Let's talk about investment in fixed income. Where are there opportunities from your point of view. By the way I hope it's a
correction because if I'm right I think it took about 10 years for the Dow to get back up above a thousand from that taping.
Look at when we look at the repricing in the bond market it's been dramatic for the first four or five months of the year.
It's been the worst bond market in history by a lot of measures. We want to take advantage of that. We think it's gone too far. I
was in Kentucky visiting clients actually yesterday. There was a lot of discussion about municipal bonds and there are a lot of
individual and institutional investors that are looking at muni bonds yielded 1 percent at year end. They're now yielding over 3
percent on a taxable equivalent yield. That's about 5 percent. And municipal finances actually look pretty good. The other area
that we're getting back into that looks pretty attractive to us. I touched on earlier it's high yield. You're at an 8 percent
yield. You at 7 percent at the start of the month. You were four and a half percent at the start of the year. A pretty dramatic
repricing. And I think a lot of investors have just fled the market and forgotten that it's a cleaner market. Six percent of
the market defaulted away in 2020. You've got a lot of middle America industrial companies in there with great fundamentals.
To me that's where a lot of value exists. All right. Come back to high yields. But Sarah what about Munis. Because I think your
interest in those as well right. Now for fixed income in general rising rates are going to be a
headwind but similar to Bob we don't see rates rising to the degree that they have. Year to date. So for fixed income there
are areas where you can lean in new municipal bonds do a strong fundamentals at the front end of the curve. We're seeing high
yields and in taxable fixed income. We like corporate credit. Those companies and sectors are strong balance sheets but also
emerging markets and high yield. You're getting a good return now much better than you did in the past. Both with all of those
are areas we like and taxable fixed and munis. So I'm really curious about the high yield because there's a lot of talk about
possible the spreads as they say blowing out and high yields. So you do want to be high yields when that happens. Are you
confident that's not going to happen. And when you have rising rates don't you have to worry about some defaults. You have to
worry about defaults right before recession. And our analysis shows that any back up in high yield credit spreads is a buying
opportunity. Unless a recession is imminent expecting one two years out isn't imminent because we know anything can happen. So
for us credit quality still looks great. The yield is there. There's a lot of money on the sidelines that needs to put yield
into their portfolios. As long as things remain stable we think that money will come in and support the market. Sara you
mentioned earlier some of the equities you're interested in. You mentioned energy. For example you mentioned Microsoft maybe
Costco. What makes you interested in those particular sorts of equities. So within energy we love the fundamentals of the
sector tight supply strong demand produce discipline. Particularly refiners we think can benefit if benefit at this
point in the cycle. Within the bank stocks. We don't think that they're dead. You just need to be selective. Look for ones with
less competition more of a unique business model not only Microsoft but Amazon. They had a very tough quarter but they've
really in a sense overinvested in their logistics. They have not so much control over their global distribution. It's going to be
a positive for them and pay off in the long term. We don't look at Amazon as a post pandemic stock. It's just going to suffer
from your other areas of equities. Consumer staples is an area where people tend to hide during periods such as this. They are
very low growth rates though valuations are high. That's not a place that we'd be looking if you want protection. Look for
those companies with strong dividends where they have the balance sheet strength to continue to increase those dividends.
So while on the on the fixed income side is there a corporate bond sort of tracking of what Sarah just said on the equity
side. Are those the corporate bonds you're most interested in. I think it's just so broad base now. Everything got thrown away.
I wish I could say there was a particular market or sector but everything cheapened up so dramatically. It's just a matter of
going in having the nerve to buy when everyone else is selling and just hanging on for a little bit and ride through the
volatility. But what if in fact there is more of a chance of recession than we're anticipating. How do you hedge against
that. How do you protect yourself Bob. Well I think there are a couple things. One is you have to go up and credit quality
because if in fact we do go into recession then you are going to see default rates go up. Then there's going to be a flight to
quality. So not only do you want higher quality corporate bonds you want government bonds again regardless of the yield. We've
seen that you'll could be anything in the government bond market and then you want to still stay in the dollar. So those are the
kinds of things where you would go to if recession became really profitable near term. So Sarah what about the dollar. I mean we
heard there Mr. Rukeyser 50 years ago. Tell you about the dollar. Boy we've had a very strong dollar this week. We saw
maybe a little bit of a backing off on the strength of the dollar. Would you have a theory on the dollar and how does it
affect your investment strategy. I hate to say anything different than Louis Rukeyser. We're in
the camp that the dollar should remain pretty strong. The US is the safe haven trade. There's so many geopolitical risks out
there from the Russia Ukraine situation to the lockdowns in China and the supply chain issues that they're having. And also
can that monetary policy really have an impact. So we're very selective non U.S. We only like Latin America at this point in
emerging markets. Dollar remains strong as the U.S. raises interest rates. You think that you know at best it's flat. It
likely remains pretty strong going. So I also want to ask you the same question as Bob on the equity side. For example if you
thought there was a larger chance of recession than you've said so far. How would your hedge against that.
Well first of all I think market time is a loser's game. The market can turn on a dime. We've seen that happen consistently
this week so we don't recommend people trying to get in and out of the market. This is where you need to be diversified
disciplined averaging into the market. And then you'd just need to look for those companies that are resilient in those sectors
where they can continue to perform well because they have the profitability. They have pricing power to overcome inflation
strong free cash flow strong balance sheets. That's where we'd be positioned in equities say out of you unprofitable technology
companies where you know you might have they might have a hard time surviving during a deep recession. And Bob sort of finally
Warren Buffet and others have said you want to buy when others are selling in the reverse. Right. Right now as you look at the
marketplace where people selling that you'd like to buy they're making a mistake. Well I think we've talked about corporate
bonds. I think that was a big mistake. I think there was a lot of selling of municipals. I don't think that was a mistake. I
think that was the technicals because they had to raise cash to pay capital gains taxes at the start of the year. I think some
of the emerging market debt sectors look pretty attractive to me. I'm glad you raised that because I was going to ask about
outside the United States. You think emerging markets may be attractive on the fixed income side. Yeah. Because they've gone
through a rate adjustment. If you look at the U.S. we've done two rate hikes for 75 basis points. If you look at the emerging
markets since the start of 2021 we've had something like a hundred and thirty rate hikes for a cumulative 11000 basis
points. There are high real yields there. They front run the inflation. They're in a good spot. So Sara same question to you
whether it's debt or equity. Emerging markets do you find attractive. Some people say this is a time to go into them.
Others say they've got a lot of external debt. I mean I agree with Bob and say emerging markets debt over
emerging markets equity. I think you're getting more for your yield. Their emerging market equities are tough because of
what's happening in China the impact of Russia and Ukraine on European equities. We're very selective there. India looks
somewhat fully valued to us. So we're finding most value in Latin America which is out of the frame. It is a challenge for
equities in emerging markets at this point. Let's sneak one last one in quickly Bob. What about China. At the very end of the
week they really cut their rates in particular market mortgages. Is that good news for the world. No it's bad news. And I think
you have to look at it and think that the probability of stagnation of stagflation goes up a lot because they're
struggling with vaccinations. They're struggling with the spread of Covid and mortality rates. They're going to lockdowns pretty
systematically. So the supply pressures are going to continue and consumption will decline.