00:00The money's still flowing. People are still raising money, doing it at relatively favorable
00:04costs, not only in the debt markets, but as we saw with Alphabet, you can even tap
00:07into the equity markets and get rewarded, relatively speaking, as well.
00:11Are you concerned about any of all this? Because when I look at these companies borrowing,
00:15I say, okay, they look relatively healthy on paper, at least to my judgment. Does it look
00:21healthy to you? It looks healthy so far. Yeah, absolutely. The high quality companies remain
00:26high quality. The balance sheets are still strong. They're still generating cash flow.
00:30The concern is over time, as the market plays out and these deals do well, you get more and more
00:35build out and you end up going too far. It's probably more pronounced in below investment
00:42grade. So far, I think the quality has been good. The investor base has been quite conservative.
00:47So those transactions have good structure. They're supported by strong tenants, the large
00:53hyperscalers. And so those I expect to perform well. They've been performing well so far.
00:58The worry is that, as you know, there's so much more issuance coming. We're talking trillions of
01:03dollars on top of what's already put into already been invested so far. And the worry is, you know,
01:09all that money will take things a little too far. There are some people that would make the argument
01:13that when you look at liquidity across markets, whether it's in whether it's in debt markets or in equity
01:18markets, there is a lot of cash out there. The idea that it can't absorb this, whether you're talking
01:22about a public IPO like SpaceX or whether you're talking about whatever the next mega debt sale will
01:27be out of one of these hyperscalers. You see that? That the market can't absorb it, basically.
01:31I think for now, the market's going to be absorbing quite well. I don't think 2026 is the problem.
01:38The demand is there, particularly if we talk about credit for a moment, that there's been a
01:44undersupply of credit for many years, really since the pandemic. So in a way, AI is filling the void
01:49that was created by the lack of issuance over the last five years. So I think that's fine. When you
01:55start talking about these upcoming IPOs, I think that's when you start triggering maybe warning signals,
02:01depending on how they trade, because they're trading on such a big multiple of revenues, not earnings.
02:07So I'm an old fashioned guy. I think you're supposed to value companies based on earnings and cash flow.
02:11How quaint are you? And the conversations people are having now, I remember back to the late 90s when
02:17people on financial news would say earnings and cash flows, that's for your dad or your grandpa.
02:23Yeah. It's all about multiple revenue and total addressable market. And so that's when you start
02:28to invest in a lot of expected growth. At some point, the growth gets beyond what's reasonable.
02:35Wasn't that what popped the dotcom bubble? It was like it was the expectation or the multiples that
02:39were being applied to it. And when some of these companies clearly couldn't meet those. And these
02:43were healthy companies. Companies are still around today. Absolutely. Cisco, Microsoft still around
02:47today. Yeah. Amazon. Amazon dropped 85 percent in, I think, 2021. Yeah. Still one of the best,
02:53one of the strongest companies around here. One of the best investments. Do you think we get a
02:56shakeout like that? At some point. The question is when. What's the trigger? Well, I think that you
03:02get too high of a multiple. Yeah. If we're talking about equities, too high of a multiple
03:05that can't be sustained eventually through earnings. So when we're spending money on CapEx
03:12for infrastructure, we're in the spending phase to try to grab market share. Eventually that has to
03:17turn into earnings. We're in the spending phase now. But if the earnings don't show up and then
03:23eventually the market is going to say these growth rates are unsustainable. They're not going to grow
03:27into the valuation, the price I paid back in history. And I think that's going to be the trigger.
03:33I do want to ask you just about the interest rate situation, too, because there are a lot of people
03:37talking about the idea that obviously in this moment cost of capital is relatively cheap, certainly if
03:41you're a high grade issuer. I mean, you're basically borrow it next to nothing, relatively speaking.
03:47Do you think that changes, though? I know no one really quite knows where interest rates will go,
03:51particularly given the volatile situation overseas. But you think cost of capital will remain
03:56relatively cheap for an extended period of time? Well, we've started the year thinking there is
04:01going to be Fed cuts. And those seem very unlikely, if not impossible, in the current inflationary
04:07environment we're in and the growth environment we find ourselves in. So I think we're in this rate
04:12regime for the foreseeable future. Then the question is, what do credit spreads do on top of that?
04:18In an environment where earnings are strong and there's still build out for this capital spending,
04:23I think that we're going to be in the same credit, not only the same rate regime, but the same
04:29credit
04:29spread regime that could widen modestly because of issuance. But I don't think the market's going
04:34to flood so much issuance that it causes spreads to come unglued. I am curious. So we were speaking
04:39with Rashir Sharma a little bit earlier, and he brought up something. It was something that
04:42Jeff Gundlach, your boss, had brought up when we saw you in L.A. a few weeks ago, was the
04:46idea of the
04:47deficit and how the deficit spending has actually been a ballast to a certain extent for corporate
04:52earnings and a lot of the valuation increases that we've seen. And, you know, no one knows when
04:57that sort of runs its course. But we had Ray Dalio at a conference today. I mean, he's been banging
05:02the
05:02throne forever. But, you know, one day he might be right. Do you worry about that, that maybe the
05:08tailwind that we've gotten from government spending could actually end up being maybe potentially the
05:13growth pool? Well, it's it's the sugar high. So we are the the reason earnings are so strong,
05:19the economy is so is in such good shape, partly because of deficit spending and partly because of
05:24trillions of dollars of spending from A.I. that's turning into earnings. Something like a third of
05:29earnings in the first quarter came from a markup of other income from hyperscaler ownership of
05:37A.I. models. At some point that, you know, that that could run out and that could be a catalyst
05:44for
05:44some some sort of accident. But I think that's what's driving the market so far. But just in
05:49just final question, this really just has to do just drawing on your your decades of experience,
05:53though. Do you have any real significant material worries in the in the in the I mean that in the
05:59context of a real sort of bust? I mean, I know there could be some correction of some kind,
06:03some sort of pullback. But do people even need to really be thinking about the potential for
06:07anything catastrophic systemic? I don't think now. But I think the concern is that good times.
06:13Wall Street never stops in moderation. Good times generate more transactions that generates more
06:19transactions. So while I don't see really any real significant issues today, I just think that we're
06:27going to keep going until the excesses build. And so I don't know if it's 28, 20, 28, 20, 29
06:32when it
06:32happens. It seems inevitable given the history of technology booms and Wall Street behavior.
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