The first print here off Lisa's great data check is up five ninety five on the dough. What a perfect moment to speak to mister Eisman with the newbury. Berman claimed in a movie of a few years ago, look for the new Heisman Hollywood property. I think it's a Memorial Day, Paul. Memorial Day's a good.
Opening, sure, you know, I guess it's very good. Look for Bear Squeeze.
You're going to see that Memorial Day twenty twenty five, Steve, is this just one big short cover? We got the wall of money out there? Lawrence McDonald, who has been brilliant on this with the action yesterday, is it an indirect short cover going on?
That's too sophisticated for me. I mean, I find the whole incredible amount of energy that people spend on the Fed day more amusing than informative. You know, think about it for a second, and how much ink was spilt about whether the Fed with lower twenty five or fifty. All right, so they lowered fifty, and then what happened? The market had no reaction, just went up and down. Nobody knew what to do. And today the market's up huge, but rates are higher. So you know you put it
all together. I tried not to spend too much time trying to figure it out. All I care about is the general direction of the FED is lower. How much lower? I don't particularly care. I don't think that's particularly important. The more important question is how's the economy. Economy is slowed, but the data seems to indicate that the economy is fine, and that's all that really matters.
So what other than you, I guess, in the context of the economy, what are the drivers for kind of whether you're bullish or bearish. What's some of the big variables that you've find.
I've gotten thematic more thematic in the last bunch of years, and I think that there are two great equity themes of our time, and we try and focus our portfolios as much as reasonable on those themes are AI slash tech and infrastructure. And I think those themes will last for years. They'll be variations, you know, on the infrastructure side there you know, politics do matter, but the overall theme will continue. Paul, let me.
Interrupt with the data check here as a market surge, Dow up five hundred and sixty six points on a percentage basis, The market lifts here at nine thirty three, greater than the futures nastacup two point three percent. As Paul predicted, the vis comes in sixteen point four zero on.
The AI trade, Steve, how do you suggest people play it? I think the first name people kind of jumped on was in Nvidia for good reason, because they put up that big revenue prints a couple.
Of years ago.
How else are you trying to play this?
So, I mean the way we play it is where most people are playing it, in Vidia, some other chip companies, the very large companies with massive databases. You know, then the question becomes, you know what apps and who's going to create them are going to work? And I think that is so early right now that it's really not worth talking about. You know, just as an example, the part of the business of accenture that is doing extremely well is not the consulting side, which would do when
companies are spending a lot of money on AI. It's the outsourcing side. And the reason why the outsourcing side is doing well is that most S and P companies do not have their data sufficiently in one place, structured appropriately to even do anything with respect to AI. So
it's very very early in the AI story. The one longer term theme that we've been thinking about, although it's so long time I don't know quite what to do with it yet, is I think there's a good argument to be made that we have seen hardware rerate up and software somewhat de rate, and I think it's possible that AI could cause that to continue, because it's possible that the cost of creating software because of AI is
going to plummet. And if that's the case, some of the iconic software companies out there may not have motes around their businesses that are quite as.
High as they used to be, within the skill set that you've earned. And at Newburg or Berman, do you people believe the capex expenditure of technology is being done intelligently and efficiently or is there wasted money being squandered away on AI?
I mean, I'm sure both. It's you know, we won't know. We won't know the answer to that question for years, so I don't think it's worth trying to figure that out at this point.
So how else do you think?
I mean, it's.
Are you A lot of folks are concerned about this. Mag seven is concentration risk, just as a market concern. Do you have this market structure concern that so much of this market is weighted towards these MAG seven ors that beyond kind.
Of Hey, well, I think one interesting aspect of that, and I'll come to that is that many active managers, probably more on the institutional side, underperform because their risk parameters don't allow them to overweight the MAG seven because the MEGS is so big and it's probably going to continue. I don't think we will really see a broadening out until we see apps come out so that some of the middle more middle companies can do that. But that's we're ways away from that.
Do you have a favorite MAG seven? Is there one where you.
I don't want to talk about individual stocks. I'm just not going to do that, all right. I get into my firm gets me into trouble.
The firm gets you into trouble. You don't get yourself into trouble. Okay, I got it on there. Just on the infrastructure theme, yes, do I go out there and just buy like Cummings and Engines and well.
Let let me talk about that because politics are important, Okay. So I think that there are four mega infrastructure themes and then there's a fifth. The four are on shoring. The second is you know, improvement of the grid yep. The third is everything having to do with actually building the data centers and that there is overlap there with the grid. And then there's then there's gratification, and then there's all the bills that guid in pass to shove
money into all four boxes. You know where the politics can become important is you know, I'll do to extreme cases. If Trump sweeps, gratifications are going to get de emphasized, and if Harris sweeps, you know, gratification will get re emphasized. So that's important. So the politics here are important.
Steve Weisman with us, and we will continue here. Let me do a data check here with the markets and the move SPX Dow records, Dow up five and forty points to the solid forty two thousand print on the Dow fifty seven hundred, sp up eighty six points, Nasdaq one two point.
Steve Isison, Steve, how how concerned are you if at all?
We're not on right now? What's on? We're we're on, We're on all. It's far radio. It's hard to tell you.
Yeah, the red light you make it easy the red light when why, yes, that's that's for me.
I just learned something exactly all right, valuation.
How concerned are you, if at all, about this market broadly?
You know, I think I learned this lesson in the dot com bust. So you know, when when dot com was rocking and rolling, everybody was yelling and screaming about evaluation. But that didn't matter until there was a recession and it turned out that a lot of these companies had actually fundamental problems. So I don't spend I mean, generally speaking, I'm not going to invest in a company that sells at one thousand PE. That's just not what I do.
But we'll invest in some high PE stocks. I just don't feel feel like it's as long as the economy is fine. It's not. It's more of an academic exercise than anything else.
So the economy, I mean, from what we're hearing from you, the economy really is underpinning almost everything. You have the foundation, I guess how you view investments correct. Okay, how about on the fixed income side, what do we do there? I mean, I can sit in it to your treasury. I used to get five percent. I'm still getting three point six percent. That's not for you know, like no risk. What do I got there? It takes my credit risk, do you think.
Look, we do some corporate bond investing, but mostly what we do is equities. Okay, I'm I don't have a strong view on fixed income right now, one way or the other. I really don't. Do you have alternatives in your portfolio? I don't have alternatives either. I'm just a stock jockey, stock jobs, stock and I always have been.
Okay, we got to talk banks here in financial with Steve Iceman. Here's a quote. So, yeah, I met with this retail banker yesterday and I'm supposed to be getting him to invest in fun but instead I start grilling him about our overdrawt penalties. And now his bank let's a customer write ten twelve checks before they tell them they're overdrawn, and this creep is making billions off of screwing over people. This way scripted.
That sounds like a much younger version of me. It's from the script A very angry young man, A very.
Angry young man from twenty fifteen. Can you buy New York Big Bank? Can you buy the future of Bank of America? You know, not individual stocks, But can you buy the big bank success of the future.
So let's talk about what the positives are. The positives are that the regulators did a very very good job post dot frank led by vice chair Daniel Trullo, truly one of the unsung heroes of the financial system. The leverage in the banks is cut by more than half. Even within that leverage, they have been de risked. So the financial system of the United States, as far as I'm concerned, is very very safe, and I don't lose any sleep about it, and by the way, I sleep
very well. But do I think there's a great story to invest in some of the very large banks. Not really. I just don't think there's a story there. One way or the other's too important.
I got to get this in lex in the Ft today, blistering about private equity and the ability not to cash out. Do you see potential problems within the illiquidity of private equity?
You know you could spend any bad tail you want. I don't. There's just not enough data on what's in private expert to really know one way or the other.
You can't make that.
I can't make that judgment.
See that you know, you know his lawyers love him, can't you know, won't do individuals.
My lawyers love me. You know. One time, in this quick story in the nineties, Oppenheimer got I was at Oppenheimer, and Oppenheimer got sued over something that I had written, and and there was you know, was discovery. And the lawyers called me and said, send us everything you have on this company that you wrote about. And I sent it to them, which was only the reports that I had written. And the lawyer called me and said, what about your notes? And I said, I don't have notes.
I don't take notes. He goes, I love you.
Guys, thank you so much. We love you too. I greatly appreciate it. Streisman, he's with Newburger Berman. Some perspectives there given most interesting times