1 00:00:02,520 --> 00:00:07,080 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:07,360 --> 00:00:10,360 Speaker 2: After the latest jobs numbers, which came out just under 3 00:00:10,480 --> 00:00:13,840 Speaker 2: an hour ago, so mixed messaging coming from it. Where 4 00:00:13,840 --> 00:00:16,239 Speaker 2: do you concentrate on. Let's bring in Black Rocks, chief 5 00:00:16,280 --> 00:00:19,200 Speaker 2: investment Officer of Global Fixed Income Rick Reader and Rick, 6 00:00:19,440 --> 00:00:21,040 Speaker 2: great to see you this morning. Thanks for joining us. 7 00:00:21,040 --> 00:00:23,000 Speaker 2: I'm sure you've been pouring over the numbers. What is 8 00:00:23,000 --> 00:00:27,160 Speaker 2: the concentration? Is it growth that comes in less than expected? 9 00:00:27,400 --> 00:00:30,640 Speaker 2: Is it the revisions for October November? Or is an 10 00:00:30,760 --> 00:00:33,360 Speaker 2: unemployment rate now just at four point four percent? 11 00:00:34,360 --> 00:00:36,320 Speaker 1: So I think what Mike mckeson was right, and that 12 00:00:36,520 --> 00:00:39,640 Speaker 1: you know, the FED talked about the unemployment rate. I 13 00:00:39,680 --> 00:00:41,720 Speaker 1: have to tell you I have a different take on it. 14 00:00:42,360 --> 00:00:44,760 Speaker 1: I think there is a we're talking about fifty thousand 15 00:00:44,840 --> 00:00:47,760 Speaker 1: jobs and then there was revision down over seventy thousand jobs. 16 00:00:48,440 --> 00:00:50,360 Speaker 1: If you take we're growing now if you go to 17 00:00:50,360 --> 00:00:53,040 Speaker 1: the last six months moving average, if you take out 18 00:00:53,040 --> 00:00:57,000 Speaker 1: healthcare jobs, we're actually running negative jobs for for the 19 00:00:57,080 --> 00:00:59,840 Speaker 1: last six months away from healthcare, which is non cyclical 20 00:01:00,160 --> 00:01:03,040 Speaker 1: interest rate sensitive. Actually, if you go back eight months, 21 00:01:03,400 --> 00:01:06,000 Speaker 1: the total net jobs is negative two hundred and thirteen 22 00:01:06,040 --> 00:01:06,880 Speaker 1: thousand jobs. 23 00:01:07,200 --> 00:01:07,959 Speaker 3: Net of healthcare. 24 00:01:08,480 --> 00:01:10,679 Speaker 1: What I think is going on is we have a 25 00:01:10,680 --> 00:01:15,200 Speaker 1: productivity revolution of extraordinary proportion, that we have an economy 26 00:01:15,200 --> 00:01:17,640 Speaker 1: that's growing at a quite robust free but we just 27 00:01:17,680 --> 00:01:21,200 Speaker 1: don't need the people. And I know when people say, well, 28 00:01:21,240 --> 00:01:23,720 Speaker 1: you know, they were focused on could this be sixty 29 00:01:23,720 --> 00:01:28,039 Speaker 1: thousand jobs, seventy thousand jobs, eighty thousand jobs. If you 30 00:01:28,080 --> 00:01:30,480 Speaker 1: go back to twenty twenty one, now that was post COVID, 31 00:01:30,480 --> 00:01:33,920 Speaker 1: we're running six hundred thousand jobs. Now, big pullback from 32 00:01:33,959 --> 00:01:36,280 Speaker 1: twenty but then in twenty two three hundred and eighty 33 00:01:36,280 --> 00:01:40,200 Speaker 1: thousand jobs a month. Twenty twenty two you're running two 34 00:01:40,280 --> 00:01:43,720 Speaker 1: hundred and seventeen thousand jobs. Twenty three you were running. Sorry, 35 00:01:43,760 --> 00:01:45,880 Speaker 1: twenty four you' running one hundred and seventy thousand jobs. 36 00:01:46,440 --> 00:01:48,720 Speaker 1: We're talking about last year you ran fifty thousand jobs 37 00:01:48,800 --> 00:01:52,640 Speaker 1: net of healthcare, no jobs. This year you're running at 38 00:01:52,680 --> 00:01:54,680 Speaker 1: a number what we just saw fifty thousand and thirty 39 00:01:54,720 --> 00:01:58,000 Speaker 1: nine thousands in healthcare. Point being, and part of why 40 00:01:58,640 --> 00:02:01,360 Speaker 1: I think the interest rate tool doesn't affect healthcare and 41 00:02:01,400 --> 00:02:03,560 Speaker 1: doesn't really affect education, which was another part of the 42 00:02:03,640 --> 00:02:06,640 Speaker 1: job market. Meaning I think we're just seeing a productivity revolution. 43 00:02:06,720 --> 00:02:08,240 Speaker 1: I mean you break down the numbers, you really look 44 00:02:08,240 --> 00:02:10,880 Speaker 1: at it, it's pretty extraordinary. And I think the labor 45 00:02:10,960 --> 00:02:13,880 Speaker 1: dynamic is quite quite significant on the back side of that. 46 00:02:14,280 --> 00:02:16,440 Speaker 4: Where do you see that? Rick? 47 00:02:16,520 --> 00:02:19,360 Speaker 5: Because I was just listening to Odd Lots, the Odd 48 00:02:19,360 --> 00:02:22,720 Speaker 5: Lots podcast that Joe and Tracy do with Jan hatziis 49 00:02:22,720 --> 00:02:27,760 Speaker 5: from Goldman Sachs. He says that AI has added about 50 00:02:27,800 --> 00:02:31,799 Speaker 5: twenty basis points in productivity to growth, and their new 51 00:02:31,880 --> 00:02:34,840 Speaker 5: chief incoming chief equity strategist Ben Schnyder said, out of 52 00:02:35,000 --> 00:02:37,600 Speaker 5: all five hundred S and P companies, only six have 53 00:02:37,680 --> 00:02:40,359 Speaker 5: been able to quantify added. 54 00:02:40,080 --> 00:02:41,120 Speaker 4: Productivity from AI. 55 00:02:41,320 --> 00:02:44,120 Speaker 5: So I hear about it all the time, and I 56 00:02:44,200 --> 00:02:47,400 Speaker 5: see the stock soaring, But what's the evidence that we 57 00:02:47,480 --> 00:02:51,080 Speaker 5: have actually increased productivity with these tools. 58 00:02:52,120 --> 00:02:55,280 Speaker 1: So, by the way, John's right, as normal as usual. 59 00:02:56,480 --> 00:03:00,600 Speaker 1: I will say one thing. People like to take productivity 60 00:03:00,600 --> 00:03:02,360 Speaker 1: and say almosts to be a two letter word AI. 61 00:03:02,520 --> 00:03:04,440 Speaker 1: AI is coming, by the way, so is robotics, so 62 00:03:04,560 --> 00:03:07,760 Speaker 1: is automation. So with oother forms of productivity. But if 63 00:03:07,800 --> 00:03:10,000 Speaker 1: you go back the last two years, and I broke 64 00:03:10,040 --> 00:03:13,280 Speaker 1: it down on a call, we did logistics inventory management 65 00:03:14,200 --> 00:03:19,400 Speaker 1: customer procurement, freight freight, how you use freight, efficiency of 66 00:03:19,440 --> 00:03:21,760 Speaker 1: how you manage your inventory, efficiency of how you manage 67 00:03:21,760 --> 00:03:26,240 Speaker 1: your receivables. Every company today is running. Why is revenue 68 00:03:26,280 --> 00:03:29,919 Speaker 1: growth a decent place by what's really happening is earning 69 00:03:29,960 --> 00:03:33,639 Speaker 1: is growth is spectacular. Earnings growth is spectacular because you're 70 00:03:33,680 --> 00:03:36,640 Speaker 1: reducing your cost infrastructure costs, A good sold SG and 71 00:03:36,680 --> 00:03:38,880 Speaker 1: A are coming down because you've come up with a 72 00:03:38,920 --> 00:03:43,480 Speaker 1: better way to actually run your business and you're using software, cloud, 73 00:03:43,800 --> 00:03:47,360 Speaker 1: inventory management tools, etc. So I think AI is coming 74 00:03:47,720 --> 00:03:51,080 Speaker 1: and I think it accelerates what is a productivity boom? 75 00:03:51,240 --> 00:03:53,080 Speaker 1: But I agree with you, I agree with what Yan 76 00:03:53,200 --> 00:03:54,840 Speaker 1: said today. 77 00:03:54,840 --> 00:03:55,520 Speaker 3: It's not AI. 78 00:03:55,920 --> 00:03:57,720 Speaker 1: And by the way you look at the M and 79 00:03:57,760 --> 00:04:00,360 Speaker 1: A calendar and which I think will can need to 80 00:04:00,360 --> 00:04:02,920 Speaker 1: be robust to say the least, Why will you see 81 00:04:02,920 --> 00:04:03,520 Speaker 1: so much M and I. 82 00:04:03,680 --> 00:04:06,000 Speaker 3: Some of it you have business incentives that are real. 83 00:04:06,160 --> 00:04:08,640 Speaker 1: Some of it is you have businesses trying to build 84 00:04:08,640 --> 00:04:10,320 Speaker 1: them mode, create more data, et cetera. 85 00:04:10,880 --> 00:04:13,200 Speaker 3: A lot of it is synergistic. I E. 86 00:04:13,640 --> 00:04:16,520 Speaker 1: I can grow my company, I can build scale, and 87 00:04:16,560 --> 00:04:18,719 Speaker 1: I can reduce my cost ecosystem. And that you know 88 00:04:18,760 --> 00:04:21,760 Speaker 1: what that means is is fewer jobs, and I think 89 00:04:21,760 --> 00:04:24,360 Speaker 1: we're watching it, and I don't think the story is ambiguous. 90 00:04:24,680 --> 00:04:26,680 Speaker 1: I think the story is quite clear. We have a 91 00:04:26,760 --> 00:04:29,680 Speaker 1: labor dynamic that is tricky. And by the way, it's 92 00:04:29,680 --> 00:04:32,760 Speaker 1: a lower skilled problem, it's an urban problem. It's a 93 00:04:33,320 --> 00:04:35,000 Speaker 1: that I think is you know, part of why I think, 94 00:04:35,120 --> 00:04:37,320 Speaker 1: you know, I've been pretty outamant that I think the 95 00:04:37,360 --> 00:04:39,240 Speaker 1: funds right needs to be I think interest rates need 96 00:04:39,279 --> 00:04:41,920 Speaker 1: to be a bit lower because I think it's lower skilled. 97 00:04:42,160 --> 00:04:43,599 Speaker 3: I think it's low low income. 98 00:04:43,800 --> 00:04:46,480 Speaker 1: I think it's small business that are on the backside 99 00:04:46,480 --> 00:04:47,919 Speaker 1: of what is a tough dynamic today. 100 00:04:48,200 --> 00:04:50,119 Speaker 5: I want to get to that, and I know Danny 101 00:04:50,160 --> 00:04:53,359 Speaker 5: does too, in terms of rates, but I want to 102 00:04:53,360 --> 00:04:55,720 Speaker 5: get to what you think we need in terms of 103 00:04:55,839 --> 00:04:59,359 Speaker 5: adding jobs because we have you know, zero immigration, and 104 00:04:59,400 --> 00:05:03,240 Speaker 5: we're close to population declining. We're not having kids in 105 00:05:03,279 --> 00:05:07,680 Speaker 5: this country. So to me, four point four percent unemployment, 106 00:05:08,040 --> 00:05:11,080 Speaker 5: you know, in that picture, especially with three point eight 107 00:05:11,080 --> 00:05:12,520 Speaker 5: percent wage growth, that looks good. 108 00:05:13,880 --> 00:05:17,159 Speaker 1: So so by the way, it's four point four trending 109 00:05:17,320 --> 00:05:19,600 Speaker 1: significantly higher from where we used to be. And by 110 00:05:19,600 --> 00:05:21,200 Speaker 1: the way, I would argue, if you took a step 111 00:05:21,240 --> 00:05:24,560 Speaker 1: back and said gosh, four point four is that a crisis? Unequivocal, 112 00:05:24,600 --> 00:05:28,920 Speaker 1: that's not a crisis. The trend isn't isn't a good story? 113 00:05:29,040 --> 00:05:29,520 Speaker 3: Number one. 114 00:05:30,000 --> 00:05:32,760 Speaker 1: Number two, we have a dynamic, and you don't think 115 00:05:32,760 --> 00:05:35,320 Speaker 1: for people say it's a supply that it's an immigration dynamic. 116 00:05:35,560 --> 00:05:37,960 Speaker 1: If you look at the demand function and so you'd 117 00:05:38,000 --> 00:05:39,960 Speaker 1: look at the jolt state of this week around job 118 00:05:40,000 --> 00:05:42,440 Speaker 1: openings and you look at the trend there, and again 119 00:05:42,480 --> 00:05:45,080 Speaker 1: I'm not saying we're in a jobs crisis today, but 120 00:05:45,120 --> 00:05:47,400 Speaker 1: if you took a step back and said, gosh, I 121 00:05:47,440 --> 00:05:49,200 Speaker 1: want to look at the big picture, and I go 122 00:05:49,279 --> 00:05:50,760 Speaker 1: back to where we were in terms of what jobs 123 00:05:50,760 --> 00:05:52,680 Speaker 1: are created in twenty two, twenty three, twenty four, we 124 00:05:52,720 --> 00:05:53,840 Speaker 1: could ship out the COVID. 125 00:05:53,680 --> 00:05:55,919 Speaker 3: Dynamic and then you say, where are we going? 126 00:05:56,440 --> 00:05:59,159 Speaker 1: Where we're going as a place from a labor perspective, 127 00:05:59,600 --> 00:06:01,960 Speaker 1: that I thought is is a bit is a bit concerning, 128 00:06:02,040 --> 00:06:04,200 Speaker 1: And I think you know what woman's opinion, I think 129 00:06:04,240 --> 00:06:05,520 Speaker 1: you have to be a bit anticipatory. 130 00:06:05,520 --> 00:06:06,640 Speaker 3: We've been talking about this, you. 131 00:06:06,600 --> 00:06:09,840 Speaker 1: Know for nine months, where you know the funds rate 132 00:06:09,920 --> 00:06:11,760 Speaker 1: was at four and three a's and by the way, 133 00:06:11,760 --> 00:06:13,200 Speaker 1: I don't I don't you know, I just think I 134 00:06:13,200 --> 00:06:14,560 Speaker 1: don't think we need to go that far. I think 135 00:06:14,560 --> 00:06:16,160 Speaker 1: we got to get the funds right down a bit 136 00:06:16,640 --> 00:06:19,039 Speaker 1: to three percent. We've been talking about that every month 137 00:06:19,080 --> 00:06:21,320 Speaker 1: on the show, and I just think you got to 138 00:06:21,320 --> 00:06:23,760 Speaker 1: get there because I think that's the equilibrium rate today. 139 00:06:23,960 --> 00:06:24,120 Speaker 4: Rick. 140 00:06:24,320 --> 00:06:26,280 Speaker 2: I just wonder, though, even if you get there, how 141 00:06:26,279 --> 00:06:26,839 Speaker 2: does that. 142 00:06:26,800 --> 00:06:29,400 Speaker 4: Change these these. 143 00:06:29,080 --> 00:06:31,880 Speaker 2: Very macro trends you're talking about. I mean, that doesn't 144 00:06:32,000 --> 00:06:36,080 Speaker 2: change this put push to productivity, that doesn't put a 145 00:06:36,080 --> 00:06:40,040 Speaker 2: cap on AI and maybe its ability to replace workers. 146 00:06:40,600 --> 00:06:43,360 Speaker 2: So if you lower rates doesn't really have as big 147 00:06:43,400 --> 00:06:45,800 Speaker 2: of an impact on the labor market this time around. 148 00:06:47,880 --> 00:06:50,840 Speaker 1: So the answer is you're ride And it's like does 149 00:06:50,880 --> 00:06:53,239 Speaker 1: a FED create jobs? And the FED have one tool 150 00:06:53,320 --> 00:06:55,799 Speaker 1: to create and you know this argumental FED has one tool. 151 00:06:56,200 --> 00:06:57,360 Speaker 3: And by the way, it's not just a fad. 152 00:06:58,120 --> 00:07:00,680 Speaker 1: I actually think most of what you describe needs to 153 00:07:00,720 --> 00:07:04,240 Speaker 1: be accomplished through fiscal initiatives. And so, by the way, 154 00:07:04,360 --> 00:07:06,960 Speaker 1: you obviously a lot of news recently about the housing market. Well, 155 00:07:07,000 --> 00:07:09,440 Speaker 1: I think the housing market is such a profound dynamic 156 00:07:10,120 --> 00:07:12,920 Speaker 1: and part of why I think that influence is so significant. 157 00:07:13,280 --> 00:07:14,840 Speaker 1: And by the way, I actually don't think the fund 158 00:07:14,840 --> 00:07:16,760 Speaker 1: fed funds rate is that critical. I think it's longer 159 00:07:16,840 --> 00:07:18,320 Speaker 1: term interest rates. You got to keep don because you 160 00:07:18,320 --> 00:07:20,240 Speaker 1: got to get the mortgage rate down. What happens if 161 00:07:20,280 --> 00:07:22,720 Speaker 1: we get housing moving. If you get housing moving, you 162 00:07:22,760 --> 00:07:25,800 Speaker 1: create more labor mobility. You see a job in another state, 163 00:07:25,840 --> 00:07:29,600 Speaker 1: another city, you can move. That's important. We create. Every 164 00:07:29,640 --> 00:07:32,120 Speaker 1: house built in this country creates three point one jobs 165 00:07:32,160 --> 00:07:35,280 Speaker 1: from people building houses. That creates and it's by the way, 166 00:07:35,320 --> 00:07:38,400 Speaker 1: it's hard to ai building a house today that creates 167 00:07:38,600 --> 00:07:41,320 Speaker 1: an improvement and employment. And then I think there's a 168 00:07:41,320 --> 00:07:44,320 Speaker 1: whole series of other things around technology, etc. That I think, 169 00:07:44,360 --> 00:07:46,920 Speaker 1: most of it on the fiscal side. But I agree 170 00:07:46,920 --> 00:07:49,040 Speaker 1: with you, I think that is the trend. So then 171 00:07:49,040 --> 00:07:50,440 Speaker 1: you go back and say, okay, so then what is 172 00:07:50,440 --> 00:07:53,800 Speaker 1: the equilibrium rate of interest relative to that? If inflation 173 00:07:53,920 --> 00:07:57,600 Speaker 1: break evens are two point three percent in inflation, productions 174 00:07:57,600 --> 00:08:01,240 Speaker 1: by you, mish are certainly well contained, and that I think. 175 00:08:01,680 --> 00:08:04,080 Speaker 1: My point being is, yes, we have a productivity revolution. 176 00:08:04,120 --> 00:08:06,400 Speaker 1: It's hard for the interest rate tool to sell. But 177 00:08:06,440 --> 00:08:08,320 Speaker 1: I think there's a whole series of things that can 178 00:08:08,440 --> 00:08:11,360 Speaker 1: ameliorate some of what is a problem today and will 179 00:08:11,400 --> 00:08:12,840 Speaker 1: be a bigger problem. 180 00:08:12,600 --> 00:08:16,480 Speaker 5: Brick reader here Black Rocks, chief investment Officer of Global 181 00:08:16,520 --> 00:08:17,160 Speaker 5: Fixed Income. 182 00:08:17,240 --> 00:08:19,680 Speaker 4: And this is so interesting. 183 00:08:19,720 --> 00:08:22,600 Speaker 5: I mean President Trump not only has he this week 184 00:08:22,680 --> 00:08:25,760 Speaker 5: said he doesn't want like Steve Schwartzman buying homes anymore, 185 00:08:26,920 --> 00:08:30,640 Speaker 5: or any institutional buyers of homes. At the same time, 186 00:08:30,680 --> 00:08:33,280 Speaker 5: I think President she of China reminds us that homes 187 00:08:33,280 --> 00:08:38,040 Speaker 5: are for living, not investments. And you've got President Trump 188 00:08:38,080 --> 00:08:40,440 Speaker 5: now doing oval office qe. 189 00:08:40,480 --> 00:08:43,679 Speaker 4: Like telling his guys at Fanny and Freddy to. 190 00:08:43,600 --> 00:08:47,240 Speaker 5: Buy two hundred billion dollars of mortgage backed securities. 191 00:08:47,600 --> 00:08:51,000 Speaker 4: Does this help Rick? You think the housing crisis that 192 00:08:51,040 --> 00:08:51,880 Speaker 4: you were talking about. 193 00:08:53,360 --> 00:08:56,720 Speaker 1: So, I mean I won't come in on a specific initiative. 194 00:08:56,720 --> 00:08:58,920 Speaker 1: The only thing I will I will say is this 195 00:08:59,000 --> 00:09:03,240 Speaker 1: in there I think we have. I think housing is pivotal, 196 00:09:03,400 --> 00:09:06,640 Speaker 1: by the way I normally think people underestimate how important 197 00:09:06,640 --> 00:09:08,480 Speaker 1: three quarters of the wealth in this country by people 198 00:09:08,559 --> 00:09:10,839 Speaker 1: is in their home. By the way young people build 199 00:09:10,880 --> 00:09:13,800 Speaker 1: wealth is through their home, the way the normal by 200 00:09:13,840 --> 00:09:16,120 Speaker 1: the way I would even translated, I would even relate 201 00:09:16,120 --> 00:09:18,880 Speaker 1: it to I'm showed a chart on fertility rates, marriage levels, etc. 202 00:09:19,440 --> 00:09:22,680 Speaker 1: I think housing, if you have what is today, what 203 00:09:22,840 --> 00:09:25,920 Speaker 1: is a moribund housing market. I think the impact is 204 00:09:26,280 --> 00:09:29,480 Speaker 1: significantly more intense than people think. So any of the 205 00:09:29,480 --> 00:09:32,760 Speaker 1: initiatives I think to move it, I think fiscal. I 206 00:09:32,760 --> 00:09:35,520 Speaker 1: think obviously moving the mortgage rate I think is helpful. 207 00:09:35,720 --> 00:09:36,720 Speaker 1: And by the way, I don't think you have to 208 00:09:36,760 --> 00:09:39,280 Speaker 1: move it that far. You know, we see we track 209 00:09:39,320 --> 00:09:42,240 Speaker 1: prepayments speeds on mortgages, as you said, very very closely. 210 00:09:42,280 --> 00:09:43,800 Speaker 1: If you get the mortgage rate to five and a 211 00:09:43,840 --> 00:09:45,840 Speaker 1: half to six, you've seen it. By the way, as 212 00:09:45,840 --> 00:09:48,000 Speaker 1: the mortgage rate has come down, you create more velocity 213 00:09:48,360 --> 00:09:50,720 Speaker 1: in terms of housing movie. You see it in existing 214 00:09:50,760 --> 00:09:53,480 Speaker 1: home sales picking up. So anyway, I think that's the case. 215 00:09:53,520 --> 00:09:55,240 Speaker 1: And I think if you get the mortgage rate down 216 00:09:55,320 --> 00:09:57,680 Speaker 1: a bit, and by the way, I only think you 217 00:09:57,720 --> 00:10:00,400 Speaker 1: need to get ten year treasuries down twenty five thirty 218 00:10:00,440 --> 00:10:02,120 Speaker 1: forty base ones and just keep them there and keep 219 00:10:02,200 --> 00:10:05,280 Speaker 1: all keep read volatility down. And then with FISCO, I 220 00:10:05,320 --> 00:10:07,760 Speaker 1: think you do some pretty positive things. And I agree 221 00:10:07,800 --> 00:10:10,320 Speaker 1: that it's arguably one of the most important things we 222 00:10:10,320 --> 00:10:10,880 Speaker 1: could do today. 223 00:10:10,920 --> 00:10:14,200 Speaker 5: Hey, Rick, does anybody ever talk about getting the fertility 224 00:10:14,240 --> 00:10:17,319 Speaker 5: rate up? Like, why don't we put some carrots out 225 00:10:17,320 --> 00:10:20,080 Speaker 5: there to create more kids. 226 00:10:21,520 --> 00:10:24,080 Speaker 1: So the uh, I don't know. I don't know if 227 00:10:24,080 --> 00:10:25,920 Speaker 1: you know this. So I'm actually becoming your grandfather today. 228 00:10:25,960 --> 00:10:30,000 Speaker 1: So yeah, no, So I think by the way, Matt, 229 00:10:30,000 --> 00:10:33,040 Speaker 1: don't if you know this, but I had my anniversary 230 00:10:33,080 --> 00:10:35,120 Speaker 1: once when I was on your show many years ago. 231 00:10:35,480 --> 00:10:37,160 Speaker 1: So I think all my big events come when I'm 232 00:10:37,360 --> 00:10:40,160 Speaker 1: when I'm talking with y'all. So if there's something good 233 00:10:40,160 --> 00:10:41,240 Speaker 1: there but being with y'all. 234 00:10:41,600 --> 00:10:44,120 Speaker 4: So anyway, I did you're in trouble at home? 235 00:10:44,160 --> 00:10:48,600 Speaker 1: I imagine, yeah, that is well, I'm close the I 236 00:10:48,600 --> 00:10:50,840 Speaker 1: think there's a couple of things that are that are play. 237 00:10:50,840 --> 00:10:52,560 Speaker 1: I mean, I do think it's right. I do think 238 00:10:52,640 --> 00:10:54,400 Speaker 1: if you have young people, to look at the student 239 00:10:54,440 --> 00:10:57,040 Speaker 1: loans thirty percent or student loans or in repayment today, 240 00:10:57,320 --> 00:11:01,400 Speaker 1: that is unbelievable. That's that is unbelievable, young people having 241 00:11:01,400 --> 00:11:02,640 Speaker 1: a hard time. By the way, if you look at 242 00:11:02,640 --> 00:11:04,559 Speaker 1: the youth unemployment rates now up, I think it's eight 243 00:11:04,559 --> 00:11:06,040 Speaker 1: and a half percent, maybe a little bit. 244 00:11:05,960 --> 00:11:08,359 Speaker 3: Higher than that. Young people graduating. 245 00:11:08,440 --> 00:11:10,200 Speaker 1: So I was that you managed one of the surveys 246 00:11:10,200 --> 00:11:13,920 Speaker 1: that showed people graduating college. It's the toughest time in 247 00:11:14,000 --> 00:11:17,800 Speaker 1: literally a generation. So listen, I think there's some things. 248 00:11:17,840 --> 00:11:20,160 Speaker 1: I think a lot of this is related, and I 249 00:11:20,160 --> 00:11:21,599 Speaker 1: think a lot of this is you know, if you 250 00:11:21,640 --> 00:11:23,480 Speaker 1: create an initiat I think the Danny's question before that 251 00:11:23,640 --> 00:11:26,240 Speaker 1: there was dead right. There is something that you know 252 00:11:26,280 --> 00:11:29,439 Speaker 1: that are just hard to fight against. But I think 253 00:11:29,440 --> 00:11:31,360 Speaker 1: there's a series of things that I think that that 254 00:11:32,200 --> 00:11:34,679 Speaker 1: can be done that will improve a bunch of things. 255 00:11:34,800 --> 00:11:37,600 Speaker 1: And by the way, the thing that is critical, nominal 256 00:11:37,600 --> 00:11:39,600 Speaker 1: GDP has to be high because we have a debt 257 00:11:39,600 --> 00:11:43,040 Speaker 1: burden in this country that is large, and if we 258 00:11:43,120 --> 00:11:46,160 Speaker 1: keep nominal GDP high, we keep employing more people. You 259 00:11:46,240 --> 00:11:50,320 Speaker 1: bring that nominal GDP number up, which diffuses the dead burden. 260 00:11:51,280 --> 00:11:54,400 Speaker 2: Rick, if we could talk about your other child, which 261 00:11:54,480 --> 00:11:57,000 Speaker 2: I realize is less important than your grandchild, but still 262 00:11:57,040 --> 00:11:59,520 Speaker 2: important for these markets, it is bank Matt has pointed 263 00:11:59,520 --> 00:12:03,120 Speaker 2: this out the fastest growing active ETF You're talking about 264 00:12:03,120 --> 00:12:04,559 Speaker 2: some size that changes. 265 00:12:04,280 --> 00:12:06,800 Speaker 4: In history in history, and the world is huge. 266 00:12:07,200 --> 00:12:09,280 Speaker 2: There's so more ets than stocks, and a lot of 267 00:12:09,360 --> 00:12:12,120 Speaker 2: active ets too, so that is a big deal. And 268 00:12:12,640 --> 00:12:14,520 Speaker 2: I'm assuming you're going to have to position this for 269 00:12:14,720 --> 00:12:18,719 Speaker 2: big changes lower rates, maybe changes with MBS's which or 270 00:12:18,760 --> 00:12:20,760 Speaker 2: mortgage back securities, which I know is part of this 271 00:12:21,120 --> 00:12:23,720 Speaker 2: maybe a tariff ruling which could also change what this 272 00:12:23,760 --> 00:12:26,400 Speaker 2: bond market does. And this brings me to a viewer 273 00:12:26,480 --> 00:12:28,640 Speaker 2: question that someone wrote in what is the best part 274 00:12:29,040 --> 00:12:31,240 Speaker 2: of the curve that is the best place to invest 275 00:12:31,240 --> 00:12:33,920 Speaker 2: for total return in twenty twenty six? How are you 276 00:12:33,960 --> 00:12:37,320 Speaker 2: thinking incorporating that idea into bank in twenty twenty six? 277 00:12:37,400 --> 00:12:38,960 Speaker 3: Rick, By the way, it's always fun. 278 00:12:39,000 --> 00:12:40,840 Speaker 1: I would the chart that goes up that shows the 279 00:12:40,840 --> 00:12:44,319 Speaker 1: price of bank, it doesn't showed the dividend yield. You know, 280 00:12:44,400 --> 00:12:46,240 Speaker 1: my job is to great as much a dividend yield 281 00:12:46,280 --> 00:12:49,520 Speaker 1: as much as much income as possible. Listen, I think 282 00:12:49,640 --> 00:12:51,360 Speaker 1: you know there's something by the way I do. This 283 00:12:51,400 --> 00:12:53,360 Speaker 1: is always an interesting thing about Like people said, like, 284 00:12:53,360 --> 00:12:55,440 Speaker 1: why is he saying that the funds rate should come down? 285 00:12:55,480 --> 00:12:57,800 Speaker 3: He must have an ulterior motive. I actually don't want 286 00:12:57,840 --> 00:12:58,319 Speaker 3: the funds right. 287 00:12:58,320 --> 00:12:59,760 Speaker 1: In fact, so I don't want interest rates to come 288 00:12:59,760 --> 00:13:03,679 Speaker 1: down because commercially, these yields are phenomenal. I mean these 289 00:13:03,720 --> 00:13:07,680 Speaker 1: yields to create income in a portfolio. And we can 290 00:13:07,760 --> 00:13:09,880 Speaker 1: create six six and a quarter six and a half 291 00:13:09,920 --> 00:13:13,679 Speaker 1: percent yield by being in, staying high quality, and staying 292 00:13:13,720 --> 00:13:15,480 Speaker 1: you know, I think, I think think is running a 293 00:13:15,480 --> 00:13:17,880 Speaker 1: low single A rating, which is pretty amazing with a 294 00:13:17,960 --> 00:13:20,960 Speaker 1: less than four year duration. Anyway, if we can just 295 00:13:21,120 --> 00:13:23,320 Speaker 1: keep that yield up, you know what, So what do 296 00:13:23,360 --> 00:13:24,960 Speaker 1: you do to do that? You reduce a little bit. 297 00:13:25,000 --> 00:13:28,360 Speaker 1: We've reduced a little bit of high yield, We've increased 298 00:13:28,360 --> 00:13:30,360 Speaker 1: a bit of emerging markets. We think the dollar, the 299 00:13:30,440 --> 00:13:32,680 Speaker 1: dollar is contained. We did we have talked about on 300 00:13:32,679 --> 00:13:35,760 Speaker 1: the show. We like mortgages quite a move today. I 301 00:13:35,760 --> 00:13:39,000 Speaker 1: don't know, I don't know at these levels, but but 302 00:13:39,040 --> 00:13:41,880 Speaker 1: you know, increase your quality and you could still run 303 00:13:42,000 --> 00:13:44,960 Speaker 1: yield that is that is pretty significant in a portfolio 304 00:13:45,080 --> 00:13:47,880 Speaker 1: and be global. Like look at and interest rates around 305 00:13:47,920 --> 00:13:50,640 Speaker 1: the world, particularly Europe, where you're going as a dollar 306 00:13:50,679 --> 00:13:51,760 Speaker 1: investor is quite adjective. 307 00:13:52,760 --> 00:13:55,360 Speaker 4: Is it, by the way, as you grow this quickly? 308 00:13:55,400 --> 00:13:58,160 Speaker 5: We were just looking at the Eric Beltunas tweet there 309 00:13:58,200 --> 00:14:01,600 Speaker 5: and I have to think he's the foremost ETF analysts, 310 00:14:02,480 --> 00:14:06,080 Speaker 5: most respecting ETF analysts in the world. Is it more 311 00:14:06,080 --> 00:14:08,480 Speaker 5: difficult as it grows to manage or is it just 312 00:14:08,559 --> 00:14:13,040 Speaker 5: such a huge space that you can't get that that big? 313 00:14:14,200 --> 00:14:14,400 Speaker 4: Yeah? 314 00:14:14,480 --> 00:14:16,840 Speaker 1: I mean so, by the way, it does you think 315 00:14:16,840 --> 00:14:19,600 Speaker 1: about in size. I mean, it's a fantastic question. There 316 00:14:19,640 --> 00:14:20,760 Speaker 1: is a couple of things. First of all, part of 317 00:14:20,760 --> 00:14:23,720 Speaker 1: why mortgage has become more interesting is because they because 318 00:14:23,720 --> 00:14:25,920 Speaker 1: they're so liquid and the size of that market is 319 00:14:26,480 --> 00:14:29,280 Speaker 1: so expansive. You do think about other things though, as 320 00:14:29,320 --> 00:14:31,480 Speaker 1: you get larger that you can do in your portfolio, 321 00:14:32,000 --> 00:14:33,720 Speaker 1: where we can you know, we do a little bit 322 00:14:33,720 --> 00:14:36,280 Speaker 1: more bespoke. You know, we tend to keep this very liquid, 323 00:14:36,320 --> 00:14:38,240 Speaker 1: but we can do a little bit more bespoke because 324 00:14:38,240 --> 00:14:40,480 Speaker 1: of the size of it, So that gives us gives 325 00:14:40,560 --> 00:14:43,200 Speaker 1: us a little bit more flexibility. But there are some 326 00:14:43,280 --> 00:14:45,640 Speaker 1: markets that are that are clear, like the COLO market 327 00:14:45,720 --> 00:14:48,240 Speaker 1: or others. How you think about you know, how big 328 00:14:48,280 --> 00:14:49,760 Speaker 1: do you want to be in certain markets? So you 329 00:14:49,800 --> 00:14:53,080 Speaker 1: do it does evolve a little bit at scale. I 330 00:14:53,120 --> 00:14:54,560 Speaker 1: think there's a lot of things that make it make 331 00:14:54,600 --> 00:14:57,320 Speaker 1: it easier to do what I'd say, on balance, it's 332 00:14:57,320 --> 00:14:59,840 Speaker 1: a little bit easier at scale. But do you do 333 00:15:00,080 --> 00:15:01,800 Speaker 1: you do evolve it a bit in terms of how 334 00:15:01,800 --> 00:15:03,960 Speaker 1: you're managing it's for sure, Rick, how. 335 00:15:03,880 --> 00:15:07,440 Speaker 2: Are you thinking about positioning heading into what might be 336 00:15:07,480 --> 00:15:11,320 Speaker 2: a decision today on IIPA from the Supreme Court? If 337 00:15:11,360 --> 00:15:13,360 Speaker 2: we don't have as much revenue coming in, and if 338 00:15:13,360 --> 00:15:16,120 Speaker 2: it is ruled illegal, what kind of changes could you 339 00:15:16,160 --> 00:15:17,000 Speaker 2: see to this curve? 340 00:15:18,720 --> 00:15:22,280 Speaker 1: Yeah, it's a great question, and uh so, So first 341 00:15:22,320 --> 00:15:24,120 Speaker 1: of all, a couple of things. You know, this has 342 00:15:24,160 --> 00:15:26,000 Speaker 1: been out there for a while, whether it's today or 343 00:15:26,280 --> 00:15:29,400 Speaker 1: when it comes out, you know, I I would say 344 00:15:29,400 --> 00:15:31,960 Speaker 1: one thing. I mean, we buy, you know, including recently, 345 00:15:32,000 --> 00:15:34,200 Speaker 1: we buy a lot of volatility in the equity market 346 00:15:34,240 --> 00:15:37,280 Speaker 1: because bot Court frankly, volatility is cheap and the equity market, 347 00:15:37,320 --> 00:15:39,240 Speaker 1: whereas I think it's high in the rates market. 348 00:15:39,480 --> 00:15:41,120 Speaker 3: But we buy a lot of volatility. 349 00:15:41,160 --> 00:15:43,200 Speaker 1: We have been recently as volatilities come down, as you 350 00:15:43,240 --> 00:15:45,880 Speaker 1: all have talked about about stocks go up, volatility comes down. 351 00:15:46,240 --> 00:15:48,720 Speaker 1: So we have built a decent amount of protection and 352 00:15:48,800 --> 00:15:50,000 Speaker 1: as people interpret it. 353 00:15:50,560 --> 00:15:52,160 Speaker 3: You know, I've talked about on your show before. 354 00:15:52,200 --> 00:15:53,720 Speaker 1: I tend to like the front to the belly of 355 00:15:53,720 --> 00:15:55,680 Speaker 1: the you curve, particularly after a number like this and 356 00:15:55,680 --> 00:15:58,320 Speaker 1: they cheapen it up a little bit, you know, the 357 00:15:58,360 --> 00:16:00,520 Speaker 1: long end of the Yell curve not that interesting because 358 00:16:00,520 --> 00:16:02,720 Speaker 1: of the volatility it gives you. So so a few 359 00:16:02,720 --> 00:16:05,280 Speaker 1: things around the edges around gosh, can you keep can 360 00:16:05,320 --> 00:16:06,920 Speaker 1: you hold a bit more front to belly of the 361 00:16:07,000 --> 00:16:09,400 Speaker 1: yield curve. Can you buy a bit more volatility protect 362 00:16:09,480 --> 00:16:12,320 Speaker 1: some downside and you were talking about in fixed income, 363 00:16:12,320 --> 00:16:13,920 Speaker 1: maybe you go a little bit higher quality for the 364 00:16:13,960 --> 00:16:16,040 Speaker 1: time being in wait for things to play through. 365 00:16:17,320 --> 00:16:19,920 Speaker 5: I've you know, we had Stephen meyron On who was 366 00:16:19,960 --> 00:16:23,200 Speaker 5: on surveillance yesterday and he thinks that the FED is 367 00:16:23,240 --> 00:16:26,400 Speaker 5: still one hundred and fifty basis points too restrictive about 368 00:16:28,040 --> 00:16:31,000 Speaker 5: what are you watching in the data that could prove 369 00:16:31,080 --> 00:16:34,000 Speaker 5: that out or what do you need to see in 370 00:16:34,040 --> 00:16:36,800 Speaker 5: the next prints to show that the FED is really 371 00:16:36,800 --> 00:16:37,760 Speaker 5: behind the curve here. 372 00:16:39,200 --> 00:16:41,880 Speaker 1: I mean, I'm pretty resolute in my opinion. I've been 373 00:16:41,920 --> 00:16:44,240 Speaker 1: for many many months that I think I think three 374 00:16:44,320 --> 00:16:47,400 Speaker 1: percent is a is a no brainer in my mind, 375 00:16:47,440 --> 00:16:49,880 Speaker 1: and that that is an equilibrium rate. If you know, 376 00:16:50,120 --> 00:16:52,080 Speaker 1: you know, inflation break evens don't trade a lot. I'm 377 00:16:52,120 --> 00:16:53,960 Speaker 1: not sure they're a great benchmark, but they're two point 378 00:16:54,000 --> 00:16:57,760 Speaker 1: three percent. You're still above inflation break evens if you say, 379 00:16:57,840 --> 00:16:59,840 Speaker 1: you know, given what the labor market is telling you 380 00:16:59,880 --> 00:17:02,640 Speaker 1: to given that inflation, most of what is in inflation 381 00:17:02,720 --> 00:17:04,360 Speaker 1: today is non cyclical. 382 00:17:04,400 --> 00:17:07,560 Speaker 3: In services, we talked about shelter. 383 00:17:07,359 --> 00:17:08,760 Speaker 1: And you can Actually, if you drop rates, you bring 384 00:17:08,840 --> 00:17:14,480 Speaker 1: shelter down, you build scharlter inflation down. But things like healthcare, education, insurance, trash, 385 00:17:14,560 --> 00:17:17,960 Speaker 1: and et cetera, like these things are not interest rates sensitive. 386 00:17:17,960 --> 00:17:21,240 Speaker 1: So I don't think inflation is We're going to hurt 387 00:17:21,240 --> 00:17:23,879 Speaker 1: inflation by getting that funds rate to any any lower 388 00:17:23,920 --> 00:17:26,360 Speaker 1: because of so much of its non cyclical and inflation. 389 00:17:27,000 --> 00:17:29,720 Speaker 1: So I think three is a is an equal is 390 00:17:29,720 --> 00:17:32,240 Speaker 1: certainly a place you can rest. You know, whether we 391 00:17:32,320 --> 00:17:34,439 Speaker 1: have to go lower, I guess the Danny's question about 392 00:17:34,880 --> 00:17:37,239 Speaker 1: like what is over You know, if you have an 393 00:17:37,240 --> 00:17:40,840 Speaker 1: economy that's not running five percent nomenal and we start 394 00:17:40,920 --> 00:17:44,399 Speaker 1: slowing because a fiscal tailwind becomes a headwind, you know, 395 00:17:44,480 --> 00:17:47,040 Speaker 1: does the neutral rate have to be closer to two? 396 00:17:47,920 --> 00:17:48,119 Speaker 3: You know? 397 00:17:48,160 --> 00:17:50,960 Speaker 1: I think time will tell, But I don't think we 398 00:17:51,080 --> 00:17:52,480 Speaker 1: have to go that much lower today. 399 00:17:52,480 --> 00:17:54,120 Speaker 3: But I don't know. If it was me, I would 400 00:17:54,119 --> 00:17:55,119 Speaker 3: get the rate to three. 401 00:17:55,320 --> 00:17:58,560 Speaker 1: I would be focused on longer on the yield curve, 402 00:17:58,560 --> 00:18:01,480 Speaker 1: because that's where real velocity system works. That's the whay 403 00:18:01,480 --> 00:18:05,600 Speaker 1: we fans mortgagees credit. Virtually everything in the system. Fans 404 00:18:05,680 --> 00:18:08,359 Speaker 1: is out the curb in the fives to tens roughly, Hey. 405 00:18:08,280 --> 00:18:09,920 Speaker 2: Rick, if I may, you know, and I've got to 406 00:18:09,960 --> 00:18:12,400 Speaker 2: ask because a lot of people listen to you really 407 00:18:12,400 --> 00:18:14,560 Speaker 2: appreciate your opinion and want to know if it will 408 00:18:14,600 --> 00:18:16,240 Speaker 2: be you, if it will be you part of making 409 00:18:16,280 --> 00:18:18,919 Speaker 2: that decision. The Treasury Secretary yesterday said that you were 410 00:18:18,960 --> 00:18:21,640 Speaker 2: one of the sole candidates who haven't yet had your interview. 411 00:18:22,119 --> 00:18:24,720 Speaker 2: Might you be headed down to Washington, DC anytime soon? 412 00:18:26,359 --> 00:18:28,359 Speaker 3: Yeah? No, you anticipated my answer. 413 00:18:29,000 --> 00:18:32,800 Speaker 1: You know, I'm well, I'm focused on my family situation 414 00:18:32,880 --> 00:18:36,040 Speaker 1: as we talked about in terms of and then you 415 00:18:36,080 --> 00:18:38,400 Speaker 1: know be you know, this is the busiest time, I cried, Frank, 416 00:18:38,480 --> 00:18:40,560 Speaker 1: I've ever seen in terms of what we're doing. You know, 417 00:18:40,600 --> 00:18:43,639 Speaker 1: We've got a lot of year end stuff, we do, markets, funds, 418 00:18:43,640 --> 00:18:44,720 Speaker 1: we're evolving, et cetera. 419 00:18:44,920 --> 00:18:45,960 Speaker 3: So I don't know. 420 00:18:46,080 --> 00:18:48,040 Speaker 1: I mean, I know it's a bad answer, but that's 421 00:18:48,200 --> 00:18:51,119 Speaker 1: that's where I'm I've never been more busy, So that's 422 00:18:51,160 --> 00:18:52,040 Speaker 1: that's what I'm doing. 423 00:18:52,600 --> 00:18:54,520 Speaker 2: Well, Rick, I think I can speak for the entirety 424 00:18:54,520 --> 00:18:57,679 Speaker 2: of the Open Interest family and wish you a congratulations 425 00:18:57,720 --> 00:19:00,640 Speaker 2: to you. Thanks Ask, congratulations, Rick, Thank you so much 426 00:19:00,640 --> 00:19:01,560 Speaker 2: for joining us today. 427 00:19:01,640 --> 00:19:03,080 Speaker 4: That's black Rocks Brick reader