What do you make of the Treasury's intervention and the fact that yields have continued to back up even though they're in the market?

So I think, I think the Treasury has been quite clear, and they're not trying to manipulate or they're not trying to set where the rate should be in the back end of the curve.

I do think what they are doing, and I do think that intervention is suggesting that, gosh, we have tools.

If people get short the back end or people are aggressive and pressing against it, they have tools to combat that.

And so, listen, the amount of size they bought, and people were focused on the fact that you think about the 40 trillion of debt we have in the country, and the fact that people were, were so wrought over it was six billion, not eight billion, it's, it's kind of ridiculous.

I think at the end of the day, secretary will make a determination, does he have to do more if rates, if rates become unanchored? But today they're not really unanchored.

I mean, you talk about, you know, the move we've seen in the back end of the curve.

... then that's a significant issue, isn't it?

in the bond market for the lack thereof of communication? I- Is, is that in part at play here too?

Scott, you know what? I don't, I really don't ...

Depends on what, how you handle that.

You know, there's been a lot of stories about disastrous performance.

I actually don't agree with that at all.

I actually think he laid out a pragmatic we've got task forces to look at these things.

There are some very complex issues.

the, the administration of the game?

Where are we in core? What's the trend line?

Yeah.

So you know, the thing I, I find interesting is that, is Chairman Warsh is focused on the left side of, of the decimal place on the right, and I think you have to take that to heart.

Meaning, if you're in and around the twos, you're okay, but when you actually zoom in closer where the markets tend to focus on, there's this been this maniacal focus on the right side.

And, you know, since, you know, over, certainly over the last year or so, the trend is pretty good in that it's coming down, but it moves around.

And, you know, the markets tend to focus on the tenths of a percent in terms of these movements.

By the way, I always get a kick out of the first thing I saw this morning while Chairman Warsh talked about the left side of the decimal place, and the number was it printed at .2154, and people are talking about the rounding.

Job done."

But s- that leaves us with an inertial, uh, economy and what do you think happens to the economy if there's no movement on the fiscal or the monetary side?

Mike, I mean, I think, I mean, [laughs] you're unbelievably good at analyzing this and I always, uh, appreciate the questions you ask at the FOMC meeting, et cetera.

Only thing I will say is I'm, I'm not sure I agree with the inertial concept.

I actually think the economy is operating at an amazingly strong level and, you know, look at the CapEx, it's obviously a big driver of that, that from AI that's getting into, uh, you know, straight growth of the economy in so many different forms.

And then you look at consumption today.

Consumption, you see this, you know, particularly in areas like leisure and hospitality.

You see this in some of the transportation dynamics in terms of, uh, travel.

What are you thinking about where you wanna place BINC just given the sheer amount of issuance that continues to hit this market?

That's a change for you.

So it, it, it, pretty significant as a matter of fact in terms of the size, the I mean, just to be clear, I still like those companies.

We have rotated within that universe, and I would say, uh, how do I describe it? Some of the companies that are more directly tied to AI, we've pulled back a bit and-

... of global fixed income.

So listen, these real rates, so I think over the next, we've added back a little bit of interest rate exposure.

We had, we had cut some.

We're adding back a bit of interest rate exposure.

These real rates, there's something very significant that's gonna happen sometime in the next month, two months, three months.

And since you're back and all that's happened since, I want to get your take on what you would do.

I mean, what I would do? Well, I'm positioned for what they will do, and I've learned in my career whatever I would do is interesting for my friends, but the way I'm positioned is what they're going to do.

Listen, I think if you take that and go back to this inflation report and you look and you break it down, the less interest-sensitive sectors are experiencing health care, education, insurance, sticky inflation.

You're not really going to bring down health care costs by moving the funds rate.

If you look at what happened in that CPA report, used cars, Automobiles, small business, low income, housing, those sectors are actually A, not experiencing much inflation, if any at all, and B, they're in a tough spot.

So it's much more complex when you think about, particularly if you have a dual mandate, and you think about my mandate is actually employment and price stability.

And today, it's very hard to use the interest rate tool to manage automobile insurance.

And I wonder, you know, whether or not you think the bond market, whether traders in general are prepared for a Federal Reserve that maybe communicates a little bit less.

IPOs like this capture the imagination of a whole new set of potential investors and the impact that they can have on market swings, on volatility and volumes, and how it sort of shapes, in many respects, how these markets trade these days by how engaged that cohort has been in a way they never really have in the past.

So a big part, you know, I've argued, particularly in the short term to, or intermediate term, what drives the markets is technicals.

The fundamentals obviously matter over the longer term.

Technicals are much more important.

That cohort has become such a...

I mean, every deal we look at, everything we look at in the market in terms of where it, how it's doing versus not, is driven off of that cohort, including, I mean, look at the growth of single day options and, you know, there's some volatility that's come into the market, so you gotta watch it like a hawk.

I would argue as well, you have so much of this momentum chasing, it's actually presented real opportunity because everybody moves to one side, and then gosh, it, what's really hard, and I wouldn't say we're, you, you know, we're perfect at it, is when everybody moves to one side, you gotta ride with the consensus, and then there's a real art to like, okay, time to get off and go the other way.

... of what your prior views have been.

BlackRock's CIO of Global Fixed Income, Rick Rieder, addressing that and what it tells us in an interview earlier.

This technology evolution, uh, is pretty incredible.

I will tell you, I spent I don't know how much of the weekend, a lot of it, going through new issuance that's coming, debt markets, equity markets, converts, um, different forms of loans.

Um, there's a lot of financing that's taking place.

Gives you a little bit of pause that it's all coming as fast as it's coming down the pike today.

As, you know, flows generally are pretty good, you still have to find room for, uh, for some of this, uh, some of the supply that's coming.

But listen, if you like, and as you know, we've talked for a long time, I love technology and I love how things are changing.

In, in all the interviews that I've done and all the research that we did for The Long Game, I've never heard, um, being focused and being intensely in your business described the-- quite the way that Rick described it.

You know, it's quite frankly, you gotta be in the mess.

Like, I see a lot of, you know, people that are deta- that are CEOs, not a lot, thankfully, that are detached, but the people that are in the mess that literally can tell you every part of their business and that have the ability to actually think and pivot because they understand exactly what's underneath the surface versus, you know, they sit in an officeAnd whatever floor is above where the actual stuff happens, that to me is like somebody who's a builder and is in the mess.

The willingness to pivot and the ability to pivot when you need to was a core competency for Rick.

You know, Eric, something I've learned about investing in equities that took me, I don't know, three decades probably to figure out, you know, it's actually the person running the company and their management team that's arguably more important than anything else.

And it took me, you know, because I came from the credit background, I would study cash flow, the balance sheet, your business, you know, what's your operating income? How do you get there? How do you drive cash flow? But actually, we live in a world where pivoting your company is incredibly important.

And, you know, most companies I've found, many, many companies, if not most of them, they start out something different than they originally anticipated, and then they pivot.

Can you explain the difference between those and how that changed the way you invest?

Eric, you know, it is a really big, so I lost a lot of money on one position.

It was like the first or second year I was in the business.

And, you know, I remember, you know, we went to school and you studied really hard.

And, you know, if you did, you know, if you studied really hard, you know, try to get a 95.

It was a and if you prepared, you probably were right.

In this markets can be wrong for a really long time, even if you are right, which is not definitional by any stretch.

Can you talk a little bit about what that really means and how you live by that?

Finally, we got back to back gains for this jobs market.

Yeah, I mean, there's some good things going on.

I mean, it's healthy to see, you know, that sort of positive game.

You say back to back.

I mean, listen, I think I think the economy is growing.

I think the economy is growing quite vigorously.

I think you could hit six percent nominal GDP this year.

I've actually gotten multiple questions on this, so I just want to start with here on where on this curve you'd be positioning and in what geographies.

And I just wonder, you know, how we sort of see this come back together, whether or not that disconnect can persist and maybe get exacerbated.

So maybe I'll start from the technical point of view.

The difference in the technicals in the equity market and the bond market are as diverse as you can imagine.

In that, we don't create enough stocks.

The buyback relative to the issuance of equities, people talk about the IPO market, it's tiny relative to the buyback market.

We don't create enough equities, and there's a huge amount of cash out there.

So you just get this continued buying, and then there's no stock.

And I wonder where you land.

Have a listen.

I've learned over time that we're not in the business of being right.

We're in the business of generating return for clients.

Mm-hmm.

And what happens is, the market perception can stay wrong longer.

And I remember studying, as you did, in school, the efficient markets thesis.

I actually think they should throw that out, because that is so far from the truth.

You know, I think markets are wrong a ton, but you got, you gotta survive, and you could be out of capital by the time the markets get it, get it, in theory, right.

What can you tell us about the process? What did you learn from the experience?

Uh, that's a great question.

So, uh, A, I will say, you know, people should respect the, I mean, the Treasury went through an incredibly rigorous process.

I mean, I'll tell you the amount, the hours and hours I spent going through it, which as I've said, is the biggest honor of my life that I would be considered for that.

But everything from the infrastructure of the Fed, the regulatory process, the, uh, how would you set, use the balance sheet? How do you think about bank, uh, about, about the banking system and, and the linkage of rate, et cetera? It was an incredibly rigorous process.

Second thing I, second thing I would say about, about the processYou know, and things you, you learn is the, um...

Listen, I think, I think there's a disposition to moving the rate lower.

Seems like Draghi's tool was his voice.

Does that bring you comfort or make you nervous?

Good question.

So I'd say a couple of things.

First of all, I think what it tells you is the technicals in the equity market are extraordinary and the earnings numbers that are coming through are pretty powerful.

And so, you know, you look at the U.S. economy and you look at what's, you know, I heard at the beginning of the show about the economy's weak, economy's strong.

Actually, the parts of the economy and the primary drivers are doing quite well.

You look at tech.

How does your thinking sort of adjust when you talk about what's going to happen with Fed funds and the relationship between that and how it informs your view of how we'll get some performance further out along the curve?

Does that bring you comfort or make you nervous?

Uh, [laughs] oh, good question.

I, so I'd say, I'd say a couple things.

First of all, I think what it tells you is the technicals in the equity market are extraordinary, and the earnings numbers that are coming through are pretty powerful.

And so, you know, you look at the US economy, and you look at what's ...

You know, I heard at, at the beginning of the show talking about the economy's weak, economy's strong.

Actually, the parts of the economy and the primary drivers are doing quite well.

How does your thinking sort of adjust when you talk about what's gonna happen with Fed funds and the relationship between that, and how it informs your view of how we'll get some performance further out along the curve?

Is, is that fair?

I think, I think that's fair.

You know what, Scott, I, I actually looked at today, particularly in the hyperscalers, I would say actually beyond that, when you take the top 10 to 15 stocks, and you think of what's happened to the earnings.

And then I looked at where forward multiples are off of, are off of some of these stocks, they're actually quite reasonable.

And you think about, you know, a bunch of these companies are t- are turning out 35, 40, 45 ROE, and then you think, "Oh gosh, I'm able to buy some of these stocks at less than a 20 multiple," that's pretty reasonable.

Point being, if you step back and say, "Would I buy some of these equities I was looking at today?" You know, would you jump in and buy some of these? I think, you know, I'd like to buy them.

I will tell you, one of the things, and you know, we talked about the last couple of years, one of the ways to manage money over the last couple years was take risk and buy volatility or buy insurance, 'cause it was super cheap to do it.

Where do you come down?

I mean, do, do you, do you think we're making too much about all of this AI angst, which certainly has the market a bit on edge?

God, it's a tough question.

I mean, [chuckles] I will say this is one of the most fascinating, by the way, challenging markets, and I will say one of the, one of the tools that I've found to be, uh, to be effective today is humility in the hot...

You know, like, our funds are doing well, but it's like every day you get a reevaluation of some industries.

There are some, like when we [chuckles] the reevaluation of content, how do you create content? Listen, I think this is...

When you talk about big market caps, that can shrink significantly.

Boy, that changes the model around how you think about different equities.

It will now be a show-me story, with the onus on companies to attach revenue growth to spend." What's your reaction to that comment?

That dichotomy, Rick... is the most fascinating, well, there's a lot of interesting stuff going on, but it's one of the most fascinating things about this economy, because it's difficult for anyone to say, even with jobs looking very challenging, that we're heading anywhere near a recession, as long as the Mag 7 is spending, what, like 2.1% of GDP on CapEx, as long as a government's running a 6% plus deficit, is this economy gonna be okay, even if the jobs market starts to have some cracks in it?

Yeah, the answer is yes.

I think people don't look at jobs and look at this economy like it was 20, 30 years ago.

You have an extraordinarily different economy, service-oriented versus goods-oriented.

But you've got an economy that's operating incredibly well, but only on a couple or three cylinders.

Today, you've got, like you pointed out, you've got CapEx that is robust and will continue.

You've got consumption that is robust, but it's driven by wealthier, older savers, and it's part of why the interest rate tool is not nearly as effective as it used to be, because that cohort is doing extremely well, where the burden today is is in terms of low income, small business, younger people.

When you think about the rest of this year, are you thinking about changes to Bink at all? Where do you want to be positioned for the road ahead in fixed income?

What is the concentration? Is it growth that comes in less than expected? Is it the revisions for October and November? Or is an unemployment rate now just at 4.4%?

I think what Mike McKee said was right in that the Fed talked about the unemployment rate.

I have to tell you, I have a different take on it.

I think there is a – we're talking about 50,000 jobs and then a revision down over 70,000 jobs.

If you take – we're growing now.

If you go to the last six-month moving average, if you take out healthcare jobs, we're actually running negative jobs for the last six months away from healthcare, which is non-cyclical, not interest rate sensitive.

Actually, if you go back eight months – The total net jobs is negative 213,000 jobs, net of health care.

I hear about it all the time, and I see the stock soaring, but what's the evidence that we have actually increased productivity with these tools?

How can we address one with lower interest rates? Just explore that for us a little bit more.

Yeah.

So first of all, if you came down from Mars and said, "Okay, so I've got five year inflation breakevens that trade in the market.

You can buy as many as you want at 2.35%." And you said, "Okay, now set the price." And you said, "Okay, 2.35% inflation, and I clearly have a slowing labor market." You would say, "Gosh, I don't know.

If I set the rate at three," and then I'd talk about, okay, so now what's equilibrium on the mortgage rate to create velocity in housing? And it, and it directly related to what you said.

Housing today is three quarters of the wealth by people in the countries in housing.

We have a housing market that, you know, you look at the earnings from D.R. Horton, you look at Lennar.

Like the balance sheet, how much would you be open to see the Fed use the balance sheet a little bit more?

How much fun are you having right now? I mean, as I've

said before, this is the best investment environment I've ever seen.

I mean, not because stocks are going to go straight up.

I mean, you have divergence that is great for investing.

You have technology that's changing.

And so the ability to look at tech stocks, healthcare tech, to look at where some of the financials, how you create velocity in the system.

And then, you know, the earlier conversation, we were talking about the break.

At what point can you imagine that things start to get a bit excessive, especially given the fact that there is a lot of cash right now looking for a home?

Rick, I would be very interested to know if any of that data, any of the tools that you've been using and looked at have changed some of your allocations or how you're thinking about Bink right now.

So it's great, Chris, thanks for asking.

I mean, so Bink, you know, there was something that is, I think, pretty intense around.

So Bink, you know, has had a good run.

We feel good about where it's going and more and more people coming into it.

The thing that it's allowed us to think through is today you've got, you've obviously got the way the Fed's going to interpret the data which is not always what I agree with, but the Fed's gonna interpret the data as you've got inflation that's a little sticky high and then employment that's moderating.

So we think you're in this, and by the way, not just the Fed, the ECB, the Bank of England, the RBA, they're in this point of let's sit back and watch the data.

Are you worried about the AI froth?

Rick, can I get your view on what you think was happening last week? Do you believe that was foreigners pulling back? Is there a question mark over the US safe haven status or is that just certain trades unwinding, things blowing up?

Uh, it's a great question.

I mean, so first of all, you know, when you have this pressure on the currency market, and by the way, super acute, when you think about equities going down the same time that the currency is going down, usually the dollar appreciates when you're in this risk-off mode.

So you've unquestionably seen the pressure on equities and international disposition of, of the equity of a number of, of US equities.

In the rates market, it's a bit more blurred, but there's no question about it, there is some concern.

We fund so much of our treasury debt internationally, there is some concern with the currency depreciating, and then quite frankly, the, the back end of the curve, uh, going through these periods of spasm where, where inflation is higher.

You know, even if the Fed cuts, what does it do for the backend? There's an argument that when you...

Can you talk about what else has changed? Does this really undermine or reshape the way you look at 60-40 or the position of gold in your portfolio?