BlackRock on 'Fixing' the 40 in 60/40

stocks were the meat and potatoes and dessert crypto. Well, maybe that was the Shotton beer you had afterwards, but

that's all obviously changed after last year's cartage. Bonds of all stripes are sporting really attractive yields that look especially enticing these days if and when that market focus shifts from worries about inflation so worries about economic growth, and exchange traded funds especially are reaping the windfalls with hundreds of billions of dollars flowing into bond products in the last year. You heard it. Bonds are exciting again, and

we're going to get into it. With the head of fixed income at the world's largest asset manager, but filledna First, speaking of excited, I was very excited yesterday when I came into the office and I noticed you had left a book for me on my desk, which I assume means I'm finally invited to one of your book clubs. And I'm very excited. Oh my gosh, I didn't mean it to look that way, but I suppose it looks that way like I am giving you I'm offering an invite. Sweet,

I'm not invited to one of your many book clubs. Okay, I suppose you and I have a book club going then, because we have a special guest next week, and you and I have been tasked with reading his book before the podcast. That's why I left it on your desk. Oh yeah, Oh, that's not as exciting is one of your real, my real book clubs which you're not invited to. I'm sorry, I'm wonder about what exactly these books are you reading? In these book they're fun books. That's yeah,

no invite for you. Tell us about the what goes up? Book club? Who do we have next week? We have Alan Blinder next week and he has a very thorough history of monetary and physical policy, so we'll be talking to him next week. That is riveting book club material right there. But this week's guest is equally exciting. Why don't you introduce him? Yeah, I want to bring in Steve lap Plea. He's the US head of fixed income ETFs at black Rock. Steve, welcome to the show. Thanks

for having me. You're welcome to join any of my many many book clubs that I belong to. The book for next week does sound riveeting, so so I'll have to check that out. You're well, come on, come on into our book club. Then you're very welcome to to be part of it. Poor the Chardonnay, I'll bring this um see, maybe we can just uh, we can just start with So, your US head of fixed income ETFs at black Rocks, So tell us about your role. Yeah.

So I've been with a firm since two thousand and nine, and you know, it's been it's been quite a journey. When I joined black Rock, bondie tfs that did exist. We launched the first set of them in two thousand and two, and we recently celebrated the twenty year anniversary

of those. But it was still, you know, a relatively nascent business in terms of where it is today, and so you know, we decided to really make it an effort at growing that business, and in particular, I'm really trying to make the market aware of just how much these products could number one, help investors, um that's the

important part. But also we had a very strong conviction that these products were going to change the bond market itself, and so I was one of the folks brought in to really, you know, start growing this team, and over time we build out the bondie TF infrastructure a lot.

And so my role currently is to oversee that business more broadly in terms of, you know, the products that we're designing, engaging with clients on their experiences, how we can improve the products, working with broker dealers, index providers, all of the folks who are very important to the ecosystem to make sure everything functions well. Just to overall make sure investors are getting the outcomes that they're expecting. You know, Steve, I was kind of joking at the

beginning they're talking about how bonds were boring. Of course they are. They've always been very exciting, but clearly in that decade of zero interest rate policy or near zero interest rate policy. There's just been this massive sea change now with higher yields. Every I think investors strategist we spoke to recently heading into twenty three was much more

bullish on bonds. That's kind of reversing a little bit now, you know, I'm looking at you know, some of the eye shares, uh, you know, big fixed income ETFs, tlt, lqd H, the aggregate agg really off to a strong year like the stock market, and now kind of back to maybe flat flatish on the year, up a little um. How do you see the rest of the year shaping out? You know, clearly inflation and the FED are the most

important elements of how bonds will do this year. There seems to be a rethink going on about how high the Fed will actually hike and when and if inflation will actually back normalize back to that two percent area. So how are you thinking that you know, how the rest of the year will play out in fixed income? Yeah, it's it's been a bumpy ride. Last year, as you know, was the worst bomb marker we've seen in probably forty years.

It was. It was incredibly challenging. I think to your point, investors have been lulled into you know a bit of well, rates are low for long and maybe low forever. That changed very, very dramatically last year. I think investors were looking forward to this idea that, oh, twenty twenty three, where these higher yields, it's great, I'm going to allocate, I'm going to fix my forty, so to speak. And then all of a sudden we got the slew of very positive data, and you know, that made everybody, as

you said, rethink. It does feel like people rethink this and maybe overthink it every week, if not more more frequently than that. I'm a little more sanguine on this. I think that, you know, there is a limit to how high rates can go. So I think that the Fed's going to be watching the data closely. You know, we've maintained a view that consistently that inflation was probably not going to go down in a straight line. We've been saying that for quite a while, and I think

that's just what we're seeing now. There's going to be some bumps along the way. We do think that, you know, it's possible that they may hike a little bit more than what was originally expected, and then they may hold rates at that elevated level. If you just look at the futures market, I think, you know, the peak rate is somewhere around and it's probably you know, it's bumping around, you know, day over day, but it's somewhere, you know, closer to a five and a half percent terminal rate

than was before, but not quite there. So I think there's going to be You're going to see the market, you know, kind of trying to find a level here. And I do believe that there's there's a limit to this because whether people believe it or not, ultimately these hikes will impact the economy. They will take hold. There's debate about win that can happen, but it will happen. It's happened every single time in the past, so they're cognizant of that and they don't want to, you know,

go too fast and too far. Yeah. See, if do you guys have an internal view in terms of what else to expect, it sounds like maybe two more twenty five basis point hikes that we can expect from the FED. We have had this discussion over the last couple of weeks of some FED members arguing, even for during the last meeting, that they should go with fifty basis points that potentially the next to the I think the March meeting could be fifty basis points. So do you have

an internal view on what we can expect. I think we're we're still thinking that they probably end up somewhere, you know, at five and a quarter or maybe one more. But but it's really like, if you look at the market that's pretty consistent us, we get, you know, a really outsized inflation surprise. Um Like I said, we we've been pretty consistent that it's not going to be linear. It's there, They're going to be some bumps along the way. So I think this is you would like to see

it go down more consistently. But but this this isn't really surprising us all that much. Um So, like I said, I think I think the market's basically pricing in, you know, around five and a quarter, between five and a quarter, five and a half. As a terminal point, you know, Steve, as I mentioned of the opening, the spent some eye popping flows into into the fixed income ETF space at Block black Rock ey Shares and really throughout the industry.

Where are you seeing most of the flows go into? What? What is it? Sort of means you, when you look at where the flows are going, is it primarily the safety haven? You know that TLT, the Treasury's ETF, that sort of thing, where you know, is our interest across

the whole portfolio? Well, it's It's interesting. If you would have told me last January that the large just category of inflows would have been treasuries, I would have probably disagreed, given the you know, how hawkish everyone was in the view that you know, rates were We're going to accelerate quite a lot. But as it turns out for US anyway, it was you know, we took in over one hundred billion in the US one hundred and twenty five billion globally.

Of that one hundred billion, sixty five billion was in treasuries, which was you know again, I think I think most people would have been quite surprised that was followed by investment grade multisector of municipals UM so Yes, to your point, it was all high quality. I do think that was a reflection of investors saying, these yields are attractive. I can't call the top. I'm not going to try to

call the top. That's that's pretty tough to get, right, so I'm going to start allocating, but you know, I'm a little bit worried about where we're going here in terms of do we tip into a recession? You know, what do we what do we ultimately end up doing as far as a land and go. So I'm going to buy high quality. The part that helped that out

the most. If you think about at the front end of the yield curve, you know, you have two year notes that are now above four and a half percent, and so it they didn't have to go down in credit to get yield. They were seeing yieldsy haven't seen them many many years that that trends persisted this year. We're seeing high quality flows this year as well to the flows sense to the HyG, the high yield ETF.

I'm guessing they track closer with risk sentiment in the stock market or are you not seeing them there that they're more of a risk on type of product. Yeah, I agree with that, and particularly HyG has become very entrenched in the you know, high yield ecosystem, and so

it does tend to react very quickly to sentiments. So you know, when you have risk on, you'll you know, you see equities rally, you'll probably see flows into HyG When you have risk off, as you said, you'll probably see the opposite, and it does happen to react quickly in a large size. I want to ask you more about your predictions for what you see for the bond ETF space down the line. But but first you mentioned the two year note. Um, it's above four and a

half percent. I'm wondering what you think the bond market is telling us right now, given the rise and eels that we've seen in recent days. Yeah, I think it was this adjustment. The market had started to get to a place where, Okay, the end is in sight, all is going according to plan, and you know, we can even start thinking about a FED pivot. You know, it

depends on what speaker, what day. But I think, you know, the last speech by Powell sort of calmed the market down and I think got them to a place where it's like, Okay, I can see the light at the end of the tunnel. This recent slew of data really upended that a bit, where you saw strong employment numbers, you know, really really outside the you know, the manufacturing

indicators PMI et cetera. Were strong, Inflation did not come down, you know, as much as as as people had expected or hope, and so what you're seeing the market is just sort of pricing in, you know, combination of you know, maybe an additional hike or you know, higher for longer, if you will. And so I think it was just that adjustment. We've seen this so remember I think last year the peak was somewhere closer to four and a

half and so we've been on this journey before. We may test at some point above four percent again, But like I said, I don't think that we're going to see yields jumped sharply higher. You may see them grinding a little bit higher, but I think we're going to be more or less in a range. It might be a voliable one as people continue to price in and

price out what they what the Fed may do. Yeah, Steve, you mentioned earlier that notion of you know, bonds being that forty percent of the portfolio on a traditional sixty forty portfolio. Last year was just one of those bad years where that stock and bond correlation reversed. You know, typically when you see stocks go up, you would expect

bonds to fall, yields to go up. As a result last year, obviously we saw stocks and bonds fall together and sort of eliminate that, you know, hedging aspect of a bond in a in a sixty forty portfolio. What do you think we need to happen to see happen to get that correlation back to what everyone expects it to be. I mean, is it a is it a narrative shift, is it a sentiment shift? Or is it really about the data and inflation normalizing? I mean, do we really have to wait for two percent inflation to

see that old sort of trusted correlation re emerge. So it's a combination of some of the things you mentioned. So as long as the FED is being very hawkish, I think that that sort of perpetuates what you just said. So you'll go up, you have risk off, you have equity sell offs, how you'll tell us or what have you. I think when the market comes to believe that, okay, we're we're reaching sort of a you know, a leveling

off place here. And I do think, you know, we may be starting to see that with the olds, you know, bumping up closer to four percent, And like I said, I'm of the view that we will pounce around in this range anyway, But I think investors will start seeing that traditional behavior. So as an example, when you don't have a hawkish speech in the market, you do tend to see the traditional correlation. Where effequities are selling off, you'll see yields trend lower. I think it was really

about getting to that level. I think we're almost there, and I think at these levels there's a lot of diversification value in yields right now. So you know, you need to have a calming down of all the hawkish speeches and all that stuff, But I think we're we're getting there. The thing that Mike was referencing, I think because I wrote it down, I liked what you said.

You said a lot of people are thinking, I'm going to fix the forty part of the sixty forty, and I think you guys are saying that advisor sixty forty portfolios are under allocated to fixed income by nine percent, so and now is a once in a many year opportunity to rebalance portfolios. So maybe you can tell us more about that. Yeah, it's been interesting. So if you think about the last decade, we've had quantity steve easing,

we've had yields. You know, if you look at where the ten year bottomed out, it was fifty basis points, which is remarkable. The two year bottomed out somewhere in the teens, you know, twelve or fifteen basis points. So a lot of investors decided to you know, stay out of the market, or you know, they had to take on a lot of additional risk to get that yield.

So whether that was overweighting high yield in that traditional part of the portfolio where maybe they would have preferred higher quality assets but they had to have the income, or things like alternatives and private credit, private equity, you know, asset classes of those natures. Now investors are looking at this market, the public fixed income markets, and realizing that they can quote unquote fix their forty by de risking

it to varying degrees. So you don't have to be you know, the majority in high yield to get a certain yield target. You can allocate to the front end of the treasury curve and get you know, yields that you were you were seeing at some point the hig yield markets. So it really is an opportunity to get back to what that forty was supposed to do, which is diversify your risk assets. And then you think about its simple. Okay, I have the SMP five hundred, what

do I want to hold against it? A very simple, you know world would be I'll hold long data treasuries against it. Mike for the reason you said, which was, I know that if the equity market sells off, probably long treasuries will rally. But investors are being a lot more intentional than that. They are looking at building out that forty in a much more deliberate way. So, yes, allocating building blocks to treasuries investment grade, having some bit

of high yield. And I think what we're advocating is to get away from this whole active passive paradigm, which we think is really just you know, kind of an archaic construct. We think really it's both. And so we're encouraging investors to use bondy tfs for that core diversification purpose. And why is that Well, because you know what they're going to do. You could see what the holdings are. They're transparent, you know what the strategy is. Because they're

following an index. Use that predictability as the diversifying part of your portfolio. Okay, whether that's treasuries, investment grade, some combination of both, and then you can use an active manager to get that extra kick in your forty as well. So it's not active versus pass if it's both. And obviously you know each investor will have to decide what that mix looks like. But we do believe that both can play a role in that forty and get you to a much more robust place than you were before.

I've never heard somebody argue that before that it should be both. It should be both. Yeah, absolutely, I mean it's a great time to do it because you know, like like you said, it's the first time in you know, ten years, done a dozen years that you've been able to get these yields and d risk at the same time, which is pretty remarkable, you know, Steve. It's it's interesting when I think and correct me if I'm wrong and

how I'm thinking about this. But what I think of sort of the audience or the user base for say equity ETFs. I think of maybe a lot of self directed retail investors, you know, average sort of fuxing around with their retirement or just their you know, personal trading account, and you know, you're your big equity ETFs are pretty easy to understand for that audience. You know, you buy the Russell two thousand, you know, buy all the small cap stocks by Chinese, large caps, by you know, whatever

it is. You know. And again I could be wrong about this, but I don't see that cohort of investors really knowing what they're doing. Uh. As well with fixed income ETFs, and my impression is that the user base is different that they're it's more of a professional user base. Even active bond fund managers a lot of times will park, you know, some some inflows into ETFs until they can pick out the bonds they want talk to us about. That sort of difference is a might write in that thing.

You know. It's kind of a different user base between the different asset classes and ETFs. Well, actually, yeah, I think it's um it's a pretty diversified investor base. It's pretty broad, and so we we actually do see direct flows into fixed income ets now, they do tend to be the ones that people know about. Like agg those folks will will know that, Okay, that's the bond market.

I'm just gonna buy that. I'm not an expert. I don't want to you know, try to try to get too too smart about it or you know, get too granular. I'll just buy the bond marketing. So you'll you'll tend to see that with the direct investors, You're right that a lot of the you know, if you will, power users tend to be these institutional investors, active managers, insurance companies, pensions, et cetera. But then there is a very large part of the you know, wealth client base, the advisor base

um that uses bond ets through things like models. Right, So models are these recipes for here's how you build a portfolio. More and more firms are going that direction where instead of saying, hey, you know, buy this set of equity ets and then you know, oh for your bonds, just go out and you know, build some ladder using municipal bonds that you like, they're advocating more for here's what your portfolio should look like. On the equity side,

here's the recipe for that. It's these ETFs. On the fixed income side, you can use a combination of these ETFs in the model portfolios are a really fast growing business, and more and more investors and for that matter of advisors like it as well because it allows them to free up their time to focus on things like you know, tax planning, things like that, and so we're starting to see that a lot. So that I think is the main you know, growth area, but we're seeing a ton

of growth in the institutional side as well. To your point, And the last thing I would say about it is your traditional bond pickers. Some people really love that, right, It's it's interesting and fun for them to do it. But even they've come to realize that if I am I bond ladder person, I can go ahead and do that for my client, but to get some diversification around that, I can buy something like you know, our eye bonds, which is it is a ladder, but you have within

a given run you can have several hundred ponds. So even even the folks who really enjoy laddering as an example, are starting to use ETFs alongside of that for for liquidity and diversification. So we talked a little bit about where you see the flows going. Where you said the majority is actually going towards treasuries. Is that also what

you would recommend how people should be positioning right now? Well, I think the investors have to have a view, So for investors who are pretty unsure about you know, whether we're going to have a recession or when that might happen. You know, you can get great yield right in these higher quality exposures, whether it's whether it's the front of the treasury curve or investment grad or what have you. You You don't have to invest in something like high yield. However,

we do still have investors who are allocating a certain portion. Again, think about the model portfolio as the recipe, if you will. There's going to be an element in that, and investors can make up their minds. If they think that the you know, the chance of a recession for example, is over stated, then how YO might look attractive right now? You know. So if you look at where default rates are implied, it's somewhere in the six percent range, which

isn't super high. I mean a lot of times during more some of these bigger selloffs that it's approached double digits. But you know, traditionally the realized experience of defaults has been around, you know, sort of the high three low four percent range. So for investors who have that view that well, I either think a recession isn't coming for a while or I think it could be a lot more shallow than what people are worried about, something like

how YO could could also look attractive. But we're seeing people vote with in terms of flows. We're seeing still the majority this year going into the higher quality segments. You know, you mentioned that how high rates are at that front end of the treasury curve. I mean, every time I look at it my eyes, you know, I take my glasses off and wipe them off and double check that I'm really seeing a three month T bill yield at foot nine percent whatever it's. But maybe you

also need new glasses. I might need new glasses too, But I can't help. But wonder if you know, we're back into the realm of straordinary measures, you know, to to get around the debt ceiling. Is that impacting the short end yet? Concerns about the debt ceiling and a potential default and if not, will it you know, how do how do you see that whole issue playing out this year? Um? And what it means for fixed income? Well, we've we've seen this movie before right where it has

happened where we were actually downgraded and everything. But um, I don't it's not It's there is a little bit of it that's in there if you look at you know, for example, credit default swaps. I haven't looked at the levels lately, but there was there was sort of some of that risk being you know, slightly priced. I think as time goes on, that concern could come forward much more, you know, as as we had you know, towards the summer um, which which is kind of a critical time.

So I would say it's not dramatically impacting the front end yet, could it sure could start creating a lot of concern um as we as we start moving towards the summer. And then I promised I would ask you about your long, long, long term views. And I think you guys are seeing are predicting that bond ETF assets will go from about one point eight trillion right now to five trillion by twenty thirty, and I wanted to

ask you to speak about that too. You know, this is something that we believe is going to happen, and I think there are a number of drivers behind that, and it before last year we also had that conviction. So I think we originally came out with a five trillion even before some of the astonishing flows that we saw last year, and there are a number of trends driving that. You know, I've mentioned a few of them already. You know, one would be, you know, this growing institutional adoption.

So we talked about how you know, before an active fixed income manager, as an example, would probably not touch one of these products because they viewed it as well, that's a passive product, I'm an active manager, I'm a bond picker, etc. We have moved has that in our view where you have active managers using these products just as tools for active management, which is pretty remarkable. And so nine of the ten largest active bond managers do use I shares fixed income ETFs and they use them

for active management tools. So that's that's a pretty interesting trend. And again we're seeing insurance companies, pensions, all of these larger institutional clients really embraced the products. COVID accelerated that because liquidity issues you're experiencing in the underlying market. Last year was a further accelerant on that trend. Another long term trend that we see that's been talked about a lot is just this idea of the bond market finally modernizing.

Some people laugh out loud when you use the term modernizing and bond market in the same sentence, because it's still not what we would call that modern compared to, you know, for example, the equity markets. But we do think that the presence of fixed income ETFs and their infrastructure has really kicked the bond market into high gear in terms of modernizing. So a lot of the things that you see today in terms of activity, you know, call it portfolio traits, which are large bond basket trades

that are priced and traded simultaneously. That's not possible without bond ETFs because they're the hedge for that and the plumbing around that. So the creation redemption mechanism is what brings that to life. It allows the dealers to move large blocks of bonds to and from the exchange into the over the counter market, and so that's a very powerful innovation. I think. The other part of that is just pricing pricing, something that everyone sort of took for

granted for many years. It was something that index pricing services did not A lot of thought was given to a butt. Because of this acceleration of these large block traits of bonds in conjunction with ETFs, it's become not only important and necessary to be able to price large numbers of bonds and price them quickly. So now you have things like algorithmic pricing in credit, which is which is pretty astonishing. I think further developments will be you know,

all to all trading. You're seeing the market structure itself change. And we think all of these things were really catalyzed by bondytfs and just the desire by investors to use these products, but also not only directly, but to use them as tools for some of the other things we just talked about. The way advisors and you know and direct investors are using bondyts to build portfolios. We think that's only going to accelerate this idea of using transparent

building blocks for your forty that's going to continue. And then lastly, just we'll continue to see innovation in the number of offerings, the number and type of bondy TF offerings over time. So those are kind of the four long term drivers. Like I said, we were already growing pretty rapidly double digit growth every single year. I think COVID accelerated that, and then the yield spike of last year for they're accelerated, so we're pretty confident in that

five trillion dollar prediction. We're almost we're approaching two trillion today, and honestly, if it wouldn't have been for this yield chock which caused the values of fixed income assets to go down, we probably would have already crossed two trillions. Does getting to that five trillion imply a shrinkage in AUM in traditional bond mutual funds? You know, that's up for debate. We think there will probably be a role for different types of rappers, depending on what investors like.

There's certainly you know, you've seen a migration by certain types of investors from mutual funds to ETFs. You've seen a lot in equities, the same thing starting to happen in the bond market, which explains why you're seeing more and more traditional active managers offering ETFs because they know that a certain segment of the investor base wants it. So I think ourgue is we want to give clients the exposure that they want in the wrapper that works

for them. Some people don't really view the TF as something that they need because well, I'm not going to trade every day, I'm not going to look at it every day. It's not that big of a concern. But we talked about these model investors. They very much want ETFs as part of that. So I think over time there will be some sort of an equilibrium, but I

think we're still in the midst of a migration. But I do think will happen is that you will see investors, more and more investors using bond ETFs instead of just going out and buying bonds. Right. So, as an example, if I'm an active manager, you know, instead of going out, I want to start a new strategy. Instead of going out and buying hundreds or more bonds. To implement that strategy, I may start with a series of bond ETFs and then I can put my higher conviction bets into individual

bonds or other positions. Right, So, recognizing that there's always a core of a portfolio that can easily be accomplished through a low cost BONDYTF, and then you can add value around that. Steve, I'm gonna put you on the spot with one final question here before we get to the crazy things. I'm looking at the ten year treasury yield now three point nine three about if we're in a fast word to the end of twenty twenty three, and I throw out a numbers, say three point five

in the ten year. You're taking the over the under on that, and show your math. Tell me why I'm going to I'm gonna take the over on that, but just slightly. If you were, if you would have rephrased that differently, where do you think will in? I would have said probably three fifty. So I think you'll see these bumps along the way where you know, you just keep testing. You know, you'll tire because I think people are still very nervous about the FED and inflation. But

that's all going to reconcile, hopefully by December. We'll have to call you next year and check on your prediction. That'll be interesting. Let's hope that I'm not off by an entire handle or something. But I you know, I agree, I don't. I don't think we'll see, you know, a collapse and yields to anything like what we were used to. But I you know, to your point, it is hard to see them going, you know, continue this sort of march higher throughout the rest of the years. So all right,

I'll I think I'm with you. I'll take slightly higher too. What do you think Phildana, Is this the time where I admit I hate the bond market? I hate it? Why do you hate the bond market? Oh my gosh, because it's so contintuitive, like you have to flip everything in your head before you can even think about what's going on. You like this, the nice, simple, easy to understand Market's like crypto better. Yes, exactly exactly. I was gonna say, how do you reconcile that? In my mind?

It's much more straightforward. I love the crypto market. All right, Well, Steve is great, great to get here, your insights here, but we can't quite let you go just yet. We've got attrition here on this podcast. Uh Thebata tell him what it is. We are going to play the craziest things you you saw in the market this week. I'll go first for once. For once, I'll go I'll go first. I was I was hoping to go first. Actually all right,

well you go first. Well, because I haven't update for something that you I don't know, maybe it was like five or six episodes ago. Um, I think you made me guess on an iPhone, like an original two thousand and seven iPhone, how much it was going to go for and right, and the final auction took place. I don't know if you saw this, Oh, I know it missed it thirty thousand dollars. No, it's way more. It sold for sixty three thousand dollars. Wow. Yeah, it's like

a vintage. I have pictures. Can we call it vintage? Yes, it's in its box with the with the plastic wrap and everything. Yeah, sixty three thousand dollars. If that's vintage, I'm a I'm a full on antique at this point. Well, I may have one of those. Uh, I may have one of those my garage somewhere. Now you have sixty three thousand dollars investment, put it up for auction, but I have one. I have another crazy thing. Okay, my weirdest thing is Starbucks has this new drink. Did you

see this? No? No, I can't believe it because my kids have met make me driving the Starbucks at least twice a week. Well, you're gonna be driving them to get coffee with olive oil. They're literally just putting olive oil into the coffee. And it's I don't know how to pronounce it. It's called oliato. Oliato latte with milk and olive oil. Is that a thing? Like? Is that an old Italian thing to do? I have no idea.

There's a picture and it's like, you know, like how they make the coffee look so beautiful, like all the milk is like dripping down, and then there's just olive oil next to all the coffees. So yeah, it looks like it's literally just olive oil and coffee. I can't wait to try it. Anyway, that's my weirdest thing. I don't know, Steve, that's a that's a tough one. The top. What's the craziest thing you've seen in markets? I don't

know how that's a market. I guess Starbucks is a well all right, fine, fine, yeah, I can't compete with that. I would say, um, the craziest thing I've seen, um, and it wasn't this week thing. But I just had this realization, you know, when we were talking about cash in the front end of the curve, you can buy a treasury floater, okay, which has almost no duration for like I think it's somewhere between four sixty and you know,

sixty four seventy somewhere around there. It's it's amazing that you can get income off of something that has almost no duration and it's it's a treasury. So think about, you know what you had to do three years ago to get that kind of yield um. Either had to take on a lot of duration or a lot of credit risk. And now you can now you can do that with with with treasury floaters. That's pretty pretty amazing,

That is pretty That is a good one. You know, as you were when you were talking about how low yields got there for a while, I was, you know, flashing back to the whole notion of negative yielding treasuries, you know, which the front end did I guess go

negative for a while there. But you know, we remember, you know, it was this big debate if and when you know like that with the ten year yield actually go negative, life comes at you fast, you know when you when you think about how that was the uh the craziest things we were talking about a few years ago. So it's quite quite a difference. But all right, I'm gonna give you mine. Um, Vilda, do you watch the

w NBA at all Women's National Basketball Association? Okay, well you might not be very good at this one, then, uh you chose it. I keep an eye on women's basketball. You know the dirty secret in the Regan family growing up, there were six of us, five boys, one girl. We all, you know, fancied ourselves as as who hoop stars. But my sister was really the best. She was the only one who played college ball. So I've always had a

soft spot for women's basketball. Diamond Miller at University of Maryland, where my daughter goes. Now is google her highlight reel. She's something special. There's a very famous recent w NBA player, and I'm probably gonna say her name wrong, but I believe it's Sabrina in Nescu. Sabrina in Nescum and her rookie card. Just sold. Her rookie card for the w NBA just sold at auction, highest ever price for a w NBA trading card. Give you a few details. Here's

one of just five copies in existence. It's created as a perfect gem mint ten whatever that means. That's good. I guess that's that's like a triple A bonds, Steve, I guess by third party greater PSA. So I'll take their word on it. So it's time to play the prices precise as you as you now know fill down a highest ever auction sale for a WNBA trading card according to CBS Sports. Where I got this story from?

What do you think it was? I have negative knowledge about any of these topics, literally negative, but this was. There's only five of them, so it's very unique. This is an exceptional player her rookie card. So that's why I chose it. I think it's a challenging one. Okay, I'm gonna go with forty five thousand dollars. Forty five thousand dollars. I like your confidence in that. In that answer, it's um feeling very not confident in that, But that's

my guess. All right, Steve, Prices precise rules are are the standard rules you know of that game show of a similar name. Yeah, yeah, that shall not be named. But you know if you go over, you'll lose, So keep that in mind. So can I do the Can I do the Prices right thing and just go over by a penny? Absolutely? Can? I'll be a little more bold, I'll say, Um, I'll do six figures. I'll say one

hundred grand. Yeah, it's a tough one. I don't know what I would have guessed, to be honest, uh, ten thousand, eight hundred dollars. Yeah, from one ye, right, I don't know. You both went over, so I think and I won. I think I'm the real winner here. You have guessed I probably would have gone closer to Steve. I think, you know, you kind of hype it up. You know, it depends how you hype it up. You know, you

think highest ever price. But at the end of the day, you were still talking about eleven grand for a piece of cardboard. It's pretty amazing. Um. So I have nagative knowledge around card collecting as well. So, but yeah, who would have thought sixty three thousand four a quote unquote vintage iPhone and eleven thousand four piece of paper? Yeah? Yeah,

I wonder if you can still use the iPhone? You know, I think you wouldn't want to literally wrapped up, Yeah, because I guess in ten years you'll sell it for double Yeah all right, Steve, go check that garage. I'm definitely gonna check that garage anyway. Great to catch up with you, Steve. I hope we can have you back again somebody. Maybe we'll have you back on the end of the year and see how that year end. Yeah, that's nice. That could be fun, I know than all right?

Thank you, Steve, What Goes Up We'll be back next week. Until then, you can find us on the Bloomberg Terminal, website and app, or wherever you get your podcasts. We'd love it if you took the time to rate and review the show so more listeners can find us. And you can find us on Twitter, follow me at Waldonna Hirich. Mike Reagan is at Reaganonymous. You can also follow Bloomer Podcasts at podcasts. What Goes Up is produced by Stacy

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