Breaking Down Euro Elections and the Equity Rally

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Well, don't forget the European Football Championship.

Oh boy, that's right.

Yeah, the UK won there as well. Now it's it's it's a it's a good mood in London. Dare I say, despite the fact that it did pour all weekend, we had elections where nobody objected, and you know, and everybody politely handed over and the moving van has already come and taken Richisu next stuff. So that was very civilized.

Paul was hit an umbrella and a drink on his deck. Here it's like one hundred and two degrees there, Tina and he and he said, get Tina ford him and he did so. Because the arch question in America Drive time this morning learning is what is the United Kingdom election? What does the French election mean for the first Tuesday of November in America? What do we take away?

It's a million dollar question, or maybe more analysts are like traders, you know, we like to spot patterns, but it isn't very obvious what the implications might be for the US, except that surprises happen in democracies. In France, a surprise really happened. I mean, even though we observed how this very unusual to the American political mind, this collaboration between different parties of where candidates would drop out of races that were calculated so that the end goal

Us, Tina. Given the elections of both in the UK and in France, what does it mean for the UK and the European Union in terms of their relationship? Can they be closer together or is Brexit still I guess kind of the issue for the two entities.

Well, Brexit was the word that you know, dare not speak its name during the campaign. Caros Starmer, now, the Prime Minister, did not actively campaign on reversing Brexit or anything like it. In fact, he said the day before Britain went to the polls that he didn't foresee that the UK would return to being a member of the European Union in his lifetime, thereby crushing the hopes of many, given just what a negative impact it's had on the

So in the UK right now, what is the to do list for this new government. Is it simply to project stability or are there certainly some things they want to get done here well, as.

Is usually the case, of course in national elections, the focus was very domestic. It's the first UK election that I can recall in my twenty two years of being here where housing reform reformed to the planning process was was front and center, and also the UK's crumbling public services. These are in the top five concerns from British voters. So the new Chancellor of the Exchequer the equivalent of Treasury Secretary Rachel Reeves, is talking a lot about delivering growth.

One final question, do you trust the polls in the United States of America?

I mean trust sounds sounds like you know, it's something.

Almost are useful. They are.

Any poster will tell you a poll is a snapshot, not a prediction. Everybody seems to forget this, It's a snapshot of where public opinion is today. Do I trust the polls? I certainly use them as the only available quantitative measure. And I think that most people's gut instincts are terrible when it comes to reading the public mood. But the same with prediction markets, Tom. They are always wrong, and yet they're cited in every single cell side research report.

Tina, Thank you, Tina Fordham just excellent. Can't say enough about our Fordum Forum Global for site. It was sitting room for years as well. Joining us Now a young buck Terry Haynes with Pangaea policy and I'm sorry, Terriott really hit home and I'm not frail, but there you are. What is the frailty measurement of this president? This morning?

I'm in the I'm on the large font club myself. Tom, So thank thank you all, thank you all for gathering this morning. Uh, the frailty quotion is I don't know you know, I'm not a doctor, but the uh, you know, you can be frail and with it and uh and you know he bed by by public view. He goes up and down, so you know, here we are. But he still knows how to give the middle finger to people.

Well, jump in here, Paul, I'm rattled by Rachel Bdard's wonderful essay.

So, Terry, I think if you were to ask John Q Democrat out on the street who he or she wants to be the nominee for the Democrat Party, they would probably respond, whoever can bet former President Trump the Republican nominee. Do we have any idea who that is? Today?

Well, based on Bloomberg Morning Consultu polling, it's Biden. Biden's right in there with an electoral college tally that is basically even with seventy seven unknown votes in the middle. And you know, he's right there and able to be able to right the ship. So this whole business that you know, Biden's going to tank was wrong. The whole business that Trump's going to take votes from Biden is wrong, and that's really wrong.

We've talked about that.

I mean, whoever tentative Biden voters are, they don't want to go to Trump. And you're in a situation now where the apparently the wheels aren't falling off, and I imagine that's part of the President's calculations too, in them middle finger Friday night, Well.

The President is out with a letter just this morning, addressed to Democratic lawmakers and released by his campaign. Bloomberg News is reporting and it's quote I am firmly committed to staying in this race, to running this race to the end into beating Donald Trump end quote. So there, I guess that says it all there, Terry, Is that kind of where we leave it at this point?

Well, I find it interesting that everybody wants to give the smoke and mirrors on the political and donor side all the credence in the world, and Biden none of the credence. And Biden was I thought, very direct on Friday night. Regardless of what you think about the directness or you know, how you know whether it's advisable or not. I mean, that's where it is. And unless there's another glitch of the kind that existed in that debate, he's going to stay in. And that's what he said.

Terry Nick Thompson at The Atlantic had a brilliant observation. I'm going to paraphrase it here. I want to be very careful, holl I do this. He said, we've become parties plural, but in the Democratic Party of an anointment by an inside group, you know, Clinton, Clinton's plural, Obamas plural, et cetera. The Bushes on the other side, maybe mister Trump, et cetera. How do we get back to our ute where they actually, you know, really had a debate with

It can come back pretty easily. Actually, you only need you only need one rule change, and that's the that's the rule change that since nineteen seventy two for Democrats nineteen seventy six for Republicans, requires the delegate vote to be an assignment to be binding on the first ballot. You take that away and you get the old style conventions where people assemble and all of a sudden figure out you know what, I don't like any of these people.

So I guess that goes to the next question to her. Should Tom and I be paying attention to these conventions this summer?

Sure? Absolutely?

You know, right now I don't think there's I mean, right now, Trump's going to be the nominee on the Republican side right now, Biden's going to be the nominee on the Democratic side because nobody can tell him no, apparently, and you know, you've got the political class on the other side saying, well, he's got to make a decision by this Friday. Let's let's think about that. This Friday is just after the NATO summit and just before the

Because of time too. I got to squeeze this in. You led with a single sentence that I've heard many others say now that all that matters is the polls. When do we see polls besides a Bloomberg pole it was out, When do we see polls that quantifies pro Biden anti Biden, for that matter, pro Trump anti Trump.

I think you see them trickle in later this week, and there's probably another big trash coming just before the Republican Convention. I would urge you all to pay attention to only two things, what's actually going on in the swing states, and whether they are registered voter or likely voter polls. Likely voter polls are what matters, and registered voter polls are pretty much all you're getting right now.

This has been brilliant. Terry Haynes is always thank you so much. With Pangaea policy. Everybody leaning on what Brian Bilski says. He's one of the pinatas on the street. He's been a bull, he's been correct the bears at m he joins us here from BEMO Capital Markets. We were talking about Michael Mobison and you were way out front of this. I think it was in his year he was at OpCo. He was still getting carted in

Well, thanks for asking, Thank you so much for having us too. I mean, I think that so many investors, meaning analysts or hedge funds or whatever, have gotten away from looking at balance sheets and cash flow and everything. They don't even know what capital allocation is. And these

This I was at a meeting.

I was I was a strategist at Piper Jeffrey at the time, and I was having a meeting and Morgan Stanley when they moved up in the McGrath Hill building. And I remember that day in particular, and that was the bottom in the tech sector. And then from that place that time frame, tech stocks had a massive secular change in terms of how they manage their capital, how they looked at cash flow.

And I think the key key thing with that.

Is that through that, through the cash flow and then filtering into the income statement, how their earnings actually became massively discernible and steady.

That was the key thing, Paul. Paul, you lived this as well. I mean the three of us lived as Lisa was she was in fourth grade or something like that. But Paul, what's so important here is when I say these companies are running like nineteenth century merchant banks in Hong Kong, they're running for profit, not the normal securities analysis we grew.

Up with, so Brian.

But there is the risk here of concentration here. How do you get comfortable with this concentration risk in the s and P five.

We've done a lot of concentration work in the past, and people just kind of poop pooed it. We've shown that markets can do well out of this super concentration. We are worried, quite frankly, on a near term basis, Paul, that the market has gotten a little ahead of itself.

I think that's pretty clear, and we.

Have not had a correction more than three percent, and we need in the second year of this cyclical bull market. Remember our call has been resolute since twenty ten that stocks entered a secular bull market, US stocks having a secular bowl market in two thousand and ninths or got another ten years to go if you want to do the quick math. But we need a nine On average, we see a nine point four percent correction in the

All right, you are at the Bank of Montreal. Let's throw a boone to our friends up in Canada. Opportunities in Canadian equities.

Oh my gosh, you know, I think you know I've been a beaman on twelve and a half years and what I've learned is it's a great stock picking market. But I've learned also that it's a massively contrarian market. When everybody's talking about one thing, go the other way. So everybody hates TD in Canada. That's my pick to click. I mean TD to twenty twenty four in Canada is what City Group was the America in twenty twenty three.

Everybody hated the City Group Ember a year ago.

When they're cutting costs, I think TD is a great place to be from a contraying perspective. I think from a stockpicking perspective to Paul is that you want to look at the Canadian consumer and stocks like a Ritzia in koush Tard which is circle K. You know that brand, very very strong names and Dollar Rama for that matter. So the Canadian consumer names look really really interesting to us from a longer term size.

So does that mean the Canadian consumer is in pretty good shape? Well, you know, all work shows that they have a big home ownership issues.

Big home ownership issues, big debt issues.

But what our work shows from a back testing perspective is that the content can consumer does very well. If the market thinks they're heading into a recession. Now the Bank can is probably going to cut again, So the Bank of Canada thinks so that Canada is going into maybe a little bit of a recession. That's when you want to buy consumer discretionary.

Now you got an election in the way, is well, Brian Belski, you mentioned being contrarian looking at consensus. Right now, the hedge funds zeitgeist is out of tech more towards energy and materials. How do you interpret that?

Well, technically, from our US strategy perspective, we're underweight both materials and energy.

Here's why.

You know, when inflation's going down, the commodity price goes down, and that means the underlying fundamentals are going to be going down in energy materials. If you take a look at other areas of the world, the other there's other places to buy energy and materials, especially Canada relative to the US. And so while we own Freeport Macmaran, and we own Chevron and Exxon and some in Chesapeake and certain equity portfolios, we're not going to be overweight the sector anytime soon.

What are you doing with the glory stocks at the moment? Like, if you want to talk individual stocks. Grade is a general statement, what are you doing with those stocks as you listen to their earnings?

The Glory seven, I think we shouldn't come up the Glory stocks. I like, I come the Super seven. I think the Super seven could be your kind of consumer staples. They'll they'll be your core holdings. And I think whoever thought that a trade down into a five hundred or eight hundred billion dollar company like Oracles a trade down?

I mean, how pathetic is that?

So retail is saying these are conservative stocks, and hedge funds are saying they're a volatility of a certain persuasion.

They are.

And think about this Bill O'Neill, which I learned the business from a long time ago, and then Lisa was in first grade or something like that.

Let's just be clear on that.

But he said that the social money's a smart money and retails of dumb money. It's the exact opposite. Now, So institutional is all about what you did for me yesterday. Retail and private weal, it's all about longer terms of what I have at wealth we think is very well positioned.

All right, So we're gonna have earnings starting actually Thursday. Some of the airlines come out and then Friday, JP Morgan and some of the other big banks. What are you looking for? What do you think this market has to see in this earning cycle.

Well, we've said that we could see a nineteen ninety six type event. Nineteen ninety six, Micron missed earnings, and if you remember back the second half of ninety five, the last quarter ninety five into ninety six, that's when the kind of tech got going, and it was earnings and fundamentally driven. Then it was momentum in dot dot com driven, and that caused a pretty decent correction in the summer of ninety six.

I think that could happen again.

Now.

A lot of people are giving.

Me crap about looking at earnings so closely, but these stocks are priced to perfection. It's going to be more about what they're going to say going forward into into twenty twenty five and twenty twenty six in terms.

Of their growth rates.

So I think we could see a bit of a correction there. But listen, I think earnings on the financial side are understated. I think healthcare earnings are understated, so we could see a kick there. I think financials with respect to return on equity is way understated as well, and I think you're going to see it a surprise up there, especially in wealth management in the capital market.

What's a Belskie correction looked like? I mean in this world, you know, pull a pullback three percent blogey correction.

Yeah.

Yeah, we need a healthy type thing that will scare people. I think anything over five to six will scare people, and then you'll have a little bit of capitulation, let's call it. In this type of market, two PM.

Let's feel some pain.

Just goes out to twenty five or thirty the good old days, the good old days.

We don't want people to lose money.

Let's be clear. We don't like it when people lose money. But we do like it when we see a little bit of air come out of this. And that's I think the needs to happen.

Single best idea stock go Netflix, Netflix.

Yeah, so think about this, what's happening in paramount Think about this. So our theme for communication services is cash, content and consolidation.

It has been all year.

We were overweight last year, neutral this year because we thought there's gonna be some consternation.

Netflix.

This is the Kleenex of streaming it's the clear winner. It's the clear winner, and we think it's going to continue to win while all these others try to combine to take it on.

I mean, Paramount just the opposite side of the trade. They get taken out today arguably down now down you know almost you know about three quarters one percent, So go figure out.

Okay, sorry.

The American consumers super smart though they know the product that Paramount is offering, what they're gonna be streaming. Just like on our retail side, they're super smart. They're going to go to They're going to go to Costco and Walmart all the time to get their stuff, but they're also going to go to like Lulu to get their specialized stuff.

That's Lisa, you know, I can understand that. Brian. We got a couple of minutes left with you. We've extended this interview because it's frankly, it's important, and Brian, I want you to talk about the job now where cab drivers don't have an S and P on their lap or a Valian line next to them looking at individual stocks, How is your world change when everybody's in ETFs and index funds within our square square to point nine to eight it's a different world.

It's a different world.

Like when I used to come to New York, you'd ask when the cab drivers and the uber drivers were talking about stocks, you knew it was the end. And now you have to kind of pull it out of.

Them a little bit.

It's more about when you're in stores and you're talking or in restaurants and you're talking about how business is.

You have to kind of do that bottles up.

But my biggest problem with the people that do what I do, and let's face it, it's a really, really tough job. Too many strategies and comics are worried about the market levels. They're forgetting that the stock market is a market of stocks. I think that's where most of them have been wrong in terms of their market targets.

Let's talk market targets. You got SBX. I think at fifty six hundred, you guys are one of the first on the street to raise your targets. Initiated a fifty five hundred bull case back in November of twenty three. Here we are, We're darn close to fifty six hundred. Now where do we go?

Well, well, it's call it today.

The markets are in there listen.

I think I still think we're gonna get a better buying opportunity. What's really cool about corrections are and especially in these big bowl markets where fundamentals actually early. Verybody keeps talking about momentum, but on average you get like a fifteen percent rally once we make a higher low, right, And so it depends upon where we kind of see the market going down in this cuestion.

Tom asked a great question, what does a crustion look like? To us? We would love to see a ten percent correction.

We're going to get there. I don't know if we see if we see an eight percent correction, we're going to see a twelve percent correction because we're going to not see ten exactly. So you know, we think that there's a likelihood of fifty six hundred is probably too low.

We'll see if we have to adapt that. But we're very very very very comfortable with where we are right now.

Brian Belski, thank you so much the BEMO Capital Markets there inequities. I can't say enough about the acuity of his research notes plural. We protect the copyright of all of our guests. Get that from BEMO Capital Markets. He's got four. They sound like eight notes or whatever. Yeah, he's got some intern way over it, way too much energy. His oldest son sounding like afidote. Yeah, he'll be in. He's looking at Netflix now. Used to be the note you got from Belski and now he's go you run.

It's all about efficiency at PMO, Man, we're efficiency ratio man e largest making North America, fourth largest making commercial fourth Marrow's commercial wake in the United States.

As are you and Ian Lincoln? On speaking terms? What's that? Oh? Yes, of course we are. What if we get a three seventy five three eighty ian lncoln yield? What does it do to your world? Nothing?

Nothing, because I think it's I think we're three fifty to four to fifty for a while, and that's normalization.

This is really good.

Three seventy five four Take it, Brian Bells, thank you so much. Beam on capital markets in the front pages of Lisa Matteo show. At least I thought it was a great list. What do you got?

All right?

Boomer?

Not sure if you guys have done this, but a lot of boomers are passing their wealth earlier to their millennial kids.

There's a little bit of a catch though.

It's called tuition.

They're telling business Insider the kids, if they get the money now, they're not going to expect that inheritance later. So you take it now, enjoy it because you're not kidding anything. Later they can give them yearly cash gifts, paying for grandkids though, to go to private school, go to college. They're helping them with down payments for homes.

There's something we'll shifted here. This came up this weekend. I mean, when we were kids, you knew you'd go three, four or five steps down from your parents. You know, if you grew up advantaged, you knew you weren't advantage. My first apartment was above a pizza parlor on Monroe Avenue, down from Getsies hot Dogs, and every night at two am the cockroaches came upstairs. Kids don't want to do that. Now, they don't they want to don't want.

To do I don't know, you know what we did, but that transfer of wealth. I mean, you hear from these financial advisors are saying it's gonna be trillions of dollars from the baby boomer generation to the next. And how do you get it from one generation to the next and most text social way, and that is an industry in and of itself.

I'll go with that, but also for me, and what's important here is what do they do with the money?

I mean, I told my kids the last check I write, it's gonna bounce. Baby.

There we go, cruel and unusual swinging.

So we talked about a higher housing costs, right, because that's the problem. A lot of kids can't afford to get the house. But it's also pushing couples to move.

In together earlier.

So I know, I moved in with my husband before like we were married. Oh yeah, Dad wasn't happy, but that's a but it did help, you know, financially because we were able to split the rent.

So a lot of couples are doing that.

But the problem is relationship experts are saying that it's causing some friction within the couples, so they're breaking apart earlier. But hey, I'm going on twenty five years.

So it.

Worked for you, but it's not working for everybody, and that's the problem.

But that you can see the economics. Housing affordability is just a huge issue.

A lot of people sing in a country. Can we all agree the biggest thing is a single tax joint tax differential. I don't, I don't get okay. They want to promote being married, so if you joint, you pay less taxes than if you're single. And I just I never got it. No, it's a big number. I mean for a lot of people.

All right, what else you Lisa, Okay?

Reach too much? Informations?

Retailers they're rushing to ship their holiday goods earlier because they want to beat the rising freight costs. You have companies like Mayor saying that they're going to increase a freight costs, so they want to get ahead of it, right, So they they're brooking their peak season forward moving goes from December holidays as early as April and May instead of July and October because they don't want to risk the empty shelves that we saw during the pandemic.

So they're moving these these dates up higher. But it's a risks rising.

Is it because of oil or is it the upset in the Red Sea?

I was about to say the Red Sea. It's a lot to do with the Red.

Sea financial times. This is a good financial times and attacks on ships in the Red Sea of forced carriers to take longer transit routes, injecting unpredictability and global supply chains that increase port congestion from Asia to the US East coast. So but again that means more inventory on the retailers, right, it's all so that could be a margin issue.

Oh that's interesting, right, because they're they're they're hoping that they have the consumer demand.

Hope that's right here that we did. We did the children's names thing earlier. Yeah, you know, it's a slot. I'm getting the amount of hate mail gets off the chart. Everybody named their daughter deaf and in fun of it, I'm sorry, folks, I meant no ill Willy. We're just the messengers we start calling you. How about that that was one of the names.

My goodness, Now, what kind of socks are you wearing on your feet when you wear sneakers, Let's say, are you wearing the low cut socks or the high cut socks, because it's kind of an indication of how old you are.

So I don't know, I wear the low cut side.

But apportently it's this controversy that's kicking around about your sock height.

So the higher socks where it covers the ankles, you know, like.

And even with sneakers, they wear the dark socks, which you I would to get left off the playground if I did that back in the day.

But now it's the opposite. So you have this shift.

So now it's popular to wear the higher cut sock and not the low ones. Apparently I'm not the cool mom anymore. I was told that a million times. So this is a new thing. Teens and gen z they wearing the higher.

So it's important here. And I go to surveillance fashioned slave data them cam advisers, I mean roth, I should say, and you know Darta wears the socks with like the flip flops or the and I mean you know, this is a major source of conversation. You know, after thought almost threw a baked potato at me. Yeah, I mean, what do you think the socks with sandals?

The kids do that with the little slides they wear.

Dartist style in that he's out on some islands somewhere. You know, what do you what do you think? I mean, I'll be on YouTube chat. I mean should I can see me in the doc Martin slides with the socks.

But do you have to be the high cut slot the socks. You can't wear the ankle socks anymore?

Parents ankle socks are yes, it says.

That you're seventies. Going back, you had the the white athletic socks up to the knees.

Oh yeah, like the basketball players, and.

Then maybe some wing WANs on top of we were two socks, so we had the tube socks going up to the the then we had what's called wigwams. Go google that, Go google that wigwams.

And you kind of push them down, you switch them down.

That's what you were Trent and Cyo basketball. That was the uniform back in the case.

If I can bring us back to something to do with the investment, I'm sorry. This weekend inflation is pernicious. It's out there in every single transaction and the bow ties, a suit and Ti crew we talked to. They're not talking the same thing I'm living or anybody else's living. It's tangible, the inflation. It's just it's every single thing.

It's ever you see in the restaurant, you see it at the grocery store, you see it.

Did you see the price of the bow ties? Did they go up?

Yeah? They did? Yes, thank you. It's a French provider. I think they'll still be in business after the French election.

But it's just the absolute level of price isn't And so the question I've here when will we get accustomed to this new level.

We'll do when our wages go up?

Yeah, but the way has been going up faster than inflation several years. But still not there. Still not there, I think. So that's the question, when will we all become accustomed to this new price level that we don't think about anymore?

Lisa Matteo with a strong newspaper segment. Here on a Monday, So thank you. This is a Bloomberg Surveillance podcast, bringing you the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube. To see the show weekday mornings from seven to ten am Eastern from our