WEBVTT - Private Credit, Investing, And Cybersecurity 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.520 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.880 at Bloomberg dot com slash podcast. I want to get 0:00:22.880 --> 0:00:25.240 to our next guest here, Jess Larson, CEO and founder 0:00:25.239 --> 0:00:28.480 of Briarcliff Credit Partners. Jess, thanks so much for joining 0:00:28.560 --> 0:00:31.200 us here. You know, I want to get you know, 0:00:31.600 --> 0:00:35.120 your view of the private credit business. Give us a 0:00:35.159 --> 0:00:38.440 sense that like how big private credit is? Is it growing? 0:00:38.760 --> 0:00:43.080 How is it used within the compital markets? Thank you well. 0:00:43.280 --> 0:00:45.040 First of all, thank you very much for for having 0:00:45.080 --> 0:00:49.120 me on and write A credit is already sitting at 0:00:49.159 --> 0:00:52.200 one point to trillion dollars, so it is. It has 0:00:52.280 --> 0:00:55.680 really matured and grown since kind of Dart Frank intermediated 0:00:55.720 --> 0:00:58.880 the banks. So it's been sprinting and growing since two 0:00:58.880 --> 0:01:03.560 thousand and ten. Now what's really interesting here is that sprinting, 0:01:03.640 --> 0:01:06.720 that growth is not it is not slowing down by 0:01:06.760 --> 0:01:10.600 any in any way. So what we anticipate is by 0:01:10.959 --> 0:01:13.600 so only a few years, two years out it will 0:01:13.640 --> 0:01:16.720 be at two point seven trillion dollar asset class. So 0:01:16.880 --> 0:01:19.880 growth is there, it's here to stay. How do I 0:01:19.920 --> 0:01:21.800 get a piece of that? Because I hear I'm looking 0:01:21.840 --> 0:01:25.080 at the ten year trading at two point four That 0:01:25.120 --> 0:01:27.360 doesn't do it for me. I need more yield. I'm 0:01:27.360 --> 0:01:29.640 thinking about private credit. How do I get exposure? How 0:01:29.680 --> 0:01:33.560 does the average investor get exposure to the private credit market? Well, 0:01:33.880 --> 0:01:36.839 depending on whether we talk about the average average consumer 0:01:36.959 --> 0:01:39.720 or the average institutions, right, But that is exactly you're 0:01:39.720 --> 0:01:42.800 starting on the on the perfect point here, right is 0:01:43.040 --> 0:01:46.120 your fixed income is really becoming a no income, and 0:01:46.240 --> 0:01:48.040 so what you want to do is you want to 0:01:48.160 --> 0:01:52.000 rotate some of that into your private creditor and in 0:01:52.040 --> 0:01:55.160 many cases, what's the diary lending asset class? So what 0:01:55.320 --> 0:01:59.520 that is exactly why we're seeing private credit becoming increasingly popular, 0:01:59.680 --> 0:02:02.960 right it is? It is for those reasons. Is there 0:02:02.960 --> 0:02:07.360 a difference between what you're doing and direct lending? Private 0:02:07.400 --> 0:02:11.679 credit um is a very broad kind of asset class 0:02:11.720 --> 0:02:14.440 as sub part of that or sub strategy that is 0:02:14.520 --> 0:02:17.760 direct lending, But there's so much more to private credits 0:02:17.840 --> 0:02:21.000 than just doric lending, and that is exactly what we 0:02:21.040 --> 0:02:24.520 do here at Briercliffe. We look at more n stack 0:02:24.600 --> 0:02:29.639 to specific uncorelated strategies, that sits outside of direct lending, 0:02:29.800 --> 0:02:33.600 offering other types of access and exposure to these institutions 0:02:34.200 --> 0:02:38.000 and to you. But you gotta call me after this program. 0:02:38.080 --> 0:02:42.120 So what kind of sectors are interesting to you guys 0:02:42.120 --> 0:02:47.519 at Briarcliffe these days in terms of the credit outlook. Yes, 0:02:48.320 --> 0:02:51.040 what we have seen over the last five six years 0:02:51.040 --> 0:02:53.320 which has been really interesting within the private credit space, 0:02:53.680 --> 0:02:56.680 we have seen direct lending really taken front and center. 0:02:57.440 --> 0:02:59.560 Bearing in mind leading up to the g f C 0:02:59.840 --> 0:03:03.560 it was really mess and distressed for control. That was 0:03:03.600 --> 0:03:08.160 really what private credit was PRETFC, both CFC and dot frank. 0:03:08.240 --> 0:03:10.840 It was all about drek lending because the banks simply 0:03:10.880 --> 0:03:13.760 couldn't offer it. Darren that direk lending is a great 0:03:13.760 --> 0:03:17.799 asset class, but as more capital comes into it, there 0:03:17.800 --> 0:03:21.639 has been some compression returns US pension funds and a 0:03:21.680 --> 0:03:24.520 lot of institutionals here in the US have an internal 0:03:25.680 --> 0:03:28.840 performance hurdle of seven percent. And if your direct lending 0:03:28.919 --> 0:03:31.760 is no longer meeting that, you really want to look 0:03:31.840 --> 0:03:35.880 outside of direct lending. It could be sector specific, it 0:03:35.920 --> 0:03:38.520 could be different kind of specialty lending. It could be 0:03:38.560 --> 0:03:42.160 structured products, it could be all sorts of encore lated 0:03:42.160 --> 0:03:45.960 strategies that kind of gives you more diversification and even 0:03:46.080 --> 0:03:51.800 higher performance. And that's what we're looking for. Where I 0:03:51.840 --> 0:03:54.640 guess there's probably no shortage of But where are you 0:03:54.680 --> 0:04:00.880 getting the borrowers? Well, the borrowers said, well, you know, 0:04:00.960 --> 0:04:04.480 the majority of our society, of the Georga or economy 0:04:04.480 --> 0:04:07.800 are really private, privately owned companies. So there is really 0:04:07.840 --> 0:04:11.040 no shortes of border borrows out there as long as 0:04:11.080 --> 0:04:15.760 the banks are unable to really service these private companies. 0:04:15.960 --> 0:04:18.159 So there are no shortage whether we find them in 0:04:18.200 --> 0:04:21.320 the healthcare industry, the food sector, or even the sports 0:04:21.760 --> 0:04:25.480 clubs or simply even the banks need help with their 0:04:25.520 --> 0:04:28.440 revolver strategies. There are really no short as of boars 0:04:28.480 --> 0:04:30.560 out there. But can you do it? I mean, is 0:04:30.560 --> 0:04:33.560 it cheaper than a bank? I mean, sorry, an institution 0:04:33.600 --> 0:04:38.000 going to a bank and selling a bond. Well, for 0:04:38.120 --> 0:04:42.880 many companies like your restaurant chains, um, the banking finances 0:04:42.880 --> 0:04:46.440 seem siming not available anymore. Right, And if you want 0:04:46.480 --> 0:04:52.360 flexible capital and flexible financing. The banking route is simply 0:04:52.360 --> 0:04:55.600 not possible anymore. So you really need to find different 0:04:55.640 --> 0:04:59.360 ways of accessing the capital market. And that is why 0:04:58.960 --> 0:05:02.960 the private credit is not so much about price, it's 0:05:03.000 --> 0:05:07.039 more about the ability to really get access. Hey, Jess, 0:05:07.040 --> 0:05:09.400 thanks so much for joining us. Really appreciate that. Jess Larson, 0:05:09.480 --> 0:05:14.359 CEO and founder of Briarcliff Credit Partners. This is the 0:05:14.520 --> 0:05:18.360 Big Take, the best of Bloomberg's in depth original reporting 0:05:18.440 --> 0:05:21.160 from around the globe. We're running on a financial system 0:05:21.200 --> 0:05:24.960 that's running on old technology. We're seeing places reach fresh 0:05:25.040 --> 0:05:28.000 recordize what unfolds in mid terms, we will no doubt 0:05:28.040 --> 0:05:31.400 see again in the next presidential election. The Big Take 0:05:31.760 --> 0:05:36.119 on Bloomberg Radio. All right, the Big Take story today 0:05:36.200 --> 0:05:40.400 takes us to the main line of Philadelphia. We're talking Malvern, Pennsylvania, 0:05:40.440 --> 0:05:42.599 and you can talk Malvern, you talk, uh, you know 0:05:42.680 --> 0:05:47.880 about Vanguard. They have eight trillion dollars in assets under management. 0:05:47.880 --> 0:05:50.520 Only black Rock manages more money. But there's change going 0:05:50.560 --> 0:05:53.679 on at Vanguard. Let's get the latest on that story. 0:05:53.720 --> 0:05:56.640 Any massive investing reporter for Bloomberg News joins us here 0:05:56.640 --> 0:06:00.680 with the Big Take story. What's going on in malve In, Pennsylvania. 0:06:00.680 --> 0:06:04.719 Any So, Vanguard, as you mentioned, is one of the 0:06:04.720 --> 0:06:07.800 world's largest asset managers. It's the second largest in the 0:06:07.920 --> 0:06:11.240 entire world with eight trillion in assets. And it built 0:06:11.480 --> 0:06:13.640 it was it was founded by Jack Bogel on this 0:06:13.720 --> 0:06:18.839 principle of low cost study as it goes investing. And 0:06:19.720 --> 0:06:23.360 they've they've pivoted in some ways as the industry has 0:06:23.480 --> 0:06:27.320 changed to keep up and to continue competing. So it's 0:06:27.400 --> 0:06:32.360 really a very unique model in the industry. And it's 0:06:32.400 --> 0:06:35.000 and they're starting to move into directions that are a 0:06:35.080 --> 0:06:38.200 little bit different for a place like Vanguard. Uh, places 0:06:38.240 --> 0:06:42.080 like private equity, for example, which uh steam counter at 0:06:42.120 --> 0:06:45.200 least to some people to what Bogol's ethos was all about. 0:06:45.720 --> 0:06:50.880 Gotta be counter to everyone about what Bogel. I mean. Imagine, 0:06:51.120 --> 0:06:54.520 if you will, someone who changed Wall Street more than 0:06:54.600 --> 0:06:57.960 anyone else and didn't end up a billionaire. Isn't that 0:06:58.000 --> 0:07:02.279 the case with Jack Bogel exactly? Uh, Vogel did not 0:07:02.400 --> 0:07:06.120 wind up a billionaire. He had I think about a 0:07:06.200 --> 0:07:09.040 net worth of less than a hundred million dollars when 0:07:09.080 --> 0:07:12.040 he died, and you compare that against you know, the 0:07:12.120 --> 0:07:16.120 billionaires the billionaire Johnson family, for example, of Fidelity Fame 0:07:16.200 --> 0:07:19.880 a direct competitor to Vanguard, So it's pretty extraordinary. He 0:07:19.960 --> 0:07:23.480 found in the firm all on the idea of lowering 0:07:23.520 --> 0:07:27.760 costs year after year for investors and really offering these 0:07:28.000 --> 0:07:34.080 cheap funds, mostly index funds um and undercutting competitors on price. 0:07:34.160 --> 0:07:38.760 What's changed in the industry is all the other competitors 0:07:38.840 --> 0:07:43.080 like black Rock, Fidelity, Charles Schwab had basically no choice 0:07:43.120 --> 0:07:46.440 but to follow Vanguard and cut their own fees on 0:07:46.480 --> 0:07:49.080 a lot of funds to the bone as well. And 0:07:49.120 --> 0:07:51.280 so what Vanguard is seeing now is that it kind 0:07:51.280 --> 0:07:53.760 of has to move in a different direction if it 0:07:53.840 --> 0:07:57.280 wants to keep accumulating assets because it's already so large. 0:07:57.360 --> 0:08:00.880 So that helped precipitate some of the changes, but does 0:08:00.880 --> 0:08:04.240 it annie. I mean, the point the reason Bogel died 0:08:04.280 --> 0:08:08.320 with only a hundred million dollars roughly is that it 0:08:08.360 --> 0:08:12.600 wasn't his endgame. He he wasn't trying to get mega 0:08:12.800 --> 0:08:17.760 rich um. He didn't need to to win in Wall 0:08:17.840 --> 0:08:20.960 Street terms. He was on a mission to help the 0:08:21.000 --> 0:08:25.840 average investor. If that's what Vanguard wants to do, um, 0:08:25.920 --> 0:08:28.360 do they think private equity products are going to help 0:08:28.400 --> 0:08:32.520 the average investor perseasely. Well, they say that they can 0:08:32.600 --> 0:08:36.600 undercut competitors on price, even for private equity. That we're 0:08:36.760 --> 0:08:39.880 that kind of rarefied higher fee world. But you know, 0:08:39.960 --> 0:08:42.040 it is different, it's a it's a it's a bit 0:08:42.040 --> 0:08:44.120 of a shift for them. They're also focused a lot 0:08:44.160 --> 0:08:48.800 on financial advice. And something that UM has has that 0:08:48.880 --> 0:08:51.120 people have kind of observed is, oh, there are a 0:08:51.120 --> 0:08:55.440 couple of funds now that are only for their advice customers. So, 0:08:55.720 --> 0:08:59.280 you know, is could that be considered counter to Bogel's 0:08:59.360 --> 0:09:02.200 kind of eat those say as well. So the point 0:09:02.400 --> 0:09:06.440 Vanguard's whole rais on detra is still lowering costs. It 0:09:06.480 --> 0:09:11.640 has this unusual mutualized ownership structure UM, where it's funds 0:09:11.640 --> 0:09:14.800 owned the firm and therefore the investors in the fund 0:09:14.880 --> 0:09:17.320 zone the firm. So it's different from any other kind 0:09:17.360 --> 0:09:19.880 of East on Wall Street. But UM, you know, it 0:09:19.960 --> 0:09:23.199 has this community of die hard fans called the Bogolheads, 0:09:23.440 --> 0:09:25.960 and they've observed some of this change happening in some 0:09:26.040 --> 0:09:28.800 cases raised in eyebrow, and he talked to us about 0:09:28.840 --> 0:09:31.680 the culture at Vanguard. One of the things that jumps 0:09:31.679 --> 0:09:35.120 out of me, was they won't pay their people that well, 0:09:35.160 --> 0:09:38.719 do they? What's the culture there? Right? So, because the 0:09:39.200 --> 0:09:44.040 firm is so focused on cost cutting and is located 0:09:44.080 --> 0:09:48.640 away from Wall Street in this suburb of Pennsylvania, Malvern, 0:09:49.320 --> 0:09:51.200 it has a different kind of culture. It has a 0:09:51.280 --> 0:09:55.959 very insular culture. UM. It has a culture of Bogol 0:09:55.960 --> 0:09:59.400 founded the firm UH with this kind of focus on 0:10:00.280 --> 0:10:04.840 ship terminology that comes from Vanguards, named after an eighteenth 0:10:04.880 --> 0:10:09.760 century naval ship. UM. So the staff is called a crew. Um. 0:10:09.800 --> 0:10:13.360 They use a lot of nautical terminology. Uh. They're removed 0:10:13.440 --> 0:10:16.679 from Wall Street and by most people's accounts, a little 0:10:16.679 --> 0:10:20.800 bit less hard charging and sharp elbowed as it can 0:10:20.840 --> 0:10:25.160 be to work at some kinds of competitors. UM. And 0:10:25.160 --> 0:10:28.559 and because the firm is focused on cost cutting, you're 0:10:28.600 --> 0:10:31.480 not going to get the kind of dazzling salaries you 0:10:31.520 --> 0:10:35.439 might be able to elsewhere, because you know, the point, 0:10:35.520 --> 0:10:37.199 so much of the point of working at Vanguard is 0:10:37.240 --> 0:10:41.600 this mission of lowering costs for investors. So to work 0:10:41.640 --> 0:10:44.280 there you kind of have to buy into that mentality. 0:10:44.400 --> 0:10:46.840 And UM. One thing we note in the story is 0:10:46.880 --> 0:10:51.360 that UH typically they pay about a third less than 0:10:51.440 --> 0:10:55.240 other major Wall Street competitors as a result, Well, you 0:10:55.240 --> 0:10:58.640 don't have to pay too much if you're if all 0:10:58.679 --> 0:11:02.160 you're gonna do is I the SMP in a basket 0:11:02.320 --> 0:11:05.120 and hold it until you die, right, which is kind 0:11:05.160 --> 0:11:09.160 of what Jack Bogel used to a spouse. Um. So 0:11:09.200 --> 0:11:12.240 it's interesting. I mean, I don't need much advice for that, Annie, 0:11:12.280 --> 0:11:16.120 I just you know, I just gave it, that's right. 0:11:16.320 --> 0:11:21.240 So that's another interesting thing Vogel. Vogel's real adherents are 0:11:21.520 --> 0:11:24.559 very do it yourself kinds of investors. When you talk 0:11:24.640 --> 0:11:27.200 to people who are in the Bogol Heads community, many 0:11:27.240 --> 0:11:31.480 of them independently came to Bogel's philosophies, read his books, 0:11:31.679 --> 0:11:38.280 and became almost religiously devoted to his principles about making 0:11:38.320 --> 0:11:41.160 sure that you're paying very low fees and just you know, 0:11:41.200 --> 0:11:44.880 buying the market um through index funds, letting it compound 0:11:44.920 --> 0:11:48.040 over times. They're they're very, very focused on that. So 0:11:48.120 --> 0:11:52.400 that's another way that the shift to advice could be 0:11:52.520 --> 0:11:56.280 seen as a little bit different from what Bogel had 0:11:56.960 --> 0:12:00.600 had previously preached. All right, Annie, thank you so much. 0:12:00.679 --> 0:12:03.120 We appreciate that. At a note, Annie and your piece, 0:12:03.200 --> 0:12:07.199 you quote Eric Balcunis and analyso Bloomberg Intelligence. He's got 0:12:07.200 --> 0:12:11.240 a new book out. It's author it's called The Bogel Effect. 0:12:11.600 --> 0:12:15.080 Uh So talks about Bogel's life and influence. So any 0:12:15.400 --> 0:12:17.560 quoted Mr Balcunis in there. Maybe we'll get Eric on 0:12:17.600 --> 0:12:19.160 at some point to talk about his book and his 0:12:19.200 --> 0:12:23.319 thoughts and what he discovered about these huge fund down 0:12:23.440 --> 0:12:28.000 in suburban Philadelphia. Any massive industry reporter for Bloomberg News 0:12:28.040 --> 0:12:30.000 with a big take story today, you can find that 0:12:30.080 --> 0:12:34.240 on Bloomberg dot com, Slash Big Take or ni Space 0:12:34.280 --> 0:12:42.280 Big Take go on the Bloomberg terminal. Interest rates they're rising, inflation, 0:12:42.920 --> 0:12:46.560 it's rising, the economy it's slowing. What is an equity 0:12:46.600 --> 0:12:49.760 investor to do? Hugh Robert's head of analytics at quant Insights, 0:12:49.840 --> 0:12:53.320 joins us. Hugh, I guess i'd love to get your 0:12:53.320 --> 0:12:57.239 thoughts about these markets here, given some of the notable 0:12:57.440 --> 0:13:03.040 headwinds we have out there, What is your take? Well, interestingly, 0:13:03.200 --> 0:13:06.760 on our models, Although you have a lot of scary 0:13:06.800 --> 0:13:10.240 headlines out there, and I totally get the narrative that 0:13:10.240 --> 0:13:13.120 that people are looking at, I've actually just seen a 0:13:13.120 --> 0:13:16.480 bounce which made complete sense on our modeling work. The 0:13:16.520 --> 0:13:22.440 way the pattern of association between smp MASDAK, Russell and 0:13:23.200 --> 0:13:27.239 macro factors is as long as the said are relatively 0:13:27.280 --> 0:13:30.640 measured with their rate hiking campaign, and as long as 0:13:30.679 --> 0:13:35.200 that measurement involves you know, none distruction to credit spreads, 0:13:35.600 --> 0:13:38.679 no big risk of music regards to VIX, and actually, 0:13:38.679 --> 0:13:41.240 on current patterning, there's no reason why this has to 0:13:41.280 --> 0:13:44.360 be bad for US equity markets. The key that we're 0:13:44.400 --> 0:13:48.120 really watching is the relationship with credit spreads and also 0:13:48.280 --> 0:13:50.120 the level of real yields. So I think the game 0:13:50.240 --> 0:13:54.200 changing will be if the fends campaign starts to continue 0:13:54.200 --> 0:13:57.400 to see real yields moving higher and even start threatening 0:13:57.520 --> 0:14:00.880 to move into positive territory, then you can have original change. 0:14:00.960 --> 0:14:03.800 But for now, equities are actually doing what they should 0:14:03.840 --> 0:14:07.959 be doing given current map for patterns. YA really ills 0:14:08.040 --> 0:14:11.679 right now are negative fifty three basis points on the tenure. 0:14:12.640 --> 0:14:18.960 Um uh. But the question is um, I guess we 0:14:19.000 --> 0:14:22.000 could still go into a recession and equities could be fine, right. 0:14:22.080 --> 0:14:25.360 I mean, it doesn't always have to mean that we 0:14:25.440 --> 0:14:29.560 have losses on indexes. Because the economy contracts for two 0:14:29.640 --> 0:14:32.760 quarters in a row. I think that's a really fair comment, 0:14:32.800 --> 0:14:34.080 I al really do. And also I think just to 0:14:34.120 --> 0:14:36.400 take a step back on that, I think the Keith 0:14:36.440 --> 0:14:40.040 in now is is that the information narrative is everywhere. 0:14:40.120 --> 0:14:44.800 Everyone knows the dynamic around inflation, even the last residaws 0:14:44.840 --> 0:14:47.560 of tin transitory. I think they're who were still hanging 0:14:47.600 --> 0:14:49.800 in there at the beginning of this year. Comfort in 0:14:49.920 --> 0:14:52.480 Ukraine's gonna killed those guys off, and and people aren't 0:14:52.480 --> 0:14:55.840 looking at transitory at all. But I think the big 0:14:55.920 --> 0:14:59.600 question now to your point, is if it's stagnation that 0:14:59.720 --> 0:15:03.480 could on extaglation and inflation, that's actually not necessarily a 0:15:03.520 --> 0:15:08.560 bad regime for equity market. Um, if it's proper staculation 0:15:08.560 --> 0:15:11.080 while we're talking about a real kind of hard landing 0:15:11.440 --> 0:15:15.880 and inflation, then yes that's different. But at the moment, yes, 0:15:15.920 --> 0:15:17.520 there's lots of reasons if you look at kind of 0:15:17.520 --> 0:15:20.400 credit impulse and what the yield curve is doing to 0:15:20.520 --> 0:15:22.960 to to fear a hard landing, but we're not actually 0:15:23.000 --> 0:15:25.920 seeing there in the data as yet. So again I 0:15:25.920 --> 0:15:29.600 think at the moment there's lots of headline reasons to 0:15:29.640 --> 0:15:32.560 scare equities, but on the analysis that we're seeing at 0:15:32.600 --> 0:15:35.880 the moment, they're largely behaving if they should be all 0:15:35.920 --> 0:15:39.080 right you So, if if I'm as Tom Keenelix say, 0:15:39.080 --> 0:15:41.440 have the courage to be in the market, in the 0:15:41.480 --> 0:15:43.320 equity markets, what are some of the sectors that you 0:15:43.360 --> 0:15:47.520 guys are focusing on these days. Well, the most interesting 0:15:47.560 --> 0:15:49.880 one is that we have the ability to fill of 0:15:49.960 --> 0:15:52.760 look at the standard investment plot. You know, whether an 0:15:52.760 --> 0:15:55.640 asset to booming bust goldilocks, and what's the kind of 0:15:55.760 --> 0:15:59.040 macro regime that it's in and at the moment the 0:16:00.040 --> 0:16:02.960 looking at the index the global index level, the one 0:16:03.000 --> 0:16:06.520 that stands out is that the NASDACK has the strongest 0:16:06.520 --> 0:16:11.320 probity sentsitute to inflation and has a modest but negative 0:16:11.360 --> 0:16:15.120 sentstitute to growth. I it's okay with the weaker growth, 0:16:15.640 --> 0:16:18.560 so that the area really us big tex. I think 0:16:18.560 --> 0:16:23.360 you have to be careful obviously spectech and nonprofitless names, 0:16:23.400 --> 0:16:27.280 but big tech actually has some nice defensive properties here. 0:16:27.600 --> 0:16:30.280 If you believe that we're going to go into extaflationary environment, 0:16:31.200 --> 0:16:34.080 what would you stay away from in general? I'm not 0:16:34.120 --> 0:16:37.720 asking for a specific company that you hate. Yeah, I mean, 0:16:37.840 --> 0:16:40.520 I guess at the end of the logic would obviously 0:16:40.600 --> 0:16:42.480 be cyclicals and we know that a lot of people 0:16:42.680 --> 0:16:47.720 rotated into value trades earlier this year. UM, if you're 0:16:47.760 --> 0:16:49.920 going to get a hard landing, then clude that to 0:16:49.920 --> 0:16:54.160 the obvious play for you. Other people will pointed the 0:16:54.160 --> 0:16:57.280 flattening and the curve in the normal relationships pursued with 0:16:57.280 --> 0:16:59.040 with TEX. There will be a lot of debate I 0:16:59.080 --> 0:17:01.680 think on the whole kind of ros versus final rination. 0:17:02.640 --> 0:17:04.920 For us right here, right now, tech it the best 0:17:04.920 --> 0:17:09.359 place to play. UM. Energy obviously is a classic cyclical blade. 0:17:09.480 --> 0:17:11.679 But you know, I just think one commodity markets are 0:17:11.720 --> 0:17:14.320 doing what they're doing, even if it's a six coal play, 0:17:14.440 --> 0:17:17.760 you wouldn't want to be under exposed to energy just 0:17:17.840 --> 0:17:20.439 because of the underlying commodity shifts and the supply demand 0:17:20.440 --> 0:17:23.000 and alex that are out there at the momentum. So 0:17:23.040 --> 0:17:25.320 I guess that would leave the more classic cyquical things 0:17:25.359 --> 0:17:30.760 that be like consumer discretionary. UM financials is a value play, 0:17:30.840 --> 0:17:33.080 but obviously if rates are going higher, that should be 0:17:33.119 --> 0:17:35.800 doing well. And a lot of financial models on our 0:17:35.840 --> 0:17:39.600 framework are in the regime that they are behaving in 0:17:39.640 --> 0:17:43.800 a kind of in a strong macro trading environment that 0:17:43.840 --> 0:17:46.920 they are lagging slightly. So it probably put consumer discretion 0:17:46.960 --> 0:17:49.879 we have of both XLF and actively here. What do 0:17:49.880 --> 0:17:52.679 you make of the destruction we've seen in the bond market. 0:17:52.720 --> 0:17:55.400 I mean it's been the worst quarter for global bonds 0:17:55.960 --> 0:18:01.639 in my lifetime. Um, what does that mean. It's brutal, 0:18:01.680 --> 0:18:03.640 isn't it. It's really brutal, and I think it's only 0:18:03.640 --> 0:18:05.680 now be challenged by the end um. They've seen the 0:18:05.800 --> 0:18:08.080 last couple of trading days and the two are fighting 0:18:08.160 --> 0:18:12.680 between them. UM. I think the thing is with the 0:18:12.720 --> 0:18:15.560 bond bear market is I think on this occasion now, 0:18:15.600 --> 0:18:18.119 a lot of people are making good money on it. Um. 0:18:18.160 --> 0:18:20.680 I think if you look at the commitment of traders stuff, 0:18:20.680 --> 0:18:21.880 you look at a lot of the kind of cell 0:18:22.040 --> 0:18:26.800 side positioning surveys. You know, it's been easy to make 0:18:26.840 --> 0:18:30.879 a bare res duration argument for some months now. So 0:18:30.920 --> 0:18:34.840 I think performance stats for your typical multi asset fund 0:18:35.440 --> 0:18:37.760 will actually be pretty decent. And yes, the price action 0:18:37.880 --> 0:18:41.320 is horrible, UM, but I don't think everyone will be chronic. 0:18:42.480 --> 0:18:45.040 All right here, thanks so much for joining us. Love 0:18:45.040 --> 0:18:47.360 getting your thoughts there. Hugh Robert's head of analytics at 0:18:47.440 --> 0:18:55.320 quant Insights. All right, let's go to Christie Why because 0:18:55.320 --> 0:18:58.320 I want to talk cyber security. We're seeing that continue 0:18:58.800 --> 0:19:03.359 to be a big issue for individuals, for corporations, for 0:19:03.680 --> 0:19:09.000 states slash countries. Christie Wyatt, CEO and president of Absolute Software, Christie, 0:19:09.000 --> 0:19:10.080 you know, we we kind of look at all the 0:19:10.080 --> 0:19:12.520 news coming out of Ukraine and Russia and you know, 0:19:12.640 --> 0:19:17.520 one of the areas where we're seeing some disputes in cybersecurity, 0:19:17.520 --> 0:19:22.119 cyber warfare. Just give us a sense kind of where 0:19:22.600 --> 0:19:26.960 the average American company or average American is in terms 0:19:27.000 --> 0:19:29.480 of dealing with cybersecurity. It seems like we're still many 0:19:29.480 --> 0:19:34.439 steps behind where the bad guys are. Well, sorry, excuse me, 0:19:34.480 --> 0:19:37.680 I think it's it's a great question, um, but I 0:19:37.720 --> 0:19:39.600 think we're always going to feel that way. I think 0:19:39.640 --> 0:19:42.680 that cyber is one of those risk landscapes where things 0:19:42.720 --> 0:19:44.840 are going to continuously evolve and we're always going to 0:19:44.920 --> 0:19:47.320 feel like we're just a little bit behind. I do 0:19:47.440 --> 0:19:51.919 think that the average enterprise in in the US that 0:19:51.960 --> 0:19:55.120 we see today is pretty well protected, meaning that they've 0:19:55.160 --> 0:19:58.359 been thoughtful about what kind of controls they need in place. 0:19:58.480 --> 0:20:01.120 I think the missing pieces do they have perfect visibility 0:20:01.160 --> 0:20:04.439 of whether those things, the technologies are actually installed in 0:20:04.480 --> 0:20:07.480 working and protecting them, especially now when we know that 0:20:07.520 --> 0:20:10.280 we're all sort of shields up right, we are all 0:20:10.520 --> 0:20:14.000 on standby waiting to see what happens. Yeah, exactly, Um, 0:20:14.040 --> 0:20:16.760 what what should I be doing? What should we all 0:20:16.800 --> 0:20:20.719 be doing? As you know private citizens? M Is there 0:20:20.720 --> 0:20:25.639 anything beyond two step verification? Oh? Gosh, the average the 0:20:25.640 --> 0:20:29.480 average enterprise UM business, so large business will start with them. 0:20:29.520 --> 0:20:32.159 You know, they have between ten and twenty security applications 0:20:32.240 --> 0:20:34.480 running on every computer that there are ways are using. 0:20:34.760 --> 0:20:37.800 So there's a lot more than multi factor authentication, and 0:20:37.880 --> 0:20:40.320 clearly the smaller the organization, the less of those you have. 0:20:40.720 --> 0:20:43.320 I would say there's really three things that you that 0:20:43.359 --> 0:20:45.480 we should be thinking about. First is have we been 0:20:45.480 --> 0:20:50.280 thoughtful about, um, what applications are appropriate for your side 0:20:50.280 --> 0:20:53.919 of business? Multi factor authentication? Encryption? The second thing is 0:20:54.480 --> 0:20:56.560 you know do do I know what I'm going to do? 0:20:56.600 --> 0:21:00.600 Is something that happens successful cyber attack? They're happening with 0:21:00.640 --> 0:21:03.720 phishing emails, things that a user clicks on, and so 0:21:03.960 --> 0:21:06.560 they're bound to happen no matter how much training you're doing. 0:21:06.960 --> 0:21:09.480 Do you know what you're going to do next? Um? 0:21:09.600 --> 0:21:11.199 And that leaves me to my third thing, which is 0:21:11.240 --> 0:21:13.159 just training. Have you talked to your employees. Have you 0:21:13.160 --> 0:21:15.359 talked to the people around to the people you care 0:21:15.400 --> 0:21:17.480 about and said, do you know what phishing looks was? 0:21:17.600 --> 0:21:19.640 Do you know what what bad things look like when 0:21:19.640 --> 0:21:21.800 they're happening? Will you recognize it? And will you know 0:21:22.359 --> 0:21:25.720 kind of what to do? So, I mean, one of 0:21:25.760 --> 0:21:27.600 the things that we've noticed as pandemic is people were 0:21:27.640 --> 0:21:30.440 spending a lot more time working from home, learning from home. 0:21:31.320 --> 0:21:34.720 It seems like there's more and more data information going 0:21:34.760 --> 0:21:39.240 into the clouds. The cloud inherently safe. Do you believe 0:21:41.280 --> 0:21:44.480 I think that. I mean, clearly, we would not see 0:21:44.480 --> 0:21:46.440 the migration of data into the cloud if we didn't 0:21:46.480 --> 0:21:48.840 feel comfortable with the level of security there. I don't 0:21:48.880 --> 0:21:53.560 think that's really where you're risks. Never say never, But 0:21:53.680 --> 0:21:56.320 the overwhelming number of attacks that we see are actually 0:21:56.320 --> 0:21:58.520 happening on the end points. They're happening on the computer 0:21:58.600 --> 0:22:01.280 that the user is using as a way to facilitate 0:22:01.320 --> 0:22:03.600 getting access to the data. And that data could be 0:22:03.640 --> 0:22:05.639 on the cloud, or in the data center, or on 0:22:05.640 --> 0:22:08.720 the computer itself. And so the endpoint is the place 0:22:08.800 --> 0:22:11.640 to focus. It is what people touch, and especially as 0:22:11.640 --> 0:22:15.000 you pointed out, because everybody's at home and so you 0:22:15.080 --> 0:22:19.240 have fewer layers of security available to you. You can't 0:22:19.400 --> 0:22:22.520 there's not network monitoring. These devices are not surrounded. They 0:22:22.520 --> 0:22:24.959 could be sitting on a home network, and so that 0:22:25.119 --> 0:22:27.720 user and those applications you're installing on that device on 0:22:27.800 --> 0:22:31.800 your last line of defense. It does seem like it's 0:22:31.880 --> 0:22:36.760 just gonna be too easy. I mean, I've I, you know, 0:22:37.240 --> 0:22:41.800 watch for this stuff and nonetheless have been either scammed 0:22:41.880 --> 0:22:46.240 or almost scammed like two or three times this quarter. Um, 0:22:46.920 --> 0:22:49.520 they're just so good, they're so good at it. You know, 0:22:49.560 --> 0:22:54.680 I had a for example, I had a call from 0:22:54.880 --> 0:22:58.760 purportedly Verizon. They knew my name, my address, they asked 0:22:58.760 --> 0:23:02.520 for my sociald A uh, you know, the last four 0:23:02.560 --> 0:23:05.119 digits of course, and they knew exactly how much my 0:23:05.200 --> 0:23:09.240 bill was to the penny at that moment. So they 0:23:09.560 --> 0:23:11.800 clearly they have access to data and then they use 0:23:11.840 --> 0:23:13.960 it to get that That's not the kind of attack. 0:23:14.000 --> 0:23:15.800 I guess we're concerned about what do you think the 0:23:15.840 --> 0:23:19.239 Russians will be able to do if they hit us 0:23:19.240 --> 0:23:22.920 as hard as they can. So if someone was going 0:23:22.960 --> 0:23:26.440