August 19, 2025 • 29 mins
Watch Tom and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Surveillance hosted by Tom Keene & Paul SweeneyAugust 19th, 2025
Featuring:
1) Monica DiCenso, Head of Global Investment Opportunities at JPMorgan, joins to talk about the US equity outlook, geopolitical and tariff risks, and US exceptionalism. Investors are turning their attention to earnings from US consumer giants for clues on the impact of tariffs, according to the text.
2) Jim Caron, CIO of Cross Asset Solutions at Morgan Stanley Investment Management, joins to talk markets blowing past tariffs post-Liberation Day and whether there's too much focus on risk rather than staying invested. Meanwhile, options traders are grabbing insurance to protect themselves from a potential plunge in technology stocks in the coming weeks, according to Bloomberg.
3) Doug Kass, president and founder at Seabreeze Partners, offers his macro, tech, and AI outlooks. Money markets are currently betting the Fed will deliver its first rate cut for the year in September, as labor-market weakness outweighs inflation risks, with another move expected before year-end.
4) Kristen Bitterly, Head: Wealth At Work at Citi Global Markets, talks asset allocation for long term investors and concern from clients amid a variety of market risks.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg
Surveillance Podcast. Catch us live weekdays at seven am Eastern
on Apple car Play or Android Auto with the Bloomberg
Business App. Listen on demand wherever you get your podcasts,
(00:25):
or watch us live on YouTube.
Speaker 2 (00:27):
We start strong this morning with Monica the Sense of
joins us. Thrilled to have her and hear from JP Morgan.
I gotta go over a year to date down, I'm
six s and B five hundred ten, NaSTA Composite up
twelve percent, and as you say, surprise, it's a great
year for equities.
Speaker 3 (00:45):
It is a message out there.
Speaker 4 (00:47):
I mean, people are still skeptical and nervous, are just funny.
It's been an amazing year by any measure from an
equity standpoint. That's a yet feel great. So you could
argue you just go home and enjoy the rest of
the year and call it a day. But I think
the challenge for many people I work with they're still
sitting in a lot of cash. So it argue not
everyone has participated in that equity rally.
Speaker 2 (01:07):
Well, not only is everyone participated, but there's a rent
here between the retail investors I guess participating and institutions
about smarter themselves.
Speaker 3 (01:18):
Is that how you see it?
Speaker 4 (01:20):
Yeah, I think to a degree, the retail investors tend
to overanalyze, right, because there's a fair amount of recency
bias that creeps in there and you can't underestimate. Again
twenty twenty two, it was a few years ago, but
it's still very recent people's minds. That the fact that
when volatility happened, nothing worked equities or down. Bonds were down.
And that's the big challenge I've been having to get
people to move out of cash and look at fixed
(01:41):
income as a real significant allocation their portfolio.
Speaker 2 (01:44):
Again, Paul, the Madrid stock exchange in US dollars, I
think it's up thirty two percent a year to day.
Speaker 5 (01:52):
I guess we miss that again.
Speaker 6 (01:54):
My word, Monica, when you talk to some of your largest,
you know, clients, your high networth your high networth clients, are.
Speaker 5 (02:01):
They fully invested?
Speaker 6 (02:03):
Do you feel or do you feel like they're still.
Speaker 4 (02:06):
Just kind of still cash balances? They are a bit
too high. If you go back over the last ten years,
I still see cash balances like thirty forty percent higher
and would have seen in the past from their old balances, right,
so some you know, I see like fifteen twenty twenty
five percent cash balances, which is too high for people
with generational wealth, which you would argue they should have.
Speaker 1 (02:24):
Almost no cash.
Speaker 4 (02:25):
They don't need it, right, they don't need the cash.
Speaker 6 (02:27):
So in fixed income you can actually get real returns
here today, even like municipal bonds.
Speaker 5 (02:32):
I mean, I don't know where you're you're.
Speaker 4 (02:33):
A US taxpayer, means are a no brainer. If you write,
like me, the privilege of living in New York City,
it's especially no brainer. You're talking high single digit tacticle
than yields with I would argue you much less risk
than you're gonna get in equities, So probably do better
than I think you will in US equities over the
next twelve months with less risk.
Speaker 6 (02:48):
That seems about alternatives, I mean, you know, private equity,
hedge funds, private credit, real estate.
Speaker 5 (02:55):
I mean, how do you guys talk to your clients
about alternatives.
Speaker 4 (02:59):
It's a big allocation for large families because again they
don't need the liquidity, so you tend to see allocations
and alternatives they could be as high as fifty percent
of them. Markelia, Yeah, it's not, it's not where we start,
but that is what I see for some of the
larger families.
Speaker 2 (03:10):
Expert have the blue button Detroit Lions blue button. You
have a wonderful resume for this question. Forget about family
networth JP Morgan Mega hitters. You know eight zero's off
to the left of the decimal point. Should people have
alternative investments in their four oh one?
Speaker 6 (03:31):
Kay?
Speaker 4 (03:33):
If for long term money? Yes, because you know data
tells me you're going to compound at a rate higher
than you would in public markets. Now that's that there
is a different risk protofile there, and you always want
people to be comfortable with that risk. And so it
depends what age you are, right, if you're in your
thirties or forties, yeah, that wouldn't scare me. If you're
in your fifty sixties seventies, are tapping to that money sooner?
(03:55):
That's a different question.
Speaker 3 (03:56):
Okay, So let's you mentioned cash earlier.
Speaker 2 (03:58):
What's the to do list for Monica Descenzo going into
labor day?
Speaker 3 (04:03):
People are like, I need to do action. What's the
action mandate?
Speaker 4 (04:07):
If you believe what the market is telling you, which
is the feed is in a cut in September. You
need to own more fixed income because your cash is
going to earn you less. And it seems so obvious,
but people don't believe it because I think they've been
hearing people like me say cuts are coming, cuts are coming,
and they haven't been coming as fast as people thought.
Speaker 3 (04:21):
Do you want to weigh in on NATO?
Speaker 4 (04:24):
You know, it's it's a thing I talk about with
a lot of clients, but then have to remind them,
do not let your geopolitical concerns on the tail wag
the dog because generally speaking, over any intermediate term, it
doesn't matter for me.
Speaker 2 (04:34):
It's just it's a nuts summer. Where were two hundred
and forty days in the in the term? Monica, thank you,
soone's too short a visit.
Speaker 3 (04:44):
Let's do this sooner. Monica Descenzo is with JP Moore.
Stay with us.
Speaker 2 (04:51):
More from Bloomberg's Surveillance coming up after this.
Speaker 1 (05:02):
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.
Speaker 2 (05:14):
Jim Karen Torstenslack publishes moments ago in Apollo Global Management
on what I walked in the building and looked at today, which.
Speaker 3 (05:22):
Is a yield curve.
Speaker 2 (05:23):
The vanilla curve is comparing the two year yield with
a ten year I went out and looked at the
two year as compared to the thirty year yield, and
they answer, I think a lot of people Jim Karen
don't know this. Going back thirty years, the steepness, the
difference in yield of the two's thirty yield curve is
(05:43):
not even back to normal. We were so negative. We're
still trying to get back to normal.
Speaker 3 (05:48):
Is that right?
Speaker 7 (05:50):
That is absolutely correct. If I look at there are
various curves that people look at. Some people look at
the three month T bill rate versus the ten year yield,
and some people look at FED funds versus tenure. If
you look at the yield curves, right now, we are
still below historical averages, so the curve has a lot
more it could potentially steepen, and that has a lot
(06:11):
of implications, right because in one sense, we're talking about
FED rate cuts, and yes, that means that front end
rates can come down, but it doesn't necessarily mean that
back end rates actually have to come down, and that
might actually be not exactly an intended consequence if you're
trying to lower mortgages or longer term borrowing rates.
Speaker 2 (06:34):
I mean, within all, this is the basic idea, Paul
am I right, A steeper yield curve is evil.
Speaker 3 (06:40):
I mean FORBOSEI one oh one, I don't know, Jimkaren.
Speaker 2 (06:43):
Is a steeper yield curve bad for our listeners and viewers?
Speaker 8 (06:48):
No, not necessarily right.
Speaker 7 (06:50):
So it depends on why the curve is steepening and
what the conditions are that are surrounding it. So in
some cases a steep yield curve is actually really positive
for the financial sector and for banks. Why because bends
Banks borrow at the short term at a low interest rate,
and they lend longer terms. So therefore the spreads get wider,
(07:11):
banks can earn more money, and what that means is
that banks are more willing to lend into the economy.
So that could actually be a positive thing. So usually
a steeper yale curve could be a positive. The other
thing that also it creates is some form of easier leverage,
meaning if you can borrow at those shorter term rates
at those lower rates, and you can invest longer term,
(07:33):
then you could actually you can actually generate more potential revenues.
But usually the yeal curve steepens when the FED starts
to cut interest rates aggressively, and that's usually in response
to something bad happening in the economy. So that's the
coincident component of the indicator that you may be referring to.
Speaker 8 (07:56):
Tom.
Speaker 6 (07:56):
Hey, Jim, Tomorrow, Tom's gonna get on the Gulf stream
and head out to Jackson Hole.
Speaker 5 (08:02):
What are you.
Speaker 6 (08:03):
Looking for from Jackson Hole? Fed Cherirman J pallin Friday.
Speaker 8 (08:08):
So I really think that.
Speaker 7 (08:11):
He's not going to alert us to a potential rate cut,
but I think he's going to open the door. I
think what he's going to do his mission is ultimately
just to basically say that the risks are more balanced
and potentially tilted to the downside, especially as it pertains
to the employment situation that gives him the opportunity to
(08:34):
cut interest rates. Now, we have a payroll number before
the next FED meeting in mid September, and we also
have inflation data coming out. The payroll numbers coming out
over the next several months, are not going to be good.
I think it's on September ninth, we have a quarterly
sensus of employment and wages. This is that downward revision
that we're supposed to get in jobs data, So we
(08:55):
may actually start to realize that our monthly job's rate
of growth over the past six months or so has
actually been a lot worse than what's actually been reported
by the BLS. So I think the labor data is
sending a very strong signal that the jobs market is
not overly strong right now. And I think we know that,
(09:16):
and I think that opens the door for the FED
to interest rates, and I think that POW will probably
allude to something along those lines with respect to the
labor market.
Speaker 6 (09:27):
Jim, you're the CIO of Cross Asset Solutions. I have
no idea what that means, but I guess I'm guessing
it means you and your team can look at a
lot of different places for value.
Speaker 5 (09:36):
Where do you see value these days?
Speaker 7 (09:39):
Yeah, So effectively, what we're seeing right now is actually
equities look a bit more attractive than fixed income does
now let me let me explain that. So clearly, fixed
income has a higher yield and has a higher coupon,
and it's good.
Speaker 3 (09:56):
It's very good, stable place to put.
Speaker 7 (09:58):
Your money, and it's a good component a portfolio for diversification. However,
we think that within the equity markets, if you look
at the broader parts of the market, so not the
top flying mag seven, but the other four ninety three,
what we're starting to see right now is a broadening
out of earnings revisions to the upside. In fact, second
quarter earnings which just came out, we're actually very very
(10:21):
strong from a historical standpoint. We're very strong that many
of these companies in the second quarter actually beat expectations
quite significantly, and that is actually pretending to something relatively
strong going into the future. So when we think about
the markets and we think about the next six to
eight nine months ahead, I don't like to think very
short term, but if we think over that period of time,
(10:45):
what we have to recognize is that we have some
tower fallout that we're going through right now. Inflation's likely
to be higher over the next couple of months. But
once we get beyond that, what we're left with is
a lot of business investment, a lot of cap x,
a lot of companies starting to invest in their own future,
and I think what that's going to do is increase
(11:06):
private sector jobs growth, and I think that's a positive.
Speaker 2 (11:09):
Are you managing for the coupon right now or can
you actually make total return forward?
Speaker 8 (11:15):
That's a great question. Tom.
Speaker 7 (11:18):
What I've been saying in fixed income is I'm managing
for the coupon right now.
Speaker 3 (11:23):
The reason I say that, do you realize that only.
Speaker 2 (11:26):
Twelve percent of our audience Jim Karen has ever done
that because there.
Speaker 3 (11:30):
Wasn't a coupon.
Speaker 7 (11:32):
Yes, well that is true, but well effectively, I think
that the duration movement. So what Tom is referring to
is if you get this drop in interest rates, you
get this increase in price, this total return just in
terms of price. I think that interest rates are have
already fallen reasonably enough at this point. They may fall
(11:53):
a little bit more, but I don't think that's going
to be the majority of the game. I think the
majority of the game that you can look for in
fixed income is the yield or it's the actual COUPI
So for fixed income, it's really a question of that stability,
and you can add that to your portfolio for diversification,
which is which is what we're doing well.
Speaker 2 (12:11):
Sweeney's been lecturing me on a daily basis. Jim Karen,
thank you so much. Margan Stanley, stay with us. More
from Bloomberg Surveillance coming up after this.
Speaker 1 (12:30):
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 Auto with the Bloomberg Business app,
or watch US Live on YouTube.
Speaker 2 (12:42):
We speak with Douglas Cast a Pinata on Wall Street.
People love to go after him, but the fact is
it's an esteemed career starting out a kidder peavity, A.
Speaker 5 (12:52):
Zillion people started, a lot of people done.
Speaker 2 (12:55):
It was great for him. Doug Cast joins US now
with Seaberg's partners. He is been cautious on the market
and run, Doug. I just looked at a toothpaste company.
We'll keep the name out that. Since the Poldic has
made four point five percent return, there's basically two markets.
Have you been wrong because you missed Meg seven or
(13:17):
have you been wrong for another specific reason.
Speaker 8 (13:20):
That's a good question.
Speaker 9 (13:21):
I just want to warn you that I prep for
this interview with one hour of Peppa Pig and Baby.
Speaker 8 (13:26):
Shark with my granddaughter Carlin.
Speaker 3 (13:28):
Good look.
Speaker 8 (13:30):
I'm painfully honest.
Speaker 9 (13:33):
I don't go on Bloomberg or any of the other
shows to improve my brand or sell a service. I
try typically to explain my view in the market's individual
stocks without an agenda to promote that view. My view
is currently is often a contraryan one it is today.
So I'm going to briefly explain how dumb I've been
in the market, but how I addressed and managed through
(13:55):
a wrong sided market view, effectively managing risk and even profiting.
I think that it's instructive for your viewers. It'll benefit
from my transparency and technique because I honestly to be blunt.
Few come on market surveillance and say how wrong they've been.
The opposite is the case. People usually talk about their successes,
the winners in the forum. They want to appear smart
(14:17):
and conveniently forget their views and performance during drawdowns like
in twenty twenty two. It reminds me of the old
Harold arl And and Johnny Mrcy's song. Accentuate the positives,
the emphasize the negatives. So since we first we last met,
and with the exception of the fall in February and March,
and really since the S and P was fifty eight hundred,
I've basically.
Speaker 8 (14:36):
Been burish and wrong.
Speaker 9 (14:38):
But astonishingly, Lee, my hedge Front Sea Breeze has been
net short in almost every month except for the March
April sell off since early twenty twenty four. Despite that,
our monthly returns have been positive and eighteen of.
Speaker 3 (14:52):
The last done that. But Doug, how is you?
Speaker 8 (14:55):
I've done it? That's a great question.
Speaker 9 (14:58):
We employee good risk management by taking a number of
small losses rather than get involved in shurre evaluation AI
AI mag seven short of the mundane companies business models
we're roading.
Speaker 3 (15:15):
Paul wants to get in here.
Speaker 2 (15:16):
I want to ask you one question, Paul Sweeney's got
to be you can ask me any question in a
short time. I on the Bloomberg have Walmart. It's a
pe of forty point one six. Can you explain to
me by somebody dropping pennies down to the bottom line
deserves a forty multiple. You're the only one living who
remembers the nifty to fifty?
Speaker 3 (15:38):
How do we get here with Walmart?
Speaker 8 (15:41):
It is astonishing to me.
Speaker 9 (15:43):
We are been short our largest short exposure in the
last year and a half have been in consumer stocks.
We actually recently showed at Walmart. And I think it's
condition of the market. It's what's It's what Warren Buffett
wrote in a in a report to his Berkshire Hathaway
shareholders in nineteen ninety nine. God's plan basically, people wait up,
(16:06):
wake up in the morning, expect stock prices to go
ever higher. So you've seen that this substantial expansion reevaluation
in price earnings ratios, and we think that equity is
a terribly overpriced against interest rates. The equity risk premium
is a two decade low that's typically consistent with the
slide in stocks. The S and P dividend yield is
(16:28):
at a near record low one point twenty five percent,
and spread between that and the ten year treasury has
rarely been so wide. As you know, I'm very close
to Coops. Iway was Lee's director of research for a
while to make advisors Lee fields bonds or over prices.
Stocks may be overpriced against overpriced sixt income And.
Speaker 3 (16:49):
That's just real.
Speaker 6 (16:51):
Quickly, given that stance, given that conservative outlook on maybe evaluation,
how are you positioned here today?
Speaker 9 (16:59):
I've been net short between ten and twenty percent, as
I said, for most of the last nineteen months, and
we are currently considering expanding our next short exposure. Outside
of that range, I think current valuations are twenty four times.
That's in the ninety eighth percentile. It's a poor launching
pad for future investment returns. Bob Barrel, in one of
(17:22):
his ten Lessons of Investing, said there are no new
eras excesses are never permanent. The SMP index trailing multiple
is twenty six. You take out the twenty three p
in twenty twenty one, and it's similar to the valuation
of August twenty two thousand, right before two year by
bear Mark.
Speaker 3 (17:39):
I'm going to pick up on this with Paul jumping here.
Speaker 6 (17:41):
So, Doug, how about in the fixed income space? Here
are you can you go there and just clip coupons?
Here is our opportunity there.
Speaker 8 (17:50):
I think that.
Speaker 9 (17:52):
If you're a high net worth individual I listened to
your prior segment about just earning the coupon, you can
get a seven and a half percent pre tax equivalent
if you're a high net worth individual in municipals. So
I think that four point three percent is thereabouts where
the ten year yield is it's a good place to
(18:14):
hang out. And if you go a little riskier in credit,
you get equity like returns for limited risk and no volatility.
Speaker 3 (18:21):
Doug, I got time for one more question. I got
eight ways to go here.
Speaker 9 (18:25):
Don't ask me about the Yankees. I'm not going to
about the Yankees. I hang up.
Speaker 2 (18:30):
Well you should, and you know it's a glorious and
beautiful thing, Doud Cass, I want you to speak to
the people listening and viewing who aren't sophisticates. They didn't
have an office next to Julian Robertson. They haven't done
what you've done. They haven't been as visible an Opinionata
like you. What do you say to our audience about
(18:50):
this addiction, this belief in MEG seven.
Speaker 8 (18:57):
Well, I'm I'm you know.
Speaker 9 (18:59):
No one I know is concerned that there'll be a
large drawer down inequities. And I think there's any number
of conditions that could bring down the market meaningfully. And
the most important one as it relates to MAG seven,
is a hiccup and AI. For example, a slow down
in AI cap spending could occur. We could see growing
(19:21):
evidence of double and triple chip ordering. We could see
the failure of AI to improve from its current state.
We can see the failure of use sets to develop
for AI. We could see an accounting scandal in AI
because companies Hyperscalers are depreciating their massive capital expenditures over
ten years well in excess of useful life. I've written
(19:44):
over one hundred and five columns on the street about that,
called wartales from Navidia. I think Navidia and the Hyperscalers,
and on long two of them, Meta and Amazon are
over earning.
Speaker 3 (19:58):
Right, Derek, quickly, You're an Apple? You long your short? Apple?
Speaker 8 (20:03):
No position?
Speaker 9 (20:03):
I was short into the move under two hundred and
I have no position. I think it's overvalued, but I
think they are far better shorts available.
Speaker 3 (20:12):
Can the Red Sox make the Wild Card?
Speaker 9 (20:16):
Red Sox, I believe are tied with the Yankees five
games out. The Red Sox are four and six in
the last ten. The Yankees is seven to three. The
leading team, Toronto is five and five. The momentum is
with the Yankees. There go the Yankees.
Speaker 2 (20:34):
Thank you so much. Get back to Peppa Pig with
your granddaughter. Mister kass Is with Seabreez Partners. He's been
very open about missing a great bullmark.
Speaker 3 (20:44):
Greatly appreciate it. Stay with us.
Speaker 2 (20:47):
More from Bloomberg Surveillance coming up after this.
Speaker 1 (20:58):
This is the Bloomberg serve Balen's podcast. Listen live each
weekday starting at seven am Eastern on Apple, Cocklay and
Android Auto with the Bloomberg Business app. You can also
watch us live every weekday on YouTube and always on
the Bloomberg terminal.
Speaker 2 (21:13):
Joining us out for clarity, Kristin Biddle, It's been wait long,
had a welts at work at City Global Markets, and
I guess just this has come up this week. Kristin,
do you believe in rebalancing?
Speaker 1 (21:26):
Like?
Speaker 2 (21:27):
Is this like a formula?
Speaker 10 (21:28):
I absolutely believe in rebalancing.
Speaker 11 (21:30):
I think look like at a very high level, what's
the number one question we're getting from our clients is
really questioning around like the sixty forty portfolio, and I
think it's gotten a little bit of a bad rap
because when you look at it over time. Just look
at it over the past decade, it's been returning around
nine percent perannum. Even year to date, you have nine
percent paranum or nine percent total year to date.
Speaker 10 (21:52):
Through the sixty forty portfolio.
Speaker 11 (21:54):
So I think where the question comes into place though,
is really looking at what does cash provide in this market?
It should you have an allocation to cash to be
a little bit more nimble. And then also the question
that everyone's been discussing around the fact that your equity
exposure is actually highly concentrated. Is that a good thing
or something that you should diversify away for?
Speaker 2 (22:13):
We want diversification. I mean my basic thing as I
see a lot of portfolio is over diversified, so that
if you have a winner, it doesn't matter because you're overdiversified.
Speaker 11 (22:24):
So the diversification across let's just say like fixed income,
alternatives and equities certainly a case for it. I think
there's a case for having some cash. Now within our portfolios,
we have about a one percent cash allocation killed in
our investors. Well, you know, you have a little bit
just to do some rebalancing on the edges. But if
(22:46):
you look at the average client's portfolio, some of those
are upwards of twenty to thirty percent in cash, which
then you have to ask the question is that really
an investment or are you kind of stuck in in inertia.
Speaker 6 (22:58):
I love some of this data from the cap Gemini report,
which I've seen in so many places. High net worth
individual wealth showed strong growth in twenty twenty four, reaching
ninety and a half trillion dollars globally.
Speaker 5 (23:10):
And this is the number I keep telling.
Speaker 6 (23:11):
My number three offspring that works at a big investment
from sixty three percent of global wealth is expected to
change hands by twenty thirty five.
Speaker 10 (23:20):
That is unbelievable, unbelievable.
Speaker 5 (23:22):
How is that going to happen?
Speaker 6 (23:23):
By the way, is that just I mean, you've got
to plan for it now, don't you know?
Speaker 11 (23:27):
You have to plan for it now. And this is
something so the cap Gemini team, they've been producing this
report for the past twenty nine years, and this is
really kind of one of the leading publications when it
comes to wealth management and the broader kind of spectrum
of ultra high networth and high net worth investors. So
I was part of the exact steerco this year, and
the focus of this is really this great wealth transfer
(23:48):
and so that sixty three percent is expected to change
hands by twenty thirty five. I think the more important
stat there is not just the movement of wealth, but
the fact that whenever you have whether it's like interspousal transfer,
whether it's in a state situation, intergenerational transfer.
Speaker 10 (24:03):
There's two key insights.
Speaker 11 (24:05):
One, within one to two years, close to ninety percent
of people change their advisor. So simply because you were
advising a family does not mean if you have one
of these big life events that you're going to continue
being the advisor. I think the other thing is when
people talk about next gen, it really is people aged
forty to sixty. You hear something like next gen and
(24:25):
you think it's someone in their early twenties or in
their teens. That transfer is going to happen first and
foremost to Gen X.
Speaker 2 (24:32):
Here's what I want to know for the listeners and
viewers that are doing all this estate planning, etc. And
the kids have no visceral interest in the markets. They
wouldn't know yield to maturity if it hit them over
the head. What do you do if you have all
your kids or some of your kids who they just
(24:53):
don't care about the material.
Speaker 11 (24:57):
So this is this is a really interesting questioned Tom,
because I think it's fascinating and almost kind of ludicrous
that you can graduate from the best universities in this
country without a foundational knowledge of financial planning, estate planning,
and just understanding investments one oh one. So since we're
dealing with that as a base case and some people
are not interested, the educational component and having a trusted
(25:21):
advisor becomes a mission critical and so everyone should have
a foundational knowledge of financial planning.
Speaker 10 (25:27):
They don't, but they need to.
Speaker 2 (25:29):
Okay, they need to. But come on, this is like
a huge deal. We have a generation behind us, whether
we have you know, the megabucks John Tucker has or
you're like me, I can never retire it.
Speaker 3 (25:41):
I mean, I mean, Kristen, the kids don't care.
Speaker 10 (25:45):
Well, we see them caring, but just in different ways.
Speaker 2 (25:48):
Right.
Speaker 11 (25:48):
So a lot of the barriers to entry from a
technology perspective, hear me out on this time. The barriers
to entry from a technology perspective, even accessing financial markets.
You've never seen so many people in their twenties and
thirties actively trading, and so the democratization in terms of
trading is free access to markets. That was a very
different story a decade ago or two decades ago. So
(26:11):
a lot of those barriers have been brought down, and
I think it's a question of meeting people where they're at.
And also with their interests. So where do we see
the primary interests of this next generation. It's definitely in
terms of digital engagement and the platform in terms of
accessing advice twenty four to seven, But it's also interest
in other asset classes. And you see a higher tendency
(26:31):
towards alternatives as opposed to public markets. And I'm not
just talking about crypto and what you would think. It's
actually alternatives because ninety nine percent of the companies in
the US market are private companies. And actually, if you say, like, okay,
fair enough, but a lot of them are small. Even
if you use the threshold of over one hundred million
in revenue, you're still talking ninety percent.
Speaker 10 (26:51):
So a lot of those themes.
Speaker 11 (26:53):
You can meet someone where they're at in terms of
what does interest them without it being financial planning one
oh one or kind of are the benefits of asset
allocation and diversification.
Speaker 6 (27:03):
Well, I've told my kids the last check I write,
I want it to bounce, So don't plan on anything else.
So what are some of the questions you get from
your clients? How do I set up the states, how
do I set up trust? What do I do with
my investments today? What kind of questions do you get
from your clients these days?
Speaker 11 (27:19):
So I would say the first question oftentimes when we
meet with a new client, right, So if it's an
existing client, you generally are going to already have a
financial plan in place, You're going to have an estate
plan in place, and you're going to have an asset
allocation and understanding your risk profile. So oftentimes when we
have that initial interaction. And by the way, we cover
people in the legal industry, we cover professional services, we
cover asset managers, pre ipo post ipo companies, so you're
(27:43):
talking about a very diverse set of individuals, but they're
very ambitious in terms of their careers and their goals
for themselves personally as well as professionally. One of those
common things that we find is people have all their
money in a savings account, right, so that they have
not actually done a financial plan or that they just
(28:03):
simply they've been saving and they start with kind of
a traditional path of I'm going to buy my first house,
I have my mortgage, then I come into liquidity and
I don't even realize and many people think it's too late.
So the question around, like, these are people who are
fine from a retirement standpoint, but then really getting an
estate plan in place, understanding wealth transfer and then understanding
(28:25):
acid allocation.
Speaker 2 (28:26):
Yeah, all I can say, Folks, is just on probate alone,
get an estate plan in order. Kristin Biddley, thank us
so much for Citygroup this morning. There.
Speaker 3 (28:34):
We don't do enough for that.
Speaker 10 (28:35):
Can you come back anytime. I'll be here.
Speaker 3 (28:38):
Kristin, thank you so much early, really well, I appreciate that.
Speaker 1 (28:41):
This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live each weekday,
seven to ten am Eastern on Bloomberg dot com, the
iHeartRadio app, tune In, and the Bloomberg Business app. You
can also watch us live every weekday on YouTube and
(29:02):
always on the Bloomberg terminal
Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg
Surveillance Podcast. Catch us live weekdays at seven am Eastern
on Apple car Play or Android Auto with the Bloomberg
Business App. Listen on demand wherever you get your podcasts,
(00:25):
or watch us live on YouTube.
Speaker 2 (00:27):
We start strong this morning with Monica the Sense of
joins us. Thrilled to have her and hear from JP Morgan.
I gotta go over a year to date down, I'm
six s and B five hundred ten, NaSTA Composite up
twelve percent, and as you say, surprise, it's a great
year for equities.
Speaker 3 (00:45):
It is a message out there.
Speaker 4 (00:47):
I mean, people are still skeptical and nervous, are just funny.
It's been an amazing year by any measure from an
equity standpoint. That's a yet feel great. So you could
argue you just go home and enjoy the rest of
the year and call it a day. But I think
the challenge for many people I work with they're still
sitting in a lot of cash. So it argue not
everyone has participated in that equity rally.
Speaker 2 (01:07):
Well, not only is everyone participated, but there's a rent
here between the retail investors I guess participating and institutions
about smarter themselves.
Speaker 3 (01:18):
Is that how you see it?
Speaker 4 (01:20):
Yeah, I think to a degree, the retail investors tend
to overanalyze, right, because there's a fair amount of recency
bias that creeps in there and you can't underestimate. Again
twenty twenty two, it was a few years ago, but
it's still very recent people's minds. That the fact that
when volatility happened, nothing worked equities or down. Bonds were down.
And that's the big challenge I've been having to get
people to move out of cash and look at fixed
(01:41):
income as a real significant allocation their portfolio.
Speaker 2 (01:44):
Again, Paul, the Madrid stock exchange in US dollars, I
think it's up thirty two percent a year to day.
Speaker 5 (01:52):
I guess we miss that again.
Speaker 6 (01:54):
My word, Monica, when you talk to some of your largest,
you know, clients, your high networth your high networth clients, are.
Speaker 5 (02:01):
They fully invested?
Speaker 6 (02:03):
Do you feel or do you feel like they're still.
Speaker 4 (02:06):
Just kind of still cash balances? They are a bit
too high. If you go back over the last ten years,
I still see cash balances like thirty forty percent higher
and would have seen in the past from their old balances, right,
so some you know, I see like fifteen twenty twenty
five percent cash balances, which is too high for people
with generational wealth, which you would argue they should have.
Speaker 1 (02:24):
Almost no cash.
Speaker 4 (02:25):
They don't need it, right, they don't need the cash.
Speaker 6 (02:27):
So in fixed income you can actually get real returns
here today, even like municipal bonds.
Speaker 5 (02:32):
I mean, I don't know where you're you're.
Speaker 4 (02:33):
A US taxpayer, means are a no brainer. If you write,
like me, the privilege of living in New York City,
it's especially no brainer. You're talking high single digit tacticle
than yields with I would argue you much less risk
than you're gonna get in equities, So probably do better
than I think you will in US equities over the
next twelve months with less risk.
Speaker 6 (02:48):
That seems about alternatives, I mean, you know, private equity,
hedge funds, private credit, real estate.
Speaker 5 (02:55):
I mean, how do you guys talk to your clients
about alternatives.
Speaker 4 (02:59):
It's a big allocation for large families because again they
don't need the liquidity, so you tend to see allocations
and alternatives they could be as high as fifty percent
of them. Markelia, Yeah, it's not, it's not where we start,
but that is what I see for some of the
larger families.
Speaker 2 (03:10):
Expert have the blue button Detroit Lions blue button. You
have a wonderful resume for this question. Forget about family
networth JP Morgan Mega hitters. You know eight zero's off
to the left of the decimal point. Should people have
alternative investments in their four oh one?
Speaker 6 (03:31):
Kay?
Speaker 4 (03:33):
If for long term money? Yes, because you know data
tells me you're going to compound at a rate higher
than you would in public markets. Now that's that there
is a different risk protofile there, and you always want
people to be comfortable with that risk. And so it
depends what age you are, right, if you're in your
thirties or forties, yeah, that wouldn't scare me. If you're
in your fifty sixties seventies, are tapping to that money sooner?
(03:55):
That's a different question.
Speaker 3 (03:56):
Okay, So let's you mentioned cash earlier.
Speaker 2 (03:58):
What's the to do list for Monica Descenzo going into
labor day?
Speaker 3 (04:03):
People are like, I need to do action. What's the
action mandate?
Speaker 4 (04:07):
If you believe what the market is telling you, which
is the feed is in a cut in September. You
need to own more fixed income because your cash is
going to earn you less. And it seems so obvious,
but people don't believe it because I think they've been
hearing people like me say cuts are coming, cuts are coming,
and they haven't been coming as fast as people thought.
Speaker 3 (04:21):
Do you want to weigh in on NATO?
Speaker 4 (04:24):
You know, it's it's a thing I talk about with
a lot of clients, but then have to remind them,
do not let your geopolitical concerns on the tail wag
the dog because generally speaking, over any intermediate term, it
doesn't matter for me.
Speaker 2 (04:34):
It's just it's a nuts summer. Where were two hundred
and forty days in the in the term? Monica, thank you,
soone's too short a visit.
Speaker 3 (04:44):
Let's do this sooner. Monica Descenzo is with JP Moore.
Stay with us.
Speaker 2 (04:51):
More from Bloomberg's Surveillance coming up after this.
Speaker 1 (05:02):
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.
Speaker 2 (05:14):
Jim Karen Torstenslack publishes moments ago in Apollo Global Management
on what I walked in the building and looked at today, which.
Speaker 3 (05:22):
Is a yield curve.
Speaker 2 (05:23):
The vanilla curve is comparing the two year yield with
a ten year I went out and looked at the
two year as compared to the thirty year yield, and
they answer, I think a lot of people Jim Karen
don't know this. Going back thirty years, the steepness, the
difference in yield of the two's thirty yield curve is
(05:43):
not even back to normal. We were so negative. We're
still trying to get back to normal.
Speaker 3 (05:48):
Is that right?
Speaker 7 (05:50):
That is absolutely correct. If I look at there are
various curves that people look at. Some people look at
the three month T bill rate versus the ten year yield,
and some people look at FED funds versus tenure. If
you look at the yield curves, right now, we are
still below historical averages, so the curve has a lot
more it could potentially steepen, and that has a lot
(06:11):
of implications, right because in one sense, we're talking about
FED rate cuts, and yes, that means that front end
rates can come down, but it doesn't necessarily mean that
back end rates actually have to come down, and that
might actually be not exactly an intended consequence if you're
trying to lower mortgages or longer term borrowing rates.
Speaker 2 (06:34):
I mean, within all, this is the basic idea, Paul
am I right, A steeper yield curve is evil.
Speaker 3 (06:40):
I mean FORBOSEI one oh one, I don't know, Jimkaren.
Speaker 2 (06:43):
Is a steeper yield curve bad for our listeners and viewers?
Speaker 8 (06:48):
No, not necessarily right.
Speaker 7 (06:50):
So it depends on why the curve is steepening and
what the conditions are that are surrounding it. So in
some cases a steep yield curve is actually really positive
for the financial sector and for banks. Why because bends
Banks borrow at the short term at a low interest rate,
and they lend longer terms. So therefore the spreads get wider,
(07:11):
banks can earn more money, and what that means is
that banks are more willing to lend into the economy.
So that could actually be a positive thing. So usually
a steeper yale curve could be a positive. The other
thing that also it creates is some form of easier leverage,
meaning if you can borrow at those shorter term rates
at those lower rates, and you can invest longer term,
(07:33):
then you could actually you can actually generate more potential revenues.
But usually the yeal curve steepens when the FED starts
to cut interest rates aggressively, and that's usually in response
to something bad happening in the economy. So that's the
coincident component of the indicator that you may be referring to.
Speaker 8 (07:56):
Tom.
Speaker 6 (07:56):
Hey, Jim, Tomorrow, Tom's gonna get on the Gulf stream
and head out to Jackson Hole.
Speaker 5 (08:02):
What are you.
Speaker 6 (08:03):
Looking for from Jackson Hole? Fed Cherirman J pallin Friday.
Speaker 8 (08:08):
So I really think that.
Speaker 7 (08:11):
He's not going to alert us to a potential rate cut,
but I think he's going to open the door. I
think what he's going to do his mission is ultimately
just to basically say that the risks are more balanced
and potentially tilted to the downside, especially as it pertains
to the employment situation that gives him the opportunity to
(08:34):
cut interest rates. Now, we have a payroll number before
the next FED meeting in mid September, and we also
have inflation data coming out. The payroll numbers coming out
over the next several months, are not going to be good.
I think it's on September ninth, we have a quarterly
sensus of employment and wages. This is that downward revision
that we're supposed to get in jobs data, So we
(08:55):
may actually start to realize that our monthly job's rate
of growth over the past six months or so has
actually been a lot worse than what's actually been reported
by the BLS. So I think the labor data is
sending a very strong signal that the jobs market is
not overly strong right now. And I think we know that,
(09:16):
and I think that opens the door for the FED
to interest rates, and I think that POW will probably
allude to something along those lines with respect to the
labor market.
Speaker 6 (09:27):
Jim, you're the CIO of Cross Asset Solutions. I have
no idea what that means, but I guess I'm guessing
it means you and your team can look at a
lot of different places for value.
Speaker 5 (09:36):
Where do you see value these days?
Speaker 7 (09:39):
Yeah, So effectively, what we're seeing right now is actually
equities look a bit more attractive than fixed income does
now let me let me explain that. So clearly, fixed
income has a higher yield and has a higher coupon,
and it's good.
Speaker 3 (09:56):
It's very good, stable place to put.
Speaker 7 (09:58):
Your money, and it's a good component a portfolio for diversification. However,
we think that within the equity markets, if you look
at the broader parts of the market, so not the
top flying mag seven, but the other four ninety three,
what we're starting to see right now is a broadening
out of earnings revisions to the upside. In fact, second
quarter earnings which just came out, we're actually very very
(10:21):
strong from a historical standpoint. We're very strong that many
of these companies in the second quarter actually beat expectations
quite significantly, and that is actually pretending to something relatively
strong going into the future. So when we think about
the markets and we think about the next six to
eight nine months ahead, I don't like to think very
short term, but if we think over that period of time,
(10:45):
what we have to recognize is that we have some
tower fallout that we're going through right now. Inflation's likely
to be higher over the next couple of months. But
once we get beyond that, what we're left with is
a lot of business investment, a lot of cap x,
a lot of companies starting to invest in their own future,
and I think what that's going to do is increase
(11:06):
private sector jobs growth, and I think that's a positive.
Speaker 2 (11:09):
Are you managing for the coupon right now or can
you actually make total return forward?
Speaker 8 (11:15):
That's a great question. Tom.
Speaker 7 (11:18):
What I've been saying in fixed income is I'm managing
for the coupon right now.
Speaker 3 (11:23):
The reason I say that, do you realize that only.
Speaker 2 (11:26):
Twelve percent of our audience Jim Karen has ever done
that because there.
Speaker 3 (11:30):
Wasn't a coupon.
Speaker 7 (11:32):
Yes, well that is true, but well effectively, I think
that the duration movement. So what Tom is referring to
is if you get this drop in interest rates, you
get this increase in price, this total return just in
terms of price. I think that interest rates are have
already fallen reasonably enough at this point. They may fall
(11:53):
a little bit more, but I don't think that's going
to be the majority of the game. I think the
majority of the game that you can look for in
fixed income is the yield or it's the actual COUPI
So for fixed income, it's really a question of that stability,
and you can add that to your portfolio for diversification,
which is which is what we're doing well.
Speaker 2 (12:11):
Sweeney's been lecturing me on a daily basis. Jim Karen,
thank you so much. Margan Stanley, stay with us. More
from Bloomberg Surveillance coming up after this.
Speaker 1 (12:30):
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 Auto with the Bloomberg Business app,
or watch US Live on YouTube.
Speaker 2 (12:42):
We speak with Douglas Cast a Pinata on Wall Street.
People love to go after him, but the fact is
it's an esteemed career starting out a kidder peavity, A.
Speaker 5 (12:52):
Zillion people started, a lot of people done.
Speaker 2 (12:55):
It was great for him. Doug Cast joins US now
with Seaberg's partners. He is been cautious on the market
and run, Doug. I just looked at a toothpaste company.
We'll keep the name out that. Since the Poldic has
made four point five percent return, there's basically two markets.
Have you been wrong because you missed Meg seven or
(13:17):
have you been wrong for another specific reason.
Speaker 8 (13:20):
That's a good question.
Speaker 9 (13:21):
I just want to warn you that I prep for
this interview with one hour of Peppa Pig and Baby.
Speaker 8 (13:26):
Shark with my granddaughter Carlin.
Speaker 3 (13:28):
Good look.
Speaker 8 (13:30):
I'm painfully honest.
Speaker 9 (13:33):
I don't go on Bloomberg or any of the other
shows to improve my brand or sell a service. I
try typically to explain my view in the market's individual
stocks without an agenda to promote that view. My view
is currently is often a contraryan one it is today.
So I'm going to briefly explain how dumb I've been
in the market, but how I addressed and managed through
(13:55):
a wrong sided market view, effectively managing risk and even profiting.
I think that it's instructive for your viewers. It'll benefit
from my transparency and technique because I honestly to be blunt.
Few come on market surveillance and say how wrong they've been.
The opposite is the case. People usually talk about their successes,
the winners in the forum. They want to appear smart
(14:17):
and conveniently forget their views and performance during drawdowns like
in twenty twenty two. It reminds me of the old
Harold arl And and Johnny Mrcy's song. Accentuate the positives,
the emphasize the negatives. So since we first we last met,
and with the exception of the fall in February and March,
and really since the S and P was fifty eight hundred,
I've basically.
Speaker 8 (14:36):
Been burish and wrong.
Speaker 9 (14:38):
But astonishingly, Lee, my hedge Front Sea Breeze has been
net short in almost every month except for the March
April sell off since early twenty twenty four. Despite that,
our monthly returns have been positive and eighteen of.
Speaker 3 (14:52):
The last done that. But Doug, how is you?
Speaker 8 (14:55):
I've done it? That's a great question.
Speaker 9 (14:58):
We employee good risk management by taking a number of
small losses rather than get involved in shurre evaluation AI
AI mag seven short of the mundane companies business models
we're roading.
Speaker 3 (15:15):
Paul wants to get in here.
Speaker 2 (15:16):
I want to ask you one question, Paul Sweeney's got
to be you can ask me any question in a
short time. I on the Bloomberg have Walmart. It's a
pe of forty point one six. Can you explain to
me by somebody dropping pennies down to the bottom line
deserves a forty multiple. You're the only one living who
remembers the nifty to fifty?
Speaker 3 (15:38):
How do we get here with Walmart?
Speaker 8 (15:41):
It is astonishing to me.
Speaker 9 (15:43):
We are been short our largest short exposure in the
last year and a half have been in consumer stocks.
We actually recently showed at Walmart. And I think it's
condition of the market. It's what's It's what Warren Buffett
wrote in a in a report to his Berkshire Hathaway
shareholders in nineteen ninety nine. God's plan basically, people wait up,
(16:06):
wake up in the morning, expect stock prices to go
ever higher. So you've seen that this substantial expansion reevaluation
in price earnings ratios, and we think that equity is
a terribly overpriced against interest rates. The equity risk premium
is a two decade low that's typically consistent with the
slide in stocks. The S and P dividend yield is
(16:28):
at a near record low one point twenty five percent,
and spread between that and the ten year treasury has
rarely been so wide. As you know, I'm very close
to Coops. Iway was Lee's director of research for a
while to make advisors Lee fields bonds or over prices.
Stocks may be overpriced against overpriced sixt income And.
Speaker 3 (16:49):
That's just real.
Speaker 6 (16:51):
Quickly, given that stance, given that conservative outlook on maybe evaluation,
how are you positioned here today?
Speaker 9 (16:59):
I've been net short between ten and twenty percent, as
I said, for most of the last nineteen months, and
we are currently considering expanding our next short exposure. Outside
of that range, I think current valuations are twenty four times.
That's in the ninety eighth percentile. It's a poor launching
pad for future investment returns. Bob Barrel, in one of
(17:22):
his ten Lessons of Investing, said there are no new
eras excesses are never permanent. The SMP index trailing multiple
is twenty six. You take out the twenty three p
in twenty twenty one, and it's similar to the valuation
of August twenty two thousand, right before two year by
bear Mark.
Speaker 3 (17:39):
I'm going to pick up on this with Paul jumping here.
Speaker 6 (17:41):
So, Doug, how about in the fixed income space? Here
are you can you go there and just clip coupons?
Here is our opportunity there.
Speaker 8 (17:50):
I think that.
Speaker 9 (17:52):
If you're a high net worth individual I listened to
your prior segment about just earning the coupon, you can
get a seven and a half percent pre tax equivalent
if you're a high net worth individual in municipals. So
I think that four point three percent is thereabouts where
the ten year yield is it's a good place to
(18:14):
hang out. And if you go a little riskier in credit,
you get equity like returns for limited risk and no volatility.
Speaker 3 (18:21):
Doug, I got time for one more question. I got
eight ways to go here.
Speaker 9 (18:25):
Don't ask me about the Yankees. I'm not going to
about the Yankees. I hang up.
Speaker 2 (18:30):
Well you should, and you know it's a glorious and
beautiful thing, Doud Cass, I want you to speak to
the people listening and viewing who aren't sophisticates. They didn't
have an office next to Julian Robertson. They haven't done
what you've done. They haven't been as visible an Opinionata
like you. What do you say to our audience about
(18:50):
this addiction, this belief in MEG seven.
Speaker 8 (18:57):
Well, I'm I'm you know.
Speaker 9 (18:59):
No one I know is concerned that there'll be a
large drawer down inequities. And I think there's any number
of conditions that could bring down the market meaningfully. And
the most important one as it relates to MAG seven,
is a hiccup and AI. For example, a slow down
in AI cap spending could occur. We could see growing
(19:21):
evidence of double and triple chip ordering. We could see
the failure of AI to improve from its current state.
We can see the failure of use sets to develop
for AI. We could see an accounting scandal in AI
because companies Hyperscalers are depreciating their massive capital expenditures over
ten years well in excess of useful life. I've written
(19:44):
over one hundred and five columns on the street about that,
called wartales from Navidia. I think Navidia and the Hyperscalers,
and on long two of them, Meta and Amazon are
over earning.
Speaker 3 (19:58):
Right, Derek, quickly, You're an Apple? You long your short? Apple?
Speaker 8 (20:03):
No position?
Speaker 9 (20:03):
I was short into the move under two hundred and
I have no position. I think it's overvalued, but I
think they are far better shorts available.
Speaker 3 (20:12):
Can the Red Sox make the Wild Card?
Speaker 9 (20:16):
Red Sox, I believe are tied with the Yankees five
games out. The Red Sox are four and six in
the last ten. The Yankees is seven to three. The
leading team, Toronto is five and five. The momentum is
with the Yankees. There go the Yankees.
Speaker 2 (20:34):
Thank you so much. Get back to Peppa Pig with
your granddaughter. Mister kass Is with Seabreez Partners. He's been
very open about missing a great bullmark.
Speaker 3 (20:44):
Greatly appreciate it. Stay with us.
Speaker 2 (20:47):
More from Bloomberg Surveillance coming up after this.
Speaker 1 (20:58):
This is the Bloomberg serve Balen's podcast. Listen live each
weekday starting at seven am Eastern on Apple, Cocklay and
Android Auto with the Bloomberg Business app. You can also
watch us live every weekday on YouTube and always on
the Bloomberg terminal.
Speaker 2 (21:13):
Joining us out for clarity, Kristin Biddle, It's been wait long,
had a welts at work at City Global Markets, and
I guess just this has come up this week. Kristin,
do you believe in rebalancing?
Speaker 1 (21:26):
Like?
Speaker 2 (21:27):
Is this like a formula?
Speaker 10 (21:28):
I absolutely believe in rebalancing.
Speaker 11 (21:30):
I think look like at a very high level, what's
the number one question we're getting from our clients is
really questioning around like the sixty forty portfolio, and I
think it's gotten a little bit of a bad rap
because when you look at it over time. Just look
at it over the past decade, it's been returning around
nine percent perannum. Even year to date, you have nine
percent paranum or nine percent total year to date.
Speaker 10 (21:52):
Through the sixty forty portfolio.
Speaker 11 (21:54):
So I think where the question comes into place though,
is really looking at what does cash provide in this market?
It should you have an allocation to cash to be
a little bit more nimble. And then also the question
that everyone's been discussing around the fact that your equity
exposure is actually highly concentrated. Is that a good thing
or something that you should diversify away for?
Speaker 2 (22:13):
We want diversification. I mean my basic thing as I
see a lot of portfolio is over diversified, so that
if you have a winner, it doesn't matter because you're overdiversified.
Speaker 11 (22:24):
So the diversification across let's just say like fixed income,
alternatives and equities certainly a case for it. I think
there's a case for having some cash. Now within our portfolios,
we have about a one percent cash allocation killed in
our investors. Well, you know, you have a little bit
just to do some rebalancing on the edges. But if
(22:46):
you look at the average client's portfolio, some of those
are upwards of twenty to thirty percent in cash, which
then you have to ask the question is that really
an investment or are you kind of stuck in in inertia.
Speaker 6 (22:58):
I love some of this data from the cap Gemini report,
which I've seen in so many places. High net worth
individual wealth showed strong growth in twenty twenty four, reaching
ninety and a half trillion dollars globally.
Speaker 5 (23:10):
And this is the number I keep telling.
Speaker 6 (23:11):
My number three offspring that works at a big investment
from sixty three percent of global wealth is expected to
change hands by twenty thirty five.
Speaker 10 (23:20):
That is unbelievable, unbelievable.
Speaker 5 (23:22):
How is that going to happen?
Speaker 6 (23:23):
By the way, is that just I mean, you've got
to plan for it now, don't you know?
Speaker 11 (23:27):
You have to plan for it now. And this is
something so the cap Gemini team, they've been producing this
report for the past twenty nine years, and this is
really kind of one of the leading publications when it
comes to wealth management and the broader kind of spectrum
of ultra high networth and high net worth investors. So
I was part of the exact steerco this year, and
the focus of this is really this great wealth transfer
(23:48):
and so that sixty three percent is expected to change
hands by twenty thirty five. I think the more important
stat there is not just the movement of wealth, but
the fact that whenever you have whether it's like interspousal transfer,
whether it's in a state situation, intergenerational transfer.
Speaker 10 (24:03):
There's two key insights.
Speaker 11 (24:05):
One, within one to two years, close to ninety percent
of people change their advisor. So simply because you were
advising a family does not mean if you have one
of these big life events that you're going to continue
being the advisor. I think the other thing is when
people talk about next gen, it really is people aged
forty to sixty. You hear something like next gen and
(24:25):
you think it's someone in their early twenties or in
their teens. That transfer is going to happen first and
foremost to Gen X.
Speaker 2 (24:32):
Here's what I want to know for the listeners and
viewers that are doing all this estate planning, etc. And
the kids have no visceral interest in the markets. They
wouldn't know yield to maturity if it hit them over
the head. What do you do if you have all
your kids or some of your kids who they just
(24:53):
don't care about the material.
Speaker 11 (24:57):
So this is this is a really interesting questioned Tom,
because I think it's fascinating and almost kind of ludicrous
that you can graduate from the best universities in this
country without a foundational knowledge of financial planning, estate planning,
and just understanding investments one oh one. So since we're
dealing with that as a base case and some people
are not interested, the educational component and having a trusted
(25:21):
advisor becomes a mission critical and so everyone should have
a foundational knowledge of financial planning.
Speaker 10 (25:27):
They don't, but they need to.
Speaker 2 (25:29):
Okay, they need to. But come on, this is like
a huge deal. We have a generation behind us, whether
we have you know, the megabucks John Tucker has or
you're like me, I can never retire it.
Speaker 3 (25:41):
I mean, I mean, Kristen, the kids don't care.
Speaker 10 (25:45):
Well, we see them caring, but just in different ways.
Speaker 2 (25:48):
Right.
Speaker 11 (25:48):
So a lot of the barriers to entry from a
technology perspective, hear me out on this time. The barriers
to entry from a technology perspective, even accessing financial markets.
You've never seen so many people in their twenties and
thirties actively trading, and so the democratization in terms of
trading is free access to markets. That was a very
different story a decade ago or two decades ago. So
(26:11):
a lot of those barriers have been brought down, and
I think it's a question of meeting people where they're at.
And also with their interests. So where do we see
the primary interests of this next generation. It's definitely in
terms of digital engagement and the platform in terms of
accessing advice twenty four to seven, But it's also interest
in other asset classes. And you see a higher tendency
(26:31):
towards alternatives as opposed to public markets. And I'm not
just talking about crypto and what you would think. It's
actually alternatives because ninety nine percent of the companies in
the US market are private companies. And actually, if you say, like, okay,
fair enough, but a lot of them are small. Even
if you use the threshold of over one hundred million
in revenue, you're still talking ninety percent.
Speaker 10 (26:51):
So a lot of those themes.
Speaker 11 (26:53):
You can meet someone where they're at in terms of
what does interest them without it being financial planning one
oh one or kind of are the benefits of asset
allocation and diversification.
Speaker 6 (27:03):
Well, I've told my kids the last check I write,
I want it to bounce, So don't plan on anything else.
So what are some of the questions you get from
your clients? How do I set up the states, how
do I set up trust? What do I do with
my investments today? What kind of questions do you get
from your clients these days?
Speaker 11 (27:19):
So I would say the first question oftentimes when we
meet with a new client, right, So if it's an
existing client, you generally are going to already have a
financial plan in place, You're going to have an estate
plan in place, and you're going to have an asset
allocation and understanding your risk profile. So oftentimes when we
have that initial interaction. And by the way, we cover
people in the legal industry, we cover professional services, we
cover asset managers, pre ipo post ipo companies, so you're
(27:43):
talking about a very diverse set of individuals, but they're
very ambitious in terms of their careers and their goals
for themselves personally as well as professionally. One of those
common things that we find is people have all their
money in a savings account, right, so that they have
not actually done a financial plan or that they just
(28:03):
simply they've been saving and they start with kind of
a traditional path of I'm going to buy my first house,
I have my mortgage, then I come into liquidity and
I don't even realize and many people think it's too late.
So the question around, like, these are people who are
fine from a retirement standpoint, but then really getting an
estate plan in place, understanding wealth transfer and then understanding
(28:25):
acid allocation.
Speaker 2 (28:26):
Yeah, all I can say, Folks, is just on probate alone,
get an estate plan in order. Kristin Biddley, thank us
so much for Citygroup this morning. There.
Speaker 3 (28:34):
We don't do enough for that.
Speaker 10 (28:35):
Can you come back anytime. I'll be here.
Speaker 3 (28:38):
Kristin, thank you so much early, really well, I appreciate that.
Speaker 1 (28:41):
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