So Chris let me start with you as the bond guy here. We saw the yields really shoot up. They've settled back down some. They're
staying pretty under three so far as we can tell. Is this the time to be investing in bonds.
David I love that clip. Thank you for showing that because I remember that show I made my wife delay our dinner out on Friday
night just so we could watch Lou. My favorite coverage all the time. You know I'll call Howard Marks here. If you buy bonds and
can hold them to maturity that's a good safe investment. And you can get high yield bonds north and 7 percent which is a good
return. The problem for most of us is we have to mark those to market and the Fed is going to raise rates consistently because
now unlike 1984 we do have inflation and the Fed is trying to fight it. So bonds I think at this point I would be underweight
fixed income and I would not try to hold the bond because I think yields are going to go higher and higher which is going to
drop those prices lower and lower. This is a time where you need to find a good long term but safe and boring investments. So
when I think of Sarah and always buying kind of stocks what kind of exploring are out there.
Oh I love being associated with boring. Well but is asking what kind of boring stocks are there out there Sarah. I couldn't find
some forest. Oh of course I have a whole portfolio of them. But what it isn't boring is what's done so well this year. Energy. I
would have had all through fruit thrown at me two years ago if we talked about oil and gas stocks. And then you have all the
other defensive utilities at the metals have done well and the consumer staples. And what has been a disaster this year to date
has been the prior darling. The information technology sector is particularly bad outside the US and and terrible in the US.
Second only to consumer discretionary. And they both have their multiples massively contracted. But in that rubble of I.T. the
information technology sector they're so fantastically defensive companies we call them value tech. And again the John Tucker
that companies like Pfizer which is one of the we think the best financial technology companies they provide and merchant
acquiring bank processing software they're critical for banks and credit unions to run their run their transactions. And that
means the business is really sticky and the multiples on the stock is quite low. The managements excellent. They made a big
acquisition. They're paying off the debt associated with that. It just goes under the radar. But for every one of those
transactions there's a fee. And so it's it it's one of these wonderful dull businesses. And it generates so much cash. And
that's exactly what we're looking for now for clients are businesses that can just ride through whatever the economic
environment is ahead and and deliver. And that creates less volatility and some downside protection.
So Chris is good to you. Boring socks. Well it sounds good to me as steady cash flow and the kind of
stock that Sarah is describing I would describe also as infrastructure. We do those kinds of investments. So outside of
the equity market when you own a pipeline or better yet you own electricity line you own a toll road. That's steady consistent
cash flow really pays off. And real estate in this kind of a market I wouldn't be a big buyer of real estate. But if you've
got it and you can hold it then you've got some steady cash flow. So those are the kind of things that help you through this
type of the difficult market. All of those levels of uncertainty is not just the Ukraine war or the struggles with China.
And I think it's a real challenge when you look around the world to find those kinds of investments. Sarah you invest in the
emerging markets. You know are there those kind of boring yield opportunities in E.M. countries.
Not many. Because people tend not to go to high risk geographies to get boring. They want growth and they're willing to take some
risk to get it. But you mentioned China. Chris in China is fascinating because China in a way is ahead of the rest of the
world in terms of earnings downgrades. We've had Covid arrive later and it created major lockdowns in Shanghai and Beijing.
And you have like 50 million people were stuck in their homes. More than that. So all of that has created a real impediment to
economic growth and hence the earnings downgrades and the stock market was absolutely horrible. So the Chinese companies trading
in Hong Kong the ones trading in the US in 80 hours and the ones trading in shares in the Chinese mainland exchanges all of them
terrible. And this is a rare opportunity in China being the largest component of any emerging market index. That just means
that the indices have fallen. But there is the potential for significant recovery because the only central bank globally is
engaged major central bank engaged in stimulus. Now not tightening that stimulus is China's.
So one thing that certainly was not boring this week was ESG investing where we had some very senior executives lose their
job over it. Lot of accusations of greenwashing whereas ESG investing. If Chris would start with you. What do you think
about ESG. Is it here to stay. Is it really having a tough time of it. Oh there's no question it's here to stay. But David let's
get away from the initials. And if I mentioned to you long term business risk everybody and every CEO would absolutely agree.
Yes there's greenwashing. But the question is and you let him show with it on one hand you have us sending weapons to Ukraine.
But then the horrible school shootings. And as a as a fund that represents teachers which were offended by the lack of federal
follow through on gun control or at least a better sustainable industry there ESG is absolutely a reality. Whether it's
environmental social or governments. And I've been saying for a long time David that climate change is real material and it's
going to massively impact our lives in the next 10 years not in the next 20 a willing 20 actually but definitely in the next 10.
And people have to realize that. So you know I think people like Sarah really have to think about what I consider sustainable
questions for companies about how they operate today and are they going to be able operate into the future. Chris it's so
much more than that. We've had to prove to our clients that these criteria that again as you rightly know we've been using
this that active management is all about finding better managed businesses that treat the environment appropriately that don't
abuse our employees that are governed so that they they reward shareholders above all. But
we can't have companies in the portfolio that don't perform. So using these ESG criteria to isolate those stocks they're going
to outperform their indices. That is the holy grail. That's what everyone is working on now. And that's why we've hired a number
of people to do that. We're focused on all of our research. But what's different now is it's one thing to investigate and use
data and say all right these companies are doing a better job at another to push them this at this active engagement. That's
what's different now is leaning on the management teams and the boards of directors to clean up their act become more for
example environmentally friendly amongst a whole variety of demands that we're making because of because of our values even
though they may be our values it's because it leads to performance improvement.
David I think you hit it on the head when you say greenwashing CEO words. Words are cheap. They really have to show by their
actions. And I agree with Sarah that engagement holding CEOs accountable making it part of their compensation thinking long
term is absolute critical.