Fidelity首席策略师Timmer：AI非泡沫，关注盈利与债市技术面

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We thank you and Timmer in studio right now. You are the number one reason for anybody in the game to go to LinkedIn. Your publications on LinkedIn are outstanding. How did that happen? How did you decide to take Fidelity Wisdom and put it out on LinkedIn?

Good morning. Um, we have Fidelity Compliance to thank for that. So, well, I've been publishing internally for decades, for as long as I've been at Fidelity. Um, every every week I do a stream of consciousness and it was just sort of first to keep myself honest when I was running a fund. It's like, okay, I want to make sure that what I'm doing is actually what I'm thinking and that you don't have this confirmation bias.

So, I I would put out just a little thing with some sound bites on a Sunday and that grew and grew and then during co um you know our higherups said look you know every person who is client-f facing at Fidelity needs to have this because you know everyone is panicking and then uh a few years later or a few years ago uh I was able to convince compliance that you know a a publicly um acceptable version of the report it would be really be helpful if that can go into uh LinkedIn or or X and LinkedIn still is was better suited for that long form content and so I'm very grateful to them.

So I publish on Sunday my my media people uh Jana who sits in the other room right now they look at it it gets approved to send to you and and people in the media on a background basis and then compliance looks at it Monday and out it goes Tuesday morning and um

by carrier pigeon.

Yeah.

You use the word hope a lot. What is the hope right now that scares you? The hope of this bull market. We hope this will happen. What's the hope that Yurian Timmer fears?

So a year ago, my hope would have been that the AI boom does not turn into a bubble like the internet boom did 26 years ago. And a year later, we can say that at least I can say that it's not a bubble because PE ratios have only been falling since then because earnings are exploding so much that market can't even keep up with it. Uh right now my hope is that the earnings train continues to chug along because if it doesn't um we run the risk of sort of an echo or aftershock of 2022 when of course we had this big reset in the cost of capital that knocked the stock market down 28% entirely because of interest rate increases.

And we're in that same dynamic. Of course we all know what's happening in the bond market. Um and you know I always remind folks that we all tend to solve for price right what's your price prediction it's like price is just the residual of earnings and valuation right discounted cash flow model you figure out earnings how much are investors going to pay or should they pay and then you sold for price

you're in timmer at fidelity folks gospel my essay of the year I'll spend the weekend getting out tidbits of this Rob Arnot and Cam Harvey at Duke on just what Yuri Timmer was speaking speaking about from Babson and Fidelity. It's about fundamentals, Alexis, not so much the price dynamic.

And in your note too, we have to talk about the bond market, of course, and and you you call it a relentless bond bear market. You would think it would be the most hated asset class, but you have a great chart in here that shows quite a different story. So, who's gobbling up the bonds? Um, so it's it's a confluence of narratives that has driven bond yields higher and investors through ETFs or mutual funds have been buying bonds just as much as they've been buying equities.

And I think that's actually a good thing because if you're looking at retirement down the road and you can buy a 10-year Treasury, the the supposedly the safest asset on the planet for a real yield of, you know, close to 3%. I mean, what's not to like about that? That doesn't mean they can't go higher. Maybe they will. But um so the economic buyers have been there. The non-economic buyers, central banks, institutions that are regulated by central banks, you know, commercial banks for instance, they have not been buying.

And so the spread between the growth in the debt, which is 17 trillion just since COVID, it's like a mind-boggling number, has not been offset by any kind of non-economic buying. And right now, of course, we're seeing selling. So, the question is who's who's doing the selling, right? Who's doing the selling? Um, I think part of it is actually technical, and this gets into, I'm sure, a topic that Tom loves is the the whole negative negative convexity hedging in the mortgage back securities market.

Um, that, you know, no one is prepaying mortgages because everyone is out the money on their mortgage because yields are rising. So, the duration of the Bloomberg MBS index is going up while the duration of the Treasury index is going down. quoting one of our indexes. That's nice.

Yeah. Well, I'm a big fan of all your data. But so, so it's the opposite of what you see with this negative convexity spiral that you see with low rates. So, in 2020 when the 10-year went to.3%.

Right?

Everyone was refinancing as they should have and so the mortgages get repaid. So, the duration of the mortgage index goes down, treasur goes up, and you always hedging.

I got two folks. Convexity is Yuri and Timor Babson talk. Monica Guerrero would never talk like that. It's like acceleration. So on a full faith and credit 10-year yield 5.2%. Mortgage out at 7 whatever percent. It's nonlinear price down yield up. How close are we to where accelerative convex tendencies go into price and really cause some damage? Are we close to that?

Yes, we're we're in it. Right. So I I would say probably the last since we broke 5%. That's just a guess, right? I would say a lot of the action has just been technical. It's hedging, right? So you you sell treasuries because your tre your durations are mismatched between treasuries and mortgages. Uh and it's just the opposite of what made yields go down even more than they should have back in 2020. So the question is when does that end?

Uh do we go to six or do we stay at 53 or or is it over? Nobody really knows. But I think a lot of what we're seeing right now is technical.

Okay. Urine Timber with us. I I don't care about any of this. Urine, here's what people want to know. Nobody in the Bloomberg surveillance world does a dinner party like Urine Timber. Now, at the end of the table for 10 is a bar, folks, at his house that looks like Lockover 1965. No one has a bar bigger than you. Is that the secret to a a dinner party for 10 is have a few beverages beforehand?

No. And actually, that bar sits mostly idle. It's really because it has all kinds of whisies and bourbons and I don't drink. I'm not a whiskey person. So, it's it's there. But generally speaking, my dinner parties, it's always 10 people. I always plate the food because like a chartist, I want people to

taste the food with their eyes before they love this.

So, I always played, but no one really goes to the bar because we, you know, we'll have wine and we sit.

Is there a cocktail of choice though? I mean,

well, so my son, uh, who just moved to New York, he's 27. He's a very very accomplished mixologist and he's actually looking for he's actually looking for a job right now if anyone out there. Um but he makes these incredible drinks and he puts like the egg white foam in it.

When when it's foam I run I want to cut to the chase. What do you do as food guy with how people are so damn fussy today? Like you can't cook meat cuz you got six different ways people have to have it or they walk out the door. What do you do about modern fussiness in a dinner party for 10?

If they walk out my door, they're not invited back. But uh so we So the only fussiness is like if someone's a vegetarian, fine. I will cater to them. Um

free.

Well, I I don't really cook with like Yeah. Okay. That would be a pasta thing,