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Speaker 1: M. This is mesters in business with very results on

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Speaker 1: Bluebird Radio this week on the podcast what Can I Say?

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Speaker 1: Rick Reader runs fixed income at black Rock. He holds

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Speaker 1: all sorts of fascinating titles. In addition to chief investment

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Speaker 1: Officer for bonds, he helps to oversee two point five

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Speaker 1: trillion dollars in various investments. And this is just a

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Speaker 1: master class in how to manage assets. Think about your career,

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Speaker 1: Understand the relationship between markets, between fixed income, the FED,

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Speaker 1: the dollar sentiment, consumer spending, just everything is related. And

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Speaker 1: understanding what matters when is the key to your success.

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Speaker 1: If you're at all interested in electric school and investing,

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Speaker 1: or fixed income or active and passive, this is just

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Speaker 1: a master class as to how to do it right.

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Speaker 1: I can keep babbling about how fascinating I found this discussion,

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Speaker 1: but instead I will say, with no further ado, my

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Speaker 1: conversation with Black Rocks Rick Reader, you have a fascinating background,

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Speaker 1: and let's go all the way back to the beginning.

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Speaker 1: You graduate Emory University with a degree in finance, you

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Speaker 1: get an MBA from Wharton. Was fixed income always in

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Speaker 1: the cards? I think it was ever in the cards? Actually? Yeah,

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Speaker 1: So when I graduated Wharton. You know, I wasn't one

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Speaker 1: of those people who had you know, my family was

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Speaker 1: in Wall was on Wall Street, and I didn't really

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Speaker 1: know what direction I was going in. And actually I

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Speaker 1: was going to go and do something different. In fact,

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Speaker 1: I was going to be a strategist financial analyst, to

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Speaker 1: work for a bank and write research reports. And I

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Speaker 1: was somebody convinced me to go into sales and trading,

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Speaker 1: and I decided to do that. And I loved you know,

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Speaker 1: they talked to me about I love sports, and you know,

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Speaker 1: I love Mark Gets and anyway, I got into fixed

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Speaker 1: income and I and I really liked the macro element

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Speaker 1: to it. I really liked you know, how you think

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Speaker 1: about big picture. And you know, one thing led to another.

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Speaker 1: There was a job opening, and uh, like I said,

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Speaker 1: I graduated, went to EF Hutton and nobody remembers anymore,

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Speaker 1: which because were the greatest commercials of all time and people, yes,

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Speaker 1: people are still remember them, and and then which was

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Speaker 1: absorbed into Lehman, and I got lucky to go there

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Speaker 1: and got a job in fixed income and and then

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Speaker 1: the ball started rolling. But I probably two years prior

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Speaker 1: to that or three years, probably didn't even know what

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Speaker 1: fixed income was. So you spend what seven to oh

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Speaker 1: eight at Lehman Brothers. That has to be one of

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Speaker 1: the most exciting two decades at a specific place and

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Speaker 1: a specific time anywhere on Wall Street. Tell us a

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Speaker 1: little bit about that history. So, first of all, when

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Speaker 1: I started, I mean I started this, it was the

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Speaker 1: July market crashes. Nothing was going on that. Yeah, so

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Speaker 1: market crashes, and then you know, we don't think that,

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Speaker 1: you know, it doesn't look like if Hutton is gonna

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Speaker 1: make it, potentially he's going to go out of business.

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Speaker 1: They get absorbed. Lehman buys them as acquisition. It was

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Speaker 1: so a Lehman paid a billion dollars free f Utton

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Speaker 1: and m and they took I was very lucky. There

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Speaker 1: were thirty five of us in the training program and

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Speaker 1: it looked like we all were gonna get fired, and

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Speaker 1: they took two of us. And I'm not sure how

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Speaker 1: I made it through the strainer, but I um, I

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Speaker 1: found somebody who I really liked on the mortgage department

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Speaker 1: and the mortgage agency mortgage business and took a liking

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Speaker 1: to me, and they went into the training program. And

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Speaker 1: then you know, and then by the way it wasn't

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Speaker 1: like the crises ended between and the recession on the

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Speaker 1: SNL dynamics and then and and you know, all had

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Speaker 1: a different stream to two thousand and two. By the way,

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Speaker 1: team like every four years there was um and then

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Speaker 1: you know, punctuating with obviously two thousand and eight. But boy,

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Speaker 1: I mean I went through and I think I still

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Speaker 1: have the scar tissue to this day of you know,

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Speaker 1: all of these And by the way, I think it's

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Speaker 1: an interesting cyclicality to markets that every four years you

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Speaker 1: need to recalibrate. You know, people are comfortable, leverage builds

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Speaker 1: and then and then and then all of a sudden,

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Speaker 1: sometimes violently, it recalibrates. But I'll tell you, you know,

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Speaker 1: going through it again in twenty two, you know, you

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Speaker 1: just know that the next couple of years are going

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Speaker 1: to be pretty good because you just reprice things again.

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Speaker 1: But I'll tell you, going through those years, I'd love

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Speaker 1: to skip those in my career. Mark your calendars. And

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Speaker 1: also maybe we should rename hundred year floods because every

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Speaker 1: time someone goes on this is a hundred year flood

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Speaker 1: until four years or years. By the way, it's interesting

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Speaker 1: that O two. You know why I didn't happen to

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Speaker 1: know six, and so you think about what happened, Well,

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Speaker 1: monetary policies stayed too easy. While I thought Jaron Greensman

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Speaker 1: was incredible, you know, he kept policy too easy. Remember

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Speaker 1: the housing market was starting a bubble. They should have

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Speaker 1: started tightening and oh six, and we should have had

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Speaker 1: the recalibration of six, and the fact that it didn't

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Speaker 1: probably created more pressure two years. Hence for sure that

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Speaker 1: we can spend a lot of time talking about seven.

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Speaker 1: Oh wait, we'll get to that later. So what departments

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Speaker 1: did you work in at Lehman Brothers. You were there

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Speaker 1: long enough. Eventually when you leave there, you're running the

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Speaker 1: firm's global principal strategies team. So clearly that was quite

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Speaker 1: a successful career path. Tell us about the different departments

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Speaker 1: you are. So, I mean I started and while I

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Speaker 1: was going to go into mortgages, and that was where

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Speaker 1: I was taken out of the place from the training program.

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Speaker 1: I went into a six month training program and Lehman

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Speaker 1: and I found um the corporate bond business to be

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Speaker 1: incredibly interesting and uh and I got to meet two

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Speaker 1: people and you know how you learn in life that

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Speaker 1: it's and I've learned over the years. It's all about

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Speaker 1: the people and and gosh, I found two people who

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Speaker 1: were extraordinarily uh. I mean, I thought smart, capable. I

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Speaker 1: love their business. And so I started in corporate bonds,

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Speaker 1: and then UM, I started trading international Yankee bonds, so

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Speaker 1: foreign bonds denominating dollars. Did that for a while. Then

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Speaker 1: I did crossover between investment grade and high yield, and

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Speaker 1: then I ran UM. Then I round the corporate bond

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Speaker 1: trading desk, and then uh did that for a while,

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Speaker 1: I run right. Then I ran our credit business across

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Speaker 1: emerging markets, money markets, UM, loans prefers, and then uh,

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Speaker 1: and then I went to the principal strategies area before

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Speaker 1: before I left in MAYO eight and uh, yeah, you

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Speaker 1: hit the bid. Yes, everything blew up, yeah, which you know, yeah,

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Speaker 1: which seemed depression, but it actually wasn't. Yeah, it was

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Speaker 1: definitely dumb luck. And in fact it wasn't even luck

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Speaker 1: because I left in O eight and I started my

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Speaker 1: hedge fund. And if somebody said what would be the

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Speaker 1: worst month in history to start a credit hedge fund,

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Speaker 1: May of oh eight may have been the one, or

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Speaker 1: certainly closer. You know, part of why you know, I laughed.

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Speaker 1: I brought my team with me. You know, this was

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Speaker 1: an exciting point in time. The markets were bubbling and

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Speaker 1: there and there were gonna be some opportunities and then

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Speaker 1: it would turned out to be calamitous. And um I

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Speaker 1: saw by the part of part of what we merged

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Speaker 1: into black Rock in Mayo nine was we did you

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Speaker 1: know we had a tough go in O eight but

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Speaker 1: then started to do well in oh nine, But we

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Speaker 1: have an opportunity to move to black Rock. You mentioned,

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Speaker 1: um luck, you very easily could have ended up in

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Speaker 1: the NBS mortgage department at Lehman you were, you had

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Speaker 1: half a foot there. How did you escape a fate

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Speaker 1: worse than that? Well, I mean it was I mean,

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Speaker 1: you think about that, that that was eighty seven. It probably

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Speaker 1: you know, it probably was a good twenty year runway

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Speaker 1: after that. But I jokingly said, you could set the

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Speaker 1: record on the on the racetrack, but if you don't

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Speaker 1: make the turn at the end, if you hit the wall,

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Speaker 1: it doesn't that is right. But I don't I found

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Speaker 1: you know, I was a financial analyst and I was

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Speaker 1: literally per you know where we talked about I was

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Speaker 1: going to go and do that again. I loved looking

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Speaker 1: at companies, both my parents who entrepreneurs. I loved how

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Speaker 1: business has worked and to think in in you know,

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Speaker 1: for some reason, naturally in school, I had a really

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Speaker 1: tough go early in my school career because I didn't

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Speaker 1: really I didn't understand philosophy or psychology. But business always

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Speaker 1: made a lot of sense to me. And looking at companies,

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Speaker 1: analyzing them, figuring out how they drive cash flow and

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Speaker 1: the amount or liquidity was I mean, I found it

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Speaker 1: phenomenally exciting. So anyway, so I did it. I did

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Speaker 1: it for for a long time, and you know I

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Speaker 1: still do this day, you know, being a being in credit,

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Speaker 1: I think people underestimate like I don't. I don't really

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Speaker 1: think top down analysis works. Like trying to analyze the

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Speaker 1: economy from the top. I think it's too hard to

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Speaker 1: do being understanding how companies drive inventory, hiring, capex, spend,

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Speaker 1: and to this day, you know, when I have a

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Speaker 1: view on the economy or usually a view on the

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Speaker 1: economy or inflation, it's usually driven because I read so

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Speaker 1: many corporate earnings reports and understand trying to understand why

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Speaker 1: they why they're cutting inventory, why are they laying off people? Anyway,

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Speaker 1: So it's been Having a credit corporate background has been

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Speaker 1: hugely powerful because I tend every analysis we do big

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Speaker 1: picture starts, bottoms up and uh, and that's what informs

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Speaker 1: I find that's the most effective way to inform your views.

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Speaker 1: Is that how you ran our three? Was? That? Was that? Yeah?

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Speaker 1: So the idea of being, you know that we could

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Speaker 1: analyze um dissect companies anywhere from senior securities secured down

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Speaker 1: to down a distress. And we had we had a

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Speaker 1: great team many many of which are still with me

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Speaker 1: today that I'm super honored by. I have a lot

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Speaker 1: of us who worked together for twenty thirty years, a

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Speaker 1: couple of over thirty years. But the idea being, you know,

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Speaker 1: we were good at analyzing companies and could do it

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Speaker 1: across cap stock, different sectors, it's and globally and we

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Speaker 1: have a great team in Asia and Europe. So yeah,

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Speaker 1: I mean that was the idea and uh and I

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Speaker 1: say that's port of White's translated to a number of

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Speaker 1: people coming to black Rock and uh and being with

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Speaker 1: me today. So let's talk a little bit about black Rock.

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Speaker 1: You said black Rock absorbed our three. Tell us a

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Speaker 1: little bit about how did that come about? Was that

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Speaker 1: something you were planning on doing, or the right opportunity

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Speaker 1: just came along and you said, I think I can

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Speaker 1: hang with you, fellas so um so. I had known

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Speaker 1: Larry Fink and Robed Computer, our CEO and president for

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Speaker 1: a number of years. In fact, the only other place

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Speaker 1: that I almost u most left Leman to go work

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Speaker 1: for was black Rock, and because I had such great

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Speaker 1: respect for the people running it, and there were actually

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Speaker 1: more people than that, but but Larry and the and

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Speaker 1: Rob being the the main drivers of the company. And

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Speaker 1: then uh, you know, after you know, I would say

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Speaker 1: the fall of oh nine, you know, going through that

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Speaker 1: darress around around Hedge, fond of being in uh you know,

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Speaker 1: it was a tough spot around the markets, coming under pressure.

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Speaker 1: You know. We started talking and we were back and

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Speaker 1: forth having a conversation about coming to black Rock, and

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Speaker 1: and I remember Rob and Larry saying, we've been talking

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Speaker 1: about for years, why don't you do it now? And

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Speaker 1: I had a big team with me and and whatever reason,

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Speaker 1: I having worked at places for a long time, very loyal,

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Speaker 1: and I said, but I gotta bring my whole team,

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Speaker 1: and uh away I get. I was a massive honor

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Speaker 1: they you know, took forty two people and um, you know,

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Speaker 1: like I say, many of whom are are still with

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Speaker 1: us today. So yeah, the fact they were willing to

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Speaker 1: do that, and quite frankly, even at the time before

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Speaker 1: black Rock was this big, I felt like it was

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Speaker 1: much the episode or a finance and I thought I

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Speaker 1: wouldn't have gone to and you know, our hedgephone started

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Speaker 1: to do well again, and I wouldn't have done it

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Speaker 1: anywhere else because I thought this was a place that, like,

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Speaker 1: how could you turn down the ability to be at

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Speaker 1: a place that was if you liked finance and you

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Speaker 1: liked what we did, this was a chance to work

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Speaker 1: somewhere that was you know, the epicenter is before it

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Speaker 1: got to be the size and scale it did. So

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Speaker 1: you've been at black Rock for well over a decade

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Speaker 1: um you're running fixed income for them, Essentially, tell us

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Speaker 1: about what the process was from bringing over a team

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Speaker 1: from your hedge fund to Okay, now we're just gonna

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Speaker 1: talk into black Rock and see what we can do here. Yeah.

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Speaker 1: So I mean the idea coming over is we're gonna

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Speaker 1: we're gonna work operate our hedgephone and work and work

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Speaker 1: within the credit business at black Rock and somebody ended

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Speaker 1: up leaving the firm. Who was the who was the

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Speaker 1: c i O. And UH anyway opened up opened up

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Speaker 1: a spot for me, and you know, I was huge

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Speaker 1: on it to be chosen to do it. So that

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Speaker 1: was that twelve thirteen years ago, and uh, which was

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Speaker 1: mine ten. So you're there for six months and Larry says, hey,

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Speaker 1: I think it was. It must have been. It's been

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Speaker 1: August of thinking through it, August at ten. And I

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Speaker 1: know it was a little bit of trepidation I was

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Speaker 1: at the time. It was still a big place, and

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Speaker 1: it was a little bit of trepidation. But it's been

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Speaker 1: incredibly exciting, and like I said, I have so many

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Speaker 1: of the team had come with me, and I got

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Speaker 1: to know some really great people across the organization. So

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Speaker 1: you know, I was honored to do it. And you know,

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Speaker 1: I've always been investing in different parts of fixed income,

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Speaker 1: and the heritage of Black Rock was in the mortgage business,

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Speaker 1: but I was my background was in credit, but we

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Speaker 1: had so many talented people in mortgages and that obviously

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Speaker 1: a huge part of the fixed income market that I

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Speaker 1: felt like that team, you know, could take my shallow

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Speaker 1: knowledge to the hopefully to the next level. And um,

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Speaker 1: so then I became I became c I O then

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Speaker 1: and uh yeah, I guess I've been doing it for

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Speaker 1: over a decade now. It was pretty unbelievable. So let's

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Speaker 1: go over all your titles. Your Chief and Stment Officer,

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Speaker 1: you run global fixed Income, your head of the Global

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Speaker 1: Allocation Investment team. Um, you're also on one of the

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Speaker 1: executive management teams and some sudden they on the Global

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Speaker 1: Executive Committee. Alright, so it sounds like you have a busy,

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Speaker 1: uh busy day, Like how do you spend your time?

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Speaker 1: What takes up the most hours during the day? And

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Speaker 1: is it I know a lot of these things meet

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Speaker 1: once a week or months once a month. It's not

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Speaker 1: like they're eighty hour week jobs. But it sounds like

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Speaker 1: a lot's on your plate. We haven't even talked about

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Speaker 1: the various funds you run. So I mean, I got

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Speaker 1: up at three forty five in the morning, Is that true? Yeah?

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Speaker 1: I thought I was earlier. You know, I think you know,

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Speaker 1: people always set of young people are coming to the business.

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Speaker 1: You know, why are you coming in a finance You

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Speaker 1: gotta really love it, And you know, I love the

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Speaker 1: business and I love. You know, it's dynamic. So I

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Speaker 1: get up at three forty five. Uh, you work out

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Speaker 1: and but but I literally the first thing I do

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Speaker 1: is I check every market around the world and see

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Speaker 1: where things are. And you know, I pretty much go

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Speaker 1: you know, whether it's dinners or what have you. I'm

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Speaker 1: I go to uh, you know, pretty late in the evening.

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Speaker 1: But I'm I'm pretty turned on by the markets. And

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Speaker 1: you know, obviously, our business so in depends on the

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Speaker 1: meeting you're in. Obviously, people drive what we do. I

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Speaker 1: mean it's not we're not running an industrial company. I

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Speaker 1: mean it's people drive what we do. So a lot

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Speaker 1: of those meetings are talking to people, you know, strategy meetings,

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Speaker 1: who are we hiring, what businesses do we need to grow?

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Speaker 1: You know, where what do you think the next opportunity is?

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Speaker 1: And markets. Much of how Black Rock evolved is, you know,

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Speaker 1: trying to be pressent about what is the next evolution

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Speaker 1: of what clients are looking for. So a lot of

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Speaker 1: those meetings are about, you know, trying to anticipate where

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Speaker 1: things going. I mean, I have to say the first thing.

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Speaker 1: Then maybe I wasn't very good at it earlier in

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Speaker 1: my career, but you start to think about, particularly on

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Speaker 1: the asset management side, like you know, you gotta you know,

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Speaker 1: take in what you're getting today, but you've gotta have

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Speaker 1: one eye on where we're going. And I think in

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Speaker 1: all those meetings, just trying to think through get in

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Speaker 1: front of where we're going, whether that's markets, positioning, our

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Speaker 1: business people, strategies, etcetera. So you've been with black Rock

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Speaker 1: since the financial crisis back in oh nine, did you

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Speaker 1: ever stop and think, oh, yeah, in a decade or so,

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Speaker 1: will be eight nine, ten trillion dollars. Was that ever

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Speaker 1: in the realm of possibilities? No. I mean at the time,

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Speaker 1: I remember when I came over, and then soon there

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Speaker 1: after the firm bought b G I and the I

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Speaker 1: shares business. But gosh, the the thought that you know,

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Speaker 1: grow into the scale that we've grown and grown into

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Speaker 1: never would have even been a consideration. You know. I

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Speaker 1: will say, you know, Larry and and Rob and the

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Speaker 1: whole operating committee and the executive committee, the firm are

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Speaker 1: very thoughtful about where opportunities are and they've they've built

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Speaker 1: the business piece by piece over the years, you know,

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Speaker 1: And I think there's something that's really important about you know,

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Speaker 1: we run our franchise around a what is the client

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Speaker 1: look more of be the risk systems. So the Laddin

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Speaker 1: risk system is when I remember when I which is

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Speaker 1: unique and specific to black Rock and not an off

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Speaker 1: the shelf piece of software totally, which is run by

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Speaker 1: many insurance going engine funds who use the Laddin and

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Speaker 1: it's a it's a commercial enterprise for the firm. But

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Speaker 1: I remember when I came to black Rock and I

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Speaker 1: got to you, and I knew about a Laddin when

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Speaker 1: I was when a Krafrankla was on the sell side

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Speaker 1: and because remember the Lehman had the Lehman Act and

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Speaker 1: that was the benchmark. But but but what happened. A

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Speaker 1: Laddin was able to take it and bring it alive

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Speaker 1: in terms of how do you manage money? And you know,

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Speaker 1: it's really been extraordinary around if you if you can

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Speaker 1: analyze your risk and you think about optimizing your return,

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Speaker 1: you could build you know, how do you look at

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Speaker 1: correlations diversification? And I remember I was like a kid

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Speaker 1: in a candic store when I first started, and I said, wow,

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Speaker 1: this isn't this is powerful? I mean if and I said,

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Speaker 1: it's the clients all the time, we could make you know,

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Speaker 1: the wrong decision on markets, But it's never that we

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Speaker 1: don't know what we own or what that decision, the

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Speaker 1: implications of that decision given our risk system, and that's

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Speaker 1: been a unique benefit to the firm, and I think

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Speaker 1: that's part of how we've grown so much. Is gosh,

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Speaker 1: if if you can make good you know, hopefully more

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Speaker 1: good calls than not, but you know exactly how they're

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Speaker 1: going to interplay within a portfolio, hugely powerful. So no

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Speaker 1: one bats a thousand. But what you're saying is the

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Speaker 1: process and managing the information flow is every bit as

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Speaker 1: important as the decision process itself a d I mean

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Speaker 1: a hundred percent. And you know, when clients invests with

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Speaker 1: you or rating agencies or consultants evaluate your business, it's

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Speaker 1: all about what is your process? Is it repeatable and

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Speaker 1: you're not gonna embarrass them or cost them or coross

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Speaker 1: the money. And you know, we built the franchise around

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Speaker 1: thoughtful investing. You know we're you know, we don't swing

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Speaker 1: for the fences on one uh investment theme. It's always

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Speaker 1: try and build diversification, try and do it thoughtfully, and

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Speaker 1: try and be consistent return without creating real pressure on

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Speaker 1: the downside, and I you know, I think that's particularly

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Speaker 1: fixed income. You know, it's not the equity market. And

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Speaker 1: I run you know, some big equity portfolios. You know

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Speaker 1: different fixed income is convex to the downside. You either

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Speaker 1: get part and either pay you back or they don't

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Speaker 1: return of capital. And so along the way, are you

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Speaker 1: clipping enough coupon to get their equities? You're trying to

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Speaker 1: get convexity to the upside. But to have have risk

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Speaker 1: system and a process, a repeatable process, you know, particularly

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Speaker 1: my business, I don't fixed income. I say it in

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Speaker 1: my funds, a lot of my funds. It's make a

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Speaker 1: little bit of money a lot of times. And as

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Speaker 1: opposed to let's swing for the fences, let's just do it,

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Speaker 1: use relative value, use all your tools, use your tools

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Speaker 1: around the world, do it over and over and over again.

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Speaker 1: And I think that that models repeatable and and uh,

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Speaker 1: you know, people aren't shocked to the downside, which I think,

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Speaker 1: particularly fixed income is the key. So let's talk a

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Speaker 1: little bit about that. I think most public investors know

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Speaker 1: about Black Rock from an equity perspective, but the company's

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Speaker 1: history is deeply rooted and fixed docom didn't it start

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Speaker 1: as a bomb shop catering to pension funds and foundations.

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Speaker 1: Isn't that the genesis it is? I mean it started

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Speaker 1: as largely mortgages, fixed income bond shop and uh, you know,

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Speaker 1: created closed end funds. And by it's very much, I

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Speaker 1: mean Larry and Rob and the and the management seems

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Speaker 1: origin was in fixed income and I'm sorry Larry and Rob,

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Speaker 1: Larry Fink and Rob Compito. It's our CEO and president

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Speaker 1: and there. But then over the years, you know, through

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Speaker 1: an acquisition and their merger with Meryll Lynch Investment Management,

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Speaker 1: all of a sudden became a big equity house and

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Speaker 1: to this stay where equities are bigger than the than

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Speaker 1: fixed income today and uh, and some of that is

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Speaker 1: is equities appreciate over over time and the end compounded

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Speaker 1: return works in the in the equity market. But now

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Speaker 1: you know, our equity business is UM is larger than

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Speaker 1: our fixed income while both are are pretty good scale.

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Speaker 1: I mean, in fact, one of the business I run

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Speaker 1: our Global Allocation fund that is more of an equity

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Speaker 1: fund UM. You know, again with a with a bit

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Speaker 1: of different the way you run that different than you

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Speaker 1: run a bond fund. So academically we know that the

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Speaker 1: passive side of equities over long periods of time tends

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Speaker 1: to be a lot of people's best bet, but that

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Speaker 1: isn't true. And fixed income there is alpha, There is

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Speaker 1: above benchmark returns to be generated by active selection of

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Speaker 1: credit quality, duration and specific bonds tell us a little

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Speaker 1: bit about how you approach fixed income investing and given

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Speaker 1: the massive scale of black rock, how do you take

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Speaker 1: advantage of that? So not many people know that that

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Speaker 1: most firms actually outperform in fixed income, and really that's

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Speaker 1: not widely known. No, I don't think so. And but

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Speaker 1: it's because the passive equity side, there's just so much

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Speaker 1: academic literature, and as soon as you dip your toe

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Speaker 1: into the research on fixed income side, because if you

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Speaker 1: think about a fixed income passive index, you own everything,

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Speaker 1: and a lot of it is not necessarily great. So

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Speaker 1: getting rid of the junk, focusing on duration and credit

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Speaker 1: quality right away, you're ahead of the game. Well that's

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Speaker 1: my pitch. So yeah, it's yeah, I know it's so.

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Speaker 1: First of all, that is exactly right. I mean, I'll

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Speaker 1: start with thing and equities. There are I think the

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Speaker 1: number is in the hundred equities different different securities globally,

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Speaker 1: I think there's forty five thousand in fixed income. So

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Speaker 1: your point about the ability to write and the ability

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Speaker 1: to say, gosh, you know, there's a lot of stuff

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Speaker 1: in fixed income that for a variety of reasons, central

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Speaker 1: bank owns it, a pension fund owns it, insurance companies

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Speaker 1: own it. It has no value and but it's you know,

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Speaker 1: it's been in a in a portfolio for a long time.

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Speaker 1: It's stuck there. So so one of the beauties of

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00:21:30,080 --> 00:21:32,320
Speaker 1: fixed income is a finding one of the forty x

430
00:21:32,359 --> 00:21:36,080
Speaker 1: thousand securities using your tools, by the way, times using

431
00:21:36,080 --> 00:21:39,040
Speaker 1: your liquidity, being able to buy mes, you know, being

432
00:21:39,160 --> 00:21:42,119
Speaker 1: you know, buying subordinated debt, buying uh, you know what

433
00:21:42,160 --> 00:21:45,480
Speaker 1: are functionally capital notes. But there are so many tools

434
00:21:45,520 --> 00:21:49,160
Speaker 1: at your disposal. And let alone how much duration you're taking,

435
00:21:49,160 --> 00:21:52,800
Speaker 1: how much interest, how much, how much credit rate you're taking, illiquidity, etcetera.

436
00:21:53,119 --> 00:21:55,920
Speaker 1: There are so many tools to try and outperform and listen.

437
00:21:55,920 --> 00:21:57,879
Speaker 1: One of the one of the secrets of fixed income

438
00:21:58,600 --> 00:22:01,320
Speaker 1: is you generally try and area more than the index.

439
00:22:01,760 --> 00:22:04,159
Speaker 1: You generally want your income in a fund to be

440
00:22:04,200 --> 00:22:07,919
Speaker 1: above the index. Can you manage that through downturns and

441
00:22:07,960 --> 00:22:10,080
Speaker 1: so when you get a downturn like twenty two or

442
00:22:10,119 --> 00:22:12,560
Speaker 1: oh eight or what have you, it is you know,

443
00:22:12,600 --> 00:22:15,840
Speaker 1: can you manage the downside because it's it's generally if

444
00:22:15,880 --> 00:22:18,440
Speaker 1: you can get more yield than the benchmark, you're gonna

445
00:22:18,480 --> 00:22:22,560
Speaker 1: outperform over time. And so managing that risk and making

446
00:22:22,560 --> 00:22:24,840
Speaker 1: sure by the way, you know, they're they're crises and

447
00:22:24,920 --> 00:22:28,240
Speaker 1: individual companies there is exhaugen, a shock that hits, but

448
00:22:28,440 --> 00:22:32,639
Speaker 1: managing that downside so that one expression doesn't hurt you.

449
00:22:32,640 --> 00:22:34,400
Speaker 1: You know, you can run a good a good business

450
00:22:34,400 --> 00:22:38,840
Speaker 1: that outperforms um, you know, almost every year. So let's

451
00:22:38,880 --> 00:22:41,560
Speaker 1: delve into that a little more deeply. It can't be

452
00:22:41,880 --> 00:22:45,080
Speaker 1: just as simple as let me buy the highest yielding stuff,

453
00:22:45,320 --> 00:22:48,439
Speaker 1: because there's a lot of They used to call them

454
00:22:48,480 --> 00:22:50,960
Speaker 1: junk bonds, now we call them high yield bonds. How

455
00:22:51,000 --> 00:22:55,040
Speaker 1: do you decide what is a high quality high yield

456
00:22:55,040 --> 00:22:58,160
Speaker 1: and how do you make the decision I'm not comfortable

457
00:22:58,200 --> 00:23:01,160
Speaker 1: with this credit risk rail lative to the return it's

458
00:23:01,200 --> 00:23:04,000
Speaker 1: gonna throw off. What's that process like? You know, it's

459
00:23:04,000 --> 00:23:06,280
Speaker 1: funny because today is an interesting you don't see this

460
00:23:06,400 --> 00:23:08,440
Speaker 1: very often, but much of the double B high yield

461
00:23:08,480 --> 00:23:11,560
Speaker 1: market is better quality the triple B investment grade market,

462
00:23:11,600 --> 00:23:15,080
Speaker 1: and that is because companies have been operating as double

463
00:23:15,160 --> 00:23:17,400
Speaker 1: bees for a long time. A number of them are

464
00:23:17,480 --> 00:23:20,040
Speaker 1: moving up to investment grade or are inspired to move

465
00:23:20,080 --> 00:23:22,399
Speaker 1: up to investment grade. Where a number of companies and

466
00:23:22,400 --> 00:23:25,479
Speaker 1: triple B that are at the lowest end of investment

467
00:23:25,480 --> 00:23:28,080
Speaker 1: grade and maybe on the deceleration. So that's an odd

468
00:23:28,119 --> 00:23:32,760
Speaker 1: institutional corek tour that higher quality, higher yieldings stuff has

469
00:23:32,800 --> 00:23:35,080
Speaker 1: a lower rating. That's at the end of the day,

470
00:23:35,119 --> 00:23:37,919
Speaker 1: there's so many metrics. You know, debt de but your

471
00:23:37,960 --> 00:23:40,280
Speaker 1: interest coverage, there's so many metrics that we dig in.

472
00:23:40,359 --> 00:23:43,800
Speaker 1: What industry you're in, what's your liquidity, You've got to

473
00:23:43,800 --> 00:23:45,520
Speaker 1: really dig in. I mean, if you're a double A

474
00:23:45,800 --> 00:23:48,359
Speaker 1: rated company, I generally don't do a lot of you know,

475
00:23:48,840 --> 00:23:51,320
Speaker 1: thorough analysis. But if it's single B, I'm doing we're

476
00:23:51,320 --> 00:23:54,200
Speaker 1: doing an awful lot of work. So you know, when

477
00:23:54,200 --> 00:23:56,359
Speaker 1: we look across fixed income and you know, beauty of

478
00:23:56,400 --> 00:23:59,040
Speaker 1: having big teams around the world, you know, I tend

479
00:23:59,080 --> 00:24:01,520
Speaker 1: to say, okay, I want be an X amount mortgages

480
00:24:01,560 --> 00:24:04,000
Speaker 1: on a the X amount credit and then let the

481
00:24:04,040 --> 00:24:06,600
Speaker 1: teams dig in and then you know, think about I'll

482
00:24:06,600 --> 00:24:08,679
Speaker 1: give a good example. Today the high yield market has

483
00:24:08,880 --> 00:24:10,920
Speaker 1: because people need the yield, are looking for the yield.

484
00:24:11,080 --> 00:24:14,119
Speaker 1: The high yield market is compressed to the investment grade market.

485
00:24:14,280 --> 00:24:15,960
Speaker 1: I don't want to take the beta risk in a

486
00:24:15,960 --> 00:24:21,040
Speaker 1: lot of high yield today. If I get functionallycent return

487
00:24:21,080 --> 00:24:23,840
Speaker 1: investment grade, I can sleep a whole lot better at night.

488
00:24:24,320 --> 00:24:26,600
Speaker 1: And then maybe I take some risk in emerging market.

489
00:24:26,640 --> 00:24:29,119
Speaker 1: So what have you? So it's all about relative value.

490
00:24:29,200 --> 00:24:31,800
Speaker 1: Are you getting paid for the risk today? So think

491
00:24:31,840 --> 00:24:34,200
Speaker 1: about you know, where's a stress and fix in commercial

492
00:24:34,200 --> 00:24:36,560
Speaker 1: real estate is tricky today? Do I want to go

493
00:24:36,600 --> 00:24:39,840
Speaker 1: and get that yield today? Probably not? You know, whereas

494
00:24:39,880 --> 00:24:44,159
Speaker 1: you know, parts of credit card um auto finance are

495
00:24:44,200 --> 00:24:47,280
Speaker 1: more attractive. So it is constantly trying to think about

496
00:24:47,320 --> 00:24:48,800
Speaker 1: where do you want to be in the capital stack,

497
00:24:48,800 --> 00:24:50,040
Speaker 1: Where do you want to be in sector? Where you

498
00:24:50,080 --> 00:24:52,040
Speaker 1: wanna be in the world, Like last year, did you

499
00:24:52,040 --> 00:24:54,800
Speaker 1: want to hang out in Europe? Probably not this year.

500
00:24:55,400 --> 00:24:59,040
Speaker 1: You know, fuel prices are lower, the economy stabilizing, China's growing,

501
00:24:59,480 --> 00:25:02,120
Speaker 1: you know, we're liifting money internationally. So every year, it's

502
00:25:02,119 --> 00:25:04,480
Speaker 1: part of why the business so fun is every year,

503
00:25:04,520 --> 00:25:07,960
Speaker 1: every month, every week, you know, the menu changes and

504
00:25:08,000 --> 00:25:10,280
Speaker 1: the opportunity set changes. We'll talk a little bit about

505
00:25:10,280 --> 00:25:13,639
Speaker 1: the inverted yield curve later, but since you mentioned getting

506
00:25:14,160 --> 00:25:16,080
Speaker 1: return on the risk you take, how do you think

507
00:25:16,119 --> 00:25:21,040
Speaker 1: about duration when the three month treasury is more or

508
00:25:21,119 --> 00:25:25,080
Speaker 1: less the same or better than the tenure. So you know,

509
00:25:25,200 --> 00:25:27,920
Speaker 1: think about last year. I mean I know, every every

510
00:25:27,960 --> 00:25:30,359
Speaker 1: media event or any any thing we did externally, I

511
00:25:30,359 --> 00:25:32,160
Speaker 1: talked about how much and it was always people said,

512
00:25:32,280 --> 00:25:34,880
Speaker 1: how much cash you running? And we're running a lot

513
00:25:34,880 --> 00:25:38,359
Speaker 1: of cash in my career on meaning non investment but

514
00:25:38,560 --> 00:25:44,160
Speaker 1: literally keeping a point oh five. Well, but as as

515
00:25:44,160 --> 00:25:46,840
Speaker 1: a year ago, right, as right. But then you know,

516
00:25:46,880 --> 00:25:48,719
Speaker 1: the front of the yeel curve started to move up,

517
00:25:49,040 --> 00:25:51,720
Speaker 1: and it became pretty clear all the central banks in

518
00:25:51,760 --> 00:25:54,560
Speaker 1: the developed markets were behind the curve. They're gonna have

519
00:25:54,600 --> 00:25:56,840
Speaker 1: to start raising Your pricer term is going to be negative.

520
00:25:57,359 --> 00:26:00,520
Speaker 1: Stay as short as possible, hold as much cash as possible.

521
00:26:00,800 --> 00:26:03,240
Speaker 1: And by the way, zero was a pretty good answer

522
00:26:03,440 --> 00:26:06,320
Speaker 1: for your for your return in twenty two. So if

523
00:26:06,359 --> 00:26:09,360
Speaker 1: we were getting zero or care or getting our income

524
00:26:09,800 --> 00:26:11,480
Speaker 1: at the short end of the Yelk curve, that was

525
00:26:11,600 --> 00:26:15,399
Speaker 1: nirvana because we weren't taking such interest rate risk. Today

526
00:26:15,480 --> 00:26:18,280
Speaker 1: it's a little bit different because now we're approaching the

527
00:26:18,400 --> 00:26:21,200
Speaker 1: end of by the way, it's not definitive, but we're

528
00:26:21,240 --> 00:26:23,480
Speaker 1: probably approaching a point where that's central, where the Fed's

529
00:26:23,480 --> 00:26:26,440
Speaker 1: gonna pause. Europe still got a bit more to go. Um,

530
00:26:26,680 --> 00:26:28,560
Speaker 1: So now we can take a little bit more risk,

531
00:26:28,760 --> 00:26:30,440
Speaker 1: you know, push it a bit further out the yel curve,

532
00:26:30,440 --> 00:26:34,800
Speaker 1: because now our aspiration is, gosh, these yields they think about.

533
00:26:35,400 --> 00:26:37,560
Speaker 1: You know, today the one to three year part of

534
00:26:37,560 --> 00:26:39,440
Speaker 1: the act, the short end of the yield curve gets

535
00:26:39,480 --> 00:26:41,680
Speaker 1: you four and a half percent. The average for the

536
00:26:41,760 --> 00:26:44,440
Speaker 1: last ten years was one, and that was one point four.

537
00:26:45,160 --> 00:26:47,000
Speaker 1: We're getting we can allow lock in four and a

538
00:26:47,040 --> 00:26:50,520
Speaker 1: half and maybe the economy is coming off the central

539
00:26:50,520 --> 00:26:53,080
Speaker 1: bank not in twenty three, but we'll start to ease.

540
00:26:53,720 --> 00:26:55,920
Speaker 1: And now there's a discussion about, gosh, maybe I can

541
00:26:55,960 --> 00:26:57,880
Speaker 1: lock these yields in for longer, and so maybe I'll

542
00:26:57,880 --> 00:27:01,280
Speaker 1: take a little bit of downside and push my maturities

543
00:27:01,440 --> 00:27:03,880
Speaker 1: a bit further on the yolker. We've been out from

544
00:27:03,920 --> 00:27:08,119
Speaker 1: one to three. You don't mean ten, you mean so three, four, five? Correct?

545
00:27:08,200 --> 00:27:10,399
Speaker 1: I mean, that's that's been to me that's the sweet

546
00:27:10,440 --> 00:27:12,920
Speaker 1: spot and the biggest I think the biggest opportunity today

547
00:27:13,000 --> 00:27:16,840
Speaker 1: is sell interest rate volatility. You think about in my career,

548
00:27:16,840 --> 00:27:18,440
Speaker 1: I've never seen this before. We had a FED that

549
00:27:18,480 --> 00:27:20,760
Speaker 1: moved four seventy five basis point moves in a row.

550
00:27:21,000 --> 00:27:24,359
Speaker 1: Interest rate volatility. You had to go back to Vulka

551
00:27:24,440 --> 00:27:26,200
Speaker 1: to see that, right, Yes, but but I was still

552
00:27:26,240 --> 00:27:30,120
Speaker 1: in college, so I wasn't. But but now, I mean

553
00:27:30,119 --> 00:27:33,439
Speaker 1: this massive move and now what's gonna happen is we're

554
00:27:33,480 --> 00:27:36,480
Speaker 1: gonna pause. Interest rate volatili can come down things like mortgages,

555
00:27:36,520 --> 00:27:39,439
Speaker 1: Like we didn't own many mortgages last year. Is in

556
00:27:39,440 --> 00:27:42,959
Speaker 1: our tactical portfolios? You know, why would you own negative

557
00:27:43,000 --> 00:27:46,520
Speaker 1: interest rate shock, negative conduction? So now FED coming into

558
00:27:46,560 --> 00:27:51,160
Speaker 1: a pause, interest rate volatility comes down things like agency

559
00:27:51,160 --> 00:27:53,440
Speaker 1: mortgages fit a portfolio that gets you a little bit

560
00:27:53,480 --> 00:27:55,760
Speaker 1: longer on the yield curve. So let's think about that

561
00:27:55,760 --> 00:27:58,480
Speaker 1: that we spiked up to about seven percent, it's pulled

562
00:27:58,520 --> 00:28:01,320
Speaker 1: back to about us and a half more or less.

563
00:28:01,560 --> 00:28:05,760
Speaker 1: Mortgage are the expectations that, hey, that's when mortgage rates

564
00:28:05,760 --> 00:28:08,480
Speaker 1: are going to be for a long time. So mbs

565
00:28:08,520 --> 00:28:11,399
Speaker 1: are starting to get attractive. Yeah, I mean, now you

566
00:28:11,440 --> 00:28:15,040
Speaker 1: can buy assets that are like mortgages, but first of all,

567
00:28:15,080 --> 00:28:17,920
Speaker 1: they're extremely liquid, and so whenever we build a portfolio,

568
00:28:18,040 --> 00:28:20,800
Speaker 1: we think about every security has a tail to it,

569
00:28:20,920 --> 00:28:22,760
Speaker 1: So you think about what what is it doing for you?

570
00:28:22,800 --> 00:28:24,800
Speaker 1: How much yield is it getting you, how much risk,

571
00:28:24,840 --> 00:28:27,880
Speaker 1: how much beta, how much illiquidity, And so you try

572
00:28:27,880 --> 00:28:30,120
Speaker 1: and take all those tails and say, okay, which ones

573
00:28:30,119 --> 00:28:31,560
Speaker 1: why am I willing to take? And which ones do

574
00:28:31,680 --> 00:28:34,680
Speaker 1: I want to extract? Mortgages today last year, I don't

575
00:28:34,680 --> 00:28:38,360
Speaker 1: want to take that interest rate volatility. Now, boy, if

576
00:28:38,400 --> 00:28:40,960
Speaker 1: I think rate volatility can come down, I'll take some

577
00:28:41,000 --> 00:28:44,840
Speaker 1: mortgage risk. Their super liquid um. They fit the portfolio

578
00:28:44,920 --> 00:28:47,880
Speaker 1: nicely because you know, having such liquidity through those assets.

579
00:28:48,360 --> 00:28:50,280
Speaker 1: Now I can buy a little bit of emerging markets

580
00:28:50,320 --> 00:28:52,520
Speaker 1: which are less liquid and more vulatable, but you also

581
00:28:52,560 --> 00:28:56,280
Speaker 1: get me more yield. So it's very very different portfolio

582
00:28:56,320 --> 00:28:59,680
Speaker 1: positioning today than than quite frankly three months ago. Before

583
00:28:59,720 --> 00:29:02,400
Speaker 1: we eve the subject of black Rock, I feel like

584
00:29:02,840 --> 00:29:05,400
Speaker 1: we have to talk about the funds you manage on

585
00:29:05,440 --> 00:29:10,120
Speaker 1: their behalf, many of which have been awarded morning Star

586
00:29:10,200 --> 00:29:12,960
Speaker 1: Gold Medals, as well as you've received a number of

587
00:29:14,000 --> 00:29:17,560
Speaker 1: recognitions about your funds. Let's talk a little bit about

588
00:29:17,960 --> 00:29:24,120
Speaker 1: strategic income Global opportunity total return and strategic global Opportunity

589
00:29:24,200 --> 00:29:26,800
Speaker 1: totally return. I'm messing up those names. Tell us about

590
00:29:26,800 --> 00:29:29,760
Speaker 1: your funds. Yeah, I mean, you know about honored to

591
00:29:29,840 --> 00:29:32,200
Speaker 1: run some some pretty great funds in our strategic income

592
00:29:32,240 --> 00:29:36,520
Speaker 1: opportunities is a flexible unconstrained funds, so unconstrained. You know,

593
00:29:36,520 --> 00:29:38,640
Speaker 1: when you think about fixing them, when you say they're unconstrained,

594
00:29:38,640 --> 00:29:43,120
Speaker 1: it sounds like you're hanging from the chandeliers. Taken risk, unconstrained, unconstrained.

595
00:29:43,160 --> 00:29:45,400
Speaker 1: This means I can take less risk because you know

596
00:29:45,440 --> 00:29:47,200
Speaker 1: the point you made earlier about gosh, I don't have

597
00:29:47,240 --> 00:29:50,360
Speaker 1: to be tethered to an index on what you want.

598
00:29:50,440 --> 00:29:52,800
Speaker 1: I can hedge. I can hedge my portfolio freely. Like

599
00:29:52,880 --> 00:29:55,240
Speaker 1: last year. You can use the dollar, I can use

600
00:29:55,280 --> 00:29:58,760
Speaker 1: I can get short in in some areas. So unconstrained.

601
00:29:58,800 --> 00:30:01,440
Speaker 1: What we're trying to do is create insistent return over

602
00:30:01,520 --> 00:30:05,440
Speaker 1: time and so regardless of of the exterior market. Yeah

603
00:30:05,720 --> 00:30:08,320
Speaker 1: we did. We didn't make money last year. We were down,

604
00:30:08,360 --> 00:30:10,360
Speaker 1: but we beat the aggregate index I think seven under

605
00:30:10,400 --> 00:30:12,680
Speaker 1: a fifty basis points. You know, years like that, if

606
00:30:12,680 --> 00:30:16,160
Speaker 1: you recognize the regime and you lose less. What was

607
00:30:16,200 --> 00:30:19,960
Speaker 1: the act down last year, Yeah, that's the worst year

608
00:30:19,960 --> 00:30:21,880
Speaker 1: in forty years. Yeah, And so you know, being able

609
00:30:21,880 --> 00:30:24,400
Speaker 1: to recognize that use some hedges run a lot of

610
00:30:24,440 --> 00:30:27,040
Speaker 1: cash um and then you know, stay in the short

611
00:30:27,120 --> 00:30:29,240
Speaker 1: end of the yield curve. And then today it's a

612
00:30:29,280 --> 00:30:31,560
Speaker 1: little different. So the ability to be flexible and tactical

613
00:30:32,280 --> 00:30:34,600
Speaker 1: is unbelievable in fixing them. And I think much of

614
00:30:34,600 --> 00:30:38,480
Speaker 1: the future fixed income is can you marry to you know,

615
00:30:38,560 --> 00:30:40,800
Speaker 1: think about the growth of ice shares and passive can

616
00:30:40,880 --> 00:30:44,640
Speaker 1: you marry an opportunistic tactical portfolio? By the way, lets

617
00:30:44,720 --> 00:30:47,240
Speaker 1: us invest around the world when things like emerging markets

618
00:30:47,240 --> 00:30:49,400
Speaker 1: become a truck. So anyway, s i AL has grown

619
00:30:49,480 --> 00:30:51,800
Speaker 1: quite a bit over the years, and uh, you know,

620
00:30:51,840 --> 00:30:53,920
Speaker 1: it's been honored to to uh have a number of

621
00:30:53,920 --> 00:30:56,840
Speaker 1: awards to it. But I think it's just creating consistent return.

622
00:30:56,880 --> 00:30:59,760
Speaker 1: So quite frankly, people can get yield and then focus

623
00:30:59,840 --> 00:31:02,560
Speaker 1: on the other areas where to take risk, equities, etcetera

624
00:31:02,760 --> 00:31:07,200
Speaker 1: private equity venture. You know, our Global Allocation Fund is

625
00:31:07,280 --> 00:31:09,800
Speaker 1: more of an unconstrained but more with an equity tilt

626
00:31:09,840 --> 00:31:12,800
Speaker 1: and that's been super fun to run that. That's a

627
00:31:12,840 --> 00:31:16,000
Speaker 1: blended portfolio stocks and yeah. So so traditionally would be

628
00:31:16,040 --> 00:31:20,200
Speaker 1: sixty forty equity debt, but with an eye towards you

629
00:31:20,200 --> 00:31:22,800
Speaker 1: can be international, you can be domestic. Last few years

630
00:31:23,120 --> 00:31:25,360
Speaker 1: we've run global allocation much more with the U S bend.

631
00:31:25,360 --> 00:31:28,920
Speaker 1: You think about the incredible growth of US technology that

632
00:31:29,160 --> 00:31:31,840
Speaker 1: was something to to ride for a while. Now we're

633
00:31:31,840 --> 00:31:35,960
Speaker 1: shifting at more international places like China, Europe, etcetera, that

634
00:31:36,000 --> 00:31:39,320
Speaker 1: are really growing and that valuations are cheaper. So that

635
00:31:39,560 --> 00:31:42,360
Speaker 1: the thing about that fund a we could toggle from

636
00:31:42,440 --> 00:31:44,800
Speaker 1: equity to debt. We could use a little bit of

637
00:31:44,840 --> 00:31:48,000
Speaker 1: illiquidity around some privates. You know, now we're doing something

638
00:31:48,000 --> 00:31:50,200
Speaker 1: in global alm that it's hard to do in other funds.

639
00:31:50,560 --> 00:31:52,719
Speaker 1: Building up our carrying income. You can use that use

640
00:31:52,760 --> 00:31:55,800
Speaker 1: fixed income to get their use quality assets, but then

641
00:31:55,840 --> 00:31:58,760
Speaker 1: take some risk in in equities to try and beat

642
00:31:58,800 --> 00:32:02,120
Speaker 1: the index in UM in a fur globolication. And then

643
00:32:02,200 --> 00:32:03,640
Speaker 1: you know the other funds on to take too long

644
00:32:03,640 --> 00:32:06,240
Speaker 1: on them. But total return gives you more of You

645
00:32:06,280 --> 00:32:09,080
Speaker 1: know that if you were building a sixty forty portfolio,

646
00:32:09,120 --> 00:32:11,960
Speaker 1: they should get you the forty and get you the

647
00:32:11,960 --> 00:32:14,720
Speaker 1: the fixed income. You know, try and outperform the egg

648
00:32:14,760 --> 00:32:17,000
Speaker 1: every year, but closer to the egg. And then our

649
00:32:17,040 --> 00:32:20,720
Speaker 1: strategic global fund allows us to use the international markets

650
00:32:20,760 --> 00:32:25,080
Speaker 1: more aggressively. Last black Rock question before I jump to

651
00:32:25,360 --> 00:32:30,160
Speaker 1: uh talking about interest rates and the FED and the economy.

652
00:32:31,080 --> 00:32:34,800
Speaker 1: At Rick reader on Twitter, you have your own Twitter feed.

653
00:32:34,880 --> 00:32:38,400
Speaker 1: That is really unusual for a person with your role

654
00:32:38,520 --> 00:32:42,240
Speaker 1: in a firm as large and buttoned down as black Rock.

655
00:32:42,720 --> 00:32:45,360
Speaker 1: Tell us a little bit about what you do on

656
00:32:45,400 --> 00:32:49,520
Speaker 1: Twitter and how is it getting that through legal and compliance?

657
00:32:49,680 --> 00:32:51,960
Speaker 1: So well, first of all, anything I tweetd goes through

658
00:32:52,040 --> 00:32:54,560
Speaker 1: legal and compliance before it gets out there. The first part.

659
00:32:54,920 --> 00:32:57,800
Speaker 1: Second part, So I use an incredible amount. I do

660
00:32:57,840 --> 00:33:00,600
Speaker 1: these monthly calls, I do these write ups. I use

661
00:33:00,760 --> 00:33:04,640
Speaker 1: immense amount of data and analysis. And you know, when

662
00:33:04,640 --> 00:33:07,840
Speaker 1: I do my monthly calls, I literally locked myself literally

663
00:33:08,040 --> 00:33:11,800
Speaker 1: in a room for for one weekend a month, and

664
00:33:12,000 --> 00:33:15,000
Speaker 1: it's brutal putting those together. I do a quarterly and

665
00:33:15,160 --> 00:33:19,120
Speaker 1: it's just a solid fifty hours of work to get

666
00:33:19,720 --> 00:33:22,040
Speaker 1: But you know, I've learned in my career that you've

667
00:33:22,040 --> 00:33:24,440
Speaker 1: got to take a step back and think about, you know,

668
00:33:24,480 --> 00:33:26,560
Speaker 1: instead of following dollar yen. Every second you gotta think

669
00:33:26,560 --> 00:33:28,840
Speaker 1: about why is dollar yen doing it's doing, try and

670
00:33:28,880 --> 00:33:31,240
Speaker 1: assimilate it all into a cogent set of thoughts. So

671
00:33:31,280 --> 00:33:34,240
Speaker 1: I need a weekend to do it. My wife hates it,

672
00:33:34,280 --> 00:33:37,040
Speaker 1: but the it's not the most socially ingratiating weekend of

673
00:33:37,040 --> 00:33:39,240
Speaker 1: my of my life. But I have to do it,

674
00:33:39,440 --> 00:33:41,240
Speaker 1: and and I go through and I put it all together.

675
00:33:41,280 --> 00:33:45,160
Speaker 1: I use immense amounts of data and analysis, stare at graphs, tables,

676
00:33:45,520 --> 00:33:48,160
Speaker 1: and then all of a sudden you get these aha moments. Literally,

677
00:33:48,200 --> 00:33:49,800
Speaker 1: you know, I could sit there for six hours, like

678
00:33:50,040 --> 00:33:52,480
Speaker 1: now I get it. Now, I get why high yield

679
00:33:52,520 --> 00:33:54,520
Speaker 1: trades here in Europe and it doesn't in the U

680
00:33:54,640 --> 00:33:57,520
Speaker 1: S and what what cross currency basis, et cetera. Takes

681
00:33:57,560 --> 00:34:00,719
Speaker 1: a while to assimilate it all. The reason why Twitter,

682
00:34:00,840 --> 00:34:03,680
Speaker 1: and maybe I'm not the perfect specimen for for Twitter

683
00:34:04,440 --> 00:34:06,520
Speaker 1: is you know, my tweets tend to be have five

684
00:34:06,600 --> 00:34:09,560
Speaker 1: or six a long thread to them with graphs, and

685
00:34:09,600 --> 00:34:11,160
Speaker 1: it's not a perfect you know in the world that

686
00:34:11,200 --> 00:34:15,280
Speaker 1: wants now, they're very useful. It's it's a rare insight

687
00:34:15,400 --> 00:34:18,360
Speaker 1: to somebody in your role as to what you're thinking,

688
00:34:19,080 --> 00:34:23,920
Speaker 1: um strong recommend Rick Reader at Rick Reader on Twitter

689
00:34:24,320 --> 00:34:26,719
Speaker 1: if you're interested in fixed income and want to get

690
00:34:26,719 --> 00:34:30,920
Speaker 1: a sense of a person's Even though it goes through compliance,

691
00:34:30,960 --> 00:34:34,880
Speaker 1: it all looks like real time. It doesn't look like

692
00:34:35,000 --> 00:34:39,480
Speaker 1: it's been massage to death by legal you've said, in fact,

693
00:34:39,800 --> 00:34:42,040
Speaker 1: some of my questions will come up with a pretty

694
00:34:42,080 --> 00:34:44,920
Speaker 1: blunts and they're just your tweets asking you what you

695
00:34:44,960 --> 00:34:48,280
Speaker 1: were thinking. So I find that fascinating that you're able

696
00:34:48,320 --> 00:34:51,040
Speaker 1: to Was there any pushback when you first said, Hey,

697
00:34:51,080 --> 00:34:52,759
Speaker 1: I want to go on Twitter and do this? So

698
00:34:52,800 --> 00:34:55,680
Speaker 1: my biggest reservation is, you know, I think the world.

699
00:34:56,040 --> 00:34:58,000
Speaker 1: You know, it's pretty hard to think about. You know,

700
00:34:58,000 --> 00:34:59,680
Speaker 1: what are you doing with duration? Oh, here's a hundred

701
00:34:59,680 --> 00:35:02,919
Speaker 1: and forty character whatever, the number of characters right to eighty.

702
00:35:03,000 --> 00:35:05,200
Speaker 1: Now so now, so how do you do that effectively?

703
00:35:05,239 --> 00:35:07,040
Speaker 1: And I've never been able to do it effectively. I

704
00:35:07,120 --> 00:35:10,720
Speaker 1: always want to here's my hypothesis, here's my ultimate thesis

705
00:35:10,760 --> 00:35:13,000
Speaker 1: around what we're doing with it. But you can do

706
00:35:13,080 --> 00:35:14,879
Speaker 1: it if as long as you can get a few

707
00:35:14,920 --> 00:35:17,080
Speaker 1: thoughts out there and then maybe people look deeper into

708
00:35:17,120 --> 00:35:19,800
Speaker 1: what you're thinking, it can be a really effective mechanism

709
00:35:19,840 --> 00:35:22,520
Speaker 1: to here's my conclusion. And it's different because usually you

710
00:35:22,560 --> 00:35:24,920
Speaker 1: build up the conclusion there. I tend to find here's

711
00:35:24,920 --> 00:35:27,120
Speaker 1: my conclusion, and maybe I can give you a couple

712
00:35:27,120 --> 00:35:29,040
Speaker 1: of snippets to how to do it. But it's a

713
00:35:29,120 --> 00:35:32,279
Speaker 1: super effective mechanism to get out there. And um so

714
00:35:32,640 --> 00:35:34,879
Speaker 1: I read a lot on Twitter. I find it's because,

715
00:35:34,920 --> 00:35:38,560
Speaker 1: like you say, it's instantaneous opinion and the new tape,

716
00:35:38,920 --> 00:35:40,799
Speaker 1: I think so so I spent a lot of time,

717
00:35:40,880 --> 00:35:42,680
Speaker 1: so it's been effective to be out there with it.

718
00:35:42,840 --> 00:35:45,760
Speaker 1: So let's talk a little bit about where we are today.

719
00:35:46,520 --> 00:35:53,359
Speaker 1: I mentioned previously Vulcar taking rates up in two from two,

720
00:35:53,480 --> 00:35:59,320
Speaker 1: we've pretty much enjoyed a spectacular forty year bullmarket in bonds.

721
00:36:00,080 --> 00:36:04,200
Speaker 1: Is that bullmarket over so? I mean, it certainly didn't

722
00:36:04,200 --> 00:36:07,239
Speaker 1: work last year? The uh so, I think, you know,

723
00:36:07,600 --> 00:36:09,439
Speaker 1: I think we are. I mean I was looking at

724
00:36:09,480 --> 00:36:12,200
Speaker 1: it that how the rates market, the Fed funds rate

725
00:36:12,320 --> 00:36:14,640
Speaker 1: looks like a mountain range over time, you know, it

726
00:36:14,719 --> 00:36:16,440
Speaker 1: spikes higher and then it comes to come down the

727
00:36:16,440 --> 00:36:18,759
Speaker 1: other side. Economy slows, then you come down the other side,

728
00:36:18,760 --> 00:36:20,879
Speaker 1: and then a couple of years goes by you start

729
00:36:20,920 --> 00:36:22,239
Speaker 1: to move up again. And then you come down the

730
00:36:22,239 --> 00:36:24,439
Speaker 1: other side. I don't think we're coming down the other

731
00:36:24,520 --> 00:36:28,160
Speaker 1: side today. Of so, I don't think usually when rates

732
00:36:28,200 --> 00:36:30,600
Speaker 1: move up this much, economy slows and we're coming I

733
00:36:30,640 --> 00:36:32,719
Speaker 1: think this is gonna be We're gonna stay on the

734
00:36:32,760 --> 00:36:34,920
Speaker 1: top of the mountain range for a while. And I

735
00:36:34,960 --> 00:36:37,520
Speaker 1: think the FED is going to let this this restricted

736
00:36:37,560 --> 00:36:41,000
Speaker 1: policy percolate through the system. And I think people underestimate

737
00:36:41,120 --> 00:36:44,919
Speaker 1: US economy is the most adaptive, reflective, and it will

738
00:36:44,960 --> 00:36:47,280
Speaker 1: adjust and you're seeing it in the interest rate parts

739
00:36:47,280 --> 00:36:51,680
Speaker 1: of the economy like housing, like automobiles, etcetera. So listen,

740
00:36:51,719 --> 00:36:53,799
Speaker 1: I think I think, you know, I think we're gonna

741
00:36:53,840 --> 00:36:56,400
Speaker 1: see a rally in in in interest rates probably in

742
00:36:56,440 --> 00:36:58,759
Speaker 1: two thousand and twenty four and twenty five, because I

743
00:36:58,800 --> 00:37:01,759
Speaker 1: think ray will go back, the tenure treasure will go

744
00:37:01,800 --> 00:37:05,040
Speaker 1: back to two and a half percent. Yeah. And I

745
00:37:05,280 --> 00:37:08,080
Speaker 1: because you think about what is potential growth in the

746
00:37:08,160 --> 00:37:12,640
Speaker 1: US and in the world. Growth follows the demographic curve

747
00:37:12,880 --> 00:37:15,719
Speaker 1: incredibly closely, and you think about the world we live

748
00:37:15,760 --> 00:37:17,880
Speaker 1: in that's different than the eighties. You know, when you

749
00:37:17,960 --> 00:37:20,480
Speaker 1: had explosive baby boomer, you know that was starting to

750
00:37:20,560 --> 00:37:24,680
Speaker 1: enter the workforce, et cetera following now and by the way,

751
00:37:24,800 --> 00:37:28,960
Speaker 1: COVID accelerated this. You've had a fertility issue, and you

752
00:37:28,960 --> 00:37:32,440
Speaker 1: think about Japan, China going through a demographic difficult period.

753
00:37:32,719 --> 00:37:35,920
Speaker 1: US is a slower period then, So what happens is

754
00:37:36,000 --> 00:37:38,320
Speaker 1: growth follows a demographic curve? Does it come off it

755
00:37:38,360 --> 00:37:40,800
Speaker 1: when you have a shock, a pandemic of financial crisis,

756
00:37:41,000 --> 00:37:43,799
Speaker 1: huge stimulus goes in. I think we're going back to

757
00:37:43,880 --> 00:37:47,799
Speaker 1: a low two's percent tenure because I think GDP will

758
00:37:47,840 --> 00:37:51,000
Speaker 1: operate at you know, one and a half to two,

759
00:37:51,320 --> 00:37:54,319
Speaker 1: by the way, lower in Europe, lower in Japan than that.

760
00:37:54,719 --> 00:37:56,400
Speaker 1: So I think rates are going back, so as the

761
00:37:56,440 --> 00:37:59,160
Speaker 1: bull market in bonds as a secular move from the

762
00:37:59,200 --> 00:38:02,759
Speaker 1: eighties and nine over. But I think if you said

763
00:38:02,800 --> 00:38:04,279
Speaker 1: to me, part of why you've seen this huge move

764
00:38:04,280 --> 00:38:06,600
Speaker 1: of people, I want to lock these rates in four

765
00:38:06,640 --> 00:38:08,719
Speaker 1: and a half is nirvana, you know, if you don't

766
00:38:08,719 --> 00:38:10,080
Speaker 1: have to take a lot of interest rate this. If

767
00:38:10,080 --> 00:38:11,800
Speaker 1: I can get five and get six we talked about,

768
00:38:12,160 --> 00:38:14,200
Speaker 1: you know, my strategic income fund. I'm trying to keep

769
00:38:14,200 --> 00:38:16,960
Speaker 1: a steady six in that portfolio. Boy, if I can

770
00:38:17,000 --> 00:38:18,759
Speaker 1: get six and we're going to two two and a half,

771
00:38:19,320 --> 00:38:21,680
Speaker 1: you know that's what we're playing for this year. Just

772
00:38:21,719 --> 00:38:25,320
Speaker 1: sort of ride a central bank that is gonna pause.

773
00:38:25,920 --> 00:38:27,480
Speaker 1: And by the way, I may still move right up

774
00:38:27,480 --> 00:38:28,960
Speaker 1: a little bit more than we are today, but can

775
00:38:29,000 --> 00:38:31,640
Speaker 1: you ride through it with um, you know, it's not

776
00:38:31,640 --> 00:38:33,399
Speaker 1: gonna be like last year. So it's a good market

777
00:38:33,480 --> 00:38:35,560
Speaker 1: for fixed income and then I think it'll get to

778
00:38:35,560 --> 00:38:38,880
Speaker 1: a better market. So let's talk about something you actually tweeted.

779
00:38:39,400 --> 00:38:42,200
Speaker 1: Quote how far the Fed goes, how willing the f

780
00:38:42,320 --> 00:38:46,640
Speaker 1: O m C is to overshoot to ensure inflation comes

781
00:38:46,680 --> 00:38:52,399
Speaker 1: markedly lower will determine how uneven, how unpredictable this deflation

782
00:38:52,640 --> 00:38:56,440
Speaker 1: of inflation will be in the months ahead. That's a

783
00:38:56,480 --> 00:39:00,319
Speaker 1: fabulous tweet. Tell us what you're thinking. They're translate for

784
00:39:00,360 --> 00:39:03,000
Speaker 1: the average listeners. I agree with that, guys, so the

785
00:39:04,120 --> 00:39:07,719
Speaker 1: so I'm not sure that but anyway, So the one

786
00:39:07,760 --> 00:39:10,840
Speaker 1: thing that I think is real, the U S economy

787
00:39:11,000 --> 00:39:13,320
Speaker 1: is very different than it was in the eighties nineties.

788
00:39:13,320 --> 00:39:15,640
Speaker 1: We are now two thirds of the economy consumption is

789
00:39:15,680 --> 00:39:18,279
Speaker 1: a service economy. We never had that. It used to

790
00:39:18,280 --> 00:39:20,560
Speaker 1: be a goods oriented economy. When you moved interest rates,

791
00:39:20,840 --> 00:39:25,160
Speaker 1: the economy recalibrated quickly because the goods oriented economy, interest sensitive,

792
00:39:25,280 --> 00:39:29,080
Speaker 1: cyclically oriented. Think about healthcare, you know, think about the

793
00:39:29,120 --> 00:39:33,080
Speaker 1: jobs market today. All the jobs are being created healthcare, education,

794
00:39:33,640 --> 00:39:37,759
Speaker 1: not hugely cyclical, not interest rates sensitive, um. And then

795
00:39:37,880 --> 00:39:40,960
Speaker 1: obviously leisure, hospitality, where there is some cyclicality to it.

796
00:39:42,000 --> 00:39:43,960
Speaker 1: But my view is the FED has gotten to a

797
00:39:44,040 --> 00:39:46,600
Speaker 1: level that is restrictive. And now the question is, when

798
00:39:46,640 --> 00:39:48,920
Speaker 1: you have an economy like this, do you bludge in

799
00:39:49,000 --> 00:39:51,840
Speaker 1: the interest rate sensitive parts of the economy real estate,

800
00:39:51,880 --> 00:39:55,240
Speaker 1: the automobile market, um, but parts of how you finance

801
00:39:55,280 --> 00:39:58,839
Speaker 1: big durable goods do you bludge in that to try

802
00:39:58,840 --> 00:40:02,440
Speaker 1: and help the overall bring inflation down? My senses, the

803
00:40:02,480 --> 00:40:06,440
Speaker 1: fed's gone far enough, doesn't need to overtighten, and if

804
00:40:06,480 --> 00:40:09,360
Speaker 1: it does, it will create exogenous shock. You know, the

805
00:40:09,440 --> 00:40:11,640
Speaker 1: leverage in the system builds. You know, you see it

806
00:40:11,680 --> 00:40:15,200
Speaker 1: in places, particularly real estate today. You know, the Feds

807
00:40:15,200 --> 00:40:18,080
Speaker 1: gotta be careful about no, not going too far. And

808
00:40:18,280 --> 00:40:19,960
Speaker 1: and you know the one thing that I'm really really

809
00:40:20,000 --> 00:40:22,680
Speaker 1: sensitive to. You know, there's something really powerful. It's happened.

810
00:40:23,040 --> 00:40:25,640
Speaker 1: All the jobs being created today are the lower wage

811
00:40:25,719 --> 00:40:28,080
Speaker 1: jobs in this country, all of the ones you talk

812
00:40:28,080 --> 00:40:32,920
Speaker 1: about healthcare, education, leisure, hospitality, hotel, etcetera. Now you're closing

813
00:40:32,960 --> 00:40:35,120
Speaker 1: the income gap. It took twenty years to close the

814
00:40:35,160 --> 00:40:37,520
Speaker 1: income gap. You know, you're getting capital going to labor

815
00:40:37,880 --> 00:40:40,920
Speaker 1: that is hugely powerful. The layoffs are happening a finance technology,

816
00:40:41,000 --> 00:40:44,279
Speaker 1: the higher income jobs, and they're just unwinding some overhiring

817
00:40:44,320 --> 00:40:46,800
Speaker 1: over the past. So think about what you know. The

818
00:40:46,880 --> 00:40:49,239
Speaker 1: reason why I think the FED should pause is let

819
00:40:49,320 --> 00:40:53,120
Speaker 1: this play out. You know, if net disposable income for

820
00:40:53,280 --> 00:40:56,200
Speaker 1: lower income, lower wage earners stays higher in kind of

821
00:40:56,520 --> 00:40:59,080
Speaker 1: with a with a consumption basket is food, energy, rent,

822
00:40:59,760 --> 00:41:02,120
Speaker 1: it's not a bad thing that that inflation is a

823
00:41:02,160 --> 00:41:05,000
Speaker 1: bit higher as long as wages for lower income or higher.

824
00:41:05,360 --> 00:41:08,200
Speaker 1: So I think the system is recalibrating. Economy is recalibrating,

825
00:41:08,239 --> 00:41:10,640
Speaker 1: It will recalibrate, and I don't think the FED should

826
00:41:10,680 --> 00:41:13,000
Speaker 1: overdo it, you know, to take two to three million

827
00:41:13,040 --> 00:41:15,520
Speaker 1: people out of work or more or more than that,

828
00:41:16,280 --> 00:41:18,520
Speaker 1: you know, and particularly those will be lower wage jobs.

829
00:41:18,880 --> 00:41:20,959
Speaker 1: To take that, I don't think it makes any sense.

830
00:41:21,160 --> 00:41:24,160
Speaker 1: I could not possibly agree with you more. And I

831
00:41:24,280 --> 00:41:26,640
Speaker 1: have to bring up what you just said about the

832
00:41:26,760 --> 00:41:30,399
Speaker 1: United States being a services based economy. A large part

833
00:41:30,440 --> 00:41:33,800
Speaker 1: of the reason we had this inflation spike was we

834
00:41:33,920 --> 00:41:37,120
Speaker 1: shifted to goods during the lockdown. Now that's over and

835
00:41:37,200 --> 00:41:42,919
Speaker 1: we're going back. Shouldn't this unwine happen naturally? Why does

836
00:41:43,000 --> 00:41:46,600
Speaker 1: the Fed seem to be at risk at least according

837
00:41:46,600 --> 00:41:50,200
Speaker 1: to the bond market of overtightening, they were late to

838
00:41:50,280 --> 00:41:54,319
Speaker 1: recognize inflation? Are they late to recognize that inflation peaks

839
00:41:54,360 --> 00:41:56,400
Speaker 1: six months ago? So? I think to one I might

840
00:41:56,480 --> 00:41:58,360
Speaker 1: I think the one mistake that the Fed mate is that,

841
00:41:58,480 --> 00:42:00,120
Speaker 1: like you said, they were too late, and I think

842
00:42:00,120 --> 00:42:03,600
Speaker 1: they could have been the historically. Isn't that true? Yeah?

843
00:42:03,680 --> 00:42:06,200
Speaker 1: But I think the reason why they were too late

844
00:42:06,320 --> 00:42:08,680
Speaker 1: is because you have, I mean thinking about vaccine happened

845
00:42:09,040 --> 00:42:11,240
Speaker 1: and all of a sudden you change the economic paradigm

846
00:42:11,400 --> 00:42:13,640
Speaker 1: so darned fast and that and and you know, one

847
00:42:13,640 --> 00:42:16,480
Speaker 1: of the things that's hugely important for the FED is credibility.

848
00:42:16,600 --> 00:42:18,520
Speaker 1: They laid out a path that they were going to

849
00:42:18,640 --> 00:42:21,120
Speaker 1: keep interest rates low and QUI in place for an

850
00:42:21,160 --> 00:42:23,200
Speaker 1: extended period of time, and then it was hard to

851
00:42:23,360 --> 00:42:25,160
Speaker 1: change it. Anyway it was. It was it was an

852
00:42:25,239 --> 00:42:28,760
Speaker 1: argument for maybe they should stop playing with their cards

853
00:42:28,840 --> 00:42:33,000
Speaker 1: on the table, so or am I it's funny to

854
00:42:33,000 --> 00:42:35,319
Speaker 1: say that, because listen, I think we've gotten the place

855
00:42:35,360 --> 00:42:38,440
Speaker 1: where there's they're actually too much communication. Like right now

856
00:42:38,480 --> 00:42:40,840
Speaker 1: you have the SEP, the dots, now you now you

857
00:42:40,960 --> 00:42:43,200
Speaker 1: have the press conferences, now you have one of the

858
00:42:43,280 --> 00:42:45,880
Speaker 1: real tools of monetary policy is to be able to

859
00:42:45,960 --> 00:42:49,160
Speaker 1: react and be adaptive to the economy as as it is.

860
00:42:49,239 --> 00:42:51,279
Speaker 1: So listen, I don't think they I don't think they

861
00:42:51,280 --> 00:42:53,520
Speaker 1: should overtighten be I think when they get to this

862
00:42:53,680 --> 00:42:55,719
Speaker 1: place or where they are today, I don't think they

863
00:42:55,760 --> 00:42:58,759
Speaker 1: have to communicate every single step of the way. They've

864
00:42:58,800 --> 00:43:01,120
Speaker 1: done a good job of transparent CRNCY. But now I

865
00:43:01,239 --> 00:43:04,200
Speaker 1: think you want to keep your tools of you know,

866
00:43:04,280 --> 00:43:06,560
Speaker 1: I can, I can surprise if I need to. Yeah,

867
00:43:06,600 --> 00:43:08,840
Speaker 1: And by the by the way, surprise is you know,

868
00:43:08,880 --> 00:43:11,239
Speaker 1: if you're trying to shock an economy, you drop interest

869
00:43:11,320 --> 00:43:13,600
Speaker 1: rates really quickly. But if you don't have the art

870
00:43:13,640 --> 00:43:16,040
Speaker 1: of surprise and to be able to shock the system,

871
00:43:16,400 --> 00:43:19,000
Speaker 1: the system doesn't react to it fast. The FED has

872
00:43:19,120 --> 00:43:22,880
Speaker 1: lost the art of surprise. That that's really kind of intriguing.

873
00:43:23,000 --> 00:43:26,279
Speaker 1: You know, you mentioned how quickly the vaccines came on.

874
00:43:27,239 --> 00:43:31,439
Speaker 1: My favorite stat from from the Lows in March till

875
00:43:31,440 --> 00:43:33,640
Speaker 1: the end of the year, the equity markets gained six

876
00:43:35,120 --> 00:43:36,839
Speaker 1: That should have been a heads up to the FED

877
00:43:36,960 --> 00:43:40,640
Speaker 1: that hey, we need to forget taking rates to five percent?

878
00:43:41,080 --> 00:43:44,399
Speaker 1: Can we get off zero? Can we start to normalize rates?

879
00:43:44,880 --> 00:43:49,160
Speaker 1: And sometimes the bond market tells you various concerns going on.

880
00:43:49,320 --> 00:43:51,839
Speaker 1: Sometimes you're gonna listen to the equity market. But let

881
00:43:51,880 --> 00:43:54,160
Speaker 1: me bring it back to the bond market. There seems

882
00:43:54,200 --> 00:43:57,719
Speaker 1: to be a disagreement between the Federal Reserve and the

883
00:43:57,800 --> 00:44:00,439
Speaker 1: bond market. The bond market is saying, hey, we see

884
00:44:00,440 --> 00:44:03,480
Speaker 1: a recession coming. We think you're gonna cut rates. In

885
00:44:05,480 --> 00:44:08,400
Speaker 1: j pal is saying no, I think we're are going

886
00:44:08,440 --> 00:44:10,360
Speaker 1: to go up and stay up for longer. How do

887
00:44:10,440 --> 00:44:14,040
Speaker 1: you reconcile these two differences. So it's a fascinating dynamic

888
00:44:14,120 --> 00:44:16,000
Speaker 1: that's playing in the markets today. So I don't think

889
00:44:16,080 --> 00:44:19,920
Speaker 1: most of the people, you know, economists, people that follow

890
00:44:19,960 --> 00:44:22,120
Speaker 1: the FED, that listen to what the Feds saying, I

891
00:44:22,120 --> 00:44:24,480
Speaker 1: don't think anybody believes that Fed's gonna cut rates in

892
00:44:24,600 --> 00:44:28,440
Speaker 1: two three. When the FED says we're not, I mean,

893
00:44:28,520 --> 00:44:31,279
Speaker 1: and all the FED presidents governors come out and say

894
00:44:31,320 --> 00:44:32,879
Speaker 1: we're not, then I think you have to take them

895
00:44:32,880 --> 00:44:35,440
Speaker 1: withut the word why is the market doing this? You know,

896
00:44:35,480 --> 00:44:39,480
Speaker 1: I've learned in my career that the technicals are as important,

897
00:44:39,480 --> 00:44:42,719
Speaker 1: if not more important, than the fundamentals. What's happening now

898
00:44:42,840 --> 00:44:45,440
Speaker 1: that kind of the discussion we had before about money

899
00:44:45,520 --> 00:44:48,480
Speaker 1: flowing in because people locking in these yields, much of

900
00:44:48,560 --> 00:44:50,640
Speaker 1: that money is not necessarily looking at what is the

901
00:44:50,680 --> 00:44:52,800
Speaker 1: one year, one year forward, the two year two year forward.

902
00:44:52,800 --> 00:44:54,839
Speaker 1: They're saying I can lock in four and a half.

903
00:44:54,840 --> 00:44:58,760
Speaker 1: I So what's happening is people are sitting on immense

904
00:44:58,840 --> 00:45:03,000
Speaker 1: amounts of cash and decade of zero and suddenly four

905
00:45:03,040 --> 00:45:05,480
Speaker 1: percent looks fantastic totally, So what is it doing? It

906
00:45:05,560 --> 00:45:08,719
Speaker 1: actually prices your forward curve in a bit because people say,

907
00:45:08,760 --> 00:45:10,439
Speaker 1: you know what, I'm willing to take that. By the way,

908
00:45:11,080 --> 00:45:12,800
Speaker 1: you know, the risk is that all of a sudden

909
00:45:12,800 --> 00:45:14,520
Speaker 1: you have some shock to the system. Economy does slow

910
00:45:14,560 --> 00:45:17,319
Speaker 1: and maybe they do move, but people are willing to say, gosh,

911
00:45:17,360 --> 00:45:20,560
Speaker 1: I'll underwrite that easy thing that's probably not priced right

912
00:45:20,719 --> 00:45:22,480
Speaker 1: because I need to lock these yields in. And by

913
00:45:22,480 --> 00:45:24,880
Speaker 1: the way, I spent much of last year sitting on

914
00:45:25,000 --> 00:45:27,800
Speaker 1: my hands and you know, trying to protect my downside.

915
00:45:28,080 --> 00:45:30,040
Speaker 1: Now these bonds are attractive, so I think it is

916
00:45:30,320 --> 00:45:33,640
Speaker 1: a technical condition that's that's driven the market to price

917
00:45:33,719 --> 00:45:36,000
Speaker 1: in that ease today. So let's talk a little bit

918
00:45:36,040 --> 00:45:38,840
Speaker 1: about some of the technical conditions that I recall you

919
00:45:39,040 --> 00:45:44,640
Speaker 1: discussing in the fourth quarter of and there were two

920
00:45:44,840 --> 00:45:49,040
Speaker 1: statements you said that have stayed with me. Let's start

921
00:45:49,080 --> 00:45:53,440
Speaker 1: with the more amusing one. October two. This is some

922
00:45:53,560 --> 00:45:56,040
Speaker 1: of the wildest fixed income trading I've seen in my

923
00:45:56,239 --> 00:45:58,960
Speaker 1: entire career. And I remember, I think that was the

924
00:45:59,560 --> 00:46:01,840
Speaker 1: September a CPI came out in October, and then we

925
00:46:01,920 --> 00:46:04,480
Speaker 1: got the job state as well tell us about what

926
00:46:04,640 --> 00:46:06,880
Speaker 1: was going on in October. So it was pretty and mean,

927
00:46:06,920 --> 00:46:09,440
Speaker 1: it's pretty wild. I mean, so you think about by

928
00:46:09,480 --> 00:46:11,840
Speaker 1: the way, when you think about two twenty two, and

929
00:46:12,160 --> 00:46:14,600
Speaker 1: part of you know, the FED deserves some blame for

930
00:46:14,760 --> 00:46:17,320
Speaker 1: taking too long, but you also at a war that

931
00:46:17,600 --> 00:46:21,120
Speaker 1: was who thought you'd shock fuel prices and who in

932
00:46:21,200 --> 00:46:23,360
Speaker 1: food prices? I mean, what is it? Russian Ukraine account

933
00:46:23,360 --> 00:46:26,440
Speaker 1: for twelve percent of the calories in the world. Giant

934
00:46:26,520 --> 00:46:30,440
Speaker 1: we bread basket and basket after the US and all

935
00:46:30,480 --> 00:46:33,200
Speaker 1: of a sudden, what we thought would look like inflation

936
00:46:33,239 --> 00:46:35,640
Speaker 1: would start to moderate or at least stabilize. We took

937
00:46:35,680 --> 00:46:38,239
Speaker 1: a whole another leg higher, and then, like you say,

938
00:46:38,320 --> 00:46:42,319
Speaker 1: in September October, we started getting these point course, cp

939
00:46:42,440 --> 00:46:45,239
Speaker 1: I was printing a point six for two straight months,

940
00:46:45,560 --> 00:46:49,319
Speaker 1: you know, so so annualizing that's over seven and all

941
00:46:49,360 --> 00:46:51,839
Speaker 1: of a sudden, like, oh my god, this FED may

942
00:46:51,920 --> 00:46:54,560
Speaker 1: have to go significantly further. And by the way, at

943
00:46:54,560 --> 00:46:59,399
Speaker 1: the same time, employment was was extraordinarily strong and is today.

944
00:46:59,440 --> 00:47:02,000
Speaker 1: And I still think people don't recognize there's not enough

945
00:47:02,040 --> 00:47:05,520
Speaker 1: people for the jobs today. There's still a deficit in

946
00:47:05,600 --> 00:47:07,759
Speaker 1: all those sectors we talked about earlier. So so the

947
00:47:07,840 --> 00:47:10,360
Speaker 1: FED should keep raising rates. That'll get bodies and jobs.

948
00:47:10,520 --> 00:47:14,360
Speaker 1: Oh wait, they can't create more people to fill those jobs.

949
00:47:14,600 --> 00:47:17,760
Speaker 1: They can't create more semiconductors, they can't build more houses.

950
00:47:18,520 --> 00:47:21,040
Speaker 1: At a certain point, the FED should really just declare

951
00:47:21,160 --> 00:47:23,960
Speaker 1: victory and go home. So I think, you know, you know,

952
00:47:24,040 --> 00:47:27,440
Speaker 1: it's interesting how like every every committee, like the FED, etcetera,

953
00:47:27,520 --> 00:47:30,080
Speaker 1: there's always this I can tweak it a little bit,

954
00:47:30,640 --> 00:47:32,359
Speaker 1: and I think at the I think at this point

955
00:47:32,960 --> 00:47:35,640
Speaker 1: it's time and the system recalibrates. I mean a number

956
00:47:35,640 --> 00:47:38,759
Speaker 1: of times that FED has to come to the fore

957
00:47:39,160 --> 00:47:41,560
Speaker 1: when you have a financial crisis, when you have a pandemic,

958
00:47:41,880 --> 00:47:43,640
Speaker 1: and then I think you've gotta go, you know, get

959
00:47:43,719 --> 00:47:46,200
Speaker 1: to the back page of the newspaper versus the front

960
00:47:46,640 --> 00:47:49,000
Speaker 1: and let the system do what it's gonna do, because

961
00:47:49,080 --> 00:47:52,000
Speaker 1: the more that you create the news. If you think

962
00:47:52,000 --> 00:47:53,879
Speaker 1: about if you're a big CEO c Ione, I'm thinking

963
00:47:53,880 --> 00:47:57,279
Speaker 1: about capex spend long term hiring plans. Do I need

964
00:47:57,360 --> 00:48:00,600
Speaker 1: to have the FED as one of the risk factors

965
00:48:00,640 --> 00:48:02,759
Speaker 1: in I don't think so. And I don't think we

966
00:48:02,840 --> 00:48:05,400
Speaker 1: need to keep the economy will do its job of

967
00:48:05,520 --> 00:48:09,680
Speaker 1: keeping the system on on on pace. And you think

968
00:48:09,680 --> 00:48:11,160
Speaker 1: about we just happen the last couple of years, like

969
00:48:11,239 --> 00:48:13,840
Speaker 1: you said, goods economy to service economy, the number of

970
00:48:13,960 --> 00:48:17,880
Speaker 1: people job shifts extraordinary of how it played out. Anyway,

971
00:48:17,920 --> 00:48:19,560
Speaker 1: I think there's a time that you need the Central

972
00:48:19,600 --> 00:48:20,960
Speaker 1: Bank to be on the front page. But I think

973
00:48:20,960 --> 00:48:24,200
Speaker 1: we're leaving that new story. You mentioned green Spin earlier,

974
00:48:24,440 --> 00:48:29,040
Speaker 1: and I had the same sense that you know, he

975
00:48:29,120 --> 00:48:31,640
Speaker 1: had a great career, and then the last couple of

976
00:48:31,719 --> 00:48:37,160
Speaker 1: innings helped to really ding his reputation because he stayed

977
00:48:37,200 --> 00:48:40,040
Speaker 1: on the front page for too long and didn't say no, no,

978
00:48:40,160 --> 00:48:42,440
Speaker 1: the system's fine. I'm going to step back and let

979
00:48:42,560 --> 00:48:45,759
Speaker 1: things play out the way they should on their own. So, man,

980
00:48:45,800 --> 00:48:47,239
Speaker 1: if you go back in the anlds of time, I

981
00:48:47,320 --> 00:48:50,799
Speaker 1: think Alan Greenspan may have been, at least in my generation,

982
00:48:50,920 --> 00:48:53,320
Speaker 1: the best central banker I've ever seen. Certain I'm on

983
00:48:53,360 --> 00:48:56,280
Speaker 1: the other side of that trade sold to you. I'm sure,

984
00:48:56,400 --> 00:48:58,960
Speaker 1: Alan green all right, and we'll continue to be I

985
00:48:59,040 --> 00:49:02,120
Speaker 1: have long put I will write calls, whatever you need

986
00:49:02,200 --> 00:49:05,600
Speaker 1: to do. I'll take the out of the maestro training, alright.

987
00:49:05,719 --> 00:49:08,799
Speaker 1: So so but make your case, alright. So, I mean,

988
00:49:08,840 --> 00:49:11,359
Speaker 1: I watched them for years and and I've seen very

989
00:49:11,400 --> 00:49:14,160
Speaker 1: few people, including getting the honor presenting to him many times,

990
00:49:14,719 --> 00:49:16,719
Speaker 1: I've seen, I mean, the way he analyzed the day

991
00:49:16,760 --> 00:49:18,080
Speaker 1: of the way he reacted to the day of the

992
00:49:18,120 --> 00:49:21,800
Speaker 1: way he commanded policy. I'll never forget when when Greenspan

993
00:49:21,920 --> 00:49:24,839
Speaker 1: said we're going this way you he had immense credibility

994
00:49:24,960 --> 00:49:28,560
Speaker 1: to execute it. Listen, I think, but I think your

995
00:49:28,600 --> 00:49:32,000
Speaker 1: point is the last year or two it was it

996
00:49:32,080 --> 00:49:34,000
Speaker 1: didn't make a lot of sense for and I think

997
00:49:34,000 --> 00:49:37,680
Speaker 1: people knew subprime in the mortgage crisis, the mortgage wasn't crisis.

998
00:49:37,760 --> 00:49:41,000
Speaker 1: The mortgage dynamic, the housing dynamic was was creating a

999
00:49:41,120 --> 00:49:44,359
Speaker 1: problem that would put a you know, put a real

1000
00:49:44,880 --> 00:49:49,600
Speaker 1: damper on what was I think an immaculate um central banker.

1001
00:49:49,840 --> 00:49:55,640
Speaker 1: So you mentioned credibility. Does the current FED insistence on

1002
00:49:55,840 --> 00:49:58,400
Speaker 1: taking us up to five five and a quarter? Is

1003
00:49:58,560 --> 00:50:02,719
Speaker 1: that sort of third Hey, we're gonna we're gonna have

1004
00:50:02,880 --> 00:50:05,720
Speaker 1: stable rates, we're gonna have full employment, and we also

1005
00:50:05,840 --> 00:50:08,960
Speaker 1: have to maintain our credibility. Is that a third mandate

1006
00:50:09,080 --> 00:50:11,839
Speaker 1: for the FED? I mean, you know, part of why

1007
00:50:12,000 --> 00:50:15,160
Speaker 1: and I say the FED stays in policy later, is

1008
00:50:15,680 --> 00:50:18,480
Speaker 1: credibility is such a big deal. Once you lose credibility.

1009
00:50:18,520 --> 00:50:19,759
Speaker 1: It's part of what I think they've done a really

1010
00:50:19,800 --> 00:50:22,640
Speaker 1: good job of communication. You think about how the few

1011
00:50:22,719 --> 00:50:25,320
Speaker 1: number of dissents when you get an f O MC decision,

1012
00:50:25,880 --> 00:50:28,880
Speaker 1: think about yeah, and there's opinions from the different officials

1013
00:50:28,960 --> 00:50:32,600
Speaker 1: that speak, but they're generally on the same page. And

1014
00:50:32,719 --> 00:50:35,120
Speaker 1: that that I think is really effective. Listen, I think

1015
00:50:35,160 --> 00:50:38,120
Speaker 1: once you lose credibility, then you're all of a sudden

1016
00:50:38,160 --> 00:50:40,800
Speaker 1: your your monetary policy. Because moral suasion and how you

1017
00:50:40,880 --> 00:50:43,200
Speaker 1: think about where you want to guide the system is

1018
00:50:43,280 --> 00:50:45,840
Speaker 1: usually important. By the way, if you guide this the

1019
00:50:46,840 --> 00:50:49,880
Speaker 1: system into finite a way, and this is part of

1020
00:50:49,920 --> 00:50:51,680
Speaker 1: the idea of like go away for a bit, stop

1021
00:50:51,760 --> 00:50:54,920
Speaker 1: defining every single you know, I think quite franking. I

1022
00:50:54,960 --> 00:50:58,200
Speaker 1: think these sep the dot plot is crazy, Like why

1023
00:50:58,239 --> 00:50:59,959
Speaker 1: do you need to tell the world where we're gonna

1024
00:50:59,960 --> 00:51:01,520
Speaker 1: be two years? Hence you don't know where you're gonna

1025
00:51:01,520 --> 00:51:03,359
Speaker 1: be two years? Hence why do you need the price

1026
00:51:03,480 --> 00:51:05,960
Speaker 1: the treasury market to the two year forward or the

1027
00:51:06,000 --> 00:51:07,440
Speaker 1: three or four work? You don't know where and you

1028
00:51:07,480 --> 00:51:09,719
Speaker 1: know they're back to year sense that you need the

1029
00:51:09,760 --> 00:51:12,880
Speaker 1: ability to surprise when necessary totally and if you pin

1030
00:51:12,960 --> 00:51:15,799
Speaker 1: yourself and even in the past the Fed has pinned

1031
00:51:15,800 --> 00:51:17,520
Speaker 1: therese ups to a date and say we're going to

1032
00:51:17,640 --> 00:51:20,560
Speaker 1: move that that's crazy or to or do you know

1033
00:51:20,680 --> 00:51:23,880
Speaker 1: one number like core PC is the most important, But

1034
00:51:23,920 --> 00:51:26,240
Speaker 1: why would you pin yourself to core PC because there's

1035
00:51:26,400 --> 00:51:29,960
Speaker 1: weird nuance that happens. You have to look at the abstract,

1036
00:51:30,080 --> 00:51:33,480
Speaker 1: give yourself some flexibility, allow the system to do what

1037
00:51:33,560 --> 00:51:37,200
Speaker 1: it's gonna do, and create normal volatility to markets as

1038
00:51:37,239 --> 00:51:40,120
Speaker 1: opposed to defining you have to be here. You mentioned

1039
00:51:40,239 --> 00:51:43,520
Speaker 1: core PC. I'm trying to remember was it Bernankee or

1040
00:51:43,600 --> 00:51:48,480
Speaker 1: green Span that liked the GDP deflator as their inflation managumer,

1041
00:51:48,520 --> 00:51:51,640
Speaker 1: I don't remember which, Um, And they're not always it's

1042
00:51:51,719 --> 00:51:54,920
Speaker 1: kind of surprising they're not always the same. Last year,

1043
00:51:55,000 --> 00:51:57,880
Speaker 1: for example, I always love to throw charts up to

1044
00:51:58,080 --> 00:52:03,600
Speaker 1: shock people. Oil was negative for everything ran up an

1045
00:52:03,640 --> 00:52:06,960
Speaker 1: anticipation of the wartime chatter, and then by the time

1046
00:52:07,000 --> 00:52:09,439
Speaker 1: we got to the fourth quarter, it was red, which

1047
00:52:09,560 --> 00:52:13,360
Speaker 1: is kind of stunning. Um, what do you think is

1048
00:52:13,440 --> 00:52:17,400
Speaker 1: the best measure of inflation? And have we seen peak inflation?

1049
00:52:17,520 --> 00:52:19,640
Speaker 1: Are we? Are we over the hump? I think so?

1050
00:52:19,800 --> 00:52:22,279
Speaker 1: I mean so, you know, I'm always you know, what

1051
00:52:22,360 --> 00:52:24,279
Speaker 1: do I look at I look at a core PC

1052
00:52:24,520 --> 00:52:27,359
Speaker 1: is is important? I look at wages a lot um.

1053
00:52:27,640 --> 00:52:31,080
Speaker 1: I look at the commodity markets. You know, a ton

1054
00:52:31,200 --> 00:52:35,759
Speaker 1: of copper, lumber, natural gas all way off their highs. Yes.

1055
00:52:35,920 --> 00:52:37,719
Speaker 1: And and by the way, by the way, if you

1056
00:52:37,840 --> 00:52:39,520
Speaker 1: if you take and we looked at this stat the

1057
00:52:39,560 --> 00:52:43,839
Speaker 1: other day, if use car prices and shelter are coming down,

1058
00:52:43,920 --> 00:52:46,319
Speaker 1: which we know they're coming down. If they come down,

1059
00:52:46,360 --> 00:52:48,239
Speaker 1: if they continue to come down, everything else can stay

1060
00:52:48,280 --> 00:52:49,880
Speaker 1: four to five and you still get in the mid

1061
00:52:49,960 --> 00:52:52,880
Speaker 1: to high twos, so meaning it's pretty it'd be pretty

1062
00:52:52,920 --> 00:52:54,960
Speaker 1: hard for us not to have seen the peak. But

1063
00:52:55,080 --> 00:52:56,640
Speaker 1: you know one thing that I you know part of

1064
00:52:57,200 --> 00:52:58,520
Speaker 1: you know, I always in my business we try and

1065
00:52:58,560 --> 00:53:00,760
Speaker 1: thinking what are your constancy you could have value the variables.

1066
00:53:01,160 --> 00:53:03,360
Speaker 1: Inflation is a hard one to think about the constants.

1067
00:53:03,400 --> 00:53:05,040
Speaker 1: And if you don't, you know, part of why I

1068
00:53:05,120 --> 00:53:08,359
Speaker 1: read inventory numbers at retailers, what's the you know you're

1069
00:53:08,360 --> 00:53:10,560
Speaker 1: talking about Semi's earlier. I think you have to think

1070
00:53:10,560 --> 00:53:14,720
Speaker 1: about the whole construct of what's driving top line revenue

1071
00:53:14,760 --> 00:53:17,200
Speaker 1: for companies. You know you're seeing Tesla logist, did you

1072
00:53:17,239 --> 00:53:22,359
Speaker 1: see companies all of a sudden they're dropping big cuts

1073
00:53:22,400 --> 00:53:25,680
Speaker 1: that substantial. You know when you see retailers, the targets

1074
00:53:25,719 --> 00:53:28,600
Speaker 1: and Walmarts, you see you know they're change in terms

1075
00:53:28,640 --> 00:53:32,280
Speaker 1: of dropping price, and you're seeing customers that are actually

1076
00:53:32,360 --> 00:53:35,799
Speaker 1: now shifting using more couponing, trading down, buying in higher

1077
00:53:35,920 --> 00:53:38,920
Speaker 1: quantity as opposed so they can get scale and purchase.

1078
00:53:39,080 --> 00:53:41,960
Speaker 1: That's real and that means inflation is coming down. And

1079
00:53:42,280 --> 00:53:45,359
Speaker 1: all these things factor into what do you build into

1080
00:53:45,480 --> 00:53:47,680
Speaker 1: what's happening in inflation because that one is hard to say.

1081
00:53:47,800 --> 00:53:49,520
Speaker 1: This is the number, and by the way, I think

1082
00:53:49,520 --> 00:53:52,399
Speaker 1: markets do that, like the employment cost index, like that's

1083
00:53:52,440 --> 00:53:54,399
Speaker 1: the number, and then it goes to this one. I said,

1084
00:53:54,400 --> 00:53:58,280
Speaker 1: I think markets like to have superficial information to drive

1085
00:53:58,400 --> 00:54:01,000
Speaker 1: big picture thoughts. So let's dick with inflation for a

1086
00:54:01,040 --> 00:54:04,680
Speaker 1: little bit, because you've touched on so many really interesting areas.

1087
00:54:05,520 --> 00:54:09,239
Speaker 1: One of my favorite aspects of where I think the

1088
00:54:09,760 --> 00:54:14,120
Speaker 1: CPI model is wrong is the cost of apartment rentals.

1089
00:54:14,520 --> 00:54:17,400
Speaker 1: And I get the sense the FED understands this, BLS

1090
00:54:17,480 --> 00:54:21,760
Speaker 1: understands this. The Cleveland Fed just created this new measure

1091
00:54:21,960 --> 00:54:26,200
Speaker 1: of owner's equivalent rent that looks at renewals, but you

1092
00:54:26,280 --> 00:54:31,759
Speaker 1: also things like Zilo apartment rental listings, and Apartment list

1093
00:54:31,920 --> 00:54:36,080
Speaker 1: is another index that tracks this. It seems that everywhere

1094
00:54:36,200 --> 00:54:41,920
Speaker 1: we look we see apartment rental prices coming down faster

1095
00:54:42,280 --> 00:54:45,120
Speaker 1: than the b L s C p I model is showing.

1096
00:54:45,520 --> 00:54:50,000
Speaker 1: How do you calibrate all models wrong but most are useful?

1097
00:54:50,120 --> 00:54:53,040
Speaker 1: Said George Box. How do you calibrate a model that

1098
00:54:53,160 --> 00:54:55,759
Speaker 1: has issues that we think we the FED understands what

1099
00:54:55,800 --> 00:54:58,719
Speaker 1: the issues are, and yet are still acting as if

1100
00:54:59,360 --> 00:55:02,080
Speaker 1: um the model is dead right. So one of the

1101
00:55:02,120 --> 00:55:03,919
Speaker 1: things I always thinking about we're investing, and I say

1102
00:55:04,040 --> 00:55:05,920
Speaker 1: to our teams all the time, We're not in the

1103
00:55:05,960 --> 00:55:07,880
Speaker 1: business of being right. We're in the business of generating

1104
00:55:07,880 --> 00:55:11,800
Speaker 1: return for clients. So what happens? So we've we have

1105
00:55:11,960 --> 00:55:15,480
Speaker 1: incredible AI data assimilation where we look at billions of

1106
00:55:15,560 --> 00:55:18,080
Speaker 1: prices and trying to where is inflation going? But the

1107
00:55:18,320 --> 00:55:22,200
Speaker 1: markets focus on core CPI, so you've got to try

1108
00:55:22,280 --> 00:55:24,919
Speaker 1: and put together what are the markets going to react

1109
00:55:24,960 --> 00:55:26,800
Speaker 1: to it. Oftentimes it's much more important to me to

1110
00:55:26,920 --> 00:55:30,239
Speaker 1: understand what is the psychology of markets than it is

1111
00:55:30,440 --> 00:55:33,759
Speaker 1: understanding you know, what is like where are we really going?

1112
00:55:33,840 --> 00:55:36,520
Speaker 1: Because you get leads and lags, apartment being the big one,

1113
00:55:36,920 --> 00:55:39,960
Speaker 1: there are huge lags in terms of when an apartment

1114
00:55:40,040 --> 00:55:43,520
Speaker 1: gets into in the reduction and prices. So you know,

1115
00:55:43,600 --> 00:55:45,400
Speaker 1: we try and think through all of that, and you know,

1116
00:55:45,440 --> 00:55:47,640
Speaker 1: at the end of the day, you know, part of

1117
00:55:47,680 --> 00:55:49,800
Speaker 1: what I'm trying to think through is it's less important

1118
00:55:49,800 --> 00:55:52,160
Speaker 1: to me to be right six months. Hence, but if

1119
00:55:52,200 --> 00:55:54,040
Speaker 1: the markets are going to focus on this core CPI

1120
00:55:54,080 --> 00:55:56,000
Speaker 1: report for the next two to three months, and maybe

1121
00:55:56,400 --> 00:55:58,800
Speaker 1: the FED is going to focus on core pc that

1122
00:55:58,960 --> 00:56:00,960
Speaker 1: I put at the top end of my priority set

1123
00:56:01,000 --> 00:56:02,960
Speaker 1: because I've got to buy and sell within the market,

1124
00:56:03,360 --> 00:56:05,000
Speaker 1: and so I spend a lot more time trying to

1125
00:56:05,080 --> 00:56:08,920
Speaker 1: think through what's the market reaction function and what is

1126
00:56:08,960 --> 00:56:11,640
Speaker 1: the data the markets tuned into because that changes over time.

1127
00:56:11,760 --> 00:56:15,560
Speaker 1: So you're always providing insight and advice to clients. But

1128
00:56:15,760 --> 00:56:19,080
Speaker 1: if you had ten minutes alone with Jerome Palell, what

1129
00:56:19,239 --> 00:56:22,120
Speaker 1: sort of advice would you give him? So I would say,

1130
00:56:22,120 --> 00:56:25,120
Speaker 1: I'm I'm a big fan, but I think the say so,

1131
00:56:25,160 --> 00:56:28,759
Speaker 1: I think I'm list so, but I'd like I say,

1132
00:56:28,840 --> 00:56:31,359
Speaker 1: you know, with all the due respect, I thought last

1133
00:56:31,440 --> 00:56:34,040
Speaker 1: year it was crazy around keeping or the year of

1134
00:56:34,160 --> 00:56:36,320
Speaker 1: keeping rates easy for too long and doing que I

1135
00:56:36,320 --> 00:56:38,359
Speaker 1: mean in January last year add billion a month going

1136
00:56:38,400 --> 00:56:41,000
Speaker 1: into the system. Certainly zero way too long. You could

1137
00:56:41,080 --> 00:56:45,040
Speaker 1: argue how far you'd go, but zero wasn't That was wrong, Listen.

1138
00:56:45,080 --> 00:56:46,640
Speaker 1: I think one of the things that he has brought

1139
00:56:46,680 --> 00:56:49,120
Speaker 1: to the fund that I think it's been extraordinaries collaboration

1140
00:56:49,840 --> 00:56:53,200
Speaker 1: and you know, a collaborative decision making that across and

1141
00:56:53,320 --> 00:56:56,400
Speaker 1: taking in tremendous amounts of information. The thing that I

1142
00:56:56,520 --> 00:56:58,960
Speaker 1: would you know that I always say, let's say, and

1143
00:56:59,280 --> 00:57:01,160
Speaker 1: I've said this before, or if the Federal Reserve said

1144
00:57:01,160 --> 00:57:02,520
Speaker 1: the funds rate is going to be two percent for

1145
00:57:02,560 --> 00:57:05,959
Speaker 1: the next five years with the system operate better or worse.

1146
00:57:06,400 --> 00:57:09,320
Speaker 1: And if if you were a CEO or CFO and said, Okay,

1147
00:57:09,400 --> 00:57:12,040
Speaker 1: I know, I gotta figure out what my inventory level is,

1148
00:57:12,080 --> 00:57:14,839
Speaker 1: what my supply chain dynamics, but I know they're gonna

1149
00:57:14,840 --> 00:57:17,880
Speaker 1: be able to fund myself off of a relatively constant

1150
00:57:18,360 --> 00:57:21,400
Speaker 1: interest rate, certainly the risk free rate. There is huge

1151
00:57:21,520 --> 00:57:23,960
Speaker 1: power in that. And I think people will underestimate this.

1152
00:57:24,440 --> 00:57:26,320
Speaker 1: Get us back on the curve and get us back

1153
00:57:26,360 --> 00:57:29,560
Speaker 1: on a I tweak it less than they do until

1154
00:57:29,680 --> 00:57:32,720
Speaker 1: you need to, and then you move decisively. And I

1155
00:57:32,800 --> 00:57:34,640
Speaker 1: think one of the things we've learned, you know that

1156
00:57:34,760 --> 00:57:37,560
Speaker 1: central bankers have done a good job with is when

1157
00:57:37,600 --> 00:57:40,920
Speaker 1: you need to move, be decisive and and and get

1158
00:57:40,960 --> 00:57:42,680
Speaker 1: it and tell people this is where we're going, and

1159
00:57:42,800 --> 00:57:45,440
Speaker 1: shocked the system when when you do it, but let

1160
00:57:45,520 --> 00:57:47,920
Speaker 1: him know now we're going. And I think that's powerful.

1161
00:57:48,280 --> 00:57:51,800
Speaker 1: But then otherwise back off and let let the system

1162
00:57:51,840 --> 00:57:53,400
Speaker 1: with the system is gonna do. By the way, it's

1163
00:57:53,400 --> 00:57:57,200
Speaker 1: harder in Argentina because you get you get a little

1164
00:57:57,360 --> 00:58:01,280
Speaker 1: you don't have. I mean, we have such a tech, chnology, innovation,

1165
00:58:01,680 --> 00:58:04,160
Speaker 1: adaptive human and thinking about I did a presentation. I

1166
00:58:04,240 --> 00:58:06,440
Speaker 1: showed what it was thirty years ago. They used to

1167
00:58:06,640 --> 00:58:08,400
Speaker 1: look for a job in the classified needs circle and

1168
00:58:08,440 --> 00:58:10,360
Speaker 1: go get a job. Now you think about getting a

1169
00:58:10,440 --> 00:58:13,720
Speaker 1: job today with all of the immense online you have

1170
00:58:13,880 --> 00:58:17,040
Speaker 1: fluidity of employment. That's that we're watching play out if

1171
00:58:17,080 --> 00:58:19,280
Speaker 1: that doesn't need to do that much other than the

1172
00:58:19,320 --> 00:58:22,200
Speaker 1: shocked period, talk about the impact of a loss of

1173
00:58:22,240 --> 00:58:26,360
Speaker 1: credibility of a central bank. It's apples and oranges between

1174
00:58:26,360 --> 00:58:29,320
Speaker 1: the US and Argentina, which, by the way, I'm always

1175
00:58:29,440 --> 00:58:32,520
Speaker 1: shocked when the parade of FED haters come out and

1176
00:58:32,640 --> 00:58:35,800
Speaker 1: it's like, we're gonna be Zimbabwe. The dollar is going

1177
00:58:35,840 --> 00:58:39,360
Speaker 1: to be worthless. Talk about getting a trade degrees wrong.

1178
00:58:40,160 --> 00:58:43,680
Speaker 1: Let's talk about the dollar. Since I mentioned Argentina and Zimbabwe,

1179
00:58:44,960 --> 00:58:48,680
Speaker 1: the dollar for the past decade has been the only

1180
00:58:48,800 --> 00:58:52,960
Speaker 1: game in town that seemed to have topped out in two.

1181
00:58:53,480 --> 00:58:55,560
Speaker 1: How do you think about the strength of the US

1182
00:58:55,640 --> 00:58:59,960
Speaker 1: dollar relative to fixed income equity US versus emerging mark

1183
00:59:00,040 --> 00:59:02,960
Speaker 1: gets What is the role of the dollar in your process?

1184
00:59:04,040 --> 00:59:06,360
Speaker 1: So for I mean, well, two was the only hedge

1185
00:59:06,400 --> 00:59:09,600
Speaker 1: we had, I mean literally, yeah, So two thousand two.

1186
00:59:09,600 --> 00:59:12,280
Speaker 1: You think about normally interest rates work against beat against

1187
00:59:12,320 --> 00:59:15,440
Speaker 1: your risk assets. You know, normally, volatility markets we use

1188
00:59:15,480 --> 00:59:17,560
Speaker 1: a lot of you know, think about call options, put options,

1189
00:59:17,600 --> 00:59:20,640
Speaker 1: the equity market when volatility spikes. Not a good hedge.

1190
00:59:20,680 --> 00:59:23,320
Speaker 1: It's too expensive because everybody's trying to buy insurance. The

1191
00:59:23,400 --> 00:59:25,800
Speaker 1: dollar was a good one because you knew that as

1192
00:59:26,000 --> 00:59:27,760
Speaker 1: as the central bank was gonna tighten, the dollar was

1193
00:59:27,760 --> 00:59:30,800
Speaker 1: gonna appreciate and risk was gonna have a hard time. Today.

1194
00:59:31,200 --> 00:59:32,680
Speaker 1: You know, I would argue, we're on the other side

1195
00:59:32,720 --> 00:59:34,640
Speaker 1: of that mountain we talked about in the dollar doesn't

1196
00:59:34,640 --> 00:59:37,080
Speaker 1: need to appreciate, and actually, you know, you could start

1197
00:59:37,120 --> 00:59:39,240
Speaker 1: to do things because the volatility markets have come down.

1198
00:59:39,440 --> 00:59:42,080
Speaker 1: I think there's one important thing with the dollar. You know,

1199
00:59:42,160 --> 00:59:46,480
Speaker 1: we're gonna go through a potential debt ceiling crisis issue.

1200
00:59:47,120 --> 00:59:49,800
Speaker 1: There were dollars of reserve currency in the world. I

1201
00:59:49,880 --> 00:59:53,640
Speaker 1: don't think people really understand it's two thirds of the

1202
00:59:53,720 --> 00:59:56,600
Speaker 1: trade flow in the world. It's roughly two thirds three

1203
00:59:56,640 --> 00:59:59,000
Speaker 1: quarters of the liabilities in the world. It's the collateral

1204
00:59:59,160 --> 01:00:01,680
Speaker 1: us treasures that call lateral in the world that is

1205
01:00:01,760 --> 01:00:05,280
Speaker 1: underneath you know, most transactions in the world. The dollar

1206
01:00:05,480 --> 01:00:07,800
Speaker 1: is such a critical dynamic. We're gonna go through and

1207
01:00:07,920 --> 01:00:11,040
Speaker 1: always find like when do you set up for these trades?

1208
01:00:11,120 --> 01:00:13,320
Speaker 1: When he set up for position your portfolio. We're gonna

1209
01:00:13,360 --> 01:00:16,040
Speaker 1: go through, you know, sometime three to six months from

1210
01:00:16,120 --> 01:00:18,800
Speaker 1: now what could be an incredibly volatile period, and then

1211
01:00:18,880 --> 01:00:22,400
Speaker 1: the dollar becomes you know, your your lever and how

1212
01:00:22,480 --> 01:00:24,560
Speaker 1: you think about that is going to change and uh

1213
01:00:25,000 --> 01:00:28,160
Speaker 1: and evolve. And like I said, it's crazy that we'd

1214
01:00:28,160 --> 01:00:31,320
Speaker 1: ever because of the immense benefits that accruiting. Why would

1215
01:00:31,360 --> 01:00:35,080
Speaker 1: anyone ever put our exorbitant privilege at risk to score

1216
01:00:35,160 --> 01:00:39,400
Speaker 1: political points. All those people really are are deserving of

1217
01:00:39,520 --> 01:00:42,680
Speaker 1: our disdain and should be called out for their recklessness

1218
01:00:42,720 --> 01:00:46,600
Speaker 1: and ir responsibility. But let's hold the politics side. The

1219
01:00:46,720 --> 01:00:50,360
Speaker 1: last question I have in the state of the fixed

1220
01:00:50,480 --> 01:00:54,920
Speaker 1: income world is you mentioned since since we talked about dollar,

1221
01:00:55,000 --> 01:00:58,320
Speaker 1: we have to talk about emerging market. Last year you

1222
01:00:58,440 --> 01:01:02,200
Speaker 1: said you're starting to become more constructive on emerging markets

1223
01:01:02,200 --> 01:01:04,920
Speaker 1: and more balanced obviously on the U. S. Dollar. You know,

1224
01:01:05,240 --> 01:01:07,800
Speaker 1: it has looked like em was going to be the

1225
01:01:08,200 --> 01:01:11,200
Speaker 1: next part of the world to do well for the

1226
01:01:11,280 --> 01:01:14,840
Speaker 1: better part of a decade. And the tires spin and

1227
01:01:14,880 --> 01:01:19,120
Speaker 1: there's no traction is three the year e M finally

1228
01:01:19,760 --> 01:01:22,880
Speaker 1: starts rewarding investors. So, I mean, one of the things

1229
01:01:22,920 --> 01:01:25,320
Speaker 1: I've learned over my career running emerging market business for

1230
01:01:25,360 --> 01:01:28,360
Speaker 1: a long time is you have to take em and

1231
01:01:28,760 --> 01:01:32,520
Speaker 1: dissect the asset class. I mean, there's sometimes no and

1232
01:01:32,640 --> 01:01:35,600
Speaker 1: so you know the difference between Mexico and Argentina and

1233
01:01:35,720 --> 01:01:39,360
Speaker 1: South Africa to Turkey is immense. And so part of

1234
01:01:39,440 --> 01:01:41,840
Speaker 1: what we try and think through is where are we

1235
01:01:41,920 --> 01:01:45,200
Speaker 1: comfortable today when we're we are taking more risk in

1236
01:01:45,440 --> 01:01:48,240
Speaker 1: UH and you know, building some income in emerging markets.

1237
01:01:48,560 --> 01:01:51,959
Speaker 1: But gosh, you know there are places today that that listen,

1238
01:01:52,000 --> 01:01:53,440
Speaker 1: We're not doing a lot in Turkey, We're not doing

1239
01:01:53,440 --> 01:01:56,040
Speaker 1: a lot in South Africa. But you know, Mexico. You

1240
01:01:56,080 --> 01:01:58,760
Speaker 1: think about who the beneficiary for a world that's becoming

1241
01:01:58,800 --> 01:02:02,240
Speaker 1: more regionalized, and who is you know, the US's partner

1242
01:02:02,280 --> 01:02:05,560
Speaker 1: in Mexico is interesting. Brazil has done a pretty about

1243
01:02:05,560 --> 01:02:08,880
Speaker 1: central banks and has done a pretty good job. Brazil

1244
01:02:09,000 --> 01:02:10,840
Speaker 1: is a is a good place Indonesia. So there are

1245
01:02:10,880 --> 01:02:13,240
Speaker 1: places and the way we've grown and by the way,

1246
01:02:13,240 --> 01:02:16,600
Speaker 1: there's some corporates that are domiciled in these countries that

1247
01:02:16,680 --> 01:02:19,720
Speaker 1: are often times better credit than the sovereign. So we've

1248
01:02:19,800 --> 01:02:22,920
Speaker 1: worked on we've increased our emerging market exposure, but I

1249
01:02:22,960 --> 01:02:24,760
Speaker 1: would say we're doing it in a way that is

1250
01:02:25,880 --> 01:02:31,960
Speaker 1: less emerging market volatility um sensitive to it. Another example

1251
01:02:32,120 --> 01:02:36,240
Speaker 1: of where active has an advantage over passive is choosing

1252
01:02:36,320 --> 01:02:40,360
Speaker 1: your country of both equity and fixed income. Yeah, and

1253
01:02:40,520 --> 01:02:42,200
Speaker 1: then one thing I will say, you know, active is

1254
01:02:42,200 --> 01:02:44,720
Speaker 1: going to live with passive for forever and the growth

1255
01:02:44,840 --> 01:02:47,280
Speaker 1: of you know, we obviously you know, are proud of

1256
01:02:47,360 --> 01:02:50,200
Speaker 1: the I shares. Development people can, fixed income, you can,

1257
01:02:50,400 --> 01:02:52,840
Speaker 1: I use a ton of them. So passive has a place.

1258
01:02:53,280 --> 01:02:55,240
Speaker 1: But then the ability to use it as active man

1259
01:02:55,360 --> 01:02:57,520
Speaker 1: in your in your process is you. And by the way,

1260
01:02:57,600 --> 01:03:00,840
Speaker 1: parts of em are hugely effective. Been using UH and

1261
01:03:00,880 --> 01:03:02,560
Speaker 1: we've been doing a bunch of dead and equity to

1262
01:03:02,640 --> 01:03:05,400
Speaker 1: get into merging markets where at times getting scale is

1263
01:03:05,480 --> 01:03:08,680
Speaker 1: hard on the individual securities. Before I let you go,

1264
01:03:08,880 --> 01:03:12,160
Speaker 1: we have to talk a little bit about Lehman Brothers.

1265
01:03:12,480 --> 01:03:17,960
Speaker 1: You started there in what was black Monday like at

1266
01:03:18,080 --> 01:03:21,040
Speaker 1: Lehman Brothers, who bet then we're really known as a

1267
01:03:21,080 --> 01:03:23,880
Speaker 1: fixed income shop. Tell us what that experience was like

1268
01:03:24,400 --> 01:03:27,160
Speaker 1: and did it leave any marks? So I'll tell you.

1269
01:03:27,360 --> 01:03:29,920
Speaker 1: You know, every time we'll a couple of interesting things

1270
01:03:29,960 --> 01:03:31,360
Speaker 1: I think about that. I mean, every time you go

1271
01:03:31,440 --> 01:03:34,400
Speaker 1: through one of these crises, you think about music crisis

1272
01:03:34,440 --> 01:03:36,600
Speaker 1: don't happen the same way the second time, you know,

1273
01:03:36,720 --> 01:03:39,640
Speaker 1: so usually and by the way, usually regulations solves Yesterday's

1274
01:03:40,240 --> 01:03:43,360
Speaker 1: every general fights the last one totally and so that

1275
01:03:43,480 --> 01:03:45,720
Speaker 1: you know that was and how but you know still

1276
01:03:45,840 --> 01:03:48,600
Speaker 1: to this day, black Monday, you know, wears on you,

1277
01:03:48,720 --> 01:03:51,280
Speaker 1: by the way, including on Mondays. There's a reason that

1278
01:03:51,400 --> 01:03:54,840
Speaker 1: Monday's happened because a liquidity etcetera. That tends to be

1279
01:03:54,880 --> 01:03:57,840
Speaker 1: a war news all the stress over the weekend news

1280
01:03:57,920 --> 01:04:00,560
Speaker 1: comes out and it just built totally. But one thing

1281
01:04:00,640 --> 01:04:03,439
Speaker 1: I've realized over been doing this almost thirty six years

1282
01:04:03,520 --> 01:04:06,560
Speaker 1: now is you gotta put you know, think about those crises,

1283
01:04:06,640 --> 01:04:08,240
Speaker 1: think about how do you manage the risk of it,

1284
01:04:08,360 --> 01:04:11,400
Speaker 1: what's the downside, what's the odds of it happening? And

1285
01:04:11,480 --> 01:04:13,160
Speaker 1: then you know you still have to invest and you

1286
01:04:13,240 --> 01:04:14,720
Speaker 1: still have to take risk. And one of the things

1287
01:04:14,800 --> 01:04:16,680
Speaker 1: I've found that I've tried to fight against for my

1288
01:04:16,760 --> 01:04:20,320
Speaker 1: whole career is you know, the longer you get you've

1289
01:04:20,360 --> 01:04:23,000
Speaker 1: done this and the more crises you see you know

1290
01:04:23,080 --> 01:04:24,680
Speaker 1: less you you know when you get punched in the stomach,

1291
01:04:24,760 --> 01:04:26,240
Speaker 1: like it doesn't feel good, Like I gotta like to

1292
01:04:26,280 --> 01:04:28,160
Speaker 1: do less of that. And you've gotta think about we're

1293
01:04:28,200 --> 01:04:30,600
Speaker 1: still in the business of taking risk. How do you

1294
01:04:30,760 --> 01:04:34,240
Speaker 1: manage those things effectively that you've got your tail risk downside?

1295
01:04:34,240 --> 01:04:36,440
Speaker 1: So to this day, you know there are things like

1296
01:04:36,520 --> 01:04:39,400
Speaker 1: I've been through, whether it's gosh, years of trading Korea

1297
01:04:39,960 --> 01:04:41,680
Speaker 1: and you know, every time there's something in North Korea,

1298
01:04:41,720 --> 01:04:42,880
Speaker 1: think about, i' my god, we got a hedge that

1299
01:04:42,880 --> 01:04:44,880
Speaker 1: And I've learned over my career, gosh, I spent more

1300
01:04:45,640 --> 01:04:48,680
Speaker 1: basis point buying insurance and think about if I just

1301
01:04:48,760 --> 01:04:51,120
Speaker 1: run my portfolio the right way, stop buying so much

1302
01:04:51,160 --> 01:04:53,520
Speaker 1: insurance because you'll figure out how to get returned to zero.

1303
01:04:54,200 --> 01:04:56,200
Speaker 1: And but you've got to think about those things and

1304
01:04:56,320 --> 01:04:58,320
Speaker 1: what are what are the risk and what is the

1305
01:04:58,400 --> 01:05:00,560
Speaker 1: hedge that could that could work relative it it doesn't

1306
01:05:00,560 --> 01:05:02,800
Speaker 1: cost you that much, or or how can I run

1307
01:05:02,880 --> 01:05:07,640
Speaker 1: my portfolio taking those risks? So fast forward from eight seven, uh,

1308
01:05:08,280 --> 01:05:12,360
Speaker 1: twenty years now it's oh five real estate sort of

1309
01:05:12,560 --> 01:05:15,840
Speaker 1: peaks and price and oh six and volume, the mbs

1310
01:05:16,000 --> 01:05:18,000
Speaker 1: that was a big part of of not what you

1311
01:05:18,080 --> 01:05:21,640
Speaker 1: were working with, but generally Lehman Brothers starts to rollovers,

1312
01:05:21,720 --> 01:05:25,120
Speaker 1: it starts to be stress. We see the derivatives begin

1313
01:05:25,240 --> 01:05:28,479
Speaker 1: to play out. When did you start to smell things

1314
01:05:28,560 --> 01:05:31,960
Speaker 1: were going off the rails at Lehman Brothers. Well, I

1315
01:05:32,040 --> 01:05:34,680
Speaker 1: didn't write that you're there and you just thought that

1316
01:05:34,760 --> 01:05:36,640
Speaker 1: this would be another thing. I mean, I mean I

1317
01:05:36,760 --> 01:05:38,480
Speaker 1: left in Mayo eight. If I, by the way, if

1318
01:05:38,480 --> 01:05:40,479
Speaker 1: I thought there was any issue there or any other place,

1319
01:05:40,960 --> 01:05:42,520
Speaker 1: then I wouldn't have started a hedge fund. Let me

1320
01:05:42,560 --> 01:05:44,880
Speaker 1: think about the volatility that I would have created. We're

1321
01:05:44,960 --> 01:05:47,320
Speaker 1: betting on the other side. Yeah, but no, I mean

1322
01:05:47,520 --> 01:05:49,520
Speaker 1: the Nate. First of all, I was doing credit, and

1323
01:05:49,560 --> 01:05:51,680
Speaker 1: as a credit hedge fund, it's pretty hard to run

1324
01:05:51,800 --> 01:05:54,880
Speaker 1: big shorts in credit, so you know, so I didn't

1325
01:05:54,880 --> 01:05:57,840
Speaker 1: I didn't think there was an issue. What I think was,

1326
01:05:58,600 --> 01:06:00,760
Speaker 1: you know, it was it was hard to leave at

1327
01:06:00,800 --> 01:06:02,880
Speaker 1: the time, and we get back to the discussion of

1328
01:06:02,960 --> 01:06:06,320
Speaker 1: Greenspan and or Treasury that it was hard to believe

1329
01:06:06,560 --> 01:06:10,360
Speaker 1: that you knew from O six oh seven subprime was

1330
01:06:10,760 --> 01:06:14,120
Speaker 1: was a problem, and you knew the housing froth was

1331
01:06:14,240 --> 01:06:16,920
Speaker 1: so extreme, But then it just kept going. I mean, remember,

1332
01:06:16,920 --> 01:06:19,320
Speaker 1: you know seven, you know we thought, okay, you know

1333
01:06:19,400 --> 01:06:21,960
Speaker 1: there's gonna be regulars is gonna be changed, the central

1334
01:06:22,000 --> 01:06:24,960
Speaker 1: bank will move and you never think you never thought

1335
01:06:25,400 --> 01:06:28,960
Speaker 1: that you would, you know, policymakers would ignore all of

1336
01:06:29,080 --> 01:06:32,240
Speaker 1: these signals along the way, and then we'd go down

1337
01:06:32,400 --> 01:06:35,000
Speaker 1: what was this tumultuous point in time you know, started

1338
01:06:35,000 --> 01:06:37,480
Speaker 1: with Bear Stearns and then all of a sudden, financial

1339
01:06:37,520 --> 01:06:41,560
Speaker 1: institutions are levered entities once the dominoes start to fall,

1340
01:06:41,760 --> 01:06:44,280
Speaker 1: and you know, you have whether it's derivatives, you have

1341
01:06:44,360 --> 01:06:48,560
Speaker 1: intertwined financial intertwined financial system once the domino start to fall,

1342
01:06:48,640 --> 01:06:51,160
Speaker 1: and you think about what would have happened to other

1343
01:06:51,280 --> 01:06:54,040
Speaker 1: firms as well. So listen, I mean, I you know

1344
01:06:54,560 --> 01:06:57,200
Speaker 1: this went on for longer. Oh six, oh seven felt

1345
01:06:57,560 --> 01:07:01,480
Speaker 1: certainly oh seven felt a little queasy about like why

1346
01:07:01,720 --> 01:07:04,560
Speaker 1: is nothing happening? And you had this incredibly over zealous

1347
01:07:04,600 --> 01:07:06,360
Speaker 1: housing market. I mean, you know, I don't think that

1348
01:07:06,400 --> 01:07:09,560
Speaker 1: will ever happen again, because I think policymakers will react

1349
01:07:09,600 --> 01:07:12,440
Speaker 1: to that a whole lot, one would hope. So you

1350
01:07:12,520 --> 01:07:15,480
Speaker 1: spend two decades and Lehman Brothers. Do you spend much

1351
01:07:15,560 --> 01:07:19,640
Speaker 1: time with the guerrilla yes, and and yeah, I mean

1352
01:07:19,680 --> 01:07:22,000
Speaker 1: in a lot of respect for them, and uh, listen,

1353
01:07:22,080 --> 01:07:24,520
Speaker 1: I think their decisions that I think anybody in their career,

1354
01:07:24,600 --> 01:07:26,960
Speaker 1: anybody's running a company or a business, would like to

1355
01:07:27,040 --> 01:07:29,560
Speaker 1: have back. But but listen, I'm and you know, the

1356
01:07:29,640 --> 01:07:31,600
Speaker 1: firm had a really really good track record for a

1357
01:07:31,680 --> 01:07:34,480
Speaker 1: lot of years. That's that's the pretty by the way,

1358
01:07:34,560 --> 01:07:38,280
Speaker 1: including going through the crisis crisis, you know, a long

1359
01:07:38,360 --> 01:07:41,240
Speaker 1: time capital management they were they were on the right

1360
01:07:41,320 --> 01:07:44,480
Speaker 1: side of yea unlike back. Yeah, so I think, you know,

1361
01:07:44,560 --> 01:07:46,880
Speaker 1: the track record was pretty good. And you know what's sad.

1362
01:07:46,960 --> 01:07:49,280
Speaker 1: I mean, I find it's sad and that you know,

1363
01:07:49,320 --> 01:07:52,200
Speaker 1: there were a lot of amazing people at bear sterns

1364
01:07:52,280 --> 01:07:54,000
Speaker 1: Levan Brothers, a bunch of places that, by the way,

1365
01:07:54,280 --> 01:07:56,520
Speaker 1: many of those people go into, you know, have fruitful

1366
01:07:56,560 --> 01:07:59,000
Speaker 1: careers and other in other worlds. But you know, it's

1367
01:07:59,000 --> 01:08:02,560
Speaker 1: sad that that. You know. My my pet theory on

1368
01:08:02,840 --> 01:08:06,560
Speaker 1: on where Dick Fold went off the rails was rejecting

1369
01:08:06,600 --> 01:08:10,400
Speaker 1: the offer from Warren Buffett Layton oh eight. I think

1370
01:08:10,480 --> 01:08:12,800
Speaker 1: when the time came to think about who do we

1371
01:08:12,880 --> 01:08:15,560
Speaker 1: bail out and who do we set an example? Gee,

1372
01:08:15,600 --> 01:08:19,000
Speaker 1: Warren Buffett offered you a few billion dollars. How do

1373
01:08:19,080 --> 01:08:21,000
Speaker 1: you say no to warrant? That's the you know, the

1374
01:08:21,120 --> 01:08:24,960
Speaker 1: finance good housekeeping seal of approval. Goldman took money from

1375
01:08:25,000 --> 01:08:29,599
Speaker 1: Warren at an even higher rate, and it basically removed

1376
01:08:29,680 --> 01:08:32,439
Speaker 1: them off the table. For Hey, do we have to

1377
01:08:32,479 --> 01:08:36,439
Speaker 1: worry about Goldman had Fold taken Warren's money. I think

1378
01:08:36,560 --> 01:08:39,800
Speaker 1: this might have ended differently. Maybe, yeah, probably, I mean

1379
01:08:39,840 --> 01:08:42,040
Speaker 1: I say, they're there are decisions that get made, and

1380
01:08:42,560 --> 01:08:44,960
Speaker 1: you know, I'm sure not everyone was. You know, it's

1381
01:08:45,000 --> 01:08:47,800
Speaker 1: the right war and ultimately but but yeah, so you're

1382
01:08:47,840 --> 01:08:51,160
Speaker 1: at Lehman for twenty years and you decide I'm going

1383
01:08:51,200 --> 01:08:54,320
Speaker 1: to set up a credit hedge funds. I want to

1384
01:08:54,360 --> 01:08:57,760
Speaker 1: go on on my own. Even though we started, we

1385
01:08:58,000 --> 01:09:01,519
Speaker 1: we saw the Bear Starns hedge funds UM run into trouble.

1386
01:09:01,640 --> 01:09:04,680
Speaker 1: There was clearly froth in the housing market and the

1387
01:09:04,840 --> 01:09:08,960
Speaker 1: early signs of a crack in the NBS foundation. As

1388
01:09:09,080 --> 01:09:11,800
Speaker 1: you're getting ready to launch, are you thinking, hey, maybe

1389
01:09:11,880 --> 01:09:14,920
Speaker 1: this is a bad idea or what's Leban has been

1390
01:09:14,960 --> 01:09:17,519
Speaker 1: good to me for twenty years? Tell us about your

1391
01:09:17,560 --> 01:09:19,960
Speaker 1: thought process. I mean, you know we thought, you know,

1392
01:09:20,120 --> 01:09:21,960
Speaker 1: first of all, I have a strong passion around it.

1393
01:09:22,000 --> 01:09:23,439
Speaker 1: And by the way, we started coming to called our

1394
01:09:23,479 --> 01:09:26,200
Speaker 1: three capital and so our three people think it's My

1395
01:09:26,240 --> 01:09:29,160
Speaker 1: initials actually was for reading, writing, and arithmetic, and so

1396
01:09:29,280 --> 01:09:31,880
Speaker 1: part one of the things I was super excited about

1397
01:09:32,040 --> 01:09:35,080
Speaker 1: was to start a fond and actually proceeds we're gonna

1398
01:09:35,080 --> 01:09:37,880
Speaker 1: go into urban education in the country. But I thought

1399
01:09:38,000 --> 01:09:40,040
Speaker 1: this was I had a great, great team, many of

1400
01:09:40,080 --> 01:09:42,320
Speaker 1: which you're still with me today. And I thought, and

1401
01:09:42,400 --> 01:09:44,599
Speaker 1: I had asked the firm about it two years prior,

1402
01:09:45,160 --> 01:09:46,720
Speaker 1: about gosh, I'd love to go and try and do

1403
01:09:46,880 --> 01:09:50,160
Speaker 1: this on my own. We've got permission in advance. Well, no,

1404
01:09:50,240 --> 01:09:52,000
Speaker 1: I asked the firm a couple of years ago, and

1405
01:09:52,080 --> 01:09:54,599
Speaker 1: I probably should have gone and done it. And anyway,

1406
01:09:54,680 --> 01:09:56,120
Speaker 1: that to me, I mean at the beginning of Oh

1407
01:09:56,400 --> 01:09:58,280
Speaker 1: struck me as my god, there's gonna be volatility, is

1408
01:09:58,280 --> 01:10:01,320
Speaker 1: gonna be opportunity. We got a really good team. Let's

1409
01:10:01,439 --> 01:10:02,840
Speaker 1: you know, let's go strike out on our own and

1410
01:10:02,960 --> 01:10:06,040
Speaker 1: do this, and and so you know, it was an

1411
01:10:06,080 --> 01:10:07,960
Speaker 1: exciting point in time to do it. Like I said,

1412
01:10:07,960 --> 01:10:10,800
Speaker 1: I didn't think the system would come to an end

1413
01:10:10,880 --> 01:10:13,320
Speaker 1: as as it. I certainly wouldn't have done it if

1414
01:10:13,360 --> 01:10:15,280
Speaker 1: I thought that that were the case. You tied me

1415
01:10:15,400 --> 01:10:18,880
Speaker 1: up for a perfect segue into a curve bowl question.

1416
01:10:19,000 --> 01:10:23,360
Speaker 1: You mentioned three rs, reading, writing, arithmetic. You serve as

1417
01:10:23,479 --> 01:10:27,800
Speaker 1: the National Leadership Council of Communities and Schools and the

1418
01:10:27,960 --> 01:10:31,200
Speaker 1: Educational Foundation UH in Newark. Tell us a little bit

1419
01:10:31,240 --> 01:10:34,840
Speaker 1: about the work you do with community schools and less

1420
01:10:34,880 --> 01:10:37,560
Speaker 1: affluent neighborhoods. So I mean less of all than so

1421
01:10:37,680 --> 01:10:40,519
Speaker 1: I was on the National Leadership So my my biggest

1422
01:10:40,560 --> 01:10:43,000
Speaker 1: endeavors today I cheer the board of North Star Academy,

1423
01:10:43,479 --> 01:10:46,080
Speaker 1: which is where fourteen schools in Newark, New Jersey charter

1424
01:10:46,200 --> 01:10:48,600
Speaker 1: schools that I think I'm biased. I think it's the

1425
01:10:48,640 --> 01:10:51,000
Speaker 1: highest performing set of schools in the country. I'm super,

1426
01:10:51,120 --> 01:10:53,680
Speaker 1: super proud of what the team does there and how

1427
01:10:53,720 --> 01:10:55,599
Speaker 1: we've been able to build that. And I started something

1428
01:10:55,640 --> 01:10:59,839
Speaker 1: called Graduation Generation Atlanta, which put together City of Atlanta, Communities,

1429
01:11:00,000 --> 01:11:03,320
Speaker 1: communities and schools, and h Emory University to try and

1430
01:11:03,439 --> 01:11:11,200
Speaker 1: create the whole package around around a student from social work, tutoring, mentoring, healthcare.

1431
01:11:11,720 --> 01:11:15,000
Speaker 1: So anyway, though those are big drivers of of you know,

1432
01:11:15,120 --> 01:11:17,960
Speaker 1: my passion of my life is giving people, particularly in

1433
01:11:18,120 --> 01:11:20,960
Speaker 1: urban education. You know, giving him a kickstart and a

1434
01:11:21,080 --> 01:11:23,080
Speaker 1: chance to succeed. And we've watched it, you know, in

1435
01:11:23,240 --> 01:11:26,600
Speaker 1: our schools, in it in Newark. I mean it's extraordinary

1436
01:11:26,600 --> 01:11:31,479
Speaker 1: included what's your affiliation with Newark? So early on somebody

1437
01:11:31,479 --> 01:11:33,240
Speaker 1: asked me to get involved with the Harlem Children Zone,

1438
01:11:33,280 --> 01:11:36,240
Speaker 1: which is an extraordinary place. I lived in New Jersey

1439
01:11:36,240 --> 01:11:37,800
Speaker 1: and I said, I gosh, I'd left. Something comes up

1440
01:11:37,800 --> 01:11:40,400
Speaker 1: in New Jersey. And then this opportunity came up in

1441
01:11:40,479 --> 01:11:43,280
Speaker 1: Newark and I got to meet, uh, somebody named Norman Atkins,

1442
01:11:43,320 --> 01:11:44,960
Speaker 1: who's I think is one of the best educators in

1443
01:11:45,080 --> 01:11:47,840
Speaker 1: the world. And any I was motivated by we doing

1444
01:11:47,840 --> 01:11:50,280
Speaker 1: it's just one school at the time. Cory Booker was

1445
01:11:50,400 --> 01:11:53,320
Speaker 1: on our board at the time It's one school and

1446
01:11:53,400 --> 01:11:55,320
Speaker 1: then uh, and then we got ability to grow to

1447
01:11:55,439 --> 01:11:58,040
Speaker 1: the point now where six thousand kids, big part of

1448
01:11:58,080 --> 01:12:02,360
Speaker 1: the population of new work with extre straordinary performance from

1449
01:12:02,880 --> 01:12:04,920
Speaker 1: from our schools, in our in our students, I mean,

1450
01:12:04,960 --> 01:12:06,679
Speaker 1: the number of students we send in the ivy leagues

1451
01:12:06,720 --> 01:12:09,680
Speaker 1: and graduate to colleges is incredible. I don't know, it's

1452
01:12:10,120 --> 01:12:12,320
Speaker 1: a Knwich has a reputation of not having a great

1453
01:12:12,320 --> 01:12:18,040
Speaker 1: school system. What's the impact of this council on neighboring schools.

1454
01:12:18,080 --> 01:12:21,920
Speaker 1: How do you elevate the entire um educational system? So,

1455
01:12:22,080 --> 01:12:23,680
Speaker 1: I mean a big deal around and I've learned this

1456
01:12:23,800 --> 01:12:25,400
Speaker 1: in my career. It's part of why, part of why

1457
01:12:25,439 --> 01:12:27,160
Speaker 1: north Star was so near and due to my heart.

1458
01:12:27,560 --> 01:12:29,400
Speaker 1: We call it and there's a number of books are

1459
01:12:29,640 --> 01:12:33,559
Speaker 1: our lead director Um Paul Bambreck started. It's called Driven

1460
01:12:33,600 --> 01:12:35,400
Speaker 1: by Data is one of the most famous books in

1461
01:12:35,560 --> 01:12:38,320
Speaker 1: education for a long time. We analyze the data where

1462
01:12:38,400 --> 01:12:41,160
Speaker 1: students performing, where they're not performing, Where how are we

1463
01:12:41,280 --> 01:12:46,200
Speaker 1: doing in in in literacy, in literacy versus math, versus science,

1464
01:12:46,560 --> 01:12:49,400
Speaker 1: And we study it and we're maniacal about the data.

1465
01:12:49,840 --> 01:12:52,640
Speaker 1: Where are we not fulfilling the needs? And then and

1466
01:12:52,680 --> 01:12:55,080
Speaker 1: then we adjust relative to that. So what we're doing

1467
01:12:55,120 --> 01:12:57,639
Speaker 1: investing and that it's been really successful. And by the way,

1468
01:12:57,640 --> 01:13:00,200
Speaker 1: it's permeated not just the city of Newark, but in

1469
01:13:00,320 --> 01:13:03,120
Speaker 1: many countries around the world. They're using, you know, sort

1470
01:13:03,160 --> 01:13:06,920
Speaker 1: of our methodology around data analysis and making sure we're

1471
01:13:07,000 --> 01:13:09,439
Speaker 1: keeping our kids up to a level or in trying

1472
01:13:09,479 --> 01:13:11,320
Speaker 1: to the number of of our students that take a

1473
01:13:11,400 --> 01:13:15,160
Speaker 1: p exams and succeed is just extraordinary. So I know,

1474
01:13:15,200 --> 01:13:16,880
Speaker 1: I'm super proud of you. Know. What the team does

1475
01:13:16,920 --> 01:13:19,519
Speaker 1: around it really interesting. I know I only have you

1476
01:13:20,000 --> 01:13:22,160
Speaker 1: for a limited amount of time, So let me jump

1477
01:13:22,280 --> 01:13:26,000
Speaker 1: to my favorite questions that I asked all of our guests,

1478
01:13:26,439 --> 01:13:29,360
Speaker 1: starting with tell us what you've been streaming these days?

1479
01:13:29,439 --> 01:13:32,240
Speaker 1: What's been keeping you entertained? So I I do. I mean,

1480
01:13:33,120 --> 01:13:35,920
Speaker 1: because I'm going at work million miles a minute, every

1481
01:13:35,960 --> 01:13:38,599
Speaker 1: minute of the day, I tend them I releases on sports,

1482
01:13:39,360 --> 01:13:41,720
Speaker 1: I mean, I watched tons of sports when I get home,

1483
01:13:41,760 --> 01:13:44,040
Speaker 1: I like, I love to watch that San Francisco game

1484
01:13:44,160 --> 01:13:46,720
Speaker 1: was just that. Yeah, that one I didn't spend a

1485
01:13:46,720 --> 01:13:48,400
Speaker 1: lot of time watching, but I watch a lot of sports.

1486
01:13:48,439 --> 01:13:51,360
Speaker 1: I'm particularly intrigued, as you would imagine. I like a

1487
01:13:51,439 --> 01:13:53,519
Speaker 1: lot of the show's. ESPN does a ton of shows

1488
01:13:54,080 --> 01:13:56,920
Speaker 1: on getting into people's mentality and how do they win?

1489
01:13:57,200 --> 01:13:59,960
Speaker 1: And some Michael Jordan's There Was a Man That Wasn't

1490
01:14:00,000 --> 01:14:02,920
Speaker 1: amazing series, wasn't it? Maybe the best I've ever seen.

1491
01:14:03,320 --> 01:14:06,360
Speaker 1: But I love understanding what drives people, how they how

1492
01:14:06,439 --> 01:14:08,479
Speaker 1: they get to the next level. Similarly, when I read

1493
01:14:08,520 --> 01:14:11,080
Speaker 1: books about how how do you get to business to

1494
01:14:11,160 --> 01:14:13,160
Speaker 1: the next level, but that that's what I watch a

1495
01:14:13,240 --> 01:14:15,840
Speaker 1: load of those. And then so did you get around

1496
01:14:15,880 --> 01:14:18,840
Speaker 1: to seeing Drive for Survive to Survive? About F one?

1497
01:14:19,240 --> 01:14:21,000
Speaker 1: It's so, it's so funny because I went to F

1498
01:14:21,160 --> 01:14:22,800
Speaker 1: one last year and we talked about it. I still

1499
01:14:22,840 --> 01:14:26,440
Speaker 1: haven't watched it. I gotta watch that. It's shockingly interesting.

1500
01:14:26,560 --> 01:14:29,479
Speaker 1: And they just rolled out a new one on tennis,

1501
01:14:30,320 --> 01:14:33,080
Speaker 1: and then there's a third one coming that they started

1502
01:14:33,120 --> 01:14:37,080
Speaker 1: on golf just as the Dubai League begin. Yeah, it's

1503
01:14:37,680 --> 01:14:40,640
Speaker 1: They do a really good job of making people you

1504
01:14:40,800 --> 01:14:43,800
Speaker 1: probably haven't. I mean, we we've all heard of a

1505
01:14:43,920 --> 01:14:46,960
Speaker 1: handful of names, but it's that, you know, the up

1506
01:14:47,000 --> 01:14:51,560
Speaker 1: and coming tier that's so interesting. Um, Netflix does some

1507
01:14:51,680 --> 01:14:54,679
Speaker 1: really interesting sports stuff. Yeah, it's fun. So so let's

1508
01:14:54,720 --> 01:15:00,320
Speaker 1: talk about mentors who helped to shape your career. So so,

1509
01:15:00,439 --> 01:15:01,920
Speaker 1: first of all, the person who hired me I lamed

1510
01:15:01,920 --> 01:15:04,240
Speaker 1: many years ago, a guy named Bart McDade. His was

1511
01:15:04,680 --> 01:15:07,439
Speaker 1: extraordinary and making. I mean I still do this day,

1512
01:15:07,439 --> 01:15:08,920
Speaker 1: I think about what would Bart doing that. He just

1513
01:15:09,040 --> 01:15:14,320
Speaker 1: had this incredibility trade invest people, have confidence in people,

1514
01:15:14,400 --> 01:15:17,920
Speaker 1: let them make mistakes. Uh not too big and uh

1515
01:15:18,040 --> 01:15:20,080
Speaker 1: but anyway, his he taught me a ton of men.

1516
01:15:20,080 --> 01:15:21,320
Speaker 1: He taught me more. He's one of my best friends

1517
01:15:21,360 --> 01:15:23,240
Speaker 1: today and and he was extraordinant. But I have also

1518
01:15:23,400 --> 01:15:25,920
Speaker 1: learned from the best investors in the world, have a

1519
01:15:26,080 --> 01:15:29,360
Speaker 1: great honor get to know David Tepper's that, Dan Druccon, Miller's,

1520
01:15:29,360 --> 01:15:32,240
Speaker 1: Paul Tutor Jones, and I've learned a bunch from each

1521
01:15:32,280 --> 01:15:35,120
Speaker 1: of them. And you know a few things about investing,

1522
01:15:35,960 --> 01:15:38,320
Speaker 1: you know, like separating the news from the noise. Some

1523
01:15:38,439 --> 01:15:40,320
Speaker 1: of those people are extraordinary. You know, we live in

1524
01:15:40,360 --> 01:15:43,599
Speaker 1: a world where which about earlier things like Twitter, etcetera.

1525
01:15:43,680 --> 01:15:46,800
Speaker 1: We live in a world where it's constant soundbites. Those

1526
01:15:46,840 --> 01:15:50,120
Speaker 1: people have an incredible ability separate the news from the noise.

1527
01:15:50,760 --> 01:15:53,760
Speaker 1: You know, interesting, interesting that matters. And those people have

1528
01:15:53,880 --> 01:15:56,040
Speaker 1: been really really helpful to me in terms of thinking,

1529
01:15:56,040 --> 01:15:58,080
Speaker 1: you know, getting to understand how they think about things,

1530
01:15:58,520 --> 01:16:02,080
Speaker 1: and you know what what drives persistent success. Let's talk

1531
01:16:02,120 --> 01:16:04,320
Speaker 1: about books. What are you reading now? What are some

1532
01:16:04,400 --> 01:16:06,679
Speaker 1: of your favorites. So I read a lot of books

1533
01:16:06,720 --> 01:16:10,560
Speaker 1: on technology, and i'm today I say, let's less a

1534
01:16:10,600 --> 01:16:13,400
Speaker 1: book that I'm reading today, But I can't read enough

1535
01:16:14,000 --> 01:16:19,000
Speaker 1: about deep research papers on artificial intelligence that including the

1536
01:16:19,120 --> 01:16:21,120
Speaker 1: chat GBT, and I'm spending a bunch of time this

1537
01:16:21,200 --> 01:16:24,000
Speaker 1: weekend playing around without to understand it, but that I

1538
01:16:24,040 --> 01:16:26,439
Speaker 1: mean technology to me. And the best book I ever

1539
01:16:26,560 --> 01:16:30,000
Speaker 1: read was The Second Machine Age that talked about where

1540
01:16:30,080 --> 01:16:33,320
Speaker 1: technology was gonna go. And now I'm all about what

1541
01:16:33,520 --> 01:16:35,920
Speaker 1: is the next evolution of technology? And like I said,

1542
01:16:35,920 --> 01:16:37,800
Speaker 1: I think this AI is going to change the world

1543
01:16:37,960 --> 01:16:40,439
Speaker 1: in many ways. But I also like to read. I'd

1544
01:16:40,479 --> 01:16:43,520
Speaker 1: like to read books on things like good, Degrade, etcetera.

1545
01:16:44,040 --> 01:16:47,360
Speaker 1: That are you know that how companies ran their businesses

1546
01:16:48,479 --> 01:16:51,679
Speaker 1: um and how momentum changes things like the tipping point

1547
01:16:52,439 --> 01:16:55,680
Speaker 1: Maxim and Malcolm Gladwell. I think it's extraordinary, So the

1548
01:16:55,720 --> 01:16:57,760
Speaker 1: whole myriad of them. And I actually started reading some

1549
01:16:57,840 --> 01:17:01,360
Speaker 1: books when I just finished permiss and to Feel, which

1550
01:17:01,479 --> 01:17:05,120
Speaker 1: is a book from from Yale. You know, our students

1551
01:17:05,160 --> 01:17:08,599
Speaker 1: in our schools undergo a lot of stress, particularly during COVID,

1552
01:17:09,040 --> 01:17:11,960
Speaker 1: and this is how emotion and letting emotion out allows

1553
01:17:12,000 --> 01:17:13,960
Speaker 1: you to be more effective and deal with some of

1554
01:17:14,000 --> 01:17:15,639
Speaker 1: the stresses. And so there's a lot of cool things

1555
01:17:15,680 --> 01:17:18,760
Speaker 1: that have been investigating over the last last few months,

1556
01:17:18,840 --> 01:17:22,719
Speaker 1: really interesting. Our last two questions, what sort of advice

1557
01:17:22,760 --> 01:17:25,280
Speaker 1: would you give to a recent college grad who was

1558
01:17:25,400 --> 01:17:30,000
Speaker 1: interested in a career in fixed income. I mean the

1559
01:17:30,040 --> 01:17:31,400
Speaker 1: first thing I meant, if you really, I mean a

1560
01:17:31,439 --> 01:17:32,880
Speaker 1: lot of people I watched them in the industry do

1561
01:17:32,920 --> 01:17:34,240
Speaker 1: it because I hear it's a way to make a

1562
01:17:34,320 --> 01:17:35,800
Speaker 1: lot of money or a way to make money. And

1563
01:17:36,000 --> 01:17:38,200
Speaker 1: I just think that be by watching people come in

1564
01:17:38,400 --> 01:17:40,600
Speaker 1: and then they leave because they're not driven by and

1565
01:17:40,680 --> 01:17:43,880
Speaker 1: make sure you're driven by it. And then I think

1566
01:17:44,000 --> 01:17:46,120
Speaker 1: most people that come into this business or any business,

1567
01:17:46,200 --> 01:17:49,320
Speaker 1: always feel like they follow the person who did it

1568
01:17:49,400 --> 01:17:52,560
Speaker 1: well right before them. And you know, what was the

1569
01:17:52,600 --> 01:17:54,840
Speaker 1: hot firm, what's the hot firm, what's the hot area,

1570
01:17:55,479 --> 01:17:58,240
Speaker 1: and anything about what markets have taught me. Usually don't

1571
01:17:58,280 --> 01:17:59,599
Speaker 1: want to buy the hot thing. You want to buy

1572
01:17:59,680 --> 01:18:02,400
Speaker 1: the thing that's that's maybe trending down and that may

1573
01:18:02,479 --> 01:18:05,160
Speaker 1: come back, but it's you know, I I remember when

1574
01:18:05,160 --> 01:18:08,000
Speaker 1: I was interviewing you appreciate this that I Drexel was

1575
01:18:08,040 --> 01:18:10,000
Speaker 1: the hard front was a part firm that was impossible

1576
01:18:10,040 --> 01:18:11,320
Speaker 1: to get into, and of course I didn't get a

1577
01:18:11,400 --> 01:18:14,800
Speaker 1: job there, thank god. And they are a bit of those.

1578
01:18:14,880 --> 01:18:17,519
Speaker 1: But the but I know why people always on what's

1579
01:18:17,520 --> 01:18:20,479
Speaker 1: in front of me today, but think about where are

1580
01:18:20,560 --> 01:18:23,240
Speaker 1: we going longer term, and then where's the area that

1581
01:18:23,280 --> 01:18:26,120
Speaker 1: maybe I can grow as opposed to the place that

1582
01:18:26,200 --> 01:18:28,639
Speaker 1: maybe has already figured it out, or or the area

1583
01:18:28,720 --> 01:18:31,240
Speaker 1: that's already figured out. I think people you are, particularly

1584
01:18:31,280 --> 01:18:34,160
Speaker 1: coming out of school, you know, I tend to all

1585
01:18:34,240 --> 01:18:36,400
Speaker 1: move in one direction. Was amazing, Like the interview when

1586
01:18:36,439 --> 01:18:38,600
Speaker 1: I was at Wharton. How everybody want to interview with

1587
01:18:38,640 --> 01:18:43,400
Speaker 1: the exact same places the market, No, and be thoughtful

1588
01:18:43,439 --> 01:18:45,160
Speaker 1: about you know, where do you go? And it's so

1589
01:18:45,360 --> 01:18:47,800
Speaker 1: much about people, But do you find the right person,

1590
01:18:48,000 --> 01:18:50,400
Speaker 1: the right mentor the right group that you fit in

1591
01:18:50,479 --> 01:18:53,479
Speaker 1: with culturally as opposed to gosh, this seems to be

1592
01:18:53,560 --> 01:18:56,519
Speaker 1: the path that worked for somebody else. And our final question,

1593
01:18:56,880 --> 01:18:59,080
Speaker 1: what do you know about the world of investing today?

1594
01:18:59,600 --> 01:19:02,240
Speaker 1: You will us you knew thirty six years ago when

1595
01:19:02,280 --> 01:19:05,160
Speaker 1: you were first getting started. So I mean I've talked

1596
01:19:05,160 --> 01:19:06,880
Speaker 1: about One of them was just you know, taking a

1597
01:19:06,920 --> 01:19:09,920
Speaker 1: step back and letting the superficial work work its way through,

1598
01:19:10,720 --> 01:19:12,760
Speaker 1: you know. I you know, when I first came into

1599
01:19:12,800 --> 01:19:15,160
Speaker 1: the business, I used to want to read everything, and

1600
01:19:15,240 --> 01:19:17,040
Speaker 1: it's like if the more I read, the smarter I'm

1601
01:19:17,040 --> 01:19:19,560
Speaker 1: gonna be. And now I've really tried to boil it

1602
01:19:19,640 --> 01:19:21,320
Speaker 1: down to the things that I think are going to

1603
01:19:21,400 --> 01:19:24,080
Speaker 1: be the most relevant, the researchers that I think are

1604
01:19:24,120 --> 01:19:25,960
Speaker 1: the best, and do a lot of the work on

1605
01:19:26,040 --> 01:19:29,160
Speaker 1: my own. Like you know, people the research, the information

1606
01:19:29,240 --> 01:19:33,200
Speaker 1: that gets out there, it's usually homogenized, and it's usually

1607
01:19:33,840 --> 01:19:36,280
Speaker 1: you know, if somebody else already had the idea, it's

1608
01:19:36,320 --> 01:19:39,960
Speaker 1: probably been expressing the markets. So I try and do it.

1609
01:19:40,360 --> 01:19:41,600
Speaker 1: You know, I find like if I can do the

1610
01:19:41,680 --> 01:19:45,000
Speaker 1: work organically and come up with my own ideas. You know,

1611
01:19:45,040 --> 01:19:46,760
Speaker 1: a lot of people go, you know, every night to

1612
01:19:46,880 --> 01:19:49,640
Speaker 1: round table dinners and listen to other people's opinion, and

1613
01:19:49,720 --> 01:19:52,320
Speaker 1: I tend to believe while I'm wrong a ton, I

1614
01:19:52,400 --> 01:19:53,920
Speaker 1: feel like if I can do my own work and

1615
01:19:53,960 --> 01:19:57,440
Speaker 1: my own analysis, then I'd probably come to a better conclusion,

1616
01:19:57,840 --> 01:19:59,800
Speaker 1: especially if it's already been played out in the market.

1617
01:19:59,880 --> 01:20:02,080
Speaker 1: So there's there's a bunch of things like that that

1618
01:20:02,400 --> 01:20:05,439
Speaker 1: that I've learned over over my career. And then one

1619
01:20:05,520 --> 01:20:07,560
Speaker 1: last thing I will say is I learned in my

1620
01:20:07,640 --> 01:20:10,400
Speaker 1: career similar to why I struggled earlier my academic career,

1621
01:20:11,080 --> 01:20:12,840
Speaker 1: is you have to prepare for everything you do. I

1622
01:20:12,960 --> 01:20:14,400
Speaker 1: used to think like you just come in and do

1623
01:20:14,520 --> 01:20:16,519
Speaker 1: it like I did well in school early on, and

1624
01:20:16,560 --> 01:20:19,040
Speaker 1: then I started to not do well because you can't

1625
01:20:19,120 --> 01:20:22,160
Speaker 1: just you know, you didn't. You can't over intellectualize it.

1626
01:20:22,479 --> 01:20:24,760
Speaker 1: You've got to prepare. And I find today that now

1627
01:20:25,040 --> 01:20:27,640
Speaker 1: every single thing I do, I spent a lot of

1628
01:20:27,680 --> 01:20:30,120
Speaker 1: time preparing for it. And similar to the way I

1629
01:20:30,160 --> 01:20:32,960
Speaker 1: finally got better at college was you know, you got

1630
01:20:33,120 --> 01:20:35,120
Speaker 1: to do the work and put in the preparation. But

1631
01:20:35,160 --> 01:20:37,600
Speaker 1: I find that young people that come in, you know,

1632
01:20:37,680 --> 01:20:39,280
Speaker 1: every day, and they think, you know, think I just

1633
01:20:39,400 --> 01:20:41,599
Speaker 1: read this and I can do it. It's all about

1634
01:20:41,680 --> 01:20:44,280
Speaker 1: the preparation and I've learned a bunch about that over

1635
01:20:44,320 --> 01:20:47,760
Speaker 1: the years. We were talking yesterday about simple but hard,

1636
01:20:48,600 --> 01:20:51,000
Speaker 1: Like people think it's easy. It's like, no, no, it's simple,

1637
01:20:51,800 --> 01:20:53,519
Speaker 1: but it's a lot of blood, sweat and tears, and

1638
01:20:53,640 --> 01:20:56,479
Speaker 1: that's the hard part. Really fascinating, Rick, thank you for

1639
01:20:56,560 --> 01:20:59,400
Speaker 1: being so generous with your time. This was this was tremendous.

1640
01:21:00,080 --> 01:21:02,400
Speaker 1: We have been speaking with Rick Reader. He is the

1641
01:21:02,479 --> 01:21:06,280
Speaker 1: chief Investment Officer for fixed income at black Rock, as

1642
01:21:06,320 --> 01:21:09,439
Speaker 1: well as holding a number of other titles. If you

1643
01:21:09,880 --> 01:21:12,920
Speaker 1: enjoy this conversation, be sure and check any of the

1644
01:21:13,000 --> 01:21:16,120
Speaker 1: other four d and ninety two such discussions we've had

1645
01:21:16,560 --> 01:21:22,000
Speaker 1: over the past eight years. You can find those at YouTube, iTunes, Spotify,

1646
01:21:22,320 --> 01:21:25,360
Speaker 1: or wherever you get your podcast from. Be sure to

1647
01:21:25,400 --> 01:21:28,000
Speaker 1: sign up for my daily reads at Ridhalts dot com.

1648
01:21:28,160 --> 01:21:31,679
Speaker 1: Follow me on Twitter at Rihalts. I would be remiss

1649
01:21:31,880 --> 01:21:33,719
Speaker 1: if I did not thank the crack team that helps

1650
01:21:33,800 --> 01:21:38,320
Speaker 1: us put these conversations together each week. Justin Milner is

1651
01:21:38,400 --> 01:21:41,280
Speaker 1: my audio engineer. Sean Russo is my head of research.

1652
01:21:41,720 --> 01:21:45,000
Speaker 1: A Tika val Bron is my project manager. Paris Wald

1653
01:21:45,439 --> 01:21:49,760
Speaker 1: is my producer. I'm Barry Rihalts. You've been listening to

1654
01:21:49,920 --> 01:21:52,360
Speaker 1: Masters and Business on Bloomberg Radio.