YouSaid · the spoken record

Nanette Jacobson

lines on the record: 71
first: 2023-09-23
most recent: 2023-09-23
sittings or episodes: 1
sources: podcast

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“And it is really takes the pressure off of inflation because supply chains are so efficient. Now because of national security reasons, trade tensions, et cetera, reshoring means that supply chains are not going to be as efficient. So that's also a pressure. Those are the structural elements of inflation. Now, you know, that is the really killer question. So why do you like bonds? Yeah.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Inflation being stickier is what our call is. And that's because you've got labor shortages. That is more of a structural issue because of demographics, because our immigration policy is tighter than it had been in past years. And you've also got an energy transition that is putting a lot of pressure on commodities that are going to be needed for that transition. And we can get into that. But copper is one thing where demand is far outstripping supply and copper is the metal of electrification. That's how you get the energy transition. And then there's deglobalization. So deglobalization is moving from an environment where supply chains are very efficient, labor, you can export anywhere in the world.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, exactly. Right, right. So that, yeah. So I just, I think it's really, it's going to be very tricky. The Fed hasn't been tested yet because the unemployment rate is so low. Consumer spending is just humming along. And, you know, we're entering a period in 2024 when the unemployment rate's going to go up. And then the question, that's when the Fed's going to be tested. How dogmatic will they be about getting inflation down to 2%? Or will 2.3 or 2.4, will that be good enough?”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, you know, I think at the moment, it does look to me like inflation is going to be stickier than what the market expects. As you said, the market's expecting, actually, I just looked this morning for, well, about 100 basis points of rate cuts next year. 2024. So this is where the inconsistency comes in. So if they're forecasting more cuts than the Fed's forecast, wouldn't that mean that there's going to be a recession or something close to a recession? In which case, equity markets are not priced for that. At least U.S. equity markets. Or the market is wrong, as you say, because inflation stays stickier and the Fed is going to be more dogmatic about getting inflation down. And so they're going to have to hike more. And in that case, equities are mispriced too.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“That is the big change in this regime is that cash is really attractive right now and it's providing a really competitive asset for any investment. You know, that said, I actually like bonds at these levels because cash is a great, you know, really short-term investment, but eventually cash rates are going to come down and the markets are going to anticipate the slowdown in the economy because of all the Fed hiking and bonds will do well.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Been very, very right. What I'm saying is that a lot of people on the television channels in 2021 were saying that rising rates were good for banks, but your prognostication was actually correct. Although I would say rising rates can be good for banks if it's 25 basis points in March and then another 25 basis points in September, if it's really slow like that, but a super fast interest rate hike, that is where net interest markets compress, especially for the smaller banks or not regional banks, I should say, because the deposit costs go up so, you know, they can't kind of hide it in a”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Did you know the old adage was that they were bad for banks because they'd have to pay higher interest rates on deposits?”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Banks are in a lot better shape because actually higher interest rates, you know, the old adage is that higher rates are bad for the banks because their net interest margins get squeezed. Wait, wait, sorry.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“The question is going forward. What can we expect? And I am still concerned, as I put in that piece, I said, you know, the really vulnerable spot are regional banks. They're the smaller banks. And the reason I'm still concerned is because of commercial real estate. So commercial real estate loans, 70% of regional banks books are concentrated in commercial real estate. That's where all the loans are. And, you know, we're just saying the byproduct of high office vacancy rates, malls, you know, where I don't know if you've been to a mall recently, but except for, you know, a couple of stores that are not exactly booming with traffic. So I think that commercial real estate is still a cloud that hangs over the regionals. The large megabit.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so I'm glad you asked me that because, again, it seems like what eons ago that we were in March and we had like a little banking crisis. So here we are and financials have certainly underperformed the overall stock market. Regional banks have done even worse. So it's not like the problems haven't been recognized.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Know PE 12 months forward PEs of 30 times 35 times, you know, nothing like the tech bubble, but still very, I would say inflated relative to the rest of the market. And there's certainly good companies with good business models outside of tech And that's what as a firm and as analysts, we're looking for those jewels or diamonds in the rough that are not being considered fairly and are just being swept up, you know, thrown out baby with a bathwater and really being overly discounted.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah, yeah. But I think you just don't want to be as binary as that. For sure. You know, these are great companies. There's no question about it. They have tremendous earnings power. And if you start thinking about generative AI, which is a big discussion that we're having, that really could, you know, the addressable market could be enormous. That could be yet another bridge to a new set of earnings. So I want to both defend what you're saying, but also be a little skeptical because the question is, do valuations already account for that? And are they maybe overly exuberant, right? And we're seeing that in some of those big tech stocks that they are really pulling back recently because of expectations, A, that real rates, interest rates may still go up.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“I did a little chart today and I looked at, everyone talks about quality stocks. So I looked at a quality ETF and I compared it to the S&P 500 and it had virtually the exact same returns, suggesting that maybe the S&P 500 has a lot of quality stocks. The quality, it's a factor. Can that account for some reason of the relatively more richer valuations in the US relative to Europe and Japan? In other words, it's just better companies. Like, for example, oh, can you believe that NVIDIA is trading at a 20 price of sales and some not so good company has a price of sales of two? And the answer is yes, I can believe that because NVIDIA has a great track record of growing profitably. in new sectors and sometimes some stocks are just not great.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“You know, zero one percent growth, which we're seeing signs that the economy is starting to slow down. You don't want to be in companies who don't have earnings. So you need to be really careful on that score.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, no, that's fair, I think, that there are a lot of, I mean, we're seeing a lot of dispersion, which is a fancy term for some stocks really outperforming and some stocks underperforming. So really what you're saying, Jack, is that it's a stock picker's market. We really believe that because some stocks have been, you know, value stocks, for instance, have really been punished in this environment. And so I see a lot of value in value-oriented companies, also because investors have gotten even without doing anything to their portfolios, they've gotten way over their skis in the tech sector and those big stocks. So I think there, you know, I'd be careful about small cap and micro cap because if we are going to go moving into”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“And the overvaluation of U.S. stocks, how much of that is concentrated in A, the technology sector, and B, the mega cap stocks. And I recognize that there's a lot of overlap between A and B. Because, you know, I've seen some folks who traffic in mid-cap, small cap, micro cap securities. And they're able to find some bargains at the table. And I think it's not as such as the case of 2021, where every stock was pretty much not overvalued, but overvalued relative to history on a historical basis.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“So that's why we're looking actually in international markets. We're looking at Europe and Japan, as you said. But interestingly, international for us really means Japan. And Japan has been left for dead over the past two decades. And now it's been the stealth performer. So would you be surprised to know that Japan, in yen, is up 31% year to date? Okay, almost twice what the U.S. markets are. So you might say, well, has it gone all the way? But we actually think there's a further runway for Japan to continue to outperform the U.S. Europe, not so much because Europe is facing recession. And obviously they're very exposed to a China slowdown because they're so reliant on exports. So in order of ranking, like Japan, Europe and bottom of the list is US.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, well, I think that's where the interesting opportunities are. When we look at the US, we see a couple of challenges. The first is that, as we know, valuations in the US are way more expensive than in other regions. So that's the first challenge, valuations. The second challenge is that the index is so concentrated in a few stocks and a few sectors. And everybody knows what they are, but it's technology, it's communication services, consumer discretionary, and those are the seven mega cap tech stocks. And they've accounted for almost 90% of the total returns this year. So you're looking at a very concentrated index. And if we get higher rates, higher inflation, those companies are at risk in terms of their multiple.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Well, I think a little bit cautious is not as cautious as we were last year. So, you know, we have more underweight global equities than we are now. And like many strategists, we did not expect the economy to be as resilient. We did expect inflation to be higher than expected. So we've reduced that underweight. And now we're close to neutral, though slightly cautious.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Bond returns. And I'll pause there. So basically overweight bonds versus equities. Not a lot, but definitely a little bit cautious over the next 12 months.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“So maybe we should just start with the economic backdrop because I think that's really important to where we're invested. And the backdrop is that growth, as everybody knows, has been way more resilient than anybody expected this year. And inflation has been resilient too. So we're looking at a very different economic picture than we have been enjoying the past two decades. So we are seeing a more challenging environment over the next 12 months. And because of that, we are actually slightly cautious on global equities. We're more positive on bonds. This is the first time we've been 10-year yields are now close to four and a half percent and real yields are 2%. So just a much more attractive picture for”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT