WEBVTT - Inside the Hidden Cycles That Rule Markets and Life 0:00:00.160 --> 0:00:02.320 But knowledge to work and grow your business with c 0:00:02.520 --> 0:00:06.680 i T from transportation to healthcare to manufacturing. C i 0:00:06.760 --> 0:00:10.520 T offers commercial lending, leasing, and treasury management services for 0:00:10.600 --> 0:00:13.480 small and middle market businesses. Learn more at c i 0:00:13.560 --> 0:00:26.880 T dot com put Knowledge to Work. Hello and welcome 0:00:26.920 --> 0:00:30.720 to another episode of the Odd Lots Podcast. I'm Joe 0:00:30.760 --> 0:00:35.159 Wisenthal and I'm Tracy Alloway. So, Tracy, our podcast is 0:00:35.200 --> 0:00:38.280 supposed to be it's there. It's a markets podcast, that's 0:00:38.280 --> 0:00:42.199 what we both cover. But it seems like markets have 0:00:42.280 --> 0:00:45.600 been kind of quiet lately. Don't you think, Oh my god, 0:00:45.640 --> 0:00:48.880 tell me about it. Um there. There's only so many 0:00:48.880 --> 0:00:52.360 times we can write about falling volatility and range bound 0:00:52.640 --> 0:00:56.200 markets and like new highs and stocks. It's really really 0:00:56.240 --> 0:00:59.720 frustrating as someone whose job it is to actually write 0:00:59.720 --> 0:01:03.080 about these things. Right, we have we have a call 0:01:03.200 --> 0:01:05.920 every day that we're on and we chat about the 0:01:05.920 --> 0:01:07.720 themes and the markets, and we're like, all right, what's 0:01:07.720 --> 0:01:10.920 the theme today? And every day it's like, uh, low 0:01:11.040 --> 0:01:15.080 volatility again, when our rates going to move and break 0:01:15.080 --> 0:01:18.479 out in a certain direction. It's getting a little repetitive. Yes, 0:01:18.800 --> 0:01:23.360 why are you reminding me of the futility of art challs. 0:01:24.080 --> 0:01:26.880 It'll change eventually, you know. Right now we seem to 0:01:26.880 --> 0:01:30.400 be in this mode where there's no volatility in almost 0:01:30.440 --> 0:01:33.480 any asset class. But it's always good to be reminded that, 0:01:33.880 --> 0:01:37.280 you know, things change. There's you go through periods where 0:01:37.520 --> 0:01:40.600 things are very quiet and then things are crazy, and 0:01:40.640 --> 0:01:43.160 then when things are crazy, it feels like things will 0:01:43.200 --> 0:01:46.399 never be quiet again. But you know, things go in cycles. 0:01:47.040 --> 0:01:50.480 One can only hope. I guess the key thing here 0:01:50.600 --> 0:01:52.760 is the timing, right, Like, how do we know when 0:01:52.760 --> 0:01:55.720 things are going to change? That is always that's always 0:01:55.760 --> 0:01:57.640 the trick. And if you knew the timing then you 0:01:57.640 --> 0:02:00.360 would you would do very well in the markets. But nice, 0:02:00.880 --> 0:02:04.320 So why are we talking about this? So today we 0:02:04.400 --> 0:02:07.400 have a guest I'm very excited to talk about. He 0:02:07.480 --> 0:02:11.160 is a long time veteran of the markets, lots of 0:02:11.200 --> 0:02:15.320 experience in trading hedge funds. He's seen lots of these 0:02:15.440 --> 0:02:20.160 different cycles over time. Uh, And in fact, he's also 0:02:20.400 --> 0:02:25.320 devoted some of his research specifically to studying market cycles 0:02:25.360 --> 0:02:28.280 and the patterns that repeat over and over again and 0:02:28.639 --> 0:02:32.800 figuring out how to time them. And um, you know, 0:02:32.880 --> 0:02:36.639 I think, uh, it's sort of the perfect the perfect 0:02:36.639 --> 0:02:39.480 guests to sort of figure out where we are and 0:02:39.520 --> 0:02:43.160 what could be where we could go next. I'm yeah, 0:02:43.400 --> 0:02:45.200 this sounds great, and he'll be able to tell us 0:02:45.200 --> 0:02:48.320 when markets are going to get exciting again, right hopefully, hopefully, 0:02:48.680 --> 0:02:50.480 hopefully we'll be able to get him to tell us 0:02:50.520 --> 0:02:52.560 to the day when markets will get excited again. But 0:02:52.800 --> 0:02:56.679 we'll see if that happens. Our guest is Peter Borish. 0:02:56.960 --> 0:03:00.320 He's a strategist at the Quad Group. He I've had 0:03:00.360 --> 0:03:02.880 him on the TV show a couple of times, one 0:03:02.919 --> 0:03:05.680 of my favorite guests, and so I was really excited 0:03:05.680 --> 0:03:08.400 about the chance to talk longer with him and to 0:03:09.320 --> 0:03:11.880 get to know a little bit more about his background, 0:03:11.919 --> 0:03:24.720 which is extremely interesting. So I'll bring him in now. Peter, 0:03:24.840 --> 0:03:27.600 thank you very much for joining us. Well, it's a pleasure. 0:03:27.600 --> 0:03:31.360 It's really an honor when you talk about how uninspiring 0:03:31.400 --> 0:03:33.760 and how uninteresting the markets are, that you can have 0:03:33.840 --> 0:03:38.320 a guest that can join right in incredibly uninspiring and uninteresting. 0:03:38.600 --> 0:03:41.400 Now it's just the opposite. We were bringing you in 0:03:41.520 --> 0:03:44.520 because we hope that you'll remind us that just because 0:03:44.520 --> 0:03:47.840 it feels a little quiet right now, uh, it won't 0:03:47.880 --> 0:03:50.840 stay this way forever. So just the it's just the opposite. 0:03:50.880 --> 0:03:53.880 But um, before we get into it, tell us a 0:03:53.920 --> 0:03:57.120 little bit about your background. You've been a you're I 0:03:57.120 --> 0:04:00.560 think you're a legitimate veteran in this industry at this point, 0:04:00.760 --> 0:04:04.760 and so tell us how you got into trading and 0:04:04.880 --> 0:04:09.160 markets and sort of your your path through. Well, first 0:04:09.160 --> 0:04:10.880 of all, thank you. It's really fun to be here. 0:04:10.880 --> 0:04:13.280 And I do very much like to go greater and 0:04:13.760 --> 0:04:17.120 in depth and and and bring some substance to these 0:04:17.200 --> 0:04:20.640 issues which are complicated. I sort of bring everything back 0:04:20.680 --> 0:04:23.240 to Michigan. I'm a big Michigan guy. I went there 0:04:23.240 --> 0:04:27.240 for undergraduate in graduate school, and I was very fortunate 0:04:27.360 --> 0:04:30.120 to get a job at the New York Fed at 0:04:30.160 --> 0:04:34.960 the real recession, which is in two i finished graduate school. 0:04:35.680 --> 0:04:40.800 My career arc has been one of pure luck. I 0:04:40.920 --> 0:04:43.280 started at the New York Fed, as I said, in 0:04:43.960 --> 0:04:48.400 two that is the summer that SMP Future started, and 0:04:48.600 --> 0:04:51.719 I was in research. And then I went down and 0:04:51.839 --> 0:04:56.000 people didn't understand these new futures markets, and they created 0:04:56.040 --> 0:05:00.200 a futures and options group right outside the desk where 0:05:00.200 --> 0:05:05.440 they traded foreign exchange. And then three years later I 0:05:05.480 --> 0:05:08.520 was recruited by this young guy from Memphis, coming off 0:05:08.560 --> 0:05:11.479 the floor of the Cotton Exchange, who was starting something 0:05:11.520 --> 0:05:14.479 at the time which people didn't really know about called 0:05:14.520 --> 0:05:16.800 a hedge fund, by the name of Paul Tutor Jones, 0:05:17.360 --> 0:05:21.039 and I was sort of his first research professional at 0:05:21.080 --> 0:05:26.320 Tutor Investment Corporation, and we were lucky to apply what 0:05:26.480 --> 0:05:31.839 I would say the discipline and methodology of futures markets 0:05:31.880 --> 0:05:35.240 as financial futures around the world were being developed. So 0:05:35.320 --> 0:05:39.080 the SMP Crude Royal started in eighty five, the Japanese 0:05:39.080 --> 0:05:42.160 futures came on in in the later eighties, and then 0:05:42.200 --> 0:05:45.920 you had the European futures markets in the early nineties, 0:05:45.920 --> 0:05:48.360 and that's when it became very much a twenty four 0:05:48.360 --> 0:05:51.760 hour world, not just in foreign exchange of course, but 0:05:51.839 --> 0:05:54.840 now in all the markets, and with the advent of 0:05:54.920 --> 0:05:59.880 stock indecks, futures, treasury futures, UH trading in the inner 0:06:00.000 --> 0:06:03.000 actions among them. So give us some insight to what 0:06:03.279 --> 0:06:07.400 trading was alike then and how the rules of future 0:06:07.440 --> 0:06:13.040 markets futures markets kind of differed from other types of markets. Well, 0:06:13.080 --> 0:06:17.440 the thing about futures markets, which are everything is a mirror. 0:06:17.480 --> 0:06:20.600 It's what's a blessing can be accurse, but in futures 0:06:20.640 --> 0:06:25.240 markets because they have this performance margin that you put up, 0:06:25.320 --> 0:06:29.760 so there's an embedded uh more leverage in terms of 0:06:29.880 --> 0:06:33.240 trading those markets relative to equity markets, So your risk 0:06:33.279 --> 0:06:38.279 management has to be far more sophisticated because of if 0:06:38.320 --> 0:06:42.840 there's volatility in one of those markets, then uh you 0:06:42.880 --> 0:06:46.640 can lose money much more quickly. The success and every 0:06:46.680 --> 0:06:51.400 trading business is about worrying about risk, not about the 0:06:51.520 --> 0:06:55.400 reward so much, because it's if you can limit your risk, 0:06:55.520 --> 0:06:58.480 if you can stay in trade for another day, then 0:06:58.520 --> 0:07:02.760 you have the opportunity to be successful. We're always talking 0:07:02.800 --> 0:07:05.480 about that. We're interested in people that want to make money, 0:07:06.080 --> 0:07:10.360 not wanting to be right, and making money means limiting 0:07:10.360 --> 0:07:15.120 your losses. So that approach that most of the future traders. 0:07:15.160 --> 0:07:17.200 So if you think of Paul Jones, if you think 0:07:17.200 --> 0:07:21.400 of Louis Bacon, if you think of of Bruce Covener, 0:07:21.520 --> 0:07:25.120 even George Sorrows, all of these people started and we're 0:07:25.120 --> 0:07:28.200 more active in the futures markets, and the sophistication of 0:07:28.240 --> 0:07:31.960 those risk management tools then could be applied to other 0:07:32.040 --> 0:07:35.120 markets as they came online. So it's a certain discipline 0:07:35.200 --> 0:07:38.600 that those guys had in terms of not losing, not 0:07:38.720 --> 0:07:41.440 being carried on at a stretcher, being able to survive 0:07:41.560 --> 0:07:44.120 to the next day. That really sort of made them 0:07:44.160 --> 0:07:48.080 the cream of the crop. Yes, we always talk about 0:07:48.200 --> 0:07:50.600 and and I sit down with all our traders now 0:07:50.640 --> 0:07:55.200 that it's discipline before vision. You know when we talk 0:07:55.240 --> 0:07:58.160 in your introduction, you were saying, well, the markets kind 0:07:58.160 --> 0:08:00.080 of boring, and I think this is gonna happen, and 0:08:00.160 --> 0:08:03.400 I think that's gonna happen. And I try to distinguish 0:08:03.560 --> 0:08:07.640 very much between research and a discipline approach to markets 0:08:08.200 --> 0:08:12.160 versus gossip. I'm a Mets fan. We can gossip about baseball. 0:08:12.240 --> 0:08:15.760 The season just started their one and oh if I 0:08:15.800 --> 0:08:18.480 project that out, they're gonna go a hundred and sixty 0:08:18.480 --> 0:08:21.000 two and zero, And you would say, wait a second, 0:08:21.080 --> 0:08:25.360 that's kind of ridiculous, that's not gonna happen. Well, Amazon's 0:08:25.480 --> 0:08:27.920 up today, it was up yesterday. I guess it's gonna 0:08:27.960 --> 0:08:32.319 be up every day. We also know that's ridiculous. So 0:08:32.440 --> 0:08:35.240 the logic of I know I'm going to be right, 0:08:35.360 --> 0:08:38.440 this is what's going to happen. No, you are wrong, 0:08:38.840 --> 0:08:42.680 the market is right. That's where risk management and discipline 0:08:42.720 --> 0:08:46.040 comes into play. You started working for Paul Tutor Jones. 0:08:46.080 --> 0:08:51.480 I think it's and two years later was the famous 0:08:51.640 --> 0:08:57.360 crash of October or about two years later. And not 0:08:57.559 --> 0:09:01.800 only did Paul Tutor did that? Did your fund do 0:09:01.920 --> 0:09:05.200 extraordinarily well in that crash? And having called it right, 0:09:05.240 --> 0:09:09.240 I believe, uh, Paul himself credited the work that you 0:09:09.320 --> 0:09:12.320 did for helping the fund be on the right side 0:09:12.360 --> 0:09:15.240 and anticipate that crash. So tell us a little bit 0:09:15.280 --> 0:09:17.920 about specifically the research you were doing for him and 0:09:17.960 --> 0:09:22.360 how you were able to anticipate what, you know, considered 0:09:22.360 --> 0:09:26.679 one of the most pivotal market events in financial history. Sure, 0:09:27.200 --> 0:09:30.320 I want to back up one second. Served fortunately that 0:09:30.440 --> 0:09:33.800 what we thought was going to happen economically as a 0:09:33.840 --> 0:09:37.680 result of the crash, in terms of you know, deflationary 0:09:37.679 --> 0:09:41.880 pressures and things did not happen. Uh. So that was 0:09:42.080 --> 0:09:44.600 very much a positive because we thought that the economy 0:09:44.600 --> 0:09:47.280 would contract far more than it did. But it goes 0:09:47.320 --> 0:09:51.320 into the cycles where we were is that we were 0:09:51.360 --> 0:09:58.000 looking at data and cycles, and back then their computing 0:09:58.040 --> 0:10:03.720 power was expensive, ATA was expensive, trading was expensive. And 0:10:03.760 --> 0:10:05.920 one of the great things that one has to give 0:10:05.960 --> 0:10:10.240 credit to Paul and the other people at Tutor was 0:10:10.320 --> 0:10:13.600 the investment in all of those things. We were early 0:10:13.720 --> 0:10:17.000 users of data computing power, and so we put this 0:10:17.120 --> 0:10:20.880 together and and and I build a model, and we 0:10:20.880 --> 0:10:23.480 were looking at early days. You know today you pull 0:10:23.520 --> 0:10:25.960 up your Bloomberg, you can pull correlations up on anything, 0:10:26.000 --> 0:10:29.280 a cross correlations, inverted matrices that back then it was 0:10:29.360 --> 0:10:32.200 very difficult. We were doing that. We saw this pattern 0:10:32.240 --> 0:10:37.120 which was incredible in terms of where we were both. 0:10:37.320 --> 0:10:41.040 We started with the economic thought of technology innovation and 0:10:41.040 --> 0:10:45.600 what was happening back in the early eighties relative to 0:10:45.679 --> 0:10:48.760 what was happening with the innovation and technology in the twenties, 0:10:49.080 --> 0:10:52.000 and then the markets were tracking that very much. And 0:10:52.000 --> 0:10:56.560 when we first started this, the projection was sort of 0:10:56.760 --> 0:11:01.440 it would go into early UH and then the data 0:11:01.559 --> 0:11:04.559 and the patterns indicated that the market was likely to break. 0:11:04.600 --> 0:11:07.600 One of the things about it was with the advent 0:11:07.760 --> 0:11:11.280 of these derivative markets and futures markets that there's some 0:11:11.400 --> 0:11:14.600 embedded misunderstanding. One can argue that to a certain extent 0:11:14.640 --> 0:11:17.080 with some of these new volatility products. It's a little 0:11:17.080 --> 0:11:19.000 bit like anybody that has a five year old. You 0:11:19.000 --> 0:11:21.040 think you could talk to them, you think they're rational, 0:11:21.559 --> 0:11:26.000 but they're not fully rational, and as markets develop and 0:11:26.080 --> 0:11:29.280 people think they understand them, they don't always do that. 0:11:29.360 --> 0:11:33.280 So that was part of the UH embedded sort of 0:11:33.760 --> 0:11:39.640 market UH construction. The way that it worked in the 0:11:39.760 --> 0:11:44.160 terms portfolio insurance and the assumption that there was always 0:11:44.200 --> 0:11:47.960 going to be liquidity that led to even more acceleration 0:11:48.080 --> 0:11:52.320 to the downside. So we were very, very fortunate, UH. 0:11:52.400 --> 0:11:56.560 And all credit has to go to UH Paul and 0:11:56.600 --> 0:12:00.480 the execution team at TUTOR, because even if I was 0:12:01.360 --> 0:12:04.120 right and I gave the exact low and the exact high, 0:12:04.440 --> 0:12:06.800 nothing goes in a straight line. And he's a far 0:12:06.840 --> 0:12:10.520 better trader than I will ever be, so he would 0:12:10.520 --> 0:12:14.000 make far more money. And UH we were fortunate as 0:12:14.040 --> 0:12:15.720 a fund to benefit from that. And I think that 0:12:15.800 --> 0:12:20.520 benefit of the entire industry in understanding the importance of 0:12:20.600 --> 0:12:25.960 both risk management and understanding that these markets have a 0:12:26.000 --> 0:12:30.439 place where they can be used for hedging. Peter, give 0:12:30.520 --> 0:12:36.040 us some more insight into this idea of cycles, because um, 0:12:36.080 --> 0:12:39.600 you know, I started researching this. UH. Joe basically gave 0:12:39.600 --> 0:12:42.439 me some homework and told me to go read some articles. 0:12:42.760 --> 0:12:46.199 So I've been learning about Martin Arms Armstrong and Edward 0:12:46.280 --> 0:12:50.760 Dewey and thinking about Fibonacci sequences and things like that. 0:12:51.240 --> 0:12:54.760 It kind of has a long history, right, Yes, I 0:12:54.800 --> 0:12:59.559 am a a a firm believer in in in cycles. 0:12:59.600 --> 0:13:03.720 Nothing works exactly, of course, but it goes back to 0:13:03.760 --> 0:13:08.760 the nature of us as human beings, which is fear 0:13:09.000 --> 0:13:15.199 versus greed, complacency versus uncertainty. And I look at where 0:13:15.200 --> 0:13:17.719 we are right now, and and this is something I 0:13:17.840 --> 0:13:23.360 talked about in Bloomberg Markets right after the election, that 0:13:24.000 --> 0:13:26.360 if you're a student of history, so you can't be 0:13:26.400 --> 0:13:30.120 a student of markets without being a student history. And 0:13:30.480 --> 0:13:35.520 there's always these long waves that appear to be obvious 0:13:35.679 --> 0:13:38.960 after the fact. So by the way that I'm one 0:13:39.000 --> 0:13:43.440 of the greatest traders of yesterday, I can tell you 0:13:43.480 --> 0:13:47.000 exactly what happened. So after the fact, my batting average 0:13:47.240 --> 0:13:50.520 is amazing. It's that pesky uncertain future that makes this 0:13:50.640 --> 0:13:54.360 business much more difficult. So what am I referring to? So, oh, well, 0:13:55.160 --> 0:13:59.719 the advent of of you know, Apple, Amazon, and the 0:14:00.040 --> 0:14:03.760 obstitution effect. So if you line them all up, one 0:14:03.760 --> 0:14:06.920 of the questions have they created more wealth than they've 0:14:07.080 --> 0:14:13.560 destroyed in terms of stores, in terms of other uh markets, 0:14:13.559 --> 0:14:18.480 Whether it's best Buy or BlackBerry in terms of Apple, 0:14:18.800 --> 0:14:21.120 in terms of the retail stores that you're seeing. Now, 0:14:21.160 --> 0:14:23.800 these are long waves and this is a cycle that's 0:14:23.840 --> 0:14:26.520 taking place so in Bloomberg markets. To me, the broader 0:14:26.600 --> 0:14:29.360 cycle that we're seeing in one of the most famous 0:14:29.440 --> 0:14:34.440 ones historically are the Chndrati of wave and the schoom Painter. 0:14:34.560 --> 0:14:37.400 Schum Painter is a famous economist that talked about this 0:14:37.840 --> 0:14:42.680 creative destruction. And where we are if you think about it, 0:14:42.800 --> 0:14:46.920 is the Berlin Wall went up. Ironically, it started its 0:14:46.920 --> 0:14:53.320 construction August thirteen, UH Ninette below in the stock market, 0:14:53.360 --> 0:14:58.080 by the way, was August thirteen of Fibonacci, twenty one 0:14:58.160 --> 0:15:02.400 years later. So if we talk at eighty two, excuse 0:15:02.440 --> 0:15:07.120 me sixty two, and then you move forward twenty seven years. UH. 0:15:07.240 --> 0:15:11.920 Ronald Reagan's most famous line was Gorbatov, tear down this wall. 0:15:12.680 --> 0:15:18.240 The wall came down, uh November nine, twenty seven years 0:15:18.280 --> 0:15:24.920 after that, November nine, ninety two thousand and sixteen, UH, 0:15:25.080 --> 0:15:29.600 President Trump is elected. Now, if you look at history, 0:15:29.720 --> 0:15:34.000 we haven't seen too many economies that have grown uh 0:15:34.040 --> 0:15:38.880 by building walls and and looking inward. I like to say, 0:15:38.880 --> 0:15:42.960 how the Great Wall of China work out, so we're 0:15:43.040 --> 0:15:47.120 here potentially at the end of another long cycle. It 0:15:47.200 --> 0:15:51.840 completes from sixty two to eighty nine to sixteen contralty 0:15:51.920 --> 0:15:55.960 of fifty four years. Now, that just keeps something very 0:15:56.040 --> 0:15:58.560 deep in the back of your mind, because that has 0:15:58.600 --> 0:16:02.120 nothing to do with trading some p futures today, where 0:16:02.600 --> 0:16:05.320 you know, if there are twenty three sixty do I 0:16:05.360 --> 0:16:08.480 think they're going to before I think they're going to 0:16:10.280 --> 0:16:14.800 But in terms of the Ralph Laurent announcement in the UH, 0:16:14.840 --> 0:16:18.400 the pay less hues closing more stores, and you're seeing 0:16:18.440 --> 0:16:23.440 that and you're saying, Okay, the deflationary pressures continue to 0:16:23.560 --> 0:16:26.360 build up. We talked about a DP this morning and 0:16:26.400 --> 0:16:29.920 being strong. Where are all these retail workers going to go? 0:16:30.000 --> 0:16:34.000 Where's the marginal consumption going to be? From what we've 0:16:34.000 --> 0:16:37.000 seen in this last cycle, which has not been addressed 0:16:37.000 --> 0:16:40.760 at a policy perspective nor per se in the markets, 0:16:40.760 --> 0:16:44.240 which is the things that you don't need have gone 0:16:44.280 --> 0:16:46.880 down in price, the things that you do need have 0:16:47.000 --> 0:16:50.120 gone up. So what do you need, education, healthcare? What 0:16:50.280 --> 0:16:54.040 you don't need? I can skip a good meal, and 0:16:54.120 --> 0:16:56.800 I can get an iPad, I can get an iPhone 0:16:57.240 --> 0:17:01.040 because for a few hundred dollars, that's the difference. The 0:17:01.040 --> 0:17:02.880 things that you don't need have really gone down the 0:17:02.960 --> 0:17:06.600 quality of life, whether it's a fifty five inch television 0:17:06.760 --> 0:17:11.000 or not. So that's what the dichotomy, and that's what's 0:17:11.040 --> 0:17:14.440 leading some of these deflationary pressures, and you're seeing that 0:17:15.960 --> 0:17:20.400 through lower real wage growth and the bond markets telling 0:17:20.440 --> 0:17:23.679 you that as well. So just to wrap up, because 0:17:23.800 --> 0:17:26.200 there are a lot of important ideas there, one thing 0:17:26.320 --> 0:17:29.959 that really stuck out to me was this idea. You know, 0:17:30.119 --> 0:17:33.040 as you said it, from the construction of the Berlin 0:17:33.119 --> 0:17:39.280 Wall through the election of Donald Trump Key, events have happened, 0:17:39.320 --> 0:17:43.399 as it turns out, on interesting annual or interesting intervals. 0:17:43.680 --> 0:17:47.199 You mentioned the Fibonacci sequence, which is of course a 0:17:47.240 --> 0:17:50.280 well known sequence that also appears in nature. You see 0:17:50.280 --> 0:17:53.840 it in flowers and stuff. So the idea being that 0:17:54.280 --> 0:17:58.240 these various events in history have a sort of deep 0:17:58.320 --> 0:18:01.000 natural rhythm to them, and that it's sort of not 0:18:01.119 --> 0:18:06.280 an accident that they appear at these certain intervals. Well, 0:18:06.480 --> 0:18:10.040 think about us as as human beings. We we go 0:18:10.200 --> 0:18:15.480 through cycles and things take place at at also that 0:18:15.800 --> 0:18:21.440 natural rhythm. Uh, But it's really a build up of 0:18:21.440 --> 0:18:27.000 of time, and that the innovation takes place over a cycle, 0:18:27.080 --> 0:18:31.639 so that we were always planting the seeds today for 0:18:32.080 --> 0:18:35.000 the next substitute, and and and it's it's funny so 0:18:35.080 --> 0:18:38.840 you think of, well, thirteen years old right on. I'm Jewish, 0:18:38.840 --> 0:18:40.720 so you have a bar mitzvah when you look at 0:18:40.760 --> 0:18:45.879 twenty one, which is a year, you know, Huh, they're 0:18:45.920 --> 0:18:50.760 both Fibonacci numbers as well. It's kind of it's I 0:18:50.800 --> 0:18:53.119 don't know why it's there. That's not I'm not smart 0:18:53.240 --> 0:18:56.680 enough to figure that out. But I just try to 0:18:56.720 --> 0:18:58.960 sit back and be an observer, which is why I 0:18:59.000 --> 0:19:03.120 said before, Uh, if you want to be uh student 0:19:03.160 --> 0:19:04.840 of market, you have to be a student of history. 0:19:04.840 --> 0:19:08.000 But you also have to be a student of people 0:19:08.520 --> 0:19:11.800 because of the behavior. If we go back to the 0:19:11.880 --> 0:19:15.840 markets for one moment, the one thing that was missing 0:19:15.920 --> 0:19:19.760 to sort of indicate a potential inflection point or top 0:19:19.800 --> 0:19:24.360 before the election was sentiment. And now sentiment is off 0:19:24.400 --> 0:19:28.760 the charts. Everybody is particularly bullish. That to me is 0:19:28.800 --> 0:19:32.440 a little bit of a contrary signal. The market hasn't 0:19:32.480 --> 0:19:36.840 gone anywhere. We talked about uh, you know after the election, 0:19:36.880 --> 0:19:40.800 when I was on uh that likely five percent move 0:19:41.080 --> 0:19:46.040 to one thousand in the dow around March expiration. That 0:19:46.200 --> 0:19:49.080 some of the largest turning points have taken place in March, 0:19:49.240 --> 0:19:52.680 and that's what we've seen. And we haven't taken out 0:19:52.680 --> 0:19:56.679 those highs yet. From March one, we've been meandering the 0:19:56.760 --> 0:20:00.040 nastic Has you had that divergence between the nasty A 0:20:00.200 --> 0:20:05.480 in the SMP back at the two thousand high uh, 0:20:05.520 --> 0:20:08.440 and everybody talked about how you know, sort of under 0:20:08.440 --> 0:20:11.920 President Obama there was all this uncertainty. There was an uncertainty. 0:20:12.560 --> 0:20:14.320 They laid out a path, there was a route. You 0:20:14.359 --> 0:20:16.880 may not have liked it, but you kind of knew 0:20:16.960 --> 0:20:21.760 with Dodd Frankin. Now the uncertainty is even wider. So 0:20:22.000 --> 0:20:28.080 it's likely that what's happened previously is unlikely to continue. 0:20:28.160 --> 0:20:31.240 And we make this mistake all the time as participants 0:20:31.280 --> 0:20:35.040 in the marketplaces. I said earlier is trying to, you know, 0:20:35.480 --> 0:20:38.560 draw one line and assume that it's going to be 0:20:38.680 --> 0:20:41.960 a linear UH movement, which is why I said the 0:20:41.960 --> 0:20:43.960 Mets will be undefeated this year, which will be great. 0:20:44.640 --> 0:20:47.200 I want to take a quick break for a word 0:20:47.240 --> 0:20:53.280 from our sponsor, but knowledge to work and grow your 0:20:53.320 --> 0:20:57.840 business with c i T from transportation to healthcare to manufacturing. 0:20:58.080 --> 0:21:00.960 C i T offers commercial lending, the seeing and treasury 0:21:01.000 --> 0:21:04.640 management services for small and middle market businesses. Learn more 0:21:04.680 --> 0:21:08.720 at c i T dot com Put knowledge to work. 0:21:12.400 --> 0:21:15.639 And we're back with Peter Borsch of the Quad Group. 0:21:15.680 --> 0:21:21.400 We've been talking about markets and history and cycles. Um 0:21:21.440 --> 0:21:24.960 I wanna. Tracy in her last question to you talked 0:21:25.000 --> 0:21:28.119 about some of the early people who worked on who 0:21:28.160 --> 0:21:34.080 started seeing cycles and markets and economics. You mentioned Edward Dewey. 0:21:34.119 --> 0:21:36.919 Who was he? And uh, what did what did he 0:21:37.359 --> 0:21:39.520 learned in his work and what have you learned from 0:21:39.520 --> 0:21:46.000 studying his work? So Edward Dewey was actually worked for 0:21:46.080 --> 0:21:50.439 the US government and was one of the early people 0:21:50.520 --> 0:21:56.760 that innovated and collected government data. His passion was cycles, 0:21:56.840 --> 0:21:59.639 and he started this foundation called the Foundation for the 0:21:59.640 --> 0:22:04.080 Study of Cycles. I served on so when I was 0:22:04.119 --> 0:22:08.480 at tutor again, we would scour the world for data 0:22:08.960 --> 0:22:13.400 literally because you couldn't download it there. There wasn't the internet. 0:22:13.440 --> 0:22:16.199 I mean I flew to Zurich to collect, you know, 0:22:16.320 --> 0:22:19.639 foreign exchange data, and got around and turned around the 0:22:19.680 --> 0:22:22.399 next day, and and and and came back and we 0:22:22.400 --> 0:22:26.119 would hire summer interns to punch in all that data 0:22:26.520 --> 0:22:31.000 in spreadsheets. Dewey was doing all this by hand. How 0:22:31.040 --> 0:22:35.240 I met Tom Demark if you talk about another data person. 0:22:35.960 --> 0:22:39.480 He was in Wisconsin and he had by far and 0:22:39.520 --> 0:22:42.320 away the cleanest data. He had these to mark chart 0:22:42.400 --> 0:22:44.800 books that he would put out which were better than 0:22:44.920 --> 0:22:48.919 Value Lyne and others. And we needed clean data. And 0:22:49.000 --> 0:22:52.359 that's how we met. And we would try to gather 0:22:52.520 --> 0:22:56.440 every book that we could that went over history and 0:22:56.560 --> 0:22:59.480 collected data both from the original source, whether it was 0:22:59.560 --> 0:23:02.880 doubt owns and in their library or people like Edward 0:23:02.920 --> 0:23:07.639 Dewey or Martin Armstrong and others that were, you know, 0:23:07.880 --> 0:23:12.399 passionate about clean data. What were some of the most 0:23:12.560 --> 0:23:16.280 interesting um sort of cycles or data sets that you 0:23:16.320 --> 0:23:21.560 can remember either collecting or studying over the years. Well, 0:23:21.760 --> 0:23:24.719 the most important one in terms of doing the model 0:23:25.600 --> 0:23:30.760 was getting the UH open high low and clothes, which 0:23:30.840 --> 0:23:34.720 was unusual at that time for the Dow Jones. And 0:23:35.119 --> 0:23:38.320 there was also Saturday sessions, so we needed to have 0:23:38.400 --> 0:23:41.399 all that. You couldn't make all these assumptions. We wanted 0:23:41.440 --> 0:23:46.080 to go to the pure source. At the same time, 0:23:46.720 --> 0:23:52.800 when of SMP futures started trading and even then understanding 0:23:53.560 --> 0:23:57.240 the SMP cash index versus the futures index, and we 0:23:57.280 --> 0:24:01.879 would look for movements in and in fair value as well. 0:24:02.160 --> 0:24:05.679 That was an early thing people doing index arbitrage because 0:24:05.720 --> 0:24:08.520 that was a sentiment indicator to a certain extent. When 0:24:08.520 --> 0:24:12.280 people were selling futures and they went to a discount, 0:24:12.560 --> 0:24:16.200 then that probably was an indication of too much negativity 0:24:16.359 --> 0:24:20.159 out there. Uh And so that was another area of 0:24:20.359 --> 0:24:24.439 data that we would collect. But we also did things 0:24:24.600 --> 0:24:28.120 which related to economic fundamental data which is relevant even 0:24:28.119 --> 0:24:31.920 to today. So the unemployment number comes out on Friday, 0:24:31.960 --> 0:24:34.520 that's the number that the market sees. But if you 0:24:34.560 --> 0:24:37.320 go back and you look at your database and you say, 0:24:37.359 --> 0:24:42.360 what's the unemployment for uh March that comes out this 0:24:42.520 --> 0:24:46.680 Friday in April, the number you pull off the database 0:24:46.800 --> 0:24:50.480 is the revised number. That's not the number that the 0:24:50.520 --> 0:24:52.840 market saw. We would have to go back and we 0:24:52.880 --> 0:24:55.680 would work with people that did newsletters and things like that. 0:24:56.000 --> 0:24:59.280 We wanted to see. We wanted three numbers. We wanted 0:24:59.320 --> 0:25:03.119 the number of what the expected number was, what the 0:25:03.160 --> 0:25:07.199 actual number that the market saw, and then finally what 0:25:07.320 --> 0:25:10.760 the revisions. So we needed that all that data you 0:25:10.840 --> 0:25:14.880 keep expanding the size of your database. So we then 0:25:14.960 --> 0:25:19.520 had to invest in smarter uh technology people to build 0:25:19.520 --> 0:25:23.880 those databases. It took a serious investment. But that's where 0:25:24.000 --> 0:25:26.199 people often make a lot of mistakes that they just 0:25:26.280 --> 0:25:28.400 download data from the internet and they go, oh, I'm 0:25:28.400 --> 0:25:31.120 going to run a model on this. No, it's completely irrelevant. 0:25:31.160 --> 0:25:32.960 Joe was telling me before we went on the air 0:25:33.000 --> 0:25:36.200 about the ADP number. The number that the market saw 0:25:36.280 --> 0:25:40.600 last month was just revised down by fifty thou Well, 0:25:41.000 --> 0:25:46.360