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

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Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.

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Speaker 2: I'm Tracy Alloway and I'm Joe Wisenthal. Joe, we are

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Speaker 2: here on the West Coast right now. We're in Newport Beach.

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Speaker 2: It's so nice.

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Speaker 3: I love it done here so much. Look, this is

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Speaker 3: what probably might be tied anyway. I yes, I will

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Speaker 3: look for any excuse to come down to this part

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Speaker 3: of the country.

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Speaker 2: We can just listen to Joe wax lyrical about California.

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Speaker 2: But we are here for work. Yes, in theory, we're

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Speaker 2: here for the future Proof Conference, which I think, honestly,

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Speaker 2: all financial conferences should be like this. They should all

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Speaker 2: take place on a beach with food trucks and we

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Speaker 2: should just hang out outside and talk to each other

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Speaker 2: about markets.

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Speaker 3: Sounds good, But we're not on the beach right now.

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Speaker 2: No, we are not. We are actually, well, let me

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Speaker 2: just say no trip to the West Coast would be

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Speaker 2: complete in terms of an A Blots episode without hitting

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Speaker 2: up PIMCO stopping.

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Speaker 3: That's right, the icon of Southern California investing in market.

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Speaker 2: And what a great time to be doing it. Because

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Speaker 2: of course we're recording this on Monday, and on Wednesday

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Speaker 2: we have the big FED decision.

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Speaker 3: That's right, it's a huge the almost virtually locked that

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Speaker 3: we're going to see the start of the raid cut cycle.

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Speaker 3: But there's still a lot of debate about twenty five

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Speaker 3: or fifty, what they signal for the rest of the year.

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Speaker 3: How significant is it whether they choose one or the other.

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Speaker 3: Definitely one of the most exciting anticipated ones in years,

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Speaker 3: and as of the time that we're recording this on

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Speaker 3: Monday morning, there is still significant ambiguity. And who knows,

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Speaker 3: by the time you're listening to this, maybe there will

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Speaker 3: be some leak in the media everyone will have settled

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Speaker 3: on fifty or twenty five or something. But at least

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Speaker 3: as of right now, we don't really know what's going

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Speaker 3: to happen.

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Speaker 2: You mentioned ambiguity, and this is really the remarkable thing

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Speaker 2: about this moment in time, which is everyone figures they're

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Speaker 2: going to cut, but we don't know twenty five or

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Speaker 2: fifty bibs. And the crazy thing is, if you look

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Speaker 2: at the swaps market right now, we're basically evenly split.

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Speaker 4: Ye.

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Speaker 3: Yeah, true excitement.

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Speaker 2: Yes, all right, So without further ado, I'm just going

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Speaker 2: to emphasize we do, in fact have the perfect guest

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Speaker 2: to be talking about all of this. We're going to

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Speaker 2: be speaking with Dan Ivison. He is, of course, the

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Speaker 2: PIMCO Group CIO and a managing director here in Newport. Dan,

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Speaker 2: thank you so much for coming back on all thoughts.

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Speaker 4: Thanks. It's really exciting to do this and do it

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Speaker 4: in person this time. Yeah.

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Speaker 2: Absolutely, and perfect timing really, So I'm just going to

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Speaker 2: jump into the big question, the big question, twenty five

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Speaker 2: or fifty what will it be?

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Speaker 4: Sure, let me real fast. I don't think will matter

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Speaker 4: that much unless you're betting on that front end contract,

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Speaker 4: and we think it's going to be a close call.

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Speaker 4: The guest, based on the news flow this weekend, is

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Speaker 4: they may actually go fifty. But I think the key

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Speaker 4: point will be that this will either be a very

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Speaker 4: dubvish twenty five basis point cut or more balanced fifty

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Speaker 4: basis point cut. We think the FED wants to get

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Speaker 4: rates down. They believe they're in restrictive territory, and I

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Speaker 4: think the key point is this is the beginning of

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Speaker 4: a cutting cycle, and we haven't had one in quite

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Speaker 4: some time.

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Speaker 3: I've heard people say that if they go twenty five,

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Speaker 3: that they could do it in a duvish way and

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Speaker 3: perhaps signal via the dots that there will be more

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Speaker 3: aggressive rate cuts through the rest of the year to

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Speaker 3: balance that out, and that the question then would arise, Well,

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Speaker 3: if you're already saying that, why not just go fifty?

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Speaker 3: Just from your perspective, you know, how does the FED

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Speaker 3: think through this question? Maybe it doesn't matter that much,

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Speaker 3: and you know, on the long sweep of history, maybe

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Speaker 3: it doesn't. But how do you think the FED is

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Speaker 3: thinking through these options?

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Speaker 4: Yeah? Well, I think the first point to note is

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Speaker 4: that the market's already done a lot of work for

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Speaker 4: the Fed. You've seen the price You have some pretty

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Speaker 4: significant cuts going into your end. In fact, we now

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Speaker 4: have well over one hundred basis points that cuts priced

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Speaker 4: in in another one hundred and twenty five to one

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Speaker 4: hundred and fifty, you know, the following year. So you know,

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Speaker 4: a combination of the data and some statements by FED

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Speaker 4: officials thus far has already eased conditions. And I think

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Speaker 4: what the FED is concerned with is the fact that

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Speaker 4: inflation isn't yet at target. We've made some progress, but

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Speaker 4: every time they speak in a dubvish tone, you see

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Speaker 4: stocks do pretty well and credit spreads are near very

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Speaker 4: very tight levels or near the tights of this cycle.

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Speaker 4: So there'll be walking a tightrope a bit and trying

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Speaker 4: to ease conditions without easing too much, without letting the

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Speaker 4: markets get ahead of them, and without letting some of

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Speaker 4: these positive wealth effects, you know, potentially drive inflation higher

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Speaker 4: and again through the combination of action signaling via the

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Speaker 4: dots and the tone at the press conference in future

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Speaker 4: correspondence with markets, they likely have enough tools at their

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Speaker 4: disposal where even if they get something wrong in a

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Speaker 4: narrow sense, that they can course correct and get the

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Speaker 4: market back on track as necessary.

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Speaker 2: You mentioned tone of the meeting, and one of the

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Speaker 2: arguments that has come up recently is this idea of, well,

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Speaker 2: maybe they don't do fifty bits because they don't want

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Speaker 2: to make everyone really worried that the economy is significantly

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Speaker 2: slowing down. Do you worry about like that side of

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Speaker 2: the messaging at all? Is there the possibility that they

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Speaker 2: go fifty and everyone's like, oh, it's worse than we thought.

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Speaker 4: It's possible. I think the other mistake, though, or concerned

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Speaker 4: I should say, is that by going fifty, the market

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Speaker 4: gets further in front of them in terms of expectations

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Speaker 4: for even more aggressive policy. So I think both risks

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Speaker 4: are there. Again, I think perhaps some of these concerns

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Speaker 4: about the FED being behind the curve or you know,

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Speaker 4: you know, to in front of the curve relative to

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Speaker 4: where inflation is, I think they're interesting soundbites. But I

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Speaker 4: and we do think that the FED has enough tools

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Speaker 4: to be able to navigate the next several months. I

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Speaker 4: think the key for markets, though, is to really really

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Speaker 4: listen to what the FED is saying. They are going

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Speaker 4: to be looking at the data. Therefore, us market participants,

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Speaker 4: we want to focus on the data. The data is

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Speaker 4: ultimately going to be driving these outcomes, and I think

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Speaker 4: it's a really interesting period for markets, given that the

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Speaker 4: data has been volatile, and we think it will likely

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Speaker 4: contigue to be quite volatile, creating ongoing uncertainty.

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Speaker 3: So setting aside whether they do twenty five or fifty

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Speaker 3: this week, the other big question is sort of, I

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Speaker 3: guess maybe more medium term or long term, but has

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Speaker 3: the neutral rate of the long term neutral rate of

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Speaker 3: interest gone up since pre COVID And there continues to

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Speaker 3: be a lot of discussion about this. No one really knows.

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Speaker 3: Do you think there's been some sort of structural change

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Speaker 3: in the economy over I guess basically the last four

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Speaker 3: and a half to five years now such that the

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Speaker 3: neutral rate of interest is higher, and what has changed if.

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Speaker 4: So, so we think it maybe a bit higher. But

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Speaker 4: if you look back through economic history, these neutral policy

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Speaker 4: rates of this concept of our star is important, but

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Speaker 4: it doesn't tend to move that quickly. And I think

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Speaker 4: a lot of the research, including our own and we

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Speaker 4: dusted off a lot of older research and updated these

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Speaker 4: studies this summer, suggests that, yeah, our star may be

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Speaker 4: a bit higher with this massive uncertainty around this type

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Speaker 4: of research. So again, I think the bottom line, as

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Speaker 4: you said, is we don't know for sure. We suspect

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Speaker 4: it's a little bit higher, not as high as some

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Speaker 4: more bearish folks out there think it may be. And

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Speaker 4: the reasons for that higher debt levels, the need for

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Speaker 4: significantly more physical infrastructure investment, this cycle less globalization, the

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Speaker 4: desire for supply chain resiliency, we think are just a

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Speaker 4: few factors contributing to the likelihood that our stars higher.

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Speaker 3: But just the implication though, if it's only modestly higher,

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Speaker 3: is at least from here. Again, setting aside what they

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Speaker 3: do this week, that there is a substantial room for

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Speaker 3: them to cut, and you'd expect their deep cuts from here.

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Speaker 4: That's correct, And you know our thought process is, you know,

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Speaker 4: maybe our stars half a percent higher, not on the

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Speaker 4: order of one one and a half percent higher. So

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Speaker 4: the bottom line is relative to a concept of neutral.

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Speaker 4: Even if neutral is closer to a three percent nominal

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Speaker 4: funds rate or even a little bit higher, gives them

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Speaker 4: a lot of room to get policy back to what

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Speaker 4: they perceive to be neutral. And again, with any cycle,

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Speaker 4: you can have overshooting to the downside too from a

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Speaker 4: growth and inflation perspective, So there's always a chance that

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Speaker 4: into a weaker economy than they and we currently intoipate

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Speaker 4: that they have room to shift into accommodative territory as well.

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Speaker 2: What's your sense of financial conditions right now? Because you

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Speaker 2: have great insight into the market. You buy mortgage bonds,

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Speaker 2: you buy credit, you buy treasuries. Obviously, what are you

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Speaker 2: seeing in terms of the market right now? I'm thinking

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Speaker 2: particularly of credit spreads. Those are still near cycle lows basically.

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Speaker 4: Yeah, so that in aggregate conditions still appear to be

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Speaker 4: quite loose. When you look at stock markets near all

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Speaker 4: time highs, credit spreads very very tight. From a very

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Speaker 4: very high level macro sense, there's still a lot of

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Speaker 4: liquidity in the system, a lot of confidence, a lot

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Speaker 4: of momentum, positive momentum, and risk aset spreads are quite tight.

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Speaker 4: But we know that looking at aggregate measures can be misleading.

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Speaker 4: If you're a lower income consumer that doesn't own a

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Speaker 4: home where we know us households have a lot of

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Speaker 4: equity trapped in their property or in their primary residence. There,

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Speaker 4: we are beginning to see signs of weakness. Most of

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Speaker 4: the debt that those households have encouraged voating rate in nature,

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Speaker 4: and they're feeling a lot of pressure. You look at

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Speaker 4: the floating rate credit markets, some of the lending that's

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Speaker 4: occurred to some weaker quality borrowers, to commercial real estate sector.

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Speaker 4: You're seeing signs of stress there that are probably not

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Speaker 4: as evident, you know, out there in the marketplace as

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Speaker 4: they should be. So there are sectors of the market

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Speaker 4: that we're beginning to see deteriorate. We think that's what's

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Speaker 4: on the mind of the Federal Reserve that, alongside some

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Speaker 4: of the more recent broad labor market weakness all suggests

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Speaker 4: that the FED from an insurance or a risk management perspective,

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Speaker 4: you know, should likely begin to get rates lower and

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Speaker 4: then again carefully look at the data to just make

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Speaker 4: sure and to calibrate to prevent a reacceleration of inflation

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Speaker 4: into even looser financial conditions.

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Speaker 3: If it's the case that our star is just a

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Speaker 3: little bit higher than what it used to be, and

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Speaker 3: if perhaps some in the market are overestimating how much

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Speaker 3: it's risen, what areas of the market specifically are either

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Speaker 3: mispriced or are the most attractive under your assumptions.

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Speaker 4: Well, good old fashioned high quality bonds would benefit to

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Speaker 4: the extent that.

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Speaker 3: We're talking high quality corporate bonds here.

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Speaker 4: High quality you know, really any type of high quality bond.

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Speaker 4: And what's nice about high quality bond market is that

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Speaker 4: if you have a multi year time horizon, the analysis

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Speaker 4: isn't that complicated. You typically earn your yield, and then

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Speaker 4: any type of incremental return you can get through thoughtful

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Speaker 4: acid allocation or alpha generation is incremental return that you'll receive.

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Speaker 4: To the extent that policy rates or neutral rates look

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Speaker 4: very similar to where we were pre COVID, that creates

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Speaker 4: room not only to realize upon very very attractive real

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Speaker 4: and nominally yields, but for the prospects for price appreciation

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Speaker 4: as well. And I think related to that point is

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Speaker 4: that fixed income has historically done real well when bad

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Speaker 4: things were happening elsewhere within your portfolio, when economic growth

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Speaker 4: has been weak. Really, the twenty two experience, in this

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Speaker 4: inflationary experience, has been the exception to the rule. And

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Speaker 4: we do think there's a good chance, you know, regardless

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Speaker 4: of whether neutral policy rates are a little bit higher

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Speaker 4: than they were pre COVID, that we're getting back into

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Speaker 4: that type of paradigm where fixed income not only has

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Speaker 4: an attractive yield, but it will have defensive, diversefyed characteristics. Finally,

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Speaker 4: and again that takes some convincing for investors, given the

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Speaker 4: battle wounds we all suffer during the twenty two experience.

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Speaker 2: You mentioned the idea of fixed income sort of coming back.

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Speaker 2: How are you looking at pricing on the short end

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Speaker 2: at the moment, because, as you said, one of the

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Speaker 2: risks is that the market kind of gets ahead of

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Speaker 2: itself right now in pricing in rate cuts, and some

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Speaker 2: people look at those shorter term maturities right now and

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Speaker 2: think like well, maybe it is a little bit overdone.

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Speaker 4: Yeah, So again, if you have a three to five

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Speaker 4: year time horizon, this is really noise. Lock in some

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Speaker 4: of these attractive high nominal or real yields and then

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Speaker 4: benefit from some of the most attractive income that we've

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Speaker 4: been able to generate in a very very long time.

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Speaker 4: From a tactical perspective, though, it's been very very target rich,

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Speaker 4: and in looking at the yield curve today, we do

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Speaker 4: think that the market's maybe getting a little bit ahead

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Speaker 4: of themselves in terms of near term cuts. Yeah, we've

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Speaker 4: had some employment weakness, but then we had a CPI

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Speaker 4: number recently that surprised a bit to the upside. Earlier

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Speaker 4: this year data surprised in a more concerning fashion. So

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Speaker 4: we think that, you know, over the course of the

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Speaker 4: next few months, there are some risks of reaccelerating inflation,

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Speaker 4: which may lead to less cuts that are priced to

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Speaker 4: the market. So what we're doing currently is reducing some

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Speaker 4: of our exposure to the very very front end of

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Speaker 4: the yeal curve, and I'm talking about one or two

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Speaker 4: year type maturities. Then our favorite part to invest in,

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Speaker 4: behalf of our clients is really in the intermediate part

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Speaker 4: of the curve in those five year type maturities where

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Speaker 4: you look at the market today and where you have

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Speaker 4: a terminal federal funds rate assumption in the market today

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Speaker 4: somewhere close to three percent. We think that's reasonable. That

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Speaker 4: would be consistent of higher neutral rates relative to where

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Speaker 4: we were pre COVID and allow for some price appreciation

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Speaker 4: if we were to get into a more challenging macro environment.

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Speaker 4: So a lot of activity, you know, within the US market,

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Speaker 4: across market, it's a lot of volatility in the front

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Speaker 4: end of the curve, and right now we have been

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Speaker 4: taking a little bit of risk off thinking that you know,

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Speaker 4: perhaps you know, over the next few months, people are

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Speaker 4: a little bit optimistic about the FED being able to

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Speaker 4: get raised out as quickly as people or at least

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Speaker 4: some people anticipate.

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Speaker 2: Can I ask a process question? These are actually my

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Speaker 2: favorite questions. But you manage the I think it's one

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Speaker 2: hundred and fifty eight billion dollars Pimco Income Fund, and

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Speaker 2: I guess the mandate is preserve capital while generating income,

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Speaker 2: which gives you the full suite of fixed income basically

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Speaker 2: to look over. You could buy you know, longer maturity treasuries,

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Speaker 2: all types of corporate bonds, mortgage backed securities. Obviously, how

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Speaker 2: do these decisions land on your desk? Like when you're

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Speaker 2: making these investment decisions, like what is the optionality that

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Speaker 2: is actually presented to you? And then just to connect

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Speaker 2: it back to the FED, you know, on Wednesday, FED

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Speaker 2: decision comes out. What does your day to day look

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Speaker 2: like on a day like that, how quickly are you

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Speaker 2: cutting positioning and what are the options available to you?

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Speaker 4: Sure, you know, we take a long term orientation, So

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Speaker 4: a lot of what we do is about process looking

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Speaker 4: for repeatable sources of alpha or return relative to passive

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Speaker 4: alternatives based on market inefficiencies, market frictions, looking to leverage

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Speaker 4: that flexibility that we're afforded in a strategy like the

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Speaker 4: income fund. So in that sense, it's very process driven

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Speaker 4: and it doesn't relate to a view on the FED

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Speaker 4: or a view on the directionality of interest rates, and

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Speaker 4: that tends to be a good portion of the incremental

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Speaker 4: return that we generate. In addition to that, as you know,

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Speaker 4: Pimpco's always had a very structured investment process. We get

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Speaker 4: together and we talk about three to five year themes

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Speaker 4: impacting markets. Every summer on a quarterly basis, and we

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Speaker 4: just finished this process last week. We get together talking

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Speaker 4: about the outlook for markets across the twelve to eighteen

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Speaker 4: month period, and then we have the investment committee. So

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Speaker 4: i'd categorized portfolio construction as you know, targeting a lot

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Speaker 4: of low hanging fruit tied to market frictions and inefficiencies,

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Speaker 4: and then the overlay of tactical, more macro oriented themes

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Speaker 4: as well, and those will be done through a committee process.

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Speaker 4: And then when you have a volatility event like the

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Speaker 4: FED or a major data release, we stand poised to react.

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Speaker 4: So you know, on a day where the data may

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Speaker 4: be surprising the market, where there may be some overshooting,

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Speaker 4: we have orders in. It could come directly from myself

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Speaker 4: or other teammates on the strategy. Perhaps we're coordinating across

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Speaker 4: multiple strategies as well. But over a full cycle, those

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Speaker 4: types of short term tactical moves got a lot of

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Speaker 4: the press, probably why I'm not as popular on CNBC.

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Speaker 4: You know, when you talk about process long term orientation,

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Speaker 4: it's less fun, but it really is about a lot

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Speaker 4: of process then standing by to take advantage of overshooting

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Speaker 4: markets when they really present themselves.

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Speaker 3: I'm going to ask an even more specific I guess

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Speaker 3: process type of question, but literally on FED day, what

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Speaker 3: are you doing? Do you have the TV on and

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Speaker 3: you're like chatting with people? I being like, what is

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Speaker 3: like your process of you know, what is the process

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Speaker 3: of consuming and digesting and hashing out the views look

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Speaker 3: like from Well, I guess you're on West Coast time

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Speaker 3: and that blows my mind. So I guess the decision

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Speaker 3: comes out at eleven? Well, what are you doing? What

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Speaker 3: do you What can we if I close my eyes,

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Speaker 3: what can I imagine is going on in your offices

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Speaker 3: at that time?

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Speaker 4: Well, I remind my colleagues, and you know, as you

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Speaker 4: talk to others over time, they'll they'll mention this. I

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Speaker 4: remind people it's less important than people think it is.

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Speaker 3: I know, we know, but we still I'm glued to it,

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Speaker 3: even though I know in the end the heat death

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Speaker 3: of the universe means none if it's important, but like

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Speaker 3: what you know, like, what are you doing?

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Speaker 4: But here's we do and we do it, you know,

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Speaker 4: pretty much every time we make sure we're around for

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Speaker 4: the FED announcement, usually in our trading seats, okay, nearly

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Speaker 4: regardless of what other activity are going on. That day,

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Speaker 4: we immediately read the release. We have some type of wordsmithing,

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Speaker 4: you know, more quant type analysis or you know, of

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Speaker 4: the actual words where we get a you know, DubVision,

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Speaker 4: a hawkish score just based on the readout relative to

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Speaker 4: prior readouts, and then we all listen to the press conference.

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Speaker 4: As soon as the press conference ends, we run into

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Speaker 4: the investment committee room. We typically have our advisor Ben

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Speaker 4: Bernanke there. Of course we have the recent advice.

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Speaker 2: That's useful, it's good, good, good to have been around in.

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Speaker 4: Of course Rich Clariater rejoined us a recent vice chair

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Speaker 4: as well, so you know, ritual join as well as

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Speaker 4: our various FED watchers and other macro thinkers, and we

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Speaker 4: go around the table talk about the outlook or talk

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Speaker 4: about the conclusion of the press conference, any other data

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Speaker 4: that was released. And then we conclude with the question

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Speaker 4: as to whether anyone did anything in response to the

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Speaker 4: FED number, should we change portfolio positioning? As Bill Gross

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Speaker 4: used to remind us, you can't trade a FED call

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Speaker 4: in the market, per se. I guess you could trade

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Speaker 4: FED fund's futures, but it's always important to take you know,

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Speaker 4: whatever type of macro release there is, or a decision

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Speaker 4: that's made and translated pretty quickly into an investment decision.

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Speaker 4: Sometimes we trade a little bit, sometimes we don't trade

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Speaker 4: it all. Occasionally we'll trade a lot based on that information,

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Speaker 4: and we always leave with a roadmap on what we're

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Speaker 4: going to do, you know, during the remaining trading day

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Speaker 4: on that particular FED release day, and then put together

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Speaker 4: a game plan if necessary, for future trading sessions as well.

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Speaker 3: Jersey, I just got to say, if they had a

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Speaker 3: microphone in that room, would be the greatest macro podcast

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Speaker 3: in the history of podcasts. I really would love to

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Speaker 3: hear that.

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Speaker 2: If you ever decide to do that, Dan, let us

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Speaker 2: know and we will gladly record a fly on the

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Speaker 2: Wall episode of All Lots at your Investment Committee. Okay,

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Speaker 2: but since we can't really do that, but we're talking

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Speaker 2: about FOMC day. What about early August when we had

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Speaker 2: the big market sell off. What was that time period

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Speaker 2: like for you, because I imagine on the one hand

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Speaker 2: it was sort of knuckle clenching for a lot of

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Speaker 2: market participants, but on the other hand, a lot of

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Speaker 2: people talked about the opportunity to come in and buy

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Speaker 2: stuff that was briefly on sale.

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Speaker 4: Yeah, so overnight in Japan we did some trading. Most

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Speaker 4: of the flow was really in the volatility markets and

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Speaker 4: in the equity markets, so it was a little bit

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Speaker 4: less of an event within fixed income, but there was

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Speaker 4: a chance to take advantage of some local overshooting that

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Speaker 4: occurred in the Japanese market. Then even earlier in the day,

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Speaker 4: US time some ability to trade global fixed income markets

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Speaker 4: and take advantage of some overshooting there. But again, given

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Speaker 4: the size of the move, a lot of time spent

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Speaker 4: that day just talking about potential implications for overall markets,

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Speaker 4: positioning questions around Japan. Maybe we were missing something in

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Speaker 4: terms of embedded leverage over in that market. And then again,

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Speaker 4: of course things settled down relatively quickly. Another important point

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Speaker 4: regarding that event again is that you had a situation

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Speaker 4: where you have a little bit of weakness in the

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Speaker 4: labor market data, a little bit of a surprise in

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Speaker 4: the Japanese market from a policy perspective, and pretty big moves,

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Speaker 4: and this time these moves coincided with a big rally

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Speaker 4: in the front of the bond market. So again a

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Speaker 4: reminder that we're getting to a point now from a

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Speaker 4: valuation perspective, and where we are in the macro cycle

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Speaker 4: that fixed income may exhibit these types of insurance type

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Speaker 4: characteristics once again. And then the second point, probably the

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Speaker 4: most important point, is that when markets are expensive, it

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Speaker 4: takes less negative surprise to create bigger moves. And this

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Speaker 4: is the world we're living in today. Equity valuations are stretched,

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Speaker 4: there's a lot of reliance on central banks to engineer

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Speaker 4: positive economic and financial market outcomes. Credit spreads are tight,

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Speaker 4: and anytime you have this type of dynamic, you just

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Speaker 4: have to be prepared for bouts of volatility, boats of overshooting.

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Speaker 4: And as an active asset manager, that's where we can

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Speaker 4: shine by having the flexibility necessary to be buying when

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Speaker 4: other people are selling somewhat indiscriminately and not getting caught

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Speaker 4: up into forced sales activity ourselves.

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Speaker 3: I'm glad you brought it back around to this sort

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Speaker 3: of hedging insurance role that fixed income can play in

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Speaker 3: times like this, because so looking back over the last

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Speaker 3: several years, you know, one of the things that really

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Speaker 3: struck me from like basically the financial crisis to COVID

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Speaker 3: was just this beautiful relationship of stocks and bonds from

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Speaker 3: the investor perspective, because you're getting paid by your bomb

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Speaker 3: holdings stocks were going up, and then the moment you

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Speaker 3: had some stock weakness, the capital appreciated it, just like

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Speaker 3: this beautiful line that went up when you combined the two.

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Speaker 3: And then, as you mentioned, twenty twenty one and twenty two,

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Speaker 3: like that broke down obviously, and bonds didn't provide that

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Speaker 3: same ballast that went up every time when stocks went down.

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Speaker 3: I'm curious if you've seen a change from a business

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Speaker 3: perspective and a distribution perspective over the last few years

436
00:21:47,040 --> 00:21:50,679
Speaker 3: where you've had to go back out and convince clients

437
00:21:51,080 --> 00:21:54,000
Speaker 3: of the role for bonds in the portfolio and remake

438
00:21:54,119 --> 00:21:56,359
Speaker 3: that pitch to them, and whether there is sort of

439
00:21:56,400 --> 00:22:01,040
Speaker 3: a persistent maybe something that will last while skeptisid, Okay,

440
00:22:01,040 --> 00:22:04,800
Speaker 3: you don't get the same insurance effect. Meanwhile, yes, you

441
00:22:04,840 --> 00:22:07,360
Speaker 3: get coupon payment. But when you look at the insane

442
00:22:07,359 --> 00:22:10,360
Speaker 3: returns that people are getting in tech doocs, you're like, well,

443
00:22:10,359 --> 00:22:13,280
Speaker 3: it's this little five percent return getting for me. And

444
00:22:13,359 --> 00:22:16,359
Speaker 3: so I'm curious whether the sales pitch or the client

445
00:22:16,440 --> 00:22:19,280
Speaker 3: pitch has changed it all over time because of the experience.

446
00:22:18,880 --> 00:22:21,320
Speaker 4: Of the last few years, it has Now we focus

447
00:22:21,359 --> 00:22:24,639
Speaker 4: on value versus passive alternatives. So our pitches, you know,

448
00:22:24,680 --> 00:22:26,359
Speaker 4: invest with PIMCO, We're going to provide you with a

449
00:22:26,400 --> 00:22:30,240
Speaker 4: better experience relative to what you can get in passive

450
00:22:30,280 --> 00:22:32,560
Speaker 4: portfolio alternatives. So we think over time, if we can

451
00:22:32,640 --> 00:22:35,560
Speaker 4: do that, clients will come. And it was hard coming

452
00:22:35,560 --> 00:22:37,960
Speaker 4: out of the GFC when interest rates were near zero,

453
00:22:38,040 --> 00:22:40,800
Speaker 4: where policy rates were at zero or below zero for

454
00:22:40,880 --> 00:22:44,720
Speaker 4: many many years. It really plated the seeds for major

455
00:22:44,880 --> 00:22:48,200
Speaker 4: change within the fixed income industry. And then you had

456
00:22:48,200 --> 00:22:50,520
Speaker 4: the inflation, and then you had the very violent sell

457
00:22:50,560 --> 00:22:53,119
Speaker 4: off in twenty twenty two where not only did bonds

458
00:22:53,160 --> 00:22:56,000
Speaker 4: not ensure much of anything, they themselves went down a lot.

459
00:22:56,160 --> 00:22:56,360
Speaker 3: Yeah.

460
00:22:56,720 --> 00:22:59,400
Speaker 2: Yeah, the mark to market on those were insane at

461
00:22:59,400 --> 00:23:01,479
Speaker 2: the time. I remember doing a headline that was like

462
00:23:01,880 --> 00:23:05,200
Speaker 2: this was for corporate bonds, but it was like demonstrational

463
00:23:05,280 --> 00:23:09,240
Speaker 2: portfolio of IG bonds and it was down like thirty percent.

464
00:23:09,400 --> 00:23:12,000
Speaker 2: At that period, anyone holding fixed income, especially as a

465
00:23:12,040 --> 00:23:14,440
Speaker 2: retirement option, would have been massively hit.

466
00:23:14,880 --> 00:23:17,600
Speaker 4: Absolutely correct, and in some sense it was a prerequisite

467
00:23:17,680 --> 00:23:20,760
Speaker 4: to get value back in fixed income markets. But if

468
00:23:20,760 --> 00:23:24,119
Speaker 4: you go back several years, because rates were near zero

469
00:23:24,480 --> 00:23:28,720
Speaker 4: or outright negative in major parts of the developed world,

470
00:23:28,960 --> 00:23:31,600
Speaker 4: people were forced to look for alternatives. What you've seen

471
00:23:32,040 --> 00:23:35,800
Speaker 4: over that period is massive growth in floating rate lower

472
00:23:35,880 --> 00:23:39,360
Speaker 4: quality corporate credit. That's very unusual when you go back

473
00:23:39,400 --> 00:23:43,399
Speaker 4: several decades, and historically floating rate lower quality corporate credit

474
00:23:43,760 --> 00:23:46,920
Speaker 4: is quite dangerous because when you have an economic shock,

475
00:23:47,320 --> 00:23:50,840
Speaker 4: short rates go down, that floating rate lower quality credit,

476
00:23:51,520 --> 00:23:54,399
Speaker 4: just as it becomes more risky, sees its yield drop

477
00:23:54,480 --> 00:23:58,359
Speaker 4: and drop quite considerably, especially if policy rates or neutral

478
00:23:58,400 --> 00:24:00,320
Speaker 4: rates are as low as some people get it, they've.

479
00:24:00,200 --> 00:24:02,280
Speaker 3: Paid less and the odds of default are going.

480
00:24:02,280 --> 00:24:04,280
Speaker 4: That's correct, and we have a dynamic now where you've

481
00:24:04,280 --> 00:24:07,040
Speaker 4: seen the lower quality floating rate credit markets grow in

482
00:24:07,040 --> 00:24:10,199
Speaker 4: the order of a couple trillion dollars in size, and

483
00:24:10,240 --> 00:24:12,440
Speaker 4: that was due to the fact that it was really

484
00:24:12,480 --> 00:24:14,960
Speaker 4: the only game in town. There was no real attractive

485
00:24:15,000 --> 00:24:18,159
Speaker 4: yield a high quality markets. Today there is What we

486
00:24:18,240 --> 00:24:20,480
Speaker 4: know is coming up, most likely in a few days,

487
00:24:20,560 --> 00:24:22,600
Speaker 4: is that these short rates are going to begin to

488
00:24:22,640 --> 00:24:25,880
Speaker 4: go down again. So you have a really really interesting

489
00:24:25,960 --> 00:24:29,000
Speaker 4: dynamic in the market where people rushed into these floating

490
00:24:29,040 --> 00:24:32,199
Speaker 4: rate sectors and segments of the market. Their yields are

491
00:24:32,200 --> 00:24:34,199
Speaker 4: going down. You don't have the ability to lock in

492
00:24:34,200 --> 00:24:36,840
Speaker 4: those longer real rates. So yeah, we do think this

493
00:24:36,880 --> 00:24:39,760
Speaker 4: could be a meaningful turning point. And I think again,

494
00:24:39,800 --> 00:24:42,159
Speaker 4: and looking at fixed income from the standpoint of a

495
00:24:42,200 --> 00:24:45,679
Speaker 4: thirty forty to fifty year time horizon, it's really been

496
00:24:45,720 --> 00:24:48,000
Speaker 4: the exception of the rule of the last several years

497
00:24:48,080 --> 00:24:50,960
Speaker 4: where you've had this dynamic in play, where duration was

498
00:24:50,960 --> 00:24:53,479
Speaker 4: a really, really bad thing and where you really needed

499
00:24:53,480 --> 00:24:57,000
Speaker 4: to perhaps reach a little bit to maintain an attractive

500
00:24:57,000 --> 00:24:59,880
Speaker 4: income in some of the more economically sensitive or risk

501
00:25:00,119 --> 00:25:02,000
Speaker 4: areas of the bond market. Now, if you have a

502
00:25:02,000 --> 00:25:06,479
Speaker 4: hard landing, this dynamic can turn quite quickly back towards

503
00:25:06,480 --> 00:25:09,200
Speaker 4: the old days. If you have a softer landing scenario,

504
00:25:09,280 --> 00:25:11,800
Speaker 4: this dynamic will play out much more slowly, but it

505
00:25:11,840 --> 00:25:14,240
Speaker 4: does create what could be the next wave of interest

506
00:25:14,400 --> 00:25:18,359
Speaker 4: into fixed rate longer maturities within the fixed income market.

507
00:25:33,760 --> 00:25:37,000
Speaker 2: Okay, so, speaking of credit and floating rate loans, do

508
00:25:37,040 --> 00:25:40,200
Speaker 2: you feel pressure or competition at all? From I guess

509
00:25:40,560 --> 00:25:44,679
Speaker 2: the proverbial growth of private credit, the booming private credit

510
00:25:44,760 --> 00:25:47,399
Speaker 2: market is that something that either makes it harder for

511
00:25:47,440 --> 00:25:51,280
Speaker 2: you guys to secure paper or maybe makes the yield

512
00:25:51,480 --> 00:25:54,080
Speaker 2: on that paper a little bit lower. What does that mean?

513
00:25:54,119 --> 00:25:54,760
Speaker 2: For your business.

514
00:25:55,119 --> 00:25:58,520
Speaker 4: From an investment perspective, it's actually a really good thing,

515
00:25:58,760 --> 00:26:00,480
Speaker 4: and in fact, even some of the growth of the

516
00:26:00,480 --> 00:26:03,280
Speaker 4: ETF market has been positive. A lot of these rules

517
00:26:03,320 --> 00:26:06,240
Speaker 4: based strategies we see in the ETF space. The daily

518
00:26:06,280 --> 00:26:10,679
Speaker 4: disclosure of activity within the ETFs has created frictions in

519
00:26:10,760 --> 00:26:13,440
Speaker 4: certain more complex areas of the market that have led

520
00:26:13,480 --> 00:26:17,280
Speaker 4: to the ability to more easily generate active alpha within

521
00:26:17,320 --> 00:26:20,720
Speaker 4: our strategies. On the private credit side, it's a bit

522
00:26:20,720 --> 00:26:24,400
Speaker 4: more nuanced. We are seeing more risk get transferred into

523
00:26:24,440 --> 00:26:27,920
Speaker 4: private markets, which ironically has made the traditional high yield

524
00:26:27,960 --> 00:26:30,760
Speaker 4: markets much more robust. I can't tell you how many

525
00:26:30,760 --> 00:26:33,719
Speaker 4: times we look at credits within the high yield corporate

526
00:26:33,760 --> 00:26:36,800
Speaker 4: bond space we say, look, we're looking at these financials.

527
00:26:36,920 --> 00:26:40,400
Speaker 4: Maturity is coming up. This company cannot afford to pay

528
00:26:40,720 --> 00:26:43,640
Speaker 4: this coupon rate to refi their debt, only to find

529
00:26:43,640 --> 00:26:45,960
Speaker 4: out a private credit manager has taken them out with

530
00:26:46,000 --> 00:26:48,720
Speaker 4: a pick deal. So instead of having to pay the

531
00:26:48,760 --> 00:26:51,240
Speaker 4: full coupon interest, currently they have the option in the

532
00:26:51,280 --> 00:26:55,439
Speaker 4: private credit markets to get a more aggressively structured transaction.

533
00:26:56,200 --> 00:26:59,000
Speaker 4: We've seen this dynamic off and on throughout my time

534
00:26:59,080 --> 00:27:02,040
Speaker 4: within the industry. And again it is leading to some

535
00:27:02,240 --> 00:27:07,280
Speaker 4: friction in markets some opportunity as well. So yes, if

536
00:27:07,359 --> 00:27:09,920
Speaker 4: more and more risk gets transferred to the private markets

537
00:27:09,920 --> 00:27:12,600
Speaker 4: over time, it will lead to a reduced opportunity set.

538
00:27:12,920 --> 00:27:15,720
Speaker 4: But from an active investment management perspective, those types of

539
00:27:15,800 --> 00:27:19,520
Speaker 4: frictions actually create opportunities to generate alpha versus passive alternatives.

540
00:27:19,680 --> 00:27:23,800
Speaker 3: This is interesting. I just want to clarify. So from

541
00:27:23,800 --> 00:27:28,520
Speaker 3: an abstract level, I certainly understand how market frictions are

542
00:27:28,560 --> 00:27:32,560
Speaker 3: what create miss pricing and therefore the opportunity to generate alpha.

543
00:27:32,600 --> 00:27:36,240
Speaker 3: But when you talk about the private credit space creating

544
00:27:36,280 --> 00:27:39,520
Speaker 3: these frictions, can you just sort of clarify that a

545
00:27:39,560 --> 00:27:41,919
Speaker 3: little bit more like what that looks like or method

546
00:27:41,920 --> 00:27:43,080
Speaker 3: out for Yes.

547
00:27:43,480 --> 00:27:45,919
Speaker 4: So again, in looking at first of all, some of

548
00:27:45,960 --> 00:27:48,679
Speaker 4: the lower quality areas of the market, a lot of

549
00:27:48,720 --> 00:27:54,160
Speaker 4: these pretty significant flows have impacted technicals across the credit

550
00:27:54,240 --> 00:27:58,240
Speaker 4: sector more broadly. So analyze and understanding the type of

551
00:27:58,280 --> 00:28:00,879
Speaker 4: risk transfer going on in the private markets can really

552
00:28:00,880 --> 00:28:05,080
Speaker 4: improve your ability to generate return make good credit decisions

553
00:28:05,320 --> 00:28:08,440
Speaker 4: within the traditional high yield or even the bank loan universe.

554
00:28:09,200 --> 00:28:12,119
Speaker 4: I think that another big dynamic in private credit today

555
00:28:12,440 --> 00:28:16,080
Speaker 4: relates to a lot of flows within two insurance platforms.

556
00:28:16,520 --> 00:28:20,399
Speaker 4: Insurance companies are regulated identities. They're mostly regulated based on rating,

557
00:28:20,720 --> 00:28:22,399
Speaker 4: And this feels a little bit similar to even the

558
00:28:22,440 --> 00:28:26,280
Speaker 4: years leading up to the global financial crisis, where there's

559
00:28:26,640 --> 00:28:30,040
Speaker 4: increasing influence from radio agencies. Now, radio agencies try their

560
00:28:30,080 --> 00:28:33,560
Speaker 4: best to rate risk and assess risk, but there's increasingly

561
00:28:33,560 --> 00:28:37,560
Speaker 4: a gap between the type of structures necessary to put

562
00:28:37,560 --> 00:28:40,880
Speaker 4: into certain vehicles that are sourced in demand for private

563
00:28:40,920 --> 00:28:44,360
Speaker 4: credit relative to our own views on the inherent credit

564
00:28:44,480 --> 00:28:47,680
Speaker 4: quality of those particular instruments. And the fact that you're

565
00:28:47,720 --> 00:28:50,640
Speaker 4: back now, even over the last few years, to so

566
00:28:50,880 --> 00:28:55,480
Speaker 4: much capital optimization going on across these platforms that there

567
00:28:55,520 --> 00:28:58,280
Speaker 4: is opportunity to do your own work, compare that work

568
00:28:58,440 --> 00:29:01,760
Speaker 4: to ratings out there across both the public and the

569
00:29:01,760 --> 00:29:04,360
Speaker 4: private credit space, and be able to make really, really

570
00:29:04,400 --> 00:29:08,600
Speaker 4: good relative decisions versus those entities, those big players and

571
00:29:08,640 --> 00:29:11,720
Speaker 4: growing players in the market that need a rating, that

572
00:29:11,880 --> 00:29:15,200
Speaker 4: they need some type of structuring in order to optimize

573
00:29:15,200 --> 00:29:18,760
Speaker 4: capital under a evolving regulatory framework. So those are the

574
00:29:18,760 --> 00:29:21,440
Speaker 4: type of frictions that we talked about earlier that are

575
00:29:21,440 --> 00:29:23,400
Speaker 4: good to have around, yeah, because it does allow you

576
00:29:23,480 --> 00:29:27,800
Speaker 4: to generate return in mandates that are less herently constrained

577
00:29:27,800 --> 00:29:28,440
Speaker 4: in that regard.

578
00:29:28,880 --> 00:29:32,560
Speaker 2: Since you mentioned regulatory framework, how closely are you following

579
00:29:32,680 --> 00:29:36,479
Speaker 2: something like the BASL endgame proposals, because this is the

580
00:29:36,520 --> 00:29:39,840
Speaker 2: forgotten event risk of this week is also we're supposed

581
00:29:39,880 --> 00:29:44,440
Speaker 2: to get the unveiled BASL endgame suggestions or proposal, and

582
00:29:44,480 --> 00:29:48,000
Speaker 2: those include a lot of potentially new guidance for how

583
00:29:48,200 --> 00:29:51,760
Speaker 2: banks hold things like mbs and treasuries and mark to

584
00:29:51,800 --> 00:29:53,200
Speaker 2: market losses on things like that.

585
00:29:53,400 --> 00:29:56,160
Speaker 4: Yeah, so we follow what's going on with BASL rules.

586
00:29:56,200 --> 00:29:59,400
Speaker 4: There's also a lot of work being done across various

587
00:29:59,560 --> 00:30:02,680
Speaker 4: insurance regulators, even a lot of work going on, you know,

588
00:30:02,720 --> 00:30:07,000
Speaker 4: across the regulatory regimes that impact various mutual funds and

589
00:30:07,120 --> 00:30:09,560
Speaker 4: other positions here in the US and over in Europe.

590
00:30:09,760 --> 00:30:12,120
Speaker 4: So these are going to be important again from the

591
00:30:12,120 --> 00:30:15,240
Speaker 4: standpoint of good, well functioning markets. You know, we think

592
00:30:15,280 --> 00:30:17,800
Speaker 4: that a lot of these regulatory regimes should be looked at.

593
00:30:17,960 --> 00:30:20,320
Speaker 4: We think that a lot of the regulation that got

594
00:30:20,320 --> 00:30:23,160
Speaker 4: put in place post global financial crisis turned out to

595
00:30:23,200 --> 00:30:27,120
Speaker 4: be perhaps a bit backward looking, bit aggressive. But all

596
00:30:27,160 --> 00:30:29,560
Speaker 4: these types of regulations create these types of frictions that

597
00:30:29,560 --> 00:30:31,720
Speaker 4: we look to exploit again in some of our more

598
00:30:31,760 --> 00:30:35,440
Speaker 4: flexible active strategies. So they're going to impact what banks

599
00:30:35,440 --> 00:30:37,560
Speaker 4: can do, what risk needs to get laid off. And

600
00:30:37,720 --> 00:30:40,600
Speaker 4: we've seen increased activity even there too with these various

601
00:30:40,640 --> 00:30:45,320
Speaker 4: SRT transactions and other aggressive transactions on the capital optimization side.

602
00:30:45,360 --> 00:30:49,000
Speaker 4: But again, all this may not be so good for

603
00:30:49,280 --> 00:30:53,520
Speaker 4: financial market efficiency, but these types of activities are very,

604
00:30:53,600 --> 00:30:56,080
Speaker 4: very good from an active asset management perspective in order

605
00:30:56,120 --> 00:30:57,960
Speaker 4: to come in and take advantage of these frictions for

606
00:30:58,000 --> 00:30:58,760
Speaker 4: the end investor.

607
00:30:59,120 --> 00:31:01,640
Speaker 2: Are you involved at all and synthetic risk transfers? Is

608
00:31:01,680 --> 00:31:02,880
Speaker 2: that something of interest to you?

609
00:31:03,120 --> 00:31:06,240
Speaker 4: We are. In fact, I was a trader of this

610
00:31:06,320 --> 00:31:08,680
Speaker 4: space back when I first joined Pimpco, you know, back

611
00:31:08,720 --> 00:31:10,440
Speaker 4: in the late nineteen nineties, and we have a lot

612
00:31:10,480 --> 00:31:11,120
Speaker 4: of folks here.

613
00:31:11,000 --> 00:31:13,160
Speaker 2: That have looked at, oh, this is like old school

614
00:31:13,400 --> 00:31:15,880
Speaker 2: SRT if you're talking about the nineteen nineties.

615
00:31:15,560 --> 00:31:18,400
Speaker 4: It is, and SRTs are similar in many respects. It's

616
00:31:18,440 --> 00:31:20,920
Speaker 4: a different flavor, you know, each time, and it's an

617
00:31:20,920 --> 00:31:25,240
Speaker 4: interesting segment of the market. There's simple deals to some degree,

618
00:31:25,520 --> 00:31:27,360
Speaker 4: but then there's a lot of complexity in terms of

619
00:31:27,440 --> 00:31:32,120
Speaker 4: understanding waterfalls, how losses are allocated, you know the documentation details.

620
00:31:32,120 --> 00:31:33,640
Speaker 4: So they tend to be popular in the sense that

621
00:31:33,680 --> 00:31:35,400
Speaker 4: you look at it the risk and you say, hey,

622
00:31:35,440 --> 00:31:37,520
Speaker 4: look at I can get a very very attractive coupon

623
00:31:37,960 --> 00:31:40,320
Speaker 4: if I avoid losses up to this point, you know

624
00:31:40,320 --> 00:31:43,560
Speaker 4: I'll have a good investment outcome. But again, a lot

625
00:31:43,600 --> 00:31:46,400
Speaker 4: of inherent complexity. So we've been involved for a long time.

626
00:31:46,560 --> 00:31:49,440
Speaker 4: We've done a few deals recently. We think it's an

627
00:31:49,440 --> 00:31:51,720
Speaker 4: interesting area of the market. But it's an area of

628
00:31:51,720 --> 00:31:54,240
Speaker 4: the market where back a year and a half or

629
00:31:54,320 --> 00:31:56,240
Speaker 4: so ago, when the regional banks were going through a

630
00:31:56,240 --> 00:31:59,560
Speaker 4: lot of challenges, there was really good value for the

631
00:31:59,640 --> 00:32:03,720
Speaker 4: end in ester sourcing that risk. Today, with all of

632
00:32:03,800 --> 00:32:07,600
Speaker 4: the money chasing some of these opportunities, some folks apparently

633
00:32:07,960 --> 00:32:10,560
Speaker 4: or appearing to compete based on market share as opposed

634
00:32:10,600 --> 00:32:14,240
Speaker 4: to prudent underwriting, there's times where some of these SRT

635
00:32:14,280 --> 00:32:16,920
Speaker 4: deals are getting done and getting done at levels quite

636
00:32:16,960 --> 00:32:19,680
Speaker 4: advantageous to the banks that are selling that risk. And

637
00:32:20,080 --> 00:32:23,000
Speaker 4: not surprisingly, when you have that dynamic in play, you're

638
00:32:23,000 --> 00:32:25,120
Speaker 4: going to see more and more of these transactions. So

639
00:32:25,280 --> 00:32:29,120
Speaker 4: it requires a lot of nuance and some good value there.

640
00:32:29,160 --> 00:32:32,720
Speaker 4: But there's pockets of froth even in that SRT market today.

641
00:32:32,920 --> 00:32:35,320
Speaker 3: That's interesting, by the way, listeners, if you're just tuning in.

642
00:32:35,720 --> 00:32:38,280
Speaker 3: Tracy and I did an episode with Michael Shemy several

643
00:32:38,360 --> 00:32:41,320
Speaker 3: weeks ago all about how SRTs work, So a good

644
00:32:41,880 --> 00:32:44,280
Speaker 3: permore to go back to and check that out. I

645
00:32:44,280 --> 00:32:46,560
Speaker 3: want to go back to the macro for a minute

646
00:32:46,600 --> 00:32:49,760
Speaker 3: and sort of where we started and thinking about where

647
00:32:49,760 --> 00:32:52,640
Speaker 3: we're going over the next several years and or in

648
00:32:52,640 --> 00:32:57,840
Speaker 3: an era of very high deficits historically you mentioned, you know,

649
00:32:57,920 --> 00:33:01,520
Speaker 3: there's talk about all this like friend shoring talk and

650
00:33:01,560 --> 00:33:06,600
Speaker 3: reorientation of supply chains. That's costly. Geopolitical tensions have risen.

651
00:33:06,960 --> 00:33:10,840
Speaker 3: That's going to be costly on multiple fronts if it persists.

652
00:33:11,080 --> 00:33:14,800
Speaker 3: In politics changes you know, obviously there was a sort

653
00:33:14,840 --> 00:33:18,080
Speaker 3: of more comfort with fiscal expansion and things like that,

654
00:33:18,160 --> 00:33:19,560
Speaker 3: and you know, in a way that we might not

655
00:33:19,600 --> 00:33:22,719
Speaker 3: have expected years ago, all these things like you know,

656
00:33:22,760 --> 00:33:25,680
Speaker 3: looking out a few years, how are you thinking about

657
00:33:25,920 --> 00:33:28,120
Speaker 3: these changes that are coming or these risks and how

658
00:33:28,120 --> 00:33:30,200
Speaker 3: they're going to change the flavor of markets over time.

659
00:33:30,280 --> 00:33:32,920
Speaker 4: Yes, a few points. One interesting that we had a

660
00:33:32,960 --> 00:33:35,640
Speaker 4: pretty extensive discussion today. We didn't talk about inflation too much.

661
00:33:35,800 --> 00:33:42,000
Speaker 3: Yeah, that's yesterday's news. No, not sure, we probably should.

662
00:33:42,120 --> 00:33:44,240
Speaker 4: But yeah, but I bring that up all you because

663
00:33:44,240 --> 00:33:46,480
Speaker 4: we do think to answer your question, you know, over

664
00:33:46,520 --> 00:33:49,040
Speaker 4: the next several years, even though inflation may come down

665
00:33:49,080 --> 00:33:52,280
Speaker 4: from a cyclical perspective, it's likely here to stay at least.

666
00:33:52,280 --> 00:33:54,160
Speaker 3: Then, why do you think that we've only seen such

667
00:33:54,160 --> 00:33:58,640
Speaker 3: a modest increase in the neutral rate if inflation here

668
00:33:58,880 --> 00:34:01,720
Speaker 3: is now going to be sort of like structurally at

669
00:34:01,840 --> 00:34:02,960
Speaker 3: least somewhat higher.

670
00:34:03,080 --> 00:34:06,240
Speaker 4: Well, we think inflation may be a little bit higher structurally,

671
00:34:06,240 --> 00:34:08,280
Speaker 4: at least the base case. We think that the risks

672
00:34:08,320 --> 00:34:11,200
Speaker 4: around inflation will likely be more symmetric. So again you

673
00:34:11,239 --> 00:34:12,880
Speaker 4: go back to the GFC. In the years, you know,

674
00:34:12,920 --> 00:34:15,759
Speaker 4: following the GFC, most of the challenge for central banks

675
00:34:15,760 --> 00:34:17,960
Speaker 4: are to get inflation back up towards target.

676
00:34:18,040 --> 00:34:19,960
Speaker 5: Yeah, you kept missing on the downside, and we think,

677
00:34:20,000 --> 00:34:22,080
Speaker 5: you know, you know, over the next several years, for

678
00:34:22,120 --> 00:34:25,279
Speaker 5: the reasons we talked about, inflation risks will be more symmetric,

679
00:34:25,320 --> 00:34:30,560
Speaker 5: which creates opportunities for investors to source inflation protection across portfolios.

680
00:34:31,040 --> 00:34:32,920
Speaker 4: We also think to your point, there's going to be

681
00:34:32,920 --> 00:34:37,520
Speaker 4: more geopolitical uncertainty deficits are high many countries, including the US,

682
00:34:37,600 --> 00:34:41,720
Speaker 4: which jumps out as being a government that can't continue

683
00:34:41,760 --> 00:34:45,840
Speaker 4: to run these types of deficits indefinitely. And we think

684
00:34:46,160 --> 00:34:51,239
Speaker 4: because deficits are high, because market participants generally believe that

685
00:34:51,360 --> 00:34:53,719
Speaker 4: central banks and fiscal agents had something to do with

686
00:34:53,800 --> 00:34:57,600
Speaker 4: inflation this cycle, you're likely to have less policy activism

687
00:34:57,640 --> 00:35:00,680
Speaker 4: on an ongoing basis. So this feels like a market

688
00:35:00,719 --> 00:35:02,799
Speaker 4: the next several years that will have to stand on

689
00:35:02,840 --> 00:35:05,240
Speaker 4: its own merits more than it has in the past,

690
00:35:05,920 --> 00:35:11,800
Speaker 4: less influence from policy makers, more local volatility, less obsynchronized

691
00:35:11,920 --> 00:35:16,600
Speaker 4: growth cycles with the risk of meaningful geopolitical uncertainty.

692
00:35:16,640 --> 00:35:18,880
Speaker 3: Is a lower strike price on the FED put, so

693
00:35:18,960 --> 00:35:19,719
Speaker 3: to speak.

694
00:35:19,480 --> 00:35:21,520
Speaker 4: And probably a lower strike price on the put. But

695
00:35:21,840 --> 00:35:25,520
Speaker 4: the power of the FED may be less than it's

696
00:35:25,520 --> 00:35:28,760
Speaker 4: been in the past because of this very, very challenging

697
00:35:28,760 --> 00:35:33,399
Speaker 4: inflationary situation we're in after the very activist policies during

698
00:35:33,440 --> 00:35:36,560
Speaker 4: the COVID period. So yeah, I think it's premature to

699
00:35:36,560 --> 00:35:39,080
Speaker 4: say that the FED and other policy makers aren't going

700
00:35:39,120 --> 00:35:41,960
Speaker 4: to be there. Yeah, during extreme bouts of volatility. There

701
00:35:42,000 --> 00:35:44,279
Speaker 4: is a question though, from our perspective, as to whether

702
00:35:44,320 --> 00:35:47,360
Speaker 4: they can be as impactful as they've been in the past.

703
00:35:47,760 --> 00:35:50,480
Speaker 4: Again good for active asset management, but there's a risk

704
00:35:50,560 --> 00:35:53,200
Speaker 4: management reminder in there that you got to be a

705
00:35:53,200 --> 00:35:56,160
Speaker 4: little bit more humble about the risks of overshooting, the

706
00:35:56,239 --> 00:35:58,880
Speaker 4: risks of harder landing scenarios, the risk that you know,

707
00:35:58,920 --> 00:36:00,960
Speaker 4: as fixed income investors would have to go with alone,

708
00:36:01,160 --> 00:36:04,239
Speaker 4: so to speak, and not rely on central banks to

709
00:36:04,719 --> 00:36:07,400
Speaker 4: bail out some of the underperforming areas of the market.

710
00:36:07,480 --> 00:36:10,360
Speaker 3: You know, Tracy, it's interesting when we had that volatility

711
00:36:10,360 --> 00:36:13,719
Speaker 3: in early August, none of the FED speakers played ball

712
00:36:14,000 --> 00:36:16,680
Speaker 3: with the talk of like emergency rate cuts. Yeah, like

713
00:36:16,719 --> 00:36:18,120
Speaker 3: you know, because that was in there, and they did

714
00:36:18,239 --> 00:36:20,720
Speaker 3: not and they were very and they didn't they didn't

715
00:36:20,840 --> 00:36:23,960
Speaker 3: really talk about the market volatility and they said, we're

716
00:36:24,000 --> 00:36:25,800
Speaker 3: just going to see the data. Like it was very interesting,

717
00:36:25,840 --> 00:36:27,799
Speaker 3: how like they were cool throughout the whole thing.

718
00:36:27,920 --> 00:36:29,920
Speaker 2: I know it's only six weeks ago, but I've already

719
00:36:29,960 --> 00:36:32,520
Speaker 2: forgotten that whole period. But some people were calling for

720
00:36:32,520 --> 00:36:36,080
Speaker 2: one hundred basis point emergency cut, right, Okay, when I

721
00:36:36,120 --> 00:36:39,600
Speaker 2: think about event risk on the horizon, okay, the return

722
00:36:39,640 --> 00:36:44,120
Speaker 2: of inflation, the hard landing scenario, but also geopolitical risks

723
00:36:44,160 --> 00:36:46,719
Speaker 2: which you just brought up. And if I'm thinking back

724
00:36:46,760 --> 00:36:49,920
Speaker 2: to the idea of bonds as a hedge and I'm

725
00:36:49,920 --> 00:36:52,799
Speaker 2: thinking about US treasuries, it feels like US treasuries aren't

726
00:36:52,840 --> 00:36:56,359
Speaker 2: necessarily a good hedge for a particular flavor of US

727
00:36:56,480 --> 00:37:00,719
Speaker 2: political risk. How do you hedge for that type of volatility.

728
00:37:01,160 --> 00:37:03,719
Speaker 4: Well, one thing that we've done, and it's not just

729
00:37:03,760 --> 00:37:06,239
Speaker 4: related to the election, is to maintain a lot of

730
00:37:06,280 --> 00:37:10,400
Speaker 4: portfolio liquidity. Liquidity means flexibility. Liquidity is a form of

731
00:37:10,440 --> 00:37:14,560
Speaker 4: positive optionality. If you have a volatility event associated with

732
00:37:14,600 --> 00:37:17,080
Speaker 4: our election or some of these other geopolitical risks that

733
00:37:17,080 --> 00:37:19,600
Speaker 4: are out there, markets can overshoot, and I think a

734
00:37:19,680 --> 00:37:22,480
Speaker 4: key theme and generating return for an active asset manager

735
00:37:22,560 --> 00:37:25,120
Speaker 4: is being there to countertrade the market if you do

736
00:37:25,239 --> 00:37:28,319
Speaker 4: have overshooting. And I think that this election set up

737
00:37:28,400 --> 00:37:32,239
Speaker 4: is one where it's a coin flip and uncertainty is

738
00:37:32,280 --> 00:37:35,960
Speaker 4: only increasing going into this election period, So we don't

739
00:37:36,040 --> 00:37:38,440
Speaker 4: yet have conviction in terms of what's going to happen.

740
00:37:38,840 --> 00:37:41,000
Speaker 4: We just want to have a bit more flexibility. That's

741
00:37:41,040 --> 00:37:43,480
Speaker 4: point one. Second point, when you step back and look

742
00:37:43,520 --> 00:37:46,839
Speaker 4: at the likelihood of generating attractive returns in the next

743
00:37:46,880 --> 00:37:49,560
Speaker 4: few years, the US is not the only game in

744
00:37:49,600 --> 00:37:52,680
Speaker 4: town anymore. Rates for negative elsewhere in the world outright negative,

745
00:37:52,760 --> 00:37:56,120
Speaker 4: not even on an inflation adjusted basis, And these marks

746
00:37:56,120 --> 00:37:59,280
Speaker 4: have reawakened, particularly from the standpoint of a US dollar

747
00:37:59,320 --> 00:38:03,320
Speaker 4: denominated investor. So you do have options versus the US,

748
00:38:03,920 --> 00:38:07,520
Speaker 4: the Australian bond market, the UK, both markets out yield

749
00:38:07,560 --> 00:38:11,680
Speaker 4: the United States, opportunities to diversify into other developed markets.

750
00:38:11,719 --> 00:38:14,520
Speaker 4: Even Japan on a hedge basis has some interesting yields

751
00:38:14,520 --> 00:38:16,040
Speaker 4: out in the long end of the yield curve. So

752
00:38:16,719 --> 00:38:18,479
Speaker 4: you know, we have over the course of the last

753
00:38:18,480 --> 00:38:21,480
Speaker 4: several months, have been using the full breadth of the

754
00:38:21,520 --> 00:38:24,719
Speaker 4: PIMCO platform, the flexibility across a lot of our mandates

755
00:38:24,719 --> 00:38:27,560
Speaker 4: to diversify a bit away from the US. And again

756
00:38:27,600 --> 00:38:31,359
Speaker 4: that theme will likely continue where investors to optimize their

757
00:38:31,400 --> 00:38:35,840
Speaker 4: portfolio should look outside the US at both higher quality

758
00:38:35,920 --> 00:38:38,520
Speaker 4: and lower quality markets out there in the world, and

759
00:38:38,560 --> 00:38:42,920
Speaker 4: we do think some diversification away from US higher quality

760
00:38:42,920 --> 00:38:45,000
Speaker 4: interest rate exposure makes a lot of sense at this

761
00:38:45,040 --> 00:38:45,800
Speaker 4: point in the cycle.

762
00:38:45,960 --> 00:38:48,960
Speaker 3: I'm going to ask a really ignorant question, and maybe

763
00:38:48,960 --> 00:38:50,960
Speaker 3: you're just going to say, no, that's not a thing

764
00:38:51,000 --> 00:38:53,279
Speaker 3: that I do you have a capacity to buy a

765
00:38:53,360 --> 00:38:56,080
Speaker 3: Chinese government bonds which have done extremely well, and the

766
00:38:56,160 --> 00:38:58,080
Speaker 3: long end of the curve has come way down there.

767
00:38:58,000 --> 00:39:00,000
Speaker 4: We do, and you know they're give exposure to them.

768
00:39:00,400 --> 00:39:02,480
Speaker 4: We have very little exposure to their market. They got

769
00:39:02,520 --> 00:39:05,120
Speaker 4: you know, yields to get a two percent type zone,

770
00:39:05,160 --> 00:39:07,239
Speaker 4: you know, in the higher quality of the market, but

771
00:39:07,320 --> 00:39:10,480
Speaker 4: an example of less synchronized global boath cycles. Their growth slowing,

772
00:39:10,640 --> 00:39:14,480
Speaker 4: no inflation problem. It in theory is a decent diversifier.

773
00:39:14,520 --> 00:39:16,279
Speaker 4: I think the problem just in the market right now

774
00:39:16,360 --> 00:39:18,719
Speaker 4: is a lot of that's priced into the Chinese market.

775
00:39:19,400 --> 00:39:21,279
Speaker 2: So the last time we spoke to you, I think

776
00:39:21,280 --> 00:39:25,000
Speaker 2: it was August twenty twenty two, something like that, and

777
00:39:25,160 --> 00:39:25,560
Speaker 2: a lot.

778
00:39:25,440 --> 00:39:27,759
Speaker 3: Of turning points, Yeah, we turned it Dan.

779
00:39:27,840 --> 00:39:30,080
Speaker 2: Well, and a lot of the conversation was about the

780
00:39:30,080 --> 00:39:34,160
Speaker 2: potential for a recession, a housing slow down, things like that.

781
00:39:34,200 --> 00:39:37,640
Speaker 2: And of course fast forward to September of twenty twenty

782
00:39:37,680 --> 00:39:41,600
Speaker 2: four and corporate credit has held up phenomenally. Well. I

783
00:39:41,719 --> 00:39:45,280
Speaker 2: take the point about disparities between you know, lesser quality

784
00:39:45,280 --> 00:39:49,719
Speaker 2: and higher quality. The housing market has been pretty robust,

785
00:39:49,840 --> 00:39:52,640
Speaker 2: more than a lot of people would have expected. Thinking

786
00:39:52,680 --> 00:39:54,920
Speaker 2: back over the past couple of years. What have you

787
00:39:55,080 --> 00:39:57,719
Speaker 2: learned from that experience and how do you incorporate it

788
00:39:57,840 --> 00:39:59,960
Speaker 2: into the PIMCO investment strategy.

789
00:40:00,400 --> 00:40:03,560
Speaker 4: Well, this was an exceptionally unique cycle. We had a

790
00:40:03,560 --> 00:40:06,600
Speaker 4: global pandemic none of us had witnessed in our lifetime,

791
00:40:06,800 --> 00:40:11,000
Speaker 4: sudden stop of the economy, massive massive policy response, and

792
00:40:11,040 --> 00:40:13,920
Speaker 4: an inflationary environment that many of us didn't see in

793
00:40:13,960 --> 00:40:16,920
Speaker 4: our actual trading career, the young folks at PIMCO even

794
00:40:17,000 --> 00:40:19,359
Speaker 4: less so. So I think it's just a reminder that

795
00:40:19,560 --> 00:40:25,239
Speaker 4: the unexpected can happen, and it's important again to have

796
00:40:25,280 --> 00:40:30,799
Speaker 4: appropriate humility. From a portfolio construction perspective, think about diversification carefully.

797
00:40:31,040 --> 00:40:34,560
Speaker 4: Risk management's critically important, not just defensive risk management, but

798
00:40:34,600 --> 00:40:38,520
Speaker 4: having a risk management mindset because you can go through

799
00:40:38,520 --> 00:40:41,120
Speaker 4: these unique periods, and as we talked about earlier, when

800
00:40:41,560 --> 00:40:45,120
Speaker 4: valuations are stretched, it doesn't necessarily take a global pandemic

801
00:40:45,200 --> 00:40:49,120
Speaker 4: type shock to create some challenges and opportunities for the

802
00:40:49,160 --> 00:40:52,720
Speaker 4: firm or the strategy that's well positioned. I think looking

803
00:40:52,760 --> 00:40:54,840
Speaker 4: back on the last few years, a lot of this

804
00:40:54,920 --> 00:40:59,520
Speaker 4: inflation likely will be perceived as being at least temporary

805
00:40:59,600 --> 00:41:04,880
Speaker 4: or do to very very unique COVID supply chain complications

806
00:41:05,360 --> 00:41:08,560
Speaker 4: and this massive fiscal stimulus that occurred. But we got

807
00:41:08,560 --> 00:41:10,279
Speaker 4: a lot to learn, a lot to analyze, and I

808
00:41:10,280 --> 00:41:13,520
Speaker 4: think going forward, plenty of uncertainty as well. So you know,

809
00:41:13,560 --> 00:41:16,600
Speaker 4: we try to be careful about being too overconfident. We

810
00:41:16,640 --> 00:41:19,000
Speaker 4: get the behavioral finance folks always in our ears, reminding

811
00:41:19,080 --> 00:41:21,200
Speaker 4: us that people like myself tend to be prone to

812
00:41:21,239 --> 00:41:24,760
Speaker 4: overconfidence unless we protect our clients from our own natural instincts.

813
00:41:24,800 --> 00:41:27,799
Speaker 4: And again, just trying to learn, continue to read the

814
00:41:27,800 --> 00:41:31,160
Speaker 4: economic history books compared to the current environment. Again, leveraging

815
00:41:31,200 --> 00:41:33,239
Speaker 4: the team. You know, investing is a team sport and

816
00:41:34,040 --> 00:41:36,960
Speaker 4: you don't have to take wildly big macro bets to

817
00:41:37,040 --> 00:41:40,200
Speaker 4: just generate lots of small return across a variety of

818
00:41:40,280 --> 00:41:42,840
Speaker 4: sectors parts of the globe. And again, if you do

819
00:41:42,880 --> 00:41:45,360
Speaker 4: that well, it adds up into a good client experience

820
00:41:45,400 --> 00:41:46,120
Speaker 4: at the end of the day.

821
00:41:46,400 --> 00:41:48,759
Speaker 2: All right, Dan Ivison, I'm so glad we could catch

822
00:41:48,840 --> 00:41:51,319
Speaker 2: up with you in person on the West Coast. Thank

823
00:41:51,360 --> 00:41:52,800
Speaker 2: you so much for coming back on offline.

824
00:41:52,840 --> 00:41:53,399
Speaker 3: Thank you so much.

825
00:41:53,440 --> 00:41:53,600
Speaker 4: Jan.

826
00:41:53,640 --> 00:41:54,040
Speaker 3: That was great.

827
00:41:54,080 --> 00:42:08,160
Speaker 2: Thanks a lot, Listen, Joe, that was fun.

828
00:42:08,880 --> 00:42:10,960
Speaker 3: That was really fun. What a treat to get to

829
00:42:11,080 --> 00:42:13,720
Speaker 3: talk to Dan Ivison right before.

830
00:42:14,680 --> 00:42:17,479
Speaker 2: Also, I was thinking, like, can you imagine being in

831
00:42:17,520 --> 00:42:20,440
Speaker 2: that run with Ben Bernank and Richard Clareda.

832
00:42:20,680 --> 00:42:23,040
Speaker 3: Actually when he said that, I had this like like

833
00:42:23,080 --> 00:42:24,920
Speaker 3: it didn't quite register to me. He's like, oh, you

834
00:42:24,960 --> 00:42:27,880
Speaker 3: have our advisor, Ben BERNANKI and I was it like

835
00:42:27,920 --> 00:42:31,239
Speaker 3: didn't Like, I was like, what does he say? It's like,

836
00:42:31,360 --> 00:42:33,399
Speaker 3: is he like speaking metaphorically? It's like no, But when

837
00:42:33,400 --> 00:42:38,160
Speaker 3: you're PIMCO, you can really to talk to you about

838
00:42:38,160 --> 00:42:38,920
Speaker 3: what just happened.

839
00:42:39,000 --> 00:42:41,759
Speaker 2: Yeah, it must be nice. Okay, well there there's a

840
00:42:41,800 --> 00:42:44,560
Speaker 2: ton to pull out of that conversation. One of the

841
00:42:44,560 --> 00:42:46,880
Speaker 2: things that struck me was very early on, you know,

842
00:42:46,920 --> 00:42:49,719
Speaker 2: he talked about the credit cycle and what's been going

843
00:42:49,760 --> 00:42:53,120
Speaker 2: on there, and I guess the downsides of looking at aggregates,

844
00:42:53,160 --> 00:42:57,360
Speaker 2: which is even when you see credit spreads falling or

845
00:42:57,400 --> 00:43:02,120
Speaker 2: staying very very low in total, it does conceal pockets

846
00:43:02,360 --> 00:43:06,960
Speaker 2: of weakness and pain for like the least quality names

847
00:43:07,000 --> 00:43:09,960
Speaker 2: in there and parts of cre and things like that.

848
00:43:10,040 --> 00:43:12,480
Speaker 2: And I think that is worth remembering as we kind

849
00:43:12,520 --> 00:43:15,480
Speaker 2: of talk about, well, the FEDS cutting rates and we

850
00:43:15,560 --> 00:43:17,880
Speaker 2: haven't had that hard landing scenario that a lot of

851
00:43:17,880 --> 00:43:21,920
Speaker 2: people thought would emerge. There are these pockets of weakness

852
00:43:21,920 --> 00:43:22,759
Speaker 2: out there.

853
00:43:22,680 --> 00:43:25,200
Speaker 3: Totally, which of course has contributed to I just so

854
00:43:25,200 --> 00:43:27,520
Speaker 3: many people are confused about the economy because you can

855
00:43:27,520 --> 00:43:30,759
Speaker 3: sort of point to anything and tell the story you want.

856
00:43:30,880 --> 00:43:33,480
Speaker 3: I also thought it was sort of interesting, and you know,

857
00:43:33,560 --> 00:43:35,839
Speaker 3: I get like there's a lot of logic to it,

858
00:43:35,880 --> 00:43:38,760
Speaker 3: this idea of like, okay, for a couple of years,

859
00:43:38,760 --> 00:43:41,520
Speaker 3: their bonds did not play the role in people's portfolios

860
00:43:41,560 --> 00:43:43,520
Speaker 3: that they might have gotten used to it. I really

861
00:43:43,560 --> 00:43:46,879
Speaker 3: just think like we and by we, I just mean

862
00:43:46,920 --> 00:43:49,040
Speaker 3: like investors, like people who put their money with other

863
00:43:49,239 --> 00:43:51,600
Speaker 3: people or in some form, Like we just said, it's

864
00:43:51,640 --> 00:43:54,680
Speaker 3: so easy in the twenty tens, because like really it

865
00:43:54,719 --> 00:43:57,320
Speaker 3: was just like this beautiful synergy of stocks and bonds,

866
00:43:57,640 --> 00:44:00,480
Speaker 3: various flavors of sixty forty what have you, like, it

867
00:44:00,520 --> 00:44:03,120
Speaker 3: all worked out and you like didn't lose money. And

868
00:44:03,320 --> 00:44:07,120
Speaker 3: twenty twenty two in particular, was like a sharp reminder

869
00:44:07,160 --> 00:44:09,480
Speaker 3: and you like pointed to the stats like no, like

870
00:44:09,560 --> 00:44:12,319
Speaker 3: that paradigm like broke in a really big way. And

871
00:44:12,400 --> 00:44:14,920
Speaker 3: so the question, to my mind is still like okay,

872
00:44:15,040 --> 00:44:18,080
Speaker 3: even if inflation has like come down, we do see

873
00:44:18,160 --> 00:44:21,719
Speaker 3: fixed income providing this sort of insurance hedging role that

874
00:44:21,800 --> 00:44:24,040
Speaker 3: it did. Like, are people going to be like totally

875
00:44:24,080 --> 00:44:28,000
Speaker 3: comfortable allocating that much to fixed income, especially because of

876
00:44:28,120 --> 00:44:29,480
Speaker 3: kind of what we were talking about at the end.

877
00:44:29,520 --> 00:44:33,720
Speaker 3: There there are these different macro dynamics, geopolitical dynamics, political

878
00:44:33,800 --> 00:44:37,520
Speaker 3: dynamics that could change basically how bonds trade.

879
00:44:37,680 --> 00:44:40,600
Speaker 2: One day in the future, we'll tell our children that

880
00:44:40,719 --> 00:44:44,680
Speaker 2: a successful investment portfolio was basically just sixty forty yes,

881
00:44:44,920 --> 00:44:47,319
Speaker 2: and that was it. That's how easy.

882
00:44:47,360 --> 00:44:49,799
Speaker 3: It was. So easy. Now, rightly we didn't know how

883
00:44:49,800 --> 00:44:51,680
Speaker 3: good we had it, but you're right.

884
00:44:51,760 --> 00:44:55,960
Speaker 2: I do think the memories of that, like very dramatic

885
00:44:56,320 --> 00:44:58,960
Speaker 2: mark to market loss, are going to stay with us

886
00:44:58,960 --> 00:45:01,319
Speaker 2: for a while. But yeah, So it was interesting to

887
00:45:01,360 --> 00:45:03,759
Speaker 2: hear Dan talk about this idea of like having to

888
00:45:03,800 --> 00:45:07,839
Speaker 2: go out to clients and repitch bonds as a rush

889
00:45:08,040 --> 00:45:11,560
Speaker 2: right hedging instrument in your portfolio, and I kind of

890
00:45:11,640 --> 00:45:16,120
Speaker 2: I wonder how quickly attitudes will adjust Once again, I

891
00:45:16,120 --> 00:45:18,560
Speaker 2: guess it depends on what happens this week and beyond.

892
00:45:18,760 --> 00:45:20,520
Speaker 3: We will see. All right, shall we leave it there,

893
00:45:20,640 --> 00:45:21,319
Speaker 3: Let's leave it there.

894
00:45:21,480 --> 00:45:24,239
Speaker 2: This has been another episode of the Odd Lots podcast.

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00:45:24,320 --> 00:45:27,600
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway.

896
00:45:27,280 --> 00:45:30,080
Speaker 3: And I'm Joe Wisenthal. You can follow me at The Stalwart.

897
00:45:30,280 --> 00:45:33,960
Speaker 3: Follow our producers Kerman Rodriguez at Carman Arman, dash Ol

898
00:45:33,960 --> 00:45:36,600
Speaker 3: Bennett who is out here in Newport Beach with us,

899
00:45:36,680 --> 00:45:39,759
Speaker 3: Calebrooks at Kalebrooks. Thank you to our producer Moses On.

900
00:45:40,719 --> 00:45:43,000
Speaker 3: For more odd Loots content, go to Bloomberg dot com

901
00:45:43,040 --> 00:45:45,480
Speaker 3: slash odd Lots, where have transcripts, a blog and a

902
00:45:45,520 --> 00:45:47,960
Speaker 3: newsletter and you can chut about all of these topics

903
00:45:47,960 --> 00:45:50,840
Speaker 3: twenty four to seven in our discord discord dot gg

904
00:45:51,000 --> 00:45:51,840
Speaker 3: slash odlines.

905
00:45:52,160 --> 00:45:54,839
Speaker 2: And if you enjoy odd Lots, if you like it

906
00:45:54,880 --> 00:45:57,440
Speaker 2: when we talk to very large bond investors on the

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909
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910
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912
00:46:14,120 --> 00:46:14,920
Speaker 2: Thanks for listening.