YouSaid · the spoken record

Jim Caron

lines on the record
19
first
2024-12-20
most recent
2024-12-20
sittings or episodes
1
sources
podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

  1. “So, this is actually as long as we're in the context, as long as this is not the start of something bigger, where the Fed is now completely going to pivot, they're going to surprise the market and start hiking interest rates, which is not our forecast, not our base case, that all they're making is an adjustment. By the way, this adjustment that the Fed made 100% in the price. Bond market was already anticipating this. This is not a surprise to the bond market.”

    2024-12-20 · Odd Lots · Jim Caron on the Market Selloff and the Fed's Historic Adjustment · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “Look, I'm excited about today, and I'll tell you why. I'm not just saying that because we've been looking for a good entry point into the markets. We are not bearish going into 2025. We think the economic fundamentals are going to be good. Why is the Fed increasing, potentially not cutting interest rates as much? It's not because the economy's weakening. It's because I think the economy is stronger. So that should be a positive for equities. So when I look at equities today and they're down almost 3% on the... Tenure yields have gotten up to four and a half percent. Well, guess what? That means as I look at my shopping list for equities and I can look at this and I can increase my equity allocation, I can also buy bonds at a good yield to actually hedge that.”

    2024-12-20 · Odd Lots · Jim Caron on the Market Selloff and the Fed's Historic Adjustment · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “Because, you know, essentially when we look at these are longer term investment profiles that typically aren't necessarily just trying to track the economic cycle like fixed income and equities do, they're really looking at valuations, mergers and acquisitions, LBOs. They're looking at a very, very different time frame and your returns are coming from different areas. In other words, it's orthogonal to your stock and bond portfolio. And that's what creates a lot of the diversification. So going forward, you're going to have to mix alternatives into this multi-asset sector. It's not just stocks and bonds.”

    2024-12-20 · Odd Lots · Jim Caron on the Market Selloff and the Fed's Historic Adjustment · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “That would be a structural shift in the way that we think about a diversified portfolio. That means some years bonds do well, some years bonds don't. They correlate with equities many times in many cases. So that would suggest that when we think about asset allocating across fixed income and equities in a multi-asset portfolio, and let's not forget about alternatives too, that now we have to think about being much more actively managed, particularly in fixed income, as opposed to passively, meaning by active managers as opposed to passive. Same thing with equities. It's less going to be about the beta. It's less going to be less going to be about multiple expansion and these MAG 7, and it's going to be much more about sector rotations, much more about the alpha and picking sectors and even picking stocks. So again, more active management versus passive management is a big change. Alternatives. Alternatives are another way to diversify your portfolio.”

    2024-12-20 · Odd Lots · Jim Caron on the Market Selloff and the Fed's Historic Adjustment · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “So essentially, what that means is that we all have to think very, very differently going forward because what's happened is that the markets become very complacent on the fact that from 1981 to 2021, we were in a 40-year bull market in fixed income. All you had to be is a passive investor buy and hold, and you did really, really well. It diversified your portfolio perfectly. What if today interest rates just move sideways?”

    2024-12-20 · Odd Lots · Jim Caron on the Market Selloff and the Fed's Historic Adjustment · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “One thing that you said right in the beginning of this podcast is that there is fixed income in equity, there's no place to hide, right? If we look at the screens today, everything's red. Bonds and equities. When the equity markets go down 2% or 3% like they're doing today right after the Fed, you would expect to get some safe harbor from bonds. Bonds should definitely do well, typically, but they're not. And this is the big issue with asset allocation going forward is that the correlation of returns between fixed income and equities is very high. It's at multi-decade highs. What that means is that if the correlation of returns are high between bonds and stocks, that means it's hard to have a diversified portfolio, right? It's hard to own stocks and bonds, and that hopefully bonds bail you out or help you when the equity market turns lower.”

    2024-12-20 · Odd Lots · Jim Caron on the Market Selloff and the Fed's Historic Adjustment · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “Becoming much more dividend friendly, shareholder friendly buybacks, all of the various components there. Pension funds are turning into less savings plans, which is fixed income and more into investment plans, which is more equity. And if the world is going to onshore, particularly in the US, Japan is very, very well leveraged to large-scale CapEx. So I think there's a lot of things that are pointing in the direction to Japanese equities in the long term. I know we've had three bad decades, but I think that's the decade. This is the decade. This is the decade that's going to happen. Let's try to fix income.”

    2024-12-20 · Odd Lots · Jim Caron on the Market Selloff and the Fed's Historic Adjustment · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “Or a fixed synchronization. Yeah, or anything like that. Yeah. Okay. Okay. Let's start with international equity, first of all, and let's start with Europe. Europe is really a large cap value play. And what has large cap value done? Not so well, right? Because the growth sectors and the tech sectors have done really, really well. So I would say that the role that international equity plays as a large cap value style of looking at the markets is it's really more of a stabilizer. So it's a diversifier in that when you typically have these downturns in markets, those large cap value segments actually outperform. They do better than the higher beta growth sectors in the marketplace. So there is a positive cash flow there. There are dividends there. There are some opportunities. We can move to places like Japan, Japanese equities. One of my favorite markets. So here we are. We have some inflation. Inflation is going to drive earnings. And I think the inflation is sustainable and durable in Japan. Plus, you have changes to corporate governance.”

    2024-12-20 · Odd Lots · Jim Caron on the Market Selloff and the Fed's Historic Adjustment · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “Into sectors that are relatively inefficient. So people look at tech and they look at financials. Yes, absolutely. But you know what? Financial companies are already pretty efficient just by definition. I mean, they're financial companies and that's what it effectively operates on. Tech is the engine that creates a lot of these things. But again, a lot of that is in the price. So we have to start to move to areas that have been the laggards that we think that there could be some technology gains that can really drive the earning cycle.”

    2024-12-20 · Odd Lots · Jim Caron on the Market Selloff and the Fed's Historic Adjustment · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “This is a segment of the market that we think AI can bring in a lot of efficiencies, whether it's on the healthcare side, we have to be very, very, very, very careful because sometimes you bring in pharma and big pharma with this, and that's not exactly what I'm talking about. But essentially, you know, more in the medical services, you know, segments of this, if you're very specific and if you're very active in how you manage this and you're a stock picker and not just building in a big index with just a bunch of pharmaceutical names, you can actually do pretty well. You know, other areas like materials, industrials, these are other areas that, you know, a little bit far afield from healthcare, but still can get the benefits of some of the AI technologies coming in. And what you're going to find is that more and more brick and mortar types of companies are going to start to incorporate it. The impact of AI is to really bring in higher productivity, which is higher growth with lower inflation.”

    2024-12-20 · Odd Lots · Jim Caron on the Market Selloff and the Fed's Historic Adjustment · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “Is the big opportunity? This is a big opportunity going forward. So, what AI effectively can do is it can ring out inefficiencies in many sectors of the market that are more inefficient. Let's take healthcare, for example. The healthcare sector is due”

    2024-12-20 · Odd Lots · Jim Caron on the Market Selloff and the Fed's Historic Adjustment · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “But nothing magnificent, you're not going to pay those high valuations. And the markets are going to turn towards these other sectors that have been left behind.”

    2024-12-20 · Odd Lots · Jim Caron on the Market Selloff and the Fed's Historic Adjustment · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “Know it's really not that people are turning negative on these MAG 7 stocks as we're talking about it. It's just that when you look at their earnings growth rates, it is starting to, and we've seen this in the recent fourth quarter and third quarter earnings, and you'll probably see in the fourth quarter earnings too, is that what you've started to see is that the earnings growth rate is now starting to flatline. So as I was saying earlier, what made these stocks magnificent was that their growth rates were magnificent. If their growth rate is just average, well, then I'm not willing to pay a 30 PE, a high multiple for these things anymore. And as long as you believe their earnings growth rate will be fantastic, well, then yes, maybe a 30 PE multiple for many of these stocks is worth it. But if it just turns out that it's more of a flatter trajectory in their growth, I mean, still a good, solid, you know, growth rate, but.”

    2024-12-20 · Odd Lots · Jim Caron on the Market Selloff and the Fed's Historic Adjustment · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “The answer is not really. It is a pretty rare event to see this type of deviation or just distinction of a handful of stocks really performing so well relative to their peers for this long of a period time.”

    2024-12-20 · Odd Lots · Jim Caron on the Market Selloff and the Fed's Historic Adjustment · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “It would look like the economy was in a mild recession or a slowdown. It's been very, very flat lined. So what we think is that as these multiples and as the earnings growth rates for these bigger tech stocks have really reached maturity at this point, that there's going to be a shift in a reallocation into these better earning potential sectors and stocks in the market.”

    2024-12-20 · Odd Lots · Jim Caron on the Market Selloff and the Fed's Historic Adjustment · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “Yeah, why didn't it happen this year? That's a great question. And the one word answer is earnings. Effectively, when we talk about the Magnificent 7 and we talk about those great performers, they've also had great earnings. And really the earnings growth rate was down to those magnificent few stocks that were out there. And that's what really stood out this year. So they've earned the title of being magnificent just through their earnings. The earnings, though, have been in much more of a lagged space in the mid-cap sector. So for example, if you look at the S&P 500, that index is going to have a very, very large weighting towards those large cap tech stocks. When you look at the S&P 400 or the S&P 600, those indices are going to have a more diversified weighting towards the mid-cap sectors. If you look at the earnings trend of the S&P 500 over the past two years, it's been straight up. It's been absolutely magnificent. If you look at the earnings trend in the S&P 400 or the S&P 600,”

    2024-12-20 · Odd Lots · Jim Caron on the Market Selloff and the Fed's Historic Adjustment · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “Lead to better performance there, as well as the cyclicality of the economy, meaning that we're not forecasting a recession in 2025, as long as there's some decent growth, we think that the mid-cap sector will actually do better. So that diversification may start to pay dividends going forward.”

    2024-12-20 · Odd Lots · Jim Caron on the Market Selloff and the Fed's Historic Adjustment · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “We're starting to look away from those big MAG 7 names. We're not going underweight. We're going more neutral weight like those top 10 performers, but we're starting to broaden out and we're starting to go into more of the mid-cap sector. So when we look at mid-cap, mid cap is an area that we're looking at PE multiples that are around 16 or 17 versus the 22 or 23 forward PEs that the index sits at around now. These are companies that you've known. These are companies anywhere between 5 billion and 20 billion in market cap that have better earnings potential and essentially in the new administration that is seemingly more business friendly if you get some deregulation this can also feed down to the mid-cap sectors that get better access to capital, cheaper access to capital that were maybe underbanked and can also”

    2024-12-20 · Odd Lots · Jim Caron on the Market Selloff and the Fed's Historic Adjustment · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “This really gets to the heart of portfolio management. So, in many of the portfolios that we manage, we come across this risk a lot. We call it concentration risk. So what you're referring to is that it's a very narrow breath, meaning that there's several tech names, big names that are out there that have really been responsible for driving a lot of the performance this year. So if you want to have a more diversified portfolio, which is a good thing to do, What that meant is that you actually slightly underperform the market because the tech sector and those in those seven names, the magnificent seven as we call them, have actually done really, really well. So what has though started to happen? And I think will happen, and this is what our view is going into 2025.”

    2024-12-20 · Odd Lots · Jim Caron on the Market Selloff and the Fed's Historic Adjustment · IDENTIFIED FROM THE TRANSCRIPT · source