1 00:00:02,400 --> 00:00:08,159 Speaker 1: Bloomberg Audio Studios, podcasts, radio news, Bruce, good to see it. 2 00:00:08,760 --> 00:00:11,799 Speaker 1: What do you make of this well good CPI numbers today? 3 00:00:11,920 --> 00:00:12,240 Speaker 2: Why? 4 00:00:12,720 --> 00:00:14,960 Speaker 1: For two reasons. Number one, the market came in short 5 00:00:15,000 --> 00:00:17,840 Speaker 1: and so technically they were short, and so anything that 6 00:00:17,880 --> 00:00:20,360 Speaker 1: came in on expectations, the market was going to rally. 7 00:00:20,400 --> 00:00:22,680 Speaker 1: You saw it in treasures and we saw the inequities 8 00:00:22,760 --> 00:00:27,040 Speaker 1: and see big rally. The second reason is CPI. You know, 9 00:00:27,040 --> 00:00:30,200 Speaker 1: when you look at fundamentally the numbers, the numbers were 10 00:00:30,200 --> 00:00:33,479 Speaker 1: pretty good at three point four percent on expectations, but 11 00:00:33,600 --> 00:00:35,520 Speaker 1: when you look at the trailing three months at four 12 00:00:35,520 --> 00:00:38,240 Speaker 1: point one percent, which is the last three months on average, 13 00:00:38,680 --> 00:00:41,159 Speaker 1: that number still too high for the FED. So it 14 00:00:41,280 --> 00:00:44,920 Speaker 1: means higher for longer, without a doubt. And you see 15 00:00:45,000 --> 00:00:47,239 Speaker 1: goods inflation. You saw that with retail sales been good. 16 00:00:47,280 --> 00:00:51,360 Speaker 1: Inflation a little soft, but the services and oeer which 17 00:00:51,360 --> 00:00:53,600 Speaker 1: is a a equivalent rent, you know, up around six percent, 18 00:00:53,880 --> 00:00:56,480 Speaker 1: still too high, too firm. So I think it was 19 00:00:56,560 --> 00:01:01,360 Speaker 1: perfect because for US bond guys and credit investors, it's goldilocks. 20 00:01:01,400 --> 00:01:03,800 Speaker 1: It's higher for longer, and we're making a lot of 21 00:01:03,840 --> 00:01:06,919 Speaker 1: money off these higher rates. And for that after equity folks. 22 00:01:07,000 --> 00:01:09,480 Speaker 1: You know, the technicals are driving it, and you know 23 00:01:09,560 --> 00:01:12,720 Speaker 1: the animal sparatreele. So okay, you've been saying this for 24 00:01:12,720 --> 00:01:14,800 Speaker 1: a while. The Golden Age for credit. 25 00:01:14,920 --> 00:01:17,280 Speaker 2: You like lots of different things. You have a. 26 00:01:17,240 --> 00:01:18,760 Speaker 1: Favorite area of credit? 27 00:01:18,800 --> 00:01:20,560 Speaker 2: Do you have an area that you don't like in credit? 28 00:01:20,600 --> 00:01:22,320 Speaker 1: Well, it's kind of like and that's why I call 29 00:01:22,360 --> 00:01:24,959 Speaker 1: it goldilocks because you look at the you know, liquid 30 00:01:25,000 --> 00:01:27,840 Speaker 1: credit markets, which is everything from high old loans. You know, 31 00:01:28,040 --> 00:01:30,520 Speaker 1: they're ripping, like you know, nearly half of the high 32 00:01:30,560 --> 00:01:33,040 Speaker 1: old bond index is trading inside of two hundred sixty 33 00:01:33,040 --> 00:01:36,080 Speaker 1: two percent of the leverage loan index is trading above par. 34 00:01:36,319 --> 00:01:39,960 Speaker 1: So that's doing really, really well. Structure credit is crushing it, ABS, 35 00:01:40,120 --> 00:01:43,400 Speaker 1: R and b S, CNBS and colos. Yes, even CMBs 36 00:01:43,680 --> 00:01:46,400 Speaker 1: is having a good run here despite what's happening in 37 00:01:46,600 --> 00:01:49,120 Speaker 1: commercial real estate and then emerging market debt doing well. 38 00:01:49,160 --> 00:01:51,240 Speaker 1: So in the liquid credit markets, which is like a 39 00:01:51,240 --> 00:01:54,640 Speaker 1: total of twelve trillion, it's all doing really well. And 40 00:01:54,680 --> 00:01:57,680 Speaker 1: do I have a favorite, Well, we are very selective 41 00:01:57,720 --> 00:01:59,320 Speaker 1: and I'll brought them up in terms of what we 42 00:01:59,440 --> 00:02:02,720 Speaker 1: invest in. And there's a lot of value right now, 43 00:02:02,920 --> 00:02:06,440 Speaker 1: particularly in the structure credit sector compared to these other sectors. 44 00:02:06,520 --> 00:02:10,560 Speaker 1: In private credit, it's you know, middle market lending, direct lending, 45 00:02:10,720 --> 00:02:12,840 Speaker 1: it's asset based lending, which is huge and going to 46 00:02:12,880 --> 00:02:15,680 Speaker 1: get much much bigger, And there's a lot of opportunities 47 00:02:16,000 --> 00:02:19,640 Speaker 1: in capital solutions. So it's kind of goldie lots for 48 00:02:19,760 --> 00:02:23,720 Speaker 1: all credit generally speaking. But there's a small cohort that 49 00:02:24,080 --> 00:02:26,480 Speaker 1: is the tell of two cities. The other part that's 50 00:02:26,480 --> 00:02:29,280 Speaker 1: struggling under these higher, higher rates. 51 00:02:29,480 --> 00:02:31,639 Speaker 2: Is there any sort of correlation with those pockets and 52 00:02:32,120 --> 00:02:33,639 Speaker 2: the areas you're talking about. 53 00:02:33,480 --> 00:02:36,760 Speaker 1: Well, there's correlation among commercial real estate of course ruin 54 00:02:37,160 --> 00:02:40,920 Speaker 1: and so you know, the banks are going to be 55 00:02:41,120 --> 00:02:45,760 Speaker 1: very very constrained because these new CRR you know, capital 56 00:02:46,040 --> 00:02:49,280 Speaker 1: requirements unto Basle three endgame comes in and it means 57 00:02:49,639 --> 00:02:52,840 Speaker 1: you really have to lower down your LTV to make 58 00:02:52,880 --> 00:02:55,400 Speaker 1: that same loan or you're gonna have a big capital charge. 59 00:02:55,560 --> 00:02:57,440 Speaker 1: And so that's when private credit is going to lean 60 00:02:57,480 --> 00:03:00,600 Speaker 1: forward and make loans. We've been very active there. Banks 61 00:03:00,880 --> 00:03:03,720 Speaker 1: pull back from extending commercial real estate loans. And the 62 00:03:03,760 --> 00:03:06,480 Speaker 1: second part are you know, companies that are just a 63 00:03:06,520 --> 00:03:09,960 Speaker 1: little bit too levered that need capital solutions. And then 64 00:03:10,000 --> 00:03:12,840 Speaker 1: again we're leaning in. And look talking about leaning in, 65 00:03:13,240 --> 00:03:15,639 Speaker 1: what's the big lean in? You know, you gotta look 66 00:03:15,639 --> 00:03:17,320 Speaker 1: at Keith Gill and you gotta look at the roaring 67 00:03:17,400 --> 00:03:20,560 Speaker 1: kitty and just see that, see that lean in. But 68 00:03:20,680 --> 00:03:26,160 Speaker 1: the real roaring kitty Jay Powell. And why I say 69 00:03:26,200 --> 00:03:29,560 Speaker 1: that is because as of last October, with his words, 70 00:03:29,560 --> 00:03:31,919 Speaker 1: he's been leaning in, and the equity market since last 71 00:03:32,000 --> 00:03:34,640 Speaker 1: in October up ten trillion. What Keith bring to the table, 72 00:03:34,880 --> 00:03:37,840 Speaker 1: he brought you know, gamestock amc like ten billion of 73 00:03:37,920 --> 00:03:41,720 Speaker 1: value is defect chairman and his liter by the way, 74 00:03:41,760 --> 00:03:47,800 Speaker 1: his liters, all the congressman, all the who put trillions 75 00:03:47,840 --> 00:03:51,400 Speaker 1: dollars of stimulus and as enabled like the comomedy to 76 00:03:51,440 --> 00:03:53,520 Speaker 1: be as you know, strong as it is. And so 77 00:03:54,120 --> 00:03:57,720 Speaker 1: that's the real roaring kitty. It's yes, it's Keith, but 78 00:03:57,960 --> 00:03:59,080 Speaker 1: j Pal is the big guy. 79 00:03:59,480 --> 00:04:01,400 Speaker 2: Is there? Do you worried all though? I mean, it's 80 00:04:01,440 --> 00:04:03,360 Speaker 2: one thing to have a Goldilock scenario where things are 81 00:04:03,440 --> 00:04:05,760 Speaker 2: kind of stable, But when you start talking about kind 82 00:04:05,800 --> 00:04:07,840 Speaker 2: of what we saw based on that ruin kitty tweeting 83 00:04:07,840 --> 00:04:10,000 Speaker 2: all the animal spirits come back in here, does that 84 00:04:10,080 --> 00:04:11,680 Speaker 2: not worry you that if we get to the stage 85 00:04:11,680 --> 00:04:14,840 Speaker 2: of that euphoria again. Then maybe that means J. Powell 86 00:04:14,880 --> 00:04:16,960 Speaker 2: then leans back in his chair and says, I first 87 00:04:17,040 --> 00:04:17,600 Speaker 2: settle down. 88 00:04:17,760 --> 00:04:20,200 Speaker 1: I think we're a little way away from that. I mean, 89 00:04:20,279 --> 00:04:22,600 Speaker 1: you know, we've been leaning in to say AMC. So 90 00:04:22,760 --> 00:04:25,400 Speaker 1: we're long AMCA for like a year, two years, three years. 91 00:04:25,440 --> 00:04:27,599 Speaker 1: And when you know you lean in, an AMC goes 92 00:04:27,640 --> 00:04:30,200 Speaker 1: running up. There's a lot of equity that the company 93 00:04:30,200 --> 00:04:32,400 Speaker 1: can now raise, and that goes right into our pocket 94 00:04:32,400 --> 00:04:35,560 Speaker 1: because we're earnning fifteen percent seeing your secured leaned up 95 00:04:35,600 --> 00:04:39,520 Speaker 1: against all their assets, and we're debt with debt protection 96 00:04:39,880 --> 00:04:43,280 Speaker 1: and we're earning fifteen percent thanks to you know, Roren 97 00:04:43,360 --> 00:04:47,000 Speaker 1: Kitty and all the meme fan club that's buying up aMCI. 98 00:04:47,120 --> 00:04:49,520 Speaker 2: So the debtish ones that we had announced yesterday by AMC, 99 00:04:49,640 --> 00:04:50,760 Speaker 2: you think we're going to see more of that from 100 00:04:50,760 --> 00:04:50,919 Speaker 2: some of. 101 00:04:50,920 --> 00:04:53,279 Speaker 1: These Absolutely, when you raise equity, you raise that and 102 00:04:53,279 --> 00:04:56,440 Speaker 1: you it's a combo platter trade. And we're long, you know, 103 00:04:56,560 --> 00:04:59,039 Speaker 1: kind of the senior secured stuff that we bought in 104 00:04:59,040 --> 00:05:01,280 Speaker 1: the sixties that went to seventies and eighties, they're now 105 00:05:01,279 --> 00:05:03,200 Speaker 1: in the nineties, but we love them still in the 106 00:05:03,279 --> 00:05:07,080 Speaker 1: nineties because we're earning fifteen percent yield on that add 107 00:05:07,080 --> 00:05:10,120 Speaker 1: a discount with all that equity cap that backs it 108 00:05:10,160 --> 00:05:12,200 Speaker 1: now and in a senior security position. 109 00:05:12,320 --> 00:05:13,160 Speaker 2: I love that for you. 110 00:05:14,080 --> 00:05:14,920 Speaker 1: I love it for us. Yeah. 111 00:05:15,000 --> 00:05:17,800 Speaker 2: Maybe what else do you like right now? What else 112 00:05:17,839 --> 00:05:18,520 Speaker 2: is speaking to you? 113 00:05:18,600 --> 00:05:21,000 Speaker 1: Well, what's not speaking to me is treasures. I think 114 00:05:21,000 --> 00:05:23,599 Speaker 1: treasuries are kind of in this range. It's four to 115 00:05:23,680 --> 00:05:26,440 Speaker 1: four and three quarters I think is the inside range. 116 00:05:26,440 --> 00:05:28,520 Speaker 1: Three and three quarters to five is the outside range. 117 00:05:28,640 --> 00:05:31,599 Speaker 1: I think that our star is going to be high 118 00:05:31,720 --> 00:05:35,880 Speaker 1: enough and all the massive treasury issues, so I'd be 119 00:05:36,040 --> 00:05:39,040 Speaker 1: fading treasuries when it gets to not today, but when 120 00:05:39,040 --> 00:05:41,080 Speaker 1: it gets to like inside of four, and I'd be 121 00:05:41,160 --> 00:05:43,040 Speaker 1: a buyer kind of like in the four and three 122 00:05:43,080 --> 00:05:45,080 Speaker 1: quarter neighborhood or infome wider than that. 123 00:05:45,279 --> 00:05:47,160 Speaker 2: Do you think we would break out of that range. 124 00:05:47,320 --> 00:05:48,599 Speaker 1: I think we're gonna be in that range for a 125 00:05:48,640 --> 00:05:51,800 Speaker 1: really long time. And I think you've fade either side 126 00:05:51,800 --> 00:05:55,800 Speaker 1: of that. And in credit, buy it and you buy 127 00:05:55,839 --> 00:05:59,440 Speaker 1: it in liquid credit with multi asset credit strategies, and 128 00:05:59,480 --> 00:06:03,040 Speaker 1: you buy it private credit with both middle market lending, 129 00:06:03,279 --> 00:06:06,559 Speaker 1: asset based lending, and some of these opportunistic strategies. Credit 130 00:06:06,600 --> 00:06:09,840 Speaker 1: is the place to be. So private equity right done 131 00:06:09,920 --> 00:06:12,640 Speaker 1: very well for very long period of time. Private credit, 132 00:06:12,640 --> 00:06:14,839 Speaker 1: which has a fraction of the risk of the leverage 133 00:06:14,880 --> 00:06:18,839 Speaker 1: private equity fraction of that risk because we're senior to it, right, 134 00:06:18,920 --> 00:06:20,839 Speaker 1: and we have our fixed coupon that you know, we're 135 00:06:20,839 --> 00:06:25,080 Speaker 1: in floating right, coupons that that underrate that cash flow. Right. 136 00:06:25,200 --> 00:06:28,080 Speaker 1: We outperformed that index of private equity last year and 137 00:06:28,080 --> 00:06:30,120 Speaker 1: the same thing will happen again this year. So I 138 00:06:30,160 --> 00:06:35,560 Speaker 1: think allocations to equity has always been the rage balance 139 00:06:35,640 --> 00:06:38,359 Speaker 1: with like maybe some hedge and treasuries, But now you 140 00:06:38,400 --> 00:06:42,159 Speaker 1: can really balance a portfolio with credit because it yields 141 00:06:42,200 --> 00:06:44,600 Speaker 1: so much and you don't have to take the equity 142 00:06:44,640 --> 00:06:47,360 Speaker 1: like risk. So I like equities. It's broad based now, 143 00:06:47,560 --> 00:06:49,240 Speaker 1: right s and p is up eleven. 144 00:06:49,880 --> 00:06:52,159 Speaker 2: Up eleven credit. Does that replace what you would maybe 145 00:06:52,160 --> 00:06:55,560 Speaker 2: have in say in government bonds or is that complement that. 146 00:06:56,120 --> 00:06:58,279 Speaker 1: I think it can come from different pockets, and I 147 00:06:58,279 --> 00:07:02,640 Speaker 1: think every plan manager, every allocation model can think about 148 00:07:02,680 --> 00:07:05,240 Speaker 1: it differently. They can think about it on the alt 149 00:07:05,279 --> 00:07:08,159 Speaker 1: side for private credit versus their other alts, Like why 150 00:07:08,160 --> 00:07:10,440 Speaker 1: should I have alts in real estate? Equity where they 151 00:07:10,480 --> 00:07:13,280 Speaker 1: can have real estate credit that yields a lot more. 152 00:07:13,280 --> 00:07:15,480 Speaker 1: That's sucking out all the cash flow from the properties, 153 00:07:15,520 --> 00:07:19,040 Speaker 1: not allowing the equity owners to participate the same thing 154 00:07:19,080 --> 00:07:21,880 Speaker 1: happening in private equity. You can start to balance DA 155 00:07:21,960 --> 00:07:23,920 Speaker 1: out a little bit, or you can take from your 156 00:07:24,400 --> 00:07:27,920 Speaker 1: high grade portfolio, whether it's government's work, investment grade corporates, 157 00:07:28,160 --> 00:07:30,960 Speaker 1: and go down in credit because the commedy is doing well, 158 00:07:31,360 --> 00:07:36,040 Speaker 1: and you know, and companies capital structures are so well 159 00:07:37,120 --> 00:07:39,960 Speaker 1: established at this point in terms of being able to 160 00:07:40,000 --> 00:07:40,680 Speaker 1: service the debt. 161 00:07:41,000 --> 00:07:44,400 Speaker 2: You sound so bullish. Everything is green, everything is positive, 162 00:07:44,440 --> 00:07:47,360 Speaker 2: treasures are ranged bound. That's making me nervous. Well, why 163 00:07:47,400 --> 00:07:48,320 Speaker 2: shouldn't I be nervous? 164 00:07:48,440 --> 00:07:50,920 Speaker 1: I think the being nervous about it is the US government. 165 00:07:53,760 --> 00:07:56,640 Speaker 1: So am I issuing so much debt and running such 166 00:07:56,720 --> 00:07:59,800 Speaker 1: massive deficits. And some point you know there's going to 167 00:07:59,840 --> 00:08:04,040 Speaker 1: be the crowding out there, But right now, you take 168 00:08:04,120 --> 00:08:06,320 Speaker 1: You don't fight the Fed. You take what they have 169 00:08:07,120 --> 00:08:10,200 Speaker 1: at you. And in a strong economy, when corporate earnings 170 00:08:10,200 --> 00:08:12,840 Speaker 1: are doing well and so it's really good for credit, 171 00:08:13,800 --> 00:08:16,680 Speaker 1: and in a high rate environment, you don't want to 172 00:08:16,720 --> 00:08:19,040 Speaker 1: be leaning out right now. You want to be not 173 00:08:19,080 --> 00:08:21,560 Speaker 1: that ruing credit kitty, and you want to buy value, 174 00:08:21,600 --> 00:08:23,720 Speaker 1: and you want to have it well structured. You want 175 00:08:23,720 --> 00:08:25,640 Speaker 1: to have all your protection in place. You want to 176 00:08:25,640 --> 00:08:28,960 Speaker 1: know you're going to get paid your par plus you're accrued. 177 00:08:29,320 --> 00:08:32,440 Speaker 1: But you do all this fundamental work, and you put 178 00:08:32,440 --> 00:08:34,800 Speaker 1: that money in the ground and just let it work 179 00:08:34,880 --> 00:08:35,520 Speaker 1: for you.