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- [00:01]
A
Hi, I'm Greg Hall, PIMCO's head of global wealth Management in the United States and the host of the Accrued Interest podcast. Accrued Interest is built for financial advisors and their clients. In each episode, I sit down with portfolio managers, economists and industry leaders to discuss the issues shaping markets and portfolios. As you listen to Streetwise, you'll hear excerpts from my recent conversation with Pimco Group CIO Dan Iveson on the themes explored in our latest Secular Outlook, rupture and resilience.
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B
If you think about the U.S. i know it's a country, but think about a company who is spending more and earning less. You as a bondholder would want their 30 year bonds to give you more compensation than their 5 year bonds.
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C
Hello and welcome to the Barron Streetwise Podcast. I'm Jack Howe and the voice you just heard is Vishal Kanduja. He's the head of Broad Markets Fixed Income at Morgan Stanley. He's going to tell us naturally what to make of the bond market. It's the part of your portfolio that might not be pulling its weight so far this year, but don't give up on it. We'll hear why. Vishal says it's a good time for bond buyers to stay short. So does Daniel Silluck. He's global head of securitized products at Janus Henderson. We hear from him too about some specific things that investors can buy. That's coming up, But first we'll say just a couple of few words about Coke. Listening in is our audio producer, Emily Somlin. Hi, Emily.
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D
Hi. Hi, Jack.
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C
Tell me about your cola game. Which way do you.
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D
What are you into as an Atlanta native? I would be a city trader.
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C
I think I see which way this is going. Go ahead.
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D
If I were to betray my ancestral home, the world of Coca Cola, and I prefer a classic original though. I've been to the museum many times and have tried the hundreds of flavors on tap.
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B
Wow.
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C
Still the biggest seller for Coke. The original.
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D
Hard to beat.
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C
I think, I think that I am a Coke Zero, man. That's not the official name for that. It's something. Coca Cola, whatever the full name is for a Coca Cola. Zero sugar. Coca Cola, whatever they call it. You know the one I mean, I think that's the way that I go. The reason I say, I think a couple of reasons. First of all, as you know, I've had a. An atomic fireball habit for some months and I think I've destroyed my taste buds. It's hard for me to tell which I Like, more. Also, I have seen studies where I guess it's kind of the opposite of a blind taste test. It's like they do a taste test and they tell you what the brands are, but they lie to you. And they find that people will say they like Coke even when the researchers know that they're not drinking their favorite thing. Like. Like they'll give them a drink they don't like and tell them it's Coke. And they'll say that. People will say they like it and they're saying that's the power of marketing. So I might just be a victim of, you know, you know, a half century of Coke marketing, successful marketing. I don't know. I can't tell at this point. But I can tell you that when I go to the store and I buy soda, if it's an equal choice between Coke Zero and Pepsi Zero, I'm getting the Coke Zero. If someone hands me a Pepsi Zero, I'm not gonna complain. It's a perfectly fine drink. But that's the way I go. I can tell you that I'm not alone. Coke is absolutely clobbering Pepsi. Right now in the stock market, if you look year to date in Coca Cola shares, you have made 26%. And that is just about double what you've made in the S&P 500. That's unusual. That's not Coke. Coke hasn't been. I mean, over the past 10 years, Coke hasn't been nearly that strong of a performer. If you've held it 10 years, you've made 172%. You've made 318% in the S&P 500. So you've been much better off with the overall stock market over the long haul. But suddenly you're doing great in Coke. Back to year to date, if you're a Pepsi investor, you've actually lost a little money this year. And I'm intrigued by those numbers. First of all, this is not supposed to be a good time for big food, and that includes big beverage. We've talked recently about. Did we talk about GLP1 drugs last week?
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D
We did indeed. And many wished you luck on making your way to the two twenties out of the two hundred thirties.
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C
Oh, did I? I heard from people who said that
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D
they believe in your progress journey. Jack.
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C
How did I get to a point where there are so many people that know my specific weight and where I've had it?
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D
I thought it's your radical honesty.
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C
Yeah, they call that oversharing. So we're at a time when GLP1 drugs are cutting into packaged food, packaged beverage sales. Beer is struggling right now, but Coke is doing great. And I want to talk about why the next few minutes. The, the subject is why Coke is clobbering Pepsi and whether it will continue and whether if it does continue, that means that the stock's outperformance will continue. Those are not necessarily the same thing. Okay, I'm going to give you a handful of reasons, starting with something that I can understand pretty well. Because it's just simple math. It's asset intensity. It's the amount of bottling infrastructure that Coke owns. When I say bottling infrastructure, you know, if you're a big soda company, you make the recipes and safeguard those, right? You make the concentrate. But then there's lots of other stuff that goes into getting the soda to your store. You got to bottle it, you got to put it in trucks, you got to ship it, you have distribution routes and so forth. And we pretty much, and we put a lot of the manufacturing under the title bottling. And if you go back to 2015, just over a decade ago, Coke's bottling investments group, in other words, the amount of ownership it had in this manufacturing of soda, that was 52% of company sales and that has declined. Last year it was 12%. Right now it's headed to mid single digits. That's because Coke is selling off a lot of its bottling stakes. There are other companies out there that trade that have Coke in the name, and they're bottling groups. They handle the manufacturing. It's making Coke an asset light company. Investors like asset light companies, they can be less cyclical, they can have higher margins, and investors tend to reward them with higher valuations. So if I were to look down, I hear you saying, Jack, what's the PE ratio on this thing? I'm going to tell you. Using this year's earnings forecasts, Coke trades at over 26 times earnings. That is a premium to the stock market. The S P500 is 22 times this year's projected earnings. And it's a heck of a lot more than investors want to pay right now. For Pepsi, that one is just 16 times earnings. Okay, that's number one. Coke has gone asset light investors like that Pepsi is still largely a vertically integrated company. It makes things complicated and at times costly. The second thing I'll tell you is that Coke is gaining market share in colas and it's coming at the expense of Pepsi. It's not really coming at the expense of Keurig Dr. Pepper, that one's doing fine. It's returned almost as much as the stock market this year. But Coke is eating Pepsi's lunch or sipping out of its thermos, at least. Thermos makes me sound 100, right? Coke is just over 52% of US carbonated soft drinks. Three years through last year, it's had compounded revenue growth of 5.6%. That's healthy growth. Its dollar share is up. Coca Cola Zero. Sugar, that's the name of that thing. It's outperforming its category, by the way. Diet Coke, it's also outperforming its category. So Coca Cola Zero. That growth is not coming at the expense of Diet Coke. The crazy thing is the original, that's doing well, too. That's gaining share, too. Now, this is a part of the business that I understand less. I can tell you what's outperforming. I can tell you the amount by which it's outperforming. But it's not always easy for me to tell you why, because that gets into marketing and advertising, and that stuff is voodoo. I did some reading on this from folks who do know better, some marketing people, and they point out that Coca Cola Zero had a long head start, more than a decade head start on Pepsi Zero. It basically established the zero sugar category. I think part of the thinking behind Coke Zero was that, well, first of all, Diet Coke doesn't really taste like original Coke. I always thought that that was because it was a bad knockoff of regular Coke. I thought it just wasn't doing a good job of being Coke. What I learned is that, no, it was designed with a different flavor. It was designed to be a little crisper, a little more citrusy. The thing about sodas with diet in the name is they have tended to not sell as well as soda companies would like with men.
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D
I have a friend who calls them fridge cigarettes.
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C
Trademark that immediately. There's a whole. There's a fascinating history, by the way, of diet soda. Uh oh, it's a detour, but it'll be a very quick one. There was a fella named Hyman Kirsch, and he helped run something called the Jewish Sanitarium for Chronic Disease in Brooklyn. Hyman was not a doctor. He was a successful soda entrepreneur for decades. Made a lot of money, and he was a philanthropist. And this was a health center that helped treat many kinds of ailments, including diabetes. And it occurred to Hyman that diabetes patients needed a drink that they could enjoy. There was like soda, but they couldn't have sugar and he made something called no Cal. N O-C a L. This was long before Diet Coke or Diet Pepsi. This was long before Tab or Patio, if you know what that is. Anyhow, Hyman was arguably the reason that Coke and Pepsi jumped into this business. But these NO Cal sodas sold very well and they were marketed around women. Hyman's no Cal operation was definitely regional, but it did so well that a bigger company out of Chicago jumped into the game. That company is called the Royal Crown Cola Company. And they came out with a soda called Diet Right. And Diet Right took serious market share. It was a big hit. And Coke and Pepsi had to respond. Anyhow, the sweeteners changed over the years, and Coke and Pepsi felt so good about the performance of diet soda that they eventually came around to attaching their main brands to it. You got Diet Pepsi first and then Diet Coke. That's all I have to tell you about the history of diet soda, except that Coke Zero launched in 2005, and that was 11 years before Pepsi launched an equivalent that gave Coke a big first mover advantage. All of this is to say I'm not the guy to tell you that Coke Zero is better than Pepsi Zero, but I think that's consensus opinion. Okay, so we have the bottler sales and we have the market share gains. I think that's enough to tell you about for now. By the way, it's not just cola. Coke is also doing well in other flavors like orange and lemon lime. It's not quite killing it. In ginger ale. You can't have everything.
- [11:31]
D
Who has Canada Dry? I feel like that's the definitive last word on ginger ale.
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C
Coke has Seagram's Canada dry is Keurig Dr. Pepper.
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D
I wouldn't trust my stomach ache to anyone else but a Canada Dry.
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C
And that company dominates. Keurig Dr. Pepper has an 85% share in ginger. Alex, so your instincts are right. Actually, it might have just gone up to 86% with your powerful endorsement. By the way, in Lemon Lime, where Coke has Sprite, Pepsi has Mountain Dew, that's been recently a market share loser. Keurig Dr. Pepper isn't doing great there either. They have 7 up squirt and something called Sun Drop. I've never heard of a Sun Drop. And I'm not drinking a squirt. When it comes to fluids, moving a squirt isn't something that I associate with ingestion. I'll do a splash, I'll do a pour. I'm not doing a Squirt. There is one last thing I'll say on the subject, which is that Coke is just beverages mainly. Pepsi has Frito Lay. Pepsi is also snacks. It's a big snack business and it's been a great snack business for many years. Investors are a little down on snacks at the moment in the same way they're down on broader big food. They're worried about the GLP1, drugs and demand. Okay, what does it mean for the stocks? I've got to tell you, Coke is doing a remarkable job. But to me, 26 times earnings for a consumer staple sounds like a lot. The bull case on Coke is that it should no longer be considered a soda company. It's now an asset light special kind of company. It should be talked about like McDonald's or even better, it should be talked about like the hotel chains. Marriott, for example. That argument for my taste is a little too cute. If we're looking at 26 times earnings and we're saying, well, it really deserves to trade at 28 or 29 times earnings, to me, that's not a lot to hang a stock purchase on. I believe in momentum and I believe that winners often keep winning. I could easily see Coke continuing to win in the consumer market, but in the stock market, it just seems a little pricey for my tastes. A consumer staple stock ought to come with a juicy dividend, but the higher the stock price goes, the lower the dividend yield. Coke's dividend is about. It's just under 2.5%. Pepsi's dividend is much more tempting. 4.3%. The only thing wrong with Pepsi is just about everything else. They need a turnaround. And when a company needs a turnaround, I like to see signs of one before I believe that one is probable. So I'm not sure where that leaves me on the Coke Pepsi stock taste test. Probably neither. What do you say, Emily? We move on from soda to bonds. I was looking at some year to date returns for some different asset classes. And you know, stocks are doing great. The stock market is giving people fits lately because it's wobbling all over the place. But you've made great money year to D in the US you made even bigger money outside the US you made good money in small caps a lot of different ways in stocks. I looked at a bond index and it has stunk. And it's because investors are, I guess, worried about higher rates, worried about the amount that the US Is borrowing. Yields are starting to creep up and as yields rise, prices fall. So you have some Income rolling in from your bonds, but it's being offset by some price declines. It's not a big deal, but with everything else making great money, it stands out as the weak part of the portfolio. At the same time, if you're nervous about the stock market, about valuations, about all that AI spending, about war, about anything having to do with stocks, bonds are your ballast. And so I wanted to know more about what's next for bonds. What are the new opportunities? With some yields now higher, what parts of the market should investors be favoring? And for that I reached out recently to Vishal Khanduja. He's the head of Broad Markets Fixed Income at Morgan Stanley. I asked Vishal what's happening with diverging yields around the world. It wasn't too long ago that yields moved together from market to market. Not anymore. Why is that? Here's Vishal.
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B
Income and yields are abundant to have in fixed income. But all these central bankers have very disparate sort of economies to deal with. Japan coming out of 30, 40 year, sort of lack of inflation or almost deflation that they were in reacting very differently. About every six months you'll see a hike there in that economy. Europe came out differently and then had to deal with slower growth, did the debt break? Germany did, which was historic from that side then went into this Ukraine, Russia sort of conflict which drastically impaired their growth and spiked inflation. And now they're dealing with the conflict in the Middle east given they are net importers of the commodity that is spiking higher. And then US on the other side reacted very aggressively post Covid took the brunt in terms of the yields rising given inflation spiked higher. But then came the era of AI Capex investing, which is significantly stronger here versus what the world is grappling with. So very different economies and central banks willing to go different paths to react to that and trying to meet their mandates.
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C
Is there anything that investors should do differently right now? Any kind of tilts, long versus short, High grade versus low grade?
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B
Very fair question. The way fixed income benchmarks are created are the more you issue, the more high quality liquid debt you issue, the bigger part of the benchmark you become passive. Benchmarks and passive strategies have accumulated a lot of assets. So what you own in fixed income has been drastically changing. For example, in 2003, U.S. treasury was about 22% of U.S. aggregate, which is a very common benchmark which is used in the fixed income space. Today you have 46% treasuries. So just by you owning fixed income passive, you own double the amount of Treasuries that you would in any active strategy over the same period of time. Now looking forward, you're seeing a lot more data center related debt coming due to the market in terms of issuance because that investment cycle is pretty heavy. Your benchmarks in the next three to five years will become very heavy in the debt of these companies who are actually accumulating and deteriorating their credit quality. So that is a massive structural shift that typically happens when one or two big sectors start to have debt binge if you will. The compensation that an investor should warrant or ask for to buy 30 year treasury versus a 5 year treasury should be a lot more in bond jargon, the term premium should be a lot more or 5 to 30 should be a lot more steeper in terms of yield compensation because I'm owning longer dated treasury of a country that is deteriorating deficits. On the other side, that compensation is not commensurate to the risk that you're taking on inflation growth and the treasury deficit situation that we are in at this point. So we are preferring 5 to 7 year treasuries rather than actually preferring 20 and 30 year treasuries within our portfolio. So that's where most of the duration is coming on within our portfolios at this point.
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C
One last question. Bonds represent debt and the US has an awful lot of it. And I sometimes have a hard time picturing where that leads many years down the road, especially for bond investors.
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B
If you look at the long term implications of these are. The word I use is nauseating because the bond math doesn't connect well from that perspective. But let's just start from what is actually working. Why we believe that you don't need to get to that dark, dark ages of not being able to pay treasury debt back or coupons back is that we are still very clearly the most liquid and reserve currency of the world being the US dollar. We are still the cleanest dirty shirt if you will in the debt market. If you compare us to the other bigger developed country debts that are outstanding. So what do I mean by that? What are the implications? A global asset allocator sitting in Saudi Arabia is looking at the biggest bond markets and the liquid bond markets to invest in, to get income, to get stability of their currency. And they're still tilting their portfolios towards fixed income now coming back to deficits and how this will in the meantime, in the short term and the medium term play out, the yield curves will steepen. So if you think about the U.S. i know it's A country. But think about a company who is spending more and earning less. You as a bondholder would want their 30 year bonds to give you more compensation than their 5 year bonds, meaning your 530s curves will steepen out. We believe that's exactly how the market will react here in the US as well.
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C
Thank you, Vishal. Let's take a quick break here. When we come back, we'll hear from Daniel Sillic. He's the global head of securitized products at Janus Henderson and he's going to talk about keeping it short and juicy. I made it weird, Emily. What's he going to talk about?
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D
Short duration bonds.
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C
That's a better way to put it. That's next after this quick break.
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A
Hey again, it's Greg hall from pimco. As promised, here's our cio Dan Ibison on why today's market environment may reward investors who in participate prepare for the unexpected.
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C
This is an environment where you need to do a lot of scenario analysis involving politics, geopolitics, changes in regulation, what may slow down all this AI momentum. There's going to be a lot more uncertainty. But for the patient investor, the value proposition in global high quality fixed income hasn't been this good in a long time.
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D
Jack, did you put something in your mouth?
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E
I know.
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C
That was not smart, right?
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E
No.
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C
I have a huge chocolate chip cookie sitting next to me.
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D
Well, I'm jealous, but it can't record with food in our mouth.
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C
Although it gives me an idea. It gives me an idea for a new podcast like Baron's Unplugged.
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D
Only Baron's unprofessional.
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C
Welcome back. We're talking about bonds. We heard about why we should keep it short. If we're going to keep it short, I want to hear about some more options. Janus Henderson has a bunch of those. They have a very popular AAA CLO fund. CLO stands for collateralized loan obligation. I know it sounds fancy. I know I generally don't like fancy. But this is fancy and high grade. It's an example of something that pays a little more than you can get in a money market right now. There are other examples. Let's hear about some of the specific offerings that Janice Henderson has. Just to give you an idea of the categories that are available at different fund companies. Dan, you, you have my full attention because you put out a report recently that talks about a high conviction view. And the high conviction view is on short duration bonds. I think a lot of people think of that as a boring part of the asset menu you get a safe yield that's kind of like when you put your money in the money market or something just above that in the risk spectrum. And the question is when? When is a 4% yield or a 5% yield attractive and exciting? The answer is when everything around it is about to fall by 10%. At least that's what's going on in my mind. I wonder if this is a note that's kind of bearish about everything else because it's so bullish about short term bonds. What can you tell me about your view?
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E
Well, there's a couple of things. One, as you point out, there are some risks on the horizon just in risk markets, in equity markets, everything that's going on, whether it's geopolitically, the last few years with Russia, Ukraine and more recently Iran, just the uncertainty on the AI CapEx build out how much of this debt markets can absorb. But then you know, the other point would be, well, investors, you know, had zero yield in the front end of the curve for the best part of 10 to 15 years in that period between the global financial crisis and Covid. So why are short duration bonds back? Well, yeah, again part of it is that that feature of, you know, the uncertainty on, on the horizon. But part of it is also that well in, you know, we're back to the old normal. You know, I think central banks in periods of crises, yes, they're going to cut rates to zero, yes, they're going to utilize that QE lever. But if there's something that we learned in that whole period between global financial crisis and the pandemic was that monetary policy alone wasn't enough to generate the growth and generate the inflation you saw whether it's Europe, Japan, et cetera, they were never able to hit their inflation targets despite even having negative rates. And the pandemic has taught us that, well, you need the fiscal lever to really work alongside the monetary lever to generate the growth and inflation. And so when I say we're back to the old normal, we're back to that period like we were pre global financial crisis where you have structurally higher yields, structurally higher inflation, structurally higher volatility. And so to the extent that you can get a little bit above risk free to your point, you know, it's not just money market, but stepping out of money markets and you know, high grade investment grade credit, some really good floating rate products like the, the AAA clo, you know, you can get some really attractive yield without taking on on too much risk. And I think, you know, investors have Just been starved of that for, for a good 10 or 15 years.
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C
I want to dig a little more into some of those options. But first you write about some demographic and geopolitical forces that could spell the end of the 50 plus year fixed income bull market. I am a fresh faced kid of 53, so I guess I've only ever known good times in bonds. How are times going to be tougher for bond investors going forward?
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E
You know, we're moving to a structural, you know, part of the economic cycle where we've got aging populations in, you know, large parts of the developed world. So there are, you know, fewer workers for every member of the population. That's going to put pressure on wages, fiscal element as well. So whether it's here in the US both in the Biden and the Trump era, there's more fiscal spending. You're seeing more fiscal spending in places like Europe, I mean Germany, for example, underspent on defense for decades now they're sort of spending more. So the fiscal and the demographic shifts are just putting pressure on the longer end of the yield curve. And so it's that component or that element of the yield curve which may be in a, you know, let's call it a longer term bear market or one whereby it doesn't exhibit the same qualities that we'd experienced before.
- [27:29]
C
I had a friend ask me recently about his mix in his retirement account. Why shouldn't I just, instead of, you know, holding these bond funds, why shouldn't I just put it in a money market? Because the yields are pretty good. And I don't think my answer was very sophisticated. It was along the lines of, I don't know, maybe that, that, that does seem like a decent idea. Maybe you should have some, you know, maybe your money market can take the place of, of, you know, your bond allocation now that yields are up. And if we're worried that the rates might climb. But you have some ideas that go beyond that, that allow people to participate in maybe some better yields, but to keep it short and relatively safe. So tell me, where should we expand our horizons to beyond money markets? What should we be looking at right now?
- [28:18]
E
Yeah, sure, look, I mean money markets are a great place to park cash, but we know that over the cycle and over extended periods of time, cash will be the lowest performing asset class. And the times where cash is the highest performing asset class. Your portfolio looks rather ugly, right? It's a sea of red. So I wouldn't necessarily say that people should have larger structural allocations to money markets, you know, to the extent that they have operational sort of day to day needs for cash, I think that is absolutely a good spot to park. But if it's more of a, you know, asset allocation style decision, I've got this strategic sort of cash balance that I know I'm not going to need to sort of call upon anytime soon or you know, is it something that can give me some, some yield into, into retirement for example? Then absolutely. You're going to want to step out of that curve a little. And you know that step out of the curve can happen in a variety of I guess subsectors within fixed income. One of the areas that we focus on is global investment grade credit. So there are some great systemically important sectors and best of breed companies in those systemically important sectors globally that you can invest in. Obviously here in the US it's the big six banks, it's the Amazons and the Googles of the world. But as you go around the globe you'll see that there are similarly strong, whether it's a utility company or a telecommunication company, some of these more recession proof type companies which are systemically important that can kick off a really good spread versus a money market.
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C
What can you get right now in a balanced portfolio of you know, let's, let's call it investment grade or high grade corporate bonds? What, what kind of yield can an investor expect in a portfolio like that?
- [30:18]
E
Right now you can get somewhere in the order of an additional 50 to 70 basis points from you know, high grade investment grade credit as you suggest. So you're getting pretty close to, to 5% there. And if you sort of think about, well, you know, where's the level of inflation kind of hovering in that 3 kind of range? Obviously the Fed target at 2. That's a really attractive positive real yield.
- [30:43]
C
What else should we be looking at?
- [30:44]
E
I think you can get some really good diversification benefits through looking globally. So that's one of the areas we focus on. And then also at Janice Henderson the firm has become a leader in that securitized space. So the AAA Clos and you know, some of the sister products that have come off the back of that also provide some really attractive yields, you know, also towards that sort of 5% range for you know, really low level of risk.
- [31:15]
C
Why is your CLO fund become such a big hit? This is, I think the ticker is jaaa on the high grade one. Fancy things are usually not the biggest things because people like simple things. But money has poured into these funds. Investors like it just give us the basics on how does it work and what do you think people like about it now?
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E
I think the important thing is the access point. You know, the fact that it's in an ETF form has just opened it up to you know, the retail sort of mum and dad who previously, you know, it's a segment of the market that was previously only really accessible to sort of the more sophisticated institutions. Now you know, the AAA silos obviously because of what happened in the global financial crisis. Other acronyms I think, you know, people misrepresent, you know, other collateralized debt which, which you know had some sort of negative headlines through the global financial crisis. They confuse these with these collateralized loans. But truth be told, you know, these, these AAA loans, you know, there's never been a default in, in their history and it's actually a really safe and somewhat less understood asset class. So yeah, the volatility is low and the access point is, is a, is a really strong feature of the products
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C
in a portfolio like this. You think about interest rate risk and you think about credit risk. In other words, rates could change and that could help or hurt the value of the fund and something could go wrong with the borrower's ability to repay. So by keeping it short, I guess you limit the interest rate risk. Obviously what happens, what's the relationship between keeping it short and the credit risk? Is this an overly simplistic view to say by keeping it short there's less time for something to go wrong on the credit side?
- [33:03]
E
That is absolutely right. And I think this is actually a characterization that people often get wrong. They think that the higher grade security is a safer security. Now that statement in isolation is inaccurate because unless you provide some sort of additional information on the maturity of the instrument, then you don't have the full picture. So for example, a triple A rated corporate, but you know, a 30 year loan is going to exhibit far more volatility, like far more volatility than say a 6 to 12 month even high yield investment grade bond. Because to your point that, you know, I've got a lot more clarity on the ability of that high yield company to repay its debt over the next six to 12 months than I do on a 30 year, you know, who knows what's going to happen in the next 30 years to you know, whether it's a General Electric or General Motors or you know, even a JP Morgan. Like who knows what happens with, with sort of tokenization and the evolution of the financial system. So yes, you're absolutely right. Despite the rating of a longer dated piece of paper, whether it's corporate or securitized, they're going to come with a lot more price sensitivity just simply because of that, that duration lever. So we've got a lot more certainty, a lot more clarity around the ability of an issuer to repay its debt in the near term horizon. And that's why, you know, we're willing to take on a little bit more of that credit risk. We're willing to own BBB assets, we're willing to own even high yield assets because we have that greater confidence.
- [34:41]
C
Thank you Dan. And I want to thank Vishal. Thanks also to Hyman Kirsch and his pioneering work in diet soda. Emily Sumlin is our producer. She's from Atlanta. Her blood type is Classic Coke. You can subscribe to the podcast at Apple Podcast Spotify wherever you listen. If you feel moved, you can write us a review. If you have a question that you'd like answered, send it in. It could be on a future episode. Record yourself on the voice memo app on your phone and then email it to jack.howe. that's h o u g h@barrons.com anything to add, Emily?
- [35:15]
D
Maybe don't record yourself in a car or in a restaurant, please.
- [35:19]
C
You know what? I'm gonna go the other direction on that one. I think it adds appeal. Record yourself Skydiving, being chased by bears and going down a slip and slide while drinking a Mr. Pibb. Thanks and see you next week.
- [35:38]
A
Before your episode of Streetwise wraps up. I'll leave you with one more thought from my conversation with Pimco CIO Dan Iveson.
- [35:45]
C
When you look at fixed income today, high quality bonds, US or even better, a diversified global opportunity set. It's attractive. You can put together a portfolio in the liquid space with a yield of 6 to 7% without having to add a lot of really economically sensitive risk. The simple bond math is very, very favorable.
- [36:07]
A
To hear my full conversation with Dan, search for Pimco's accrued interest on Apple Podcasts or Spotify. There you'll also find my conversations with our multi asset credit strategist Lutfi Karui, New Edge CIO Cameron Dawson, my old friend Ted Seides from Capital Allocators and other voices shaping the market and economy today.
- [36:27]
C
All investments contain risk. The discussion is for informational purposes only and not a recommendation of any investment product. Individual investors should contact their own financial professional to discuss investment options for their financial situation.