1 00:00:15,120 --> 00:00:18,439 Speaker 1: Welcome to What Goes Up a weekly markets podcast. Umbildana 2 00:00:18,960 --> 00:00:21,239 Speaker 1: a cross asset reporter with Bloomberg. 3 00:00:20,920 --> 00:00:23,400 Speaker 2: And I'm Katie Greifeld, also a cross asset reporter. 4 00:00:24,200 --> 00:00:27,600 Speaker 1: Federal Reserve officials spooked markets recently when they signaled they 5 00:00:27,640 --> 00:00:30,160 Speaker 1: were willing to hike interest rates a few more times 6 00:00:30,200 --> 00:00:33,480 Speaker 1: to get inflation under control. But a new data point 7 00:00:33,520 --> 00:00:37,320 Speaker 1: this week showed inflation decelerating to the slowest pace in 8 00:00:37,400 --> 00:00:40,479 Speaker 1: more than two years. So what does that mean for 9 00:00:40,520 --> 00:00:43,360 Speaker 1: the Fed's hiking path going forward? We're going to get 10 00:00:43,360 --> 00:00:46,240 Speaker 1: into it with the chief investment officer of fixed income 11 00:00:46,320 --> 00:00:50,959 Speaker 1: at the largest asset manager. I'm super excited for that conversation, Katie, 12 00:00:51,200 --> 00:00:53,479 Speaker 1: But first you're filling in for Mike Reagan. 13 00:00:53,680 --> 00:00:56,680 Speaker 2: I am hopefully. We're going to talk about bonds. We're 14 00:00:56,680 --> 00:00:58,000 Speaker 2: going to talk about the FED, We're going to talk 15 00:00:58,000 --> 00:01:01,400 Speaker 2: about inflation. We're also going to talk about exchange traded funds. Yes, 16 00:01:01,560 --> 00:01:03,680 Speaker 2: I love ETF we all do. 17 00:01:03,320 --> 00:01:04,840 Speaker 3: You love ETFs more than I do? 18 00:01:04,959 --> 00:01:05,319 Speaker 1: Actually? 19 00:01:05,520 --> 00:01:05,959 Speaker 2: Probably? 20 00:01:06,080 --> 00:01:10,479 Speaker 1: Yeah? But this is like basically people getting a view 21 00:01:10,600 --> 00:01:14,720 Speaker 1: into mine and your daily conversations at our desks. This 22 00:01:14,760 --> 00:01:16,640 Speaker 1: is literally we sit around and these are the types 23 00:01:16,640 --> 00:01:18,000 Speaker 1: of things we chat about all day long. 24 00:01:18,240 --> 00:01:20,039 Speaker 2: Just to put a visual in hear Vill Doon and 25 00:01:20,040 --> 00:01:23,120 Speaker 2: I sit back to back. We're constantly swinging around and saying, 26 00:01:23,200 --> 00:01:24,319 Speaker 2: holy moly. 27 00:01:24,080 --> 00:01:25,679 Speaker 3: Holy moly, did you see this? 28 00:01:26,080 --> 00:01:28,840 Speaker 2: What yields are doing right now? Have you taken a 29 00:01:28,880 --> 00:01:32,000 Speaker 2: look at the twos ten curve? Even today? This morning 30 00:01:32,000 --> 00:01:35,240 Speaker 2: we were talking about real yields. They are super high 31 00:01:35,319 --> 00:01:35,920 Speaker 2: right now. 32 00:01:35,760 --> 00:01:36,759 Speaker 3: And I said how high? 33 00:01:37,680 --> 00:01:38,400 Speaker 2: So high? 34 00:01:38,520 --> 00:01:40,040 Speaker 3: And you said so high? Lol? 35 00:01:40,200 --> 00:01:42,080 Speaker 2: Yeah. 36 00:01:42,240 --> 00:01:44,280 Speaker 1: You know what else we should chat about? Tell me 37 00:01:44,480 --> 00:01:48,200 Speaker 1: other non market stuff theoretically, So I have a question 38 00:01:48,240 --> 00:01:52,200 Speaker 1: for you. Yeah, Barbie, I'm so Oppenheimer. 39 00:01:53,160 --> 00:01:56,800 Speaker 2: I do love that. How do you pronounce it? Barbenheimer? 40 00:01:57,120 --> 00:01:59,800 Speaker 2: The double feature of people seeing both in the same day, 41 00:02:00,040 --> 00:02:00,840 Speaker 2: think that is, will you. 42 00:02:00,840 --> 00:02:01,560 Speaker 3: Do that with me? 43 00:02:01,680 --> 00:02:02,320 Speaker 2: I would love to. 44 00:02:02,680 --> 00:02:04,880 Speaker 1: You have to say yes, I know, we'll plan it. 45 00:02:05,360 --> 00:02:07,400 Speaker 1: Maybe our guest wants to come with us too, let's 46 00:02:07,400 --> 00:02:09,920 Speaker 1: ask him. We can ask him. I'm so excited to 47 00:02:09,919 --> 00:02:13,480 Speaker 1: have him on. He has so many accolades, Like really, 48 00:02:13,600 --> 00:02:16,840 Speaker 1: we were so thrilled to be having this conversation. It's 49 00:02:17,040 --> 00:02:21,440 Speaker 1: Rick Reader black Rocks, chief investment Officer of Global Fixed Income. 50 00:02:21,480 --> 00:02:23,480 Speaker 1: Thank you so much for joining us. Thanks for having 51 00:02:23,520 --> 00:02:27,560 Speaker 1: me I'm looking forward to Barbie or Oppenheimer for you that. 52 00:02:27,680 --> 00:02:29,520 Speaker 4: I don't know that the question is all going to 53 00:02:29,520 --> 00:02:32,200 Speaker 4: be this hard because that I can't. 54 00:02:32,880 --> 00:02:35,760 Speaker 2: That was actually the softball question. 55 00:02:36,800 --> 00:02:39,480 Speaker 3: Yeah, well, Katie. The reason I was asking is because 56 00:02:39,560 --> 00:02:40,280 Speaker 3: Katie sent me an. 57 00:02:40,280 --> 00:02:43,440 Speaker 1: Article that said people are double booking and so they're 58 00:02:43,440 --> 00:02:46,280 Speaker 1: seeing both on the same day. But the Barbie ticket 59 00:02:46,400 --> 00:02:48,400 Speaker 1: sales have been much I mean. 60 00:02:48,360 --> 00:02:50,480 Speaker 2: They've marketed the heck out of it. It's crazy. 61 00:02:50,520 --> 00:02:53,440 Speaker 1: Oh, I see so many ads every single basically literally 62 00:02:53,440 --> 00:02:56,400 Speaker 1: every single day. Okay, just to start, like I said, 63 00:02:56,440 --> 00:02:58,520 Speaker 1: you have so many accolades. You have the morning Star 64 00:02:58,560 --> 00:03:02,720 Speaker 1: Award for Investing Excellence for Outstanding Portfolio Manager in twenty 65 00:03:02,760 --> 00:03:06,080 Speaker 1: twenty three. Just your fixed income group at black Rock 66 00:03:06,200 --> 00:03:10,720 Speaker 1: manages two point seven trillion with a T. So maybe 67 00:03:10,760 --> 00:03:13,280 Speaker 1: just to start, you can lay out your market views 68 00:03:13,280 --> 00:03:13,679 Speaker 1: for US. 69 00:03:15,280 --> 00:03:17,440 Speaker 4: In my career, I've been doing US for over thirty years. 70 00:03:17,480 --> 00:03:22,120 Speaker 4: I've never seen inflation stay so persistently high. We've lived 71 00:03:22,120 --> 00:03:26,839 Speaker 4: in a world where technology aging population you've had, it's 72 00:03:26,840 --> 00:03:28,880 Speaker 4: been hard to keep prices high. You know, the last 73 00:03:28,880 --> 00:03:32,200 Speaker 4: couple of years post COVID posts, the dynamic around this 74 00:03:32,240 --> 00:03:35,200 Speaker 4: immense fiscal and monetary stimulus that we've had to deal with. 75 00:03:35,800 --> 00:03:38,960 Speaker 4: You know, this increasingly high levels of inflation. Listen, I 76 00:03:38,960 --> 00:03:40,760 Speaker 4: think we're getting on the other side of it. I 77 00:03:40,760 --> 00:03:43,720 Speaker 4: think we've got data on this, this recent CPI report 78 00:03:43,800 --> 00:03:46,000 Speaker 4: that suggests that we're getting on the other side of 79 00:03:46,040 --> 00:03:48,960 Speaker 4: this inflation trend and is throughout one stat that blew 80 00:03:49,040 --> 00:03:51,240 Speaker 4: me away. We actually break it down. You know, the 81 00:03:51,280 --> 00:03:54,880 Speaker 4: Fed is focused on core services X shelter for a 82 00:03:54,920 --> 00:03:57,880 Speaker 4: couple of reasons. Why One, core goods inflations come down, 83 00:03:58,440 --> 00:04:01,040 Speaker 4: but services have been sticky, and it's been sticky because 84 00:04:01,080 --> 00:04:04,560 Speaker 4: wages have been high, but core services has been high 85 00:04:04,760 --> 00:04:06,760 Speaker 4: X shelter And part of why they look at that 86 00:04:06,880 --> 00:04:09,440 Speaker 4: is shelter takes a while for the inflation to come down. 87 00:04:09,480 --> 00:04:11,560 Speaker 4: Rental prices take a while, but they are starting to 88 00:04:11,720 --> 00:04:15,120 Speaker 4: just But anyway, long with my long preamble, core services 89 00:04:15,240 --> 00:04:18,520 Speaker 4: X shelter three month annualized is now down to one 90 00:04:18,520 --> 00:04:21,880 Speaker 4: point seven percent, down from nine and a half percent 91 00:04:21,880 --> 00:04:24,800 Speaker 4: a couple of years ago. We're at one seven So 92 00:04:25,080 --> 00:04:26,680 Speaker 4: and you know, you break down the other numbers, it's 93 00:04:26,680 --> 00:04:29,080 Speaker 4: in core CPI still at four. It's still not at target, 94 00:04:29,600 --> 00:04:31,880 Speaker 4: but gosh, you look at the component parts and you 95 00:04:31,920 --> 00:04:34,800 Speaker 4: look at the trajectory of where we're going. That's a 96 00:04:34,839 --> 00:04:38,280 Speaker 4: really big deal. So so core thesis is listen. I 97 00:04:38,320 --> 00:04:40,560 Speaker 4: think I think we're on the backside of, you know, 98 00:04:40,640 --> 00:04:43,680 Speaker 4: as a Fedkinna hike one more time, you know, maybe 99 00:04:43,680 --> 00:04:45,160 Speaker 4: they try and get two hikes out of it. We're 100 00:04:45,160 --> 00:04:48,760 Speaker 4: on the backside of what has been a bludgeoning of 101 00:04:48,839 --> 00:04:51,280 Speaker 4: the interest rate market, a bludgeoning of people that have 102 00:04:51,440 --> 00:04:54,960 Speaker 4: held rate related products or interest rate sensitive and I 103 00:04:54,960 --> 00:04:56,560 Speaker 4: think that's a really big deal. Not that I think 104 00:04:56,560 --> 00:04:58,760 Speaker 4: they're going to sit there for a while, so rates 105 00:04:58,760 --> 00:05:02,680 Speaker 4: will stay stable for aeriod of time, but I think this, gosh, 106 00:05:02,720 --> 00:05:04,480 Speaker 4: get out of the way because rates are going higher. 107 00:05:04,520 --> 00:05:06,000 Speaker 4: I think we're on the backside of that, which is 108 00:05:06,000 --> 00:05:08,920 Speaker 4: a big deal, whether you're doing debt, equity, private equity, anything. 109 00:05:09,160 --> 00:05:11,839 Speaker 1: Katie, I saw a funny tweet that said it's possible 110 00:05:11,880 --> 00:05:15,000 Speaker 1: services inflation stays high because of Barbie Oppenheimer. 111 00:05:15,279 --> 00:05:17,760 Speaker 2: It could. That's quite a tie in. We'll see if 112 00:05:17,760 --> 00:05:21,159 Speaker 2: the data bears that out. But there's about five different 113 00:05:21,160 --> 00:05:22,960 Speaker 2: things I want to get to there, but I want 114 00:05:23,000 --> 00:05:27,600 Speaker 2: to start with just inflation overall. Because headline CPI fell 115 00:05:27,720 --> 00:05:30,120 Speaker 2: to three percent, which it feels like we haven't seen 116 00:05:30,160 --> 00:05:31,760 Speaker 2: in a while. And the story that ran on the 117 00:05:31,839 --> 00:05:35,040 Speaker 2: terminal immediately after the headline I thought was pretty bold. 118 00:05:35,080 --> 00:05:39,160 Speaker 2: Inflation at three percent flags end of emergency, and Rick, 119 00:05:39,200 --> 00:05:41,560 Speaker 2: you said, we're on the other side of it. Do 120 00:05:41,600 --> 00:05:44,240 Speaker 2: you think that we're out of crisis mode? When it 121 00:05:44,240 --> 00:05:45,440 Speaker 2: comes to inflation. 122 00:05:45,839 --> 00:05:49,599 Speaker 4: Three percent is a very different paradigm than you know 123 00:05:49,600 --> 00:05:51,800 Speaker 4: when you're at four or five six percent. By the way, 124 00:05:51,839 --> 00:05:55,120 Speaker 4: not just quantitatively, but it's also been the case there's 125 00:05:55,160 --> 00:05:57,520 Speaker 4: a lot of academic thought about when you're a well 126 00:05:57,560 --> 00:06:03,039 Speaker 4: above three that your inflationary expectations in people and it's 127 00:06:03,080 --> 00:06:05,800 Speaker 4: hard to get out from under that. When you get 128 00:06:05,839 --> 00:06:09,640 Speaker 4: to three, you're at a place where you're close enough 129 00:06:09,680 --> 00:06:12,839 Speaker 4: to target and it's not that scary data a piece 130 00:06:12,839 --> 00:06:16,320 Speaker 4: of data, and that monetary policy doesn't have to be 131 00:06:16,440 --> 00:06:19,480 Speaker 4: that concerned about it. Listen, I think it's going to 132 00:06:19,520 --> 00:06:22,719 Speaker 4: You'll see inflation continue to come down. I'm much more 133 00:06:22,760 --> 00:06:25,520 Speaker 4: confident that inflation is going to come down that I am. 134 00:06:25,640 --> 00:06:28,320 Speaker 4: Unemployment rate is going to come up. You know, one 135 00:06:28,320 --> 00:06:31,919 Speaker 4: man's opinion. I don't think the FED needs to destroy 136 00:06:32,440 --> 00:06:35,920 Speaker 4: the employment paradigm today. In fact, I think it does 137 00:06:35,960 --> 00:06:38,880 Speaker 4: more harm than good to try and bring that inflation down. 138 00:06:38,920 --> 00:06:41,400 Speaker 4: I think there's a natural migration lower and once you 139 00:06:41,440 --> 00:06:44,039 Speaker 4: reach these levels. To your question, I did a piece 140 00:06:44,080 --> 00:06:47,440 Speaker 4: that I wrote about patients as a virtue, just let patients. 141 00:06:47,560 --> 00:06:51,039 Speaker 4: Just let time and a restrictive interest rate do its work, 142 00:06:51,080 --> 00:06:53,680 Speaker 4: and I think you'll find that it'll approach target over time. 143 00:06:54,640 --> 00:06:57,560 Speaker 1: So over time approaching target, meaning by the end of 144 00:06:57,600 --> 00:07:00,400 Speaker 1: the year or early next year. And then we see 145 00:07:00,400 --> 00:07:03,120 Speaker 1: the very big question now is what does this mean 146 00:07:03,160 --> 00:07:06,800 Speaker 1: for the Fed's future path in terms of you know, 147 00:07:06,880 --> 00:07:09,680 Speaker 1: do we get a hike in July and then a 148 00:07:09,720 --> 00:07:13,640 Speaker 1: pause or another hike after that, what do you foresee? 149 00:07:14,120 --> 00:07:16,120 Speaker 4: Yeah, it's a great question. We're not going to get 150 00:07:16,120 --> 00:07:19,080 Speaker 4: to target. By the way goods inflation we're getting to target, 151 00:07:19,400 --> 00:07:21,640 Speaker 4: but in services we're we're not going to get there. 152 00:07:21,680 --> 00:07:23,600 Speaker 4: We're not going to get there this year. You know, 153 00:07:23,640 --> 00:07:26,640 Speaker 4: could you get there next year? Don't know? But I 154 00:07:26,680 --> 00:07:29,360 Speaker 4: think you can get close, and you know, certainly within 155 00:07:29,400 --> 00:07:32,200 Speaker 4: spitting distance and certainly a place that you feel comfortable with. 156 00:07:33,080 --> 00:07:35,440 Speaker 4: You know, even with today's better data, you have to 157 00:07:35,440 --> 00:07:37,400 Speaker 4: marry yourself to the idea that the Fed's going to 158 00:07:37,480 --> 00:07:39,560 Speaker 4: hike in July. I think it would be a big credibility 159 00:07:39,640 --> 00:07:42,640 Speaker 4: problem if after they paused and the reason why they're 160 00:07:42,640 --> 00:07:44,680 Speaker 4: going to pause, and then everybody and then people in 161 00:07:44,680 --> 00:07:46,600 Speaker 4: the Fed committee have suggested we're going to get two 162 00:07:46,600 --> 00:07:49,200 Speaker 4: more hikes. He did you not go in July if 163 00:07:49,200 --> 00:07:50,520 Speaker 4: that were the case. So I think you have to 164 00:07:50,560 --> 00:07:53,440 Speaker 4: write that in stone that they're going to go in July. 165 00:07:54,320 --> 00:07:55,800 Speaker 4: But I think you've got to listen. I think they're 166 00:07:55,800 --> 00:07:57,920 Speaker 4: going to still try and get another hike done, probably 167 00:07:58,040 --> 00:08:00,920 Speaker 4: you know, November, but I think it's ambiguous now as 168 00:08:01,000 --> 00:08:02,600 Speaker 4: to whether you know, ah, are you going to do 169 00:08:02,640 --> 00:08:06,000 Speaker 4: any more hikes? And quite frankly, the people don't understand 170 00:08:06,040 --> 00:08:08,280 Speaker 4: these rates are restrictive. I think you talked about earlier 171 00:08:08,320 --> 00:08:11,720 Speaker 4: real rates at these levels like these are restrictive levels, 172 00:08:11,720 --> 00:08:13,800 Speaker 4: and if you know, let them marinate through the system, 173 00:08:13,840 --> 00:08:15,200 Speaker 4: you know, you see the impact that has in the 174 00:08:15,200 --> 00:08:17,840 Speaker 4: banking system, You see the impact that has on commercial 175 00:08:17,880 --> 00:08:19,920 Speaker 4: real estate. I think we're going to move to a 176 00:08:19,960 --> 00:08:22,520 Speaker 4: form which I think is right, a form of patients 177 00:08:22,600 --> 00:08:26,120 Speaker 4: versus impatience with how restrictive rates are to try and 178 00:08:26,160 --> 00:08:27,160 Speaker 4: achieve target. 179 00:08:27,440 --> 00:08:30,280 Speaker 2: Well to the idea that we should just let things marinate. 180 00:08:30,760 --> 00:08:34,040 Speaker 2: Here in letting things marinate, should the conversation shift to 181 00:08:34,120 --> 00:08:37,000 Speaker 2: not how many more hikes are left, but how long 182 00:08:37,040 --> 00:08:39,160 Speaker 2: it takes them to cut how long they're on hold 183 00:08:39,240 --> 00:08:40,439 Speaker 2: for Listen. 184 00:08:40,559 --> 00:08:42,120 Speaker 4: I think you know, we went through this period where 185 00:08:42,160 --> 00:08:45,400 Speaker 4: the market was anticipating, particularly around the banking crisis, that 186 00:08:45,480 --> 00:08:47,080 Speaker 4: you're going to have this cliff event, You're going to 187 00:08:47,120 --> 00:08:49,199 Speaker 4: hike and then you're going to have to ease quickly, 188 00:08:49,240 --> 00:08:51,360 Speaker 4: and that when the FED starts easing, when you have 189 00:08:51,400 --> 00:08:53,679 Speaker 4: a crisis, they don't move twenty five base one increments. 190 00:08:53,720 --> 00:08:58,400 Speaker 4: You move quickly. Listen, unless you have some form of crisis, 191 00:08:59,400 --> 00:09:01,960 Speaker 4: which are are hard to anticipate, and I don't see 192 00:09:02,000 --> 00:09:04,240 Speaker 4: one that's out there. You know, you have to assume 193 00:09:04,280 --> 00:09:06,440 Speaker 4: that this Fed stays on hold for at least the 194 00:09:06,520 --> 00:09:09,080 Speaker 4: year and then starts to bring it down. But I 195 00:09:09,120 --> 00:09:12,160 Speaker 4: think they have to bring these rates down. And you know, 196 00:09:12,520 --> 00:09:14,720 Speaker 4: we know the issue around it's not just the deposits 197 00:09:14,720 --> 00:09:17,640 Speaker 4: of the banks. It's a cost of funding those deposits 198 00:09:17,640 --> 00:09:20,880 Speaker 4: are so painful, but it's also people don't talk about 199 00:09:20,920 --> 00:09:22,679 Speaker 4: the debt burden on the country today. When you talk 200 00:09:22,720 --> 00:09:24,600 Speaker 4: about you know, we spend time on the debt ceiling. 201 00:09:25,080 --> 00:09:27,199 Speaker 4: But when you have an economy that's sitting with thirty 202 00:09:27,240 --> 00:09:30,240 Speaker 4: trillion of debt, the longer you keep that rate up, 203 00:09:30,400 --> 00:09:34,079 Speaker 4: the more you impair your fiscal flexibility. And you think 204 00:09:34,080 --> 00:09:37,360 Speaker 4: about debt to GDP, you know what happens is not 205 00:09:37,400 --> 00:09:40,480 Speaker 4: only is your debt service becoming expensive, but you want 206 00:09:40,480 --> 00:09:43,280 Speaker 4: to bring rate down so nominal GDP can can continue 207 00:09:43,320 --> 00:09:46,560 Speaker 4: to be high, so that your debt to GDP is 208 00:09:46,600 --> 00:09:48,840 Speaker 4: not that scary. So I think you got to bring 209 00:09:48,880 --> 00:09:50,480 Speaker 4: these rates down. I don't think you can sit here 210 00:09:50,520 --> 00:09:53,000 Speaker 4: for that long because of the damage it does to 211 00:09:53,160 --> 00:09:54,959 Speaker 4: the economy in multiple forms. 212 00:09:55,600 --> 00:09:58,080 Speaker 1: Is there anything that could happen that would make the 213 00:09:58,120 --> 00:10:01,120 Speaker 1: Fed not hike at the end of July, or as 214 00:10:01,160 --> 00:10:03,480 Speaker 1: you say, is it more credibility issue where they would 215 00:10:03,480 --> 00:10:03,800 Speaker 1: just have. 216 00:10:03,800 --> 00:10:06,480 Speaker 4: To go by the way, not a zero probability, but 217 00:10:06,480 --> 00:10:09,080 Speaker 4: the markets are pricing it as a remote probability. If 218 00:10:09,080 --> 00:10:11,920 Speaker 4: you had some of the bank earnings that were so 219 00:10:12,160 --> 00:10:15,840 Speaker 4: horrible that suggested that gosh, you know, the FED is 220 00:10:16,400 --> 00:10:19,720 Speaker 4: creating its own damage, not just the damage of raising rates, 221 00:10:19,720 --> 00:10:23,120 Speaker 4: but keeping rates too low for too long. Funding you know, 222 00:10:23,160 --> 00:10:27,720 Speaker 4: having banks fund purchase assets at aggressively low yields and 223 00:10:27,760 --> 00:10:30,640 Speaker 4: then all of a sudden shock interest rates higher. Boy, 224 00:10:30,679 --> 00:10:32,840 Speaker 4: it'd be pretty hard if those numbers, those bank earnings 225 00:10:32,920 --> 00:10:37,959 Speaker 4: numbers were dramatically worse than anticipated. You know. Other than that, 226 00:10:38,000 --> 00:10:40,840 Speaker 4: it's hard to see something else that would take them 227 00:10:40,880 --> 00:10:43,160 Speaker 4: off a trajectory that would be you know, I think 228 00:10:43,200 --> 00:10:45,760 Speaker 4: the more likely outcome is you get the July hike in, 229 00:10:46,440 --> 00:10:50,400 Speaker 4: but you do a quote unquote dubbish hike and suggests that, gosh, 230 00:10:50,440 --> 00:10:53,120 Speaker 4: we're nearing the end of what has been a long 231 00:10:53,160 --> 00:10:55,920 Speaker 4: and arduous period to get rates to a very restrictive level. 232 00:10:56,000 --> 00:10:58,319 Speaker 2: So we would go from a hawkish hold to a 233 00:10:58,360 --> 00:11:01,559 Speaker 2: dubbish hike, which would be fun and find out pretty soon. 234 00:11:01,679 --> 00:11:05,079 Speaker 2: But to the idea of it being a credibility issue 235 00:11:05,120 --> 00:11:08,480 Speaker 2: if they didn't go in July, I mean, listening to you, 236 00:11:08,520 --> 00:11:11,040 Speaker 2: it kind of sounds like they've forced their own hand here. 237 00:11:11,600 --> 00:11:13,360 Speaker 4: And by the way, I've throwing one other thing. They're 238 00:11:13,360 --> 00:11:15,400 Speaker 4: also reducing the size of the balance sheet training the 239 00:11:15,400 --> 00:11:18,320 Speaker 4: money supply, and so you know, the policy is not 240 00:11:18,360 --> 00:11:20,080 Speaker 4: just restrictive on the rate. We go back to what 241 00:11:20,120 --> 00:11:23,400 Speaker 4: the most popular with the popular thing to watch is. 242 00:11:23,440 --> 00:11:26,240 Speaker 4: But liquidity is a really big deal Uh huh, it doesn't. 243 00:11:26,240 --> 00:11:28,839 Speaker 4: It doesn't get enough airtime relative to rate. When you 244 00:11:28,840 --> 00:11:31,440 Speaker 4: bring down the money supply, you reduce the balance sheet. 245 00:11:31,920 --> 00:11:33,680 Speaker 4: It has a real impact. I mean, you track the 246 00:11:33,679 --> 00:11:36,760 Speaker 4: stock market over time relative to the growth or shrinkage 247 00:11:36,760 --> 00:11:41,040 Speaker 4: of the money supply. It is very sincere. So listen, 248 00:11:41,160 --> 00:11:44,160 Speaker 4: I think I think this idea of of you know, 249 00:11:44,200 --> 00:11:46,680 Speaker 4: you leave it there, let it marinate, reduce the balance sheet, 250 00:11:47,000 --> 00:11:49,319 Speaker 4: you know, just watch watch the system do what it's 251 00:11:49,360 --> 00:11:50,640 Speaker 4: going to do. On the back side of it. 252 00:11:58,120 --> 00:11:59,600 Speaker 2: I want to go back to what you were saying. 253 00:12:00,280 --> 00:12:02,520 Speaker 2: That policy is restrictive right now. You can see that 254 00:12:02,720 --> 00:12:05,160 Speaker 2: in real rates and just the level of where we 255 00:12:05,200 --> 00:12:07,880 Speaker 2: are right now. So you have to bring rates down 256 00:12:07,960 --> 00:12:11,160 Speaker 2: at some point. But where do you think neutral is 257 00:12:11,920 --> 00:12:13,040 Speaker 2: after what we've been through. 258 00:12:14,720 --> 00:12:17,040 Speaker 4: Wow, it's a great question. That is a great question. 259 00:12:17,240 --> 00:12:18,760 Speaker 2: So that was the softball. 260 00:12:19,480 --> 00:12:21,319 Speaker 4: Yeah, Oh my god, I would say, hopefully the question 261 00:12:21,360 --> 00:12:25,679 Speaker 4: is gonna get easier for that. Yeah. The uh so, 262 00:12:25,760 --> 00:12:28,160 Speaker 4: you know, it's real rates and nominal rates. And so 263 00:12:28,440 --> 00:12:30,640 Speaker 4: let me say, from a real rate perspective, and the 264 00:12:30,679 --> 00:12:32,520 Speaker 4: way you guys started this, some may not you know, 265 00:12:32,520 --> 00:12:36,240 Speaker 4: should real rates be closer to you know, depending on 266 00:12:36,240 --> 00:12:38,000 Speaker 4: where on the curve you think about it closer to 267 00:12:38,120 --> 00:12:40,800 Speaker 4: fifty base points to one hundred bases points. I think 268 00:12:40,840 --> 00:12:43,480 Speaker 4: that is. You know, we're way above that today, particularly 269 00:12:43,559 --> 00:12:45,520 Speaker 4: out you know, we think about where the ten yure 270 00:12:45,600 --> 00:12:48,520 Speaker 4: point is today, and so you know that I think 271 00:12:48,520 --> 00:12:52,000 Speaker 4: can come closer to what is the neutral long term rate. 272 00:12:52,040 --> 00:12:54,480 Speaker 4: And then if you said, and I have I have 273 00:12:54,559 --> 00:12:57,600 Speaker 4: a very non consensus view about this. I think the 274 00:12:57,679 --> 00:13:01,320 Speaker 4: FED should leave the funds rate at somewhere between two 275 00:13:01,360 --> 00:13:04,680 Speaker 4: and three percent for a long period of time. Once 276 00:13:04,720 --> 00:13:07,680 Speaker 4: you get on the other side of inflation, you know, 277 00:13:07,920 --> 00:13:10,560 Speaker 4: why not two percent? Think that? I think the idea 278 00:13:10,679 --> 00:13:14,520 Speaker 4: being that we're going to have because of deglobalization, you're 279 00:13:14,520 --> 00:13:17,880 Speaker 4: going to have because of the demographic you know, shortage 280 00:13:17,880 --> 00:13:21,120 Speaker 4: of labor, you're going to have a higher inflation, structurally 281 00:13:21,160 --> 00:13:24,160 Speaker 4: higher inflation. So should it be two and a half? 282 00:13:24,320 --> 00:13:26,600 Speaker 4: I don't know, should it be two? But I think 283 00:13:26,640 --> 00:13:28,600 Speaker 4: they should leave the funds right there for a long time. 284 00:13:28,679 --> 00:13:30,600 Speaker 4: I think the Fed, no, I know, I've talked about 285 00:13:30,640 --> 00:13:32,760 Speaker 4: it before. If you take the last seventy five meetings 286 00:13:32,760 --> 00:13:34,880 Speaker 4: of the Federal Reserve, sixty five of them, they've kept 287 00:13:34,960 --> 00:13:38,679 Speaker 4: rate successively low or changed it. I just don't think 288 00:13:38,720 --> 00:13:41,000 Speaker 4: you need to spend that much time tweaking it. I 289 00:13:41,040 --> 00:13:43,439 Speaker 4: think they should. They should leave it at a reasonable 290 00:13:43,520 --> 00:13:46,959 Speaker 4: level and that the system recalibrate because the system US 291 00:13:47,080 --> 00:13:52,079 Speaker 4: economy is the most flexible, adaptive, technology oriented economy in 292 00:13:52,120 --> 00:13:53,480 Speaker 4: the world, and it will adapt. 293 00:13:54,600 --> 00:13:57,800 Speaker 1: What about their two percent inflation goal, because I think 294 00:13:57,840 --> 00:14:00,040 Speaker 1: one of the Fed officials this week was asked, like, 295 00:14:00,600 --> 00:14:04,160 Speaker 1: are you willing to sacrifice the economy just to stick 296 00:14:04,240 --> 00:14:06,800 Speaker 1: to that two percent goal? Like the alter of the 297 00:14:06,880 --> 00:14:11,680 Speaker 1: two percent? Is it worth sacrificing the economy just to 298 00:14:11,720 --> 00:14:13,959 Speaker 1: get to that point that you have been telling people 299 00:14:14,000 --> 00:14:14,439 Speaker 1: you would get. 300 00:14:14,600 --> 00:14:16,079 Speaker 2: Is it a false god? 301 00:14:16,240 --> 00:14:18,400 Speaker 3: Is it wow? A Taylor Swift reference. 302 00:14:18,480 --> 00:14:22,640 Speaker 4: Yes, one man's opinion. I think there is. You just 303 00:14:22,720 --> 00:14:26,040 Speaker 4: had massive monetary and physical stimulus. You've got to give 304 00:14:26,040 --> 00:14:28,240 Speaker 4: it a little bit of time. Like this whole idea 305 00:14:28,400 --> 00:14:31,640 Speaker 4: like there's a magic to two doesn't make any sense 306 00:14:31,680 --> 00:14:34,920 Speaker 4: to me that you just had immense stimulus. Let it plan. 307 00:14:35,000 --> 00:14:37,360 Speaker 4: By the way, two percent over the intermediate term, I 308 00:14:37,440 --> 00:14:40,960 Speaker 4: get two percent over any short period of time. It 309 00:14:41,000 --> 00:14:44,360 Speaker 4: doesn't make any sense, particularly defense raise interest rates five 310 00:14:44,400 --> 00:14:47,080 Speaker 4: hunderd base once the unemployment rate is three point six percent. 311 00:14:48,520 --> 00:14:51,000 Speaker 4: How much do you have interest rates? How much would 312 00:14:51,000 --> 00:14:53,720 Speaker 4: you have to move them to get the unemployment rate 313 00:14:53,800 --> 00:14:56,160 Speaker 4: to a level to slow wages and get it to 314 00:14:56,160 --> 00:14:58,720 Speaker 4: a level that you're coming it's not worth it. Why 315 00:14:58,720 --> 00:15:01,640 Speaker 4: would you take why would you take millions of people 316 00:15:01,680 --> 00:15:04,160 Speaker 4: out of work because you need to go from two 317 00:15:04,240 --> 00:15:07,240 Speaker 4: point seven to two? It's like, why do it? And 318 00:15:07,240 --> 00:15:08,680 Speaker 4: I want to talk about this too much, but the 319 00:15:08,680 --> 00:15:11,000 Speaker 4: people that get hurt by the higher levels of inflation 320 00:15:11,360 --> 00:15:12,880 Speaker 4: are the people you're going to take out of work. 321 00:15:13,720 --> 00:15:16,040 Speaker 4: And I think there is you know you think about 322 00:15:16,080 --> 00:15:19,400 Speaker 4: when you raise rates to these levels, you're actually creating 323 00:15:19,440 --> 00:15:23,160 Speaker 4: an income benefit to people. They're wealthier people who are savers, 324 00:15:23,640 --> 00:15:26,160 Speaker 4: and you're hurting the people that just love to borrow. 325 00:15:26,800 --> 00:15:29,120 Speaker 4: And I just don't think that trade off makes any sense. 326 00:15:29,160 --> 00:15:33,840 Speaker 4: You know, this too is some magical, mystical perfection. It 327 00:15:33,960 --> 00:15:36,160 Speaker 4: doesn't make it. It doesn't. It's illogical to me. 328 00:15:36,640 --> 00:15:39,320 Speaker 2: I mean listening to you talk. And you also made 329 00:15:39,360 --> 00:15:41,040 Speaker 2: the point that the FED probably doesn't have to murder 330 00:15:41,080 --> 00:15:44,440 Speaker 2: the labor market here. Just to tie a bow on 331 00:15:44,520 --> 00:15:49,400 Speaker 2: that thought, do you need to get the unemployment rate 332 00:15:49,560 --> 00:15:52,640 Speaker 2: above four percent to get back to two percent or 333 00:15:52,640 --> 00:15:55,120 Speaker 2: can we have this sort of happy balance. 334 00:15:57,400 --> 00:16:01,240 Speaker 4: So I think the system will reach calibrate itself, and 335 00:16:01,280 --> 00:16:03,520 Speaker 4: I think technology. I mean, first of all, we're about 336 00:16:03,560 --> 00:16:08,200 Speaker 4: to go through the most extraordinary productivity growth. I think, 337 00:16:08,440 --> 00:16:11,440 Speaker 4: you know, certainly since the Internet, and maybe even more so, 338 00:16:12,240 --> 00:16:15,520 Speaker 4: we really don't know how many job functions are going 339 00:16:15,560 --> 00:16:18,080 Speaker 4: to be eliminated through AI. We don't know how many 340 00:16:18,560 --> 00:16:21,960 Speaker 4: how much true efficiency is going to be created, and 341 00:16:22,040 --> 00:16:24,600 Speaker 4: so this whole concept of gosh, there's a number that 342 00:16:24,640 --> 00:16:27,200 Speaker 4: we need to get to in payroll. And I'm not 343 00:16:27,280 --> 00:16:31,120 Speaker 4: convinced that wages is that sincere to serve it to 344 00:16:31,240 --> 00:16:33,720 Speaker 4: service inflation. I think it's an indicator and I think 345 00:16:33,720 --> 00:16:36,160 Speaker 4: it can be representative. But you think about it, we 346 00:16:36,200 --> 00:16:39,160 Speaker 4: went for a long period of time where you had 347 00:16:39,240 --> 00:16:42,480 Speaker 4: low levels of inflation. I think it is it is 348 00:16:42,520 --> 00:16:46,200 Speaker 4: an academic exercise, and only that that suggests there's a 349 00:16:46,280 --> 00:16:50,040 Speaker 4: level of employment that creates this level of inflation. You know, 350 00:16:50,080 --> 00:16:52,560 Speaker 4: particularly when you don't know how much efficiency you're going 351 00:16:52,600 --> 00:16:54,600 Speaker 4: to get off of AI, how much technology, how much 352 00:16:54,600 --> 00:16:57,920 Speaker 4: substitution effect that you're going to see play through. I mean, 353 00:16:57,920 --> 00:17:01,440 Speaker 4: the world is changing so quickly, so many ways, But 354 00:17:01,560 --> 00:17:04,679 Speaker 4: I just think those historic calculations and what was a 355 00:17:04,720 --> 00:17:08,920 Speaker 4: simple economy, cyclical goods oriented economy, or do just don't 356 00:17:08,960 --> 00:17:09,640 Speaker 4: hold anymore? 357 00:17:10,359 --> 00:17:12,960 Speaker 1: I want to ask you about that, broadly speaking, and 358 00:17:13,240 --> 00:17:15,800 Speaker 1: about what we've seen so far in twenty twenty three, 359 00:17:15,880 --> 00:17:19,399 Speaker 1: because everything has gone basically not in any way that 360 00:17:19,440 --> 00:17:23,600 Speaker 1: anybody predicted. Like the stuff that's up is stuff that 361 00:17:23,720 --> 00:17:26,639 Speaker 1: nobody thought would be up this year. What is it 362 00:17:26,720 --> 00:17:30,640 Speaker 1: about this year that's been so difficult to make sense of? 363 00:17:30,920 --> 00:17:34,040 Speaker 1: Or is it just the reality of the post pandemic 364 00:17:34,080 --> 00:17:37,000 Speaker 1: world where people are just having a more difficult time 365 00:17:37,480 --> 00:17:38,960 Speaker 1: making some of these forecasts. 366 00:17:39,440 --> 00:17:41,080 Speaker 4: I mean, I'll go back to the first point on AI. 367 00:17:42,359 --> 00:17:45,200 Speaker 4: I mean seven stocks drive in the market. I mean, 368 00:17:45,200 --> 00:17:47,480 Speaker 4: if you take you eliminate those seven stocks of the 369 00:17:47,480 --> 00:17:49,200 Speaker 4: equity market and you look at it and saying, it 370 00:17:49,280 --> 00:17:51,480 Speaker 4: doesn't seem like a market's not up that much, it 371 00:17:51,480 --> 00:17:54,520 Speaker 4: doesn't seem that aberrational. And there by the way, there 372 00:17:54,520 --> 00:17:56,680 Speaker 4: are a lot of equities now they traded three, four 373 00:17:56,760 --> 00:17:59,480 Speaker 4: or five multiple of cash flow that are pretty reasonable. 374 00:18:00,119 --> 00:18:03,080 Speaker 4: So that is, but I think the advent of AI 375 00:18:03,200 --> 00:18:06,639 Speaker 4: coming in and the true explosive opportunity set on that 376 00:18:07,080 --> 00:18:09,879 Speaker 4: has certainly impacted a number of equities on the backside 377 00:18:09,880 --> 00:18:12,400 Speaker 4: of it. I think that has been a surprising dynamic. 378 00:18:12,480 --> 00:18:16,640 Speaker 4: Second being, you know, nobody in this generation has ever 379 00:18:16,720 --> 00:18:21,399 Speaker 4: seen inflation stay as high for as long as it 380 00:18:21,440 --> 00:18:24,240 Speaker 4: had and continue to surprise to the upside. And that 381 00:18:24,280 --> 00:18:26,800 Speaker 4: has been you know, has put the central banks. You know, 382 00:18:26,840 --> 00:18:30,760 Speaker 4: we've had these false starts of inflation, particularly in places 383 00:18:30,800 --> 00:18:34,000 Speaker 4: like the UK, that it feels like it's coming down 384 00:18:34,040 --> 00:18:36,200 Speaker 4: and then all of a sudden it is not, and 385 00:18:36,200 --> 00:18:38,240 Speaker 4: it is not. So I think I think those have 386 00:18:38,280 --> 00:18:39,920 Speaker 4: been the things that have been the most surprising. I 387 00:18:39,960 --> 00:18:42,000 Speaker 4: would say one thing I've learned over the years of investing, 388 00:18:42,119 --> 00:18:46,040 Speaker 4: too is the markets do what hurts the most people, 389 00:18:46,640 --> 00:18:49,639 Speaker 4: and the technicals. So I just give a presentation the 390 00:18:49,680 --> 00:18:52,000 Speaker 4: other day about, you know, some of the things I've 391 00:18:52,040 --> 00:18:54,520 Speaker 4: learned over the years and investing, which I feel like 392 00:18:54,560 --> 00:18:56,600 Speaker 4: I'm still learning more than I did when I first started. 393 00:18:56,680 --> 00:18:58,119 Speaker 4: But you know, one of them is the technicals are 394 00:18:58,119 --> 00:19:01,800 Speaker 4: more important than the fundamentals, and fundamentals win out over 395 00:19:01,880 --> 00:19:04,480 Speaker 4: long periods of time. The technicals went out much more 396 00:19:04,520 --> 00:19:07,359 Speaker 4: so in the short term. And you realize what happened 397 00:19:07,359 --> 00:19:09,040 Speaker 4: at the beginning of this year is people got out 398 00:19:09,040 --> 00:19:12,399 Speaker 4: of equities and had reduced some of it, you know, 399 00:19:12,400 --> 00:19:14,399 Speaker 4: for obviously the pressure that was on it. All of 400 00:19:14,400 --> 00:19:16,600 Speaker 4: a sudden you have this, you know, people need to 401 00:19:16,600 --> 00:19:18,600 Speaker 4: get in the tech stocks, they'd reduce a lot of it. 402 00:19:18,920 --> 00:19:21,119 Speaker 4: This year has been more than any of what I've seen, 403 00:19:21,680 --> 00:19:24,800 Speaker 4: has been driven by technicals in an incredible way, in 404 00:19:24,920 --> 00:19:26,560 Speaker 4: violent ways at times. 405 00:19:27,280 --> 00:19:31,200 Speaker 2: That's interesting because a conversation I've had with a lot 406 00:19:31,200 --> 00:19:33,240 Speaker 2: of investors at this point is that you're just seeing 407 00:19:33,280 --> 00:19:37,000 Speaker 2: a massive gain game of catchup, particularly when it comes 408 00:19:37,000 --> 00:19:39,040 Speaker 2: to equities because coming into the year, you know, this 409 00:19:39,240 --> 00:19:42,040 Speaker 2: was the year of fixed income. Maybe it's still is 410 00:19:42,160 --> 00:19:43,919 Speaker 2: rick I don't know, but you had a lot of 411 00:19:43,920 --> 00:19:46,560 Speaker 2: people underweight. Now they've been forced to chase that rally 412 00:19:46,640 --> 00:19:49,479 Speaker 2: and now we are where we are. But bringing it 413 00:19:49,880 --> 00:19:53,280 Speaker 2: to fixed income, obviously you have a perch. You're looking 414 00:19:53,320 --> 00:19:57,000 Speaker 2: across all the different asset classes within fixed income, where 415 00:19:57,040 --> 00:19:59,520 Speaker 2: do you see the most opportunity right now? 416 00:20:00,040 --> 00:20:01,800 Speaker 4: And I can said one last thing about course. The 417 00:20:01,840 --> 00:20:03,440 Speaker 4: other thing that the other thing that I think is 418 00:20:03,480 --> 00:20:06,679 Speaker 4: surprising and which is pretty profound statement. You know the 419 00:20:06,720 --> 00:20:08,920 Speaker 4: world has talked about like the federis rates. We got 420 00:20:08,920 --> 00:20:11,320 Speaker 4: to we have to go in a recession. I just 421 00:20:11,359 --> 00:20:13,960 Speaker 4: don't know why a modern financial economy like the US 422 00:20:14,080 --> 00:20:17,880 Speaker 4: goes in a recession anymore other than some quantitative can 423 00:20:17,920 --> 00:20:21,600 Speaker 4: you have a negative one percent in twenty twenty, nominal 424 00:20:21,680 --> 00:20:24,160 Speaker 4: GDP was twelve, and twenty one it was seven, nominal 425 00:20:24,240 --> 00:20:27,080 Speaker 4: GDP was seven. You know, these numbers are pretty impressive, 426 00:20:27,080 --> 00:20:29,480 Speaker 4: And unless you have a pandemic or unless you have 427 00:20:29,640 --> 00:20:34,040 Speaker 4: some exogyshock financial crisis, when you have a consumer oriented, 428 00:20:34,080 --> 00:20:37,520 Speaker 4: service oriented economy, it's much more stable than people give 429 00:20:37,560 --> 00:20:40,440 Speaker 4: credit to. And I think if we had a negative 430 00:20:40,440 --> 00:20:44,520 Speaker 4: one percent recession after these massive nominal GDP numbers, I 431 00:20:44,520 --> 00:20:46,560 Speaker 4: think you'd have to like wake people up to tell them, like, 432 00:20:46,920 --> 00:20:49,119 Speaker 4: you know, we're in a recession now. Like I think 433 00:20:49,160 --> 00:20:51,800 Speaker 4: it's a really different paradigm. China is different because it's 434 00:20:51,800 --> 00:20:54,600 Speaker 4: a debt finance. But I just think recession is grossly 435 00:20:54,640 --> 00:20:59,280 Speaker 4: overstated as a phenomena today without some massive shock to 436 00:20:59,359 --> 00:21:01,600 Speaker 4: the system. So it's just so different than when I 437 00:21:01,600 --> 00:21:03,639 Speaker 4: first started the business. Yeah, you had a recession, you 438 00:21:03,680 --> 00:21:05,920 Speaker 4: had food lines, you had gas line, mean, it was 439 00:21:05,960 --> 00:21:06,800 Speaker 4: like bad stuff. 440 00:21:22,240 --> 00:21:24,280 Speaker 2: We've already seen a lot of these recession calls for 441 00:21:24,359 --> 00:21:27,280 Speaker 2: twenty twenty three get pushed into twenty twenty four. But 442 00:21:27,359 --> 00:21:29,800 Speaker 2: if we don't get a recession, I mean, how do 443 00:21:29,880 --> 00:21:33,320 Speaker 2: you invest along that. Are there any markets where you 444 00:21:33,359 --> 00:21:36,119 Speaker 2: can see that a recession is mistakenly priced in? 445 00:21:36,400 --> 00:21:38,120 Speaker 4: Yeah? So by the way, it gets to this point 446 00:21:38,160 --> 00:21:41,439 Speaker 4: about you know why things have been surprising and why 447 00:21:41,680 --> 00:21:45,040 Speaker 4: the equity market. So, I mean people were like, get out. 448 00:21:45,320 --> 00:21:47,879 Speaker 4: You know, earnings estimates. You know, we saw earnings estements 449 00:21:47,920 --> 00:21:51,320 Speaker 4: that almost were quantitatively impossible to hit unless the big 450 00:21:51,359 --> 00:21:54,760 Speaker 4: tech stocks get devastated for some reason. And I think 451 00:21:55,119 --> 00:21:58,320 Speaker 4: now people are realizing it, even if you had a 452 00:21:58,480 --> 00:22:01,840 Speaker 4: moderate recession, if you had one of these two quarters 453 00:22:01,840 --> 00:22:05,119 Speaker 4: of negative small size, is it really going to change 454 00:22:05,240 --> 00:22:07,040 Speaker 4: you know, what your asset mix is going to be 455 00:22:07,119 --> 00:22:09,359 Speaker 4: in terms of your portfolio. And I think that's been 456 00:22:09,400 --> 00:22:11,399 Speaker 4: a big adjustment. So what do you do with that? 457 00:22:11,520 --> 00:22:13,280 Speaker 4: How do you invest around it? Listen, I still think 458 00:22:13,320 --> 00:22:15,960 Speaker 4: you got to own your own equities as part of 459 00:22:16,000 --> 00:22:17,960 Speaker 4: a bar bell and a portfolio. One of the beautiful 460 00:22:17,960 --> 00:22:22,000 Speaker 4: things today in investing you can own front end yielding assets. 461 00:22:22,560 --> 00:22:24,480 Speaker 4: I bought some commercial paper the other day at six 462 00:22:24,520 --> 00:22:26,600 Speaker 4: and a half percent one year CPE six and a 463 00:22:26,640 --> 00:22:29,399 Speaker 4: half percent. It's like, I don't I just want to 464 00:22:29,400 --> 00:22:31,200 Speaker 4: go home at six and a half. I just sit 465 00:22:31,240 --> 00:22:32,600 Speaker 4: and sit of saying to tell clients, sos, I'm going 466 00:22:32,640 --> 00:22:34,080 Speaker 4: to get you six and a half and I'll be 467 00:22:34,080 --> 00:22:36,480 Speaker 4: taking the rest of the year off. But that's pretty 468 00:22:36,520 --> 00:22:38,400 Speaker 4: I mean, that's pretty attractive. But if you ran let's 469 00:22:38,400 --> 00:22:40,439 Speaker 4: say you ran a lot of carry, a lot of 470 00:22:40,440 --> 00:22:43,560 Speaker 4: front end yield, you know, in high quality assets, investment 471 00:22:43,560 --> 00:22:45,520 Speaker 4: in great credit, maybe go a little longer, and some 472 00:22:45,600 --> 00:22:48,000 Speaker 4: things like agency mortgages. And then I'm going to own 473 00:22:48,040 --> 00:22:51,760 Speaker 4: some of these equities. And you know, we assume that 474 00:22:51,800 --> 00:22:54,840 Speaker 4: the equity market of companies can throw off ten twelve 475 00:22:54,880 --> 00:22:58,360 Speaker 4: percent return on equity. You could generate a nice return 476 00:22:58,560 --> 00:23:01,240 Speaker 4: in a portfolio and frankly more stable than you have 477 00:23:01,359 --> 00:23:03,200 Speaker 4: historically because you're getting a lot of carry from your 478 00:23:03,200 --> 00:23:05,879 Speaker 4: fixed income quality assets and fixing it doesn't mean you 479 00:23:05,920 --> 00:23:07,240 Speaker 4: have to stretch for fixed income. 480 00:23:07,600 --> 00:23:10,080 Speaker 2: I thought you were a bond guy. Here you are talking. 481 00:23:10,640 --> 00:23:14,240 Speaker 4: I move around global allocation, all right, all right? 482 00:23:14,280 --> 00:23:14,480 Speaker 1: Fair? 483 00:23:15,440 --> 00:23:18,040 Speaker 4: So no we do? We do all asset classes. 484 00:23:18,040 --> 00:23:19,159 Speaker 3: Do you know what else he runs? 485 00:23:19,840 --> 00:23:24,080 Speaker 2: I do, but tell me his own ETF launched in May. 486 00:23:24,119 --> 00:23:26,960 Speaker 2: We're talking about the ticker is bank. I believe it's 487 00:23:27,040 --> 00:23:30,360 Speaker 2: black Rock Flexible Income. Did I get that right? 488 00:23:30,600 --> 00:23:31,480 Speaker 4: Right? Yeah? Yeah? 489 00:23:31,640 --> 00:23:33,520 Speaker 2: What's about long lit? 490 00:23:33,640 --> 00:23:36,240 Speaker 4: I mean, I think the advent of ETFs has been 491 00:23:36,320 --> 00:23:38,840 Speaker 4: you know, largely, I mean, the size of the ETF 492 00:23:38,960 --> 00:23:41,440 Speaker 4: market has been in the passive space. I mean, I use, 493 00:23:41,520 --> 00:23:45,800 Speaker 4: I've been trading managing ETFs for years in some of 494 00:23:45,800 --> 00:23:49,320 Speaker 4: the big indices, and the advent of you know, running 495 00:23:49,359 --> 00:23:53,480 Speaker 4: now active ETFs, the growth of active ecfs is really accelerated, 496 00:23:53,520 --> 00:23:56,640 Speaker 4: and quite frankly, now the ability to use different tools 497 00:23:57,520 --> 00:24:00,399 Speaker 4: to run an active ETF in a sufficient way as 498 00:24:00,440 --> 00:24:03,159 Speaker 4: you can as a mutual fund is now there. So, 499 00:24:03,440 --> 00:24:07,160 Speaker 4: like I say, I use things like HyG or LQD 500 00:24:07,560 --> 00:24:11,560 Speaker 4: or obviously SBY or so many different tools that allow 501 00:24:11,680 --> 00:24:17,199 Speaker 4: me to run in an open architecture, transparent portfolio. You 502 00:24:17,240 --> 00:24:19,680 Speaker 4: can run it and create similar returns you run in 503 00:24:19,720 --> 00:24:21,560 Speaker 4: a mutual fund. And I feel like you've hit that 504 00:24:21,640 --> 00:24:25,080 Speaker 4: inflection point today around the scale of the ETF market. 505 00:24:25,080 --> 00:24:27,480 Speaker 4: They're running an active ETF, you can do it effectively. 506 00:24:27,600 --> 00:24:29,920 Speaker 4: So anyway, I'm super excited about it. Hey, it's been 507 00:24:29,960 --> 00:24:33,919 Speaker 4: a obviously well manage and traded gazillions of them for 508 00:24:34,040 --> 00:24:38,280 Speaker 4: years and be able to manage that type of portfolio 509 00:24:38,359 --> 00:24:39,600 Speaker 4: has been a lot of fun and it's been a 510 00:24:39,680 --> 00:24:41,600 Speaker 4: lot of excitement around it, which has been great. 511 00:24:41,880 --> 00:24:44,639 Speaker 1: Well. I think the most interesting part to me is 512 00:24:44,680 --> 00:24:48,080 Speaker 1: that there's a person behind the ETF, like you're kicking 513 00:24:48,119 --> 00:24:52,080 Speaker 1: off this trend of people basically attaching their names to 514 00:24:52,280 --> 00:24:55,600 Speaker 1: the exchange traded fund. I really think you were the first, 515 00:24:55,720 --> 00:24:57,160 Speaker 1: and now we're seeing sort. 516 00:24:56,960 --> 00:25:01,640 Speaker 2: Of Dan Iverson from Pimco launchuria first ETF this year 517 00:25:01,880 --> 00:25:04,080 Speaker 2: who was it. Ed Perks also came out with his 518 00:25:04,160 --> 00:25:07,399 Speaker 2: own ETF, So there's definitely a migration of some of 519 00:25:07,400 --> 00:25:10,439 Speaker 2: these star managers such as yourself coming over to the 520 00:25:10,440 --> 00:25:13,760 Speaker 2: wrapper officially, even though to your point you've been using 521 00:25:13,800 --> 00:25:15,560 Speaker 2: them for a while in portfolios. 522 00:25:15,920 --> 00:25:17,800 Speaker 4: Yeah, I know it's been I don't know there's star category, 523 00:25:17,840 --> 00:25:20,199 Speaker 4: but I definitely humble. 524 00:25:20,880 --> 00:25:21,120 Speaker 1: Yeah. 525 00:25:21,400 --> 00:25:23,240 Speaker 4: I think it's you know, meeting with a lot of 526 00:25:23,240 --> 00:25:26,640 Speaker 4: clients which I haven't heretofore, who are in the ETF 527 00:25:26,680 --> 00:25:29,399 Speaker 4: that do models and what have you. You realize the 528 00:25:29,400 --> 00:25:33,679 Speaker 4: efficiency of the tax efficiency, the transparency, you can build 529 00:25:33,720 --> 00:25:36,359 Speaker 4: models around it. I mean, that's an innovation that's going 530 00:25:36,400 --> 00:25:38,600 Speaker 4: to be continue to grow and so it's been a 531 00:25:38,600 --> 00:25:40,200 Speaker 4: lot of fun. I've met a lot of new people 532 00:25:40,200 --> 00:25:43,760 Speaker 4: in new areas around doing it, so it'll be exciting. 533 00:25:43,800 --> 00:25:45,879 Speaker 4: But I say that technology allows you to do it 534 00:25:45,920 --> 00:25:46,720 Speaker 4: pretty efficiently. 535 00:25:46,760 --> 00:25:49,600 Speaker 1: Today, Rick, I have a million more questions for you, 536 00:25:49,640 --> 00:25:52,400 Speaker 1: so we'll have to bring you back on. But Rick 537 00:25:52,480 --> 00:25:56,080 Speaker 1: Reader black Rocks, chief investment officer of Global Fixed Incomers, 538 00:25:56,119 --> 00:25:57,879 Speaker 1: so happy you could join us, we can't let you 539 00:25:57,960 --> 00:26:00,000 Speaker 1: go yet. Okay, we have to play a quick round 540 00:26:00,200 --> 00:26:04,000 Speaker 1: of craziest things we've all seen in markets this week, 541 00:26:04,040 --> 00:26:06,399 Speaker 1: and I think Katie promised me a really good one. 542 00:26:06,480 --> 00:26:10,119 Speaker 2: I actually came completely unprepared. 543 00:26:10,720 --> 00:26:11,880 Speaker 3: You'll have to do it on the fly. 544 00:26:12,800 --> 00:26:14,399 Speaker 2: If I had to do it on the fly, I 545 00:26:14,440 --> 00:26:16,480 Speaker 2: have no idea. I would just say real rates at 546 00:26:16,480 --> 00:26:19,320 Speaker 2: a fifteen year high, that's pretty amazing. Real rates at 547 00:26:19,320 --> 00:26:22,560 Speaker 2: a fifteen year high, and equities don't care at all. 548 00:26:22,600 --> 00:26:24,960 Speaker 2: I remember, like two years ago, we were writing a 549 00:26:24,960 --> 00:26:28,040 Speaker 2: bunch of bearish takes about the equity market that once 550 00:26:28,119 --> 00:26:31,679 Speaker 2: real yield started to move significantly higher, it was going 551 00:26:31,760 --> 00:26:34,560 Speaker 2: to be lights out for risk assets and we were 552 00:26:34,600 --> 00:26:35,320 Speaker 2: completely wrong. 553 00:26:35,400 --> 00:26:40,080 Speaker 3: So I was about to say we were so right, Rick, 554 00:26:40,119 --> 00:26:44,919 Speaker 3: what about you? Anything interesting? You've seen in markets anything crazy, crazy, weird. 555 00:26:45,480 --> 00:26:48,760 Speaker 4: So similar thing the volatility equity markets. The price of 556 00:26:48,840 --> 00:26:53,120 Speaker 4: volatility is insane. We did the treade yesterday where I mean, 557 00:26:53,240 --> 00:26:55,800 Speaker 4: you know, people fall the VIX index, but you can 558 00:26:55,840 --> 00:27:00,680 Speaker 4: price option volatility at nine ten fold his crazy people 559 00:27:00,680 --> 00:27:03,440 Speaker 4: are giving. You can buy equities without paying for them 560 00:27:03,720 --> 00:27:05,879 Speaker 4: in terms of downside in terms of downside risk. We 561 00:27:05,920 --> 00:27:07,919 Speaker 4: did a one day which I don't do a lot of, 562 00:27:08,119 --> 00:27:11,040 Speaker 4: in fact very rarely in my portfolios. But you can 563 00:27:11,040 --> 00:27:13,280 Speaker 4: do a one day option for a one percent move 564 00:27:13,280 --> 00:27:15,199 Speaker 4: in the equity marketing get it? It was actually ten to 565 00:27:15,200 --> 00:27:18,560 Speaker 4: one odds. Like it's all because volatility is so low 566 00:27:18,800 --> 00:27:21,160 Speaker 4: in the equity market. People don't think the market can move. 567 00:27:21,720 --> 00:27:24,920 Speaker 4: But while rate volatility is really high. You know, it's 568 00:27:24,920 --> 00:27:28,560 Speaker 4: interesting my career, Like equity people in bond, people work 569 00:27:28,600 --> 00:27:31,159 Speaker 4: in different buildings, and so are times that there are 570 00:27:31,160 --> 00:27:33,240 Speaker 4: aberrations between the two of these. I still do both, 571 00:27:33,280 --> 00:27:36,359 Speaker 4: but most people work in different We're working different buildings, 572 00:27:36,520 --> 00:27:39,080 Speaker 4: and like this has been an amazing one, like equity 573 00:27:39,119 --> 00:27:41,240 Speaker 4: of all, Like I keep looking at those markets singing, 574 00:27:41,920 --> 00:27:44,440 Speaker 4: why are things why are they giving that nobody's buying 575 00:27:44,480 --> 00:27:47,240 Speaker 4: insurance to the downside to dias a vault trade super cheap. 576 00:27:47,960 --> 00:27:49,840 Speaker 1: I saw a note that said, I forget how many 577 00:27:49,920 --> 00:27:52,320 Speaker 1: days we've gone, like weeks without even a three percent 578 00:27:52,440 --> 00:27:54,000 Speaker 1: drot bela stock market. 579 00:27:54,160 --> 00:27:56,200 Speaker 4: So yeah, but a lot of updates. I mean you 580 00:27:56,400 --> 00:27:58,200 Speaker 4: buy Upside. I mean that's the beauty of it. You 581 00:27:58,240 --> 00:28:00,520 Speaker 4: can buy Upside convex to. They pretty cheap today. 582 00:28:01,000 --> 00:28:03,040 Speaker 3: Okay, my craziest thing has nothing to do with any 583 00:28:03,080 --> 00:28:03,680 Speaker 3: of these things. 584 00:28:03,760 --> 00:28:04,440 Speaker 2: Great, hit me. 585 00:28:06,400 --> 00:28:08,200 Speaker 1: I'm going to tie it back to this. I promise 586 00:28:08,480 --> 00:28:11,960 Speaker 1: there's this Bloomberg story out that there's this new trend 587 00:28:12,400 --> 00:28:15,880 Speaker 1: of restaurants providing stools for people's purses. 588 00:28:16,200 --> 00:28:19,240 Speaker 5: Okay, have you seen this? No, I don't go anywhere 589 00:28:19,760 --> 00:28:23,440 Speaker 5: me neither. I only go to the movie theater with you. Basically, yeah, 590 00:28:23,520 --> 00:28:25,760 Speaker 5: when I forced you to come with me. But if 591 00:28:25,840 --> 00:28:27,399 Speaker 5: you go to a fancy restaurant and you have a 592 00:28:27,480 --> 00:28:30,400 Speaker 5: super fancy purse, they'll bring you a little stool, huh, 593 00:28:30,800 --> 00:28:32,639 Speaker 5: and then you can like, your purse will sit there 594 00:28:32,680 --> 00:28:34,320 Speaker 5: with you and it will eat dinner with you. 595 00:28:34,400 --> 00:28:35,760 Speaker 2: What a crazy thing in markets? 596 00:28:35,920 --> 00:28:37,840 Speaker 3: What a crazy thing in markets? That's not it. I'm 597 00:28:37,880 --> 00:28:38,480 Speaker 3: tying it back. 598 00:28:38,520 --> 00:28:42,800 Speaker 1: I promise there actually is a handbag that's sold for 599 00:28:42,920 --> 00:28:47,240 Speaker 1: a crazy amount of money in recent weeks. It is 600 00:28:47,560 --> 00:28:50,920 Speaker 1: so tiny that you need a microscope. 601 00:28:50,520 --> 00:28:51,560 Speaker 2: To see it. I've seen this. 602 00:28:51,760 --> 00:28:56,360 Speaker 1: It's a Louis Vuitton inspired Neon Green miniature purse created 603 00:28:56,440 --> 00:28:59,560 Speaker 1: by an arts collective in Brooklyn. It's smaller than a 604 00:28:59,600 --> 00:29:00,360 Speaker 1: grain of salt. 605 00:29:01,240 --> 00:29:02,000 Speaker 2: Rick, have you seen this? 606 00:29:02,400 --> 00:29:06,400 Speaker 3: Have you seen this story? Yes, it's cute. It's small. 607 00:29:06,560 --> 00:29:09,520 Speaker 3: It's so tiny, it's narrow enough to pass through the 608 00:29:09,800 --> 00:29:11,960 Speaker 3: eye of a needle. They used it. 609 00:29:12,160 --> 00:29:14,840 Speaker 1: They made it using three D printing, and then the 610 00:29:15,360 --> 00:29:18,760 Speaker 1: person who won the auction got microscope for viewing it 611 00:29:18,840 --> 00:29:23,040 Speaker 1: because it's so small. Anyway, it's time to play. I 612 00:29:23,160 --> 00:29:25,720 Speaker 1: have so much trouble saying this. The price is precise. 613 00:29:26,360 --> 00:29:29,320 Speaker 1: I'm going to have you, guys, guess what the auction 614 00:29:29,480 --> 00:29:29,760 Speaker 1: went for. 615 00:29:29,920 --> 00:29:31,280 Speaker 3: What was the winning bid? 616 00:29:32,680 --> 00:29:34,880 Speaker 2: Okay, four hundred thousand dollars? 617 00:29:35,960 --> 00:29:40,480 Speaker 4: Rick, come on, I med thirty thousand dollars. 618 00:29:41,000 --> 00:29:44,520 Speaker 2: Wow. Wow, that's quite a spread, Delta. Who won? 619 00:29:45,360 --> 00:29:46,120 Speaker 5: Not you? Oh? 620 00:29:46,280 --> 00:29:46,520 Speaker 4: Really? 621 00:29:47,160 --> 00:29:48,000 Speaker 2: What did it sell for? 622 00:29:48,760 --> 00:29:50,480 Speaker 4: What was in the prices? Right? You're supposed to be 623 00:29:50,520 --> 00:29:51,719 Speaker 4: low anyway, so I forget right? 624 00:29:51,720 --> 00:29:55,280 Speaker 3: Oh jeez, can't go over not the price is right? 625 00:29:55,320 --> 00:29:56,680 Speaker 3: We can't call it that. We can call it. The 626 00:29:56,720 --> 00:30:00,560 Speaker 3: price is precise, I understand. Okay. 627 00:30:00,640 --> 00:30:02,959 Speaker 1: The winning bid for this tiny thing that nobody can 628 00:30:03,120 --> 00:30:06,800 Speaker 1: use or carry anywhere sixty three thousand, seven hundred and 629 00:30:06,920 --> 00:30:07,680 Speaker 1: fifty dollars. 630 00:30:08,120 --> 00:30:09,160 Speaker 2: I'm really surprised. 631 00:30:09,600 --> 00:30:10,920 Speaker 3: I got it for you for your birthday. 632 00:30:10,960 --> 00:30:14,240 Speaker 2: Oh my god, thank you. Welcome so excessive, but thank you. 633 00:30:14,480 --> 00:30:16,000 Speaker 3: You can bring it to the movie theater when we 634 00:30:16,120 --> 00:30:16,760 Speaker 3: go see Barbie. 635 00:30:16,920 --> 00:30:20,320 Speaker 2: I don't like inhale it by when you eat popcorn. 636 00:30:22,520 --> 00:30:25,440 Speaker 3: Rick Reader, thank you so so much for joining us. Katie. 637 00:30:25,680 --> 00:30:27,640 Speaker 3: I'm so happy to have you on the podcast too. 638 00:30:27,760 --> 00:30:28,800 Speaker 3: I don't miss Mike at all. 639 00:30:29,000 --> 00:30:31,480 Speaker 2: Yeah, I don't even I don't even remember that man. 640 00:30:31,960 --> 00:30:32,719 Speaker 3: What's his last name? 641 00:30:32,760 --> 00:30:32,840 Speaker 4: Right? 642 00:30:33,360 --> 00:30:35,360 Speaker 3: That was great though, Thank you, Rick, Thank you both 643 00:30:35,440 --> 00:30:35,880 Speaker 3: so much. 644 00:30:36,240 --> 00:30:37,680 Speaker 4: Thanks for having Meil. That was awesome. 645 00:30:45,280 --> 00:30:47,240 Speaker 3: What goes app We'll be back next week. 646 00:30:47,800 --> 00:30:50,040 Speaker 1: Until then, you can find us on the Bloomberg Terminal 647 00:30:50,240 --> 00:30:54,480 Speaker 1: website and app, or wherever you get your podcasts. We'd 648 00:30:54,520 --> 00:30:56,040 Speaker 1: love it if you took the time to rate and 649 00:30:56,200 --> 00:30:58,440 Speaker 1: review the show so more listeners can find us. 650 00:30:59,120 --> 00:31:03,280 Speaker 3: You can find us on Twitter, follow me at Wildona Hirich. 651 00:31:03,760 --> 00:31:07,479 Speaker 3: Mike Reagan is at Reaganonymous. You can also follow Bloomer 652 00:31:07,560 --> 00:31:09,520 Speaker 3: Podcasts at podcasts. 653 00:31:10,320 --> 00:31:13,040 Speaker 1: What Goes Up is produced by Stacy Wong, and our 654 00:31:13,080 --> 00:31:14,959 Speaker 1: head of podcasts is Sage Pauman. 655 00:31:15,440 --> 00:31:17,200 Speaker 3: Thanks for listening and we'll see you next week.