THERE'S A LOT WE STILL DON'T KNOW ABOUT THIS NEW VARIANT,
AND YET THE MARKET SEEMS TO HAVE MADE UP ITS MIND THAT IT
IS VERY BAD NEWS. IS THIS BEING OVERDONE? JULIE:
I THINK IT IS HARD TO SAY BECAUSE WE DON'T HAVE A LOT OF
DATA, AND IT IS VERY POSSIBLE THAT IF THIS IS A SEVERE
VARIANT AND IT STARTS TO BE ABLE TO EVADE VACCINES, THIS
ACTUALLY SETS US BACK QUITE A BIT.
WHAT I AM WORRIED ABOUT IS HOW STRUCTURAL WILL THE CHANGES BE
THAT IMPACT THE MARKET.
DO WE HAVE A SITUATION WHERE DUAL INCOME FAMILIES SUDDENLY
SWITCH TO SINGLE INCOME FAMILIES BECAUSE A PARENT WANTS
TO STAY AT HOME? THAT HAS A RIPPLE IMPACT ON THE
ECONOMY. SO IT IS IMPORTANT TO KEEP IN
MIND WHAT IS GOING TO BE TEMPORARY AND WHAT IS GOING TO
BE MORE STRUCTURAL. GUY: ON THE FLIPSIDE OF THAT, IF WE
DO SEE WEAKNESS IN THE ECONOMY, THE FED IS GOING TO STEP BACK
FROM ANY TAPERING. THE FED IS GOING TO CONTINUE TO
DELIVER HUGE AMOUNT OF LIQUIDITY INTO THE SYSTEM.
THE TAPIR IS MAYBE GOING TO BE ELONGATED RATHER THAN TRUNCATED.
CAN YOU OFF -- CAN YOU OFFSET THOSE FORCES FOR ME? JULIE:
AT THE END OF THE DAY, EVERYONE OF US WOULD RATHER HAVE A
STRONG ECONOMY RATHER THAN ONE SUPPORTED BY THE FED.
WE HAVE REALLY ENTERED INTO UNPRECEDENTED WATERS HERE.
TO JUST CALL IT AN EXPERIMENT IS LIKE HAVING YOUR PARENTS
OVER AND GIVING THEM AN EDIBLE DURING THANKSGIVING TO KEEP
THEM CALM. THAT IS AND ASK FOR MEANT.
I'M IN CALIFORNIA -- THAT IS AND ASK PERMIT -- THAT IS AN
EXPERIMENT. I AM IN CALIFORNIA COME AS I
CAN SAY THAT -- I AM IN CALIFORNIA, SO I CAN SAY THAT.
[LAUGHTER] I THINK IT IS MORE IMPORTANT TO
THINK ABOUT THE FUNDAMENTALS BECAUSE THAT IS WHAT DRIVE
LONG-TERM. RIGHT NOW, VALUATIONS FOR SURE
ARE VERY IMPACTED BY INTEREST RATES, BUT I THINK ALL OF US
WOULD JUST PREFER TO HAVE A SOLID, STRONG ECONOMY RATHER
THAN ONE PROPPED UP BY THE FED. KAILEY:
AS YOU SAY, THERE'S BEEN A LOT OF LIQUIDITY.
IT HAS BEEN VERY ABUNDANT. BUT THE CAP IS STARTING TO TURN
OFF. YOU HAD JAN HATZIUS PUBLISHING
YESTERDAY, SAYING HE EXPECTS THE FED TO BASICALLY DOUBLE THE
SPEED AT WHICH IT PERFORMS THE TAPER.
DO YOU THINK THAT ACCELERATION OF TIGHTENING MAY BE A MISTAKE?
JULIE: IT IS HARD BECAUSE WE DON'T
KNOW HOW THE LIQUIDITY IS GOING TO REALLY PLAY OUT.
IF USING ABOUT THE RALLY AND THE AMOUNT OF LIQUIDITY THAT WE
HAVE, I THINK IT IS NO SECRET THAT VALUATIONS ARE VERY HIGH,
SO THERE IS A CERTAIN AMOUNT OF CYNICISM AROUND THIS RALLY.
PEOPLE WANT TO BE IN THE MARKET AND WANT TO BE ON RISK ASSETS
IN CASE THE RECOVERY IS STRONGER-THAN-EXPECTED, BUT THE
MINUTE THERE IS A WITH OF DANGER AHEAD, WE GET A REACTION
LIKE TODAY WHERE EVERYONE PULLS OUT.
SO I THINK THAT IS A REFLECTION OF THE PSYCHOLOGY OF THE MARKET
WHERE PEOPLE FEEL THEY HAVE TO BE INVESTED ON RISK ASSETS, BUT
ARE VERY QUICK TO PULL OUT. GUY: WILL THEY BE AS QUICK TO GO
BACK IN? I HAVE BEEN IN THE OFFICE FOR
MANY HOURS NOW, WATCHING KAILEY LEINZ ON TELEVISION, AND THE
PEOPLE SHE HAS BEEN TALKING TO HAVE GENERALLY SOUNDED REALLY
POSITIVE. THIS IS AN OPPORTUNITY.
THIS IS BLACK FRIDAY. NORMALLY I WOULD BE SHOPPING
FOR STUFF AREA I'M SHOPPING FOR STOCKS TODAY.
THIS IS SOMETHING I WANT TO STEP INTO RATHER THAN OUT OF.
WHAT DO YOU MAKE OF THAT REACTION?
BECAUSE IT SEEMS TO BE PRETTY UNIVERSAL, JUDGING BY THE
PEOPLE THAT HAVE COME ON OUR AIR TODAY. JULIE:
I THINK IT IS EVERY FLEXION OF THE FACT THAT EVERYONE HAS SEEN
LOTS OF BUSINESSES THAT THEY WANT TO BUY , BUT THEY FIELD
EVALUATIONS ARE TOO HIGH. THIS IS THE KIND OF OPPORTUNITY
TO HAVE BEEN HOPING FOR. I THINK THAT MAKES SENSE IF YOU
ARE TRADING IN AND OUT OF STOCKS , BUT FOR US, WE ARE
LONG-TERM INVESTORS AND OUR TIME HORIZON IS FIVE YEARS
TYPICALLY, SO THIS MAY BE AN OPPORTUNITY FOR SOME QUALITY
NAMES THAT MAY HAVE BEEN A LITTLE BUT OVERVALUED.
MAYBE WE HAVE AN OPPORTUNITY THERE.
BUT IT JUST GENERALLY DEPENDS ON WHAT YOUR TIME HORIZON IS.
KAILEY: AS WE SPEAK, THE 10 YEAR YIELD
HAS DROPPED SUB 1.50%, AT 1.249 5%, THE LOWEST SINCE NOVEMBER
10. WHERE IS YOUR HEDGE? IS IT BONDS, OR SOMETHING ELSE?
JULIE: HEDGES ARE SOPHISTICATED THINGS
THAT I KNOW NOTHING ABOUT AS A LONG HOLDING MANAGER. KAILEY:
BUT WHAT DO YOU PUT IN A PORTFOLIO TO GET A LITTLE MORE
SAFETY? JULIE: I THINK TO GET A LITTLE BIT
MORE SAFETY, YOU GET INTO BUSINESSES THAT CAN DO WELL
EVEN THOUGH THERE IS A MORE CHALLENGING VARIANT, OR IF THE
ECONOMY RECOVERS. A GOOD WHEN I WOULD THINK OF IS
AN OFF-PRICE RETAILER WHICH HAS BEEN UNDER SOME PRESSURE
BECAUSE PEOPLE ARE WORRIED ABOUT THE SUPPLY, BUT THE FACT
IS HAVING THIS MUCH DISLOCATION IN THE SUPPLY CHAIN IS A
BENEFICIAL THING FOR THEM LONG-TERM, AND THE EXTRA
BENEFIT TO THEM IS THAT IF THERE ARE SHUTDOWNS, BECAUSE
THEY ARE GENERAL MERCHANDISE, THEY WILL STAY OPEN.
SO THIS HAS UPSIDE AND DOWNSIDE POTENTIAL.
THOSE ARE THE ONES WE ARE REALLY LOOKING FOR.