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Sebastian Page has been writing up a storm.
He wrote a book about the Baltimore Orioles psychology of leadership. Oh, it's working out Oriols starting strong, five hundred ball.
I believe there. He's a t rowe price.
We're thrilled at Sebastian Page could get us started, and he's spent much on my mind the last two or three days because everyone's talking about diversification and what it means and rebalancing, and that his book is definitive.
It is beyond.
Diversification whatever investor needs to know when there's a war. And we're thrilled Sebastian Page could join us this morning. I got so many pundent Sebastian going back and forth on stocks, bond's correlation. Cliff Astness had a beautiful tweet out going what is this hot air? What should we do with diversification given this war?
Tom the stockbond correlation is super hard to understand and predict, but financial advisors everywhere just use a negative return correlation assumption, and to me, that's wrong. The twelve month correlation historically between stocks and bonds has flipped time has flipped signs twenty nine times over the last eighty years from positive
to negative. It has ranged from minus eighty to plus eighty. Now, the key to understanding the correlation is a simple question, are we facing a growth shock or an inflation shock? If you're flacing a little bit of both, it's complicated. But if inflation volatility dominates, both stocks and bonds can go down together. We learn this in twenty twenty two. And by the way, if you're a nerd like me and you studied correlations back to the seventies, same thing
that happened in the seventies. I do think looking out six to twelve months, that inflation volatility is going to dominate. So I'm arguing you should diverse fire hedges, not just use treasure.
Clifastes alludes to the idea that we have equity products and we have equity exposure, even though we're not calling it equity all the alternative and derivative products out there today. Paul's better at this, folks than I am. All those private this private that are those equity equivalents.
Look, I think they are in a broad sense. We're talking about businesses. You value them by discounting cash flows. You use an interest rate to discount the cash flows. Tom, it's CFA stuff, right, and then their discout rate should be influenced by risk and liquidity and market conditions. But you know, Cliff Astness likes to be controversial, and he calls it volatility laundering, I think is the term he uses. But we don't mark to market the private assets. Look,
private assets can be wonderful additions to investors' portfolios. In my own personal portfolio, I own private assets.
But that's continue you know, that's his private ass.
Yeah, but you know those are financial assets. And if you're kind of a mark to market person, I think it's better to build risk models around an assumption and adjustments where you can, you know, synthetically mark to market those investments and do it more thoughtful portfolio construction. Well, these are great assets generally, they're just not free lunches.
So Sebastian, what do we doing in the bond market here, how much credit risks should you be taking in a world that has black Swan events, has a lot of cross currents, has a lot of geopolitical risk here, how about credit?
We're slightly long credit. And yesterday was interesting because the relief rally was clearly risk on. You saw high yield spreads titan again to Tom's point, the Vicks went down, you had five percent pops and stock prices also, it was favorable to the broadening. You know, European stocks did well, Emerging market stocks, small caps, they all are performed. But I think we also need to accept that there's remaining
inflation pressures. Damage has been done and all prices yesterday they went down twenty percent, but they stabilized fifty percent higher than they were twelve months ago. So we don't expect a recession. The underlying forces in the economy are actually pretty good, because you know, the Bloomberg's economic surprise and dext is at its highest in two and a half years. And someone just showed me data that the tax refunds are running fourteen percent higher than last year.
So quietly, in the background of all these headlines, the economy's humming if not accelerating, so we don't expect a recession. We're short duration because we're worried about inflation risk, but we're slightly long credit.
What do you expect, Sebastian, This fed a reserve to do. It looks if I'm just looking at the worp function on the Bloomberg terminal, I got nothing. I mean, the market's not looking for cuts, not looking for hikes. It looks like they're just going to sit on their hands here.
I think nothing is the base case. But if you ask me, where's the skew to use a technical term, right, can you get is the probability of an upside surprise and inflation greater than the probability of a downside surprise? I'll give you a resounding yes.
You know.
Just look at where oil prices is stabilizing on a day like yesterday, when we think we think this trait is going to reopen, it's nowhere near where it was. And go ahead, Tom, well, I got it.
We gotta go.
Keith Lender is here going win a man? Sebastian, As simple as I can. If you attended the Oriols yet, if you sat in the Tiro price box.
It's in the dugout. And have you seen Alonso play yet for the Orioles.
I haven't. I can't wait to go. You know, players are wearing a Tiro Price patch. We have Tier Price signage at the stadium. It's a wonderful partnership between the Orioles and Tiro Price where we have our global headquarters. So and tom My dream is to watch a game with you one day.
Well, we'd like to do that.
I'd love to see the I saw the Canadians the other day in New Jersey, Sebastian. I would kill to see les Abiitan with Sebastian Page always of Quebec.
Sebastian, thank you so much.
His book, The Psychology Leadership is out now, folks getting a heavy read by corporate leaders.
Stay with us.
More from Bloomberg Surveillance coming up after this.
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The incredible and recent work of Jennifer Welch, chief JE Economics Analysts for Bloomberg Economics. Jennifer, I'm honored to have you on one of the most painful books of my life. And this goes to your East Asian studies in Beijing with Bucknell, and it was Daniel kurtz Phalen's one volume on Marshall in nineteen forty six. There was a ceasefire and it didn't work out well in China in nineteen forty six. I know you studied that your thoughts on a ceasefire in twenty twenty six.
Yeah, So the ceasar at the moment is looking rather fragile and rather ambiguous. It's unclear what terms it contains. It's unclear whether it is fully in place at the moment. The strait of her moves seems still be subject to Iranian control, and there's ongoing fighting in Lebanon, which Iron
says is a violation of the ceasefire. Now that being said, it does seem negotiations are still moving forward this weekend, led by US Vice President Jad Vans and Iran Speaker of the Parliament, but there's very narrow space for a deal that lasts beyond the two week pause.
Am I control, As I said to Paul earlier, where in Lord's name is the Secretary of State doing shuttle diplomacy.
It is a excellent question, and I think it's not entirely coincidental that Secuary of State Mark or Rubio, who is also the National Security Advisor, hasn't seemed to be as directly involved in this conflict as he has, for example, in US operations in Venezuela and US policy on Cuba.
It seems that he is focusing.
Largely on Latin America, and President Trump has asked JD.
Vans to take the helmet negotiations here.
Now, that might be attempting to play to a domestic political audience, with JD.
Vans being a known.
Sort of skeptic of US foreign policy arrangements and sort of a way of signaling to Trump's base, don't worry, We're sending sort of our most skeptical person out there to make sure that we extract ourselves from this conflict that we launched.
So what are the choices realistically for the US and for President Trump here as negotiations begin.
So, frankly, President Trump doesn't have a huge number of options at his disposal right If Aron is seen as still not making good on its promise to reopen the straight of per Moves, which Trump said was critical to the ceasefire.
He really has two choices.
He can either threaten as he has to use military force against them, saying that the ceasefire is now Nolan void.
I think the bar for that is rather high. This is an unpopular war in the United States. Gas prices are still rather high. He's clearly looking for an exit ramp.
So that leads to the second option, which is diplomacy, and I think that's why we are seeing talks happening this weekend and there It's also difficult to say because the White House is saying that the ten terms around has put out publicly are not the terms are negotiating over. But even if we look at those ten terms, we think that there is the potential for a landing space for a deal. There are probably some areas Iran's willing to compromise on, areas the United States is willing to
compromise on. I think the key sticking point is going to be how much Washington takes into account Israel's perspective, which is probably far less willing to accept some of the terms that Iran.
Has put on the table, at least publicly.
Jennifer Wells, chief geoeconomics analysts for Bloomberg and Economics. Jennifer on the economics of the moment, it is the cost of the war or do we just print bill notes and bonds and we don't care about the cost of the war?
Well, I think there are two dimensions to the cost of the war for the United States. There's the military dimension, the cost of operations and in the Middle East, and clearly that's something that is high and probably rising further. The longer that these assets are deployed away from their home stations, the more maintenance they will need.
After the fact.
The more that we are deploying, in particular more personnel who the region, the higher those payroll costs are going to be. And then there's the second dimension, which is probably the one that President Trump is more sensitive to, and that's the oil price dimension and how that affects prices back at the pump here in the United States.
That's obviously something that's incredibly domestically politically sensitive and salient, and that's probably the trigger that he is most closely paying attention to, along with the resulting impact on markets.
Jennifer real quick here the Straight of HORNUS. I guess we're all getting small on this. How important it is. Before this war, it was effectively open to all international traffic. Now it's not. How was that an improvement for the US.
That's a great question, and I think there's still many questions looming about what the ultimate path forward for her Moves is. Iran is saying that it wants to charge a toll, that it wants any vessels transitting through to do so in coordination with its military, and as several leaders in the region have pointed it out, that's not a free and open her Moves. That is still controlled passage, and so I think that is going to have a real constraining effect on how much traffic can go back
to the Strait now. Obviously, I think negotiators this weekend are going to be trying to hammer this out. The US is going to be pushing for truly reopening it. But at the same time President Trump has turned out this idea of a joint toll, So a lot of questions still remaining.
Jennifer, thank you so much. Jennifer Welch Bloomberg Economics today just brilliant. Stay with us more from Bloomberg Surveillance coming up after this.
You're listening to the Bloomberg Surveillance podcast. Catch us live weekday afternoons from seven to ten am Eastern Listen on Apple Karplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube Android.
Perrald joins us down at HI Vista Strategies with all of his work as well at HBS in Boston. And I mean the parchment, folks, is important, the George Gunn, Professor of Finance and Banking Emeritus at HBS. It carries a lot of way to it. Is the stereotype of HBS the same as it was thirty years ago?
Is it still case study? Rigor?
It's a good stereotype, Okase, study grounded in the real world, having serious conversations with very smart people did nothing.
Nothing can beat that.
I mean, I think of the number I thank you so much down the road at MIT, Simon Johnson and Gary Gensler mentioning me and Paul in their latest podcast Down the River. At MIT and at Harvard, we're all dealing with AI. I assume there isn't a case study yet at AI.
What's it going to look like?
In five years now they're no okay, studies on AID all now. It totally pervades the curriculum completely, and startups and students trying to startups in the summer.
And in the second year. And AI is a very big part.
So I got to get to it. Paul's got any questions. I got to get to it as simple as I can. Everybody listening, everybody watching across America, what is the parole formula to embrace AI and keep going?
Start my being scared.
If you don't understand AI and use it yourself, you will be out.
Of a job. So get with it. Learn it. Learn to vibe code? What code? Vibe code? You you can.
Program yourself by talking to a program and it writes code and any of us can do it. If you can do Excel, you can do vibe coding. It's extraordinary, all right.
So let's well the AI story before the war, it was all AI for the last three four years in this marketplace. Now we've got geopolitical risk, at least temporarily on the front burner.
What's an investor to do?
How do you instruct perhaps some of your students, HBS, there's a lot, it's arguably a more complicated world today than it was ten twenty, thirty forty years. So you could probably always say that, but how do you set that up in terms of trying to build a portfolio here.
So, firstly, it's the most amazing world. It's crazy dynamic. I call it a world of exponential change on many dimensions. Think what's happening with AI AI on jobs, it's eviscerating jobs, it's creating jobs. It's eviscerating firms. It's creating firms at a pace we've never seen. War offense, Look at fiscal deficits completely out of control, inflation. Look what's happening with energy,
you know, immigration, Just look around the world. It's scary, but it's changing rapidly and it's very exciting.
So in a world like that where.
It's changing rapidly, the chances you can get an edge if you're careful go way up. So if you're an investor, if the world is static, it's very hard to get an edge because everyone just catches up.
But in this world you can get an edge.
It's a fantastic place to be an active investor and for a career. I say to young people you should go to places where you can get an edge. Go where there's exciting new things happening as opposed to a staid old place.
So where is that today?
My coming through business school myself, it was Wall Street and consulting. Now it seems so much broader technology as taking some of the best and brightest. Where do you see some opportunities? Is it all AI today?
It's well, stuff is related. I'll give examples. So electricians are in crazy demand. Okay, I don't know how many Nbas want electrician jobs, but they it's a fantastic job today. Data centers are consuming them and there's a huge shortage. It's an example of a job category that is amazing for.
Global Wall Street Mark Champion coming up in a bit, but we are honored to bring an under approval of HBS CIO partner at High Vista Strategies as well. In HBS, did they still teach modern capitalism the first year that macroc course from ages ago?
They teach it in varying ways.
I would teach finance, and I think teaching finance is the is the most fantastic way to teach capitalism. It's about markets, right and what it does for the economy.
I mean you sound like v body over at the other school there and coming with the avenue as well. Then help me here with your thoughts on the ginormous bond issuance. Are Robert Shifman saying we could see a multi billion dollar tens of billion a dollar amount of Facebook deal coming out of the transactions just in the last six six hours. How do you perceive the megabond deals and the demand for them.
So the bond issuance right now, they have great credit rating so they can fund these data centers. Data centers get funded by guarantees from these things, and that's related to their bond issuance. But bond issuance at large in the economy.
That is huge.
The federal deficit for one, so real rates are extraordinary. You can buy thirty inflation bonds yielding two point seven locked in for thirty years, so as long as the government doesn't default, I'm getting two point seven plus inflation. If we go to stagflation, those will rerate yields down, prices up plus inflation protection. Why would you buy gold if you worried about monetary debasement, buy inflation bonds. GDP growth is like two two in a bit and I'm getting two seven on inflation bonds.
It sounds like one of those young selling me some song, you know, moving some bonds exactly. Professor inefficiencies in the market, They're hard to find. However, one area to me in the equity markets that seems incredibly inefficient. It's almost a binary response. Is biotech. Either the thing works and you double your money, or the test fails and it goes to zero. How do you approach something like that with that risk profile.
So we love biotech. It's a hedge fund investor.
That's a stockpicker's dream because the upside is huge, the downside is huge. If you know what you're doing, you can distinguish it's event rich. Every time there's a clinical trial readout, it's an event. Every time there's a financing, it's an event. So it's a hedge fundream. You've got events. They shortened the time horizon on what's otherwise a long dated investment.
Did biotech save Boston?
Basically it came along jen Zimon all that years ago, and then it worked out from there and did essentially the courage to do biotech and the ge thing in Fidel do you know that it's saved.
Boston and now it's hurting Boston because biotech took a big whack the last few years. Why because rates went up the cost they consume capital. They never make money, they get sold to farmer when they do make money, so they always consuming capital.
Okay, rates go up, It really.
Hurt them and they shut down tons of labs who were built and those have been show.
Is that the analog for AI where they're consuming tons of capital and it's going to be.
Oops, it could absolutely be absolutely the capital consumption startups. A startup today is in the billions of of value consuming megacap.
X is at high vista strategies.
How do you guys play the AI story?
So AI is it's hard. We think of it as shorten your time horizon.
What AI has done and all these other dynamic changes is it means terminal values are very hard to figure out. So if you take software sasmageddon or sas apocalypse, it's shortened the time rise. You know, earnings are great, but you don't have terminal values. So think very hard about terminal values.
Do you think some of the sell off and some of these software stories which were so well regarded for so many years. Is that overdone?
Some of them might be, But look at Claude came out with Mythos yesterday. It's going to eviscerate a lot of cybersecurity stocks and.
Firms so powerful. Yeah, so right, Andrew peroled with us and we continue partner cio. Hi Vista strategy is truly definitive at Harvard Business School. Mister Kaplan was in the other day of the Dallas Fed and Goldbin's an original interview I did years ago with Quinn Mills. It's just been very kind to Team Surveillance. I want you to speak now to the graduate students across this nation looking for a job. And it ain't happened in the first
week at April. We've been here before. This too will pass or is there something different going on from newly minted top tier MBAs.
It's going to pass, but it's going to take time until so. AI will destroy, but AI will create, and we're going to go through a period of destruction before you get creation. So what do you do in the meantime? Build your human capital? Realize that your human capital is the only real asset you have.
It's worth a fortune.
Invest in it make connections. Think of skills that you need, now invest in those. And if you don't have a great job for the next year, so what invest in your human capital. It's the best thing you can do.
Look at you know where we are, and everybody's telling me out there where AI is going to create jobs?
Is that a hope?
Which is a word I everything in literature. I circle when I see the word hope is trouble? The answer is there is there a model where you see job creation or is it just simply a hope?
I think it's like the Internet. Look but look at all of the businesses around today. I would never have existed without the Internet. And look at the employment rate it's low. How's that possible? The jobs created in with new tech or extraordinary? It may take a while this time.
Where do you put the AI on this companium of I've heard someone I'll say, hey, you got electricity really high, the Internet a little bit lower. AI is probably just below electricity in terms of its importance to mankind? Do you take it to that level?
One hundred percent? I used to think there was a chance it would fizzle out. Okay, and now when you see the rapidity and the impact. It feels like it's it's a total game finger.
Can you do it?
Study in the Boston Red Sox. Can we get something done here before the end of the year.
We know the answer.
They only went a few times every two centuries, so we know the answer is not a good case study.
There, We're good. There's the case study. Thank you so much for coming in. Please don't be a stranger. Andrey Perld with us of h Legendary.
At HBS, I should say in partners Cio High Vistas Strategies, stay with us. More from Bloomberg Surveillance coming up after this.
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Courtney Rosenberger Gellman joins us working with Jason Trener and Dan Clifton, strategist Securities, and we welcome her this morning.
Courtney.
One of your great focuses is NATO. I would suggest it's incredibly off the American radar.
Let's start with the why.
Why should we focus on this fractious relationship between President and Trump in NATO.
Thank you for having me.
I mean, we even NATO is just something that's missing, you know, something that's being underpriced by investors. And it's certainly not our base case that there's going to be a US withdrawal from NATO. But I do think that there's a little bit of complacency when we talk to investors and others who are who are in the space about the fact that there's this law that prevents the
president from withdrawing. But the president has a number of other options that he can take that can weaken NATO or kind of withdraw the US kind of a name or at least in practice from NATO. So we see it's very important and just important in terms of how the US interacts with the rest of the world, especially as we do enter this period where it seems like geopolitical conflict is kind of becoming Hotter.
Explain them to me.
I'm still in shock over the idea that NATO and Brussels there's a Swedish flag and a Finnish flag. Our Francis Lacroix with their reward acclaimed conversation with mister Stubbs of Finland what to Finland and Sweden is the newbies. What do they think of all this tension of this agreement back to the Atlantic Charter.
Well, I'm not sure what they think specifically, but I mean, if I were then they joined NATO in an effort to thinking that they were joining a coalition that was going to be able to help them defend against threats that are again becoming more and more prominent. And it seems like this alliance is weakening, and again you have the administration not threatening to withdraw from it entirely. And if the US withdraws from NATO, does NATO still really exist?
I think that that's the larger question. So I'm sure that there's concerns about the fact that they made these efforts to join an institution that it seems like it's deteriorating.
Courtney, what do you think is would be a reasonably decent scenario here for the US to get out of this conflict in Iran? The reasons for getting inter in in the first place, I think for a lot of people remain unclear.
So maybe that makes it.
More difficult to actually get out of Iran in a successful way.
How do you view that we have a lot of questions.
I mean, certainly there's no good answers at this point. The president was boxed in, and that's why you have this ceasefire that was agreed to you for two weeks that has kind of unclear parameters. But the US and Iran seeming to have agreed to negotiate different points. So I think that there's a lot of questions about what ultimately this will look like. But we do think that the president wants to get out of Iran and move
on to other priorities. The fact that Jade Vance, Vice President Vance was appointed to lead these negotiations, I think is important just because of the headlines about how he was opposed to going into Iran and the military action. So if he is running point on this and the ceasefire does hold, I think the US is going to look for any option that it can take to not
have a military conflict extent. I do think that there's probably going to be a good deal of trying to give Iran what it wants reasonably, so probably kind of more concessions than kind of might have been thought about six weeks ago in terms of Iran's control of the streets, allowing them to impost tolls sanctions really.
In some of those other measures.
The first sentence of our claim top life go says the White House said the US will hold.
Direct talks with Iran. Ok. I don't know what that means.
That's how fluid this is right now. And it's such a privilege to speak to Courtney Rosenberger Gelman because Paul, this is the key, as you mentioned, am I right, Islamabad Friday or Saturday.
Yeah, that's the zeitgeist right now, and vice President of VANCE will be there, and I'm not sure. And so the question is will the US negotiate directly with or any representations or through some Pakistani But.
This needs clarify case sure a lot into Thursday and Friday.
Yeah, So Accordney, again, what does this mean here for the region in the Mid East? Here it seems like even if there is a permanent cease fire here, things have materially changed in the Mid East. How do you view that going forward?
I think that that's correct.
I think we have a lot of questions.
Is this going to be something like the nineteen nineties post Golf War, where there's several years of rebuilding of trust. That's certainly a scenario. Is this going to be a situation where trust is permanently gone between countries? Because I think a lot of these Gulf nations are surprised and upset I Ran for the fact that they attack them. And then I also think, you know, we have to consider does the fact that kind of geopolitics and war
around energy be coming back into focus? Does China try to make moves into the Middle East? Does Russia trying to make moves into the Middle East? Does I Ran allow China to build a base. China only has one base in the Middle East, one known base I should stand in the Ely East.
So does it become a.
Center of geopolitical conflict as well?
A lot of questions Courtney, you got to put up with Dan Clifton, which is, you know, a weight into itself, synthesize your work and the rest is strtiguous securities work. Is President Trump a lane duck right now?
What is the thought of your Washington shop?
I mean, definitionally, he is because he is not able to run for reelection, but he still has a lot of power and a lot of sway over the party. He is the face of the Republican Party. So we don't see him as kind of not able to implement policy at this point. He has proved that he can use executive authority to implement an agenda really without the need for much from Congress. So we still see a lot of investment implications and outcomes that can come from the President using his authority.
Courtney, thank you so much, really appreciate it. This morning and important brief Courtney Rosenberger at Gilman with Jason Trenton's Strateiga's Securities.
In part Stay with us.
More from Bloomberg Surveillance coming up after this.
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Andrew Jackson joins us. Now we are thrilled to do this is a Vaunteville asset management. You may not know that wonderful European and Swiss shop as well. He is in Zurich and joins us in studio today as well. Yesterday I came in and the first thing I looked at is Swiss Frank is a flight to quality. This war, Given all of the independence of Switzerland, its heritage back a zillion years, how does this work look from Zurich.
It's not great news story for those of you who sit in You're right, the strength of the Swiss Frank is not fantastic. But as a as a business based in Zurich, it's really positive. People are looking around the world, there's a sort of geopolitical mailstream occurring, and they're looking for stabilization. They're looking for stability, they're looking for no nonsense. You know, I know what I'm going to get from you, and Switzerland provides that, and that's a nice news story
for Zurich based companies. It's a nice news story for Swiss banks generally. But then also in the background, you've got some you know, uncertainty about the regulatory backdrop in Switzerland, which is the headwind that we're facing as we sit in Switzerland.
Paul, this is the precursor to jpm Worgan's earnings After the Diamond Letter.
Life goes on, it does andrew in the world of fixed income in the last six seven weeks, with all this uncertainly on the geopolitical front with Iran, what are your clients asking you, is it where we should maybe allocate some capital outside of the US In the US, I mean, what's the regional play for you.
There's three questions that people are asking. First question they're asking is what's the medium and long term perspective on global economy US trading relationship with the rest of the world. That's a very complex problem that we could spend hours talking about. The second is what happens to the US dollar? Candidly, that is a major topic of conversation. And then the third is how should we allocate our capital with this level of uncertainty and how should we trade our capital
with this level of uncertainty. The response that we're giving is this is an environment in which you should be trading. You should be moving your portfolio a mound around a higher level of turnover in this setting than you would do in normal circumstances. Yesterday is a great example. Yesterday wasn't a rally. It was a short squeeze plus a rally, and that's why it was so powerful. There were a lot of shorts that had their fingers burnt yesterday, and
a lot of the price action was around shorts. That's why I think we're seeing the top come off of some of those moves from yesterday. So we were encouraging our clients to be a bit more active to trade these markets a little more because the uncertainty, the short term uncertainty, is maybe clouding your vision that over the long term things are more predictable than they are over that sort of daily cycle.
And I think a lot of folks are saying, to the extent you can afford to look past the short term volatility, fundamentals are pretty solid out there. We're going to get earning starting next week, as Tom's mentioned with JP Morgan, we'll kick it off. Economic trends seem pretty solid, Earning seem pretty solid. You know, rates are steady at probably the worst case scenario.
So I don't know, Yeah, I totally agree with you.
I think credit fundamentals in particular look rock solid almost everywhere. At this point in a credit cycle, having been so long since we last had a credit cycle, you'd expect HI yield to start to look worse, leverage to start creeping up, you to have more worries. There are less worries than you would actually think private credit aside, the
software exposure aside. Other than that, credit fundamentals look strong, which is why I think technicals were so good in fixed income rates aside, the credit side of fixed income did very well over the last four weeks.
Andrew Jackson vauntable with us and we continue here.
Lots coming up, Claudias sim later, Mark Champions scheduled as well. One of the heroes in my house as a kid was James Clerk Maxwell, which is magnetism. It's actually, folks, pretty difficult mathematics.
I didn't do that well at it.
You darkened the door at King's College in London, where he was absolutely iconic as well.
You know the variables.
There's an epsilon on the back end of every equation, which is the unknown risk out there, the systemic risk measure right now for the pros listening the epsilon that's out there.
Yeah, I think it's meaningful as a brit here in New York, our relationship with the US is the starting point.
You know.
I've been asked by a number of people, how are you feeling here in New York? New York was my second home for many many years. I used to come here regularly. I've worked here for a while and that has changed and that shift. It's got wider ramifications than people realize, and that level of uncertainty is making investors, I think, are a little more uncomfortable, and they're being forced to diversify away from where they used to previously put their bets. And I think for me, it's easy
to talk about how much uncertainty there is. You don't want to get irrationally sort of bearish about things. I'm a fixed income guy, so it's easy for me to see the downside. But there is a very very large level of uncertainty, and the US's relationship with the rest of the world is critical to that.
Reading a fobosi, what do you do given the stress with duration? Is it efficacious to play duration or do you just hide?
No, I don't think you hide.
I think you have to be involved.
I think you probably have to trade it. Going back to the theme, do I think the move in short end rates over the last four weeks has been rational?
Yes?
I actually actually do you know? Strength of horll moves closed is bad for information, particularly in Germany, and therefore short end rates should be moving around. The ECB setting has fundamentally shifted over the last six weeks. Six weeks ago, no one would have predicted the ECB would raise rates in the next twenty four months. Now we have to price that in that level of uncertainty, and that confidence that we were only heading on a down with trajectory
in terms of underlying rates has been eroded. But to play duration, I think, yeah, there's lots of parts of the curve that you can play duration. The longer dates, I think you've got a higher degree of confidence because medium term confidence is higher than that short end.
When about a year ago, just today, almost when the tariffs really came into effect, there was a sale of US assets, the dollar, bonds, stocks, How has that trade these days? How are your clients thinking about the US versus rest of world? Because we did see a lot of those funds come back to the US, but now the world's changed it yet again.
Yeah, I think the big theme that we saw in the back end of last year, and it wasn't necessarily as a direct result of the tariff conversations, but people shifted to thinking about emerging market fixed income and emerging market equities again in real fashion, in order to provide them diversification, not necessarily as a return play, but as a diversification play. People still talk about US high yield, of course they do. I was in Chile a couple
of weeks ago. They're still allocating to US high yield, but their allocation to US highyield is probably lower than their allocation to emerging market fixed income right now. And within equities land, yes, of course they're going to allocate to US equities, but they're definitely going to start looking at emerging market equities again. So I think that's the
long term ramifications of what we saw last year. And I thought the price action that we saw last year post the tariff talk, you know, that was very irrationally. That was a very irrational move. We've stabilized from there, this more recent move from the outside in. I would it expected this the Uranian conflict to have been a bigger deal for markets than what we saw last year.
Andrew I was almost fired once. Okay, I can't believe that's Zurich.
Okay, Al from New Jersey costs me up and he goes, how much did you spend at the McDonald's down the street from Vauntable.
Are the prices of Zurich still stupid? Insane?
I wateringly insane?
It's it's it's like McDonald's way back then was twenty five bucks. Yeah, it must be like forty bucks now.
But Tom, the quid pro quote for that is everything works. Everything works in Zurich. Everything's on times, on time, The trains are on time, the tramp you can get a countdown to when the trains arriving in seconds in Zurich. So you've got something nice about being there.
You got Barretto, which is great.
It's this wooden bar folks, it looks like it's out of the Spyo kitmen from the cold with this incredible artwork on the walls. In these itty bitty Martinez that's Barretto Barretta. They're like twenty euros each. Andrew, don't be a stranger. Andrew Jackson, thank you so much.
With Vulntable Asset Management.
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