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Eric Chemi sits down with Sam Burns of Mill Street Research, to delve into the intricacies of the current economic landscape. Sam shares his valuable insights on a range of topics including the future of the bull market, the impact of inflation and interest rates on investments, and the potential for growth in tech stocks. Whether you’re an experienced investor or just starting out, Sam’s analysis offers a unique perspective on where the markets are headed and how to position yourself for success.

2:47 – The ‘TINA’ Factor in Investment
5:09 – Federal Reserve Policies in 2024
7:02 – Investor Risk Appetite and Market Trends
10:13 – Analyzing US Fiscal Policy and Global Impact
12:23 – US vs Non-US Equities:
14:03 – Large Cap Tech Stocks
16:27 – Valuing Tech Giants: When is it Too Expensive?
19:23 – The Role of Small Caps in Investment Strategy
20:55 – Predictions for Commodity Markets in 2024
23:16 – The Chinese Economic Dilemma
26:31 – Structural Differences in Global Economies
30:59 – Sam Burns’ Journey to Mill Street Research
34:06 – Challenges in Modern Investment Research
37:34 – Avoiding the Hype: Sound Investment Strategies
40:24 – Media Influence on Financial Sentiment
42:03 – Global Economic Crisis: Lessons for the US
44:00 – Political and Economic Stability in Investment
47:48 – Balancing Clicks vs. Investment Accuracy
49:42 – Mill Street Research: A Resource for Investors
51:27 – Closing Remarks and Additional Resources


Eric Chemi 0:05
Welcome to Wealthion. I’m Eric Chemi. So much conversation going on right now, if the Fed is at the right interest rates, are we going to see a soft landing a hard landing or no landing at all? And our equities at all time highs a good buy right now so much to ponder. To talk more about this today, we’ve got Sam Burns, he is the investment brain behind Millstreet research. Sam, thank you so much for joining me on the show. And I got to start with what’s got you worried? What’s keeping you up at night right now?

Sam Burns 0:33
Well, yeah, I guess I would say in general, I’m probably a little more on the more positive side relative to some of my strategies, colleagues. But the thing that would worry me for know for this year really is if if growth slows down more than people expect last year was all about too much growth and too much inflation. I think the problem this year would be too little. If the Fed stays too tight, or there’s another big shock, from, you know, from wars, or the Middle East or something like that. I think the domestic US economy is probably okay. But the thing that gets me you know, worried is things that are outside the US, and much less, sort of under the control of the domestic economic situation here.

Eric Chemi 1:10
So you know, what gets me to see your latest portfolio strategy note coming out, you know, just came out January 17. Right, so it’s just days old, you’re increasing your overweight in stocks. And here we are at all time highs, right. And I’ve been asking other people, do I really want to be buying stocks at all time highs, right? The last time we saw this two years ago, wasn’t it like the first day of the year? 2022, right, like gen two was the high and it went straight down the rest of the year, and it never came back all the way up until now. And here you are saying, you know, I’m not just staying low. I’m getting more long right now. Tell. Tell me about that. Yeah,

Sam Burns 1:44
no, you’re right. I mean, psychologically, for a lot of people, you know, buying, you know, after things have moved up a lot are there at highs is very difficult, it seems like you’ve missed it, and seems like it’s gonna be the wrong time to buy. Now, if you look back, you know, historically, the market spent a fair amount of time, you know, making new highs or being close to their highs. So even though you can certainly pick points where and it would have been a bad time to buy, that’s often not the case. And in my mind, it’s more a matter of we’ve been through two years of basically no returns. So it’s not like we’re really extended on a longer term standpoint, we’ve got some momentum over the last few months. And that’s part of the reason that I think we’ll continue to go out, or at least stay, you know, stay positive for a while longer. But I think for the fact that the interest rate backdrop is shifting from one of higher rates to one of at least stable or lower rates, inflation has become much less of a problem, and earnings are holding up means that stocks are going to be better than the alternative. So bonds, cash, other assets, I think US stocks in particular, are going to be the alternative. So that’s why you got to be overweight, the

Eric Chemi 2:47
classic Tina, right TNA, there is no alternative to stocks. Is it? Is that really your thesis though? Is it just more I don’t love stocks, but I hate everything else more? And and I don’t want to be in stocks, but I’ve got no choice? Or is it that you’re like saying no, I really want to be in stocks, regardless of the alternatives right now?

Sam Burns 3:09
Well, no, I think I have do have a more positive view on equities and have for over a year now. And so I’ve kind of maintained that. And I think that a lot of it is because you know, earnings are in fact, you know, still rising. And that’s what you know, look drives stocks in the longer term. And but you do have an alternative now that you didn’t have, you know, a couple of years ago, and the fact that, you know, cash yields four or 5%. And so that is an alternative. And certainly a better one than we have had for most of the last, you know, 10 or 20 years, where rates have been much lower. So it’s less a matter of I hate everything else. As a matter of if you have a relatively solid economy and moderate inflation, and the fact that rates could come down, that’s usually better for stocks and for other assets. So bonds don’t get to benefit from growth. stocks do. And so if you think there’s going to be some growth, still, stocks are an asset that benefits most from that. So

Eric Chemi 4:00
that’s a good point. You mentioned cash is yielding 5% Right now, right? Or just the safest bonds. So you got to be pretty confident that you’re gonna get even a lot more than 5%. On returns. You’re given the risk involved, right? So what do you see as a this year? 2024? Let’s call it large cap s&p 500 kind of return? My guess is you’re expecting more than 5%?

Sam Burns 4:22
Yeah, no, my guess would be that you get more than 5%. And that, you know that something in in a 10 to 15% range would probably be historically, you know, typical. If you figure that 2020 to the end of 2022 is kind of a bear market low in some ways that we’re only you know, a little over a year into this. bull market cycles tend to last significant longer than this. Three to four years is more typical. So I think on time basis, you’ve got more time and I think on a kind of a earnings and valuation basis. There’s potentially you know, somewhat more more to go there. So I think there is more upside for stocks. I think, you know, Cash is fine in the sense that you want to probably have some and this just says that asset allocation thing. But I think overall, stocks will give you a better return than cash will. And

Eric Chemi 5:09
then you’re one of the things you talk about a new report here is removing the Fed headwind, it’s allowed risk appetite to return your view as the federal likely cut rates this year, maybe not as aggressively as the bond market thinks, but the trend and rates is lower instead of higher. And we have Howard Marks out there, right, the billionaire hedge fund manager on Tuesday talking about rates being closer more to 3%, rather than these these five numbers and being artificially high. Do you see this aggressive cutting cycle here making a big difference? Well,

Sam Burns 5:42
in my mind, it’s less about kind of how much or how aggressively the Fed cuts, as the fact that there is there are cuts on the table, they’re openly discussing lower rates, and they realize that rates now are almost certainly too high. Meaning that the five or five and a half percent policy rates in a two to 3% inflation environment is excessively tight, that’s higher than they need to be. And then it’s just a question of, you know, how far and how fast they want to kind of bring things down. And if you remember, the last time this really happened, was almost 30 years ago, or 1995. When we had the economy slowed down, inflation came down, but there wasn’t a recession. And it was essentially a soft landing. And the Fed cut rates, I think three times from the peak. And that was enough to set off a strong bull market, big gains and stocks, and a pretty solid economy in 9596 97. And so I think that’s what kind of some people are looking at it as kind of a historical analog, you don’t need a huge number of cuts. As long as you know, rates are kind of high and moving down. That means that you’ve got, again, a tailwind rather than a headwind. And the Feds realized that it’s probably too tight and is looking to loosen, dig

Eric Chemi 6:49
into that a little more, because I think I want people to really reflect that it’s not how many cuts you make, it’s not how aggressive your cutting policy is, just the fact that you are cutting you think just the direction itself is all that matters.

Sam Burns 7:02
I think so in general, yeah, in terms of just getting investors to think along those ways. And to have a risk appetite, like the 5% that you’re getting in the money market right now won’t last, that, you know, six months or a year from now, it’ll be might be four, or something less, I don’t know, but it won’t be as high as it is now. And so you got to think about if you’re going to allocate long term money, do you want to put it in a money market fund? And have that you know, the interest rate go down? Or do you want to think about other assets that can participate in longer term growth, as long as you kind of think that the general US economy will hold up, and earnings will hold up? You’re not not going into a bad recession, and you know, falling earnings and things. So I think as long as you’re reasonably comfortable with that general perspective, which I am, for now, at least, then that makes stocks a more attractive asset class, even relative to what looks like a high right now that might not last. And

Eric Chemi 7:52
then before we turn to stocks in a second, I want to just focus a little bit, because I’m not sure I agree on this, right. You’re saying inflation over the last couple years was mostly due to COVID. And Ukraine supply shocks, a little bit from fiscal stimulus and had relatively little to do with the Fed, it’s not the 1970s, I was under the sort of impression right, from sort of my reading that this was all from government stimulus, right, and that Ukraine doesn’t have that much of an impact on what we’re doing here. And that the COVID stimulus or the COVID stimulus, the the big government spending plans, whether it was I lose track of it and build back better inflation reduction output to me is like the inflation increasing act, right? Because we’re putting more money into the economy, all the stimulus all the just free money for people, to me that felt like, that’s probably why prices are up. But tell me why why I’m wrong here.

Sam Burns 8:44
Well, I think I mean, there was definitely an influence from the stimulus, both from the COVID stimulus and the more infrastructure related stimulus that came along, you know, someone later the inflation Reduction Act, infrastructure Act, the chips act. But I think in some ways, that’s those are the reasons why the US economy has done much better than most of our other the other economies in Europe or China, or a lot of other places that didn’t have that kind of fiscal policy. And I think in many ways, when you look at the thing, the prices of things that went up and the pattern they followed, it was much more directed by the things that were in short supply, and they were disrupted by COVID. And then there was that kind of response to that than it was by where the fiscal money was going. And you also, if you think about, you know, other countries did not do the same fiscal policy we did, but they had very similar inflation patterns. If you look at Europe, and you look at Canada, you look at a lot of other markets that did not do what we did the same pattern inflation, a big jump and 2122 and then starting to roll over now, even if they had very different fiscal policies, kind of tells you that it wasn’t just us fiscal policy that drove it. It was, you know, COVID that that the global shocks that were happening, and some of that was a lot of it was COVID some of it for a little while. I think it was Ukraine because of the oil and gas food price impacts, but a lot of that’s really gone the other way now. And so commodity prices are way back down. inflation in the US is down. But it’s also following in most other countries too. So you can’t really tie it to just US policy. If it’s happening elsewhere,

Eric Chemi 10:13
then it makes you wonder, does this the policy matter? That right? If it’s if the if the policy didn’t have an impact, then should politicians get credit for anything they did, like, well, doesn’t matter that you did all this, you just increase the debt. And we didn’t actually end up any better situation than the other countries that might have done nothing?

Sam Burns 10:30
Oh, I think we have definitely much better off than the other countries that didn’t do it. If you look at the growth rate of GDP and incomes and unemployment, the US is way ahead of most of the poorer countries in terms of recovery from COVID, economically speaking, and that’s also showing up in US earnings growth as well, corporate earnings in the US are holding up far better than they are in other countries. So I think the policies did work in the sense that they kept the US economy doing much better than it would have otherwise, given the size and the magnitude of the global shocks that we had. I mean, they’re really big shocks. So they required some pretty big, you know, responses. I think we also kind of learned the lesson that after the financial crisis in 2008, the fiscal response was kind of too weak. And we had years and years of basically to high unemployment and to weaker growth, because there just wasn’t the fiscal policy to support it, like there is, has been more recently. So I think the US has done a much better job of managing fiscal policy relative to other countries that don’t have that kind of coordinated fiscal policy like we had.

Eric Chemi 11:31
Okay, so then that’s a good way to think about it. It’s not how I had been thinking about it before. So I appreciate getting to hear that that other approach, like okay, if we are doing better than other countries where like, I think most people would agree, hey, we’re not Europe, we’re not China. We’re not some of these other places. And maybe that that is the difference there. And that takes us to equities. Right. That takes us to looking at US equities. Certainly, if you’ve been in the Hang Seng for the last couple years, you lost 50% of your money, right? I think that’s what people are afraid of here, right? People are afraid of, oh my God, and I want to buy here at all time highs. And I’m looking at 10 years where I haven’t made the money back. Right. It’s like this. It just doesn’t come back. I’m afraid of a Hang Seng outcome or I’m afraid of the Fed tries to cut inflation comes back like a zombie. Right? It wasn’t dead yet. It’s coming back. Here we go. You What do you say to those types of fears? Because we hear a lot about that right now.

Sam Burns 12:23
But no, I think I think you’re right, in the sense that US equities definitely kind of look different than a lot of non US equities. Whether it’s the Hang Seng or even European equities, the US has have been outperforming the rest of the world really, at least the last 10 or 12 years. It’s been a long time now since non US equities have systemic systematically outperform the US. And a lot of that is because the US economy is much stronger and more more robust. And earnings have grown faster in the US than they had elsewhere again for over the last decade, not just recently. So there’s a good fundamental reason for that. For the US to have outperformed. And yeah, if you’ve been in certainly in Chinese stocks have been terrible. And I’ve been underweight and avoiding Chinese stocks for a long time now, and and the earnings trends really corroborate that their earnings have been much weaker, in you know, in China and a lot of other countries than they have in the US so. So equity allocation regionally does make a big difference. If you’ve been in non US equities, and yeah, you might have a different, you know, kind of view of things. But overall, I think equities and US equities and the US large caps in particular, have been the place where the fundamentals of invest and have been best positioned to take advantage of the global trends. So like, you know, large cap technology stocks, you know, that’s where a lot of money has been going for years now. And the US companies that are dominant, there have been the best place to benefit from that. So I think there’s there’s sort of a general tendency for the US economy to have done better. And there’s a particular way that the US equity markets are aligned to benefit from a lot of the kind of global secular trends that we’ve seen over the last few years. The classic Magnificent

Eric Chemi 14:03
Seven, right US equities, large cap tech. And we know what those companies are, whether those seven companies or others that are similarly positioned, they’re going even faster, way up higher, more so than the s&p 500 on an average basis, right, they’re pulling up everything else. And yet, you’re saying you want to stick with large caps you want to stick with these names, despite the fact that they’ve run up enormous numbers here.

Sam Burns 14:31
Yeah, that’s right. I mean, there’s some of it is, you know, kind of the investor behavior momentum, kind of idea of you want to kind of least an intermediate term stay with what’s working and not try to fight the trend too much, because that can get become very expensive trying to catch falling knives. But the other is that yeah, again, the underlying fundamentals are there I mean, they’re the reason they’ve gone up a lot is their earnings go up a lot faster than other companies have. And and they have much better balance sheets and they have you know, a You know, sort of intellectual property and things like that that other companies don’t have. And so they’re more resistant to, you know, higher interest rates. So that’s why even though a lot of people think, you know, higher rates are bad for growth stocks, or you know, long duration stock, as they’re often called, that historically has not been the case, they’re much less sensitive to interest rates, 10 companies that are smaller or more cyclical, or need to borrow a lot more. So the big cap tech stocks and other companies, you know, are much more insulated from that, than a lot of other companies are, and have the benefit of kind of underlying US economic growth. So yeah, to me, it makes sense in some way, still, that I see stronger earnings estimate trends in those companies than I do in a lot of other areas. So as long as that’s the case, I’m happy to go with them. Now, if that changes, and their earnings estimate start to falter, and momentum starts to weaken, or they get so expensive, that they’re just no way to justify their valuations, then yeah, then I’d become more cautious to want to look to to other areas. But I don’t see that quite yet. That

Eric Chemi 15:59
one’s going to be my question is, but they are very expensive, right? Or that some people think they’re expensive. So when do you when you draw that line? And this is too expensive? Because all the factors that you’ve said, I think we would agree a lot of people know those facts, right? There’s nothing surprising what you’re saying. And that’s why the stocks have gone up so much, right? So now it’s a matter of, okay, I know they’re up. I know why they’re up. But I don’t know how much more they’re gonna go up. So where do you draw that line? And now it’s too expensive? Yeah,

Sam Burns 16:27
and I say a lot of ways, you know, I’m kind of looking for those inflection points in the underlying fundamentals. And, you know, I track that by looking at the, you know, with aggregated kind of indicators of what earnings analysts are doing with earnings estimates, you know, at the margin, are they’re raising, still raising numbers? Are there still surprises coming through and causing them to push their, you know, sales and earnings estimates up? Or are they started to kind of, you know, trim them, or even cut them more aggressively. In which case, you’d say, okay, whatever the good news was, has now kind of ended, and they’re starting to pull back. So I haven’t really seen broad base signs that they’re starting to cut estimates in those leading technology related areas yet. That would be the thing that I worry about. And if you think about an example, like, I don’t know, Nvidia, were at the beginning of last year, it was very, very expensive on a Ford p basis, you know, three times the market multiple, I think, something like that. But their earnings went up so fast, they’re actually cheaper now than they were a year or two ago, even though they’ve gone up 200%, because the earnings have simply gone up even faster than the stock price has. And I think, again, nobody expected that level of earnings growth. Now, that’s an extreme example. But it is still possible to surprise to the upside for some of these companies, I think. But that was really the story of 2023. Overall, most people came into last year expecting earnings to be down, and then economy to go into recession. And it didn’t. So that was, you know, better than expected. Now, the bar is somewhat higher, as you said, people are seeing it more and expecting it more. So you’d have to have a little bit more to get things to go further on the upside. But we still haven’t seen things looking like they’re turning down. I think that’s the key thing that if at least if he’s got the interest rate, inflation situation looking better, and earnings holding up, you’ve still got on balance, a case to be made for equities, and some of those techniques as well. I

Eric Chemi 18:18
think it’s a good point, just thinking about, we’re going to be the example it’s gone up, but it’s cheaper. Right, right for what’s expected. So I think that’s something for people to ponder and think about. Right? It’s gone up, but what you’re expecting out of it, your your, what is it? Like? The expectation is, is a higher low? Yeah, it’s the higher expectation. So the price for what you’re paying for the expectation is actually relatively lower than it was before. So that is a good point. And an add some nuance, I think, to the conversation of okay, do you want to buy something that’s up? 5x? Right, it’s like, well, but but now their forward earnings is 10x. Right, or whatever the number is, right? It’s actually you’re getting a discount. You know, the one thing that we didn’t get to yet, because you mentioned stocks, you mentioned large caps, small caps. And I think that’s a good point, too, that the large caps are often less sensitive to rates. But then it means that rate cuts shouldn’t help them as much. Right. Thank you. If you think there’s rate cuts, once you say okay, then the rate sensitive stocks should now catch up maybe more of the small caps.

Sam Burns 19:23
No, I think that is a good point. And we’ve seen certainly in the financials are is an area that has been benefiting from the rally in the bond market that’s kind of anticipating the rate cuts. And, and so we would expect as if the Fed does, in fact follow through and cut rates this year, that, you know, smaller cap companies that are more sensitive to, to short term interest rates, and they need to borrow and are more constrained in terms of their access to credit. Those who’d be the ones that would potentially benefit more than some of the large caps, which didn’t have, you know, much more cash and less debt and are less sensitive, that sort of thing from on a fundamental basis. is. So it may be that the lower rates will help stimulate, you know, generally the economy and housing and autos and other things like that in terms of consumer demand, but will also help. Those companies that have more restricted access to credit have to pay more for it. If they see, you know, relief on that sense from the Fed, then they would get a benefit later in the year. So I haven’t quite seen it yet, I want to see if the Fed really does kind of come through with this. But with that would be the next leg is to broaden out the base of kind of performance within the US equity market, because I think that’s the reason, large caps in particular, the tech stocks have led and small caps, always have lagged is because of that relative sensitivity to interest rates, which have been going the wrong way for small caps, and could shift later this year. We

Eric Chemi 20:45
haven’t touched on commodities yet. And I know in your views, you see them as weaker. Are you expecting or afraid for a massive collapse in commodities this year, I

Sam Burns 20:55
don’t necessarily see a collapse. But I think that the general trend in commodities was probably going to be flat to lower, I think that a lot of commodities are pretty well supplied overall, including oil and natural gas. And I think a lot of only things that really kind of tend to push the other way have been these sorts of occasional shocks, you know, whether it’s, you know, the war in Ukraine, or a couple of years ago, or concerns about the Red Sea right now. But those are all kind of temporary disruptions rather than real underlying supply demand things. And I think a lot of that is also tied to China, for the last 20 or 30 years, most of the incremental demand for commodities has come from China’s growth and their demand for a lot of things. And they’re really just not going to produce that kind of level of demand growth anymore. I don’t think China is initially going to fall apart, I don’t think it’s just going to grow anywhere near as fast as it had previously. And they don’t have scope to sort of stimulate and to do that kind of really aggressive buying that they have done in past years. So to me, it’s the fact that the global economy is sort of generally going to be slower. And China in particular, will be less of a source of demand. And that there actually is, you know, plenty of commodities around for what we need, given that, you know, demographics and technology and all that kind of thing tend to be kind of disinflationary influences over the longer term anyway. So yes, I’m underweight commodities, and don’t really see them as an area to go into, unless you’re going to bet on a supply shock of some kind. Which is generally of course hard to predict. Why did

Eric Chemi 22:29
China just screw up so badly? Right, the whole idea of command and control economy, one party system, we will tell you what to do, we are so smart data that we’re the threat we’re going to be great Baba is like, this is not working, right. And they, you know, the whole idea that the Americans are, are dumb and look at the West and look at us, and it’s just not working. Right. So where did they go wrong? Where they have full control of their government, they have full control of everybody, they can do whatever they want. And they can accomplish those things. If they want to get it done. Did they? They focus on the wrong goals? Are they incompetent? Is it corruption? Because they have all the natural resources, they have a lot of natural resources to? They build everything. So I’m very confused. What and I think a lot of people are too.

Sam Burns 23:16
No, you’re right. And there’s been a lot of discussion and kind of confusion, I think about you know, what’s happened with China. I mean, I think big picture of a lot of things going on, and certainly in things like corruption, and having a one party system are there’s there’s downsides to that, for sure. And they’re they’re realizing that now, but I think a lot of it is really just that their whole structure is different than what we think of, in the sense of, they basically decide what they want GDP or whatever to be. And we want to go up 6% or 8%, or whatever number they choose, and then they just go out and build things to make it happen even if they don’t actually need them. So there’s been a lot there’s been years and years of trying to sort of use building bridges and roads and you know, apartment complexes that people can’t afford to live in all these kinds of things that they didn’t actually need, just to make, you know, GDP growth look better, and to kind of keep things going. And now they’re kind of realizing they have all this excess stuff. And households don’t actually have money to spend to do it. And so they have a very big mismatch between kind of the export and infrastructure driven spending they focused on versus kind of domestic consumption, which is what you really need to have kind of long run real growth, whereas the US has been kind of more of the opposite, and has been, you know, runs a trade deficit as a much more consumer driven economy. So I think that, you know, 30 years ago, they needed to build a lot of infrastructure. They didn’t have it. Now they do, and they’re still building it. And now they’ve kind of over invested in debt and malinvestment. And now having kind of, you know, take write offs on real estate, and all these things, but they don’t have a system design like we do, you know, for companies to go bankrupt and take the loss and write it off and then move on. It kind of just stays there and wait for the government to do something about it. And that’s a very sensitive political process. And so a lot of things that would happen in our system wouldn’t happen over there. Or at least,

Eric Chemi 25:07
I didn’t realize it talk to me about this bankruptcy or, or lack of bankruptcy options, because that is one of the great features of the American system, which is what allows entrepreneurs to make you try it, you fail, you try it, you feel someone’s gonna eat the money on that, right, but at least you can, you can have your nine lines, and you can keep trying, and we know a lot of great companies are from multiple previous failed entrepreneurs. Oh,

Sam Burns 25:29
sure. Yeah, exactly. And that’s, that’s the thing is that, you know, we have a system that’s more designed to have, you know, failure, and then you move on. And as long as it doesn’t become systemic, where the, you know, the banking system, or the whole economy is threatened, then that works, you know, reasonably well. But if you’re in a one party system, and you have, you know, where it’s designed to, you know, to be really top down kind of driven, then, you know, admitting mistakes or saying something failed, is a very different proposition. And that you have to, if you have, if you’re kind of agreement with your, you know, the populace is that you let us be in charge, and we’ll make sure that growth continues no matter what, then you made a promise you can’t keep. And that’s the thing, that what they’re running into now, is that they just can’t keep growing in the same way, even though they keep trying to, and then they’re, they’re realizing that, you know, keeping building things you don’t need is not a good way to structure the economy. So

Eric Chemi 26:31
that’s why you wouldn’t even buy, even at the most lower price or at the lows here, because you think just the structure of how they’ve set up their government, their capitalism system, you think the structure is so bad that you wouldn’t even want to come in here at these lower levels?

Sam Burns 26:46
Well, I’m never gonna say, you know, don’t buy something ever, there’s always a price for everything. But when I see in my, you know, again, in the earnings estimate data, looking at the company level, you know, six or 800, Chinese companies and looking with analysts are doing with their earnings estimates. They’re not there, they’re very weak, they’re still, you know, cutting their earnings estimates pretty aggressively across a lot of different companies in China, in Hong Kong. And so that tells me that whatever is happening over there, there’s been no real signs of improvement at the margin, things aren’t getting, you know, less negative, to the degree that you’d want to see, to really put money in there. And so if you have structural issues, you have issues of you know, whether, you know, AI technology, you know, chips and things from the US or elsewhere are going to be able to, you know, are going to influence their growth. So they have geopolitical issues, and they have kind of bottom up fundamental issues, in terms of their earnings. You know, I would want to see some of that needs to change, to make me want to, you know, take a longer term view on it. And certainly, tactically, you could, you could trade bounces, and there’s maybe, you know, short term things you could do. But, but so far, I haven’t seen evidence of the fundamentals really changing there. And therefore, even if they are somewhat cheaper, they’d have to get really, really cheap, which they aren’t yet, or fundamentals get better. I’m

Eric Chemi 28:03
looking through your, your research here as you go through some of this. And it’s got a lot of details, right. But you keep talking about this, this model of yours, right, your your benchmark model, overweight, underweight, walk us through what what this typical model looks like, because you’ve got, you know, cash, long term bonds, small caps, large caps, equities. I’m curious what the model is. And then I’m curious, is this how you actually invest your personal money.

Sam Burns 28:29
So I try to keep my personal money pretty, you know, conservative, just because I want to make sure there’s no conflicts of interest with what I’m telling people to buy versus what I’m doing myself. And military research does not manage anyone else’s money. So just to be clear that whatever advice I’m giving is, is sort of, you know, straightforward, meaning that there’s nothing else going on that I have another incentive to get paid by somebody to say something, right, yeah, I can be bullish or bearish? No, there’s no investment banking, there’s no trading operation. There’s no asset management here. So the idea Yes, to have an objective anchor to you know, what I’m doing. And that’s really been my thing, all my whole, you know, the last 25 years I’ve been doing this is to have, you know, testable, objective indicators that will keep me kind of focused on what matters and not get distracted by what’s in the headlines. It’s very easy to read articles and things and say, Oh, this must be you know, what’s most important right now, or I should buy or sell based on this? And then we find out well, everybody knew that or that’s it’s old news, or it’s just not relevant. So the like, the the global equity risk model, for instance, that’s kind of the cornerstone to my, you know, risk on risk off views, you know, has eight different indicators in it. And they’re all, you know, designed and tested to kind of tell you what’s going on in different aspects of the market, and which ones are bullish and which ones are bearish? And if the majority of them line up bullish ly, then it’s usually historically been a good idea to be bullish and vice versa. So that gives me a way to objectively say, you know, this is the set of indicators that I trust. And they’re telling me that right now is a bullish scenario. Because you know, equity price momentum is good, volatility is pretty low credit conditions are good. The Fed may be lowering rates soon. Those are all conditions that have historically been pretty good over, say, three to six months, looking out for equities relative to say, cash or bonds. Same thing with a small cap large cap is a model there that tries to figure out, you know, what part of the cycle are we in? Are we in the early stages when small caps into lead? Or are we in the later stages when large caps tend to lead? And it’s been kind of telling me later cycle lately, so that’s why I’ve been favoring large caps. But again, I want to have something that I can test and anchor and kind of point to. And and clients really seem to like that they want to have something objective that they can kind of analyze, and follow along with me.

Eric Chemi 30:50
And then just tell me a bit about, you know, who is Sam Burns, right? Where did where did Millstreet come from? What were you doing before, before you launched this?

Sam Burns 30:59
Yeah, so for for a long time, I work at different investment research firms. Started off in Ned Davis research down in Florida, about 25 years ago, I was there for about five years and built a lot of models did a lot of writing and things there, and then moved up here to the Boston area to work for State Street Global Markets, again, doing similar kind of macro quantitative research. Then I worked at Brown Brothers Harriman for a little while, and then Oppenheimer and company until about 2016, when I started Millstreet research as a way to kind of pull together all of the work that I’ve been doing over the years into one place, and be able to do it independently, not having a big brokerage firm or, you know, investment bank or whatever, kind of looking over my shoulder and telling me what to do, that I could do it my way. And, and give clients you know, exactly what I thought was good, and what they wanted, without any kind of constraints. And so I’ve been doing that, yeah, for seven or eight years now. And mostly deal with institutional clients, but anywhere from a big mutual fund company all the way down to small investment advisors, or anyone in between.

Eric Chemi 32:03
I liked that you said that you left sort of big corporate, because you don’t want people looking over your shoulder as you wanted to be able to have those shackles removed. What should the regular investor out there be be concerned about when they’re seeing the big corporate research? Right? The big the big businesses out there, like you said, you’re avoiding conflicts of interest, you don’t have all those other businesses that are trying to make a buck? What should they be watching out for when they see research that maybe has a bias towards it?

Sam Burns 32:31
Yeah, I mean, there’s a lot of, you know, kind of subtle things that, that go on there. I mean, one of which is, of course, if you’re in a brokerage business, then your business is to sell stocks. So if you’re, you know, you have an incentive to be bullish, or to tell people to buy stocks, if you tell them to get out and go to cash, a brokerage firm isn’t gonna make any money from that. So, you know, brokerage firms will tend to have a bullish bias, just by the nature of their business and what they profit from the same thing with, you know, advisors who might recommend certain funds and things that they get paid for, or if they had investment banking, they might want to tell you to buy stocks, that they’ve done investment banking underwriting for, that they would, you know, get, you know, profit from trading themselves. So there’s a lot of ways that in the kind of in the background, you know, companies like that can profit from things that are not to your benefit as an individual investor, reading them. Now, there’s still a lot of, you know, useful information you can get from them, but you kind of have to read it carefully. And make sure that, you know, the information you’re getting from them is less about do I buy? Or do I sell, but you know, Is there information about how this company is doing how the economy is doing, that I can then use to make my own independent decision about, you know, what I think, you know, is useful for my economic, you know, kind of asset allocation portfolio. So having like an investment advisor that works for you, on a fee, rather than just, you know, what a brokerage firm tells you can often be a better way to do it, because you have someone that you can talk to who is an expert, but it’s also not conflicted. And that’s why a lot of people that I work with are investment advisors in that way.

Eric Chemi 34:06
And then do you think the era of picking stocks individually is gone? Should everyone just become active passive index investors? Or do you still think there’s opportunity for a normal person to get information that the marketplace doesn’t have and then start to invest on that? Because that’s starting to feel very rare right now?

Sam Burns 34:25
Oh, yeah, you’re right. It’s definitely much harder now. To be an individual investor and manage a billion actively traded actively manage individual stock portfolio. They’re nothing to say you can’t couldn’t do it. But there’s just a competition is extreme right now. So yeah, I think a lot of people have shifted towards ETFs and other things that our portfolio is essentially and then, you know, reflect some sort of investment thesis or idea of, you know, whether it’s you just kind of pro technology or your growth, or you like value as a pro and support are kind of general investment kind of approaches rather than individual company analysis, which is just very time consuming. And most people don’t have time. I mean, if you have a day job, you don’t have time to sit there and look at all these financial statements and the markets and everything all day every day, which is kind of what you would have to do to really build your own stock portfolio and expect to outperform consistently over the long term. So think it’s just a matter of time and resource allocation that most people don’t have now. And that you have to either rely on an advisor or, you know, pick funds that just match your kind of, you know, personal investment beliefs, and then you’re going to hold on to for longer periods. And that there’s a million choices. Now, it’s much easier to find a fund that aligns with what you are looking for now, which is great. And a lot of them have much lower fees than they used to, which is also good. But it is harder to make a stock picking case nowadays.

Eric Chemi 35:54
And I noticed in your research is not like you’re picking stocks, or you’re talking about macro stuff, right? Treasury bonds, or s&p 500, that kind of stuff, China versus us very big macro, you’re not saying hey, go buy this random stock that I’m talking about? So

Sam Burns 36:07
no, I do. I do sort of pick stocks in the sense that I have a quantitative ranking model for stocks for institutional investors. Okay, again, it’s not for the necessarily for the average person to try to use. Because again, it still requires a certain amount of knowledge of the markets and sort of consistent oversight. It’s meant for a portfolio manager primarily, who comes into work every day looking for stock ideas, or to check their own portfolio ideas, and see if my quantitative model agrees with them or not. So again, the stock selection work that I do is helpful, mostly for institutional managers who have to do this all day. And to be able to build those kind of aggregated indicators to see if there’s a lot of stocks in one sector that screen Well, right now, that’s a that’s a clue. There’s a lot of stocks that screen badly in one area, or there’s China or commodity sectors or whatever, that’s another indication that, okay, you might want to avoid that area. So there is a stock selection component from my work. But it’s not what you think of as kind of looking at the management and, you know, visiting the company and kind of the traditional fundamental macro or micro research that that you would normally see. It’s meant to be an adjunct to what institutional investors do. And

Eric Chemi 37:18
what is something that it’s just a big red flag for you right now, in terms of investments. At the moment, when you read the news, when you see some kind of hype cycle? Is there something that you just think you everyone needs to just stay the heck away from X? Like, what would that be? Or what do you stay the heck away from?

Sam Burns 37:34
I mean, a lot of, you know, a lot of what I see at the macro level is sort of the excessive doom and gloom, essentially, saying that the, you know, the US dollar is going to collapse, and, and become worthless, or that, you know, the US Treasury is going to go bankrupt or won’t be able to issue debt anymore, or things like that. Those kinds of like, big macro scare things, really, you know, I’ve been hearing him for a long time, and they’ve been wrong for a long time. But those kinds of things, you know, worry me when I hear them, because it’ll, it’ll cause people to basically, you know, become scared and only hold, you know, cash or Bitcoin or something, and Miss, you know, the other opportunities that they might otherwise have had. And, you know, but otherwise, you know, any kind of really extreme views, you know, up or down, you know, kind of made me a little nervous, because it’s pretty rare that that’s going to be the right way to approach things overall. And then, you know, other than that, it’s going to be, you know, specific things where if people take too extreme view on, say, you know, real estate, you know, millfields, a commercial real estate is horrible, you should avoid it at all costs. Some of it is, but some of it’s actually starting to improve. So, again, you want to be, you know, careful about, you know, making too many sweeping generalizations, or at all tech is The Magnificent Seven. Well, it’s not, there’s likely a lot of technology companies that are doing pretty well, it’s not just a Magnificent Seven, and here, not all the Magnificent Seven are doing very well, you know, Apple isn’t doing that great, for instance, on an earnings basis, in my work. So it varies, you have to kind of look at it more closely. So when I see those kind of simplistic, you know, extreme views, you know, it makes me nervous, because there’s people trying to get attention more than trying to give you useful information. So,

Eric Chemi 39:23
you know, you know, what’s funny is on this channel, anything doom and gloom, that’s what’s gonna get a lot of viewership. And I’ve seen tweets where people say, Oh, anything, and it’s like other people. 20 other financial guys saying, hey, you know, whenever we have something bearish, it gets 10 times as many views as when we have something bullish. And so even part of this conversation, I’m trying to get you to say something that’s a little bit scary because that’s the headline and get people to click on it. But I was thinking about it before he said you very moderate everything you’re saying is is in line, right? And, and we just had a conversation yesterday with somebody, they do commercial real estate and they are seeing a lot of positives and I’m like, wait a minute, and thing I read was negative. And they said, no, no, but we’re in the right areas where it’s growing. We’re we don’t have any vacancies, we’ve just got all occupancy, right. And so it is, like you’re saying, and I do think there’s this weird dynamic, especially with, you know, something that’s going to be on the internet with financial show. There’s media value and doom and gloom, but there’s not necessarily a lot of economic value in

Sam Burns 40:24
it. Ya know, and that’s really what I’ve seen is really dramatic over the last year or two. But that’s always been the case, that doom and gloom sells, it gets more clicks, and gets more headlines. And, you know, it sounds an awful sound, you know, kind of sound smart, smart, smart. Yeah. And it sounds like very contrarian, and like, you know, you must be on the right side, if you’re going against traditional conventional wisdom, or whatever. But then you look at the track record of, you know, so many people saying these things, and it’s not working. So I think you have to be real careful with that kind of stuff about whether it’s kind of looking for attention or trying to give you useful information. And but it’s been, you know, economically speaking, the consumer sentiment surveys, for instance, University of Michigan and consumer confidence surveys have been way, way more negative than the economic data would normally suggest it should be. And so up until about 2019, there was a pretty tight correlation between unemployment, you know, housing activity, stock market, you know, earnings, all those kinds of things were pretty correlated with what consumer sentiment was. And then all of a sudden, after COVID, they broke, the economy got a lot better and sentiment didn’t. And I think there’s a lot of that kind of media influenced thing where people say it’s bad. And people believe it, even though it’s objectively not. And I think that’s what caught people offsides, at the beginning of last year, everyone’s saying the market was gonna go down and then went up. And now they’re still catching up to that. Because, you know, it’s all focused on what they see in the media, as opposed to the underlying, you know, hard data.

Eric Chemi 41:57
It’s funny, if you ask some of the doom and gloom people what they’re invested in, they’re still long anyway. Right? Short?

Sam Burns 42:03
Yeah. Which is what you would logically assume, if you believe what they were saying, you’d be short everything and in just in cash or gold or something. And they’re not usually. But so yeah, so that’s been the real thing that I’ve kind of watched, particularly being on social media and everything else has been a really stark dynamic. And yeah, I have clients come to me and say the same thing. Like, well, you know, everything’s terrible, right. And we’re going into recession. Right? And like, we might someday, but it doesn’t look like it right now. And, you know, not for the last year, 18 months. So, you know, yeah, the Fed raised rates so much. Yeah. But fiscal policy helped offset that. And, you know, the economy was recovering from COVID. And, you know, there’s reasons why that didn’t have the same impact it did in 2007. So we’re probably not going to have another great financial crisis.

Eric Chemi 42:53
What about the fears because we see other countries, right, you see China, right? Kind of imploding a little bit, or you see countries in Latin America, where the currency is worthless, and you see currencies that get devalued, you see inflationary shocks in the 1000s, of percents, and we see it and it’s happening. It’s in the world. And it’s right now, right? Like, we know, that’s true. And it’s just this question of, is the United States turning into that, because the debt is massive, right? Because there’s whether you want to call it a border crisis, or a political, you know, division in this country, like, there’s enough things that people can point to, and it makes them concern, right, or it’s, Hey, it’s, the sentiment is bad, for whatever reason, right? If the sentiment is bad, and long enough, it’s going to create B people to behave in a certain way. Or the idea that the average shareholder stock owner is doing well, but the average person who maybe isn’t in stocks, they’re getting hurt, because, okay, inflation is going up and incomes go down. It’s like, do you put any value in the idea that people are genuinely concerned? Like, I see bad countries around us, and I see bad policymakers? And I’m afraid they’re gonna put us in that position.

Sam Burns 44:00
No, you’re right. Yeah. I mean, a lot of other countries. I mean, you know, have had big problems. Yeah. I mean, whether it’s Yeah, currency devaluations or high inflation, or anything else, and those are almost always traceable to, you know, terrible economic policies, and structural issues in their economies, a lot of them are small, you know, much smaller economies that are more dependent on, you know, foreign funding and things like that, you know, the US is different in many ways, partly just the size, and diversity of the economy, but also the dollar, of course, being the global reserve currency. But and having our own energy sources in many ways. So Europe, for instance, has had a lot more trouble with energy, cost and us because they don’t have their own oil and natural gas to the same degree we are. But a lot of videos or longer term structural issues, like we talked about with China. A lot of that’s been years and years in the making. So this isn’t and so you know, COVID kind of set some of this off in China and elsewhere. But It was it was sort of a match on something that was already set to set to burn, you know, Turkey or Argentina or these places that have, you know, very, very high inflation rates. You know, that’s just years and years of just gross mismanagement, by, you know, a multitude of different leaders, just pursuing economic policies that weren’t sensible at all. And so, two minute, Jimmy, you certainly want to differentiate those and be careful if you’re going to invest in anywhere that you think has wildly, you know, leadership or economic policies, and Europe, you know, as a problem, because there is no, of course, Central European fiscal policy, it’s a collection of a whole bunch of different countries, they have one currency, but no common fiscal policy. And so they can’t really coordinate, you know, unemployment benefits, or banking systems supervision, or, you know, stimulus or whatever, they did a little bit of that in COVID, but not much. And they’ve, they’ve struggled as a result. So I think there’s some things that are structural like that, where you have a currency union without a fiscal union, or you have a one party system in China that tries to dictate, you know, growth, when it’s not really there, or things like that. And those can take years to kind of play out. But eventually, you know, the kind of things come home to roost. But I think the US has done a better job of that, partly because of our structure, it’s just much more opening kind of capitalistic this your freedom to fail. And because, you know, our policies have been a little bit more dynamic, and willing to respond to it. And so I think, you know, as much people, you know, sometimes complain about the the inflation Reduction Act of the chips Act, or the infrastructure act, I think those are actually critical in keeping the US economy in better shape than it would have been otherwise, again, compared to a lot of other economies. And I think as long as we can continue to make at least somewhat sensible economic decisions, then that’s going to help. I think if we get, you know, get ceiling crises, which is just a made up thing, or, you know, government shutdowns, things like that, I think that’s going to be you know, problematic. Luckily, we’ve managed to avoid major problems like that historically. But I think people focus too much on, you know, things like the federal deficit, and less on what, what they’re spending the money on, and how, and you know, what it’s doing. And I think if you’re investing in useful things than that, you know, that’s good. And so I think you have to think about not just, you know, how much money there is, but where it’s going and what it’s doing. And that gets overlooked a lot. Again, the nuance,

Eric Chemi 47:31
I appreciate that, I appreciate that context is really good. Really good. Sam, thank you so much. eye opening discussion on how you’re thinking about things and getting to moderation back, you know, you might only get like, a few views for this, because you’re not scaring the world into, into just

Sam Burns 47:48
a mattress. Yeah, no, no, it’s hard sometimes thinking about what will sell or get the clicks, versus what is more likely to be right, or what, you know, investors can really use to manage your portfolio. And so I’ve, you know, I’ve tried to resist, you know, making extreme points of view, just just to get the attention. You know, I’m here, again, as an independent reserve provider to, to try and give good advice. And, and have, you know, sort of a long career for that. And so, so, yeah, so whether it’s maybe less exciting, but to hopefully more accurate, or

Eric Chemi 48:25
even I was gonna say that was my question is, would you rather, would you rather your career be more accurate? Or you’re selling more newsletters, right? Which one, which one matters more, right?

Sam Burns 48:35
Well write and sell more newsletters today, or, you know, people realize that your advice isn’t very good. And they stopped buying it, you know, a year or two from now. And then you kind of have hurt your reputation. So, you know, again, whether I’m right or wrong, I at least figure like I have objective indicators that can show you that, you know, that I can test and I can walk you through the you know, the logic of what I’ve said and why as opposed to kind of, you know, more extreme views that are harder to you know, when you dig into them, you know, tend to fall apart. That’s why

Eric Chemi 49:06
I asked about your personal investments because it was interesting to hear other people who are like, Oh, I’m Doom Doom, Doom, Doom, Doom, but along all these things, because if you go short, you’re gonna get blown up anyway. So that’s why I was curious. You know, you’re

Sam Burns 49:18
Yeah, I have equities in my portfolio. I’m overweight stocks. So I don’t really say I don’t have a lot of active trading, but I do kind of more or less put my money along the lines of what I recommend other like

Eric Chemi 49:31
following the model basically. Right, right. Right. And then where can people to get more so it’s Millstreet What are some other ways maybe Are you on social media where other ways can they can follow you directly?

Sam Burns 49:42
Yeah, and so on. Twitter is probably where I’m most active. So it’s at Mill Ste research on Twitter. So a post there most days, you know, kind of macro views and kind of highlights some of the work I do sectors or regions or stock selection. Also on LinkedIn. Again, there’s a Millstreet research page there you can follow where you can catch up on things. There’s a blog that I update periodically on the Millstreet Research website you can go to the website and put in your email and get free get updates whenever the blog is updated to get in kind of just to get a perspective on on things that I’m saying there’s sample reports there as well. So you know, if you’re interested you can certainly find out a lot more we are on follow Millstreet on Twitter and LinkedIn awesome

Eric Chemi 50:25
awesome Sam, thank you so much. Thanks for everybody sitting through this and and listening and learning we really appreciate it of course if you liked this episode, like it, share it, subscribe for it, go to sans website, you know, check out the newsletter, of course go to You can check out all the information about this episode and many more over there. And if you’re looking for some other investment advice, or someone helped manage your portfolio because you’re trying to figure out what to do with all this information, maybe you don’t want to do it yourself. We’ve got a forum there you can connect with investment professionals that we that we can we have relationships with here wealthy and that we can connect you it is no cost, just a free public service that we provide. Hopefully we can help families figure out their finances and their investments. So that’s You can also check out our other shows as well. Anthony Scaramucci has a show if you want some different hot takes and opinions once a week. He’s got the live q&a Fridays at 11. You can fill out the form there submit your questions at He’ll answer them on the show. Sam, thank you again for joining me. This has been really a pleasure. Really a treat. Thanks so much for coming on Wealthion.

Sam Burns 51:27
Oh, my pleasure. Thank you for having me on.


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