. What they were doing, what they were alleged to have been doing, was fraudulent. Yeah, And I mean, Tim, I know you used to host the Crypto show that went off the air after the eight episodes? Is that one it's seasonal romance. We got seasons. Well, we'll give us a preview of what's coming up in the next season because in all serious is I mean and to Hannah, what handle has been reporting on? I mean, it's not

just crypto. You had a huge collapse in other markets that are tied to this n f T market is just nothing now right, It's actually it is nothing yet. Hannah's reported on this. It's down or something Hannah so far this year. But I think that's a perfect segue to my next question for Hannah, because we did start our Crypto I r L show kind of unpacking what happened with Three Arrows Capital and the contagion related to

this cryptohedge fund. And you're laughing now because up until f t X collapse in November, that was the biggest story in crypto, but that was blown out of the water by f t X and the contagion there. And I referred to this earlier in the program. Hannah, it seems like there's this fundamental shift in crypto, like the before SPF collapse and after you know, SPF f t X collapse. What does look like if this is the aftermath? Yeah, I mean the collapse of f t X is monumental

for the industry. People aren't going to forget this anytime soon. So I think is all going to be about recovery, how products are going to move forward, how regulators are looking at the space, and whether you know, the industry can get investors back on board, can they regain that trust um and is there any way forward for you know,

box chain gaining traction among mainstream users. Okay, I just want to end Hannah talking a little bit about micro Strategy here, because for the first time ever you had micro Strategy. It's so called enterprise software company, but really it's gone to it for bitcoin. I can hear you laughing, Romain and see you out of the corner of my eye laughing. But you did see micro Strategy actually sell bitcoin for the first time ever. What can you tell

us about what's going on there? Yeah, this is a pretty insane because micro Strategy and UH has been one of Bitcoin's biggest bowls and has very much promoted the cryptocurrency over the past few years. And you know Michael Sailor, who helped found. The company is also just a major bitcoin bowl, so the fact that they have sold part of their holdings isn't necessarily a good sign for bitcoin

and the broader digital asset. And they do say it's for tax loss harvesting purposes or for tax purposes, but you know, and they bought more too, so we'll see. They coin really danced extensive evercent only today. Alright, a little ways to go before it gets a million, I thinks there to Hannah Miller. Well, let's get more on markets overall. We're pleased to have with us now. Jonathan Gala, the chief US equity strategist and head of quantitative research

at Credit Suites. Jonathan, good to have you with us this afternoon. I just want to start with the recession outlook for three and what you're forecasting, because I don't know about you with you know, the smp F I founder down more than so far this year. I'm ready to look ahead to Yeah, and the data actually looks a lot less recessionary than it did, you know, three

or four months ago. I mean, the big story here is that inflation expectations are falling, which means people are gonna spend less money on the things they want to buy, but wages don't look like they're gonna fall as much. So for the average consumer, they're gonna get a stronger um wage increase. The things they buy are gonna be going down in price, not going down to price, but aren't going to go up as much as their wages. And yet jobs are really plentiful. And when you add

that all together, it means a consumer is stronger. And if the consumer is stronger, the likelihood of recession in the next six months or so is less than everybody thought it would be. And and you know it's and that ultimately is why we had this big jump of a stock market rally since early October obviously December it's rolled over a little bit. What what What explained that? Though? Uh, Jonathan, I mean, why why do you think sentiment shifted so much coming out of that rally that we saw a

late summer early fall into where we are now. Well, it's it's more than anything else. It's as like I said, it's this this twin issue of the job market being so strong that people are feeling really confident in their ability to um to make a you know, a capital purchase, whether that's you know, remodeling their kitchen or buying a

new home or whatever it is. And then the second thing is CPI is expected to fall to two percent UM roughly this time next year, And that means the market is is of the belief that no matter what the FED says, the likelihood is that the Fed is going to ultimately getting close to get closer to their inflation target when we leave twenty three. And that's a positive, and that's what the market is ultimately fixated on, and I think that's why stocks are gonna do pretty pretty well.

But over the next you know, you know, over the next several months, Jonathan to do you have a forecast after the SNP. We do. We have a forty fifty forecast, Carol. But I think the I think the more interesting story is that while initially there's going to be this optimism um that I just talked about, ultimately, if wages stay high, which is what I also said, the FED is gonna eventually have to get involved and and bring that down.

So the you know, the general public, even investors on Wall Street, I think, are gonna be really happy with falling inflation. But the FED has a longer term issue with sticky wages, which ultimately is gonna prove to be

a problem, but probably later in rather than earlier. Okay, So, how given what you've told us and the research that you've done at Credit Suite of late, give us a understanding of how this kind of translates into what happens to tech stocks because two has been a brutal year, and look, if right to stay high, that could be

tough for growth stocks. Yeah. You know, I think a lot of people tim are are focused on the idea that that tech was down because of interest rates or a sentiment, and I don't think it's at at all. They're really having a hard time um on the earnings front. I mean, and the story there is pretty simple. When we were, you know, all staying at home because the pandemic, what do we do. We bought laptops, and we bought tablets, and we bought streaming services, and we bought home exercise equipment,

and we did all these things. But when we pulled forward all that activity, what you're left with once the economy opens up, that we start going on vacation and doing other things, and those purchases have a shortfall and then and you've seen a real softening in demand for technology, and that has ultimately and you're seeing that in the chip market, you're seeing that elsewhere, And I think, what what's gonna happen is it probably has another several quarters

to go before it runs its course. And that means that earnings are gonna be rough again for the next several quarters per Tech and that and which is one of the reasons why I'm not upgrading the group. We up we downgraded in early two and we're gonna leave it there. Okay, Well, so where are the overweight positions? I mean, where do you think people might actually find better opportunities for that price return. Well, so let's go flow. Me start with what we what we don't want to do.

So I would love to buy tech, but the earnings, like I said, are a problem. And if I don't think there's a recession, you don't want to buy defensive share See what do you You don't want to buy summer staples or healthcare or utilities because they do well if you're going into a session. So the first thing is it forces you into more cyclical parts of the market. My favorite by far is the energy sector. Um even even after two years of crazy gains and way out performance. Johnathan,

do you think that's still a play? Yeah, And Carol, it's not a look at what the what were there? You know, what was the stock price movement moment? Take a look at what the pe is on these these energy companies. The reason the stocks are up is because their earnings have been insanely strong. And what's probably the most interesting, in the last two months, when oil prices have generally been falling, the earnings expectations for oil companies

have actually been rising. So there's there's I think there's a lot of good news on the energy side. And the second area, like I mentioned you before, was the consumer we think actually holds up pretty well. So I like the cyclical group in general would include industrials, but my two favorite in that area would be energy and consumer.

Hey just quickly, um, would you buy airlines? You even talk a lot about airlines and Romayne was, you know, highlighting that despite everybody's saying we're all flying, those stocks are really beaten down. Would you be a buyer of airline stocks? I would be. I would be a buyer in general of travel companies. I mean there's a there's a very different dynamic in airlines. You know, one of them um which you know you folks are saying, is why have hotels and so much um better And there's

different issues with capacity. But if oil prices do go up, that is a drag on the airlines in a way that it wouldn't be a drag on a hotel. So I'm not sure. I'm you know, not being a consumer analyst. I'm not sure that I have the ability to say is it restaurants, is it hotels? Is it cruises, casinos? Airlines? But I like the group in general. Yes, all right, well, always great to check in with you and catch up. Jonathan galab He is the chief US equity strategist over

at Credit Suite. All right, as we walked through and look ahead read, one of the biggest stories of this year and maybe one of the biggest stories of next year is going to be the US housing market, of course, battered around this year as prices, which are already elevated, ran into rising rates, which effectively shut a lot of folks out of the market. The home builders overall, I've

actually held up pretty well so far this year. Most of the stocks a lot of investors look at more long term past this year, past next year, and they see, well, I guess the potential the potential for more growth not only for those companies, but for the housing market overall. Please just say, joining us right now to talk a little bit more about this is the head of Pulty uh Group, Pulty Capital, the CEO and former Pulti Group director, Bill Poulty, joining us right now to talk a little

bit more about this. And Bill, let's just start off before we get into some of the I guess shorter term issues that you're going through here in this industry, some of the longer term issues and the longer term planning, and how much more complicated it's gotten given that we are kind of at this major inflection point, this major structural shift in interest rates, in economic policy and fiscal policy as well well. The big problems that I see and a lot of we'll talk about inventory and inventory

being a problem. I think the big problem is zoning. Zoning has just become almost impossible in many municipalities. And as you know, even if builders want to get inventory up, they still need to be able to be legally permitted to build these structures. So I think it's a little bit of a misnomer or misleading thing to say, oh, you know we're low on inventory. Well, sure, but we're also low on inventory for a big reason. And I

think that's zoning. And I think Romaine, you're gonna be seeing in years to come more and more talk about what can we do at a local level to fix some of this zoning problem. Do you think, though, is an appetite there. I mean, you're I mean, obviously you're running a business, but you're also talking about something that is inherently very political, and obviously those politics differ, can

differ dramatically from state to state and city to city. Here, do you think there's a political will on a mass scale to sort of address some of those zoning issues you just highlighted, I would hope so. But again, remember real estate is location, location, location, So that means that zoning is local, local, local. So if you have local governments, it could be different ten miles apart, it could be different one mile apart, right, it could be different for

one property next door to another. So it's really a problem, and I don't think it's going away anytime soon. And I think that's actually in part why the home building stock prices have kind of stayed where they're at because they do own or at least have option to a lot of property, many cases that's already been zoned. Yeah, if we take a look at the SNP supercomposite home building there down those stocks as a group overall down about this year built. So let's talk about we're watching

prices come down. Right. We are seeing a sloan in the market because of higher rates thanks to the US Central Bank, higher mortgage rates. How do you see the housing market ine, you have a special vantage point. I think it's gonna be a tough hill decline because I think that for so long we had so low of interest rates that anybody in their mom excuse the phrase could make money in the market. Now you a situation where you have high interest rates. You have to be

dynamic in terms of the sale process. For a lot of these builders that have moved up homes, people aren't gonna want to give up there to three percent mortgage rate to get into these move up homes that are expensive, that have all these kind of bells and whistles on them, so to speak. At a six percent mortgage rates, So

it's gonna be tough. One of the good things that's going on, frankly, is that inflation as it pertains to lumber as it pertains, so many of the costs that's sold to go into home building is actually going down. I mean, lumber was sky high. It's now kind of gotten back to pre COVID levels. So I think that you've seen some pressure come off of the builders. But again you're gonna have a different kind of pressure, and in this case, it's very important pressure, and that is

higher interest rates. To remember, all we were talking about is lumber. Yeah, that was like it was like it was like we were doing and we we found some great guests out of there. I mean we're talking abou lumberjacks thing. Everybody thought it just keep going up, keep going through the roof, and now it's interest rates. Hey Bill,

I'm really curious about what you said about zoning. I want to go back to that, and I'm wondering if you're talking about single family homes, land zone for single family homes, or if you're thinking more multi family and density in our cities. And what we really need to do is rethink here in the United States the idea

of density. I mean, we saw what happened in California over the last year with the debate around accessory dwelling units, the so called grandmother units right a d r s, and the way that that's adding hundreds of thousands of potential places for people to live in California. Um, what are your thoughts around density? Well, think about it this way.

You have social media these days, So when people have problems, let's say it's a local area and they don't want more traffic, whether it's single family or multifamily like you're talking about, I think it's a problem for both d all the above, and people can get on social media these days, they can speak up. They can say, look, we have this quiet neighborhood, we have good schools. We

don't want these builders coming in. I'm not saying that's what I say, but I'm saying, you know, people in their own local municipal right, nimbies, right, not in my backyard is sort of the pejorative term that's used for this, correct, correct? All right? So look, I mean we talk about sort of the structural issues here that uh, you and the rest of your industry has to navigate here. I am

curious here about just overall demand. There's sort of been this narrative that obviously we have a housing shortage, and the idea is that it's only gonna get worse, it's not going to get better. Population is going to continue to grow here. Is there a sense here that there will be geographical shifts that could potentially maybe ease some

of those issues. Are we still going to be kind of concentrated in the same you know, metropolis is that have dominated the housing market for so many years, great question. Most of the market frankly has changed compared to a year or two ago. For instance, the Southeast is doing phenomenal compared to many other parts of the country. But frankly, if you're a home builder right now, you have to be very dynamic. In fact, that's kind of why I've

been tough on our legacy family business, Pulty Holmes. Recently they had a rogue executive doing some nonsense, and I hope it's a rogue rogue executive. Yeah, you have to be a top performer right now. And you know, if you're one of these big public builders, now is the time to make money and to take market share, and a lot of these smaller builders, frankly aren't able to move inventory like they were able to move a year or two ago. So you really have to be on

the top of your game. So I just want to go back a bill, I mean, since you brought it up, I mean, we've been sort of captivated by some of the drama between you and I guess Brandon Jones, uh, the CEO over there, can you guess give us a longer today? They removed him as you know, yes, yes, sorry, thank thank you for that that correction. But give us

a sense here of what exactly was going on. What was the disconnect between the management there and you over there at the Pulty Capital Well, I hope it wasn't the management. I hope it was just this Brandon Jones, who was the CEO of number two in this entire company, Pulty Group, which as you know, our family founded and I was on the board there for many years. I don't know what it was about. We need an independent investigation and hired this King and Spalling law firm. Need

an independent investigation to see what went on here. But to answer your question, there were at least, as far as we know, six or seven different thoughts, as we call them, fictitious accounts that were attacking me and my family and stuff being operated by the number two in this fortune company. We can't have this kind of nonsense in a publicly traded company. We can't have this kind of nonsense in a fortune company. We had to turn around the company. We don't want to have that happen again.

And hopefully, uh, hopefully, you know, we're getting to the bottom of it alright, just going down Ahead's hard for people to understand that somebody could be number two in a fortune company doing this kind of stuff. I mean, they're attacking my dead grandfather who founded the fortune company, and it's really a shame. Yeah, certainly, if you think about kind of the social market, social media market, there are a lot of things that go on that make

it very difficult for individuals and companies alike. Hey, Bill, just running out of a little bit of a time here. But when you look ahead year, it's interesting how you say, you know, we talked about housing stock being down. I think about after the financial crisis, the mortgage meltdown, we had so much housing supply. Help me understand in about a minute or so here the housing cycles. Well, I think that you're gonna have and you've already experienced a

housing cycle. In fact, one of the reasons that at least we were more cautious on the general market is because housing, in our opinion, tends to lead, uh, you know, the market into a recession, which I think we're headed towards um and then it tends to lead it actually out. So to answer your question, I think we've already seen somewhat of a cycle down at least in housing that's obviously been reflected and was first reflected in housing stocks

and then was reflected in some of these other stocks. Now, I'll say this one of the wild cards we have here, Carol, and it's a great question, is this inflation picture Because many of these builders own these land and this land, you can't make more of it, you can't zone in many cases for the reasons we discussed, right, and so there is real value in the assets that these builders have a right. Gonna leave it on that note, Listen, have a good new year. Bill. We really appreciate Bill Pulty,

of course CEO Pulty Capital, former Pulty Group Director. Thanks for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud or Bloomberg dot Com. You can also listen to our radio show at two pm Eastern on Bloomberg Radio, or stream us live on YouTube and Bloomberg dot com