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Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.

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Speaker 1: I'm Joe Wisenthal and.

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Speaker 2: I'm Tracy Alloway.

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Speaker 1: Tracy, we just got back from California. We're at the

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Speaker 1: future Proof Conference. I love going to southern California.

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Speaker 3: I mean, you can't beat Huntington Beach. It was pretty sweet.

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Speaker 1: It was so beautiful, it was really cool. We were

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Speaker 1: out on the beach.

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Speaker 2: We walked out to the pier, watch the.

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Speaker 1: Perfect weather, watched the surfers, ate some really good food,

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Speaker 1: and had some pretty good conversations about the state of

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Speaker 1: financial markets.

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Speaker 3: Yep, and we finally got to record an episode that

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Speaker 3: we've been meaning to do for a while. We dived

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Speaker 3: into not the ocean, but the credit market.

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Speaker 1: I guess, like the credit market like comes up here

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Speaker 1: or there in various aspects of our conversations. I guess

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Speaker 1: typically when we talk about real estate, maybe a little

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Speaker 1: bit about the FED. But the credit market is obviously

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Speaker 1: so diverse and it's such a its own world that,

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Speaker 1: like we really it had been too long since we

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Speaker 1: talked about, Okay, what is happening in credit?

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Speaker 4: Well.

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Speaker 3: Also, I think there was this expectation that as interest

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Speaker 3: rates went up, you were going to see lots of

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Speaker 3: drama in the credit market, and even though we've seen

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Speaker 3: bankruptcies rise a little bit, we haven't really seen the

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Speaker 3: big fallout that a lot of people had been expecting.

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Speaker 1: Right, And you know, look, the way people think about

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Speaker 1: the FED is that it works by tightening credit conditions,

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Speaker 1: right like in theory, like that's what like how the

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Speaker 1: it's all's supposed to work, as you said, when interest

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Speaker 1: rates go up. And yet we have got this rise

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Speaker 1: in interest rates. For sure, we definitely see it on

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Speaker 1: the mortgage side, like less housing activity, but the sort

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Speaker 1: of like broader tightening of like business credit. We certainly

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Speaker 1: haven't seen much of a widening in spreads at all.

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Speaker 1: So it's a confusing time.

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Speaker 3: Absolutely. So we really do have the perfect guest to

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Speaker 3: talk about this.

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Speaker 1: That's right, our guest. We spoke with Wayne Dall. He's

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Speaker 1: a managing director, portfolio manager, an investment risk officer at

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Speaker 1: oak Tree. We talk about all things credit. What do

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Speaker 1: you see, Why did rates move so hard? Why are

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Speaker 1: they still like pressed up against the ceiling.

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Speaker 4: We went through a period so long where interest rates

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Speaker 4: were very low and money was very easy, and unfortunately,

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Speaker 4: during the period of COVID with some of the supply

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Speaker 4: chain issues, with a lot of the stimulus that was

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Speaker 4: put into the economy, both through the monetary channel and

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Speaker 4: the fiscal channel, that really set up kind of the

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Speaker 4: perfect storm for demand to go through the roof and

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Speaker 4: supply to be diminished, and ultimately we ended up with

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Speaker 4: this big inflation push, which, if you go back to

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Speaker 4: the formula from the seventies and eighties, how do you

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Speaker 4: cure inflation? You raise interest rates quickly, And I think

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Speaker 4: that's the playbook that the central banks, not only in

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Speaker 4: the US but really globally had no choice but to follow.

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Speaker 3: What does risk actually mean to you an oak Tree

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Speaker 3: and does it differ from maybe other financial firms definition

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Speaker 3: of risk?

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Speaker 4: Yeah, that is that is a great question, And anyone

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Speaker 4: who's read our chairman Howard Marx's memos knows that he's

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Speaker 4: very clear that risk is more than just the masure

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Speaker 4: of volatility. I mean when typically at oak Tree, when

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Speaker 4: we talk about risk, it is our number one investment philosophy,

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Speaker 4: an investment tenant to keep risk under control. Really it's

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Speaker 4: to avoid loss. And the tagline there for oak Tree

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Speaker 4: is if you avoid the losers, the winners take care

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Speaker 4: of themselves. So as credit investors, especially in a market

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Speaker 4: like this where yields are high, you want to earn

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Speaker 4: that yield and keep that yield and not give it

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Speaker 4: back in the form of default. So to us, minimizing

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Speaker 4: risk is largely related to kind of minimizing loss for investors.

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Speaker 1: All right, let's dive deeper into credit. I mean, let's start, like,

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Speaker 1: spreads are still pretty narrow, yeah, and credit is such

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Speaker 1: a huge world, so I know we have to like

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Speaker 1: go from like slice to slice and slides. But like

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Speaker 1: big picture, people don't seem particularly concerned about like defaults.

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Speaker 4: Yeah, I mean, look, I think one of the things

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Speaker 4: with credit that has changed is largely related to the

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Speaker 4: backdrop of interest rates. And to quote Howard again, our chairman.

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Speaker 4: You know, he wrote a memo in December called a

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Speaker 4: sea change, and in that memo he talked about this

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Speaker 4: change in what was a low return world.

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Speaker 5: To a high return world.

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Speaker 4: And that has really I think shifted the dynamic and

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Speaker 4: the expectations around credit. And you're right, have credit spreads

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Speaker 4: moved maybe as wide as people thought, No, but the

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Speaker 4: yields have become very attractive, and ultimately, I think if

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Speaker 4: you look at credit this is something we did a

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Speaker 4: lot last year. There's kind of three ways I would

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Speaker 4: look at value in fixed income. Number one is what

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Speaker 4: is the yield? Well, that was very attractive. Number two,

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Speaker 4: what is the price? If I can buy fixed income

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Speaker 4: at a discount, then I can you know, earn more

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Speaker 4: than just the coupon. And number three what is the spread?

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Speaker 4: The first two where it very attractive levels and spreads

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Speaker 4: maybe kind of at median levels, but you know, two

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Speaker 4: out of three makes a pretty good investment.

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Speaker 2: Well, how are you thinking about default risk now?

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Speaker 3: Because certainly there were a lot of people, I mean

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Speaker 3: just last year in twenty twenty two, who were warning

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Speaker 3: about we're going to get this big recession, there's going

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Speaker 3: to be a big spike in defaults. We certainly haven't seen,

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Speaker 3: you know, the bankruptcy rate has picked up a little bit,

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Speaker 3: but we haven't seen this wave of failures that a

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Speaker 3: lot of people were predicting.

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Speaker 5: Yeah, that is definitely true.

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Speaker 4: And I think for part of that, you have to

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Speaker 4: think about what happened during COVID, And in a way

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Speaker 4: you could almost say COVID was maybe recession part one,

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Speaker 4: and we're on our way to recession part two. And

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Speaker 4: the reason why I say that is because if you

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Speaker 4: think back to the end of twenty nineteen, before COVID,

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Speaker 4: the FED had stopped hiking rates in December twenty eighteen,

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Speaker 4: and at that time actually had planned to continue to hike.

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Speaker 4: Chairman Powell pivoted in early January twenty nineteen and ultimately

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Speaker 4: ended the year by cutting rates three times. There were

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Speaker 4: a lot of the similar signs of slow down in

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Speaker 4: ism data, in industrial production data, a lot of your

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Speaker 4: typical signs of a recession. So in a way, COVID

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Speaker 4: potentially just accelerated us into a recession that was maybe

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Speaker 4: on its way already. But what it also did is

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Speaker 4: brought forth a number of defaults. You had, you know,

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Speaker 4: default rates in the high yeld bond market, the broadly

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Speaker 4: syndicated loan market anywhere from kind of four to six percent,

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Speaker 4: And in a way that was kind of a cleansing

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Speaker 4: event that prepared us for this time here in the

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Speaker 4: high yield bond market. Because of that default rate, you

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Speaker 4: cleared out a lot of the lowest rated companies that

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Speaker 4: were under the most stress. Simultaneously, you had a number

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Speaker 4: of downgrades, so triple B rated securities into double B

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Speaker 4: or single b rated into.

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Speaker 5: High yield, so you up the quality of.

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Speaker 4: The high yeld bond market maximum triple b's, minimum triple c's,

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Speaker 4: and kind of created this environment where everybody just refinanced

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Speaker 4: at the lowest rates in history and they don't really

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Speaker 4: have a cash flow problem or a maturity problem.

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Speaker 1: So you anticipated my next question. And I appreciate that

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Speaker 1: you brought the twenty nineteen experience because we don't really

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Speaker 1: talk about twenty nineteen, but it's that much anymore. But

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Speaker 1: of course that was an interesting year. And then so okay,

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Speaker 1: so we have these defaults, then then the the pool

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Speaker 1: of credit gets better, and then the big turming out

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Speaker 1: of debt, so everyone refinances fixed.

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Speaker 5: Rate ultra low.

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Speaker 1: Talk to us about, like today in September twenty twenty three,

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Speaker 1: how that turning out is playing into things now, and like,

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Speaker 1: you know, people talk about the maturity wall.

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Speaker 2: And no, Joe, you have to say looming maturity.

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Speaker 1: That's the rule, the looming maturity wall. Talk to us

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Speaker 1: about like the effects we're seeing today from that turning out.

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Speaker 4: You're absolutely right, I mean, just to kind of put

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Speaker 4: some numbers to that. In twenty twenty and twenty twenty one,

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Speaker 4: the highy bond market in the US had gross issuance

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Speaker 4: of about eight hundred billion dollars in a one point

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Speaker 4: three trillion dollar market, so you had two thirds of

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Speaker 4: the market refinance.

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Speaker 5: Wow.

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Speaker 4: Now today, you're right, we've obviously the the duration has

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Speaker 4: shrunk in that market because refinancings have declined. But it

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Speaker 4: does kind of become a twenty twenty six maturity, you know,

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Speaker 4: kind of problem. Companies don't wait for the last minute

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Speaker 4: to refinance their debt. That wouldn't be wise because what

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Speaker 4: if the capital markets freeze up, So you kind of

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Speaker 4: bring that forward maybe one to one and a half years.

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Speaker 4: So I think as we get into twenty twenty four,

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Speaker 4: you will start to see a situation where companies are

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Speaker 4: going to have to come to the capital markets.

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Speaker 5: Well it's not there yet.

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Speaker 3: Well I was about to ask, though, because this month

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Speaker 3: we have seen a pickup in new issue and so

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Speaker 3: what's going on there? Like, why are companies deciding this

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Speaker 3: is the moment to start selling new bonds?

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Speaker 5: I mean there are certainly companies.

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Speaker 4: I mean I can't remember the exact number, Maybe less

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Speaker 4: than twenty percent of the market that comes due over

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Speaker 4: the next eighteen months. So there is some amount of refinancing.

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Speaker 4: There is some capital activity going on, and some of

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Speaker 4: it I think is moving exposure from one market to

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Speaker 4: another market. If you look at the broadly syndicated loan market,

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Speaker 4: that market is made up of floating rate debt. I

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Speaker 4: mean there is a market where people's interest cost has

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Speaker 4: gone well, it's more than double in the last eighteen months,

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Speaker 4: and the high yield market has seen some refinancing out

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Speaker 4: of the loan market into secured bonds in the high

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Speaker 4: yield market, So there has been some kind of new

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Speaker 4: entrance in there as opposed to simply refinancing.

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Speaker 1: Other sectors or types of borrowers who, in your view,

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Speaker 1: are going to have a trickier time over the next

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Speaker 1: eighteen twenty four months as some of these refinancings pick up.

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Speaker 4: Well, Like I said, I mean you if you want

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Speaker 4: to talk about the places in I'll say that non

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Speaker 4: eventvement grade or speculative grade market that's going to have trouble.

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Speaker 4: It will, I think potentially be some of these issuers

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Speaker 4: in the loan market. And again the reason for that

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Speaker 4: is they have seen their cost of financing really go

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Speaker 4: up as their index to short rates, which are now

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Speaker 4: five and a half percent what type.

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Speaker 5: Of borrowers in the loan market.

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Speaker 4: So you certainly get you know, exposure to many industries,

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Speaker 4: but the loan market today has really shifted into the

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Speaker 4: financing source of leverage buyouts. That is the majority of

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Speaker 4: the issuance in that market. When you talk about a

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Speaker 4: pick up an issuance in the loan market, you're typically expecting,

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Speaker 4: you know, a pickup in m and A activity using

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Speaker 4: loans to refinance. And one of the biggest areas that's

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Speaker 4: seen a lot of m and A activity from private

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Speaker 4: equity sponsors over the last few years is in some

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Speaker 4: software and technology related business. So that is the largest

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Speaker 4: single sector in the loan market today.

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Speaker 3: Do you see froth in the leverage loan market, because

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Speaker 3: this was an area of concern for I mean years,

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Speaker 3: even before COVID, you saw a lot of financial regulators

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Speaker 3: start to crack down on you know, capital requirements for

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Speaker 3: leverage loans. You saw I should tell a story about

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Speaker 3: I was in a bank one time, and I won't

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Speaker 3: name the bank, but I was going to see their

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Speaker 3: leverage loan bankers and they had a framed T shirt

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Speaker 3: in their office that said I stole this shirt off

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Speaker 3: my client's back, So that.

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Speaker 2: Kind of encapsula I think it would have been.

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Speaker 3: Like maybe twenty fifteen, twenty sixteen, it was definitely the

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Speaker 3: height of the leverage loan boom.

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Speaker 2: But is there froth?

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Speaker 4: Look, I mean, there's definitely been frauth in that market,

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Speaker 4: and maybe to define that a little more clear, to say,

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Speaker 4: there are certainly borrowers that probably you are at risk

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Speaker 4: of having extended their balance sheet too much, and in

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Speaker 4: the face of borrowing costs or interest rates going so high,

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Speaker 4: they've kind of put themselves in a tough situation. I

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Speaker 4: think one of the things to remember in the loan

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Speaker 4: market that has maybe masked some of the potential volatility

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Speaker 4: over the years is the majority of buyers in that market,

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Speaker 4: almost seventy percent, are coming from the CLO market or

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Speaker 4: clateralized loan obligations, and those buyers are not active traders,

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Speaker 4: so you don't see loans traded like you do some

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Speaker 4: of the other investment grade bonds, high yield bonds, and

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Speaker 4: in a way that can kind of mask some of

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Speaker 4: that building volatility.

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Speaker 3: Again, one of the stories pre pandemic was this idea

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Speaker 3: that a lot of the power in the market had

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Speaker 3: shifted from lenders to so the companies who are issuing

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Speaker 3: debt or taking out a loan could dictate the terms

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Speaker 3: of that deal, and so we saw a lot of

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Speaker 3: cove light deals, maybe some sketchy leverage loans. Is that

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Speaker 3: still the case or does it feel like the pendulum

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Speaker 3: has swung a little bit as interest rates have risen.

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Speaker 4: I think in the broadly syndicated loan market that's probably

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Speaker 4: still largely the case. There is a lot of demand,

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Speaker 4: and obviously over the last call it eighteen months, supply

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Speaker 4: has been diminished. So you have people who want to

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Speaker 4: buy loans. As institutions, you're competing against CLO's buying loans,

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Speaker 4: so that demand has kept up. I think one of

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Speaker 4: the places where maybe you have seen a little bit

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Speaker 4: more of a shift there is in the private credit

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Speaker 4: market that's issuing loans, where interesting you've seen kind of

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Speaker 4: a pullback from some of the buyers that were very,

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Speaker 4: very active in twenty twenty one, and the either the

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Speaker 4: new buyers or continuing buyers have been able to be

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Speaker 4: a little bit more strict with their demands for terms.

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Speaker 5: Cove things like that, and those deals.

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Speaker 1: When a private credit comes up all the time, and

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Speaker 1: we probably should even do more on this, But it

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Speaker 1: always seems like, for whatever reason, and I don't really

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Speaker 1: understand it. I don't know much about the market. For

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Speaker 1: whatever reason, it seems like it doesn't matter where the

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Speaker 1: cycle is. It just seems like it just grows and

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Speaker 1: grows private credit. What's the how does that happen?

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Speaker 5: Well?

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Speaker 4: I mean, who wouldn't want to put an asset in

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Speaker 4: their portfolio that has no volatility and the price doesn't

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Speaker 4: Is that.

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Speaker 5: Really isn't really that simple? Is it?

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Speaker 3: Like?

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Speaker 1: Because people say that, I'm like, Oh, can't really be

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Speaker 1: like that. They can't really be the story? But is

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Speaker 1: that the story?

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Speaker 4: I mean, Joe, to date, I think that largely has

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Speaker 4: been the story. I mean, you're right, there has been

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Speaker 4: a story can to the well, the time will come

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Speaker 4: for the day of reckoning of you know, all this

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Speaker 4: all this borrowing in this private credit market, all these

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Speaker 4: marks that are staying at par are gonna are gonna

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Speaker 4: come down, and you know, perhaps we are getting closer

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Speaker 4: to that date, but you're right, that really still has

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Speaker 4: not been tested, although I think people are preparing a

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Speaker 4: little more, you know, for that day to come.

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Speaker 1: Every time I hear about like pe or VC or

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Speaker 1: private credit, and people are like, well, the biggest nice

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Speaker 1: thing is like it doesn't move, and so I'm like,

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Speaker 1: that can't be it.

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Speaker 5: It can't be that.

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Speaker 1: And yet maybe that is a big thing.

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Speaker 5: I mean, it has kind of been that easy to date.

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Speaker 4: But like I said, I think people are getting a

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Speaker 4: little more concerned where you see. You know, I think

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Speaker 4: some private credit managers deciding do I want to deploy

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Speaker 4: this incremental capital that I can draw down or do

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Speaker 4: I need to preserve this to potentially, you know, rescue

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Speaker 4: some of the deals that are already in my portfolio.

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Speaker 4: I think investors are getting a little more picky as

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Speaker 4: well when looking at some of these legacy portfolios, going, hey,

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Speaker 4: I like private credit and I like where it's priced today,

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Speaker 4: But do I want to buy the portfolio that was

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Speaker 4: built in twenty twenty one when money was free?

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Speaker 3: Does the rise of private credit affect oat Tree at all?

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Speaker 3: And what I mean by that is like, maybe there

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Speaker 3: are certain opportunities that end up getting taken by private

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Speaker 3: lenders versus publicly traded. You know, a company will decide

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Speaker 3: I'm going to do a private deal. There's a lot

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Speaker 3: of appetite, a lot of demand, rather than go down

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Speaker 3: the publicly traded route.

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Speaker 4: Maybe the caveat is it depends which group you talk to. Yeah,

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Speaker 4: but no, I think the growth in private credit, especially

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Speaker 4: over the last few months, has has been positive for

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Speaker 4: oak Tree and has potential to be to be positive.

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Speaker 5: For more areas.

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Speaker 4: I mean, we are certainly active in these private credit

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Speaker 4: markets seeking to you know, find value and really fill

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Speaker 4: a gap that I think has grown over the last

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Speaker 4: eighteen months where some of the larger players have you know,

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Speaker 4: maybe step back and including some of the banks.

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Speaker 3: Yeah.

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Speaker 4: I think on the other hand, you know, oak Tree

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Speaker 4: obviously we're known for our distressed as distressed debt business,

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Speaker 4: which now is our global opportunities business. You know, here's

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Speaker 4: an here's an opportunity for you know, a group like

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Speaker 4: that to maybe you know, step in and support some

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Speaker 4: of these deals if if things go south. So I

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Speaker 4: think there's multiple ways where where we can see a

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Speaker 4: benefit from from this growth.

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Speaker 1: You mentioned, you know, maybe like some of these private

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Speaker 1: credit managers and maybe they don't want to like to

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Speaker 1: deploy that additional marginal capital for that risk. It made

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Speaker 1: me wonder, just going back to the sort of the

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Speaker 1: beginning of the conversation, like you can get a real

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Speaker 1: return risk free these days, which you haven't been able

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Speaker 1: to get in a long time, and you don't even

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Speaker 1: have to take any like duration risk. You can like

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Speaker 1: there's positive rates at the short end. Does that change

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Speaker 1: risk ampetite or you see people was like, yeah, look

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Speaker 1: I could make money and I don't have to take

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Speaker 1: any risk. Does that change like how money gets deployed

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Speaker 1: in your view?

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Speaker 4: Yes, I definitely think it does. And really from our standpoint,

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Speaker 4: it kind of shifts even where we take risk on

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Speaker 4: the you know, on on the maybe the risk spectrum

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Speaker 4: or the duration spectrum. I mean, it's rare that you

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Speaker 4: have short rates being the highest part of the curve.

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Speaker 5: So what's what's kind of.

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Speaker 4: Resulted in that is securities that pay interest index to

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Speaker 4: those short rates.

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Speaker 5: Have become even more and more attractive.

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Speaker 4: So just to again kind of put some numbers that

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Speaker 4: if you look at the high yield market, a fixed

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Speaker 4: rate market, sure their yields have gone up, but their

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Speaker 4: income they generate has stayed, you know, right around low

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Speaker 4: sixes despite the call it nine percent yields. Can you

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Speaker 4: just explain that a little for what I mean is

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Speaker 4: the coupon on a high yield bond is under six percent,

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Speaker 4: their price is currently below par. So you take that

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Speaker 4: coupon divided by the price, that's your current yield.

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Speaker 5: That's going to be in the low sixes.

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Speaker 4: Whereas, if I can buy a high quality floating rate

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Speaker 4: security that might be a structured asset, that might be

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Speaker 4: a broadly syndicated loan, I'm earning that near five and

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Speaker 4: a half percent solfar rate plus a spread of call

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Speaker 4: it four hundred basis points, now I'm earning nine and

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Speaker 4: a half percent. So, yes, risk free is a you know,

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Speaker 4: certainly a viable investment, but you know, so are a

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Speaker 4: lot of other investments that are you know, reasonably safe,

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Speaker 4: that have you know, an appropriate kind of spread for

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Speaker 4: their risk.

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Speaker 3: So we're talking about yields sort of enticing buyers at

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Speaker 3: this moment in time. But there's something else that has

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Speaker 3: happened since the pandemic, which is the Federal Reserve announced

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Speaker 3: this massive corporate bond buying program that, in theory is

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Speaker 3: now a permanent backstop for the market. Do you think

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Speaker 3: that's affected investing behavior.

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Speaker 4: There's no doubt that had a significant impact on investing

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Speaker 4: behavior in twenty twenty. Just knowing that that backstop was there,

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Speaker 4: I'm not sure how much today. I mean, I think

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Speaker 4: in the case of say the hi Yo bond market,

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Speaker 4: you have seen that market kind of shrink over the

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Speaker 4: last eighteen months, shrink because deals of come do that

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Speaker 4: haven't been refinanced. You've had actually more upgrades than downgrades

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Speaker 4: in that market, which may be surprising given the you know,

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Speaker 4: all the talk of recession and the need for spreads

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Speaker 4: to be wider. So you know, you do kind of

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Speaker 4: have this almost supply demand mismatch on the side of

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Speaker 4: you know, maybe demand kind of pushing those those spreads tighter.

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Speaker 4: But I think it's in the back of people's minds somewhere.

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Speaker 1: How do you think about the Fed here Tracy mentioned

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Speaker 1: the backstop, but in terms of like the sort of

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Speaker 1: good old fashion where they are on the rate side.

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Speaker 1: Obviously there's hope that maybe they could cut rates even

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Speaker 1: in the absence of a recession.

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Speaker 5: But is the FED like, are we clear?

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Speaker 1: Is the Fed kinda like we got the inflation thing licked.

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Speaker 4: I think that's a mistake that the market has made

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Speaker 4: for the last year, that inflation would come down regardless

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Speaker 4: of what the economic backdrop is, regardless of what happens

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Speaker 4: to asset prices, the FED would turn around and cut rates.

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Speaker 4: That was a big story in January of this year,

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Speaker 4: when you had kind of everything rallied spreads, compressed rates,

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Speaker 4: rallied high yield, rallied investment grade credit rally kind of

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Speaker 4: everything rallied on this expectation that rates would come down

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Speaker 4: before the end of the year, despite the fact that

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Speaker 4: people called for a recession and that I think the

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Speaker 4: market's kind of coming around to the fact that is

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Speaker 4: probably maybe a little bit too much wishful thinking.

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Speaker 1: My memory's gonna hit you. At some point, people were

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Speaker 1: thinking that by like they would already be cutting by this.

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Speaker 5: Point, yes, yeah, oh yeah in January. Well yeah.

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Speaker 4: The other triggering event for the FED was in March.

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Speaker 4: Right in March this year, when you had the Silicon

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Speaker 4: Valley Bank signature bank, kind of regional bank flare up.

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Speaker 4: The market really pivoted to expecting rates to be cut

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Speaker 4: by about one hundred and fifty basis points.

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Speaker 5: By the end of this year. That's completely reversed.

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Speaker 1: And everyone said, like, oh, historically the FED hikes untilcilding

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Speaker 1: breaks and then like a few weeks later it's still

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Speaker 1: red hot.

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Speaker 4: I think the Fed's kind of in an interesting spot

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Speaker 4: right now. And you know, obviously you guys were at

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Speaker 4: Jackson Hole, and you know, had a number of guests

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Speaker 4: out at Jackson Hole. And I think looking at Chairman

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Speaker 4: Powell's speech this year, maybe compared to the last two,

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Speaker 4: I think he's got to be feeling pretty good about

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Speaker 4: himself right now, because clearly last year he kind of

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Speaker 4: had to give the market a bit of a scolding

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Speaker 4: and say, hey, all you dreamer out there that think

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Speaker 4: inflation is going to come down and we're going to

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Speaker 4: immediately kind of ease financial conditions, you're wrong. We're in

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Speaker 4: this for the long haul. And this year he was

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Speaker 4: kind of able to stand up and say, thank you

439
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Speaker 4: for listening to us. We're still in it for the

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Speaker 4: long haul as long as the data dictates.

441
00:22:31,359 --> 00:22:34,080
Speaker 3: Given your credit perspective, what do you think about the

442
00:22:34,200 --> 00:22:36,800
Speaker 3: R star debate? So the idea that the neutral rate

443
00:22:36,840 --> 00:22:39,240
Speaker 3: of interest might be higher than we once thought, or,

444
00:22:39,920 --> 00:22:41,800
Speaker 3: to put it another way, the idea that maybe the

445
00:22:41,840 --> 00:22:46,159
Speaker 3: economy is more interest rate resilient than it was previously.

446
00:22:46,240 --> 00:22:48,440
Speaker 4: I will say, personally, I don't really have an opinion

447
00:22:48,440 --> 00:22:50,720
Speaker 4: on what our star could be and should be, And

448
00:22:50,760 --> 00:22:52,399
Speaker 4: I feel like I get a little cover from that

449
00:22:52,440 --> 00:22:54,800
Speaker 4: because I believe Chairman Powell, he said the same thing,

450
00:22:55,119 --> 00:22:58,840
Speaker 4: also said that. So, but I do think if you

451
00:22:58,880 --> 00:23:01,960
Speaker 4: look at kind of where the market, you know, moved

452
00:23:02,119 --> 00:23:06,200
Speaker 4: from a rate perspective, maybe leading into Jackson Hole, if

453
00:23:06,240 --> 00:23:08,359
Speaker 4: you look at that kind of shift, maybe you know,

454
00:23:08,800 --> 00:23:11,359
Speaker 4: call it like a shift in turn premium across the curve.

455
00:23:11,680 --> 00:23:15,560
Speaker 4: I think there's no doubt that investors were probably thinking

456
00:23:15,600 --> 00:23:18,560
Speaker 4: that there's a possibility that we may kind of have

457
00:23:18,720 --> 00:23:21,680
Speaker 4: some form of higher rates for longer, and in order

458
00:23:21,720 --> 00:23:22,600
Speaker 4: to compensate that.

459
00:23:23,280 --> 00:23:25,040
Speaker 5: Let's let's lift the yield curve.

460
00:23:25,920 --> 00:23:29,000
Speaker 1: Well, how much does the turning out of debt that

461
00:23:29,119 --> 00:23:33,160
Speaker 1: we talked about a few minutes ago explain the lack

462
00:23:33,400 --> 00:23:36,560
Speaker 1: of impact? They're the like, you know, we haven't had

463
00:23:36,560 --> 00:23:40,840
Speaker 1: a recession, we have at a slow down. The rates

464
00:23:40,840 --> 00:23:42,919
Speaker 1: have gone a lot higher than many people would have guessed,

465
00:23:43,040 --> 00:23:45,040
Speaker 1: certainly in January, certainly in.

466
00:23:45,040 --> 00:23:46,360
Speaker 5: March, et cetera.

467
00:23:46,520 --> 00:23:48,159
Speaker 1: Like how much is it just the fact, you know,

468
00:23:48,200 --> 00:23:49,960
Speaker 1: there are all these charts that people look at where

469
00:23:49,960 --> 00:23:52,760
Speaker 1: it's like, yeah, rates are here, but actual net interest payments,

470
00:23:53,040 --> 00:23:55,480
Speaker 1: share gdper whatever are still pretty low. How much is

471
00:23:55,520 --> 00:23:59,080
Speaker 1: that just a function of Yeah, when so much fixed

472
00:23:59,160 --> 00:24:01,800
Speaker 1: rate debt, these rate heis just don't wipe vent that quickly.

473
00:24:02,040 --> 00:24:04,359
Speaker 4: I think that's definitely true in the corporate space, And

474
00:24:04,400 --> 00:24:07,160
Speaker 4: don't forget. I mean a lot of corporates built up

475
00:24:07,200 --> 00:24:10,040
Speaker 4: a lot of cash during the COVID period, So much

476
00:24:10,160 --> 00:24:13,160
Speaker 4: was poured into the economy that yes they turned out

477
00:24:13,240 --> 00:24:16,199
Speaker 4: that yes the rates were lower, but they also built

478
00:24:16,280 --> 00:24:19,359
Speaker 4: cash and you know, saw leverage come down. But I

479
00:24:19,359 --> 00:24:22,560
Speaker 4: think from an economy perspective, one of the keys to

480
00:24:22,800 --> 00:24:25,919
Speaker 4: kind of why we haven't felt that interest rate push

481
00:24:26,320 --> 00:24:29,320
Speaker 4: is in the residential housing market. Yeah, I mean that,

482
00:24:29,520 --> 00:24:32,000
Speaker 4: to me is the real one of the real keys

483
00:24:32,040 --> 00:24:35,640
Speaker 4: to why twenty twenty three from a consumer standpoint, from

484
00:24:35,680 --> 00:24:39,400
Speaker 4: a spending standpoint, from a confidence standpoint, from a gross standpoint,

485
00:24:39,680 --> 00:24:42,680
Speaker 4: has been a lot more robust than people would have expected.

486
00:24:42,840 --> 00:24:45,960
Speaker 3: You mean the refinancing boom, basically putting money in a

487
00:24:45,960 --> 00:24:47,240
Speaker 3: lot of people's pockets.

488
00:24:47,440 --> 00:24:49,880
Speaker 4: Well, what I mean is if you look at the

489
00:24:49,920 --> 00:24:54,960
Speaker 4: house prices since COVID, so from December twenty nineteen through

490
00:24:55,119 --> 00:24:57,879
Speaker 4: you know twenty twenty one, house prices were up thirty percent,

491
00:24:58,320 --> 00:25:02,000
Speaker 4: mortgage rates were three percent. If I told everyone in

492
00:25:02,040 --> 00:25:03,920
Speaker 4: the room at that time. Hey, by the way, in

493
00:25:03,960 --> 00:25:06,720
Speaker 4: the next eighteen months, the mortgage rate on a thirty

494
00:25:06,760 --> 00:25:08,600
Speaker 4: year mortgage is going to go from three to seven

495
00:25:08,680 --> 00:25:12,000
Speaker 4: and a half. How many would have said, oh great,

496
00:25:12,320 --> 00:25:15,080
Speaker 4: I think house prices will go up another fifteen percent.

497
00:25:16,240 --> 00:25:18,440
Speaker 4: I don't think anyone would have done that. But that's

498
00:25:18,480 --> 00:25:22,040
Speaker 4: exactly what happened, because in this country, with our ability

499
00:25:22,080 --> 00:25:24,879
Speaker 4: to lock in that financing like the companies for a

500
00:25:24,920 --> 00:25:29,439
Speaker 4: long time, everyone just immediately said, well, great, honey, I'm sorry.

501
00:25:29,440 --> 00:25:31,960
Speaker 4: That means we're not moving for the next ten years,

502
00:25:32,160 --> 00:25:33,160
Speaker 4: and nobody has.

503
00:25:33,600 --> 00:25:37,160
Speaker 1: We did an episode about a thirteen or fourteen months

504
00:25:37,200 --> 00:25:39,720
Speaker 1: ago and our guest was like, house prices aren't going

505
00:25:39,800 --> 00:25:41,640
Speaker 1: to fall and for this reason, And in the back

506
00:25:41,680 --> 00:25:43,000
Speaker 1: of my head, I was like, man, this guy's saying,

507
00:25:43,080 --> 00:25:44,159
Speaker 1: this guy's really going.

508
00:25:44,040 --> 00:25:44,760
Speaker 5: Out on a limb.

509
00:25:45,000 --> 00:25:47,439
Speaker 1: But I'm glad it is, like he gets it.

510
00:25:47,440 --> 00:25:48,000
Speaker 5: He was right.

511
00:25:48,200 --> 00:25:50,200
Speaker 4: Yeah, But I mean, think about think about what makes

512
00:25:50,200 --> 00:25:53,840
Speaker 4: people happy they see the equity in their home. I mean,

513
00:25:53,880 --> 00:25:56,280
Speaker 4: that is a big part of I think consumers kind

514
00:25:56,320 --> 00:25:59,639
Speaker 4: of propensity to spend, maybe spend down some more of

515
00:25:59,640 --> 00:26:01,680
Speaker 4: that access savings.

516
00:26:01,720 --> 00:26:02,639
Speaker 5: It's a real driver.

517
00:26:02,800 --> 00:26:06,480
Speaker 4: I think of just kind of overall kind of balance

518
00:26:06,560 --> 00:26:10,920
Speaker 4: sheet stability and from a consumer standpoint, for sure.

519
00:26:11,520 --> 00:26:15,080
Speaker 3: The last time interest rates were really high would have

520
00:26:15,119 --> 00:26:17,200
Speaker 3: been the nineteen seventies, and.

521
00:26:17,440 --> 00:26:19,920
Speaker 5: I think time we all remember fondly obviously.

522
00:26:20,119 --> 00:26:22,240
Speaker 2: Well so, I think a lot of people remember the.

523
00:26:22,280 --> 00:26:26,240
Speaker 3: Nineteen seventies for inflation, you know, the oil crisis, things

524
00:26:26,280 --> 00:26:30,399
Speaker 3: like that. Not many people except maybe me, remember it

525
00:26:30,440 --> 00:26:32,600
Speaker 3: as the birth of the junk bond market.

526
00:26:33,240 --> 00:26:35,080
Speaker 2: And there are a lot of people who.

527
00:26:34,920 --> 00:26:37,720
Speaker 3: Made their names in that environment, Mike Milkin being one.

528
00:26:38,160 --> 00:26:40,960
Speaker 3: Howard Marx I think got his start then as well.

529
00:26:41,800 --> 00:26:45,639
Speaker 3: Do you see the opportunity in the current environment of

530
00:26:45,760 --> 00:26:49,280
Speaker 3: higher rates, maybe more volatility around bonds, things like that

531
00:26:49,880 --> 00:26:52,920
Speaker 3: for a similar dynamic, could you see something brand new

532
00:26:53,280 --> 00:26:54,080
Speaker 3: enter the market?

533
00:26:54,400 --> 00:26:56,720
Speaker 5: Oh? Good question. Yeah, that is a great question.

534
00:26:56,760 --> 00:26:59,920
Speaker 4: I mean, look, you're right that the junk bond market,

535
00:27:00,040 --> 00:27:02,640
Speaker 4: the high yield market did really kind of benefit from

536
00:27:02,680 --> 00:27:04,920
Speaker 4: that that kind of peak and rates. And you're right,

537
00:27:05,000 --> 00:27:07,320
Speaker 4: Howard Marx did start one of the first kind of

538
00:27:07,600 --> 00:27:10,760
Speaker 4: public high yield bond funds back in the late seventies.

539
00:27:11,840 --> 00:27:14,240
Speaker 4: You know, I think the one difference maybe then versus

540
00:27:14,240 --> 00:27:18,520
Speaker 4: today is rates were you know, fifteen to twenty percent,

541
00:27:18,680 --> 00:27:20,720
Speaker 4: and you know, fixed income just.

542
00:27:21,320 --> 00:27:23,399
Speaker 5: Rode that wave for forty years.

543
00:27:23,440 --> 00:27:27,160
Speaker 4: And Howard mentioned this in his memo you Know More

544
00:27:27,280 --> 00:27:30,440
Speaker 4: most recently that one thing he's certain is rates probably

545
00:27:30,520 --> 00:27:34,280
Speaker 4: won't fall two thousand basis points again over a twenty

546
00:27:34,359 --> 00:27:36,000
Speaker 4: year period. So I don't know if you get that

547
00:27:36,080 --> 00:27:39,240
Speaker 4: same dynamic and fixed income, but the market seems to

548
00:27:39,280 --> 00:27:42,240
Speaker 4: always find a way to to, you know, find a

549
00:27:42,280 --> 00:27:44,120
Speaker 4: new way to solve an old problem.

550
00:27:44,600 --> 00:27:46,800
Speaker 1: I'm buying a house right now, and one of the

551
00:27:46,840 --> 00:27:49,080
Speaker 1: things people will tell me, like, oh, well to buy

552
00:27:49,080 --> 00:27:51,160
Speaker 1: a house to They're like, oh, well, it's okay.

553
00:27:51,200 --> 00:27:53,679
Speaker 5: That like paying cash, that's.

554
00:27:53,560 --> 00:27:54,400
Speaker 1: A long story.

555
00:27:54,960 --> 00:27:57,479
Speaker 5: That's funny. You should say that. No, I'm not.

556
00:27:57,800 --> 00:27:59,400
Speaker 1: But one of the things people say is like, oh,

557
00:27:59,400 --> 00:28:02,080
Speaker 1: it's yeah, it's all right, you just refined a few years.

558
00:28:02,160 --> 00:28:04,240
Speaker 1: And what that tells me is like everyone is a

559
00:28:04,240 --> 00:28:06,959
Speaker 1: bunch of people at least like are like of this

560
00:28:07,040 --> 00:28:09,960
Speaker 1: generation locked into like a sort of assert mentality where

561
00:28:10,000 --> 00:28:12,719
Speaker 1: it's like seven percent mortgages like super high, right, and

562
00:28:12,760 --> 00:28:14,640
Speaker 1: so it's like this is abnormal, and the Fed's gonna

563
00:28:14,640 --> 00:28:16,280
Speaker 1: and then they're gonna cut and just kind of what

564
00:28:16,280 --> 00:28:18,639
Speaker 1: we were talking about before. But like, could it go

565
00:28:18,680 --> 00:28:20,800
Speaker 1: in the other direction? Could we have like I mean,

566
00:28:20,920 --> 00:28:24,040
Speaker 1: it just seems so unfathomable that like FED funds rates

567
00:28:24,080 --> 00:28:26,359
Speaker 1: wherever like above ten. But it's like, is there some

568
00:28:26,480 --> 00:28:29,080
Speaker 1: natural limit? Could we go like much higher on rates

569
00:28:29,119 --> 00:28:31,760
Speaker 1: like that? None of us are thinking about.

570
00:28:32,720 --> 00:28:35,560
Speaker 4: Look, that debate has certainly come up more often in

571
00:28:35,600 --> 00:28:37,359
Speaker 4: the last twelve months, and it certainly did in the

572
00:28:37,400 --> 00:28:42,600
Speaker 4: previous ten years. You mentioned kind of that belief about mortgages,

573
00:28:42,600 --> 00:28:44,560
Speaker 4: and I think that's true. I can tell you with

574
00:28:44,600 --> 00:28:47,160
Speaker 4: somebody who refinanced a mortgage in twenty twenty one that

575
00:28:47,240 --> 00:28:50,080
Speaker 4: wasn't a thirty year and thought, okay, I have seven

576
00:28:50,120 --> 00:28:53,040
Speaker 4: to ten years. Rates will probably come down again or

577
00:28:53,120 --> 00:28:55,640
Speaker 4: won't stay high. But I think the big wild card

578
00:28:55,880 --> 00:28:58,520
Speaker 4: in that is really just the cost of public debt.

579
00:28:58,920 --> 00:29:00,680
Speaker 4: And I know you guys have spoken about this with

580
00:29:00,760 --> 00:29:03,600
Speaker 4: other guests, but I mean that burden on the on

581
00:29:03,680 --> 00:29:07,920
Speaker 4: the you know, our our budget annually to see rates

582
00:29:07,960 --> 00:29:11,120
Speaker 4: at that level to refinance what's now you know, thirty

583
00:29:11,160 --> 00:29:14,680
Speaker 4: two trillion dollars of debt. No, that's that's not a

584
00:29:14,680 --> 00:29:16,480
Speaker 4: good story in the long And I don't know how

585
00:29:16,520 --> 00:29:19,960
Speaker 4: you have a kind of viable economy with persistent rates

586
00:29:20,000 --> 00:29:21,280
Speaker 4: that high.

587
00:29:21,840 --> 00:29:26,040
Speaker 3: So we've been talking about inflation and rates and yields

588
00:29:26,240 --> 00:29:27,400
Speaker 3: and default risk.

589
00:29:28,040 --> 00:29:29,080
Speaker 2: But I'm curious.

590
00:29:29,160 --> 00:29:33,520
Speaker 3: Even before COVID, there was a massive discussion around how

591
00:29:33,720 --> 00:29:37,160
Speaker 3: bonds and credit are actually traded, and a lot of

592
00:29:37,200 --> 00:29:40,000
Speaker 3: people talked about liquidity issues. They talked about the rise

593
00:29:40,040 --> 00:29:44,640
Speaker 3: of exchange traded funds as a mechanism for maybe trading

594
00:29:44,680 --> 00:29:49,400
Speaker 3: more liquid assets. And I'm curious, in twenty twenty three,

595
00:29:49,920 --> 00:29:53,240
Speaker 3: in the current environment, has the way we traded we

596
00:29:53,360 --> 00:29:55,560
Speaker 3: trade bonds changed even further.

597
00:29:56,920 --> 00:30:00,000
Speaker 4: Not being a definite expert to answer the question, but

598
00:30:00,000 --> 00:30:02,120
Speaker 4: but I think one thing that's happened for sure is

599
00:30:02,160 --> 00:30:07,640
Speaker 4: that these exchange traded funds have increased liquidity in certain

600
00:30:07,720 --> 00:30:10,840
Speaker 4: pockets of the markets. I speak a lot about the

601
00:30:10,880 --> 00:30:13,720
Speaker 4: high yield market and not surprising, that's where you know,

602
00:30:13,840 --> 00:30:16,640
Speaker 4: non investment great credit is kind of where where oak

603
00:30:16,680 --> 00:30:19,200
Speaker 4: Tree makes its name and we focus a lot, but

604
00:30:19,560 --> 00:30:21,520
Speaker 4: you know that is a market to where today, if

605
00:30:21,560 --> 00:30:24,040
Speaker 4: you wanted to trade a lot of double B rated bonds,

606
00:30:24,520 --> 00:30:27,760
Speaker 4: there's probably more liquidity because that's where the ETFs are

607
00:30:27,760 --> 00:30:30,200
Speaker 4: going to be buyers. But if you still want to

608
00:30:30,240 --> 00:30:34,960
Speaker 4: trade that, maybe you know, smaller maybe slightly sketchyr issue

609
00:30:35,040 --> 00:30:38,400
Speaker 4: single B minus or triple C. You know, you're still

610
00:30:38,400 --> 00:30:40,760
Speaker 4: going to have some challenges from a liquidity standpoint, So

611
00:30:40,800 --> 00:30:43,920
Speaker 4: I guess it kind of depends exactly what you're buying.

612
00:30:43,960 --> 00:30:48,840
Speaker 4: It certainly hasn't been you know, equally distributed across all

613
00:30:48,880 --> 00:30:50,920
Speaker 4: of these different segments of the market.

614
00:30:51,040 --> 00:30:53,160
Speaker 1: I want to go back to real estate for a second.

615
00:30:53,240 --> 00:30:56,000
Speaker 1: You know, we talked about the residential component. One area

616
00:30:56,040 --> 00:30:59,680
Speaker 1: where there's like obvious weakness is certainly like large swaths

617
00:30:59,720 --> 00:31:03,200
Speaker 1: of the commercial real estate market. And I understand that

618
00:31:03,240 --> 00:31:05,560
Speaker 1: it's not the entire market, and the commercial real estate

619
00:31:05,640 --> 00:31:08,280
Speaker 1: is diverse, but offices in a lot of cities aren't

620
00:31:08,720 --> 00:31:09,680
Speaker 1: doing great.

621
00:31:09,880 --> 00:31:10,840
Speaker 5: Has that been felt like.

622
00:31:10,920 --> 00:31:13,880
Speaker 1: Other people and other like further shoes to drop in

623
00:31:13,960 --> 00:31:15,120
Speaker 1: commercial real estate?

624
00:31:15,920 --> 00:31:18,720
Speaker 5: What's your view on that? You mean beyond like the

625
00:31:19,080 --> 00:31:20,120
Speaker 5: challenge in the office.

626
00:31:20,200 --> 00:31:22,680
Speaker 1: So right, so we've seen like these big jobs in office,

627
00:31:22,840 --> 00:31:23,760
Speaker 1: and but then there's.

628
00:31:23,720 --> 00:31:25,520
Speaker 2: Questions where will office get worse.

629
00:31:25,320 --> 00:31:28,000
Speaker 1: Have they likes will get worse, or have have the

630
00:31:28,040 --> 00:31:31,280
Speaker 1: holders of these assets really taken their marks yet or

631
00:31:31,280 --> 00:31:33,840
Speaker 1: are they still living in some sort of fantasy where

632
00:31:33,880 --> 00:31:35,920
Speaker 1: next year everyone comes back to the office and vacancy

633
00:31:36,000 --> 00:31:39,440
Speaker 1: rates drop and everything, there's still like chapters to the

634
00:31:39,480 --> 00:31:40,160
Speaker 1: series story.

635
00:31:40,520 --> 00:31:43,160
Speaker 4: Yeah, I mean, look, there's no doubt that office has

636
00:31:43,200 --> 00:31:45,760
Speaker 4: has its challenges, and I'm sure we have certainly not

637
00:31:45,840 --> 00:31:48,000
Speaker 4: heard the end of it. One of the things in

638
00:31:48,040 --> 00:31:51,080
Speaker 4: commercial real estate maybe unlike some of the corporate markets,

639
00:31:51,120 --> 00:31:54,120
Speaker 4: when you have a maturity in a bond, you've either

640
00:31:54,200 --> 00:31:58,280
Speaker 4: paid the bond or you've defaulted from a because the

641
00:31:58,280 --> 00:32:01,840
Speaker 4: maturities dictated that. In commercial real estate you don't quite

642
00:32:01,920 --> 00:32:05,800
Speaker 4: have that same dynamic. There's extensions you don't have to

643
00:32:05,920 --> 00:32:09,440
Speaker 4: you know, in the case of securitizations, you can go

644
00:32:09,520 --> 00:32:12,640
Speaker 4: into real estate owned, so you're effectively defaulted, but the

645
00:32:12,680 --> 00:32:16,440
Speaker 4: asset maybe didn't change hands. A mezzanine buyer can step in,

646
00:32:16,480 --> 00:32:18,960
Speaker 4: so there's a lot of ways to kind of you know,

647
00:32:19,200 --> 00:32:21,680
Speaker 4: I'll honestly like kick the can down the road, and

648
00:32:21,880 --> 00:32:24,440
Speaker 4: to some degree, so I don't think we've seen the end.

649
00:32:24,480 --> 00:32:28,080
Speaker 4: But to your other point is there is a lot

650
00:32:28,080 --> 00:32:32,200
Speaker 4: of dispersion and what is perceived today as the quality

651
00:32:32,200 --> 00:32:35,040
Speaker 4: parts of the commercial real estate market certainly don't trade

652
00:32:35,200 --> 00:32:38,520
Speaker 4: like stress is around the corner, and I'm not sure

653
00:32:38,560 --> 00:32:41,400
Speaker 4: it is. We've had this debate at work a few

654
00:32:41,400 --> 00:32:43,720
Speaker 4: times of hey, are we going to get a chance

655
00:32:43,760 --> 00:32:47,840
Speaker 4: to buy this high quality industrial asset at a fifteen

656
00:32:47,880 --> 00:32:48,680
Speaker 4: percent yield?

657
00:32:49,320 --> 00:32:53,880
Speaker 5: And so far that answer has been no real estate owned.

658
00:32:54,000 --> 00:32:56,000
Speaker 3: Is a blast from the sort of like two thousand

659
00:32:56,000 --> 00:32:57,240
Speaker 3: and eight, two thousand and nine passed.

660
00:32:58,480 --> 00:33:00,040
Speaker 2: Well, your job.

661
00:32:59,800 --> 00:33:02,120
Speaker 3: Is to think about risk on a day to day basis.

662
00:33:02,120 --> 00:33:06,200
Speaker 3: So I'm going to ask the very obvious, lazy journalistic question,

663
00:33:06,280 --> 00:33:09,200
Speaker 3: which is what do you worry about the most?

664
00:33:10,240 --> 00:33:12,080
Speaker 5: Wow in today's environment?

665
00:33:12,160 --> 00:33:15,840
Speaker 4: Yeah, I think one of the things that's really challenging

666
00:33:15,920 --> 00:33:19,360
Speaker 4: right now is it's very hard to define I think

667
00:33:19,360 --> 00:33:22,320
Speaker 4: what is normal and a lot of people look at

668
00:33:22,800 --> 00:33:25,640
Speaker 4: you know, different kind of masures of what they perceive

669
00:33:25,720 --> 00:33:28,720
Speaker 4: to be normal. Oh, look at the jobs market. We're

670
00:33:28,760 --> 00:33:32,600
Speaker 4: seeing an uptick in part time jobs. We're seeing an

671
00:33:32,720 --> 00:33:36,840
Speaker 4: uptick in or a downdraft in full time jobs. Oh no,

672
00:33:37,000 --> 00:33:39,719
Speaker 4: that's a sign that the labor market's weakening. We're going

673
00:33:39,760 --> 00:33:43,480
Speaker 4: to fall into a receession. But really, in reality, we're

674
00:33:43,600 --> 00:33:46,000
Speaker 4: kind of getting back to what we the labor market

675
00:33:46,040 --> 00:33:50,480
Speaker 4: look like pre twenty twenty. You know, with inflation, is

676
00:33:50,520 --> 00:33:53,920
Speaker 4: inflation going to remain sticky? A lot of that has

677
00:33:53,960 --> 00:33:56,280
Speaker 4: to do with shelter price is how quickly will those

678
00:33:56,360 --> 00:33:59,000
Speaker 4: feed through? I think to me there's just a big

679
00:33:59,120 --> 00:34:02,080
Speaker 4: kind of unknown in how to interpret some of these

680
00:34:02,440 --> 00:34:07,080
Speaker 4: kind of traditional economic measures that you know historically were

681
00:34:07,240 --> 00:34:10,759
Speaker 4: our kind of benchmarker indicator for how much risk and

682
00:34:10,920 --> 00:34:13,360
Speaker 4: in this case, maybe a risk of recession was building.

683
00:34:13,400 --> 00:34:16,319
Speaker 4: And I think this year is an example for how

684
00:34:16,320 --> 00:34:19,760
Speaker 4: hard that's been because, and I think you mentioned this earlier, Joe,

685
00:34:20,239 --> 00:34:22,760
Speaker 4: the market went from thinking we were near an imminent

686
00:34:22,760 --> 00:34:26,239
Speaker 4: recession twelve months ago to now thinking we might not

687
00:34:26,320 --> 00:34:27,359
Speaker 4: have a recession at all.

688
00:34:27,600 --> 00:34:28,319
Speaker 5: Yeah.

689
00:34:28,640 --> 00:34:32,440
Speaker 1: Wayne Dahl, thank you so much for doing the live

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00:34:32,560 --> 00:34:36,200
Speaker 1: podcast here as a real treat, great perspective, and appreciate

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00:34:36,239 --> 00:34:36,640
Speaker 1: you coming on.

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00:34:37,000 --> 00:34:46,840
Speaker 5: Thank you very much for having me. It's my pleasure.

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00:34:50,880 --> 00:34:55,040
Speaker 1: That was our conversation with Wayne Dull, Managing Director, assistant

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00:34:55,040 --> 00:34:59,480
Speaker 1: portfolio manager and investment risk officer at oak Tree, recorded

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00:34:59,560 --> 00:35:03,400
Speaker 1: live at the future Proof Conference in Huntington Beach, California.

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00:35:03,840 --> 00:35:04,800
Speaker 2: I'm Tracy Alloway.

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00:35:04,880 --> 00:35:07,240
Speaker 3: You can follow me at Tracy Alloway.

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00:35:06,920 --> 00:35:10,080
Speaker 1: And I'm Joe Wisenthal. You can follow me at the Stalwart.

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00:35:10,360 --> 00:35:14,120
Speaker 1: Follow our producers Carmen Rodriguez at Carmen Arman dash Ol

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00:35:14,160 --> 00:35:18,040
Speaker 1: Bennett at dashbot and Moses Adnan and for all of

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00:35:18,040 --> 00:35:21,279
Speaker 1: the Bloomberg podcasts, check out at Podcasts and for more

702
00:35:21,320 --> 00:35:24,760
Speaker 1: Odd Lots content, go to Bloomberg dot com slash odd Lots.

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00:35:25,120 --> 00:35:27,520
Speaker 1: We have transcripts, a blog, and a newsletter, and you

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00:35:27,520 --> 00:35:30,160
Speaker 1: can chat about markets and this topic and others at

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Speaker 1: discord dot gg slash online.

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Speaker 3: And if you enjoy odd Lots, if you like it

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Speaker 3: when we talk all things credit, then please leave us

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00:35:41,080 --> 00:35:41,800
Speaker 2: Thanks for listening

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00:36:07,000 --> 00:36:07,040
Speaker 3: In