Before we invented the margin credit market, the stock market ran on fundamentals, things
like earnings, things like valuations.
And then the credit market came along, and starting in the 1990s, disrupted that whole
40 years ago in the '70s, the average company was highly rated, AA or AAA rated from a credit
Now we've added so much leverage in the last 40 years that the average credit quality has
gone down to just above junk.
Brian Reynolds, here to talk about unfunded pension liabilities, the credit boom and corporate
And we're here at this lovely New Hampshire Institute of Politics, which is the perfect
setting for our conversation.
First, why don't you just get everyone familiar with your background and maybe go through
that a little bit.
So in a month it'll be my 35th anniversary in this business.
I started in 1984.
And I've been in the business so long, the junk market didn't exist when I started.
That's how long I've been in the business.
The first 16 years I spent on the buy side of David L. Babson and Company.
It was a great place to work because it started in 1940.
I have mentors that go back to the 1920s, '30s, and '40s, they taught me to follow the
They taught me this business the old fashioned way.
And I've brought that through every job I've ever had since.
And it was a great place to be because that was the emergence of credit as an asset class.
Not only was the junk market not invented yet but the actual investment grade credit
market was still in its infancy.
So it's a very different world now than it was then, because credit is now so big it
dominates financial markets, but back then it was a backwater.
So I ran our money market funds, which is where shadow banking started.
I was in charge of bank and finance bonds, which is some of the original shadow bankers.
And then in the late 1980s, as structured finance began to become more significant,
I was in charge of that product from the late '80s until 2000.
So I kind of grew up with the Martin credit market.
I saw it develop from almost nothing into this large asset class, which is now the tail
that wags the dog.
Some of the things you talk about, the Daisy chain of capital, now that's like a primary
theme throughout your work, can you explain that for the viewers?
Before we invented the Martin credit market, the stock market ran on fundamentals, things
like earnings, things like valuations.
And then the credit market came along, and starting in the 1990s, disrupted that whole
So now we're in the third modern credit boom.
The first one lasted from 1991 through 2000, then we had a financial disaster.
The second one went from 2004 to 2007, then we had another financial disaster.
And then we launched another one in 2009.
And all this Daisy chain is, is our public pensions needing to make outsized returns.
They have become the dominant global investor.
Our pensions were only about 60% of GDP in '84.
Now they are 120% of GDP.
That's massive spectacular growth.
There's nothing on earth that's grown that fast from such a high base.
So they're the dominant global investor, but they're so underfunded they need to make 7.5%.
So talk about how the big, big pension funds work.
And where's that money going?
The 7.5% they need to make, that's the difference between what their governors and their legislatures
have under the mat versus the promises they've made to our public sector workers, police
officers, firefighters, teachers.
Most state governments tend to work the same, so they all tend to have that same gap.
And that gap works out to be 7.5%, which is crazy because most interest rates are much,
much lower than that.
So they really have to push the envelope in terms of what they invest in to try and get
And you would think they would be in stocks because pensions should be long term oriented,
but most pension boards are police officers, teachers, firefighters, and politicians.
They have a short term focus, and so they invest in the credit market.
They started doing it in the 1990s.
The most famous credit fund they hired was John Meriwether's long-term capital management.
But it wasn't just him, it was thousands and thousands of other credit funds that mimicked
These pensions will hire these credit funds, they'll put money to work on an aggressive
leveraged basis to try and get that 7.5% yield they need.
And when they buy these record amounts of corporate bonds from companies, that puts
cash into corporate balance sheets.
Modern CEOs are incented to get their stock price up, so they take this unlimited money
that comes from our pensions via these credit funds and use it to buy back their stock.
That's a Daisy chain of financial engineering.
That's what happened in the '90s, it's what happened from '03 to '07, that's what's been
going on since 2009.
Now, can you put that in a relative context?
How much of the buybacks have pushed the market up?
First, like say, ETF or mutual funds.
How come people don't quantify the buybacks in relative terms to that?
They concentrate so much energy on Wall Street talking about ETF flows and mutual fund flows.
And how does it get overlooked?
What's the number?
Because the world has changed in the last 3 and 1/2 decades.
As I said, the junk market didn't exist when I started in the business, but from the late
1980s on, the junk market began to become a bigger force for this, and that's when we
started putting on leverage.
So 40 years ago, in the '70s, the average company was highly rated, AA or AAA rated
from a credit standpoint.
Now we've added so much leverage in the last 40 years that the average credit quality has
gone down to just above junk.
That's how much we've levered up corporate America.
And if you look at a chart of who's been buying stocks over the last few decades, there's
been money going to ETFs, but that's come at the expense of mutual funds, pensions,
both state and private pensions have been large sellers.
So investors as a whole have really done nothing these last three decades.
The buybacks have taken an increasing share to the point where they're almost 100% of
the buyers of the last decade.
In other words, investors have done nothing on a net basis for 10 years.
Yeah, they put money into ETFs at the expense of active product.
And the result is this Daisy chain of money coming in from taxes to pensions, going into
credit, which is then used to artificially push up stock prices.
And a lot of times that money ends up in not profitable zombie companies.
And you talked about in 2015, 2016, I believe, that money flowing into energy companies that
oversupplied the market.
Can you talk about how that kind of related to back in the WorldCom days?
This credit money typically zeros in on a particular industry.
In addition to boosting the overall level of credit, we overdo it in an industry.
So in the 1990s, we focused on companies like WorldCom and Enron.
We inflated their balance sheets to the point where their valuations didn't jibe with reality.
And then it came down like a souffle.
Then we did the same thing with subprime housing in the next cycle, and that collapsed.
And then we did it with energy companies from, say, energy and commodity companies from say
2009 to 2013, then those companies collapsed.
And now we're starting to do it with commercial real estate, so it's just like we go from
one asset class to another within the context of boosting overall leverage.
So in terms of shocks and supply, I know the big concentration these days is on the stock
market when it's falling and the VIX is going crazy.
What happens to the credit markets?
Because I think very rarely you turn on the news and you see, stocks are in turmoil, stocks
are in turmoil, but no one's talking about how credit markets are functioning.
I have three themes.
My first theme is that we're in this credit boom, this Daisy chain of financial engineering.
But my second theme was that it gets periodically interrupted by these panics, because equity
investors just don't believe in this.
The stock markets outpace the economic fundamentals over the last decade.
So if you are a fundamentally oriented equity investor, you don't want to buy stocks, you
don't want to own them, you want to sell them in a drop of a hat every time there's a worry.
We've had 35 pullbacks in the stock market that have been marked by irrational inversions
of the VIX curve, where people get so panicked about the downside that they pay up for short
term protection when longer term protection is cheaper.
The most recent of those was in the fourth quarter of 2018.
And when these stock market panics happen and the VIX gets inverted, the credit market
Because these credit funds that are hired by our pensions to put money to work, they're
allowed to take a break during a panic to see if the turbulence creates a better buying
So yields and spreads typically go up during these panics.
That happened again in the fourth quarter of last year, as demand for credit temporarily
But once the equity panic runs its course, as it did at the start of January, then the
credit market opens right back up.
People make up for lost time and stocks go ripping higher on a new round of buybacks
We've done that 35 times in the last 10 years.
We'll probably keep doing it a number of times per year.
These drops feel like the world is ending, and as soon as the panic is over, we go right
That frustrates active managers tremendously.
And I think-- so my background is in trading, so market structure wise I think what's happening
is outflows work differently.
So back in 2008, you could be 30% of the trading volume and not move the price of the stock.
Nowadays you can be 5% of a trading volume and move the price of the stock.
So buybacks are constantly pushing us up.
And then in the panics, when those corporate pensions pull back and the credit markets
seize up, it's like a go trail going out.
But what's interesting, I think, what you're saying is pensions actually are always constantly
I think you said in one of your notes, University of California Endowment lowered their cash
Can you talk about that and CalPERS and how they're getting even more aggressive on the
Well, that example of lowering their cash weighting, it's not just that particular pension,
it's a slew of pensions that are doing that, because they all typically need to make about
If you've got cash that yields 2%, that's a drag on that.
So what we've seen over the last 10 years, especially the last 5, is more and more pensions
reducing their low yielding cash in favor of more aggressive credit investments, that
helps increase the intensity of this credit boom and it exacerbates these up and down
panics, because it removes shares from the stock market, which means that the money that
remains can move shares with less effort, as you mentioned.
That makes the downside more rapid and it makes the upside more rapid as well.
And that's what-- that further drives people nuts.
And now, another thing is the Detroit bankruptcy.
how much has that influenced the next exuberance in investing in these needed based investments?
So the Detroit bankruptcy has actually radically changed the tenor of this credit boom.
In the prior cycles, the 1990s with WorldCom and Enron, the next cycle was subprime.
We did it purely with leverage.
But now we're doing with increased taxes.
Because until Detroit went bankrupt, nobody really cared about pensions, because most
state constitutions guarantee pensions.
Once you give a pension to a police officer, a firefighter, a teacher, you can't cut it,
you can't eliminate it, you just have to keep providing for that pension.
But then Detroit went bankrupt and they filed an US bankruptcy court.
And the judge says, yes, I know the Michigan constitution protects your pension, but you
filed an US bankruptcy court and US law trumps state law, so the pensioners ended up taking
a hit on the unfunded liabilities.
And since most pensions are only about 2/3 funded, that sent shockwaves through the public
labor union movement.
And since then they've gone to every major state.
And every major state since then has either raised or is thinking of raising taxes to
try and narrow this funding gap in our pension system.
And the result is overwhelming.
Every month I tracked pension votes going into credit from these new tax flows, the
chart I do goes up and to the right.
It's now growing faster than the average annual value of the federal tax cut that was passed
In other words, we did $1 trillion tax cut over 10 years, that's 100 billion a year.
State and local taxes just for pensions are now growing at more than 115 billion a year.
So fiscal policy is actually negative now.
That's one more reason why the economy's cooling.
But this money goes into levered credit and it comes back in the stock market with five
times the buybacks, because that's the leverage they start to employ.
And so if you're a fundamentally based investor, you're looking at a historically slow economy
relative to prior decades and prior economic cycles.
Yet, we're putting more money to work than ever in credit and doing it on a leverage
basis, so you get one of the greatest stock market bull markets in history.
That everyone hates.
That everyone hates because it way outpaced the economic fundamentals, because of these
new inflows of money at the state and local level.
And there, can give me like a recap of California?
I know you talk about Kentucky, I believe.
Any of those specific.
It'll be easier to list the pensions that are in good shape and are not raising taxes.
I think Delaware is in good shape, but they're kind of small relative to the other states.
Starting in California, whether it's fashion or finance, the trends start in California.
So the California legislature passed a bill giving CalPERS an extra 5 billion a year over
and above what they've been doing.
And then they passed another law giving CalSTRS another 5 billion a year over and above what
they've been doing.
And you can go down the list of all the major states, Texas, Colorado, Michigan, New York,
Pennsylvania, New Jersey, Massachusetts, they've all taken steps to raise taxes and bring more
money into the pensions, which doesn't do anything for the economy.
It's actually a net negative for the economy, but it helps boost our financial markets.
And that's why this is the most intense credit boom in our nation's history.
And the short interest remains because all the economic fundamentals look horrible on
The short interest remains high, which causes those extra short squeezes higher, correct?
People hate stocks.
Yeah, they hate them.
Short selling, which is a bet that stocks are going to go down is higher now than it
was during the 2008 financial crisis.
It's near a record.
So active hedge fund managers have been betting against this bull market in near record amounts.
That's another reason for active management underperformance.
On the hedge fund side they're betting stocks are going to go down.
And we're in one of the greatest bull markets in history.
Why is it that hedge funds ignore that?
They want to talk next quarter's earnings.
But when you're talking giant liquidity, they seem to ignore it.
And why are you one of the lone wolf voices on the street that analyzes pensions whereas
everyone else is stuck in the weeds?
I managed pension money for 16 years.
So I was there at the beginning of this process.
I helped do some of these practices that we're doing now.
So I bought one of the first auto loan deals in the 1980s.
One of the first credit card deals, one of the first manufactured housing deals in the
1980s, which of course, turned into subprime in the next cycle, so sorry.
At the time we were doing them we thought they were great, they were good, but Wall
Street always takes a good idea and runs with it and pushes it until it becomes overdone
and a negative for the financial system.
So there's not a lot of strategists on Wall Street that have actually done structured
finance the way I have.
My mentors let me run in credit, but they also gave me experience in equities.
So I can speak both languages.
It's like I can be a general contractor and explain to the plumbers what the electricians
are doing, whereas most people who come into this business on the equity side, they're
taught equities and they're taught classical equities, Graham and Dodd type stuff, fundamentals,
valuations, margins of safety.
Whereas our public pensions don't worry about any of that.
All they focus on is the need to make 7.5%.
So that's kind of like the dumb money.
And the smart money wants to short, because fundamentally this doesn't make any sense.
But there's that old saying that markets can stay irrational longer than you can stay solvent.
And it looks like this irrationality is not only going to continue but it's going to intensify.
So how does it all end?
What indicators are you looking at to give you a heads up on when things change?
Because these 35 that you talk about is-- how are you going to know next time that this
is the one?
My third theme is that this is just a credit cycle.
Credit cycles always end and they always end badly.
So this will be the same with this one.
My first theme was that it's a Daisy chain of financial engineering.
My second theme was we're going to have periodic panics.
My third theme was it will end in a crisis.
And that's the difference.
We've had 35 panics that had been brief and seen stocks go back up.
Eventually we'll have a crisis like 2008, like 2000, where you have a multi-year financial
And the difference between a panic and a crisis is that in panics we see pensions keep voting
to put more money to work in credit, even though there's a panic.
So we saw that in the fourth quarter of last year.
October, November and December were horrible for stocks.
The credit markets shut down towards the end of that, but yet pensions keep voting to take
money in and allocate it to credit when the credit market will open back up.
A crisis is when there's a run on the shadow banking system and our pensions are forced
to sell their credit investments.
Because credit's a one way market.
Everybody's either buying or everybody's selling.
We're like electricians, we're either on or off.
On the equity side, I view them as plumbers with flow control, because equity traders,
as you've been, are trained to sell overbought rallies and buy oversold dips.
We don't have that concept in credit.
When we get overbought, we get overbought and stay there for years.
And then somebody flips the switch and it's off.
And what I mean by a run on the bank, it's like a run on the-- a run on the shadow banking
system it's like a run on the bank in the 1920s.
All of a sudden some people want their money back and there's nothing behind it, so that
causes a rush for the exits.
So what happened in 2007, November of that year, Florida was running a cash fund, which
is like a money market fund without any rules or regulations, on behalf of their cities
One of the cities in Florida wanted some money back to buy some school buses, but they couldn't
give-- the fund couldn't give the money back because they were in subprime.
So instead of cash, the city got slices of subprime.
And it wasn't until four years ago that the cities were made whole.
That was a 24 billion fund.
It had a $15 billion outflow in a few weeks.
The New York Times detailed it perfectly in a story on November 30th of 2007.
But it wasn't just Florida, it was the other cash funds that were also experiencing runs
on the bank, because all the city and town state treasurers, they all know each other,
they all talk to each other, they're like, oh, this is actually in subprime, we need
to get out.
And when you've got subprime investments, or illiquid structured finance investments,
and a few people want to get out, it's impossible to make everybody whole.
And that's what causes a crisis.
So commercial real estate you're keeping an eye on specifically.
Commercial real estate, but also these lightly regulated cash funds.
Because a few years ago the SEC essentially banned institutional prime money market funds,
those were the money market funds that owned Lehman commercial paper and had the run on
the bank in 2008.
And they thought that would make the system safer.
Most of the money went into treasury money market funds and did make the system safer,
but a significant amount of money, which may be as large as 400 billion, went into these
unregulated cash funds that take multiples of the risk of money market funds.
So to me, that's where the next run on the shadow banking system is likely going to occur.
It typically happens in the stuff that's perceived to be safe, which means people get very comfortable
with their expectations.
And then when they realize they need their money and they can't get it all, that causes
a run for the exits.
So that's the difference between panic, when stocks go right back up, and a crisis, when
you have a financial calamity and a multi-year bear market in equities.
When I see the next run on the shadow banking system-- I don't expect it for a number of
years, but when I see it, that'll be the sign that this cycle is over and that a disaster
lies on the horizon.
So since you think this bull market has legs to run, and I think it's three or so years
you think we still are in this bull market, do you think it gets turned into euphoria
or has this system been financialized where it's not really following its way into the
retail pockets, per say?
Well, right now it's the opposite of euphoria.
People hate stocks to the extent that anyone putting money to work in stocks, it's in ETF,
but at the expense of mutual funds.
So that's just kind of like-- that's a wash.
And the big institutions, like pensions, are selling their stocks to put money into credit.
That's not euphoria.
That's a dislike of stocks.
When the yield curve inverts, and that I'm talking the 2-year treasury versus the 10-year
treasury, historically, that's what launches a 2-year cycle of LBOs, where companies get
taken private at insane valuations.
And those two years after that inversion are typically some of the best years for stocks
because companies are getting taken out at above market prices, people feel compelled
to get money to work, so they don't fall behind.
And if you're short, or betting on stocks going down, you've got to cover, because if
you're betting on a down trend and your company gets taken out 25% higher, you've lost your
So the euphoria doesn't typically happen until the last two years of a cycle.
Given that this is the opposite of euphoria, that's one more reason why I think that this
cycle has longer to go.
And some of the deals-- you've talked specifically about where they raise money in the debt markets,
they're massively oversubscribed still, correct?
Can you espouse on that a little bit?
Any deals specifically where you remember-- We don't talk about specific deals in public,
but in the last month there have been some financings that were three to five times oversubscribed.
Which is amazing.
And some of them were for lousy credit.
There was a loan that came to market.
At the time it was the worst loan ever, according to some sources, in terms of investor protections,
The company redid some of the covenants, so some sources said it was one of the worst
instead of the worst.
And they were still able to boost the size of the deal by 25%.
And it was still like three times oversubscribed.
So there's just a massive amount of appetite for garbage, which is one of the hallmarks
of a credit boom.
When this junky stuff coming to market and it's oversubscribed, that tells you that people
need to make above market returns.
So if they need to make 7.5%, and junk's at 6%, and investment grade's at 3%, you've got
to push the envelope on structure and on credit to get your desired return, which means as
the cycle goes on, you have to run harder and faster.
And that's why you're seeing, I guess, some money going into private equity more-- did
you say CalSTRS increase their allocation?
They're hiring 15 more people, I believe.
Most of the large pensions are looking at creating their own private equity firm within
a firm type of ventures.
They're wrestling with how to do that.
A number of them have proposed adding more internal staff, but some of the best deals
are from external managers, so they're debating that.
But what they're not debating is their desire to move away from public markets towards private
And not only in private equity, but in private credit, private credit is one of the fastest
growing areas of finance.
And we've talked about shadow banking.
This is the epitome of shadow banking, where in a private credit market it doesn't even
trade, it's not allowed to trade.
So we put it more deeply into the shadows, so regulators and investors have less of an
idea of what's going on, which fuels more demand for equities because of the cash flows.
But when there's a run on the shadow banking system it's more of a surprise to investors
and regulators and what leads to a bigger disaster.
I believe we had Jeff Gundlach on before and he was saying it's kind of ironic the point
we are in time because this money is going almost to unconstrained bond funds like you're
talking about on the active side, they're super active, they're putting it any way they
Whereas on the equity side, everything's passive.
And just 30 years ago it was almost the opposite, where you had passive bond funds and active
So it seems to be an ongoing pendulum that swings back and forth.
Well, that's because the people who allocate money drive by looking through the rear view
So it's very hard to beat an equity index like the S&P 500 if you're an active manager.
So the trend has been to passive ETFs to fully participate in the stock market, because the
smart money, the active money has been betting against this bull market and causing underperformance.
Whereas on the credit side, it's very easy to beat a credit index during a bull market.
All you have to do is overweight yield.
To overweight yield means you overweight the worst credits.
Then you buy Argentinean bonds at 8%, right?
We've been issuing bonds in the last couple of weeks for European banks, for Russian banks.
And for African nations.
All with overwhelming demand.
So if you overweight your portfolio with yield, you'll outperform.
And that's why money flows to active managers on the credit side in a credit boom.
But when you're in the lousiest credits, when it turns and goes against you, you can't sell
And that's why you get a bigger disaster, because everyone wants to go for the exit
at the same time, and in a one way market, there is no exit.
And I believe Dodd-Frank has kind of nullified the brokers in all this, their supply has
absolutely shrunk, so you must have this situation-- a highway going in, goat trail going out,
where you have these giant institutions on the credit side owning things.
And if they do sell next time, I guess, who's the only game in town?
Is the Fed.
I don't know, do you have any perspective on that?
Well, Dodd-Frank is interesting in terms of both the intensity of this credit boom and
for what lies ahead.
I think back to the last cycle and the cycle before, the broker dealers were some of the
biggest customers for this credit.
Remember the Bear Stearns funds were 50 times margined, but so was Bear Stearns.
And Merrill Lynch, Morgan-- they were all 50 times margined.
Now they own none of this stuff.
They're clean as a whistle, but yet it's the most intense credit boom in history.
The credit market's grow by over 85%.
Since this credit cycle started, nominal GDP is only up about 38%.
So we've massively levered up this economy, but without the broker dealers participating.
That tells you the other participants, the pensions, the insurance companies are pressing
the accelerator even harder this cycle than they were the last time around, which is why
this credit boom is so intense.
And the brokers never helped anybody out in a crisis.
If you wanted to bid, there were no bids, because they already owned the credit.
The one thing that might make let the next disaster less worse at the bottom is if Congress
relents and lets broker/dealers take on that risk.
I doubt it.
I think they'll be a bailout faster than they can change that law.
But that might be one relief valve, but it won't come into play early in a crisis.
It would only come into play towards the end of a crisis.
It might signal the bottom as opposed to signaling a crisis.
Now, do you see any social ramifications of this all?
What happens to the millennials?
What happens to the baby boomers in a pension crisis?
Will there be a social divide?
Is it going to be a political answer?
I find it ironic-- We're here at the New Hampshire Institute
And this is where all the presidential candidates come through when they visit New Hampshire
for the first primary in the nation.
And it's led to a tremendous divide.
Because if you look at who's been the winners since we started financial engineering in
the 1990s, it hasn't been the average working class person.
In real terms, real personal income has done nothing for 30 years.
It's been gravitating towards the 1%.
And that's because of this financial engineering, which creates a boom and a bust cycle for
WorldCom and Enron, a boom and a bust cycle for subprime, then a boom and a bust cycle
for commodities, and now a boom and a bust cycle for commercial real estate, which leaves
the average person no better off than when they started.
So no wonder why everybody's angry.
And so from a political standpoint, you're going to get more of a division, I think.
From a financial market standpoint, the politics don't matter, because what really matters
is the large investors, our pensions needing to make 7.5%, and that Trump's political ideology.
Until they have to cut potential.
Well, it doesn't matter.
We started doing this under George Bush I, then we did it under Bill Clinton, then we
did it under Bush II, then we did it under Obama, and now we're doing under Trump.
That's a pretty wide spectrum of presidents, which means it doesn't matter.
The engine just keeps going.
As long as the yield curve is positively slow and our pensions need to make 7.5%, this is
going to go on no matter who's in office.
And has for 30 years.
So that last part where the yield curve does invert, I guess that's a race for, if you're
someone who wants capital, right?
You probably want to just run to the capital markets and raise money.
You're just taking it in.
Because right now we're seeing a little inversion on the 3-month, the 10-year.
Is that the next big kick we'll supply, just go in overdrive at that point?
Because-- Supply is always there.
Companies always want to borrow because they don't know when it's going to end.
So throughout this bull market, throughout this credit boom, throughout the last one
and the one before, companies have always rushed to market.
They're always in a hurry to borrow.
Either the Fed's raising rates and they want to borrow money before the cost of capital
goes up, or the Fed's cutting rates and they want to get capital before the economy cools
The variable is demand.
And in a credit boom, the demand is always there, except during these brief panics when
it shuts down.
Until there's a crisis, a run on the financial-- a run on the shadow banking system, and then
there's no capital that's available.
Right now we're seeing demand increase.
That's leading to a more intense credit boom.
When the yield curve inverts, that leads to a more intense financial engineering environment
because that leads to a two year LBO wave.
When did private equity-- when did leveraged buyout kind of morph into private equity?
It seems like we conflated those two things over the past.
Well, technically LBOs are private equity because there's no publicly traded stock.
It's like they rebranded themselves.
So to me it's a polite name for LBOs, just like high yield bonds is a polite name for
It's the same thing with just a nicer phrase to use it.
That's why private credit sounds much nicer than junk bonds, or highly leveraged loans.
You say private credit, it's like, oh, OK, it's like a little club.
And in reality, it's just leveraged junk loans and junk bonds.
There's more of a demand for it because our pensions have this demand for it.
When the pensions have a run on their system and their cities and towns want some of their
money back, that's when it's a crisis.
Which demographically it looks like baby boomers are retiring over the next 10 years.
So I guess we'll find out at that point.
It's a real generational issue, but that might actually help solve the crisis.
Because if you've got enough people with enough demand-- in other words, if you have the big
California pensions and the Illinois pensions and the New York, New Jersey, Pennsylvania
pensions going to Congress in a disaster representing millions of blue collar voters, I think Congress
will give them a bailout faster than they gave one to the banks.
And if we do that and make our pensions go to defined contribution instead of defined
benefit, then we can stop this crazy boom bust investing.
And in the next cycle start to invest for real sustainable economic growth for the first
time in 40 years.
And you won't have unprofitable companies for--
Not only unprofitable, but leveraged.
Because it's the leverage that really causes the boom and bust.
And if we can arrange to eliminate that leverage, eliminate these credit funds that need to
reach for yield, then the millennials will be in good shape, because they'll be functioning
in a non-leveraged growing economy.
And there you have it.
Brian Reynolds, thank you so much for coming on.
Thank you for having me.
It's been awesome.
And hopefully you'll come back soon.
I'd love to.