1 00:00:00,400 --> 00:00:03,840 Speaker 1: Strap on your parachute. It's time for What Goes Up 2 00:00:04,120 --> 00:00:13,840 Speaker 1: with Sarah Ponzick and Mike Reagan. Hello and welcome to 3 00:00:13,920 --> 00:00:17,759 Speaker 1: What goes Up, a Bloomberg Weekly Markets podcast. I'm Sarah Ponzek, 4 00:00:18,040 --> 00:00:20,880 Speaker 1: reporter on the Cross Asset team, and I'm Mike Reagan, 5 00:00:21,000 --> 00:00:23,840 Speaker 1: a senior editor at Bloomberg. This week on the show, 6 00:00:24,040 --> 00:00:27,240 Speaker 1: for a second time this year, yield on junk bonds 7 00:00:27,240 --> 00:00:29,920 Speaker 1: in the US hit a record low this month. Investment 8 00:00:30,000 --> 00:00:32,880 Speaker 1: grade credit spreads are extremely narrow to this ahead of 9 00:00:32,920 --> 00:00:36,080 Speaker 1: a FED meeting next week, which is possibly, dare I 10 00:00:36,159 --> 00:00:39,600 Speaker 1: say it, the last big risk event of So what's 11 00:00:39,640 --> 00:00:41,960 Speaker 1: the outlook for corporate debt as the year comes to 12 00:00:42,000 --> 00:00:45,320 Speaker 1: a close. We'll discuss. Sorry you're really chinxing us there 13 00:00:45,360 --> 00:00:52,200 Speaker 1: with the last capitalized, last capitalized risk event of the year. Wow. Wow, 14 00:00:52,400 --> 00:00:55,040 Speaker 1: I really hope not. I'm sitting at a completely wooden 15 00:00:55,080 --> 00:00:57,840 Speaker 1: desk right now, and you can just imagine me knocking 16 00:00:57,880 --> 00:01:00,400 Speaker 1: on the bottom of it, because I do it was 17 00:01:00,440 --> 00:01:04,240 Speaker 1: a risk. We'll all know who to blame. We'll all 18 00:01:04,240 --> 00:01:06,360 Speaker 1: know who to blame. But it's good to have you back. 19 00:01:06,360 --> 00:01:09,039 Speaker 1: Sarah was off last week. I was I was trolling 20 00:01:09,080 --> 00:01:11,360 Speaker 1: you a little bit while you were out. It's good 21 00:01:11,400 --> 00:01:13,120 Speaker 1: to have you back. I'll make you You'll have to 22 00:01:13,160 --> 00:01:15,360 Speaker 1: go back and uh and listen to that. To be 23 00:01:15,400 --> 00:01:18,760 Speaker 1: completely honest, I I didn't have a chance. Uh, But 24 00:01:18,800 --> 00:01:20,440 Speaker 1: now I'm going to have to go back later this 25 00:01:20,480 --> 00:01:22,600 Speaker 1: evening and listen in so that I can get right 26 00:01:22,600 --> 00:01:25,480 Speaker 1: back at you. Mike. Not surprisingly, it was about your 27 00:01:25,520 --> 00:01:28,520 Speaker 1: proficiency with the craziest things. I was telling Katie Gray 28 00:01:28,560 --> 00:01:32,360 Speaker 1: felt don't sweat it. Sarah sets a low bar for 29 00:01:32,440 --> 00:01:35,839 Speaker 1: this stuff. I would imagine that Katie brought it. She 30 00:01:35,840 --> 00:01:39,000 Speaker 1: she did pretty good. We'll see how our guests this 31 00:01:39,040 --> 00:01:41,440 Speaker 1: week's do well. Of course, finish the episode with our 32 00:01:41,520 --> 00:01:44,919 Speaker 1: tradition the craziest things we saw in markets. But first 33 00:01:45,000 --> 00:01:46,920 Speaker 1: before that, we're shifting gears a little bit and we 34 00:01:46,959 --> 00:01:49,960 Speaker 1: want to talk about the credit markets, which, like all 35 00:01:50,040 --> 00:01:53,320 Speaker 1: markets this year, what a wild sort of round trip 36 00:01:53,360 --> 00:01:56,720 Speaker 1: for the credit markets, uh, with the pandemic and then 37 00:01:56,840 --> 00:01:59,640 Speaker 1: some support from the Fed. So to help us wrap 38 00:01:59,680 --> 00:02:02,120 Speaker 1: our head is around it all. We are very happy 39 00:02:02,200 --> 00:02:05,800 Speaker 1: to have the head of North American investment grade credit 40 00:02:05,880 --> 00:02:10,000 Speaker 1: at Aviva Investors. His name is Josh Lomire. Josh, welcome 41 00:02:10,040 --> 00:02:12,840 Speaker 1: to the show. Yeah, really really grateful to be on 42 00:02:13,000 --> 00:02:15,919 Speaker 1: thank you. Yeah. Yeah. So we're Sarah and I are 43 00:02:15,960 --> 00:02:19,079 Speaker 1: more of the the dummies in the stock market, uh 44 00:02:19,280 --> 00:02:21,280 Speaker 1: end of things. So bear with us if some of 45 00:02:21,280 --> 00:02:24,239 Speaker 1: our questions are are credit markets one on one, but 46 00:02:24,280 --> 00:02:26,520 Speaker 1: I think some of our listeners could could benefit from 47 00:02:26,520 --> 00:02:29,400 Speaker 1: that as well, Josh. As Sara put it out, the 48 00:02:29,480 --> 00:02:33,040 Speaker 1: spreads have have really obviously come back in a lot 49 00:02:33,320 --> 00:02:35,560 Speaker 1: since the FED stepped up to the plate. You know, 50 00:02:35,639 --> 00:02:37,680 Speaker 1: I was looking at just the triple A spreads, which 51 00:02:37,720 --> 00:02:40,480 Speaker 1: I know is not the hugest basket of credit out there, 52 00:02:40,480 --> 00:02:44,280 Speaker 1: but wow, talk about a dramatic year that the spreads 53 00:02:44,280 --> 00:02:46,320 Speaker 1: went up to correct me if I'm wrong, something like 54 00:02:46,360 --> 00:02:50,240 Speaker 1: three thirty or so basis points in March back down 55 00:02:50,360 --> 00:02:54,600 Speaker 1: about one thirty and change. Now. So I'm gonna ask 56 00:02:54,600 --> 00:02:57,040 Speaker 1: you a question that's probably unanswerable, but give us your 57 00:02:57,080 --> 00:02:59,560 Speaker 1: best guests. Where would these spreads be? Do you think 58 00:02:59,639 --> 00:03:02,280 Speaker 1: if the SAID hadn't done what it's doing. I think 59 00:03:02,320 --> 00:03:05,600 Speaker 1: that's the great epiphany we've all had this year or 60 00:03:05,639 --> 00:03:07,840 Speaker 1: through the experience was you know, a lot people like 61 00:03:07,960 --> 00:03:11,120 Speaker 1: to talk about economic cycles in terms of years, and 62 00:03:11,320 --> 00:03:16,080 Speaker 1: we've we've experienced an entire economic cycles worth of volatility 63 00:03:16,160 --> 00:03:20,160 Speaker 1: within within less than twelve months. From a spread per perspective, 64 00:03:20,240 --> 00:03:22,720 Speaker 1: you know, to your point, we peaked in March and 65 00:03:22,760 --> 00:03:25,399 Speaker 1: then you know, three hundreds well into the three hundreds, 66 00:03:25,520 --> 00:03:29,040 Speaker 1: and we're officially now through where we started the year. 67 00:03:29,120 --> 00:03:31,720 Speaker 1: So you wouldn't have thought that we're still in the 68 00:03:31,720 --> 00:03:34,520 Speaker 1: middle of a pandemic. You wouldn't have thought we're still 69 00:03:34,560 --> 00:03:38,640 Speaker 1: recovering from a pandemic if you just look at valuations today. 70 00:03:38,840 --> 00:03:43,240 Speaker 1: And so from our perspective, what the Fed did, because 71 00:03:43,800 --> 00:03:47,120 Speaker 1: you know, clearly they haven't really actually bought too many 72 00:03:47,120 --> 00:03:50,200 Speaker 1: corporate bonds. They've they've only spent about nine billion dollars 73 00:03:50,320 --> 00:03:53,800 Speaker 1: actually in in corporate bond purchases in a market that's 74 00:03:53,840 --> 00:03:57,760 Speaker 1: actually issued one point seven five trillion dollars this year. 75 00:03:58,240 --> 00:04:01,960 Speaker 1: And so we we've broke and every record known to 76 00:04:02,120 --> 00:04:06,240 Speaker 1: man or woman in supply this year. It's mind boggling. 77 00:04:06,320 --> 00:04:09,680 Speaker 1: Talk about getting your nine billions worth. Huh, But yeah, exactly, 78 00:04:10,480 --> 00:04:12,520 Speaker 1: I guess it's just the notion that they're there and 79 00:04:12,560 --> 00:04:15,040 Speaker 1: they've got the checkbook at hand if they need to 80 00:04:15,040 --> 00:04:18,520 Speaker 1: do more, that's exactly right. It's it's a psychological healing 81 00:04:18,640 --> 00:04:21,719 Speaker 1: that that can't be underestimated the impact and value that 82 00:04:21,760 --> 00:04:25,320 Speaker 1: it's provided markets. It's knowing that they're willing and able, 83 00:04:25,400 --> 00:04:27,120 Speaker 1: and they do have a big check book. They were 84 00:04:27,120 --> 00:04:29,000 Speaker 1: willing to write a lot more than nine billion. That 85 00:04:29,080 --> 00:04:31,159 Speaker 1: just happened to be all they needed to do, which 86 00:04:31,200 --> 00:04:33,799 Speaker 1: which I think is brilliant policy talk, a big game. 87 00:04:34,279 --> 00:04:36,640 Speaker 1: Spend as little as you have to to calm down 88 00:04:36,680 --> 00:04:39,160 Speaker 1: markets and make sure they're functioning. And that's what we got, 89 00:04:39,200 --> 00:04:42,400 Speaker 1: and that's been you know, they've been extremely responsive and 90 00:04:42,440 --> 00:04:45,400 Speaker 1: helpful in that regard. So let's stay pretty broad. I mean, 91 00:04:45,440 --> 00:04:49,159 Speaker 1: you talk about how unbelievably quick this cycle has been, 92 00:04:49,200 --> 00:04:52,000 Speaker 1: and I find it amazing just to think about the 93 00:04:52,040 --> 00:04:55,000 Speaker 1: fact that we have record low junk on yield, we 94 00:04:55,040 --> 00:04:58,479 Speaker 1: have stocks at record highs, and yet we're talking, or 95 00:04:58,560 --> 00:05:01,719 Speaker 1: we hear strategists investors talking about the fact that we 96 00:05:01,760 --> 00:05:04,479 Speaker 1: are at the beginning of a new economic cycle. Yet 97 00:05:04,640 --> 00:05:09,159 Speaker 1: from these historic levels, from your perspective looking out into 98 00:05:09,200 --> 00:05:13,000 Speaker 1: the future, and when you think about constructing your own portfolios, 99 00:05:13,800 --> 00:05:18,200 Speaker 1: how much has the outlook for even been pulled forward 100 00:05:18,240 --> 00:05:22,000 Speaker 1: into and how much more is there to look forward to? 101 00:05:22,600 --> 00:05:25,120 Speaker 1: I mean, especially if you do believe in the fact 102 00:05:25,200 --> 00:05:27,120 Speaker 1: that we are at the beginning of a new economic cycle, 103 00:05:27,560 --> 00:05:30,440 Speaker 1: even seeing financial markets where they are today. Yeah, I 104 00:05:30,440 --> 00:05:33,680 Speaker 1: think that the great challenge, I think for investors today 105 00:05:33,920 --> 00:05:38,920 Speaker 1: is to sadly not get too bogged down into the fundamentals. 106 00:05:38,960 --> 00:05:44,440 Speaker 1: What great advice could have painted some pretty draconian pictures 107 00:05:44,440 --> 00:05:47,000 Speaker 1: earlier in the year, even in March, after the FED 108 00:05:47,080 --> 00:05:50,039 Speaker 1: came out and said we were gonna support markets, you 109 00:05:50,080 --> 00:05:52,640 Speaker 1: aren't really going to know the extent of the true 110 00:05:52,720 --> 00:05:56,280 Speaker 1: damage in the corporate sector till after third quarter earnings, 111 00:05:56,720 --> 00:05:59,960 Speaker 1: really in September. Certain, you know, because even in in June, 112 00:06:00,200 --> 00:06:02,839 Speaker 1: you know, even the June thirty kind of earning season, 113 00:06:03,400 --> 00:06:05,159 Speaker 1: you were kind of right in the middle of where 114 00:06:05,160 --> 00:06:08,960 Speaker 1: the crisis was really ramping up. So the willingness and 115 00:06:09,000 --> 00:06:12,960 Speaker 1: ability of the market to to price out this virus 116 00:06:13,040 --> 00:06:17,120 Speaker 1: and price in a recovery has been spectacular. But but 117 00:06:17,200 --> 00:06:20,120 Speaker 1: I guess in perfect time site which we're all blessed with, 118 00:06:20,640 --> 00:06:23,720 Speaker 1: what we've realized is the magnitude and the amount of 119 00:06:23,760 --> 00:06:26,400 Speaker 1: stimulus that was just thrown at this problem, to the 120 00:06:26,480 --> 00:06:31,040 Speaker 1: extent that inaggregate wages were actually higher through the crisis. 121 00:06:31,160 --> 00:06:33,200 Speaker 1: And when you include the stimulus checks and all other 122 00:06:33,279 --> 00:06:36,920 Speaker 1: things and unemployment, that the economy actually got a boost 123 00:06:36,960 --> 00:06:40,200 Speaker 1: from a wages perspective, and people were stuck at home 124 00:06:40,200 --> 00:06:42,720 Speaker 1: and still able to spend some money. And so I 125 00:06:42,760 --> 00:06:45,880 Speaker 1: think when you look forward at what's going to happen, 126 00:06:45,880 --> 00:06:48,480 Speaker 1: and you have more confidence in a in a vaccine, 127 00:06:48,520 --> 00:06:51,720 Speaker 1: and you have some level measure of confidence that there 128 00:06:51,760 --> 00:06:56,039 Speaker 1: will be some agreement on stimulus continuing looking forward with 129 00:06:56,600 --> 00:06:59,960 Speaker 1: potentially you know, Yelling coming into Treasury, working with Powell 130 00:07:00,000 --> 00:07:02,360 Speaker 1: at the FETE, there's a lot of stars that are 131 00:07:02,400 --> 00:07:05,880 Speaker 1: aligning to say, we're still gonna do, in any scenario 132 00:07:06,400 --> 00:07:09,680 Speaker 1: everything we can to try to make sure we're we're 133 00:07:10,840 --> 00:07:15,200 Speaker 1: stimulating slash supporting our way into this recovery in twenty one. 134 00:07:15,240 --> 00:07:19,640 Speaker 1: And so valuations, to your point, have absolutely really started, 135 00:07:20,160 --> 00:07:22,480 Speaker 1: you know, all year, have really priced in that that 136 00:07:22,600 --> 00:07:25,800 Speaker 1: upside outcome for markets. And I think we're in a 137 00:07:25,840 --> 00:07:28,600 Speaker 1: position now with you know, the things just mentioned that 138 00:07:28,680 --> 00:07:30,720 Speaker 1: we're probably in a position where the market is going 139 00:07:30,760 --> 00:07:34,160 Speaker 1: to keep right on pricing into that, uh, that positive 140 00:07:34,200 --> 00:07:37,120 Speaker 1: outlook around the vaccine and and and things starting to 141 00:07:37,160 --> 00:07:39,320 Speaker 1: open up, you know, in the let's call it second 142 00:07:39,360 --> 00:07:41,760 Speaker 1: half of next year. So I feel like, that's what 143 00:07:41,920 --> 00:07:45,640 Speaker 1: everybody's you know, that's what the momentum and the valuations 144 00:07:45,640 --> 00:07:48,440 Speaker 1: are telling us today. You know, Josh, my eyes were 145 00:07:48,440 --> 00:07:50,920 Speaker 1: popping when I was reading about some of the fund 146 00:07:50,920 --> 00:07:53,720 Speaker 1: flows into one of the Viva's. One of the funds 147 00:07:53,760 --> 00:07:57,640 Speaker 1: you manage, the Global Investment Grade Corporate Bond Fund. Ay, 148 00:07:57,680 --> 00:08:00,440 Speaker 1: you am doubled over the course of twenty I team 149 00:08:00,480 --> 00:08:02,760 Speaker 1: doubled again in the first half of this year to 150 00:08:03,480 --> 00:08:07,600 Speaker 1: seven and change billion. I mean, wow, what is going 151 00:08:07,640 --> 00:08:11,240 Speaker 1: on here? Is it just the proverbial hunt for yield 152 00:08:11,280 --> 00:08:14,040 Speaker 1: around the world? And is it? I mean, the sovereign 153 00:08:14,040 --> 00:08:19,200 Speaker 1: bond market has basically gone away in many respects for 154 00:08:19,360 --> 00:08:21,720 Speaker 1: some investors with negative yields or you know, in the 155 00:08:21,840 --> 00:08:25,160 Speaker 1: US tenure yields you know blow one percent? Is it 156 00:08:25,200 --> 00:08:27,600 Speaker 1: all just that hunt for yield? And is it? Is 157 00:08:27,600 --> 00:08:30,080 Speaker 1: the i G market kind of playing the role that 158 00:08:30,160 --> 00:08:32,080 Speaker 1: the sovereign bond market used to play for a lot 159 00:08:32,120 --> 00:08:33,959 Speaker 1: of investors. Do you think you know, we talk a 160 00:08:34,000 --> 00:08:36,920 Speaker 1: lot about the sixty Are you guys taking a bigger 161 00:08:36,920 --> 00:08:40,080 Speaker 1: share of that forty? Do you think? Yeah? I like 162 00:08:40,200 --> 00:08:43,480 Speaker 1: that question. It's really important, and it's when we think 163 00:08:43,520 --> 00:08:45,440 Speaker 1: about a lot and I hope you're right. I hope 164 00:08:45,480 --> 00:08:48,280 Speaker 1: we are taking a bigger chunk of that forty and 165 00:08:48,360 --> 00:08:51,480 Speaker 1: kind of would be great. And so yeah, from an 166 00:08:51,520 --> 00:08:54,120 Speaker 1: a u M growth perspective, I think there's some video 167 00:08:54,200 --> 00:08:56,719 Speaker 1: syncresies we're doing as a manager in the market that 168 00:08:56,760 --> 00:09:00,679 Speaker 1: are that are resonating with clients. But from a broader 169 00:09:00,720 --> 00:09:05,240 Speaker 1: market demand perspective, you know, when you think about the crisis, 170 00:09:05,920 --> 00:09:08,160 Speaker 1: what we saw a lot of if clients had a 171 00:09:08,200 --> 00:09:11,520 Speaker 1: tactical asset allocation where they can where they can quickly 172 00:09:11,559 --> 00:09:15,080 Speaker 1: move from treasuries to investment grade bonds, they did that 173 00:09:15,360 --> 00:09:18,120 Speaker 1: or many people did do that, particularly because you know, 174 00:09:18,240 --> 00:09:20,800 Speaker 1: rates rock bottomed at the same time spreads blue out. 175 00:09:20,880 --> 00:09:23,440 Speaker 1: If you believed in the fedback stop, in the potential 176 00:09:23,480 --> 00:09:25,920 Speaker 1: for for spreads to recover, that was a really nice 177 00:09:26,000 --> 00:09:29,800 Speaker 1: trade for you at the time. And now that spreads 178 00:09:29,800 --> 00:09:32,880 Speaker 1: are kind of getting back to the levels we're at today, 179 00:09:32,920 --> 00:09:35,240 Speaker 1: the debate is now, you know, it's still it's still 180 00:09:35,320 --> 00:09:39,120 Speaker 1: the same debate. We're not getting anything from our risk 181 00:09:39,200 --> 00:09:43,880 Speaker 1: free rate, We're not getting any yield from government bonds, 182 00:09:43,920 --> 00:09:46,120 Speaker 1: and so right now, you know, if you think about 183 00:09:46,120 --> 00:09:48,240 Speaker 1: the Royal government bonds place, and this has been the 184 00:09:48,240 --> 00:09:50,440 Speaker 1: great benefit of sixty forty over the years, it's the 185 00:09:50,480 --> 00:09:54,000 Speaker 1: ability for government bonds to rally when other risk assets 186 00:09:54,040 --> 00:09:57,360 Speaker 1: are selling off. And there's still you know, a component 187 00:09:57,400 --> 00:09:59,240 Speaker 1: of that even at the levels were at for the 188 00:09:59,320 --> 00:10:03,720 Speaker 1: thirty year asury. Today you can still rally basis points 189 00:10:03,720 --> 00:10:06,600 Speaker 1: in an extreme scenario, which is a real positive outcome 190 00:10:07,120 --> 00:10:09,480 Speaker 1: for those bonds. You're still getting a little bit of that, 191 00:10:09,520 --> 00:10:11,959 Speaker 1: but you're not getting any carry and so really all 192 00:10:12,000 --> 00:10:14,160 Speaker 1: you're getting for the most part is a little bit 193 00:10:14,200 --> 00:10:17,520 Speaker 1: of downside protection and liquidity for a big part of 194 00:10:17,559 --> 00:10:20,240 Speaker 1: the market. If if you're a foundation or an endowment 195 00:10:20,640 --> 00:10:23,640 Speaker 1: and you have calls on your liquidity, you still have 196 00:10:23,720 --> 00:10:26,319 Speaker 1: to have a big slug of your you know, your 197 00:10:26,320 --> 00:10:29,600 Speaker 1: asset allocation in the most liquid assets on the market. 198 00:10:29,640 --> 00:10:31,160 Speaker 1: And so I think what a lot of people are 199 00:10:31,200 --> 00:10:35,160 Speaker 1: struggling with now, is am I content owning almost zero 200 00:10:35,320 --> 00:10:37,480 Speaker 1: just to preserve that liquidity? And how much can I 201 00:10:37,520 --> 00:10:40,240 Speaker 1: push into these other asset classes to generate something of 202 00:10:40,280 --> 00:10:58,760 Speaker 1: a return. I want to go ahead and read one 203 00:10:58,760 --> 00:11:00,520 Speaker 1: of the quotes from the notes that or sent over 204 00:11:00,559 --> 00:11:05,000 Speaker 1: to us um from you before we actually started discussing 205 00:11:05,640 --> 00:11:09,240 Speaker 1: on the episode. So you said subdued global growth, continued 206 00:11:09,280 --> 00:11:11,640 Speaker 1: government and central bank support, and the relative safety of 207 00:11:11,640 --> 00:11:14,560 Speaker 1: investment grade credit as an asset class may put it 208 00:11:14,559 --> 00:11:16,920 Speaker 1: in a sweet spot in and I also imagine some 209 00:11:16,960 --> 00:11:19,760 Speaker 1: of these factors that we've been discussing contribute to that 210 00:11:19,840 --> 00:11:24,360 Speaker 1: quote unquote sweet spot as well. But really illustrate that 211 00:11:24,480 --> 00:11:27,120 Speaker 1: for us, what does a sweet spot and investment grade 212 00:11:27,120 --> 00:11:30,079 Speaker 1: credit these days actually even look like this? Yeah, the 213 00:11:30,120 --> 00:11:35,600 Speaker 1: sweet spot to me is really an environment where companies 214 00:11:36,160 --> 00:11:40,400 Speaker 1: are incredibly motivated still to repair their balance sheet. So, 215 00:11:41,360 --> 00:11:44,320 Speaker 1: you know a lot of companies weren't infected nearly as 216 00:11:44,440 --> 00:11:47,120 Speaker 1: much as you know, the sectors in the in the 217 00:11:47,200 --> 00:11:50,040 Speaker 1: in the companies at the epicenter of the coronavirus, things 218 00:11:50,080 --> 00:11:53,400 Speaker 1: like you know, airlines and hotels and in various aspects 219 00:11:53,400 --> 00:11:56,320 Speaker 1: of retail. You know, they're they're still fighting, you know, 220 00:11:57,000 --> 00:12:00,280 Speaker 1: fighting to survive in this type of environment. Others actor's 221 00:12:00,360 --> 00:12:02,160 Speaker 1: might have taken a little bit of a hit, you know, 222 00:12:02,200 --> 00:12:04,440 Speaker 1: in their ebit down, they're gonna you know, bounce right 223 00:12:04,480 --> 00:12:07,400 Speaker 1: back up with with the recovery and so. But everybody 224 00:12:07,720 --> 00:12:10,560 Speaker 1: took down lots of debt to build a cash hoard 225 00:12:10,640 --> 00:12:13,160 Speaker 1: in that in that environment, and so the great debate 226 00:12:13,200 --> 00:12:15,120 Speaker 1: of twenty one is gonna be what do they do 227 00:12:15,200 --> 00:12:17,400 Speaker 1: with that cash? Are they going to pay it back? 228 00:12:17,440 --> 00:12:18,920 Speaker 1: Are they going to give it to shareholders? Are they 229 00:12:18,960 --> 00:12:21,439 Speaker 1: going to do him and A? Are they gonna are 230 00:12:21,440 --> 00:12:24,120 Speaker 1: they just gonna buy back debt? And so we're in 231 00:12:24,160 --> 00:12:27,080 Speaker 1: this environment where it's certainly in everyone's best in your 232 00:12:27,120 --> 00:12:30,640 Speaker 1: interest to stabilize your leverage, stabilize your ratings, and and 233 00:12:30,679 --> 00:12:34,080 Speaker 1: behave yourself. So that that's a positive. You know, even 234 00:12:34,080 --> 00:12:37,400 Speaker 1: though the spreads look incredibly anemic right now, right where 235 00:12:37,480 --> 00:12:40,559 Speaker 1: we're anywhere between let's call it the low one hundreds 236 00:12:40,600 --> 00:12:44,720 Speaker 1: on spreads for investment grade, well you're talking about a 237 00:12:44,760 --> 00:12:47,800 Speaker 1: base of you know, a treasury market that's you know, 238 00:12:48,240 --> 00:12:51,720 Speaker 1: tenure treasuries at closet is only at one percent. And 239 00:12:51,800 --> 00:12:54,080 Speaker 1: so if you're at one thirty on spreads on the 240 00:12:54,120 --> 00:12:56,720 Speaker 1: index level and you're at one percent, you're still getting 241 00:12:57,200 --> 00:12:59,760 Speaker 1: you know, your yield on a corporate bond is you know, 242 00:13:00,040 --> 00:13:03,480 Speaker 1: in some instance as close to of your total yield 243 00:13:03,600 --> 00:13:06,480 Speaker 1: is the corporate spread. And so to be in that 244 00:13:06,520 --> 00:13:10,120 Speaker 1: sweet spot when you think about investment grade still being 245 00:13:10,160 --> 00:13:13,640 Speaker 1: an asset class with very low default rates and still 246 00:13:13,760 --> 00:13:17,040 Speaker 1: quite a bit of liquidity in the market, particularly with 247 00:13:17,120 --> 00:13:19,960 Speaker 1: FED backing to keep the functioning in the liquidity of 248 00:13:20,000 --> 00:13:23,480 Speaker 1: the market. Then you can see people say, look, I'm 249 00:13:23,480 --> 00:13:25,520 Speaker 1: willing to take some money out of treasury is I'm 250 00:13:25,559 --> 00:13:28,280 Speaker 1: willing to put more of my allocation into corporate bonds. 251 00:13:28,320 --> 00:13:31,640 Speaker 1: Because of these factors, you're more than doubling your yield, 252 00:13:32,040 --> 00:13:35,600 Speaker 1: You're still have a very low probability of default, and 253 00:13:35,880 --> 00:13:38,720 Speaker 1: you're you're getting a much higher you know, spread for 254 00:13:38,760 --> 00:13:41,960 Speaker 1: your for your money. And you're also in an asset 255 00:13:41,960 --> 00:13:45,280 Speaker 1: class that's still pretty darn liquid and also uh low 256 00:13:45,320 --> 00:13:48,120 Speaker 1: probability of default. And so that's what I refer to 257 00:13:48,240 --> 00:13:51,640 Speaker 1: as kind of the the Goldilocks scenario for corporate bonds, 258 00:13:51,679 --> 00:13:54,080 Speaker 1: and and that and that behavior, that balance sheet behavior 259 00:13:54,120 --> 00:13:56,680 Speaker 1: is a big part of that. So how low could 260 00:13:56,679 --> 00:13:58,920 Speaker 1: spreads go? Do you do you think? I mean, is 261 00:13:58,960 --> 00:14:04,199 Speaker 1: it possible? So think of corporate bonds yielding a negative 262 00:14:04,280 --> 00:14:07,199 Speaker 1: rate of inflation, a negative real real rate or is that? 263 00:14:07,600 --> 00:14:09,720 Speaker 1: Is that a crazy notion? And at this point in 264 00:14:09,760 --> 00:14:14,400 Speaker 1: the economic cycle, philosophically and theoretically, it's a crazy notion 265 00:14:17,720 --> 00:14:24,280 Speaker 1: that may become a reality. Uh it's times yeah, um, 266 00:14:24,600 --> 00:14:28,480 Speaker 1: And so yeah, did you jump to the crazy question party? Alright, 267 00:14:28,560 --> 00:14:31,720 Speaker 1: it's kind of specially, it's kind of you know, I 268 00:14:31,760 --> 00:14:34,280 Speaker 1: think we can't. We can keep going from here. And 269 00:14:34,600 --> 00:14:37,239 Speaker 1: and this is where I make that common on fundamentals 270 00:14:37,320 --> 00:14:40,520 Speaker 1: versus technicals. If if you focus on the fundamentals, we 271 00:14:40,600 --> 00:14:44,240 Speaker 1: are recovering. The world's not ending, but we probably shouldn't 272 00:14:44,240 --> 00:14:46,600 Speaker 1: be at these levels based on where we're at from 273 00:14:46,600 --> 00:14:49,960 Speaker 1: an economic recovery perspective. But when we go back, there's 274 00:14:49,960 --> 00:14:51,960 Speaker 1: two points I want to make on on why the 275 00:14:52,040 --> 00:14:55,840 Speaker 1: market has as a significant ability to continue to grind 276 00:14:55,880 --> 00:14:59,720 Speaker 1: in from here is because we had one point seven 277 00:14:59,760 --> 00:15:03,480 Speaker 1: five trillion of new issues last year. That number is 278 00:15:03,960 --> 00:15:06,640 Speaker 1: definitely going to go down. Not only did we have 279 00:15:06,680 --> 00:15:08,960 Speaker 1: one point seven five chillion of new money coming in, 280 00:15:09,120 --> 00:15:15,280 Speaker 1: we actually rallied through twenty nineteen levels with one point 281 00:15:15,280 --> 00:15:17,960 Speaker 1: seven five trillion a new supply. So when you have 282 00:15:18,000 --> 00:15:21,560 Speaker 1: a market, yeah, exact, mind boggling. And sir, you can't 283 00:15:21,560 --> 00:15:23,960 Speaker 1: blame the Robin Hood kids for this either. I don't think. 284 00:15:24,280 --> 00:15:28,000 Speaker 1: I don't think they're training. I don't know. I know 285 00:15:28,080 --> 00:15:29,720 Speaker 1: a few of them, and they haven't talked to me 286 00:15:29,720 --> 00:15:37,920 Speaker 1: about pedal and state. Um, so yeah, go ahead. Well, 287 00:15:38,040 --> 00:15:41,440 Speaker 1: so there's always a risk, right, And uh, one thing 288 00:15:41,720 --> 00:15:44,640 Speaker 1: you mentioned before that I found interesting is M and A. 289 00:15:44,880 --> 00:15:48,280 Speaker 1: You know, and I assume there must be a bottleneck 290 00:15:48,400 --> 00:15:50,480 Speaker 1: of M and A that hasn't been done this year 291 00:15:50,520 --> 00:15:52,960 Speaker 1: because of you know what a crazy year it is. 292 00:15:53,600 --> 00:15:55,840 Speaker 1: Do you see the potential for a big M and 293 00:15:55,880 --> 00:16:00,000 Speaker 1: A boom and you know presumably that that requires company 294 00:16:00,080 --> 00:16:02,080 Speaker 1: used to lever up and sort of have a little 295 00:16:02,080 --> 00:16:05,000 Speaker 1: bit of deterioration and credit quality and maybe you'll see 296 00:16:05,040 --> 00:16:07,440 Speaker 1: some spread widening. Then is that is that a real risk? 297 00:16:07,560 --> 00:16:10,120 Speaker 1: You think it's a risk. I wouldn't call it the 298 00:16:10,160 --> 00:16:12,880 Speaker 1: biggest risk because you know, what we do know is 299 00:16:12,920 --> 00:16:15,600 Speaker 1: a lot of companies are flush with more cash than 300 00:16:15,640 --> 00:16:19,280 Speaker 1: they need, and so there has to be a temptation 301 00:16:19,560 --> 00:16:21,840 Speaker 1: to look at all the different means with which they 302 00:16:21,880 --> 00:16:24,400 Speaker 1: can deploy that. And so I think you're going to 303 00:16:24,520 --> 00:16:27,080 Speaker 1: continue to see what we have seen where if you 304 00:16:27,120 --> 00:16:29,680 Speaker 1: think about going into the crisis, you know, there were 305 00:16:29,680 --> 00:16:32,920 Speaker 1: a lot of companies really you know, that was the 306 00:16:33,080 --> 00:16:35,600 Speaker 1: that was the m oh they they needed to do 307 00:16:35,800 --> 00:16:39,280 Speaker 1: M and A to grow And that probably hasn't changed, right, 308 00:16:39,320 --> 00:16:42,800 Speaker 1: And so if anything, it might give companies an opportunity 309 00:16:43,160 --> 00:16:46,160 Speaker 1: because of the crisis to pick off firms slower to 310 00:16:46,240 --> 00:16:50,400 Speaker 1: recovery steel market share when firms are struggling. But you know, 311 00:16:50,440 --> 00:16:53,640 Speaker 1: the the rally and equity valuation certainly has taken some 312 00:16:53,720 --> 00:16:56,440 Speaker 1: of that off the table where they're probably not getting, 313 00:16:56,880 --> 00:16:59,680 Speaker 1: you know, a sweet deal today based on the recovery 314 00:16:59,680 --> 00:17:01,920 Speaker 1: and value suations at the equity side. But if you're 315 00:17:01,920 --> 00:17:04,000 Speaker 1: flushed with cash and you've already got it, you've already 316 00:17:04,000 --> 00:17:07,480 Speaker 1: issued the debt, you've got one variable out of the equation, 317 00:17:07,760 --> 00:17:10,919 Speaker 1: you've already locked in very cheap financing. So him and 318 00:17:10,960 --> 00:17:13,359 Speaker 1: A may very well well be a great place to 319 00:17:13,400 --> 00:17:17,200 Speaker 1: deploy that capital. I'm curious, you know, in the equity market, 320 00:17:17,240 --> 00:17:21,080 Speaker 1: the idea there's been a few narratives around the election, 321 00:17:21,119 --> 00:17:24,159 Speaker 1: and I got admit, it's a shifting narrative and and uh, 322 00:17:24,280 --> 00:17:26,560 Speaker 1: you know, for a while there looked like everyone was 323 00:17:26,560 --> 00:17:30,119 Speaker 1: excited about a blue wave. Now everyone's excited about the 324 00:17:30,119 --> 00:17:32,119 Speaker 1: idea of a split government. I think that the moral 325 00:17:32,119 --> 00:17:35,080 Speaker 1: of the story is people are excited about equities regardless, 326 00:17:35,240 --> 00:17:39,439 Speaker 1: uh what's going on in Washington. But but how's it 327 00:17:39,840 --> 00:17:42,399 Speaker 1: looked too from a as the perspective of a credit 328 00:17:42,440 --> 00:17:47,000 Speaker 1: market investor, Is this divided government, this gridlock in Washington 329 00:17:47,640 --> 00:17:49,840 Speaker 1: a good scenario? You know, it's to remove some of 330 00:17:49,840 --> 00:17:52,920 Speaker 1: the regulation risks for for certain industries that sort of thing. 331 00:17:53,000 --> 00:17:55,240 Speaker 1: Or where how are you you know, are you worried 332 00:17:55,280 --> 00:17:59,120 Speaker 1: about the election and and the composition of the Congress 333 00:17:59,160 --> 00:18:01,680 Speaker 1: next year at all? Uh? Thinking about it at all 334 00:18:01,680 --> 00:18:03,840 Speaker 1: when it comes to credit. Yeah, I mean, if I 335 00:18:03,840 --> 00:18:06,879 Speaker 1: think about it, I would say a split government is 336 00:18:06,960 --> 00:18:11,240 Speaker 1: probably the most um will create the least volatility for 337 00:18:11,440 --> 00:18:13,960 Speaker 1: from certainly from a regulatory perspective. And if you think 338 00:18:13,960 --> 00:18:18,160 Speaker 1: about you know, what's driven euphori and risk assets, it's 339 00:18:18,200 --> 00:18:21,680 Speaker 1: tax cuts, it's you know, less regulation, it's it's all 340 00:18:21,760 --> 00:18:25,160 Speaker 1: these things that are no longer at risk of being 341 00:18:25,200 --> 00:18:28,120 Speaker 1: materially disrupted in the short term. And so I think 342 00:18:28,160 --> 00:18:31,280 Speaker 1: on the margin, that's a very helpful thing. Uh. And 343 00:18:31,320 --> 00:18:34,439 Speaker 1: also I think you're also what we're seeing now is 344 00:18:34,440 --> 00:18:37,040 Speaker 1: you're also gonna gonna hopefully get to a point where 345 00:18:37,040 --> 00:18:40,399 Speaker 1: cooler heads prevail and people do come together in a 346 00:18:40,440 --> 00:18:43,080 Speaker 1: bipartisan way and and work on the things that really 347 00:18:43,119 --> 00:18:45,840 Speaker 1: matter and get some sort of stimulus package out, get 348 00:18:45,920 --> 00:18:49,080 Speaker 1: some sort of keep moving the things that are really 349 00:18:49,119 --> 00:18:52,080 Speaker 1: going to help the economy. And I've always said, even 350 00:18:52,160 --> 00:18:54,399 Speaker 1: leading into the elections, you know what happens to the 351 00:18:54,400 --> 00:18:56,480 Speaker 1: Blue Way, what happens with the you know this or that? 352 00:18:56,520 --> 00:18:59,119 Speaker 1: And I said, look, the one thing we have going 353 00:18:59,160 --> 00:19:01,960 Speaker 1: for us is that in any scenario, it almost doesn't 354 00:19:01,960 --> 00:19:05,399 Speaker 1: matter in the very very short term, as long as 355 00:19:06,080 --> 00:19:09,000 Speaker 1: we know, no matter what the administration is, the sole 356 00:19:09,080 --> 00:19:11,240 Speaker 1: focus over the next six months is going to be 357 00:19:11,800 --> 00:19:15,120 Speaker 1: getting us into this recovery. And I think that's still 358 00:19:15,160 --> 00:19:35,160 Speaker 1: the case today. Last question before we get two crazy things, 359 00:19:35,160 --> 00:19:38,359 Speaker 1: because I know Mike is itching over there at his 360 00:19:38,400 --> 00:19:41,919 Speaker 1: home in New Jersey, but I feel like we cannot 361 00:19:41,960 --> 00:19:46,119 Speaker 1: have a conversation about financial markets these days without mentioning stimulus. 362 00:19:46,160 --> 00:19:50,199 Speaker 1: And we've had this unbelievable monetary backstop, We've had this 363 00:19:50,280 --> 00:19:54,760 Speaker 1: unbelievable fiscal backstop, and now once again we have Capitol 364 00:19:54,840 --> 00:19:58,560 Speaker 1: Hill and conversation about get another package? Will will it 365 00:19:58,640 --> 00:20:03,520 Speaker 1: not get past what for it? Maybe? But even with 366 00:20:03,720 --> 00:20:07,000 Speaker 1: all this money flowing through the system, it doesn't completely 367 00:20:07,000 --> 00:20:09,000 Speaker 1: erase bankruptcy risk. So we just want to get a 368 00:20:09,040 --> 00:20:11,440 Speaker 1: sense of how you still think about bankruptcy risk and 369 00:20:11,680 --> 00:20:14,120 Speaker 1: if there are certain areas that you would completely steer 370 00:20:14,160 --> 00:20:16,040 Speaker 1: clear of if there are areas that you like right 371 00:20:16,080 --> 00:20:18,400 Speaker 1: now and you think companies are going to be able 372 00:20:18,400 --> 00:20:21,880 Speaker 1: to go ahead and really get through this recovery even 373 00:20:21,920 --> 00:20:24,880 Speaker 1: stronger on the other side eventually. Yeah, that's a great 374 00:20:24,960 --> 00:20:27,719 Speaker 1: question because you know this this gets into what are 375 00:20:27,760 --> 00:20:30,439 Speaker 1: you actually doing with your money? Right We're talking a 376 00:20:30,440 --> 00:20:35,399 Speaker 1: lot about you know, momentum and technicals and stimulus impacting demand, 377 00:20:35,560 --> 00:20:39,080 Speaker 1: but we always have to stay focused on fundamentals that 378 00:20:39,240 --> 00:20:42,080 Speaker 1: they may not be driving markets for periods small, short 379 00:20:42,119 --> 00:20:44,960 Speaker 1: periods of time, um, but they will always you know, 380 00:20:45,040 --> 00:20:47,760 Speaker 1: get the last laugh, so to speak. And so from 381 00:20:47,760 --> 00:20:50,960 Speaker 1: a fundamental perspective, you know what I think we we 382 00:20:51,080 --> 00:20:54,280 Speaker 1: caution people on and this this came through with with 383 00:20:54,680 --> 00:20:56,480 Speaker 1: you know, the things the Fed and the Treasury did 384 00:20:56,520 --> 00:21:00,560 Speaker 1: with the corporate bond buying problem program is don't mistake 385 00:21:01,359 --> 00:21:05,800 Speaker 1: the government's willingness to to roll maturities, extend debt, help 386 00:21:05,880 --> 00:21:10,480 Speaker 1: you refinance for bailing companies out, because companies can and 387 00:21:10,520 --> 00:21:14,680 Speaker 1: will still fail if they are bad businesses with very 388 00:21:14,720 --> 00:21:19,399 Speaker 1: bleak outlooks, and so defaulting and bankruptcies is still a 389 00:21:19,480 --> 00:21:24,720 Speaker 1: very real risk, particularly in sectors most impacted and by 390 00:21:24,720 --> 00:21:28,440 Speaker 1: the coronavirus and facing a much uh steeper hill to 391 00:21:28,480 --> 00:21:31,120 Speaker 1: climb to get their revenues back up to to kind 392 00:21:31,119 --> 00:21:34,480 Speaker 1: of let's call it pre pandemic level. So um, the 393 00:21:34,520 --> 00:21:36,960 Speaker 1: way we think about it is you should never lose 394 00:21:37,000 --> 00:21:39,800 Speaker 1: sight of following the cash flows. So you know, some 395 00:21:39,840 --> 00:21:41,720 Speaker 1: people are going to be willing to to buy a 396 00:21:41,760 --> 00:21:44,720 Speaker 1: company just because the market was willing to extend them debt. 397 00:21:45,160 --> 00:21:47,640 Speaker 1: That's a bad idea in some instances unless you really 398 00:21:47,640 --> 00:21:51,000 Speaker 1: believe cash flows can ramp quite quickly on our recovery. 399 00:21:51,080 --> 00:21:54,080 Speaker 1: So when we build a portfolio, and when we think 400 00:21:54,080 --> 00:21:57,919 Speaker 1: about allocating risk, we look at the entire landscape and 401 00:21:57,960 --> 00:22:01,679 Speaker 1: say where we actually getting paid to take risk today? 402 00:22:01,720 --> 00:22:04,160 Speaker 1: If that, you know, plenty of things are rich, not 403 00:22:04,280 --> 00:22:07,480 Speaker 1: very many things are cheap. But let's just set the 404 00:22:07,640 --> 00:22:11,000 Speaker 1: entire credit market on on a on a level playing 405 00:22:11,040 --> 00:22:13,640 Speaker 1: field and say relative to each other, where that where 406 00:22:13,720 --> 00:22:15,840 Speaker 1: is their value? And I'm going to talk a little 407 00:22:15,840 --> 00:22:18,119 Speaker 1: bit about how yield too in this answer. And so 408 00:22:18,280 --> 00:22:22,320 Speaker 1: within the investment grade market, we think the most expensive 409 00:22:22,440 --> 00:22:25,840 Speaker 1: part is triple B risk inside of five years, and 410 00:22:25,920 --> 00:22:28,240 Speaker 1: that's because of the FED buying program. You know, if 411 00:22:28,280 --> 00:22:30,679 Speaker 1: everybody thinks everything inside of five years is safe and 412 00:22:30,680 --> 00:22:34,119 Speaker 1: can get built out. That's probably caused the inside of 413 00:22:34,160 --> 00:22:36,440 Speaker 1: five year triple be part of the market to price 414 00:22:36,520 --> 00:22:40,119 Speaker 1: extremely rich. So for that part of the investment grade market, 415 00:22:40,119 --> 00:22:42,920 Speaker 1: we're actually buying a little bit of high quality short 416 00:22:43,000 --> 00:22:47,600 Speaker 1: duration high yield. You're getting probably uh let's call it 417 00:22:48,320 --> 00:22:51,240 Speaker 1: an extra two d basis points and or more of 418 00:22:51,240 --> 00:22:54,760 Speaker 1: of spread to go into high quality, short duration high 419 00:22:54,800 --> 00:22:59,719 Speaker 1: yield when when historically, fundamentally that relationship should probably be 420 00:22:59,760 --> 00:23:01,720 Speaker 1: a lot closer to a hundred. So you're probably getting 421 00:23:01,720 --> 00:23:04,840 Speaker 1: an extra hunter basis points of additional spread for the 422 00:23:04,880 --> 00:23:09,520 Speaker 1: fundamental risk to buy some short duration high yield in 423 00:23:09,560 --> 00:23:11,800 Speaker 1: the front end. Now, when you think about the other 424 00:23:11,840 --> 00:23:15,040 Speaker 1: places to deploy some some risk in the investment grade market, 425 00:23:15,600 --> 00:23:18,160 Speaker 1: because the zero to five year has been so bit 426 00:23:18,240 --> 00:23:21,000 Speaker 1: up and so rich, now we like to push some 427 00:23:21,080 --> 00:23:23,240 Speaker 1: of our triple b risk out to six, seven and 428 00:23:23,320 --> 00:23:26,240 Speaker 1: eight years because you're still getting a much steeper spread. 429 00:23:26,640 --> 00:23:28,399 Speaker 1: It hasn't bit up like been bit up like the 430 00:23:28,440 --> 00:23:31,199 Speaker 1: five year, So you're getting a higher carry and a 431 00:23:31,280 --> 00:23:33,920 Speaker 1: higher spread. And over the next eighteen to twenty four 432 00:23:33,920 --> 00:23:35,760 Speaker 1: months you're going to become a five year bond and 433 00:23:35,760 --> 00:23:39,040 Speaker 1: you're going to benefit from that price appreciation. So that 434 00:23:39,200 --> 00:23:41,679 Speaker 1: part of the market, the middle of the belly of 435 00:23:41,760 --> 00:23:43,760 Speaker 1: the curve for triple b's, is where we like more 436 00:23:43,800 --> 00:23:47,640 Speaker 1: of our investment grade risk. And we still like owning 437 00:23:47,760 --> 00:23:50,720 Speaker 1: more defensive positions in the long end of the curve 438 00:23:50,840 --> 00:23:54,280 Speaker 1: because spreads are so tight, you're not getting a lot 439 00:23:54,320 --> 00:23:58,000 Speaker 1: of good let's call it risk adjusted carry to own duration. 440 00:23:58,040 --> 00:24:01,360 Speaker 1: It doesn't take a big move and spreads or interest 441 00:24:01,440 --> 00:24:05,000 Speaker 1: rates to eat up all your carry in the longer part. 442 00:24:05,040 --> 00:24:08,159 Speaker 1: So we like more defensive positions in the long end. 443 00:24:08,200 --> 00:24:11,840 Speaker 1: So structurally that allocation makes sense to us. From a 444 00:24:11,840 --> 00:24:16,120 Speaker 1: sector perspective, you're not going to be able to outperform 445 00:24:16,160 --> 00:24:20,600 Speaker 1: from here these starting point levels if the market continues 446 00:24:20,640 --> 00:24:23,080 Speaker 1: to rally by just owning all the safe stuff. So 447 00:24:23,080 --> 00:24:26,040 Speaker 1: you gotta start to cherry pick where do I actually 448 00:24:26,119 --> 00:24:29,159 Speaker 1: think I'm getting paid to take some beta risk, some 449 00:24:29,280 --> 00:24:32,119 Speaker 1: higher beta risk. And so if you think about it, 450 00:24:32,160 --> 00:24:35,000 Speaker 1: I like some defensive, higher quality corporates in the long end. 451 00:24:35,040 --> 00:24:38,200 Speaker 1: But if I talk about sectors now, I still think 452 00:24:38,280 --> 00:24:41,400 Speaker 1: it makes a lot of sense to own some consensus 453 00:24:41,600 --> 00:24:47,359 Speaker 1: risk in healthcare, in telecom, and in banks, because they're 454 00:24:47,400 --> 00:24:51,600 Speaker 1: just in a better place cash flow capital capitalization perspective, 455 00:24:52,000 --> 00:24:54,359 Speaker 1: they churn off big money and they have interest in 456 00:24:54,400 --> 00:24:57,200 Speaker 1: behaving from a balance sheet perspective, and you're still getting 457 00:24:57,240 --> 00:25:00,720 Speaker 1: reasonable spreads in those sectors. So, but if you're gonna 458 00:25:00,760 --> 00:25:03,960 Speaker 1: start to take some let's call it coronavirus beta risk, 459 00:25:04,560 --> 00:25:08,600 Speaker 1: you've got hotels, you've got airlines, you've got energy, you've 460 00:25:08,600 --> 00:25:11,000 Speaker 1: got retail. There's a lot to choose from it, and 461 00:25:11,240 --> 00:25:13,840 Speaker 1: add and out of that list, we choose to take 462 00:25:13,840 --> 00:25:16,119 Speaker 1: our we're choosing to take more of our risky beta 463 00:25:16,200 --> 00:25:19,160 Speaker 1: risk in the energy sector. And so to end on, 464 00:25:19,359 --> 00:25:22,080 Speaker 1: I'll say, why why do we like energy today from 465 00:25:22,080 --> 00:25:25,320 Speaker 1: a higher beta perspective, Because that's a bit non consensus, 466 00:25:25,320 --> 00:25:27,719 Speaker 1: although it's starting to become a little bit more consensus. 467 00:25:28,359 --> 00:25:33,879 Speaker 1: Is because of all the sectors most impacted by economic 468 00:25:33,960 --> 00:25:37,320 Speaker 1: growth in the coronavirus, energy is one of the few 469 00:25:37,800 --> 00:25:41,800 Speaker 1: that actually has an oligopoly called OPEC plus working very 470 00:25:41,840 --> 00:25:46,080 Speaker 1: hard and together to set a floor for oil prices. 471 00:25:46,240 --> 00:25:49,480 Speaker 1: So if you've got a stabilizing force to really help 472 00:25:49,680 --> 00:25:52,479 Speaker 1: keep your base commodity at a level where you're not 473 00:25:53,040 --> 00:25:57,280 Speaker 1: hemorrhaging cash flows, that's incredibly helpful to buy you time 474 00:25:57,720 --> 00:26:00,920 Speaker 1: for recovery. And I think after the last modity crisis 475 00:26:00,960 --> 00:26:07,000 Speaker 1: we've had, coupled in with the coronavirus um crisis, you've 476 00:26:07,040 --> 00:26:09,800 Speaker 1: seen an industry that's you know, been been slapped on 477 00:26:09,840 --> 00:26:12,479 Speaker 1: the risk a few times now to say, you know, 478 00:26:12,880 --> 00:26:15,280 Speaker 1: you've now officially have to learn how to live within 479 00:26:15,320 --> 00:26:18,119 Speaker 1: your means and behave in a way that's very protective 480 00:26:18,160 --> 00:26:21,320 Speaker 1: of your balance sheet. That that's that's really not spending 481 00:26:21,320 --> 00:26:25,000 Speaker 1: on exploration and production unless you have a very clear 482 00:26:25,000 --> 00:26:26,920 Speaker 1: line of sight that you're going to be making money 483 00:26:26,920 --> 00:26:28,520 Speaker 1: off of it. And you're seeing a lot of really 484 00:26:28,560 --> 00:26:32,240 Speaker 1: strong consolidation of these businesses where they're where they're where 485 00:26:32,240 --> 00:26:35,320 Speaker 1: they're doing everything they can to clear the runway from 486 00:26:35,359 --> 00:26:38,600 Speaker 1: a maturity perspective and and and bolster their balance sheets. 487 00:26:38,840 --> 00:26:41,760 Speaker 1: And so you've got genuine interest, You've got coil prices 488 00:26:41,800 --> 00:26:45,080 Speaker 1: that seemingly are stable because of the opequ plus UH 489 00:26:45,119 --> 00:26:49,520 Speaker 1: supply containment, and those things are helping us get more 490 00:26:49,560 --> 00:26:53,600 Speaker 1: comfortable with that sector having where you don't need a massive, 491 00:26:53,720 --> 00:26:57,760 Speaker 1: meaningful economic recovery for that sector to continue to heal 492 00:26:58,400 --> 00:27:01,359 Speaker 1: in mid stream scenario that we like within there as well, 493 00:27:01,880 --> 00:27:05,000 Speaker 1: um just because it's always been more insulated from oil prices. 494 00:27:05,680 --> 00:27:07,639 Speaker 1: So instead of the FED put, we've got the OPAC, 495 00:27:08,119 --> 00:27:11,480 Speaker 1: even though it didn't that one time oil prices turned out. Yeah, 496 00:27:11,520 --> 00:27:14,439 Speaker 1: I mean yeah, And I would say, you know, plus 497 00:27:14,800 --> 00:27:16,960 Speaker 1: is a is a you know, as a large group 498 00:27:17,000 --> 00:27:21,200 Speaker 1: of personalities that we can't guarantee will will continue to 499 00:27:21,119 --> 00:27:24,760 Speaker 1: to to to all agree, uh, you know, at all times. 500 00:27:24,840 --> 00:27:27,080 Speaker 1: But I think that it's in everyone's bested interest to 501 00:27:27,160 --> 00:27:29,920 Speaker 1: support that the market and do what's best for the 502 00:27:30,240 --> 00:27:32,399 Speaker 1: industry as a whole. And we're seeing that alignment, and 503 00:27:32,440 --> 00:27:35,600 Speaker 1: you're seeing it in prices, you know, uh, you know, 504 00:27:35,720 --> 00:27:38,840 Speaker 1: gradually getting up from forty to forty five, you know, 505 00:27:38,920 --> 00:27:42,320 Speaker 1: even approaching fifty to you know, before we've even hit 506 00:27:43,200 --> 00:27:47,080 Speaker 1: the true economic growth. It's interesting. So it's it sounds 507 00:27:47,119 --> 00:27:49,439 Speaker 1: like almost a similar which I guess should not be 508 00:27:49,480 --> 00:27:52,520 Speaker 1: that surprising, but a similar impulse as the sort of 509 00:27:52,520 --> 00:27:56,480 Speaker 1: growth to value or mega cap to small cap rotation 510 00:27:56,480 --> 00:28:00,440 Speaker 1: in the equity markets. Have you seen that sort of 511 00:28:00,480 --> 00:28:04,200 Speaker 1: put into effect already has has that rotation? Uh, you know, 512 00:28:04,320 --> 00:28:05,880 Speaker 1: is it too late to get in on That's that's 513 00:28:05,880 --> 00:28:09,480 Speaker 1: sort of the sector cyclical rotation in the credit markets. Yeah, 514 00:28:09,600 --> 00:28:12,240 Speaker 1: I know, I don't think so, because if you look 515 00:28:12,240 --> 00:28:15,320 Speaker 1: at spreads and you look at relationships of spreads, you 516 00:28:15,320 --> 00:28:18,320 Speaker 1: know they're there. You know, these sectors most affected by 517 00:28:18,359 --> 00:28:22,239 Speaker 1: coronavirus certainly haven't recovered to pre pandemic levels like so 518 00:28:22,280 --> 00:28:25,080 Speaker 1: many other sectors have, So so there's still some upside there. 519 00:28:25,080 --> 00:28:28,040 Speaker 1: And I guess the other point is what we think 520 00:28:28,080 --> 00:28:31,879 Speaker 1: about when we're managing our credit strategies is we never 521 00:28:32,040 --> 00:28:35,040 Speaker 1: try to guess or time the market, and so we're 522 00:28:35,040 --> 00:28:38,520 Speaker 1: always rotating our beta and rotating our sectors so that 523 00:28:38,560 --> 00:28:40,920 Speaker 1: we're we always have the same amount of alatility and 524 00:28:40,920 --> 00:28:43,840 Speaker 1: our portfolios at all times. It's just where are we 525 00:28:44,200 --> 00:28:47,280 Speaker 1: allocating our beta risk and where are we allocating our 526 00:28:47,320 --> 00:28:50,960 Speaker 1: defensive positions, so that we're doing that delicate tango of 527 00:28:51,000 --> 00:28:54,040 Speaker 1: always making sure we're in the places we feel most 528 00:28:54,080 --> 00:28:56,800 Speaker 1: compensated to take risk and moving out of the ones 529 00:28:56,880 --> 00:28:59,959 Speaker 1: that that are transitioning. And so we're not we're certainly 530 00:29:00,040 --> 00:29:02,160 Speaker 1: not stomping on the gas here saying we need to 531 00:29:02,200 --> 00:29:05,160 Speaker 1: have a long risk position at the portfolio level, but 532 00:29:05,200 --> 00:29:08,320 Speaker 1: we are transitioning some of this let's call it sleep 533 00:29:08,360 --> 00:29:11,719 Speaker 1: well at night, you know, less impacted risk into a 534 00:29:11,720 --> 00:29:15,400 Speaker 1: few more of the more exposed sectors, and and and 535 00:29:15,400 --> 00:29:17,560 Speaker 1: and maybe playing a little bit deep more defense on 536 00:29:17,600 --> 00:29:20,000 Speaker 1: the side as well to kind of help balance that out. 537 00:29:20,200 --> 00:29:22,560 Speaker 1: The delicate tango. I like, that's a nice turn of phrase. 538 00:29:22,600 --> 00:29:30,600 Speaker 1: I'm gonna be stealing that one. Josh'sah, that's good. And 539 00:29:30,760 --> 00:29:34,040 Speaker 1: I think that is our que Sarah for the delicate, 540 00:29:34,280 --> 00:29:38,880 Speaker 1: delicate tango of crazy things, the delicate tango into the crazy. Yeah, 541 00:29:40,280 --> 00:29:44,480 Speaker 1: stand clear of the craziest things we sawn markets this week. 542 00:29:45,080 --> 00:29:48,520 Speaker 1: I'm excited, Sarah, because we have so many offerings from 543 00:29:48,560 --> 00:29:50,640 Speaker 1: listeners this week that it's a lot of fun. We 544 00:29:50,640 --> 00:29:52,800 Speaker 1: we love to get offering, so I apologies if we 545 00:29:52,800 --> 00:29:55,240 Speaker 1: don't get to all of them. I think, um, we 546 00:29:55,240 --> 00:29:59,040 Speaker 1: were a bit overloaded with our crazy thing uh suggestions 547 00:29:59,040 --> 00:30:01,080 Speaker 1: this week, but not a good one. So let's let's 548 00:30:01,120 --> 00:30:03,080 Speaker 1: try to get through him quickly here and give shout 549 00:30:03,080 --> 00:30:06,160 Speaker 1: out to everyone who's been listening and offering their crazy things. 550 00:30:06,160 --> 00:30:08,280 Speaker 1: They why don't you get us started, Sarah with the listeners, 551 00:30:08,640 --> 00:30:10,600 Speaker 1: all right, I'll get us started. And also just a reminder, 552 00:30:10,640 --> 00:30:12,680 Speaker 1: we also have our Bloomberg Podcasts hotline, so if you 553 00:30:12,720 --> 00:30:14,440 Speaker 1: want to give us a call, leave us a message. 554 00:30:14,480 --> 00:30:16,440 Speaker 1: We can even play it on the show. Here. It 555 00:30:16,440 --> 00:30:18,400 Speaker 1: from you yourself, and that number is six ft six 556 00:30:18,720 --> 00:30:21,760 Speaker 1: three to four three for nine zero. Alright, So I'm 557 00:30:21,760 --> 00:30:24,400 Speaker 1: just gonna run through a couple of these. I got 558 00:30:24,440 --> 00:30:27,760 Speaker 1: a direct message on Twitter from a Comma Underscore one 559 00:30:27,800 --> 00:30:32,080 Speaker 1: on one and she sent me a story from Bloomberg. UM, 560 00:30:32,160 --> 00:30:34,920 Speaker 1: and the headline of that was oligarch son lost fifty 561 00:30:34,920 --> 00:30:37,880 Speaker 1: million dollars treating at his university. And I'll just read 562 00:30:37,920 --> 00:30:41,160 Speaker 1: you the top of this story. The son of a 563 00:30:41,240 --> 00:30:44,200 Speaker 1: Russian oligarch said fifty million dollars in funds from his 564 00:30:44,240 --> 00:30:47,400 Speaker 1: father didn't disappear because he was hiding the assets from 565 00:30:47,400 --> 00:30:49,800 Speaker 1: his mother. The truth, he said was that he lost 566 00:30:49,840 --> 00:30:54,240 Speaker 1: the money on quote risky trades while he was at university. UM. 567 00:30:54,280 --> 00:30:57,560 Speaker 1: So there you go. It's not just your Robin Hood traders, 568 00:30:57,680 --> 00:31:01,120 Speaker 1: or maybe he was using Robin and who knows, but 569 00:31:01,120 --> 00:31:04,680 Speaker 1: but pretty unbelievable fifty million dollars. I gotta know what 570 00:31:04,760 --> 00:31:07,400 Speaker 1: he was trading. How do you lose fifty Wow, that's 571 00:31:07,520 --> 00:31:09,480 Speaker 1: that's I'd love to know what he was in on. 572 00:31:09,600 --> 00:31:12,040 Speaker 1: I'll have to I'll have to get his contact information 573 00:31:12,040 --> 00:31:14,240 Speaker 1: and reach out. That'll be the next saga. Alright, so 574 00:31:14,320 --> 00:31:16,200 Speaker 1: moving on to the next one. This comes from at 575 00:31:16,280 --> 00:31:20,000 Speaker 1: Hindsight Cap l lp uh. He says, here's a crazy 576 00:31:20,040 --> 00:31:23,400 Speaker 1: thing that happened today, and this is wild. Micro Strategy 577 00:31:23,480 --> 00:31:26,360 Speaker 1: issued a four hundred million dollar convertible bond to buy bitcoin. 578 00:31:26,440 --> 00:31:29,880 Speaker 1: The convertible was oversubscribed. They're adding to their seven d 579 00:31:30,040 --> 00:31:32,479 Speaker 1: eighty million dollar holding in an attempt to become a 580 00:31:32,520 --> 00:31:36,680 Speaker 1: listed bitcoin vehicle. As if there weren't enough crazy things 581 00:31:37,240 --> 00:31:42,880 Speaker 1: into love that. I love that one, Hindsight. I think 582 00:31:42,880 --> 00:31:44,480 Speaker 1: that's that guy must be a fan of our own. 583 00:31:44,560 --> 00:31:47,880 Speaker 1: John Authors, who runs an imaginary hedge fund called Hindsight 584 00:31:47,960 --> 00:31:50,720 Speaker 1: Capital where he reads a year end uh column every 585 00:31:50,800 --> 00:31:54,640 Speaker 1: every year looking. I guess it's, you know, to show 586 00:31:55,320 --> 00:31:57,640 Speaker 1: how well you would do if if you could invest 587 00:31:57,680 --> 00:32:00,640 Speaker 1: with Hindsight at the end of the year. Are you 588 00:32:00,720 --> 00:32:04,880 Speaker 1: a buyer of a bond that's being issued to buy bitcoin? 589 00:32:05,880 --> 00:32:09,680 Speaker 1: I think I know the answer is that investment. Yeah, 590 00:32:09,840 --> 00:32:11,880 Speaker 1: I mean, I think I think we all know by now. 591 00:32:12,280 --> 00:32:21,280 Speaker 1: Bond investors are paid to be paranoid, So pretty pretty crazy. 592 00:32:21,360 --> 00:32:24,800 Speaker 1: And then um one last one at Reality Hurts tweeted 593 00:32:24,800 --> 00:32:27,160 Speaker 1: at Mike and I and he said um g l 594 00:32:27,320 --> 00:32:30,959 Speaker 1: s I, which is um Grandwunch Life Sciences UM Internet 595 00:32:31,000 --> 00:32:34,400 Speaker 1: action is a solid hashtag craziest thing candidate. And I'll 596 00:32:34,440 --> 00:32:36,520 Speaker 1: just to give you a sense of what happened the 597 00:32:36,880 --> 00:32:41,880 Speaker 1: middle of this week Granwich Life Sciences sort. This was 598 00:32:41,920 --> 00:32:45,360 Speaker 1: on Wednesday, UM and the way that Bloomberg puts it 599 00:32:45,360 --> 00:32:47,240 Speaker 1: as day traders leap frogged each other to get in 600 00:32:47,280 --> 00:32:52,720 Speaker 1: on the microcap drug developer socent gain in a single day. 601 00:32:53,120 --> 00:32:54,880 Speaker 1: I'll take it. I'll take it all right. I got 602 00:32:54,880 --> 00:32:58,760 Speaker 1: a good one over direct message on Twitter from Sam 603 00:32:58,840 --> 00:33:01,520 Speaker 1: Kidston and let me get the chain of custody of 604 00:33:01,560 --> 00:33:06,040 Speaker 1: this crazy thing correct. It was actually an Andrea Felsted 605 00:33:06,120 --> 00:33:10,560 Speaker 1: column for Bloomberg Opinion that was tweeted by Adam Tuesday 606 00:33:10,600 --> 00:33:12,360 Speaker 1: and said to me by Sam Kiston. I want to 607 00:33:12,400 --> 00:33:15,880 Speaker 1: make sure everyone gets the proper credit or blame for 608 00:33:15,920 --> 00:33:17,720 Speaker 1: this one. And this is a good one, Sarah, because 609 00:33:18,400 --> 00:33:20,520 Speaker 1: it's got everything I love about a crazy thing. It's 610 00:33:20,560 --> 00:33:24,080 Speaker 1: an alternative asset and it allows us to play a little, 611 00:33:24,120 --> 00:33:28,280 Speaker 1: a little game of prices, right. And the column is 612 00:33:28,320 --> 00:33:34,040 Speaker 1: about how popular dogs have gotten in the UK during 613 00:33:34,200 --> 00:33:37,600 Speaker 1: during the quarantine. And I can totally sympathize anyone who's 614 00:33:37,720 --> 00:33:40,880 Speaker 1: quarantining or locked down without a dog. I don't know 615 00:33:40,920 --> 00:33:43,040 Speaker 1: what you're doing. I don't know how your pastners. You know, 616 00:33:43,160 --> 00:33:46,720 Speaker 1: I can sympathize. I'm one of the dog buyers right right, 617 00:33:46,760 --> 00:33:49,920 Speaker 1: you were, you were this crazy thing for Soonify. So 618 00:33:50,520 --> 00:33:53,640 Speaker 1: dog prices have have really shot up in the UK, 619 00:33:54,400 --> 00:33:58,120 Speaker 1: especially for for pure breads. So here's the prices, right, 620 00:33:58,240 --> 00:34:00,440 Speaker 1: and you're you're on the hook for this too, Josh. 621 00:34:01,000 --> 00:34:04,360 Speaker 1: How much do you think pure bred dog prices are 622 00:34:04,520 --> 00:34:10,239 Speaker 1: up in the UK? Anyone? Sorry? How much do you think? 623 00:34:10,920 --> 00:34:15,839 Speaker 1: I'm going to go ahead and guess they've doubled? So 624 00:34:15,880 --> 00:34:19,080 Speaker 1: I'll say game, all right, I'm gonna keep my poker 625 00:34:19,120 --> 00:34:20,920 Speaker 1: face on, Josh. What do you think you're taking the 626 00:34:20,960 --> 00:34:23,520 Speaker 1: over under on that? I'm going over right, I'm gonna 627 00:34:23,520 --> 00:34:27,960 Speaker 1: guess triple triple wow. Wow. I might sell you my dog, Josh, 628 00:34:27,960 --> 00:34:32,920 Speaker 1: if I didn't say I was Mike. Mike's talking about 629 00:34:33,360 --> 00:34:36,279 Speaker 1: quarantining with the dog. Clearly there's some day I don't 630 00:34:36,320 --> 00:34:38,680 Speaker 1: just days where i'd sell him at a at a 631 00:34:38,920 --> 00:34:41,839 Speaker 1: deep discount. We'll tell you that I've currently paid my 632 00:34:41,880 --> 00:34:43,759 Speaker 1: oldest daughter to take him out for a walk so 633 00:34:43,800 --> 00:34:47,640 Speaker 1: he doesn't interrupt the podcast. So that that tells you that, yeah, 634 00:34:47,680 --> 00:34:50,160 Speaker 1: I'm gong one dogs. I said, maybe maybe I'm a 635 00:34:50,200 --> 00:35:00,560 Speaker 1: seller at the right dog cats. It's a so I 636 00:35:00,600 --> 00:35:03,320 Speaker 1: don't know acculding to the prices right laws? Who who? 637 00:35:03,360 --> 00:35:08,920 Speaker 1: Who triple? John was? But some dogs have tripled in 638 00:35:08,960 --> 00:35:13,720 Speaker 1: price though, um Cocker spaniels up hunter and seven percent, 639 00:35:14,400 --> 00:35:18,279 Speaker 1: Jack Russell terriers up a border colleges a hundred nights. 640 00:35:18,320 --> 00:35:20,080 Speaker 1: So you're right. So a lot of dogs have tripled 641 00:35:20,080 --> 00:35:22,240 Speaker 1: in value this year. I don't know what the resell 642 00:35:22,320 --> 00:35:25,800 Speaker 1: value is. But what are your what are your? I 643 00:35:25,800 --> 00:35:29,120 Speaker 1: guess and if we can invest in in uh cocker spaniels, 644 00:35:29,239 --> 00:35:32,080 Speaker 1: uh see if we can get an ETF that invests 645 00:35:32,080 --> 00:35:34,920 Speaker 1: in cocker spaniels are a convertible or a convertible bond. 646 00:35:38,280 --> 00:35:41,560 Speaker 1: It converts bitcoin when you go cous. The port of 647 00:35:41,560 --> 00:35:43,799 Speaker 1: the columns is a lot of these dogs are out 648 00:35:43,800 --> 00:35:50,080 Speaker 1: performing big poins. No, it's not. So that's a good one. 649 00:35:50,160 --> 00:35:53,400 Speaker 1: That's that's a good crazy thing. Courtesy of Sam Kidston 650 00:35:53,600 --> 00:35:56,560 Speaker 1: on Twitter. But Josh, how about you have you seen 651 00:35:56,560 --> 00:36:00,759 Speaker 1: anything crazy this week? You know? My crazy thing? And 652 00:36:01,080 --> 00:36:03,520 Speaker 1: I was looking this up as we uh. You know, 653 00:36:03,840 --> 00:36:07,040 Speaker 1: as I was preparing for this conversation, and and I think, 654 00:36:07,440 --> 00:36:10,480 Speaker 1: I'm still this is nothing incredibly new, but I'm still 655 00:36:10,520 --> 00:36:14,160 Speaker 1: baffled by it. Um Why people don't just put money 656 00:36:14,239 --> 00:36:16,879 Speaker 1: under their mattress, I don't know. But we have seventeen 657 00:36:17,000 --> 00:36:21,440 Speaker 1: point eight five chillion dollars of negative yielding debt globally 658 00:36:21,600 --> 00:36:25,440 Speaker 1: as we speak, seventeen point eight five chillion. It's hovering 659 00:36:26,160 --> 00:36:31,239 Speaker 1: very near thirty percent of the global Egg Index. And 660 00:36:31,239 --> 00:36:35,520 Speaker 1: and so from my perspective, you know, structurally that doesn't 661 00:36:35,560 --> 00:36:39,480 Speaker 1: make sense. Structurally that doesn't work. You're not you're punishing, 662 00:36:39,880 --> 00:36:43,200 Speaker 1: even though you're trying to bail out economies, you're punishing 663 00:36:43,360 --> 00:36:46,600 Speaker 1: savers with these kinds of raids. And then the other 664 00:36:46,640 --> 00:36:48,960 Speaker 1: thing I looked up because clearly a lot of that's 665 00:36:49,160 --> 00:36:52,240 Speaker 1: in the in the developed markets, in in Western Europe, 666 00:36:52,840 --> 00:36:54,960 Speaker 1: and I and I was like, oh, remember remember the 667 00:36:55,000 --> 00:36:59,040 Speaker 1: sovereign crisis, uh in Europe a few years ago. Well now, 668 00:36:59,320 --> 00:37:04,160 Speaker 1: low and behold old places like Spain, Italy, Portugal and 669 00:37:04,200 --> 00:37:08,560 Speaker 1: even Greece are now having negative yielding debt out to 670 00:37:08,640 --> 00:37:11,560 Speaker 1: five years. Greece has negative yilding doubt out to five years. 671 00:37:11,600 --> 00:37:15,800 Speaker 1: So that's a pretty crazy thing from it. It's mind boggling. 672 00:37:15,880 --> 00:37:18,919 Speaker 1: YEA patrol ten went negative this week for the first time. 673 00:37:19,120 --> 00:37:21,879 Speaker 1: I mean, jush. The thing to me though, was how 674 00:37:21,920 --> 00:37:24,160 Speaker 1: do you ever reverse that? How did the central banks 675 00:37:24,200 --> 00:37:28,040 Speaker 1: unwind this? I don't see how it's possible. Yeah, I think, uh, 676 00:37:28,440 --> 00:37:33,239 Speaker 1: I think the only way you you eventually unwind it. 677 00:37:33,280 --> 00:37:36,279 Speaker 1: And thankfully a lot of this is you know, government's 678 00:37:36,360 --> 00:37:40,560 Speaker 1: queueing que eating their own debt, so that's helpful. So 679 00:37:40,640 --> 00:37:43,040 Speaker 1: from some extent you can just let it roll up 680 00:37:44,640 --> 00:37:47,200 Speaker 1: and pay back. But you're right like that. That's one 681 00:37:47,239 --> 00:37:50,640 Speaker 1: of the counter arguments to the what we hear about. 682 00:37:50,719 --> 00:37:53,520 Speaker 1: You know, the potential for inflation is uh. You know, 683 00:37:53,560 --> 00:37:55,719 Speaker 1: if you look at Europe, you look at Japan over 684 00:37:55,760 --> 00:37:59,440 Speaker 1: the last number of decades um, you know, you you 685 00:37:59,480 --> 00:38:03,120 Speaker 1: can't have of inflation without growth and and so it's 686 00:38:03,320 --> 00:38:07,000 Speaker 1: you can certainly get rises in yields due to supply 687 00:38:07,040 --> 00:38:09,919 Speaker 1: and demand fundamentals. If governments have so much paper they're 688 00:38:09,920 --> 00:38:12,279 Speaker 1: trying to issue and buyers aren't showing up, that can 689 00:38:12,320 --> 00:38:16,400 Speaker 1: shoot rates up. You can clearly have some structural inflation impacts. 690 00:38:16,400 --> 00:38:19,840 Speaker 1: But yeah, you're it's going to be interesting to see 691 00:38:20,520 --> 00:38:24,560 Speaker 1: how long this persists and whether we an aggregate continue 692 00:38:24,600 --> 00:38:27,920 Speaker 1: down this path rates continue to get lower, or you know, 693 00:38:28,000 --> 00:38:30,479 Speaker 1: with a few shocks and blips along the ways most 694 00:38:30,480 --> 00:38:33,200 Speaker 1: likely outcome. Well, we've got a FED meeting to look 695 00:38:33,239 --> 00:38:36,040 Speaker 1: forward to next week, and I'm sure we'll get powells 696 00:38:36,080 --> 00:38:39,080 Speaker 1: take so plenty to look forward to, but we're going 697 00:38:39,120 --> 00:38:41,960 Speaker 1: to have to leave it there. Uh, Josh Lomier, thank 698 00:38:41,960 --> 00:38:44,520 Speaker 1: you so much for joining the show this week. Pleasure 699 00:38:44,560 --> 00:38:56,120 Speaker 1: was all mine. What Goes Up. We'll be back next week. 700 00:38:56,520 --> 00:38:59,040 Speaker 1: Until then, you can find us on the Bloomberg Terminal, 701 00:38:59,120 --> 00:39:02,799 Speaker 1: website and app, or wherever you get your podcasts. We'd 702 00:39:02,800 --> 00:39:04,600 Speaker 1: love it if you took the time to rate and 703 00:39:04,640 --> 00:39:07,400 Speaker 1: review the show on Apple Podcasts so more listeners can 704 00:39:07,440 --> 00:39:10,200 Speaker 1: find us. And you can find us on Twitter, follow 705 00:39:10,280 --> 00:39:13,680 Speaker 1: me at at Sarah pont Sack, Mike is that Reaganonymous, 706 00:39:13,880 --> 00:39:18,120 Speaker 1: and you can also follow Bloomberg Podcasts at Podcasts. Also 707 00:39:18,160 --> 00:39:20,320 Speaker 1: thank you to Charlie Pellett of Bloomberg Radio and the 708 00:39:20,400 --> 00:39:23,279 Speaker 1: voice of the New York City Subway System. What Goes 709 00:39:23,360 --> 00:39:26,040 Speaker 1: Up is produced by Jordan Gospore. The head of Bloomberg 710 00:39:26,080 --> 00:39:29,600 Speaker 1: podcast is Francesco Levie. Thanks for listening See you next time.