You're listening to Taking Stock with Pim Box and Kathleen Hayes on Blueberg Radio. We are broadcasting live from e t F Exchange b n Y Melon's et F Symposium in Dana Point, California. I'm Pim Fox, my co host Kathleen Hayes, and our next guest, well David Cudler. He is chief executive and the chief investment strategist for Mainstay Capital Management. He can be followed on Twitter at David Underscore Cudla KU d l A. David, Thanks very much
for being with us. All right now, I've been trying to figure I've been trying to think of an analogy that you know that that would work here having to do with with stocks. And I was a kid. He used to fill a balloon with air. Right, you blow it up and you rub it on your head and you stick it on the wall and it stays. But for a while you have to keep doing that, or if you pump air into a balloon, eventually leaks out.
Is that's what's happened with Central Bank, Paula See and equity prices, that all that money it's really just flashed into stocks. Yeah, we think that's largely what has happened. And you know, not just our Federal Reserve, but central banks around the world, maybe even more so other central banks around the world, the E, t V and B O J. We've had UH. Stimulus measure after stimulus measure.
We've had UH since the Great Recession. There have been six fifty rate cuts by central banks around the world, more than six fifty rate cuts UH. And now we have negative rates in places. We have asset purchase programs the highest in history. And you know, we look at what are many people consider some weakening fundamentals for let's say the U S stock market, other markets, but the markets continue to do well because of Tina. There is
no alternative. H. We have cash as dead money, bonds have zero to negative yields and are very low yields, and so stocks. The money continues to flow into stocks, and we believe, for instance, a bull market here continues
to be fueled by central bank stimulus. Well, UH, I guest on the show at the top of the show, actually Frank Losala, who's with B and Y Melanin here at the et F conference in Dana Point UH said that in his view, even if the FED raisers rates once this year, you're still going to have so much accommodation. And we're really talking more about bonds and why he
doesn't see bond yields rising much. If anything, maybe they could go a little bit lower and stay in this this low tight range is the same true for stocks. I think it may be true for stocks, But let's let's look at bonds first. And I might disagree with the earlier guest about bond yields. You know, we think they're Our bond yields on the intermediate, longer term into the curve are more a function of what's happening around
the world than they are here. You know, our Federal Reserve of controls they pen the short end, they control the Fed funds rate. But when we look at tenure and thirty year bonds, we saw yields rise recently because of um, you know what was happening with the ECB. The now rumors about the operation reverse twist potentially from the BOG where they let the long end come up
a little bit to step in the yield curve. You know, David, how does a chief investment strategists navigate this this current landscape? What do the fundamentals tell you, and is there a divergence between what the fundamentals are saying and what policymakers
are actually doing. Yeah, PIM, that's a great question, and I think that's what individual investors and professional money managers alike are frustrated with because we live in this environment where, you know, if we look at fundamentals, we have a PEO multiple that is expanded by thirty over the past year and a half, while the S and P five is essentially where it was a year and a half ago,
with altility along the way. Um, you know, we look at other measures like price to IBATA, which is earnings before interest, taxes, depreciation, amortization before the accountants get ahold of it and start to manipulate earnings, which really is looking at raw earnings or free cash flow that's at the highest ever. But there's a lot of measures we can look at in an economy that is growing at one that we've seen the I s M I s
M numbers come down recently. Uh, job growth is slowing, and you know, we so it's a matter of you know, it almost becomes more a matter of how we handicap FED policy. If we look at just a week and a half ago, on a Friday, one Fed president spoken hawkishly in the market went down to an alf percent. On Monday, a Fed governor spoken duviishly in the market went up one a half percent, Which shows is how fragile this bull market is at this point and how much it is a function more of central bank and
central bank stimulus than fundamentals. Okay, give us one or two strategies. Are gonna bow thirty seconds left here, Dave, to make money or not lose it at a time like this, sure, so to make money. You know, domestically, what do we do in the in the waning years of a bowl market. Well, we want companies that have a good business model, good quality companies and can defend
their market share and profit margins. That brings us to an e t f uh like Mote m o a t vanneck Vector's morning Star Wide Mote et f uh. Companies like Harley Davison are in there an iconic American motorcycle brand. There there will never be a motorcycle brand like Harley Davison, Microsoft, Amazon. You know, these are defensible
business models. And around the world we like emerging markets because of all the liquidity globally and then of course non correlated assets to give us that hedge on those days weeks once when the market takes a dive dive Coudla, CEO, chief investment strategist, Mainstay Capital Management. I'm Kathleen Hayes. Along with pim Fox, this is Bloomberg