1 00:00:13,560 --> 00:00:16,880 Speaker 1: Hello, and welcome to What Goes Up a Bloomberg Weekly 2 00:00:16,920 --> 00:00:20,720 Speaker 1: Markets podcast. I'm Sarah Plantzek, a reporter on the Cross 3 00:00:20,720 --> 00:00:23,520 Speaker 1: Asset team, and I'm Mike Reagan, a senior editor on 4 00:00:23,560 --> 00:00:26,240 Speaker 1: the Markets Team. This week on the show, the beloved 5 00:00:26,280 --> 00:00:30,720 Speaker 1: trade of is being tested or session fears have faded. 6 00:00:31,120 --> 00:00:35,280 Speaker 1: Sentiment has turned incrementally more positive, and that's set in 7 00:00:35,320 --> 00:00:38,519 Speaker 1: Bonn yield higher and it's now pressuring stock investors that 8 00:00:38,520 --> 00:00:41,640 Speaker 1: were before playing defense. Is this the start of something 9 00:00:41,680 --> 00:00:45,440 Speaker 1: new or is it just a false dawn? And as always, 10 00:00:45,440 --> 00:00:48,319 Speaker 1: will end the episode with our tradition the Craziest Thing 11 00:00:48,440 --> 00:00:51,559 Speaker 1: I Saw in Markets this week? Sarah, I presume you're 12 00:00:51,560 --> 00:00:53,519 Speaker 1: prepared for that second. I am prepared, but I have 13 00:00:53,560 --> 00:00:56,080 Speaker 1: a feeling that you have a very special one I got. 14 00:00:56,120 --> 00:00:58,400 Speaker 1: I have a very special edition of the Craziest Thing 15 00:00:58,480 --> 00:01:00,560 Speaker 1: I Saw in Markets this week. But let's get right 16 00:01:00,560 --> 00:01:03,640 Speaker 1: to it. I mean, sort of a crazy week in 17 00:01:03,680 --> 00:01:07,120 Speaker 1: the bond market. We're seen a really notable back up 18 00:01:07,160 --> 00:01:11,440 Speaker 1: in yields, and luckily, by happenstance, we happen to have 19 00:01:11,560 --> 00:01:14,920 Speaker 1: the perfect guest to help us break it down. From 20 00:01:15,040 --> 00:01:18,399 Speaker 1: p G I am, we have Robert Tip, who is 21 00:01:18,440 --> 00:01:21,399 Speaker 1: the chief investment strategist at p G. I am Robert, 22 00:01:21,440 --> 00:01:23,120 Speaker 1: Welcome to the show. Thank you, good to be here. 23 00:01:23,160 --> 00:01:24,520 Speaker 1: And it's good to have a Jersey guy. I would 24 00:01:24,520 --> 00:01:26,480 Speaker 1: say to at least do you work in Jersey and Newark? 25 00:01:26,560 --> 00:01:29,480 Speaker 1: If if my notes are credit, well I'm quite diverse. 26 00:01:29,520 --> 00:01:32,240 Speaker 1: I commute from a Westchester so I drive through you know, 27 00:01:32,319 --> 00:01:35,240 Speaker 1: quite a range of geography that's very regional. Yeah, that's 28 00:01:35,280 --> 00:01:38,440 Speaker 1: a nightmare of a community I imagined. No comment, Well 29 00:01:38,480 --> 00:01:40,280 Speaker 1: it's not, you know, at least it's not the most 30 00:01:40,319 --> 00:01:44,360 Speaker 1: common commonly trodden path. And also joining us this week, 31 00:01:44,360 --> 00:01:47,720 Speaker 1: commuting all the way from Greenwich Village, we have Chris ag, 32 00:01:47,920 --> 00:01:51,160 Speaker 1: the executive editor of Markets at Bloomberg. Chris, welcome back 33 00:01:51,200 --> 00:01:53,560 Speaker 1: to the show. Thanks for having me, Mike, thanks for 34 00:01:53,600 --> 00:01:56,240 Speaker 1: identifying where I live. That's true. Anyone looking for Chris 35 00:01:56,280 --> 00:02:00,960 Speaker 1: you can find pretty big, right. Well, you've got people 36 00:02:01,080 --> 00:02:04,280 Speaker 1: looking for you, Chris, based on some of our Trump stories. Yes, 37 00:02:06,760 --> 00:02:11,880 Speaker 1: so Trump fans and debt collectors can find Chris Navy. Robert, 38 00:02:11,919 --> 00:02:14,040 Speaker 1: I gotta sort of pat you on the back, pat 39 00:02:14,080 --> 00:02:15,680 Speaker 1: your team on the back. So I was looking at 40 00:02:15,720 --> 00:02:18,160 Speaker 1: some of the returns on the funds this year, especially 41 00:02:18,200 --> 00:02:21,000 Speaker 1: the p g i AM Total Return bond Fund up 42 00:02:21,040 --> 00:02:24,839 Speaker 1: ten year to date. Wow. But not only that, it's 43 00:02:24,960 --> 00:02:28,720 Speaker 1: it's uh performance compared to peers is really impressive. A 44 00:02:28,760 --> 00:02:30,520 Speaker 1: one year basis, according to our date, it's in the 45 00:02:30,600 --> 00:02:34,080 Speaker 1: ninety percentile. Five years, it's in the eighty nine percentile. 46 00:02:34,760 --> 00:02:37,480 Speaker 1: What's going right? I mean, obviously we've had this ferocious 47 00:02:37,560 --> 00:02:40,320 Speaker 1: rally and bonds, but what are you guys doing especially 48 00:02:40,440 --> 00:02:43,560 Speaker 1: right to have these really great numbers? Sure, well, thanks, 49 00:02:43,800 --> 00:02:46,560 Speaker 1: you know, we're taking a long term approach, So we're 50 00:02:46,560 --> 00:02:51,760 Speaker 1: looking at the overall backdrop the macro economy, policy, monetary, 51 00:02:51,840 --> 00:02:55,040 Speaker 1: fiscal not just in the US, but globally and so 52 00:02:55,120 --> 00:02:57,639 Speaker 1: much so these days what happens in the bond market 53 00:02:57,720 --> 00:03:01,400 Speaker 1: is really a global phenomena. The balance of borrowing and 54 00:03:01,480 --> 00:03:04,880 Speaker 1: lending is really driven almost more so by the amount 55 00:03:04,919 --> 00:03:07,799 Speaker 1: of savings coming out of foreign countries than what's going 56 00:03:07,840 --> 00:03:10,840 Speaker 1: on here just domestically in the US that would impact 57 00:03:11,360 --> 00:03:15,040 Speaker 1: you know, a general intermediate bond fund. And so when 58 00:03:15,040 --> 00:03:18,040 Speaker 1: we look at the big picture, even just in the US, 59 00:03:18,160 --> 00:03:21,119 Speaker 1: the markets quite sensitive to interest rates, and when they've 60 00:03:21,160 --> 00:03:25,000 Speaker 1: been up well north of two percent, the economy has 61 00:03:25,040 --> 00:03:27,200 Speaker 1: really kind of bogged down a bit, especially the interest 62 00:03:27,280 --> 00:03:29,760 Speaker 1: rate sensitive sector, and give you the message that the 63 00:03:29,800 --> 00:03:33,760 Speaker 1: equilibrium interest rate here is lower than most people think. 64 00:03:34,480 --> 00:03:37,520 Speaker 1: And when we look abroad, the money is pouring across 65 00:03:37,560 --> 00:03:40,080 Speaker 1: the trance and most places have negative rates. People are 66 00:03:40,120 --> 00:03:43,000 Speaker 1: paying to park their money in these countries, or if 67 00:03:43,000 --> 00:03:46,320 Speaker 1: they're buying long dated securities, they might be zero yield 68 00:03:46,680 --> 00:03:49,720 Speaker 1: um long term, zero coupon bonds, you know, that have 69 00:03:49,920 --> 00:03:53,160 Speaker 1: an asymmetric looking risk we term profile. And so the 70 00:03:53,160 --> 00:03:55,320 Speaker 1: money has come over here as well, even if on 71 00:03:55,360 --> 00:03:58,840 Speaker 1: a hedge basis, when they eliminate currency risk, they end 72 00:03:58,920 --> 00:04:02,720 Speaker 1: up with a negative UH yield on a standstill basis, 73 00:04:02,760 --> 00:04:06,480 Speaker 1: but at least over here yields are well north of zero. 74 00:04:06,600 --> 00:04:09,240 Speaker 1: Maybe you have some upside as well as downside, and 75 00:04:09,280 --> 00:04:11,720 Speaker 1: so I think you know, that's driven us to a 76 00:04:11,800 --> 00:04:15,280 Speaker 1: secular view that rates would be declining, and we've positioned 77 00:04:15,320 --> 00:04:18,240 Speaker 1: for that. Is there anything in this so often the 78 00:04:18,279 --> 00:04:21,800 Speaker 1: bond market this week that sort of changes your your 79 00:04:21,920 --> 00:04:23,800 Speaker 1: stance on on all of that. Is is it a 80 00:04:23,839 --> 00:04:26,520 Speaker 1: turning point or is this just sort of a little 81 00:04:26,520 --> 00:04:29,120 Speaker 1: bit of a correction in a very much an overbought 82 00:04:29,120 --> 00:04:33,159 Speaker 1: treasury market. Well, I wish I could give you the answer, UM, 83 00:04:33,200 --> 00:04:35,279 Speaker 1: But you know what, what we've seen over the years 84 00:04:35,360 --> 00:04:38,279 Speaker 1: in the secular bowle market that we've had in bonds 85 00:04:38,320 --> 00:04:40,960 Speaker 1: for forty years, At any given point in time, you 86 00:04:41,000 --> 00:04:46,000 Speaker 1: may have a cyclical upturn and expectations and views of 87 00:04:46,080 --> 00:04:50,640 Speaker 1: economies around the world have become pretty morose, and uh 88 00:04:50,800 --> 00:04:52,839 Speaker 1: so you can get a backup in the bond market 89 00:04:52,920 --> 00:04:55,599 Speaker 1: driven by technical conditions. And I think to a large extent, 90 00:04:55,680 --> 00:04:57,919 Speaker 1: what we've seen so far is kind of an equal 91 00:04:57,920 --> 00:05:00,719 Speaker 1: and opposite reaction to the panic by that we saw 92 00:05:01,560 --> 00:05:04,480 Speaker 1: not too long ago. And we'll have to see if 93 00:05:04,480 --> 00:05:08,720 Speaker 1: the fundamentals follow through, um, but our base case would 94 00:05:08,800 --> 00:05:13,560 Speaker 1: be that the range safe for the tenure treasury is 95 00:05:13,680 --> 00:05:15,520 Speaker 1: maybe one and a half to two and a half, 96 00:05:15,760 --> 00:05:19,159 Speaker 1: but probably more likely something more like one to two, 97 00:05:19,720 --> 00:05:22,599 Speaker 1: and that we're going to see these fundamentals reassert themselves 98 00:05:22,600 --> 00:05:25,279 Speaker 1: and cause rates to stabilize or maybe even fall again. 99 00:05:25,640 --> 00:05:28,279 Speaker 1: So we did see a pretty major backup and yield 100 00:05:28,360 --> 00:05:31,479 Speaker 1: this week, the tenure once again approaching two percent, which 101 00:05:31,480 --> 00:05:33,719 Speaker 1: is a level we hadn't seen in at least a 102 00:05:33,760 --> 00:05:37,400 Speaker 1: couple of months. Because when you think about your lower 103 00:05:37,480 --> 00:05:40,160 Speaker 1: for longer thesis. Much of that does have to do 104 00:05:40,680 --> 00:05:44,720 Speaker 1: with where yields are overseas. Does that just mean that 105 00:05:44,760 --> 00:05:48,120 Speaker 1: there is a cap on where US treasury yield can 106 00:05:48,200 --> 00:05:50,640 Speaker 1: go going forward, because no matter what, as long as 107 00:05:50,680 --> 00:05:53,440 Speaker 1: they're higher than yields overseas, you're always going to have 108 00:05:53,480 --> 00:05:56,560 Speaker 1: some sort of demand. I think creates a friction. And 109 00:05:56,640 --> 00:05:58,760 Speaker 1: so what we've seen in the sell off is the 110 00:05:58,800 --> 00:06:02,400 Speaker 1: treasuries have sold off less than foreign bonds. And in 111 00:06:02,520 --> 00:06:08,960 Speaker 1: these UH that the key global markets j g B s, buons, UH, 112 00:06:09,080 --> 00:06:11,920 Speaker 1: European bonds, Japanese bonds, there has been a sell off 113 00:06:12,080 --> 00:06:15,119 Speaker 1: and UH, you know, there there's a whiff of change 114 00:06:15,120 --> 00:06:17,080 Speaker 1: in the air. And both of these places. In Japan 115 00:06:17,279 --> 00:06:19,880 Speaker 1: they've been trying to steep in their yield curve, push 116 00:06:19,960 --> 00:06:22,279 Speaker 1: up long term yields to lead more on the table 117 00:06:22,360 --> 00:06:25,320 Speaker 1: for insurers, for banks UH and in Europe you have 118 00:06:25,360 --> 00:06:28,960 Speaker 1: a change of of of leadership at the e c B. 119 00:06:29,680 --> 00:06:33,520 Speaker 1: So people you know, questioning will there be this unflinching 120 00:06:33,640 --> 00:06:37,560 Speaker 1: commitment to incredibly low rates and quee going forward. And 121 00:06:37,640 --> 00:06:41,679 Speaker 1: so I think the level of yields is spread being 122 00:06:41,880 --> 00:06:46,360 Speaker 1: at at you know, your nine type percentile of multidecade 123 00:06:47,680 --> 00:06:51,159 Speaker 1: levels relative to much higher than these four yields. That 124 00:06:51,240 --> 00:06:54,640 Speaker 1: creates a cushion, but it doesn't create a lid. I 125 00:06:54,640 --> 00:06:56,240 Speaker 1: wanted to dig in a little bit on the I 126 00:06:56,279 --> 00:06:58,359 Speaker 1: was looking at the p G I am Total Return 127 00:06:58,480 --> 00:07:00,160 Speaker 1: bond Fund. I think it's one of your big gets 128 00:07:00,160 --> 00:07:03,039 Speaker 1: straight about fifty billion in assets, UM. And I was 129 00:07:03,040 --> 00:07:05,360 Speaker 1: looking at sort of the allocations and the holdings. Now, 130 00:07:05,400 --> 00:07:06,920 Speaker 1: this is our data is at the as of the 131 00:07:07,000 --> 00:07:10,920 Speaker 1: end of August, so not necessarily current, but a couple 132 00:07:10,920 --> 00:07:17,440 Speaker 1: of things really caught my eye. Uh, mortgages corporate about 133 00:07:17,440 --> 00:07:21,680 Speaker 1: eighteen percent government. But looking at the individual top holdings, 134 00:07:21,920 --> 00:07:26,040 Speaker 1: there were a few US D euro swaps uh usd 135 00:07:26,480 --> 00:07:31,040 Speaker 1: uh British pounds swap, so walk us through UM and 136 00:07:31,080 --> 00:07:32,960 Speaker 1: I think those were all about like four or five 137 00:07:33,440 --> 00:07:37,000 Speaker 1: of the allocation, so pretty big positions. UM. Now, I'm 138 00:07:37,000 --> 00:07:38,920 Speaker 1: a stock guy, so I don't necessarily know what's going 139 00:07:38,960 --> 00:07:41,000 Speaker 1: on with these, but my guess is these are these 140 00:07:41,000 --> 00:07:45,800 Speaker 1: are basically bets on rate spreads, yield spreads narrowing between 141 00:07:46,320 --> 00:07:49,080 Speaker 1: the US and Europe. Is that is that the safe 142 00:07:49,080 --> 00:07:52,600 Speaker 1: way to describe it. Our risk or principally domestic and 143 00:07:52,720 --> 00:07:57,160 Speaker 1: a currency risk, foreign interest rate risk, is going to 144 00:07:57,240 --> 00:08:01,040 Speaker 1: be very limited, and so uh, notes of of swaps 145 00:08:01,040 --> 00:08:03,240 Speaker 1: that will be used in the fund will be issues 146 00:08:03,280 --> 00:08:07,000 Speaker 1: selection driven. So we may find that a US issue 147 00:08:07,080 --> 00:08:10,000 Speaker 1: are issues and euros maybe at a wider spread than 148 00:08:10,040 --> 00:08:12,880 Speaker 1: in the US. We buy that bond and we hedge 149 00:08:12,880 --> 00:08:16,400 Speaker 1: it back to the US. Now we have had, um, 150 00:08:16,440 --> 00:08:18,680 Speaker 1: you know, at different points in time, uh, you know, 151 00:08:18,720 --> 00:08:22,280 Speaker 1: small positions and for an interest rate risk or even 152 00:08:22,280 --> 00:08:24,480 Speaker 1: fcs on for on the foreign currency side, but those 153 00:08:24,480 --> 00:08:26,640 Speaker 1: tend to be very small, not not as large as 154 00:08:26,800 --> 00:08:30,600 Speaker 1: as that magnitude generally, Right, Chris, come in here and 155 00:08:30,640 --> 00:08:33,040 Speaker 1: give us the equity view, because it's not only yields 156 00:08:33,120 --> 00:08:35,160 Speaker 1: that have been rising this week. I mean stocks have 157 00:08:35,240 --> 00:08:38,679 Speaker 1: been rising and pretty forcefully to it that. Yeah, um, 158 00:08:39,640 --> 00:08:41,600 Speaker 1: I feel like stocks are happy to see yields go up. 159 00:08:41,600 --> 00:08:44,600 Speaker 1: I mean the big equity perspective on that is that 160 00:08:45,160 --> 00:08:47,920 Speaker 1: something going on with bonds and yields in the curve 161 00:08:48,280 --> 00:08:52,040 Speaker 1: means recessions coming. So anything that kind of undoes that argument. 162 00:08:52,040 --> 00:08:54,360 Speaker 1: Now you're saying that just as big an issue would 163 00:08:54,360 --> 00:08:56,679 Speaker 1: be fields getting too high at this point kind of 164 00:08:56,720 --> 00:08:58,559 Speaker 1: reminds me of a saying we have on the desk, 165 00:08:58,800 --> 00:09:03,760 Speaker 1: which is whatever the hell happens, it's bad, But I 166 00:09:03,800 --> 00:09:05,760 Speaker 1: guess we shouldn't get too comfortable with the relief for 167 00:09:05,880 --> 00:09:08,200 Speaker 1: feeling over seeing a little bit of unwinding in the 168 00:09:08,240 --> 00:09:10,560 Speaker 1: curve and all of these uh, you know, sort of 169 00:09:10,640 --> 00:09:14,280 Speaker 1: unbelievably reliable recession indicators. What is true that you know, 170 00:09:14,440 --> 00:09:18,720 Speaker 1: the the good news that's that's boosting the equity market, 171 00:09:19,520 --> 00:09:23,400 Speaker 1: whether it was less worse than feared earnings or some 172 00:09:23,480 --> 00:09:27,080 Speaker 1: optimism on the trade front, that that's it's bad for 173 00:09:27,160 --> 00:09:29,400 Speaker 1: yields until yields get too hind they begin to choke 174 00:09:29,480 --> 00:09:31,920 Speaker 1: off what's going in the equity market. But so far 175 00:09:31,960 --> 00:09:35,280 Speaker 1: we're in the sweet spot where you have some concerns 176 00:09:35,280 --> 00:09:38,679 Speaker 1: on the right side, but rising risk appetite and not 177 00:09:38,880 --> 00:09:42,800 Speaker 1: economic optimism to outweigh, you know, the rising discount rates. 178 00:09:42,840 --> 00:09:45,760 Speaker 1: So is the last few weeks in markets? How much 179 00:09:45,760 --> 00:09:50,040 Speaker 1: would you attribute it to, uh, the trade optimism and 180 00:09:50,040 --> 00:09:52,240 Speaker 1: how much would you attribute it to the FED apparently 181 00:09:52,280 --> 00:09:55,840 Speaker 1: being on hold but yet still uh, sort of doing 182 00:09:55,920 --> 00:09:58,240 Speaker 1: what it can to keep the repo market, uh, in 183 00:09:58,400 --> 00:10:01,440 Speaker 1: order with with this short term treasury purchases, I mean, 184 00:10:01,480 --> 00:10:02,880 Speaker 1: how big of a deal is to FED at least 185 00:10:02,880 --> 00:10:05,160 Speaker 1: in the rates market right now. Yeah, I mean I 186 00:10:05,240 --> 00:10:07,840 Speaker 1: think those are those are excellent points. I think that 187 00:10:08,200 --> 00:10:11,560 Speaker 1: the risk on makes people wonder, you know, g is 188 00:10:11,600 --> 00:10:14,240 Speaker 1: it really over for bond? Should I have more equities? 189 00:10:14,280 --> 00:10:16,520 Speaker 1: And on the retail side there have been a lot 190 00:10:16,520 --> 00:10:20,560 Speaker 1: of outflows from equities, so there's some of that. I 191 00:10:20,600 --> 00:10:25,640 Speaker 1: think though we have shifted in market environment from one 192 00:10:25,679 --> 00:10:30,160 Speaker 1: where central banks had wound down their quantitative purchases. There 193 00:10:30,240 --> 00:10:34,440 Speaker 1: their quei buys, and that was bad for risk I 194 00:10:34,440 --> 00:10:36,960 Speaker 1: mean what we saw, for example in two thousand nine, 195 00:10:37,000 --> 00:10:40,600 Speaker 1: in these previous instances of aggressive quei is it dampened 196 00:10:40,600 --> 00:10:45,640 Speaker 1: equity volatility, It pushed up stock markets, it pushed down volatility, 197 00:10:45,720 --> 00:10:48,160 Speaker 1: and we had moved away from that. Last year was 198 00:10:48,200 --> 00:10:52,400 Speaker 1: a very volatile year where risk product had a hard 199 00:10:52,400 --> 00:10:54,800 Speaker 1: time going anywhere and there was much less liquidity coming 200 00:10:54,840 --> 00:10:59,240 Speaker 1: into the system. So now we've gone back into bill buying, 201 00:10:59,480 --> 00:11:02,280 Speaker 1: you know, UH and a rising FED balance sheet. The 202 00:11:02,320 --> 00:11:05,680 Speaker 1: e CB is back in buying. Bank of Japan is 203 00:11:05,679 --> 00:11:08,240 Speaker 1: is slowing their purchases, but at a very slow rate, 204 00:11:08,280 --> 00:11:11,240 Speaker 1: and at the same time they are in a way 205 00:11:11,600 --> 00:11:17,439 Speaker 1: remodeling their policy because they feel they will be incredibly 206 00:11:17,440 --> 00:11:22,640 Speaker 1: accommodative for even longer than anticipated. So I think the accommodation, 207 00:11:22,640 --> 00:11:26,439 Speaker 1: the aquidity liquidity injection has tended to bear steep in 208 00:11:26,480 --> 00:11:28,160 Speaker 1: the curve a little bit, and we're seeing some of 209 00:11:28,200 --> 00:11:30,720 Speaker 1: that here. At the same time, you look at the 210 00:11:30,800 --> 00:11:33,840 Speaker 1: data that's come in so far for the fourth quarter 211 00:11:34,040 --> 00:11:36,760 Speaker 1: and kind of distill it down to these UH now 212 00:11:36,880 --> 00:11:40,520 Speaker 1: casts that the FED does. The Atlanta FEDS GDP now model, 213 00:11:40,559 --> 00:11:43,960 Speaker 1: I think is that like zero point nine percent growth 214 00:11:44,080 --> 00:11:46,160 Speaker 1: for the fourth quarter. The New York FEDS one is 215 00:11:46,160 --> 00:11:48,360 Speaker 1: even lower. I think it's like zero point eight. So, 216 00:11:48,640 --> 00:11:51,880 Speaker 1: you know, some of the lowest growth potentially we've seen 217 00:11:51,920 --> 00:11:54,679 Speaker 1: in the cycle. Albeit you know models that tend to 218 00:11:54,760 --> 00:11:56,400 Speaker 1: jump around a lot. There's still a lot of data 219 00:11:56,440 --> 00:11:59,400 Speaker 1: to come in UH for the quarter, but our markets 220 00:11:59,400 --> 00:12:01,520 Speaker 1: getting a little bit ahead of themselves on the optimism 221 00:12:01,559 --> 00:12:03,880 Speaker 1: here this week, well, I think so, I mean, our 222 00:12:03,880 --> 00:12:06,640 Speaker 1: base case of a one to two percent range would 223 00:12:06,640 --> 00:12:09,040 Speaker 1: suggest you're getting near the top of the range. And 224 00:12:09,440 --> 00:12:14,360 Speaker 1: as as you're highlighting this week, the news has not 225 00:12:14,480 --> 00:12:17,520 Speaker 1: been really positive on the fundamental side in terms of 226 00:12:17,920 --> 00:12:22,360 Speaker 1: what really matters for rates markets, which in some um 227 00:12:22,520 --> 00:12:25,520 Speaker 1: some extent is really the real economy. Do people need 228 00:12:25,679 --> 00:12:29,520 Speaker 1: to borrow a lot of money to invest durable goods. 229 00:12:30,040 --> 00:12:34,319 Speaker 1: Big picture, those numbers are very flat. We had this 230 00:12:34,400 --> 00:12:40,040 Speaker 1: week another poor industrial production figure coming from the European side, 231 00:12:40,840 --> 00:12:44,840 Speaker 1: and so basically, you know, that would suggest that more 232 00:12:44,880 --> 00:12:47,520 Speaker 1: likely than not, there was some exuberance when the rates 233 00:12:47,520 --> 00:12:49,560 Speaker 1: were rallying, and then some people are asking themselves what 234 00:12:49,559 --> 00:12:52,600 Speaker 1: were we doing? Uh? And and a little bit of 235 00:12:52,600 --> 00:12:54,920 Speaker 1: panic selling here, Chris. So it seems as that the 236 00:12:54,920 --> 00:12:57,400 Speaker 1: stock market is maybe getting a bit ahead of itself too. 237 00:12:57,400 --> 00:12:59,600 Speaker 1: I mean, you just look at where we're seeing the 238 00:12:59,600 --> 00:13:02,640 Speaker 1: output formans lately, and energy stocks are really on a 239 00:13:02,720 --> 00:13:04,880 Speaker 1: tear this week. You look at other cyclical areas of 240 00:13:04,920 --> 00:13:09,760 Speaker 1: the market. Is it possible that this is just beta chasing? Um? 241 00:13:10,320 --> 00:13:12,440 Speaker 1: In a in a way, yes, I I feel like 242 00:13:12,440 --> 00:13:16,440 Speaker 1: what's going on in the in the equity market reflects uh, 243 00:13:16,440 --> 00:13:19,240 Speaker 1: this sort of standard word is rotation going on? That 244 00:13:19,240 --> 00:13:20,840 Speaker 1: does a lot of people have been caught short by 245 00:13:20,840 --> 00:13:22,400 Speaker 1: this routy And let's face it, if the if the 246 00:13:22,559 --> 00:13:26,079 Speaker 1: if the markets stopped dead right here basically a year 247 00:13:26,120 --> 00:13:28,160 Speaker 1: to date, no one would be no one would have 248 00:13:28,200 --> 00:13:30,520 Speaker 1: any reason to complain. I'm sure they would complain in fact, 249 00:13:31,080 --> 00:13:36,880 Speaker 1: um yeah, um, but uh, if you're a fund manager 250 00:13:36,960 --> 00:13:39,640 Speaker 1: who's watched this happen and has been wedded to defensive 251 00:13:39,679 --> 00:13:43,440 Speaker 1: shares or bond proxies, and now the bond markets rolling 252 00:13:43,679 --> 00:13:46,360 Speaker 1: or some degree rolling over, and you're stuck with all 253 00:13:46,360 --> 00:13:48,800 Speaker 1: of that stuff and you're watching everything take off. I mean, 254 00:13:48,840 --> 00:13:50,920 Speaker 1: it's a sort of a self fulfilling prophecy. You're gonna 255 00:13:50,960 --> 00:13:53,520 Speaker 1: you're gonna need to dive back in and grab some beta. 256 00:13:54,200 --> 00:13:57,200 Speaker 1: It reminds me of a story your team had out 257 00:13:57,800 --> 00:14:03,200 Speaker 1: this week about the percentage of active equity mutual fund 258 00:14:03,200 --> 00:14:07,199 Speaker 1: managers who are beating they're getting killed. It was getting 259 00:14:07,200 --> 00:14:09,280 Speaker 1: the benchmarker. I mean, they're they're always getting killed, but 260 00:14:09,280 --> 00:14:11,040 Speaker 1: they're getting killed a little worse right now for some 261 00:14:11,080 --> 00:14:13,079 Speaker 1: of these reasons. And it's a bad year I think 262 00:14:13,120 --> 00:14:15,720 Speaker 1: probably to look bad. I mean everyone's gonna I mean, 263 00:14:16,000 --> 00:14:18,640 Speaker 1: to the degree people care about performance, I feel like 264 00:14:18,679 --> 00:14:21,200 Speaker 1: everyone should look at their returns in their foreign k 265 00:14:21,320 --> 00:14:24,840 Speaker 1: and say, man, I made this year. But that's not 266 00:14:24,920 --> 00:14:28,520 Speaker 1: how the professional class will look at it. And this 267 00:14:28,600 --> 00:14:30,680 Speaker 1: is sort of the big sort of melt up thesis 268 00:14:30,840 --> 00:14:31,920 Speaker 1: right now that there's going to be a lot of 269 00:14:31,920 --> 00:14:34,400 Speaker 1: people diving back into the market in the next two 270 00:14:34,440 --> 00:14:38,320 Speaker 1: months try to make those numbers. And it's like, lookout above. 271 00:14:38,400 --> 00:14:40,720 Speaker 1: If that starts to happen, what do you think the 272 00:14:40,800 --> 00:14:43,320 Speaker 1: chances that are. I mean, we're obviously seeing it to 273 00:14:43,400 --> 00:14:45,240 Speaker 1: some degree. Does it continue through the t the end 274 00:14:45,240 --> 00:14:46,760 Speaker 1: of the year. Walking in here, I probably would have 275 00:14:46,800 --> 00:14:50,160 Speaker 1: said pretty good. As I listened to our guests and 276 00:14:50,240 --> 00:14:52,200 Speaker 1: some of the signals coming from the boom market, I 277 00:14:52,200 --> 00:14:55,520 Speaker 1: think that's ultimately the determined if the economy doesn't go anywhere. 278 00:14:55,600 --> 00:14:58,200 Speaker 1: And what I know about is the economy is earnings, 279 00:14:58,200 --> 00:15:01,240 Speaker 1: and earnings in the fourth quarter look like they're gonna suck, 280 00:15:01,640 --> 00:15:06,240 Speaker 1: so uh, they're The ultimate determinant will be whether or 281 00:15:06,240 --> 00:15:08,440 Speaker 1: not the macro picture is good enough for stocks. And 282 00:15:08,640 --> 00:15:10,800 Speaker 1: you know, the supply demand and chasing beta things are 283 00:15:10,840 --> 00:15:12,960 Speaker 1: a factor for a little while, but they won't they 284 00:15:13,000 --> 00:15:15,520 Speaker 1: won't call the ultimate tune. Much of this reversal has 285 00:15:15,560 --> 00:15:17,840 Speaker 1: been predicated on the idea that we are seeing a 286 00:15:17,880 --> 00:15:20,840 Speaker 1: stabilization and growth. We could see a nice rebound in 287 00:15:21,760 --> 00:15:23,920 Speaker 1: And I did do my homework, Robert. I dug up 288 00:15:23,960 --> 00:15:26,840 Speaker 1: something that you said on Bloomberg Television last week and 289 00:15:26,960 --> 00:15:29,320 Speaker 1: after the employment report, you said, this is a picture 290 00:15:29,400 --> 00:15:32,880 Speaker 1: perfect soft lanning. It's what they're on track for talking 291 00:15:32,960 --> 00:15:36,760 Speaker 1: about the federal reserve. Is that actually what we're seeing 292 00:15:36,840 --> 00:15:40,120 Speaker 1: And if so, wouldn't that bode very well then for 293 00:15:40,240 --> 00:15:43,560 Speaker 1: risk assets? I think so. And I think the comment 294 00:15:43,600 --> 00:15:48,320 Speaker 1: I made was that he Powell has been criticized, you know, 295 00:15:48,360 --> 00:15:50,840 Speaker 1: for how he's handled the press conferences, and I think 296 00:15:50,840 --> 00:15:55,320 Speaker 1: they did a pretty flat footed last hike last year, 297 00:15:55,440 --> 00:15:56,960 Speaker 1: you know, one too many, but I think in a 298 00:15:56,960 --> 00:15:58,920 Speaker 1: way they kind of wanted to stick their finger in 299 00:15:58,920 --> 00:16:01,960 Speaker 1: the eye of the President who had been badgering them, 300 00:16:02,680 --> 00:16:04,800 Speaker 1: and so they managed to do that without doing too 301 00:16:04,840 --> 00:16:08,320 Speaker 1: much damage. They've whipped around, they've cut three times, which 302 00:16:08,400 --> 00:16:11,360 Speaker 1: was you know, going every meeting every six weeks, as 303 00:16:11,400 --> 00:16:13,640 Speaker 1: opposed to when they were hiking, which you know, they 304 00:16:13,640 --> 00:16:17,160 Speaker 1: were only moving once a quarter. So that quickly cut 305 00:16:17,880 --> 00:16:20,480 Speaker 1: and they may be there for the soft landing. And 306 00:16:20,560 --> 00:16:24,480 Speaker 1: so our hypothesis, Frank, for some time is that although 307 00:16:24,520 --> 00:16:27,480 Speaker 1: this is a moribund economic backdrop, it is not as 308 00:16:27,600 --> 00:16:29,520 Speaker 1: much growth as people would want to see. It is 309 00:16:29,560 --> 00:16:33,080 Speaker 1: not a feel good economy for people that in the markets, 310 00:16:33,320 --> 00:16:36,800 Speaker 1: you have a declining equilibrium interest rate, you have a 311 00:16:36,920 --> 00:16:41,600 Speaker 1: very long business cycle. Because these central banks have prevented uh, 312 00:16:41,960 --> 00:16:45,920 Speaker 1: really big financial accesses from building up, and they have 313 00:16:46,080 --> 00:16:48,720 Speaker 1: not jumped in and crushed the economy with rate hikes, 314 00:16:48,760 --> 00:16:51,560 Speaker 1: which is typically what kills it. So I think what's 315 00:16:51,640 --> 00:16:54,200 Speaker 1: what's shocking to people is you are having a very 316 00:16:54,200 --> 00:16:58,280 Speaker 1: extended cycle. They're on track to continue this, and so 317 00:16:58,400 --> 00:17:02,000 Speaker 1: as a result, your eights are likely remain low, your 318 00:17:02,480 --> 00:17:06,600 Speaker 1: period of spread sector outperformance continues, and your equity market 319 00:17:07,280 --> 00:17:11,120 Speaker 1: continues to look quite competitive in terms of earnings, yields, 320 00:17:11,119 --> 00:17:15,040 Speaker 1: and valuations relative to a bond market with yields this low. 321 00:17:15,680 --> 00:17:17,480 Speaker 1: I feel like that there's a point to be made 322 00:17:17,480 --> 00:17:20,399 Speaker 1: here about the stock market being an economic input onto itself. 323 00:17:20,440 --> 00:17:22,240 Speaker 1: That's sort of a lucky break that they get here, 324 00:17:22,640 --> 00:17:25,119 Speaker 1: that the one thing that could not the one that obviously, 325 00:17:25,119 --> 00:17:27,560 Speaker 1: the consumer remains strong. One of the reasons the consumer 326 00:17:27,640 --> 00:17:29,520 Speaker 1: remains storming. You saw this after the fourth quarter of 327 00:17:29,600 --> 00:17:33,480 Speaker 1: last year when market tank some of the uh animal 328 00:17:33,520 --> 00:17:35,399 Speaker 1: spirits kind of get beaten out. But right now a 329 00:17:35,440 --> 00:17:36,960 Speaker 1: lot of people are sitting with a lot of money 330 00:17:37,000 --> 00:17:39,119 Speaker 1: thanks to stock market. That's part of the big Eco 331 00:17:39,160 --> 00:17:57,480 Speaker 1: bowl case. I'm glad you brought the consumer, Chris, that 332 00:17:57,640 --> 00:17:59,680 Speaker 1: that brings me back to looking at the p g 333 00:17:59,800 --> 00:18:04,800 Speaker 1: I total return return bond fund mortgages. Um, is it 334 00:18:05,000 --> 00:18:07,399 Speaker 1: safe to say that you know a lot of what 335 00:18:07,440 --> 00:18:10,480 Speaker 1: we've heard people talk about and seeing ourselves this year 336 00:18:10,560 --> 00:18:13,000 Speaker 1: is Yeah, certain parts of the economy are very week. 337 00:18:13,080 --> 00:18:18,800 Speaker 1: You have you have manufacturings week, the consumers still remain strong. Um, 338 00:18:19,760 --> 00:18:21,480 Speaker 1: what are you looking at in the housing market? Is 339 00:18:21,480 --> 00:18:24,359 Speaker 1: it just blue skies ahead? Uh? In the housing market, 340 00:18:24,480 --> 00:18:27,920 Speaker 1: is there you know and is there still yield there? 341 00:18:28,000 --> 00:18:32,280 Speaker 1: Considering Uh, you know some people are still looking at 342 00:18:32,320 --> 00:18:35,840 Speaker 1: that market with a jaundiced eye after the financial crisis. Well, 343 00:18:35,880 --> 00:18:38,359 Speaker 1: I think that in terms of the agency passed through market, 344 00:18:38,400 --> 00:18:41,080 Speaker 1: we're seeing a little bit of value there after the 345 00:18:41,119 --> 00:18:44,280 Speaker 1: FED has been rolling off and people have been scared 346 00:18:44,320 --> 00:18:47,480 Speaker 1: out of that market a little bit. We're we're stabilizing 347 00:18:47,480 --> 00:18:50,280 Speaker 1: at at attractive levels and and so we have you know, 348 00:18:50,400 --> 00:18:53,359 Speaker 1: some intermittent exposure there. But most of what you're seeing 349 00:18:53,760 --> 00:18:57,120 Speaker 1: in the mortgage categories is structured product that is actually 350 00:18:57,160 --> 00:19:01,040 Speaker 1: away from residential. So you're gonna be looking at a 351 00:19:01,080 --> 00:19:04,879 Speaker 1: good amount of commercial mortgage backed where those asset prices 352 00:19:04,880 --> 00:19:08,040 Speaker 1: have been firmer, but also where we tend to be Uh, 353 00:19:08,119 --> 00:19:11,399 Speaker 1: in the top position in the capital structure or in 354 00:19:11,520 --> 00:19:13,800 Speaker 1: one of at any rate, one of the very highly 355 00:19:13,880 --> 00:19:17,439 Speaker 1: rated ones unless uh, you know, in some exceptional cases 356 00:19:17,480 --> 00:19:21,680 Speaker 1: there could be a single asset type situation that's that's 357 00:19:21,720 --> 00:19:24,159 Speaker 1: mid rated, but there's much less of that, so predominantly 358 00:19:24,560 --> 00:19:28,399 Speaker 1: high quality commercial and then a fair amount of collateralized 359 00:19:28,440 --> 00:19:34,960 Speaker 1: loan obligation clos and uh, this is a sector where 360 00:19:35,000 --> 00:19:39,760 Speaker 1: you are collateralized by below investment grade loans. So uh, 361 00:19:40,200 --> 00:19:43,680 Speaker 1: an area that is not one of the best looking 362 00:19:43,720 --> 00:19:46,200 Speaker 1: areas right here. That's an area that was technically very 363 00:19:46,240 --> 00:19:49,520 Speaker 1: well supported because they're floating rate assets during the period 364 00:19:49,520 --> 00:19:52,040 Speaker 1: of FED rate hikes, and now the FED is on 365 00:19:52,119 --> 00:19:55,639 Speaker 1: hold and so retail money is going out of those funds. 366 00:19:55,880 --> 00:19:59,800 Speaker 1: Loan prices are under pressure, and their concerns on asset. 367 00:20:00,280 --> 00:20:05,240 Speaker 1: The underwriting was most aggressive there. But for diligent investors, 368 00:20:05,280 --> 00:20:07,919 Speaker 1: I think, who can you know forge through the different 369 00:20:07,960 --> 00:20:10,600 Speaker 1: managers what exactly is in these deals and then go 370 00:20:10,760 --> 00:20:12,760 Speaker 1: right to the top of the capital structure, not in 371 00:20:12,760 --> 00:20:15,800 Speaker 1: the middle, not at the bottom, that they are spreads 372 00:20:15,840 --> 00:20:19,520 Speaker 1: available that are very competitive with intermediate and long term 373 00:20:19,600 --> 00:20:23,040 Speaker 1: corporate bonds that are much lower rated than a triple 374 00:20:23,080 --> 00:20:26,159 Speaker 1: a c L o U and have very competitive spreads 375 00:20:26,280 --> 00:20:27,760 Speaker 1: the c L so I think it's a fair amount 376 00:20:27,760 --> 00:20:30,840 Speaker 1: of that, uh where we're looking to get some some 377 00:20:30,920 --> 00:20:34,040 Speaker 1: lower risk, lower beta spread at this point in the cycle. 378 00:20:34,760 --> 00:20:37,280 Speaker 1: Do you see any product offerings out there that do 379 00:20:38,359 --> 00:20:42,560 Speaker 1: make cause for concern for those who maybe aren't doing 380 00:20:42,600 --> 00:20:47,960 Speaker 1: their due diligence we work, Yeah, Well, I think the 381 00:20:48,400 --> 00:20:52,600 Speaker 1: loan area is one where you've had some uh you 382 00:20:52,600 --> 00:20:57,199 Speaker 1: know changes. I mean there's almost a terminology misplacement at 383 00:20:57,200 --> 00:20:58,880 Speaker 1: this point where a lot of those deals they don't 384 00:20:58,920 --> 00:21:02,160 Speaker 1: go through banks at all. So at one point that 385 00:21:02,359 --> 00:21:05,879 Speaker 1: market in its genesis, if you had an LBO, or 386 00:21:05,920 --> 00:21:08,399 Speaker 1: you had a lower rated company, they may have a 387 00:21:08,560 --> 00:21:10,840 Speaker 1: range of different financing options. They may go to the 388 00:21:10,880 --> 00:21:14,359 Speaker 1: high yield market, they may borrow collateralized in the bank 389 00:21:14,400 --> 00:21:17,080 Speaker 1: loan market and then that would be syndicated out, but 390 00:21:17,200 --> 00:21:19,159 Speaker 1: that paper would be going through a major bank that 391 00:21:19,200 --> 00:21:23,800 Speaker 1: would have a certain kind of underwriting process. Now, with 392 00:21:24,359 --> 00:21:28,040 Speaker 1: the really large private equity pools out there and a 393 00:21:28,080 --> 00:21:31,119 Speaker 1: lot of capital looking for deals, a lot of the 394 00:21:31,280 --> 00:21:33,920 Speaker 1: loans are not going through a bank intermediary at all. 395 00:21:34,600 --> 00:21:37,080 Speaker 1: There are a lot of very small deals, uh, and 396 00:21:37,560 --> 00:21:42,080 Speaker 1: um um much wider range of credit quality. And so 397 00:21:42,560 --> 00:21:44,600 Speaker 1: you know, as the economy is moderated a little bit, 398 00:21:44,640 --> 00:21:47,960 Speaker 1: and you alluded to the stats on the economic side, 399 00:21:48,240 --> 00:21:52,800 Speaker 1: you are seeing rising um UH a number of companies 400 00:21:52,880 --> 00:21:55,320 Speaker 1: that are missing their earnings forecast and seeing their bonds 401 00:21:55,400 --> 00:21:59,359 Speaker 1: drop ten points UH. And that's more so on the 402 00:21:59,359 --> 00:22:02,760 Speaker 1: loan side, for sure, than than in the high yield area. 403 00:22:03,200 --> 00:22:04,880 Speaker 1: I'm curious to know to get back to that one 404 00:22:04,960 --> 00:22:07,520 Speaker 1: percent to two percent range on the tenure yield that 405 00:22:07,560 --> 00:22:10,240 Speaker 1: you see. UH. Is there an expiration date on that 406 00:22:10,400 --> 00:22:13,399 Speaker 1: if say we wake up next week and that Phase 407 00:22:13,440 --> 00:22:17,119 Speaker 1: one trade deal is signed, um, or is it you 408 00:22:17,119 --> 00:22:19,119 Speaker 1: think we'll stay in that range regardless of what happens 409 00:22:19,119 --> 00:22:21,760 Speaker 1: with trade. You can never say for sure. And we're investors, 410 00:22:21,760 --> 00:22:24,560 Speaker 1: were not forecasters. So if that situation changes, I have 411 00:22:24,680 --> 00:22:26,560 Speaker 1: to change. I have to get on the right side 412 00:22:26,560 --> 00:22:31,640 Speaker 1: of it. Um. But my a priori is that the 413 00:22:31,640 --> 00:22:35,360 Speaker 1: world has changed in a massive way after the financial crisis, 414 00:22:35,400 --> 00:22:39,560 Speaker 1: and it is in some respects just begun that the 415 00:22:39,600 --> 00:22:44,480 Speaker 1: workforces in China uh, and in Europe we're growing until 416 00:22:44,520 --> 00:22:46,560 Speaker 1: you got to the financial crisis, and now they have 417 00:22:46,720 --> 00:22:49,920 Speaker 1: rolled over it. They're actually shrinking, And so you're left 418 00:22:49,960 --> 00:22:53,280 Speaker 1: in a world where debt is not rising at an 419 00:22:53,320 --> 00:23:00,000 Speaker 1: astronomical rate fueling growth, fueling profit growth, fueling spending, fueling investment. Uh, 420 00:23:00,040 --> 00:23:02,879 Speaker 1: and where you have a growing population that needs a 421 00:23:02,960 --> 00:23:06,680 Speaker 1: growing stock of goods, cars, housing, and so on. You 422 00:23:06,800 --> 00:23:09,879 Speaker 1: on the far side of that. And even in in China, 423 00:23:10,080 --> 00:23:14,400 Speaker 1: your car sales have rolled over your retail square footage 424 00:23:14,400 --> 00:23:17,680 Speaker 1: being put in place. This is a global phenomena where 425 00:23:17,680 --> 00:23:20,320 Speaker 1: your growth rates are you gonna be much more modest. 426 00:23:20,680 --> 00:23:23,720 Speaker 1: You're borrowing again for the real economy, much more modest. 427 00:23:23,720 --> 00:23:26,800 Speaker 1: And so that one and a half percent central tendency 428 00:23:27,160 --> 00:23:30,760 Speaker 1: basically does not have a shelf life. I would think 429 00:23:30,760 --> 00:23:33,720 Speaker 1: it's going to be there until we see some major 430 00:23:33,800 --> 00:23:35,840 Speaker 1: change on the horizon that's going to take us too 431 00:23:35,920 --> 00:23:38,800 Speaker 1: much faster or slower plane of growth. Regardless of the 432 00:23:38,880 --> 00:23:41,000 Speaker 1: supply of treasuries coming into the market. I mean, we're 433 00:23:41,000 --> 00:23:43,119 Speaker 1: looking at what trillion dollars. That's another good point I 434 00:23:43,119 --> 00:23:46,200 Speaker 1: should differentiate too. So when I look at the curve, now, 435 00:23:46,680 --> 00:23:49,000 Speaker 1: I will look at treasuries, but I really need to 436 00:23:49,040 --> 00:23:51,800 Speaker 1: look at o I S. SO o I S or 437 00:23:51,840 --> 00:23:55,160 Speaker 1: overnight index swaps are based on the Fed funds rate, 438 00:23:55,480 --> 00:23:58,119 Speaker 1: that is the rate that the Fed is controlling. The 439 00:23:58,520 --> 00:24:04,639 Speaker 1: treasuries are really trading at big spreads relative to O 440 00:24:04,840 --> 00:24:07,400 Speaker 1: I S because of the massive issuance. I don't think 441 00:24:07,400 --> 00:24:12,280 Speaker 1: it's necessarily credit concerns, although at this pace the US 442 00:24:12,440 --> 00:24:16,560 Speaker 1: over time will click down in ratings as debt to 443 00:24:16,640 --> 00:24:20,920 Speaker 1: GDP rises and so on. When you look at the 444 00:24:20,920 --> 00:24:23,040 Speaker 1: the O I S curve, it's perfectly flat and about 445 00:24:23,040 --> 00:24:26,920 Speaker 1: the effective Fed funds rate right now. Uh. And but 446 00:24:27,080 --> 00:24:30,359 Speaker 1: your treasury yields make you know very around that depending 447 00:24:30,400 --> 00:24:33,119 Speaker 1: on what what happens with the deficit. Chris, last question before 448 00:24:33,160 --> 00:24:36,240 Speaker 1: we get to the craziest things that we will all share. 449 00:24:36,640 --> 00:24:39,520 Speaker 1: How much do you think it's possible that this resumption 450 00:24:39,680 --> 00:24:42,400 Speaker 1: is such a risk on fuel has to do with timing, 451 00:24:42,480 --> 00:24:45,640 Speaker 1: that we're getting closer to we're less than a year 452 00:24:45,640 --> 00:24:48,159 Speaker 1: away from the election, and that President Trump and the 453 00:24:48,160 --> 00:24:52,200 Speaker 1: administration just can't screw up this US China deal. Well, yeah, 454 00:24:52,200 --> 00:24:54,000 Speaker 1: if you take part of his motive as being the 455 00:24:54,040 --> 00:24:57,040 Speaker 1: beginning of that kind of a campaign, then yes, timing 456 00:24:57,119 --> 00:24:59,439 Speaker 1: could be part of it. Of Course, the election itself 457 00:24:59,440 --> 00:25:02,600 Speaker 1: hold all ends of volatility potential that we shouldn't under undercount. 458 00:25:02,600 --> 00:25:05,920 Speaker 1: It's not like that's just unanimously good tidings coming down 459 00:25:06,720 --> 00:25:10,200 Speaker 1: over the horizon. But um, there's that there's a general 460 00:25:10,240 --> 00:25:12,040 Speaker 1: tendency for stocks to go up at the end of 461 00:25:12,080 --> 00:25:15,000 Speaker 1: the year for all kinds of sort of window dressing 462 00:25:15,040 --> 00:25:22,000 Speaker 1: as reasons, and you know, uh, just the end. If 463 00:25:22,000 --> 00:25:24,880 Speaker 1: this thing has been going on for so long, and 464 00:25:25,119 --> 00:25:27,719 Speaker 1: if you know there's some if there's ever really there 465 00:25:27,720 --> 00:25:29,959 Speaker 1: really isn't reason to believe that it's permanently settled at 466 00:25:30,000 --> 00:25:33,040 Speaker 1: any level. We shouldn't kid ourselves. But to the degree that, uh, 467 00:25:33,600 --> 00:25:35,639 Speaker 1: it's it's getting weight as far as what when Trump 468 00:25:35,640 --> 00:25:37,440 Speaker 1: can roll it back and sort of sort of get 469 00:25:37,440 --> 00:25:39,640 Speaker 1: the economy, get the stock market, the economy and these 470 00:25:39,640 --> 00:25:44,040 Speaker 1: sort of sentiment proxies and under control timing could be 471 00:25:44,080 --> 00:25:47,920 Speaker 1: a factor for sure. Speaking of timing, it's that time, Sarah, 472 00:25:48,160 --> 00:25:50,440 Speaker 1: what is the craziest thing you saw in markets this week? 473 00:25:50,960 --> 00:25:54,040 Speaker 1: So I'm going to go back to I believe something 474 00:25:54,040 --> 00:25:56,240 Speaker 1: we've spoken about before on the show, which is the 475 00:25:56,240 --> 00:26:00,840 Speaker 1: Popeye's Chicken sandwich because it's pair an owner which is 476 00:26:00,960 --> 00:26:04,640 Speaker 1: Restaurant Brands International Canadian company. They also Aarned Burger King. 477 00:26:05,000 --> 00:26:09,239 Speaker 1: They also owned Tim Horton's. There's been a lot of 478 00:26:09,400 --> 00:26:13,000 Speaker 1: hype over this Popeye's chicken sandwich. Um, and they're trying 479 00:26:13,040 --> 00:26:17,400 Speaker 1: to kind of gain competition and gain traction from Chick 480 00:26:17,440 --> 00:26:19,560 Speaker 1: fil A. Well, what happened was when they first came 481 00:26:19,560 --> 00:26:22,600 Speaker 1: out with the sandwich, they did not have the manpower 482 00:26:22,640 --> 00:26:25,240 Speaker 1: for it, so they had to hire more people at Popeyes, 483 00:26:25,280 --> 00:26:29,040 Speaker 1: and Popeyes actually just had an unbelievable quarter in sales. Um. 484 00:26:29,080 --> 00:26:33,120 Speaker 1: But what's crazy? And it's pretty unbelievable and also a 485 00:26:33,119 --> 00:26:35,560 Speaker 1: little bit sad, I must say. Um, there was so 486 00:26:35,680 --> 00:26:39,560 Speaker 1: much demand this one Popeye's location that a fight broke 487 00:26:39,600 --> 00:26:42,960 Speaker 1: out over a chicken sandwich in line and it actually 488 00:26:43,080 --> 00:26:49,439 Speaker 1: ended in a fatality, which is yeah, um, unbelievable that 489 00:26:49,480 --> 00:26:51,120 Speaker 1: you get to that point. But it just shows you 490 00:26:51,680 --> 00:26:54,080 Speaker 1: what they're trying to do to gain competition gain traction 491 00:26:54,320 --> 00:26:56,960 Speaker 1: is leading to other issues for the company. Um. In 492 00:26:57,000 --> 00:26:58,919 Speaker 1: the long hall, Robert, did they tell you about our 493 00:26:58,960 --> 00:27:01,560 Speaker 1: gimmick here? The craziest thing in markets that we've seen? 494 00:27:01,960 --> 00:27:03,800 Speaker 1: You know, I did hear about it, but I don't 495 00:27:03,800 --> 00:27:07,080 Speaker 1: have any content for you, Okay, that's all right, that's 496 00:27:07,080 --> 00:27:09,280 Speaker 1: all right, I mean for me every day, wake up. 497 00:27:09,560 --> 00:27:11,720 Speaker 1: Look at the markets. I'm totally shocked and have to 498 00:27:11,720 --> 00:27:15,160 Speaker 1: figure it out from there. Would you say seventeen basis 499 00:27:15,160 --> 00:27:17,399 Speaker 1: points swing in ten years on Thursday was pretty crazy. 500 00:27:17,920 --> 00:27:20,359 Speaker 1: I think the swings that that we're seeing and U 501 00:27:21,080 --> 00:27:25,040 Speaker 1: market swings and sentiment on on trade and I'm positioning 502 00:27:25,040 --> 00:27:28,040 Speaker 1: and fixing them, they have been a little shocking. Chris As, 503 00:27:28,080 --> 00:27:30,680 Speaker 1: I think you possibly are our first five time or 504 00:27:30,760 --> 00:27:34,040 Speaker 1: guest here. Yeah, like the Paul Simon you are. Yeah, 505 00:27:34,119 --> 00:27:36,680 Speaker 1: we're gonna get you the smoking jacket. Anything. Have you 506 00:27:36,800 --> 00:27:39,359 Speaker 1: witnessed anything crazy and market? I would say, there's this 507 00:27:39,359 --> 00:27:40,879 Speaker 1: thing that happened this week, so I wrote it up. 508 00:27:40,920 --> 00:27:43,840 Speaker 1: This guy Cliff Fastness, who loves he adores our coverage 509 00:27:43,840 --> 00:27:46,600 Speaker 1: of the start read. He can say enough good things 510 00:27:46,640 --> 00:27:48,680 Speaker 1: about it. You got to get him on sometimes man 511 00:27:49,160 --> 00:27:51,879 Speaker 1: who um. But anyway, he put out a note where 512 00:27:51,960 --> 00:27:56,240 Speaker 1: he said that this he's he runs Qure Capital Management, 513 00:27:56,280 --> 00:27:59,160 Speaker 1: big hitch fund, big hitch fund that runs equity factors, 514 00:27:59,160 --> 00:28:01,640 Speaker 1: which means that they and things like high dividend stocks 515 00:28:01,640 --> 00:28:05,800 Speaker 1: and low valuation stocks, value stocks, and his whole thing 516 00:28:05,880 --> 00:28:08,520 Speaker 1: is to basically program his computers and step back. It's 517 00:28:08,560 --> 00:28:12,440 Speaker 1: kind of like really like advanced calculus passive investing, and 518 00:28:12,480 --> 00:28:15,520 Speaker 1: they're incredibly rich and successful and huge and really is 519 00:28:15,600 --> 00:28:18,640 Speaker 1: one of the smartest guys really on Earth and um. 520 00:28:18,680 --> 00:28:21,520 Speaker 1: But so he came up with a note saying, so 521 00:28:21,600 --> 00:28:23,520 Speaker 1: his big thing is you don't you don't jump in 522 00:28:23,560 --> 00:28:25,320 Speaker 1: and out of markets. You sit and let the computers 523 00:28:25,320 --> 00:28:27,880 Speaker 1: do their work with the factors run. He when I 524 00:28:27,920 --> 00:28:30,040 Speaker 1: when up with a note saying, now might be a 525 00:28:30,080 --> 00:28:34,280 Speaker 1: time value stock cheap stocks have gotten so cheap that 526 00:28:34,600 --> 00:28:36,159 Speaker 1: it might be a time to sort of try to 527 00:28:36,200 --> 00:28:39,520 Speaker 1: market time to take sort of opportunity opportunistic stabs at them, 528 00:28:39,640 --> 00:28:41,800 Speaker 1: which for him, I mean, it's hard to describe. It's 529 00:28:41,840 --> 00:28:46,120 Speaker 1: so outside of his usual worldview and philosophy for him 530 00:28:46,160 --> 00:28:47,960 Speaker 1: to come in and say act like he's not saying, 531 00:28:47,960 --> 00:28:49,760 Speaker 1: act like a day trader. But you could translate that. 532 00:28:49,800 --> 00:28:52,120 Speaker 1: He probably expect us to translate that into one of 533 00:28:52,120 --> 00:28:56,760 Speaker 1: our stories. Um. But given some of the wars he's 534 00:28:56,800 --> 00:29:00,640 Speaker 1: had on Twitter and in public about trying to time 535 00:29:00,680 --> 00:29:02,760 Speaker 1: factors with another guy guy we had on this show, 536 00:29:02,920 --> 00:29:05,960 Speaker 1: Rob are not they've really gotten into up in each 537 00:29:05,960 --> 00:29:08,040 Speaker 1: other's face about it. But now Cliff is saying, you know, 538 00:29:08,200 --> 00:29:12,160 Speaker 1: factor's values so cheap that maybe in this limited instance, 539 00:29:12,200 --> 00:29:15,800 Speaker 1: it's okay. He says, modest overweight might be the same 540 00:29:15,840 --> 00:29:18,400 Speaker 1: as I don't want to Cliff. If you're listening, you 541 00:29:18,440 --> 00:29:21,040 Speaker 1: can call to what goes up hotline and correct whatever 542 00:29:21,120 --> 00:29:24,720 Speaker 1: Chris got wrong in that description, which is nothing. Obviously. 543 00:29:25,280 --> 00:29:27,240 Speaker 1: All right, time for mine. I think I got I 544 00:29:27,280 --> 00:29:29,160 Speaker 1: think I hate to pat myself on the back, but 545 00:29:29,200 --> 00:29:30,520 Speaker 1: I think I think I got the best one here. 546 00:29:32,440 --> 00:29:35,040 Speaker 1: So we've all heard about this price war in the 547 00:29:35,680 --> 00:29:39,560 Speaker 1: retail brokerage industry, Charles Schwab cutting commissions to zero. Well, 548 00:29:39,560 --> 00:29:43,160 Speaker 1: the firm that really got it started Robin Hood a 549 00:29:43,200 --> 00:29:46,760 Speaker 1: few years ago, the first to offer commission free trading. 550 00:29:47,360 --> 00:29:52,320 Speaker 1: Now they're one upping everyone by offering quote unquote infinite offering. 551 00:29:54,800 --> 00:29:57,600 Speaker 1: There is a glitch in the system, in the system, 552 00:29:59,120 --> 00:30:01,360 Speaker 1: and of all places, it came out on Reddit. Someone 553 00:30:01,600 --> 00:30:05,800 Speaker 1: someone basically out of them for this on Yeah, I 554 00:30:05,800 --> 00:30:08,200 Speaker 1: guess I have to read Reddit now. But basically, if 555 00:30:08,240 --> 00:30:10,720 Speaker 1: I get it right, what happens is you you take 556 00:30:10,760 --> 00:30:13,360 Speaker 1: out a marginal loan, you buy a bunch of stock, 557 00:30:13,560 --> 00:30:15,920 Speaker 1: then you sell a bunch of covered calls based on 558 00:30:16,000 --> 00:30:20,080 Speaker 1: that position. The one do you collect from the selling 559 00:30:20,120 --> 00:30:22,960 Speaker 1: the covered calls, you buy more stock. With more leverage, 560 00:30:23,080 --> 00:30:25,520 Speaker 1: you sell calls on them, and on and on it 561 00:30:25,520 --> 00:30:28,640 Speaker 1: goes Robert, if you had infinite leverage, what would you buy? 562 00:30:29,040 --> 00:30:32,080 Speaker 1: Oh my god, I'm listening. You know, after your description 563 00:30:32,160 --> 00:30:35,160 Speaker 1: of of Ascetic, I'm just a bond guy. You know, 564 00:30:35,880 --> 00:30:37,840 Speaker 1: if they didn't have a tap performing fund, I would 565 00:30:37,840 --> 00:30:42,040 Speaker 1: have a complete complex. But we don't go to the 566 00:30:42,080 --> 00:30:47,800 Speaker 1: infinite leverage only Robin Hood. With that said, though, I 567 00:30:47,800 --> 00:30:49,880 Speaker 1: think Mike you you did when it this time. It 568 00:30:49,920 --> 00:30:53,240 Speaker 1: was pretty unbelievable saying that story this week. But Robert Tip, 569 00:30:53,360 --> 00:30:55,320 Speaker 1: Chris nag thank you so much for joining the show 570 00:30:55,360 --> 00:31:05,600 Speaker 1: this week. Thanks, thank you. What goes up? We'll be 571 00:31:05,640 --> 00:31:08,040 Speaker 1: back next week. Until then, you can find us on 572 00:31:08,080 --> 00:31:11,000 Speaker 1: the Bloomberg Terminal website and app, or wherever you get 573 00:31:11,000 --> 00:31:13,600 Speaker 1: your podcasts. We'd love it if you took the time 574 00:31:13,720 --> 00:31:16,400 Speaker 1: to rate interview the show on Apple podcast so more 575 00:31:16,440 --> 00:31:18,880 Speaker 1: listeners can find us. And you can find us on 576 00:31:18,920 --> 00:31:23,600 Speaker 1: Twitter follow me at Sara pont Sec, Mike is afre Anonymous, 577 00:31:23,720 --> 00:31:26,880 Speaker 1: and Chris Nagi is at Chris nag One. You can 578 00:31:26,920 --> 00:31:30,560 Speaker 1: also follow Bloomberg Podcast at podcast and don't Forget. You 579 00:31:30,600 --> 00:31:32,560 Speaker 1: can also give us a call at our very own 580 00:31:32,600 --> 00:31:36,360 Speaker 1: Bloomberg Podcast hotline. 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