Playing the Greens: Rick Rieder's Market Insights

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And we say we're not in the business of being right. We're in the business of generating return for clients. And those aren't always consistent, meaning the markets can be wrong for a long time. But you have to operate in markets that move on assumptions and interpretation of the existing data. This show spans global markets and institutional investments through conversations with some of the world's leading investment, economic and philanthropic minds. Welcome to the FEG Insight Bridge. I'm joined by Rick Rieder.

 

one of the most influential voices in fixed income and macro investing. Rick is chief investment officer of global fixed income at BlackRock. Additionally, he's a member of BlackRock's global executive committee and chairman of BlackRock's investment council. He has also served as vice chairman and member of the borrow committee for the United States Treasury and member of the Federal Reserve Investment Advisory Committee on Financial Markets.

 

In our conversation, we'll explore his personal journey, his thoughts on today's unusually complex economic environment, AI, and the impact of government deficits. Finally, being an avid golfer, we hear what the sport teaches about investing. Rick, welcome to the FEG Insight Bridge. Thanks a lot. Thanks for having me. Appreciate it. Yeah, we are very excited. Would you mind introducing yourself and BlackRock?

 

Rick Reader, Chief Investment Officer, Global Fixed Income. I run our global allocation business. Yeah, I work for BlackRock. We manage a lot of assets. I'm responsible for about 2.7 trillion of the firm's assets. And obviously, big, big diversified asset management firm manages money from like literally everything from money markets to private investments, the whole gamut.

 

It's a neat place to work. When I joined the firm, didn't think it would be on the scale we are, but we see a lot through the world of finance, for sure. So you joined in 2009, is that correct? I did, yeah. How big was BlackRock back then? Oh my God. I should know the answer to this. I don't know, it's probably a little over a trillion or so. yeah, now it's grown to what are we, 13 and a half now?

 

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Yeah, the firm has grown remarkably. I will say, and I haven't talked about this, know, Griffin, I don't think ever. You know, I remember when we joined and I thought, like, there's a lot of interesting things. I this is one of the places that is, could be the center of finance or is the center of finance. And by the way, I never believe I am or we are the center of finance, but we're certainly around that, the middle part of it. And anyway, I never anticipated it would be like this.

 

By the way, it's not like that's all fantastic. There are challenges you have to deal with and there things that come alongside that. anyway, it certainly gives us a pretty good lens as to where the world is. Well, I was going to ask, so what are the benefits of that? I think you said the global perspective. You're tangential to a lot of things that go on in global finance. So maybe have you expand on one advantage? There's got to be a disadvantage going from 1 trillion to 13 trillion.

 

Yeah, so mean, the big advantage is, you know, I love dynamic environments and I love learning and I always think, you know, I always think when I stop learning then it's over. And, you know, I will say every day, not only are we learning, but like the stuff that comes through the pipeline and, you know, every day what makes, you know, and I'm unbelievably blessed that, you know, I like looking at what's happening in different equities, what's happening in the volatility markets and currencies, what's happening in the mortgage market.

 

Why are interest rates affecting high coupon mortgages versus low? And like the big advantage is you get to see across the broad landscape. And by the way, I just said mostly US, but we also get interesting to see particularly today where there's so many global influences. I meet with investors around the world. I was in Canada yesterday and going back to Asia and to hear the perspective of people around the world and frankly to get.

 

you know, get a chance to meet with a lot of them and talk with them about what are they thinking? How do they think about the dollar? How do they think about their financing? So that's the big advantage. just, you know, I love the finance markets and so, you know, learning and experiencing with people, I think has been phenomenal. The tricky thing is, by the way, the bar is high, you know, because of our scale and because it's like, you got to perform. Like how you work, you know, I work like crazy. You know, the bar is high. Like, you know, if, if whatever reason we're not

 

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doing our job and we're not performing, people have no problem saying, you you may be a large firm, but we're moving on. And so anyway, we got to keep performing. You know, sometimes some of the markets get smaller when we're trying to operate in, you know, including some of the new issue markets when we're trying to get, you know, particularly for deals that are hot when you're trying to get in like that, that can be a disadvantage at times. But like I said, I think all the other stuff, the amount of research analytics,

 

flow in for me, you know that that we got I think tends to you know help relative to those other things but I would say for me the biggest challenge is like I take it really seriously that you know managing money for teachers environment and what have you and like if I fail it's my you know I can't I can't is the answer so yeah so smaller even a trillion is really large but when you're 13 trillion or whatever BlackRock is today well you don't do well

 

That's on the front page of the Wall Street Journal and everything else. So you're definitely getting a lot more attention on that. By the way, Greg, you know, it's a funny part about that. I can came up this week, you whenever there's a headline and something, you know, that's volatile and they say they immediately print who owns it. And the and I'm like, God. And like, by the way, sometimes it's positive, but it's literally like, you know, including, you know, in emerging markets, whatever. Sometimes it's positive. And it's like, my God, these are normal. Actually, it was was it was pretty good.

 

But you know you're going to get and even times where we have exposure to something, but it's actually not that large relative to what our benchmark is. But nobody really cares. And it's like, wow, they own a lot of it. So sometimes we get, you know, we get that headline with it's a bit unfair, but anyway, sort of life. is life when you're a big boy. So I want to spend a lot of time talking about kind of your outlook and views on the markets. But before I go there, maybe one last question on

 

maybe you and your time at BlackRock. Is there a moment, I mean, you've seen inflation, deflation, QE, QT, is there any one or two things when you look back at all your time that had just kind of a career defining moment for you? Something you learned a lot from? I mean, I don't even know how to start anywhere from other than financial crisis like that thing.

 

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my God. I, by the way, it right before I came to BlackRock. I, you know, there's some things, you know, I find, I'm thinking about as we were talking, you're thinking about starting this, you know, you, tend to remember when I lost money way more than when I made it. Like what was the exogenous shock or what is the thing that you didn't predict would happen? And usually when there's a crisis, you can go back to the ones over time. You usually don't get the answer in advance. And, and it's, and you, people are set up for it. And quite frankly, regulation.

 

usually regulates what happened before. So regulation is not prepared for this, for the stuff that happens. It usually regulates for what just occurred as it should. Oh boy, you know, what's the next one? you know, so we spent a bunch of time and quite frankly, one of the things that I have to overcome personally is after you've gone through, and by the way, not just that one, but 1994, 98, and after you go through periods of high stress,

 

We still have to generate return. And so the easiest thing to do is put your head in the sand and say, I'm just going to benchmark index and I'm going to not take risk. And you're not doing the right thing. And, know, I would say it's like with a boxer, it's like you punch in the stomach a few times. You don't really enjoy it, but it's sort of part of the job. And, um, so I don't know why you learn from it, but, you try and anticipate what are the, what are the signals that led to, to a crisis or led to one to a real downturn.

 

And then try and be smarter around around preparing for it, but they're generally pretty hard to prepare for. Yeah. The GFC was something, especially being at BlackRock at that, at that time. And so your other, your other point, which I love is you got to look forward, right? You can't invest looking in the rear view mirror. Totally. And, know, I think particularly people who haven't been through crises, you know, there tends to be a willingness to take more risk. So by the way, we're in a competitive world. And so if you're competing against people who haven't actually taken, who haven't seen risk go down aggressively.

 

You got to stay up with those people while you're trying to prepare for the downside. So we live in a very competitive world. Obviously, we're trying to create the right return for clients. You got to be in it. Like you got to be in it and willing to take the punch when it's coming. And by the way, when I say take the punch when it's coming, we do so many things. And I think what I learned around that period is what's your exit strategy? How do you manage downside? How do you think about liquidity? How do you think about, you know, are you diversified enough? Where's exogenous shock possible?

 

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You you pick up a bunch of things to help you be prepared so that, and you know, we saw it in COVID, I think we did okay. You know, because some of the things that we, you know, we're good about, how do you manage liquidity, diversity of assets, et cetera, hedges. Certainly GFC. I remember that. think everybody who is investing remembers that. And as we segue to today, hopefully that's not a good comparison point, but I do want to talk a little bit about the markets here in, 2026 and in reading your, your market outlook.

 

which is probably, cause this is kind of like late 2025, you talked a lot about the data fog that we had due to the government shutdown. As we start the year, are we still in a data fog? I mean, I think we're pretty much out of it. You know, we're getting more and more data that is now more normalized because then you get the catch up and the, so we're getting more and more data that's, that is normalized. So I feel better about that.

 

You know, I'll say one thing about that's fascinating about markets I've learned over time that the markets tend to react to the big published data. And so we've spent a crazy amount of hours looking at high frequency data using AI, et cetera, and strip things off the internet. And we scrape a bunch of data and try and understand like what is true inflation? What is true payroll growth? But it's fascinating because the markets only care about the payroll number, know, overstating a little bit, or they only care about the CPI report.

 

It's like it was point three two or point three one. That's what they care about. And so we have to operate in markets where they really don't care about that one number. So that that data fog around those numbers. Well, I actually felt like we had a pretty good read on the economy and inflation that were better than anybody else. But we had a pretty good read on where it was. But it's actually the markets tend to react and you see why volatility was so low during that period, because markets tend to react to those big published benchmark pieces of data. And so now that we're getting those, you know, then we

 

You know, get some of that. That's what will move markets. So there's always this balance of, think we've got really good information. We go through tons of earnings reports. I think we've got pretty good information. But then what is the market going to react to? And started trying to balance that as I think a big deal for transactive markets. That's the beauty contest, right? Going to feel what the market is going to...

 

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think is beautiful and not just what you think is beautiful, right? I always say we're not in the business of being right. We're in the business of generating return for clients and those aren't always consistent. Meaning the markets can be wrong for a long time. And, but you have to operate in markets that move on assumptions and interpretation of existing data. As the data fog has cleared, what are you seeing? How's the economy? I'm pretty blown away by it. Like I think we're going, we're watching history play out. I think we're watching a productivity boom of

 

extraordinary proportion that is not that people say, that's AI. And actually, I think it's way broader than AI. I think it is how companies manage inventories, receivables, logistics, automation, customer procurement. Like, I think we're going through something like technology is going to a level that I think is pretty unbelievable. And it puts us in a place where, you know, talk about the big challenges, you know,

 

What does mean for labor? Which I think is a very, very tricky thing. I think we're going to grow faster than taking the entire labor force alongside of it. And I think that is the biggest challenge. I think you're going to have an economy that operates at a good level because it's driven by consumption, but only by a portion of the population that can spend. then, then quite frankly, a lot of capex from infrastructure, AI, cetera. So really good economy and aggregate.

 

not a very diverse economy and not a very deep way in terms of breadth economy today. So I think this year we'll grow at 5 % nominal GDP, pretty good after years of doing that or higher than that. So I still think we're in a good economic environment. I just think it is, you know, this incredible dispersion that is, quite frankly being in the interest rate markets and you know, the interest rate tool doesn't work like it used to work. And it just doesn't, know, the companies that spend on capex

 

If the rate is 50 base, it's different. It's not like we can't order chips. And so it's a very, very different framework for how policy works. there a historical analog for a kind of an acceleration of growth without an increase in employment? I mean, this could be a jobless recovery. Well, how do we think about that? I'm sure I'm wrong, but I don't think so. Every technology that's developed

 

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Even, you we go back telephony, transportation. I've been the one that people never talk about is actually that is at a remarkable. I read an incredible report about air conditioning that had was one of the most trends because brought the whole South into commerce. It's pretty adult Southern part of the part of the world. Anyway, but all of those enhanced production and develop an economic growth and that move people to different forms of labor alongside of that.

 

This is the only technology that I think we've ever seen that is designed specifically to replace cognitive thinking and human labor. And whether it's robotics, automation, and you know, we're in a mode today that I think people underestimate that companies are driving in aggregate, good revenue growth alongside a good economy, but earnings growth is fantastic because they're cutting their cost infrastructure. And you see all this &A that's taking place, not all of it, but a lot of it is

 

I can, I can, I can grow my moat, can use more data and I can create synergies that don't require such a cost infrastructure, including people. So I don't, they're parts of it in other cycles in history, but I don't think anything like this. other question I wanted to ask too is, all of this kind of predisposes that the productivity boom comes through AI and the build out of all this CapEx data centers that we're seeing. Is there a risk that

 

we build it and don't get the productivity or maybe better said productivity and monetization. Totally. And I think there's a different, so I think the productivity will happen. The monetization or the return driven off of the amount of CapEx that goes in, that is questionable for, for, I, my guess is generally yes. You know, is it enough? mean, would it, would you have invested in that much knowing what the IRR was? I don't know.

 

I'm convinced the productivity is dramatic and whether it comes through traditional AI or it comes through software implementation or, but I'm pretty convinced. I mean, it's just, pretty blown away. look at things like autonomous driving and there's 4 million people in the country that are in attached to driving in some way from trucking to taxi, cetera. I mean, the autonomous driving is nine times safer than human drivers. And by the way,

 

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I've driven in my car in full self-driving a bunch of times. I swear to when I go into high traffic areas, I feel safer having it drive than me, because it's got to have 50 cameras or something. anyway, point being, it's a metaphor for I'm convinced we're going down to a higher productivity, similar to things like GPS technology. Nobody really talks about how incredible that was in changing so many things. Your point about is the return representative of the amount of money that went in, think that's something we're all going to learn together.

 

In terms of just AI, sticking on that a little bit, you're a fixed income guy, right? A lot of this is being fueled by the tremendous cashflow of the Mag-7, but these CapEx plans are so large that they're starting to turn to the debt markets. What do you think that the impact will be of AI on the corporate debt markets?

 

Yeah, by the way, I've run very big equity portfolios, which by the way is very relevant to the question because I've historically, I have this belief that you're supposed to buy technology and equity and you're supposed to buy things like utilities, telecom, magnifying in debt. But actually now there's something, something that's pretty wild. I think this issuance that's coming, particularly from the hyperscalers, if you go back in time and look at heavy industry, automobile, energy,

 

communications, telephony, like that was, those were the big issuers that were building out their CapEx. I actually think the hyperscalers are the same dynamic today and the differences coming into it, they have no debt today. So while they're going to issue a lot, know, I looked at if you take the top 30 companies attached to AI, they've 45 % of the market cap of the S &P 500, 45%, they're only 3 % of the debt.

 

So meaning they're going to issue a lot of debt. And the point you made, their cash flow and their free cash flow is so high and the cap structure is so under geared, under levered that I think it's a, we've quite frankly, we'd like to buy it and A, to diversify our portfolios, B, because we think those are the safest, literally some of the safest companies in the world now and most stable. For many of them, the breadth of their business is so extensive that they become

 

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You know what was, you know, we all know the big auto companies of 20, 30 years ago. know you're an equity guy, but I always think of you as a fixed income guy first. It's definitely much more fixed income. That is totally fair. But you're also an asset allocation guy. and so maybe playing on that, just AI, just the last little bit is if AI is everywhere, if it's in your, your equities, if it's in your bonds, if it's in your real asset portfolio through power generation and data centers.

 

Like how do you get proper diversification in a portfolio? Is that, is that a risk eventually? Nobody really talks about that. It's a big deal. It's a big deal. It's like, I will just tell you flat out, you when our global allocation fund, I'm super proud of, you know, we've had some really good returns and I'm proud of it. And I, I know it only matters since, the year is not that it's still young. So it only matters what we're doing now, but you know, I think about it a lot.

 

Like you know, having a 5 % position in Nvidia and 4 % and by the way, not gonna say anything, that's what the index is. Like we're not that far from index in some of these exposures and like the comment you made about you own it and now it's increasingly the debt side. It's something you have to manage. So I will tell you flat out, the reason why that question I think is such a good one today. We've spent a bunch of time in the last few weeks, particularly thinking about 2026 and a bit more balance.

 

So meaning, if you think about, gosh, you got AI and you got the infrastructure and you know the big high profile companies, but what are the picks and shovels around infrastructure, who benefiting from the developing it, parts of healthcare, either the financials, if you believe you're going to have M &A, et cetera. So we've been on a mission over the last few weeks to say exactly what you made. Can we create a bit more balance?

 

across our portfolios. And so while on the debt side, we're increasing, no doubt, like you said, we're increasing our investment there. On the equity side, we're actually creating more balance, particularly if you think the economy is doing okay. You know, some of the mid cap equities, you know, we do some small cap, but it's the amount of work required for, you know, tiny market caps to move the needle is pretty hard, but we have been doing a bunch to try and create more balance. I mean, the equity market is so dominated by the mag seven, but I mean, I guess maybe

 

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good news is we're starting to see a little bit of expanding breadth, although it's kind of early days. So hopefully that that continues because otherwise you're just a few companies. Totally. By the way, there is an argument that AI in some ways levels the playing field for a number. I don't think it's for many companies, but I think it does level the playing field of your ability to compete for some businesses. in fact, in

 

places like in some of the industrials, the specialized industrials, particularly ones, you know, where you don't have many competitors in the space already, but your AI allows you to be competitive in, in some. So, you know, we spent a bunch of time to figure it out, figuring out where that is. Cause there are some places where it democratizes commerce in some areas. we're talking about AI debt there for a little bit, but let's talk about government debt. We got a lot of it. We got a lot of it here. We got a lot of it everywhere around the world.

 

China might actually have more debt than we do if you kind of add up all the off balance sheet items. Are we entering kind of a period of like fiscal domination where it's just a different market than it has been? The debt's too big. mean, so there's something that gives me a bit of comfort that it won't blow up. Some of it like we've seen over the financial crisis. There are four forms of debt in economy. There's consumer, household debt, financial debt, corporate debt, and government debt. Today,

 

Financial debt's in pretty good shape. are good shape. Corporate debt generally is in good shape. Household in aggregate, I think, you we have a low income problem. It's all in the government. And the government's the best place to have it because you can tax and there are whole series of things, can sell assets, et cetera. But it's too big. And it's just, I mean, it's reached a point, I would argue, the size of the debt we're rolling, 560 billion a week in the US. And people say, it just sounds like numbers.

 

160 billion is like, you know, I would say it's like literally rolling Singapore. I every week and it's too, it's too big. And by the way, 89 % of it is two years in in. So you think about like, would you run a company and say, you know what, I'm just going to use the front end of the curve to finance everything. It's too big. So I think it's a really important point that over the next two to three years, the economy has to grow. And the only way you overcome the size of the debt.

 

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is your nominal GDP has to be over the cost. So I think the feds got to keep getting the rate down and then we just got to grow. I mean, you only have to run like a powered, high octane economy because there is no other way. it's certainly, when you're driving that fast, it's harder to see around you. so I do think it's something we look at a lot.

 

And, know, of why, you know, I look at how much long end interest rate exposure do I need when the volatility is high and if something is a problem. So, you know, we definitely try and manage around that because this is very different period than we've seen in the past with this sort of debt.

I was kind of getting to, at this, maybe this crossroads between productivity growth, which can be deflationary and just growth by itself. And especially lots of capex, which is inflationary and

 

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You also have unemployment. how does the, just as a general, how does the federal reserve balance the idea of inflation and unemployment? And we have a dual mandate, but does one become more important than the other? Labor. And I, you know, I think, you know, one thing I think that has to evolve is, you know, this idea of data dependency.

 

You know, one thing I believe is whoever is chairing that Fed, you know, if you were in the markets and you reacted to the data from the past, you wouldn't do a very good job as opposed to anticipating, you know, we're doing markets obviously is you have to think about where we are today and where we go. Where's the train going? I think it's a labor issue. think productivity, the end result of productivity is lower wage costs and,

 

Lower frictional costs across virtually everything now there is you got to balance that with a little bit of de-globalization That's coming it that's coming to the equation But I you know, I personally think I mean if inflation is running three or is running three or below That's not an infectious. I mean post-covid we're running depending on the measure six seven eight three or below and By the way, when you when if you run higher nominal GDP, which is real plus inflation it diffuses the debt the impact of the debt

 

So if we're running at three, I'm just not that worked up about it. You can see all the numbers around inflationary expectations. They're all low, like five-year inflation expectations are around 2%, a little above 2%. I just think it's, like we got to, and I think it's really important, you know, go back to your question about the debt. We got to keep nominal GDP up. We got to put a lot of people to work. We got to keep growing. And to me, that is...

 

And, know, as long as you're managing, and I think there are tools that the Fed has to manage inflation, the money supply, if you grow the money supply, you know, similar to what happened post COVID, which was the right decision, but can you keep the money supply contained, et cetera? So I think using all your tools to make sure you have one eye, I would say maybe not as much as one eye, but partially looking at inflation. But boy, I think what you got to do is if you get the rate down,

 

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It doesn't cost the taxpayer too much money because 89 % of the debt's two years in end. And then B, we just gotta put more people to work. We just gotta put more people to work. Grow your way out of it. I think so. By the way, if you said, here's the plan, I'm gonna put on a ton of debt and I'll grow my way out of it, you would say, I don't wanna go down that path. It doesn't really matter what people said was a good idea or bad idea. That's where we are. I hear people all the time, like, we're in a bad place. Like, okay, so what are you gonna do?

 

And the, you know, I think you just have to address it. You have to address it head on. the fixed income side. I think you favor structured over corporate. that? I do. Why do you like structured over corporate areas of the structured market? like better? So yeah, I mean, and by the way, that is a recent comment in that there are a couple of things that have happened. Credit spreads have gotten really tight. Like you were describing earlier, there's a lot of issuance. It's going to come.

 

Particularly think about it in portfolio concept. Like if I own corporate equities, corporates and equities, and I also own corporate credit and the spreads tighten corporate credit and my upside in corporate credit is not that much relative to what I can get in equities. do I need that much of it? You know, one thing when spreads were wide today, the difference in owning like things like agency mortgages, which are more liquid. And, so why not just own that it's more liquid and I, you know, I can manage the convexity around it. And then.

 

You know, one of the things that in the security securitization market, whether it's residential real estate, commercial real estate, you know, we do a lot where, you know, we pick where on the cap stack we are, what is our structural collateral, cashflow sweeps, et cetera. And the extent that you know what your assets are and can manage them specifically and diversified. So for example, we buy a residential mortgage pool, regionally diversified. Like, you know that, you know, it's not all going to

 

unless you think rates are really going to spike, you can manage your risk more effectively that way. So we've moved more to, and by the way, a little bit to EM as well, because a yield is so much better. As long as you believe the dollar is contained, which I think it will be, EM gets a better yield than credit does now. So by the I don't want to overstate it. I still like European credit. I still think we own some European high yielded investment credit. I also own US high yield, just less.

 

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than we've had. you're on the structured side, you tend to be much more consumer facing. Is there a risk in a K-shaped economy more than the corporate side? You some good questions. think the, yeah, so exactly right. mean, so things like subprime, you know, tend not to be where I think the stress is today in that lower income. You know, things like subprime auto.

 

By the way, things like credit card trades too rich, relative, and by the way, credit card will be fine and aggregate. But yeah, we tend to be in the area. So you think about commercial real estate, like fully leased up New York City Class A property, some of the logistics, warehouse, finance, et cetera, in Europe, some of the office logistics. But yes, the places that you have to be a bit careful are things like subprime auto and places where

 

where the consumer I think can have some stress. And so yeah, we've spent a bunch of time. By the way, you also think about within those areas, are you going to be at the top end? Do you want to be in the triple-H runs? Do want to be in Mez? I'm comfortable in, for example, we do warehouse financing guaranteed by big companies. I'm comfortable owning Mez or a little bit lower rated.

 

You know, and some of those where I'm worried a little bit about consumer slowdown will be at the top of the stack. the corporate side, is it structured? Probably your top, right? Below that you're like, know, corporate and the corporate side, you favor some of the European side and then a little bit of high yield, is it? US. US high yield and any industries you're focused on or avoiding?

 

Yeah, I mean, so on the like on the loan side, I mean, we've definitely we've scaled down a little bit of our loan, you know, whether it's some of the traditional businesses like packaging, retail, auto in some places, cable that we deemphasize. I think I said software like some of those areas we've deemphasized a little bit, you know, generically in high in you in US high yield. Like I don't I don't find the need to thrill seek and triple see high yield that I just don't feel like we need.

 

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We need to get that yield. and so it tends to be, tends to be more in the higher quality parts of high yield today. Um, and then, you know, say, try and, try and avoid some of the, some of the stressed areas, particularly in loans where, um, where I think, where I the gearing is a, uh, is a bit high. EM side, you mentioned that this is all predicated on, on a belief that the dollar won't rally. So you kind of feel that on a relative basis, the dollar is going to, going to be where it's at or.

 

potentially weaken more, is that the general view? I think it's a reasonable bet to say that because of the debt in the country, that I think it's a reasonable bet to assume that countries, when I travel all over the world, people are definitely diversifying their holdings, not selling dollar assets, but definitely diversifying their holdings. And so my sense is the dollar will be around here to maybe a bit softer.

 

And all I need in the end with these yields, as long as I think the dollar is relatively contained, and by the way, a number of those central banks around the world are actually moving, cutting rates because inflation is coming down. we feel like you got, as long as you want to take, when we do some hard currency, but the real yield is in a local currency space, as long as you feel the dollar is contained, by the way, it was the best performing, it was up 13.5 % this year, this past year.

 

You know, I think we have another good year in the end. tend to be in higher quality. I don't really like taking political risk. It was impossible to predict, but we tend to be in higher quality. And I've been the same thing. feel like you get enough yield staying in the higher quality parts of it. But I think I'm telling you, when I travel around the world, the number people want to talk about EM, it's different than the last few years for sure. For sure. And gold, by the way. Nobody wanted to talk about EMD for many years, but it is.

 

It is back in vogue. Is there a risk in that? I mean, you always have that risk off where, you know, the US assets become the safe harbor, even if the US creates the crisis, oftentimes, not always, but oftentimes, is that really the risk is that they just as a risk off moment and you get whipsawed a little bit? Totally. mean, so, you know, we always think about that and that the

 

(35:10.06)

It's part of why this year more than other years, we're talking about balancing your equity portfolio. But actually, it's an interesting thing. mean, volatility markets, particularly in equities, are really cheap. And so what I like doing in those periods, I think it's a bit more ambiguous today than it's been in the past about the flight to US assets. No doubt there is the safe haven to some extent. But if you said to me, gosh, hard assets, things like gold, owning volatility,

 

particularly in things like equities or trades at a pretty reasonable price like that. That's a pretty good portfolio hedge. And so we tend to do a lot in the vol markets. And then one thing I've learned about hedging my portfolio is just own less of the stuff you're trying to hedge. And I've learned that maybe the hard way over the years, just manage your beta as opposed to trying to hedge it.

 

Wanted to kind of take it full circle and kind of go back to you a little bit with a couple personal questions. One, I know you've been very generous with your time outside of BlackRock with a lot of charities and not-for-profit work. Do you want to highlight any, anyone in particular that? I'm a big believer in that, you know, it's not inconsistent with my view on productivity. Urban education, and I've felt this for, I don't know, 25 years. Urban education is the key. And I think we lose a lot of people through this country in that.

 

because our education system isn't where it needs to be. And you look at the unemployment report today, you look at all the lower skilled jobs that are going away. Anyway, think education is the key to freedom. anyway, I'm involved in, chaired the board the last 20 years of North Star Academy and 14 charter schools in Newark and I'm involved, I started the graduation generation in Atlanta. And yeah, I think there's a, I really believe in,

 

You know, you have a chance to, uh, to give, you know, give some unbelievably talented people a chance and, uh, and level the playing field. I'm very simple in terms of my life. don't have that many things that I spent a lot of time on, but that is, is work and my family and golf. Work family. I was gonna say, only are a charitable, you're very sporting and your sport of choice is golf. Are you a better investor or a better golfer?

 

(37:29.218)

God, the investing came up as an occupational possibility. I find golf the most frustrating. mean, I don't know. I can't get better. I don't devote enough hours to it. By the way, I'm a devout believer in the 10,000 hour principle, and that just if you don't spend it on golf, it's just impossible. But anyway, I still enjoy it. I've resigned myself, particularly as I get older, and my distance seems to drop three to five yards a year.

 

And anyway, thankfully I spent more time on the investment side by a lot. We've established that you're a great investor, probably a mediocre at best golfer, but what is the best golf experience you've ever had? So I've had four hole-in-ones. By the way, I played golf with the number seven player in the world. And I said, how many hole-in-ones do have? And he said, three. I said, well, that means I'm better than you.

 

And they and anyway, those are I mean, it's by the way you realize all the ones just total luck. Or as I say, or luck, right? If you could be. Yeah. Except for one of my friends almost killed me when I made one because he jumped me and he was more excited than I was. the I thought those were fun. got to play Augusta National, which. Wow. That was that's like an area. And played two rounds of the first round. I was so nervous that I was awful. But anyway, that that those two and I also think Pebble Beach.

 

I get the chills. I've gotten to play it a number of times. I get the chills every time I'm out there. Those, those are, those are really cool. By the way, I mean, just think being outdoors and, uh, I know. I'm sticking on my head. They, I, I, right, right behind you. Yeah. It's a place I play in Ireland called old head. That is, I just like being, you know, outside and, you know, seeing these vistas and, uh, so pebbles like that old head is old. was like that as well. What's next on your bucket list for golf.

 

I was a place in Ireland called Port. Well, there two places. There's a place in Ireland called Port Rush. They had the British Open that I've never gotten to play that I'm going think I'm going do that this summer. And then there's one in. So I don't know if anybody who's on a call is a member of this place called Sandhills in Nebraska. I've never been, hey, I've never been to Nebraska and I've been, I've been obviously to the golf course, but I'm told it's really cool.

 

(39:40.27)

Any folks listening or watching extended invite, he'd be happy to come to your state and play a little golf. Hey, last, last, last question for you. Let's put a bow on this and what can golf teach us about investing? know, it's a bunch of things. First of all, you know, I've heard the expression golf's not a game of perfect. You know, I'll say one thing about investing. you know, the thing that I've learned more than anything is like.

 

You when the market's down or it's going against you, is you just got to, you know, you reevaluate and you just got to figure out, you got to stay in the game. Like if you made a similar in golf, you make a double or triple, you got to stay in the game. But the same thing in investing. Like the days you lose money, you know, I'm not great, I've said this over the years, I'm not great at doubling down. It's just nothing I've ever been any good at. But do you stay in it?

 

does it provide more opportunity in their things you look at? But I think you got to take it. You're going to lose money. you're not going to be right 95 % of the time. You got to lose money. You got to stay in the game. And the other thing that goes back to 10,000 hours, unless you, I mean, we use AI, we use systems, we use data, we use analytics. This thing requires a crazy amount of work. similarly, if you're the work in, it is...

 

Hopefully you're tilting the odds in your favor just because you're going deeper. It's just kind of a crazy thing. I like reading earnings reports from cover to cover. And you read, what's the company doing on inventory and receivables? And you learn a lot about what's their philosophy. But hopefully AI is going to make it mean I don't have to read it cover to cover. I like that. Spending time and resiliency. If you have a bad shot.

 

You're not walking off on the third hole and you can't do that investing either. So you, heard that from, from Rick here. So I do break golf clubs and I know I better not break my systems here or my boss will fire me, but I do break golf clubs. Hey Rick, thanks so much for sharing some of your wisdom with us and we really appreciate it. Thank you very much. Thanks for having me. I appreciate it.

 

(41:47.082)

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