Consumer In Great Shape, Room To Spend: Michael Hans

We are seeing it. The question is a transitory is it's something more permanent that could really put up some roadblocks for this economy. You know, I'm looking at the ten years. We're talking with Ira Jersey just earlier again, one point five three percent on the ten years, So the bond market is not seeing Michael Hans he's the chief investment officer for Clarfeld Financial Advisors. They about seventeen billion dollars in assets under management. Michael joints this. Michael.

We appreciate you taking the time here as you look at markets here, we I know you've been constructive on these markets. How do you think about the inflation risk to these markets, Good morning, Thanks for having me. So I think the biggest risk that we discuss is we sit down and try to think about setting investment policy and direction for our clients is not necessarily the individual asset class performance that you're going to see directly resulting

from moves into the inflation data. Is more so the challenges that it puts on the FED, who's really guessing

at this point in time, with two potential outcomes. One is that they're right and guiding towards transitory levels of inflation, in which case they will have the ability of reasonable growth coming in these inflation dynamics moderating with what we're seeing right now is a complience of issues but making it really challenging and the base effects, and then they have the ability to set policy and be somewhat restrictive

at the margin in a more gradual pace. The flip side is what I think many market participants are afraid of, is that they are somewhat complaced because of their desire to maintain policy focusing on the labor side of their mandate, and then forced to more aggressively restrict policy down the line. So from our vantage point, not an issue likely, right we're still talking about first thinking about some form of paper, and there's a lot that's going to happen before they

raise rates, and so the market right now. Frankly, I think some of your your guests point about you as well. It's a little bit of back and forth here in a in a relatively tight range both on equities and on fixed income, waiting for some directional movement that will then set the tone for the pounds of the year. Yeah,

it's interesting. Bill Dudley wrote a piece for Bloomberg yesterday and said just that, Um, well two things, one the focus on UM the labor markets, and to the insistence that UH inflation be allowed to run hot, therefore overheating the economy. He then said, you know they raise rates after that, Um, they'll be forced to do it at a faster pace than they previously had. And if they push up unemployment by just half a percent, this is what I found surprising over the past seventy five years.

Every time the unemployment right rate rises just half a percent, a full blown recession occurs thereafter. UM. And this is the this is the problem, right, This is the concern that the Fed is going to have to tighten harder than it previously would have had to because it's allowing

the economy to overheat. If you buy into his his narrative, it's a very valid question, and they think what's interesting, And it was a question in one of the prior you know, FED press conferences that like McKay brought up, was you know, we're not hearing that narrative that we did in the prior rate hiking cycle of we'd like to reset some level of ammunition for that next downturn. I think it's very it is somewhat premature, but the question really beg do you need to be buying billion

dollars of securities on a monthly basis? And I think we're in a different position today than we were on the prior cycle because we've blown out the balance sheet substantially more than what we did during the financial crisis. So there are little pockets of areas where you know, the Fed last week it was wasn't heavily paid attention to, but they're starting at the margins to nibble down at that balance sheet. They made comments related to the corporate

credit facility and their ets purchases. So this is going to be something that I think of volumes and from their perspective in a methodical fashion over a prolonged period

of time. But we are likely sitting in that in the environment right now over the course of the next couple of months, where there may not be a major direction the news and the data flows might not matter all that much because we all have this heightened level of expectations for a high cp I print, right And so at this point, I think it's really when does the FED start detailing their plans, because they really do want to, you know, calm the market. Hey, Michael, just

real quickly thirty seconds. Given that FED backdrop, where what are you telling clients right now in terms of risk? In terms of risk, and I think an important dynamic is that the equity market still has you know, and as you mentioned the onset, we are fairly constructive because

of the relatively low yield dynamic. What we're looking at is just a lower duration position across our fixed income portfolios because you will not get the same benefit even if rates start coming back in, So be more mindful about what you own across fixed income, but also being you know, cognizant of the potential for lower rates of return in in the balance of this cycle because we pulled a lot of that forward. Michael, thanks so much for your insight. Always great to get your view on

this market. Michael Hans is the chief investment officer at Clarfeld Financial Advisors, talking to us about UM, the market's view on inflation, which really has been UM going through a bit of a back and forth over the past days, sometimes hours. This is crazy but fastly I think would count as a small cap stock. UM. It's only it's only worth six and a quarter billion dollars in market cap. And this is a company that before today I didn't realize has the power to shut down the Internet, even

if just momentarily. Nate Langston joins us Bloomberg Europe Tech editor and consumer tech reporter UM and Nate, I get why these shares were up, because the first thing I thought when I when I heard this is, Man, this is a powerful and important company. I kind of want to buy shares in that. You're absolutely right, and that was exactly my reaction, UM when I first saw this, is that this is not a company that many people, UM,

you know, myself included. And I've been covering technology for over fifty years and I hadn't really ever paid any attention to this company, and when you see some of the sites that it is possible for it to have, you know, have a hand in taking offline, ilbeit obviously accidentally you have to sort of it turned heads a little bit and you think, well, maybe we should be paying more attention to this company, and certainly I will

be doing in terms of how we cover it. Um, it's it's and as you say, the the investor response and that the stock price since since the opens has been really quite fascinating. All right, Nate, tell us what happened this morning and how did it happen? Well, as far as we know, this all originated as essentially user error within the company itself. There's no suggestion here that that it was a a hack or or the subject

of any kind of UM cyber attack. This is essentially the equivalent to somebody pressing the wrong button on a computer and then having to quickly roll it back. Certainly, the speed with which this both happened and was fixed, all of which took place within about an hour, UM makes me very confident that that that is the case. But the short version of what happened is people started

noticing that they weren't able to access websites. UM for a little while, Bloomberg dot com included in in that and um the Amazon and read it exactly and read it, and there was Spotify was reporting outages Shopify as well. Yeah, and it's just a lot of a lot of averages.

And people started reporting this. The company within about I think twenty five thirty minutes have posted a status update on its service datas page, which ironically for a little while, was also taken offline to say that an issue had been identified and a fix is being deployed. And in just under an hour total, from the first outage to a resolution, things started taking back online. UM, and the

company said, it's you know, it's further investigating. And generally when something like this happens, it takes a day or two for sort of full disclosure on the you know, the cause for that to be. Yeah. They were like, our intern accidentally pressed the red button. He's been fired, Nate. Um. You gotta wonder whether or not this makes companies want to diversify. I mean, if if I was running a website and this took me down, I would think, man, is there can I get two people that offer the

same service. Yeah, I mean, that's definitely the first reaction. But realistically, for the kind of systems administrators that are in charge of these websites, this is something that it's

just understood to happen from time to time. You know, if if the the entirety of a year, your website goes down for a few minutes here or a few minutes there over the course of that year, you know, you're still talking way above up time, which is what a lot of these companies promise and guarantee, and there is often a you know, small amount of edit and compensation that are applied based on the percentage of total

autage with course of say a month. Um. So, I can't imagine they will see a fallout in people moving uh, purely because of this one incident. But if this turns out to be one of many over the coming weeks, months, or whatever, that's when things start to get a lot more serious. Sure. All right, Nate, thanks so much for joining us. Really appreciate your time and getting your thoughts on this fascinating story. To start this uh this day, Nate Lengths and Bloomberg grob Tech editor and consumer tech

reporter Matt, You're gonna like this. Our next guests participated on a panel at the largest bitcoin conference in the world, entitled Bitcoin One, which took place in Miami, Florida. What I found interesting is, Uh, this conference was held two years ago, attracted about two thousand people, but in one they're an estimated twelve thousand people in attendance, so assign that bitcoin and cryptos really are getting into the mainstream. Frank Holmes he joins US today. Frank's the CEO and

chief investment officers US Global Investors. Frank, I love to start there. There's lots to chat with you about, but just give us a sense of what was the vibe down a bitcoin in Miami. It was electrifying. I've spoken as so many investment conferences over the past thirty years, attended so many of them, uh, and never has been to an event where we're twelve thousand people spent six hundred dollars to get in the door and on on

game day. Basically the tickets were twelve hundred dollars. Uh. The big retail conference for investors and ETFs and mutual funds. The money shown Orlando, you know they'll get six thousand people, but it's free. So I was really impressed with this. That just the level and it wasn't close to anything like you had to have a fifteen minute Uber drive to get there. UH. Usually as a big convention right beside the hotel, these other events, if you get lots

of people, but people who were really committed. People flew in from all over the world to an end. Uh. And so I thought that was fascinating and the caliber of speakers was outstanding. Great event. I know Mike mcglowan are Bloomer Commodities analysts, was down there as well. What did you what did you take away from the event? Um? What did you learn? Um? Down in Miami? Well, you know, on on stage I spoke regarding the cryptal mining companies.

I launched the first UH cryptal mining company in the world in two thousand seventeen, called High Blockchain Technology. And uh, it's interesting because on that panel it was all about being green and clean your coins, and uh, I got booed and then I got hurrah. So you have some real devotees there, bitcoin enthusiasts that are like religious fanatics, and then the other hand you have lots of scientists and people are for sort of the non centralized or

decentralized financial network. Uh. And that spectrum was was huge. There was four thousand people in standing room only in file marshals had to come in and tell people they couldn't stand at the back. Amazing. Yes, Frankie, what's the What do you think was the overriding key issue for participants in this conference? Here? Is it? Is it regulation? Is it a greater adoption? Um, greater you know, just more technology? What are some of the key takeaways? All

of them? It was interesting, It was all of them. Ron Paul, I hope when I'm in my eighties I can uh moonwalk like he was. I mean, he was unbelievable his energy up there on that on that stage. So he had the sort of the the political positioning of uh, financial independence, etcetera. And and then you had the Michael Sailor did a phenomenal job. He had the standing room ovation. Uh. So I think it was very broad, uh doors he was there for Twitter, uh and he

was sort of a philosophical approach. We had a Heckler for him. But you know, it was it was just fascinating to observe what I you know, I did see is is that there is a push for crypto mining to be done in North America and Europe and away from China. The pools for more transparency is better to have than coming from China. That there was a The mayor spoke very well and how he's trying to create the Silicon Valley of the East Coast is going to be in Miami. So you know, that was very interesting

to see that shift. So there's many dynamic things happening at the same time in all ages. You had the venture capital funds, the bigonaire players flying in from San Francisco, uh to the kid and his flip flops on walking around with his knapstack. That's up three million dollars on his bitcoin holdings. Is that Mat Miller? Matt, were you in Miami? I is not, but I would definitely be wearing flip flops because I hate shoes. Everyone who knows

me knows how I feel about shoes. Frank I promised our listeners that would get you to talk a little bit about airlines, and I know that on the day you left there were one point six million passengers screened. Um, that's up from a year ago. We gotta get you back because we've run out of time, but I do want to hear from you in the future, so well, hopefully you have time we can rebook you talk a little bit about airlines and about the jets E T F as well. Frank Holmes, c i O, Chief Investment

Officer US Global Investors. He was a speaker at the Big Bitcoin Conference in Miami and founder of one of the first big bitcoin minds. This is Bloomberg. Let's bring in Dan Gantner now, he's president, chief executive officer, and chief investment officer at r NC Gender Capital Management and Dan Um. It's great to get somebody who has skin in the game game. You've got five billion and asked under management and has some stock picks for us UM.

Let's talk about what you want right now. Well, first of all, let's talk about your inflation outlook, because I guess that drives your decisions to some degree. Yeah, man, I think that you know right now, certainly inflation is the is the hot button, and it's the watchword and the overall market and uh, it's you know, we're we're waiting to see what these numbers come out with with cp I and obviously for PC which is really what

the FED is looking at. But you know, the numbers are very very hot right now, and there there's certainly I think a little above the Fed's expectations. The market is little concerned about it. You know, we're seeing PC that just came out at three point six per uh, FED once a long term target of about two uh.

You know, the watchword right now is transitory, though I think what you're going to see is that the definition of transitory is going to change over time, and I think the market is really looking to see, is this something that really is going to be a few months that's going to open up as you have supply chain. Basically reopening of supply chain is what we're dealing with, and so is that going to be truly a few

months of transitory nature? We get back on the feds more or less two percent guideline for inflation, and therefore any unwinding that they're going to do is going to be either insignificant or non existent. If it stays longer than that and really becomes more cyclical, then the market's going to adjust to that. You know. We uh we think employment's a huge part of this right now, and

that that's the main thing we're watching. Yeah, we got some very interesting jolts data out this morning about the record job openings. Uh so that was very interesting for this market. Then you know that that cyclical trade, if you will, that started it's called it last September has really worked out well for investors that have played, you know, some of the more cyclical parts of the marketingbe even the small caps um A, are you in on that

trade and be you know kind of what's your outlook. Well, we're very heavy on that trade as a matter of fact, and really started in the end of the third quarter and pretty heavily into the fourth quarter of last year. I mean the look the energy sector, you know, which was beat up so badly last year, has led the

market this year. I mean, the energy sector is upt hot on its heels, as financials at up almost tht and even materials are up over so it's it's been a big part of our portfolios and and even in our growth and value portfolios. As we reached the second half of last year, we went much heavier towards the value side, and I think that that's going to continue.

I think what you're what you're seeing in this market, despite some of the side shows that are taking headlines, uh, is that this market is moving back to being very earnings oriented. And whether that's reopening trade or whether or not, it's just fundamentals of ongoing companies. I mean, that's where we're going. And and so valuations have become very very critical and and so the market is fully moving that way. We think franktically, what we're early in that rotation of

rotation back the value. So it's it's something we definitely intend to participate with. And and uh, and something that you know, we think is going to pull more and more investors into it as they see confirmation and you like Philip sixty six here with a four percent yield. Yeah, I think it's you know, I think it's one of the create the very key um underlyings with regards to investor sentiment right now is that people are looking for, you know, not just again things that are going to

be extraordinarily volatile. They may play in those areas, but for core portfolio assets. You know, they want to see not only some stability of earnings growth, but they want

to see some income and some yield. And what we're seeing now is also a very significant transformation and transition of bond holders that are realizing if they're going to have some income out there, looking at where pen your treasury rates are and rates overall, they're gonna have to have more risk, and they're going to start to gravitate towards high dividend stocks that are in many cases three or four times what they're going to get in fixed

income assets because they need to have some cash flow, they need to have something to live on. And so when you look at a Philip sixty six, which is still trading at ten percent below its pre COVID values, uh, then it's a it's a we think it's a very strong play, especially you get four that's tax preferred. While you wait, how about Christol Myers squib that's a obviously the we've seen the healthcare stocks with Biogen kind of in the news over the last couple of days. Is

Bristol Myers? Is that another one like a Philip sixties six where it's just a steady eddy kind of a good long term performer. Well, I think it's a combination. You know, first of all, it clearly it's the cheapest of the large farmer stocks right now trading at about p of eight and it's got a good strong yield

once again three in cash flow while you wait. And one of the real values we see in Bristol Myers is we think that the market is just severely handicapping, you know, some of the need drugs that are going to come off of patent and at the at the tail end of the pipeline, and what they're not taking into consideration. They had four new drugs last year, They've

got four new launches that are coming out. They're modeling about ten billion from those new releases, and we think that that's uh, just significantly lower than the five billion dollars that we're modeling. So when you look at you know, based upon that, we think overall earnings are going to be about eighties six dollars even on a multiple of

ten half of the overall market. You know, we're you know, we think it's eighty six dollar stock right from where it is now sixty that would be a good return there, Dan getting their president, CEO and c i O of r n C Genter Capital Management, they have about five billion dollars in assets under management. Looking at some of those big cap names and I guess, you know, for the market. A lot of investors in the market, you know, those cyclical names have really worked well in this reopening trade,

if you will. And the question I hear from a lot of investors is, you know, what's the duration? How much legs does that trade have? Can I still ride the energy stocks? Can I still ride the financial stocks, uh for example? Or do I need to pivot back to the tried and true top line growth stories? That is what markets are looking at. This is Bloomberg. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast

platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three pt on Ball Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.