let's come back to these major indexes joining me now is thomas.
Hayes share of Great Hill capital
thomas, it's great to have you on the show?
Broad based gains across the board on Wall Street today?
Certainly a reprieve after heavy selling
last week, but it looks like we're still technically in a bear market.
What's your reaction?
Well, I think this is a nice relief rally, as you had mentioned,
Kristen there was a lot of pessimism over the weekend
about recessions, about the odds of recessions going up.
And I think the Goldman and morgan Stanley calls about the recession are reasonable
considering the fact that we inverted the yield curve is several months back.
The 2 10 spread,
we recently inverted it temporarily in recent sessions.
Uh and then you've got the Atlanta Fed GDP now numbers that
are currently at zero and if they go negative for Q.
Two, that would mean we've had two consecutive quarters of negative GDP growth,
which would mean a recession, that's the bad news,
The good news is How much is already priced in, you know,
as you mentioned with the S&P down over 20% bear market territory,
NASDAQ got down over 30%, I think with the shallow recession,
with the employment situation,
a good portion of that may already be priced in Kristin.
So a relief rally at thomas is what you called
it earlier and I think people would agree with that.
Certainly there's no disputing that it was a reality,
but how much further could we fall from here?
Do you think we've reached a bottom or do you think there's further selling to come?
Well, I think that when quality goes on sale you have to start to nibble, you know,
as Warren Buffet says,
y widespread fear is your friend that serves up bargain opportunities to purchase.
Personal fear is your enemy.
And I'll give you an example of a once in 100 year black swan,
which was the great financial crisis in 2000 and eight.
If you bought September 15, 2008 When Lehman Brothers declared bankruptcy,
the S&P was down 26% at that point.
Uh so you would have bought at a discount however, over the next few months
the market fell another 44% from 1100 down to 666.
That seems like bad news. But if you took the long term view,
even buying too early, you were up about 14% compounded,
including the recent correction versus the long term
average of eight or 9% per year.
So basically buying too early,
You doubled your money every 5.2 years versus the average of every 8 to 9 years.
So you,
you can't get it perfect but you gotta gotta nibble when there are opportunities.
So here's a question.
What do you say to investors who are just honestly scared the markets altogether.
Um inflation obviously may not have pink just yet.
They're still inflationary pressures out there,
Russia still invasion invading Ukraine and china
still technically does have a zero tolerance policy
not to mention that we could see another owner,
crone like variant pop up when it comes to the coronavirus.
I mean this is still a pandemic
after all. And so what do you say to investors who are absolutely
almost just turned off by the stock market?
They don't know if they want to get back in.
Yeah, I would say you have to separate your emotions from the data.
Let's, let's take a look for instance, Disney.
Disney is down 54% off of its recent highs when you look out three years from now,
do you think more people are gonna be going to the
parks or less people are gonna be going to the park.
Do you think more people are going to sign up their kids to watch
their, their high quality family content or less people?
Uh Starbucks, it's down 42% from its recent highs on the china.
Overhang china is reopening and they're aggressively stimulating.
Uh do you think more people are gonna be drinking Starbucks
two years from now than we were during the lockdown?
And the answer for all of these is yes.
So do you have to worry about getting the perfect bottom No.
If you bought it the quote unquote wrong time
In 2008 and the market still fell another 44%.
You still grew your money twice as fast as if
you didn't step in when those bargains were there.
So I think you have to be selective.
We're not wholesale buying the industries but I will say you you
hit the nail on the head China with with China Kristen in that
while the west europe and the United
States are aggressively tightening to bring down consumption
china is reopening and they are aggressively easing.
They're one of the only two large economies,
aggressively easing and stimulating their economies.
And we've seen some of these technology stocks based
out of china do well of late because the
country also scaling back some of that regulation that
we had seen take up these past few years
thomas.
Another question that I have for you is what about
people wondering if they should sell at these levels?
What would you recommend to them
selling chinese stocks,
no selling stocks in general. U. S. Stocks.
Yeah.
No look the time to the time to buy insurance is before your house is on fire right now.
The house has already burned down. So it's probably a little bit late to be selling.
We'd be more inclined and we are in the market buying on a selective basis
particularly you know chinese market.
The interesting thing about it both in the great financial crisis and now it seems
China bottomed several months before the US markets bottomed in 2008
and 2009 and I think the same thing is happening now.
The Chinese markets particularly China Tech, which got hit the hardest
bottomed in March and Bellwethers like Alibaba are
up over 44% in the last few months.
But they're still trading dramatically below their intrinsic value.
If you consider the earning powers
power in the out years, there's still a tremendous amount of things to do.
So that's one area we've been adding.
You're adding there. We got to leave it there. We're gonna end on that note.
That's thomas Hayes, chair of Great Hill Capital thomas.
Thanks so much for joining me this afternoon.