It's hard to know where the markets are going but the one thing I think we can say is they are turbulent in these turbulent
times. Where do you put your bucks at this point. Where does it make sense.
Well look you're not gonna be able to put your money anywhere that is going to be unaffected by the volatility. So if the
objective is find some place to invest where you don't have volatility that's the zero sum game.
On the other hand equities will go up over time and credit has gotten a lot cheaper. And so if you're looking for incremental
places to invest even large institutional investors you have to be beginning to look at putting some money back into the equity
markets. They're down 30 plus percent and somebody into the fixed income markets. Spreads have moved out pretty dramatically
but you're not going to be able to do that without volatility and you're not going to do that with probably without additional
drawdowns. So you need to be cautious about how much you commit. And Jillian I wonder is it going to be able to do that without
additional risk. I mean Peter says that credit is cheaper now. It's a better buy. You can get better return. There may be a
reason for that. What is the risk of default. We haven't had defaults in a while now. Well we going incredibly retro in all
kinds of ways right now. You haven't yet got the sideburns unfortunately David but I hope we see that soon. Well your
former host. But you know one of the things that investors have not had to
worry about for a very long time are corporate defaults and risks in the high yield market. And we're still not seeing that
the default rate right now is incredibly low in spite of all the falls in the equity markets and concern about recession.
But what you'll see a number of bankers and lawyers and others talk about is a likelihood that as rates keep going up we're
going to start to see more more pressure on risky companies. Now it's hard to predict exactly when that it's going to strike
because most risky companies miss high yield companies or leveraged loans have been essentially refinancing themselves or
locked in financing for quite a while. So they really only begin to bite when the refinancings come up. And that's the sort of
stock a timetable they will because each company is different. But when you do see those refinancing occurs you could cause
these very nasty shock for investors and you already seeing the high yield bond market react to that. But in some ways that's a
clue as part of the markets where you've actually seen a reaction to the tightening of liquidity conditions. So that is
absolutely something the investors should be looking to in the next year or so as one of the big risks that are waiting as
well. Peter I wonder if we're getting an accurate read on the full market right now in this sense that back in 1985 by the way
I was just starting law school. I did have sideburns. For the record there were quite as well. But I did have them. But one
different thing David. Exactly. I try to bring it back a lot wider that now. But. But Peter I wonder at one of the changes
that we've seen since 1935 is how much the markets are private rather than public. We've seen a big shift. And I wonder whether
we really are getting an accurate read on all that private capital. No we are not. By the way I never had good sideburns.
Such went well with a beard. But with regards to the private markets I think that that is a serious problem meaning that we
we know for a fact that private markets lag public market valuations but is also a fact that the assets owned in private
hands are also being affected by this market change. You cannot have this change in the interest rate construct that I spoke
about briefly before without affecting values. So private equity assets are going to decline in value. I've already gone down in
value but haven't yet been adjusted. And those adjustments when they occur are going to cause stress for investors. In some
cases they could cause liquidity issues. In some cases they may actually make raising additional capital much more challenging.
And in some cases it could cause defaults and ultimate bankruptcies.
So that that whole private credit and private equity sector is a place where we need to be focused on risk rising substantially
and potential stress coming from a mark to market of those assets. Julian these days we can't have a real conversation
investor without talking about China and one way or another. Of course we have the anniversary 25th anniversary the handover of
Hong Kong right now going on with President Xi in Hong Kong. Is China a place that's attractive potentially for investors
because they are going the other direction from the United States in much of the West. We're tightening. They're actually
loosening. Well absolutely. China is something of an enigma in many ways because yes they are going the opposite direction from
most other markets right now in terms of loosening. There is great pressure on President JI to ensure that he tries to hit
the GDP growth targets because he has the all important party Congress later on this year. And all the signs are that because
of the Covid lockdowns they are in danger of missing the growth targets. So President Xi has every incentive to try and
stimulate the economy going forward in the coming months. The problem there really is threefold.
Firstly we don't know how China will respond if there are more Covid outbreaks on the lockdowns in Shanghai have been very
damaging but thus far there's no sign that the government is going to back away from those. If there are more Covid
outbreaks. So that could certainly upset the economic figures. And of course China is exposed to the wider global economy as
well. So yes China could be providing some growth for the global
economy going forward and offsetting some of the problems in Europe and the US. But the one thing that's clear we cannot
expect China to do what it back did did back in 2008 which is to provide a real motive for global economic growth that drags the
other countries out of a potential recession. Peter what about it. You've had a career now investing your way other people's
money. Is that a place we should be putting a letter now going to try to.
Can't be sure. China right now. Just can't being long. China's a challenge for sure. But being short I think is a is a very big
risk. Look I also think investors are somewhat circumspect about the motivations of the government with regards to the external
investor. How will they treat the bond investors. How are they going to treat equity investors vs the regulation and changes to
companies inside of China. We thought early to be leaders and real growers. Those those issues still remain. But China's a
huge market very strong economy when it starts to grow. It will come back. Covid will get resolved. And it's still in China
still provide significant exports to the world and buys significant imports. So I think as an investor it's very very
challenging to be short China and I wouldn't be OK. Let's get the last minute here to the European amongst us. Gillian what
about Europe. We'll get to shaping up in Europe as ever is a varied mix of some places like the UK which
look really pretty soggy right now to use the wonderful British phrase you've got other parts of Europe that are doing better.
But the one thing I want you to realize is that Europe is very vulnerable to any retaliation or any more retaliation on the
energy front as a result of Russia's invasion of Ukraine. So Europe as ever is unlikely to
go completely off a cliff but is it likely to boom. And so there is growing concern right now about the price pressures building.
And you know that isn't the base safe haven either. I guess the real message from all of this is that right now we're not
dealing with a beauty parade in terms of decisions about where to put your money. It's really more like an orderly parade which
is an ugly place and probably the only best option out of all. That is a classic investment advice of diversify. Hold your
breath and looked at the long term.