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Private Equity, Private Credit, Gold & Oil: Market Risks and Opportunities with Ed Miller and Craig Cooper · Financial Futures: A Measured Wealth Podcast

• 0:02
  SPEAKER_04: Is global uncertainty influencing your capital allocation decisions?
• 0:06
  SPEAKER_04: Stay with us as we shine a spotlight on private equity, private credit, gold, oil, and more.
• 0:13
  SPEAKER_00: The information presented on this program is believed to be factual and up to date at the time of its recording.
• 0:19
  SPEAKER_00: We do not guarantee its accuracy and it should not be regarded as a complete analysis of the topics covered.
• 0:24
  SPEAKER_00: Discussions and answers to questions do not involve the rendering of investment advice, personalized or otherwise, but are limited to the dissemination of general information.
• 0:34
  SPEAKER_00: A professional advisor should be consulted before implementing any of the options presented.
• 0:38
  SPEAKER_00: Measured Wealth Private Client Group is registered with the Securities and Exchange Commission and only transacts business in states in which it is registered or exempt from registration.
• 0:50
  SPEAKER_02: Welcome to Financial Futures, a Measured Wealth podcast powered by the team at Measured Wealth in beautiful Portsmouth, New Hampshire.
• 0:58
  SPEAKER_02: Each episode, we're bringing you fresh insights on retirement, investing, and everything you need to take control of your financial future.
• 1:06
  SPEAKER_02: Whether you're preparing for retirement or already living it, we're here to help you make informed choices with confidence.
• 1:13
  SPEAKER_02: To kick off today's conversation, here's your host, certified financial planner and chartered financial analyst, George Saharopoulos.
• 1:29
  SPEAKER_04: Today I'm joined by Ed Miller, Chief Investment Officer at Measured Wealth.
• 1:33
  SPEAKER_04: Ed is a chartered financial analyst, chartered market technician, and he is a returning guest.
• 1:38
  SPEAKER_04: Also joining me today is Craig Cooper for the first time.
• 1:42
  SPEAKER_04: So Craig is an investment analyst at Measured Wealth.
• 1:45
  SPEAKER_04: Craig has a master's degree in finance and is currently a candidate for the Chartered Financial Analyst designation.
• 1:51
  SPEAKER_04: How's it going, guys?
• 1:52
  SPEAKER_04: Thanks for joining.
• 1:53
  SPEAKER_04: Thanks for having us.
• 1:54
  SPEAKER_04: All right.
• 1:55
  SPEAKER_04: We have a great conversation for today.
• 1:59
  SPEAKER_04: We're going to start out with a little bit about private equity and private credit, but before we go too deep, let's just level set for a second.
• 2:06
  SPEAKER_04: Craig, can you kind of just explain to our audience the history of private credit, private equity, break down what they are, and how are they different from stocks and bonds in the market?
• 2:17
  SPEAKER_03: Yeah, so to start with how they're different.
• 2:19
  SPEAKER_03: They are private, generally larger institutions, accredited investors who are actually able to invest in private equity and private credit.
• 2:28
  SPEAKER_03: It's not necessarily it's not traded publicly.
• 2:31
  SPEAKER_03: So you can't just go onto your brokerage account and say, I want to buy this private equity fund or private credit fund.
• 2:38
  SPEAKER_03: It's more limited and it's a little bit more illiquid.
• 2:40
  SPEAKER_03: Just to kind of table set on what they are.
• 2:43
  SPEAKER_03: Private equity is really just raising capital to acquire, turnaround, or grow a private company.
• 2:48
  SPEAKER_03: With that, there's leverage buyouts where you use debt to buy a public or private company, then approve it, and then you try to get an exit, whether taking it public or selling it to someone else.
• 2:58
  SPEAKER_03: Growth equity and venture capital are really buying a piece of the company to help them grow, and then you provide guidance and help them reach their exit.
• 3:05
  SPEAKER_03: Private credit is really loans provided by non-bank financial institutions to companies rather than traditional bank lending or public bond markets.
• 3:14
  SPEAKER_03: They both have their benefits and risks.
• 3:16
  SPEAKER_03: Private equity funding at riskier stages with venture capital, arguably make companies more efficient.
• 3:22
  SPEAKER_03: That's a big private equity leverage buyout type thing.
• 3:25
  SPEAKER_03: They provide capital while the company can stay private, which may allow them to face less regulation and scrutiny.
• 3:31
  SPEAKER_03: The private equity firms provide business expertise and guidance, can provide additional diversification for investors and unique opportunities.
• 3:40
  SPEAKER_03: On the private credit side, some of the benefits that are argued are access to capital faster, they're more customizable or more flexible with their lending.
• 3:49
  SPEAKER_03: Companies face less scrutiny, and that's both a benefit and a risk.
• 3:53
  SPEAKER_03: Generally higher yields for investors, less correlation to public markets.
• 3:58
  SPEAKER_03: Historically, there's been some research that shows lower default rates, but I think that can be debated.
• 4:05
  SPEAKER_03: Again, diversification and less public disclosure on the risk side.
• 4:10
  SPEAKER_03: Private equity valuations are a little bit murky, and we can get into that.
• 4:15
  SPEAKER_03: Maybe higher risk and leverage.
• 4:17
  SPEAKER_03: You're looking at earlier stage or private companies that aren't facing the regulation and scrutiny, so transparency is lacking.
• 4:24
  SPEAKER_03: They're illiquid, right?
• 4:26
  SPEAKER_03: Trading it is more difficult, and there's often lockup periods.
• 4:30
  SPEAKER_03: Then the fees for private equity and private credit are both pretty high.
• 4:33
  SPEAKER_03: And then on the private credit risk side, again, illiquidity.
• 4:37
  SPEAKER_03: You might face higher default and credit risk, limited transparency and information, higher fees, again, less transparency, less regulation and oversight.
• 4:46
  SPEAKER_03: Often more complexity is involved, and there's some valuation murkiness, kind of like on the private equity side.
• 4:52
  SPEAKER_03: And then you also face uh credit cycles, um, and that's expected to hit leveraged lending pretty hard.
• 4:58
  SPEAKER_03: Um, and then where there's exposure that risk.
• 5:02
  SPEAKER_04: And and historically, you know, this has been more for institutional investors, but but now things are changing.
• 5:08
  SPEAKER_04: Uh private credit, private equity are becoming more mainstream.
• 5:11
  SPEAKER_04: And I think we're even going to talk about the potential for these investments to be uh included in a 401k lineup.
• 5:18
  SPEAKER_04: Um but Ed, how does this all work?
• 5:21
  SPEAKER_04: I mean, you know, if you're a private equity, private uh credit fund manager, you're getting dollars from investors, and what happens from there?
• 5:31
  SPEAKER_04: Are you searching for deals, but a deal might not happen right away, so maybe the money is sitting on the sidelines.
• 5:36
  SPEAKER_04: But but what's going on when that happens?
• 5:39
  SPEAKER_01: So just to your to your point, the Department of Labor, I mean, how this may affect the investor, our clients, has to do with 401k.
• 5:50
  SPEAKER_01: So the Department of Labor is going to propose or is proposing a new 401k rule that would allow for, quote, alternative asset classes, close quote, to be allowed in 401ks.
• 6:07
  SPEAKER_01: And under that, alternative asset classes falls private credit, private equity, things along these lines that in the past, anyway, have not been allowed to enter into these 401ks.
• 6:20
  SPEAKER_01: So that so there's the real um scare, if you will, uh, or fear that investors may end up having this stuff in their 401ks and maybe not even realizing it.
• 6:32
  SPEAKER_04: Okay.
• 6:32
  SPEAKER_04: Ed, what should investors be aware of if they were to seek out uh a private equity or private credit type of fund?
• 6:41
  SPEAKER_01: One way to participate in the private equity space is to buy the public stock of one of the private equity players, like Apollo or Blackstone, I mean KKR.
• 6:53
  SPEAKER_01: There are these firms that are private equity firms that you can buy their stock.
• 6:59
  SPEAKER_01: And the benefit there is it's liquid, you can get in and out of it whenever you want.
• 7:04
  SPEAKER_01: Um, and you know it trades.
• 7:06
  SPEAKER_01: So you you know what the price is, you know the valuation.
• 7:10
  SPEAKER_01: The problem with private equity and private credit, they're private.
• 7:14
  SPEAKER_01: So there's less there's less knowns for the public to even know what they're getting into.
• 7:20
  SPEAKER_01: Um and you know, that in itself is scary.
• 7:24
  SPEAKER_01: It's one thing to have something in your portfolio that you are aware of and you understand the risk and rewards, but it's quite another for things to appear that you had no idea and frankly may not even want in your 401k.
• 7:39
  SPEAKER_01: So I mean that's that's really where the the danger comes in.
• 7:43
  SPEAKER_04: Right.
• 7:43
  SPEAKER_04: And Craig, uh, you know, in the past, private investments have been touted as longer-term investments, a diversifier to a portfolio.
• 7:54
  SPEAKER_04: But what are some of the underlying concerns?
• 7:57
  SPEAKER_04: Why why is um private equity and private credit in the news recently?
• 8:03
  SPEAKER_04: What's going on in those areas?
• 8:05
  SPEAKER_03: Recently it's been more concerned with the private credit space where you're seeing funds face redemption requests from investors, and because there's a lockup and there's a basically they're able to say, okay, if 40% of shares are trying to be redeemed or sold, we can allow 5% if we want to.
• 8:27
  SPEAKER_03: And people aren't able to actually exit their investment.
• 8:30
  SPEAKER_03: So it kind of locks it up.
• 8:32
  SPEAKER_03: So there's a risk there.
• 8:33
  SPEAKER_03: Um it kind of all started.
• 8:34
  SPEAKER_03: There was a company first brands who had basically went they defaulted and they found a bunch of issues.
• 8:41
  SPEAKER_03: Um, they were double pledging assets, so pledging the same assets is collateral.
• 8:46
  SPEAKER_03: Um that kind of started people on the path of thinking, okay, this might be an issue with private credit as a whole, uh, where there's less transparency and that the due diligence of the people lending to them might not be doing the amount of work that they should be and making sure that the lending standards are as high as they should be.
• 9:06
  SPEAKER_03: Anything to add to that?
• 9:07
  SPEAKER_01: Well, and uh First Brands, I believe, was an auto parts company.
• 9:12
  SPEAKER_01: Um and there was another one, I think it was Tri-Color Holdings.
• 9:16
  SPEAKER_01: Yep.
• 9:16
  SPEAKER_01: That was an auto lender, and that one also um declared bankruptcy.
• 9:21
  SPEAKER_01: So those two occurred in the fourth quarter last year and really started to spook the markets.
• 9:27
  SPEAKER_01: And, you know, we do know that Blue Owl is another um that's having trouble this year and is receiving elevated requests, uh, redemption requests that it's limiting, which is again further instilling more fear that to the investors that they're not going to be able to get their money out.
• 9:49
  SPEAKER_01: So it's sort of just percolating.
• 9:51
  SPEAKER_01: Um, but also private credit and private equity they can concentrate in certain sectors and industries.
• 9:58
  SPEAKER_01: And the concern is um that private credit is heavily concentrated in the software and AI space.
• 10:07
  SPEAKER_01: And the software space is going through a transition, if you will, where people fear that AI is gonna put a lot of these software companies out of business because AI can just come up with it on its own and these companies will no longer be needed.
• 10:23
  SPEAKER_01: And as it turns out, private credit is heavily involved with these software, a lot of these software companies, offer you know, lending money to them, and now there's fear that that money won't be repaid.
• 10:34
  SPEAKER_04: Well, that's interesting because I was gonna ask you if you were to examine uh a private equity or private credit type of fund, uh, what would you be looking for under the hood?
• 10:44
  SPEAKER_04: Do uh investors have access to the breakdown uh on different sectors, geography, credit risk?
• 10:51
  SPEAKER_04: Is there a list of all of the private companies that are uh held in the fund?
• 10:56
  SPEAKER_04: What are you looking for, Ed?
• 10:58
  SPEAKER_01: You know, that is a great question because my job has always involved public assets, public securities where I can get my hands on data and do backtests and you know, really look under the hood as opposed to private equity, which frankly I've never been involved with.
• 11:16
  SPEAKER_01: And I know that, you know, endowments like Yale and Harvard, they hire, you know, experts slash consultants to advise them on where to put their uh money in private equity.
• 11:28
  SPEAKER_01: But that's been no I mean the studies show that that's throwing darts also.
• 11:33
  SPEAKER_01: So, you know, I I don't really have a good answer to that, which I think just further cautions at least our investors, play to your strengths.
• 11:43
  SPEAKER_01: And I don't know many that, you know, I know the numbers, but to consistently be at that top quartile in terms of picking private equity, I think there's a few and far between.
• 11:54
  SPEAKER_01: You know, I I I think the volatility of returns in that space is much, much greater than in the public space.
• 12:02
  SPEAKER_04: Yeah, no.
• 12:03
  SPEAKER_04: Um and so, you know, measured wealth has not officially uh looked at adding uh private equity or private credit to portfolios.
• 12:13
  SPEAKER_04: And I think, you know, we've had this conversation before.
• 12:16
  SPEAKER_04: It really the illiquidity and and non-transparency uh of some of those investments have kind of impeded adding those to portfolios.
• 12:25
  SPEAKER_04: Would you say that's correct?
• 12:27
  SPEAKER_01: I'll add one other thing.
• 12:28
  SPEAKER_01: Um yeah, so there's definitely a lack of transparency and liquidity, which we've talked about.
• 12:33
  SPEAKER_01: There's lockups and, you know, I mean, right there, investors may get trepidation that they can't get the money out when they want, given some circumstance going on, you know, in their life.
• 12:44
  SPEAKER_01: So that's that's something that has to be considered.
• 12:46
  SPEAKER_01: But the other thing that's other things that are being talked about is there's sort of a life cycle when it comes to these projects, if you will.
• 12:56
  SPEAKER_01: Um, private equity, they're all out there.
• 12:58
  SPEAKER_01: There's many, many firms, not just the the ones that you hear about, and they're all looking for the same companies, if you will, high quality companies they can take private and later take public.
• 13:09
  SPEAKER_01: But eventually it gets to be pretty slim pickings in that in that area.
• 13:15
  SPEAKER_01: And the fear is that these lower quality projects that have been taken on and funded will be the ones that are offloaded to the public in the 401ks.
• 13:26
  SPEAKER_01: That's the concern, you know, and that the good high quality funds, if you will, will stay with the partners at these firms.
• 13:34
  SPEAKER_01: Um that's obviously cynical, but it is something that to be considered.
• 13:39
  SPEAKER_04: Right.
• 13:40
  SPEAKER_04: And and some private equity funds focus more on the early, early parts of a company, uh, which would be the venture capital.
• 13:49
  SPEAKER_04: And those aren't always a hit.
• 13:51
  SPEAKER_04: You know, it's more of a not necessarily a long shot, but you know, not all of them end up being a public company or or have that payoff that the private equity firm was looking for, right, Ed?
• 14:03
  SPEAKER_01: That's true.
• 14:04
  SPEAKER_01: They I'm not gonna say it'd throw spaghetti against the wall, but I mean they definitely they definitely invest in more companies than you know, when you end up seeing that they invested in Google and you know companies like that in their early stages, they don't tell you about the many losers that they also invested in.
• 14:23
  SPEAKER_01: So it, you know, because at that point, even they don't know which ones are gonna catch on.
• 14:28
  SPEAKER_01: So what they do, you know, this is also how books are being sold.
• 14:32
  SPEAKER_01: You know, Stephen King funded so many other books that were never bought.
• 14:37
  SPEAKER_01: So you spread it because you don't you spread your bets because you don't know where the next Stephen King is gonna be.
• 14:43
  SPEAKER_04: Right.
• 14:44
  SPEAKER_01: Um, so that's really they do their research, but even they don't know if Amazon or Google are gonna become what they are.
• 14:51
  SPEAKER_01: But they have their investments and they see that they're winning, so they cut their losses on the ones that you know go bankrupt and put that money into the winners and compound it.
• 15:04
  SPEAKER_01: I mean, so that's sort of what's going on there.
• 15:07
  SPEAKER_04: Yeah, and I I I think it's interesting that you know, we work with a lot of business owners, and you know, as they go through their uh succession process, it's interesting to hear that private equity has you know entered the chat.
• 15:21
  SPEAKER_04: You know, private equity is targeting all-size companies, even even the really, really micro ones as well.
• 15:27
  SPEAKER_04: But Craig, let me ask you, what should investors keep in mind if they they find a fund they want to invest in?
• 15:34
  SPEAKER_04: I know from from my perspective, working as a financial advisor, I I look and see if it really fits into their long-term plan.
• 15:41
  SPEAKER_04: Does this make sense?
• 15:42
  SPEAKER_04: But what should they be expecting or what should they be keeping in mind entering into private equity, private capital?
• 15:50
  SPEAKER_04: You know, there's not an immediate payoff, I would guess.
• 15:52
  SPEAKER_04: So what's what's there to keep in mind for them?
• 15:54
  SPEAKER_03: Yeah, if you're entering it, it's probably going to be through a fund for anyone that would be a client of ours.
• 16:00
  SPEAKER_03: If they're doing it that way, really try to research it as much as you can.
• 16:04
  SPEAKER_03: You can get some information on what the holding companies might be, go through their website and really make sure you understand what you're investing in, understanding the dispersion of returns.
• 16:13
  SPEAKER_03: Uh, Ed had mentioned that.
• 16:15
  SPEAKER_03: It can really go from one end to the other.
• 16:17
  SPEAKER_03: You might get a 20% return or you might get nothing for depending on the fund.
• 16:22
  SPEAKER_03: Um, it's just harder to research them than it is for a public company in the dispersion of returns.
• 16:28
  SPEAKER_03: Even if the median is similar to public equities or large cap public equities, you might have a large dispersion of returns.
• 16:36
  SPEAKER_03: And it really that lockup period, making sure you're not putting too much of your capital in there, especially if you need it.
• 16:42
  SPEAKER_03: If you don't have any expectation that you're gonna need the capital, it could potentially be a good option for you.
• 16:49
  SPEAKER_03: But again, you're gonna face lockup periods with these funds, whether it's an interval fund, if you dire invest directly, there's gonna be a lockup period.
• 16:57
  SPEAKER_03: Um so you need to be aware of that.
• 16:58
  SPEAKER_04: Just to comment on what you just said about the amount to allocate to a private investment, uh, that's a real critical decision because uh hopefully you have a plan in place where you have your your risk tolerance as well as your time horizon, uh future time horizon as far as when you expect to make some withdrawals from your money.
• 17:20
  SPEAKER_04: So keeping all of that in mind, uh knowing how the liquidity on the fund works, also knowing you know how the fund is priced.
• 17:28
  SPEAKER_04: So I don't know if there's a universal way that private equity firms value the underlying investments, but that's a key thing to understand and know that that's one of the differences between uh private investments versus uh the public markets.
• 17:43
  SPEAKER_04: And in addition, you basically just need to have patience, right, for the payoff to take place because private equity works a little bit different uh than the public markets.
• 17:52
  SPEAKER_04: My understanding is you know, uh private equity managers they get capital, but that capital is not necessarily deployed uh right away.
• 18:02
  SPEAKER_04: They need to find a deal for that money to be um deployed to.
• 18:06
  SPEAKER_04: And so there's just a lot uh that goes on with each deal.
• 18:10
  SPEAKER_04: I I think each deal is is could be different, you know, and there's different reasons for for either entering a deal uh or not.
• 18:18
  SPEAKER_03: Yeah, you mentioned the valuations.
• 18:19
  SPEAKER_03: That's that's a really important point because they're not being traded and there's not constant price discovery.
• 18:25
  SPEAKER_03: One thing that was a pretty newsworthy thing in the past handful of months was continuation funds.
• 18:32
  SPEAKER_03: So I'm not saying this is all firms, and it's it's it's one thing to be aware of if you are investing, is that a private equity firm might have a some assets that they're unable to exit in order to receive the capital.
• 18:48
  SPEAKER_03: So they'll start what they call a continuation fund where they essentially sell the company to themselves and add it to a new portfolio to get the liquidity.
• 18:57
  SPEAKER_03: To me, that's a bit murky and a little disingenuous.
• 19:01
  SPEAKER_03: Um there's debate between investors and people at private equity firms whether that's an ethical thing to do, but there are continuation funds and then understanding how valuations are set, whether it is during a fundraising period, if shares are being traded in the private market between investors, or if they're just sitting there how they value them quarter to quarter, year to year, if there's no activity.
• 19:27
  SPEAKER_04: Okay.
• 19:28
  SPEAKER_04: Yeah.
• 19:28
  SPEAKER_04: I mean, uh there's a lot of hidden risks that have been identified here.
• 19:33
  SPEAKER_04: And we're not saying that private equity, private credit isn't uh an option that you should be looking at for investing.
• 19:40
  SPEAKER_04: Regulations change all the time.
• 19:42
  SPEAKER_04: So um, you know, in this point in time, uh these these are some great talking points.
• 19:47
  SPEAKER_04: So wanted to just pivot uh to gold.
• 19:50
  SPEAKER_04: Before we do, uh Ed, did you have any final thoughts on private equity, private credit?
• 19:54
  SPEAKER_01: I mean, we've looked into research papers that have looked at returns for private equity because it gets such a buzz and the allure and you know, bang right there in Boston and Mitt Romney.
• 20:07
  SPEAKER_01: I mean, people hear things and they think that there's something better going on there.
• 20:12
  SPEAKER_01: And yet when you look at the research, at the end of the day, when they correct, you know, when they adjust for performance within the private equity, because that's another Wild West compared to public, um, there's different ways to calculate performance within private equity.
• 20:29
  SPEAKER_01: But once they adjust for that, as I think we are discussed, the the median returns for private equity is more or less equal to longer term, the returns for public equities.
• 20:41
  SPEAKER_01: However, the difference is the disparity, the variance or volatility of returns in the private equity is much wider.
• 20:50
  SPEAKER_01: So that's the risk.
• 20:52
  SPEAKER_01: So we're always about risk versus reward, you know, and will the promised reward, is the risk manageable or is it, you know, outsized compared to what you could stand to gain?
• 21:05
  SPEAKER_01: And I mean, when you look at the variance of returns for private equity, I would argue the risk is much higher than the reward when you compare it to public.
• 21:13
  SPEAKER_04: I think that's a good setup for a much longer podcast in the future.
• 21:17
  SPEAKER_04: I'd love to dive into the minutiae details of private equity and private credit.
• 21:23
  SPEAKER_04: But I'm going to turn it right back to you uh on gold.
• 21:26
  SPEAKER_04: Gold has surged to record highs earlier in the year, uh, but now there's some volatility.
• 21:31
  SPEAKER_04: Uh what are the headwinds that that gold is facing right now?
• 21:34
  SPEAKER_04: And are are they temporary?
• 21:36
  SPEAKER_01: Yeah, gold has been the place to be for actually the last couple of years, up until you know this war.
• 21:42
  SPEAKER_01: So at the end of February, you know, we along with Israel attacked Iran.
• 21:48
  SPEAKER_01: And gold has been headed south ever since, more or less.
• 21:51
  SPEAKER_01: So it's down about ten percent since the start of the war, and that confuses people because gold is supposed to hold up in terms of crises or Wars or you know bearish times, and yet it's not.
• 22:03
  SPEAKER_01: And one of the reasons for that could be oil.
• 22:08
  SPEAKER_01: So the war happens to be going on in an oil-intensive area, and the price of oil is up 45% since the war started.
• 22:16
  SPEAKER_01: It was actually at one point up 70%.
• 22:19
  SPEAKER_01: But countries like India, China, Japan, even the Eurozone, they all depend much more on importing oil and using it than we do here in the U.S.
• 22:33
  SPEAKER_01: So 70% of the oil is consumed by those countries.
• 22:39
  SPEAKER_01: And to pay for this now almost 50% higher price in oil, those countries have to sell gold.
• 22:46
  SPEAKER_01: Their central banks sell gold to buy oil with US dollars.
• 22:51
  SPEAKER_01: You can only pay for oil with US dollars.
• 22:54
  SPEAKER_01: So they need to convert something into US dollars to buy this.
• 22:57
  SPEAKER_01: So the gold is being sold to buy this oil, and that's putting pressure on the price of gold.
• 23:04
  SPEAKER_01: At least one reason why it's going down.
• 23:06
  SPEAKER_04: Okay.
• 23:07
  SPEAKER_04: So gold right now, the fluctuation might be conflict-driven, not necessarily fundamentals.
• 23:15
  SPEAKER_04: Would you agree with that?
• 23:16
  SPEAKER_01: Yeah, I I think you know everyone's wondering what to do who have held gold, you know, up to this point.
• 23:22
  SPEAKER_01: And there's the debate going on whether you know the gold gold will continue to ascend, assuming that this war ends, you know, fairly quickly.
• 23:31
  SPEAKER_01: But if not, and it continues and oil continues to go north, um, you would expect gold to have trouble.
• 23:39
  SPEAKER_04: Fascinating.
• 23:40
  SPEAKER_04: It's fascinating how you know the conflict in the in the Mideast right now is affecting oil, which is affecting gold.
• 23:47
  SPEAKER_04: And it's also affecting the price of gas at the pump.
• 23:51
  SPEAKER_04: So um Craig, you know, if this conflict persists, uh, certainly oil prices could continue to rise.
• 23:58
  SPEAKER_04: What effect would that have on interest rates, monetary policy?
• 24:02
  SPEAKER_04: What would we be looking at?
• 24:03
  SPEAKER_03: Yeah, it would lead to more sustained inflation more than likely, uh, as oil is used in a lot of products, not just gasoline.
• 24:12
  SPEAKER_03: With monetary policy and interest rates, you're probably expecting at least to maintain interest rates at the level where they're at, not seeing the, I believe the beginning of the year is expected, three interest rate cuts.
• 24:25
  SPEAKER_03: That's probably off the table.
• 24:27
  SPEAKER_03: You're probably going to see zero if it continues.
• 24:30
  SPEAKER_03: Um even with the appointment of a new Fed chair.
• 24:34
  SPEAKER_03: It's going to be really difficult for interest rate cuts if inflation is sticky and isn't cooling off as they were expecting or it was happening, seemed to be happening prior to the conflict occurring.
• 24:49
  SPEAKER_03: So you're probably expecting interest rates to stay where they are.
• 24:52
  SPEAKER_04: Monetary policy could continue to stay tight.
• 24:54
  SPEAKER_04: Ed, what do you have to add to that?
• 24:57
  SPEAKER_01: So the the Fed was having trouble getting inflation down to its two percent target even before the war.
• 25:03
  SPEAKER_01: I think, you know, uh inflation was heading down, but it they just could not get it to get to that two percent level.
• 25:10
  SPEAKER_01: I think I think it got to 2.5 maybe, and now it's gonna head back up given this war, um, and the you know, the price of gas at the pump, etc.
• 25:20
  SPEAKER_01: So that's definitely puts a ceiling on any interest rate cuts by the Fed, at least on its surface, um, the war and probably continued high inflation.
• 25:31
  SPEAKER_01: But there is always the chance that that kind of inflation and the pricing at the pump forces consumers to cut back spending to pay for the increase um in price at the at the gas pump, and that could tip the economy into a recession.
• 25:48
  SPEAKER_01: And if that were to happen, then the Fed has much more leeway to cut rates.
• 25:53
  SPEAKER_04: Aaron Powell If the conflict does come to an end, oil supply is is released on the market, uh what effect could that have on the stock market, Craig?
• 26:02
  SPEAKER_04: And particularly the energy sector?
• 26:03
  SPEAKER_03: Yeah, you would expect to see oil prices come down and normalize.
• 26:08
  SPEAKER_03: Uh it might take a little while, but should be fairly quickly.
• 26:11
  SPEAKER_03: But again, prices rise for oil quicker than they fall.
• 26:16
  SPEAKER_03: It takes a little while for them to fall.
• 26:18
  SPEAKER_03: As far as the energy sector, it would take a little bit for it to to normalize.
• 26:23
  SPEAKER_03: Uh Ed, any thoughts there?
• 26:25
  SPEAKER_01: Yeah, no, I I would expect probably initially a a reflex that that oil like it did, I think, yesterday.
• 26:32
  SPEAKER_01: I think it was down big on the news of a ceasefire, but it'll gravitate back to probably where it was in the short term.
• 26:41
  SPEAKER_01: But it's not as if we leave there and everything goes back to normal.
• 26:45
  SPEAKER_01: I mean, things have changed there for one.
• 26:48
  SPEAKER_01: I mean, a lot of oil fields in that area were damaged, um, whether it be crude or natural gas.
• 26:55
  SPEAKER_01: So there could be lingering effects to come.
• 26:59
  SPEAKER_01: But yeah, no, I initially I think, yeah, the oil will come back and you know the stocks will will rally and gold, I guess, would rally.
• 27:08
  SPEAKER_01: But but beyond that, it's we'll see.
• 27:12
  SPEAKER_04: Right, right.
• 27:12
  SPEAKER_04: Well, this has been a great timely discussion.
• 27:15
  SPEAKER_04: We covered a lot today: private equity, private credit, gold oil, uh, the conflict.
• 27:20
  SPEAKER_04: For those of you listening, if you'd like more information about what we covered today, please see our monthly insights on our website or call us.
• 27:28
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• 27:30
  SPEAKER_04: And with that, Craig and Ed, thank you very much for joining me today.
• 27:35
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• 27:44
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• 27:51
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• 27:59
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• 28:02
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