The Dividend Cafe - Replay: National Conference Call on Covid 19 and Markets May 4, 2020

Episode Date: May 4, 2020

Chief Investment Officer David L. Bahnsen answers questions from investors on markets and the ongoing COVID-19 pandemic Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Bonson Group's national video call, Current Market Outlook, around COVID-19, May 4th, 2020. Our host for today's call is David Bonson, the Bonson Group's founder, managing partner, and chief investment officer, and Scott Gamm of Strategy Voice Communications. Okay, I think we're live here, and thank Scott for joining us and hopefully you all can see and hear me. This is David Bonson and I've invited Scott Gamm to participate here today because Scott's someone that I've known now for several years, works closely with the Bonson Group. And we got a lot of really good feedback after our last call on a format that might kind of better suit the exchange and getting as much information to you all as possible, as opposed to sort of a 45-minute monologue from me and then a rushed Q&A. So I'm going to kind of let Scott handle moderating us through everything we want to talk about. everything we want to talk about. And then as Erica mentioned, if you all have questions as we're going through it, please email them to covid at thebonsongroup.com. And in real time, we'll get the emails and send them over. And we're going to try to leave ourselves about 20 minutes at the end to interact with the questions you guys have sent ahead of time or that

you send throughout. So with that said, Scott, I'm going to turn it over to you. And I'll reassure our listeners that you and I have not coordinated at all yet. And I don't have any idea what you're going to be asking me other than I have a general feeling about the subject matter that is most on people's minds today. It's going to be something related to the markets. That's right, David. It's great to be with you. Thank you so much. And there's obviously no shortage of topics. So let's get right to it. Of course, David, the market has rebounded quite significantly from that March 23rd bottom, what we think is the so-called recent bottom in stocks. But I guess that doesn't mean we're out of the woods just yet. So starting off more broadly, how would you characterize the markets right now?

Well, there's no question that the rebound in April would have been much quicker than I would have anticipated. And I think most honest actors, the question that people have is whether or not we're assured of a retest of those prior lows. And I don't think that we're assured of anything. And I don't know that it's sensible to formulate investment policy around such a short-term forecast. It has to do with how one might deploy money that is presently not in the market into the market. Having funds that are fully invested in equity-like securities now and removing them out of concern of a move from 23 down to 20,000 before it continues its onward surge, I don't think makes a lot of sense. The question though is for those that are sensitive to the timing of deployment of new capital. And to me, we already know the answer in terms of how to resolve that tension. And it's through an averaging in process. Whether or not we go lower before we go higher, the ability to put some money in and sort of tether those funds in

over a six, nine and 12 month period of time remedies a lot of that risk. It's kind of psychological, Scott, to some degree, because what happens is if the markets go higher and you're still deploying, you can tell yourself, hey, at least I've had some money that we put to work at these lower prices. And if the market goes lower, you can tell yourself, hey, at least I still have more dry powder to be deploying. But trying to formulate

guesswork as to where exactly the Dow will go next, I don't think makes any sense. And by the way, I think it makes less sense now than normal. So we hear a lot about how obvious it is the market will go lower. We most certainly did not hear that it was obvious the market was going to go up 6,000 points five weeks ago. I don't think there's anything obvious about what's going on. And what I'm trying to do very frequently in our communications to clients is reiterate the conflicting forces here. You may feel,

and you would be right, that it's obvious we face economic challenges, but you also have to counteract that feeling against the force of the stimulus, the absolutely unprecedented force of fiscal stimulus that has not even begun to work its way into the economy yet, and factor in the force of the monetary stimulus, which is going to significantly revalue risk assets as we come out of COVID. So there are pro and con arguments. And more or less, what you have is a market that dropped 10,000 and made half of it back. So rather than worry about if we go 2,000 lower or 2,000 higher next, I'm far more focused on the next 5,000 points over time. And in that sense, we want to be long invested. And you mentioned fiscal monetary stimulus, which we'll talk about

a little bit later. But folks who have been reading your weekly Dividend Cafe commentary and podcast will know that you frequently bring up this notion of forecasting. And you're very honest in saying, look, no one knows, including you, where the next direction of the market will go. And I think that's pretty admirable for someone like you to come out and say, listen, it's not worth trying to guess where this thing is going to go next. Speak to the importance of having that kind of mindset in this time. Yeah, we're trying to divide up the categories by which we talk about forecasting and the market and the economy in short and medium and long-term perspectives. And the silo that I would have the least conviction in, and everyone should have the least conviction in, is short-term prognostications. There's just simply far too many variables and unknowns and sentiment drivers that are inherently unpredictable that could affect things. I've done my best to help educate clients and readers about the technical factors that drove

markets in March. You had a fundamental avalanche of uncertainty, a health pandemic that was this black swan event that utterly corroded markets and investor confidence, but then you had a technical pile on. To the extent that I believe the bulk of that technical pile on is gone and in sort of a recovery phase, I can be more sanguine about the fact that technical detractors from the market are largely out of the way at this time. But that doesn't help me in short-term projections around the fundamentals. So the idea of a health, a backward step in the health pandemic, you know, could all of a sudden move markets lower. Getting on the other side of COVID, where the economy begins to reopen, but then the data is even worse than expected. You know, there's those type of things.

But that's also true that the data could end up being better than expected. There's already little surprise green shoots we're seeing that I think people thought would maybe wait till July or August to start to pick up, and we're seeing a little bit of data points going in the other way. All of that to say, Scott, I don't believe that I can formulate a conviction in the short-term movement, and that's a good thing for me and for my clients because I don't have any practical implications from the short-term movement. In other words, I'm not at risk of a client needing money in three months that could be in stocks and if stocks go lower, I'm going to be giving them a lesser amount of money. I wouldn't put client money that is needed in three months in stocks ever, COVID or no COVID. It's bad financial planning and bad matching of a solution to a problem. Intermediate

is where I'd be most bullish. And what I mean by that is I believe we will get past the short-term considerations and we will be facing the reality that the U.S. stock market looks more attractive than foreign stock markets, and it looks more attractive than all bond markets due to the low-rate environment we're going to be in for a long, long time. And that will boost up valuations, and combined with that kind of underlying sentiment as companies go about innovating and replenishing, restocking inventories, I think there will be a very nice sentiment. Now, I may have said before the heart of COVID

that I would have thought that would come in Q3 and I'm probably more undecided at this point as to when it will come. Q3, Q4, into Q1, we've talked a lot about the shape of the recovery and how that will manifest itself in the market. But again, in these sort of intermediate periods, when we're having this conversation a year from now into 2021, I feel middle of 21, a lot of optimism about what could be out there waiting for risk asset investors. lot of optimism about what could be out there waiting for risk asset investors. Long term,

lots of things we could talk about later that are both good and bad that we face right now. Well, and you mentioned something really important, the technical aspect of the March sell-off. And I think that's really important. And you and I have talked about this offline. The fact that investors were just selling everything, right? Sell first, ask questions later. Talk about that dynamic and why it played out in such a powerful way. Yeah. A lot of this dynamic that I've referred to as forced selling is something that is inevitable in a leveraged financial system. There are so many financial actors with significant investment capital that have leverage on their investments. And when everything starts to drop, decisions get made for them. On a retail level, mom and pop investors, the most obvious case is margin selling. People

that have bought risk assets on a margin, the underlying collateral value is dropping, and so they are forced to redeem. But in the hedge fund world, it could be a number of other types of things. They have models and ratios of the way assets are supposed to be related to one another, and those models were blowing up. And you put, instead of 20% leverage, all of a sudden you're 4 to 1 leveraged or more. The implications could have been severe. But what is underrated in the for-selling or technical factors that we're driving is not even necessarily complicated things like risk parity hedge funds or margin selling

inside of a leveraged financial system. It's just people who needed cash, companies, individuals, system. It's just people who needed cash, companies, individuals, folks saying, look, we don't know how bad COVID is going to be. We need X number of dollars of cash for the next 90 days, 180 days, go sell some municipal bonds, go sell some taxable bonds, whatever the case may be. Those assets froze up. And I believe the number was $110 billion in a week of high-investment-grade corporate bonds that were being sold. There was no buyer appetite for that, so it just had this cascading effect down. That applied to every asset class. And obviously, with equities, they were ground zero for it, and everything kind of trickled out from there. That forced selling pressure being gone, that's where the bottom of March 23rd and March 24th came from. Fundamentally, if you could just sort of have a divinely appointed

fair value right now, what the Dow should be, irrespective of extreme sentiment and so forth, should be, irrespective of extreme sentiment and so forth, would that number be 29,000 right here, right now? Of course not. Would it be 18 or 19,000? I don't think so either. I think that you're sitting somewhere in the 23 to 26,000 range that makes sense for the uncertainty, for the valuation, for where we were and where we need to go. But none of that's helpful in formulating an investment policy because the market is not ultimately going to be priced on where things ought to be in July of 2020. It's going to get priced on where things are headed in 2021 because of markets being forward-looking. Well, and that's a great segue to another point I wanted to bring up, which is the fact that

throughout this downturn, the market seemed to do things in the face of really bad economic data. I mean, there were times where jobless claims would come out, right? Five, six million people filing for unemployment insurance, and yet the market would rise on those days. And I think that, you know, confounded a lot of people who maybe don't follow the markets on a daily basis. But I think it speaks to that simple dynamic that you're referring to, which is the discounting mechanism in markets. Yeah, the discounting is a huge factor. And there's also sometimes the confusion around when news is really bad, but maybe was not as bad as been expected. And the example you bring up is a really powerful one and one that maybe will serve as a learning experience for many years to come. that the Thursday that the initial jobless claims number came, we were just seeing utterly atrocious numbers. And five out of five weeks, the market was up on those days. And one of those days,

I believe, was a 2,000 point up day, one of the biggest days ever up in the market percentage wise. And you had a 600 point and a 400 point up day. And yet, as you said, it was a 6 million initial jobless claims day, a 6 million initial jobless claims day, a 4 million initial jobless claims. Horrific numbers. We're aggregated now at 30 million people that have filed unemployment claims. And that obviously understates the real number because not everybody who's unemployed has filed an unemployment claim. There's still claims that have not been processed. There's people that, for whatever reason, have not filed one. So we have over 30 million people that have left the payrolls, and yet markets have responded positively on those days.

And it is largely the fact that that was already known and already priced in. The markets had dropped 10,000 points before we had those negative unemployment days. those negative unemployment days. But then it also is a byproduct of people looking forward and saying, is this unemployment going to be transitory or is it going to be structural? And I'm certainly in the transitory side of things. The question is 80% or 90%. There's a lot that is kind of waiting to see about that. If we end up, we know 100% of those jobs are not coming back by end of the year, obviously. There will be some structural impediments in our labor force that come out of this. But it won't be 100% of 30 million people. The question is, is it going to be 10% or 20 or something like that, both of which would be

horrific. 10% of 30 million people is still 3 million jobs lost. That would be a major blow to the economy. It's very hard for us to answer that question as economists when every data point we would look to to answer that question, we don't have. It's a variable that is unknown in terms of the employment picture into the economic recovery when our country is reopened for business. And to combat all of that disappointing and really bleak economic data, of course, the government has stepped in with stimulus to try to incentivize employers to keep their employees on the payroll. And then, of course, earlier you mentioned the freezing of certain markets, which the Federal Reserve has taken measures to unfreeze those markets. I guess, what is your overall reaction to the monetary and fiscal stimulus we've seen? What stood out to you over the past couple of weeks? Well, the overall response is being, from an investment standpoint,

The overall response is being, from an investment standpoint, just purely in the context of my role as my client's investment advisor, I'm utterly stunned by the degree of stimulus that we've seen, not just the magnitude, but the speed at which it has come through. It makes it very difficult to have a great deal of confidence in my own negative assumptions because they are up against unprecedented counteractions. And so I can't say that all of the fiscal stimulus measures are going to work. Some of them, I'm quite certain, are not going to work. But some of them have the potential to take a very negative data point and completely wash it away. And then you say, OK, well, maybe it doesn't completely wash it away, but it washes 85% of it away, something to that effect. I read a piece this morning that I'm going to be publishing this week that is arguing, and I think very cogently, that the Paycheck Protection Act has thus far saved 32 million

jobs, that we would have 32 million jobs not come back or end up being lost, and the number could be as high as 40 million. Okay, you know, for all the negatives around the Paycheck Protection Program in the press, that issue of public companies getting those funds that were intended for small businesses, it amounts to 0.3% of the total capacity of that initial $350 billion. 99 over 99.7 percent has gotten in the hands of small businesses and is largely we can see it through the data and it's going to be pulling through in the weeks and months ahead i think going to work its way through that part of the economy and it has a has a large multiplier effect attached to it so it the stimulus makes it very difficult for one to be overly negative in what the impact of

economic data will be to markets, because this is so different than anything we've seen before. There was a lot of stimulus out of the financial crisis, particularly on the monetary side. The fiscal stimulus was not very thoughtful, and it was very slow, and it was very political, and it was very small in the grand scheme of things. This is huge stimulus that was done very quickly. So I think that has to be factored in how we sort of handicap the uncertainty of the moment. So David, before we go to Q&A, and we've been getting some great questions throughout the show, which we'll get to in a moment. Give us a sense of what you think the reopening of the economy will look like, both from an economic point of view, meaning will people

return to restaurants, assuming those open? And then from a stock market point of view, how does the stock market price in whatever jitters we have on the economic side in terms of reopening? That second part's a lot harder to answer because I really do think that the stock market itself is going to need a little bit of time to absorb what the reopening looks like. The stock market, by the way, will not be limited to just with the restaurants and movie theaters. Those are really important indicators in the consumer side of things. And also, I think the overall psychology of our society, you know, full restaurants and full movie theaters is better just for the energy and the kind of

optimism of where we are as a free society. But economically, there'll be a lot of other considerations that are probably not being discussed as much. You know, the restaurants and theaters just are very visible, and they have a really important symbolic significance in terms of the opening of the economy. But to the first part of your question, I remain extremely optimistic about the reopening of the economy to the extent that they let the economy reopen. As more and more states join and as there's a real thoughtfulness to the way the economy is reopening that engenders public confidence and safety, this presupposes that it's being in concert with positive health data. So if the economy is reopening a little bit,

there's some percentage of people that are ready to go day one. They're not concerned. They feel good about things. They're in a low risk, low vulnerability side demographically. They're good out there. There's others that might stay back and kind of want to see how things are. And if the numbers stay benign, then it enables them to get back out. So you get this sort of buildup effect in the way the economy reopens. Those places where you mostly have to use European analogies, although South Korea has become more potent as well. And I'm putting a lot of this in covidandmarkets.com today. I was working on this at 3.30 this morning.

The Germany had reopened auto dealerships, bicycle shops, and a few other categories, kind of a soft reopening two weeks ago. And they've continued to see their case growth and their daily deaths plummet. They've had no pickup in negative data. Denmark is probably the most advanced in sort of reopening. And keep in mind, Sweden never really shut down to begin with. And so the numbers out of those countries that had shut down and have started quasi-reopening, they look very good. So that, I think, builds in the confidence level in the public to be able to go back out. But the part I've really tried to describe, this is very important, I've tried to write about this in Dividend Cafe because it's almost more philosophical than economic,

I've tried to write about this in Dividend Cafe because it's almost more philosophical than economic, is that when someone asks the binary question, a restaurant used to fit 200 people, and now because of social distancing, it's only going to fit 80 people. That restaurant's doomed. They're losing 50% or 60% of their capacity. What are we going to do? There's a big problem with that question, besides the fact that its basic assumptions are probably wrong on their face. But even if you accept some of that, it doesn't allow for the real heart of the matter, which is entrepreneurial creativity, reshaking business models, reconfiguring things from the ground up. Things that are above my ability to comprehend as an investment manager, people that are actually in their coffee shop and bicycle store and restaurant that are able to sort of recalibrate for what the circumstances allow.

I have an unbelievable confidence in the entrepreneur's ability to recalibrate to conditions as they are and generate a profit from those recalibrations. Did you have any reaction to something we heard from Warren Buffett over the weekend, of course, selling all of his holdings in the major airlines? And he also said that he wasn't so sure if people would fly in three or four years the same number of miles that they flew pre-COVID in 2019. And that seems to suggest some sort of longer structural problem with some sectors of the economy. Well, I share with Mr. Buffett a total uncertainty as to how many people will fly how many miles in a couple of years. But I am sharing this week in Dividend Cafe a real chart of miles that were flown in the couple

years pre-9-11, miles that were flown in the couple years post-9-11, and miles that have been flown since. And it is my belief that there are a whole lot of unknowns that would make predicting this completely futile for both myself and Mr. Buffett. A vaccine that comes online that is widely accepted as, you know, neutering the societal risk of COVID would drastically change public psychology. And I expect that by the time people are ready to be flying in mass, we will have a vaccine. But also, I just think the way the airlines execute safety measures, the way the protocols are sort of recalibrated, that it will take time. A couple of years sounds about right. Business travelers are going to return quicker. I'm on record as saying,

I'm someone who flies hundreds of thousands of miles a year I fully intend to be at full capacity of flying on day one that they'll let me but that's sort of my psychology Others won't be there. And so those things will have to kind of creep up through time. But no, I think that the 911 Lesson is one here that should require us all to be very humble And and have a lot of confidence in the resilience of the American people with the caveat being time and safety. Yeah. No, it's very important points. We should end on Q&A from viewers. We've got a bunch of great questions, so I'll just get right to it. Someone asked, where can people park their money and still eke out some returns while being able to sleep at night?

And another question on a related note is, what are you guys doing at the Bonson Group to prepare for a possible leg downward in the stock market? possible idea on the stock market, but I think just the overall reality of the moment in managing risk and reward is preparing to raise dry powder from our fixed income asset class, whether that be taxable bonds or tax-free bonds or both, prepare some degree of cash dry powder that we would look to deploy into risk assets over time. And if the lowest point stocks ever see again is the point they're at right now, and we're deploying into higher prices over the next six to nine months, I'm totally fine with that. We're deploying them for what we believe about their future return prospects. To the degree that equities drop further and we're picking up more shares at lower prices, I guess that's even better. So we would see that as an advantage. But what we are not looking to do is time it and guess as to where the market will go

and when. As a fiduciary, we think it would be a reckless thing to do. You would have a very high chance of being wrong, and then you would have an almost certain chance of being wrong again, which is the real tricky part, the reentry. So exiting is hard enough to do, and reentering is pretty much impossible. David, that a lot of your strategy is centered around dividend growth stocks. I mean, you wrote a whole book on it about two years ago. Has that strategy, I mean, that's not changing, right? That served you well, of course, throughout this downturn too. Well, and it's a really important part of the investment philosophy we have and part of our confidence in the way we're approaching equities right now is that we are so focused on the sustenance of these dividends that our companies are paying us and their ongoing growth. Through this really troubled earnings season, we've had a minimum of six companies already increase the dividend. overall dividend level of our client portfolios will be higher in 2020 than it was in 2019, even with 2019 being a huge year up in stocks and 2020 so far being a down year in stocks.

So it speaks to the system that we have to avoid dividend cutters and to focus in on very reliable dividend payers. And we think it neutralizes a lot of the risks people have about market timing. And for accumulators, it makes market down volatility their friend, not their foe, because of the reinvestment of dividends at lower prices. And it seems like you just answered the next question, which was how do you assess the chilling outlook for this year and into next year given by Fed Chair Jerome Powell, and how does that affect your investing strategy? And then just on the Fed as well, somebody wants to know if you were worried about inflation from all of these different Fed stimulus measures. Well, the inflation issue is one that I wrote about in Dividend Cafe this

last Friday, and I've been writing about that broad subject for years now, and I'm going to be writing about it for decades to come. It's a passion of mine. I'm very convinced that the issues that we have right now out of the Fed, our present monetary policy, and our debt excess as a country, that they are deflationary pressures and that they create more deflationary pressures. The misunderstanding economically is that what the Fed is doing is equal to increasing the money supply, which people think of as inflationary. That's not what they're doing. The Fed can't increase the money supply by putting excess reserves on the balance sheets of banks. That gets into the money supply when banks lend those things out. But banks don't lend out excess reserves if there's not more demand for money. Well, what creates a greater demand for money, demand for credit, is a good economy, right? So we're doing this in a bad economy. And what you

want is people that are building more goods and services and consumers that want more goods and services in a pro-cyclical virtuous cycle of economic growth. What we're doing is putting downward pressure on interest rates in response to excessive debt and to try to liquefy our financial system. So it becomes short-term medicine that I certainly think is very effective in its short-term financial stabilization goals. But long-term, it enhances the deflationary cycle. And somebody else had asked if I subscribed to Lacey Hunt, a famous economist, theories about that. And I subscribed to him entirely. And in fact, Lacey and I have interacted directly on this very thing. But it's not just Lacey. The data is overwhelming. Excessive debt creates a

deflationary negative feedback loop, and that's what I think we're going into. What I'm not worried about is inflationary pressures from the quantitative easing and bond buying the Fed's doing now. So if that answer is confusing, I'll summarize it like this. There are things I'm very worried about from what are happening now, but inflation is not one of them. Well, and David, as you wrote last week in Dividend Cafe, it's the pursuit of profit from the banks that would increase the supply of money. Pursuit of profit from the banks and pursuit of profit from the bank's customers. I mean, I think that's the most important thing is when you have economic actors, that they see a profit pursuit in a business they want to start or a project they want to undertake, capital expenditures, you know, R&D, those types of things, capital improvements. They go to the bank to borrow money, and then that debt becomes productive

debt. What is deflationary is unproductive debt. And at the risk of sounding political, there's nothing more unproductive debt. There's no more unproductive debt generally than government debt. Yeah. And speaking of government debt, someone else wants to know, does the current explosion in national debt make default more likely? And is modern monetary theory a form of default? Repeat the first part of the question again. Does the exploding national debt we're seeing as of late, does that make, I guess, a U.S. default more likely? And is modern monetary theory a form of late? Does that make, I guess, a U.S. default more likely? And is modern monetary theory a form of default? Well, again, the U.S. can't default on its debt involuntarily. For the U.S. to default

on its debt, it would require them choosing to do so. They have the greatest military in the world, the largest military in the world, and they have a printing press. So it begs the question to some degree. The issue that we always face is currency, valuation, and price level, which is inflation. There's a lot of things that the government could do that could be very negative economically, but they can't default on their debt without choosing to do so, which obviously has been something since the late 1700s that has been outside of our DNA as a country. So no, I don't fear that they would

have a default on the debt. But the question really, I think in the second part is, would they pursue something like modern monetary theory, which is a form of default in the sense that you're paying your bill, but you're just paying it with ongoing printed money. And this is where a lot of people confuse modern monetary theory, let's call it MMT, with quantitative easing and the bond buying programs that the Fed has been doing since financial crisis, and now picked back up again here with COVID. And it's very important people understand for all the problems that may be with it, for all the risks that come along with it, all the criticisms that are either appropriate or inappropriate, it's not the same thing as MMT. They're not taking a liability and using it as a

currency. They're not printing money to pay bills out of thin air. That would be MMT, and I don't see that happening anytime soon. Long term down the line, do I believe our central bank will be monetizing in some form the debt of our government? I do, and I think that Japanification concept is one that we're going to face, but that is very different from the MMT concerns people have right now. I hope that's an answer to that person's question. Yeah, and that relates to another question we have, which is how firm are you in your prediction that the U.S. will be in a low interest rate environment for a long, long time, and is there any risk that that prediction could be wrong given the massive deficit spending and debt that we've

been talking about. Well, the massive deficit spending and massive debt are why my conviction is so high that we'll be in a low rate environment. So one has to ask themselves these questions. Do they have control over the interest rate? The answer is yes. The second question is, are they going to be spending less money or more money in the future? My belief is they'll spend more money, that we're not on the verge of a fiscal responsibility virus breaking out. the citizens demanding the government spend less money. So as long as we believe my two premises, which is that they will continue to spend excessively, either by necessity or not, and that they can control the interest rate with monetary actions, then I have 100% conviction in my thesis of long-term low interest rates. I have history to help me out in the UK, in the United States, in the European Union, and in Japan. We have 40 years of rising deficits, 40 years of rising national debt, and 40 years of collapsing interest rates. Japan, in particular, has basically had 30 years of near 0% interest rates.

All of that is by central bank intervention, mind you. I'm not saying those are organic forces, but the central bank is the reason that they're able to hold the interest rate low. And I believe that we have to accept that that's the environment we're going to be in. Borrowers see that as a good thing. People with their home mortgages see it as a good thing. However, my argument is that what is good in one area, there's no free lunch. The negative is that it compresses the long-term expected growth in our society. And what about the stock angle, though? I mean, the typical thing we

always hear in markets is that lower interest rates make stocks more attractive. Does that apply here? Does it make stocks more attractive in the short term? Right. Yeah, it does. It does. Incumbent stocks that have cash flow, incumbent stocks that have a moat around their business, it helps sort of protect incumbent assets, whether it's real estate or successful companies like public equity. But then the loser is the company that doesn't get started or the particular venture from a company that never gets off the ground because new innovation and new growth is compressed while we protect and bid up the value of incumbent growth

so In a weird almost self-centered way at what i'm suggesting is the present policy Is geared towards benefiting people on stocks now and punishing Um kind of ongoing growth into the future All right, well david we got of minutes left. I'll toss it back to you for a closing remark. Okay. Well, I appreciate all those questions that came in, and any ones that we didn't get to, I'll make sure to send a written response after the market closes today. Our key themes, our investment committee did a podcast last week, and we've

talked a lot about what we're seeing as opportunities in structured credit. We still want to continue gaining exposure there where people have a tolerance for that risk and that volatility. In terms of within the equity market, we still very much believe that some of the thematic things that we're seeing are already fully bid up. And some of other thematic things that we're seeing are already fully bid up and some of other thematic things are very opportunistic. We like these asset managers that have dry powder that they can go deploy. Some of the publicly held private equity and private credit companies that are deploying capital. We own a couple of these names, high dividend payers with a great opportunity to exploit some of the economic vulnerabilities of the moment to the favor of their investors and their shareholders. In terms of the healthcare

side, it's very difficult to not be bullish on a lot of the healthcare sector, particularly pharma and biotech. We have to be selective. We have to look to the balance sheets and the sophistication of management, the R&D pipelines. So we're trying to be very selective there, but we like the names that we own and are continuing to look for new possible admissions in the portfolio. In terms of the long-term view on bonds, I think it really is the greatest question

that we are gonna have to deal with at some point here, perhaps later this year and certainly into future years, is if I am correct, that instead of a 2% to 3% low rate environment for, let's say, the 10-year yield, that we're dealing with a 0% to 1% environment or 1.5%, will it be worthwhile to maintain the same level of historical allocation to bonds that investors are used to having when it is neither generating income or price appreciation of any magnitude. And that's right now, luckily, something we don't have to immediately face because there's still adequate spreads in high-grade corporates and in structured credit and in municipal

bonds that there's still that yield spread that is attractive. But long term, my view is that we have some decisions to make about the best way to allocate clients non-risk capital. And there's a lot of thoughts and research being done around that. To the extent you're not so much focused right now on a year from now or six months from now, still focusing on the very short term, I empathize with the view. I do want you to know that we're really far more focused right now on six months and a year and two years than we are on six days and six weeks. And that's by necessity, my friends. We just don't have a choice. The market's ability to go up 1,000 points in two days as it did early part of last week and

down 1,000 points as it did in the last two days of last week, that's here to stay right now. And it will at some point subside. The heavy intraday volatility will subside, but that time is not yet. So we're looking at the health data. We're looking at the reopening of the economy. We're looking at public policy. We're trying to carefully and objectively evaluate positive and negative data. But ultimately, we are totally determined to maintain discipline and prudence and not become wild-eyed in some of the projections that we make around things. There's principles guiding what we're doing and not an iota of principle has been violated or is

going to be violated on my watch or the watch of my colleagues, advisors, and partners. And that's one thing I'll close you with because I've been doing a lot to come speak to you, talk to you, write, but understand that behind the scenes, the advisors at Bonson Group are talking to each other every day. There are lengthy interactions amongst the investment committee, amongst the partners. There's a really significant team effort, absolutely first-class professionals that I'm blessed to work with, all working together towards the common good of us making right decisions for our clients. So if this bi-weekly video call is helpful for you, please keep the feedback coming. We're doing it for you. We want

your input. I really thank my friend Scott Gamm for helping today. Hopefully we'll get good feedback on Scott's role, but it did help, I think, facilitate a more useful conversation. And so, Scott, thank you. And anyone else with any questions, send them our way. We'll get back to you. And what do we got? An hour and 15 minutes left in the market day. So, we'll get back to it. Thanks, everybody, for tuning in. The Bonson Group is registered with Hightower Securities LLC, member FINRA and SIPC, and with Hightower Advisors LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities LLC. Advisory services are offered

through Hightower Advisors LLC. This is not an offer to buy or sell securities. No investment process is free of risk, and there's no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors. All data and information referenced herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary. It does not constitute investment advice. The team in Hightower shall not be in any way liable for claims and make no express or

implied representations or warranties as the accuracy or completeness of the data and other information or for statements or errors contained in or omissions from the obtained data and information reference herein. The data and information are provided as of the date reference. Such data and information are subject to change without notice. This document was created for informational purposes only. The opinions expressed are solely those of the team and do not represent those of Hightower Advisors LLC or any of its affiliates.