1 00:00:02,440 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:09,600 --> 00:00:13,560 Speaker 2: This is Master's in Business with Barry red Holts on 3 00:00:13,800 --> 00:00:14,720 Speaker 2: Bloomberg Radio. 4 00:00:16,480 --> 00:00:20,360 Speaker 1: This week on the podcast, another extra special guest. If 5 00:00:20,400 --> 00:00:25,560 Speaker 1: you are at all interested in fixed income, in cross 6 00:00:25,640 --> 00:00:31,600 Speaker 1: asset management, in intermarket analysis, in understanding the many moving 7 00:00:31,760 --> 00:00:36,840 Speaker 1: parts that go into putting together a near trillion dollar 8 00:00:36,920 --> 00:00:42,040 Speaker 1: fixed income portfolio, well then strap yourself in Greg Peters. Really, 9 00:00:42,400 --> 00:00:45,080 Speaker 1: I don't know who's better to discuss this. He's been 10 00:00:45,159 --> 00:00:49,000 Speaker 1: with Pgum for the past decade, where he helps oversee 11 00:00:49,400 --> 00:00:53,280 Speaker 1: a giant pile of capital on behalf of a variety 12 00:00:54,040 --> 00:00:59,600 Speaker 1: of institutional investors. He's kind of uniquely situated in having 13 00:00:59,680 --> 00:01:03,360 Speaker 1: spent a lot of his career not only overseeing fixed 14 00:01:03,400 --> 00:01:08,280 Speaker 1: income portfolios, but also part of a multisector team. Pigum 15 00:01:08,400 --> 00:01:10,560 Speaker 1: is kind of unique that they have a very different 16 00:01:10,600 --> 00:01:13,680 Speaker 1: approach than a lot of companies do. I found the 17 00:01:13,720 --> 00:01:16,760 Speaker 1: conversation to be fascinating and I think you will also. 18 00:01:17,560 --> 00:01:22,039 Speaker 1: With no further ado my discussion with pagam's Greg Peters. 19 00:01:22,240 --> 00:01:23,160 Speaker 2: Thanks for having me back. 20 00:01:23,760 --> 00:01:26,280 Speaker 1: So let's start out with your background. You get a 21 00:01:26,440 --> 00:01:28,960 Speaker 1: BA in Finance from the College of New Jersey and 22 00:01:29,040 --> 00:01:34,039 Speaker 1: an MBA from Fordham University. Sounds like finance was always 23 00:01:34,480 --> 00:01:35,240 Speaker 1: the career plan. 24 00:01:35,800 --> 00:01:36,960 Speaker 2: Yeah, I don't know about that. 25 00:01:37,040 --> 00:01:38,760 Speaker 1: You know, what was the original thinking. 26 00:01:38,920 --> 00:01:42,600 Speaker 2: I don't know what my original thinking was. I kind 27 00:01:42,600 --> 00:01:46,240 Speaker 2: of fancied myself as more of a liberal arts type 28 00:01:46,240 --> 00:01:51,240 Speaker 2: of individual, Like I had a English minor. I studied 29 00:01:51,280 --> 00:01:56,400 Speaker 2: as much as I could around literature and art, and 30 00:01:56,400 --> 00:01:59,360 Speaker 2: then really just did finance because I felt I needed 31 00:01:59,400 --> 00:02:04,480 Speaker 2: something engible. So it's not a great story, you know, 32 00:02:04,560 --> 00:02:06,880 Speaker 2: as if you're on the show, but I. 33 00:02:06,880 --> 00:02:09,640 Speaker 1: Hear people saying, well, you know, economics, business was my 34 00:02:09,760 --> 00:02:13,160 Speaker 1: backup and they end up being very successful in those fields. 35 00:02:13,480 --> 00:02:15,840 Speaker 1: So let's talk a little bit about your experience at 36 00:02:15,880 --> 00:02:19,080 Speaker 1: the US Treasury Department. How'd you get there and what'd 37 00:02:19,080 --> 00:02:19,959 Speaker 1: you do while you were there? 38 00:02:20,320 --> 00:02:23,560 Speaker 2: Yeah, so I was part of After I graduated college, 39 00:02:23,680 --> 00:02:27,120 Speaker 2: I took some time off. I traveled through Europe. I 40 00:02:27,200 --> 00:02:30,000 Speaker 2: bartended over the summer prior to so I could fund 41 00:02:30,000 --> 00:02:34,880 Speaker 2: my trip abroad. I came back, I realized I needed 42 00:02:34,880 --> 00:02:38,639 Speaker 2: to get a job, and or more importantly, my father 43 00:02:39,000 --> 00:02:40,760 Speaker 2: told me I needed to get a job. And he's 44 00:02:40,760 --> 00:02:42,840 Speaker 2: the one who actually cut the ad out of the paper. 45 00:02:43,200 --> 00:02:45,680 Speaker 2: I'm dating myself but that's when I was put as 46 00:02:45,720 --> 00:02:49,320 Speaker 2: in the paper, and and the role was for a 47 00:02:49,760 --> 00:02:54,520 Speaker 2: bank examiner, so on the regulatory side with the Office 48 00:02:54,560 --> 00:02:58,720 Speaker 2: of Thrift Supervision. So if you recall that was the 49 00:02:58,760 --> 00:03:02,320 Speaker 2: agency that was created. It is a cleanup for the 50 00:03:02,400 --> 00:03:05,480 Speaker 2: SNL crisis. And so I was fortunate to land a 51 00:03:05,560 --> 00:03:08,400 Speaker 2: job there, and I gotta tell you, Barry, it was 52 00:03:08,440 --> 00:03:14,720 Speaker 2: a fantastic, fantastic training ground. I learned so much and 53 00:03:14,800 --> 00:03:16,280 Speaker 2: I'm really quite grateful for it. 54 00:03:16,800 --> 00:03:21,040 Speaker 1: So when we look at US treasuries right that they're 55 00:03:21,040 --> 00:03:25,359 Speaker 1: about forty percent of the Bloomberg Barclays AG, the largest 56 00:03:25,480 --> 00:03:29,240 Speaker 1: set of holdings by far. Any of your experience at 57 00:03:29,320 --> 00:03:33,080 Speaker 1: Treasury help you when you're looking at a bond portfolio 58 00:03:33,160 --> 00:03:37,160 Speaker 1: that very often is contains a lot of treasuries themselves. 59 00:03:37,440 --> 00:03:42,520 Speaker 2: I would say my bank regulatory background was more instructive 60 00:03:42,560 --> 00:03:45,760 Speaker 2: and how I think about the financial system writ large, 61 00:03:46,680 --> 00:03:51,640 Speaker 2: the flow of money so to speak, and credit right 62 00:03:52,280 --> 00:03:56,080 Speaker 2: and that was probably more of a defining characteristic of 63 00:03:56,120 --> 00:03:59,520 Speaker 2: that rain or that time than kind of the impact 64 00:03:59,640 --> 00:04:03,640 Speaker 2: on the US treasury market, so that that came later. 65 00:04:04,160 --> 00:04:06,960 Speaker 1: Next up, you're at Solomon Smith Barney. What was the 66 00:04:07,160 --> 00:04:10,480 Speaker 1: energy like there? I recall them, you know, Liar's Poker 67 00:04:10,600 --> 00:04:13,600 Speaker 1: the eighties and nineties. They were a bond powerhouse for 68 00:04:13,600 --> 00:04:14,360 Speaker 1: a long time. 69 00:04:15,840 --> 00:04:20,279 Speaker 2: That was a real experience, so being on that trading floor. 70 00:04:20,640 --> 00:04:24,719 Speaker 2: So I started out on the mortgage trading, mortgage derivative side. 71 00:04:25,800 --> 00:04:30,159 Speaker 2: I moved or was moved into research, which was really 72 00:04:30,279 --> 00:04:32,800 Speaker 2: quite a blow for me at the time. You know, 73 00:04:32,960 --> 00:04:35,599 Speaker 2: moving from a trading seat to a research seat was 74 00:04:35,640 --> 00:04:40,440 Speaker 2: not something that one desired. It took me a while 75 00:04:40,520 --> 00:04:43,400 Speaker 2: to kind of get over that, to be quite frank, 76 00:04:43,560 --> 00:04:47,120 Speaker 2: but I realized, man, that was the best thing for me. 77 00:04:47,200 --> 00:04:50,080 Speaker 2: It was the best thing for my personality. It allowed 78 00:04:50,120 --> 00:04:54,880 Speaker 2: me to zoom out understand markets more critically. But Solomon 79 00:04:54,960 --> 00:05:01,159 Speaker 2: itself was such a unique institution. It was excellent personified 80 00:05:01,279 --> 00:05:04,719 Speaker 2: in the bond market. From a research perspective, from a 81 00:05:04,760 --> 00:05:08,920 Speaker 2: trading perspective, it was by far the best trading operation 82 00:05:09,080 --> 00:05:13,680 Speaker 2: I've ever seen. The investment grade trading desk of Brian Eckerson, 83 00:05:14,240 --> 00:05:19,080 Speaker 2: of Brian Rianno and John Eckerson was just fantastic. So 84 00:05:19,120 --> 00:05:23,920 Speaker 2: it really really just showed me what greatness is about 85 00:05:24,000 --> 00:05:25,400 Speaker 2: and what swagger is about. 86 00:05:25,839 --> 00:05:29,080 Speaker 1: Swagger to say the least, were you at Solomon during 87 00:05:29,080 --> 00:05:32,880 Speaker 1: the financial crisis, and what was that desk like back then? 88 00:05:33,200 --> 00:05:37,279 Speaker 2: Now, So I moved in two thousand almost if you 89 00:05:37,440 --> 00:05:41,480 Speaker 2: mark the all time high Morgan Stanley's stock, you know, 90 00:05:41,520 --> 00:05:44,640 Speaker 2: pre adjusted, it was trading like an Internet. That's the 91 00:05:44,720 --> 00:05:48,640 Speaker 2: day I joined Morgan Stanley and so that was that 92 00:05:48,720 --> 00:05:50,320 Speaker 2: was the Internet bubble blowing up. 93 00:05:51,320 --> 00:05:53,800 Speaker 1: So I joined March two thousand something like. 94 00:05:54,480 --> 00:05:58,119 Speaker 2: Yeah, it was early two thousand, and that was also 95 00:05:58,160 --> 00:06:02,200 Speaker 2: a fantastic experience. So I had the financial crisis through 96 00:06:02,200 --> 00:06:03,560 Speaker 2: the Morgan Stanley lens. 97 00:06:03,839 --> 00:06:06,320 Speaker 1: So you had a couple of really interesting titles in 98 00:06:06,360 --> 00:06:12,159 Speaker 1: Morgan Stanley. The first is pretty straightforward Director of Fixed 99 00:06:12,160 --> 00:06:15,880 Speaker 1: Income and Economic Research. I don't think there's anything especially 100 00:06:16,000 --> 00:06:20,839 Speaker 1: unusual about that. But the second title, Chief Global cross 101 00:06:20,839 --> 00:06:24,440 Speaker 1: Asset Strategist. You don't hear that all that often tell 102 00:06:24,520 --> 00:06:27,120 Speaker 1: us about that role. And what'd you do there in 103 00:06:27,160 --> 00:06:27,720 Speaker 1: the two. 104 00:06:27,520 --> 00:06:30,760 Speaker 2: Thousand Yeah, so that was basically a derivative, no pun 105 00:06:30,839 --> 00:06:35,640 Speaker 2: intended of a global strategist role that really focused on 106 00:06:36,279 --> 00:06:40,679 Speaker 2: the linkages across markets. And so the thought. 107 00:06:40,760 --> 00:06:45,520 Speaker 1: Meaning intermarket analysis. If this happens in oil, here's what 108 00:06:45,560 --> 00:06:46,120 Speaker 1: it means for. 109 00:06:46,400 --> 00:06:50,719 Speaker 2: Bonds precisely right, And I actually think that is possibly 110 00:06:50,760 --> 00:06:55,240 Speaker 2: the most important aspect of investing. I think investors are 111 00:06:55,320 --> 00:07:01,240 Speaker 2: very narrowly focused, and rightfully so, expertise is awarded, but 112 00:07:01,560 --> 00:07:06,080 Speaker 2: what happens away from you matters a whole heck of 113 00:07:06,120 --> 00:07:10,720 Speaker 2: a lot to what your current investment look like and 114 00:07:11,000 --> 00:07:14,880 Speaker 2: your own portfolio and your own trading. And so that 115 00:07:15,080 --> 00:07:19,880 Speaker 2: role was emblematic of the importance of that. And so 116 00:07:20,720 --> 00:07:25,280 Speaker 2: it's a terrible title, right, but it's one that I 117 00:07:25,360 --> 00:07:29,440 Speaker 2: think is quite important and made me a much better investor. 118 00:07:29,640 --> 00:07:31,800 Speaker 1: You were there during the John mac era. He was 119 00:07:31,800 --> 00:07:34,760 Speaker 1: a guest on the show last year. What a fascinating 120 00:07:34,760 --> 00:07:38,520 Speaker 1: guy and fascinating career. What was it like working under 121 00:07:38,560 --> 00:07:39,360 Speaker 1: his stewardship? 122 00:07:40,560 --> 00:07:45,640 Speaker 2: John Mac defined leadership I think of Morgan Stanley and 123 00:07:45,720 --> 00:07:50,160 Speaker 2: John macus anonymous. I think he was a fantastic leader. 124 00:07:51,960 --> 00:07:55,880 Speaker 2: We worked very closely together during the crisis. I remember, 125 00:07:56,480 --> 00:07:58,960 Speaker 2: you know, during the kind of the darkest days of 126 00:07:59,000 --> 00:08:02,520 Speaker 2: the financial crisis, we have our morning risk meeting and 127 00:08:02,520 --> 00:08:06,120 Speaker 2: he comes in, sits on a dais and we're talking 128 00:08:06,200 --> 00:08:11,280 Speaker 2: and you know, Lehman was basically you know, just just 129 00:08:11,320 --> 00:08:14,480 Speaker 2: gone under. It's about to and I make this comment, 130 00:08:14,600 --> 00:08:17,640 Speaker 2: I don't think it's about Lehman, It's about aig and 131 00:08:17,680 --> 00:08:21,160 Speaker 2: he just went crazy on me, just yelling at me 132 00:08:21,200 --> 00:08:23,840 Speaker 2: in front of like all these people. But I have 133 00:08:23,920 --> 00:08:27,200 Speaker 2: nothing but the utmost respect for John. I think he's 134 00:08:27,400 --> 00:08:29,280 Speaker 2: just embodies leadership and all. 135 00:08:29,760 --> 00:08:33,360 Speaker 1: And I think history proved you right, Leman. I like 136 00:08:33,440 --> 00:08:37,360 Speaker 1: to describe Lehman Brothers as the first trailer that was 137 00:08:37,559 --> 00:08:40,360 Speaker 1: in the trailer park that was hit by the tornado. 138 00:08:40,400 --> 00:08:43,520 Speaker 1: But the tornado was coming regardless of what happened. 139 00:08:43,240 --> 00:08:46,440 Speaker 2: To Leman, absolutely, and you know, I stand by that statement. 140 00:08:46,520 --> 00:08:50,840 Speaker 2: But he definitely dressed me down in a real strong 141 00:08:50,880 --> 00:08:51,720 Speaker 2: emotional way. 142 00:08:52,280 --> 00:08:55,240 Speaker 1: Huh. So let's talk a little bit about you're at 143 00:08:55,240 --> 00:08:58,480 Speaker 1: Morgan Stanley for a better part of a decade. How 144 00:08:58,520 --> 00:09:02,640 Speaker 1: did that experience all ltimately help you doing what you're 145 00:09:02,679 --> 00:09:05,800 Speaker 1: doing today, which is co head of the multi sector team. 146 00:09:06,480 --> 00:09:09,760 Speaker 2: Yeah, so I was fortunate. So I left Morgan Stanley 147 00:09:10,480 --> 00:09:14,280 Speaker 2: in twenty thirteen. I took some took some time off, 148 00:09:14,360 --> 00:09:17,840 Speaker 2: but essentially I was just tired of the self side. 149 00:09:19,120 --> 00:09:23,200 Speaker 2: I wanted to really begin to invest on my own, 150 00:09:23,920 --> 00:09:26,719 Speaker 2: so I took some time off. I looked at different options, 151 00:09:26,880 --> 00:09:31,040 Speaker 2: starting up my own fund, creating a new multi asset 152 00:09:31,080 --> 00:09:34,880 Speaker 2: business at a pe firm and then PGIM came about, 153 00:09:35,760 --> 00:09:38,520 Speaker 2: and I do have some new Jersey roots and it 154 00:09:38,600 --> 00:09:42,360 Speaker 2: kind of felt, you know, natural, and they really took 155 00:09:42,360 --> 00:09:47,040 Speaker 2: a chance on me. As you know, Mike Lillard, who 156 00:09:47,520 --> 00:09:51,040 Speaker 2: is my recently retired boss, is like, what you were 157 00:09:51,080 --> 00:09:54,800 Speaker 2: doing at Morgan Stanley is directly applicable to what we're 158 00:09:54,840 --> 00:09:56,880 Speaker 2: doing here. It just has a different rapper or a 159 00:09:56,920 --> 00:10:00,360 Speaker 2: different name to it. And so they really with me 160 00:10:01,840 --> 00:10:05,280 Speaker 2: in a position to succeed because what PGM is really 161 00:10:05,320 --> 00:10:10,040 Speaker 2: about is a team construct. So was really helped by that. 162 00:10:10,280 --> 00:10:11,760 Speaker 2: So that was really the move. 163 00:10:12,240 --> 00:10:14,959 Speaker 1: I'm glad you brought up the team construct because one 164 00:10:15,040 --> 00:10:18,440 Speaker 1: of things when you look at the org chart for PGM, 165 00:10:18,520 --> 00:10:21,840 Speaker 1: you can't help but notice all of the co positions. 166 00:10:21,840 --> 00:10:25,959 Speaker 1: So your co CIO, the company itself has co CEOs 167 00:10:26,360 --> 00:10:28,880 Speaker 1: and when you go down that chart, there are cos 168 00:10:29,200 --> 00:10:32,680 Speaker 1: here and there pretty regularly. What's the thought process of 169 00:10:32,840 --> 00:10:36,559 Speaker 1: having dual leadership in all these different departments? 170 00:10:36,800 --> 00:10:39,720 Speaker 2: Yeah, you know, coming from the street, it's a hard 171 00:10:39,760 --> 00:10:44,319 Speaker 2: pill to swallow oftentimes because many think of cos as 172 00:10:44,360 --> 00:10:47,280 Speaker 2: a game of thrones exercise, Right, who's going to win, 173 00:10:47,320 --> 00:10:50,400 Speaker 2: who's going to lose? At PGM and in our fixed 174 00:10:50,400 --> 00:10:55,720 Speaker 2: income organization is very different. It is shared responsibility, shared leadership. 175 00:10:56,480 --> 00:11:00,680 Speaker 2: We do think we're better together than a part, and 176 00:11:00,960 --> 00:11:03,320 Speaker 2: there's a lot of responsibility, and you could make an 177 00:11:03,400 --> 00:11:07,840 Speaker 2: argument that as a fiduciary to your clients and the 178 00:11:07,920 --> 00:11:12,440 Speaker 2: stewards of capital, that that actually is what is a 179 00:11:12,440 --> 00:11:15,600 Speaker 2: better outcome. So I think it really works for us. 180 00:11:16,920 --> 00:11:23,120 Speaker 2: We typically have complementary skill sets and it's additive and 181 00:11:23,559 --> 00:11:26,320 Speaker 2: it works really well for us as an organization, really 182 00:11:26,440 --> 00:11:27,200 Speaker 2: really interesting. 183 00:11:27,559 --> 00:11:30,600 Speaker 1: A lot of people seem to assume that, oh, pgeum, 184 00:11:30,640 --> 00:11:34,240 Speaker 1: they're running money for crudential insurance, but it's not just prue. 185 00:11:34,240 --> 00:11:37,520 Speaker 1: You guys are running money for a lot of institutional clients, 186 00:11:37,559 --> 00:11:37,960 Speaker 1: aren't you. 187 00:11:38,240 --> 00:11:42,600 Speaker 2: Absolutely, So the way our AOM is broken out, a 188 00:11:42,600 --> 00:11:46,120 Speaker 2: little under a third is the insurance company. We think 189 00:11:46,160 --> 00:11:49,840 Speaker 2: about them as a very important client, of course, but 190 00:11:50,040 --> 00:11:53,319 Speaker 2: outside of that, the other two thirds is outside capital, 191 00:11:53,400 --> 00:11:57,720 Speaker 2: so whether it's on the retail or institutional side. So 192 00:11:57,760 --> 00:12:01,480 Speaker 2: it's a very diverse group group of investors. I think 193 00:12:01,520 --> 00:12:07,280 Speaker 2: we have over eleven hundred different investors, and not including 194 00:12:07,320 --> 00:12:10,960 Speaker 2: the small retail I just mean institutionally. So yes, it's 195 00:12:11,000 --> 00:12:15,000 Speaker 2: a broad swath of clients that we cover from pension funds, 196 00:12:15,280 --> 00:12:17,760 Speaker 2: sovereign wealth funds, retail, you name it. 197 00:12:18,040 --> 00:12:20,960 Speaker 1: So that's over half a trillion dollars in non prudential 198 00:12:21,520 --> 00:12:24,720 Speaker 1: just bonds. We're not talking about anything else. Let's talk 199 00:12:24,760 --> 00:12:29,040 Speaker 1: about what it's like being a co CIO for fixed income. 200 00:12:29,559 --> 00:12:33,600 Speaker 1: How do you share the responsibilities, who is in charge 201 00:12:33,640 --> 00:12:36,440 Speaker 1: of what? And do you ever kind of run into 202 00:12:36,559 --> 00:12:37,679 Speaker 1: complications with that? 203 00:12:38,240 --> 00:12:42,560 Speaker 2: Yeah, So my co is Craig Dueling, who incidentally was 204 00:12:42,600 --> 00:12:45,120 Speaker 2: my boss since the day I joined. Oh yeah, he's 205 00:12:45,160 --> 00:12:48,560 Speaker 2: a fantastic boss. So I feel very fortunate. We've been 206 00:12:48,600 --> 00:12:51,760 Speaker 2: sitting next to each other since the day I joined, 207 00:12:53,480 --> 00:12:57,240 Speaker 2: and we have a real complementary skill set. So he 208 00:12:58,440 --> 00:13:06,480 Speaker 2: focuses largely on insurance company Japan. You know, multisector is 209 00:13:06,720 --> 00:13:09,000 Speaker 2: you know, part of my remit because I'm on the fund. 210 00:13:09,120 --> 00:13:12,600 Speaker 2: So I'm a portfolio manager on those funds. So you 211 00:13:12,640 --> 00:13:16,000 Speaker 2: know that is a you know, big responsibility of course, 212 00:13:16,880 --> 00:13:22,960 Speaker 2: but we we really work together and try to critically 213 00:13:23,000 --> 00:13:26,600 Speaker 2: assess the process and how do we improve the process 214 00:13:26,640 --> 00:13:28,760 Speaker 2: of investing across the entire floor. 215 00:13:28,960 --> 00:13:31,880 Speaker 1: So I could see how having two sets of eyes 216 00:13:32,559 --> 00:13:38,160 Speaker 1: is advantageous when you have co heads for the department. 217 00:13:38,280 --> 00:13:42,200 Speaker 1: What are the challenges I can imagine it's not easy 218 00:13:42,520 --> 00:13:46,319 Speaker 1: when you sort of have to reach a happy consensus 219 00:13:46,320 --> 00:13:47,599 Speaker 1: on all major decisions. 220 00:13:48,800 --> 00:13:50,599 Speaker 2: You know, I'll take the other side of that to 221 00:13:50,760 --> 00:13:55,959 Speaker 2: a degree. I think conflict is a good thing, and 222 00:13:56,000 --> 00:13:59,040 Speaker 2: so I'm not you know, saying Game of Thrones type 223 00:13:59,080 --> 00:14:02,400 Speaker 2: of conflict to go back to that reference. But but 224 00:14:02,679 --> 00:14:06,160 Speaker 2: you know, I'm very much into the idea of pre mortem. 225 00:14:06,360 --> 00:14:09,440 Speaker 2: So I want to suss out the issues I want 226 00:14:09,480 --> 00:14:14,280 Speaker 2: to debate. We have a real culture of debate, you know, 227 00:14:14,360 --> 00:14:18,520 Speaker 2: at the firm, and so I think having that in 228 00:14:18,559 --> 00:14:23,440 Speaker 2: the mix prior to whether getsing a portfolio or making decision, 229 00:14:23,520 --> 00:14:26,960 Speaker 2: I think is critically important. You know, command and control 230 00:14:27,040 --> 00:14:31,280 Speaker 2: oftentimes has lots of blind spots to it right, It 231 00:14:32,720 --> 00:14:37,240 Speaker 2: suffers from that individual's biases, and I think that's dangerous. 232 00:14:37,280 --> 00:14:39,960 Speaker 2: So having that, you know, checks and balances, I think 233 00:14:40,040 --> 00:14:44,080 Speaker 2: is incredibly powerful. And you know, you have to trust 234 00:14:44,120 --> 00:14:49,240 Speaker 2: each other as an individual and as an organization as 235 00:14:49,400 --> 00:14:52,120 Speaker 2: it's not malicious. Someone disagreeing with you is not a 236 00:14:52,160 --> 00:14:56,480 Speaker 2: malicious act exactly quite the opposite. And you know, if 237 00:14:56,520 --> 00:14:59,560 Speaker 2: you think that you're all in it together, working for 238 00:14:59,600 --> 00:15:02,440 Speaker 2: a common and purposed and I think it works pretty well. 239 00:15:03,040 --> 00:15:06,600 Speaker 1: I love the concept of doing the pre mortems while 240 00:15:06,640 --> 00:15:11,360 Speaker 1: you're unemotional and objective, because once something hits the fan 241 00:15:11,480 --> 00:15:13,760 Speaker 1: and you're trying to figure out, hey, what do we 242 00:15:13,800 --> 00:15:17,040 Speaker 1: do here, it's a very different set of analyzes, isn't it. 243 00:15:17,480 --> 00:15:23,440 Speaker 2: Absolutely? And you know, I'm a very big fan of 244 00:15:23,520 --> 00:15:27,760 Speaker 2: looking at a probabilistic scenario based approach, and I think 245 00:15:27,800 --> 00:15:32,440 Speaker 2: the important part of that exercise is to analyze those 246 00:15:32,520 --> 00:15:38,120 Speaker 2: different possibilities, right, and think about what your portfolio would 247 00:15:38,160 --> 00:15:41,800 Speaker 2: look like, what a certain trade will look like before 248 00:15:41,800 --> 00:15:45,080 Speaker 2: it happens, right, And so you shouldn't be so surprised 249 00:15:45,080 --> 00:15:46,880 Speaker 2: by it. And of course you're always surprised because you 250 00:15:46,920 --> 00:15:51,680 Speaker 2: can never kind of put the proper scenarios around everything, 251 00:15:51,680 --> 00:15:54,960 Speaker 2: of course, But at the same time, I think looking 252 00:15:55,000 --> 00:16:00,000 Speaker 2: at it through a multiple scenario lens is incredibly powerful. 253 00:16:01,000 --> 00:16:04,440 Speaker 1: So last year twenty twenty three, we saw treasure yields 254 00:16:04,480 --> 00:16:07,400 Speaker 1: hit their highest levels since I don't know, I want 255 00:16:07,400 --> 00:16:11,280 Speaker 1: to say seven since right before the financial crisis. How 256 00:16:11,360 --> 00:16:15,720 Speaker 1: are you guys managing your duration? Here? Are you short term? 257 00:16:15,720 --> 00:16:18,920 Speaker 1: Are you long term? Where you relative to where Pgum's 258 00:16:18,920 --> 00:16:21,520 Speaker 1: fixed income duration was in the twenty tens. 259 00:16:21,800 --> 00:16:26,840 Speaker 2: Yeah, so we were known as the lower for longer institution. 260 00:16:27,280 --> 00:16:31,280 Speaker 2: So you know, when the world thought rates would rise, 261 00:16:31,400 --> 00:16:34,760 Speaker 2: we were like, no, rates are here to stay last 262 00:16:34,800 --> 00:16:39,840 Speaker 2: decade on the yeah, before twenty twenty, and so that 263 00:16:40,040 --> 00:16:43,200 Speaker 2: was kind of our calling card and that worked really, 264 00:16:43,240 --> 00:16:49,680 Speaker 2: really well, that transition from you know, twenty twenty post pandemic. 265 00:16:50,320 --> 00:16:53,000 Speaker 2: Quite candidly, we were a little slow to react on 266 00:16:53,040 --> 00:16:56,240 Speaker 2: the secular shift. So if I had to, you know, 267 00:16:56,280 --> 00:16:59,120 Speaker 2: go back and revisit, you know, items that we didn't 268 00:16:59,160 --> 00:17:00,920 Speaker 2: get right, that would be one that we did not 269 00:17:01,000 --> 00:17:06,720 Speaker 2: get right. At the same time, though, looking forward, we've 270 00:17:06,840 --> 00:17:10,520 Speaker 2: really moved from lower to longer to higher for longer, right, 271 00:17:10,520 --> 00:17:12,480 Speaker 2: which doesn't have the same ring to it, of course, 272 00:17:13,200 --> 00:17:16,240 Speaker 2: but you know, we do think the world has changed 273 00:17:17,280 --> 00:17:22,040 Speaker 2: and we see a little more growth, kind of secular growth, 274 00:17:22,480 --> 00:17:25,840 Speaker 2: a little more inflation on a secular basis as well, 275 00:17:26,240 --> 00:17:29,159 Speaker 2: and that should translate to a higher bond yields. So 276 00:17:29,840 --> 00:17:33,840 Speaker 2: long winded ways saying we've been short duration, so we've 277 00:17:33,880 --> 00:17:37,280 Speaker 2: felt that our rates have been poised to rise all 278 00:17:37,320 --> 00:17:42,280 Speaker 2: else equal and stay high. And that's where we are today. 279 00:17:42,320 --> 00:17:45,280 Speaker 1: At what point in the cycle. Do you say, okay, 280 00:17:45,280 --> 00:17:47,879 Speaker 1: it feels pretty safe to go out on the duration 281 00:17:48,040 --> 00:17:51,080 Speaker 1: curve and instead of being three to five years of 282 00:17:51,119 --> 00:17:53,960 Speaker 1: five to seven years, maybe we could be ten, seven 283 00:17:54,000 --> 00:17:54,920 Speaker 1: to ten years. 284 00:17:55,760 --> 00:18:00,159 Speaker 2: Here's the irony is that given where yields are, you 285 00:18:00,200 --> 00:18:04,240 Speaker 2: actually get paid to be out there, whether yields rally 286 00:18:04,359 --> 00:18:08,400 Speaker 2: or even sell off a little, right, So we were 287 00:18:08,440 --> 00:18:12,880 Speaker 2: suffering from such a recency bias where so many investors 288 00:18:12,920 --> 00:18:20,240 Speaker 2: haven't seen the world pre GFC the you know, yields 289 00:18:20,240 --> 00:18:23,720 Speaker 2: weren't supposed to be that low, right, and so you know, 290 00:18:23,840 --> 00:18:26,480 Speaker 2: all the modeling that well, you know, the fan has 291 00:18:26,480 --> 00:18:29,280 Speaker 2: to bring back rates to zero again and so on 292 00:18:29,280 --> 00:18:32,520 Speaker 2: and so forth. I think is really really miscast. And 293 00:18:32,640 --> 00:18:37,919 Speaker 2: so you know, I think having duration in a portfolio, 294 00:18:37,960 --> 00:18:39,680 Speaker 2: and we got a whiff of that at the end 295 00:18:39,680 --> 00:18:43,320 Speaker 2: of last year, right when there was this ferocious rally 296 00:18:43,359 --> 00:18:47,040 Speaker 2: for whatever reason I don't recall necessarily it didn't make 297 00:18:47,080 --> 00:18:49,600 Speaker 2: a lot of sense to me, but it just tells 298 00:18:49,640 --> 00:18:54,960 Speaker 2: you have duration on you're getting paid carried to do it, 299 00:18:55,880 --> 00:18:59,080 Speaker 2: and you have this protective measure where if the world 300 00:18:59,240 --> 00:19:02,920 Speaker 2: does go around, if a recession does hit, growth does 301 00:19:02,960 --> 00:19:08,320 Speaker 2: slow for whatever reason, it has that protective characteristic. Importantly, 302 00:19:08,600 --> 00:19:12,640 Speaker 2: it didn't have that before, right, So when rates were 303 00:19:12,720 --> 00:19:17,119 Speaker 2: effectively at zero, it was a didn't make sense to 304 00:19:17,160 --> 00:19:19,800 Speaker 2: be long that instrument because there was no positive carry. 305 00:19:20,320 --> 00:19:22,560 Speaker 2: And then if a recession did hit, there was no 306 00:19:22,720 --> 00:19:26,439 Speaker 2: room or scope for rates to rally. So bonds lost 307 00:19:26,600 --> 00:19:31,439 Speaker 2: their way, and which is why everyone was questioning the 308 00:19:31,480 --> 00:19:35,240 Speaker 2: sixty forty efficacy. And it was a good question. But 309 00:19:35,280 --> 00:19:37,000 Speaker 2: I think we're in a very different place today, and 310 00:19:37,040 --> 00:19:39,399 Speaker 2: I think bonds have a tremendous amount of value in 311 00:19:39,400 --> 00:19:40,400 Speaker 2: a balanced portfolio. 312 00:19:40,640 --> 00:19:43,919 Speaker 1: The great irony is prior to the twenty twenty two 313 00:19:43,960 --> 00:19:47,960 Speaker 1: to twenty three rate hiking cycle, there was an entire 314 00:19:48,040 --> 00:19:52,440 Speaker 1: generation of bond managers, traders, analysts who really have never 315 00:19:52,600 --> 00:19:57,040 Speaker 1: lived through a rising rate environment. They've been at zero 316 00:19:57,320 --> 00:20:02,000 Speaker 1: practically since September eleventh. Since dot Com implosion, rates have 317 00:20:02,040 --> 00:20:05,679 Speaker 1: only trended lower and stayed low for forever. As you said, 318 00:20:06,040 --> 00:20:09,520 Speaker 1: that really isn't very normal, isn't How far are we 319 00:20:10,080 --> 00:20:13,520 Speaker 1: from what you would think of as fairly normalized rates. 320 00:20:14,040 --> 00:20:18,280 Speaker 2: I think we are finally in a normal zone. But 321 00:20:18,320 --> 00:20:22,639 Speaker 2: you're quite right, you need to zoom out. So financial 322 00:20:22,720 --> 00:20:27,679 Speaker 2: history didn't start in two thousand, right as well before that, 323 00:20:27,760 --> 00:20:30,040 Speaker 2: So we have this chart that has one hundred and 324 00:20:30,040 --> 00:20:35,840 Speaker 2: fifty years of yields, right, you know, so you know, 325 00:20:36,080 --> 00:20:41,800 Speaker 2: looking at different regime chefs. So I think we are 326 00:20:41,960 --> 00:20:45,439 Speaker 2: finally in a more normal environment. I also believe that, 327 00:20:46,200 --> 00:20:49,240 Speaker 2: you know, history will continue to shine a really unfavorable 328 00:20:49,320 --> 00:20:53,600 Speaker 2: light on a central bank policy of zero rates and 329 00:20:53,640 --> 00:20:57,920 Speaker 2: negative rates. Right if you kind of asked the common person, 330 00:20:59,320 --> 00:21:03,080 Speaker 2: you know, why is a bond yield negative? I don't 331 00:21:03,080 --> 00:21:06,600 Speaker 2: think anyone could come up with a great reason. Kind 332 00:21:06,640 --> 00:21:09,720 Speaker 2: of us, in a professional realm, convince ourselves why. But 333 00:21:11,160 --> 00:21:15,359 Speaker 2: was that really true? Probably not? So, So I think 334 00:21:15,359 --> 00:21:18,080 Speaker 2: we're more normal now, and I think it makes sense, 335 00:21:18,080 --> 00:21:19,360 Speaker 2: and I feel pretty good about it. 336 00:21:19,560 --> 00:21:23,080 Speaker 1: So we're talking about rates, but let's go beyond rates. 337 00:21:23,119 --> 00:21:26,480 Speaker 1: What do you see on the credit quality side? How 338 00:21:26,560 --> 00:21:31,680 Speaker 1: significant is that? I've noticed the gap between high yields 339 00:21:32,200 --> 00:21:35,959 Speaker 1: and riskless seems to be kind of tight these days. 340 00:21:36,200 --> 00:21:39,200 Speaker 1: How do you look at the credit quality side? 341 00:21:39,359 --> 00:21:44,679 Speaker 2: Credit's tricky. So it's important to note that we have 342 00:21:44,840 --> 00:21:49,080 Speaker 2: not had a credit cycle, you know, since the early 343 00:21:49,200 --> 00:21:52,800 Speaker 2: two thousands, right, so kind of the late nineties cycle. 344 00:21:54,119 --> 00:21:58,560 Speaker 2: As a consequence of that, we really haven't experienced credit losses, right, 345 00:21:58,600 --> 00:22:01,840 Speaker 2: We've had these the these swoons of liquidity risk, and 346 00:22:01,880 --> 00:22:05,119 Speaker 2: obviously we have the GFC. But what we've seen is 347 00:22:05,160 --> 00:22:09,480 Speaker 2: that central banks have stepped in very quickly to kind 348 00:22:09,520 --> 00:22:12,280 Speaker 2: of rescue. But you haven't seen a real uptick in 349 00:22:12,320 --> 00:22:16,200 Speaker 2: to faults, right, distressing the faults. You're starting to see 350 00:22:16,200 --> 00:22:21,320 Speaker 2: that pick up, and I believe that distressing default activity 351 00:22:21,359 --> 00:22:25,600 Speaker 2: will remain high, just given so many balance sheets were 352 00:22:25,640 --> 00:22:29,119 Speaker 2: built on the backs of zero interest rates, and as 353 00:22:29,760 --> 00:22:33,919 Speaker 2: that gets refinanced, that puts more pressure on these businesses 354 00:22:33,960 --> 00:22:36,920 Speaker 2: to survive, and that just leads to more handing over 355 00:22:36,960 --> 00:22:39,520 Speaker 2: the keys type of you know situations. 356 00:22:39,560 --> 00:22:43,520 Speaker 1: So two questions about that. First, is that an early 357 00:22:43,600 --> 00:22:47,680 Speaker 1: warning sign of something untoward in the economy? And second, 358 00:22:48,240 --> 00:22:50,840 Speaker 1: if we're seeing these defaults take up, why is there 359 00:22:50,880 --> 00:22:56,680 Speaker 1: such a tight spread between high quality corporates and high 360 00:22:56,760 --> 00:22:57,560 Speaker 1: risk corporates. 361 00:22:58,280 --> 00:23:00,880 Speaker 2: I think it is an early warning sign, for sure. 362 00:23:01,440 --> 00:23:06,199 Speaker 2: I also think it's a resumption of normalcy, so we're 363 00:23:06,240 --> 00:23:10,200 Speaker 2: in a more normal environment. I also think it's incredibly 364 00:23:10,760 --> 00:23:13,840 Speaker 2: opportunistic for investors like us as well, so I'm excited 365 00:23:13,880 --> 00:23:17,359 Speaker 2: about it. But your point around the compression, though, is 366 00:23:17,400 --> 00:23:20,920 Speaker 2: an excellent one, and so I still believe, we still 367 00:23:20,960 --> 00:23:25,520 Speaker 2: believe a PGM that investors are overpaying for credit risk, 368 00:23:25,880 --> 00:23:29,080 Speaker 2: whether it's down the capital stack in a structured product, 369 00:23:29,680 --> 00:23:36,159 Speaker 2: whether it's single B versus a triple B as I 370 00:23:36,320 --> 00:23:39,440 Speaker 2: think once again the recency bias aspect of it, right, 371 00:23:39,600 --> 00:23:42,119 Speaker 2: So you know, I see a lot more value on 372 00:23:42,160 --> 00:23:44,760 Speaker 2: the higher quality scale than the lower quality. I think 373 00:23:44,920 --> 00:23:47,920 Speaker 2: the relative value is inverted. And if you look at 374 00:23:48,040 --> 00:23:52,080 Speaker 2: just kind of broad index levels, we're in the tightest 375 00:23:52,119 --> 00:23:56,280 Speaker 2: decile for investment grade corpus as well as high yield. 376 00:23:56,320 --> 00:23:59,920 Speaker 2: So there's not a lot of room to tighten more 377 00:24:00,119 --> 00:24:00,600 Speaker 2: from here. 378 00:24:01,119 --> 00:24:05,640 Speaker 1: So some of the criticism I've seen of private debt 379 00:24:05,680 --> 00:24:10,440 Speaker 1: and private credit is exactly what you've said generally, which 380 00:24:10,480 --> 00:24:15,640 Speaker 1: is some investors are overpaying for risk. Do you look 381 00:24:15,680 --> 00:24:18,199 Speaker 1: at the world of private credit and in terms of 382 00:24:18,240 --> 00:24:22,480 Speaker 1: intermarket analysis, how does that make you think about publicly 383 00:24:22,520 --> 00:24:23,560 Speaker 1: traded fixed income? 384 00:24:23,960 --> 00:24:27,719 Speaker 2: Yeah, so I do look at the world of private credit, 385 00:24:27,800 --> 00:24:31,439 Speaker 2: and I look across the broad spectrum of credit, and 386 00:24:31,480 --> 00:24:35,439 Speaker 2: so what you've seen over the past is called seven 387 00:24:35,560 --> 00:24:39,800 Speaker 2: to ten years is obviously this tremendous growth in private credit, 388 00:24:41,400 --> 00:24:46,720 Speaker 2: but that has actually taken risk out of the public markets, right, 389 00:24:46,760 --> 00:24:49,280 Speaker 2: And I think the most important market to focused on 390 00:24:49,680 --> 00:24:52,160 Speaker 2: focus on is the lever loan market, right because it's 391 00:24:52,240 --> 00:24:55,280 Speaker 2: kind of private, but it's kind of public, so it's 392 00:24:55,359 --> 00:24:58,119 Speaker 2: kind of the fulcrum point. And so what we've seen 393 00:24:58,680 --> 00:25:03,880 Speaker 2: is leverage really ramp up on the levered loan side, 394 00:25:04,000 --> 00:25:07,640 Speaker 2: and so kind of the LBO transactions, the pro forma 395 00:25:08,040 --> 00:25:11,240 Speaker 2: leverage and ibadah has been heroic, it hasn't come through. 396 00:25:12,000 --> 00:25:15,680 Speaker 2: So that is I think the Canary and the coal mine. 397 00:25:16,560 --> 00:25:20,440 Speaker 2: Interestingly enough, that has been the best performing fixed income 398 00:25:22,160 --> 00:25:24,879 Speaker 2: an asset over the past eighteen months or so. So 399 00:25:25,320 --> 00:25:27,040 Speaker 2: you know, the joke's kind of been on me for 400 00:25:27,080 --> 00:25:29,840 Speaker 2: a little bit, but I do think that gives you 401 00:25:29,880 --> 00:25:34,200 Speaker 2: a gateway into where the leverage is, and the leverage 402 00:25:34,200 --> 00:25:39,000 Speaker 2: in the system is in a more opaque area and 403 00:25:39,119 --> 00:25:44,040 Speaker 2: not the public area, and that is quite worrisome for 404 00:25:44,200 --> 00:25:47,159 Speaker 2: me for me when we think about kind of the 405 00:25:47,200 --> 00:25:47,920 Speaker 2: next recession. 406 00:25:48,400 --> 00:25:51,240 Speaker 1: So I'm going to assume that in the current environment, 407 00:25:51,800 --> 00:25:54,440 Speaker 1: you're not looking to dial up credit risk. 408 00:25:55,520 --> 00:26:00,320 Speaker 2: No, No, So I would say two things. One is 409 00:26:00,359 --> 00:26:04,040 Speaker 2: that kind of broad kind of macro credit risk we've 410 00:26:04,680 --> 00:26:07,680 Speaker 2: we've taken now we've continue to you know, take down 411 00:26:08,359 --> 00:26:12,240 Speaker 2: just kind of risk reward. Risk adjusted returns don't look 412 00:26:12,280 --> 00:26:15,560 Speaker 2: really that attractive to us. At the same time, though, 413 00:26:16,320 --> 00:26:22,320 Speaker 2: I talked about the increase in distressed and you know, 414 00:26:22,400 --> 00:26:27,879 Speaker 2: quasi distressed, and that's creating dispersion, and dispersion's good for 415 00:26:27,960 --> 00:26:31,800 Speaker 2: active managers. So on one end, the broad macro credit 416 00:26:31,920 --> 00:26:36,520 Speaker 2: risk looks kind of fully valued, not that exciting, but 417 00:26:36,720 --> 00:26:40,199 Speaker 2: the dispersion in the market creates a lot of value 418 00:26:40,240 --> 00:26:44,240 Speaker 2: for active managers. Now it's incumbent upon active managers like 419 00:26:44,320 --> 00:26:48,520 Speaker 2: us to capture it, but that's exciting. Whereas before it 420 00:26:48,680 --> 00:26:51,399 Speaker 2: was everything was very compressed and it traded kind of 421 00:26:51,440 --> 00:26:54,639 Speaker 2: all together and it was hard to add a lot 422 00:26:54,680 --> 00:26:56,359 Speaker 2: of value in that. 423 00:26:56,359 --> 00:27:00,000 Speaker 1: That's really interesting. So first quarter of twenty twenty four 424 00:27:00,119 --> 00:27:03,439 Speaker 1: or you said something that I thought was really intriguing. 425 00:27:04,200 --> 00:27:09,200 Speaker 1: Investors need to figure out how to bulletproof their bond portfolio. 426 00:27:10,080 --> 00:27:12,400 Speaker 1: How does one bulletproof your bond portfolio? 427 00:27:12,600 --> 00:27:14,320 Speaker 2: Yeah, you know, I think that was taken a little 428 00:27:14,320 --> 00:27:16,680 Speaker 2: out of context if I remember, but the idea behind 429 00:27:16,720 --> 00:27:23,600 Speaker 2: it essentially was don't take unnecessary risk. The world has changed. 430 00:27:24,960 --> 00:27:29,160 Speaker 2: Investors aren't incentivized or rewarded to take the same kind 431 00:27:29,160 --> 00:27:32,960 Speaker 2: of risk that they were before. So move up the 432 00:27:33,040 --> 00:27:39,000 Speaker 2: quality curve, don't move down. So I still believe, as 433 00:27:39,000 --> 00:27:41,639 Speaker 2: I mentioned before, that investors are still stuck in this 434 00:27:41,680 --> 00:27:45,960 Speaker 2: old world and they're overpaying for real credit risk and 435 00:27:46,119 --> 00:27:50,080 Speaker 2: underpaying light credit risk. And so that's really what I 436 00:27:50,119 --> 00:27:52,600 Speaker 2: mean by it. So you don't have to take the 437 00:27:52,720 --> 00:27:57,520 Speaker 2: risk now that you had to a few years back. 438 00:27:57,960 --> 00:28:00,840 Speaker 1: You were very early when you were told about higher 439 00:28:00,840 --> 00:28:04,119 Speaker 1: for longer, you know, last decade, not a lot of 440 00:28:04,119 --> 00:28:08,960 Speaker 1: people got that right, and you totally did. What were 441 00:28:09,000 --> 00:28:11,439 Speaker 1: you seeing at that time that led you to the 442 00:28:11,520 --> 00:28:14,400 Speaker 1: conclusion the FED is in no hurry to get off 443 00:28:14,440 --> 00:28:18,080 Speaker 1: its emergency footing, and there's no impulse to raise rates. 444 00:28:18,680 --> 00:28:21,760 Speaker 1: Expect lower rates for the rest of this decade. 445 00:28:22,280 --> 00:28:25,199 Speaker 2: Yeah. So you know, as I mentioned before, we pivoted 446 00:28:25,440 --> 00:28:29,439 Speaker 2: in twenty twenty one from our low for longer to 447 00:28:29,560 --> 00:28:34,480 Speaker 2: hire the longer, And that was just a realization that 448 00:28:36,160 --> 00:28:41,160 Speaker 2: you know, post COVID, you're in an environment where infl 449 00:28:41,960 --> 00:28:45,680 Speaker 2: inflationary pressures are very different. Right. You talk about or 450 00:28:45,760 --> 00:28:52,280 Speaker 2: you hear about near shoring, friend shoring, the adjacencies, proximity, 451 00:28:52,360 --> 00:28:56,200 Speaker 2: so on and so forth. That's less efficient, that puts 452 00:28:56,240 --> 00:29:02,160 Speaker 2: more pressure on inflationary forces. You know, in every other 453 00:29:02,240 --> 00:29:07,200 Speaker 2: aspect that we look at seems inflationary to me. So 454 00:29:07,760 --> 00:29:10,960 Speaker 2: that's the one side. The other side is I do 455 00:29:11,080 --> 00:29:15,600 Speaker 2: really feel like we're finally out of this secular stagnation store. 456 00:29:16,280 --> 00:29:20,240 Speaker 2: And so if you just take those two items, that's 457 00:29:20,280 --> 00:29:22,720 Speaker 2: our premise. It's not factor course, but that's our premise. 458 00:29:23,120 --> 00:29:27,000 Speaker 2: Then that should lead to a higher rate environment, not 459 00:29:27,040 --> 00:29:31,080 Speaker 2: a lower rate environment. And so we're in a series 460 00:29:31,320 --> 00:29:34,880 Speaker 2: of secular shifts, I believe, and I think that manifests 461 00:29:34,920 --> 00:29:39,480 Speaker 2: itself through higher rates, not lower rates, and so that's 462 00:29:39,520 --> 00:29:43,239 Speaker 2: been our thesis. At the same time, there's been this 463 00:29:43,360 --> 00:29:47,440 Speaker 2: tendency in the market where any data print, it doesn't 464 00:29:47,440 --> 00:29:49,160 Speaker 2: matter if it's good, better and different, it could be 465 00:29:49,240 --> 00:29:57,000 Speaker 2: deciphered however you like, seems to want to resort back 466 00:29:57,040 --> 00:29:59,120 Speaker 2: to the world that it was, and I think that 467 00:29:59,200 --> 00:30:02,719 Speaker 2: misses the bigger pictures. So that's that's kind of our thinking. 468 00:30:03,480 --> 00:30:05,640 Speaker 2: It's going to be a volatile ride. So this is 469 00:30:05,720 --> 00:30:09,760 Speaker 2: not a point estimate like tenures X, but I think 470 00:30:09,800 --> 00:30:12,320 Speaker 2: it'll be in a volatile yet higher range. 471 00:30:12,960 --> 00:30:16,480 Speaker 1: So let me follow up with a couple of questions. 472 00:30:16,480 --> 00:30:19,760 Speaker 1: Some things I find really intriguing. You know, I've heard 473 00:30:19,800 --> 00:30:23,320 Speaker 1: a number of people say, hey, this, if globalization is 474 00:30:23,360 --> 00:30:29,320 Speaker 1: efficient and deflationary, well near Suring is going to be inflationary. 475 00:30:29,840 --> 00:30:35,040 Speaker 1: But wasn't the spark that lit this entire inflationary cycle 476 00:30:35,920 --> 00:30:41,120 Speaker 1: the lack of supply chain logistics? We were unable to 477 00:30:41,160 --> 00:30:47,239 Speaker 1: get things because we couldn't get masks or or you know, 478 00:30:47,400 --> 00:30:51,080 Speaker 1: alcohol rubs or anything like that, toilet or toilet paper, 479 00:30:51,240 --> 00:30:54,560 Speaker 1: or semiconductors or what have you because it was coming 480 00:30:54,600 --> 00:30:59,440 Speaker 1: from overseas. Doesn't Near Suring create a little more resiliency 481 00:30:59,760 --> 00:31:04,920 Speaker 1: and tipe fragility. And if the broken supply chains was 482 00:31:04,960 --> 00:31:09,320 Speaker 1: the early spike of inflation, well removing that shouldn't that 483 00:31:10,120 --> 00:31:13,040 Speaker 1: give us a little bit of a shield against the 484 00:31:13,080 --> 00:31:17,000 Speaker 1: next inflationary cycle, at least a supply chain driven cycle. 485 00:31:17,280 --> 00:31:21,200 Speaker 2: Yeah. I mean, if you think about how businesses were running, 486 00:31:21,760 --> 00:31:25,600 Speaker 2: it was just in time, inventory in extremists. 487 00:31:24,960 --> 00:31:27,240 Speaker 1: Super super efficient, super low cost. 488 00:31:27,200 --> 00:31:31,400 Speaker 2: And the supply chains were exceedingly complicated, right, So it 489 00:31:32,480 --> 00:31:36,240 Speaker 2: wasn't a one jurisdiction supply chain. It was multiple jurisdictions 490 00:31:36,240 --> 00:31:42,440 Speaker 2: across the supply chain. And so yeah, maybe you eked 491 00:31:42,440 --> 00:31:46,600 Speaker 2: out additional efficiencies and I'm using air quotes that means 492 00:31:46,680 --> 00:31:49,480 Speaker 2: costs by doing that, But you lose control at the 493 00:31:49,520 --> 00:31:53,280 Speaker 2: same time. So you know, I think what CEOs and 494 00:31:53,320 --> 00:31:56,640 Speaker 2: you know, business leaders decided is that, you know, it's 495 00:31:56,680 --> 00:32:01,520 Speaker 2: better to have a little more control than a few sins. 496 00:32:01,840 --> 00:32:05,000 Speaker 1: Everything is a series of trade offs. The other thing 497 00:32:05,040 --> 00:32:07,840 Speaker 1: that we were talking about earlier, the lower for longer. 498 00:32:08,360 --> 00:32:11,760 Speaker 1: In the twenty tens, let's talk about the twenty tens 499 00:32:11,840 --> 00:32:17,600 Speaker 1: versus the twenty twenties. Twenty tens obviously monetary policy driven. 500 00:32:18,280 --> 00:32:22,160 Speaker 1: Suddenly we have the pandemic, we have the Cares Act 501 00:32:22,440 --> 00:32:26,080 Speaker 1: one and two, this giant fiscal stimulus under President Trump. 502 00:32:26,120 --> 00:32:29,120 Speaker 1: You have the Cares Act three under President Biden, plus 503 00:32:29,200 --> 00:32:35,400 Speaker 1: a whole bunch of other longer term tenuere spends. Is 504 00:32:35,600 --> 00:32:39,920 Speaker 1: the twenty twenties the decade of fiscal stimulus, and how 505 00:32:39,920 --> 00:32:41,520 Speaker 1: does fixed and income adapt to that. 506 00:32:42,680 --> 00:32:46,800 Speaker 2: Fiscal has been incredibly powerful, no doubt about it. If 507 00:32:46,840 --> 00:32:49,680 Speaker 2: you look at I think the durability of the US 508 00:32:49,760 --> 00:32:53,960 Speaker 2: economy and the outperformance of the US economy, I think 509 00:32:54,440 --> 00:32:57,000 Speaker 2: a lot of that has to do with fiscal of course, 510 00:32:59,200 --> 00:33:02,640 Speaker 2: But you know, at the same time, you look at 511 00:33:02,920 --> 00:33:05,760 Speaker 2: the Chips Act and some other I think notable industrial 512 00:33:05,840 --> 00:33:10,280 Speaker 2: policy measures. You know that money hasn't really been put 513 00:33:10,280 --> 00:33:11,720 Speaker 2: in the system either, right, and. 514 00:33:11,680 --> 00:33:13,600 Speaker 1: That's over ten years. Yeah, that's going to be a 515 00:33:13,640 --> 00:33:14,440 Speaker 1: tailwind right now. 516 00:33:14,480 --> 00:33:19,000 Speaker 2: So yeah, so I think there's lots of focus on 517 00:33:19,040 --> 00:33:23,040 Speaker 2: the deficit, and that's precisely right. We should focus on 518 00:33:23,080 --> 00:33:27,360 Speaker 2: the deficit. But I do believe that having a more 519 00:33:28,520 --> 00:33:35,840 Speaker 2: cohesive fiscal policy around industrial measures is important, and that 520 00:33:36,040 --> 00:33:39,280 Speaker 2: actually is leading us to believe that there's hope on 521 00:33:39,320 --> 00:33:42,400 Speaker 2: the horizon to get a little more efficiencies out of 522 00:33:42,400 --> 00:33:46,480 Speaker 2: the economy and we can grow at a higher plane. 523 00:33:47,040 --> 00:33:49,720 Speaker 1: So in January twenty twenty four, you had a quote 524 00:33:49,800 --> 00:33:54,160 Speaker 1: that quote, my attention, yield is destiny for fixed income. 525 00:33:54,520 --> 00:33:55,760 Speaker 1: Explain what you mean by that. 526 00:33:56,440 --> 00:34:01,920 Speaker 2: So, essentially what we mean by that is the yield 527 00:34:01,960 --> 00:34:07,280 Speaker 2: itself is the value proposition, right, So earning that carry 528 00:34:07,920 --> 00:34:10,920 Speaker 2: the income. Right, So the income out of fixed income 529 00:34:11,080 --> 00:34:15,920 Speaker 2: was taken out of the equation post DFC, but having 530 00:34:15,960 --> 00:34:20,440 Speaker 2: that income, having that carry is incredibly powerful. And so 531 00:34:21,200 --> 00:34:23,799 Speaker 2: if you look at you know, over the course of 532 00:34:23,840 --> 00:34:28,759 Speaker 2: many decades, the key driver to performance and returns is 533 00:34:28,800 --> 00:34:31,440 Speaker 2: the starting yield, right, so I know it sounds trite 534 00:34:31,480 --> 00:34:34,399 Speaker 2: to say, but starting point matters, and so when you're 535 00:34:34,440 --> 00:34:39,759 Speaker 2: starting with a higher yield, that that allows investors a 536 00:34:39,920 --> 00:34:41,520 Speaker 2: higher possible return. 537 00:34:42,520 --> 00:34:46,680 Speaker 1: So you mentioned in December there was an extreme disconnect 538 00:34:46,840 --> 00:34:50,160 Speaker 1: between the FED and the markets. What are you referring 539 00:34:50,200 --> 00:34:50,440 Speaker 1: to that? 540 00:34:50,760 --> 00:34:53,520 Speaker 2: Yeah, So I was really besides myself at that time, 541 00:34:54,400 --> 00:35:00,400 Speaker 2: and so I was looking at the inflation picture, looking 542 00:35:00,440 --> 00:35:04,400 Speaker 2: at growth, and I couldn't understand why the market was 543 00:35:04,480 --> 00:35:08,440 Speaker 2: so aggressively pricing in rate cuts. I just couldn't, for 544 00:35:08,480 --> 00:35:11,920 Speaker 2: the life of me, understand it. And it's funny story. 545 00:35:12,040 --> 00:35:15,360 Speaker 2: I was down at some hedge fund conference in Miami, 546 00:35:15,400 --> 00:35:21,640 Speaker 2: of course, in January, and the whole room was I'm 547 00:35:21,640 --> 00:35:23,560 Speaker 2: not sure if it's bared up or bulled up, but 548 00:35:23,600 --> 00:35:28,120 Speaker 2: they were basically in the camp that March is a 549 00:35:28,160 --> 00:35:32,360 Speaker 2: done deal. Fifty they have to cut cut and it 550 00:35:32,400 --> 00:35:37,400 Speaker 2: didn't matter whether it was because of disinflation or the 551 00:35:37,480 --> 00:35:39,880 Speaker 2: job market was rolling over. It was all about cuts. 552 00:35:40,480 --> 00:35:45,720 Speaker 2: And it just really struck me as a bizarre thought process, 553 00:35:45,760 --> 00:35:49,000 Speaker 2: I guess. And so you can't have you know, head, 554 00:35:49,080 --> 00:35:53,080 Speaker 2: you win tells you when right, and so it really 555 00:35:53,120 --> 00:35:56,560 Speaker 2: kind of emboldened us to take the other side of it, 556 00:35:56,760 --> 00:35:58,279 Speaker 2: it was too much. It's too much. 557 00:35:58,400 --> 00:36:01,080 Speaker 1: Is this the same crowd and maybe this is the 558 00:36:01,120 --> 00:36:04,720 Speaker 1: thought process there. Look, all we heard in twenty twenty 559 00:36:04,719 --> 00:36:07,880 Speaker 1: two is the US is inner recession or about to 560 00:36:07,920 --> 00:36:10,399 Speaker 1: fall into a recession, and we heard the same thing 561 00:36:10,440 --> 00:36:13,359 Speaker 1: in twenty twenty three, not that you could tell by 562 00:36:13,560 --> 00:36:16,040 Speaker 1: looking at the equity markets. The equity markets made it 563 00:36:16,040 --> 00:36:19,239 Speaker 1: pretty clear we don't see any sort of recession. And 564 00:36:19,280 --> 00:36:23,280 Speaker 1: then we go into the first five months of twenty 565 00:36:23,320 --> 00:36:26,920 Speaker 1: twenty four, bonds continue to just kind of drift lower. 566 00:36:28,000 --> 00:36:31,920 Speaker 1: Or how related is the we're expecting fed cuts now 567 00:36:32,560 --> 00:36:35,359 Speaker 1: and we expect a recession any day. 568 00:36:36,200 --> 00:36:38,640 Speaker 2: I don't know. I can't figure it out. I mean, 569 00:36:38,680 --> 00:36:42,800 Speaker 2: I think many, many made a mistake, you know, myself 570 00:36:42,840 --> 00:36:47,960 Speaker 2: included just thinking about the ability of this economy or 571 00:36:48,000 --> 00:36:52,560 Speaker 2: any economy to withstand higher rates. It goes back to 572 00:36:52,600 --> 00:36:55,480 Speaker 2: the narrative where we were so accustomed to living in 573 00:36:55,520 --> 00:36:58,919 Speaker 2: this low rate world that we couldn't fathom the fact 574 00:36:59,000 --> 00:37:03,840 Speaker 2: that the economy could survive on higher rates. So I 575 00:37:03,840 --> 00:37:08,600 Speaker 2: think that was just just kind of a mistake that 576 00:37:08,640 --> 00:37:12,560 Speaker 2: many made, which is why recession probabilities were so high. 577 00:37:13,360 --> 00:37:17,320 Speaker 2: What's notable to me, is so on the macro side, 578 00:37:17,360 --> 00:37:20,560 Speaker 2: that was the narrative, and so I PGM fixing. Come. 579 00:37:20,640 --> 00:37:23,319 Speaker 2: We have like one hundred and thirty credit analysts, right, 580 00:37:23,360 --> 00:37:27,120 Speaker 2: so we have a tremendous micro team, and they weren't 581 00:37:27,160 --> 00:37:30,839 Speaker 2: seeing it boots on the ground level, right, And so 582 00:37:31,880 --> 00:37:35,200 Speaker 2: there was this macro narrative based on this premise that 583 00:37:35,920 --> 00:37:40,640 Speaker 2: the world can't live with higher rates, not kind of 584 00:37:41,239 --> 00:37:43,800 Speaker 2: pulling it back and saying, well, rates are highed because 585 00:37:44,160 --> 00:37:47,560 Speaker 2: growth is pretty good, Yeah, a little inflation rates are 586 00:37:47,560 --> 00:37:51,760 Speaker 2: there for a reason, right. And at the same time, 587 00:37:51,800 --> 00:37:54,960 Speaker 2: our analysts were saying, you know, the companies are really 588 00:37:55,000 --> 00:37:58,560 Speaker 2: doing well. So I think you know, that was a 589 00:37:58,600 --> 00:38:01,600 Speaker 2: real lesson for us and really embold in us to 590 00:38:01,800 --> 00:38:06,560 Speaker 2: believe once again that this whole fed cunning narrative was 591 00:38:07,520 --> 00:38:08,480 Speaker 2: definitely overplay. 592 00:38:08,640 --> 00:38:11,279 Speaker 1: But what do you make of the latest thing that 593 00:38:11,320 --> 00:38:14,200 Speaker 1: I've been hearing from. I want to say, it's the 594 00:38:14,239 --> 00:38:20,239 Speaker 1: same crowd. We're concerned about stagflation. What do you see 595 00:38:20,280 --> 00:38:24,319 Speaker 1: in terms of a slowing economy and rising interest rates, 596 00:38:24,400 --> 00:38:26,080 Speaker 1: rising inflation rates? 597 00:38:26,480 --> 00:38:32,560 Speaker 2: Yeah, so we do a bunch of scenarios. Stagflation is 598 00:38:32,680 --> 00:38:36,839 Speaker 2: one that we don't assign really any weight to at 599 00:38:36,840 --> 00:38:40,239 Speaker 2: this point, I think it was more of a European 600 00:38:40,360 --> 00:38:45,320 Speaker 2: possibility or probability than a US one. So everything's possible, 601 00:38:45,520 --> 00:38:50,279 Speaker 2: of course, but I don't know mortal density scenario. I 602 00:38:50,280 --> 00:38:54,959 Speaker 2: don't see that. I don't see that as a real 603 00:38:55,080 --> 00:38:55,560 Speaker 2: risk here. 604 00:38:55,880 --> 00:38:59,960 Speaker 1: What's the Elroy Dimson quote. Risk means more things can happen, 605 00:39:00,200 --> 00:39:04,919 Speaker 1: will happen. So, and I think Jerome Powell came out 606 00:39:04,920 --> 00:39:07,200 Speaker 1: and said, I don't see the stag and I don't 607 00:39:07,200 --> 00:39:11,359 Speaker 1: see the inflation. So I'm kind of surprised that that 608 00:39:11,440 --> 00:39:14,520 Speaker 1: has sort of found a life of its own in 609 00:39:14,560 --> 00:39:16,640 Speaker 1: the US. Hey, if you want to talk about Europe, 610 00:39:17,040 --> 00:39:21,160 Speaker 1: that's a very different set of circumstances, both fiscally and 611 00:39:21,760 --> 00:39:25,799 Speaker 1: in terms of their growth rates. But let's bring this 612 00:39:25,920 --> 00:39:30,320 Speaker 1: back to inflation generally. Beginning of the year, you said 613 00:39:30,840 --> 00:39:34,799 Speaker 1: markets are writing off inflation a little prematurely. What's the 614 00:39:34,880 --> 00:39:40,480 Speaker 1: disconnect between what the markets are seeing or wishing for 615 00:39:41,000 --> 00:39:42,920 Speaker 1: and what's actually happening in the economy. 616 00:39:43,719 --> 00:39:48,319 Speaker 2: Yeah, So the first way to think about it is 617 00:39:48,640 --> 00:39:51,640 Speaker 2: just kind of mechanically, right. So the measure of inflation 618 00:39:51,880 --> 00:39:54,520 Speaker 2: is the rate of change, right. So the reason why 619 00:39:54,560 --> 00:39:59,040 Speaker 2: I think, you know, the polling numbers are so poor 620 00:39:59,120 --> 00:40:02,960 Speaker 2: around inflation is because you know, once milk rises to 621 00:40:03,520 --> 00:40:07,160 Speaker 2: you know, whatever, it is nine dollars for organic milk, 622 00:40:09,080 --> 00:40:11,960 Speaker 2: it's not moving lower, right, just doesn't keep rising, and 623 00:40:12,000 --> 00:40:15,120 Speaker 2: so you're feeling the full effect of that nine dollars, 624 00:40:15,640 --> 00:40:18,400 Speaker 2: whereas us in the markets, we're looking at the delta. 625 00:40:19,160 --> 00:40:24,120 Speaker 2: So the reason why I mentioned that is because some 626 00:40:24,200 --> 00:40:26,279 Speaker 2: of the easy comps are starting to roll off. So 627 00:40:26,400 --> 00:40:31,959 Speaker 2: just mechanically, we would expect to see inflation just rise 628 00:40:32,040 --> 00:40:35,960 Speaker 2: because it's those easy comps rolling off. But to me, 629 00:40:37,520 --> 00:40:41,320 Speaker 2: I think it's important to dissect and decompose where inflation 630 00:40:41,480 --> 00:40:46,719 Speaker 2: is coming from. And it's about labor. Right, So core 631 00:40:46,840 --> 00:40:51,120 Speaker 2: services is I think fifty six percent of core PCEE 632 00:40:53,239 --> 00:40:58,640 Speaker 2: and that's about labor. So how can you really forecast 633 00:40:58,920 --> 00:41:04,520 Speaker 2: a meaningful decline in inflation when the job market is 634 00:41:04,640 --> 00:41:05,759 Speaker 2: as strong as it is? 635 00:41:06,000 --> 00:41:09,520 Speaker 1: All Right, So we're seeing a slight decrease in immigration 636 00:41:09,680 --> 00:41:12,319 Speaker 1: in twenty twenty four, What did it looked like last year? 637 00:41:12,360 --> 00:41:15,160 Speaker 1: What it looked like in twenty twenty three? 638 00:41:15,480 --> 00:41:18,080 Speaker 2: So immigration last year skyrocketed? 639 00:41:18,239 --> 00:41:20,239 Speaker 1: Oh really, legal immigration. 640 00:41:19,840 --> 00:41:24,760 Speaker 2: Legal immigration and illegal properly as well. It's a really 641 00:41:24,960 --> 00:41:32,319 Speaker 2: difficult measure but either way that that helped expand the 642 00:41:32,400 --> 00:41:37,839 Speaker 2: labor supply, and that expansion of labor supply allowed two 643 00:41:37,880 --> 00:41:42,279 Speaker 2: things to unfold. One, it allowed i think disinflation to 644 00:41:42,320 --> 00:41:45,880 Speaker 2: come through the entire system last year. 645 00:41:45,800 --> 00:41:48,640 Speaker 1: Less pressure on rising wages because there are more bodies 646 00:41:48,680 --> 00:41:51,960 Speaker 1: and you're not just competing on price correct. 647 00:41:51,840 --> 00:41:55,000 Speaker 2: And the second is it allowed that economic activity to 648 00:41:55,160 --> 00:41:59,520 Speaker 2: actually occur. So it was a twofold benefit. What you've 649 00:41:59,520 --> 00:42:03,120 Speaker 2: seen this is the labor market is much more in balance, 650 00:42:05,160 --> 00:42:08,280 Speaker 2: and at the same time, you've seen immigration really dep 651 00:42:08,760 --> 00:42:14,200 Speaker 2: pre election, so you're seeing just the labor market in 652 00:42:14,200 --> 00:42:15,320 Speaker 2: a more natural state. 653 00:42:16,280 --> 00:42:19,920 Speaker 1: Really interesting. Let's stick with inflation for a minute, So 654 00:42:19,960 --> 00:42:23,359 Speaker 1: we're recording this in the middle of May twenty twenty four. 655 00:42:24,000 --> 00:42:26,320 Speaker 1: We had a two point two percent year of a 656 00:42:26,400 --> 00:42:31,160 Speaker 1: year producer price index sort of soft, and then a 657 00:42:31,360 --> 00:42:36,759 Speaker 1: very soft consumer price index below consensus. Is it too 658 00:42:36,880 --> 00:42:40,479 Speaker 1: soon to declare victory over inflation? Can we say, hey, 659 00:42:40,520 --> 00:42:43,760 Speaker 1: we're at a three handle, and if you back out 660 00:42:44,280 --> 00:42:47,560 Speaker 1: some of the adlies of owner's equivalent rent and the 661 00:42:47,600 --> 00:42:51,839 Speaker 1: shelter component's CPI were really at a two handle. Why 662 00:42:51,840 --> 00:42:53,920 Speaker 1: can't the Fed just plant the flag in the ground 663 00:42:53,920 --> 00:42:55,440 Speaker 1: and say we're good here. 664 00:42:55,960 --> 00:42:59,359 Speaker 2: Well, I think they can't plant the flag because their 665 00:42:59,400 --> 00:43:02,279 Speaker 2: mandate is two percent, right, And you could argue whether 666 00:43:02,360 --> 00:43:04,680 Speaker 2: two percent is a made up number, which it. 667 00:43:04,600 --> 00:43:07,360 Speaker 1: Is from New Zealand in the nineteen eighties. 668 00:43:07,400 --> 00:43:10,880 Speaker 2: So there's no scientific evidence to support two percent, but 669 00:43:10,920 --> 00:43:14,080 Speaker 2: it's two percent because we said it's two percent. That's 670 00:43:14,120 --> 00:43:18,600 Speaker 2: the beauty of economic theory oftentimes. So I think it's 671 00:43:18,640 --> 00:43:21,120 Speaker 2: really hard to back away from that because you start 672 00:43:21,160 --> 00:43:25,080 Speaker 2: to lose credibility. But the way to think about the 673 00:43:25,120 --> 00:43:30,280 Speaker 2: FEDS mandate in that construct is not around easing necessarily, 674 00:43:30,680 --> 00:43:35,719 Speaker 2: but around being less restrictive. And so is there room 675 00:43:35,840 --> 00:43:39,640 Speaker 2: for them to adjust policy rates lower to be less restrictive. 676 00:43:40,000 --> 00:43:43,240 Speaker 2: I think there is, but not a lot. 677 00:43:43,040 --> 00:43:45,520 Speaker 1: Like in the mid fes and hopefully that frees up 678 00:43:45,560 --> 00:43:47,720 Speaker 1: a lot of this frozen housing supply. 679 00:43:47,920 --> 00:43:52,839 Speaker 2: Yeah, but exactly the issue I think is that it's 680 00:43:52,880 --> 00:43:56,640 Speaker 2: already prebate and you know, if you look at kind 681 00:43:56,680 --> 00:43:58,760 Speaker 2: of real estate prices, you look at you know, corporate 682 00:43:58,800 --> 00:44:05,279 Speaker 2: credit as well, kind of those beliefs are already factored in. 683 00:44:05,800 --> 00:44:09,640 Speaker 2: And so what happens if the FED doesn't adjust policy 684 00:44:09,719 --> 00:44:12,200 Speaker 2: rate it's lower, then I think there's more bumps in 685 00:44:12,239 --> 00:44:12,560 Speaker 2: the road. 686 00:44:12,920 --> 00:44:16,319 Speaker 1: I find it ironic than in the twenty tens, an 687 00:44:16,360 --> 00:44:20,960 Speaker 1: era we described as driven by monetary policy, we couldn't 688 00:44:20,960 --> 00:44:24,279 Speaker 1: get inflation up to two percent, and now in the 689 00:44:24,320 --> 00:44:29,640 Speaker 1: twenty twenties, an era defined by fiscal stimulus, we can't 690 00:44:29,680 --> 00:44:33,799 Speaker 1: seemingly get inflation down to two percent. It just kind 691 00:44:33,800 --> 00:44:37,880 Speaker 1: of makes you wonder about these targets and the background 692 00:44:37,880 --> 00:44:41,359 Speaker 1: that they're in. I understand they don't want to say, well, 693 00:44:41,360 --> 00:44:43,520 Speaker 1: we can't get to two percent, we'll go to three percent, 694 00:44:44,120 --> 00:44:47,800 Speaker 1: But if we get more housing supply out there, maybe 695 00:44:47,800 --> 00:44:50,720 Speaker 1: that drives the apartment rental index a little lower. 696 00:44:51,040 --> 00:44:54,359 Speaker 2: Well, you know, what you described is the imputence of 697 00:44:54,640 --> 00:44:58,759 Speaker 2: central bank policy right on inflation itself. So fiscal is 698 00:44:59,120 --> 00:45:02,960 Speaker 2: much more powerful tool, not only from an economic growth perspective, 699 00:45:03,080 --> 00:45:06,680 Speaker 2: but from an inflation or disinflation standpoint as well. So 700 00:45:07,040 --> 00:45:09,880 Speaker 2: it actually calls in the question how much central banks 701 00:45:09,880 --> 00:45:10,799 Speaker 2: can really do it? 702 00:45:11,200 --> 00:45:11,319 Speaker 1: Right? 703 00:45:11,400 --> 00:45:13,440 Speaker 2: They're very, very limited, I think. 704 00:45:13,400 --> 00:45:16,560 Speaker 1: Especially when you look at the fiscal stimulus, especially from 705 00:45:16,600 --> 00:45:20,840 Speaker 1: the Cares Act under both Trump and Biden. It wasn't 706 00:45:21,160 --> 00:45:24,840 Speaker 1: like the Semiconductor Act or the Infrastructure Act or the 707 00:45:24,880 --> 00:45:28,120 Speaker 1: Inflation Reduction Act that spread out over a decade. That 708 00:45:28,360 --> 00:45:31,480 Speaker 1: was trillions of dollars dumped into the economy in twenty 709 00:45:31,520 --> 00:45:35,560 Speaker 1: and twenty one. One would assume that by twenty twenty 710 00:45:35,560 --> 00:45:39,360 Speaker 1: two the pig was through the python and you're still 711 00:45:39,400 --> 00:45:43,280 Speaker 1: just dealing with whatever money's left over, and everybody's savings 712 00:45:43,320 --> 00:45:48,160 Speaker 1: account is the biggest part of the fiscal stimulus behind us. 713 00:45:48,200 --> 00:45:52,759 Speaker 1: Now can we start thinking in terms of so we've 714 00:45:52,840 --> 00:45:58,320 Speaker 1: normalized monetary policy, are we almost normalizing fiscal policy? 715 00:45:59,000 --> 00:46:03,239 Speaker 2: Well? I think the big rush of cash into consumers' 716 00:46:03,320 --> 00:46:08,360 Speaker 2: wallets is definitely behind us. We talked earlier about the 717 00:46:08,440 --> 00:46:12,040 Speaker 2: Chips Act and how very little of it has actually 718 00:46:12,080 --> 00:46:16,600 Speaker 2: been put into the system yet. So I do think 719 00:46:17,120 --> 00:46:20,480 Speaker 2: a lot of the fiscal thrust though, is behind us. 720 00:46:21,440 --> 00:46:23,759 Speaker 2: But the real question on the table is what does 721 00:46:23,840 --> 00:46:27,000 Speaker 2: fiscal look like going forward? Are we going to continue 722 00:46:27,040 --> 00:46:32,440 Speaker 2: to run such large deficits. There's lots of focus on 723 00:46:32,480 --> 00:46:35,480 Speaker 2: the election, of course, but the item on the table 724 00:46:35,560 --> 00:46:39,400 Speaker 2: for many is what's the contours of fiscal look like. 725 00:46:39,680 --> 00:46:42,080 Speaker 2: I don't think anyone believes that you'll see a real 726 00:46:42,160 --> 00:46:46,920 Speaker 2: pullback in fiscal spending, but you know, Republican led Trump 727 00:46:47,040 --> 00:46:49,799 Speaker 2: victory that probably keeps the tax cuts in place, and 728 00:46:49,840 --> 00:46:52,040 Speaker 2: that adds you know, one and a half percent to 729 00:46:52,239 --> 00:46:53,880 Speaker 2: the deficit instantaneously. 730 00:46:54,560 --> 00:46:57,080 Speaker 1: What would that mean for inflation if we saw either 731 00:46:57,120 --> 00:46:59,960 Speaker 1: a renewal of the tax cuts or more task. 732 00:47:00,960 --> 00:47:05,040 Speaker 2: I think it's inflationary right now. I think the multiplier 733 00:47:05,080 --> 00:47:09,000 Speaker 2: effect is much lower, so I don't think you have 734 00:47:09,080 --> 00:47:15,360 Speaker 2: the same kind of economic impulse effect necessarily. But it's inflationary. 735 00:47:15,440 --> 00:47:18,400 Speaker 2: And you know, everything that we look at on the 736 00:47:18,520 --> 00:47:21,319 Speaker 2: margin is inflationary, not this inflationary. 737 00:47:21,680 --> 00:47:22,600 Speaker 1: That's really interesting. 738 00:47:22,880 --> 00:47:25,840 Speaker 2: You know. The counter to that is China. But China 739 00:47:25,920 --> 00:47:29,120 Speaker 2: is less influential in that way than they were before. 740 00:47:29,160 --> 00:47:33,160 Speaker 2: And I think that's another real secular story that investors 741 00:47:33,200 --> 00:47:37,320 Speaker 2: are are kind of slow to kind of grasp onto. 742 00:47:37,400 --> 00:47:41,320 Speaker 2: It's the influence of China kind of you know, post 743 00:47:41,600 --> 00:47:47,440 Speaker 2: wto admission is very different today than where we were 744 00:47:47,480 --> 00:47:49,520 Speaker 2: the past twenty years, and I think that matters a lot. 745 00:47:49,719 --> 00:47:53,200 Speaker 1: They were exporting deflation for a good couple of decades. 746 00:47:53,560 --> 00:47:56,960 Speaker 1: Are you suggesting that's much more moderate than it once was? 747 00:47:57,160 --> 00:47:59,560 Speaker 2: I think it is moderate, more moderate, And if you 748 00:47:59,600 --> 00:48:08,200 Speaker 2: think about the areas where you know they are exporting deflation, 749 00:48:08,680 --> 00:48:14,520 Speaker 2: and some areas like solar evs and whatnot. Tires are 750 00:48:14,760 --> 00:48:17,040 Speaker 2: slapped on top of that, so it's trying to level 751 00:48:17,120 --> 00:48:19,799 Speaker 2: the playing field as far as that's concerned. So I 752 00:48:19,800 --> 00:48:22,160 Speaker 2: think it's a different environment bottom line, and I think 753 00:48:22,200 --> 00:48:25,319 Speaker 2: that matters a lot. And I think it's inflationary. I 754 00:48:25,360 --> 00:48:29,760 Speaker 2: think it means bond yield will remain higher, not lower. ALSEQL. 755 00:48:30,239 --> 00:48:32,000 Speaker 1: You know, you just put an interesting thought in my 756 00:48:32,080 --> 00:48:35,720 Speaker 1: mind thinking about the different tax policies and the different 757 00:48:35,760 --> 00:48:40,560 Speaker 1: import export policies of each of these candidates. But it 758 00:48:40,680 --> 00:48:43,600 Speaker 1: dawned on me that no matter who gets elected, they're 759 00:48:43,600 --> 00:48:47,440 Speaker 1: both lame duck presidents. They're both second term presidents. It 760 00:48:47,640 --> 00:48:50,120 Speaker 1: makes you wonder what they'll be able to get accomplished 761 00:48:50,200 --> 00:48:50,800 Speaker 1: either way. 762 00:48:51,120 --> 00:48:52,960 Speaker 2: Yeah, and it's all about Congress, right as you know. 763 00:48:53,200 --> 00:48:57,200 Speaker 2: So there's intense focus on the presidential race. But you know, 764 00:48:57,400 --> 00:48:59,439 Speaker 2: I think we all know that, you know, having full 765 00:48:59,480 --> 00:49:02,720 Speaker 2: control of the House matters a lot. I think that'll 766 00:49:02,760 --> 00:49:07,400 Speaker 2: be a more driver of policy domestically. Foreign policy. You 767 00:49:07,440 --> 00:49:11,279 Speaker 2: can do more by presidential edict, but domestic policy has 768 00:49:11,280 --> 00:49:12,280 Speaker 2: to go through Congress. 769 00:49:12,560 --> 00:49:15,840 Speaker 1: All right, One last curveball question before we get to 770 00:49:15,920 --> 00:49:19,080 Speaker 1: our favorite questions. We ask all of our guests so 771 00:49:19,160 --> 00:49:22,200 Speaker 1: you're a member of the Fixed Income Analyst Society and 772 00:49:22,239 --> 00:49:25,320 Speaker 1: the Bond Market Association. Tell us a little bit about 773 00:49:25,360 --> 00:49:29,000 Speaker 1: those two organizations. I don't hear those names all that 774 00:49:29,080 --> 00:49:29,960 Speaker 1: often these days. 775 00:49:30,160 --> 00:49:32,560 Speaker 2: Yeah. So look, I mean that's just a forum for 776 00:49:32,640 --> 00:49:36,600 Speaker 2: investors from all parts of the industry, right whether you're 777 00:49:36,640 --> 00:49:43,120 Speaker 2: from the rating agencies, the buyside sell side, to debate 778 00:49:44,320 --> 00:49:51,000 Speaker 2: share information around you know, pertinent issues, market issues, and 779 00:49:51,080 --> 00:49:57,000 Speaker 2: I guess the takeaway there is the diversity of expertise, 780 00:49:57,320 --> 00:50:02,759 Speaker 2: perspectives and kind of just thought processes, uh, just make 781 00:50:02,800 --> 00:50:05,000 Speaker 2: you a better investor. So it's a so it's a 782 00:50:05,040 --> 00:50:11,680 Speaker 2: shared environment where we're like minded fixed income professionals, but 783 00:50:11,800 --> 00:50:15,080 Speaker 2: with different lens and different backgrounds, can debate. 784 00:50:15,560 --> 00:50:19,040 Speaker 1: Really really interesting. So let's jump to our favorite questions, 785 00:50:19,239 --> 00:50:22,080 Speaker 1: starting with what have you been streaming these days? What 786 00:50:22,120 --> 00:50:24,640 Speaker 1: are you watching or listening? What's keeping you entertained? 787 00:50:24,920 --> 00:50:27,920 Speaker 2: Yeah, well, you know I do like a good streaming, 788 00:50:28,040 --> 00:50:30,560 Speaker 2: so you know, it's hard to narrow. So I just started, 789 00:50:31,000 --> 00:50:34,239 Speaker 2: well I'm in you know, it just started means last week, 790 00:50:34,280 --> 00:50:38,040 Speaker 2: which means I'm almost done with season two Succession. So 791 00:50:38,600 --> 00:50:42,200 Speaker 2: I was a late adopter to Succession, So I enjoy 792 00:50:42,280 --> 00:50:46,160 Speaker 2: that greatly and thankful that I'm not in that family. 793 00:50:47,640 --> 00:50:51,160 Speaker 2: The other one I'm streaming is Masters of Air on 794 00:50:51,239 --> 00:50:51,879 Speaker 2: Apple TV. 795 00:50:52,160 --> 00:50:54,359 Speaker 1: It's next up in Mike Cue. It looks fascinating, it's 796 00:50:54,440 --> 00:50:54,879 Speaker 1: very good. 797 00:50:55,120 --> 00:50:58,000 Speaker 2: It's you know, it's very good. I love I love history, 798 00:50:58,200 --> 00:51:00,359 Speaker 2: and you know, it's a good story. And what I'm 799 00:51:00,480 --> 00:51:01,400 Speaker 2: enjoying it greatly. 800 00:51:02,320 --> 00:51:07,560 Speaker 1: It just looks if you watch the preview visually, it's stunning. 801 00:51:07,600 --> 00:51:08,600 Speaker 1: It just looks great. 802 00:51:08,760 --> 00:51:11,640 Speaker 2: It is visually excellent. Absolutely. The problem is I watch 803 00:51:11,680 --> 00:51:13,520 Speaker 2: it on my iPad, so it's like I'm not getting 804 00:51:13,560 --> 00:51:16,000 Speaker 2: the full experience. But this story is really quite good. 805 00:51:16,719 --> 00:51:18,000 Speaker 2: And then I am a nerd at the end of 806 00:51:18,040 --> 00:51:20,719 Speaker 2: the day and I'm the lord of the Rings, the 807 00:51:20,800 --> 00:51:23,640 Speaker 2: Rings of Power. So I'm waiting for season two to 808 00:51:23,680 --> 00:51:27,520 Speaker 2: come out, I think next week. And then podcast wise, 809 00:51:28,160 --> 00:51:32,560 Speaker 2: there's a few that I like. What I really like 810 00:51:33,000 --> 00:51:36,719 Speaker 2: the Tim Ferriss Show. So what I like about that 811 00:51:37,000 --> 00:51:41,279 Speaker 2: podcast is that it's about process and gets in the 812 00:51:41,400 --> 00:51:45,880 Speaker 2: minds no matter the discipline, what the process is to 813 00:51:47,000 --> 00:51:50,480 Speaker 2: you know, your expertise. So I really find that to 814 00:51:50,520 --> 00:51:55,000 Speaker 2: be quite excellent. And then I also like invest like 815 00:51:55,080 --> 00:51:58,920 Speaker 2: the best podcast. Yeah, yeah, very good, really exceptional. 816 00:51:59,000 --> 00:52:02,600 Speaker 1: Yeah, yep, absolutely. Tell us about your mentors who helped 817 00:52:02,800 --> 00:52:03,920 Speaker 1: shape your career. 818 00:52:04,920 --> 00:52:07,480 Speaker 2: Yeah, so you know mentors. I think of mentors as 819 00:52:07,480 --> 00:52:13,600 Speaker 2: a mosaic, you know. I I have lots of positive mentors, 820 00:52:13,640 --> 00:52:16,440 Speaker 2: and I also have you know, the anti mentor. Right 821 00:52:16,440 --> 00:52:19,799 Speaker 2: you go back to my Solomon days. Uh, I was 822 00:52:19,840 --> 00:52:23,160 Speaker 2: really shaped by some leaders that like man, I don't 823 00:52:23,160 --> 00:52:25,600 Speaker 2: want to be like that person, so that could be 824 00:52:25,640 --> 00:52:28,120 Speaker 2: equally as powerful. I'm not trying to be negative about it. 825 00:52:29,880 --> 00:52:33,920 Speaker 2: There's informational content and everything that we do positive and negative, 826 00:52:33,960 --> 00:52:36,360 Speaker 2: but there's a few that stand out to me. 827 00:52:36,719 --> 00:52:36,839 Speaker 1: Uh. 828 00:52:37,040 --> 00:52:40,880 Speaker 2: The The first is a gentleman, Dan Lancelotti. I worked 829 00:52:40,880 --> 00:52:44,880 Speaker 2: with him at Solomon Smith Barney and he really taught 830 00:52:44,960 --> 00:52:49,840 Speaker 2: me around kind of operational workflow and design product design 831 00:52:50,600 --> 00:52:54,279 Speaker 2: and you know, everything is an operational management project and 832 00:52:54,640 --> 00:52:59,319 Speaker 2: really helped me think through that. When when I got 833 00:52:59,320 --> 00:53:02,279 Speaker 2: to Morgan stan Only, I worked for a gentleman Steve Zamski. 834 00:53:04,000 --> 00:53:08,440 Speaker 2: He taught me about creativity and cross market application into practice. 835 00:53:09,320 --> 00:53:12,319 Speaker 2: And so what's interesting there is the story that most 836 00:53:12,360 --> 00:53:15,920 Speaker 2: people don't know. So Steve and I was part of 837 00:53:15,920 --> 00:53:17,840 Speaker 2: that group, so I can't really claim credit it was 838 00:53:17,880 --> 00:53:21,960 Speaker 2: really his design. Created this product product called tracers in 839 00:53:22,000 --> 00:53:26,680 Speaker 2: two thousand and one, and that was the first index 840 00:53:27,040 --> 00:53:32,400 Speaker 2: bond product tradable, so very early stages. Lehman kind of 841 00:53:32,480 --> 00:53:35,759 Speaker 2: quickly replicated to call the trains. We launched it in 842 00:53:35,800 --> 00:53:38,399 Speaker 2: the middle of nine to eleven, so that was, you know, 843 00:53:39,000 --> 00:53:43,200 Speaker 2: quite a difficult time. But the ingenuity and beauty Morgan 844 00:53:43,280 --> 00:53:46,600 Speaker 2: Stanley is that we took that product and turned into 845 00:53:46,680 --> 00:53:51,200 Speaker 2: trace X, that turned into CDX, and so a gentleman 846 00:53:51,680 --> 00:53:57,120 Speaker 2: on her CDs trading desk, Jared Epstein, had the vision of, like, 847 00:53:57,960 --> 00:54:02,520 Speaker 2: managing this from a bond perspective was was really really difficult. 848 00:54:03,480 --> 00:54:07,000 Speaker 2: Let's turn it into kind of a bunch of CDs 849 00:54:07,040 --> 00:54:11,960 Speaker 2: contracts and that launch CDX and CDX is the most liquid, 850 00:54:12,320 --> 00:54:16,799 Speaker 2: largest instrument and uh and uh and credit. So I'm 851 00:54:17,120 --> 00:54:20,839 Speaker 2: kind of happy to be part of that transformation. Uh. 852 00:54:20,840 --> 00:54:23,040 Speaker 2: And then the last is kind of funny. It was 853 00:54:23,080 --> 00:54:26,640 Speaker 2: my boss at Morgan Stanley who used to run research, 854 00:54:26,920 --> 00:54:30,799 Speaker 2: Juan Luis Perez uh, and so what he taught me 855 00:54:32,200 --> 00:54:37,520 Speaker 2: was just the importance of probabilistic scenario based approaches. You know, 856 00:54:37,560 --> 00:54:40,680 Speaker 2: I really hold on to that. I believe in that. 857 00:54:40,960 --> 00:54:44,160 Speaker 2: I believe the root of all evil is kind of 858 00:54:44,200 --> 00:54:47,840 Speaker 2: point estimates, so to speak. Uh. And he also taught 859 00:54:47,880 --> 00:54:50,920 Speaker 2: me about kind of evidence based investing, So there's you know, 860 00:54:51,040 --> 00:54:54,120 Speaker 2: taking the outside, whether there's data mining and whatnot. So 861 00:54:54,160 --> 00:54:57,160 Speaker 2: it's you know, really quite powerful. And then last is 862 00:54:57,160 --> 00:55:00,680 Speaker 2: my boss who just retired at PGM, you know, Mike Lillard, 863 00:55:00,680 --> 00:55:05,480 Speaker 2: who was just an unbelievable analytical mind, the smartest person 864 00:55:05,520 --> 00:55:08,840 Speaker 2: I probably ever met. And so you just you know, 865 00:55:08,920 --> 00:55:12,440 Speaker 2: you learn all these aspects from you know, people throughout 866 00:55:12,440 --> 00:55:14,560 Speaker 2: the years, and so I feel quite fortunate. 867 00:55:14,520 --> 00:55:17,360 Speaker 1: Really interesting. Let's talk about books. What are some of 868 00:55:17,400 --> 00:55:19,160 Speaker 1: your favorites? What are you reading right now? 869 00:55:19,880 --> 00:55:24,120 Speaker 2: Yeah, so books, you know, you know, you have to 870 00:55:24,120 --> 00:55:30,080 Speaker 2: go with the classics. So uh, you know when Genius failed. 871 00:55:30,160 --> 00:55:35,960 Speaker 2: I think you're talking about one podcast earlier. Yeah, just uh, 872 00:55:36,840 --> 00:55:41,120 Speaker 2: but I I'm a big fan of studying history, as 873 00:55:41,160 --> 00:55:45,879 Speaker 2: I mentioned, and I believe like studying like like Napoleon, 874 00:55:46,080 --> 00:55:50,760 Speaker 2: Alexander the Great, Caesar Churchill, kind of Washington, Lincoln, Grant, 875 00:55:50,800 --> 00:55:54,480 Speaker 2: all those things have been incredibly instructive for me as 876 00:55:54,520 --> 00:55:57,399 Speaker 2: I think about, you know, my role and you know, 877 00:55:57,760 --> 00:56:00,160 Speaker 2: my life, I guess. And then kind of one of 878 00:56:00,200 --> 00:56:03,760 Speaker 2: the books I'm reading now. I finished Chip War, which 879 00:56:04,239 --> 00:56:07,200 Speaker 2: is a much created course, but then I rolled it 880 00:56:07,239 --> 00:56:12,360 Speaker 2: into this book called The New Fire, The War Piece 881 00:56:12,400 --> 00:56:16,719 Speaker 2: and Democracy in the Age of AI. It's just a 882 00:56:16,719 --> 00:56:23,360 Speaker 2: fantastic read, really well written, highly recommended. And then I 883 00:56:23,440 --> 00:56:28,160 Speaker 2: just finished up The Alchemy of Air by Thomas Hager 884 00:56:28,880 --> 00:56:33,640 Speaker 2: was it's a fascinating, fantastic, fascinating book on it's the 885 00:56:33,719 --> 00:56:40,799 Speaker 2: haber Bosch method which basically turns air into ammonium right 886 00:56:40,880 --> 00:56:43,560 Speaker 2: and used it as a fertilizer, but also fueled the 887 00:56:43,600 --> 00:56:47,560 Speaker 2: war in Nazi Germany, and now it's creating kind of 888 00:56:47,600 --> 00:56:50,520 Speaker 2: this other type of crisis, this OBCD crisis, and so 889 00:56:50,560 --> 00:56:56,239 Speaker 2: it's a it's it's a fantastic read. And then I 890 00:56:56,280 --> 00:57:00,719 Speaker 2: think from a credit perspective, a must read is Caesar's 891 00:57:00,760 --> 00:57:07,160 Speaker 2: Palace Coup. So that basically goes through the Caesar Palace 892 00:57:07,239 --> 00:57:11,840 Speaker 2: bankruptcy and it just highlights that weren't a very different 893 00:57:11,960 --> 00:57:14,960 Speaker 2: world today than we were in the past with respect 894 00:57:15,000 --> 00:57:19,320 Speaker 2: to workouts and bankruptcy. You have different players in the mix, 895 00:57:19,400 --> 00:57:24,720 Speaker 2: different incentive structures, and to me, it's a cautionary tale. 896 00:57:24,720 --> 00:57:28,600 Speaker 2: So when you're getting involved in low risk credit and 897 00:57:28,640 --> 00:57:34,120 Speaker 2: distress investing. That that should be something you should fully 898 00:57:34,160 --> 00:57:37,880 Speaker 2: understand because you realize how fraught it is. 899 00:57:38,200 --> 00:57:41,400 Speaker 1: All right, our final two questions, what sort of advice 900 00:57:41,440 --> 00:57:44,280 Speaker 1: would you give a recent college grad interested in a 901 00:57:44,360 --> 00:57:49,960 Speaker 1: career in either investing or fixed income or a multi 902 00:57:50,080 --> 00:57:52,120 Speaker 1: strategy approach to investing. 903 00:57:52,560 --> 00:57:56,280 Speaker 2: Yes, so you know, I would would. I think it's 904 00:57:56,280 --> 00:57:58,960 Speaker 2: a manifold. But the first is, you know, be open 905 00:57:59,320 --> 00:58:04,120 Speaker 2: to ideas, don't be quick to narrow your focus. I 906 00:58:04,160 --> 00:58:08,280 Speaker 2: think of experience as a set of building blocks, and 907 00:58:08,360 --> 00:58:12,720 Speaker 2: with any foundation, having a broad foundation is a more 908 00:58:12,760 --> 00:58:19,320 Speaker 2: stable foundation than a narrow one. I would also say, 909 00:58:19,400 --> 00:58:22,600 Speaker 2: play chess, not checkers. And what I mean by that is, 910 00:58:23,200 --> 00:58:26,120 Speaker 2: you know, think several moves ahead, right, think about your 911 00:58:26,200 --> 00:58:29,360 Speaker 2: career of where you want to be, and you know, 912 00:58:29,440 --> 00:58:33,000 Speaker 2: maybe your current move in a certain area is not 913 00:58:33,040 --> 00:58:37,320 Speaker 2: exactly what you thought. But you know, knowledge is portable 914 00:58:37,480 --> 00:58:40,760 Speaker 2: and often applicable. And I think about my own career 915 00:58:40,800 --> 00:58:43,320 Speaker 2: and how much I learned from being in other areas 916 00:58:43,360 --> 00:58:45,280 Speaker 2: and how it applies to what I do today. Is 917 00:58:45,920 --> 00:58:50,880 Speaker 2: incredibly powerful. Ask questions relentlessly, you know, I think it's 918 00:58:50,920 --> 00:58:56,360 Speaker 2: important to know what you don't know, and I think 919 00:58:56,360 --> 00:58:59,480 Speaker 2: that's a sign of strength not weakness, right, you know, 920 00:58:59,560 --> 00:59:04,560 Speaker 2: particularly at the kind of more early stages of your career. 921 00:59:05,040 --> 00:59:07,200 Speaker 2: And then finally, something that we just talked about is 922 00:59:07,240 --> 00:59:10,760 Speaker 2: just you have to read, right, you have to read 923 00:59:10,840 --> 00:59:15,440 Speaker 2: financial history, so you have to study and understand. You know, 924 00:59:15,520 --> 00:59:21,200 Speaker 2: these books are incredibly powerful and important, and so I 925 00:59:21,240 --> 00:59:24,320 Speaker 2: think you know, reading those sets of books like you know, 926 00:59:24,320 --> 00:59:28,360 Speaker 2: when Genius failed, Manius Panics and crashes, those types of 927 00:59:28,400 --> 00:59:33,520 Speaker 2: things are highly instructive and will really allow you to 928 00:59:33,640 --> 00:59:34,920 Speaker 2: accelerate in your career. 929 00:59:35,240 --> 00:59:37,800 Speaker 1: And our final question, what do you know about the 930 00:59:37,800 --> 00:59:41,320 Speaker 1: world of fixed income and investing today you wish you 931 00:59:41,360 --> 00:59:44,160 Speaker 1: knew twenty five thirty years ago when you were first 932 00:59:44,200 --> 00:59:44,800 Speaker 1: starting out. 933 00:59:44,920 --> 00:59:50,400 Speaker 2: Yeah, other than everything, right, Barry, I would start by saying, 934 00:59:50,800 --> 00:59:53,080 Speaker 2: don't be afraid to be a contrarian. And that don't 935 00:59:53,120 --> 00:59:56,080 Speaker 2: mean be a contrarian for contraeran's sake. I mean think 936 00:59:56,080 --> 01:00:01,120 Speaker 2: about things differently and critically. And you know, it is 937 01:00:01,160 --> 01:00:04,200 Speaker 2: a slippery slope sometimes because it kind of drives me 938 01:00:04,280 --> 01:00:07,120 Speaker 2: mad when folks just throw out contraaring things to try 939 01:00:07,160 --> 01:00:09,800 Speaker 2: to be controversial. And I don't mean it that way. 940 01:00:09,880 --> 01:00:14,280 Speaker 2: I just mean think critically in a contraran way. I 941 01:00:14,280 --> 01:00:17,200 Speaker 2: would also say it's a marathon and not a sprint. 942 01:00:17,600 --> 01:00:22,640 Speaker 2: And I think long term investing is the key to success. 943 01:00:23,840 --> 01:00:26,680 Speaker 2: And so thinking about you know, not only your own career, 944 01:00:27,120 --> 01:00:30,680 Speaker 2: but market wise from a longer term perspective, I think 945 01:00:30,960 --> 01:00:36,400 Speaker 2: pays dividends, you know, no pun intended, you know, I 946 01:00:36,960 --> 01:00:39,880 Speaker 2: say process, process, process, I think those are the three 947 01:00:39,960 --> 01:00:44,880 Speaker 2: most important things. So you know, whether it's organizing an 948 01:00:45,000 --> 01:00:50,320 Speaker 2: argument on a you know, particular trade, or your view 949 01:00:50,360 --> 01:00:54,280 Speaker 2: on the secular themes, like, have a thought process around it. Oftentimes, 950 01:00:54,360 --> 01:00:58,280 Speaker 2: what's more powerful than the output is how you get there. 951 01:00:58,320 --> 01:01:04,680 Speaker 2: And I think that is that organizing principle is quite 952 01:01:05,040 --> 01:01:09,640 Speaker 2: quite important. I would also say think like an investor. 953 01:01:10,280 --> 01:01:13,680 Speaker 2: So I'm biased here because I don't really have a 954 01:01:13,720 --> 01:01:18,920 Speaker 2: tremendous trader mindset, but I think conflating the two is 955 01:01:19,200 --> 01:01:24,040 Speaker 2: not appropriate. But I think investing is very different than trading, 956 01:01:24,600 --> 01:01:27,440 Speaker 2: and so you know, I try to think like an investor. 957 01:01:27,560 --> 01:01:32,080 Speaker 2: And then just lastly, you know, embrace adversity, right, you know, 958 01:01:32,200 --> 01:01:35,000 Speaker 2: rally from your failures. You know, I think about the 959 01:01:35,040 --> 01:01:39,120 Speaker 2: Michael Jordan Hall of Fame speech, right, you know, just 960 01:01:39,200 --> 01:01:42,360 Speaker 2: he failed over and over again, and that's why he succeeded. 961 01:01:42,960 --> 01:01:46,320 Speaker 2: I'm sure there's other reasons why he succeeded too, but 962 01:01:46,320 --> 01:01:48,720 Speaker 2: but you know, some of the most defining moments in 963 01:01:48,800 --> 01:01:52,400 Speaker 2: my career have been on things that haven't worked out, 964 01:01:52,880 --> 01:01:55,840 Speaker 2: and I think it's important to pick yourself up, dust 965 01:01:55,880 --> 01:01:59,080 Speaker 2: yourself off, and learn from it. And I think the 966 01:01:59,200 --> 01:02:01,520 Speaker 2: learning is that's the most powerful part. 967 01:02:02,040 --> 01:02:05,760 Speaker 1: Really interesting stuff. Greg, thank you for being so generous 968 01:02:05,760 --> 01:02:09,120 Speaker 1: with your time. We have been speaking with Greg Peters. 969 01:02:09,760 --> 01:02:13,760 Speaker 1: He is co chief investment officer of Pigeum's fixed income 970 01:02:13,920 --> 01:02:16,880 Speaker 1: as well as co head of the multi sector team. 971 01:02:17,200 --> 01:02:20,640 Speaker 1: If you enjoy this conversation, well check out any of 972 01:02:20,640 --> 01:02:24,280 Speaker 1: the five hundred previous discussions we've had over the past 973 01:02:24,400 --> 01:02:28,440 Speaker 1: ten years. You can find those at iTunes, Spotify, YouTube, 974 01:02:28,520 --> 01:02:33,240 Speaker 1: wherever you find your favorite podcasts. Speaking of which, check 975 01:02:33,240 --> 01:02:36,960 Speaker 1: out my new podcast At the Money, short ten minute 976 01:02:37,000 --> 01:02:42,240 Speaker 1: conversations with experts about issues that affect you and your portfolio, 977 01:02:42,720 --> 01:02:46,360 Speaker 1: earning your money, spending it, and most importantly, investing it. 978 01:02:46,800 --> 01:02:50,160 Speaker 1: At the Money, in your Master's and business feed or 979 01:02:50,200 --> 01:02:53,640 Speaker 1: wherever you find your favorite podcasts. I would be remiss 980 01:02:53,640 --> 01:02:56,880 Speaker 1: if I did not thank the Crack team that helps 981 01:02:56,960 --> 01:03:01,080 Speaker 1: me put these conversations together each week. John Wasserman is 982 01:03:01,120 --> 01:03:05,280 Speaker 1: my audio engineer. Attika of Albron is my project manager. 983 01:03:05,920 --> 01:03:08,480 Speaker 1: Sean Russo is my head of research. Anna Luke is 984 01:03:08,520 --> 01:03:13,000 Speaker 1: my producer. Sage Bauman is the head of podcasts. Here Bloomberg, 985 01:03:13,560 --> 01:03:17,280 Speaker 1: I'm Barry Riddolts. You've been listening to Masters in Business 986 01:03:17,920 --> 01:03:19,480 Speaker 1: on Bloomberg Radio.