00:00Well, so far, the hyperscalers have collectively reached, issued about a $200 billion debt.
00:05I think it is reaching a point of saturation.
00:08The bond market is throwing a tantrum.
00:10You know, look at the cost period names like Oracle at a SpaceX, you know, trading well over $200 in
00:16a business point.
00:17And that is kind of in the high-yield category, right?
00:21So if you think about what the trade is projecting out, you know, through 2030, 5.7, 5.8 trillion
00:28of a CapEx.
00:29Right.
00:29I honestly doubt, you know, the bond market, it can finance even a quarter of that.
00:34That's a really important statement.
00:35Give me the granola, the granular, the granola of that.
00:40Give me the, folks, it's a Tito and Tang.
00:43It's a hot day.
00:44Give me the granularity of that, Mr. Tan.
00:48The idea that there's the buy side.
00:51They go to the banks.
00:53The banks go to the hyperscalers.
00:55What's the conversation right now between Wall Street banks and the Amazons, the Microsofts of the world?
01:02Well, I would imagine, I think that they're trying to, you know, find financing for them from all corners of
01:09the market.
01:09So where's the new corner?
01:11Well, the new corner, there has been, you know, a lot of private credit, you know, financing.
01:15There's a leaseback, you know, financing, and there's also certainly the public bond market.
01:21They're trying to find it.
01:22I just had a 2006 vision there.
01:24When you say leaseback, I'm like, Paul, save the interview.
01:28Yeah, save the accounting, leaseback accounting.
01:31We have a transitioning Fed.
01:32What's your view of our new chairman and maybe how he may, and the various commissions may take this Federal
01:38Reserve?
01:38Well, you say the bond market yields is shooting up nicely over past a couple of weeks, right?
01:44So I think that is when, in a phenomenon, when the board should go silent, the bond market goes screaming,
01:50right?
01:50So I think there are two challenges facing bond investors right now.
01:53One is certainly not knowing what the new Fed's reaction function will be, but also the data itself has become
02:01very troubling with oil, you know, back up, and the war back in, and also maybe, you know, tariffs are
02:07going to be back in play.
02:09So with all this stuff going on, I think it's very rational for the bond market to say, you know
02:13what, I don't like what I'm saying, and I think the inflation story is not bad, is not dumb.
02:20And so, you know, we're driving bond yields up.
02:24It looks like the bond market's kind of doing the work for the Fed.
02:27I mean, they're just taking yields up the, you know, it seems like the bond market's saying to the Fed,
02:31we're not waiting for you.
02:32I mean, we're pricing what we think is a different market, maybe a higher risk out there.
02:37I agree.
02:37I think even more so, you know, when there's no guidance there, and basically, you know, the bond market has
02:42to figure out itself.
02:43And when they've tried to figure it out, then they're going to be probably more volatile.
02:46And there may be overshoot on the upside, but also probably overshoot on the downside.
02:50So do I just go out there and buy a two-year government bond at 4.35 percent?
02:54I mean, that's a great coupon.
02:56Do I need to take any credit risk above and beyond that, do you think?
02:59I would agree with you.
03:00I think if you're super conservative, you know, the two-year government bond yield is very attractive.
03:06But if you want to take a little bit, you know, more risk going out of the curve, say, one
03:10to two years, you can actually get a five point, you know, five and a quarter to 5.5 percent
03:15of a yield in a one to two-year type of bond fund without taking much credit risk at all.
03:21Right.
03:21So to me, that is probably the best part of the, you know, the curve in the bond market, you
03:26know, stay on the front end and, you know, favor front end to carry.
03:32But I look at the INGO function on the Bloomberg terminal and the best performance out there in your world
03:36of fixed income is still in high yield.
03:38U.S. high yield, you know, more than two percent total return.
03:40Which is true, you know, look at the credit market in general, the fundamentals are still pretty solid, right?
03:47So they do still very much of a carry market, right?
03:50In the carry market, they hire you, they would give you a nice return.
03:54So, but the question is, you know, as, you know, the AI spending, you know, goes up, more bonds get
03:59issued, will the whole market be kind of dragged up higher in terms of the spreads?
