Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at seven am Eastern on Apple CarPlay or Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Dan Kurnet where this is now founder's CEO at Macro Risk Advisors. He is the surveillance Greek letter authority. Okay, so let's have some can we just some math this early in the.
Morning, Let's give a show.
Let's go there s equals VOT plus one a f GT squared. Okay, this is the way it is, folks. It's physics envy. That's all this finance stuff up is ding kurrent. The rated change is the delta. The rated change of the rated change is the gamma. The gamma on the Vicks is off the chart. How do you go from thirty one to eighteen in the vix? What is that signal?
Well, you give the President of the United States a Twitter account and allow him to escalate and de escalate through tweet. Perhaps there's a new Greek called tweet gamma, which is you've just got to follow truth. Social you have to appreciate the uniqueness of this specific risk event. Kevin Wirsch once told me, if you've seen one financial crisis, you've seen one financial crisis. There is commonality, but they're all unique. A decade ago was Brexit and we were
following British poundvall. Right, now it's crude and that's the epicenter of every single correlation out there. It drives the VIX, it drives the move index, the S and P, credit spreads, and Trump drives crude.
Speak to Global Wall Street right now, listening across the nation, around the world, Dean current, We've had a short cover, we've had an OMG, you were going up cover. What is the positioning right now that you see?
Yeah, it's an incredibly important question, and it's very difficult to disentangle what's going on oftentimes, because of course there is a ceasefire, there is some kind of green shoots of good news. You wouldn't see crude fall by as much as it has unless you'd seen that. And yet markets have got a lot of mechanical trades that live
and breathe within them. There's a CTA trading strategy, Commodity Trading Advisors, which essentially got very short on the way down, and then as the ceasefire prospects emerged, they had to rebuy. So that was a lot of fuel adding to the market. If you bought hedges a couple of weeks ago, you bought them at a very high VIX. They were expensive hedges, and they're going to lose value very fast because as you reference Tom, the VIX has fallen fast. It's not
just fallen, it's fallen fast. So if you've along these hedges, you've.
Got to get out of the way.
If you want to retain any value for that insurance, you got to sell it fast, because the market's going up and imply volatilities going down to double whammy against you if you want to keep some value. That also adds fuel to the fire because when you sell a put that you own, someone's got to buy stock. That's
the hedge. And again, all of these things have happened all at once, and so what I would just say is I kind of caution the interpretation that, Okay, the vis is way back down, and that means that there's a lot of optimism on the ceasefire. I think there's some, but we've got to respect the positioning that got kind of re orchestrated as a result of the ceasefire as well.
Dean, when you're talking to your clients right now, do you feel like they're looking to buy protection or they looking to maybe buy some risk.
Here, Well, I think it's kind of a both, right. You can't get away from the SMP as a benchmark. We're basically back up. We're really round tripped from seven thousand.
On the future as well.
Yeah, we're really exactly where we were on the eve of the war. And for folks who are managing capital, the risk of falling behind is a real thing, right, So the SMP is this benchmark that you really have to be careful not to underperform. So, yes, they are rewaiting now if they're listening to us, they're also looking at the prospects for owning insurance. That's really what the
VIC is. It's a proxy for the price. Really have a five percent one month put on the S and P five percent out of the money, and that's going to cost just something like fifty five basis points. Right now, I think that's a really good deal.
I was going to say, is that is that expensive or not? It seem it's.
Right back to where we were on February twenty six, in fact, the day before the war. This put now costs twenty five percent less than it did, ok. I find that hard to square. I think that the last two months have added to the totality of uncertainty that investors are up against.
Traders want to go into the weekend with risk because, as you mentioned, we're just one social media post away from armageddon or just one way or the other, positive or negative. I'm not sure. So what a trader do kind of towards the end of.
The week, Yeah, I think, well, so there was a little bit of a trend where the Thursdays and Fridays were bad returns and then Monday, Tuesday, Wednesdays were good returns. I think we're a little bit away from that right now. And I think what we have to recognize is that there does seem to be a motivation for Trump to try to, you know, kind of tie things up into Clare victory, and that's the strategy. And I think we have to, you know, recognize that a real.
Treat for global Wall Street. Here at the seven o'clock hour, we start strong Dean at Current with his founder chief executive officer at Macro Risk Advisors. I make jokes about it, but it's it's all Greek to say that, let's do a book pause here so that I'm here one day in the combine. You know. It's sort of like Game of Thrones. It's like in season three, that big tall tower. That's what Bloomberg's like. Somebody comes up a minion. There's
someone upstairs to meet you, and he's very strange. I go to the escalator and look up, and I'm almost in tears. It's Sheldon Leytenberg, who invented the Bible on options. I kid you not. He's got the short sleeve white astronaut shirt like an Apollo thirteen with the fourteen pencils in the plastic container. Explain to the kids right now some of them pass CFA or announced two days ago, some of them flunked. Explain the value of learning the first seven Greek letters in finance.
Well, I think I'll quote Annie Duke's the famous poker player hook book, Thinking in bets. We all think in bets, we all think in probabilities. And I think that's if you're trained in the options market.
There's a couple of things.
One is that there's the physics side, the heat equation and all the fancy math and greeks that come out of that. That's fun and interesting, and I think it provides you with a framework to think about relative prices, arbitrage type prices. So that's the first thing. The second thing is markets are strange sometimes and they can get very far away from the physical sciences. Interpretation of black
shows you have to be very careful. And you've seen a lot of folks, brilliant folks like long term Capital blow up with the model being gospel.
So let's go to chapter fourteen. Nobody reads it theta. That's where I live the DX folks in the calculus. Theta to me is the most understood thing here. Explain if a pro has a bad the vix is moved, they have to rehedge, explain how they handle the data, which costs money. That's the biggest problem. Nobody ever says this in the media. It costs money to hedge.
Yes, So the first The best feature imbedded in an option contract is that it gives you the right to change your mind. Wall Street is a you know, it doesn't really give out free lunches at all, and so it charges you for the right to change your mind.
That's important.
And the charge Tom is theta. Meaning if you own an option contract and you're all jazzed up about hedging and you think the market's going to fall fast and nothing happens one day that goes by, is the theta. That's the time decay. So all lseqel that option contract is going to be less worth less tomorrow than it
is today. That's the theta. And what you're balancing that against is the level of churn, the movement in the market, because the movement is what allows you to make money on theta's inverse, which is the gamma, right, that's the rate of change that you can monetize, and that's what you're balancing. It's the time decay versus your ability to make money trading when you own options.
Paul, should we move on? Please?
Thank you?
You brought up theta exactly.
Tom asked word see over the last six seven weeks with this war here, how would your characterize the trading in the market. It didn't feel panicky to me. Yes, we had the vics kind of push out that close to thirty, but it didn't feel panick. What did you see in the marketplace, Well.
If you look at the results from the big banks, the trading was fast and furious, you know, all things consider, this is a fascinating event to study.
The vics I.
Think on an intro day basis got as high as thirty one tie, but during the tariff tantrum last year it got to fifty five, so that was considerably hard and the drawdown was considerably greater last year. What you do see in these sort of more macro events, where again crude is the epicenter and the linkage has become prominent, is a move towards index and ETF trading. Right, so there was much less discussion around the AI trade over
the last couple of weeks. That's maybe going to come back into you know, into view because earnings are coming. But people were very furiously trading macro instruments and that's going to lead to options and ATFS.
We are now getting you right into the teeth of the earning season. When you talk to your clients, are they pretty constructive on the earnings out look here and the ability for earnings to support this market?
I think that's definitely been the playbook. At every turn, we find a way to for the hyperscalers to increase their capex and even at a high bar, to report incredible earnings.
Okay, let's do that. Let's get away from derivative madness. I keep mentioning this, folks. There are these two guys, Merton and Medigliani. They could execute the double play like nobody. But the answer is bonds is a substitute for capex. Worry if they just issue the bonds five and seven times over subscribe their profit making companies. Who cares about the capex given the marginal thirty to fifty billion dollar bond issuance.
Yeah, I think I think you're correct. What I would just say is that the bar gets so high quarter after quarter after quarter. Right, there's no doubt that in Nvidia is going to report that they've made a tremendous amount of money, as and Meta and Amazon and Microsoft are going to say the same. However, and you know, we can use Microsoft as an example. It's an interesting one to look at because the way the options market
prices that particular earnings. And you can see this little plug here on the E r N page of Bloomberg. You could see the one day implied move that the market is ascribing to the earning state, and that's about
six percent. That's really really high for Microsoft, and it speaks to the angst around software right the Again, this is where the bar gets so high and then you start to you know, impose slightly different assumptions, slightly less optimistic assumptions, and suddenly you're dealing with a you know, a negative results.
It's a math guy like you have a buy on Microsoft.
I have a hold on Microsoft, as in hold the spy, and it's a part of the spy, not really doing single stocks as much.
It's like, you know, it's like he's working for a mutual fund. You what you need is a carefully balanced.
Portfolio exactly, Dean. What are you looking for here for the next direction move for this market? Do you think?
Yeah?
I think probably more than anything, consolidation with the you know, we just have to be incredibly mindful of what we've just gone through and that and this is not any Trump arrangement syndrome.
It's just to notice things.
You've got to notice a Twitter account that's moving markets in a way that doesn't feel really constructive. I think we're supposed to also look at the inflation side of things. That's a new new sort of thing that's been introduced. But at the end of the day, the earnings engine of the S and P is what empowers everything. If that can hold up, then we may just move on from geopolitical conflict decurrent.
Thank you so much, really appreciate this morning. Stay with us. More from Bloomberg Surveillance coming up after this.
You're listening to the Boomberg Surveillance Podcast. Catch us Live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.
Patrick Murphy is an earned authority. Is far more than a former Undersecretary of the Army service to the nation. He is geopolitical Advisory Hillcoke Global. Patrick. Did you study blockades when you were in service? Did you study them in forms of military school? How does Patrick Murphy discuss a given blockade?
Of course, I listen, you had to talk about it, and you know, you learn about what we did, and then during a Cuban missile crisis, you know kind of what started that. But as you know, I taught at West point for years, and I still lecture at the US Army War College. You had to know all the demands domains of warfare, you know, land, sea, air space, and cyber. So you know, that's what we try and do at HOKO Advisory HOCO Global for our advisory group.
And I tell you the world has never been as bald as it is right now, at least it feels that way.
You know. I look at this and I fall by Patrick on my deep military career Russell Kroll and Master in Commander, the Patrick O'Brien movie of the Napoleonic Wars. This is a Napoleonic Wars AXIOS has today. That's seventy five percent of casualties Ukraine, Russia are from drones. Patrick Murphy on a blockade in an age of drones.
Yeah, well, listen, I let's hope that there's not swarm drones going after you know, our troops that are over there, because as you know, we've had the largest US military build up in that region since before the Iraq War, which I served in Darni invasion. And you know, it's already cost you know, when you think about Tom Today's tax day, it's cost the micro tax payer by the end of this month, two months of the war, forty two billion dollars.
And that's from the.
Pen and Budget Model Office at Penn Wharton where I teach. So you know, that's why a lot of Americans are saying, Hey, you promised me one thing, no new wars, and you gave me this. You promised me less inflation. It's gone up. And you know, I tried to be four point two percent gas prices over dollar. And that's why, you know,
for US looking and advising industry, they want certainty. And that's why not just the American people, but Wall Street and business across American this world are pretty frustrated by what they're seeing.
Patrick.
You know, the air offensive against Iran has been extraordinarily and extraordinarily effective. But I think what we've all learned over you know, the last thirty forty fifty years, there's always so much air strikes can do here. What do you think the next step should be for the US here? I mean there's additional talks today of maybe extending the ceasefire. What do you think is is the best off ramp here?
Yeah?
Well, listen, that's those of us who've seen war and I've lost nineteen men of my unit, and evasion in Iraq do not want war. We'rethy, reluctant warriors. It's always the last line of defense. It's also a failure of diplomacy. So let's hope that we then restart new negotiations. Obviously, Pakistan, Turkey, i'mon and now China are trying to broker that and get that back on the table after the first twenty
one hours didn't go well last weekend. And by the way, there's also negotiations as we know in Washington, d C. Right now, between Levenon and Israel. So it's a fragile ceasefire. But those of us who understand warfare understand that, you know, you cannot have regime change with just airpower. We knew that months ago, right and anyone that understands bilt their history and as commanded that understands it wasn't gonna happen. And you know, the Iranian regime is still in place.
Obviously we took out their top leaders, but the toll Son is now George. He's even more radical. He lost his wife, he lost his son, and that's why a lot of folks are clamoring to say, how are we going to bring this to as you said, an elegant solution at elgon end here where we protect their interest, have the straight flowing again because of you know, our greatest allies get like you look at South Creage, you look at Japan.
Seventy percent of the.
Oil comes from the Strait, and so a lot of phrasey asking America to figure this out real quick.
I got to get this in. I've only got a minute and a half. I'm so sorry, sir your comments and the firing of General George General Smith, General C. Q. Brown Jr. And for that matter, Admiral Franchetti as well. What are we doing with our top brass.
Well, unfortunately, a lot of great public servants that have warn o'clock this country been let go. It reminds me of when we fired the Secretary of the Army, Eric Schecky before the Iraq work because he spoke truth to power and before that war.
And I will.
Tell you I am a big believer Tom and suing leadership over military should be that way. But at the same time, you know, as someone who helped lead the army, you have to listen to military experts and you have to listen, and God gave us all two eyes, two ears, and only one mouthful reason. And I feel like they're listening only for the They're already listening for what they
want to hear. And patriots like Randy George Iraq, Afghanistan Vetcher, West Point graduate, c Q. Brown, the Chairman of the Joint Chiefs of Staff, and so many others have been let go. And a lot of us who've worn the cloth of our country. Are you know, one eyebrow up saying what the hell is gone down there?
Washington?
D C.
Patrick got a run and Paul and I got to run. But thank you so much for your time and your public service. It's odd I find Patrick Murphy, that sparta who drives the whole ship here. He said the same thing to me the other day. Hey stupid, you got two ears in one mouth. Fix it. Mister Murphy is with Hillco a Global and of course the former Undersecretary of the Army. We greatly appreciate his support. Stay with us. More from Bloomberg Surveillance coming up after this.
You're listening to the Bloomberg Surveillance podcast. Catch us Live weekday afternoons from seven to ten am. Eastern Listen on Apple, Karplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.
She is Wolf Research always a help to us to fed asides and lots of other good economic Stephanie roth darkins the door today. Can you make a GDP estimate? Now?
Yeah, you ken, I mean you have to make some assumptions, right, So we're assuming that at some point in the next couple of weeks that the war ends, and I mean both sides seem to want to get to a deal despite them being relatively far apart. What you're seeing so far is that there's there's no real negative impact on consumption. You're hearing across the board from companies, the credit card data that spending is pretty solid.
There is cattle a record high that does a dend consumption.
I mean, there are parts of the inflation bucket that are elevated, but so far and spending has been solid.
Returned to surveillance. Steakhouse correspondent Paul Sweeney, where's your tip point on a steak menu item? Is it seventy bucks? You go? I'm not paying that.
I think I represent the market. There isn't one. I don't eat it. That often. But I'm going i will find myself in a steakhouse. I'm getting a New York strip. I'm not getting you don't have a price resistance point, but I don't know that often. So it's to me every time I walk into a steak house, it's a special event.
So God, Lisa Mateo's not here. He has had steak in thirty years. Paul Sweety was Stephanie Row.
So we're Stephanie. Where do you think we may see some of the spillover of now seven weeks of work, higher energy costs. Will we see it in inflation? Will we see it in slower economic growth? Where do you think we'll see it? If anywhere?
Yeah, So far, the March inflation data have been a bit lower than expected for a couple of reasons. Airfares haven't been quite as high as expected. They were still elevated, you know, call it about two percent month a month.
You've seen there's other some other.
Things that went the other direction, like legal services, which is you know, sort of a one off thing. Generally speaking, we do expect to show up in the inflation data the next couple months, specifically in airfares, that's the component that is most tied to energy prices. That is part of core, but outside of that, it might take a
long time for it to bleed into inflation. And if the economy is humming along, if the labor market is picking up a bit as we expect, then then the economy should be fine.
We're looking for two point three percent GDP.
Growth and the consumer. Are we in an economy here against are the US economies roughly seventy percent? Services? Is the case shaped economy such today day that the higher part of the K is just driving the bus. It almost doesn't matter what's happening out there because we have the other part of the k. Those folks are really struggling paycheck to paycheck, But we don't see it in the ultimate data points, do we?
No, you have it, and you've seen just the middle to upper income people just sort of driving the economy and it's you know, it's a problem and a real world issue, but from an economic perspective, when you look at the macrodata, you don't really see it because everybody else has been spending fairly well.
Sephanie Wroth with us with a terrific synthesis with Wolf Research of where we are. So the UNIMF puts out the Green Book. I saw it, folks, I relinked in it. Guess what, I haven't read it yet. It's like four hundred pages long. I need a beverage and bill sit next to me. But then the Green Book, they say, OMG, the United States their their deficit treasury bill issue wins. And yet everybody out on Lexington Avenho says, we don't care. So what is it? It? Does it matter?
I mean, it doesn't matter for now.
At some point there could be an issue where the botto market really starts to be upset about it. But you know, we've seen a couple of periods of time where the bottom market gets concerned about the deficit and then it kind of moves on because over the short term, generally speaking, it's economic conditions and FED policy that tend.
To drive where the tenure is.
And by the way, the US is different from the rest of the world because the US is a reserve currency, so it has the ability to take a higher deficit.
I get it.
But okay, Paul, but I know you want to jump in here. I gotta go to this. I gotta sell Barry. I can agree my book of the summer, folks, is money and borders. It's very ic a green of Berkeley, And it's exactly what Ms Roth just said, which is our seniorage, our our having the US dollar is absolutely fundamental. The strength of the dollar, the use of the dollar is truly foundational to your work.
Yeah, so, I mean what would happen in other countries.
What tends to happen is if investors don't feel comfortable with the currency, they're gonna they're gonna pull their money out, and then you get some big currency moves. But in the US it's different because it's the reserve currency. So people continue need to need to trade in the dollar, and in times where you really get risk off, money still comes into the dollar, which then puts downward pressure on rates and helps to offset that.
Paul. It's like your rock stars seating at God's country. Sure, Okay, it's an exorbitant privilege. That's your true that's you start to stay. He loved God's Country, Paul.
There we go, So all right, talk to us about the labor market. Are we still in a market where it's little to no hire, little to no fire, and we're just kind of stasis, right, here.
Yeah, it's been a slow labor market.
This low fire, low higher environment seems to continue to be the case.
We might see a bit of a pickup in hiring from here.
We might see call it around seventy thousand, which has been the most recent three month run rate. You might see a bit of a pickup in cyclical hiring.
There seems to be less of.
An appreciation for the fact that tariff uncertainty did weigh on a labor market last year and that is starting to fade. So our expectation is the labor market should be hit better this year than it was in twenty twenty five.
If it's not really growing the labor market, how does the economy growth to Did it exist? Workers just get more efficient? I guess maybe AI, I don't know.
Yeah, it's been a productivity cycle that's been a key driver of growth and net what problemly continue to be and productivity could be really strong in the next couple of years, right.
Paul, just ask folks the single smartest question of the quarter, of the year, of the decade, whatever. I mean, this is something on every American's mind. We're sort of leveling out with the immigration changes and all that productivity to the rescue. Okay, great, but does productivity help how many Americans? What portion of the people benefit from Stephanie Roth productivity? It's not fifty percent, is it.
Well, So here's how productivity ends up being a good thing for American consumers. It's generally speaking, is initially good for companies because it helps the profit margins. They can
hire less and produce more. But then eventually, at least in theory, then you end up having competition amongst companies that drives down prices and it allows real to rise or wages can rise above inflation, and the people that are, you know, having trouble with affordability can kind of grow into some of the prices are that exist today.
We are seeing wages growing, are we not.
We're seeing wages growing, but we just are growing faster than inflation.
But we could see that play out even more.
You tend not to have strong productivity cycles and inflation problems at the same time.
This is brilliant, Paul, your question is beyond trench and this is unfair. It's not Cairo, it's kro Illinois. It's like this wicked historic Civil War location at the tippy tip bottom of Illinois. The unemployment rate there's fourteen point six percent. Now I'm cherry picking one of the worst economies in the country to be to be fair, Alexander County and Caro, Illinois. But stuff, I got to be quick here. I mean, the dispersion of productivity is more narrow maybe than we think.
Yeah, it's possible, and you know, eventually that could that could broaden out, and that would be that would be a you know, really positive development if.
It takes time.
If it takes time and which it generally does these productivity cycles. And there are pockets of the economy where, of course unemployment radar is higher than others. But you know, you know, a little about four percent is a fine place today.
Brilliant Stephanie Roth, Thank you so much for the little research. Stay with us. More from Bloomberg Surveillance coming up after this.
You're listening to the Bloomberg Surveillance podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.
David Serby and here I got to get one investment Covin in your David Sarby in studio in from Detroit with and Cora is, Well, you didn't go to cash, did you?
Absolutely not.
Cash is trash compared to on an inflation adjusted after tax basis.
Why so, do you fly new cash now?
Or do you go I made the right decision? You do?
You put cash to work prudently. Okay, But if you look at when sentiment gets unusually bearish, as it did in mid March. Twelve months later, the S and p on averages up twenty percent, the Russell two thousand small caps up twenty five percent, why go to cash?
Okay? So, folks, we've got a really special treat for you right now. We get Sobery out of the way with the investment thing. Nobody cares and we're thrilled he is here today, Paul Sweeney. He's like, yeah, I do finance and bonds and banking, and yeah I can do radio. Tom Keene amateur, Mark Crumpton and Katie Ka Pittsburgh yep km OX and say you know these names, Walter Crost before CBS out in the midwe What people don't know here is we get to work every day with a
rock star w JR. All you need to know is there was a point where they said to Ernie Harwell, where we structuring Michael Barr with us from w j R, which David Sawerby is a foundation part of Detroit. What was it like the day they said goodbye to Ernie Harwell of the Detroit Tigers.
I'll never forget this. I was driving down dis Road and I'm listening and at first I hear that, okay, well, there you know, Ernie Harwell is going to move on. And it's like, oh, that's too bad. And as I'm driving, all of a sudden, Ernie says, no, I didn't want to go. They told me to leave, and I almost wrecked the car and I'm like, oh, no, this is And sure enough the moment I got into work, it was David Sawerby.
I mean, you live this as well. Michael Barr is iconic within Detroit. We treasure having him every single explain like KMOX and Saint Louis or Katie Knaw. There's WTP, Washington and all that explain Michael Barr and w JR. To people who were bored out of his financial news every day.
Ernie Harwell was the voice of the Tigers. They brought him back. Remember that and an icon in Detroit. And I'm here to speak for Detroit. When I was walking through the airport to board, there's a store. It's called Detroit Versus Everybody, and I can tell you with great enthusiasm. And Detroit debt has been upgraded eleven times in the last ten years, from Triple C to BUBA one. It has been It had been a long time since Detroit was investment grade, but it's a value stock that got much better.
Okay, we got to get back to investors of Michael Barr quickly. Here where do you go for the best steak, sandwich, kind of meat thing in Detroit? Where is the restaurant?
Well, you know, you know where I love going, and that's the Detroit to Coney Island.
David American or Lafayette, Lafayette, Lafiete.
Okay, we got Michael Bart. Thank you so much for joining us definitive at WJR. Our privileged to be with them every day. Paul Javier Blass. The price of beef just hit a record high, David sawbrig at Coney Island, La Fiette or anyplace else. How do we deal with record cattle prices?
Inflation will still be a temporary event, I believe, because the FED is still only growing M two at five to six percent. That's not like the twenty percent growth rates that gave us the eight percent inflation. So the concern about energy, and it's rightly so four dollars for a gallon of gas, it will be temporary because the FED is not ratifying it by printing more money. They're much more sensible than they were in twenty twenty one.
So David's what's.
Kind of your allocation these days? Stocks, bonds, alternatives? Has it changed it all over the last couple of months.
Generally, no, Public equity is still the best place to make money. Private equity is getting exposed for not having the illiquidity premium people often thought. Private credit is certainly under duress. So it leaves you back to public equity, and with the S and P generating eleven percent free cash flow margins and double digit earnings growth, it's still the place to be to grow your wealth.
Economic data out to get a lift, I got a little bit higher yield, a little bit of the disinflationary since plus empire manufacturing, the buffalo statistic that comes in more optimistic with an eleven versus zero. These are more constructive numbers, Paul, as we've heard from others, including mister Sowerby.
Exactly right. How about equities here at David US versus non US, because we did have a little bit, you know, in twenty twenty five, US equity markets did very well, but a lot of the markets outside the US did even better. How do you think about that?
I still think it's a US biased allocation in portfolios. It's been that way since nineteen eighty seven. SMP has compounded five percentage points annualized over the MSCIEFA. As I said, our free cash flow margins are still well above we're seeing in non US. And a quick shout out to small caps as we like to talk about that. Since Thanksgiving of last year when we all asked for good things,
small caps are up fifteen percent. The SMP is up four percent, so they're certainly robust opportunities in small caps.
As Detroit Lions faded. David Serby AI, is there a mid cap play in AI? Or does David Sawerbery gotta buy Microsoft I?
For the record, in my large cap portfolio, the largest position is Broadcom, which is AI spending beneficiary, but indirectly, I'll give you Stefol mid cap only six analysts following.
Still the financial, Yes, the financial. They're on the shoulder of the Saint Louis Cardinals.
And they're growing revenue at ten percent. The valuation is attractive. They're acquiring advisors who are leaving the big shops to go to somebody who's more entrepreneurial and a very good opportunity. And they're a beneficiary of AI. It's helping them with productivity and compliance administrative duties. Young advisors are learning as fast as to become smart like older advisors because AI is helping UH and a company like.
Steve they have lind Yes, I mean that's another reason.
I'm still looking at the Lafay at Coney and menu here what I do? That's my next ship. That did Detroit, That's where I'm going. We had rotation kind of late last year out of some of the high growth or high multiple stocks into smaller value. Was that a short term trade? Is that something you're playing? How do you think about that?
I think it's got more duration because now it's six months into this small cap rotation and I can buy valuations in small cap on a technical free cash flow yield basis of six and a half to seven percent compared to a treasury that looks very attractive. Amentum is another idea. It's a global engineering technology play. They made equipment for the Artemis Orion rocket. They make equipment for a golden dome for missile defense. There's only six animals
who follow Amentum. It's a small cap MidCap stock.
Twenty seconds. Is it so cool to see Mary Barr and Cadillac at F one? It's just got It's just in Detroit. It's just got to be great.
GM has made a great transformation, better better capital allocation of their cash flow generation. They're growing the dividend once again. You can own the auto stocks more permanently than simply dating them, and that speaks to general motors.
David Sarvey think as much treasure the comments on Michael Barr and w JR.
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