The days of beating the market by just investing in tech are over: Neuberger Berman's Eisman

Steve Isman is a senior portfolio manager at Newburger, Burman. Steve, good to see you. Good to see you. Have you on set last week? We had one of our frequent guests, Shree Komal Kumar, was on. He wasn't even saying that he likes two years at 480. He likes long duration, 10 year at 4%, and thinks you're going to make money on those. Instead of going for 480, a lot of times you worry about principal risk, right? The duration, if it goes too long.

But he said do it. And I think you're buying bonds now for the first time in a long time. We're buying bonds, especially treasuries. I mean, I like 480 over 4 because 480 is bigger than 4. But it's only two years. And if we're going, if it's going to really slow down. In this world, two years is an awfully long time.

Yeah. So you don't go long duration, but. I don't think, I think it's early. I mean, I suppose people who are going long duration are expecting a recession. Right. I think they think they're going to go long. I mean, I think the times are so complicated right now.

I mean, I've watched the show all the time. You have guests come on who say there's going to be recession. Then they come on, they say you're not sure. You have other folks say it's not going to be recession. Then they say they're not sure. I mean, it's a very, very complicated time. Well, paradigm shift sounds, that's why I ask you whether you're talking about tenure, because a paradigm shift buying a two year note doesn't sound that profound to me.

It doesn't sound like a paradigm shift. What paradigm shift are you talking about? Well, we define paradigm, first of all. It's a set of assumptions that are so deeply embedded in your head. You don't even know they're there. You don't believe in your paradigm. You inhabit it. That applies to investing just as it applies to a lot of other different things.

The paradigm that has existed for the last 10 years has been that because rates have been zero, people have been paid to take risk. They've invested in tech stocks and they've invested in hyper growth stocks, meaning big revenue growth, no earnings, and valuation be damned. So assuming that we take the Fed at its word, which is obviously questionable, and rates will stay higher for much longer, I think the days of people beating the market by just investing in tech are going to be over. And we're going to go to a new paradigm, which I'm not 100% sure where that's going to be because we won't really know until we get there. But I think it's going to, I mean, there's still be tech stocks to invest in, but I think the days of investing in companies that have no earnings or have multiples of 200 times will be gone. There'll be a lot more themes like infrastructure, maybe greenification, bringing back on shoring of the industrial sector in the United States. It's not clear yet, but I think that's where the market's going to go and bonds.

Over the years, 5%, 6%, we saw tech do fine and tech stocks do fine over the past 30, 35 years, whatever it is. Now we're going from zero back up. So obviously, it's on a relative basis. It's much worse than it was. But historically, it doesn't seem like you just stop buying tech. Well, I'm not saying you stop buying tech. I think you'll be selective.

When you're talking about companies, I mean, I'm not going to name names that have high revenue growth and have negative earnings. I think it's going to be very hard for people to buy them. We go through that.

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