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Speaker 1: M. This is Mesters in Business with very renaults on

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Speaker 1: Bloomberg Radio this weekend. On the podcast, I have an

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Speaker 1: extra special guest, Tina vander Steel. She heads the entire

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Speaker 1: Emergent Country Debt team over at GMO located in Boston,

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Speaker 1: the venerable investing firm that's head by Jeremy Grantham, He's

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Speaker 1: the g and GMO UH myself and vander Steel talk

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Speaker 1: about everything from the risks involved in EM investing, how

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Speaker 1: you can hedge whether or not you should be investing

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Speaker 1: in the local currency or in dollar denominated in debt.

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Speaker 1: This is really a deep dive into a fascinating and

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Speaker 1: under followed sector of the marketplace. It's trillions and trillions

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Speaker 1: of dollars UH and yet most of us are fairly

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Speaker 1: unfamiliar with what goes on UH in e M and

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Speaker 1: and really Tina gives us a master class in what

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Speaker 1: you should be looking for and how you should be

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Speaker 1: thinking about the risks and potential rewards in e M.

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Speaker 1: I really enjoyed the conversation and I think you will

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Speaker 1: also so with no further ado, my interview with GMOs

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Speaker 1: Tina vander Steele, this is Masters in Business with very

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Speaker 1: results on Bloomberg Radio. My extra special guest this week

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Speaker 1: is Tina vander Steel. She is the head of the

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Speaker 1: Emerging country Debt team at GMO, which she is also

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Speaker 1: a partner. She joined the firm in two thousand and four,

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Speaker 1: coming from JP Morgan's Fixed income Research, where she developed

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Speaker 1: quantitative arbitrage strategies for emerging market debt and high yield bonds.

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Speaker 1: Teter vander Steel, Welcome to Bloomberg. You. So, so let's

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Speaker 1: talk a little bit about your background, which kind of

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Speaker 1: surprises me. You graduate Washington and Lee University not only

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Speaker 1: with a BA in economics, but a BA in journalism.

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Speaker 1: How do you go from journalist them to emerging market debt? Well,

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Speaker 1: that one is an easy one. Um. My dad set

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Speaker 1: my expectations early in life that he would pay for

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Speaker 1: my existence through undergraduate or twenty one years old, whichever

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Speaker 1: came first. So I graduated at twenty and I figured

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Speaker 1: that a path and economics had higher lifetime earning potential,

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Speaker 1: and I wanted to live in New York City. So, um,

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Speaker 1: I chose that path. Of course, at the time, if

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Speaker 1: you think about emerging debt, this is so the fall

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Speaker 1: of communism. We had just finished in economic studying Nancar

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Speaker 1: Olson's famous comparative economic systems. So now is here a

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Speaker 1: chance to really get to know some of the countries

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Speaker 1: that we had been studying. And my economics professors had said, listen,

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Speaker 1: you get kind of a free m b A if

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Speaker 1: you join any of the Wall Street banks that go

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Speaker 1: through their training program, and free sounded like a good thing.

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Speaker 1: So I applied to a couple of them, to Goldman

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Speaker 1: and JP Morgan, and planted a job with both. But

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Speaker 1: my dad convinced me I should definitely take the JP

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Speaker 1: Morgan job, the lesser earnings notwithstanding, he said, the culture

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Speaker 1: will would be more of a fit for somebody like me,

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Speaker 1: And so that's how I got there. Quite quite interesting.

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Speaker 1: You spent two years working at JP morgan San Paulo

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Speaker 1: office in the mid nineties. That had to be a

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Speaker 1: fascinating experience. Tell us a little bit about that. What

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Speaker 1: did you learn from your time in sal Palo uh

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Speaker 1: So Paulo was amazing. I mean, if I had been

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Speaker 1: the kind of journalist that Michael Lewis was, I would

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Speaker 1: have written a whole book just about that experience. I mean,

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Speaker 1: if you think about it, So Plana Heal so At

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Speaker 1: Fernando Hikkardo Soos elected president. He introduces Plan of Hell,

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Speaker 1: which he had devised when he was Finance minister, and

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Speaker 1: a hyperinflation, introduced a new currency that is still the

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Speaker 1: currency to this day, which is quite an achievement for Brazil.

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Speaker 1: UM And as an employee of JP Morgan, they gave

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Speaker 1: you just a crazy amount of power. So I'm in

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Speaker 1: my mid twenties. My job at the time, my name

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Speaker 1: job was to be a strategist, which I didn't really

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Speaker 1: know what a strategist was, but apparently what it meant

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Speaker 1: was I would take my little Vice president card and

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Speaker 1: I would travel up to Brazilia and I would get

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Speaker 1: to know the congressman. Because this was during the whole

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Speaker 1: constitutional reform effort, which is actually still ongoing today. UM

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Speaker 1: and all of the votes that went on in Congress

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Speaker 1: were super important to the future of the country. So

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Speaker 1: I would get to know the congressman, figure out which

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Speaker 1: way the vote was going to go, fly back to

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Speaker 1: sell Pollo, get on the houton holler, tell JP Morgan's

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Speaker 1: worldwide clients how that was going to go. And at

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Speaker 1: the time, I guess that was really the origins of

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Speaker 1: sales color, which is something I don't read these days,

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Speaker 1: but at the time, I guess I was in charge

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Speaker 1: of producing sales color, which he was pretty funny. That's

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Speaker 1: really quite interesting that today sun Pala was something like

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Speaker 1: twelve million people, it's one of the world's most populous cities,

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Speaker 1: and it's now a Brazil's vibrant financial center. Was it

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Speaker 1: clear in that this was going to be a financial powerhouse?

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Speaker 1: This location, well, it would spend several locations actually since then,

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Speaker 1: um at the time that I moved there, the center

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Speaker 1: was actually in Chant like the actual center of the city,

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Speaker 1: but had already moved to Avanita Paulista, and since I moved,

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Speaker 1: has now moved to a new section of Salpalla called

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Speaker 1: sari Alima. And I think it was pretty clear. If

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Speaker 1: you got to know any of the Brazilians at that time,

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Speaker 1: many of them are very famous even today. Adam Fraga

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Speaker 1: and a whole bunch of people they were. They're very

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Speaker 1: very smart people. If you think about how crazy hyper

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Speaker 1: inflation is and the uncertainties of investing in hyper inflation,

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Speaker 1: these people were crack. I mean the to give you

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Speaker 1: a sense, if I wrote a check in Salpolo, it

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Speaker 1: cleared the next day, where back in the US it

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Speaker 1: would be several days, and that was because you know,

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Speaker 1: inflation was very high. And uh, some people are probably

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Speaker 1: aware that Brazil has a very unusual interest rate compounding system.

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Speaker 1: So whereas we here in the US use simple interests

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Speaker 1: because inflation and hisstrates are low, in Brazil they use

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Speaker 1: daily compounded interest because their history is that inflation is

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Speaker 1: very high because a very sophisticated financial system there. I'm

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Speaker 1: not surprised at all. Really interesting, So how did the

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Speaker 1: experience living abroad, working abroad affect how you view the

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Speaker 1: world of emerging market debt? And you know what were

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Speaker 1: the big takeaways for you? Well, one thing I can say,

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Speaker 1: and I've only lived in Brazil as an emerging market,

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Speaker 1: is that the locals are the most pessimistic. And I've

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Speaker 1: often wondered why is that the case? And I have

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Speaker 1: a theory, and the theory is part of my journalism background,

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Speaker 1: which is I remember back in journalism school, we used

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Speaker 1: to say, if it bleeds, it leads, or fire, rape,

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Speaker 1: incest film at eleven right, So whatever was the most tragic,

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Speaker 1: the most awful thing, that was what you were going

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Speaker 1: to learn about. Now this is the so we don't

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Speaker 1: have Internet yet, but there is a very vibrant press

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Speaker 1: in Brazil. There were five daily newspapers worth reading. There

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Speaker 1: were two weekly magazines that were also worth reading, and

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Speaker 1: of course they only brought you the most pessimistic version

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Speaker 1: of anything that was happening. Cardos so he was going

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Speaker 1: to fail and inflation was going to come back. It

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Speaker 1: was just this constant parade of bad news. That may

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Speaker 1: sound familiar. That's true everywhere, right, the Internet makes it worse,

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Speaker 1: but it's true everywhere. And the only exception that I

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Speaker 1: found to that is briefly, we had a fellow who

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Speaker 1: were for us who eventually he was Chinese and he

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Speaker 1: eventually moved back to China unfortunately, so we didn't necessary

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Speaker 1: had to move on. But he was super optimistic about China,

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Speaker 1: and I thought to myself, well, maybe that's related to

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Speaker 1: the fact that press freedom in China is poor. In

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Speaker 1: other words, they're pessimistic because of what they read. Schools

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Speaker 1: don't really teach us anything about information hygiene or how

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Speaker 1: to evaluate what you see, unless you go to law school,

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Speaker 1: where they teach you how to, you know, cross examin

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Speaker 1: a witness and look at all their motivations and biases, etcetera.

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Speaker 1: Most people don't don't approach media that way. So that's

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Speaker 1: really fascinating about um, not just em but media in general.

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Speaker 1: So spending time abroad has this led you to sort

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Speaker 1: of discount the terrible media stories you might see about,

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Speaker 1: be it Argentina or Venezuela or Brazil, or not even

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Speaker 1: just South America, if you look at Africa, cun parts

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Speaker 1: of Asia. There's a constant drumbeat of terrible news coming

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Speaker 1: out of places like that. Yes, I definitely discounted. There's

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Speaker 1: a there's a wonderful article by Michael Crichton called Why Speculate,

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Speaker 1: and in it it talks about this idea and he's

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Speaker 1: probably not the only person who's thought about this or

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Speaker 1: talked about this idea of Gelman and Nisia. So imagine

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Speaker 1: that you're an expert in your field and you open

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Speaker 1: up today's newspaper whatever it is, you read something online,

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Speaker 1: and you realize that what's being written there is completely false. Absolutely,

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Speaker 1: you know firsthand that what's written there is just wrong.

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Speaker 1: And then you turn the paper and you turn the

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Speaker 1: page and you read the next article and you've completely

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Speaker 1: forgotten what you've just experienced. Right, So the next article

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Speaker 1: is about something you don't really know anything about, and

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Speaker 1: you just trust the source. So I took away from

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Speaker 1: that article that, you know what, it's very rare, especially

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Speaker 1: if you think about news. News is happening real time,

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Speaker 1: and what's the old adage? We don't even know the

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Speaker 1: the genesis of the French Revolution? So how could you

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Speaker 1: expect that anybody in real time has the correct interpretation

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Speaker 1: about anything? So you're better off, I think, just not

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Speaker 1: reading most things, the first draft of history, so to speak,

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Speaker 1: the first draft of history that's right, really really the

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Speaker 1: financial markets where you get a price, and the price

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Speaker 1: has a lot of information content in it, so you

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Speaker 1: don't really need to hear about market color or interpretations.

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Speaker 1: You just have to witness the price. I'm intrigued. So

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Speaker 1: let's talk about a place like Venezuela. How do you

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Speaker 1: manage the risks of investing in a space like that

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Speaker 1: when it's pretty clear you can't rely on the media.

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Speaker 1: Is it just a matter of boots on the ground

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Speaker 1: and seeing what's going on for stand How do you

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Speaker 1: um come up with some sort of investment thesis and

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Speaker 1: then try and verify it? Well, I would say in

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Speaker 1: the way we invest in the way we approach emerging

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Speaker 1: debt markets, we try to de emphasize needing to know

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Speaker 1: anything about the country. So my background is in relative

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Speaker 1: value analysis and arbitrage analysis, and it's kind of a

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Speaker 1: widget way of looking at things. It's it's independent of

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Speaker 1: whatever the country is, or the company is, or whatever

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Speaker 1: that is. And what's nice about it is imagining that

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Speaker 1: the same risk is priced it differently into markets and

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Speaker 1: trying to arbitrage that difference of opinions for that same risk.

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Speaker 1: That's a lucky thing to be able to do, because

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Speaker 1: otherwise you would have to have some knowledge or be

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Speaker 1: able to come up with an opinion about places like Venezuela,

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Speaker 1: and I would say that's very, very, very hard to do.

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Speaker 1: I mean, Venezuela is an interesting case in so far

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Speaker 1: as they did something that no other country has ever done.

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Speaker 1: And what I mean by that is we work in

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Speaker 1: default sensitive markets. Right every year we get it a

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Speaker 1: fault or two, and usually the way that works out

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Speaker 1: is the classic Hemingway way, which is, how did you

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Speaker 1: go bankrupt gradually and then suddenly right people refused to

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Speaker 1: roll over your debt at reasonable prices and then you

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Speaker 1: either go to the I M F for you to

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Speaker 1: fall to whatever it is. Venezuela ran out of money

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Speaker 1: in and continued to pull oil out of the ground

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Speaker 1: and starve its population to pay foreign creditors for four

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Speaker 1: more years. Crazy. So you know, could we have predicted

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Speaker 1: that they would have done that? Of course not. I

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Speaker 1: don't think anyone would have predicted anyone would do something

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Speaker 1: so insane. So let me ask you an obvious question

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Speaker 1: I probably should have asked you earlier, And that's simply

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Speaker 1: what do we mean by emerging market? What makes a

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Speaker 1: particular country an emerging market versus a frontier market or

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Speaker 1: a developed market. So taxonomy, it varies, so we distinguish

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Speaker 1: between emerging countries and emerging markets. So classically, the definition

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Speaker 1: of emerging countries, which includes frontier countries, are those countries

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Speaker 1: that are either low or middle income countries and therefore

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Speaker 1: may run out of the money to pay you back

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Speaker 1: or have defaulted in the past and have demonstrated that

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Speaker 1: they are willing to default on you. So those are

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Speaker 1: those are what we referred to as emerging countries. Emerging

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Speaker 1: market has much more to do with the accessibility by

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Speaker 1: foreigners into a market, So can you act fess the

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Speaker 1: local market? Um, what are the tax implications of being

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Speaker 1: a foreigner in the local market? So, for example, you

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Speaker 1: might have a Gainaian bond in dollars which is from

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Speaker 1: an emerging country, but it clears in euroclear, So it's

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Speaker 1: a developed market emerging country bond as opposed to its

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Speaker 1: local currency bonds which are emerging country emerging market bond.

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Speaker 1: Does that make sense? Sure? And this is whether or

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Speaker 1: not it's corporate debt government debt. There they can all

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Speaker 1: be out of an emerging country. There's no distinction other

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Speaker 1: than the specific corporate risk for any given company. If

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Speaker 1: you're buying e M private debt as opposed to e

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Speaker 1: M public debt, is that a fair statement? That is

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Speaker 1: a fair statement. The way we think about corporate debt

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Speaker 1: within e M is that the sovereigns are the very

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Speaker 1: powerful agent. Doesn't matter if you're emerging or developed, the

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Speaker 1: sovereign are the powerful agent, and so the corporates are

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Speaker 1: really a compound risk with respect to their sovereign So

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Speaker 1: corporate in the US, with the rule of law and

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Speaker 1: all of that and transparency is not that risky. But

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Speaker 1: a corporate in Ghana, where you know the assets are

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Speaker 1: in Ghana subject to Ghana law. Doesn't matter if the

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Speaker 1: bond is a US law bomb in UK or in

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Speaker 1: the US. The assets are still in Ghana, so we

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Speaker 1: think of them as a compound risk. So I want

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Speaker 1: to ask you about a piece you wrote in twelve

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Speaker 1: titled the What, Why, when and How Guide to Owning

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Speaker 1: Emerging country Debt? What motivated that piece and and how

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Speaker 1: was it received by various investors? Sure? Um, I think

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Speaker 1: every asset manager eventually has to produce something along these

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Speaker 1: lines that asks why emerging debt? Like, what's the purpose

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Speaker 1: of this thing? And so this was our shelf piece

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Speaker 1: to describe to a hypothetical allocator what they should be

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Speaker 1: on the lookout for. And I would say GMO takes

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Speaker 1: a very very standard traditional approach to thinking about an

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Speaker 1: allocator's problem, if for no other reason than GMO is

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Speaker 1: most famous for its ASDA Allocation division headed by Benninker

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Speaker 1: and founded by Jeremy Grantham. So what do they care about?

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Speaker 1: They care about value, diversification and alpha, And so we

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Speaker 1: describe in the paper, well, how do you determine if

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Speaker 1: something represents value? Right? How do you think about the

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Speaker 1: spread you earn on a sovereign relative to losses you

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Speaker 1: might experience, or on a corporate or how do you

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Speaker 1: think about currency risk in local currency denominated death? So

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Speaker 1: that's the value section diversification is how do these subasset

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Speaker 1: classes present with respect to develop markets? Uh? You know,

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Speaker 1: if if you think about a portfolio optimization, how does

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Speaker 1: this new asset play with respect to your existing assets?

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Speaker 1: And then finally alpha, which is the most fun space. Um,

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Speaker 1: the alpha in this asset class is very high. The

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Speaker 1: median manager beats the benchmark. So um, it's a super

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Speaker 1: inefficient asset class and that's one of the reasons that

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Speaker 1: we really like it. Huh. Interesting. So so this leads

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Speaker 1: me to the obvious question, how does GMO approach emerging

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Speaker 1: market debt, say US corporate debt or US distress debt,

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Speaker 1: and how does that differ from some of your competitors. Well,

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Speaker 1: I would say that GMO takes a very unusual approach,

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Speaker 1: and I knew that when I worked at JP Morgan because,

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Speaker 1: as I think I said earlier, I did relative value arbitrage.

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Speaker 1: And so as a strategist, you know, the salespeople want

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Speaker 1: to take you around and visit clients, and after a

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Speaker 1: while they realized that the big asset managers weren't interested

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Speaker 1: in hearing my spiel, if for no other reason, and

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Speaker 1: they were so big that the you know, ten by

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Speaker 1: ten million trade that I proposed was rounding error for them.

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Speaker 1: So the only people who are really interested in this

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Speaker 1: were GMO and a small set of hedge funds, among

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Speaker 1: them long Term Capital, which is its own interesting, fascinating story.

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Speaker 1: And now that I work at GMO, I find how

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Speaker 1: unusual it is because people approach us and say, wow,

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Speaker 1: what you've just described is totally different than what other

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Speaker 1: people describe, and so what is it that we do differently?

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Speaker 1: It's really this emphasis on relative value, so trying to

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Speaker 1: find cheap securities, thinking about it from a long short perspective,

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Speaker 1: and emphasizing that rather than emphasizing what most managers emphasize,

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Speaker 1: which is the fun stuff to talk about, right the

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Speaker 1: what do we think about Venezuela to your earlier point,

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Speaker 1: or what do we think about Brazil or what we

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Speaker 1: think about the FED or any of these other very

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Speaker 1: very challenging questions to ask an answer. And it's not

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Speaker 1: that we don't try, By the way, we have some

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Speaker 1: extremely experienced people thinking about those questions, but we all

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Speaker 1: collectively agree that if you can find an arbitrage, you

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Speaker 1: should put all your alpha chips there first and then

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Speaker 1: worry about the rest later, which leads to an obvious question.

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Speaker 1: You spend some time developing strategies using quant aarb um,

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Speaker 1: do we really care what someone's opinion is on something like?

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Speaker 1: It seems that the work you did um on the

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Speaker 1: quant side was pretty empirical versus the hey, give me

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Speaker 1: your squishy gut reaction to what's going on there. In

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Speaker 1: other words, when when people are asking for that color commentary,

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Speaker 1: what is it? What's the value of that other than

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Speaker 1: you know, making casual chit chat. Well, from an investment perspective,

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Speaker 1: the value is generally low, right. I mean, we can

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Speaker 1: all sit around and have opinions about things, But are

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Speaker 1: you going to buy or sell something based on those

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Speaker 1: opinions in the presence of by the way, very high

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Speaker 1: transactions costs. The weighted average price bid offer of bonds

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Speaker 1: in my market is seventy five basis points. These aren't treasuries,

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Speaker 1: so you better have a real sharp view, and you

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Speaker 1: better hope that that view obtains for some period of time,

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Speaker 1: because otherwise you're going to cross that bid offer twice,

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Speaker 1: so we really try to avoid that. I think we

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Speaker 1: are not only the lowest turnover manager of any of

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Speaker 1: the active managers, are turnovers lower than the ETF. So

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Speaker 1: we buy and hold arbitrage like positions in and out that.

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Speaker 1: That's some big just just for the spread. Let's talk

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Speaker 1: about another spread that's out there. So so you join

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Speaker 1: GMO and oh four and then worked on a strategy,

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Speaker 1: you know six that was the Emerging market FX total

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Speaker 1: return strategy. Tell us about that, What are the local

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Speaker 1: currency debt strategies like in in that develop out of that,

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Speaker 1: and what are the currency spreads like So local currency

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Speaker 1: debt investing is a really fascinating one. It's i'd say

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Speaker 1: the largest bundle of risks that we analyze. So when

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Speaker 1: we think about positioning, it's always with respect to well,

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Speaker 1: what risk are we addressing, and it's any collection of

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Speaker 1: credit risk, right, all of them have sovereign credit risk

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Speaker 1: combebted within that, there's a question of selective sovereign default.

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Speaker 1: So a sovereign can choose, Okay, I'm in a corner,

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Speaker 1: I'm only going to default on my foreign currency debt.

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Speaker 1: I'm only going to default on my local currency debt

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Speaker 1: or I'm going to default on them all, And we've

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Speaker 1: seen examples of both. In fact, our sovereign analysts just

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Speaker 1: went to a fascinating conference at Georgetown this week about

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Speaker 1: the possibility of selective domestic debt default. There's a whole

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Speaker 1: very interesting topic. Um On top of that, if it's

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Speaker 1: a corporate it can have idiosyncratic corporate risk, and if

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Speaker 1: it's a local currency bond, then it has interest rate

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Speaker 1: risk and up to two types of currency risk. So

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Speaker 1: currency volatility risk, that's the one you see crawl across

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Speaker 1: your Bloomberg screen. But currency convertibility risk is a very

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Speaker 1: serious one. What if I take my my foreign investors

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Speaker 1: dollars or euros or or Swiss Franks and I convert

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Speaker 1: them into Argentine pesos, to take a recent example, and

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Speaker 1: then Argentina says, I'm sorry, you can't get them out

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Speaker 1: at the official rate. You have to go to the

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Speaker 1: parallel rate, and that's a depreciated from the official rate.

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Speaker 1: These are serious risks, and we price each one of

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Speaker 1: them independently, and we take and hedge the risks that

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Speaker 1: we don't think are priced appropriately. How do you hedge

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Speaker 1: a risk like that. Is it just purely currency hedging

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Speaker 1: or are there default hedges and other such insurance or

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Speaker 1: derivative products. There is one of each flavor, and believe

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Speaker 1: you me, we make sure the documentation or whatever we're

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Speaker 1: hedging is air tight with respect to whatever we're trying

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Speaker 1: to hedge. So to take an interesting example from the nineties, actually,

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Speaker 1: when Russia defaulted and devalued the ruble, those who had

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Speaker 1: hedged their ruble exposure in Chicago found out that that

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Speaker 1: hedge was worthless because it was a nondlibable currency and

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Speaker 1: the Russians could just manipulate that market independent of the

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Speaker 1: actual ruble spot exchange rates. So we are very careful

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Speaker 1: to make sure whatever asset we own, however, the fixing

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Speaker 1: mechanism is for that lines up with our hedge. We

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Speaker 1: don't want to have any basis risks. So when you

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Speaker 1: say non deliverable, that entire hedge was just a complete

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Speaker 1: waste of of capital and failed. It just did nothing.

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Speaker 1: What was that? I recall the long term capital management

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Speaker 1: blow up and I always thought of it as a

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Speaker 1: problem that was based on leverage did hedging, And I

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Speaker 1: know I'm asking you this out of left field, but

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Speaker 1: was hedging a factor in the Russian default for an

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Speaker 1: entity like LTCM. I don't know if Ruble was part

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Speaker 1: of their problem. Leverage was certainly part of their problem. Yeah,

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Speaker 1: what's what's a hundred and one amongst friends? Right, Well,

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Speaker 1: here's how I experienced it. So I'm a you know,

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Speaker 1: twentysomething year old kid producing these relative value analytics, which

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Speaker 1: is a lot of math but not a lot of

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Speaker 1: practical experience, right, I'm just a Wall Street strategist. And

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Speaker 1: the salesperson who covered GMO also covered long term capital,

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Speaker 1: and he would say, oh, I need a trade sheet

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Speaker 1: for this Paris trade that you're recommending, and I'm like, okay,

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Speaker 1: well who's it for. And the choice there was how

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Speaker 1: it was going to be levered, and GMO used very

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Speaker 1: conservative leverage because we cared about well they cared now

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Speaker 1: I care about default risk, and long term Capital would

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Speaker 1: use a lot of leverage because they were trying to

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Speaker 1: hedge market risk, right, And that simple choice turned out

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Speaker 1: to be fatal for one and not the other. And

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Speaker 1: so so that was what led me to be interested

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Speaker 1: in GMO. I thought, Wow, gosh, these guys are smarter

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Speaker 1: than those Nobel laureates. You know, they're very simplistic, twenty

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Speaker 1: year old view of the thing. That's really interesting. Although

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Speaker 1: although I don't think you need a Nobel prize to

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Speaker 1: know that one leverage probably isn't a great idea or

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Speaker 1: is probably you know, the concern about about tail risk

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Speaker 1: if it hedges market risk of the time. But but

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Speaker 1: that one percent you don't make the curve and smash

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Speaker 1: into the wall doesn't really work, does it? Apparently it doesn't.

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Speaker 1: Before we get into the details of some of the

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Speaker 1: currency issues, I have to ask how big is the

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Speaker 1: opportunity in e M bonds. How large is this market?

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Speaker 1: I don't know compared to let's say, US corporates or treasuries.

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Speaker 1: So round numbers for dollar denominated bonds, UH sovereign and

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Speaker 1: Quality sovereign external debt in the MBI Global Index, it's

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Speaker 1: around one point four trillion. For the Corporate e M

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Speaker 1: Index SEMBI it's also around one point four trillion, and

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Speaker 1: for local currency e M debt it's around two and

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Speaker 1: a half trillion. Now that's just the index eligible stuff.

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Speaker 1: I think you could safely multiply that by another to

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Speaker 1: capture all possible investible debt. Has this been exped ending,

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Speaker 1: because what we seem to have seen over the past

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Speaker 1: I don't know, a decade or two, is really a

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Speaker 1: bit of a shortage of of high quality sovereign debt.

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Speaker 1: What's the growth rate of of emerging market debt look like?

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Speaker 1: So from memory, I would say each of these were

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Speaker 1: probably about half again this size or half the size

429
00:27:23,960 --> 00:27:29,640
Speaker 1: maybe fifteen years ago. So it's growing um for sure,

430
00:27:29,720 --> 00:27:32,480
Speaker 1: there's more interest in it. I was looking this morning

431
00:27:32,600 --> 00:27:38,080
Speaker 1: at the Bloomberg Global Aggregate Index and they produced the

432
00:27:38,240 --> 00:27:42,160
Speaker 1: sub index of negative yielding debt. That's about fourteen trillion,

433
00:27:43,440 --> 00:27:47,119
Speaker 1: So folks are acced to find things with positive yields,

434
00:27:47,160 --> 00:27:49,879
Speaker 1: and I think that's uh where e M debt has

435
00:27:49,920 --> 00:27:54,160
Speaker 1: been coming in. Huh quite interesting. So we started talking

436
00:27:54,200 --> 00:27:55,879
Speaker 1: a little bit about the spread in the e M

437
00:27:55,960 --> 00:27:59,159
Speaker 1: debt and some of the currency risk. How do you

438
00:27:59,240 --> 00:28:02,600
Speaker 1: measure different currencies? You know, are the I know about

439
00:28:02,680 --> 00:28:06,040
Speaker 1: the textbook models, but what's it like in the real world.

440
00:28:06,560 --> 00:28:09,440
Speaker 1: It's funny that you say the textbook models. I gave

441
00:28:09,520 --> 00:28:12,240
Speaker 1: a talk. We have a fall client conference, and in

442
00:28:13,359 --> 00:28:16,680
Speaker 1: I wanted to give a talk about arbitrage, and that

443
00:28:17,560 --> 00:28:21,879
Speaker 1: is an extremely dry topic, especially at a firm where

444
00:28:22,240 --> 00:28:25,480
Speaker 1: you know, plausibly, I am following Jeremy Grantham himself on

445
00:28:25,760 --> 00:28:28,120
Speaker 1: on the stage. Now you have a bunch of people

446
00:28:28,160 --> 00:28:31,159
Speaker 1: interested in equities and as dellocation, and I'm gonna try

447
00:28:31,200 --> 00:28:34,280
Speaker 1: and get them to be really interested on Japanese cross

448
00:28:34,359 --> 00:28:39,560
Speaker 1: currency basis and this kind of idea. And I started

449
00:28:39,600 --> 00:28:42,160
Speaker 1: off with a quote because at this point it was

450
00:28:42,280 --> 00:28:46,160
Speaker 1: just around the time that Japan was entering yield curve control.

451
00:28:47,080 --> 00:28:50,400
Speaker 1: And the quote that struck me was from I remember

452
00:28:50,480 --> 00:28:52,760
Speaker 1: going to the I M F meaning so ostensibly just

453
00:28:52,880 --> 00:28:55,560
Speaker 1: to think about em but if you think about the

454
00:28:55,640 --> 00:28:58,840
Speaker 1: time period of European sovereign debt crisis is sort of

455
00:28:58,880 --> 00:29:01,760
Speaker 1: coming to a day new mall on um. You know,

456
00:29:01,840 --> 00:29:04,720
Speaker 1: the Cypriots had just defaulted on bank debts, so there's

457
00:29:04,720 --> 00:29:07,760
Speaker 1: a lot of interesting stuff going on. And the most

458
00:29:08,040 --> 00:29:12,280
Speaker 1: crowded room at that I M S in was the

459
00:29:12,320 --> 00:29:16,280
Speaker 1: Bank of Japan. So the assistant governor, the fellow MoMA

460
00:29:16,400 --> 00:29:22,480
Speaker 1: says stakes are high if we fail. Economics textbooks might

461
00:29:22,600 --> 00:29:28,880
Speaker 1: be wrong. That's uncertainty. And I could never forget that

462
00:29:29,000 --> 00:29:31,560
Speaker 1: quot because I thought to myself, well, gosh, it seems

463
00:29:31,600 --> 00:29:34,080
Speaker 1: like economics textbooks have been wrong for some time now.

464
00:29:34,160 --> 00:29:35,960
Speaker 1: But what I'm interested in is the fact that the

465
00:29:36,160 --> 00:29:43,320
Speaker 1: finance textbooks are also wrong. Right. And um Olivier Blanchard

466
00:29:43,440 --> 00:29:48,080
Speaker 1: gave a talk called how to teach intermediate Macroeconomics after

467
00:29:48,160 --> 00:29:50,880
Speaker 1: the Crisis is after the Great Financial Crisis, and he says,

468
00:29:51,480 --> 00:29:55,640
Speaker 1: I used to derive movements of exchange rates from uncovered

469
00:29:55,760 --> 00:30:00,400
Speaker 1: interest rate parity conditions, and that was precise see the

470
00:30:00,760 --> 00:30:02,440
Speaker 1: point of my talk. It used to be that you

471
00:30:02,480 --> 00:30:05,840
Speaker 1: could look at interest rate differentials and price currency boards

472
00:30:06,240 --> 00:30:09,840
Speaker 1: in developed marketings, right, not always an emerging markets, especially

473
00:30:09,960 --> 00:30:13,120
Speaker 1: in non deliverable emerging markets. But by this point in

474
00:30:14,160 --> 00:30:18,920
Speaker 1: and for sure in developed markets were no longer following

475
00:30:19,000 --> 00:30:21,840
Speaker 1: this right, there are huge cross currency bases going on,

476
00:30:22,160 --> 00:30:26,520
Speaker 1: only eventually capped by the growing use of central bank

477
00:30:26,600 --> 00:30:30,600
Speaker 1: swap lines right and lately repo lines in the case

478
00:30:30,720 --> 00:30:36,920
Speaker 1: of say the People's Republic of China. So Um, I

479
00:30:37,000 --> 00:30:41,840
Speaker 1: would say finance and macroeconomic textbooks are actually not all

480
00:30:41,920 --> 00:30:44,280
Speaker 1: that useful these days because what you would have learned

481
00:30:44,760 --> 00:30:48,480
Speaker 1: hardly applies anymore. And there's an argument to be made

482
00:30:48,560 --> 00:30:52,360
Speaker 1: that the same is true across all the various chapters

483
00:30:52,560 --> 00:30:55,920
Speaker 1: in that those economic books, except for the most um

484
00:30:56,120 --> 00:30:58,959
Speaker 1: reason updates that that they seem to be catching up

485
00:30:59,000 --> 00:31:02,920
Speaker 1: a little bit. So let's talk about how you hedge

486
00:31:03,680 --> 00:31:06,920
Speaker 1: in the real world some of the currency risk you're taking,

487
00:31:07,440 --> 00:31:09,720
Speaker 1: and can you do that at reasonable prices? If you

488
00:31:09,840 --> 00:31:14,520
Speaker 1: want to invest as a US investor in Brazil or

489
00:31:14,960 --> 00:31:19,560
Speaker 1: or in a place like Thailand, how can you do

490
00:31:19,800 --> 00:31:24,160
Speaker 1: that without assuming too much currency risk? Well, you have

491
00:31:24,480 --> 00:31:27,280
Speaker 1: a number of choices you can. If you're a dollar

492
00:31:27,360 --> 00:31:31,160
Speaker 1: based investor, you can simply buy dollar Brazilian bombs, right,

493
00:31:31,200 --> 00:31:33,680
Speaker 1: there aren't that many dollar Thai bombs, but you can

494
00:31:33,720 --> 00:31:38,040
Speaker 1: buy dollar bombs. You can buy local currency denominated bombs

495
00:31:38,280 --> 00:31:43,960
Speaker 1: and hedge the currency risk associated with those bombs. Um.

496
00:31:44,680 --> 00:31:47,840
Speaker 1: And you know, to take a recent example, we found

497
00:31:48,800 --> 00:31:56,800
Speaker 1: fascinating Brazilian real denominated instrument. It's actually guaranteed by you

498
00:31:56,960 --> 00:32:00,680
Speaker 1: and me the U S TASH pair and it was

499
00:32:00,800 --> 00:32:06,320
Speaker 1: paying local Brazilian treasury so nt N plus forty basis points.

500
00:32:06,800 --> 00:32:09,200
Speaker 1: So you could hedge out the currency risk and the

501
00:32:09,360 --> 00:32:11,720
Speaker 1: interest rate risk of that thing and be left with

502
00:32:11,800 --> 00:32:17,479
Speaker 1: a US guaranteed thing at sort of treasuries plus a hundred.

503
00:32:18,120 --> 00:32:21,680
Speaker 1: That's a great bond. So so here's the question that

504
00:32:21,760 --> 00:32:26,280
Speaker 1: I'm kind of intrigued by how do you determine whether

505
00:32:26,360 --> 00:32:30,560
Speaker 1: to invest in the local currency or dollar based if

506
00:32:30,600 --> 00:32:34,760
Speaker 1: you're here in the US. Are there specific advantages and disadvantages,

507
00:32:35,440 --> 00:32:38,760
Speaker 1: or does all the currency risk essentially wash out at

508
00:32:38,800 --> 00:32:43,120
Speaker 1: the end. So this is a very very difficult question

509
00:32:43,680 --> 00:32:46,520
Speaker 1: as an arbitrage focused person. When I think about naked

510
00:32:46,600 --> 00:32:49,760
Speaker 1: currency risk, it's so far away from an arbitrage I

511
00:32:50,080 --> 00:32:52,560
Speaker 1: of course lean on my team who are much smarter

512
00:32:52,600 --> 00:32:57,000
Speaker 1: than I am in THEWS dimensions. So we we bucket

513
00:32:57,120 --> 00:33:01,080
Speaker 1: the emerging currencies in two different buckets. On our floating

514
00:33:01,200 --> 00:33:05,080
Speaker 1: rate currencies and the investment pieces. There is the broad

515
00:33:05,240 --> 00:33:07,479
Speaker 1: dollar goes up and down and takes all of them

516
00:33:07,560 --> 00:33:09,640
Speaker 1: up and down with it, right, So we're going to

517
00:33:09,760 --> 00:33:15,040
Speaker 1: pick relative winners and losers among that pack of floating

518
00:33:15,160 --> 00:33:18,920
Speaker 1: rate currencies. That way, we insulate ourselves from broad dollar moves.

519
00:33:18,960 --> 00:33:22,920
Speaker 1: So it's a relative value program for the very highly

520
00:33:23,040 --> 00:33:28,280
Speaker 1: managed and pegged currencies. We have a program that UM,

521
00:33:29,360 --> 00:33:32,200
Speaker 1: one of the people on my team, developed, which tried

522
00:33:32,280 --> 00:33:36,520
Speaker 1: to answer the question, given the ambient fundamentals of this

523
00:33:36,720 --> 00:33:39,840
Speaker 1: particular country in terms of its balance of payments, it's

524
00:33:40,080 --> 00:33:43,040
Speaker 1: place in the economic cycle, and so forth, what's the

525
00:33:43,320 --> 00:33:47,720
Speaker 1: likelihood that we'll get to keep whatever the ex anti

526
00:33:47,880 --> 00:33:52,280
Speaker 1: carry of the currency is. And so you know, if

527
00:33:52,320 --> 00:33:54,960
Speaker 1: this is a pegged currency. We were looking most recently

528
00:33:55,360 --> 00:34:02,520
Speaker 1: at the Uzbek psalme and that currency is more managed

529
00:34:02,560 --> 00:34:05,360
Speaker 1: against the Russian rouble than against the dollar per se,

530
00:34:05,680 --> 00:34:09,080
Speaker 1: but it has very high yields for ten twelve percent,

531
00:34:09,760 --> 00:34:12,680
Speaker 1: And so the question is is is that high enough

532
00:34:12,960 --> 00:34:15,560
Speaker 1: or will we see a devaluation in the film that

533
00:34:15,600 --> 00:34:18,600
Speaker 1: would wipe out that ex anti kerry. So that's how

534
00:34:18,640 --> 00:34:22,440
Speaker 1: we think about the problem. So let's talk a little

535
00:34:22,480 --> 00:34:26,719
Speaker 1: bit about the state of e M investing today. So

536
00:34:27,000 --> 00:34:30,200
Speaker 1: looking at this from an equity market perspective, I look

537
00:34:30,239 --> 00:34:33,800
Speaker 1: at what took place in China and the change in

538
00:34:33,880 --> 00:34:37,120
Speaker 1: the government and the change and attitudes towards companies like

539
00:34:37,239 --> 00:34:40,960
Speaker 1: Ali Baba kind of makes me look at the country

540
00:34:41,360 --> 00:34:46,200
Speaker 1: at least now and say they appear to be frightening.

541
00:34:46,320 --> 00:34:49,440
Speaker 1: From an equity perspective, I'm would be reluctant to put

542
00:34:49,600 --> 00:34:52,680
Speaker 1: capital at risk there. What do you make of the

543
00:34:52,960 --> 00:34:57,000
Speaker 1: geopolitical worlds and the various risks they present. Are there

544
00:34:57,120 --> 00:35:01,160
Speaker 1: certain countries that, hey, there's no respect for the rule

545
00:35:01,200 --> 00:35:04,239
Speaker 1: of law or sanctity of contract or private property for

546
00:35:04,320 --> 00:35:09,759
Speaker 1: that matter, and therefore, regardless of the potential upside in

547
00:35:10,040 --> 00:35:14,399
Speaker 1: the dead instruments, we just don't believe that any money

548
00:35:14,560 --> 00:35:17,440
Speaker 1: is safe there because of that. It's a good question,

549
00:35:17,960 --> 00:35:21,799
Speaker 1: and I would say for the fundamental credit analysts who

550
00:35:21,880 --> 00:35:27,280
Speaker 1: we have on the team, we rely a lot on precedence. Frankly,

551
00:35:28,400 --> 00:35:32,080
Speaker 1: so I'll take an example from a few years ago

552
00:35:32,520 --> 00:35:37,719
Speaker 1: in well, first I guess in Kazakhstan, and then later

553
00:35:37,960 --> 00:35:42,200
Speaker 1: a few years later in in Azerbaijan, where we weren't

554
00:35:42,239 --> 00:35:46,000
Speaker 1: involved in the kazak one Um. There was a big

555
00:35:46,120 --> 00:35:49,279
Speaker 1: bank in Kazakhstan, and I actually don't know the name

556
00:35:49,280 --> 00:35:53,840
Speaker 1: of it, but the ticker was Betas, and over the

557
00:35:53,960 --> 00:35:58,640
Speaker 1: course of a weekend they rewrote their bankruptcy laws and

558
00:35:58,840 --> 00:36:05,440
Speaker 1: basically wiped out the bank creditors. H And so you

559
00:36:05,719 --> 00:36:08,040
Speaker 1: you look at that and you say, gosh, that's a

560
00:36:08,239 --> 00:36:11,200
Speaker 1: serious risk that you know we should take into account.

561
00:36:11,480 --> 00:36:14,800
Speaker 1: If I said we weren't involved, because the risk premium

562
00:36:14,840 --> 00:36:17,239
Speaker 1: that you were being paid over Kazakhstan wasn't enough to

563
00:36:17,320 --> 00:36:21,760
Speaker 1: even contemplate such a day at the time. In that case,

564
00:36:22,160 --> 00:36:24,560
Speaker 1: they went on to have quite a lot of debt

565
00:36:24,600 --> 00:36:27,840
Speaker 1: relief for the country. So this is after that oil

566
00:36:28,000 --> 00:36:31,160
Speaker 1: market collapse, and so oil sensitive countries like Kazakhstan needed

567
00:36:31,200 --> 00:36:35,880
Speaker 1: debt relief and so forth. You fast forward to Azerbaijan

568
00:36:36,040 --> 00:36:38,440
Speaker 1: and there was a fascinating case that we were involved,

569
00:36:38,520 --> 00:36:41,520
Speaker 1: and we owned some bonds from this bank called the

570
00:36:41,560 --> 00:36:45,759
Speaker 1: International Bank of Azerbaijan. It was nineties something present government owned,

571
00:36:45,840 --> 00:36:49,520
Speaker 1: so we considered it a state owned enterprise. That followed

572
00:36:49,560 --> 00:36:52,160
Speaker 1: that same playbook. Over the weekend they wrote, rewrote their

573
00:36:52,200 --> 00:36:56,359
Speaker 1: bankruptcy laws and so forth, and they gave a very

574
00:36:56,480 --> 00:36:59,120
Speaker 1: mild haircut to creditors. It actually was more or less

575
00:36:59,239 --> 00:37:02,799
Speaker 1: MPV newt role. So they got all the reputational hit

576
00:37:02,960 --> 00:37:04,799
Speaker 1: of doing this, but they got none of the debt

577
00:37:04,880 --> 00:37:08,279
Speaker 1: relief that kazakh stile that under a head scratcher. Why

578
00:37:08,320 --> 00:37:09,759
Speaker 1: on earth would they do this. It's still in the

579
00:37:09,840 --> 00:37:14,400
Speaker 1: London courts. By the way, UM actually wrote to the

580
00:37:14,640 --> 00:37:17,600
Speaker 1: Finance Minister of Azerbaijan. I said, this just doesn't make

581
00:37:17,600 --> 00:37:20,560
Speaker 1: any sense. Conditional on your writing off creditors, you should

582
00:37:20,560 --> 00:37:23,560
Speaker 1: at least get some debt worthy for doing it. Um.

583
00:37:24,320 --> 00:37:28,000
Speaker 1: But to your point, all you can do is file

584
00:37:28,160 --> 00:37:31,320
Speaker 1: these away and understand what's happened in the past and

585
00:37:31,440 --> 00:37:35,480
Speaker 1: make some educated judgment about how likely the current administration

586
00:37:35,719 --> 00:37:37,719
Speaker 1: or dictator or whatever it is of the country is

587
00:37:37,800 --> 00:37:40,160
Speaker 1: likely to do that in the future. That's an art.

588
00:37:40,800 --> 00:37:42,880
Speaker 1: Like I said that the credit research people on my

589
00:37:43,000 --> 00:37:47,120
Speaker 1: team have a very hard job. It sounds like they

590
00:37:47,200 --> 00:37:51,000
Speaker 1: got some bad counsel at AER that. That's kind of interesting.

591
00:37:51,360 --> 00:37:54,719
Speaker 1: Let's go in the opposite direction. When you look around

592
00:37:54,760 --> 00:37:59,080
Speaker 1: the world, where is there safe E M debt? And

593
00:37:59,200 --> 00:38:03,080
Speaker 1: I'm assuming the safer the debt, perhaps the lower the

594
00:38:03,160 --> 00:38:05,840
Speaker 1: potential alpha you're going to see from that. Is that

595
00:38:05,960 --> 00:38:10,040
Speaker 1: a fair way to look at this? You're asking about

596
00:38:10,080 --> 00:38:12,719
Speaker 1: a cake and eating it too question? Pretty much? Yeah,

597
00:38:14,400 --> 00:38:20,479
Speaker 1: So earlier we talked about fourteen trillion in negative yielding debt,

598
00:38:22,160 --> 00:38:27,800
Speaker 1: So we ask ourselves the purpose of holding a certain

599
00:38:27,880 --> 00:38:30,200
Speaker 1: class of government debt We used to refer to it

600
00:38:30,239 --> 00:38:33,359
Speaker 1: as the anchor to windward portfolio right at the hell

601
00:38:33,440 --> 00:38:37,879
Speaker 1: or high water portfolio is to have ballast in your

602
00:38:37,920 --> 00:38:41,320
Speaker 1: portfolio in the event that there's a supere equity market

603
00:38:41,360 --> 00:38:45,160
Speaker 1: decline or risk assets have their own decline. Whatever that

604
00:38:45,320 --> 00:38:50,160
Speaker 1: is the cost of holding that debt right now. In

605
00:38:50,520 --> 00:38:53,640
Speaker 1: many of the major markets, whether it's you know, buns

606
00:38:53,800 --> 00:38:57,120
Speaker 1: or oats or jgbs or so forth, is holding a

607
00:38:57,200 --> 00:39:01,759
Speaker 1: negative yielding asset right it's an insurance premium almost. So

608
00:39:01,880 --> 00:39:04,319
Speaker 1: the question is is can you choose from the group

609
00:39:04,400 --> 00:39:09,720
Speaker 1: of positive yielding e M local markets on a currency

610
00:39:09,800 --> 00:39:12,759
Speaker 1: hedged or unhedged basis in the event that you're willing

611
00:39:12,840 --> 00:39:15,120
Speaker 1: to take some currency risk and you think it's well

612
00:39:15,200 --> 00:39:21,960
Speaker 1: priced that has the defensive properties of these developed markets

613
00:39:22,040 --> 00:39:26,680
Speaker 1: bonds but with positive yields. And the answer to that

614
00:39:26,880 --> 00:39:29,279
Speaker 1: is yes, there's a small clutch of these things. They

615
00:39:29,320 --> 00:39:33,080
Speaker 1: are not UM countries for the most part. They're not

616
00:39:33,239 --> 00:39:37,360
Speaker 1: the poor countries. They are the Taiwans and Koreas of

617
00:39:37,400 --> 00:39:42,239
Speaker 1: the world. But those markets do present as relatively safe now.

618
00:39:42,360 --> 00:39:44,719
Speaker 1: Not safe from financial repression, none of us is safe

619
00:39:44,719 --> 00:39:48,960
Speaker 1: from financial repression, but safe in a anchor to winward

620
00:39:49,040 --> 00:39:53,680
Speaker 1: statistical sense, really really kind of interesting. What parts of

621
00:39:53,719 --> 00:39:56,600
Speaker 1: the world are you excited about any any countries that

622
00:39:56,760 --> 00:40:00,200
Speaker 1: you're looking at and thinking, wow, this is underprised. Then

623
00:40:00,239 --> 00:40:03,600
Speaker 1: there's a ton of upside here. I would say the

624
00:40:03,760 --> 00:40:08,920
Speaker 1: thing that's glaring right now are the stressed and distressed

625
00:40:09,560 --> 00:40:14,719
Speaker 1: UM emerging countries so we're at a if you take

626
00:40:14,760 --> 00:40:19,400
Speaker 1: out the the real wives of the pandemic, the difference

627
00:40:19,480 --> 00:40:25,080
Speaker 1: between the high yield sub piece of our hard currency

628
00:40:25,160 --> 00:40:29,640
Speaker 1: benchmark versus the investment grade one, it's at very very

629
00:40:29,719 --> 00:40:33,840
Speaker 1: wide levels, right, so not pandemic levels, but very wide

630
00:40:33,880 --> 00:40:39,680
Speaker 1: levels about five over investment grades. Within that subset, there

631
00:40:39,800 --> 00:40:43,160
Speaker 1: are arbitrage like positions that can be set up and

632
00:40:43,320 --> 00:40:45,959
Speaker 1: buy that. What I mean is, these are countries whose

633
00:40:46,000 --> 00:40:50,200
Speaker 1: bond prices indicate a high likelihood of default. So can

634
00:40:50,360 --> 00:40:54,200
Speaker 1: you ensure the default case while holding on for the

635
00:40:54,400 --> 00:40:57,040
Speaker 1: no default case? And in a handful of those of

636
00:40:57,160 --> 00:40:59,440
Speaker 1: those countries, the answer to that is yes, And I

637
00:40:59,520 --> 00:41:02,400
Speaker 1: think those makes some of the most interesting opportunities. You

638
00:41:02,480 --> 00:41:06,120
Speaker 1: want to name names, what what countries UH present those

639
00:41:06,160 --> 00:41:10,640
Speaker 1: sort of opportunities, I would say Ivory Coast is one,

640
00:41:10,840 --> 00:41:15,879
Speaker 1: Ghana is one, um El Salvador is one. So there's

641
00:41:15,960 --> 00:41:20,840
Speaker 1: some interesting ones, really interesting. You mentioned the response to

642
00:41:20,920 --> 00:41:25,560
Speaker 1: the pandemic. How did various emerging market countries and their

643
00:41:25,600 --> 00:41:30,520
Speaker 1: governments respond to COVID and the financial crisis were in

644
00:41:30,840 --> 00:41:34,400
Speaker 1: O eight oh nine? Was this really developed world issue

645
00:41:34,560 --> 00:41:38,759
Speaker 1: in terms of UH the Great Financial Crisis? Or did

646
00:41:38,800 --> 00:41:44,600
Speaker 1: an impact e M significantly also, well, both crises really

647
00:41:46,120 --> 00:41:51,200
Speaker 1: are exogenous shocks from the perspective of the emerging markets, right,

648
00:41:51,440 --> 00:41:56,120
Speaker 1: Unlike where we were the epicenter. Let's say in two

649
00:41:56,200 --> 00:42:01,160
Speaker 1: thousand and eight, emerging markets were run over as bystanders, right,

650
00:42:01,280 --> 00:42:03,279
Speaker 1: and I would say the whole world was run over

651
00:42:03,440 --> 00:42:07,239
Speaker 1: as as part of COVID. So whenever you have these

652
00:42:07,440 --> 00:42:11,680
Speaker 1: external crises that impinge upon the markets, there are some

653
00:42:12,120 --> 00:42:18,040
Speaker 1: very well established programs out there for the sovereigns in

654
00:42:18,080 --> 00:42:21,600
Speaker 1: our markets to make sure it doesn't become a systemic crisis.

655
00:42:22,719 --> 00:42:25,839
Speaker 1: So if you think about two thousand and eight, there

656
00:42:25,920 --> 00:42:28,480
Speaker 1: was a very standard playbook already in place to help

657
00:42:28,560 --> 00:42:32,320
Speaker 1: some of the weaker credit um whose debt was sustainable

658
00:42:32,360 --> 00:42:35,600
Speaker 1: in the medium term, they just had to rollover problem,

659
00:42:35,840 --> 00:42:37,520
Speaker 1: and the I m F was there to help them

660
00:42:37,640 --> 00:42:41,120
Speaker 1: roll over their deaths until market access was regained. Some

661
00:42:41,280 --> 00:42:43,320
Speaker 1: of them, of course, their debt was not sustainable in

662
00:42:43,360 --> 00:42:45,800
Speaker 1: the medium term and so they elected to default. So

663
00:42:45,920 --> 00:42:48,960
Speaker 1: in Ecuador defaulted in two thousand eight, for example. What

664
00:42:49,320 --> 00:42:52,840
Speaker 1: about the early when we saw a lot of Southern

665
00:42:52,920 --> 00:42:56,960
Speaker 1: Europe running into problems. Do we really think about Greece

666
00:42:57,160 --> 00:43:00,360
Speaker 1: as an emerging market or is that more of a

667
00:43:00,480 --> 00:43:07,279
Speaker 1: developed nation with long history of credit problems. It's a

668
00:43:07,360 --> 00:43:10,120
Speaker 1: great question. So earlier, when I was trying to lay

669
00:43:10,160 --> 00:43:13,799
Speaker 1: out the taxonomy of what's considered an emerging country from

670
00:43:13,840 --> 00:43:17,600
Speaker 1: an investment perspective, I said, it's usually lower middle income

671
00:43:17,680 --> 00:43:21,800
Speaker 1: countries or countries that have defaulted, even if they're high income,

672
00:43:21,880 --> 00:43:26,240
Speaker 1: and I would put Greece in that louder category. How

673
00:43:26,360 --> 00:43:31,840
Speaker 1: did that Southern European crisis, and I remember it seemed

674
00:43:31,840 --> 00:43:33,800
Speaker 1: like it was never going to end. How did that

675
00:43:33,920 --> 00:43:36,320
Speaker 1: affect the rest of the universe. I don't want to

676
00:43:36,400 --> 00:43:41,560
Speaker 1: use a dirty word like contains, but was that primarily

677
00:43:41,719 --> 00:43:46,680
Speaker 1: focused in Europe? Or did the tremors from that radiate

678
00:43:46,920 --> 00:43:52,920
Speaker 1: outwards to all the various emerging market debt? Well, it's

679
00:43:53,000 --> 00:43:56,239
Speaker 1: a as a relative value construct, of course it would

680
00:43:56,400 --> 00:43:58,640
Speaker 1: radiate out. I mean, if you're going to get paid

681
00:43:58,920 --> 00:44:04,520
Speaker 1: five over bunds for BTPs or Spanish government bonds, why

682
00:44:04,640 --> 00:44:08,960
Speaker 1: on earth would you buy emerging markets debt? Right? So,

683
00:44:09,160 --> 00:44:13,080
Speaker 1: of course our spreads widened in sympathy. And I used

684
00:44:13,080 --> 00:44:15,880
Speaker 1: to say that you know it's it's Spain default. Right.

685
00:44:15,920 --> 00:44:21,640
Speaker 1: If a major developed markets government elects to default, the

686
00:44:21,880 --> 00:44:27,080
Speaker 1: signaling for our markets will be very very bad. Right.

687
00:44:27,200 --> 00:44:30,040
Speaker 1: Just think about how terrible that would be. Argentina would

688
00:44:30,040 --> 00:44:32,120
Speaker 1: just default because they would say, well, if the Spanish

689
00:44:32,239 --> 00:44:34,040
Speaker 1: aren't going to pay, we're not going to pay, even

690
00:44:34,080 --> 00:44:38,520
Speaker 1: if they could pay right. Um, But I thought one

691
00:44:38,560 --> 00:44:41,439
Speaker 1: of the most interesting things in two thousand and ten,

692
00:44:43,239 --> 00:44:50,400
Speaker 1: Mexico issued its first century bond, hundred year bond and

693
00:44:50,680 --> 00:44:54,560
Speaker 1: the Mexican Hacienda. The Debt Capital Markets group there was

694
00:44:54,760 --> 00:45:00,400
Speaker 1: very very clever, and they figured out which in vestors

695
00:45:00,480 --> 00:45:03,160
Speaker 1: would be most likely to dip their toes into this

696
00:45:03,640 --> 00:45:09,760
Speaker 1: hundred year Mexican bond, and they offered it shockingly cheap

697
00:45:10,200 --> 00:45:13,279
Speaker 1: to the Mexican curve for those of us brave enough

698
00:45:13,320 --> 00:45:14,759
Speaker 1: to do it. And by the way, they issued it

699
00:45:15,000 --> 00:45:17,520
Speaker 1: at a large original issue discount, whichman and had a

700
00:45:17,560 --> 00:45:20,239
Speaker 1: lot of default protection relative to other Mexican bonds. It

701
00:45:20,400 --> 00:45:23,160
Speaker 1: was nirvana of a bond for us. We bought as

702
00:45:23,280 --> 00:45:24,960
Speaker 1: much of it as we could. We were the largest

703
00:45:25,000 --> 00:45:27,160
Speaker 1: holder of this bond, even though we weren't a very

704
00:45:27,280 --> 00:45:32,480
Speaker 1: large emerging debt asset manager, and we couldn't figure out, like,

705
00:45:32,640 --> 00:45:35,399
Speaker 1: why why would Mexico give us such a free lunch?

706
00:45:35,480 --> 00:45:38,120
Speaker 1: It just doesn't make any sense. And our sovereign analysts

707
00:45:39,200 --> 00:45:40,960
Speaker 1: came up with a theory, which I think is a

708
00:45:41,000 --> 00:45:45,960
Speaker 1: reasonable one. He said, here's the thing. Us rates are low,

709
00:45:46,080 --> 00:45:49,120
Speaker 1: interest rates are low, so while the spread is very wide,

710
00:45:49,200 --> 00:45:52,279
Speaker 1: the yield is one of the lowest that Mexico is

711
00:45:52,360 --> 00:45:56,880
Speaker 1: ever issued at. And that's politically popular. On top of that,

712
00:45:58,000 --> 00:46:01,120
Speaker 1: it's politically popular to say we Mexico can borrow for

713
00:46:01,200 --> 00:46:05,399
Speaker 1: a hundred years while Fain is struggling. So a little

714
00:46:05,440 --> 00:46:11,120
Speaker 1: bit of political populism and national pride allows them to

715
00:46:11,440 --> 00:46:14,800
Speaker 1: offer this, and and it's relatively in expensive money for

716
00:46:15,120 --> 00:46:18,360
Speaker 1: for them, isn't it. That's right, that's right. That was

717
00:46:18,440 --> 00:46:23,560
Speaker 1: our only Mexican holding for years until Brexit came along

718
00:46:24,120 --> 00:46:27,680
Speaker 1: and a Sterling version of that bond became shockingly cheap

719
00:46:27,760 --> 00:46:29,680
Speaker 1: to it, so we got rid of all of our

720
00:46:29,719 --> 00:46:35,880
Speaker 1: dollar bonds and bought Sterling bonds relative value playing so

721
00:46:36,760 --> 00:46:40,320
Speaker 1: from Azerberjan to the Ivory Coast, to Mexico to to

722
00:46:40,480 --> 00:46:43,120
Speaker 1: all around the world. It kind of raises an interesting question.

723
00:46:43,840 --> 00:46:48,360
Speaker 1: So you mentioned you had an analyst who covered Mexican debt.

724
00:46:49,360 --> 00:46:52,640
Speaker 1: How do you analyze governments or companies for that matter,

725
00:46:53,239 --> 00:46:56,359
Speaker 1: that are halfway around the world and presents a risk

726
00:46:56,520 --> 00:47:02,760
Speaker 1: of all sorts of upheaval, politics, currency crisis, defaults on debts.

727
00:47:03,040 --> 00:47:05,040
Speaker 1: Do you have to have boots on the ground in

728
00:47:05,120 --> 00:47:09,160
Speaker 1: each country or can you do this? You know from Afar?

729
00:47:09,320 --> 00:47:13,680
Speaker 1: What do you lose not participating on the ground. In

730
00:47:13,840 --> 00:47:19,319
Speaker 1: my opinion, this is more of a marketing question than

731
00:47:19,680 --> 00:47:25,480
Speaker 1: an investing question. Really interesting tell us more so if

732
00:47:25,960 --> 00:47:29,160
Speaker 1: you think through the process that I've just described, where

733
00:47:29,200 --> 00:47:34,040
Speaker 1: you load your chips, your alpha chips on arbitrage like

734
00:47:34,280 --> 00:47:36,719
Speaker 1: things where you don't even really care which country you're

735
00:47:36,760 --> 00:47:41,719
Speaker 1: talking about. Frankly, right, then from that perspective, no, you

736
00:47:41,760 --> 00:47:44,480
Speaker 1: don't need boots on the ground because you are emphasizing

737
00:47:44,640 --> 00:47:47,800
Speaker 1: that activity and de emphasizing what you think you know

738
00:47:47,920 --> 00:47:53,200
Speaker 1: about any particular country. And so the country tilts that

739
00:47:53,360 --> 00:47:56,920
Speaker 1: we remain with are mostly a function of whether or

740
00:47:56,960 --> 00:47:59,880
Speaker 1: not there are arbitrage like things to do in that country.

741
00:48:00,120 --> 00:48:03,239
Speaker 1: You know, if I take Papa New Guinea or t Jikistan,

742
00:48:03,280 --> 00:48:05,400
Speaker 1: there's there's nothing to do there. You either buy the

743
00:48:05,480 --> 00:48:08,040
Speaker 1: one bond they have or you don't. It's pure country selections.

744
00:48:08,080 --> 00:48:10,560
Speaker 1: So we just don't bother. Right, So you're saying this

745
00:48:10,719 --> 00:48:14,360
Speaker 1: is really a quantitative form of analytics and not a

746
00:48:14,480 --> 00:48:20,440
Speaker 1: squish your qualitative approach. That's correct. Correct if you've marketed

747
00:48:20,480 --> 00:48:23,080
Speaker 1: yourself as you know, boots on the ground and we

748
00:48:23,200 --> 00:48:26,600
Speaker 1: think we can get more information than other people, which,

749
00:48:26,680 --> 00:48:31,160
Speaker 1: by the way, regulation f D wasn't just for equities,

750
00:48:31,239 --> 00:48:33,520
Speaker 1: it's for everybody. Everybody gets the same information at the

751
00:48:33,560 --> 00:48:36,160
Speaker 1: same time, the same road shows the same everything. It's

752
00:48:36,160 --> 00:48:39,000
Speaker 1: not true even overseas. I mean, I would think that

753
00:48:39,120 --> 00:48:40,960
Speaker 1: if you're issuing a bond and equador or what the

754
00:48:41,000 --> 00:48:44,439
Speaker 1: hell do you care about the SEC rules? Oh, these

755
00:48:44,480 --> 00:48:50,000
Speaker 1: are SEC registered bonds. None of the market is euro clear,

756
00:48:50,280 --> 00:48:55,399
Speaker 1: US law, UK law. The country is emerging, gotcha. That's

757
00:48:55,440 --> 00:48:58,239
Speaker 1: really the idea of the nineties, where I go and

758
00:48:58,360 --> 00:49:00,880
Speaker 1: find out the vote and I tell the US you know,

759
00:49:01,000 --> 00:49:03,759
Speaker 1: the worldwide JAW Oregon salesforce. What the thing is going

760
00:49:03,840 --> 00:49:07,640
Speaker 1: to be? That kind of inside knowledge that doesn't exist anymore, right, right?

761
00:49:07,760 --> 00:49:10,080
Speaker 1: That makes that makes a lot of sense um to

762
00:49:10,320 --> 00:49:15,160
Speaker 1: other questions about what's going on today. So inflation seems

763
00:49:15,239 --> 00:49:21,879
Speaker 1: to be the watchword in one along with interest rates

764
00:49:21,920 --> 00:49:26,200
Speaker 1: that seem to follow. Uh, these are popular subjects of

765
00:49:26,440 --> 00:49:30,000
Speaker 1: at the moment. What do you make of inflation as

766
00:49:30,040 --> 00:49:33,520
Speaker 1: a risk both to the rate regime we see and

767
00:49:33,760 --> 00:49:38,399
Speaker 1: and how does that impact emerging market debt. So inflation

768
00:49:40,080 --> 00:49:45,400
Speaker 1: is a form of default where you don't have to

769
00:49:46,080 --> 00:49:51,520
Speaker 1: declare it. Mm hmm. Right. So, from everything I know

770
00:49:52,000 --> 00:49:55,120
Speaker 1: about sovereigns, when they get their backs against the wall

771
00:49:55,160 --> 00:49:58,120
Speaker 1: and eventually have to make a political choice to default,

772
00:49:58,880 --> 00:50:02,040
Speaker 1: it's a very it's to really a very unpopular decision.

773
00:50:02,520 --> 00:50:06,280
Speaker 1: And if you can, you want to, you know, conditional

774
00:50:06,360 --> 00:50:08,520
Speaker 1: on being in that position, you want to heap the

775
00:50:08,600 --> 00:50:11,880
Speaker 1: losses on foreigners. Right. That's why it used to be

776
00:50:12,040 --> 00:50:14,520
Speaker 1: that countries would default on their foreign currency debt because

777
00:50:14,520 --> 00:50:17,640
Speaker 1: that's where the foreigners were, right. Russia changed that calculus

778
00:50:17,680 --> 00:50:19,960
Speaker 1: because they defaulted on local currency debt, which is where

779
00:50:20,000 --> 00:50:22,399
Speaker 1: the foreigners were, and paid dollar debt, which is where

780
00:50:22,400 --> 00:50:26,920
Speaker 1: the Russian ologogums were. So once you're in that position,

781
00:50:27,200 --> 00:50:30,120
Speaker 1: if you can use financial repression in the form of

782
00:50:30,520 --> 00:50:35,799
Speaker 1: negative real interest rates partially through higher inflation, right, then

783
00:50:36,440 --> 00:50:39,640
Speaker 1: you can default slowly without having to make a political

784
00:50:39,719 --> 00:50:44,600
Speaker 1: decision to say we're not going to pay. And that's

785
00:50:44,640 --> 00:50:50,040
Speaker 1: how that's why, in my opinion, you see shadow assets

786
00:50:50,239 --> 00:50:53,520
Speaker 1: trying to pop up so if all the developed markets

787
00:50:53,560 --> 00:50:58,120
Speaker 1: are all using financial repression simultaneously, you can't escape. You

788
00:50:58,160 --> 00:51:00,600
Speaker 1: can escape by going to emerging market, but they're going

789
00:51:00,640 --> 00:51:04,120
Speaker 1: to try and do the same thing. If you're China,

790
00:51:04,440 --> 00:51:06,960
Speaker 1: you used to have a closed capital system. So it's

791
00:51:07,040 --> 00:51:09,440
Speaker 1: very hard for people to say, I don't like negative

792
00:51:09,480 --> 00:51:11,800
Speaker 1: real interest rates here, I'm going to go by you know,

793
00:51:11,960 --> 00:51:14,000
Speaker 1: US dollar bonds or something like that. Was hard for

794
00:51:14,080 --> 00:51:19,520
Speaker 1: citizens to change their currency. That's evolved a little bit,

795
00:51:19,560 --> 00:51:23,600
Speaker 1: but it's still fairly hard. So you see people playing

796
00:51:23,719 --> 00:51:26,800
Speaker 1: hope as a strategy. I would say cryptocurrency is hope

797
00:51:26,920 --> 00:51:29,520
Speaker 1: is a strategy, and I don't I know. I'm a

798
00:51:29,560 --> 00:51:31,919
Speaker 1: sitting duck for financial repression, so I'm going to hope

799
00:51:32,000 --> 00:51:35,399
Speaker 1: that this other thing is better because there's nowhere else

800
00:51:35,440 --> 00:51:38,840
Speaker 1: to escape. Do you want to define financial repression? I

801
00:51:38,960 --> 00:51:41,440
Speaker 1: hear that phrase constantly, and I always get the sense

802
00:51:41,840 --> 00:51:45,239
Speaker 1: people use it very differently. So what I mean by

803
00:51:45,440 --> 00:51:53,879
Speaker 1: financial repression is a running down of debts by allowing

804
00:51:54,840 --> 00:52:00,120
Speaker 1: than the earnings, so whether it's corporate earnings or or

805
00:52:00,280 --> 00:52:04,279
Speaker 1: personal earnings or government earnings to be inflated through the

806
00:52:04,360 --> 00:52:09,600
Speaker 1: inflation process, while the debts that are owed, whether it's

807
00:52:10,120 --> 00:52:12,960
Speaker 1: m zero in the form of your bank note in

808
00:52:13,040 --> 00:52:15,480
Speaker 1: your wallet or in your bank account all the way

809
00:52:15,520 --> 00:52:19,680
Speaker 1: out to your US tenure bond yielding one forty something.

810
00:52:20,200 --> 00:52:22,880
Speaker 1: If inflation is higher than that, then you're eroding the

811
00:52:23,000 --> 00:52:27,359
Speaker 1: real value of those debts, which is somebody else's assets, right,

812
00:52:28,840 --> 00:52:32,560
Speaker 1: And that's how you run down your debt GDP slowly

813
00:52:32,680 --> 00:52:35,920
Speaker 1: over time. But you don't actually default, you don't. You

814
00:52:35,960 --> 00:52:38,320
Speaker 1: don't fail to pay, you just fail to pay in

815
00:52:38,440 --> 00:52:43,480
Speaker 1: real terms. Really quite quite interesting. So you have decades

816
00:52:43,560 --> 00:52:48,319
Speaker 1: of experience looking at emerging markets. You've lived through economic,

817
00:52:48,440 --> 00:52:53,760
Speaker 1: financial credit crisis, all manner of mayhem in these markets.

818
00:52:54,520 --> 00:52:57,640
Speaker 1: What have you learned about these type of situations over

819
00:52:57,680 --> 00:52:59,919
Speaker 1: the course of your career? What what's your big take

820
00:53:00,000 --> 00:53:06,120
Speaker 1: away here? Well, you've probably read Tolstoy, so the idea

821
00:53:06,200 --> 00:53:10,720
Speaker 1: that every family is unhappy in its own way, every

822
00:53:10,840 --> 00:53:14,719
Speaker 1: crisis is unhappy in its own way. Right. There are

823
00:53:15,440 --> 00:53:19,560
Speaker 1: elements that may be the same, but each one is

824
00:53:19,680 --> 00:53:24,480
Speaker 1: slightly different. And an early book that was given to

825
00:53:24,560 --> 00:53:27,120
Speaker 1: me when I started, while there were two books when

826
00:53:27,160 --> 00:53:31,520
Speaker 1: I started in the emerging debt markets about the relationship

827
00:53:31,680 --> 00:53:35,560
Speaker 1: between creditors and debtors and what happens when they get

828
00:53:35,600 --> 00:53:39,040
Speaker 1: into crisis. One is called Banks, Borrowers and the Establishment,

829
00:53:39,160 --> 00:53:41,759
Speaker 1: which is great book, and the other one is called

830
00:53:41,880 --> 00:53:45,680
Speaker 1: Debt Games. And in Debt Games they look through all

831
00:53:45,800 --> 00:53:48,480
Speaker 1: the crises up until the moment that book was written,

832
00:53:48,719 --> 00:53:53,160
Speaker 1: and they use a game theoretic approach to the strategic

833
00:53:53,320 --> 00:53:56,759
Speaker 1: game of creditors and debtors as they head into a

834
00:53:57,320 --> 00:54:01,759
Speaker 1: failure to pay moment. And so you can try and

835
00:54:02,160 --> 00:54:05,640
Speaker 1: conceptualize things that way and say, Okay, what are the

836
00:54:05,719 --> 00:54:09,200
Speaker 1: facts that we have? Are the known unknowns about this

837
00:54:09,320 --> 00:54:11,600
Speaker 1: particular situation and how does it line up with our

838
00:54:11,680 --> 00:54:17,520
Speaker 1: past experience? But again, there's still some unknown unknowns every

839
00:54:17,600 --> 00:54:19,239
Speaker 1: time you do that, so you just have to be

840
00:54:19,360 --> 00:54:22,280
Speaker 1: humble about what is really knowable in any given situation.

841
00:54:22,600 --> 00:54:26,680
Speaker 1: So so I see Debt Games. Um, that's a vin

842
00:54:26,760 --> 00:54:32,120
Speaker 1: odd Aga wild debt game, strategic international interaction in international

843
00:54:32,239 --> 00:54:36,440
Speaker 1: debt rescheduling. Is that the book you're referring to? Yes?

844
00:54:36,719 --> 00:54:38,880
Speaker 1: And what was the other book? I'm sorry I missed it.

845
00:54:39,520 --> 00:54:44,839
Speaker 1: It's called Banks, Borrowers and the Establishment. It's I want

846
00:54:44,880 --> 00:54:46,920
Speaker 1: to say, oh, I found it right here, it is,

847
00:54:47,200 --> 00:54:50,800
Speaker 1: got it? It was I was It's Banks borrowers and

848
00:54:50,840 --> 00:54:54,120
Speaker 1: the establishment or revisionist account of the international debt crisis

849
00:54:54,280 --> 00:54:59,560
Speaker 1: is that it yes, quite interesting. Um So go on,

850
00:54:59,600 --> 00:55:01,520
Speaker 1: I'm sorry, know I interrupted you about that. I just

851
00:55:01,640 --> 00:55:05,880
Speaker 1: wanted to track these because they sound intrigue. Yeah, I know,

852
00:55:06,000 --> 00:55:11,879
Speaker 1: they're super It's it's mostly about how to take these

853
00:55:11,960 --> 00:55:17,560
Speaker 1: strategic interactions and map them onto the utility functions of

854
00:55:17,719 --> 00:55:21,960
Speaker 1: the people involved. Right, So, my utility function as an

855
00:55:22,000 --> 00:55:25,360
Speaker 1: investor on behalf of you know, endowments and pensions and

856
00:55:25,440 --> 00:55:29,040
Speaker 1: foundations or whatever, is to maximize alpha relative to my benchmark.

857
00:55:29,320 --> 00:55:33,560
Speaker 1: That's I have a very very transparent utility function. The

858
00:55:34,360 --> 00:55:38,879
Speaker 1: the borrower, right, let's say it's a government borrower, may

859
00:55:39,000 --> 00:55:42,720
Speaker 1: not be so transparent, and their utility function can shift

860
00:55:42,840 --> 00:55:47,600
Speaker 1: quickly over time. And so just thinking about how that

861
00:55:47,800 --> 00:55:52,160
Speaker 1: evolves and trying to make some guesses. And by the way,

862
00:55:53,400 --> 00:55:56,759
Speaker 1: this administration might get voted out of office over the

863
00:55:56,920 --> 00:55:58,799
Speaker 1: term of the debt of the bonds that you own,

864
00:55:59,320 --> 00:56:01,759
Speaker 1: and so you know, your opinion is only good so

865
00:56:01,880 --> 00:56:03,400
Speaker 1: long as so and so is in office. You know

866
00:56:03,440 --> 00:56:06,719
Speaker 1: a great example of that was Ecuador earlier this year,

867
00:56:06,800 --> 00:56:08,680
Speaker 1: where you vote in the new guy, and the new

868
00:56:08,760 --> 00:56:11,400
Speaker 1: guy is more investor friendly and the bonds go up.

869
00:56:13,600 --> 00:56:18,839
Speaker 1: So you know that's that's a it's a pretty big change. Huh.

870
00:56:19,239 --> 00:56:21,400
Speaker 1: So you you've seen a lot over the course of

871
00:56:21,560 --> 00:56:24,719
Speaker 1: your career. I'm gonna throw you a curve ball now

872
00:56:25,600 --> 00:56:29,520
Speaker 1: and ask. In two thousand and two, you leave JP

873
00:56:29,680 --> 00:56:34,040
Speaker 1: Morgan to train for a spot on the US national

874
00:56:34,200 --> 00:56:38,880
Speaker 1: rowing team to compete at the Olympics in Athens and

875
00:56:39,440 --> 00:56:43,439
Speaker 1: four tell us about that. What motivated it? I'm gonna

876
00:56:43,480 --> 00:56:46,160
Speaker 1: assume you weren't just going to Athens to check out

877
00:56:46,239 --> 00:56:50,200
Speaker 1: their debt. What what got you involved in in crew

878
00:56:50,360 --> 00:56:56,320
Speaker 1: and rowing? Yeah? So after I moved back from Brazil

879
00:56:56,400 --> 00:57:00,200
Speaker 1: and I took over a pretty big job at EPE

880
00:57:00,239 --> 00:57:03,919
Speaker 1: Morigan and it was right as the Asian financial crisis came,

881
00:57:05,719 --> 00:57:09,439
Speaker 1: and that was a hellish period for about eighteen months

882
00:57:09,520 --> 00:57:12,440
Speaker 1: through Russia's default and I just burned out a lot.

883
00:57:12,640 --> 00:57:15,200
Speaker 1: And one of my clients, who was a prop trader

884
00:57:15,239 --> 00:57:18,880
Speaker 1: at Banker's Trust, said, I think you need to take

885
00:57:19,000 --> 00:57:21,520
Speaker 1: up a sport. You know, you work all the time.

886
00:57:22,880 --> 00:57:24,560
Speaker 1: And I said, well, I live in Manhattan, I live

887
00:57:24,600 --> 00:57:26,320
Speaker 1: in a village. What am I like? What sport am

888
00:57:26,320 --> 00:57:27,760
Speaker 1: I going to take up? He says, why don't you

889
00:57:27,800 --> 00:57:30,000
Speaker 1: take up rowing? Nobody needs you at four in the morning.

890
00:57:31,080 --> 00:57:34,000
Speaker 1: And so I bought a car, I joined a rowing club.

891
00:57:34,360 --> 00:57:37,960
Speaker 1: I loved it. I got more serious. I transferred to

892
00:57:38,040 --> 00:57:40,640
Speaker 1: the New York Athletic Club and had a great coach

893
00:57:40,800 --> 00:57:47,280
Speaker 1: there who watched an evolution that was very subtle. And

894
00:57:48,360 --> 00:57:51,160
Speaker 1: this is partially a story of JP Morgan. So JP

895
00:57:51,200 --> 00:57:55,520
Speaker 1: Morgan had an extremely special culture. It's hard to describe

896
00:57:56,160 --> 00:57:57,920
Speaker 1: until it was gone right. That was the only job

897
00:57:57,960 --> 00:58:04,360
Speaker 1: I've ever had, but spot JP Morgan and that culture

898
00:58:05,080 --> 00:58:09,840
Speaker 1: fell apart. And so my coach, who was watching me

899
00:58:09,920 --> 00:58:14,360
Speaker 1: get faster and faster simultaneously saw me not love my

900
00:58:14,480 --> 00:58:16,560
Speaker 1: job anymore. He's like, you used to be first off

901
00:58:16,640 --> 00:58:19,280
Speaker 1: the water, jump in your little car, get to your job,

902
00:58:19,400 --> 00:58:21,000
Speaker 1: be at your desk at seven in the morning. Now

903
00:58:21,040 --> 00:58:23,200
Speaker 1: I see you hang out, you have breakfast with the team.

904
00:58:23,280 --> 00:58:26,080
Speaker 1: What's going on? And I said, I don't love my

905
00:58:26,200 --> 00:58:28,959
Speaker 1: job anymore. And he says, you're so talented. Why don't

906
00:58:28,960 --> 00:58:31,360
Speaker 1: you quit your job then and try and train for Athens?

907
00:58:32,160 --> 00:58:34,000
Speaker 1: And so I said, you know what, You're right, and

908
00:58:34,120 --> 00:58:37,360
Speaker 1: I did. And this was the woman's double event, which

909
00:58:37,440 --> 00:58:41,960
Speaker 1: is really a challenging event. Isn't it. Well, this is

910
00:58:42,000 --> 00:58:45,800
Speaker 1: the women's lightweight double. Yeah. So in Olympic women's rowing,

911
00:58:45,920 --> 00:58:49,200
Speaker 1: if you're an open weight, there's the single, the double,

912
00:58:49,400 --> 00:58:53,640
Speaker 1: the four, the quad, and the eight, and lightweight rowing

913
00:58:53,720 --> 00:58:56,360
Speaker 1: there's the double. So you're either number one and two

914
00:58:56,440 --> 00:59:00,200
Speaker 1: in the country or you're not so and plus it's

915
00:59:00,200 --> 00:59:02,720
Speaker 1: a lot of dieting. You had to weigh a very

916
00:59:02,800 --> 00:59:06,680
Speaker 1: small amount. He was really intense to do. And my coach,

917
00:59:06,880 --> 00:59:08,520
Speaker 1: you know, when I showed up for practice the next

918
00:59:08,600 --> 00:59:10,520
Speaker 1: day and I said, I quit my job, Benny, I'm

919
00:59:10,520 --> 00:59:12,080
Speaker 1: ready to go. He says, all right, now you have

920
00:59:12,160 --> 00:59:14,320
Speaker 1: to move to Boston because that's where all the lightweight rowers.

921
00:59:14,400 --> 00:59:16,880
Speaker 1: I couldn't believe it. I was like, what I thought

922
00:59:16,880 --> 00:59:18,240
Speaker 1: I was going to row for you. He says, no,

923
00:59:18,360 --> 00:59:20,720
Speaker 1: you're rowing for Athens. So you moved to Boston. So

924
00:59:21,320 --> 00:59:24,440
Speaker 1: that's amazing. Sorry, so that's what led you to Boston,

925
00:59:24,520 --> 00:59:29,000
Speaker 1: and I guess ultimately to g m O. Yep, yep. I.

926
00:59:29,400 --> 00:59:32,080
Speaker 1: I mean, I didn't make the team, and I was

927
00:59:32,280 --> 00:59:34,320
Speaker 1: very desponded about that. But I didn't meet a guy

928
00:59:34,720 --> 00:59:39,360
Speaker 1: who's now my wonderful and long suffering husband, and I said,

929
00:59:39,360 --> 00:59:42,360
Speaker 1: I'm not moving back to New York. So then I thought,

930
00:59:42,400 --> 00:59:43,800
Speaker 1: what am I going to do? So I called up

931
00:59:43,840 --> 00:59:45,200
Speaker 1: g M O and said, hey, you remember me, and

932
00:59:45,240 --> 00:59:47,160
Speaker 1: they're like, yeah, I remember you said I need a job.

933
00:59:47,240 --> 00:59:50,080
Speaker 1: They said, okay, did they ask what have you been

934
00:59:50,120 --> 00:59:52,640
Speaker 1: doing for the past two years since you left JPM?

935
00:59:53,480 --> 00:59:56,919
Speaker 1: And they did. And fortunately the head of the team

936
00:59:56,960 --> 00:59:59,640
Speaker 1: at the time himself is really big into sports. We

937
00:59:59,720 --> 01:00:02,360
Speaker 1: still follow each other on Strava now that he's retired,

938
01:00:02,640 --> 01:00:06,720
Speaker 1: and so most of my interview with him was about

939
01:00:06,800 --> 01:00:10,800
Speaker 1: my power to weight ratio. I'm not kidding, that's amazing.

940
01:00:11,000 --> 01:00:15,640
Speaker 1: That's really that's really amazing. So how how competitive were

941
01:00:15,760 --> 01:00:20,400
Speaker 1: you in the women's lightweight doubles? Did how close did

942
01:00:20,480 --> 01:00:23,320
Speaker 1: you come to actually go on to Athens? Because that's

943
01:00:23,360 --> 01:00:29,160
Speaker 1: supposed to be an incredibly competitive slot. So in two

944
01:00:29,320 --> 01:00:32,320
Speaker 1: thousand and three, which is the year leading up where

945
01:00:32,320 --> 01:00:35,680
Speaker 1: they're going to decide the likely national teams the following year,

946
01:00:36,400 --> 01:00:42,640
Speaker 1: we came in second at trials. Now, interestingly enough, I

947
01:00:43,160 --> 01:00:46,240
Speaker 1: still row every day and on the weekends. We have

948
01:00:46,320 --> 01:00:48,800
Speaker 1: a house at the Cape and I've started rowing down there,

949
01:00:49,040 --> 01:00:51,200
Speaker 1: and one of the guys I now row with is

950
01:00:51,280 --> 01:00:55,520
Speaker 1: the coach of the other women's double and I remember

951
01:00:55,560 --> 01:00:57,840
Speaker 1: the first day that I showed up. I was so nervous.

952
01:00:57,920 --> 01:01:01,800
Speaker 1: I thought, oh my god, I'm gonna Jim Deeps and

953
01:01:02,000 --> 01:01:04,919
Speaker 1: I you know, I said hi, Mr Deets and he says,

954
01:01:05,040 --> 01:01:08,520
Speaker 1: vander Steel, you wrote against you know Stacy. I'm like, yes,

955
01:01:08,640 --> 01:01:13,000
Speaker 1: He's like you you did a good job. I was

956
01:01:13,080 --> 01:01:15,160
Speaker 1: so pleased. And then this year at the head of

957
01:01:15,200 --> 01:01:18,200
Speaker 1: the child we raised my partner and I raced against

958
01:01:18,240 --> 01:01:21,320
Speaker 1: a couple of the open weight women from Athens, Hillary

959
01:01:21,400 --> 01:01:26,640
Speaker 1: and Marion. We just lost. So it's fun to still

960
01:01:26,760 --> 01:01:28,720
Speaker 1: race these women all of these years later. Of course

961
01:01:28,760 --> 01:01:30,880
Speaker 1: we have kids and jobs and other stuff going on.

962
01:01:31,480 --> 01:01:34,000
Speaker 1: What do you work out on at home? Are you

963
01:01:34,240 --> 01:01:37,479
Speaker 1: using a rowing machine or you're not in the water

964
01:01:37,640 --> 01:01:40,920
Speaker 1: every day? Certainly not this time a year. We were

965
01:01:41,040 --> 01:01:44,240
Speaker 1: out on Saturday and Sunday. This morning. I have a

966
01:01:44,320 --> 01:01:47,560
Speaker 1: group called the Early Birds. It's all of these fabulous women.

967
01:01:48,640 --> 01:01:54,520
Speaker 1: Um and at the race starts, so you just hit

968
01:01:54,600 --> 01:01:56,880
Speaker 1: the faith time. Whoever shows up today it was Sam

969
01:01:56,960 --> 01:01:59,840
Speaker 1: and Alex and you know, we had to work out

970
01:02:00,000 --> 01:02:02,640
Speaker 1: it agreed to yesterday. Normally we would do it at

971
01:02:02,640 --> 01:02:04,840
Speaker 1: the rowing club on the rowing machines, but right now

972
01:02:04,920 --> 01:02:07,760
Speaker 1: with COVID, we just do it over the face time. Huh,

973
01:02:08,120 --> 01:02:10,280
Speaker 1: what machine didn't get out of bed without these women?

974
01:02:10,320 --> 01:02:13,400
Speaker 1: By the way, is this any particular machine or you?

975
01:02:14,040 --> 01:02:16,440
Speaker 1: How are you actually doing this? The reason I ask

976
01:02:16,600 --> 01:02:20,720
Speaker 1: is I have a hydro which I kind of get

977
01:02:20,840 --> 01:02:22,880
Speaker 1: very lax when the weather is nice and I'd rather

978
01:02:22,960 --> 01:02:26,720
Speaker 1: be outside. But around this time a year, it's like, okay,

979
01:02:26,800 --> 01:02:30,920
Speaker 1: it's time to start, and I'm just about ready to

980
01:02:31,720 --> 01:02:34,120
Speaker 1: mid December, just about ready to say all right, no

981
01:02:34,240 --> 01:02:37,160
Speaker 1: more goofing around, let's let's hit the machine. Well, that

982
01:02:37,280 --> 01:02:40,480
Speaker 1: looks like a very very sticky machine I've seen not

983
01:02:40,600 --> 01:02:44,480
Speaker 1: only have I seen the advertisement for it, but the

984
01:02:44,600 --> 01:02:47,560
Speaker 1: people who do the videos, Yeah, they're great. They're out

985
01:02:47,640 --> 01:02:49,760
Speaker 1: on the Charles all the time, so we see them

986
01:02:49,880 --> 01:02:54,680
Speaker 1: go by. That's funny. But what we row on concept twos,

987
01:02:54,680 --> 01:02:58,120
Speaker 1: which are just the basic equipment, well, you know, I went.

988
01:02:58,240 --> 01:03:00,480
Speaker 1: I learned recently that one of the women in from

989
01:03:00,640 --> 01:03:03,680
Speaker 1: back in the day, and it's woman could Trine's working

990
01:03:03,760 --> 01:03:06,160
Speaker 1: on an improvement to what we have going, which is

991
01:03:06,200 --> 01:03:09,200
Speaker 1: just literally FaceTime. So we're you know, got video chat

992
01:03:09,320 --> 01:03:11,600
Speaker 1: going on, but we can't see each other's monitors as

993
01:03:11,640 --> 01:03:14,280
Speaker 1: that we were all there together. So she's working on

994
01:03:14,360 --> 01:03:17,600
Speaker 1: an enhancement where it'll be FaceTime plus your ability to

995
01:03:17,680 --> 01:03:21,439
Speaker 1: see other people's scores, which really gets your juices going.

996
01:03:21,520 --> 01:03:25,120
Speaker 1: You know, that's the secret source of Peloton and other

997
01:03:25,880 --> 01:03:30,280
Speaker 1: you know, competitive machines like Hydro and I'm sure there's

998
01:03:30,320 --> 01:03:33,640
Speaker 1: a Nordic Trek has something similar. Um. At a certain point,

999
01:03:33,680 --> 01:03:36,120
Speaker 1: it just you know, becomes I just want a little

1000
01:03:36,160 --> 01:03:40,480
Speaker 1: piece and quiet, and the videos are very it's a

1001
01:03:40,560 --> 01:03:44,120
Speaker 1: relaxing workout. Even if you work out work up a sweat. Um,

1002
01:03:44,480 --> 01:03:48,080
Speaker 1: you're much more competitive in that space. So I don't dare,

1003
01:03:48,920 --> 01:03:51,280
Speaker 1: but it sounds like it's really fascinating. It's amazing you've

1004
01:03:51,280 --> 01:03:55,160
Speaker 1: stayed with it all these times. I know, it's amazing

1005
01:03:55,240 --> 01:03:58,000
Speaker 1: you stayed with it all this time. I know I

1006
01:03:58,080 --> 01:04:00,400
Speaker 1: only speaking of time. I know only have for a

1007
01:04:00,520 --> 01:04:04,000
Speaker 1: few more moments. Let's jump to our favorite questions that

1008
01:04:04,080 --> 01:04:07,360
Speaker 1: we ask all of our guests, starting with tell us

1009
01:04:07,400 --> 01:04:11,040
Speaker 1: what you're streaming these days? Would have been keeping you entertained?

1010
01:04:11,160 --> 01:04:16,040
Speaker 1: You and the family entertained during the lockdown. Well, my

1011
01:04:16,480 --> 01:04:19,640
Speaker 1: two teenage daughters include me, and the other day they said, Mom,

1012
01:04:19,680 --> 01:04:23,800
Speaker 1: you haven't opened your Spotify wrapped yet m hm, So

1013
01:04:23,920 --> 01:04:25,120
Speaker 1: I don't know if you know what that is, but

1014
01:04:25,200 --> 01:04:27,760
Speaker 1: that's where Spotify tells you what you most listen to,

1015
01:04:28,440 --> 01:04:33,720
Speaker 1: so it's perfect timing. Um. So according to Spotify, what

1016
01:04:33,880 --> 01:04:37,600
Speaker 1: I most listened to is eminem, Jay, z n F

1017
01:04:37,720 --> 01:04:42,720
Speaker 1: and Rihanna. So these are all upbeat workout music, upbeat

1018
01:04:42,760 --> 01:04:45,040
Speaker 1: workout stuff. Yeah, I listened to a lot of the

1019
01:04:45,360 --> 01:04:48,080
Speaker 1: dred and eight beat per minute running workout stuff. So

1020
01:04:48,400 --> 01:04:52,320
Speaker 1: that's my hypothesis where that comes from. Um, in terms

1021
01:04:52,360 --> 01:04:55,959
Speaker 1: of watching stuff, the girls have gotten us into a show.

1022
01:04:56,160 --> 01:04:57,960
Speaker 1: It's I don't even think it's on Netflix. I think

1023
01:04:57,960 --> 01:05:01,440
Speaker 1: it's on the YouTube called The try Hi Guys. So

1024
01:05:01,560 --> 01:05:05,040
Speaker 1: it's these four hilarious guys who are on a cooking

1025
01:05:05,040 --> 01:05:07,800
Speaker 1: show where they're not allowed to use any recipes and

1026
01:05:07,920 --> 01:05:10,280
Speaker 1: they just make stuff up. So it's very very funny.

1027
01:05:10,320 --> 01:05:13,120
Speaker 1: We laugh a lot about that, The Try Guys. All right,

1028
01:05:13,320 --> 01:05:16,760
Speaker 1: I see this on YouTube that does look amusing. Um,

1029
01:05:16,920 --> 01:05:19,760
Speaker 1: tell us about your early mentors who helped to shape

1030
01:05:20,080 --> 01:05:26,160
Speaker 1: your career. Well, UM, certainly my parents, my older half

1031
01:05:26,240 --> 01:05:29,680
Speaker 1: brothers and sisters. Um, they're much much older than I am,

1032
01:05:29,760 --> 01:05:32,680
Speaker 1: and you know they had interesting careers that I learned

1033
01:05:32,680 --> 01:05:36,800
Speaker 1: about growing up. Uh. I would say my high school

1034
01:05:36,880 --> 01:05:39,840
Speaker 1: math teacher, one of my college journalism professors who was

1035
01:05:39,880 --> 01:05:42,880
Speaker 1: at my wedding. I'm still very good friends with um

1036
01:05:43,120 --> 01:05:46,120
Speaker 1: at JP Morgan. My god, there would be too many

1037
01:05:46,200 --> 01:05:48,640
Speaker 1: to mention there was. The place was just teeming with

1038
01:05:48,960 --> 01:05:54,320
Speaker 1: unbelievable people. But one really comes to mind as fellow

1039
01:05:54,360 --> 01:05:59,320
Speaker 1: with Mike Symbolist, who still works there. Um he he

1040
01:05:59,480 --> 01:06:02,040
Speaker 1: taught me all about relative value. He was there, he

1041
01:06:02,440 --> 01:06:07,240
Speaker 1: you know, watched the GMO versus long term UH outcomes.

1042
01:06:08,400 --> 01:06:10,720
Speaker 1: He was the person who suggested I go to Brazil.

1043
01:06:11,640 --> 01:06:13,600
Speaker 1: You know, he said, listen, this relative value work is

1044
01:06:13,640 --> 01:06:15,960
Speaker 1: really interesting and we all really like it. But you're

1045
01:06:16,000 --> 01:06:18,280
Speaker 1: not going to win any I awards or get paid

1046
01:06:18,400 --> 01:06:19,880
Speaker 1: much for doing it. You need to be one of

1047
01:06:19,920 --> 01:06:21,919
Speaker 1: these strategists. You need you need to be a person

1048
01:06:22,000 --> 01:06:26,919
Speaker 1: who can talk about the country. And so he said,

1049
01:06:27,000 --> 01:06:29,440
Speaker 1: just take the job in Brazil. I didn't. I couldn't

1050
01:06:29,440 --> 01:06:32,040
Speaker 1: speak Portuguese and know anything about Brazil. He's like, uh,

1051
01:06:32,440 --> 01:06:37,240
Speaker 1: it'll be fine, and it was so fine. Um. Interesting.

1052
01:06:37,760 --> 01:06:40,160
Speaker 1: Let's let's talk about books you mentioned too. What are

1053
01:06:40,240 --> 01:06:43,520
Speaker 1: some of your favorite what do what do you reading currently?

1054
01:06:44,440 --> 01:06:48,360
Speaker 1: So Um, when I thought about what books do I

1055
01:06:48,480 --> 01:06:50,560
Speaker 1: most love, I thought of it more in a desert

1056
01:06:50,600 --> 01:06:53,120
Speaker 1: island books. So you're stranded on a desert island, you

1057
01:06:53,160 --> 01:06:56,160
Speaker 1: can only bring so many books with you. And if

1058
01:06:56,240 --> 01:06:59,200
Speaker 1: that were the case, the ones that come to mind

1059
01:07:00,280 --> 01:07:07,640
Speaker 1: top are Throws, Pillars of Hercules, or O'donchy's Running in

1060
01:07:07,680 --> 01:07:12,440
Speaker 1: the Family, or the English Patients. Um. I love Ann Patchett,

1061
01:07:12,520 --> 01:07:16,960
Speaker 1: she wrote Belle Conto and Patron Sainted Liars. And then

1062
01:07:17,000 --> 01:07:19,000
Speaker 1: I think I would always need to have a copy

1063
01:07:19,120 --> 01:07:25,080
Speaker 1: of Hofstadter's godel esher Bach, which keeps your mind sharp. Um,

1064
01:07:25,520 --> 01:07:27,760
Speaker 1: I'm looking at a copy that right now. That was

1065
01:07:27,800 --> 01:07:30,840
Speaker 1: a college book that I keep swearing I'm going to reread,

1066
01:07:31,000 --> 01:07:35,120
Speaker 1: and I have yet to honor that promise. It's it's

1067
01:07:35,160 --> 01:07:39,480
Speaker 1: a great book, right written by my one of my researches,

1068
01:07:40,120 --> 01:07:46,400
Speaker 1: JP Morgan's mom's boyfriend. Interesting, any of the books you

1069
01:07:46,440 --> 01:07:49,680
Speaker 1: want to mention or I didn't want to cut you off? Yeah,

1070
01:07:49,720 --> 01:07:52,680
Speaker 1: I know. After that, like, you know, the usual reading stuff.

1071
01:07:52,800 --> 01:07:56,080
Speaker 1: I like to read literature. I love Barnes McEwen. That

1072
01:07:56,240 --> 01:08:00,640
Speaker 1: kind of stuff sounds sounds like that's a quite a

1073
01:08:00,680 --> 01:08:03,360
Speaker 1: great list. What sort of advice would you give to

1074
01:08:03,480 --> 01:08:06,880
Speaker 1: a recent college grad who was interested in a career

1075
01:08:07,600 --> 01:08:12,880
Speaker 1: in either fixed income or emerging market, Well, definitely try

1076
01:08:12,920 --> 01:08:16,680
Speaker 1: and get yourself a job at one of the big

1077
01:08:16,760 --> 01:08:20,160
Speaker 1: banks and go through the training program experience. I mean,

1078
01:08:21,080 --> 01:08:23,280
Speaker 1: you get a free m b A, you get to

1079
01:08:23,479 --> 01:08:26,360
Speaker 1: rotate around and figure out what you like, because I

1080
01:08:26,400 --> 01:08:28,280
Speaker 1: think it's very hard to imagine what you're going to

1081
01:08:28,400 --> 01:08:35,320
Speaker 1: like without actually doing it right. Um. After that, I

1082
01:08:35,360 --> 01:08:40,960
Speaker 1: would say, I think very very carefully about cultural fit.

1083
01:08:41,640 --> 01:08:45,559
Speaker 1: I didn't know that that mattered so much, like I said,

1084
01:08:45,680 --> 01:08:49,160
Speaker 1: until it was gone. So if you're not feeling it,

1085
01:08:49,439 --> 01:08:54,080
Speaker 1: move on. Really interesting, and our final question, what do

1086
01:08:54,160 --> 01:08:56,880
Speaker 1: you know about the world of investing today, be it

1087
01:08:57,600 --> 01:09:03,640
Speaker 1: emerging market, dead heads, funds, large corporate um investing strategies

1088
01:09:04,080 --> 01:09:07,000
Speaker 1: that you wish you knew thirty years or so ago

1089
01:09:07,080 --> 01:09:13,120
Speaker 1: when you were first getting started. Mm hmm, Well, I

1090
01:09:13,160 --> 01:09:17,479
Speaker 1: would say, in line with the last question, you've got

1091
01:09:17,600 --> 01:09:21,760
Speaker 1: to try stuff, right. I think it's hard for me

1092
01:09:21,880 --> 01:09:23,840
Speaker 1: to say what do I wish that I had known?

1093
01:09:23,920 --> 01:09:27,719
Speaker 1: I think you've got to try stuff, fail, try again.

1094
01:09:29,000 --> 01:09:32,519
Speaker 1: That's how you learn, and I can tell you to

1095
01:09:32,640 --> 01:09:36,080
Speaker 1: avoid mistakes, but until you make them yourself. It's going

1096
01:09:36,120 --> 01:09:41,599
Speaker 1: to be really difficult. I remember considering going to get

1097
01:09:41,640 --> 01:09:44,439
Speaker 1: a PhD actually while I was at Shaping Morgan, thinking oh,

1098
01:09:44,520 --> 01:09:46,960
Speaker 1: that would be something useful to have. And I went

1099
01:09:47,000 --> 01:09:49,280
Speaker 1: out to Stanford and met with a person who I

1100
01:09:49,320 --> 01:09:52,240
Speaker 1: thought I wanted to study under. And I explained the

1101
01:09:52,400 --> 01:09:54,559
Speaker 1: use case, like why do I want to have this PhD?

1102
01:09:54,720 --> 01:09:56,160
Speaker 1: And I explained to what I did for a living.

1103
01:09:56,200 --> 01:09:57,960
Speaker 1: He says, you don't need this PhD to do what

1104
01:09:58,040 --> 01:09:59,920
Speaker 1: you're doing for a living. If that's your use case,

1105
01:10:00,479 --> 01:10:06,599
Speaker 1: forget it. You are a practitioner already. So um, I'm

1106
01:10:06,640 --> 01:10:10,880
Speaker 1: not sure that I would have known that without actually

1107
01:10:10,960 --> 01:10:14,640
Speaker 1: practicing it. Huh. That's really kind of intriguing. We've been

1108
01:10:14,680 --> 01:10:17,200
Speaker 1: speaking to Tina vander Steel. She is the head of

1109
01:10:17,240 --> 01:10:21,120
Speaker 1: Emerging Country Debt at GMO, where she is also a partner.

1110
01:10:21,880 --> 01:10:24,559
Speaker 1: If you enjoy this conversation, check out any of our

1111
01:10:24,640 --> 01:10:28,640
Speaker 1: previous three hundred and seventy seven discussions we've had. You

1112
01:10:28,760 --> 01:10:32,960
Speaker 1: can find those at iTunes, Spotify, wherever you buy your

1113
01:10:33,040 --> 01:10:36,960
Speaker 1: favorite podcasts. We love your comments, feedback and suggestions right

1114
01:10:37,040 --> 01:10:40,559
Speaker 1: to us at m IB podcast at Bloomberg dot net.

1115
01:10:41,240 --> 01:10:44,400
Speaker 1: Sign up from my daily reads at rid Halts dot com,

1116
01:10:44,920 --> 01:10:48,360
Speaker 1: follow me on Twitter at rit Halts. I would be

1117
01:10:48,439 --> 01:10:50,800
Speaker 1: remiss if I did not thank the correct team that

1118
01:10:51,000 --> 01:10:55,040
Speaker 1: helps me put together this conversation each week. Mohammed Ramaui

1119
01:10:55,439 --> 01:11:00,320
Speaker 1: is my audio engineer. Paris Wald is my you Sir.

1120
01:11:00,520 --> 01:11:03,120
Speaker 1: Michael Batnick is my head of research. A ticket of

1121
01:11:03,160 --> 01:11:07,840
Speaker 1: Alberoni is our project manager. I'm Barry Ritolts. You've been

1122
01:11:07,880 --> 01:11:11,120
Speaker 1: listening to the asker's business on Bloomberg, Brady