The transcript from this week’s MiB: PIMCO’s Jerome Schneider is below.
You can stream/download the full conversation, including the podcast extras on Bloomberg, iTunes, Overcast, and Soundcloud. Our earlier podcasts can all be found on iTunes, Soundcloud, Overcast and Bloomberg.
ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.
BARRY RITHOLTZ, HOST: This weekend on the podcast, I have an extra special guest. His name is Jerome Schneider. He is the head of had a short-term portfolio management of PIMCO. If you are remotely interested in fixed income bonds, trading, the plumbing of how finance works, this is a master class and tremendous details of how the fixed income market works. It is absolutely fascinating.
If you are remotely considering any sort of fixed income investing, working on a bond desk, being a portfolio manager of any sort, then this is a conversation you have to listen to. It’s absolutely fascinating.
With no further ado, my conversation with PIMCO’s Jerome Schneider.
My special guest today is Jerome Schneider. He is the head of short-term portfolio management and funding at PIMCO which manages about $1.75 trillion as of the end of 2017.
Prior to joining PIMCO in 2008, he was a senior managing director at Bear Stearns specializing in credit and mortgage related funding transactions. He held a number of various positions on the municipal and fixed-income trading desks at Bear. Morning Star named him the Fixed Income Fund Manager of the Year for 2015. He manages three separate funds, one over $14 billion dollars, the other, over $8 billion, the smallest, a mere $2.2 billion. Jerome Schneider, welcome to Bloomberg.
JEROME SCHNEIDER, HEAD OF SHORT-TERM PORTFOLIO MANAGEMENT AND FUNDING, PIMCO: Thanks very much, Barry. It’s great to be here.
RITHOLTZ: This is the perfect time to be speaking with you given everything that’s going on in — with the Fed, with rising rates, with yield curve, but let me start with a little bit of background. How did you first get interested in finance?
SCHNEIDER: Pretty easily on, I had a great uncle who was always sort of fascinated with the stock market at that point in time and had bought me a handful of shares, you know, like everybody does and from that fascination, you quickly realize that the power of capital and I think at the age of 11, I had asked my dad, you know this stock market thing is pretty interesting.
Let’s read about it. Let’s read about it on the Wall Street Journal, and for my 12th birthday, he actually took me to the Stock Exchange on the floor and for young chap from Oklahoma, Oklahoma City that is — that’s a pretty, pretty empowering thing to see your dream location come true.
So, for me it was a trip to the Stock Exchange and to see the Yankees who I loved at that point in time and really, put together in your mind how you actually get to that point from being 12 to being a young professional and the steps it takes, so that was a magical moment in my formative years.
RITHOLTZ: And that was back in the day when you could both A, get on the floor of the Stock Exchange, you can’t do that really today and B, it’s not just the front (ph) for a television studio, that was where stocks were actually traded back then.
SCHNEIDER: Yes, and amazing and thinking about it, you know, I was probably hardly five-feet tall at that point in time. You know, it was a scrum and this was in the mid-early 80s and I looked back at the photos we took and the funniest thing, obviously is the people and how they are dressed and second of all, it was a functioning entity in a physical sense, not just a literal sense and a spiritual sense as it is now, along with computers, but it’s a physical breathing entity.
And then today, obviously, it’s changed and the NYSE is — and all the stock exchanges have their functioning perspective to code up to technology, but I think more importantly, and this is the thing that I would say is that, as a young person having the ability to have that experience and learning from people what it took — it takes to get there and then putting those steppingstones in place, seeing the right people, understanding what they took to get there even though they might be 10, 20, 30, 40 years your senior — that’s a very powerful thing.
And I think, one of the key things for people whether they are interested in finance or otherwise is to find people that will serve as mentors, rabbis — whatever it is to help empower them to achieve their goals in that kind of way and I was just fortunate to have a ton of people around me.
RITHOLTZ: It sounds like that was a formative experience for you.
SCHNEIDER: Yes, it was. It was great and I think, you know, people recognized that at that point in time, as odd as it might be from young kid in Oklahoma City, it might have been one of those things that it was a way out, so to speak, and so for me Oklahoma is a great place to be from and is a great place to be going back to with family, but at the same time, I haven’t lived there since high school.
RITHOLTZ: No interest in being a roughneck and working in the oil fields or any of that?
SCHNEIDER: Not as —
RITHOLTZ: Physical labor?
SCHNEIDER: Not at this point. Well, I mean, that was the other formative expense in my life actually being exposed to the roughnecks and when you grow up in Oklahoma and Texas and your whole family is exposed to the oil industry, in the late 70s and early 80s —
RITHOLTZ: During the oil crash? Yes, sure.
SCHNEIDER: The oil bust basically was an eye-opening experience and then frankly, that was one of the things that led me to want to understand capital markets because, you know when you’re in the oil business, you’re putting together a ton of capital, a lot of it is not your money and so your incentives are very different.
And at the same time, when you think about the ramifications of a re-pricing event, in that case, it’s oil and everybody — I mean, they’re in there sitting on the oil patch and things, oil prices only go, up but as a young kid, you see everybody going from having literally Learjets and third and fourth lake homes and multiple cars to nothing overnight and you look around, and you know, we had a very modest upbringing.
I would say that, you know, in retrospect, it was – the (ph) down side is fairly limited compared to some people —
RITHOLTZ: Not a lot of leverage —
SCHNEIDER: Well, not a lot of leverage, so to speak, but at the same time, not a lot of the different up side, but I learned at that point in time, the strength of leverage and the danger of leverage, which oddly, as my professional career evolved in the fixed income — that obviously became a keystone to that.
RITHOLTZ: So, you go to University of Pennsylvania and then you get your MBA at NYU Stern?
RITHOLTZ: And what was your first job right out of the school?
SCHNEIDER: So, when I graduated Penn, I wanted sort of a degree that was related to finance, but really more economics related and so I had a more customized degree in international finance economics and international relations and so, Penn was a perfect place to do that.
Unfortunately, when I was graduating and started with an interview in 1994, my background was a series of internships for a small — from a small shop in Oklahoma City called Stifel Nicolaus —
RITHOLTZ: Oh sure.
SCHNEIDER: And then —
RITHOLTZ: Which is now not such a small shop.
SCHNEIDER: Not such a small shop, but they were really focused on muni bonds back then, which is a good and bad thing and the other one was running a guy’s campaign for state treasurer of Oklahoma, which was successful, but that was both — it took me back to Oklahoma and so, as a result, at Penn, you’re looking out for internships and most of the kids in the East Coast had connections to New York and Wall Street and things like that and I didn’t have any of those connections, so to speak.
So, I was really trying to find my way to get to Wall Street at that point in time and it took a little bit more effort. That combined with the fact that when I was graduating in 1994, it wasn’t the best job market in the in the world and when you think about it, you had to get in on any floor whatsoever. So, I interviewed. I interviewed with people who were trying to sell limited partnerships, limited — people who were trying to trade stocks and be in the operations group, and oddly, coincidentally, the job I took was with Bear Stearns and I joined their operations training program at that that tender young age for a very small salary, but a great opportunity to learn.