Hey, Chris, it is and B is.
World word is living in it. And we just keep saying that every time
we seem to talk. Does that make you nervous or does that
make you feel good, though? It always makes you nervous.
Well, think of the fact that it's grown the size of Microsoft.
That's crazy. And, you know, I have to say, Alex, it
reminds me a lot of intel in the nineties where you had intel
millionaires. My neighbor had intel and Intel.
Suddenly it was going to retire rich. It is amazing, but the story can't grow
forever. Right now.
It's just pure optimism. And that's okay.
It is the new future. But let's remember there are 2999 other
stocks in the US market, and those are the ones that matter.
The economy is what matters. We don't eat in video for dinner.
We don't fly in video airplanes. So there are other things that matter a
ton when you're a long term investor and you own the USA.
I mean, we don't fly in and video airplanes yet.
Let's just keep that in mind. So if we wind up coming off the boil
here when it comes to, say, chips and tech, do you feel like that money just
drains out of the market altogether or is it a rotation play?
I think right now we're due for the summer doldrums, frankly.
You know, tech can can continue. But look at what we're seeing today.
A record new high, but by a centimeter or a millimeter, I mean, just tiny
fractions higher. I think that we'll still see that.
I want this market to continue on for a little bit period of time.
But look at the consumer. Boy, we're seeing signs of cracks in the
average consumer, especially middle and low income.
We're getting those warning signs months ago from Dollar General and and
Wal-Mart, different stores like that. Now we're seeing numbers in terms of
auto loans and just credit cards, not the sign of a recession, but the sign
the consumer is tapped out. And boy, consumer optimism, as we've
seen, is close to turning to pessimism. And that's a concern.
So I'm worried about this market having legs.
But I think you and I love bonds and I think people really need to pay
attention to bonds. That option was a good sign.
People have an interest in our debt. That's important because we're going to
be borrowing a lot more money. The USA next year, whoever is president
and an all time record. So those auctions are really something
to watch. Yeah, and we keep waiting for investors
to drop out. We get the tick data later on today and
that's sort of what overseas investors are doing here with U.S.
investments. And it hasn't happened like the demand
is still there. Do you like duration?
Do you like shorter duration? Do you like the belly?
What's the best way to capitalize? You know, I'm a 30 year investor, Alex,
so I like the curve. I'm going to extend out when the curve
is is inverted and almost flat as it is. A lot of people I've been talking to are
using short term CDs. Well, that's okay.
But this the rates will drop eventually. And so you do want to extend out a
little bit in duration. I would make a duration bet.
I don't think the long bonds coming down dramatically.
I think the Fed's proven the US economy can do okay with rates in the 4 to 5
range. Well, ten.
So yeah, go ahead, Chris. Sorry.
No, the pressure's off them to make this cut.
They want a job on the market to be optimistic.
But they don't have to make a cut right here.
Well, and then to that point, like we had, I think, seven Fed officials, that
blackout period is no longer all talking today.
And the general message was not yet. Not yet.
Like be patient. It might be even quarters, not months,
until we get confident on inflation data.
What kind of cycle do you think we're going to see?
A shallow cutting cycle. What do you think?
Oh, very shallow. There should not be a reason for them to
cut dramatically. If it is, then the economy's in bad
shape and and we're heading for a recession.
They should be able to ease off a quarter of a point at a time very
slowly. And for some then for long term
investors back to fixed income, I think they should extend out into the curve.
I think you should look at credit. Look at how well high yield has done in
the last couple of years. It's remarkable.
All of that points, Alex, to diversification.
And when, you know, every mutual fund now owns and vedere almost always in the
top five, some of the value in mutual funds are even creeping into Nvidia
because it's driving everything that tells you you need to diversify because
it's not going to grow to the moon and you need to be in bonds in your
portfolio. Where else within within the market You
mentioned credit was also interesting. Where else provides that
diversification? Well, for a long term institutional
investor like us, we can be in real estate and obviously they're very
different segments in real estate. I've got the office background on.
You don't want to be in an office right now, but data centers, another tech play
are huge, but as well as the warehouses. So there are opportunities in just good
old, stable real estate. Remember, real estate pays a nice,
steady operating income. Don't invest for capital gains, invest
for operating income. That's where most of your return comes
as an institutional investor. And there's value in the private markets
infrastructure. There's a lot of money in the CHIPS Act
that they really want to see go to work. And especially in the IRA, that is going
to be pushed out in the next six months for long term projects.
And those are long term stable returns. If you're a retirement investor in your
401. K, you're looking for long term patient
capital. And I'd say but India is not long term
patient. Nvidia is a short term flair rocket.
It's fun to ride it, but what are you going to do next year and the year after
in the year after that? So I think you need to diversify and
have a balanced portfolio.
