1 00:00:03,120 --> 00:00:07,480 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:10,160 --> 00:00:14,240 Speaker 2: Hi are you good to see you again? Nice, good 3 00:00:14,280 --> 00:00:16,079 Speaker 2: to see Thank you guys for having me. 4 00:00:16,079 --> 00:00:20,160 Speaker 3: No, thank you for coming anything going on this weekly? 5 00:00:20,480 --> 00:00:24,079 Speaker 2: Yeah, you know, we've been feeling stuff, seeing stuff for 6 00:00:24,120 --> 00:00:26,319 Speaker 2: a while. But you know, by the end of last 7 00:00:26,320 --> 00:00:28,760 Speaker 2: week it was like, this is getting pretty hectic and 8 00:00:28,800 --> 00:00:30,560 Speaker 2: I had to drive like eight hours each way up 9 00:00:30,600 --> 00:00:33,280 Speaker 2: to New Hampshire. I got back Sunday, I was like, 10 00:00:33,320 --> 00:00:34,960 Speaker 2: I got to start this right now. 11 00:00:37,920 --> 00:00:41,280 Speaker 3: I did a deadlift one Jimmy, Okay, go. 12 00:00:44,159 --> 00:00:44,959 Speaker 1: Uh marches. 13 00:00:45,120 --> 00:00:47,199 Speaker 3: This isn't after school Special, except. 14 00:00:46,880 --> 00:00:49,440 Speaker 1: I've decided I'm going to base my entire personality going 15 00:00:49,440 --> 00:00:52,680 Speaker 1: forward on campaigning for a strategic pork reserve in the US. 16 00:00:52,760 --> 00:00:54,480 Speaker 2: Where's the best with imposta? 17 00:00:54,680 --> 00:00:57,240 Speaker 1: These are the important question? Is that robots taking over 18 00:00:57,280 --> 00:00:57,640 Speaker 1: the world. 19 00:00:57,720 --> 00:01:00,840 Speaker 3: No. I think that like a couple of years, the 20 00:01:00,920 --> 00:01:03,120 Speaker 3: AI will do a really good job of making the 21 00:01:03,120 --> 00:01:06,600 Speaker 3: Odd Lots podcast. And people say, I don't really need 22 00:01:06,640 --> 00:01:08,280 Speaker 3: to listen to Joe and Tracy anymore. 23 00:01:08,480 --> 00:01:09,440 Speaker 2: We do have. 24 00:01:10,800 --> 00:01:14,679 Speaker 3: The perfect welcome to lots more where we catch up 25 00:01:14,680 --> 00:01:16,800 Speaker 3: with friends about what's going on right now. 26 00:01:17,160 --> 00:01:20,880 Speaker 1: Because even when Odd Lots is over, there's always lots more. 27 00:01:21,319 --> 00:01:26,280 Speaker 3: And we really do have the perfect guest. So would 28 00:01:26,319 --> 00:01:28,520 Speaker 3: you say that like stuff was already getting a little 29 00:01:28,600 --> 00:01:31,560 Speaker 3: hairy last Like, what were those early signs. Was it 30 00:01:31,600 --> 00:01:34,560 Speaker 3: just Wednesday during defense decision or what were what were 31 00:01:34,560 --> 00:01:35,400 Speaker 3: you starting to see? 32 00:01:35,560 --> 00:01:40,040 Speaker 2: Well, there's different time horizons, for sure, and I think 33 00:01:40,080 --> 00:01:43,440 Speaker 2: one of the things that we absolutely have to discuss 34 00:01:43,600 --> 00:01:48,400 Speaker 2: is the signal from Skew Right Skew is this you know, 35 00:01:48,560 --> 00:01:51,600 Speaker 2: relative measure of kind of demand for downside versus demand 36 00:01:51,680 --> 00:01:54,400 Speaker 2: for upside, which is, you know, something that we can 37 00:01:54,600 --> 00:01:57,640 Speaker 2: come back to later, but without a doubt, when you 38 00:01:58,080 --> 00:02:03,120 Speaker 2: began to see Skew, you relentlessly stay bid. When you 39 00:02:03,160 --> 00:02:07,000 Speaker 2: begin to see the volatility of volatility, stay so bid 40 00:02:07,040 --> 00:02:10,840 Speaker 2: even as stocks were, you know, trying to kind of 41 00:02:10,840 --> 00:02:14,320 Speaker 2: stabilize after some of the recent death by papercut of 42 00:02:14,480 --> 00:02:19,520 Speaker 2: geopolitical and kind of earnings disappointments. So you know, obviously 43 00:02:20,080 --> 00:02:22,959 Speaker 2: the growth dynamic is a big part of this too, 44 00:02:23,120 --> 00:02:25,560 Speaker 2: as far as you know, the labor data finally catching down. 45 00:02:26,000 --> 00:02:28,240 Speaker 2: But you know, it told you that there was this 46 00:02:28,720 --> 00:02:32,560 Speaker 2: you know, grab into tails and you know a big 47 00:02:32,639 --> 00:02:35,560 Speaker 2: part of the messaging that I've been giving since March 48 00:02:35,639 --> 00:02:38,880 Speaker 2: April period was that we had been living in this 49 00:02:39,080 --> 00:02:43,520 Speaker 2: really interesting world where in the end of April SKW 50 00:02:43,639 --> 00:02:48,200 Speaker 2: was extremely extremely historically all time kind of flat levels, 51 00:02:48,760 --> 00:02:53,000 Speaker 2: meaning that it was really representative of two things. Extremely 52 00:02:53,040 --> 00:02:55,480 Speaker 2: low demand for downside extremely high demand for. 53 00:02:55,520 --> 00:02:58,240 Speaker 3: Upside downside protection. Right, all right, just want just for 54 00:02:58,360 --> 00:02:59,600 Speaker 3: listeners to make sure. 55 00:02:59,600 --> 00:03:01,919 Speaker 2: Right, and kind of when you look at the forwards 56 00:03:01,960 --> 00:03:04,120 Speaker 2: and in my view, is this skew really on a 57 00:03:04,160 --> 00:03:08,760 Speaker 2: longer horizon, like decades type horizon to me is representative of, 58 00:03:08,840 --> 00:03:12,160 Speaker 2: you know, what's the actual risk taking, risk appetite backdrop, 59 00:03:12,320 --> 00:03:16,960 Speaker 2: Meaning it's heavily related to central bank policy. So for instance, 60 00:03:16,960 --> 00:03:19,640 Speaker 2: in the kind of q E era where you know, 61 00:03:19,680 --> 00:03:23,600 Speaker 2: the FED was trying to incentivize a wealth effect, right, 62 00:03:23,919 --> 00:03:28,080 Speaker 2: they wanted you to be leveraged long assets, and in 63 00:03:28,120 --> 00:03:33,120 Speaker 2: that because that's economically you know, virtuous right consumption, you know, 64 00:03:33,200 --> 00:03:36,360 Speaker 2: paper wealth effect all those things, you were leverage long 65 00:03:36,440 --> 00:03:39,200 Speaker 2: risk assets. SKEW is deep because you had something to hedge. 66 00:03:40,040 --> 00:03:44,600 Speaker 2: But after the events that created that, you know, idiosyncratic 67 00:03:44,760 --> 00:03:50,520 Speaker 2: stacking of stuff from the FEDS inflation rethink in twenty nineteen, 68 00:03:50,720 --> 00:03:55,400 Speaker 2: the flexible average inflation targeting the tariffs impact into COVID, 69 00:03:55,640 --> 00:04:01,120 Speaker 2: into the supply chain disruption, into the stimulus plus you know, 70 00:04:01,200 --> 00:04:03,880 Speaker 2: the tectonic stimulus, which had never been tried before. In 71 00:04:03,920 --> 00:04:08,960 Speaker 2: addition to the unprecedented quantitative easing, you finally had this 72 00:04:09,120 --> 00:04:12,600 Speaker 2: escape velocity inflation event, which then forced the FED behind 73 00:04:12,600 --> 00:04:15,840 Speaker 2: the ball, and it forced them to have to tighten 74 00:04:16,080 --> 00:04:18,800 Speaker 2: in a place that we've never seen before. And QT 75 00:04:20,080 --> 00:04:22,840 Speaker 2: right as opposed to QE. They needed to create a 76 00:04:22,880 --> 00:04:27,320 Speaker 2: negative wealth effect because they could only impact demand side inflation, 77 00:04:27,920 --> 00:04:30,560 Speaker 2: and with demand side inflation being the only lever that 78 00:04:30,560 --> 00:04:32,560 Speaker 2: they could pull, they had to create a negative wealth effect. 79 00:04:33,080 --> 00:04:37,080 Speaker 2: And in that environment, skew went extremely flat. You didn't 80 00:04:37,120 --> 00:04:39,480 Speaker 2: own underlying They were telling you to get out of 81 00:04:39,560 --> 00:04:42,400 Speaker 2: risk assets. They were telling you to park in cash. 82 00:04:42,600 --> 00:04:47,279 Speaker 2: Cash isn't at the money put right, it's a hedge. There. 83 00:04:47,400 --> 00:04:49,440 Speaker 2: You were able to sleep at night collect three four 84 00:04:49,600 --> 00:04:53,120 Speaker 2: five percent. At times, the only tail that you were 85 00:04:53,160 --> 00:04:56,840 Speaker 2: afraid of was no left tail, was no crash downside event. 86 00:04:57,360 --> 00:04:59,800 Speaker 2: It was about missing the right tail. It was a 87 00:05:00,240 --> 00:05:04,240 Speaker 2: missing the rally, the upcrash, the upcrash. So the last 88 00:05:04,320 --> 00:05:07,039 Speaker 2: two years, you know, kind of prior to the last 89 00:05:07,040 --> 00:05:10,240 Speaker 2: six months let's say the last two years, we were 90 00:05:10,240 --> 00:05:12,680 Speaker 2: in this super bizarre place to a lot of people, 91 00:05:12,720 --> 00:05:18,280 Speaker 2: counterintuitive with positive spot meaning kind of underlying market VALL correlation. 92 00:05:18,920 --> 00:05:21,280 Speaker 2: You know, VALL was going higher as the market was 93 00:05:21,400 --> 00:05:24,719 Speaker 2: rallying because people didn't have the exposure on we're being 94 00:05:24,760 --> 00:05:27,560 Speaker 2: forced to chase, right. Data was beginning to soften, Inflation 95 00:05:27,640 --> 00:05:29,080 Speaker 2: was starting to come off the FED. It was kind 96 00:05:29,080 --> 00:05:31,080 Speaker 2: of opening the door to the end of the tightening cycle, 97 00:05:31,720 --> 00:05:35,080 Speaker 2: and you were under positioned, so you're grabbing into calls, 98 00:05:35,839 --> 00:05:40,720 Speaker 2: and that same positive spot VALL correlation on selloffs meant 99 00:05:40,760 --> 00:05:43,640 Speaker 2: that VALL would grind lower because you were in this 100 00:05:43,839 --> 00:05:48,240 Speaker 2: really virtuous backdrop for VALL selling, right, So down days 101 00:05:48,240 --> 00:05:51,440 Speaker 2: were opportunities to sell VALL. And at the core of 102 00:05:51,480 --> 00:05:53,880 Speaker 2: everything that has kind of happened over the last week, 103 00:05:53,960 --> 00:05:57,039 Speaker 2: in particular the last few days really has been about 104 00:05:57,320 --> 00:06:00,000 Speaker 2: that kind of come to Jesus moment for the short 105 00:06:00,080 --> 00:06:02,920 Speaker 2: VALL trade of the past two years. So you know, 106 00:06:03,080 --> 00:06:05,839 Speaker 2: you had this dynamic where flat skew is a feature 107 00:06:05,839 --> 00:06:09,560 Speaker 2: of quantitative tightening, and at the march kind of extremes 108 00:06:10,120 --> 00:06:15,160 Speaker 2: we started beginning to see skew steep and again pretty impulsively, 109 00:06:15,200 --> 00:06:18,760 Speaker 2: and that was the signal that you know, we were 110 00:06:18,839 --> 00:06:22,240 Speaker 2: going to resume back to this prior world of a 111 00:06:22,440 --> 00:06:24,360 Speaker 2: negative spot vult correlation. 112 00:06:24,839 --> 00:06:27,719 Speaker 1: So we are speaking with Charlie mcgelligate. He is, of course, 113 00:06:27,760 --> 00:06:31,200 Speaker 1: the cross asset macro strategist at Nomora and the guy 114 00:06:31,279 --> 00:06:33,239 Speaker 1: we like to call when we need to start talking 115 00:06:33,240 --> 00:06:36,960 Speaker 1: about Greek letters and things like delta hedging and all 116 00:06:37,000 --> 00:06:39,760 Speaker 1: of that. Charlie, what are we calling the sell off? 117 00:06:40,200 --> 00:06:43,000 Speaker 1: I came up with an idea that I'm I'm quite 118 00:06:43,000 --> 00:06:43,400 Speaker 1: proud of. 119 00:06:43,960 --> 00:06:46,520 Speaker 2: Give it to me. I mean, it sounds like fodder 120 00:06:46,560 --> 00:06:47,640 Speaker 2: for my subject, Lineman. 121 00:06:47,880 --> 00:06:52,000 Speaker 1: Yes, yes, you can have this one volma fedian and 122 00:06:52,520 --> 00:06:57,520 Speaker 1: the valma is AI, so it's volatility ai fed And 123 00:06:57,600 --> 00:06:59,240 Speaker 1: yet that's good. 124 00:06:59,279 --> 00:07:00,440 Speaker 3: That really rolls. 125 00:07:00,560 --> 00:07:05,080 Speaker 1: Yeah, I know, meta, it's going to be useful. 126 00:07:05,920 --> 00:07:09,320 Speaker 2: Multivariate. Yeah, I mean, look, there's you know we spoke about, 127 00:07:09,440 --> 00:07:11,920 Speaker 2: you know, the macro catalyst that kind of set off 128 00:07:11,920 --> 00:07:15,440 Speaker 2: this event, you know, and a lot of people I think, 129 00:07:15,560 --> 00:07:17,920 Speaker 2: you know, way off the mark with regards to oh 130 00:07:17,960 --> 00:07:23,320 Speaker 2: it's you know, it's yen carry unwined or oh you know, yeah. 131 00:07:22,640 --> 00:07:24,640 Speaker 1: Wait, talk more about that, because I see lots of 132 00:07:24,640 --> 00:07:27,960 Speaker 1: people saying it's the yen carry unwined, So the idea 133 00:07:28,000 --> 00:07:30,800 Speaker 1: that people were borrowing in yen at a low interest 134 00:07:30,880 --> 00:07:36,120 Speaker 1: rate and then investing that in risk assets. But if 135 00:07:36,120 --> 00:07:39,440 Speaker 1: that was happening on a scale which would cause the 136 00:07:39,480 --> 00:07:42,200 Speaker 1: market moves that we've seen in the past couple of days, 137 00:07:42,400 --> 00:07:43,720 Speaker 1: I would have thought that you would see more of 138 00:07:43,760 --> 00:07:47,160 Speaker 1: an impact in stuff like credit, right, like ig or 139 00:07:47,280 --> 00:07:50,600 Speaker 1: high yield, and that hasn't really happened because my impression 140 00:07:50,640 --> 00:07:52,320 Speaker 1: was always like a lot of targets of the carry 141 00:07:52,360 --> 00:07:54,240 Speaker 1: trade were actually in credit right. 142 00:07:54,320 --> 00:07:57,880 Speaker 2: I mean my like very simplistically, the carry trade, if 143 00:07:57,920 --> 00:08:02,680 Speaker 2: anything at best, is simply representative of risk appetite. And 144 00:08:02,720 --> 00:08:07,080 Speaker 2: when carry trades are popular and thus crowded and leveraged, 145 00:08:07,480 --> 00:08:10,360 Speaker 2: it speaks to a backdrop of low volatility. You need 146 00:08:10,400 --> 00:08:13,280 Speaker 2: low volatility to be able to accumulate those positions, you know, 147 00:08:13,400 --> 00:08:16,120 Speaker 2: short this to buy this higher yielder. And you know, 148 00:08:16,760 --> 00:08:20,400 Speaker 2: without question, as far as the butterfly flapping its wings event, 149 00:08:21,440 --> 00:08:25,520 Speaker 2: the Bank of Japan allowing people to be structurally short 150 00:08:25,520 --> 00:08:30,360 Speaker 2: the end for decades because of their just consistency with 151 00:08:30,480 --> 00:08:36,280 Speaker 2: regards to this, you know, perma Dubvish posture. Then switching 152 00:08:36,360 --> 00:08:41,240 Speaker 2: in pretty short time, arising into something more hawkish than expectations, 153 00:08:41,280 --> 00:08:44,560 Speaker 2: particularly that last meeting where they you know, they raised 154 00:08:44,559 --> 00:08:47,640 Speaker 2: by more than kind of market expectations. They ultimately are 155 00:08:47,640 --> 00:08:50,320 Speaker 2: targeting half the bond buying, and they'd already cut off 156 00:08:50,320 --> 00:08:54,120 Speaker 2: the ETF purchases. That that was absolutely not helpful for 157 00:08:54,120 --> 00:08:55,959 Speaker 2: the carry trade. But for the carry trade as far 158 00:08:56,000 --> 00:08:59,600 Speaker 2: as our industry goes, it is one piece of the puzzle. 159 00:08:59,640 --> 00:09:04,360 Speaker 2: As far as the kajillion strategies out there, and yes, 160 00:09:05,240 --> 00:09:08,480 Speaker 2: Carrie had been popular, Carrie had been crowded. To build 161 00:09:08,520 --> 00:09:10,960 Speaker 2: into those trades, you need low volatility. A lot of 162 00:09:10,960 --> 00:09:12,960 Speaker 2: those trades then look like trend trades. A lot of 163 00:09:12,960 --> 00:09:17,439 Speaker 2: those trades are overlapping and concentric with CTAs. But it 164 00:09:17,800 --> 00:09:20,240 Speaker 2: in and of itself was not the issue. 165 00:09:20,360 --> 00:09:23,560 Speaker 3: Yeah, I was gonna say, it often feels like, because 166 00:09:23,559 --> 00:09:27,480 Speaker 3: we did a recent episode on the correlation trade, and 167 00:09:27,520 --> 00:09:30,400 Speaker 3: we've talked about the low vault trade, it often feels 168 00:09:30,440 --> 00:09:32,720 Speaker 3: like these are all the same trades and different the 169 00:09:32,800 --> 00:09:35,480 Speaker 3: carry trade being another one, the momentum trade being another one, 170 00:09:35,960 --> 00:09:37,560 Speaker 3: the same trade in different flavors. 171 00:09:37,640 --> 00:09:40,440 Speaker 2: I say this all the time. This is often used 172 00:09:41,040 --> 00:09:46,520 Speaker 2: with regards to these deleveraging events. It's oftentimes used when 173 00:09:46,640 --> 00:09:50,600 Speaker 2: discussing you know, systematic strategy, you know of all events, 174 00:09:50,679 --> 00:09:54,640 Speaker 2: but you know, volatility is the exposure toggle in modern 175 00:09:54,880 --> 00:10:01,000 Speaker 2: market structure, and that being the case stained periods of 176 00:10:01,040 --> 00:10:04,280 Speaker 2: low volatility where I would say that, you know, the 177 00:10:04,320 --> 00:10:07,960 Speaker 2: big shift, the bigger shift from a macro catalyst to 178 00:10:08,000 --> 00:10:10,680 Speaker 2: me that occurred over the past few weeks was back 179 00:10:10,720 --> 00:10:15,959 Speaker 2: to this idea that we had been consensually and comfortably 180 00:10:16,400 --> 00:10:20,880 Speaker 2: in a low Vall narrative as the market was forced 181 00:10:20,920 --> 00:10:24,880 Speaker 2: into a soft landing consensus last year, right, people were, 182 00:10:25,440 --> 00:10:28,640 Speaker 2: you know, perpetually trying to pull forward the hard landing recession, 183 00:10:28,679 --> 00:10:31,160 Speaker 2: and end of twenty two, start of twenty three, you 184 00:10:31,240 --> 00:10:33,880 Speaker 2: had the CIVB crisis that was going to be the 185 00:10:33,880 --> 00:10:36,960 Speaker 2: credit crunch that pushed us over the edge, fighting fighting, 186 00:10:37,040 --> 00:10:40,240 Speaker 2: fighting for the recession that never came. Ultimately, we kind 187 00:10:40,240 --> 00:10:45,000 Speaker 2: of got stopped into this really comfortable backdrop soft landing 188 00:10:45,320 --> 00:10:48,760 Speaker 2: fed would still be supportive. Treasury did a little work 189 00:10:48,800 --> 00:10:52,200 Speaker 2: around the edges to ease financial conditions and lighten the 190 00:10:52,200 --> 00:10:54,760 Speaker 2: load of the Treasury sell off and the long and 191 00:10:54,880 --> 00:10:58,840 Speaker 2: rate volatility in the fall, and that low Vall backdrop 192 00:10:59,640 --> 00:11:04,360 Speaker 2: was really facilitating this massive growth in the shortfall stuff 193 00:11:04,360 --> 00:11:07,360 Speaker 2: that's been out there and the AUM growth. And it's 194 00:11:07,400 --> 00:11:10,800 Speaker 2: not just shortvall premium income ETFs, of course, it's VRP, 195 00:11:11,120 --> 00:11:15,760 Speaker 2: it's dispersion strategies, it's you know, correlation short correlation trades, 196 00:11:15,800 --> 00:11:20,559 Speaker 2: it's qis, you know at banks, their proliferation, especially being 197 00:11:20,600 --> 00:11:23,120 Speaker 2: used by multi strategy hedge funds which are big users 198 00:11:23,160 --> 00:11:25,839 Speaker 2: of those products. All of that stuff created the short 199 00:11:25,920 --> 00:11:28,280 Speaker 2: vall supply. And here's kind of the kicker to me 200 00:11:29,120 --> 00:11:33,199 Speaker 2: with regards to that soft landing outcome, which was consensual. 201 00:11:34,040 --> 00:11:36,400 Speaker 2: We had had a kind of assigned a zero delta 202 00:11:36,920 --> 00:11:39,600 Speaker 2: of a hard landing, but we had been saying for 203 00:11:39,679 --> 00:11:42,600 Speaker 2: quite a long time market had been fixated this mark. 204 00:11:42,720 --> 00:11:45,440 Speaker 2: This economy goes as far as the consumer goes, and 205 00:11:45,520 --> 00:11:49,360 Speaker 2: the consumer is a function of the employment data. And 206 00:11:49,440 --> 00:11:52,840 Speaker 2: when in you know, less than a month span, we've 207 00:11:52,880 --> 00:11:56,600 Speaker 2: seen six of the last seven major US labor releases 208 00:11:57,120 --> 00:12:01,560 Speaker 2: at magnitude downside surprises. You kind of got the whites 209 00:12:01,600 --> 00:12:05,360 Speaker 2: of the eyes of this trade, where well, holy moly, 210 00:12:05,559 --> 00:12:07,560 Speaker 2: like maybe that's not a zero delta, Maybe that's a 211 00:12:07,559 --> 00:12:11,239 Speaker 2: twenty delta on the hard landing and that completely ruptures 212 00:12:11,800 --> 00:12:15,560 Speaker 2: as a macro catalyst, the comfort and the delta on 213 00:12:15,600 --> 00:12:18,400 Speaker 2: that short vall trade, the comfort in that soft landing trade, 214 00:12:18,440 --> 00:12:20,559 Speaker 2: and that, to me, if anything, if you want to 215 00:12:20,600 --> 00:12:24,480 Speaker 2: point to one thing, was what lit the match to 216 00:12:24,559 --> 00:12:28,520 Speaker 2: then take advantage of the larger structural short ball supply that, 217 00:12:29,040 --> 00:12:31,800 Speaker 2: like every other short ball build up in history, does 218 00:12:31,840 --> 00:12:35,800 Speaker 2: have a stopping out, and that's where we are. 219 00:12:47,200 --> 00:12:49,199 Speaker 1: I do think it's kind of funny that one of 220 00:12:49,240 --> 00:12:51,880 Speaker 1: the things that's happened in recent days is the yield 221 00:12:51,920 --> 00:12:54,720 Speaker 1: curve has uninverted. And the yield curve, of course, was 222 00:12:54,760 --> 00:12:57,960 Speaker 1: the thing that last year when everyone was focused on recession, 223 00:12:58,200 --> 00:13:01,440 Speaker 1: they were so focused on the curve inversion, and now 224 00:13:01,440 --> 00:13:05,000 Speaker 1: it's like, oh, it uninverted, but actually we're all worried 225 00:13:05,000 --> 00:13:08,360 Speaker 1: about the hard landing now. Anyway, how much short vall 226 00:13:08,559 --> 00:13:11,400 Speaker 1: exposure do you think is still out there? Or have 227 00:13:11,520 --> 00:13:14,199 Speaker 1: the past couple of days seen a cleaning of the house, 228 00:13:14,240 --> 00:13:14,640 Speaker 1: so to. 229 00:13:14,520 --> 00:13:18,880 Speaker 2: Speak, so great? You know, it's the trillion dollar question. 230 00:13:19,200 --> 00:13:22,400 Speaker 2: I think a lot of folks after that Friday freakout, 231 00:13:22,559 --> 00:13:24,880 Speaker 2: and this is again, this is part of the issue here. 232 00:13:25,200 --> 00:13:29,600 Speaker 2: We've been conditioned on a multi year decade type of 233 00:13:30,559 --> 00:13:34,560 Speaker 2: look back. We've been conditioned to see these opportunities to 234 00:13:34,679 --> 00:13:39,240 Speaker 2: monetize downside hedges or say VIX upside convexity, you know, 235 00:13:39,360 --> 00:13:42,520 Speaker 2: or SMP downside in this span of hours when you 236 00:13:42,600 --> 00:13:45,800 Speaker 2: have these whatever the macro catalyst is, you know, we 237 00:13:45,920 --> 00:13:48,840 Speaker 2: slide from dealers from a long gamma spot to a 238 00:13:48,880 --> 00:13:52,599 Speaker 2: short gamma spot at trigger systematic synthetic short gamma. You 239 00:13:52,640 --> 00:13:55,080 Speaker 2: get these accelerant flows and you have these wipeouts. You 240 00:13:55,120 --> 00:13:57,719 Speaker 2: have like a couple of hours max. To monetize those 241 00:13:57,760 --> 00:14:02,760 Speaker 2: hedges before reflexive all sellers reappear, before the dip buyers reappear. 242 00:14:03,360 --> 00:14:07,160 Speaker 2: And I think the hard lesson here was due to 243 00:14:07,200 --> 00:14:10,560 Speaker 2: the magnitude of how much shortfall there were across you know, 244 00:14:12,280 --> 00:14:16,840 Speaker 2: multiple strategies that we referenced earlier. A lot of people 245 00:14:17,120 --> 00:14:20,920 Speaker 2: ended the day Friday thinking that they could be SHORTVALL 246 00:14:21,920 --> 00:14:24,520 Speaker 2: and maybe short delta, you know, short the market, but 247 00:14:24,560 --> 00:14:26,440 Speaker 2: also too short ball coming out of that trade because 248 00:14:26,440 --> 00:14:29,960 Speaker 2: the wall moves were so magnificent, you know, so outlier. 249 00:14:30,720 --> 00:14:35,800 Speaker 2: The issue then became that they got their fingers blown 250 00:14:35,840 --> 00:14:39,120 Speaker 2: off on the Monday reopen, so you know, you can 251 00:14:39,200 --> 00:14:42,440 Speaker 2: lose money trying to do that based on prior back 252 00:14:42,560 --> 00:14:45,800 Speaker 2: test on these VALL squeezes and these outlier ball squeezes. 253 00:14:46,280 --> 00:14:50,680 Speaker 2: It's when Asia crashed overnight, and that in and of 254 00:14:50,720 --> 00:14:54,440 Speaker 2: itself is another conversation, another you know, probably a separate 255 00:14:54,560 --> 00:14:57,560 Speaker 2: recording for us. But when Asia crashed overnight and those 256 00:14:57,600 --> 00:15:00,520 Speaker 2: people woke up and vall was where it was, and 257 00:15:00,720 --> 00:15:03,400 Speaker 2: you saw more you know, more bid for tails and 258 00:15:03,480 --> 00:15:05,520 Speaker 2: vivix went absolutely bonkers. 259 00:15:05,600 --> 00:15:09,000 Speaker 1: Oh yeah, volatility of volatility, that was yeah, you know. 260 00:15:09,080 --> 00:15:11,720 Speaker 2: As far as just a read on demand for tales, 261 00:15:12,240 --> 00:15:14,560 Speaker 2: it was over for those people. So the second day 262 00:15:14,560 --> 00:15:16,760 Speaker 2: in a row and now you have a pattern here 263 00:15:16,800 --> 00:15:18,920 Speaker 2: where you know, for me one, shame on you, for 264 00:15:19,040 --> 00:15:21,400 Speaker 2: me twice shame on me, where you've gotten your your 265 00:15:21,400 --> 00:15:24,520 Speaker 2: fingers blown off two days in a row trying to 266 00:15:24,600 --> 00:15:28,240 Speaker 2: play this trade. And by the way, this VALL squeeze, 267 00:15:28,280 --> 00:15:34,200 Speaker 2: this vall out performance on a beta adjusted look was 268 00:15:34,280 --> 00:15:39,240 Speaker 2: unlike anything we'd seen, I'm telling you, like past COVID extremes. 269 00:15:39,320 --> 00:15:43,560 Speaker 2: At a point past vallmageddon, we're to LTCM. You know, 270 00:15:43,720 --> 00:15:47,760 Speaker 2: some of these metrics were unbelievable, whether it was VIX 271 00:15:47,920 --> 00:15:50,400 Speaker 2: relative to S and P, whether it was vall of 272 00:15:50,480 --> 00:15:54,640 Speaker 2: all relative to VIX, whether it was skew relative to 273 00:15:54,680 --> 00:15:57,160 Speaker 2: add the money imply valves all these different metrics one 274 00:15:57,240 --> 00:16:00,880 Speaker 2: hundred percentile. This was a volume. This was not a 275 00:16:00,920 --> 00:16:06,160 Speaker 2: stocks event, and that occurred. You're now dealing with an 276 00:16:06,240 --> 00:16:08,960 Speaker 2: environment from a risk management perspective, and I know you 277 00:16:09,080 --> 00:16:11,440 Speaker 2: just had some really good content, you know, talking about 278 00:16:11,520 --> 00:16:14,760 Speaker 2: risk management on the show. From a risk management perspective, 279 00:16:14,800 --> 00:16:19,240 Speaker 2: and your var that it is going to be incredibly 280 00:16:19,440 --> 00:16:24,840 Speaker 2: difficult to get that you know, reflexive say systematic buyer 281 00:16:24,920 --> 00:16:27,960 Speaker 2: back in the market right now, or that discretionary macro 282 00:16:28,080 --> 00:16:30,840 Speaker 2: trader who who's running the back test and the back 283 00:16:30,880 --> 00:16:34,400 Speaker 2: tests are saying after these types of overreactions, you've got 284 00:16:34,400 --> 00:16:36,760 Speaker 2: to be long the market in shortfall. But the problem 285 00:16:36,840 --> 00:16:39,360 Speaker 2: is you're blowing out your risk budget now on down 286 00:16:39,440 --> 00:16:42,160 Speaker 2: days we snap back overnight in Japan, you're blowing out 287 00:16:42,200 --> 00:16:44,120 Speaker 2: your risk budget up with You're not going to be 288 00:16:44,160 --> 00:16:47,440 Speaker 2: able to allocate any risk into this trade of any 289 00:16:47,480 --> 00:16:49,560 Speaker 2: size that's going to make a difference. So we're still 290 00:16:49,600 --> 00:16:52,520 Speaker 2: on very thin ice and the market is still priced 291 00:16:52,920 --> 00:16:54,440 Speaker 2: for a lot of crash. 292 00:16:54,760 --> 00:16:56,880 Speaker 3: I'm glad you brought it back to the sort of 293 00:16:56,960 --> 00:17:01,040 Speaker 3: simple macro, which is just that look, you know, suddenly 294 00:17:01,080 --> 00:17:04,680 Speaker 3: people realized on Friday, maybe that soft land between Paul 295 00:17:04,760 --> 00:17:09,000 Speaker 3: on Wednesday and the employment report on Friday. Maybe that 296 00:17:09,160 --> 00:17:12,760 Speaker 3: soft landing scenario that everyone consensus had emerged. Maybe it's 297 00:17:12,880 --> 00:17:15,960 Speaker 3: no done deal. You said it could be a separate recording. 298 00:17:15,960 --> 00:17:19,120 Speaker 3: Can you give us like the thirty second version of 299 00:17:19,160 --> 00:17:22,359 Speaker 3: that Sunday night Asia crash and what you thought was 300 00:17:22,400 --> 00:17:24,640 Speaker 3: going on there or what was on your mind? 301 00:17:24,640 --> 00:17:30,359 Speaker 2: Then we've seen so many times after a Friday sell off, 302 00:17:30,640 --> 00:17:34,520 Speaker 2: Asia just act poorly, right, I mean, and I you know, 303 00:17:34,880 --> 00:17:37,560 Speaker 2: I then too think back to like the financial crisis 304 00:17:37,720 --> 00:17:41,080 Speaker 2: where you know, it was one large hedge fund kind 305 00:17:41,080 --> 00:17:44,440 Speaker 2: of liquidating their converts book that really started like a 306 00:17:44,520 --> 00:17:47,720 Speaker 2: knock on calamity leading it, you know, around the Leman event. 307 00:17:48,080 --> 00:17:52,000 Speaker 2: You know, this I think too, was then further amplified. 308 00:17:52,040 --> 00:17:55,800 Speaker 2: Let's look at Japan specifically. The Japan trade has been 309 00:17:56,080 --> 00:17:59,280 Speaker 2: a great trade. The long knee k the short end 310 00:17:59,280 --> 00:18:02,439 Speaker 2: obviously the care component have been great trend trades with 311 00:18:02,520 --> 00:18:05,359 Speaker 2: high sharps for a reason. You know, there's a fundamental 312 00:18:05,359 --> 00:18:08,879 Speaker 2: economic story this. You know, you got the third arrow achieved, 313 00:18:09,240 --> 00:18:13,119 Speaker 2: You've got you know a wage renegotiation. Now corporates have 314 00:18:13,200 --> 00:18:16,080 Speaker 2: pricing power consumers and can digest it all this stuff. 315 00:18:16,200 --> 00:18:20,119 Speaker 2: They escape deflation. Great story. It was crowded and it's illiquid, 316 00:18:20,160 --> 00:18:22,280 Speaker 2: and it doesn't trade very well. And in a world 317 00:18:22,320 --> 00:18:25,600 Speaker 2: where the US exceptionalism trade is dominated for a decade, 318 00:18:26,240 --> 00:18:31,199 Speaker 2: and Europe is eternally tied into China, and Europe is 319 00:18:31,200 --> 00:18:34,359 Speaker 2: eternally cyclical, and they don't buy back their stocks and 320 00:18:34,400 --> 00:18:37,359 Speaker 2: they don't have any secular growth tech and all those things, 321 00:18:37,760 --> 00:18:41,680 Speaker 2: a lot of global equities managers were looking for opportunities 322 00:18:41,680 --> 00:18:45,080 Speaker 2: to diversify out and play Japan. And that meant real 323 00:18:45,119 --> 00:18:47,760 Speaker 2: money in Japan, and that meant hedge fund started chasing 324 00:18:47,760 --> 00:18:51,760 Speaker 2: in Japan. That meant retail certainly domestically in Japan playing 325 00:18:51,760 --> 00:18:54,360 Speaker 2: the stock market boom. So you just had a lot 326 00:18:54,400 --> 00:18:56,359 Speaker 2: of hot money, a lot of fast money, a lot 327 00:18:56,400 --> 00:18:58,760 Speaker 2: of slow money in a place that doesn't trade very well. 328 00:18:59,200 --> 00:19:03,400 Speaker 2: And when you got that first d risking, particularly amongst 329 00:19:03,600 --> 00:19:07,359 Speaker 2: a lot of overseas leveraged pod multi strat investors that 330 00:19:07,440 --> 00:19:10,560 Speaker 2: have been there, you shoot first, ask questions later. It's 331 00:19:10,560 --> 00:19:13,919 Speaker 2: skinny exits and the deleveraging and getting out of a 332 00:19:13,960 --> 00:19:18,560 Speaker 2: place that is that type of liquid liquidity constrained. It 333 00:19:18,720 --> 00:19:21,639 Speaker 2: was you know, just a magnitude's move, but it was 334 00:19:21,720 --> 00:19:23,879 Speaker 2: all the stuff that had the highest sharps. It was 335 00:19:23,920 --> 00:19:26,239 Speaker 2: topics banks, right, It was all those things that are 336 00:19:26,240 --> 00:19:28,959 Speaker 2: going to be most sensitive to you know, escaping negative 337 00:19:29,000 --> 00:19:31,800 Speaker 2: interest rates, and you know you crowded into them and 338 00:19:31,840 --> 00:19:34,600 Speaker 2: you crowd out of them. And the magnitude of those 339 00:19:34,640 --> 00:19:37,480 Speaker 2: moves now as you're seeing both down and back up, 340 00:19:37,840 --> 00:19:41,280 Speaker 2: you know, speaks to how much leverage was in that trade. 341 00:19:41,320 --> 00:19:53,800 Speaker 2: And that was just a particularly sloppy unwind. 342 00:19:57,920 --> 00:20:00,880 Speaker 1: So, as you said, people have had their fingers burnt 343 00:20:01,000 --> 00:20:04,520 Speaker 1: multiple times now and we think there might be some 344 00:20:04,640 --> 00:20:07,760 Speaker 1: short vall exposure still left in the market. What are 345 00:20:07,800 --> 00:20:10,680 Speaker 1: these sort of I guess either pain points that you're 346 00:20:10,720 --> 00:20:15,160 Speaker 1: looking at that would accelerate the downside or the sort 347 00:20:15,160 --> 00:20:19,520 Speaker 1: of things you need for a durable recovery. As you said, 348 00:20:19,520 --> 00:20:22,240 Speaker 1: I guess it's going to take some time for those 349 00:20:22,320 --> 00:20:25,439 Speaker 1: like windows of volatility events and the var spikes to 350 00:20:25,600 --> 00:20:28,119 Speaker 1: fade into the distance. But is there anything there that 351 00:20:28,119 --> 00:20:28,679 Speaker 1: you're watching? 352 00:20:28,880 --> 00:20:31,560 Speaker 2: So the thing to me where I was still uncomfortable, 353 00:20:31,680 --> 00:20:34,480 Speaker 2: for instance, in the micro term about you coming into 354 00:20:34,520 --> 00:20:37,679 Speaker 2: today and how if we'd be able to hold onto 355 00:20:37,960 --> 00:20:39,679 Speaker 2: the rally last night was at the end of the 356 00:20:39,800 --> 00:20:45,359 Speaker 2: US cash equity session yesterday, it was an ugly close 357 00:20:45,520 --> 00:20:48,960 Speaker 2: from a ball perspective, Vall went out bid, skewing out 358 00:20:49,000 --> 00:20:53,080 Speaker 2: bid Vallavall was super firm, super sticky. There was no 359 00:20:53,200 --> 00:20:55,920 Speaker 2: pullback despite you know, for instance, in the last couple 360 00:20:56,040 --> 00:20:58,960 Speaker 2: minutes of the day, there was a large hedge online, 361 00:20:59,040 --> 00:21:01,639 Speaker 2: large put spread on line that bought you know, just 362 00:21:01,680 --> 00:21:03,600 Speaker 2: about four and a half billion bucks of Delta in 363 00:21:03,640 --> 00:21:05,840 Speaker 2: a rally, it's like twenty handles. But like VALL was 364 00:21:05,880 --> 00:21:09,960 Speaker 2: still stressy. That to me is indicative of the fact 365 00:21:10,240 --> 00:21:13,440 Speaker 2: that they're still and I think it's a dealer problem. 366 00:21:13,520 --> 00:21:16,199 Speaker 2: I think it's a market maker problem that there is 367 00:21:16,359 --> 00:21:19,639 Speaker 2: still a lot of embedded kind of short gamma in 368 00:21:19,720 --> 00:21:22,560 Speaker 2: the VIX complex and there still is a lot of 369 00:21:22,600 --> 00:21:25,800 Speaker 2: short skew out there maybe in like the dealer the 370 00:21:25,880 --> 00:21:29,680 Speaker 2: S and P positioning and that VIX complex is really interesting, guys, 371 00:21:29,680 --> 00:21:32,000 Speaker 2: because I feel like maybe we talked about this when 372 00:21:32,000 --> 00:21:34,000 Speaker 2: I was on the show once before, but on a 373 00:21:34,160 --> 00:21:38,479 Speaker 2: kind of pre Dodd Frank view versus where we are 374 00:21:38,600 --> 00:21:42,200 Speaker 2: now from speaking with VIX dealers VIX options dealers around 375 00:21:42,200 --> 00:21:46,840 Speaker 2: the street, you maybe have ten percent twenty percent max 376 00:21:47,280 --> 00:21:49,440 Speaker 2: of the risk taking capacity that you used to have. 377 00:21:50,000 --> 00:21:54,320 Speaker 2: But as the equity market rally became so unstable over 378 00:21:54,359 --> 00:21:57,920 Speaker 2: the course of the past year, VIX upsides. So VIX 379 00:21:58,040 --> 00:22:01,040 Speaker 2: calls was or you know, all spreads. But that's not 380 00:22:01,080 --> 00:22:03,880 Speaker 2: a true hedge. That's a separate conversation where it's kind 381 00:22:03,880 --> 00:22:06,000 Speaker 2: of the most popular tail hedge out there. You know, 382 00:22:06,080 --> 00:22:08,840 Speaker 2: VIX is inherently convexed. It's a square root of variance, 383 00:22:08,880 --> 00:22:10,560 Speaker 2: so it's going to move off the line, it's going 384 00:22:10,600 --> 00:22:13,760 Speaker 2: to outperform and do you know, kind of a crashy 385 00:22:13,800 --> 00:22:18,760 Speaker 2: type situation. There was a massive amount of short VIX 386 00:22:18,880 --> 00:22:21,400 Speaker 2: calls for dealers over the course of the past year. 387 00:22:21,440 --> 00:22:23,239 Speaker 2: We've had a couple events, we get squeezy and then 388 00:22:23,240 --> 00:22:25,119 Speaker 2: it you know, fills back in. People keep reloading on 389 00:22:25,160 --> 00:22:28,199 Speaker 2: it because this trade has been quite cheap. Once this 390 00:22:28,359 --> 00:22:31,640 Speaker 2: short vall trade really began to implode, what you started 391 00:22:31,680 --> 00:22:35,760 Speaker 2: seeing and we did recently have another reload last week 392 00:22:35,920 --> 00:22:38,280 Speaker 2: of dealer of a dealer getting short you know, really 393 00:22:38,320 --> 00:22:42,360 Speaker 2: big size and VIX calls. When VVIX starts expanding like that, 394 00:22:42,440 --> 00:22:45,480 Speaker 2: you know, that they are stressed and scrambling to cover 395 00:22:46,160 --> 00:22:48,440 Speaker 2: what is effectively their short gamma, and they have to 396 00:22:48,480 --> 00:22:50,840 Speaker 2: go out and they have to buy VIX delta, which 397 00:22:50,920 --> 00:22:52,719 Speaker 2: is buying VIX futures, or they have to go out 398 00:22:53,160 --> 00:22:56,560 Speaker 2: in this case because we're now negative spot vault correlation, 399 00:22:56,600 --> 00:22:58,440 Speaker 2: I meaning as the market's going lower of all is 400 00:22:58,480 --> 00:23:01,560 Speaker 2: going higher again, they have to go out in short futures. 401 00:23:02,040 --> 00:23:04,200 Speaker 2: So that to me, when we saw the market staying 402 00:23:04,280 --> 00:23:06,920 Speaker 2: stressing into the clothes, I know that people are still 403 00:23:07,280 --> 00:23:09,400 Speaker 2: you know, buried in some of those trades and are 404 00:23:09,400 --> 00:23:11,920 Speaker 2: not out. I think a lot of people were finally 405 00:23:11,920 --> 00:23:14,879 Speaker 2: getting the shoulder tap in the last you know, thirty 406 00:23:14,920 --> 00:23:17,679 Speaker 2: minutes yesterday saying this hasn't pulled back. We haven't been 407 00:23:17,680 --> 00:23:19,880 Speaker 2: able to cover this. We got to cover and cover 408 00:23:19,920 --> 00:23:21,919 Speaker 2: out some of this risk. So that to me was 409 00:23:21,920 --> 00:23:25,639 Speaker 2: indicative on the go forward to the point that you 410 00:23:25,800 --> 00:23:29,600 Speaker 2: raised with regards to when do things stabilize. I want 411 00:23:29,640 --> 00:23:34,920 Speaker 2: to see this current flow which is just hedge unwined 412 00:23:34,920 --> 00:23:38,000 Speaker 2: hedge monetization, which is going to help stabilize the market 413 00:23:38,200 --> 00:23:41,080 Speaker 2: in periods. I want to see that turn more into 414 00:23:41,160 --> 00:23:43,879 Speaker 2: a willingness for the ball sellers to reemerge out of 415 00:23:43,880 --> 00:23:46,760 Speaker 2: their bunkers. That's a big if, right now, right are 416 00:23:46,760 --> 00:23:49,480 Speaker 2: you able to be short vall? Are you able to 417 00:23:49,520 --> 00:23:51,879 Speaker 2: be short gamma? Are you able to be short skew 418 00:23:52,080 --> 00:23:55,119 Speaker 2: or you be able to short crash, you know, systematically 419 00:23:55,359 --> 00:23:57,960 Speaker 2: in light of the ball events of the last few 420 00:23:58,000 --> 00:24:00,560 Speaker 2: days and whether or not you can get approval or 421 00:24:00,560 --> 00:24:02,959 Speaker 2: the risk budget to put that trade on. But there 422 00:24:03,080 --> 00:24:08,920 Speaker 2: still has been massive asset growth across the VRP complex, 423 00:24:09,000 --> 00:24:14,159 Speaker 2: across the premium income ets, across the dispersion books, across QIS. 424 00:24:14,200 --> 00:24:18,840 Speaker 2: Products that are exploiting zero DTE options, no overnight risk, 425 00:24:19,560 --> 00:24:22,920 Speaker 2: Those still have to trade, those still have to sell all, 426 00:24:23,080 --> 00:24:26,439 Speaker 2: those still have to short VEGA. And I think that 427 00:24:26,640 --> 00:24:30,200 Speaker 2: they are going to slowly reappair. And as they begin 428 00:24:30,280 --> 00:24:33,480 Speaker 2: to slowly reappear, and that's going to take time, dealers 429 00:24:33,480 --> 00:24:37,440 Speaker 2: start getting longer gamma again. Range compression begins to set 430 00:24:37,480 --> 00:24:41,480 Speaker 2: back in trailing realized VALL windows begin to roll back 431 00:24:41,560 --> 00:24:46,280 Speaker 2: over ever so incrementally. But the trick is this VALL control, 432 00:24:46,560 --> 00:24:50,080 Speaker 2: which is kind of a euphemism, a generic for anything 433 00:24:50,160 --> 00:24:55,320 Speaker 2: from target volatility funds to various annuities. To assume of 434 00:24:55,320 --> 00:24:59,439 Speaker 2: these balanced funds that shift out of equities into cash 435 00:24:59,640 --> 00:25:03,760 Speaker 2: or during of all event, well, we view them as 436 00:25:03,800 --> 00:25:06,359 Speaker 2: the primary source of much of this deleveraging over the 437 00:25:06,480 --> 00:25:09,800 Speaker 2: last week again volatilities or exposure toggle, we got it. 438 00:25:10,000 --> 00:25:11,960 Speaker 2: We think they've sold almost over the past two weeks 439 00:25:11,960 --> 00:25:15,159 Speaker 2: one hundred and thirty billion bucks of equities because of 440 00:25:15,200 --> 00:25:19,159 Speaker 2: that realized VALL issue that we're talking about, where you know, 441 00:25:19,320 --> 00:25:22,359 Speaker 2: still with the front Vick's future right now. As I 442 00:25:22,400 --> 00:25:24,959 Speaker 2: was walking in here was kind of you know, twenty 443 00:25:25,040 --> 00:25:28,600 Speaker 2: eight or so, you're still you know, pricing in something 444 00:25:28,640 --> 00:25:30,919 Speaker 2: close to one point eight percent daily moves in the 445 00:25:31,000 --> 00:25:33,240 Speaker 2: S and P. You know, it's going to take a 446 00:25:33,400 --> 00:25:37,040 Speaker 2: month of fifty basis point moves to get half of 447 00:25:37,080 --> 00:25:41,080 Speaker 2: that buying back. Even just two weeks of fifty BIPs 448 00:25:41,160 --> 00:25:45,000 Speaker 2: moves a day, which is a magnitude smaller versus where 449 00:25:45,000 --> 00:25:47,040 Speaker 2: we are right now and we're still priced for stress, 450 00:25:48,000 --> 00:25:50,280 Speaker 2: is barely going to create any buying right now. So 451 00:25:50,400 --> 00:25:54,640 Speaker 2: you need a sustained period of calm. You don't need rallies, 452 00:25:54,720 --> 00:25:57,280 Speaker 2: you just need you know, VALL tends to mean revert 453 00:25:57,560 --> 00:25:59,879 Speaker 2: at some point. You've got to keep feeding volatility with 454 00:26:00,040 --> 00:26:03,040 Speaker 2: big moves or else it tends to mean revert lower, 455 00:26:03,359 --> 00:26:05,800 Speaker 2: and that's when the ball sellers reappear, and that's when 456 00:26:05,840 --> 00:26:08,560 Speaker 2: dealers get long gamma, and that's when markets begin to 457 00:26:08,600 --> 00:26:11,639 Speaker 2: compress again, and that's when you know, we can see 458 00:26:11,680 --> 00:26:15,040 Speaker 2: some kind of resumption of, say, more constructive behavior. 459 00:26:15,640 --> 00:26:18,520 Speaker 1: Joe, you know what's cool. On the terminal, you can 460 00:26:18,640 --> 00:26:21,800 Speaker 1: chart target VALL equity exposure and you can see it 461 00:26:21,880 --> 00:26:26,240 Speaker 1: peeking in sort of June and then obviously falling very 462 00:26:26,280 --> 00:26:30,440 Speaker 1: precipitously in recent days. So that's kind of cool. Charlie. 463 00:26:30,480 --> 00:26:32,520 Speaker 1: We have to keep this fairly short because it's an 464 00:26:32,520 --> 00:26:34,720 Speaker 1: emergency episode. We want to get it out quickly. But 465 00:26:34,800 --> 00:26:37,560 Speaker 1: I have one very important question for you, which is 466 00:26:37,640 --> 00:26:40,040 Speaker 1: I have someone visiting me in the next week or 467 00:26:40,040 --> 00:26:42,919 Speaker 1: so in New York. Where should I take them for steak? Oh? 468 00:26:43,160 --> 00:26:43,760 Speaker 2: Good question. 469 00:26:44,200 --> 00:26:46,520 Speaker 1: I figure you're the guy to ask. We ask you 470 00:26:46,520 --> 00:26:48,760 Speaker 1: about VALL and meet basically. 471 00:26:49,640 --> 00:26:53,320 Speaker 2: You know it's so funny is that I get, you know, 472 00:26:53,440 --> 00:26:56,000 Speaker 2: I'm a home steak guy, like I have a half 473 00:26:56,040 --> 00:26:59,040 Speaker 2: cow share, so I get, you know, these parts delivered 474 00:26:59,040 --> 00:27:00,879 Speaker 2: to me from up think Tracy would have. 475 00:27:01,000 --> 00:27:03,760 Speaker 1: Yeah, I love bone marrow. I have. 476 00:27:05,600 --> 00:27:07,960 Speaker 2: The bone marrow on the steak then, right. 477 00:27:08,080 --> 00:27:10,000 Speaker 1: It's like eating a life force. 478 00:27:10,119 --> 00:27:13,800 Speaker 2: I drink at the bone, broth, all that stuff. So 479 00:27:14,400 --> 00:27:20,080 Speaker 2: I honestly am somewhat averse to restaurant steakhouses, oftentimes cooking 480 00:27:20,080 --> 00:27:23,320 Speaker 2: with vegetable oil, siedos, all that stuff. I've always been 481 00:27:23,640 --> 00:27:28,960 Speaker 2: like a big, brawny New York City steakhouse type of 482 00:27:28,960 --> 00:27:31,639 Speaker 2: a guy, So like a very generic smith and wooly 483 00:27:31,760 --> 00:27:35,240 Speaker 2: type of a Yeah, lunch. 484 00:27:35,480 --> 00:27:37,600 Speaker 1: Yeah, actually, I'd be totally Actually. 485 00:27:37,280 --> 00:27:39,520 Speaker 3: My lunch plans just fell through, so I actually have 486 00:27:39,600 --> 00:27:41,600 Speaker 3: some time. We could talk through some stuff. Let's good 487 00:27:41,600 --> 00:27:42,160 Speaker 3: steak for lunch. 488 00:27:42,240 --> 00:27:47,080 Speaker 1: Yeah, let's do that, okay. 489 00:27:48,359 --> 00:27:51,440 Speaker 3: Lots More is produced by Carmen Rodriguez and dash Ol Bennett, 490 00:27:51,480 --> 00:27:53,639 Speaker 3: with help from Moses on Them and Kill Brooks. 491 00:27:54,080 --> 00:27:57,200 Speaker 1: Our sound engineer is Blake Maples. Sage Bowman is the 492 00:27:57,240 --> 00:27:58,800 Speaker 1: head of Bloomberg Podcasts. 493 00:27:59,119 --> 00:28:02,439 Speaker 3: Please rate you and subscribe to Odd, Lots and Lots 494 00:28:02,480 --> 00:28:05,359 Speaker 3: More on your favorite podcast platforms. 495 00:28:05,119 --> 00:28:07,880 Speaker 1: And remember that Bloomberg subscribers can listen to all our 496 00:28:07,920 --> 00:28:12,560 Speaker 1: podcasts ad free by connecting through Apple Podcasts. Thanks for listening.