00:00This isn't a surprise, what's happening. I think the surprise this week is now we have volatility in those rates
00:05thanks to the Treasury.
00:06So I would prefer to be in cash or short-term fixed income and other types of diversifiers, dare I
00:12say it, gold.
00:13Here's the canard of the business, folks. Bring up the chart, please. This is for Rebecca Patterson.
00:19Wall Street and Rebecca Patterson talk differently than mere mortals.
00:23If you own the TLTs out 20 years plus, like a lot of retail does, picking up that yield, it's
00:31priced down from COVID.
00:32It has been a crater of yield up, price down. In your world, what's long term?
00:39Seven-year duration, not 20-year when you're looking at retirement and wealth management.
00:44Yeah, I think even shorter duration, like money markets right now.
00:48So the yield pickup you have by owning a longer-term bond right now, yes, you get something for it,
00:54but is it worth the risk?
00:55And right now, I haven't thought it is.
00:58What I would say, though, is for retail investors, if you lose money when rates going up, it does depend
01:05on how fast the rates go up, and it depends what the yield is.
01:09So if I'm getting a high yield, say the 30-year, it's 5.24%, and yields continue higher but very
01:15slowly, I lose money as the prices fall and the yields go up, but I'm making money on that coupon.
01:21So it depends how quickly this move happens from here.
01:25They get the envelope at home, I'm sorry.
01:27They get the envelope at home, and $100,000 has become $97,438.
01:32And then for your wealth management, the next month, it's $95,800.
01:37Wall Street rationalizes.
01:39In the Bloomberg money world, folks, you're looking to yield up, price down.
01:42Right.
01:43So the rate of change is what you're saying you're focused on.
01:45Correct.
01:46When we look at the volatility in the bond market, and you can see it certainly this week, does it
01:50feel like the U.S. bond market is increasingly looking like a developing market as opposed to a developed market?
01:56A little bit, yes.
01:57I mean, if I wanted this kind of volatility, I'd go and invest in another country's bonds, not the U
02:02.S.
02:02Well, the irony today is that a number of emerging market, financial markets, have done better than the U.S.
02:09market in stocks and bonds this year.
02:12And some of that is fundamentals, and some of it is just a point in time and what those economies
02:16are doing.
02:17If I'm Korea or Taiwan and I'm doing a lot of AI, that's obviously helped me.
02:21If I'm another country and I'm doing a lot of commodity exports, maybe that would have helped me.
02:26But I hear you.
02:27The point is that with our debt to GDP in the United States running around 100 percent and poised to
02:33go towards 120 over the next decade and questions around who's buying the bonds and what yield they need to
02:40buy them, it makes things a little more tenuous.
02:43You say we need to watch the U.S. dollar because it'll suffer if the U.S. Treasury, under Scott
02:49Baskin, can bring down yields.
02:50If you're an American living abroad, you certainly feel the effects of the dollar's strength and weaknesses, all the swings.
02:55And I feel affected if I'm traveling abroad.
02:58But not if I'm sitting here in New York for weeks on end.
03:01Right.
03:01Am I misunderstanding that?
03:03A hundred percent.
03:03If you're an American, you live in dollars, you get paid in dollars, you spend dollars.
03:07The only way you're going to feel that exchange rate movement is what it does to inflation and what it
03:13does to financial conditions.
03:15And what I mean by that is when you have a weaker dollar, basically it tends to push up inflation
03:21in the U.S.
03:21And at the margin, that might make it more likely that the Federal Reserve thinks it needs to raise interest
03:26rates.
03:30I'm more in kind of the range camp right now.
03:34So I don't think the dollar is about to fall off a cliff.
Comments