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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Master's in

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Speaker 1: Business with Barry red Holds on Bloomberg Radio.

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Speaker 2: This week on the podcast, I have an extra spatial guest.

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Speaker 2: If you are at all interested in fixed income, how

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Speaker 2: you assess bonds, how you evaluate the economy, the market,

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Speaker 2: what the Fed's gonna do, what clients want, how to

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Speaker 2: assess risk in credit markets, Well, then you're going to

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Speaker 2: really enjoy this conversation. Matt Egan has spent his entire

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Speaker 2: career in fixed income, from credit analysts to portfolio manager.

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Speaker 2: Now he's the head of the discretion team at Loomis Sales,

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Speaker 2: which manages well over three hundred and thirty five billion

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Speaker 2: dollars in client assets. He's really seen every aspect of

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Speaker 2: the fixed income side more than just a bond manager,

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Speaker 2: but someone who has really covered it, from credit analyst

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Speaker 2: to research analysts, to fixed income member to full unconstrained

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Speaker 2: bond manager and now running this discretionary team. His group

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Speaker 2: has about seventy five billion that they're responsible for. I

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Speaker 2: don't know what else to say other than there are

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Speaker 2: a few people in the world that understand running a

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Speaker 2: fixed income portfolio on behalf of institutional for retail clients

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Speaker 2: as well as Matt Egan does. I thought this conversation

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Speaker 2: was fascinating and I think you will also with no

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Speaker 2: further ado, Loomis Sales.

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Speaker 1: Matt Egan, thanks for having me Berry.

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Speaker 2: Well, well, thanks for coming. Let's talk a little bit

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Speaker 2: about your background. You get a bachelor's from Northeastern and

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Speaker 2: an NBA from Boston University. Was finance always the career plan?

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Speaker 1: It was not. I started northeasterners an electrical engineering. Oh

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Speaker 1: that's a major. And the good thing about Northeastern University

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Speaker 1: that they've tremendously great quad education program. That saved my

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Speaker 1: life because it made me understand it did not want

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Speaker 1: to be a double or an engineering in my profession.

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Speaker 1: And the key was I started after one year. I

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Speaker 1: kind of gutted through one year of engineering classes. It

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Speaker 1: wasn't really that interested, but I gutted through it, and

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Speaker 1: I started interviewing for the first internships and I started,

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Speaker 1: you know, I had a number of them. I realized

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Speaker 1: I am not like these people and this is not

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Speaker 1: what I want to do, and so I transferred to

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Speaker 1: the business.

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Speaker 2: School after it. It's so funny you say that I

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Speaker 2: started out math and physics, And in high school I

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Speaker 2: was a rock star in math and physics. And you

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Speaker 2: get to college and suddenly it's like, oh, I'm okay

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Speaker 2: at this, but those guys are great, and you quickly realize, hey,

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Speaker 2: this is way above my pig. I need to figure

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Speaker 2: out what I need to do. So Northeastern and Boston.

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Speaker 2: Were you a Boston kid?

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Speaker 1: Boston kid? Well, I grew up outside in a relatively

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Speaker 1: small city, and of course moved to the city to

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Speaker 1: go to school and just fell in love with Boston

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Speaker 1: and stayed ever since.

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Speaker 2: Right, Oh, that's interesting, And is that where you are today?

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Speaker 2: You're not New York, You're boss. I'm in Boston, right,

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Speaker 2: And there's a giant set of finance farms in Boston.

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Speaker 2: That must be fun there.

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Speaker 1: Yeah, there was a lot to choose from you as

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Speaker 1: a you know, newly minted financed major coming out of school.

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Speaker 1: There were a lot of things to do. This profession

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Speaker 1: wasn't necessarily my first choice coming out of undergrad, but

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Speaker 1: there were plenty of other things to do in the

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Speaker 1: field too. It's a broad field, to say the least.

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Speaker 2: So you start out credit analyst at Century Back Bank

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Speaker 2: and Trust prior to getting an MBA. What was it

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Speaker 2: like being a credit analyst in the nineteen eighties.

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Speaker 1: Yeah, I gravitated to I had to envision myself as

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Speaker 1: a commercial banker. You know. Back when I graduated and

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Speaker 1: I had done an internship at Bank of Boston, one

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Speaker 1: of the first things I did was spread financial statements.

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Speaker 1: This in the old days before really there were spreadsheets there,

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Speaker 1: and we would take fortune five hundred annual reports or

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Speaker 1: ten queues and put them into a spreadsheet give them

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Speaker 1: to the commercial armorms. That was when I first started

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Speaker 1: getting involved with looking at company. So when I fancy

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Speaker 1: myself as a loan officer, there were great programs in

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Speaker 1: that field. There was a super regional banking industry in Boston. However,

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Speaker 1: when I graduated, there was a really kind of a

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Speaker 1: nasty correction in the market. What year nineteen eighty nine,

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Speaker 1: and you remember, there's a pretty nasty recession, believe it

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Speaker 1: or not, Massachusetts U employment was over ten percent back then. Wow,

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Speaker 1: which is hard to believe because mass always had relatively

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Speaker 1: low But there was a real estate crisis back then.

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Speaker 2: We were just talking about this over the weekends. You know,

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Speaker 2: the problem with the financial crisis, models were Supposedly many

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Speaker 2: failed to contemplate real estate prices going down. But I

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Speaker 2: remember coming out of grad school in the late eighties

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Speaker 2: and friends who had purchased co ops in New York

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Speaker 2: City in like eighty seven, eighty eight, eighty nine. You

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Speaker 2: didn't get back to break even until like the late nineties.

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Speaker 2: There was a major dip. It might have been worse

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Speaker 2: in some areas than others, but nationally, real estate foundered in.

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Speaker 1: The ninth right, New England was crushed. There was a

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Speaker 1: big glut of condos. You know, you'd walk it bride

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Speaker 1: by certain you know, you'd be on the highway you

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Speaker 1: go by, say a one hundred unit condo building there

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Speaker 1: was one light on right. You know. It also hit

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Speaker 1: hard in Texas too, which was you know, after the

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Speaker 1: oil bus the sea through buildings, right, that was the

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Speaker 1: origination to see through buildings. And it was a great

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Speaker 1: learning experience for me. But first of all, when I

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Speaker 1: was in the you know, looking for jobs, you had

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Speaker 1: to go to the placement office back then, And as

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Speaker 1: I was looking at jobs, I remember looking at a

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Speaker 1: g finance job and as I was looking at as

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Speaker 1: somebody pulled it down in front of me. It's not

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Speaker 1: available anymore. That's where the economy was at that point.

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Speaker 1: And so but I I knew a fella, this guy,

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Speaker 1: George Duncan, who was a friend of my dad's. He

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Speaker 1: he was a president of a small bank, enterprise bank

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Speaker 1: up in Lowell. He didn't have a job for me,

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Speaker 1: but he got me in touch with Century Bank and Trust.

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Speaker 1: I had an interview there, became credit analyst. I was

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Speaker 1: thankful I had an opportunity at that point. So I

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Speaker 1: did that first, and that was a good learning experience. Again,

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Speaker 1: you know what I witnessed then, as you know that

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Speaker 1: real estate bubble kind of burst, is those same loan

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Speaker 1: officers with their underwriting loans that was helping them. Do

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Speaker 1: they became landlords?

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Speaker 2: Oh?

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Speaker 1: No, that was the thing, you know, because they were

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Speaker 1: you know, they were taking on some losses and they

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Speaker 1: would have to go and then show the buildings.

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Speaker 2: You know, they would take over the.

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Speaker 1: Yeah, I mean that thing did fine. We were fine,

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Speaker 1: but you know, that was it was an experience.

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Speaker 2: So essentially they go from underwriters to default managers to

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Speaker 2: suddenly we're real estate portfolio.

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Speaker 1: Right. It's like working with the borrower, right, you know

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Speaker 1: that whole that concept. But but I didn't stay there

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Speaker 1: a lot that long. I learned how commercial banking worked,

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Speaker 1: but I had an opportunity after that to move over

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Speaker 1: back to Bank Boston, which is where I was interested

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Speaker 1: in at the time.

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Speaker 2: So, so, how did you end up as a senior

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Speaker 2: fixed income analyst at Liberty Mutual Insurance.

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Speaker 1: It was funny that same fellow, George Duncan, when I

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Speaker 1: talked to him, he said, go go check out this bank.

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Speaker 1: He said, you know, whatever you do, you're gonna need

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Speaker 1: to go back for a graduate career. You go get

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Speaker 1: your MBA and make sure your company pays for it.

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Speaker 1: And the guy ran Centry Bank and Trust was an

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Speaker 1: older fella, guy Sloan. He was a family owned bank.

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Speaker 1: And I asked him, mister Sloan, will you will you

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Speaker 1: pay for my MBA? He said absolutely not. He said

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Speaker 1: you're going to get it and you're going to move on.

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Speaker 1: And I said, all right, you know, And actually so

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Speaker 1: that's why I went to Back of Possum. From there

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Speaker 1: I started. I enrolled in Boston University, and that's when

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Speaker 1: I started meeting people that were actually in the investment business.

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Speaker 1: And I met a really good friend of mine at

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Speaker 1: that time. We went through our entire career together, NBA career,

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Speaker 1: and he said, why don't you come over to Liberty

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Speaker 1: Mutual and applied for a job in the investment apartment,

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Speaker 1: and so I did that and I started working there,

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Speaker 1: and that was to me, really my first sort of

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Speaker 1: entry into you know, investing.

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Speaker 2: So I'm assuming a Liberty mutual, what you're investing is

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Speaker 2: the firm's own capital from the insurance, right.

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Speaker 1: It's the pot of money that it's the insurance money.

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Speaker 2: And what was that experience, like, how did that affect

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Speaker 2: how you approach fixed income today?

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Speaker 1: To me, it was sort of the boot camp for

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Speaker 1: fixed income investing. So we were pretty lean group of

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Speaker 1: individuals by nature. Most of us were research people and

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Speaker 1: we were giving corporate insurance. Companies do a lot of

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Speaker 1: corporate investing, so we've had our own sectors. I took

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Speaker 1: on the banking sector, which was interesting. I had a

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Speaker 1: number of other things as well. But we also traded

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Speaker 1: for our sector. So we had an empty trading room

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Speaker 1: and the tartphones were in there. If you wanted to trade,

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Speaker 1: you say, hey, fellas were you know, I'm going to

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Speaker 1: go do some bank trades, you know, come on in

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Speaker 1: and we'd call Wall Street and we you know, we'd

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Speaker 1: do the trades right there and when we're done, we

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Speaker 1: would go back to our research. And also dabbled in

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Speaker 1: a little portfolio management. At the time, I ran a

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Speaker 1: Mexican peso denominated portfolio believe it or not. So it

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Speaker 1: was a really great boot camp, and you know, I

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Speaker 1: had a really interesting manager there who was really disciplined people.

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Speaker 1: In terms of research, it was deep dive research. We

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Speaker 1: did a really good job.

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Speaker 2: Huh. Really interesting. So, from Century Bank to Liberty Mutual,

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Speaker 2: the rest of your career has been primarily on the

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Speaker 2: fixed income side. Was that happenstance? By design? What led

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Speaker 2: to that outcome?

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Speaker 1: You know, I think it just was a natural fit

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Speaker 1: for me, you know, with the training as a as

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Speaker 1: a commercial bank analyst, and then it just really kind

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Speaker 1: of fascinated me more. And so I think, you know,

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Speaker 1: my skill set when I was, you know, approaching employers,

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Speaker 1: it just naturally gravitated towards the fixed income area. And

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Speaker 1: for me, surprising to say, it's a little bit more

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Speaker 1: exciting than stocks, and the stocks are interesting, but there's

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Speaker 1: so many different facets to fixed income. It's become highly

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Speaker 1: much more specialized. But I'm fortunate. I span a lot

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Speaker 1: of different areas, you know, my career, which has been.

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Speaker 2: So let's talk about that. So not only a head

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Speaker 2: of the full discretionary team, and we'll get to exactly

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Speaker 2: what that means in a bit, but you run ten

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Speaker 2: different mutual funds and ten institutional strategies. I assume there's

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Speaker 2: a lot of overlap, and it covers the spectrum of

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Speaker 2: fixed income from treasuries here to high you'el there, and everything.

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Speaker 1: In between, everything in between globally, So we're kind of

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Speaker 1: an eclectic group, you know, in terms of investment style.

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Speaker 1: It sounds like there's a lot of strategies that we do,

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Speaker 1: and that's true, but really there's the same common investment

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Speaker 1: engine underneath it, and that's really what we're focused on.

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Speaker 1: I spend most of my time on that. And what

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Speaker 1: does that mean. It means the frameworks and the investment

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Speaker 1: processes that we put in place provide through that provide

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Speaker 1: the raw materials for investing. That's views on rates, you know,

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Speaker 1: where you want your duration to be, et cetera, Views

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Speaker 1: on the value in certain sectors, views on individual securities,

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Speaker 1: you know. So that's the raw material that we get

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Speaker 1: and then we can mix and match that to our

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Speaker 1: various portfolios, most of our portfolios. Really it's a spectrum,

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Speaker 1: just to kind of think about it. And it's a

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Speaker 1: spectrum for I would say lower risk to a higher

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Speaker 1: degree of risk. That's usually but not always defined by

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Speaker 1: the quality that you can invest in. So as you

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Speaker 1: go down more non investment great for example.

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Speaker 2: Huh So I like the idea of this engine as

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Speaker 2: the underlying driver of all these different strategies. It's not

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Speaker 2: that there are ten completely novel approaches and ten different funds.

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Speaker 2: It's really the core and you're just playing with how

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Speaker 2: much returns you want and how much risk you have

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Speaker 2: to take to get that, what sort of duration you're

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Speaker 2: looking at, what sort of geographies. But the underlying engine

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Speaker 2: is the same across all these different portfolios.

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Speaker 1: That's right, that's right. And you know we can expand

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Speaker 1: that risk depending on the client. And so when you

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Speaker 1: look across our least risky RAN, we run a really

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Speaker 1: great core plus product. It's a bit more out there

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Speaker 1: than the typical court plus that you'll see, you know,

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Speaker 1: other words got cor plus meaning treasury treasure corporates, you know,

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Speaker 1: but we don't do for example, we don't do a

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Speaker 1: lot of agency. We don't know agency works back securities.

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Speaker 1: We definitely tilt into corporates. That's our you know, our

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Speaker 1: bread and butter. What Loomis is known for our research.

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Speaker 1: Uh and so that'll have you know, the least amount

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Speaker 1: of risk, let's say, relative to say a multisector bond

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Speaker 1: fund style portfolio or strategic income that's going to tilt down.

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Speaker 1: But when you look across those, you'll see commonalities in

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Speaker 1: terms of interest rate, positioning, names, exposures from a top

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Speaker 1: down and a bottom up perspective.

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Speaker 2: So you are now the head of the discretion team.

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Speaker 2: Tell us what that means. Certain funds have discretion, others don't.

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Speaker 2: I think the average lay person is not familiar with

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Speaker 2: discretion in that context.

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Speaker 1: You know, the business sometimes does a poor job of

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Speaker 1: labeling things, and this is not no different, you know.

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Speaker 1: And the way I kind of describe it is that,

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Speaker 1: you know, a more constrained approach is typically something wrapped

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Speaker 1: around it index, you know, And a lot of our

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Speaker 1: competitors in the core plus space are like this. They

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Speaker 1: take a benchmark. In that case, the Agrid index is

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Speaker 1: bi bar the most common one used, and they'll have

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Speaker 1: a very low tracking, or that they'll just ebb and

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Speaker 1: flow with pretty much the beta that's you know, assigned

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Speaker 1: to that with maybe generating a little bit of excess

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Speaker 1: return for the good managers that are there. You know,

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Speaker 1: when you start to get into something that has full discretion,

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Speaker 1: the client says, Okay, let's sort of go or lean

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Speaker 1: into your opportunity set where your skills are. Let's allow

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Speaker 1: you to do more and have a wider degree of

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Speaker 1: risk and off benchmarkting sector. And that's where that full

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Speaker 1: discretion notion. So when you think of core plus, it's

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Speaker 1: those plus sectors, non investment grade, you know, emerging markets,

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Speaker 1: things like that that somebody was looking to you to

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Speaker 1: have discretion. But full discretion doesn't mean you don't have

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Speaker 1: any limits, right you still we all have constraints, right,

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Speaker 1: there's always constraints.

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Speaker 2: So the phrase I always hear is it's an unconstrained fund.

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Speaker 2: What's the difference between constraints and discretion or or they

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Speaker 2: just really the same terms to me?

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Speaker 1: They can be used interchangeably. I think the nomenclature typically,

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Speaker 1: you know when I started and multisector for example, has changed.

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Speaker 1: We run the bond fund, which is kind of a

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Speaker 1: go anywhere strategy or strategy come. Those used to be

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Speaker 1: called multisector even before they were medium grade or something

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Speaker 1: like that.

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Speaker 2: See today when I think of multisector, I think of corporates, treasuries,

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Speaker 2: high yield equities, and private including private credit. All that

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Speaker 2: seems to be multi sector unconstrained.

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Speaker 1: Yeah, it's this is where the nomenclature changes over time.

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Speaker 1: I've known and it causes some confusion. And then you

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Speaker 1: know what emerged too, and I launched one of these

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Speaker 1: over ten years ago. Is that unconstrained or non traditional space.

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Speaker 1: That was the you know, what's the difference between unconstrained

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Speaker 1: and multisector. Well, there's not really that much difference. The

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Speaker 1: young constraint typically does not have a benchmark. That was

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Speaker 1: one aspect of it. So so does.

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Speaker 2: That mean it's an absolute return fund? Yes, so, and

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Speaker 2: then we'll care about relative performance and what's.

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Speaker 1: The difference between absolute return and total return? In some ways,

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Speaker 1: because like the bond fund we're looking, I don't really

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Speaker 1: manage on a tracking your I don't like managing on

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Speaker 1: a relative return. Let's say, you know, like it's like, oh,

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Speaker 1: mister client, you know, we outperformed your index was down

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Speaker 1: ten percent and we were only down nine That's not

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Speaker 1: really a great outcome, right, Right. We're looking to make money,

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Speaker 1: and that's absolute return or total return, whatever you want

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Speaker 1: to call it.

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Speaker 2: That's what we see. We talk about jargon and confusing labels.

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Speaker 2: To me, total return on the equity side is equity

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Speaker 2: plus dividends. As on the bond side, it means something else.

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Speaker 1: Income, right, income and principal return.

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Speaker 2: That's right. So you've spent more than twenty seven years

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Speaker 2: at Loomis Sales and Company. That's rather unusual these days.

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Speaker 2: What has kept you around so long? What's it like

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Speaker 2: growing with the firm that that's been in business? You're

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Speaker 2: coming up on one hundred years.

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Speaker 1: Sometimes you're you know, you're you're looking and doing your

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Speaker 1: job and you wake up, you know, you look up

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Speaker 1: and you go, wow, I've been here this long. It's

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Speaker 1: been fun. I've enjoyed it. You know. When I first

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Speaker 1: came to Loomis, you know, I encountered this guy named

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Speaker 1: Dan Fuss, and I was to me, it was like

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Speaker 1: a duck to water. I just took to his style.

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Speaker 1: I can't imagine doing investing any of the way. It

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Speaker 1: just suited me to.

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Speaker 2: Attend and he is a little bit of a legend

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Speaker 2: this and he.

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Speaker 1: Is a he is a legend.

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Speaker 2: Yeah, he's been around a while. And how long have

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Speaker 2: you did you work with him?

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Speaker 1: Well, the funny story, when I first came to Loomis interviewed,

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Speaker 1: there was a sort of an arms race for research

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Speaker 1: analysts on the street on the by side. At that

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Speaker 1: point in time, Wall Street had tons of research analysts,

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Speaker 1: but the by side was really ramping up. And I

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Speaker 1: had a lot of opportunities to interview and one of

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Speaker 1: them was at Looma Sales and I got the job

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Speaker 1: and a fella helped me, This guy, Dan Holland at

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Speaker 1: Golden Sacks was instrumental helping me and took at the job.

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Speaker 1: And I'm like, well, there's this guy Dan Fuss there

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Speaker 1: and I know I don't really know him that well,

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Speaker 1: but he's sixty five, let's say. At the time, he said,

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Speaker 1: I don't know, you know, it seems like he's really

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Speaker 1: a key marque part of that firm. Maybe there's a

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Speaker 1: risk there. And Dan told me was great advice, He said,

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Speaker 1: Matt five years as an eternity, take the job. So

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Speaker 1: many eternities later, because Dan worked is still working. He's

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Speaker 1: ninety really yeah, he could still comes out here.

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Speaker 2: Bless him.

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Speaker 1: He stopped managing money a while ago. But never did

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Speaker 1: I expect what was to come, and nor did I

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Speaker 1: expect that I would become a successor for him. That

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Speaker 1: was the entry point. And I'll tell you a story.

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Speaker 1: But when I first came, there was not seven ninety eight, Okay,

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Speaker 1: the Asian crisis was just getting going. Remember the tie

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Speaker 1: Bot the value it went down like fifty percent, and

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Speaker 1: you know LTCM was going to hit Russia default and

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Speaker 1: so it was you know, bonds were coming out, and

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Speaker 1: back then there was the the Brady bond market was

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Speaker 1: still big. Brazilian Sea bond was the most liquid bond

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Speaker 1: in the universe. The market was going down, and I

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Speaker 1: witnessed Dan with a big smile on his face in

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Speaker 1: the trading room in the morning meetings. I'd go there

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Speaker 1: and he would be snapping up all these bargains. Our

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Speaker 1: portfolios went from you know, close to zero in the

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Speaker 1: Asian market to reaching like we were talking about constraints,

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Speaker 1: reaching the limits that we could do by specified by

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Speaker 1: the guidelines at thirty thirty five percent, right, And so

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Speaker 1: that was a huge lesson for me, first of all,

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Speaker 1: I said, this is where I want to be. What

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Speaker 1: he was doing there was providing liquidity to illoquin markets.

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Speaker 1: Now I participated in some of that as a research

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Speaker 1: analyst by looking at companies like Total Access Communications, a

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Speaker 1: tie wireless comme, PLD, Philippine long Distance Telecom. It's like

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Speaker 1: AT and TuS.

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Speaker 2: And all these companies have fixed income.

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Speaker 1: They had fixed income, and they're trading wavelessens in the

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Speaker 1: dollar sense of dollar. In the case of Total Access Communication,

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Speaker 1: bought the stock at eleven cents, went to five.

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Speaker 2: You know, it's a five cents or five dollars dollars.

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Speaker 2: That's a good rate.

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Speaker 1: Yeah, I should have specified that. So these were you know,

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Speaker 1: like in my formative stages like as a as a

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Speaker 1: research channelst and becoming you know, not just a research

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Speaker 1: chanalyst in making calls or you know, sort of opining

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Speaker 1: on the credit quality or the opportunities and risks of

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Speaker 1: a particular credit. It's really becoming an investor. And that's

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Speaker 1: that's sort of what they end taught me.

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Speaker 2: I love the expression providing liquidity to ill liquid markets,

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Speaker 2: which usually means picking up things at fractions of their

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Speaker 2: actual value. The same phrase was during the financial crisis

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Speaker 2: when people talked about toxic assets, and my answer was always,

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Speaker 2: there's no such thing as a toxic asset. It is

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Speaker 2: only a toxic price. At the right price, everything has value.

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Speaker 1: Without a doubt, and it introduced me to sort of

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Speaker 1: that concept of margin and safety. A lot of people

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Speaker 1: talk about it, but with bonds it's really interesting, particularly

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Speaker 1: the corporate bonds. As the dollar prices come down, your

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Speaker 1: risk goes down because there's a recovery. In the worst

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Speaker 1: case scenario, you end up you know, owning the company basically, right.

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Speaker 1: So the recovery value, and sometimes those recovery values are

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Speaker 1: the trading value you could come close to or if

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Speaker 1: not below, the actual recovery value in those situations. So

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Speaker 1: because like a quant person would come in and say, oh,

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Speaker 1: your value at risk is going bonkers right now, you know,

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Speaker 1: of all, if your portfolio is nine percent and you're backwards,

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Speaker 1: it's like, no, no, this is the time you want

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Speaker 1: to go. And in fact, at that point the returns

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Speaker 1: are skewed in your favor. Before looking returns, huh.

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Speaker 2: Really fascinating. So let's talk a little bit about the

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Speaker 2: team you work with. Your head of the full discretion team.

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Speaker 2: What does the team do, how are they working with

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Speaker 2: various funds and strategies, and how do they work with client?

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Speaker 1: Right, So we're managing roughly about seventy four billion dollars

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Speaker 1: and fixing come portfolio. We have four main product categories.

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Speaker 1: That talked about our Core plus offering, which is our

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Speaker 1: largest over twenty eight billion dollars, and then it goes

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Speaker 1: into sort of multisector, and then after that you're into

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Speaker 1: the high yield. We do all our dedicated high land

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Speaker 1: BANKO and investing as well. Like I said, we're pretty eclectic.

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Speaker 1: We tend to not look like our benchmarks. We have

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Speaker 1: a lot of discretion to go outside, and we're you know,

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Speaker 1: really interested in just generating the best total returns we

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Speaker 1: can from a very wide opportunity set.

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Speaker 2: Really really interesting. You talk a bit about various strategies

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Speaker 2: across all the funds. I want to dive into these

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Speaker 2: and get a handle on what they mean. So I

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Speaker 2: often see the phrase research driven, bottom up approach. I

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Speaker 2: assume that means we're not making big macro calls. We're

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Speaker 2: looking at quality, we're looking at duration, we're looking at risk.

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Speaker 1: Right, I mean it's hard to get away from macro

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Speaker 1: calls altogether. Fixing come portfolio for example, duration is a

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Speaker 1: big call you got to but you know a lot

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Speaker 1: of our alpha are so called total access. Sort of

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Speaker 1: return is driven buy our bottom up security selection and

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Speaker 1: that comes through really excellent research. When you look at

433
00:21:05,840 --> 00:21:09,560
Speaker 1: our process, we do think about a macro. We are

434
00:21:09,680 --> 00:21:12,200
Speaker 1: credit cycle investors. As I said before, we lean into

435
00:21:12,200 --> 00:21:14,040
Speaker 1: the credit markets. Where we're going to make our money

436
00:21:14,119 --> 00:21:18,000
Speaker 1: is tilting into risk. So for us, you know, most

437
00:21:18,040 --> 00:21:20,280
Speaker 1: of our intermediate quality is going to be triple B

438
00:21:20,400 --> 00:21:22,720
Speaker 1: average quality of our portfolios.

439
00:21:23,240 --> 00:21:25,040
Speaker 2: So that's a little below of investment.

440
00:21:25,280 --> 00:21:27,679
Speaker 1: Yeah, and we think that it really makes sense to

441
00:21:27,800 --> 00:21:32,520
Speaker 1: tilt in through the cycle. Okay, to get that spread premium,

442
00:21:32,560 --> 00:21:35,280
Speaker 1: you get compensated for it as an investor. You know,

443
00:21:35,320 --> 00:21:37,840
Speaker 1: maybe it's only one hundred or two hundred basis points,

444
00:21:37,840 --> 00:21:40,320
Speaker 1: but compound that over five years you got more than

445
00:21:40,320 --> 00:21:43,720
Speaker 1: double the money. It's significant. Yes, The key is to

446
00:21:43,920 --> 00:21:47,399
Speaker 1: not to avoid permanent losses, and that's where you know

447
00:21:47,480 --> 00:21:49,960
Speaker 1: the individual security selection comes out. We tend to be

448
00:21:50,080 --> 00:21:52,960
Speaker 1: concentrated in those so we when we find something we like,

449
00:21:53,440 --> 00:21:56,000
Speaker 1: we'll buy it relatively big size, not as big as

450
00:21:56,000 --> 00:21:58,159
Speaker 1: they say a forty You know, you look at the stocks,

451
00:21:58,200 --> 00:22:00,760
Speaker 1: you might say something like a thirty five star portfolio.

452
00:22:00,800 --> 00:22:02,400
Speaker 1: You can't do that in the fixed income. You got

453
00:22:02,400 --> 00:22:05,920
Speaker 1: to diversify more. But that's what we seek to do.

454
00:22:06,480 --> 00:22:10,200
Speaker 2: Opportunistic we'll get to value driven That is so interesting

455
00:22:10,760 --> 00:22:14,399
Speaker 2: on the fixed income side and so different than what

456
00:22:14,480 --> 00:22:17,720
Speaker 2: people mean when they say value inequity. What are you

457
00:22:17,760 --> 00:22:20,720
Speaker 2: getting paid for the risk you assume and fixed income?

458
00:22:20,880 --> 00:22:24,920
Speaker 2: Like if we look currently, especially with an inverted yield curve,

459
00:22:25,560 --> 00:22:28,640
Speaker 2: you're not getting paid a lot for very long duration,

460
00:22:29,840 --> 00:22:33,320
Speaker 2: but there's some risk with very short duration that hey,

461
00:22:33,359 --> 00:22:37,040
Speaker 2: if the Fed decides to eventually one of these days

462
00:22:37,240 --> 00:22:41,480
Speaker 2: cut rates, well, your short term duration now you have

463
00:22:41,520 --> 00:22:44,879
Speaker 2: reinvestment risk. How do you think of value relative to

464
00:22:44,960 --> 00:22:45,680
Speaker 2: fixed income?

465
00:22:45,840 --> 00:22:47,720
Speaker 1: You bringing up a point. There are a lot of

466
00:22:47,720 --> 00:22:50,320
Speaker 1: different types of risk premium and fixed income more so

467
00:22:50,359 --> 00:22:52,520
Speaker 1: than there are just in the stock market. And that's

468
00:22:52,640 --> 00:22:55,919
Speaker 1: interesting because you can build really interesting portfolios that have

469
00:22:56,400 --> 00:22:59,879
Speaker 1: different risk factors that co vary very well together, not

470
00:23:00,080 --> 00:23:04,320
Speaker 1: perfectly correlated. So that's diversification. So let's just focus on

471
00:23:04,359 --> 00:23:06,600
Speaker 1: the interest rate risk premium that you're talking about. You

472
00:23:06,600 --> 00:23:09,159
Speaker 1: bring up a good point here, So first, and I've

473
00:23:09,240 --> 00:23:11,480
Speaker 1: learned a lot of this from Dan, But you think

474
00:23:11,520 --> 00:23:13,920
Speaker 1: about this. Let's take a big, big step back about

475
00:23:14,000 --> 00:23:16,240
Speaker 1: interest rates. You know, we all know for a long

476
00:23:16,320 --> 00:23:21,800
Speaker 1: time your concept of reinvestment rate risk and principle risk

477
00:23:22,200 --> 00:23:25,159
Speaker 1: are the key big picture risks that you take in

478
00:23:25,200 --> 00:23:29,160
Speaker 1: fixed income for many decades. You know, after the poll

479
00:23:29,280 --> 00:23:33,640
Speaker 1: Vocar slayed inflation, right, your biggest risk. People really didn't

480
00:23:33,720 --> 00:23:36,240
Speaker 1: understand this, but your biggest rist of reinvestment rate risks.

481
00:23:36,040 --> 00:23:38,560
Speaker 2: Right, especially when you're in a thirty year market where

482
00:23:38,640 --> 00:23:42,280
Speaker 2: rates continue to fall. I remember my father in law

483
00:23:42,359 --> 00:23:46,280
Speaker 2: saying to me back in like two thousand, he had

484
00:23:46,320 --> 00:23:50,719
Speaker 2: a bunch of NYC GEO bonds that were fifteen percent

485
00:23:50,800 --> 00:23:53,240
Speaker 2: when New York City was in trouble, and he's like,

486
00:23:53,240 --> 00:23:54,720
Speaker 2: what can I do with this? I'm like, ah, we

487
00:23:54,760 --> 00:23:56,920
Speaker 2: get six and a half seven on a treasury. He's

488
00:23:56,960 --> 00:23:59,280
Speaker 2: like seven percent. That's why would I want seven percent

489
00:24:00,119 --> 00:24:01,920
Speaker 2: going lower? We'll talk in a few years it will

490
00:24:01,920 --> 00:24:04,400
Speaker 2: be five percent, no, can't be yes?

491
00:24:04,640 --> 00:24:07,360
Speaker 1: Yes, yes, So rates start came down more and more

492
00:24:07,440 --> 00:24:09,800
Speaker 1: more than people are expecting over time. You know, it's

493
00:24:09,840 --> 00:24:13,040
Speaker 1: interesting Dan used to run a ten year duration in

494
00:24:13,080 --> 00:24:15,719
Speaker 1: his portfolio. That's for people to know, that's very difficult

495
00:24:15,760 --> 00:24:18,160
Speaker 1: to do. You have to buy basically thirty years zeros

496
00:24:18,480 --> 00:24:20,320
Speaker 1: right to kind of get you out there, and he

497
00:24:20,400 --> 00:24:22,879
Speaker 1: was doing that in the Canadians bond market zero. So

498
00:24:22,920 --> 00:24:25,000
Speaker 1: it was very interesting. People ask them, well, well, you

499
00:24:25,000 --> 00:24:27,359
Speaker 1: don't manage duration just sort of artifact of your PORTFOLI.

500
00:24:27,400 --> 00:24:30,600
Speaker 1: He's like, no, no, no, I want to maximize that because

501
00:24:30,640 --> 00:24:34,520
Speaker 1: I want to capture this yield for as long as possible.

502
00:24:35,080 --> 00:24:37,520
Speaker 1: Don't worry about the cycles. You're going to have lower

503
00:24:37,560 --> 00:24:40,600
Speaker 1: lows and lower highs. And that persisted until about two

504
00:24:40,640 --> 00:24:44,120
Speaker 1: thousand and three. Remember the conundrum, the bond conundrum. Right

505
00:24:44,200 --> 00:24:46,600
Speaker 1: rates started getting really lower. It was kind of back then,

506
00:24:46,600 --> 00:24:48,120
Speaker 1: even approaching the lower bound.

507
00:24:48,080 --> 00:24:51,600
Speaker 2: That whole excess savings nonsense we heard from at least

508
00:24:51,640 --> 00:24:53,960
Speaker 2: I thought it was nonsense. Fixed income people might have a.

509
00:24:54,040 --> 00:24:57,159
Speaker 1: Right and so then now you had to get to

510
00:24:57,240 --> 00:24:59,760
Speaker 1: a point where you start, okay, now you have to

511
00:24:59,760 --> 00:25:02,240
Speaker 1: start considering the principal risk. Now, it took a long

512
00:25:02,359 --> 00:25:07,080
Speaker 1: time before principal risks has become a problem, but even

513
00:25:07,080 --> 00:25:09,560
Speaker 1: I would say even before the pandemic, there were signs

514
00:25:09,640 --> 00:25:13,199
Speaker 1: that you need to start flipping your calculus as a

515
00:25:13,200 --> 00:25:16,280
Speaker 1: fixed incoming vector investor on a secular.

516
00:25:15,880 --> 00:25:19,639
Speaker 2: Basis another word saying, hey, we've been at zero for

517
00:25:19,680 --> 00:25:23,080
Speaker 2: a long time. Eventually rates are going to go up,

518
00:25:23,600 --> 00:25:26,960
Speaker 2: and I would rather be sooner than later, because if

519
00:25:27,000 --> 00:25:32,200
Speaker 2: I wait too long, especially with long duration, rising rates

520
00:25:32,240 --> 00:25:35,920
Speaker 2: in long duration fixed income leads to capital laws.

521
00:25:36,160 --> 00:25:39,080
Speaker 1: In twenty twenty to ten years fifty basis points, we

522
00:25:39,200 --> 00:25:41,240
Speaker 1: ran a very low duration there, and you would say, well,

523
00:25:41,280 --> 00:25:43,000
Speaker 1: it wasn't a big risk because you're at the zero

524
00:25:43,240 --> 00:25:45,880
Speaker 1: lower bound. What are the chances they're going to go lower.

525
00:25:45,720 --> 00:25:46,840
Speaker 2: And you weren't getting paid for it.

526
00:25:46,840 --> 00:25:48,920
Speaker 1: And you weren't getting paid for it. Now that seems

527
00:25:48,960 --> 00:25:52,040
Speaker 1: like any decision now, but it not necessarily at the

528
00:25:52,119 --> 00:25:55,080
Speaker 1: time because people weren't sure. But that was a really

529
00:25:55,080 --> 00:25:57,040
Speaker 1: good call for us. And before you used to be

530
00:25:57,040 --> 00:25:58,960
Speaker 1: able to ride the like Dan did the tenure you

531
00:25:58,960 --> 00:26:01,720
Speaker 1: could just stay long. You can not stay short right

532
00:26:01,800 --> 00:26:04,119
Speaker 1: in this market and expect to do well over the

533
00:26:04,119 --> 00:26:06,560
Speaker 1: long run. You've got to manage through the FED cycle.

534
00:26:06,640 --> 00:26:08,600
Speaker 1: So I like to think about it as a FED cycle.

535
00:26:09,160 --> 00:26:11,719
Speaker 1: I think we're, you know, obviously coming to a cutting

536
00:26:11,760 --> 00:26:15,720
Speaker 1: cycle soon. Your risk now on reinvestment rate risk is

537
00:26:15,760 --> 00:26:17,119
Speaker 1: in the short end, and I think it's time to

538
00:26:17,200 --> 00:26:19,679
Speaker 1: kind of move out into the intermedia of the part of.

539
00:26:19,680 --> 00:26:23,040
Speaker 2: The cur I totally agree. We've sort of taken the

540
00:26:23,040 --> 00:26:26,639
Speaker 2: same approach internally. Let's go over the rest of your

541
00:26:28,080 --> 00:26:31,680
Speaker 2: core principles for the for the key strategies we briefly

542
00:26:31,680 --> 00:26:34,560
Speaker 2: mentioned multi asset. Does that include equities? That does that

543
00:26:34,600 --> 00:26:37,760
Speaker 2: include private credit? How multi is multi asset?

544
00:26:38,160 --> 00:26:41,800
Speaker 1: Multi asset does include for certain portfolios, you know, the

545
00:26:41,840 --> 00:26:44,600
Speaker 1: more risky portfolios, we can start putting in stocks, our

546
00:26:44,640 --> 00:26:48,480
Speaker 1: most risky strategic income. We can do up to thirty

547
00:26:48,680 --> 00:26:52,400
Speaker 1: five percent stocks in that portfolio. Then you go into

548
00:26:52,440 --> 00:26:55,760
Speaker 1: something called global allocation, which I manage the bonds leave

549
00:26:55,840 --> 00:26:58,000
Speaker 1: but with a couple of great equity managers and a

550
00:26:58,000 --> 00:27:00,919
Speaker 1: great global manager. On the fixed income side, that is

551
00:27:00,960 --> 00:27:04,360
Speaker 1: typically like seventy percent stocks. So we do bottom up

552
00:27:04,640 --> 00:27:05,760
Speaker 1: stock selection as well.

553
00:27:05,880 --> 00:27:10,119
Speaker 2: So in your multi asset, where you're looking at the equities,

554
00:27:10,400 --> 00:27:12,480
Speaker 2: is it a particular type of equities? Are you looking

555
00:27:12,480 --> 00:27:15,200
Speaker 2: at diven m payers, are you looking at convertibles? What

556
00:27:15,920 --> 00:27:19,280
Speaker 2: sort of equities complement the fixed income side and the

557
00:27:19,359 --> 00:27:20,200
Speaker 2: multi asid.

558
00:27:19,960 --> 00:27:23,159
Speaker 1: Yeah, you bring a good point. Equity premium can be

559
00:27:23,200 --> 00:27:26,520
Speaker 1: gotten from not just stocks but also from converts. Yeah, right,

560
00:27:26,600 --> 00:27:29,600
Speaker 1: So we do that across all our portfolios. Right, even

561
00:27:29,640 --> 00:27:32,320
Speaker 1: once that don't necessarily allow us to buy outright stocks,

562
00:27:32,320 --> 00:27:34,960
Speaker 1: we can buy convertible bonds, and we've made hay in

563
00:27:35,000 --> 00:27:37,000
Speaker 1: that market because it's I think it's less efficient.

564
00:27:38,119 --> 00:27:42,399
Speaker 2: So it's a challenging space because if done right, you

565
00:27:42,440 --> 00:27:45,280
Speaker 2: get the best of both worlds. Yes, and have done poorly,

566
00:27:45,480 --> 00:27:47,840
Speaker 2: it's the worst of both worlds. Hey, low yield, but

567
00:27:47,840 --> 00:27:50,360
Speaker 2: at least as principal risk that wants that.

568
00:27:50,720 --> 00:27:52,840
Speaker 1: Well, it's the only kind of bond that's a growth

569
00:27:52,880 --> 00:27:55,199
Speaker 1: bond too. So if you're right, you're really right. And

570
00:27:55,240 --> 00:27:58,359
Speaker 1: we've had some really great winters like cornering over the years.

571
00:27:58,400 --> 00:28:01,120
Speaker 2: Well if the underlying if the if the paying company

572
00:28:01,200 --> 00:28:07,119
Speaker 2: has some positive corporate event, well obviously the convertibles do

573
00:28:07,240 --> 00:28:09,359
Speaker 2: really well, and some of them have you know, the

574
00:28:09,440 --> 00:28:11,240
Speaker 2: terms that say, hey, well this is going to convert

575
00:28:11,320 --> 00:28:13,880
Speaker 2: at this low price. When the price is up here,

576
00:28:13,960 --> 00:28:16,640
Speaker 2: it's a win win other than having to pay the taxes.

577
00:28:16,840 --> 00:28:19,040
Speaker 1: Right, So we do that and we're very good at that,

578
00:28:19,080 --> 00:28:21,879
Speaker 1: always have been. And on the stock side, you know

579
00:28:21,920 --> 00:28:25,600
Speaker 1: we are we're fixed income investors our investors expect us

580
00:28:25,600 --> 00:28:27,639
Speaker 1: to generate yield, so that pushes us into the dibbinit

581
00:28:27,720 --> 00:28:30,679
Speaker 1: paying stocks. For the most part, I would say from

582
00:28:30,680 --> 00:28:33,680
Speaker 1: a bottom up perspective, you know, our research group does

583
00:28:33,720 --> 00:28:37,159
Speaker 1: a tremendous job at uncovering value. What I asked my

584
00:28:37,240 --> 00:28:39,440
Speaker 1: nis to do is really understand what the assets of

585
00:28:39,480 --> 00:28:42,280
Speaker 1: a company are worth. Okay, this is our fixed income analysts.

586
00:28:42,280 --> 00:28:42,400
Speaker 2: You know.

587
00:28:42,440 --> 00:28:44,720
Speaker 1: This is typically you know, you think of equity.

588
00:28:44,640 --> 00:28:46,360
Speaker 2: Meaning an event of a default. What do we end

589
00:28:46,440 --> 00:28:48,200
Speaker 2: up with as what is? Yeah?

590
00:28:48,200 --> 00:28:49,800
Speaker 1: But what is the value? Because then I can look

591
00:28:49,800 --> 00:28:52,000
Speaker 1: at the cap structure and I can say how well

592
00:28:52,120 --> 00:28:53,920
Speaker 1: is that debt cover But and then I can look

593
00:28:53,920 --> 00:28:57,160
Speaker 1: at have a view on the stock too. So oftentimes

594
00:28:57,200 --> 00:28:59,040
Speaker 1: where we see the best value is that in the

595
00:28:59,080 --> 00:29:01,920
Speaker 1: equity market. Is it is when a company is going

596
00:29:01,960 --> 00:29:05,320
Speaker 1: from say, you know, a low quality but is all

597
00:29:05,320 --> 00:29:08,840
Speaker 1: of a sudden moving up rapidly from a credit fundamental

598
00:29:08,880 --> 00:29:13,040
Speaker 1: perspective that starts to accrue eventually to the stock. It

599
00:29:13,120 --> 00:29:15,880
Speaker 1: sort of goes from sort of worry about the leverage too, Oh,

600
00:29:15,880 --> 00:29:18,080
Speaker 1: we're not worried about it. The risk premium starts to

601
00:29:18,080 --> 00:29:19,960
Speaker 1: come down stock and it starts.

602
00:29:19,720 --> 00:29:23,320
Speaker 2: To so when you're doing your fixed income corporate analysis

603
00:29:23,320 --> 00:29:28,480
Speaker 2: of bonds, you can also identify mispricing on the equity side. Absolutely, yes,

604
00:29:28,600 --> 00:29:31,200
Speaker 2: we see you know all the time that that explains

605
00:29:31,280 --> 00:29:35,160
Speaker 2: this sort of pet thesis I've had for many, many years.

606
00:29:35,680 --> 00:29:40,160
Speaker 2: A lot of my favorite equity analysts began as bond

607
00:29:40,200 --> 00:29:44,280
Speaker 2: analysts or are bond analysts with opinions on equities, and

608
00:29:44,320 --> 00:29:48,520
Speaker 2: it's very different than the equity side, perhaps because of

609
00:29:48,560 --> 00:29:52,840
Speaker 2: that exact reason. They're really in the minutia of cap table,

610
00:29:53,280 --> 00:29:57,240
Speaker 2: the corporate structure, what the priorities are, and that really

611
00:29:57,280 --> 00:29:59,560
Speaker 2: seems to provide a lot of insight into what does

612
00:29:59,640 --> 00:30:02,680
Speaker 2: this compon been really worth going forward?

613
00:30:02,880 --> 00:30:04,400
Speaker 1: I agree, we see it all the time.

614
00:30:04,680 --> 00:30:07,560
Speaker 2: So let's talk a little bit about your clients. Loomis

615
00:30:07,600 --> 00:30:11,360
Speaker 2: sales manages well over three hundred billion dollars three hundred

616
00:30:11,360 --> 00:30:13,719
Speaker 2: and thirty three hundred and forty billion dollars. Who are

617
00:30:13,760 --> 00:30:17,040
Speaker 2: your clients? I know they're primarily institutional and they're spread

618
00:30:17,040 --> 00:30:21,239
Speaker 2: out over twenty countries, is it US, Europe? Asia? Who

619
00:30:21,320 --> 00:30:22,440
Speaker 2: and where are your clients?

620
00:30:23,080 --> 00:30:25,720
Speaker 1: But most of our asset bases in North America, as

621
00:30:25,720 --> 00:30:28,600
Speaker 1: you would expect being a US manager. But we've expanded

622
00:30:28,920 --> 00:30:31,120
Speaker 1: both in Europe. Asia, I think is the biggest pot

623
00:30:31,120 --> 00:30:35,000
Speaker 1: of money outside of the United States, so we're pretty

624
00:30:35,080 --> 00:30:37,520
Speaker 1: much everywhere. We have offices now in Singapore for Loomis

625
00:30:37,560 --> 00:30:41,280
Speaker 1: offices in Singapore and in London, and that's something that's

626
00:30:41,320 --> 00:30:44,520
Speaker 1: grown as I've grown over there. It's been fun to

627
00:30:44,640 --> 00:30:47,880
Speaker 1: kind of expand internationally. My client base. Half of it

628
00:30:48,000 --> 00:30:50,840
Speaker 1: is retail. You know, we're either doing our own funds

629
00:30:50,920 --> 00:30:53,960
Speaker 1: or subadvising on that half. And you know, so we're

630
00:30:54,000 --> 00:30:56,880
Speaker 1: dealing mainly with the big wirehouses like the Merrill Lynches

631
00:30:56,880 --> 00:30:59,160
Speaker 1: of the world, et cetera. You know, the fas are

632
00:30:59,160 --> 00:31:01,880
Speaker 1: investing in the funds. That's for the most part. Oria's

633
00:31:01,920 --> 00:31:04,880
Speaker 1: two places like that. And then on the institutional side

634
00:31:04,880 --> 00:31:08,320
Speaker 1: we do of course all private pensions, somber wealth funds,

635
00:31:08,360 --> 00:31:12,960
Speaker 1: public pensions, tapped, Hartley plans, insurance, all of that.

636
00:31:13,560 --> 00:31:16,600
Speaker 2: Huh. Really interesting how often you get to London or Singapore.

637
00:31:17,040 --> 00:31:20,080
Speaker 1: I go to Asia. My wife's from Sydney. I was

638
00:31:20,120 --> 00:31:22,800
Speaker 1: just in Sydney a couple of weeks ago. Interesting contrast

639
00:31:22,840 --> 00:31:24,160
Speaker 1: between the US and Sydney right now.

640
00:31:24,160 --> 00:31:25,840
Speaker 2: But why is that?

641
00:31:26,480 --> 00:31:29,240
Speaker 1: Well, this goes back to the FED and the transmission

642
00:31:29,280 --> 00:31:31,440
Speaker 1: of policy here in the United States, we've bet what's

643
00:31:31,440 --> 00:31:33,760
Speaker 1: the the average mortgage now is like a three handle.

644
00:31:33,880 --> 00:31:37,080
Speaker 2: Yeah, So like if you look at the pool of

645
00:31:37,120 --> 00:31:40,720
Speaker 2: mortgages five percent below, it's like sixty five seventy percent

646
00:31:40,760 --> 00:31:43,040
Speaker 2: of yes, well outstanding, whereas most of the rest of

647
00:31:43,040 --> 00:31:45,600
Speaker 2: the world is variable, not fixed mortgages.

648
00:31:45,720 --> 00:31:49,040
Speaker 1: That's just it. So that transmission is muted on the

649
00:31:49,120 --> 00:31:51,840
Speaker 1: upside for when they're raising rates for the FED. On

650
00:31:51,880 --> 00:31:55,680
Speaker 1: the downside, refine it refined. Every penis some mortgage once

651
00:31:55,720 --> 00:31:57,920
Speaker 1: a long time ago before I made one coupon payment.

652
00:31:58,200 --> 00:32:00,680
Speaker 1: But that so there's a sort of asymmetry now. When

653
00:32:00,720 --> 00:32:03,840
Speaker 1: I was over in Sydney visiting family and doing some business,

654
00:32:03,880 --> 00:32:07,080
Speaker 1: you talk to people there, their mortgage bills is hitting

655
00:32:07,120 --> 00:32:09,760
Speaker 1: their pocketbuts right away a little bit of a lab

656
00:32:09,800 --> 00:32:12,640
Speaker 1: but it's killing them right now. And you know, inflation

657
00:32:12,760 --> 00:32:15,080
Speaker 1: is tough there. The same themes here are there, but

658
00:32:15,160 --> 00:32:17,960
Speaker 1: you can start to see it more there is.

659
00:32:18,320 --> 00:32:21,160
Speaker 2: That why we've seen who's cut rates over the past

660
00:32:21,200 --> 00:32:24,280
Speaker 2: few weeks. The Bank of Canada, Canada, Bank of Australia

661
00:32:24,360 --> 00:32:28,040
Speaker 2: right cb RBA has not done that. They have not yet.

662
00:32:28,160 --> 00:32:30,440
Speaker 1: Yeah, and they're even talking about raising because inflation is

663
00:32:30,440 --> 00:32:32,440
Speaker 1: still a problem there. Now. The difference there is I

664
00:32:32,520 --> 00:32:35,520
Speaker 1: got way more immigration, right, and it's a growing population.

665
00:32:35,680 --> 00:32:37,280
Speaker 1: You talk to a developer there, they have the same

666
00:32:37,280 --> 00:32:40,520
Speaker 1: housing problem. Not they just can't and you can't find

667
00:32:40,520 --> 00:32:44,240
Speaker 1: skilled labors to do the job. So that's that's where

668
00:32:44,240 --> 00:32:45,200
Speaker 1: the similarities are.

669
00:32:45,200 --> 00:32:47,440
Speaker 2: It's still a robust economy that's doing pretty well.

670
00:32:47,480 --> 00:32:50,400
Speaker 1: It's a robust economy. Yeah, so in Australia has always

671
00:32:50,440 --> 00:32:51,600
Speaker 1: been like that because that growth.

672
00:32:52,080 --> 00:32:54,520
Speaker 2: Plus they have China. They're a giant supplier to China

673
00:32:54,600 --> 00:32:58,200
Speaker 2: for commodities everything else. I would love to go to Australia.

674
00:32:58,440 --> 00:33:01,040
Speaker 2: I am just so intimidated by that flight. It's on

675
00:33:01,080 --> 00:33:04,000
Speaker 2: a flight, it's like eighteen twenty hours something crazy.

676
00:33:04,120 --> 00:33:05,440
Speaker 1: You bring a good book with you.

677
00:33:05,440 --> 00:33:07,040
Speaker 2: You've got to bring a couple of books, a couple

678
00:33:07,120 --> 00:33:10,640
Speaker 2: of movies, and some sleeping pills and you're halfway there, right.

679
00:33:11,000 --> 00:33:14,440
Speaker 2: It's it's really tough, all right. So across your career

680
00:33:14,640 --> 00:33:17,720
Speaker 2: at Loomis, for twenty seven years, you have gone from

681
00:33:17,840 --> 00:33:24,240
Speaker 2: analysts to portfolio manager to head of the full discretionary team.

682
00:33:24,840 --> 00:33:28,440
Speaker 2: Tell us what that transition was like and how are

683
00:33:28,440 --> 00:33:31,360
Speaker 2: you able to relate with some of the younger analysts

684
00:33:31,360 --> 00:33:34,040
Speaker 2: in the firm. Considering you started out where they.

685
00:33:33,880 --> 00:33:35,880
Speaker 1: Did, I kind of got lucky and that there was

686
00:33:35,920 --> 00:33:38,360
Speaker 1: an opening as a portfolio manager. And you know, I

687
00:33:38,360 --> 00:33:40,520
Speaker 1: had spent only three years in the research group. I

688
00:33:40,560 --> 00:33:42,360
Speaker 1: was sort of snake bitten as an analyst. Anything I

689
00:33:42,400 --> 00:33:44,360
Speaker 1: touched as an industry seemed to blow up. But when

690
00:33:44,400 --> 00:33:47,000
Speaker 1: I came to Loomis, I was covering oil and gas

691
00:33:47,040 --> 00:33:49,000
Speaker 1: when oil went to five dollars a barrel, right, or

692
00:33:49,040 --> 00:33:51,240
Speaker 1: ten dollars something like that, and then I also pa.

693
00:33:51,480 --> 00:33:54,480
Speaker 2: Dollars a barrel, I want to say, late nineties.

694
00:33:54,120 --> 00:33:56,960
Speaker 1: Something like that was yeah, with late nineties and on

695
00:33:57,000 --> 00:33:59,440
Speaker 1: the cover of the Economists that said five dollars with

696
00:33:59,560 --> 00:34:00,400
Speaker 1: a I'm like that.

697
00:34:00,800 --> 00:34:03,880
Speaker 2: And that was low. So it's so funny you say

698
00:34:03,880 --> 00:34:06,120
Speaker 2: that I sat in on a meeting I won't mention

699
00:34:06,200 --> 00:34:11,520
Speaker 2: the firm and listen to the market strategist slash managing

700
00:34:11,560 --> 00:34:15,040
Speaker 2: partner scream about two and three dollars oil, and I

701
00:34:15,120 --> 00:34:17,000
Speaker 2: leaned over the guy next to him, I'm like, you

702
00:34:17,040 --> 00:34:19,640
Speaker 2: will never see in the lower print of oil in

703
00:34:19,680 --> 00:34:23,200
Speaker 2: our lifetime, literally read the same nonsense that this guy

704
00:34:23,280 --> 00:34:25,960
Speaker 2: was spewing in Barns that week, and I'm like, gee,

705
00:34:26,000 --> 00:34:28,960
Speaker 2: this sounds kind of like the opposite of what you

706
00:34:28,960 --> 00:34:32,200
Speaker 2: get at the tops and equity markets. That's it. Oil

707
00:34:32,280 --> 00:34:34,319
Speaker 2: is bottomed, and that was fair enough.

708
00:34:34,360 --> 00:34:36,000
Speaker 1: It was, yeah, and so we made some good money.

709
00:34:36,160 --> 00:34:38,160
Speaker 1: We made tons of money of chutspeak energy back then

710
00:34:38,200 --> 00:34:40,880
Speaker 1: and the Asian crisis. Have made a lot of money

711
00:34:40,960 --> 00:34:43,520
Speaker 1: with Dan in the trading desk. At that time. I

712
00:34:43,600 --> 00:34:46,160
Speaker 1: also covered wireless telecoms, so that entered into a you know.

713
00:34:47,000 --> 00:34:49,799
Speaker 1: So anyways, I had a lot of swings there that

714
00:34:49,840 --> 00:34:51,560
Speaker 1: went really well, and I was asked to manage money

715
00:34:51,600 --> 00:34:54,239
Speaker 1: with Dan and I didn't expect it at that time,

716
00:34:54,280 --> 00:34:56,520
Speaker 1: but it just happened, and so I fell into that.

717
00:34:57,680 --> 00:34:59,480
Speaker 1: Back then, it was a lot different. You ate what

718
00:34:59,520 --> 00:35:01,440
Speaker 1: you killed. What I mean by that is you were

719
00:35:01,440 --> 00:35:04,040
Speaker 1: loosely affiliated as a portfolio manager. You know. I basically

720
00:35:04,040 --> 00:35:06,200
Speaker 1: would hang my name up on a shingles, say Maddie

721
00:35:06,200 --> 00:35:09,040
Speaker 1: and portfolio manager, and a client would hire me right,

722
00:35:09,360 --> 00:35:12,600
Speaker 1: not necessarily Loomis, and we were loosely affiliated around like

723
00:35:12,640 --> 00:35:15,239
Speaker 1: the Dan Fuss style, and I love the Dan Fust style.

724
00:35:15,280 --> 00:35:18,520
Speaker 1: So I was investing like that. But my first opportunity

725
00:35:18,520 --> 00:35:20,520
Speaker 1: as a as a portfolio manager, you know, you had

726
00:35:20,560 --> 00:35:22,360
Speaker 1: to go where other people didn't want to go. The

727
00:35:22,400 --> 00:35:25,040
Speaker 1: other senior managers didn't want to go. So an opportunity

728
00:35:25,080 --> 00:35:27,200
Speaker 1: came up in the middle of January to go to Helsinki,

729
00:35:27,520 --> 00:35:29,160
Speaker 1: Finland for a highyield opportunity, and.

730
00:35:29,160 --> 00:35:30,480
Speaker 2: I raised me in the middle of January.

731
00:35:30,480 --> 00:35:32,560
Speaker 1: In the middle of January, which is quite interesting, is

732
00:35:32,960 --> 00:35:35,120
Speaker 1: very cold and very dark and very dark, and I

733
00:35:35,160 --> 00:35:36,680
Speaker 1: went there and I got it. It was like two

734
00:35:36,760 --> 00:35:39,120
Speaker 1: or three hundred million dollar mandate for high yield, so

735
00:35:39,600 --> 00:35:42,840
Speaker 1: that was great. At the same time, we started institutionalizing

736
00:35:42,880 --> 00:35:45,640
Speaker 1: as a business because Loomis was really created as an

737
00:35:45,640 --> 00:35:49,400
Speaker 1: investment counselor back in the day. The manager did bonds

738
00:35:49,440 --> 00:35:52,960
Speaker 1: and stocks and worked directly with that client one on one,

739
00:35:53,400 --> 00:35:55,800
Speaker 1: and we needed to institutionalize. When I first started Loomis,

740
00:35:55,800 --> 00:35:58,520
Speaker 1: we were eighty billion in AUM and we were growing

741
00:35:58,719 --> 00:36:00,920
Speaker 1: right so now we're almost three under fifty billions, so

742
00:36:01,000 --> 00:36:02,400
Speaker 1: it's been a lot of growth, and that's one of

743
00:36:02,440 --> 00:36:06,440
Speaker 1: the reasons. Growth creates opportunities right for people, So we

744
00:36:06,480 --> 00:36:10,640
Speaker 1: need institutionalize. We hired a new CEO, Cio came in

745
00:36:10,680 --> 00:36:12,960
Speaker 1: to help us do that, and we created teams and

746
00:36:13,000 --> 00:36:16,040
Speaker 1: that's when we started to create the team that you

747
00:36:16,080 --> 00:36:19,320
Speaker 1: know Dan was on. I was on Elaine Stokes. Everybody's

748
00:36:19,360 --> 00:36:21,960
Speaker 1: retired except for me, off that original team, you know.

749
00:36:21,960 --> 00:36:24,720
Speaker 1: From there, I started creating that product team that you

750
00:36:24,840 --> 00:36:29,840
Speaker 1: see over twenty people today. We institutionalized the products, the

751
00:36:29,880 --> 00:36:32,880
Speaker 1: product offerings, which really makes you think about how do

752
00:36:32,960 --> 00:36:35,879
Speaker 1: you explicitly state what the objectives are?

753
00:36:36,239 --> 00:36:36,439
Speaker 2: Right?

754
00:36:36,960 --> 00:36:40,280
Speaker 1: And then we institutionalized the framework. And I think behind

755
00:36:40,360 --> 00:36:45,600
Speaker 1: every great shop, equity bonds, whatever, behind every great manager

756
00:36:45,680 --> 00:36:48,440
Speaker 1: is a great framework, a repeatable framework.

757
00:36:48,480 --> 00:36:51,759
Speaker 2: That's the hardest thing we did developing the process that

758
00:36:51,800 --> 00:36:53,000
Speaker 2: you can do over and over again.

759
00:36:53,120 --> 00:36:56,200
Speaker 1: We had the foundation, we had it up in our brains.

760
00:36:56,239 --> 00:36:59,040
Speaker 1: The idea was to put it on paper and write

761
00:36:59,080 --> 00:37:02,040
Speaker 1: it out, and that took a long time. And then,

762
00:37:02,080 --> 00:37:04,000
Speaker 1: of course succession for Dan was a huge part of

763
00:37:04,040 --> 00:37:04,840
Speaker 1: my microphone.

764
00:37:05,160 --> 00:37:08,520
Speaker 2: So let's let's talk a little bit about what you

765
00:37:08,680 --> 00:37:13,920
Speaker 2: described as the Dan Fuss approach. I love the concept

766
00:37:14,080 --> 00:37:19,520
Speaker 2: of opportunistic investing, So a few questions. Let me just

767
00:37:19,560 --> 00:37:22,920
Speaker 2: start with explain what is the Dan Fuss approach?

768
00:37:23,239 --> 00:37:25,880
Speaker 1: Before I answer that question, let me just describe, you know,

769
00:37:25,920 --> 00:37:28,040
Speaker 1: a situation when I became a portfolio manager. I was

770
00:37:28,080 --> 00:37:29,880
Speaker 1: a credit guy, you know, I was a credit research

771
00:37:29,920 --> 00:37:32,920
Speaker 1: channels and I really liked hy yield investing. And you know,

772
00:37:33,000 --> 00:37:35,800
Speaker 1: Dan was covering all these markets and it looked really daunting.

773
00:37:35,920 --> 00:37:38,440
Speaker 1: I mean when I say everything, everything around the globe.

774
00:37:38,440 --> 00:37:41,360
Speaker 1: He was reading, you know, uh Asian papers, he was

775
00:37:41,400 --> 00:37:44,480
Speaker 1: covering Canadian bond markets and all the Ozzie bond markets,

776
00:37:44,480 --> 00:37:47,520
Speaker 1: et cetera. I said, hmm, maybe I can just do hi,

777
00:37:47,800 --> 00:37:49,399
Speaker 1: I said, Dan, you know, I think I just want

778
00:37:49,400 --> 00:37:51,640
Speaker 1: to focus on our Higeld portfolios. What do you think

779
00:37:51,640 --> 00:37:53,160
Speaker 1: about that? And Dan said, You're not going to get

780
00:37:53,160 --> 00:37:56,480
Speaker 1: away with that too easy. You're not gonna get away

781
00:37:56,480 --> 00:37:59,200
Speaker 1: with that. So you are. You are going to be

782
00:37:59,239 --> 00:38:01,239
Speaker 1: a better investor. Trust me, You're gonna be a better

783
00:38:01,320 --> 00:38:03,640
Speaker 1: vestor if you can cast a wire net. So that's

784
00:38:03,640 --> 00:38:06,480
Speaker 1: one of the first things, cast a wye net. Okay,

785
00:38:06,480 --> 00:38:08,239
Speaker 1: So I said, all right, how does he do that?

786
00:38:08,760 --> 00:38:12,600
Speaker 1: So what I started observing him and what people know

787
00:38:12,680 --> 00:38:14,799
Speaker 1: Dan very well. Most of the times when this to

788
00:38:14,880 --> 00:38:16,759
Speaker 1: this day, he still does this. He stands up in

789
00:38:16,800 --> 00:38:19,840
Speaker 1: his office and there's a sort of a table that

790
00:38:19,880 --> 00:38:25,640
Speaker 1: he's at and he charts things by hand. He charts, commodities,

791
00:38:25,880 --> 00:38:29,840
Speaker 1: bond prices, stock, all of these market information. So I

792
00:38:29,880 --> 00:38:31,759
Speaker 1: asked him to show me this and it was done

793
00:38:31,800 --> 00:38:34,160
Speaker 1: on green Ledger paper, you know, the old Green County paper.

794
00:38:34,320 --> 00:38:37,239
Speaker 1: And he started flipping this thing open and it just

795
00:38:37,320 --> 00:38:40,319
Speaker 1: flipped page after page after page. He used to have

796
00:38:40,360 --> 00:38:43,719
Speaker 1: a he has a slide ruler that he says he

797
00:38:43,800 --> 00:38:47,120
Speaker 1: used to scratch his back and also to do straight lines.

798
00:38:47,880 --> 00:38:50,440
Speaker 1: And I said, wow, right, I said, why do you

799
00:38:50,560 --> 00:38:54,040
Speaker 1: do this? He said, I learned through the end of

800
00:38:54,040 --> 00:38:57,160
Speaker 1: a pencil, okay. And what it does is it allows

801
00:38:57,200 --> 00:39:01,800
Speaker 1: you to connect disparate spots and connect points that seem

802
00:39:02,120 --> 00:39:05,879
Speaker 1: unconnected and then you see that they are connected, right,

803
00:39:06,640 --> 00:39:09,080
Speaker 1: And that's where how you learn as an investor. So

804
00:39:09,200 --> 00:39:11,520
Speaker 1: I started doing that. I did it through spreadsheets. It's

805
00:39:11,560 --> 00:39:14,120
Speaker 1: different than just looking at a chart. You pull up

806
00:39:14,120 --> 00:39:16,520
Speaker 1: a bloom chart, you look at it right, doesn't stay

807
00:39:16,560 --> 00:39:19,759
Speaker 1: with you as well. Another way method is actually either

808
00:39:19,800 --> 00:39:21,799
Speaker 1: writing it out or putting it into a spreadsheet and

809
00:39:21,920 --> 00:39:25,840
Speaker 1: looking at the data over time and tracking it economic data,

810
00:39:26,160 --> 00:39:31,400
Speaker 1: GDP data, employment data, bond prices, auction. I have auction,

811
00:39:31,920 --> 00:39:34,160
Speaker 1: you know, data going back on a spreadsheet, back to

812
00:39:34,200 --> 00:39:38,759
Speaker 1: the two thousand, So that helped me become a multisector investor.

813
00:39:39,400 --> 00:39:43,759
Speaker 2: Huh, really intriguing. I took the technical analyst course in

814
00:39:43,800 --> 00:39:47,719
Speaker 2: the nineties with Ralph Akmpora, and I had not only

815
00:39:47,800 --> 00:39:51,759
Speaker 2: heard something very similar from him to what you're describing

816
00:39:51,800 --> 00:39:55,920
Speaker 2: with Dan, but a number of traders and fund managers

817
00:39:56,000 --> 00:40:00,319
Speaker 2: and technicians all had said, I like the expression learning

818
00:40:00,320 --> 00:40:03,040
Speaker 2: from the end of a pencil. Looking at a chart

819
00:40:03,239 --> 00:40:06,200
Speaker 2: is not the same as drawing a chart. You end

820
00:40:06,280 --> 00:40:10,240
Speaker 2: up feeling something viscerally that you can't get just by

821
00:40:10,360 --> 00:40:14,120
Speaker 2: visually viewing it, especially when you're doing it every day

822
00:40:14,160 --> 00:40:17,680
Speaker 2: with a whole run of different assets. What you begin

823
00:40:17,760 --> 00:40:21,439
Speaker 2: to feel is a real rhythm, a real intuition as

824
00:40:21,480 --> 00:40:25,480
Speaker 2: to what's going on. It may look random, and often is,

825
00:40:26,000 --> 00:40:28,000
Speaker 2: but when you're doing it manually, day by day, you

826
00:40:28,080 --> 00:40:29,440
Speaker 2: kind of get a sense of what's happening.

827
00:40:29,520 --> 00:40:32,680
Speaker 1: Yeah. In fact, as it's your intuition that everybody talks about,

828
00:40:32,760 --> 00:40:34,640
Speaker 1: you start to build this kind of intuition about the

829
00:40:34,640 --> 00:40:38,040
Speaker 1: market and these funny feelings that something's going on, you know,

830
00:40:38,080 --> 00:40:40,160
Speaker 1: on the surface, and then you know, I would like

831
00:40:40,200 --> 00:40:42,239
Speaker 1: to listen to that, and you start sort of on

832
00:40:42,440 --> 00:40:44,880
Speaker 1: peeling that and it leads you to start to focus

833
00:40:44,920 --> 00:40:46,840
Speaker 1: on areas that maybe other people aren't focusing on.

834
00:40:46,880 --> 00:40:50,000
Speaker 2: That that's the art, not the science. When I think

835
00:40:50,040 --> 00:40:54,960
Speaker 2: of opportunistic investing on the equity side, it's very much,

836
00:40:55,640 --> 00:40:58,560
Speaker 2: you know, buying when there's blood in the streets. Taking

837
00:40:58,600 --> 00:41:02,560
Speaker 2: the opposite side of panic. It's a little harder tops

838
00:41:02,600 --> 00:41:05,319
Speaker 2: than bottoms. Bottoms are very visible tops or this long,

839
00:41:05,400 --> 00:41:10,120
Speaker 2: slow process, but it's really visceral and emotional and people

840
00:41:10,120 --> 00:41:12,959
Speaker 2: are panicking and I'll make a little liquidity over here.

841
00:41:13,560 --> 00:41:17,680
Speaker 2: What you described in terms of opportunistic investing on the

842
00:41:17,719 --> 00:41:24,080
Speaker 2: fixed income side seems somewhat qualitatively different. What is opportunistic

843
00:41:24,160 --> 00:41:25,840
Speaker 2: investing on the bond side.

844
00:41:26,040 --> 00:41:27,879
Speaker 1: I think it's it's similar. I mean, like I said,

845
00:41:27,880 --> 00:41:30,319
Speaker 1: we provide liquidity to illocan markets, so we're looking for

846
00:41:30,760 --> 00:41:34,160
Speaker 1: dislocations in the market and that because of greed and fear,

847
00:41:34,440 --> 00:41:40,960
Speaker 1: you know, or different differences in timing of horizons of investments.

848
00:41:41,000 --> 00:41:42,799
Speaker 1: You know, for the street is very short, you know,

849
00:41:42,800 --> 00:41:45,440
Speaker 1: we can be longer. I think you know the temperament

850
00:41:45,480 --> 00:41:49,879
Speaker 1: for my style, I think you have to really enjoy volatility.

851
00:41:50,719 --> 00:41:53,000
Speaker 1: I noticed that, well, I'm smiling when the market is

852
00:41:53,040 --> 00:41:55,680
Speaker 1: down and I think that's an important kind of trait

853
00:41:55,760 --> 00:41:59,600
Speaker 1: to have. I get antsy and kind of more grouchy. Unfortunately,

854
00:41:59,640 --> 00:42:01,600
Speaker 1: a lot of the times you're in these markets where

855
00:42:01,600 --> 00:42:03,319
Speaker 1: they're just kind of going sideways and there's not a

856
00:42:03,320 --> 00:42:06,080
Speaker 1: lot of bad right, that makes me grouchy. I try

857
00:42:06,080 --> 00:42:07,080
Speaker 1: not to bring that home.

858
00:42:06,920 --> 00:42:08,760
Speaker 2: But nauci or is it just boring?

859
00:42:08,920 --> 00:42:11,719
Speaker 1: It's boring, which makes you a little bit irritable, you know,

860
00:42:11,800 --> 00:42:14,919
Speaker 1: And I think, you know, I really enjoy I probably

861
00:42:14,960 --> 00:42:16,240
Speaker 1: would have been a good er doctor.

862
00:42:16,280 --> 00:42:17,000
Speaker 2: I like it.

863
00:42:17,040 --> 00:42:18,920
Speaker 1: You know, in twenty twenty, you know, we're in the

864
00:42:18,960 --> 00:42:22,839
Speaker 1: pandemic right right, and that's going on, and you can

865
00:42:22,880 --> 00:42:25,919
Speaker 1: buy McDonald's at seventy cents of the dollar. I love

866
00:42:25,960 --> 00:42:27,000
Speaker 1: that kind of market.

867
00:42:27,320 --> 00:42:31,080
Speaker 2: That's hilarious. That's I remember in the middle of even

868
00:42:31,120 --> 00:42:34,040
Speaker 2: the early months of eight and after being kind of

869
00:42:34,080 --> 00:42:37,280
Speaker 2: a goat for a year saying warning, hey, it's coming.

870
00:42:37,440 --> 00:42:39,080
Speaker 2: I don't know exactly when it's going to start, but

871
00:42:39,560 --> 00:42:43,000
Speaker 2: you could see this can't last. In eight I used

872
00:42:43,000 --> 00:42:46,280
Speaker 2: to play free Falling by Tom Petty on the computer

873
00:42:46,880 --> 00:42:50,799
Speaker 2: and one of the older senior people said, listen, I

874
00:42:50,880 --> 00:42:54,560
Speaker 2: understand what you went through, and you're finally getting a

875
00:42:54,560 --> 00:42:57,480
Speaker 2: little come up in for everybody who doubted the analysis.

876
00:42:58,040 --> 00:43:01,319
Speaker 2: But people are getting fired blood in the streets. You

877
00:43:01,400 --> 00:43:04,400
Speaker 2: got to take it down, right, so that like smile

878
00:43:04,520 --> 00:43:06,759
Speaker 2: is like okay, you got to kind of exactly got

879
00:43:06,760 --> 00:43:08,480
Speaker 2: to kind of keep it on the inside. But when

880
00:43:08,480 --> 00:43:11,400
Speaker 2: I was younger and dumber, I didn't realize that. Now

881
00:43:11,400 --> 00:43:13,560
Speaker 2: I'm older and dumber, and I kind of figured some

882
00:43:13,640 --> 00:43:16,080
Speaker 2: of that out. So let's talk about the state of

883
00:43:16,120 --> 00:43:19,080
Speaker 2: the bond market. You and I kind of began around

884
00:43:19,120 --> 00:43:23,480
Speaker 2: the same time, around mid nineties. We were the beneficiary

885
00:43:23,760 --> 00:43:29,319
Speaker 2: of Paul Volker's breaking the back of inflation. For anybody

886
00:43:29,360 --> 00:43:33,240
Speaker 2: who has been working in markets for most of the past,

887
00:43:33,760 --> 00:43:39,359
Speaker 2: you know, forty years, rates primarily trended downwards. How does

888
00:43:39,400 --> 00:43:43,440
Speaker 2: that impact how you think about fixed income? Sure, there

889
00:43:43,480 --> 00:43:46,080
Speaker 2: have been occasional spasms upwards, and we'll talk about the

890
00:43:46,120 --> 00:43:49,759
Speaker 2: twenty twenties next, But what does that framework do to

891
00:43:50,600 --> 00:43:54,120
Speaker 2: how you were running a bond portfolio in a multi

892
00:43:54,239 --> 00:43:57,000
Speaker 2: decade long bond bull market.

893
00:43:57,920 --> 00:44:00,359
Speaker 1: Right, Well, you know, of course went into the Q years,

894
00:44:00,360 --> 00:44:02,319
Speaker 1: and you know you had to look at like real

895
00:44:02,440 --> 00:44:05,040
Speaker 1: What QUI does is it pulls real rates into the

896
00:44:05,080 --> 00:44:07,680
Speaker 1: negative market and the Fed basically sells set tells you

897
00:44:07,800 --> 00:44:10,600
Speaker 1: do something else, go by risk. Right, during those periods,

898
00:44:10,640 --> 00:44:12,400
Speaker 1: we just had to follow what the Fed was doing,

899
00:44:12,680 --> 00:44:15,200
Speaker 1: you know, and if they were providing liquidity in the market,

900
00:44:15,200 --> 00:44:17,000
Speaker 1: you could feel pretty comfortable taking risk.

901
00:44:17,239 --> 00:44:19,520
Speaker 2: And that's literally the past twenty years. You got to

902
00:44:19,560 --> 00:44:23,120
Speaker 2: go back to the two thousand and one recession and

903
00:44:23,120 --> 00:44:27,160
Speaker 2: then September eleventh, we were pretty close to zero for decades.

904
00:44:27,320 --> 00:44:29,879
Speaker 1: Yeah, so we know the bond market really changed during

905
00:44:29,880 --> 00:44:31,640
Speaker 1: that and you remember, you know, you used to earn

906
00:44:31,719 --> 00:44:33,360
Speaker 1: you know, you think about the Yeld curve around the

907
00:44:33,360 --> 00:44:36,120
Speaker 1: classical thinking thought processes, what the FED doing, what the

908
00:44:36,120 --> 00:44:39,040
Speaker 1: economy is doing. During those Q years, you just worried

909
00:44:39,040 --> 00:44:40,640
Speaker 1: about what the balance sheet of the FED look like,

910
00:44:40,840 --> 00:44:43,879
Speaker 1: is it expanding or contracting? And that pretty much told

911
00:44:43,920 --> 00:44:46,839
Speaker 1: you what to do. Really, I think que now is

912
00:44:46,880 --> 00:44:48,600
Speaker 1: sort of in the rear view mirror for now. I

913
00:44:48,600 --> 00:44:50,359
Speaker 1: don't think it's going to come back. I think we're

914
00:44:50,400 --> 00:44:54,319
Speaker 1: in a different type of market where people who have

915
00:44:54,520 --> 00:44:58,520
Speaker 1: not witnessed an era where inflation is driving more decisions.

916
00:44:58,560 --> 00:45:01,120
Speaker 1: I think you really should look, you know, at longer history.

917
00:45:01,440 --> 00:45:03,120
Speaker 1: I was telling some of the younger people, like, do

918
00:45:03,239 --> 00:45:08,600
Speaker 1: not try to expect to extrapolate what's going to happen

919
00:45:08,640 --> 00:45:11,440
Speaker 1: based on recent I mean I'm talking like decade or

920
00:45:11,440 --> 00:45:13,440
Speaker 1: two type of bond markets.

921
00:45:13,480 --> 00:45:15,919
Speaker 2: Mean, reversion doesn't mean going back to zero, it means

922
00:45:15,920 --> 00:45:17,640
Speaker 2: it goes to five percent, right.

923
00:45:17,520 --> 00:45:19,560
Speaker 1: So I think that you know, it kind of goes

924
00:45:19,600 --> 00:45:22,640
Speaker 1: back to that concept we were talking about reinvestment rate

925
00:45:22,719 --> 00:45:25,600
Speaker 1: risk and principal risk. Now going forward, your biggest concern

926
00:45:25,680 --> 00:45:29,279
Speaker 1: or your challenge, and it's manageable, is how do you

927
00:45:29,280 --> 00:45:32,080
Speaker 1: preserve principle while getting to a higher level yield. So

928
00:45:32,120 --> 00:45:34,480
Speaker 1: you think of today's market, it used to be we

929
00:45:34,480 --> 00:45:38,640
Speaker 1: were walking down a steep staircase. It was going down, down, down.

930
00:45:38,840 --> 00:45:41,640
Speaker 1: Now you're looking at steps going up before you.

931
00:45:41,760 --> 00:45:43,520
Speaker 2: I believe is that the new trend.

932
00:45:43,760 --> 00:45:46,280
Speaker 1: I believe it is. I think we can talk about

933
00:45:46,280 --> 00:45:48,920
Speaker 1: that there's a structural feature to this market that's going

934
00:45:49,000 --> 00:45:51,279
Speaker 1: to keep it higher for longer, let's call at least

935
00:45:51,320 --> 00:45:53,480
Speaker 1: over the next decade or so. And then there's a

936
00:45:53,480 --> 00:45:55,640
Speaker 1: cyclical component, which we can talk about in a moment.

937
00:45:55,719 --> 00:46:00,040
Speaker 1: But the structural components are there are tailwinds to in

938
00:46:00,680 --> 00:46:03,040
Speaker 1: and the biggest driver is a fiscal deficit.

939
00:46:03,280 --> 00:46:06,000
Speaker 2: I was going to ask about that we've had this

940
00:46:06,400 --> 00:46:10,840
Speaker 2: giant regime change that during those twenty years, the prime

941
00:46:10,960 --> 00:46:14,560
Speaker 2: driver was monetary policy. Now it feels like, not only

942
00:46:14,560 --> 00:46:18,320
Speaker 2: do we have a massive fiscal stimulus first with the

943
00:46:18,360 --> 00:46:21,600
Speaker 2: tax cuts under Trump and then kars Act one and two,

944
00:46:21,719 --> 00:46:25,080
Speaker 2: which were giant fiscal stimulus, but now you have Karz

945
00:46:25,120 --> 00:46:28,000
Speaker 2: Act three plus all of these ten year long the

946
00:46:28,120 --> 00:46:32,680
Speaker 2: Infrastructure Bill, the Semiconductive Bill, the Inflation Reduction Bill, whatever

947
00:46:32,719 --> 00:46:35,560
Speaker 2: the name of the bill was, that added a whole

948
00:46:35,560 --> 00:46:38,600
Speaker 2: bunch of money to the veterans' hospitals. And those are

949
00:46:38,680 --> 00:46:43,080
Speaker 2: all ten year ongoing fiscal stimulus. Is that what you

950
00:46:43,120 --> 00:46:44,320
Speaker 2: mean when you talk about.

951
00:46:44,320 --> 00:46:48,000
Speaker 1: I started this actually really predates the when I started

952
00:46:48,040 --> 00:46:50,719
Speaker 1: thinking about this. Like for example, you know, I was

953
00:46:50,719 --> 00:46:53,840
Speaker 1: always asking me during those Q years what fundamentally needs

954
00:46:53,880 --> 00:46:58,320
Speaker 1: to change for us to start thinking differently about structurally

955
00:46:58,320 --> 00:47:00,440
Speaker 1: where rates are going, because we were starting to see

956
00:47:00,760 --> 00:47:04,000
Speaker 1: labor market conditions tight. Remember around eighteen nineteen, the FED

957
00:47:04,239 --> 00:47:06,319
Speaker 1: was starting to you know, it started going the other way.

958
00:47:07,000 --> 00:47:09,319
Speaker 2: Q four eighteen was a major draw down in the

959
00:47:09,320 --> 00:47:10,720
Speaker 2: equity market almost twenty percent.

960
00:47:10,880 --> 00:47:13,360
Speaker 1: Yeah, so you could see wages were just starting to

961
00:47:13,360 --> 00:47:15,160
Speaker 1: lift up. And now all of that was hidden by

962
00:47:15,200 --> 00:47:17,719
Speaker 1: the pandemic after that. But there's a tightening in the

963
00:47:17,800 --> 00:47:21,239
Speaker 1: labor force underneath all of this, and that's the demographics.

964
00:47:21,280 --> 00:47:24,279
Speaker 1: I was reading The Great Demographic Reversal at that time

965
00:47:24,320 --> 00:47:26,520
Speaker 1: by good Heart at All. It was talking about the

966
00:47:26,560 --> 00:47:29,480
Speaker 1: aging of the population. People used to think aging the

967
00:47:29,520 --> 00:47:32,360
Speaker 1: population is deflationary. Well, he put a different spin on it,

968
00:47:32,360 --> 00:47:34,640
Speaker 1: and it kind of got me thinking. And the big

969
00:47:34,640 --> 00:47:37,640
Speaker 1: thing there is, globally in the industrialized world, this is true.

970
00:47:37,760 --> 00:47:41,120
Speaker 2: Wait, the aging of the population is deflationary or is

971
00:47:41,200 --> 00:47:46,560
Speaker 2: this not so? The traditional discussion is people get older,

972
00:47:46,640 --> 00:47:49,320
Speaker 2: they stop consuming as much as they do when they're younger.

973
00:47:49,320 --> 00:47:51,799
Speaker 2: They already own their house, the mortgage paid off, they

974
00:47:51,840 --> 00:47:56,120
Speaker 2: own their cars, they'll drive them forever, and that's somewhat deflationary.

975
00:47:56,239 --> 00:47:59,399
Speaker 2: What's the counter, Well, he talks about it's really about

976
00:47:59,400 --> 00:48:02,240
Speaker 2: the working population. And if you looked at the big

977
00:48:02,280 --> 00:48:05,239
Speaker 2: event that we had was the ascension of China to

978
00:48:05,280 --> 00:48:07,279
Speaker 2: the World Trade Organization around two thousand and one or

979
00:48:07,320 --> 00:48:09,600
Speaker 2: something like that, they brought eight hundred million people to

980
00:48:09,640 --> 00:48:12,600
Speaker 2: the working age population. So our wages in the developed

981
00:48:12,600 --> 00:48:15,960
Speaker 2: world were crushed on a you know, on a real basis.

982
00:48:15,960 --> 00:48:18,920
Speaker 2: So there was sort of stagnation in there, and their

983
00:48:18,960 --> 00:48:22,239
Speaker 2: wages grew in the emerging markets, they became richer. Now

984
00:48:22,320 --> 00:48:25,279
Speaker 2: we all know the story now that China's you know,

985
00:48:25,360 --> 00:48:29,080
Speaker 2: population is rolling over now globally in the industrialized world,

986
00:48:29,239 --> 00:48:33,160
Speaker 2: the working age population is kind of stagnant, and that's

987
00:48:33,239 --> 00:48:36,600
Speaker 2: the tightness there you're seeing there. The people who spend

988
00:48:36,760 --> 00:48:40,120
Speaker 2: are the young folks and the older folks in the

989
00:48:40,200 --> 00:48:42,720
Speaker 2: middle of the way working age populations where the saving

990
00:48:43,080 --> 00:48:46,840
Speaker 2: takes place. So as you age, you actually spend your wealth.

991
00:48:47,000 --> 00:48:48,600
Speaker 2: And so that's what's going on.

992
00:48:48,800 --> 00:48:50,239
Speaker 1: I think, you know, a lot of people will push

993
00:48:50,239 --> 00:48:52,839
Speaker 1: against that theory, and I understand a lot of that,

994
00:48:52,960 --> 00:48:55,640
Speaker 1: but I look at it anecdotally. What did we see.

995
00:48:55,680 --> 00:48:58,759
Speaker 1: We saw, you know, some unionization efforts happening in this

996
00:48:58,840 --> 00:49:01,759
Speaker 1: country for the first time, small but an Amazon and

997
00:49:01,800 --> 00:49:04,440
Speaker 1: so on. And we can feel it, you know, in

998
00:49:04,600 --> 00:49:07,560
Speaker 1: our spending it wages, you know, having necessarily kept up

999
00:49:07,600 --> 00:49:10,120
Speaker 1: with this boost and inflation, but they're continuing. So that

1000
00:49:10,200 --> 00:49:12,520
Speaker 1: was one aspect of it. The other thing was going on,

1001
00:49:12,600 --> 00:49:15,919
Speaker 1: and Trump was you know, really started more or less

1002
00:49:15,920 --> 00:49:19,920
Speaker 1: a trade war with China. Trade had been sort of

1003
00:49:20,160 --> 00:49:22,960
Speaker 1: you had the Chimerica, you know, you all understood that

1004
00:49:23,000 --> 00:49:25,480
Speaker 1: it worked well for both parties. Now we're in a

1005
00:49:25,480 --> 00:49:29,480
Speaker 1: situation where it's not working well. There's tensions there, securities

1006
00:49:29,520 --> 00:49:34,240
Speaker 1: concerns are rising, have risen. So now you have near shoring,

1007
00:49:34,760 --> 00:49:38,440
Speaker 1: you have chips war things like that. You have this

1008
00:49:38,600 --> 00:49:41,719
Speaker 1: fence spending going up. So all of these things are

1009
00:49:41,760 --> 00:49:44,000
Speaker 1: adding to that inflation. And then on top of that

1010
00:49:44,040 --> 00:49:47,240
Speaker 1: you have electrification through climate change and other factors evs,

1011
00:49:47,280 --> 00:49:47,840
Speaker 1: all of that stuff.

1012
00:49:47,840 --> 00:49:51,080
Speaker 2: Well, what's the impact of electrification, which I saw a

1013
00:49:51,120 --> 00:49:55,480
Speaker 2: chart this morning that just showed China's electrification has just

1014
00:49:55,640 --> 00:50:00,840
Speaker 2: blown everybody else away. They are moving towards full electrification

1015
00:50:01,239 --> 00:50:04,319
Speaker 2: faster than anybody else by in order of magnitude.

1016
00:50:04,480 --> 00:50:06,160
Speaker 1: Right, they're winning sort of in the battery in the

1017
00:50:06,239 --> 00:50:08,840
Speaker 1: V space. We know, we know that they're leapfrogging in

1018
00:50:08,840 --> 00:50:11,399
Speaker 1: certain areas where they can just sort of jump technologies,

1019
00:50:11,400 --> 00:50:13,160
Speaker 1: if you will. That happens a lot in the emerging market.

1020
00:50:13,280 --> 00:50:15,439
Speaker 1: So the electrification, though, you know, in the United States

1021
00:50:15,480 --> 00:50:17,400
Speaker 1: and the developed world, it's all about the grid and

1022
00:50:17,440 --> 00:50:19,880
Speaker 1: how you know, we've got to get our grid able

1023
00:50:19,960 --> 00:50:23,480
Speaker 1: to handle all these evs, all the electrification that's going

1024
00:50:23,560 --> 00:50:26,759
Speaker 1: to take place. And that's going to require just a

1025
00:50:26,960 --> 00:50:30,600
Speaker 1: massive amount of investment and also stranded assets down the road.

1026
00:50:31,280 --> 00:50:33,359
Speaker 1: So all you add all of these factors, I think

1027
00:50:33,480 --> 00:50:37,439
Speaker 1: structurally there are tailwinds to inflation. Now what I think

1028
00:50:37,480 --> 00:50:40,759
Speaker 1: that means, what the consequences of that are is that

1029
00:50:40,800 --> 00:50:46,040
Speaker 1: inflation will be unstable and so you'll have syckicality inflation.

1030
00:50:46,120 --> 00:50:47,680
Speaker 1: Think of it as like the saw tooth where the

1031
00:50:47,719 --> 00:50:51,440
Speaker 1: teeth become you know, steeper. You probably remember this. You

1032
00:50:51,440 --> 00:50:55,280
Speaker 1: have more variability in the economic cycle. Because what inflation

1033
00:50:55,520 --> 00:50:59,239
Speaker 1: does is it adds uncertainty to consumers spending. It adds

1034
00:50:59,320 --> 00:51:02,680
Speaker 1: uncertainty planning for businesses, and so you get these fits

1035
00:51:02,719 --> 00:51:06,080
Speaker 1: and starts. It's a more compacted business cycle. It makes

1036
00:51:06,120 --> 00:51:08,359
Speaker 1: it difficult or trickier for the FED to deal with.

1037
00:51:09,160 --> 00:51:10,959
Speaker 1: So I think that's what we're going to see.

1038
00:51:10,960 --> 00:51:12,200
Speaker 2: This last cycle was.

1039
00:51:12,280 --> 00:51:14,000
Speaker 1: Really weird, you know, and I think we're going to

1040
00:51:14,000 --> 00:51:16,200
Speaker 1: see more of these types of cycles, and so I

1041
00:51:16,239 --> 00:51:17,880
Speaker 1: just think you need to have that in your brain

1042
00:51:17,960 --> 00:51:21,400
Speaker 1: about how this market's going to behave and you know,

1043
00:51:21,600 --> 00:51:24,280
Speaker 1: we can talk about the cyclical component of that today

1044
00:51:24,400 --> 00:51:25,799
Speaker 1: and how you play it in the near term.

1045
00:51:26,200 --> 00:51:29,120
Speaker 2: The big counter to higher for longer. That I keep

1046
00:51:29,160 --> 00:51:33,000
Speaker 2: hearing is, you know, the things that are bringing rates

1047
00:51:33,120 --> 00:51:36,839
Speaker 2: down hasn't been higher interest rates because of the lack

1048
00:51:36,880 --> 00:51:39,480
Speaker 2: of pass through in the housing market. Although it is

1049
00:51:39,520 --> 00:51:42,680
Speaker 2: impacting the bottom half of the economic stratas credit spending,

1050
00:51:42,719 --> 00:51:46,640
Speaker 2: it'squesting them more. But wherever we look, we see these

1051
00:51:46,960 --> 00:51:51,200
Speaker 2: structural shortages. So you mentioned how tight the labor market is.

1052
00:51:51,640 --> 00:51:55,120
Speaker 2: A lot of that is a reduction in legal immigration,

1053
00:51:56,200 --> 00:51:59,640
Speaker 2: not just under Biden and under Trump, but going back

1054
00:51:59,640 --> 00:52:02,880
Speaker 2: about fifteen years that kind of post nine to eleven,

1055
00:52:02,960 --> 00:52:07,320
Speaker 2: we tightened our rules. Some people have said the entire

1056
00:52:07,640 --> 00:52:11,480
Speaker 2: jobs growth over the past few years has been primarily immigration.

1057
00:52:12,600 --> 00:52:16,720
Speaker 2: Giant shortage in housing in the United States, mostly because

1058
00:52:16,800 --> 00:52:20,560
Speaker 2: since the financial crisis, we pivoted to multifamily homes and

1059
00:52:21,040 --> 00:52:24,120
Speaker 2: didn't build enough homes to keep up with population growth,

1060
00:52:24,200 --> 00:52:27,840
Speaker 2: and suddenly there's a giant surge even things like cars

1061
00:52:27,880 --> 00:52:30,719
Speaker 2: and a shortage of semiconductors, and how long it took

1062
00:52:31,040 --> 00:52:33,960
Speaker 2: to get all that back online. We haven't had enough

1063
00:52:34,000 --> 00:52:38,440
Speaker 2: automobiles out there. That's what's elevated prices. So that's a

1064
00:52:38,600 --> 00:52:42,040
Speaker 2: long winded way to say, how much can the FED

1065
00:52:42,400 --> 00:52:47,080
Speaker 2: influence this current cycle of inflation when it's driven in

1066
00:52:47,320 --> 00:52:51,600
Speaker 2: part by so many things that are responsive to policies

1067
00:52:51,640 --> 00:52:52,880
Speaker 2: outside of the Federal Reserve.

1068
00:52:52,960 --> 00:52:55,080
Speaker 1: Yeah, and I think that's been their number one problem here.

1069
00:52:55,080 --> 00:52:57,799
Speaker 1: And there's been supply side issues. I know you've talked

1070
00:52:57,800 --> 00:53:00,919
Speaker 1: before about the housing market. Raise rates and then people

1071
00:53:00,920 --> 00:53:03,360
Speaker 1: stop building new homes, and how does that unpacked the

1072
00:53:03,400 --> 00:53:04,200
Speaker 1: supply of housing?

1073
00:53:04,280 --> 00:53:08,560
Speaker 2: It's counter you know, right, counteract raising rates makes inflation higher.

1074
00:53:09,440 --> 00:53:13,000
Speaker 1: It's a weird situation. I think all of that is true.

1075
00:53:13,280 --> 00:53:15,960
Speaker 1: I do not know for sure that we're structurally on

1076
00:53:16,000 --> 00:53:18,800
Speaker 1: a higher for longer type of scenario, higher highs and

1077
00:53:18,880 --> 00:53:21,040
Speaker 1: higher lows. That that is the way I think you

1078
00:53:21,080 --> 00:53:23,680
Speaker 1: should bet right now, based upon what I see other

1079
00:53:23,719 --> 00:53:25,520
Speaker 1: factors that I think are gonna you know, particularly on

1080
00:53:25,560 --> 00:53:28,640
Speaker 1: the democraphic side. What about AI, right, how does that

1081
00:53:28,680 --> 00:53:31,920
Speaker 1: affect you know, productivity, the productivity mirror.

1082
00:53:32,120 --> 00:53:34,360
Speaker 2: I mean outside of the AI companies, the rest of

1083
00:53:34,440 --> 00:53:35,799
Speaker 2: the marketplace.

1084
00:53:35,320 --> 00:53:37,399
Speaker 1: The rest of that, you know, just uh, how does

1085
00:53:37,400 --> 00:53:40,040
Speaker 1: it affect wages? How does it affect productivity? Can you

1086
00:53:40,120 --> 00:53:43,680
Speaker 1: actually have rising wages and rising productivity and growth without

1087
00:53:43,800 --> 00:53:46,720
Speaker 1: you know, wage inflation, Because if you don't have wage inflation,

1088
00:53:46,800 --> 00:53:48,560
Speaker 1: it's tough to get kind of like a more of

1089
00:53:48,640 --> 00:53:51,440
Speaker 1: a sort of spiral of if not a structural right,

1090
00:53:51,480 --> 00:53:54,120
Speaker 1: it's not structural. So if you if you start those

1091
00:53:54,120 --> 00:53:56,359
Speaker 1: things start to fall away, you kind of have to say, oh,

1092
00:53:56,400 --> 00:53:59,560
Speaker 1: maybe we're back to a two percent. I think it's

1093
00:53:59,600 --> 00:54:01,799
Speaker 1: it's not. I'm not talking about a reverse. I saw

1094
00:54:01,840 --> 00:54:04,280
Speaker 1: the seventies as a young you know, a young person.

1095
00:54:04,680 --> 00:54:06,880
Speaker 1: I know what that's. I'm not suggesting it it's going

1096
00:54:06,920 --> 00:54:09,279
Speaker 1: to be like that, but I just think that what's

1097
00:54:09,320 --> 00:54:11,880
Speaker 1: important for a bond investment to understand is that inflation,

1098
00:54:12,000 --> 00:54:14,840
Speaker 1: which was stuck below structurally blow too, is going to

1099
00:54:14,840 --> 00:54:18,000
Speaker 1: be above two to some level. How much I don't know,

1100
00:54:18,440 --> 00:54:20,080
Speaker 1: but I think it's going to spend more of his

1101
00:54:20,239 --> 00:54:23,440
Speaker 1: time above there. Higher for longer, in my mind means

1102
00:54:23,800 --> 00:54:29,440
Speaker 1: higher real rates and higher inflation premiums for the uncertainty

1103
00:54:29,440 --> 00:54:32,160
Speaker 1: of that inflation. So what does that mean? I think,

1104
00:54:32,239 --> 00:54:35,880
Speaker 1: for example, like on tenure today, like long term, you know,

1105
00:54:35,960 --> 00:54:37,759
Speaker 1: maybe fair value in the ten you're somewhere on four

1106
00:54:37,760 --> 00:54:38,400
Speaker 1: and a half percent.

1107
00:54:38,880 --> 00:54:43,239
Speaker 2: So that would suggest now is the time to start

1108
00:54:43,320 --> 00:54:45,160
Speaker 2: lengthening duration if you haven't already.

1109
00:54:45,560 --> 00:54:47,440
Speaker 1: Yes, and with a caveat that, I think there's going

1110
00:54:47,480 --> 00:54:50,359
Speaker 1: to be a shallow rate cutting cycle. I think they

1111
00:54:50,400 --> 00:54:52,080
Speaker 1: start at sometime at the end of this year be

1112
00:54:52,120 --> 00:54:55,440
Speaker 1: my expectation. I think the economy cyclically is losing momentum.

1113
00:54:55,680 --> 00:54:58,080
Speaker 2: You're seeing it on the consumer spending side starting to

1114
00:54:58,200 --> 00:54:58,920
Speaker 2: drift flow.

1115
00:54:58,719 --> 00:55:02,640
Speaker 1: And retail sales the while there's a lot of problems

1116
00:55:02,680 --> 00:55:04,560
Speaker 1: with the job data that I you know, can't even

1117
00:55:04,560 --> 00:55:06,560
Speaker 1: want to go into. It's hard to trust that data.

1118
00:55:06,560 --> 00:55:09,440
Speaker 1: But when you look at claims data. But even when

1119
00:55:09,440 --> 00:55:11,799
Speaker 1: you start digging into the job data, you know, you

1120
00:55:11,840 --> 00:55:15,960
Speaker 1: look at permanent job losers rising, you see you know,

1121
00:55:16,000 --> 00:55:19,360
Speaker 1: part time overtaking sort of full time. So on the

1122
00:55:19,640 --> 00:55:22,400
Speaker 1: you know it's I'm not this is not a big correction.

1123
00:55:22,520 --> 00:55:25,240
Speaker 1: Let's face it. Unployment is really low. But on the margin,

1124
00:55:25,440 --> 00:55:27,040
Speaker 1: you know you're going to see that acceleration.

1125
00:55:27,280 --> 00:55:30,239
Speaker 2: It's a robust economy. But cracks are starting to show

1126
00:55:30,280 --> 00:55:31,040
Speaker 2: in the foundation.

1127
00:55:31,360 --> 00:55:33,319
Speaker 1: And you know, like you always see, like people are

1128
00:55:33,360 --> 00:55:35,160
Speaker 1: not going to know you're let's say you go into

1129
00:55:35,160 --> 00:55:36,400
Speaker 1: a recession. I don't think it's going to be a

1130
00:55:36,400 --> 00:55:41,319
Speaker 1: full blown recession. Those numbers are revised. Like I always

1131
00:55:41,480 --> 00:55:43,319
Speaker 1: it's funny to me that we spend so much time.

1132
00:55:43,360 --> 00:55:45,440
Speaker 1: But you know, job Report Friday comes out and everybody

1133
00:55:45,440 --> 00:55:47,719
Speaker 1: trades all over the number, the most important number though,

1134
00:55:47,920 --> 00:55:50,200
Speaker 1: and a year later all those numbers are revised in

1135
00:55:50,280 --> 00:55:53,239
Speaker 1: a big, big way. Yes, and you'll often see, oh,

1136
00:55:53,280 --> 00:55:56,560
Speaker 1: we actually were losing jobs in that period of time.

1137
00:55:57,080 --> 00:55:58,680
Speaker 1: You know, I don't know if that's going to happen.

1138
00:55:58,680 --> 00:56:01,320
Speaker 1: It can go both way. It can revise to the

1139
00:56:01,400 --> 00:56:05,440
Speaker 1: upside too, But I do sense my senses that it,

1140
00:56:05,640 --> 00:56:07,440
Speaker 1: you know, looking at the tea leaves out there that

1141
00:56:07,480 --> 00:56:08,319
Speaker 1: were decelerated.

1142
00:56:08,760 --> 00:56:11,560
Speaker 2: If that's the case, then I have to ask you

1143
00:56:11,600 --> 00:56:14,359
Speaker 2: to put on your FED chairman hat and say, what

1144
00:56:14,400 --> 00:56:15,239
Speaker 2: are we waiting for?

1145
00:56:15,480 --> 00:56:18,360
Speaker 1: I think that the FED has been job owning rates

1146
00:56:19,160 --> 00:56:22,120
Speaker 1: as they Yeah, they've been job owning. So remember they

1147
00:56:22,640 --> 00:56:26,080
Speaker 1: last November time frame they did the Dubbes pivot. I

1148
00:56:26,080 --> 00:56:28,840
Speaker 1: think they did that to get ahead of the election cycle.

1149
00:56:28,920 --> 00:56:31,920
Speaker 1: I know people say, well, FED doesn't respond to elections.

1150
00:56:32,320 --> 00:56:34,799
Speaker 1: I talked to a prominent FED chairman and says, you know,

1151
00:56:34,840 --> 00:56:36,440
Speaker 1: in a week moment said, you know, you kind of

1152
00:56:36,480 --> 00:56:38,879
Speaker 1: have to take that into consideration. I do think they're

1153
00:56:38,880 --> 00:56:40,840
Speaker 1: political animals at the end of the day to a

1154
00:56:40,880 --> 00:56:41,480
Speaker 1: certain degree.

1155
00:56:41,760 --> 00:56:45,000
Speaker 2: Although they have raised in previews what they need to do.

1156
00:56:45,640 --> 00:56:49,879
Speaker 2: They've done rate changes in prior election years, but this election.

1157
00:56:49,680 --> 00:56:52,400
Speaker 1: Is a big one, right, and so I think they

1158
00:56:52,440 --> 00:56:54,000
Speaker 1: just wanted to be out of the way and then

1159
00:56:54,120 --> 00:56:56,600
Speaker 1: they could be in position to job own the rates

1160
00:56:56,600 --> 00:56:58,960
Speaker 1: because they knew they had done a yeoman's work already

1161
00:56:59,000 --> 00:57:02,319
Speaker 1: to reduce the spike in inflation to get down to

1162
00:57:02,400 --> 00:57:05,600
Speaker 1: that beginning of the last mile, so class mile, that's

1163
00:57:05,640 --> 00:57:08,440
Speaker 1: been more difficult than it expected. We were thinking that

1164
00:57:08,520 --> 00:57:12,000
Speaker 1: as well. We faded that bond rally in the fourth

1165
00:57:12,080 --> 00:57:15,600
Speaker 1: quarter the curve. I think it's a shallow rate cycle.

1166
00:57:15,680 --> 00:57:17,240
Speaker 1: Most of the ray cuts are going to come from

1167
00:57:17,280 --> 00:57:20,080
Speaker 1: the front end of the market. Remember the FED controls

1168
00:57:20,160 --> 00:57:23,360
Speaker 1: the front end of the market out to the two year,

1169
00:57:23,520 --> 00:57:24,960
Speaker 1: maybe even a little bit in the five year.

1170
00:57:25,040 --> 00:57:26,920
Speaker 2: After that, it's all the Bunne.

1171
00:57:27,000 --> 00:57:29,360
Speaker 1: It's all the pond market, particularly thirty year, it's in

1172
00:57:29,400 --> 00:57:31,840
Speaker 1: its own it's its own beast. It runs to supply

1173
00:57:31,880 --> 00:57:34,520
Speaker 1: and demand. I don't want to get stuck long the

1174
00:57:34,560 --> 00:57:39,120
Speaker 1: long end, especially going to this election uncertainty. So I

1175
00:57:39,160 --> 00:57:41,200
Speaker 1: think you don't want to get that reinvestment rate risk

1176
00:57:41,240 --> 00:57:43,960
Speaker 1: on a T bill and you know, watch that five

1177
00:57:44,080 --> 00:57:47,280
Speaker 1: percent go down with four to three percent handle. In

1178
00:57:47,320 --> 00:57:49,440
Speaker 1: short order, you want to move out in that five

1179
00:57:49,720 --> 00:57:52,600
Speaker 1: seven year part of the curve. That's the best risk reward.

1180
00:57:52,280 --> 00:57:54,200
Speaker 2: I think the belly of the curve in the middle

1181
00:57:54,200 --> 00:57:57,640
Speaker 2: of the duration. So let me throw one more question

1182
00:57:57,720 --> 00:58:00,680
Speaker 2: at you and then we'll get to our favorites. The

1183
00:58:00,760 --> 00:58:04,680
Speaker 2: curve ball question is tell us what Boston Scores is.

1184
00:58:05,080 --> 00:58:08,400
Speaker 2: What do you do working with kids and team environments

1185
00:58:08,400 --> 00:58:09,640
Speaker 2: to help build character.

1186
00:58:10,000 --> 00:58:12,160
Speaker 1: It's an interesting organization I've been involved in for a

1187
00:58:12,160 --> 00:58:15,480
Speaker 1: while now. And what Boston Scores does. It's the largest

1188
00:58:15,720 --> 00:58:19,560
Speaker 1: K through twelve after school program for Boston Public school

1189
00:58:19,600 --> 00:58:22,400
Speaker 1: so they partner with Boston Public schools. They're known for

1190
00:58:22,480 --> 00:58:27,200
Speaker 1: their soccer program, so they provide free soccer programs after

1191
00:58:27,240 --> 00:58:30,000
Speaker 1: school for children to get involved a number of days

1192
00:58:30,040 --> 00:58:32,680
Speaker 1: of weeks. And they also in addition that provide other

1193
00:58:32,800 --> 00:58:36,360
Speaker 1: Richmond like poetry, and they actually have an entrepreneurial type class,

1194
00:58:36,360 --> 00:58:40,000
Speaker 1: which I find interesting. So this is a terrific way

1195
00:58:40,080 --> 00:58:43,840
Speaker 1: to get these kids together working as groups. It's about mind, body,

1196
00:58:44,040 --> 00:58:48,120
Speaker 1: and spirit really and they learn how they can solve

1197
00:58:48,160 --> 00:58:52,280
Speaker 1: problems in their community, get them prepared for potentially going

1198
00:58:52,320 --> 00:58:55,120
Speaker 1: into to college. You know, as they come towards their

1199
00:58:55,240 --> 00:58:59,160
Speaker 1: twelve year So it's terrific. I've seen the outcome for kids,

1200
00:58:59,240 --> 00:59:02,400
Speaker 1: and they have so much confidence. Some of these kids

1201
00:59:02,440 --> 00:59:04,400
Speaker 1: that are coming out. I look at him from where,

1202
00:59:04,480 --> 00:59:06,720
Speaker 1: you know, when I was graduating at that time. It's

1203
00:59:06,800 --> 00:59:09,960
Speaker 1: just amazing what these kids in this program.

1204
00:59:09,640 --> 00:59:12,560
Speaker 2: Does for the Boston school sounds really interesting. All right,

1205
00:59:12,600 --> 00:59:14,880
Speaker 2: our favorite questions, and we're going to turn this into

1206
00:59:14,920 --> 00:59:18,439
Speaker 2: a speed round. Tell us what's keeping you entertained these days?

1207
00:59:18,480 --> 00:59:19,800
Speaker 2: What are you watching or listening to?

1208
00:59:20,800 --> 00:59:24,040
Speaker 1: I'm watching Three Body Problem on loved It. Yeah, so

1209
00:59:24,120 --> 00:59:26,080
Speaker 1: I read the book a while ago. Somebody I was

1210
00:59:26,080 --> 00:59:27,920
Speaker 1: reading New York Times, like, what is this book? You know?

1211
00:59:27,960 --> 00:59:29,760
Speaker 2: There's such a love to get through?

1212
00:59:30,040 --> 00:59:32,360
Speaker 1: It was. I read all three of them. Actually there

1213
00:59:32,440 --> 00:59:35,200
Speaker 1: was a fourth one written by a fan. Finish it

1214
00:59:35,240 --> 00:59:37,800
Speaker 1: interesting to read if you want to continue that saga.

1215
00:59:37,840 --> 00:59:40,720
Speaker 1: But you know that that's on Amazon and Netflix. There's

1216
00:59:40,960 --> 00:59:42,680
Speaker 1: there's a Chinese version on Amazon.

1217
00:59:42,760 --> 00:59:45,440
Speaker 2: Oh really, yeeah, I get that one. Did you see

1218
00:59:45,520 --> 00:59:46,760
Speaker 2: did You? Subtitled did You?

1219
00:59:47,040 --> 00:59:49,200
Speaker 1: I started that one and I flipped to the Netflix

1220
00:59:49,240 --> 00:59:51,960
Speaker 1: one because it's faster moving. I think that's a hard

1221
00:59:51,960 --> 00:59:52,840
Speaker 1: book to translate.

1222
00:59:53,080 --> 00:59:55,280
Speaker 2: I picked it up and tried to read it a

1223
00:59:55,280 --> 00:59:57,960
Speaker 2: few times and just got It's like, it's like the

1224
00:59:57,960 --> 01:00:01,840
Speaker 2: first ninety two pages of nineteen eighty four is a tough, tough,

1225
01:00:02,000 --> 01:00:05,520
Speaker 2: tough slug. But I was I was down with COVID

1226
01:00:05,560 --> 01:00:08,360
Speaker 2: in March and just binged it and it was I

1227
01:00:08,400 --> 01:00:09,360
Speaker 2: thought it was fabulous.

1228
01:00:09,440 --> 01:00:11,800
Speaker 1: Yeah, typically don't read a lot of sci fi. But

1229
01:00:11,800 --> 01:00:13,600
Speaker 1: I read that and somebody said, if you like that,

1230
01:00:13,760 --> 01:00:16,360
Speaker 1: read Isaac as them off and I was a read foundation.

1231
01:00:16,680 --> 01:00:18,280
Speaker 1: It's an old you know classic.

1232
01:00:18,840 --> 01:00:21,080
Speaker 2: You know, once you go down that rabbit hole, there's

1233
01:00:21,160 --> 01:00:23,080
Speaker 2: no coming back. You should be you should be aware

1234
01:00:23,240 --> 01:00:24,720
Speaker 2: what else? What are the other ones you're watching?

1235
01:00:24,920 --> 01:00:27,560
Speaker 1: So I have more I have a bigger group of

1236
01:00:27,720 --> 01:00:30,360
Speaker 1: portfolio managers now, we went from forward to about eight,

1237
01:00:31,080 --> 01:00:33,240
Speaker 1: like managing different kinds of portfolios. And what I'm most

1238
01:00:33,280 --> 01:00:35,640
Speaker 1: interested in is behavior biases now because you get more

1239
01:00:35,680 --> 01:00:38,640
Speaker 1: people in the you know, in this in making decisions,

1240
01:00:39,600 --> 01:00:42,960
Speaker 1: it's important for a strategy have consistency and temperament and

1241
01:00:42,960 --> 01:00:44,920
Speaker 1: all that. The problem is you get eight people, they

1242
01:00:44,920 --> 01:00:47,080
Speaker 1: don't all have the same temperament. So I want people

1243
01:00:47,120 --> 01:00:49,360
Speaker 1: to really understand what their bias is. So the greatest

1244
01:00:49,360 --> 01:00:52,160
Speaker 1: guy to go do is is a comment on thinking

1245
01:00:52,160 --> 01:00:54,720
Speaker 1: fast and slow, right, or all those behavioral biases. I

1246
01:00:54,760 --> 01:00:58,440
Speaker 1: read that again, thinking fast and slow, and you know,

1247
01:00:58,480 --> 01:01:00,840
Speaker 1: the fast part reminds me is that that's the intuitive

1248
01:01:00,920 --> 01:01:04,160
Speaker 1: side of investing right, And we were talking a little

1249
01:01:04,200 --> 01:01:06,080
Speaker 1: bit about that. That's really important. I want to you know,

1250
01:01:06,120 --> 01:01:08,680
Speaker 1: foster that, but that can lead to a lot of

1251
01:01:08,720 --> 01:01:12,440
Speaker 1: behavioral biases. And the slow part, which is more difficult

1252
01:01:12,440 --> 01:01:14,520
Speaker 1: to slow down and really think about. That's sort of

1253
01:01:14,520 --> 01:01:17,080
Speaker 1: the checks. So you know, you have your investment thesis,

1254
01:01:17,080 --> 01:01:19,000
Speaker 1: you're like, go, We're ready to go. You want to

1255
01:01:19,080 --> 01:01:20,320
Speaker 1: keep checking it on those.

1256
01:01:20,520 --> 01:01:22,320
Speaker 2: Any other books you want to mention as long as.

1257
01:01:22,240 --> 01:01:25,840
Speaker 1: We're I think going into the elections, I've been reading

1258
01:01:25,960 --> 01:01:28,560
Speaker 1: a lot. I've done a lot of reading on China

1259
01:01:28,600 --> 01:01:33,520
Speaker 1: over the years. Cultural Revolution from now to now is

1260
01:01:33,520 --> 01:01:36,360
Speaker 1: a great want to understand what's going on in China.

1261
01:01:36,920 --> 01:01:40,160
Speaker 1: I think our Eastern civilization history was never that good

1262
01:01:40,200 --> 01:01:42,000
Speaker 1: for a lot of people in the United States, so

1263
01:01:42,400 --> 01:01:45,240
Speaker 1: revisiting that and what I'm reading now is called economic

1264
01:01:45,280 --> 01:01:48,240
Speaker 1: Independence in War by Copeland I think his name is Copeman.

1265
01:01:49,240 --> 01:01:53,360
Speaker 1: Interesting talking about even though you have trade that's very interdependent,

1266
01:01:53,880 --> 01:01:55,760
Speaker 1: that doesn't mean there won't be conflict. And it's about

1267
01:01:55,760 --> 01:01:59,440
Speaker 1: trade expectations. This is really key. It's key going up

1268
01:01:59,440 --> 01:02:02,640
Speaker 1: to the election because we're talking about big tariffs on

1269
01:02:02,720 --> 01:02:04,040
Speaker 1: both sides of the aisle.

1270
01:02:03,880 --> 01:02:05,720
Speaker 2: Right, and that's a tax on consumers.

1271
01:02:05,840 --> 01:02:08,560
Speaker 1: That's a tax on consumers. It's I think it's that's inflationary,

1272
01:02:08,600 --> 01:02:11,360
Speaker 1: by the way, and we have to be careful how

1273
01:02:11,560 --> 01:02:14,640
Speaker 1: we as a nation respond to these challenges. You know,

1274
01:02:14,680 --> 01:02:18,880
Speaker 1: it's going to be a rivalry, right, but expectations and

1275
01:02:18,960 --> 01:02:21,200
Speaker 1: you know if people think one is au serping the

1276
01:02:21,240 --> 01:02:23,880
Speaker 1: other or boxing people out, that's going to lead to

1277
01:02:24,120 --> 01:02:25,120
Speaker 1: possibility conflict.

1278
01:02:25,160 --> 01:02:27,840
Speaker 2: You know you mentioned China. The other book that's next

1279
01:02:27,880 --> 01:02:30,360
Speaker 2: up in my cueue is Chip Wars. People keep telling

1280
01:02:30,400 --> 01:02:32,200
Speaker 2: me I have to read that, you read it.

1281
01:02:32,560 --> 01:02:33,880
Speaker 1: I have not, but I want to read it yet.

1282
01:02:33,960 --> 01:02:37,160
Speaker 2: All right, Next question, who are your mentors who helped

1283
01:02:37,560 --> 01:02:38,600
Speaker 2: shape your career?

1284
01:02:38,920 --> 01:02:41,480
Speaker 1: Yeah, so there's so many. I mean I remember that

1285
01:02:41,480 --> 01:02:43,840
Speaker 1: there was an old guy, old banker Don Lang at

1286
01:02:43,880 --> 01:02:47,000
Speaker 1: Central Bank of Trust. He taught me how commercial lending works.

1287
01:02:47,040 --> 01:02:49,320
Speaker 1: You know, he's basically, somebody puts a deposit in, we

1288
01:02:49,400 --> 01:02:51,240
Speaker 1: lend the back their money and we make this amount

1289
01:02:51,240 --> 01:02:52,760
Speaker 1: of money. You went through the math and I'm like, wow,

1290
01:02:52,800 --> 01:02:55,720
Speaker 1: that's a great return. You lend people their own money.

1291
01:02:56,200 --> 01:02:58,040
Speaker 1: But he also said to me, Matt, because as I

1292
01:02:58,040 --> 01:02:59,720
Speaker 1: was leaving, he said, Matt, whatever you do, stay close

1293
01:02:59,760 --> 01:03:03,760
Speaker 1: to the revenues. It was a good advice career wise.

1294
01:03:03,840 --> 01:03:05,760
Speaker 1: Career wise, yeah, no matter what you do. I think

1295
01:03:05,800 --> 01:03:09,320
Speaker 1: that's that's something I always tell, you know, graduating students. Obviously,

1296
01:03:09,400 --> 01:03:12,160
Speaker 1: Dan Fuss has been an amazing you know, he's a

1297
01:03:12,200 --> 01:03:14,440
Speaker 1: non traditional mentor, but he really, you know, taught me

1298
01:03:14,560 --> 01:03:16,760
Speaker 1: how to invest. He also taught me this is a

1299
01:03:16,800 --> 01:03:20,440
Speaker 1: people business, our clients. Really understanding your clients. He was

1300
01:03:20,520 --> 01:03:22,920
Speaker 1: very close to his clients. But it's also about people

1301
01:03:23,040 --> 01:03:25,280
Speaker 1: in your work in the organization. There's a lot of

1302
01:03:25,320 --> 01:03:28,120
Speaker 1: stress of investing. We don't try to create that at work.

1303
01:03:28,600 --> 01:03:32,520
Speaker 1: And that was an important lesson I learned from him.

1304
01:03:32,600 --> 01:03:34,040
Speaker 1: And I would say, you know, I don't think he

1305
01:03:34,120 --> 01:03:36,560
Speaker 1: would know he's a mentor, but Howard Marx is just

1306
01:03:36,640 --> 01:03:40,280
Speaker 1: fantastic thinker. I read all of his stuff. He's got

1307
01:03:40,320 --> 01:03:44,080
Speaker 1: the I would say total force on the most wrote

1308
01:03:44,080 --> 01:03:47,520
Speaker 1: on liquidity, which was amazing. I think people should read that.

1309
01:03:47,960 --> 01:03:49,520
Speaker 2: What was the name of that it's one of the

1310
01:03:49,600 --> 01:03:52,200
Speaker 2: letters he wrote about liquidity. I'll dig that up and

1311
01:03:52,280 --> 01:03:54,880
Speaker 2: link to it and the book. The most important thing

1312
01:03:55,000 --> 01:03:59,920
Speaker 2: was really super seminal. Dan Fuss has all these affors

1313
01:04:00,240 --> 01:04:03,320
Speaker 2: and rules. Did anybody ever put that together? Says there

1314
01:04:03,360 --> 01:04:04,200
Speaker 2: ever been something like that?

1315
01:04:04,280 --> 01:04:07,680
Speaker 1: Essentially you did. It was our investment framework, right. I'd

1316
01:04:07,720 --> 01:04:10,040
Speaker 1: like to think we made it better because Dan was

1317
01:04:10,040 --> 01:04:13,480
Speaker 1: one person, and you know we've extended that into other

1318
01:04:13,520 --> 01:04:18,360
Speaker 1: markets like securitized bank loans, but it's the same underlying principles.

1319
01:04:18,440 --> 01:04:22,720
Speaker 2: I would love to see his quotes in like Top

1320
01:04:22,760 --> 01:04:25,400
Speaker 2: ten or Top twenty list. I know, in prepping for this,

1321
01:04:26,000 --> 01:04:29,400
Speaker 2: I keep coming across him in various articles and stuff

1322
01:04:29,440 --> 01:04:32,520
Speaker 2: being quoted. I thought it was really some fascinating stuff.

1323
01:04:32,720 --> 01:04:35,720
Speaker 2: Our last two questions, what advice would you give to

1324
01:04:35,760 --> 01:04:39,520
Speaker 2: a recent college grad interested in a career in fixed

1325
01:04:39,560 --> 01:04:40,720
Speaker 2: income or investing?

1326
01:04:41,160 --> 01:04:43,200
Speaker 1: One thing I would. I'd say, as soon as you

1327
01:04:43,240 --> 01:04:45,600
Speaker 1: can figure out what type of investor you are, understand

1328
01:04:45,600 --> 01:04:47,800
Speaker 1: what your temperament is. And that sounds easy, but it's

1329
01:04:48,000 --> 01:04:51,200
Speaker 1: really you really got to think about this, and you

1330
01:04:51,200 --> 01:04:54,240
Speaker 1: know describes you know where you might fit the best

1331
01:04:54,440 --> 01:04:56,400
Speaker 1: as you and I think that's important. You really got

1332
01:04:56,400 --> 01:05:00,560
Speaker 1: to gel with what you're doing. I also think I

1333
01:05:00,560 --> 01:05:02,840
Speaker 1: wish I knew this, you know, coming into the to

1334
01:05:02,920 --> 01:05:06,080
Speaker 1: the market is really don't wait, even if you don't

1335
01:05:06,080 --> 01:05:08,720
Speaker 1: know what you're doing, just pretend you're in the business

1336
01:05:08,720 --> 01:05:11,840
Speaker 1: and you're trying to invest and make money. Start reading

1337
01:05:11,880 --> 01:05:14,000
Speaker 1: things and you know, you know all the jargon and

1338
01:05:14,080 --> 01:05:16,200
Speaker 1: all the shows that go in, start reading it. If

1339
01:05:16,240 --> 01:05:18,520
Speaker 1: you don't understand something, go figure out what it is,

1340
01:05:19,080 --> 01:05:21,160
Speaker 1: and that will just you know, keep you going to

1341
01:05:21,280 --> 01:05:23,080
Speaker 1: the the next thing and the next. Before you know,

1342
01:05:23,160 --> 01:05:24,000
Speaker 1: you'll get it.

1343
01:05:24,080 --> 01:05:26,360
Speaker 2: And our final question, what do you know about the

1344
01:05:26,360 --> 01:05:29,800
Speaker 2: world of investing today? You wish you knew thirty five

1345
01:05:29,880 --> 01:05:32,400
Speaker 2: years or so ago when you were first getting started.

1346
01:05:32,720 --> 01:05:36,160
Speaker 1: Well, I think I was sort of this view. I

1347
01:05:36,200 --> 01:05:38,440
Speaker 1: was a pure fundamental person. I thought, you know, there

1348
01:05:38,520 --> 01:05:40,680
Speaker 1: was this hard fast number that you get and you

1349
01:05:40,680 --> 01:05:43,280
Speaker 1: could transact on pretty much all the ideas that you

1350
01:05:43,680 --> 01:05:46,320
Speaker 1: would get. And what I realized is that there are

1351
01:05:46,320 --> 01:05:49,440
Speaker 1: a lot of other things that move prices in the market,

1352
01:05:49,440 --> 01:05:52,440
Speaker 1: including technicals, and you know, things can say cheap for

1353
01:05:52,440 --> 01:05:55,200
Speaker 1: a lot longer, and you really have to understand what

1354
01:05:55,240 --> 01:05:58,880
Speaker 1: the other side of the argument is and understand what's

1355
01:05:58,920 --> 01:06:01,280
Speaker 1: being priced in. So you might have this great idea,

1356
01:06:02,080 --> 01:06:04,640
Speaker 1: but if it's already priced into the market, it ain't

1357
01:06:04,640 --> 01:06:08,600
Speaker 1: worth anything. So you really have to understand that and

1358
01:06:08,720 --> 01:06:12,240
Speaker 1: see where your edge is and understand why that edge

1359
01:06:12,600 --> 01:06:13,440
Speaker 1: is pertinent.

1360
01:06:13,720 --> 01:06:17,080
Speaker 2: Huh, really fascinating, Matt. Thank you for being so generous

1361
01:06:17,080 --> 01:06:20,120
Speaker 2: with your time. We have been speaking with Matt Egan,

1362
01:06:20,240 --> 01:06:24,200
Speaker 2: portfolio manager and head of the Full Discretion team at

1363
01:06:24,240 --> 01:06:28,560
Speaker 2: Loomis Sales. If you enjoy this conversation, well, be sure

1364
01:06:28,600 --> 01:06:31,800
Speaker 2: and check out any of the previous five hundred plus

1365
01:06:32,240 --> 01:06:36,040
Speaker 2: interviews we've done over the past ten years. You can

1366
01:06:36,080 --> 01:06:41,080
Speaker 2: find those at Bloomberg iTunes, Spotify, YouTube, wherever you find

1367
01:06:41,160 --> 01:06:45,200
Speaker 2: your favorite podcasts. Be sure and check out my new podcast,

1368
01:06:45,400 --> 01:06:50,520
Speaker 2: At the Money, short ten minute conversations with experts about

1369
01:06:50,600 --> 01:06:54,480
Speaker 2: topics related to your money, earning it, spending it, and

1370
01:06:54,560 --> 01:06:58,880
Speaker 2: most importantly, investing it. At the Money, in the Master's

1371
01:06:58,920 --> 01:07:02,640
Speaker 2: and Business feed, or wherever you find your favorite podcasts.

1372
01:07:03,200 --> 01:07:04,920
Speaker 2: I would be remiss if I did not thank the

1373
01:07:04,960 --> 01:07:08,360
Speaker 2: Cracked team who helps me put these conversations together each week.

1374
01:07:08,640 --> 01:07:12,760
Speaker 2: My audio engineer is Meredith Frank, My producer is Anna

1375
01:07:12,840 --> 01:07:16,520
Speaker 2: Luke Attika of Albron is my project manager. Short Russo

1376
01:07:16,640 --> 01:07:19,360
Speaker 2: is my head of research. Sage Bauman is the head

1377
01:07:19,400 --> 01:07:24,000
Speaker 2: of podcasts at Bloomberg. I'm Barry Ritholtz. You've been listening

1378
01:07:24,040 --> 01:07:31,400
Speaker 2: to Masters in Business on Bloomberg Radio.