1 00:00:02,360 --> 00:00:06,960 Speaker 1: Bloomberg Audio Studios, podcasts, radio news, and. 2 00:00:06,880 --> 00:00:08,600 Speaker 2: I want to start there give considering the fact that 3 00:00:08,600 --> 00:00:10,280 Speaker 2: you've talked about how the US is going to go 4 00:00:10,320 --> 00:00:14,120 Speaker 2: bankrupt and how it's on our unsustainable fiscal path, are 5 00:00:14,160 --> 00:00:16,479 Speaker 2: we seeing that priced in or is there still a 6 00:00:16,480 --> 00:00:17,279 Speaker 2: reconing to come. 7 00:00:17,800 --> 00:00:22,560 Speaker 3: Well, it's certainly behaving differently than it was for the 8 00:00:22,680 --> 00:00:24,080 Speaker 3: last four decades. 9 00:00:24,880 --> 00:00:26,480 Speaker 1: I mean, what we've seen is. 10 00:00:28,600 --> 00:00:33,199 Speaker 3: In the last of fifteen years, there's been a number 11 00:00:33,280 --> 00:00:36,320 Speaker 3: of corrections on the s and P five hundred, and 12 00:00:36,400 --> 00:00:38,600 Speaker 3: in every single one of them, when the SMP goes 13 00:00:38,600 --> 00:00:42,080 Speaker 3: down more than ten percent, the dollar indexed the trade 14 00:00:42,080 --> 00:00:47,280 Speaker 3: weighted dollar index goes up. This time, the dollar went 15 00:00:47,320 --> 00:00:50,560 Speaker 3: down when the SMP five hundred went down almost twenty percent. 16 00:00:51,159 --> 00:00:53,479 Speaker 1: That's strange. Things are behaving differently. 17 00:00:53,760 --> 00:00:57,520 Speaker 3: Usually, when the Fed starts cutting interest rates, rates. 18 00:00:57,240 --> 00:00:58,680 Speaker 1: Across the yel curve go down. 19 00:00:59,360 --> 00:01:02,840 Speaker 3: The ten year t y almost always goes up immediately 20 00:01:02,840 --> 00:01:07,280 Speaker 3: following the first Fed rate cut, and then it keeps 21 00:01:07,360 --> 00:01:11,200 Speaker 3: rallying for a while. This time, the tenure yield went up, 22 00:01:12,000 --> 00:01:15,679 Speaker 3: and the yield curve is steepening. So I think what 23 00:01:15,760 --> 00:01:20,920 Speaker 3: we have is recognition that the interest expense for the 24 00:01:20,959 --> 00:01:25,160 Speaker 3: United States is untenable if we continue running a two 25 00:01:25,160 --> 00:01:28,200 Speaker 3: point one trillion dollar budget deficit and we continue to 26 00:01:28,240 --> 00:01:31,959 Speaker 3: have sticky interest rates. One thing that people fail to 27 00:01:32,000 --> 00:01:37,119 Speaker 3: appreciate is how much the average treasury payment has gone up. 28 00:01:37,160 --> 00:01:41,880 Speaker 3: The average yield, the average coupon on treasuries was below 29 00:01:41,920 --> 00:01:45,280 Speaker 3: two percent. The entire treasury market, all thirty odd billion 30 00:01:45,319 --> 00:01:46,840 Speaker 3: of it, you a resolved together. 31 00:01:46,920 --> 00:01:47,720 Speaker 1: Some of them are old. 32 00:01:47,760 --> 00:01:49,960 Speaker 3: You know, they were issued with higher interest rates, but 33 00:01:50,000 --> 00:01:53,080 Speaker 3: it was below two percent. Now it's pushing four percent. 34 00:01:53,840 --> 00:01:56,960 Speaker 3: And as long as bonds are maturing, and there's trillions 35 00:01:56,960 --> 00:01:59,280 Speaker 3: and trillions of dollars of the maturing, a lot of 36 00:01:59,320 --> 00:02:06,080 Speaker 3: them were issued back in you know, two thousand and nine, eighties, 37 00:02:06,240 --> 00:02:08,480 Speaker 3: other time periods. Even if you just issued them in 38 00:02:08,520 --> 00:02:10,840 Speaker 3: twenty nineteen. Some of these are starting to come doe. 39 00:02:11,200 --> 00:02:13,400 Speaker 3: And they were issued with coupons of a quarter of 40 00:02:13,440 --> 00:02:16,080 Speaker 3: a percent, and now it's four and a quarter of percent, 41 00:02:16,120 --> 00:02:20,560 Speaker 3: so it's four hundred basis points higher. So this problem 42 00:02:20,600 --> 00:02:26,080 Speaker 3: continues to build, and there's an awareness now that the 43 00:02:26,160 --> 00:02:28,880 Speaker 3: long term treasury bond is not a legitimate flight to 44 00:02:28,960 --> 00:02:34,640 Speaker 3: quality asset. It's not responding to lower interest rates. It's 45 00:02:34,680 --> 00:02:37,600 Speaker 3: not really responding to an inflation rate which is now 46 00:02:37,919 --> 00:02:40,440 Speaker 3: two and a half percent. Probably going to go higher 47 00:02:40,480 --> 00:02:43,040 Speaker 3: on the inflation rate because the ones that are rolling 48 00:02:43,040 --> 00:02:45,920 Speaker 3: off from a year ago, I mean the cumulative I 49 00:02:45,919 --> 00:02:49,120 Speaker 3: think headline CPI that came out today it was a 50 00:02:49,160 --> 00:02:51,480 Speaker 3: point one to eight, but the one that was rolling 51 00:02:51,520 --> 00:02:54,440 Speaker 3: off I think was zero point one. And if you 52 00:02:54,480 --> 00:02:57,720 Speaker 3: do the next two months, those three months together that quarter, 53 00:02:58,480 --> 00:03:00,519 Speaker 3: the cumulative rise from a year ago is point one. 54 00:03:01,200 --> 00:03:05,200 Speaker 3: So we're likely seeing the low point in near term inflation. 55 00:03:05,760 --> 00:03:08,919 Speaker 3: So yeah, I think there's the reckoning is coming, is 56 00:03:08,960 --> 00:03:13,200 Speaker 3: that we have to somehow figure out how we're going 57 00:03:13,240 --> 00:03:15,520 Speaker 3: to deal with thirty seven trillion dollars. I mean, we're 58 00:03:15,520 --> 00:03:18,119 Speaker 3: actually going to hit the thirty seven trillion number for real. 59 00:03:18,160 --> 00:03:22,320 Speaker 3: It's still thirty six point nine to five trillion, but 60 00:03:22,400 --> 00:03:23,640 Speaker 3: it's going up quickly. 61 00:03:23,680 --> 00:03:24,960 Speaker 1: So yeah, there's going. 62 00:03:24,800 --> 00:03:27,880 Speaker 3: To have to be some pretty creative thinking, and the 63 00:03:27,919 --> 00:03:33,800 Speaker 3: market's starting to believe that. So the private previous group 64 00:03:33,919 --> 00:03:37,480 Speaker 3: talked about the capital flows, and one of the reasons 65 00:03:37,480 --> 00:03:42,360 Speaker 3: that the US is underperforming at this point is so 66 00:03:42,560 --> 00:03:46,560 Speaker 3: much money came into the United States since say twenty 67 00:03:46,680 --> 00:03:51,920 Speaker 3: fifteen or so or twenty oh five, and it's there 68 00:03:52,000 --> 00:03:55,560 Speaker 3: was a net investment position. Foreigners were investing more in 69 00:03:55,600 --> 00:03:57,720 Speaker 3: the US than the US was investing outside the country. 70 00:03:57,880 --> 00:04:00,560 Speaker 3: To the tune of three trillion dollars. That was about 71 00:04:00,640 --> 00:04:04,840 Speaker 3: fifteen seventeen years ago. It's now over twenty five trillion 72 00:04:04,920 --> 00:04:08,880 Speaker 3: dollars is the net investment position, and the dollar is falling. 73 00:04:09,640 --> 00:04:14,560 Speaker 3: So it's not inconceivable that some of that twenty five 74 00:04:14,720 --> 00:04:17,160 Speaker 3: trillion dollars that came in over just a couple of 75 00:04:17,160 --> 00:04:17,679 Speaker 3: not even. 76 00:04:17,520 --> 00:04:19,880 Speaker 1: Two decades could go out. 77 00:04:20,080 --> 00:04:23,960 Speaker 3: And so this is a moment where finally you had 78 00:04:23,960 --> 00:04:27,280 Speaker 3: the setup where non US investment, even if you're a 79 00:04:27,320 --> 00:04:30,680 Speaker 3: dollar based investor, you should be thinking about increasing your 80 00:04:30,720 --> 00:04:33,480 Speaker 3: allocations to non dollar investments. 81 00:04:33,680 --> 00:04:36,919 Speaker 1: And it's already working. It's already working. So there's so 82 00:04:37,000 --> 00:04:37,920 Speaker 1: much to unpack there. 83 00:04:38,279 --> 00:04:40,839 Speaker 2: I want to talk about the idea that there could 84 00:04:40,920 --> 00:04:43,039 Speaker 2: be this twenty five trillion or some of it that 85 00:04:43,200 --> 00:04:46,240 Speaker 2: was wait, exactly whatever it is, three trillion. You get 86 00:04:46,240 --> 00:04:49,960 Speaker 2: trillions of dollars moving out of US assets. How high 87 00:04:50,279 --> 00:04:52,599 Speaker 2: or what kind of behavior do you have to see 88 00:04:52,839 --> 00:04:54,520 Speaker 2: in a thirty year bond. 89 00:04:54,240 --> 00:04:55,000 Speaker 1: To like it? Again? 90 00:04:55,080 --> 00:04:56,640 Speaker 2: Given the fact, even very vocal. 91 00:04:56,480 --> 00:04:58,680 Speaker 3: I've I've been fit sure about this for a long time, 92 00:04:59,000 --> 00:05:03,440 Speaker 3: and I've come to the idea that as the FED 93 00:05:03,560 --> 00:05:07,760 Speaker 3: eases and when the economy really does weaken more than 94 00:05:07,920 --> 00:05:11,640 Speaker 3: the treasure will continue to go up at the long end. 95 00:05:12,160 --> 00:05:15,719 Speaker 3: And so for now we're very uninvolved in the long 96 00:05:15,800 --> 00:05:19,480 Speaker 3: term treasury bond. But there will come a moment where 97 00:05:19,480 --> 00:05:22,680 Speaker 3: you have to pivot because there's going to be a response, 98 00:05:23,320 --> 00:05:26,800 Speaker 3: and I've got many ideas of what that response might be, 99 00:05:26,880 --> 00:05:30,760 Speaker 3: but one of the leading candidates would be quantitative easy. 100 00:05:30,839 --> 00:05:32,599 Speaker 3: So you get to a point where the rate is 101 00:05:32,640 --> 00:05:36,640 Speaker 3: so uncomfortably high, what is that number, I'm going to 102 00:05:36,640 --> 00:05:40,920 Speaker 3: guess six percent, where they say this is going to 103 00:05:41,080 --> 00:05:43,599 Speaker 3: be something that we're going to be running a five 104 00:05:43,680 --> 00:05:46,920 Speaker 3: trillion dollar budget deficit with all this bond issuance when 105 00:05:46,920 --> 00:05:50,680 Speaker 3: we go into a recession, and so they'll pivot. I 106 00:05:50,760 --> 00:05:55,120 Speaker 3: believe this is a sensible idea. There's other ideas too, 107 00:05:55,200 --> 00:05:59,479 Speaker 3: but the leading candidate is they will announce quantitative easing 108 00:06:00,080 --> 00:06:03,520 Speaker 3: on buying long term treasuries, and when they do, you 109 00:06:03,560 --> 00:06:06,800 Speaker 3: have to you have to very quickly, and hopefully you 110 00:06:06,839 --> 00:06:10,760 Speaker 3: do it the day before they announced it. But we 111 00:06:10,800 --> 00:06:13,479 Speaker 3: don't have access to the day before stuff. That's that's 112 00:06:13,480 --> 00:06:19,560 Speaker 3: for the primary broker dealers. But you would need to 113 00:06:19,600 --> 00:06:23,559 Speaker 3: buy long term treasuries as much as you possibly could, 114 00:06:24,040 --> 00:06:26,479 Speaker 3: because when that gets denounced, it will be just like 115 00:06:26,480 --> 00:06:30,320 Speaker 3: when they announced buying corporate bonds in COVID, where all 116 00:06:30,360 --> 00:06:32,919 Speaker 3: of a sudden the corporate bond market went from down 117 00:06:33,600 --> 00:06:36,440 Speaker 3: twenty points to right back to where it started in 118 00:06:36,520 --> 00:06:38,040 Speaker 3: just a matter of a few days. 119 00:06:38,520 --> 00:06:39,160 Speaker 1: You could get a. 120 00:06:39,080 --> 00:06:41,640 Speaker 3: Twenty point rally on the long bond if they announced 121 00:06:41,640 --> 00:06:43,279 Speaker 3: that they're buying long band could that would be one 122 00:06:43,320 --> 00:06:44,400 Speaker 3: hundred basis point drop. 123 00:06:44,680 --> 00:06:46,800 Speaker 2: You said that if the Fed were to cut rates 124 00:06:47,120 --> 00:06:50,160 Speaker 2: that might cause a selloff in thirty year treasuries. 125 00:06:50,320 --> 00:06:51,279 Speaker 1: It's already happening. 126 00:06:51,320 --> 00:06:55,359 Speaker 3: They started cutting rates September of twenty twenty three, and 127 00:06:55,400 --> 00:06:58,839 Speaker 3: the long bond has gone up in yield significantly since 128 00:06:58,880 --> 00:07:00,159 Speaker 3: then one hundred basis point Do. 129 00:07:00,200 --> 00:07:01,160 Speaker 2: You think that will happen again? 130 00:07:01,240 --> 00:07:01,719 Speaker 1: Well? Why not? 131 00:07:02,279 --> 00:07:08,200 Speaker 3: I mean, it's a paradigm shift. We have a tremendous 132 00:07:08,240 --> 00:07:11,840 Speaker 3: paradigm shift that's going on where money is not coming 133 00:07:11,880 --> 00:07:15,120 Speaker 3: into the United States, where the long line is not 134 00:07:15,360 --> 00:07:18,640 Speaker 3: a flight to quality asset. Gold suddenly is the flight 135 00:07:18,680 --> 00:07:23,040 Speaker 3: to quality asset. People I think Costco is selling gold 136 00:07:23,120 --> 00:07:25,680 Speaker 3: retail and they can't keep it in stock, you know. 137 00:07:25,800 --> 00:07:29,000 Speaker 3: And gold has gone from it was living at eighteen 138 00:07:29,040 --> 00:07:32,280 Speaker 3: hundred dollars an ounce not very long ago, and once 139 00:07:32,320 --> 00:07:34,800 Speaker 3: it broke above two thousand, it was just straight up. 140 00:07:35,120 --> 00:07:36,480 Speaker 1: And now it was basically a. 141 00:07:36,440 --> 00:07:40,280 Speaker 3: Third of ten thousand, thousand, three hundred thirty three and 142 00:07:40,320 --> 00:07:40,920 Speaker 3: thirty three cents. 143 00:07:40,920 --> 00:07:42,480 Speaker 1: It was actually what I looked at yesterday. 144 00:07:42,960 --> 00:07:47,080 Speaker 3: So it's I think gold is a real asset class. 145 00:07:47,120 --> 00:07:52,560 Speaker 3: It's no longer for lunatic survivalists and wild speculators. It's 146 00:07:52,640 --> 00:07:55,720 Speaker 3: viewed as an asset class. And central banks have been 147 00:07:55,760 --> 00:07:58,920 Speaker 3: accumulating gold. Gold was so was stuck in the mud 148 00:07:59,320 --> 00:08:02,920 Speaker 3: because for a decade or more central banks were selling 149 00:08:02,920 --> 00:08:03,280 Speaker 3: it down. 150 00:08:03,480 --> 00:08:06,200 Speaker 1: They've bought it all back, so you buy gold. 151 00:08:06,560 --> 00:08:09,240 Speaker 3: I've owned gold since it was three hundred dollars, and 152 00:08:09,280 --> 00:08:11,480 Speaker 3: I also owned some gold miners personally. 153 00:08:12,040 --> 00:08:14,040 Speaker 1: But they bought it all back. It's amazing. 154 00:08:14,080 --> 00:08:17,920 Speaker 3: They sold it at like three hundred, four hundred dollars 155 00:08:17,960 --> 00:08:20,840 Speaker 3: and they're buying it back at three thousand dollars. See, 156 00:08:21,080 --> 00:08:23,600 Speaker 3: central banks are not very good long term investors. 157 00:08:24,480 --> 00:08:26,240 Speaker 2: Well maybe they could use advice from you. One thing 158 00:08:26,280 --> 00:08:28,320 Speaker 2: that we've been hearing about in a number of the 159 00:08:28,320 --> 00:08:30,880 Speaker 2: panels this morning has been about the corporate debt market. 160 00:08:31,600 --> 00:08:35,000 Speaker 2: And one thing that I've gathered from talking with people 161 00:08:35,040 --> 00:08:38,000 Speaker 2: at Double Line and reading your outlooks is that you've 162 00:08:38,000 --> 00:08:40,120 Speaker 2: reduced your allocation to below. 163 00:08:39,920 --> 00:08:44,240 Speaker 3: Investment grade credit systematically over a two year period. 164 00:08:44,080 --> 00:08:46,680 Speaker 2: To the lowest level I believe since the inception of 165 00:08:46,720 --> 00:08:47,360 Speaker 2: Double Line. 166 00:08:47,360 --> 00:08:47,720 Speaker 1: That's right. 167 00:08:47,760 --> 00:08:52,240 Speaker 3: We have higher quality portfolios today relative to strategy style 168 00:08:53,440 --> 00:08:56,760 Speaker 3: at any time we run closed down funds that are leveraged. 169 00:08:57,480 --> 00:08:59,720 Speaker 3: We have the lowest leverage of all time. 170 00:09:00,080 --> 00:09:00,480 Speaker 1: We had. 171 00:09:00,559 --> 00:09:04,680 Speaker 3: We had forty five percent leverage us versus net assets, 172 00:09:05,040 --> 00:09:07,760 Speaker 3: and one of our funds were at seven and we're 173 00:09:07,800 --> 00:09:12,160 Speaker 3: just we're there because we want to be a liquidity provider. 174 00:09:12,640 --> 00:09:15,440 Speaker 3: When you get paid to be a liquidity provider and 175 00:09:15,480 --> 00:09:21,120 Speaker 3: you're not. Now, the spreads are very uninteresting in the 176 00:09:21,320 --> 00:09:23,880 Speaker 3: in the credit market, just as the valuation of the 177 00:09:23,920 --> 00:09:26,479 Speaker 3: S and P five hundred is incredibly uninteresting. 178 00:09:26,880 --> 00:09:30,199 Speaker 1: You know, when we had the big sell off in April. 179 00:09:29,920 --> 00:09:32,040 Speaker 3: If we were like, yeah, we were kind of asleep 180 00:09:32,040 --> 00:09:32,679 Speaker 3: at the switch. 181 00:09:32,760 --> 00:09:34,280 Speaker 1: The market was really overvalued. 182 00:09:34,600 --> 00:09:36,680 Speaker 3: We really shouldn't have We really should have been thinking 183 00:09:36,960 --> 00:09:41,160 Speaker 3: more cautiously. Well, it's more overvalue today because the S 184 00:09:41,200 --> 00:09:43,240 Speaker 3: and P five hundred is down one or two percent 185 00:09:43,760 --> 00:09:47,040 Speaker 3: and earnings estimates have been cut significantly. 186 00:09:47,480 --> 00:09:48,280 Speaker 1: So if you look at the. 187 00:09:48,280 --> 00:09:51,480 Speaker 3: Forward pe, it's higher now than it was at the 188 00:09:51,480 --> 00:09:55,040 Speaker 3: all time high back in February or early March. 189 00:09:55,360 --> 00:09:57,760 Speaker 2: So what are you sort of anticipating? 190 00:09:58,040 --> 00:10:02,440 Speaker 3: What kind of anticipat a great buying opportunity? I don't 191 00:10:02,440 --> 00:10:05,480 Speaker 3: know when it's going to happen, but it's getting close. 192 00:10:06,160 --> 00:10:11,520 Speaker 3: I feel that the environment feels a lot like nineteen 193 00:10:11,600 --> 00:10:17,000 Speaker 3: ninety nine relative to AI. Is just mapover dot com 194 00:10:17,360 --> 00:10:20,680 Speaker 3: for AI. I also think it feels a lot like 195 00:10:21,480 --> 00:10:24,640 Speaker 3: two thousand and six, two thousand and seven. You know, 196 00:10:25,000 --> 00:10:27,880 Speaker 3: it's funny. One of the hardest things to do in 197 00:10:27,920 --> 00:10:31,719 Speaker 3: the investment business is to learn and fully appreciate how 198 00:10:31,800 --> 00:10:35,680 Speaker 3: long everything takes to happen. It takes forever for the 199 00:10:35,720 --> 00:10:38,280 Speaker 3: problems to actually show up, it takes forever to the 200 00:10:38,320 --> 00:10:46,719 Speaker 3: defaults to finally arrive. But people anticipate changes with great enthusiasm, 201 00:10:47,200 --> 00:10:51,679 Speaker 3: so AI, of course, was embraced with great enthusiasm. Electricity 202 00:10:52,320 --> 00:10:55,720 Speaker 3: was all the rage back in nineteen hundred because people 203 00:10:55,760 --> 00:10:58,760 Speaker 3: realized that electricity could change the world, and I think 204 00:10:58,800 --> 00:11:01,559 Speaker 3: we can all agree electricity change the world in ways 205 00:11:01,559 --> 00:11:03,680 Speaker 3: they're bigger than AI will change the world. 206 00:11:03,679 --> 00:11:07,760 Speaker 1: In my opinion, electricity is like amazing. But there was 207 00:11:07,800 --> 00:11:08,719 Speaker 1: a huge boom in. 208 00:11:08,679 --> 00:11:12,160 Speaker 3: Electricity stocks in the first decade of the twentieth century. 209 00:11:12,720 --> 00:11:18,360 Speaker 3: But electricity stocks boomed so much that their relative performance 210 00:11:19,120 --> 00:11:24,040 Speaker 3: peaked versus the stock market excluding electricity stocks in nineteen eleven. 211 00:11:24,760 --> 00:11:27,320 Speaker 3: If you own electricity stocks, you've been underperforming the non 212 00:11:27,320 --> 00:11:32,160 Speaker 3: electricity stocks since nineteen eleven. That's a long time, and 213 00:11:33,040 --> 00:11:35,960 Speaker 3: that's what happens. That happened with the dot coms too. 214 00:11:35,960 --> 00:11:38,480 Speaker 3: That was the nineteen ninety nine thing. Sure, it turned 215 00:11:38,480 --> 00:11:41,280 Speaker 3: out that some of those stocks were great investments, but 216 00:11:42,679 --> 00:11:47,120 Speaker 3: that enthusiasm becomes very excessive. They see the possibilities, but 217 00:11:47,200 --> 00:11:49,720 Speaker 3: it takes long time for the possibilities to arrive. 218 00:11:50,280 --> 00:11:52,400 Speaker 1: It's taking a long time for the tariffs to arrive. 219 00:11:53,040 --> 00:11:55,520 Speaker 2: So do you think that the tech stocks that have 220 00:11:55,559 --> 00:11:58,200 Speaker 2: been not performing are going to lag behind in terms 221 00:11:58,200 --> 00:12:01,360 Speaker 2: of the ninety nine performance? Sort of the corollary of 222 00:12:01,400 --> 00:12:03,839 Speaker 2: all of the credit investments tied to the AI build 223 00:12:03,840 --> 00:12:04,520 Speaker 2: out also. 224 00:12:04,600 --> 00:12:08,400 Speaker 3: Momentum trade and momentum trades always overshoot on the upside, 225 00:12:08,760 --> 00:12:12,400 Speaker 3: and then once the momentum is broken, the late comers 226 00:12:12,559 --> 00:12:15,560 Speaker 3: to decide that their first loss is their best loss. 227 00:12:15,559 --> 00:12:17,320 Speaker 1: And it turns into a seller's market. 228 00:12:17,559 --> 00:12:19,560 Speaker 2: You talk about two thousand and six, two thousand and seven, 229 00:12:19,679 --> 00:12:23,199 Speaker 2: that's a credit event. And when we took that poll 230 00:12:23,320 --> 00:12:27,280 Speaker 2: that my colleague Danny was pointing to, private credit seemed 231 00:12:27,320 --> 00:12:29,240 Speaker 2: to be the spot where people expect a faults to 232 00:12:29,280 --> 00:12:30,000 Speaker 2: really pick up. 233 00:12:30,280 --> 00:12:31,320 Speaker 1: Yeah, do you agree? 234 00:12:31,360 --> 00:12:33,720 Speaker 2: Do you think that that's sort of the epicenter some risk? 235 00:12:33,880 --> 00:12:39,480 Speaker 3: Sure, it's private credit is analogous to private credit today, 236 00:12:39,520 --> 00:12:44,120 Speaker 3: is analogous to the CDO market in the mid part 237 00:12:44,800 --> 00:12:49,439 Speaker 3: of the OS, where there's just tremendous issuance, there's a 238 00:12:49,760 --> 00:12:51,480 Speaker 3: tremendous acceptance. 239 00:12:52,160 --> 00:12:54,959 Speaker 1: There's all kinds of I was listening. 240 00:12:54,600 --> 00:12:58,480 Speaker 3: Briefly to kind of private creditors panel here and there's 241 00:12:58,520 --> 00:13:02,160 Speaker 3: a lot of there's a lot of phraseology that I 242 00:13:02,240 --> 00:13:04,960 Speaker 3: heard that reminded me of CDO panels in two thousand 243 00:13:04,960 --> 00:13:09,760 Speaker 3: and six, two thousand and seven. Just complexity, ill liquidity, 244 00:13:11,120 --> 00:13:17,120 Speaker 3: I don't know, very large, you know, tensions between investor classes, 245 00:13:18,760 --> 00:13:24,280 Speaker 3: these things. Private credit is extremely heavily invested in, you know, 246 00:13:24,360 --> 00:13:25,960 Speaker 3: Harvard University. 247 00:13:25,440 --> 00:13:27,840 Speaker 1: Who has a fifty three billion dollar endowment. 248 00:13:27,880 --> 00:13:31,320 Speaker 3: Supposedly they had to come to the bond market twice 249 00:13:31,960 --> 00:13:34,839 Speaker 3: because they couldn't have they did enough money. They have 250 00:13:34,920 --> 00:13:37,760 Speaker 3: fifty three billion dollars and they can't pay They can't 251 00:13:37,760 --> 00:13:41,199 Speaker 3: pay for repairs, they can't pay for operating expenses. They 252 00:13:41,200 --> 00:13:43,360 Speaker 3: came to the bond market looking for a couple of 253 00:13:43,679 --> 00:13:45,520 Speaker 3: two and a half billion dollars. I think they got 254 00:13:45,600 --> 00:13:47,960 Speaker 3: one and a half billion dollars. And then they came 255 00:13:48,000 --> 00:13:50,719 Speaker 3: back again. And I think it was last week it 256 00:13:50,840 --> 00:13:54,640 Speaker 3: was announced that Harvard is thinking about selling some of their. 257 00:13:54,480 --> 00:13:56,600 Speaker 1: Private equity interests at a discount. 258 00:13:56,640 --> 00:13:59,640 Speaker 3: Obviously, because when you're when you're a forced seller, you're 259 00:13:59,640 --> 00:14:02,600 Speaker 3: not going to your cost, and so there's a lot 260 00:14:02,640 --> 00:14:05,280 Speaker 3: of over investment. When I speak to Rias, you know 261 00:14:05,360 --> 00:14:08,800 Speaker 3: Peel that manage a kind of hire net worth retail 262 00:14:08,800 --> 00:14:13,080 Speaker 3: money for the past three four years, the UH one 263 00:14:13,120 --> 00:14:17,240 Speaker 3: of the very first questions, without exception, what about private credit? 264 00:14:17,520 --> 00:14:20,800 Speaker 1: And I say, are you heavily invested in private credit? Yes? 265 00:14:21,200 --> 00:14:25,800 Speaker 3: And everybody is, and I say, so, you know, what's 266 00:14:25,840 --> 00:14:28,680 Speaker 3: the argument? And I was giving a speech down in 267 00:14:28,720 --> 00:14:32,120 Speaker 3: Texas and the woman before me was from a fund 268 00:14:32,120 --> 00:14:35,640 Speaker 3: that's very heavily involved in private credit, and she basically 269 00:14:35,640 --> 00:14:39,160 Speaker 3: gave a sales pitch for private credit, and basically a 270 00:14:39,200 --> 00:14:42,000 Speaker 3: three pointed sales pitch, none of which are the points 271 00:14:42,040 --> 00:14:46,920 Speaker 3: really sell me. The first is that it's less volatile. 272 00:14:47,040 --> 00:14:49,920 Speaker 3: It's a sharp ratio argument, so you know, and it's 273 00:14:49,920 --> 00:14:51,520 Speaker 3: only we all know. It's only because they don't mark 274 00:14:51,560 --> 00:14:53,960 Speaker 3: them to market. I mean, everybody knows that. So it's 275 00:14:53,960 --> 00:14:56,160 Speaker 3: just like private private equity. It's S and P five 276 00:14:56,200 --> 00:14:58,800 Speaker 3: hundred goes from one hundred to fifty. They mark their 277 00:14:58,800 --> 00:15:02,560 Speaker 3: private equity down twenty points, and then they both recover 278 00:15:02,800 --> 00:15:04,360 Speaker 3: over time, they both go up to one hundred. 279 00:15:04,600 --> 00:15:05,160 Speaker 1: So look at that. 280 00:15:05,200 --> 00:15:07,760 Speaker 3: They have the same return, but one had S ANDP 281 00:15:07,840 --> 00:15:11,560 Speaker 3: had double the volatility. And then some that argument is 282 00:15:11,600 --> 00:15:16,720 Speaker 3: not valid. It's they aren't marked to market. So you know, 283 00:15:16,800 --> 00:15:21,400 Speaker 3: the next argument is somewhat valid. Historical performance. Private credit 284 00:15:21,520 --> 00:15:24,560 Speaker 3: had some very good years. It was quite cheap, you know, 285 00:15:24,640 --> 00:15:27,280 Speaker 3: five or seven years ago, and you use a historical 286 00:15:27,840 --> 00:15:32,040 Speaker 3: argument that the performance is good, and it's true, but 287 00:15:32,120 --> 00:15:35,600 Speaker 3: as we all know, as they say in the disclaimers 288 00:15:35,600 --> 00:15:39,400 Speaker 3: at the commercials, you know, past performance is no guarantee 289 00:15:39,440 --> 00:15:43,880 Speaker 3: of future results, and public credit I think has outperformed 290 00:15:43,960 --> 00:15:46,360 Speaker 3: private credit for a few quarters. 291 00:15:46,040 --> 00:15:48,400 Speaker 1: At least now, so it's already changing. 292 00:15:48,840 --> 00:15:51,800 Speaker 3: So I think that there's a lot of overinvestment in 293 00:15:51,840 --> 00:15:55,880 Speaker 3: private credit, and the liquidity is not very good, and 294 00:15:56,760 --> 00:16:01,240 Speaker 3: I just don't think the excess reward is anything close 295 00:16:01,280 --> 00:16:03,360 Speaker 3: to what it used to be. So I would view 296 00:16:03,400 --> 00:16:05,400 Speaker 3: that as a place where there would be forced selling. 297 00:16:05,880 --> 00:16:09,640 Speaker 3: Harvard could turn into a foreseller, and Harvard, you know, 298 00:16:09,720 --> 00:16:14,040 Speaker 3: they at least used to have the best reputation. Yale 299 00:16:14,080 --> 00:16:17,560 Speaker 3: had this great reputation for investing in private markets, and 300 00:16:18,040 --> 00:16:21,760 Speaker 3: that lured in a lot of me too behavior because 301 00:16:21,800 --> 00:16:25,359 Speaker 3: they were emulating the results of Yale. But there's once 302 00:16:25,440 --> 00:16:29,520 Speaker 3: one university is in publicly acknowledging that they have liquidity problems. 303 00:16:29,720 --> 00:16:30,600 Speaker 1: I've got news for you. 304 00:16:30,760 --> 00:16:32,920 Speaker 3: If you have a cockroach in the kitchen, there's never 305 00:16:33,000 --> 00:16:35,440 Speaker 3: one cockroach, so there's more. 306 00:16:35,720 --> 00:16:37,560 Speaker 1: It's always it becomes systemic. 307 00:16:38,320 --> 00:16:42,360 Speaker 3: It doesn't mean everybody's overinvested and overly locked up. But 308 00:16:42,800 --> 00:16:47,520 Speaker 3: in two thousand and eight, I was raising lots of 309 00:16:47,560 --> 00:16:49,960 Speaker 3: money for distressed mortgages, you know, the stuff that was 310 00:16:50,000 --> 00:16:53,360 Speaker 3: defaulting like crazy. It got to such a price that 311 00:16:53,440 --> 00:16:58,920 Speaker 3: it was just truly unbelievable. I mean, there were securities 312 00:16:58,920 --> 00:17:01,960 Speaker 3: that were trading that life at one hundred had never 313 00:17:02,040 --> 00:17:04,679 Speaker 3: really had much volatility, and they were being liquidated at 314 00:17:04,720 --> 00:17:05,159 Speaker 3: prices of. 315 00:17:05,160 --> 00:17:08,000 Speaker 1: Thirty cents on the dollar. And you could use. 316 00:17:07,840 --> 00:17:12,880 Speaker 3: Assumptions that were just nobody believed would happen. You could say, 317 00:17:12,880 --> 00:17:15,119 Speaker 3: seventy percent of these mortgages to fall and we recover 318 00:17:15,240 --> 00:17:18,119 Speaker 3: thirty cents on the dollar, and it's a twenty four IRR. 319 00:17:18,600 --> 00:17:21,159 Speaker 3: And I said this to the Stanford University Endowment, the 320 00:17:21,200 --> 00:17:23,520 Speaker 3: head guy, and I said, I can prove to you 321 00:17:23,560 --> 00:17:25,160 Speaker 3: that your worst case is going to be a twenty 322 00:17:25,200 --> 00:17:28,399 Speaker 3: four IRR because I'm going to use you. Tell me 323 00:17:28,480 --> 00:17:35,960 Speaker 3: what assumptions you think are absurdly punishing, and I'll use them. 324 00:17:36,280 --> 00:17:38,320 Speaker 1: And you got twenty four ir at. Let me finish. 325 00:17:38,400 --> 00:17:43,119 Speaker 3: And he says, I can't argue with you. You make a 326 00:17:43,240 --> 00:17:47,720 Speaker 3: very compelling point, but I can't invest with you. And 327 00:17:47,760 --> 00:17:51,280 Speaker 3: I said why, He said, I have no money. We're 328 00:17:51,320 --> 00:17:54,080 Speaker 3: all locked up. We're getting called because everything's so cheap. 329 00:17:54,119 --> 00:17:57,000 Speaker 3: Everyone's calling their money now. You know these are draw funds. 330 00:17:57,320 --> 00:17:59,960 Speaker 3: Now we're calling your capital. And he said, I can't 331 00:18:00,080 --> 00:18:02,080 Speaker 3: even make those capitol calls. And I said, come on, 332 00:18:03,160 --> 00:18:06,679 Speaker 3: I really love Stanford Endowment. What a great name for 333 00:18:06,720 --> 00:18:09,400 Speaker 3: the client list. Give me ten million dollars. 334 00:18:10,920 --> 00:18:14,120 Speaker 1: I don't have ten million dollars. I have no money. 335 00:18:14,359 --> 00:18:21,359 Speaker 1: These are large endowments and if they if they need money, 336 00:18:21,520 --> 00:18:22,719 Speaker 1: they have to sell. 337 00:18:22,880 --> 00:18:26,879 Speaker 3: You say markets. Everyone knows markets have fear and greed 338 00:18:27,000 --> 00:18:29,200 Speaker 3: that drive them. And everyone knows that fear is stronger 339 00:18:29,200 --> 00:18:32,520 Speaker 3: than greed when it really push comes to shove. But 340 00:18:32,640 --> 00:18:37,520 Speaker 3: the actual strongest driver of investment behavior is need. 341 00:18:38,440 --> 00:18:40,280 Speaker 1: Sometimes people need back. 342 00:18:40,359 --> 00:18:44,560 Speaker 3: In nineteen ninety three, interest rates were perceived to be low, 343 00:18:44,600 --> 00:18:47,560 Speaker 3: and I went to one of my university of endowment. 344 00:18:48,080 --> 00:18:50,920 Speaker 1: It was the treasurer. It was their operating money, and he. 345 00:18:50,880 --> 00:18:53,560 Speaker 3: Said, I just met with the president of the university 346 00:18:53,760 --> 00:18:56,119 Speaker 3: and he says, I have to make six percent for 347 00:18:56,200 --> 00:18:58,320 Speaker 3: the operating money. And he said, I told him it's 348 00:18:58,359 --> 00:19:03,320 Speaker 3: impossible to get six percent without tremendous risk because treasury 349 00:19:03,400 --> 00:19:07,160 Speaker 3: interest rates are at three And he said, wrong answer. 350 00:19:07,880 --> 00:19:10,720 Speaker 3: You're going to get six percent. Just find out how 351 00:19:10,720 --> 00:19:13,320 Speaker 3: you're going to do it. And of course, in nineteen 352 00:19:13,400 --> 00:19:15,679 Speaker 3: ninety four, interest rates went way up, and everybody that 353 00:19:15,920 --> 00:19:20,120 Speaker 3: had done that sort of thing like Orange County, California had. 354 00:19:20,359 --> 00:19:24,600 Speaker 3: There was a very famous default of Orange County, California. 355 00:19:25,119 --> 00:19:31,200 Speaker 1: And you know, so their need is very powerful. 356 00:19:31,240 --> 00:19:36,000 Speaker 3: But it's bad enough when you make the determination, you say, 357 00:19:36,080 --> 00:19:39,359 Speaker 3: I have this goal, the six percent goal, I need 358 00:19:39,400 --> 00:19:39,840 Speaker 3: to make it. 359 00:19:40,000 --> 00:19:40,879 Speaker 1: I'll give it a shot. 360 00:19:41,080 --> 00:19:43,760 Speaker 3: But the other side of that is even more powerful 361 00:19:44,160 --> 00:19:47,240 Speaker 3: when you're forced to sell. It doesn't matter what the 362 00:19:47,240 --> 00:19:50,480 Speaker 3: price is. You don't have an option. If you have 363 00:19:50,600 --> 00:19:52,200 Speaker 3: to sell to pay the bills. 364 00:19:52,760 --> 00:19:53,640 Speaker 1: What are you going to do. 365 00:19:54,080 --> 00:19:56,399 Speaker 2: If you're preparing for that kind of moment, are you 366 00:19:56,440 --> 00:19:58,359 Speaker 2: sitting mostly in cash a little gold? 367 00:19:58,560 --> 00:20:01,000 Speaker 1: No have. 368 00:20:02,040 --> 00:20:04,119 Speaker 3: We manage a lot of other people's money, and a 369 00:20:04,119 --> 00:20:05,480 Speaker 3: lot of it is in. 370 00:20:05,440 --> 00:20:06,440 Speaker 1: The fixed income market. 371 00:20:06,480 --> 00:20:11,400 Speaker 3: We're just protecting and waiting for much better opportunities. 372 00:20:11,600 --> 00:20:14,560 Speaker 1: I think about it. You know, markets take the stairs up. 373 00:20:14,440 --> 00:20:17,720 Speaker 3: In the elevator down, which means they go up faster 374 00:20:17,800 --> 00:20:19,439 Speaker 3: than they go they go down faster than they go up. 375 00:20:20,119 --> 00:20:24,200 Speaker 3: And so when it really when it really breaks, it's 376 00:20:24,240 --> 00:20:27,080 Speaker 3: not down a couple of points, even what we saw 377 00:20:27,080 --> 00:20:29,840 Speaker 3: in April, that's not a real break of the credit market. 378 00:20:29,840 --> 00:20:32,200 Speaker 3: A real break the credit market is bonds drop thirty 379 00:20:32,200 --> 00:20:37,320 Speaker 3: points and everyone thinks they're cheap, but they have to sell, 380 00:20:38,160 --> 00:20:40,280 Speaker 3: so you have an opportunity at some point to buy 381 00:20:40,320 --> 00:20:43,040 Speaker 3: bonds down. I don't know, let's just say it. Let's 382 00:20:43,040 --> 00:20:46,400 Speaker 3: just say it's twenty five points. How your bonds yield 383 00:20:46,440 --> 00:20:50,520 Speaker 3: about two and a half percent more than treasury bonds. 384 00:20:51,000 --> 00:20:53,600 Speaker 3: So if it takes ten years for that twenty five 385 00:20:53,600 --> 00:20:55,359 Speaker 3: point opportunity, you're going to break even. 386 00:20:56,160 --> 00:20:58,040 Speaker 1: And it's not going to take ten years. It's not 387 00:20:58,080 --> 00:21:01,480 Speaker 1: going to take five years. Leave. But the other the 388 00:21:01,520 --> 00:21:03,160 Speaker 1: panel before me said, I think is true. 389 00:21:03,160 --> 00:21:06,000 Speaker 3: I think twenty seven twenty eight are going to be 390 00:21:07,119 --> 00:21:10,879 Speaker 3: are likely to be a window of tremendous opportunity because 391 00:21:10,880 --> 00:21:14,920 Speaker 3: I think by then the treasury problem will be even 392 00:21:15,000 --> 00:21:18,080 Speaker 3: more in focus than it is today, and I think 393 00:21:18,119 --> 00:21:22,439 Speaker 3: that it'll weigh it'll weigh upon market behavior. We need 394 00:21:22,600 --> 00:21:26,840 Speaker 3: we need to restructure a lot of things in our system. 395 00:21:26,960 --> 00:21:28,000 Speaker 1: We need to restructure. 396 00:21:28,920 --> 00:21:33,040 Speaker 3: We need to structure institutions, we need to restructure political parties, 397 00:21:33,080 --> 00:21:36,840 Speaker 3: we need to restructure our finances. All these things are 398 00:21:36,920 --> 00:21:41,360 Speaker 3: have been in place. It's the it's the waves of history, 399 00:21:41,840 --> 00:21:44,119 Speaker 3: you know. Neil Howe calls of the fourth turning. He 400 00:21:44,200 --> 00:21:46,520 Speaker 3: wrote a book called the fourth turning the mid nineties, 401 00:21:46,720 --> 00:21:50,280 Speaker 3: predicting the credit crisis around two thousand and six using 402 00:21:50,320 --> 00:21:54,919 Speaker 3: demography pretty good. And I know him pretty well and 403 00:21:54,920 --> 00:21:56,640 Speaker 3: we talk about it and we have the same concepts, 404 00:21:56,640 --> 00:22:02,280 Speaker 3: and that is that societies start with a pact. They 405 00:22:02,280 --> 00:22:04,840 Speaker 3: have an economic system that produces things, and then they 406 00:22:04,880 --> 00:22:07,760 Speaker 3: have so that's the means of production, and then they 407 00:22:07,800 --> 00:22:12,000 Speaker 3: have the property relations that split up the rewards. And 408 00:22:12,119 --> 00:22:14,280 Speaker 3: when it starts out, and this would be say right 409 00:22:14,320 --> 00:22:17,240 Speaker 3: after World War two or after the Civil War, it 410 00:22:17,240 --> 00:22:19,840 Speaker 3: starts out that everybody kind of buys into how the 411 00:22:19,880 --> 00:22:24,080 Speaker 3: system works. But there's a fundamental problem with this kind 412 00:22:24,119 --> 00:22:28,359 Speaker 3: of duality of proper relations and the means of production. 413 00:22:28,480 --> 00:22:37,520 Speaker 3: Means of production change in revolutionary ways steam engine, radio, television, telephone, internet, AI, 414 00:22:38,359 --> 00:22:42,680 Speaker 3: they're just explosions of innovation. But the proper relations they 415 00:22:42,680 --> 00:22:44,199 Speaker 3: don't change very quickly. 416 00:22:44,240 --> 00:22:47,920 Speaker 1: In fact, they're. 417 00:22:46,480 --> 00:22:50,439 Speaker 3: Barely evolutionary in the way they change, because over time 418 00:22:50,880 --> 00:22:54,119 Speaker 3: there's this becomes a wealth inequality. 419 00:22:53,640 --> 00:22:56,280 Speaker 1: Which which of course we're in an extreme where the 420 00:22:56,320 --> 00:22:58,240 Speaker 1: people that benefit from the. 421 00:23:00,119 --> 00:23:04,240 Speaker 3: The property relations they don't want them to change because 422 00:23:04,280 --> 00:23:04,879 Speaker 3: they're winning. 423 00:23:05,520 --> 00:23:07,639 Speaker 1: So when you have tremendous. 424 00:23:07,000 --> 00:23:12,000 Speaker 3: Concentration of wealth and power, the proper relations become calcified, 425 00:23:12,480 --> 00:23:16,240 Speaker 3: and meanwhile the means of production are causing all kinds 426 00:23:16,280 --> 00:23:21,360 Speaker 3: of disruption and to make intensifying the wealth inequality. 427 00:23:21,720 --> 00:23:24,720 Speaker 1: And then suddenly the whole thing says, this doesn't work. 428 00:23:24,760 --> 00:23:27,640 Speaker 3: We have to get the proper relations to a right 429 00:23:27,720 --> 00:23:33,919 Speaker 3: place where this isn't a feudal system where there's the lords. 430 00:23:33,520 --> 00:23:34,160 Speaker 1: And the serfs. 431 00:23:34,880 --> 00:23:37,520 Speaker 3: But that's what we have, and so we need to 432 00:23:37,560 --> 00:23:42,920 Speaker 3: rejigger all of this stuff. And the treasury debt problem, 433 00:23:42,960 --> 00:23:48,119 Speaker 3: the interest expense unaffordability is another offshoot of all this. 434 00:23:48,119 --> 00:23:51,480 Speaker 3: It's all the same thing is that we need institutions 435 00:23:51,520 --> 00:23:52,439 Speaker 3: that people believe in. 436 00:23:53,080 --> 00:23:54,560 Speaker 2: We're almost at a time and I can speak with 437 00:23:54,600 --> 00:23:56,520 Speaker 2: you for an hour, but I want to finish with 438 00:23:56,560 --> 00:23:59,119 Speaker 2: the idea that is this United States problem or is 439 00:23:59,160 --> 00:24:02,040 Speaker 2: this a global problem? Can you hide by going to 440 00:24:02,119 --> 00:24:04,840 Speaker 2: invest in places like say Europe or Japan? 441 00:24:05,800 --> 00:24:09,480 Speaker 3: You can, You can hie to a certain extent. I 442 00:24:09,480 --> 00:24:13,280 Speaker 3: don't think it could become immune. I think the way 443 00:24:13,280 --> 00:24:15,480 Speaker 3: to invest in periods like this, I think are to 444 00:24:15,560 --> 00:24:19,959 Speaker 3: go with long term themes, and a long term theme 445 00:24:20,720 --> 00:24:23,199 Speaker 3: that I think is one of the most bankable and 446 00:24:23,440 --> 00:24:27,600 Speaker 3: it might take in thirty years this will be a 447 00:24:27,600 --> 00:24:31,080 Speaker 3: great success. And that is you should buy. You should 448 00:24:31,119 --> 00:24:36,160 Speaker 3: invest in India because India has a similar profile today 449 00:24:36,600 --> 00:24:40,400 Speaker 3: to where China was thirty five years ago when they 450 00:24:40,440 --> 00:24:47,119 Speaker 3: had tremendous population, labor force visibility of labor force growth, 451 00:24:47,200 --> 00:24:50,160 Speaker 3: tremendous problems, a gummed up legal system. 452 00:24:49,840 --> 00:24:53,879 Speaker 1: Corruption all over the place. But those are things that 453 00:24:53,920 --> 00:24:57,160 Speaker 1: can be fixed. And you see what China went from 454 00:24:57,640 --> 00:24:58,600 Speaker 1: one twelfth. 455 00:24:58,280 --> 00:25:01,440 Speaker 3: Of the US GDP to seventy eighty percent of US 456 00:25:01,520 --> 00:25:04,760 Speaker 3: GDP and they certainly produce more goods in the United States, 457 00:25:04,760 --> 00:25:07,840 Speaker 3: so in a certain sense they're bigger. Well, India has 458 00:25:07,880 --> 00:25:11,679 Speaker 3: the same demographic outlook as China did then, and India 459 00:25:12,119 --> 00:25:17,320 Speaker 3: has a benefit for supply chain being moved around, for 460 00:25:17,520 --> 00:25:23,080 Speaker 3: manufacturing can come there. They're very technology, they're not they 461 00:25:23,119 --> 00:25:28,119 Speaker 3: have a long history of being a significant society. So 462 00:25:28,200 --> 00:25:30,000 Speaker 3: I don't know how long it's going to take, but 463 00:25:30,200 --> 00:25:33,600 Speaker 3: that's one that you buy and you just do yourself 464 00:25:33,640 --> 00:25:36,440 Speaker 3: a favor and don't open the statement because if you do. 465 00:25:36,600 --> 00:25:38,560 Speaker 1: When there's trouble, you're going to sell it right because 466 00:25:38,560 --> 00:25:39,679 Speaker 1: it'll be down thirty percent. 467 00:25:40,080 --> 00:25:42,680 Speaker 3: So just just hold it for your for your grandchildren's 468 00:25:42,680 --> 00:25:44,440 Speaker 3: college fund, and that'll work. 469 00:25:44,520 --> 00:25:47,919 Speaker 1: So there are places to hide. But I think gold is. 470 00:25:49,680 --> 00:25:53,159 Speaker 3: It's proven to be a source of growth. If you 471 00:25:53,200 --> 00:25:55,520 Speaker 3: were a bitcoin person, I would recommend instead of being 472 00:25:55,520 --> 00:25:58,480 Speaker 3: a bitcoin person, you would take the same unit of 473 00:25:58,560 --> 00:26:03,000 Speaker 3: volatility by buying gold and leveraging it probably twice. See 474 00:26:03,040 --> 00:26:05,760 Speaker 3: it's interesting that gold has outperformed. 475 00:26:05,280 --> 00:26:08,240 Speaker 1: Bitcoin here today even though bitcoin's done very well, and for. 476 00:26:08,200 --> 00:26:12,120 Speaker 3: The last twelve months, bitcoin has outperformed gold, but they're 477 00:26:12,160 --> 00:26:16,119 Speaker 3: both up forty plus percent. Those are the places to be, 478 00:26:16,520 --> 00:26:21,080 Speaker 3: and then dollar based investors should be investing in foreign currencies. 479 00:26:21,560 --> 00:26:25,240 Speaker 1: The S and P five hundred has stopped outperforming. 480 00:26:24,600 --> 00:26:28,960 Speaker 3: The MSCI Europe and it's underperforming in a major way 481 00:26:29,240 --> 00:26:33,639 Speaker 3: on a year to day basis. And that took a 482 00:26:33,680 --> 00:26:37,320 Speaker 3: while to happen, but things always take longer than people think. 483 00:26:37,359 --> 00:26:39,520 Speaker 3: But it's happening in real time. And the next one 484 00:26:39,560 --> 00:26:43,240 Speaker 3: will be selected emerging market equities as as the United States, 485 00:26:43,280 --> 00:26:46,760 Speaker 3: because the emerging markets will have the same benefit broadly 486 00:26:47,000 --> 00:26:50,719 Speaker 3: as India does most specifically. But you also win on 487 00:26:50,760 --> 00:26:53,840 Speaker 3: the currency translation if you're a dollar based investor, so. 488 00:26:54,400 --> 00:27:00,840 Speaker 1: We are for the first time in a long time, starting. 489 00:27:00,560 --> 00:27:04,800 Speaker 3: To introduce foreign currencies into our funds, even ones that 490 00:27:04,840 --> 00:27:06,639 Speaker 3: are owned by dollar based investors. 491 00:27:07,440 --> 00:27:08,320 Speaker 1: We're not all in. 492 00:27:08,720 --> 00:27:10,960 Speaker 3: We want to see the dollar break through a certain 493 00:27:12,240 --> 00:27:14,919 Speaker 3: trend line and resistance lines and stuff like that, but 494 00:27:14,960 --> 00:27:15,720 Speaker 3: we're pretty close. 495 00:27:16,480 --> 00:27:19,120 Speaker 2: Jeffrey Gunlock of Double Line Capital, thank you so much. 496 00:27:19,160 --> 00:27:20,199 Speaker 1: It's a pleasure speaking with you.