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Speaker 1: Let's take the conversation to a veteran of the job support.

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Speaker 1: It is black Rocks rec reader Rick, good to see

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Speaker 1: you again. This is hot hot, This is better than

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Speaker 1: some like it hot, not just closed on Saturday night

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Speaker 1: and Broadway. So first take, what goes through my mind

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Speaker 1: is this sets the bar much higher for an immediate

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Speaker 1: rake cut in March.

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Speaker 2: Good morning, good morning, good morning, thank you, Vera and

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Speaker 2: the veteran.

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Speaker 3: That veteran sounds better than older. So's a couple of it.

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Speaker 3: But it's solid. I think Mike McKee described that. It's

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Speaker 3: a solid report.

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Speaker 2: I mean, you know, you break it down, and you know,

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Speaker 2: we talked about a new show a bunch. If you

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Speaker 2: look at the breakdown of this thing, you have a

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Speaker 2: different economy than we're used to.

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Speaker 3: You look at healthcare and education.

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Speaker 2: That is a demograph like that is a changing service

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Speaker 2: oriented economy.

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Speaker 3: That's just hard.

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Speaker 2: We're gonna be We're gonna have sticky job growth. The

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Speaker 2: thing that I think though, if you step back and

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Speaker 2: look at it.

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Speaker 3: We're starting it's trending down a little bit. It's a

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Speaker 3: little softer.

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Speaker 2: You look at things like temporary hiring coming down a

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Speaker 2: little bit.

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Speaker 3: Look at the jolt support.

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Speaker 2: We got this week professional business services coming off of it.

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Speaker 2: So listen, I think you have to characterize this as

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Speaker 2: solid report. As Mike said, average early earnings. By the way,

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Speaker 2: the month on month was point four to four. It's

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Speaker 2: a pretty strong number, meaning there's demand for labor.

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Speaker 3: I think the paradigm.

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Speaker 2: That you have to describe in terms of the economy, markets,

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Speaker 2: certainly employment is when people psy gosh, this is you know,

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Speaker 2: we're going into recession, deprocession.

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Speaker 3: It's just not evident in the data.

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Speaker 2: The data is solid, and you got consumption buoyed by

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Speaker 2: what is low unemployment rate, still good wages, and it's

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Speaker 2: still a pretty good employment report. So again, slowing economy,

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Speaker 2: and it's certainly illustrative in terms of this, but gosh,

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Speaker 2: that's certainly not fallen off the cliff anytime soon.

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Speaker 1: And here is the conundrum, as you say, it's different

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Speaker 1: this time. There was another cross saucet alligator who have

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Speaker 1: known for many years. He said this to me in

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Speaker 1: the IB this is a unique cycle. And unless the

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Speaker 1: FED and others have recently made a dramatic change in

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Speaker 1: where they see the long term mutual rate, the modus

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Speaker 1: operandi can't normalize and get us back to three to

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Speaker 1: three and a half over eighteen to twenty four months.

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Speaker 1: That's just longer, perhaps not as low as the market wants.

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Speaker 1: It is a unique cycle, isn't it. We've not lived

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Speaker 1: through a post pandemic. I mean, I've been around a while,

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Speaker 1: but I've not even lived through a pandemic. But you know,

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Speaker 1: it is unique, unique, So I mean.

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Speaker 3: You couldn't describe it any better than the way you

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Speaker 3: just said. So, So I actually go back, let's put

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Speaker 3: this in perspective. You go back and you look at GDP.

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Speaker 2: And twenty one we ran twelve twelve nominal GDP. Then

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Speaker 2: we got seven in twenty two, then we slowed down

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Speaker 2: in twenty three to five and forty five.

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Speaker 3: We're going to be five and a half ish. I

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Speaker 3: think this year you're going to slow to four. This

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Speaker 3: is not a classic. You know, this was we ran

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Speaker 3: too hot.

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Speaker 2: We were in the economy was running a twelve out

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Speaker 2: of ten, created inflation. Now I think we're create We're

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Speaker 2: getting back to a normalized economy. And you know, I

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Speaker 2: would say one thing that I would challenge about where

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Speaker 2: the FED is. Listen, I don't think the Fed's going

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Speaker 2: in March. I've said that before. I think it's crazy

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Speaker 2: they can't move. I don't think they'll move that quick,

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Speaker 2: but I do think they'll get the long term funds

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Speaker 2: rate down. I do think it'll get closer to two

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Speaker 2: and a half to three over time. The question is

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Speaker 2: how long does it take to get there? Listen, I

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Speaker 2: think you know part of why I think you can

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Speaker 2: start owning interest rates. You know, this backup is great.

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Speaker 2: The market got way too ahead of the FED. Now

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Speaker 2: you're backing up to levels that are starting to make

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Speaker 2: some sense again. I'd love to see them pull back

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Speaker 2: even a bit more. And I think when you think

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Speaker 2: about where we're ultimately going, I think we're ultimately going

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Speaker 2: to two and a half to three. This question of

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Speaker 2: when we get there, I think they'll start cutting in

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Speaker 2: May June, and then I think they'll get there. You know,

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Speaker 2: the eighteen months. I wouldn't argue with that, but maybe

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Speaker 2: I think to a slightly lower trajectory consistent with potential

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Speaker 2: growth being lower over the next couple of years.

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Speaker 1: So I, like you native would just follow us jump in.

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Speaker 1: I'm what you say is, look, I can have a

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Speaker 1: bigger splash of a jump off a a higher diving board.

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Speaker 1: We've had a small retlacement as high I would categorize

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Speaker 1: at ten twelve bits. How much more of a backup

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Speaker 1: in US do you expect and where is that perhaps

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Speaker 1: a better re entry point on treasuries first of all,

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Speaker 1: to come to credit very quickly.

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Speaker 3: It's a great question. So I think by the way.

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Speaker 2: We've made a good move out in the belly of

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Speaker 2: the curve out to the ten year point. I don't

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Speaker 2: think we're that far away, you know, would you would

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Speaker 2: you be really excited if you got another fifteen twenty

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Speaker 2: basis once?

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Speaker 3: I think so? Could you add a little bit here?

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Speaker 3: I think so. The front of the yeld curve I

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Speaker 3: still think is too high.

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Speaker 2: I still think we got a price more out of

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Speaker 2: the FED moving in March. I think we have to

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Speaker 2: price a bit more out of how many cuts though

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Speaker 2: the markets are anticipating for this year. But I think

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Speaker 2: in the in that belly of the curve, you know

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Speaker 2: you're getting you know, you know, would you start to

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Speaker 2: put some money to work here?

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Speaker 3: Yeah, I think you can put a little bit of

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Speaker 3: money to work here. Okay.

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Speaker 1: On credit, I've had lots of opinions it's priced to

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Speaker 1: perfection ig over high yield is where people want to

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Speaker 1: be given this trajectory that we're on at the moment,

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Speaker 1: perhaps delayed rate cuts a quasi soft landing. What does

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Speaker 1: that do to credit? You want to see a little bit.

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Speaker 1: I mean a quarter of a billion was wiped off

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Speaker 1: credit this week alone, in two days. So we've taken

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Speaker 1: a chunk out of credit. Do you expect it to

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Speaker 1: back up further? Are there better we enter you points

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Speaker 1: in credit?

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Speaker 2: So there's a lot of supply that's going to get

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Speaker 2: by the way you US Europe, we're pricing a lot

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Speaker 2: of supply in the market.

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Speaker 3: Market needs to digest that. You push back a little bit.

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Speaker 2: I think if you step back, you know, these spread

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Speaker 2: levels sexy? Not really, but I think people are what

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Speaker 2: they're going to realize for twenty twenty four. If we

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Speaker 2: can create a portfolio using credit, using mortgages, using some

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Speaker 2: securitized assets. If you can create a yield of six

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Speaker 2: to six and a half using the risk free rate,

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Speaker 2: some credit, some securitized, some mortgages, some high quality assets,

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Speaker 2: Let's say you can build a portfolio six six and

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Speaker 2: a half if the economy is moderating to one and

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Speaker 2: a half real GDP two and a half inflation, you

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Speaker 2: can clip six six and a half. That is really

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Speaker 2: in an environment, what's my return going to be in

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Speaker 2: twenty four if I can get a six six and

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Speaker 2: a half maybe a little bit higher and fixed income,

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Speaker 2: marry that to equities. So when I buy some credit, Yeah,

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Speaker 2: I'd buy some credit through the through the indigestion of

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Speaker 2: the supply that's coming, and just try and build this

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Speaker 2: portfolio that gets you, you know, gets you six six

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Speaker 2: and a half yield. That's pretty good in you know,

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Speaker 2: an environment with an economy that's slow and inflation that's coming,

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Speaker 2: that's coming down, and a FED that'll get to that

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Speaker 2: long term funds target.

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Speaker 3: Boy, if you can clip six to six and a half,

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Speaker 3: pretty pretty good.

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Speaker 1: I'm on my way.

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Speaker 3: I'm on my way.

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Speaker 1: I'm coming out of coming out of those things that

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Speaker 1: they've told me. Now what CDs are in this country.

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Speaker 3: I'm on my way.

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Speaker 1: I'm looking for the for the rick reader, the retail fund,

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Speaker 1: a little touch of that. Let's just close it off.

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Speaker 1: I mean, give you your opinion. I'm surprised you say

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Speaker 1: we have seventeen trillion in cash assets across the market,

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Speaker 1: in money market funds. Now to a certain extent, you're

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Speaker 1: going to speak your own book, aren't you ricking that

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Speaker 1: it's going to be the bomb market that picks up that?

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Speaker 1: But is it that those yields, the structure of those

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Speaker 1: years you've just outligned to me, is a better return

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Speaker 1: relative to the risk and equity.

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Speaker 2: So this is not the you're not the most profound

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Speaker 2: answer you're ever going to Again. I think that money.

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Speaker 2: I think that some of the money will come into equities.

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Speaker 2: I actually think the equity, the technicals and the equity

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Speaker 2: and I think are terrific.

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Speaker 3: We're getting huge.

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Speaker 2: Amounts of treasury supply, We're getting some credit supply coming

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Speaker 2: in fixed income. I still think there's some equities that

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Speaker 2: make a bunch of suns. I've been buying some in

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Speaker 2: the last few days. There's some equities you can buy

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Speaker 2: that traded three times cash flow, you know, seven to

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Speaker 2: ten times earnings that you know, you look at energy,

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Speaker 2: you look at autos, you look at airlines, you can

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Speaker 2: look at casinos.

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Speaker 3: You can there's some equities to buy.

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Speaker 2: You know, we could talk a lot about them, about

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Speaker 2: the Magnificent seven. I think equities will get some of

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Speaker 2: that money, and so my answer would be, I think

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Speaker 2: money will continue to flow in a fixed income and

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Speaker 2: you're seeing that at the beginning of this year. You saw

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Speaker 2: a lot of the quote unquote January effect happen in

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Speaker 2: November and December. But I think you're going to see

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Speaker 2: that money come in. But I also think people underestimate

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Speaker 2: you don't have you big equity buybacks, you don't have

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Speaker 2: a lot of IPO calendar and equities, and I think

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Speaker 2: it'll be it'll support the equity market. My next conclusion

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Speaker 2: is if I can get six to seven in fixed income,

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Speaker 2: I think equities not going to have the returns I

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Speaker 2: had last year. But if boy, if companies can throw

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Speaker 2: off in an economy like this ten percent eight to

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Speaker 2: twelve percent Roe, then boy, you know, I take some

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Speaker 2: equities too, and so build more a balanced portfolio that

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Speaker 2: I think will work.

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Speaker 3: This in twenty twenty four.

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Speaker 2: Not spectacular equity like returns in in tech AI, but

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Speaker 2: are pretty good numbers.

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Speaker 1: Hey, what's not to love about six six and a

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Speaker 1: half percent? Rick, Thank you very much.

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Speaker 3: Rig greated that