RUSH TRANSCRIPT Back in ░░░░░░░░ stocks rebounding Our next ░░░░░░░░ says it is still ░░░░░░░░ to remain cautious Joining ░░░░░░░░ now Richard Saperstein of ░░░░░░░░ partners one of the ░░░░░░░░ rated financial advisors in ░░░░░░░░ country are you still ░░░░░░░░ Negative Thanks for the ░░░░░░░░ Are you you ve ░░░░░░░░ really negative So look ░░░░░░░░ look at this as ░░░░░░░░ pivot rally where 22 ░░░░░░░░ fears of inflation and ░░░░░░░░ reaction function of the ░░░░░░░░ now this year that ░░░░░░░░ past us and we ░░░░░░░░ a rally going on ░░░░░░░░ it doesn t really ░░░░░░░░ into account that we ░░░░░░░░ going to have a ░░░░░░░░ cycle and the business ░░░░░░░░ is being indicated by ░░░░░░░░ at m 2 is ░░░░░░░░ profit margins are down ░░░░░░░░ basis points there s ░░░░░░░░ leading indicators Three of ░░░░░░░░ are pointing to slowdown ░░░░░░░░ are down so we ░░░░░░░░ the business cycle to ░░░░░░░░ in 23 leading the ░░░░░░░░ eps and a weak ░░░░░░░░ market So you are ░░░░░░░░ almost identically positioned at ░░░░░░░░ how you re thinking ░░░░░░░░ this market to Mike ░░░░░░░░ at Morgan Stanley who ░░░░░░░░ almost the exact same ░░░░░░░░ don t believe the ░░░░░░░░ none of this is ░░░░░░░░ on fundamentals this being ░░░░░░░░ rally that we have ░░░░░░░░ to start the year ░░░░░░░░ s been positioning It ░░░░░░░░ been short covering everything ░░░░░░░░ going to happen as ░░░░░░░░ said it just may ░░░░░░░░ pushed off a little ░░░░░░░░ more than people thought ░░░░░░░░ and I think if ░░░░░░░░ take a longer term ░░░░░░░░ we have the ability ░░░░░░░░ opt in or opt ░░░░░░░░ So the market was ░░░░░░░░ 100 for the three ░░░░░░░░ ending 21 last year ░░░░░░░░ down 20 January it ░░░░░░░░ up another 8 There ░░░░░░░░ a lot of volatility ░░░░░░░░ year we reduced equity ░░░░░░░░ in client accounts and ░░░░░░░░ added municipals We talked ░░░░░░░░ that in October You ░░░░░░░░ like those Yeah but ░░░░░░░░ window closed on what ░░░░░░░░ did we were able ░░░░░░░░ lock in yields of ░░░░░░░░ 4 5 tax free ░░░░░░░░ 8 to 10 years ░░░░░░░░ that s over Now ░░░░░░░░ have to focus on ░░░░░░░░ to do going forward ░░░░░░░░ we re still not ░░░░░░░░ with bringing on more ░░░░░░░░ exposure So you re ░░░░░░░░ you re still sitting ░░░░░░░░ a pile of cash ░░░░░░░░ I think the last ░░░░░░░░ you were here was ░░░░░░░░ most you ever had ░░░░░░░░ deployed the cash across ░░░░░░░░ board into municipals We ░░░░░░░░ comfortable What gets you ░░░░░░░░ into stocks Well I ░░░░░░░░ there s a couple ░░░░░░░░ things we have to ░░░░░░░░ for First of all ░░░░░░░░ tightening cycle won t ░░░░░░░░ until the Fed funds ░░░░░░░░ is above the inflation ░░░░░░░░ so we re still ░░░░░░░░ 150 basis points away ░░░░░░░░ that You think they ░░░░░░░░ going to go 150 ░░░░░░░░ points more No I ░░░░░░░░ inflation will continue to ░░░░░░░░ down Okay And I ░░░░░░░░ At some point they ░░░░░░░░ going to meet right ░░░░░░░░ And that would be ░░░░░░░░ indication that the Fed ░░░░░░░░ the terminal rate so ░░░░░░░░ another 50 basis points ░░░░░░░░ funds But I think ░░░░░░░░ other thing we have ░░░░░░░░ consider is the business ░░░░░░░░ and we talk about ░░░░░░░░ soft landing real rate ░░░░░░░░ return the guy on ░░░░░░░░ street doesn t care ░░░░░░░░ that The guy on ░░░░░░░░ street wants to expand ░░░░░░░░ business had a loan ░░░░░░░░ s say two years ░░░░░░░░ the cost of capital ░░░░░░░░ 3 5 today it ░░░░░░░░ fed funds plus 500 ░░░░░░░░ points or 10 so ░░░░░░░░ grinds the economy to ░░░░░░░░ halt over time That ░░░░░░░░ what we re seeing ░░░░░░░░ the data suggests we ░░░░░░░░ going to see a ░░░░░░░░ cycle What about I ░░░░░░░░ the consumer and the ░░░░░░░░ of the labor market ░░░░░░░░ suggest that there s ░░░░░░░░ longer runway to that ░░░░░░░░ than people like you ░░░░░░░░ to suggest there is ░░░░░░░░ There is definitely strength ░░░░░░░░ the labor market you ░░░░░░░░ have you know a ░░░░░░░░ of optimism and obviously ░░░░░░░░ s not reflected in ░░░░░░░░ data So the market ░░░░░░░░ moving data s going ░░░░░░░░ way Here s what ░░░░░░░░ sort of see as ░░░░░░░░ disconnect between your at ░░░░░░░░ part of your positioning ░░░░░░░░ your perspective Microsoft You ░░░░░░░░ that stock You say ░░░░░░░░ s your top pick ░░░░░░░░ 2023 Yeah In an ░░░░░░░░ that has a lot ░░░░░░░░ skepticism around it that ░░░░░░░░ t fit your overall ░░░░░░░░ of view on the ░░░░░░░░ how We re long ░░░░░░░░ holders of apple Microsoft ░░░░░░░░ Google Microsoft has great ░░░░░░░░ because you have the ░░░░░░░░ okay which has 70 ░░░░░░░░ margin they have 23 ░░░░░░░░ the cloud business which ░░░░░░░░ they re behind Amazon ░░░░░░░░ has 32 of cloud ░░░░░░░░ which is a recurring ░░░░░░░░ business and game So ░░░░░░░░ you look at Microsoft ░░░░░░░░ billion of free cash ░░░░░░░░ on a 2 trillion ░░░░░░░░ so it s a ░░░░░░░░ 3 free cash flow ░░░░░░░░ on the company company ░░░░░░░░ going to continue growing ░░░░░░░░ high gross margins great ░░░░░░░░ penetration excellent CEO and ░░░░░░░░ is our number one ░░░░░░░░ for the year Aren ░░░░░░░░ you making the case ░░░░░░░░ most of large cap ░░░░░░░░ Yeah Even as you ░░░░░░░░ on the market Yeah ░░░░░░░░ there s the market ░░░░░░░░ but we still are ░░░░░░░░ invested our clients still ░░░░░░░░ 35 to 50 of ░░░░░░░░ portfolio in equities so ░░░░░░░░ s not like we ░░░░░░░░ out of the market ░░░░░░░░ just scaled back our ░░░░░░░░ and added munis at ░░░░░░░░ rates last year You ░░░░░░░░ also in a sense ░░░░░░░░ the case that if ░░░░░░░░ are putting your money ░░░░░░░░ stock market go towards ░░░░░░░░ and these are the ░░░░░░░░ that you want to ░░░░░░░░ which suggests that do ░░░░░░░░ think that the tech ░░░░░░░░ of this year is ░░░░░░░░ for lack of a ░░░░░░░░ word The tech move ░░░░░░░░ high cash flow companies ░░░░░░░░ but there s a ░░░░░░░░ amount of companies that ░░░░░░░░ still negative cash flow ░░░░░░░░ they had tremendous moves ░░░░░░░░ year So last year ░░░░░░░░ you take the 10 ░░░░░░░░ with the greatest decline ░░░░░░░░ the S P down ░░░░░░░░ on average or up ░░░░░░░░ this year but 7 ░░░░░░░░ of 10 of them ░░░░░░░░ negative earnings revisions So ░░░░░░░░ is a pivot rally ░░░░░░░░ we re not really ░░░░░░░░ in so what do ░░░░░░░░ do We basically look ░░░░░░░░ high cash flow that ░░░░░░░░ basically you have high ░░░░░░░░ flow tech stocks Oil ░░░░░░░░ and then we have ░░░░░░░░ deglobalization So you re ░░░░░░░░ deterred by energy s ░░░░░░░░ to start this year ░░░░░░░░ no theat all energy ░░░░░░░░ let s call it ░░░░░░░░ of the S P ░░░░░░░░ profits but only 6 ░░░░░░░░ market cap the spr ░░░░░░░░ are over Asia s ░░░░░░░░ to pick up with ░░░░░░░░ China reopening Demand s ░░░░░░░░ to increase I don ░░░░░░░░ see our scenario is ░░░░░░░░ that oil is going ░░░░░░░░ outside of 70 or ░░░░░░░░ a barrel and you ░░░░░░░░ free cash flows anywhere ░░░░░░░░ 10 to 20 which ░░░░░░░░ an amazing return opportunity ░░░░░░░░ owning oil stocks Let ░░░░░░░░ ask you lastly and ░░░░░░░░ I got to go ░░░░░░░░ the mountain of cash ░░░░░░░░ re sitting on the ░░░░░░░░ you haven t put ░░░░░░░░ munis and other parts ░░░░░░░░ credit when you do ░░░░░░░░ it into equities what ░░░░░░░░ the first place you ░░░░░░░░ going It depends on ░░░░░░░░ we are in the ░░░░░░░░ and what s come ░░░░░░░░ but I think we ░░░░░░░░ to look at the ░░░░░░░░ earnings at 220 estimate ░░░░░░░░ year we don t ░░░░░░░░ it happening And stocks ░░░░░░░░ pretty vulnerable down to ░░░░░░░░ 600 At that point ░░░░░░░░ ll re evaluate 3 ░░░░░░░░ okay we ll see ░░░░░░░░ s good to talk ░░░░░░░░ you