1 00:00:13,720 --> 00:00:17,000 Speaker 1: Hello, and welcomes to What Goes Up, a weekly markets podcast. 2 00:00:17,040 --> 00:00:19,079 Speaker 1: My name is Mike Reagan. I'm a senior editor at 3 00:00:19,079 --> 00:00:22,919 Speaker 1: Bloomberg and I'm Madonna Across Acid reporter with Bloomberg. And 4 00:00:23,000 --> 00:00:25,880 Speaker 1: this week on the show, Well, Stocks and Bonds got 5 00:00:25,920 --> 00:00:28,960 Speaker 1: off to a huge start in January, sharp reversal of 6 00:00:29,000 --> 00:00:33,080 Speaker 1: the trends we saw in two What exactly has caused 7 00:00:33,080 --> 00:00:35,800 Speaker 1: the change of heart? And will it last? We're gonna 8 00:00:35,800 --> 00:00:38,639 Speaker 1: get into it with a portfolio manager and strategist at 9 00:00:38,640 --> 00:00:41,120 Speaker 1: a quant firm that had, let's just say, a very 10 00:00:41,240 --> 00:00:45,920 Speaker 1: successful year in two despite or we're accurately because of 11 00:00:45,960 --> 00:00:50,519 Speaker 1: all the market turbulence last year. But the first I've 12 00:00:50,560 --> 00:00:54,840 Speaker 1: got offer condolences to your Buffalo bills. Oh my gosh, 13 00:00:54,880 --> 00:00:59,400 Speaker 1: my heart hurts your heart? Yes, you know. Sports depression 14 00:00:59,480 --> 00:01:02,640 Speaker 1: is a real thing. So where is you know, cardiac arrest? 15 00:01:02,680 --> 00:01:04,760 Speaker 1: You better get that checked out. I honestly, they make 16 00:01:04,840 --> 00:01:08,959 Speaker 1: me so depressed and um, actual chest paint. Yeah, Like 17 00:01:09,400 --> 00:01:12,000 Speaker 1: you just get so like so sad and you're like, 18 00:01:12,040 --> 00:01:14,959 Speaker 1: why didn't why if only they had done X, if 19 00:01:15,000 --> 00:01:18,360 Speaker 1: only they had done why? Um, it's really sad. But 20 00:01:19,080 --> 00:01:20,680 Speaker 1: let me ask, do you ever bet On the games. 21 00:01:20,680 --> 00:01:22,560 Speaker 1: Have you downloaded any of these apps now where you 22 00:01:22,600 --> 00:01:26,039 Speaker 1: can bet? Yeah? I did, like friends referred me not 23 00:01:26,200 --> 00:01:28,440 Speaker 1: this year, last year, like when it first became available 24 00:01:28,520 --> 00:01:31,360 Speaker 1: in New York. I did. And I want like two 25 00:01:31,520 --> 00:01:34,280 Speaker 1: or three hundred dollars or something. Yeah, of course you did. 26 00:01:34,480 --> 00:01:36,119 Speaker 1: I never bet on the bills though, because I feel 27 00:01:36,160 --> 00:01:40,600 Speaker 1: like it's bad. Yeah, I bet on like other random Yeah, 28 00:01:40,880 --> 00:01:43,480 Speaker 1: I'm too chicken. I know if I download one, I'll 29 00:01:43,480 --> 00:01:45,600 Speaker 1: win one bet and then I'll be like, that's it. 30 00:01:45,920 --> 00:01:48,559 Speaker 1: I'm a betting genius. I'm going to do it forever 31 00:01:48,600 --> 00:01:50,560 Speaker 1: and I lose it all. No, No, I want money, 32 00:01:50,600 --> 00:01:52,920 Speaker 1: thank you very much. But that's pretty good. I have 33 00:01:52,960 --> 00:01:57,520 Speaker 1: good intuition, which is what every gambler says. They lure 34 00:01:57,640 --> 00:01:59,480 Speaker 1: in with that free money. But this is all just 35 00:01:59,520 --> 00:02:03,520 Speaker 1: a tease. My craziest thing week, which is uh, a 36 00:02:03,560 --> 00:02:06,600 Speaker 1: guy who bet five dollars of that free money they 37 00:02:06,600 --> 00:02:09,400 Speaker 1: give you, and you'll never guess what happened next? He 38 00:02:09,560 --> 00:02:13,800 Speaker 1: want a million dollars? Don't don't. Oh my gosh, guess what. 39 00:02:14,080 --> 00:02:19,960 Speaker 1: I'm an Eagles fan now, heywagon fly, Eagles fly, don't 40 00:02:20,000 --> 00:02:23,160 Speaker 1: embarrass us Eagles please please. I don't know about our guests. 41 00:02:23,160 --> 00:02:25,600 Speaker 1: I think she's finished. She's a Pats fan, which we 42 00:02:25,639 --> 00:02:31,520 Speaker 1: can't talk about. Yeah they're losers. No, I'm just kidding, Okay, 43 00:02:31,560 --> 00:02:33,440 Speaker 1: I do want to bring her in. It's Katy Kaminski. 44 00:02:33,560 --> 00:02:37,920 Speaker 1: She's the chief research strategist and portfolio manager at Alpha Simplex. Katie, 45 00:02:37,919 --> 00:02:41,000 Speaker 1: thank you so much for joining us. Thanks for having 46 00:02:41,040 --> 00:02:44,840 Speaker 1: me got more of a Celtics fan, myself a basketball person. Well, 47 00:02:44,880 --> 00:02:47,400 Speaker 1: I was gonna ask to uh, to quants like yourself 48 00:02:47,440 --> 00:02:48,880 Speaker 1: bet on football or there are a lot of a 49 00:02:48,919 --> 00:02:52,240 Speaker 1: lot of you know, fandels going on and off a Simplex. 50 00:02:52,880 --> 00:02:55,840 Speaker 1: We do tend to have some pooling sometimes about sports, 51 00:02:55,880 --> 00:02:58,680 Speaker 1: but for me personally, I feel like the markets provide 52 00:02:58,800 --> 00:03:03,200 Speaker 1: enough volatility and certainty, uh for for these days for 53 00:03:03,919 --> 00:03:07,600 Speaker 1: I love to watch make your heart race anyway, Yeah exactly, 54 00:03:07,760 --> 00:03:09,639 Speaker 1: I have too much heart racing going on. I need 55 00:03:09,680 --> 00:03:13,680 Speaker 1: to like give up sports and everything. Seriously. But anyway, Katie, 56 00:03:13,680 --> 00:03:15,639 Speaker 1: you've been on the show before. But for anybody who 57 00:03:15,760 --> 00:03:17,919 Speaker 1: who might not know about your background, I was hoping 58 00:03:17,960 --> 00:03:20,280 Speaker 1: you could just start out telling us about your background 59 00:03:20,960 --> 00:03:24,720 Speaker 1: because it's very interesting and just you know, your your 60 00:03:24,840 --> 00:03:28,639 Speaker 1: role at Alpha Simplex as a quant researcher. So I 61 00:03:28,760 --> 00:03:32,640 Speaker 1: spent most of my career studying systematic training strategies. I 62 00:03:32,680 --> 00:03:35,440 Speaker 1: got a pH d at m I T and Operations Research, 63 00:03:35,480 --> 00:03:39,119 Speaker 1: and I was really fascinated with rules that investors used 64 00:03:39,120 --> 00:03:42,840 Speaker 1: to make decisions. So it's quite natural that eventually my 65 00:03:42,880 --> 00:03:47,040 Speaker 1: career ended up to becoming a systematic trend follower, where 66 00:03:47,040 --> 00:03:52,040 Speaker 1: our job is really about designing systems to follow markets 67 00:03:52,280 --> 00:03:58,600 Speaker 1: and find opportunities using quantitative techniques UM. This is exciting 68 00:03:58,720 --> 00:04:02,560 Speaker 1: because we're using math, which I love UM to find 69 00:04:02,960 --> 00:04:07,440 Speaker 1: new trends and new new opportunities. And it's especially exciting 70 00:04:07,480 --> 00:04:10,160 Speaker 1: after a year like last year. I know, the Mantaged 71 00:04:10,200 --> 00:04:14,760 Speaker 1: Features fund did what something like that and the uh 72 00:04:14,880 --> 00:04:18,000 Speaker 1: the with the alternatives funded broke even I think, which 73 00:04:18,000 --> 00:04:19,960 Speaker 1: one year like last year you've got to ac count 74 00:04:19,960 --> 00:04:23,240 Speaker 1: as a w I guess, so last year was phenomenal. 75 00:04:23,320 --> 00:04:25,279 Speaker 1: I mean for someone like myself who's been in the 76 00:04:25,320 --> 00:04:29,280 Speaker 1: managed future space for years, this space is a place 77 00:04:29,320 --> 00:04:32,480 Speaker 1: where it's definitely a clumpy returns but we do really 78 00:04:32,480 --> 00:04:36,840 Speaker 1: well when there's massive trends, when there's dislocation, when things 79 00:04:37,040 --> 00:04:42,159 Speaker 1: are uncomfortable, and last year was definitely uncomfortable, particularly fixed income. 80 00:04:42,279 --> 00:04:45,000 Speaker 1: And I've been really fascinated by fixed income last year 81 00:04:45,000 --> 00:04:47,880 Speaker 1: as well, but other things were exciting too. Okay, So 82 00:04:47,880 --> 00:04:49,920 Speaker 1: so tell us about this because you have a note 83 00:04:50,080 --> 00:04:53,760 Speaker 1: that sort of reviews two I believe, and you said 84 00:04:53,880 --> 00:04:57,080 Speaker 1: it was a manner year for trend and specifically for 85 00:04:57,120 --> 00:05:01,120 Speaker 1: the pigs fly trade. Oh yeah, that's great. I mean, 86 00:05:01,160 --> 00:05:04,240 Speaker 1: so if you think about fixed income, most people think 87 00:05:04,279 --> 00:05:06,520 Speaker 1: of it as a tried and true investment. They think 88 00:05:06,839 --> 00:05:09,520 Speaker 1: if things go wrong, fixed incomes there. For me, so 89 00:05:09,560 --> 00:05:13,080 Speaker 1: that classic sixty last year was the first year where 90 00:05:13,120 --> 00:05:15,760 Speaker 1: we had to think about the concept of rising rates, 91 00:05:16,040 --> 00:05:18,880 Speaker 1: where we had to think about present value of bonds 92 00:05:19,000 --> 00:05:21,920 Speaker 1: actually being affected. And so you saw a very very 93 00:05:22,000 --> 00:05:25,720 Speaker 1: negative year for fixed income and this was a tremendous 94 00:05:25,920 --> 00:05:28,560 Speaker 1: short trend. But I just have to say that this 95 00:05:28,720 --> 00:05:32,080 Speaker 1: hasn't worked for almost forty years, and most of us 96 00:05:32,120 --> 00:05:34,320 Speaker 1: haven't been trading in the markets for forty years, so 97 00:05:34,360 --> 00:05:38,360 Speaker 1: it's basically an artifice of history. So for us who 98 00:05:38,440 --> 00:05:43,480 Speaker 1: trade systematically, seeing those trends and actually trading short and 99 00:05:43,600 --> 00:05:46,719 Speaker 1: fixed income was sort of doing something that most people 100 00:05:46,760 --> 00:05:50,159 Speaker 1: wouldn't dare to do. But we're quants. We follow where 101 00:05:50,160 --> 00:05:53,360 Speaker 1: the opportunities are, and that was a very very profitable 102 00:05:53,400 --> 00:05:57,400 Speaker 1: opportunity last year, being able to short bonds as central 103 00:05:57,440 --> 00:06:01,240 Speaker 1: bankers raise rates to find inflation. So then, kitty, you know, 104 00:06:01,400 --> 00:06:06,080 Speaker 1: then the calendar turned to three. Everyone's staring at a 105 00:06:06,120 --> 00:06:09,200 Speaker 1: fresh P and L for the year. We've seen you know, 106 00:06:10,480 --> 00:06:14,359 Speaker 1: very strong strength inequities, treasuries as well, yields coming down. 107 00:06:14,920 --> 00:06:17,800 Speaker 1: But yet I feel like there's the danger of sort 108 00:06:17,800 --> 00:06:20,359 Speaker 1: of a fault, you know, interpreting that with a false 109 00:06:20,360 --> 00:06:23,400 Speaker 1: signal that you know, the soft landing is a done deal, 110 00:06:23,640 --> 00:06:27,440 Speaker 1: that inflation, that beast is tamed. But January is a 111 00:06:27,480 --> 00:06:30,440 Speaker 1: weird month, you know. Obviously you can see these reversals 112 00:06:30,440 --> 00:06:33,280 Speaker 1: in trend at the start of a year that that 113 00:06:33,320 --> 00:06:36,400 Speaker 1: don't last. So how are you thinking about this month 114 00:06:36,839 --> 00:06:39,200 Speaker 1: and is it setting a signal about what we can 115 00:06:39,240 --> 00:06:40,880 Speaker 1: expect for the rest of the year. Is this kind 116 00:06:40,920 --> 00:06:44,479 Speaker 1: of a head fake that's just uh, perhaps a result 117 00:06:44,600 --> 00:06:48,520 Speaker 1: of the new P and L everyone has for so 118 00:06:48,600 --> 00:06:51,599 Speaker 1: there's been so many positive things at the beginning of 119 00:06:51,640 --> 00:06:54,240 Speaker 1: this year, people are not expecting things to be as 120 00:06:54,279 --> 00:06:57,040 Speaker 1: positive as it's been. But if you really look at it, 121 00:06:57,120 --> 00:07:00,200 Speaker 1: there's a couple of key factors. First of all, any 122 00:07:00,240 --> 00:07:02,800 Speaker 1: investors got beaten up last year, they took their money 123 00:07:02,800 --> 00:07:05,919 Speaker 1: out of the markets. They're waiting for that signal that 124 00:07:06,000 --> 00:07:08,320 Speaker 1: things are okay and I gotta get in, so they're 125 00:07:08,400 --> 00:07:11,520 Speaker 1: under invested coming into the beginning of the year. Number two, 126 00:07:11,640 --> 00:07:15,280 Speaker 1: we're seeing some moderation in inflation, which is a positive 127 00:07:15,320 --> 00:07:18,520 Speaker 1: signal that we're going to eventually find a way to 128 00:07:18,680 --> 00:07:22,600 Speaker 1: go on hold and potentially stabilize some of the inflation 129 00:07:22,640 --> 00:07:25,680 Speaker 1: situation that people are dealing with. And number three, we're 130 00:07:25,720 --> 00:07:29,920 Speaker 1: seeing positive news in Europe and also in Asia, particularly China, 131 00:07:30,240 --> 00:07:33,160 Speaker 1: which is suggesting that things can get back to normal 132 00:07:33,240 --> 00:07:35,800 Speaker 1: at some point. So there's this optimism that kind of 133 00:07:36,240 --> 00:07:40,000 Speaker 1: is flooded by several good factors. I think the thing 134 00:07:40,120 --> 00:07:43,200 Speaker 1: to be aware of is that there are a lot 135 00:07:43,240 --> 00:07:47,320 Speaker 1: of positive signals, but at the same time, inflation is 136 00:07:47,320 --> 00:07:51,000 Speaker 1: still very, very very far from the target, which means 137 00:07:51,080 --> 00:07:53,600 Speaker 1: that central bankers who don't always think like the markets, 138 00:07:53,600 --> 00:07:56,520 Speaker 1: who think a little more long term, are still going 139 00:07:56,600 --> 00:07:59,160 Speaker 1: to have to fight that fight, and that fight may 140 00:07:59,160 --> 00:08:01,360 Speaker 1: not be over as quick as people think. And I 141 00:08:01,400 --> 00:08:04,240 Speaker 1: think that's what we're seeing in terms of why it's 142 00:08:04,240 --> 00:08:08,760 Speaker 1: such a positive January. I feel like there's a split between, uh, 143 00:08:08,800 --> 00:08:12,760 Speaker 1: what strategists and others are expecting for the year, where 144 00:08:12,800 --> 00:08:17,520 Speaker 1: a lot had been saying before three started that we 145 00:08:17,560 --> 00:08:21,440 Speaker 1: would see a choppy first half than a better second half. 146 00:08:22,040 --> 00:08:27,680 Speaker 1: Now we're seeing just about everything rallying, including crypto etcetera, etcetera. So, um, like, 147 00:08:27,680 --> 00:08:29,840 Speaker 1: where do you fall in that camp of of like 148 00:08:30,000 --> 00:08:33,640 Speaker 1: the breakdown between when which part of the year could 149 00:08:33,640 --> 00:08:38,040 Speaker 1: possibly be the stronger part? So I agree with you, 150 00:08:38,120 --> 00:08:40,960 Speaker 1: And what's happened is people have been a little nervous, 151 00:08:41,000 --> 00:08:43,319 Speaker 1: perhaps it was what happened last year and just kind 152 00:08:43,320 --> 00:08:46,480 Speaker 1: of getting over that expecting a choppy's first half and 153 00:08:46,800 --> 00:08:49,560 Speaker 1: a positive second half. I think we're probably more of 154 00:08:49,600 --> 00:08:52,160 Speaker 1: the camp that you may see the opposite, So you're 155 00:08:52,160 --> 00:08:54,680 Speaker 1: going to see a choppy second half of the year 156 00:08:54,720 --> 00:08:57,640 Speaker 1: when we actually realized that inflation doesn't fall as quickly 157 00:08:57,760 --> 00:09:01,080 Speaker 1: as we like. So if we actually see inflation bottom 158 00:09:01,360 --> 00:09:03,760 Speaker 1: and come back up, and we've seen some early indications 159 00:09:03,800 --> 00:09:08,640 Speaker 1: recently that central bankers are holding but inflation isn't moving 160 00:09:08,880 --> 00:09:13,080 Speaker 1: low enough, that's where that could be a more challenging 161 00:09:13,080 --> 00:09:15,320 Speaker 1: second half of the year. The reality that this takes 162 00:09:15,360 --> 00:09:18,120 Speaker 1: a lot longer than we would like you know, Katie, 163 00:09:18,120 --> 00:09:21,000 Speaker 1: I know at Alpha Simplex, one of the foundations of 164 00:09:21,040 --> 00:09:24,280 Speaker 1: the firm is this idea of the adaptive market hypotheses, 165 00:09:24,360 --> 00:09:26,640 Speaker 1: which you know, to dump it down, the way I 166 00:09:26,679 --> 00:09:28,440 Speaker 1: think of it is, you know, market rules aren't really 167 00:09:28,480 --> 00:09:30,560 Speaker 1: written in stone. They're they're sort of written in pencil, 168 00:09:30,600 --> 00:09:31,959 Speaker 1: and you have to erase them every now and then 169 00:09:32,000 --> 00:09:35,199 Speaker 1: and rewrite them. And I think the one thing along 170 00:09:35,240 --> 00:09:38,920 Speaker 1: those lines that a lot of people are wondering is 171 00:09:39,000 --> 00:09:42,440 Speaker 1: the correlation between stocks and bonds. You know, typically we 172 00:09:42,559 --> 00:09:47,480 Speaker 1: tend to think of them negatively correlated. If stocks are rallying, 173 00:09:48,040 --> 00:09:52,000 Speaker 1: you know, history would suggest that bonds are falling and 174 00:09:52,080 --> 00:09:56,200 Speaker 1: yields are rising. Uh, last year we saw bonds yields 175 00:09:56,320 --> 00:09:59,920 Speaker 1: rise and stocks fall. I'm wondering what sort of condition 176 00:10:00,120 --> 00:10:03,040 Speaker 1: you think need to be in place to sort of 177 00:10:03,160 --> 00:10:06,400 Speaker 1: have that revert back to the historical trend of negative 178 00:10:06,440 --> 00:10:09,840 Speaker 1: correlations between bond prices and stock prices. Is it as 179 00:10:09,840 --> 00:10:13,440 Speaker 1: simple as just a normalization of inflation or is there 180 00:10:13,480 --> 00:10:15,319 Speaker 1: more to it? Do you think? Well, I think the 181 00:10:15,440 --> 00:10:18,640 Speaker 1: simple answer is inflation. The reason is if you look 182 00:10:18,720 --> 00:10:21,960 Speaker 1: farther back in history, and a lot of investors don't 183 00:10:22,040 --> 00:10:24,600 Speaker 1: think that way looking back and appeared where we had 184 00:10:24,800 --> 00:10:28,080 Speaker 1: rising rates and we had higher inflation and changing inflation. 185 00:10:28,640 --> 00:10:32,920 Speaker 1: You saw three key factors. First, you saw that bonds 186 00:10:33,200 --> 00:10:37,200 Speaker 1: had higher volatility then typical and what were you're used to. 187 00:10:37,440 --> 00:10:42,080 Speaker 1: You also saw that stock bond correlation was positive, and 188 00:10:42,120 --> 00:10:44,600 Speaker 1: you saw that there was a lot more uncertainty in 189 00:10:44,640 --> 00:10:48,480 Speaker 1: general about that relationship. And so if you look at 190 00:10:48,520 --> 00:10:51,679 Speaker 1: what's happened recently, it's very, very similar to what you 191 00:10:51,720 --> 00:10:55,640 Speaker 1: see in terms of asset price dynamics recently. And what 192 00:10:55,720 --> 00:10:59,920 Speaker 1: that says to me is that inflation changes asset price dynamics. 193 00:11:00,800 --> 00:11:05,000 Speaker 1: You now are focusing on fixed incomes relationship to inflation 194 00:11:05,160 --> 00:11:08,319 Speaker 1: as opposed to fixed income as a safe haven asset, 195 00:11:08,840 --> 00:11:12,679 Speaker 1: and that is how that negative correlation becomes the dominant factor. 196 00:11:13,080 --> 00:11:15,600 Speaker 1: In a world where fixed income is no longer a 197 00:11:15,600 --> 00:11:20,320 Speaker 1: safe haven, you lose that negative correlation, and that's exactly 198 00:11:20,320 --> 00:11:23,440 Speaker 1: what we saw last year. Can you talk to us 199 00:11:23,480 --> 00:11:25,600 Speaker 1: more about what you guys are projecting in terms of 200 00:11:25,600 --> 00:11:29,280 Speaker 1: what we'll be seeing from the inflation front, because it 201 00:11:29,320 --> 00:11:32,240 Speaker 1: sounds like you are saying it won't be falling as 202 00:11:32,240 --> 00:11:34,400 Speaker 1: fast as a lot of people are expecting. And then 203 00:11:34,440 --> 00:11:36,280 Speaker 1: at the same time, we have people coming out and 204 00:11:36,320 --> 00:11:39,720 Speaker 1: saying the FED really should rethink it's two percent target. 205 00:11:41,000 --> 00:11:43,920 Speaker 1: What do you make of all that? Well, the truth is, 206 00:11:44,000 --> 00:11:48,160 Speaker 1: in general, markets like things to move quicker than especially 207 00:11:48,240 --> 00:11:52,120 Speaker 1: uncomfortable things to be over faster than they are. And 208 00:11:52,200 --> 00:11:54,959 Speaker 1: I think what happened throughout this entire last two or 209 00:11:55,040 --> 00:11:58,400 Speaker 1: three years has been very clear trends and asset prices 210 00:11:58,720 --> 00:12:02,760 Speaker 1: that were consistent with a very serious inflation problem. And 211 00:12:02,800 --> 00:12:05,800 Speaker 1: then by the time we actually got into dealing with 212 00:12:05,840 --> 00:12:08,000 Speaker 1: this problem this year, it's also going to take quite 213 00:12:08,040 --> 00:12:10,880 Speaker 1: some time for things to moderate. I mean, I think 214 00:12:11,000 --> 00:12:14,480 Speaker 1: a simple example would be wage inflation. We really don't 215 00:12:14,600 --> 00:12:17,760 Speaker 1: know how much wage inflation is going to impact until 216 00:12:17,800 --> 00:12:20,480 Speaker 1: we've really seen year end and we've seen what happens 217 00:12:20,960 --> 00:12:24,280 Speaker 1: after companies are just what they're doing for this year. 218 00:12:24,720 --> 00:12:28,200 Speaker 1: So I think those are very stale and slow moving estimates, 219 00:12:28,200 --> 00:12:31,240 Speaker 1: and I think people tend to underestimate how long it 220 00:12:31,280 --> 00:12:35,080 Speaker 1: takes for these type of very opaque forces to calm 221 00:12:35,120 --> 00:12:38,240 Speaker 1: down um, which means that there's going to be a 222 00:12:38,240 --> 00:12:42,520 Speaker 1: lot more trends with people underreacting to some and overreacting 223 00:12:42,520 --> 00:12:46,120 Speaker 1: to other events. You know, Katie, if I look out 224 00:12:46,280 --> 00:12:48,080 Speaker 1: for the rest of the year and try to you know, 225 00:12:48,559 --> 00:12:51,640 Speaker 1: thick of what risks lie ahead. Politics springs to mind, 226 00:12:51,679 --> 00:12:53,520 Speaker 1: and and the issue with the debt ceiling. And I 227 00:12:53,520 --> 00:12:56,360 Speaker 1: imagine that's a hard thing for a quant to sort 228 00:12:56,360 --> 00:12:59,400 Speaker 1: of put numbers attached numbers too, But how are you 229 00:12:59,440 --> 00:13:03,520 Speaker 1: thinking about this potential conflict over the debt ceiling? You know, 230 00:13:03,600 --> 00:13:06,480 Speaker 1: in uh, more than ten years ago, the last time 231 00:13:06,480 --> 00:13:08,360 Speaker 1: we had a crisis like this, we did get the 232 00:13:08,440 --> 00:13:11,840 Speaker 1: US credit rating downgraded and sort of have a counterintuitive 233 00:13:11,880 --> 00:13:15,240 Speaker 1: reaction where Treasury is actually rallied after that, uh, you 234 00:13:15,280 --> 00:13:18,800 Speaker 1: know for that safe haven haven u bid. Are you 235 00:13:18,800 --> 00:13:21,840 Speaker 1: thinking much about that risk this year? And and so 236 00:13:21,880 --> 00:13:23,760 Speaker 1: how do you how do you see it playing out? 237 00:13:24,480 --> 00:13:26,480 Speaker 1: I mean, I have to be honest, we think more 238 00:13:26,480 --> 00:13:29,440 Speaker 1: in terms of the pressure that's on the FED and 239 00:13:29,520 --> 00:13:32,520 Speaker 1: what they'll do. And I think in general most investors 240 00:13:32,559 --> 00:13:35,960 Speaker 1: out there looking at the fixed income markets are just wondering, 241 00:13:36,559 --> 00:13:38,600 Speaker 1: you know, how far will the FED go and will 242 00:13:38,640 --> 00:13:42,800 Speaker 1: these factors actually impact their choices? Um And I think we, 243 00:13:42,960 --> 00:13:46,720 Speaker 1: just like everyone else, will be dissecting every commentary and 244 00:13:46,760 --> 00:13:51,679 Speaker 1: trying to really understand how those different issues may impact 245 00:13:51,760 --> 00:13:55,480 Speaker 1: FED policy. Because right now, FED policy has been at 246 00:13:55,520 --> 00:13:58,679 Speaker 1: the center of many different asset class returns. I mean, 247 00:13:58,760 --> 00:14:01,600 Speaker 1: let me give you a simple example, currencies as well. 248 00:14:01,880 --> 00:14:05,080 Speaker 1: We've seen huge correlations between the US two year and 249 00:14:05,360 --> 00:14:08,680 Speaker 1: the US dollar. We're seeing a lot of cross asset 250 00:14:08,720 --> 00:14:11,760 Speaker 1: relationships that are very strong and all tied to the 251 00:14:11,760 --> 00:14:15,320 Speaker 1: inflation rising rates narrative, which I feel like we're in 252 00:14:15,320 --> 00:14:19,440 Speaker 1: the next phase of right now, what's next? What happens next? 253 00:14:19,520 --> 00:14:22,440 Speaker 1: Now that we're seeing this inflation abates and we have 254 00:14:22,560 --> 00:14:25,800 Speaker 1: these other issues, do they come front and center next? 255 00:14:26,520 --> 00:14:28,720 Speaker 1: So it almost sounds like, you know, maybe the risk 256 00:14:28,880 --> 00:14:33,240 Speaker 1: is that the FED reacts to the political chaos by 257 00:14:33,240 --> 00:14:37,080 Speaker 1: easing up on its tightening campaign and quantitative tightening. Is 258 00:14:37,080 --> 00:14:39,920 Speaker 1: that is that a real possibility you think, and my 259 00:14:40,000 --> 00:14:42,840 Speaker 1: guests would be that the market won't care so much 260 00:14:42,880 --> 00:14:46,240 Speaker 1: about the politics if the FED is easing precisely. And 261 00:14:46,280 --> 00:14:48,720 Speaker 1: I think the challenge was if you look last year 262 00:14:48,760 --> 00:14:51,200 Speaker 1: at a data point, I think what was the most 263 00:14:51,240 --> 00:14:56,760 Speaker 1: surprising was when when the FED decided to hike amidst 264 00:14:56,760 --> 00:14:59,520 Speaker 1: what was going on in Ukraine. There was an example 265 00:14:59,680 --> 00:15:03,920 Speaker 1: of them not reacting to markets behavior and people's nervousness. 266 00:15:04,400 --> 00:15:06,880 Speaker 1: So I think people have gotten a little used to 267 00:15:06,920 --> 00:15:09,800 Speaker 1: the fact that the FED is going on its own path. 268 00:15:10,640 --> 00:15:12,880 Speaker 1: If that were to change course and they were to 269 00:15:13,080 --> 00:15:16,480 Speaker 1: react based on political or other reasons, I think that 270 00:15:16,520 --> 00:15:19,560 Speaker 1: would create some new uncertainty in terms of this narrative 271 00:15:19,600 --> 00:15:22,800 Speaker 1: of fighting inflation. So it's really a matter of hanging 272 00:15:22,840 --> 00:15:25,760 Speaker 1: on every speech, I guess, and every Beige book and 273 00:15:25,840 --> 00:15:35,240 Speaker 1: every every minute everything. Can you talk to us more 274 00:15:35,280 --> 00:15:38,200 Speaker 1: about what else you're expecting for the rest of the year. 275 00:15:38,240 --> 00:15:40,080 Speaker 1: I think in one of your recent notes you said 276 00:15:40,680 --> 00:15:43,080 Speaker 1: energy prices have been subdued. I'm wondering how you're thinking 277 00:15:43,120 --> 00:15:46,360 Speaker 1: about that and also how it relates to the stock 278 00:15:46,440 --> 00:15:50,040 Speaker 1: market UM. But then also tell us maybe you can 279 00:15:50,080 --> 00:15:52,320 Speaker 1: talk about some of the components that go into your 280 00:15:52,360 --> 00:15:54,400 Speaker 1: models and what exactly you guys are tracking, and just 281 00:15:54,480 --> 00:15:57,680 Speaker 1: how the secret sauce if I can say so, UM 282 00:15:57,800 --> 00:16:02,920 Speaker 1: works behind UM predictions. So first I'll start with commodities. 283 00:16:02,960 --> 00:16:06,880 Speaker 1: I mean, commodities were a major hot topic earlier last year. 284 00:16:07,160 --> 00:16:09,720 Speaker 1: They have really been very mixed and back and forth 285 00:16:09,760 --> 00:16:14,160 Speaker 1: since then. But we've seen more moves recently in industrial metals, 286 00:16:14,280 --> 00:16:17,720 Speaker 1: and we've also seen in some sets of pause in 287 00:16:17,920 --> 00:16:23,160 Speaker 1: energy markets because of some rather favorable weather conditions, So 288 00:16:23,200 --> 00:16:25,520 Speaker 1: I think that has the potential to change over the 289 00:16:25,520 --> 00:16:28,000 Speaker 1: next two to three months, so we should watch that 290 00:16:28,000 --> 00:16:32,040 Speaker 1: that could That could also be a potential tailwind for 291 00:16:32,240 --> 00:16:35,360 Speaker 1: decreasing inflation. Is if we start to see those assets 292 00:16:35,400 --> 00:16:38,960 Speaker 1: increasing and value, that's something that will fight against this 293 00:16:39,320 --> 00:16:42,840 Speaker 1: reducing inflation narrative. So that's very important and that's why 294 00:16:42,840 --> 00:16:45,520 Speaker 1: it's something to watch in the next few weeks to 295 00:16:45,640 --> 00:16:49,400 Speaker 1: months um and how those raw materials really do impact 296 00:16:50,000 --> 00:16:53,000 Speaker 1: the entires of my process. But when it comes to 297 00:16:53,040 --> 00:16:55,760 Speaker 1: our models, I think that's a fantastic question. I love 298 00:16:55,760 --> 00:16:58,800 Speaker 1: that question. Tell us all the secret, the secret sauce. 299 00:16:59,360 --> 00:17:03,000 Speaker 1: So the exciting part about being a systematic trader is 300 00:17:03,040 --> 00:17:06,639 Speaker 1: that your job is to build the system that makes 301 00:17:06,680 --> 00:17:11,080 Speaker 1: decisions based on data and as data driven. So as 302 00:17:11,200 --> 00:17:15,520 Speaker 1: data and information come in, your adjusting your positions and 303 00:17:15,640 --> 00:17:18,320 Speaker 1: your view on the markets as a function of what 304 00:17:18,480 --> 00:17:22,960 Speaker 1: the market is doing. So more fundamental strategies focus on 305 00:17:23,000 --> 00:17:26,680 Speaker 1: trying to understand what the market should do, and what 306 00:17:26,760 --> 00:17:29,399 Speaker 1: we do is try and understand what the market is 307 00:17:29,480 --> 00:17:32,879 Speaker 1: actually doing, because if you think about it, the market 308 00:17:32,920 --> 00:17:37,000 Speaker 1: itself is made up of very very intelligent and why 309 00:17:37,119 --> 00:17:41,480 Speaker 1: groups of people across the world, so really, oftentimes in 310 00:17:41,520 --> 00:17:45,960 Speaker 1: a very distressful environment, aggregating the information there and following 311 00:17:46,000 --> 00:17:49,960 Speaker 1: those prevailing trends can provide opportunities. And that's why you're like, 312 00:17:50,080 --> 00:17:53,800 Speaker 1: last year provided a lot of great opportunities because it 313 00:17:53,880 --> 00:17:56,720 Speaker 1: was very hard to understand how will the world react 314 00:17:57,119 --> 00:18:02,080 Speaker 1: to a rising inflation, rising rate environment? Right, and that 315 00:18:02,200 --> 00:18:05,680 Speaker 1: dollar is just such always a perennial, such an important 316 00:18:05,720 --> 00:18:08,760 Speaker 1: component of of everything going on in markets. You know, 317 00:18:08,840 --> 00:18:11,520 Speaker 1: part of this risk off action we saw last year 318 00:18:11,640 --> 00:18:13,720 Speaker 1: was obviously at probably at least in part because of 319 00:18:13,760 --> 00:18:17,240 Speaker 1: that strengthening dollar, or at least they you know, both 320 00:18:17,240 --> 00:18:20,159 Speaker 1: occurred hand in hand. What are you expecting for the 321 00:18:20,200 --> 00:18:22,760 Speaker 1: dollar this year? And it's part of this rally we've 322 00:18:22,760 --> 00:18:25,399 Speaker 1: seen in equities because it's sort of come off the 323 00:18:25,440 --> 00:18:28,640 Speaker 1: highs that we saw last year. So that's a good 324 00:18:28,680 --> 00:18:32,159 Speaker 1: question because the dollar has been most highly correlated also 325 00:18:32,280 --> 00:18:34,800 Speaker 1: with the two year and so what that means is 326 00:18:34,840 --> 00:18:37,760 Speaker 1: that the US being stronger in terms of their monetary 327 00:18:37,800 --> 00:18:42,000 Speaker 1: policy has actually led in terms of relative strength as 328 00:18:42,040 --> 00:18:45,800 Speaker 1: a dollar for several reasons. One is, risk off behavior 329 00:18:45,880 --> 00:18:48,520 Speaker 1: tends to be very favorable for the dollar. You also 330 00:18:48,600 --> 00:18:52,600 Speaker 1: saw the US being tightening faster, which was also favorable 331 00:18:52,640 --> 00:18:55,720 Speaker 1: for the dollar um and you saw the US looking 332 00:18:55,800 --> 00:18:59,600 Speaker 1: economically somewhat ahead last year. That all sort of started 333 00:18:59,640 --> 00:19:02,840 Speaker 1: to ravel in the last couple of months, and we've 334 00:19:02,880 --> 00:19:06,480 Speaker 1: really steadily seen that trade unravel all the way the 335 00:19:06,480 --> 00:19:08,560 Speaker 1: other directions. So it was a very strong trade that's 336 00:19:08,600 --> 00:19:13,560 Speaker 1: unraveled since roughly September. Now we actually think that there's 337 00:19:13,600 --> 00:19:16,919 Speaker 1: a possibility that you might see some resurgence of that 338 00:19:17,040 --> 00:19:20,439 Speaker 1: narrative because you really did see a very very strong, 339 00:19:20,880 --> 00:19:25,479 Speaker 1: coordinated move in the other direction for some substantial period 340 00:19:25,480 --> 00:19:28,120 Speaker 1: of time, which means that if the US ends up 341 00:19:28,160 --> 00:19:32,240 Speaker 1: being strong again in relative terms, or if tightening happens 342 00:19:32,240 --> 00:19:35,200 Speaker 1: in the US in a faster pace, or they hold 343 00:19:35,200 --> 00:19:38,000 Speaker 1: steady for longer, you might see some resurgence of that 344 00:19:38,080 --> 00:19:40,480 Speaker 1: strong dollar at the bottom here, because it's really moved 345 00:19:40,520 --> 00:19:44,000 Speaker 1: quite a long way. And what about textos, because I've 346 00:19:44,000 --> 00:19:48,160 Speaker 1: heard conflicting views on what actually is behind the tech 347 00:19:48,240 --> 00:19:50,080 Speaker 1: valley that we've seen at the start of the year, 348 00:19:50,119 --> 00:19:54,160 Speaker 1: where I've even had some people say tex stalks used 349 00:19:54,160 --> 00:19:57,359 Speaker 1: to act as defensive place almost during the pandemic, and 350 00:19:57,400 --> 00:19:59,880 Speaker 1: maybe we can even start to think of them uh 351 00:20:00,080 --> 00:20:03,800 Speaker 1: that way as well this year, just because people are 352 00:20:04,280 --> 00:20:08,840 Speaker 1: expecting slower growth or even a recession. What are some 353 00:20:08,880 --> 00:20:11,680 Speaker 1: of the factors behind the tech rally. So I think 354 00:20:11,680 --> 00:20:14,080 Speaker 1: one of the key factors, especially for the first part 355 00:20:14,080 --> 00:20:15,840 Speaker 1: of this year in terms of the rally of tech, 356 00:20:15,920 --> 00:20:19,360 Speaker 1: has been the relative under performance as well. So it's 357 00:20:19,400 --> 00:20:22,520 Speaker 1: definitely been a buying opportunity for a lot of investors 358 00:20:22,560 --> 00:20:25,400 Speaker 1: that were sort of frightened by what happened last year. 359 00:20:25,920 --> 00:20:27,919 Speaker 1: So you have buying at the bottom, You definitely have 360 00:20:28,000 --> 00:20:30,800 Speaker 1: buying power. But there's also the issue that we have 361 00:20:30,880 --> 00:20:34,000 Speaker 1: to think about with tech stops is interest rate sensitivity. 362 00:20:34,280 --> 00:20:37,239 Speaker 1: They have been much more sensitive to rising rates, and 363 00:20:37,280 --> 00:20:40,719 Speaker 1: the fact that rising rates might eventually be on hold 364 00:20:41,119 --> 00:20:44,640 Speaker 1: is actually a positive signal for tech companies based on 365 00:20:44,640 --> 00:20:47,080 Speaker 1: on sort of recent price movements. So I think you've 366 00:20:47,080 --> 00:20:50,160 Speaker 1: got some technical factors that are sort of putting a 367 00:20:50,200 --> 00:20:53,760 Speaker 1: tech companies already in the plus. Will those sustain, It's 368 00:20:53,760 --> 00:20:56,119 Speaker 1: going to depend on what happens as earning season. It's 369 00:20:56,160 --> 00:20:59,080 Speaker 1: going to depend on how we navigate the rising rates 370 00:20:59,400 --> 00:21:02,920 Speaker 1: environment we continue or not, and also sort of how 371 00:21:03,400 --> 00:21:06,280 Speaker 1: how those companies come out of this new sort of 372 00:21:06,320 --> 00:21:09,080 Speaker 1: regime this year, Katie, you mentioned that to be getting 373 00:21:09,280 --> 00:21:11,440 Speaker 1: uh sort of how important it is to be able 374 00:21:11,480 --> 00:21:14,680 Speaker 1: to embrace uncomfortable situations. So I'm gonna give you a 375 00:21:14,960 --> 00:21:19,160 Speaker 1: very uncomfortable hypothetical here. All right, you're ready. If I said, Katie, 376 00:21:19,480 --> 00:21:21,880 Speaker 1: you've you get to make one trade for the rest 377 00:21:21,960 --> 00:21:26,040 Speaker 1: of the year. It's either long US equities or short 378 00:21:26,160 --> 00:21:29,919 Speaker 1: US equities, and you can unwind the trade on the 379 00:21:30,000 --> 00:21:35,320 Speaker 1: first day of Which way are you going and why short? Yeah? 380 00:21:36,280 --> 00:21:38,160 Speaker 1: I think it's going to hurt for the first part 381 00:21:38,160 --> 00:21:42,480 Speaker 1: of the year being short. But I think that if 382 00:21:42,520 --> 00:21:46,000 Speaker 1: we have a bottoming and inflation that people will be 383 00:21:46,320 --> 00:21:49,800 Speaker 1: realizing the actual impacts of inflation um and I also 384 00:21:49,840 --> 00:21:52,080 Speaker 1: think that will show up in earnings and that we 385 00:21:52,119 --> 00:21:55,320 Speaker 1: have to have some sort of correction. I don't like it. 386 00:21:55,320 --> 00:21:57,800 Speaker 1: It's not comfortable. I'm not sure i'd want to hold it. 387 00:21:59,000 --> 00:22:02,120 Speaker 1: But I definitely have some some short views this year. 388 00:22:02,240 --> 00:22:06,439 Speaker 1: And by bottoming in inflation, you mean bottoming somewhere significantly 389 00:22:06,480 --> 00:22:10,760 Speaker 1: above that two percent targetized Yes, and we've seen some 390 00:22:10,800 --> 00:22:12,960 Speaker 1: discussion of that. I mean, you just need a couple 391 00:22:12,960 --> 00:22:15,720 Speaker 1: of tail winds. You need maybe commodity prices to start 392 00:22:15,800 --> 00:22:18,479 Speaker 1: surging again, you need a couple of things to kind 393 00:22:18,520 --> 00:22:21,600 Speaker 1: of go against that narrative because, like I said, it 394 00:22:21,680 --> 00:22:25,960 Speaker 1: could take longer to dissipate some of the inflation pressure 395 00:22:26,160 --> 00:22:29,280 Speaker 1: or some of the sort of many factors where inflation 396 00:22:29,400 --> 00:22:33,000 Speaker 1: is moving. Is there any lesson from trend following in 397 00:22:33,040 --> 00:22:35,760 Speaker 1: markets when it comes to trying to predict the trend 398 00:22:35,760 --> 00:22:38,320 Speaker 1: and inflation, is there? You know? Is I feel like 399 00:22:38,359 --> 00:22:41,440 Speaker 1: inflation is a lot trickier perhaps, or maybe I'm wrong, 400 00:22:41,440 --> 00:22:44,000 Speaker 1: I don't know, but is is there you know, a 401 00:22:44,080 --> 00:22:46,679 Speaker 1: lesson to be applied from from market trend following and 402 00:22:46,680 --> 00:22:50,200 Speaker 1: trying to gauge the trend for inflation. So the one 403 00:22:50,240 --> 00:22:54,800 Speaker 1: thing I would say is inflation is uncomfortable. Everyone hates it. 404 00:22:54,800 --> 00:22:59,439 Speaker 1: It's it's painful, it's it's difficult in multiple aspects. It 405 00:22:59,560 --> 00:23:03,200 Speaker 1: provides opportunity. But I think for trend falling, why it's 406 00:23:03,200 --> 00:23:07,440 Speaker 1: such an interesting environment. Finally for us is that when 407 00:23:07,480 --> 00:23:12,240 Speaker 1: you have inflation, by definition, things are moving, things are inflating, 408 00:23:12,320 --> 00:23:14,440 Speaker 1: and then if it dissipates, you have you might even 409 00:23:14,440 --> 00:23:17,840 Speaker 1: have deflation. And so I think for us it's a 410 00:23:17,840 --> 00:23:21,520 Speaker 1: sign that sort of things are influx. And so I 411 00:23:21,560 --> 00:23:24,320 Speaker 1: think looking at as surprise movements. There's a lot more 412 00:23:24,359 --> 00:23:29,080 Speaker 1: opportunities for dynamic strategies and active management in a world 413 00:23:29,080 --> 00:23:32,679 Speaker 1: where inflation is higher. So I think that's something that 414 00:23:32,800 --> 00:23:36,160 Speaker 1: investors have to think about because for the last ten 415 00:23:36,280 --> 00:23:39,760 Speaker 1: or fifteen years, sixty was all you needed to do. 416 00:23:40,880 --> 00:23:44,439 Speaker 1: That's no longer the case, and that is definitely a 417 00:23:44,520 --> 00:23:48,639 Speaker 1: frightening proposition for many investors. What, in your view do 418 00:23:48,680 --> 00:23:52,160 Speaker 1: you think the FED does if we do have the 419 00:23:52,240 --> 00:23:55,560 Speaker 1: downturn and inflation topping out at four or five percent, 420 00:23:55,680 --> 00:23:59,439 Speaker 1: let's say, Well, the challenge for the FED then is 421 00:23:59,720 --> 00:24:02,040 Speaker 1: do they say, hey, we can't get to our goal 422 00:24:02,680 --> 00:24:05,080 Speaker 1: or do they say, well, let's just change the goal. 423 00:24:05,640 --> 00:24:08,359 Speaker 1: And so either of those are not very positive. I 424 00:24:08,400 --> 00:24:11,119 Speaker 1: think the more positive one, which everybody would like, is 425 00:24:11,160 --> 00:24:14,000 Speaker 1: to go back to two and have things sort of 426 00:24:14,000 --> 00:24:17,480 Speaker 1: be stable. But I think the challenges the likelihood is 427 00:24:17,520 --> 00:24:20,440 Speaker 1: we're gonna end up it for or so, and then 428 00:24:20,560 --> 00:24:23,120 Speaker 1: the question is the Feed either has to say well, 429 00:24:23,160 --> 00:24:26,399 Speaker 1: we're no longer going to try, or we're gonna have 430 00:24:26,440 --> 00:24:28,840 Speaker 1: to keep trying, and people are not gonna like that either. 431 00:24:29,359 --> 00:24:31,600 Speaker 1: So I think that that's the that's the challenge I 432 00:24:31,600 --> 00:24:34,280 Speaker 1: think that was facing us in the next few months. Yeah. 433 00:24:34,359 --> 00:24:36,879 Speaker 1: And of course, the the other side of the Fed's 434 00:24:36,920 --> 00:24:39,480 Speaker 1: mandate comes into play, the job market. You know, does 435 00:24:39,960 --> 00:24:42,760 Speaker 1: does that bottoming of inflation? Will that go hand in 436 00:24:42,800 --> 00:24:44,760 Speaker 1: hand with a rising unemployment? You think? And then then 437 00:24:44,760 --> 00:24:49,560 Speaker 1: we're really getting into this sort of uncomfortable territory. No, 438 00:24:49,680 --> 00:24:53,000 Speaker 1: I agree, I mean, especially if we're thinking stagflation or 439 00:24:53,320 --> 00:24:56,800 Speaker 1: or some of those big long words, right, And I 440 00:24:56,800 --> 00:24:59,399 Speaker 1: guess you can find cycles of that in history to 441 00:24:59,480 --> 00:25:02,280 Speaker 1: look at, but they're so different from today, especially with 442 00:25:02,320 --> 00:25:05,560 Speaker 1: technology and other things, that it's really hard to know. 443 00:25:06,240 --> 00:25:08,080 Speaker 1: And I think that means that there's gonna be a 444 00:25:08,160 --> 00:25:12,280 Speaker 1: lot of uncertainty about where things are going, especially if 445 00:25:12,320 --> 00:25:14,960 Speaker 1: we could go into one of those type of scenarios. Katy, 446 00:25:15,000 --> 00:25:16,840 Speaker 1: can I just if we can go back to the 447 00:25:16,880 --> 00:25:21,320 Speaker 1: macro discussion, we were having another sort of point of contention. 448 00:25:21,440 --> 00:25:24,240 Speaker 1: I hear from just talking to people on a daily 449 00:25:24,280 --> 00:25:27,320 Speaker 1: basis is we always hear good news is bad news 450 00:25:27,400 --> 00:25:30,840 Speaker 1: because the FED skulls aren't working. Now I'm hearing bad news. 451 00:25:30,920 --> 00:25:34,520 Speaker 1: Actually it's just bad news. So is bad news? Bad news? 452 00:25:34,600 --> 00:25:36,600 Speaker 1: Is good news? Bad news? Like? Where what do you 453 00:25:36,640 --> 00:25:40,200 Speaker 1: make of it of this discussion? Yeah? You're exactly right. 454 00:25:40,320 --> 00:25:42,679 Speaker 1: Last year, everything that was good was bad, and everything 455 00:25:42,760 --> 00:25:45,600 Speaker 1: that bad was good. This year, from the beginning of 456 00:25:45,640 --> 00:25:48,440 Speaker 1: the year, we're starting to see good is good for now, 457 00:25:48,880 --> 00:25:51,280 Speaker 1: and so we'll have to see how that evolves. I mean, 458 00:25:51,320 --> 00:25:54,879 Speaker 1: I think for us it's very counterintuitive because if you 459 00:25:54,920 --> 00:25:59,119 Speaker 1: imagine trying to predict what to do from a fundamental perspective, 460 00:26:00,000 --> 00:26:02,919 Speaker 1: if you have good news, usually think that's a positive signal. 461 00:26:03,560 --> 00:26:07,160 Speaker 1: But for us, as trend followers, we don't really care. 462 00:26:07,520 --> 00:26:09,959 Speaker 1: I hate to say that. What we care about is 463 00:26:10,440 --> 00:26:14,560 Speaker 1: where are we going? And if bad news being good 464 00:26:14,560 --> 00:26:18,480 Speaker 1: news creates a big trend, that's an opportunity. And maybe 465 00:26:18,560 --> 00:26:21,200 Speaker 1: that's actually a great environment for us because nobody can 466 00:26:21,200 --> 00:26:24,000 Speaker 1: figure out what is really going on um and there's 467 00:26:24,000 --> 00:26:25,480 Speaker 1: a lot of things that are up in the air. 468 00:26:26,160 --> 00:26:28,679 Speaker 1: What about bad news is bad news where we are 469 00:26:28,680 --> 00:26:32,359 Speaker 1: getting economic data to the point where people are super 470 00:26:32,400 --> 00:26:36,080 Speaker 1: worried about what's happening with the economy. So if it's 471 00:26:36,119 --> 00:26:38,440 Speaker 1: bad news as bad news, as long as we see 472 00:26:38,520 --> 00:26:42,520 Speaker 1: sort of a sustained negative trend, that would also be 473 00:26:42,600 --> 00:26:45,080 Speaker 1: an interesting environment for us. So I think for us, 474 00:26:45,440 --> 00:26:49,120 Speaker 1: it's more about how extreme things are and how much 475 00:26:49,160 --> 00:26:52,440 Speaker 1: things move, and so in environments where there's a lot 476 00:26:52,480 --> 00:26:56,680 Speaker 1: of good news or bad news either way, but things 477 00:26:56,720 --> 00:27:01,119 Speaker 1: are actually happening across assets, that's a good environment for 478 00:27:01,200 --> 00:27:06,000 Speaker 1: trend falling. A very calm, sort of smooth flow of 479 00:27:06,040 --> 00:27:10,440 Speaker 1: information both good and bad is not really the environment 480 00:27:10,480 --> 00:27:13,919 Speaker 1: where trend falling performs as well. I miss those times, 481 00:27:14,760 --> 00:27:36,439 Speaker 1: I know. Well, you know, Katie, we tend to be 482 00:27:36,480 --> 00:27:40,160 Speaker 1: fixated on the US markets here, um and for good reason. 483 00:27:40,240 --> 00:27:44,119 Speaker 1: You know, the largest, most liquid markets UH often correlated 484 00:27:44,160 --> 00:27:46,320 Speaker 1: with the rest of the world. But I'm wondering as 485 00:27:46,359 --> 00:27:51,159 Speaker 1: you look out there opportunities elsewhere in the world that 486 00:27:51,240 --> 00:27:53,119 Speaker 1: looked like more attractive to you, either on the long 487 00:27:53,240 --> 00:27:55,760 Speaker 1: or the short side, compared to the US, you know, 488 00:27:56,040 --> 00:27:59,919 Speaker 1: and especially because we have seen some really strong performance 489 00:28:00,119 --> 00:28:01,960 Speaker 1: from the rest of the world equities this year, even 490 00:28:01,960 --> 00:28:04,000 Speaker 1: though you know, the US markets doing great, but you 491 00:28:04,040 --> 00:28:07,600 Speaker 1: know some markets are even doing better. Is there you know, 492 00:28:07,920 --> 00:28:11,760 Speaker 1: do you dive into some of the foreign markets, you know, 493 00:28:11,760 --> 00:28:14,800 Speaker 1: are there any sort of trends you're seeing there that 494 00:28:14,800 --> 00:28:18,000 Speaker 1: that we should know about. Yeah. The two biggest trends 495 00:28:18,000 --> 00:28:20,639 Speaker 1: we've seen that are more cross sectional have been a 496 00:28:20,720 --> 00:28:26,640 Speaker 1: relative play on E M Asia versus US, and you've 497 00:28:26,640 --> 00:28:30,280 Speaker 1: seen massive movements in Asia in relative sense more recently. 498 00:28:30,560 --> 00:28:32,680 Speaker 1: But hey, again this comes to the fact that they 499 00:28:32,720 --> 00:28:35,399 Speaker 1: had a much larger attraction than we did last year, 500 00:28:35,440 --> 00:28:38,000 Speaker 1: so let's see if it continues. We've also seen in 501 00:28:38,040 --> 00:28:42,040 Speaker 1: the currency markets a definite tilt towards long em currencies 502 00:28:42,640 --> 00:28:46,240 Speaker 1: versus the dollars, so those have strengthened even more relative 503 00:28:46,280 --> 00:28:48,720 Speaker 1: to the US dollar as well. So those are both 504 00:28:48,840 --> 00:28:51,960 Speaker 1: some good indicators as well that sort of there's good 505 00:28:51,960 --> 00:28:55,600 Speaker 1: potential in the m there's also potential um in Asia 506 00:28:55,720 --> 00:28:58,840 Speaker 1: versus US. How long that last is going to depend, 507 00:28:58,880 --> 00:29:00,840 Speaker 1: but it definitely is an interesting trade at the beginning 508 00:29:00,840 --> 00:29:03,840 Speaker 1: of this year. Is that, you know, all related to 509 00:29:03,840 --> 00:29:06,520 Speaker 1: the China reopening story. I guess do you think? I 510 00:29:06,520 --> 00:29:09,000 Speaker 1: think it's both. I think some of it's a sort 511 00:29:09,040 --> 00:29:12,840 Speaker 1: of an under investment and sort of a undervaluation relative 512 00:29:12,880 --> 00:29:17,320 Speaker 1: valuation story, but it's also a question of reopening potential 513 00:29:17,360 --> 00:29:21,520 Speaker 1: for economic activity and sort of recovery um that we 514 00:29:21,560 --> 00:29:24,440 Speaker 1: have already seen in the US that you're now starting 515 00:29:24,480 --> 00:29:26,400 Speaker 1: to see. I mean, I think it will take a while, 516 00:29:26,480 --> 00:29:29,440 Speaker 1: but it is a positive there's some positive signs that 517 00:29:29,440 --> 00:29:33,120 Speaker 1: that's moving in that direction. Well, Katie Kaminski, chief research 518 00:29:33,160 --> 00:29:36,320 Speaker 1: strategist and portfolio manager at Alpha Simplex, it is always 519 00:29:36,360 --> 00:29:38,280 Speaker 1: such a pleasure to pick your brain. We we really 520 00:29:38,280 --> 00:29:40,640 Speaker 1: appreciate it. But we, as you know, we cannot let 521 00:29:40,640 --> 00:29:44,200 Speaker 1: you go just yet. We've got our little traditional, exciting 522 00:29:44,240 --> 00:29:50,160 Speaker 1: games to play. Well, why do you get us started? 523 00:29:50,160 --> 00:29:52,360 Speaker 1: What's the craziest thing you saw this week? Okay, I'm 524 00:29:52,400 --> 00:29:55,400 Speaker 1: going with something that is very dear isn't the right word, 525 00:29:55,520 --> 00:29:59,440 Speaker 1: but something I've been covering for months now and I've 526 00:29:59,600 --> 00:30:02,959 Speaker 1: devoted in my life to it basically, and then finally 527 00:30:02,960 --> 00:30:05,680 Speaker 1: we saw it happened last week, which was the Genesis 528 00:30:05,720 --> 00:30:12,680 Speaker 1: bankruptcy Genesis, the lending arm of it within the DCG Empire, 529 00:30:12,800 --> 00:30:16,200 Speaker 1: the Digital Currency Group Empire in crypto, so minuscript are related. 530 00:30:16,600 --> 00:30:20,680 Speaker 1: We saw the finally after months of anticipation where a 531 00:30:20,680 --> 00:30:22,640 Speaker 1: lot of people have been expecting it to come through, 532 00:30:23,080 --> 00:30:26,080 Speaker 1: we finally saw it come in last week. And what 533 00:30:26,120 --> 00:30:31,560 Speaker 1: did bitcoin do? I think? Yes, I mean people were 534 00:30:31,600 --> 00:30:34,040 Speaker 1: really anticipating this for such a long time, so that 535 00:30:34,400 --> 00:30:37,480 Speaker 1: helps explain part of it. But we've seen this huge 536 00:30:37,560 --> 00:30:41,520 Speaker 1: rally in bitcoin and crypto to start the year. It's 537 00:30:41,720 --> 00:30:44,360 Speaker 1: huge so market spot them on bad news. I guess 538 00:30:44,400 --> 00:30:48,200 Speaker 1: the old cliche. Maybe I don't know, I don't who 539 00:30:48,240 --> 00:30:51,720 Speaker 1: knows what happens, but yeah, so far at least, Katie, 540 00:30:51,800 --> 00:30:53,840 Speaker 1: how do you think of crypto? Is it just sort 541 00:30:53,840 --> 00:30:56,880 Speaker 1: of a higher beta version of the riskiest parts of 542 00:30:56,880 --> 00:30:58,560 Speaker 1: the equity market? A lot a lot of people seem 543 00:30:58,640 --> 00:31:01,760 Speaker 1: to think that's the case. It was interesting, is crypto 544 00:31:01,920 --> 00:31:03,920 Speaker 1: used to be something they thought as a sort of 545 00:31:03,960 --> 00:31:07,320 Speaker 1: a safe haven asset or something that's uncorrelated equities. But 546 00:31:07,400 --> 00:31:09,360 Speaker 1: the last two or three years, I think most of 547 00:31:09,400 --> 00:31:12,000 Speaker 1: the people that I know in crypto see that it's 548 00:31:12,200 --> 00:31:16,960 Speaker 1: very much a risk asset, just basically highly levered and 549 00:31:17,040 --> 00:31:20,880 Speaker 1: such that. So it's you know, so high flying risk assets. 550 00:31:20,960 --> 00:31:23,960 Speaker 1: And so I think we tend to as quant managers, 551 00:31:23,960 --> 00:31:27,640 Speaker 1: it's all about measuring VALL and the VALL of bitcoin, 552 00:31:27,760 --> 00:31:31,360 Speaker 1: and these assets are significantly higher than what you see 553 00:31:31,400 --> 00:31:34,320 Speaker 1: in traditional assets. So I think for us, it's definitely 554 00:31:34,440 --> 00:31:37,680 Speaker 1: not something that we're ventured in yet, but you know, 555 00:31:37,720 --> 00:31:41,320 Speaker 1: we're evaluating it. Yeah, Well, it's hire violin. Is it 556 00:31:41,360 --> 00:31:45,080 Speaker 1: also sort of a more hard to predict violatilty? Well, 557 00:31:45,240 --> 00:31:48,640 Speaker 1: it's higher VALL, more hard to predict I'm not sure 558 00:31:48,720 --> 00:31:51,560 Speaker 1: yet because I haven't tried to predict it, but it 559 00:31:51,680 --> 00:31:55,120 Speaker 1: definitely in terms of volatility, is much much higher than 560 00:31:55,320 --> 00:31:58,360 Speaker 1: things like oil or even some of the more knack 561 00:31:58,440 --> 00:32:03,160 Speaker 1: ass makes knack Us look pretty calm. So that that 562 00:32:03,280 --> 00:32:05,000 Speaker 1: to me is you know, not gas is one of 563 00:32:05,000 --> 00:32:07,560 Speaker 1: the big movers, so so I think that that kind 564 00:32:07,560 --> 00:32:11,160 Speaker 1: of puts Bitcoin in perspective. Alright, Katie, how about you, 565 00:32:11,160 --> 00:32:14,760 Speaker 1: Have you seen anything crazy in the last week? I think, 566 00:32:15,000 --> 00:32:17,520 Speaker 1: you know, one of the things that surprised me in 567 00:32:17,560 --> 00:32:20,040 Speaker 1: the last couple of days is seeing a peak in 568 00:32:20,200 --> 00:32:23,520 Speaker 1: Australian inflation. And the reason I say this is that 569 00:32:24,200 --> 00:32:28,600 Speaker 1: Australia has a phenomenal equity market return, right and to 570 00:32:28,800 --> 00:32:31,360 Speaker 1: see that initial sign that they're having a little bit 571 00:32:31,400 --> 00:32:34,400 Speaker 1: of an uptick again in inflation, I think is something 572 00:32:34,400 --> 00:32:36,880 Speaker 1: that investors need to pay attention to. And that goes 573 00:32:36,920 --> 00:32:39,360 Speaker 1: back to the narrative that we were talking about earlier 574 00:32:39,360 --> 00:32:42,800 Speaker 1: in this program, is that you know, I think that 575 00:32:42,840 --> 00:32:46,280 Speaker 1: we can find some surprises um going forward, not just 576 00:32:46,360 --> 00:32:49,320 Speaker 1: going to be a straight walk down. What is causing 577 00:32:49,320 --> 00:32:52,080 Speaker 1: that Australia inflation pick up? Can you can you tell? It? 578 00:32:52,200 --> 00:32:56,440 Speaker 1: Says mostly electricity prices and other costs, and so I 579 00:32:56,480 --> 00:32:59,200 Speaker 1: think that's sort of the headline view. But I would 580 00:32:59,200 --> 00:33:02,760 Speaker 1: say that that's where my question about looking at commodities 581 00:33:02,840 --> 00:33:05,320 Speaker 1: is important. So if we start to see commodity prices 582 00:33:05,440 --> 00:33:09,120 Speaker 1: or other prices increasing, that will sort of give some 583 00:33:09,240 --> 00:33:13,080 Speaker 1: fuel to the narrative that inflation doesn't go away, that critique, 584 00:33:13,960 --> 00:33:17,000 Speaker 1: And there's so many variables that could cause energy to 585 00:33:17,200 --> 00:33:21,320 Speaker 1: you know, Vladimir Putin could wake up some morning and uh, 586 00:33:21,400 --> 00:33:25,400 Speaker 1: you know I have some news along those lines. Who knows. Uh, 587 00:33:25,600 --> 00:33:29,800 Speaker 1: definitely something to keep an eye out for. All right, 588 00:33:29,920 --> 00:33:33,360 Speaker 1: my turn, As I said, I'm treating the gambling markets 589 00:33:33,400 --> 00:33:37,400 Speaker 1: just like any other markets. That's okay. So this guy, 590 00:33:37,480 --> 00:33:41,760 Speaker 1: this is a story courtesy of USA Today, This guy 591 00:33:42,680 --> 00:33:47,640 Speaker 1: Cameron Craig Um. He got placed a five dollar bet, 592 00:33:47,680 --> 00:33:50,480 Speaker 1: but again he got one of those bonuses. I have 593 00:33:50,520 --> 00:33:53,440 Speaker 1: to read the full story, but I think free bet 594 00:33:53,520 --> 00:33:57,360 Speaker 1: for this guy. And the reason I think I'm gonna 595 00:33:57,400 --> 00:33:59,520 Speaker 1: eventually get lured into sports betting on one of these 596 00:33:59,560 --> 00:34:03,200 Speaker 1: apps is the sheer insanity of the bet you can place. 597 00:34:04,080 --> 00:34:06,760 Speaker 1: So he placed a bet on who the first person 598 00:34:07,400 --> 00:34:10,920 Speaker 1: to score a touchdown would be, not just of one game, 599 00:34:11,239 --> 00:34:14,040 Speaker 1: but of all four games this past weekend, So you 600 00:34:14,080 --> 00:34:19,359 Speaker 1: had to identify the player in each game who would 601 00:34:19,360 --> 00:34:23,080 Speaker 1: be the first to score a touchdown. And he now, 602 00:34:23,760 --> 00:34:26,080 Speaker 1: how does it work if somebody doesn't score one at all? 603 00:34:26,120 --> 00:34:30,040 Speaker 1: What if it's like a string of field Well, then 604 00:34:30,080 --> 00:34:33,759 Speaker 1: you lose your five bucks? Okay, I think, yeah, Well 605 00:34:33,800 --> 00:34:36,640 Speaker 1: it's still someone's bound to score that first touchdown, you right, 606 00:34:36,760 --> 00:34:39,280 Speaker 1: even if there's a field goal. First person who scores 607 00:34:39,360 --> 00:34:42,040 Speaker 1: the first touchdown of the game, that's who you got 608 00:34:42,080 --> 00:34:45,920 Speaker 1: a name, right? So he now at five bucks? He 609 00:34:46,040 --> 00:34:51,080 Speaker 1: placed on four games, got it right on all four. 610 00:34:51,800 --> 00:34:55,480 Speaker 1: What do you suppose the winnings were, Donna? Are we 611 00:34:55,560 --> 00:34:59,000 Speaker 1: playing prices precisely? Yes we are, Katie, You are now 612 00:34:59,160 --> 00:35:03,160 Speaker 1: a contestant on the prices is precise? How much do 613 00:35:03,200 --> 00:35:07,720 Speaker 1: you think this guy won? I'll explain it again. Four games? 614 00:35:08,480 --> 00:35:11,839 Speaker 1: He named the player that scored the touchdown the first 615 00:35:11,880 --> 00:35:15,359 Speaker 1: touchdown in each of the four games, five dollar free bet? 616 00:35:16,200 --> 00:35:18,920 Speaker 1: What do you think you want one three million dollars 617 00:35:19,840 --> 00:35:22,520 Speaker 1: with that? Pretty quick? I saw you. You're like doing 618 00:35:22,560 --> 00:35:24,680 Speaker 1: some math over there when you carry the one and 619 00:35:25,560 --> 00:35:29,600 Speaker 1: one point three million? Yeah, I guess a hundred No, wait, 620 00:35:29,640 --> 00:35:32,920 Speaker 1: it's way more, way more. I gotta give it to 621 00:35:33,000 --> 00:35:36,080 Speaker 1: Katie on the spot. How much was it sent? Thousand? 622 00:35:37,920 --> 00:35:40,399 Speaker 1: I thought that was pretty good for a three dollar 623 00:35:40,520 --> 00:35:43,160 Speaker 1: five bet. You're like, I wouldn't touch it for less 624 00:35:43,200 --> 00:35:47,160 Speaker 1: than a million three one one point three? All right? Wow, 625 00:35:47,200 --> 00:35:50,719 Speaker 1: I mean okay, that's especially for the five dollars being 626 00:35:50,840 --> 00:35:54,600 Speaker 1: a giveaway. Yeah, it's pretty good. He said his life 627 00:35:54,640 --> 00:35:58,280 Speaker 1: changing money, and people were arguing with him, saying, how's 628 00:35:58,320 --> 00:36:00,640 Speaker 1: seventy three thou dollars life change the money? He's like, look, 629 00:36:00,640 --> 00:36:03,280 Speaker 1: I paid off all my bills, I paid off my loans, 630 00:36:03,520 --> 00:36:06,040 Speaker 1: my credit cards. My life's changed. Let's say the word 631 00:36:06,040 --> 00:36:12,480 Speaker 1: bills that was entirely unintentional. Did not me to twist 632 00:36:12,520 --> 00:36:16,399 Speaker 1: that it hurt because you got to see a cardiologist. 633 00:36:16,480 --> 00:36:18,439 Speaker 1: I would have thought I would have thought way more. 634 00:36:18,640 --> 00:36:20,960 Speaker 1: I'm sorry. I just hear of these like crazy, it's 635 00:36:21,000 --> 00:36:25,480 Speaker 1: your fault, you you always Yeah, I don't know about 636 00:36:25,520 --> 00:36:28,280 Speaker 1: seventy three grand for five bucks. How often can you 637 00:36:28,320 --> 00:36:31,319 Speaker 1: find me a stock, Katie that I can place five 638 00:36:31,360 --> 00:36:33,800 Speaker 1: bucks on and get us to seventy three? Maybe a 639 00:36:33,840 --> 00:36:40,600 Speaker 1: meme stock? Yeah, crypto, crypto, sure that there's high ball there. 640 00:36:42,239 --> 00:36:44,279 Speaker 1: I'm gonna go. I like the Sam coins, any coin 641 00:36:44,360 --> 00:36:47,839 Speaker 1: linked to Sam, the surging. They're surgery. Of course they are, 642 00:36:48,160 --> 00:36:53,080 Speaker 1: of course, of course. Anyway, Katie Kavinsky again, can't thank 643 00:36:53,080 --> 00:36:55,080 Speaker 1: you enough. I hope we can have you back again 644 00:36:55,160 --> 00:36:57,359 Speaker 1: sometime later in the year and see how it's all going. 645 00:36:57,760 --> 00:37:08,440 Speaker 1: Thanks for having me. Thank you, Katie, What Goes Up. 646 00:37:08,440 --> 00:37:10,520 Speaker 1: We'll be back next week. Until then, you can find 647 00:37:10,560 --> 00:37:13,640 Speaker 1: us on the Bloomberg Terminal website and app, or wherever 648 00:37:13,680 --> 00:37:16,279 Speaker 1: you get your podcasts. We love it if you took 649 00:37:16,280 --> 00:37:18,480 Speaker 1: the time to rate and review the show on Apple 650 00:37:18,560 --> 00:37:21,520 Speaker 1: Podcasts so more listeners can find us. And you can 651 00:37:21,560 --> 00:37:25,320 Speaker 1: find us on Twitter, follow me at reag Anonymous, Bildonna 652 00:37:25,400 --> 00:37:29,120 Speaker 1: hierarch Is at Bldanna Hirach. You can also follow Bloomberg 653 00:37:29,160 --> 00:37:33,919 Speaker 1: Podcasts at podcasts. What Goes Up is produced by Stacy Wong. 654 00:37:34,400 --> 00:37:35,920 Speaker 1: Thanks for listening, See you next time.