“In a slow growth world, growth is going to outperform value.”
Stephanie Link is chief investment strategist and portfolio manager at Hightower, a national wealth management firm that provides investment, financial and retirement planning services to individuals, foundations and family offices, as well as 401(k) consulting and cash management services to corporations.
Tech stocks take up a very large percentage of the S&P market capitalization which only grew as part of the pandemic. Despite the likelihood of reducing this concentration as the economy recovers, the dominant tech companies have huge opportunities ahead of them for continued growth. “The internet of things is going to be a trillion dollar market by the end of this decade.”
The economic fallout from a pandemic is uniquely different from previous crises like the 2008 recession where financial institutions were responsible for much of the disaster. Lessons learned from Federal Reserve are being put to use this time around. Chairman Jerome Powell has proven comfortable providing aggressive quantitative easing to support a pandemic-ravaged economy.
LISTEN AND SUBSCRIBE
SPEAKER
Stephanie Link
Chief Investment Strategist & Portfolio Manager
Hightower
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
EPISODE TRANSCRIPT
John Darsie: (00:08)
Hello, everyone, welcome back to SALT Talks. My name is John Darsie. I'm the managing director of SALT, which is a global thought leadership forum at the intersection of finance, technology and geopolitics. SALT Talks are a series of digital interviews we've been doing during the work from home period with leading investors, creators, and thinkers. What we're really trying to do is replicate the experience that we provided our global conference series, the SALT Conference, which is providing our audience a window into the minds of subject matter experts and providing a platform for what we think are big, important world changing ideas.
John Darsie: (00:41)
We're very excited to welcome Stephanie Link today to SALT Talks. Stephanie is the chief investment strategist and portfolio manager at Hightower, which is a national wealth management firm that provides investment, financial and retirement planning services to individuals, foundations, and family offices, as well as 401k consulting and cash management services to corporations.
John Darsie: (01:03)
Prior to joining Hightower, Stephanie was the senior managing director and the head of global equities research at Nuveen, where she co managed the CREF stock variable annuity portfolio with $170 billion in assets. She also managed her own US core portfolio with 3.7 billion in assets and oversaw 33 investment professionals who collectively managed about $40 billion. Prior to joining Nuveen, Stephanie spent seven years at TheStreet as the chief investment officer and co portfolio manager of Jim Cramer's charitable trust. And before that, she served for 10 years at Prudential Equity Group as managing director of institutional sales and director of research. She began her career at Dean Witter Reynolds in the institutional sales department.
John Darsie: (01:50)
Stephanie earned a bachelor's degree in finance from Boston college, and she currently serves as the chairperson for the investment advisory council at the Basking Ridge Presbyterian church in Basking Ridge, New Jersey. She's an investment professional with over 20 years of experience managing money, and her professional insights are frequently sought out for industry events and media. And you've likely seen her on CNBC where she's a contributor.
John Darsie: (02:15)
Stephanie, we're very excited to have you today. A reminder to our audience, if you have any questions for Stephanie during today's talk, you can enter them in the Q&A box at the bottom of your video screen. Hosting today's interview is Anthony Scaramucci, a founder and managing partner of SkyBridge Capital, a global alternative investment firm and the chairman of SALT. And with that, I'll turn it over to Anthony for the interview.
Anthony Scaramucci: (02:37)
Stephanie, it's great to see you again. As we were talking before we went live, thank you for big footing John Darsie on the room rater, the room looks absolutely fantastic. My son, he just graduated from Stanford, basically he's like, "Dad, why do you ask people about their backgrounds? You can find them on Wikipedia." And I say, "Well, I ask people about their backgrounds because maybe they'll tell us something that's not on Wikipedia." So, Stephanie, what's not on Wikipedia? What could you tell us about your path to money management and that odyssey that you were making as you were trying to figure out your career, what triggered you to go in this direction?
Stephanie Link: (03:17)
Yeah, and it's so great to be here, Anthony and John, thank you guys so much for the invitation. I have to say after being in the business 27 years, 16 years on the sell side, and then 16 years on the buy side, it really has been a remarkable learning experience. The sell side as you know, is under secular pressure, right? And I have been for a long time. Quite frankly, I'm surprised that a lot of sell side institutions still actually exists because a lot of people don't want to pay for research and trying to get paid for that has always been a challenge.
Stephanie Link: (03:51)
And so, I left the sell side and I wanted to run money because I enjoyed picking stocks. I enjoyed marketing or analysts, which is what I was doing on the sell side. So Jim Cramer and I had a mutual friend and he was looking for someone to fund his charitable trust and small amount of money, but a lot of subscribers that are attached to that product. And Jim, he's so visible. And so we met for 30 minutes, we had tea and he hired me on the spot, and I thought, well, this is going to be a really great learning experience. I'll be here for a couple of years and then I'll figure out something else to do.
Stephanie Link: (04:28)
And so, six and a half years later, I'm his longest standing employee. And I'll tell you, we had had some battles before, but he taught me a remarkable amount in terms of actually running a portfolio. Because it's much different, Anthony, you know this, it's much different than being a sell side person, marketing ideas, coming up with strategies and that sort of thing. It's putting your money where your mouth is. And I think that that was such a great experience.
Stephanie Link: (04:55)
And then of course, when I was working for him, I became a CNBC contributor, but it wasn't him that introduced me actually to the CNBC folks. It was, my COO got a phone call from CNBC and said, you know what? I know Stephanie and her dream job was to be Chris McKendry on ESPN. So this is not in Wikipedia. So, he said, well, let's give her a shot. Maybe she'll be okay on TV talking about stock. So, that began my career.
Stephanie Link: (05:25)
And then, TIAA which is now called Nuveen, they were a client of mine. So I had known them for many, many years, and they were looking for someone to be the face of the firm and then also to run money. So I stayed there for five years, but the company continued to see outflows and the buy side is continuing to see outflows. It doesn't matter about the performance. And so, those challenges were frustrating. I think for 27 years I had to cut costs. I had to right size businesses and I was tired of that.
Stephanie Link: (05:56)
So I stepped back and I said, where in the investment world, where is their growth? And I literally LinkedIn to Bob Oros at Hightower, the CEO, and he LinkedIn back to me and we exchanged ideas and he thought, I don't have a job for you, but let's create one. Let's try to figure out how we can build our brand because it is in growth mode. A company that's going to hire someone during this environment in the COVID world, I think speaks volumes. And I'm really looking forward to working with the advisors and helping them grow assets. I'm going to run my own portfolio as well.
Stephanie Link: (06:32)
And then, I'm in charge of the OCIO division, which is just an outsourcing mechanism for the advisors if they like to invest in the products that we manage. So I'm really excited about it, it's different. Growth has a different feel to it for sure.
Anthony Scaramucci: (06:50)
Well, it's great, but it also speaks to your courage that you're willing to venture out in this environment where unfortunately we're all stuck at home. Before I get to the next question, I just got to tell you this quick Jim Cramer story. So I'm 23, I'm at the Harvard Law School. Cramer is a God to guys like me because I wanted to always get into money management. He had worked at Goldman and he was recruiting people, and then he had just left to start his hedge fund. He had started a hedge fund with a guy named Larry Levy. And these guys were in cash during the '87 crisis. And Jim writes about this in Confessions of a Street Addict.
Anthony Scaramucci: (07:24)
So, I got his phone number from somebody, I cold called him. He picks up the phone in that barking squeal voice of his and he says, "What do you want?" I said, I really want to come meet you or to get a job on Wall Street, something like that. For about four minutes, he lit into me, do you read the Wall Street Journal? Of course, I said, no. Do you read the New York Times? Of course, I said, no. He went down a list of publications. He says, "Listen, man, you are not ready for this job. You need to read every single one of these papers and you need to start following the markets," slams down the phone on me.
Anthony Scaramucci: (07:58)
And so, I can never thank him enough for that four minute experience because I went and did all that, Stephanie. I went and read all those things. So, and it prepared me for those job interviews. So, he's a legend and we both obviously have a tremendous amount of respect for him. So let's talk about what we do for a living. Okay, the S&P is now flat on the year. After being down 30, the NASDAQ is up 20 year to date. At SkyBridge, look, I'll compare, we're in structured credit, so we're still down on the year. We're probably down 16 now, although we're getting an 8% yield on our portfolio. I think the stat is very cheap, but this stuff has snapped back. And the composition of the S&P is totally different today than it was in January in terms of where the value is. So, is this justified? What's your opinion of all of this?
Stephanie Link: (08:52)
Yeah, I think it is justified, especially on the equity side, because you've had a massive amount of liquidity. You really have. I mean, the fiscal liquidity and we're going to get more, probably a trillion or another two trillion in fiscal, monetary policy has just been remarkable. Now, if you combine the two, fiscal and monetary policies that are put in place, it's 44% of our US GDP. Just to put it in a context, you know this Anthony. Back in 2008, that percentage of fiscal and monetary policy in that crisis was only 4% of US GDP.
Stephanie Link: (09:28)
So, this is enormous, enormous liquidity. This is a very big tailwind. And while, I'm a little less certain about where the recovery trajectory is going to go, because we've had now reopens and then partial closures, we have up until this month, we have seen pretty good economic data, the snapback. And so you've got this combination and what I said, it's like a debate or a push call between the V-shape recovery in May and June, and then all of a sudden, July reopens, partial closures, what is this going to do to the recovery?
Stephanie Link: (10:06)
And we're already starting to see it. We had two weeks in a row of initial claims being very disappointing. I mean, look at the four week average of initial claims, we'll watch that and we can get into that if you like, but if it continues to go up, that's something that is worrisome to me. But nevertheless, I do think that we are seeing a recovery. And as a result, we are seeing a profit recovery. And in fact, 83% of the companies in the S&P 500 have beat earnings. 65% have beaten on revenues so far this quarter.
Stephanie Link: (10:37)
So we are seeing a little bit better in terms of economic activity and also on earnings. I expect 2021 is going to be a year where we have to normalize earnings to get comfortable about valuations. But I do think you are going to continue to see progress. As I've mentioned, initial claims, a little bothersome, restaurant openings and reservations is flattening out. TSA travel is actually rolling, but on the flip side, you have housing that is extremely strong.
Stephanie Link: (11:08)
I mean, every single company that has had housing in their revenue mix, they've actually beaten on expectations in earnings and they've had some really remarkable things to say. We can get into some of those details if you like too. We also have really a nice recovery in auto. I mean, look at AutoNation. I mean, the CEO of AutoNation said it was the best quarter in their history. So, you listen to these comments-
Anthony Scaramucci: (11:36)
Home sales, home sales.
Stephanie Link: (11:37)
Home sales are off the charts. So I feel like there's the push pole, there's a mix going on in the economy, but that's one of the ... And the reason that we're going to get more fiscal policy is because it is uneven, right? Nothing is perfect, but the market is sniffing out the recovery, next year and the normalization of profits.
Anthony Scaramucci: (11:57)
So, let's talk about the tech sector for a second though, because it's raging and again, there's four or five stocks that are making up a very large percentage now of the market capitalization of the S&P. So it's like the S&P five and then the S&P 495, what are your thoughts on that, Stephanie?
Stephanie Link: (12:16)
Yeah, no, I mean, it's not something I want to see and you bring up a great stat. So if you look at FAANG plus Microsoft, it's 20% of the S&P 500 and they accounted for 80% of the returns in July. So to your point exactly, it is super concentrated. And you mentioned early on again, DX is up 20% on a year, which is also amazing. I would love to see a more broad picture, I really would. And I think you are starting to see pockets as I mentioned, we did get, it's housing, it's auto sales, it's retail sales, it's e-commerce.
Stephanie Link: (12:52)
I mean, I feel like we are starting to broaden just a little bit, but it is still very, very focused for now. But then again, these companies have total addressable markets that are enormous. The internet of things is going to be a trillion dollar market by the end of this decade, wearables is going to be a $55 billion market in the next two years. Cloud is going to be, their total addressable market in the next three years is $600 billion, and SAS cloud, which is a component of cloud is going to be a trillion dollar total addressable market by the end of the decade.
Stephanie Link: (13:26)
So I feel like, and these numbers are probably underestimated given now that we're working from home and all the things that we're doing. And so, I feel like in a way it is justified that they should be doing so well. That said, I mean, on the margin, I've been taking profits because I think you have to. That's one thing Jim Cramer always said, never apologize for taking a profit. And so, I'm very mindful of the expectations and the setups for tech.
Stephanie Link: (13:55)
And we'll see tonight, we get a whole bunch of really, really high profile companies that report tonight. Maybe we'll see a pullback, maybe they'll stall out. But, in a slow growth world, growth is going to outperform value, even though I have a value bias myself as you know, which makes me sad to say, but that's the reality. So you have to have a barbell.
Anthony Scaramucci: (14:17)
Yes. And I've always seen you talking about the fundamentals and that whole Graham and Dodd analysis. So that brings up a very good question, is value over? Is the debate over value over? Has growth won the debate? And is there really not going to be a time where you see value eclipse growth going forward, given the magnitude of the transformation of the future economy?
Stephanie Link: (14:41)
I mean, I think growth has a very hard time if you don't have-
Anthony Scaramucci: (14:43)
I can see sadness in your eyes, Stephanie, as I'm asking you this question.
Stephanie Link: (14:45)
I know. I know, I know. And by the way, I do own some of these tech names, you have to, because my bench is the S&P 500 and they represent a whole of 26% of the market cap. So anyway, I think it's hard in a slow growth environment for value to outperform. And I really think you need better GDP, better growth, and a little bit of inflation. And while inflation break evens are actually on the rise, which is interesting to me and the dollar has pulled back, and that should lead to a value risk on trade, if you will. It's hard when you have such again, total addressable market opportunities for these companies.
Stephanie Link: (15:31)
And so, I think it's a combination, Anthony, I think you can own a little bit of both, but it's not been the right call to be in the value sectors. It really hasn't, even though that they've recovered nicely from the March lows.
Anthony Scaramucci: (15:47)
No, I understand. Listen, I've been vexed with this for the last 10 years since, actually 12 years as the last crisis. What about the traditional 60, 40 portfolio model still viable in your mind?
Stephanie Link: (15:57)
I mean, I think so, and every person is different, right? And depending on your age and your risk tolerance and that sort of thing, I just don't ... I mean, it's so hard to find value in the fixed income market. That's the whole problem, right? And so, that's why I think the equity markets, another reason why the equity markets have done so well is because there is no alternative. And if you can find companies that have a dividend yield of two or 3%, that's way better than what you're getting from a 10 year. So I lean a little bit more on the equity side, diversification, of course, global exposure, a little bit of EM, and then also you have some fixed income, but then you have some alternatives too in your world.
Anthony Scaramucci: (16:45)
Our world is getting beat up, Steph.
Stephanie Link: (16:48)
I know, I know, yeah.
Anthony Scaramucci: (16:49)
Which is a sign, usually that we're on the road of recovery. We got hurt hard in 2008, and then we had our best performance over the next four years. So let's see what happens. John Darsie, go ahead.
John Darsie: (17:00)
Yeah. You talked a little bit about the push pull between value and tech, and there's another push pull going on between passive management and active management. Obviously in the last six to seven years, following the crisis, passive management has massively outperformed, things like hedge funds have been a little bit out of favor. Do you think, given the environment we're in and given the rich valuations on equities right now that a more active management type of approach might go through a period of outperformance for the next three to five years?
Stephanie Link: (17:30)
I mean, I hope so, because that's what I do for a living. That's what you guys do for a living, right? But it hasn't been the case. And in fact, this is one of the reasons why I've mentioned that the buy side is under such secular pressure because there's so much competition, the performance has been okay, in some instances, very good and other instances, not so good. You hope that your clients are longer term and they can ride through the storms if you will.
Stephanie Link: (17:55)
But I really believe this trend, I'm not sure what it's going to take quite frankly, because if performance doesn't really matter, I mean, we were at TIAA, we had great numbers and we still saw outflows every single day. So, I just think that maybe we set up for a reversion, I hope so, but I don't know if there's really concrete evidence that we're even starting that at this point.
John Darsie: (18:20)
Right. And you touched briefly on earnings in your opening, but I want to talk a little bit more about earning season. I follow you on Twitter and I love keeping up with your analysis on different earnings reports that come out. What have we learned so far from earning season and our investors just giving 2020 earnings a pass and focusing on the future? What can we glean so far from what we've seen during this earning season?
Stephanie Link: (18:44)
Yeah, it is interesting that the analysts were so wrong, right? I mean that 83% beat rate is crazy to me, right? I mean, that's very high relative to historical levels. So, people, we came into the earnings period and we were flying blind, we really were. We had no idea. And I've been surprised by two things, one, companies are already starting to talk about currency and the dollar weakness and how it's going to be less of a headwind, took me by surprise a bit.
Stephanie Link: (19:14)
And in fact, Pfizer said just the other day that they're going to see a $300 million benefit, so less bad in terms of getting pressure from the currency side of things, so that's interesting. And then that bodes well for certain industries, multinationals, right? So you would think that maybe if you're going to see any rotation, maybe it is really more global multinationals, if you will. I've been very surprised at how strong, I'll mention it again, housing is. And we know existing home sales are up 20%.
Stephanie Link: (19:43)
But any company, it's Stanley Black & Decker, it's Pulte Homes, it's Lennar, it's Toll Brothers, it's D. R. Horton, they're all saying that housing is absolutely on fire. And by the way, these stocks are still super cheap. So you're going to see again, more of a rotation, I think, into housing. And we'll see about auto. So auto the global data that I get, it suggests that the light vehicle sales around the globe are at 73 million SAR. And that's up from 43 million SAR in April.
Stephanie Link: (20:20)
And so, China is back to last year's levels in auto. North Korea saw last month up 41% jump. So you are seeing this, and I think this is a very controversial topic. I don't think people believe that we are seeing an improvement in auto. And I think that's why you're seeing some of these semiconductor companies do well, right? With the end market exposure to auto, because you're starting to see production back online.
Stephanie Link: (20:43)
So overall, I mean, I think it's still early. I think the companies have really managed well. I think they continue to under promise and try to over deliver. That's what CEOs really truly get paid to do. And so, I'm interested to see the back half, and especially tonight with the FAANG reporting.
John Darsie: (21:03)
Anthony, I'll let you ask the next question. I know you don't like when I dominate the conversation.
Anthony Scaramucci: (21:07)
No, no, no, I do. He's actually very good at it. He said, we know you're a rising star, John, we know. We know, that I'll be soon, you'll be long gone. I'll be on the Pepper Talks when this is over, Stephanie, okay? If this keeps up, okay? Forget about SALT. But, I want you to talk a little bit about the private markets and sorting through the rubble inside the private. How do you look at the private markets after the pandemic? What's your thought there?
Stephanie Link: (21:34)
Well, I mean the private, so what I do is I actually talk about, or I look through from an equity point of view, I look at the Blackstones of the world and I look at the Apollos of the world and I've invested in some of those companies as well, but you're the expert on this field, you'll know better than I. I think there is a place in every portfolio for diversification. And I will tell you just back on the ALTS comment that I've made before, that's the number one item that everyone that I'm meeting, the advisors, that's the number one thing they want help with because they don't know as well. It's not as liquid. It's something that they really do want to have because some of their clients want that exposure, but they know nothing about it. So, it's interesting to me.
Anthony Scaramucci: (22:28)
Yeah, I just think there's going to be room there because of the regulation, things like space. There's still a tremendous amount of midsize to very large companies like SpaceX that we can take advantage of in the private market side, which if you look at the relative valuations, it's attractive. But, I want to ask you about your views about the country, the crisis, the past crises you and I have seen in our careers. Is this different? Does it feel different?
Anthony Scaramucci: (23:04)
You and I could tick off 10 or 12 crises that we've lived through since we got started in our careers. And so we know that we're going to always face them, and I always joke with my team, the thousand year flood happens every four or five years on Wall Street, so it's like one of these things we can't avoid, but is this different? And I hate saying it that way, because I know everyone says, well, well this time is different, it's not different, but it does feel different to me. And I'm just wondering if it feels different to you and if it does, why does it feel different?
Stephanie Link: (23:33)
Yeah, no, I think it's definitely different, I think. If you just go back to the last crisis in eight and '09, and that was a financial meltdown. That was a huge issue with the financial services companies being the ones that really created it and nearly took our country down. I mean, we lost banks. We lost companies, huge companies last crisis. Not that we're not going to lose companies this go round, but this was an intentional shutdown by the government because it's a health crisis.
Stephanie Link: (24:06)
And we maybe weren't as well informed about COVID-19, who knows? I don't know, but we weren't prepared for it like we should have been, we had to take aggressive action. We had to close. We're seeing now what's happening in these partial closers again, as you're seen some of these reopenings. We're all wearing masks now, we weren't wearing masks in March. I mean, there's so much going on, but when you close a country down, we're losing $25 billion a day in the country. I mean, that's just huge.
Stephanie Link: (24:40)
So now that you have partial openings, I do not think partial openings and partial closings, I don't think we're going to close the country down entirely again. I really don't. And I do take a lot of solace in the fact that these companies that are working on a vaccine are really making tremendous progress. I mean, listen to J&J, they just increased their trials, their human trials by two months, they've just, they accelerated it. And so, that's a really good thing.
Stephanie Link: (25:07)
Look at Moderna, look at Gilead, I mean, they're all these companies that are working so hard at trying to get us a vaccine that I'm encouraged that hopefully it's by the end of the fourth quarter, and maybe we can get it mass distribution in 2021. So, I don't know how long this is going to last. I do think though, that we are starting to see a recovery because we are opening, but it's a lot different than what it was in 2008.
Anthony Scaramucci: (25:34)
Yeah. It's just the combination of the financial issues, plus the health scare is something I think is unique, and we had the oil shock going on in April as well. So it just, it was a trifecta that I don't think we've seen all of those colliding together at the same time. We've got a question out here. Let me ask this question then I'll let John ask something, coming in on the fixed income side, what do you think of substituting for Feds or bonds? What's your thought there?
Stephanie Link: (26:01)
I think that that's a great idea because obviously you get more yields for certain. I think you have to be very selective though. It's like picking a stock, you have to have confidence in the fundamentals of the company and the balance sheet and that sort of thing, but absolutely that is a great combination. You can certainly mix in that, along with ... Because you're not getting yield and [inaudible 00:26:21], you're not really getting that much.
John Darsie: (26:26)
So Stephanie, you talked about the Fed earlier and about how much the liquidity they've dumped into the market has impacted asset prices, particularly in the equity market. The Fed is now starting to trim its balance sheet. Is this a completely Fed driven market whereby some of the volatility we're seeing today in markets is driven by concerns that maybe the fiscal stimulus isn't going to be as large or as quick as people would like? I know some of the unemployment benefits are expiring and then you have the Fed trimming its balance sheet a little bit. Is the market completely driven by news flow on policy or are fundamentals playing any role in volatility that we're seeing?
Stephanie Link: (27:05)
Well, I mean, the Fed is really, I mean, they really came out with the bazooka, right? I mean, I thought unlimited QE was one thing and then all of a sudden they're buying junk bonds on the other side. So it's like, wow, I've never seen such extreme action. And, it's very substantial.
Anthony Scaramucci: (27:22)
Could you get them to buy some structure credit for me, Steph. I mean, if you ever get in touch with any of these guys, just, you could mention that for me.
Stephanie Link: (27:27)
Absolutely.
Anthony Scaramucci: (27:28)
Go ahead. I'm sorry, I didn't mean to interrupt. I thought maybe I'd just ... I ask everybody I come in contact with.
Stephanie Link: (27:32)
So funny. I will, I will, absolutely.
Anthony Scaramucci: (27:34)
All right, thank you. Thank you, I appreciate that.
Stephanie Link: (27:38)
I would just simply say though with regards to the liquidity, I mean, did you hear ... I mean, I thought Powell sounded even more dovish this week than he did even a month ago, right? And a couple of weeks ago you had a number of Fed governors, also sounding much more dovish like there's more we can do. We're still keeping an eye on everything. I was just surprised that they were still so dovish. And so, I think, I mean, the Fed funds future market actually doesn't have the Fed raising rates until the end of 2022.
Anthony Scaramucci: (28:09)
Yeah. Well, the president has called in privately the most improved player on his team. When I heard that from one of the guys that I still talk to inside the administration, I was laughing at that. I thought that was typical of the president. I mean, if you notice he doesn't tweet about him anymore.
Stephanie Link: (28:26)
No, he doesn't.
Anthony Scaramucci: (28:27)
So, chairman Powell has done a great job. Obviously he's a very cautious guy, but he recognizes what we all recognized last time and if you read the book Firefighting, which was written by Geithner and Bernanke and Paulson, they said do more, be more aggressive. And I think this Fed has decided to do that. I think he's been very helpful to the overall economy.
Stephanie Link: (28:48)
Absolutely, I mean.
John Darsie: (28:49)
At least the expectations, that's half the battle is if investors feel like if anything goes wrong, the Fed will be there with an even bigger bazooka than they had last time, then it encourages risk-taking, which we're seeing in markets today.
Stephanie Link: (29:02)
Absolutely. No, absolutely.
Anthony Scaramucci: (29:03)
You worried about inflation, Stephanie?
Stephanie Link: (29:08)
That's why I mentioned the inflation break evens. Have you seen that chart? If you haven't, you should look at it on Bloomberg because it is an interesting chart. It really has rebounded and it gives me pause for sure. I don't think you're going to see inflation in the near term, maybe in the next three to six months, but I do think you're going to see something. What do you think gold is ... I think gold is telling us that for sure.
Stephanie Link: (29:29)
I am watching the dollar too, because that is also going to be instrumental in the pile on if we do get some inflation, but I think it's probably more like a 12 to 18 months time horizon that we see it. But I have to say, my entire team that I work with right now, they're fairly young. They've never seen inflation in their whole lives. So, there are PMs out there. There are people running money that have never seen inflation, which when it comes, it's going to come pretty fast, I think.
Anthony Scaramucci: (30:01)
Yeah. Well, listen, I'm worried about it as you have to be worried about it and obviously gold prices. But I remember going back to 2010 and '11, where gold was on a little bit of a run, but the Fed was telling you there wasn't going to be inflation. And then what you realized that they were replacing a lot of lost economic output, that's why you didn't get the inflation. However, you got the asset inflation.
Anthony Scaramucci: (30:24)
I think that's where the anxiety comes into the system from a political perspective, because, if you're lowering rates, rates work great on assets. If you own assets, the asset prices go up, but your wages do not necessarily go up. And even though everything has changed, I can still remember 35 years ago in an economics class, a very brilliant economics professor said to me, you're not going to get lots of inflation in the United States without wage growth, but you study wages, and you study wage growth, you don't really have a lot of mobility and wages right now, given the magnitude of people that are looking for work or are currently unemployed due to the work stoppages.
Anthony Scaramucci: (31:04)
So, I just think it's going to be hard to get the inflation, even though the expectation is there. We'll have to see, but I think it's going to look a lot like 2009 and '10. It's going to surprise me. Go ahead, John.
Stephanie Link: (31:17)
That'll be good for stocks.
Anthony Scaramucci: (31:18)
Yeah, no question. No question.
John Darsie: (31:20)
So the pandemic in a lot of ways was like a meteor strike that came completely out of left field. A lot of people were unprepared for it, and we've talked to some hedge fund managers and others who are changing the way they think about risk management as a result of the pandemic. We haven't had a pandemic like this in 100 years, so a lot of people were very unprepared for all the different implications of it. How, if at all, has the pandemic changed the way you think about portfolio construction for clients and about risk management in general?
Stephanie Link: (31:49)
So I would say that I always want to be diversified for sure. And I actually lean towards high quality companies and blue chip companies. My mantra is if I can get the number one or number two company in an industry with a great balance sheet, strong management team, market share growth, they're investing appropriately and properly to continue to see growth in the future, what I call compounders, if you will, those are the kinds of companies that I think will weather the storm better.
Stephanie Link: (32:22)
And they're also the companies that they're not going to not go down in a market. They're going to go down, but they're going to be the first ones to actually recover. So what I called them back in March, these kinds of companies, I called them accidentally high yielders, so that they went down, their yields went up, they had the liquidity, and that was why I actually added in March and April. And it was hard, trust me. I mean, you guys know it, it really, really was hard to buy anything back then.
Stephanie Link: (32:52)
I mean, we had so many very prominent figures in the industry really be very negative and very cautious. And quite frankly, it was alarming. I actually told everyone, just turn the TV off. You can't listen to these kinds of people and you just got to focus on fundamentals. And so for me, that's what drives me. And I don't know if it's necessarily the pandemic has changed that, it's just intensified that, it's just reminded me that I think my process makes sense. And while I might lag on these rip rallies, because it's always that secondary, third groupings that do well and outperform, and the way down you don't get hurt nearly as much. And again, if you're diversified and you do have, is it 60 40, is it 70 30, is it 80 20, you have a balance. I think that will serve you well over the long term.
John Darsie: (33:39)
I'm going to finish with a question about Hightower, which you started there, I think three and a half weeks ago. And it's a very fast growing firm, the independent RIA model is on fire in the marketplace because of how it eliminates conflict of interest between the advisor and their clients. Talk a little bit about your experience so far and why you were so attracted to that independent RIA model and what it's been like dealing with clients in a different way than you were when you were on the buy side?
Stephanie Link: (34:07)
Sure.
Anthony Scaramucci: (34:08)
And full disclosure, Stephanie, John worked at Hightower.
John Darsie: (34:11)
And I'm still invested-
Anthony Scaramucci: (34:13)
And worked very close to a lot of the Hightower [crosstalk 00:34:17].
John Darsie: (34:16)
Invested in the success of the business, so I'm a cheerleader from afar.
Stephanie Link: (34:21)
I will prove you proud. I will make you proud.
John Darsie: (34:22)
All right. Yeah, I'm excited that you joined it. It was a exciting press release to read, so I'm pumped about that.
Anthony Scaramucci: (34:29)
They were about to change the name of the company to Lowtower and then John left. And they said it was okay to stay at Hightower. But go ahead, Stephanie, I'm sorry, I have to rip him a little bit, because look at him, how can I not rip him? But go ahead, Steph, I'm sorry.
Stephanie Link: (34:44)
George Washington in the background.
Anthony Scaramucci: (34:46)
Yeah. Well, he's related to George Washington. I mean, how am I not going rip him? I'm an Italian kid from Long Island with my [inaudible 00:34:53] cup, see.
Stephanie Link: (34:54)
That's awesome.
Anthony Scaramucci: (34:55)
Today is going to be an amazing day. See that, they keep losing, but it's fine.
Stephanie Link: (35:00)
The power of positive thinking, right?
Anthony Scaramucci: (35:02)
So tell us about Hightower.
Stephanie Link: (35:04)
Yeah, I know and it's been a really great experience so far. So, as I mentioned earlier, I wanted to try to find a place that was growing in the business. I had gotten tired of cost cutting and restructuring and reorganizing and laying off. And it just wasn't fun and that was on the sales side and the buy side. And it was a surprise to me. But when I really did a lot of homework on the industry, I think the demographics are very favorable, number one. And number two, the piece that I'm going to be involved in is investing in products, in equities, in multi-asset, in fixed income, in ALTS.
Stephanie Link: (35:38)
I have a great team that's there and we're going to hopefully be able also to get the advisors to outsource to our products. And then, I'm also running my own product. So I'm still running money because I think, well, that's my passion quite frankly. And I obviously, I think to be on TV and to be in the media and to talk about stocks and to talk about the market, I think you have to have skin in the game and to have credibility. And so, that's why we decided I will still have a product, I'll have this other OCIO group too. I'll be working with the advisors, whether they put money with us or not, I'll be happy to talk to their clients as well and to give them advice, if I can.
Stephanie Link: (36:17)
Obviously I'm more equity focused versus fixed income and ALTS, but that's the piece that was also very interesting to me that I could learn. At this point in my career, there's a chance that I could still learn because I learn in the stock market, it's very humbling. Things change every day. But I wanted to know this is the way I think this is where the industry is going and in total. And so, I wanted to be part of that.
Stephanie Link: (36:39)
And then as I've met people, advisors as well as corporate and everyone is so, well, they're kind, and they were very welcoming, but they're also so focused on growth. Every single person, how are we growing? What can we do? Where can we expand? Where is it not working and we can reallocate the resources. I mean, they're being very creative.
Stephanie Link: (37:00)
As I mentioned, Bob Oros, the CEO created this position and we talked about what would be the perfect job for me. And it's a lot, it's like a fire hose, but it's very exciting. And so, I'm thrilled to be part of it. As I mentioned before, to hire in this environment speaks volumes. And I think I made the right choice, so I'm excited.
Anthony Scaramucci: (37:23)
Well, we love the company. And we agree, we love the company. We have a tremendous amount of RIAs over there in your distribution network, and we do a lot of business with them and they do a great job servicing their clients. And I always maintain that you're just not going to sit in ETFs all your ... If you are a high net worth individual, or you're an endowment, you're going to want to speak to people because flying the plane robotically has worked, but it may not always work. And I think it's very important to have those touch points, so they've got to be thrilled to have you, Stephanie.
Anthony Scaramucci: (37:59)
John is very thrilled because I think he owns a small little piece he's indicating. So, he's recognizing that you're already adding value to his life. We are very grateful to have you on. I hope we can get you back as we get closer to the election, because I think the economy is going to look a little different as we get out into the fourth quarter. We'd love to have you back to hear your insights there as well. John, do you have anything else you want to add?
John Darsie: (38:25)
That's it. We appreciate you taking the time, Stephanie. I know you're busy in your new role, but we appreciate you taking time out to join us, and we'll look forward to watching you on CNBC in the coming weeks and months.
Stephanie Link: (38:39)
Thank you so much for the invitation. It was a lot of fun.
Anthony Scaramucci: (38:39)
And congratulations, Stephanie, wishing you the best. Thank you.
Stephanie Link: (38:41)
Thank you. Stay safe.