RUSH TRANSCRIPT Guest to ░░░░░░░░ us to the bell ░░░░░░░░ Davis is founder and ░░░░░░░░ at quadratic capital management ░░░░░░░░ us now also the ░░░░░░░░ manager for the quadratic ░░░░░░░░ ibol etf Earlier today ░░░░░░░░ had archer taught around ░░░░░░░░ because you had Atlanta ░░░░░░░░ president Raphael Bostic no ░░░░░░░░ putting out a statement ░░░░░░░░ the Atlanta fed website ░░░░░░░░ about how the fight ░░░░░░░░ our inflation is far ░░░░░░░░ over This jumped out ░░░░░░░░ me The idea in ░░░░░░░░ words that when inflation ░░░░░░░░ no longer top of ░░░░░░░░ or will largely be ░░░░░░░░ I have to eight ░░░░░░░░ break into them but ░░░░░░░░ is on top of ░░░░░░░░ s minds Inflation is ░░░░░░░░ top of mind Powell ░░░░░░░░ it more than 10 ░░░░░░░░ in his last press ░░░░░░░░ that the markets are ░░░░░░░░ in disinflation I know ░░░░░░░░ and scarlet I have ░░░░░░░░ standing on my soap ░░░░░░░░ trying to grab investor ░░░░░░░░ Even though realized inflation ░░░░░░░░ trading at 40 year ░░░░░░░░ whatever index you are ░░░░░░░░ at whether consumer price ░░░░░░░░ or other indices it ░░░░░░░░ all priced at 40 ░░░░░░░░ highs Future inflation protection ░░░░░░░░ trading at a very ░░░░░░░░ discount It is trading ░░░░░░░░ around the Fed s ░░░░░░░░ above the 2 long ░░░░░░░░ target whether you look ░░░░░░░░ the five year five ░░░░░░░░ Or the inverted yield ░░░░░░░░ area the most inverted ░░░░░░░░ has been since the ░░░░░░░░ 80 s in the ░░░░░░░░ market All signs are ░░░░░░░░ to future inflation being ░░░░░░░░ cheap It is on ░░░░░░░░ Nancy it is on ░░░░░░░░ and you have been ░░░░░░░░ about the need to ░░░░░░░░ up inflation linked assets ░░░░░░░░ a while Nancy You ░░░░░░░░ the inverted yield curve ░░░░░░░░ two year yield approaching ░░░░░░░░ point 9 the 10 ░░░░░░░░ yield and now it ░░░░░░░░ about 4 at the ░░░░░░░░ It got above that ░░░░░░░░ and is managed to ░░░░░░░░ there Now we are ░░░░░░░░ more action at the ░░░░░░░░ end of the yield ░░░░░░░░ How do you see ░░░░░░░░ proceeding from here on ░░░░░░░░ we try to make ░░░░░░░░ sense and get more ░░░░░░░░ on the inflation picture ░░░░░░░░ I think investors have ░░░░░░░░ be very careful Because ░░░░░░░░ you think about the ░░░░░░░░ yield curve what it ░░░░░░░░ you are loaning the ░░░░░░░░ S treasury money for ░░░░░░░░ and getting paid less ░░░░░░░░ know Think about that ░░░░░░░░ a second Assume the ░░░░░░░░ year is 4 Assume ░░░░░░░░ t bill is 515 ░░░░░░░░ are getting paid less ░░░░░░░░ to make a loan ░░░░░░░░ the U S government ░░░░░░░░ longer I think investors ░░░░░░░░ it s not normal ░░░░░░░░ have an inverted yield ░░░░░░░░ like this Normally when ░░░░░░░░ loan money to somebody ░░░░░░░░ longer you get paid ░░░░░░░░ Investors have to be ░░░░░░░░ careful The 10 year ░░░░░░░░ is not risk free ░░░░░░░░ in the investing world ░░░░░░░░ risk free I think ░░░░░░░░ is a lot of ░░░░░░░░ builders and other people ░░░░░░░░ oh we will have ░░░░░░░░ recession let s go ░░░░░░░░ the 10 year treasury ░░░░░░░░ our inflation expectations appropriate ░░░░░░░░ based on what we ░░░░░░░░ seen priced into the ░░░░░░░░ Nancy Nancy everybody I ░░░░░░░░ to talk to is ░░░░░░░░ the camp that we ░░░░░░░░ hit peak inflation added ░░░░░░░░ fall dramatically 99 of ░░░░░░░░ people I talked to ░░░░░░░░ that Markets are forward ░░░░░░░░ like all markets Stock ░░░░░░░░ bond markets inflation markets ░░░░░░░░ is being priced in ░░░░░░░░ dramatically in the future ░░░░░░░░ disinflation Who knows whether ░░░░░░░░ Fed I do not ░░░░░░░░ if the Fed s ░░░░░░░░ rate hikes will be ░░░░░░░░ Inflation is global and ░░░░░░░░ is a good time ░░░░░░░░ investors to be adding ░░░░░░░░ assets area it s ░░░░░░░░ not priced expensively in ░░░░░░░░ future Romaine we are ░░░░░░░░ conversation with Nancy Davis ░░░░░░░░ quadratic capital We want ░░░░░░░░ get our stock of ░░░░░░░░ hour in with emily ░░░░░░░░ at the board Emily ░░░░░░░░ AI is an enterprise ░░░░░░░░ software company with a ░░░░░░░░ run up to start ░░░░░░░░ year a gain of ░░░░░░░░ 82 year to date ░░░░░░░░ the popularity of chat ░░░░░░░░ means investors are trying ░░░░░░░░ get their hands on ░░░░░░░░ with AI in the ░░░░░░░░ A big reversal today ░░░░░░░░ about 8 5 The ░░░░░░░░ is reporting earnings after ░░░░░░░░ bow tomorrow Analysts expect ░░░░░░░░ loss per share of ░░░░░░░░ 22 The company has ░░░░░░░░ turned a profit In ░░░░░░░░ earnings releases I said ░░░░░░░░ are expecting to be ░░░░░░░░ at some point in ░░░░░░░░ year 2024 We will ░░░░░░░░ how they update the ░░░░░░░░ Definitely today unprofitable tech ░░░░░░░░ sell off on days ░░░░░░░░ higher rates are in ░░░░░░░░ Romaine thank you emily ░░░░░░░░ our stock of the ░░░░░░░░ After Nancy Davis founder ░░░░░░░░ cio at quadratic capital ░░░░░░░░ want to get back ░░░░░░░░ the idea of how ░░░░░░░░ position yourself around it ░░░░░░░░ has been a lot ░░░░░░░░ talk about either buying ░░░░░░░░ hedges or buying other ░░░░░░░░ that that would benefit ░░░░░░░░ this environment Do you ░░░░░░░░ it risk assets in ░░░░░░░░ of themselves attractive at ░░░░░░░░ in this environment Nancy ░░░░░░░░ think the problem is ░░░░░░░░ lot of people are ░░░░░░░░ at what happened in ░░░░░░░░ 1970 s and 1980 ░░░░░░░░ Everybody is a slave ░░░░░░░░ that test I like ░░░░░░░░ point out the obvious ░░░░░░░░ I think a lot ░░░░░░░░ people do not realize ░░░░░░░░ U S treasury did ░░░░░░░░ issue inflation protection bonds ░░░░░░░░ 1997 So when people ░░░░░░░░ looking and saying what ░░░░░░░░ in the 1970 s ░░░░░░░░ 80 s interest rate ░░░░░░░░ read to not exist ░░░░░░░░ lot of people are ░░░░░░░░ into to commodities and ░░░░░░░░ stocks and real estate ░░░░░░░░ other things that have ░░░░░░░░ in other inflationary periods ░░░░░░░░ I think it is ░░░░░░░░ important to have diversification ░░░░░░░░ inflation linked assets I ░░░░░░░░ the interest rate markets ░░░░░░░░ inflation predicted bond markets ░░░░░░░░ an obvious place to ░░░░░░░░ that a lot of ░░░░░░░░ are not focusing on ░░░░░░░░ big of a presence ░░░░░░░░ your portfolio should tips ░░░░░░░░ Nancy caps off problems ░░░░░░░░ their own Ibol has ░░░░░░░░ than 84 of the ░░░░░░░░ in tips but tips ░░░░░░░░ issues Number one it ░░░░░░░░ only the consumer price ░░░░░░░░ No one would ever ░░░░░░░░ the dow Jones index ░░░░░░░░ the NASDAQ and say ░░░░░░░░ have the U S ░░░░░░░░ market CPI one third ░░░░░░░░ it is shelter You ░░░░░░░░ have a core tips ░░░░░░░░ but you have to ░░░░░░░░ it is only CPI ░░░░░░░░ The second issue is ░░░░░░░░ are bonds All bonds ░░░░░░░░ short duration will still ░░░░░░░░ money based on duration ░░░░░░░░ They are all long ░░░░░░░░ Short duration is is ░░░░░░░░ a head scratcher It ░░░░░░░░ like a fake name ░░░░░░░░ really should be called ░░░░░░░░ long because all bonds ░░░░░░░░ to ration That is ░░░░░░░░ solution we try to ░░░░░░░░ with ibol by taking ░░░░░░░░ tips portfolio and taking ░░░░░░░░ measure of inflation besides ░░░░░░░░ as a way to ░░░░░░░░ when 10 year yields ░░░░░░░░ higher not just to ░░░░░░░░ money Romaine Nancy I ░░░░░░░░ talking to you and ░░░░░░░░ had in the background ░░░░░░░░ Davis the founder and ░░░░░░░░ at quadratic capital Hoping ░░░░░░░░ count on to the ░░░░░░░░ bell Stick with us ░░░░░░░░ will take you to ░░░░░░░░ bell and beyond where ░░░░░░░░ rates are in focus ░░░░░░░░ thank you emily with ░░░░░░░░ stock of the hour ░░░░░░░░ Nancy Davis founder and ░░░░░░░░ at quadratic capital I ░░░░░░░░ to get back to ░░░░░░░░ idea of how you ░░░░░░░░ yourself around it There ░░░░░░░░ been a lot of ░░░░░░░░ about either buying inflation ░░░░░░░░ or buying other things ░░░░░░░░ that would benefit from ░░░░░░░░ environment Do you find ░░░░░░░░ risk assets in and ░░░░░░░░ themselves attractive at all ░░░░░░░░ this environment Nancy I ░░░░░░░░ the problem is a ░░░░░░░░ of people are looking ░░░░░░░░ what happened in the ░░░░░░░░ s and 1980 s ░░░░░░░░ is a slave to ░░░░░░░░ test I like to ░░░░░░░░ out the obvious that ░░░░░░░░ think a lot of ░░░░░░░░ do not realize The ░░░░░░░░ S treasury did not ░░░░░░░░ inflation protection bonds until ░░░░░░░░ So when people are ░░░░░░░░ and saying what worked ░░░░░░░░ the 1970 s and ░░░░░░░░ s interest rate to ░░░░░░░░ to not exist A ░░░░░░░░ of people are rushing ░░░░░░░░ to commodities and cyclical ░░░░░░░░ and real estate and ░░░░░░░░ things that have worked ░░░░░░░░ other inflationary periods area ░░░░░░░░ think it is really ░░░░░░░░ to have diversification with ░░░░░░░░ linked assets I think ░░░░░░░░ interest rate markets at ░░░░░░░░ predicted bond markets are ░░░░░░░░ obvious place to go ░░░░░░░░ a lot of people ░░░░░░░░ not focusing on How ░░░░░░░░ of a presence in ░░░░░░░░ portfolio should tips makeup ░░░░░░░░ caps off problems on ░░░░░░░░ own Ibol has more ░░░░░░░░ 84 of the funds ░░░░░░░░ tips but tips have ░░░░░░░░ Number one it is ░░░░░░░░ the consumer price index ░░░░░░░░ one would ever by ░░░░░░░░ dow Jones index or ░░░░░░░░ NASDAQ and say I ░░░░░░░░ the U S equity ░░░░░░░░ CPI one third of ░░░░░░░░ is shelter You can ░░░░░░░░ a core tips portfolio ░░░░░░░░ you have to understand ░░░░░░░░ is only CPI inflation ░░░░░░░░ second issue is tips ░░░░░░░░ bonds All bonds even ░░░░░░░░ duration will still lose ░░░░░░░░ based on duration exposure ░░░░░░░░ are all long duration ░░░░░░░░ duration is is like ░░░░░░░░ head scratcher It is ░░░░░░░░ a fake name It ░░░░░░░░ should be called less ░░░░░░░░ because all bonds have ░░░░░░░░ ration That is the ░░░░░░░░ we try to fix ░░░░░░░░ ibol by taking the ░░░░░░░░ portfolio and taking another ░░░░░░░░ of inflation besides CPI ░░░░░░░░ a way to benefit ░░░░░░░░ 10 year yields go ░░░░░░░░ not just to lose ░░░░░░░░ Romaine: Nancy, I love talking