Expect Continued Volatility: David Katz

at Bloomberg dot com Slash podcast. Well, a lot of folks in this market, you know, they've been waiting for, you know, of a pullback of five, seven, ten percent pullback is part of a healthy part of this market, maybe saying you know, I'll get in at that point. Our next guest says, don't worry about time in the market. If you have the time horizons, stay long. David Kat's,

chief investment officer from Matrix Asset Advisors, joins us. So, David, I know, you guys did a survey, you know, taking a look at um buying the dips if if, if you will, what did your survey kind of show you, guys? So, basically, we looked at the period of nree to this summer and over that twenty eight and a half year period, stocks work about ten point four percent. Within that you had thirty four corrections of five percent or more. So the moral of the story is the stock market is

going to correct. Uh. You basically want to ride the ups and downs and that's the best way to make money. The other thing that's pretty interesting is the recoveries occur much faster than anybody imagines or beliefs is possible or likely. So thirty one of those thirty four corrections were between five and twenty and the average recovery time was two point two months. So that means the market sells off

pretty quickly and then bounces back pretty quickly. And our best advices, by the dip, we've already had a five percent correction. We think it's a good time to be putting money to work. We think the market recovery is

going to be much quicker than anybody thinks possible. I'm wondering what you think the role of the retail trader is in all of this, because the narrative for so long has been that it is the small time individual investor that's really super bullish that has been coming in and buying these dips with such big here and there are signs that that kind of activity is starting to wane. Does that mean by the dip is also going to

We don't think so. Again, this study goes back to three So this is a long time and they're always different forces at different points in time. We think one of the biggest drivers of the stock recovery this time is there's a tremendous amount of liquidity out there. Interest rates are still very low. People are looking places to put their money, which means that on a dip, money is going to likely come into the market. All right, So where are you at, Matrix Advisors kind of allocating

your capital these days? There's a lot of economic concern growing out there. Um, you know what the base of supply chain challenges, margin pressures, inflation challenges. We've got some uncertainty in Washington, d C. Where do you guys see the opportunities? So we think if you look at the market on a longer term basis, you can look through a lot of these uncertainties. Washington is dysfunctional and unfortunately has been dysfunctional for the last twenty or thirty years,

if not longer. Ultimately, they're going to get their act together, but it's just going to be at the last minute, and it's gonna be a lot of noise along the way. In terms of the supply disruptions, we think that's going to hit a lot of companies in this quarter's earnings. Right now, the market is penalizing those companies pretty fiercely. We think that one or two things, you want to try to buy companies that are not going to be impacted by that, or you want to buy companies in

the aftermath of having a problem. So stock that we think is a great opportunity right here is Federal Express. They are a good long term secular growth story is more people are shopping online, they're shipping more packages. Global economies picking up very good for them. They had a modestly disappointing quarter and it was driven by logistics UH, not being able to get enough employees and inflation. As a result, the stock is sold off from three twenty

to twenty five. We think it's a great entry point right here if you can look beyond the short term uncertainty. But what happens if some of those uncertainties and or supply side pressures proved to be more persistent, how long can they last? While you still think that those are a quote unquote short term well in terms of Federal Express the stocks at eleven times earning, so you know, if it takes six months to turn around their nine months, we are less concerned because we know the stocks is

gonna be thirty or higher. In terms of corporate America, we think that inflation is picked up. You're gonna see it more this quarter. We think it's starting to team in certain areas that had at first, like the consumer product companies. We're talking about inflation six nine months ago. Now that seems to be having peaked and coming down slowly. We think they're gonna be supplied disruptions. We think they're gonna be chip shortages, but the economy is very strong,

demand is robust. We think we're gonna get through this. And the key is find good businesses that are going to do well, you know, through the cycle. So Cisco, which is a technology company, they're having supplied disruptions, are having to pay more for their chips, but they have great to man and they're still learning a lot of money. It's at a great price and it's paying you a

good yield while you wait. So we think as long as you're not looking for really healthy, sharp momentum right now, you're able to buy good businesses that are going to get through this, and the time to buy them is when the stock has been discounted, assuming that the problem last forever and it's not going to David Facebook, regulatory risk, what's your concerned if any we think Facebook is a

bad corporate citizen. There is regulatory risk. However, Uh, at three thirty dollars, we think the stock is a very good buying opportunity if you don't mind holding a company where you're a little bit less enamored with management. Uh. They have an addictive product. That's part of the problem. The good part is it's an addictive product and as a result, their advertising is going to grow for years

to come. So we think it's a good long term investment, but you have to understand you're not buying Uh, the best management team in terms of ethics out there, David Cat's, chief investment Officer, Matrix Asset Advisors. Interesting call, they're on Facebook. Just go where the money is and uh, that's certainly where the money is going from an advertising perspective. David Katz, Matrix as Advisors. We're got more coming up. This is Bloomberg, all right. Tom Keene's not here. So we can talk

about bitcoin fifty thousand dollars per coin volatility. Okay, the question is where does this thing go? And it is big, big news here at Bloomberg News Crypto because we're just recently Hardy Managing editor for Crypto. That tells me. I was like, oh boy, we're all in following this asset class as we should be. Station Marie Ishmael, Managing Managing editor for Crypto for Bloomberg News, joining us on the phone here, Station Marie, again, bitcoin at fifty. It's a

nice round number, it's a level. What do you take away from it, Well, it certainly is a nice round number on but you know, one of the things that's been interesting about the moves, you know, we were really paying attention to kind of the trend over the past two months, right, so we're looking at UM says that have gone up more than sixty since hitting lows in July, and of course the high in April in the sixties

of thousands. One of the pieces of news that came out in the past couple of days, which you know, folks in the markets say, has been really driving some of this enthusiasm UM is a report from Bank of America, they've initiated coverage their hiring crypto team, and the you know, the phrase that they used in the in the research note was if the bitcoin is too large to ignore, And various market participants, who are enthusiastic at the best of times, have really taken this as a sign that

this is a currency and asset class that is really around to stay. And the hope of a lot of these market participants is that it's going to continue to go up for sure. Well, how do technicals maybe help us figure out if indeed the trajectory from here is higher. I feel like that's all you really can rely on when it comes to crypto, because you know, there's not that many fundamentals. Well, I think there are are a

few technical conditions that folks are looking at. One is UM fifty hundred, which is a minor resistance number that some folks are paying attention to, and the suspicion is that if there is you know, if we hit above that number, then we're looking to potentially have a breakout, which might see us hit those sixty five prices again. So Station Maria, a lot of folks and even some folks I think that the big New York banks are

still not buying into this crypto thing. Majig um. You know, what do you think is the next event that needs to happen for legitimacy for those folks that are kind of naysayers. Is it something like a G twenty country adopting bitcoin in some way? What do you think are

the next big milestones for this space? Well, I think one of the things that I've really been listening to, you know, we you know, here at Bloomberg, we've had a lot of folks on TV and at our events and on radio of course, talking about what it would take for them to either be personally or professionally invested in crypto. And we had Ken Griffin say just yesterday that whatever his initial crypto skepticisms and his long standing cryptoscopticism is, actually he would be more interested from a

citadel perspective if there was more clarity around regulation. And that's certainly been something I've heard echoed by other market participants. You mentioned having kind of a G twenty country. Take this seriously, obviously, folks are looking at the experiments in a Salvador with making bitcoin acceptable as legal tender. As you know, perhaps something that other countries might follow. Um, I think there's a tremendous amount of potential institutional interest

in what would happen if bitcoin ets. Actually it was just about to say, do we think it's I mean, the Gary Gensler sec I feel like remains a mystery on its crypto policy. It seems like it's not as friendly as people maybe thought initially. Do we have any kind of idea when and if we will actually get

some kind of bitcoin ets approved? Well, I think far be it from me to speculate, but I would say that market participants are optimistic that E t F at least one, and you know, per your point about Gensler, that it would likely be a futures back to E t F. UM, I think there is a you know, folks are predicting that there will be at least one

in the market by the end of the year. It's interesting I see one of the top top analysts on all of Wall Street, Jessica reef Erlik, who has been a number top rated media analys for probably thirty years on Wall Street at Mary Lynch and now Bank of American Marylynch. She is now a strategist focusing on crypto so there's another example of a big, big bank saying we're putting some research, We're putting some assets, some resources

behind this asset class. Um, are we starting to see that more and more, Stacy, Marie, As you as you think about the the by side, the cell side, the whole kind of Wall Street support of crypto, are you're seeing what's what's the level of engagement and resources that you think are being allocated to this asset class. Well, to your point, there are a couple of ways that we are trying to keep an eye on this right. One is just the sheer volume of CRYP dimensions and

existing research notes from different teams. Crypto is something that such as lots of different asset classes, and so you have you know, our own UM analysts and strategist that b I for example, will regularly contextualize this in terms of like what's happening with gold and how is that affecting bitcoin? So we are really paying attention to how folked with that macro perspective are considering or mentioning crypto or even in some cases, um, you know, other coins.

That's one. The second is hiring, so both at the Wall Street level and on the buy side on the south side. But also you know, we're looking at like pension funds who are saying we might be interesting and

understanding how bitcoin would make sense in our portfolio. Um Us Bank came out with a statement today saying that they are going to start offering custodial services for cryptocurrencies and so like, that's kind of the level of institutional normalization that we're paying attention to, in addition to just you know, pure fund flows. Yeah, just it extraorderateds. It kind of watch, uh and study the growth of this market. It's really fascinating. Stationary Ishmael. She's a managing editor cover

all things crypto for Bloomberg. Let's call her our crypto czar. If you um this is radio. We're trying to make the feet of the mind, all right, so she joins from Bloomberg News. Thanks so much, Stacy, We really appreciate it. Well. Big tech has increasingly come under I think the attention of Washington lawmakers, regulators, and no company it seems more so than Facebook, and Facebook recently had a whistleblower speak out against the some of the harms that the company perpetuates.

The former employee Francis Hoggan went on sixty minutes this past weekend speaking today testifying at a Senate hearing on kids safety. So some big issues for Facebook. And then I looked down the stock. It's up year to date, a little bit off of its all time high, So it doesn't seem to be that big of an issue, at least for the stock price. Naomi Nick's corporate influence reporter for Bloomberg News, joins us on the phone from Washington. So, Naomi by, it just seems like there's a lot lots

of fundamental problems overhanging Facebook. How do you think this plays out? Is this a big problem for the company? It could be now. Look, on the one hand, Facebook has weathered a number of politic crises in the past. It was just you know, three years ago when it was UM handling Cabridge Analytica, uh, and there was a lot of blowback for the company. But ultimately it's still built this very powerful, very profitable um advertising behemoth UM.

And it actually, you know, Washington never passed a national privacy law to address that breach. Where again, in one of those kinds of major crisy moments where Facebook is grappling with criticism, for wimmakers and advocates that it's been hiding its internal research showing some of the negative effects of its platform. And so the question is, well, Washington act, Uh, will Facebook be forced to change its ways? I think

that's still an open question. Well, on the whole kind of basis of this testimony from the whistleblower centers around the idea that the company prioritize profits over people. How much can regulators really fault a company for prioritizing profit? Isn't that what companies do? And that's exactly right, UM, But remember that that refrain from the whistleblower, she was really talking about specific areas and specific types of practices that the company was engaging in in which she saw

that that to be the case. So, for instance, UM, one of the revelations that came from the documents was that Facebook U had essentially been UM making some very powerful celebrities and politicians and journalists essentially immune from their content enforcement decisions. And they had previously said, oh, that just affects a small number of users, when in fact that group that receives a form of immunity or difference in treatment numbers in the millions. UM. You know, there

were revelations about kind of you know. Facebook often deflected to conflicting mix of outside studies about the mental health impact of Instagram on its youngest users, when in fact it actually knew far more that, particularly for some vulnerable teams who are already feeling bad about their bodies, that Instagram has a very negative role in their lives. UM and so like those are specific kind of issues that

regulators could try to get at. There's been some proposals in this today's hearing around UM, you know, enhancing privacy protections or women in targeted advertising, or pairing back UM a legal shield known as Section to thirty that protects tech companies here. We've heard that one floated a few times before. So, Naomi, I've even heard lawmakers equate Facebook with big tobacco, I e. They had internal information knowing that their product at negative effects, yet they withheld it

and kept promoting their product. Is that taking it too far? Do you think? I'm not sure for this taking it too far? There's certainly some parallels um so for decades, right, big tobacco companies essentially argued that wow, the research linking UM cigarettes to UH to having CANCERUS effects or to being addictive is a little bit mixed and more research

is needed. Facebook when it came to UM, when it was facing questions around what you know, is social media good for young kids often also deflected to outside research, which was conflicting. But in fact, Facebook is the organization that's the best position to conduct the most thorough research on this topic, and they had a lot more concrete evidence that for some kids it is actually uh not,

doesn't play a good role in their lives. And so, you know, the question is, will will Congress bring Facebook to account in the same way that UM the government brought big tobacco company's to account. I don't know well, And the question is how difficult bringing them to account really is, because I mean, obviously it's not just the whistleblower that has given Facebook a headache. Over the last

couple of days. They had a huge outage yesterday and me and everybody I know basically cease to function because Instagram wasn't working, WhatsApp wasn't working. So that just goes to show you how massive the influence of this company is in the amount of people that reaches. How do

you even go about reining in a company that large. Well, it's a good question, right, because any laws that Congress would try to pass um would likely not just affect Facebook, right, it would affect other tech platforms who um, maybe you're doing similar things but don't have some more problems um. And so getting that regislation right in a way that's precise would be tricky. I think one area of vulnerability

that Facebook is facing is on the antitrust front. Um. It's obviously at least seeing some critiques um from the Federal Trade Commission and states on that level. UM. You know, going as far as seeking to unwind Facebook from its Instagram and WhatsApp acquisitions. That would have a very sort of catastrophic effect on the company's future. UM. But I think regulating these areas get really tricky, and that's part

of the reason why we haven't seen some progress. Uh Naomi, How well do you think or how is Facebook performing in terms of defending itself? I mean it, Mark Zuckerberg, the face of Facebook. Is that a good thing? How do you think the company is doing and dealing with all these issues? Facebook has has really launched an aggressive

defense campaign against some of the allegations. It went as far as to release a point by point rebuttal to the Wall Street Journal It's reporting and characterization of its own research. It said the used paper was downplaying some of the evidence that shows that social media, and particularly its own social networks, play a positive role in teenagers lives. Um it has you know, we've seen Nick clegg Um, you know, participated interview with Mike Allen. We've seen um.

The company had went as far as to release additional slides to show context to the Wall Street journalists reporting. The Wall Street Journal then responded and released Stephen Moore slides. UM, And so they're they're definitely aggressive, and there's a good reason for that. They need to be able to attract young users to remain competitive. All Right, Naomi, thank you so much for joining us. Really really good to get

your perspective. And you're reporting. Naomi Nick's corporate influence reporter for Bloomberg News on the phone from Washington, d C. Looking at my become Bloomberg Commodities index chart for the trailing twelve months. Boy, it is up and to the right in a big way, uh, showing the commodity inflation out there. Let's check in with Will Ryant he's founder and sea of Granted Chairs. They have about one point

five billion dollars in assets under management. So Bill, as we step back and take a thirty foot view of what a lot of folks are concerned about, which is inflation in this economy sparked in part by rising commodity prices. How are you viewing the commodity uh asset class, if you will, what's really driving it here? Yeah, that's a

great question. Um, I think that now we live in a complicated world where the the interconnectedness of you know, not just the commodity markets, but global markets more broadly means that, you know, there's not one sort of simple answer to what we're experiencing at the moment. You know, part of it is the COVID recovery. Part of it is the fact that we have a huge amount of demand right now, but we don't have the supplies to

meet that demand. Part of it at also due to COVID, is the fact that, you know, in terms of the supply chain, we have still a lot of restrictions in place around moving goods, et cetera around the world due

to COVID. And then we have also factors such as you know, the transition to renewable energy, that decarbonization efforts that major economies are taking, and you know, some of that, particularly relevant to Europe at the moment, has meant that we've perhaps jumped a little bit too quickly to a scenario whereby we don't now have enough energy to meet these immediate needs and hence the prices of skyrocketing. You have the China effect as well in terms of what's

going on in the Chinese economy. Is very important always the global commodity prices, but I think that we're looking a situation now where rising commodity prices across the board it's largely due to the fact that you know, we

have more demand than we have supply at the moment. Yeah, the whole renewable energy green energy transition is really interesting when we think about the current power crisis, because you have a lot of investment in new renewable energy sources wind, solar, and you're seeing a pullback and investment of those more legacy energy sources like coal and oil, and that leaves you,

obviously with this huge gap we're seeing in storage. Of course, is a big problem when you're thinking about the impact of the green energy transition and the materials that are required for it. How does that kind of affect your outlook for commodities if oil and gas is continuing to be under invested in and utilized less versus clean energy. Well, again, that's a great, great point, because there's been woeful under

investment in the commodity sector for many, many years. I mean certainly since two thousand and fourteen, you can argue, so at the bottom of the last kind of bear market. UM, the capital expenditure or capex just more broadly has been really laughable in the sector. And so that's now kind of comp hounding these issues where on the one hand, we're saying we want to try and we want to decarbonize as a global economy, we want to transition to

M to green energy or renewable energy. But I think what's perhaps underappreciated is the amount of commodities that we need, the amount of materials we need to do that now. Albeit they're different to the hydrocarbons that are making the headlines today, I oil, natural gas, etcetera. But certainly the amount of materials we need, particularly metals, you know, copper, aluminum, etcetera. Um, those are all metals that we greatly need, and we

just don't have um those resources at the moment. We're going to need a huge amount of investment to to get that production up, all right. So I guess the question for many people is timing here is this about of commodity inflation transitory as a fatal reserve, continues to believe, or is it something maybe a little bit more pronounced, give all of the variables, whether it's supply chain and

others that we have to deal with. I mean, my my view is that I think that this is I mean, I guess it goes back to what's the definition of transitory. The longer that we have five plus inflation, more difficult it is to say that it's transitory, or indeed the transitory becomes longer and longer um And so I think that we're going to see inflation higher or an elevated

levels for quite some time. My concern, I guess at the moment is that this all feels a little bit like the nineties seventies where those will remember that were around then we had an oil crisis, which is, you know, in some respects analogous to what's going on at the moment, an energy crisis followed by a recession, but inflation that ended up at the end of that deck decade with you know, certainly the goal price among other things that

an all time high. So I think that there's some lessons potentially in that period to what's potentially going on today. But you know, some of these issues would be the COVID situation around commodities at the moment when you can make an argument that those can start to ease and those will get better. But my concern is more the structural imbalances that we have due to the woeful lack of capex in the sector. And those are just some things that you just can't fix overnight. That these are

not going to happen. They're not short turnarounds, and so I think we could be an environment where, um, you know, these commodity prices remain elevated for some time. Hey, well, thanks so much for joining us. We really appreciate getting your thoughts here. Again, commodities really in focus, the impact on inflationary pressures on the economy really coming into focus on like I go, see more evidence of that as

we come into earning season. Will Ryan, he's a founder and CEO of Granted Chairs about one point five billion dollars in assets under management located in New York City. And again as we come up with earning starting UH in earnest next week, we'll be interesting to see how companies frame this inflation and its impact on their operations UH and on their guidance. More importantly, will that be an issue into what extent? So we'll certainly be on

the lookout for that. 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. Ye put on fall Sweeney. I'm on Twitter at pt Sweeney Before the podcast. You can always catch us worldwide at Bloomberg Radio