WEBVTT - DoubleLine Capital Co-Founder & CEO Jeffrey Gundlach Talks Private Credit Risks 0:00:02.480 --> 0:00:07.040 Bloomberg Audio Studios, podcasts, radio news. 0:00:07.280 --> 0:00:11.480 We're joined by the firms CEO and CIO Jeffrey Gunlock. Jeffrey, 0:00:11.480 --> 0:00:12.959 thank you so much for having us here. 0:00:13.080 --> 0:00:15.640 Yeah, it's good to be here. Glad you made a 0:00:15.680 --> 0:00:18.799 house call. Excuse me to do absolutely. 0:00:18.840 --> 0:00:20.960 I mean, we've got this nice rug, these nice chairs, 0:00:21.000 --> 0:00:23.479 so we couldn't be happier. But let's get right to 0:00:23.480 --> 0:00:25.160 the good stuff here. I want to talk about this 0:00:25.200 --> 0:00:27.600 moment in private credit. There's been a ton of different 0:00:27.600 --> 0:00:31.200 analogies and metaphors used. One of the ones that you've used, 0:00:31.480 --> 0:00:35.080 you said only in early April on X that basically 0:00:35.120 --> 0:00:37.920 we're in two thousand and seven for private credit. I 0:00:37.960 --> 0:00:41.559 want to talk about the potential domino effects here, because 0:00:42.080 --> 0:00:44.960 you think about any potential crisis in private credit, what 0:00:45.080 --> 0:00:48.440 is the actual read through into markets more broadly, the 0:00:48.479 --> 0:00:53.040 economy more broadly, and what does that mechanism actually look like. 0:00:53.600 --> 0:00:57.920 I think the mechanism is already underway, and the mechanism 0:00:58.120 --> 0:01:02.360 is a decline or eliminate of trust because there's been 0:01:02.520 --> 0:01:06.920 so much reporting that is questionable in terms of the 0:01:07.000 --> 0:01:11.640 underlying activity. When I point out the one that really 0:01:11.720 --> 0:01:14.039 grabbed my attention to last fall was there was a 0:01:14.040 --> 0:01:16.920 fund that was marked at one hundred, and overnight it 0:01:16.959 --> 0:01:17.920 was marked at eighty one. 0:01:18.840 --> 0:01:20.839 Now that is hard to understand. 0:01:20.880 --> 0:01:24.319 Markdown by a not insignificant sponsor, one with a good 0:01:24.360 --> 0:01:28.480 reputation and a very large staff supposedly doing underwriting and 0:01:28.560 --> 0:01:31.240 due diligence and tracking and all that sort of stuff, 0:01:31.959 --> 0:01:35.880 and yet it goes down nineteen percent overnight. Now many 0:01:35.959 --> 0:01:41.120 people don't quite fully understand the ramifications of that. They 0:01:41.120 --> 0:01:43.160 think about a stock, you know that reports and it 0:01:43.200 --> 0:01:45.120 goes from one hundred to eighty one, and that's a 0:01:45.120 --> 0:01:47.720 big move, But there was a big earningsmiths or something. 0:01:48.080 --> 0:01:51.160 These re portfolios of hundreds of loans, maybe thousands of 0:01:51.200 --> 0:01:53.880 loans in some cases, and one hundred to eighty one 0:01:54.320 --> 0:01:57.360 means either all the loans were marked out nineteen points 0:01:57.520 --> 0:02:00.480 all of them, or say, since I keep being told 0:02:00.560 --> 0:02:03.480 that everything's largely fine, let's say fifty percent of the 0:02:03.520 --> 0:02:06.560 loans are absolutely rock solid. That means that the other 0:02:06.600 --> 0:02:08.920 fifty percent were marked down thirty eight points. 0:02:09.800 --> 0:02:11.280 What if seventy five. 0:02:11.200 --> 0:02:13.920 Percent of the portfolio is absolutely rock solid, which is 0:02:14.000 --> 0:02:14.480 kind of what the. 0:02:16.360 --> 0:02:20.120 Messaging has been. That's mostly all good. I remember I think. 0:02:19.919 --> 0:02:23.240 One said no red flags, no orange, no yellow flags, 0:02:23.480 --> 0:02:26.360 and mostly green flags. Wait a minute, where's the other 0:02:26.400 --> 0:02:30.440 slice of the pie, No red, no yellow, and mostly green. 0:02:30.520 --> 0:02:32.560 What about the not mostly you know what type of thing. 0:02:32.600 --> 0:02:34.880 But if seventy five percent of the loans are absolutely 0:02:34.919 --> 0:02:37.200 rock solid, it means the other twenty five percent were 0:02:37.200 --> 0:02:40.320 marked down to twenty four right. 0:02:40.800 --> 0:02:42.079 So but what if it's. 0:02:42.160 --> 0:02:44.120 Ten percent of the loans upset have to be marked 0:02:44.120 --> 0:02:44.959 down to below zero? 0:02:46.160 --> 0:02:46.320 Right? 0:02:46.360 --> 0:02:51.800 So it's clear and when we get these markedowns, it 0:02:51.800 --> 0:02:55.320 would be awfully helpful if they would say, this is 0:02:55.320 --> 0:02:57.680 how many loans we have, This is the dollar amount 0:02:57.680 --> 0:03:00.000 of loans we have, and this is how many were 0:03:00.080 --> 0:03:03.200 marked down. Because we know the dollar amount of the markdown, 0:03:03.480 --> 0:03:04.320 it's the percentage. 0:03:04.400 --> 0:03:05.800 So how many are there? 0:03:06.000 --> 0:03:08.440 That would really really big issue. But I've been saying 0:03:08.600 --> 0:03:11.960 this is not just about private credit. This is something 0:03:12.000 --> 0:03:16.520 that is endemic to market cycles. This happened in the 0:03:16.560 --> 0:03:20.320 IPO of dot coms back in the late nineties. They 0:03:20.320 --> 0:03:23.600 had they had no revenue, no business plan, and they 0:03:23.600 --> 0:03:27.120 were selling for large, large prices. And then, of course 0:03:27.280 --> 0:03:30.680 in the lead up to the global financial crisis, you 0:03:30.760 --> 0:03:34.200 had the mortgage market. The non guaranteed mortgage market exploded 0:03:34.240 --> 0:03:37.360 in size to about where the private credit market is today, 0:03:37.360 --> 0:03:41.800 a little less actually for those securitized mortgage about two trillion, 0:03:42.600 --> 0:03:45.800 you know, and it boomed, and of course that ended 0:03:45.840 --> 0:03:49.600 up blowing up. It's all because the growth is so fast. 0:03:50.120 --> 0:03:52.440 That's what really drives it. And it can happen when 0:03:52.440 --> 0:03:55.640 there's a huge liquidity events that money is pumped in 0:03:55.640 --> 0:03:58.680 from the government some such thing as it wasn't during COVID, 0:03:59.240 --> 0:04:02.960 and sudden that money has to get deployed and it 0:04:03.000 --> 0:04:05.840 can be indiscriminate. So I use the analogy of the 0:04:05.840 --> 0:04:08.320 Wild West. This one, I think really explains it in 0:04:08.360 --> 0:04:10.960 simple terms. You've got a nice town. It's eighteen forty 0:04:11.160 --> 0:04:12.880 and out on the frontier. You've got a little town 0:04:13.160 --> 0:04:16.120 mostly farmers living off the land, and they're all God 0:04:16.160 --> 0:04:18.880 fearing people. And they got a sheriff there. He's got 0:04:18.880 --> 0:04:21.960 a heart of gold. He's like Gary Cooper and high noon. 0:04:22.080 --> 0:04:23.200 And there's very little crime. 0:04:23.320 --> 0:04:24.640 You know, every now and then there'll be a murder 0:04:24.680 --> 0:04:27.280 of passion or something. But no one had even locked 0:04:27.360 --> 0:04:29.640 their doors. I don't have to worry about it. And 0:04:29.680 --> 0:04:32.880 then something happens, so maybe it's there's a discovery of 0:04:32.920 --> 0:04:35.560 gold three miles away, and all of a sudden, all 0:04:35.600 --> 0:04:38.920 the fast buck artists and con men and rapscallions they 0:04:38.920 --> 0:04:42.200 come flooding. And not everybody's a rap scallion, but a 0:04:42.279 --> 0:04:45.280 sufficient fraction of them are rap scallions, and they're coming 0:04:45.279 --> 0:04:47.360 in there to hit it big and then get out. 0:04:47.760 --> 0:04:51.560 And suddenly there's murders. You have to lock your door, 0:04:51.600 --> 0:04:52.919 you have to barricade your door. 0:04:53.200 --> 0:04:55.960 The sheriff is completely overwhelmedble who's going to clean. 0:04:55.800 --> 0:04:56.280 That up this time? 0:04:56.320 --> 0:04:58.000 I mean, who's going to be the Gary Cooper? And 0:04:58.000 --> 0:05:00.640 if I remember, at the end, the Mark Opera badge and. 0:05:00.760 --> 0:05:01.880 Market will be the Grey Cooper. 0:05:02.600 --> 0:05:05.799 Market inflicts the pain and so you'll end up having 0:05:06.920 --> 0:05:10.960 sales at lower prices and so forth. But the trust 0:05:11.120 --> 0:05:16.279 problem is pretty significant. I mean, it appears that many 0:05:16.320 --> 0:05:19.839 of the investors in the interval funds didn't quite understand 0:05:20.080 --> 0:05:23.120 what was going on with the gating possibilities. I'm sure 0:05:23.120 --> 0:05:26.159 it's in the documents. I'm absolutely positive it's in the documents. 0:05:26.640 --> 0:05:30.359 But the investors are being sold Tube through intermediaries. In 0:05:30.400 --> 0:05:34.400 many many cases, those intermediaries get paid a very large commission. 0:05:34.760 --> 0:05:35.480 I read reporting. 0:05:35.480 --> 0:05:39.680 If there were billions of dollars paid to intermediaries. 0:05:38.960 --> 0:05:41.480 Selling private credit by the private credit. 0:05:41.200 --> 0:05:43.560 Firms, billions of dollars, so they have a lot of 0:05:43.600 --> 0:05:48.320 incentive to not focus exclusively on the negatives. 0:05:48.600 --> 0:05:49.640 Let me put it that way. 0:05:50.000 --> 0:05:52.200 And so I have a feeling that some people who 0:05:52.240 --> 0:05:55.880 are in interval funds think and maybe this didn't read 0:05:55.880 --> 0:05:58.760 the documents. Did you read your mortgage documents when you 0:05:59.000 --> 0:05:59.840 in delivery page? 0:06:00.000 --> 0:06:02.600 I'm actually going through that. 0:06:03.360 --> 0:06:05.719 Who knows what's end? Didn't read the fine print? Yeah, 0:06:06.040 --> 0:06:06.360 we do. 0:06:06.560 --> 0:06:08.800 We live in a disclosure based society. But you make 0:06:08.839 --> 0:06:11.279 a good point. I mean, you think about the fine print, 0:06:11.360 --> 0:06:13.720 did people read it? And how do you make sure that. 0:06:13.680 --> 0:06:14.240 They read it? 0:06:14.279 --> 0:06:16.960 But I want to talk about how this develops because 0:06:16.960 --> 0:06:19.400 we got through the first quarter of redemptions and certainly 0:06:19.600 --> 0:06:22.599 we saw some big headlines and some big numbers there. 0:06:23.040 --> 0:06:26.920 You warned about the IDEs of June on CNBC last week. 0:06:27.040 --> 0:06:29.960 I want to talk on Bloomberg about what that means. 0:06:29.960 --> 0:06:32.360 Are you expecting even bigger redemptions when you get those 0:06:32.360 --> 0:06:33.400 second quarter numbers? 0:06:33.600 --> 0:06:35.200 I think if I went in front of a crowd 0:06:35.320 --> 0:06:38.880 of two thousand people who are somewhat familiar with private credit, 0:06:39.200 --> 0:06:41.719 and said, show of hands, who in this room thinks 0:06:41.720 --> 0:06:45.039 the redemption requests are going to be higher than in 0:06:45.120 --> 0:06:46.840 June than redemption. 0:06:46.520 --> 0:06:47.400 Requests in March. 0:06:47.960 --> 0:06:52.479 I believe virtually every hand would go up, because it's 0:06:52.520 --> 0:06:55.080 just human nature. When you can't get out, it makes 0:06:55.120 --> 0:06:58.080 you want to get out even more. On the panel 0:06:58.120 --> 0:07:00.120 that I did at the Milkin Conference yesterday, there's this 0:07:00.839 --> 0:07:04.600 statement made by one of the private credit people that 0:07:04.720 --> 0:07:07.560 it's really public credit that's at risk, not private credit, 0:07:07.800 --> 0:07:09.720 because since they can't get out of the private credit, 0:07:10.040 --> 0:07:10.840 we don't have to sell. 0:07:10.880 --> 0:07:12.880 See that's one of the beauties of private credit. 0:07:13.440 --> 0:07:18.480 So obfuscation is now a synonym for beauty. But you know, 0:07:18.520 --> 0:07:20.240 they say that because they can't get out of their 0:07:20.240 --> 0:07:22.520 private credit, they're going to sell their public credit. 0:07:22.800 --> 0:07:24.560 They're going to sell stocks. It's going to be bad 0:07:24.600 --> 0:07:25.240 for the stock market. 0:07:25.280 --> 0:07:27.880 They're going to sell high yield, they're going to sell 0:07:27.920 --> 0:07:30.800 bank loans, corporate bonds. And I said, you know, there's 0:07:30.800 --> 0:07:35.320 a certain intellectual attractiveness of that concept. The only problem 0:07:35.360 --> 0:07:37.640 I have with it is it's not happening at all. 0:07:39.120 --> 0:07:41.720 The stock market is not in trouble. It's at new highs, 0:07:41.880 --> 0:07:45.840 not today, but it's near the highs. The loan market's 0:07:45.880 --> 0:07:48.600 not in trouble, yeah, they're they're up near power. The 0:07:48.680 --> 0:07:51.000 high yield market isn't in trouble. The spreads are tightened 0:07:51.080 --> 0:07:53.680 right back down where they where they started from at 0:07:53.720 --> 0:07:56.160 their lows of the year. So it could happen that 0:07:56.160 --> 0:07:59.480 that that logic may apply to the future, but it's 0:07:59.480 --> 0:08:00.320 not happening now. 0:08:00.360 --> 0:08:02.600 And with all of the noise and all of. 0:08:02.520 --> 0:08:05.280 The redemptions that weren't met, you'd think if there was 0:08:05.320 --> 0:08:08.600 something to that concept, we'd see more evidence of it. 0:08:08.640 --> 0:08:10.040 And that's how does this play out? 0:08:10.040 --> 0:08:12.160 Though, because I mean, hearing you talk, I'm having flashbacks 0:08:12.160 --> 0:08:13.480 to kind of like twenty years ago. 0:08:13.680 --> 0:08:15.720 I mean, the same thing. People weren't reading and what 0:08:15.880 --> 0:08:16.800 was packaging. 0:08:16.360 --> 0:08:20.600 Into these mortgage bond deals, and then once they found 0:08:20.640 --> 0:08:22.280 out what was in them, it was kind of this rush, 0:08:22.320 --> 0:08:25.080 but it was a flow moving rush, I mean first. 0:08:24.880 --> 0:08:31.480 But this will be slower, I think because the stresses 0:08:31.560 --> 0:08:35.920 in the subprime market were being tracked by the ABX indices. 0:08:36.240 --> 0:08:39.480 We could buy an ABX trunch of double B, double A, 0:08:39.600 --> 0:08:43.320 single A, triple A, and the triple b's started to 0:08:43.360 --> 0:08:47.000 fall pretty noticeably in early two thousand and seven, and 0:08:47.040 --> 0:08:49.480 they got down to about eighty and a lot of 0:08:49.520 --> 0:08:51.920 people thought it was over, that was the end, and 0:08:51.960 --> 0:08:54.640 that was actually a buying opportunity. But obviously it wasn't 0:08:54.640 --> 0:08:57.480 a buying opportunity. But you could see it on the 0:08:57.520 --> 0:09:02.400 screen every day. You could also see on a monthly basis, 0:09:02.640 --> 0:09:04.360 the delinquency is starting to pile up. 0:09:04.800 --> 0:09:06.520 This is more of a quarterly. 0:09:06.120 --> 0:09:09.480 Cycle with these with these interval funds, and so they 0:09:09.520 --> 0:09:12.480 get a respite, you know, they once they go through 0:09:12.520 --> 0:09:15.240 the painful process of gaining them, they now have I 0:09:15.280 --> 0:09:18.240 don't know, ten weeks where they have to revisit that 0:09:18.280 --> 0:09:18.920 topic again. 0:09:19.440 --> 0:09:20.800 So we know beware. 0:09:20.880 --> 0:09:23.320 The eydes of March is from Shakespeare's Julius Caesar and 0:09:23.360 --> 0:09:25.520 it was about it's talking about you shouldn't go to 0:09:26.360 --> 0:09:29.480 the capitol, you know. The eyes of March was March fifteenth. 0:09:29.720 --> 0:09:31.079 It turns out that the eyes of March is not 0:09:31.120 --> 0:09:33.280 always the fifteenth. It has to do with them how 0:09:33.280 --> 0:09:35.080 many days. It has to do with when the full 0:09:35.120 --> 0:09:37.400 moon is. So the eyes of June this year, I 0:09:37.440 --> 0:09:40.319 believe is June thirteenth. I looked it up one time. 0:09:40.360 --> 0:09:41.920 I thought I saw June twenty third, but I think 0:09:41.960 --> 0:09:44.720 it's June thirteenth. Doesn't matter which one it is. Beware 0:09:44.760 --> 0:09:48.000 the eydes of March, because that's when around when the 0:09:48.040 --> 0:09:49.360 redemption requests are going to come in. 0:09:49.480 --> 0:09:51.040 Are we going to see true default? 0:09:51.120 --> 0:09:53.240 I don't mean like these kind of shadow of defaults 0:09:53.320 --> 0:09:55.079 or whatever the heck we're calling in those days. Are 0:09:55.080 --> 0:09:56.599 we going to see true default in any sort of 0:09:56.679 --> 0:09:57.959 meaningful way in private credit? 0:09:58.040 --> 0:10:01.520 Yeah, you already are a are We've seen markdowns from 0:10:01.559 --> 0:10:03.959 one hundred to eighty one on a very large private 0:10:04.000 --> 0:10:08.959 credit fund. They will believe them at par if they 0:10:08.960 --> 0:10:12.240 believe they're not on the way to default. I've seen statements, 0:10:12.400 --> 0:10:14.480 not by every private credit company, by a lot of 0:10:14.480 --> 0:10:16.960 them that they say that's how they justify the one 0:10:17.000 --> 0:10:19.520 hundred to zero. Remember thee hundred to zeros that we 0:10:19.559 --> 0:10:25.560 saw last summer, You know they didn't They one day 0:10:25.679 --> 0:10:28.960 had to make a binary decision that yesterday we thought 0:10:29.000 --> 0:10:31.280 there was a chance of this paying off. Today we 0:10:31.320 --> 0:10:33.440 don't think there's a chance with paying off one hundred 0:10:33.480 --> 0:10:36.880 to zero. It's not going back up. It's written off. 0:10:37.200 --> 0:10:40.280 And so there's plenty of write offs happening I saw 0:10:40.400 --> 0:10:43.520 today there was another fund that marked it's NAV down 0:10:43.559 --> 0:10:44.120 five percent. 0:10:44.280 --> 0:10:45.520 Yes, Now, that I. 0:10:45.480 --> 0:10:48.280 Think is something to start seeing more of, because it's 0:10:48.320 --> 0:10:51.160 a lot more defensible to mark a fundowns five percent 0:10:51.280 --> 0:10:54.560 three times than a mark of fun down fifteen percent overnight. 0:10:54.880 --> 0:10:57.240 You can spread it out over three weeks, you know, 0:10:57.320 --> 0:10:59.520 it's a little easier to wave your hands about it 0:11:00.240 --> 0:11:04.600 one hundred to zero overnight. And so it's pretty clear 0:11:04.600 --> 0:11:08.679 to me that the trust is starting to dissipate because 0:11:08.720 --> 0:11:11.959 everything's always one off, and it's always at somebody else. 0:11:13.160 --> 0:11:17.680 It's Lake wobe Gone on steroids. Every firm is top Dessa. 0:11:18.080 --> 0:11:20.320 Well, Jeffrey, I'd love to get your thoughts on some 0:11:20.400 --> 0:11:22.959 of the recent efforts we've seen to make private credit 0:11:23.000 --> 0:11:28.120 basically more transparent. Here's two different headlines from Bloomberg yesterday. 0:11:28.280 --> 0:11:31.400 One of them is Apollo to start reporting daily prices 0:11:31.440 --> 0:11:34.080 for private markets, and then you had JP Morgan creating 0:11:34.120 --> 0:11:38.520 a new index tracking sixty four hundred private companies. So 0:11:38.840 --> 0:11:40.840 there is that effort out there. I mean, do you 0:11:40.840 --> 0:11:43.040 think that initiatives like this are helpful? 0:11:43.600 --> 0:11:48.040 It's very confusing because they started out in the early 0:11:48.120 --> 0:11:50.880 days saying this was a positive feature that we're not 0:11:50.960 --> 0:11:53.440 marketing to market, which is a strange thing because it's 0:11:53.679 --> 0:11:56.600 certainly my my institutional clients don't feel that way. 0:11:57.040 --> 0:11:58.560 Yesterday I came up with this idea. 0:11:58.640 --> 0:12:00.760 Maybe what I should do is go to my institutional 0:12:01.360 --> 0:12:04.760 regular investment crede bond clients and say, why don't we 0:12:05.160 --> 0:12:08.800 not prevail your portfolio every month and with the last 0:12:08.840 --> 0:12:11.720 close of the day for your performance report, why don't 0:12:11.720 --> 0:12:13.120 we use a one year moving average? 0:12:13.200 --> 0:12:14.400 You should try it? Why not? 0:12:14.559 --> 0:12:17.720 Because it appears that people find it attractive. Isn't that 0:12:17.720 --> 0:12:20.760 that's one of essentially the major selling points for private credit. 0:12:21.440 --> 0:12:27.199 It has what Sherman has termed laundered volatility. Everybody knows 0:12:27.240 --> 0:12:30.600 that the prices are moving. They say that private credit 0:12:30.760 --> 0:12:34.600 really earned its stripes during the lockdown, the COVID lockdown, 0:12:34.920 --> 0:12:39.480 because it held up well. Corporate credit bonds would have 0:12:39.480 --> 0:12:41.520 held up to if you didn't mark them down. Does 0:12:41.600 --> 0:12:45.120 anybody really believe they could have sold private credit loans 0:12:45.160 --> 0:12:49.760 the first week of April twenty twenty five, say, during 0:12:49.760 --> 0:12:51.960 the tape ptenpement, they could have sold those loans. 0:12:52.080 --> 0:12:55.480 At cost that's served of course they couldn't. 0:12:55.480 --> 0:12:58.520 Nobody thinks that but instead of saying, yes, we could 0:12:58.559 --> 0:13:01.440 have sold them, they say, you're missing the point. We 0:13:01.559 --> 0:13:04.280 don't have to sell them, and that's what's so great 0:13:04.320 --> 0:13:07.360 about it. Well, okay, but if I use moving average 0:13:07.360 --> 0:13:10.760 marks on my portfolio of publicly traded bonds, I'll probably 0:13:10.800 --> 0:13:13.520 have three times the sharp ratio. It will be the 0:13:13.559 --> 0:13:16.160 same return ultimately over the fullness of time, but it'll 0:13:16.160 --> 0:13:19.120 look different because it won't be as bumpy. And that's 0:13:19.200 --> 0:13:21.680 kind of the number one characteristic. It was always sold 0:13:22.200 --> 0:13:26.160 as being lower volatility. Everything's lower relative. You don't market. 0:13:26.400 --> 0:13:30.160 Nobody thinks that private equity is really lower volatilty than 0:13:30.160 --> 0:13:34.400 public equity. It's just the vehicle that it's in. And 0:13:34.440 --> 0:13:38.000 then it was sold. The second sales point was the 0:13:38.080 --> 0:13:42.240 higher historical returns. That's almost all born of twenty twenty, 0:13:42.320 --> 0:13:45.600 particularly through twenty twenty two, when the public market and 0:13:45.640 --> 0:13:49.520 corporate bonds went down fifteen to eighteen points in price 0:13:49.600 --> 0:13:52.480 thanks to rising interest rates. You don't mark them, you've 0:13:52.480 --> 0:13:54.160 got eighteen points better performance. 0:13:54.240 --> 0:13:55.320 Well, I am curious about one day. 0:13:55.280 --> 0:13:56.600 There's been a lot of talk about sort of this 0:13:56.720 --> 0:13:58.760 new sort of wave of vintages that might be coming 0:13:58.760 --> 0:14:00.840 down the pike, and sort of what the what the 0:14:00.880 --> 0:14:03.080 potential yield might be on that that's off there, But 0:14:03.120 --> 0:14:06.440 more importantly, the demand. Will the demand be there in 0:14:06.480 --> 0:14:08.440 the same way that we saw, you know, seventy eight 0:14:08.480 --> 0:14:09.600 years ago when the last mantages. 0:14:09.720 --> 0:14:12.800 I doubt you'll you'll see a repeat of the glory 0:14:12.880 --> 0:14:17.480 days when the public markets had zero yield and the 0:14:17.520 --> 0:14:22.120 private markets had both the yield and the hidden volatility. 0:14:22.560 --> 0:14:26.479 You know, if I just use moving averages, I'm actually surprised. 0:14:26.760 --> 0:14:29.360 I wonder if I can get the regulators to allow 0:14:29.400 --> 0:14:30.400 me to do a mutual fund. 0:14:30.600 --> 0:14:32.040 This is when you're moving average price. 0:14:32.800 --> 0:14:34.960 I kind of doubt it, but if I could, I mean, 0:14:35.000 --> 0:14:37.040 I think it would be a massive success. 0:14:37.240 --> 0:14:37.520 Right. 0:14:37.960 --> 0:14:39.400 Well, I do want to talk a little bit about 0:14:39.480 --> 0:14:42.760 vehicles here, because you know, you mentioned interval funds. You 0:14:42.760 --> 0:14:45.680 think about these non traded BDCs, and you think about 0:14:45.680 --> 0:14:47.600 the last year. I mean, there has been a real 0:14:47.720 --> 0:14:50.760 push to put retail and open up access. 0:14:50.960 --> 0:14:54.600 Yeah, because the machine has kind of reached its limits. 0:14:54.640 --> 0:14:58.240 Institutional investors and I've seen it written, which is a 0:14:58.280 --> 0:15:00.640 little bit concerning to me. I don't know know exactly 0:15:00.680 --> 0:15:03.120 what they mean underneath this, but they see we need 0:15:03.160 --> 0:15:06.680 to go to retail to keep making loans. It's almost 0:15:06.760 --> 0:15:09.800 like you have to always add your investor base. 0:15:09.880 --> 0:15:12.640 What does that sound like? Well, what does that sound like? 0:15:12.720 --> 0:15:15.440 You you can't go forward unless you get attract more 0:15:15.480 --> 0:15:16.520 and more and more investors. 0:15:16.800 --> 0:15:17.560 What does that sound like? 0:15:18.040 --> 0:15:18.400 I don't know. 0:15:18.560 --> 0:15:22.280 I think they build its not like a social security system. 0:15:22.440 --> 0:15:24.560 Well, I'm curious whether or not you think that you know, 0:15:24.600 --> 0:15:27.680 we're going to see some of that push die down here, 0:15:27.720 --> 0:15:30.960 whether we are going to see demand from retail heading 0:15:31.080 --> 0:15:31.640 forward here. 0:15:32.280 --> 0:15:33.520 I'm not sure it'll cool. 0:15:34.000 --> 0:15:39.160 I think that there will be, for sure heightened redemption requests. 0:15:39.560 --> 0:15:42.120 There may be some people that think that. 0:15:42.200 --> 0:15:43.120 It's a buye. 0:15:44.680 --> 0:15:48.320 I would recommend against that because my experience is long, 0:15:48.680 --> 0:15:51.040 and I have a very strong memory, and I know 0:15:51.080 --> 0:15:53.280 the way these things work. You have the push first, 0:15:53.320 --> 0:15:58.320 push down, and it looks cheap by historical prices, and 0:15:58.360 --> 0:16:02.280 then some intrepid people decide they're going to take a 0:16:02.280 --> 0:16:05.120 punt on it and they buy it, and it pushes 0:16:05.160 --> 0:16:06.000 it up somewhat. 0:16:06.000 --> 0:16:07.160 That's what happened in subprime. 0:16:07.240 --> 0:16:10.200 Like I said, the triple BABX went down from one 0:16:10.240 --> 0:16:12.360 hundred to eighty, and then it rallied up to like 0:16:12.440 --> 0:16:16.040 ninety two or something before it went to zero. But 0:16:17.120 --> 0:16:19.920 so I think there'll be some people that think that 0:16:19.960 --> 0:16:24.400 it's a buy although there's an inconsistentency between everything's fine 0:16:24.400 --> 0:16:27.560 and our nav was marked down one percent. But this 0:16:27.640 --> 0:16:30.320 is the greatest opportunity you got to buy now because 0:16:30.320 --> 0:16:33.680 it's down a whole whopping percent. So I think there 0:16:33.720 --> 0:16:36.200 will be people that buy it and then sell it lower. 0:16:36.320 --> 0:16:36.720 Yeah. 0:16:36.800 --> 0:16:38.120 I am curious though, if we do end up in 0:16:38.120 --> 0:16:39.600 a crisis. There's been a lot of talk as to 0:16:39.600 --> 0:16:42.400 what capacity the government would have to even bail things 0:16:42.440 --> 0:16:44.760 out the way they did, you know, twenty years ago. 0:16:44.920 --> 0:16:47.840 I have a really hard time thinking about a government 0:16:47.840 --> 0:16:50.280 bailout on this one. The last one they were able 0:16:50.360 --> 0:16:52.880 to wrap it up in the little guy on Main 0:16:52.880 --> 0:16:56.480 Street losing his house, right, this is the richest guys 0:16:56.520 --> 0:17:00.560 in the world making money in the wild West, and so. 0:17:02.360 --> 0:17:04.280 They might do it. I mean it might be possible. 0:17:04.320 --> 0:17:07.639 I modified the mortgages that was against the law and 0:17:07.720 --> 0:17:11.240 violation of prospectuses, so a lot of weird things can happen. 0:17:11.600 --> 0:17:14.880 But I think I think to get a. 0:17:14.960 --> 0:17:18.000 Government bail out, the problem would have to grow so 0:17:18.359 --> 0:17:20.520 large that it wouldn't be possible. 0:17:20.880 --> 0:17:21.280 It's weird. 0:17:21.320 --> 0:17:24.239 They could do a bailout if if it was not 0:17:24.280 --> 0:17:26.320 that large a problem, But then the public could go, 0:17:26.359 --> 0:17:28.760 what do you do? And you're just wiring wirring money 0:17:28.760 --> 0:17:32.080 to these billionaires. You've already given your tax breaks too, 0:17:32.240 --> 0:17:35.600 even though that's largely a myth, but that's the way. 0:17:35.800 --> 0:17:37.400 That's the way the public has been. 0:17:37.440 --> 0:17:38.720 But when you look at when you look at the 0:17:38.720 --> 0:17:42.080 fiscal situation, particularly with the interest expense continuing to rise 0:17:42.400 --> 0:17:44.879 higher than defense, I am curious what you think the 0:17:44.920 --> 0:17:48.040 Treasury Department is actually doing right now with regard to 0:17:48.040 --> 0:17:51.119 its issuance, primarily on the shorter end of the curve, 0:17:51.440 --> 0:17:54.040 and what, at least from what they've communicated, is probably 0:17:54.040 --> 0:17:55.360 going to be their strategy going forward. 0:17:55.400 --> 0:17:57.399 Do you trust in what they're doing? Uh? 0:17:57.640 --> 0:17:59.440 Well, trust is an interesting word. 0:17:59.560 --> 0:18:04.800 But they're already issuing the vast majority of the treasury 0:18:04.840 --> 0:18:05.720 debt short term. 0:18:05.960 --> 0:18:07.159 Most people aren't aware of this. 0:18:07.640 --> 0:18:09.920 Over the last year and spent the case for the 0:18:09.960 --> 0:18:13.200 last few years, about eighty five percent of all treasury 0:18:13.480 --> 0:18:15.720 issuance is inside a one year And you know what 0:18:15.800 --> 0:18:19.920 percentage is longer than twenty years? Under two percent, actually 0:18:20.000 --> 0:18:24.000 under one and a half percent, so it's already It's 0:18:24.040 --> 0:18:27.080 funny the long end gets so much attraction attention, but 0:18:27.119 --> 0:18:30.320 it's really not the area. They're already doing it all 0:18:30.359 --> 0:18:33.119 on the short end. The big mistake was that we 0:18:33.200 --> 0:18:35.480 didn't go much more heavily on the long end. But 0:18:35.560 --> 0:18:38.600 the yield was one you know, because now the yield's 0:18:38.680 --> 0:18:41.560 up at five, so it's up four hundred basis points. 0:18:41.560 --> 0:18:44.600 Those bonds, those one percent or thirty years, they're still 0:18:44.600 --> 0:18:46.879 down at fifty cents on the dollar still. I mean, 0:18:46.920 --> 0:18:48.680 they're still on their lows because the yield is within 0:18:48.720 --> 0:18:50.280 ten ten basis points of it's high. 0:18:50.440 --> 0:18:51.720 But the market keeps absorbing this. 0:18:52.720 --> 0:18:56.520 Well, maybe it's being manipulated. I mean they talked about 0:18:56.560 --> 0:19:00.600 you curve control, but rates, it has the market really 0:19:00.880 --> 0:19:04.000 been dealing with it. Because since the Fed start cutting 0:19:04.040 --> 0:19:08.359 interest rates back in September of twenty twenty four, the 0:19:09.280 --> 0:19:12.040 long rates are up one hundred basis points, right, they 0:19:12.080 --> 0:19:15.159