00:00Rick Reeder of BlackRock writing, the immense disruption of trade and global supply conditions
00:03will be what truly influences market pricing. Rick joins us now for more. Rick, welcome to the
00:09program, buddy. Always a privilege, a pleasure to catch up with you, sir. This move that we've
00:13seen in this equity market, we've thrown so much at the stock market over the last several months.
00:18AI disruption, private market jitters, and now the straighter formers remain enclosed
00:22for almost two months now, Rick. And here we are at all-time highs.
00:26Does that bring you comfort or make you nervous?
00:30Oh, good question. So I'd say a couple things. First of all, I think what it tells you is the
00:36technicals in the equity market are extraordinary. And the earnings numbers that are coming through
00:41are pretty powerful. And so, you know, you look at the U.S. economy and you look at what's, you
00:46know,
00:46I heard at the beginning of the show talking about the economy is weak, economies are strong.
00:49Actually, the parts of the economy and the primary drivers are doing quite well. You look at tech,
00:53I mean, you look at some of the numbers yesterday that you cited, and you look at these earnings
00:57growth. And I was looking at some of the semis. You're talking about 97% earnings growth year on
01:01year. I mean, like unbelievably powerful numbers. And then you look at, you know, the high-end
01:05consumer, that consumption. You look at retail sales when you break it down. Pretty darn good.
01:10So you've got an economy. And by the way, you've got, you know, housing's not in good shape.
01:14Lower income's not in good shape. So that is what it is. But what drives the equity market is in
01:19pretty
01:19good shape. And the technical. So you had this period of time that nobody wanted to buy stocks.
01:24And then you realize, you know, I've said it before, you know, you're going to have an IPO
01:27calendar this year that maybe is a couple hundred billion. Maybe. We're going to buy back a trillion
01:33of stock this year. So we're actually, there's not enough stock to buy. So it's just a pretty,
01:38you know, talk about how explosive this is. You realize people sit on their hands, I don't want
01:41to do anything, particularly in tech. And then all of a sudden, you know, maybe a little bit of
01:44better news, the earnings come in, and then you create this. The technicals and equities,
01:48by the way, it's completely different when you think about the treasury market, et cetera,
01:52because we're getting, we get 520 billion a week of supply. It's, I mean, it's amazing in the equity
01:58market how good the technicals are. Rick, is there a contradiction in the fact that we're
02:04seeing such explosive confidence in equities? You're seeing so much cash out there that are
02:10looking for places to go. And at the same time, people are expecting inflation to come back down
02:14to 2% over the next five to 10 years. Does that seem contradictory?
02:20No, I mean, I, listen, I think, I think, and I've been doing this for many, many, a few decades.
02:26I've never seen a productivity revolution like this before. I mean, so you go through,
02:30I mean, almost every company I look at, you see a similar dynamic. I can grow my top line revenue,
02:35let's say it's four to 10%. Obviously tech, it's significantly more significant than that.
02:39But then if I keep my labor static to down, and then if I can get my cost of goods
02:43sold,
02:44and you see this in M&A, if I can create synergies, I can run a higher operating margin. If
02:48you can run
02:49a higher operating margin, then my ROE is significantly higher. And so then it just
02:54keeps driving this dynamic. So you think about what, and by the way, we haven't really seen
02:58automation AI really kick in yet. So I think, you know, there's this transmission. Part of why I
03:03think big cap stocks are so powerful is you're building a mode because you utilize data so effectively.
03:08We're seeing productivity take place. It buoys earnings. Companies do great. By the way,
03:14the counter of that, it's not great from an employee point of view. You're seeing that play out,
03:18which, you know, is part of what, you know, what affects the interest rate transmission. So
03:21it's a really good story from a productivity and a corporate earnings point of view,
03:26not so much for, for the broad, broad population.
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