1 00:00:13,800 --> 00:00:17,000 Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast. 2 00:00:17,120 --> 00:00:19,840 Speaker 1: My name is Mike Regan. I'm a senior editor at Bloomberg, 3 00:00:19,920 --> 00:00:23,239 Speaker 1: and I'm Veldona Hire, across asset reporter with Bloomberg. And 4 00:00:23,440 --> 00:00:25,799 Speaker 1: this week on the show, Well, anyone who has spent 5 00:00:25,960 --> 00:00:29,680 Speaker 1: any time really studying the stock market is probably familiar 6 00:00:29,720 --> 00:00:33,360 Speaker 1: with the old cliche sell in May and go away 7 00:00:33,800 --> 00:00:37,880 Speaker 1: and come back on Saint Leger's Day. That's September fifteenth 8 00:00:37,920 --> 00:00:42,800 Speaker 1: for those who aren't familiar with their sixteenth century English saints. Well, 9 00:00:42,920 --> 00:00:44,920 Speaker 1: May's only a couple of weeks away, and the stock 10 00:00:44,960 --> 00:00:47,279 Speaker 1: market has gotten off to a rip roaring start this year, 11 00:00:47,400 --> 00:00:49,520 Speaker 1: So is this a good year to follow that old 12 00:00:49,560 --> 00:00:52,920 Speaker 1: advice in the cliche? We'll talk to a market strategist 13 00:00:52,960 --> 00:00:55,760 Speaker 1: who says, hey, don't wait, sell now. He'll explain why 14 00:00:55,800 --> 00:00:58,600 Speaker 1: he's expecting a drop of as much as about twenty 15 00:00:58,600 --> 00:01:02,240 Speaker 1: two percent from current level in the SMP five hundred. 16 00:01:02,800 --> 00:01:06,280 Speaker 1: But first, Phil though, I have to ask ask away. 17 00:01:06,400 --> 00:01:07,840 Speaker 1: You know it's going to be a strange one. When 18 00:01:08,920 --> 00:01:12,040 Speaker 1: have you ever owned a pair of Air Jordan's? No, no, 19 00:01:12,800 --> 00:01:15,640 Speaker 1: but they're very trendy now, even if you don't play hoops. No. 20 00:01:15,800 --> 00:01:17,440 Speaker 1: I used to buy him when I when I was 21 00:01:17,480 --> 00:01:21,360 Speaker 1: still a basketball just because the idea is, like you, 22 00:01:21,880 --> 00:01:24,200 Speaker 1: they'll make you a better player. Well they're good, yeah, 23 00:01:24,240 --> 00:01:26,480 Speaker 1: they're good basketball sneakers. No, but they're trending now just 24 00:01:26,560 --> 00:01:29,080 Speaker 1: as a fashion item and in fact, shout out to 25 00:01:29,480 --> 00:01:35,160 Speaker 1: Mario DeAngelo. Frequent listener Penn Palavars who pointed out a 26 00:01:35,200 --> 00:01:37,319 Speaker 1: crazy thing for this week. It's not my crazy thing. 27 00:01:37,520 --> 00:01:40,080 Speaker 1: Oh good, because I saw it. You did, Yeah, I know. 28 00:01:40,160 --> 00:01:41,880 Speaker 1: That's why. It's not because I knew you knew the 29 00:01:41,880 --> 00:01:44,400 Speaker 1: press because he sent it to me to a pair 30 00:01:44,480 --> 00:01:46,560 Speaker 1: of they well it's this is a BBC story, So 31 00:01:46,640 --> 00:01:49,120 Speaker 1: they called him trainers. I'd have never heard Air Jordan's 32 00:01:49,200 --> 00:01:53,000 Speaker 1: referred to as trainers except in the BBC, but pair 33 00:01:53,040 --> 00:01:56,800 Speaker 1: of trainers once worn by basketball legend Michael Jordan himself. 34 00:01:56,800 --> 00:02:00,000 Speaker 1: So Aired Jordan's worn in a game by Air Jordan's 35 00:02:00,040 --> 00:02:04,000 Speaker 1: himself sold for two point two million at auction, which 36 00:02:04,040 --> 00:02:05,920 Speaker 1: sounds like a lot, but it's actually less than what 37 00:02:06,200 --> 00:02:09,880 Speaker 1: they were expecting, which I think is a bearish signal. 38 00:02:10,000 --> 00:02:14,760 Speaker 1: Oh signal. Wow? Maybe. Well we've been waiting for this, 39 00:02:14,880 --> 00:02:18,400 Speaker 1: right like it's always some obnoxious number every time we 40 00:02:19,320 --> 00:02:22,000 Speaker 1: are thinking about like auctions, they were expected to go 41 00:02:22,000 --> 00:02:25,960 Speaker 1: as high as four million two point two. So I 42 00:02:26,000 --> 00:02:28,320 Speaker 1: think that's a good segue to our guest, who's a 43 00:02:28,360 --> 00:02:30,880 Speaker 1: little bit in the bearish camp, even though it is. Yeah, 44 00:02:30,919 --> 00:02:33,720 Speaker 1: I think our first guest ever to join us from Honolulu, 45 00:02:33,840 --> 00:02:35,880 Speaker 1: So yeah, I think he might be. I'm so jealous 46 00:02:35,919 --> 00:02:38,120 Speaker 1: of him. Hard to be too pessimistic in Honolulu and 47 00:02:38,160 --> 00:02:41,079 Speaker 1: he's there for a conference, Like, do you think Bloomberg 48 00:02:41,080 --> 00:02:45,560 Speaker 1: would send us to Honolulu? It's maybe you probably not, Yeah, yeah, bye, 49 00:02:47,560 --> 00:02:49,640 Speaker 1: but I do want to bring him in. It's Troy Gayesky, 50 00:02:49,720 --> 00:02:53,080 Speaker 1: chief market strategist at FEST Investment. Troy, I've been wanting 51 00:02:53,080 --> 00:02:54,760 Speaker 1: to get you on the podcast for forever, So thank 52 00:02:54,800 --> 00:02:56,960 Speaker 1: you so much for joining us. Yeah, it's great to 53 00:02:56,960 --> 00:02:59,120 Speaker 1: be on. Looking forward to it. Yeah, I'm so happy 54 00:02:59,120 --> 00:03:00,880 Speaker 1: to have you on. So maybe just to start, you 55 00:03:00,880 --> 00:03:04,840 Speaker 1: can tell us about FS Investments. Yeah. So, FS Investments 56 00:03:05,080 --> 00:03:08,240 Speaker 1: was really founded by Michael Foreman with the mission to 57 00:03:08,280 --> 00:03:12,280 Speaker 1: democratize alternative investments and you know, bring strategies that had 58 00:03:12,320 --> 00:03:15,360 Speaker 1: only been available to the ultra altar, high net worth 59 00:03:15,480 --> 00:03:20,240 Speaker 1: individuals or you know mega institutions like CalPERS, or Yale's endowment, 60 00:03:20,720 --> 00:03:23,280 Speaker 1: and then take those strategies and package them in a 61 00:03:23,320 --> 00:03:27,400 Speaker 1: way that was readily accessible with much lower standards in 62 00:03:27,480 --> 00:03:30,680 Speaker 1: terms of size, in terms of liquidity, in terms of fees, 63 00:03:31,000 --> 00:03:34,960 Speaker 1: and so over time we've evolved from being mainly focused 64 00:03:35,000 --> 00:03:38,280 Speaker 1: on middle market corporate lending package through BDCs, some of 65 00:03:38,320 --> 00:03:41,760 Speaker 1: which are listed, to a broad suite of solutions that 66 00:03:41,880 --> 00:03:46,120 Speaker 1: range from daily liquid multi strategy funds packaged in a 67 00:03:46,200 --> 00:03:49,960 Speaker 1: mutual fund wrapper. We run the largest public non traded 68 00:03:50,440 --> 00:03:55,119 Speaker 1: senior security commercial real estate lending rate. We've recently combined 69 00:03:55,120 --> 00:03:58,880 Speaker 1: with Portfolio Advisors to bring private equity secondaries to individuals 70 00:03:59,560 --> 00:04:02,760 Speaker 1: in a user friendly way, so the mission of the 71 00:04:02,800 --> 00:04:06,200 Speaker 1: firm remains the same democketizing alternatives. We're just pleased and 72 00:04:07,200 --> 00:04:10,400 Speaker 1: feel very fortunate that, you know, these strategies are so 73 00:04:10,480 --> 00:04:13,840 Speaker 1: timely in an environment like we're going now, and you know, 74 00:04:14,040 --> 00:04:16,160 Speaker 1: when when we think of last year, they're really five 75 00:04:16,160 --> 00:04:20,480 Speaker 1: alternative strategies that did well from credit reads, multi strts, 76 00:04:20,680 --> 00:04:25,200 Speaker 1: equity reads, perpetual BDCs, and managed future CTAs, and two 77 00:04:25,240 --> 00:04:28,200 Speaker 1: of them have a richer opportunities set in twenty three 78 00:04:28,200 --> 00:04:30,479 Speaker 1: than twenty two, and those happen to be two of 79 00:04:30,480 --> 00:04:35,559 Speaker 1: our flagship alternative solutions. So we're somewhat fortunate, somewhat lucky, 80 00:04:35,640 --> 00:04:38,400 Speaker 1: but we think the business model has served our clients 81 00:04:38,400 --> 00:04:42,920 Speaker 1: and ourselves. Well, well try, let's talk about that idea 82 00:04:43,279 --> 00:04:46,000 Speaker 1: that the market is sort of due for a come up. 83 00:04:46,040 --> 00:04:48,480 Speaker 1: And so you sent us some notes before the podcast 84 00:04:48,520 --> 00:04:51,320 Speaker 1: in so you see a scenario where the SMP could 85 00:04:51,360 --> 00:04:54,760 Speaker 1: drop as low as thirty two hundred twenty something percent 86 00:04:54,920 --> 00:04:57,480 Speaker 1: dropped from here, is the selling may work this year? 87 00:04:57,520 --> 00:05:01,239 Speaker 1: I guess? Is the question? Yeah, it be incredibly stunning 88 00:05:01,279 --> 00:05:03,880 Speaker 1: if if selling in May, or selling prior to May, 89 00:05:03,960 --> 00:05:07,120 Speaker 1: like I said, note, there's there's no reason to wait. 90 00:05:07,200 --> 00:05:08,960 Speaker 1: You know, it's not like you're gonna leave ten percent 91 00:05:08,960 --> 00:05:12,040 Speaker 1: off side on the table. Doesn't work out. And if 92 00:05:12,080 --> 00:05:15,240 Speaker 1: you think about, first of all, the strongest rallies have 93 00:05:15,320 --> 00:05:17,760 Speaker 1: always been in bear markets, right, Bear marker rallies are 94 00:05:17,800 --> 00:05:21,320 Speaker 1: nothing new. They happen all the time. Usually they're driven 95 00:05:21,360 --> 00:05:25,200 Speaker 1: by technical factors, and then there's a narrative that's put 96 00:05:25,240 --> 00:05:29,039 Speaker 1: together to justify it. The more recent one was that, yeah, 97 00:05:29,120 --> 00:05:32,359 Speaker 1: like inflation is going to slow enough that the Fed 98 00:05:32,640 --> 00:05:35,479 Speaker 1: won't have to hike anymore, and then we're gonna have 99 00:05:35,520 --> 00:05:38,120 Speaker 1: a recession and somehow that's going to cause the FED 100 00:05:38,200 --> 00:05:42,720 Speaker 1: to cut rapidly. But recessions aren't bad for revenue or earnings, 101 00:05:42,839 --> 00:05:45,640 Speaker 1: and it really makes very little sense. So ultimately, if 102 00:05:45,640 --> 00:05:49,520 Speaker 1: you think of where we are, you know, multiples compressed 103 00:05:49,560 --> 00:05:52,240 Speaker 1: last year significantly, we got down to fifteen point seven 104 00:05:52,320 --> 00:05:55,600 Speaker 1: five times forward earnings. We've popped back up to let's 105 00:05:55,600 --> 00:05:58,479 Speaker 1: call it eighteen point four to eighteen point six. Let's 106 00:05:58,760 --> 00:06:01,480 Speaker 1: go at the rosiest sum that we've bottomed in terms 107 00:06:01,480 --> 00:06:05,320 Speaker 1: of multiples, because multiples tend to bottom before earnings. And 108 00:06:05,400 --> 00:06:07,880 Speaker 1: if you look forward and just take eighteen point six 109 00:06:08,000 --> 00:06:11,839 Speaker 1: down to call it sixteen or seventeen times trough earnings 110 00:06:11,880 --> 00:06:14,240 Speaker 1: at two hundred, that gets you to that thirty two 111 00:06:14,240 --> 00:06:16,960 Speaker 1: to thirty four hundred. And that makes a lot of 112 00:06:17,000 --> 00:06:21,640 Speaker 1: sense to us, just from a historical analysis perspective, when 113 00:06:21,880 --> 00:06:25,560 Speaker 1: we've always thought that this bear market would be meaningfully 114 00:06:25,560 --> 00:06:28,320 Speaker 1: worse than the twenty eighteen correction or some of those 115 00:06:28,360 --> 00:06:32,320 Speaker 1: shocks we had in the post GFC period, but not 116 00:06:32,480 --> 00:06:35,480 Speaker 1: as bad as we had from two thousand oh two 117 00:06:35,640 --> 00:06:38,560 Speaker 1: and also the financial crisis, and so we always thought 118 00:06:38,560 --> 00:06:43,200 Speaker 1: thirty to forty percent was a rational range Obviously that 119 00:06:43,720 --> 00:06:46,360 Speaker 1: math on sixteen to seventy times trough earnings. The two 120 00:06:46,440 --> 00:06:48,800 Speaker 1: hundred takes us down about twenty nine to thirty three 121 00:06:49,240 --> 00:06:52,440 Speaker 1: from the peak in the beginning of twenty twenty two 122 00:06:52,800 --> 00:06:55,880 Speaker 1: before things got really ugly. And so bottom line is, 123 00:06:56,480 --> 00:06:59,720 Speaker 1: if you're an investor today and you have still elevated 124 00:06:59,800 --> 00:07:03,599 Speaker 1: level abate in your portfolio, you haven't gotten the message 125 00:07:03,680 --> 00:07:08,600 Speaker 1: yet that bear markets occur, they don't end magically overnight. 126 00:07:08,839 --> 00:07:12,120 Speaker 1: This is a golden opportunity to use this bear market 127 00:07:12,200 --> 00:07:16,320 Speaker 1: rally to de risk in advance of potentially very painful 128 00:07:16,320 --> 00:07:19,000 Speaker 1: losses over the next six, nine to twelve months. And 129 00:07:19,520 --> 00:07:22,920 Speaker 1: you know, this is a side topic, but it completely 130 00:07:23,040 --> 00:07:27,520 Speaker 1: stuns me still at how much inertia there is an 131 00:07:27,520 --> 00:07:32,400 Speaker 1: acid allocation, and how even when faced with clear evidence 132 00:07:32,480 --> 00:07:35,760 Speaker 1: that the risk reward of equities is poor, there's very 133 00:07:35,760 --> 00:07:39,560 Speaker 1: little capital that flows out into strategies that actually have 134 00:07:39,600 --> 00:07:41,640 Speaker 1: a fighting chance to make you five to eight percent 135 00:07:41,720 --> 00:07:44,200 Speaker 1: instead of potentially losing you know, fifteen to twenty five. 136 00:07:44,600 --> 00:07:46,320 Speaker 1: So I think if I were to take sort of 137 00:07:46,320 --> 00:07:51,240 Speaker 1: the side of the bulls out there today, they would say, well, 138 00:07:51,320 --> 00:07:55,000 Speaker 1: you know, inflation is coming down. I think the CPI 139 00:07:55,080 --> 00:07:58,320 Speaker 1: print this week was what five percent versus six percent 140 00:07:58,760 --> 00:08:02,960 Speaker 1: last month something like that, And that FED reaction function 141 00:08:03,680 --> 00:08:08,960 Speaker 1: to Silicon Valley Bank and Signature Bank was so lightning quick. 142 00:08:09,000 --> 00:08:14,080 Speaker 1: They created that term lending facility, the discount windows open wide. 143 00:08:14,240 --> 00:08:18,120 Speaker 1: They're sort of reintroducing liquidity, expending their balance sheet again. 144 00:08:18,640 --> 00:08:20,440 Speaker 1: You know, I think they boils down to the kids 145 00:08:20,480 --> 00:08:23,040 Speaker 1: on Twitter would say the money printers going bar again, 146 00:08:23,120 --> 00:08:27,640 Speaker 1: you know, which is a very obviously an oversimplified reason 147 00:08:27,720 --> 00:08:31,200 Speaker 1: to be bullish for stocks. But nonetheless, there's a lot 148 00:08:31,240 --> 00:08:35,160 Speaker 1: of believers in that that notion that the you know, 149 00:08:35,920 --> 00:08:37,720 Speaker 1: maybe we get one or two more rate hikes from 150 00:08:37,720 --> 00:08:40,720 Speaker 1: the Fed, but that balance sheet is open for business again. 151 00:08:40,920 --> 00:08:43,440 Speaker 1: How do you sort of respond to that bullish take 152 00:08:43,920 --> 00:08:46,959 Speaker 1: these days? Yeah. Look, so we've always said throughout this 153 00:08:46,960 --> 00:08:51,120 Speaker 1: period that, you know, the probability of the FED cutting 154 00:08:51,200 --> 00:08:55,920 Speaker 1: significantly or reprinting money was exceptionally low until they broke 155 00:08:56,000 --> 00:09:00,839 Speaker 1: things right and real things, and so obviously you had 156 00:09:00,840 --> 00:09:04,160 Speaker 1: some poorly managed banks in terms of asset liability, mismatch 157 00:09:04,520 --> 00:09:07,960 Speaker 1: in terms of duration, and they did respond. And that's why, 158 00:09:08,280 --> 00:09:11,280 Speaker 1: quite frankly, up until last week's data came out on 159 00:09:11,320 --> 00:09:14,400 Speaker 1: the FED reshrinking their balance sheet. We kind of moved 160 00:09:14,400 --> 00:09:17,640 Speaker 1: from a narrative of all right, it's clear that money 161 00:09:17,640 --> 00:09:21,280 Speaker 1: supplies contracting at the fastest pace in history, balance sheets 162 00:09:21,320 --> 00:09:24,520 Speaker 1: being drained. Fed's got, you know, at least two hikes 163 00:09:24,559 --> 00:09:26,439 Speaker 1: at that point, maybe three to four left in him. 164 00:09:27,080 --> 00:09:29,920 Speaker 1: Everything's going down. And then for a brief window of 165 00:09:30,040 --> 00:09:34,440 Speaker 1: time you moved to like, is the FED doing QE 166 00:09:34,480 --> 00:09:37,760 Speaker 1: while they're doing qt can you hike at the front 167 00:09:37,880 --> 00:09:40,400 Speaker 1: end while expanding the balance sheet? What does this mean 168 00:09:40,440 --> 00:09:42,920 Speaker 1: for money supply? What does this mean for the four 169 00:09:43,040 --> 00:09:47,320 Speaker 1: trajectory of multiples? But then, of course, now that we 170 00:09:47,400 --> 00:09:49,360 Speaker 1: have more data, you've seen that the balance sheet just 171 00:09:49,400 --> 00:09:52,559 Speaker 1: started to shrink again, which obviously has negative ramifications for 172 00:09:52,679 --> 00:09:55,120 Speaker 1: money supply. The FED will more than like the only 173 00:09:55,160 --> 00:10:00,080 Speaker 1: hike one to two more times. But advocating that the 174 00:10:00,160 --> 00:10:03,160 Speaker 1: Fed is going to come to the rescue prior to 175 00:10:03,240 --> 00:10:07,040 Speaker 1: having more downside pain in the economy and markets, we 176 00:10:07,120 --> 00:10:09,760 Speaker 1: think is very naive at this stretch of the game. 177 00:10:10,280 --> 00:10:13,360 Speaker 1: And you do have to give the Fed, FDIC and 178 00:10:13,400 --> 00:10:17,280 Speaker 1: Treasury a lot of credit. Obviously missed the problem, but 179 00:10:17,320 --> 00:10:20,439 Speaker 1: they addressed it very rapidly, and it does look like 180 00:10:20,679 --> 00:10:24,240 Speaker 1: they've so far ring fenced the problem in a number 181 00:10:24,280 --> 00:10:27,480 Speaker 1: of problematic banks but kept the system rather safe. So, 182 00:10:27,920 --> 00:10:30,400 Speaker 1: you know, I think we've really for two or three 183 00:10:30,400 --> 00:10:34,000 Speaker 1: weeks it was very confusing. You had conflicting narratives, you 184 00:10:34,000 --> 00:10:37,360 Speaker 1: had conflicting data on how this would play out. But 185 00:10:37,400 --> 00:10:40,120 Speaker 1: now it's back to the same path of shrinking balance 186 00:10:40,160 --> 00:10:42,320 Speaker 1: sheet several more, you know, one of the two more hikes, 187 00:10:42,760 --> 00:10:45,319 Speaker 1: and that just means multiples are way way too high. 188 00:10:45,800 --> 00:10:48,040 Speaker 1: And by the way, just to go from a historical perspective, 189 00:10:48,480 --> 00:10:50,439 Speaker 1: you know, when you go back to you know, let's 190 00:10:50,480 --> 00:10:52,680 Speaker 1: look and assume we bottomed at fifteen and a half 191 00:10:52,679 --> 00:10:56,240 Speaker 1: to sixteen times for earnings. Remember the multiple bottom in 192 00:10:56,280 --> 00:11:00,280 Speaker 1: the GFC was nine, right, so that's nowhere near the 193 00:11:00,320 --> 00:11:03,280 Speaker 1: pain that we saw then. And the multiple bottom coming 194 00:11:03,320 --> 00:11:06,040 Speaker 1: out of twenty two was fifteen. Right. We went from 195 00:11:06,080 --> 00:11:10,480 Speaker 1: twenty five times to fifteen. So in some ways, like 196 00:11:10,679 --> 00:11:14,240 Speaker 1: our board view, we don't even consider barish, We just 197 00:11:14,280 --> 00:11:18,400 Speaker 1: consider it like realistic, right, and arguing that in eighteen 198 00:11:18,480 --> 00:11:23,960 Speaker 1: or nineteen multiple is rational in this type of environment 199 00:11:24,080 --> 00:11:27,000 Speaker 1: makes very very little sense to us. I'm wondering what 200 00:11:27,040 --> 00:11:29,360 Speaker 1: you make We had the FED minutes come out this week, 201 00:11:29,400 --> 00:11:31,960 Speaker 1: and one of the headlines was the Fed. FED staff 202 00:11:32,000 --> 00:11:35,640 Speaker 1: is projecting a mild recession starting later in twenty twenty three. 203 00:11:35,679 --> 00:11:38,120 Speaker 1: Aren't we not supposed to hear from the FEDS saying 204 00:11:38,240 --> 00:11:43,840 Speaker 1: that they're expecting any type of downturn after some of 205 00:11:43,880 --> 00:11:48,959 Speaker 1: their missteps on describing inflation and as transitory. I give 206 00:11:48,960 --> 00:11:51,760 Speaker 1: them a lot of credit for being fairly honest and 207 00:11:51,800 --> 00:11:56,240 Speaker 1: straightforward that the end game here is a recession, right, 208 00:11:56,360 --> 00:11:59,240 Speaker 1: That's how you break inflation. There's really no other way 209 00:11:59,400 --> 00:12:01,920 Speaker 1: to get through this cycle and bring inflation down to 210 00:12:01,960 --> 00:12:04,600 Speaker 1: two or three percent, which is you know, their target 211 00:12:04,640 --> 00:12:06,920 Speaker 1: probably should be three now instead of two, but they're 212 00:12:06,920 --> 00:12:09,000 Speaker 1: still stuck on two. So that's where we're headed. And 213 00:12:09,400 --> 00:12:11,560 Speaker 1: you know, the way we describe that to investors is 214 00:12:11,880 --> 00:12:14,920 Speaker 1: we've really been mired in this ugly environment for quite 215 00:12:14,920 --> 00:12:17,840 Speaker 1: some time. And by ugly we mean, you know, inflation, simmering, 216 00:12:18,040 --> 00:12:21,720 Speaker 1: spreading to services and labor. FED has to hike a lot, 217 00:12:21,840 --> 00:12:25,240 Speaker 1: shrink the balance sheet, everything's going down. You know. The 218 00:12:25,280 --> 00:12:28,120 Speaker 1: good news is that we were certainly always going to 219 00:12:28,160 --> 00:12:30,800 Speaker 1: get out of that and not stay have a seventy 220 00:12:30,840 --> 00:12:34,319 Speaker 1: style stagflationary outcome. If for an other reason that money 221 00:12:34,360 --> 00:12:36,400 Speaker 1: supply was already shrinking and the FED was behind the 222 00:12:36,400 --> 00:12:39,240 Speaker 1: curve but caught up fast. But the bad news is, 223 00:12:39,960 --> 00:12:42,439 Speaker 1: as we leave the ugly, the next stop is almost 224 00:12:42,440 --> 00:12:44,840 Speaker 1: certainly what we call the bad which is a classic 225 00:12:44,880 --> 00:12:47,800 Speaker 1: old school recession. And you know, when you think of 226 00:12:47,960 --> 00:12:50,800 Speaker 1: what's kept this out of it so far, it's been 227 00:12:50,880 --> 00:12:55,120 Speaker 1: the remarkable resilience of the labor market and the US consumer, 228 00:12:55,120 --> 00:12:58,959 Speaker 1: which is basically single handedly kept the global economy afloat here. 229 00:12:59,480 --> 00:13:02,280 Speaker 1: And you know, as the labor market cracks, and we're 230 00:13:02,280 --> 00:13:05,280 Speaker 1: starting to see signs of that, particularly in withholding tax 231 00:13:05,400 --> 00:13:09,200 Speaker 1: data and layoffs move from you know, very high paying 232 00:13:09,240 --> 00:13:11,480 Speaker 1: tech jobs and to lesser extent financial services to the 233 00:13:11,480 --> 00:13:14,720 Speaker 1: broader economy, there just won't be enough support from consumption 234 00:13:14,760 --> 00:13:16,959 Speaker 1: to keep us out of recessions. So you know, that 235 00:13:17,080 --> 00:13:19,199 Speaker 1: is the next stop. You know, at this point, the 236 00:13:19,320 --> 00:13:22,480 Speaker 1: soonest we could see that is really late Q two, 237 00:13:22,520 --> 00:13:25,600 Speaker 1: early Q three of this year. The latest is Q 238 00:13:25,679 --> 00:13:28,520 Speaker 1: one of twenty four and then you know, kind of 239 00:13:28,559 --> 00:13:32,600 Speaker 1: circling back to the question on the bullish argument, in 240 00:13:32,640 --> 00:13:36,720 Speaker 1: some ways you could justify holding onto assets in a 241 00:13:36,760 --> 00:13:40,800 Speaker 1: meaningful way that have twenty percent downside if you thought 242 00:13:40,920 --> 00:13:43,360 Speaker 1: coming out of that, you know, hey, the next three years, 243 00:13:43,360 --> 00:13:47,439 Speaker 1: you're going to make eight. But remember, the next FED 244 00:13:47,520 --> 00:13:50,560 Speaker 1: cutting cycle is going to look a lot like the 245 00:13:50,559 --> 00:13:54,640 Speaker 1: mirror image of the last hiking cycle, where they hiked very, 246 00:13:54,720 --> 00:13:57,960 Speaker 1: very gingerly from fifteen to eighteen, and they did that 247 00:13:58,040 --> 00:14:01,040 Speaker 1: to make sure that they'd slayed the disinflation and deflation demon. 248 00:14:01,600 --> 00:14:05,640 Speaker 1: And this time again barring an apocalyptic economic ALcom or 249 00:14:05,679 --> 00:14:08,640 Speaker 1: market calamity, they're going to cut very very slowly. So 250 00:14:09,040 --> 00:14:12,640 Speaker 1: you're not going to see the multiple expansion from say, 251 00:14:12,679 --> 00:14:15,920 Speaker 1: you know, later this year early twenty four over the 252 00:14:15,920 --> 00:14:18,960 Speaker 1: next five six years that we saw from O nine 253 00:14:18,960 --> 00:14:20,640 Speaker 1: to twenty one. It'll be much more like the O 254 00:14:20,720 --> 00:14:23,920 Speaker 1: two to seven bull market, where he came into that 255 00:14:23,960 --> 00:14:26,440 Speaker 1: bull market at fifteen times borderings. You ended that bull 256 00:14:26,480 --> 00:14:35,280 Speaker 1: market at fifteen times sport. What is behind the rally 257 00:14:35,360 --> 00:14:37,440 Speaker 1: right now? Is it just that people are thinking about, 258 00:14:38,120 --> 00:14:41,280 Speaker 1: you know, the FED potentially pausing and or cutting rates 259 00:14:41,320 --> 00:14:44,360 Speaker 1: down the line, and how we square that with why 260 00:14:44,400 --> 00:14:47,320 Speaker 1: they'd be cutting rates to begin with, like something would 261 00:14:47,400 --> 00:14:53,240 Speaker 1: be bad happening with the economy right at the same time. Yeah, 262 00:14:53,720 --> 00:14:57,240 Speaker 1: So that again that it's been really stunning that you've 263 00:14:57,240 --> 00:15:01,480 Speaker 1: had folks articulated narrative that the FED will cut and 264 00:15:01,520 --> 00:15:05,360 Speaker 1: cut aggressively because we're going to have a recession and 265 00:15:05,400 --> 00:15:08,040 Speaker 1: that's somehow good for revenue and earnings, right, I mean, 266 00:15:08,080 --> 00:15:10,520 Speaker 1: like I just don't understand that for life of me. 267 00:15:10,600 --> 00:15:13,520 Speaker 1: And and I think this gets back to another point 268 00:15:13,640 --> 00:15:17,000 Speaker 1: of where you know, bear market rallies are typically driven 269 00:15:17,040 --> 00:15:22,120 Speaker 1: by technicals. Right, there's short covering starts, there's DAMA hedging 270 00:15:22,360 --> 00:15:26,560 Speaker 1: by options trading desks. Then you have systematic trend followers 271 00:15:26,640 --> 00:15:28,760 Speaker 1: or traders hop on, you know, the bear market rally 272 00:15:28,840 --> 00:15:31,760 Speaker 1: drives it higher. And then the industry And by industry, 273 00:15:31,800 --> 00:15:35,800 Speaker 1: I mean you know, strategists, CIOs, analysts try to figure 274 00:15:35,840 --> 00:15:38,640 Speaker 1: out a way to justify it. And sometimes that justification 275 00:15:38,680 --> 00:15:41,200 Speaker 1: makes no sense at all. And did you guys know 276 00:15:41,240 --> 00:15:44,560 Speaker 1: that you know, typically you know, recessions cause at least 277 00:15:44,600 --> 00:15:47,440 Speaker 1: the twenty percent drop and earnings all all we did 278 00:15:47,480 --> 00:15:50,400 Speaker 1: with our our math before was say ten percent drop, 279 00:15:50,800 --> 00:15:53,200 Speaker 1: which is a lot less than twenty So it certainly 280 00:15:53,240 --> 00:15:56,840 Speaker 1: could be could be worse. But yeah, the the idea 281 00:15:57,000 --> 00:16:00,520 Speaker 1: that a recession and a FED that's four to pivot 282 00:16:00,600 --> 00:16:05,280 Speaker 1: because of it late, we will drive a positive outcome 283 00:16:05,480 --> 00:16:09,200 Speaker 1: for equity markets is just borderline bizarre, you know. True. 284 00:16:09,240 --> 00:16:11,800 Speaker 1: I think one shoe that everyone seems to be waiting 285 00:16:12,480 --> 00:16:16,200 Speaker 1: to drop next is in the credit markets, and you know, 286 00:16:16,240 --> 00:16:18,880 Speaker 1: the supply of credit, and it's kind of a hard 287 00:16:18,960 --> 00:16:21,360 Speaker 1: thing to really gauge in real time. You know, the 288 00:16:21,480 --> 00:16:24,680 Speaker 1: FED reports, the H eight report and things like that 289 00:16:24,720 --> 00:16:27,520 Speaker 1: are usually a week or two old. The Senior Loan 290 00:16:27,560 --> 00:16:30,560 Speaker 1: Officer Survey. I think the next one's not till the 291 00:16:30,560 --> 00:16:33,800 Speaker 1: middle of May or something like that. How do you 292 00:16:33,880 --> 00:16:37,440 Speaker 1: look at sort of the conditions in the credit market 293 00:16:37,560 --> 00:16:40,440 Speaker 1: to determine whether they're tightening up in real time? And 294 00:16:40,560 --> 00:16:43,080 Speaker 1: is there any evidence yet that it's come. I mean, 295 00:16:43,120 --> 00:16:46,680 Speaker 1: obviously we've had all these rate hikes and the failure 296 00:16:46,760 --> 00:16:50,800 Speaker 1: of a few banks clearly must be making loan officers nervous. 297 00:16:50,840 --> 00:16:52,880 Speaker 1: You know, where are you? Is there any where you 298 00:16:52,920 --> 00:16:56,440 Speaker 1: can point to now and say it started or is 299 00:16:56,480 --> 00:16:59,720 Speaker 1: it still just kind of bracing for that to happen. Yeah, 300 00:16:59,760 --> 00:17:03,040 Speaker 1: So look, I think it really depends on the market. 301 00:17:03,560 --> 00:17:06,320 Speaker 1: I would go back to when you think about when 302 00:17:06,600 --> 00:17:09,560 Speaker 1: high yield and i G spreads started widen in like 303 00:17:09,680 --> 00:17:12,480 Speaker 1: Q one Q two of last year, It took until 304 00:17:12,560 --> 00:17:16,040 Speaker 1: May of last year for senior commercial estate lending spreads 305 00:17:16,119 --> 00:17:20,639 Speaker 1: start widening. Then it took until say August for middle 306 00:17:20,680 --> 00:17:24,439 Speaker 1: market corporate private loan spreads to start widening. And then 307 00:17:24,440 --> 00:17:27,000 Speaker 1: obviously in this risk on period, you've had spreads tightened 308 00:17:27,000 --> 00:17:29,879 Speaker 1: back in liquid markets. That hasn't happened yet in private 309 00:17:29,880 --> 00:17:33,040 Speaker 1: markets we don't expect it to, but more directly, and 310 00:17:33,119 --> 00:17:35,840 Speaker 1: this gets back to that confusing kind of narrative around 311 00:17:35,920 --> 00:17:38,480 Speaker 1: what was going on. For a three period. You saw 312 00:17:38,720 --> 00:17:41,520 Speaker 1: obviously the stresses in the banks during a time where 313 00:17:41,560 --> 00:17:45,320 Speaker 1: loan officers were already constraining credit creation, so credit standards 314 00:17:45,320 --> 00:17:48,359 Speaker 1: were already tightening, and then you got this pop up 315 00:17:48,440 --> 00:17:51,360 Speaker 1: in actually commercial bank lending, a really quick pop up, 316 00:17:51,840 --> 00:17:54,479 Speaker 1: and it's like, well, like, what the heck's going on here? Oh, 317 00:17:54,520 --> 00:17:57,639 Speaker 1: I get it. Everybody's drawn down revolvers, like grabbing cash 318 00:17:57,640 --> 00:18:01,000 Speaker 1: while they can, while they can, And then you know, 319 00:18:01,040 --> 00:18:03,320 Speaker 1: of course we expected that to roll over, and that's 320 00:18:03,320 --> 00:18:06,400 Speaker 1: exactly what's happened. Now that the past two weeks you're 321 00:18:06,560 --> 00:18:11,880 Speaker 1: directly seeing evidence of the banking situation in regional community 322 00:18:11,880 --> 00:18:15,560 Speaker 1: banks impacting broader commercial lending. So the big banks are 323 00:18:15,600 --> 00:18:17,920 Speaker 1: doing more but the smaller banks are doing far less. 324 00:18:18,400 --> 00:18:22,919 Speaker 1: And then you know, also from a mortgage availability standpoint, 325 00:18:23,560 --> 00:18:28,280 Speaker 1: you'd already seen agency rmbs spreads wide and dramatically because 326 00:18:28,280 --> 00:18:31,719 Speaker 1: the QT, which was further constraining funding to the housing market. 327 00:18:32,119 --> 00:18:34,879 Speaker 1: That's actually one of our we have a really unique 328 00:18:35,119 --> 00:18:38,199 Speaker 1: exposure in our multi strategy fund to take advantage of 329 00:18:38,240 --> 00:18:41,040 Speaker 1: that that we can maybe talk about later. But you're 330 00:18:41,080 --> 00:18:44,640 Speaker 1: certainly seeing now ample evidence right that credit conditions are tightening, 331 00:18:45,320 --> 00:18:50,960 Speaker 1: which further reinforces the concept of how in the world 332 00:18:51,320 --> 00:18:55,120 Speaker 1: can we possibly avoid recession the next six, nine, twelve months. 333 00:18:55,760 --> 00:18:59,440 Speaker 1: It's really mission impossible. You know, we always stop the probability, 334 00:18:59,480 --> 00:19:02,720 Speaker 1: the FED magically threading the needle and guiding us to 335 00:19:03,560 --> 00:19:05,160 Speaker 1: you know, a five or five and a half percent 336 00:19:05,240 --> 00:19:09,080 Speaker 1: unemployment without a recession was at tops was a ten 337 00:19:09,119 --> 00:19:13,480 Speaker 1: percent probability. Now it just looks, you know, virtually zero. 338 00:19:14,200 --> 00:19:16,800 Speaker 1: If we wanted to get a read through of the 339 00:19:17,280 --> 00:19:20,040 Speaker 1: what's happening in the wake of the turmoil with the 340 00:19:20,080 --> 00:19:22,720 Speaker 1: banks in the stock market, do you think the small 341 00:19:22,760 --> 00:19:25,159 Speaker 1: cap space would be the place to look, with the 342 00:19:25,200 --> 00:19:29,600 Speaker 1: idea being that maybe smaller companies have less access to 343 00:19:30,280 --> 00:19:34,879 Speaker 1: banks and potentially maybe would also be a place where 344 00:19:35,160 --> 00:19:38,280 Speaker 1: we'd start to see some layoffs as a result of 345 00:19:38,280 --> 00:19:41,520 Speaker 1: the credit crunch. It's interesting you say that, because you know, 346 00:19:41,680 --> 00:19:46,840 Speaker 1: smid cap or small cap factor exposures, we're already really 347 00:19:46,920 --> 00:19:50,200 Speaker 1: cheap coming into the year relative to large omega, and 348 00:19:50,480 --> 00:19:53,120 Speaker 1: we actually had that factor trade on. But as soon 349 00:19:53,240 --> 00:19:55,840 Speaker 1: as the banking crisis started, it's like, all right, like 350 00:19:56,359 --> 00:19:59,000 Speaker 1: you know, cheap things can get cheaper, or relationships can 351 00:19:59,040 --> 00:20:00,840 Speaker 1: get more out of whack. We blew out of that 352 00:20:01,240 --> 00:20:06,360 Speaker 1: really quick, and ultimately what it does is it delays 353 00:20:06,920 --> 00:20:10,560 Speaker 1: any compression of that that spread, right, And that's again 354 00:20:10,640 --> 00:20:13,480 Speaker 1: when you think about just locally more, what's happened to 355 00:20:14,040 --> 00:20:17,720 Speaker 1: the Nasdaq or you know, Apple and Microsoft in particular, 356 00:20:17,840 --> 00:20:20,680 Speaker 1: you know, the last remaining you know, fangs that are 357 00:20:20,720 --> 00:20:24,879 Speaker 1: still performing as as you'd expect as growth companies that 358 00:20:24,880 --> 00:20:27,560 Speaker 1: aren't grossly overvalued. You know, a lot of that gets 359 00:20:27,560 --> 00:20:29,320 Speaker 1: back to the fact that you know, those have more 360 00:20:29,359 --> 00:20:32,280 Speaker 1: pristine balance sheets. And when you think about smaller cap 361 00:20:32,320 --> 00:20:36,960 Speaker 1: companies that are clearly more exposed to the domestic economy, 362 00:20:37,040 --> 00:20:40,200 Speaker 1: that are clearly more reliant upon you know, local small 363 00:20:40,240 --> 00:20:45,040 Speaker 1: bank financing, um, it's it's unlikely that death situation improves, 364 00:20:45,040 --> 00:20:47,639 Speaker 1: and you know, I would say one cross current to 365 00:20:47,720 --> 00:20:51,239 Speaker 1: that which is fascinating to us, uh, just given our 366 00:20:51,240 --> 00:20:54,280 Speaker 1: footprint and private credit, both in commercial real estate and 367 00:20:54,760 --> 00:20:58,760 Speaker 1: middle market corporate loans, is you know, the the window 368 00:20:59,119 --> 00:21:02,600 Speaker 1: now for private lenders to take market share from banks 369 00:21:02,960 --> 00:21:07,119 Speaker 1: at wider spreads. It has expanded far more than again 370 00:21:07,160 --> 00:21:09,600 Speaker 1: we would have imagined six weeks ago, right, and that 371 00:21:10,640 --> 00:21:13,800 Speaker 1: we expected banks to retrench they had been. We expected 372 00:21:13,960 --> 00:21:16,840 Speaker 1: better opportunities to service the needs of those that had 373 00:21:16,840 --> 00:21:21,560 Speaker 1: to roll loans. We'd already seen many companies doing what 374 00:21:21,640 --> 00:21:26,119 Speaker 1: I politely call bankruptcy prevention DIP loans to reduce the 375 00:21:26,200 --> 00:21:29,639 Speaker 1: risk of going bankrupt in the event of a recession. 376 00:21:30,680 --> 00:21:33,440 Speaker 1: And now that's just even escalating more. So you think 377 00:21:33,480 --> 00:21:36,520 Speaker 1: about like commercial real estate lending, there's about one point 378 00:21:36,520 --> 00:21:38,600 Speaker 1: eight trillion loans that are going to roll this year 379 00:21:38,640 --> 00:21:42,360 Speaker 1: in the next three years, and there's just less financing 380 00:21:42,400 --> 00:21:45,800 Speaker 1: options for those borrowers, and so that creates a better 381 00:21:45,840 --> 00:21:49,320 Speaker 1: opportunity if you have dry powder to lend into a 382 00:21:49,359 --> 00:21:52,760 Speaker 1: mini liquidity vacuum. And it's really the best time to 383 00:21:52,880 --> 00:21:56,120 Speaker 1: be a lender that we've seen since the global financial crisis. 384 00:21:56,520 --> 00:21:59,720 Speaker 1: And you know, fortunately that's one of the three silver 385 00:21:59,800 --> 00:22:03,200 Speaker 1: line things of this environment. We expect a recession. Obviously 386 00:22:03,240 --> 00:22:06,000 Speaker 1: the weakest links in the financial system were cracked, but 387 00:22:06,040 --> 00:22:08,840 Speaker 1: the system is still strong. I'd like to get into 388 00:22:08,880 --> 00:22:11,159 Speaker 1: that the idea of commercial real estate a little bit. 389 00:22:11,200 --> 00:22:13,800 Speaker 1: You know, you mentioned, uh you guys manage a real 390 00:22:13,880 --> 00:22:18,879 Speaker 1: estate investment trust, especially the property sector roets of or 391 00:22:18,960 --> 00:22:23,280 Speaker 1: the office rates h have I really just been annihilated 392 00:22:23,359 --> 00:22:26,080 Speaker 1: this year to the point where you know, it's gotten 393 00:22:26,119 --> 00:22:28,320 Speaker 1: so ugly that it starts looking pretty I think to 394 00:22:28,640 --> 00:22:31,359 Speaker 1: a lot of investors. You know, these yields are pretty 395 00:22:31,400 --> 00:22:37,000 Speaker 1: eye popping? Are there riets and commercial real estate investments 396 00:22:37,000 --> 00:22:39,239 Speaker 1: in general? Where there's you know, babies being thrown out 397 00:22:39,280 --> 00:22:41,960 Speaker 1: with the bathwater right now? Are there are certain sectors, 398 00:22:42,000 --> 00:22:45,560 Speaker 1: certain areas that that are attractive to well? So I 399 00:22:45,600 --> 00:22:50,040 Speaker 1: think it really depends right for for our franchise word 400 00:22:50,080 --> 00:22:53,359 Speaker 1: senior lenders. So the markets coming to us, you had 401 00:22:53,400 --> 00:22:55,920 Speaker 1: this long period of time where you had the head 402 00:22:55,960 --> 00:22:58,960 Speaker 1: wind of uh, you know, front and rates were extremely 403 00:22:58,960 --> 00:23:02,040 Speaker 1: low and what we floating rate loans. So when the 404 00:23:02,080 --> 00:23:04,000 Speaker 1: Fed never hikes and then they hike a little, and 405 00:23:04,000 --> 00:23:06,400 Speaker 1: then they cut again and they cut back to zero, 406 00:23:06,480 --> 00:23:09,600 Speaker 1: you obviously don't have that same degree of income you'd expected. 407 00:23:09,680 --> 00:23:12,520 Speaker 1: And then in a world where you had money supply ballooning. 408 00:23:13,000 --> 00:23:18,160 Speaker 1: In general, spreads in every credit strategy we're tight relative 409 00:23:18,240 --> 00:23:22,760 Speaker 1: to a normalized environment. And obviously that's changed significantly. So 410 00:23:23,160 --> 00:23:28,120 Speaker 1: the opportunities to lend, particularly in multifamily or industrial where 411 00:23:28,119 --> 00:23:31,880 Speaker 1: the fundamentals look really good, it's just you know, spreads 412 00:23:31,880 --> 00:23:34,200 Speaker 1: were too tight or LTVs were higher than we would 413 00:23:34,200 --> 00:23:37,680 Speaker 1: have liked. You know, LTVs are dropping have dropped materially, 414 00:23:37,680 --> 00:23:39,760 Speaker 1: and spreads and wide and you know when you when 415 00:23:39,800 --> 00:23:43,800 Speaker 1: you think about you know, office specifically, So there's obviously 416 00:23:43,840 --> 00:23:47,959 Speaker 1: a big difference between small footprint secondary tertiary you know 417 00:23:48,000 --> 00:23:50,800 Speaker 1: cities and in u in the Sun Belt or in 418 00:23:50,840 --> 00:23:53,960 Speaker 1: the Smile States and major metro you know, office in 419 00:23:54,000 --> 00:23:57,239 Speaker 1: New York, San Francisco, Chicago. The way we see that 420 00:23:57,320 --> 00:24:00,200 Speaker 1: playing out, and we've been articulated this for about eighteen months, 421 00:24:00,320 --> 00:24:02,560 Speaker 1: is it's going to be a repeat of the slow 422 00:24:02,600 --> 00:24:05,000 Speaker 1: motion train wreck that we had in Bricks and Water retail. 423 00:24:05,040 --> 00:24:08,919 Speaker 1: All right, So Brisonmwatar Retail was a real credit concern, 424 00:24:09,000 --> 00:24:12,800 Speaker 1: a real owner operator concern for for years and you know, 425 00:24:13,000 --> 00:24:17,360 Speaker 1: ultimately that cured itself with a surprisingly low amount of losses. 426 00:24:18,480 --> 00:24:21,960 Speaker 1: But major metro office, as you know, it's very difficult 427 00:24:22,040 --> 00:24:26,520 Speaker 1: to repurpose major towers into multi family giving the footprints, 428 00:24:27,440 --> 00:24:29,879 Speaker 1: and there's just going to be a submistantial amount of 429 00:24:29,880 --> 00:24:35,040 Speaker 1: wealth destroyed by owner operators. I'd say we'd be cautious 430 00:24:35,400 --> 00:24:39,040 Speaker 1: on trying to play any short term bounce in any 431 00:24:39,280 --> 00:24:43,199 Speaker 1: equity read that's listed as we're going into a session, 432 00:24:43,760 --> 00:24:47,000 Speaker 1: but clearly as that happens, yields will go even higher, 433 00:24:47,560 --> 00:24:50,440 Speaker 1: and at some point, you know, two to three years 434 00:24:50,440 --> 00:24:53,480 Speaker 1: from now, we'll start to see real estate broadly rebound 435 00:24:53,640 --> 00:24:57,479 Speaker 1: at least stabilize at a lower valuation. So we're always 436 00:24:57,480 --> 00:25:00,760 Speaker 1: ones to say, in an environment like this, what you 437 00:25:00,800 --> 00:25:02,960 Speaker 1: really want to do is focus on strategies that have 438 00:25:03,119 --> 00:25:06,160 Speaker 1: a bright opportunity that happened to have gotten at least 439 00:25:06,160 --> 00:25:08,200 Speaker 1: slightly better because of what's going on in the banking 440 00:25:08,200 --> 00:25:11,040 Speaker 1: system and financial markets, as opposed to trying to be 441 00:25:11,080 --> 00:25:15,359 Speaker 1: a hero in time of bottom in any particular security 442 00:25:15,480 --> 00:25:18,600 Speaker 1: or asset class that could have meaningfully more downside from here. 443 00:25:19,080 --> 00:25:20,960 Speaker 1: That's interesting, So you think it could be another two 444 00:25:20,960 --> 00:25:23,600 Speaker 1: to three years before we really see the bottom in 445 00:25:24,440 --> 00:25:27,720 Speaker 1: office rates, especially, I asked, because we had a headline 446 00:25:27,760 --> 00:25:32,400 Speaker 1: out today JP Morgan orders all managing directors back into 447 00:25:32,400 --> 00:25:35,000 Speaker 1: the office five days a week. Is it not return 448 00:25:35,080 --> 00:25:37,679 Speaker 1: to work alone is not enough to solve the issue 449 00:25:37,680 --> 00:25:41,119 Speaker 1: with office rates in the short term, I guess, well, again, 450 00:25:41,280 --> 00:25:45,560 Speaker 1: I don't want to speak specifically about any anyone security. Yeah, yeah, 451 00:25:46,119 --> 00:25:51,960 Speaker 1: But bottom line is, the trends of outward migration from 452 00:25:52,280 --> 00:25:56,000 Speaker 1: certain areas of the country had been in place for 453 00:25:56,080 --> 00:25:58,840 Speaker 1: quite some time. That was obviously amplified by the pandemic 454 00:25:59,520 --> 00:26:04,000 Speaker 1: in you know, return to work for certain mega institutions 455 00:26:04,040 --> 00:26:09,760 Speaker 1: alone won't necessarily cause any particular rebound evaluations that you 456 00:26:09,800 --> 00:26:12,639 Speaker 1: can point to with a great deal of specificity. I 457 00:26:12,680 --> 00:26:15,160 Speaker 1: would say, though, again, if you think of real estate broadly, 458 00:26:15,880 --> 00:26:18,600 Speaker 1: and we have this term called galactic meter version, where 459 00:26:18,920 --> 00:26:23,280 Speaker 1: you know, after years of outrageous asset out performance versus 460 00:26:23,280 --> 00:26:26,399 Speaker 1: the real economy and the labor market, you know, we 461 00:26:26,480 --> 00:26:29,159 Speaker 1: started to go through again, not another lost decade or 462 00:26:29,160 --> 00:26:31,000 Speaker 1: in nineteen sixty four to nineteen eighty two, but a 463 00:26:31,040 --> 00:26:35,280 Speaker 1: period where financial assets would would perform poorly and labor 464 00:26:35,320 --> 00:26:38,560 Speaker 1: market would be surprisingly resilient and that's actually played out 465 00:26:38,560 --> 00:26:41,320 Speaker 1: even better than we thought. But it wasn't just about 466 00:26:41,680 --> 00:26:44,320 Speaker 1: you know, financial assets. Real estate also had a hockey 467 00:26:44,320 --> 00:26:46,800 Speaker 1: stick like move. You know, Residential real estate you know, 468 00:26:46,880 --> 00:26:49,320 Speaker 1: up thirty five to forty two percent. Commercial you know, 469 00:26:49,760 --> 00:26:52,320 Speaker 1: not quite as much upside. And so naturally, when when 470 00:26:52,359 --> 00:26:55,120 Speaker 1: financing rates go up and borrowing costs go up, you're 471 00:26:55,160 --> 00:26:57,440 Speaker 1: going to have some degree of giveback. You know. Whenever 472 00:26:57,440 --> 00:26:59,920 Speaker 1: an asset class has a hockey stick like move, you know, 473 00:27:00,040 --> 00:27:02,159 Speaker 1: obviously you give back some of those gains. And and 474 00:27:02,200 --> 00:27:05,720 Speaker 1: so for broader real estate, whether it's rezzi or commercial, 475 00:27:06,359 --> 00:27:08,480 Speaker 1: all we're going through is a healthy correction, right, you're 476 00:27:08,480 --> 00:27:11,840 Speaker 1: taking out the access and valuations. The difference with major 477 00:27:11,880 --> 00:27:15,880 Speaker 1: metro office is that that's that's a sustained secular problem, right, 478 00:27:15,920 --> 00:27:19,439 Speaker 1: That's not like, hey, I probably overpaid for a multi 479 00:27:19,440 --> 00:27:22,480 Speaker 1: family property at the peak, and I'm gonna my IRR 480 00:27:22,600 --> 00:27:24,359 Speaker 1: is gonna be a lot lower the next seven years, 481 00:27:24,359 --> 00:27:26,800 Speaker 1: and I hope risk of default does not existent. I'm 482 00:27:26,840 --> 00:27:30,040 Speaker 1: just gonna make less money owning the property. Um, those 483 00:27:30,040 --> 00:27:33,600 Speaker 1: are areas where they will be realized losses to owner 484 00:27:33,640 --> 00:27:36,919 Speaker 1: operators that in some cases we'll bleed through into the 485 00:27:36,920 --> 00:27:55,240 Speaker 1: banking system. So in your notes you said tim your 486 00:27:55,240 --> 00:27:59,720 Speaker 1: equity exposure and embrace democratized alt because the time for 487 00:28:00,200 --> 00:28:03,639 Speaker 1: the right alts is still now. I'm wondering then what 488 00:28:03,680 --> 00:28:05,399 Speaker 1: you would put on that list of the right alts. 489 00:28:05,960 --> 00:28:08,280 Speaker 1: So there's really three silver lines of this environment. One 490 00:28:08,359 --> 00:28:12,000 Speaker 1: seventy style outcome was always a credibly low probability. It's 491 00:28:12,040 --> 00:28:15,639 Speaker 1: not existing now to repeat of a GFC, given how 492 00:28:15,680 --> 00:28:20,359 Speaker 1: strong underwriting standards have been. You know where the excess 493 00:28:20,400 --> 00:28:22,960 Speaker 1: liquidity is still in the banking system, not in every bank, 494 00:28:23,040 --> 00:28:24,959 Speaker 1: and in the banking system, you know stuff over three 495 00:28:25,040 --> 00:28:27,960 Speaker 1: trillion of excess slash total reserves versus forty to fifty 496 00:28:27,960 --> 00:28:31,040 Speaker 1: billion coming into GFC. But the third is that alternatives 497 00:28:31,040 --> 00:28:33,879 Speaker 1: have been democratized. Right, You didn't have fixed income to 498 00:28:33,960 --> 00:28:35,879 Speaker 1: protect the last year like you did in two thousand 499 00:28:35,880 --> 00:28:38,880 Speaker 1: and two or even the GFC, but you had a 500 00:28:38,920 --> 00:28:42,760 Speaker 1: series of democratized alternative strategies that actually performed really well 501 00:28:42,840 --> 00:28:45,960 Speaker 1: last year relative to markets. And you know those five 502 00:28:46,200 --> 00:28:51,800 Speaker 1: categories supplicitly not all inclusive, were credit reads, multi strategy funds, 503 00:28:52,280 --> 00:28:57,760 Speaker 1: equity reads, fully invested perpetual BDCs, and CTA's managed future. 504 00:28:57,880 --> 00:29:02,719 Speaker 1: So last year, those five groups all performed very well 505 00:29:02,960 --> 00:29:05,360 Speaker 1: relative to what was going on in fixed income and 506 00:29:05,400 --> 00:29:07,640 Speaker 1: equity markets, where it was a horror show, as you know. 507 00:29:07,720 --> 00:29:10,800 Speaker 1: So the difference this year and why we evolved the 508 00:29:10,840 --> 00:29:13,719 Speaker 1: message from the time for alts is now to the 509 00:29:13,720 --> 00:29:17,360 Speaker 1: time for the right alts is still now. Is of 510 00:29:17,400 --> 00:29:23,280 Speaker 1: those five strategies too, have we believe maturely better opportunities 511 00:29:23,880 --> 00:29:28,160 Speaker 1: to have a darker outlook. And the fifth it's not 512 00:29:28,360 --> 00:29:32,200 Speaker 1: necessarily that you're guaranteed to lose money. It's just the 513 00:29:32,320 --> 00:29:37,160 Speaker 1: history of client allocations to CTAs or trend following strategies 514 00:29:37,280 --> 00:29:40,560 Speaker 1: is people buy tops and sell bottoms, rinch, repeat, do 515 00:29:40,640 --> 00:29:43,160 Speaker 1: it again. Very very difficult to time. So you know, 516 00:29:43,520 --> 00:29:46,760 Speaker 1: multi strates at least we know have higher income now 517 00:29:47,440 --> 00:29:50,239 Speaker 1: than they did coming into twenty twenty two. So all 518 00:29:50,280 --> 00:29:52,240 Speaker 1: things being equal, if you can generate the same amount 519 00:29:52,240 --> 00:29:56,080 Speaker 1: of alpha, again it's an if not a guarantee, you're 520 00:29:56,120 --> 00:29:59,400 Speaker 1: starting with much higher cash flower carry, which should lead 521 00:29:59,400 --> 00:30:02,600 Speaker 1: to a higher toll return. In the case of credit reats, 522 00:30:02,640 --> 00:30:06,560 Speaker 1: you know you're lending it wider spreads earning higher yields 523 00:30:06,560 --> 00:30:09,800 Speaker 1: at lower LTVs. However, so those are the two that 524 00:30:09,960 --> 00:30:12,840 Speaker 1: we believe have a more positive outlook, and again we 525 00:30:13,320 --> 00:30:16,160 Speaker 1: think we're very fortunate as a firm to have two 526 00:30:16,160 --> 00:30:19,960 Speaker 1: of those as our flagship strategies right now, and then 527 00:30:20,120 --> 00:30:22,640 Speaker 1: to the two that have a darker outlook, at least 528 00:30:22,680 --> 00:30:25,320 Speaker 1: for the time being. Our equity reads where you know, 529 00:30:25,360 --> 00:30:29,240 Speaker 1: that was a story of income, small amounts of income, 530 00:30:29,280 --> 00:30:32,960 Speaker 1: but still reasonable income plus massive NAV appreciation that was 531 00:30:33,040 --> 00:30:35,760 Speaker 1: then goosed by some of the post pandemic measures by 532 00:30:35,760 --> 00:30:40,280 Speaker 1: the Fed and the fiscal stimulus. That's evolved to paltry 533 00:30:40,320 --> 00:30:44,440 Speaker 1: income with now NAB depreciation or to be mathematically correct, 534 00:30:44,720 --> 00:30:47,880 Speaker 1: less income plus NAB depreciation at least for the next 535 00:30:47,920 --> 00:30:50,600 Speaker 1: several years as the real estate market continues to decline 536 00:30:51,160 --> 00:30:54,479 Speaker 1: and then perpetual BDCs. The good news is income has 537 00:30:54,520 --> 00:30:56,840 Speaker 1: gone up more than you thought. The bad news is 538 00:30:56,840 --> 00:31:00,280 Speaker 1: you're going to have more marked market markdowns on owns 539 00:31:00,440 --> 00:31:04,360 Speaker 1: and also more realized loss. So again, not not the 540 00:31:04,400 --> 00:31:06,680 Speaker 1: end of the world, but not as rosy of an 541 00:31:06,720 --> 00:31:08,800 Speaker 1: outlook in twenty three and twenty four then he had 542 00:31:08,800 --> 00:31:11,840 Speaker 1: coming into twenty two. So you know, two of the 543 00:31:11,840 --> 00:31:14,680 Speaker 1: five we think look materially better, Two of the five 544 00:31:14,760 --> 00:31:18,360 Speaker 1: look at least modestly darker. In the fifth, it's just 545 00:31:18,440 --> 00:31:21,800 Speaker 1: more about client timing and investment in seeing so many 546 00:31:21,840 --> 00:31:25,800 Speaker 1: times people allocate to cincinac trend followers at the precise 547 00:31:25,840 --> 00:31:28,960 Speaker 1: wrong time, lose money, don't make money for a while, 548 00:31:29,040 --> 00:31:32,360 Speaker 1: redeem and then rinse, repeat And by the way, like 549 00:31:32,800 --> 00:31:35,120 Speaker 1: like a lot of the that's you could actually say 550 00:31:35,160 --> 00:31:37,800 Speaker 1: that just about every asset class, right, Like we're actually 551 00:31:37,840 --> 00:31:41,280 Speaker 1: looking at at private equity flows trying to get a 552 00:31:41,320 --> 00:31:44,560 Speaker 1: handle on how big the private equity secondary opportunity could be. 553 00:31:45,120 --> 00:31:47,760 Speaker 1: And it's just amazing that like seventy seventy seventy five 554 00:31:47,800 --> 00:31:51,240 Speaker 1: percent capital ever allocated to private equity was from eighteen 555 00:31:51,320 --> 00:31:55,000 Speaker 1: to twenty two, you know, when you had much higher evaluations, 556 00:31:55,360 --> 00:31:57,440 Speaker 1: much lower borrowing costs. Yeah. Have there been a lot 557 00:31:57,440 --> 00:32:01,560 Speaker 1: of inflows into your managed features strategy? No? So so 558 00:32:01,600 --> 00:32:04,719 Speaker 1: managed futures we do not. We have a very tiny 559 00:32:05,040 --> 00:32:08,040 Speaker 1: strategy that focuses on that. But the flows that had 560 00:32:08,080 --> 00:32:11,680 Speaker 1: come into managed futures as an industry were very robust 561 00:32:11,800 --> 00:32:15,320 Speaker 1: last year because the performance was very was very strong, 562 00:32:15,360 --> 00:32:19,200 Speaker 1: And I wonder are the are the trends just not 563 00:32:19,320 --> 00:32:21,560 Speaker 1: as well defined to this year and easy to follow? 564 00:32:21,600 --> 00:32:25,240 Speaker 1: Do you think? Yes? So the master thesis coming into 565 00:32:25,280 --> 00:32:29,960 Speaker 1: twenty three was it would be very difficult for markets 566 00:32:30,080 --> 00:32:32,640 Speaker 1: to replicate the degree of trending that you had in 567 00:32:32,680 --> 00:32:35,200 Speaker 1: twenty two. Right. It was just like you go through 568 00:32:35,240 --> 00:32:38,040 Speaker 1: O eight in early oh nine and then you get 569 00:32:38,080 --> 00:32:40,440 Speaker 1: into twenty ten to twenty twelve and you have more 570 00:32:40,520 --> 00:32:44,080 Speaker 1: range mound choppy, sloppy markets. So we thought from a 571 00:32:44,080 --> 00:32:47,480 Speaker 1: return expectation standpoint, you have to lower your return expectations. 572 00:32:48,040 --> 00:32:50,400 Speaker 1: That being said, we certainly didn't see them getting hit 573 00:32:50,480 --> 00:32:53,000 Speaker 1: to degree they have so far this year. The more 574 00:32:53,120 --> 00:32:55,959 Speaker 1: problematic issue is that you know it was setting up 575 00:32:56,160 --> 00:32:58,880 Speaker 1: for an exact repeat of what we've seen historically, where 576 00:32:59,280 --> 00:33:01,320 Speaker 1: you know you have great performance, you have the non 577 00:33:01,360 --> 00:33:05,560 Speaker 1: and eagle be correlated return profile. Everyone weaks up and says, oh, 578 00:33:05,600 --> 00:33:11,800 Speaker 1: we should allocate to this, and then they allocate. Yeah, yeah, yeah, 579 00:33:11,840 --> 00:33:17,800 Speaker 1: Well Troy Gaki, chief market strategists at FS Investments in Honolulu, 580 00:33:17,880 --> 00:33:21,400 Speaker 1: vill Donna Jealous meet Try and Honolulu to do the 581 00:33:21,640 --> 00:33:25,120 Speaker 1: he should have told us before. Come on, Trey next time. 582 00:33:25,760 --> 00:33:29,720 Speaker 1: Sorry about that. We can't let you go just yet. However, 583 00:33:29,760 --> 00:33:32,080 Speaker 1: we do have a tradition here on what goes up 584 00:33:32,160 --> 00:33:35,920 Speaker 1: where we're gonna have to hear about everyone's craziest thing 585 00:33:35,920 --> 00:33:38,600 Speaker 1: of the week. Holda, why don't you get it started? 586 00:33:38,880 --> 00:33:40,640 Speaker 1: I think this is the first time we're talking about this. 587 00:33:41,560 --> 00:33:44,000 Speaker 1: You and I are working on a new project. Yes, 588 00:33:44,640 --> 00:33:49,400 Speaker 1: and for that new project, the producers had to interview 589 00:33:49,760 --> 00:33:53,320 Speaker 1: our family members. Did that happen too too? They called 590 00:33:53,320 --> 00:33:56,160 Speaker 1: my sister they did. Yeah, so I want to give 591 00:33:56,160 --> 00:33:58,520 Speaker 1: a shout out to my sister Marilla who your sister 592 00:33:58,600 --> 00:34:01,040 Speaker 1: Marilla who? Since they interview her, she had to go 593 00:34:01,080 --> 00:34:02,600 Speaker 1: back and listen to a bunch of What Goes Up 594 00:34:02,640 --> 00:34:08,440 Speaker 1: episodes And now she is a crazy Craziest Things finder, Like, 595 00:34:09,360 --> 00:34:11,920 Speaker 1: I mean, the stuff she sends me is amazing, but 596 00:34:12,000 --> 00:34:13,960 Speaker 1: she always sends it like after the episode air, so 597 00:34:14,000 --> 00:34:15,680 Speaker 1: it's always too late. So I'm just gonna list a 598 00:34:15,680 --> 00:34:18,200 Speaker 1: few of the line A right, okay, Tesla made a 599 00:34:18,239 --> 00:34:23,879 Speaker 1: beer with cyber hoops, gigab beer b I er. Then 600 00:34:23,880 --> 00:34:27,080 Speaker 1: she sent me do you know the sore Aldi. Yeah, 601 00:34:27,120 --> 00:34:30,080 Speaker 1: they have like a clothing line now really yeah, it 602 00:34:30,160 --> 00:34:33,600 Speaker 1: looks kind of funky. Then she sent me Coca Cola 603 00:34:33,600 --> 00:34:37,160 Speaker 1: bottles with yellow caps because it denotes that they weren't 604 00:34:37,200 --> 00:34:41,480 Speaker 1: made with corn syrup, so that they're passover friendly. Okay, 605 00:34:41,719 --> 00:34:43,719 Speaker 1: she's just send me so much stuff, So I just 606 00:34:43,840 --> 00:34:46,560 Speaker 1: might have a new Crazy Things Chef correspondent. I think 607 00:34:46,600 --> 00:34:48,440 Speaker 1: we do. I mean she even went to Aldi and 608 00:34:48,480 --> 00:34:53,040 Speaker 1: took pictures of the stuff. Listeners can't see it, but anyway, 609 00:34:53,120 --> 00:34:58,600 Speaker 1: mine is New York City rats Are. The rats are 610 00:34:59,080 --> 00:35:01,120 Speaker 1: New York City rats Are. Is earning one hundred and 611 00:35:01,120 --> 00:35:03,719 Speaker 1: fifty five thousand dollars to lead the road in fight 612 00:35:04,400 --> 00:35:07,880 Speaker 1: not enough. I would double that. I mean, I'm interested 613 00:35:07,920 --> 00:35:10,759 Speaker 1: to see what happens. Like, he's got to get rid 614 00:35:10,800 --> 00:35:14,279 Speaker 1: of all the rats. She she she's got to get 615 00:35:14,360 --> 00:35:15,960 Speaker 1: rid of them. So that's is that a new possession 616 00:35:16,040 --> 00:35:18,160 Speaker 1: or is that a standing? No. Remember, they announced the 617 00:35:18,200 --> 00:35:21,120 Speaker 1: position a while ago, and they just hired this woman 618 00:35:21,160 --> 00:35:24,880 Speaker 1: who used to be the Department of Educations rat reduction. 619 00:35:25,520 --> 00:35:30,319 Speaker 1: She spearheaded a Department of Education rat reduction efforts. She's 620 00:35:30,360 --> 00:35:31,880 Speaker 1: got her work cut out for her. I don't know. 621 00:35:32,440 --> 00:35:35,279 Speaker 1: She might be a good podcast guest on that. Yeah, 622 00:35:35,320 --> 00:35:37,080 Speaker 1: I don't know, Trey, that's pretty good. I don't know. 623 00:35:37,160 --> 00:35:39,840 Speaker 1: It's nothing to do with markets, but well, it's a salary. 624 00:35:39,920 --> 00:35:41,400 Speaker 1: I was going to make a joke that it's like 625 00:35:41,480 --> 00:35:44,440 Speaker 1: one of the Jolts, you know, figures that had to 626 00:35:44,480 --> 00:35:49,359 Speaker 1: because they hired her. You know, the rat one hundred 627 00:35:49,400 --> 00:35:51,920 Speaker 1: and fifty grand not enough, not enough to handle all 628 00:35:51,920 --> 00:35:54,319 Speaker 1: the rats in New York City, couldn't pay you enough, Trey. 629 00:35:54,320 --> 00:35:56,359 Speaker 1: How about you? You You say anything crazy this week? Well, 630 00:35:56,360 --> 00:35:59,120 Speaker 1: I'll tell you I think the craziest thing has happened. 631 00:35:59,520 --> 00:36:03,680 Speaker 1: You know that was actionable recently. It's just, you know, 632 00:36:03,719 --> 00:36:07,759 Speaker 1: we already had these ridiculous levels of industry volatility, you know, 633 00:36:07,800 --> 00:36:11,600 Speaker 1: with an expectation that you know, at some point we'd 634 00:36:11,600 --> 00:36:14,319 Speaker 1: have a recession in you know, when you think about 635 00:36:14,360 --> 00:36:16,600 Speaker 1: what's been going on in the housing market, it's obviously 636 00:36:16,640 --> 00:36:21,680 Speaker 1: a downturn. And if you had asked me six weeks ago, 637 00:36:22,080 --> 00:36:25,560 Speaker 1: when I thought in versaios which I won't get into 638 00:36:25,719 --> 00:36:29,280 Speaker 1: all the complex description, but bottom line is they benefit 639 00:36:29,280 --> 00:36:32,760 Speaker 1: from a steeper eel curve and slower refinance activity would 640 00:36:32,800 --> 00:36:36,719 Speaker 1: start to perform even a shadow of what they did 641 00:36:36,960 --> 00:36:40,520 Speaker 1: from really O eight through twenty twelve. I never would 642 00:36:40,520 --> 00:36:43,800 Speaker 1: have guessed at But then it had the mini banking crisis, obviously, 643 00:36:43,800 --> 00:36:47,399 Speaker 1: the Ford curb reprices. Suddenly these securities that had very 644 00:36:47,400 --> 00:36:50,120 Speaker 1: little no cash flow have the potential to cash flow 645 00:36:50,440 --> 00:36:55,759 Speaker 1: pretty significantly. And so the massive levels of industry volatility 646 00:36:56,200 --> 00:37:00,400 Speaker 1: combined with a potential shift in FED direction, even a 647 00:37:00,440 --> 00:37:03,400 Speaker 1: mild one, just caused the value of those two to 648 00:37:03,520 --> 00:37:06,240 Speaker 1: go up dramatically. And it was just something we never 649 00:37:06,680 --> 00:37:09,960 Speaker 1: saw coming, you know, even six weeks ago. So it 650 00:37:10,040 --> 00:37:14,320 Speaker 1: was one of the few negatively chord expressions that really 651 00:37:14,680 --> 00:37:17,440 Speaker 1: showed up in terms of performance a lot faster than 652 00:37:17,440 --> 00:37:19,879 Speaker 1: we would have dreamed of. Interesting, I have to look 653 00:37:19,920 --> 00:37:22,640 Speaker 1: those up. Look those up on the terminal. All right, 654 00:37:23,040 --> 00:37:26,239 Speaker 1: you like alternative assets, tree, I got this is I 655 00:37:26,440 --> 00:37:31,719 Speaker 1: specialize in very very alternative assets. So here to hear it, 656 00:37:32,280 --> 00:37:36,120 Speaker 1: vil Dona. Are you familiar with the song Hot for 657 00:37:36,239 --> 00:37:40,080 Speaker 1: Teacher by Van Helen? No? No, no, really, no I 658 00:37:40,160 --> 00:37:44,839 Speaker 1: am it is, And I know we've seen the video 659 00:37:44,960 --> 00:37:47,440 Speaker 1: very It's a very good video. A lot of production 660 00:37:47,520 --> 00:37:49,719 Speaker 1: value in the video. I'll leave it at that, But um, 661 00:37:50,520 --> 00:37:53,960 Speaker 1: the guitar Eddie Van Helen was playing in that video, 662 00:37:54,080 --> 00:37:57,080 Speaker 1: it's like the red guitar with the white stripes across 663 00:37:57,120 --> 00:38:00,640 Speaker 1: it going up for sale at Southby. The Hot for 664 00:38:00,760 --> 00:38:05,840 Speaker 1: Teacher guitar. It's a Kramer guitar. It was made and 665 00:38:05,920 --> 00:38:11,560 Speaker 1: I think eight nineteen eighty two at the Kramer green 666 00:38:11,640 --> 00:38:16,719 Speaker 1: Grove Plant in Neptune, New Jersey. Wow, right near Asbury Park. Interesting, 667 00:38:16,719 --> 00:38:18,799 Speaker 1: which is something I did not know. It's gone up 668 00:38:18,800 --> 00:38:23,239 Speaker 1: for sale at Sotheby's. So it's time to play. The 669 00:38:23,360 --> 00:38:27,719 Speaker 1: prices precise, the prices precise, right, Tree, bad news, You're 670 00:38:27,760 --> 00:38:31,320 Speaker 1: now a game show contestant on our show. The prices precise, 671 00:38:31,680 --> 00:38:34,280 Speaker 1: I guess I'll phrase it this way. But this hasn't 672 00:38:34,280 --> 00:38:36,400 Speaker 1: gone up for sale, so we're dealing with the what 673 00:38:36,520 --> 00:38:39,680 Speaker 1: Sotheby's expects it to finish. So we'll go with the 674 00:38:39,760 --> 00:38:43,600 Speaker 1: high end. Okay, So the first question is do you 675 00:38:43,680 --> 00:38:46,520 Speaker 1: think more or less than those air Jordan's for two 676 00:38:46,560 --> 00:38:48,920 Speaker 1: point two million. I've never heard of this. I never 677 00:38:48,960 --> 00:38:52,200 Speaker 1: heard of Oh my god, no, got it bad? Got 678 00:38:52,239 --> 00:38:57,600 Speaker 1: it bad? No, come on, no, very famous song. My 679 00:38:57,640 --> 00:39:00,680 Speaker 1: guess is going to be so bad. What do you guess? 680 00:39:00,800 --> 00:39:04,480 Speaker 1: High end estimate for that Cramer guitar seventy five thousand 681 00:39:04,520 --> 00:39:10,279 Speaker 1: dollars seventy five thousand dollars, Tree, I'm going I'm gonna 682 00:39:10,320 --> 00:39:14,319 Speaker 1: go Tree, think of all those those heavy metal head 683 00:39:14,400 --> 00:39:19,439 Speaker 1: fans of ours. He's telling you to go higher. Yeah, 684 00:39:19,480 --> 00:39:22,000 Speaker 1: but hey, heavy metal guys, they have a lot of money. 685 00:39:22,000 --> 00:39:23,960 Speaker 1: I don't know, I don't know. Yeah, it's it's a 686 00:39:24,040 --> 00:39:28,320 Speaker 1: narrow market, right, yeah, it is. It is. You'll go higher, 687 00:39:28,320 --> 00:39:32,279 Speaker 1: You'll go seventy five thousand and one dollar. Yes, go high. 688 00:39:32,880 --> 00:39:38,239 Speaker 1: They're saying a three million million, Oh my god, two 689 00:39:38,280 --> 00:39:40,399 Speaker 1: to three million. Put it this way. The opening bid 690 00:39:40,600 --> 00:39:44,440 Speaker 1: is one point eight million dollars. So wow, just saying, Valdonna, 691 00:39:45,000 --> 00:39:47,720 Speaker 1: you know, if you're looking, I don't understand why present 692 00:39:47,760 --> 00:39:51,520 Speaker 1: for me for my next birthday? Your birthday just passed. 693 00:39:52,560 --> 00:39:56,239 Speaker 1: Your next birthday isn't for another year. All right, Well, 694 00:39:56,239 --> 00:39:58,120 Speaker 1: if it's still for sale, you don't want to get me. 695 00:39:58,400 --> 00:40:02,879 Speaker 1: Oh my gosh, I'll look this up. Sparash. He's only 696 00:40:02,880 --> 00:40:06,720 Speaker 1: going seventy five, but he won. So how for teacher 697 00:40:06,719 --> 00:40:08,560 Speaker 1: gets her? It's a lot of liquidity out there. Talk 698 00:40:08,600 --> 00:40:15,320 Speaker 1: about asset inflation. Yeah, anyway, try great to hear your thoughts. 699 00:40:15,560 --> 00:40:18,239 Speaker 1: He told us to sell may Maybe we'll bring you 700 00:40:18,280 --> 00:40:20,040 Speaker 1: back on Saint Ledger's Day to see how it went. 701 00:40:20,280 --> 00:40:23,720 Speaker 1: Let me think it goes. Yeah. Well, hey you guys, 702 00:40:24,040 --> 00:40:26,359 Speaker 1: great to be on. Thanks so much. Enjoy the rest 703 00:40:26,360 --> 00:40:29,319 Speaker 1: of your day, and I'm looking forward to get a 704 00:40:29,320 --> 00:40:31,840 Speaker 1: little surfing in while out here. Yeah, where that sound screening? 705 00:40:32,360 --> 00:40:40,480 Speaker 1: I will thank you Troy What Goes Up. We'll be 706 00:40:40,480 --> 00:40:43,200 Speaker 1: back next week. Until then, you can find us on 707 00:40:43,200 --> 00:40:46,879 Speaker 1: the Bloomberg Terminal website and app, or wherever you get 708 00:40:46,920 --> 00:40:49,279 Speaker 1: your podcast. We'd love it if you took the time 709 00:40:49,320 --> 00:40:51,719 Speaker 1: to rate and interview the show so more listeners can 710 00:40:51,760 --> 00:40:55,400 Speaker 1: find us. You can find us on Twitter, follow me 711 00:40:55,840 --> 00:41:00,239 Speaker 1: at Bildonna Hire. Mike Reagan is at Reaganonymous. You can 712 00:41:00,280 --> 00:41:04,880 Speaker 1: also follow Bloomer Podcasts at podcasts. What Goes Up is 713 00:41:04,880 --> 00:41:07,880 Speaker 1: produced by Stacy Wong, and our head of podcasts is 714 00:41:07,920 --> 00:41:10,680 Speaker 1: Sage Falman. Thanks so much for listening, and we'll see 715 00:41:10,680 --> 00:41:18,600 Speaker 1: you next week.