1 00:00:00,160 --> 00:00:02,440 Speaker 1: The future may not be clear, but our commitment is 2 00:00:02,600 --> 00:00:04,440 Speaker 1: so when you sit with an advisor at Merrill Lynch, 3 00:00:04,519 --> 00:00:07,160 Speaker 1: will put your interests first. Visit mL dot com and 4 00:00:07,240 --> 00:00:09,640 Speaker 1: learn more about Merrill Lynch, an affiliative Bank of America. 5 00:00:09,760 --> 00:00:12,039 Speaker 1: Mery Lynch makes available products and services offered by Merrill 6 00:00:12,080 --> 00:00:14,440 Speaker 1: Lynch Pierce Veneran Smith Incorporated or Registered Broker Dealer remember 7 00:00:14,560 --> 00:00:19,880 Speaker 1: s I PC. This is Master's in Business with Barry 8 00:00:20,000 --> 00:00:25,880 Speaker 1: Ridholts on Bloomberg Radio. This week. On the podcast, I 9 00:00:26,000 --> 00:00:28,640 Speaker 1: have Michael Jesus. You may not have heard of him, 10 00:00:28,680 --> 00:00:33,879 Speaker 1: but he is Morgan Stanley's chief strategist for public policy 11 00:00:34,360 --> 00:00:38,360 Speaker 1: and municipal bonds. If you are at all an investor 12 00:00:38,600 --> 00:00:43,199 Speaker 1: in the fixed income portion of assets, if you're curious 13 00:00:43,240 --> 00:00:48,320 Speaker 1: as to what goes into the bond buying decision, how 14 00:00:48,360 --> 00:00:53,160 Speaker 1: how the by side actually thinks about tracks and makes 15 00:00:53,720 --> 00:00:58,800 Speaker 1: allocation decisions, you will find this conversation fascinating, as did I. 16 00:00:59,760 --> 00:01:02,080 Speaker 1: It's a little wonky, it's a little in the weeds. 17 00:01:02,160 --> 00:01:05,960 Speaker 1: It's very very specific, but you would be amazed at 18 00:01:06,000 --> 00:01:10,680 Speaker 1: how many different subjects have to come under the data 19 00:01:10,720 --> 00:01:15,320 Speaker 1: set that muni bond investors look at. Everything from politics 20 00:01:15,319 --> 00:01:21,160 Speaker 1: and public policy, to credit quality, to local economics, to 21 00:01:21,360 --> 00:01:25,200 Speaker 1: macro economics. It's really as well as the federal reserve 22 00:01:25,280 --> 00:01:27,560 Speaker 1: and interest rates, which we didn't even touch on. I 23 00:01:27,560 --> 00:01:30,680 Speaker 1: think everybody has heard enough of that. Obviously, if rates 24 00:01:30,680 --> 00:01:34,880 Speaker 1: are going up or not, it becomes a fairly significant question. UM. 25 00:01:34,920 --> 00:01:39,000 Speaker 1: All told, Mike is a really knowledgeable guy about these things. Obviously. 26 00:01:39,080 --> 00:01:43,200 Speaker 1: Morgan Stanley is a giant firm UH, both in equities 27 00:01:43,240 --> 00:01:47,279 Speaker 1: and UH fixed income and muni bonds. UH. The muti 28 00:01:47,280 --> 00:01:51,400 Speaker 1: bond market is almost four trillion dollars in the United States. 29 00:01:51,760 --> 00:01:56,600 Speaker 1: Other countries have their own version of municipal bonds. UH. 30 00:01:56,640 --> 00:01:59,919 Speaker 1: It's it's really very interesting and it touches on areas 31 00:02:00,040 --> 00:02:03,200 Speaker 1: you might not have been aware of. So, with no 32 00:02:03,320 --> 00:02:09,359 Speaker 1: further ado, here is my conversation with Michael Jesus. This 33 00:02:09,800 --> 00:02:13,880 Speaker 1: is Masters in Business with Barry Ridholts on Bloomberg Radio. 34 00:02:16,400 --> 00:02:20,600 Speaker 1: My special guest today is Michael Zesus. He is Morgan 35 00:02:20,720 --> 00:02:26,560 Speaker 1: Stanley's chief US public policy and municipal bond strategist. He 36 00:02:26,680 --> 00:02:29,640 Speaker 1: joined Morgan Stanley about a decade ago in the role 37 00:02:29,760 --> 00:02:34,120 Speaker 1: of head of credit analysis for their US investment group. 38 00:02:34,880 --> 00:02:37,960 Speaker 1: Previous to that, he worked at Fitch Ratings as a 39 00:02:38,000 --> 00:02:42,040 Speaker 1: credit analyst, and he began his career focusing on the 40 00:02:42,120 --> 00:02:46,800 Speaker 1: public sector capital budgeting and economic development. He comes to 41 00:02:46,919 --> 00:02:50,840 Speaker 1: us with a b a. From Georgetown and a master's 42 00:02:50,840 --> 00:02:53,960 Speaker 1: of Public Affairs from the lb J School of Public 43 00:02:54,280 --> 00:02:58,160 Speaker 1: Affairs at the University of Texas at Austin. Michael Jesus, 44 00:02:58,240 --> 00:03:00,799 Speaker 1: Welcome to Bloomberg. Hey, thanks for having so. We were 45 00:03:00,840 --> 00:03:03,880 Speaker 1: just in Austin. What a fantastic town. Every time I'm 46 00:03:03,720 --> 00:03:06,600 Speaker 1: I'm in there, I'm like, wow, this is really Someone 47 00:03:06,639 --> 00:03:09,600 Speaker 1: described it to me as the blueberry in the middle 48 00:03:09,720 --> 00:03:12,680 Speaker 1: of the Texas raspberry pie. Which or the or the 49 00:03:12,720 --> 00:03:16,760 Speaker 1: third coast, the third Coast, Yeah, definitely, definitely not Dallas 50 00:03:16,800 --> 00:03:20,359 Speaker 1: or Houston the least. You have a really interesting background 51 00:03:20,400 --> 00:03:24,679 Speaker 1: and the transitions that you've gone through are really quite fascinating. 52 00:03:25,040 --> 00:03:29,120 Speaker 1: How do you go from looking at public affairs and 53 00:03:29,160 --> 00:03:34,240 Speaker 1: analyzing credit to running a muni bond portfolio? I would 54 00:03:34,240 --> 00:03:38,640 Speaker 1: say by accident, inadvertently for the most part. So the 55 00:03:38,680 --> 00:03:42,000 Speaker 1: public policy, public affairs was sort of my first intellectual love, 56 00:03:42,080 --> 00:03:45,360 Speaker 1: so to speak. Um through let's say, kind of a 57 00:03:45,400 --> 00:03:49,760 Speaker 1: series of experiences, work experiences, both in college and afterwards 58 00:03:49,800 --> 00:03:53,840 Speaker 1: where I decided and really like the pace um of 59 00:03:54,120 --> 00:03:58,440 Speaker 1: public policy a little too slow, a little yeah, not 60 00:03:58,520 --> 00:04:02,240 Speaker 1: much competition. Um. There were a lot of smart people 61 00:04:02,240 --> 00:04:04,520 Speaker 1: who worked in those areas, but I think the sort 62 00:04:04,520 --> 00:04:08,520 Speaker 1: of pace of bureaucracy, um, it just just wasn't what 63 00:04:08,560 --> 00:04:10,520 Speaker 1: you would want if you were a very ambitious person. 64 00:04:10,600 --> 00:04:13,120 Speaker 1: Let's not say it's not worthwhile work, but it's it's 65 00:04:13,160 --> 00:04:16,000 Speaker 1: kind of academic and slow as opposed to market based 66 00:04:16,160 --> 00:04:19,719 Speaker 1: and and it sort of fall fell into the markets 67 00:04:19,760 --> 00:04:22,560 Speaker 1: based work when I was in grad school or try 68 00:04:22,600 --> 00:04:24,320 Speaker 1: to make a little extra money working for one of 69 00:04:24,320 --> 00:04:26,920 Speaker 1: the credit rating agencies that worked for Fitch down in Austin. 70 00:04:27,600 --> 00:04:29,360 Speaker 1: And that was kind of my first taste. Even though 71 00:04:29,520 --> 00:04:31,800 Speaker 1: rating agencies are not terribly fast placed to work, it 72 00:04:31,839 --> 00:04:33,280 Speaker 1: was my kind of my first taste of kind of 73 00:04:33,320 --> 00:04:36,000 Speaker 1: translating public policy because I was working in munies then 74 00:04:36,600 --> 00:04:41,279 Speaker 1: translating public policy into kind of market based analytics. And 75 00:04:41,320 --> 00:04:43,200 Speaker 1: I got hooked. I got hooked. I stayed there. I 76 00:04:43,200 --> 00:04:46,640 Speaker 1: didn't go into government like I intended to, and you know, 77 00:04:46,680 --> 00:04:48,400 Speaker 1: one thing led to another. I ended up on the 78 00:04:48,440 --> 00:04:51,800 Speaker 1: by side within Morgan Stanley and a couple of years 79 00:04:51,880 --> 00:04:53,839 Speaker 1: later in the role that I have now which is 80 00:04:54,040 --> 00:04:56,400 Speaker 1: running a research and strategy team for munis and now 81 00:04:56,400 --> 00:04:59,320 Speaker 1: public policies. So so let's talk about when you joined 82 00:04:59,360 --> 00:05:02,640 Speaker 1: Morgan Stan Like, you start pretty much right in the 83 00:05:02,680 --> 00:05:05,720 Speaker 1: midst of the credit bubble. You're on a buy side, 84 00:05:05,880 --> 00:05:10,240 Speaker 1: your meaning you're not on the brokeren side selling individual 85 00:05:10,279 --> 00:05:14,800 Speaker 1: bonds to investors, your buying bonds on behalf of investors. 86 00:05:15,040 --> 00:05:17,839 Speaker 1: What was it like to start right in the middle 87 00:05:17,839 --> 00:05:22,960 Speaker 1: of that storm. It was it was scary. It was well, first, 88 00:05:23,000 --> 00:05:26,360 Speaker 1: there's the shock of having a responsibility of managing other 89 00:05:26,360 --> 00:05:29,880 Speaker 1: people's money, which to someone who at the time was 90 00:05:30,560 --> 00:05:34,240 Speaker 1: pretty broke. Um, it felt this kind of huge burden 91 00:05:34,680 --> 00:05:38,240 Speaker 1: that uh, you know, it didn't really completely understand or 92 00:05:38,279 --> 00:05:40,520 Speaker 1: was having trouble grapple with. On top of that, you 93 00:05:40,520 --> 00:05:42,360 Speaker 1: had this kind of big crisis that was just getting 94 00:05:42,360 --> 00:05:46,720 Speaker 1: bigger and bigger. Oh seven. Yet really the very early 95 00:05:46,839 --> 00:05:50,280 Speaker 1: stages of the housing market rolling over, early stages of 96 00:05:50,720 --> 00:05:53,960 Speaker 1: the default starting on on mortgages in some prime starting 97 00:05:54,000 --> 00:05:57,039 Speaker 1: to pick up. Markets were still going higher. You stock 98 00:05:57,080 --> 00:06:00,440 Speaker 1: markets were going higher, as we're bond markets. At what 99 00:06:00,640 --> 00:06:04,520 Speaker 1: point in that baptism of fire did you say, hey, 100 00:06:04,560 --> 00:06:08,280 Speaker 1: this is really an unusual set of circumstances. I was 101 00:06:08,320 --> 00:06:11,080 Speaker 1: initially focused just on Muni's when I was there, so 102 00:06:11,440 --> 00:06:13,440 Speaker 1: we saw some of the telltale signs, were able to 103 00:06:13,520 --> 00:06:15,720 Speaker 1: identify some of them early in the sense that when 104 00:06:15,760 --> 00:06:19,360 Speaker 1: you see corporate credit markets starting to show signs of weakness, 105 00:06:19,800 --> 00:06:23,920 Speaker 1: because there's a lag effect right where government revenues tend 106 00:06:23,960 --> 00:06:25,920 Speaker 1: to kind of trail the real economy. You know, if 107 00:06:25,920 --> 00:06:28,960 Speaker 1: you think about it, if you go buy something at 108 00:06:29,040 --> 00:06:31,120 Speaker 1: your drug store, the sales tax you pay on it 109 00:06:31,200 --> 00:06:33,320 Speaker 1: might not make it into the state's coffers for a while, 110 00:06:33,400 --> 00:06:35,960 Speaker 1: or effectively be spent for a while, So not on 111 00:06:36,000 --> 00:06:40,560 Speaker 1: income tax takes forever. So yea. So the point there, 112 00:06:41,080 --> 00:06:43,159 Speaker 1: we could kind of see what was happening in corporate 113 00:06:43,200 --> 00:06:46,120 Speaker 1: credit markets and it was appropriate to kind of be 114 00:06:46,200 --> 00:06:49,520 Speaker 1: more defensive. So from that perspective, it was easy for 115 00:06:49,600 --> 00:06:52,080 Speaker 1: us to be a little bit defensive. And then that environment, 116 00:06:52,120 --> 00:06:54,160 Speaker 1: you weren't getting paid too much to take a lot 117 00:06:54,160 --> 00:06:57,839 Speaker 1: of credit risk anyway, So so you were buying bonds, 118 00:06:57,839 --> 00:07:02,680 Speaker 1: primarily MUNI bonds primarily for their tax for yields. Was 119 00:07:02,720 --> 00:07:05,560 Speaker 1: that the thinking back then? I mean, yeah, boring, So 120 00:07:06,160 --> 00:07:09,160 Speaker 1: it was a boring approach, but design it's bored, right, 121 00:07:09,160 --> 00:07:10,800 Speaker 1: I was gonna say it's boring, but they're bill to 122 00:07:10,840 --> 00:07:14,480 Speaker 1: be boring. And how big is the muni market in 123 00:07:14,480 --> 00:07:17,400 Speaker 1: the United States. It's tremendous three point seven trillion dollars. 124 00:07:17,600 --> 00:07:19,720 Speaker 1: If you want risk, you can find it in that market. 125 00:07:20,240 --> 00:07:22,280 Speaker 1: Just that wasn't that wasn't the That wasn't the place 126 00:07:22,280 --> 00:07:24,200 Speaker 1: at the time where we went looking on purpose or 127 00:07:24,200 --> 00:07:25,960 Speaker 1: by accident. I mean, we could talk about we can 128 00:07:26,000 --> 00:07:28,280 Speaker 1: talk about Illinois, we could talk about Puerto Rico. Or 129 00:07:28,360 --> 00:07:30,960 Speaker 1: do you mean there's risk that people are wholly unaware 130 00:07:31,000 --> 00:07:35,720 Speaker 1: of because of inflation, credit risk, duration, etcetera. I guess 131 00:07:35,720 --> 00:07:37,960 Speaker 1: I would say all of the above. What you're saying, 132 00:07:38,200 --> 00:07:40,760 Speaker 1: uh there, I mean in any market, there there are 133 00:07:40,800 --> 00:07:44,200 Speaker 1: investors taking risks they don't completely understand, and you know 134 00:07:44,240 --> 00:07:47,640 Speaker 1: that that's what kind of makes them interesting. The muni market. 135 00:07:47,640 --> 00:07:50,440 Speaker 1: The most misunderstood risks that I think are now beginning 136 00:07:50,520 --> 00:07:55,040 Speaker 1: to be better understood are the risks of basically sovereign 137 00:07:55,080 --> 00:07:59,640 Speaker 1: political risk. Right Puerto Rico, Illinois, These are places they 138 00:07:59,640 --> 00:08:01,960 Speaker 1: tell you that the same type of sovereign political risk 139 00:08:02,040 --> 00:08:05,640 Speaker 1: that exists in other countries they exist in the MUNI market. 140 00:08:05,680 --> 00:08:09,080 Speaker 1: Also So what was your take on on the very 141 00:08:09,120 --> 00:08:13,920 Speaker 1: famous Meredith Whitney claim that we're gonna see hundreds of 142 00:08:13,920 --> 00:08:18,440 Speaker 1: of muni bond default state cities, etcetera. That really rocked 143 00:08:18,480 --> 00:08:21,040 Speaker 1: the muni bond market for a while. I I'd say 144 00:08:21,080 --> 00:08:25,120 Speaker 1: that she was right in spirit, but really wrong in magnitude. 145 00:08:25,600 --> 00:08:27,320 Speaker 1: And when I say right in spirit, what I mean 146 00:08:27,440 --> 00:08:30,600 Speaker 1: is that there are some very meaningful long term credit 147 00:08:30,680 --> 00:08:34,400 Speaker 1: challenges to the muni market that, uh, if they're not 148 00:08:34,480 --> 00:08:38,280 Speaker 1: addressed politically, uh, they're going to express themselves in a 149 00:08:38,320 --> 00:08:41,400 Speaker 1: meaningfully negative way, you know, over the medium term, let's 150 00:08:41,400 --> 00:08:43,080 Speaker 1: call it kind of five cent years from now, or 151 00:08:43,120 --> 00:08:47,200 Speaker 1: maybe if they're catalyzed with a big recession. But she 152 00:08:47,320 --> 00:08:50,080 Speaker 1: was wrong in magnitude and timing, and that means a 153 00:08:50,080 --> 00:08:52,480 Speaker 1: lot in market for sure, to say the least. Take 154 00:08:53,240 --> 00:08:55,760 Speaker 1: if you give a forecast. The old joke is you 155 00:08:55,800 --> 00:08:58,280 Speaker 1: could give a dollar level or a date, but never 156 00:08:58,320 --> 00:09:01,040 Speaker 1: both at the same time. Coming up, we continue our 157 00:09:01,040 --> 00:09:05,280 Speaker 1: conversation with Michael Jesus Morgan, Stanley's chief muni bond strategist, 158 00:09:05,760 --> 00:09:11,520 Speaker 1: discussing investing in municipal bonds. I'm Barry Rehults. You're listening 159 00:09:11,559 --> 00:09:15,320 Speaker 1: to masters in Business on Bloomberg Radio. My special guest 160 00:09:15,360 --> 00:09:19,520 Speaker 1: today is Michael Jesus. He is Morgan Stanley's chief Muni 161 00:09:19,559 --> 00:09:23,520 Speaker 1: bond strategist. Let's talk a little bit about the bond world. 162 00:09:23,840 --> 00:09:27,839 Speaker 1: Why do people say the bond market is the smart money. 163 00:09:28,160 --> 00:09:31,719 Speaker 1: I think that there's this kind of romantic romantization. I'm 164 00:09:31,760 --> 00:09:34,200 Speaker 1: not sure if I'm saying it right, but of kind 165 00:09:34,240 --> 00:09:37,079 Speaker 1: of the contrarian right of the person who can kind 166 00:09:37,080 --> 00:09:41,280 Speaker 1: of see risks before they develop and see disasters before 167 00:09:41,320 --> 00:09:45,080 Speaker 1: they develop. And I think bond investors, generally speaking, are 168 00:09:45,160 --> 00:09:48,000 Speaker 1: kind of always looking for that because they've got the 169 00:09:48,040 --> 00:09:52,760 Speaker 1: same price incentive positive price incentive that a stock investor has. 170 00:09:52,800 --> 00:09:54,439 Speaker 1: You know, if you want to see stock prices go up, 171 00:09:54,480 --> 00:09:56,360 Speaker 1: you tend to kind of ignore looming risks. If you 172 00:09:56,400 --> 00:09:58,120 Speaker 1: want to see bond prices go up, you tend to 173 00:09:58,120 --> 00:10:00,760 Speaker 1: focus on those looming risks as you're focused on whether 174 00:10:00,800 --> 00:10:02,600 Speaker 1: or not you're gonna get paid back. It's basically like 175 00:10:02,640 --> 00:10:06,880 Speaker 1: making a loan. So I think in the times that 176 00:10:06,960 --> 00:10:09,720 Speaker 1: the that markets around risk markets take a downturn and 177 00:10:09,760 --> 00:10:12,360 Speaker 1: bond investors look smart, there is this kind of you know, 178 00:10:12,480 --> 00:10:15,640 Speaker 1: lionizing of the bond investor. But the problem is if 179 00:10:15,640 --> 00:10:17,960 Speaker 1: you kind of give in to that kind of perma 180 00:10:18,000 --> 00:10:20,280 Speaker 1: bearish view, you end up losing a lot of money 181 00:10:20,280 --> 00:10:22,360 Speaker 1: in the interim. You know, the opportunity costs of being 182 00:10:22,360 --> 00:10:25,480 Speaker 1: permanently bearish is negative. So I'd say early in my 183 00:10:25,520 --> 00:10:27,679 Speaker 1: career and yesked earlier about what it meant to kind 184 00:10:27,679 --> 00:10:29,599 Speaker 1: of start in the middle of the financial crisis and 185 00:10:29,679 --> 00:10:31,880 Speaker 1: say that was kind of hammered into me just by 186 00:10:31,880 --> 00:10:34,720 Speaker 1: market conditions early that being bearished was kind of the 187 00:10:34,800 --> 00:10:36,920 Speaker 1: right thing to do. It took a while for me 188 00:10:36,960 --> 00:10:39,320 Speaker 1: to kind of unwind that view and embrace a more 189 00:10:39,400 --> 00:10:42,000 Speaker 1: risk taking view, which I think is more having a 190 00:10:42,000 --> 00:10:44,040 Speaker 1: more balanced and sort of flexible approach. It has to 191 00:10:44,080 --> 00:10:48,520 Speaker 1: be more appropriate. So so let's address that perma bear attitude. 192 00:10:49,200 --> 00:10:51,720 Speaker 1: We see it in stocks, but we've been seeing it 193 00:10:51,760 --> 00:10:55,120 Speaker 1: in bonds for forever. I can't count how long I've 194 00:10:55,160 --> 00:10:58,680 Speaker 1: been told we're in a bond market bubble. Interest rates 195 00:10:58,679 --> 00:11:02,359 Speaker 1: have nowhere to go but up. I've heard that literally 196 00:11:02,440 --> 00:11:06,280 Speaker 1: for decades, pretty much my entire career. Uh, this is 197 00:11:06,320 --> 00:11:09,240 Speaker 1: as low as yields are gonna go, the bondbill market 198 00:11:09,320 --> 00:11:11,719 Speaker 1: is over, when in fact it's thirty two years in 199 00:11:11,760 --> 00:11:14,560 Speaker 1: the making, and I don't think we can officially say 200 00:11:14,559 --> 00:11:19,120 Speaker 1: it's ended yet. Yeah, I mean there are mathematical reasons, 201 00:11:19,600 --> 00:11:22,600 Speaker 1: uh to sort of to discount that argument, and then 202 00:11:22,640 --> 00:11:25,640 Speaker 1: there's kind of fundamental economic reasons. You know. The mathematical 203 00:11:25,679 --> 00:11:29,400 Speaker 1: reasons are basically bond investment. You're clipping a coupon. You've 204 00:11:29,400 --> 00:11:32,720 Speaker 1: got some cushion against negative price movement. History tells you 205 00:11:32,760 --> 00:11:37,080 Speaker 1: that if you're underweight bonds, or you're you just own 206 00:11:37,240 --> 00:11:41,080 Speaker 1: very short maturity bonds within a balanced portfolio, that is 207 00:11:41,120 --> 00:11:44,960 Speaker 1: the riskier choice as opposed to something longer that's a 208 00:11:44,960 --> 00:11:47,520 Speaker 1: good credit rating or a good credit risk that you 209 00:11:47,520 --> 00:11:49,719 Speaker 1: could hold to mature. The income you give up by 210 00:11:49,760 --> 00:11:52,360 Speaker 1: doing that in order to make it up later. You 211 00:11:52,440 --> 00:11:56,480 Speaker 1: have to be really right, really fast about bond yields 212 00:11:56,480 --> 00:12:00,200 Speaker 1: going up. And it's not typical that that happens. There 213 00:12:00,200 --> 00:12:04,480 Speaker 1: are the obvious exceptions throughout history. You got your late seventies, 214 00:12:04,480 --> 00:12:08,160 Speaker 1: early eighties, but those are exceptions to the rule. So 215 00:12:08,160 --> 00:12:12,240 Speaker 1: that's kind of mathematical reason. Fundamental reason is unless there 216 00:12:12,320 --> 00:12:16,120 Speaker 1: is some type of exogenous shock to the economic system 217 00:12:16,400 --> 00:12:18,480 Speaker 1: that kind of shocks us into a higher growth rate, 218 00:12:18,920 --> 00:12:22,320 Speaker 1: we're still looking at real growth rates and inflation that 219 00:12:22,360 --> 00:12:27,120 Speaker 1: are relatively low. So the fundamentals don't necessarily support real 220 00:12:27,160 --> 00:12:30,680 Speaker 1: bond yields meaningfully higher from here. And so you know, 221 00:12:30,760 --> 00:12:32,959 Speaker 1: the the big debate this year and sort of the 222 00:12:33,000 --> 00:12:34,960 Speaker 1: end of last year after the election, was where we're 223 00:12:34,960 --> 00:12:38,000 Speaker 1: going to get that exogen a shock because President Trump 224 00:12:38,040 --> 00:12:40,600 Speaker 1: and Republican Congress we're going to deliver a big tax cut, 225 00:12:40,880 --> 00:12:44,800 Speaker 1: big expansion of infrastructure spending. And so if that happens, 226 00:12:44,840 --> 00:12:47,560 Speaker 1: then sure, I think it's valid to say that bond 227 00:12:47,640 --> 00:12:50,600 Speaker 1: yields are are going to go up, But um, you 228 00:12:50,679 --> 00:12:52,720 Speaker 1: have to have a lot of confidence in that view 229 00:12:52,800 --> 00:12:55,000 Speaker 1: and a lot of evidence behind it. Right now we 230 00:12:55,040 --> 00:12:57,880 Speaker 1: don't see either. I can't say I disagree. Let's let's 231 00:12:57,920 --> 00:13:02,120 Speaker 1: fast forward to the current circumstance. I want to pull 232 00:13:02,160 --> 00:13:05,800 Speaker 1: a quote from one of your recent UH notes. The 233 00:13:05,920 --> 00:13:09,560 Speaker 1: prospect of a FED taper to its balance sheet raises 234 00:13:09,720 --> 00:13:15,599 Speaker 1: obvious questions about long term rates. Justice tax reform threatens 235 00:13:16,080 --> 00:13:19,440 Speaker 1: long end MUNI rates, Exactly what you were just discussing about. 236 00:13:19,840 --> 00:13:23,160 Speaker 1: Explain why that is. What is it about tax reform 237 00:13:23,679 --> 00:13:26,160 Speaker 1: that impacts the muni rates, and what is it about 238 00:13:26,720 --> 00:13:31,120 Speaker 1: um the Feds taper that's going to affect shorter term rates. 239 00:13:31,160 --> 00:13:33,600 Speaker 1: So so this this is kind of two components of 240 00:13:33,640 --> 00:13:36,640 Speaker 1: what we call the Trump triple threat to Muni's what 241 00:13:36,800 --> 00:13:40,040 Speaker 1: what's the third threat? So it's fed it's tax reform, 242 00:13:40,120 --> 00:13:42,480 Speaker 1: and well there's basically there's two components of tax reform. 243 00:13:42,559 --> 00:13:44,800 Speaker 1: One is lowering the tax rate, the other is changing 244 00:13:44,840 --> 00:13:48,960 Speaker 1: the tax exempt treatment of MUNI bonds. And is that 245 00:13:49,080 --> 00:13:52,720 Speaker 1: legitimately on the table. We think so? We think so. 246 00:13:52,760 --> 00:13:55,480 Speaker 1: It's not part of any formal plan right now, but 247 00:13:56,360 --> 00:13:59,320 Speaker 1: it's been part of previous formal plans like the Dave 248 00:13:59,400 --> 00:14:02,920 Speaker 1: Camp Plan. It was part of almost every single one 249 00:14:02,960 --> 00:14:06,679 Speaker 1: of Barack Obama's budgets. The not the idea of eliminating 250 00:14:07,000 --> 00:14:10,559 Speaker 1: tax exempt interest, but capping it for high income individuals, 251 00:14:10,840 --> 00:14:13,679 Speaker 1: meaning you can't just buy billions of dollars worth of 252 00:14:14,040 --> 00:14:16,439 Speaker 1: munies and expect to get that income tax. Right there, 253 00:14:16,480 --> 00:14:19,720 Speaker 1: there's basically, without boring you the death on the details, 254 00:14:19,720 --> 00:14:23,080 Speaker 1: you would have to pay staff. Well, think about it 255 00:14:23,120 --> 00:14:26,400 Speaker 1: this way. If you have let's let's look at Barack 256 00:14:26,400 --> 00:14:29,440 Speaker 1: Obama's original plan on this. You want to cap itemize 257 00:14:29,480 --> 00:14:33,000 Speaker 1: deductions and exclusions for high in commuters. So it wasn't 258 00:14:32,840 --> 00:14:37,160 Speaker 1: that what dollar amount. So his proposal was based on 259 00:14:37,480 --> 00:14:39,840 Speaker 1: the tax rate that you pay, so and it was 260 00:14:39,880 --> 00:14:42,120 Speaker 1: for everything. It wasn't muni focus. But think about this way. 261 00:14:42,160 --> 00:14:44,640 Speaker 1: If you are earning a hundred thousand dollars of muni 262 00:14:44,680 --> 00:14:47,880 Speaker 1: interest and you're in the h thirty five percent tax bracket, 263 00:14:48,120 --> 00:14:50,720 Speaker 1: but he wanted to cap the way the amount you 264 00:14:50,720 --> 00:14:52,720 Speaker 1: could enjoy that just the same as someone in the 265 00:14:52,720 --> 00:14:57,080 Speaker 1: twenty percent bracket. Right, hundred thousand dollars muni interest THTC. 266 00:14:57,200 --> 00:15:00,160 Speaker 1: Tax bracket, you're shielded from a thirty five thousand dollar 267 00:15:00,240 --> 00:15:02,800 Speaker 1: tax liability. But if instead they said we want to 268 00:15:02,840 --> 00:15:06,520 Speaker 1: cap you at PENT and you're only shielded from a 269 00:15:07,080 --> 00:15:10,040 Speaker 1: thousand dollar liability, that's seven thousand dollar differences attacks you 270 00:15:10,120 --> 00:15:14,640 Speaker 1: have to pay. So I said, differently, less attractive. Yeah, 271 00:15:14,720 --> 00:15:17,280 Speaker 1: so there's still very much a tax preference in that 272 00:15:17,320 --> 00:15:19,760 Speaker 1: scenario because you're still being shielded from twenty eight thou 273 00:15:19,960 --> 00:15:22,440 Speaker 1: dollars at tax, but there's some level of tax that 274 00:15:22,480 --> 00:15:24,680 Speaker 1: you have to pay, and that's a that would be 275 00:15:24,800 --> 00:15:27,960 Speaker 1: very different to the market where you had something that 276 00:15:28,120 --> 00:15:30,640 Speaker 1: felt purely tax free before. Now there's some level of 277 00:15:30,680 --> 00:15:33,440 Speaker 1: taxation applied to it. But That's just one example. I mean, 278 00:15:33,480 --> 00:15:36,000 Speaker 1: and our view of the reason it's hypothetically on the 279 00:15:36,040 --> 00:15:41,160 Speaker 1: table is because there is a drive to make tax reform, 280 00:15:41,440 --> 00:15:44,800 Speaker 1: to push tax reform as a republican only plan through 281 00:15:44,840 --> 00:15:51,000 Speaker 1: budget reconciliation. Right, that's the procedure by which you can get. Right. 282 00:15:51,560 --> 00:15:54,600 Speaker 1: In order to do that and make the tax cut permanent, 283 00:15:55,160 --> 00:15:57,360 Speaker 1: you have to raise a bunch of money to offset 284 00:15:57,360 --> 00:16:00,640 Speaker 1: the money you're losing by lowering tax To explain that, 285 00:16:00,800 --> 00:16:03,720 Speaker 1: you can do it on a simple majority, if it's 286 00:16:03,760 --> 00:16:07,320 Speaker 1: revenue neutral, if it actually course revenue you need sixty 287 00:16:07,400 --> 00:16:10,680 Speaker 1: votes or is that correct, or if you allow it 288 00:16:10,800 --> 00:16:14,640 Speaker 1: to sunset, so you think about the Bush tax. So 289 00:16:14,920 --> 00:16:17,080 Speaker 1: what you have here is a plan at least the 290 00:16:17,080 --> 00:16:20,200 Speaker 1: one that Paul Ryan is following right now, which he 291 00:16:20,280 --> 00:16:22,560 Speaker 1: claims his revenue neutral based on the assessment, and it 292 00:16:22,640 --> 00:16:25,400 Speaker 1: got from the Tax Foundation, which is a conservative leaning 293 00:16:25,480 --> 00:16:28,560 Speaker 1: think tank. Coming up, we continue our conversation with Michael 294 00:16:28,640 --> 00:16:33,400 Speaker 1: Jesus Morgan, Stanley's chief UNI bond strategists, discussing public policy 295 00:16:33,760 --> 00:16:37,760 Speaker 1: and tax reform. I'm Barry Hilts. You're listening to Masters 296 00:16:37,760 --> 00:16:40,800 Speaker 1: in Business on Bloomberg Radio. My special guest today is 297 00:16:40,840 --> 00:16:45,080 Speaker 1: Michael Jesus. He is chief strategist at Morgan Stanley for 298 00:16:45,320 --> 00:16:49,440 Speaker 1: Municipal Bonds and Public Policy. UH. Previous to that, he 299 00:16:49,520 --> 00:16:53,200 Speaker 1: was a credit analyst at Fitch Ratings. Let's talk a 300 00:16:53,240 --> 00:16:56,760 Speaker 1: little bit about the prospects for tax reform. One of 301 00:16:56,760 --> 00:16:59,920 Speaker 1: your recent notes did something that I don't think you 302 00:17:00,120 --> 00:17:02,320 Speaker 1: guys have done a whole lot in the past. You 303 00:17:02,440 --> 00:17:07,600 Speaker 1: put some fairly specific probabilities on the odds of of 304 00:17:07,720 --> 00:17:13,200 Speaker 1: tax reform actually passing. Tell us about that. So I'm 305 00:17:13,280 --> 00:17:16,760 Speaker 1: always very reticent to put specific probabilities on things because 306 00:17:17,560 --> 00:17:20,560 Speaker 1: what what I worry about is that it implies a 307 00:17:20,600 --> 00:17:24,159 Speaker 1: kind of false precision. Um the old joke about economists 308 00:17:24,240 --> 00:17:27,199 Speaker 1: using two decimal places, it's just to show they have 309 00:17:27,200 --> 00:17:31,320 Speaker 1: a sense of humor. Yeah, exactly. So Yeah, I would 310 00:17:31,320 --> 00:17:34,480 Speaker 1: say two things. One, Investors really kind of demand that 311 00:17:34,560 --> 00:17:38,120 Speaker 1: from us um and too. I sort of understand that 312 00:17:38,200 --> 00:17:42,880 Speaker 1: because what probabilities, as long as they're well defensed and logical, 313 00:17:42,880 --> 00:17:45,159 Speaker 1: will help you do as they help you build some 314 00:17:45,200 --> 00:17:48,680 Speaker 1: logic into your portfolio, into your portfolio strategy. And if 315 00:17:48,720 --> 00:17:50,880 Speaker 1: you have that type of consistency with how you build 316 00:17:50,880 --> 00:17:55,239 Speaker 1: probabilities of different event risks, Um across your portfolio. Then 317 00:17:55,280 --> 00:17:59,320 Speaker 1: whatever story you're trying to tell as an investor is coherent, 318 00:17:59,680 --> 00:18:02,120 Speaker 1: and then the easier to manage risks. So that that's 319 00:18:02,160 --> 00:18:04,159 Speaker 1: the rationale for why we do it. I'd say the 320 00:18:04,200 --> 00:18:08,560 Speaker 1: way that we try and keep our probabilities sane um 321 00:18:08,840 --> 00:18:11,920 Speaker 1: is we you know, we we try and we whatever problem, 322 00:18:11,960 --> 00:18:15,800 Speaker 1: whatever event we're trying to to to forecast here, we 323 00:18:15,960 --> 00:18:18,919 Speaker 1: first try and establish what are the rules of this event, 324 00:18:19,000 --> 00:18:21,320 Speaker 1: like really what how far can this go one way 325 00:18:21,400 --> 00:18:24,240 Speaker 1: or another? We try and established data that kind of 326 00:18:24,280 --> 00:18:27,399 Speaker 1: help us measure kind of prior probabilities, and then we 327 00:18:27,440 --> 00:18:30,800 Speaker 1: try and iterate on those prior probabilities. So you know, 328 00:18:30,800 --> 00:18:34,800 Speaker 1: if you take tax reform for example, um, the sort 329 00:18:34,800 --> 00:18:39,040 Speaker 1: of operative um uh, you know, the the the the 330 00:18:39,080 --> 00:18:42,480 Speaker 1: operative theme that we had to focus on was what's 331 00:18:42,520 --> 00:18:47,280 Speaker 1: possible through budget reconciliation, which is the process that would 332 00:18:47,280 --> 00:18:52,240 Speaker 1: allow Republicans to basically ignore Democrats. And then on we 333 00:18:52,280 --> 00:18:55,600 Speaker 1: had the layer on top of that, given the current 334 00:18:55,600 --> 00:18:59,040 Speaker 1: political conditions, how likely is it that a president and 335 00:18:59,200 --> 00:19:03,879 Speaker 1: the same party can actually execute on their policy priorities. 336 00:19:03,880 --> 00:19:06,440 Speaker 1: So we had to go back and reconstruct data. We went, 337 00:19:06,680 --> 00:19:09,119 Speaker 1: we looked all the way back to presidential elections, going 338 00:19:09,160 --> 00:19:11,880 Speaker 1: all the way back to World War Two. We catalogued 339 00:19:12,280 --> 00:19:15,240 Speaker 1: UM what the main promises were of each candidate eventually 340 00:19:15,240 --> 00:19:17,400 Speaker 1: one and what was the execution rate in their first 341 00:19:17,440 --> 00:19:20,119 Speaker 1: year on office. It was about six, and so we 342 00:19:20,119 --> 00:19:24,240 Speaker 1: were able to iterate UM above and below six based 343 00:19:24,240 --> 00:19:28,600 Speaker 1: on other conditions party agree on on the goals, etcetera. Yeah, 344 00:19:28,600 --> 00:19:31,560 Speaker 1: and I'm simplifying it a bit, and I'm a big 345 00:19:31,560 --> 00:19:34,479 Speaker 1: fan of using kind of too sanity check ourselves. I'm 346 00:19:34,520 --> 00:19:36,879 Speaker 1: a big fan of using Bayes' theorem. I'm also a 347 00:19:36,880 --> 00:19:38,600 Speaker 1: big fan of just kind of asking some of the 348 00:19:38,600 --> 00:19:41,800 Speaker 1: other smart people that we work with UM to find 349 00:19:41,840 --> 00:19:44,280 Speaker 1: base theorem for listeners who may not have a mathematical 350 00:19:44,440 --> 00:19:47,399 Speaker 1: or statistical background. So, I mean, Bayes' theorem is just 351 00:19:47,480 --> 00:19:50,960 Speaker 1: a way of calculating the probability, or at least the 352 00:19:50,960 --> 00:19:52,760 Speaker 1: way we use it, it's the way of calculating the 353 00:19:52,760 --> 00:19:57,760 Speaker 1: probability of an event given given uh the sort of 354 00:19:57,840 --> 00:20:02,200 Speaker 1: prior baseline probability, then relating it to new evidence. So 355 00:20:02,400 --> 00:20:05,119 Speaker 1: if if in any given year, knowing nothing else, the 356 00:20:05,160 --> 00:20:09,520 Speaker 1: probability of a tax reform was five percent, based on 357 00:20:09,720 --> 00:20:12,280 Speaker 1: just how many years you've got the tax reform divided 358 00:20:12,320 --> 00:20:16,119 Speaker 1: by how many years we've been in existence, um, and 359 00:20:16,160 --> 00:20:18,560 Speaker 1: then you sort of iterate for new information, Well, what's 360 00:20:18,560 --> 00:20:21,840 Speaker 1: new information here? New information is that Republicans control the 361 00:20:21,840 --> 00:20:23,760 Speaker 1: White House and both Houses of Congress, and we know 362 00:20:23,840 --> 00:20:25,520 Speaker 1: that sixty percent of the time they can ext you 363 00:20:25,560 --> 00:20:29,960 Speaker 1: on their top priorities. We know that, um, they that 364 00:20:30,119 --> 00:20:32,600 Speaker 1: the reforms they want to pass can go through the 365 00:20:32,640 --> 00:20:35,800 Speaker 1: reconciliation process, so that ups the probability and on and 366 00:20:35,840 --> 00:20:37,840 Speaker 1: on and on. So let me let me throw a 367 00:20:37,840 --> 00:20:42,000 Speaker 1: curve ball at you. What did the failure of Obamacare 368 00:20:42,080 --> 00:20:46,919 Speaker 1: repeal and replace due to your probability stick studies on 369 00:20:47,119 --> 00:20:50,159 Speaker 1: corporate tax reform? So you know, a part of this 370 00:20:50,280 --> 00:20:53,800 Speaker 1: for US is defining a timeline to UM in the 371 00:20:53,840 --> 00:20:58,520 Speaker 1: sense that we think that a failure to pass a 372 00:20:58,600 --> 00:21:02,320 Speaker 1: tax reform and timely fashion this potentially is disappointing to 373 00:21:02,400 --> 00:21:06,880 Speaker 1: investors as just an outright failure. So better late than never, 374 00:21:07,040 --> 00:21:10,679 Speaker 1: but sooner was much better than Yeah. So what happened 375 00:21:10,960 --> 00:21:13,320 Speaker 1: after the kind of let's call it the hereto for 376 00:21:13,480 --> 00:21:17,840 Speaker 1: failure to repeal and replace Obamacare was, uh, it was 377 00:21:18,040 --> 00:21:19,879 Speaker 1: it's sort of failure to pivot on the part of 378 00:21:19,920 --> 00:21:23,320 Speaker 1: the Republicans right, we said they need to fisher cut bait, 379 00:21:23,359 --> 00:21:25,040 Speaker 1: whether or not the fish or cut bait, and moved 380 00:21:25,080 --> 00:21:26,600 Speaker 1: to tax reform. Is going to tell you a lot 381 00:21:26,600 --> 00:21:29,520 Speaker 1: about the timing of tax reform and the content of it, 382 00:21:30,080 --> 00:21:32,479 Speaker 1: and they appear to have tried to do both. They 383 00:21:32,480 --> 00:21:34,560 Speaker 1: said they're going to focus on tax reform, but they 384 00:21:34,560 --> 00:21:37,960 Speaker 1: haven't given up on the legislative process, and so that 385 00:21:37,960 --> 00:21:41,320 Speaker 1: that pushes the timing of tax reform back. They've also, 386 00:21:41,760 --> 00:21:46,120 Speaker 1: in our view, tried to overcorrect for what happened um 387 00:21:46,160 --> 00:21:48,879 Speaker 1: in A c A by opening up the process. So 388 00:21:48,920 --> 00:21:51,399 Speaker 1: now they're gonna have hearings. Now they're going to engage 389 00:21:51,440 --> 00:21:54,280 Speaker 1: Democrats in at least try a bipartisan or at least 390 00:21:54,280 --> 00:21:55,800 Speaker 1: they say they're going to try a bart who knows 391 00:21:55,840 --> 00:21:58,240 Speaker 1: what they really want to do. All of that adds 392 00:21:58,280 --> 00:22:01,240 Speaker 1: time to the clock. All of that rolls the possible 393 00:22:01,280 --> 00:22:05,000 Speaker 1: details of tax reform. None of it improves the probability 394 00:22:05,000 --> 00:22:08,920 Speaker 1: of success, but because it pushes back timing, the probability 395 00:22:08,920 --> 00:22:11,320 Speaker 1: of success within a timely manner has gone down in 396 00:22:11,359 --> 00:22:14,320 Speaker 1: our view. Coming up, we continue our conversation with Michael 397 00:22:14,560 --> 00:22:20,119 Speaker 1: Jesus Morgan Stanley's chief muni bond strategist discussing the municipal 398 00:22:20,200 --> 00:22:23,680 Speaker 1: bond market. I'm Barry rid Helts. You're listening to Masters 399 00:22:23,680 --> 00:22:27,639 Speaker 1: in Business on Bloomberg Radio. My guest today is Michael Jesus. 400 00:22:27,840 --> 00:22:31,840 Speaker 1: He is Morgan Stanley's chief strategist for municipal bonds and 401 00:22:32,000 --> 00:22:35,120 Speaker 1: public policy. Let's talk a little bit about the muni 402 00:22:35,280 --> 00:22:40,000 Speaker 1: bond market. When you're analyzing municipal bonds, where do you 403 00:22:40,080 --> 00:22:43,239 Speaker 1: even begin? How does that what does that process look like? 404 00:22:43,920 --> 00:22:47,560 Speaker 1: So we always start with fundamentals, and it's both top 405 00:22:47,640 --> 00:22:51,399 Speaker 1: down and bottom up. The process I like is to 406 00:22:51,520 --> 00:22:54,239 Speaker 1: sort of sequence them that way top down, then bottom up, 407 00:22:54,280 --> 00:22:57,159 Speaker 1: top down, meeting where are we in the economic cycle? 408 00:22:57,280 --> 00:23:01,120 Speaker 1: What's driving the economic cycle? Um where the weak sectors 409 00:23:01,119 --> 00:23:04,199 Speaker 1: of the economy the strong sectors of the economy, and 410 00:23:04,240 --> 00:23:06,879 Speaker 1: then go bottom up to see where are their credit 411 00:23:06,960 --> 00:23:12,160 Speaker 1: vulnerabilities within the municipal bond system are the regional economic vulnerabilities? 412 00:23:12,280 --> 00:23:15,800 Speaker 1: Is of the vulnerability in terms of types of security. 413 00:23:16,160 --> 00:23:19,080 Speaker 1: So to give you an example, a couple of years back, 414 00:23:19,640 --> 00:23:23,080 Speaker 1: when oil prices were dropping like a stone and seemed 415 00:23:23,119 --> 00:23:25,520 Speaker 1: like the energy sector if there was gonna be another 416 00:23:25,600 --> 00:23:27,520 Speaker 1: recession in the short term is gonna be driven by 417 00:23:27,520 --> 00:23:30,359 Speaker 1: the energy sector. So then we had to do was 418 00:23:30,400 --> 00:23:33,320 Speaker 1: go around and say where the regional economy is that 419 00:23:33,359 --> 00:23:41,200 Speaker 1: haven't outsized UM exposure too energy sector, and you know, realistically, 420 00:23:41,440 --> 00:23:43,600 Speaker 1: not not just the economic impact, but what does the 421 00:23:43,680 --> 00:23:46,480 Speaker 1: revenue impact to state and local budgets. And what we 422 00:23:46,560 --> 00:23:50,160 Speaker 1: found there was that you had mostly higher, higher rated 423 00:23:50,480 --> 00:23:53,800 Speaker 1: areas of the country were exposed. But outside of a 424 00:23:53,920 --> 00:23:59,119 Speaker 1: few uh kind of smaller um Oklahoma, North Dakota, they 425 00:23:59,119 --> 00:24:01,280 Speaker 1: don't have a lot of that outstanding. So the risk 426 00:24:01,320 --> 00:24:04,400 Speaker 1: of this being a systemic problem was quite low. There 427 00:24:04,480 --> 00:24:07,800 Speaker 1: was a risk of these places kind of underperforming, and 428 00:24:08,160 --> 00:24:09,600 Speaker 1: you know, net net, we didn't think it would be 429 00:24:09,600 --> 00:24:11,919 Speaker 1: a big problem for the market. So we said, all right, well, 430 00:24:11,960 --> 00:24:13,879 Speaker 1: this is not going to drive our view. There are 431 00:24:13,880 --> 00:24:15,600 Speaker 1: other things that are going to drive our view, but 432 00:24:15,640 --> 00:24:18,760 Speaker 1: not necessarily this. So so if you look at a 433 00:24:18,880 --> 00:24:22,160 Speaker 1: region like Texas or or Houston, I remember the eighties 434 00:24:22,240 --> 00:24:25,639 Speaker 1: was a disaster when oil prices fell, it seems like 435 00:24:25,760 --> 00:24:29,560 Speaker 1: they're much more diversified and much better capable of withstanding 436 00:24:29,600 --> 00:24:33,000 Speaker 1: that sort of press a state like Texas, that's certainly true, 437 00:24:33,200 --> 00:24:37,600 Speaker 1: and Texas was one of the more conservative states in 438 00:24:37,720 --> 00:24:41,480 Speaker 1: terms of projecting oil prices for so a lot of 439 00:24:41,480 --> 00:24:44,159 Speaker 1: these states have what they call severance taxes. Right when 440 00:24:44,200 --> 00:24:46,120 Speaker 1: you take some oil out of the ground or anything else, 441 00:24:46,160 --> 00:24:48,720 Speaker 1: you charge at tax on it, and that taxes based 442 00:24:48,760 --> 00:24:52,760 Speaker 1: on the prevailing market price for that oil. And Texas, 443 00:24:52,840 --> 00:24:55,760 Speaker 1: I remember the exact numbers, but amongst the major states 444 00:24:56,320 --> 00:25:01,400 Speaker 1: uh that are oil producers, so you know, Texas, Oklahoma, Louisiana, Alaska, um, 445 00:25:02,320 --> 00:25:05,879 Speaker 1: North Dakota, Texas had among the more conservative estimates of 446 00:25:05,960 --> 00:25:08,320 Speaker 1: what the price would be, so the revenue shortfall for 447 00:25:08,359 --> 00:25:10,639 Speaker 1: them was far smaller. On top of the fact that 448 00:25:10,640 --> 00:25:13,280 Speaker 1: they were much more economically diversified. You know, you look 449 00:25:13,320 --> 00:25:15,399 Speaker 1: at the place like North Dakota, which is focused on 450 00:25:15,480 --> 00:25:18,919 Speaker 1: shale and therefore needs that price to be higher. The 451 00:25:18,960 --> 00:25:21,840 Speaker 1: revenue shortfalls there, at least the risk of revenue shortfalls 452 00:25:21,840 --> 00:25:26,440 Speaker 1: were really substantial. But ultimately, like the state, North Dakota 453 00:25:26,840 --> 00:25:29,480 Speaker 1: has about two billion dollars of dead outstanding, and that's 454 00:25:29,480 --> 00:25:31,560 Speaker 1: including all of the local debts, so that's not even 455 00:25:31,600 --> 00:25:33,879 Speaker 1: the state level debt. Really kind of a drop in 456 00:25:33,880 --> 00:25:36,359 Speaker 1: the bucket relative to a three point seven trillion market. 457 00:25:36,800 --> 00:25:40,440 Speaker 1: So how many different municipalities in the United States, do 458 00:25:40,480 --> 00:25:43,640 Speaker 1: you guys cover Well, it's gotta be a lot, right, 459 00:25:44,200 --> 00:25:48,880 Speaker 1: So here's our team is the sort of strategy team 460 00:25:48,880 --> 00:25:52,520 Speaker 1: from the municipal market. It's akin to having strategist who 461 00:25:52,520 --> 00:25:56,200 Speaker 1: covers the SMP five hundred inequities. So the single name 462 00:25:56,240 --> 00:26:00,639 Speaker 1: analysis is largely done by our desk analyst team. Um, 463 00:26:00,720 --> 00:26:03,960 Speaker 1: we are more sort of trend watchers and sort of 464 00:26:04,000 --> 00:26:06,360 Speaker 1: we build up sector trends. So we do a lot 465 00:26:06,359 --> 00:26:09,240 Speaker 1: of single name analysis in the aggregate where we try 466 00:26:09,240 --> 00:26:13,320 Speaker 1: and build up what trends are driving. Um. Uh, you know, 467 00:26:13,359 --> 00:26:16,120 Speaker 1: credit quality moving up and down. But give us an example. 468 00:26:16,200 --> 00:26:19,560 Speaker 1: I mean you mentioned Indiana before. In Puerto Rico, what 469 00:26:19,560 --> 00:26:22,399 Speaker 1: what is other than far too much spending relative to 470 00:26:22,440 --> 00:26:26,080 Speaker 1: their income? What what's driving those trends? So I'll give you, 471 00:26:26,680 --> 00:26:29,160 Speaker 1: I'll give you. I'll give you a a couple of secular 472 00:26:29,200 --> 00:26:32,359 Speaker 1: trends that are important. The one that gets talked about 473 00:26:32,400 --> 00:26:39,240 Speaker 1: all the time is pensions and retire reliabilities. Right, and uh, 474 00:26:39,359 --> 00:26:42,520 Speaker 1: the you know that is a problem most acutely being 475 00:26:42,560 --> 00:26:46,760 Speaker 1: experienced in states like Illinois, but it's certainly not absent 476 00:26:46,840 --> 00:26:51,200 Speaker 1: in other geographies. Is a perfect example. Yeah, yeah, of course, 477 00:26:52,119 --> 00:26:55,560 Speaker 1: And you know that the question there is about when 478 00:26:55,840 --> 00:26:59,000 Speaker 1: are those funds depleted such that it actually impacts the 479 00:26:59,040 --> 00:27:01,760 Speaker 1: operating budget and therefore there's less money to pay for 480 00:27:01,800 --> 00:27:03,960 Speaker 1: schools and roads and the type of stuff that voters 481 00:27:04,000 --> 00:27:07,800 Speaker 1: care about, which then catalyzes the political risk. Right in 482 00:27:07,840 --> 00:27:11,399 Speaker 1: Puerto Rico, the willingness to pay was high until it wasn't, 483 00:27:11,640 --> 00:27:13,480 Speaker 1: And it wasn't because all of a sudden, people it 484 00:27:13,560 --> 00:27:16,160 Speaker 1: was not politically popular to pay the bond holders anymore 485 00:27:16,240 --> 00:27:18,719 Speaker 1: because they would rather not pay the bond holders than 486 00:27:18,800 --> 00:27:22,800 Speaker 1: shut down another hospital. So that's the that's the kind 487 00:27:22,800 --> 00:27:26,439 Speaker 1: of secular burden of debt generally, but the sort of 488 00:27:26,480 --> 00:27:29,840 Speaker 1: soft debt of pensions. But but there's still enough kind 489 00:27:29,840 --> 00:27:31,960 Speaker 1: of life in those funds that this is probably not 490 00:27:32,040 --> 00:27:35,399 Speaker 1: a problem for another five years or so. Um. The 491 00:27:35,440 --> 00:27:37,919 Speaker 1: other secular trend, which is it's not about state and 492 00:27:37,960 --> 00:27:41,720 Speaker 1: locals whatsoever. It's just one example, really, UM that I 493 00:27:41,760 --> 00:27:44,320 Speaker 1: find really interesting and really timely given what's happening in 494 00:27:44,440 --> 00:27:47,720 Speaker 1: d C. Is the secular shift in how healthcare is 495 00:27:47,720 --> 00:27:52,399 Speaker 1: provided this country. When Obamacare came to be, there was 496 00:27:52,640 --> 00:27:56,040 Speaker 1: in the muni bond market. So hospital debt is basically 497 00:27:56,080 --> 00:27:58,280 Speaker 1: about a let ten to eleven the Muni bond mark 498 00:27:59,280 --> 00:28:03,280 Speaker 1: when Pomacare was being debated and initially passed, the spreads 499 00:28:03,320 --> 00:28:06,400 Speaker 1: on those bonds really widened quite a bit. And this 500 00:28:06,440 --> 00:28:08,560 Speaker 1: was a great in my opinion, this was kind of 501 00:28:08,560 --> 00:28:11,480 Speaker 1: a great example of where people kind of conflated their 502 00:28:11,520 --> 00:28:16,080 Speaker 1: public opinions, their their political opinions, with market views, because 503 00:28:16,119 --> 00:28:18,479 Speaker 1: what was really happening was, regardless of whether or not 504 00:28:18,520 --> 00:28:21,199 Speaker 1: you think Obamacare is a disaster, it was creating a 505 00:28:21,240 --> 00:28:24,880 Speaker 1: massive amount of government spending that was going to take 506 00:28:24,920 --> 00:28:27,199 Speaker 1: a whole bunch of uninsured people and make them insured. 507 00:28:27,320 --> 00:28:29,680 Speaker 1: In other words, you created twenty to thirty million new 508 00:28:29,720 --> 00:28:33,840 Speaker 1: consumers for hospital services, that's right, and consumers anyway, as 509 00:28:33,880 --> 00:28:37,240 Speaker 1: opposed to emergency room consumers who may not pay you 510 00:28:37,280 --> 00:28:39,479 Speaker 1: an often don't. So that was that was a great 511 00:28:39,720 --> 00:28:43,040 Speaker 1: opportunity to buy hospital bonds. And you even saw kind 512 00:28:43,080 --> 00:28:47,040 Speaker 1: of a mini opportunity around that emerge UH in the 513 00:28:47,080 --> 00:28:50,000 Speaker 1: first quarter because it looked like, you know, the train 514 00:28:50,080 --> 00:28:52,120 Speaker 1: was really rolling. The Republicans were going to get rid 515 00:28:52,160 --> 00:28:55,600 Speaker 1: of the Affordable Care Act, and all of that revenue 516 00:28:55,600 --> 00:28:58,000 Speaker 1: and margin expansion that happened with Obamacare was going to 517 00:28:58,040 --> 00:29:01,080 Speaker 1: be totally unwound, so it spreads why ning again and 518 00:29:01,120 --> 00:29:03,640 Speaker 1: then as soon as you could tell the political prospects 519 00:29:03,640 --> 00:29:05,800 Speaker 1: for this, we're just not going to work out. Jim 520 00:29:05,920 --> 00:29:09,320 Speaker 1: Chanos of of Chemicals Partners was the first person I 521 00:29:09,400 --> 00:29:14,640 Speaker 1: recall hearing say, I know they have both houses, but 522 00:29:14,680 --> 00:29:17,240 Speaker 1: if you look at these stocks, look at the hospital 523 00:29:17,320 --> 00:29:20,640 Speaker 1: stocks and bonds, they're trading as if this is gonna fail, 524 00:29:20,640 --> 00:29:22,760 Speaker 1: as if this is not going to go through. The 525 00:29:22,800 --> 00:29:27,760 Speaker 1: market arguably saw this before the political analysts seem to 526 00:29:27,760 --> 00:29:31,120 Speaker 1: have noticed. Yeah, I mean, I think that's right, and 527 00:29:31,160 --> 00:29:36,200 Speaker 1: I think that the if you, I think the political 528 00:29:36,240 --> 00:29:40,320 Speaker 1: analysts were probably very focused on the idea that the 529 00:29:40,360 --> 00:29:44,360 Speaker 1: intent of Republicans and sort of the motivation was really 530 00:29:44,440 --> 00:29:46,600 Speaker 1: high to get this done right, that there were that 531 00:29:46,720 --> 00:29:49,120 Speaker 1: there were going the wings of the party, though they 532 00:29:49,160 --> 00:29:52,440 Speaker 1: disagreed on how to replace Obamacare, we're not going to 533 00:29:52,560 --> 00:29:55,240 Speaker 1: risk not doing this because it would be a political blunder. 534 00:29:55,800 --> 00:29:58,680 Speaker 1: But the market was telling you was that they were 535 00:29:58,720 --> 00:30:02,440 Speaker 1: just irreconcilable differ perences within the Republican Party as to 536 00:30:02,480 --> 00:30:05,160 Speaker 1: how you replace this. The conservative wing of the party 537 00:30:05,440 --> 00:30:08,040 Speaker 1: wants a very market based approach where you reduce coverage 538 00:30:08,040 --> 00:30:10,360 Speaker 1: and but then lower costs and the moderate wing of 539 00:30:10,360 --> 00:30:14,160 Speaker 1: the party, it's unclear how much different they want things 540 00:30:14,280 --> 00:30:17,320 Speaker 1: relative to what the current system is. So those two 541 00:30:17,360 --> 00:30:19,920 Speaker 1: things really can't be reconciled. I think Paul Ryan did 542 00:30:19,960 --> 00:30:24,120 Speaker 1: his best to try and reconcile them, but almost impossible job. 543 00:30:24,160 --> 00:30:27,640 Speaker 1: And so let's let's apply this to to our previous 544 00:30:27,640 --> 00:30:33,800 Speaker 1: discussion on comprehensive tax reform. Tell us about what the 545 00:30:33,880 --> 00:30:36,760 Speaker 1: odds are today, what they were, and what was the 546 00:30:36,800 --> 00:30:41,200 Speaker 1: impact of the failure of repeal and replace. So with 547 00:30:41,280 --> 00:30:44,600 Speaker 1: comprehensive tax reform, the first thing we like to tell 548 00:30:44,680 --> 00:30:47,400 Speaker 1: people is that there are a lot of different things 549 00:30:47,440 --> 00:30:51,080 Speaker 1: which could hypothetically count as comprehensive tax reform. And some 550 00:30:51,240 --> 00:30:54,040 Speaker 1: of them are really good market outcomes, some of them 551 00:30:54,120 --> 00:30:56,880 Speaker 1: are really risky market outcomes, and some are just kind 552 00:30:56,880 --> 00:30:59,840 Speaker 1: of neutral. So right now we're saying that you've basically 553 00:30:59,840 --> 00:31:02,760 Speaker 1: had about a six chance in the next twelve months 554 00:31:02,800 --> 00:31:05,120 Speaker 1: that you will see a tax reform. How has that 555 00:31:05,240 --> 00:31:09,360 Speaker 1: number change from from our last iteration. It's down about 556 00:31:09,400 --> 00:31:15,400 Speaker 1: ten percent. But the outcomes within um within tax reform 557 00:31:15,440 --> 00:31:18,440 Speaker 1: are kind of skewing somewhat worse from a market standpoint, 558 00:31:19,320 --> 00:31:23,040 Speaker 1: because what you have is a higher probability of delays 559 00:31:23,960 --> 00:31:26,760 Speaker 1: because of what happened with the Affordable Care Act and 560 00:31:26,760 --> 00:31:28,600 Speaker 1: the fact that they're going to follow a more deliberative 561 00:31:28,640 --> 00:31:35,400 Speaker 1: process now, and then b you have um less of 562 00:31:35,400 --> 00:31:40,080 Speaker 1: a path towards a tax reform that doesn't include some 563 00:31:40,160 --> 00:31:43,440 Speaker 1: of the elements that the markets would probably consider somewhat 564 00:31:43,440 --> 00:31:46,480 Speaker 1: disruptive in the near term, things like limiting corporate bond 565 00:31:46,520 --> 00:31:50,280 Speaker 1: interest for limiting deduction of corporate interests, for example. So 566 00:31:50,680 --> 00:31:54,080 Speaker 1: if we're just looking at let's let's talk corporate tax reform, 567 00:31:54,120 --> 00:31:59,040 Speaker 1: If we're looking at a thirty nominal rate, everybody pays 568 00:31:59,120 --> 00:32:01,800 Speaker 1: much lower, if anything at all. But one of the 569 00:32:01,920 --> 00:32:05,320 Speaker 1: key aspects of the Trump campaign was lowering that too, 570 00:32:05,880 --> 00:32:10,200 Speaker 1: depending on the speech, whatever the number is, what are 571 00:32:10,240 --> 00:32:13,280 Speaker 1: the odds of seeing that lowered to Let's be rational 572 00:32:13,320 --> 00:32:16,320 Speaker 1: and say, how do you how do you see that 573 00:32:16,400 --> 00:32:20,320 Speaker 1: taking place? Yeah, I mean, I think, reasonably speaking, we 574 00:32:20,320 --> 00:32:22,400 Speaker 1: think is the lowest they can go at this point. 575 00:32:22,560 --> 00:32:25,680 Speaker 1: There there are scenarios really kind of so we think 576 00:32:25,720 --> 00:32:29,040 Speaker 1: fifteen is pretty much off the table. I think the 577 00:32:29,120 --> 00:32:34,320 Speaker 1: actual rate is sixteen or seventeen percent that people realistically 578 00:32:34,360 --> 00:32:38,320 Speaker 1: pay on a thirty nominal rate. Is that a fair number. 579 00:32:38,840 --> 00:32:42,440 Speaker 1: I think the average effective tax rate of an SMP 580 00:32:42,520 --> 00:32:46,320 Speaker 1: five companies around it is that much. Okay, So to 581 00:32:46,640 --> 00:32:50,040 Speaker 1: get down to there are a lot of loopholes and 582 00:32:50,080 --> 00:32:52,600 Speaker 1: a lot of deductions that would have to go away. 583 00:32:52,920 --> 00:32:55,320 Speaker 1: That's right. And on top of that, if you want 584 00:32:55,320 --> 00:32:57,320 Speaker 1: to do it in a revenue neutral way, you have 585 00:32:57,400 --> 00:33:00,520 Speaker 1: to consider things that would be and the new taxes. 586 00:33:01,040 --> 00:33:05,240 Speaker 1: We have been speaking with Michael Jesus Morgan, Stanley's chief 587 00:33:05,360 --> 00:33:09,440 Speaker 1: muni bond strategist. Be sure and check out the rest 588 00:33:09,480 --> 00:33:13,120 Speaker 1: of our conversation, which we put up on Apple iTunes, 589 00:33:13,160 --> 00:33:17,040 Speaker 1: Bloomberg dot com and SoundCloud, where we keep the tape 590 00:33:17,120 --> 00:33:21,680 Speaker 1: rolling and continue discussing all things muni bonds. Check out 591 00:33:21,680 --> 00:33:25,080 Speaker 1: my daily column at Bloomberg View dot com or follow 592 00:33:25,120 --> 00:33:29,200 Speaker 1: me on Twitter at rid Halts. I'm Barry Hults. You're 593 00:33:29,240 --> 00:33:33,240 Speaker 1: listening to Masters in Business on Bloomberg Radio. What could 594 00:33:33,240 --> 00:33:35,960 Speaker 1: your future hold? More than you think because at Merrill Lynch, 595 00:33:36,040 --> 00:33:38,000 Speaker 1: we work with you to create a strategy built around 596 00:33:38,000 --> 00:33:40,720 Speaker 1: your priorities. Visit mL dot com and learn more about 597 00:33:40,720 --> 00:33:43,200 Speaker 1: Merrill Lynch. An affiliated Bank of America. Mery Lynch makes 598 00:33:43,200 --> 00:33:46,200 Speaker 1: available products and services offered by Merrill Lynch Pierce feder Smith, Incorporated, 599 00:33:46,240 --> 00:33:48,640 Speaker 1: a registered broker dealer. Remember s I PC. Welcome to 600 00:33:48,680 --> 00:33:51,040 Speaker 1: the podcast. Thank you Michael for doing this. I really 601 00:33:51,080 --> 00:33:53,960 Speaker 1: appreciate your time. And I'm a little bit of a 602 00:33:54,000 --> 00:33:58,120 Speaker 1: want and and you know you you said earlier. UM, 603 00:33:58,160 --> 00:33:59,480 Speaker 1: you know, I don't want to bore people with the 604 00:33:59,520 --> 00:34:03,760 Speaker 1: details when it's not if you are looking for tax 605 00:34:03,840 --> 00:34:07,200 Speaker 1: free income, and that is an enormous aspect of the 606 00:34:07,560 --> 00:34:12,560 Speaker 1: investing community. Muni bonds are amongst assuming you're not in 607 00:34:12,640 --> 00:34:15,640 Speaker 1: a tax deferred vehicle, is one of the best options 608 00:34:15,640 --> 00:34:20,319 Speaker 1: that that people have. Yeah, yes, agreed. And as you said, 609 00:34:20,320 --> 00:34:25,040 Speaker 1: it's nearly a four trillion dollar UH sector, which which 610 00:34:25,120 --> 00:34:28,560 Speaker 1: is nothing, uh, nothing to sneeze at. So I know 611 00:34:28,600 --> 00:34:30,440 Speaker 1: I only have you for a finite amount of time 612 00:34:30,480 --> 00:34:33,879 Speaker 1: because you're catching a plane down to d C. Let's 613 00:34:33,920 --> 00:34:37,000 Speaker 1: let's jump into some of my favorite questions I asked 614 00:34:37,320 --> 00:34:40,319 Speaker 1: all of my guests, tell us about some of your 615 00:34:40,360 --> 00:34:44,840 Speaker 1: early mentors who helped guide your career. So it's a 616 00:34:45,520 --> 00:34:49,400 Speaker 1: it's a great question, and I wish I had a 617 00:34:49,480 --> 00:34:53,399 Speaker 1: more um, I don't know, sort of corporate answer for it. 618 00:34:53,480 --> 00:34:55,960 Speaker 1: But the answer that that pops to my mind is 619 00:34:56,440 --> 00:34:59,160 Speaker 1: my dad. You're not the first person who said that. Well, 620 00:34:59,200 --> 00:35:01,479 Speaker 1: you know, and it's not that I haven't had great 621 00:35:01,480 --> 00:35:04,160 Speaker 1: people guiding me throughout my career, but you know, the 622 00:35:04,239 --> 00:35:07,520 Speaker 1: voice in my head when it comes to being a 623 00:35:07,520 --> 00:35:11,040 Speaker 1: critical thinker and working hard and and sort of persevering, 624 00:35:11,160 --> 00:35:13,160 Speaker 1: and I mean, we deal with these sort of tough, 625 00:35:13,320 --> 00:35:16,480 Speaker 1: ambiguous analytical challenges all the time, so it's really easy 626 00:35:16,520 --> 00:35:17,879 Speaker 1: to kind of throw your arms up and just walk 627 00:35:17,920 --> 00:35:22,160 Speaker 1: away from it. And so, um, you know, that voice 628 00:35:22,160 --> 00:35:24,800 Speaker 1: in my head kind of keeps me going, gives me confidence, 629 00:35:24,840 --> 00:35:30,080 Speaker 1: and that's that's where that's who it comes from. But interesting, um, 630 00:35:30,520 --> 00:35:33,920 Speaker 1: tell us about some investors who influenced your approach to 631 00:35:34,040 --> 00:35:39,520 Speaker 1: investing in in the credit and bond markets. Well, you know, here, 632 00:35:39,560 --> 00:35:43,440 Speaker 1: I'd say that I rely a lot on the people 633 00:35:43,480 --> 00:35:46,799 Speaker 1: I work with. I think Morgan Stanley has a a 634 00:35:46,880 --> 00:35:51,280 Speaker 1: brilliant research department UM with a lot of experience, And 635 00:35:51,360 --> 00:35:53,799 Speaker 1: you know here I actually also kind of give a 636 00:35:53,800 --> 00:35:56,279 Speaker 1: shout out to my friend Colin Roache, who we talked 637 00:35:56,320 --> 00:36:00,640 Speaker 1: about earlier, who I think you can by the the process. 638 00:36:00,640 --> 00:36:03,359 Speaker 1: We use a very evidence based process, right. We try 639 00:36:03,400 --> 00:36:06,360 Speaker 1: as much to kind of ignore what we think should 640 00:36:06,360 --> 00:36:09,279 Speaker 1: happen and look at what we think will happen. Right, 641 00:36:09,520 --> 00:36:11,160 Speaker 1: If someone wants to sit down with me over a 642 00:36:11,160 --> 00:36:13,120 Speaker 1: beer and talk about ideally what would I want to 643 00:36:13,120 --> 00:36:15,680 Speaker 1: happen in a perfect world, that's fine. But for investors, ultimately, 644 00:36:15,680 --> 00:36:19,200 Speaker 1: what happens happened, what matterage is what will happen. And 645 00:36:20,200 --> 00:36:22,400 Speaker 1: that's more or less the philosophy that you know that 646 00:36:22,480 --> 00:36:25,880 Speaker 1: Colin uses when he um when he's taking approach to 647 00:36:25,880 --> 00:36:28,440 Speaker 1: what's happening with the economy was having the financial system. 648 00:36:28,480 --> 00:36:30,640 Speaker 1: And I think there's something really refreshing about that, sort 649 00:36:30,640 --> 00:36:34,560 Speaker 1: of free from the constricts of the you know, having 650 00:36:34,560 --> 00:36:37,920 Speaker 1: a consistent academic theology as opposed to you know, are 651 00:36:38,000 --> 00:36:42,200 Speaker 1: really pragmatic, uh, you know, kind of functionary and and 652 00:36:42,280 --> 00:36:45,960 Speaker 1: uh and full disclosure. We host an evidence based Investing 653 00:36:46,000 --> 00:36:48,400 Speaker 1: conference twice a year, once in New York in the 654 00:36:48,440 --> 00:36:51,320 Speaker 1: fall and then in in June and California, and Colin 655 00:36:51,520 --> 00:36:55,400 Speaker 1: is a panelist on one of our conversations about the 656 00:36:55,520 --> 00:36:59,200 Speaker 1: role of data in making investment decisions. And I had 657 00:36:59,239 --> 00:37:02,560 Speaker 1: no idea you got is uh yeah, no, we uh 658 00:37:02,640 --> 00:37:05,000 Speaker 1: we lived together in college for a few years. Really, 659 00:37:05,840 --> 00:37:08,759 Speaker 1: I would not have guessed that he would end up 660 00:37:08,760 --> 00:37:11,640 Speaker 1: being the kind of responsible guru that he is. I 661 00:37:12,880 --> 00:37:15,280 Speaker 1: think you could. I think you could take any weekend 662 00:37:15,440 --> 00:37:20,120 Speaker 1: of anybody's college life and then juxtapose it twenty years 663 00:37:20,160 --> 00:37:22,919 Speaker 1: down the road, and it's like, really, that doesn't seem 664 00:37:22,960 --> 00:37:25,800 Speaker 1: to make a home a lot of sense that that's 665 00:37:25,800 --> 00:37:29,920 Speaker 1: that's pretty pretty standard. Um, let me talk about books. 666 00:37:29,960 --> 00:37:34,160 Speaker 1: This is the question I get asked the most from listeners. 667 00:37:35,560 --> 00:37:37,560 Speaker 1: So and so, what what books did you listen to? 668 00:37:37,719 --> 00:37:40,719 Speaker 1: So we always work this in. Tell us about some 669 00:37:40,800 --> 00:37:44,000 Speaker 1: of your favorite books, be they fiction or nonfiction, investing 670 00:37:44,040 --> 00:37:48,880 Speaker 1: related or or unrelated. So what I like from what 671 00:37:49,239 --> 00:37:53,240 Speaker 1: book that's really helped me from a work perspective? Is? Um? 672 00:37:53,600 --> 00:37:58,799 Speaker 1: Thinking fast and slow? So it's you know, identifying, Yeah, 673 00:37:58,920 --> 00:38:03,080 Speaker 1: identifying psychological biases and and being aware of them and 674 00:38:03,440 --> 00:38:06,520 Speaker 1: the kind of role that data can play and sort 675 00:38:06,560 --> 00:38:08,920 Speaker 1: of training your mind to be aware of those probably 676 00:38:08,920 --> 00:38:10,799 Speaker 1: makes me a much more boring person, but I think 677 00:38:10,800 --> 00:38:13,480 Speaker 1: it makes me better at my job. Um, you know, 678 00:38:13,480 --> 00:38:16,880 Speaker 1: on the more leisurely side, UM, a book that I 679 00:38:16,920 --> 00:38:19,160 Speaker 1: really like and I still reread every so often is 680 00:38:19,360 --> 00:38:22,440 Speaker 1: Friday Night Lights. Really Yeah, so not the not the 681 00:38:22,440 --> 00:38:27,920 Speaker 1: TV school football. Yeah, I mean it's sports, I think, right, right, 682 00:38:27,960 --> 00:38:31,719 Speaker 1: So it's basically UM. So the the author's Bissinger, and 683 00:38:31,719 --> 00:38:34,839 Speaker 1: he goes and lives with a high school football team 684 00:38:34,840 --> 00:38:37,560 Speaker 1: in West Texas for a season and kind of file 685 00:38:37,760 --> 00:38:40,480 Speaker 1: follows their trials and tribulations. But the book is less 686 00:38:40,480 --> 00:38:44,000 Speaker 1: about football, and it's more about kind of the experience 687 00:38:44,600 --> 00:38:49,120 Speaker 1: that the team has, kind of focusing on um following 688 00:38:49,160 --> 00:38:51,440 Speaker 1: one dream. And it's also about kind of the social 689 00:38:51,480 --> 00:38:54,280 Speaker 1: and economic stresses of the area and how they interact. 690 00:38:54,360 --> 00:38:56,799 Speaker 1: And I mean the reason I think it appeals to 691 00:38:56,840 --> 00:38:59,080 Speaker 1: me is that, I mean sports have played a really 692 00:38:59,080 --> 00:39:01,400 Speaker 1: big role in my life. I basically played organized sports 693 00:39:01,440 --> 00:39:03,600 Speaker 1: all the way through college. And what did you play 694 00:39:03,640 --> 00:39:07,759 Speaker 1: in college? Rugby? Um? And you still have all your 695 00:39:07,760 --> 00:39:11,240 Speaker 1: own teeth. That's very impressive. I do. But I've had 696 00:39:11,600 --> 00:39:14,200 Speaker 1: I'd probably be smarter if I hadn't had a few concussions. 697 00:39:14,760 --> 00:39:17,040 Speaker 1: And I have had to have shoulder surgery and I 698 00:39:17,120 --> 00:39:20,640 Speaker 1: definitely took off for something else laborham. Oh yeah, that's 699 00:39:20,640 --> 00:39:22,799 Speaker 1: not a fun surgery, is it. No? And I had 700 00:39:22,840 --> 00:39:26,719 Speaker 1: to have that surgery basically about four weeks before my 701 00:39:26,800 --> 00:39:30,200 Speaker 1: first daughter was born, which my wife was not happy, 702 00:39:30,320 --> 00:39:32,760 Speaker 1: not too happy, not too happy about but it's amazing 703 00:39:32,760 --> 00:39:34,439 Speaker 1: what they can do with modern medicine. I could hold 704 00:39:34,440 --> 00:39:36,160 Speaker 1: the beat. I was good enough to hold the baby 705 00:39:36,200 --> 00:39:39,879 Speaker 1: when so so. Friday Night Lights somewhat reminds me of 706 00:39:39,920 --> 00:39:44,200 Speaker 1: The blind Side by Michael Lewis, which is ostensibly about football, 707 00:39:44,280 --> 00:39:48,760 Speaker 1: but really football is just the McGuinty that's used to 708 00:39:48,920 --> 00:39:55,719 Speaker 1: tell a story about everything you just described, race, poverty, economics, hope, streams, etcetera. Yeah, 709 00:39:55,719 --> 00:39:58,319 Speaker 1: And I think for me, I kind of I feel like, 710 00:39:58,360 --> 00:40:01,160 Speaker 1: on some level kind of share an experi orients with 711 00:40:02,320 --> 00:40:05,839 Speaker 1: the people in that story, in the sense that there 712 00:40:05,960 --> 00:40:08,440 Speaker 1: is sort of a shared purpose that comes with organized 713 00:40:08,440 --> 00:40:11,040 Speaker 1: sports and teamwork, and there's also a kind of shared 714 00:40:11,080 --> 00:40:14,439 Speaker 1: experience of what it means to persevere, you know, six 715 00:40:14,480 --> 00:40:19,960 Speaker 1: succeed or fail, and uh, you know, having those experiences 716 00:40:20,040 --> 00:40:23,759 Speaker 1: helps you later in life to you also persevere. I've 717 00:40:23,800 --> 00:40:26,680 Speaker 1: I've made the argument that the reason Wall Street desks 718 00:40:26,680 --> 00:40:29,759 Speaker 1: are so populated with college athletes is exactly what you 719 00:40:29,840 --> 00:40:32,680 Speaker 1: just described. I think there's some truth to that, you know, 720 00:40:32,719 --> 00:40:35,360 Speaker 1: I think you know, Muni bond desks in particular to 721 00:40:35,440 --> 00:40:38,080 Speaker 1: end to have a lot of ex college athletes Um. 722 00:40:38,160 --> 00:40:40,319 Speaker 1: It definitely makes for good intram real sports. We had 723 00:40:40,320 --> 00:40:43,160 Speaker 1: a dodgeball team a few years ago which was undefeated. 724 00:40:43,880 --> 00:40:47,600 Speaker 1: Yeah yeah, Um. Any of the books before we move 725 00:40:47,600 --> 00:40:50,040 Speaker 1: on to our next few questions. Um, you know, I 726 00:40:50,040 --> 00:40:54,080 Speaker 1: mean it's corny, but the Bible. I still read the Trial. Yeah, 727 00:40:54,200 --> 00:40:57,319 Speaker 1: I every couple of years I try and grind through 728 00:40:57,680 --> 00:41:02,040 Speaker 1: this sort of chronological there's a version of the Bible, um, 729 00:41:02,040 --> 00:41:06,400 Speaker 1: which attempts to kind of reorganize the Bible and chronological order. 730 00:41:06,719 --> 00:41:08,879 Speaker 1: And what's the name of that. Well, it's just called 731 00:41:08,880 --> 00:41:12,439 Speaker 1: the Chronological Bible. That's interesting. Yeah. And then it's set 732 00:41:12,480 --> 00:41:15,080 Speaker 1: up so that you read it about fifteen minute increments 733 00:41:15,080 --> 00:41:17,000 Speaker 1: every day and you get through it and in a 734 00:41:17,120 --> 00:41:23,560 Speaker 1: year in a year, right, Um, and uh that's interesting. Yeah, 735 00:41:23,600 --> 00:41:26,080 Speaker 1: I think I think, how does how does this shift 736 00:41:26,200 --> 00:41:29,120 Speaker 1: take place? Because you know now that I think I 737 00:41:29,160 --> 00:41:32,840 Speaker 1: always assume the Bible is chronological, but I guess it 738 00:41:32,920 --> 00:41:36,680 Speaker 1: really isn't. You start with Genesis, you're talking Old Testament, 739 00:41:37,239 --> 00:41:39,440 Speaker 1: and then eventually you do kind of jump around a 740 00:41:39,440 --> 00:41:41,400 Speaker 1: bit later on you do. I mean I would say 741 00:41:41,440 --> 00:41:45,080 Speaker 1: it's more or less chronological. But you know, the the 742 00:41:45,200 --> 00:41:48,040 Speaker 1: interesting thing is, you know when you get to Psalms, right, 743 00:41:48,120 --> 00:41:51,080 Speaker 1: which is more or less poems that they can kind 744 00:41:51,080 --> 00:41:54,080 Speaker 1: of pair them with the events that are happening, whereas 745 00:41:54,120 --> 00:41:56,399 Speaker 1: the Book of Psalm stands on its own. That's right. 746 00:41:56,840 --> 00:41:59,120 Speaker 1: So some of that stuff, it gives you a new perspective. 747 00:41:59,640 --> 00:42:01,359 Speaker 1: Also for me, it's just a way that kind of, 748 00:42:01,920 --> 00:42:04,880 Speaker 1: you know, keep on task, right. So I think it's helpful. 749 00:42:04,960 --> 00:42:07,080 Speaker 1: And let's I think there's a lot of I'm not 750 00:42:07,120 --> 00:42:10,400 Speaker 1: trying to proselytize here about religion or anything, but I 751 00:42:10,400 --> 00:42:14,120 Speaker 1: think there's a lot of sort of encouragement of truth 752 00:42:14,160 --> 00:42:18,360 Speaker 1: telling and truth seeking that that you know that I 753 00:42:18,360 --> 00:42:22,160 Speaker 1: think you need that inspiration, particularly when you're in financial markets, 754 00:42:22,200 --> 00:42:24,680 Speaker 1: which is, you know, every day is a puzzle where 755 00:42:24,719 --> 00:42:26,239 Speaker 1: you're really trying to figure out what the kind of 756 00:42:26,320 --> 00:42:28,960 Speaker 1: most truthful, neuggative information is that you can rely on. 757 00:42:29,120 --> 00:42:31,960 Speaker 1: And I think that inspiration really helps. So tell us 758 00:42:32,000 --> 00:42:33,960 Speaker 1: about a time, by the way, this is another question 759 00:42:34,000 --> 00:42:36,680 Speaker 1: that comes from listeners. Tell us about a time that 760 00:42:36,719 --> 00:42:40,879 Speaker 1: you failed and what you learned from the experience. Um, 761 00:42:40,960 --> 00:42:44,000 Speaker 1: I'm kind of embarrassed to admit this because I'm the 762 00:42:44,080 --> 00:42:50,160 Speaker 1: chief MUNI bond strategist From Marian Stanley I'll tell you this, Um, 763 00:42:50,200 --> 00:42:53,239 Speaker 1: I have one C on my college transcript and it's 764 00:42:53,239 --> 00:42:58,200 Speaker 1: in public finance. Really yeah, so you just redoubled your 765 00:42:58,200 --> 00:43:02,719 Speaker 1: effort and overcame. Um. I think that's one way to 766 00:43:02,760 --> 00:43:06,080 Speaker 1: look at it. Or drunk during the test, is he? No? No, 767 00:43:06,280 --> 00:43:08,479 Speaker 1: I mean to me, it was. It was a big 768 00:43:08,520 --> 00:43:11,080 Speaker 1: failure in the sense that I believe it was my 769 00:43:11,120 --> 00:43:14,759 Speaker 1: sophomore year of college and I was always able to 770 00:43:14,920 --> 00:43:18,880 Speaker 1: until then kind of reach back kind of based on 771 00:43:19,200 --> 00:43:22,520 Speaker 1: raw intellect and and and get by right. And in 772 00:43:22,560 --> 00:43:25,479 Speaker 1: that class. It was very humble experience because I left 773 00:43:25,480 --> 00:43:27,879 Speaker 1: that class and it finally sunk into like there are 774 00:43:27,880 --> 00:43:31,120 Speaker 1: things that I just know nothing about and and I 775 00:43:31,160 --> 00:43:33,560 Speaker 1: really knew nothing about what this professor is teaching me. 776 00:43:33,600 --> 00:43:36,600 Speaker 1: And I think after that, I decided that's not gonna 777 00:43:36,680 --> 00:43:39,200 Speaker 1: happen again. And so it wasn't about public finance per se, 778 00:43:39,920 --> 00:43:42,279 Speaker 1: but it was about not being afraid to ask for help, 779 00:43:42,360 --> 00:43:45,200 Speaker 1: not being afraid that I to admit that I don't 780 00:43:45,360 --> 00:43:49,640 Speaker 1: know something and ask for help. Um, and you know, 781 00:43:49,680 --> 00:43:52,360 Speaker 1: kind of putting your ego aside, right, I mean, you 782 00:43:52,440 --> 00:43:54,480 Speaker 1: don't have to be the smartest person in the room. 783 00:43:54,560 --> 00:43:56,279 Speaker 1: You're not a failure if you're not the smartest person 784 00:43:56,280 --> 00:43:58,840 Speaker 1: in the room on everything. But you can be a 785 00:43:58,880 --> 00:44:02,680 Speaker 1: failure if you try and pretend you are and ultimately 786 00:44:02,800 --> 00:44:06,280 Speaker 1: don't know what you're talking about. I share a similar 787 00:44:06,360 --> 00:44:09,439 Speaker 1: college experience in terms of being able to get by 788 00:44:09,520 --> 00:44:13,680 Speaker 1: on just raw processing power and then when you're confronted 789 00:44:14,440 --> 00:44:18,360 Speaker 1: with a set of circumstances where that is insufficient to 790 00:44:18,560 --> 00:44:21,719 Speaker 1: coast through. I wish I handled it as gracefully as 791 00:44:21,760 --> 00:44:25,600 Speaker 1: it sounds like that was really a significant life lesson. Well, 792 00:44:25,640 --> 00:44:28,520 Speaker 1: you know, it's good because part of my job is 793 00:44:28,600 --> 00:44:31,399 Speaker 1: to sit in front of people, and you know they 794 00:44:31,400 --> 00:44:33,520 Speaker 1: want you to have all the answers, and so it's 795 00:44:33,560 --> 00:44:36,239 Speaker 1: tempting to pretend like you do have all the answers. 796 00:44:36,280 --> 00:44:39,000 Speaker 1: But I think what's better and more genuine, and you 797 00:44:39,040 --> 00:44:42,960 Speaker 1: often get rewarded for, is admitting that you don't know 798 00:44:43,000 --> 00:44:45,799 Speaker 1: the answer you're thinking and brainstoring about how you might 799 00:44:45,800 --> 00:44:48,520 Speaker 1: get that answer and come back with it later, because 800 00:44:49,040 --> 00:44:51,440 Speaker 1: no doubt, the smartest investors know that no one has 801 00:44:51,480 --> 00:44:53,319 Speaker 1: the answers, so they're going to know your fake if 802 00:44:53,320 --> 00:44:55,880 Speaker 1: you try and fake it makes a whole lot of sense. 803 00:44:56,480 --> 00:45:00,000 Speaker 1: Um tell us about you work with a bunch of 804 00:45:00,080 --> 00:45:03,479 Speaker 1: younger folks as well as people more senior. What sort 805 00:45:03,480 --> 00:45:07,240 Speaker 1: of advice would you give to a millennial or someone 806 00:45:07,320 --> 00:45:10,480 Speaker 1: just beginning their career if they said to you, Amac, 807 00:45:10,520 --> 00:45:13,879 Speaker 1: I'm interested in going into Muni bonds. What what would 808 00:45:13,920 --> 00:45:17,800 Speaker 1: you say to them? So I'd say a couple of things. 809 00:45:17,840 --> 00:45:20,360 Speaker 1: And this is interesting. I was like the millennial question 810 00:45:20,360 --> 00:45:22,360 Speaker 1: because I'm I'm not sure if I'm a millennial or not. 811 00:45:22,480 --> 00:45:25,279 Speaker 1: I feel like a straddle. I'm like right there. So 812 00:45:25,280 --> 00:45:27,840 Speaker 1: it's so funny. I'm the exact same way. I'm not 813 00:45:27,880 --> 00:45:30,399 Speaker 1: a baby boomer. They're all older than me, but I'm 814 00:45:30,440 --> 00:45:32,760 Speaker 1: too old to be gen X. I get to look 815 00:45:33,200 --> 00:45:37,319 Speaker 1: in both directions, you might be find yourself similarly situated 816 00:45:37,360 --> 00:45:40,359 Speaker 1: on the cusp, right, I got the technology aspect of it, 817 00:45:40,400 --> 00:45:42,439 Speaker 1: but maybe a little bit of a different world view. 818 00:45:42,600 --> 00:45:47,319 Speaker 1: But I would say two things. One on the Muni issue, specifically, 819 00:45:47,480 --> 00:45:50,880 Speaker 1: because Muni's have this, or at least had this reputation 820 00:45:50,880 --> 00:45:55,720 Speaker 1: of being boring asset class you kind of put the charismatic, 821 00:45:55,840 --> 00:45:58,800 Speaker 1: but people who are considered less intellectual on that product 822 00:45:58,880 --> 00:46:02,399 Speaker 1: in terms of sales and rating. And you know, one 823 00:46:02,400 --> 00:46:05,120 Speaker 1: of the early phrases I heard about the muni industry. 824 00:46:05,239 --> 00:46:10,000 Speaker 1: Was the muni jocks right? And I think the the 825 00:46:10,040 --> 00:46:13,279 Speaker 1: post crisis realization is that this is a market that 826 00:46:13,520 --> 00:46:19,440 Speaker 1: incorporates elements of sovereign risk analysis, corporate credit analysis, um, 827 00:46:19,480 --> 00:46:22,560 Speaker 1: you know, traditional bond math analysis. I mean, there there 828 00:46:22,560 --> 00:46:27,280 Speaker 1: are a lot of similarities to the mortgage rates, inflation, convexity, 829 00:46:27,560 --> 00:46:30,360 Speaker 1: so and therefore there are macro elements. I have to 830 00:46:30,360 --> 00:46:32,000 Speaker 1: know as much about what's going on with the FED 831 00:46:32,000 --> 00:46:34,239 Speaker 1: as I do have to know what's going on in Springfield, 832 00:46:34,239 --> 00:46:38,560 Speaker 1: Illinois with the state legislature. So I think it challenges 833 00:46:38,600 --> 00:46:41,600 Speaker 1: you on a number of different levels. So, um, don't 834 00:46:41,680 --> 00:46:44,920 Speaker 1: let the fact that it tends to be something for 835 00:46:45,080 --> 00:46:47,640 Speaker 1: mom and pop as opposed to you know, derivatives or 836 00:46:47,719 --> 00:46:49,720 Speaker 1: f X or something like that, kind of shy away 837 00:46:49,760 --> 00:46:51,840 Speaker 1: from it. And then I mean the other bit of 838 00:46:51,880 --> 00:46:55,360 Speaker 1: advice I would have is more just general career advice 839 00:46:55,360 --> 00:46:57,319 Speaker 1: than something that worked really well for me, even though 840 00:46:57,360 --> 00:47:00,200 Speaker 1: I didn't seek it out. Which is kind of kind 841 00:47:00,200 --> 00:47:03,960 Speaker 1: a job where you're probably gonna get too much responsibility 842 00:47:04,000 --> 00:47:07,440 Speaker 1: too early, um, probably out of necessity. And this was 843 00:47:07,480 --> 00:47:09,279 Speaker 1: something that was born of being a mortgage Stanley in 844 00:47:09,320 --> 00:47:12,759 Speaker 1: the financial crisis right where you know, in the in 845 00:47:12,800 --> 00:47:15,040 Speaker 1: the crisis, in the immediate aftermath, there weren't a lot 846 00:47:15,040 --> 00:47:17,080 Speaker 1: of resources to go around. A lot of people kind 847 00:47:17,080 --> 00:47:19,000 Speaker 1: of forced into duty that was a little bit above 848 00:47:19,040 --> 00:47:21,960 Speaker 1: their heads. It was kind of like an Apollo thirteen moment, 849 00:47:22,040 --> 00:47:23,920 Speaker 1: like we all have to fix this problem, but you 850 00:47:24,000 --> 00:47:25,719 Speaker 1: only have the things that are being thrown on the 851 00:47:25,760 --> 00:47:27,880 Speaker 1: desk right now to fix it with, you know, do 852 00:47:27,920 --> 00:47:32,279 Speaker 1: your best mcgeiver impersonation. And that was great. That was great. 853 00:47:32,280 --> 00:47:35,600 Speaker 1: I mean, you know, you had, you know, spreadsheets, Bloomberg 854 00:47:35,640 --> 00:47:39,040 Speaker 1: machine and uh and your wits, and you go and 855 00:47:39,160 --> 00:47:41,480 Speaker 1: you you learn how to innovate, you learn how to 856 00:47:41,480 --> 00:47:44,120 Speaker 1: take responsibility. It's a sink or swim kind of moment. 857 00:47:44,200 --> 00:47:46,759 Speaker 1: And I think if you have those moments earlier in 858 00:47:46,800 --> 00:47:48,799 Speaker 1: your career, it gives you a lot of confidence later. 859 00:47:49,480 --> 00:47:52,520 Speaker 1: And our final that's a really interesting answer, um, And 860 00:47:52,600 --> 00:47:56,080 Speaker 1: our final question, what is it that you know today 861 00:47:56,239 --> 00:48:00,359 Speaker 1: about municipal bond investing that you wish you knew ten 862 00:48:00,480 --> 00:48:03,920 Speaker 1: or fifteen years ago when your career was just ramping up. 863 00:48:06,160 --> 00:48:11,560 Speaker 1: M hmm um that I guess that the rules are 864 00:48:11,560 --> 00:48:13,919 Speaker 1: made to be broken in the sense that a lot 865 00:48:13,960 --> 00:48:18,040 Speaker 1: of the define that before compliance in their office when 866 00:48:18,040 --> 00:48:20,360 Speaker 1: they hear that, because I know what you mean, but 867 00:48:20,440 --> 00:48:22,680 Speaker 1: they don't know what you mean. What I mean, and 868 00:48:22,719 --> 00:48:24,759 Speaker 1: I mean this in terms of bond covenants. So in 869 00:48:24,760 --> 00:48:30,160 Speaker 1: a more boring way, right, there are um stresses that 870 00:48:30,200 --> 00:48:32,840 Speaker 1: are so big that the things that are being promised 871 00:48:32,880 --> 00:48:35,440 Speaker 1: to you as an investor, you know, can be broken 872 00:48:35,600 --> 00:48:39,239 Speaker 1: for reasons outside of your control. That shouldn't scare you. 873 00:48:39,440 --> 00:48:41,959 Speaker 1: What it means is that you should demand some extra 874 00:48:42,000 --> 00:48:45,720 Speaker 1: compensation for it, and you should take that into account 875 00:48:45,719 --> 00:48:48,239 Speaker 1: when you analyze it. And here we go back again 876 00:48:48,280 --> 00:48:52,560 Speaker 1: to something like Puerto Rico. You know, the mantra before 877 00:48:52,600 --> 00:48:56,080 Speaker 1: the financial crisis and even for years afterwards, were general 878 00:48:56,080 --> 00:49:00,319 Speaker 1: obligation bonds don't default, can't default. The law says that you, 879 00:49:00,440 --> 00:49:03,120 Speaker 1: as the bondholder, are entitled to any and all resource 880 00:49:03,200 --> 00:49:05,680 Speaker 1: that the municipality has at its disposal to pay you 881 00:49:05,719 --> 00:49:09,040 Speaker 1: back before anyone else. And if you think about it, 882 00:49:09,040 --> 00:49:14,000 Speaker 1: that doesn't make much sense because what political constituency or 883 00:49:14,080 --> 00:49:17,279 Speaker 1: group of citizens anywhere is going to allow the bondholders 884 00:49:17,320 --> 00:49:21,239 Speaker 1: to completely suck dry the resources of a municipality just 885 00:49:21,320 --> 00:49:24,880 Speaker 1: to uh, just to uphold the law, particularly when states 886 00:49:24,880 --> 00:49:28,600 Speaker 1: are sovereign entities. Puerto Rico is not sovereign, but Congress was, 887 00:49:28,760 --> 00:49:32,360 Speaker 1: and Congress saw that the only way to effectively solve 888 00:49:32,440 --> 00:49:35,560 Speaker 1: this crisis was to exercise its sovereign authority. And what 889 00:49:35,600 --> 00:49:37,719 Speaker 1: I mean by that is the sovereign authority means they 890 00:49:37,719 --> 00:49:39,320 Speaker 1: get to write the rules, they get to write the 891 00:49:39,360 --> 00:49:43,080 Speaker 1: contract laws. And you know, I'm not a lawyer, so 892 00:49:43,120 --> 00:49:44,680 Speaker 1: I think there are a lot of lawyers who could 893 00:49:44,680 --> 00:49:46,640 Speaker 1: get in here a debate that say that what's happening 894 00:49:46,640 --> 00:49:50,640 Speaker 1: in some of these situations is unconstitutional. But you create 895 00:49:50,719 --> 00:49:54,520 Speaker 1: facts on the ground beforehand that create losses for bondholders first, 896 00:49:55,400 --> 00:49:59,440 Speaker 1: So you know, So going back to the question itself, 897 00:50:00,120 --> 00:50:04,279 Speaker 1: I think you have to take all rules and all laws, um, 898 00:50:04,480 --> 00:50:05,800 Speaker 1: you know, with some kind of grain of salt. You 899 00:50:05,840 --> 00:50:08,080 Speaker 1: always have to figure out what your blind spot is 900 00:50:08,160 --> 00:50:10,680 Speaker 1: and at least account for how this could go against 901 00:50:10,719 --> 00:50:12,600 Speaker 1: you and not take for granted some of the kind 902 00:50:12,600 --> 00:50:16,040 Speaker 1: of standard rules of you know, of any market, right 903 00:50:16,120 --> 00:50:20,160 Speaker 1: or the standard kind of rules of thumb. Anyway, Yeah, 904 00:50:19,960 --> 00:50:23,080 Speaker 1: you mentioned Michael Lewis earlier. I mean he basically lionizes 905 00:50:23,239 --> 00:50:25,839 Speaker 1: the type of people who just don't take things for granted, right, 906 00:50:25,960 --> 00:50:29,520 Speaker 1: and you know the h I think that's just a 907 00:50:29,520 --> 00:50:33,560 Speaker 1: good general lesson fascinating stuff. We have been speaking with 908 00:50:33,600 --> 00:50:38,240 Speaker 1: Michael Jesus. He is Morgan Stanley's chief strategist for public 909 00:50:38,239 --> 00:50:41,440 Speaker 1: policy municipal bonds. If people want to have access to 910 00:50:41,640 --> 00:50:44,600 Speaker 1: your research notes, I assume they must be a Morgan 911 00:50:44,680 --> 00:50:49,279 Speaker 1: Stanley client or is anything public? Uh, they should be 912 00:50:49,320 --> 00:50:52,480 Speaker 1: a Morgan Stanley clients. Um. You know that every once 913 00:50:52,480 --> 00:50:54,160 Speaker 1: in a while we can get we do get media. 914 00:50:54,200 --> 00:50:57,799 Speaker 1: We do get media coverage from Bloomberg and others. If 915 00:50:57,880 --> 00:51:00,480 Speaker 1: you have enjoyed this conversation, be you want to look 916 00:51:00,560 --> 00:51:04,520 Speaker 1: upward down on Apple iTunes or on our SoundCloud or 917 00:51:04,560 --> 00:51:07,439 Speaker 1: Bloomberg View dot com page and you can see all 918 00:51:07,520 --> 00:51:12,160 Speaker 1: of our previous hundred and forty one or so such conversations. 919 00:51:12,760 --> 00:51:16,359 Speaker 1: I would be remiss if I did not thank Taylor Riggs, 920 00:51:16,400 --> 00:51:20,719 Speaker 1: my booker, Michael bat Nick, my head of research, and 921 00:51:20,800 --> 00:51:26,000 Speaker 1: Medina Parwana are recording engineer. I'm Barry Ritults. You've been 922 00:51:26,040 --> 00:51:30,000 Speaker 1: listening to Masters in Business on Bloomberg Radio. Our world 923 00:51:30,040 --> 00:51:32,120 Speaker 1: is always moving, so with Mery Lynch, you can get 924 00:51:32,160 --> 00:51:35,399 Speaker 1: access to financial guidance online, in person or through the app. 925 00:51:35,560 --> 00:51:37,799 Speaker 1: Visit mL dot com and learn more about Mery Lynch. 926 00:51:37,880 --> 00:51:40,520 Speaker 1: An affiliated Bank of America, Mary Lynch makes available products 927 00:51:40,520 --> 00:51:42,840 Speaker 1: and services offered by Merrill Lynch, Pierce Federan Smith, Incorporated 928 00:51:42,880 --> 00:51:44,399 Speaker 1: or Registered Broker Dealer remember s I PC