Bloomberg Audio Studios, podcasts, radio news, Bruce, good to see it. What do you make of this well good CPI numbers today?
Why?
For two reasons. Number one, the market came in short and so technically they were short, and so anything that came in on expectations, the market was going to rally. You saw it in treasures and we saw the inequities
and see big rally. The second reason is CPI. You know, when you look at fundamentally the numbers, the numbers were pretty good at three point four percent on expectations, but when you look at the trailing three months at four point one percent, which is the last three months on average, that number still too high for the FED. So it means higher for longer, without a doubt. And you see goods inflation. You saw that with retail sales been good.
Inflation a little soft, but the services and oeer which is a a equivalent rent, you know, up around six percent, still too high, too firm. So I think it was perfect because for US bond guys and credit investors, it's goldilocks. It's higher for longer, and we're making a lot of money off these higher rates. And for that after equity folks. You know, the technicals are driving it, and you know the animal sparatreele. So okay, you've been saying this for a while. The Golden Age for credit.
You like lots of different things. You have a.
Favorite area of credit?
Do you have an area that you don't like in credit?
Well, it's kind of like and that's why I call it goldilocks because you look at the you know, liquid credit markets, which is everything from high old loans. You know, they're ripping, like you know, nearly half of the high old bond index is trading inside of two hundred sixty two percent of the leverage loan index is trading above par. So that's doing really, really well. Structure credit is crushing it, ABS,
R and b S, CNBS and colos. Yes, even CMBs is having a good run here despite what's happening in commercial real estate and then emerging market debt doing well. So in the liquid credit markets, which is like a total of twelve trillion, it's all doing really well. And do I have a favorite, Well, we are very selective and I'll brought them up in terms of what we invest in. And there's a lot of value right now, particularly in the structure credit sector compared to these other sectors.
In private credit, it's you know, middle market lending, direct lending, it's asset based lending, which is huge and going to get much much bigger, And there's a lot of opportunities in capital solutions. So it's kind of goldie lots for all credit generally speaking. But there's a small cohort that is the tell of two cities. The other part that's struggling under these higher, higher rates.
Is there any sort of correlation with those pockets and the areas you're talking about.
Well, there's correlation among commercial real estate of course ruin and so you know, the banks are going to be very very constrained because these new CRR you know, capital requirements unto Basle three endgame comes in and it means you really have to lower down your LTV to make that same loan or you're gonna have a big capital charge. And so that's when private credit is going to lean forward and make loans. We've been very active there. Banks
pull back from extending commercial real estate loans. And the second part are you know, companies that are just a little bit too levered that need capital solutions. And then again we're leaning in. And look talking about leaning in, what's the big lean in? You know, you gotta look at Keith Gill and you gotta look at the roaring kitty and just see that, see that lean in. But
the real roaring kitty Jay Powell. And why I say that is because as of last October, with his words, he's been leaning in, and the equity market since last in October up ten trillion. What Keith bring to the table, he brought you know, gamestock amc like ten billion of value is defect chairman and his liter by the way, his liters, all the congressman, all the who put trillions dollars of stimulus and as enabled like the comomedy to be as you know, strong as it is. And so
that's the real roaring kitty. It's yes, it's Keith, but j Pal is the big guy.
Is there? Do you worried all though? I mean, it's one thing to have a Goldilock scenario where things are kind of stable, But when you start talking about kind of what we saw based on that ruin kitty tweeting all the animal spirits come back in here, does that not worry you that if we get to the stage of that euphoria again. Then maybe that means J. Powell then leans back in his chair and says, I first settle down.
I think we're a little way away from that. I mean, you know, we've been leaning in to say AMC. So we're long AMCA for like a year, two years, three years. And when you know you lean in, an AMC goes
running up. There's a lot of equity that the company can now raise, and that goes right into our pocket because we're earnning fifteen percent seeing your secured leaned up against all their assets, and we're debt with debt protection and we're earning fifteen percent thanks to you know, Roren Kitty and all the meme fan club that's buying up aMCI.
So the debtish ones that we had announced yesterday by AMC, you think we're going to see more of that from some of.
These Absolutely, when you raise equity, you raise that and you it's a combo platter trade. And we're long, you know, kind of the senior secured stuff that we bought in the sixties that went to seventies and eighties, they're now in the nineties, but we love them still in the nineties because we're earning fifteen percent yield on that add a discount with all that equity cap that backs it now and in a senior security position.
I love that for you.
I love it for us. Yeah.
Maybe what else do you like right now? What else is speaking to you?
Well, what's not speaking to me is treasures. I think treasuries are kind of in this range. It's four to four and three quarters I think is the inside range. Three and three quarters to five is the outside range. I think that our star is going to be high enough and all the massive treasury issues, so I'd be fading treasuries when it gets to not today, but when it gets to like inside of four, and I'd be a buyer kind of like in the four and three quarter neighborhood or infome wider than that.
Do you think we would break out of that range.
I think we're gonna be in that range for a really long time. And I think you've fade either side of that. And in credit, buy it and you buy it in liquid credit with multi asset credit strategies, and you buy it private credit with both middle market lending, asset based lending, and some of these opportunistic strategies. Credit is the place to be. So private equity right done
very well for very long period of time. Private credit, which has a fraction of the risk of the leverage private equity fraction of that risk because we're senior to it, right, and we have our fixed coupon that you know, we're in floating right, coupons that that underrate that cash flow. Right. We outperformed that index of private equity last year and
the same thing will happen again this year. So I think allocations to equity has always been the rage balance with like maybe some hedge and treasuries, But now you can really balance a portfolio with credit because it yields so much and you don't have to take the equity like risk. So I like equities. It's broad based now, right s and p is up eleven.
Up eleven credit. Does that replace what you would maybe have in say in government bonds or is that complement that.
I think it can come from different pockets, and I think every plan manager, every allocation model can think about it differently. They can think about it on the alt side for private credit versus their other alts, Like why should I have alts in real estate? Equity where they can have real estate credit that yields a lot more. That's sucking out all the cash flow from the properties, not allowing the equity owners to participate the same thing
happening in private equity. You can start to balance DA out a little bit, or you can take from your high grade portfolio, whether it's government's work, investment grade corporates, and go down in credit because the commedy is doing well, and you know, and companies capital structures are so well established at this point in terms of being able to service the debt.
You sound so bullish. Everything is green, everything is positive, treasures are ranged bound. That's making me nervous. Well, why shouldn't I be nervous?
I think the being nervous about it is the US government. So am I issuing so much debt and running such massive deficits. And some point you know there's going to be the crowding out there, But right now, you take You don't fight the Fed. You take what they have at you. And in a strong economy, when corporate earnings are doing well and so it's really good for credit, and in a high rate environment, you don't want to
be leaning out right now. You want to be not that ruing credit kitty, and you want to buy value, and you want to have it well structured. You want to have all your protection in place. You want to know you're going to get paid your par plus you're accrued. But you do all this fundamental work, and you put that money in the ground and just let it work for you.