If in fact inflation is here to stay at least as far as we can see how does that change in investors decision for example with
fixed income. What does that make you attracted to. So right now I'd say what it makes me attracted to staying short duration
right is a short duration. You are extremely careful. As much as Savita said you look at
individual sectors in the corporate debt space and you are very careful about selecting individual corporates. If that's where
you're going in in the event that rehab a period before a distinct slowdown slowdown in the economy you can look at things
like floating rate. But to me what I think about as you know though the light at the
end of the tunnel is actually that if we get through the next year the next to you. Year and a half of rates going up and
fixed income looking rather unattractive at the long end. We do come out of the other side where it finally after to maybe close
to 14 15 years. We will have what I would think about as a bog standard recession i.e. you would have long and rates high
enough and short end rates high enough that the Fed could actually stimulate the economy using that old fashioned tool of
cutting interest rates. And that actually is a positive environment for fixed income. It's just that we've got to get
from point A to point B. And during that time especially right now we're going to see a
lot of volatility. Same question that equities. So on equities I think it's a
similar answer. But you know it's the idea of short duration or medium duration equities and this would be dividend yield
dividend growth companies that are giving you your cash upfront. And one of the things that we've noticed is that dividends
lagged earnings growth. Last year we saw a lot of earnings growth 50 percent earnings growth last year.
But dividend growth was just a fraction of that. I think we're going to see catch up.
I also think we're moving into a total return world. And if you think about it since the beginning of the S&P 500 over a third
of your total return has come from income in the last 10 years. We've had this heyday for first stocks and price returns. But I
think we're moving back to an environment where total return and dividends are going to be a much bigger part of our our overall
wealth creation. So are blue. We tend to talk about sectors a lot when it comes to equities. I saw that you said not so much
sectors as it is factors. Well so it's interesting because you know everybody wants to know what consumer stocks are going to
do during a you know a rising rate environment. And if you think about the consumer sector today versus 20 years ago two of the
biggest stocks in consumer discretionary are Amazon and Tesla. Twenty years ago it was Wal-Mart and GM. These are different
types of companies that are going to behave differently in an environment of rising rates. So the way we like to slice and
dice the market is by looking at factors. And what I mean are kind of themes or ways to pick stocks like free cash flow. Yield
is one of my favorite screening criteria because I think as soon as I mentioned we're in an environment where the Fed is
basically moving cash yields from zero to 3 or 4 in a very short period of time. So free cash flow yield at an equity level I
think is one of the most powerful ways to invest today. So now on fixed income at what point do we need to be concerned about
credit risk. I mean what about default. Remember the old idea of default. You haven't had much of that lately. No we haven't had
much of that lately. And I think that already the problem the issue of choosing with care is becoming increasingly important
literally by the week and month. Having said that a lot of culprits are coming into this period in much better shape than
they were previously. And I think again you know it's so singing from the prayer book. But you've just got to you've got to be
active. You've got to make sure that you're thinking very carefully. I think going back to what Ethan said fixed income at
the end of you know the silver lining is that I was talking about is that in fact there will be some income coming from
fixed income something which we haven't had now for a good 15 years. So I think that's another thing which is a positive. Over
the medium term but maybe all right now we will get there to getting to that point though. Could be much more painful for
bonds very pain talks. So I think the benefit of stocks is that earnings grow with inflation rather than just a fixed coupon.
And I think that's where we see the opportunities within the equity market. I would just note though there are lots of
questions about starting valuations. I'd be the last person to argue that bonds were particularly
undervalued coming into this particular period. But I think there could be some debate as to where we were starting. But
definitely you know it's not a time to be long duration which does it tend to move you towards equities particularly since the
slowdown. I don't see that happening in the next quarter or two quarters
in a meaningful way. So I think it's further out. It's a part of the reason that inflation will stay relatively strong I believe
as we go forward in the next few quarters. The economy is not going to slow down enough quickly enough. So Venus and Al said a
lot of corporate go into this from a credit point of view in a strong position. Yeah a lot. Not all. Not on it makes me wonder
about the so-called zombie corporations. There are more of them out there than we think there are. So I think when we talk about
bathing trunks and the tide going out and things like that. Right now I think that we've been in an environment where hurdle
rates were effectively zero. Capital was free and it funded almost any company that did
capital. And today we're starting to see the real companies the wheat separated from the chaff. And I think that's a good thing.
I mean we're getting back to a more rational market environment. We've we've come back to a point where real rates are positive
where they were negative last year. So I think there are a lot of positive trends that we're seeing that will create more of a
stock pickers market more of them you know a market where active managers can actually outperform the passive benchmark which is
something we haven't seen in quite a while. You know I think we're past the point where all you need to do is buy an S&P
index fund and you'll be fine. So now I'm curious besides factors in sectors you also have geography when it comes to
fixed income. Are there some opportunities if you go geographic. So I think there probably are because the reality is I look at
the U.S. and I look at Europe. Europe is facing what I would consider a more traditional supply
shock. The price of gas has gone up three times. It's three times more in Europe than it has in the U.S. because of our
different situations in the US instead. I think that I think you're going to see divergent monetary policies which is
something which we haven't really seen again in a long time and that always offers up some opportunities in fixed income.