Libby Cantrill Discusses Fixed Income and Equities

Her name is Luby Cantrell, and she is the head of Public Policy, Affairs and Government Affairs at PIMCO, where she not only works lobbying to make sure Pimco's voice is represented in d C but is integrated very closely with the Investment Committee, explaining what is coming down the road from Congress in d c UH and what various events are going to do that could very well impact bond or stock holdings. And and that's a really unique

position in the world of finance. PIMCO literally created this role just for her and she's been thriving uh doing this. If you are at all interested in government affairs, public policy and how that intersects with finance and Wall Street, then you're gonna find this to be an absolutely fascinating conversation. So, with no further ado, my chat with Pimco's Libby Cantrell. I'm Barry Ritults. You're listening to Masters in Business on

Bloomberg Radio. My special guest today is Libby Cantrell. She is head of Public Policy at PIMCO, the investing giant, managing a trillion plus dollars in fixed income and equities. She coordinates the firm's response to policy issues and analyzes political events for the firm's investment committee. She has an NBA out of Harvard Undergraduate. She was at Brown. She is also a c f A charterholder. Libby Cantrell, Welcome to Bloomberg. Thanks for having so let's talk a little

bit about the early days of your career. You started as an investment banking analyst in two thousand, pretty much as the bubble was blowing up. What was it like to begin your career in that environment. Yeah, I mean it was. It was certainly an interesting time. And not only did was I investment banking, but I was actually in the technology corporate finance department of investment banking. So I was right. I was had a front row seat in some ways, um to to the run up to

the bubble and then of course the bubble bursting. I mean it was, you know, it was interesting because I think in some ways, looking back on it, it just, um, I think it reinforced this idea of the markets are cyclical. Um that you know that that that asset. You know, prices go up, and if they go up to a point where that they seem completely disconnected to their fundamentals, then they're probably probably there's probably a problem. Um. So you know, going back, I I didn't have a sort

of traditional business background in college. I I majored in in math and economics UM at Brown. There was no pre business. Economics is pretty much what you need if you're gonna find it, but it's different, right, I mean, I've never taken an accounting course. But but something that I did, I think that that has stayed with me is that when I entered the technology um group at Morgan Stanley, I was questioning how we were valuing these these companies when not only did they not have profits,

but they hardly had any sales. And of course a lot of people who were you know, much more senior to me and much more experienced and I think much wiser, said oh, you know, Libby, you'll you'll learn, you know, you just you know, you're get your feet wet, and yeah, inter of corporate finance. UM. So you know, I that that that that's held to me this day, because you know, common sense actually does typically prevail. So what all of

these things did unravel. I think in some ways to my very kind of um, you know, nassan neophyte, uh you know point of view, it wasn't necessarily that surprised. So revenues and profits, that's old school. We're about eyeballs and the cash flow statements. What are you even talking about? Right? I literally had a conversation yesterday with a venture capitalist who said, let's be honest, if we're looking at discounted cash flow was on these startups, They're all made up numbers.

How could you even begin to put a put a figure evaluation on that? Yeah, exactly. And I think here even in the run up on the housing um side as well, I was in business school and I remember being in a class and my you know, my, my business school colleagues were just pounding the table that, you know, everybody should be able to own a house, and it doesn't matter what their income was, and doesn't matter exactly. We're three, um, everybody should be able to get alone.

And you know, again, I just didn't pass the smell test. And I think my experience at Morgan Stanley just sort of reinforced that the importance of common sense and the smell test. My favorite scene in the Big Short in the film is the Steve Carell character is literally speaking to a stripper about a house and he says, wait, you have a house. She goes, no, I have six. And that's like the light bulb goes off. This is

all going to collapse, right exactly, Just just hilarious. So, so in two thousand three, you go to Washington, you work for a congressman, right, congresswoman congresswoman congress per yes, um, and you're you're doing legislative work, You're you're doing policy analysis. How do you make the transition from that back to finance? Was that a natural progression or was a little bit hmm. Let's see if we can we can mix these two interests. Yeah. So, you know, when I was at SO, I did a

third year investment banking Morgan Stanley. I was in Financial Sponsors, so sort of the private equity group, and all when all my friends were graduating from the analyst program, they were all going into private equity programs UM, TPG and Apollo, and I just felt, you know, as much as I liked my experience in investment banking, and in some ways, so many of the things that I applied today I learned from that experience. UM, I just was looking for

something more. And before I even went to college, I had worked as a volunteer for a woman at the time who was in the Colorado State legislature where I'm from. And um, I had sort of always had this itch about going to Washington, and so felt like it was it was scary in a lot of ways because as again all my friends and investment banking and Morgan Stanley were going to these, you know, very these premiere private equity firms, and I was thinking of taking this really

significant pay cut to do something that was pretty risky. Um. But this woman who had worked for in Colorado had later gotten elected to Congress, and so that I worked for her as a legislative a And I really do view that as one of the inflection points in my career as something that felt really uncomfortable and really scary, but um, it was in retrospect, the best decision. And would you recommend to inform you know, so much of

what I'm doing today? Would you recommend people go outside of their comfort zone and do stuff that's scary as a way to develop their career, because it sounds like it worked out very well for you. Yeah, it's you know, it's so tree right. Um, kind of go, you know, do something that's that that's pushes you, that's uncomfortable. But a business school one of my professors gave her a kind of at HARV they had these last speeches of every semester, and she said, you know, go towards the

discomfort in your career. So when somebody asks you to do something that feels really uncomfortable, uh and makes you sort of nauseous, Um, you know, do that because that means that you're going to to learn and even if you fail, you're learning through failure. And so you know, I think this going to Washington was even maybe a bigger example of that, um because but you know, you're in your twenties and I felt like, you know, looking back again, it was such a wise decision, but it

was it did feel really scared. I don't I don't think that's tried. I think people are afraid of that uncomfort zone. That just I'm not familiar with this. I don't know this, and I wish when I was younger, I was more willing to try stuff that really frightened me. It's it's so easy to say, I really don't have any expertise in that I'm gonna stick to my knitting

right now exactly. And I think, um, you know, again, I see a lot of my friends who went right from investment banking to private equity to business cool, and then they kind of had a reckoning in their career, right because they hadn't necessarily scratched those itches that were maybe a little bit more unconventional, a little bit scarier, and you have less to lose in your twenties, right

and have a family. Um, yeah, I had, I had it right, and I had made enough money and were instantly to you know, have some savings because it was a really dramatic pay cut. Um. But again, money had never really been sort of the big focus in my life. It was doing to me again sounds so the cheesy, but doing something that fulfilled me and taking that step really kind of satisfied a lot a lot of what

I was looking for. Take us through the typical day in the life of the head of public policy at Bondiant PIMCOH Yeah, I mean I think that that title is vague enough, um that it because sort of encapsulates you know, UM a lot of what I do and allows it to be really dynamic, which it is. So the way I think about the position and it's UM.

The position didn't exist before before I took it over, and so in some ways that's given me a lot of flexibility and the firm a lot of flexibility in order to sort of design it UM in the way that they know that they see fit and that UM is the most sort of beneficial from a client and

investment perspective. So, you know, I view myself as wearing a couple of different hats in that in that role, one is this sort of traditional government affairs role, which is advocating on behalf of our clients and our business UM about policies in Washington, or you know, playing defense in some ways depending on the administration and what's going on in d in d C. So one is more

of a traditional government affairs role UM. The other hat, though, that I think is more unique in this position, is that I'm pretty integrated into the investment process, so helping our investment committee sort of think about what's going on in Washington and how that may inform our positioning and our macro outlook UM and then sort of the last, uh, sort of function that I serve is you're talking to clients about how we're thinking about Washington, how we're looking

at things, and as you might imagine, UM, on any given day, you know, there's more demands in one of those sort of parts of the function than others. So sometimes our clients are really you know, wondering, Um, I got lots of questions about tariffs or about tax or what have you. Other. Um. Other times I'm again, we're playing more active in Washington from a from a traditional

government affairs. So so let's delve into your work with the Investment Committee, because I'm kind of fascinated about that. We have just we're recording this in early April. We've just had a run of I can't even use the

word in sanity anymore. We need different adjectives. But but it's been the trade war, and it's been the negotiations with North Korea, and just this week we had the FBI kicked the doors down to the President's attorney's office hotel at home, and it's just like there's no escaping

the news. It's it's brutal. Now you go sit down with the Investment Committee is the discussion more from the perspective of here's the macro issue of how these tariffs will impact these sectors, or is it a broader this is what sentiment looks like in response to these headlines, or is it not limited to any of the above. Well, I think it's I think in some ways it's all of the all of the above, And I agree with you.

It's just been relentless, right, I mean, the news cycle over the last two years has been just you just cannot escape it. Um, you know one but that one guy in Ohio who threw all his TV's out and hasn't written anything other than him. For the rest of us, it's just been especial if you're you know, if you're if you have to follow the news as part of your job. I mean, of course from a policy from a walk and nerd position, Um that I kind of

think about myself as a policy nerd. It's fascinating, right, because this is a really dynamic, um, you know, really in some ways unpredictable policymaking environment. We can speak for an hour about the effect of the pass through tax cut legislation of LLC's like you want to lank out

it's been three hours. I don't know, I don't know if your if your listeners are going to appreciate that, but but no so so, but but to serve to your to your question about how our Investment Committee thinks about this, well, first of all, and I would say that that politics and policy have always been a big part of what we've considered, at least it's been one

of the inputs to our investment process. Um, given the fact that you're you began as a fixed income shop and what the Feddle Reserve did and response to inflation

has to be exactly right. So so the FED response to inflation and growth, and what is a big driver of growth, Well, it's the fiscal part, right, of course, it's other you know, other parts of the economy, but that that g and the g d P equation is pretty pretty important, the gross part, the gross right, yeah, the government part, thank you very Do we need to walk through the equation maybe, um, but but but so anyway, so, so it's always been something that has been a big consideration.

We've you know, we've talked about it, we've thought about it, but clearly over really since the financial crisis, when the inner set action of politics and policy and markets have been more acute. I mean, going back to Tarp, going back to Dodd Frank Um and then of course the you know, the housing bail out, the bank's bail out, all of this, you know, you know, what have you And then fast forward to today when all of these you know, what's going on Washington really is driving markets.

Um So, you know, I think we have the luxury in many ways of being a long term investor. Right We're a fiduciary for millions of retirees, for thousands of pension plans and what have you. So we really are not necessarily reacting to the news of the day so much. We are trying to construct a longer term outlook about you know, where we should be, um as it relates to say, interest rates or credit or emerging markets, and what's going on Washington drives you know, all of those

things arguably these days, um so so. So take trade, you know something. Trade has been something I've been talking about honestly at nauseum to our Investment Committee really since right after the election, because I think people under estimated how sincere President Trump felt feels about trade, and I really and you know, which is stunning to me because every speech he gave during the campaign was Hey, NAFTA's I'm quoting the president. NAFTA is a terrible deal. I

don't believe t p P is working for us. We need to change these rules and if no one is going to treat us fairly, we're going to implement tariffs.

Every time people say they're surprised, it's like, were you not listening to any of the exactly And you even go back to the tape when he did interviews back in the nineteen eighties and he was talking about Japan cleaning our clocks on trade, about NAFTA, about China ascension to the w t O. And I don't think a lot of public policy issues animated him before he became

the president, but this was one of them. And I really think he sincerely believes that we're getting short changed on these trade agreements, and he wants directively it's been you know, he's pretty all over the place on so many subjects. If you're going to give him credit for

being consistent on anything, this goes back decades. There was an O five into of view with someone, maybe it was Oprah, where he's talking about We're not being treated fail ay boy other countries and our leaders are ignoring it.

I think that was back in the nineties. Actually, I think there are several probably several interviews, but there's one interview I think from seven or something with Oprah or He's talking about your pain totally that I have the exact same feeling that you do when people say, well,

these taffs are a shock. Are really He's been pounding the table about this for not that you have to agree with the tariffs, but you shouldn't be certain to be surprised, right and so and you know, and and and you know, you go back to seen and I think people thought, Okay, well he hadn't done anything in twenty seventeen on trade, and I would be I mean, not pedantic, but I would I would take issue with that as well, because if you actually look at what

he was doing and what his trade representative, Bob Leitchheiser was doing, what Ross was doing at Commerce, they were

laying the foundation for these tariffs. So you know, not to not to bor everybody, but before you can just pursue tariffs, you have to go through this investigation process and that's you know, several took in this case almost a year to do so on stealing aluminum that was initiated back in April seventeen, and then of course they just made the decision most more recently on on how to um, on how to proceed. But this this felt pretty clear that this was these were all these things

were coming UM. And I think to the credit of our folks at PIMCO, you know, they weren't necessarily surprised that that that that this has happened. UM. But of course, you know, this is this is determining how markets are reacting. So it's something that we've been talking more recently about. Let's talk a little bit about the changing role of women on Wall Street, and I have to go back

to a quote from Michelle Meyer. She's UM one of the senior economists at Bank America Merrill Lynch, and she made a specific point of saying when she was coming up, there were very few women role models for her to look up to and emulate as an analyst slash economist. But it's beginning to change. What are your perspective on that topic. I think it, I mean, it's changing, but it's at a glacial pace. Honestly, I think especially on

the cell side and investment banks. If I if I look back to when I entered finance back at two thousand, you know, but almost half of my analysts class were women, UM, which was UM, I think really notable at the time. I just don't think, you know what what what's been UM in some ways discouraging is that over time there have been many women who have dropped out of finance. UM. So it's not necessarily that we're not starting at the right place. It's really a question of retaining them and

developing them and promoting them and all of those things. UM. But but to Michelle's point, it's certainly I think the the landscape and is looking different, but also the commitment among senior leaders. I think that UM, you know, our folks, certainly at PIMCO, UH, you know, from the CEO down, are really committed to increasing diversity. And it's not just lip service. It's actually UM making sure that you know, every interview slate has UM some woman on it, UM

at the very least one, UM, if not more. UM. It's making sure that when we're looking at promotion classes that they're balanced. UM. It's making sure that we are looking two women for um, you know, different opportunities instead of just instead of maybe just just sort of the conventional man. So and I think we're really trying to make a difference. Um, but it's again, it's been I think it's been glacial. I just look of almost the

last twenty years in finance. I've been involved in financial services, and we haven't made as much progress as we really need to. But I do think it's I do think it's changing. So So, I had a debate not too long ago with a friend from outside of the industry saying, so, when is when is Wall Street having it's meat too movement?

And my response was, Hey, you know, things were really terrible in the eighties, and I think it had it in and from my perspective, trading deaths were horrific, and the lack of general respectful women in that period was awful. But you had a bunch of litigation in the boom boom room and all that crazy stuff. And I think Wall Street has been woke long before the rest of

the country did. Plus compliance plus litigation, it seems Wall Street, at least in my career, has been ahead of other fields in terms of recognizing, hey, this is a problem. We better do something about it. Not that it's remotely fixed, but there's some awareness. Is that a fair Yeah? I think that's I think that's fair. Um. However, if you look at the composition of management teams across Wall Street and the buy side, you don't necessarily see as many

women as you want to. So I think, wow, we may not have, um, the more draconian severe harassment issues that I think some of these other industries had that have been unearthed recently, we still do have a real development problem among women and retention problem. And so that's the key is how do we make sure we can we can get women in the door. You know, you can get women in the door at twenty two because they want to be an investment banking programs and they

want to go to the buy side. Um, but how do we make sure that we're getting them to the

next step? And I think some of it is, um, you know this, Some of it is the women do have to have children biologically, right, So making sure that we're supporting women during that period of time and not just making sure that they have maternity leave, but making sure that when they come back that they're supported, making sure that they don't necessarily miss out on a promotion or opportunity when they're out on leave or when they're

really just in um the fast lane of parenting. I think that And and you know, the the interesting thing that PIMCO is that we're seeing these demands both from women but also from men. I mean, we a lot of men in our New York office especially have working wives, and so you know, they want to make sure that they have parental leave, that they have some flexibility, um, to make sure that they can go to the preschool

recital or what have you. So in some ways, um, you know, and this I don't want to say that this if you kind of address these issues of mothering, that you're going to fix the problem, but that definitely is a piece in the puzzle that has to be addressed him go, like other organizations are trying to do.

So promotion retention are Is it fair to say it's just as important as pay, parity and recruitment on the other end, I think I think promotion and retention in some ways fixes the pay issue because a lot of times the pay issue is because you just have more senior men at the top. So if you get more women at the top, I a making these decisions about pay, but be just making sure that there is just sort

of balance about the distribution of pay um. And you know, some of these recent studies that have come out have I think conflated the issue. Right, So there's this UK gender parity study that came out and at least in our case, because like every other funny intra firm, we had to to publish it. What I think, you know, I don't think we have a pay I mean, it's it's it's it's illegal to discriminate pay on gender, right, so well, but in our case I can say is

that it's it's it's not about pay parity. It's about making sure that you get more women at the top so that distribution of pay doesn't look so so out of whack. So the area that becomes gray, or at least that people have been hiding in has been all right. If you're a level three c F A and AN analysts and you have five years experience, you would imagine that plus or minus a small percentage, that pay level should be sort of comparable regardless of gender, what have you.

But some of the complaints have been two people, maybe one person's covering tech and someone's covering a less sexty space like utilities. You end up with some pretty wild disparities in pay. And the defense has always been, well it's this sector versus that or something along those lines. Is that an issue that people are hiding behind, or is itself simply by having more senior women at the

upper echelons and upper pay scale at at large farms. Yeah, I mean, look, I don't hey, I don't think there's one silver bullet and be I can't speak about other firms, but I can just speak about about him go. And we've you know, we've brought in the third party auditors to make sure that we're paying fairly, um, in terms of somebody who has the you know, wearing the same role, the same level and what what have you in the same function. Um. But again it's the issue of making

sure that we have women in leadership. So um, you know those women are you know, having the same opportunities and are getting those big paychecks that men have been getting historically. So I I don't want to say that there's one, you know, there's one way to solve this, but I do think that developing women and promoting them and getting them into these decision making roles is super important. Your offices are in New York, right are you? You're

not Newport Beach. You're in New York, New York, Yes, right, that office, that Newport Beach location is about as beautiful as a place. Pretty nice, Yes, you can. You can imagine that. A lot of my my business school friends think I'm just nuts for working in New York versus Newport Beach. But of course New York is closer to Washington. That makes that makes perfect sense for you for your drills. So let's let's talk about Washington, and let's talk about

your role. Is it more government affairs and d C or is it more hey, investment committee, Here are some issues you need to be aware of. I mean, it's honestly, it's just both. And it really depends on the environment. So you can imagine back a few years ago, after Dodd Frank was was implemented, and you know, all the regulatory agencies were deciding the rules of the road, um for derivatives and other things that that matter. From our perspective,

it was more of a traditional government affairs role. Um, we were educating folks in Washington. We were trying to UM make our you know, make our arguments about you know what the they what they should kind of the direction of the policy should go in UM. But now, just given what we've been talking about, you know how newsworthy and eventful, event driven this this administration has been.

It's been more on on the investment side. So we have a tragedy like the Parkland school shooting and these things normally fade pretty quickly, that seemed to have legs and really seemed to last a while. How do you integrate something like that into the investment committee? I know black Rock is talking about a gun free fund and other such things. How do you deal with something ang

so that does not necessarily impact us as much. I mean, well, we might have specific sectors that are impacted, but from a macro perspective, you know, gun legislation is not necessarily going to impact the growth of the economy or the FEDS next move right, So most of the things that from a pure kind of top down macro perspective are the things that are going to be driving growth and inflation.

And you know, gun policy is not necessary, but it could obviously impact more of a bottom up so so let's so then let's talk about something that could impact theoretically the economy. You had a very interesting set of comments about the tariffs and saying, this is the sixteen trillion dollar economy. These are a hundred or a hundred and fifty billion dollars worth the tariffs. Explain what the thought processes and how that gets digested by the group

running investments. Sure, so, you know, the the the the statement that you're referring to is really based on the fifty billions. So the initial set of tariffs that President Trump had announced as part of this investigation into China's you know, potential um sort tenuous use of American intellectual property, fifty billion is not going to really be too much of a headwind on the economy, right, we say, a tenth of represent perhaps in terms of a drag on GDP.

That's really dwarfed by the more pro growth things that we have seen from this administration, including of course the tax bill, which has gotten a lot of news, but also something that hasn't really gotten i think as much attention in the media, which has been the spending bill that was approved, you know, earlier this year, and that adds about you know, thirty basis points to real GDP growth and everybody and so yeah, I mean maybe not us, but but we we knew it was coming. Honestly, I

think that the size of it was surprising. We were thinking more sort of twenty basis points. But the fact that it is up to the kind of the three tenths of a of a percent in terms of real real GDP we're talking about really you know, significant impulse from Washington, so about six tenths. So if you talk about one tenth of a drag, well, again, distill the

good outweighs the bad. I think the big question, however, is do these hundred billion dollars of tariffs um in addition to the fifty billion or do we proceed with those? And then of course the big question is what is China do and retaliation and that there's just a lot of uncertainty around it. But to our earlier to our earlier discussion, and I just I think it's going to be a much more significant concession from China for this

administration to back off. I think people who view this as sort of symbolic posturing just trying to get China to the negotiating table and an easy win, or again really underestimating what how President Trump feels about this issue and the folks that he has in charge. I mean, Bob Bleitheiser is an incredibly widely credible U. S Trade representative who knows the law and was behind many of

the more protectionous measures against Japan and nine. So um, I would take again, I would take the I would take President Trump very seriously on these issues. Do you ever find yourself looking at the reaction at elsewhere on the street that they're not taking this of all the things, like I think the wall is never going to be built. I don't think anybody really cares about the wall. But the protection ism in the tariffs, I'm surprised people are

surprised exactly. I'm surprised that there's a surprised My my has been trades equities and uh, we have some pretty interesting dinner conversations and all of he's like, oh, you're such a bear about the trade policy and the protection is m and the potential trade war. Um. But again, I mean to to our to our discussion, we needed this. This was this was so clearly telegraphed to the market that this was going to happen. It was just a

question of when and not if. Um that sometimes the equity market does you know, it's it's the fuddles us and I think it fuddles me and sometimes fuddles other folks that have So let's hold the equity market saw and look at the fixed income market. We now are back to trillion dollar deficits the first time in about six or seven years. Uh, the nineteen trillion dollar collected total debt. I've seen all sorts of forecast from to thirty trillion, whatever it is. It's a lot of money,

and deficits tend to impact the bond market. How are you advising the Investment Committee of here's what def sits are going to mean for inflation, for credit availability, and for were yields may end up. Yeah, and this is I mean, this is one where I'm really just an input and it's really their analysis and discussion that will lead to that in terms of how it impacts our position positioning. But it but it is one of the

reasons um. Our view is that you know the spending bill was going to happen, and that there was going to be you know, some more fiscal profligacy. Then I think people had had maybe expected, um, but this is going to have a dampening effect on growth over the long term. So you know, again we have the benefit

of being long term investors. We think three things through on a cyclical sort of six to nine months basis, but we also have the luxury of thinking things through on a kind of a three to five year basis. And this is the genesis of our new neutral and um you know, new normal kind of paradigm that we think. This is one of the reasons why rates are structurally going to be lower, because you're probably going to have a dampening of you know, on growth because as of

these large you know, kind of debt overhangs. Because in a of course, in a in a time of recession or you know, down you know, or downturn, the sort of the fiscal um side will have less capacity to actually step in because of these big deficits that they're running in good times. I mean, as you know, this is a very unusual approach, right to be adding all of this kind of fiscal juice at a time that you know, the economy is actually doing pretty well, right,

so to add it late in the economic cycle. Um, we think what might preclude policymakers from stepping in when actually the ac this would have been better timed had it been six years earlier or fill in the blank, three or four or five years later whenever the next recession hit. Yeah, and you know, we you know, we don't really take a normative view on policy, so we're not telling policymakers what they should do or what they

shouldn't do. What we say is, if you do this, this is how the market will react, and this is how the economy will react. So, um, you know, should it have been and done later? You know, who knows, But certainly I think the practical impact of it being done now is that means that policymakers have less flexibility longer terms. So pro cyclical stimulus is different than countercyclical stimulus. Pretty right. So so let me ask you eCOM one

or two questions. How long you're right at the intersection between Wall Street and DC, between public policy and finance. How long does it take for the markets will hold the efficient market hypothesis to decide for a moment to actually understand what's taking place in DC and reflected in prices. Because I'm thinking about your husband's comments on oh, what is this all this tariff chatter in seventeen When it's

not chatter, it's going to happen. How long does it take for the markets to actually digest and and adjust to these big issues. It seems somethings take a long time to work their way in. Yeah, and I think, um,

I think that that's absolutely true. Although it really is important to define which markets you're talking about obviously, right, So the equity market, which we just have less interaction, and because we really managed primarily fixed income assets, um, seems much more reactive to these headlines and and and arguably things are more you know, some certain sectors or more price for perfection, so they're probably more vulnerable to sell offs when you do have a negative headline, whether

it's trade or something else. Um. I think the fixed income market has been maybe a little bit more deliberate, a little bit more thoughtful about internalizing some of these policies. You see I think less dramatic moves from on headlines. Uh, And I think you see kind of less um, less volatili and again is what the drivers are of, you know, of fixed income versus versus equities, But I think that the fixed income market has been more a little bit

more immune to be what's going on in Washington. We have been speaking with Libby Cantrell of PIMCO Issues, the head of Public Policy and Government Affairs. If you enjoy this conversation, be sure and check out our podcast extras, where we keep the tape rolling and continue to discuss all things policy wonk and market related. You can find that wherever Finer podcasts are sold Apple, iTunes, Overcast, SoundCloud,

and of course Bloomberg dot com. We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. You could follow me on Twitter at rit Halts, or check out my daily columns at Bloomberg View dot com. I'm Barry Hults. You're listening to Masters in Business on Bloomberg Radio. Welcome to the podcast. Thank you Libby so much for doing this. This has really been quite fascinating and we've been trying to get

you edualed for some time. Before I get to my favorite questions, they're they're a handful of other questions we didn't get to that. I'm really I really wanna just just get a few, um a few moments on UM and and it's mostly politics. So the first question, and I think, and this is a pretty standard issue, how should investors think about politics and how it relates to

their portfolios? Because we we get emails about this all the time, I know, and I wish I had I wish I had a one one, uh simple, straightforward way of thinking of it. I mean, I think in some ways, UM, you know, investors, uh, I think hope the politics politicians are about a base level do no harm, right, but they don't they don't really get in the way of

of markets. I think that the sort of second order is that they hope that polity titians actually do something for economic growth, UM, for longer term viability and what

have you. And then I think on the sort of flip side of that is really what they can do to to hinder markets and the economy and and you know not it's it's probably too reductive to characterize UM the past ten years any one way, but it has been more of I think a headwind just two markets and UM and you know, maybe to growth then than the typical investor would would would meaning things like deficits or tax hikes or wars in Iraq or just the whole.

I think the noise coming out of Washington really right. I mean, I think the fact that um bipartisanship isn't necessarily lost, but it's definitely on ice, at least for a while. UM that we've seen more manufactured crises, whether it's the debt ceiling crisis or or government shutdowns, or just this real lack of comedy and lack of I think constructive engagement between policy between the two parties to actually address really longer term issues like our entitlements issue,

which has become so polarized. But having worked on the Hill, there's some really easy ways to address this that are actually quite bipartisan that if a centrist coalition came out I think put something forward in the political environment was different, we could actually affect change. But it's really the kind of the lack of political will, of political courage in some ways, just the the lack of even discussion between between the two parties. It seems that a lot of

these are unforced eras and self inflicted wounds. I mean, for sure, yes, I mean and and so I just so again, you know, I don't it's not only are they not doing no harm. And maybe it's not, it's not sort of short term harm, but in the long run, you think that you really have to have the courage of your convictions and and just courage in general in order to address some of these really longer term big

issues like we're that we're talking about. Either it's the debt issue, it's the entitlement issue, it's investment in education or infrastructure, what have you. That that's that that takes courage, and also you risk not getting reelected. And I think we don't have folks who are have that kind of long term view. The thing I'm shocked about you said, do no harm. For a second, put put in place some pro growth policies. If there's anything that's pro growth

and has some bipartisan support, it's an infrastructure spend. And yet nobody seems to be able to get anything through it. I know it's been frustrating, right because it's something that was contemplated under President Obama UM and it was certainly

obviously contemplated on the campaign trail. And I think if both candidates, both candidates and and and to your point, you know, everybody, every member of Congress likes to bring it home some goodies for the district, right, Um, and that is one thing that you know, I would say, and again there's not one explanation for why there has been a lack of bipartisanship, but the elimination of earmarks.

And this is going to be the unpopular thing to say, but you know, these are the things that that horse trading for some sort of middle ground, and it really precludes sort of the ideological wings of both parties from um, you know, sort of abandoning their party and from not voting for something. So basically brings people to the table

and it allows compromise. And I really fundamentally believe and to to the to the credit of policymakers in Washington, I actually think this is a widely held belief that compromise is really central to governing. I mean, it's like, guess it's the statement of the obvious, right, but you need to bring those folks, and you need to bring you need to incentivise them to compromise, and earmarks was a way to do that. Talk about unintended consequences of

of rule changes, did it? Did anyone raise the objection that if you get rid of your marks, you're elimiting the ability for people to horse straight across the aisle exactly. Um and and it's it's been something that has been discussed behind I think closed doors recently. But but it's so the optics of bringing back earmarks, I think it would be so bad. But it's you know, it's one percent of discretionary spending. It's such a small part of spending.

And discretionary spending, of course, is only a third of all government spending because two thirds is entitlement spending. So we're talking about a really diminimus is entitled in spending. Yeah, military, big chunk of that also, I just want Yeah, it's about five billion of discretionaries, so it's about half of discretionaries military and some of the mandatory some of entitlements is earmarked for military folks in terms of benefits and

what have you and healthcare programs. But but yeah, so anyway, so it's a very small part of discretionary spending. And again this is a difficult thing for a member of Congress to advocate for, but I do think it was an uintended consequence of its elimination, and you you you look at sort of the inflection point of when all this partisanship happened, and maybe it's just totally coincidental, but

it really was around two thousand and ten. It was partly because of the Tea Party, of course, but again there wasn't an incentive to bring them to the table because there weren't those air marks anymore. And my last question before I get to my favorite questions. Your role of PIMCO is so central to dealing with policy and the and the the investment side. How do you not

let your own personal politics interfere with your process? Yeah? Well, something that I you know, I think like every investor who's covering their own a sector, they really try to do it in a dispassionate, objective way. Um. I think because politics is so visceral, it's so emotional. Um, it's maybe harder to do, but I really and it goes back to our view that we don't have we don't

have a normati vie about how things should be. If we're trying to you know, react to how things are um and predict how things will be um again, not how they should be. So that so that's ah, that's it makes it easier because I'm not saying projecting my own kind of views on what a policy direction. I'm sort of saying, Okay, this is what is likely to happen, and this is how the market will react to it.

And I view that instead a very similar role as any sort of credit research analyst who's looking at another sector. Just passionate, objective. But you know, it's it's it's a harder just given given the topic. All Right, so let's get to my favorite questions. These are the the issues we ask all of our guests. I think I'm woefully unprepared for. By the way, just just re associate the

first thing that comes into your mind. Uh, tell us the most important thing people don't know about your background. I'm a huge Denver Broncos fan. Um no, I I from Denver. You know. I I struggled. That's all these questions this morning. I struggled with that one. And um, you know, I think it's Uh, I think it's something. And we talked a little bit about this, that you're taking these risks early on your career. Um, and it's it's something I talked to about, especially to younger women

who are who are coming into finance. But um, you know, taking risks, it's taking calculated risks. It's just it's just important. And I did that when I left finance temporarily to go to Washington, and then I helped, you know, in some ways create this role at Pimcoes role had never existed before. And if I hadn't spoken up, if I hadn't made the case for why this was important from a business and an investment perspective, I wouldn't be here today.

So I so, I don't know whether this is something that I want people to know about me, but I do think when reflecting on my career, it's something that's held me in goodstead by taking calculated risks, by speaking up um, and you know, by sort of by by risking failure. And I think that's a that's a hard it's a hard thing to do. Tell us about some of your mentors who helped god your career. Law Well, so you know, my my U I have to say, my my my mom is important because my my parents

got divorced. My mom hadn't worked um, and she went back to work at a pretty difficult time because she had to. And I think seeing her her kind of resilience and her grit um, you know, just sort of solidified the importance of well, first of all, it's the importance of work for me that I think as a especially as a woman. UM. You know, my view is that the work is just really important. It gives you, um obviously gives you, you know, some professional identity, but

it also gives you economic independence. And I think that UM was certainly you know, underscored to me during this kind of experience growing up. UM. And then you know later on, UM, this member of Congress who I worked for, UH in the in the state legislature and then later in the House of Representatives, she really in some ways exemplified But UM, I hope I am. Now you know, she was a real professional. She was dedicated to her work.

She was ambitious. But at the same time, she was a mother, and she was you know, a friend and a wife and all of those things. I mean again sounds kind of cheesy, UM, but to see that, and I really do believe when we were talking about this about you know, women mentors in Wall Street, but you have to you know, you could only be what you can see, and I think see working for this woman while when I was a teenager UM and sort of seeing her struggle with a parenthood and running for Congress.

You know, really just again kind of reffirmed that you can do it. It's just that takes a lot of hard work and persistence. Let's talk a little bit about books. You have to travel a decent amount of What what do you read for other than those PDFs that that get produced by PIMCO. What do you read for pleasure? Mark either fiction nonfiction market related? I would I read both, right,

So I read um. In terms of non fiction, I read a lot of presidential history, which I think has been in some ways reassuring or interesting during this period of time to sort of see you read about what we went through in the nineteenth century or or what have you. How chaotic that has been. Um uh, well so so I just I just downloaded um grant by Chair now, which is supposed to be supposed to be amazing.

And then on the other hand, I like to read fiction too, because to what we were talking about earlier, there's just been no escape from the news psychle and so to read and I was, you know, read fire and Fury, and I just like too much too much right back in there. I had the exact same reaction to you. I read the first thirty pages and I'm like, wait, now I'm doing this when the TV is offen. You know, I know I ended up. I ended up feeling like I had to read it for my job, but it

wasn't necessarily for pleasure. I felt like it was more of a work assignment, um than anything else. So, you know, I like novels, but honestly, I think like other folks have said, you know, I'm being a worker, working and traveling, and then being a parent doesn't allow me a lot, and then having to read the news. So honestly, I go to bed reading Twitter, and I wake up reading Twitter, which is that I don't think it's healthy long term. No,

it's definitely not healthy. Well unless you mute with with great extreme prejudice, if you're muting people who are just I can't read another screed and threaded um fest. I'm just I'm done with this guy, unless you are an aggressive muter. Yeah, it's just painful. Yeah, it's just it doesn't feels just relentless. So so tell us what has changed over the course of your career within finance. Are you seeing progress or is it still a glacial pace

of change? You know, I think again, you know, going back to our discussion at least about gender and just about diversity in general, you know, you know, ethnicity and what have you. I, um it did that has been glacial.

I don't think that looks very different. Um But in a big butt here, I think there is much more of a commitment of an awareness, a commitment on boards, the commitment among management teams to actually change things and not again, not just creating a woman's network and having a woman you know, talk over glasses of wine about whatever it's really about. You know, a fundamental commitment to change.

And I think that does feel like it's changing. And you know, I think the data is really compelling on this. And this is what we've been trying to make. The argument other folks and our clients are making this argument to us as well, is that diverse teams lead to better outcomes from a performance from a from a financial perspective. So this is not just a question of it would be nice to have. This is a question of the must have because it really is drives the bottom line.

Avoid group think. Can it's never a bit exactly right? Tell us about a time you failed and what you learned from the experience. Oh gosh, I mean I feel like I fail every day. Um, you know, I I you know, I joke, but I do feel in some ways. Again, I think it's just a juggling. Uh, you know, not to put too much of a point on this, but having two small children and trying to do what and that.

You know, we haven't really talked about this, but I also co had our New York office here, and so I just have a lot of my a lot of my plate, and invariably I feel like I'm letting somebody down. I'm not doing something. Um, whether it's you know, usually work takes priority over over my kids. Um, even though my kids are my of course my number one priority, and so is my husband. If he was listening to them to this that in there, he's probably tuned out

a couple of pages. Nobody else is. UM. But but you know, I mean, you know, again not just kind of be tripe, but I think that you just realized that, you know, nobody has going into working starting to work

at twenty two. You sort of think that you look up to the especially the women at thirty or forty, and they think that they have a figured out I think as I realized I just turned ford to you just realized that you never figured this out, and that's okay, and you sort of have to give yourself the freedom in order to fail but also to rectify things. Um. So you know, I just keep I keep just trying and trying, is you know. And I this again a kind of a lesson from my mom, is that you

just you know, persistence is important. And I think persistence can get you can get you far. What do you do outside of the office to relax and just kick back? Oh, I go to my my six year old karates karate classes. Uh. You know again there's I do I and I uh, I really I do have a lot of Um. I spent a lot of time with my kids on the weekend.

Of course. Um you know, I try to I try to work out, but I have a three and a six year old, so they're pretty unforgiving when I when I'm around, they you know, they want my um, they want my time. But um, you know, I think I wouldn't have it any other way, right, I wouldn't have it. I think that being a mom makes me a better employee, and being an employee and be having having a career makes me a better mom Um. So it's it's hectic,

but I wouldn't do any differently. So what sort of advice would you give to a millennial or a recent college graduate who was considering a career in finance. Yeah, that's a that's a that's a good question. I mean I think, you know, I think, um, by the way, these are all I think they are all. That's yet

that is yet another good question. Very Uh, you know, you know what I think is and I see this you know in our in our New York office that hasn't even a more disproportionate number of millennial millennial folks, UM,

but that their voice is really important. And I think what we're seeing this is sort of seeing this in Parkland, right, is that UM, I guess they're not that's not technically the millennial generation, but but what have you but that this kind of younger generation with a fresher perspective is really important. And UM, I think they need to be realistic about how much they can change in organizations. But that shouldn't necessarily prevent UM from speaking up, from trying

to make change. And we we found that in our at listener in New York office at PIMCO that we've really a lot of the change that we've instituted the last two years from a cultural perspective has come from those folks because they've made suggestions. Um and they have a totally different perspective. And I think growing up with social media is just totally changing this generation and there

and their perspective. Um and and I think it is moving these sort of you know, um not not you know, these kind of older or more traditional organizations in a in a really positive way. So I would say, you know, joined, don't don't be discouraged by sort of financial services joined financial services, but also be prepared to to speak up and try to make some change. And our final question, what is it that you know about the world of investing and public policy today that you wish you knew

fifteen twenty years ago when you came out of business. Wow, I mean, I think it's changing every single day. So it's uh, um, you know, I think, um, you know, in some ways, it's some ways I was lucky, right because I think I saw that Washington didn't speak Wall Street language, and Wall Street didn't speak Washington language. UM. So I think in fifteen fifteen years back I wish I had more confidence that that was really the case,

that there was really a need for this. UM and uh and I think what we're you know, what we're seeing here is that markets really are influenced by what's going on in Washington and and and and policymakers. So UM, I don't know if it's what I wish I knew, but I but I but again, I think that this bridge between the two is really important. I think will become even more important going forward. We have been speaking with pimco's Libby Cantrell. She runs the Office of Public

Policy and Government Affairs at PIMCO. If you enjoy this conversation, be sure and look up an Inch or down an inch on Apple, iTunes, overcast, SoundCloud, wherever you find your favorite podcasts, and you could see any of the other two hundred or so such conversations we've had. We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. I would be remiss if I did not thank Mike crack staff that helps

put together these podcasts each week. Uh Medina Parwana is our audio engineer. Slash producer. Taylor Riggs is our booker. Michael Batnick is my head of research. I'm Barry Ridholts. You've been listening to Masters in Business on Bloomberg Radio.