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Jay Powell, Markets, and CVS (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
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Speaker 1: my co host Matt Miller. Every business day, we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
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Speaker 1: on Apple podcast or wherever you listen to podcasts, and
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Speaker 1: at Bloomberg dot com slash podcast. Anyways, let's talk about
0:22
Speaker 1: this market here, because we do have a little bit
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Speaker 1: of red on the screen. How much of this is
0:26
Speaker 1: really the market's kind of bracing for all the FED
0:28
Speaker 1: speak that we're going to get today. I think it's
0:30
Speaker 1: like just a slew of FED speakers. I don't even
0:33
Speaker 1: remember what the count is, but it's like William's Boston Cook,
0:35
Speaker 1: Neil Cash Carrion's all today. I think it's too much.
0:39
Speaker 1: It's a lot. Well, I would agree with you. I
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Speaker 1: think that I think transparency is actually a bad idea.
0:44
Speaker 1: Bring back Alan Greenspan. I think I think that they
0:48
Speaker 1: tried so hard to eliminate the idea of any risk
0:53
Speaker 1: and risk analytics and your decision making when you when
0:56
Speaker 1: you make an investment or trade. I think it's a
0:58
Speaker 1: very bad thing. I think it acts He's functionally. We
1:01
Speaker 1: have so shortened the time frame on analysis it's actually
1:05
Speaker 1: quite unhealthy in many ways. So the markets are hunting
1:07
Speaker 1: for this devishnus. The signals out there is anybody pushing
1:13
Speaker 1: poun didn't sound like he's pushing back. Well. Yesterday at Boston,
1:16
Speaker 1: Raphael I think, came out and said, you know, look,
1:19
Speaker 1: I think I'm pushing up where I may need to
1:21
Speaker 1: push up, where I think my peak rate is. Mr
1:25
Speaker 1: Kashkari was pretty clear yesterday that he said is where
1:29
Speaker 1: he thinks we're going. Um. You know, I suspect it's
1:33
Speaker 1: going to be very hard from the litany of other
1:36
Speaker 1: members of the FMC to have much more of an
1:38
Speaker 1: impact UM right now, given um what Powell said yesterday,
1:44
Speaker 1: I would have, you know, and last week I was
1:46
Speaker 1: a little shocked last week. Look, as a general matter,
1:51
Speaker 1: I think the biggest problem they have is liquid is
1:55
Speaker 1: too much liquidity. And every time they allow the stock market,
1:59
Speaker 1: which they seem to ignore and the definition of liquidity,
2:02
Speaker 1: to go rallying a lot, they're throwing more liquidity into
2:06
Speaker 1: a market. It's putting a little bit of you know,
2:08
Speaker 1: of of oil into a fire, and it raises the
2:11
Speaker 1: risk that they have to do more, and it it
2:14
Speaker 1: impedes with their impedes their efforts to try and achieve
2:18
Speaker 1: a lower rate of inflation in a short period of time.
2:21
Speaker 1: And when I think people also, just as a gentle matter,
2:23
Speaker 1: missed to my my perspective, it's not just getting to
2:27
Speaker 1: two percent, it's getting to a stable, ambient two percent level.
2:31
Speaker 1: So you know, that's to me the bigger problem. I
2:35
Speaker 1: don't know how fast they'll get to two percent. I mean,
2:38
Speaker 1: I think Powell said it yesterday that they're hoping it
2:40
Speaker 1: will be some time next year. But you know, you
2:43
Speaker 1: could hit two percent in a day and then find
2:45
Speaker 1: out six weeks later you're at six percent. That's not
2:47
Speaker 1: what he wants. And so I think the liquidity issues
2:51
Speaker 1: and constraints that the that the equity market seems to
2:55
Speaker 1: apply or a problem for them. Well, I'm still wondering, though,
3:00
Speaker 1: how much more we really even need to hear from
3:02
Speaker 1: the Fed. Look, I asked Alan Blinder, the former vice
3:05
Speaker 1: chair under Alan Greensman about this yesterday. He is the
3:08
Speaker 1: Fed over communicating? He said, Look, they're not over communicating
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Speaker 1: at all, But how much of this do we do
3:14
Speaker 1: the markets really need to hear? When the message is
3:16
Speaker 1: repeatedly the same. We don't know what the end terminal
3:18
Speaker 1: rate is, we don't know how much we need to
3:19
Speaker 1: hike or data dependent. How much value are you really
3:23
Speaker 1: getting from from that? Me? I think very little. I
3:26
Speaker 1: think the biggest question, again, let's take a different issue,
3:28
Speaker 1: is not just what the terminal rate is um. I
3:32
Speaker 1: think the market and if you look at the forward
3:35
Speaker 1: curve and the your dollar futures, it's been clear for
3:37
Speaker 1: a while. The market just thinks we're going to hit
3:38
Speaker 1: a peak and then go right back down right. I
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Speaker 1: think the fault. You know, the forward live or rates
3:44
Speaker 1: are three and a half or so, not very far out,
3:47
Speaker 1: and I think that seems to be a big mistake.
3:51
Speaker 1: The only thing to first of all, look how well
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Speaker 1: the economy is still performing functionally. Certainly when you look
3:56
Speaker 1: at employment, even with the FED having raised rates four
4:00
Speaker 1: percentage points, give it take half percentage points in seven months,
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Speaker 1: why does anyone think that if we're going to slowly
4:08
Speaker 1: glide into a trajectory towards lower inflation, but we're still
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Speaker 1: at functionally near full employment, that the FETE has to
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Speaker 1: do anything but just stay where they are for a
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Speaker 1: very very long time. All right, What's what's the lag? Then?
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Speaker 1: I mean, hell, you know what, what are you going
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Speaker 1: to tell Jerome Powell? Well, first off, why do you
4:26
Speaker 1: assume there's a lagnus? I mean, look, I've been I've
4:30
Speaker 1: been on the show with or on Bloomberg now almost
4:32
Speaker 1: twenty years, and I've been suggesting for actually this goes
4:37
Speaker 1: back to the late nineties, that zero interest rates are
4:41
Speaker 1: actually antithetical to growth and two very too good economic
4:45
Speaker 1: and financial decision making, and that at an ambient level
4:48
Speaker 1: of interest rates, say between two and a half and
4:50
Speaker 1: five percent, is actually a very healthy environment and this
4:55
Speaker 1: economy will perform just fine at that level once you've
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Speaker 1: gone through the transition of leaving ultra low behind you.
5:03
Speaker 1: And I think what you're seeing in many ways is
5:05
Speaker 1: exactly that there are parts of the economy that are
5:08
Speaker 1: responding to the to the upward movement in rates. But
5:12
Speaker 1: even now you're already seeing where two percentage points lower
5:14
Speaker 1: in mortgages and the mortgage markets coming back to life. Yeah,
5:18
Speaker 1: is it? So? Is is it working here? I mean,
5:20
Speaker 1: in the last about thirty seconds that we have is
5:23
Speaker 1: the FEDS tightening policy? Are we seeing effects of it already?
5:27
Speaker 1: Or are we so to wait. But you've seen you've
5:29
Speaker 1: seen some effects on certain areas of economy, and you've
5:32
Speaker 1: certainly seen some effect on prices, although again some of
5:36
Speaker 1: that is as much due to the year on your
5:39
Speaker 1: comparisons to very very high rate levels. But what the
5:42
Speaker 1: longer term effects are we don't know yet. But I
5:44
Speaker 1: wouldn't rush to judgment that that a three and a
5:48
Speaker 1: half to four percent or four and a half interest
5:52
Speaker 1: rate level is going to be catastrophic, which everyone seems
5:54
Speaker 1: to be working on. I'm just now reading his bio
5:57
Speaker 1: the University of Cambridge Department of Applied Mathematics and Theoretical
6:01
Speaker 1: Physics fusion. How far off fusions exists already in terms
6:06
Speaker 1: of well, you're talking about energy, what you're talking about
6:10
Speaker 1: on the planet of it, I would bet it's forty
6:13
Speaker 1: years off. That the mechanisms for containing the plasma are
6:18
Speaker 1: a problem, but it's the first time they've actually gotten
6:20
Speaker 1: more energy out and man, and as soon as they
6:22
Speaker 1: get it working, of course, that's a tremendous step for humanity.
6:26
Speaker 1: Although I don't think I don't think the President is
6:28
Speaker 1: gonna be able to complain about too much profitability for oil,
6:32
Speaker 1: the amount the amount of previous nuclear fusion vision whatever
6:36
Speaker 1: people that are now in the financial sector is hilarious. Anyways,
6:41
Speaker 1: Neil Grossman, former CIO with t k NG capitals down
6:49
Speaker 1: four tents of one percent, down down one NASTAC only
6:52
Speaker 1: down half a percent, which that's like not the volatility
6:56
Speaker 1: that we're used to in last year. What do you think, um,
6:59
Speaker 1: do you are you attention to VIX? I know you're
7:01
Speaker 1: going to make it, Tom Cain, that's my point. Mentioned
7:05
Speaker 1: eighteen sixty seven right now, Now we remember back when
7:08
Speaker 1: it was seventies eighties. Yeah, it was I think in
7:12
Speaker 1: Pete COVID it hit eighty three. That was the highest volatility.
7:16
Speaker 1: But look you were getting eight, like seven eight swings
7:18
Speaker 1: in either direction. Um, but you know, that's a really
7:20
Speaker 1: good question to ask. Our next guest, Michael Cogito joins
7:24
Speaker 1: US president and portfolio manager of the Permanent Portfolio family
7:28
Speaker 1: of funds, and he joins, of course, the program to
7:30
Speaker 1: talk about this market. Michael, thank he was always for joining.
7:34
Speaker 1: What do you do with the VIX right now? Sure?
7:36
Speaker 1: Good morning. Um, Well, it's an indicator of volatility and
7:40
Speaker 1: concern or fear, but it isn't an indicator of alatility.
7:44
Speaker 1: Really I think, well, I mean right now, the numbers
7:51
Speaker 1: loaves and there's a lack of volatility, So yes, it
7:54
Speaker 1: isn't it's an indicator at the moment or a byproduct
7:57
Speaker 1: of a lack of vulatility. As as you guys mentioned, Um,
8:01
Speaker 1: you know, you're not seeing white swings like you saw
8:03
Speaker 1: last year, at least right now, and the market appears
8:07
Speaker 1: to be a little bit more calmer um and UM,
8:11
Speaker 1: you know, we'll see what happens. It's a long year,
8:13
Speaker 1: but but that's what you see right now. Okay, So
8:15
Speaker 1: a stupid question for what is in the driver's seat
8:18
Speaker 1: fed uh FED speak earnings? What I would say the
8:24
Speaker 1: primary driver is the FED, and probably a second concern
8:26
Speaker 1: with the earnings. Um. You know, I think that the
8:30
Speaker 1: FED is story one and has been and will continue
8:33
Speaker 1: to be, and you know it was earlier this week
8:35
Speaker 1: as well. I think what you've had with the FED
8:39
Speaker 1: is the what you're hearing out of the FED is
8:43
Speaker 1: consistent with the markets expectations, and as a result, the
8:48
Speaker 1: market is okay generally speaking with UM FED speak and
8:52
Speaker 1: where we're at and where we might be going, and
8:55
Speaker 1: so you know you've got kind of a quieter trade
8:58
Speaker 1: going on now. That could all be up ended, you know,
9:00
Speaker 1: an hour from now with some new information, But for
9:03
Speaker 1: the moment of the last few days, that's what you've had.
9:06
Speaker 1: And even this week with Powell's UH uh d C,
9:10
Speaker 1: you know, one on one Q and A yesterday, I mean,
9:13
Speaker 1: there were no surprises there. UM. Earlier in the week
9:16
Speaker 1: there were no surprises. Or last week's meeting, there were
9:20
Speaker 1: no surprises. And so as a result, the market is
9:23
Speaker 1: settling down to more on fundamentals and UM and maybe
9:28
Speaker 1: UH selling off a little bit after the big run
9:30
Speaker 1: based on earnings, based on maybe a little too far,
9:33
Speaker 1: too fast. But but you know, stocks were very oversold
9:36
Speaker 1: coming out of December, so that's why you haven't seen
9:39
Speaker 1: a big sell off either. I mean, it's settled into
9:41
Speaker 1: some sort of valuation that makes sense given the Fed
9:43
Speaker 1: and everything else right now. We were always told don't
9:47
Speaker 1: fight the Fed, but we're fighting the Fed. Why is
9:49
Speaker 1: there such a disconnect between the market pricing and uh
9:53
Speaker 1: the Fed speak. I'm not so sure we're fighting the Fed.
9:59
Speaker 1: I mean, value relations have adjusted from December that some
10:03
Speaker 1: would argue they're a little even I might argue they're
10:06
Speaker 1: a little higher than maybe they should be given the
10:09
Speaker 1: macro with potentially a slowing economy. Um. In terms of
10:14
Speaker 1: how far they came in January, although you had such
10:17
Speaker 1: a strong jobs number last week that really I think
10:21
Speaker 1: was so strong it was a surprise. Um. And it
10:25
Speaker 1: remains to be seen whether there's some novelies and that
10:27
Speaker 1: it will kick out and in further months. But you know,
10:30
Speaker 1: honestly speaking, it's very difficult to have a recession with
10:35
Speaker 1: the job market so strong, and so what that's done,
10:39
Speaker 1: what that's done is that's kept the soft landing scenario
10:43
Speaker 1: very much alive and the market is comfortable with that.
10:46
Speaker 1: So again getting back to the first question, Um, you know,
10:50
Speaker 1: think think the market perceives things to be okay. Um.
10:54
Speaker 1: And and as a result of voltio is little muted. Well,
10:58
Speaker 1: does that mean that when it comes to the catalyst
11:00
Speaker 1: that then move the stock market on an inter day basis,
11:03
Speaker 1: You were then seeing more emphasis put on initial jobless
11:07
Speaker 1: claims the payrolls report as opposed to say the earnings picture. Um. Well,
11:14
Speaker 1: I mean everybody has expected the earnings estimates to come
11:18
Speaker 1: down and and so far the earnings we're still you know,
11:21
Speaker 1: in the middle of ear each season so we don't
11:23
Speaker 1: really have the data on where they ended up, but
11:25
Speaker 1: that wouldn't be a surprise now given the run and
11:28
Speaker 1: stocks multiples have expanded during that time a little bit,
11:31
Speaker 1: which is a little bit interesting given the macro story
11:34
Speaker 1: of a possible slowdown. Um, but while we may have
11:38
Speaker 1: a slowdown, you're not seeing it in the labor and
11:41
Speaker 1: and so you know, if people are working and spending,
11:44
Speaker 1: then it's very hard to have a deep recession. And
11:47
Speaker 1: as long as that's true, now, labors lagging indicators, so
11:50
Speaker 1: you know that could change, and and then you know,
11:53
Speaker 1: the labor just gets added to the other macro negatives.
11:56
Speaker 1: But at the moment that hasn't happened. And and as
11:58
Speaker 1: a result, people like the economy, um, you know, soft landing,
12:03
Speaker 1: maybe shallow recession, etcetera, etcetera, And and equities are okay
12:08
Speaker 1: with that for the moment um. I think the one
12:11
Speaker 1: risk factor there in that story though, is that there
12:14
Speaker 1: was such a move and interest late last year and
12:16
Speaker 1: the feat is tapering, but still um, that move hasn't
12:21
Speaker 1: been fully factored in. It hasn't worked its way through
12:23
Speaker 1: the economy yet, and so it's possible that there's more
12:28
Speaker 1: negative and increasingly negative news to come out in the
12:31
Speaker 1: future as those interest rates work their way through and
12:34
Speaker 1: actually slow things down. We haven't seen that yet, but
12:36
Speaker 1: that's still a distinct possibility. Just back to earnings for
12:39
Speaker 1: a second. That is margin pressure going to go away
12:42
Speaker 1: anytime soon? Um? Well, in theory, if inflation alleviates, that
12:50
Speaker 1: would decrease the pressure on margins um and you know
12:55
Speaker 1: other cost factors. So yeah, the answer is yes, maybe, um,
13:00
Speaker 1: but we don't know that either. And the inflation has
13:03
Speaker 1: been coming down. I personally don't think it's going to
13:06
Speaker 1: come down to the fetes two percent. I think it's
13:09
Speaker 1: gonna settle somewhere at three, four or five percent when
13:12
Speaker 1: all of a a sudden done, And then the question becomes, well,
13:15
Speaker 1: you know, can the U. S. Economy uh grow really
13:19
Speaker 1: you know readjusting to inflation rate at that level at
13:22
Speaker 1: least where we are you know right now. So you
13:25
Speaker 1: know that's not the The U. S. Economy has grown
13:29
Speaker 1: with inflation at those levels. I mean you can look
13:31
Speaker 1: to the nineteen eighties for that, and you know the
13:33
Speaker 1: inflation rate took ten plus years to come down from
13:36
Speaker 1: where it was in the early eighties, Yet you had
13:38
Speaker 1: a good economic growth decade in the eighties for the
13:40
Speaker 1: most parts. So so it can do that, and you
13:44
Speaker 1: know that maybe where we're at the other factor, I
13:47
Speaker 1: think you have to consider with inflation that again we
13:50
Speaker 1: don't know the effects yet. But you know, we passed
13:52
Speaker 1: three something trillion dollars in in fiscal policy with the
13:57
Speaker 1: Inflation Reduction Act and the Budget Deal late December. That
14:02
Speaker 1: money hasn't been spent, It hasn't cycled its way through
14:04
Speaker 1: the economy yet, um And so will that reduce the
14:09
Speaker 1: decline and inflation once that money starts to work its
14:13
Speaker 1: way through the economy and and so that would be
14:15
Speaker 1: a factor that would maybe mitigate the decline and inflation
14:18
Speaker 1: that we haven't seen. So you've got a lot of
14:20
Speaker 1: cross currents right now going in both directions, and it
14:24
Speaker 1: remains to be seen where we settle. But but I
14:27
Speaker 1: think you know we're settling somewhere near at least in
14:30
Speaker 1: the short term where the FED maybe tapering and waiting,
14:34
Speaker 1: and that would be around that five percent number. Okay,
14:36
Speaker 1: So what's your investment thesis given all that, Well, we
14:40
Speaker 1: would be pretty diversified right now under the theory. There's
14:44
Speaker 1: a lot of question marks and um, A lot of
14:47
Speaker 1: unknowns and there really is there's a lot of things
14:50
Speaker 1: we just can't answer at the moment. So we're uh,
14:53
Speaker 1: we we run a strategy that that you know, invest
14:57
Speaker 1: in a variety of different non correlated asset class to
15:00
Speaker 1: so precious metals, real estate, US and non US equities,
15:03
Speaker 1: and US and non US fixed income. And and we
15:06
Speaker 1: would add to advocate a strategy that does that. UM.
15:10
Speaker 1: We think with inflation risk, with the uncertainty factor UM,
15:14
Speaker 1: and the amount of equity has been created over the
15:16
Speaker 1: last you know, several years, healthy investment in gold would
15:21
Speaker 1: make sense, especially if the fet IS is slowing down
15:23
Speaker 1: and stopping or maybe cutting at some point in the future.
15:26
Speaker 1: Over as well, UM equities were not negative on them,
15:29
Speaker 1: but we're sensitive to valuation. We would recommend a variety
15:33
Speaker 1: of stocks and different asset classes so that you're not
15:36
Speaker 1: wedded to any one sector UM. And then on the
15:40
Speaker 1: fixed income side, well, lengthening duration probably makes sense at
15:44
Speaker 1: some point. We're not quite there yet, so we would
15:47
Speaker 1: advocate high quality and short duration fixed income, especially on
15:51
Speaker 1: the on the corporate side. And we've found some opportunities
15:54
Speaker 1: in you know, pretty short term investment grade paper UM
15:58
Speaker 1: and then a health the doe so hard assets like
16:01
Speaker 1: real estate, commodities, so the equities of those businesses which
16:04
Speaker 1: you think on the commodity side, there's a there's a
16:06
Speaker 1: longer cycle at play in that space energy, you know,
16:10
Speaker 1: commodity metals, those sorts of things UM, and real estate
16:14
Speaker 1: as a hedge and and also potentially uh, you know,
16:18
Speaker 1: rising rentals and all that stuff. Certainly something we're gonna
16:21
Speaker 1: keep our eye on. Brent Crude. Of course at eighty
16:22
Speaker 1: three as we speak, Michael Codino over at President portfolio
16:27
Speaker 1: manager sees me of the permanent portfolio family of funds,
16:29
Speaker 1: we thank you. As always, a lot of uncertainty around
16:36
Speaker 1: the inflation. Look, he says, Uh, if this situation changes,
16:40
Speaker 1: big surprise, the centerment could move faster than uh basis
16:44
Speaker 1: point pace. Uh. He also said that it's a reasonable
16:47
Speaker 1: view most officials for a cast rates UH in the
16:51
Speaker 1: range of five and five and a quarter percent. That's
16:54
Speaker 1: what he's calling a reasonable view at this point. Thank
16:57
Speaker 1: you for rescuing me. I appreciate that. Well, well, let's
17:00
Speaker 1: ask if it is a reasonable view to someone who
17:02
Speaker 1: has a lot more experience than either one of us
17:04
Speaker 1: on on this front, and Yale. DiMartino Booth joins us.
17:07
Speaker 1: She's a CEO, Chief strategist of Quill Intelligence. I believe
17:10
Speaker 1: worked for the former Dallas FED as well, so she
17:13
Speaker 1: has the capacity Daniel inside knowledge. Um. I was. I
17:18
Speaker 1: was kind of uh Richard Fisher's senior adviser on all
17:22
Speaker 1: things markets at the intersection of macroeconomic data. So I
17:26
Speaker 1: was I was a role that no longer exists at
17:28
Speaker 1: the Dallas head It's they eliminated the position Anthony left. Yeah, clearly. Yeah,
17:34
Speaker 1: they're like, we can't replace it. End of story, Like
17:37
Speaker 1: we're just giving up. Um. But it was pretty fascinating
17:40
Speaker 1: throughout the crisis, especially drawing parallels between now and then
17:44
Speaker 1: when Bernanke wanted to foment certainty and Powell and his
17:49
Speaker 1: closest confidence Waller Williams, they want to foment uncertainty. So
17:56
Speaker 1: they don't want to they don't want from markets to
17:58
Speaker 1: lock anything in. And I think that that's why they're
18:00
Speaker 1: having such a difficult time communicating because that's not how
18:04
Speaker 1: we view the FED. It's not how we've been trained
18:06
Speaker 1: for forty years to view communications from the FED. Well,
18:11
Speaker 1: I mean, we didn't get much communication a law when
18:13
Speaker 1: we had individual's law worth, we couldn't understand it when
18:17
Speaker 1: we had green Span. I mean, what, why is there
18:21
Speaker 1: the drive towards uncertainty at this point? I think they
18:25
Speaker 1: really do want to keep the window open to be
18:30
Speaker 1: higher for longer. And again, the only thing we've ever
18:33
Speaker 1: known is lower for longer. But I think they're they're
18:36
Speaker 1: they're desperately trying to say we want to maintain rates
18:41
Speaker 1: at a high level that gives them license to continue
18:45
Speaker 1: conducting quantitative tightening quote unquote in the background, what nobody
18:49
Speaker 1: in the media ever asks him about, and what he
18:51
Speaker 1: doesn't really talk about very much. Uh, you know, he
18:54
Speaker 1: was asked about mortgage backed securities, would you ever consider
18:56
Speaker 1: selling them, obviously for a big loss in this kind
18:59
Speaker 1: of high interest rate environment, to purchase him at two
19:02
Speaker 1: to and alf percent cuban Now mortgage rights are north
19:04
Speaker 1: of six um. You know, when when he was asked directly,
19:07
Speaker 1: he said, you know, it's not really something that we're
19:09
Speaker 1: talking about right now. Next more uncertainty, And I think
19:13
Speaker 1: that I think that that's his goal, uncertainty. Yeah, it's
19:17
Speaker 1: interesting you bring that up with it the titening, because
19:19
Speaker 1: I just says an aside Europe. I mean, that's the
19:22
Speaker 1: big story I think for or potentially could be with
19:26
Speaker 1: the with a sovereign bond market. Why is it not
19:30
Speaker 1: as we do the unwind here? Why is that not
19:33
Speaker 1: a focus? You know? I think he has tried so hard,
19:38
Speaker 1: And I say he because I really do feel like
19:41
Speaker 1: the Federal Reserve is a community of speakers leaders. But
19:46
Speaker 1: at the end of the day, we really are. I mean,
19:48
Speaker 1: yesterday was like, oh my gosh, the Super Bowl starting
19:50
Speaker 1: at twelve thirty. I mean, the whole world shut down
19:53
Speaker 1: waiting to hear Powell. So he really is this this
19:56
Speaker 1: one person mechanism. And yet you know, you don't get
20:00
Speaker 1: that same type of focus when you're talking about Europe
20:04
Speaker 1: and tightening potentially faster than the United States. None of
20:07
Speaker 1: that really matters. If the Fed doesn't pause or pivot,
20:11
Speaker 1: If they really keep going, other central banks are going
20:15
Speaker 1: to have an effect on global liquidity and then the
20:19
Speaker 1: price of money. But if we maintain high rates and
20:23
Speaker 1: don't go in a different direction, if we're not the leader,
20:26
Speaker 1: if we don't follow the Bank of Canada in pausing,
20:28
Speaker 1: then it's all irrelevant, uh, you know, is Michael Burry
20:31
Speaker 1: said on on on Odd lots yesterday on Bloomberg it
20:35
Speaker 1: would be a paradigm shift. Paradigm shift. Some heavy words
20:40
Speaker 1: from Michael Burry. We don't listen to the shows, just
20:44
Speaker 1: Bloomberg Markets and John and I listen to it on
20:46
Speaker 1: repeating that is all just kidding. Danielle, I am getting
20:50
Speaker 1: a question. I b to here into me. I want
20:52
Speaker 1: to talk to you about the divergence you started seeing
20:54
Speaker 1: the Federal Reserve. It feels like, whereas there was this consensus,
20:58
Speaker 1: especially in the back half of two where it was
21:02
Speaker 1: just be as hawkish as possible, until we start to
21:04
Speaker 1: see some cracks and inflation, that seems to start diverging.
21:08
Speaker 1: Now we have Neil Kashkary on the most hawkish end um,
21:10
Speaker 1: others perhaps walking back some of the Fed's comments from
21:14
Speaker 1: last Wednesday, to what extent is that by design? To
21:17
Speaker 1: what extent is that divergence worth paying attention to? So
21:22
Speaker 1: I think, I think really to the extent that that
21:27
Speaker 1: the care Powell is guiding other speakers narratives. It's important.
21:34
Speaker 1: And when you are inside the FED, I mean, wandering
21:37
Speaker 1: off the reservation with a crazy view is looked down upon.
21:42
Speaker 1: You cannot do that. So I mean you bring up
21:45
Speaker 1: the best example of all Neil cash Cary, whose narrative
21:48
Speaker 1: is completely flipped. We used to think he was the
21:50
Speaker 1: biggest dove in the world, and now he's saying, oh,
21:53
Speaker 1: maybe five point four percent, maybe we're gonna go higher.
21:56
Speaker 1: I don't think that that that type of communication is
21:58
Speaker 1: not is on articulated and condoned at the very top
22:04
Speaker 1: of the head. Okay, with your background and experience, what
22:07
Speaker 1: should they be doing at this point? Look, I think
22:12
Speaker 1: what a few people are talking about, and hats off
22:15
Speaker 1: to Rubensteins were bringing it up. It's it's the debt ceiling.
22:19
Speaker 1: And it was yesterday it was Powell saying I'm not
22:22
Speaker 1: stepping in and doing anything. Good luck, I'll see you
22:26
Speaker 1: on the other side. That's I mean. People are not
22:29
Speaker 1: talking about this ticking clock in the background and the
22:33
Speaker 1: parallels to two thousand and eleven, which was really a
22:37
Speaker 1: bad time for markets. And we've already had two rating
22:40
Speaker 1: agencies come out and say, if this really does go
22:43
Speaker 1: down to the wire, then we are going to be
22:45
Speaker 1: potentially flirting with another downgrade of the sovereign debt of
22:49
Speaker 1: the United States. People just are not They don't know
22:52
Speaker 1: where to they don't know where to couch it. They
22:53
Speaker 1: don't know where to put it. And so I think
22:55
Speaker 1: that that that is the thing that so few were
22:58
Speaker 1: talking about, is that we could have a sequel of
23:01
Speaker 1: what markets look like in two thousand eleven, and that
23:03
Speaker 1: would not be a good thing. Was that really his remant?
23:07
Speaker 1: I mean, he's monetary, not fiscal or it's gonna bleed.
23:11
Speaker 1: I gotta look at twenty seconds, of course, I but
23:15
Speaker 1: there are ways for monetary to come to the rescue
23:17
Speaker 1: of fiscal and yesterday Powell said, not on my watch.
23:20
Speaker 1: That's your that's your takeaway, all right. Danielle di Martino,
23:24
Speaker 1: booth CEO and chief stragist over at Quill Intelligence, we
23:28
Speaker 1: thank you as always on a crucial day. Of course,
23:30
Speaker 1: we're going to get a lot of fed Speaker k
23:36
Speaker 1: CBS shares higher though in the day, up about four
23:38
Speaker 1: percent on the session. Um, there's some M and A
23:41
Speaker 1: news here. There's also some earnings news. We're gonna bring
23:43
Speaker 1: in our very own. Jonathan Palmer, senior industry analyst with
23:47
Speaker 1: Limberg Intelligence. What do you want to start with first,
23:49
Speaker 1: the earnings or the acquisition? What's bigger for you? Oh?
23:52
Speaker 1: Absolutely the acquisition. I mean the earnings came in and
23:54
Speaker 1: kind of as expected a little bit stronger. But the
23:57
Speaker 1: real story here is this deal for oak Street Health,
24:00
Speaker 1: which has been rumored and bantered around by Bloomberg News
24:03
Speaker 1: in the Wall Street Journal for the last couple of months,
24:05
Speaker 1: and it really comes on the back of some other
24:07
Speaker 1: big plays here in the health st I've never heard
24:10
Speaker 1: of them, or maybe I should have, but now you
24:13
Speaker 1: probably haven't heard of them. I mean, they're a Medicare
24:15
Speaker 1: advantage platform that they service the Medicare advantage customer base.
24:20
Speaker 1: They've only been around for about a decade. They have
24:22
Speaker 1: centers in twenty one states where they manage these patients.
24:26
Speaker 1: It's only I think a hundred and fifty five thousand
24:29
Speaker 1: as at the end of last year. But it's really
24:31
Speaker 1: a different kind of new age primary care platform, and
24:34
Speaker 1: primary care is kind of all the rage in the
24:37
Speaker 1: healthcare services business. We have Amazon buying one Medical, We've
24:42
Speaker 1: got CBS with oak Street. There's been some rumors about
24:44
Speaker 1: some of the other newer platforms um potentially getting acquired
24:48
Speaker 1: as well. So everybody wants to own this primary care space.
24:52
Speaker 1: H The one I forgot to mention was your Walgreens
24:55
Speaker 1: owning Village, m D. So the move in pharmacy and
25:00
Speaker 1: healthcare services in general is to just make the umbrella
25:03
Speaker 1: bigger and and capture more of those patient workflows, you know,
25:07
Speaker 1: in their enterprise and primary care is the kind of
25:09
Speaker 1: the next battleground. Does um anybody from Justice or the
25:14
Speaker 1: FTC say, hold on, wait a second, Well interesting you
25:18
Speaker 1: say that, because the FTC is going to be examining
25:21
Speaker 1: the Amazon One Medical and I wouldn't be surprised, you know,
25:24
Speaker 1: given that that they also look at this Oak Street
25:27
Speaker 1: and the CBS deal as well. I mean the reality is,
25:31
Speaker 1: you know, for me as a health care analyst, I
25:33
Speaker 1: don't necessarily see any conflicts of interest from a from
25:35
Speaker 1: a pure antitrust perspective for Amazon and and One Medical.
25:39
Speaker 1: I mean Amazon, that side of owning you know, some
25:42
Speaker 1: pharmacy assets doesn't really deliver healthcare, so it's kind of
25:45
Speaker 1: hard to see where the conflict is. You know, CVS
25:49
Speaker 1: with three billion in revenue, you know, touching basically you know,
25:53
Speaker 1: the majority of pressure points in the healthcare system. You know,
25:58
Speaker 1: maybe there's an issue there, But again, they don't own
26:00
Speaker 1: a lot of primary care assets now outside of minute clinics,
26:02
Speaker 1: which is a very different beast than primary care. What
26:08
Speaker 1: does that that mean for I mean, you mentioned the
26:10
Speaker 1: Amazon kind of trying to get in. I remember a
26:12
Speaker 1: while back. I think there was some sort of partnership
26:14
Speaker 1: between Amazon. I must say it was a Berkshire Hathaway
26:17
Speaker 1: and right. Um, do you start to see or are
26:22
Speaker 1: we anticipating more of those larger non traditional health players
26:25
Speaker 1: to enter the space. My view is that you know,
26:29
Speaker 1: somebody famously set healthcare is very hard, and you know,
26:33
Speaker 1: the non traditional players have been trying to get into
26:36
Speaker 1: healthcare for years. I think Amazon's the furthest too long
26:40
Speaker 1: and very frankly, I would say they're at the end
26:43
Speaker 1: of the day nowhere in the grand scheme of things.
26:45
Speaker 1: I mean, they do have their pharmacy. They started a
26:49
Speaker 1: thing called Amazon Clinic, which they were offering two employers,
26:52
Speaker 1: and then they quickly shuttered it. We'll see what happens
26:55
Speaker 1: with one Medical. Um. You know, again, one medical is
26:59
Speaker 1: not a very big player in the grand scheme of
27:01
Speaker 1: things either. And you have the Googles and the Microsoft's
27:04
Speaker 1: and and facebooks maybe hunting around the margin, but none
27:08
Speaker 1: of them have really stepped into the delivery of care
27:11
Speaker 1: in a meaningful way. So I don't see non traditional
27:14
Speaker 1: players as being a huge threat. It's the incumbents like CBS,
27:18
Speaker 1: like Walgreens, like United Health who are really the ones
27:20
Speaker 1: who are are changing the healthcare system in the US
27:23
Speaker 1: as we know it. This is a potentially stupid question,
27:26
Speaker 1: as all of my questions are, do they eventually take
27:29
Speaker 1: over my local doctor's office? Well, yeah, I think they do.
27:33
Speaker 1: I mean, I live in northern New Jersey and the
27:37
Speaker 1: big regional player in that space is a company called
27:40
Speaker 1: Summit and Billa g m D just just bought that
27:44
Speaker 1: uh so slowly but surely, the practices and the regional
27:48
Speaker 1: practices are getting rolled up into these bigger organizations. I
27:51
Speaker 1: don't think it happens overnight, um, but it is a
27:54
Speaker 1: trend that we're seeing happen across the country. And I
27:56
Speaker 1: just wonder how that impacts the health or that you get.
28:01
Speaker 1: I mean, I'd rather deal with my individual doctor who
28:04
Speaker 1: has his own practice, rather than a giant conglomerate of
28:07
Speaker 1: you know, owned by whomever. Now it's a it's a
28:11
Speaker 1: fair statement. I think that's why there's a lot of skepticism,
28:13
Speaker 1: you know, among practitioners and and people like myself. I mean,
28:16
Speaker 1: I don't even know that the economics, you know, from
28:19
Speaker 1: the small business perspective even works for individual practitioners anymore. Well,
28:24
Speaker 1: that's that's one of the problems. I mean, we have
28:26
Speaker 1: seen this trend where there's been consolidation among providers. That's
28:29
Speaker 1: why they've moved to some of these regional platforms and
28:32
Speaker 1: consolidated themselves into bigger practices which are now being scooped
28:35
Speaker 1: up by bigger companies. I mean the Amazon's are the
28:40
Speaker 1: one Medicals, and Amazons and United Health and cvs is
28:43
Speaker 1: of the world will tell you that, you know, when
28:45
Speaker 1: they're looking at at the long term, that they're going
28:48
Speaker 1: to provide you know, the best clinical outcomes at the
28:51
Speaker 1: lowest costs. I think the proof needs to be seen
28:54
Speaker 1: in the pudding to know that that that's actually going
28:57
Speaker 1: to happen. I mean I personally, I mean I cover healthcare,
29:00
Speaker 1: I use everything. I use One Medical, Walgreen, CBS, right Aid.
29:05
Speaker 1: You know, I don't know that I have a great
29:06
Speaker 1: experience across any of them. So when I sit there
29:09
Speaker 1: and think about my primary care now being folded into
29:11
Speaker 1: one of these organizations, I wonder what the future state
29:14
Speaker 1: looks like. And I think that needs to be proven
29:16
Speaker 1: out across the space. So that's more on the acquisition front.
29:20
Speaker 1: We have about a minute left. I'm gonna put you
29:22
Speaker 1: on the spot. Let's talk to us, talk to us
29:23
Speaker 1: about the earnings here, um and what really stands out
29:25
Speaker 1: to you there. Yeah, so they beat on revenue, they
29:28
Speaker 1: beat a little bit on EPs UM. The retail portion
29:32
Speaker 1: of their business was a little stronger because cold and
29:35
Speaker 1: flu has come back. UM. The PBM, which is their
29:39
Speaker 1: care mark business, continues to hum along. John Menchelin's specialty.
29:43
Speaker 1: That's a that's always been a big driver of that business.
29:46
Speaker 1: And the benefits business too is humming along as well.
29:49
Speaker 1: There's not really any sea changes in in the core
29:51
Speaker 1: of CVS. I mean, the most exciting thing is that
29:54
Speaker 1: they've had this uh strategy of wanting to acquire primary
29:58
Speaker 1: care and they've been talking about it for a year
29:59
Speaker 1: paus now and and now it's finally come to fruition.
30:02
Speaker 1: So we'll see how that shakes out. But you know,
30:05
Speaker 1: by all accounts, the markets positive on this deal. Do
30:08
Speaker 1: that make any money selling milk and you know, good
30:12
Speaker 1: ease and stuff like that at the front of the store,
30:14
Speaker 1: Sure they still do, but you know, a lot of
30:16
Speaker 1: that has been impacted by online you know, whether it's
30:20
Speaker 1: Amazon or Walmart. You know, the driver of the pharmacy
30:24
Speaker 1: business used to be that you had the pharmacy and
30:26
Speaker 1: back and you had to walk through all the aisles
30:27
Speaker 1: and you you pay you know, over plus for the
30:32
Speaker 1: items that you need. But you were willing to pay
30:34
Speaker 1: that for a convenience factor. That's slowly shifting. Okay, that's
30:37
Speaker 1: where I get the Valentine gifts, CBS, the candy. I mean,
30:41
Speaker 1: it's it's a pretty great selection. Um. Jonathan Palmer of
30:45
Speaker 1: Bloomberg Intelligence, we thank you as always covering the health
30:47
Speaker 1: care space. I have a bond market question before you
30:53
Speaker 1: introduced the guests. Do you buy for yield or you're
30:57
Speaker 1: buying for the price depreciation? Um? I believe, Excuse me.
31:02
Speaker 1: I believe it depends on investment grade versus how yield
31:04
Speaker 1: the way I was taught. Okay, Um, but I believe
31:08
Speaker 1: you're buying for the spread change. Anyways, we should ask
31:11
Speaker 1: Brian Whalen, Co, Chief investment Officer and generalist portfolio manager
31:15
Speaker 1: with t c W Investment He invest Management. Excuse me,
31:18
Speaker 1: he does join us on the phone for his monthly
31:21
Speaker 1: segment on the latest fixed income market moves. Let's start there.
31:24
Speaker 1: Brian answer John's questions, do you purchase? Yeah, I'll ask
31:29
Speaker 1: do you purchase for a yield appreciation or the price appreciation?
31:33
Speaker 1: Because it was the spread they traveling opposite directions. I
31:38
Speaker 1: think the answer is yes to all the above. You
31:41
Speaker 1: answer for all that and more. I think you you
31:44
Speaker 1: buy it depaying your time rise, and you buy it
31:46
Speaker 1: for the yield, which right now looks better than it
31:49
Speaker 1: has in a long long time. You know five um,
31:53
Speaker 1: if you have an opinion on the economy and credit spread,
31:56
Speaker 1: you buy it for the total return, which could be
31:58
Speaker 1: the price impact up or down to pen on which
32:00
Speaker 1: way you know, spreads and interest rates go. And then
32:03
Speaker 1: the third reason he didn't manage it, didn't mention excuse me?
32:06
Speaker 1: You can buy it for what it does in your portfolio.
32:09
Speaker 1: You know, obviously it provides some diversification. Maybe not last year,
32:13
Speaker 1: nothing provided diversification last year, but typically uh and certainly
32:17
Speaker 1: at a at a yield of about five, you know
32:19
Speaker 1: it can offer some diversation and hedging against other pieces
32:23
Speaker 1: of your portfolio, like equities or alternatives or emerging markets.
32:28
Speaker 1: Let's go a little bit more nerdy. If we shall
32:32
Speaker 1: because I'm the person keep going because I'm really a
32:38
Speaker 1: genuinely confused when it comes to the bond market. Look,
32:41
Speaker 1: they're tied. It's tied at the hip of the Federal Reserve.
32:43
Speaker 1: No brainer there. There are cuts priced in, no brainer there.
32:46
Speaker 1: We're looking at a tenure yield that's really just trading
32:49
Speaker 1: in a range, and it have been for the last
32:51
Speaker 1: few months. So why should we care about the bond
32:53
Speaker 1: market right now? Oh? It drives, it dries everything. I
32:58
Speaker 1: don't think the equity people like to admit that, but
33:00
Speaker 1: that's that's the truth. I mean, you know, it's it's
33:04
Speaker 1: the smart smart John. I'm glad you said that. I'm glad,
33:08
Speaker 1: but I can't say I disagree. I mean, it's it's
33:11
Speaker 1: it's behind everyone. You know, a neutral John, you can't
33:14
Speaker 1: take the side of the bond people. Oh my god,
33:19
Speaker 1: it's your cost of borrowing, you know, it's it's you know,
33:22
Speaker 1: it's it's your cost of capital. It impacts currency markets,
33:25
Speaker 1: I mean, it has, it has ramifications throughout the global economy.
33:29
Speaker 1: So you're supposed to focus on it. Yeah, I mean
33:31
Speaker 1: it's been amazing. I'm given how volatile last year was.
33:34
Speaker 1: You know, the ten year. Um, you know, the five
33:37
Speaker 1: ten in the thirty years kind of all kind of
33:38
Speaker 1: settled into a range here. And you know, since the
33:41
Speaker 1: employment report last Friday, we've had a little bit of
33:43
Speaker 1: a sell off, but um, you know, honestly, it feels
33:46
Speaker 1: incredibly um, I'll say, almost son of seamless um in
33:51
Speaker 1: terms of the adjustment the market just made. You know,
33:53
Speaker 1: it's a very strong employment on Friday. It basically then
33:57
Speaker 1: just said, okay, you know what, five or it's not
34:00
Speaker 1: going to be the upper bound. It's gonna be five
34:02
Speaker 1: and a quarter percent. But once we get there, the
34:04
Speaker 1: Fed's gonna stay on hold for most of the year.
34:06
Speaker 1: And then, just like we've thought for months now, by
34:08
Speaker 1: the end of the year, they're going to make a
34:09
Speaker 1: couple of cuts and by the end of four you know,
34:12
Speaker 1: we're you know, we're they're going to make at least
34:14
Speaker 1: in a hundred more cuts. Uh. And so it's been
34:16
Speaker 1: amazing just how strong that member was. What I'd say
34:19
Speaker 1: is a fairly seamless adjustment, both in the bond market
34:21
Speaker 1: as well as you know, every other market. But that
34:23
Speaker 1: feels like a fairly consensus take there, which then brings
34:27
Speaker 1: me back to my original question, how do you even
34:30
Speaker 1: trade it? Then? Is that why we're seeing this trading
34:32
Speaker 1: range for the tenure, but you're also seeing in the
34:34
Speaker 1: two years as well. Is it because those cuts are
34:36
Speaker 1: so strongly priced in that's essentially creating a cap. Yeah,
34:41
Speaker 1: you know, I'd say the this whole market reeks of
34:44
Speaker 1: in patients. You know, it's year to date, it's got
34:47
Speaker 1: kind of like a fomo rally, meaning you know, I
34:49
Speaker 1: think you know, it just feels like investors want to
34:52
Speaker 1: look around and say, all right, you know, we're ten
34:54
Speaker 1: months into a tightening cycle and the economy hasn't rolled over.
34:57
Speaker 1: You know, an unemployment is still low. It must be
35:00
Speaker 1: a soft landing. There isn't gonna be recession, and therefore
35:03
Speaker 1: I'm gonna run out and buy risk. And you know,
35:05
Speaker 1: I think we kind of scratch our heads a little
35:07
Speaker 1: bit and say, you know what, like, you know, the
35:08
Speaker 1: term long and variable but didn't come out of nowhere.
35:11
Speaker 1: It's there for a reason. And typically typically ten months
35:14
Speaker 1: into a monetary tightening cycle, you don't have a recession.
35:17
Speaker 1: Yet you don't see the economy rolling over, especially this time.
35:20
Speaker 1: You know, we came into you know, the consumer had
35:24
Speaker 1: well over a trillion dollars of excess savings, you know,
35:27
Speaker 1: and when you look at an employment report ten months
35:29
Speaker 1: into a tightening cycle, with that kind of kind of
35:32
Speaker 1: momentum in the economy, and from all that, you know,
35:35
Speaker 1: that accumulated savings, it shouldn't surprise anybody that we haven't
35:39
Speaker 1: rolled over yet. But it's just gonna take some time. So,
35:42
Speaker 1: you know, when we look at interest rates, or particularly
35:45
Speaker 1: when we look at things like credit spreads, like you know,
35:47
Speaker 1: high yield trading at three ninety over treasuries and if
35:50
Speaker 1: you exclude kind of the distress part of that market,
35:53
Speaker 1: hi yield bonds only offer a yield cream of about
35:55
Speaker 1: three percent over treasuries, which I will tell you, and
35:58
Speaker 1: you know, the listeners, that's pretty that's that's not a
36:00
Speaker 1: lot of compensation. That's what we call that's pretty tight. Uh,
36:04
Speaker 1: it's certainly not indicative of of the risk of entering
36:07
Speaker 1: our sessions. So to my first point, it just seems
36:10
Speaker 1: like the market wants to kind of a rush to
36:12
Speaker 1: judgment on what this monetary tightening cycle has done or
36:16
Speaker 1: has not done. And I think, you know, we would
36:18
Speaker 1: kind of caution everyone to be patient because, uh, you know,
36:21
Speaker 1: monetary tightening is long and variable, and we think we'll
36:24
Speaker 1: see the impact of it later this year. Okay, we
36:26
Speaker 1: both get duration. It's just like how long is the instrument? Right?
36:30
Speaker 1: Can you explain to me give me the real stupid person,
36:34
Speaker 1: me being the stupid person, explanation of convexity in the
36:37
Speaker 1: bond market. Oh, that's the that's that, that's your change
36:41
Speaker 1: of duration. Let let me let me give you an
36:44
Speaker 1: easy example. No, no, it's just we're gonna out your
36:52
Speaker 1: your I warned you your you're you're ready. He's gonna
36:54
Speaker 1: plumb it here. But let's let's do it. So when
36:58
Speaker 1: you started, thank you, here we go. You've got a mortgage, right,
37:02
Speaker 1: and you have an option you can either pay that
37:06
Speaker 1: forever you know you can, or you can refinance it
37:08
Speaker 1: when interest rates drop. Right, And that means if you
37:11
Speaker 1: think about that, from the timing of all the cash
37:13
Speaker 1: flow that you're paying, it can shift. It can get
37:16
Speaker 1: really short, or it can shift out really long, depending
37:19
Speaker 1: upon what you want to do with your prepayment option. Now,
37:22
Speaker 1: picture a bond backed by a thousand of those mortgages.
37:28
Speaker 1: What happens is everybody's got a three percent mortgage. You
37:32
Speaker 1: enter a year like two. When interest rates sell off
37:35
Speaker 1: and get much much higher interest rates, you know, mortgage
37:38
Speaker 1: rates go to six or seven percent. Most homeowners are
37:41
Speaker 1: gonna look at that and say, you know what, I
37:43
Speaker 1: love my home, I love my school district. This is
37:45
Speaker 1: a great place. I don't want to move and pay
37:47
Speaker 1: six percent a three percent, So I think I'll sit
37:49
Speaker 1: here for the next thirty years, which means the bond
37:53
Speaker 1: backed by a thousand of those decisions, just went from
37:56
Speaker 1: being a three year bond to a seven year bond.
38:00
Speaker 1: And I will tell you when you have a seven
38:02
Speaker 1: year bond, it's price goes down a lot more when
38:06
Speaker 1: rates rise in a three year bond. And so that's
38:08
Speaker 1: what happened to the mortgage market last year, and that's
38:10
Speaker 1: actually why it's one of the cheaper areas of the market.
38:13
Speaker 1: It extended, the price performance was very poor um and
38:18
Speaker 1: a lot of investors fled that market, which made it cheap,
38:21
Speaker 1: which is why it's one of the few places we
38:23
Speaker 1: actually have, let's say, a higher exposure than other areas
38:27
Speaker 1: because it looks cheap because of that extension of duration,
38:30
Speaker 1: which is negative convex me. Did that answer your question,
38:33
Speaker 1: John Tucker? It does. It's also I guess explains that
38:36
Speaker 1: it's kind of different on the way up and from
38:39
Speaker 1: the way down. There's a different dynamic in place. I
38:42
Speaker 1: guess first drive to bond math right here on Bloomber
38:46
Speaker 1: Radio Market. Yeah, those of you, now that was great.
38:52
Speaker 1: That really was Brian Whale and co Chief investment Officer
38:54
Speaker 1: and generals portfolio manager at we T c W Investment Management.
38:57
Speaker 1: We thank you as always, thanks for listening to the
39:03
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