Right now, liberal arts, and
particularly the classics, are getting killed across American universities.
You and it's truly definitive under classical studies defend right now the
value you got out of a classical studies education to get you to worry about
duration and convexity. So there are many other things you study
at university, and I did a lot of sciences which ultimately helped me with
bond math, but I always thought of classics as my avocation while I was
studying other things that I knew would lead to a vocation.
And I think if you get that balance, it makes for a far better university life.
I totally agree. And the strongest point since.
Did you study Latin and Greek? Are you like former Prime Minister
Johnson, where you can waltz right now into Latin or groupama, where some kind
of tricky premise? Boris,
can we can we get that to you? Robert Brockton Can you be sure that we
get they wanted to take a guinea again, please.
Few few Tea Party gig in a thrasymachus There you go.
You learn it. You never forget it.
That's great. Paul, can you save the damn interview?
Well, I can. I can save him because he also got a CFA
that got some to where he said we're in good shape.
So, Bob, what do we do here? I mean, we're going to get a big
inflation print tomorrow. A lot of folks are trying to figure out
what this Federal Reserve is going to do.
It seems like, you know, march off the table, may not sure maybe push it back
to June for a rate cut. How are you guys at Morgan Stanley
thinking about this? Honestly, Paul, I just want to enjoy the
soft landing. Okay.
We're in the midst of it now. We've got very low unemployment.
We've got stable inflation. We look at the six month annualized rate
of core PC. It's currently 1.9%.
Tomorrow will likely get a point for it, will push it up to 2.4.
It's okay. Okay.
It's in touching distance of 2%. You go back a few years, it was 6.6%.
So I think the Fed is right to just pause here.
I think if they look at inflation on a shorter term basis, they have to be real
happy with it. But they were late to hiking rates
thinking inflation would be transitory. They can't make that mistake again.
So June still looks like ours and everyone else's central case.
All right, I said Morgan, saying, of course, Jp morgan's it's all Morgan's.
You know, at some point in time back when and probably back in the day when
it was so I mean you think about this market I'm looking at I and go on the
Bloomberg terminal that's the Bloomberg index browser and you get all the fixed
income indexes, most of which Bloomberg owns.
We're we're in the red this year. 2022 is brutal for the fixed income
market. Little bit of performance last year
thanks to November December. Now where do I go in the fixed income
space? What do you walk around the trading
floor? What are the your traders doing?
So there are a couple of things. And I was out at a dinner last night
with about 50 financial advisors and we were talking about this.
And and my greatest concern is not that the market rallies 2 to 1%.
I don't really want that. I'd rather have the market back up to
about 5% to give more investors an opportunity to get into the market.
And I think when you when you all you look at the the amount of money in money
market funds, it's five and a half percent.
It people want to get in. They want a slightly higher yield.
You look at pension funds, they they want a slightly higher yield.
I look at the aggregate bond index at the end at December 31, 2022, it was
4.67% yield 4.7%. And we were looking at for additional
rate hikes at the start of 2023. This morning, 5.0%.
So you're up about 30 basis points and we're looking at 3 to 5 rate cuts.
And Michael Farrell is going to tell you we're a long way from potential GDP and
for whatever reason, let's say the stimulus, whatever.
But I'm just imagining I mean I mean, the new Park Avenue offices is Jp
morgan. Oh, boy.
Don't. Jamie will have a lunch up in the
girders. Like it's like, you know, one of those
photos. Black way to get inside that.
Well, Bob, come on up with me and sit on a gurney and broadcast from there.
We'd like to do it as seriously. I'd like to do that.
You line up, you and Mr. Dimon.
And the number one question Mr. Dimon is going to have for you or his
team is all this cash that's out there. How does Bob Michaels think the
deployment of trillions of dollars of cash at the margin will occur?
Well, I think it's going to go into a lot of different places.
First, I think a lot of it will stay. Yes.
Where it is because you get a yield on cash, which you didn't get before.
And, you know, the Fed cuts rates a few hundred.
Let's say they take it down to 3%. You're still going to get a yield on
cash, about 3%. I think a lot of it's coming into the
bond market. Everyone is waiting for the Fed to cut
rates. That makes cash less attractive.
That's where a lot of it goes.
