1 00:00:02,480 --> 00:00:07,000 Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. 2 00:00:07,720 --> 00:00:09,720 Speaker 2: We begin the sound with trade tensions Wang on the 3 00:00:09,720 --> 00:00:13,280 Speaker 2: tech sector. Rick Reader of Black Croc writing. Taking opportunistic 4 00:00:13,320 --> 00:00:16,240 Speaker 2: positions in good quality companies in the equity market has 5 00:00:16,480 --> 00:00:19,080 Speaker 2: and should continue to pay off for investors with longer 6 00:00:19,360 --> 00:00:22,000 Speaker 2: time horizons. I'm pleased to say the Rick join us 7 00:00:22,040 --> 00:00:24,520 Speaker 2: now for more. Rick Reader, it's been too long, my friend. 8 00:00:24,600 --> 00:00:26,840 Speaker 2: Let's go straight to it. I just want to understand 9 00:00:27,320 --> 00:00:30,040 Speaker 2: what you've been seeing with the team over the last 10 00:00:30,040 --> 00:00:33,080 Speaker 2: week or so. Have the foreign buyers of treasuries been 11 00:00:33,120 --> 00:00:34,000 Speaker 2: pulling back. 12 00:00:35,880 --> 00:00:38,600 Speaker 1: So? I mean, boy, it's been an incredible period. 13 00:00:38,600 --> 00:00:40,879 Speaker 3: I mean, so you know, to start with, I mean 14 00:00:40,880 --> 00:00:42,680 Speaker 3: the treasury market to move back in the treasurer of 15 00:00:42,680 --> 00:00:46,159 Speaker 3: Friday was extraordinary. This pressure on the treasury market, concern 16 00:00:46,240 --> 00:00:50,040 Speaker 3: about international selling that was that was pretty amazing. And 17 00:00:50,040 --> 00:00:52,480 Speaker 3: then we bounced back pretty nicely as some calm has 18 00:00:52,520 --> 00:00:54,680 Speaker 3: come back in and then you know, the volatile and 19 00:00:54,720 --> 00:00:56,800 Speaker 3: the equity market of the daily volatile a little bit 20 00:00:56,840 --> 00:01:00,360 Speaker 3: calmer this week. Those present you know, similar to what 21 00:01:00,400 --> 00:01:03,200 Speaker 3: I said there before, it does present some opportunity in 22 00:01:03,240 --> 00:01:03,840 Speaker 3: these markets. 23 00:01:03,840 --> 00:01:04,720 Speaker 1: It is, I will tell you. 24 00:01:04,840 --> 00:01:08,920 Speaker 3: The uncertainty though has led to liquidity in these markets 25 00:01:09,080 --> 00:01:10,360 Speaker 3: that's pretty rough right now. 26 00:01:10,360 --> 00:01:12,240 Speaker 1: When you go to execute, you've got to be very. 27 00:01:12,120 --> 00:01:14,840 Speaker 3: Thoughtful and very tactical about how you do it because 28 00:01:14,880 --> 00:01:17,440 Speaker 3: markets are very jumpy and very uncertain these days. 29 00:01:17,520 --> 00:01:19,680 Speaker 2: And Rick, typically the place you go FORLL liquidity is 30 00:01:19,720 --> 00:01:24,360 Speaker 2: the treasury market, deep predictable. That's why people buy treasuries. Rick, 31 00:01:24,440 --> 00:01:25,920 Speaker 2: can I get your view on what you think was 32 00:01:25,959 --> 00:01:28,760 Speaker 2: happening last week? Do you believe that was foreigners pulling back? 33 00:01:28,880 --> 00:01:31,600 Speaker 2: Is there a question mark over the US safe haven status? 34 00:01:31,920 --> 00:01:34,399 Speaker 2: Or is that just certain traits and winding things blowing up. 35 00:01:36,160 --> 00:01:37,240 Speaker 1: It's a great question. I. 36 00:01:37,400 --> 00:01:39,440 Speaker 3: So, first of all, you know when you have this 37 00:01:39,560 --> 00:01:41,759 Speaker 3: pressure on the currency market, and by the way, it's 38 00:01:41,760 --> 00:01:44,360 Speaker 3: super acute when you think about equities going down the 39 00:01:44,440 --> 00:01:46,320 Speaker 3: same time that the currency is going down. 40 00:01:46,440 --> 00:01:49,200 Speaker 1: Usually the dollar appreciates when you're in this risk off mode. 41 00:01:49,400 --> 00:01:53,640 Speaker 3: So you've unquestionably seen the pressure on equities and international 42 00:01:53,640 --> 00:01:58,000 Speaker 3: disposition of the equity of a number of US equities 43 00:01:58,200 --> 00:02:00,960 Speaker 3: in the rates market, it's a bit more, but there's 44 00:02:00,960 --> 00:02:03,880 Speaker 3: no question about it. There is some concern we fund 45 00:02:04,000 --> 00:02:07,040 Speaker 3: so much of our treasury debt internationally. There is some 46 00:02:07,120 --> 00:02:10,520 Speaker 3: concern with the currency depreciating, and then quite frankly, that 47 00:02:10,600 --> 00:02:14,120 Speaker 3: the back end of the curve going through these periods 48 00:02:14,160 --> 00:02:18,040 Speaker 3: of spasm where inflation is higher. You know, even if 49 00:02:18,040 --> 00:02:20,160 Speaker 3: the FED cuts, what does it do for the back end. 50 00:02:20,160 --> 00:02:22,080 Speaker 3: There's an argument that when you've been the FED cuts, 51 00:02:22,320 --> 00:02:25,680 Speaker 3: the back end becomes less tethered, and in fact you 52 00:02:25,720 --> 00:02:26,799 Speaker 3: get a steepening. 53 00:02:26,440 --> 00:02:26,880 Speaker 1: Of the curve. 54 00:02:27,000 --> 00:02:30,200 Speaker 3: So yes, I think there's some international disposition for sure 55 00:02:30,240 --> 00:02:33,040 Speaker 3: as the currency weakens. But I think broadly it's its 56 00:02:33,160 --> 00:02:35,360 Speaker 3: uncertainty and it's just hard. You see you watch days 57 00:02:35,360 --> 00:02:38,120 Speaker 3: like Friday. You know, it's just hard stepping in, particularly 58 00:02:38,160 --> 00:02:40,440 Speaker 3: in the back end, with this uncertainty still out there. 59 00:02:40,639 --> 00:02:42,160 Speaker 4: So rack, at what point would you step in? 60 00:02:44,320 --> 00:02:47,440 Speaker 3: So so I like gowning the belly of the yield curve, 61 00:02:47,440 --> 00:02:49,679 Speaker 3: and I like gowning you know, the front end has 62 00:02:49,760 --> 00:02:52,560 Speaker 3: gotten pretty well priced. I mean, you've got to and 63 00:02:52,600 --> 00:02:54,679 Speaker 3: I think the way you all described it, you know, 64 00:02:54,720 --> 00:02:56,720 Speaker 3: the FED you're pricing an awful lot of cuts for 65 00:02:56,760 --> 00:03:00,400 Speaker 3: the FED this year and you haven't seen that hard datauration. 66 00:03:00,480 --> 00:03:03,200 Speaker 3: I do think you'll see that in labor over the 67 00:03:03,240 --> 00:03:05,640 Speaker 3: next two or three months. You'll see some pullback of 68 00:03:05,880 --> 00:03:09,079 Speaker 3: probably some significance in place like healthcare and education, leisure 69 00:03:09,120 --> 00:03:10,880 Speaker 3: and hospitality, but we've got. 70 00:03:10,800 --> 00:03:11,240 Speaker 1: To see it. 71 00:03:11,560 --> 00:03:13,920 Speaker 3: But the ability of the Ueld curve, there are some opportunities, 72 00:03:13,919 --> 00:03:16,760 Speaker 3: and quite frankly, Europe is more interesting because you don't 73 00:03:16,760 --> 00:03:18,720 Speaker 3: have the inflation impact in Europe. 74 00:03:18,880 --> 00:03:20,919 Speaker 1: The ECB has got to cut more aggressively. 75 00:03:21,200 --> 00:03:23,160 Speaker 3: So I actually think, you know, we've you know where 76 00:03:23,200 --> 00:03:24,600 Speaker 3: we've seen some real opportunities. 77 00:03:24,600 --> 00:03:26,560 Speaker 1: Actually European rates very different. 78 00:03:26,600 --> 00:03:28,240 Speaker 3: And by the way, you don't you don't have the 79 00:03:28,240 --> 00:03:31,360 Speaker 3: international disposition there. In fact, that's where you have probably 80 00:03:31,440 --> 00:03:33,480 Speaker 3: international I'm sure you have international buying. 81 00:03:33,520 --> 00:03:36,080 Speaker 1: So European rates is a place recently we've liked quite 82 00:03:36,080 --> 00:03:36,320 Speaker 1: a bit. 83 00:03:36,480 --> 00:03:38,920 Speaker 4: Can we take this a step further? You talk about 84 00:03:38,960 --> 00:03:42,280 Speaker 4: how US treasury markets tend to be the deepest, most liquid, 85 00:03:42,320 --> 00:03:44,640 Speaker 4: and then you talk about how rocky liquidity has been 86 00:03:44,680 --> 00:03:48,280 Speaker 4: and how execution risk has become an increasing consideration for you. 87 00:03:48,800 --> 00:03:50,920 Speaker 4: Have we gone to the point where on some of 88 00:03:50,960 --> 00:03:54,360 Speaker 4: these days the European rates market has actually been more 89 00:03:54,440 --> 00:03:56,480 Speaker 4: liquid than the US rates market. 90 00:03:58,480 --> 00:04:02,640 Speaker 3: Good question, More quid. I don't know if you know 91 00:04:02,720 --> 00:04:05,520 Speaker 3: certainly the back end of the yield curve. It takes 92 00:04:05,600 --> 00:04:08,440 Speaker 3: price to get to get execution. I don't know if 93 00:04:08,480 --> 00:04:11,360 Speaker 3: it's more liquid, it certainly feels to me like you 94 00:04:11,480 --> 00:04:15,080 Speaker 3: have this ballast of you've got an ECB moving, you've 95 00:04:15,120 --> 00:04:17,320 Speaker 3: got a yield curve that's also that's already pretty steep 96 00:04:17,360 --> 00:04:19,520 Speaker 3: in Europe. And by the way, if you're a dollar investor, 97 00:04:19,600 --> 00:04:22,560 Speaker 3: you get a cross currency swap benefit, and because of 98 00:04:22,640 --> 00:04:25,080 Speaker 3: curves so steep, you roll down. So you know, there 99 00:04:25,080 --> 00:04:27,040 Speaker 3: are a lot of reasons why I'm sure others as 100 00:04:27,040 --> 00:04:29,880 Speaker 3: well as ourselves have felt like it's a it's a 101 00:04:29,920 --> 00:04:32,800 Speaker 3: safer place to be, even though you're going to get 102 00:04:32,800 --> 00:04:35,240 Speaker 3: European funding of fiscal and issues over the next couple 103 00:04:35,240 --> 00:04:35,560 Speaker 3: of years. 104 00:04:35,560 --> 00:04:36,559 Speaker 1: That just takes some time. 105 00:04:37,120 --> 00:04:39,760 Speaker 3: But I don't, you know, I still say the traagery 106 00:04:39,760 --> 00:04:45,080 Speaker 3: market generally is much deeper, but you know, Europe, you 107 00:04:45,200 --> 00:04:48,000 Speaker 3: definitely see more buyers coming in internationally as well as 108 00:04:48,040 --> 00:04:49,000 Speaker 3: what we see in the States. 109 00:04:49,400 --> 00:04:52,000 Speaker 4: It seems like the picture that you're painting is a 110 00:04:52,040 --> 00:04:55,120 Speaker 4: regime change. The picture that you're painting is shifting away 111 00:04:55,160 --> 00:04:58,520 Speaker 4: from the United States and following a real flood of 112 00:04:58,560 --> 00:05:01,880 Speaker 4: money into some of the or markets, and frankly not 113 00:05:02,120 --> 00:05:04,280 Speaker 4: betting that the long end of the yield curve will 114 00:05:04,320 --> 00:05:07,520 Speaker 4: provide the ballast that it has in the past. Can 115 00:05:07,560 --> 00:05:10,120 Speaker 4: you talk about what else has changed? Does this really 116 00:05:10,240 --> 00:05:13,479 Speaker 4: undermine or reshape the way you look at sixty forty 117 00:05:13,560 --> 00:05:15,480 Speaker 4: or the position of gold in your portfolio? 118 00:05:17,800 --> 00:05:19,680 Speaker 1: That is a long it's a great discussion. That's a 119 00:05:19,680 --> 00:05:21,760 Speaker 1: long discussion. A ton has changed. 120 00:05:22,200 --> 00:05:24,480 Speaker 3: Like you say, we've added in the portfolio, is not 121 00:05:24,560 --> 00:05:26,920 Speaker 3: in our fixed income. At other portfolios we've added gold. 122 00:05:27,320 --> 00:05:29,640 Speaker 3: We think gold is a is a is a good 123 00:05:29,800 --> 00:05:33,360 Speaker 3: hedge generally, you know, quite frankly, you have to do 124 00:05:33,440 --> 00:05:35,920 Speaker 3: during periods like this, you tactically hold more cash. 125 00:05:35,680 --> 00:05:36,520 Speaker 1: In the portfolios. 126 00:05:36,960 --> 00:05:39,040 Speaker 3: We've done that back end of the yield curve and 127 00:05:39,120 --> 00:05:41,520 Speaker 3: interest rates and as a hedge when you've got inflation 128 00:05:41,680 --> 00:05:45,640 Speaker 3: moving potentially signmularly higher, not really a big benefit to 129 00:05:45,680 --> 00:05:48,000 Speaker 3: the portfolio. So and then the other one, when you 130 00:05:48,000 --> 00:05:51,560 Speaker 3: get rates backing up, you can get your yield much 131 00:05:51,600 --> 00:05:55,200 Speaker 3: more attractively using high quality assets. So even though you 132 00:05:55,240 --> 00:05:57,120 Speaker 3: know you're you know, some pressure on parts of the 133 00:05:57,160 --> 00:05:59,279 Speaker 3: high yield market, pressure is in the left loan market, 134 00:05:59,800 --> 00:06:02,120 Speaker 3: can actually still create them. In one of our ETF 135 00:06:02,200 --> 00:06:05,040 Speaker 3: is bing ETF, we're able to create over seven percent 136 00:06:05,120 --> 00:06:08,680 Speaker 3: yield and actually improve the quality of portfolio. Run more cash. 137 00:06:08,920 --> 00:06:11,240 Speaker 3: That becomes super attractive. As long as you're not stretching, 138 00:06:11,680 --> 00:06:15,480 Speaker 3: go down the credit structure into the triple C rated 139 00:06:15,520 --> 00:06:17,479 Speaker 3: high yield, you can actually create more yield today. 140 00:06:17,520 --> 00:06:19,719 Speaker 1: So I like the idea, build some more. 141 00:06:19,560 --> 00:06:22,640 Speaker 3: Cash, use some tools that are different than in the past, 142 00:06:23,040 --> 00:06:25,240 Speaker 3: and then quite frankly, just get higher quality and more 143 00:06:25,279 --> 00:06:26,520 Speaker 3: liquidity in the portfolio. 144 00:06:26,920 --> 00:06:29,400 Speaker 4: Do you think the rhetoric around the fact that some 145 00:06:29,520 --> 00:06:32,640 Speaker 4: investors are saying they're dumping dollar, dumping treasuries, that the 146 00:06:32,720 --> 00:06:36,679 Speaker 4: US is losing safe haven reserve asset level. 147 00:06:36,760 --> 00:06:38,080 Speaker 3: Do you think that rhetoric is overblown. 148 00:06:40,640 --> 00:06:43,039 Speaker 1: I'd say sentiment can change really quickly. 149 00:06:43,160 --> 00:06:45,880 Speaker 3: I mean, we're in this period now where there's clearly 150 00:06:46,360 --> 00:06:49,240 Speaker 3: a concern about the currency, and there's clearly a concern 151 00:06:49,320 --> 00:06:51,680 Speaker 3: about how do we bring the debt down, how do 152 00:06:51,720 --> 00:06:53,440 Speaker 3: we get how do we get interest rates down? 153 00:06:53,480 --> 00:06:55,520 Speaker 1: So I'd say near term, you know, there is a 154 00:06:55,600 --> 00:06:56,200 Speaker 1: question listen. 155 00:06:56,200 --> 00:06:59,440 Speaker 3: I think reserve currency status status is something that is 156 00:06:59,560 --> 00:07:01,719 Speaker 3: absolutely critical to the United States. 157 00:07:01,720 --> 00:07:03,880 Speaker 1: We fund a lot of deck globally. The number of 158 00:07:04,040 --> 00:07:05,880 Speaker 1: you know, the percentage of trades in the world. 159 00:07:05,640 --> 00:07:09,440 Speaker 3: That happen in dollars bills as a collateral for for 160 00:07:09,440 --> 00:07:11,640 Speaker 3: for many of the transactions in the world. I think 161 00:07:11,640 --> 00:07:15,600 Speaker 3: reserve currency status is absolutely critical. Are you denting it? 162 00:07:16,000 --> 00:07:18,640 Speaker 3: You're definitely denting it. And listen, I think that I 163 00:07:18,640 --> 00:07:19,000 Speaker 3: think this. 164 00:07:19,040 --> 00:07:20,200 Speaker 1: Year is going to change. 165 00:07:20,400 --> 00:07:22,080 Speaker 3: I think we've got a couple of months here where 166 00:07:22,080 --> 00:07:25,240 Speaker 3: there's a lot of uncertainty an economy that's probably in 167 00:07:25,240 --> 00:07:28,040 Speaker 3: the recession today in terms of certainly where corporate spend 168 00:07:28,080 --> 00:07:30,120 Speaker 3: will be. And then but I think as you get 169 00:07:30,120 --> 00:07:32,320 Speaker 3: to the back half of the year, things can really evolve. 170 00:07:32,400 --> 00:07:35,320 Speaker 3: So listen, I think you're chipping away at reserve currency, 171 00:07:35,640 --> 00:07:38,040 Speaker 3: but I don't think there's a natural alternative. 172 00:07:38,240 --> 00:07:40,080 Speaker 1: So and I, you know, and I think I think 173 00:07:40,120 --> 00:07:41,600 Speaker 1: things can change. Hopefully they do. 174 00:07:41,800 --> 00:07:43,680 Speaker 2: Rick hopefully they do. But that last point there, I 175 00:07:43,680 --> 00:07:46,920 Speaker 2: think is important. If we are in recession today, do 176 00:07:46,960 --> 00:07:50,480 Speaker 2: you think risk assets are approprily priced for that scenario? 177 00:07:52,760 --> 00:07:56,000 Speaker 3: So I would say, I would say today, listen, I 178 00:07:56,040 --> 00:07:58,080 Speaker 3: think that I think the tail, the tail has the 179 00:07:58,120 --> 00:08:01,920 Speaker 3: taist has gotten fatter. I think quality assets there they 180 00:08:01,920 --> 00:08:04,200 Speaker 3: are pretty reasonable. There's a lot of quality assets we've 181 00:08:04,280 --> 00:08:07,440 Speaker 3: added to agency mortgages, et cetera. Listen, I think you've 182 00:08:07,480 --> 00:08:09,800 Speaker 3: got to put a wider range on the equity market 183 00:08:09,840 --> 00:08:12,720 Speaker 3: today than you've had before. You've got an economy that's 184 00:08:12,720 --> 00:08:15,960 Speaker 3: pretty uncertain, and you've got to you know, I think 185 00:08:16,000 --> 00:08:18,360 Speaker 3: you've got to keep your beta a bit more restrained today. 186 00:08:18,520 --> 00:08:20,360 Speaker 3: Quite frankly, one of the most interesting trades in the 187 00:08:20,440 --> 00:08:22,760 Speaker 3: last couple of weeks has been to sell puts. You know, 188 00:08:22,800 --> 00:08:25,480 Speaker 3: not to necessarily increase, but you know, the best time 189 00:08:25,560 --> 00:08:27,880 Speaker 3: to sell insurance is after a hurricane. 190 00:08:27,840 --> 00:08:30,800 Speaker 1: And they've been some great trades. Actually sell downside. We 191 00:08:30,880 --> 00:08:31,280 Speaker 1: are Gosh. 192 00:08:31,320 --> 00:08:32,920 Speaker 3: You know, if we go down another ten to fifteen 193 00:08:33,040 --> 00:08:36,280 Speaker 3: twenty depending on single name, go down ten fifteen twenty percent, 194 00:08:36,679 --> 00:08:39,520 Speaker 3: you get paid handsomely for taking that. So keep your 195 00:08:39,559 --> 00:08:42,040 Speaker 3: beta restrained, hunker down a bit in terms of risk, 196 00:08:42,400 --> 00:08:44,600 Speaker 3: but then find someplace like Gosh. I would add if 197 00:08:44,600 --> 00:08:47,160 Speaker 3: we came down, if we if markets went down significantly. 198 00:08:47,200 --> 00:08:49,480 Speaker 3: So anyway, a bunch of things to do in this market. 199 00:08:49,559 --> 00:08:50,760 Speaker 3: And I think, but I just think you have to 200 00:08:50,800 --> 00:08:54,839 Speaker 3: expand your the where you think your return objectives are 201 00:08:54,840 --> 00:08:56,400 Speaker 3: going to be, in the probability around it. 202 00:08:56,760 --> 00:08:59,480 Speaker 2: In an environment like this, things have changed a lot. 203 00:08:59,559 --> 00:09:01,800 Speaker 2: Rick is good to see you as always Rick Reader 204 00:09:01,800 --> 00:09:03,320 Speaker 2: of black Rock there, Rick, Thank you sir. We'll doing 205 00:09:03,320 --> 00:09:03,800 Speaker 2: it again soon.