YouSaid · the spoken record

Michael Zezas

lines on the record: 77
first: 2017-05-07
most recent: 2017-05-07
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“We try and establish data to kind of help us measure kind of prior probabilities. And then we try and iterate on those prior probabilities. If you take tax reform, for example, the sort of operative theme that we had to focus on was what's possible through budget reconciliation, which is the process that would allow Republicans to basically ignore Democrats.”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, exactly. So, you know, I would say two things one, investors really kind of demand that from us. And two, I sort of understand that because what probabilities, as long as they're well defensed and logical, help you do is they help you build some logic into your portfolio, into your portfolio strategy. And if you have that type of consistency with how you build probabilities of different event risks, Across your portfolio, then whatever story you're trying to tell as an investor is coherent and that makes it easier to manage risks. So that's the rationale for why we do it. I'd say the way that we try and keep our probability sane is we try and whatever problem, whatever event we're trying to forecast here. We first try and establish what are the rules of this event, like really how far can this go one way or another?”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I'm always very reticent to put specific probabilities on things because what I worry about is that it implies a kind of false precision. The old joke”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is that correct? Or if you allow it to sunset. So you think about the Bush tax to 2001. Right. So what you have here is a plan, at least the one that Paul Ryan is following right now, which he claims is revenue neutral based on an assessment it got from the tax foundation, which is a conservative leaning think tank”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Right. In order to do that and make the tax cut permanent, you have to raise a bunch of money to offset the money you're losing by lowering tax rates.”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“But that's just one example. I mean, in our view, the reason it's hypothetically on the table is because there is a drive to make tax reform, to push tax reform as a Republican-only plan through budget reconciliation. That's the procedure by which you can get”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so there's still very much a tax preference in that scenario because you're still being shielded from $28,000 of tax, but there's some level of tax that you have to pay. And that would be very different to the market where you had something that felt purely tax-free before. Now, there's some level of taxation applied to it.”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So his proposal was based on the tax rate that you pay. So, and it was for everything. It wasn't muni focused. But think about it this way if you are earning $100,000 of Muni interest and you're in the 35% tax bracket, but he wanted to cap the way the amount you could enjoy that the same as someone in the 28% bracket, right? $100,000 of muni interest, thirty five percent tax bracket, you're shielded from a thirty five thousand dollars tax liability. But if instead they said we want to cap you at 28%, then you're only shielded from a $28,000 liability. That $7,000 difference is the tax you have to pay. So I said differently.”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, think about it this way. If you look at Barack Obama's original plan on this, you want to cap itemize deductions and exclusions for high income earners. So it wasn't.”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“We think so. We think so. It's not part of any formal plan right now But it's been part of previous formal plans like the Dave Camp plan in 2014. It was part of almost every single one of Barack Obama's budgets. Not the idea of eliminating tax-exempt interest, but capping it for high income individuals.”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, there's basically two components of tax reform. One is lowering the tax rate, the other is changing the tax exempt treatment of muni bonds.”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“The income you give up by doing that in order to make it up later, you have to be really right, really fast about bond yields going up. And it's not typical that that happens, right? There are the obvious exceptions throughout history. You got your kind of 1994, late 70s, early 80s, but those are exceptions to the rule. So that's kind of a mathematical reason. Fundamental reason is unless there is some type of exogenous shock to the economic system that kind of shocks us into a higher growth rate. We're still looking at real growth rates and inflation that are relatively low. So the fundamentals don't necessarily support real bond yields meaningfully higher from here. And so the big debate this year and sort of the end of last year after the election was were we going to get that exogenous shock because President Trump and Republican Congress were going to deliver a big tax cut, big expansion of infrastructure spending. And so if that happens, then sure, I think it's valid to say that bond yields are going to go up, but you have to have a lot of confidence in that view.”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah. I mean, there are mathematical reasons. To sort of discount that argument, and then there's kind of fundamental economic reasons. The mathematical reasons are basically. Bond investment, you're clipping a coupon, you've got some cushion against negative price movement. History tells you that if your underweight bonds or you just own very short maturity bonds within a balanced portfolio, that is the riskier choice.”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I think in the times that markets, around risk markets take a downturn and bond investors look smart, there is this kind of lionizing of the bond investor. But the problem is if you kind of give in to that kind of perma bearish view, you end up losing a lot of money in the interim. The opportunity cost of being permanently bearish is negative. So I'd say early in my career and you asked earlier about what it meant to kind of start in the middle of the financial crisis, I'd say that was kind of hammered into me just by market conditions early that being bearish was kind of the right thing to do. It took a while for me to kind of unwind that view and embrace a more risk-taking view, which I think is more having a more balanced and sort of flexible approach has to be more appropriate.”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that there is this kind of romanticization. I'm not sure if I'm saying it right, but of kind of the contrarian, of the person who can kind of see risks before they develop and see disasters before they develop. And I think bond investors, generally speaking, are kind of always looking for that. Because they've got the same price incentive, positive price incentive that a stock investor has. If you want to see stock prices go up, you tend to kind of ignore looming risks. If you want to see bond prices go up, you tend to focus on those looming risks because you're focused on whether or not you're going to get paid back. It's basically like making a loan”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'd say that she was right in spirit, but really wrong in magnitude. And when I say right in spirit, what I mean is that there are some very meaningful long-term credit challenges to the Muni market that if they're not addressed politically, they're going to express themselves in a meaningfully negative way over the medium term. Let's call it kind of five to ten years from now, or maybe if they're catalyzed with a big recession. But she was wrong in magnitude and timing, and that means a lot in market. For sure.”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Puerto Rico, Illinois. These are places that tell you that the same type of sovereign political risk that exists in other countries. They exist in the muni market also.”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I guess I would say all of the above what you're saying. I mean, in any market, there are investors taking risks they don't completely understand. And, you know, that's what kind of makes them interesting. The muni market, the most misunderstood risks that I think are now beginning to be better understood are the risks of basically sovereign political risk.”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“3.7 trillion dollars. If you want risk, you can find it in that market. That wasn't the place or the time where we went looking”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the point there, we could kind of see what was happening in corporate credit markets, and it was appropriate to kind of be more defensive. So from that perspective, it was easy for us to be a little bit defensive. And then that environment”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Government revenues tend to kind of trail the real economy. You know, if you think about it, if you go buy something at your drugstore, the sales tax you pay on it might not make it into the state's coffers for a while or effectively be spent for a while.”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Was initially focused just on munis when I was there. So we saw some of the telltale signs we were able to identify some of them early in the sense that when you see corporate credit markets starting to show signs of weakness because there's a lag effect, right?”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“To someone who at the time was pretty broke. It felt this kind of huge burden that it didn't really completely understand or was having trouble grapple with. On top of that, you had this kind of big crisis that was just getting bigger and bigger.”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's right. And it sort of fell into the markets based work when I was in grad school. Or tried to make a little extra money working for one of the credit rating agencies. I worked for Fitch down in Austin. And that was kind of my first taste, even though rating agencies are not terribly fast placed to work. It was my kind of my first taste of kind of translating public policy because I was working in Munis then, translating public policy into kind of market-based analytics. And I got hooked. I got hooked. I stayed there. I didn't go into government like I intended to. And one thing led to another. I ended up on the buy side within Morgan Stanley. And a couple years later, in the role that I have now, which is running a research and strategy team for Munis and now public policy.”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Little too slow, a little not much competition. There were a lot of smart people who worked in those areas, but I think the sort of pace of bureaucracy just wasn't what you would want if you were very ambitious person. Let's not say it's not worthwhile work, but it's.”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Say the least. No. I would say by accident inadvertently for the most part. So public policy, public affairs was sort of my first intellectual love, so to speak. Through, let's say, kind of a series of experiences, work experiences both in college and afterwards where I decided and really like the pace of public policy slow.”
2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
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2017-05-07 · Masters in Business · Interview With Michael Zezas: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source