Past Peak Profit?

Published on
September 11th, 2019
Duration
31 minutes

Past Peak Profit?

The Interview ·
Featuring Richard Bernstein

Published on: September 11th, 2019 • Duration: 31 minutes

Richard Bernstein, CEO of Richard Bernstein Advisors, sits down with Vincent Catalano, CIO of Redmount Capital Partners, to explain the profit cycle and why its peak in the fourth quarter of 2018 matters for investors. Bernstein also places it in the context of the debt super-cycle. He also touches on inflation, the validity of the latest yield curve inversion as an indicator of recession, and how to structure a portfolio in order to optimize risk and reward. Filmed on September 5, 2019 in New York.

Comments

Transcript

  • JS
    Jason S.
    27 September 2019 @ 17:33
    “The yield curve represents a model of profitability of bank lending. So if you have a very steep upwards sloping curve - banks will borrow/pay interest on deposits at the short end of the curve & lend at the long end of the curve. So a very steep curve represents strong bank profitability because banks love to lend & the credit sector picks up. But when you have an inverted curve, short term rates (what you pay to deposits) are higher than the long rates (what your lending out) and therefore higher than the anticipated return on the loan. Banks don’t like to lend & the credit cycle begins to shut down.” Extremely interesting comments. But what about credit cards - absolute fraudulent rates!
  • NR
    Nelson R.
    18 September 2019 @ 03:44
    Insightful interview. Vincent does a great job as interviewer.
  • EK
    Edward K.
    15 September 2019 @ 16:58
    Waiting for an Uber driver to recommend a startup. That would be euphoria and a top perhaps.
  • TM
    Tariq M.
    14 September 2019 @ 12:34
    Love Vincent interview style because whenever he spoke while asking questions, he was encouraging and from start to finish- tempo and flow was impeccable. For my taste Grant always seems to be too STARstruck.
    • VC
      Vincent C. | Contributor
      14 September 2019 @ 16:46
      Thanks, Tariq. Much appreciated.
  • IF
    Ian F.
    12 September 2019 @ 17:24
    Are they paying 2% on checking accounts now? I don't think so. Do banks lend at the risk free rate with no spread? I don't think so.
  • BT
    Brian T.
    12 September 2019 @ 16:53
    His process sounds remarkably similar to that used by Hedgeye.
    • GT
      Greg T.
      13 September 2019 @ 23:08
      It is in a way in that's its macro call first. However, I would say Bernstein is way more rigorous, and way more accurate.
  • dm
    daryl m.
    12 September 2019 @ 05:52
    Great interview and dialogue. Vincent 's questions were on point and informative !
    • VC
      Vincent C. | Contributor
      14 September 2019 @ 16:46
      Thanks, Daryl. Much appreciated.
  • JS
    Jason S.
    12 September 2019 @ 04:41
    Literally the best explanation of the yield curve I have ever heard! Really made it simple for us guys who are still learning about yields! cheers
  • DS
    David S.
    12 September 2019 @ 03:53
    One of the only reasons I can rational the US stock market continuing to move up now is a flow of funds from negative rate bonds overseas into the US stock market. Does anyone know how much money is flowing into the US markets from overseas? DLS
    • MG
      Michael G. | Contributor
      12 September 2019 @ 20:56
      Not much, David. The rising stock market has other drivers.
    • DS
      David S.
      13 September 2019 @ 09:53
      Michael G. - Thanks. I appreciate your answer. I will have to give up on that idea, even though it is what I would do. DLS
    • DS
      David S.
      13 September 2019 @ 10:02
      A retired Swiss friend told me he is only allowed to have $60,000 in America stocks. He has a large portfolio as a long-retired stock broker from Z
    • DS
      David S.
      13 September 2019 @ 10:04
      from Zürich. I will ask him why at dinner tonight. DLS
    • DS
      David S.
      17 September 2019 @ 06:44
      I learned that non-US citizens have a US tax entanglement concerns about investing in US bonds or stocks in the US. Therefore their involvement is limited. This complication is normal for persons with dual US citizenships. This is anecdotal information for what it is worth. DLA
  • TT
    Tokyo T.
    12 September 2019 @ 03:31
    Thanks, RV, for finally moving past the recession fear series and doomsday narrative. More interviews like this one, please.
  • FF
    Farouk F.
    12 September 2019 @ 01:55
    I was really looking forward to this one but id have to agree with a lot of the comments that Vincent greatly held this one back. I hope Vincent or someone from RV is reading these comments and constructively taking the feedback.
    • VC
      Vincent C. | Contributor
      14 September 2019 @ 16:48
      Thanks, Farouk. Very much appreciate the feedback.
  • KB
    Kenneth B.
    11 September 2019 @ 23:34
    I don't comment too often. Bottom line I couldn't get through the interview because of Vincent's interview style. Very disruptive. I wasn't interested with what he had to say. Love those interviews where the question is put up with words on the screen and we never see or hear the interviewer.
    • VC
      Vincent C. | Contributor
      14 September 2019 @ 16:49
      Thanks, Kenneth. Sorry to hear you found my interview style disruptive. Very much appreciate the feedback.
    • WS
      Will S.
      17 September 2019 @ 00:25
      I didn't feel that way at all. This was a good conversation.
  • GT
    Greg T.
    11 September 2019 @ 22:41
    This was way too short. The interviewer jumped around a lot and just scratched the surface. I would have liked to hear alot more in depth discussion of Bernstein's process. I think this could've been 2 hours if done properly.
    • VC
      Vincent C. | Contributor
      14 September 2019 @ 16:51
      Thanks, Greg. Appreciate the feedback. Will keep it in mind.
  • HS
    HANA S.
    11 September 2019 @ 20:25
    Disrupting
  • CB
    Chris B.
    11 September 2019 @ 17:35
    Where is Grant? I miss him.
    • JF
      John F.
      12 September 2019 @ 02:44
      Abducted by Tesla.
  • dd
    david d.
    11 September 2019 @ 17:02
    "where are we in the profit cycle?" "my company is great" this is the pattern of the interview
    • VC
      Vincent C. | Contributor
      11 September 2019 @ 17:06
      Hilarious!! (Although, I think we did go a little deeper than that.) :-)
  • LM
    Leighan M.
    11 September 2019 @ 16:13
    MORE more more more MOREmoreMORE, MOREmoreMORE, MOREmoreMORE!
  • JM
    John M.
    11 September 2019 @ 15:42
    If corporations are borrowing money to buy back shares rather than invest in innovation I can see how increasing (corporate) debt causes a decline in productivity but otherwise I don't get it. Just maybe an increasing proportion of USA government expenditures are going to military (ie., waste of money) and social programs (feel good but dubious value - can't easily measure effectiveness)?
  • DP
    Devraj P.
    11 September 2019 @ 15:13
    Spectacular !!
  • JG
    John G.
    11 September 2019 @ 14:20
    Richard Bernstein was one of the first and loudest to say, coming out of the Great Recession, that this bull market would be longer and and stronger than most investors think. As he said in the interview, they over-weighted domestic small-cap stocks. I have always been impressed with his forecasting ability.
    • DS
      David S.
      11 September 2019 @ 19:05
      Please listen again or check transcript. I heard differently concerning current position. I cannot check now, I must get a train. DLS
  • JV
    James V.
    11 September 2019 @ 13:09
    Would love to hear a Bernstein / Acuthan debate.
    • VC
      Vincent C. | Contributor
      11 September 2019 @ 14:12
      Will keep that in mind. Thanks.
  • RM
    Richard M.
    11 September 2019 @ 12:40
    Great interview! As stated below this would have been even better if it had been an hour long session and they could have really explored the topics in more depth (and more topics too). Please have Vinnie and Rich on again in a longer segment when you do a follow-up. Thanks.
  • SA
    Stephen A.
    11 September 2019 @ 11:07
    Rich is a pro's pro. This is a much better forum for him to outlay his methodology than the constant harassing of Joe Kiernan. Loved that chart in the beginning - it's a foundational chart for every active investors.
  • sB
    sylvain B.
    11 September 2019 @ 10:28
    China pick up is what T. Valle mentioned as well and what we are seeing in our indicators but pick up is very modest to say the least and Chinese PPI still trending lower = lower industrial profit
    • VM
      Vincent M.
      12 September 2019 @ 03:25
      I buy from China ... every purchase has been at a lower price and delivered a lot faster than quoted. All vendors say they have plenty of capacity. While he says it is a bottom... time will tell but I see /hear there is a ton of slack.
  • dd
    david d.
    11 September 2019 @ 09:33
    ECRI models are saying to opposite about China. I dont trust this guy, his comparison about horses made no sense.
  • GC
    George C.
    11 September 2019 @ 09:03
    My only complaint about this interview is that it was too short. I hope you bring him back soon and cover more ground and go deeper.
  • DS
    David S.
    11 September 2019 @ 06:54
    Very interesting on the profit cycle turning in China. The yield curve inversion may be caused by all the world QE money fleeing negative interest rates. Regardless it still causes major problems for bank lending. The second problem with bank lending is the debt supercycle, corporate buybacks, and political disruptions makes any actual investments in new projects play second fiddle. DLS