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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: This is Master's in Business with Barry Ridholds on Bloomberg Radio.

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Speaker 1: This week on the podcast what Can I Say? Funny story.

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Speaker 1: Jeffrey Sherman, He's been on the podcast before. I've had

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Speaker 1: been on his podcast, The Sherman Show before. The very

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Speaker 1: first Masters in Business broadcast was just about a decade.

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Speaker 2: Ago, and that was his boss.

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Speaker 1: Jeffrey Gunlock, founder of Double Line Capital, back in July

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Speaker 1: twenty fourteen. So he just flew in late yesterday. The

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Speaker 1: calendar was a little tight. They got here a little late.

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Speaker 1: They had to leave a little early. I apologize in

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Speaker 1: advance if it sounds like I'm jumping in trying to

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Speaker 1: get to the next question. I have pages and pages

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Speaker 1: of topics to talk to him about. I had a

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Speaker 1: very limited amount of time to get to it. So

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Speaker 1: if it sounds like I am leaping into push him forwards,

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Speaker 1: I am. He was super generous with his time. He

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Speaker 1: was supposed to leave about twenty five minutes to go

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Speaker 1: to his next appointment, but we just kept going. There

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Speaker 1: are few people who understand both fixed income and equity

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Speaker 1: investment and quantitative strategies to each better. Than Jeffrey Sherman.

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Speaker 1: He really is one of the most knowledgeable people in

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Speaker 1: this space, and not just knowledgeable in the abstract, but

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Speaker 1: helping to oversee just about one hundred billion dollars in

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Speaker 1: client assets. Really just a tour to forced discussion. I

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Speaker 1: find his take very insightful, very refreshing. I love the

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Speaker 1: approach of just throwing everything out the window and going

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Speaker 1: back to first principles on occasion.

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Speaker 2: Double Line is known for that.

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Speaker 1: Just a delightful conversation, so informative, with no further ado.

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Speaker 1: My discussion with Jeffrey Sherman, Double Lines Deputy Chief Investment Officer.

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Speaker 2: Thanks, Barry, it's good to be back. It's good to

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Speaker 2: have you.

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Speaker 1: So, you know, the last time we spoke, we were

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Speaker 1: really talking about funds and bonds and really got into

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Speaker 1: the minutia. But I want to roll back a little

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Speaker 1: bit and talk about your background, which is really kind

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Speaker 1: of interesting. Undergraduate applied mathematics, master's degree in financial engineering,

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Speaker 1: a little bit of teaching. What was the original career plan?

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Speaker 2: What were you thinking so prior to going to graduate school,

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Speaker 2: I was looking at becoming a teacher. Everybody told me

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Speaker 2: that if you get a degree in mathematics the world's

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Speaker 2: your oyster. And I didn't really see it, to be honest,

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Speaker 2: originally really because I started off in what was the

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Speaker 2: discipline of pure mathematics. So pure mathematics for the uninitiated,

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Speaker 2: is essentially proving everything you've already learned, and so you

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Speaker 2: go back and you have to go back to the

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Speaker 2: basics and the principles, and it's just a lot of

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Speaker 2: logic at the end of the day, and trying to

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Speaker 2: make that connection to how to be employed very difficult

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Speaker 2: for especially for like a nineteen twenty year old who

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Speaker 2: has no clue what's out there in the world.

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Speaker 1: And it's like studying philosophy. You could be philosophy professor,

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Speaker 1: but that's pretty much it.

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Speaker 2: Right, But also like there's a lot of overlap between

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Speaker 2: philosophy and a pure mathematician as well. And again it

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Speaker 2: comes down to logic and you know, the deduction of arguments.

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Speaker 2: But you moved to applied mathematics, I did, and I

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Speaker 2: did looking for something different, and I just didn't see

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Speaker 2: much there. And further to that, I was on the

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Speaker 2: track to become a teacher, so I was I thought,

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Speaker 2: you know, hey, I'll be a high school baseball coach,

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Speaker 2: high school teacher seems interesting, and I have to thank

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Speaker 2: the university for forcing us to go actually sit in classrooms.

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Speaker 2: And so I don't mean attending class for your own education,

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Speaker 2: but I meant if you want to teach, you have

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Speaker 2: to go to the local.

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Speaker 1: School or did a course, watch a teacher do what

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Speaker 1: you're studying to do, and say, hey, is this for me? Yeah?

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Speaker 2: And I realized the repetition, the redundancy, also the lunacy

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Speaker 2: of trying to babysit teenagers, and so I was very

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Speaker 2: turned off by it. And so that was actually the

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Speaker 2: transition to to applied mathematics to try to find a

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Speaker 2: different career. And what they don't tell you about applied

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Speaker 2: mathematics is you can apply it to things, but it's

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Speaker 2: not blatantly obvious what said application is. And so effectively,

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Speaker 2: by the time I became a senior, I didn't really

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Speaker 2: know what I wanted to do, and time was rolling

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Speaker 2: around and I really hadn't applied for a job. So

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Speaker 2: the natural thing was, well, let's just stay in academia,

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Speaker 2: and so that's what I did. I actually started off

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Speaker 2: into PhD and applied mathematics, and I like to say,

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Speaker 2: I'm a dropout. I didn't really see the path of

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Speaker 2: becoming a professor at the kind of the university level,

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Speaker 2: because again, I still felt there was that redundancy and

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Speaker 2: it just didn't it didn't seem to, you know, elicit

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Speaker 2: some spark inside of me.

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Speaker 1: So, how do you go from a PhD program to

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Speaker 1: financial engineering?

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Speaker 2: Gusty, Well, what it was was, so, as I said,

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Speaker 2: with applications, there's many applications of math, and the usually

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Speaker 2: obvious one is physics. And I really hated physics. I

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Speaker 2: never really liked physics, and it was just something that

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Speaker 2: didn't intrigue me. So I spent a lot of time

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Speaker 2: in probability and statistics, which probability is very wonky statistic

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Speaker 2: people think they're the same, they're not really completely different,

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Speaker 2: absolutely different fields. But I'd done a lot of econometrics

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Speaker 2: and things like that, and so from the standpoint of statistics,

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Speaker 2: that was one of my specialties, in addition to calculus,

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Speaker 2: and so really I was focused on applied during the

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Speaker 2: run of differential equations and calculus based stuff. And at

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Speaker 2: the time, this was the late nineties, obviously quants were

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Speaker 2: becoming bigger and bigger. Part of the financial industry, and

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Speaker 2: so there was starting to become these programs on like

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Speaker 2: financial math more applied. Usually it's like a you know,

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Speaker 2: a University of Chicago, which again I didn't have a

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Speaker 2: lot of exposure to these, you know, prestigious universities and

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Speaker 2: didn't know about a lot of this, and so I

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Speaker 2: was looking like a Carnegie mellon the likes. They ended

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Speaker 2: up going back to a school in la called Clermont

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Speaker 2: and they had a financial engineering program there, and so

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Speaker 2: I was always concerned, well, I haven't studied accounting finance

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Speaker 2: over the time, and the advisor there gave me some

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Speaker 2: great advice, and we can teach mathematicians finance, we can't

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Speaker 2: always teach finance majors math. And so it's so true.

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Speaker 2: There is something about it. It's an easier transition. I

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Speaker 2: won't say you can't teach them, it's just the finance

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Speaker 2: was a lot easier when you've studied a lot of

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Speaker 2: math for a long time and the applications were absolutely

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Speaker 2: directly applicable.

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Speaker 1: It seems that some people are math people and some

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Speaker 1: people are not. And you know, if it comes to

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Speaker 1: you naturally, you don't understand why other people don't get

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Speaker 1: the fundamental like it. There's an internal logic that makes

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Speaker 1: so much sense if you're one of those people, and

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Speaker 1: if you're not, you know, it's Greek too.

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Speaker 2: And also it was something that I was always kind

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Speaker 2: of gifted with. Right, the math came easier. The reason

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Speaker 2: I became a math major berry is that I actually

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Speaker 2: disliked reading by the time I got to college. And

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Speaker 2: it was really and obviously, think about it, finance never

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Speaker 2: have to read, right, we don't have to read anything

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Speaker 2: in there. But I was actually floored by when I

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Speaker 2: got my first job as an intern and the amount

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Speaker 2: of reading that I had to do in a given day.

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Speaker 2: And I was like, wow, you know, I chose math

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Speaker 2: because it was very simple. It came natural. It was like,

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Speaker 2: you know, you read a couple of pages, you do

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Speaker 2: some problems, it's over. I don't have to read, you know,

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Speaker 2: hundreds of pages of a novel. But very quickly I

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Speaker 2: learned that you definitely have to read day and day out.

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Speaker 1: And a poorly written novel with a terrible narrative, plot structure,

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Speaker 1: and awful characters.

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Speaker 2: Right, that's finance in a nutshell, right, So so definitely,

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Speaker 2: you know, again that's just being young and naive as well,

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Speaker 2: But you know, you should always gravitate to some of

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Speaker 2: your internal skill set, and that's what I did. But

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Speaker 2: I think the people who told me that you can

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Speaker 2: always do stuff with the math degree, but I also

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Speaker 2: really cursed them for a while not tell me what

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Speaker 2: that exactly was. And by the way, when I heard

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Speaker 2: you can become an engineer, I never wanted to drive

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Speaker 2: a train, right, and so no one ever told me

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Speaker 2: what an engineer was actually doing. Is that the definition

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Speaker 2: engineer is using math to solve problems exactly right, real

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Speaker 2: world problems. And so I don't know if financial engineering

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Speaker 2: holds up as well, because I don't know if there

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Speaker 2: are the real world problems, but I definitely know there

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Speaker 2: are problems there and there are things we can help

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Speaker 2: in the world by doingthing.

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Speaker 1: You mentioned you were an intern. Where did you start

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Speaker 1: your internship? And wasn't in the World Definance?

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Speaker 2: It was? It was so when I was in the

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Speaker 2: master's program require an internship as part of it, and

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Speaker 2: I got it. Trust come to the West, so tcw oh,

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Speaker 2: and so that was your first job. My first job

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Speaker 2: was there, and I've worked with the same crew effectively

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Speaker 2: ever since. So that was in. That was in two

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Speaker 2: thousand and one, early then, and then ultimately you know,

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Speaker 2: I've been working with the same team around me for

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Speaker 2: about twenty five years. Now.

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Speaker 1: That's amazing. How did you bump into some kid named

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Speaker 1: Jeff Gunlock though.

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Speaker 2: Well he was he was a lot older than me,

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Speaker 2: you know, he was not a kid at the time too,

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Speaker 2: but he definitely had GRAVI toss around the firm. And

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Speaker 2: I think there's something about finance too that you get

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Speaker 2: defined into your roles as a function of essentially your

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Speaker 2: entry point in the industry. And so I've noticed that

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Speaker 2: me coming in two thousand and one, think about it

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Speaker 2: not really a great equity market.

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Speaker 1: Dot com implosion, right, I mean in.

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Speaker 2: The middle of it, obviously we had nine to eleven.

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Speaker 2: You had all kinds of crazy stuff that happened in

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Speaker 2: the world. And so I've noticed that the people that

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Speaker 2: came a few years after me tend to be more

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Speaker 2: risk takers right where we were a little bit more

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Speaker 2: risk verse. I think there's this anchoring of when you

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Speaker 2: start one's career sometimes of how you get into a

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Speaker 2: side of the business. Now, obviously we can read a

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Speaker 2: fi in ourselves, right, but I do think that there

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Speaker 2: is something to be said about that. So again, this

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Speaker 2: is a world where interest rates. You know, you got

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Speaker 2: paid unlike the last time we were here talking right

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Speaker 2: when we had that financial true financial repression for like

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Speaker 2: twelve years, and so there was something that was interesting

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Speaker 2: about it. And inherently it's more mathematical nature. And so

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Speaker 2: as I was doing like risk analytics and working to

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Speaker 2: help support some of the marketing staff and do that,

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Speaker 2: you know, I gravitated to that side of the business

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Speaker 2: a little bit. So my goal was to work for

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Speaker 2: mister Gunlog. I did not on day one, but I

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Speaker 2: always felt that like there was something in there, just

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Speaker 2: analyzing returns, looking at the history, looking at the team,

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Speaker 2: and my goal was to try to get on that team,

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Speaker 2: and effectively I did so.

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Speaker 1: Just a little bit of a trivia footnote the very

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Speaker 1: first Masters in Business that was broadcast just about ten

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Speaker 1: years ago, July twenty fourteen, episode number one. Jeffrey Gunlock,

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Speaker 1: double long capital. That's right, So you really really I

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Speaker 1: owe him a special debt of gratitude.

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Speaker 2: So so I do too, very yeah. So he still

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Speaker 2: writes my paychecks today, signs that right, Yeah. Yeah.

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Speaker 1: At TCW, you're at the Trust Company of the West.

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Speaker 1: You're senior vice president, You're a portfolio manager, you're a

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Speaker 1: quantitative analyst. It sounds like you're wearing a lot of

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Speaker 1: different hats. Are these sequential positions or were these all

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Speaker 1: at once?

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Speaker 2: Yeah, No, it's sequential. You know, I started as a

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Speaker 2: quant and then you know, you get these corporate titles

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Speaker 2: as things go along. But ultimately, you know, I liked

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Speaker 2: being on the fortflow management side and so devising strategies,

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Speaker 2: coming up with ideas and trying to figure out different

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Speaker 2: ways to execute them. That was always of interest, and

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Speaker 2: so I worked a lot on the asslecation side. And

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Speaker 2: so I've had a lot of roles throughout my career,

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Speaker 2: even though it's it's very narrow team right Instead, I've

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Speaker 2: worked at the same folks forever. You know, I've trafficked

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Speaker 2: in a lot of markets. I mean, at one point

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Speaker 2: I worked for a guy that wrote a very similar

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Speaker 2: piece on commodities, and so we created commodity products. We

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Speaker 2: ran those for a few years. Again, as I said,

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Speaker 2: we've worked in at allocation. I've helped build a lot

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Speaker 2: of our quantitative strategies. We run at double line as well,

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Speaker 2: and so it's not just me. I have a good

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Speaker 2: team around me too, and so I've always been able

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Speaker 2: to surround myself with people who can think about these

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Speaker 2: ideas and I are really kind of big picture folks,

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Speaker 2: but it can also get into the minutia. And so

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Speaker 2: not shockingly, I like quants, right, I feel like we vibe,

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Speaker 2: you know, we can we can get together. But I

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Speaker 2: like the way that the quants think, you know. And

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Speaker 2: so I've never I struggled when I took the CFA exam,

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Speaker 2: not not with the whole curriculum, but obviously the accounting.

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Speaker 2: I mean, I have a degree in financial engineering and

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Speaker 2: I took one accounting course, right, and so the statement

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Speaker 2: analysis never made sense to me. It still doesn't, you know.

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Speaker 1: Well, it doesn't have the same internal logic, the same

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Speaker 1: You can't arrive mathematical rationality where you just have to

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Speaker 1: start with a basic premise and so much things can

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Speaker 1: be derived logically from that starting point. This is just rules,

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Speaker 1: and it's just especially if you're a left brain person,

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Speaker 1: the right brain stuff and vice versa. So you mentioned

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Speaker 1: financial repression, You and the rest of the qants in

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Speaker 1: your core group, including Gunlock, decide to stand up your

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Speaker 1: own firm in two thousand and nine. It's pretty much

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Speaker 1: in the midst of people. The worst of the market

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Speaker 1: I think was somewhat behind us, but still people were

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Speaker 1: shell shocked. What was it like standing up a new

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Speaker 1: firm right in the financial crisis, right in the midst

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Speaker 1: of nine with the Fed every week it seemed like

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Speaker 1: there was a different new credit line, a different new

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Speaker 1: way to unfreeze. What was going on in the credit markets?

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Speaker 1: Tell us about that period.

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Speaker 2: Yeah, well, actually the bulk of that period transpired at TCW,

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Speaker 2: so the eight sure, but even in nine, even though

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Speaker 2: nine there was there was still this was kind of

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Speaker 2: the bounce back. As we all know. The lows were

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Speaker 2: in March of nine. But what you found was that

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Speaker 2: in we left in December of nine. At that point

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Speaker 2: things were starting to have more clarity. Now massive uncertainty

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Speaker 2: in the world, and there's the old adage that investors

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Speaker 2: fight the last war. They're still fighting the last one

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Speaker 2: right every time, right, And so trying to show people

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Speaker 2: this idea that you know, investing in these mortgages that

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Speaker 2: did go down fifty or sixty percent, that there was

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Speaker 2: significant upside in this and really limited downside, and so

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Speaker 2: there was something special about that time as well, where

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Speaker 2: the opportunity set was extremely obvious. But it's never obvious.

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Speaker 2: Right at the time, it wasn't obvious. We thought it

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Speaker 2: was obvious. Looking back with hindsight, it was the best

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Speaker 2: time to make money and fixation.

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Speaker 1: Can I tell you something about obvious so we full disclosure.

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Speaker 1: We used to own the way back in nine, ten, eleven, twelve,

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Speaker 1: the Double Line mortgage backed portfolio, and it was obvious

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Speaker 1: that hey, you're buying these deeply distressed mortgages with an

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Speaker 1: implicit federal guarantee. How are you not gonna outperform plain

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Speaker 1: vanilla mortgages and that product for I want to say,

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Speaker 1: like the next seven eight years until you just couldn't

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Speaker 1: buy any more mortgage. They just weren't available.

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Speaker 2: They weren't They weren't available at those prices anymore. Anyone

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Speaker 2: says when you buy them at par it's a lot

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Speaker 2: different than buying them it's fifty, right, But.

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Speaker 1: That that fund just destroyed old commerce for years and

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Speaker 1: years and years. Am I overstating that? No?

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Speaker 2: I mean, look, anybody who was in the space did similar,

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Speaker 2: right as long as you.

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Speaker 1: Had any guys were very aggressive, very early, and I

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Speaker 1: want to say seventy five eighty five percent of the

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Speaker 1: portfolio at least in the beginning was mortgage back.

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Speaker 2: So no, it was almost one hundred how real at

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Speaker 2: the time, very early on, because it was blatantly obvious

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Speaker 2: that you had two sides of the markets. You had

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Speaker 2: the government guaranteed side, which gave you interest rate risk,

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Speaker 2: and you had this stuff that was so bombed out

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Speaker 2: it had zero exposure to interest rate exposure. It was

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Speaker 2: all about the credit. And as we said, you know,

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Speaker 2: investors fighting the last war were saying, well, they went

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Speaker 2: down to fifty, they must be going to twenty five, right,

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Speaker 2: So where you just say, hey, I'm buying you know,

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Speaker 2: wells Fargo's shelf paper with six coupons. Now, if you

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Speaker 2: buy an asset with a six cupon at fifty cents

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Speaker 2: on the dollar, and let's just think you think you're

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Speaker 2: getting par back, that thing has an IRR like close

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Speaker 2: to thirty, right, And that math probably doesn't jump out

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Speaker 2: to a lot of people, but just think of current yield.

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Speaker 2: It's got six you divided by fifty, that's a twelve

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Speaker 2: current yield. That's the cash flow. Now you have to

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Speaker 2: assume some losses and what we were doing was just running

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Speaker 2: these bonds to like draconian scenarios where the world's ending

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Speaker 2: if how these bonds are still profit and they don't

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Speaker 2: break But they don't they don't, they don't lose money,

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Speaker 2: especially at fifty cents on dollars. But the biggest challenge

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Speaker 2: Barier that a lot of it investors had would say, well,

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Speaker 2: you're buying this but and we tell them, look, we

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Speaker 2: think we're going to get seventy five cents on the

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Speaker 2: dollar back, Well, why the hell would you buy this bond?

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Speaker 2: It doesn't Yeah, But but people don't think that way.

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Speaker 2: They're like, but you're not going to get par back.

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Speaker 2: And by the way, if you don't get par back,

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Speaker 2: these bonds go deeper default in a range agency model.

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Speaker 2: But who cares. But see, but that's not the mentality

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Speaker 2: of it.

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Speaker 1: And that was an unconstrained fund, right. It wasn't like

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Speaker 1: we have to buy conforming fanning in front.

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Speaker 2: It's like it was. It was all written in their perspectives.

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Speaker 2: And by the way, the nice thing about starting a

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Speaker 2: new firm is you can write perspectives the way you want.

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Speaker 1: No legacy paper, no god, but you.

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Speaker 2: Don't have to do it. You don't need a proxy

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Speaker 2: for it. You say, this is how we want to

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Speaker 2: run the portfolios. And so it was a great time.

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Speaker 2: I would I advise people, you know, five years ago

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Speaker 2: or six years ago to set up a bond shop. No,

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Speaker 2: but at the time it was it was just everything

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Speaker 2: was kind of in our favor. And the thing I

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Speaker 2: remember is that the day we launched that total return

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Speaker 2: fund at double on, it was actually April sixth of

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Speaker 2: of twenty ten. The flash crash.

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Speaker 1: Right around the flash it was a little bit.

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Speaker 2: Prior to that, but why, yeah, that was later on. Yeah,

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Speaker 2: I don't know exactly the day, but it was definitely later.

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Speaker 2: But why I remember that is I used to tell

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Speaker 2: people that was the last time we saw four percent tenure.

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Speaker 2: That day that we launched that fun it was a

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Speaker 2: four percent tenure and it took us until twenty twenty

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Speaker 2: two to get back to that.

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Speaker 1: Like, hey, what's it doesn't twice between friends?

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Speaker 2: It's so funny.

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Speaker 1: You specifically said what a great time it was in

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Speaker 1: nine to launch a firm, to launch a fun I

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Speaker 1: have a vivid recollection of walking into my training room

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Speaker 1: in eight oh nine and just channeling DeValve from Apocalypse Now.

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Speaker 2: Remember that, Charlie, don't surf the thing.

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Speaker 1: At one point, he turns to Martin Sheen says, you know, son,

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Speaker 1: someday this war is going to end with this bittersweet

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Speaker 1: wistfulness like this is the time. You have to just

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Speaker 1: recognize it. And I always thought it was much more

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Speaker 1: applicable to markets than to war, because hey, when it's

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Speaker 1: just a hell out there and there's blood on in

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Speaker 1: the streets, that's when the greatest opportunities come.

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Speaker 2: It really is. And unfortunately war never ends, as we know, right,

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Speaker 2: we continue to see that left and right. But definitely

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Speaker 2: markets are cyclical in nature. And you know, it's the

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Speaker 2: same thing when valuation gets out of control too. It

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Speaker 2: will come home to roost at some point. But doesn't

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Speaker 2: mean the valuation can't get worse, right, it can't go higher.

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Speaker 2: And so what you have to you have to realize

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Speaker 2: is that you've got to stick to principles, you've got

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Speaker 2: to think through things, and you know, regimes change, but

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Speaker 2: they don't change that much, right, And so what I

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Speaker 2: think in that is that if once you start hearing

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Speaker 2: this time is different, this is the new era. Typically

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Speaker 2: those things are the signs of excess in the market.

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Speaker 2: And look, I think that we've been through one of

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Speaker 2: those recently as well. I think we've had some accesses

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Speaker 2: out there.

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Speaker 1: On the fixed income shid or on the equ on

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Speaker 1: both both.

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Speaker 2: And so, look, corporate spreads are tight today, valuations are tight.

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Speaker 2: They're tight for a reason. But it doesn't you know, Look,

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Speaker 2: corporate bonds being a little bit over value doesn't mean

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Speaker 2: they're going to crash, doesn't mean you're going to lose

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Speaker 2: half your money. But the problem is in some equity

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Speaker 2: markets you can have that experience right now. Granted, bonds

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Speaker 2: had a significant draw down as we all saw in

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Speaker 2: twenty two, but from the standpoint of thinking about valuation,

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Speaker 2: you know, credit spreads are not really reflecting much of

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Speaker 2: a default premium today, and I think that's reflective of

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Speaker 2: the economy. I think that's reflective of kind of where

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Speaker 2: we are. But also I think that's backward looking, not

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Speaker 2: forward looking, right, And so from that standpoint, do I

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Speaker 2: get excited about you know, when the oas on corporate

404
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Speaker 2: bonds is like, you know, inside of ninety bases points

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Speaker 2: not really high yield got inside of three hundred, you know,

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Speaker 2: a couple of weeks ago. That's not exciting and what

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Speaker 2: I hear from a lot of people is when I'll

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Speaker 2: hear it from the credit team significantly at the firm

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Speaker 2: yield buyer, there's a yield buyer, there's a yield buyer,

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Speaker 2: and there's a threshold of yields. All they care about

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Speaker 2: is yield. Well, if you only care about yield, just

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Speaker 2: go buy treasuries. They have yield. Right, you have to

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Speaker 2: get compensated for each risk. So when I say to

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Speaker 2: the excess in valuation, some of it does apply to

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Speaker 2: the corporate market, because look, the economy has been very strong, right.

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Speaker 2: I mean last year was the recession. It was a

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Speaker 2: massive recession. Member everybody forecasts it, and of course when

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Speaker 2: everybody does it, it doesn't happen.

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Speaker 1: Hey, it's in the price already. I used to hear

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Speaker 1: that early in my career, early in the price, and

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Speaker 1: it used to be so frustrating. And when that light

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Speaker 1: goes on, it's like, hey, if everybody is discounting a recession,

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Speaker 1: then the market's figured it out a little time.

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Speaker 2: I also also think what happened is that you know,

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Speaker 2: a lot of us are trained, especially from an economic background,

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Speaker 2: to look at in financial markets, to look over year

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Speaker 2: over year, data, and the year over year data was

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Speaker 2: flashing very negative. And what a lot of us miss

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Speaker 2: and I'll take some blame for this too, a lot

430
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Speaker 2: of us missed it was that it was the amount

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Speaker 2: of excesses that came into the system during the pandemic

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Speaker 2: that haven't worked through. And the one I heard so

433
00:22:12,880 --> 00:22:15,240
Speaker 2: much was excess savings. And I hated the phrase. The

434
00:22:15,320 --> 00:22:17,800
Speaker 2: FED used it, and it was like, here's the savings rate,

435
00:22:17,880 --> 00:22:20,400
Speaker 2: but we pumped all this money in, so thus there's

436
00:22:20,440 --> 00:22:23,600
Speaker 2: this excess savings amount that's out there. And I always

437
00:22:23,640 --> 00:22:26,640
Speaker 2: tell anybody, Barry, if you know anyone with excess savings,

438
00:22:26,720 --> 00:22:29,560
Speaker 2: I can help them. We can take the excess off

439
00:22:29,600 --> 00:22:32,439
Speaker 2: your hand. You can put it in bank some return. No,

440
00:22:32,480 --> 00:22:33,800
Speaker 2: you can just put it in the bank of sureman.

441
00:22:33,880 --> 00:22:36,160
Speaker 2: Because to me, it's not an excess. All my savings

442
00:22:36,200 --> 00:22:38,320
Speaker 2: I need, right, It's what I'm going at. There is

443
00:22:38,359 --> 00:22:41,760
Speaker 2: no excess savings in the world. And so from my standpoint,

444
00:22:41,880 --> 00:22:43,800
Speaker 2: that's what I would say. So call me if you

445
00:22:43,800 --> 00:22:45,879
Speaker 2: have excess savings, forget the investment. I'll just take it

446
00:22:45,880 --> 00:22:47,960
Speaker 2: off your hands. It'll help all of us out.

447
00:22:48,320 --> 00:22:50,600
Speaker 1: You sound like what I say every time someone tells

448
00:22:50,640 --> 00:22:53,880
Speaker 1: me the dollar is being destroyed. Well, send me your

449
00:22:54,240 --> 00:22:57,840
Speaker 1: worthless just dollars for proper disposal. I'll take care of those.

450
00:22:57,920 --> 00:22:59,000
Speaker 2: Don't worry. I'll tell you what.

451
00:22:59,080 --> 00:23:00,919
Speaker 1: You take care of the excess savings. I'll take care

452
00:23:00,960 --> 00:23:03,479
Speaker 1: of the worthless dollars. We'll make sure no one has

453
00:23:03,520 --> 00:23:04,000
Speaker 1: any crust.

454
00:23:04,119 --> 00:23:06,040
Speaker 2: And we're just helping the world out here.

455
00:23:06,119 --> 00:23:06,280
Speaker 1: Right.

456
00:23:06,359 --> 00:23:10,199
Speaker 2: But but so that phrase I hated, but there is

457
00:23:10,200 --> 00:23:12,720
Speaker 2: a there's kind of a corollary to it, and it's

458
00:23:12,760 --> 00:23:15,840
Speaker 2: something that really I think is impactful, and it's still

459
00:23:15,880 --> 00:23:17,960
Speaker 2: in the market today. And this was the amount of

460
00:23:18,040 --> 00:23:21,040
Speaker 2: monetary growth. And this is what we call M two

461
00:23:21,520 --> 00:23:25,359
Speaker 2: inside of in the wonky economics world. And this M

462
00:23:25,400 --> 00:23:28,520
Speaker 2: two growth at one point, with all the you know,

463
00:23:28,960 --> 00:23:31,479
Speaker 2: six to seven trillion dollars of money printed to all

464
00:23:31,480 --> 00:23:34,959
Speaker 2: these support programs, led to an increase of the monetary

465
00:23:35,000 --> 00:23:37,440
Speaker 2: base of twenty eight percent year over here. Two eight.

466
00:23:38,080 --> 00:23:41,800
Speaker 2: I mean that's a promost a third increase increase in

467
00:23:42,160 --> 00:23:44,879
Speaker 2: the amount of money out there, Okay, And so you

468
00:23:44,920 --> 00:23:47,160
Speaker 2: can say that it was free money. You could say

469
00:23:47,160 --> 00:23:49,600
Speaker 2: we gave free money to people, we gave it to corporations,

470
00:23:49,680 --> 00:23:52,520
Speaker 2: we printed it. It existed. The fad bought some of

471
00:23:52,560 --> 00:23:53,400
Speaker 2: it through you know.

472
00:23:53,760 --> 00:23:56,119
Speaker 1: Now, and this is on top of you I'm not

473
00:23:56,160 --> 00:24:00,240
Speaker 1: a big fan of the phrase financial repression, but to

474
00:24:00,359 --> 00:24:06,119
Speaker 1: be fair, this is following about ten fifteen years of

475
00:24:06,960 --> 00:24:12,320
Speaker 1: pretty aggressive monetary policy, including you know printer goes Burr

476
00:24:12,480 --> 00:24:16,560
Speaker 1: was the meme. This isn't just an isolation. This follows

477
00:24:16,600 --> 00:24:20,600
Speaker 1: a solid decade. Is that a fair number of expansion

478
00:24:20,640 --> 00:24:21,480
Speaker 1: of the monetary base?

479
00:24:21,680 --> 00:24:24,840
Speaker 2: It is, and it's these you know, what was it

480
00:24:24,960 --> 00:24:28,040
Speaker 2: Friedman that said there's nothing more permanent than a temporary

481
00:24:28,040 --> 00:24:32,200
Speaker 2: government program, right, And that's that's absolutely true. But when

482
00:24:32,240 --> 00:24:34,880
Speaker 2: I think about it, what you was starting to see

483
00:24:34,920 --> 00:24:36,600
Speaker 2: is the year over year numbers. We were starting to

484
00:24:36,640 --> 00:24:40,000
Speaker 2: see the M two fall precipitously, and it was getting

485
00:24:40,000 --> 00:24:42,720
Speaker 2: to a point where, you know, outsider war we are

486
00:24:42,760 --> 00:24:44,920
Speaker 2: going into like these you know, coming off of these

487
00:24:44,920 --> 00:24:47,240
Speaker 2: war page you've never really seen the monetary based shrink.

488
00:24:47,600 --> 00:24:49,960
Speaker 2: We saw it shrink in late twenty two.

489
00:24:49,800 --> 00:24:54,000
Speaker 1: To say, if that's what is the fallible recession forecast?

490
00:24:54,359 --> 00:24:57,400
Speaker 1: You haven't even brought up the inverted yield coll hold on, but.

491
00:24:57,359 --> 00:24:59,119
Speaker 2: Hold on, I'm not even done with this Berry. This

492
00:24:59,200 --> 00:25:00,919
Speaker 2: is because I think this is way more important than

493
00:25:00,960 --> 00:25:01,480
Speaker 2: the old curve.

494
00:25:01,600 --> 00:25:02,520
Speaker 1: Oh really, I have.

495
00:25:02,640 --> 00:25:04,760
Speaker 2: I have some ideas on the old curve too that

496
00:25:05,920 --> 00:25:09,000
Speaker 2: we'll get to. But where I'm going with this monetary

497
00:25:09,040 --> 00:25:12,080
Speaker 2: growth is that what you actually need to do is

498
00:25:12,119 --> 00:25:14,600
Speaker 2: look at the two year number change, or look at

499
00:25:14,600 --> 00:25:16,479
Speaker 2: the three year number change. What you need to do

500
00:25:16,520 --> 00:25:18,640
Speaker 2: is look at the trend line over the last seven

501
00:25:18,720 --> 00:25:20,800
Speaker 2: or eight years, not just ye over year. And what

502
00:25:20,920 --> 00:25:22,840
Speaker 2: you would see if you did that trend line and

503
00:25:22,960 --> 00:25:25,760
Speaker 2: I put it on a webcast recently, the gap is

504
00:25:25,800 --> 00:25:28,600
Speaker 2: still so massively to the upside of how much we

505
00:25:28,720 --> 00:25:31,800
Speaker 2: created relative to this trend. And you can talk, you

506
00:25:31,800 --> 00:25:34,040
Speaker 2: can do it over many, many years and you get

507
00:25:34,080 --> 00:25:36,560
Speaker 2: the same result. And so what that means is that

508
00:25:36,760 --> 00:25:40,240
Speaker 2: there truly is liquidity in the market. We created these

509
00:25:40,320 --> 00:25:43,440
Speaker 2: dollars and put them out there. And also I think

510
00:25:43,480 --> 00:25:47,520
Speaker 2: you put together the consumer and what's happened there is

511
00:25:47,560 --> 00:25:49,280
Speaker 2: that behavioral patterns have changed.

512
00:25:49,560 --> 00:25:53,320
Speaker 1: So before we were talking about the expansion of the

513
00:25:53,359 --> 00:25:57,000
Speaker 1: monetary base, I have to ask you, and we'll talk

514
00:25:57,040 --> 00:26:01,040
Speaker 1: about the inverted yould government. But given the fall off

515
00:26:01,040 --> 00:26:05,359
Speaker 1: in the monetary base you mentioned, how do you contextualize

516
00:26:05,400 --> 00:26:09,479
Speaker 1: that against just we went I don't know fifteen years

517
00:26:09,520 --> 00:26:13,760
Speaker 1: with kind of dominimus fiscal stimulus. Monetary was shouldering all

518
00:26:13,800 --> 00:26:18,280
Speaker 1: of the burden. Come Come the Pandemic Cares Act one

519
00:26:18,600 --> 00:26:23,080
Speaker 1: under a former president Trump, two trillion dollars biggest fiscal

520
00:26:23,119 --> 00:26:26,960
Speaker 1: stimulus literally is a percentage of GDP about ten percent

521
00:26:27,040 --> 00:26:30,560
Speaker 1: since World War Two. KARS Act two, eight hundred billion

522
00:26:30,680 --> 00:26:33,960
Speaker 1: under Trump, Cares Act three, almost a trillion and a

523
00:26:34,040 --> 00:26:35,600
Speaker 1: half under Biden.

524
00:26:35,760 --> 00:26:37,200
Speaker 2: And then you have the.

525
00:26:37,119 --> 00:26:41,639
Speaker 1: Infrastructure Bill, the Inflation Reduction Bill, the Semiconductor Bill, the.

526
00:26:41,560 --> 00:26:42,920
Speaker 2: Packed VA Bill.

527
00:26:43,560 --> 00:26:49,200
Speaker 1: These are giant ten year fiscal stimulus is the regime

528
00:26:49,440 --> 00:26:55,040
Speaker 1: change from monetary policy to fiscal policy. Impacting equities more,

529
00:26:55,119 --> 00:26:58,240
Speaker 1: is it impacting bonds more? Or is just it's a

530
00:26:58,280 --> 00:26:59,800
Speaker 1: new day and you have to start over.

531
00:27:00,119 --> 00:27:02,760
Speaker 2: Well, I think what you see here is we realize

532
00:27:02,880 --> 00:27:06,800
Speaker 2: that the fiscal stimulus drives the consumer at the end

533
00:27:06,840 --> 00:27:09,640
Speaker 2: of the day, and dumping money into the system has

534
00:27:09,680 --> 00:27:14,199
Speaker 2: really really changed that dynamic where molnetary policy. You know,

535
00:27:14,240 --> 00:27:16,360
Speaker 2: if you go back to Bernanky when they rolled out

536
00:27:16,359 --> 00:27:19,400
Speaker 2: the QE, he always talked about the wealth effect. He's

537
00:27:19,400 --> 00:27:22,080
Speaker 2: really telling you trickle down economics, right that if people

538
00:27:22,160 --> 00:27:24,800
Speaker 2: feel wealthier, they're willing to spend money.

539
00:27:25,119 --> 00:27:28,440
Speaker 1: By the way, the way the FED describes the wealth effects,

540
00:27:29,119 --> 00:27:32,320
Speaker 1: do you buy that it always smells funny to me?

541
00:27:32,480 --> 00:27:34,200
Speaker 2: No, I think it's I think it's stupid, like I

542
00:27:34,240 --> 00:27:37,800
Speaker 2: think trickle down economics is stupid. Right, it's a theory,

543
00:27:37,800 --> 00:27:39,520
Speaker 2: but in the real world it just do. That's what

544
00:27:39,600 --> 00:27:42,240
Speaker 2: rich people say because they own assets, right, and they're like,

545
00:27:42,280 --> 00:27:44,680
Speaker 2: if I own more money, you know, like you know, Barry,

546
00:27:44,720 --> 00:27:46,840
Speaker 2: I'm going to probably give you some Barry, I haven't

547
00:27:46,840 --> 00:27:48,800
Speaker 2: given you any more money as I made more money.

548
00:27:49,000 --> 00:27:51,200
Speaker 2: But in theory, I'm going to do so right, cut

549
00:27:51,240 --> 00:27:54,159
Speaker 2: my taxes, I'm going to help you out. And I

550
00:27:54,240 --> 00:27:57,560
Speaker 2: just I don't think it has this broad economic impact.

551
00:27:58,119 --> 00:28:00,720
Speaker 2: I think it sounds good. That's why we all argue

552
00:28:00,720 --> 00:28:05,200
Speaker 2: in politics, but I just I'm not convinced that any

553
00:28:05,240 --> 00:28:05,879
Speaker 2: of it works.

554
00:28:06,240 --> 00:28:09,679
Speaker 1: I one hundred percent agree, and I can't help. But

555
00:28:09,760 --> 00:28:13,080
Speaker 1: notice that wealthy people, and I mean very wealthy people,

556
00:28:13,680 --> 00:28:18,280
Speaker 1: their spending happens whether the market's up thirty percent, flat down.

557
00:28:18,960 --> 00:28:24,119
Speaker 1: Maybe during a crisis, some of the more conspicuous consumption

558
00:28:24,760 --> 00:28:28,119
Speaker 1: gets throttled back because you know, Marie Antoinette and all

559
00:28:28,160 --> 00:28:32,200
Speaker 1: of that. But for the most part, the wealth effect.

560
00:28:32,800 --> 00:28:36,480
Speaker 1: Since eighty percent of stocks are own by five ten

561
00:28:36,480 --> 00:28:38,800
Speaker 1: percent of people, how big of an impact can the

562
00:28:38,800 --> 00:28:43,240
Speaker 1: wealth effect have on the bottom eighty percent of I.

563
00:28:43,160 --> 00:28:46,240
Speaker 2: Think the only place that it could potentially happen is

564
00:28:46,320 --> 00:28:48,960
Speaker 2: with the housing market. And so I think that's part

565
00:28:49,000 --> 00:28:51,000
Speaker 2: of what you're seeing today and some of this as well.

566
00:28:51,080 --> 00:28:53,200
Speaker 2: So we were talking about the M two growth and

567
00:28:53,240 --> 00:28:55,560
Speaker 2: the money used to play out there, but don't forget.

568
00:28:55,600 --> 00:28:59,440
Speaker 2: If people feel confident, they're willing to spend money. And

569
00:29:00,160 --> 00:29:02,920
Speaker 2: I think part of this last push we've seen is that,

570
00:29:03,120 --> 00:29:05,760
Speaker 2: you know, with the advent of Zillow and you know

571
00:29:05,840 --> 00:29:07,720
Speaker 2: redfin and we can look up the price of our

572
00:29:07,720 --> 00:29:10,000
Speaker 2: homes and we can creep on our neighbors and you know,

573
00:29:10,080 --> 00:29:13,080
Speaker 2: our friends, what do they buy? I think that has

574
00:29:13,200 --> 00:29:15,560
Speaker 2: created something in the psyche of people that they feel

575
00:29:15,600 --> 00:29:18,400
Speaker 2: a little wealthier if they're a homeowner.

576
00:29:18,360 --> 00:29:20,920
Speaker 1: Especially if the neighbors house went for a butt ton

577
00:29:20,960 --> 00:29:21,280
Speaker 1: of money.

578
00:29:21,360 --> 00:29:24,800
Speaker 2: Right, But you have to see that transaction. Now we

579
00:29:24,920 --> 00:29:27,280
Speaker 2: have this algorithm and you can go log in every

580
00:29:27,320 --> 00:29:29,160
Speaker 2: day and look at your house and it moves every

581
00:29:29,240 --> 00:29:32,560
Speaker 2: day kind of or you know, it's I think there

582
00:29:32,640 --> 00:29:33,960
Speaker 2: is something in there.

583
00:29:33,760 --> 00:29:35,720
Speaker 1: But well, let me throw a curve ballet you because

584
00:29:35,720 --> 00:29:40,320
Speaker 1: you mentioned psychology and sentiment. On the one hand, even

585
00:29:40,360 --> 00:29:44,200
Speaker 1: though it's off the lows, consumer sentiment has been awful,

586
00:29:44,240 --> 00:29:47,360
Speaker 1: like below, the financial crisis, below, the dot com below

587
00:29:47,480 --> 00:29:50,560
Speaker 1: nine to eleven. But when we look around in the

588
00:29:50,560 --> 00:29:54,320
Speaker 1: world of consumer spending, on the high end, you want

589
00:29:54,320 --> 00:29:57,600
Speaker 1: to Porsche, Ferrari, Lamborghini, there's a wait list. On the

590
00:29:57,880 --> 00:30:00,920
Speaker 1: upper medium end, you want to go buy a Rolex,

591
00:30:01,360 --> 00:30:02,160
Speaker 1: you can't get them.

592
00:30:02,160 --> 00:30:05,360
Speaker 2: They're they're getting cheaper though, right you probably can't buy

593
00:30:05,400 --> 00:30:06,000
Speaker 2: a brand new one.

594
00:30:06,440 --> 00:30:09,040
Speaker 1: So if you go to the certified pre owned or

595
00:30:09,040 --> 00:30:12,720
Speaker 1: even just the use one. A watch that costs ten

596
00:30:12,840 --> 00:30:17,320
Speaker 1: grand MSRP that was twenty two thousand dollars used is

597
00:30:17,360 --> 00:30:20,080
Speaker 1: now down to seventeen, but it's still much more than

598
00:30:20,080 --> 00:30:22,560
Speaker 1: new because you can't get new. There's no supply of

599
00:30:22,600 --> 00:30:26,440
Speaker 1: homes or very at least dramatically reduced. You want to

600
00:30:26,480 --> 00:30:28,840
Speaker 1: buy a boat or a jet ski, you'll wait a

601
00:30:28,880 --> 00:30:32,720
Speaker 1: few months. It's it's or a big truck, all right,

602
00:30:32,760 --> 00:30:33,920
Speaker 1: you could probably get the big truck.

603
00:30:33,960 --> 00:30:35,280
Speaker 2: I got somebody you can buy. You can buy a

604
00:30:35,280 --> 00:30:36,800
Speaker 2: Tesla right now. You know there's a lot of those.

605
00:30:37,000 --> 00:30:38,400
Speaker 2: There's a lot of those on offer right now.

606
00:30:38,400 --> 00:30:42,600
Speaker 1: You know, we maybe the takeaway from that is, if

607
00:30:42,720 --> 00:30:48,200
Speaker 1: you're if the demographics of your primary customers are, you know,

608
00:30:48,400 --> 00:30:53,040
Speaker 1: left of center, save the planet, anti.

609
00:30:52,720 --> 00:30:55,080
Speaker 2: Global warming people, maybe owning.

610
00:30:54,800 --> 00:30:57,280
Speaker 1: The LIBS is a bed marketing strategy.

611
00:30:57,480 --> 00:30:58,920
Speaker 2: Yeah, but that who knows.

612
00:30:58,960 --> 00:31:01,640
Speaker 1: And there's also a ton of competition today in that space.

613
00:31:01,760 --> 00:31:04,520
Speaker 2: Sure, sure, but I guess where I'm going with this

614
00:31:04,680 --> 00:31:08,640
Speaker 2: is consumer sentiment. Okay, So why why does it feel abysmal? Well,

615
00:31:09,240 --> 00:31:13,040
Speaker 2: let's talk about inflation. So instead of doing what Jay

616
00:31:13,040 --> 00:31:14,760
Speaker 2: Powell is doing or what all of us do, and

617
00:31:14,760 --> 00:31:16,920
Speaker 2: they're going to cite the year over year inflation number.

618
00:31:16,920 --> 00:31:18,920
Speaker 2: And by the way, the core PC is looking a

619
00:31:18,920 --> 00:31:22,040
Speaker 2: little bit better after this last print. Sure two, But

620
00:31:22,560 --> 00:31:24,760
Speaker 2: Jay has a problem. He's been talking about CPI for

621
00:31:24,760 --> 00:31:27,320
Speaker 2: the last few years, so moving the goal sticks is

622
00:31:27,360 --> 00:31:30,080
Speaker 2: just not good for him right now. And he doesn't

623
00:31:30,080 --> 00:31:32,320
Speaker 2: need to do anything anyway, so he's we can talk

624
00:31:32,360 --> 00:31:32,920
Speaker 2: about that later.

625
00:31:33,000 --> 00:31:35,480
Speaker 1: Listen, inflation came down regardless of what the Fed, but

626
00:31:35,520 --> 00:31:37,840
Speaker 1: here it was so late and by the time they

627
00:31:37,880 --> 00:31:40,680
Speaker 1: started it was just about to peek and come down.

628
00:31:41,000 --> 00:31:44,200
Speaker 2: But here's the problem. Now, let's go back on Europe.

629
00:31:44,280 --> 00:31:46,280
Speaker 2: Not instead of year of year, let's go back two years,

630
00:31:46,360 --> 00:31:49,360
Speaker 2: let's go back three years. And if you ask people

631
00:31:49,720 --> 00:31:53,440
Speaker 2: what inflation looks like, usually the common person will give

632
00:31:53,480 --> 00:31:56,240
Speaker 2: you one of two statistics. They'll talk about their grocery bill,

633
00:31:56,600 --> 00:31:59,600
Speaker 2: but they'll talk about fuel pump prices. That's really how

634
00:31:59,640 --> 00:32:02,720
Speaker 2: people think about inflation. But if you think about what's

635
00:32:02,760 --> 00:32:07,000
Speaker 2: happening right now, I think people's anchor is pre pandemic and.

636
00:32:07,080 --> 00:32:09,840
Speaker 1: We're what twenty percent generally you're.

637
00:32:09,840 --> 00:32:12,400
Speaker 2: You're in the mid to high twenties now, and so

638
00:32:12,880 --> 00:32:15,440
Speaker 2: that I think is weighing on sentiment, but it's not

639
00:32:15,640 --> 00:32:19,160
Speaker 2: changing the dynamic of the spending. And I also think

640
00:32:19,200 --> 00:32:21,840
Speaker 2: this is part of the whole fed's policy is that

641
00:32:21,920 --> 00:32:24,320
Speaker 2: when you when you're hiking rates, you're trying to do

642
00:32:24,440 --> 00:32:27,840
Speaker 2: two things to this transmission mechanism, make credit more expensive.

643
00:32:27,920 --> 00:32:32,520
Speaker 2: They've done that, okay, mission accomplished, but also totail to

644
00:32:32,640 --> 00:32:36,800
Speaker 2: curretail consumption. You also want incentive saving. That's the missing

645
00:32:36,880 --> 00:32:39,960
Speaker 2: part in this, I believe. And I saw that you

646
00:32:40,000 --> 00:32:43,400
Speaker 2: know the JP Morgan CFO come out of no disrespect there,

647
00:32:43,400 --> 00:32:47,080
Speaker 2: but he's complaining about how clients want CDs, But why

648
00:32:47,120 --> 00:32:49,640
Speaker 2: he's complaining is because they're paying a basis point on

649
00:32:49,680 --> 00:32:52,200
Speaker 2: their savings account, and if you're you have a great relationship,

650
00:32:52,200 --> 00:32:55,440
Speaker 2: you get two basis points. Well there's your repression, Barry.

651
00:32:55,600 --> 00:32:58,200
Speaker 1: You move to a money market, you're getting about five percent.

652
00:32:58,240 --> 00:33:01,160
Speaker 2: But that's called financial literacy, right, So that's the gap

653
00:33:01,280 --> 00:33:03,600
Speaker 2: we have here, right. But it's true and this is

654
00:33:03,640 --> 00:33:06,120
Speaker 2: not a US phenomenon. This is a global phenomenon, right,

655
00:33:06,160 --> 00:33:09,920
Speaker 2: that there is just not this robust financial literacy. But

656
00:33:10,400 --> 00:33:13,480
Speaker 2: so if you think about a person that I was

657
00:33:13,520 --> 00:33:16,600
Speaker 2: contending probably two years ago going into twenty two or

658
00:33:16,680 --> 00:33:18,719
Speaker 2: sorry going yeah, going into twenty three, after we had

659
00:33:18,800 --> 00:33:21,560
Speaker 2: higher rates, that people are going to save money, I

660
00:33:21,600 --> 00:33:25,200
Speaker 2: didn't realize that the banking system wasn't transmitting that megazine.

661
00:33:25,240 --> 00:33:27,480
Speaker 2: We work in capital markets, right, right, so we know

662
00:33:27,560 --> 00:33:28,120
Speaker 2: what rates are.

663
00:33:28,240 --> 00:33:31,080
Speaker 1: That's what six or seven trillion dollars some crazy number.

664
00:33:31,200 --> 00:33:33,280
Speaker 2: It was six trillion we got to in money market.

665
00:33:33,320 --> 00:33:35,720
Speaker 2: It obviously went down because of tax payments a couple

666
00:33:35,680 --> 00:33:38,440
Speaker 2: of weeks ago. But the thing is is that what

667
00:33:38,520 --> 00:33:41,680
Speaker 2: you find is that that savings wasn't there. Now. I

668
00:33:41,720 --> 00:33:45,520
Speaker 2: would have contended in twenty three that people thought inflation

669
00:33:45,840 --> 00:33:47,720
Speaker 2: was going to continue at the nine handle, right or

670
00:33:47,720 --> 00:33:50,080
Speaker 2: the eight handle, and so they didn't think that that

671
00:33:50,320 --> 00:33:53,240
Speaker 2: money market account was enough. Now I think it's that

672
00:33:53,320 --> 00:33:56,560
Speaker 2: they're not getting paid on their deposits either, right, Yes,

673
00:33:56,640 --> 00:33:59,680
Speaker 2: sophisticated people do people we know do this, and our

674
00:33:59,760 --> 00:34:02,040
Speaker 2: job is to educate more people. All my friends asked

675
00:34:02,080 --> 00:34:04,200
Speaker 2: me about that don't work in markets? What side I

676
00:34:04,320 --> 00:34:07,760
Speaker 2: was like, Janet Yellen's money market account, government money market.

677
00:34:07,960 --> 00:34:10,279
Speaker 2: Don't worry about it. I promise you won't lose. What's

678
00:34:10,320 --> 00:34:13,479
Speaker 2: the yield today? What's Janet pain? Janet's paying about five

679
00:34:13,520 --> 00:34:15,480
Speaker 2: and five and the five and three eighty.

680
00:34:15,280 --> 00:34:19,239
Speaker 1: Five right right, that's an impressive listen, especially coming on

681
00:34:19,320 --> 00:34:23,399
Speaker 1: top of a decade of practically zero. That's that's an

682
00:34:23,400 --> 00:34:24,480
Speaker 1: oasis in the desert.

683
00:34:24,560 --> 00:34:27,320
Speaker 2: It is. But so let's continue on this path of

684
00:34:27,600 --> 00:34:30,160
Speaker 2: of why the consumer, why the sentiments so bad? Is

685
00:34:30,200 --> 00:34:32,640
Speaker 2: because I don't think that what we see in this

686
00:34:32,719 --> 00:34:36,080
Speaker 2: slow down is the savings rate go up. Right, if

687
00:34:36,160 --> 00:34:38,560
Speaker 2: you look at a percentage of disposable income, they're they're

688
00:34:38,560 --> 00:34:39,040
Speaker 2: really at.

689
00:34:39,040 --> 00:34:40,960
Speaker 1: An you took all their excess saving.

690
00:34:41,239 --> 00:34:43,480
Speaker 2: I haven't yet. I'm making a plea, I'm making a

691
00:34:43,600 --> 00:34:47,120
Speaker 2: please still, But where I'm going with this still is

692
00:34:47,160 --> 00:34:50,440
Speaker 2: that I don't think people have been incentivized to save

693
00:34:50,880 --> 00:34:52,759
Speaker 2: and you know what, we have the yolos, they have

694
00:34:52,880 --> 00:34:55,520
Speaker 2: the there was the idea that we were locked down

695
00:34:55,600 --> 00:34:57,480
Speaker 2: for a year or two, depending on where your jurisdic

696
00:34:57,560 --> 00:34:58,240
Speaker 2: people died.

697
00:34:58,400 --> 00:35:02,440
Speaker 1: It's fair to say. My big takeaway from the pandemic,

698
00:35:02,920 --> 00:35:08,000
Speaker 1: aside from hey, these vaccines are a miracle, was life

699
00:35:08,040 --> 00:35:11,120
Speaker 1: is short. Open that expensive bottle of wine. What are

700
00:35:11,120 --> 00:35:14,800
Speaker 1: you waiting for people who were like otherwise fairly healthy

701
00:35:15,000 --> 00:35:18,279
Speaker 1: suddenly dying. You know a lot of people had that

702
00:35:18,440 --> 00:35:21,360
Speaker 1: moment of existential dread where hey, I only got so

703
00:35:21,400 --> 00:35:23,800
Speaker 1: many years left, Let's go live life.

704
00:35:23,840 --> 00:35:26,640
Speaker 2: That's right, And I think that that has changed the psyche.

705
00:35:26,680 --> 00:35:28,239
Speaker 2: So if you want to talk about a regime change,

706
00:35:28,239 --> 00:35:31,440
Speaker 2: I think that's changed. And I think that's missing in

707
00:35:31,480 --> 00:35:35,120
Speaker 2: this FED transmission mechanism right now is that we're not

708
00:35:35,360 --> 00:35:38,200
Speaker 2: curtailing this or we're not increasing the sailing savings and

709
00:35:38,280 --> 00:35:42,600
Speaker 2: curtailing consumption. We are spending still. And so from that standpoint,

710
00:35:42,640 --> 00:35:46,480
Speaker 2: as long as people stay employed, that's probably going to continue.

711
00:35:46,800 --> 00:35:48,520
Speaker 2: And by the way, we're here in April, we're in

712
00:35:48,520 --> 00:35:51,200
Speaker 2: New York. It's actually a beautiful day out that taculate, right,

713
00:35:51,400 --> 00:35:54,320
Speaker 2: And this is the seasonal part where you guys on

714
00:35:54,400 --> 00:35:56,080
Speaker 2: the East Coast start to go out and spend more

715
00:35:56,120 --> 00:35:59,480
Speaker 2: money too. Out in LA We're justing it around all

716
00:35:59,520 --> 00:36:01,719
Speaker 2: the time. We do it all the time. But so

717
00:36:01,800 --> 00:36:04,359
Speaker 2: the seasonal component will probably kick in here too. So

718
00:36:04,680 --> 00:36:07,800
Speaker 2: this is the idea of waiting for a catastrophe to happen.

719
00:36:08,239 --> 00:36:10,640
Speaker 2: What's missing in a lot of this is also just

720
00:36:10,640 --> 00:36:14,120
Speaker 2: the dynamic of the consumer. And look, people have criticized

721
00:36:14,160 --> 00:36:17,359
Speaker 2: the labor market statistics, birth death models, all of that.

722
00:36:17,800 --> 00:36:20,000
Speaker 2: But what I what I look at in the labor

723
00:36:20,040 --> 00:36:23,600
Speaker 2: market today is I watch unemployment claims because we can argue.

724
00:36:23,440 --> 00:36:25,840
Speaker 1: About weekly unemployment claim is about a two hundred K

725
00:36:25,920 --> 00:36:27,600
Speaker 1: a week, And now why do I want low?

726
00:36:27,800 --> 00:36:30,000
Speaker 2: But why do I watch that? The one thing I

727
00:36:30,040 --> 00:36:33,680
Speaker 2: can say is that I'm pretty confident in our fellow Americans.

728
00:36:34,040 --> 00:36:35,880
Speaker 2: I mean, Barry, You've worked a long time in your career,

729
00:36:35,880 --> 00:36:38,480
Speaker 2: You've paid in the system. Right, Sure, if Bloomberg lets

730
00:36:38,480 --> 00:36:41,239
Speaker 2: you go, Let's say Ritholtz doesn't want you anymore. That

731
00:36:41,280 --> 00:36:43,319
Speaker 2: would be kind of weird, but it could happen. What

732
00:36:43,360 --> 00:36:45,799
Speaker 2: are you probably about yourself? You may you may just

733
00:36:45,800 --> 00:36:46,319
Speaker 2: get match up.

734
00:36:46,360 --> 00:36:48,640
Speaker 1: If I decide to pick up golf and spend my

735
00:36:48,719 --> 00:36:49,480
Speaker 1: time doing.

736
00:36:49,280 --> 00:36:50,920
Speaker 2: That, but think it. But I want to go the

737
00:36:50,920 --> 00:36:53,279
Speaker 2: other way, I would say, you lose your job. If

738
00:36:53,360 --> 00:36:55,600
Speaker 2: you lose your job, I'm pretty sure that most people

739
00:36:55,719 --> 00:36:59,160
Speaker 2: don't have an issue going and filing those claims. So

740
00:36:59,200 --> 00:37:01,680
Speaker 2: when I look at it claims and not seeing spikes

741
00:37:01,680 --> 00:37:04,080
Speaker 2: that were continuing claims not being out there, to me,

742
00:37:04,160 --> 00:37:08,400
Speaker 2: it says something about that we can't dismiss the jobs data.

743
00:37:08,560 --> 00:37:13,080
Speaker 1: Right well, the labor market is tight. During the previous administration,

744
00:37:13,880 --> 00:37:17,120
Speaker 1: legal immigration I'm not talking about people coming under the

745
00:37:17,120 --> 00:37:20,160
Speaker 1: fence at the Mexican border, but legal people coming in

746
00:37:20,560 --> 00:37:23,520
Speaker 1: dropped off about a million persons per year.

747
00:37:24,000 --> 00:37:26,680
Speaker 2: Then you have the pandemic took a couple million out

748
00:37:26,680 --> 00:37:30,120
Speaker 2: of the WORKFORCET. But we've actually seen that that foreign

749
00:37:30,200 --> 00:37:33,000
Speaker 2: born cohort starting to starting to grow up. It's above

750
00:37:33,040 --> 00:37:33,480
Speaker 2: trend now.

751
00:37:33,880 --> 00:37:36,000
Speaker 1: So you still have a very tight labor market with

752
00:37:36,560 --> 00:37:39,160
Speaker 1: a shortage of available workers.

753
00:37:39,640 --> 00:37:41,120
Speaker 2: That's going to keep wages.

754
00:37:40,800 --> 00:37:42,960
Speaker 1: Up and that's going to keep the unemployment claims down.

755
00:37:43,000 --> 00:37:45,760
Speaker 2: And if you keep wages up, if people are making

756
00:37:45,760 --> 00:37:47,920
Speaker 2: it even though they may be living paycheck to paycheck,

757
00:37:48,000 --> 00:37:50,600
Speaker 2: they are spending money. And so this is the thing

758
00:37:50,680 --> 00:37:53,719
Speaker 2: you can't dismiss in the overall cycle. And so I

759
00:37:53,719 --> 00:37:55,360
Speaker 2: think when you start to look at it and you

760
00:37:55,400 --> 00:37:57,840
Speaker 2: take a different perspective versus year over year, and you

761
00:37:57,880 --> 00:38:00,279
Speaker 2: go back a couple of years, you find that you're

762
00:38:00,320 --> 00:38:03,160
Speaker 2: getting a different signal in the marketplace. And that's something

763
00:38:03,160 --> 00:38:04,719
Speaker 2: that we had to recognize last year.

764
00:38:04,840 --> 00:38:08,000
Speaker 1: Well, let's talk about that, because you came into this year,

765
00:38:08,480 --> 00:38:12,319
Speaker 1: you came into twenty twenty four specifically saying, hey, rate

766
00:38:12,400 --> 00:38:16,560
Speaker 1: cuts in March seems kind of optimistic to me. You

767
00:38:16,640 --> 00:38:19,600
Speaker 1: were dead right. And I'm going to assume between the

768
00:38:19,640 --> 00:38:23,520
Speaker 1: strength of the economy and sticky inflation at least in

769
00:38:23,560 --> 00:38:29,279
Speaker 1: the services and apartment rental market was the basis for that.

770
00:38:29,719 --> 00:38:32,400
Speaker 1: The market's caught up to you. I think the market

771
00:38:32,440 --> 00:38:33,000
Speaker 1: has now.

772
00:38:34,040 --> 00:38:35,839
Speaker 2: You got about one and a half. You got one

773
00:38:36,320 --> 00:38:38,359
Speaker 2: and a half kind of cuts this year, and it's

774
00:38:38,360 --> 00:38:41,560
Speaker 2: really back to law. It's way backloaded. You're talking about

775
00:38:42,160 --> 00:38:45,880
Speaker 2: you're talking about probably fourth like September or something. A

776
00:38:45,880 --> 00:38:47,799
Speaker 2: lot of people will say, well, the Fed can't cut

777
00:38:47,880 --> 00:38:49,839
Speaker 2: right in front the election. They've cut every year during

778
00:38:49,880 --> 00:38:52,799
Speaker 2: an election they cut it just crap. It's this thing

779
00:38:52,800 --> 00:38:55,480
Speaker 2: where they're gonna be viewed politically. I tell it, people,

780
00:38:55,719 --> 00:38:58,120
Speaker 2: if the FED cut one hundred bases points two months

781
00:38:58,160 --> 00:39:00,600
Speaker 2: before the election, do you think it changed is the election?

782
00:39:01,160 --> 00:39:01,960
Speaker 2: It does nothing?

783
00:39:02,160 --> 00:39:05,919
Speaker 1: If everything's if anything that hurts the incumbent because it's saying, hey,

784
00:39:06,800 --> 00:39:07,839
Speaker 1: look right, what's going on.

785
00:39:08,120 --> 00:39:09,560
Speaker 2: I know you're a data.

786
00:39:09,280 --> 00:39:12,239
Speaker 1: Wonk and you're not afraid to dive deep into the numbers.

787
00:39:12,760 --> 00:39:16,759
Speaker 1: Let me ask you a kind of counterintuitive question. I

788
00:39:17,080 --> 00:39:20,839
Speaker 1: read a fantastic stat half of the homes that are

789
00:39:20,880 --> 00:39:25,280
Speaker 1: owned that have mortgages, so only about fifty sixty percent

790
00:39:25,360 --> 00:39:27,759
Speaker 1: of homes have mortgages, But half of the homes with

791
00:39:27,840 --> 00:39:31,120
Speaker 1: mortgages have mortgages at four percent or less. And I

792
00:39:31,160 --> 00:39:33,040
Speaker 1: think it's like two thirds and five percent.

793
00:39:33,560 --> 00:39:35,560
Speaker 2: I think it's well at least in the agency market,

794
00:39:35,600 --> 00:39:37,359
Speaker 2: which is easy to look at. If you look at

795
00:39:37,680 --> 00:39:39,960
Speaker 2: you can pull up the what's called the effective cupon

796
00:39:40,040 --> 00:39:43,080
Speaker 2: of the agency mortgage market. So the effective just means

797
00:39:43,080 --> 00:39:45,120
Speaker 2: that you're taking it all the game average and averaging

798
00:39:45,120 --> 00:39:48,319
Speaker 2: it right, and that number is about three and three

799
00:39:48,400 --> 00:39:49,080
Speaker 2: quarters today.

800
00:39:49,800 --> 00:39:51,560
Speaker 1: So much refinancing took place.

801
00:39:51,600 --> 00:39:54,279
Speaker 2: It took place, But this is Also another reason for

802
00:39:54,320 --> 00:39:57,760
Speaker 2: that strength of the consumer is that like corporate America,

803
00:39:57,840 --> 00:40:00,799
Speaker 2: who was smart and refined their death and of course

804
00:40:01,960 --> 00:40:04,880
Speaker 2: so did homeowners. But here's what's caused an inventory problem

805
00:40:05,120 --> 00:40:06,399
Speaker 2: because now, so.

806
00:40:06,320 --> 00:40:08,960
Speaker 1: That's where I wanted to go, is how much has

807
00:40:09,000 --> 00:40:13,000
Speaker 1: the FED taking rates up and bringing forcing mortgages to

808
00:40:13,080 --> 00:40:16,960
Speaker 1: seven and a half percent created a sort of persistent

809
00:40:17,520 --> 00:40:22,839
Speaker 1: inflation both in single family homes, apartment rentals, and of

810
00:40:22,840 --> 00:40:27,279
Speaker 1: course owners equivalent rented in BLS data for CPI for

811
00:40:27,360 --> 00:40:31,600
Speaker 1: Consumer Price Index, is it sort of perverse that the

812
00:40:31,640 --> 00:40:35,040
Speaker 1: FED raising rates has raised inflation or at least made

813
00:40:35,080 --> 00:40:35,560
Speaker 1: it sticky.

814
00:40:35,719 --> 00:40:37,920
Speaker 2: Well, that's that's the whole that's the whole thing. If

815
00:40:38,040 --> 00:40:39,600
Speaker 2: if I had told you rates were going to a

816
00:40:39,640 --> 00:40:42,640
Speaker 2: seven handle on mortgagees, I don't think you would have

817
00:40:42,680 --> 00:40:45,640
Speaker 2: said that house prices go up from where we were

818
00:40:45,680 --> 00:40:47,160
Speaker 2: when we were talking about a two and a half

819
00:40:47,200 --> 00:40:47,920
Speaker 2: percent mortgage.

820
00:40:48,040 --> 00:40:49,879
Speaker 1: Well, it's because of exactly what they said.

821
00:40:49,960 --> 00:40:52,120
Speaker 2: The supply is gone. So think about this way. One

822
00:40:52,160 --> 00:40:54,840
Speaker 2: thing we've been thinking about, and we've been thrown around

823
00:40:54,920 --> 00:40:57,719
Speaker 2: the table in some of our discussions, is that what

824
00:40:57,760 --> 00:41:00,320
Speaker 2: if the FED cuts rates meaningfully and what if mortgage

825
00:41:00,400 --> 00:41:02,279
Speaker 2: rates come down two hundred bases.

826
00:41:01,960 --> 00:41:03,680
Speaker 1: Points, You'll free up a ton of inventory.

827
00:41:03,800 --> 00:41:07,160
Speaker 2: Prices will go down. My contention is if if mortgage

828
00:41:07,200 --> 00:41:10,000
Speaker 2: rates came down two hundred, prices go down because you

829
00:41:10,080 --> 00:41:13,279
Speaker 2: have a people that are landlocked or they're stuck in this.

830
00:41:13,280 --> 00:41:15,000
Speaker 1: Hold in handcuffs, correct.

831
00:41:15,000 --> 00:41:17,120
Speaker 2: And on top of that, you have, you know, a

832
00:41:17,160 --> 00:41:21,520
Speaker 2: boomer generation that ultimately is looking to maybe downsize and

833
00:41:21,560 --> 00:41:24,719
Speaker 2: things like that, where they'll just say, at some point, well,

834
00:41:24,800 --> 00:41:28,000
Speaker 2: now I can afford the mortgage on the smaller place, right,

835
00:41:28,080 --> 00:41:30,760
Speaker 2: and I'm up so much on my home. I've doubled

836
00:41:30,760 --> 00:41:31,360
Speaker 2: my price in.

837
00:41:31,360 --> 00:41:33,400
Speaker 1: The or even we added a second or third kid.

838
00:41:33,480 --> 00:41:36,000
Speaker 1: We want a little more space to go from three

839
00:41:36,000 --> 00:41:39,120
Speaker 1: and three quarters to seven and a half is exorbitant

840
00:41:39,120 --> 00:41:40,759
Speaker 1: on the same size house, you want to add a

841
00:41:40,800 --> 00:41:42,719
Speaker 1: bedroom of two, My god, no.

842
00:41:42,680 --> 00:41:43,359
Speaker 2: One could do it.

843
00:41:43,560 --> 00:41:46,640
Speaker 1: So you know, you know, Nick Hanover of a second

844
00:41:46,640 --> 00:41:51,839
Speaker 1: Wave Capital has been talking about this exact issue, which is,

845
00:41:52,480 --> 00:41:57,400
Speaker 1: if the FED wants lower inflation, especially on the housing side,

846
00:41:57,800 --> 00:42:00,480
Speaker 1: they need to lower rates. Yeah, the people's seem to

847
00:42:00,520 --> 00:42:03,200
Speaker 1: not wrap their heads around, but you obviously get it.

848
00:42:03,000 --> 00:42:06,520
Speaker 2: It's tough though, because on the other side, think about

849
00:42:06,560 --> 00:42:09,960
Speaker 2: what happened starting in November one of last year, when

850
00:42:09,960 --> 00:42:13,480
Speaker 2: the FED kind of authorized that, hey, let's start talking

851
00:42:13,520 --> 00:42:17,080
Speaker 2: about cuts. And what you saw was really, I'm going

852
00:42:17,120 --> 00:42:20,600
Speaker 2: to call it excess into the market. Right, Rates rallied meaningfully,

853
00:42:20,680 --> 00:42:24,160
Speaker 2: Spreads came in meaningfully, Equity prices went up meaningfully. Gold

854
00:42:24,200 --> 00:42:27,640
Speaker 2: went up strangely meaningfully. That's the one I can't get

855
00:42:27,680 --> 00:42:29,759
Speaker 2: my head around as much. It's gold. Yeah, well, how

856
00:42:29,760 --> 00:42:32,279
Speaker 2: it went up so much recently? Right went while it

857
00:42:32,360 --> 00:42:36,120
Speaker 2: ignored dead printing, and yeah, we have these real yields

858
00:42:36,120 --> 00:42:37,960
Speaker 2: that are positive. It's everything you know has kind of

859
00:42:37,960 --> 00:42:43,080
Speaker 2: been thrown upside down. However, Crypto, all these speculative assets

860
00:42:43,120 --> 00:42:45,239
Speaker 2: and again I'm not here to criticize any of them,

861
00:42:45,440 --> 00:42:48,640
Speaker 2: are up. If the FED truly believes the wealth effect,

862
00:42:48,800 --> 00:42:51,520
Speaker 2: they think if you cut rates more, you fuel that again.

863
00:42:51,960 --> 00:42:54,759
Speaker 2: And so that's another reason why you coming into the year,

864
00:42:54,920 --> 00:42:57,760
Speaker 2: I thought that we should be patient on the rate cuts.

865
00:42:58,440 --> 00:43:01,719
Speaker 2: And you know, don't look that strange today, But a

866
00:43:01,719 --> 00:43:03,680
Speaker 2: couple of months ago I was telling people the biggest

867
00:43:03,719 --> 00:43:05,879
Speaker 2: risk to the market is that the FED doesn't cut

868
00:43:05,880 --> 00:43:09,200
Speaker 2: this year, and people looked at me like I was insane, Barry, well,

869
00:43:09,360 --> 00:43:11,879
Speaker 2: more insane than they usually usually right, Yeah, right, I mean,

870
00:43:11,960 --> 00:43:15,719
Speaker 2: so there's a baseline there. But but I just said, like,

871
00:43:15,960 --> 00:43:17,680
Speaker 2: why do we have to have cuts at this point?

872
00:43:17,719 --> 00:43:20,160
Speaker 2: And what if the economy continues? Do you think the

873
00:43:20,200 --> 00:43:22,080
Speaker 2: FED wants to cut to have to turn around and

874
00:43:22,160 --> 00:43:24,399
Speaker 2: hike again later on? Now I'm not in the Larry

875
00:43:24,400 --> 00:43:27,040
Speaker 2: Summers camp, but we should be hiking this year. I

876
00:43:27,040 --> 00:43:28,480
Speaker 2: think we're just fine where we are.

877
00:43:28,520 --> 00:43:30,879
Speaker 1: Who's left in the Larry Summers camp? He's been dead

878
00:43:30,920 --> 00:43:32,240
Speaker 1: wrong for a couple of years.

879
00:43:32,320 --> 00:43:32,600
Speaker 2: Now.

880
00:43:33,160 --> 00:43:37,040
Speaker 1: At what point do people say, maybe the nineteen seventies

881
00:43:37,080 --> 00:43:40,640
Speaker 1: and the twenty twenties are somehow different decades.

882
00:43:40,920 --> 00:43:43,919
Speaker 2: You know, you know, maybe there's a thing called technology

883
00:43:43,960 --> 00:43:46,759
Speaker 2: that's a little different. I don't know. But but where

884
00:43:46,760 --> 00:43:49,440
Speaker 2: I'm thinking about all of this is that, you know,

885
00:43:49,560 --> 00:43:52,600
Speaker 2: it's not just falling the path of what the market

886
00:43:52,680 --> 00:43:56,080
Speaker 2: is telling you, because remember, the bond guys get a

887
00:43:56,080 --> 00:43:58,879
Speaker 2: lot of credit for, you know, being smarter than other

888
00:43:58,920 --> 00:44:02,040
Speaker 2: folks in the bond market knows more than other markets.

889
00:44:02,280 --> 00:44:04,880
Speaker 2: But remember we're just people too. That forward curve is

890
00:44:04,920 --> 00:44:07,520
Speaker 2: a bad indicator of where rates are going. It always

891
00:44:07,520 --> 00:44:09,920
Speaker 2: has been, and you know, if you think about when.

892
00:44:09,960 --> 00:44:11,360
Speaker 1: Rates are about that dot plot.

893
00:44:11,440 --> 00:44:13,239
Speaker 2: Yeah. I mean, look at where rates were pinned down

894
00:44:13,239 --> 00:44:15,319
Speaker 2: in the early twenty tens. Through the whole the whole

895
00:44:15,360 --> 00:44:18,880
Speaker 2: decade of the tens, the market always had cut hikes

896
00:44:18,880 --> 00:44:22,560
Speaker 2: are coming, hikes are coming so effectively. I thought the

897
00:44:22,600 --> 00:44:25,840
Speaker 2: market got way too giddy at this point. You know,

898
00:44:26,360 --> 00:44:28,440
Speaker 2: it's it's harder to make a decision now because it

899
00:44:28,480 --> 00:44:30,399
Speaker 2: was very easy to say, look, I want to fade

900
00:44:30,400 --> 00:44:32,319
Speaker 2: the forward cave. I want to continue to own some

901
00:44:32,360 --> 00:44:35,120
Speaker 2: floaters in the market. There's nothing wrong with owning some

902
00:44:35,160 --> 00:44:37,360
Speaker 2: floating rate debt. Yes, you got to be careful with

903
00:44:37,400 --> 00:44:39,000
Speaker 2: it because they can be problematic. But I can buy

904
00:44:39,000 --> 00:44:42,160
Speaker 2: floating rate mortgages, for instance, they're guaranteed by the government.

905
00:44:42,400 --> 00:44:45,440
Speaker 2: They've got seven caps, meaning that mortgage you know the

906
00:44:45,719 --> 00:44:48,359
Speaker 2: rates and member these these were issued before they would

907
00:44:48,360 --> 00:44:50,759
Speaker 2: have to go up to over seven before you're penalized.

908
00:44:51,000 --> 00:44:54,360
Speaker 2: You know, they trade one hundred over right, that seems

909
00:44:54,400 --> 00:44:56,600
Speaker 2: like a no brain or trade for not taking credit

910
00:44:56,680 --> 00:44:59,640
Speaker 2: risk right now, you know, it's kind of priced right

911
00:44:59,640 --> 00:45:02,439
Speaker 2: into the market and so things aren't as exciting there.

912
00:45:02,520 --> 00:45:05,160
Speaker 2: But as you as you look through it, I just

913
00:45:05,160 --> 00:45:08,200
Speaker 2: think there was just so much fervor that everyone thinks

914
00:45:08,200 --> 00:45:10,719
Speaker 2: the Fed's going to go down in rates. But as

915
00:45:10,800 --> 00:45:13,520
Speaker 2: I as I tell people on the desk, what's wrong

916
00:45:13,560 --> 00:45:17,400
Speaker 2: with yield? What is wrong with having a positive real yield?

917
00:45:17,680 --> 00:45:19,799
Speaker 2: You sound like a bond manage I know. And you

918
00:45:19,840 --> 00:45:22,680
Speaker 2: know what, It's kind of funny because you know, these

919
00:45:22,719 --> 00:45:25,279
Speaker 2: these younger analysts and things, they just think it's okay

920
00:45:25,360 --> 00:45:28,320
Speaker 2: to have zero real yield like that the rate should

921
00:45:28,360 --> 00:45:31,480
Speaker 2: equal inflation, and I'm like, you have to have a premium.

922
00:45:31,520 --> 00:45:34,760
Speaker 2: And I think that's also what's changed is because inflation

923
00:45:34,920 --> 00:45:37,680
Speaker 2: has come back into the market, the bond folks are

924
00:45:37,719 --> 00:45:41,040
Speaker 2: going to require an inflation premium, which means we need

925
00:45:41,120 --> 00:45:41,720
Speaker 2: real yield.

926
00:45:41,920 --> 00:45:44,520
Speaker 1: What was did you say this in one of your notes?

927
00:45:45,200 --> 00:45:49,840
Speaker 1: Like the current crop of bond managers have never experienced

928
00:45:49,960 --> 00:45:54,319
Speaker 1: a bond market where they were generating real returns, real

929
00:45:54,440 --> 00:45:56,360
Speaker 1: yield relative.

930
00:45:55,960 --> 00:45:57,240
Speaker 2: To to rates.

931
00:45:57,480 --> 00:46:01,400
Speaker 1: They only know decades going back to the two thousand

932
00:46:01,840 --> 00:46:04,560
Speaker 1: of pretty close to zero percent FED funds.

933
00:46:04,719 --> 00:46:06,239
Speaker 2: Yeah, I think I said something like that. I won't

934
00:46:06,239 --> 00:46:08,799
Speaker 2: say there's none out there because obviously we.

935
00:46:08,800 --> 00:46:10,960
Speaker 1: Have I mean in here, but like a low generations,

936
00:46:11,000 --> 00:46:14,399
Speaker 1: who are the under forty crowd has never seen higher rates?

937
00:46:14,480 --> 00:46:17,080
Speaker 2: Well, they had never seen a hiking cycle either, they've

938
00:46:17,120 --> 00:46:20,439
Speaker 2: never seen inflation, chiefly like eighteen Yeah, I mean, yeah,

939
00:46:20,440 --> 00:46:22,160
Speaker 2: you got a little bit. And I think I said

940
00:46:22,160 --> 00:46:24,480
Speaker 2: that back in the sixteen era, Like there's people out

941
00:46:24,480 --> 00:46:26,600
Speaker 2: there haven't ever seen a hiking cycle that are making

942
00:46:26,640 --> 00:46:29,319
Speaker 2: investment decisions. But you know the thing about it is

943
00:46:29,320 --> 00:46:31,799
Speaker 2: is that that's why we have to be students of history, right,

944
00:46:31,840 --> 00:46:34,279
Speaker 2: we have to know some of the dynamics. But I

945
00:46:34,320 --> 00:46:36,640
Speaker 2: think that's a buffet quote, right, were not Jimmy but

946
00:46:36,719 --> 00:46:39,719
Speaker 2: Warren where he says that if history was all there

947
00:46:39,880 --> 00:46:42,080
Speaker 2: was or past his proluge, then the richest people in

948
00:46:42,080 --> 00:46:44,600
Speaker 2: the world wuld be librarians, right, And so you have

949
00:46:44,680 --> 00:46:46,640
Speaker 2: to have that in your toolkit. You have to have

950
00:46:46,719 --> 00:46:49,480
Speaker 2: the behavioral side in your toolkit, but also you have

951
00:46:49,520 --> 00:46:52,120
Speaker 2: to be willing to kind of just think about things differently.

952
00:46:52,160 --> 00:46:55,120
Speaker 2: And you know, that's that's what's great about this business.

953
00:46:55,120 --> 00:46:57,560
Speaker 2: And that's why I'm glad I didn't become a teacher, Barry.

954
00:46:58,000 --> 00:47:01,080
Speaker 2: I think I teach through this, right. I try. I

955
00:47:01,160 --> 00:47:04,600
Speaker 2: try to help our analysts. I try to educate our clients.

956
00:47:04,680 --> 00:47:08,520
Speaker 2: And to me, it's solving these mysteries all the time.

957
00:47:08,760 --> 00:47:11,120
Speaker 2: It's way more fun than just teaching you how to

958
00:47:11,160 --> 00:47:14,040
Speaker 2: do pem doos and figure out the order operation.

959
00:47:14,320 --> 00:47:17,400
Speaker 1: And it's pretty it's pretty clear you made the correct choice.

960
00:47:17,760 --> 00:47:20,120
Speaker 1: So I want to talk about what you're doing at

961
00:47:20,160 --> 00:47:21,879
Speaker 1: the firm with some of the new funds you have,

962
00:47:22,320 --> 00:47:25,560
Speaker 1: but I have to talk a little bit about how

963
00:47:25,640 --> 00:47:28,080
Speaker 1: this year has gone for bond investors.

964
00:47:28,640 --> 00:47:29,360
Speaker 2: What are we looking at.

965
00:47:29,400 --> 00:47:31,400
Speaker 1: We're off about two and a half percent in bonds,

966
00:47:31,880 --> 00:47:35,719
Speaker 1: nothing like twenty twenty two, but it really seems like

967
00:47:35,960 --> 00:47:38,480
Speaker 1: the bond market has been off sides. What's going on there?

968
00:47:38,520 --> 00:47:40,439
Speaker 2: Yeah, well, you got to rewind the clock.

969
00:47:40,480 --> 00:47:40,560
Speaker 1: Man.

970
00:47:40,560 --> 00:47:42,040
Speaker 2: We were talking about year over year. You got to

971
00:47:42,040 --> 00:47:44,680
Speaker 2: expand the windows. So yeah, we all look in calendar years.

972
00:47:44,719 --> 00:47:47,400
Speaker 2: But let's go back to November one. You're up meaningfully

973
00:47:47,400 --> 00:47:49,480
Speaker 2: in the bond portfolio, right, So, yeah, we got a

974
00:47:49,480 --> 00:47:52,919
Speaker 2: little too excited, Like we cut a duration back back

975
00:47:52,920 --> 00:47:55,320
Speaker 2: in January a little bit in our portfolios, especially on

976
00:47:55,360 --> 00:47:59,239
Speaker 2: the intermediate term side. We did so because I was

977
00:47:59,280 --> 00:48:02,080
Speaker 2: just adamant J. Powell was not going to let this

978
00:48:02,120 --> 00:48:04,680
Speaker 2: thing keep going. We're not going to get rates down

979
00:48:04,719 --> 00:48:07,840
Speaker 2: to you know, three percent on the ten year. It

980
00:48:07,920 --> 00:48:09,480
Speaker 2: just seemed ridiculous.

981
00:48:08,960 --> 00:48:12,080
Speaker 1: And that was like one hundred basis points very quickly came.

982
00:48:11,920 --> 00:48:14,160
Speaker 2: Out of the market. Yeah, it did, it did, and

983
00:48:14,920 --> 00:48:18,680
Speaker 2: Jay just added fuel to the fire in December, and

984
00:48:18,719 --> 00:48:20,920
Speaker 2: so I was kind of licking my wounds for a

985
00:48:20,960 --> 00:48:22,760
Speaker 2: little bit and say, man, that was a bad call.

986
00:48:23,120 --> 00:48:25,520
Speaker 2: I'll own it here. It looks like a good call now.

987
00:48:25,640 --> 00:48:27,960
Speaker 2: But the thing is is that, you know, if you

988
00:48:28,080 --> 00:48:30,440
Speaker 2: roll back the clock, bonds have done very well in

989
00:48:30,480 --> 00:48:32,919
Speaker 2: the last eighteen months or so since since we really

990
00:48:32,920 --> 00:48:34,680
Speaker 2: got to those kind of peak levels. Yeah, we had

991
00:48:34,680 --> 00:48:37,120
Speaker 2: that five percent tenure last year for about I don't

992
00:48:37,120 --> 00:48:38,840
Speaker 2: know why you were in it, right, Yeah, it was

993
00:48:38,880 --> 00:48:42,000
Speaker 2: it was overnight, really what you saw, and like, I

994
00:48:42,040 --> 00:48:43,799
Speaker 2: think we're going to try to test it again. And

995
00:48:43,880 --> 00:48:45,799
Speaker 2: so we've been in the stance that coming in the

996
00:48:45,840 --> 00:48:50,080
Speaker 2: year that bonds probably have you know, rates probably fluctuate around.

997
00:48:50,080 --> 00:48:52,040
Speaker 2: They probably go up in the first half of the year.

998
00:48:52,480 --> 00:48:55,200
Speaker 2: Maybe you get something that stabilizes here. It just depends

999
00:48:55,239 --> 00:48:58,640
Speaker 2: on the outcome of the economy. But as a bond investor,

1000
00:48:58,680 --> 00:49:01,040
Speaker 2: there's nothing wrong with having higher yields, you know. And

1001
00:49:01,080 --> 00:49:04,600
Speaker 2: so if you were patient and you weren't aggressive with

1002
00:49:04,680 --> 00:49:07,440
Speaker 2: this bond allocation, you got a good rally in January,

1003
00:49:07,480 --> 00:49:11,279
Speaker 2: don't forget. So we got rates pretty dang low in January,

1004
00:49:11,719 --> 00:49:13,560
Speaker 2: and then it just got sucked out all of a

1005
00:49:13,560 --> 00:49:16,919
Speaker 2: sudden because the inflation data came in still a little hot, right,

1006
00:49:16,960 --> 00:49:20,480
Speaker 2: And so ultimately, I look, if I'm syn at the fat,

1007
00:49:20,560 --> 00:49:23,440
Speaker 2: there is zero urgency of cutting rates at this point.

1008
00:49:23,880 --> 00:49:24,040
Speaker 2: You know.

1009
00:49:24,160 --> 00:49:27,560
Speaker 1: My my argument has been, Yeah, the CPI is coming

1010
00:49:27,560 --> 00:49:31,919
Speaker 1: in hot, but to quote George Box, all models are wrong,

1011
00:49:31,960 --> 00:49:36,520
Speaker 1: but some are useful. Oer the apartment side, it's on

1012
00:49:36,560 --> 00:49:37,919
Speaker 1: such a leg, but.

1013
00:49:37,880 --> 00:49:40,000
Speaker 2: Just take take the services exit. Let's look at the

1014
00:49:40,000 --> 00:49:43,680
Speaker 2: supercore stuff. It's it's not comforting, and that's because people

1015
00:49:43,680 --> 00:49:47,200
Speaker 2: are spending, right, they are spending, and so forget the

1016
00:49:47,239 --> 00:49:49,560
Speaker 2: oeer side. Strip it out. That's what That's what Jay

1017
00:49:49,640 --> 00:49:52,879
Speaker 2: was trying to do. But supercore is now like four

1018
00:49:52,920 --> 00:49:56,759
Speaker 2: percent if you take supercore pc CPI. So he has

1019
00:49:56,800 --> 00:50:01,920
Speaker 2: a problem still. And why if the economy is still performing,

1020
00:50:02,200 --> 00:50:05,359
Speaker 2: people aren't losing their jobs, what are we Why are we.

1021
00:50:05,320 --> 00:50:10,279
Speaker 1: Asking the R what is the incessant ubiquity of doing

1022
00:50:10,360 --> 00:50:14,840
Speaker 1: it now other than freeing up that supply of housing

1023
00:50:15,040 --> 00:50:18,120
Speaker 1: bringing rates down. And let me talk about something else

1024
00:50:18,120 --> 00:50:20,200
Speaker 1: that I want to ask you about. So it's pretty

1025
00:50:20,239 --> 00:50:28,120
Speaker 1: well understood that huge, huge advantage for equity index investors

1026
00:50:28,200 --> 00:50:31,919
Speaker 1: if you have a ten year time horizon. However, when

1027
00:50:31,920 --> 00:50:36,600
Speaker 1: we look at fixed income index investors, it seems that

1028
00:50:36,840 --> 00:50:43,520
Speaker 1: a skillful bond manager can do better than the Bloomberg

1029
00:50:43,600 --> 00:50:48,000
Speaker 1: Barclay's bond debt for a variety ways. You can make

1030
00:50:48,080 --> 00:50:51,480
Speaker 1: duration choices, you can make credit quality choices. Twenty twenty

1031
00:50:51,520 --> 00:50:54,840
Speaker 1: two was a tough year for bonds, down about fifteen

1032
00:50:54,880 --> 00:50:59,880
Speaker 1: percent across the Barclay agg You guys are our discretion

1033
00:51:00,640 --> 00:51:05,040
Speaker 1: unconstrained bond managers. What were you thinking during twenty twenty two?

1034
00:51:05,200 --> 00:51:07,719
Speaker 2: Well, look, remember, even though we have some of that,

1035
00:51:07,760 --> 00:51:10,160
Speaker 2: you have guardrails and you have to own some duration,

1036
00:51:10,360 --> 00:51:14,080
Speaker 2: and like there's there's limits to how unconstrained are unconstrained

1037
00:51:14,160 --> 00:51:17,560
Speaker 2: really is? And so you know what we were seeing

1038
00:51:17,600 --> 00:51:21,160
Speaker 2: in that market was just pain, right, And what you

1039
00:51:21,200 --> 00:51:23,720
Speaker 2: also have to remember, if you're running a bond fund,

1040
00:51:24,160 --> 00:51:28,320
Speaker 2: you're providing liquidity. And remember when bonds go down, people

1041
00:51:28,360 --> 00:51:31,160
Speaker 2: sell bonds, just like when stocks go down, they sell stocks.

1042
00:51:31,640 --> 00:51:34,680
Speaker 2: And so what happens during this too is that you're

1043
00:51:34,760 --> 00:51:37,400
Speaker 2: forced to sell everybody's forces out, there's no money to

1044
00:51:37,480 --> 00:51:40,759
Speaker 2: go buy things, and so we all complained about the

1045
00:51:40,800 --> 00:51:43,320
Speaker 2: same thing. Look at the value in some of this stuff,

1046
00:51:43,640 --> 00:51:46,479
Speaker 2: but it keeps going down, right, And so I think

1047
00:51:46,560 --> 00:51:48,520
Speaker 2: what you see in today's market, I don't think we're

1048
00:51:48,520 --> 00:51:50,400
Speaker 2: gonna have a repeat of twenty two at this point.

1049
00:51:50,440 --> 00:51:53,759
Speaker 2: Why we're not starting with a one percent tenure, right,

1050
00:51:53,800 --> 00:51:55,919
Speaker 2: you know, or FED funds at zero or FED funds

1051
00:51:55,920 --> 00:51:59,640
Speaker 2: at zero. You're starting where you get yield. So basic

1052
00:51:59,719 --> 00:52:01,200
Speaker 2: math today says, if I on a four and a

1053
00:52:01,239 --> 00:52:03,680
Speaker 2: half percent tenure and it has a duration, you call

1054
00:52:03,719 --> 00:52:06,520
Speaker 2: it seven and a half, Maybe it's closer to eight today.

1055
00:52:06,840 --> 00:52:09,240
Speaker 2: That says that, Okay, If I think about that ratio

1056
00:52:09,360 --> 00:52:11,960
Speaker 2: between the yield and the duration, that tells me how

1057
00:52:12,040 --> 00:52:15,279
Speaker 2: much yields can go up in a calendar year, and

1058
00:52:15,320 --> 00:52:17,560
Speaker 2: my yield will offset it. Right, So that's how I

1059
00:52:17,640 --> 00:52:21,959
Speaker 2: break even with a duration trade. And so from that standpoint,

1060
00:52:22,000 --> 00:52:24,400
Speaker 2: there is some value in it, because I do believe

1061
00:52:24,440 --> 00:52:27,120
Speaker 2: that if we do fall apart in the economy, if

1062
00:52:27,120 --> 00:52:29,920
Speaker 2: we have problems, I do think the tenure rallies. I

1063
00:52:29,920 --> 00:52:32,520
Speaker 2: don't know if it rallies like it has historically because

1064
00:52:32,520 --> 00:52:34,600
Speaker 2: of the debt loads that we see out there because

1065
00:52:34,600 --> 00:52:37,120
Speaker 2: of the big deficit, and this is the other side

1066
00:52:37,120 --> 00:52:40,880
Speaker 2: of it. We need some inflation, Barry, we need nominal

1067
00:52:41,000 --> 00:52:44,759
Speaker 2: GDP growth. We've got to grow ourselves out of these deficits.

1068
00:52:45,200 --> 00:52:49,200
Speaker 2: But the problem is is that we've changed the script

1069
00:52:49,320 --> 00:52:53,960
Speaker 2: and something changed under the previous administration. We're during the

1070
00:52:54,160 --> 00:52:56,759
Speaker 2: good times, which that era was pretty good. Right in

1071
00:52:56,800 --> 00:53:01,560
Speaker 2: the sixteen era, we actually expanded the deficit exactly historically

1072
00:53:01,880 --> 00:53:04,040
Speaker 2: we decrease the deficit.

1073
00:53:03,760 --> 00:53:06,080
Speaker 1: To be fair pandemic related.

1074
00:53:06,120 --> 00:53:08,520
Speaker 2: No no, no, no, no, no, I'm saying the path that Trump

1075
00:53:08,600 --> 00:53:11,240
Speaker 2: had us. I'd almost say Trump, let's say the entire

1076
00:53:11,360 --> 00:53:14,600
Speaker 2: Congress that we were spending more money. We were increasing

1077
00:53:14,640 --> 00:53:17,320
Speaker 2: the budget deficit on an annual basis, the first time

1078
00:53:17,600 --> 00:53:20,000
Speaker 2: really in the last seventy years we've seen it absent

1079
00:53:20,040 --> 00:53:23,480
Speaker 2: a war, okay and sair enough, and then we've continued

1080
00:53:23,520 --> 00:53:26,480
Speaker 2: it during this administration. So there's no change on which

1081
00:53:26,480 --> 00:53:29,239
Speaker 2: team you play on here. Politically, they're they're they're both

1082
00:53:29,280 --> 00:53:29,839
Speaker 2: bad for bond.

1083
00:53:29,920 --> 00:53:32,040
Speaker 1: Wait, people in DC spend money they don't have.

1084
00:53:32,320 --> 00:53:35,520
Speaker 2: That's right, And yeah, yeah, so I know Breaking News

1085
00:53:35,520 --> 00:53:37,800
Speaker 2: put put that on the marquee for blue book today.

1086
00:53:38,080 --> 00:53:41,120
Speaker 2: But the thing is is that you know, we aren't.

1087
00:53:41,120 --> 00:53:43,840
Speaker 2: We aren't keeping the house in order, and so I

1088
00:53:43,880 --> 00:53:46,080
Speaker 2: think it's going to be fearful next time we have

1089
00:53:46,120 --> 00:53:48,160
Speaker 2: a recession. So my boss has been talking about this

1090
00:53:48,200 --> 00:53:50,560
Speaker 2: for a while now. And it's not that this is

1091
00:53:50,560 --> 00:53:52,640
Speaker 2: a twenty twenty four problem. The deficit is not a

1092
00:53:52,680 --> 00:53:56,279
Speaker 2: twenty four problem. But when we have another recession, what

1093
00:53:56,400 --> 00:53:59,520
Speaker 2: if Congress sees what we did during the pandemic and says,

1094
00:53:59,719 --> 00:54:01,320
Speaker 2: you know, we should print fifteen percent.

1095
00:54:01,480 --> 00:54:03,239
Speaker 1: This fiscal stimulus things seems to.

1096
00:54:03,440 --> 00:54:07,560
Speaker 2: Work, and that's one's guy he's talking about. But also

1097
00:54:07,800 --> 00:54:10,240
Speaker 2: there isn't a ramification on the other side of inflation,

1098
00:54:10,280 --> 00:54:12,680
Speaker 2: and the bond mark will sniff that out quickly. So

1099
00:54:13,000 --> 00:54:15,400
Speaker 2: I think you can get a rally going into a recession.

1100
00:54:15,440 --> 00:54:18,719
Speaker 2: But once the fiscal authority start to act, you may

1101
00:54:18,719 --> 00:54:20,440
Speaker 2: not want to be owning that body. You may have

1102
00:54:20,560 --> 00:54:21,880
Speaker 2: wanted to rent it over that period.

1103
00:54:22,160 --> 00:54:25,319
Speaker 1: Let me ask you my pet peeve question, not so

1104
00:54:25,440 --> 00:54:29,560
Speaker 1: much from the prior administration, but from the era before

1105
00:54:29,600 --> 00:54:33,840
Speaker 1: the pandemic, when rates were zero for a decade. How

1106
00:54:33,920 --> 00:54:38,000
Speaker 1: big of a missed opportunity was it? So households refinanced

1107
00:54:38,360 --> 00:54:42,799
Speaker 1: cooperations refinanced. Congress said no, no, we have no you know,

1108
00:54:42,840 --> 00:54:46,080
Speaker 1: if we refinance, it'll just encourage more spending. Well, look,

1109
00:54:46,120 --> 00:54:48,640
Speaker 1: it's like the single dumbest thing I've ever heard in

1110
00:54:48,640 --> 00:54:49,040
Speaker 1: my life.

1111
00:54:49,320 --> 00:54:52,279
Speaker 2: Okay that is, but let me give them a little

1112
00:54:52,280 --> 00:54:55,000
Speaker 2: bit of credit. And I'm not here to give Congress

1113
00:54:55,040 --> 00:54:59,120
Speaker 2: credit or the Treasury at all, but historically the Fed,

1114
00:54:59,400 --> 00:55:02,040
Speaker 2: I'm sorry, and here I am screwing this up. Historically

1115
00:55:02,040 --> 00:55:05,759
Speaker 2: Treasury has issued more short than long right, and that's

1116
00:55:05,840 --> 00:55:08,880
Speaker 2: because of the shape of the old curve effectively. But

1117
00:55:08,960 --> 00:55:12,520
Speaker 2: also there's an argument that most people miss in this Barry,

1118
00:55:12,960 --> 00:55:15,520
Speaker 2: and what it is is, remember, the treasury market is

1119
00:55:15,520 --> 00:55:17,680
Speaker 2: one of the most liquid markets in the world. Except

1120
00:55:17,760 --> 00:55:22,040
Speaker 2: during March of twenty twenty. Nothing was liquid. Folks that

1121
00:55:22,160 --> 00:55:24,480
Speaker 2: traded in the eighties, by the way, they were telling

1122
00:55:24,520 --> 00:55:25,960
Speaker 2: us that they've never seen such.

1123
00:55:25,760 --> 00:55:29,160
Speaker 1: A horrible market, worse than you know, September eight worse.

1124
00:55:29,800 --> 00:55:33,880
Speaker 2: Absolutely, there was liquidity in that stuff. You couldn't trade

1125
00:55:33,960 --> 00:55:36,440
Speaker 2: off the runs. You couldn't trade, they wouldn't even trade.

1126
00:55:36,560 --> 00:55:39,040
Speaker 2: You couldn't make an appointment, you couldn't call someone to

1127
00:55:39,080 --> 00:55:41,160
Speaker 2: try to do it on the run. Stuff you were

1128
00:55:41,200 --> 00:55:44,320
Speaker 2: hard pressed to do ten million bucks. No desk wanted

1129
00:55:44,400 --> 00:55:47,359
Speaker 2: risk at all, and even treasuries. But where I'm going

1130
00:55:47,400 --> 00:55:50,320
Speaker 2: with this on the whole liquidity is, remember we have

1131
00:55:50,400 --> 00:55:54,280
Speaker 2: a term structure of rates. We advertise our auction calendars,

1132
00:55:54,360 --> 00:55:56,719
Speaker 2: right the quarterly refunding an outs which there's one coming up,

1133
00:55:56,719 --> 00:55:58,000
Speaker 2: by the way, and.

1134
00:55:57,960 --> 00:55:59,919
Speaker 1: They've been pretty mediocre the past few ones.

1135
00:56:00,200 --> 00:56:02,200
Speaker 2: Yeah, and this one looks a little scared Jane. It's

1136
00:56:02,239 --> 00:56:03,800
Speaker 2: got a lot of work to do there. She's issuing

1137
00:56:03,840 --> 00:56:05,879
Speaker 2: a lot of front and paper this week. We'll see

1138
00:56:05,880 --> 00:56:09,120
Speaker 2: how that gets digested. But let me just let's go

1139
00:56:09,120 --> 00:56:11,879
Speaker 2: back to the term structure. Okay, they need to have

1140
00:56:11,920 --> 00:56:14,040
Speaker 2: the market. You can't just say all we're going to

1141
00:56:14,080 --> 00:56:16,839
Speaker 2: do is issue fifty year treasuries. You can't just do

1142
00:56:16,880 --> 00:56:19,400
Speaker 2: all that. Should they have issued some yes, the market

1143
00:56:19,400 --> 00:56:21,600
Speaker 2: and the said was at zero and ten years were

1144
00:56:21,600 --> 00:56:23,320
Speaker 2: at one percent, and get it. But you can have

1145
00:56:23,440 --> 00:56:27,279
Speaker 2: done thirty years at three and basically changed the but

1146
00:56:27,360 --> 00:56:29,279
Speaker 2: you would have no liquidity for the next few years

1147
00:56:29,320 --> 00:56:32,080
Speaker 2: if you took the entire I'm saying at the extrema, right,

1148
00:56:32,280 --> 00:56:35,080
Speaker 2: So if you went out there, you could put some

1149
00:56:35,280 --> 00:56:38,080
Speaker 2: into it, but the treasury market you have to have

1150
00:56:38,120 --> 00:56:41,360
Speaker 2: this functioning market of people rolling paper and moving around.

1151
00:56:41,640 --> 00:56:43,680
Speaker 2: There are people that buy thirties and lock them up

1152
00:56:43,840 --> 00:56:47,839
Speaker 2: right there. They're called sovereign funds. But in general you've

1153
00:56:47,880 --> 00:56:50,680
Speaker 2: got to have some dynamic of providing that liquidity to

1154
00:56:50,880 --> 00:56:53,879
Speaker 2: different points on the curve and so and so there

1155
00:56:53,920 --> 00:56:55,839
Speaker 2: is something you said. Now, should they have done as

1156
00:56:55,920 --> 00:56:58,160
Speaker 2: much on the front end, Absolutely not, But they were

1157
00:56:58,440 --> 00:57:00,920
Speaker 2: short sighted thinking about the zero. Look you could have

1158
00:57:00,960 --> 00:57:03,359
Speaker 2: done You could have done a fifty year sub two

1159
00:57:03,840 --> 00:57:05,920
Speaker 2: at that really time. Oh yeah, you definitely could have

1160
00:57:05,920 --> 00:57:08,360
Speaker 2: been the market Remember the long bond in twenty twenty

1161
00:57:08,480 --> 00:57:11,799
Speaker 2: got to one right one exactly. That was the low

1162
00:57:12,000 --> 00:57:14,560
Speaker 2: in yields, and so you could have done stuff like

1163
00:57:14,600 --> 00:57:16,960
Speaker 2: that too, and the market clamored for that. So I remember,

1164
00:57:17,120 --> 00:57:18,880
Speaker 2: I mean there was there was like this Austrian hundred

1165
00:57:18,960 --> 00:57:21,400
Speaker 2: year paper that trade with almost a negative yield for

1166
00:57:21,440 --> 00:57:25,840
Speaker 2: a while, right one hundred years, and you know, so ultimately,

1167
00:57:26,120 --> 00:57:28,200
Speaker 2: when you pull it all back together, some of it

1168
00:57:28,240 --> 00:57:29,960
Speaker 2: is just the function of the market. They couldn't do,

1169
00:57:30,160 --> 00:57:32,080
Speaker 2: but they should have done some of it because there

1170
00:57:32,120 --> 00:57:34,920
Speaker 2: was a massive demand for it out there, specifically in

1171
00:57:34,960 --> 00:57:37,960
Speaker 2: the Eurozone, where a positive real yield or a positive

1172
00:57:38,000 --> 00:57:41,240
Speaker 2: nominal yield would have cleared the market very strongly. But

1173
00:57:41,320 --> 00:57:44,480
Speaker 2: you couldn't take the entire budget and do the whole thing,

1174
00:57:44,480 --> 00:57:47,440
Speaker 2: and the obviously you can't refine all of the United States,

1175
00:57:47,480 --> 00:57:49,520
Speaker 2: but you certainly could have made.

1176
00:57:49,560 --> 00:57:52,000
Speaker 1: The circumstances where we are today much you.

1177
00:57:51,920 --> 00:57:54,200
Speaker 2: Could have made it better. And again, I'm not trying

1178
00:57:54,240 --> 00:57:55,959
Speaker 2: to give them a lot of credit, but I'm giving

1179
00:57:55,960 --> 00:57:58,040
Speaker 2: you the reason why some of it is there. And

1180
00:57:58,080 --> 00:58:01,640
Speaker 2: it's also it's this entrench thinking that they have to

1181
00:58:01,640 --> 00:58:04,120
Speaker 2: issue short So let's come back to a couple of.

1182
00:58:05,720 --> 00:58:08,600
Speaker 1: Funds that you guys run. I gotta start with I

1183
00:58:08,640 --> 00:58:10,800
Speaker 1: don't know who coined this, but the first person I

1184
00:58:10,840 --> 00:58:11,520
Speaker 1: heard say.

1185
00:58:11,360 --> 00:58:13,600
Speaker 2: It was you. What do you make of the idea

1186
00:58:13,720 --> 00:58:17,120
Speaker 2: of T bill and chill? Oh, look, it's been a

1187
00:58:17,120 --> 00:58:19,880
Speaker 2: great place if you're a T bill and chill person,

1188
00:58:20,040 --> 00:58:22,960
Speaker 2: meaning that you just buy T bills forget your bond allocation.

1189
00:58:23,080 --> 00:58:25,240
Speaker 2: It's worked for you. Congratulations.

1190
00:58:25,360 --> 00:58:26,560
Speaker 1: When does that stop working?

1191
00:58:26,600 --> 00:58:28,640
Speaker 2: At some point? It does and it has risk. And

1192
00:58:28,720 --> 00:58:30,720
Speaker 2: I tell people that and they're like, well, yeah, we

1193
00:58:30,720 --> 00:58:32,840
Speaker 2: could default time now that that's not the risk I'm

1194
00:58:32,840 --> 00:58:35,680
Speaker 2: talking It has refinancing risks. Right, every month, your te

1195
00:58:35,800 --> 00:58:38,800
Speaker 2: bill and chill. If Jay cuts rates, you don't get

1196
00:58:38,840 --> 00:58:41,280
Speaker 2: to chill as much, and so at some point you

1197
00:58:41,400 --> 00:58:43,360
Speaker 2: got to you gotta move it out a little bit.

1198
00:58:43,520 --> 00:58:47,520
Speaker 2: But that phrase alone is working, and Jay has given

1199
00:58:47,560 --> 00:58:49,600
Speaker 2: you a renewed sense on life. There.

1200
00:58:49,840 --> 00:58:51,720
Speaker 1: Yeah, at least another six months, rest a.

1201
00:58:51,720 --> 00:58:53,840
Speaker 2: Few more months. But the question is what if they

1202
00:58:53,880 --> 00:58:56,240
Speaker 2: surprise you? Right? So again we all think we know,

1203
00:58:56,360 --> 00:58:58,040
Speaker 2: but what we'd all know is we don't know.

1204
00:58:58,160 --> 00:59:00,760
Speaker 1: Let's talk about surprise. Because the FED has been so

1205
00:59:00,960 --> 00:59:04,520
Speaker 1: transparent and there have been criticisms from a variety of

1206
00:59:04,640 --> 00:59:07,480
Speaker 1: quarters that hey, you know, the FED is more effective

1207
00:59:07,480 --> 00:59:12,520
Speaker 1: when it can occasionally shock the market. My fantasy is

1208
00:59:13,280 --> 00:59:16,360
Speaker 1: Jay cuts in June, startles the market, and then we

1209
00:59:16,400 --> 00:59:17,640
Speaker 1: have a little bit of a reset.

1210
00:59:17,960 --> 00:59:20,520
Speaker 2: If he did that, I think the knee jerk reaction

1211
00:59:20,520 --> 00:59:22,720
Speaker 2: would be to sell things. And because it would, it

1212
00:59:22,760 --> 00:59:26,160
Speaker 2: would the man mind. Yeah, the market would say that

1213
00:59:26,160 --> 00:59:28,120
Speaker 2: the FED right, that takes.

1214
00:59:28,000 --> 00:59:30,960
Speaker 1: The consumer, It does all these things that he says

1215
00:59:30,960 --> 00:59:32,720
Speaker 1: he wants. He wants to calm down the consumer. He

1216
00:59:32,720 --> 00:59:36,240
Speaker 1: wants to calm down. I know it was it isn't.

1217
00:59:36,360 --> 00:59:38,320
Speaker 1: But if I was a birdie whispering in his ear,

1218
00:59:39,120 --> 00:59:39,880
Speaker 1: just fifty bases.

1219
00:59:39,960 --> 00:59:42,800
Speaker 2: When the last time Jay shocked the market, they didn't

1220
00:59:42,840 --> 00:59:45,040
Speaker 2: even shock the market with the fifties and the seventy five.

1221
00:59:45,160 --> 00:59:47,520
Speaker 2: They went to Nicky leaks, right, it's right, you know

1222
00:59:47,560 --> 00:59:48,640
Speaker 2: one of the banks called him.

1223
00:59:48,520 --> 00:59:52,360
Speaker 1: And Nick timaraurosis at the Wall Street Journal.

1224
00:59:52,400 --> 00:59:53,440
Speaker 2: I don't even say that's why I call it that.

1225
00:59:53,480 --> 00:59:56,800
Speaker 2: I can't pronounce the last name that great. But what

1226
00:59:56,880 --> 00:59:58,880
Speaker 2: you see is that they don't and who shocks the

1227
00:59:58,920 --> 01:00:02,800
Speaker 2: market today? And look at what it creates. It's not

1228
01:00:02,840 --> 01:00:05,960
Speaker 2: what the FED wants because there's ripple effects. If the

1229
01:00:06,000 --> 01:00:09,440
Speaker 2: FED shocks, then the ECB does too. If you notice,

1230
01:00:09,440 --> 01:00:12,200
Speaker 2: the ECB follows our lead and all this right now,

1231
01:00:12,400 --> 01:00:15,400
Speaker 2: So it's much more dangerous for Jay to shock the market.

1232
01:00:15,720 --> 01:00:18,440
Speaker 2: And they feel like they want forward guidance to be there,

1233
01:00:18,440 --> 01:00:20,720
Speaker 2: and that's what they set off back in November. So

1234
01:00:21,240 --> 01:00:26,400
Speaker 2: all right, but what does it matter. It doesn't change anything.

1235
01:00:26,400 --> 01:00:29,480
Speaker 2: We're talking about twenty five big housing, not twenty five

1236
01:00:29,480 --> 01:00:32,440
Speaker 2: basis points. Did not change the housing market. Berry, come on,

1237
01:00:32,680 --> 01:00:35,480
Speaker 2: all right, here's the thing, t Bill and Chill. You

1238
01:00:35,520 --> 01:00:37,320
Speaker 2: should be moving out the curve a little bit. Look

1239
01:00:37,600 --> 01:00:39,920
Speaker 2: by one year, like we've run low duration funds for

1240
01:00:39,960 --> 01:00:43,240
Speaker 2: these reasons. You know, Look they've been great for clients.

1241
01:00:43,240 --> 01:00:46,360
Speaker 2: You can pick up yield. So from my standpoint, there's

1242
01:00:46,400 --> 01:00:49,040
Speaker 2: better things to do. But look, my cash sits in

1243
01:00:49,120 --> 01:00:52,800
Speaker 2: money market, right and look I'm ready to move some

1244
01:00:52,880 --> 01:00:55,280
Speaker 2: of that out, and look I'm looking for yields like

1245
01:00:55,320 --> 01:00:57,080
Speaker 2: four to seventy five on tens. I think is a

1246
01:00:57,120 --> 01:00:59,440
Speaker 2: great point. I think when we have our next conversation

1247
01:00:59,560 --> 01:01:01,360
Speaker 2: with every five or six years, you invite me, we

1248
01:01:01,400 --> 01:01:04,120
Speaker 2: could when we do that. When we do that, what

1249
01:01:04,200 --> 01:01:06,680
Speaker 2: we'll do is, uh, we'll review this and I know

1250
01:01:06,720 --> 01:01:09,640
Speaker 2: you have it all recorded, so I'll be on tape

1251
01:01:09,640 --> 01:01:11,480
Speaker 2: for that. But I think you're you're gonna want that

1252
01:01:11,560 --> 01:01:12,080
Speaker 2: for this period.

1253
01:01:12,080 --> 01:01:14,000
Speaker 1: All right, So let's talk about two other funds that

1254
01:01:14,040 --> 01:01:18,440
Speaker 1: you guys have launched. The equal Weighted ETF focused on

1255
01:01:18,560 --> 01:01:22,680
Speaker 1: Fortune five hundred, where you're ranking the holdings by revenue,

1256
01:01:22,880 --> 01:01:26,919
Speaker 1: very smart beta ish or fundamental beta, whatever you want

1257
01:01:26,920 --> 01:01:29,320
Speaker 1: to call it. Tell us the thinking behind the equal

1258
01:01:29,360 --> 01:01:32,520
Speaker 1: weight ETF with the Fortunite five hundred revenue basis.

1259
01:01:32,520 --> 01:01:34,320
Speaker 2: So, first of all, what it does. The Fortune five

1260
01:01:34,400 --> 01:01:38,440
Speaker 2: hundred list published annually, right, it includes public and private companies.

1261
01:01:38,560 --> 01:01:40,840
Speaker 2: So before I say that we're not investing in the

1262
01:01:40,840 --> 01:01:44,000
Speaker 2: private companies. Okay, so it's all public, but what happens

1263
01:01:44,080 --> 01:01:47,160
Speaker 2: is that it's US domiciled names, So you don't have

1264
01:01:47,200 --> 01:01:50,120
Speaker 2: any conglomerate you know, like a Schlumberge or something that's

1265
01:01:50,160 --> 01:01:53,560
Speaker 2: creeping into there like an SMP. And it's very you know,

1266
01:01:54,120 --> 01:01:56,640
Speaker 2: it's very rules based, right, you just rank on revenue.

1267
01:01:56,800 --> 01:01:58,760
Speaker 2: So what this does if you compare this to like

1268
01:01:58,800 --> 01:02:02,680
Speaker 2: the SMP five hundred, there's about on average in any

1269
01:02:02,720 --> 01:02:05,240
Speaker 2: given year it's called one hundred and ten to one

1270
01:02:05,320 --> 01:02:07,680
Speaker 2: hundred and thirty different names that are in the SMP,

1271
01:02:08,240 --> 01:02:10,840
Speaker 2: So we all know there's equally away to SMP out there. Sure,

1272
01:02:11,400 --> 01:02:13,640
Speaker 2: and what we find is that this through a cycle

1273
01:02:13,720 --> 01:02:17,000
Speaker 2: does significally better than equally weighted and in today's environment,

1274
01:02:17,160 --> 01:02:19,760
Speaker 2: and this is revenue ranked, not market cap, not market

1275
01:02:19,760 --> 01:02:21,720
Speaker 2: cap ranked on how they deduce it. You don't have

1276
01:02:21,800 --> 01:02:24,480
Speaker 2: some subjective committee like an SMP that comes in there.

1277
01:02:24,520 --> 01:02:28,400
Speaker 2: So names that are growing and actually generating revenue show

1278
01:02:28,480 --> 01:02:30,960
Speaker 2: up sooner in this index than it would in the SMP.

1279
01:02:31,200 --> 01:02:34,480
Speaker 1: And if they're not yet profitable because they're reinvesting, they still.

1280
01:02:34,240 --> 01:02:36,760
Speaker 2: Share their outs. So you're going to be way underweight,

1281
01:02:36,840 --> 01:02:39,280
Speaker 2: like services, software as a service. I always get that

1282
01:02:39,280 --> 01:02:41,240
Speaker 2: backwards software as a service, you're going to bender, you're

1283
01:02:41,240 --> 01:02:43,120
Speaker 2: gonna be wait, some of these tech names to unprofitable

1284
01:02:43,200 --> 01:02:45,320
Speaker 2: tech isn't in there, So you're going to have some

1285
01:02:45,320 --> 01:02:47,920
Speaker 2: more industrial type names. You're going to have more value

1286
01:02:48,080 --> 01:02:52,000
Speaker 2: kind of names over a cycle. But in general, these

1287
01:02:52,000 --> 01:02:54,080
Speaker 2: are still names, you know, and when you look at

1288
01:02:54,080 --> 01:02:56,840
Speaker 2: the list, it's like, okay, But what it ends up

1289
01:02:56,880 --> 01:02:59,080
Speaker 2: doing is it gives you a different cohort to play with.

1290
01:02:59,520 --> 01:03:01,920
Speaker 2: And what you find is that these names get overlooked

1291
01:03:02,040 --> 01:03:04,240
Speaker 2: because they're not in the s and P. Five hundred

1292
01:03:04,480 --> 01:03:06,520
Speaker 2: and so over time, you know, if you go back

1293
01:03:06,560 --> 01:03:08,560
Speaker 2: and compliance that hate me on a back test anything,

1294
01:03:08,600 --> 01:03:10,560
Speaker 2: but you can generate about one hundred and fifty over

1295
01:03:10,560 --> 01:03:13,280
Speaker 2: the SMP equal weight per annum. And look, if you

1296
01:03:13,280 --> 01:03:15,200
Speaker 2: can do something like that, and we all know over

1297
01:03:15,240 --> 01:03:18,120
Speaker 2: long term equal weight tends to do better than market cap. Now,

1298
01:03:18,120 --> 01:03:20,160
Speaker 2: we go through periods with the late nineties, we had

1299
01:03:20,200 --> 01:03:22,240
Speaker 2: the one we've just been through, and so for us,

1300
01:03:22,320 --> 01:03:25,480
Speaker 2: the timing perspective was very interesting because at the end

1301
01:03:25,480 --> 01:03:28,040
Speaker 2: of the day, we couldn't It's hard for us to

1302
01:03:28,120 --> 01:03:30,480
Speaker 2: really love the mag seven or now it's down to

1303
01:03:30,520 --> 01:03:32,960
Speaker 2: four or five. Who even knows what we changed it all?

1304
01:03:33,000 --> 01:03:34,400
Speaker 2: It was a fantastic four.

1305
01:03:35,240 --> 01:03:38,000
Speaker 1: We went from Fang double A to MAG seven. Offensive.

1306
01:03:38,160 --> 01:03:41,400
Speaker 1: So let's talk about another fund which is avoiding the

1307
01:03:41,520 --> 01:03:45,680
Speaker 1: MAG seven, which is the double line Chiller enhance Cape.

1308
01:03:45,960 --> 01:03:46,919
Speaker 2: And I know you.

1309
01:03:46,960 --> 01:03:49,480
Speaker 1: Can't say this becaust of compliance, but I could say

1310
01:03:49,920 --> 01:03:54,280
Speaker 1: top one percent of large cap value crushing fourteen percent

1311
01:03:54,280 --> 01:03:57,080
Speaker 1: a year for the past three years, beating the S

1312
01:03:57,160 --> 01:04:00,720
Speaker 1: and P five hundred. Why did you guys partner with

1313
01:04:00,760 --> 01:04:03,160
Speaker 1: Shield to come up with the enhanced cape? Other than

1314
01:04:03,320 --> 01:04:04,360
Speaker 1: the obvious.

1315
01:04:03,960 --> 01:04:08,680
Speaker 2: Performance, I mean it fills with us philosophical one. As

1316
01:04:08,720 --> 01:04:11,280
Speaker 2: a bond manager, we are sector rotators, right, so that's

1317
01:04:11,280 --> 01:04:13,400
Speaker 2: something we focus on. And the other thing we focus

1318
01:04:13,440 --> 01:04:17,960
Speaker 2: on is valuation. So what the Schiller methodology does is

1319
01:04:18,000 --> 01:04:21,560
Speaker 2: that it's looking at the relative cape ratio. So it

1320
01:04:21,600 --> 01:04:23,760
Speaker 2: takes the cape ratio of each sector and compares it

1321
01:04:23,800 --> 01:04:26,000
Speaker 2: to its own history. So it says, it's for each

1322
01:04:26,040 --> 01:04:28,960
Speaker 2: sector of the market, where are we in the cycle effectively?

1323
01:04:29,320 --> 01:04:31,480
Speaker 2: And it ranks them and just says which are the cheapest,

1324
01:04:31,520 --> 01:04:33,919
Speaker 2: which are the most rich? So you avoid the rich

1325
01:04:34,000 --> 01:04:36,400
Speaker 2: by the cheapest. Right, So you take the universe there's

1326
01:04:36,400 --> 01:04:39,560
Speaker 2: eleven sectors, cut it in half, call it five. Five

1327
01:04:39,640 --> 01:04:41,320
Speaker 2: cheapest what you want to look at, and you apply

1328
01:04:41,400 --> 01:04:44,360
Speaker 2: momentum like any good academic would do to control for

1329
01:04:44,920 --> 01:04:47,440
Speaker 2: the kind of the value trap, and you're left with

1330
01:04:47,520 --> 01:04:49,680
Speaker 2: four and uqually weight them. It's as simple as it

1331
01:04:49,720 --> 01:04:50,200
Speaker 2: gets here.

1332
01:04:50,200 --> 01:04:53,120
Speaker 1: You know, there's something to be said for bond managers

1333
01:04:53,760 --> 01:04:58,200
Speaker 1: being better pms on the equity side because of the

1334
01:04:58,240 --> 01:05:05,160
Speaker 1: focus on valuation, return of capital and just tracking the

1335
01:05:05,200 --> 01:05:08,440
Speaker 1: math in a way that the equity side tends not to.

1336
01:05:08,720 --> 01:05:10,840
Speaker 2: Yeah, but look, they'll beat us through different parts in

1337
01:05:10,920 --> 01:05:13,560
Speaker 2: time the lot. The goal is to have a long tenure.

1338
01:05:13,720 --> 01:05:15,520
Speaker 2: And if you can do it over a full cycle

1339
01:05:15,520 --> 01:05:17,640
Speaker 2: and you can do much better, then why wouldn't you

1340
01:05:17,720 --> 01:05:17,960
Speaker 2: do it?

1341
01:05:18,160 --> 01:05:18,280
Speaker 1: All?

1342
01:05:18,360 --> 01:05:18,600
Speaker 2: Right?

1343
01:05:18,640 --> 01:05:20,479
Speaker 1: So I have to get you out of here sooner

1344
01:05:20,600 --> 01:05:24,120
Speaker 1: rather than later. So let's turn our favorite five questions

1345
01:05:24,160 --> 01:05:27,000
Speaker 1: into a speed round perfect answer these as quickly as

1346
01:05:27,040 --> 01:05:30,240
Speaker 1: you can. Starting with tell us what you're streaming these days?

1347
01:05:30,240 --> 01:05:31,520
Speaker 1: What are you watching or listening to?

1348
01:05:32,000 --> 01:05:34,760
Speaker 2: One of my colleagues turned me on to something called

1349
01:05:34,760 --> 01:05:38,200
Speaker 2: the X Files and told me that you should watch

1350
01:05:38,280 --> 01:05:43,040
Speaker 2: this because and exactly that's what I was gonna end with,

1351
01:05:43,080 --> 01:05:45,880
Speaker 2: but yes, and it actually does hold up pretty well.

1352
01:05:45,920 --> 01:05:49,560
Speaker 2: So anyway, something that I've been revisiting. I don't have

1353
01:05:49,600 --> 01:05:51,480
Speaker 2: any of the new ones out there. It's it's kind

1354
01:05:51,480 --> 01:05:51,840
Speaker 2: of glad.

1355
01:05:52,040 --> 01:05:56,360
Speaker 1: Plus the company was Angillian. They're both so fantastic.

1356
01:05:56,000 --> 01:05:57,960
Speaker 2: And you got to remember the song David d'coveny, why

1357
01:05:57,960 --> 01:05:59,080
Speaker 2: don't you Love Me? Right?

1358
01:06:00,000 --> 01:06:02,120
Speaker 1: Tell us about your early mentors, although I kind of

1359
01:06:02,120 --> 01:06:04,240
Speaker 1: have a feeling who those are going to be, who

1360
01:06:04,320 --> 01:06:06,160
Speaker 1: helped guide and shape your career.

1361
01:06:06,280 --> 01:06:08,800
Speaker 2: Yeah, I think I mentioned this before when we were here,

1362
01:06:08,840 --> 01:06:10,880
Speaker 2: but there was a guy I worked with named Claude

1363
01:06:10,880 --> 01:06:13,800
Speaker 2: herb Too on the COMMANDITI side, really really a guy

1364
01:06:13,800 --> 01:06:16,160
Speaker 2: that taught me to question everything. And then there was

1365
01:06:16,240 --> 01:06:18,920
Speaker 2: this guy named Jeffrey Gunlock too, very very kind of

1366
01:06:18,920 --> 01:06:23,680
Speaker 2: prominent guy who said, not only question everything, but question

1367
01:06:23,760 --> 01:06:26,680
Speaker 2: it again, you know too, And that's very helpful. And

1368
01:06:26,840 --> 01:06:29,360
Speaker 2: also I think what was what's been very good about

1369
01:06:29,480 --> 01:06:32,320
Speaker 2: Gunlock and why he has such a loyal crew around him,

1370
01:06:32,440 --> 01:06:35,440
Speaker 2: is that all of us are really pushed to challenge

1371
01:06:35,480 --> 01:06:38,160
Speaker 2: each other and there's no dumb questions. Yeah, we'll call

1372
01:06:38,200 --> 01:06:40,360
Speaker 2: each other dumb at times, you know, we're like a

1373
01:06:40,360 --> 01:06:44,080
Speaker 2: family that way. But it's it's encouraging people to come

1374
01:06:44,120 --> 01:06:46,240
Speaker 2: up with ideas, and we're an idea of business. Right

1375
01:06:46,280 --> 01:06:48,480
Speaker 2: you have to create, you have to you have to

1376
01:06:48,480 --> 01:06:51,080
Speaker 2: have new things in the market, and we want people

1377
01:06:51,120 --> 01:06:53,720
Speaker 2: to poke holes. And I think that's something that's very

1378
01:06:53,720 --> 01:06:55,760
Speaker 2: good about the team is that it's not being a

1379
01:06:55,800 --> 01:06:58,840
Speaker 2: contrayer for the sake of being a contrarian. But what

1380
01:06:58,880 --> 01:07:01,280
Speaker 2: are we all missing when we're all nodding vertically up

1381
01:07:01,280 --> 01:07:04,040
Speaker 2: and down? You know, that's the time whirred question. And

1382
01:07:04,160 --> 01:07:06,080
Speaker 2: that's what we've been doing our last as the location meetings.

1383
01:07:06,120 --> 01:07:09,080
Speaker 2: It's like we've been sitting around going credit looks expensive,

1384
01:07:09,160 --> 01:07:11,600
Speaker 2: but we don't want to sell it, and we're all cringing,

1385
01:07:11,680 --> 01:07:13,800
Speaker 2: and we're all just saying, Okay, we're just gonna let

1386
01:07:13,800 --> 01:07:16,720
Speaker 2: it run for right now. And you know, Gunlock keeps saying,

1387
01:07:16,920 --> 01:07:18,200
Speaker 2: I just want to make anyone to wear it. We

1388
01:07:18,320 --> 01:07:21,160
Speaker 2: keep doing this each month. I'm not I don't have

1389
01:07:21,200 --> 01:07:23,640
Speaker 2: another idea right now, but it's starting to say we're

1390
01:07:23,680 --> 01:07:25,480
Speaker 2: maybe rates look pretty decent too.

1391
01:07:25,520 --> 01:07:28,920
Speaker 1: How do you hedge credit short of going out and

1392
01:07:28,960 --> 01:07:31,520
Speaker 1: buying credit to foulk swaps? And they're not cheap.

1393
01:07:31,720 --> 01:07:35,360
Speaker 2: Now, you really don't. If you're having to hedge your credit,

1394
01:07:35,400 --> 01:07:37,320
Speaker 2: you shouldn't known it. That's one thing I've learned, because

1395
01:07:37,320 --> 01:07:39,720
Speaker 2: the hedge costs you money. If you want to hedge

1396
01:07:39,720 --> 01:07:41,920
Speaker 2: the credit, maybe you should known it. And the best

1397
01:07:41,920 --> 01:07:45,040
Speaker 2: hedge out there I think today are longer data treasuries.

1398
01:07:45,080 --> 01:07:47,720
Speaker 2: I think they work. I think if we have a meltdown,

1399
01:07:47,800 --> 01:07:50,480
Speaker 2: and I'm not saying credit spreads wide and ten bases points.

1400
01:07:50,520 --> 01:07:52,960
Speaker 2: I'm saying extended duration isn't gonna hurt you. It's not

1401
01:07:53,000 --> 01:07:54,560
Speaker 2: gonna hurt you, and you get paid to do it.

1402
01:07:54,880 --> 01:07:57,160
Speaker 2: So that's a hedge that makes you money. It's what

1403
01:07:57,200 --> 01:07:58,720
Speaker 2: we call a positive carry hedge.

1404
01:07:58,760 --> 01:08:00,680
Speaker 1: There you go, Let's look at up books. What are

1405
01:08:00,720 --> 01:08:01,400
Speaker 1: some of your favorites.

1406
01:08:01,440 --> 01:08:03,200
Speaker 2: What are you reading it right now? Yeah? I think

1407
01:08:03,200 --> 01:08:05,440
Speaker 2: I said to you last time was against the gods

1408
01:08:05,480 --> 01:08:08,440
Speaker 2: of Bernstein. That hasn't changed. That's so it's a class

1409
01:08:08,680 --> 01:08:11,480
Speaker 2: everybody should read that out there. You know, I'm a

1410
01:08:11,480 --> 01:08:13,840
Speaker 2: big fan of the Michael Lewis stuff. I know he

1411
01:08:13,920 --> 01:08:16,439
Speaker 2: got a he got a bad rap with the latest

1412
01:08:16,439 --> 01:08:20,280
Speaker 2: one too, about going infinite. Yeah on SBFO, A lot

1413
01:08:20,280 --> 01:08:22,040
Speaker 2: of fun if you read it. I think a lot

1414
01:08:22,080 --> 01:08:25,320
Speaker 2: of people read like fifty pages and thought, oh, he's

1415
01:08:25,320 --> 01:08:27,680
Speaker 2: a fan boy. This is Michael Lewis. He's building a

1416
01:08:27,760 --> 01:08:30,160
Speaker 2: character first of exactly. You know, if you haven't read

1417
01:08:30,240 --> 01:08:32,040
Speaker 2: in his other stuff, then maybe you could get there.

1418
01:08:32,080 --> 01:08:34,120
Speaker 2: But if you read the whole book, he's pretty caustic

1419
01:08:34,200 --> 01:08:37,599
Speaker 2: at the end, right, I mean it was, It's total Lewis,

1420
01:08:37,640 --> 01:08:40,559
Speaker 2: and so I think that people that were criticized up front,

1421
01:08:40,880 --> 01:08:44,000
Speaker 2: but Chip Wars is the one that someone recommends to me.

1422
01:08:44,560 --> 01:08:47,320
Speaker 2: I love it and I think everybody should read it.

1423
01:08:47,600 --> 01:08:50,000
Speaker 2: That is where it's at. You talked about the chips

1424
01:08:50,000 --> 01:08:52,559
Speaker 2: at I think that's the only great thing that's come

1425
01:08:52,600 --> 01:08:55,080
Speaker 2: out of Congress, and this last you know, kind of rounds.

1426
01:08:55,479 --> 01:08:58,600
Speaker 2: I think building the chip plants, getting our own security

1427
01:08:58,680 --> 01:09:01,640
Speaker 2: that direction and being a pre eminent player there is

1428
01:09:01,680 --> 01:09:05,639
Speaker 2: extremely important. I've always hated the iPhone where it says

1429
01:09:05,800 --> 01:09:09,960
Speaker 2: designed in Coopertino, but it's manufactured somewhere else. They forgot

1430
01:09:10,000 --> 01:09:12,240
Speaker 2: that part out. They only kept the Cooper Tino part.

1431
01:09:12,600 --> 01:09:15,120
Speaker 2: I think this is something very powerful. Why would you

1432
01:09:15,160 --> 01:09:17,400
Speaker 2: not want to be the next TSMC? Why not?

1433
01:09:17,600 --> 01:09:21,519
Speaker 1: And well they're building a play in Arizona, right, we.

1434
01:09:21,439 --> 01:09:24,080
Speaker 2: Could call USMC, but we got a few of those already,

1435
01:09:24,280 --> 01:09:26,439
Speaker 2: you know, So yeah, the Marine Corps don't want to

1436
01:09:26,439 --> 01:09:28,080
Speaker 2: piss those guys off. You know. I'm a big fan

1437
01:09:28,120 --> 01:09:30,200
Speaker 2: of the Marine Corps. I do not want to say

1438
01:09:30,240 --> 01:09:32,439
Speaker 2: anything and shout out to the Marines out there that

1439
01:09:32,520 --> 01:09:33,160
Speaker 2: take care of us.

1440
01:09:33,360 --> 01:09:36,160
Speaker 1: By the way, I loved the Michael Lewis Going Infinite

1441
01:09:37,280 --> 01:09:41,120
Speaker 1: if you want a different perspective, that's every bit as

1442
01:09:41,160 --> 01:09:45,920
Speaker 1: well written and entertaining. Just a little more horrifying is

1443
01:09:46,240 --> 01:09:49,599
Speaker 1: Zeke Fox's number go up okay, which which is really

1444
01:09:49,600 --> 01:09:51,360
Speaker 1: a You read the two of those and now you

1445
01:09:51,400 --> 01:09:54,960
Speaker 1: know everything you need to know about about ftxcrypto And

1446
01:09:55,000 --> 01:09:55,920
Speaker 1: I got to fly back.

1447
01:09:55,760 --> 01:09:58,120
Speaker 2: To la later in the week, so I'll take a

1448
01:09:58,160 --> 01:09:58,559
Speaker 2: look at it.

1449
01:09:58,600 --> 01:10:01,000
Speaker 1: Our final two questions, what's sort of advice would you

1450
01:10:01,040 --> 01:10:04,360
Speaker 1: give a recent college grad interested in a career in

1451
01:10:04,439 --> 01:10:07,839
Speaker 1: either applied mathematics, bond management or investing.

1452
01:10:08,720 --> 01:10:11,599
Speaker 2: I think you need to stray from what you've learned

1453
01:10:11,640 --> 01:10:14,320
Speaker 2: thus far, meaning that if you're the mathematician, you need

1454
01:10:14,320 --> 01:10:16,840
Speaker 2: to learn another side of the business, learn the fundamental side,

1455
01:10:16,880 --> 01:10:20,400
Speaker 2: which is something that I didn't appreciate. Be a student

1456
01:10:20,400 --> 01:10:23,000
Speaker 2: of history that applies to everyone unless you're a history

1457
01:10:23,040 --> 01:10:25,799
Speaker 2: major then you already know that. But a student of history,

1458
01:10:25,880 --> 01:10:28,800
Speaker 2: financial markets rhyme a lot of times they're not the same.

1459
01:10:29,200 --> 01:10:31,679
Speaker 2: But you'll learn a lot through that, and you'll learn

1460
01:10:31,680 --> 01:10:34,519
Speaker 2: that a lot of things. We've experienced these things before,

1461
01:10:35,120 --> 01:10:40,400
Speaker 2: and most importantly, learn psychology, learn the behavioral side. Realize

1462
01:10:40,439 --> 01:10:43,200
Speaker 2: we're all people. There is no smart money dumb money.

1463
01:10:43,200 --> 01:10:46,040
Speaker 2: It's all ran by people. Institutions are ran by people.

1464
01:10:46,600 --> 01:10:49,040
Speaker 2: They behave a little differently because their own career risk.

1465
01:10:49,520 --> 01:10:51,479
Speaker 2: Your hedge fund's going to behave a little differently because

1466
01:10:51,479 --> 01:10:54,679
Speaker 2: of its career risk. But understand that all these dynamics

1467
01:10:54,720 --> 01:10:57,360
Speaker 2: are in play. So the last advice I have when

1468
01:10:57,360 --> 01:10:59,639
Speaker 2: it comes to this, and the cfasity hates it when

1469
01:10:59,640 --> 01:11:02,080
Speaker 2: I say this, you know, and I've given a couple

1470
01:11:02,120 --> 01:11:04,599
Speaker 2: of speech ob recently and I put that cabot out there.

1471
01:11:04,880 --> 01:11:08,400
Speaker 2: Fundamentals work. They just can be they can they can

1472
01:11:08,479 --> 01:11:12,160
Speaker 2: be off for a while and ultimately fundamentals come home

1473
01:11:12,160 --> 01:11:16,400
Speaker 2: to roost. Technicals teach you how to trade technicals. There's

1474
01:11:16,520 --> 01:11:19,440
Speaker 2: levels like that. They work relatively well because of the psychology.

1475
01:11:20,160 --> 01:11:22,760
Speaker 2: So that leads into psychology. But the one thing you

1476
01:11:22,760 --> 01:11:27,120
Speaker 2: can never ever ever ignore is money flow. Money flow

1477
01:11:27,200 --> 01:11:29,639
Speaker 2: is the most powerful thing. If people are buying price

1478
01:11:29,720 --> 01:11:32,760
Speaker 2: go up, people are selling price go down. And when

1479
01:11:32,800 --> 01:11:34,639
Speaker 2: you see that in the market, When you see that,

1480
01:11:34,640 --> 01:11:38,000
Speaker 2: that's called momentum. To the quants out there, that is

1481
01:11:38,040 --> 01:11:41,000
Speaker 2: the most powerful force in the universe ever a short

1482
01:11:41,080 --> 01:11:43,679
Speaker 2: term timeframe. So if you can marry those three things together,

1483
01:11:44,120 --> 01:11:45,439
Speaker 2: that's that can give you success.

1484
01:11:45,479 --> 01:11:46,639
Speaker 1: How do you track money flow?

1485
01:11:47,560 --> 01:11:50,080
Speaker 2: Well, you watch fun flows, We watch ETF flows, we

1486
01:11:50,120 --> 01:11:54,000
Speaker 2: watch ETF creation units. You watch also the demand from

1487
01:11:54,040 --> 01:11:56,760
Speaker 2: the institutional when it comes to RFP demand. So all

1488
01:11:56,760 --> 01:11:59,679
Speaker 2: of these things are somewhat in our toolkit. But remember

1489
01:11:59,680 --> 01:12:02,639
Speaker 2: we talked about M two. That's a powerful force as well.

1490
01:12:02,680 --> 01:12:05,720
Speaker 2: When we print money and create money that it has

1491
01:12:05,760 --> 01:12:08,280
Speaker 2: to go somewhere right right, and you've got to track

1492
01:12:08,320 --> 01:12:08,960
Speaker 2: where it's going.

1493
01:12:09,360 --> 01:12:11,080
Speaker 1: It goes where it's treated best.

1494
01:12:10,880 --> 01:12:12,320
Speaker 2: And water finds its levels.

1495
01:12:12,400 --> 01:12:15,160
Speaker 1: That's exactly right. Our final question, what do you know

1496
01:12:15,200 --> 01:12:19,080
Speaker 1: about the world of investing today? You wish you had

1497
01:12:19,080 --> 01:12:22,200
Speaker 1: in your toolkit, You wish you knew twenty five years

1498
01:12:22,280 --> 01:12:24,160
Speaker 1: or so ago when you were first getting stick.

1499
01:12:24,240 --> 01:12:27,760
Speaker 2: It's that behavioral aspect, hands down, hands down that you

1500
01:12:27,800 --> 01:12:30,120
Speaker 2: know when I came in as a naive quant I

1501
01:12:30,120 --> 01:12:32,920
Speaker 2: thought Mass solved the world. You can model everything, right,

1502
01:12:34,080 --> 01:12:36,920
Speaker 2: and I realized that you know, the models their guides.

1503
01:12:37,800 --> 01:12:40,360
Speaker 2: Everything we have in the toolkits a guide because it's

1504
01:12:40,479 --> 01:12:45,280
Speaker 2: people making decisions and we are inherently strange creatures. Right,

1505
01:12:45,360 --> 01:12:49,120
Speaker 2: we do not act in our best interest? Right, we don't.

1506
01:12:49,160 --> 01:12:53,160
Speaker 2: We are not utility maximizers, you know, to borrow the

1507
01:12:53,200 --> 01:12:55,960
Speaker 2: economic phrase. And so at the end of it, I

1508
01:12:55,960 --> 01:12:59,599
Speaker 2: think it's understanding that dynamic of psychology is very important.

1509
01:13:00,080 --> 01:13:03,880
Speaker 2: Does one model psychology? You don't, but you know it,

1510
01:13:04,000 --> 01:13:06,160
Speaker 2: you can can feel it. And there's something about markets

1511
01:13:06,160 --> 01:13:08,920
Speaker 2: where we say we feel something's happening that means we're

1512
01:13:08,920 --> 01:13:10,160
Speaker 2: talking about that psychology.

1513
01:13:10,200 --> 01:13:12,400
Speaker 1: Well, what's the famous Richard Fyneman quote. I know I'm

1514
01:13:12,400 --> 01:13:15,799
Speaker 1: going to mangle this, but if you think physics is difficult,

1515
01:13:15,840 --> 01:13:18,519
Speaker 1: now imagine what would happen if electrons had emotion.

1516
01:13:19,960 --> 01:13:24,040
Speaker 2: I mean, Fineman is amazing. There's actually something on Twitter

1517
01:13:24,080 --> 01:13:27,000
Speaker 2: where someone does find me quotes. I love that too,

1518
01:13:27,120 --> 01:13:28,760
Speaker 2: and Twitter still around.

1519
01:13:28,840 --> 01:13:32,320
Speaker 1: I've been, you know, said sadly watching it. Circle the drink.

1520
01:13:32,439 --> 01:13:35,080
Speaker 2: Yeah, I mean I think it something happened with the

1521
01:13:35,120 --> 01:13:37,639
Speaker 2: management there I don't know. It kind of changed the dynamic.

1522
01:13:37,760 --> 01:13:41,439
Speaker 2: So I actually haven't been using it as much as

1523
01:13:41,479 --> 01:13:42,320
Speaker 2: myself either.

1524
01:13:42,439 --> 01:13:45,679
Speaker 1: And so, but the glory days of Twitter peak Twitter

1525
01:13:45,800 --> 01:13:46,960
Speaker 1: was a fabulous period.

1526
01:13:47,080 --> 01:13:50,280
Speaker 2: It was. And I remember you giving me some advice Mary, Mary,

1527
01:13:50,400 --> 01:13:53,479
Speaker 2: so you can go on to the mentor list with this,

1528
01:13:53,600 --> 01:13:55,400
Speaker 2: I think you should wrap it up. Well, let's see

1529
01:13:55,439 --> 01:13:58,679
Speaker 2: this horrible advice. All right. So I was a young

1530
01:13:58,680 --> 01:14:00,760
Speaker 2: guy in here, sitting here because I was younger than

1531
01:14:00,760 --> 01:14:03,840
Speaker 2: I am today, and the thing you told me about

1532
01:14:03,880 --> 01:14:05,680
Speaker 2: I was like Twitter. I was like, it's so just

1533
01:14:05,760 --> 01:14:08,360
Speaker 2: a horrible it's a cesspool and all of this. You said, true,

1534
01:14:08,680 --> 01:14:11,559
Speaker 2: Which that's great advice, right. You were like, yeah, true,

1535
01:14:11,960 --> 01:14:14,519
Speaker 2: And you said, if you want to do it, block

1536
01:14:14,680 --> 01:14:18,320
Speaker 2: and curate, oh lot, Yes, you know what. It changed

1537
01:14:18,360 --> 01:14:21,400
Speaker 2: my life, blandly curate because I got what I was

1538
01:14:21,400 --> 01:14:24,240
Speaker 2: looking for. Now I have some self reference in there.

1539
01:14:24,600 --> 01:14:26,760
Speaker 2: And that's the other thing, going back to your previous question.

1540
01:14:27,600 --> 01:14:31,400
Speaker 2: Follow people who you don't want to follow. Follow, follow,

1541
01:14:31,560 --> 01:14:35,479
Speaker 2: get out out of your ideological bubble. Correct, understand the

1542
01:14:35,520 --> 01:14:38,360
Speaker 2: other side and you may not understand it, but listen

1543
01:14:38,400 --> 01:14:40,479
Speaker 2: to it, and it will make you better for doing

1544
01:14:40,520 --> 01:14:43,479
Speaker 2: that because You've got to realize that no one has

1545
01:14:43,560 --> 01:14:47,559
Speaker 2: your experience. They have their experience, and so to put

1546
01:14:47,600 --> 01:14:50,120
Speaker 2: yourself in someone else's shoes and try to try to

1547
01:14:50,600 --> 01:14:53,679
Speaker 2: grow from that. It's very important. And don't just read

1548
01:14:53,840 --> 01:14:56,479
Speaker 2: everyone who agrees with you. It's really fun for me

1549
01:14:56,560 --> 01:14:58,240
Speaker 2: to walk on the desk. I was like, yeah, yeah,

1550
01:14:58,240 --> 01:15:01,160
Speaker 2: great job. Sherman. Yeah, yeah, Well, if it's not truthful,

1551
01:15:01,200 --> 01:15:03,800
Speaker 2: it doesn't matter. Poke holes in it. And I think

1552
01:15:03,960 --> 01:15:04,840
Speaker 2: that's the thing we're all look it.

1553
01:15:05,040 --> 01:15:08,280
Speaker 1: It's as if every trade has a buyer and a seller.

1554
01:15:08,439 --> 01:15:11,000
Speaker 2: It's funny how that works, right, That's why prices went out.

1555
01:15:11,000 --> 01:15:11,960
Speaker 2: There's more buyers and sellers.

1556
01:15:12,000 --> 01:15:15,160
Speaker 1: By definition, there can't be by the way that, As

1557
01:15:15,200 --> 01:15:18,040
Speaker 1: someone who started on a trading desk, that expression has

1558
01:15:18,080 --> 01:15:22,040
Speaker 1: always annoyed me because the true expression is more buyers

1559
01:15:22,080 --> 01:15:24,640
Speaker 1: than what it wire. Stocks up today, more buyers than

1560
01:15:24,720 --> 01:15:27,760
Speaker 1: filers at this level. Once you exhaust the sellers at

1561
01:15:27,800 --> 01:15:28,640
Speaker 1: this level.

1562
01:15:28,640 --> 01:15:29,320
Speaker 2: Now you go up.

1563
01:15:29,400 --> 01:15:32,000
Speaker 1: Thank you Jeffrey for being so generous with your time.

1564
01:15:32,120 --> 01:15:35,640
Speaker 1: We have been speaking with double lines Jeffrey Sherman. He

1565
01:15:35,760 --> 01:15:39,600
Speaker 1: is deputy chief investment officer at the firm, helping to

1566
01:15:39,680 --> 01:15:44,040
Speaker 1: oversee about one hundred billion dollars in fixed income and equity.

1567
01:15:44,200 --> 01:15:46,720
Speaker 1: If you enjoy this conversation, be sure to check out

1568
01:15:46,760 --> 01:15:50,040
Speaker 1: any of the five hundred plus discussions we've had over

1569
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1570
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1571
01:16:00,120 --> 01:16:03,080
Speaker 1: be sure and check out my new podcast at the

1572
01:16:03,120 --> 01:16:10,560
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1573
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1574
01:16:15,040 --> 01:16:18,559
Speaker 1: or in the Master's in Business feed. I would be

1575
01:16:18,640 --> 01:16:20,720
Speaker 1: remiss if I did not thank the Cracked team that

1576
01:16:20,800 --> 01:16:24,880
Speaker 1: helps put these conversations together each week. John Wasserman is

1577
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Speaker 1: my audio engineer. Attika Valbrun is my project manager. Sean

1578
01:16:29,439 --> 01:16:33,760
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1579
01:16:33,800 --> 01:16:37,960
Speaker 1: Barry Renholts. You've been listening to Masters in Business on

1580
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Speaker 1: Bloomberg Radio.