MIB: Oil Crash as a Formative Lesson on Leverage

This week, we speak with Jerome Schneider, Pacific Investment Management Co. LLC’s head of short-term portfolio management and funding. In 2015, Morningstar named him Fixed-Income Fund Manager of the Year (U.S.).

Growing up in Oklahoma, he saw first-hand the oil crash of the 1980s and the ensuing destruction of wealth it caused. It was an important lesson for Schneider, imparting upon him at a very early age the dangers of leverage.

We also discuss the factors that are affecting fixed income today: liquidity, supply, safety, demand, central bank purchases, and the dearth of high-quality assets. It may be too early to declare the multi-decade bear bond market over, but Schneider also notes an increased need for the U.S. to borrow a greater supply of bonds to fund large increases in deficits. This will likely drive rates higher.

Some of his favorite books are referenced here; conversation transcript is available here.

You can stream/download the full conversation, including the podcast extras on BloombergiTunesOvercast, and Soundcloud. Our earlier podcasts can all be found on iTunesSoundcloudOvercast and Bloomberg.

Next week, we speak with MIT Professor Luis Perez-Breva, originator of the MIT Innovation Teams Program and author of “Innovating: A Doer’s Manifesto for Starting from a Hunch, Prototyping Problems, Scaling Up, and Learning to Be Productively Wrong.”



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