War, Oil & Inflation with WisdomTree Head of Equity Strategy Jeff Weniger

In this special episode we are joined by Head of Equity Strategy at WisdomTree, Jeff Weniger and Director for the Mid-Atlantic region, Brandon Liebman. During our conversation we discuss the war in Ukraine, inflation in the United States, the outlook on the Federal Reserve, the effects oil prices will have on the markets moving forward and what investors can expect through the end of 2022 and beyond in their investment portfolios.

Meet with us


This podcast is for informational purposes only. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. StatonWalsh and Founder’s Financial Securities do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.

Ryan Staton is an Investment Advisor of, and securities offered through, Founders Financial Securities, LLCMember FINRA/SIPC and Registered Investment Advisor.

Devin Walsh  is an Investment Advisor of, and securities offered through, Founders Financial Securities, LLCMember FINRA/SIPC and Registered Investment Advisor.

Check the background of this firm on http://brokercheck.finra.org/

Make sure to like and subscribe if you enjoyed the show!

For more information on StatonWalsh please visit, StatonWalsh


This podcast is for informational purposes only. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. StatonWalsh and Founder’s Financial Securities do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.

Ryan Staton is an Investment Advisor of, and securities offered through, Founders Financial Securities, LLCMember FINRA/SIPC and Registered Investment Advisor.

Devin Walsh is an Investment Advisor of, and securities offered through, Founders Financial Securities, LLCMember FINRA/SIPC and Registered Investment Advisor.

Check the background of this firm on http://brokercheck.finra.org/

Transcript

Speaker 1: 0:00

Hello everyone. And welcome to today's episode of wealth builders presented by StatonWalsh. On today's episode, we cover the topic of Ukraine, Russia inflation in the United States and the outlook on the federal reserve. For that conversation, we brought two special guests from wisdom tree asset management. The first was Brandon Liebman, a director for the Mid-Atlantic region and Jeff Weniger the head equity strategy at wisdom tree asset management. Through our conversation today, we discussed topics like the conflict in Europe, as well as what effects that will have on the market. Moving forward, what effects oil prices may have on markets moving forward and what investors can expect through the end of 2022 and beyond in their investment portfolios. We hope you enjoy today's show and feel free after listening to like and subscribe.

Speaker 2: 0:47

This is wealth builders presented by StatonWalsh, a show designed to pull back the curtain of the financial industry and bring true transparency to the forefront of conversation. On the show, we cover topics like financial education, current events, and interview business leaders and industry experts with the ultimate goal of helping listeners discover their own path to financial independence.

Speaker 3: 1:25

Thanks everyone for joining us today for this week's episode of wealth builders, Ryan, with everything going on with the war in Ukraine and the volatility in the markets. Investors have a lot of questions and concerns. We have two very special guests say, join us from wisdom tree to discuss their views on what investors should be looking for and what to expect this year. So Ryan, go ahead and introduce our guests.

Speaker 1: 1:46

Yes, thanks Devin. So super excited today about our guests from wisdom tree asset management, we have Jeff Weniger and Brandon Liebman from wisdom tree. I don't wanna steal too much of their thunder, so I'll let those guys introduce themselves and what they do at wisdom tree, but at a high level to like Devin mentioned, we're gonna be talking about macro point of view on the market, moving forward for those that, listen, we did a market update a few weeks ago, a lot has changed in the world. So we're gonna talk a little bit about that today and then just also talk about a path forward. So with that, I'll turn it over first to Brandon Leman. Brandon, if you just want to introduce who wisdom tree is is, and, and what you do for them.

Speaker 4: 2:25

Absolutely appreciate the opportunity Ryan and Devin. My name is Brandon Liebman. The director covering the Mid-Atlantic region for wisdomtree, asset management and wisdom tree asset management. We're an asset management provider focusing solely on ETFs exchange, traded funds. We have about 80 different ETFs available at wisdom tree and the vast majority of them track proprietary indices that we create in house at wisdom tree to deliver specific end goal, whether it be outperformance, lower volatility, income, or allocating to the higher quality areas of the marketplace. Many of our ETFs have 15 plus years of track record and really utilize proprietary investment objectives to allocate to the higher quality areas of the market, which should provide a better investment experience for the end user. I will now turn it over to Jeff. Weniger our head of equity to introduce himself, Jeff, please take it away.

Speaker 5: 3:21

Sure. And thank you for the invitation, everyone. This is one of those calls where I, I wish that we could say that we were going to have a lot of fun, yuck it up, talk macro, but there's no time to yuck it up when there is a war on our hands. And, and when you're in the role of equity strategists slash macro strategist is you have to constantly be evolving with the market. If you would've said to me, 10 years ago, what do you do for a living? The answer would've been well, I studied Greek politics, right? Trying to figure out if Greece is gonna exit the Eurozone when we had, that was the front page type thing. And here, the number one as the market finds concern right here in March of 22, the, the topic is the Russia Ukraine issue. It's completely overtaken COVID, which was our dominant headline for two straight years. The, the wonderful news gentlemen is that COVID case counts United States are down 94%. And so that's one of, of the things that you have to do as the strategist is try to figure out, okay, what rigidities will stem from this war, certainly everything that's happening at the crude oil price and number one. And then how is that offset by the other 10 or 20 still very important headlines. And then I think that's, what's really, really critical as you, as much as you want to focus on that front page thing. You have to remember that we have a housing market in the background. We have that whole crypto rise in the background. You have Jay Powell, how many hikes will he give? And the inflation that we had long before this conflict arose, we had an inflation problem and then trying to get a handle handle on will that persist in 2022. So I'll say that on you guys, and we'll see where you wanna go with this conversation.

Speaker 3: 5:09

I tell you, I tell you what, there there's a ton going on. We could spend three hours talking about all the headline news right now. I think maybe it won the, we're talking about one of the first things. Talk about oil though, that, you know, the recent spike was like, is that something you, is that due to the conflict over in Ukraine war? Is that something completely different from there? So what was going on there?

Speaker 5: 5:28

Well, look, we were challenging on Brent crude, which would be the international gauge as opposed to west Texas intermediate, which is what Americans like us most focus on. We were challenging a hundred dollars before this started to really kick in and you never know completely how much of that was the, the oil price getting ready for it in January and February. But look, in terms of the lay of the land in, in global oil, us peak production was several years ago or about a million and a half barrels lower than we were at our peak. And the issue that has persisted since, before any of us were born, going back to the embargoes of the 1970s is that this particular commodity that makes the world turn has been so heavily produced from nations. That may not exactly be the proverbial Denmark of the world in that even when you get away from the middle east, which is frequently at any given year, there's some conflict occurring in the middle east, outside of there, you have Russia. And as we can see now, this has been a fools errand by the west to let Russia continue to dominate as at any given time, the number one, two and three players are Russia, the United States and Saudi Arabia. But then additionally, you have other oil producers that are, are again, the, not exactly the bastion of stability, places like Angola and in Latin America, to the extent that it used to be, you had Mexico, which was a very, very close ally of the United States, had the Cantrell oil field, which is completely run off over the last 15 years. When you think of Latin oil assets, you're left with Brazil, which is friendly to the United States and the other one being uhoh Maduro down there in Venezuela. And as we get here into this podcast, now we have the Americans trying to talk to Maduro to try to get that opened up, to try to counter what is going to be this massive embargo on Russian oil assets. But now you're friendly to Maduro. Yeah. Which is only going to anger, for example, the Colombians next door. And so the oil has been the ban of our existence for 50 years. It looks like it's going to continue to be problematic. And to the extent that we had this supply chain muck up, which is one of the two or three major black clouds over this market in the last two years, now we have this and I'll pass back to you guys. The other thing to consider here is the interaction, but between fossil fuel pricing and the other things that we use and consume, for example, food, right, food is energy. And we had a food crisis essentially heading into this. I'll give you an example. The UN has tabulate global food prices for a few generations. And before this happened in what is the bread basket of Europe, we were at a, in, even in real terms an all time high in global food prices. Unfortunately, that data was most recently collected in February. And you could see grains and various food steps have continued higher here in March on account of guess who's producing all the wheat in the Eastern portion of Europe. You correct? It's, it's really hairy.

Speaker 1: 8:47

That's interesting. And that's certainly something that we feel here at home in our wallet. You know, the talking about inflation numbers and CPI. I think with that being said, what would be your take on what's having more impact on the markets specifically today? Is it inflation the feds in action to inflation? Is it the conflict? Is it a combination of all of those? Like, is there, is there something that you would pinpoint or do you, would you say it's a perfect storm of all these things happening at the same time?

Speaker 5: 9:16

Well, look, I mean, even if this war race, so step back in our frameworks to the beginning of the first quarter, what was playing his day is federal reserve was decidedly behind the ball, just completely, completely swinging and missing. We had a raging bull market and we were already starting to see bread prices rise before this. And I, I come back to the grains because really so much of the wheat production. You just think about the sheer size of that land mass. That is Ukraine. Now the bread is, and the cereals will be headed higher in the second and third quarters. And we are behind the curve in various respects. We have had gentlemen in used car prices. It's so hard to conceptualize this. This was one of those big headlines that was affecting CPI. Used car prices have doubled since COVID started doubled so that you're making 30 or 40 or$50,000 a year. You need a$10,000 car to get two and fro you're not in asking anybody with this$10,000 car, but you need four wheels cuz your commute is 10 miles. Well that 10,000 car is 18 or$19,000 now. And so now there's a real pinch here from the fed. The fed has to tighten into a war. And one of the things that you have to consider with respect to where the fed is on all of this is that we went in the first quarter from just an outlook of when I say we I'm talking about the street consensus of a couple hikes in 2022 to suddenly it was going to be eight hikes this year. Now the war in favor of the equity bowls has tapered that back down to only about five fed hikes. But I suspect that even if they only have five, that that's not going to be enough to tame this inflation genie, that's gotten out of the bottle. And, and if you look at the market, the stock market, the positioning that's been on for about a hundred, hundred 25 days or so has been value stocks, decidedly, outperforming growth. And the reason is, is because you could almost go back and say, look from 2009 to 2021, it was this low interest rate, lack of inflation environment that favored the proverbial. Thanks, right? Facebook app, apple, Amazon, Netflix, and Google because you grab these types of companies when you can't find growth anywhere, but now that's, that's reversed. And guys, I'll tell you this in order for value to keep beating growth. I think what you need to have is this rising rates regime, or at least the anticipation thereof to continue. And one of the ways that you get that is if it's not the stag part of stag inflation, that it is in fact inflation with an economy that is at least moving along at somewhat of an, an acceptable pace, maybe two and a half percent real GDP growth or something like that. And I suspect we're going to get it. And the reason I think that is because, and this happens every time you are rightly focused on Ukraine, Russia, because I mean, just think about the, the enormity of, of that event when what's going on in the background might just be the hottest us labor market in 22 and 23 that we've ever encountered. There's a distinct possibility that us unemployment gets below three. By the time the cycle is run out. If that's the case, I think it's going to surprise a lot of people that were in these distant growth type companies. That's the trade of prior years. I mean, it, it, that has completely died. These NASDAQ style trades have completely died. That's been all about deep value, higher quality within value, you know, value at whatever you wanna call it. That seems to be the market has been a massive, massive regime change.

Speaker 1: 12:59

Yeah, no, definitely. I, I think one of the things that we have clients and investors ask us all the time is what's next with all this going on? What's our outlook. Like what can we expect to see? And I think, you know, one of the interesting things we did a market update at the start of 2022 and we rolled out kind of our outlook based on Q4 economic numbers. What expectations were moving forward, obviously a crisis and in Europe has thrown a wrench in that. But I guess the, the overarching theme of the questions that we get are, or what can we expect for the rest of this year, if this does continue, if rates are hiked, if the fed does continue to tighten what happens? Like what should we expect through the end of this year going into 23,

Speaker 5: 13:49

Right? And look, here's some of the things you always wanna keep in mind when you have a conflict or a war between two states that are in the grand scheme of things. If your question is the dollars and cents of bonds and stocks, which is what the business we are in, as opposed to figuring out war games, the two states in question here, Russia and Ukraine are small. Ukraine's GDP is about equivalent to that of Kentucky. For example, now that doesn't take away from the things we were earlier, wheat oil, gas, the other two issues. That would be another wrench into the supply chain, aluminum and nickel, right? You need nickel to make stainless steel and anybody who needs stainless steel, if anywhere along the chain from raw materials to end consumer. And that could be five or 10 producers, no nickel, no factory, right? Same thing goes for aluminum. Russias number two to China in aluminum production. So it's much more than the Coca Cola can. Aluminum is if, for example, in an automobile, it's everywhere. It's the door of the car. It's in the motor, it's in the brake system. If there's a freeze on account of sanctions, that's the issue there. So the supply chain may get further mucked up from this, even though we are dealing with two smaller nations, if you can conceptualize the land mass being small now. Yeah. The countervailing force guys is we have completely forgotten to the extent that everything was so locked up from COVID that is essentially over. And yeah, I have to back the envelope this, but if you take the us economy it's multiples and multiples and multiples, and same with the population of that of Russia, I think it would be something like three human beings in, in the United States for every one, Russia Russia's been having population declined for some time. Now in the United States, you had so many things that were messing up the Q3 and Q4 data right last year, not to mention that the rest of 20, 20 and 2021, which was, if your kids, classmate got COVID, your kid was out for 10 days and you didn't have a sitter. You were out for 10 days, right? And then when your own kid got COVID, you were out for another 10 days. And, and if the sibling didn't have it at that time, when the sibling got it a month later, you were out for 10 more days and we do need to counter that being completely alleviated now, because we do have the, the absolute crashing COVID case counts against everything that will affect economic activity to the downside from the Russia, Ukraine war. Additionally, it's so important that as far as the last 30 or 40 years, it has always been the fed and to go from 0% policy rates to let's say one and a half, which would be six quarter point hikes this year, that is still highly accommodated monetary policy. It's inappropriate. They should be considerably higher than that already, but they're not. They've made a, a mistake. And that mistake is inflationary. That mistake is towards trying to liquidate all the debt at the federal level, at the state level. And at one time, the household level, not so much anymore, the households are much more cashed up than they were. This is bullish for the market. Now long term, it's a grievous error because we've created way to get societal instability is to feed the inflation gremlin. And that's exactly what they've done. And so we have to, as a, an investor base snap out of that, which has worked in the market for so many years, this is the beginning of something that looks like a commodity Supercycle aside from what is, what is essentially a shock here, we have a supply side shock from the Russians. There were structural reasons for commodity Supercycle before this namely of the money that has been already created. And as we speak, the feds balance sheet is still continuing to expand. They haven't even started to reduce that yet. And so when you look at the market's internals, I I'll give you guys an example inside the S and B 500, the energy sector's only 2%. In prior years, there was times where was 15% people are very underinvested in these groups. There has been an, a feeling in the market that we will be getting away from fossil fuels and that the energy codes are going to be all dead. Within five years. We will still be using more fossil fuels by mid-century than we're using. Now. That's just the cold-hearted reality of the matter. And people are so loaded up in tech and communication services. They've only started to rotate. It's only been four year, four months. I mean, in something that was going on for a dozen years.

Speaker 1: 18:22

Great insight. So you mentioned the fed and raising rates. Do you think at this point there's anything you mentioned going from eight to five, do you think there's anything that may deter them from continuing to hike rates? Or do you think that they've dug their feet in pretty deep on this and they're committed to this this year and, and that's basically how it's gonna play out?

Speaker 5: 18:45

Well, that's really cool game theory. We could game out a situation where rather than hiking five times, maybe they hike no times that would be a situation where the crude to a price that recently the Brent crude had touched one 30. I think it retraced back to one 20. I'm just speaking in terms of what it's done in the last 12 hours. As we record, imagine if in the next few weeks crude oils at a 150 or$200, which we to think of an absolute nightmare scenario, that would be a scenario where the fed feels like they need to almost reverse course and go back to quantitative easing. One of the things that I would point out is why do stocks get concerned or sell off? They sell off because people think that bad times are coming or recession is coming right? You don't off stocks necessarily. If you think a boom is coming. One of the things that I think is absolutely imperative to game out in your own head. And I say this with, I know, energy at the household level is not just what you're paying for gasoline, right? You have a natural gas bill in your house. You have an electric bill. And I don't know, let's say you're in M and you're drinking orange juice for breakfast. Somebody needed to get that orange on a truck from Miami to Minneapolis at whatever the diesel price was to haul that stuff. So certainly it's much more than what you're paying at your, at your corner gas station. But one of the things to always game out is if listeners of the view that in combination with housing, that it was$4 gasoline back in oh eight that sent the middle class down the tubes. It was unbearable cost of$4 gasoline. In that last time we had triple digit crude oil. What needs to be considered is, and I was doing this on what my view is of the typical sedan that you would see on I 95 or over here in Chicago, the Eisenhower be a Toyota Camry, and think about a Toyota Camry is, and you know, it could be a Nissan Altima, whatever it is, just think of something. I also did it for the Ford F150. The other day, you're getting about eight or 10 more miles per gallon. Now on all of these cars, then you were getting on the 2005, 2006, 2007 version of these. So when you're at for dollars gasoline, remember that you're, you're filling up much less frequently than you were then. And this is not to count for those of us who own hybrids. I personally don't, but the hybrid gets even better fuel economy incrementally. I'll tell you guys, he is sitting here in March, April may. We could be at$6 a gallon. And what we need to remember is that in oh eight, at$4, a gallon meeting household income in this country was$50,000. Now it's$67,000. So$4 is not the same as$4. And also that 2017 vehicle that 2018 vehicle is getting 32, 30, 3, 34 miles to the gallon, not 25. That's why I suspect that that is going to be the single piece of calculus. That's somebody we need to do this spring because guys, you know, right now it's oil price, oil, price, oil price. Tell me the oil price. And I'll tell you whether I'm sad or happy today. Yeah. That's the way this market wants to trade. I think that's the theme for the rest of 2022.

Speaker 1: 22:05

Okay. Fair enough. Yeah. I get also take into consideration. Obviously one of the side effects of COVID was work from home. So what relevance does a gas price have if you don't necessarily have to go anywhere, those are all great points. So from an investor perspective, when we're talking about, you know, how the markets are gonna trade, I guess, what should investors be looking at? How should they be positioning themselves moving forward? Is there anything that's changed? I know you mentioned some different asset classes that may be more favorable moving forward, but I guess, is there anything that's changed for the long term investor in today's market? Should they be looking at the world differently? Should they be investing differently or does broad diversification and a long term point of view still worked in today's market?

Speaker 5: 22:53

Well, yeah, you always wanna in portfolio construction have broad diversification. And that long term view is the big question is, is what is going to be the cycle for the entirety of the 2020s might be the question posed. And the core of that argument is, is it going to be value stocks or road stocks? There are many and many data points. If you look at, for example, the outperformance of the highest PE quintile of the us stock market rolled to the lowest PE quintile, the 10 outperformance up until when it Crested four months ago, exceeded the 10 years of to the absolute peak of the.com. You know, this was a us mega cap, which is code for the large of the large, right? This was a us mega cap growth market from 2007 to 2021. And this is why market's not easy. One of the big stunners is that for the last half year or so, it has been emerging markets value. And you wouldn't think so, cuz Russia just took a zero, right? I mean, Russian stocks, many investment houses are valuing those securities at zero, but Russia's a small portion of the emerging markets. Emerging markets are Asia. Emerging markets value is best performer. Nobody. You wouldn't know it. That's a fundamental in what this market is looking for. This market is looking for basic materials. It's looking for industrials, it's looking for energy. It's not looking for social media or ride share or the next big thing in messenger, RNA that's 2021. This is a smoke stack earth moving heavy industry market. That was the big rotation. That is very, very similar to, if you go back to March of 2000, when the NASDAQ began, its tumble, that market rotated from 2000 to 2007, a seven year cycle. That was all about commodities, emerging markets value, small cap. It was the opposite of everything that had worked from basically the end of the crude price spike when Saddam went into Kuwait in OC. And that was that peaked in October, 1990. And it was all growth stocks from 1990 to 2000. It's 10 years there, seven years for value. And then it's been 14 years for growth that ended in November of 21. This stuff can go five, 10 years. Yeah. That where our minds are. It's all about you just look at, I mean, it's, it's dividends again. It's heavy industry. It's all these sectors that we're not performing and what's on the outs. The market leaders are down. Don't even mention the NASDAQ and we had passive bat. You guys, we had, when I last week 30 per percent of the NASDAQ composite corporations were down at least five, 0% from the 52 week highs, 30% of 3,600 companies is a thousand companies. It's

Speaker 1: 25:38

Incredible.

Speaker 5: 25:39

It's been brutal out there for the stuff that used to be the darlings.

Speaker 1: 25:43

Yeah. Yeah. I think you mentioned emerging markets and, and value. That's something that often gets overlooked. It's funny. You, you mentioned, you know, the early two thousands, it's something that we talk about quite a bit. And some other presentations that we've given, you know, the lost decade and how everyone was enamored with, with us markets and S and P 500 was virtually flat for a decade. And what happened to during that period of time as the rest of the world was up pretty significantly during that time period. And so, you know, the question always becomes when obviously the market can be cyclical at times and often is, but when is the right time to rotate to make those changes? And so something that we've been wrestling with and questions that we get a lot are, is now a better time to be allocating more heavily or to be just investing in general internationally is today that time, is that something that investors should be looking to do if they're not already doing in their portfolios?

Speaker 5: 26:43

Ooh. And international can mean so many things too. Yeah. And the extent that, okay, we've talked about emerging markets, let's talk about developed markets, which generally means let's lump Europe, Japan, Australia, New Zealand, Singapore, and Hong Kong together. And Hong Kong has that big question mark. Now that it's essentially been a, an next by mainland China, but is an interesting situation because the relative valuations are there, right. Or the S and P trading about, well at this point, maybe 19 times forward earnings, you're at mid teens on something like an Ms C Europe, but you're right next door to, to Ukraine. Right? And so now we have a nuclear threat and, and to the extent that there's a nuclear threat over the region, that ends a little bit of political risk premium in there. Additionally, one of the other things that that is, uh, always a concern with respect to Europe is that the prospect of Greece, Spain and Italy exiting is never on your radar when you do have global GDP expansion. But let's not forget that. For example, Greece in Italy, those debt burdens never stopped rising. I mean, Greece essentially to budget for four years. And then don't ask about COVID because that just negated everything you did on your balanced budget once COVID rolled around for Athens. So that's one of the, the other risks with respect to European equities, what we oftentimes say. And I mean, we have so many ETFs, you know, it's always the advisors choice, but in terms of European, you can either be long the European stocks and own them in Euro, or you can hedge back to us D and we oftentimes say hedge it back because then you don't have to worry about that Euro risk, where you're long, a basket of securities grease starts making its way back to the front page of the head. Uh, front page. The year is 2025. Whatever is the situation may be, and you're losing on your German equities. While at the same time, the Euro is losing a nickel or a dime or 15 cents, and you're getting the double whammy. So that's one of the things that's a concern with respect to Europe. Now, Japan is really intriguing with a big asterisk, which is we've been waiting for what seems like forever for activist investors. Now, activism in corporate Japan in 2022 means something a little different from activism in the United States activism right now in the United States usually means ESG climate activism, ESG environmental, social governance in Japan. Activism usually means right now, Hey, get that cash off your balance sheet, already angry with you. And so we, we kind of want these activists, these loud, New York types to take an equity interest in some of these Tokyo listed firms and start getting some of that cash off the balance sheet as a dividend propelling, the NEK higher propelling, our total returns higher and also producing profit old metrics because suddenly you're running your, your firm much more efficiently. If that pile of cash that's sitting in, in Japanese government, bonds, earning zero actually gets distributed back to investors. That's the bull case on Japan, the bear consideration. That's always critical. Cause I always like to let everybody know, Hey, this is, this is one thing that's good. This is one thing that you gotta consider. Japan's not exactly an oil nation, right? If you have$150 crude oil, which may be the fear of the listener here, can any of us on the phone right now? Name any Japanese oil companies? No, it's not good.

Speaker 1: 29:58

I can't,

Speaker 5: 29:59

It's not good. And the other thing that the Japanese will have to contend with is Fukushima was what, 11 years now. And we've seen the Europeans now start to embrace nuclear. Now that the Germans really, really got caught off guard here with Nord stream, too, the pipeline that's supposed to get all the natural gas into the core of Europe. They had been moving away from nuclear for so long. And so certainly the Japanese had after that horrible incident at Fukushima, now the Japanese need to make a decision what they want to do outside of oil and gas, because the Japanese also have a another issue, which is when you get liquified natural gas from the Americans, you have to pay through the nose for it. Now it's much more expensive than what we get for what we call Henry natural gas, domestic natural gas, which is pennies on the dollar compared to what the Europeans and Japanese have to pay. So the Japanese are in a bind in an oil crisis situation, but there's also this coal optionality on that market in the event that we can again, get some of that cash off the balance sheet and start rewarding. Shareholders. Corporate has been notoriously shareholder unfriendly for generations,

Speaker 1: 31:06

Definitely a lot to unpack there, all great points. And, and we appreciate that insight. So a lot going on in the world, obviously, right? We've talked about a lot today. We've covered a lot of different bases. So how should investors in the market, it, how should they stay focused, amid all these different external forces and what do you see as the path forward for investors with all these different things kind of crossing their face in the news cycle?

Speaker 5: 31:37

Well, that is so important. And I don't know that even I fully appreciate how important that is. I have to make myself do it, which is whenever you get one of these major, major concepts going back through the years, certainly COVID was, was one of those concepts. Certainly Russia, Ukraine is another, but even like a, something that was a lesser market driver that still was a, was all over the market for an entire you year 2017 was all Trump tax cuts. Trump tax cuts. That was the driver of the market. 20 15, 20 16 was, is China going to slow down? That was all the market cared about. Right? And before that it was Greece. And, and before that it was the banking crisis. And before that, let's say, oh, 5 0 6 was the beginning of the, the housing market coming up. So there's always that one big thing. And so you have to make yourself, cuz we all know this is a psychological game, trying to figure out markets. You have to make yourself say, okay, I know what this number one thing is. It's Russian Ukraine. It's oil price, aluminum wheat. Okay, I get it. What else is going on? That is still decidedly newsworthy that I am making an error in my own mind, not paying enough attention. Let me give you a good example. This one's bearish. You guys know that we should be talking a lot more about the fact that a mortgage rate in the United States, new year's Eve was at two and three quarters and now it's four and a quarter and it's page 36 in, in the newspaper because this war is scary. Yeah. But if our business is where's the stock market going, where's the bond market going? That's our business. Then the wealth effect in the United States is going to be a function of how does middle class couple with a couple of kids in the center of the country. How does the change in their house price affect their marginal propensity to go out and get dinner at a restaurant or book a flight or take the kids to Disney? I mean, that's the question. We don't focus enough on it. When this big headline comes here, have to focus on all these things in the backbone, the big ones that you still need to entertain that mortgage rate, you still need to be thinking about the effects of cleaning up this labor market as COVID seemingly ends, which just now getting out of that, right? We need to figure out, I think critically for the inflation question, what the heck going on with auto supply? Are we going to see a amelioration on auto prices or are we gonna break the middle class? Cause sooner or later you go from wanting a new car to needing a new car or wanting a used car to needing a used car. That's a critical question. So you also need to figure out, and this is why I think it's so important. Not as much talk about it as I would suspect. What does our labor situation look like? The answer by the way, piping hot, right? As we discussed something south of 3%, unemployment being a possibility what else? And profit margins, which might be the biggest question outside of Russia. Ukraine can the S and P, which is prognostic to have operating income of about$225 this year. So you take a price earnings ratio by dividing the headline S and P wherever it's trading right now in the call, it 4,300 divided by call it$225 worth of earnings. And then you get a price earnings ratio. Is that sustainable? That's the big question for the market. The risks to that would be if the supply chain keeps being a mess and it pitches your margins. And also if the wages that you have to pay, your employees are rising too fast of a rate that ends up hurting your margins. The countervailing force to that is nobody ever went into recession when everybody's current on their credit card bill. And what I mean by that is at 3% unemployment, everybody's current on their credit card. And so you don't have that credit risk into the system. So those are the other considerations. You have to be on Russia, Ukraine like everyone else, but don't get, don't fall into that trap of only focusing on that. It's not the only market driver, if your business is stocks and bonds.

Speaker 1: 35:37

Got it. No, that's great. And I guess just to we've unpacked a lot today. So first of all, I appreciate you going through all of this. And these are, I think all questions that are heavy on the mind of listeners, investors, clients, people out there in the marketplace, wondering what's next, I guess just a it to wrap it up from your perspective in your position at wisdom tree, is there anything that you guys are actively doing to prepare for some of the stuff that you discussed? Is there anything that you're doing differently? I know Brandon mentioned in the beginning of the show, just to reiterate, you know, your focus is on quality and, and you have some other factors that you look at when you're building out your portfolio specifically, but has anything changed or is there anything different that you guys are doing moving forward through 2022 into 23?

Speaker 5: 36:27

Sure. Yeah. And, and we've been really bold up on value and, and really, really encouraging quality for downside mitigation and what you do as an asset manager, especi, when you have the overwhelming majority of your ETFs are rules based is you get out in front of trends in the way you launch products, you say, oh, I think the next five or 10 years is going to be, the market is going to want more of this type of product. And so we've launched ideas like gold plus gold Myers, right? In, in recent months, it's probably three or six months ago. We did that. Anticipating that gold is bold up that type of product launch. Also a lot of these buffer type products they've come out in recent years, we launched one of those in tandem with, uh, some of the put writing concepts that we've done in the past, because we think that there might be more of an embrace of that. Some of this blind following of the S and B 500 may lead to some disappointment in coming years. So that's one of the things we've done from a business perspective. Additionally, in the portfolios really emphasizing the dividend mandates the dividend mandates end up being much more value style than some of our more mega trend type growthy strategies. We have some of them in the models, but really getting down and dirty with some of that deeper value type concept. We, this is a, a decade for dividend screens. We think this is a decade for, for buyback screens and really topping some of that stuff up in the mandates. And some of the ones that are kind of in an ETF structure, you can have some that are quasi active, really getting down into those quality screens and buyback screens, because buybacks might be one of the best concept for navigating this reason being because typically in order to engage a shareholder buyback, you need to have some cash and companies that have cash are not typically the ones that get caught with, let's say with their pants down when the bear comes right, it's it's companies that are cash thin business models, sketchy that really get taken out in a choppy, skittish type market. Like what we've seen here, if that ends up being the type of market that we'll continue to have, we suspect we'll see some out performance out of these buyback type concepts. And so that's, that's another thing we've done at wisdom tree.

Speaker 4: 38:33

And if I could just piggyback on what Jeff said, obviously, you know, over the course of the call today, we've unpacked a lot and there's obviously a ton of noise in the market, but, um, as we all know, there's no certainties in the market, but we feel pretty confident that we will see the fed raising rates sometime. You know, I don't know exactly when this podcast is being released, but in the middle of March, Jerome Powell last week actually explicit said, expect a 25 basis point rate increased the markets, expecting five professor Jeremy Siegel, who folks might be, uh, familiar with from CNBC. One of the figureheads at wisdom tree is actually calling for a 2% fed funds rate by a years out from here. So prepare the portfolio horizon rates. Obviously that means tilting towards higher quality equity, these high quality dividend growers, and on the fixed income side, shortening up duration where you can and tilting towards higher credit quality on the fixed income side are really two themes that we're baking into our portfolios. It was contr.

Speaker 3: 39:26

That's great guys. We really appreciate it. I think that's a great way to kind finish up today. So Jeff, Brandon, Ryan, thank you guys so much to today. This was fantastic. I who's listen. Say got a ton out of this. I know it's tough times out there on the market right now, but, um, as I said, you know, always have that long term vision and any questions at all, feel free to reach out to Ryan or I, and make sure to, uh, click that subscribe button. And thanks for listening to wealth builders. Have a great day.

Speaker 4: 39:52

Thank you guys. Thanks guys. Thank you.