Lead-Lag Live
Welcome to the Lead-Lag Live podcast, where we bring you live unscripted conversations with thought leaders in the world of finance, economics, and investing. Hosted by Melanie Schaffer each episode dives deep into the minds of industry experts to discuss current market trends, investment strategies, and the global economic landscape.
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Lead-Lag Live
Data vs Reality: Jay Hatfield on Jobs Revisions, Fed Cuts, and Where Value Hides
During this webinar, Jay Hatfield, CEO of Infrastructure Capital, cuts through the noise around jobs revisions, Fed policy, and where investors should be positioning now.
From outdated government data to the bond rally and the fate of small caps and REITs, Hatfield explains why the real risks are different from the headlines — and how investors can navigate a slowing economy without overreacting.
In this webinar:
– Why BLS jobs data is unreliable in a real-time economy
– How bond markets are signaling deeper Fed cuts ahead
– The case for small caps and REITs into year-end
– Where to find yield with less downside risk
– Why tariffs are a distraction compared to Fed policy tightening
Lead-Lag Live brings you inside conversations with the financial thinkers who shape markets. Subscribe for interviews that go deeper than the noise.
#LeadLagLive#JobsReport #FedCuts #SmallCaps #REITs #BondMarket
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Spotify: https://open.spotify.com/show/75YJ921WGQqUtwxRT71UQB?si=4R6kaAYOTtO2V
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Do you think that small caps now should start to kind of get back into leadership mode?
Speaker 2:We do. The rates are clearly a tailwind because they're more in more. It's not that small caps borrow too much, and particularly S-Cap. Our small cap fund is focused on high quality companies with low leverage. So even if the overall index had a little bit more leverage than the S&P, ours does not. But what really drives it is there's less tech. There's about 10% tech in the value part. We focused on value for small caps because they're risky enough anyway. And then you do get a lot of financials, reits, utilities and old economy stocks that tend to be interest rate sensitive.
Speaker 1:My name is Michael Guy, a publisher of the Lead Laguerre Pour joined me as Mr Jay Hatfield of Infrastructure Capital. Let's get right to it. There was a little bit of a news cycle last week and a little bit of a market reaction to the jobs revisions, and I guess I want to start with a simple question, which is what data is real and what's not when it comes to what the government puts out.
Speaker 2:Well, Michael, you know we have a complete. We were strongly in favor of the firing, but for completely different reasons, specifically the. The BLS lives in the 20th century and you know we are 25 years into the 21st century and I'm not sure you've heard of this, but there was something invented in the first part of this century, which is the Internet, and there's a lot of real time national data available, none of which the BLS utilizes. So we're hopeful that a new BLS director will modernize the BLS or will modernize the BLS, and the reason that we in a way, we agree with the president that the data is very inaccurate coming out of the BLS, particularly on the jobs fund. But it really was inaccurate because it was too optimistic this whole year and we have videos that we've made in the past saying this is that we've had a view that the labor market was weakening for four or five months, but we were always a little bit reluctant to pound the table because we knew the BLS data was unreliable. And it's proven to be the case that the labor market and here's another unreliability it's either flat or it's down 800,000 jobs, that's the household survey but so what the BLS needs to do is to use national data like ADP. There's hundreds of national databases they can draw from and develop an algorithm for estimating this without using the archaic survey methodology that nobody really follows.
Speaker 2:And just one other quick point on that, even more important than the labor data the BLS's methodology to do the shelter component as CPI is ridiculously flawed. They purposely delay it for six months. So that alone should really be criteria for firing the BLS director. Because there's no, in a internet economy, real-time information AI. Why would you delay any information six months for no reason? So it's delayed six months. And then you use renewing rents and these same arcane surveys of small panels of homeowners and apartments, when you can simply use apartment list and Zillow like we do. They should really just use our CPI-R, real-time CPI. They could certainly make it more complicated than that, but so the BLS is a cesspool of archaic methodology that needs to be updated. But we don't agree with the president. The economy is weakening, not because of tariffs, but because of ultra-tight monetary policy.
Speaker 1:I don't know how many people realize that point, that the methodology is a survey. I kind of feel like we need to educate people a little bit on that.
Speaker 2:Right, and then they revise it, I guess because some people don't respond to the survey Right, and this is just like. This was great technology and great methodology in 1960, when I was born, or maybe 1980, but not in 2010, 20, and now 25.
Speaker 1:The reaction by the bond market was particularly interesting, I think yields before the announcement were rising and then had a very aggressive about face and obviously the stock market sold off. I wasn't were you surprised by the reaction of both bonds and stocks? I mean, I would think that, because that's just one data point, that if the economy really is weakening, the market would have already anticipated some of that, not suddenly had a whole new vision of what's happening based on one data point.
Speaker 2:Well, the reason that it was such a dramatic move, particularly in the bond market, was Chair Powell was just on two days before that move, particularly in the bond market was Chair Powell was just on two days before that. Doesn't he have the ability to call up the BLS and ask them what's going on? We had been calling for weakening labor market, but then we were thinking, well, I guess the Fed chair must have a sense at least he has his own economists who can estimate this of what this report is going to be. And yet, and so we were thinking, well, maybe not this month but the next month, because the data is already weakening on a real time basis, because continuing claims are almost 2 million. That's been deteriorating for quite a while. So that kind of realization, sudden realization, was not surprising to us. And, as you know, we've said ad nauseum on on your broadcast that we're bullish on bonds and think they're going to trade below 4 percent by the end of the year. And it's really. The catalyst was more Fed rate cuts, and everybody knows they're you know, particularly the Keynesian Democrats that are fearful of tariffs weren't going to cut unless the labor market weakened. Now it's clearly weakened Again, the employment the sorry household survey has negative 800,000 jobs.
Speaker 2:Not sure that's reliable either, but that's disconcerting and should be paid attention to. And also it's important to note too that the old economy is in recession. So normally the Fed raises rates. Long rates go up which they have and then construction and housing decline, there's layoffs and then we have recession. Housing is more resilient because we built fewer homes after the great financial crisis. We also have investors we didn't have before the great financial crisis, so that's stabilized it. And then, of course, we have this tech boom going on. That's very, very powerful and more capital intensive. So those two factors neutralize themselves last quarter. So we're not in a free fall, but we're definitely headed towards recession, particularly in the old economy.
Speaker 1:So is now the time to extend out duration for those that.
Speaker 2:We think so We've been recommending. It's also notwithstanding today's rally. We called for a summer power rally, which was sort of ridiculously correct. Um, it's good that we said summer, because that includes june. We were really thinking july, to be fair.
Speaker 2:So we're not all knowing, but it's easy to play earning season on the long side. Earning season is winding down, so it's a little bit more problematic. Not that we're negative on the market. We have 6,600 target and believe that's too conservative because AI is going to become arguably overvalued, or fully valued at least. So that would imply more than our target. So maybe 7,000 is more reasonable.
Speaker 2:But the point being that if we already saw the volatility on Friday, so it's just harder to make money. Even if the market's up 100 and then the next, or down 100 and up 85 the next day, that's still more risky and problematic than just being long in July where we just ground higher by 15 to 25 points a day. So in that environment, in terms of new money at least, we don't think you need to sell. We think there's strong support at 6,000 or maybe higher, particularly with the Fed rate coming.
Speaker 2:But we've recommended PFFA, our preferred stock fund, and BNDES, our high-yield bond fund, because you get paid 8% or 9% and 8% respectively to wait Rates are coming down. That's a tail end. If the market is down a little, but not a lot, then spread should maintain and even if you know we're wrong about everything, you still get paid eight or 9% regardless and you can reinvest your dividends. So we think it's okay to be a little bit more cautious in the fall, as no, is normally the case, but we're not banning the table. Like I said, we're more closer to neutral, but it's just more problematic, higher volatility and a little bit more painful, just to be massively long I actually haven't uh taken a look at the fed futures expectation changes, but I assume a Fed cut is back on the table now.
Speaker 2:Absolutely. And the key thing to keep in mind because a lot of disinformation that gets put about or probably misinformation I don't think there's any intent behind it the 10-year is statistically about 70% correlated to the terminal Fed fund rates, Fed fund rate. So in other words, what the market thinks that where the Fed funds rate is going to stabilize and it typically trades at 100 over. So after the employment report, terminal Fed funds rate dropped 20 base points and our model, if you want to call it that, worked perfectly because the 10-year dropped 20 base points and our model, if you want to call it that, worked perfectly because the 10-year dropped 20 base points and I'd been contradicting another competitor's view that you needed to be short the long end and long the Fed funds futures, because we just think they'll trade together, not the near-term one but the longer-term one. So that's the key way to predict rates is.
Speaker 2:Take the terminal Fed funds rate we think it's really close to two and three quarters. That's the normal spread over inflation of two and, by the way, inflation is below two, as we indicated, if you market to market using any methodology, but ours works quite well. So if you have 2% inflation, 75 over is a normal spread, that's 275 gets 375. So we are bullish on bonds, not surprised by the activity and we had feared a weak employment report would destabilize the market. Now I think people are focused on lower rates and the fact probably aren't going to have a recession, we just have a slowing economy, Federal cut and finally there also is going to be a new Fed governor, so it'll be four Democrats you know, anti-Trump tariff Democrats and three Republicans. It's going to be harder for the Fed chair to stand pat with, you know, if he gets three dissents on the Fed. I don't think that's ever happened. Two hasn't happened since 93. So he's going to have to make at least two cuts. We think three is the most likely case.
Speaker 1:Two is priced, at least two and a half is priced into fed funds futures I would think that probably means small cap should also start to run, and they're still. You know, I've noted myself on x that the momentum was there and then suddenly very aggressively did an about face. Do you think that small caps now should start to kind of get back into leadership mode?
Speaker 2:we do the um rates are clearly a tailwind because they're more in more. It's not that small caps borrow too much, and particularly SCAP, our small cap fund, is focused on high-quality companies with low leverage. So even if the overall index had a little bit more leverage than the S&P, ours does not. But what really drives it is there's less tech. There's about 10% tech in the value part. We focused on value for small caps because they're risky enough anyway. And then you do get a lot of financials, reits, utilities and old economy stocks that tend to be interest rate sensitive. So we do think that small caps will do well.
Speaker 2:But just the only caveat you know we mentioned BNDES and PFFA. Those have betas or in other words sensitivity to the market of. You know, in the case of BNDES, about 0.3, 0.5 for PFFA, but small caps, arguably, are over one. So people are dumping stocks willy-nilly. They're going to sell small caps as well. So you have to be more in the neutral to positive camp and rates coming down neutral to positive on the stock market and rates coming down to be super bulled up on small caps during the fall, it's going to be, we think, an easy trade in the fourth quarter during the fall, it's going to be, we think, an easy trade in the fourth quarter. But you know we'll have to see how rational the market is. Rationally the market should just power up to 6,600 and beyond. But the seasonal factor for some reason never gets arbed out of the market.
Speaker 1:Yeah, it doesn't get arbed out of the market because it doesn't get arbed out until it starts to actually hit and then people start to react. Right, Everyone's just doing recency bias and buy. The dip continues to work. So it sounds to me like you just think that this was just a blip. What we saw Friday. It wasn't the start of anything, maybe more.
Speaker 2:Well, we had warned people I'm going to at least publicly on TV, that just be aware that you know we, the summer rally is becoming a fall stall it's actually not a bad way of saying it. So, um, you can make money. We don't think you need to sell everything or sell even significantly 60. We think there's hard, hard support at 6,000. You do have this fed cut coming in September almost certainly. So just more neutral. So okay to put some money to work if you're bullish long-term.
Speaker 2:But it's possible we'll get another 100 down or sort of drift down into the low 6,000s. 6,300 is pretty fully valued for midway through the year, not at the end of the year. That's when our target is. So just a recognition that if you read any of our stuff which you would have made a lot of money if you did and played this power summer rally, the card count's not as good as it was before doesn't mean you can't play blackjack, but you know there's not uh, it's not all aces in the deck right now, so earlier you had mentioned it's uh bls is in the 20th century and that it's not all aces in the deck right now.
Speaker 1:So earlier you'd mentioned it's uh bls is in the 20th century and that it's not modernized. Um, it doesn't sound to me like you think it was political the way that trump makes it out to be uh, but correct me if I'm wrong on that no, it's more just flat out incompetence, not of the individuals, but just their process.
Speaker 2:I mean, I don't think it's changed in 45 years, so it's not anybody's fault, it's just you do need a new commissioner to come in and say, ok, let's use modern techniques. I have a friend we were sort of joking around yesterday he's a little bit more tech savvy than me and he asked Chad GPT. Well, how could you calculate the employment situation in the US on a real-time basis? And it spit out like 20 data sources that could be used to provide a reliable estimate. So, and that's just one cut from ChatGPT. So this notion of calling people people don't even respond anymore or email and what, however they contact them, is ridiculous because first of all, you get the unreliability of the response and secondly, it's so narrow, like, like I said, for you know I'm more concerned about CPI, the employment you can sort of already could tell because of claims, but it's kind of anybody new. And you also get the household survey as a check. But on this ridiculous CPI shelter calculation, they have a very, very narrow panel. They only update every six months and Zillow an apartment list. That's almost every apartment and home in the entire US. Why wouldn't you use that? So what they're doing makes no sense.
Speaker 2:Not blaming the people who work at the BLS. The BLS commissioner was just doing normal bureaucratic, you know status quo stuff. So it's not like she deserved to be fired per se it just. But the truth is they're massively incompetent and 50 years behind on the technology they should be using. Is there to believe it, by the way, that the but I mentioned this, but it's worth emphasizing the employment market is really weak. It's not in our models and we are, by the way, a member of the greed is good party. So we're not political, we're just trying to make money and the truth of the matter is that the Fed is way, way too tight. They're shrinking the money supply 10% a year. That hasn't happened since the Great Depression.
Speaker 2:Rates are obviously way too high. It's really hard to get a mortgage. It's really expensive to buy a home relative to renting. So the economy is slowing because of the Fed. That's the reality.
Speaker 2:So the president shouldn't be so defensive and should just focus on the Fed. Should do it privately, by the way, because it doesn't really work when you do it publicly. That's what Yellen did and she convinced how arguably I'm not certain of this, but it seemed like it to carry the administration's water on the transitory side side. So private lobbying can be affected. Public is sort of counterproductive.
Speaker 2:But the reality is so strong that even this incompetent Fed will get the joke. And that should keep the market pretty stable, because even if you get some quick sell-offs, people realize oh well, actually there's a lot of bargain stocks. Rates are coming down Rates. Lower rates do justify higher multiples. Our 22 multiple assumes 375 on the 10-year and every 25 basis points is one multiple of the S&P, so that's 300 points. So if we end up only four, that would imply a 21 times multiple. I wouldn't get too concerned about that because it's really the AI stocks driving the market and they're almost certainly going to become massively overvalued at some point in the next two or three years. So valuation's going to be not necessarily your best yardstick, just like it wasn't during the late 90s, if anybody can remember that period.
Speaker 1:What's cheaper at this point from an asset class perspective stocks or bonds?
Speaker 2:Well, I would say you know certain stocks, the old economy stocks are, you know, super cheap. Reits have been really beat up. A lot of financials are really cheap, so kind of the risk part of interest sensitivity is cheap, of interest sensitivity is cheap. A lot of tech stocks are fairly valued, or even undervalued, I would argue, even though it's out of favor right now because of conservative guidance. Amazon's very cheap, so we think there's value all over the market.
Speaker 2:I would just avoid the gamble, what I call the gambling stocks. So I would avoid, you know, stocks that trade over a hundred times earnings. So, like Tesla, we'll see how Palantir does. But be aware that you know we trade some Palantir. But going into a print, the risk reward, I would argue, is not that good. If they miss, it could be down 60 points, if they blow it out, maybe up 20. So doing these gambling stocks into earnings is problematic. You might make money, just like if you go to Vegas and bet on red or black. You can make money. But there's plenty of other stocks like Broadcom, amazon. We've recommended KKR. So high beta, high risk stocks trading at reasonable multiples.
Speaker 1:I want to touch on REITs a little bit more, since you just referenced REITs, because they haven't been a that has not been a good place at all. Right, I mean, on a relative basis, it's horrible, it's really horrible. So, but I've done my own studies on this. It's not clear to me if REITs are kind of more of an offensive or defensive asset. I guess it depends on the interest rate environment that you're in and the economy obviously more broadly. But let's make the argument for REITs more explicitly and then what within REITs looks maybe more appealing in other areas.
Speaker 2:Well, you know, to be fair. So I sort of was ridiculously timely because I was on TV on Wednesday and said you know this could be a more problematic market and I recommended, you know, philip Morris and a utility and I recommended a REIT. But to be fair, that maybe wasn't the greatest recommendation, because these stocks do, because these stocks do, reits do have high betas. So Philip Morris' beta is close to zero, which is almost unheard of. So it's like 0.1. Mcdonald's is 0.3. But REITs tend to be one or higher. So it's not necessarily a great place to just hide out if the market's tanking. But they do tend to do well in markets where rates are dropping and stock markets at least stable. So it could again be the same thing with small caps. It's more of a fourth quarter power rally. They will take off. They're super cheap. We think there'll start to be some buyouts. They're trading well below what we at least believe is fair value.
Speaker 2:If you look at construction costs, the office sector is normalizing because offices are being converted A lot of land. We had recommended KRC on television, that's Kilroy. They've sold off a lot of their land they had for office buildings to residential developers, not necessarily converting. They have a building so they're not going to convert those to residential developers Not necessarily converting they have a building so they're not going to convert those to residential. But there really is no new office supply and so we think that the fundamentals for most sector offices the most challenge, by the way, the others are strong.
Speaker 2:So that good fundamentals, fed cutting rates, commies should improve. And, by the way, fed cutting rates commies should improve. And, by the way you know, even anticipating cutting rates does help already, because the 30-year mortgage is related to the 10-year treasury because of duration. That's what it gets priced off of. So we already have what will be a 20 basis point drop in the 30-year, so that will have a tendency to stabilize housing. So it's OK to bet on the economy not tanking because the markets cut rates for the Fed, as long as they don't completely blow it and not cut rates at least 25 or some talk of 50, which is what they should do. I'm not sure they're good enough to do that, but lower rates means the economy will stabilize.
Speaker 1:Reits will have good fundamentals and lower rates and should outperform. We don't talk about it often, but you do have a fund that plays with the REITs.
Speaker 2:We have a preferred stock REIT fund, pffr. It's got smart data so it sells preferred trading. But par which is critical to do If you run your own preferred portfolio, you need to do that it doesn't have any leverage an index fund, so that's a popular fund. It's done well relative to the unmanaged index and so for conservative investors cap-weighted as well, so you get more of the higher-rated credits and more liquid credits. So it's a good fund for conservative investors who want yield from REITs. But that is more safe and more stable with less upside, to be fair, than REIT equities.
Speaker 1:So we touched on bonds and BNDS. I was just looking at the chart, you know, nice up into the right pattern. What more could you ask for? And I agreed on the tailwind there. Small caps really there. Also agree with you there with the seasonality. So we're very much in alignment on a lot of things. I feel like we should touch a little bit on the MLP space, which we haven't really touched on in a while.
Speaker 2:Yeah, so our fund there is AMZA. You may have some viewers that have been burned by MLPs in the past. That really is the past. The companies have reduced their leverage, increased their coverage. They buy back shares instead of issuing shares and, by the way, the producers have as well. So oil prices are way more sticky than they used to be, when producers would ramp up production dramatically when prices were higher.
Speaker 2:So far more stable sector tends to be somewhat uncorrelated, like if tech is getting smacked. Reits might be up, but the real key point is you get to participate in the energy upside of North America export of natural gas, ai, demand for electricity that requires natural gas. Our fund, amca, is focused on natural gas and so you get AI and energy upside, but you get typically deferred tax income, like our fund yields around eight. That's likely to increase because the underliers are increasing their dividends. So good, somewhat less correlated asset class, good fundamental drivers and good tax outcome. And AMZA gives you a 1099, so it's way cleaner than getting if you bought all of our holdings and just to replicate it, we do write call options, which are difficult to do, but you would get 25 K-1s which would probably cost you a lot unless you have a gigantic tax return, like I do, with tons of partnerships in it, it's going to cost you a lot because your accountant may not prefer to do partnerships and might charge you a lot for that.
Speaker 1:Of all these ideas we've talked to you so far. I mean, do you typically find that certain advisors will favor one over the other, or is it really just agnostic? It's based on views? I mean, talk to me about sort of mixing the different funds together.
Speaker 2:Well, the most important thing is distinguish between fixed income and equity income. So we have three equity income funds. We do love ICAP as well. That's our large cap dividend fund. We write a ton of very short term individual calls, which we think is a phenomenal strategy. So we have ICAP, scap and AMZI.
Speaker 2:But the point there, as I was already making, is you get equity risk. So it's not going to be like if you look at those funds on Friday it wasn't like they were up and everything else was down. But if you look at our fixed income funds, they were benefiting from rates being lower. They are very low beta, so they're basically flattish, maybe up a little bit. Even so, with fixed income you get less volatility, more income, somewhat more All of our funds are pretty good income and with the equity component you get equity risk, you know, enhanced with more income, hopefully less volatility. So that's just the more, I think, the no brainer.
Speaker 2:Right now Rates are going lower, so no brainer is that PFFA and kind of to your point, like we can like PFFA kind of sells itself, like if we spent every waking moment assuming we continue to manage it, which we will appropriately positively, trying to get people not buy it, they would buy it. So it kind of sells itself. You get nine plus yield, five morning star stars for return, yield, five morning star stars for return. And you know, good upside to probably the 25 area if we do have lower rates. So that's kind of a no brainer. So that's where we get a lot of flows. But you know you can get better longer term returns if you do take more risk and buy some of our equity funds or other equity funds, of course, and you can get good income from BNDS or other high-yield bond funds.
Speaker 2:But less upside because bonds are more efficient than preferreds and there's less ability for us to take advantage of things like new issue and do other arbitrage not really arbitrage, but simple trading. Arbitrage is too complicated but selling above par, buying below par, buying credits that people are concerned about but there really is nothing to worry about and managing interest rate risk. So there's just more to do on the preferred side. So the returns are likely to be higher. So a little bit more equity risk as well. So without risk, no return. So that's the critical thing to keep in mind is fixed income lowers your equity risk. If you buy equity funds, you're getting equity risk, regardless of what subsector, whether it's European, even. You're going to get equity risk.
Speaker 1:Slow down but not recession. What subsector whether it's European even, you're going to get equity risk. Slow down, but not recession. What would make the slowdown more significant If the Fed doesn't cut rates? So it's a time-loss issue in terms of their own lags and monetary policy.
Speaker 2:Right and, as I mentioned, it's only. It doesn't really matter whether they cut 50 or 25. It just matters that they don't become hawkish, like everybody wants to say, fallaciously, in our opinion. Oh, the Fed cut rates and then the 10-year went up, but it gets back to this terminal rate. They cut rates and then there was some mixed I would argue mixed inflation data and then the tariffs. They got super hawkish and the terminal rate went up. Well, that's what caused the 10-year to go up, not that they cut rates. So a lot of bad analysis out there around rates. So it's not really much of a risk as long as they're on track to cut.
Speaker 2:And now, with another Republican on the core Federal Reserve and even the somewhat incompetent regional governors started, like Bostick, starting to figure out like oops, we should have caught all these tariff fears and, by the way, we were totally correct. Tariffs are not material to CPI. But even if they were, they need to be ignored. They're one time they go away in a year. 100% it's like a sales tax and in the very short term it's a little bit of a headwind for the economy. So the Fed, except for Waller and Bowman, was 100% wrong about tariffs. It actually means you should cut sooner.
Speaker 2:And so they will cut now that finally the labor data is reflecting reality, which we had been predicting for too long because we didn't realize well, we did realize actually the data was unreliable. We didn't know when it would become reliable. So we don't really view it as a risk, barring some I don't know what I guess. Oil prices skyrocketing, but they're actually dropping. Oil prices matter, tariffs, do not. The money supply matters the most, like 90%. In certain very strange situations oil can become a factor.
Speaker 1:Yeah, and I feel like you know, if it were going to be a factor, it would have been a factor earlier, when there was the. Weren't we at war, or close to war again, with Israel and Iran? I forget about all this, right, right.
Speaker 2:We were also correct about that in that there can be a war as long as you don't disrupt production. Oil's not going any higher. Supply and demand argues for oil around $70 a barrel. It could be $65, which it is now, or, by the way, $60 or $80, but somewhere around $70. So it ran up to $75, but supply and demand didn't change. Well, guess what? It's going to go back to $70 or in, in this case, went below. Opec continues to increase production. So we've been on the negative side. On oil, we lowered our target $10. But we do think it's going to be stable. So that's a great environment for AMZ and pipelines because they still get the throughput. They're not commodity sensitive, put um, they're not uh commodity sensitive. So on the energy side we would be. If you want to participate in energy and have that diversification because it does trade differently than the rest of the market, we'd be on the pipeline side get yield, no direct commodity risk and, um, you know, good tax outcome what do we miss, jay?
Speaker 1:I mean you again. It's like this typically is a slow time for markets. I mean I just talked to another issuer who said it's abnormally busy for them. I mean, are things going to be slow, you know, in the next 30 days? I mean, what do you think in terms of just a market?
Speaker 2:action. Well, you know, to be fair, we said that the fall would be weak. We weren't predicting like August 1st would be down 100 handles on the S&P, or more, I guess. So we do have another week of earnings, another 100 companies, so that's good data for the market should be all positive, or mostly positive. And then after that, yes, there's less news and we're subject to random events which are normally negative. You know, like the president saying he's going to reposition our nuclear subs, things like that, moody's downgrades, what have you. So that's why we're more neutral on the market.
Speaker 2:But we don't think it's going to be super volatile. And, like I said, we don't think you need to raise cash and buy back. You know, thousand S&P points down, you can pretty much get it up, particularly if you have yield investments. That's where our funds are good, because you know you're getting your monthly dividend Market's a little lower. If you don't need the cash, reinvest and then you benefit from a slight dip. So we think it'll be probably less volatile than most falls. And keep in mind, normally the Fed doesn't cut rates in September. You have that as a inflection point, positive inflection point. So just more neutral. We were totally correct in being completely bulled up about the summer rally and we just try to be realistic and say you're going to get days like Friday. It's not going to feel so good, necessarily, we didn't get that during the summer and but overall we should be fine and trade in this probably 6,000, 6,400 range.
Speaker 1:I know we touched on this a little bit, but just going back to Friday's market action, you guys were active.
Speaker 2:clearly A day like Friday was anything happening on the active side that was out of the not hedge funds. So we don't like go all in and take all of our exposure off and then go all in back. So we just took it back to be. We were actually, you know, greater than one time exposed the S&P. Now we're a little bit less. So we shade our exposure and that does help our alpha. And if you look at like ICAP for instance, it's right it bang in line with the S&P, which is pretty amazing because we're only 10% tech and the S&P is 35. So the active management can't pay off and so we paid a lot of money on this rally.
Speaker 2:So we took some of our higher bidder stocks and took huge profits on them. Actually. And if we're wrong and the market just keeps rocketing higher, that's okay. You know, we might add a little bit exposure. So we're market whispers. If market tells us it just wants to go higher and higher every day, we will shade our exposure up a little bit, but it's all at the margin. It's not like a hedge fund. We do have edge fund. In that hedge fund we might be cycling our exposure much more aggressively hedge fund, and that hedge fund we might be cycling our exposure much more aggressively.
Speaker 1:Jay, for those who want to track more of your thoughts and learn more about the funds, where would you point them to?
Speaker 2:I would urge you to go to infracatfundscom but also sign up for our mailing list and our webinars. They've been extremely helpful to our clients. It's a great opportunity to ask questions about not just macro but our funds, so easy way to stay in touch with us. Get our mailing list, get on our webinar list and you can get replays of it. You can get the slides and if you do look back, you'll verify what you were asserting. Michael and I've asserted a couple of times because I've given up on being humble that our calls have been extremely accurate, very helpful to our clients, and we do use that to manage the portfolios.
Speaker 1:And the returns have been positive, which, with regard to returns, you should look on the website and verify all the returns and verify all the returns, I can definitely verify that you have been very right this year, given I've been interviewing you for the last several months and it's been playing out the way that you said real time. Appreciate those that watch this live and hopefully I'll see you all on the next episode, or at least I'll watch with Melanie Schaefer as the new host. Thank you, jay, appreciate it.
Speaker 2:Thanks, michael, great questions, appreciate it. Cheers Jay, appreciate it. Thanks, michael, great questions, appreciate it. Cheers everybody.
