An interview with Tony Crescenzi, Executive Vice-President, Market Strategist and Portfolio Manager with PIMCO. Want to know if we are headed into a growth recession and what that is?
FOR THE FULL INTERVIEW PLEASE LISTEN TO THE CM GROUP- FREE LUNCH PODCAST, EPISODE 152 “ARE WE HEADED INTO A GROWTH RECESSION?”
Colin and Greg: We're really pleased to have a great guest join us today. Tony Crescenzi is an Executive Vice President, Market Strategist and Portfolio Manager in the New York office for PIMCO. And prior to joining PIMCO back in 2009, he was chief bond market strategist at Miller Tabak and worked for Lehman Brothers and Prudential. So obviously he's got some experience. He's also written six books, which is six more books than you or I have written, including The Strategic Bond Investor and Beyond the Keynesian Endpoint. He regularly appears on CNBC and Bloomberg Television and other financial news media. And now the highlight of anyone's career. Greg, a guest on the Free Lunch podcast. So Tony, welcome to the show.
Tony: Thank you, Colin.
Colin and Greg: Let's kick it off. Tony, just a quick question, which is not a challenging one. We're interested in how you ended up where you are today. You've got obviously a long and storied career to date. Catch us up a little bit on how you got here so quickly.
Tony: It's 40 years now. March 28th marked 40 years since I began on Wall Street at 115 Broadway for Prudential Securities. It's feet from Wall Street. It was a room with lots of brokers, as they call them, but now they're called financial advisors. In fact, they were more brokers then when what mattered most was simply getting a ticket, a trade ticket to earn commission. Those days are long gone and for the benefit of investors, because today an advisor is truly an advisor well-versed on many different matters. So I started there. I went to Lehman Brothers, worked in the 104th floor of the World Trade Center. Marvelous experience, then to Miller Tabak, a boutique firm, dealt with hedge funds, and big firms, including PIMCO, did a lot of bond market type stuff investing for clients, trading futures and bonds, and began to get quoted a lot somehow kind of feeds on itself in the media in the 1990s and kept going and would write a lot. I'd like to write ever since second grade when I spit out a bunch of book reports more than the teacher wanted. I've been writing and I wrote a lot in the 1990s and would write notes on the markets and I would send it to lots of people, including to Bill Gross, the founder of PIMCO.
In the 1990s. I simply saw a check mark on Bloomberg that he picked it up. I was super excited. I was like begging the elephant, as they say, seeing the movie Wall Street. Somehow, ten years later, he had people call me and said, Do you want to come interview? And since you're working in New York, out in Newport Beach. So I got interviewed there and picked up, so to speak, and it's been a great experience traveling around the world for PIMCO, seeing the biggest investors in the world, large and small, though I've seen and been to many events with direct clients, meaning it could be a doctor, a dentist, a bus driver. Et cetera. That have money invested with PIMCO. I've seen many, many people around the world and I always start. And the final words, I think the allure to me of Wall Street is not the dollars and cents. Of course, that's important, but it's in how you can help people. Because if you managing money for a hospital, for example, as we do, you're helping that hospital to take care of patients better. Et cetera. Et cetera. There's so many stories behind the monies we manage. Millions of investors affected by us. So I take it very seriously. That's where we are today.
Colin and Greg: I think you make a good point there. And Greg, I'm going to cut you off here just for a sec. Sorry about that. But I was hanging out with a friend of mine who's an orthopedic surgeon, and he was telling me how important our jobs are. I found that very interesting.
Tony: It is. I mean, that doctor, if you help him somehow, it's helping his life in one way or another in ways we can't imagine. Maybe it pays for a wedding or college education or philanthropy or what have you, and enables a better retirement for individuals. So it's vitally important to people's lives. And I try to impress that upon the young. And I'm not part of the young anymore at age 59. So I try to say to them, you've got to think about the end client because they are what matter most. And so that's why performance matters so much.
Colin and Greg: Right on. Well, listen, before we dive into some questions about the markets and things, can you maybe just expand a little bit for us on when you're not spending your day on podcasts? Like ours. What does a market strategist do? How do you spend your days?
Tony: Well, today would be a good example. I attempted to watch Elon Musk launch a spacecraft, but they abandoned it. I was watching the live casting of it, but it eventually got scrapped. Looking forward, as I did in the 70 seconds, seeing the Apollo astronauts land. And I wanted to be a land on the moon and I wanted to be an astronaut. Back then, I so on a tiny black and white television looking forward to in a couple of years, a woman and the first person of color stepping on the moon on our giant 80 inch ultra HD TV. So I get interested in astronautics and astronomy. So I wind up drifting there, not to Facebook, but to there. I read a lot of articles on markets and the economies and things like that, and I spent a lot of time with kids and I was just in Disney World. So you try to lighten things up, find some levity amidst the serious stuff that we all do.
Colin and Greg: Well, let's get into the serious stuff. There has been a lot of volatility over the last few years, and most recently the failure of a couple of US banks, takeover of Credit Suisse by UBS. Lots of people are asking, are we headed for another GFC, another global financial crisis?
Tony: The market behavior since early March has been pretty good, pretty stable, one could say it's nothing like 2008. The great innovation in the post GFC period has been the stress testing of banks. Some might dispute that because the stress testing of banks failed to identify the problems in those few banks. But more broadly, it has kept the system and that's the emphasis here. The system whole because we had major banks, you know, the names all looking pretty good. In fact, earnings from a major company, major Bank today, JP Morgan seemed to set that stock the equity of that company on fire, I should say, of late, doing pretty well. The big banks have done well. So the stress test imposed upon the banks subject them to a 55% drop in the stock market, a 40% drop in real estate prices, 10% unemployment and 10% drop in GDP, which hasn't happened since the Great Depression. So what banks are supposed to do in this simulation run by the Federal Reserve is pass the test with a certain level of capital money invested basically in the bank to meet a regulatory minimum. And in this stress test, with those conditions, banks still had capital levels that were twice the regulatory minimum. Now, unfortunately, some banks have slipped through the cracks and that's what happened here in this recent weeks past month. And there were failures, two of the biggest failures in history. But the system looks good. But let me give one quick perspective. As I mentioned, I've worked on Wall Street since 1983. In the 1980s, there were lots of bank failures. But I want to get to in all of this discussion is the idea of maintaining a long term orientation. So in the 1980s, the 1984 to 2000, there were 1600 bank failures from 2000 to now another 600. So 2200 US banks have failed in my 40 years. But what has happened to the stock market investor that invested in the Dow Jones Industrial Average 30 years ago? 40 years ago when I joined, Wall Street would have made 30 times their money and the S&P 500 has gone up 25 times. So you get lots of things that happen. We're talking here only about the banking situation. There's lots of geopolitical situations. Et cetera. But yet investors in the end seem to fare well. And so with the long term orientation, one shouldn't worry too much about these sorts of things, and instead think of them as opportunities to invest in high quality companies that over the long run would be expected to fare well in an ever growing economy.
For more questions and answers with Tony please refer to our Podcast.
Stay safe, stay happy, stay well!
