00:00Mike, big picture. How big of a deal is it what happened in Venezuela, especially when it comes
00:05to the global market and investing landscape? How are you looking at it? Yeah, Tim and Carol,
00:10Happy New Year. Great, great to be here. You know, I get these questions all the time whenever you
00:14have these geopolitical flare ups around the world, whether they're in Asia, the Middle East,
00:19or Latin America. And my answer is always the same, you know, kind of fade the headlines is
00:24generally the knee jerk instinct that you should have as an investor, you should really focus
00:29on the fundamentals of the global economy, the fundamentals of the US economy,
00:35where growth is going to be, where inflation is going to be. Obviously, commodity prices are
00:39in the headlines today with the Venezuela thing. But remember, Venezuela is producing now less than
00:451% of global oil. Remember, 60 years ago, back when I was born, they were producing 15% of the world's
00:53oil. And now they're less than 1%, right? So they have taken a huge fall from grace, they do not have
00:58a big impact economically on the global stage 60 years ago, believe it or not, Venezuela was in
01:04the top quartile of all countries in terms of GDP per capita. Today, they are at the bottom of the
01:11list, right? And you think of other countries where they've been geopolitical flare ups, typically,
01:16these countries don't have huge international economic implications. So that's why the markets
01:21are just kind of, you know, whistling past the graveyard here and just ignoring the geopolitical
01:26risks. That is the standard playbook. And Michael, just forgive me, I want to go back
01:30more than a trillion dollars over at PGM fixed income under management, I misspoke earlier.
01:37Okay, so if that's why we're seeing sort of a relative calm today, let's then focus on kind of
01:45what comes next and the political and potential implications for that. Because I think that is a
01:49big question that investors have right now. I mean, certainly, people don't want to see some
01:54prolonged and, you know, dare I say boots on the ground mission in the country. But but I think
02:00that meaning me going into this week, that was a big concern that that I thought investors would
02:05have. What if this actually gets turns into something akin to like we've seen with past quote
02:10unquote, nation building activities from the US? We've spent most of the weekend and a lot of this
02:17morning, doing deep dives into the situation in Venezuela. I mean, I'm fortunate to work on this
02:22gigantic team where we have, you know, geopolitical, political, political analysts, we have really
02:28deep economic and analytical resources, we have people who've been in the military. So we have a
02:34lot of great color, just from our own team and our and our contacts. And, and there's really two
02:39scenarios, right, right, one, Tim, is the one you pointed out that that things do get ugly, that
02:45Venezuela kind of gets worse, conditions get worse, that the US tries to do a more aggressive takeover,
02:51and it gets really messy, a la some of the situations in the Middle East that your last
02:55guest was talking about. But there's also this upside scenario, right. And I think it kind of
03:00confirms the fact that we're moving into this, you know, G3 ish type of world. And the US is certainly
03:07trying to take the lead there and showing that, hey, we have control of the Americas here, which could
03:15result in better outcomes for countries like Venezuela could result in better outcomes for
03:21the US could result in better outcomes for other Latin American countries, right. And I think that's
03:26what the markets are focusing on. And we were looking at all the emerging market debt quotes and
03:31runs out there right now. And, and generally, the bonds are trading better, right. And I think they're
03:37looking at this as potentially the upside scenario, not not the downside. But But you're absolutely right.
03:42I mean, we really have to, you know, keep our radar attentive to to those potential downside risks.
03:48Yeah, Mike, on that point, a raft of investment firms eyeing opportunities in Venezuela after that
03:53US strike, Tribeca Investment Partners is sending a team to to excuse me, Caracas this week to inspect
04:00potential assets, calling it a gold rush. Have you guys changed any of your investment theses when it
04:07comes to Venezuela at this point or not yet? Well, remember, they've been pretty heavily
04:13sanctioned in terms of trading and also trading some of their security. So a good news is for
04:18people who have a huge emerging market debt team and big investments around the world in emerging
04:24market debt, you know, this could potentially free up trading opportunities and relative value
04:28opportunities. I mean, again, these bonds, some of their bonds have, you know, doubled or tripled
04:33over the last over the last few weeks. So so they're still trading at really distress levels,
04:38right? We're talking, you know, 20, 30 cents on the dollar. But, you know, there are opportunities for
04:44sure. There are going to be a lot of relative opportunities. We're looking at even places like
04:48Columbia today. We're talking about where their their local interest rates are really high and their
04:52credit spreads are pretty wide. And and so, you know, I think it sets up the world for better
04:57relative value trading opportunities. And that's something we're really looking to capitalize on.
05:01So, Mike, if you had to kind of make a bet, I mean, is it 50 percent that the fortunes and maybe
05:06economic and investment outlook for Venezuela are changing for the better at this point? Or
05:12is it, you know, I would say it's a little better than than a coin toss, Carol. I probably put higher
05:18odds. Maybe I'm just, you know, talking our book or agreeing with the market's reaction so far. But
05:23yeah, but it certainly feels like, you know, when you're having more private sector resources come into
05:29a country that's been totally mismanaged in terms of their natural resources and their in the
05:34politics, you know, there there is, I think, a higher likelihood of a better outcome there. But,
05:40you know, the road to that better outcome can be really long. Right. And with all kinds of problems.
05:45Right. Lots of bumps can always happen, certainly in a situation like this. Many would agree with that.
05:51Hey, Mike, before you go, I'm thinking about the U.S. this week. We do get a jobs report on Friday.
05:56We have a bunch of economic news. We did see the U.S. Treasury curve move down today. A little bit
06:02of economics news today. What is more important, though, in terms of the U.S. Treasury trade at this
06:06point? Is it the U.S. economy, what the Fed does ultimately? Just give us about 30, 40 seconds on that,
06:12if you would. Yeah. Again, it's going back to the fundamentals, Carol. Right. And if you're looking at U.S.
06:18growth, I mean, if anything, expectations for growth this year have ticked up over the last
06:24few months. We're entering 2026 with really strong kind of real GDP or consumption and capital
06:30expenditure expectations, you know, momentum going into this year. So most forecasts now for U.S.
06:36GDP have two handles. Right. Whereas not that long ago, they're they're in the ones. I think the
06:41recession risks have moderated in the U.S. and we've taken our probabilities down and the upside
06:47risk to growth to more productivity from from A.I., maybe to higher inflation and permanently
06:55higher rates has gone up. And that's actually not a great environment for risk assets necessarily.
07:01Right. So we've been threading this needle. We call it the the muddle through scenario where you kind of
07:06run at two percent. You have inflation stuck, you know, between two and three. The Fed eases a couple
07:11of times. That's a great environment for growth and for inflation and for financial assets. But
07:16but any of those tales are.
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