WEBVTT - Surveillance: We're De-Risking, Topcuoglu Says 0:00:00.080 --> 0:00:12.960 Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.920 Bloomberg dot Com, and of course on the Bloomberg. It 0:00:28.040 --> 0:00:29.640 is great to have Brown wife scene at the Mite 0:00:29.640 --> 0:00:32.400 with us now. Morgan Stanley Investment Management, Head of Global 0:00:32.440 --> 0:00:34.559 fixed Income Brown, we have come a long day, a 0:00:34.600 --> 0:00:38.279 long year, a long way, yields down and now we've 0:00:38.320 --> 0:00:40.080 had a little bit of a bounce off around one 0:00:40.240 --> 0:00:42.680 forty in the last couple of months. Back up to 0:00:44.200 --> 0:00:48.040 what are your talent clients now? Not to expect rates 0:00:48.080 --> 0:00:50.160 to go up that much, but they're still too low. 0:00:50.600 --> 0:00:53.400 It's amazing. I think you're right that ten year notes 0:00:53.440 --> 0:00:56.800 went from three to one forty. Unloved the whole time. 0:00:56.920 --> 0:00:59.000 I think I was with you when when they were 0:00:59.040 --> 0:01:01.360 loved to think you and uh, and we discussed that 0:01:01.400 --> 0:01:04.679 was too low. Listen to five seems like a good 0:01:04.680 --> 0:01:07.679 ceiling for now. Central banks don't want to ease, but 0:01:07.920 --> 0:01:09.920 rates do seem low. You're confident we've come out of 0:01:09.920 --> 0:01:13.440 this growth scale. No, we wish we were and there's 0:01:13.520 --> 0:01:16.120 a hundred reasons to be optimistic, but you really haven't 0:01:16.160 --> 0:01:19.319 seen a lot of data that shows it is. Um Listen, 0:01:19.480 --> 0:01:21.080 the markets are expecting p M I is to go up, 0:01:21.080 --> 0:01:23.600 the markets are expecting employment to be okay. The danger 0:01:23.720 --> 0:01:25.319 is that that it doesn't come through. At this point, 0:01:25.480 --> 0:01:30.440 our bonds linked to equities now, yes, it looks like 0:01:30.480 --> 0:01:33.320 it us. I mean if you told me, what if 0:01:33.319 --> 0:01:35.440 you ask me what's the most dangerous thing for equities? 0:01:35.680 --> 0:01:37.679 I would think it could be meaningfully higher rates. I 0:01:37.680 --> 0:01:39.800 think it would. It would ruin the narrative that you 0:01:39.840 --> 0:01:41.560 have to find yield, you have to move out the 0:01:41.560 --> 0:01:44.720 curve that you have to We've been looking for meaningfully 0:01:44.840 --> 0:01:48.600 higher rates for what fifteen years at least? I mean, 0:01:48.640 --> 0:01:50.720 do do you? Can you guys? You guys have made 0:01:50.720 --> 0:01:53.640 some really important calls. Ellen sentor Mike Wilson and the rest. 0:01:53.960 --> 0:01:56.680 Can you make a call that we range out and 0:01:56.720 --> 0:01:59.559 break through to higher yields? I don't hear that. No, 0:02:00.200 --> 0:02:02.080 it's hard to make that call. You don't see inflation, 0:02:02.160 --> 0:02:04.200 you don't see growth breaking out. It would take some 0:02:04.240 --> 0:02:07.600 other policy movement I think to break out. I'm watching 0:02:07.640 --> 0:02:10.280 European bond markets because we're focused on the US market, 0:02:10.440 --> 0:02:13.880 But frankly, uh, European bonds have actually had a much 0:02:13.880 --> 0:02:17.320 bigger sell off, and I want to get a sense 0:02:17.560 --> 0:02:21.760 of this being capitulation. The negative yields a haven't worked, 0:02:21.800 --> 0:02:24.480 and that be the ECB has no more ammunition. Are 0:02:24.520 --> 0:02:26.560 you more concerned about the European debt market right now 0:02:26.600 --> 0:02:31.000 than the US? No? Not not really. I think to 0:02:31.080 --> 0:02:33.920 say negative fields haven't worked is is you have to 0:02:33.919 --> 0:02:36.160 break it down a little bit more granularly. Obviously, if 0:02:36.200 --> 0:02:38.720 you're borrowing at higher rates, like some of the periphery 0:02:38.880 --> 0:02:41.560 was lower rates and negative rates been very important. Do 0:02:41.560 --> 0:02:44.680 you think Italy would issue a sixty basis point bond today? 0:02:44.600 --> 0:02:47.040 They should they? I mean should they be able to? 0:02:47.280 --> 0:02:48.919 It's a it's a great question, but that they are, 0:02:48.919 --> 0:02:51.520 it's great for them, it's great for for risk assets. 0:02:51.639 --> 0:02:54.359 So listen, I think European heels are going to stay low. 0:02:54.400 --> 0:02:55.799 I don't think they're going to give up on the 0:02:55.840 --> 0:02:59.040 negative yield experiment. Um and and and yes there's been 0:02:59.080 --> 0:03:01.359 a sell off, but they're still pretty negative. So I 0:03:01.400 --> 0:03:04.160 don't think a forty or fifty base point moving European 0:03:04.240 --> 0:03:07.440 yield from negative seventy. Negative thirty or to zero is 0:03:07.440 --> 0:03:08.960 what's going to break the card. With the policy right 0:03:08.960 --> 0:03:11.160 at negative fifty basis points, it's hard to construct an 0:03:11.200 --> 0:03:14.000 argument the front end of the yield curve in Europe 0:03:14.040 --> 0:03:16.040 is going to sell off massively with the policy rate 0:03:16.040 --> 0:03:18.560 where it is. Brian totally totally agreed, And as I said, 0:03:18.560 --> 0:03:21.640 I wish I could give you a magical high interest 0:03:21.720 --> 0:03:24.120 rate call, but it's not. It's that doesn't seem like 0:03:24.200 --> 0:03:26.240 it's in the cards. Markets are telling you a story 0:03:26.280 --> 0:03:29.240 about the future. The fundamentals continue a very different story 0:03:29.280 --> 0:03:32.280 in German Germany right now. Arguably we're in a recession 0:03:32.560 --> 0:03:36.080 in Germany, yet the decks in is up around about 0:03:37.360 --> 0:03:39.520 and button yields have had a massive move. What do 0:03:39.520 --> 0:03:42.480 you make of the spread between sentiment and fundamentals at 0:03:42.520 --> 0:03:45.880 the moment. The one thing I'll say about equity markets 0:03:46.040 --> 0:03:49.920 is that there was a big swoon between October November 0:03:49.920 --> 0:03:51.840 of last year and today. So I think the SMP 0:03:52.040 --> 0:03:54.600 from the October highs is only up about six percent, 0:03:55.280 --> 0:03:57.480 depends how you measure it. So, yes, equities are done well. 0:03:58.720 --> 0:04:00.839 I think the I think go back to what Tom said, 0:04:00.880 --> 0:04:02.920 which is that I think that this promise of lower 0:04:03.000 --> 0:04:05.920 yields is driving people in equity markets. And even though 0:04:05.920 --> 0:04:09.040 people don't feel great about the world, it's an unloved 0:04:09.040 --> 0:04:12.440 equity market. Uh, they're still slowly trickling in and and 0:04:12.760 --> 0:04:16.760 levels keep going higher. Extraordinary the market action yesterday, just 0:04:16.800 --> 0:04:20.200 the sector by sector diffusion and the dynamics of it. John, 0:04:20.240 --> 0:04:23.880 I can honestly say I've never seen all time high 0:04:24.160 --> 0:04:26.520 on the natstack, on a Dow and on the SMP 0:04:26.560 --> 0:04:32.520 five hundred as well. The outperformance yesterday coming from energy industrials, financials, 0:04:32.800 --> 0:04:35.640 the value sectors that many people have been waiting for 0:04:35.640 --> 0:04:39.080 this rotation into and waiting for tracery yields to move 0:04:39.160 --> 0:04:42.280 with it. Your call now going into year end? What's 0:04:42.279 --> 0:04:44.880 the conviction call now for you? Brian? The conviction call 0:04:44.960 --> 0:04:47.120 for us is that that some of these unloved sectors 0:04:47.120 --> 0:04:48.839 are going to find some love. So you can see 0:04:48.839 --> 0:04:50.440 them in fix income too. Right, if you look at 0:04:50.440 --> 0:04:53.320 what's underperformed emerging markets, and and and the energy sectors 0:04:53.320 --> 0:04:55.719 in high yield, a few others, So we'd buy triple 0:04:55.760 --> 0:04:57.800 cities in high guild. Well it's not that simple, right, 0:04:57.839 --> 0:04:59.520 A bunch of those triple cs are actually really bad. 0:05:00.279 --> 0:05:02.080 So you can't just go and buy the triple C index, 0:05:02.480 --> 0:05:04.320 but you can certainly find names that in there that 0:05:04.400 --> 0:05:06.480 that are Okay, It's not easy, I'll be honest. Fixed 0:05:06.480 --> 0:05:10.760 income valuations are are are are not obviously wide. For 0:05:10.839 --> 0:05:13.320 the benefit of our listeners, I asked that question smiling 0:05:13.640 --> 0:05:15.640 quite a lot because I know how complex that is 0:05:15.680 --> 0:05:17.480 in that space. Right now, By a second, I want 0:05:17.480 --> 0:05:21.039 to just give a little statistic. Yesterday the one day 0:05:21.120 --> 0:05:24.719 move in triple C rated bond yields, they went from 0:05:24.720 --> 0:05:27.880 eleven point two percent to ten point nine percent. Bam. 0:05:28.000 --> 0:05:30.680 It was just a massive rally in the triple C space, 0:05:30.720 --> 0:05:32.880 and it was really on the heels in particular of 0:05:32.920 --> 0:05:35.599 the energy rally that we saw. But really interesting to 0:05:35.600 --> 0:05:37.600 see people going back into that. There are so few 0:05:37.640 --> 0:05:39.880 things that you can pick fixed income. They have that 0:05:39.920 --> 0:05:41.919 type of coupone. So it's funny, well, the well, the 0:05:41.960 --> 0:05:44.520 fundamentals and the and the technicals separated. In other words, 0:05:44.520 --> 0:05:46.240 will you buy what's terrible just to get the yield 0:05:46.240 --> 0:05:48.360 for a little while. It's definitely a danger right here, 0:05:48.440 --> 0:05:51.840 yea Aprom, We appreciate your time this morning, thanks for 0:05:51.920 --> 0:05:54.600 running back into the studio, But I'm staying the Stanley 0:05:54.720 --> 0:06:14.880 Investment Management head of Global fixed Income, Phoenix Klein, now 0:06:14.960 --> 0:06:16.760 with us, it was sock Jen as we look at 0:06:16.839 --> 0:06:22.880 emerging market, Phoenix, can you link a better China directly 0:06:23.040 --> 0:06:26.479 into a better e M or is it a discreete 0:06:26.600 --> 0:06:31.520 matter right now? I think the Chinese story has become 0:06:31.920 --> 0:06:34.280 a huge part of the e M overall story, and 0:06:34.560 --> 0:06:36.640 I think that's one of the reasons why you know, 0:06:36.680 --> 0:06:40.239 our our views and e M is grossly intricately tied 0:06:40.279 --> 0:06:42.640 to what happens to China over the course of the 0:06:42.640 --> 0:06:45.680 next month. Is it a broader dollar coal head, Phoenix? 0:06:47.920 --> 0:06:51.680 Is it a broader dollar coal here? Yes, So so 0:06:51.800 --> 0:06:53.560 that in terms of the dollar call, you know, we're 0:06:53.560 --> 0:06:57.239 expecting for dollar c n y to go towards seven 0:06:57.240 --> 0:06:59.880 point five by the end of the third quarter and 0:07:00.200 --> 0:07:03.320 years so, you know, within twelve months UM, and that's 0:07:03.360 --> 0:07:07.359 going to likely to lead to further EM weakness UM 0:07:07.400 --> 0:07:11.600 across the M complex. So uh, So far, we've gotten 0:07:11.680 --> 0:07:15.400 a number of pm I data industrial production data out 0:07:15.440 --> 0:07:18.360 of merging markets, particularly in Eastern Europe, and it does 0:07:18.400 --> 0:07:20.920 appear that there is at least some bottoming out or 0:07:20.920 --> 0:07:22.680 getting a whole host of p M I s this 0:07:22.760 --> 0:07:26.560 week as well from other developing markets. What are you expecting? 0:07:26.560 --> 0:07:31.840 How important are those figures? Those figures are quite essential 0:07:32.000 --> 0:07:35.120 in reflecting the state of the economies, especially in Eastern 0:07:35.160 --> 0:07:38.160 European markets. And as we've seen in the numbers released 0:07:38.200 --> 0:07:41.840 yesterday from Poland, there is spill over from the weakness 0:07:41.880 --> 0:07:44.680 coming out of the German manufacturing complex. And that's still 0:07:44.720 --> 0:07:47.360 I think a long term story ahead for this economy's 0:07:47.920 --> 0:07:50.560 um and and that's likely to weigh on the economic 0:07:50.560 --> 0:07:53.800 growth picture and and still hold back the overall region. 0:07:53.840 --> 0:07:56.720 So I think that's still going to impact currencies in particular. 0:07:57.120 --> 0:08:00.400 So how tied is a slowdown in industrial production to 0:08:00.520 --> 0:08:02.040 what we're seeing in China, I mean just sort of 0:08:02.040 --> 0:08:06.120 connecting it back to the U N Yeah, So I 0:08:06.120 --> 0:08:08.680 think that this is part of a much bigger global 0:08:08.720 --> 0:08:12.800 trade story, and China's slowdown has certainly impacted other regions, 0:08:12.880 --> 0:08:16.840 and Germany's linked into that intricately. Um And I think 0:08:16.840 --> 0:08:20.120 that's that's kind of the global slowdown that's being reflected 0:08:20.480 --> 0:08:23.040 across the manufacturing in the season in particular, and unless 0:08:23.040 --> 0:08:26.440 so in the services and season, do you partition e 0:08:26.720 --> 0:08:32.920 M bigger more sophisticated big cap companies away from other 0:08:33.080 --> 0:08:38.760 e M stocks or is it all one basket? Now, 0:08:38.760 --> 0:08:41.480 there's there's a huge amount of videos incre seas and 0:08:42.320 --> 0:08:45.720 diversity across the e M world, So I think there's 0:08:45.760 --> 0:08:49.480 there's lots of ways to partition its um. And certainly 0:08:49.480 --> 0:08:51.320 you know some of the countries as well as well 0:08:51.360 --> 0:08:55.240 as bill functioned by blocks, still functions by regions. And 0:08:55.280 --> 0:08:58.160 then there are the videos and that we hear from 0:08:58.200 --> 0:09:00.240 time to time. We'll give us an idiosync at a 0:09:00.320 --> 0:09:03.679 sock gen view. What what where is that opportunity right 0:09:03.720 --> 0:09:08.160 now geographically on a nation's basis? Where where would you 0:09:08.160 --> 0:09:11.640 suggest the opportunity is for someone that believes these ill 0:09:11.679 --> 0:09:14.320 winds will clear and that we will have a better market. 0:09:16.960 --> 0:09:19.680 But that goes against the core sucks and dow which 0:09:19.720 --> 0:09:24.400 is quite bearish in nature in fact, and because in 0:09:24.480 --> 0:09:27.040 terms of new US growth for next year, we're expecting 0:09:27.160 --> 0:09:30.160 for US to print only zero point seven present GDP 0:09:30.520 --> 0:09:34.319 versus consensus at one point seven. So um, yeah, I 0:09:34.360 --> 0:09:36.400 think what you are kind of the standouts in terms 0:09:36.400 --> 0:09:38.520 of the market, in terms of how bearished we think 0:09:39.240 --> 0:09:42.880 the economy will perform um And in that context, you 0:09:42.920 --> 0:09:45.000 know our our views are along the lines of still 0:09:45.120 --> 0:09:50.400 being very bullish bond various currencies. Yeah, very good. We 0:09:50.480 --> 0:09:52.439 gotta get you back on that Phoenix. Kalin will be 0:09:52.480 --> 0:09:55.480 appearing with us every three months here on a zero 0:09:55.559 --> 0:09:58.640 point seven g d picle. I mean, John, that's extraordinary. 0:09:58.679 --> 0:10:01.240 It is famous. Kind that is I'm gonna call that 0:10:01.280 --> 0:10:03.920 a hundred and twenty basis points South, director of a 0:10:04.080 --> 0:10:20.199 M strategy gun into. One of the great things you 0:10:20.240 --> 0:10:22.600 can do is drive across the fabric of the country 0:10:22.640 --> 0:10:25.920 and outside Des Moines there's a sign five and eighty 0:10:25.960 --> 0:10:30.600 miles Denver, and that's where Eastern coast people like me go, oh, 0:10:30.640 --> 0:10:34.199 it's a big country out there. Joseph Fricketts lived in 0:10:34.240 --> 0:10:37.680 He's the second most famous person out of Nebraska City, Nebraska. 0:10:37.720 --> 0:10:41.040 Greg Whorton, football player, is the most famous. Joe Ricketts 0:10:41.080 --> 0:10:43.160 joins us. The book is the harder you work, luckier 0:10:43.160 --> 0:10:45.599 you getting. Yes, we will talk a merry trade, and 0:10:45.679 --> 0:10:49.120 yes we will talk cubs. At some point. What was 0:10:49.240 --> 0:10:53.320 Nebraska City like in World War Two? And I bring 0:10:53.360 --> 0:10:57.640 that up because we have a president nostalgic for the 0:10:57.760 --> 0:11:01.200 smallness of America of the forties, of these sixties, what 0:11:01.360 --> 0:11:03.800 was it. I was born in forty one, so I 0:11:03.960 --> 0:11:09.319 was a baby during the war. I remember though, the 0:11:09.400 --> 0:11:12.160 anxiety that people had. I felt it as a baby. 0:11:12.679 --> 0:11:15.040 But coming out of the war, which is when I 0:11:15.080 --> 0:11:16.960 started to become a child and grew up through the 0:11:17.000 --> 0:11:22.240 late fifties, Nebraska City was the perfect place to grow up. 0:11:23.000 --> 0:11:25.439 I had the freedom to room, to ride my bicycle 0:11:25.640 --> 0:11:28.160 in the morning, and the summertime, my wife or my 0:11:28.320 --> 0:11:30.200 mother would give me a zack lunch and I didn't 0:11:30.200 --> 0:11:31.880 come back. And you capture that in your book and 0:11:31.920 --> 0:11:34.560 the fabulous photographs as well. We have a president who 0:11:34.559 --> 0:11:39.679 you support, President Trump, who has a nostalgia for what was. 0:11:40.520 --> 0:11:44.400 How do we take our belief in what was and 0:11:44.520 --> 0:11:50.000 drag it forward into the modern America. I I don't 0:11:50.000 --> 0:11:55.240 know how to answer that question correctly, accept to say 0:11:55.280 --> 0:11:57.480 that if we don't keep the free enterprise system, our 0:11:57.520 --> 0:12:01.959 society is going to change dramatically for the worlds. So 0:12:02.000 --> 0:12:03.760 that one of the reasons why I wrote the book 0:12:04.480 --> 0:12:08.160 was to encourage young people, if they have an entrepreneurial band, 0:12:08.360 --> 0:12:10.480 to start a business. And suggested John, we don't have 0:12:10.480 --> 0:12:13.839 a vote here for Senator Warren. Let's let's talk about 0:12:13.840 --> 0:12:20.080 it carry on, please do we No, no, no, I'm 0:12:20.320 --> 0:12:25.560 stunned at the conversation that's that's in the arena today 0:12:25.640 --> 0:12:29.760 with this presidential election coming up. Our greatness comes from 0:12:29.760 --> 0:12:35.240 pre enterprise. Every society that has tried socialism has failed, 0:12:36.480 --> 0:12:41.760 and there is poverty and despair that comes out of socialism. 0:12:41.880 --> 0:12:44.760 Senator Warren says, she's a capitalist. She just wants markets 0:12:44.800 --> 0:12:47.920 to work more efficiently. Do you believe that? No, not 0:12:48.000 --> 0:12:50.320 at all, not when you listen. What is it that 0:12:50.360 --> 0:12:52.440 tells you that she's not what she says she is 0:12:52.640 --> 0:12:56.440 Because all the benefits that she says she as the 0:12:56.600 --> 0:12:59.319 leader of the government is going to provide to society 0:12:59.400 --> 0:13:02.760 is going to read ware that she changed society dramatically 0:13:03.320 --> 0:13:06.600 and not in favor of for enterprise. She says, all 0:13:06.640 --> 0:13:09.360 she needs to do to get Medicare for rule is 0:13:09.400 --> 0:13:12.240 tax the billionaires. The billionaires are the only people that 0:13:12.280 --> 0:13:14.440 are going to be paid more. And last count I 0:13:14.440 --> 0:13:17.360 think Forbes had six hundred and seven billionaires in the 0:13:17.400 --> 0:13:20.080 United States of America's still quite a rare think, isn't 0:13:20.080 --> 0:13:22.640 it joke to be that it's a very that much money, 0:13:22.880 --> 0:13:26.200 very rare thing. And these are the people that make 0:13:26.280 --> 0:13:28.880 society work. If you'll look at that list with the 0:13:28.920 --> 0:13:32.680 top four billionaires, they're all people that are in business 0:13:32.880 --> 0:13:37.559 that are providing jobs and providing benist society. Did you 0:13:37.760 --> 0:13:40.160 ever think did you ever think they're becoming a billionaire 0:13:40.200 --> 0:13:42.760 would be seen as a sign not of success but 0:13:42.840 --> 0:13:47.760 of market failure. Never never dreamed of it. No, not 0:13:47.840 --> 0:13:50.240 at all, Joe. We got to bring in and introduce you. 0:13:50.440 --> 0:13:53.600 Lisa Abrahamo. It's her great claim to fame is at 0:13:53.640 --> 0:13:56.520 the University of Chicago. She begged Richard Taylor to go 0:13:56.559 --> 0:13:59.160 to the Cubs game with him, but it never worked out. Dude, 0:13:59.240 --> 0:14:01.720 when you said when you said your claim to frame, 0:14:01.960 --> 0:14:04.480 I got this wave of nervousness come over me. I 0:14:04.520 --> 0:14:06.959 had no no clue where you're going with that. But 0:14:07.160 --> 0:14:09.960 the number of the number of Nobel laureates that darkened 0:14:09.960 --> 0:14:12.600 the door of really field is just something to talk about. Yeah, 0:14:12.640 --> 0:14:13.920 And I could never get them to go with it 0:14:14.000 --> 0:14:16.720 with me to a Cubs game. But I will ask you, Um, 0:14:16.880 --> 0:14:19.080 you talk about free enterprise, and that brings me to 0:14:19.120 --> 0:14:23.040 the business of TD merrit Trade, which you founded. Uh. 0:14:23.240 --> 0:14:27.280 Increasingly it's moving toward free trading of assets, and I'm 0:14:27.320 --> 0:14:30.600 wondering can you connect that the idea of uh, sort 0:14:30.640 --> 0:14:34.040 of the availability and the ease of which people can 0:14:34.280 --> 0:14:38.560 buy and sell securities without paying anything. Do you think 0:14:38.560 --> 0:14:41.640 that that is a good thing. I'm not sure. I 0:14:41.680 --> 0:14:44.240 think it has to play out. I I am hesitant 0:14:44.320 --> 0:14:46.720 to say it's a good thing. First of all, is 0:14:46.760 --> 0:14:50.480 the culmination of what happened in so we've had all 0:14:50.480 --> 0:14:53.560 of this time for the discount brokerage industry free evolved 0:14:53.560 --> 0:14:55.560 to come to this point. But the thing that we 0:14:55.600 --> 0:14:58.240 need to be careful with f from my point of view, 0:14:58.320 --> 0:15:00.760 is we don't want to equate I in a stock 0:15:01.480 --> 0:15:05.120 with betting on a football game. That and if that 0:15:05.280 --> 0:15:07.160 kind of goes there, it's going to turn out to 0:15:07.160 --> 0:15:09.160 be a bad thing. Do you think that that's sort 0:15:09.160 --> 0:15:13.760 of implication of having no fees on these transactions. I 0:15:13.800 --> 0:15:15.640 don't know. We have to see it play out. That's 0:15:15.640 --> 0:15:17.760 my hesitation. That's what I don't know. That's what we're 0:15:17.760 --> 0:15:20.520 gonna have to see. We don't want the wrong type 0:15:20.520 --> 0:15:22.680 of volume in the business. I would point out, the 0:15:22.680 --> 0:15:25.000 harder you work, the lucky to get. Joe Rickerson back 0:15:25.160 --> 0:15:28.040 of the book says it all he's got. George will uh, 0:15:28.600 --> 0:15:31.680 channeling branch Rickey, X of the Cardinals, a guy named 0:15:31.680 --> 0:15:34.080 Diamond in the banking business, and one of your arch 0:15:34.120 --> 0:15:37.560 competitors Charles Schwab as well. You invent a t DA merritrade. 0:15:37.600 --> 0:15:41.360 I remember the wonder of it off of Mayday in 0:15:41.400 --> 0:15:44.480 all that, but has it become a barbell business where 0:15:44.480 --> 0:15:49.800 it's adults holding equities forever essentially versus the micro hyper trading? 0:15:50.080 --> 0:15:52.920 Does that industry that you invent do they now live 0:15:52.960 --> 0:15:57.400 and die on that hyper trading? Uh, that hyper trading segment. 0:15:58.040 --> 0:16:00.520 A lot of them do, but a lot of them 0:16:00.560 --> 0:16:05.480 also don't. We have evolved out of Merritorde just from 0:16:05.480 --> 0:16:08.640 providing trades to providing a lot of other services that 0:16:08.720 --> 0:16:11.960 the customer can pay for, which include financial planning. So 0:16:12.000 --> 0:16:14.200 there's an evolution that has come about it. So there's 0:16:14.240 --> 0:16:17.880 spectrum of traders that are in the customer base of 0:16:17.920 --> 0:16:20.680 our merritrade, but there's also the buy and hold people 0:16:24.320 --> 0:16:28.640 your silence. I mean, look, I think that it's an 0:16:28.640 --> 0:16:33.640 interesting point, this idea of uh, you know, whether removing 0:16:33.680 --> 0:16:36.680 the difficulty of entrance, the barriers to entry in the 0:16:36.720 --> 0:16:41.000 market will encourage imprudent behavior and will encourage people to 0:16:41.160 --> 0:16:45.080 trade more and not necessarily be deep dive investors. But 0:16:45.280 --> 0:16:50.120 in some way, don't index funds already do that. They do. Yes, 0:16:50.160 --> 0:16:54.080 they trade often, and they provide a lot of volume 0:16:54.080 --> 0:16:56.600 to the business, which is good. It's help the market 0:16:56.680 --> 0:17:01.240 grow in depth. Uh So, it's not so much that 0:17:01.280 --> 0:17:03.520 they're going to harm the market, is that they may 0:17:03.560 --> 0:17:07.000 not help themselves. I want to ask you about the 0:17:07.040 --> 0:17:09.280 title of your book, the Harder you Work, the Lucky 0:17:09.359 --> 0:17:12.399 You Get, which is an ethos of Pete Peterson's Nebraska. 0:17:12.440 --> 0:17:15.920 You're in Nebraska as well, and it speaks to a 0:17:16.000 --> 0:17:20.159 massive body of disaffected Republicans who have had it with 0:17:20.320 --> 0:17:23.639 this president. What do you say, and your family is 0:17:24.040 --> 0:17:26.679 raised funds for President Trump, what do you say to 0:17:26.720 --> 0:17:29.199 the group of the Grand Old Party out there? It 0:17:29.320 --> 0:17:33.480 doesn't like this guy's style. I really don't feel like 0:17:33.520 --> 0:17:35.120 I have to talk to them, but I can tell 0:17:35.119 --> 0:17:36.679 you this. All you have to do is look at 0:17:36.720 --> 0:17:39.359 the figures. Look at the employment figures, look at the 0:17:39.359 --> 0:17:42.840 gross national product, look at our factories. I thinks are 0:17:42.840 --> 0:17:45.879 reviving in a fresh way in the United States. We 0:17:45.960 --> 0:17:47.920 gotta come on, Joe, we gotta we gotta run rate 0:17:47.960 --> 0:17:51.040 of one point nine g d p of for lucky 0:17:51.080 --> 0:17:53.560 on a trade ward that this guy invented. I mean, 0:17:53.600 --> 0:17:57.760 what does that trade war doing to a farmer? Forget 0:17:57.800 --> 0:18:00.920 about that. My distance is wrong, John, I think New Jersey. 0:18:00.960 --> 0:18:03.000 What is this due to a farmer four hundred and 0:18:03.000 --> 0:18:06.119 seventy miles west of Omaha on the way to cose It? 0:18:06.280 --> 0:18:08.720 What's it due to him? I think that in the 0:18:08.760 --> 0:18:10.560 short term is you I know what I read in 0:18:10.600 --> 0:18:13.880 the papers. It's it's caused them some harm, but he's 0:18:13.920 --> 0:18:16.280 given them some help and now he's got one of 0:18:16.320 --> 0:18:19.520 the biggest trade arrangements for soybeans that the United States 0:18:19.560 --> 0:18:22.280 have ever had with China. I don't you worry about 0:18:22.280 --> 0:18:24.840 that though, that that help came from the government. The 0:18:24.880 --> 0:18:33.160 farm is increasingly depending on handouts. I prefer society without handouts, 0:18:34.119 --> 0:18:39.840 but sometimes there needs to be some help for a society. 0:18:39.880 --> 0:18:43.080 I know that my grandfather had one of the most 0:18:43.119 --> 0:18:46.800 successful farms near Manly, Nebraska, and he went broken during 0:18:46.800 --> 0:18:50.080 the depression and he moved to a house in Nebraska 0:18:50.160 --> 0:18:52.520 City to work in the packing house, into a house 0:18:52.520 --> 0:18:55.200 with dirt floors. I mean, there was no social programs, 0:18:55.280 --> 0:18:57.760 So there needs to be some where you where you 0:18:57.840 --> 0:19:00.240 draw that line is the big question. Can do a 0:19:00.240 --> 0:19:03.639 surveillance correction, Joe, in honor of you in Nebraska? I 0:19:03.680 --> 0:19:07.000 mentioned four and seventy miles west of Omah, that would 0:19:07.040 --> 0:19:10.399 be Sydney, Nebraska out I eighty. I was wrong Cosad's 0:19:10.440 --> 0:19:14.320 in closer to Omah than I recall, okay years ago. 0:19:15.040 --> 0:19:19.760 That's our surveillance correction for the Dayphy. The harder you work, 0:19:19.800 --> 0:19:22.120 the luckier you get get you know him from merri Tree. 0:19:22.200 --> 0:19:25.040 The family's got a night and acquaintance with Anthony Rizzo 0:19:25.040 --> 0:19:28.120 in the Chicago Cubs as well, and we thank him 0:19:28.160 --> 0:19:32.440 for coming in today. Uh truly. And I think John, 0:19:32.440 --> 0:19:54.320 in the history it's forgotten. They revolutionized the business. John, 0:19:54.320 --> 0:19:57.320 I've really been looking forward to this, this serious bontom 0:19:57.400 --> 0:20:00.520 dynamics to discuss, really really happy to site it. Joining 0:20:00.680 --> 0:20:03.879 Lisa Tom of myself is Lally too of j O H. 0:20:03.920 --> 0:20:06.640 C Mly Good morning to you, Good morning, big day 0:20:06.720 --> 0:20:09.560 yesterday for credit spreads, some real tightening. What do you 0:20:09.560 --> 0:20:12.320 make of the moves with staying at the moment? Complacency 0:20:12.400 --> 0:20:14.000 is a beautiful thing, isn't it? Is that what you 0:20:14.000 --> 0:20:15.920 think it is? Complacency at the moment? Well, look e 0:20:16.000 --> 0:20:17.680 t f are getting inflows. And when e t f 0:20:17.760 --> 0:20:20.800 s have gone inflows, uh, they're just buy. That's just 0:20:20.840 --> 0:20:22.440 the rule of the game. And if you actually look 0:20:22.480 --> 0:20:25.479 at the active manager cash holdings, it's been steadily rising. 0:20:26.160 --> 0:20:28.440 What I mean my complacency is everybody's hiding out in 0:20:28.480 --> 0:20:30.720 the same trade. Everybody's long double bees. That's just the 0:20:30.800 --> 0:20:34.520 name of the game. When is it not complacency? Uh, 0:20:35.040 --> 0:20:37.320 if you're getting returned so far, you're to date on 0:20:37.400 --> 0:20:39.879 higail bonds of twelve point one percent, I mean at 0:20:39.880 --> 0:20:43.440 a certain point, they're right, it's right. But when you 0:20:43.600 --> 0:20:45.679 cash in and just say, you know what, going forward, 0:20:45.720 --> 0:20:49.760 because you got to look forward, not backwards. So going forward, 0:20:49.920 --> 0:20:52.000 what's the best you can make out of double bees today, 0:20:52.000 --> 0:20:54.440 which you'll three point eight percent? I think it's interesting 0:20:54.440 --> 0:20:58.000 that you're delineating double bees, which have a much lower 0:20:58.080 --> 0:21:00.760 yield and have had a much bigger rally versus triple 0:21:00.800 --> 0:21:03.920 cs versus single bees. Is now the time to either 0:21:04.240 --> 0:21:06.440 take big risk or go home, go into the triple 0:21:06.480 --> 0:21:09.600 cs or not by high yield. I'm going home? Are 0:21:09.600 --> 0:21:12.800 you coming home? Are you d risking? At the moment, 0:21:13.400 --> 0:21:15.879 we we have been um so remember we run a 0:21:15.880 --> 0:21:19.639 comingal portfolio between equities and credit. When you look at 0:21:19.640 --> 0:21:22.520 the restroared ratio, to me, equities seem a lot more 0:21:22.680 --> 0:21:25.360 interesting if you think the growth is going to recover 0:21:25.520 --> 0:21:28.000 than than credit from here, and if you think we're 0:21:28.000 --> 0:21:30.439 gonna sell off. Look, I think people forget credit is 0:21:30.440 --> 0:21:35.399 a risk asset class. It is not a hedge against equities. 0:21:35.440 --> 0:21:37.720 If you want to hedge, you go by treasuries, you 0:21:37.840 --> 0:21:41.640 don't go by credit. Well, in your research note, you've 0:21:41.640 --> 0:21:44.159 got something pro which I want you to explain to 0:21:44.160 --> 0:21:46.640 the public, which is how much of bonds are trading 0:21:46.680 --> 0:21:49.680 the first call. This is a really important idea of folks. 0:21:49.680 --> 0:21:52.359 This goes way back to the Bloomberg y a screen 0:21:52.400 --> 0:21:55.159 where you have language like yield the worst, yield, the 0:21:55.200 --> 0:21:57.879 first call, et cetera. What is yield the first call? Me? 0:21:58.000 --> 0:22:01.359 I mean, I know, yield the last call, you know, 0:22:01.440 --> 0:22:06.119