1 00:00:02,240 --> 00:00:06,800 Speaker 1: This is Master's in Business with Barry Ridholts on Bloomberg Radio. 2 00:00:09,000 --> 00:00:11,559 Speaker 1: This week on the podcast, I have an extra special guest. 3 00:00:11,680 --> 00:00:13,840 Speaker 1: His name is Jerome Schneider. He's the head of short 4 00:00:13,920 --> 00:00:18,239 Speaker 1: term portfolio Management of Pimco. If you were remotely interested 5 00:00:18,400 --> 00:00:23,960 Speaker 1: in fixed income bonds trading, the plumbing of how finance works, 6 00:00:24,400 --> 00:00:30,040 Speaker 1: this is a master class in tremendous details of how 7 00:00:30,080 --> 00:00:35,519 Speaker 1: the fixed income market works. It's absolutely fascinating. If you 8 00:00:35,680 --> 00:00:41,320 Speaker 1: are remotely considering any sort of fixed income investing, working 9 00:00:41,360 --> 00:00:45,160 Speaker 1: on a bond desk, being a portfolio manager of any sort, 10 00:00:45,760 --> 00:00:48,919 Speaker 1: then this is a conversation you have to listen to. 11 00:00:49,640 --> 00:00:55,400 Speaker 1: It's absolutely um fascinating. With no further ado, my conversation 12 00:00:55,480 --> 00:01:03,840 Speaker 1: with pimco's Jerome Schneider. My special guest today is Jerome Schneider. 13 00:01:04,200 --> 00:01:07,440 Speaker 1: He is the head of short term portfolio Management and 14 00:01:07,480 --> 00:01:11,600 Speaker 1: Funding at PIMCO, which manages about one point seven five 15 00:01:11,880 --> 00:01:15,840 Speaker 1: trillion dollars as of the end of seventeen. Prior to 16 00:01:15,920 --> 00:01:18,640 Speaker 1: joining Pimco in two thousand and eight, he was a 17 00:01:18,720 --> 00:01:22,840 Speaker 1: senior managing director at bear Sterns, specializing in credit and 18 00:01:22,959 --> 00:01:26,679 Speaker 1: mortgage related funding transactions. He held a number of various 19 00:01:26,760 --> 00:01:30,600 Speaker 1: positions on the municipal and fixed income trading desks at Bear. 20 00:01:31,240 --> 00:01:34,640 Speaker 1: Morning Star named him the fixed income Fund Manager of 21 00:01:34,640 --> 00:01:39,360 Speaker 1: the Year for fifteen. He manages three separate funds, one 22 00:01:39,480 --> 00:01:42,840 Speaker 1: over fourteen billion dollars, the other over eight billion, the 23 00:01:43,000 --> 00:01:47,160 Speaker 1: smallest a mere two point two billion dollars. Jerome Schneider, 24 00:01:47,360 --> 00:01:49,640 Speaker 1: Welcome to Bloomberg. Thanks very much, very it's great to 25 00:01:49,680 --> 00:01:51,960 Speaker 1: be here. Um, this is the perfect time to be 26 00:01:52,040 --> 00:01:56,200 Speaker 1: speaking with you, given everything that's going on in with 27 00:01:56,240 --> 00:01:59,800 Speaker 1: the FED, with rising rates, with yield curve. But let 28 00:01:59,800 --> 00:02:02,480 Speaker 1: me start with a little bit of backgrounds. How did 29 00:02:02,560 --> 00:02:06,360 Speaker 1: you first get interested in finance? Uh, pretty easily on. 30 00:02:06,440 --> 00:02:08,280 Speaker 1: I had a great uncle who was always sort of 31 00:02:08,320 --> 00:02:10,760 Speaker 1: fascinated with the stock market at that point in time, 32 00:02:11,280 --> 00:02:13,600 Speaker 1: and had bought me a handful of shares, you know, 33 00:02:13,760 --> 00:02:16,680 Speaker 1: like everybody does. And from that fascination you quickly realized 34 00:02:16,720 --> 00:02:19,000 Speaker 1: that you know the power of capital. And I think 35 00:02:19,120 --> 00:02:21,560 Speaker 1: the at the age of eleven, I had I had 36 00:02:21,600 --> 00:02:23,880 Speaker 1: asked my dad, you know, this stock market thing is 37 00:02:23,880 --> 00:02:25,799 Speaker 1: pretty interesting, let's read about it. Let's read about in 38 00:02:25,800 --> 00:02:27,600 Speaker 1: the Wall Street drawal. And for my twelfth birthday he 39 00:02:27,600 --> 00:02:30,079 Speaker 1: actually took me to the Stock Exchange on the floor. 40 00:02:30,480 --> 00:02:33,400 Speaker 1: And for a young chap from Oklahoma, Oklahoma City, that 41 00:02:33,560 --> 00:02:36,920 Speaker 1: is that's a pretty pretty empowering thing to you know, 42 00:02:37,000 --> 00:02:40,240 Speaker 1: see your dream location come true. So for me, it 43 00:02:40,320 --> 00:02:42,200 Speaker 1: was a trip to the Stock Exchange and to see 44 00:02:42,240 --> 00:02:44,080 Speaker 1: the Yankees, who I loved at that point in time, 45 00:02:44,440 --> 00:02:47,520 Speaker 1: and uh and and really put together in your mind 46 00:02:47,600 --> 00:02:50,160 Speaker 1: how you actually get to that point from being twelve 47 00:02:50,280 --> 00:02:52,679 Speaker 1: to being a young professional and the steps it takes. 48 00:02:52,720 --> 00:02:54,520 Speaker 1: So that was a that was a magical moment my 49 00:02:54,720 --> 00:02:57,040 Speaker 1: in my formative years. And that was back in the 50 00:02:57,120 --> 00:03:00,280 Speaker 1: day when you could both a get on the floor 51 00:03:00,280 --> 00:03:02,640 Speaker 1: of the Stock Exchange. You can't do that really today. 52 00:03:03,080 --> 00:03:06,799 Speaker 1: And b it's not just the front for a television studio. 53 00:03:07,240 --> 00:03:10,119 Speaker 1: That was where stocks were actually traded back there. Yeah, 54 00:03:10,120 --> 00:03:12,360 Speaker 1: and and amazing and thinking about it, you know, I 55 00:03:12,440 --> 00:03:14,400 Speaker 1: was I was probably hardly five feet tall at that 56 00:03:14,400 --> 00:03:16,480 Speaker 1: point in time. You know, it was a scrum and 57 00:03:16,520 --> 00:03:18,359 Speaker 1: this is the mid early eighties. And I look back 58 00:03:18,360 --> 00:03:20,519 Speaker 1: at the photos who took in. The funniest thing obviously 59 00:03:20,600 --> 00:03:22,560 Speaker 1: is the people and how they're dressed and and and 60 00:03:22,600 --> 00:03:24,640 Speaker 1: the second of all it was it was a functioning, 61 00:03:25,040 --> 00:03:27,960 Speaker 1: uh entity and a physical sense not just a literal 62 00:03:27,960 --> 00:03:30,840 Speaker 1: sense and of a spiritual sense as it as it 63 00:03:31,000 --> 00:03:33,880 Speaker 1: as it is now along with computers, but it's a physical, 64 00:03:34,280 --> 00:03:37,560 Speaker 1: breathing entity. And today obviously it's changed in m Y 65 00:03:37,640 --> 00:03:39,680 Speaker 1: s c IS and all the stock exchanges have changed 66 00:03:39,920 --> 00:03:43,760 Speaker 1: their their functioning perspective to co adapt to technology. Um. 67 00:03:43,800 --> 00:03:45,760 Speaker 1: But I think more importantly, and this is the thing 68 00:03:46,320 --> 00:03:48,640 Speaker 1: that I would say, is that as a young person, 69 00:03:48,880 --> 00:03:53,160 Speaker 1: having the ability to have that experience and learning from 70 00:03:53,200 --> 00:03:55,520 Speaker 1: people what it took takes to get there, and then 71 00:03:55,680 --> 00:03:58,240 Speaker 1: putting those stepping stones in place, seeing the right people 72 00:03:58,320 --> 00:04:00,720 Speaker 1: understanding what they took to get there, even though they 73 00:04:00,800 --> 00:04:04,960 Speaker 1: might be forty years or senior, that's a very powerful thing. 74 00:04:05,000 --> 00:04:06,640 Speaker 1: And I think one of the one of the key 75 00:04:06,680 --> 00:04:09,040 Speaker 1: things for people who whether they're interested in finance or otherwise, 76 00:04:09,120 --> 00:04:12,320 Speaker 1: is to find people that will serve as mentors, rabbis, 77 00:04:12,440 --> 00:04:14,960 Speaker 1: whatever it is to help empower them to achieve their 78 00:04:15,000 --> 00:04:16,240 Speaker 1: goals in that kind of way. And I was just 79 00:04:16,279 --> 00:04:18,480 Speaker 1: fortunate to have a ton of people around me. Sounds 80 00:04:18,520 --> 00:04:21,599 Speaker 1: like that was a formative experience for you. Yeah, it was. 81 00:04:21,680 --> 00:04:24,080 Speaker 1: It was great, and I think you know, people recognize 82 00:04:24,120 --> 00:04:25,960 Speaker 1: that at that point in time as as odd as 83 00:04:25,960 --> 00:04:27,560 Speaker 1: it might be if from a young kid in in 84 00:04:27,600 --> 00:04:29,720 Speaker 1: Oklahoma City, you know, it might have been one of 85 00:04:29,760 --> 00:04:32,680 Speaker 1: those things that it was a way out, so to speak. 86 00:04:32,960 --> 00:04:35,240 Speaker 1: And so for me, Oklahoma is a great place to 87 00:04:35,279 --> 00:04:37,200 Speaker 1: be from, and it's a great place to be going 88 00:04:37,240 --> 00:04:39,760 Speaker 1: back to his family. But at the same time, I 89 00:04:39,800 --> 00:04:42,120 Speaker 1: haven't lived there since high school. No interest in being 90 00:04:42,120 --> 00:04:44,400 Speaker 1: a roughneck and working in the oil fields or any 91 00:04:44,400 --> 00:04:48,000 Speaker 1: of that, uh not at this point of enough. Well, 92 00:04:48,040 --> 00:04:50,159 Speaker 1: I mean, that was the other formative experience in my life, 93 00:04:50,160 --> 00:04:52,719 Speaker 1: actually being being exposed to the roughnecks. And when you 94 00:04:52,720 --> 00:04:55,039 Speaker 1: grow up in Oklahoma and Texas and your whole family 95 00:04:55,120 --> 00:04:57,680 Speaker 1: is exposed to the oil industry. In the late seventies 96 00:04:57,720 --> 00:05:02,400 Speaker 1: and early eighties, the oil the oil bust basically was 97 00:05:02,560 --> 00:05:04,760 Speaker 1: an eye opening experience and and frankly that was one 98 00:05:04,760 --> 00:05:07,040 Speaker 1: of the things that led me to want to understand 99 00:05:07,080 --> 00:05:10,640 Speaker 1: capital markets, because you know, when you're in the oil business, 100 00:05:10,720 --> 00:05:13,640 Speaker 1: you're putting together a ton of capital, a lot of 101 00:05:13,640 --> 00:05:16,080 Speaker 1: it's not your money, and and so your incentives are 102 00:05:16,160 --> 00:05:18,880 Speaker 1: very different. And at the same time, when you think 103 00:05:18,880 --> 00:05:22,560 Speaker 1: about the ramifications of a repricing event, in that case, 104 00:05:22,640 --> 00:05:25,240 Speaker 1: it's oil and everybody when you're sitting in the oil patch, 105 00:05:25,320 --> 00:05:28,600 Speaker 1: thinks oil prices only go up. But as a young kid, 106 00:05:29,240 --> 00:05:32,640 Speaker 1: you see everybody going from having literally lear jets and 107 00:05:32,760 --> 00:05:36,600 Speaker 1: third and fourth lake homes and multiple cars to nothing overnight. 108 00:05:36,880 --> 00:05:39,360 Speaker 1: And you look around and we had a very modest upbringing, 109 00:05:39,400 --> 00:05:42,280 Speaker 1: you know, I would say that, you know, in retrospect, 110 00:05:42,640 --> 00:05:45,080 Speaker 1: it was we are downside was fairly limited compared to 111 00:05:45,120 --> 00:05:47,440 Speaker 1: some people. Not a lot of leverage, well not a 112 00:05:47,480 --> 00:05:49,839 Speaker 1: lot of leverage so to speak, but at the same time, 113 00:05:49,880 --> 00:05:51,760 Speaker 1: not a lot of the different upside. But I or 114 00:05:51,839 --> 00:05:54,040 Speaker 1: learned at that point in time the strength of leverage 115 00:05:54,080 --> 00:05:57,000 Speaker 1: and the danger of leverage, which probably as my professional 116 00:05:57,000 --> 00:05:59,480 Speaker 1: career evolved in the fixed income that obviously became a 117 00:05:59,560 --> 00:06:02,640 Speaker 1: keystones that. So so you go to University of Pennsylvania 118 00:06:02,720 --> 00:06:04,520 Speaker 1: and then you get your m b a. At n 119 00:06:04,640 --> 00:06:07,839 Speaker 1: y U stern Um and what was your first job 120 00:06:08,160 --> 00:06:11,200 Speaker 1: right out of school? So when I graduated pen I 121 00:06:11,240 --> 00:06:14,760 Speaker 1: wanted to sort of a degree that was related to finance, 122 00:06:14,800 --> 00:06:17,440 Speaker 1: but really more economics related into I had a more 123 00:06:17,480 --> 00:06:21,520 Speaker 1: customized degree in international finance, economics, and international relations, and 124 00:06:21,560 --> 00:06:23,960 Speaker 1: so penn was a perfect place to do that. Unfortunately, 125 00:06:23,960 --> 00:06:27,360 Speaker 1: when I was graduating and was starting interview in h 126 00:06:27,520 --> 00:06:30,360 Speaker 1: My background was a series of internships for small uh 127 00:06:30,400 --> 00:06:33,160 Speaker 1: from small a small shop in Oklahoma City called stephil 128 00:06:33,200 --> 00:06:36,880 Speaker 1: Nicholas and then which is now not such a such 129 00:06:36,880 --> 00:06:38,680 Speaker 1: a small shop, but they were really focused on muni 130 00:06:38,760 --> 00:06:40,360 Speaker 1: bonds back then, which is a good and bad thing. 131 00:06:40,680 --> 00:06:42,479 Speaker 1: And the other one was running a guy's campaign for 132 00:06:42,480 --> 00:06:45,480 Speaker 1: State Treasurer of Oklahoma, which was successful, but that was 133 00:06:45,560 --> 00:06:48,520 Speaker 1: both both took me back to Oklahoma and and so 134 00:06:48,600 --> 00:06:51,240 Speaker 1: as a result at Penn you're looking around for internships. 135 00:06:51,320 --> 00:06:53,840 Speaker 1: Most of the kids from the East Coast had your 136 00:06:53,839 --> 00:06:55,880 Speaker 1: connections to New York and Wall Street and things like that, 137 00:06:56,279 --> 00:06:58,160 Speaker 1: and I didn't have any of those connections, so to speak. 138 00:06:58,200 --> 00:07:00,320 Speaker 1: So I was really trying to find my way to 139 00:07:00,640 --> 00:07:02,880 Speaker 1: get to Wall Street at that point in time, and 140 00:07:03,080 --> 00:07:04,960 Speaker 1: it took a little bit more effort. That combined with 141 00:07:05,000 --> 00:07:08,080 Speaker 1: the fact that when I was graduating, wasn't the best 142 00:07:08,160 --> 00:07:11,560 Speaker 1: job market in the world, and when you think about it, 143 00:07:11,680 --> 00:07:14,000 Speaker 1: you had to get in on any floor whatsoever. So 144 00:07:14,040 --> 00:07:16,200 Speaker 1: I interviewed. I interviewed with people who are trying to 145 00:07:16,240 --> 00:07:19,080 Speaker 1: sell limited partnerships, limited people who are trying to trade 146 00:07:19,080 --> 00:07:22,840 Speaker 1: stocks and being the Operations group. And oddly coincidentally, the 147 00:07:22,920 --> 00:07:25,680 Speaker 1: job I took was with bear Stearns and I joined 148 00:07:25,720 --> 00:07:29,440 Speaker 1: the operations training program UH at that tender young age 149 00:07:29,680 --> 00:07:32,600 Speaker 1: for a very small salary, but a great opportunity to learn. 150 00:07:33,200 --> 00:07:35,960 Speaker 1: Let's talk a little bit about the Federal Reserve today 151 00:07:36,160 --> 00:07:39,840 Speaker 1: and the impact they have on the fixed income market. 152 00:07:40,400 --> 00:07:43,960 Speaker 1: First off, what do you think about today's Federal Reserve? Yeah, 153 00:07:44,000 --> 00:07:46,600 Speaker 1: I think today's Federal Reserve is one thing is very 154 00:07:46,600 --> 00:07:48,480 Speaker 1: different than it was before. You know, they try to 155 00:07:48,520 --> 00:07:50,960 Speaker 1: be as transparent as possible. Is that a good thing 156 00:07:51,080 --> 00:07:52,920 Speaker 1: or a bad It's a good thing because the purpose 157 00:07:52,960 --> 00:07:55,960 Speaker 1: of the Federal Reserve is to communicate effective monetary policy, 158 00:07:56,440 --> 00:07:59,720 Speaker 1: and unlike federal reserves of two decades three decades ago, 159 00:07:59,760 --> 00:08:01,480 Speaker 1: who used to do things in the silence and night 160 00:08:01,760 --> 00:08:04,680 Speaker 1: or effect open money market operations and then you simply 161 00:08:05,160 --> 00:08:07,360 Speaker 1: I saw the cash mover in or out at specific 162 00:08:07,400 --> 00:08:10,480 Speaker 1: time during the day because they were adjusting the the 163 00:08:10,520 --> 00:08:14,440 Speaker 1: access reserves in the repo markets. UH. Now it actually 164 00:08:14,520 --> 00:08:17,600 Speaker 1: is quite effective because what they hope to do is 165 00:08:17,680 --> 00:08:20,920 Speaker 1: manage expectations over the medium term. One in terms of 166 00:08:21,280 --> 00:08:23,800 Speaker 1: clearly in terms of growth of the economy. UH and 167 00:08:23,880 --> 00:08:26,800 Speaker 1: also unemployment clearly, but also in terms of inflation. And 168 00:08:26,840 --> 00:08:30,160 Speaker 1: that second metric is what's incredibly important to the communication 169 00:08:30,680 --> 00:08:36,160 Speaker 1: uh effort, and so being communicative obviously comes to this criticism. 170 00:08:36,200 --> 00:08:38,520 Speaker 1: It comes to this criticism because people want when they 171 00:08:38,559 --> 00:08:42,280 Speaker 1: people communicate, want them to be succinct and clear and precise. 172 00:08:42,800 --> 00:08:45,120 Speaker 1: And if you don't have those three things, which aren't 173 00:08:45,120 --> 00:08:48,920 Speaker 1: necessarily the same um, people start to offer their own criticism. 174 00:08:49,040 --> 00:08:52,640 Speaker 1: Let's go over that succincts clear and precise meaning you 175 00:08:52,679 --> 00:08:55,560 Speaker 1: want it short and sweet, right, you want it accurate. 176 00:08:55,600 --> 00:08:58,520 Speaker 1: Although there's a difference between precision and precision, and precision 177 00:08:58,640 --> 00:09:01,360 Speaker 1: is the accountability the That's the thing about the FED, though, 178 00:09:01,400 --> 00:09:03,760 Speaker 1: and people fail to realize, is that the FED wants 179 00:09:03,760 --> 00:09:06,680 Speaker 1: to maintain its optionality, and that's what it's continued to do, 180 00:09:07,080 --> 00:09:09,640 Speaker 1: not only during this hiking cycle but really since the 181 00:09:09,679 --> 00:09:12,920 Speaker 1: financial crisis, and in doing so, they want to find 182 00:09:12,960 --> 00:09:16,560 Speaker 1: themselves to basically point a direction, but they want to 183 00:09:16,600 --> 00:09:18,880 Speaker 1: alter the course and speed of that direction over a 184 00:09:18,880 --> 00:09:21,160 Speaker 1: period of time. And I think one of the failures 185 00:09:21,160 --> 00:09:23,840 Speaker 1: of the market, quite honestly, is understanding and comprehending that 186 00:09:23,840 --> 00:09:27,679 Speaker 1: reconciliation process. Frankly, because much of the market can't imagine 187 00:09:27,720 --> 00:09:30,120 Speaker 1: themselves as being that central baker in that seat. But 188 00:09:30,160 --> 00:09:32,760 Speaker 1: if you were, you know, like any good parent, you 189 00:09:32,760 --> 00:09:35,480 Speaker 1: wouldn't necessarily want to be painted in the corner by 190 00:09:35,480 --> 00:09:37,520 Speaker 1: your kid. You know, the kids comes home and says, 191 00:09:37,800 --> 00:09:39,439 Speaker 1: you know, mom, Dad, I only eat junk food for 192 00:09:39,440 --> 00:09:41,400 Speaker 1: the next year, they're gonna say, well, let's try to 193 00:09:41,400 --> 00:09:43,160 Speaker 1: have a balance of it. Let's figure out I have 194 00:09:43,160 --> 00:09:44,839 Speaker 1: some days that are healthy, some days that you you 195 00:09:44,880 --> 00:09:47,679 Speaker 1: can go and eat potato chips all day. In this situation, 196 00:09:47,720 --> 00:09:50,480 Speaker 1: the FED wants to simply be as clear as they 197 00:09:50,520 --> 00:09:53,280 Speaker 1: possibly can at that point in time without being fully 198 00:09:53,280 --> 00:09:57,200 Speaker 1: committed to an ingredient mix, which they can't fully bake, 199 00:09:57,320 --> 00:09:59,240 Speaker 1: you know, a masterpiece in the future. And and that's 200 00:09:59,320 --> 00:10:01,240 Speaker 1: ultimately what they want to do is try to be 201 00:10:01,280 --> 00:10:03,160 Speaker 1: as clear as they can at this point in time 202 00:10:03,440 --> 00:10:06,800 Speaker 1: and balance it to manage the expectations of the marketplace 203 00:10:06,840 --> 00:10:09,320 Speaker 1: without upsetting him. And that's what people have called the 204 00:10:09,360 --> 00:10:12,480 Speaker 1: put of you know, bern Yankee, greed, spin and whatever, 205 00:10:12,679 --> 00:10:14,920 Speaker 1: yell and put. And I think that there's a there's 206 00:10:14,920 --> 00:10:16,679 Speaker 1: a there's a trade off in that, and that's the 207 00:10:16,720 --> 00:10:19,320 Speaker 1: insurance policy or the cost if you will of the 208 00:10:19,360 --> 00:10:22,520 Speaker 1: policy measure of trying to be as open, open minded 209 00:10:22,520 --> 00:10:25,240 Speaker 1: and communicative as they have been. Some people have said 210 00:10:25,360 --> 00:10:29,400 Speaker 1: that the transparency of the FED and this constant communication 211 00:10:30,080 --> 00:10:33,720 Speaker 1: has made the job of the balance manager easier, and 212 00:10:33,800 --> 00:10:36,520 Speaker 1: others have said, no, they say one thing and it 213 00:10:36,520 --> 00:10:38,439 Speaker 1: turns out not to be true, and they do another. 214 00:10:38,559 --> 00:10:41,920 Speaker 1: It's made it more challenging. Where do you fall on 215 00:10:41,960 --> 00:10:46,640 Speaker 1: that continue? I honestly think that the marketplace is has 216 00:10:47,160 --> 00:10:49,560 Speaker 1: has evolved in such a way that you're not simply 217 00:10:49,559 --> 00:10:51,600 Speaker 1: looking at a single variable at this point in time, 218 00:10:51,679 --> 00:10:54,000 Speaker 1: being the FED. In fact, there's other influences you have 219 00:10:54,040 --> 00:10:56,280 Speaker 1: to look at, which is obviously the global influence. We 220 00:10:56,320 --> 00:10:58,000 Speaker 1: can see that. You know, just because you have a 221 00:10:58,040 --> 00:11:00,720 Speaker 1: view on US interest rates or US monetary policy doesn't 222 00:11:00,760 --> 00:11:03,800 Speaker 1: mean that it's not influenced by other policies around the world. 223 00:11:03,800 --> 00:11:05,680 Speaker 1: We saw that basically two years ago at the end 224 00:11:05,679 --> 00:11:08,720 Speaker 1: of two thousand and fifteen, when global financial conditions worsened, 225 00:11:09,120 --> 00:11:12,679 Speaker 1: it obviously effectuated a FED policy. So as a trader, 226 00:11:12,720 --> 00:11:16,240 Speaker 1: as a portfolio manager, as a as a manager of 227 00:11:16,280 --> 00:11:18,760 Speaker 1: capital for our clients, the thing we want to be 228 00:11:18,800 --> 00:11:22,840 Speaker 1: most mindful of is these inputs, These variables and mitigating 229 00:11:22,960 --> 00:11:26,199 Speaker 1: these risks in a way that produces positive risk adjusted returns. 230 00:11:26,440 --> 00:11:29,720 Speaker 1: The bottom line is is that there's just as much 231 00:11:29,760 --> 00:11:31,599 Speaker 1: forecasting that we're going to do and think about it 232 00:11:31,679 --> 00:11:34,800 Speaker 1: PIMCO looking at the macroeconomics, which has clearly been the 233 00:11:34,800 --> 00:11:37,920 Speaker 1: baseline of our forecasting for forty years plus at our firm, 234 00:11:38,120 --> 00:11:40,520 Speaker 1: but you also have to incorporate at the evolving market 235 00:11:40,559 --> 00:11:45,160 Speaker 1: dynamics and most importantly, the market perception of the market 236 00:11:45,200 --> 00:11:49,760 Speaker 1: pricing meaning sometimes sometimes understanding where the market is, whether 237 00:11:49,800 --> 00:11:53,400 Speaker 1: it's overpriced, mispriced, whatnot. Is actually just as important to 238 00:11:53,520 --> 00:11:56,720 Speaker 1: your portfolio positioning as anything else in the policy measures 239 00:11:56,760 --> 00:11:58,400 Speaker 1: that you might observe from the FED or the data 240 00:11:58,440 --> 00:12:00,920 Speaker 1: that comes every week or whatnot. So let's let's stay 241 00:12:00,920 --> 00:12:03,000 Speaker 1: with the Fed, because you're really the right person to 242 00:12:03,080 --> 00:12:05,760 Speaker 1: ask this question. The work you did in the back 243 00:12:05,840 --> 00:12:09,640 Speaker 1: office in the early parts of your career, UH, doing 244 00:12:09,679 --> 00:12:13,440 Speaker 1: the settlements and DTC and all that other stuff, explain 245 00:12:13,600 --> 00:12:18,559 Speaker 1: what the FED is actually doing mechanically when they raise 246 00:12:18,679 --> 00:12:22,120 Speaker 1: or lower rates. I don't think the average person understands 247 00:12:22,360 --> 00:12:25,000 Speaker 1: what this process is. Like, Yeah, it actually you know, 248 00:12:25,080 --> 00:12:27,480 Speaker 1: it actually isn't as complicated now as it probably once 249 00:12:27,559 --> 00:12:31,160 Speaker 1: was simply because of the magic of computers and electronic money, 250 00:12:31,200 --> 00:12:34,280 Speaker 1: so to speak. But effectively, what you're doing is effectuating 251 00:12:34,320 --> 00:12:38,080 Speaker 1: monetary reserves access reserves in multiple ways. The first one 252 00:12:38,160 --> 00:12:40,400 Speaker 1: basically being that you know, as we've seen over the 253 00:12:40,400 --> 00:12:43,600 Speaker 1: past few years, even with the emergency monetary stimulus, that 254 00:12:43,640 --> 00:12:46,199 Speaker 1: they're able to grow their balance sheet, which creates access 255 00:12:46,240 --> 00:12:49,200 Speaker 1: reserves into the system and in a variety of ways. 256 00:12:49,360 --> 00:12:52,920 Speaker 1: And that means they're purchasing bonds, purchasing mortgages, purchasing treasuries, 257 00:12:53,080 --> 00:12:56,679 Speaker 1: which increases the amount of monetary supply, the money available 258 00:12:56,880 --> 00:12:59,960 Speaker 1: to help. I'll set, you know, I'll set the conditions 259 00:13:00,000 --> 00:13:02,440 Speaker 1: that they're trying to count, meaning they take these paper 260 00:13:02,840 --> 00:13:06,080 Speaker 1: um assets and bring them onto their balance sheet in 261 00:13:06,160 --> 00:13:09,760 Speaker 1: exchange for actual dollars correct. And I think this is 262 00:13:09,800 --> 00:13:13,040 Speaker 1: important because that's a semi permanent way of establishing reserves, 263 00:13:13,080 --> 00:13:15,200 Speaker 1: whereas what they used to do is what they referred 264 00:13:15,200 --> 00:13:18,080 Speaker 1: to as open market operations, which possibly are you know, 265 00:13:18,200 --> 00:13:21,720 Speaker 1: are returning more to the cloaquial. But open market operations 266 00:13:21,760 --> 00:13:25,240 Speaker 1: for decades was simply the FED coming in and purchasing 267 00:13:25,240 --> 00:13:29,960 Speaker 1: bonds on short short term operations REPO operations, to buy 268 00:13:30,000 --> 00:13:33,000 Speaker 1: bonds effectively versus lending out cash to the marketplace, and 269 00:13:33,040 --> 00:13:36,080 Speaker 1: by doing that they would make small incremental adjustments to 270 00:13:36,120 --> 00:13:38,520 Speaker 1: the effective FED funds rador the FED Funds target rate 271 00:13:38,520 --> 00:13:40,800 Speaker 1: at that point in time. And actually, because it wasn't 272 00:13:40,800 --> 00:13:43,080 Speaker 1: posted on Bloomberger, wasn't set at a point in time, 273 00:13:43,360 --> 00:13:47,080 Speaker 1: you for in late seventies, early eighties, you wouldn't actually 274 00:13:47,080 --> 00:13:50,040 Speaker 1: know that the Fed was actually targeting or adjusting interest 275 00:13:50,080 --> 00:13:53,559 Speaker 1: rates until you actually saw those processes are felt them 276 00:13:53,559 --> 00:13:56,160 Speaker 1: in the marketplace occurring in the short term markets. So 277 00:13:56,240 --> 00:14:00,520 Speaker 1: you said semi permanent earlier when discussing um what we 278 00:14:00,559 --> 00:14:04,640 Speaker 1: can I guess called quantitative easing. Why semi permanent because 279 00:14:04,679 --> 00:14:07,400 Speaker 1: some of these asset classes have a maturity date and 280 00:14:07,440 --> 00:14:10,600 Speaker 1: eventually run off, or they could always decide to unwind 281 00:14:10,600 --> 00:14:13,840 Speaker 1: at a later date. What makes it permanent versus semi perament. Well, 282 00:14:13,920 --> 00:14:16,280 Speaker 1: we've evolved now over the past two years into an 283 00:14:16,280 --> 00:14:19,960 Speaker 1: acceptance and and actually implementation of a normalization process of 284 00:14:20,000 --> 00:14:24,440 Speaker 1: our of our monetary policy. We're moving from emergency emergency 285 00:14:24,440 --> 00:14:27,080 Speaker 1: measures to one that's more normalized and going trying to 286 00:14:27,120 --> 00:14:29,160 Speaker 1: go back to where we were to priest crisis mode. 287 00:14:29,480 --> 00:14:31,080 Speaker 1: So what does that mean we have to take our 288 00:14:31,120 --> 00:14:34,240 Speaker 1: balance sheet from what it was and it's now grown 289 00:14:34,280 --> 00:14:37,800 Speaker 1: to four point two trillion in size, and generally decrease 290 00:14:37,840 --> 00:14:41,400 Speaker 1: it over time through basically um through basically letting it 291 00:14:41,400 --> 00:14:44,680 Speaker 1: amortized down mortgages that the FED owns will pay down, 292 00:14:44,880 --> 00:14:47,640 Speaker 1: treasuries will eventually go off the balance sheet, and then 293 00:14:47,640 --> 00:14:52,200 Speaker 1: doing so, that's gonna gradually tighten monitor monetary conditions as 294 00:14:52,240 --> 00:14:55,400 Speaker 1: those access reserves, as those access moneys get removed from 295 00:14:55,440 --> 00:14:59,320 Speaker 1: the marketplace, and the repurchases of and and and the 296 00:14:59,320 --> 00:15:02,160 Speaker 1: FED doesn't re purchase as much of the securities as 297 00:15:02,200 --> 00:15:05,440 Speaker 1: are maturing in their portfolio. So it's a passive reduction 298 00:15:05,840 --> 00:15:09,720 Speaker 1: in that process. And it's very important because for the marketplace, 299 00:15:10,000 --> 00:15:13,400 Speaker 1: because it is a it's it's a it's a mile marker. 300 00:15:13,400 --> 00:15:16,520 Speaker 1: Effectively that we are heading towards not just higher rates, 301 00:15:16,520 --> 00:15:19,520 Speaker 1: but a normalization process which is going to generally move 302 00:15:19,640 --> 00:15:22,640 Speaker 1: real rates higher over over a period of time. It's 303 00:15:22,640 --> 00:15:26,360 Speaker 1: not shortly, it's gently because because it's just such a 304 00:15:26,360 --> 00:15:29,080 Speaker 1: gradual it's a gradual thing. And as Jennet Yellen likes 305 00:15:29,120 --> 00:15:31,240 Speaker 1: to say, hey it's in the background, nothing to see here, 306 00:15:31,400 --> 00:15:34,040 Speaker 1: Just move on and an ideal world, that's what's going 307 00:15:34,080 --> 00:15:35,920 Speaker 1: to happen, and I actually think it will work out 308 00:15:35,960 --> 00:15:38,680 Speaker 1: that way. People at the beginning, we're very concerned that 309 00:15:38,720 --> 00:15:40,240 Speaker 1: the FED was going to come in and sell all 310 00:15:40,240 --> 00:15:42,560 Speaker 1: their assets and needs to do it all overnight. But 311 00:15:42,600 --> 00:15:44,080 Speaker 1: what we've learned from the FED, and this is what 312 00:15:44,120 --> 00:15:45,720 Speaker 1: I think is, you know, getting back to my point 313 00:15:45,760 --> 00:15:48,680 Speaker 1: about the market reacting in the market's perception that that 314 00:15:48,720 --> 00:15:51,000 Speaker 1: would be fullhardy because the mark because the FED wants 315 00:15:51,040 --> 00:15:54,240 Speaker 1: to always maintain their optionality, and so the reality is 316 00:15:54,240 --> 00:15:56,400 Speaker 1: is that the FED wants to keep those assets on 317 00:15:56,400 --> 00:15:58,960 Speaker 1: his bounce sheet, not only to not upset the market, 318 00:15:59,000 --> 00:16:01,560 Speaker 1: but also to maintain genalogy for the future. But as 319 00:16:01,560 --> 00:16:03,760 Speaker 1: it's right now, they've been pretty clear about the prescription 320 00:16:03,840 --> 00:16:07,320 Speaker 1: of how much they're going to increase that reduction. I 321 00:16:07,320 --> 00:16:09,960 Speaker 1: guess that's an oxymoron, but increase that reduction of their 322 00:16:09,960 --> 00:16:13,240 Speaker 1: balance sheet over the next few quarters by a prescribed amount, 323 00:16:13,280 --> 00:16:16,560 Speaker 1: and and that has been forecasted and digested by the market, 324 00:16:16,760 --> 00:16:19,080 Speaker 1: and it's not that that upsetting at all to the marketplace. 325 00:16:19,080 --> 00:16:21,320 Speaker 1: As we've seen over the pastime. I was always stunned 326 00:16:21,320 --> 00:16:24,800 Speaker 1: at the the claims in the beginning of quee. Hey, 327 00:16:24,840 --> 00:16:26,600 Speaker 1: you know they're gonna have to unline this and it's 328 00:16:26,600 --> 00:16:30,240 Speaker 1: gonna be so disruptive, and it just didn't make any sense. 329 00:16:30,640 --> 00:16:34,240 Speaker 1: All these all this paper has a maturity date. You 330 00:16:34,280 --> 00:16:36,120 Speaker 1: could just let it and and they're not all the 331 00:16:36,160 --> 00:16:39,680 Speaker 1: same date. There is a curve, the that duration curve. 332 00:16:39,800 --> 00:16:42,440 Speaker 1: You could just let that run off naturally. Why was 333 00:16:42,480 --> 00:16:44,840 Speaker 1: there such fear that, oh, you know, when the fed 334 00:16:44,880 --> 00:16:47,880 Speaker 1: on wines, it's gonna be really problematic. Well, the question 335 00:16:47,960 --> 00:16:50,080 Speaker 1: is who is the incremental buyer? And that's actually a 336 00:16:50,120 --> 00:16:53,040 Speaker 1: real question to pose it today, but in a different 337 00:16:53,560 --> 00:16:55,960 Speaker 1: a different size and different scale. There's one thing that 338 00:16:56,000 --> 00:16:58,160 Speaker 1: if you're gonna let you know, an entire four trillion 339 00:16:58,160 --> 00:16:59,960 Speaker 1: dollars with the assets run off the balance sheet of 340 00:17:00,000 --> 00:17:02,480 Speaker 1: access reserves very quickly, and is another thing just to 341 00:17:02,480 --> 00:17:05,520 Speaker 1: have incremental supply coming to the market. One is a 342 00:17:05,560 --> 00:17:08,520 Speaker 1: five five billion dollar plus question and the other is 343 00:17:08,520 --> 00:17:11,320 Speaker 1: a four trillion dollar question. But the question in both 344 00:17:11,320 --> 00:17:13,600 Speaker 1: of them is who is the incremental buyer of treasuries? 345 00:17:13,640 --> 00:17:16,119 Speaker 1: Is at four in central banks? Is their retail investors, 346 00:17:16,160 --> 00:17:18,800 Speaker 1: is their corporate cash investors who need to buy this um? 347 00:17:18,960 --> 00:17:21,240 Speaker 1: Their banks who need to buy it for regulatory purposes 348 00:17:21,280 --> 00:17:24,040 Speaker 1: not so much anymore. But what about just the maturity issue? 349 00:17:24,119 --> 00:17:31,000 Speaker 1: Is if hey, I'm holding twenty twenty papers around, all right, 350 00:17:31,200 --> 00:17:34,320 Speaker 1: the paper matures, it goes away, I get cash. Nothing 351 00:17:34,359 --> 00:17:37,040 Speaker 1: actually hits the market unless they decide to reinvest that 352 00:17:37,280 --> 00:17:39,800 Speaker 1: right that that is correct, So well, what hits the market? 353 00:17:39,840 --> 00:17:42,240 Speaker 1: They have to reinvest. Their reinvesting a certain amount, but 354 00:17:42,320 --> 00:17:44,800 Speaker 1: not all of their maturities. And so they're doing it 355 00:17:44,880 --> 00:17:47,160 Speaker 1: in a pro rated portion across the curve. And so 356 00:17:47,359 --> 00:17:50,560 Speaker 1: they're trying not to disrupt that allocation of what is 357 00:17:50,600 --> 00:17:52,560 Speaker 1: already coming to market. And and and that was the 358 00:17:52,600 --> 00:17:54,879 Speaker 1: key is they're not trying to shape This is not 359 00:17:54,960 --> 00:17:57,399 Speaker 1: an operation Twist, So they're not trying to reshape the 360 00:17:57,440 --> 00:17:59,639 Speaker 1: yield curve here. What they are simply trying to do 361 00:17:59,760 --> 00:18:03,120 Speaker 1: is reduced their overall footprint to the treasury market over 362 00:18:03,200 --> 00:18:05,959 Speaker 1: time in a methodical manner. We're deep in the weeds. 363 00:18:06,000 --> 00:18:09,320 Speaker 1: This is pure fixed income walkery, and there is an 364 00:18:09,320 --> 00:18:12,919 Speaker 1: audience that will really appreciate that it is wonkery. But 365 00:18:12,960 --> 00:18:16,040 Speaker 1: it's important. The one takeaway for for for your listeners 366 00:18:16,480 --> 00:18:19,800 Speaker 1: is that the wonkery is the magic of how people 367 00:18:19,840 --> 00:18:22,440 Speaker 1: are going to think about adapting to higher rates going forward. 368 00:18:22,800 --> 00:18:25,760 Speaker 1: And that is the facet which is most most of 369 00:18:25,800 --> 00:18:28,679 Speaker 1: misunderstood when you get to these periods of monetary policy. 370 00:18:28,720 --> 00:18:31,840 Speaker 1: Monetary policy is fascinating, but if you don't understand what's 371 00:18:31,840 --> 00:18:34,240 Speaker 1: going on, it can be pretty dangerous. How many times 372 00:18:34,240 --> 00:18:37,920 Speaker 1: over the past ten years have have we heard, oh, 373 00:18:38,040 --> 00:18:42,400 Speaker 1: the bullmarket and bonds is over. Is this multi decade 374 00:18:42,720 --> 00:18:46,119 Speaker 1: bond bull market finally over? Well? I think it's truly 375 00:18:46,160 --> 00:18:48,480 Speaker 1: to say, first of all, there's so many factors in 376 00:18:48,520 --> 00:18:51,720 Speaker 1: the bond market that led to the bull conditions as 377 00:18:51,880 --> 00:18:54,639 Speaker 1: as we knew it for many years, UM, the dollar, 378 00:18:54,760 --> 00:18:57,240 Speaker 1: the view of the dollar, the United States, the reemergence 379 00:18:57,280 --> 00:19:00,520 Speaker 1: of of other factors on the on the global forces, UM. 380 00:19:00,720 --> 00:19:03,240 Speaker 1: And I think that when we think about this, it's 381 00:19:03,280 --> 00:19:05,520 Speaker 1: not a pivot point that you can simply say this 382 00:19:05,600 --> 00:19:08,160 Speaker 1: is the exact pivot that we're moving back the other way. 383 00:19:08,280 --> 00:19:10,359 Speaker 1: In fact, I think there's more factors today that come 384 00:19:10,400 --> 00:19:13,480 Speaker 1: into that condition that we need to be brought into one. 385 00:19:14,080 --> 00:19:17,960 Speaker 1: So obviously, treasury supply, we're dealing with larger fiscal stimulus 386 00:19:17,960 --> 00:19:19,720 Speaker 1: at this point in time, tax cuts, things like that, 387 00:19:19,720 --> 00:19:22,080 Speaker 1: they're going to impact Um, you know, the fiscal side 388 00:19:22,080 --> 00:19:24,359 Speaker 1: of the equation and the need to borrow more money 389 00:19:24,440 --> 00:19:27,359 Speaker 1: in the United States. Uh, do you think that is 390 00:19:27,400 --> 00:19:29,919 Speaker 1: a recipe for higher rates or or does all that 391 00:19:30,000 --> 00:19:33,560 Speaker 1: supply hitting the market? Um, have other factors. It's one, 392 00:19:33,920 --> 00:19:35,919 Speaker 1: it's one, it's one factor in this. The other factor 393 00:19:35,960 --> 00:19:37,760 Speaker 1: is the demand side. And I think that that is 394 00:19:37,800 --> 00:19:40,320 Speaker 1: the other factor, as we mentioned previously, whether it comes 395 00:19:40,320 --> 00:19:43,680 Speaker 1: from foreign central banks or foreign investors or even US investors, 396 00:19:43,880 --> 00:19:46,320 Speaker 1: you know, that is an important factor in condition. And 397 00:19:46,440 --> 00:19:50,479 Speaker 1: more specifically, the demographics which people and we have PIMCO 398 00:19:50,600 --> 00:19:53,359 Speaker 1: spent a lot of time thinking about. The demographic factor 399 00:19:53,680 --> 00:19:56,320 Speaker 1: is actually one that is in favor of bonds over 400 00:19:56,359 --> 00:19:58,560 Speaker 1: the next few years as people look to de risk 401 00:19:58,640 --> 00:20:01,760 Speaker 1: and move into higher asset classes, you know, the higher 402 00:20:01,840 --> 00:20:04,760 Speaker 1: rates right now, or something to incentivize people to finally 403 00:20:05,040 --> 00:20:08,720 Speaker 1: reallocate potentially out of higher risk allocations and moving to 404 00:20:08,760 --> 00:20:11,240 Speaker 1: the safety of bonds for that current income and current 405 00:20:11,280 --> 00:20:13,359 Speaker 1: yield that that they offer. And so there is a 406 00:20:13,520 --> 00:20:16,400 Speaker 1: there's there's a variety of factors on the pro and concite, 407 00:20:16,600 --> 00:20:19,040 Speaker 1: but to simply declare this as the as the pivot 408 00:20:19,040 --> 00:20:22,280 Speaker 1: point of the end of the bull market is it's 409 00:20:22,320 --> 00:20:24,440 Speaker 1: too early to it's too early to determine, and and 410 00:20:24,480 --> 00:20:29,639 Speaker 1: more more importantly, there is a growing awareness in the 411 00:20:29,720 --> 00:20:33,399 Speaker 1: in the global economy of the improving factors globally that 412 00:20:33,440 --> 00:20:35,560 Speaker 1: are going into the data, not just in the United States, 413 00:20:35,560 --> 00:20:38,800 Speaker 1: the Eurozone, even Japan is starting to see that. So 414 00:20:39,160 --> 00:20:42,480 Speaker 1: as we have evolved over the past thirty years from 415 00:20:42,480 --> 00:20:44,920 Speaker 1: the bull market into the bull market, it's the global 416 00:20:44,960 --> 00:20:47,320 Speaker 1: forces that will ultimately decide whether this was the end 417 00:20:47,560 --> 00:20:50,760 Speaker 1: of the bull market or not. So you reference supply, 418 00:20:50,920 --> 00:20:53,920 Speaker 1: let's go back to that a second. It seems like 419 00:20:54,119 --> 00:20:57,120 Speaker 1: there has been I don't know if the word shortage 420 00:20:57,480 --> 00:21:00,280 Speaker 1: is the right word, but when you look at high 421 00:21:00,400 --> 00:21:05,320 Speaker 1: quality sovereign fixed income products, doesn't seem like there's been 422 00:21:05,800 --> 00:21:09,919 Speaker 1: an overwhelming supply of that, right. So the key to 423 00:21:10,000 --> 00:21:13,800 Speaker 1: this is the plumbing. When people think about where have 424 00:21:13,920 --> 00:21:16,920 Speaker 1: bonds gone? Where has safety gone? It's all on the plumbing. 425 00:21:17,880 --> 00:21:22,920 Speaker 1: The repo markets have basically been uh detrimentally affected by 426 00:21:23,080 --> 00:21:26,679 Speaker 1: regulation globally that have put constraints on bank balloties to 427 00:21:26,960 --> 00:21:31,520 Speaker 1: which basically function as the grease for treasury markets and 428 00:21:31,520 --> 00:21:34,080 Speaker 1: and and high quality bond markets around the world. So 429 00:21:34,119 --> 00:21:35,920 Speaker 1: if you put a constraint on the amount of grease 430 00:21:35,920 --> 00:21:39,159 Speaker 1: in the system the repo markets. That affects liquidity and 431 00:21:39,160 --> 00:21:43,359 Speaker 1: that affects pricing in another wise. So that's one element ultimately, 432 00:21:43,440 --> 00:21:45,280 Speaker 1: you know, when you also think about it on the 433 00:21:45,359 --> 00:21:48,520 Speaker 1: on the supply side, or that is also the demand side, 434 00:21:48,560 --> 00:21:51,000 Speaker 1: and the demand over the past five six seven years, 435 00:21:51,000 --> 00:21:55,080 Speaker 1: as we've gone into emergency stimulus mode globally, has been 436 00:21:55,080 --> 00:21:58,840 Speaker 1: the central banks buying the safe assets and so they've 437 00:21:58,840 --> 00:22:01,879 Speaker 1: been buying bonds to help produce this warm blanket around 438 00:22:01,960 --> 00:22:04,760 Speaker 1: risk assets globally for the past five to ten years, 439 00:22:05,000 --> 00:22:07,520 Speaker 1: and as a result, there's a dearth of high quality 440 00:22:07,600 --> 00:22:10,720 Speaker 1: safe assets that people have been searching for. So they've 441 00:22:10,720 --> 00:22:13,240 Speaker 1: been the number one buyer, being the central banks of 442 00:22:13,280 --> 00:22:15,280 Speaker 1: these assets over a period of time. And as they 443 00:22:15,480 --> 00:22:18,480 Speaker 1: reduced that footprint, there are people who have actually needed 444 00:22:18,480 --> 00:22:21,479 Speaker 1: to buy these safe assets will actually emerge as a 445 00:22:21,520 --> 00:22:24,520 Speaker 1: marginal buyer and over the next few years, so it 446 00:22:24,560 --> 00:22:26,560 Speaker 1: could be a nice and nice handoff, you know, if 447 00:22:26,600 --> 00:22:29,119 Speaker 1: things go according to plan, although nothing ever goes smoothly, 448 00:22:29,160 --> 00:22:31,000 Speaker 1: as you know Berry, so we have to be prepared 449 00:22:31,040 --> 00:22:33,359 Speaker 1: for those ree pricings, and that's and that's what's as 450 00:22:33,400 --> 00:22:35,760 Speaker 1: active managers at PIMCO, that's what we're poists to take 451 00:22:35,800 --> 00:22:39,480 Speaker 1: advantage of. So you mentioned that we we haven't been 452 00:22:39,600 --> 00:22:45,040 Speaker 1: running giant deficits um other immediately after the financial crisis 453 00:22:45,040 --> 00:22:47,600 Speaker 1: there was a huge set of deficits, but that seemed 454 00:22:47,600 --> 00:22:50,160 Speaker 1: to work its way down pretty quickly over seven years 455 00:22:50,240 --> 00:22:53,080 Speaker 1: or so. The new tax bill is at least a 456 00:22:53,200 --> 00:22:55,960 Speaker 1: trillion and a half dollars. They're talking about a big 457 00:22:56,000 --> 00:22:59,880 Speaker 1: infrastructure spends, all of which raises the question, should there 458 00:23:00,040 --> 00:23:05,000 Speaker 1: be a reissuance of much longer term bonds be at 459 00:23:05,080 --> 00:23:07,840 Speaker 1: treasuries at thirty years, fifty years? Some people have talked 460 00:23:07,840 --> 00:23:10,879 Speaker 1: about hundred year bonds. Should we do that? And what 461 00:23:10,960 --> 00:23:12,840 Speaker 1: are the odds of that actually happened? Yeah, I mean 462 00:23:12,840 --> 00:23:15,120 Speaker 1: optically people would say, take advantage of the low rates 463 00:23:15,160 --> 00:23:17,560 Speaker 1: and issue up and turn out the debt. And there's 464 00:23:17,560 --> 00:23:20,000 Speaker 1: obviously been a lot of countries who have done that. 465 00:23:20,040 --> 00:23:22,080 Speaker 1: Mexico issued a hundred your bonds. You know, there's there's 466 00:23:22,080 --> 00:23:24,879 Speaker 1: a good variety of precedent for this, but ultimately you 467 00:23:24,880 --> 00:23:26,320 Speaker 1: have to go where the demand is. And when you 468 00:23:26,320 --> 00:23:29,320 Speaker 1: look at the committees, the Treasury borrowing a committee, the 469 00:23:29,320 --> 00:23:32,600 Speaker 1: TEA back um, they've actually assessed this. And while it 470 00:23:32,720 --> 00:23:35,240 Speaker 1: was floated in the very beginning by the Treasury Secretary Revolution, 471 00:23:35,560 --> 00:23:37,560 Speaker 1: you know, the reality is that there wasn't a good 472 00:23:37,640 --> 00:23:40,760 Speaker 1: demand assessment concluded at that point in time, and so 473 00:23:40,920 --> 00:23:43,880 Speaker 1: you don't want to issue and to avoid no issuer, 474 00:23:43,920 --> 00:23:46,800 Speaker 1: whether corporate or sovereign, wants to issue and to avoid 475 00:23:46,880 --> 00:23:49,280 Speaker 1: where there's not enough demand, because that means your execution 476 00:23:49,359 --> 00:23:52,040 Speaker 1: is not gonna be good. And more importantly, the secondary 477 00:23:52,040 --> 00:23:55,160 Speaker 1: liquidity will be debt or will be it will be marginalized. 478 00:23:55,520 --> 00:23:58,119 Speaker 1: And so what they're gonna do is simply add on 479 00:23:58,160 --> 00:24:01,040 Speaker 1: to existing maturities and more slightsely. And this is what 480 00:24:01,160 --> 00:24:03,320 Speaker 1: is important for investors at this point in time is 481 00:24:03,520 --> 00:24:06,200 Speaker 1: increase allocations to the front end of the YEO curve, 482 00:24:06,440 --> 00:24:09,480 Speaker 1: specifically in the T bill space. And I think what's 483 00:24:09,480 --> 00:24:12,560 Speaker 1: noteworthy that happens, which happens to be my playground, and 484 00:24:12,840 --> 00:24:14,920 Speaker 1: I always love more people in my playground. But they're 485 00:24:14,920 --> 00:24:17,960 Speaker 1: gonna add five hundred billion dollars worth of supply over 486 00:24:17,960 --> 00:24:20,520 Speaker 1: the course of the next year, probably backloaded the second 487 00:24:20,560 --> 00:24:23,359 Speaker 1: half of this year to that playground. And so what 488 00:24:23,440 --> 00:24:25,840 Speaker 1: does that mean, Well, it's great for those investors looking 489 00:24:25,840 --> 00:24:29,520 Speaker 1: for safety, looking for you marginal increase in yields as 490 00:24:29,520 --> 00:24:31,600 Speaker 1: that new supply hits, but it doesn't do a lot 491 00:24:31,640 --> 00:24:34,760 Speaker 1: to the asset liability. The caution are the urge of 492 00:24:34,760 --> 00:24:37,320 Speaker 1: people wanting to turn out the liability structure to the US. 493 00:24:37,359 --> 00:24:40,119 Speaker 1: Although what is noteworthy is the fact that when you 494 00:24:40,119 --> 00:24:42,600 Speaker 1: look at the overall construct, the average life of the 495 00:24:42,720 --> 00:24:44,959 Speaker 1: US debt is actually not that much different than than 496 00:24:45,000 --> 00:24:47,480 Speaker 1: what was previously prescribed. So you know, they've done a 497 00:24:47,480 --> 00:24:50,840 Speaker 1: pretty good job about about managing that asset liability mismatch. 498 00:24:51,280 --> 00:24:53,399 Speaker 1: Let's talk a little bit about what's going on in 499 00:24:53,520 --> 00:24:58,800 Speaker 1: the modern markets, and in particular on the equity side, 500 00:24:58,840 --> 00:25:02,960 Speaker 1: we've seen a fair at least substantial shift away from 501 00:25:03,160 --> 00:25:08,120 Speaker 1: active management towards passive management. And yet the data shows 502 00:25:08,320 --> 00:25:13,159 Speaker 1: on the bond side active management actually adds alpha. What 503 00:25:13,400 --> 00:25:16,399 Speaker 1: why or the bond equivalent of alpha? But what is 504 00:25:16,440 --> 00:25:17,760 Speaker 1: there a different name for that or do we just 505 00:25:17,800 --> 00:25:20,959 Speaker 1: call that alpha? We call it alpha? Call it alpha? Um, 506 00:25:21,119 --> 00:25:25,600 Speaker 1: why does active management generate alpha on the bond side. Well, 507 00:25:25,760 --> 00:25:27,720 Speaker 1: it's not magic, and it takes a lot of work 508 00:25:27,840 --> 00:25:30,520 Speaker 1: to to have that, to have that, and the data 509 00:25:30,600 --> 00:25:33,639 Speaker 1: does quite clearly point to the fact that in fixed income, 510 00:25:34,080 --> 00:25:38,560 Speaker 1: active management does clearly add benefits to clients portfolios, and 511 00:25:38,720 --> 00:25:41,000 Speaker 1: some of it comes from offensive meaning learned to how 512 00:25:41,000 --> 00:25:44,520 Speaker 1: to create better risk adjusted portfolios, i e. There's income 513 00:25:44,600 --> 00:25:46,960 Speaker 1: that you can have in your portfolio and some capital 514 00:25:46,960 --> 00:25:49,840 Speaker 1: appreciation when times are good by picking the right sectors 515 00:25:49,840 --> 00:25:52,639 Speaker 1: and creating a diversity portfolio. But Barry, this is the 516 00:25:52,640 --> 00:25:54,879 Speaker 1: more important thing as we give it pivot into this 517 00:25:54,960 --> 00:25:57,639 Speaker 1: type of the cycle when we don't have quantitative easing 518 00:25:57,720 --> 00:26:01,080 Speaker 1: and the warm blanket and monetary policies global really supporting 519 00:26:01,080 --> 00:26:05,200 Speaker 1: all asset valuations. The ability to differentiate risk asset classes 520 00:26:05,520 --> 00:26:09,000 Speaker 1: is incredibly powerful, and in fixed income we need to 521 00:26:09,000 --> 00:26:11,959 Speaker 1: be thinking about the ways to create that diversification and 522 00:26:12,040 --> 00:26:16,000 Speaker 1: steering clear of those pitfalls that might might be in 523 00:26:16,080 --> 00:26:20,560 Speaker 1: portfolio construction. We saw that clearly in two thousand five, 524 00:26:20,600 --> 00:26:22,680 Speaker 1: two thousand and six, and two thousand and seven, when 525 00:26:22,720 --> 00:26:26,800 Speaker 1: you had the evolution of structured products, the evolution of 526 00:26:27,320 --> 00:26:30,199 Speaker 1: abundant leverage in the marketplace. Even in my own, my 527 00:26:30,240 --> 00:26:33,880 Speaker 1: own lovely repo markets, you had mispriced bonds and structured 528 00:26:33,920 --> 00:26:37,320 Speaker 1: products that simply weren't sound to the triple A Moniker 529 00:26:37,440 --> 00:26:40,400 Speaker 1: that many many radi agencies gave them um. But if 530 00:26:40,440 --> 00:26:44,280 Speaker 1: you have the ability to discern, re underwrite, and distinguish 531 00:26:44,359 --> 00:26:47,120 Speaker 1: between these different credit risks, whether it's corporate credit risk 532 00:26:47,400 --> 00:26:51,160 Speaker 1: or structured credit risks, and then understand how they interplay 533 00:26:51,200 --> 00:26:53,520 Speaker 1: with each other, you can actually steer clear of a 534 00:26:53,560 --> 00:26:56,760 Speaker 1: lot of dangers and pitfalls that passive management would steer 535 00:26:56,840 --> 00:26:59,200 Speaker 1: right into. And the case in point I would point 536 00:26:59,200 --> 00:27:02,840 Speaker 1: to is even in my own domain, the short term universe, 537 00:27:02,840 --> 00:27:05,320 Speaker 1: and I call short term zero to five years, we 538 00:27:05,440 --> 00:27:08,199 Speaker 1: manage on our team two hundred plus billion dollars in 539 00:27:08,200 --> 00:27:11,440 Speaker 1: that sector. Right now. The vote, the vote of confidence 540 00:27:11,480 --> 00:27:13,760 Speaker 1: that we have is that we had steered clear of 541 00:27:13,760 --> 00:27:16,160 Speaker 1: a lot of credits that were miss priced in two 542 00:27:16,160 --> 00:27:18,840 Speaker 1: thousand five, two six, and two seven. We had steered 543 00:27:18,840 --> 00:27:21,800 Speaker 1: clear of asset back commercial paper that many folks were 544 00:27:21,840 --> 00:27:24,439 Speaker 1: just simply buying an additional bait because it was an 545 00:27:24,440 --> 00:27:31,120 Speaker 1: additional one basis point one. That's but that's the way 546 00:27:31,160 --> 00:27:34,720 Speaker 1: the market was functioning in the cash equivalent space. And 547 00:27:34,920 --> 00:27:37,960 Speaker 1: when you've gotten to the crisis, people were basically underwriting 548 00:27:38,000 --> 00:27:42,840 Speaker 1: liquidity risk for marginal income. They didn't understand the downside risk. 549 00:27:42,880 --> 00:27:45,600 Speaker 1: They have, and to this day I hear still people 550 00:27:45,640 --> 00:27:48,239 Speaker 1: when I go visit into retail branches, which I do 551 00:27:48,320 --> 00:27:50,720 Speaker 1: quite honestly because I want to hear about people's experience 552 00:27:50,760 --> 00:27:53,600 Speaker 1: with managing their cash. When I hear about that, they'll say, 553 00:27:53,680 --> 00:27:55,520 Speaker 1: you know what, I still have these auction rate securities 554 00:27:55,520 --> 00:27:57,600 Speaker 1: in my portfolio because they're still frozen or this that 555 00:27:57,680 --> 00:28:01,080 Speaker 1: the other still some are on are. But you you know, 556 00:28:01,119 --> 00:28:02,600 Speaker 1: once a year somebody will come up to me with 557 00:28:02,640 --> 00:28:05,480 Speaker 1: a story. And the thing about it is, in order 558 00:28:05,520 --> 00:28:08,440 Speaker 1: to understand the value and the perception of where the 559 00:28:08,440 --> 00:28:10,720 Speaker 1: marketplace is going, you have to take a step back 560 00:28:11,040 --> 00:28:13,879 Speaker 1: and understand what the influences are and more importantly, have 561 00:28:14,000 --> 00:28:17,399 Speaker 1: the resources to discern and understand that. And so my 562 00:28:17,520 --> 00:28:21,400 Speaker 1: background while being formatively in operations and the rebo desk 563 00:28:21,480 --> 00:28:24,560 Speaker 1: and the drivative desk that bear sterns and understanding structured 564 00:28:24,600 --> 00:28:27,119 Speaker 1: products because we ran at that point in time a 565 00:28:27,160 --> 00:28:31,080 Speaker 1: funding vehicle related to structured investment vehicles or two vehicles. 566 00:28:31,760 --> 00:28:34,760 Speaker 1: That was a magical time because it allowed me to 567 00:28:35,200 --> 00:28:38,120 Speaker 1: understand and have a good array of of knowledge and 568 00:28:38,120 --> 00:28:40,880 Speaker 1: build that array and arsenal knowledge that when I came 569 00:28:40,920 --> 00:28:43,520 Speaker 1: to PIMCO as a portfolio manager, I understood all these 570 00:28:43,520 --> 00:28:46,760 Speaker 1: different markets and underplayed and and more importantly, as we 571 00:28:46,800 --> 00:28:49,640 Speaker 1: think about our team construction, the portfolio management team around me, 572 00:28:49,840 --> 00:28:52,280 Speaker 1: we have people who are specialized in corporate bonds, in 573 00:28:52,360 --> 00:28:55,600 Speaker 1: understanding non dollar events. We have a person who's focused 574 00:28:55,600 --> 00:28:58,440 Speaker 1: solely on funding and the beauty of this. And you 575 00:28:58,560 --> 00:29:00,720 Speaker 1: mentioned this in my title on ahead of our short 576 00:29:00,800 --> 00:29:04,120 Speaker 1: term portfolio management and funding. The key element to understanding 577 00:29:04,120 --> 00:29:08,040 Speaker 1: liquidity management is funding. The key element to understanding short 578 00:29:08,160 --> 00:29:12,120 Speaker 1: term markets, which is interest rates, is funding in liquidity. 579 00:29:12,160 --> 00:29:14,480 Speaker 1: They're all the same. And if you are an interest 580 00:29:14,560 --> 00:29:17,520 Speaker 1: rate if you're an interest rate practitioner, if you're a saver, 581 00:29:17,960 --> 00:29:21,000 Speaker 1: if you are thinking about ways to manage your capital 582 00:29:21,000 --> 00:29:24,080 Speaker 1: for capital preservation plus an income, and you don't have 583 00:29:24,120 --> 00:29:27,280 Speaker 1: an insight to where funding markets are trading, meaning the 584 00:29:27,280 --> 00:29:31,360 Speaker 1: cost of capital. That's like baking a cake without any flour. 585 00:29:31,840 --> 00:29:34,080 Speaker 1: So it doesn't it might look good, but it doesn't 586 00:29:34,080 --> 00:29:35,880 Speaker 1: taste very good and it might fall on you. So 587 00:29:35,960 --> 00:29:38,960 Speaker 1: let's let's talk a little bit about the mechanics of 588 00:29:38,960 --> 00:29:42,800 Speaker 1: of some of these processes, specifically at bear Sterns. Was 589 00:29:42,840 --> 00:29:47,400 Speaker 1: it at bear Sterns you worked on repoke conduit financing companies. 590 00:29:47,480 --> 00:29:49,600 Speaker 1: Correct that that sounds and we're gonna go a little 591 00:29:49,640 --> 00:29:52,400 Speaker 1: bit into the weeds here, but that sounds like that 592 00:29:52,560 --> 00:29:56,320 Speaker 1: is really the specific plumbing of how dollars find their 593 00:29:56,360 --> 00:30:00,360 Speaker 1: way to specific assets. Describe a little bit of exactly 594 00:30:00,440 --> 00:30:02,800 Speaker 1: what that that is. So the premise of what we 595 00:30:02,800 --> 00:30:04,840 Speaker 1: were trying to do was you have to have a 596 00:30:04,880 --> 00:30:07,280 Speaker 1: fundamental belief and understand what a repo agreement is a 597 00:30:07,320 --> 00:30:10,840 Speaker 1: repurchase agreement, and all the repurchase agreement is is a 598 00:30:10,920 --> 00:30:15,840 Speaker 1: borrowing of your basically borrowing dollars or borrowing funds in 599 00:30:15,920 --> 00:30:19,320 Speaker 1: exchange for collateral, and that collateral is usually bonds. But 600 00:30:19,400 --> 00:30:22,600 Speaker 1: the beauty of a repo agreement is that it's overcollateralized, 601 00:30:22,720 --> 00:30:26,200 Speaker 1: so you might be posting on the bonds but only 602 00:30:26,240 --> 00:30:29,840 Speaker 1: get seventy cents worth of cash away. Sound safe. So 603 00:30:30,040 --> 00:30:31,960 Speaker 1: the beauty of a repo, and I still believe this 604 00:30:32,040 --> 00:30:33,000 Speaker 1: to this day, and I think it's one of the 605 00:30:33,080 --> 00:30:37,240 Speaker 1: most underappreciated assets in the entire world, is that repos 606 00:30:37,240 --> 00:30:40,360 Speaker 1: in general are marked to market daily, so your risk 607 00:30:40,440 --> 00:30:43,040 Speaker 1: is limited, and the fact is you can calibrate them 608 00:30:43,200 --> 00:30:45,800 Speaker 1: the haircuts the excess margin to what you think the 609 00:30:45,920 --> 00:30:49,040 Speaker 1: risk is. And so if you're a good practitioner, your 610 00:30:49,240 --> 00:30:52,160 Speaker 1: understanding of the marketplace is simply what does the value 611 00:30:52,160 --> 00:30:54,160 Speaker 1: of the cloudal you hold on any given point in time, 612 00:30:54,360 --> 00:30:57,160 Speaker 1: and do you have enough excess margin. The idea here 613 00:30:57,280 --> 00:31:00,720 Speaker 1: is that with any experience and understand ending, you can 614 00:31:00,760 --> 00:31:03,719 Speaker 1: actually back into what you think is a superb asset, 615 00:31:03,720 --> 00:31:06,480 Speaker 1: even better than a treasury because you have the over collateralization. 616 00:31:07,080 --> 00:31:10,160 Speaker 1: So what we were doing in that marketplace is looking 617 00:31:10,200 --> 00:31:13,680 Speaker 1: and lending through what we what we called liquid funding, 618 00:31:13,680 --> 00:31:15,920 Speaker 1: which was a structured investment vehicle at that point in time, 619 00:31:16,200 --> 00:31:18,240 Speaker 1: to borrow money in the in the funds market and 620 00:31:18,320 --> 00:31:20,719 Speaker 1: lend it to a variety of clients and do it 621 00:31:20,760 --> 00:31:22,920 Speaker 1: on over a cloud realized basis. And and it worked 622 00:31:23,000 --> 00:31:26,640 Speaker 1: very well, very triffic until about, you know, until about 623 00:31:26,680 --> 00:31:29,120 Speaker 1: two thousand seven. And at that point in time, the 624 00:31:29,120 --> 00:31:31,800 Speaker 1: funding markets, not the asset markets, but the funding markets 625 00:31:32,000 --> 00:31:35,200 Speaker 1: did turiate to the point that the the optics and 626 00:31:35,200 --> 00:31:37,440 Speaker 1: and frankly the economics didn't work out. And so we 627 00:31:37,480 --> 00:31:39,320 Speaker 1: had we closed that business, you know, and all our 628 00:31:39,320 --> 00:31:41,760 Speaker 1: equity holders got their capital back when did Bear close 629 00:31:41,840 --> 00:31:44,640 Speaker 1: up business. So we closed it in early two thousand seven, 630 00:31:44,920 --> 00:31:46,920 Speaker 1: really and you were at Bear you want to git 631 00:31:47,000 --> 00:31:50,240 Speaker 1: through the entire crisis. Was I was actually there? I was. 632 00:31:50,360 --> 00:31:52,360 Speaker 1: I was there until the very end, and actually worked 633 00:31:52,400 --> 00:31:55,800 Speaker 1: one day at JP Morgan and retired from JP Morgan 634 00:31:55,840 --> 00:31:58,880 Speaker 1: and then went to went out to California after Uh. 635 00:31:59,080 --> 00:32:00,959 Speaker 1: Two things. One my life wanted me to move out 636 00:32:01,000 --> 00:32:03,000 Speaker 1: there for a family. But a gentleman by the name 637 00:32:03,000 --> 00:32:05,480 Speaker 1: of Paul McCulley called me up on the phone, who 638 00:32:05,960 --> 00:32:08,160 Speaker 1: guest on the show. And Paul is a great friend 639 00:32:08,160 --> 00:32:11,280 Speaker 1: of mine and an avid fisherman and a great economist 640 00:32:11,360 --> 00:32:14,760 Speaker 1: who who obviously you know, coined the term Minsky moment 641 00:32:14,760 --> 00:32:17,760 Speaker 1: and everything else. But to have him sitting there, you know, 642 00:32:17,840 --> 00:32:20,240 Speaker 1: as my partner, sitting on the desk and welcome me, 643 00:32:20,440 --> 00:32:22,600 Speaker 1: was an opportunity that I simply couldn't pass, that would 644 00:32:22,600 --> 00:32:25,000 Speaker 1: not could not say no. And he's now at Cornell 645 00:32:25,520 --> 00:32:27,680 Speaker 1: I think in the fall, teaching and then back in 646 00:32:28,160 --> 00:32:31,240 Speaker 1: Newport piece. That is correct, he's he's teaching me to it. 647 00:32:31,360 --> 00:32:34,440 Speaker 1: He's a great teacher, and more importantly, he's a great communicator. 648 00:32:34,440 --> 00:32:36,680 Speaker 1: And he was a great great mentor and and and 649 00:32:36,680 --> 00:32:38,920 Speaker 1: and sponsored me at PIMCO. Uh. You only the very 650 00:32:38,920 --> 00:32:41,400 Speaker 1: early years because I walked in from one storm into 651 00:32:41,440 --> 00:32:43,480 Speaker 1: and obviously at PIMCO you're on the defensive at that 652 00:32:43,480 --> 00:32:45,640 Speaker 1: point in time. So so before we leave Bear, I 653 00:32:45,640 --> 00:32:48,520 Speaker 1: have to ask what was it like at Bear Sterns 654 00:32:49,440 --> 00:32:52,080 Speaker 1: in that sort of storm, that that be just a 655 00:32:52,080 --> 00:32:55,120 Speaker 1: wild experience. So I think what you when you think 656 00:32:55,160 --> 00:32:58,640 Speaker 1: about Bear, Bear was a meritocracy. Pimco's a meritocracy in 657 00:32:58,640 --> 00:33:00,440 Speaker 1: a way. You work hard, you try to drive, you 658 00:33:00,560 --> 00:33:02,800 Speaker 1: try to put all the pieces together. And I think 659 00:33:02,840 --> 00:33:05,760 Speaker 1: people at that point in time, uh, we're We're focused 660 00:33:05,800 --> 00:33:08,240 Speaker 1: on the markets and the market perception. And I'm not 661 00:33:08,240 --> 00:33:10,400 Speaker 1: here to rehash history per se, but I think it's 662 00:33:10,400 --> 00:33:12,760 Speaker 1: important that there is a tremendous amount of lessons to 663 00:33:12,800 --> 00:33:15,400 Speaker 1: be learned from that whole experience. Unfortunately for me and 664 00:33:15,440 --> 00:33:17,520 Speaker 1: actually a lot of my other expert brethren. You can 665 00:33:17,520 --> 00:33:20,720 Speaker 1: look around the street now, they're everywhere, and there was 666 00:33:20,760 --> 00:33:22,720 Speaker 1: such a lot of quality people there. There was a 667 00:33:22,720 --> 00:33:25,520 Speaker 1: tremendous amount of quality people. And more importantly, we all 668 00:33:25,600 --> 00:33:27,480 Speaker 1: learned from each other, and we learned from the experience, 669 00:33:27,480 --> 00:33:29,280 Speaker 1: and we were able to grow out of it. And 670 00:33:29,280 --> 00:33:31,960 Speaker 1: and and whether it was market forces or internal issues 671 00:33:32,200 --> 00:33:34,440 Speaker 1: or whatnot, I think there's a lot of experiences and 672 00:33:34,480 --> 00:33:36,200 Speaker 1: a lot of history that we can go back and 673 00:33:36,240 --> 00:33:38,479 Speaker 1: read from and glean information from. And and I'm actually 674 00:33:38,520 --> 00:33:41,280 Speaker 1: fortunate and I I you know, Bear was a great sponsor. 675 00:33:41,400 --> 00:33:44,200 Speaker 1: My upbringing allowed me to allowed me to grow. And 676 00:33:44,240 --> 00:33:46,320 Speaker 1: every time I got, you know, I got I needed 677 00:33:46,320 --> 00:33:48,600 Speaker 1: some more challenge. That gave me an incremental bit, a 678 00:33:48,640 --> 00:33:51,240 Speaker 1: bit of a line to go and run with and 679 00:33:51,240 --> 00:33:53,080 Speaker 1: and and PIMCO is the same way we try to 680 00:33:53,120 --> 00:33:55,280 Speaker 1: groom young people to do the same and that I 681 00:33:55,320 --> 00:33:58,080 Speaker 1: think is a very strong parallel to the success. It 682 00:33:58,120 --> 00:34:02,360 Speaker 1: looks like that the Airston's acquisition by Jamie Diamond at 683 00:34:03,040 --> 00:34:05,760 Speaker 1: JP Morrigan turned out to be a really good fit. 684 00:34:06,320 --> 00:34:10,600 Speaker 1: Is that your perspective from the outside, or because I 685 00:34:10,640 --> 00:34:13,919 Speaker 1: haven't heard any stories of usually there's a takeover, there's 686 00:34:13,960 --> 00:34:17,040 Speaker 1: all sorts of turmult and turmoil and you hear, I 687 00:34:17,080 --> 00:34:18,919 Speaker 1: haven't really heard a lot of that sort of chat. 688 00:34:19,200 --> 00:34:20,759 Speaker 1: Being being the fact that I worked there for all 689 00:34:20,760 --> 00:34:22,480 Speaker 1: of one day, I probably don't have that much insight 690 00:34:22,760 --> 00:34:25,520 Speaker 1: insight to that. But but but I would say that 691 00:34:25,560 --> 00:34:28,040 Speaker 1: you know, for most people, um, you know, ten years 692 00:34:28,040 --> 00:34:29,640 Speaker 1: on almost now, I think it's one of the things 693 00:34:29,680 --> 00:34:31,759 Speaker 1: that people take it as a as a learning as 694 00:34:31,800 --> 00:34:33,880 Speaker 1: a learning lesson, and and and and the market as 695 00:34:33,920 --> 00:34:36,680 Speaker 1: a whole clearly has. So we've heard the expression over 696 00:34:36,719 --> 00:34:40,399 Speaker 1: the years, Um, the bond market is supposed to be 697 00:34:40,880 --> 00:34:44,080 Speaker 1: the smart money. What's your take on that? I would 698 00:34:44,120 --> 00:34:46,360 Speaker 1: hope so. UM. I'm not saying that's no, it's no 699 00:34:46,400 --> 00:34:48,239 Speaker 1: pat on the back to myself, but I think that 700 00:34:48,719 --> 00:34:52,239 Speaker 1: when you look at how capital markets function, we try 701 00:34:52,280 --> 00:34:55,600 Speaker 1: to be more proactive than most in terms of allocating 702 00:34:55,640 --> 00:34:58,640 Speaker 1: capital on the active management side than most. And I 703 00:34:58,719 --> 00:35:00,960 Speaker 1: think that's a pretty power whole thing when you think 704 00:35:00,960 --> 00:35:03,319 Speaker 1: about the smart money aspect, and a lot of that 705 00:35:03,320 --> 00:35:07,000 Speaker 1: smart money is because smart money are not central banks, 706 00:35:07,000 --> 00:35:08,919 Speaker 1: and some of them are very very smart and they're 707 00:35:09,000 --> 00:35:12,160 Speaker 1: very sophisticated. Um are are in that realm as well, 708 00:35:12,200 --> 00:35:14,160 Speaker 1: and so they're not necessarily you know, with the exception 709 00:35:14,160 --> 00:35:16,600 Speaker 1: of one or two central banks in the equity realm. 710 00:35:16,920 --> 00:35:20,400 Speaker 1: Uh yet but Japan other than Japan, who else is 711 00:35:20,440 --> 00:35:24,640 Speaker 1: in Sweden? I was good? Um, I'm sorry, but I 712 00:35:24,640 --> 00:35:28,040 Speaker 1: would say those two, Um, those two are probabmarily you know, 713 00:35:28,040 --> 00:35:30,440 Speaker 1: the ETFs and Japan are clearly the big one. But 714 00:35:31,120 --> 00:35:33,440 Speaker 1: the smart money there's probably a smart a lot more 715 00:35:33,480 --> 00:35:35,839 Speaker 1: smart people in that fixed income market. Now. What it 716 00:35:35,880 --> 00:35:39,880 Speaker 1: means though, is that that's institutional side. As a retail investor, 717 00:35:40,239 --> 00:35:42,120 Speaker 1: you can't be complacent about how you're thinking about your 718 00:35:42,120 --> 00:35:45,279 Speaker 1: fixed and commalocation, especially amongst rising rates. And so the 719 00:35:45,360 --> 00:35:47,640 Speaker 1: challenge for the retail investor now is to challenge their 720 00:35:47,640 --> 00:35:52,040 Speaker 1: financial advisors kick the tires, understand how their portfolios performed 721 00:35:52,080 --> 00:35:55,920 Speaker 1: and upward rate environments, albeit slowly, and more importantly, where 722 00:35:55,960 --> 00:35:58,600 Speaker 1: on the interst rate curve their they're destined. Then the 723 00:35:58,640 --> 00:36:00,960 Speaker 1: second element to pay attention to just because you've earned 724 00:36:01,000 --> 00:36:04,080 Speaker 1: a very handsome coupon, very handsome income over the past 725 00:36:04,080 --> 00:36:07,880 Speaker 1: three or four or five years in your in your portfolios, 726 00:36:07,880 --> 00:36:09,799 Speaker 1: because you've reached out the curve in terms of risk. 727 00:36:09,880 --> 00:36:11,920 Speaker 1: Maybe you're invested in a high yield funds something like that. 728 00:36:12,400 --> 00:36:14,720 Speaker 1: Take that into consideration now and take that in a coistration, 729 00:36:14,800 --> 00:36:16,680 Speaker 1: how you've derived that income, what kind of risks are 730 00:36:16,680 --> 00:36:18,839 Speaker 1: you're taking, and do some homework and maybe it's time 731 00:36:18,880 --> 00:36:20,880 Speaker 1: to de risk a little and look in the yield 732 00:36:20,880 --> 00:36:24,280 Speaker 1: curve shorter in the short term side and take advantage 733 00:36:24,320 --> 00:36:27,319 Speaker 1: of mutual funds or et s out there that may 734 00:36:27,480 --> 00:36:30,399 Speaker 1: might offer better risk adjusted returns. We haven't talked much 735 00:36:30,400 --> 00:36:33,840 Speaker 1: about inflation, obviously a key factor for the Fed and 736 00:36:33,920 --> 00:36:36,880 Speaker 1: for the bond market. What are your thoughts on tips 737 00:36:36,920 --> 00:36:40,839 Speaker 1: treasury and inflation protected securities. Yeah, they've moved up quite 738 00:36:40,880 --> 00:36:43,760 Speaker 1: a bit over the break even, so that's the inflation 739 00:36:43,960 --> 00:36:46,000 Speaker 1: expectation has moved up quite a bit over the past 740 00:36:46,040 --> 00:36:48,160 Speaker 1: few weeks, and they're probably fair and value at this 741 00:36:48,200 --> 00:36:51,040 Speaker 1: point in time. The key factor here is is that 742 00:36:51,080 --> 00:36:53,480 Speaker 1: what does that mean to the Fed itself? And to 743 00:36:53,560 --> 00:36:56,520 Speaker 1: the Fed itself, that's actually probably a positive sign that 744 00:36:56,640 --> 00:37:02,080 Speaker 1: the market is repricing in a expectation of inflation similar 745 00:37:02,080 --> 00:37:05,480 Speaker 1: to their own, similar to their own views moving forward, 746 00:37:05,480 --> 00:37:08,279 Speaker 1: meaning the low periods of inflation were transitory. Now the 747 00:37:08,280 --> 00:37:10,760 Speaker 1: market sort of agreeing with that, and that's a positive 748 00:37:10,800 --> 00:37:13,120 Speaker 1: thing for the Fed to basically accept the fact that 749 00:37:13,120 --> 00:37:15,719 Speaker 1: we're probably gonna have higher rates to come, because if 750 00:37:15,719 --> 00:37:18,879 Speaker 1: the market can accept higher inflation, then that basically says 751 00:37:18,920 --> 00:37:20,799 Speaker 1: the market is also accepting the notion that we're going 752 00:37:20,840 --> 00:37:23,560 Speaker 1: to get higher rates to come. But the key here 753 00:37:23,640 --> 00:37:26,959 Speaker 1: is is not just higher real rates meaning risk adjusted rates, 754 00:37:27,000 --> 00:37:29,239 Speaker 1: but it's higher nominal rates. And for a fixed a 755 00:37:29,280 --> 00:37:31,399 Speaker 1: con investor. When they hear about higher rates, they tend 756 00:37:31,480 --> 00:37:33,560 Speaker 1: to get scared. But this isn't a time to get 757 00:37:33,560 --> 00:37:35,239 Speaker 1: scared because the high rates is actually a time to 758 00:37:35,280 --> 00:37:38,560 Speaker 1: embrace those higher rates going forward. We have been speaking 759 00:37:38,560 --> 00:37:43,200 Speaker 1: with Jerome Snyder, head of Short Term Portfolio Management and Funding. 760 00:37:43,640 --> 00:37:45,960 Speaker 1: If you enjoy this conversation, be sure and check out 761 00:37:45,960 --> 00:37:49,000 Speaker 1: our podcast extras. Will we keep the tape rolling and 762 00:37:49,000 --> 00:37:53,120 Speaker 1: continue discussing all things bond related. You can find that 763 00:37:53,160 --> 00:37:59,279 Speaker 1: wherever finer podcasts are sold iTunes, Overcast, SoundCloud, Bloomberg dot com. Uh. 764 00:37:59,440 --> 00:38:03,359 Speaker 1: We love comments, feedback and suggestions right to us at 765 00:38:04,080 --> 00:38:07,360 Speaker 1: m IB podcast at Bloomberg dot net. Check out my 766 00:38:07,440 --> 00:38:10,440 Speaker 1: daily column on Bloomberg View dot com. Follow me on 767 00:38:10,480 --> 00:38:14,760 Speaker 1: Twitter at rid Halts. I'm Barry rid Halts. You're listening 768 00:38:14,760 --> 00:38:31,719 Speaker 1: to Masters in Business on Bloomberg Radio. Welcome to the 769 00:38:31,760 --> 00:38:33,719 Speaker 1: podcast Drum. Thank you so much for doing this. This 770 00:38:33,800 --> 00:38:37,400 Speaker 1: is really fascinating stuff and I love going deep into 771 00:38:37,440 --> 00:38:40,799 Speaker 1: the weeds on some of these issues. I had no 772 00:38:40,880 --> 00:38:43,120 Speaker 1: idea you knew Paul McCullough. You know I know Paul 773 00:38:43,160 --> 00:38:46,479 Speaker 1: pretty well? Right we uh we fish in Maine every year. 774 00:38:46,520 --> 00:38:51,640 Speaker 1: Although um lately he's been sort of all around the 775 00:38:51,640 --> 00:38:53,759 Speaker 1: world and and and hasn't I don't think he's been 776 00:38:53,800 --> 00:38:57,719 Speaker 1: doing all that much fishing. I remember when he went 777 00:38:57,920 --> 00:39:02,400 Speaker 1: from clean cut pim cut to the Jesus version of 778 00:39:02,400 --> 00:39:05,280 Speaker 1: Paul McCulley had hair passed the shoulders and long beard, 779 00:39:05,600 --> 00:39:08,279 Speaker 1: and then kind of came back to the clean cut version. 780 00:39:08,320 --> 00:39:12,160 Speaker 1: It was kind of an interesting um transition. Well, you 781 00:39:12,280 --> 00:39:13,680 Speaker 1: I think he was trying to scare the fish out 782 00:39:13,680 --> 00:39:16,080 Speaker 1: of the water at that time. I think he scared 783 00:39:16,120 --> 00:39:18,959 Speaker 1: everybody else. Uh, you know, a few questions I didn't 784 00:39:19,080 --> 00:39:22,600 Speaker 1: get to. We we touched upon bare Sterns. I was 785 00:39:22,640 --> 00:39:25,279 Speaker 1: really fortunate that I got a little lucky and I 786 00:39:25,320 --> 00:39:28,480 Speaker 1: was pretty much out of equities and heavily into bonds 787 00:39:28,520 --> 00:39:35,480 Speaker 1: and shorts, so the financial crisis wasn't emotionally painful. However, 788 00:39:36,239 --> 00:39:38,480 Speaker 1: I had, you know, I had friends that were getting 789 00:39:38,480 --> 00:39:41,399 Speaker 1: fired everywhere. I used to send down an email list 790 00:39:41,440 --> 00:39:46,040 Speaker 1: of about two thousand people, and it was astonishing. Starting 791 00:39:46,040 --> 00:39:49,560 Speaker 1: in late I want to say, late oh seven, earlyer eight, 792 00:39:50,680 --> 00:39:52,960 Speaker 1: I could track the economy based on the amount of 793 00:39:53,400 --> 00:39:57,320 Speaker 1: bad email bounces that out of this list of two thousand. 794 00:39:57,320 --> 00:39:59,879 Speaker 1: By the time the crisis was done, was down till 795 00:40:00,160 --> 00:40:03,319 Speaker 1: nine hundred that many people had either switch jobs or 796 00:40:03,400 --> 00:40:06,000 Speaker 1: lost their jobs. You were right in the eye of 797 00:40:06,000 --> 00:40:10,800 Speaker 1: the hurricane. What was that like? You know, I remember obviously, 798 00:40:10,800 --> 00:40:13,200 Speaker 1: I remember like it was yesterday. But I think the 799 00:40:13,239 --> 00:40:17,000 Speaker 1: important factor that we all think about is is that 800 00:40:17,480 --> 00:40:20,120 Speaker 1: the market we were an unpresident in times, and the playbook, 801 00:40:20,160 --> 00:40:21,960 Speaker 1: so to speak, was it was one that had to 802 00:40:22,000 --> 00:40:25,840 Speaker 1: be consistently evolving, and in history will try to reconstruct 803 00:40:25,840 --> 00:40:28,640 Speaker 1: all the minutia that happened, you know, during the financial crisis, 804 00:40:28,719 --> 00:40:32,640 Speaker 1: you know, starting with the the funds that basically we're 805 00:40:32,680 --> 00:40:35,560 Speaker 1: gated at parablele in two thousand seven, and obviously the 806 00:40:35,560 --> 00:40:38,080 Speaker 1: bear Sterns bear Sterns asset management funds and things like that. 807 00:40:38,440 --> 00:40:40,840 Speaker 1: But I think what we recognize as the fact that 808 00:40:40,880 --> 00:40:43,120 Speaker 1: there was a structural breakage, and that structural breakage was 809 00:40:43,239 --> 00:40:46,200 Speaker 1: number one, investors failed to understand risk, and that was 810 00:40:46,239 --> 00:40:50,960 Speaker 1: institutional and retail investors. And number two, the central bankers 811 00:40:51,000 --> 00:40:54,160 Speaker 1: themselves weren't doing anything help to weren't doing anything to 812 00:40:54,200 --> 00:40:57,560 Speaker 1: provide guard rails to sufficient enough to offset the leverage 813 00:40:57,600 --> 00:40:59,759 Speaker 1: points that they saw in the marketplace on a real 814 00:40:59,800 --> 00:41:01,960 Speaker 1: time basis. They were aware of them. But at the 815 00:41:02,000 --> 00:41:05,200 Speaker 1: same time, so I'll interrupt you right there, because I 816 00:41:05,320 --> 00:41:08,560 Speaker 1: hear from the same people depending on what's going on 817 00:41:08,600 --> 00:41:11,719 Speaker 1: in the market. The FED is that, you know, this 818 00:41:11,760 --> 00:41:14,239 Speaker 1: is in a free market anymore, there's too much intervention. 819 00:41:14,520 --> 00:41:16,200 Speaker 1: The FED should just let the market do its thing 820 00:41:16,239 --> 00:41:19,480 Speaker 1: and stop distorting it. But a few years earlier, it's like, 821 00:41:19,600 --> 00:41:21,719 Speaker 1: when is the FED going to step in and fix this? 822 00:41:22,080 --> 00:41:25,000 Speaker 1: It's a disaster. It seems they wanted both ways. Am 823 00:41:25,000 --> 00:41:27,520 Speaker 1: I overstating that or I think that you know? And 824 00:41:27,560 --> 00:41:29,160 Speaker 1: this goes on sort of talking both sides of the 825 00:41:29,200 --> 00:41:32,520 Speaker 1: coin here. From Pimcoast perspective there, we were clearly, clearly 826 00:41:32,520 --> 00:41:35,040 Speaker 1: early to the game. We were starting to see signs 827 00:41:35,040 --> 00:41:37,200 Speaker 1: of the housing market in two thousand five, two thousand six, 828 00:41:37,400 --> 00:41:39,000 Speaker 1: and we sort of pulled it in our our reins 829 00:41:39,160 --> 00:41:41,359 Speaker 1: with regard to that, and that risk actually a bear 830 00:41:41,440 --> 00:41:43,680 Speaker 1: at that same point in time, we you know, from 831 00:41:43,680 --> 00:41:45,920 Speaker 1: our perspective in many of the businesses we ran, we 832 00:41:46,000 --> 00:41:50,200 Speaker 1: actually were we we resisted doing transactions that we saw 833 00:41:50,280 --> 00:41:52,400 Speaker 1: guoding done in the marketplace because we thought they were 834 00:41:52,400 --> 00:41:55,279 Speaker 1: overlevered and simply did not make sense. The irony, the 835 00:41:55,280 --> 00:41:57,240 Speaker 1: whole thing. Even though we were prudent in many regards, 836 00:41:57,280 --> 00:41:59,120 Speaker 1: we were obviously the first ones to take it a 837 00:41:59,440 --> 00:42:02,600 Speaker 1: huge express the mortgages and housing that was their specialty. 838 00:42:02,719 --> 00:42:05,120 Speaker 1: But at the same time, it wasn't just mortgages than housing, 839 00:42:05,120 --> 00:42:07,359 Speaker 1: it was equities. It was the correlation trades and things 840 00:42:07,400 --> 00:42:10,239 Speaker 1: like that that basically brought the entire market to to 841 00:42:10,400 --> 00:42:13,440 Speaker 1: where we became. And so the mark to market issues, 842 00:42:13,960 --> 00:42:17,520 Speaker 1: just generally speaking, was one because of incremental leverage requires 843 00:42:17,880 --> 00:42:20,000 Speaker 1: whenever there is a mark to market too, that you 844 00:42:20,040 --> 00:42:23,080 Speaker 1: have to pony at additional capital and or sell assets 845 00:42:23,200 --> 00:42:25,799 Speaker 1: or sell assets, and that's the digital spin. So it 846 00:42:25,840 --> 00:42:28,719 Speaker 1: wasn't necessarily one asset class. It wasn't just mortgages, it 847 00:42:28,840 --> 00:42:31,239 Speaker 1: was everything. And so that's the correlation that you have 848 00:42:31,280 --> 00:42:34,160 Speaker 1: to understand when you get into these situations that are 849 00:42:34,360 --> 00:42:37,080 Speaker 1: that's pretty you know, it's pretty damaging to portfolio. So 850 00:42:37,400 --> 00:42:40,400 Speaker 1: leverage works great assuming that you understand the cost of 851 00:42:40,400 --> 00:42:42,399 Speaker 1: that leverage and you can play defense against it, which 852 00:42:42,400 --> 00:42:45,400 Speaker 1: is why us understanding that cost, that capital and funding 853 00:42:45,480 --> 00:42:49,360 Speaker 1: cost most importantly is incredibly important to understanding why fixed 854 00:42:49,360 --> 00:42:51,799 Speaker 1: income is value the way it is today. So so 855 00:42:51,920 --> 00:42:57,040 Speaker 1: that's been the criticism of a screenberg. It's not the 856 00:42:57,080 --> 00:43:01,160 Speaker 1: paper clips, which are an insignificant round ding era. It's 857 00:43:01,200 --> 00:43:03,879 Speaker 1: the focus on the minutia and at the same time 858 00:43:03,920 --> 00:43:08,480 Speaker 1: ignoring the giant exposure. Although really, to be fair to him, 859 00:43:08,560 --> 00:43:11,399 Speaker 1: by the time oh five oh six came around, he 860 00:43:11,520 --> 00:43:14,319 Speaker 1: was chairman emeritus. He wasn't really running things day to day? 861 00:43:14,440 --> 00:43:16,200 Speaker 1: Was he? That? That? I mean, that's that's a great 862 00:43:16,200 --> 00:43:17,640 Speaker 1: case in point. And you know, I'm not here to 863 00:43:17,680 --> 00:43:20,440 Speaker 1: point fingers, but I do think that number one. There 864 00:43:20,440 --> 00:43:22,759 Speaker 1: there's a fantastic book that he wrote which is called 865 00:43:22,800 --> 00:43:25,400 Speaker 1: Memos from the Chairman and in it he has a 866 00:43:25,440 --> 00:43:28,040 Speaker 1: Mammos from the Chairman and you and you should pick 867 00:43:28,120 --> 00:43:29,600 Speaker 1: up a copy. It's a quick read. But there is 868 00:43:29,640 --> 00:43:32,399 Speaker 1: a fictional character which he called him Jankle, and him 869 00:43:32,480 --> 00:43:34,719 Speaker 1: Jankle was the guy who came around and said, you know, 870 00:43:34,760 --> 00:43:38,200 Speaker 1: why does anybody need things? You know tomorrow? Meaning why 871 00:43:38,200 --> 00:43:40,440 Speaker 1: do you do FedEx? Why? Why do you what? You know? 872 00:43:40,480 --> 00:43:43,480 Speaker 1: When I walked into bear Stearns um in in you know, 873 00:43:43,560 --> 00:43:46,480 Speaker 1: in they handed me two things I think, a firewarden 874 00:43:46,560 --> 00:43:48,880 Speaker 1: hat um in a direction where to get out, how 875 00:43:48,920 --> 00:43:50,719 Speaker 1: to get out of the building, and a and a 876 00:43:51,040 --> 00:43:53,759 Speaker 1: and a paper bag that was probably three inches by 877 00:43:53,760 --> 00:43:56,319 Speaker 1: two inches that had a box of paper clips, ten 878 00:43:56,440 --> 00:44:00,400 Speaker 1: rubber bands, um and and uh some tape and they 879 00:44:00,440 --> 00:44:02,200 Speaker 1: said this is all you'll need in your entire career. 880 00:44:02,200 --> 00:44:04,480 Speaker 1: And literally I think I still I didn't even get 881 00:44:04,480 --> 00:44:07,000 Speaker 1: through the paper clips. But the idea behind it was 882 00:44:07,080 --> 00:44:09,759 Speaker 1: is that you know, saving the money is it goes 883 00:44:09,800 --> 00:44:12,279 Speaker 1: into the partner's pocket. So that's clearly and at that 884 00:44:12,320 --> 00:44:14,200 Speaker 1: point in time Barrow was a public company, but it 885 00:44:14,280 --> 00:44:16,759 Speaker 1: was the mentality that you are an owner, you want 886 00:44:16,760 --> 00:44:19,360 Speaker 1: to protect capital. You want to protect your capital, and 887 00:44:19,360 --> 00:44:21,200 Speaker 1: in doing so, you want to make sure that your 888 00:44:21,239 --> 00:44:24,360 Speaker 1: business is profit motivated to generate the highest returns and 889 00:44:24,400 --> 00:44:28,239 Speaker 1: best risk adjusted returns. And that creates adverse situations as well, 890 00:44:28,280 --> 00:44:29,879 Speaker 1: because people are going to try to shoot the moon 891 00:44:29,920 --> 00:44:31,360 Speaker 1: at various points of time, and that's just not a 892 00:44:31,360 --> 00:44:34,440 Speaker 1: bare thing. It was. It's Wall Street of absolutely. So 893 00:44:34,680 --> 00:44:37,480 Speaker 1: I think that that was one one element, but it 894 00:44:37,560 --> 00:44:41,399 Speaker 1: also takes macro management and risk. We had actually very 895 00:44:41,480 --> 00:44:44,439 Speaker 1: strong risk management at bear um or around the Horn, 896 00:44:44,719 --> 00:44:46,719 Speaker 1: but when you put it all together in terms of 897 00:44:46,719 --> 00:44:49,120 Speaker 1: thinking about how it was related to the boardroom, etcetera, 898 00:44:49,280 --> 00:44:53,640 Speaker 1: there's now much more rigid input from a risk management 899 00:44:53,640 --> 00:44:56,560 Speaker 1: group in every bank, in every portfolio management, in every 900 00:44:56,560 --> 00:44:58,960 Speaker 1: by side shop today than there probably ever has been. 901 00:44:58,960 --> 00:45:02,480 Speaker 1: And that simply increase the stake and makes make sure 902 00:45:02,520 --> 00:45:06,319 Speaker 1: that capital was allocated by and more importantly criticized those 903 00:45:06,360 --> 00:45:10,400 Speaker 1: allocations by independent party. So risk management became something that 904 00:45:10,480 --> 00:45:12,400 Speaker 1: was you know, from the back office or maybe not 905 00:45:12,440 --> 00:45:15,360 Speaker 1: appreciated to actually pretty glamorous in the spotlighter of the 906 00:45:15,360 --> 00:45:17,160 Speaker 1: past ten years. I don't know if glamorous is the 907 00:45:17,239 --> 00:45:20,359 Speaker 1: right word, but certainly it's a focus on every bank. Now. 908 00:45:20,920 --> 00:45:25,640 Speaker 1: Compliance and risk management are the two fastest growing departments, 909 00:45:25,800 --> 00:45:27,879 Speaker 1: to say the least. But I'll tell you this, even 910 00:45:27,880 --> 00:45:29,880 Speaker 1: at PIMCO, you know when we come in and have 911 00:45:29,960 --> 00:45:34,840 Speaker 1: due diligences, we have entire sectors, segments hours plus with 912 00:45:34,880 --> 00:45:37,520 Speaker 1: the rich risk mans roteam that's global like the robust 913 00:45:37,600 --> 00:45:40,120 Speaker 1: and and there, and they're your sophisticated and they need 914 00:45:40,160 --> 00:45:43,160 Speaker 1: to understand and do stress testing for portfolios and they 915 00:45:43,239 --> 00:45:45,279 Speaker 1: want to. They're gonna offer their objective you in terms 916 00:45:45,320 --> 00:45:48,560 Speaker 1: of how your report positioned what you know, what idiucing 917 00:45:48,560 --> 00:45:51,680 Speaker 1: credic events you could be defensive or offensively position for. 918 00:45:52,120 --> 00:45:54,359 Speaker 1: And and it's a critical element to our to our 919 00:45:54,440 --> 00:45:57,600 Speaker 1: teams and PIMCO success to protect capital for our clients. 920 00:45:57,640 --> 00:45:59,600 Speaker 1: So let me let me shift gears a little bit 921 00:45:59,640 --> 00:46:03,680 Speaker 1: on you. We talked about the FED earlier. UM. Some people, well, 922 00:46:03,760 --> 00:46:05,640 Speaker 1: let me start with this question. Some people have said 923 00:46:06,080 --> 00:46:09,560 Speaker 1: the FED is distorting the bond market. Doesn't the FED 924 00:46:09,560 --> 00:46:12,440 Speaker 1: always distort the bond market? Isn't that what raising the 925 00:46:12,480 --> 00:46:15,080 Speaker 1: lowing rates does? No, it's more, it's not that the 926 00:46:15,120 --> 00:46:18,080 Speaker 1: FED is distorting the bondo market. It's that the they're 927 00:46:18,120 --> 00:46:21,920 Speaker 1: trying to adjust the market's perceptions of the fair pricing 928 00:46:21,920 --> 00:46:25,520 Speaker 1: of the bond market. And it's nuanced. But but it 929 00:46:25,520 --> 00:46:27,759 Speaker 1: seems to make sense. Well, I mean, it depends if 930 00:46:27,760 --> 00:46:29,640 Speaker 1: you think that the tail is wagging the dog or 931 00:46:29,640 --> 00:46:33,040 Speaker 1: the other way around. You know, the reality is when 932 00:46:33,080 --> 00:46:36,160 Speaker 1: you look at how the bond market functions, irrational things 933 00:46:36,200 --> 00:46:39,680 Speaker 1: happen all the time almost any market. UM as an example. 934 00:46:40,000 --> 00:46:43,160 Speaker 1: UM two examples, one being you know, the pricing of 935 00:46:43,280 --> 00:46:47,200 Speaker 1: dollar funding over year end. There are certain constraints that 936 00:46:47,600 --> 00:46:50,560 Speaker 1: for that forbid banks from lending dollars over a year. 937 00:46:50,560 --> 00:46:52,680 Speaker 1: And as a result, if you have excess dollars, it's 938 00:46:52,719 --> 00:46:55,360 Speaker 1: a great time because you're able to earn a huge 939 00:46:55,480 --> 00:46:58,239 Speaker 1: excess premium to lend those dollars to foreign investors who 940 00:46:58,320 --> 00:47:00,680 Speaker 1: need to borrow those dollars every year end. The same 941 00:47:00,719 --> 00:47:03,840 Speaker 1: thing goes on with regard to treasuries and fixed income securities. 942 00:47:04,000 --> 00:47:07,399 Speaker 1: There's a premium assigned to fixed income securities as a 943 00:47:07,440 --> 00:47:11,280 Speaker 1: safe haven asset. And it used to be that treasuries 944 00:47:11,360 --> 00:47:15,000 Speaker 1: were the golden child of safe haven assets, and they 945 00:47:15,040 --> 00:47:17,040 Speaker 1: still are to some extent. But when you got to 946 00:47:17,160 --> 00:47:19,239 Speaker 1: a zero bound in terms of yield, when you had 947 00:47:19,280 --> 00:47:22,279 Speaker 1: the tenure at you know, sub sub two percent, when 948 00:47:22,280 --> 00:47:23,799 Speaker 1: you had the two year, you know, the two year 949 00:47:23,840 --> 00:47:27,439 Speaker 1: note at sub one cent, those weren't really attractive safe 950 00:47:27,480 --> 00:47:31,359 Speaker 1: haven assets because you couldn't necessarily squeeze anymore juice out 951 00:47:31,400 --> 00:47:34,040 Speaker 1: of those And and the reality is it's hard to make, 952 00:47:34,280 --> 00:47:35,880 Speaker 1: you know, when during times of stress, it's hard to 953 00:47:35,880 --> 00:47:38,600 Speaker 1: make lemonade all those lemons because you already squeeze all 954 00:47:38,600 --> 00:47:41,680 Speaker 1: the juice out. We call that basically the term premium 955 00:47:41,760 --> 00:47:44,920 Speaker 1: these days. And when you think about it, the marketplace 956 00:47:45,040 --> 00:47:48,760 Speaker 1: right now still has a excess amount of term premium 957 00:47:48,760 --> 00:47:52,600 Speaker 1: assigned to owning a treasury, meaning they're willing to pay 958 00:47:52,680 --> 00:47:56,719 Speaker 1: up earn less yield by owning a treasury than they 959 00:47:56,760 --> 00:47:59,439 Speaker 1: typically would otherwise. That's the key metric. And with the 960 00:47:59,440 --> 00:48:02,759 Speaker 1: fedtestring to do is influence what they view to be 961 00:48:02,840 --> 00:48:04,920 Speaker 1: that term premium to be over time. Do they want 962 00:48:04,920 --> 00:48:08,440 Speaker 1: to reduce that term premium, Well, they want to reduce 963 00:48:08,440 --> 00:48:11,560 Speaker 1: it because they ultimately think the inflation is going higher 964 00:48:11,640 --> 00:48:13,480 Speaker 1: over a period of time and shape the you O 965 00:48:13,560 --> 00:48:17,560 Speaker 1: curve accordingly to those inflation expectations. So that's one element. 966 00:48:17,640 --> 00:48:19,960 Speaker 1: The other element, well, wait before we move, let's talk 967 00:48:20,000 --> 00:48:22,120 Speaker 1: about inflation, because we really didn't get to that as 968 00:48:22,200 --> 00:48:26,000 Speaker 1: much as I wanted. Um, it seems to be that 969 00:48:26,040 --> 00:48:28,919 Speaker 1: there's not a lot of inflation, and inflation has been 970 00:48:29,680 --> 00:48:35,120 Speaker 1: preternaturally low for lord knows how long are we going 971 00:48:35,200 --> 00:48:38,960 Speaker 1: to see an uptick in inflation? The the best description 972 00:48:39,000 --> 00:48:42,360 Speaker 1: I've heard, and I this may have started yet another 973 00:48:42,400 --> 00:48:45,640 Speaker 1: thing that started with mccaully was we have we have 974 00:48:45,719 --> 00:48:48,480 Speaker 1: inflation and the things we need, and deflation and the 975 00:48:48,520 --> 00:48:51,440 Speaker 1: things we want. And if it's not poll it certainly 976 00:48:51,440 --> 00:48:54,560 Speaker 1: sounds like him. Um, so where are we in the 977 00:48:54,600 --> 00:49:00,320 Speaker 1: process of inflation, disinflation, deflation or all of the above. 978 00:49:00,680 --> 00:49:03,160 Speaker 1: The number one metric, and this gets back into my 979 00:49:03,160 --> 00:49:05,160 Speaker 1: comments about optionality for the FED. But the number one 980 00:49:05,239 --> 00:49:08,000 Speaker 1: metric that the FED is going to be focused on 981 00:49:08,160 --> 00:49:11,360 Speaker 1: is the tightness of the job market and wage pressures 982 00:49:11,360 --> 00:49:15,080 Speaker 1: on a go forward basis. So sure inflation, headline inflation 983 00:49:15,200 --> 00:49:17,040 Speaker 1: is perked up a little bit. A lot of that 984 00:49:17,080 --> 00:49:19,120 Speaker 1: has to do with energy pricing over the past few months, 985 00:49:19,200 --> 00:49:21,960 Speaker 1: and when you approach seventy bucks of barrel oil, there's 986 00:49:22,000 --> 00:49:24,719 Speaker 1: gonna be some headline pressure, so to speak. But what 987 00:49:24,840 --> 00:49:27,560 Speaker 1: they really want to see is an increase in wage pressures, 988 00:49:27,560 --> 00:49:29,960 Speaker 1: an increase in growth, and we're starting to see that. 989 00:49:30,000 --> 00:49:32,120 Speaker 1: Some of it's in relation to the job or to 990 00:49:32,200 --> 00:49:35,239 Speaker 1: the tax tax reform. You're seeing some some of the 991 00:49:35,560 --> 00:49:38,360 Speaker 1: just immediately come through in terms of bonus payments, some 992 00:49:38,360 --> 00:49:40,680 Speaker 1: some increase in wages. But they want to see on 993 00:49:40,680 --> 00:49:43,160 Speaker 1: a sustained basis, and so getting some of those wage 994 00:49:43,200 --> 00:49:46,000 Speaker 1: under caters, average hour, really earnings, things like that on 995 00:49:46,080 --> 00:49:49,239 Speaker 1: a upward trajectory, not just flat, but upper trajectory over 996 00:49:49,280 --> 00:49:51,880 Speaker 1: the next quarter or two will actually give some sustenance 997 00:49:51,880 --> 00:49:54,080 Speaker 1: to the FED to actually continue to move forward, which 998 00:49:54,239 --> 00:49:56,839 Speaker 1: they likely will. But I'm saying that's really what they're 999 00:49:56,840 --> 00:49:58,759 Speaker 1: focused on in terms of that wage in terms of 1000 00:49:58,760 --> 00:50:03,319 Speaker 1: that inflation metric into eighteen, we've seen eighteen states and 1001 00:50:03,360 --> 00:50:07,440 Speaker 1: I believe it's twenty two or twenty three municipalities raise 1002 00:50:07,560 --> 00:50:12,000 Speaker 1: their minimum wage. What does that do to quote unquote 1003 00:50:12,000 --> 00:50:15,239 Speaker 1: wage pressure, How it trickles up the pay scale? And 1004 00:50:15,280 --> 00:50:19,520 Speaker 1: how does the FED perceive that sort of legislative attempt 1005 00:50:19,600 --> 00:50:21,880 Speaker 1: to drive wages higher. That's one side of it. You know, 1006 00:50:21,920 --> 00:50:25,720 Speaker 1: they clearly want you know, that's clearly one mandated wage 1007 00:50:25,719 --> 00:50:28,080 Speaker 1: pressure so to speak, so that that's that's going to 1008 00:50:28,160 --> 00:50:30,319 Speaker 1: play into that, But they actually want to see you know, 1009 00:50:30,400 --> 00:50:32,360 Speaker 1: other things go into it. You know, they're going to 1010 00:50:32,440 --> 00:50:35,720 Speaker 1: see UM obviously unemployment go clearly below four percent probably 1011 00:50:35,760 --> 00:50:38,799 Speaker 1: this year. Yeah, and what does that And they're gonna 1012 00:50:38,800 --> 00:50:40,759 Speaker 1: also look at the broader employment measures, you know, which 1013 00:50:40,760 --> 00:50:43,239 Speaker 1: are covering you just north of eight percent UM, you know, 1014 00:50:43,400 --> 00:50:46,520 Speaker 1: looking to see those dips. But it's again it's simply 1015 00:50:46,640 --> 00:50:49,800 Speaker 1: you know, is there hidden capacity in terms of jobs 1016 00:50:49,840 --> 00:50:53,040 Speaker 1: in the economy. Maybe some, but we're getting to a diminished, 1017 00:50:53,200 --> 00:50:56,080 Speaker 1: diminished size right now. And in fact, there's articles about 1018 00:50:57,040 --> 00:51:00,520 Speaker 1: about employment employers looking for employees who they probably would 1019 00:51:00,520 --> 00:51:03,760 Speaker 1: have never talked to UM over the past few years 1020 00:51:03,840 --> 00:51:06,560 Speaker 1: people with prison records. I read that same thing, and 1021 00:51:06,800 --> 00:51:09,200 Speaker 1: so I mean that sort of gets you scratching your head, like, 1022 00:51:09,280 --> 00:51:11,680 Speaker 1: you know, actually, maybe maybe my fift you know, maybe 1023 00:51:11,719 --> 00:51:13,640 Speaker 1: my kid this summer can actually get a job because 1024 00:51:13,719 --> 00:51:15,800 Speaker 1: he's not competing with someone who is you know, forced 1025 00:51:15,920 --> 00:51:18,880 Speaker 1: forced earlier retirements, you know, over the summer. But you know, 1026 00:51:18,960 --> 00:51:21,520 Speaker 1: I think that that is that is what we're ultimately 1027 00:51:21,520 --> 00:51:25,360 Speaker 1: looking at. So, yes, you can legislate minimum wage, but 1028 00:51:25,400 --> 00:51:28,160 Speaker 1: they're also looking at the growth segment across the breath 1029 00:51:28,200 --> 00:51:30,719 Speaker 1: of the across the breath and the breath of the 1030 00:51:31,560 --> 00:51:33,360 Speaker 1: breath of the employment sector is really what they're going 1031 00:51:33,400 --> 00:51:35,479 Speaker 1: to be focused on. So they're pretty sophisticated in this regard. 1032 00:51:35,640 --> 00:51:38,520 Speaker 1: So here's the pushback to that. It's, well, we've created 1033 00:51:38,520 --> 00:51:40,440 Speaker 1: all these jobs, but a lot of them are in 1034 00:51:40,600 --> 00:51:44,799 Speaker 1: low paying sectors without benefits or very modest benefits like 1035 00:51:45,360 --> 00:51:49,279 Speaker 1: hospitality and the lower end of healthcare and and the 1036 00:51:49,320 --> 00:51:55,279 Speaker 1: lower end of retail. Has the quality of the US 1037 00:51:56,080 --> 00:52:00,560 Speaker 1: labor market affected how the FED perceives wages and inflation, perhaps, 1038 00:52:00,880 --> 00:52:02,960 Speaker 1: But let me offer something else to that, is that 1039 00:52:03,160 --> 00:52:06,200 Speaker 1: if there is the man to employ people and people can't, 1040 00:52:06,719 --> 00:52:09,880 Speaker 1: and those employers can't find people to employ. What what 1041 00:52:10,000 --> 00:52:11,520 Speaker 1: is going to happen gets back to my whole supply 1042 00:52:11,520 --> 00:52:13,200 Speaker 1: demand to bring some people in who have left the 1043 00:52:13,280 --> 00:52:17,600 Speaker 1: labor for us and theoretically HB one visas another qualified 1044 00:52:18,160 --> 00:52:21,920 Speaker 1: immigrants um. But eventually you start running out of bodies, right. 1045 00:52:22,160 --> 00:52:24,040 Speaker 1: And that's the point is that eventually, when you start 1046 00:52:24,120 --> 00:52:27,319 Speaker 1: running out of that supply, you're gonna have to facilitate 1047 00:52:27,320 --> 00:52:29,840 Speaker 1: it by getting people to move back to your arena. 1048 00:52:30,000 --> 00:52:32,480 Speaker 1: And the way you do that is you increase your wages. 1049 00:52:32,640 --> 00:52:34,719 Speaker 1: And so that's the key what they want to and 1050 00:52:34,719 --> 00:52:37,160 Speaker 1: and this is we have one thing that hasn't even 1051 00:52:37,239 --> 00:52:40,000 Speaker 1: entered our discussion here today Verry is productivity. And I 1052 00:52:40,040 --> 00:52:41,800 Speaker 1: think that's something that we have to focus on. Okay, 1053 00:52:41,800 --> 00:52:43,400 Speaker 1: so let's talk about that because that's one of my 1054 00:52:43,480 --> 00:52:47,799 Speaker 1: favorite questions I have long been So some of this 1055 00:52:47,880 --> 00:52:51,040 Speaker 1: has to do with my particular lens in the world 1056 00:52:51,080 --> 00:52:56,360 Speaker 1: of finance. Uh, I see just a huge uptick in 1057 00:52:57,400 --> 00:53:00,160 Speaker 1: productivity and the benefits of software and automation and the 1058 00:53:00,239 --> 00:53:05,160 Speaker 1: technology in my job, which you don't necessarily see in 1059 00:53:05,280 --> 00:53:09,120 Speaker 1: the data. So I'm forced to either say, hey, am 1060 00:53:09,160 --> 00:53:11,960 Speaker 1: I just in a field that happens to be unusually productive. 1061 00:53:12,040 --> 00:53:16,040 Speaker 1: So my view was skewed. Or is there something wrong 1062 00:53:16,040 --> 00:53:18,399 Speaker 1: with the measurements where we're missing a ton of these 1063 00:53:18,440 --> 00:53:23,279 Speaker 1: productivity gains in broader society. Maybe you're just productive where 1064 00:53:23,320 --> 00:53:25,440 Speaker 1: you're more productive as you Yeah, but it's not just me. 1065 00:53:25,560 --> 00:53:27,759 Speaker 1: I keep coming back to it. It's not just me. 1066 00:53:29,640 --> 00:53:31,759 Speaker 1: Is there is there a it could be both. Is 1067 00:53:31,800 --> 00:53:36,040 Speaker 1: there a a productivity softness or is there a measurement 1068 00:53:36,840 --> 00:53:39,080 Speaker 1: there's both. I mean, let's be fair. I mean, it's 1069 00:53:39,080 --> 00:53:41,799 Speaker 1: just like any politics. You get it, you get evangelists 1070 00:53:41,800 --> 00:53:43,600 Speaker 1: on both sides of the aisle. But like you know, 1071 00:53:43,640 --> 00:53:45,560 Speaker 1: I think at this point we have to be rational 1072 00:53:45,920 --> 00:53:51,080 Speaker 1: as we get older, life start now. Well we get 1073 00:53:51,080 --> 00:53:55,560 Speaker 1: a whole different discussion, uh, and perhaps a separate podcast. 1074 00:53:55,600 --> 00:53:57,759 Speaker 1: But the reality is is that you have to as 1075 00:53:57,800 --> 00:53:59,799 Speaker 1: you get older, you want to adapt to product things 1076 00:53:59,800 --> 00:54:02,279 Speaker 1: that ake you more productive. That's clearly one side, one 1077 00:54:02,280 --> 00:54:04,040 Speaker 1: side of the equation, and it's very important. So the 1078 00:54:04,040 --> 00:54:06,319 Speaker 1: willingness to adapt to things that will make you more 1079 00:54:06,360 --> 00:54:09,239 Speaker 1: productive is actually something that we as human beings are 1080 00:54:09,280 --> 00:54:12,200 Speaker 1: going to have to be um, you know, open minded 1081 00:54:12,200 --> 00:54:14,839 Speaker 1: to over the over the next few decades, um and 1082 00:54:14,880 --> 00:54:17,240 Speaker 1: I think that that's one in regard, but the measurement side, 1083 00:54:17,239 --> 00:54:19,960 Speaker 1: the measurement side is a key element, and that's very 1084 00:54:19,960 --> 00:54:22,920 Speaker 1: difficult to handicap, you know, personally, I think when you 1085 00:54:22,920 --> 00:54:26,480 Speaker 1: look at things that um that are are are misguided 1086 00:54:26,480 --> 00:54:29,640 Speaker 1: in terms of productivity, technology, things like that. We're gonna 1087 00:54:29,640 --> 00:54:31,600 Speaker 1: look back in twenty thirty years just as we did, 1088 00:54:31,840 --> 00:54:34,920 Speaker 1: you know, I remember, you know, just as we did 1089 00:54:34,920 --> 00:54:37,280 Speaker 1: ten twenty years ago about the impact of the Internet, 1090 00:54:37,320 --> 00:54:41,319 Speaker 1: impact of of robotics, impact of simply um, you know, 1091 00:54:41,640 --> 00:54:44,439 Speaker 1: even in portfolio management, for goodness sake, you know, we're 1092 00:54:44,440 --> 00:54:47,279 Speaker 1: doing more more stuff, you know, out of you know, 1093 00:54:47,400 --> 00:54:50,520 Speaker 1: that's that's not less with less bodies and and and 1094 00:54:50,600 --> 00:54:52,759 Speaker 1: not as many fingers in the air. Um. You know, 1095 00:54:52,800 --> 00:54:54,560 Speaker 1: you can pull a lot of charts and and do 1096 00:54:54,680 --> 00:54:56,320 Speaker 1: a lot of analysis and read a lot of reams 1097 00:54:56,360 --> 00:54:58,839 Speaker 1: of paper. But there's some pretty interesting things we're doing, 1098 00:54:58,840 --> 00:55:01,440 Speaker 1: you know, with with computer power, some really smart analytics 1099 00:55:01,480 --> 00:55:03,399 Speaker 1: that we weren't doing three, four or five years ago, 1100 00:55:03,440 --> 00:55:05,400 Speaker 1: and that and that's and that makes us all that 1101 00:55:05,440 --> 00:55:08,600 Speaker 1: more productive. But that doesn't necessarily show up in the 1102 00:55:08,640 --> 00:55:11,799 Speaker 1: actual measurements. And I think that we have to, like 1103 00:55:11,880 --> 00:55:15,080 Speaker 1: any piece of data. It's open to interpretation and you 1104 00:55:15,120 --> 00:55:17,560 Speaker 1: have to be rational. And unless you're willing to do that, 1105 00:55:17,920 --> 00:55:20,600 Speaker 1: then you're simply driving down the road at fifty no 1106 00:55:20,680 --> 00:55:23,279 Speaker 1: matter the traffic conditions. And you know what, that's a 1107 00:55:23,440 --> 00:55:27,239 Speaker 1: terrifying place to be. There are two questions I want 1108 00:55:27,239 --> 00:55:29,439 Speaker 1: to get to my favorite questions, but there are two 1109 00:55:29,480 --> 00:55:32,200 Speaker 1: things I didn't um come back to. I have to 1110 00:55:32,239 --> 00:55:37,680 Speaker 1: ask about. One is the liquidity issue with trading. The 1111 00:55:37,840 --> 00:55:41,720 Speaker 1: number of trading bonddesks on Wall Street and trading farms 1112 00:55:41,719 --> 00:55:45,520 Speaker 1: on Wall Street has declined dramatically. What does this mean 1113 00:55:45,719 --> 00:55:51,160 Speaker 1: for liquidly in the bond market or is everybody just 1114 00:55:51,200 --> 00:55:54,600 Speaker 1: forced to trade with black Rocks bonddesk and and they've 1115 00:55:54,680 --> 00:55:59,040 Speaker 1: replaced Wall Street. Yeah, you're too You guys are coming 1116 00:55:59,080 --> 00:56:03,399 Speaker 1: up on two trillions and income. So I would say 1117 00:56:03,400 --> 00:56:06,200 Speaker 1: this is that it's a great thing for our clients. 1118 00:56:06,280 --> 00:56:09,280 Speaker 1: And the reason is that we are able to understand 1119 00:56:09,320 --> 00:56:12,600 Speaker 1: and assess good opportunities and entry points into bond markets 1120 00:56:12,600 --> 00:56:17,720 Speaker 1: and opportunities and most importantly, earn liquidity premiums for our clients. 1121 00:56:18,040 --> 00:56:20,399 Speaker 1: And what I mean by that is, in the old days, 1122 00:56:20,640 --> 00:56:23,480 Speaker 1: everything used to be sort of locked markets liquidity. You know, 1123 00:56:23,600 --> 00:56:26,640 Speaker 1: liquidity was very open. You know, everybody had a bond desk, 1124 00:56:26,760 --> 00:56:28,960 Speaker 1: things like that. We might, we might get back there, 1125 00:56:29,000 --> 00:56:31,160 Speaker 1: but not to that point. I don't think. I don't 1126 00:56:31,160 --> 00:56:33,680 Speaker 1: see that move going back in that surrection. But you 1127 00:56:33,680 --> 00:56:37,200 Speaker 1: have to admit that the regulatory winds have changed official 1128 00:56:37,280 --> 00:56:38,880 Speaker 1: six months and so you're not gonna get all the 1129 00:56:38,920 --> 00:56:40,719 Speaker 1: way back there. But the point I would make is 1130 00:56:40,760 --> 00:56:44,719 Speaker 1: that when you have inefficiencies and markets, it is an 1131 00:56:44,760 --> 00:56:48,280 Speaker 1: ideal time for fixed and comme asset managers or asset 1132 00:56:48,280 --> 00:56:52,120 Speaker 1: managers who can who can influence and most importantly understand 1133 00:56:52,280 --> 00:56:55,720 Speaker 1: and participate in those inefficiencies. And so for clients of PIMCO, 1134 00:56:56,160 --> 00:56:58,920 Speaker 1: that is a great asset in and of itself because 1135 00:56:59,040 --> 00:57:01,560 Speaker 1: as a portfolio manage You're sure I'm telling people how 1136 00:57:01,560 --> 00:57:04,279 Speaker 1: to position themselves. But Barry, I'm spending sixt of my 1137 00:57:04,360 --> 00:57:06,520 Speaker 1: day trading. I get in the office at three thirty 1138 00:57:06,560 --> 00:57:08,920 Speaker 1: in the morning and I'm looking at markets in London, 1139 00:57:09,120 --> 00:57:12,040 Speaker 1: and I stayed until six six, seven o'clock at night 1140 00:57:12,080 --> 00:57:15,000 Speaker 1: looking at how Asia opens. Those are great opportunities for 1141 00:57:15,040 --> 00:57:17,800 Speaker 1: global investors to really take advantage of. So for our 1142 00:57:17,840 --> 00:57:21,000 Speaker 1: clients over the past five to ten years, as markets, 1143 00:57:21,520 --> 00:57:24,040 Speaker 1: market conditions have evolved or devoulved, however you want to 1144 00:57:24,040 --> 00:57:27,520 Speaker 1: look at it, that's been really powerful. Uh. What's the 1145 00:57:27,560 --> 00:57:31,920 Speaker 1: most important thing? People don't know about your background. They 1146 00:57:32,000 --> 00:57:34,400 Speaker 1: don't know about my background. Uh, they clearly know I'm 1147 00:57:34,400 --> 00:57:36,479 Speaker 1: from Oklahoma. And and so I view that as being 1148 00:57:36,560 --> 00:57:40,640 Speaker 1: a view that as being a um a huge attribute. 1149 00:57:40,920 --> 00:57:44,560 Speaker 1: I would say, uh, being self you know, being a 1150 00:57:44,560 --> 00:57:49,040 Speaker 1: self starter, understanding and understanding um, sort of how things 1151 00:57:49,040 --> 00:57:50,840 Speaker 1: are put together in a very simplistic term. Not to 1152 00:57:50,840 --> 00:57:54,880 Speaker 1: say I'm simple minded, but that upbringing was very powerful. Um, 1153 00:57:54,960 --> 00:57:58,320 Speaker 1: you know, I think the transition really uh. And and 1154 00:57:58,320 --> 00:58:01,960 Speaker 1: I guess being being being a minority in Oklahoma was 1155 00:58:02,800 --> 00:58:05,680 Speaker 1: one of the few Jews in Oklahoma. I think that 1156 00:58:05,680 --> 00:58:09,920 Speaker 1: that actually was a h an open minding experience in 1157 00:58:09,920 --> 00:58:11,520 Speaker 1: a lot of ways. And you had friends from all 1158 00:58:11,520 --> 00:58:14,720 Speaker 1: different religions, um sort of come you know, coming forth. 1159 00:58:15,040 --> 00:58:16,880 Speaker 1: And it wasn't until I moved to the East Coast 1160 00:58:16,960 --> 00:58:19,960 Speaker 1: that I actually had a h an ability to reconcile 1161 00:58:20,080 --> 00:58:22,880 Speaker 1: my heritage effectively with that. And so, um, I would 1162 00:58:22,880 --> 00:58:24,560 Speaker 1: say that for me, you know, just sort of being 1163 00:58:24,560 --> 00:58:26,880 Speaker 1: that minority for many years was a positive and a 1164 00:58:26,880 --> 00:58:29,920 Speaker 1: negative influence and experience. Um. But it also was very 1165 00:58:30,120 --> 00:58:33,280 Speaker 1: very formative. That's quite interesting. UM, tell us about some 1166 00:58:33,360 --> 00:58:36,120 Speaker 1: of your mentors. So you're early mentors. We know who 1167 00:58:36,120 --> 00:58:40,160 Speaker 1: your ladder mentor was. Yeah. Um, so there's there's a 1168 00:58:40,160 --> 00:58:42,600 Speaker 1: couple that come to mind here. Of course, you have, um, 1169 00:58:42,840 --> 00:58:45,160 Speaker 1: you know my you know, a speech and debate teacher 1170 00:58:45,160 --> 00:58:48,520 Speaker 1: who pulls you out of you know who, who says 1171 00:58:48,560 --> 00:58:49,920 Speaker 1: you probably have a good gift for gab or at 1172 00:58:49,960 --> 00:58:52,960 Speaker 1: least extempering and speaking. So that's when Glinda Ferguson was 1173 00:58:53,000 --> 00:58:55,400 Speaker 1: her name, and she sort of molded helped to mold 1174 00:58:55,400 --> 00:58:58,760 Speaker 1: me at least to say something coherent in probably ninth grade. Um. 1175 00:58:58,800 --> 00:59:00,920 Speaker 1: But you also have other people, and there was a gentleman. 1176 00:59:01,480 --> 00:59:03,680 Speaker 1: There's two people that I always had jobs in my 1177 00:59:03,800 --> 00:59:06,160 Speaker 1: entire life, and I had owned a lawnmowing business, but 1178 00:59:06,280 --> 00:59:08,360 Speaker 1: the summer before my senior of high school, I had 1179 00:59:08,360 --> 00:59:10,200 Speaker 1: two people influenced me. The first one was a gentleman 1180 00:59:10,240 --> 00:59:12,920 Speaker 1: by the name of Leroy Gilmer. And Leroy was not 1181 00:59:13,120 --> 00:59:16,920 Speaker 1: anybody who was who who who was significant in a 1182 00:59:16,960 --> 00:59:19,080 Speaker 1: noteworthy way, but he was significant in my life because 1183 00:59:19,120 --> 00:59:21,520 Speaker 1: he was a hard worker. He worked three jobs and 1184 00:59:21,560 --> 00:59:24,360 Speaker 1: we worked at a basically a sports bar is what 1185 00:59:24,440 --> 00:59:26,160 Speaker 1: we worked at, and he hired me on a whim 1186 00:59:26,200 --> 00:59:28,080 Speaker 1: because he thought I was probably from the right side 1187 00:59:28,120 --> 00:59:30,440 Speaker 1: of right side of the tracks, but hard enough working 1188 00:59:30,440 --> 00:59:31,920 Speaker 1: that I would work in the hours I wanted to. 1189 00:59:31,960 --> 00:59:34,280 Speaker 1: So my hours were five to two thirty in the morning, 1190 00:59:34,280 --> 00:59:36,320 Speaker 1: five pm to two thirty in the morning. And what 1191 00:59:36,440 --> 00:59:39,600 Speaker 1: he taught me was the ability to prioritize an industrial 1192 00:59:39,680 --> 00:59:42,720 Speaker 1: kitchen and what to do when you get slammed. So 1193 00:59:42,760 --> 00:59:45,600 Speaker 1: there's nothing like a sporting event where you have fifty 1194 00:59:45,640 --> 00:59:48,200 Speaker 1: tickets of food sitting in front of you and you 1195 00:59:48,240 --> 00:59:52,000 Speaker 1: have to prioritize all those hungry, possibly drunk patrons at 1196 00:59:52,000 --> 00:59:54,680 Speaker 1: a very quick point in time. And for me, Leroy 1197 00:59:54,920 --> 00:59:57,720 Speaker 1: was the epitome of hard work and diligence and the 1198 00:59:57,800 --> 01:00:01,840 Speaker 1: understanding how to logically put sequencing together during times of stress. 1199 01:00:02,960 --> 01:00:05,560 Speaker 1: What happened during that sounds like it's applicable to future. 1200 01:00:05,680 --> 01:00:08,120 Speaker 1: So one of the first things that I asked people 1201 01:00:08,200 --> 01:00:11,680 Speaker 1: is what is your first job? Um when they interview 1202 01:00:11,680 --> 01:00:14,120 Speaker 1: of them, probably laying the calibat, and if they said 1203 01:00:14,240 --> 01:00:16,600 Speaker 1: internship at x y Z Investment Bank is my first job, 1204 01:00:17,240 --> 01:00:19,800 Speaker 1: it's a very short interview, because the reality is is 1205 01:00:19,840 --> 01:00:22,280 Speaker 1: that you want people to have real experiences who can 1206 01:00:22,360 --> 01:00:25,200 Speaker 1: understand how to adapt and and that's an important thing. 1207 01:00:25,200 --> 01:00:27,080 Speaker 1: And so I'm more real world than probably even most 1208 01:00:27,080 --> 01:00:28,680 Speaker 1: of my brethren at PIMCO in terms of the types 1209 01:00:28,840 --> 01:00:31,520 Speaker 1: of questions they asked, because they all wanted to try 1210 01:00:31,520 --> 01:00:34,800 Speaker 1: to stump people with some intellectual like quantitative thing. That's 1211 01:00:34,840 --> 01:00:37,560 Speaker 1: one element. But the other other person who molded my 1212 01:00:37,600 --> 01:00:39,200 Speaker 1: life was a joan by the name of Tom Love. 1213 01:00:39,640 --> 01:00:43,360 Speaker 1: And Tom Love Tom Love and so you probably don't 1214 01:00:43,360 --> 01:00:46,760 Speaker 1: know Tom, but Tom's worth several billion dollars and what 1215 01:00:46,960 --> 01:00:49,800 Speaker 1: it's it's interesting about Tom Love. And as you you 1216 01:00:49,800 --> 01:00:51,680 Speaker 1: get into the gas industry, I had two people who 1217 01:00:51,680 --> 01:00:54,919 Speaker 1: are very close to me in that. But Tom Love 1218 01:00:55,360 --> 01:00:58,720 Speaker 1: had a had a had a series of truck stops 1219 01:00:58,800 --> 01:01:01,040 Speaker 1: called Love's Country Store, and you might see him on 1220 01:01:01,080 --> 01:01:03,200 Speaker 1: the interstates, and there's now tons of them, but back 1221 01:01:03,480 --> 01:01:05,640 Speaker 1: in the early nineties there there was a good few, 1222 01:01:05,680 --> 01:01:08,520 Speaker 1: but it was more of a regional type of situation. Anyway, 1223 01:01:08,760 --> 01:01:11,560 Speaker 1: I had worked at a He had very few bad 1224 01:01:11,600 --> 01:01:14,640 Speaker 1: investments in his life, I think um but he had 1225 01:01:14,680 --> 01:01:17,480 Speaker 1: one investment which was in a car wash and the 1226 01:01:17,480 --> 01:01:19,680 Speaker 1: car wish. Business is very tough business. But I was. 1227 01:01:20,080 --> 01:01:22,280 Speaker 1: I worked my daytime shifts at the car wash, and 1228 01:01:22,320 --> 01:01:23,920 Speaker 1: I was a salesman and I did some of those 1229 01:01:24,080 --> 01:01:26,440 Speaker 1: cleaning the cars of course, and things like that. But 1230 01:01:26,480 --> 01:01:28,880 Speaker 1: it was he lost money on it, and and he 1231 01:01:28,920 --> 01:01:30,960 Speaker 1: was so perturbed by this. He actually showed up every 1232 01:01:31,040 --> 01:01:34,000 Speaker 1: day in is um aulsomobile truck, I remember at that 1233 01:01:34,040 --> 01:01:36,320 Speaker 1: point in time, and here I was, and he, you know, 1234 01:01:36,800 --> 01:01:39,240 Speaker 1: he was very frustrated by the fact that this was 1235 01:01:39,280 --> 01:01:40,960 Speaker 1: a money losing operation. At that point time, he had 1236 01:01:40,960 --> 01:01:43,280 Speaker 1: invested a million dollars in this property and another million 1237 01:01:43,280 --> 01:01:46,160 Speaker 1: in the plant, and it never came to fruition. And 1238 01:01:46,880 --> 01:01:49,120 Speaker 1: he kept every day coming in to see what was 1239 01:01:49,160 --> 01:01:51,440 Speaker 1: going on and talking to the employees at the ground level. 1240 01:01:51,440 --> 01:01:52,840 Speaker 1: And I made a couple of suggestions to him, but 1241 01:01:52,880 --> 01:01:54,920 Speaker 1: he was open minded in my suggestions. And number two, 1242 01:01:54,960 --> 01:01:58,080 Speaker 1: no matter how big his business became, he was actually 1243 01:01:58,160 --> 01:02:00,680 Speaker 1: very hands on in terms of understand ending how to 1244 01:02:00,800 --> 01:02:03,320 Speaker 1: learn from this failure. And so I learned two things 1245 01:02:03,320 --> 01:02:05,479 Speaker 1: from it. It's important to be not an absentee owner, 1246 01:02:05,560 --> 01:02:08,280 Speaker 1: number one. And number two learned from your failures. And 1247 01:02:08,280 --> 01:02:10,320 Speaker 1: and Tom Toes, you know, to this day is obviously 1248 01:02:10,440 --> 01:02:14,160 Speaker 1: quite successful. Let's talk about books. This is everybody's favorite question. 1249 01:02:14,200 --> 01:02:17,120 Speaker 1: Tell us some books that you think you've read recently 1250 01:02:17,240 --> 01:02:20,280 Speaker 1: or you think are important. Yeah, there's a couple here, 1251 01:02:20,320 --> 01:02:23,080 Speaker 1: but um, you know, obviously you know it's funny. I 1252 01:02:23,360 --> 01:02:25,960 Speaker 1: still to this day ask people interviewing, have you read 1253 01:02:26,000 --> 01:02:29,040 Speaker 1: Liars Poker? And clearly, uh, that was sort of formative 1254 01:02:29,040 --> 01:02:30,640 Speaker 1: in the in the beginning of the year. Or there's 1255 01:02:30,640 --> 01:02:32,960 Speaker 1: one called The Bombardiers by Paul Paul Bronson, and those 1256 01:02:33,000 --> 01:02:35,320 Speaker 1: are just sort of industry books, but Peul Bronson was 1257 01:02:35,360 --> 01:02:39,040 Speaker 1: the biggest little con value, right. Yeah, yeah, but but 1258 01:02:39,080 --> 01:02:41,080 Speaker 1: it's amazing to me that people who are just coming 1259 01:02:41,160 --> 01:02:43,720 Speaker 1: this industry have no understanding of that history and and 1260 01:02:44,200 --> 01:02:45,840 Speaker 1: I literally will buy it for them just to give 1261 01:02:45,880 --> 01:02:47,200 Speaker 1: them that sense of history. Not that it was the 1262 01:02:47,280 --> 01:02:50,280 Speaker 1: right or the wrong, is just the sense of history. Um. Philosophically, 1263 01:02:50,280 --> 01:02:51,959 Speaker 1: you have to think about the places like ann Rand 1264 01:02:51,960 --> 01:02:54,560 Speaker 1: and the Fountain Head in places like that, not necessarily 1265 01:02:54,560 --> 01:02:57,200 Speaker 1: that you coveted, but I think it was who eye 1266 01:02:57,200 --> 01:03:00,280 Speaker 1: opening experience for me to read it as a young adult. Um. 1267 01:03:00,320 --> 01:03:02,560 Speaker 1: But I actually go back to my upbringing in the 1268 01:03:02,560 --> 01:03:05,080 Speaker 1: oil bust, and there was a book by by a 1269 01:03:05,120 --> 01:03:08,600 Speaker 1: gentleman name of Mark singer Um called Funny Money, and 1270 01:03:08,680 --> 01:03:11,840 Speaker 1: it was the the beginning of the end of the 1271 01:03:11,840 --> 01:03:14,720 Speaker 1: savings and loan crisis. And what you don't realize actually 1272 01:03:14,760 --> 01:03:17,080 Speaker 1: is that the savings loan crisis. Everybody thinks of Continental 1273 01:03:17,080 --> 01:03:19,600 Speaker 1: of Illinoise being the pinnacle of it, but it started 1274 01:03:19,640 --> 01:03:22,320 Speaker 1: from literally a bank branch in the middle of a 1275 01:03:22,400 --> 01:03:26,120 Speaker 1: parking lot called Penn Square in Oklahoma City. Penn Square 1276 01:03:26,160 --> 01:03:29,600 Speaker 1: Bank did so many bad oil deals that it was 1277 01:03:29,640 --> 01:03:32,920 Speaker 1: out of a branch. There's probably no bigger than an 1278 01:03:32,920 --> 01:03:35,120 Speaker 1: average house, you know, a couple of couple of thousand 1279 01:03:35,160 --> 01:03:38,040 Speaker 1: square feet, but yet that was ground zero for the 1280 01:03:38,080 --> 01:03:42,200 Speaker 1: savings and loan crisis. And it's often misunderstood about how 1281 01:03:42,960 --> 01:03:46,680 Speaker 1: things grow become misproportioned and misaligned in terms of risk, 1282 01:03:46,920 --> 01:03:49,720 Speaker 1: and that, as I mentioned before, it was the upbringing 1283 01:03:49,760 --> 01:03:53,280 Speaker 1: I had was how to react to ultimately the oil bust, 1284 01:03:53,360 --> 01:03:55,760 Speaker 1: and that was very formative. But that book really gets 1285 01:03:55,760 --> 01:03:58,360 Speaker 1: into the detail of of how, you know, how euphoria 1286 01:03:58,440 --> 01:04:01,800 Speaker 1: and you know, caltivate itself, and more importantly, personalities captivate people, 1287 01:04:02,160 --> 01:04:04,440 Speaker 1: and that's an important factor tell us what you do 1288 01:04:04,560 --> 01:04:07,680 Speaker 1: outside of the office to either relax or stay fit 1289 01:04:07,880 --> 01:04:10,400 Speaker 1: or mentally unwind. H I love to spend time with 1290 01:04:10,440 --> 01:04:12,400 Speaker 1: my family, my wife. You know, that's a that's a 1291 01:04:12,400 --> 01:04:14,959 Speaker 1: good balance, uh, and you know, try to work out. 1292 01:04:15,000 --> 01:04:16,840 Speaker 1: You know, I'm pretty I've been doing cross fit for 1293 01:04:16,880 --> 01:04:23,080 Speaker 1: ten years and so that's ah. They're great, They're not familiar. 1294 01:04:23,080 --> 01:04:25,040 Speaker 1: I've had a handful of surgeries, but not because of that. 1295 01:04:25,280 --> 01:04:27,640 Speaker 1: But I do it as a stress relief. There's admittedly 1296 01:04:27,680 --> 01:04:30,360 Speaker 1: some movements that I will clearly stare away from. But 1297 01:04:30,880 --> 01:04:33,360 Speaker 1: the people that you deal, that you train with and 1298 01:04:33,400 --> 01:04:35,200 Speaker 1: you work out with, are not in your everyday life, 1299 01:04:35,640 --> 01:04:38,120 Speaker 1: and it's fascinating to hear their stories. And you know, 1300 01:04:38,160 --> 01:04:40,760 Speaker 1: my my goal isn't too you know, back squat five 1301 01:04:40,840 --> 01:04:43,400 Speaker 1: hundred pounds, but it's to stay you know, stay fit, 1302 01:04:43,440 --> 01:04:45,200 Speaker 1: and more importantly, you sweat a little and have a 1303 01:04:45,240 --> 01:04:47,200 Speaker 1: good time. And that's what I find. So if a 1304 01:04:47,240 --> 01:04:50,400 Speaker 1: millennial or someone just graduating college comes up to you 1305 01:04:50,440 --> 01:04:53,200 Speaker 1: and says they're interested in the career in fixed income, 1306 01:04:53,440 --> 01:04:55,440 Speaker 1: what sort of advice would you give them? Two pieces 1307 01:04:55,440 --> 01:04:58,720 Speaker 1: of advice, be patient. I just had this conversation with 1308 01:04:58,760 --> 01:05:02,320 Speaker 1: a colleague not so long the expectation is that somebody's 1309 01:05:02,360 --> 01:05:04,160 Speaker 1: making more money around you, and you should make as 1310 01:05:04,240 --> 01:05:07,280 Speaker 1: much money around it where they've given more priority. The 1311 01:05:07,360 --> 01:05:10,440 Speaker 1: reality is that careers take a long time to build, 1312 01:05:10,760 --> 01:05:13,960 Speaker 1: and your firm is likely investing in your career in 1313 01:05:14,000 --> 01:05:15,920 Speaker 1: a variety of way, shape, or form. They will be 1314 01:05:15,960 --> 01:05:20,520 Speaker 1: rewarded over time, and so patients is essential. Believe me, 1315 01:05:20,560 --> 01:05:22,160 Speaker 1: people told me that along the way at an old 1316 01:05:22,200 --> 01:05:25,480 Speaker 1: boss's name is Lennie Feeder, who basically helped me to 1317 01:05:25,520 --> 01:05:27,880 Speaker 1: get me under my way. And you know it took 1318 01:05:27,880 --> 01:05:30,040 Speaker 1: me places from London to double in Ireland, where I 1319 01:05:30,040 --> 01:05:31,720 Speaker 1: lived for a couple of years, back to New York. 1320 01:05:32,000 --> 01:05:34,960 Speaker 1: The reality is that patience is an incredibly powerful thing 1321 01:05:34,960 --> 01:05:37,560 Speaker 1: in a career. And and and I think that's someber 1322 01:05:37,560 --> 01:05:38,760 Speaker 1: one and number two. If you really want to be 1323 01:05:38,760 --> 01:05:41,160 Speaker 1: in finance these days, UM no offense to New York 1324 01:05:41,200 --> 01:05:42,960 Speaker 1: because I love New York and spent many years here. 1325 01:05:43,560 --> 01:05:46,280 Speaker 1: Global finances a global industry. And if somebody's going to 1326 01:05:46,360 --> 01:05:48,600 Speaker 1: hand you an opportunity, and that could be in London 1327 01:05:48,720 --> 01:05:52,120 Speaker 1: or Munich or Singapore, Tokyo or Sydney or our Newport Beach, 1328 01:05:52,560 --> 01:05:55,080 Speaker 1: um run with it. And you've got to be open 1329 01:05:55,120 --> 01:05:57,840 Speaker 1: mind enough for you and your significant other to take 1330 01:05:57,880 --> 01:06:01,240 Speaker 1: those opportunities when they come, because oppert tunities don't fall 1331 01:06:01,320 --> 01:06:03,360 Speaker 1: in your lap very often, and the most successful people 1332 01:06:03,360 --> 01:06:05,480 Speaker 1: are the ones who can capitalize on that and then 1333 01:06:05,520 --> 01:06:08,120 Speaker 1: grow beyond that. And our our final question, what is 1334 01:06:08,160 --> 01:06:11,320 Speaker 1: it that you know about the fixed income market today 1335 01:06:11,360 --> 01:06:13,440 Speaker 1: that you wish you knew twenty years ago when you 1336 01:06:13,480 --> 01:06:17,000 Speaker 1: were getting started? Um? Well, one of the things that 1337 01:06:17,040 --> 01:06:19,920 Speaker 1: Ace Greenberg was was very mad at me about was 1338 01:06:19,960 --> 01:06:21,920 Speaker 1: the fact that I was actually in the fixed income market. 1339 01:06:21,960 --> 01:06:23,680 Speaker 1: He wanted me to be in the equity markets. He 1340 01:06:23,720 --> 01:06:26,800 Speaker 1: was not a bond guy, believe it. And so one 1341 01:06:26,840 --> 01:06:28,920 Speaker 1: of the things, and I got to be honest with you, 1342 01:06:28,960 --> 01:06:31,800 Speaker 1: my being in the fixed and cort was was market 1343 01:06:31,880 --> 01:06:34,560 Speaker 1: was a little bit by chance. Um but it's something 1344 01:06:34,600 --> 01:06:36,840 Speaker 1: that I became fascinated with. I think one of the 1345 01:06:36,880 --> 01:06:40,840 Speaker 1: things that would have been really useful in understanding is 1346 01:06:40,840 --> 01:06:44,920 Speaker 1: is how leverage really plays itself into this system, and 1347 01:06:44,960 --> 01:06:48,800 Speaker 1: more importantly, have a better mapping tool to understand how 1348 01:06:48,880 --> 01:06:52,600 Speaker 1: leverage proliferate is proliferate prolifer rates throughout the entire global 1349 01:06:52,640 --> 01:06:54,760 Speaker 1: system at this point time. It's something that you think 1350 01:06:54,760 --> 01:06:57,360 Speaker 1: you know, but it's very difficult to map out in 1351 01:06:57,440 --> 01:07:00,320 Speaker 1: any articulate way. And no matter what people think, that's 1352 01:07:00,320 --> 01:07:02,440 Speaker 1: something that's you know, more of a more of a 1353 01:07:02,800 --> 01:07:06,040 Speaker 1: more of an educated guest as opposed to precise measurement factor. 1354 01:07:06,360 --> 01:07:09,480 Speaker 1: We have been speaking with Jerome Schneider. He is the 1355 01:07:09,520 --> 01:07:13,640 Speaker 1: head of short term portfolio Management and Funding at PIMCO. 1356 01:07:14,120 --> 01:07:16,640 Speaker 1: If you enjoy this conversation, be sure and look up 1357 01:07:16,640 --> 01:07:19,360 Speaker 1: an inch or down an inch at any of the 1358 01:07:19,400 --> 01:07:24,120 Speaker 1: other hundred in G eighty or so such conversations. We 1359 01:07:24,240 --> 01:07:28,360 Speaker 1: love your comments, feedback and suggestions right to us at 1360 01:07:29,040 --> 01:07:32,360 Speaker 1: M I B Podcast. That's M I B Podcast at 1361 01:07:32,360 --> 01:07:35,400 Speaker 1: Bloomberg dot net. I would be remiss if I did 1362 01:07:35,400 --> 01:07:38,040 Speaker 1: not thank my crack team who helps to put together 1363 01:07:38,520 --> 01:07:43,120 Speaker 1: these weekly conversations. Taylor Riggs is our booker. Mike Batnick 1364 01:07:43,280 --> 01:07:47,920 Speaker 1: is our head of research. Medina Parwanna is our audio 1365 01:07:48,000 --> 01:07:52,760 Speaker 1: engineer slash producer. I'm Barry Ritolts. You've been listening to 1366 01:07:52,880 --> 01:08:00,960 Speaker 1: Masters in Business on Bloomberg Radio. The PAK