00:00 Speaker A
I’d like to hear your thoughts on the U.S. economy. First, I do want to get your thoughts on these headlines, which is the US-China trade tensions. It’s interesting to me because I think a lot of investors are thinking, you know what, things are going well and the two sides are talking. In a way, I think it’s actually fallen off the radar. Now it feels like these tensions are coming back into focus. You have a new post from the president saying he believes China is deliberately not buying U.S. soybeans as an act of economic hostility. Indicates that we are considering terminating our business with China related to gutter oil, gutter oil and other elements of trade in retaliation. You are an investor and you actually have to put your money into this market. How do you cope with all this?
00:53 Speaker B
Well, I think the first thing we have to think about is that you have to do a deep and long study and recognize that there are some fundamental questions behind all of this. The reality is that China’s trade with us accounts for 2.3% of its economy. If they don’t trade with us, they will go into recession. Our trade with them is about one-half of one percent. So if you look at this battle and this back-and-forth war, it’s an economic war, and the crux of the matter is we have the stronger hand. They need us more than we need them. Period, end of story, period. If you step away from that a little bit, you realize that what we’re seeing is a lot of noise, a lot of words surrounding a battle, but in total war, we’re probably going to win.
01:50 Speaker A
So what do you do as an investor, you say to yourself, I’m going to see these posts, I’m going to see these headlines, but I’m going to look at it carefully. Is this noise and I’m only focused on returns?
02:02 Speaker B
Exactly. Because you focus on earnings, you focus on fundamentals. You know, a lot of this, I call it “tired cat syndrome.” The market is in a real state. The market is at some kind of high and you hear any noise and everyone goes crazy, they’re upside down on the ceiling, they panic, they overreact. So that’s one thing we’ve been saying for a long time, buy the dip. When people overreact to these things, go back and look at the fundamentals and look at the earnings and make sure that’s what drives you
02:37 Speaker A
Do you think this market is overreacting in a sense because of market concentration, valuation?
02:46 Speaker B
Absolutely. I mean, because especially when you hit the peak, when pricing was a little bit higher than earnings, when we’re seeing now that people are kind of wondering what’s going to happen next. But when they come out, we’re going to see that the earnings can be really good. We’re just getting started today, right? Or yes, and then we’ll continue to see gains over the next few weeks. I think these would be really good. We would look for overall S&P 500 earnings growth of 10% to 10% to 12% next year. So, you know, earnings at an all-time high means the market is at an all-time high. I think we have to recognize that we’ve reached these peak moments where people are overreacting. Sometimes people, sometimes people are irrational and they overreact, and then for us, we see it as an opportunity.
