Bulls, Bears, and Big Moves: Bob Elliott's Optimism Unveiled | Buy Hold Sell

[00:00:00] Stocks are up 8 straight days, running into a 7 week winning streak.

[00:00:10] There are fulls everywhere on Wall Street.

[00:00:12] Everyone is running.

[00:00:13] As a matter of fact, we're finding there are zero bears out there.

[00:00:16] And the most famous bear of all is actually joining our show today because he's got some

[00:00:23] news.

[00:00:24] He might be flipping to the bullish side as well.

[00:00:26] Welcome everyone to bring inflation down. And I think since that point, they've done their own pivot. Whether you think it's a good idea or not, who cares? Yes, thinking that-

[00:01:40] When you're trading markets, who cares?

[00:01:42] You have to respond to the things that are in front of you.

[00:01:46] And in particular, starting with the QRA announcement I responded that, you know. Well, when you say using though, you're speaking on two different types of using. There's the Fed and the fact that instead of actually selling bonds, they stop selling bonds. And then there's Powell and his pivot, which is now like the onomatopoeia thing, the Powell pivot was powerful and combined.

[00:03:01] It basically forced equates to go up in value

[00:03:05] since there was no, you know,

[00:03:06] the wind was up for sales,

[00:03:07] not at their headset, but particularly bad for bonds. And when you say the easing, again, tell our audience what you're talking about at the Fed. Yeah, so I mean, I think the first, the first easing was by Secretary Janet Yellen at the Treasury. And basically, we all know that there's a big fiscal deficit. And the question is,

[00:04:22] how do you finance that fiscal deficit for all sorts of, for a number of different reasons related Yeah, you make a great point, but it's a point that I don't think many people have actually got their heads around. Was that the minute they were supposed to announce that they were going to be selling a whole bunch of 20 year and 30 year bonds all of a sudden she got, no, not going to do it. No, I mean, huge shift to bills, huge shift to bills. And this is the prop like she'll in an interview, you know, that's it. That's a very, I would say, I mean, that's a very opinionated statement, though. I mean, there's no factual, I know what you're saying, and it does seem that way that you're going to have somebody in Treasury that wants to make sure the current administration continues, especially going into an election year.

[00:07:00] But if that's the case, and that leads everyone to believe that the Fed is going to cut rates

[00:07:05] not because it's good for the economy, but they're just doing it to help the current

[00:07:08] administration. like Mnuchin wasn't really playing politics in his debt composition. It's been a long time since there was real politics being played in debt composition, really back into the 70s since the last time you saw it. So it was ambiguous. And I think adamant saying, oh yeah, the US economy, we're going to recession territory. You want to play that background, Todd? I was the judge. Oh yeah, please, please play back to me. Where are your thoughts now on a recession? Well, any good macro trader has very strong opinions loosely held.

[00:09:43] And particularly loosely held when monetary policy and fiscal policy or a bull, right? It's, you know, it's dependent on the circumstances and dependent upon the market pricing. And so this is a good example of that where people who got entrenched in one view or another, you know, have not, I mean, really the realities haven't done well over the course of the last two years. Neither bulls nor bears have done well over the last two years. The people who have done well have been flexible and responsive to the dynamics at play.

[00:11:02] Now, the thing I would say in terms of being a bear, you can make me the biggest bear on bonds

[00:12:06] Trump, Trump EPS absolutely. And I think there's also interestingly right now a flows dynamic, which is particularly advantageous on a forward looking basis for stocks relative to bonds,

[00:12:11] because stocks have been depressed, haven't actually been as responsive to this easing as

[00:12:16] you normally expect, because there's been a big rebalancing dynamic in the market.

[00:12:22] If you look back through the course of this's, you know, we built about a 8% cash, getting 5%. And all of a sudden they're saying,

[00:13:44] like, Toby, we have too much cash. I said, I don't have much of a particular independent view specifically on the MAG 7 stocks. I mean, other than, you know, historically when you see stocks in the PE range that many of those are priced in, it's hard policy where if that's the reality is not that way, then at least in the short term should really benefit. Well, Russell 2000 was a great example. To me, it was very bullish that we were seeing some rotation. I mean, there's really no reason why some of

[00:16:21] these Russell 2000, you know, good companies small cap companies are the most highest beta companies, right? Like we've gotten sort of confused over the last 18 months that it's Mags, Evan, that are the highest beta companies. But that's not right. Like typically those small companies that are living on the edge and where those incremental shifts in monetary policy were detrimental, but now beneficial to them is where you see

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[00:21:43] Product at Options Play. You're listening to buy is create a product that replicates what hedge funds are doing in terms of their positioning and their returns. And I think the thing that many investors looked at over the course, particularly coming out of 2022 was they said the safe place to be

[00:24:03] in that level because as we've seen, like, look, this market timing stuff can matter on the order of weeks or months in a way that, you know, the everyday investor is just not going

[00:24:09] to get it done. They're just not going to shift fast enough. And so I think, you know,

[00:24:13] these head-to-head managers are quite compelling. And if you actually, if you, you know, obviously,

[00:24:18] very high beta stocks have done very well over the course of the last 15 months, but if you just

[00:24:21] go back over the course of the, since can do that is because my co-founder Bruce and I have been in the hedge fund business for many decades. So we have a pretty good sense as to what they're doing. And so as we observe how they're how they're

[00:25:42] returning, what their returns are and close to real time, we

[00:25:45] have a pretty good sense as to how they're navigating through

[00:25:48] these environments.

[00:26:45] return until you get to that point where the cycle breaks and it's clearer it's more growing in one direction or the other and where they can lever on more bets. And what we have seen over

[00:26:49] the course of the last, I mean, eight or 10 weeks is that these managers are picking up

[00:26:54] the amount of risk that they're taking really directionally moving it in the form of long

[00:27:01] equity, equity positions in a bunch of different ways. And that's pretty interesting,

[00:28:01] the six or eight of those that are out there. And the reason why that is is hedge funds are always trying to benchmark how they're

[00:28:04] doing relative to other funds in their category or the overall industry.

[00:28:08] And so we're just leveraging all of that reporting that they're doing to all

[00:28:12] these different performance aggregators and using it in a novel way that's, you

[00:28:17] know, not what people typically use it for.

[00:28:20] So we actually have very good, very timely understanding.

[00:28:23] I think going back to your first point about how hedge funds seem to have always

[00:28:26] underperform the market, totally right.

[00:29:21] That's right. Because every profit dollar you make for me, you're taking 20% of a bitches.

[00:29:27] You know what, I had a hedge fund.

[00:29:29] I couldn't look somebody in the eye and take 20%.

[00:29:32] You know, I could do 10% of the ups.

[00:29:35] But of course, I'm not like the typical hedge fund manager who has two divorces, two houses

[00:29:40] and a half-tens, five kids for three different women.

[00:29:44] There's a 10- So you could buy assets and just hold on to them and do index investing and you expect that to have a positive return over time because if it didn't, you shouldn't give your money to people who are using it through borrowing or issuing equity. So that's what we call beta. Alpha is outperforming relative to that index investing. And so that's really what hedge funds are focused on.

[00:31:03] It's not, they're not focused on generating index- yeah, I mean, it's like a tale is all this time. What's the best position to be in is to be on both sides of the trade and be the market maker. So if you can do it, good for them for being the market maker. But if you're betting long and short markets, most of the return is

[00:32:20] pretty, it's in many ways kind of boring relative to that. a hedge fund manager again, because like 40% of my returns every year are actual freaking cash money dividends. You know, things you can spend, things you can pay alimony checks with. Yes. And I, you know, just to be only long, you know, stocks are only

[00:33:40] start when you can get now these crazy dividends.. So for him, you know, he's getting 50 million in endorsements anyway. So he's going on, the economy's growing above potential. We just had a massive easing injection that's come in and unemployment's at secular lows. And inflation is moving down, but it's not. The Fed hasn't met its mandate yet. Certainly not the sort of time to be swiftly easing monetary policies.

[00:36:22] So economic conditions look OK.

[00:36:25] Inflation is still a concern where all these cuts going to come from. at all because there's so much private equity, there's so many other lenders out there that are not based pricing off of them. That's for the next one. If we haven't put everybody to sleep so far on alpha and beta. Well, I think that's the big question is where, you know, if you look at. I could see staying higher for longer, which let me tell you a bit. I could see cutting rates to get mortgage rates down a little bit so people would start to

[00:39:01] sell their homes so that we could actually get some turnover and residential. It's so significantly different than the economy that I started Wall Street in 82 that you wouldn't recognize. And I mean, I think we already had this pre recession. I think the market priced in the recession before we had a recession because it just made so much sense to everybody because nobody knew it was like flying an airplane with no

[00:40:21] compass and having the things spin around.

[00:40:23] All these new inputs, all these for the audience, go to unlimitedfunds.com to learn more about all the products that they have over there. And I think it'll definitely be pleasantly surprised,

[00:41:43] that's for sure.

[00:41:44] So I know we are as well.

[00:41:45] So all right, so Bob, if I will reconnect with you

[00:41:47] over the next couple of weeks,