Our speakers today are Mike Ribich from Merrill Lynch and Joe Terranova from Virtus Investment Partners. We've also got Brian McGuire, President and CEO of AED on the Line. And before I turn it over to him, I'd like to let those of you who are live with us know that you may submit questions during the webinar via the chat box in the lower left side of your screen. Also, the slide deck from today's presentation is available as a PDF in the handouts tab of the webinar homepage. We're also recording this webinar so that you can watch or re-watch on demand at your convenience. And with that, I will turn it over to Brian. Well, welcome, everybody. Again, this is our second webinar on the topic of dealing with the volatility and what you need to know during the crisis. So we want to thank Mike Ribich from Merrill Lynch and Bank of America for joining us. And we appreciate their partnership on this as AED continues to provide these webinars on information that we think is going to be helpful to you as we all weather this uncharted territory and we figure out our next moves. But again, please feel free to submit your questions through the chat box. And with that, it's my pleasure to welcome Michael Ribich. Michael? Great. Thank you, Brian and Liz. Good afternoon, everybody. For those that were on the call last week, again, I appreciate your time last week. And for those that were not, you know, this is part two. Part one last week was really talking about market volatility and looking at things you should be doing. We discussed some market commentary from Merrill Lynch's chief investment office as well as, you know, a few, you know, five, ten minutes insights from representatives of PIMCO. You know, I'm not going to really go through the markets and things you should be doing again on this call. We have a great guest speaker today with us, Joe Terranova. Many of you who watch CNBC will recognize him from, you know, Fast Money or Halftime or Squawk. In addition to being a CNBC contributor, Joe is really the chief market strategist for Verdis Investment Partners, which is a $100 billion plus investment management firm. They're one of the investment managers that we utilize as a partner of my team and I here at Merrill Lynch and Merrill Lynch in general. And so Joe's going to really give us, you know, some commentary and talk about the markets, the economy, you know, from his perspective and their perspective. But just before we get into that, you know, I just, you know, wanted to reiterate, you know, one of the key themes I talked about last week and key themes to managing your investments during these volatile times, whether it's today, whether it's previous volatile times, whether it's the volatile times we will have in the future, right, is really just staying the course, right? There's a saying that we use that it's time in the market, not timing the market, right? And the reason we say that is that, you know, people forget that if you get out of the markets, right, that's not the only decision you have to make. You have to realize and make a second decision is when do you get back in, right? And as I talked about last week and we went through some of the slides last week, you know, if you miss the best 10 days in the market, you know, you really are giving up substantial returns. And again, it's simply just missing the best 10 days in the market. For example, in the, you know, 2010 to 2020 decade, if you miss the best 10 days, you gave up close to 100% return, right? In the 2000 decade, you gave up, you know, 40, close to 40% return by missing 10 days. And so how do you miss those 10 days by not being in the market, right? A lot of people are like this time is different. You know, there's a lot of analogies that we like 2008, you know, there's been talk about the Great Depression, Joe is going to talk about that. I think he does a great, great job giving an analogy about relating, you know, today and the environment right now to the Great Depression. But people forget that, you know, we have gone through double digit down years in the past. And on the chart on the screen, you see that. And it's amazing how many people forget, right? Less than 15 months ago, we went through a period where you're down 20 plus percent, right? Fourth quarter of 2018, right, Christmas, right, right around Christmas time, I remember Christmas Eve, normally is a very quiet lack day for us in the investment business, and you're down 600 points on Christmas Eve, which is a half a day of trading. So again, we've been there before, we will get through this markets have continued to go up. If you look at a long term chart of the markets, right, it's a slide up. So again, take away, stay the course, rebalance your portfolios, and for those that have taxable assets, this is a great opportunity to do tax offs on. These are things we're doing with all of our clients. On the next screen, you know, Liz will put up here again is my contact information, it was the same slides that were up, you know, last time, but feel free to reach out to my partner Tim, myself, anybody else, I got this is just a slide that we used yesterday. So Tim's in there, but myself, rather, we have a 12 person team. On the bottom of this slide is some additional resources. Merrill Lynch makes available on a daily basis, at 2pm Eastern Time, a daily audio cast with our chief investment office. So every day we're, we're doing an audio cast on the daily market insights. And then also on our market volatility website, we have various white papers, audio casts, recordings of things surrounding the COVID, oil crisis, and market volatility. So please utilize those. And myself, that's what we're here for. If you have any questions, we've had a couple year relationship with AED and currently, you know, working with them as the advisor on the foundation and the reserve account. So with that, again, I will turn over to Joe Teranova from CNBC Invertis. Thank you, Joe. Thank you. Thank you so much for joining this afternoon, ladies and gentlemen. It's an honor and a privilege to speak with all of you. I think the team that Mike is putting together and the information that he's providing is incredibly valuable at this point. Let me also just offer to all of you, first and foremost, I hope all of you are staying safe, you and your families are healthy, and that you're actually able to enjoy what's most important, some quality time with your loved ones. I'm going to enjoy this time that we're going to have together talking about the capital markets, and I'm going to go home, and I just found out my 11-year-old daughter made me some peanut butter and jelly muffins. So I'm going to enjoy some quality time with her and those muffins. All that being said, let's talk a little bit about what's going on. Obviously, the violence that we have experienced as the capital markets have experienced a 32% decline over the course of basically 24 trading days. You could look at that as basically since the end of February until where we sit now. It was mentioned that there are correlations between the Great Depression. I think many people are making an analogy between now and the 1929 Great Depression circumstances. So let's address that right away. Yes, the correlation between the short duration of decline for the S&P 500 in 2020 can only correlate to one experience in the history of the capital markets. That would be 1929. In 1929, we had a similar, fast, accelerating decline for the capital markets in a short period of time. That's where the correlation ends for everyone on this call. Beyond that, we are actually talking about a 180-degree difference circumstance in 1929 versus 2020. Now, when you think about 1929, you think about three words, the Great Depression. 1929 did not cause the Great Depression. The selloff from COVID-19 from February into March is not going to cause the next Great Depression. What caused the Great Depression in 1929 was fiscal and monetary policymakers who were unreceptive to providing capital markets and the economy with the needed measures to recover. Monetary policymakers at that time realized there was an absence of liquidity in the capital markets. They didn't address it. Fiscal policymakers at the time knew that citizens were in need of a form of stimulus. They didn't provide it. They actually raised taxes. So the Great Depression was caused by the absence of a response on the part of fiscal and monetary policymakers. There is by no measure that the comparison can be drawn between 29 and 2020 except the rate of decline. The Great Depression was not caused by the selloff in 1929. It was caused by the actions or the inactions of fiscal and monetary policymakers. 2020. We are faced, ladies and gentlemen, with what I would categorize as a crisis of preservation. A crisis of preservation that has placed the economy into a man-made recession, a crisis of preservation that needs a mosaic of coordination for a recovery process to unfold. Mohamed El-Erian has done a great job on CNBC recently. He's been talking about the destination and the journey. Let's talk about that for one second and what that means to me. The destination for me is the great opportunity that when we look back upon this, we are all going to understand from a capital market pricing standpoint, it was a great opportunity. That's the destination. I think most of you on the call, Mike and his team, I'm sure, listening to his words, understand we're going to look back and view this as a great opportunity. It's about the journey, though, and how we get to that destination. In the great opportunity that I'm defining when we look back upon this, I want you to understand two critical things. For the very first time in many years, diversification, diversification so important to everyone's portfolio, so important to everyone's goals and everyone's outcomes, diversification has been placed on sale. In addition to diversification being placed on sale, quality has been placed on sale. Keep those two things in your mind as I now walk you through the process, the mosaic of coordination that's needed. The mosaic of coordination begins first and foremost with monetary policy and the Federal Reserve, distinctly different than 1929. That's it. I'm not mentioning 1929 because there is no relevance in this conversation anymore for 1929. Monetary policy, highly accommodative in 2020. Let's give you some evidence towards that. It's all about liquidity. Asset prices respond to liquidity, okay? Liquidity nourishes leverage. At times, leverage becomes excessive, and at those moments, liquidity becomes scarce and we go through a process of needing to reliquify once again to re-nourish once again leverage towards risk assets. If I go back and identify from 2000 to 2019, the years in which the S&P 500 happened to be the leading global asset class, ladies and gentlemen, you only find three instances. You find 2013, 2014, and 2015. For those of you on the call, you probably say to yourself, wow, three consecutive years in an embodiment of 19 years and the only circumstance we could find. Well, what did we do from December on the bookend of those three years? What did we do from December of 2012 until January of 2015? What we did was provide the single greatest source of liquidity to the capital markets that we would experience until today. What we did was we took the size of the Federal Reserve's balance sheet from $2.7 trillion to $4.5 trillion. We called it QE3 at the time. The response was nourishing risk assets and creating an environment for equities to flourish. Now in this mosaic of coordination that is needed to move the process towards our ultimate destination and time, ladies and gentlemen, patience is what you as investors must exhibit first and foremost, patience during this time. The Federal Reserve has raised their hand and said in the mosaic of coordination, we're going to take the lead. We're going to present the biggest charge. So let's give you some evidence as to how they're doing that. On Friday, March 13th, the President stood in the Rose Garden and had a press conference. S&P rallied that day towards 2,700. The Dow Jones Industrial was up over 2,000 points. The following week, on Wednesday, March 18th, the Federal Reserve was set to have a pre-scheduled monetary policy meeting. And the expectation was they were going to give the market a 100 basis point cut, take the Fed funds rate down to zero to 25 basis points. That was kind of expected. What happened was the day after the President's press conference, Dow Jones was up 2,000 points, Apple announces on a Saturday it's going to close all its retail stores. Apple makes the announcement, Federal Reserve raises their hand, highly accommodative and says Sunday night, March 15th, 100 basis point cut ahead of the meeting, $750 billion worth of quantitative easing. Markets didn't actually respond too favorably to that. Market was down the next day. Why? Market was suggesting to the Federal Reserve we need more. Liquidity is scarce. Risk assets are being sold because they need to be converted into U.S. dollars, and there's a global shortage of U.S. dollars. The world needs more liquidity, needs more dollars. Federal Reserve immediately addresses it that following week. Municipal paper facility, first facility that they rolled out. Then they targeted the mortgage, the municipal bond market. Then they targeted the mortgage market. Then they went after the corporate debt market. And ultimately, in the following week, they changed the terms of the QE program that they announced from $750 billion to infinite, infinite QE. The mosaic of coordination finds its foundation in the Federal Reserve. The evidence that they're providing stability and lessening the heightened sense of urgency that investors are feeling to sell risk assets and convert them into dollars is found in the U.S. Treasury market. Here's the evidence. Let me explain to you. Back in January, in the middle of January, the price of a U.S. 10-year Treasury was 1.85. At that very same time, U.S. financial institutions were reporting their earnings. They were reporting historically strong earnings, but yet their equities were not responding favorably to the earnings. It was puzzling at the time to most. What that really was was an early warning sign that there was visibility of some global contagion that was going to disrupt the global economy and global capital markets. It was COVID-19, and it was emanating from the Asia Pacific region. That was the early warning sign. The Treasury market and the 10-year Treasury yield itself became the focus point for all investors. This heightened sense of urgency that I discussed presented itself in the form of a need to aggressively purchase Treasuries and push down yields to the point where if I take the collective six-week period from February 21st, that's a Friday, the week ending February 21st, if I take six weeks, first week being week ending February 21st, and I go through to the week ending March 27th, six-week period, what's represented in the evidence is the actual urgency to rush towards risk assets in the Treasury market. So the week of February 21, a 10-year Treasury experienced a 14 basis point range, calm, calm environment. The following week, week ending February 28, it expanded to 31 basis points, nearly doubling. The week after that, March 6, it was out to 51 basis points. That fear, that urgency was building. And by Friday, March 13, when President Trump was standing in the Rose Garden, we had an 80 basis point weekly range for the US Treasury market. Now, the evidence of this mosaic of coordination represented by the Federal Reserve first and foremost being the area support is that two weeks later, the weekly range for the US 10-year Treasury is down. It is compressed to only 22 basis points. That's right. It went from 80 basis points in a range two weeks ago to 22 basis points. We're seeing a mitigation in the heightened sense of urgency that the capital markets have traded. In addition to that, the week of March 20, Friday, March 20 week, on Thursday, March 19, we saw the VIX, a fear gauge, trade to 85. That is moderated now down below 60. Why? What's the reasoning? The reasoning is we have an infinite Fed who is providing asset liquidity, moderating that behavior from investors to rush to safety. In addition to that, what is comforting to us is that yesterday, Monday, March 30, we had the first high yield debt offering in the capital markets since March 4. On March 4, Charter Communications offered some high yield paper. Yesterday, Yum! Yum! Brands offered $500 million of paper, five-year maturity, 8% yield. By 1130, the notice was given that they were oversubscribed and that they were going to go for another $100 million. Tomorrow, ladies and gentlemen, I encourage all of you to observe, and I'll talk about it on CNBC, Carnival Cruise Lines. Obviously, a troubled company and indicative of the environment that COVID-19 has created. They're going to try and raise about $3 billion, hopefully $3 billion, as much as $6 billion, 13% yield, three-year senior secured. We're going to watch Carnival Cruise Lines tomorrow. What all of that collectively represents the evidence I'm showing you, this moderation of volatility, the moderation in the fear gauges, the VIX, the relaunching of high yield offerings. It shows the asset liquidity, the infinite Fed, and the foundation, this mosaic of coordination from the Federal Reserve. So I said it's a process. But what I haven't said on this call just yet is what everyone wants to know. Was the bottom traced out on, say, March 23rd? The answer to that is that no one knows the resolution of this biological health care crisis. Therefore, not many people know the answer to if that was the bottom. However, what I have just done in the exercise for you is that I have identified for you the conditions that have changed that are more favorable in addressing the liquidity concerns. So even if the market were in a very ominous health care driven sell-off back to the lows, I would offer to you structurally we are in a much more supportive place in terms of monetary policy. And that would even heighten the opportunity that we all know when we look back the destination that this is, it'll heighten that opportunity. So I'm not going to come on this call and say bottom or not bottom. What I'm going to do is give you the conditions. Now, in this process, this mosaic of coordination, what further improvements? Because listen, we are not at the moment where we believe recovery has gained a strong foothold of momentum, and it's well on its way. What else is needed in this mosaic of coordination? First, we've created, because of this biological crisis, the need for what I define as a still society, a still society. In a still society, you freeze economic activity. When you freeze economic activity, what you need to do is you need to give those who you are imperiling their ability to earn, you need to give them a temporary comfort or safety net. That has come in the form of a $2 trillion fiscal stimulus bill. That fiscal stimulus bill is 10% roughly of US GDP. For comparison, in 2008, the fiscal stimulus bill was 5% of US GDP. So we've got a bill that's twice as big. Now, what we've announced recently is we're going to keep this still society in place until April 30th. That's a needed circumstance to mitigate the number of new coronavirus cases and to mitigate and flatten the curve. What will be needed is a revisitation of added stimulus. I would offer that policymakers are going to have to come back and take a look at the size of the stimulus as it relates to a percentage of GDP. From a percentage of GDP standpoint, this probably needs to be closer to 15% to 20%. That's a condition in the mosaic of coordination still that needs to be resolved, part of the journey that gets us to the destination. In addition, Italy is the analog for the United States. Italy is where we could try and model the rate of growth of COVID-19 cases. Currently, Italy is tracking with a daily growth rate of somewhere between 5% and 7%. That's slightly off of the three-day moving average, which is about 6% to 8%. We need to see those numbers get under 5%. So Italy is critical in the context of modeling where the US trajectory might go. Third, price of oil. The price of oil is the single financial instrument that most represents COVID-19. What do I mean by that? So while you're hearing that President Trump is going to speak with Vladimir Putin in the Kingdom of Saudi Arabia, and they're going to address the supply concerns for oil, rightly so, what they need to ultimately address is the demand, the demand evaporation. Yes, evaporation. Now, the only way the demand evaporation can be resolved is not by President Trump talking to Vladimir Putin or the Kingdom of Saudi Arabia. It comes from some form of a health care resolution. And when this crisis of preservation moderates into a crisis of confidence, that's the only time the demand evaporation will find its trough. As an example on that, six weeks ago, I keep highlighting these Fridays. Six weeks ago, February 21, when you had that 14 basis point range for the US 10-year treasury, the price of oil was $50.88. Two weeks later, Friday, March 6, the price of oil was $41.05. That weekend, OPEC had the meeting. There was the disagreement between the Russians and the Kingdom of Saudi Arabia. Price of oil the following week was $27.34. So you lost $14 on a supply dispute. I go back, though, February was $50.88. Price today is basically $20.50. So you've lost $30 in the price of oil. You lost 14 of which from a supply disagreement. The other $16 are represented in the demand evaporation. So the price of oil itself will define for us when we have gained footing in this process towards recovery. Lastly, we need unified acceptance. We need unified acceptance in the fight to mitigate the circumstances surrounding COVID-19. When, and ultimately they will, we resolve oil, a peak for Italy, unified acceptance, and added fiscal stimulus. At that point, we will have the visibility to the destination of what this great opportunity is. And what this great opportunity is, is I go back to where I started. A chance for all of us on this call, for the very first time in many years, to diversify. Diversify by four components, not by one component as we've done the last few years. That one component was asset class. Now you're able, on a competitive balance, to diversify by geography, by equity size class, and by strategy. Let me walk you through that. When I talk about diversifying by asset class, this has hit the reset button on the taxable fixed income market. This has hit the reset button for the investment grade component of the taxable fixed income market. This has hit the reset button for the intermissible bond market. That's looking at it by asset class. In addition, what are we fighting? Are we fighting deflation? Are we fighting inflation? Well, if you look at a $2 trillion stimulus plan, and me calling for another trillion and a half, that might lead you to think inflation. However, when you see the evaporation in demand with the price of oil, and a still society that is economically frozen, that suggests deflation. In the middle of that, exposure to gold in a portfolio somewhere around 3% to 7%. In that environment, it's warranted. That's the diversification story by asset class. See, ladies and gentlemen, the last couple of years, diversification for everyone meant fang, mega cap technology. Now it means something different. Now, competitively, because the US dollar is awash in liquidity, there's no longer the gravitational pull higher. We had a coordinated G20 meeting just the other day. Not ironically enough that day, the value of the dollar was down 1.75%. But what does a lower dollar do? Number one, it helps multinationals, US exporters. Number two, it alleviates the stress that the emerging markets and the developed economies have when they price their debt in US dollars. So for the first time in a couple of years, from a competitive balance, you could actually look outside the US. You could look at some of the emerging market stories. And interestingly enough, so far, year to date, some of those emerging markets are outperforming the United States, which is diversification by geography. The next component is diversifying by equity size class. There's been eight instances since 1980 where the market has declined by over 20%, eight instances. In each of those instances, the equity size class that led the market out of the recovery and showed outperformance was small caps. Yes, small caps. Now, that argument in the last couple of years could not be made. Small caps, mid caps, the combination of the two, SMID. Mid caps present a tremendous opportunity. Why? Because you have the fallen angels out of the large cap construct that are now mid cap companies because their market cap has obviously declined in its environment. So there's diversifying by equity size class. And lastly, strategy. Whether it's growth, whether it's value, whether it's momentum, or whether it's dividends, the collaboration of all of those strategies provide in the portfolio diversification. As example, when I say value for a second, think about financial institutions. Financial institutions will be void in their ability to really be buying back shares. So share buybacks are going to kind of go to the sidelines. The estimate is share buybacks will be down about 25% to 30% over the next 18 months. What does that mean? More cash on the balance sheet. So in the last week or so, I've gotten a lot of questions. Would you buy XYZ Financial Institution? Would you buy XYZ Regional Bank? Would you buy XYZ Commercial Bank? The answer to that is I'd look at the preferreds, and I'd look at the debt of financial institutions because those balance sheets are going to look even better than they did over the past five to seven years. So that's where you look at it strategically. Four components of diversification. Next, quality has gone on sale. Quality has gone on sale, in particular, in the S&P 500. When you're looking at companies in the S&P 500, you're not looking at airlines right now. You're not looking at energy. You're not looking at some of the travel and entertainment or the brick and mortar retail space. You're looking at the quality. You're looking at real estate. You're looking at technology companies. You're looking at companies with low debt levels. Low debt levels will matter going forward. You're looking at companies that will have a return to visibility in their earnings. That's how I define quality. Much was made about the S&P 500 trading below the December of 2018 low. Well, yes, in fact, it did. But much of the S&P 500, of which I would define it as quality, never traded below the December of 2018 low. And that, over the last week or so, is what has provided stability and a little bit of comfort and, again, suppressed that heightened sense of volatility and urgency that we are experiencing in the market. That's the destination, the opportunity, the opportunity to take advantage of diversification on sale, the opportunity to take advantage of quality on sale. But it is all part of this mosaic of coordination, this process that we must endure. And I encourage all of you on the call today to please patiently understand with your investments that is the needed right behavior right now, is to sit back, observe, thoughtfully understand the conditions as they might exist, keep the expectations low, and keep your time horizons short in terms of where resolutions will be. Because ultimately, the resolution comes back to unfreezing the society. And unfreezing the society distinctly is motivated by some form of confidence that this crisis of preservation that is biological in its nature is mitigating in terms of the viciousness and wickedness that we're experiencing right now for it. Lastly, and then I would love to take some questions from all of you, last couple of years, passive investing seemed to be the desired strategy. Ladies and gentlemen, with the absence of buybacks, passive investing will be very challenged going forward. What will be important and where the premium will be paid is for active management and for stewards of capital that understand liquidity, leverage, and how to apply risk to that. So please keep that in mind when we talk about strategies going forward. I think the return, okay, of the professional risk-oriented active manager is where the solutions to guide you to your outcomes will be found. I think I've gone on long enough. I'd love to take some questions for all of you. Great. Thanks, Joe. Really appreciate the insights and the comments. I know, as Joe said, for those that aren't on, we'd welcome some questions. If you want to just put it in the chat box, I think that's what we're doing that with, right? Yep, correct. Joe, while we're waiting for questions, I know we talked about this last week on the call with everybody, and it was similar but a little different viewpoints. What is your view on the recovery? You hear reshape, you hear U-shape, you hear a lot of people saying that recovery is going to be by year-end. Thoughts, comments? We're not looking for a prediction or any type, but just how long do you think this recovery will be? Okay, so there will come a point. Let's talk about where the economy was before we froze the economy. The economy was arguably in one of the best conditions that it's been in since the 1950s. Why do I say that? Because the U.S. economy has recreated itself in a transformation that has not been witnessed since the 1950s. What did it do? The U.S. economy became a technology economy. We are an asset-light technology exportation economy. We export software and services. We export software and services to the rest of the world. And we have a competitive advantage over the rest of the world. Israel is the second-leading exporter of technology. So the economy, once it is unfrozen, will return to where it found its natural growth. And that natural growth is not going to experience the demand destruction that other components that are less relevant to the economy will. As an example, take a company like Microsoft. Think about how many people are utilizing the cloud right now. Think about how many people are utilizing Skype right now. Think about how many people are using Team right now, okay? That usage for Microsoft, which was very strong before we froze the economy, there will be a high visibility return once we unfreeze the economy, and there's not much modeling of behavior that will change to disrupt that. That's the first construct of the economy, technology-oriented. Second construct of the economy, energy independence. Yes, we're experiencing right now a lower price point for oil, and that lower price point for oil in 2021 will present a challenge with a lot of debt maturing in the high-yield market. But the energy independence that we are experiencing here in the world – John, I'm going to stop you. You broke up there for a minute, so if you can just restart it. Yeah, where did I break up? With oil? Yeah, oil. Start over with oil. Okay, so we've got the construct of a very supportive, technology-oriented economy. Beyond that, we have energy independence, and that's incredibly powerful structurally for the U.S. economy. We have a cyclical challenge right now for oil as it relates to oversupply, half the problem. And then the other half of the problem is the demand evaporation. Okay? Structurally, to be energy independent, what other economy in the world has energy independence and has an economy that's predicated on technology? Okay? Last construct is the U.S. consumer. The U.S. consumer has a savings rate right now of approaching 8%. That's twice what the savings rate was in 2008. So you asked the question on what the recovery looks like, okay? What the recovery looks like is a return to visibility for those strong constructs of the U.S. economy, unrivaled by any other economy in the world. And what happened was, in the last couple of years that was recognized, so any asset domiciled or having that gravitational pull towards the United States, there was an elevated premium that was being paid. So while you might experience or want the V recovery for the economy, and I've just defined the three components of support that could provide it, what you'd rather see for risk assets is not so much of a V but more of a U. And why I say that is because you don't want to return to where the premium gets paid again for anything U.S. centric. What you want is to be able to take advantage of this cyclical opportunity to find diversification on sale and have other asset classes, okay, that are competitively balanced and you don't want an environment where one particular asset class runs away in a V-shaped recovery. That would be what we experience from the fall of 2008 into the first half of 2019. I hope I didn't cut out for any of that. Nope, it was good. We've actually got two questions that came in, both great questions. I'm actually going to go to the second question first because we touched on it just now and we touched on it last week. But the question was, is last week passive investments was mentioned and now again today. Can you explain more about that? Example, how are investment brokers tooled up and engaged? Can you go a little deeper? So a little background on what I mentioned last week on our call was the rapid decline, right? I think you mentioned it earlier, right? We talked about last week was how this bear market from peak to where we're at, bear market was the most rapid we've had, right? 21 days from peak to where we're down 20%. And there was questions and what you hear is why are these drops so big this time around? We're seeing 1,000-point drops, 900-point drops, plus 1,000-point drops. And one of the two stats that we used just from our research that I've seen was that one is that 80% of all trades done on a cash basis are done by algorithms and computers, right? So discussing that. And then the second thing we mentioned is that over 50% of all assets in the funds, and I think you could speak of this as well, are in index funds now. And so what you're going to understand, when we say passive investment, for those that aren't familiar with just what we mean by passive, that's an index fund. And so when we look at passive or an index fund in ETF, it's typically run and managed by a computer. And so, you know, Joe, many people don't know this, but Joe's got a trading background. I'm going to just touch quickly on the algorithms and the computerized trading today versus back then, and then just a little elaborate more, right, on index funds versus active management, and then I'll touch on why that matters from an investment standpoint. Yeah, I think it goes back to risk. And I'd like you to, you know, to kind of engage me on this, because I appreciate your opinion on this. But I think risk matters. And I think, you know, I mentioned before, seas of liquidities, which are now an ocean of liquidity, historically they nourish leverage. And ultimately you get to a point where leverage becomes excessive. Well, when you have excessive leverage, we call that greed. When you have leverage that is swimming in an ocean of liquidity and doesn't want to take on more leverage, that's called fear. And I think the thing that these algorithms and that these exposures to indexing cannot properly measure is something that I grew up in the business understanding, and that's risk. And that's risk assumption. So I would assume that most of your clients are able to do what I'm suggesting to do now, which is to be thoughtful and to utilize patience in your behavioral strategy. The reason that they're able to do that is that their risk has been defined not in the moment of crisis, but prior to the moment of crisis. That's so incredibly important. And I don't know necessarily from my observation if the exposure to that index allows you to properly define your risk and prepare you for the circumstances that ultimately present themselves in an experience that, like, we're having now. What I'll tell you is if you're unprepared and you're over leveraged, then the great opportunity that I'm describing, you can't take advantage of it because you've got excessive leverage. And I think a lot of people that had the exposure, and I'm going to talk specifically about FANG, and the heavy weighting that it had in the index, okay, the trillion-dollar club, I think there was excessive leverage that needed to be moderated. There was a point two weeks into this sell-off, I think it was the first week of March, where I pulled up and I looked at Apple, Amazon, Microsoft, and Facebook, and Alphabet. They all were down at that point somewhere between 11% and 15%. How could that be? How that can be is because it was a risk mitigation circumstance that was coming for indexing. So, again, I use the word risk. I think risk is the most important word in the capital market construct. And if you've defined your risk properly, okay, you're able to endure with patience and take these moments as a secular opportunity. That's how I would categorize the environment when you talk about algos and indexing. You may disagree with that. No, no, I agree. There's a place, and I think this goes right along, there's a place for indexing, right, and it goes back to each individual investor, whether you're an institution, whether you're an individual investing in a taxable account or a retirement account. There's an appropriate place for indexing and there's not. I think the point of what we've talked about and Joe hit on earlier is that you've got to start being selective. And when you own an index or when you own a passive fund, as we're using the term there, but, again, the analogy would be just an index is that an index is going to own, you know, S&P 500 is going to own the 500 names, right? And as I said, the highest weighted, the largest companies are going to have the most weight. And if you have an active manager, they're going to be able to select, look at those individual companies and maybe you don't own an Amazon or you don't own an Apple for certain reasons. An active manager, you know, in certain times is going to hold cash, right? There's an active manager that's holding 10% or 15% cash. The issue with indexes is also, you know, which you see, again, it's a computerized, right? So you saw this sell-off, right? The average investor, right, we talked about fear and greed a little bit, they see the fear they're going to sell, right? That index fund is going to go in and sell. They have to sell equities. If an active manager is holding cash, he's going to utilize some of that cash up before he starts going and selling in a down market. And so, again, it just goes back. There was a big push on indexing over the last 5, 7, 10 years, right? When the markets are going up and every asset class is going up and stocks are going up in tandem, yeah, people wanted indexing because the expense ratios are very, very low, right? You're not paying a team of research analysts, a team of portfolio managers for their intellectual capital. You're paying a firm to put stocks in a computer and run that computer. So I think it all goes back to the advisor you're working with, right? Our team, just to plug the team, uses a combination, right? Some indexes could be tax-efficient in an ETF world, but then there's funds that are tax-efficient as well, active management funds that are tax-efficient. I think you're going to start seeing a lot more separately managed accounts, SMAs, where you have a portfolio management team going in and buying individual stocks for you. Again, it can be selective, but you also get the benefits of the tax efficiency if you need that. So, again, I think it's, you know, without going too much deeper, it's working with your advisor and figuring out which is appropriate for you based on, Joe said, your risk and then also your current and personal situation. The last question, then we'll let Joe go. Joe, what's your view on the housing market going forward? I think real estate is going to be incredibly strong. I really believe that. And I think suburban real estate is going to make the comeback. There was a little bit of a move away from suburban real estate in prior years. I think it will make the return because of this social distancing mentality that we're all going to have, whether there's validity to it or not. I'll leave that to the health care professionals. But I think housing is going to be strong. I'm not concerned about that. I think the REIT market is going to be strong as well. And I think at some point the SALT deductions seem to be the obvious choice. If there's more relief or stimulus that needs to be given, that's where I think you could see a little bit of relief come. So I'm favorable on housing. And we concur with that, right? If you look at definitely the interest rate environment right now is pro real estate. I think we just locked a client in today on a 10-year at 262. So you're borrowing for a 10-year mortgage, again. So interest rates are pro real estate. It's funny, you said suburban real estate. I had a phone with a client this morning, and the first thing she said to me is, I wish we lived in the suburbs. They live in the city, in a townhouse in the city, and with all the kids at home and everybody home, she's like, we're really considering going back. We looked at it. We really wanted to stay in the city. They stayed in the city, and her and her husband are seriously having that conversation now. And I think that's kind of along the lines is you're going to start seeing people look at that. So we agree. We think the housing is going to be strong going forward. I think I saw this morning housing numbers actually came out. They were a little better than expected this morning too. With that, I don't think we have any more questions. We appreciate, Joe, your time and the partnership. Everybody else, stay on the call. Go ahead. I just want to leave with one example, if it's okay. I'm going to tell you a quick story. Go ahead. So I can't tell you who the trader was, but it's a legendary trader that if I said the name all of you would go, oh, okay. So about 30 years ago I had the experience of getting to know this person, and we were involved in a market that was incredibly volatile and incredibly stressful. And he was very agitated. He was very angry. He was very frustrated. And it was visible to all of us. The next day he comes in and his entire demeanor changes, and he begins to approach the market much differently, much more thoughtful, much more calm. And over the following week he continues to approach the market in a very calm demeanor, and the result of that was a very successful investment outcome. Going back a couple of weeks later, we sat down and we said to him, your mood, your circumstance changed. And it was the most interesting thing, the reasoning behind it. And he said, I realized that I needed to do something to clear my mind and I needed to do something to make me relax and see things the right way. And what's so interesting about it is we're all challenged and faced with the same thing right now. So we're all sitting at home. We're all frustrated. We're with our family. We're probably eating a little bit too much. We're all tense. We're all tight. But the craziest thing relaxed him and put him in a good demeanor. And you know what that was? Stretching. And I happened to speak this morning to my doctor, because we've been talking about this health care situation, and he's been helping me on CNBC. And he said the same exact thing to me. He said, if you could do anything for yourself at home, besides any physical fitness equipment you have, he said make sure you stretch during this crisis. It's going to make you see things much more optimistically. I hope that means something to everyone on the call. Great. All right, everybody, thank you very much for your time. If you have any additional questions or comments or you want to have a conversation, our stuff's been up on the screen. It's in the PDF that's attached, and the folks at AED know how to get ahold of us. So, again, thank you for your time. And we'll be doing one more next week, more focused on the industrial machinery. We're finalizing the date, but we're going to have one of our top-ranked analysts in the industrial machinery space, Ross Galardi, speak about the outlook and the industry there. So thank you again for your time, and talk to you again. Thank you. Thank you very much, everyone. Thanks.

market volatility

investors

crisis

staying the course

Great Depression

Federal Reserve

fiscal stimulus

diversification

housing market