Surveillance: Equity Picks With Gabelli

and of course on the Bloomberg terminal. Maria Gabelly with us right now, needs no introduction with Gabelly Funds and also, of course is wonderful individual stock work sometimes see it in Baron's were thrilled at Mr Gobelly could join us this morning. Mary, I'm gonna stay in a stock theme and I'm gonna start out with your wheelhouse long agoing far away. You knew where spark plug went. You knew the carburetors. You know the automobiles and the tractors. Case

Holland is a bet on the American agriculture. You go long, Case Holland, Why, well, I've got Let's assume the stock markets flat for the next two years. Assumed that the ten year bond is two and a half of two corporate taxes. How do you make so I look for companies that can benefit from infrastructure? Case knew how even if there isn't any, the construction business will boom in

part because of the tailwind up CAPEX from corporation. Secondly, the agricultural ecosystem farmers have underspent, but more importantly than that, tom more importantly, they want precision farming. That's the name of the game. Less water, more precise, less labor because

your factors can do it autonomously. And then what you want to own is a company, uh that basically also has an ability to do s G. A new CEO Scott Wine came up from Fars and so case New Holland a fifteen and a half dollars with a bucket of quarter and earnings in two years and a spinoff of their Ibico business, which is financial engineering. That's enough reasons done it and buy it. Well, let's continue the

theme here. Heister. Yeah, most of our viewer and listeners don't know Hoister h y s t R. Heister Yale. That's not Amazon. What's the risk here of missing out on Amazon and Apple if I go into a gabelly case Hollander Heister Yale. Well, the notion is that you basically have choice in life and choice in making another one of my fifty per centers. Tom is a company called GROUPO Televisa. But going back to Hister Yelle, the stock seventy three, the sixteen million chairs Rankin, who's a

young guy at seventy nine, same age as Biden. He basically is running the company and they put too much money without demonstrating the success in creating a hydrogen fuel for their forklift trucks and then taking that skill set and moving it elsewhere. You know, it's a it's a good bit on the recovery of their business, which benefits from the change in the logistics and the stock seventy three we thought they would earn five dollars in two years.

Were still sticking with that. But the it's not one of my nifty fifty for the moment, but it's an okay play from here and we own it. We're nibbling at it again and we own it and we haven't sold much. It went from sixty to a hundred back to sixty five or seventy where it's training. Now, let me on a bigger thing for you in the grants you at the line, and this is from your notes. I just want to say one word to you. Plastics today you say he would have said batteries why marriage.

Well that's a great point, John, Let's go back one giant step. What we have to do is love the planet, love the people in our planet, and look at the potential in that regard. Climate change requires renewables, that's wind, solar transmission, where I have a bunch of companies that I like, uh, cybersecurity because there's some crazy organizations around

the world that are unfettered, but also battery storage. And then on top of that you have the E V dynamic, and that is do you do lithium eye line or do you lose solid state or which of those two will work? How do you get fast charged, how to get longer distance, how do you recycle it? So the battery is an important element in that ecosystem. We're having our forty six forty six years of an auto conference

this time. Last year was featuring three years ago autonomous vehicles, last year with pre owned cars, uh, and this year it's gonna be batteries. So I like that over the next three or four years, how do we get a major battery breakthrough? And companies like Berkshire have to we understand that what they're doing in their and their field, and companies that provide lithium like album mall In Live and and so on a benefit from that, And how

do we do it in the US. Are you more interested in doing it then through the batteries, through the technology that goes into the car, or can you do which one is in Mariott, I've the answer is that

we look at the entire ecosystem. I'm just picking batteries because it was if you saw The Graduate, which was at R rated probably at the time, it was that scene in there where Dustin Hoffman has to confront the husband or is conf unted by the husband of um end Up without getting into details for this is a next family program, I think that's it. So it's batteries is a good sound, like you could have said removal of plastics, recycling of plastics on it, but I just choice.

I chose batteries because I spent my fifty five years

in the auto industry. So Mario, there is a question if we want to go to the Graduate graduating parallels where Dustin Hoffman was under the water, blowing bubbles and sort of trying to reset his life, and there is a question as you try to look for bottom up opportunities about how you even evaluate what's been priced in, because a lot of the companies that you're talking about the industries, particularly within renewable energy and batteries, have been

incredibly highly bid up because people agree with you, at what point is it too much and has it been priced in? You always look at value versus price. I think you'll make a significant of fifty and four years. I'll give you the four names and then you can pick whatever you want. I gave it case to Holland, I give you Group of Television because the Spanish market

is doing well, the good management, the financial engineering. They're converting it with univisual Univision, and Univision is going public sometime in the next six months. And then you have in addition to that, a company that's buying at a bargain price. Going back to your E D notion Electric Vehicles for the last smile electric Vehicles period. Electric Trucks Company and UH Volkswagen spun off their truck business traded on, but they have a lot of at that intellectual capacity

and they're buying at a bargain price. Navistar, which is closing shorely Tradon is selling at twenty eight euros. They're gonna earn four dollars plus and you've got a good play, and you know the stock is a fifty in two years. So you know, there's a lot of ways to participate at the margins on some of these stocks. And uh, you know that then obviously you gotta play baseball at this time of year, so you don't need to say

what's over priced in this market? What happens when the government comes in with a six point two trillion dollar expenditure and and raise only four trillion and we've gotta increased deficit. You know, we think about those things, but we look at companies Lisa with a microscope, and then we look and step back with a telescope and say, what's gonna work two years from now? Uh? You know, in some of these stocks we don't chase and nor that we go short Nicola or al R and so on.

So I will let you talk about the opportunities in baseball with Tom, and I'm sure that you have things to sell him for his triple average cash fund. There is a question though, about concentration, especially as someone who has been bottom up for so many years. Do you have more confidence in a higher degree of concentration your portfolio if you can do the analysis, then you have in the past, just based on where we are in the credit cycle. Well, you take our small cap front. Okay,

we love the ignored and unloved. And so when we go see a company, and that, by the way, finally getting out to see three or fourth companies, I saw one that's not in small cap I, T and T. You listen to that story. You listen to how management is executing. You listen to how every day they come in and work and they worked at fanties off for the for the economy, for the company, for the shareholders,

and for their constituents. So there's a lot of companies that are not fully understood because you have the new dynamics in the market, MOBI al goes obviously and so on, and then there's a lot of risks. The risk that you point out, I worry about the high margin requirements. Should we increase the margin requirement? I worry about shadow banking the dot Frank Today you guys are talking about the huge amount of money coming in by the banks

this afternoon tomorrow. But it's in part they were reined in by dot Frank if DoD Frank some credits in addition to that. Uh So, we look at the valuations and we look at what is the present value of the future stream and who's gonna buy the company. Lisa think about SPACs, thinks about strategics, buying companies with their stocks at these prices using it as a currency. And even companies that we like are selling converts when a

one percent coopon up to raise money. Mario, I want to talk about the heart and soul of the matter, particularly going into this earning season. And this goes back to the wonderful Jack Welch. The idea of pricing power. Revenues are made up of a unit dynamic and a price dynamic. Are we gonna have pricing power and unit growth to go with it? That's a good question. Talk. The way we look at the model is everybody talks seven percent GDP growth, but that's not that's real. You've

got three percent inflation. Revenues are gonna grow ten percent. So if I was the only company in the United States, I'm gonna have temper cent revenue increase and I'm gonna basically look for improvement in two in part because of the leg effect of certain companies coming through. But if I have a surgeon my cost which is crimping my gross margin, can I pass through my cost with the

margin maintained. There are companies that can do that. Sdn A is not gonna rise temper cent, so I have an increase in pretax mode and then I'm gonna get hurt by taxes and I'm gonna be hurt by uh an increase the multiple. But but the heart of the matter here, and this goes back to the religion of Gabelly, is I want my cash back. I want dividend growth. They want share buy back. Do you see any change in use of cash dynamics. Yeah, I got a big

fan of cash buy back. And if corporate dipp and you're gonna pay on dividends and you've got a soul tax that adds thirteen and then you've got the Obama tax on top of that you're gonna keep and that's a triple tax on childers. No, I'm not a big fan of dividends. I like the buffet approach, get good managements that compound. Yes, he's buying backstock because it's really well below intrinsic value. But but Tom, a year ago, when I was on a program, we had shortage people

who were concerned about financial liquidity. Today they're not as concerned about that. They want supplied their overordering, and you're gonna see some double some of that and the surgeon prices. You saw Lumba come down from seventeen eight hundreds. But you're gonna have wage increases because there's a shortage of lay and that gives you your wage push element to inflation.

And that's what we have to be sensitive about. And one of my directors call out to Perl when he was headed the Bundesbank, said it's like inflations, like two paste. Once it gets out, it's very hard to put it back in the tube. So we have to be super sensitive. At what point does Powell lift this foot off the accelerator on financial dynamics in terms of pumping money into the system, and how will the market react. But that's just a short term pothole in the next ten year

voyage for stock ownership. Mario, let's not wait another year before we talk again. It's got a catch up, sir, as always, Mario Cavelly There Caveelli Fund CEO and sharemon I want to send to Lori Canvasy, to Tim obviously Capital Market's head of US equity strategy, and Laurie let's start there. Do we want to stick with what's worked so far this year energy the banks for the second

half too. It's a great question, John. We spent a lot of time on that in medias and Look, I think that the leadership backdrop is getting a little bit choppier, but I think at the end of the day, there's still a lot of room in the cyclical value trade UM. So your your your poster children of that are going to be things like the financials, energy materials UM. I

might be a little bit cooler on the industrials. I don't think you have the same valuation opportunity and industrial so you arguably have some you know, catalysts from the from the infrastructure bill UM, but I think that you still have a lot of room in these banks, in particular, it's regularly one of the cheapest sectors in the market.

We've got catalysts now in the form of what are probably gonna be pretty buy back at big, big buyback announcements CUP coming, and I think that the underlying economic data is going to continue to run pretty hot. I think they're gonna be some wobbles here, which might you know, kind of keep some of that leadership, you know, moving back and forth day to day, week to week. But at the end of the day, this economy is running very, very hot above long term averages, and that should push

you into the cyclicals for a while longer. Lore readjust market cap right now, do you go to MidCap small cap or you barbell and MidCap small cap with selected big cap So I think that you want to go down into MidCap if you're a large cap manager, and if you're a multi cap manager, you do want to go all the way down into smaller cap stocks. And you know, there are a couple of reasons for that one.

If you just look at it at the broader index level, these companies are still inherently more cyclical than the big cap companies, so you're getting more exposure to that, you know, kind of hot US domestic economy um. And also, frankly, the valuation appeal is there. We've been in this world for the last decade or so where large cap growth megacap growth has dominated. If you look at the relative valuation multiples between mid and large or small and large. Frankly,

I mean there's still pretty astounding. There's still a lot of valuation runway here. LORI, How do you make sense then, given your call on the rally that we've seen in the tenure, notwithstanding last week where we saw the sell off, the idea here that the balance seems to be towards lower yields, how does that cohere with his view towards

cyclicals like financials, which depend on higher yields. Look, I'm an equity strategist, but you know, when I talked to my friends in the fixed income world, they a very good job of convincing me that the yield is not necessarily reacting only to macroeconomic conditions, that there's also a

positioning issue um at play. And I know that in my work whenever I look at anything from a tactical asset allocation perspective, so I look at the healthhold balance sheets, for example, I if I look at tactical assid allocation funds tracked by morning Star, I see very very low bond exposure and very very high equity exposure. So I do think that there is a lot of truth to the idea that there is some positioning um at play

in the in the yield. Let's talk about the positioning in your world energy by more than on sp energy. On that sect. We talked about the banks briefly a couple of moments ago. Laurie, you do some tremendous work on ownership. Who owns this story? How well owned is it? How well owned is that story right now? So let's take energy first, because I think that's a little bit

different from the financials or the materials. If we look at energy, it's actually hilarious, at least if you're a data nerd like me, because every positioning study I run, everybody does their best to stay neutral the end energy sector. Whether I'm looking at large cap value funds, growth funds, small cap funds, hedge funds, SMP five, benchmark funds, everybody just hugs the benchmark waiting here. And I think that's because commodity prices, you know, are difficult for equity folks

to predict um. And I think frankly, a lot of equity folks have been burned over the years trying to make big bets on commodity prices. So they try to you know, just really hug the benchmark. If you look at the Russell reconstitution. One thing we've heard sort of forecast season, um, was certain managers were seeing energy going up in their benchmark waiting. They're like, well, you know, I don't want to be overweight this sector, but I

need to own another stock. You know, I may have one a small position, I need to add a little bit more. I think if you look at the financials, it's entirely different. The large cap long only to have been there for a long time. Frankly, it's something that's really impeded their performance in recent years, and it's working

out for them now. Um. But if you look at hedge funds, I mean they were deeply, deeply underweight at the end of one que and they actually got more underweight, which is the exact opposite of what you would have expected. So the financials, if the hedge funds ever come back in, I mean, get out of the way. They're going to bid this space up in a hurry. Laurie is Amazon, Apple, the rest of them? Are they part of your valuation runway?

So look, when we look at sort of the tech space or the communication services space, I actually have a basket of T I MT tech, Internet media, telecom. I grew up in the kind of aftermath of the tech bubble on the street. Uh, you know, we we started out thinking it would be the craziest thing, you know, we've ever seen in our careers, and it just has gotten crazier and crazier. But that's a that's another tangent um.

But look at the end of the day, you know, I think the fundamentals in that space are unbelievably strong, and I think the secular growth appeal is there. I think that there are two problems with that space today. I think number one, you just don't have the same

valuation opportunity. Now you've gotten better valuations as the year has progressed, UM, but we just don't see cheap valuations versus the S and P. And that's important because for much of the big bull run in that T I M T space from the financial crisis up to kind of that pre pandemic era, UM, we did cheap relative p S. A lot of people forget that it wasn't just about the secular growth narrative. And I think the problem today when you think about the fundamentals, the fundamentals

are fine. They're just not all that special. They're just just not all that unique. And that's where I go back to this idea of a hot economy and the aftermath of the financial crisis. We really didn't get a lot out of Washington, and we had an economy that ran cool below average, below the two and a half percent long term run rate for quite some time. And that's really the kind of environment that secular growth does

well in. But right now I'm looking down the barrel of you know, kind of six seven percent GDP this year, four percent plus next year, getting back closer to average frankly in three. But it's you know, it's just not the same kind of post crisis environment that we had back then. And these secular growth names, they're just not that special anymore. That's the problem with them. Right now, you're special. We love catching out right now in the infrastructure bate debate. It would be good to get a

little experience. We can do that with decades of work. William Hoglan joins us the Bipartisan Policy Center Senior vice President, with all sorts of tangible work over the decades with Capitol Hill, with the House, and with the Senate Bill Hoglan, we don't want to pay for our infrastructure. At what point did we decide the gas tax was a bad idea?

I think that we decided. I think the President decided that when he decided that he would not want to raise taxes on anybody with incomes less than four hundred thousand. I think that was the mark that resulted in their not being any increase in the gas tax. I agree with you, Tom, I think that's an obvious one. In the past, that's been one that we've used to fund

our fund, our Highway Trust Fund. But it obviously it was tied up with the politics of not taxing anybody with incomes under four Okay, But the critics here Bill Hoglan say, simple, the gas tax goes to other programs. Can they in a bipartisan agreement if they say the gas tax increase will all go to bridges, etcetera, etcetera. Is that doable? Yes, it's absolutely doable, and you can

define where you want that revenue to go. It goes right now, goes into the Highway Trust Fund, and you can make certain that that money is spent specifically on highways and bridges as example, without having to go to other things that you have a transit tax tax also that goes into a transit fund. So there are ways to handle that bipartisan wise. I think that's a that's a bogus argument that you can't you can't do what

you've just outlined. Tom. But Bill, there is this larger argument, which is do we really have to pay for anything anymore given the fact that benchmark yields are so low and they are around the world. And this goes to your more than three decades of service for the government crafting budgets. Have we rethought the need to repay or actually work over the asked for some of these programs based in the fact the bigger deficits haven't proven to

be a liability for the nation. Well, Lisa, I'm sorry, but I'm one of those who still believes that deficits and debt matter, and that while interest rates clearly are low right now and this is a good time in terms of investments and going forward for from the federal government's perspective long term, I am not of the mindset that those interest rates won't climb back up. And once they climb back up, when you're running a debt, total

debt a well over thirty trillion dollars. Then the fastest growing component of the federal budget will not be Social Security or Medicare, but it will be just paying the interest on our public debt. So I'm sorry, I'm of

that mindset. Still believe that you have to pay for what you have to pay for this, even with the low interest rates that we have, and I think, uh, in many ways, the bipartisan agreement that was reached over last Thursday, off track on Friday, back on tracks yesterday and Saturday on Sunday, I think that there was an indication there's some desire to try to pay for it, even though the pay for us I think are somewhat soft.

Do you think among the Republican members who still do keep in contact with do you think that they have rethought whether it's proper to have this low tax rate for corporations, whether they actually would be more amenable to the idea of raising those based on the steady trajectory downwards that we've seen over the past few decades. Yeah, I think that. I think that depends what Republicans I

talked to and their staffs particularly. I think there are some who would agree that there is a need for a readjustment of the corporate tax I think we're probably if we get to it, uh in another bill called the Reconciliation Bill. I think you're going to see a movement, particularly in the area from going up to not on the corporate tax rate that the President's proposed, but I think you're going to find that there is going to be some pressure here to increase uh, increased taxes and

corporate taxes. I mean, John, it's in the United them as well. The Hammersmith Bridge back to eight seven or whatever is basically completely broken down, and they can't get it done there, can they. I love how you're confined about this is if you've ever been south of the river in London, you ever been on that bridge? Time? I? I maybe, I don't know. I went to the Imperial War Museum, did you. Okay? Yeah, I think that was south of the river. Belle. Let's go that not on

this particular self topic of the Hammersmith Bridge. But defining infrastructure seems to be a struggle right now. If we've done that, now, have we agreed on what infrastructure is? I think we've agreed in a bi person manner that

it's basic physical infrastructure that has a bipartisan support. There still is a lot of discussion and will be continue to beat this h about other forms of what's called individual or personal infrastructure, childcare, family paid lead UH, these kinds of provisions that some of the progressives in the Congress want to define and which would would which has been one of the issues over the weekend about the dividing the Republicans and the progressives from the Republicans in

terms of what they want to put in. But I think for right now, for now, for the current and

hopefully we'll be able to put this bill together. The Republicans and Congress, along with the Democrats and the leadership and Congress and the President, I think they've pretty well defined it as physical infrastructure UH, bridges, waterways, highways, h I think it has been expanded to include, of course issues associated with the broadband but but but the individual infrastructure, the family UH plan that the President put forward, I think it's still up in the airs to whether that

should be defined as infrastructure or not in the minds of a number of individuals within the Congress. But I was gonna see you we appreciate venty times bill hugand Biess and Policy Santa Snia, Vice President. Let's bringing Tavanka Sho. We come toto fe to see and David, if I may, I want to start right there. Is there still a big beat on something big happening down in Washington. I don't know about. I mean, it looks like we'll have

some type of infrastructure playing. John. They have to deliver a plan. It won't be as big as anticipated, and it will have all kinds of changes in it. That's underway. Biden wants to complete something. The Republicans don't want to be the obstacle that nothing. So it would look to me as if something will happen, and whether it's a billion or nine d billion or trillion or whatever the number will be, we'll got to find out. David, um, I want to talk about marcuts first, we'll do COVID

here and David, you went to some cash here. Everybody follows your often allocations of E T F Cumberland Advisors. You're sitting on cash. What are you gonna do with it? What is your re search on sectors? Tell you right now? Well, our largest sector tom is a health care sector. We have maintained that as a strategic position. That group did very well and then sort of leveled off except for a couple of biotechs. We believe the COVID shock is

a strategic shock that will take years. And the health care sector in the United States and the various component parts of it, are they beneficiaries in a business sense. Wish it were otherwise. We don't want pandemics, but that's what we have. So the health care sector is probably four of the SMP five in our shop. We're closer to double that around. It's the highest wait for a large sector I have I have ever been, So, David, I want to go back to this idea that Tom

raised about higher cash allocation. What are you seeing not being fully invested that other people are not well. We had a position of Lisa in in materials commodities to E t f s. We sold them and we are not ready to redeploy that cash. We are not going to put any more into healthcare. So we have to look at the sectors very carefully. As you just said in the beginning, we're slowing from a peak. So if you're going down the highway at sixty miles and you

slow to forty miles, an hour. At the time you're slowing, you don't know. It feels the same as if you're going to slow to zero. I don't believe we're going to go to zero, but we are slowing. We cannot maintain this six seven percent GDP growth rate in the United States. It's not there to be had. So the slowing is going to reveal something. The second thing that's going to reveal a lot are the earnings reports, which are going to start in the next couple of weeks.

We're going to get a handle on earnings capacity in this quarter of such robust recovering. David, because the time John lies and I have like six things to talk to you about. I know you're in Breckon Ridge, where the Blue River moves north to the Colorado. We could do the western drought. We'll do that in another time. David Kotak, you were the absolute national leader in Wall Street on the bird virus of years ago. Everybody thought you were nuts, and now in hindsight, you look like

an absolute genius. Your thought and how we're going to adapt to COVID, the delta variant, and how we get out of this pandemic. I I think I'm very pessimistic about it because of the political divide in the United States. Town and we see it happening. We see for you, Bloomberg reported four eighty two counties which have low vaccination rates and they all have rising alter rates. Pandemic isn't over. It's going to be over sometime. It will take a while.

Do you fold that into your investment Outlook? Absolutely, we have a million excess deaths. We have three and a half million long haul disability, partial or full disability COVID cases, and we have more of it coming. So that's what's happening in the United States, and then it's worldwide. So we don't even fold in the global impact yet, but that's coming to well specifically then, David just quickly linked to that is in your market code. Well, I want

some cash. I want the healthcare sector. And the second overweight sector, John is defense because of what the world looks like. You just reported a run you've gotten to air strikes. I mean, defense is a big issue in the United States. I don't see a defense budget cut or any anywhere near and any impairment of defense. The United States has a very heavy defense load now in this world, David got to leave it there. Small stuff,

interesting provocative thoughts. David kot there come to devise a see io, Lisa, I'm gonna have you asked the first question to Mr Brill, but it's got to be on the supply or the so called dearth of it coming up. Well, the idea here being that our company is actually deleveraging. Are they actually becoming more credit worthy and perhaps justifying

the tightening and spreads? Matt Brill of Investo ahead of US investment Grade and senior portfolio manager, do you think that that's what's going on here, that they're actually becoming more credit worthy companies? Hey, good morning everybody. Yeah, I do think that you're seeing just the fundamentals get better and better with the U. S economy, but you're also seeing corporations really trying to figure out how to get

rid of last year's debt. And last year's debt was all out survival, and this year they're really kind of pivoted. And so we've seen a T and T, we've seen g e ups are all big names looking to pay down debt. So overall that that's pretty good for the market. Um I would say he's evaluations are very very challenged though,

but the fundamental fundamentals are going to keep getting better. Here, what is the maturity probabfile of these massive companies look like now, Matt, So, most of these companies have actually termed out their debt. We call this, you know, kind of kicking the can down the road, or or really just making sure they don't have any near term debt maturity. So the average duration of the US corporate market continues

to get longer. Um. That's bad from a mark to market standpoint, that's because it means there's more duration, more volatility potentially, but it's very good from a fundamental standpoint because it means they don't have near term debt maturities that they have to worry about if the market were to seize up again. So all in, you know, I'd say,

that's really in that positive. Do they play into this theme if the same is true, if how yield that was stripping out the sick locality from this market, just how sensitive these markets are to a given turn of the economy. I think so from from from the turning out of maturities, but also at least it was mentioning which just the Federal Reserve and that all the FED didn't really buy high yield, they did buy some crossover names. Really, just the fact that the FED was there, I think

eliminated tail risk to the corporate credit market. And so whether or not this will be permanent, it is certainly up for debate. But we do believe that from an overall beta standpoint, um, you know, it means that you're you're more comfortable investing in investing in the investment grade market and a little bit in the aield market as well. Matt bro I, I look at all this and I go, is this two thousand six? Is this two thousand six? It's not. It's it's two thousand one, just to be clear.

But it has some resemblances to it, but but not really so two thousands six, two thousand seven, you had the t x U l B OH just a few weeks ago you had the medline LBO, and the medline LBO it has about fifty equity so t x U, I can't remember the exact number, it is around fifteen percent equity, So you went from fifteen to fifty. So there's a lot more equity um private equities having to put up more more more equity into the deals to

get these deals done. They don't want to go through t x U. T XU they made some money off of but at the end of the day, you know, the market wouldn't fund a deal like that today. I really don't think they would. They did, however, fund a five hundred million dollar micro strategy deal to buy bitcoin, so you know, maybe that's a little different. I like to say though, that there is a lot more prudency in this market. There are people that are really not

going to make dumb decisions. I don't think on the on the investor side of things, but they are being forced to invest, and they are being forced to invest at a rich evaluations, but not into bad companies, just necessarily maybe not as much yield as they would like. So where's the opportunity? I mean, you know, I know, we're sixty forty in my portfolio, I mean John's portfolio. Excuse me? If I got two percent and fixed income,

what do I do? Well? John is a really young guy, so he doesn't really need a lot of good Yeah, there is opportunities still in the reopening trade, where we're seeing names like Boeing today get a large deal from from United that they have some negative news out as well, But for the most part, the reopening trade lives on

the reflation trade. You're calling, well, maybe not calling for a hundred dollars there, Tom, But we do think that that that that commodity prices go higher, and with that there are certainly opportunities with the emerging market world as well. So emerging markets um that that have more correlation to commodity prices and asset prices overall going up um you know, we think is good. So there are ways to make money in the in the corporate market right now, particularly

in investment grade around the globe. But it's a lot more selective and it's it's not the two thousand and twenty trade of just riding the beta. You have to really look under every stone to find to find value out there. It's interesting, there's sort of contradictory messages here. On one hand, you have to look under every stone and be idiosyncratic and and and select securities. In the

other hand, it's a macro trade. I mean, at a certain point, credit trades in tandem with treasuries rate full stop, because ultimately it's whether the Fed comes in and backs things and how duration sensitive some of these bonds have become. No, yes, that's right, and so duration has really been the the you know, the the key theme of the year. And you look up and and and you know, we don't

have equity like returns this year. But if you look at most corporate bonds that they're essentially flat on the ear in terms of total returns. So it hasn't been the disaster that many might have predicted um at the start of the year when we were seeing interest rates go higher. UM. So I would say, if the all eyes are on the Fed in terms of tapering, all eyes are on the Fed in terms of whether they're going to have lift off. Um, the foreigners continue to buy a lot of bonds. And if the Fed does

lift off, that makes makes hedging costs go higher. If hedging costs go higher, the foreign buyers will buy less. So to us, that's really the key thing to watch is is when will the Fed hike because when they do, that will likely make it more expensive for foreigner buyers and and and and less attractive to them to buy our our higher yielding bonds here versus their negative yielding bonds back home. Prey small funnel point them. Matt's going to catch up. Matt bro investa had a fe s

investment cried, It's welcome back any time. This is the Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays from seven to ten am Eastern on Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from the best in economics, finance, investment, and international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, and of course, on the terminal. I'm Tom keene In. This is Bloomberg