WEBVTT - Surveillance: Bonds with Bill Gross 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.840 --> 0:00:23.560 To find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg dot 0:00:23.560 --> 0:00:29.840 com and of course on the Bloomberg terminals in the 0:00:30.120 --> 0:00:31.960 count Well. The outlooks that we had at the end 0:00:32.000 --> 0:00:34.800 of the year are basically useless, like all the outlooks 0:00:34.800 --> 0:00:37.360 Bill Gross wrote over the years. Let's migrate on Thatch 0:00:38.000 --> 0:00:41.040 to a conversation with one William Gross, former PIMCO of 0:00:41.080 --> 0:00:44.440 co c i O that barely describes his contribution to 0:00:44.520 --> 0:00:49.480 bond investment. He's put out a book which is hugely readable. 0:00:49.720 --> 0:00:52.879 I wasn't sure what to expect from the stamp collector. 0:00:53.000 --> 0:00:55.880 I'm still standing has a lot of smart notes in it, 0:00:55.960 --> 0:00:59.880 in some extremely frank talk about his turmoil of the 0:01:00.080 --> 0:01:03.960 recent years. Bill Gross, Um, thank you so much. I 0:01:04.000 --> 0:01:06.600 love the idea in the beginning of the book there 0:01:06.640 --> 0:01:09.360 never was a bond king. I met you the first 0:01:09.400 --> 0:01:13.080 time at the Waldorf Story, and you were almost in 0:01:13.160 --> 0:01:17.280 tears because you got the bond market wrong. I can't 0:01:17.280 --> 0:01:20.200 remember Bill if it was price up, yield down, or 0:01:20.280 --> 0:01:23.120 yields up, price down. But you blew it on a 0:01:23.200 --> 0:01:25.759 but at that at that time, you completely blew it. 0:01:26.440 --> 0:01:29.560 What did you get right that made you the so 0:01:29.680 --> 0:01:36.280 called bond king? Well, I think Tom that I from 0:01:36.280 --> 0:01:40.280 an early stage I wrote a book called the you know, 0:01:40.360 --> 0:01:44.119 the Long Term Secular View of Financial Markets and UM. 0:01:44.360 --> 0:01:47.400 It seemed to me that if you know, you could 0:01:47.440 --> 0:01:50.800 eliminate human emotion, which is what you just talked about 0:01:50.840 --> 0:01:54.720 on a day to day basis that if you look 0:01:54.800 --> 0:01:59.400 three to five years out and had a intelligent forecast 0:01:59.480 --> 0:02:03.200 as to the direction of inflation, UM and the economy, 0:02:03.360 --> 0:02:05.720 than you have a better chance. Not not that you 0:02:06.320 --> 0:02:08.600 terribly succeed, but you'd have a better chance. And so 0:02:08.639 --> 0:02:11.640 I think the the secular outlook at PIMCO, which was 0:02:11.680 --> 0:02:15.800 three to five years was key going forward. You were 0:02:15.840 --> 0:02:19.440 in Indian Wells. There's a small tennis tournament there UH 0:02:19.520 --> 0:02:22.160 this week which will be of great interest to those 0:02:22.200 --> 0:02:24.640 that follow tennis. And part of his getting the ball 0:02:24.680 --> 0:02:27.480 in play and putting the ball back and forth across 0:02:27.520 --> 0:02:31.880 the net. You started out in the mail room at PIMCO. 0:02:32.080 --> 0:02:34.440 How did you get the ball moving on the Pimco 0:02:34.520 --> 0:02:39.840 tennis court. Starting out in the mail room, well, we 0:02:39.880 --> 0:02:44.120 had a billion dollar portfolio. Pacific Mutual did. It wasn't 0:02:44.320 --> 0:02:47.640 Pimco at the time. And Uh I just graduated from 0:02:47.760 --> 0:02:49.760 U C. L A. Anderson, I had a master's degree. 0:02:49.800 --> 0:02:52.840 I was clipping coupons, um, not exactly in the mail room, 0:02:52.880 --> 0:02:57.160 but clipping coupons. And uh I said to myself, wouldn't 0:02:57.160 --> 0:02:59.320 it be better to get out of the vault and 0:02:59.400 --> 0:03:02.920 into the chine and and maybe you could trade these bonds? Um. 0:03:03.120 --> 0:03:06.160 You know, back then there weren't computers, IBM at A 0:03:06.200 --> 0:03:09.840 three sixty, etcetera. But um, you couldn't really move them 0:03:09.840 --> 0:03:13.280 back and forth except physically. And so most banks and 0:03:13.360 --> 0:03:16.680 most insurance companies didn't. And so I thought that if 0:03:16.720 --> 0:03:21.119 I could take five million of that one billion portfolio 0:03:21.200 --> 0:03:24.240 and traded and performed, then we could get some clients 0:03:24.280 --> 0:03:28.440 and grow a little investment company. Called a little investment company, 0:03:28.480 --> 0:03:32.240 they grew quite large. Bill. You talk also about your 0:03:32.280 --> 0:03:35.720 start just even with education, with two hundred dollars into 0:03:35.760 --> 0:03:39.320 your pants, going to Las Vegas gambling and getting ten 0:03:39.320 --> 0:03:42.520 thousand dollars to pay for your college education. Partly that 0:03:42.640 --> 0:03:46.120 gambling to the markets and how the game has changed. 0:03:46.200 --> 0:03:50.880 How much has the game changed over your tenure? Those 0:03:51.000 --> 0:03:55.520 change a lot, you know since I when I started, UH, 0:03:55.680 --> 0:04:00.960 there weren't really liquid UH mortgage passed through certainly, wasn't 0:04:01.440 --> 0:04:07.000 interest in foreign bonds. There weren't any tips, inflation protected securities, etcetera, etcetera. 0:04:07.080 --> 0:04:10.600 And so that and the evolution of financial futures, which 0:04:10.680 --> 0:04:15.280 is probably the biggest change. You introduced liquidity into the marketplace, 0:04:15.320 --> 0:04:17.520 and it allowed for even a small firm at the 0:04:17.560 --> 0:04:21.240 time like Pimco UH to to basically trade and to 0:04:21.360 --> 0:04:25.240 make money. UH. Financial futures back in the day were cheap, cheap, cheap, 0:04:25.320 --> 0:04:28.440 and we could buy a treasury bond through the financial 0:04:28.480 --> 0:04:32.480 futures market and turn a at the time ten percent 0:04:32.600 --> 0:04:36.039 yield into a twelve percent yield. And UH the first 0:04:36.080 --> 0:04:39.280 mover advantage for Pimco in terms of all of these 0:04:39.320 --> 0:04:42.480 categories was quite critical as well. Bill. The reason why 0:04:42.480 --> 0:04:44.360 I ask is because we're in an era where a 0:04:44.400 --> 0:04:47.120 lot of people talk about the distortions in the de 0:04:47.240 --> 0:04:49.760 bond markets by the Federal Reserve, where the feed is 0:04:49.800 --> 0:04:52.599 prepared to start moving back from some of their support 0:04:52.920 --> 0:04:56.200 from their bond purchases. Today marks the last day of 0:04:56.279 --> 0:05:00.880 those pandemic era purchases, at least the expansion much. Can 0:05:00.920 --> 0:05:04.240 the bond market really give the same kinds of messages 0:05:04.880 --> 0:05:10.640 as it did back when you started out clipping coupons, Well, 0:05:10.680 --> 0:05:15.000 certainly not as much. There's there's more involvement by almost 0:05:15.040 --> 0:05:20.080 all central banks, despite the pullback that you mentioned occurring today. 0:05:20.560 --> 0:05:25.159 And um, you know, interest rates are so artificially low 0:05:25.400 --> 0:05:30.640 that that it's hard for institutional investors or even individual 0:05:30.680 --> 0:05:34.000 and private investors too to make much of a difference. 0:05:34.279 --> 0:05:38.839 Central banks control the market. Um. I think they're terribly 0:05:38.839 --> 0:05:41.599 wrong in terms of what they've done, stayed so low 0:05:42.000 --> 0:05:45.280 for so long. Uh, and now we have inflation, not 0:05:45.440 --> 0:05:50.440 necessarily because of those policies, but probably in a large 0:05:50.480 --> 0:05:53.880 part because of them. And so it's um, it's just 0:05:53.920 --> 0:05:57.359 a difficult market. You you try and anticipate the central banks, 0:05:57.400 --> 0:06:01.240 which has been relatively seen the past few years because 0:06:01.240 --> 0:06:05.120 they haven't done anything. But now they're about moving. It's 0:06:05.160 --> 0:06:08.440 simply a question of what Coal and others UM do 0:06:08.640 --> 0:06:11.680 in terms of the policy rate. Bill Gross I've been 0:06:11.680 --> 0:06:14.160 out to Newport to see your Monroe trader on your 0:06:14.200 --> 0:06:17.400 desk of long ago and far away where you calculated 0:06:17.440 --> 0:06:20.239 convexity like no one that could do it. And part 0:06:20.279 --> 0:06:22.800 of the as you mentioned, the first mover advantage of 0:06:22.880 --> 0:06:26.840 PIMCO was intellect. I want you to speak about what 0:06:26.920 --> 0:06:30.680 you and Dr al Arian did when the two of 0:06:30.720 --> 0:06:35.000 you got together and put intellect first for a bye 0:06:35.080 --> 0:06:39.880 side house. Every single by side shop had to react 0:06:40.000 --> 0:06:44.560 and pattern themselves against what you and Mohammed invented. Tell 0:06:44.640 --> 0:06:50.000 us how you put intellect first at your Pimco. Well, 0:06:50.040 --> 0:06:53.520 we we did build a small company than a larger 0:06:53.560 --> 0:06:57.160 company of very smart people. And um, it wasn't just 0:06:57.279 --> 0:07:01.400 myself and uh and Mohammed. Mommed came much later. PIMCO 0:07:01.600 --> 0:07:04.520 was very much of a success before Mohammed, but Paul 0:07:04.600 --> 0:07:08.360 mcculloy was very key in terms of FED policy and 0:07:08.440 --> 0:07:13.040 anticipating the Great Recession. Chris Dialmus was very important in 0:07:13.160 --> 0:07:17.200 terms of bringing financial futures to the company. Um, there 0:07:17.200 --> 0:07:20.680 were lots of others that were innovators, that were mild 0:07:20.760 --> 0:07:24.960 risk takers, and um, you know, putting together a group 0:07:25.000 --> 0:07:30.240 of bond kings and later Queen's was quite important. Was 0:07:30.280 --> 0:07:32.920 the challenges that you had later in your career and 0:07:32.960 --> 0:07:35.040 I don't want to get into the soap opera of it, 0:07:35.520 --> 0:07:38.200 but Bill gross or the challenges that you had, like 0:07:38.280 --> 0:07:41.680 at so many other shops due to the decline and 0:07:41.800 --> 0:07:45.480 profitability of the Bye side. It used to be a 0:07:45.520 --> 0:07:48.440 cozy job bill. You'd show up for two hours, then 0:07:48.480 --> 0:07:51.640 you'd go pay cof golf trying to get your handicap 0:07:51.720 --> 0:07:56.040 up and that bill the Bye side. You know, every 0:07:56.080 --> 0:07:59.240 single by side story is about lower and lower and 0:07:59.320 --> 0:08:02.760 lower reven new and squeezed margin. Is that what you 0:08:02.880 --> 0:08:06.800 ran into later in your career, Well, that's what I 0:08:06.840 --> 0:08:10.440 was advocating. In the von market. There was this um 0:08:10.520 --> 0:08:16.120 uh extension of trading into E T F s and 0:08:16.560 --> 0:08:21.240 too um vehicles that charged lower and lower and lower fees. 0:08:21.400 --> 0:08:25.920 I sensed that as a trade, as a UM as 0:08:25.960 --> 0:08:30.480 a a sense, it as a trend because simply as 0:08:30.640 --> 0:08:34.960 interest rates themselves lowered went down to five four three 0:08:35.000 --> 0:08:38.120 to one, UM, you know, you couldn't charge fifty basis 0:08:38.120 --> 0:08:42.280 points on a one tenure treasure. That's half of the 0:08:42.880 --> 0:08:45.559 half of the yield. And it was almost an egregious 0:08:45.600 --> 0:08:50.079 type of uh of situation, and so um, you know, 0:08:50.160 --> 0:08:54.760 fees became important, became important in terms of my leaving 0:08:54.800 --> 0:09:01.040 PIMCO because the the surviving contingent basically wanted higher yield 0:09:01.760 --> 0:09:04.320 products hedge fund types of products, and I wanted to 0:09:04.360 --> 0:09:07.720 stick to the old total return formula that had done 0:09:07.760 --> 0:09:10.400 so well. The total return formula is in a very 0:09:10.440 --> 0:09:14.080 tenuous moment simply because of where yields are and where 0:09:14.120 --> 0:09:17.440 inflation is expected to be. Some people consider Jeff Gunlock 0:09:17.720 --> 0:09:20.959 your successor when it comes to the bond king moniker. 0:09:21.640 --> 0:09:24.720 You may disagree, others do. The question I have is 0:09:24.760 --> 0:09:27.840 do you agree with his prognostications of a ten percent 0:09:27.920 --> 0:09:30.840 inflation rate this year and the likelihood that the FED 0:09:30.960 --> 0:09:36.120 is vastly behind the curve? Well, the latter, yes, Uh, 0:09:36.240 --> 0:09:40.200 you know, a ten percent inflation rate is problematic. We'll 0:09:40.240 --> 0:09:42.000 say a little bit of it tomorrow. And it depends 0:09:42.000 --> 0:09:45.920 a course on commodity prices, oil prices, and you know 0:09:45.960 --> 0:09:49.280 the wage follow on. But I do think inflation will 0:09:49.320 --> 0:09:52.560 be in a fort five percent category for the next 0:09:52.720 --> 0:09:56.840 several years. And and does that validated tenure at one 0:09:57.040 --> 0:10:00.319 eighty or eighty five It does not. Um does it 0:10:00.480 --> 0:10:02.480 mean that there will be a huge amount of sellers 0:10:03.160 --> 0:10:06.280 because of the lack of FED buying um, you know, 0:10:06.640 --> 0:10:09.800 probably not. You know, as we've seen in the last 0:10:09.800 --> 0:10:13.640 few weeks, treasuries are a safe haven much like gold, 0:10:13.760 --> 0:10:17.360 and so investors that can hit to stick at one 0:10:17.400 --> 0:10:21.320 point eight percent until the coast clears. I do think 0:10:21.320 --> 0:10:24.280 though that uh, you know, bonds are risk investment here. 0:10:24.440 --> 0:10:27.600 Durations are very very very low, as low as almost 0:10:27.679 --> 0:10:31.600 they've ever been. And so when uh inflation is accepted 0:10:31.640 --> 0:10:34.440 in the marketplace at four to five percent, which I 0:10:34.480 --> 0:10:38.360 think it might UM, then bonds are a sale. And 0:10:38.920 --> 0:10:41.319 you know, once we get above on the tenure, once 0:10:41.360 --> 0:10:46.560 we get above to fifteen UM, I think there's substantial risk. 0:10:46.640 --> 0:10:48.760 There's a if you give me just one second, there's 0:10:48.800 --> 0:10:53.440 a long term trend, a thirty five year downward trend 0:10:53.480 --> 0:10:56.079 in terms of the tenure and the third year UM 0:10:56.200 --> 0:10:59.319 that hasn't been broken. It's one of the most amazing 0:10:59.400 --> 0:11:03.080 trend line that exist in financial markets. And right now, 0:11:03.120 --> 0:11:07.000 the tenure at two fifteen would break of the downward 0:11:07.080 --> 0:11:09.720 trend for thirty or five years, and so I think 0:11:09.760 --> 0:11:11.959 that's critical, but I think it will happen. So you 0:11:12.000 --> 0:11:13.960 do think that that trend will be broken. But do 0:11:14.000 --> 0:11:16.960 you think that we're going to escape the negative real 0:11:17.040 --> 0:11:18.760 yield vortex or do you think that that's going to 0:11:18.840 --> 0:11:23.440 persist well and might in certain areas. I mean they're 0:11:23.640 --> 0:11:28.439 they're less fewer and fewer negative yielding bonds. I think 0:11:28.440 --> 0:11:31.200 we're down to four trillion as opposed to fifteen trillion 0:11:31.280 --> 0:11:35.320 and the German tenures of but a magnificent eight basis 0:11:35.400 --> 0:11:39.800 points this morning, um so UM. I think ultimately we 0:11:40.400 --> 0:11:45.520 have to as a finance based global economy. Negative interest 0:11:45.600 --> 0:11:50.679 rates are definitely a negative, a detriment to UH to 0:11:51.200 --> 0:11:57.040 economic growth because they encourage or discourage savers, which is 0:11:57.120 --> 0:12:00.280 the thrust of investment. If you don't have I means 0:12:00.360 --> 0:12:03.200 you don't have an investment, and UM to a certain extent, 0:12:03.240 --> 0:12:06.079 if you stayed down there in negative territory, investors will 0:12:06.160 --> 0:12:09.240 put some of that money into a mattress and it 0:12:09.320 --> 0:12:13.800 doesn't do very well in terms of productivity in a mattress. 0:12:14.000 --> 0:12:16.080 We're going to continue with Bill Gross. He's gonna stay 0:12:16.120 --> 0:12:18.280 where this with his new e book out. I'm still 0:12:18.320 --> 0:12:22.600 standing right now and more timely, perhaps because of the 0:12:22.640 --> 0:12:26.480 invasion of Ukraine. It is a launch of SpaceX. They're 0:12:26.520 --> 0:12:30.079 preparing uh that right now. This is SpaceX Falcon nine. 0:12:30.520 --> 0:12:33.720 It is a launch of forty eight Starlink satellites, and 0:12:33.800 --> 0:12:36.400 you've got to you've got to believe that it is 0:12:36.480 --> 0:12:39.280 somehow changed off of Cape Canaveral. Then it would have 0:12:39.320 --> 0:12:43.160 been Lisa thirteen or fourteen days ago. Well, and actually 0:12:43.200 --> 0:12:45.319 this is important because it comes at a time and 0:12:45.480 --> 0:12:49.080 we do have this dominance of the tracking of a 0:12:49.080 --> 0:12:51.200 lot of individuals through their phones, which is part of 0:12:51.200 --> 0:12:55.320 how Ukraine actually got ahead of Russia and even attract tanks. 0:12:55.400 --> 0:12:57.760 There was an anecdote that actually they could tell where 0:12:57.760 --> 0:13:00.520 the tanks were because Google Maps was saying that there 0:13:00.559 --> 0:13:03.079 was a lot of traffic there. So these satellites are 0:13:03.120 --> 0:13:05.439 integral in the way that we understand the world and 0:13:05.480 --> 0:13:07.480 they we're operating, and it is a new regime. This 0:13:07.520 --> 0:13:09.480 will be a number of minutes here of a launch 0:13:09.520 --> 0:13:11.880 and then fifty six minutes in is when we would 0:13:11.880 --> 0:13:15.520 see a deployment. Make that one hour, sixty five minutes 0:13:15.559 --> 0:13:19.320 in we'll see the deployment of the starlink at satellites. 0:13:19.400 --> 0:13:21.520 We'll leave Cape Canado right now. For all of you 0:13:21.559 --> 0:13:24.719 on Bloomberg Radio and Bloomberg Television. Someone who's been of 0:13:24.760 --> 0:13:27.439 a great support to us over the years when William 0:13:27.480 --> 0:13:31.079 Gross always in forever of his Pimco and of course 0:13:31.120 --> 0:13:34.439 tenure at Janice as well. Out with a wonderful new book, 0:13:34.960 --> 0:13:38.760 Bill Gross. There is a hilarious moment in the book. 0:13:38.880 --> 0:13:41.840 And I'm not surprised because I've tried to fire you 0:13:41.920 --> 0:13:46.000 at least three times. Lu Roue Keiser went after you 0:13:46.480 --> 0:13:49.520 on Wall Street Week and said, who is this young turk? 0:13:49.960 --> 0:13:53.439 Get rid of them? How did lu Roue Keiser fire 0:13:53.600 --> 0:13:58.400 Bill Gross? Well, we always had a question as panelist, 0:13:59.120 --> 0:14:03.720 and my question was about the fiscal deficit and UH expanding, 0:14:03.800 --> 0:14:06.000 And so I thought I'd be cute and bring a 0:14:06.080 --> 0:14:11.320 rubber band into the studio and fire it at lose 0:14:11.440 --> 0:14:15.400 ear when I talked about an expanding fiscal deficit. I 0:14:15.440 --> 0:14:19.000 did that. It was a good shot. Missed his ear. 0:14:19.880 --> 0:14:24.280 He smiled, and UH went on in the conversation, but 0:14:24.400 --> 0:14:27.880 clearly it was very miffed and at the end UH 0:14:28.120 --> 0:14:30.760 he had his producer farming. It didn't take long. An 0:14:30.800 --> 0:14:33.680 important question. I know, Lisa and I've talked about this before, 0:14:34.200 --> 0:14:37.880 the parlor game of fed guessing. You've been a pinata 0:14:37.920 --> 0:14:40.760 on this. Sometimes you've got it right, sometimes you've got 0:14:40.760 --> 0:14:43.640 it wrong. Sometimes it's what you believe in and not 0:14:43.760 --> 0:14:45.840 so much what you think the FED will actually do. 0:14:45.880 --> 0:14:49.480 I get it is their value to the modern FED 0:14:49.560 --> 0:14:54.600 watching what I call the FED parlor game. Well, I 0:14:54.640 --> 0:14:58.120 think there still is uh, you know, debating whether it's 0:14:58.160 --> 0:15:02.080 a quarter or fifty base points may not have been 0:15:02.160 --> 0:15:06.000 of or may not be too much value. But if 0:15:06.360 --> 0:15:10.720 you can analyze the fits rather longer term moves in 0:15:10.800 --> 0:15:16.480 terms of twelve, thirty six months, and that's the critical judgment, 0:15:16.520 --> 0:15:22.400 and that becomes very difficult politically and otherwise. So I 0:15:22.800 --> 0:15:26.280 still think since central banks control the market, do you 0:15:26.320 --> 0:15:30.320 want to try and guess um what Powell and others 0:15:30.320 --> 0:15:35.120 are thinking in terms of interest rate hikes? And so yes, 0:15:35.280 --> 0:15:38.520 I'd say listen closely. Well, especially at a time when 0:15:38.560 --> 0:15:40.160 you think that the trend is going to be broken, 0:15:40.200 --> 0:15:43.960 the downward trend of yields that we had experienced for decades. 0:15:44.200 --> 0:15:47.000 At what point or do you think that investors should 0:15:47.000 --> 0:15:50.440 look to just break even on an inflation adjusted basis 0:15:50.600 --> 0:15:53.720 rather than actually get returns from financial instruments the way 0:15:53.760 --> 0:15:58.280 they've become accustomed to. Well, if you're talking about tips 0:15:58.360 --> 0:16:01.280 or in general, because I think that there's been this 0:16:01.360 --> 0:16:03.720 feeling where you were talking about investing in risky your 0:16:03.720 --> 0:16:05.640 assets to try to get bigger returns for the likes 0:16:05.680 --> 0:16:08.480 of pension funds and foundations. And you have a lot 0:16:08.480 --> 0:16:10.520 of big investors coming out and saying, look, you've got 0:16:10.520 --> 0:16:13.400 to lower your expectations in order to not just lose 0:16:13.440 --> 0:16:17.240 your shirt in really risky assets. What's your view? Yeah, correct, 0:16:17.280 --> 0:16:20.680 I think going forward, and I've said this for a 0:16:20.760 --> 0:16:23.240 few years now, and obviously not with the fangs and 0:16:23.680 --> 0:16:26.000 the high flyers that hasn't been the case. They've done 0:16:26.080 --> 0:16:28.760 very well until the last few months. But I think 0:16:28.760 --> 0:16:33.320 an investor can really only expect five to six percent 0:16:34.080 --> 0:16:37.800 going forward. Um. You know, these are days in which 0:16:37.840 --> 0:16:41.119 interest rates will be rising, They will be pressuring corporate 0:16:41.160 --> 0:16:44.040 profit margins. They will be affecting the housing market and 0:16:44.080 --> 0:16:48.640 slowing the economy down. Um, there's less liquidity in the 0:16:48.720 --> 0:16:52.400 marketplace and and so UM, you know, a five to 0:16:52.440 --> 0:16:55.640 six percent return instead of a tin banger like Peter 0:16:56.000 --> 0:16:59.040 Lynch used to call it, or even ten to twenty, 0:16:59.560 --> 0:17:04.920 which millennials um and new investors think they deserve. Um, 0:17:05.320 --> 0:17:09.040 it is probably a pretty good number, Bill if you're 0:17:09.040 --> 0:17:12.959 restarting a career now, which asset class would you choose 0:17:13.080 --> 0:17:19.000 as having the most promise, well, not bonds, um, you know, 0:17:20.440 --> 0:17:27.240 probably commodities, and not just because it's hot. Um. I 0:17:27.240 --> 0:17:32.400 wouldn't choose real because I think that's um been thwarted 0:17:32.440 --> 0:17:35.399 as well, because of the potential for higher indust rates. 0:17:35.680 --> 0:17:40.480 Bonds stocks um, you know, stocks are stocks for me, 0:17:40.560 --> 0:17:44.640 would still be an exciting young person's type of asset 0:17:44.720 --> 0:17:49.439 class despite the lower returns going forward. There's lots to choose. Uh, 0:17:49.560 --> 0:17:51.679 there's lots of a difference to make in terms of 0:17:51.880 --> 0:17:56.640 analyzing various sectors. And so I don't know I pick stocks. 0:17:56.680 --> 0:17:59.200 I pick stocks in the beginning, but they wouldn't have me. 0:17:59.480 --> 0:18:02.399 So I I went down and clip coupons the girls. 0:18:02.480 --> 0:18:05.320 How do was our listeners and our viewers? And I 0:18:05.680 --> 0:18:07.679 love thank you for the mention of the Bloomberg in 0:18:07.720 --> 0:18:10.040 your book. I'm still standing where you say you get 0:18:10.119 --> 0:18:11.960 up in the morning and look at the Bloomberg screen 0:18:12.040 --> 0:18:14.560 for five hours. I mean, you know that's a great 0:18:14.600 --> 0:18:18.000 retirement bill. But when you when you get up in 0:18:18.040 --> 0:18:21.080 the morning, and even with your caution over the years, 0:18:21.119 --> 0:18:25.880 you've never been associated with the gloom crew. How should 0:18:25.920 --> 0:18:31.280 our listeners and viewers respond to? Typically the Friday data 0:18:31.480 --> 0:18:35.600 and Internet dump of gloom out there on the markets. 0:18:37.680 --> 0:18:41.840 Well should you should take it very carefully because you know, Tom, 0:18:42.119 --> 0:18:45.679 human emotion is is critical in terms of an investor 0:18:46.160 --> 0:18:52.000 and attitudes towards markets. Um, you know, I've been a 0:18:52.119 --> 0:18:57.480 glass half empty because that's what fund investors are. They 0:18:57.560 --> 0:19:00.840 have to protect capital. But at the same time, PIMCO 0:19:01.200 --> 0:19:06.600 and myself rode the bond bull market from all the 0:19:06.640 --> 0:19:09.800 way down to a few years ago, and that's a 0:19:09.960 --> 0:19:13.960 very bullish, optimistic type of attitude in terms of bond prices. 0:19:14.119 --> 0:19:17.920 So I think an investor has to know who they 0:19:17.960 --> 0:19:23.440 are and then to to try and apply that servitablate 0:19:23.520 --> 0:19:26.800 to markets. You're more qualified on this and maybe five 0:19:26.880 --> 0:19:29.399 or ten guys in the world. I've been preaching for 0:19:29.440 --> 0:19:32.919 the last fifteen days that Ukraine is a crisis of 0:19:33.040 --> 0:19:37.680 tangible assets, commodities, things, as Gartman says, things that fall 0:19:37.760 --> 0:19:40.920 in your foot, like an oil drum, et cetera. You're 0:19:40.960 --> 0:19:45.920 the king. Some would say, of financial instruments. What's different 0:19:46.000 --> 0:19:51.959 about the financial system now given tangible asset crisis versus 0:19:52.600 --> 0:20:00.119 intangible asset financial instrument crisis like what we saw. Well, 0:20:00.160 --> 0:20:05.600 I think certainly liquidity is different in terms of at 0:20:05.640 --> 0:20:09.119 least Russia's central bank reserves, and I think that begins 0:20:09.160 --> 0:20:13.240 to affect other countries as well, and then ultimately it 0:20:13.280 --> 0:20:18.920 effects investor's attitude. You know, UM momentum which is a 0:20:19.040 --> 0:20:25.080 valid alpha generator meaning UM. Those that follow momentum types 0:20:25.080 --> 0:20:27.640 of trends have done very well over the past ten 0:20:27.720 --> 0:20:31.560 or twenty years. As markets have moved up UM. Momentum 0:20:31.640 --> 0:20:33.920 is now of course shifted the other way UM, and 0:20:34.200 --> 0:20:36.440 and so an investor has to be cautious of this 0:20:36.600 --> 0:20:39.920 ever increasing trend of higher and higher prices than buying 0:20:39.920 --> 0:20:42.840 the dips, because momentum is going the other way, and 0:20:42.880 --> 0:20:46.800 so I think financially that's a key consideration relative to 0:20:47.200 --> 0:20:50.399 what you mentioned with things, Bill, You've had a history 0:20:50.440 --> 0:20:53.280 of bold bats throughout your career. What's your boldest bet 0:20:53.359 --> 0:20:59.520 right now at this moment? Oh? Um, very few. You 0:20:59.520 --> 0:21:06.880 know I'm doing UM. I'm doing arbitrage corporate buyouts by 0:21:06.920 --> 0:21:09.800 Microsoft and Google. You know Google announced one just the 0:21:09.840 --> 0:21:12.920 other day. I'm content to take four or five. Actually, 0:21:12.960 --> 0:21:15.760 my biggest bet has taken place over the last year. 0:21:15.800 --> 0:21:18.720 I did very well and have done very well in 0:21:19.640 --> 0:21:23.960 gas pipelines partnerships, Uh, there aren't too many of them, 0:21:24.040 --> 0:21:27.720 but they yield eight to nine percent and their tax deferred. 0:21:27.920 --> 0:21:32.600 Check your tax consultant. But um, you know they've gone 0:21:32.680 --> 0:21:37.080 up as the fangs and high flighters have gone down. 0:21:37.119 --> 0:21:39.800 And so the last six to twelve months have been 0:21:39.920 --> 0:21:43.720 very good to my uh foundation. Girl. It's good to 0:21:43.720 --> 0:21:46.439 see you. Thank you so Mutching. Congratulations on the essays 0:21:46.440 --> 0:21:48.640 within your book, and of course of wonderful new text 0:21:48.680 --> 0:21:58.160 as well from Bill Gross. I'm still standing. Let's get 0:21:58.200 --> 0:22:01.959 to the institutional conversation of the day. All institutions react. 0:22:02.000 --> 0:22:05.600 We wait on the international Monetary phone in Christiana, Gorgeva. 0:22:05.680 --> 0:22:08.199 But David mel Pass is at the World Bank. To 0:22:08.320 --> 0:22:11.440 his immense credit, they have not taken down World Bank 0:22:11.520 --> 0:22:14.879 research on the Russian Federation, but front and center on 0:22:14.920 --> 0:22:18.040 the front of the page of their website, the World 0:22:18.200 --> 0:22:22.600 Bank Group is taking quick action to support Ukraine. David 0:22:22.640 --> 0:22:26.840 mel Pass, what do you do this morning? Hi, good 0:22:26.840 --> 0:22:31.480 morning Tom. Well, I'm grateful that our board on Monday 0:22:31.520 --> 0:22:35.240 passed a major package Monday afternoon, so that money becomes 0:22:35.280 --> 0:22:38.840 available right away, meaning I don't know today or tomorrow 0:22:39.400 --> 0:22:43.200 through means for Ukraine, and that helps them survive as 0:22:43.240 --> 0:22:48.399 there as they're fighting, uh, fighting back against the Russian invasion. UH. 0:22:48.440 --> 0:22:52.840 It goes for things like food and salaries and doctors 0:22:52.880 --> 0:22:55.960 that they desperately need. So today now we look to 0:22:56.000 --> 0:22:59.439 build a bigger, a bigger, broader package that can begin 0:22:59.560 --> 0:23:02.360 to think about reconstruction as well. But right now we're 0:23:02.359 --> 0:23:05.879 focused on refugees, on the region, and on how do 0:23:05.920 --> 0:23:08.560 you how do you hold it together? Do you believe 0:23:08.600 --> 0:23:11.520 that you can have a relationship with Mr Putin the 0:23:11.600 --> 0:23:15.720 invader where you can go directly into these these ravaged 0:23:15.760 --> 0:23:19.760 cities and provide World Bank support, or you basically working 0:23:19.760 --> 0:23:24.920 at the border like the Red Cross. Today we're working 0:23:25.040 --> 0:23:28.840 through the Ministry of Finance of Ukraine, which still exists 0:23:28.840 --> 0:23:35.240 and is operational, so they're they're supporting the basic services 0:23:35.320 --> 0:23:38.879 in Ukraine. We're not working with Russians in Ukraine or 0:23:38.960 --> 0:23:42.760 with Russians in Russia. We've suspended, we've stopped all of 0:23:42.800 --> 0:23:46.920 our operations in both Russia and Belarus. David, there's a 0:23:46.960 --> 0:23:49.840 lot of focus on Ukraine and helping the refugees, as 0:23:49.880 --> 0:23:53.359 there should be. There's also growing focus on nations that 0:23:53.440 --> 0:23:56.080 rely on Ukraine and Russia for wheat, for a lot 0:23:56.080 --> 0:23:59.919 of the commodities and thinking of Egypt of their import 0:24:00.000 --> 0:24:03.200 parts of wheat come from Russia and Ukraine. How are 0:24:03.200 --> 0:24:05.960 you preparing a package to help some of those countries 0:24:06.000 --> 0:24:08.520 as they deal with the food inflation and a commodities 0:24:08.520 --> 0:24:12.720 inflation more broadly that they haven't seen before. Yeah, this 0:24:12.840 --> 0:24:16.000 is a huge problem for developing countries in general, and 0:24:16.160 --> 0:24:19.879 especially the poorest ones. People at the that are that 0:24:19.960 --> 0:24:23.520 are inland from ports are having a great deal of 0:24:23.560 --> 0:24:26.520 trouble getting food because the supplies would cut off. I 0:24:26.600 --> 0:24:29.760 spoke with the Prime Minister of Egypt on on Thursday 0:24:29.880 --> 0:24:32.600 or Friday last week. The Egypt is a major importer 0:24:32.840 --> 0:24:36.760 from Ukraine. But fortunately they have storage and their crop 0:24:36.840 --> 0:24:39.320 will be coming in. So as you look around the world, 0:24:39.359 --> 0:24:43.199 the key variables here are how can global production be 0:24:43.359 --> 0:24:47.760 boosted outside of Ukraine and Russia. So that would and 0:24:48.000 --> 0:24:51.920 you know the US, UH and Canada and even Mexico 0:24:52.280 --> 0:24:57.119 are major potential suppliers both of agricultural products and of energy, 0:24:57.440 --> 0:25:02.000 so making it productively rapidly available is going to be 0:25:02.040 --> 0:25:05.040 one of the key the key responses of the world 0:25:05.560 --> 0:25:09.879 to this horrible situation that's hitting Ukraine. I have to 0:25:09.880 --> 0:25:12.680