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Joining us now to talk about all that's going on in the markets right now is black Global, Chief Investment Officer of Global Fixed Income, Rick Reader. And Rick, we book you on every Job's Day, but this is yet another Friday when we don't get the jobs report because of a short government shutdown. It looks like we could have another one partial shutdown at the end of next week. What do you make of this sort of muddy data picture when we don't get the things we need in time.
Well, so, first of all, it hasn't been jobs Day in a number of months anyway, because we're not getting any of those. So I think the last three months we've had negative people. We had a government shutdown, but you've still have negative negative jobs.
Listen.
I mean it's a little trickier when you don't get the actual published reports and markets pivot off and by the way, the volatility markets, you strike a lot of options in and around those dates. So I tells you this creates a little bit of trickiness that being sad. I mean, particularly for jobs, and we've talked about a number of months on your show. You look at what we got yesterday. Look at the Jolt support, look at the Challenger job counts, you look at the claims data,
you look at the ISM services. In terms of jobs, like, there's no ambiguity around where we are in the job market. We're having a really tough time. We're watching productivity explode higher in terms of growth being really.
Good, but at job market, that's that's really tricky.
That dichotomy, Rick is the most fascinating. Well, there's a lot of interesting stuff going on, but as one of the most fascinating things about this economy because it's difficult for anyone to say, even with jobs looking very challenging,
that we're heading anywhere near a recession. As long as the mag seven is spending what like two point one percent of GDP on capex, as long as a government's running a six percent plus deficit deficit, is this economy going to be okay even if the jobs market starts to have some cracks in it.
Yeah, the answer is yes.
And the you know, I think I think people don't you know, look at jobs and look at this economy like it was twenty thirty years ago. You have an extraordinarily different economy service oriented versus goods oriented. But you've got an economy that's operating incredibly well, but only on a couple or three cylinders.
Today.
You've got, like you pointed out, you've got cap X that is robust and will continue. You've got consumption that is robust, but it's driven by wealthier, older savers. And it's part of why the you know, the interest rate tool is is not nearly as effective as it used to be because that cohort is doing extremely well. Where the burden today is is in terms of low income, small business, younger people and so.
But if when you.
Aggregate the data, and I hear a lot of people talking about when my god, the jobs market is softening, the economy.
Is going to come under pressure.
It's actually this is an economy that's more acid oriented than labor oriented, and that cohort I don't want to understate this.
We have a problem too, is we need to employ more people.
But that cohort isn't that much in terms of aggregate spend, so the economy can continue to motor along. And productivity, I mean you watch it play out every day. I mean the equity market has taken it on. About where is productivity manifesting itself effectively some spaces.
Not other Who are the winners? Who's building a moat? Who's not going to be a winner in this?
But I mean, at the core, you're watching something play out that's pretty historic.
Anthropic putting out another AI tool, this time for financial analysis. They did earlier this week for legal services. Both of them kind of rocking the market. That will affect sales at big companies I imagine, big and small, as well as the jobs picture. Right, we're talking to a lot
of people. Yesterday we're talking Mike Arraghetti from Aries, who pointed out that, you know, the younger talent, the new hires aren't going to be doing the same work and may not be as plentiful as they once were in that industry. What do you make of AI changing the way we work or the fact that we work at all.
Well, Mike's a very smart guy. I would say, I would say a couple of things. You know, I chair the board of we have fourteen charter schools in Newark, New Jersey, and we just had a discussion this week at our board meeting about what is our curriculum going forward? How does AI evolve how we teach kids. How do we what are the disciplines we're teaching our kids for going forward? How do we use AI to augment a traditional teaching process? This is all new territory, and this
is all new land in terms of where we're going. Listen, I think there's a bunch of things that are you know, that have been standard operating procedure that you know that we used to teach people for and quite frankly, AI is going to fulfill that function going forward. I still think learning and interacting with people and the core of education will will be sincere to what it was.
But gosh, there's so many things we got to.
Think about about what can AI do that can make the economy more efficient, make people more efficient, and then move people into the zones that are going to be fulfilling going forward. But that is I'll tell you'm out there. There is no roadmap for this.
Well what do you make of I mean, I look at Bink, the ETF that you manage very well, and we'll show in a second how you've beaten returns of the benchmarks by a lot. But there's some corporate assets there right forty five percent, And I wonder how you judge whether or not a company has a moat, what that moat would look like so that it can defend itself against AI disruption.
So mat there is how do I describe this by the way, you know, we'll take it in a couple of different rections.
One that's interesting. You know, you hear the.
Discussion about capex and the cap X was too high, and you know, I would argue, there's some other things that play there.
Cap X is your moat.
Cap X and R and D spend are the way companies can build their moat. And it's actually data utilization and the companies that are exploiting data effectively that are building bigger moats.
That is at the core of what is happening.
You know, there's something also that's different today some companies, the free cash flow generation that's been so robust the last.
Couple of years.
You see some of these big companies buying back a huge amount of stock. Now they're spending more on capex that has real ratifications for the technicals in the equity market that we got to think through.
It's a lot of hard work, YEA.
Well, I just want to jump in about the other hard work you do at BINK and how you're thinking about positioning the fund and where on the curve. Yield curve just shy of its twenty twenty two highs, somewhat reverse a little bit yesterday, but some of that steepening continues. We have an incoming FED chief who's been talking about trying to shrink the balance sheet over at the FED. When you think about the rest of this year, are you thinking about changes to bank it all? Where do
you want to be positioned for the road ahead? And fixed income?
Bunch of changes your point about credit. We've reduced some credit, We've reduced some ig because quite frankly, it's not that fulfilling. We're gonna get a lot of supply. The spread's not that interesting, you know. We've cut a little bit of the low quality high yield, and by the way, we're running a bit less high yield than we're running overall.
We've added to mortgages, although recent the last couple of months or there's no last couple months, last few days, maybe we've cut a little bit of mortgages because the balance sheet discussion becomes a little less enthusiastic than than it was before.
But we still like mortgages.
We like EM a lot, and the dollar will stay contained and so EM. The yield differential between EM and high yield is as good as it's ever been. And then the key one for us is and is securitization markets that I'll allow you to structure the collateral, the covenants, the you know, what's your attachment point is. So we love the securitization market, but you're right, it's a different expression, a little less credit, a little more EM, a little
more sicking the securitization zone. By the way, Europe killed it last year, and now the benefit you're getting from Europe is not nearly as robust as it was. So we've dulled down a little bit of that and more actually more Asia in the portfolio. So yeah, we've been moving around a fair amount to keep a dynamic and where the best we think the best opportunity is