Pod Insights Masters in Business 'Barbell' Investing Strategies With Jurrien Timmer About this episode Barry Ritholtz speaks with Jurrien Timmer, director of global macro at Fidelity investments. They discuss his career path, key market charts and Timmer's "barbell approach" to investing in both high-flying tech stocks and equities outside of the US.
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0:00 Speaker 00 At Brookfield, we believe you can own wealth that's measured in generations. Because true ownership looks beyond today and beyond cycles. For 125 years, we've built long-term wealth through expertise, discipline, and a clear vision for the future. Providing investors access to alternative strategies built for what's next. Brookfield. Own what's next. Learn more at Brookfield.com/own. This is not an offer to sell or investment advice. Investing involves risks, including loss of capital. Past performance is not indicative nor a guarantee of future results. Please review performance and offering materials before investing.
0:38 Speaker 01 This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.
1:21 Speaker 01 But according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.
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2:41 Speaker 01 This is Masters in Business with Barry Ritholtz on Bloomberg Radio.
2:47 Barry Ritholtz? On the latest Masters in Business podcast, an amazing conversation. I sit down with Urian Timmer. He's the Director of Global Macro at Fidelity. They touch about 50 million separate clients. What an amazing conversation. Urian has been started out in fixed income before he became a market technician. Now global macro is his beat, which means he covers everything: U.S., overseas, equity, bonds, commodities, economic data. I thought this conversation was fascinating, and I think you will also. What a depth and breadth of knowledge. With no further ado, my conversation with Fidelity's Urian Timmer. Urian Timmer, welcome to Bloomberg.
3:32 Speaker 04 Thank you very much, Barry.
3:34 Barry Ritholtz? I've been looking forward to this. I've been consuming your stuff for it feels like forever. I'm a big fan of what you do. But before we get to your work at Fidelity for the past three decades, let's talk a little bit about your background. You get a bachelor's in finance from Babson College. What was the original career plan?
3:54 Speaker 04 Well, so I was born and raised on the island of Aruba in nineteen sixty-two, when Aruba was still very small and sheltered. And as a Dutch citizen, now also an American citizen, but, you know, generally, the Dutch kids would go to Holland to go to higher education. But I was in love with the American culture. I met many tourists on the beach, you know. And so I wanted to go to the States and do the American thing. And then my father, who was an importer of construction materials, et cetera, he had contacts in Boston. They said, okay, well, you should send your kid to Babson because it's small. He won't be overwhelmed as an international student.
4:38 Speaker 04 And I've always wanted to be an architect, but then in the last year before finishing high school, I'm like, I don't think I'm good enough to be an architect, so let me do business. And I figured, you know, there's always something you can do with a business degree. And so I studied finance with a minor in investments. And then, you know, I graduated with no work permit, right? So I was in that place where you need to have, obviously, a work permit. So back then, I don't know if it's still the case, but back then you got one year practical training visa. And then you had to go, you know, get a real visa. And so I took literally the only job that was offered to me in the United States.
5:20 Speaker 04 So I applied to every Dutch company. I figured at least they'll have maybe some sentimental reasons to hire a Dutch person. I could have worked in Holland, of course, but I wanted to be in the States. So the Dutch bank ABN, which later became Avian Amro,
5:33 Barry Ritholtz? Right.
5:34 Speaker 04 hired me. I went to New York into their corporate banking credit program, in which I had zero interest. But it's like, you know, this is the job.
5:45 Barry Ritholtz? No pun intended, right? But you eventually become pretty senior in the fixed income group at ABN.
5:51 Speaker 04 Yeah, so I was very lucky. And again, you know, it's sort of, you take the job that's offered to you and you make the best of it. You know, you play the hand that's dealt. And literally within a few months. ABN set up a capital markets group because, you know, we were the the primary dealer in New York, together with LaSalle National Bank in Chicago for the HQ in Amsterdam, which of course was one of the world's largest banks at the time and a very large treasury book. And so I was the person who would execute the the trades for HQ. So I became a client of like Solomon Brothers and Smith Barney and, you know, Goldman Sachs, et cetera. And so I got into the Wall Street game and I learned everything about fixed income. And
6:35 Speaker 04 to this day, I'm, you know, like, if you're either a stock market person or a global macro person, having a foundation of fixed income is so important.
6:45 Barry Ritholtz? It's so true. You say that. Some of my favorite stock analysts began as bond analysts because they're concerned about return of capital, not return on capital. And it focuses them very much on staying away from the speculative nonsense and real. It's been very consistent over the years. I have a list of some favorite people in that space. So, so you start out in fixed income. When did technical analysis and becoming a CMT arise in your journey?
7:14 Speaker 04 So I was at ABN AMRO in New York for 10 years. And so I'm, you know, I'm there executing trades, learning about the markets, watching my the teller eight and the Bloomberg's were still, there were quad screens with amber.
7:26 Barry Ritholtz? Right.
7:27 Speaker 04 And, you know, I just, I've always been a visual person. And so I started gravitating towards charts and, you know, charts are kind of the mainstay of what I do even now, 40 years later.
7:38 Barry Ritholtz? Forty years later. That's crazy.
7:40 Speaker 04 And I like to write. I think I get that from my dad, who's a great writer. And so I always had this kind of urge to put pen to paper and, and to show charts. And so I just started writing a newsletter for the, the people in my universe at the time. And, you know, it would be like charts from CQG, cut out, taped onto a type report and then faxed to people. Like, that's what the technology was back then. And so it was always... So that's how it started and then I ended up, you know, uh, getting the, the chartered market technician, although that may have been during the fidelity years.
8:19 Barry Ritholtz? So, so how did you go from ABN Amro to fidelity? When was that?
8:23 Speaker 04 So ABN, so the culture at ABN Amro, um, uh, not, not to spill any beans, but this was a long time.
8:29 Barry Ritholtz? Thirty years ago.
8:30 Speaker 04 Thirty years ago. I didn't like where it was going. So we, we, uh, ABN had a, um, a bank in Chicago and they saw what a profit center in New York was. So they wanted to, they wanted me to work for them, become a commissioned salesman. And I'm like, uh, it's like, it's not what I do. Uh, and just coincidentally at that time, um, fidelity came looking around, uh, looking for the most obscure job in the world, a, a fixed income technical analyst.
8:57 Barry Ritholtz? Right.
8:58 Speaker 04 I mean, talk about a narrow field, right?
9:00 Barry Ritholtz? Very specific.
9:01 Speaker 04 So that was in 1994. Uh, around that time, you know, I was kind of looking around and, um, and I had two major career highlights within six months of each other because in 94, I was approached by Paul Truder Jones's company.
9:15 Barry Ritholtz? Oh, really?
9:16 Speaker 04 And so I had a meeting with Paul in his office downtown New York, uh, with this giant teller rate on the screen and we were looking at the bond chart, 94, the bear market.
9:25 Barry Ritholtz? Right. And he very famously had called the 87 crash before.
9:28 Speaker 04 And he was like, is that, do you think that's a fourth wave? And we were having that conversation. That was great. Um, and then, you know, I was approached by fidelity and I ended up going with fidelity, but the last interview of that process was with Ned Johnson.
9:41 Barry Ritholtz? Oh, really?
9:42 Speaker 04 And so I was spent.
9:43 Barry Ritholtz? The founder.
9:44 Speaker 04 I spent an hour with him in his office talking about brokers because I was hired to go into the chart room. And at fidelity, nobody got into the chart room without Ned's blessing, right? Because.
9:55 Barry Ritholtz? And back then, were they still doing charts by hand?
9:58 Speaker 04 Yep.
9:59 Barry Ritholtz? Amazing.
9:59 Speaker 04 Um, and so, uh, so that, so that, anyway, so that's how the fidelity career started and it was, it was interesting because this is now early 95 and of course 94 was that bear market. We had the, the so-called tequila crisis in Mexico. And so the, the new mandate from upstairs in 95 was we're not making any duration bets. You just stick to your bottom up, you know, you you look at credits and like I'm coming in there as a technician and like, what am I supposed to do now? Like, there really is nothing for me to do. And so at that point, I kind of reinvented myself and became multi, multi asset and I went to the equity side. And anyway, so that was the start of it.
10:41 Barry Ritholtz? When you say multi asset, I I think you're the only person in all of finance with the title Director of Global Macro. Global means around the world. Macro means 30,000 foot view. Is everything out there in your jurisdiction?
10:57 Speaker 04 Pretty much. So I don't do security selection. I, you know, we have armies of very talented analysts.
11:03 Barry Ritholtz? But you do stocks, bonds, alts, crypto, commodities, gold, you name it.
11:08 Speaker 04 I do everything, but it's top down.
11:09 Barry Ritholtz? As well as economic data, interest rates, employment, etc.
11:14 Speaker 04 And and that's how I transitioned from being a technical strategist to being more kind of multidisciplinary, because I quickly learned at Fidelity as I was roaming the halls, pitching ideas to to portfolio managers who generally are fundamentally oriented, right? I'm like, you know, I'm it's like I'm speaking a different language, right? So Fidelity's always had a lot of technical analysts and the chart room, but I I had to like reinvent myself again and pivot towards at least speaking their language. And like, you know, a chart is a chart, right? It can just be a bar chart of of the S and P, or it could be of the P E ratio or earnings or monetary policy. So I figured a chart's a chart. I'm
11:57 Speaker 04 gonna like weave a broader approach to this. And and that's where kind of I came up with the title.
12:03 Barry Ritholtz? So whenever I see a technician and a fundamental analyst having a discussion, somewhere along the line, someone says, Look, I'm a technical analyst. I'm just telling you what's going on in the battle between supply and demand. It's up to you to create a narrative around that. You tell us what's going on fundamentally. I don't know, but I could tell you who's winning, the buyers or the sellers.
12:26 Speaker 04 Yeah. So the fundamentals tell you.
12:30 Speaker 04 Kind of the why, um, maybe the what and the why. And the technicals tell you kind of the when and the how much. And it helps give you conviction. And generally speaking, we use technical analysis like our equity PMs do. Like they're obviously gonna have an idea about a company and what their long-term prospects are. But then our technical analysts will, will say, okay, well, you've rated this stock a one, meaning strong buy. But the chart looks like hell, like you, you should be aware that, that what's in, what's happening is not the same as what should be happening. Uh, and maybe it takes time, but it's like, it's a, it's a second opinion, which can be very helpful.
13:11 Speaker 04 And the other way around as well, like a chart looks amazing, but it gets a really poor fundamental ranking. And we also have a quantitative dean that does a quant overlay as well.
13:21 Barry Ritholtz? So, so we talked about global macro. I'm curious, you're a Dutch citizen originally, born and raised in Aruba. Now a citizen of the U S for the past 25 years. How does that international upbringing affect how you see the entire world of assets?
13:39 Speaker 04 Uh, yeah, it's, it's a great question. I, I do think, um, that I'm, I've been privileged to grow up in a very diverse, um, environment. Like if you look at old high school pictures, I'm like maybe one of two white kids in there. Everyone else is different shades, but so very, very diverse. And, um, and, and so I think, and, and also just going to different countries and learning different cultures or being exposed to them. I think it's helped me like I view myself sort of as a global citizen.
14:10 Barry Ritholtz? Well, you're a globetrotter, you're, you're, you're in the U S, you were in California, you're in New York, Boston. You're going to where? What's your next few stops? London?
14:19 Speaker 04 I'm flying to London on Saturday, I'll be in Geneva after that, and then, um.
14:24 Barry Ritholtz? We were just in Lake Geneva a year ago, spectacular.
14:28 Speaker 04 And then actually we're going to Holland because my parents are, they live in The Hague. They're celebrating their 70th wedding anniversary.
14:35 Barry Ritholtz? Wow, that's amazing.
14:37 Speaker 04 So they're 91 and 97. So they've got three generations of Timmer descending on the Hague
14:42 Barry Ritholtz? That's incredible.
14:43 Speaker 04 in about a week and a half. And I think what I feel at home in almost any place
14:48 Barry Ritholtz? Really?
14:49 Speaker 04 in the world. And, you know, when it's hard to understand what someone says because the English is not their first language, you can kind of like, you figure it out because you're just kind of used to this, you know, this environment where everyone's coming from different places. And, and like, you know, even now, like I run, and this is totally separate topic, but I run a food camp at Burning Man. And it's a very global camp. We have 90 people. We all cook meals that we gift away to the artists there. But we have like 30 Brazilians and we have like French and Swiss and Mexican people and obviously Americans. And that like, it's, it's easy to do because you're just used to having all these different cultures
15:33 Speaker 04 in the same space.
15:35 Barry Ritholtz? So I'm kind of fascinated by the new, I don't love the earbuds, they're not comfortable in my ear, but the new AI-enabled instant translation, that is Star Trek next level
15:46 Speaker 04 It's very cool.
15:47 Barry Ritholtz? futuristic. I can see that saying, oh, you want to go to Japan or Korea or China? Here you go, knock yourself out. That, that sort of technological innovation is, that, that turns that into a must-have technology.
15:58 Speaker 04 Yeah, for sure.
15:59 Barry Ritholtz? How many languages do you speak?
16:01 Speaker 04 I speak, obviously Dutch is my native language. English, I used to be totally fluent in Spanish, but I've, I've kind of lost that. And then, of course, there's the world language called Papia Mento, which is what they speak in Aruba, which is essentially kind of a Spanish, Portuguese blend. But if you don't know a word, you can just say it in Dutch or English and it makes, and it's completely acceptable.
16:26 Barry Ritholtz? Really fascinating. Coming up, we continue our conversation with Urien Timmer, Director of Global Macro at Fidelity, discussing various asset classes, equities, bonds, commodities, alternatives. You're listening to Masters in Business on Bloomberg Radio.
16:52 Speaker 00 At Brookfield, we believe you can own wealth that's measured in generations. Because true ownership looks beyond today and beyond cycles. For 125 years, we've built long-term wealth through expertise, discipline, and a clear vision for the future, providing investors access to alternative strategies built for what's next. Brookfield. Own what's next. Learn more at Brookfield.com/own. This is not an offer to sell or investment advice. Investing involves risks, including loss of capital. Past performance is not indicative nor a guarantee of future results. Please review performance and offering materials before investing.
17:30 Speaker 01 This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.
18:13 Speaker 01 But according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.
18:56 Barry Ritholtz? I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My guest this week, Uriah Timmer, Director of Global Macro at Fidelity. They touch about $16 trillion in assets and have discretion over $6.4 trillion. So we were talking about what a globetrotter you are. Let's trot around the world and talk about various asset classes. Since you began your career with bonds, let's start with bonds. How do you see what's been going on with treasury yields anticipating not only the 25 basis cut point we had in September, but perhaps a couple more this year and next?
19:40 Speaker 04 Yeah, so treasury yields, such an interesting market right now. We've been stuck sort of between 4% and 5%.
19:48 Barry Ritholtz? For a while.
19:49 Speaker 04 For a while. And when we go above 4.5%, it's like nothing good happens. Like the old Fed model from the Greenspan days comes lurking back and it starts to wobble the stock market because the bond yield and the equity yield are about the same right now. And so that takes you back to the 80s and mid 90s and even the 70s and 60s where bonds to stocks were positively correlated instead of negatively correlated. That happened, that began during the Great Moderation Era, late 90s until COVID, basically. And then in 2022, of course, the correlation flipped back to positive. It was rising yields that caused the problem in the stock market.
20:32 Speaker 04 And so there's a whole broader conversation about the 60-40, but just dealing with treasuries right now. So as you get close to 5%, it really starts to freak the stock market out, but also the bond buyers start to emerge because there's value, right? I mean, real rates are positive.
20:48 Barry Ritholtz? 5% yields over 2.5% inflation, you're actually making money.
20:52 Speaker 04 The income is back into fixed income, right? But down at 4%, when you have a growth scare, kind of like, I mean, I wouldn't say it's a growth scare, but the jobs market...
20:59 Barry Ritholtz? There's some nervousness and some, I hate the word uncertainty, but there's a lack of clarity as to how all these things, tariffs, yield, FOMC plays out.
21:08 Speaker 04 So at 4%, generally, I would be a better seller than a buyer. But this question of fiscal dominance, clearly, the administration wants to grow out of the debt. I think that's the very... Overt plan, if you've listened to Scott Besond or even the president.
21:27 Barry Ritholtz? They're pretty explicit about it.
21:29 Speaker 04 And so they're trying to goose the economy and outrun the debt because everyone knows you can't really cut the debt very much because too much of the budget is not discretionary. And so that's the plan. And I think it's basically, it's a good plan because what are the alternatives, right?
21:46 Barry Ritholtz? Raising taxes and cutting spending, which we know what the odds of that have.
21:50 Speaker 04 Yes. But running kind of that fiscal train means deficit spending, or at least that's part of it. And that means more supply and that could mean higher term premium for long treasuries. And we saw, we've seen that, right? The term premium during the QE financial repression days was like minus 150, which makes no sense, right? A risk premium should always be positive. And now it's plus 60, plus 70. But historically, it's been plus 150 or even more. And so if the term premium mean reverts back to a normal level, positive level, because deficit spending and debt levels are rising, you could easily see a
22:32 Speaker 04 five handle on treasuries. And a five handle on treasuries are not going to sit well with equities. Like, the equity market can go up, earnings can drive the bus, but the PE gets under pressure because the risk-free asset is now competing with the risky asset and they're offering the same yield.
22:48 Barry Ritholtz? So, so, quick question on that. In the 2010s, or at least towards the end of the 2010s, we had an inverted yield curve for a while. What's the impact of that on that term premium or lack thereof?
23:01 Speaker 04 Yeah, so we had that very inverted yield curve. Obviously, it shouted recession and it didn't happen. And I think the reason in hindsight was that the economy is just less interest rate sensitive than it used to be, right? So everyone refied their mortgage in 2020 and 21 at sub 3%. That's also why the housing market is frozen.
23:22 Barry Ritholtz? Right.
23:22 Speaker 04 But also, if you look at the big banks, right? Why is a yield curve inversion typically bad? It's because banks' net interest margins goes upside down, right? They borrow short, lend long. And so banks stop lending and you get a credit crunch and you get a recession. But in this case, uh, the large banks, you know, i- if you notice your, your deposit rate at the large, uh, mega center banks, uh, has not really gone up commensurate with the yield on money market funds, right?
23:51 Barry Ritholtz? That's right.
23:51 Speaker 04 That deposit rate went up to a half a percent and is now coming back down again. So for a large bank, the yield curve not only was never inverted, it was extremely steep. Half a percent funding, right? If you're, if you're funding your loans on deposits and you're paying half a percent on those deposits and you can lend at seven or eight percent, you'll do that all day long.
24:13 Barry Ritholtz? And yet, at the same time, we've watched money markets go five trillion, six trillion, seven trillion. It's become so easy with your app to move money from, hey, I'm going from Chase to Schwab, I'm going from Citi to Fidelity, where I'm getting real yield. Yeah, I wonder how much technology plays a role in people. It used to be a pain in the neck, oh, I'm getting quarter percent in my checking account. But do I really want to write a check and mail it out and wait for the?
24:41 Speaker 04 Yeah, so, so you leave money at the bank for convenience, you know, you got bills to pay. Uh, but if you have extra cash, uh, you're, you're buying a CD or a money market fund or buying T-dills or what have you. And it's a lot easier than it used to be. And so now you've got seven trillion in money market funds, which a lot of people actually think is money waiting to be invested in the stock market. But I, I, I don't think there's really a signal there because I think that money came out of the banks and probably will go back to the banks.
25:08 Barry Ritholtz? So some people have said, hey, as soon as the Fed starts cutting rates, it'll A, make the cost of borrowing cheaper for corporate America as well as American households. And B is going to scare some of that money away and it's got nowhere to go but equity. Fair narrative or kinda a lot of wishful thinking?
25:27 Speaker 04 Um, it, it could be a combination of both, but if you typically look at when money market fund assets swell, like it did during the pandemic, it's money coming out of the stock market seeking a safe haven. And then when the stock market recovers, the money goes back in the stock market. That's not. Not the pattern this year. The money came out of the banks in part because of like the Silicon Valley.
25:49 Barry Ritholtz? Right.
25:49 Speaker 04 Debacle a few years ago.
25:50 Barry Ritholtz? But also 500 basis points of rate hikes in 2022.
25:54 Speaker 04 So money markets went from zero to five and a half.
25:56 Barry Ritholtz? Suddenly attractive.
25:57 Speaker 04 And deposits went from zero to half, you know, so money markets yielded 10x the bank deposit. And so some of that may go to the stock market, but I but it didn't come from the stock market. Let me put it that way.
26:09 Barry Ritholtz? So you noted something really interesting. I remember you wrote in 2022. Bonds went from being a port in the storm to the storm itself.
26:18 Speaker 04 Yes.
26:20 Barry Ritholtz? So normally we think of money leaving equity and going in the safe harbor of money markets. Were we seeing money exiting bonds and going to money markets? Is that what happened? Was it a duration play?
26:31 Speaker 04 From among sort of the typical investors, we we have not really seen an exodus at all. And I think part of that is just the demographics of, you know, the baby boom solving for income more so than growth. So you look at fund flows into fixed income, they've remained strong. And they were strong at, you know, 1% and they're strong at 4%. So I think that is more of a structural trend than playing the markets, if you will. Like, I think the average investor is not looking at, okay, well, real rates are now positive, so let me do this. But they're solving for outcomes. They're buying solutions based funds, like like our target date will have certain amount of fixed income.
27:12 Barry Ritholtz? Which have just attracted so much money in 401ks over the past 20 years. It's it's amazing. So let's talk a little bit about equities. I keep hearing people complain about valuations, but if you stayed out of equities due to elevated valuation, you missed most of this run from the 2013 breakout.
27:32 Speaker 04 Yes, so.
27:35 Speaker 04 So the market obviously is very bifurcated. We got the MAC7. The cap weighted PE is, you know, 23, 24. The equal weighted PE is 18, so there's a very large gap there.
27:49 Speaker 04 You know. If you look back at the mid to late nineties, which is a kind of an analogous period to today, right? We had the ninety-four stealth bear market when Greenspan raised rates three hundred basis points, then he gave back seventy-five and we had a huge rally and it was also the start of the internet boom, you know, the Netscape IPO, I think it was like in ninety-six. Ninety-six, yeah. So the post-two thousand twenty-two period, very analogous to post-nineteen ninety-four, you know, soft landing, ease off the brakes, markets rip. And then the post-ninety-eight long-term capital. Yeah. That, you know, twenty-two percent decline, very robust recovery, and then Greenspan eases
28:31 Speaker 04 three times into that recovery. We're seeing the same thing now. We had a twenty-one percent tariff tantrum. Right. Uh, no recession, you know, the kind of the administration backed off, very, very strong, one of the strongest ever recoveries from a twenty percent decline other than nineteen ninety-eight. And then now Powell's easing into that. And so, but the point is that that period saw almost non-stop multiple expansion. And that's what we've seen since two thousand twenty-two. And, you know, PEs are, they have, they are strong predictors of long-term returns. So if you take a ten-year Cape ratio, and you regress that against ten-year forward
29:13 Speaker 04 returns, you see a very high, you know, it explains the forward returns very well. But over the near term, a high P has very little to say about the next year or two. And this is because the market tends to be in a rising trend. Momentum begets momentum. And that's what we're in. So it's, it's a, you know, it's a tough game to time on the mean reversion of PEs. Valuation, right. Even though we know that historically it's between ten and thirty and it does mean revert, but when the mean revert, reversion starts and from what level is very, very difficult to do, especially during secular trends, which I think we're very clearly in.
29:58 Barry Ritholtz? So, so many different places to go with this. I have a dozen questions. Maybe we'll go a little along the segment and delve deeper into equities. I love the concept of a secular bull market as opposed to a cyclical. But I think a lot of people don't really understand the difference. Give us your definition of what is a secular bull market, when this one began and why?
30:23 Speaker 04 Yeah, so we have, so we have the market cycle, which is generally driven by the business cycle. So you have a recession and you have the early cycle recovery where things get less bad. And of course, the market is always anticipating that, right? The market's always in price discovery. And this is why at bottoms, price will lead earnings. Which is why the PE always goes up in the first year of a bull market. Like it always does. And, and it doesn't make sense on the surface. People are like, oh, this can't be real. It's all PE driven. Where are the earnings? Well, the market's just front-running the earnings. But then there are the secular trends. And, you know, if you go back 100 years, you can see them. You can spot them very easily because the market has a kind of central trend line.
31:08 Speaker 04 Plus 10% nominal, plus 7, 6 and 3/4 real. And if you run a regression trend line against the, the total real return of the S and P or some basket of stocks going back 150 years, it's like perfect. And then you have the pendulum swinging above it and below it. So you have
31:26 Barry Ritholtz? Very noisy, but still the overall trend is being maintained.
31:29 Speaker 04 But you have these super cycles where you're outperforming the trend line. So the 80s and 90s was one of those. So instead of a 10% return, we got 18% returns for like 18 years. The 50s and 60s after World War II. The 20s, that was a truncated one, but from 20 to 29, boy, did that thing go. And since '09 is where I put it. Other technicians generally disagree with me. They think it was 2013. When you look at the CAPE model, you look at deviation from trend. You look at the slope of those early trend lines. For me, it's '09, which puts us at 16. And, and of course, and then you
32:07 Speaker 04 Have the secular bear markets, right? So the 2000s was one, uh, the 1970s, very famous, of course, 1930s. Doesn't mean the market necessarily goes down, but it it's underperforming that 10% trend line. And generally in real terms, it's probably going down. And so that's kind of how I define the secular trend.
32:27 Barry Ritholtz? So, uh, uh, we are in agreement on so much stuff. I'll, I'm gonna circle back to 09 and push back a little bit. But, um, you mentioned that first year you get a PE spike as the market anticipates improving earnings. One of the things that's kind of fascinating is to see how much of a bull market's gains are attributable to not improving fundamentals, but multiple expansion from 82 to 2000. What was it? Three quarters of the gains were multiple expansion? How much of that is psychology and how much of that is just people getting on board late in, in, as the market rallies?
33:05 Speaker 04 Uh, it, it's, it's both, but yeah, for instance, in 82, the PE was like seven and in 2000.
33:11 Barry Ritholtz? And what was the yields in 82?
33:13 Speaker 04 It is double ditch is almost 20%.
33:16 Barry Ritholtz? A lot of competition.
33:17 Speaker 04 And then in 2000, yes, exactly. And in 2000, the PE was 35, uh, using operating earnings. That, that was the forward PE actually. Um, the trailing PE was like 45. So that's a hell of a pendulum swing.
33:29 Barry Ritholtz? Yeah.
33:30 Speaker 04 And, you know, obviously, um, 1982 inflation was very high. They had the malaise of in the economy. Bonds were very competitive. Nobody wanted to pay for earnings.
33:41 Barry Ritholtz? The death of equities was just a few years earlier on in business.
33:45 Speaker 04 Death of equities, yes, for sure. Um, and then people become more comfortable and then they go from comfortable to confident. And then it's like, yeah, I'm gonna pay, I'm gonna pay 20 or 25, uh, times these earnings. And then, of course, then you have the growth, the, the growth stocks. So the late 90s, obviously, were, were, you know, I, I used to call them the Janus 20. There was a fund that would just own the, the most stocks and so.
34:08 Barry Ritholtz? I remember the Ryan net, net fund around that time.
34:12 Speaker 04 And of course, right now it's the Mag 7, formerly known as the, as the Fangs. Um, and those are secular growers, right? And there's a theme, right? It was internet back then. It's AI now. And people get onto the, onto the bandwagon and it's like, yeah, you know, I'll pay 35 times earnings for. A company that is in this space and is going to grow their earnings in a secular way, not a cyclical way.
34:35 Barry Ritholtz? Mm hmm.
34:36 Speaker 04 And so it's totally plausible and understandable, but at the end, it goes too far, and I don't think we're anywhere close to that. But then you start looking for signs of froth. But yeah, but that's the pendulum swing.
34:49 Barry Ritholtz? So let's talk about oh nine and why so many of your technical brethrens dated to 2013, which was when all of the major indices broke out over their prior trading range. So the pushback I hear to oh nine is, well, that's like dating the 82 to 2000 bull market to the lows in 73, 74. And you're still, all you're doing over that period is recovering the sell off. 23, what, we were down 56, 57% from October oh seven to March oh nine. And then to get back to where you were in oh seven, it took till 2013. So why oh nine as opposed to 13?
35:32 Speaker 04 It's totally a legit argument, but I would say a couple of things. One is, this is not an exact science, right? There's only been two or three or four secular bull markets, right?
35:46 Barry Ritholtz? Small data set.
35:47 Speaker 04 Small data set. It's not a quant model. You have to look at the chart, at the slope. So I date the secular bull market from the 50s, I date at 49, even though 49 was not the low, right?
36:02 Barry Ritholtz? Right.
36:03 Speaker 04 The low was
36:04 Barry Ritholtz? Forty-six, forty-four, something like that.
36:05 Speaker 04 But in 49, something changed and the slope started to, you know, like the market found itself and that trajectory started to really compound at double digits. And you broke out of that big shelf that was really from 29 all the way to 49. Seventies, the low was of course in seventy four, October seventy four, after forty eight percent bear market. We had some other little cycles, but then in eighty two, it took off. There was a change in the fundamentals, you know, Volcker broke inflation. And so, and then you look at the Cape, so then I get verification from the fundamentals. So then,
36:45 Speaker 04 so I look at the charts and yes, I see the, the argument and I agreed, it's a good point. But in oh nine, the market just went straight up after a decade of sideways. In eighty two, the market went straight up after a decade of sideways.
37:01 Barry Ritholtz? I see.
37:02 Speaker 04 In forty nine, same thing. Whether the low was in or not, and of course, in real terms, the eighty two low was below the seventy four low. So
37:10 Barry Ritholtz? Because of inflation, you really fell tremendously in the seventies.
37:13 Speaker 04 So I want to get second opinions from the real chart and from the fundamentals. So the Cape model, again, where you compare the ten year P E to the ten year forward return, looks very similar at the oh nine and not similar at the thirteen, when the market already had a lot of momentum. And then the other thing I look at, again, that hundred and fifty year regression trend line of the real S and P.
37:38 Barry Ritholtz? Hundred and fifty years.
37:39 Speaker 04 Yeah. And so at the, at secular peaks, the market is about a hundred percent above the trend line. And at secular troughs, it's about fifty percent below. So that point was in oh nine. It was not in thirteen. So, so I look at, at, at, at like the weight of the evidence from a multitude of indicators. And again, it's, it's not an exact science.
38:01 Barry Ritholtz? Right.
38:01 Speaker 04 I'm not saying I'm right, they're wrong. But that's, for me, that's where I get
38:05 Barry Ritholtz? But you've been a whole lot more right than, than many other people.
38:09 Speaker 04 And, and it's interesting. So in oh nine, you know, I, I was actually running a, a fund back then, a, a kind of a global macro fund. And I was like, the market was so depressed, right? So remember March of oh nine?
38:23 Barry Ritholtz? Sure, of course.
38:24 Speaker 04 And I'm like, you know, I want to be long, but what if I'm wrong? And I'm like, at this point, if I'm wrong?
38:32 Barry Ritholtz? So what? You're already down fifty Cut in half.
38:34 Speaker 04 But at that, at that point, the whole system is going to collapse. So it's like, why, why not, why not bet at, at that point? And so, yeah.
38:44 Barry Ritholtz? When is down more than 50% in US markets? Not a great entry point. I mean, that, that's one thing. But I have to ask you a question about oh nine. So I was looking through some of my old notes as I was preparing for this. And I have, I'm curious as to your thoughts on some of the behavioral aspects, including sentiment and bull bear ratios. I wrote something up in October oh nine, calling that recovery, the most hated bull market in market history. Markets went straight up. Everybody was miserable. It's a head fake. It's a false breakout. This is all going to be a disaster. And if you listen to those people, you left a ton of money on the table.
39:29 Barry Ritholtz? What's your thought on that extreme sentiment in one direction or the other? And just what it means when everybody hates a particular asset class?
39:38 Speaker 04 It's obviously an opportunity because that means that everyone is not on the same side of, of, of the boat, right? And, and actually, and what I was.
39:45 Barry Ritholtz? Or they're all on the wrong side of the boat.
39:47 Speaker 04 But before I answer the rest of that, I went, I, what I was going to say earlier was, when you run the regression of the oh nine to present S and P, either in real or nominal terms, and you run the same regression from 82 to 2000, from 49 to 68, it's exactly the same slope. And, and, and so if in oh nine, I got bullish and in 13, I'm like, yeah, now we've taken out the highs. So now we can say this bull market is confirmed. So the 13, for me, is not the start, but it's confirmation. But if I had looked at nothing else for the la, for the next, you know.
40:27 Speaker 04 12 years, today I would be within 10% of that slope.
40:33 Barry Ritholtz? Wow.
40:33 Speaker 04 Having materialized. And so, again, you're never going to do that on a secular chart. You want to have weight of the evidence, but it shows you how powerful that context can be to just look at those different timeframes and see where they are because it'll keep you on the right side of the market.
40:52 Barry Ritholtz? So last question on equities, given the 49 to 66 rally, the 82 to 2000, and then the 09 forward, how much legs does this secular bull market have? Can this go another five, six, seven years? And the other related question is, how much of a reset does that giant fiscal stimulus of 20, 21, 22 build into markets?
41:23 Speaker 04 It's a great question. And so, on the surface of it, we're 16 years in. The last two were 18 years. But again, sample size of two, like you can't go with that, right? But the CAPE model, again, which has been a very good long-term model in terms of the 10-year CAGR for the market, suggests that the, so the PE, the growth rate in the PE peaked in 19 for obvious reasons, because it's a 10-year model, so 09 rolls off, and then, you know, you have that peak. And we've been holding steady at around, you know, 14, 15% 10-year CAGRs. That actually has another peak in about like 2026, 2027, 2028.
42:08 Speaker 04 My guess is that that acceleration will be an AI bubble, or it could be where it's just like, you know, the AI boom, the Mag7, like all of a sudden everyone's buying companies with no earnings because they're promising to be the next killer app and that sort of
42:21 Barry Ritholtz? The next Pets.com.
42:23 Speaker 04 Yes. And my guess is that if we are heading into a fiscally dominant era, or we're in it already, so we had 5 trillion of helicopter money in 2020, we now have another $5 trillion fiscal bill. If the next Fed post Powell is going to be just more dovish than the economics suggest in order to fund that, help fund that debt, then you could see inflation, you know, be structurally higher than 2%, maybe 3% to 4%. And if that, and if the 10-year yield at that point goes to a 5 handle because the term premium is back, you can easily see a scenario where in a few years, that Fed
43:06 Speaker 04 model principle of rising yields, bringing down the PE, is going to be the thing that flattens that secular slope. That doesn't mean like a 2000s like bear market, it doesn't have to mean that, but it could just be a flattening. Instead of running at 2X the 10-year rate of change, maybe you're at half X or something like that.
43:27 Barry Ritholtz? So generally speaking, when you see an elevated cape, it's not a sell signal, it's really a signal, lower your future return expectations, things going to be a little more, little less easy sledding.
43:39 Speaker 04 Yes, I think the next 10 years will be less, less robust than the last, but it doesn't mean they have to be negative at all.
43:45 Barry Ritholtz? You, you mentioned the 80s into the 90s and the post-World War II era. It's kind of fascinating to look at rolling 15-year periods. The, the 15 years following 09 is the third best 15-year period in history. It's really amazing.
44:01 Speaker 04 Yep, yep.
44:02 Barry Ritholtz? Coming up, we continue our conversation with Urien Timmer, Director of Global Macro at Fidelity, talking about crypto, gold, commodity, alternatives, and the state of the economy. I'm Barry Ritholtz, you're listening to Masters in Business on Bloomberg Radio.
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45:56 Barry Ritholtz? I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Urien Temmer. He is the Director of Global Macro at Fidelity Investments, the giant firm helping to manage over $16 trillion in client assets. So, so let's talk a little bit about the current environment. You, you look at more than just stocks and bonds. You look at a lot of economic data as well and, and chart that. So how do you think where we are in the current economic cycle? How do you describe our location in the business cycle?
46:35 Speaker 04 So generally speaking, the economy remains pretty solid. People are employed. Their wages are exceeding the inflation rate at this point. Debt levels are not high, at least as a percent of GDP, right? So the household debt to GDP ratio peaked during the financial crisis in '08.
46:55 Barry Ritholtz? Pretty modest, and has been.
46:56 Speaker 04 Yeah, it was 100%. Percent of GDP is now seventy. So there's a debt issue on the government's balance sheet, but but not in the household or even the corporate balance.
47:05 Barry Ritholtz? Even the government side, isn't our debt to GDP ratio like half of Japan, something like that?
47:11 Speaker 04 Uh, so about one hundred and twenty percent if it's just the federal debt. If you add all other debt, it's about two hundred and fifty, uh, but it's comparable to other regions, but certainly Japan gets the prize and China as well, and just in terms of the growth rate of the debt.
47:28 Barry Ritholtz? China, oh, okay, not total, but yeah, China's been growing debt and the Chinese provinces have been growing debt as well.
47:34 Speaker 04 Yeah, and and the Chinese numbers, of course, are um, can be a little vague because the the federal debt in China is not high, but they have the four big policy banks that are essentially providing liquidity. And so you have to add that. And uh, so China and Japan are are the worst offenders. The US is is on par with most kind of European and other other countries. Um, uh, but so anyway, so so the the economy looks pretty good, but you know, one of the things that COVID did was it sort of upended a lot of the things we think about when we look at the at the economic cycle, at the business cycle. So, you know, of course, we know what happened. The economy froze.
48:15 Speaker 04 Uh, people got laid off and then, at least in the US, the economy came back really fast, faster than in other places. And the labor wasn't there, right? Baby boomers had checked out. They left the labor force. Of course, the borders were closed. And I remember like I was, uh, I was doing a lot of flying back to LA at the time because I was hiding in Santa Barbara because the office was closed. And it's like, like the counter at JetBlue in Boston was like, they just did not have enough people. People were coming back, like everyone was like, okay, we're back, but the the they weren't, there wasn't, the supply chains weren't there. And so we had this very tight labor market that, of course, we would hear about all the time, you know, from the Jolts report,
48:59 Speaker 04 two job openings for every job seeker, that sort of thing. Um, and that has been worked off over the last few years. I think that was the goal of the tight. Lightning policy or part of the goal. So when you look at the JOLTS report or you look at the the U three jobless rate relative to NARU, the non-accelerating rate of employment. Everything is in balance, like it's right at that zero line. So they supply.
49:22 Barry Ritholtz? Is that why we've kind of been hanging around four, three, four, two in unemployment?
49:26 Speaker 04 So no one's hiring, but not many people are looking for jobs.
49:29 Barry Ritholtz? And and not a lot of people getting laid off.
49:31 Speaker 04 No. And so there's balance, right? The job seekers versus the the job providers. But you look at that chart over fifty years. Uh, and you can see that there's a pendulum swing of that business cycle. So we went from very tight to neutral. And, you know, like, the inclination is to look at that. It's like, well, every other time that's happened, the next phase is contraction. And I think that's what the bond market is saying. That's, I think, what where the Fed's coming from now that they did the twenty five. They're looking at the the jobs dated, looking at the revision, right? The jobs report revision.
50:07 Barry Ritholtz? Big downward revision, almost a million jobs.
50:09 Speaker 04 Eleven thousand jobs. And they're like, OK, you know, we should, we should build in some some cushion for that. And so I think that's generally the vibe. But other than that, uh, you know, we have a whole economics team that looks at the business cycle and we're not really seeing a lot of red flags other than that yellow flag, if you will.
50:27 Barry Ritholtz? How closely does the market cycle track the business cycle? Because, you know, I've heard it said so many times, the market is not the economy and vice versa. And the old joke is the stock market is forecast nine of the last four recessions. Um, how do you see the that overlay?
50:45 Speaker 04 There is, of course, a connection, right? If you look at GDP growth and inventories, I mean, it's less about that now than it was decades ago. Uh, the impact of monetary policy. But, you know, the markets are not the economy. There is a reflection because if the economy grows. Earnings are going to grow and then, uh, you know, the market's going to go up because price follows earnings, but there's a sentiment equation in the stock market that of course you don't have so much in the, in the economic cycle and, um, and you have the timing, right? So the market is always going to anticipate future changes. So
51:22 Barry Ritholtz? You, you have a chart showing markets bottom eight months below profits.
51:26 Speaker 04 Yeah.
51:26 Barry Ritholtz? That's a huge lead time, eight months.
51:29 Speaker 04 So you can be a hundred percent correct about the economic cycle and be a hundred percent wrong about the market.
51:36 Barry Ritholtz? Late as
51:36 Speaker 04 Because if it's already been reflected and if it's already have, has even over earned against that future signal, then you're buying yesterday's news.
51:46 Barry Ritholtz? You missed it.
51:47 Speaker 04 Uh, but yeah, so the market generally at bottoms, um, will bottom two, three quarters before earnings. That happened during COVID and I remembered like it was yesterday because during COVID, you know, the market fell 35% February, March, then like late March it bottomed.
52:03 Barry Ritholtz? March 25th.
52:04 Speaker 04 And I think by June it was at new highs.
52:07 Barry Ritholtz? Right. 69% for the year from the lows, which is amazing.
52:11 Speaker 04 And people like the economists had a cover saying this is divorced from reality and everyone, and so it's my job, A, to have people not sell in the first place, to be, to be the long-term investor, you know, like the way I, I always describe it is you're getting a really juicy 10, 11% return, uh, by investing in stocks, but the price of admission is you gotta endure some volatility and if you can't stand the price, then you don't get the reward.
52:38 Barry Ritholtz? How do you explain to clients, and I, I got a million calls, man, this market has become disconnected from reality. What's your explanation to them?
52:47 Speaker 04 So that, so that's what, what happened. It happened after the financial crisis.
52:51 Barry Ritholtz? Right.
52:51 Speaker 04 So price bottoms, the market bets on recovery and it could be wrong, right? Price discovery doesn't mean the market knows everything and that's one thing where I sometimes disagree with technicians who say markets always right. So well, the market's not always right, but the market's always right in discounting everything that's knowable.
53:07 Barry Ritholtz? Right.
53:08 Speaker 04 So it's right in that, but it doesn't mean that that, what it's discounting. Can't change, right? And we saw this during the tariff tantrum in April. The market was pricing in a left tail that never arrived and now and then it had to unprice it. So but so the market looks ahead and the market bottomed in March of oh nine. Earnings didn't bottom until the third or fourth quarter. Same thing during covid, March bottomed in March of twenty twenty, earnings recovered third or fourth quarter. And and so you you have so you can't look at the news and say, how can the market be here? When the earnings or like people are dying.
53:46 Barry Ritholtz? So how did you explain this to clients? I'm curious.
53:48 Speaker 04 I explained it exactly that way, that the price always leads. And you can't look at it in sort of a linear way. You have to just. You you have to know that at at inflection points. The the the the the price action is going to make no sense. And this is why people, you know, sell at bottoms and and buy at tops because they are. They're trying to understand the narrative and that narrative is not the one that that is ruling the the roost at the time.
54:17 Barry Ritholtz? One of the things that we found was useful was explaining to clients. That their life experience isn't market cap weighted. When you look at what's driving the big indexes. It was back then it was the Fang, now we call it the magnificent seven. But we did a calculation and found out that. If all the airlines, all the hotels, all the local retailers, like just a run of the worst businesses during the pandemic. If they just disappeared tomorrow with six percent of the S and P five hundred. And, you know, or Apple or Microsoft. It's like it's amazing how. How our daily experience is so different from what markets are like.
54:57 Speaker 04 And and we had that during Brexit in twenty sixteen. I mean, that was constantly the headlines. What about Brexit? Why is the? The US market ignoring it? Well, because.
55:07 Barry Ritholtz? It's irrelevant.
55:07 Speaker 04 Because the UK is three percent of S and P revenues. That's why.
55:12 Barry Ritholtz? So that raises a really interesting question about the US versus the rest of the world in terms of economic activities. So the S and P 500 just gets just about half of its revenue from overseas. For most of the past 15 years, the US side of consumer spending, business spending, government spending has been very supportive of the domestic side of the S and P 500. Kind of feels like that's shifting a little bit. We're seeing a little slowdown on consumer spending, a little slowdown on economic activity here as Europe and Asia seem to be starting to finding their footing after bad 10 years.
55:54 Barry Ritholtz? Can we just pass off the baton without the S and P stumbling? Is that, is that possible?
55:59 Speaker 04 It's possible and it's actually happening right now. And this is one of the areas that I'm most excited about right now is that this US bull market has become a global bull market. You look at EM stocks, Chinese stocks, Europe, Japan, and it's very exciting because, you know, for many years, right, the US exceptionalism train has been running since 2014, 15, and the rest of the world was always so tempting with its lower valuation. And I, I've had conversations with our asset allocation PMs for years saying like, yeah, I can, I can buy EFA or EM at 14 times.
56:39 Barry Ritholtz? They're cheap, yeah. It's cheap for a reason though.
56:41 Speaker 04 It's cheap for a reason. The market's very efficient, but for the, but so the catalyst, so you need a catalyst to make the mean reversion in valuation to trigger that. And the catalyst is always going to be related to earnings. Like if you look at the relative performance, US versus non-US over the past 10 years, it is exactly the same as the relative earnings line. Like it's the same thing. So you need something to change in the, on the earnings side, and that's changing. So we have, of course, a very concentrated market in the US and that does pose risks, right? I mean, if, if those seven stocks go down, guess what? The S and P is going to go down, even if 70% of the stocks. Stocks in the S and P are going up.
57:24 Speaker 04 If you're an indexer or you're buying an ET, an SPY, you're not going to feel those gains because those top seven stocks are, are taking the index down. And so it was, so for the last year or so, it was a question of, okay, how do you diversify against concentration risk? Do you go down cap? Do you buy the Russell 2000? But now the answer is easier because now you have a catalyst, a fundamental catalyst that is causing the mean reversion to happen with between US and non-US stocks. And where that's coming from is that, so I'm a big fan of the discounted cash flow model, the DCF, which looks at not so much earnings, but the payout of earnings. So if you have earnings growth at 10% and 70% of those
58:09 Speaker 04 earnings are being returned to shareholders as dividends or buybacks. The payout is that 70% and the payout ratio is 70%. And for the US, it's always been a very dominating scenario where the payout in the US is very strong because of all the share buybacks we have here.
58:27 Barry Ritholtz? Where are we today with that? Are we still seeing the same sort of share buybacks? Because it seems like we haven't been hearing a lot of announcements, but that doesn't mean it's not happening.
58:36 Speaker 04 We don't hear a lot, but the buybacks are at record highs. There's 300 billion over the last 12 months. And the payout ratio is 75% for the S and P. But guess what? The payout for EFA, which is non-US developed stocks, the payout ratio is also 75%. It always used to be lower because they don't do buybacks over there. They do dividends. But now they're doing more buybacks. And the growth rate in the payout itself over the last five years is now higher in EFA than in the US. So you're getting equal or superior, or at least competitive fundamentals at, at a fraction of the valuation. And that, that is a good, that's a good deal.
59:20 Speaker 04 And so that's, so finally that, that part is working where the pond that we're fishing from is now broader. And for me, it kind of, it's, it's a barbell strategy. I don't want to be short the Mag 7 because they can get bigger.
59:33 Barry Ritholtz? Right.
59:33 Speaker 04 And you don't want to miss out on that. But rather than going down cap in the US.
59:39 Barry Ritholtz? Go overseas.
59:40 Speaker 04 Do a barbell of Mag 7 and non-US stocks. Then you can play the dollar, dollar weakening story. You can get equally good fundamentals for a 15 PE instead of a 24 PE. And to me, that's, that's, that's a good, that's a good thing right now.
59:56 Barry Ritholtz? So, so the last two things I want to talk to you about in terms of the current environment are inflation and sentiment, and I'm not sure how much of this is related. You know, when we see the Michigan sentiment data, it seems to be so awful. And it just doesn't feel like, is this really worse than the financial crisis, worse than COVID, worse than the dot com implosion in 9/11, or worse than the 87 crash? If you follow the sentiment data, it's saying yes, just doesn't feel that way.
1:00:27 Speaker 04 No, it doesn't. And I think the sentiment data, obviously they're very bifurcated by political belief.
1:00:35 Barry Ritholtz? Right.
1:00:35 Speaker 04 You know, and I.
1:00:36 Barry Ritholtz? We've seen those charts are really useful.
1:00:38 Speaker 04 Yeah, and I, I spent time on both coasts and I, you know, I was in at a dinner party in Montecito, California a few weeks ago. And people were like, how, how can everything look so good when we're like at the end of the world type of thing?
1:00:52 Barry Ritholtz? Right.
1:00:52 Speaker 04 And then I'll be, you know, in some other place and it'll be the total opposite. But I think a lot of the sentiment data are still driven by the inflation data. Like, obviously, the inflation rate has come down to 2.8%.
1:01:06 Barry Ritholtz? But everything remains more expensive.
1:01:08 Speaker 04 That, that, you know, that COVID spike, you know, that has not been unwound. And one of, and that's one of the things I worry about because not, not to make a comparison to the 1970s, which obviously was the great inflation.
1:01:21 Barry Ritholtz? Long term.
1:01:21 Speaker 04 But during the 50s and 60s, inflation was super low, 2%. Then you, to the second half of the 60s, it started to creep up. And then it came back down. But in order to, for the average to be at 2%, if you go to 6%, you then need to go below 2 for the average to be 2. And we haven't done that. We went from 2 to 9 to 2.8.
1:01:46 Barry Ritholtz? Right.
1:01:47 Speaker 04 And we're, we never went below 2. And, and if we, for some reason, get another upswing and we're at 3 and 4. Like that five year number is now going to be at four, five percent. And I think that's what's driving a lot of this. It certainly did during COVID. And it's things like food, right? So, you know, like the top-
1:02:06 Barry Ritholtz? Now beef prices are up. Egg prices have come back down, but beef prices have run away.
1:02:11 Speaker 04 So I, I think a lot of it has to do with that because, you know, people are employed. Wages are, are competitive right now. And, you know, employment rate's 4.3%, but I think it's just that, that cost of living. Uh, it just kind of like grinds, you know, and it's been grinding for five years now.
1:02:29 Barry Ritholtz? So, so let's talk about that 2% target. You know, in the 2010s, an era of concerns about deflation and monetary stimulus. 2% seemed like a reasonable number. Is that still a reasonable number now that? And that was an upside target, right? You were at 1% aiming for two. Now we're at two and a half, three, aiming back at two. Maybe in an era of fiscal stimulus, two and a half, 3% makes more sense? I mean, I'm not a monetarist, but I, I don't know why the whole world changes except for our inflation target.
1:03:05 Speaker 04 There's nothing magical about two. Like if you go back 150 years again, the average inflation rate is like 3%, 2.8. If you look at a distribution of equity PEs and the inflation rate, the sweet spot is sort of one to four.
1:03:24 Barry Ritholtz? Right.
1:03:25 Speaker 04 So whether you're at three or two, like for the stock market, doesn't matter.
1:03:28 Barry Ritholtz? Doesn't matter.
1:03:28 Speaker 04 Like 10, 10 to two, like that, that matters.
1:03:31 Barry Ritholtz? Nine, nine matters.
1:03:32 Speaker 04 That matters. Um, uh, and, and that distribution is interesting because, uh, obviously the higher the inflation rate goes, the lower the PE, which makes perfect sense. Because if inflation goes up, bond yields go up, then the safe asset is, is very competitive with the risky asset. So why take the risk?
1:03:48 Barry Ritholtz? Plus the cost of capital goes up.
1:03:51 Speaker 04 If you go to the left tail, deflation, there is really no correlation. Nobody likes deflation. Uh, so, so from that angle, two and a half is not a problem. Even three is not a problem. I think the Fed worries that if they were to ever admit that. You know, inflation expectations could get unanchored, but they went to the A I T thing, right? The average inflation targeting. And actually, that actually prevented them from raising rates when they should have back in 2021 and two.
1:04:24 Barry Ritholtz? They were late to the party to raise, and they seem like they were late to the party to cut as well.
1:04:28 Speaker 04 Yeah. So their their policy was, we need to see the whites in the eyes of inflation before we raise rates. And and by the time the whites of the eyes were visible, it was like, too late, you know, inflation was at five going to nine. But so, you know, it's a nuanced thing. But again, 3% is not going to be the end of the world. It just means the bonds have a term premium. And the stock market is still fine. Maybe the P is like 17 instead of 19. But like, you know, if earnings are doing the heavy lifting, it doesn't matter. But again, it's like, what what will it take for the Fed to actually say that? Or will they ever say it? Or will we just have a post Powell Fed that says,
1:05:10 Speaker 04 you know, instead of neutral being inflation plus 100, neutral is inflation. And and and you know, so they are at three instead of four or something.
1:05:18 Barry Ritholtz? So I see your charts everywhere. Not only are they all over social media, but you do regular chart packs. I love your monthly chart pack. I'm going to flip open my laptop and let's look at some of your favorite charts. And I'll make these available on YouTube and and on the website when when this posts. Let's start with market cycles. And and what we see going back to around our birth date is just a series of long bull markets followed by shorter, shallower bear markets. Tell us about this market cycle chart. And what are the different shading means in in blue and red? What what's the significance of that?
1:06:04 Speaker 04 Yeah, so um, so the shadings are is the valuation, the five-year Cape ratio.
1:06:09 Barry Ritholtz? When it starts to get pricey, it turns red.
1:06:11 Speaker 04 It turns red, yeah. And so what the top part of the chart shows are the market cycles. So the green are, you know, the bull markets, of course, cyclical bull markets. The red are the bear markets. And you can see, as we, as we talked about earlier, they're really, it's pretty rare for a 50% drawdown. There's only been really a couple of them. And so what this shows is that the current bull market, as strange as it or as unusual as it has felt for many people, actually is pretty garden variety, right? 88% gain over 35 months. So it's pretty, pretty average. But then, when you look at the bottom panel, it shows the relative, the percentage of stocks outperforming the index.
1:06:53 Speaker 04 And now you see something pretty unusual, something we've only seen a few times in history. And that is, of course, the, the concentration effect of the Mag 7, then before that, the FANGS. And it is, the market is as concentrated as it was in the late 90s and the early to mid 70s, which was the original Nifty 50 period. And so, you know, for, for an indexer, I guess it, it doesn't matter. For an active manager, active investor, it does. But even for an indexer, it does, because the largest stocks are getting bid up, whether they deserve it or not. Of course, they're large because they deserve to be generally. But it shows you how narrow the market has been during this cycle.
1:07:37 Speaker 04 And so it's, it's just a way of describing kind of where we are. So you got the cyclical on the top and the bottom speaks more to the secular.
1:07:45 Barry Ritholtz? Really interesting. So let's talk about debt dynamics, which shows the change in federal debt versus what?
1:07:54 Speaker 04 So what this chart shows, and it's a very simple chart, but it's, I think it speaks volumes, is that, you know, during COVID, we kind of, I think, entered the fiscally dominant era, where debt financing or deficit spending becomes a very major tool, which is definitely different from the financial crisis, when we actually had austerity after the financial crisis with the Tea Party movement. Now we have the opposite. And in the initial years after that fiscal expansion started.
1:08:26 Speaker 04 The Fed was actually doing a lot of the heavy lifting by putting those bonds, or not those bonds, but putting bonds on its balance sheet. So you could see the rise in debt is largely accommodated by an expanding balance sheet. Since that time, since 2022, the Fed's gone into quantitative tightening mode where it's shrinking its balance sheet, but the debt just keeps going up. So the debt is now up about 14 trillion in the last five years, and only about two and a half of that is sort of been absorbed by the Fed. So I put two and two together and say, okay, if that purple line at the top just keeps going up, who's going to buy this, right? Who's going to buy the debt? And will the Fed be forced
1:09:12 Speaker 04 back into playing a bigger role in kind of mopping up that supply? And that's the fiscal dominance thing.
1:09:18 Barry Ritholtz? That's a little bit of modern monetary theory is that the Fed can just buy up all the debt and there's no constraints whatsoever. SOMA stands for what?
1:09:26 Speaker 04 System Open Market Account.
1:09:28 Barry Ritholtz? So that's what the Fed has on its balance sheet that went up since the financial crisis and it's come down since 22.
1:09:36 Speaker 04 It's the part of the Fed's balance sheet that is sort of the QE part, if you will.
1:09:40 Barry Ritholtz? So let's talk a little bit about equity supply and demand. What are we looking at this chart back to 1986? Is this simply liquidity driven or what's going on here?
1:09:51 Speaker 04 So I think this is, and not a lot of people talk about this, but I think this is one of the fundamental drivers of the current secular bull market era. And so you can see on the chart, I started the clock at the bottom in 09, which again, I believe is the start of the secular bull market. And I look at just the supply and demand of equities just from within the corporate America structure. So not investor flows, but how much were there in IPOs and secondary issues? And it's a couple of trillion. How much was share buybacks and how much was M and A? And share buybacks and M and A have something in common in that it's corporates buying shares of other corporates and those
1:10:36 Speaker 04 shares get retired, right? So that's the demand for shares. And what you see is the, if you look at the supply, demand ratio. Like it's very unbalanced, like it's the demand far exceeds the supply. And to me, this has been one of the important drivers for driving returns in the secular bull market. And there's no signs that this is this is letting up. And so when when we think about what inning is the secular bull market in, when is it going to end and why? This is one of the things I look at. It's just, you know, when when you're retiring far more shares than you're issuing, it's like, duh, you know, markets are going to go up, all else being equal.
1:11:15 Barry Ritholtz? What what's so surprising about this is how relatively insignificant the retail flows are. It's it's just the opposite of how so many people describe it. Coming up, we continue our conversation with Uriah Timmer, Director of Global Macro at Fidelity, discussing various asset classes: equities, bonds, commodities, alternatives. You're listening to Masters in Business on Bloomberg Radio.
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1:13:19 Barry Ritholtz? I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Urian Temmer. He is the Director of Global Macro at Fidelity Investments, the giant firm helping to manage over $16 trillion in client assets. Let's talk about U.S. fundamentals versus EFA fundamentals. So this looks at various market data, buybacks, dividends, et cetera. Tell us what this chart is showing us.
1:13:50 Speaker 04 Yeah, so this, we were talking about earlier about there finally being a catalyst for non-U.S. stocks to compete with the U.S., with the Mag 7-driven U.S. stock market. And so on the left, I show the earnings line for the S and P, the payout, so that the share of earnings being returned, quote unquote, to shareholders.
1:14:10 Barry Ritholtz? Shareholder yield.
1:14:10 Speaker 04 As dividends and buybacks. And then at the bottom, you see the payout ratio, again, either as dividends in the yellow, buybacks in the purple. And you can see the payout has risen very nicely, almost a double since, oh, since five years ago. Payout ratio is about 75%. So very bullish fundamentals like you, you know, those fundamentals deserve a high, a high P E, right? Because not only is, are the earnings growing, but they're being returned to shareholders, which of course is worth more than if you're not getting them back. It's just the present value of future cash flows. But what's changed just in the last few years is that for EFA, again, which is the
1:14:53 Speaker 04 MSCI Non-U.S. Developed Index, you see an even better growth rate in the payout and you see.
1:14:59 Barry Ritholtz? More than double.
1:15:00 Speaker 04 Yeah, and you see an equally robust payout ratio, again, of about. About seventy five percent. So the rest of the world is really competitive now, despite the fact that this is such a mag seven heavy market. And so this is, you know, just a very exciting time because you can actually, you don't have to make that make or break binary decision like you're either in these big stocks or you're left behind. There are other places to get those returns now.
1:15:27 Barry Ritholtz? What's so fascinating about this chart is how inverted the ratio of buybacks to dividends is. In the US, forty five percent of shareholder yield is buybacks, thirty percent are dividends. That flips. In Europe, it's forty seven percent are dividends, only twenty seven percent are buybacks. Or I should say EFA, not just Europe, although a lot of it seems to be concentrated in Europe. How much of that is just driven by tax policy and regulations?
1:15:56 Speaker 04 I think it's largely culture. It's just, you know, and Europe is more of a value market, right? So it's really like the banks are really running the show right now. And so the US, it's more the growthy stocks. So they don't want to, so you know, dividends are kind of like a sacred contract, if you will. Like it takes a lot for dividends to be cut. So I think Europe and Japan has just generally been more of a value driven and the culture has been more, okay, we're going to earn so much and you're going to get that back as dividends. But especially the Japanese and also the Europeans are getting much more with the shareholder culture now in terms of unlocking value and returning those as buybacks.
1:16:41 Speaker 04 So it's they're getting, they're starting to play the game.
1:16:44 Barry Ritholtz? Last few questions before we get to our favorite questions. You have a section in the chart book about the post sixty forty world. I've heard people say the old sixty forty is now fifty thirty twenty or fifty thirty ten five five. Tell us what you think of as the post sixty forty world.
1:17:08 Speaker 04 So I look at it, I call it the sixty twenty twenty. So the sixty forty paradigm worked like a charm, right? From the late nineties until the early twenty twenties. And, you know, sixty percent S and P, forty percent Bloomberg Ag, so the investment grade bond index. And you got a nine percent CAGR against a nine percent vol. And like, what's not to like about that, right? During that time, inflation was like two and a half. So you got a very attractive real return with really moderate volatility. But the whole premise of that paradigm was that the forty was insurance against the sixty. So the sixty, of course, is always the anchor.
1:17:52 Speaker 04 That's where the compounding is. And the forty would be your port in the storm. I think that's now changed. So 2022 obviously was a return to the old Fed model days where rising yields take, you know, take, take the, the mojo out of the stock market, to put it mildly. The good news is that bonds, of course, now are a viable asset. They, they generate a positive, uh, real yield. But their correlation is now positive against equities instead of negative. So when I think about the post sixty forty world, I'm less worried about the sixty. Like, we can add more international in the sixty and, and like we were just discussing. But what do we do about the forty?
1:18:36 Speaker 04 If the forty can be the cause of problems rather than the solution to problems. And especially if we end up with a higher term premium, then, uh, bonds are not going to be as, as safe as they used to be. So then I get into kind of, okay, I'm going to take some share from the bonds. It doesn't have to be twenty, like, again, this is not investment advice, but back of the envelope stuff. And, you know, maybe some cash strategies are more competitive if we're not going to go back to the zero interest rate days, which I don't think we are. Gold are the proven anti-bond over history, right? They don't produce a cash flow.
1:19:12 Barry Ritholtz? Thirty seven hundred bucks as we speak.
1:19:14 Speaker 04 But when bonds do poorly, gold really shines, no pun intended. And then you got to throw Bitcoin in there as kind of the, the wannabe exponential gold. And then other strategies like alternatives, right? Managed futures, equity, long, short, private credit, um, you know, all of those kind of alpha rather than beta strategies.
1:19:36 Barry Ritholtz? You have, you have tips in there as well.
1:19:37 Speaker 04 Yep, tips, high yield, um, uh, you know, markets or asset classes. That are not negatively correlated, but they're not positively correlated as well. So when you look at kind of the sharp ratios versus the correlation, not just to the 60, but especially to the 40, right? Because I want to hedge more against the 40 than the 60.
1:19:58 Barry Ritholtz? I was gonna say, this doesn't look like a yield chase. This looks like a diversifier. Is that the thinking here?
1:20:03 Speaker 04 Yeah, yeah. And actually, if you go down one chart, I think, yeah, right there.
1:20:07 Barry Ritholtz? Oh, look at that.
1:20:08 Speaker 04 So I want high sharp ratios or high short, high shortino ratios. And, and, and assets that are uncorrelated. And you get into, you get into the BCOM commodities, you get into gold. Bitcoin is not quite uncorrelated, but all the alt strategies are uncorrelated. And so to me, that is sort of the next 60, 40.
1:20:31 Barry Ritholtz? Really, really fascinating. Last question before we get to our favorites. You look at so many charts each week, you identify trends before a lot of people do. What are investors not talking about, but perhaps should be? What topics, assets, geographies, data points? What do you think is getting overlooked, but is really worth investors' time to pay attention to?
1:20:54 Speaker 04 One asset class, and we just talked about it, that I think generally is seen as a, as a sideshow. The way Bitcoin used to be, it's no longer a sideshow for sure, is actually gold. Because for
1:21:08 Barry Ritholtz? Even at 3,700 bucks, it's, are people still thinking of it as a sideshow?
1:21:13 Speaker 04 I think institutions do, right? So regular retail investors, as I call them, you know, you can buy GLD or some other gold ETF. And like, you know, I own it in my portfolio. And so there, I think there it's part of the conversation. But when you think about like large endowments, institutional investors, even mutual funds, like you need a special wrapper in your mutual fund to own physical gold. Like you need to go to the SEC and get approval. And so, you know, gold has been sort of dormant for so long until recently. That is like, yeah, I don't really want to go through this trouble to buy something that doesn't have a cash flow, can't be valued, requires special regulatory approvals.
1:21:56 Speaker 04 And then all of a sudden it starts to run like it is now.
1:22:00 Barry Ritholtz? Everybody wants in.
1:22:01 Speaker 04 And and so so I think that's the story. So in ironically, because Bitcoin has obviously come well after gold as a kind of a store of value, hard money asset. In a way, gold is kind of like where Bitcoin was 10 years ago or five years ago, where, okay, Bitcoin's interesting, but I don't understand it. I don't feel like spending 100 hours on this. It's a bubble. It's a scam. It's a pet rock. And and gold is like, if it keeps going the way it is, and I suspect it will, like, the endowments are like, okay, like, people are asking me about this. I need to like, really, like, figure out how do we not how do we buy it? You can buy it, of course, but it's it's always been a dismissed asset. Let me
1:22:46 Speaker 04 put it that way.
1:22:47 Barry Ritholtz? I mean, that's what I grew up with. It was kind of mocked by the equity people. Depends on the length of the chart you look at, you could show a trailing multi-decade period where gold has outperformed the asset. So so if you look at gold as in a secular bull market, I'm not asking for a forecast, but what's within the range of possible numbers gold could run to from 3,700 up from the low 2000s and early? What do we peak in like 2014 and then 2019, something like that?
1:23:21 Speaker 04 And it was like 260 back in the
1:23:23 Barry Ritholtz? Oh, God, I remember in the 90s, sure.
1:23:25 Speaker 04 Yeah, yeah.
1:23:26 Barry Ritholtz? When GLD first came out, I want to say gold was about 430, 440. I remember talking about it on TV and getting laughed at by anchors.
1:23:33 Speaker 04 So I once saw a chart that actually Paul Tudor Jones created, speaking of Paul, where he compared the the above-ground value of gold or the value of above-ground gold and compared it to the the value of M2. And and
1:23:53 Barry Ritholtz? They kind of track each other.
1:23:54 Speaker 04 The chart concluded that when the money supply grows too fast,
1:24:00 Speaker 04 gold takes market share. So hard money takes market share from soft money, from fiat money. And at certain extremes, like in the seventies and other periods of thirties, gold, the value of gold will go all the way up or beyond the value of M2. And so right now, M2 is about 23 trillion. Gold plus Bitcoin is is also about 23 trillion. So in that sense, it's come a long way to to take that market share. And now it's a question of does M2 either globally or in the US continue to grow at an above average pace. So the average pace is about 6% nominal, but 2, 2, 3% real.
1:24:44 Speaker 04 So I do think a lot of the gains are in already. But it will it will naturally overshoot as these cycles always do. So so that's kind of how I would how I would measure it. So if the money supply goes to 30 trillion, gold and Bitcoin could be 35 trillion. And and obviously, gold is is a large part of that. Bitcoin is about 2 trillion. And then you convert that to to a price. But that's kind of how I think about the valuation side.
1:25:10 Barry Ritholtz? Really fascinating. Tell us about your mentors who helped shape your career.
1:25:17 Speaker 04 Definitely Ned Johnson. Because when I came in to Fidelity in 95, I'd been in, you know, in New York for 10 years. Didn't really have mentors. And so he, you know, Fidelity has a very strong corporate culture, let's put it that way. And especially around, you know, the way we approach long term investments. We're obviously a long term investor. But so he, he was like the last person I spoke to before I got hired. And then in those formative years, I worked in the chart room and I would spend hours per week with with Ned, like he would just come down.
1:25:57 Barry Ritholtz? Really?
1:25:58 Speaker 04 And
1:25:58 Barry Ritholtz? Hours per week?
1:25:59 Speaker 04 And we would just pour over. Charts like we have these huge charts on the wall, floor to ceiling, you know, like forty foot wide, like a daily chart of the of whatever the Dow.
1:26:10 Barry Ritholtz? Manually by hand.
1:26:11 Speaker 04 It would be computer generated, but then because we don't want to print a whole new forty foot sheet every week.
1:26:17 Barry Ritholtz? So you would just.
1:26:18 Speaker 04 You fill it in by hand and and you know, just the the oral tradition, the oral history. So he was looking at the chart and then he would say, okay, well, like, and he would go from right to left and say, okay, you know, then and we'd end up like in nineteen sixty eight and he's telling me about the glamour stocks and this and that. And I'm like, wow, this is like gold, right? Like you don't, you know.
1:26:40 Barry Ritholtz? Literally.
1:26:41 Speaker 04 And so he would have this encyclopedic memory, but also just the way the information was displayed, semi log skills, the chart room has like museum quality lighting, how you display, uh, how you visualize, you know, data. Um, and so that he instilled that culture, you know, we we call it Kaizen, kind of just gradually improving. Um, and having, you know, compounding isn't just for investing, right? It's just in our day to day stuff. You do something consistently right. It's going to make an impact. And when I look back at my forty years and I'm not going anywhere, but like to me that that Kaizen has has really played a role in my relationships, in my work.
1:27:26 Speaker 04 Um, and and I think a lot of that just came from him.
1:27:30 Barry Ritholtz? Really, really interesting. Let's talk about books. What are some of your favorites? What are you reading now?
1:27:36 Speaker 04 So I I hate to admit it, but um, I don't read a lot of finance books because I'm very interested in having balance.
1:27:45 Barry Ritholtz? Oh, I don't want finance.
1:27:46 Speaker 04 Between right and left.
1:27:47 Barry Ritholtz? We've all read reminiscences of a stock operator. I'm more curious as to what else you're reading.
1:27:52 Speaker 04 Well, I will say that during COVID, uh, I read, uh, this huge tomb called The History of the Federal Reserve by Alan Meltzer.
1:28:02 Barry Ritholtz? Oh, sure.
1:28:03 Speaker 04 Um, because, you know, I've looked at so many charts, you've read the reports of like, you know, financial repression.
1:28:09 Barry Ritholtz? Thousand pages, isn't it? It's a doorstop.
1:28:11 Speaker 04 But I went like that book, it was like this blow by blow using the Fed minutes and all these, you know, uh, uh, correspondence to see how the Fed handled the fu- the financial repression of the forties. And so that was fascinating, although most people would say, well, that sounds really boring.
1:28:28 Barry Ritholtz? A little dry.
1:28:29 Speaker 04 But but as as a as a consumer of the data, just to hit to see, okay, you know, like the whoever was at the Fed would go to the Treasury and they were playing games like the Treasury would issue bonds below market and then the auction would fill and then knowing that the Fed would have to mop up the supply, like all of that stuff was just really, really fascinating. And, you know, and we see the interference in polit- with politics and monies monetary policy today. But it's nothing new. Like in the sixties, both Nixon and Kennedy were equally guilty of.
1:29:01 Barry Ritholtz? Seems a little more overt and public today. It used to be sort of cloakroom sort of stuff.
1:29:08 Speaker 04 So so that was one. But the I the most um, interesting recent book I've read was it's called Rock Me on the Water. And it's a book about music, TV and movies during the early seventies and how LA was like the epicenter of American culture. So you had like the Laurel Canyon folks, the older musicians.
1:29:32 Barry Ritholtz? Joni Mitchell, David Crosby.
1:29:33 Speaker 04 And you had these groundbreaking TV shows, right? Because we were coming out of the straitjacket of the sixties conformists, like no one dared to make a a show that that like challenged the the status quo. And then you had like Mash and, you know, Mary Tyler Moore, Own the Family, and then the movies like Taxi Driver. And and as a, you know, as a, I'm, I think I'm kind of Gen X, but on the border of Gen X and Baby Boom.
1:29:58 Barry Ritholtz? Right. I'm in the same, like a foot in each camp.
1:30:00 Speaker 04 Yeah. And so growing up, you know, formative years in the seventies in Aruba, but consuming American pop culture. We would sit down every night watching like, you know, Wide World of Sports and Mary Tyler Moore and and all those shows.
1:30:14 Barry Ritholtz? Rock Me on the Water.
1:30:15 Speaker 04 Rock Me on the Water. And it's just like, so it's fascinating to read about the things that we lived through as kids, as teenagers. But then like, yeah, you know, that was so.
1:30:26 Barry Ritholtz? Amazing. Um, let's talk about streaming. What are you watching or listening to right now?
1:30:32 Speaker 04 Uh, we are binge watching The Bear. So I'm a, I'm an avid cook. You know, like I said, I run a food camp uh at Burning Man. And uh, that's, that's, and we, we tend to be late to shows and then we, we just watch like four, four seasons.
1:30:47 Barry Ritholtz? Yeah, The Bear is great. And if you're a cook or worked in restaurants, it just rings so true.
1:30:52 Speaker 04 Yeah.
1:30:53 Barry Ritholtz? Um, I gotta ask you a, a crazy question. You're a cook. What pots do you like? What knives do you like?
1:31:01 Speaker 04 I use the uh, Allclad. Um, I have um, I, I have two places. I have a, a gas stove in Santa Barbara and an induction stove in Boston.
1:31:11 Barry Ritholtz? You know, I came this close to putting an induction stove in my primary residence, but we had just gotten gas. And so of course we ran with gas.
1:31:20 Speaker 04 Yeah, I, I, I will run with gas anytime. Induction is good. It's very precise.
1:31:25 Barry Ritholtz? Yes.
1:31:25 Speaker 04 Um, but I, I like the, the organic kind of tactile uh, dimension of gas, but uh, so Allclad. And um, the, the German knives, uh, what's it called? Gustorff? I forget. Um. And my go-to knife is a 10-inch chef's knife, not the really high one, but the medium one. So the medium one is, is thick enough to like smash on garlic, but not so thick that you don't feel connected. You don't have the, the, the road feel uh, of the knife on the cutting board. So.
1:32:00 Barry Ritholtz? So I'm jonesing for this shun knife I keep seeing and they're just exorbitant.
1:32:07 Speaker 04 Yeah.
1:32:07 Barry Ritholtz? Um, and we gave someone a gift of uh, the Stanley Tucci Healthy uh, Non-Stick. Cause supposedly the old non-stick is not good.
1:32:17 Speaker 04 Yeah.
1:32:18 Barry Ritholtz? And she loves it. She's been, so we're debating going out and getting a set for a, like it's rare. You give someone a gift and they're like, oh my God, this is amazing.
1:32:25 Speaker 04 Stanley Tucci is one of my heroes.
1:32:27 Barry Ritholtz? Oh, really?
1:32:27 Speaker 04 Yeah.
1:32:28 Barry Ritholtz? Um, have you watched his show in Italy?
1:32:30 Speaker 04 Yeah.
1:32:30 Barry Ritholtz? I had to stop cause it just makes me wanna eat, even after dinner. You wanna go, you wanna go eat.
1:32:36 Speaker 04 That, that, that's my, my guilty pleasure on TikTok is little food clips.
1:32:41 Barry Ritholtz? Uh huh.
1:32:41 Speaker 04 Uh, and I don't. Even have to have the sound on. It's just, you know, because I kind of know what works with recipes. So I don't need a recipe, but I just need someone to visualize an approach. And so a lot of the things I cook today are from TikTok.
1:32:56 Barry Ritholtz? Oh, no kidding. Oh, that's amazing. All right. Our final two questions. What sort of advice would you give a recent college grad interested in a career in technical analysis, fixed income, or just investing generally?
1:33:13 Speaker 04 Be open minded, be humble. You know, the, the, the true heroes of mine in our business, including Ned Johnson, you know, he's no longer with us, of course, was that just humility, right? I'll talk to Will Danoff, who runs 300 billion.
1:33:27 Barry Ritholtz? I love Will.
1:33:28 Speaker 04 He's the humblest guy you'll ever, you'll ever meet. And there is no room for, for big egos, like no matter how important you are, like I have no time for that, right? So stay humble, don't figure out, don't think you've, or you've, you've figured it all out when at, at the age of 25, you know, be learner and be ready to reinvent yourself. I've had to do it a number of times at Fidelity, either as planned or as not planned. And you just gotta roll with the punches. And like I said, the first job I had, I, I was like the last job I was interested in, but I took it because it was the only job, you know?
1:34:03 Barry Ritholtz? And our final question, what do you know about the world of investing today? You wish you knew 40 years ago or so when you were first getting started.
1:34:12 Speaker 04 The markets go through cycles and it always comes back, not always quickly. But, you know, every time the market goes down 20 plus percent, it's like the end of the world. And it's like totally different from every other time. And this is like such a crisis. But then, you know, I've now been through like 12 bear markets in my career and it's like, yeah, whatever. Like nothing shocks me anymore. Of course I'm, I may be in a better place because I've, I've earned my, my wealth. I'm not still building it, but, but it's just, you know, take, take, take a step back, look at the bigger picture. Make sure your portfolio is where it should be in terms of. Risk and goals and don't be your own worst enemy by selling at the bottom,
1:34:57 Speaker 04 you know, call, call someone like have them talk you off the ledge first, you know?
1:35:01 Barry Ritholtz? Thank you, Yurian, for being so generous with your time. We have been speaking with Yurian Timmer, Director of Global Macro at Fidelity Investments. If you enjoy this conversation, well, check out any of the 563 we've done over the past 11 and a half years. You can find those at Bloomberg, iTunes, Spotify, YouTube, or wherever you get your favorite podcasts. Be sure to check out my new book, How Not to Invest: The Ideas, Numbers, and Behavior That Destroy Wealth and How to Avoid Them, How Not to Invest, at your favorite bookstore. I'd be remiss if I did not thank the crack team that helps put these conversations together each
1:35:42 Barry Ritholtz? week. Alexis Noriega and Anna Luke are my producers. Sean Russo is my researcher. Sage Baumann is the head of podcasts. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.
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