Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Masters in
Speaker 1: Business with Barry Ritholts on Bloomberg Radio.
Speaker 2: This week on the podcast, I have another extra special guest,
Speaker 2: So now, Decie. What can I say? She runs the
Speaker 2: Fixed Income Group as chief investment Officer for Franklin Templeton.
Speaker 2: She directly manages two hundred and fifteen billion dollars in assets.
Speaker 2: Soanal has been named to just about every most influential
Speaker 2: Woman in finance list Baron's five years in a row
Speaker 2: Forbes Pension Investments. If you are at all interested in
Speaker 2: fixed income, what the thought process is like, I'm trying
Speaker 2: to figure out how to structure a portfolio fixed income?
Speaker 2: What you think about, what affects the returns you're going
Speaker 2: to see? This is gonna be a great podcast for you.
Speaker 2: I thought this was interesting, really fascinating, and I think
Speaker 2: you will also with no further ado Franklin Templeton's Sanal Decide,
Speaker 2: Welcome to Blomberg.
Speaker 3: Thank you Barry that it's so kind of you to
Speaker 3: have me here.
Speaker 2: Well, it's a pleasure. I'm excited to talk to you.
Speaker 2: Let's start out with the background that you come from
Speaker 2: bachelors and economics from del High University. PhD from Northwestern,
Speaker 2: also in economics. What was the original career player?
Speaker 3: This is a really interesting one because I grew up
Speaker 3: in Indo. You know, there are two careers. At that time,
Speaker 3: there were two careers any good parent wanted from for
Speaker 3: his son or in my case daughter. You could be
Speaker 3: an engineer, or you could be a doctor. And if
Speaker 3: you really didn't want to do either of those, you
Speaker 3: could work for the government. I didn't want to do
Speaker 3: any of the three, and economics seemed at that time
Speaker 3: to be the one which left the most options open
Speaker 3: for me. So I did economics. At the end of
Speaker 3: my undergraduate degree, though I didn't feel like I'd really
Speaker 3: learned enough about economics, and so I decided, you know,
Speaker 3: not having understood the concept of sunk cost, I decided
Speaker 3: to do even more and I did a PhD.
Speaker 2: And was that two years? Three years?
Speaker 3: The PhD? Yeah, no, that was a full five four
Speaker 3: five years.
Speaker 2: So that's more than sun costs. That's double, more than
Speaker 2: double exactly. So you come out of Northwestern with a
Speaker 2: PhD in economics, What was your first job in finance
Speaker 2: or what was your first job out of school?
Speaker 3: I was assistant professor of economics at the University of Pittsburgh.
Speaker 3: And here's the deal. When I got that job, I
Speaker 3: had also interviewed with the IMF, and I had really
Speaker 3: liked the IMF. But you have to understand, I don't
Speaker 3: know if it's that way today, but at that time,
Speaker 3: there was no way I was going to my thesis
Speaker 3: advisor and telling him, yeah, I do have a tenure
Speaker 3: track offer from a decent university, but you know, I'm
Speaker 3: going to go to the dark side and work for
Speaker 3: the IMF. So I couldn't bring myself to do it.
Speaker 3: I went and I did the academia thing for a
Speaker 3: couple of years. And I was young enough that the
Speaker 3: IMF told me at that time that, look, if you
Speaker 3: change your mind within the next two years, let us.
Speaker 2: Know, huh. I mean, academia is in for everybody, and
Speaker 2: it might take a year or two to figure that out.
Speaker 2: I mean, if that lifestyle works for you, it certainly,
Speaker 2: you know, could be rewarding intellectually very much.
Speaker 3: So, Look, academia, I admire it. I think it is
Speaker 3: the pinnacle of what this country does brilliantly having academia,
Speaker 3: having those research universities, all of that is absolutely superb
Speaker 3: for me. The problem was I'd spent five years of
Speaker 3: my life essentially doing research, and now I wanted to
Speaker 3: get out there and do something with it. To me,
Speaker 3: getting into the IMF, it was mind bogglingly, ioway, it
Speaker 3: was fantastic. Remember this is in the mid nineties, so
Speaker 3: let's let me date myself. Yeah, so this is in
Speaker 3: the mid nineties. Eastern Europe is just coming in from
Speaker 3: the cold, right, and that was where I focused most
Speaker 3: of my time.
Speaker 2: So how long did you stay at Pittsburgh before you
Speaker 2: joined the IMF?
Speaker 3: Two years? It was two years.
Speaker 2: So what was the experience like in Europe in the
Speaker 2: nineties working for the International Monetary.
Speaker 3: No, no, no. So I worked out of Washington, DC.
Speaker 3: I worked on Eastern Europe. So I'm talking about countries
Speaker 3: like Bulgaria, Macedonia, Romania, Croatia. Prior it liter the wall
Speaker 3: had fallen in the late eighties, eighty nine, was it,
Speaker 3: you know? And so these countries, some of these countries
Speaker 3: didn't even have the concept of GDP as we know it.
Speaker 3: They had gross social product, they didn't have CPI in disease.
Speaker 3: So it was in some ways the initial piece was
Speaker 3: like an extension of being a university because we were
Speaker 3: bringing these concepts to them. It was. It was an
Speaker 3: amazing experience.
Speaker 2: So any lessons that you learn at IMF that ultimately
Speaker 2: influenced your investment philosophy.
Speaker 3: My enormous respect and belief in macroeconomics actually comes from
Speaker 3: my time at the IMF. Were you know that IMF
Speaker 3: got a lot of things for program countries, you know,
Speaker 3: for programs which are put into place around the world.
Speaker 3: Some were better than others. I get all of that,
Speaker 3: but here's the thing. We would go to these countries
Speaker 3: and the idea was really frankly orthodox fiscal and monetary policy.
Speaker 3: And sometimes when you're starting from a certain point, be
Speaker 3: it high perinflation, be it out of control physical balance,
Speaker 3: be it lack of any kind of international reserves, you
Speaker 3: need to go back to orthodoxy. It kind of works,
Speaker 3: and that carrying that forward, I think it's influenced a
Speaker 3: lot of how as thought about emerging markets through the
Speaker 3: through the years.
Speaker 2: How long did you stay at the IMF four.
Speaker 3: It was it was six years. It was six years
Speaker 3: in DC and then half a year. Basically my husband
Speaker 3: and I at that time we chose to move to
Speaker 3: the private sector right. He was moving to the private
Speaker 3: sector in London and I was following him, and I
Speaker 3: had accumulated six months of vacation. They let you do that.
Speaker 3: They wouldn't cash me out for six months, but they
Speaker 3: said take the holiday. You know what I did. I
Speaker 3: had the IMF pay for me to do a professional
Speaker 3: patisserie course in London because I had to take the holiday.
Speaker 3: I couldn't go out and work, but I was being
Speaker 3: paid and I couldn't not be paid. So I took
Speaker 3: a one year course question to.
Speaker 2: Six months full on pastry and.
Speaker 3: Court UNPLO, Basic, intermediate and superior.
Speaker 2: Do you still do a lot of cooking?
Speaker 3: So I do a lot of cooking, but I don't
Speaker 3: do much much baking anymore. My husband always complains. He says,
Speaker 3: I baked more before the partisiri course because after that,
Speaker 3: but I would come into our rental apartment and say,
Speaker 3: I can't work in these conditions.
Speaker 2: So you became a chef prima donna?
Speaker 3: Is that what I have to looking back at myself,
Speaker 3: I have to believe I became a prima donna.
Speaker 2: So you relocate with your husband to London, I'm going
Speaker 2: to assume that's how you end up at Thames River Capital,
Speaker 2: Is that right?
Speaker 3: First? Actually I was on the cell side, so I've
Speaker 3: done it all. I've done academia. Then I did the
Speaker 3: public sector at the IMF. Then I did the cell
Speaker 3: side Dresna Klein watwas Stein Investment Banking and I was
Speaker 3: in the research team there and that was in London.
Speaker 3: And then after six years with them, I moved to
Speaker 3: Thames River Capitol, which was a macro hedge fund in London.
Speaker 2: What was that experience like that you were there right
Speaker 2: through the Great Financial Crisis?
Speaker 3: Yeah? Actually, so I started with them in two thousand
Speaker 3: and six and in two thousand and nine I moved
Speaker 3: back to the long only by side. I think it
Speaker 3: was absolutely eye opening, all right, And I think one
Speaker 3: of great things about working with them small team, boutique
Speaker 3: firm hedge fund, but a macro hedge fund, so at
Speaker 3: every stage it felt like and I'd been on the
Speaker 3: cell side and now it's on the buy side. It
Speaker 3: gets you a little bit closer to the end point.
Speaker 3: I think it was a fascinating point of time because essentially,
Speaker 3: over the course of the two thousands, the private sector
Speaker 3: really came into its own, so in a sense, when
Speaker 3: we were at the IMF, A lot of these emerging markets,
Speaker 3: they came to the IMF because there wasn't a true alternative.
Speaker 3: Private markets, especially for em had not deepened enough. And
Speaker 3: now as as we got into eight nine, you started
Speaker 3: seeing the strength and power of the private sector. And
Speaker 3: then we had the global financial crisis. Holy cow, that
Speaker 3: was you know. That was when I would walk around
Speaker 3: and I used to walk home from my work and
Speaker 3: I was just thinking. Everyone keeps talking about, oh, you know,
Speaker 3: living an unprecedent times, living through history. I draw to
Speaker 3: read about it. You know, living through it was amazing.
Speaker 3: I remember waking up at three or four in the
Speaker 3: morning to find out what had happened overnight, what were
Speaker 3: markets doing. It was a whole different level. It was
Speaker 3: just amazing. And now I look back and it's like, great,
Speaker 3: we did that. We did that. But I will tell
Speaker 3: you one of the best things about that time was
Speaker 3: remembering to look out of the window we worked out
Speaker 3: of Berkeley Square, lovely officers, looking out of the window
Speaker 3: and watching people having normal lives and realizing, you know,
Speaker 3: the world doesn't begin or end with finance.
Speaker 2: For sure, it certainly has an impact, but yeah, it's
Speaker 2: kind of funny. Some of the younger folks who are
Speaker 2: late thirties, early forties, this is it's hard to imagine
Speaker 2: this is before their time. It is like they were
Speaker 2: in college. So I was in grad school during the
Speaker 2: eighty seven crash, and it was you really didn't pay
Speaker 2: attention to it. I imagine anybody who's an undergraduate or graduate
Speaker 2: or even just starting to work into eight o nine,
Speaker 2: you really don't understand how unusual and the force of
Speaker 2: that debacle across the entire economy.
Speaker 3: Barry, take it one step further and recognize that somebody,
Speaker 3: some kid who got into JP Morgan as a trader
Speaker 3: and was fortunate enough not to lose their job in
Speaker 3: eight or nine. This is somebody who probably through COVID,
Speaker 3: ended up being a senior trader and has never lived
Speaker 3: through truly non zero interest rates. I mean yet the
Speaker 3: FED started raising them, but through what I would consider normal,
Speaker 3: normal business cycles. It is remarkable. That's when you really realize, Wow,
Speaker 3: you've lived through interesting times.
Speaker 2: To say the very least. So you mentioned you joined
Speaker 2: Franklin in nine the long Only. Yes, pretty good timing
Speaker 2: to join a long only shop mid o nine. Tell
Speaker 2: us what that transition was like going from a long
Speaker 2: short hedge fund to a long only asset manager.
Speaker 3: So actually, you know, the reality is the team i
Speaker 3: joined at that time was the global macro team within
Speaker 3: Franklin Templeton, and in many respects that team works with
Speaker 3: deep value investing in a sense, looking for emerging markets
Speaker 3: which are totally out of favor, thinking in terms of
Speaker 3: long business cycles and really investing approach. So it was
Speaker 3: a bit of a natural transition. The part which was
Speaker 3: more complicated to get my head around was being part
Speaker 3: of an enormous organization after having basically been a part
Speaker 3: of a very small team, a small boutique team where
Speaker 3: if you want to do something you could be very
Speaker 3: entrepreneurial and go out and do it. At Franklin you
Speaker 3: have to to get your arms around a much bigger organization.
Speaker 3: But it was very good.
Speaker 2: Twenty eighteen you become chief investment officer for the fixed
Speaker 2: income group at Franklin Templeton. Is that the timing right, Yeah?
Speaker 3: Roughly, Yeah, that's the timing.
Speaker 2: That's got to be a pretty big change in enroll
Speaker 2: from had a research to yeah, running fixed income.
Speaker 3: So it was a big change. And now we get
Speaker 3: to the point where my predecessor was retiring, and Jenny
Speaker 3: asked if I thought.
Speaker 2: I could do this, and Jenny Johnson.
Speaker 3: Jenny Johnson, and she asked me if I if I
Speaker 3: thought I could take this role on. And I have
Speaker 3: to say my first reaction was that there's too many
Speaker 3: pieces that I can't do. And I tell you something.
Speaker 3: This is a difference between men and women. My husband
Speaker 3: when he looks at, you know, a job description, there
Speaker 3: are something like twenty things on that job and so
Speaker 3: I can apply for this. I said, but but, but
Speaker 3: but you know, you haven't done you haven't digged up
Speaker 3: one of these boxes. He says, I take that one.
Speaker 3: He will apply for it and he will likely get
Speaker 3: the job.
Speaker 2: When I had Jenny here for an interview, we talked
Speaker 2: about that exact thing, and did she mentioned, She goes,
Speaker 2: women will look at this and say, oh, I can't
Speaker 2: do that, like I don't have one seven and twelve,
Speaker 2: and guys are like, yeah, we'll figure it out as
Speaker 2: we go. It's a very genetic di It's.
Speaker 3: A real genetic difference because my instinct is, well, I
Speaker 3: haven't done that before, so I can't do it. And
Speaker 3: between between my husband and Jenny They basically kicked me
Speaker 3: in the pants and said, no, you can do it.
Speaker 3: Learn learn on the job. I guess I did. It
Speaker 3: was fantastic. It's been really fantastic.
Speaker 2: Really interesting. So let's talk a little bit about Franklin.
Speaker 2: So you've been chief investment officer for seven almost eight
Speaker 2: years now. What's been the most surprising thing about this role?
Speaker 3: Number One, When you challenge yourself, you really can step up.
Speaker 3: Number Two, there are parts of fixed income that I
Speaker 3: thought would be I'll just say it boring. They're not
Speaker 3: as exciting as going out and finding that emerging market.
Speaker 3: And what you find is actually everything is fascinating if
Speaker 3: you spend enough time looking at it. So that's been great.
Speaker 3: And I'd say the other part of it, which has
Speaker 3: been somewhat surprising to me, I'd say, is it goes
Speaker 3: actually into the broad into broader markets, not just my
Speaker 3: role within this within this group, it is the extent
Speaker 3: to which markets look at what is happening currently, and
Speaker 3: it's a very short step for analysts to look at
Speaker 3: what's happening extended into the future and give you a
Speaker 3: reason for why it happened. How difficult it is to
Speaker 3: break out of the mold and try to act genuinely
Speaker 3: look forward. Does this make sense?
Speaker 2: Yes, we you know, flick on the TV radio and
Speaker 2: people are constantly explaining what just happened when they had
Speaker 2: no idea what was going to happen. So a lot
Speaker 2: of hindsight bias.
Speaker 3: Yes, And there's also what just happened and therefore why
Speaker 3: it should continue happening. And I think that's something which
Speaker 3: I never realized how deeply ingrained it is and how
Speaker 3: difficult it is to break people out of that way of.
Speaker 2: Just extrapolating to infinity infinity. Yeah, that happens all the time.
Speaker 2: You recently were on with my colleague Shanali and you
Speaker 2: said to her, investors need to price risk more seriously.
Speaker 2: Explain what you mean by that.
Speaker 3: What I mean by that is, I said more than
Speaker 3: I'm looking now since the global financial crisis, and Barry
Speaker 3: we just talked about the fact that their entire entire
Speaker 3: generations of people who have never lived in a world
Speaker 3: where liquidity were anything other than hyperabundant. And by the way,
Speaker 3: we're still in that world. You look at the Fed's
Speaker 3: balance sheet, it's still enormous. I think it's very hard
Speaker 3: for people to even realize that the FED sat on
Speaker 3: a minuscule bald sheet prior to this, they were We
Speaker 3: were not in a situation where essentially there was always
Speaker 3: a get out of jail for free card out there.
Speaker 2: The classic FED put fed.
Speaker 3: The FED put. Eventually it was a FED put. Then
Speaker 3: people thought there was a Trump put. And quite frankly,
Speaker 3: over the over the last four or five years, we've
Speaker 3: had a fiscal policy put. We have put all over
Speaker 3: the place, and I think that what happens in that environment.
Speaker 3: You know, when I said that we need to price risk,
Speaker 3: start remembering again how to price risk appropriately. It is
Speaker 3: the fact that when financial markets started moving out along
Speaker 3: the yield curve, out along the risk spectrum. I've even
Speaker 3: seen the IMF talk about, oh, well, markets need to
Speaker 3: price risk correctly. Well, hello, they were forcing us into
Speaker 3: those positions explicitly. When the first set of Q one
Speaker 3: two threes happened, it was explicitly there to get financial
Speaker 3: markets to take risk again. Q one definitely Q one
Speaker 3: and two. Maybe you know markets had frozen up. We
Speaker 3: needed to liquefy frozen markets. And to me, if I
Speaker 3: look at that, that made sense. Problem is we hung
Speaker 3: on to it for too long. If I look at
Speaker 3: high yield credit, let's talk about fixed ink markets high
Speaker 3: heeld credit. Typically in a recession, spreads of high yield
Speaker 3: credit over treasuries equivalent treasuries should be at around six hundred,
Speaker 3: six fifty even higher. We've never gotten there were tight
Speaker 3: yet No, today we are close to record tights. Right
Speaker 3: by only looking at a few hundred basis points, we're
Speaker 3: sub three hundred. This to me means that while people
Speaker 3: like to talk the talk of recipession, what they're really
Speaker 3: saying is cut rates. We want more liquidity because we're
Speaker 3: not getting rid of four of all of our assets
Speaker 3: over here, the risky assets, which should sell off if
Speaker 3: people truly expected a recession.
Speaker 2: So I'm going to assume you're not in the recession
Speaker 2: camp here.
Speaker 3: I haven't been. I haven't been. I'd say that I
Speaker 3: can proudly say that it's been. You know, I'm on redquord.
Speaker 3: So I think it was in probably early twenty twenty one,
Speaker 3: when inflation started picking up here that I was saying, yeah,
Speaker 3: this isn't looking so good. This transitory stuff isn't looking
Speaker 3: so good. And most importantly, it wasn't at all clear
Speaker 3: to me why we were expanding fiscal while we also
Speaker 3: had this massively easy monetary policy and how that could
Speaker 3: possibly result in a recession. And we've been having recessions
Speaker 3: which are two quarters out now, I think rolling two
Speaker 3: quarters out for the better part of something like three
Speaker 3: and a half years. And I will say, we've not
Speaker 3: bought into that. I think it's a very strong economy.
Speaker 2: So it certainly has been. We continue to see consumer
Speaker 2: spending despite weak sentiment. Consumers continue to spend. The labor
Speaker 2: market is tight. Yeah, there are some warts on the
Speaker 2: housing markets, and you know, there's always some sector you
Speaker 2: could poke at, but by and large, this seems to
Speaker 2: be a fairly robust, fairly resilient economy. Fair statement.
Speaker 3: I think that is a fair statement because here's the thing.
Speaker 3: You know, in the first few months of this year,
Speaker 3: we saw sentiment tank and everyone said, well, hard data
Speaker 3: will follow. I wasn't so sure because sentiment was moving
Speaker 3: on something which was unusual. It wasn't moving on the
Speaker 3: back of weakness and labor markets or people feeling uncertain
Speaker 3: about their jobs. It was weakening on the back of pronouncements,
Speaker 3: you know, on top of policy pronouncements. I'd see the
Speaker 3: execution of that stuff was really bad and continues to
Speaker 3: not be particularly good in terms of tariffs that impacted sentiment. However,
Speaker 3: people continue to spend. They didn't stop spending, as you said.
Speaker 3: And I'm not suggesting that this economy's recession proof. I'm
Speaker 3: just saying, so far, we haven't got whatever we need
Speaker 3: to push us right.
Speaker 2: Interansas, any thoughts on the idea that perhaps sentiment measures
Speaker 2: are broken, that when you see Michigan sentiment worse than
Speaker 2: the pandemic, worse than the financial crisis, worse than the
Speaker 2: eighty seven crash, and yet you know you look at
Speaker 2: the data, you're just not seeing anything remotely.
Speaker 3: I have to say that I'm looking a little bit
Speaker 3: less at some of these indicators. I think they need
Speaker 3: to be leeve and we need to now do more digging.
Speaker 3: Our country has become very polarized, and that feeds into
Speaker 3: people's sentiment. It doesn't feed into their shopping habits. That's
Speaker 3: the reality, right.
Speaker 2: So I'm wondering how much of this is driven not
Speaker 2: just by media, but by social media and algorithms. It
Speaker 2: seems to send people to more extreme.
Speaker 3: Absolutely huge, and I think that the speed of the
Speaker 3: news cycle, the need for clickbait style, tweets, headlines, whatever
Speaker 3: it is. I think that exacerbates every sentiment. However, people
Speaker 3: still seem to be relatively sensible in terms of how
Speaker 3: they actually behave, because we're not hearing about people massively
Speaker 3: canceling their European vacations, which, according to Delta, we're taking
Speaker 3: in record numbers.
Speaker 2: Right, It's so funny you say that because last quarter
Speaker 2: they drop their guidance. Hey, everybody's frozen. JetBlue did something similar.
Speaker 2: We don't know what's happening. They just came out in
Speaker 2: the most recent few days talking about not only reinstating
Speaker 2: guidance but being pretty aggressive as to what they see
Speaker 2: going forward. That's fairly constructive kind of fights against the Oh,
Speaker 2: this tariff war is going to cause a vib session
Speaker 2: and crash everybody. Yeah.
Speaker 3: No, I really never bought the vibe session idea on tariffs.
Speaker 3: I mean, let's can we talk about tariffs? Sure? I
Speaker 3: mean it's been talked to death, but why not let's
Speaker 3: talk about tariffs briefly. Here's the thing. I look at
Speaker 3: our country and I'm gonna use big round numbers here. Right,
Speaker 3: We're about a thirty trillion economy. Okay, twenty nine call
Speaker 3: it thirty trillion economy. Seventy percent of our economy is consumption. Okay,
Speaker 3: so you get to around twenty one twenty twenty one trillion,
Speaker 3: Seventy percent of consumption is services. Guess what services aren't
Speaker 3: really impacted by tariffs? Now I go to Okay, I've
Speaker 3: got around six six six and a quarter trillion of
Speaker 3: consumption of goods. How much of this is actually imported?
Speaker 3: Around three point four trillion of goods are imported. So
Speaker 3: I'm looking at three point four trillion against all of
Speaker 3: this huge economy size, and I say, okay, they're talking
Speaker 3: about putting tariffs. You know, let's assume tariff revenue ends
Speaker 3: up being three hundred billion. Yeah it's not. Yeah, that's
Speaker 3: it could be much lower three hundred billion. If I
Speaker 3: were to spread this out over all goods and services
Speaker 3: like the Europeans do, using a vat that's a two
Speaker 3: percent tax, right, would we all be jumping up and
Speaker 3: down saying vibe session If magic happened and the federal
Speaker 3: government did something very intelligent and put just a small
Speaker 3: consumption tax on the economy to lower the budget deficit,
Speaker 3: we wouldn't. So I guess what I'm trying to say
Speaker 3: is I don't love tariffs, please. Tariff's are a highly
Speaker 3: inefficient form of raising revenue that they there distortionary because
Speaker 3: they randomly hit some products relative to other products. I
Speaker 3: don't love tariffs. I just don't think that they are
Speaker 3: as catastrophic for the US as they are for the
Speaker 3: rest of the world. The rest of the world. Yeah,
Speaker 3: it is a big problem. The US doesn't depend It's
Speaker 3: a huge economy, which is essentially a large closed economy.
Speaker 2: Closed economy, it is. That's very interesting.
Speaker 3: How do I come back?
Speaker 2: It seems like, look, our phones are made in China.
Speaker 2: I'm wearing a watch. We're in Switzerland. Cars are from
Speaker 2: Japan and Germany and Korea and elsewhere. It feels like
Speaker 2: we see so many imported goods, clothing, just all this stuff.
Speaker 2: But what you're really pointing out is the things we
Speaker 2: import are relatively small percent way exactly.
Speaker 3: I think you're totally right, you know, And here's the thing.
Speaker 3: Should we be manufacturing more in the US? This is
Speaker 3: actually a political decision, and people vote for this, don't
Speaker 3: And you know, anybody who says that's a crazy idea, well,
Speaker 3: Germany does it, Japan does it. You know, it's a choice.
Speaker 3: It's a choice, it's a political choice, and I think
Speaker 3: that it is up to the people of our country
Speaker 3: to decide which direction do they wish to go, And
Speaker 3: there's no right answer. It's a democracy. People need to choose. However,
Speaker 3: it is an incredibly wealthy country. And therefore when we
Speaker 3: talk about imports and exports, I look at exports, which
Speaker 3: is how our gd HE gets impacted via tariffs or
Speaker 3: trade or anything. Imports are ten twelve percent of our
Speaker 3: overall GDP because we import around four and a half
Speaker 3: trillion of goods and services three and a half of
Speaker 3: just goods four and a half trillion out of you know,
Speaker 3: a thirty trillion economy called it twelve thirteen percent. That
Speaker 3: is where we are looking in terms of our imports.
Speaker 3: And you compare this to a Germany. Germany, including its
Speaker 3: exports to the rest of the euro Area, it's around
Speaker 3: forty four percent of GDP.
Speaker 2: Isn't that true throughout Europe? There they're much like I
Speaker 2: look at Germany, France, Italy, Spain, sort of like New York, California, Texas, Florida,
Speaker 2: because there are substantial economies and they're right there. There's
Speaker 2: no ocean in between them.
Speaker 3: And they know and they also export outside, right, so
Speaker 3: they're very, very dependent on what the wins of the
Speaker 3: rest of the world are because they need Here's the
Speaker 3: reality of it. You know, Well, every time the administration
Speaker 3: talks about VAT as a trade barrier, any economists will
Speaker 3: tell you that's just plain wrong. It's not it because
Speaker 3: it's a trade it's a trade adjustment. No, no, and
Speaker 3: it basically it's not a barrier because it's a board
Speaker 3: what we call a border adjusted tax. So you know,
Speaker 3: we export a car to Germany, absolutely you have to
Speaker 3: pay VAT there, but you'll have to pay the VAT
Speaker 3: on the BMW may.
Speaker 2: That's whatever you're going to say, that's just wrong.
Speaker 3: However, if you want to take again that twenty thousand
Speaker 3: foot up in the air view to this, there is
Speaker 3: an economic model which I think the Europeans have chosen
Speaker 3: to follow, which is to penalize consumption in Europe with
Speaker 3: the VAT twenty two percent tax on average on consuming,
Speaker 3: which means the Europeans aren't consuming not European stuff and
Speaker 3: not American stuff. And we have some of the lowest
Speaker 3: taxes in the world and everyone we consume everybody's production,
Speaker 3: so you're supporting global GDP, buyo our desire for consumption.
Speaker 2: We also have privatized things that the VAT tax subsidizers
Speaker 2: in Europe.
Speaker 3: Yeah, yeah, so we.
Speaker 2: Pay our own healthcare and retirement in college. For many
Speaker 2: European countries, they're paying much higher taxes. But that's part
Speaker 2: of the sort of the social safety net, not part
Speaker 2: of the private sector.
Speaker 3: Totally agree, And again I'd come back to the idea
Speaker 3: that these are choices made by democracies, and there are
Speaker 3: no right and wrong answers. So it's wrong for us
Speaker 3: to say get rid of your VAT. They made the
Speaker 3: choice to have that.
Speaker 1: Eight.
Speaker 2: I will tell you that I have a vivid recollection
Speaker 2: of being in London and Brussels during the dot com crash,
Speaker 2: like two thousands for business. And you leave New York
Speaker 2: where everybody's kind of freaked out and stressed, and you
Speaker 2: go to London and people are a little more relaxed.
Speaker 2: Then you go to Brussels and they're even more relaxed.
Speaker 2: And I guess there's no fear of losing your healthcare
Speaker 2: or owing college loans or saving for retirement. Kind of
Speaker 2: makes people a little more sanguine when it comes to
Speaker 2: the economic.
Speaker 3: Cycle, it is you know, there are trade offs on everything, right,
Speaker 3: So we could have an entire philosophical discussion in terms
Speaker 3: of the choices people make, and everyone doesn't make the
Speaker 3: same choices. The other side, I would argue, of the
Speaker 3: coin that you're pointing out correctly, which is the lack
Speaker 3: of stress associated with all these fundamental needs of life.
Speaker 3: The other side can and is a lack of innovation,
Speaker 3: which you see across the boards. There is a desire
Speaker 3: of a risk taking right, and that's what permeates the
Speaker 3: entire American dream, so to speak. You know, you work
Speaker 3: really hard, you can be entrepreneurial, You go out there,
Speaker 3: you do things, and you can make it. And I'm
Speaker 3: an immigrant, I'm a naturalized American, and I have to
Speaker 3: tell you that's what I bought into and I really
Speaker 3: believe in it. I love that about this country.
Speaker 2: Huh. Really really interesting. You mentioned earlier all the liquidity
Speaker 2: that the FED has flooded the system with. What's the
Speaker 2: implication of that for fixed income today?
Speaker 3: So I'd say the implication is when you're looking for
Speaker 3: let's call them risky assets within the fixed income space
Speaker 3: to invest in it's quite difficult. Like I said, typically
Speaker 3: risk assets, you look at the premium you get for
Speaker 3: taking the risk over the risk Free Act, which is
Speaker 3: of course the Treasury. And the reality is there's clearly
Speaker 3: enough to the point of complacency. I would say comfort
Speaker 3: around what is going on within the economy and what
Speaker 3: the expectations are from the FED that those spreads. If
Speaker 3: I again I point to something like high yield, they're
Speaker 3: nowhere close to what I think would be reasonable. Nonetheless,
Speaker 3: you are getting close to seven percent seven and a
Speaker 3: half percent depending on the day you're looking at it,
Speaker 3: without not in spread terms, but all in terms for
Speaker 3: a high yield or a risky bond in the for
Speaker 3: a high yeld corporate. Now, this I think remains reasonable
Speaker 3: if you are active. I wouldn't buy passively into this
Speaker 3: because when you have way too much liquidity, clearly some
Speaker 3: excesses are bound to creep up, and I think that
Speaker 3: probably they have. We are active managers, so we're literally
Speaker 3: doing bottom up picking a company by company, and I
Speaker 3: think you need to do that. So what do you do.
Speaker 3: I look at ten your treasuries, and I look at
Speaker 3: FED funds, and I try to decide at four forty
Speaker 3: four p. Fifty. We're range trading right now. Is this
Speaker 3: a sing by? Should you be jumping in because you
Speaker 3: think that treasuries are going to rally massively? And the
Speaker 3: answer is, actually, though I would call myself aggressively neutral,
Speaker 3: I'm stealing that term from a colleague of mine. Aggressively neutral.
Speaker 3: At this range, I think fair value for US treasuries
Speaker 3: actually is probably today at between four seventy five and five. So,
Speaker 3: in fact, I think there's more for US treasuries to
Speaker 3: sell off, and thus this is this is the backdrop.
Speaker 3: Now why do I think this? I think all these
Speaker 3: complaints about where the FED is, you know, the FED
Speaker 3: should cut rates, cut rates, cut rates, Well, I think
Speaker 3: the neutral Fed funds rate is actually between four and
Speaker 3: four twenty five or so. So I don't think the
Speaker 3: Fed is that much room to cut rates. Why do
Speaker 3: I think it's four percent? Is there a magic number? Well,
Speaker 3: if I again abstract from these POSTGFC fifteen seventeen years
Speaker 3: that we're looking at where we've had this very abnormal,
Speaker 3: unorthodox monetree policy for a large part of this period,
Speaker 3: and I look at the decades prior to that, neutral
Speaker 3: FED funds was around four p fifty five percent. That
Speaker 3: was what this economy took. What does that neutral FED
Speaker 3: funds rate consist of inflation and what you think productivity
Speaker 3: growth is going to be. I think inflation is around
Speaker 3: two two and a quarter and productivity growth we're kind
Speaker 3: of cruising back towards that two percent is level that
Speaker 3: we were gives you your FED funds.
Speaker 2: So inflation is softening, productivity is gaining. That sounds like
Speaker 2: a very productive environment for both the economy and the
Speaker 2: fixed income market.
Speaker 3: Well, I think it's a good time for fixed income.
Speaker 3: From the following perspective, You're getting yield from fixed income,
Speaker 3: and I think you'd probably sell off a bit more.
Speaker 3: You're getting income from fixed income. Let's put it that way,
Speaker 3: and again talking about generations of people who were used
Speaker 3: to getting one or two two and a half percent
Speaker 3: from their you know, there was a point where, given
Speaker 3: where inflation was and given where tenure treasuries were, we
Speaker 3: were paying the government in real terms for the privilege
Speaker 3: of lending the government money, which is what you're doing
Speaker 3: every time you buy a treasury. Right, But at least
Speaker 3: we're not there anymore. We're getting positive real returns. I
Speaker 3: think it is a constructive environment for fixed income, but
Speaker 3: you can't expect equity like returns from fixed income. And again,
Speaker 3: because of liquidity flows and so on, people have become
Speaker 3: a little bit married to the idea of fixed income
Speaker 3: delivering massive outperformance. And what it should really be doing
Speaker 3: is giving you boring returns. You know, boring returns. It
Speaker 3: should be the ballast in your portfolio when your equity
Speaker 3: market delivers equity like returns. And that is the future
Speaker 3: state that I anticipate for fixed income.
Speaker 2: So let's stay with the issue of liquidity, which keeps
Speaker 2: coming up. How does that affect how you look at
Speaker 2: fixed income, whether you want to go out for further
Speaker 2: duration or maybe even higher credit risk. What is all
Speaker 2: of this, both from the FED and elsewhere. What does
Speaker 2: all this liquidly do to how you construct a portfolio
Speaker 2: fixed thing comet?
Speaker 3: I think it actually makes it a little bit more difficult.
Speaker 3: We talked earlier about the issue of pricing risk. When
Speaker 3: you have this much of liquidity, those spreads, people will
Speaker 3: get forced into risky your products. You can't stay out
Speaker 3: of the market because you need to clip that coupon.
Speaker 3: So you are present. But like I said, you're not
Speaker 3: getting massively over your skis in terms of adding on
Speaker 3: extra risk, because things are priced to perfection in a
Speaker 3: market like this one. So what I mean by this
Speaker 3: is my baseline is that we don't get a recession.
Speaker 3: As we spoke about it, nobody has perfect foresight into
Speaker 3: what this looks like. You could get anything coming out
Speaker 3: of left field. COVID came from somewhere. None of us
Speaker 3: anticipated very short recession, but it had very meaningful consequences. Clearly,
Speaker 3: there are many areas of uncertainty, and these are the
Speaker 3: reasons why. From my perspective, my baseline on the fundamental
Speaker 3: economic fundamentals is no recession. But given how assets are
Speaker 3: priced right now, I would not go overboard loading up
Speaker 3: on risk at current levels. There are many reasons to anticipate,
Speaker 3: for example, additional corrections, including on the equity markets. Frankly,
Speaker 3: just from a macro perspective, which we don't have right now.
Speaker 2: We're gonna We're gonna keep it modest on the credit side.
Speaker 2: What about duration, we had we had an inverted yield
Speaker 2: curve for a couple of years. The yield curve more
Speaker 2: or less uninverted, so you're getting paid a little bit
Speaker 2: for longer duration, But you're not getting paid a whole lot.
Speaker 2: How do you look at at the long term choices
Speaker 2: for where's the sweet spot?
Speaker 3: Is it forty No, I'd say it's it's shorter right now.
Speaker 3: It's shorter than fourty seven, So I'd say I'd stay
Speaker 3: a little bit shorter right now because I, like I said,
Speaker 3: we're at four forty. I don't think it would take
Speaker 3: us very much to grind higher over here. And then
Speaker 3: if you've taken on a lot of duration, it will
Speaker 3: hurt you. Now if you're taking some of that credit risks,
Speaker 3: should you be hedging it out? That is something which
Speaker 3: you can consider, But outright simply going long I wouldn't
Speaker 3: do too much in terms of we actually still think
Speaker 3: that there is an enormous amount of cash still sitting
Speaker 3: on the sidelines and everything from money markets onwards. And
Speaker 3: perhaps one of the best things to do is to
Speaker 3: at least dip your feet in and get at least
Speaker 3: to ultra short, get yourself comfortable with ultra short, so
Speaker 3: you could start moving out the yield curve as opportunities
Speaker 3: present themselves.
Speaker 2: So one of the questions anytime we discuss hedging, either
Speaker 2: credit or duration risk, what are the prices of that
Speaker 2: look like these days curse. I recall pre financial crisis
Speaker 2: it was wildly miss priced then turned out to be
Speaker 2: really cheap to hedge credit risk. What about today in
Speaker 2: duration risk? Is it cheap or expensive to hedge that.
Speaker 3: It's still expensive still? I would say, it's still expensive,
Speaker 3: but you can't do it. You can do it in
Speaker 3: option space, for example.
Speaker 2: But that's that's really interesting. We hinted at but really
Speaker 2: didn't spend a lot of time talking about geopolitical risk.
Speaker 2: How do you factor that into your investment decisions? How
Speaker 2: does this drive fixed income choices?
Speaker 3: I think the interesting thing about geopolitics is increasingly it's
Speaker 3: become a backdrop, and I think that markets are not
Speaker 3: capable of remaining in a heightened state of panic and
Speaker 3: anticipation indefinitely. What I mean is, when Russia went into Ukraine,
Speaker 3: we all thought this was going to be a short period,
Speaker 3: and you know, geopolitics became very central to everyone's thinking.
Speaker 3: It's gone on for three years and it's not unclear when,
Speaker 3: if ever, it's going to go away. And I think
Speaker 3: what's happening is that geopolitical uncertainty has become so much
Speaker 3: a part of the backdrop that you can't actually manage
Speaker 3: your portfolio to that geopolitical risk. You can when risks
Speaker 3: get sharply higher, you can try doing something, but you
Speaker 3: cannot position your portfolio for these geopolitical risks. So what
Speaker 3: are the geopolitical stress points? The Middle East is frankly,
Speaker 3: it was a forever geopolitical stress point, which has to
Speaker 3: give this administration it's due come markedly lower. Based on
Speaker 3: what we have seen so far, I think actually things
Speaker 3: are looking a lot better in the Middle East than
Speaker 3: they have over a very long period of time, So
Speaker 3: that's a positive. I think the issue of China, you
Speaker 3: have different geopolitical stress points. You have the trade tensions,
Speaker 3: but then separately there's the eternal question of what happens
Speaker 3: with Taiwan, and that is always going to be a
Speaker 3: part of the backdrop. And I think a lot of
Speaker 3: people take a great deal of comfort from the fact
Speaker 3: that the Chinese authorities are extremely, extremely careful, and so
Speaker 3: we don't anticipate shooting from the hips, so to speak,
Speaker 3: you know. So this is something which we will continue
Speaker 3: to see stress points go up and down, and so
Speaker 3: I do think that in the early days of this administration,
Speaker 3: you know, certainly early days post Liberation Day, there was
Speaker 3: a thought that somehow you have a complete realigning of
Speaker 3: the geopolitical environment with the US not being credible or dependable.
Speaker 3: I don't I think that was overstated. The US is
Speaker 3: more important than any one administration or any one single
Speaker 3: set of policies.
Speaker 2: We talked a little bit about Europe and the euro Area,
Speaker 2: at least in the equity side. Europe is finally outperforming
Speaker 2: the US after a long period of underperformance. What are
Speaker 2: your thoughts on the Euro Area and emerging markets in
Speaker 2: today's environment?
Speaker 3: So you know the euro so if I look at
Speaker 3: the equity markets, I think you can't really talk about
Speaker 3: the equity markets without talking a little bit about the dollar,
Speaker 3: and that actually impacts em as well. And I see
Speaker 3: a lot of discussion again, and it's somewhat related to
Speaker 3: our previous comments on geopolitics, that somehow the dollar is
Speaker 3: no longer fit to be the world's reserve currency. It
Speaker 3: is the end of US exceptionalism, et cetera, et cetera.
Speaker 3: I think it's mixing up a whole bunch of things.
Speaker 3: Number One, when we entered this year trade in trade
Speaker 3: weighted terms, the dollar was at its strongest level since
Speaker 3: the Plaza code, right, do you know that since the
Speaker 3: Plaza Corde I didn't realize we're talking about the absolute
Speaker 3: strongest levels in trade weighted terms since in something like
Speaker 3: close to forty five fifty years, really strong. Then what happened.
Speaker 3: We came into this year and the first thing that happened,
Speaker 3: frankly was deep Seek you know, Deep Seek burst, and somehow,
Speaker 3: oh my god, the US is not exceptional and people
Speaker 3: were put us exceptionalism hand in glove with the mag seven.
Speaker 3: I think, however, if you were a European investor right
Speaker 3: last two years, you got fifty four percent just on
Speaker 3: the S and P, and then you got what was it,
Speaker 3: ten to fifteen percent in dollar appreciation? You made not
Speaker 3: like a bandit. If you were smart, you took some profits.
Speaker 3: Right as soon as you got deep Sea happening. In
Speaker 3: short order afterwards, you got the Germans suddenly talking about
Speaker 3: one trillion euros over the ten year period in terms
Speaker 3: of spending. So the last fiscal man standing, like I
Speaker 3: like to say, goes toppling down and we will go yeah, yay,
Speaker 3: that happened. But more seriously, it meant that potentially European
Speaker 3: growth would not look as lackluster, frankly as it has
Speaker 3: been for a while. So that happened, and then you
Speaker 3: had Liberation Day. You had three sets of reasons. And
Speaker 3: the European equity market had been lagging so much more
Speaker 3: than even the Nike in Japan. It was obviously a
Speaker 3: good time for people to go put money back there.
Speaker 3: And I think there's a little bit of catch up
Speaker 3: going on. So I don't think it's anything deep and amazing,
Speaker 3: and quite frankly, if I look at European growth, European
Speaker 3: growth is not yet showing German growth is not yet
Speaker 3: showing any impact from the one trillion ten year dollars spend.
Speaker 3: It's not yet showing up. I personally think that perhaps
Speaker 3: it's gone a bit too far, because if I look
Speaker 3: at funds which had been approved during COVID time five
Speaker 3: years ago, five years ago, they still have not been
Speaker 3: able to deploy them. The Europeans tied up in red
Speaker 3: tape at a level which makes me have a certain
Speaker 3: degree of I'm not going to go as far as
Speaker 3: saying skepticism, but caution in terms of how quickly this
Speaker 3: money will actually show up.
Speaker 2: What about the defense spending that we're hearing about. That's
Speaker 2: probably weaponized Knesenism. That's probably going to be a little
Speaker 2: quicker to find its way into the economy.
Speaker 3: I think it could be. But the only thing is
Speaker 3: the multiplier for defense spending is one of the lowest
Speaker 3: multipliers you have. Your highest multiplier is going to be
Speaker 3: what we did, which was to helicopter drop checks during
Speaker 3: co COVID to everyone. That has a very high multiplier eventually,
Speaker 3: But if you look at defenses, the multiplier zero point four,
Speaker 3: it's a low, low, low multiplier. Separately, you have other
Speaker 3: issues which I think are not discussed enough, and that
Speaker 3: is I think there are that somebody who's telling me
Speaker 3: it's close to seventeen different arms manufacturers and europe haamny
Speaker 3: arms manufacturers. You need if you have multitudes of people
Speaker 3: making tanks. The problem is the demand for tanks is
Speaker 3: not infinite, right right, And so you have a lot
Speaker 3: of relatively inefficient defense expenditure which is likely to take
Speaker 3: place as well. I think it will make its way.
Speaker 3: I don't want to come across as being overly negative.
Speaker 3: I think it's very positive that the Europeans are taking
Speaker 3: their own defense in hand, and I think we and
Speaker 3: markets need to be cautious in terms of the speed
Speaker 3: at which we think this will show up.
Speaker 2: Sure, so the European Central Bank has cut rates. We've
Speaker 2: seen other central banks around the world cut rates. We
Speaker 2: talked a little bit about the FED. What do you
Speaker 2: think they're paying attention to? Are they legitimately tight, especially
Speaker 2: now with q E ending and QT beginning. How do
Speaker 2: you look at the role of the FED.
Speaker 3: Here, Barry, Look, we talked a little bit about what
Speaker 3: I thought a reasonable FED funds rate was. When I
Speaker 3: call it neutral, I mean the economy is neither falling
Speaker 3: into recession or overheating ie inflation accelerating. I think that
Speaker 3: number is four to four twenty five given where rates
Speaker 3: are right now. Last year, before all of these ups
Speaker 3: downs and ins and outs, I thought the FED had
Speaker 3: within its gift around one hundred and twenty five to
Speaker 3: one hundred and fifty basis points of rate cuts in all,
Speaker 3: and they did a hundred basis points already. So I
Speaker 3: think there isn't an unlimited amount that the FED really
Speaker 3: can or should do. Will they do more? Probably, you know,
Speaker 3: I don't know whether it's this Fed or next year.
Speaker 3: At some stage they can it won't be catastrophic. I
Speaker 3: don't think it's particularly wise to cut rates dramatically. Are
Speaker 3: they messing up right now? No? Actually, I don't think
Speaker 3: they're messing up. This is a very dubbish FED by
Speaker 3: the way, everyone says that, oh, markets will panic if
Speaker 3: we get a dubbish FED chair. Hello, the last non
Speaker 3: dubbish FED chair we had was Paul Volca. We haven't
Speaker 3: had a hawkish FED chair in an enormous amount of time,
Speaker 3: and I don't see it happening now. It's not in
Speaker 3: the Fed's DNA.
Speaker 2: Huh, really really interesting. Let me throw a curveball question
Speaker 2: at you. What do you think investors are not talking
Speaker 2: about but perhaps should be.
Speaker 3: So that's a really excellent question. In this day and age,
Speaker 3: I think you can't talk about what's being overlooked without
Speaker 3: talking about time horizon. I think that we are all
Speaker 3: talking about fiscal but in very vague terms, and the
Speaker 3: mistake we are making is acting as if we suddenly
Speaker 3: got a fiscal deficit. We have been running ridiculous deficits
Speaker 3: for the last close to five years now, and it's
Speaker 3: very much like the excesses we saw with QE in
Speaker 3: the sense of monetary policy which lasted long after it
Speaker 3: should have been withdrawn, and we're seeing that now. And
Speaker 3: I don't see any desire on either party's side to
Speaker 3: do something serious about that deficit, which implies we won't
Speaker 3: fall into a recession. But I do think at some
Speaker 3: stage there needs to be some change in policy which
Speaker 3: reduces that deficit meaningfully. And I'm not sure you can
Speaker 3: do that without actually reducing growth. This is an additional
Speaker 3: reason why I don't think the FED should go too
Speaker 3: far today. So I I think there is a long
Speaker 3: way of saying there's almost nothing that we don't talk about.
Speaker 3: It is a question of the timing. I think today
Speaker 3: we're probably looking at most of the important things that
Speaker 3: need to be looked at.
Speaker 2: Huh, really interesting. So I only have you for a
Speaker 2: certain amount of time, But let me jump to my
Speaker 2: favorite questions. Tell us about your early mentors who helped
Speaker 2: shape your career.
Speaker 3: So you know, my earliest mentor, I'd have to say,
Speaker 3: is my father. I grew up in India. In India,
Speaker 3: the path that I followed is not very traditional, and
Speaker 3: I have two brothers, and my father always treated me
Speaker 3: exactly the same as my brothers, and so in a sense,
Speaker 3: when people ask me, even today, how do you get
Speaker 3: more women into the workplace? And I get asked this
Speaker 3: question around the world when I go to our different offices,
Speaker 3: I tell everyone, you know, encourage your daughters, your sisters,
Speaker 3: your wives to be in finance, and they will be
Speaker 3: in finance. My father didn't encouraged me to be in finance.
Speaker 3: He did encourage me to think exactly the way frankly
Speaker 3: my brothers were thinking in terms of what the future held.
Speaker 3: So he was my earliest mentor second mentor, I would
Speaker 3: have to say, is one of my first mission chiefs
Speaker 3: at the IMF, Paul Thompson, who subsequently actually led missions
Speaker 3: to Greece and became the director of the European Department.
Speaker 3: He was my first mission chief and he is an
Speaker 3: amazing negotiator. And I still find myself using hand gestures
Speaker 3: that I see I've learnt from him, and I still
Speaker 3: find myself doing this. How amazing is that, because now
Speaker 3: you're talking about a very long time ago, and he
Speaker 3: definitely shaped how I work in the workplace.
Speaker 2: Really interesting. Let's talk about books. What if some are
Speaker 2: your favorites? What are you reading right now?
Speaker 3: Okay, so some of my favorites. I've got an enormously
Speaker 3: very The only thing I don't read is horror of
Speaker 3: any kind. It scares me too much. My imagination is
Speaker 3: too real. But if I think about things I always
Speaker 3: go back to I will throw out. There's the Master
Speaker 3: in Margarita, which is Mikhail Bulkrakov, which was the first
Speaker 3: first book which actually seen It was transcendental. I think
Speaker 3: love pride and prejudice. I love The Lord of the Rings.
Speaker 3: And currently I'm reading urban fantasy. It's called The author's
Speaker 3: names are Ilona Andrews, Kate Daniels. It's very escapist. It's
Speaker 3: about as as escapist as anything I think you would
Speaker 3: watch on Netflix. It is absolutely fantastic.
Speaker 2: What's the title.
Speaker 3: So it's a series of books. The protagonist is called
Speaker 3: Kate Daniels, and I think the first one was Magic
Speaker 3: Bites or something like that, set in a dystopian Atlanta
Speaker 3: where you have a mixture of various types of supernatural
Speaker 3: elements and things like that.
Speaker 2: It's really cool, huh, really interesting. Our final two questions,
Speaker 2: what sort of advice would you give to a recent
Speaker 2: college grad interested in the career in either fixed income
Speaker 2: or investing.
Speaker 3: Number one, be extremely curious, right, extremely curious. I would
Speaker 3: note that learn to do research. I'm not talking about research.
Speaker 3: What I'm saying is, especially today with gen Ai, I
Speaker 3: think one of the worst things is immediately having answers,
Speaker 3: because if you don't learn to spend the time to
Speaker 3: dig really, really deep into different areas, I don't think
Speaker 3: you're going to find answers. You're not going to be
Speaker 3: able to find the answers all written in the first
Speaker 3: three lines of Google search. Actually, I do think that
Speaker 3: people coming fresh into the markets that we have, they
Speaker 3: need to read a little bit more about what has
Speaker 3: gone before them. I think there are some brilliant books
Speaker 3: out there. I would call out Ken Rogoff and Carmen
Speaker 3: Reinhart have a couple of them. It's just a good
Speaker 3: this time is different, Yeah, this time, this time it's different.
Speaker 3: It's fantastic. And and your book, I'm gonna give you
Speaker 3: that shout out because I think it's good to actually
Speaker 3: read practitioners books because we live in bizarre times and
Speaker 3: many people will not have seen the various cycles history.
Speaker 2: You know, those of us who don't learn from history
Speaker 2: are condemned to repeat it.
Speaker 3: There's that part of it, and I think. The other
Speaker 3: piece I would say is it's very hard, I know,
Speaker 3: but try not to be too impatient. If you can't
Speaker 3: go through a few market cycles, it's very difficult to
Speaker 3: really understand my markets, right. So I don't believe in
Speaker 3: time and grade. I'm all for people umping ahead, but
Speaker 3: sometimes nothing substitutes for actually living through different market cycles
Speaker 3: in our business.
Speaker 2: Huh, really really interesting. What do you know about the
Speaker 2: world of investing today? You wish you knew thirty years
Speaker 2: or so ago when you were first getting started.
Speaker 3: You know, the biggest thing I'd say is that nothing.
Speaker 3: While in the moment it feels like the catastrophe is
Speaker 3: going to end the world number one, it won't number
Speaker 3: two cycles end. I would have had a lot fewer
Speaker 3: sleepless nights if I could have just calmed myself down
Speaker 3: and said, Okay, this too will pass. So I think
Speaker 3: I think there is an element of just knowing that
Speaker 3: you know, this is a part of what we do.
Speaker 2: Really so interesting. Thank you Sanal for being so generous
Speaker 2: with your time. We have been speaking with Sonal Dasai.
Speaker 2: She's chief investment serve for Franklin Templeton's fixed income group.
Speaker 2: If you enjoy this conversation. Well, check out any of
Speaker 2: the five hundred we've done over the past eleven years.
Speaker 2: You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever
Speaker 2: you find your favorite podcast, And be sure and check
Speaker 2: out my new book How Not to Invest The ideas, numbers,
Speaker 2: and behavior that destroys wealth and how to avoid them
Speaker 2: How Not to Invest at your favorite bookseller. I would
Speaker 2: be remiss if I did not thank the Crack team
Speaker 2: that helps us put these conversations together each week. Meredith
Speaker 2: Frank is my audio engineer. Anna Luke is my producer.
Speaker 2: Sean Russo is my researcher. Sage Bauman is the head
Speaker 2: of podcasts at Bloomberg. I'm Barry Riholts. You're listening to
Speaker 2: Masters in Business on Bloomberg Radio. Y