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I was always good at math, but I really, I just didn’t relate to things that were more esoteric bonds options. And, and that is, you know, the treasuries were so low that you could be, have a 4%, 5% yield, even 3% on a real estate investment and still have a nice cushion over treasuries. I have no family history.
I’m good at math and science and you know, I always had an idea what go into business, but I felt that electrical engineering would be a good foundation. You know, I, it always, I I see different numbers all the time, so it’s always kinda like, who’s math if you will? What’s been been keeping you entertained?
And when you think about translating the S&P 500 PE to an implied equity risk premium by looking at the 10 year treasury yield, you’re 200 basis points below what it’s been for the last 10 years. Tell us a little bit about what you’ve been streaming, what’s been keeping you entertained these days.
But since you mentioned getting return on the risk you take, how do you think about duration when the three-month Treasury is more or less the same or better than the 10-year? RIEDER: Why do you need the price of the Treasury market to the two-year forward or the three-year forward? And I think people underestimate U.S. RIEDER: Yeah.
So I, I did a math degree at Oxford, which is more pure math. You know, pure math can be very theoretical and detached from the real world, and it’s getting worse. Some people look at a casino as entertainment and hey, we’re gonna spend X dollars, pick a number, 500, 2000, whatever it is.
So you go back a couple of years and you could say, “Well, what return is available buying a treasury?” ” And it turned out, if you looked at the market at that time, it was, I’ll call it 1%, five-year treasury or 10-year treasury. It’s just entertainment. We are deposits cost less than that.
September 13, 1981, I think the 10-year Treasury was 15.84 percent 10-year Treasuries, it is nowhere near kind of the situation. KLINSKY: Well, that’s why I tried to say my first day at work, intra-10-year Treasuries were 15.8 RITHOLTZ: So it’s different math then I need 100x winner versus 99? RITHOLTZ: Yeah.
And I was a math nerd as a kid. He developed the Ginnie Mae contract, which at one time was a big thing in treasury bond contract. What’s kept you entertained these days? It was the kind who thought it’s cool that 1, 2, 3, 4, 5, 6, 7, 8, 9 times eight is roughly 9, 8, 7, 6, 5, 4, 3, 2, 1.
Not only did he serve on the Brady Commission looking at the ’87 crash, but his history of investing and trading and public service, both at the Fed and the Chicago Board of Trade and Treasury Department, really unparalleled, as well as just a pretty amazing track record as an investor and trader. What did you find? RITHOLTZ: Right.
And I literally just started putting adjectives and nouns on piece of paper, trying to figure out like how do I describe the work that I think I should be doing, and that hopefully, people find at least entertaining, if not valuable? NADIG: Well, I mean, there’s like TLT, with the big Treasury funds, LQD and HYG. NADIG: Right.
Jeffrey Sherman : Well, what it was was, so I, as I said, with applications, there’s many applications of math, and the usually obvious one is physics. Barry Ritholtz : It seems that some people are math people and some people are not. The, the math came easier. And I really hated physics, really. It’s so true.
I’d been ranked i i back in the seventies, if you can do the math. When you look at the, well-known economists who came of age during the inflationary 1970s, I’m thinking of like Larry Summers former treasury secretary, they see inflation as structural. Starting with what’s keeping you entertained these days?
They don’t let the reporters into the fun stuff, but it’s a bunch of CEOs with Steven Mnuchin, the Treasury Secretary, and they’re all yakking about this, the big theme that year, as it often has been since then, was environment, ESG, and they’re all talking about the kind of corporate babble that you hear at these things.
We participated in that with treasury and FHFA and the regulators, the White House. We ask all of our guests starting with what have you been entertained with these days? So I’ve seen all of the, the pre the, you know, the, the prequels and so forth under, on the entertainment side. 01:03:39 [Speaker Changed] Oh, wow.
In fact, I think Secretary of the Treasury at the time said the market will work out these things and they will not become a problem. What’s keeping you entertained? And there really was a sense during the late ’80s, especially after the crash of 1987, that we really don’t want to meddle with this. RITHOLTZ: No.
I started out math and, and physics, and in high school I was a rock star in math and physics. And it covers the spectrum of fixed income from treasuries here to high yield there, and everything in between. I’m like, ah, we get six and a half, seven on the treasury. But those guys are great, right?
So this is the math that I applied. So think about this, do the math. LINDZON: But that math, if you really put it in a calculator … RITHOLTZ: Becomes a problem. I never thought I’d be, I never had owned a bond or a treasury. What’s been keeping you entertained over the past couple of years?
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