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Speaker 1: M. This is Mesters in Business with very renaults on

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Speaker 1: Bluebird Radio. This weekend. On the podcast, I have an

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Speaker 1: extra special guest, somebody who I consider to be one

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Speaker 1: of my mentors and someone I've looked up to for

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Speaker 1: a long time. David Kotok, Chairman, Chief Investment Officer of

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Speaker 1: Cumberland Advisors. David is just one of those people who

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Speaker 1: his name comes up all the time in all sorts

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Speaker 1: of funny and unexpected ways. And what I mean by

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Speaker 1: funny is is not ha funny, but just unusual funny. Uh.

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Speaker 1: He is the nexus of a network of people, very

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Speaker 1: influential folks within the world of finance, asset management, economics,

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Speaker 1: public policy uh, Federal Reserve and monetary policy. Uh. He

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Speaker 1: international relations and global interdependent inns. Uh. He has really

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Speaker 1: created one of these careers where he is a very

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Speaker 1: consequential individual, far over what you might expect just from

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Speaker 1: you know, a quick read of his bio. I've been

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Speaker 1: going to his events. I don't know how I managed

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Speaker 1: to wrangle an invitation all the way back in oh

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Speaker 1: eight or oh nine. Maybe it was when I was

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Speaker 1: writing about the financial crisis before the financial crisis that

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Speaker 1: got me somehow an invite, but it really became one

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Speaker 1: of my favorite things I do each year as we

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Speaker 1: go up to Maine every August and and go fishing.

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Speaker 1: And I have met people who have become lifelong friends

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Speaker 1: from from this event. I have engaged in in deals

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Speaker 1: and transactions and media events and all manner of things

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Speaker 1: that came out of this sort of miniature VOS that

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Speaker 1: takes place in private on the lakes and streams and

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Speaker 1: in the woods of Maine. It's it's really an amazing

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Speaker 1: legacy that he's created for himself from this experience. And uh,

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Speaker 1: I find him to just be one of those rare

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Speaker 1: and unique individuals who just makes everybody around him that

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Speaker 1: much better. So rather than me just babbling on and on,

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Speaker 1: let me just say, with no further ado, my conversation

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Speaker 1: with Cumberland's David Kotok. This is Mesters in Business with

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Speaker 1: Very Renaults on Bloomberg Radio. My extra special guest this

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Speaker 1: week is one of my favorite people world of finance.

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Speaker 1: David Kotok is co founder, chairman, and chief investment officer

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Speaker 1: of Cumberland Advisers, which runs about four billion dollars in

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Speaker 1: plying assets. He is the author of numerous books, including

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Speaker 1: Adventures in Muni Land, from Bull to Bear with ETFs.

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Speaker 1: His most recent publications include Lessons from Fucidities and Zeka

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Speaker 1: Lessons from a Pandemic. He comes to us with three

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Speaker 1: degrees from the Wharton School at the University of Pennsylvania.

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Speaker 1: David Kotok, Welcome back to Bloomberg, Barry. It took pleasure. Indeed,

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Speaker 1: we made it this far through the pandemic, and we've

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Speaker 1: made it on a number of fishing trips and experiences

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Speaker 1: for many years. And so I'm delighted to be here

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Speaker 1: one and to be on the conversation, in the conversation

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Speaker 1: with you, and that you were here as well. So

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Speaker 1: we're going to circle back to some of the writings

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Speaker 1: you've done, but let's just start out talking about what

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Speaker 1: you were referencing these past two years. Market and an

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Speaker 1: economy working its way through a global pandemic. As an investor,

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Speaker 1: what do you make of this whole period, Well, you know,

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Speaker 1: it's an interesting, um, it's an interesting way to start

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Speaker 1: the discussion. I've studied pandemics as from you, and I

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Speaker 1: spoke about folks want some normalcy, they want business cycles,

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Speaker 1: they want the traditional metrics. Pandemics don't work that way.

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Speaker 1: They never have throughout history, and this one is no different.

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Speaker 1: And therefore market agents and people who do this type

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Speaker 1: of analysis and examination of this COVID pandemic who haven't

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Speaker 1: studied history miss the degree of the shock of a pandemic.

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Speaker 1: And so what I make of this is how few

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Speaker 1: people have really studied the history. There are some, of

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Speaker 1: course who have. You and I spoke about that, but uh,

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Speaker 1: not a lot. They don't read history. I guess if

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Speaker 1: it doesn't fit within the Twitter limits it's too much

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Speaker 1: to read, or who could possibly ask for more than

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Speaker 1: characters on any subject? That seems excessive. So you and

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Speaker 1: I have been chatting about this big research piece you've

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Speaker 1: been working on on the history of market shocks, especially

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Speaker 1: pandemics and health crises through history. Tell us about what

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Speaker 1: some of your preliminary research has found. Well, we've really

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Speaker 1: divided the market, Chucksberry, into sort of three segments. So

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Speaker 1: antiquity UM, post medieval period UM. Think of that as

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Speaker 1: the Black Death plague seven hundred years ago up through

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Speaker 1: UM maybe the century or two centuries ago, and then

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Speaker 1: the modern period and particularly the modern period during the

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Speaker 1: Spanish flu misname Spanish flu but John Barry has made

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Speaker 1: the name famous with his book UM in nineteen eighteen,

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Speaker 1: which was really a pandemic of nineteen seventeen, eighteen ninety

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Speaker 1: and twenty one, and and the Asian Flu period, which

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Speaker 1: was the end of the Eisenhower administration, that's nineteen fifty

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Speaker 1: seven and fifty eight. And we looked at the Federal

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Speaker 1: Reserve Bank of San Francisco's study of pandemics for seven

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Speaker 1: hundred years. They derived some macro economic data. It also

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Speaker 1: provided us with a little bit of bibliography. We also

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Speaker 1: went looking for more um and that's how we are

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Speaker 1: assembling this piece that I have to write in three

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Speaker 1: sections about pandemic shocks, not the disease. We know a

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Speaker 1: lot about the disease. Part about interest rates, inflation rates, wages,

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Speaker 1: economic changes, growth curves, reallocation of labor to capital. And

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Speaker 1: what we've kind of find is every single pandemic shock

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Speaker 1: delivers a similar sequence and this one is no different. Alright,

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Speaker 1: So hold on, I have to interrupt you. So so

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Speaker 1: when I think about that list that you gave us,

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Speaker 1: the Black plague, the pandemic of the nineteen fifties, these

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Speaker 1: are all very different environments, and I want you to

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Speaker 1: walk me through them. First, the Black Plague in the

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Speaker 1: middle of the last millennia. Yeah, how do we even

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Speaker 1: have any sort of data from the hundreds and sixteen hundreds?

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Speaker 1: Tell us a little bit about the economic impact of

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Speaker 1: the bubonic plague? Okay, So what we did is this,

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Speaker 1: how do you find economic data? That was a real challenge.

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Speaker 1: And you can't go to Wikipedia or uh some other source.

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Speaker 1: You've got to open a book. It's an old fashioned

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Speaker 1: kind of research. So I have books sitting around now

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Speaker 1: in my office. Um, they are references, historical references, and

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Speaker 1: they helped me, and they helped me in this search

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Speaker 1: for information. And they also helped me by saying what

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Speaker 1: isn't in them? So a good example is Sydney Homer's

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Speaker 1: Treatise on the History of Interest Rates, because I can

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Speaker 1: look at interest rate data that he accumulated in his

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Speaker 1: research and find information that corresponds with the time periods

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Speaker 1: of plagues and pandemics. At the same time, I went

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Speaker 1: into Allan Meltzer's History of the Federal Reserve, which covered

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Speaker 1: the period of the creation of the fad from nineteen

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Speaker 1: thirteen to nineteen fifty one. It was the first of

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Speaker 1: the two volumes. Unfortunately, Allan Meltzer died and never completed

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Speaker 1: the second volume, and I looked at Milton Friedman's Treatise

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Speaker 1: about Monetary Policy with Anna Schwartz, two marvelous books that cover,

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Speaker 1: in the case of Meltzer, the Spanish flu pandemic period

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Speaker 1: and in the case of Friedman, both the Spanish flu

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Speaker 1: pandemic period and the nineteen fifty seven fifty eight Asian

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Speaker 1: Flu period. Neither one mentions disease, neither one mentions pandemic shock.

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Speaker 1: The minutes of the Federal Reserve, the history don't talk

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Speaker 1: about it. They talk about the war loans and the

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Speaker 1: interest rates and the slowdown, and they attribute to war

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Speaker 1: or geopolitical risk characteristics that also exists in pandemics. And

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Speaker 1: what's very interesting is that when you look at history

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Speaker 1: you see pandemics and shocks, you also see wars. They

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Speaker 1: go together, and that becomes a fascinating linkage. In modern time.

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Speaker 1: We couldn't find the references, but we did find the data.

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Speaker 1: For example, in the fifty fifty eight Asian Flu period,

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Speaker 1: interest rates and federalies are of activity. Then was a

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Speaker 1: very narrowly defined operation of a central bank. And what

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Speaker 1: we found was by nineteen fifty nine inflation had rolled

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Speaker 1: over and was back down towards zero and interest rates

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Speaker 1: were falling, and there was a shock. Sure was it

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Speaker 1: attributed by the central Bank to a disease shock? No?

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Speaker 1: Was the disease shock a cause? Maybe? I remember the

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Speaker 1: fifty seven fifty eight Asian flu I was a teenager.

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Speaker 1: How how did that compare to either the current um

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Speaker 1: pandemic we're going through with covid or And I know

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Speaker 1: this is before your time, the pandemic of n eighteen

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Speaker 1: and the years before and after. Okay, so if you

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Speaker 1: look if you look at the World War One period,

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Speaker 1: and you look at the Spanish flu pandemic, which was

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Speaker 1: a worldwide event, and you say, I'm going to really

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Speaker 1: combine them because actually the war in part was part

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Speaker 1: of the re in the spread we're so severe. What

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Speaker 1: happened after the shock? Was it only the recovery from

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Speaker 1: a post war environment? What triggered inflation to go down

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Speaker 1: to zero? In What triggered a period of no inflation

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Speaker 1: even as credit was expanding in the roaring twenties? What

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Speaker 1: was the change? And the change was when you have

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Speaker 1: a demographic shock and you have fewer people. You get

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Speaker 1: two things. You get a rise in wages because of

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Speaker 1: the remaining people get paid more, meaning literally, the death

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Speaker 1: rate affects the labor pool that much fewer bodies, same

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Speaker 1: demand equals higher wages exactly, and people begin to compete

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Speaker 1: to pay more to get minimal or scared labor. At

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Speaker 1: the same time, something else happens. Entrepreneurial folks. Governments too,

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Speaker 1: reallocate capital away from labor to capital investment because they

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Speaker 1: don't have a choice. They they change what they do

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Speaker 1: because they don't have the people to do them. We

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Speaker 1: now have that going on in this pandemic, whether it's

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Speaker 1: telemedicine or a robot that carries a patient or a

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Speaker 1: pronating bed in the hospital. And we're going to soon

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Speaker 1: have it with self driving trucks because we don't have

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Speaker 1: people to drive the trucks. Who knows where this goes.

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Speaker 1: So what do you do when you when you get

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Speaker 1: capital investment instead of labor, you get productivity gains, which

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Speaker 1: means you can get growth without the inflation shock. You

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Speaker 1: get the inflation shock at the front end. We've got it.

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Speaker 1: We've had it every single pandemic habit. Interesting data in

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Speaker 1: the European post medieval shocks. You can see some of

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Speaker 1: this in historical references. You can see a government in

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Speaker 1: your act to try to maintain wage controls because the

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Speaker 1: price of labor was rising, and obviously the power that

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Speaker 1: be was in trying to influence to suppress the ability

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Speaker 1: of people to get paid more. If you look at

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Speaker 1: interest rates on some loans, you can find they rolled

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Speaker 1: over and declined post shock. And if you look at

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Speaker 1: prices you can see the price shocks coming from foods

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Speaker 1: or from agriculture changes which are observable in the antiquity period.

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Speaker 1: You can't find any history why labor with slave labor.

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Speaker 1: So during during the plague in Athens, HM, it was

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Speaker 1: interesting I tried to find a wage change. First of all,

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Speaker 1: it's hard to find what the wages were in Athens. Secondly,

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Speaker 1: you know, I I looked everywhere. I looked in A

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Speaker 1: professor ed Cohen, who studied Greek history, actually wrote a

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Speaker 1: marvelism book on prostitution in Athens. Can you imagine writing

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Speaker 1: such a book and you can't find the prices in Athens.

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Speaker 1: You can't find changes in prices. For example, I was

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Speaker 1: able to find that a mercenary who was hired to

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Speaker 1: fight a war. And those days you had mercenaries and

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Speaker 1: you're hired him to fight wars and they were paid

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Speaker 1: one drachma a day. But when they were in battle,

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Speaker 1: they were paid too. And that was the rate at

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Speaker 1: which you went to hire people to fight war for

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Speaker 1: you one drama. Normally combat pay was to drop. Now

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Speaker 1: what's the conversion rate from drachma to dollars? Do we do?

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Speaker 1: We know what? Well, this is ancient Greece, so so so,

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Speaker 1: no bls, no monthly data. We're really trying to reconstruct

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Speaker 1: this from broken fragments. Uh and papyrus reads from two

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Speaker 1: thousand years ago. My pyrus were reads and thucidities translated

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Speaker 1: with a good English translation. It's not so easy to do,

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Speaker 1: but it's fascinating because there are references. So I've broken

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Speaker 1: the references into three pieces. Antiquity, which is really a

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Speaker 1: history lesson medieval period. To think of it, it's four

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Speaker 1: or five years starting with the Great Plague, and the

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Speaker 1: most recent period which is Spanish Flu period in Asian

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Speaker 1: Flu period. And the message is always the same. Anecdotes

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Speaker 1: are different, but they all tell the same story. You

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Speaker 1: get a shock, you get wages up, you get an

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Speaker 1: reallocation to capital. Because you have fewer people, you have

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Speaker 1: to replace the functions. You get a productivity game. Inflation

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Speaker 1: is transitory. Transitory needs definition of time because it's an

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Speaker 1: intertemporal relationship. But it does happen. Yeah. I find that

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Speaker 1: whenever people talk about transitory, the the audience says, all right,

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Speaker 1: you've got three days, and then if I don't see

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Speaker 1: my results in three days, then it's not transitory. When

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Speaker 1: you use the phrase transitory. And you and I have

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Speaker 1: discussed this before. I'm in the same camp as you.

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Speaker 1: You're talking about um anywhere from two four, six quarters

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Speaker 1: or more. Well, I would agree, and I would like

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Speaker 1: to add the shock isn't even over yet. Only we

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Speaker 1: got a bunch of people walking around the state saying, oh,

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Speaker 1: I want it to be over. Okay, you can want

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Speaker 1: it to be over. The virus doesn't care what you want.

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Speaker 1: So so let me let me follow up with one

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Speaker 1: other period I have to ask you about. So the

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Speaker 1: Greeks two thousand years ago, Medieval five hundred years ago,

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Speaker 1: what you've described as modernity in terms of the early

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Speaker 1: nineteen teens, UM and under Eisenhower in the late nineteen fifties,

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Speaker 1: between Eisenhower and today though uh was Zeka and you

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Speaker 1: also did a study of the impact of Zeka. Tell

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Speaker 1: us what you learned from that was that consistent with

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Speaker 1: these other health related pandemic shocks. What was your takeaway

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Speaker 1: the takeaway from Zeke? And you know, I wrote a

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Speaker 1: nine chapter I think it was pamphlett about it, and

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Speaker 1: did did some research about SEEK. In fact, it was fascinating.

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Speaker 1: I actually took a trip to Cuba, which had UM,

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Speaker 1: a preventive medicine only its a poor country, and I

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Speaker 1: was able with gratuity or two to actually walk. You

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Speaker 1: notice I'm being polite when I said a gratuity or UM.

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Speaker 1: I was able to actually walk with mosquito spraying units

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Speaker 1: in the morning and see how they managed this mosquito

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Speaker 1: born because it's a mosquito factor. And and what ZEKA

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Speaker 1: did was have the early stage pandemic disease fear risk component,

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Speaker 1: but it never evolved into a pandemic or a large spread.

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Speaker 1: So you saw signs of it in South American countries

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Speaker 1: and it was a mosquito vector, and you saw cases

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Speaker 1: of it, but it never got big enough to be

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Speaker 1: pandemic risk. The early stage had the fear component Ebola,

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Speaker 1: by the way, did the same. It was so fatal.

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Speaker 1: And therein lies what's an alarming lesson or trajectory that

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Speaker 1: history teaches. History says, these things mutate and mutate and mutation,

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Speaker 1: and some of those mutations of them, I don't know

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Speaker 1: the exact number, but a huge number have no material change,

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Speaker 1: and therefore they don't get a Greek letter called delta

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Speaker 1: or macron or alpha or other name. But every once

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Speaker 1: in a while the mutations become extraordinarily different O macron

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Speaker 1: is very transmissible, but not as dangerous in terms of

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Speaker 1: f although if you're not vaccinated, it'll get you. It's

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Speaker 1: simple is that what we don't know is is a

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Speaker 1: mutation in front of us which has the killer cytokine

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Speaker 1: storm trigger that made the Spanish flu what it really was,

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Speaker 1: and we don't know. That's the unknown. And it was

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Speaker 1: the unknown with Stars and two thousand and three, it

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Speaker 1: was the unknown with mirrors, it was the unknown with Zeka,

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Speaker 1: it was the unknown with Ebola, and it is the

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Speaker 1: unknown with COVID. And it seems that throughout history there

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Speaker 1: is a period in a pandemic where some mutation or

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Speaker 1: alteration makes it very deadly that changes behaviors because a

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Speaker 1: lot of people who in history said, oh it's it's

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Speaker 1: it's religiously based, or God is punishing knows, or God

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Speaker 1: is punishing the ones who got sick, or whatever the

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Speaker 1: reasons were in history, suddenly say, wait a minute, this

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Speaker 1: is really serious and can affect me. And we've reached

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Speaker 1: maybe some of that in the US. We've got all

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Speaker 1: approximately a million excess deaths in the United States, but

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Speaker 1: we've got a whole population that still doesn't get it.

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Speaker 1: It's I don't know where this inc it. Will talk

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Speaker 1: a little bit more about the anti vax or movement later.

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Speaker 1: I wanna stick with the impact of these shocks on

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Speaker 1: the economy and the market, because essentially we're a financial

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Speaker 1: if nothing else. So you mentioned that wages go up

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Speaker 1: um inflation, am I'm interpreting this right. You're saying inflation

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Speaker 1: spikes but then eventually rolls over as do rates. What

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Speaker 1: what is the impact on equities? We we we get

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Speaker 1: the impact on bonds there, but what is the impact

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Speaker 1: in the world of equities. Well that's not easy to

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Speaker 1: do because we don't have a lot of history. But

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Speaker 1: we have some history. We have a century in the

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Speaker 1: United States to two pandemics and now this one. And

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Speaker 1: we have some references in Europe, but not very much, um.

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Speaker 1: But the impact is that when you reallocate from labor

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Speaker 1: to capital, that means you go to entrepreneurial businesses. Entrepreneurial

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Speaker 1: businesses get productivity gains. That's how the growth takes place

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Speaker 1: in the new demographically adjusted population and it becomes more profitable.

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Speaker 1: And we see that in the US equity response so far,

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Speaker 1: and we I believe once we get posts pandemic shock

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Speaker 1: in other places in the world, we'll see it there

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Speaker 1: as well. So are the US has had a leadership role.

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Speaker 1: Look at how well we did in trying to roll

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Speaker 1: out vaccines and by the way, we're now lagging, no

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Speaker 1: longer leading. That's a shame, um, But that's the case.

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Speaker 1: Our companies are leading. Our population isn't. So equities do

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Speaker 1: well owning survivors the winners. There are winners and losers

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Speaker 1: in every shock, and the winners really do well. H

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Speaker 1: quite fascinating. Let's talk a little bit about Cumberland, because

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Speaker 1: you guys were a little bit of ahead ahead of

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Speaker 1: the carve. The company is founded in seventy three, so

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Speaker 1: you're just about g almost almost fifty years old, but

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Speaker 1: about a decade ago you relocated Cumberland from the Tri

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Speaker 1: state area to Florida. Tell us a little bit about

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Speaker 1: what the motivation of that relocation was. It turned out

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Speaker 1: that you were on the leading edge of a lot

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Speaker 1: of financial firms looking to relocate to places where the

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Speaker 1: cost structure is cheaper and the taxes are lower. Well,

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Speaker 1: we we were looking at the move in late two

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Speaker 1: thousand six, seven and eight, and the financial crisis was

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Speaker 1: unfolding at the time. What we found is my colleagues

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Speaker 1: and I were on airplanes to Florida all the time,

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Speaker 1: so that became a trigger. I at that point it

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Speaker 1: was my company, and now I have seventeen shareholders and

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Speaker 1: the majority of them are employees. But I was the

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Speaker 1: driver in two thousand and eight two thousand nine, and

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Speaker 1: um I was the caregiver for my mother who died

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Speaker 1: in two thousand and eight, So it was a restraining

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Speaker 1: a situation for me. Before I moved, the move commenced

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Speaker 1: seriously to Florida in two thousand and nine, we had

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Speaker 1: examined it for a number of years and we started

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Speaker 1: to transition the entire company and we still have a

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Speaker 1: little office in New Jersey. We still have a person

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Speaker 1: um and sometimes two people in the New Jersey office,

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Speaker 1: but everything is in Florida. Took us four years to

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Speaker 1: move people. It was literally during the financial crisis and aftermaths.

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Speaker 1: It was very difficult. Um. And there's a long story

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Speaker 1: as to how we got to Sarasota instead of the

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Speaker 1: East coast, and that's another story. But the bottom line

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Speaker 1: is we're now here. We're about forty six people, UM,

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Speaker 1: and we do most of the activities in Florida. The

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Speaker 1: motivation was not just taxes. Everybody says, oh, yeah, you

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Speaker 1: went there to cut your taxes, Well, that was part

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Speaker 1: of it. And certainly in New Jersey after John Corzine

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Speaker 1: high taxes, he encouraged us to leave. I jokingly say,

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Speaker 1: John Corzine bought my condo for me. That's what I

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Speaker 1: was laughing about, because I remember that exact line coming

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Speaker 1: from you, you know, eight years ago. Well, we moved

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Speaker 1: into a very nice place that Corsne paid for, meaning

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Speaker 1: what you're not paying in state taxes basically covers your

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Speaker 1: the cost of your very nice housing on on the intercoastal. Yeah.

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Speaker 1: Well here's the here's the thing, though, we had our

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Speaker 1: accounts at the time, and I said, look at the

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Speaker 1: company and give me the picture if this were in Florida,

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Speaker 1: and so, well, that's easy. We just change the income tax.

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Speaker 1: And Business to Act said, no, no, no, no, no,

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Speaker 1: take all these people. Have them live in the same

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Speaker 1: value house, have them insure their cars in Florida. Give

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Speaker 1: me a full picture. The full picture was really compelling

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Speaker 1: because the cost structure totally besides just the direct taxes

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Speaker 1: was was an enormous amount. So I said, so if

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Speaker 1: I move people and I can give them real incentives,

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Speaker 1: and those incentives give them an opportunity to really examine

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Speaker 1: a full picture. And that's what we created. And we

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Speaker 1: had a very strong incentive package of moving expenses. We

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Speaker 1: reimbursed bonuses if you make the move. If you choose

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Speaker 1: not to make the move, you stay at your desk

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Speaker 1: in New Jersey. Um and all but two eventually made

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Speaker 1: the move, and we had to deal with a whole

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Speaker 1: lot of issues. People to sell houses and buy houses,

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Speaker 1: and then the deal with families, and I had. The

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Speaker 1: biggest crisis I had was somebody's daughter had a date

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Speaker 1: for the prom and couldn't come them. And by the way,

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Speaker 1: she broke up and went to the problem with somebody else.

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Speaker 1: But I mean, we went through it all, but we

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Speaker 1: got everybody here. So so that was way before the pandemic.

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Speaker 1: The question I'm leading you towards is, so now with

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Speaker 1: the pandemic the past two years, you and I have

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Speaker 1: talked about hiring people having never met them in person

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Speaker 1: and having never had them step into your office, but

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Speaker 1: having them work remote raises the question, how has the

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Speaker 1: pandemic and the work from home era changed the entire

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Speaker 1: calculus of where a firm like yours can can elect

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Speaker 1: to locate itself. Well, it's massive. You've written about it

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Speaker 1: in describing your own experiences work from home. I have to.

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Speaker 1: Work from home can be in Idaho or in Florida.

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Speaker 1: It has it can be for many people where you

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Speaker 1: want it to be, and what you and I would add,

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Speaker 1: it's made us much more productive, our capacity to do

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Speaker 1: things and accomplish units of work if you will, it's

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00:30:15,000 --> 00:30:20,959
Speaker 1: so much improved depending on what you do. So, um,

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Speaker 1: work from home. Why Florida, if it's so attractive, is

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Speaker 1: not growing as fast as Idaho? Why is this change

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Speaker 1: taking place? So you have to ask yourself, are people

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Speaker 1: rethinking location and lifestyle. And I think that you look

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Speaker 1: at place of the Guidaho, Montana, you look at sections

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Speaker 1: of the country, and you say, something's going on here

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Speaker 1: because they want to get out of the center of

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Speaker 1: the big city. You and I have friends who have

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Speaker 1: moved out of center city in downtown New York. Worry

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00:31:04,520 --> 00:31:06,480
Speaker 1: and are they going to come back? I mean, we

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00:31:06,720 --> 00:31:09,440
Speaker 1: we have. This is all part of what I call

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Speaker 1: pandemic shock disruption. So let's let's go into let's delve

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Speaker 1: into that a little more deeply. And I want to

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Speaker 1: talk about wages and I want to talk about real estate.

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Speaker 1: The first question is if and let's not count the

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Speaker 1: dozen partners and or people whose names are on the

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Speaker 1: door at a firm like yours or mine. Um, we're

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Speaker 1: talking about you know, either new hires or or administrative staff.

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Speaker 1: If you can locate them anywhere in the country. Do

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Speaker 1: you pay the same wages in Idaho that you do

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Speaker 1: in San Francisco or New York? Or is it a

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Speaker 1: cost savings having a person remote in an area where

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Speaker 1: the cost of living is so much lower. Well, that's

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Speaker 1: your that's that's a good question. But is it just

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Speaker 1: savings or can you obtain and higher, better skill set,

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Speaker 1: and more productivity, Yes, and more productivity, and so paying

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Speaker 1: more really obtains you a better bargain, and both of

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Speaker 1: those things are happening, and that this whole notion. There

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Speaker 1: was a book I have a book in my library

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Speaker 1: from nineteen thirty five or that area is by a

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Speaker 1: German economist by the name of Lersh unknown mostly and

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Speaker 1: he wrote about the economics of location, and did it

429
00:32:36,920 --> 00:32:40,720
Speaker 1: in those days in the form of concentric circles to

430
00:32:40,960 --> 00:32:45,960
Speaker 1: a center point and distance. The concept in that book

431
00:32:46,120 --> 00:32:49,040
Speaker 1: not the location itself, because in those days yet to

432
00:32:49,080 --> 00:32:52,480
Speaker 1: think about a horse or a chart, or maybe a railroad.

433
00:32:53,000 --> 00:32:58,880
Speaker 1: But the concept of location was discussed in valuing distance.

434
00:33:00,000 --> 00:33:04,000
Speaker 1: Work from home in the modern environment eliminates the distance,

435
00:33:04,760 --> 00:33:09,040
Speaker 1: but it identifies the values which were just articulated a

436
00:33:09,160 --> 00:33:13,000
Speaker 1: century ago in that book, and there at work today.

437
00:33:13,600 --> 00:33:15,959
Speaker 1: You use them. I use them, a lot of us

438
00:33:16,000 --> 00:33:18,480
Speaker 1: who can use them. And so what we now have

439
00:33:18,680 --> 00:33:23,600
Speaker 1: is this divide, another disruption between those of us who

440
00:33:23,680 --> 00:33:28,200
Speaker 1: can gain these advantages and do so and those who

441
00:33:28,280 --> 00:33:31,720
Speaker 1: are unable to. And they are the ones who have

442
00:33:31,880 --> 00:33:34,560
Speaker 1: a problem, and they suffer. And so we get this

443
00:33:34,760 --> 00:33:38,960
Speaker 1: divided community in which we live and we find our

444
00:33:39,040 --> 00:33:45,000
Speaker 1: neighbor cannot take advantage of the positives but has to

445
00:33:45,720 --> 00:33:51,000
Speaker 1: confront in daily life the risks and the negatives. That's

446
00:33:51,000 --> 00:33:53,880
Speaker 1: a political discussion in the United States as well as

447
00:33:53,920 --> 00:33:58,920
Speaker 1: a societal risk that comes out of pandemics. Bury every

448
00:33:59,080 --> 00:34:07,040
Speaker 1: pandemic shot also had disruption in government. Really interesting. But

449
00:34:07,360 --> 00:34:09,959
Speaker 1: before we we moved to politics, I want to stick

450
00:34:10,080 --> 00:34:13,640
Speaker 1: with real estate because what you were just discussing the

451
00:34:13,760 --> 00:34:19,319
Speaker 1: concentric circles around urban areas. I literally had this conversation

452
00:34:19,400 --> 00:34:22,879
Speaker 1: over the weekend with Jonathan Miller, who's the famed real

453
00:34:22,960 --> 00:34:27,120
Speaker 1: estate appraiser and data wong at Miller Samuel and we

454
00:34:27,200 --> 00:34:32,239
Speaker 1: were talking about rings around cities and my frame of

455
00:34:32,320 --> 00:34:35,279
Speaker 1: references in New York City. But it's true in Chicago,

456
00:34:35,840 --> 00:34:38,200
Speaker 1: although it's a partial ring because it's up against the

457
00:34:38,320 --> 00:34:41,120
Speaker 1: Great Lake or or San Francisco or l A or

458
00:34:41,239 --> 00:34:43,759
Speaker 1: really any city you want to think about. You have

459
00:34:43,960 --> 00:34:48,759
Speaker 1: this ring immediately around the city. The bedroom communities that

460
00:34:48,880 --> 00:34:52,239
Speaker 1: are less than a thirty minute commute, those are some

461
00:34:52,440 --> 00:34:55,759
Speaker 1: of the most expensive real estate today. And then the

462
00:34:55,920 --> 00:35:00,560
Speaker 1: next ring thirty to forty five minutes a little less expensive,

463
00:35:00,640 --> 00:35:03,840
Speaker 1: but still you know, not cheap. Pretty pretty expensive, and

464
00:35:03,920 --> 00:35:07,560
Speaker 1: as you get out past sixty minutes no longer real

465
00:35:07,719 --> 00:35:12,839
Speaker 1: estate prices start to drop appreciably. What is that dynamic

466
00:35:13,000 --> 00:35:17,279
Speaker 1: that Lurcher observed and that Jonathan and I observed. As

467
00:35:17,440 --> 00:35:20,960
Speaker 1: the pandemic wears on and as people find the ability

468
00:35:21,000 --> 00:35:26,200
Speaker 1: to locate themselves anywhere, I can imagine that inner ring

469
00:35:26,600 --> 00:35:29,560
Speaker 1: is going to be the partners and the people who

470
00:35:29,600 --> 00:35:32,120
Speaker 1: were at the top of the income scale and they

471
00:35:32,239 --> 00:35:34,480
Speaker 1: want a fast, easy commute into the city. For the

472
00:35:34,560 --> 00:35:37,719
Speaker 1: two or three days they're probably going into the city

473
00:35:37,800 --> 00:35:40,000
Speaker 1: to work, or maybe every day if they're on a

474
00:35:40,040 --> 00:35:43,520
Speaker 1: trading desk or at a hedge, Fondora, private equity or

475
00:35:43,600 --> 00:35:46,760
Speaker 1: VC type of shop. But what about the next rings,

476
00:35:46,840 --> 00:35:50,600
Speaker 1: the forty five minutes away, the ninety minutes away. Are

477
00:35:50,800 --> 00:35:54,640
Speaker 1: those areas going to be at a disadvantage to places

478
00:35:54,760 --> 00:36:00,560
Speaker 1: like Idaho and Wyoming. Well, we don't know, but history

479
00:36:01,880 --> 00:36:08,719
Speaker 1: history says that what we had up until January, February

480
00:36:09,160 --> 00:36:15,840
Speaker 1: or March of has changed, and the change is structural,

481
00:36:16,400 --> 00:36:21,520
Speaker 1: not temporary, and it will unfold over the next few years.

482
00:36:22,960 --> 00:36:26,239
Speaker 1: And history would say those who longed to go back

483
00:36:26,480 --> 00:36:28,960
Speaker 1: to what was before the pandemic are going to be

484
00:36:29,040 --> 00:36:31,960
Speaker 1: disappointed because it isn't going to be there. The world

485
00:36:32,080 --> 00:36:39,120
Speaker 1: has changed. Every pandemic in history introduced change, and the change,

486
00:36:40,160 --> 00:36:45,479
Speaker 1: which was geographical when transportation was on a horse or cart,

487
00:36:47,120 --> 00:36:53,360
Speaker 1: is now electronic. For whatever portion of economic activity takes

488
00:36:53,440 --> 00:36:57,400
Speaker 1: place in the virtual space. And that's a lot. And

489
00:36:57,560 --> 00:37:02,879
Speaker 1: it's also more and more, not just finance. We think

490
00:37:02,960 --> 00:37:05,640
Speaker 1: of it in finance because we're in the finance area.

491
00:37:06,160 --> 00:37:10,400
Speaker 1: But if I get some spot and I need a dermatologist,

492
00:37:10,680 --> 00:37:12,960
Speaker 1: what do I do today? I take a picture of it.

493
00:37:13,640 --> 00:37:16,120
Speaker 1: I sent it to the dermatologist. He looks at it,

494
00:37:16,600 --> 00:37:20,520
Speaker 1: He text or emails or calls me on the phone,

495
00:37:21,239 --> 00:37:23,960
Speaker 1: and we talked about it. I don't have to go

496
00:37:24,080 --> 00:37:26,760
Speaker 1: to this office. I can be a thousand miles away.

497
00:37:27,920 --> 00:37:31,520
Speaker 1: So this is a massive disruption of what we had,

498
00:37:32,760 --> 00:37:39,600
Speaker 1: huge introduction of productivity gain in every single sphere, every

499
00:37:39,760 --> 00:37:44,440
Speaker 1: single thing we think about, and we've only begun to

500
00:37:44,520 --> 00:37:47,880
Speaker 1: see it. And I keep saying, you know, I had

501
00:37:47,920 --> 00:37:51,480
Speaker 1: a conversation with John Farah last month in an interview

502
00:37:51,560 --> 00:37:55,239
Speaker 1: on surveillance, and he said, what's your takeaway from this?

503
00:37:55,480 --> 00:37:58,120
Speaker 1: And I said, the takeaway is it is a huge shock.

504
00:37:58,920 --> 00:38:03,440
Speaker 1: It's not busines as usual and we end it's still

505
00:38:03,640 --> 00:38:09,960
Speaker 1: going on. It's not over yet. So monstrous. So so

506
00:38:10,160 --> 00:38:12,279
Speaker 1: I want to get to politics, but before I do,

507
00:38:12,440 --> 00:38:17,239
Speaker 1: I have to stick with the technology question that you're

508
00:38:17,800 --> 00:38:22,160
Speaker 1: dancing around a little bit. The pushback to the shock

509
00:38:23,560 --> 00:38:28,279
Speaker 1: thesis is not so much that this changes everything and

510
00:38:28,360 --> 00:38:31,239
Speaker 1: we're gonna start with a clean sheet of paper. But

511
00:38:32,280 --> 00:38:36,000
Speaker 1: we actually had all these trends in place pre pandemic,

512
00:38:36,600 --> 00:38:40,600
Speaker 1: and this accelerated them and brought them all forward by

513
00:38:40,680 --> 00:38:45,000
Speaker 1: a decade. So think about what we're doing currently. Zoom

514
00:38:45,080 --> 00:38:47,480
Speaker 1: calls or Google hand calls. We've been doing that in

515
00:38:47,560 --> 00:38:51,000
Speaker 1: my office for a decade now. Everybody is very comfortable

516
00:38:51,040 --> 00:38:56,200
Speaker 1: with its screen shares, FaceTime on your iPhone, delivery of food,

517
00:38:56,320 --> 00:39:01,720
Speaker 1: delivery of supermarket's just everything grab vitating so rapidly towards

518
00:39:01,960 --> 00:39:07,080
Speaker 1: online and Amazon. What do you take of the claim that, hey,

519
00:39:07,239 --> 00:39:10,200
Speaker 1: none of this is new, you've just moved us to

520
00:39:12,640 --> 00:39:17,000
Speaker 1: instead of in terms of where we are technology wise

521
00:39:17,600 --> 00:39:22,560
Speaker 1: dealing with the pandemic, Uh, I would I would say

522
00:39:22,680 --> 00:39:32,680
Speaker 1: that history would show that every pandemic accelerated procedures and

523
00:39:32,880 --> 00:39:37,880
Speaker 1: directions and trajectories which were under way. That's what a

524
00:39:37,960 --> 00:39:43,759
Speaker 1: shock would do. It also had another impact. If the

525
00:39:43,880 --> 00:39:47,319
Speaker 1: trajectory was in the direction of something that was going

526
00:39:47,360 --> 00:39:53,560
Speaker 1: to fail, it accelerated the failure. Both happened, so it

527
00:39:53,719 --> 00:39:59,759
Speaker 1: speeds things up in addition to introducing a new dis

528
00:40:00,000 --> 00:40:08,360
Speaker 1: option simultaneity of both speed and form of disruption. So

529
00:40:08,520 --> 00:40:12,359
Speaker 1: what you've described I totally agree with. But you were

530
00:40:12,640 --> 00:40:15,080
Speaker 1: in a place and in a business. I'm in a

531
00:40:15,200 --> 00:40:18,160
Speaker 1: place in a business where we were in a very

532
00:40:18,239 --> 00:40:23,520
Speaker 1: adaptive phase. The rest of the world didn't have to adapt.

533
00:40:24,320 --> 00:40:28,560
Speaker 1: The shock forced them to. That was the accelerator. Yeah,

534
00:40:28,600 --> 00:40:33,160
Speaker 1: we're fortunate that when we launched back in we were

535
00:40:33,239 --> 00:40:37,400
Speaker 1: built for virtual from day one, so this transition was

536
00:40:37,800 --> 00:40:41,200
Speaker 1: really very easy for us, and and I very much

537
00:40:41,280 --> 00:40:46,520
Speaker 1: empathize with people. My neighbor is an orthopedic surgeon. He says, I,

538
00:40:46,840 --> 00:40:48,719
Speaker 1: you know, we're not at the point where I could

539
00:40:48,800 --> 00:40:53,320
Speaker 1: log into my computer and manipulate a robot remotely. I

540
00:40:53,480 --> 00:40:56,920
Speaker 1: have to go to the hospital to do surgeries, and

541
00:40:57,000 --> 00:41:02,240
Speaker 1: there was a period in where any elective surgery was canceled,

542
00:41:02,360 --> 00:41:05,720
Speaker 1: So you know, he was setting bones and and fixing

543
00:41:05,840 --> 00:41:08,960
Speaker 1: other things. But that's you know, a third of his practice.

544
00:41:09,000 --> 00:41:11,400
Speaker 1: He said, for about six months he was afraid he

545
00:41:11,480 --> 00:41:13,439
Speaker 1: was gonna have to lay off all his people. I'm

546
00:41:13,560 --> 00:41:18,480
Speaker 1: I'm very empathetic for people, especially frontline workers, who were

547
00:41:18,680 --> 00:41:22,080
Speaker 1: putting their own health and safety at risk dealing dealing

548
00:41:22,120 --> 00:41:26,360
Speaker 1: with the public. Which brings us to the politics of this.

549
00:41:27,239 --> 00:41:30,520
Speaker 1: What do you make of of some of the pushback.

550
00:41:31,280 --> 00:41:33,799
Speaker 1: I know we're all exhausted and tired of the pandemic,

551
00:41:33,920 --> 00:41:36,680
Speaker 1: but this started from day one. What do you make

552
00:41:36,719 --> 00:41:44,520
Speaker 1: of the pushback to government interventions, mandates, masks, vaccine requirements.

553
00:41:44,600 --> 00:41:47,719
Speaker 1: How do you how do you interpret this stuff? Well,

554
00:41:48,160 --> 00:41:57,080
Speaker 1: history of pandemics would suggest that finger pointing, political um distraction,

555
00:41:58,239 --> 00:42:05,239
Speaker 1: governance was of victim in every pandemic. Behaviors are being

556
00:42:05,360 --> 00:42:11,799
Speaker 1: repeated now in various ways, and part of the pandemic

557
00:42:11,960 --> 00:42:18,520
Speaker 1: history is the pandemic. The disease doesn't have a political party,

558
00:42:19,600 --> 00:42:25,320
Speaker 1: and it eventually gets those who are more likely not

559
00:42:25,600 --> 00:42:31,040
Speaker 1: to be wary of it, or whose behaviors expose them more.

560
00:42:31,960 --> 00:42:36,359
Speaker 1: That's what disease does, and this is no different. It's

561
00:42:36,400 --> 00:42:41,200
Speaker 1: a political it's just opportunistic. Look in Milan in sixteen

562
00:42:41,400 --> 00:42:48,399
Speaker 1: thirty two, I don't remember exactly, Um the governor UM

563
00:42:49,360 --> 00:42:53,319
Speaker 1: heard about. This is during the plagues that went through

564
00:42:53,360 --> 00:42:56,640
Speaker 1: the Italians states in the seventeenth century, and the governor

565
00:42:56,680 --> 00:42:59,640
Speaker 1: of Milan heard about what was going on. He sent

566
00:42:59,800 --> 00:43:03,280
Speaker 1: to emissaries. He said, you guys, go over to Sienna.

567
00:43:03,480 --> 00:43:05,000
Speaker 1: In those days, you had to ride there in a

568
00:43:05,080 --> 00:43:08,480
Speaker 1: horse and look around, see what you see, and come

569
00:43:08,520 --> 00:43:10,759
Speaker 1: back and tell me. So they do, if you can

570
00:43:10,800 --> 00:43:13,680
Speaker 1: bring the disease back with you. Yeah, well they come

571
00:43:13,719 --> 00:43:16,239
Speaker 1: back and they say, Governor, people are dying and lying

572
00:43:16,320 --> 00:43:19,080
Speaker 1: in the streets. They can't pick up the bodies fast enough.

573
00:43:19,760 --> 00:43:23,719
Speaker 1: He says, we cannot tell the people. Listen, now we

574
00:43:23,840 --> 00:43:28,040
Speaker 1: have documentation, because at this point we have some written documentations.

575
00:43:28,160 --> 00:43:30,880
Speaker 1: What does he do? He says, Number one, get the

576
00:43:30,960 --> 00:43:34,920
Speaker 1: governing council, let's report. Number two, let's not tell the people.

577
00:43:35,000 --> 00:43:38,360
Speaker 1: We don't want to scare them. Number three, we have

578
00:43:38,440 --> 00:43:43,239
Speaker 1: a new princess. We'll have a celebration, in a joyful celebration.

579
00:43:43,680 --> 00:43:46,840
Speaker 1: So he convenes it and he hosts a super spreader,

580
00:43:46,960 --> 00:43:49,560
Speaker 1: and three months later he's got dead people all over

581
00:43:49,680 --> 00:43:54,160
Speaker 1: his town. That was thirty Barry. Yeah, well, you would

582
00:43:54,200 --> 00:43:58,560
Speaker 1: hope we have learned over the ensuing five years how

583
00:43:58,680 --> 00:44:02,799
Speaker 1: to behave in a panza. Although arguably many of us

584
00:44:03,120 --> 00:44:07,279
Speaker 1: have not well the nature of the human being. Well,

585
00:44:07,480 --> 00:44:09,760
Speaker 1: let me ask you this question. And as someone who's

586
00:44:09,880 --> 00:44:13,560
Speaker 1: vaxed and boosted, and as soon as they give me

587
00:44:13,640 --> 00:44:18,799
Speaker 1: the green light cross um boost, I'm fiser up till

588
00:44:18,840 --> 00:44:22,879
Speaker 1: now I will happily go get the maderna. As number four,

589
00:44:24,520 --> 00:44:27,160
Speaker 1: I'm not worried about you know, I'm trying to avoid

590
00:44:27,239 --> 00:44:30,800
Speaker 1: getting catching it, but I'm not worried about a terrible

591
00:44:30,880 --> 00:44:37,239
Speaker 1: outcome of of hospitalization, ventilator and death. However, this long

592
00:44:37,440 --> 00:44:42,239
Speaker 1: COVID is quite a scary proposition. What do you think

593
00:44:42,280 --> 00:44:45,239
Speaker 1: about this? And and how has this to bring it

594
00:44:45,440 --> 00:44:49,120
Speaker 1: back from the human element to the economy, how has

595
00:44:49,200 --> 00:44:53,000
Speaker 1: this impacted uh, the labor force and and the overall

596
00:44:53,200 --> 00:44:57,200
Speaker 1: impact of of you know how we're dealing with the pandemic. Well,

597
00:44:57,280 --> 00:45:02,400
Speaker 1: I believe long COVID is really a monster issue in

598
00:45:02,560 --> 00:45:07,360
Speaker 1: front of us. A little disclosure, I sponsored am sponsoring

599
00:45:07,440 --> 00:45:11,200
Speaker 1: for the Global Interdependent Center a webinar series on long

600
00:45:11,320 --> 00:45:15,320
Speaker 1: COVID and the health issues. Um, I'm part of a

601
00:45:15,440 --> 00:45:18,680
Speaker 1: group which is a long COVID initiative. And here's what

602
00:45:18,760 --> 00:45:22,360
Speaker 1: we know. In the UK. We've now identified over a

603
00:45:22,480 --> 00:45:26,840
Speaker 1: million by their definition long COVID patients, they have a

604
00:45:26,920 --> 00:45:31,120
Speaker 1: population of sixty seven million. If we use that reference

605
00:45:31,239 --> 00:45:33,759
Speaker 1: for the United States, we're due for five or six

606
00:45:33,880 --> 00:45:39,920
Speaker 1: million cases. The numbers grow every single reporting period. In

607
00:45:40,080 --> 00:45:42,520
Speaker 1: the United States. We now have about a hundred and

608
00:45:42,680 --> 00:45:48,000
Speaker 1: fifty long COVID clinics in America. We had zero a

609
00:45:48,120 --> 00:45:52,920
Speaker 1: year ago. We have about fifty pediatric long COVID clinics.

610
00:45:53,080 --> 00:45:55,480
Speaker 1: We had zero a year ago. What are we finding.

611
00:45:56,160 --> 00:45:59,640
Speaker 1: People think of COVID as a respiratory disease, that's how

612
00:45:59,680 --> 00:46:02,680
Speaker 1: you get it, But there's more and more evidence that

613
00:46:02,800 --> 00:46:06,160
Speaker 1: it's a blood disease. Gets into you, then you get

614
00:46:06,280 --> 00:46:09,560
Speaker 1: micro cloths, and it gets to all your organs. So

615
00:46:10,160 --> 00:46:13,920
Speaker 1: long COVID, I think, is a big issue. That estimates

616
00:46:14,000 --> 00:46:16,800
Speaker 1: for the United States are somewhere between ten and twenty

617
00:46:17,000 --> 00:46:23,000
Speaker 1: million cases before this is over, and again back to

618
00:46:23,120 --> 00:46:30,160
Speaker 1: the political question. The vaccines tend so far to reduce

619
00:46:30,440 --> 00:46:33,879
Speaker 1: enormously the risk of long COVID. If you get sick,

620
00:46:34,719 --> 00:46:37,920
Speaker 1: the unvaccinated are going to be the victims. If they

621
00:46:37,960 --> 00:46:41,799
Speaker 1: didn't die, they are the most likely to get long

622
00:46:41,960 --> 00:46:46,000
Speaker 1: COVID symptoms. It's a terrible circumstance, but long COVID is here.

623
00:46:46,080 --> 00:46:48,320
Speaker 1: It's big, and it's going to be bigger and bigger.

624
00:46:49,000 --> 00:46:54,800
Speaker 1: Think of it as people who are temporarily, partially or

625
00:46:55,040 --> 00:47:01,200
Speaker 1: permanently disabled. That's a cohort of million ms, and many

626
00:47:01,320 --> 00:47:04,480
Speaker 1: of them are labor force age. So let me ask

627
00:47:04,520 --> 00:47:08,920
Speaker 1: you about that exact question, because following the financial crisis

628
00:47:09,640 --> 00:47:12,480
Speaker 1: in O eight oh nine, I think people were somewhat

629
00:47:12,520 --> 00:47:18,120
Speaker 1: surprised at the big surge, the big uptick in disability

630
00:47:18,680 --> 00:47:24,640
Speaker 1: applications that took place. A shocking large slice of the

631
00:47:24,800 --> 00:47:30,040
Speaker 1: labor force moved to disability. Are you suggesting we're gonna

632
00:47:30,200 --> 00:47:33,920
Speaker 1: see the same sort of thing post COVID. Yes, I

633
00:47:34,040 --> 00:47:35,719
Speaker 1: think we're gonna see it. I think it's going to

634
00:47:35,800 --> 00:47:37,800
Speaker 1: be bigger than people think. I think there's going to

635
00:47:37,880 --> 00:47:40,400
Speaker 1: be all the fights with the insurance company and who's

636
00:47:40,400 --> 00:47:43,200
Speaker 1: going to pay and what are the definitions? Right now,

637
00:47:43,320 --> 00:47:45,960
Speaker 1: the World Health Organization, the UK and the U s

638
00:47:46,200 --> 00:47:49,799
Speaker 1: h h S have three different They're similar, but they're

639
00:47:49,840 --> 00:47:52,840
Speaker 1: not identical. And we have to remember this is a

640
00:47:52,960 --> 00:47:58,120
Speaker 1: worldwide disease, which means disabled here is also disabled in

641
00:47:58,280 --> 00:48:02,520
Speaker 1: all the countries of the world. Wow, amazing, there seems

642
00:48:02,600 --> 00:48:06,920
Speaker 1: to be a ton of focus on the Federal Reserve

643
00:48:07,280 --> 00:48:11,359
Speaker 1: and inflation and rising interest rates. But before we dive

644
00:48:11,440 --> 00:48:13,920
Speaker 1: deep into the FED, let's start with its chairman. What

645
00:48:14,040 --> 00:48:16,640
Speaker 1: do you make of J. Pale? What sort of job

646
00:48:16,800 --> 00:48:21,759
Speaker 1: has he been doing, uh navigating over the past six years. Well,

647
00:48:22,800 --> 00:48:28,440
Speaker 1: my opinion is that J. Pal has been a terrific

648
00:48:29,520 --> 00:48:35,200
Speaker 1: Central Bank chairman in the midst of this pandemic. Number One,

649
00:48:35,320 --> 00:48:39,560
Speaker 1: he's a student of history. Number two, he knows the

650
00:48:39,800 --> 00:48:44,400
Speaker 1: degrees through and he has a lens which is deeper

651
00:48:44,480 --> 00:48:48,440
Speaker 1: than just monetary economics. So he sees it in the

652
00:48:48,719 --> 00:48:52,759
Speaker 1: in the full sense of financial markets, look at all

653
00:48:52,840 --> 00:48:56,480
Speaker 1: the different programs that were implemented along the way. And

654
00:48:56,600 --> 00:49:00,279
Speaker 1: he also sees it in terms of community impact and

655
00:49:00,560 --> 00:49:04,160
Speaker 1: people impact on three d and thirty five million Americans.

656
00:49:04,840 --> 00:49:09,560
Speaker 1: And so I applaud Pal and those who criticize him

657
00:49:09,760 --> 00:49:12,919
Speaker 1: after the fact that it's easy to quarterback a game

658
00:49:13,000 --> 00:49:16,680
Speaker 1: on a Monday, if I could use the cliche, miss

659
00:49:17,640 --> 00:49:21,040
Speaker 1: what it's like to have to make real time decisions

660
00:49:21,960 --> 00:49:26,880
Speaker 1: in the midst of such a shock. Pal has done that,

661
00:49:27,400 --> 00:49:32,080
Speaker 1: and he's done it really well. Under the circumstances. There's

662
00:49:32,120 --> 00:49:37,480
Speaker 1: an entire committee in the FED which is reaching to

663
00:49:38,080 --> 00:49:45,520
Speaker 1: community elements that are outside the banking system, philanthropy, community activities,

664
00:49:46,360 --> 00:49:52,680
Speaker 1: support systems, and it's advising the FED on impacts. It's

665
00:49:52,719 --> 00:49:56,160
Speaker 1: not well known. The minutes are published, people don't know

666
00:49:56,320 --> 00:49:59,960
Speaker 1: about it. What has pal done? He said, the Federal

667
00:50:00,080 --> 00:50:05,360
Speaker 1: reserves position must be much broader than this. The narrowly

668
00:50:05,600 --> 00:50:11,440
Speaker 1: defined banking system financial stability. Those are important, that's our

669
00:50:11,520 --> 00:50:14,880
Speaker 1: bread and butter business. But if we don't get to

670
00:50:15,040 --> 00:50:22,040
Speaker 1: the full impact in the country, we're missing this shock

671
00:50:22,719 --> 00:50:26,680
Speaker 1: and its effects. And that's something that Pale has done

672
00:50:26,960 --> 00:50:31,520
Speaker 1: very quietly, no fanfare. I've had occasion to speak to

673
00:50:31,640 --> 00:50:36,880
Speaker 1: people who are on that committee, and some of the

674
00:50:37,040 --> 00:50:43,520
Speaker 1: programs from the Federal Reserve, which narrowed to very small

675
00:50:43,719 --> 00:50:47,840
Speaker 1: balances to be able to give financial support and system

676
00:50:48,480 --> 00:50:54,680
Speaker 1: too smaller businesses, conduit structures came out of that sensitivity.

677
00:50:55,239 --> 00:50:59,040
Speaker 1: Let me pick up on that. Because the consistent criticism

678
00:51:00,080 --> 00:51:04,080
Speaker 1: we've heard about the FED and and we have at

679
00:51:04,120 --> 00:51:05,800
Speaker 1: some of the events we go to. You know the

680
00:51:05,880 --> 00:51:07,920
Speaker 1: exact people. I won't mention it by name, but you

681
00:51:08,000 --> 00:51:11,200
Speaker 1: know the people who bring up Look at how giants

682
00:51:11,239 --> 00:51:13,800
Speaker 1: the Federal Reserve balance sheet has become, Look at the

683
00:51:13,920 --> 00:51:17,399
Speaker 1: rate of change over the past ten twenty thirty years.

684
00:51:17,480 --> 00:51:21,240
Speaker 1: This is unprecedented and then's badly. How do you respond

685
00:51:21,360 --> 00:51:25,040
Speaker 1: to the folks who say the accumulation of assets on

686
00:51:25,120 --> 00:51:30,600
Speaker 1: the Federal Reserve balance sheet is problematic and will result

687
00:51:30,680 --> 00:51:36,800
Speaker 1: in subsequent crises. Well, I would answer two ways with

688
00:51:36,960 --> 00:51:40,759
Speaker 1: two elements, because in our dialogue, in the business that

689
00:51:40,880 --> 00:51:43,839
Speaker 1: we're both in, we get those kinds of conversations all

690
00:51:43,880 --> 00:51:47,879
Speaker 1: the time. And I say to somebody, show me number one,

691
00:51:49,000 --> 00:51:55,720
Speaker 1: a study which is curated that determines the optimal size

692
00:51:56,360 --> 00:52:01,200
Speaker 1: of the Fed's balance sheet, produced to study to criticize

693
00:52:01,280 --> 00:52:04,880
Speaker 1: its size. Produce the study to say this is how

694
00:52:05,040 --> 00:52:08,279
Speaker 1: large it should be, and this is why now we

695
00:52:08,440 --> 00:52:11,439
Speaker 1: do know. There's some elements in the Fed's balance sheet.

696
00:52:11,560 --> 00:52:18,040
Speaker 1: For example, currency in circulation, it's a liability. The treasury balances,

697
00:52:18,360 --> 00:52:23,440
Speaker 1: it's a liability necessary bank reserves. It's a liability. To

698
00:52:23,600 --> 00:52:26,400
Speaker 1: do that, you need assets. On the other side, you

699
00:52:26,520 --> 00:52:30,800
Speaker 1: have to support the international balances, so that's global Central

700
00:52:30,880 --> 00:52:35,200
Speaker 1: rank repot redeposits at the FED. So that's a liability.

701
00:52:35,280 --> 00:52:37,879
Speaker 1: So you can add up some elements and say, gee,

702
00:52:38,320 --> 00:52:43,640
Speaker 1: I can get to four or five or six trillion immediately,

703
00:52:44,400 --> 00:52:50,000
Speaker 1: and I haven't gone beyond it. Now the question becomes

704
00:52:50,160 --> 00:52:53,640
Speaker 1: how much cushion should you have and how big should

705
00:52:53,640 --> 00:52:56,879
Speaker 1: it be? And ben Bonanke himself said, if you wait

706
00:52:57,000 --> 00:53:01,640
Speaker 1: long enough, the balance sheet will abs orb any size

707
00:53:02,320 --> 00:53:05,960
Speaker 1: over time as long as you have nominal growth. He's right.

708
00:53:06,640 --> 00:53:10,759
Speaker 1: So this favor pointing about the size of the bid

709
00:53:11,120 --> 00:53:14,759
Speaker 1: FEDS balance sheet and hand ringing about it, to me,

710
00:53:15,719 --> 00:53:19,840
Speaker 1: is a great way to introduce hyperbole without curated facts.

711
00:53:20,560 --> 00:53:25,919
Speaker 1: Why if it's so bad and so inflationary and so destructive,

712
00:53:26,640 --> 00:53:30,440
Speaker 1: is the Japanese central bank balance sheet larger than the

713
00:53:30,560 --> 00:53:34,640
Speaker 1: GDP of the country and there's no inflation? And to

714
00:53:34,719 --> 00:53:38,879
Speaker 1: be fair, to be fair about the US Central Bank

715
00:53:39,040 --> 00:53:42,840
Speaker 1: and the current bout of inflation, Hey, it's been twelve

716
00:53:43,000 --> 00:53:47,080
Speaker 1: years with very very low inflation. To blame the post

717
00:53:47,200 --> 00:53:50,600
Speaker 1: pandemic period on the FED balance sheet to blame that

718
00:53:50,719 --> 00:53:56,120
Speaker 1: inflation really seems to be an unfair accusation. I completely agree.

719
00:53:56,360 --> 00:54:00,239
Speaker 1: I think it's taking advantage of a shock to throw

720
00:54:00,360 --> 00:54:06,200
Speaker 1: a political barb. Well, central banks are always fair game

721
00:54:06,840 --> 00:54:13,600
Speaker 1: because they cannot defend themselves in political environment, so they're

722
00:54:13,600 --> 00:54:17,680
Speaker 1: an easy target for a politician or critic. It's a

723
00:54:17,760 --> 00:54:19,880
Speaker 1: hold different story when you have to sit in the

724
00:54:20,000 --> 00:54:23,640
Speaker 1: room in real time and make a decision and you

725
00:54:23,840 --> 00:54:26,680
Speaker 1: don't have a full plate of facts because you're in

726
00:54:26,719 --> 00:54:30,239
Speaker 1: a moving environment. So I'm a defender of PAL. I

727
00:54:30,400 --> 00:54:33,719
Speaker 1: think the fit has done as good a job as

728
00:54:33,800 --> 00:54:38,680
Speaker 1: you could ever expect under these extraordinary circumstances. So so

729
00:54:38,800 --> 00:54:41,200
Speaker 1: what do you make of the current move where we're

730
00:54:41,200 --> 00:54:46,480
Speaker 1: actually recording this early January Poal is as literally testifying

731
00:54:46,560 --> 00:54:49,759
Speaker 1: to Congress as as we speak, so you don't get

732
00:54:49,800 --> 00:54:52,320
Speaker 1: to hear what he is currently saying. What do you

733
00:54:52,440 --> 00:54:56,400
Speaker 1: make of the current move towards the taper and the

734
00:54:56,640 --> 00:55:01,400
Speaker 1: idea that quantitative easements and purchase is of bonds have

735
00:55:01,680 --> 00:55:04,399
Speaker 1: run their course. We we won't even get to zero

736
00:55:04,480 --> 00:55:07,040
Speaker 1: interest rate policy just yet. What do you think of

737
00:55:07,200 --> 00:55:11,520
Speaker 1: quie in the idea of the taper, Well, to taper

738
00:55:11,719 --> 00:55:15,200
Speaker 1: from some level to some lower level and then eventually

739
00:55:15,360 --> 00:55:21,680
Speaker 1: to zero is something that eventually had to happen, and

740
00:55:21,920 --> 00:55:28,279
Speaker 1: the forces that require the Fed to do that, which

741
00:55:28,320 --> 00:55:32,080
Speaker 1: are both political and economic in the face of evidence

742
00:55:32,200 --> 00:55:38,680
Speaker 1: of this shorter term You're quite right, inflation shock require

743
00:55:38,800 --> 00:55:43,160
Speaker 1: them to do that. My biggest fear is the Federal

744
00:55:43,280 --> 00:55:46,799
Speaker 1: try to do two things at once. It will try

745
00:55:46,880 --> 00:55:50,279
Speaker 1: to reset an interest rate to a higher level than zero.

746
00:55:50,440 --> 00:55:54,320
Speaker 1: I never like zero because it's such a distortion. I

747
00:55:54,400 --> 00:55:56,359
Speaker 1: don't mind if it was a quarter of a point

748
00:55:56,440 --> 00:56:00,239
Speaker 1: or a half a point floor, but zero destroy did

749
00:56:00,360 --> 00:56:04,440
Speaker 1: things and we were in a long time. To do

750
00:56:04,680 --> 00:56:08,520
Speaker 1: that and also alter the composition in size of the

751
00:56:08,600 --> 00:56:12,480
Speaker 1: balance sheet at the same time is to try to

752
00:56:12,640 --> 00:56:17,279
Speaker 1: do two very difficult things simultaneously. It's hard enough for

753
00:56:17,360 --> 00:56:20,279
Speaker 1: the central Bank to do one of them, and so

754
00:56:21,160 --> 00:56:24,440
Speaker 1: my view is they should tackle one before they tackle

755
00:56:24,560 --> 00:56:27,040
Speaker 1: the other. And if I were sitting in that room,

756
00:56:27,520 --> 00:56:30,759
Speaker 1: I would tackle the interest rate first. I'd take a

757
00:56:30,840 --> 00:56:34,319
Speaker 1: hike in March or April or may get the rate

758
00:56:34,480 --> 00:56:41,560
Speaker 1: above zero. Clear markets, clear, repo, clear sofa, get an

759
00:56:41,719 --> 00:56:46,240
Speaker 1: operating system above zero, so anybody who's got any cash

760
00:56:46,360 --> 00:56:49,400
Speaker 1: anywhere in the world can put it to work and

761
00:56:49,560 --> 00:56:52,920
Speaker 1: get more than a single basis point at some place.

762
00:56:53,440 --> 00:56:57,799
Speaker 1: And now you have a market clearing mechanism, and then

763
00:56:58,800 --> 00:57:02,240
Speaker 1: when you get interest rate trip, then you can tackle

764
00:57:02,360 --> 00:57:05,200
Speaker 1: the size of the balance sheet. I'm afraid, though the

765
00:57:05,360 --> 00:57:07,880
Speaker 1: pressure is such, they're going to do both at once,

766
00:57:08,360 --> 00:57:11,960
Speaker 1: and to me, that's a recipe for trouble. Huh, that's

767
00:57:12,000 --> 00:57:15,600
Speaker 1: really uh, that's really interesting. So what does this mean

768
00:57:15,840 --> 00:57:20,520
Speaker 1: for your business? You're essentially known humbling is known as

769
00:57:20,600 --> 00:57:24,840
Speaker 1: a bond shop. At one point, mini bonds were super

770
00:57:24,920 --> 00:57:29,480
Speaker 1: attractive on an after tax basis as a source of

771
00:57:29,640 --> 00:57:35,000
Speaker 1: yield versus treasuries or even high grade corporates. Given everything

772
00:57:35,080 --> 00:57:38,200
Speaker 1: that's taken place for us with the financial crisis and

773
00:57:38,600 --> 00:57:43,720
Speaker 1: then subsequently with the pandemic, how should bond investors be

774
00:57:43,840 --> 00:57:47,560
Speaker 1: operating in this environment? Well, I don't know what others

775
00:57:47,880 --> 00:57:50,520
Speaker 1: should do, but I can say what we do do.

776
00:57:51,720 --> 00:57:55,080
Speaker 1: We've been running a Barbel. Barbell means you got a

777
00:57:55,160 --> 00:57:58,720
Speaker 1: slug of a portfolio, depending on the type of portfolio,

778
00:57:58,840 --> 00:58:04,640
Speaker 1: in the shortened earlier shorter duration maturities, and you get

779
00:58:04,800 --> 00:58:07,840
Speaker 1: very low yield there, and then you have a piece

780
00:58:07,960 --> 00:58:10,400
Speaker 1: in the longer maturities, which is how you get some

781
00:58:10,680 --> 00:58:15,120
Speaker 1: yield by blending them. Our duration in the morning meeting

782
00:58:15,320 --> 00:58:23,320
Speaker 1: yesterday was approximately four. That is relatively short. So we've

783
00:58:23,400 --> 00:58:29,320
Speaker 1: been rolling duration around four, waiting for the opportunity for

784
00:58:29,520 --> 00:58:32,960
Speaker 1: markets to deliver a higher yield. Now today you can,

785
00:58:33,120 --> 00:58:35,960
Speaker 1: as we're speaking, you can look at the market and say, well,

786
00:58:36,040 --> 00:58:38,520
Speaker 1: I could get about three percent in a high grade

787
00:58:39,120 --> 00:58:43,080
Speaker 1: tax free bond, depending on what state and jurisdiction. But

788
00:58:44,000 --> 00:58:48,720
Speaker 1: my guess is as rates rise, and it looks like

789
00:58:48,880 --> 00:58:53,000
Speaker 1: they're going to, we may get close to three and

790
00:58:53,000 --> 00:58:56,760
Speaker 1: a half or four in a municipal yield out of four.

791
00:58:57,120 --> 00:59:02,360
Speaker 1: This becomes very attractive rate, really interesting. So we're recording

792
00:59:02,440 --> 00:59:06,480
Speaker 1: this early in January. The tenure yield has just tipped

793
00:59:07,080 --> 00:59:10,919
Speaker 1: up about one eight percent or so. Do you think

794
00:59:11,040 --> 00:59:15,840
Speaker 1: the bond markets are seeing inflation as a structural element

795
00:59:16,000 --> 00:59:18,360
Speaker 1: of the economy looking forward or did they see this

796
00:59:18,520 --> 00:59:24,200
Speaker 1: as transitory? UM. Bond markets are adjusting upward of view,

797
00:59:24,960 --> 00:59:31,600
Speaker 1: away from much lower inflation expectations to something higher. UM.

798
00:59:32,040 --> 00:59:36,280
Speaker 1: The shock inflation measures we see at six and seven

799
00:59:38,000 --> 00:59:41,720
Speaker 1: are inconsistent with the yields and the bond market of

800
00:59:41,840 --> 00:59:44,320
Speaker 1: one point eight or two or two and a half

801
00:59:44,480 --> 00:59:47,400
Speaker 1: or even three. So what the bond market is saying

802
00:59:47,560 --> 00:59:49,360
Speaker 1: is we're going to have an adjustment. It's not going

803
00:59:49,400 --> 00:59:54,120
Speaker 1: to be anywhere near this high single digit perpetual rate

804
00:59:54,160 --> 00:59:57,200
Speaker 1: of inflation. Is the temporary shock now where it comes

805
00:59:57,240 --> 01:00:00,560
Speaker 1: out two, two and a half, three maybe, but not

806
01:00:00,720 --> 01:00:03,439
Speaker 1: a lot more. That's what the bottom market is saying,

807
01:00:03,880 --> 01:00:09,560
Speaker 1: and history would say, if we have a transition and

808
01:00:09,720 --> 01:00:13,680
Speaker 1: we get beyond the shock, that's the more likely outcome.

809
01:00:15,040 --> 01:00:20,560
Speaker 1: Really really interesting. So if we think this shock eventually passes,

810
01:00:21,640 --> 01:00:26,480
Speaker 1: what's the best definition of transitory? Are you implying it's

811
01:00:26,520 --> 01:00:30,160
Speaker 1: twelve to twenty four months before we're back to a

812
01:00:30,360 --> 01:00:34,680
Speaker 1: more normal footing, albeit at higher federal funds rate and

813
01:00:35,200 --> 01:00:41,320
Speaker 1: higher yield on the tenure? I think so it's an opinion.

814
01:00:41,640 --> 01:00:45,920
Speaker 1: We'll find out in a couple of years. But my

815
01:00:46,120 --> 01:00:52,440
Speaker 1: worry is central banks, in their hurry to renormalize policy,

816
01:00:53,960 --> 01:01:00,600
Speaker 1: make the transitory rollover worse. Huh. They are under pressures

817
01:01:01,080 --> 01:01:04,520
Speaker 1: to do so everywhere in the world, and so my

818
01:01:04,680 --> 01:01:07,200
Speaker 1: worry is they go too far, too fast. So you

819
01:01:07,320 --> 01:01:11,160
Speaker 1: want a more gradual shift towards away from the emergency

820
01:01:11,200 --> 01:01:16,160
Speaker 1: footing and towards a more normal footing from central banks

821
01:01:16,200 --> 01:01:20,360
Speaker 1: around the world. Which raises an interesting question, what do

822
01:01:20,440 --> 01:01:23,400
Speaker 1: you think about what's been going on from a macro

823
01:01:23,600 --> 01:01:28,360
Speaker 1: perspective in China well as well as the rest of

824
01:01:28,560 --> 01:01:33,280
Speaker 1: the non Chinese emerging market world. Well, China is a story.

825
01:01:33,720 --> 01:01:37,440
Speaker 1: We have an emerging dictatorship, we have a model, the

826
01:01:37,560 --> 01:01:42,320
Speaker 1: Malsa tongue model modernized. And we see behaviors in China,

827
01:01:42,840 --> 01:01:46,520
Speaker 1: in the second largest economy in the world, and they

828
01:01:46,600 --> 01:01:52,560
Speaker 1: are alarming. Um where this leads I don't know. My

829
01:01:52,760 --> 01:01:57,000
Speaker 1: hope is that behaviors don't get to war, which I

830
01:01:57,120 --> 01:02:02,360
Speaker 1: don't think anybody wants. It doesn't serve a purpose. But

831
01:02:02,560 --> 01:02:08,120
Speaker 1: the relationship between the United States and China is permanently changed,

832
01:02:08,400 --> 01:02:12,920
Speaker 1: permanently meaning for at least a generation, and it's evolving.

833
01:02:13,880 --> 01:02:18,600
Speaker 1: In the United States, politics drive a hard China line

834
01:02:19,280 --> 01:02:28,320
Speaker 1: both parties. In China, politics drive more isolationism, a different

835
01:02:28,520 --> 01:02:35,360
Speaker 1: internal structure, no dissent permitted, a suppression of whatever forces

836
01:02:35,440 --> 01:02:48,600
Speaker 1: of descent or outspokenness or existing, and the forced initiatives

837
01:02:49,280 --> 01:02:53,280
Speaker 1: of Beijing on a population at one point four billion people.

838
01:02:54,680 --> 01:02:58,280
Speaker 1: And that's underway. So that's what That's the world that

839
01:02:58,400 --> 01:03:02,840
Speaker 1: we live in and are probably going to live in

840
01:03:03,160 --> 01:03:06,439
Speaker 1: for the rest of our lives. And what about doing

841
01:03:06,680 --> 01:03:09,720
Speaker 1: are only you and I are only thirty nine years old,

842
01:03:09,800 --> 01:03:13,600
Speaker 1: like Jack Benny, so we you know we have UM,

843
01:03:13,760 --> 01:03:16,640
Speaker 1: what about the rest of the emerging markets outside of China?

844
01:03:16,800 --> 01:03:19,880
Speaker 1: How do you look at those parts of the world

845
01:03:20,800 --> 01:03:26,200
Speaker 1: when China has become so such an outsized contributor to

846
01:03:26,280 --> 01:03:30,600
Speaker 1: global GDP. What's your perspective there, Well, I think there

847
01:03:30,600 --> 01:03:35,480
Speaker 1: are some places that are are a real interest. So

848
01:03:36,040 --> 01:03:41,320
Speaker 1: I think Vietnam is a frontier market um that has

849
01:03:41,560 --> 01:03:48,480
Speaker 1: entrepreneurial characteristics independent of China. Uh South Korea is an

850
01:03:48,520 --> 01:03:54,240
Speaker 1: example of developed market. There are plenty of places that

851
01:03:54,360 --> 01:03:58,440
Speaker 1: are not China. In Taiwan, of course, emerges as a

852
01:03:58,560 --> 01:04:01,800
Speaker 1: mature market, although it's out geopolitical risk with the China

853
01:04:01,880 --> 01:04:06,240
Speaker 1: so close. But what we see is many places which

854
01:04:06,280 --> 01:04:11,680
Speaker 1: have the ability to modernize, highly productive, contribute to world

855
01:04:11,760 --> 01:04:17,680
Speaker 1: economic activity and do so with with modern skills, and

856
01:04:19,080 --> 01:04:24,400
Speaker 1: they will supplant China. They will go to places for

857
01:04:24,720 --> 01:04:29,640
Speaker 1: capital investment, and China is less and less a safe place.

858
01:04:30,360 --> 01:04:33,000
Speaker 1: I've been to China several times. I wouldn't travel to

859
01:04:33,160 --> 01:04:36,640
Speaker 1: China now, not because of COVID, because I would feel

860
01:04:36,920 --> 01:04:41,560
Speaker 1: at risk being there. Others say the same thing. You

861
01:04:41,680 --> 01:04:43,920
Speaker 1: and I have a lot of colleagues who have business

862
01:04:44,000 --> 01:04:50,040
Speaker 1: relationships and analytical relationships with China, and they are afraid

863
01:04:50,760 --> 01:04:55,360
Speaker 1: they physically wouldn't go now. Oh yeah, we and you

864
01:04:55,480 --> 01:04:58,080
Speaker 1: know we speak to when we're together in Maine. We

865
01:04:58,520 --> 01:05:02,800
Speaker 1: we meet and talk up these things is as you're

866
01:05:03,040 --> 01:05:06,200
Speaker 1: you're an old timer, you're a tenured professor of it.

867
01:05:06,320 --> 01:05:09,360
Speaker 1: I am, I am, but I'm kind of surprised that

868
01:05:09,760 --> 01:05:13,600
Speaker 1: people would you mean, fear physically for their safety as

869
01:05:13,640 --> 01:05:17,440
Speaker 1: an American in China, Yes, I would. I wouldn't go

870
01:05:18,000 --> 01:05:21,240
Speaker 1: from the public or from the government. Well, I would

871
01:05:21,280 --> 01:05:24,400
Speaker 1: be afraid of the government. And I'm not sure how

872
01:05:24,560 --> 01:05:28,160
Speaker 1: welcome I would be now as an American from the public.

873
01:05:28,240 --> 01:05:31,320
Speaker 1: When I was in China, it was a very welcoming experience.

874
01:05:31,360 --> 01:05:33,480
Speaker 1: When I was in China with a group of economists,

875
01:05:33,480 --> 01:05:37,040
Speaker 1: when we traveled around, it was a welcoming experience. Hong

876
01:05:37,120 --> 01:05:44,000
Speaker 1: Kong a welcoming experience. Beijing a welcoming experience today not

877
01:05:44,200 --> 01:05:48,640
Speaker 1: the same. To go there. They describe it and they

878
01:05:48,720 --> 01:05:53,120
Speaker 1: say it's different. You go and and the way you're treated,

879
01:05:53,440 --> 01:05:59,440
Speaker 1: greeted and viewed is different. Things have changed last things

880
01:05:59,520 --> 01:06:02,920
Speaker 1: in China you have changed because the people are afraid

881
01:06:03,000 --> 01:06:09,640
Speaker 1: of their government and understandable reasons. So for me, I think,

882
01:06:10,120 --> 01:06:12,280
Speaker 1: you know, I watch a lot of our colleagues and

883
01:06:12,320 --> 01:06:15,440
Speaker 1: a lot of investment firms, and they're placing money at

884
01:06:15,640 --> 01:06:20,240
Speaker 1: risk in China, and they're developing things in China, and Okay,

885
01:06:20,480 --> 01:06:24,400
Speaker 1: that's their decision. My view is China is a growing

886
01:06:24,880 --> 01:06:33,960
Speaker 1: risk for capital investment, entrepreneurial investment UM and physically dangerous

887
01:06:34,160 --> 01:06:37,920
Speaker 1: for some people. So you're preaching to the choir about

888
01:06:38,080 --> 01:06:41,360
Speaker 1: capital risk. I asked the question a year ago. Is

889
01:06:41,480 --> 01:06:45,480
Speaker 1: China becoming uninvestable when you see what they did to

890
01:06:45,560 --> 01:06:49,600
Speaker 1: Ali Baba and the rest of the tech space, And

891
01:06:49,800 --> 01:06:52,720
Speaker 1: some people try to draw a parallel to what Donald

892
01:06:52,760 --> 01:06:57,720
Speaker 1: Trump did. Trump was mostly noise and tweets about companies.

893
01:06:58,400 --> 01:07:03,960
Speaker 1: This is actually government action in China UM affecting how

894
01:07:04,080 --> 01:07:08,120
Speaker 1: companies operate and behave not just noise but rules. So

895
01:07:08,680 --> 01:07:12,400
Speaker 1: so I understand where you're coming from saying you would

896
01:07:12,440 --> 01:07:16,240
Speaker 1: be reluctant to put capital at risk there. UM. But

897
01:07:16,400 --> 01:07:19,200
Speaker 1: you brought something else up that I'm I'm eager to

898
01:07:19,280 --> 01:07:23,840
Speaker 1: talk about. You mentioned fishing and what we've done in Maine.

899
01:07:24,560 --> 01:07:27,640
Speaker 1: So let's talk a little bit about what's become known

900
01:07:27,800 --> 01:07:33,080
Speaker 1: as Camp COO talk, where you gather four or five

901
01:07:33,200 --> 01:07:39,520
Speaker 1: dozen economists, fund managers, commentators, analysts, etcetera, for what what

902
01:07:39,720 --> 01:07:44,680
Speaker 1: some people have described as a more productive miniature version

903
01:07:44,960 --> 01:07:48,439
Speaker 1: of of Davos tell us a little bit about camp

904
01:07:48,520 --> 01:07:52,480
Speaker 1: Ko talk. Well, it's interesting now you're you've been irregular

905
01:07:52,560 --> 01:07:55,000
Speaker 1: there for a lot of years. So going back to

906
01:07:55,240 --> 01:07:58,120
Speaker 1: I think oh eight was my first year. So you're

907
01:07:58,160 --> 01:08:03,880
Speaker 1: a tenured professor, ampoke. You think about you think about

908
01:08:03,960 --> 01:08:09,960
Speaker 1: the history. We're twenty years since um the towers in

909
01:08:10,040 --> 01:08:12,560
Speaker 1: the attack in New York. And it was the year

910
01:08:12,760 --> 01:08:17,840
Speaker 1: after the World Trade Center event that ratcheted up the

911
01:08:18,040 --> 01:08:21,519
Speaker 1: discussion and the number of people who would say, all right,

912
01:08:21,560 --> 01:08:23,240
Speaker 1: I'll come with you will go out in the woods

913
01:08:24,400 --> 01:08:28,120
Speaker 1: and we'll spend a weekend and I don't care about fishing.

914
01:08:28,160 --> 01:08:31,719
Speaker 1: I remember Harvey Rosenbloom from the Dallas Fed the first

915
01:08:31,760 --> 01:08:34,080
Speaker 1: time he held a fishing rod in his hand, and

916
01:08:34,200 --> 01:08:36,320
Speaker 1: I said, Harvey, you're not supposed to hit the fish

917
01:08:36,400 --> 01:08:38,400
Speaker 1: over the head. You actually have to use a hook

918
01:08:38,439 --> 01:08:41,880
Speaker 1: and line. And Harvey's head was head of research at

919
01:08:41,920 --> 01:08:47,160
Speaker 1: the Dallas Fed. Not an inconsequential economist. Well, he was

920
01:08:47,439 --> 01:08:49,840
Speaker 1: director of research at the Dallas Fed for a long time.

921
01:08:49,920 --> 01:08:52,400
Speaker 1: Said a lot of federal open market committees of the

922
01:08:52,520 --> 01:08:55,080
Speaker 1: Fed and everything else. But he came, and before that

923
01:08:55,240 --> 01:08:58,040
Speaker 1: he never would have never would have come. What me

924
01:08:58,280 --> 01:09:00,760
Speaker 1: go out the main fishing? What are you talking about.

925
01:09:01,600 --> 01:09:07,519
Speaker 1: So it's changed. We've created an environment I think, where

926
01:09:07,800 --> 01:09:11,920
Speaker 1: there are periods of conversation under Chatham House rule where

927
01:09:12,000 --> 01:09:16,760
Speaker 1: people are comfortable and they can speak privately, and they

928
01:09:16,800 --> 01:09:19,400
Speaker 1: can talk about their views of the world, and they

929
01:09:19,439 --> 01:09:26,160
Speaker 1: can exchange views and take a takeaway. Um, those conversations

930
01:09:26,200 --> 01:09:29,400
Speaker 1: are rare anymore, so so let's let's the place that

931
01:09:29,680 --> 01:09:31,840
Speaker 1: we can hold them. So so let's stay with that.

932
01:09:32,120 --> 01:09:36,320
Speaker 1: Because I was discussing Maine with another friend of ours.

933
01:09:36,360 --> 01:09:39,880
Speaker 1: We're gonna be name dropping everywhere. David Noddig, who who

934
01:09:40,080 --> 01:09:45,720
Speaker 1: his takeaway was being outside with people in nature, engaging

935
01:09:45,880 --> 01:09:51,240
Speaker 1: in holistic thinking, being able to have these important, meaningful

936
01:09:51,320 --> 01:09:55,120
Speaker 1: discussions in private, not in the public square. He says,

937
01:09:55,479 --> 01:10:00,360
Speaker 1: that's a completely different experience than than something like Vos

938
01:10:00,479 --> 01:10:03,720
Speaker 1: or anywhere else where everything is televised and it's just

939
01:10:04,080 --> 01:10:09,240
Speaker 1: completely a public spectacle. Was that the intention from the

940
01:10:09,320 --> 01:10:12,880
Speaker 1: beginning or it did? Did it just an evolve into

941
01:10:13,000 --> 01:10:19,680
Speaker 1: this wonderful outdoor experience? Well, evolution I think is the

942
01:10:19,840 --> 01:10:22,160
Speaker 1: right word. You know, Dave told me he's already in

943
01:10:22,240 --> 01:10:24,639
Speaker 1: communication with you to figure out how to ride together

944
01:10:24,760 --> 01:10:29,160
Speaker 1: or something like that. So did that last year? Also? Yeah?

945
01:10:29,760 --> 01:10:35,360
Speaker 1: So I mean we we've we've created something, it's evolved

946
01:10:35,400 --> 01:10:40,360
Speaker 1: over time, we've changed lodges, and we've modified the program.

947
01:10:40,479 --> 01:10:42,840
Speaker 1: Some people say, gee, why do you have thirty minutes

948
01:10:42,920 --> 01:10:47,400
Speaker 1: of a panel before dinner? And why not do it

949
01:10:47,479 --> 01:10:49,600
Speaker 1: in the afternoon. People don't want to do it in

950
01:10:49,600 --> 01:10:52,200
Speaker 1: the afternoon. The fact is, if you do thirty minutes

951
01:10:52,320 --> 01:10:55,439
Speaker 1: before dinner, Barry, you've been a moderator, you've been a seeker,

952
01:10:55,560 --> 01:10:59,160
Speaker 1: a part of those sessions. We talk about a topic

953
01:10:59,760 --> 01:11:03,519
Speaker 1: for thirty minutes in a structured environment. Thirty minutes enough,

954
01:11:04,560 --> 01:11:07,720
Speaker 1: and then the dinner conversation, more sent all kinds of

955
01:11:07,800 --> 01:11:10,040
Speaker 1: things for the next two hours. That's right. And the

956
01:11:10,120 --> 01:11:14,280
Speaker 1: secret is you close the bar during the panel discussion

957
01:11:14,640 --> 01:11:18,040
Speaker 1: so you have everybody's attention, and as soon as it's over,

958
01:11:18,800 --> 01:11:22,800
Speaker 1: the bar reopens and and the conversation really starts. And

959
01:11:23,240 --> 01:11:27,800
Speaker 1: we do it before dinner. Remember, they're hungry, they've been

960
01:11:27,840 --> 01:11:31,040
Speaker 1: out in the woods all day, so you get them wet,

961
01:11:31,200 --> 01:11:33,920
Speaker 1: then you close the bar. Then you keep them hungry

962
01:11:34,000 --> 01:11:36,360
Speaker 1: for thirty minutes and everybody and you as you know

963
01:11:36,600 --> 01:11:40,040
Speaker 1: you were, you were you ran a panel and you

964
01:11:40,200 --> 01:11:43,360
Speaker 1: said and the rules were seven minutes. I remember you

965
01:11:43,479 --> 01:11:45,599
Speaker 1: standing in the front of the dining hall and said

966
01:11:45,720 --> 01:11:47,800
Speaker 1: seven minutes, I'm going to shut you down. Go to

967
01:11:47,840 --> 01:11:49,639
Speaker 1: the next one. You were, that's what you have. People

968
01:11:49,680 --> 01:11:52,439
Speaker 1: through rolls at me. They wanted to keep going. It

969
01:11:52,640 --> 01:11:58,760
Speaker 1: was it's very unruly group to enforce discipline, especially by

970
01:11:58,800 --> 01:12:00,800
Speaker 1: the time you roll around to the second or third

971
01:12:00,920 --> 01:12:03,840
Speaker 1: night and the second or third glass of wine. Uh.

972
01:12:04,000 --> 01:12:07,400
Speaker 1: It's amazing how people you think of as button down,

973
01:12:08,000 --> 01:12:12,720
Speaker 1: stiff economists turned out to be uh, a little more

974
01:12:13,520 --> 01:12:16,519
Speaker 1: free flowing when when the time is right, no question

975
01:12:17,000 --> 01:12:20,240
Speaker 1: for sure. So so I when I think of you,

976
01:12:20,560 --> 01:12:24,280
Speaker 1: when I describe David Ko talk, there's a lot of

977
01:12:24,360 --> 01:12:27,280
Speaker 1: different ways I think of you. But I think the

978
01:12:27,560 --> 01:12:34,040
Speaker 1: legacy of camp Ko Talk has probably had the greatest

979
01:12:34,240 --> 01:12:38,799
Speaker 1: impact on the greatest number of people, even those people

980
01:12:39,240 --> 01:12:43,639
Speaker 1: three and four and five steps removed from the event,

981
01:12:44,520 --> 01:12:48,160
Speaker 1: to the point where where people have asked me, Hey,

982
01:12:48,280 --> 01:12:50,040
Speaker 1: what do I have to do to get on the

983
01:12:50,160 --> 01:12:54,120
Speaker 1: camp COO talk list? And my enter is always, you're

984
01:12:54,120 --> 01:12:56,000
Speaker 1: sucking up to the wrong guy. You gotta go suck

985
01:12:56,080 --> 01:12:58,800
Speaker 1: up to David, not me. It's called camp Ko Talk,

986
01:12:58,880 --> 01:13:02,000
Speaker 1: not camp Rid Halts. He's the guy that's off too. Well,

987
01:13:02,120 --> 01:13:05,599
Speaker 1: thank you very much. There are a lot of folks

988
01:13:05,640 --> 01:13:08,840
Speaker 1: who raise that question. Interesting mix of folks because we

989
01:13:09,080 --> 01:13:11,400
Speaker 1: was trying to mix it up and where you know,

990
01:13:11,560 --> 01:13:16,080
Speaker 1: also involved with the Global Interdependence Center now and that

991
01:13:16,280 --> 01:13:19,760
Speaker 1: helps with what we try to organize and do the

992
01:13:19,880 --> 01:13:22,800
Speaker 1: programming for it. It's interesting if I can just say,

993
01:13:22,960 --> 01:13:26,880
Speaker 1: the name camp cook Talk was not coined by me. Um.

994
01:13:27,760 --> 01:13:30,479
Speaker 1: Steve Leashman was up there and he was interviewing me

995
01:13:30,640 --> 01:13:32,840
Speaker 1: on the deck. I don't know if I can do

996
01:13:32,960 --> 01:13:36,880
Speaker 1: Amazy's gimbals thing here, but whatever. No, absolutely Leastman was

997
01:13:37,320 --> 01:13:40,920
Speaker 1: not only was he there for CNBC UM and CBC

998
01:13:41,040 --> 01:13:43,680
Speaker 1: and Bloomberg have both been up there with cameras, but

999
01:13:44,320 --> 01:13:48,639
Speaker 1: he's a pretty well known dead head and a singer musician,

1000
01:13:49,120 --> 01:13:52,000
Speaker 1: and he would bring a guitar and entertain people. Yes,

1001
01:13:52,160 --> 01:13:54,799
Speaker 1: and if he comes back this year and I've invited

1002
01:13:54,880 --> 01:13:57,280
Speaker 1: him and he can bring it again, I would tell

1003
01:13:57,280 --> 01:14:00,400
Speaker 1: you he's also an excellent fly fisherman. We've fish together.

1004
01:14:00,800 --> 01:14:04,120
Speaker 1: But when Liceman was interviewing me on the deck and

1005
01:14:04,240 --> 01:14:07,599
Speaker 1: they broke to a commercial break, it was Becky Quipp

1006
01:14:08,400 --> 01:14:12,479
Speaker 1: who coined the name camp co Talk. That's where the

1007
01:14:12,600 --> 01:14:15,080
Speaker 1: name came from. I didn't create the name. When I

1008
01:14:15,200 --> 01:14:18,479
Speaker 1: first heard the name, I heard the Shadow Federal Reserve

1009
01:14:18,560 --> 01:14:22,880
Speaker 1: Committee was how it initially was approached to me. And

1010
01:14:23,680 --> 01:14:26,800
Speaker 1: I had enough people asked me about it that eventually

1011
01:14:27,560 --> 01:14:30,599
Speaker 1: I wrote this long, two thousand word missive for Business

1012
01:14:30,680 --> 01:14:33,519
Speaker 1: Week about it that I still get emails about. You know,

1013
01:14:33,600 --> 01:14:35,960
Speaker 1: it was a couple of years ago. Ready. That name

1014
01:14:36,040 --> 01:14:39,040
Speaker 1: came from John Hilton Rath when he was writing a column.

1015
01:14:39,280 --> 01:14:41,519
Speaker 1: He was up there and he wrote a column in

1016
01:14:41,600 --> 01:14:44,840
Speaker 1: the Journal, and he called it the Shadow Kansas City Fit.

1017
01:14:45,360 --> 01:14:48,360
Speaker 1: That's hilarious. Well, I know I only have you for

1018
01:14:48,600 --> 01:14:50,599
Speaker 1: a limited amount of time, and I want to get

1019
01:14:50,680 --> 01:14:54,000
Speaker 1: to my favorite questions. As much as I would love

1020
01:14:54,080 --> 01:14:58,120
Speaker 1: to wax nostalgic about all things camp Cot talk, I

1021
01:14:58,240 --> 01:15:00,840
Speaker 1: do have to share one for any story, and I'm

1022
01:15:00,840 --> 01:15:04,360
Speaker 1: not going to mention names. But we're playing poker one night,

1023
01:15:05,040 --> 01:15:08,280
Speaker 1: me and a buddy who's a hedge fund manager. On

1024
01:15:08,520 --> 01:15:12,519
Speaker 1: his right is uh, an equity manager at a you know,

1025
01:15:12,800 --> 01:15:17,519
Speaker 1: bold face name brand shop. On on my left is

1026
01:15:17,720 --> 01:15:21,400
Speaker 1: a bond manager at also a name face you know,

1027
01:15:21,520 --> 01:15:24,599
Speaker 1: a bold faced name brand shop. And they both get

1028
01:15:24,720 --> 01:15:28,360
Speaker 1: up to go get more drinks, and they each ask us, Hey,

1029
01:15:28,439 --> 01:15:30,320
Speaker 1: would would you like another class? I'm sure I bring

1030
01:15:30,479 --> 01:15:32,680
Speaker 1: each of us say yes. And I turned to my

1031
01:15:32,760 --> 01:15:34,920
Speaker 1: hedge fund buddy, and I say, I just want to

1032
01:15:34,960 --> 01:15:39,559
Speaker 1: point out that my waiter manages a trillion dollars. Your

1033
01:15:39,600 --> 01:15:43,560
Speaker 1: waiter only manages five billion dollars. And that's like a

1034
01:15:43,800 --> 01:15:48,600
Speaker 1: typical camp co talk type of a story. And and

1035
01:15:48,720 --> 01:15:52,080
Speaker 1: I have we all have endless, endless versions of that.

1036
01:15:52,920 --> 01:15:56,320
Speaker 1: With that said, let's jump to some of our favorite

1037
01:15:56,840 --> 01:16:01,800
Speaker 1: questions we ask all of our guests darting with. Given

1038
01:16:01,840 --> 01:16:05,080
Speaker 1: the pandemic and the lockdown, tell us what you're streaming

1039
01:16:05,160 --> 01:16:11,799
Speaker 1: these days? What's entertaining you on either Netflix or Amazon Prime. Okay,

1040
01:16:11,880 --> 01:16:15,920
Speaker 1: so you gave me warning about the five questions. I

1041
01:16:16,000 --> 01:16:19,559
Speaker 1: had time to think about them, and I know we're

1042
01:16:20,320 --> 01:16:23,360
Speaker 1: up against the clock with only a few minutes. So

1043
01:16:23,600 --> 01:16:26,320
Speaker 1: I thought about that and I said, okay, I'll pick

1044
01:16:26,400 --> 01:16:30,560
Speaker 1: one and that Don't Look Up. And I believe the

1045
01:16:31,160 --> 01:16:35,679
Speaker 1: Meryl Street movie Don't Look Up, which is a parody

1046
01:16:35,960 --> 01:16:39,639
Speaker 1: on the politics of the country in so many ways,

1047
01:16:40,080 --> 01:16:47,800
Speaker 1: is a wonderful, wonderful modern parody. I enjoyed it, thought

1048
01:16:47,840 --> 01:16:51,800
Speaker 1: about it. I particularly liked some of the characters who

1049
01:16:51,960 --> 01:16:58,320
Speaker 1: depicted those which we're part of our political scene. So

1050
01:16:58,680 --> 01:17:03,519
Speaker 1: I would say, don't look up makes the movie lift. Huh,

1051
01:17:03,720 --> 01:17:07,519
Speaker 1: really really good. Let's talk about mentors. What who were

1052
01:17:07,600 --> 01:17:11,639
Speaker 1: some of your mentors who helped to shape your career? Well?

1053
01:17:14,040 --> 01:17:18,519
Speaker 1: I thought about two an economist, probably not widely known,

1054
01:17:18,720 --> 01:17:24,680
Speaker 1: Hungarian economist, Gabriel Carrakesh, that many many years ago, and

1055
01:17:26,000 --> 01:17:30,160
Speaker 1: he was a mentor for me in many ways, and

1056
01:17:30,560 --> 01:17:36,840
Speaker 1: with him I actually joined in publishing the first editorial

1057
01:17:37,000 --> 01:17:43,559
Speaker 1: piece in a publication that was nineteen seven three, maybe

1058
01:17:44,840 --> 01:17:48,719
Speaker 1: something like that. Gabriel Rakish and I had a great

1059
01:17:48,800 --> 01:17:53,960
Speaker 1: political mentorship from Governor Tom Kane. I was able to

1060
01:17:54,040 --> 01:17:57,200
Speaker 1: be part of his administration and work with him and

1061
01:17:57,320 --> 01:18:01,960
Speaker 1: get to know them, and he affirms for me to

1062
01:18:02,160 --> 01:18:04,240
Speaker 1: this day. I spoke with them just a few weeks ago,

1063
01:18:05,080 --> 01:18:10,080
Speaker 1: um that there is a hope for this great experiment

1064
01:18:10,880 --> 01:18:15,240
Speaker 1: called democracy in the United States. It's a glass half full.

1065
01:18:15,439 --> 01:18:19,400
Speaker 1: It's under a lot of stress these days. But Caine

1066
01:18:20,080 --> 01:18:23,479
Speaker 1: is a person who doesn't give up, and and he

1067
01:18:24,720 --> 01:18:28,280
Speaker 1: he was able to teach me something. He said, when

1068
01:18:28,400 --> 01:18:32,680
Speaker 1: people get the right information these days, that's a tough one,

1069
01:18:34,240 --> 01:18:39,360
Speaker 1: and they get the facts presented so they're clear the

1070
01:18:39,479 --> 01:18:44,519
Speaker 1: electorate makes valid decisions. Sometimes it's tough to get to him,

1071
01:18:45,120 --> 01:18:50,840
Speaker 1: but he has confidence in the American system. That's something

1072
01:18:50,920 --> 01:18:54,840
Speaker 1: that has stayed with me. Tom Kane was a great mentor.

1073
01:18:56,960 --> 01:19:01,160
Speaker 1: Is was it really interesting? He's x and he's still going.

1074
01:19:01,880 --> 01:19:05,160
Speaker 1: So let's talk books. You mentioned you're surrounded by books.

1075
01:19:05,200 --> 01:19:07,840
Speaker 1: I'm gonna ask you this in two parts. What are

1076
01:19:07,880 --> 01:19:10,559
Speaker 1: some of your all time favorite books and what are

1077
01:19:10,560 --> 01:19:14,920
Speaker 1: you reading currently? Well, I read The Peloponnesian War again

1078
01:19:15,120 --> 01:19:18,760
Speaker 1: with slucidity, so I had to dig into that all

1079
01:19:18,840 --> 01:19:22,120
Speaker 1: time favorite books. I've got a lot, but reading now

1080
01:19:22,560 --> 01:19:25,840
Speaker 1: two books. One you know the author written on Water.

1081
01:19:26,000 --> 01:19:28,759
Speaker 1: It's his third book, Randy Spencer, and he's a fishing

1082
01:19:28,840 --> 01:19:33,679
Speaker 1: guide up in Grand Lake Street, Maine. He's written several

1083
01:19:33,760 --> 01:19:35,640
Speaker 1: books and he's got one it's got a bunch of

1084
01:19:35,720 --> 01:19:38,599
Speaker 1: stories about the region. And the other book I'm reading

1085
01:19:38,680 --> 01:19:41,000
Speaker 1: now and I think you would know the author is

1086
01:19:41,160 --> 01:19:44,839
Speaker 1: Vito Racanelli. Sure it was at Barns for two decades.

1087
01:19:45,680 --> 01:19:49,599
Speaker 1: First novel. It's a murder mystery, the Man in Milan.

1088
01:19:50,640 --> 01:19:54,759
Speaker 1: So good for Vito. He's ventured away from financial writing.

1089
01:19:55,520 --> 01:19:59,880
Speaker 1: And Randy has a good third book, which is what's

1090
01:20:00,080 --> 01:20:04,280
Speaker 1: name of the third one? Written on water? Written on water?

1091
01:20:05,040 --> 01:20:08,040
Speaker 1: That that makes a lot of sense. Uh. What sort

1092
01:20:08,080 --> 01:20:11,120
Speaker 1: of advice would you give to a recent college graduate

1093
01:20:11,240 --> 01:20:15,600
Speaker 1: who was interested in a career in either investment management

1094
01:20:15,800 --> 01:20:24,080
Speaker 1: or finance? Um one that Winston Churchill gave two students

1095
01:20:25,640 --> 01:20:33,000
Speaker 1: when asked about this similar question, and he said, study history,

1096
01:20:33,439 --> 01:20:38,320
Speaker 1: study history, study history, and when you're done, study more history.

1097
01:20:38,880 --> 01:20:42,240
Speaker 1: And I think that sound advice. It's a guide we

1098
01:20:42,400 --> 01:20:46,760
Speaker 1: learned from history. I'm saddened that the fact that our

1099
01:20:47,040 --> 01:20:53,120
Speaker 1: our education system doesn't teach enough history. Huh. And our

1100
01:20:53,200 --> 01:20:56,840
Speaker 1: final question that we ask all of our guests, tell

1101
01:20:56,920 --> 01:20:59,280
Speaker 1: us what you know about the world of investing today

1102
01:21:00,160 --> 01:21:02,760
Speaker 1: you wish you knew fifty years or so ago when

1103
01:21:02,800 --> 01:21:06,680
Speaker 1: you were first starting out. Well, there there's a statistical

1104
01:21:06,800 --> 01:21:13,519
Speaker 1: basis Bayesian theory. And Bayesian theory was something we were

1105
01:21:13,600 --> 01:21:18,240
Speaker 1: taught in abstract. It's applicable. We use it in our

1106
01:21:18,360 --> 01:21:21,760
Speaker 1: conotative work in our shop. We use it a lot. Uh.

1107
01:21:23,040 --> 01:21:27,720
Speaker 1: I didn't give it in the earlier times the respect

1108
01:21:28,920 --> 01:21:34,400
Speaker 1: that Tom Bays deserves. And I think if there's one

1109
01:21:34,520 --> 01:21:42,280
Speaker 1: single thing two articulate in a mathematical sense, that requires

1110
01:21:42,400 --> 01:21:48,759
Speaker 1: you to be adaptive. It's Bayesian theory applied in finance

1111
01:21:48,840 --> 01:21:51,360
Speaker 1: and economics and probably a whole bunch of other things too.

1112
01:21:51,680 --> 01:21:53,720
Speaker 1: So let me let me drill down into this a

1113
01:21:53,800 --> 01:21:56,240
Speaker 1: little bit, because when I think of Bay's theorem, I

1114
01:21:56,439 --> 01:22:00,519
Speaker 1: I we typically think of the traditional Bell curve. Are

1115
01:22:00,600 --> 01:22:05,400
Speaker 1: you focusing more on that right tail and black swan

1116
01:22:05,479 --> 01:22:09,639
Speaker 1: events or are you focusing more on the traditional fat

1117
01:22:09,760 --> 01:22:14,639
Speaker 1: part of of the most likely outcomes? Well, I would

1118
01:22:14,680 --> 01:22:20,160
Speaker 1: start with the Bell curve, which was a Gaussian depiction

1119
01:22:20,920 --> 01:22:26,760
Speaker 1: data points name for Gus who created it, And the

1120
01:22:26,880 --> 01:22:30,479
Speaker 1: notion we have is the shape of that curve and tails.

1121
01:22:31,120 --> 01:22:34,599
Speaker 1: But as a practical matter, no curve looks like a bill.

1122
01:22:35,840 --> 01:22:43,360
Speaker 1: It's scattered plot. And so what I think base suggests

1123
01:22:43,960 --> 01:22:47,679
Speaker 1: in modern times is the data points in those scatter

1124
01:22:47,800 --> 01:22:53,879
Speaker 1: plots are moving, and you have to examine those shifts

1125
01:22:54,800 --> 01:22:58,519
Speaker 1: and the rates of change in them. So whether it's

1126
01:22:58,640 --> 01:23:04,920
Speaker 1: right tailor left hail, or how flat the curve is,

1127
01:23:05,120 --> 01:23:08,439
Speaker 1: if you try to depict it, the fact is it's

1128
01:23:08,560 --> 01:23:14,120
Speaker 1: not constant. It's vibrating. If you will, it has it

1129
01:23:14,280 --> 01:23:20,120
Speaker 1: has features which are adjusting constantly to new metrics and

1130
01:23:20,240 --> 01:23:24,479
Speaker 1: new events. So it's a living thing, not a static thing.

1131
01:23:25,120 --> 01:23:28,960
Speaker 1: And what base math does and when you incorporated in

1132
01:23:29,080 --> 01:23:34,360
Speaker 1: the math is attempt to measure or estimate the rates

1133
01:23:34,400 --> 01:23:38,479
Speaker 1: of those changes. Huh. Quite fascinating, David, Thank you so

1134
01:23:38,640 --> 01:23:42,160
Speaker 1: much for being so generous with your time. We have

1135
01:23:42,400 --> 01:23:46,000
Speaker 1: been speaking with David Kotak, chairman and chief investment officer

1136
01:23:46,600 --> 01:23:51,040
Speaker 1: at Cumberland Investors. If you enjoy this conversation, well, be

1137
01:23:51,160 --> 01:23:53,599
Speaker 1: sure and check out any of the previous four hundred

1138
01:23:53,680 --> 01:23:57,679
Speaker 1: or so such interviews we've done over the past eight years.

1139
01:23:57,800 --> 01:24:02,360
Speaker 1: You can find that at Spotify, iTunes, Bloomberg dot com,

1140
01:24:02,520 --> 01:24:06,280
Speaker 1: wherever you get your favorite podcasts. We love your comments,

1141
01:24:06,360 --> 01:24:10,440
Speaker 1: feedback and suggestions right to us at m IB podcast

1142
01:24:10,479 --> 01:24:14,120
Speaker 1: at Bloomberg dot net. You can sign up for my

1143
01:24:14,320 --> 01:24:18,439
Speaker 1: daily reading list each morning at Dhalts dot com. Follow

1144
01:24:18,520 --> 01:24:21,759
Speaker 1: me on Twitter at rid Halts. I would be remiss

1145
01:24:21,800 --> 01:24:24,360
Speaker 1: if I did not thank the correct team that helps

1146
01:24:24,439 --> 01:24:29,720
Speaker 1: put these conversations together each week. Mohammed Ramaui is my

1147
01:24:29,880 --> 01:24:34,680
Speaker 1: audio engineer. Paris Wold is my producer. Michael Batnick is

1148
01:24:34,760 --> 01:24:38,719
Speaker 1: my head of research. Attica val Broun is our project manager.

1149
01:24:39,360 --> 01:24:43,320
Speaker 1: I'm Barry Hults. You've been listening to Master's business on

1150
01:24:43,479 --> 01:24:44,400
Speaker 1: Bloomberg Radio