Market's Worst Sell-Off In A Month, Will It Get Worse? Fund Manager Reveals What's Next
Summary
Market Outlook: Expect elevated volatility into year-end as Fed cuts are not a foregone conclusion and rates remain the key driver of asset valuations.
Concentration Risk: The market is heavily reliant on mega-cap tech; a sell-off in the top names could drag indices lower despite long-term optimism for technology and AI.
Key Companies: Discussion centered on MAG7 valuations including TSLA, NVDA, AAPL, AMZN, MSFT, GOOGL, META, with value examples like JPM and C for balance.
Portfolio Positioning: Pair large cap growth with large cap value (especially dividend payers) and add high-quality, intermediate-duration fixed income to dampen volatility.
AI Infrastructure: Significant capex is anticipated for AI buildout, benefiting enablers beyond chipmakers, including construction, manufacturing, equipment rentals, and energy providers powering data centers.
Energy Implications: Power demand from data centers supports the Energy sector, with attention to upstream inputs and producers that can supply reliable capacity.
Credit and Liquidity: IG and HY spreads are tight, but private credit spreads are widening amid cov-lite structures and opaque collateral risks, though systemic risk in regionals is not yet priced.
Hedging & Alternatives: Managed futures offer uncorrelated, trend-following exposure across rates, commodities, and equities; selective use of Crypto ETFs can provide speculative upside with downside-managed structures.
Transcript
the consumer is just stretched way too thin right now. I mean, you know, we still have high inflation, especially for the, you know, goods and services that consumers actually care about. I know that the Fed targets core PCE, you know, which excludes food and energy, but that's really what consumers are care about. When you have those big tech names, if they start to sell off, it can drag the whole index down with it. So, investors need to be thoughtful and tactical and remain diversified. I'm joined today by David Bush. He is the co-CIO at Trajan Wealth, uh a fund that oversees $2 billion in assets under management. Uh David leads a multiasset investment strategy covering global research and portfolio construction. He brings in over 20 years of experience across equities, fixed income, currencies, derivatives, and alternatives. And we're talking today on the 13th of November, the day of the worst selloff in over a month in the stock market. So, let's talk about that first. David, welcome to the show. >> Thank you so much for having me. Let's start by talking about what's going on today. A blood bath in the equities markets. Actually, risk assets overall. Bitcoin is down as well. Stocks, stocks, crypto, uh, everything just looks bad. Even gold, um, not doing great. Down 1% on gold futures. Stocks not the worst day in over a month as tech selloff intensifies. This has been going on for more than a week now, David. Uh it's kind of started two weeks ago and then it was on and off and then we've had rebound days and now today it looks like markets are cracking under pressure again pressure again. Ironically or maybe not ironically the government reopened so the shutdown is over as of today but clearly markets don't care for that good news. So things are back down where maybe markets are just pricing in but the government shutdown they're going to make more bad decisions. Shutdown over. They're going to go back to work and make more bad decisions. I don't know. um why are we seeing this intensifying sell-off today and just generally speaking the last month? >> Yeah, I think I think it's a combination of factors. One is is that there is concern that has built up over the valuation specifically over the max 7, you know, the large cap tech uh stocks and their high PE PE ratios. I think that's part of it. The other side of the coin is, you know, now that the government's reopening, you know, there's an expectation that we're going to receive a deluge of data that's going to come to investors. You know, everything from inflation and unemployment, which could, you know, impact what the Fed does over the over the next coming uh FOMC meetings. And I think that's what's driving a lot of it. >> Do you think then there's a bubble bursting right now? That seems to be the theme that everyone's discussing. Is there even a bubble? Well, it's it's interesting because I I know a lot of uh people have, you know, sort of looked back to the dotcom bust, which I started my career in January of 2000, so I lived through it. The the difference today is is that these large cap tech companies are flushed with cash. They have positive earnings. And so, that's a that's a a massive tailwind. I think on the in the short term, one of the big concerns is the capital expenditures that are going to be required to build out this AI infrastructure. And I think we could see some volatility there. Long-term, you know, uh, tech is the wave of the future. And so I think that it's important to to keep that in mind. But in terms of a bubble bursting, you know, it's it's hard to tell if this is a bubble that's actually bursting or if it's a sell-off and in a you know, slight correction. >> Well, let's just look ahead now, David. Um, are you expecting more volatility towards the end of the year? If if so, why? >> Yes, I am. and and the main catalyst I think is going to be what comes out of the Fed. Um, you know, so so the Fed cut interest rates in October, December, you know, is still up in the air. I mean, the Fed is going to remain data dependent and of course we don't have the data and so everybody's trying to piece together, you know, what could the inflation metric be, what could the unemployment number be, but um, you know, JPAL himself said it's not a foregone conclusion. And so if we just take a step back and we look at all of the valuation models and and this is true across almost all asset classes is that interest rates drive valuations. And so higher higher interest rates, you know, mean lower valuations. Lower interest rates means higher valuations. And I think that there's some concern that the Fed may not cut nearly as much as most people would like. >> What about the end of QT quantit quantitative tightening? Some argue that uh may actually inject more liquidity. It's not exactly QE per se, but it does help with uh driving up money supply, which may or may not help with uh equities. What do you think? >> Yeah, that's a that's a great point. So with quantitative the end of quantitative tightening, you know what I in my mind what I think is is that it's going to potentially reduce interest rate volatility particularly on the longer end of the curve because keep in mind that uh when the Fed cuts rates they're only cutting the overnight Fed funds rate and then the rest of the curve is really driven by supply and demand. And if the Fed's heavy hand is um not necessarily adding to their balance sheet, but they're maintaining and reinvesting back into the Treasury market, that should seek to, you know, that should uh squash a little bit of that interest rate volatility and be somewhat of a a benefit to the economy. But you're right, it is adding more uh money supply into the economy, which in theory should be beneficial. Two Fridays ago, banks borrowed the most amount on record so far from the uh Fed Stanny repo facility. Uh that may have been just been a one-off, but can we continue monitoring that, David, and see what indicators that may uh um give us? >> Yes. So, so with the standing repo facility, you're right there, you know, that's the that's the facility that banks can go and borrow from the Fed. The other side of the coin is the reverse repo facility, which is where banks can deposit money at the Fed. those those balances had had drained as well. And so what that tells me is that, you know, liquidity was was starting to to dry up a little bit. And I think that that was one of the big catalysts for the Fed to say, look, we've we've got to do something here to stabilize, you know, the money supply because it looked like reserves were draining out of the system. >> David, you coming from a fixed income background, tell us how credit spreads are behaving now and what they tell us about risk ahead. Yeah. So, right now what's interesting to me is is that um investment grade corporate spreads have continued to tighten. Even high yield spreads have tightened. And so, what that would indicate from a from an investor's perspective is that you know you know that that investors think that these are are good credits to buy and so on. What I'm looking at outside of uh investment grade corporates and high yield is also in the private credit space because it seems as though a lot of companies, you know, they they went from, you know, high yield to the leverage loan uh market, which is where, you know, loans can be traded to private credit. And the difficulty with private credit is that we don't have optics. But there was a headline today that um spreads within private credit are actually widening. And so that may be sort of the canary in the coal mine from a credit perspective and that's that's one sector that I've been monitoring pretty closely. >> What does that signal David? >> Well you know the the goal of private credit and the reason um businesses will turn to private credit is for speed of execution and customization. Um the difficulty is is that um you know when a bank makes a loan you know they have certain covenants that are in place they file UCCC reports which um in in banking terms we call it perfecting the collateral meaning that there's an assignment of that collateral to the loan in the private credit space. I don't know if that's happening. And and there's a lot of loans that are being issued that are called covite, meaning that they're trimming some of the covenants that are, you know, that would typically be required from a bank loan perspective. And so my biggest concern there is is that, you know, as they've made these loans that are now, you know, sitting on balance sheets somewhere that, you know, one, do they have access to the collateral? two, is it a perfected, you know, stake in that collateral or will we see something like uh what we recently saw with First Brands and Triricolor where they've rehypothecated the collateral, meaning they've assigned the same collateral to multiple loans. And you know, a couple of banks uh regional banks took a you know, took a pretty sizable charge um in that space. And then of course Black Rockck, you know, there's been headlines, you know, of a $150 million loss and a $500 million loss, but it's all tied to that private credit space. So, you know, it's it's difficult because we just as investors, we don't have optics into what these loans are doing, what how they're performing, what their collateral is, and so on. >> Is there even an incentive for investors to be chasing yield in the bond market right now, given how well the stock market, particularly the tech stocks, have performed thus far? I think you know uh with with bond yields specifically um you know what's interesting to me is you know these are the highest yields we've seen you know over the last 15 years you know really starting in about 2023 2024 you know yields were were high. So for for us as a an investment advisory firm, what we focus on is using bonds, one as an income generation, but also two, you know, as a as a as an asset that can help dampen volatility. I think the correlation between stocks and bonds, and I haven't checked today because it seems like everything's selling off today, but have have been at around zero, meaning that that bonds can act as a good diversification tool. And so right now I think you know stay up in credit quality. Um don't chase yields and and I'm focusing for for retail clients in that uh intermediate part of the curve. Call it right around that 3 to 5year part of the curve. >> Yeah. And just to finish off the private credit um story here. This comes um from Jamie Diamond's comments. Uh this was a couple weeks ago, but um basically he was on an earnings call and then he said when you see one cockroach there's probably more it was the closest thing to a vicious burn you ever hear from a major bank CEO. Um this is from a business insider. So he was he was he was reacting to uh the recent collapses by subprime auto lenderricolor holdings um and and other companies uh and shortly after you saw what happened with the Zion's Bank and um I think it was Western Alliance a few others missing earnings. Yeah, there we go. Uh bad loans disclosed on their books. Uh alleged fraud from some of their clients. Uh interestingly the broader market isn't maybe I don't know maybe it is maybe it isn't factoring these risk into account. So I don't think this is I don't think the markets are pricing in a systemic risk in the regional banking sector just yet. What do you think? >> That's that's correct. I agree with that. I don't I don't think that the market is pricing in systemic risk and and I'm not sure that this will evolve into systemic risk. Right now it appears to be idiosyncratic or company specific risk. And and you know I agree with with Jamie Diamond in that you know when you see one there's probably more. And then the question is is is who's holding it and um which which of those loans are bad. And the difficulty is is that we just as investors, you know, in the public markets, we don't have optics into it. And that's I think was what one of the most difficult things about the private credit space, you know, we don't have optics. And then two, we don't know the performance of of any of these loans. And so it's it's difficult to gauge. And because it's private credit, most investors, you know, aren't watching this space to, you know, to see any cracks that that may be forming. >> Well, we can look at consumer sentiment and what the consumer is doing and see if delinquencies on, uh, debt, uh, credit cards, lines of credit, mortgages, and so on are rising. I think, uh, you know, depending on which measurement you're looking at. For example, the St. Louis Fed, uh, measure on delinquency rates on credit card loans, that's been flat and stabilizing. Um but generally have you have you looked at how well the consumer in the United States on average is is performing now and you know can we extrapolate uh using that data how they will perform into the new year? >> Yes. So I've I've been monitoring you know data that's published by the Federal Reserve. Yes. >> You know and what we've seen is is that you know you know credit card auto loan personal loan delinquencies and defaults have been rising. the consumers are stretched way too thin right now. I mean, you know, we still have high inflation, especially for the, you know, goods and services that consumers actually care about. I know that the Fed targets core PCE, you know, which excludes food and energy, but that's really what consumers are care about because that's what shows up, you know, in their in their personal income statement, you know, as they go to the store to buy goods, you know, it's it's there. And so consumers are stretched really thin. And consumers are roughly, you know, 70% of the US economy. And so when the consumer starts to pull back, you know, we'll see that trickle through, you know, from retailers to, you know, autos to I mean, just across the economy and and that's that's a sign and something that I've been watching and monitoring closely as well. >> Like you mentioned, there is probably a lower expectation for uh for dovishness from the Fed. Treasuries paired off today on the expectation that the Fed may not be as dovish as anticipated before. What do we do then with this feeling of more volatility into into the end of the year? Uh the market is very concentrated and concentration risk is very real. So when we can expect volatility, we want to diversify or at least stay defensive. Very difficult to do when you're just invested in the index which is mostly just tech as you know. >> Yes, that's right. and and by concentration when we look at the S&P 500 and the composition it's a market cap weighted index meaning that the biggest companies you know are higher weighted in that index and if we zoom out and look at those top 10 companies I think they you know represent roughly 30 to 35% of the index as a whole and so when when you have those big tech names if they start to sell off it can drag the whole index down with it so investors need to be thoughtful and tactical and remain diversified. So, you know, large cap tech, you know, I'm I'm a firm believer that tech is the wave of the future and this AI infrastructure build is going to be hugely beneficial to the US economy. In the near term, I would pair that large cap growth with large cap value, specifically dividend payers because dividend, you know, dividend dividends will provide, you know, steady cash flow that can help dampen volatility. And also if we look at the historical performance between growth and value, value should uh perform better in a sell-off than growth. So that's that's how we're sort of managing it, you know, um pairing growth with value and then adding a layer of fixed income to help soften that that volatility. >> Can you just give us one example of a large cap growth stock and one example of a large cap value stock just so we know how to reference this? >> Yeah. So, so large cap growth is, you know, is specifically the tech names. It's all the MAG 7, you know, the Teslas, the Metas, uh, the Nvidias of the world. large cap value can be everything from you know city and JP Morgan to energy producers, utilities, um you know uh construction, manufacturing, you know those are sort of the the stalwarts, you know the those that have been around and have uh that are cyclically proven businesses that are at reasonable valuations and and by reasonable valuations you know I look at you know pees of you know right around you know call it 15 to 25. Um, anything below that, you have to be careful that you don't fall into a value trap. Meaning that, you know, there's a reason it's discounted and, you know, there's not a lot of earnings growth, but um, you can kind of balance that out. >> This is a chart that's been circulating on social media. I just get your reaction to this. Even next to Nvidia, Tesla's valuations look ludicrous. So, this is trailing PE 320 on Tesla and then you got 55.6. So, yeah, even amongst its peers, it's it's it's kind of high. I how do you what do you but where do you as a fund manager draw the line? I know you look at peers and you look at comps but what what's high for you? Is there a number? >> Yeah. So for me and my my personality and one of the one of the best pieces of advice that I got in, you know, in my career in in finance is >> trade your personality, you know, and so as a fixed income, you know, value income oriented, you know, personality. Um, you know, Tesla's Tesla's PE seems, I mean, especially as you look at its peers, I mean, it's extraordinarily high. Um the others you know if we look down into Meta and Amazon and Microsoft even you know call it Apple down to Alphabet you know are they reasonable? Well you know if we zero in on like somebody like Apple right they have a huge amount of cash sitting on their balance sheet so they're going to be able to weather that you know weather a storm. Um the others, you know, likely seem, you know, pretty well in line with valuations, but Nvidia, it seems a little high at 55 and Tesla seems really high at 320. >> Is fixed income a hedge against equities right now? In other words, do you expect the correlation between uh yields and stocks to diverge? >> Yeah, I think I think that's right. especially if the Fed if if there's something dramatic that happens in the economy and the Fed steps in, you know, they'll they'll lower interest rates fast. Uh a rule of thumb, and again, this is just a rule of thumb, is the Fed has historically operated with escalator up, elevator down, you know, because you know, historically once, you know, once we're at the neutral rate or or above it, if something cracks, they they cut rates pretty quickly. So in that scenario, bonds will be u valuable and hugely beneficial because yields down, bond values will go up and help offset some of that price risk in a portfolio. >> Well, this year was not actually a bad year for uh for uh the US 10 year. Um so we had uh as as you recall throughout the year um yields stayed relatively well, let's just take a look here. So yeah, I mean it was it wasn't great. It wasn't bad. I mean it was just rangebound all year mostly and then um this was a year when the S&P climbed what 23 25%. Uh probably a bit less now today and so you would expect maybe in a year like this for bonds to really underperform but they didn't really. Um why is that? >> Yeah it's uh so bond yields are a combination of you know two components and let me back that up. Treasury treasury yields is a combination of two components. One is as an investor you want to get paid for the time risk or the term risk but also you want to get paid for the inflation expectations. So as inflation expectations come down that should be uh a tailwind and drop you know bond yields should start to fall or remain relatively stable. But if for whatever reason we see inflation spike, you know, and it could be to a myriad of factors, we would see bond yields, you know, jump, but also if inflation expectations come down significantly, we'll see bond yields fall. So I think I think it's really driven by those inflation expectations. >> Yeah. So actually bond, this is the 10-year yield. Uh started the year about 4.46, now down to 4.1. So yeah, the 10 years had a pretty good year. um and uh huge volatility around tariffs. How do you think fiscal policy and specific specifically trade uh policies with tariffs in other countries how do they impact the bond market? >> Yeah. So, so tariffs are essentially attacks and if we think of it like a tax then we can see the impact on on the economy. So initially tariffs will be inflationary because the the cost of the goods that we're we're shipping from overseas to the US is is going to go up. The question is can they pass that increase in price onto the consumer? Will the consumer pull back? Um over the long term tariffs ultimately become deflationary because of that consumer demand pulling back. >> I'm just going to go back to what I said earlier about the correlation between stocks and uh long-term yields. So, there have been times when stocks and the long-term Treasury yield are correlated early in the year, for example. There have been times when they're not correlated. You can certainly find periods when, you know, one is applicable and one isn't. Typically, what does it mean when both uh the 10-year yield and the stock market move in the same direction um as was the case earlier in the year and what does it mean when they completely diverge as was what happened this summer? >> Yeah. So, so an easy way to think about it is stocks are risk on, bonds are risk off. Meaning that, you know, if if investors are, you know, if the animal spirits are in the market, you know, they'll they'll move into the stock market, which should cause stock prices to to go up. When >> when, you know, there's volatility and stock prices start to come down and investors get nervous, then typically, you know, bond yields or or bonds will will perform well and yields will come down. Mhm. >> Now there you're right there are times when when they are you know uh maybe not one for one correlated but they move in the same direction and and typically that's when investors are are just you know fearful of you know what can happen in the stock market and the bond market at the same time you know and and again the bond market you know is probably price movement is is likely driven by inflation expectations specifically in the treasury in the treasury space. So, right now we're in an environment where the stocks continue to go up to record levels. Well, except today we have a big sell-off today and then uh and then the yield just continues to on a monthly uh we're on a on a on a several month basis. We we've got uh yields coming down. So, so yields coming down while stocks are going up. That could one could look at that as saying the stock market is running on off on its own and not really correlating with reality here. or maybe um the bond market is sniffing out um some risk that equities investors are not. How do you interpret this? >> Yeah. So um again with a with a bond background you know I'm a fixed income investor by heart and by trade >> you know um when when we look at at uh price action specifically between stocks and bonds um you know my interpretation is is that um everything that the Fed has done over the last you know couple of years to squash inflation even though we still have you know persistent inflation specifically ally in the services sector, but those inflation expectations are coming down. Meanwhile, with, you know, with the animal spirits that have been present in the equity markets, you know, people have still been investing. And those those names that you pulled up on your chart, those are all the mag seven. And so, you know, people don't want to be uh, you know, investors don't want to be left off sides, you know, and not be invested in these big names, especially as we've seen this massive growth. So I think it's just sort of a re-calibration and looking between that large cap growth, large cap value and then adding in that layer of fixed income. >> So let's run through some scenarios here. Uh inflation data cooling and inflation data running hotter. So let's start with hotter first. If in day if indeed we have higher inflation, where should we be leaning to sector-wise? >> Yeah, higher inflation would mean that the inflation premium in the treasury market will increase meaning yields will come up. In that case with the valuations you know uh stock valuation should come down. So so a rise in inflation will we'll see a selloff in the bond market yields will come up and a sell off in the stock market. If inflation cools you know then yields should start to compress and it should be supportive of equity valuations. That's why at this point, at this juncture with where we're at in the cycle, I think it's so important to balance that growth with with value because value will, you know, provide a balance for growth. So inflation, inflation running hot, value should in theory overperform against growth. And if inflation cools, growth should outperform versus value. Can you see a scenario in which we have higher inflation and more growth? Does that does that happen often? >> It it can and um in that case, you know, it's likely driven by um that infrastructure buildout that has to happen with this whole AI infrastructure. M >> so you know while while most investors are focused on the mag 7 you know those big large cap tech names what I've been looking at is going that next level down below and saying okay what are the um businesses and services that are going to you know be required to build out this AI infrastructure and it's and it goes beyond kind of the chip manufacturers and you know the big tech names it goes into everything from like construction you know manufacturing um equipment rentals energy production. You know, that's that's a big issue in the US is if we want this AI infrastructure built, we have to provide energy to power those data centers. And so those companies should be benefited as well. So, I'm looking at, you know, everybody from uh, you know, natural gas producers to, um, uranium miners to, uh, you know, um, rare earth minerals and so on because that that could be the big boom to the economy is with this manufacturing and the uplift that's going to be required. >> Do you think that the tariffs have any um, long-term impact on the manufacturing sector in the US? In other words, are you bullish on on domestic manufacturing? I think it's going to be difficult to onshore a lot of the manufacturing that's going to be required in the near term because I mean to build this these manufacturing plants is going to be extremely difficult. Instead, what I could see is is shipping, you know, manufacturing to some of our other partner countries. But but that's the the lasting legacy of these tariffs is is that you know now the cost of goods that are being manufactured overseas and coming to the US are going to be priced higher and and it's going to you know potentially slow um down the you know the momentum that's needed to build this AI infrastructure. >> Okay. And how do you generally hedge against volatility? Say you're bearish on economic growth or you're expecting some sort of contraction or you're just generally not very confident that valuations can sustain. U one of people take this a number of ways. The um common way is to just state defensive get on the defensive sector. Staples, consumer staples, healthcare, utilities, uh fixed income. uh people use other instruments to hedge outright or they find alternative assets that may have a negative or inverse or just no correlation at all with the stock market. What's your approach? >> Yeah, so that's that's a that's a great question because what what can happen, right? So if if an investor thinks, you know, there's going to be increased volatility, there's going to be a market selloff, I'm going to hedge it, but then you know the market continues to reach new highs. So the way that I manage it is again balancing between those three asset classes, growth value, and fixed income. But one asset class that that I've been monitoring closely and that we actually utilize in some of our client portfolios is a managed future strategy, which is a trend following strategy. And it can invest in uh it can be long or short. And so if if the market is going up, it tends to, you know, go up. If the market's going down, it tends to perform well, you know, on the opposite side. So they they try to make money in either direction. So and they they utilize things like interest rate, commodity, you know, interest rate futures, commodity futures, you know, to try to to gauge that. So the nice thing about managed futures is it's an uncorrelated asset class and can be added to a portfolio to dampen that volatility. >> Okay. So am I right to interpret this as being it's a it's not a static vehicle like it it ch the the components of this managed future funds it changes constantly. >> That's right. That's right because because those you know the the portfolio managers who are running you know these funds they can go across any different sector you know again it could be interest rates it could be commodities it could be equity futures and and all they're trying to do is just um you know follow the trend and and uh if if if the market's moving higher they want to they want to participate in that but if the market's moving lower they're going to put on some instruments and some trades to help you know you you know, do perform well during those times, during those market sell-offs. >> Now that the Trump administration has made it easier for cryptos to be held in 401ks, have you started looking at this asset class? >> Yes. Yes. You know, it's it's interesting because um I still remember when Bitcoin was, you know, kind of first, you know, evolving and um but but yeah, you know, I think that that it's it's an asset class. You know, obviously there's ETFs that um that are comp that are comprised of digital currencies and and that's a that's an asset class that we view as speculative, but I think that it's it's got a place and purpose and and the way that we try to manage that is to limit the downside risk. So some of the funds that we invest in seek to participate in the upside but limit the downside risk through a series of uh derivatives and and from that exposure you know it makes a ton of sense but as you know you know the volatility on crypto is super high and uh most individual investors you know can't buy like you know even a bitcoin one one coin at you know 100,000 or 98 what whatever the price is today. So, so putting it in an ETF type fund, I think makes a ton of sense. >> Okay, great. And uh finally, what uh what can investors expect looking ahead? What are some of the major economic uh events and or economic milestones that we need to be following? >> Yeah, I always go back to the big three, which is the three that the Federal Reserve follows. So, it's uh core inflation, it's unemployment, and it's GDP. So, right now, yes, inflation has been falling, but it's been persistently high and persistently above that 2% target. Meanwhile, we've started to see some cracks form in the employment in the labor markets. Now, we we didn't get a jobs report, you know, and we won't get a jobs report while the government was shut down, >> but you know, we've seen, you know, uh layoff announcements, you know, there was also, you know, government employees who were furoughed, you know, and some fired. So, you know, it's likely that the unemployment rate has actually come up, but we just haven't observed it. And then, of course, economic growth. So, those those are kind of the big three. And then the next steps will be how does the Fed react. So in December a rate cut is not a foregone conclusion. But having said that you know if the data warrants they'll cut. But if the data doesn't warrant because they have this dual mandate of stable prices and maximum employment and it's going to be difficult for them to thread the needle and and and orchestrate the the quote unquote soft landing between those two because they're sort of moving in the opposite directions. Inflation is still high, but we have now have a rising unemployment rate. >> Okay, very good, David. Very good talk. Thank you very much for your time. Where can we learn about you, follow your work? >> Yes. Uh, you can find us at trajunwealth.com and across all of our social media platforms. >> Okay, we'll put the links down below. So, make sure to follow Trajunwealth down below. Thank you very much, David. Appreciate your time. We'll speak next time. >> Thank you. >> Thank you for watching. Don't forget to like and subscribe.
Market's Worst Sell-Off In A Month, Will It Get Worse? Fund Manager Reveals What's Next
Summary
Transcript
the consumer is just stretched way too thin right now. I mean, you know, we still have high inflation, especially for the, you know, goods and services that consumers actually care about. I know that the Fed targets core PCE, you know, which excludes food and energy, but that's really what consumers are care about. When you have those big tech names, if they start to sell off, it can drag the whole index down with it. So, investors need to be thoughtful and tactical and remain diversified. I'm joined today by David Bush. He is the co-CIO at Trajan Wealth, uh a fund that oversees $2 billion in assets under management. Uh David leads a multiasset investment strategy covering global research and portfolio construction. He brings in over 20 years of experience across equities, fixed income, currencies, derivatives, and alternatives. And we're talking today on the 13th of November, the day of the worst selloff in over a month in the stock market. So, let's talk about that first. David, welcome to the show. >> Thank you so much for having me. Let's start by talking about what's going on today. A blood bath in the equities markets. Actually, risk assets overall. Bitcoin is down as well. Stocks, stocks, crypto, uh, everything just looks bad. Even gold, um, not doing great. Down 1% on gold futures. Stocks not the worst day in over a month as tech selloff intensifies. This has been going on for more than a week now, David. Uh it's kind of started two weeks ago and then it was on and off and then we've had rebound days and now today it looks like markets are cracking under pressure again pressure again. Ironically or maybe not ironically the government reopened so the shutdown is over as of today but clearly markets don't care for that good news. So things are back down where maybe markets are just pricing in but the government shutdown they're going to make more bad decisions. Shutdown over. They're going to go back to work and make more bad decisions. I don't know. um why are we seeing this intensifying sell-off today and just generally speaking the last month? >> Yeah, I think I think it's a combination of factors. One is is that there is concern that has built up over the valuation specifically over the max 7, you know, the large cap tech uh stocks and their high PE PE ratios. I think that's part of it. The other side of the coin is, you know, now that the government's reopening, you know, there's an expectation that we're going to receive a deluge of data that's going to come to investors. You know, everything from inflation and unemployment, which could, you know, impact what the Fed does over the over the next coming uh FOMC meetings. And I think that's what's driving a lot of it. >> Do you think then there's a bubble bursting right now? That seems to be the theme that everyone's discussing. Is there even a bubble? Well, it's it's interesting because I I know a lot of uh people have, you know, sort of looked back to the dotcom bust, which I started my career in January of 2000, so I lived through it. The the difference today is is that these large cap tech companies are flushed with cash. They have positive earnings. And so, that's a that's a a massive tailwind. I think on the in the short term, one of the big concerns is the capital expenditures that are going to be required to build out this AI infrastructure. And I think we could see some volatility there. Long-term, you know, uh, tech is the wave of the future. And so I think that it's important to to keep that in mind. But in terms of a bubble bursting, you know, it's it's hard to tell if this is a bubble that's actually bursting or if it's a sell-off and in a you know, slight correction. >> Well, let's just look ahead now, David. Um, are you expecting more volatility towards the end of the year? If if so, why? >> Yes, I am. and and the main catalyst I think is going to be what comes out of the Fed. Um, you know, so so the Fed cut interest rates in October, December, you know, is still up in the air. I mean, the Fed is going to remain data dependent and of course we don't have the data and so everybody's trying to piece together, you know, what could the inflation metric be, what could the unemployment number be, but um, you know, JPAL himself said it's not a foregone conclusion. And so if we just take a step back and we look at all of the valuation models and and this is true across almost all asset classes is that interest rates drive valuations. And so higher higher interest rates, you know, mean lower valuations. Lower interest rates means higher valuations. And I think that there's some concern that the Fed may not cut nearly as much as most people would like. >> What about the end of QT quantit quantitative tightening? Some argue that uh may actually inject more liquidity. It's not exactly QE per se, but it does help with uh driving up money supply, which may or may not help with uh equities. What do you think? >> Yeah, that's a that's a great point. So with quantitative the end of quantitative tightening, you know what I in my mind what I think is is that it's going to potentially reduce interest rate volatility particularly on the longer end of the curve because keep in mind that uh when the Fed cuts rates they're only cutting the overnight Fed funds rate and then the rest of the curve is really driven by supply and demand. And if the Fed's heavy hand is um not necessarily adding to their balance sheet, but they're maintaining and reinvesting back into the Treasury market, that should seek to, you know, that should uh squash a little bit of that interest rate volatility and be somewhat of a a benefit to the economy. But you're right, it is adding more uh money supply into the economy, which in theory should be beneficial. Two Fridays ago, banks borrowed the most amount on record so far from the uh Fed Stanny repo facility. Uh that may have been just been a one-off, but can we continue monitoring that, David, and see what indicators that may uh um give us? >> Yes. So, so with the standing repo facility, you're right there, you know, that's the that's the facility that banks can go and borrow from the Fed. The other side of the coin is the reverse repo facility, which is where banks can deposit money at the Fed. those those balances had had drained as well. And so what that tells me is that, you know, liquidity was was starting to to dry up a little bit. And I think that that was one of the big catalysts for the Fed to say, look, we've we've got to do something here to stabilize, you know, the money supply because it looked like reserves were draining out of the system. >> David, you coming from a fixed income background, tell us how credit spreads are behaving now and what they tell us about risk ahead. Yeah. So, right now what's interesting to me is is that um investment grade corporate spreads have continued to tighten. Even high yield spreads have tightened. And so, what that would indicate from a from an investor's perspective is that you know you know that that investors think that these are are good credits to buy and so on. What I'm looking at outside of uh investment grade corporates and high yield is also in the private credit space because it seems as though a lot of companies, you know, they they went from, you know, high yield to the leverage loan uh market, which is where, you know, loans can be traded to private credit. And the difficulty with private credit is that we don't have optics. But there was a headline today that um spreads within private credit are actually widening. And so that may be sort of the canary in the coal mine from a credit perspective and that's that's one sector that I've been monitoring pretty closely. >> What does that signal David? >> Well you know the the goal of private credit and the reason um businesses will turn to private credit is for speed of execution and customization. Um the difficulty is is that um you know when a bank makes a loan you know they have certain covenants that are in place they file UCCC reports which um in in banking terms we call it perfecting the collateral meaning that there's an assignment of that collateral to the loan in the private credit space. I don't know if that's happening. And and there's a lot of loans that are being issued that are called covite, meaning that they're trimming some of the covenants that are, you know, that would typically be required from a bank loan perspective. And so my biggest concern there is is that, you know, as they've made these loans that are now, you know, sitting on balance sheets somewhere that, you know, one, do they have access to the collateral? two, is it a perfected, you know, stake in that collateral or will we see something like uh what we recently saw with First Brands and Triricolor where they've rehypothecated the collateral, meaning they've assigned the same collateral to multiple loans. And you know, a couple of banks uh regional banks took a you know, took a pretty sizable charge um in that space. And then of course Black Rockck, you know, there's been headlines, you know, of a $150 million loss and a $500 million loss, but it's all tied to that private credit space. So, you know, it's it's difficult because we just as investors, we don't have optics into what these loans are doing, what how they're performing, what their collateral is, and so on. >> Is there even an incentive for investors to be chasing yield in the bond market right now, given how well the stock market, particularly the tech stocks, have performed thus far? I think you know uh with with bond yields specifically um you know what's interesting to me is you know these are the highest yields we've seen you know over the last 15 years you know really starting in about 2023 2024 you know yields were were high. So for for us as a an investment advisory firm, what we focus on is using bonds, one as an income generation, but also two, you know, as a as a as an asset that can help dampen volatility. I think the correlation between stocks and bonds, and I haven't checked today because it seems like everything's selling off today, but have have been at around zero, meaning that that bonds can act as a good diversification tool. And so right now I think you know stay up in credit quality. Um don't chase yields and and I'm focusing for for retail clients in that uh intermediate part of the curve. Call it right around that 3 to 5year part of the curve. >> Yeah. And just to finish off the private credit um story here. This comes um from Jamie Diamond's comments. Uh this was a couple weeks ago, but um basically he was on an earnings call and then he said when you see one cockroach there's probably more it was the closest thing to a vicious burn you ever hear from a major bank CEO. Um this is from a business insider. So he was he was he was reacting to uh the recent collapses by subprime auto lenderricolor holdings um and and other companies uh and shortly after you saw what happened with the Zion's Bank and um I think it was Western Alliance a few others missing earnings. Yeah, there we go. Uh bad loans disclosed on their books. Uh alleged fraud from some of their clients. Uh interestingly the broader market isn't maybe I don't know maybe it is maybe it isn't factoring these risk into account. So I don't think this is I don't think the markets are pricing in a systemic risk in the regional banking sector just yet. What do you think? >> That's that's correct. I agree with that. I don't I don't think that the market is pricing in systemic risk and and I'm not sure that this will evolve into systemic risk. Right now it appears to be idiosyncratic or company specific risk. And and you know I agree with with Jamie Diamond in that you know when you see one there's probably more. And then the question is is is who's holding it and um which which of those loans are bad. And the difficulty is is that we just as investors, you know, in the public markets, we don't have optics into it. And that's I think was what one of the most difficult things about the private credit space, you know, we don't have optics. And then two, we don't know the performance of of any of these loans. And so it's it's difficult to gauge. And because it's private credit, most investors, you know, aren't watching this space to, you know, to see any cracks that that may be forming. >> Well, we can look at consumer sentiment and what the consumer is doing and see if delinquencies on, uh, debt, uh, credit cards, lines of credit, mortgages, and so on are rising. I think, uh, you know, depending on which measurement you're looking at. For example, the St. Louis Fed, uh, measure on delinquency rates on credit card loans, that's been flat and stabilizing. Um but generally have you have you looked at how well the consumer in the United States on average is is performing now and you know can we extrapolate uh using that data how they will perform into the new year? >> Yes. So I've I've been monitoring you know data that's published by the Federal Reserve. Yes. >> You know and what we've seen is is that you know you know credit card auto loan personal loan delinquencies and defaults have been rising. the consumers are stretched way too thin right now. I mean, you know, we still have high inflation, especially for the, you know, goods and services that consumers actually care about. I know that the Fed targets core PCE, you know, which excludes food and energy, but that's really what consumers are care about because that's what shows up, you know, in their in their personal income statement, you know, as they go to the store to buy goods, you know, it's it's there. And so consumers are stretched really thin. And consumers are roughly, you know, 70% of the US economy. And so when the consumer starts to pull back, you know, we'll see that trickle through, you know, from retailers to, you know, autos to I mean, just across the economy and and that's that's a sign and something that I've been watching and monitoring closely as well. >> Like you mentioned, there is probably a lower expectation for uh for dovishness from the Fed. Treasuries paired off today on the expectation that the Fed may not be as dovish as anticipated before. What do we do then with this feeling of more volatility into into the end of the year? Uh the market is very concentrated and concentration risk is very real. So when we can expect volatility, we want to diversify or at least stay defensive. Very difficult to do when you're just invested in the index which is mostly just tech as you know. >> Yes, that's right. and and by concentration when we look at the S&P 500 and the composition it's a market cap weighted index meaning that the biggest companies you know are higher weighted in that index and if we zoom out and look at those top 10 companies I think they you know represent roughly 30 to 35% of the index as a whole and so when when you have those big tech names if they start to sell off it can drag the whole index down with it so investors need to be thoughtful and tactical and remain diversified. So, you know, large cap tech, you know, I'm I'm a firm believer that tech is the wave of the future and this AI infrastructure build is going to be hugely beneficial to the US economy. In the near term, I would pair that large cap growth with large cap value, specifically dividend payers because dividend, you know, dividend dividends will provide, you know, steady cash flow that can help dampen volatility. And also if we look at the historical performance between growth and value, value should uh perform better in a sell-off than growth. So that's that's how we're sort of managing it, you know, um pairing growth with value and then adding a layer of fixed income to help soften that that volatility. >> Can you just give us one example of a large cap growth stock and one example of a large cap value stock just so we know how to reference this? >> Yeah. So, so large cap growth is, you know, is specifically the tech names. It's all the MAG 7, you know, the Teslas, the Metas, uh, the Nvidias of the world. large cap value can be everything from you know city and JP Morgan to energy producers, utilities, um you know uh construction, manufacturing, you know those are sort of the the stalwarts, you know the those that have been around and have uh that are cyclically proven businesses that are at reasonable valuations and and by reasonable valuations you know I look at you know pees of you know right around you know call it 15 to 25. Um, anything below that, you have to be careful that you don't fall into a value trap. Meaning that, you know, there's a reason it's discounted and, you know, there's not a lot of earnings growth, but um, you can kind of balance that out. >> This is a chart that's been circulating on social media. I just get your reaction to this. Even next to Nvidia, Tesla's valuations look ludicrous. So, this is trailing PE 320 on Tesla and then you got 55.6. So, yeah, even amongst its peers, it's it's it's kind of high. I how do you what do you but where do you as a fund manager draw the line? I know you look at peers and you look at comps but what what's high for you? Is there a number? >> Yeah. So for me and my my personality and one of the one of the best pieces of advice that I got in, you know, in my career in in finance is >> trade your personality, you know, and so as a fixed income, you know, value income oriented, you know, personality. Um, you know, Tesla's Tesla's PE seems, I mean, especially as you look at its peers, I mean, it's extraordinarily high. Um the others you know if we look down into Meta and Amazon and Microsoft even you know call it Apple down to Alphabet you know are they reasonable? Well you know if we zero in on like somebody like Apple right they have a huge amount of cash sitting on their balance sheet so they're going to be able to weather that you know weather a storm. Um the others, you know, likely seem, you know, pretty well in line with valuations, but Nvidia, it seems a little high at 55 and Tesla seems really high at 320. >> Is fixed income a hedge against equities right now? In other words, do you expect the correlation between uh yields and stocks to diverge? >> Yeah, I think I think that's right. especially if the Fed if if there's something dramatic that happens in the economy and the Fed steps in, you know, they'll they'll lower interest rates fast. Uh a rule of thumb, and again, this is just a rule of thumb, is the Fed has historically operated with escalator up, elevator down, you know, because you know, historically once, you know, once we're at the neutral rate or or above it, if something cracks, they they cut rates pretty quickly. So in that scenario, bonds will be u valuable and hugely beneficial because yields down, bond values will go up and help offset some of that price risk in a portfolio. >> Well, this year was not actually a bad year for uh for uh the US 10 year. Um so we had uh as as you recall throughout the year um yields stayed relatively well, let's just take a look here. So yeah, I mean it was it wasn't great. It wasn't bad. I mean it was just rangebound all year mostly and then um this was a year when the S&P climbed what 23 25%. Uh probably a bit less now today and so you would expect maybe in a year like this for bonds to really underperform but they didn't really. Um why is that? >> Yeah it's uh so bond yields are a combination of you know two components and let me back that up. Treasury treasury yields is a combination of two components. One is as an investor you want to get paid for the time risk or the term risk but also you want to get paid for the inflation expectations. So as inflation expectations come down that should be uh a tailwind and drop you know bond yields should start to fall or remain relatively stable. But if for whatever reason we see inflation spike, you know, and it could be to a myriad of factors, we would see bond yields, you know, jump, but also if inflation expectations come down significantly, we'll see bond yields fall. So I think I think it's really driven by those inflation expectations. >> Yeah. So actually bond, this is the 10-year yield. Uh started the year about 4.46, now down to 4.1. So yeah, the 10 years had a pretty good year. um and uh huge volatility around tariffs. How do you think fiscal policy and specific specifically trade uh policies with tariffs in other countries how do they impact the bond market? >> Yeah. So, so tariffs are essentially attacks and if we think of it like a tax then we can see the impact on on the economy. So initially tariffs will be inflationary because the the cost of the goods that we're we're shipping from overseas to the US is is going to go up. The question is can they pass that increase in price onto the consumer? Will the consumer pull back? Um over the long term tariffs ultimately become deflationary because of that consumer demand pulling back. >> I'm just going to go back to what I said earlier about the correlation between stocks and uh long-term yields. So, there have been times when stocks and the long-term Treasury yield are correlated early in the year, for example. There have been times when they're not correlated. You can certainly find periods when, you know, one is applicable and one isn't. Typically, what does it mean when both uh the 10-year yield and the stock market move in the same direction um as was the case earlier in the year and what does it mean when they completely diverge as was what happened this summer? >> Yeah. So, so an easy way to think about it is stocks are risk on, bonds are risk off. Meaning that, you know, if if investors are, you know, if the animal spirits are in the market, you know, they'll they'll move into the stock market, which should cause stock prices to to go up. When >> when, you know, there's volatility and stock prices start to come down and investors get nervous, then typically, you know, bond yields or or bonds will will perform well and yields will come down. Mhm. >> Now there you're right there are times when when they are you know uh maybe not one for one correlated but they move in the same direction and and typically that's when investors are are just you know fearful of you know what can happen in the stock market and the bond market at the same time you know and and again the bond market you know is probably price movement is is likely driven by inflation expectations specifically in the treasury in the treasury space. So, right now we're in an environment where the stocks continue to go up to record levels. Well, except today we have a big sell-off today and then uh and then the yield just continues to on a monthly uh we're on a on a on a several month basis. We we've got uh yields coming down. So, so yields coming down while stocks are going up. That could one could look at that as saying the stock market is running on off on its own and not really correlating with reality here. or maybe um the bond market is sniffing out um some risk that equities investors are not. How do you interpret this? >> Yeah. So um again with a with a bond background you know I'm a fixed income investor by heart and by trade >> you know um when when we look at at uh price action specifically between stocks and bonds um you know my interpretation is is that um everything that the Fed has done over the last you know couple of years to squash inflation even though we still have you know persistent inflation specifically ally in the services sector, but those inflation expectations are coming down. Meanwhile, with, you know, with the animal spirits that have been present in the equity markets, you know, people have still been investing. And those those names that you pulled up on your chart, those are all the mag seven. And so, you know, people don't want to be uh, you know, investors don't want to be left off sides, you know, and not be invested in these big names, especially as we've seen this massive growth. So I think it's just sort of a re-calibration and looking between that large cap growth, large cap value and then adding in that layer of fixed income. >> So let's run through some scenarios here. Uh inflation data cooling and inflation data running hotter. So let's start with hotter first. If in day if indeed we have higher inflation, where should we be leaning to sector-wise? >> Yeah, higher inflation would mean that the inflation premium in the treasury market will increase meaning yields will come up. In that case with the valuations you know uh stock valuation should come down. So so a rise in inflation will we'll see a selloff in the bond market yields will come up and a sell off in the stock market. If inflation cools you know then yields should start to compress and it should be supportive of equity valuations. That's why at this point, at this juncture with where we're at in the cycle, I think it's so important to balance that growth with with value because value will, you know, provide a balance for growth. So inflation, inflation running hot, value should in theory overperform against growth. And if inflation cools, growth should outperform versus value. Can you see a scenario in which we have higher inflation and more growth? Does that does that happen often? >> It it can and um in that case, you know, it's likely driven by um that infrastructure buildout that has to happen with this whole AI infrastructure. M >> so you know while while most investors are focused on the mag 7 you know those big large cap tech names what I've been looking at is going that next level down below and saying okay what are the um businesses and services that are going to you know be required to build out this AI infrastructure and it's and it goes beyond kind of the chip manufacturers and you know the big tech names it goes into everything from like construction you know manufacturing um equipment rentals energy production. You know, that's that's a big issue in the US is if we want this AI infrastructure built, we have to provide energy to power those data centers. And so those companies should be benefited as well. So, I'm looking at, you know, everybody from uh, you know, natural gas producers to, um, uranium miners to, uh, you know, um, rare earth minerals and so on because that that could be the big boom to the economy is with this manufacturing and the uplift that's going to be required. >> Do you think that the tariffs have any um, long-term impact on the manufacturing sector in the US? In other words, are you bullish on on domestic manufacturing? I think it's going to be difficult to onshore a lot of the manufacturing that's going to be required in the near term because I mean to build this these manufacturing plants is going to be extremely difficult. Instead, what I could see is is shipping, you know, manufacturing to some of our other partner countries. But but that's the the lasting legacy of these tariffs is is that you know now the cost of goods that are being manufactured overseas and coming to the US are going to be priced higher and and it's going to you know potentially slow um down the you know the momentum that's needed to build this AI infrastructure. >> Okay. And how do you generally hedge against volatility? Say you're bearish on economic growth or you're expecting some sort of contraction or you're just generally not very confident that valuations can sustain. U one of people take this a number of ways. The um common way is to just state defensive get on the defensive sector. Staples, consumer staples, healthcare, utilities, uh fixed income. uh people use other instruments to hedge outright or they find alternative assets that may have a negative or inverse or just no correlation at all with the stock market. What's your approach? >> Yeah, so that's that's a that's a great question because what what can happen, right? So if if an investor thinks, you know, there's going to be increased volatility, there's going to be a market selloff, I'm going to hedge it, but then you know the market continues to reach new highs. So the way that I manage it is again balancing between those three asset classes, growth value, and fixed income. But one asset class that that I've been monitoring closely and that we actually utilize in some of our client portfolios is a managed future strategy, which is a trend following strategy. And it can invest in uh it can be long or short. And so if if the market is going up, it tends to, you know, go up. If the market's going down, it tends to perform well, you know, on the opposite side. So they they try to make money in either direction. So and they they utilize things like interest rate, commodity, you know, interest rate futures, commodity futures, you know, to try to to gauge that. So the nice thing about managed futures is it's an uncorrelated asset class and can be added to a portfolio to dampen that volatility. >> Okay. So am I right to interpret this as being it's a it's not a static vehicle like it it ch the the components of this managed future funds it changes constantly. >> That's right. That's right because because those you know the the portfolio managers who are running you know these funds they can go across any different sector you know again it could be interest rates it could be commodities it could be equity futures and and all they're trying to do is just um you know follow the trend and and uh if if if the market's moving higher they want to they want to participate in that but if the market's moving lower they're going to put on some instruments and some trades to help you know you you know, do perform well during those times, during those market sell-offs. >> Now that the Trump administration has made it easier for cryptos to be held in 401ks, have you started looking at this asset class? >> Yes. Yes. You know, it's it's interesting because um I still remember when Bitcoin was, you know, kind of first, you know, evolving and um but but yeah, you know, I think that that it's it's an asset class. You know, obviously there's ETFs that um that are comp that are comprised of digital currencies and and that's a that's an asset class that we view as speculative, but I think that it's it's got a place and purpose and and the way that we try to manage that is to limit the downside risk. So some of the funds that we invest in seek to participate in the upside but limit the downside risk through a series of uh derivatives and and from that exposure you know it makes a ton of sense but as you know you know the volatility on crypto is super high and uh most individual investors you know can't buy like you know even a bitcoin one one coin at you know 100,000 or 98 what whatever the price is today. So, so putting it in an ETF type fund, I think makes a ton of sense. >> Okay, great. And uh finally, what uh what can investors expect looking ahead? What are some of the major economic uh events and or economic milestones that we need to be following? >> Yeah, I always go back to the big three, which is the three that the Federal Reserve follows. So, it's uh core inflation, it's unemployment, and it's GDP. So, right now, yes, inflation has been falling, but it's been persistently high and persistently above that 2% target. Meanwhile, we've started to see some cracks form in the employment in the labor markets. Now, we we didn't get a jobs report, you know, and we won't get a jobs report while the government was shut down, >> but you know, we've seen, you know, uh layoff announcements, you know, there was also, you know, government employees who were furoughed, you know, and some fired. So, you know, it's likely that the unemployment rate has actually come up, but we just haven't observed it. And then, of course, economic growth. So, those those are kind of the big three. And then the next steps will be how does the Fed react. So in December a rate cut is not a foregone conclusion. But having said that you know if the data warrants they'll cut. But if the data doesn't warrant because they have this dual mandate of stable prices and maximum employment and it's going to be difficult for them to thread the needle and and and orchestrate the the quote unquote soft landing between those two because they're sort of moving in the opposite directions. Inflation is still high, but we have now have a rising unemployment rate. >> Okay, very good, David. Very good talk. Thank you very much for your time. Where can we learn about you, follow your work? >> Yes. Uh, you can find us at trajunwealth.com and across all of our social media platforms. >> Okay, we'll put the links down below. So, make sure to follow Trajunwealth down below. Thank you very much, David. Appreciate your time. We'll speak next time. >> Thank you. >> Thank you for watching. Don't forget to like and subscribe.