Latest / Capital Ideas podcast / Why municipal bonds can win on an after-tax basis

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Why municipal bonds can win on an after-tax basis · Capital Ideas podcast

• 0:00
  - Hi, I'm Mike Gitlin. Welcome to another episode
• 0:02
  of our "Capital Ideas" podcast.
• 0:05
  We get to meet the people behind the portfolios,
• 0:07
  hear from portfolio managers and analysts,
• 0:10
  some of the lessons learned, investment edge, ideas,
• 0:13
  a little bit more about Capital Group as well.
• 0:15
  Today, we have Karl Zeile with us.
• 0:17
  Karl's a fixed income portfolio manager.
• 0:20
  He's based in LA.
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  And we're going to talk about
• 0:23
  the evolving world of fixed income,
• 0:25
  some of the strategies Karl is investing in,
• 0:28
  and the long-term thinking that drives us at Capital Group.
• 0:31
  Karl, welcome to the podcast.
• 0:33
  - Thanks for having me, Mike.
• 0:35
  - So, Karl, you and I are both guilty of the same thing.
• 0:38
  We can be classified as crazy sports parents
• 0:43
  because one of the first times I met you,
• 0:46
  it was 11 years ago and we were running around
• 0:48
  the cross-country course.
• 0:49
  I have a picture of a cross-country race in Fresno,
• 0:53
  and I think this was the Clovis Invitational.
• 0:56
  - Yeah, it was. - But your daughter
• 0:58
  was running, my daughter was running,
• 1:00
  and you and I were running.
• 1:01
  So, how do you remember that?
• 1:04
  - Okay, so yeah, this was Clovis, an invitational.
• 1:07
  So, there are several hundred runners
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  at an event like this.
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  And for those of you who have not participated
• 1:13
  in spectating at a cross-country meet,
• 1:16
  you are in for a treat
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  because it is absolutely an active participation.
• 1:21
  - You need your running shoes on.
• 1:23
  - And I just, I'll never forget seeing you.
• 1:25
  It's a Saturday morning early,
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  and you're there in your shorts,
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  I'm in my shorts.
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  We both have our running shoes on, and we were ready to go.
• 1:32
  Like I knew immediately-
• 1:33
  - They were wondering if we were running the race.
• 1:35
  - I knew immediately
• 1:36
  that we were going to have fun working together
• 1:38
  because we were so completely aligned in the strategy
• 1:43
  of what we needed to accomplish that day as spectators.
• 1:46
  But even more than that,
• 1:47
  just the joy we shared in watching our daughters compete.
• 1:50
  Like it was just- - It's hard to imagine
• 1:52
  it was a decade ago.
• 1:54
  So, let's get into you, Karl.
• 1:56
  You've been a fixed income investor for 30 years,
• 1:58
  over 30 years.
• 1:59
  And in particular, municipal bonds.
• 2:02
  Did you grow up saying, you know what,
• 2:04
  one day I want to be a muni bond portfolio manager.
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  How'd you get into it?
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  - Yeah, I'm pretty sure nobody does that, so-
• 2:10
  - No one says that.
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  - When I was growing up, the Wall Street Journal
• 2:13
  did not have printouts of the pricing of municipal bonds
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  that you could page through.
• 2:18
  So, it's a little bit of a circuitous route.
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  So, studied economics and humanities for undergrad.
• 2:26
  And really thought that I was going to head
• 2:28
  into not-for-profit management, administration.
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  So, I went into a graduate program in public policy,
• 2:34
  thinking I was going to prepare myself
• 2:36
  for not-for-profit management.
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  And lo and behold, during the first year,
• 2:41
  I was exposed to the broad field of public finance,
• 2:45
  which I really knew nothing about.
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  That exposure led me to apply to a summer internship
• 2:53
  at our local, this is in Boston,
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  at the Massachusetts Industrial Finance Agency,
• 2:58
  which was a conduit issuer of municipal bonds
• 3:01
  based in Boston.
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  And I thought that I would just get some exposure
• 3:04
  to economic development,
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  various types of entities that issue municipal debt.
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  And I was just completely hooked right out of the gates.
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  You know, one of the things that people don't realize
• 3:16
  as it relates to the muni bond market
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  is there is so much here in the U.S.
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  that we confront in our day-to-day life
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  that was financed by municipal bonds.
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  - So, give us some examples
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  because not everyone is super familiar.
• 3:30
  So, give us a few examples.
• 3:31
  - So, I'll tell you just today,
• 3:33
  I mean, coming into our office here in downtown Los Angeles,
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  you pass the MTA, the MTA, financed municipal bonds.
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  LAX, an airport, financed with municipal bonds.
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  Hospitals, universities, charter schools,
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  senior living facilities, roads, bridges,
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  the list goes on and on.
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  - So, you're lending them money
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  to get the project off the ground and sustain it.
• 3:58
  - Yeah, that is actually absolutely right.
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  And that's one of the most interesting aspects
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  of the muni bond market relative, in my opinion,
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  to the corporate bond market.
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  In munis, you can't borrow
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  for kind of general corporate purposes.
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  Many of the issuers that come into the muni market
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  are kind of one-and-done type issuers.
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  And so, they come to the market,
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  they need to finance the people mover at LAX
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  or they need to finance a new power plant.
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  And they will come, they'll pitch the idea to investors,
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  they'll borrow a bunch of money, and then build the project.
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  And that kind of connection
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  with both kind of the fabric of the economy,
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  as well as kind of the variety that you confront
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  as a muni bond investor is super interesting.
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  - So, I remember years ago when we were chatting about this,
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  I had asked you, how many issuers are there
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  in the muni bond market?
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  I think you said something like 50,000.
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  - Yeah, I think it's over 60,000.
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  - 60,000. So, 60,000 separate issuers
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  financing projects, effectively.
• 4:57
  - That's right, that's right.
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  I mean, just to put it into perspective, Mike,
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  that the size of the municipal bond market in the U.S.
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  is around 4 trillion, a little over 4 trillion.
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  That's roughly the same size
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  as the U.S. corporate bond market in terms of total dollars.
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  The difference is, is munis have over 10 times
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  the number of issuers.
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  Just to put that into perspective.
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  - So, if you're a financial advisor
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  and you're using municipal bonds
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  in a balanced portfolio, how do you use them?
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  How would a financial advisor think about that?
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  - Yeah, I think where I would start,
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  if I was talking to a financial advisor about it,
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  is to say, first of all, muni bonds are exactly that.
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  They're bonds first and foremost.
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  And so, what we talk a lot about at Capital Group
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  are kind of the roles of fixed income.
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  So, it's opportunity to get some diversification
• 5:47
  from the equity market, capital preservation, income,
• 5:51
  obviously; all three of those super important.
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  All of those can be delivered in a municipal bond portfolio.
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  A couple of key distinctions, though, are that,
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  as we talked about,
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  the breadth of the issuer landscape is huge.
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  And the range of credit quality is very, very wide.
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  And so, we have everything from
• 6:13
  very highly rated AAA issuers
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  borrowing money in the mini market all the way down
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  to below investment grade, higher yielding securities
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  and everything in between.
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  And so, when you combine the number of issuers plus
• 6:27
  that range of credit quality,
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  you really have to do your homework to invest successfully.
• 6:32
  And I'll just add one more thing.
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  - Sure. - If you do all of that,
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  you get this great additional advantage,
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  which is in the U.S., municipal bonds,
• 6:41
  the interest on municipal bonds, are exempt
• 6:43
  from federal income tax.
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  And in many states, it's exempt from state income tax.
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  That's a big deal.
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  And it ends up causing municipal bonds to trade at,
• 6:54
  be priced at, yield slightly lower than taxables,
• 6:58
  but you still get an advantage if you are a high.
• 7:01
  - Yeah, you think about that taxable equivalent yield
• 7:04
  relative to the corporate market,
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  and while the print of it may be lower,
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  after you assume the tax benefit,
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  it's actually often higher.
• 7:12
  - Exactly. Yeah, if you think about it,
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  kind of apples to apples after tax returns,
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  munis through almost every market cycle tend
• 7:21
  to have an advantage for those who are
• 7:22
  in the higher tax brackets.
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  - So, speaking about that cycle,
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  what are we thinking about muni bonds right now, today?
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  We're in 2026.
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  Last year, munis didn't do well as corporates.
• 7:34
  They lag typically, after a year like that,
• 7:37
  munis play some catch up.
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  But what do you think of for 2026
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  and for the next three to five years
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  when you're looking forward?
• 7:43
  - It's a really good question.
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  It's one we talk about a lot internally
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  because you're right.
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  2025 was a challenging year for munis
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  in kind of an unexpected way.
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  It really came down to some technical aspects.
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  Very, very high supply in 2025.
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  Demand had shifted a bit.
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  And so, there was a bit of a supply and demand imbalance.
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  That caused munis to underperform
• 8:08
  kind of like-for-like taxable bonds
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  by 300 basis points in 2025.
• 8:13
  - Which is a lot. I mean- - That's a lot.
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  - In the world of equities, maybe not so much.
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  In the world of fixed income, 300 basis points,
• 8:18
  three full percentage points, a lot of underperformance.
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  - It's a big deal. It's a big deal.
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  And to your point earlier, almost always
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  there is a catch-up that occurs.
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  And it doesn't always happen immediately,
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  but it happens over time.
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  Typically over one to two years, you will see
• 8:33
  kind of a recalibration of the relative value
• 8:36
  of the two markets.
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  That should be a nice tailwind for muni bonds.
• 8:40
  - So, reversion to the mean, effectively.
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  - Essentially. - All right,
• 8:43
  let's move to Karl Zeile, the portfolio manager,
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  your experience at Capital Group.
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  One of the things we do in every one of these sessions
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  is talk about about lessons learned.
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  This is a humbling profession.
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  What are some lessons you learned earlier
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  in your career that you want to share with others,
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  maybe so they don't make the same mistake,
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  but also how it was an experience here
• 9:06
  that made it even better experience at Capital Group?
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  - For me, in particular, and this really does apply
• 9:11
  specifically to investing in the bond market, I think.
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  I think it's really important
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  that as much as we talk about the importance
• 9:19
  of bottom-up fundamental investment,
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  digging deep into credits,
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  understanding them really, really well,
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  we have to be careful about not falling in love
• 9:29
  with the bottom-up credit story in bonds.
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  And the reason for that is that every new issue
• 9:36
  that comes to market, it has a spread, a credit spread,
• 9:40
  that you're earning by taking on that risk.
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  - So, how much you're getting paid above the risk-free rate
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  to take that risk?
• 9:48
  - To take whatever risk that is.
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  That's going to change over time if the project does well,
• 9:53
  that spread could narrow.
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  And the value of owning that bond anymore in your portfolio
• 9:59
  could go down.
• 10:00
  You need to be aware of that.
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  At the same time, we're investing
• 10:03
  in a broad macro environment.
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  All of these muni bonds have a lot of other things
• 10:08
  kind of attached to them.
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  They have a maturity.
• 10:11
  They have a coupon.
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  They often have a call structure.
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  These are all things that in different economic environments
• 10:18
  could make that bond somewhat less attractive
• 10:21
  in a diversified portfolio.
• 10:23
  I think it's great to really, really enjoy
• 10:26
  the bottom-up work.
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  We do better, in my opinion,
• 10:31
  better than anyone in terms of the work we do bottom-up
• 10:34
  in terms of identifying the greatest investments.
• 10:36
  And at the same time, you need to be careful
• 10:39
  about falling in love.
• 10:40
  It's better to hold on loosely.
• 10:41
  - So, in your earlier career,
• 10:44
  did you fall in love with things
• 10:45
  and own things longer than you should have?
• 10:48
  - Time after time. - Not falling in love.
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  I would hear the same thing from our equity analyst
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  and equity portfolio managers
• 10:54
  is just reevaluating all the time.
• 10:57
  So, I think that's a great lesson both in the bond market
• 11:00
  and the stock market.
• 11:02
  But what's your specific investment edge?
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  - I think it is some combination of insatiable curiosity
• 11:11
  and absolutely loving collaboration.
• 11:15
  So, to me, the opportunity to reach an investment conclusion
• 11:21
  with the help of the people around me,
• 11:24
  essentially the team of professionals, whether it's traders,
• 11:27
  portfolio managers, other analysts, equity colleagues,
• 11:31
  fixed income colleagues, high yield, investment grade.
• 11:33
  Like, I love that. I love that.
• 11:36
  And, you know, some people may have kind of a view
• 11:40
  of a fixed income portfolio manager
• 11:43
  being someone who kind of is hunched behind a desk and,
• 11:45
  you know, with a bunch of screens.
• 11:48
  - Hopefully not too hunched, but yeah.
• 11:49
  - Not too hunched.
• 11:50
  Right, well, and it is a very quantitative business,
• 11:55
  for sure, but if you saw me at work on a day-to-day basis-
• 12:00
  - It's a people business. - It's a people business
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  at the end of the day, because getting great ideas
• 12:05
  into portfolios is about a lot more than my best ideas.
• 12:09
  It's about putting together the interconnections,
• 12:11
  like putting the puzzle together, not alone,
• 12:14
  but with people that you work with every day.
• 12:16
  - Yeah. I mean, we were based in West LA together
• 12:18
  for a number of years and I saw that.
• 12:20
  You are a collaborator. It does make your process different
• 12:24
  than others who don't do that as much.
• 12:27
  So, I saw that.
• 12:28
  Talk about that, though,
• 12:29
  in the context of The Capital System.
• 12:31
  I think most people are aware of what The Capital System is
• 12:35
  and how Capital is different.
• 12:37
  But I think a lot of them, when they think of it,
• 12:40
  use it for equities.
• 12:41
  And they say, does that really work in fixed incomes?
• 12:44
  Is that same Capital System from 1958,
• 12:47
  does it work in the bond market?
• 12:50
  Does it? - Yeah, 100%.
• 12:52
  (panelists crosstalk)
• 12:53
  - I agree with you.
• 12:54
  That was a bit of a set-up question because I agree,
• 12:56
  but tell us exactly how.
• 12:58
  - Yeah, well, you had Martin on this podcast
• 13:01
  not too long ago and no one can explain-
• 13:03
  - [Mike] Martin Romo, who is our Chief Investment Officer
• 13:06
  and our Chair and a wonderful person.
• 13:08
  - And explains the power of The Capital System broadly
• 13:11
  at Capital better than anyone.
• 13:13
  You start with kind of the basics,
• 13:14
  which is, you know, diverse thinking, collaboration
• 13:17
  and long-term view.
• 13:19
  All of that is true.
• 13:21
  And there are a couple of other particular nuances
• 13:25
  in fixed income that are important.
• 13:27
  One, because of the nature of the market,
• 13:29
  and one, because of the nature of the investment.
• 13:32
  So, the market in fixed income and bonds
• 13:34
  is what we call an over-the-counter market,
• 13:37
  meaning that to buy or sell a bond is a negotiation.
• 13:41
  Someone owns the bond, you want to buy it,
• 13:43
  you negotiate the price.
• 13:45
  - Right, very different than the equity market.
• 13:46
  - That has an exchange.
• 13:48
  - Yes. - Right.
• 13:48
  What that means is is that our traders
• 13:51
  who are responsible for navigating
• 13:53
  that over-the-counter market, that negotiation,
• 13:57
  have incredible insight in fixed income,
• 14:00
  over everything from valuation to liquidity
• 14:05
  to how the sell side is viewing a given credit.
• 14:07
  - So, you need their voice in the room.
• 14:09
  - You 100% need their voice in the room.
• 14:11
  There is no more powerful conversation
• 14:14
  than what occurs when you bring an analyst, a trader
• 14:17
  and a portfolio manager all together,
• 14:19
  and you have multiple perspectives weighing in
• 14:23
  on everything from valuation to credit to market.
• 14:26
  Like, it's magic.
• 14:27
  - Can I actually build the position enough
• 14:29
  to make a difference
• 14:30
  in the portfolio? - Exactly, right,
• 14:31
  100%, yeah.
• 14:31
  What's the liquidity characteristic of this thing?
• 14:34
  So, that's the first thing.
• 14:35
  The second is just the nature of fixed income investing,
• 14:40
  which does require a macro framework.
• 14:43
  And we have employed on the fixed income side
• 14:47
  a kind of top-down macro framework
• 14:51
  that provides consistency across our fixed income portfolios
• 14:55
  on the key macro drivers that we want to make sure
• 14:59
  are both consistent and correct
• 15:01
  in order to deliver for clients.
• 15:03
  So, these are overall direction of interest rates,
• 15:06
  overall direction of the shape of the yield curve,
• 15:09
  overall direction on credit spreads.
• 15:12
  These are our macro decisions that we make,
• 15:16
  not by a single person, again, in a room by themselves,
• 15:20
  but through a collaborative process,
• 15:22
  employing The Capital System,
• 15:24
  bringing our global investors together
• 15:27
  and sharing information, opinions and so forth.
• 15:30
  And that is, it's a way we harness
• 15:32
  The Capital System to deliver a more stable, robust process
• 15:38
  that I think our clients expect
• 15:40
  when they invest in fixed income.
• 15:41
  - So, like in the stock market as it relates
• 15:44
  to Capital Group, analysts manage money, portfolio managers
• 15:48
  have their own conviction,
• 15:50
  they work together in a portfolio.
• 15:52
  But this broader top-down macro perspective
• 15:55
  that we try to row in the same direction is something
• 15:57
  that makes it a little bit different
• 15:58
  than what we do in equities.
• 16:00
  - That's right.
• 16:01
  Yeah, you can't count on just those first two,
• 16:03
  the analyst and portfolio manager,
• 16:05
  kind of working independently to fully deliver
• 16:09
  the diversification and the stability that we need
• 16:12
  to deliver in fixed income.
• 16:14
  - So, you mentor a ton of people.
• 16:16
  What advice do you give in this world of fixed income,
• 16:20
  municipal bonds, and Capital Group, and The Capital System,
• 16:22
  and how it all works,
• 16:24
  what advice do you give to new analysts?
• 16:26
  - There are two things that I say pretty consistently.
• 16:30
  The first is don't wait to start
• 16:33
  to build relationships outside of your team.
• 16:36
  To truly harness the power of The Capital System means
• 16:40
  picking up the phone, reaching out
• 16:42
  to a senior portfolio manager on the equity side,
• 16:46
  an EM investor.
• 16:48
  - Emerging market. - Emerging market investor,
• 16:50
  a high-yield investor.
• 16:52
  Build those conversations,
• 16:54
  those relationships right out of the gate.
• 16:56
  - Yeah, I couldn't agree more.
• 16:58
  You have years to work with folks,
• 17:01
  spending that initial time
• 17:03
  to really build those relationships and get to know them
• 17:06
  and learn from them and help them.
• 17:08
  Do it early and do it consistently,
• 17:10
  and it makes a huge difference.
• 17:12
  - 100%. And then the other thing I would just say
• 17:15
  is that the investor role and especially the analyst role
• 17:19
  at Capital is just very different.
• 17:21
  And it's fun.
• 17:23
  It can be a little bit unnerving
• 17:24
  because you're being asked to not only make
• 17:26
  a credit recommendation,
• 17:28
  but also establish a valuation framework
• 17:31
  and invest in that idea or not.
• 17:33
  - Manage real money.
• 17:34
  I mean, again, our analysts manage money.
• 17:36
  They're not just telling Karl what to do
• 17:38
  and suggesting what to do in your portfolio.
• 17:40
  They're managing client assets.
• 17:42
  Fundamental difference than other assets.
• 17:44
  - Exactly.
• 17:45
  And that role doesn't end there
• 17:47
  because the very best analysts have an opportunity
• 17:50
  and a responsibility to get their best ideas
• 17:54
  not just held in the research portfolio, but held broadly.
• 17:57
  - Scale it. Scale it in the portfolios
• 17:59
  by the portfolio managers also coming along.
• 18:02
  - Yeah, exactly.
• 18:02
  And I use the example, I say, you know what?
• 18:05
  As a new analyst at Capital,
• 18:06
  you're basically hanging a shingle outside
• 18:09
  your office door saying,
• 18:10
  "Investment analyst covering XYZ sector."
• 18:14
  And it's your responsibility
• 18:15
  to make that business successful.
• 18:17
  And in order to do that, make great investment decisions
• 18:20
  and get those decisions invested broadly.
• 18:23
  - You made me think of Charlie Brown and what was it?
• 18:26
  Free advice or advice for five cents, whatever it was.
• 18:29
  (both laughing)
• 18:31
  That's how you mentor folks, which is, again,
• 18:33
  you do that exceptionally well.
• 18:35
  Who mentored you?
• 18:37
  - I want to touch on four people,
• 18:38
  specifically on the muni team.
• 18:39
  - Now, we asked for one or two.
• 18:41
  This is the bonus plan. - I got to give you four.
• 18:42
  - Okay, go ahead, give us what you got.
• 18:45
  - They each impacted me in different ways,
• 18:47
  but all in very powerful ways.
• 18:49
  So, when I joined the team, there were four people
• 18:52
  who were working on the muni team:
• 18:55
  Brenda Ellerin, Neil Langberg, Ed Nahmias, and David Hoag.
• 18:58
  - And this is 1999, 2000? - 1999.
• 19:01
  - 1999, okay. - 1999.
• 19:02
  They were mentors to me because, you know,
• 19:05
  frankly, I was an investment analyst,
• 19:07
  but I had never managed money before.
• 19:10
  I didn't know the intricacies of The Capital System,
• 19:13
  and they truly brought me alongside and helped me develop
• 19:20
  both a voice as an investor, confidence as an investor,
• 19:24
  and really helped me navigate The Capital System.
• 19:29
  - We're going to shift
• 19:29
  to some of the personal things about you.
• 19:32
  Don't get nervous.
• 19:34
  In the office treasure hunt, I'm going to be careful
• 19:37
  in lifting it because it looks delicate-
• 19:40
  - That's valuable, Mike. - It looks delicate
• 19:43
  and potentially expensive,
• 19:45
  but I'm going to ask you to tell folks what it is.
• 19:48
  There's a picture on it on the screen behind-
• 19:51
  - You've got it backwards. - Okay, well, I don't even
• 19:54
  know what it is, but it's weird enough for you to tell us
• 19:57
  because it's in your office.
• 19:58
  - Yeah, yeah, let me take it.
• 19:59
  - What do you got?
• 20:00
  - So this, this is called a sextant. - Okay.
• 20:02
  - And it is used even today in nautical navigation.
• 20:07
  The technology has been around for 300 years.
• 20:09
  And this is the concept.
• 20:11
  You're out on the open ocean, right?
• 20:13
  So you have no landmarks.
• 20:16
  You have a horizon line, which you can see most of the time.
• 20:20
  And you have what I'll call celestial objects.
• 20:23
  So, think sun, moon.
• 20:25
  - Yeah, I've already been lost at sea.
• 20:29
  I'm already lost at sea.
• 20:30
  Go ahead, but go on. - All right, so anyway,
• 20:33
  the cool thing about this is that if you can find
• 20:35
  the horizon and you can identify the moon,
• 20:39
  you establish the horizon looking through here,
• 20:42
  and then you adjust the mirrors
• 20:45
  so that you bring the moon down to the horizon point.
• 20:50
  - And doing that achieves what?
• 20:52
  - Okay, as soon as you do that, you look at your watch.
• 20:55
  This is important, and you know what time it is.
• 20:57
  As soon as you know where the horizon line is,
• 21:00
  where the moon, say, hits that horizon line and the time,
• 21:06
  you can consult a book and that will tell you
• 21:08
  where you are in the world.
• 21:10
  - Wow. All right.
• 21:11
  So, what's the importance of that in your life?
• 21:14
  - Right, right. Well, so for those that are still with us-
• 21:17
  (both laughing)
• 21:19
  This is the reason it's important.
• 21:21
  I think that there are so any cool analogies
• 21:26
  to investing to what I just said.
• 21:28
  The first is identifying the horizon, and when I think,
• 21:33
  oh, there you go, be careful.
• 21:34
  - Yes, I'm being careful. - When you think about
• 21:36
  the horizon, I think of that as being long term.
• 21:40
  You aren't going to get anywhere as an investor
• 21:43
  if you're looking over the side of the boat,
• 21:45
  looking at the swell and the waves and the white caps.
• 21:50
  It's all about looking out at the horizon.
• 21:52
  And the second thing is,
• 21:53
  is when you think about lining up something that is moving,
• 21:58
  but you have pretty high degree of confidence
• 22:00
  that you know what it is, where it's going.
• 22:05
  Between those two things,
• 22:06
  you can do a pretty good job of both generating
• 22:11
  kind of strong investment ideas for the long term
• 22:13
  and avoid the distractions.
• 22:16
  So, anytime I start thinking about day-to-day volatility,
• 22:20
  news flow, whatever, I remind myself, you know what,
• 22:23
  the most important thing, establish my view on the horizon
• 22:26
  and figure out what do I know, maybe not for certain,
• 22:30
  but what do I have a pretty high degree of confidence
• 22:32
  I know is true and I can build from that.
• 22:35
  - You just set the bar super high for future podcast guests.
• 22:39
  I mean, it's going to be hard to show something
• 22:42
  that's not as exciting as that, but well done on that.
• 22:46
  I'm going to a little more on the personal side.
• 22:49
  I know you very well. I know you love the outdoors.
• 22:52
  I have a couple pictures up of you in the outdoors.
• 22:56
  How did it become your thing?
• 22:57
  - Yeah. So, the shot behind you
• 23:01
  is taken in the Grand Teton National Park
• 23:03
  and aptly named Death Canyon.
• 23:04
  And on the right, this is the Santa Monica Mountains
• 23:06
  in Southern California.
• 23:09
  I love being in the outdoors
• 23:11
  and I love doing kind of longer distance time outdoors
• 23:16
  all by myself.
• 23:17
  And the reason that's important to me
• 23:20
  is that I find the silence and the solitude
• 23:24
  to be so rejuvenating and energizing for me
• 23:28
  to kind of clear my mind of the extraneous stuff.
• 23:32
  And that doesn't happen in 20 or 30 minutes.
• 23:34
  At least it doesn't for me.
• 23:36
  Like, it takes hours for me to kind of relax my brain
• 23:40
  and kind of repair after kind of all the, you know,
• 23:44
  all the things that we confront day in and day out.
• 23:47
  - Karl, we're going to end
• 23:48
  with how we always finish these podcasts,
• 23:50
  this "Be Obsessively Grateful" mug.
• 23:54
  And I know just from our relationship,
• 23:56
  a lot of folks in society lack gratitude,
• 23:58
  you are not one of them.
• 24:00
  I mean, you tend to be a very grateful person,
• 24:03
  so I'm going to share with you the mug
• 24:05
  and then ask you to share with us what you're grateful for.
• 24:09
  - Yeah, thanks, Mike.
• 24:10
  I'd say the only thing that's longer than the mentor list
• 24:14
  is the grateful list, to be honest.
• 24:16
  I could go on and on about this,
• 24:18
  so I'm just going to keep it simple
• 24:20
  and just talk about my family.
• 24:22
  Family is so incredibly important to me.
• 24:24
  I come from a large family. I was one of six.
• 24:28
  Diane and I now have been married 36 years.
• 24:30
  We've coming up 40 years since we first met
• 24:34
  at the mailboxes.
• 24:35
  For the listeners who don't know what a mailbox is
• 24:38
  at a college campus- - Are they still there?
• 24:40
  I don't know.
• 24:41
  - Together, we have had an opportunity not just for me
• 24:45
  to build a great career, but to build a great family.
• 24:47
  So, we have four children.
• 24:49
  Our two oldest now are married.
• 24:50
  Our youngest is graduating high school.
• 24:52
  Our second youngest is graduating college.
• 24:55
  They each are so different.
• 24:57
  And yet they each are following their passion.
• 25:01
  We love them so much.
• 25:02
  And it's just such a tight and close family.
• 25:06
  And every single day I'm thankful for Diane
• 25:09
  and I'm thankful for our kids.
• 25:10
  - Yeah, it's a great way to finish it.
• 25:13
  And I feel like I know them so well
• 25:15
  just from our conversation
• 25:16
  because you talk about them so often, which is great.
• 25:19
  That's part of being part of the Capital family
• 25:22
  is learning about your family.
• 25:24
  Karl, thank you.
• 25:25
  Great discussion.
• 25:26
  I appreciate you being here at a great time.
• 25:28
  - I loved it, Mike. Thank you.
• 25:30
  (upbeat music)