1 00:00:02,720 --> 00:00:15,880 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:18,680 --> 00:00:21,720 Speaker 2: Hello and welcome to another episode of The Odd Lots Podcast. 3 00:00:21,760 --> 00:00:24,120 Speaker 3: I'm Jill Wisenthal and I'm Tracy Alloway. 4 00:00:24,239 --> 00:00:26,720 Speaker 2: Tracy, Market's getting interesting again. 5 00:00:26,920 --> 00:00:28,360 Speaker 3: I love interesting markets. 6 00:00:28,400 --> 00:00:28,639 Speaker 4: We do. 7 00:00:28,960 --> 00:00:31,880 Speaker 2: We always say we're long volatility. That's right here at 8 00:00:31,880 --> 00:00:35,560 Speaker 2: the Odd Lots Podcast. All financial journalists are long volatility. 9 00:00:35,600 --> 00:00:37,440 Speaker 3: I guess yes. I mean you can actually see it 10 00:00:37,479 --> 00:00:41,760 Speaker 3: in the listeners and readership numbers. Our traffic follows the. 11 00:00:41,760 --> 00:00:46,400 Speaker 2: Vin there's some bad incentives. Yeah, perhaps perhaps, but if 12 00:00:46,440 --> 00:00:48,120 Speaker 2: it bleeds at leads. I mean they've been saying this 13 00:00:48,120 --> 00:00:49,000 Speaker 2: about the news forever. 14 00:00:49,120 --> 00:00:49,479 Speaker 4: Yeah. 15 00:00:49,520 --> 00:00:53,840 Speaker 3: So at the moment, we are recording this on Friday, November. 16 00:00:53,520 --> 00:00:55,160 Speaker 2: Fourteenth, at ten oh seven am. 17 00:00:55,280 --> 00:00:56,760 Speaker 3: Yeah, we have to say that we have to be 18 00:00:56,840 --> 00:00:59,880 Speaker 3: very specific because things are changing so fast. At the moment, 19 00:01:00,120 --> 00:01:02,400 Speaker 3: the S and P five hundred is down like zero 20 00:01:02,440 --> 00:01:05,560 Speaker 3: point seven percent, but it was down more than one 21 00:01:05,600 --> 00:01:08,240 Speaker 3: percent earlier, and then yesterday it fell, you know, one 22 00:01:08,240 --> 00:01:11,920 Speaker 3: point eight percent. So this is a pretty substantial slide. 23 00:01:11,959 --> 00:01:13,840 Speaker 3: And of course it comes at a time when people 24 00:01:13,880 --> 00:01:18,800 Speaker 3: were already worried about things like tech valuations and the 25 00:01:18,840 --> 00:01:20,400 Speaker 3: possibility of an AI bubble. 26 00:01:20,560 --> 00:01:23,479 Speaker 2: Totally. The US DOC market has had a phenomenal year, 27 00:01:23,640 --> 00:01:25,920 Speaker 2: and this is all kind of minor in the grand 28 00:01:25,959 --> 00:01:29,200 Speaker 2: scheme of things, but some of the moves haven't been 29 00:01:29,240 --> 00:01:32,360 Speaker 2: that minor for some big things. It is some of 30 00:01:32,400 --> 00:01:35,399 Speaker 2: the most volatile period since April. Really, I mean, it's 31 00:01:35,440 --> 00:01:37,440 Speaker 2: kind of been a smooth rite up since the end 32 00:01:37,480 --> 00:01:40,120 Speaker 2: of April or the middle of April, whenever that bottom. 33 00:01:40,319 --> 00:01:42,839 Speaker 2: There's just a lot going on questions about the FED. 34 00:01:43,200 --> 00:01:46,080 Speaker 2: Gold interestingly had a massive year, and it also is 35 00:01:46,120 --> 00:01:48,200 Speaker 2: selling off, so that sort of raises the question about 36 00:01:48,200 --> 00:01:52,920 Speaker 2: what's been driving gold Bitcoin getting absolutely clobbered. Of course, 37 00:01:52,960 --> 00:01:54,920 Speaker 2: you know, it's sort of a glorified tech stock and 38 00:01:55,000 --> 00:01:58,440 Speaker 2: the way it trades, so many interesting things, so many 39 00:01:58,440 --> 00:02:00,600 Speaker 2: market winners fading a little bit. 40 00:02:01,080 --> 00:02:04,040 Speaker 3: You know, it was really interesting this morning. For a second, 41 00:02:04,600 --> 00:02:07,480 Speaker 3: bonds weren't really doing anything. They weren't rallying, And so 42 00:02:07,720 --> 00:02:09,600 Speaker 3: if you can't go into gold, if you can't go 43 00:02:09,639 --> 00:02:11,840 Speaker 3: into bonds, if everything's selling off at the same time, 44 00:02:11,880 --> 00:02:12,800 Speaker 3: that seems kind of worried. 45 00:02:12,880 --> 00:02:15,560 Speaker 2: Well, this is really interesting and probably needs to be 46 00:02:15,639 --> 00:02:18,400 Speaker 2: discussed more. But you're absolutely right. I think yields on 47 00:02:18,440 --> 00:02:22,720 Speaker 2: the tenure were actually up yesterday, November thirteenth. In the 48 00:02:22,800 --> 00:02:25,520 Speaker 2: last week I was looking at the work function on 49 00:02:25,520 --> 00:02:27,880 Speaker 2: the Bloomberg terminal. Odds of a December rate cut have 50 00:02:27,960 --> 00:02:30,280 Speaker 2: come in quite a bit. It's closer to a coin flip. 51 00:02:30,320 --> 00:02:32,760 Speaker 2: A week ago is sixty six percent. There have been 52 00:02:32,800 --> 00:02:36,720 Speaker 2: some speeches from some of the FMC members talking about 53 00:02:36,880 --> 00:02:39,400 Speaker 2: you know, they're uncertain, and part of the reason were 54 00:02:39,440 --> 00:02:41,320 Speaker 2: uncertain because we've had so little data. I guess we're 55 00:02:41,320 --> 00:02:42,960 Speaker 2: going to start getting data again now that. 56 00:02:42,919 --> 00:02:45,000 Speaker 3: The although it's still going to be messy. 57 00:02:44,760 --> 00:02:47,640 Speaker 2: It's still going to be super messy. You know, Understanding 58 00:02:47,680 --> 00:02:49,280 Speaker 2: the economy in real time is hard in the best 59 00:02:49,280 --> 00:02:51,640 Speaker 2: of times. It's really hard when there's no data, and 60 00:02:51,680 --> 00:02:54,639 Speaker 2: then it's really hard when the data that does come 61 00:02:54,680 --> 00:02:56,800 Speaker 2: out is going to be driven by the lack of 62 00:02:57,200 --> 00:03:00,000 Speaker 2: government employment, which then make the data even more ambiguos. 63 00:03:00,280 --> 00:03:03,000 Speaker 2: So a million questions, very interesting moment in a very 64 00:03:03,000 --> 00:03:05,040 Speaker 2: interesting year for markets. We sort of got to get 65 00:03:05,040 --> 00:03:06,360 Speaker 2: a better understanding of what's going on. 66 00:03:06,520 --> 00:03:08,240 Speaker 3: Can I say one more thing before we get to 67 00:03:08,280 --> 00:03:10,560 Speaker 3: our guest, which is I think part of the discussion 68 00:03:10,560 --> 00:03:12,639 Speaker 3: at the FED. We're kind of getting very circular here 69 00:03:12,639 --> 00:03:14,960 Speaker 3: because I suspect what's happening is, yes, the FED is 70 00:03:15,000 --> 00:03:18,720 Speaker 3: worried about inflation, so some FOMC members are getting a 71 00:03:18,720 --> 00:03:21,680 Speaker 3: little bit more hawkish in their speech. I think they're 72 00:03:21,720 --> 00:03:26,360 Speaker 3: worried about AI bubble possibilities and valuations as well. And 73 00:03:26,400 --> 00:03:29,600 Speaker 3: the longer they heat right slow, the longer this goes on, 74 00:03:29,760 --> 00:03:32,120 Speaker 3: and then maybe the mess is even bigger when they 75 00:03:32,120 --> 00:03:33,920 Speaker 3: eventually have to clean it up totally. 76 00:03:34,000 --> 00:03:36,600 Speaker 2: All kinds of crosswinds, yea to speak well. Anyway, I'm 77 00:03:36,680 --> 00:03:38,800 Speaker 2: very excited to say that we do indeed have the 78 00:03:38,800 --> 00:03:41,640 Speaker 2: perfect guest, someone we've never had on the show before, 79 00:03:41,680 --> 00:03:43,440 Speaker 2: but very excited to talk to him. We're going to 80 00:03:43,480 --> 00:03:45,440 Speaker 2: be speaking with Dirk Villa. He is the head of 81 00:03:45,560 --> 00:03:48,920 Speaker 2: Global macro strategy at City. He brought us a book 82 00:03:48,920 --> 00:03:52,240 Speaker 2: to that he co authored, Trading Fixed Income and FX 83 00:03:52,480 --> 00:03:53,600 Speaker 2: and Emerging Markets. 84 00:03:53,920 --> 00:03:55,800 Speaker 3: It's going to be useful in the US, I know. 85 00:03:55,960 --> 00:03:59,000 Speaker 2: That's the thing. It's like suddenly all these em veterans like, 86 00:03:59,080 --> 00:04:01,880 Speaker 2: let's tell you how some of these things really works. So, Derek, 87 00:04:01,960 --> 00:04:04,160 Speaker 2: thank you so much for coming on the podcast. 88 00:04:04,200 --> 00:04:06,320 Speaker 5: Great to be here. Thanks for the invite to ask. 89 00:04:06,160 --> 00:04:08,400 Speaker 2: You a question. If you went back, say a month 90 00:04:08,440 --> 00:04:11,640 Speaker 2: ago or a month and a half ago, you're talking 91 00:04:11,640 --> 00:04:14,680 Speaker 2: to clients, et cetera. Did you ever encounter a single bear? 92 00:04:15,600 --> 00:04:17,719 Speaker 4: I mean, I'm trafficking more among the macro people than 93 00:04:17,760 --> 00:04:20,160 Speaker 4: the equity folks, sure, and the macro guys always half 94 00:04:20,160 --> 00:04:22,880 Speaker 4: class empty, right, So that you did find some bears, 95 00:04:23,279 --> 00:04:25,920 Speaker 4: and I would say, actually only a few weeks ago 96 00:04:26,279 --> 00:04:29,600 Speaker 4: that disappeared because there was a really strong buying into 97 00:04:29,680 --> 00:04:33,760 Speaker 4: the center, really right, So meaning November and December have 98 00:04:33,920 --> 00:04:39,320 Speaker 4: exceptionally positive seasonality always, and they've even better seasonality risk 99 00:04:39,440 --> 00:04:42,960 Speaker 4: and risk and exactly. So I think the bears that 100 00:04:43,040 --> 00:04:46,000 Speaker 4: we found disappeared over the last few weeks. So maybe 101 00:04:46,400 --> 00:04:48,840 Speaker 4: just at the wrong time you value, but that's how 102 00:04:48,880 --> 00:04:49,440 Speaker 4: it goes. 103 00:04:49,279 --> 00:04:53,000 Speaker 3: Right, Yeah, How do you officially measure sentiment in this market? 104 00:04:53,040 --> 00:04:56,760 Speaker 3: I'm always curious because obviously everyone has different methodologies, but 105 00:04:57,080 --> 00:05:01,040 Speaker 3: sentiment seems quite key. When you're talking about a ball 106 00:05:01,120 --> 00:05:04,880 Speaker 3: run that's really driven by tech stocks and this AI narrative, 107 00:05:05,120 --> 00:05:06,960 Speaker 3: the story becomes so important. 108 00:05:07,400 --> 00:05:10,040 Speaker 4: It's actually really key to this because if you were 109 00:05:10,120 --> 00:05:12,120 Speaker 4: to say, listen, this is the top of a bubble 110 00:05:12,160 --> 00:05:15,240 Speaker 4: or something, you'd have to see really really into the 111 00:05:15,360 --> 00:05:18,839 Speaker 4: ztic sentiment and we never quite saw that. My favorite 112 00:05:18,839 --> 00:05:22,960 Speaker 4: indicator is because the polls indicated stands for positioning and 113 00:05:23,200 --> 00:05:26,120 Speaker 4: various other things, and that is something that we put 114 00:05:26,120 --> 00:05:28,760 Speaker 4: out and that worked really really well this year and 115 00:05:28,839 --> 00:05:31,280 Speaker 4: actually the last five years for that matter, and that 116 00:05:31,440 --> 00:05:34,800 Speaker 4: never went into territory that really told us to be cautious. 117 00:05:35,080 --> 00:05:37,400 Speaker 4: We do a bunch of surveys, so we survey all 118 00:05:37,400 --> 00:05:41,360 Speaker 4: the big asset allocators worth the futrillion in asset under management, 119 00:05:41,880 --> 00:05:45,840 Speaker 4: and they never got as bullish on US equities because 120 00:05:46,320 --> 00:05:50,400 Speaker 4: after April there was a big move outside of US equities, 121 00:05:50,400 --> 00:05:54,440 Speaker 4: as you know, and they never really fully jumped into 122 00:05:54,480 --> 00:05:56,640 Speaker 4: the US equity market as much as they went outside 123 00:05:56,680 --> 00:05:58,400 Speaker 4: of the US. So we always thought, you know what, 124 00:05:59,240 --> 00:06:02,599 Speaker 4: there are certain stories here that definitely remind us of 125 00:06:02,640 --> 00:06:05,480 Speaker 4: two thousand of a bubble, and on our definition, actually 126 00:06:05,920 --> 00:06:08,479 Speaker 4: it is a bubble, but it's not close to the 127 00:06:08,560 --> 00:06:12,560 Speaker 4: end of it. And one missing component was really the 128 00:06:12,560 --> 00:06:15,320 Speaker 4: sentiment that never got as extreme on our measures. 129 00:06:15,560 --> 00:06:18,000 Speaker 3: We're definitely going to get more into the bubbles, especially 130 00:06:18,000 --> 00:06:20,120 Speaker 3: the two thousands. But before that, I want to ask, 131 00:06:20,400 --> 00:06:24,200 Speaker 3: how do you square I guess non frenzied sentiment with 132 00:06:24,520 --> 00:06:28,160 Speaker 3: the amount of announcements that we're getting from companies. We're 133 00:06:28,200 --> 00:06:31,279 Speaker 3: joking on the podcast that every day while we're recording 134 00:06:31,320 --> 00:06:34,039 Speaker 3: this in studio, we get a new headline that, you know, 135 00:06:34,120 --> 00:06:37,040 Speaker 3: Anthropic is going to spend fifty billion on data centers, 136 00:06:37,160 --> 00:06:39,479 Speaker 3: or someone else is going to spend one hundred billion. 137 00:06:39,520 --> 00:06:40,520 Speaker 3: It just goes on and on. 138 00:06:41,160 --> 00:06:42,800 Speaker 5: Yes, that is, It's very true. 139 00:06:42,839 --> 00:06:46,000 Speaker 4: I mean, I think the market is starting to question 140 00:06:46,080 --> 00:06:47,920 Speaker 4: those numbers a little bit. Right when the Oracle deal 141 00:06:48,000 --> 00:06:51,039 Speaker 4: came out, for example, the stock jumped. Guess what, We're 142 00:06:51,040 --> 00:06:53,160 Speaker 4: back to where we were before the deal was announced. 143 00:06:53,480 --> 00:06:56,280 Speaker 4: So I think there is a certain sense of skepticism 144 00:06:56,440 --> 00:06:59,359 Speaker 4: a party because some people think they've seen all that before, right, 145 00:06:59,480 --> 00:07:01,320 Speaker 4: and people bullish. I'm not telling you they're bearish. 146 00:07:01,320 --> 00:07:04,560 Speaker 5: I'm just telling you they're not as excited as you 147 00:07:04,640 --> 00:07:05,560 Speaker 5: might have expected. 148 00:07:05,680 --> 00:07:07,600 Speaker 4: Just watching the price action, I think that is more 149 00:07:07,880 --> 00:07:11,320 Speaker 4: than us here and the actually none of the indicators 150 00:07:11,320 --> 00:07:14,200 Speaker 4: suggests that. I mean you, I'm sure everyone has their 151 00:07:14,240 --> 00:07:17,000 Speaker 4: own favorite, but it's really very rare to find one 152 00:07:17,000 --> 00:07:19,360 Speaker 4: that tells you, you know what, this is in line with 153 00:07:19,400 --> 00:07:20,800 Speaker 4: what you've seen at other market tops. 154 00:07:21,240 --> 00:07:23,160 Speaker 2: You know what, since we've never had you on the 155 00:07:23,200 --> 00:07:25,840 Speaker 2: podcast before and you know, the author of a book 156 00:07:25,880 --> 00:07:28,160 Speaker 2: on and you have a great job global head of 157 00:07:28,200 --> 00:07:30,600 Speaker 2: macro Strategy City. What do you give us the sixty 158 00:07:30,640 --> 00:07:33,280 Speaker 2: second background of what you do and how you got here, 159 00:07:33,320 --> 00:07:35,680 Speaker 2: like what's your job? And yeah, okay, how'd you land here? 160 00:07:36,240 --> 00:07:36,440 Speaker 5: Yeah? 161 00:07:36,480 --> 00:07:40,040 Speaker 4: I came over to the US in ninety nine. Essentially 162 00:07:40,040 --> 00:07:43,120 Speaker 4: it's joining a macro hedg fund. We traded back then 163 00:07:43,400 --> 00:07:45,960 Speaker 4: and again right now. Actually, I think it's all about 164 00:07:46,040 --> 00:07:48,200 Speaker 4: the bubble. That's the single biggest call. Everything else will 165 00:07:48,200 --> 00:07:50,920 Speaker 4: fall into place. Whenever the bubble bursts, the dollar weekends, 166 00:07:50,960 --> 00:07:53,240 Speaker 4: the FED rates will go to zero on maybe not 167 00:07:53,280 --> 00:07:56,640 Speaker 4: quite to zero, but you could AGGRESSI effect. So everything 168 00:07:56,880 --> 00:07:58,080 Speaker 4: that's what you have to focus on. 169 00:07:58,400 --> 00:08:00,200 Speaker 5: And so even though I joined. 170 00:08:00,160 --> 00:08:03,200 Speaker 4: The hedge fund back then as an em specialist, very 171 00:08:03,240 --> 00:08:05,680 Speaker 4: quickly I looked into companies because we really had to 172 00:08:05,680 --> 00:08:08,960 Speaker 4: figure out when is this dot com bubble over? And 173 00:08:09,000 --> 00:08:11,320 Speaker 4: then we you know, we traded very successfully actually the 174 00:08:11,760 --> 00:08:14,400 Speaker 4: run up and the run down, although I would say 175 00:08:14,560 --> 00:08:17,920 Speaker 4: it's way very hard to trade a beer market because 176 00:08:17,960 --> 00:08:20,080 Speaker 4: these bear market valies are really quite vicious, and so 177 00:08:20,120 --> 00:08:21,520 Speaker 4: in the end, all the money was made being long 178 00:08:21,560 --> 00:08:24,440 Speaker 4: fixed in come rather than being short equities, but broady speaking, 179 00:08:24,480 --> 00:08:28,120 Speaker 4: that was me shifting from emerging markets to global macro, 180 00:08:28,160 --> 00:08:28,520 Speaker 4: if you like. 181 00:08:29,040 --> 00:08:29,880 Speaker 5: But then I went back. 182 00:08:29,800 --> 00:08:32,720 Speaker 4: To the buyside party because you know, the particular hedge 183 00:08:32,720 --> 00:08:34,880 Speaker 4: fund never became as poolish again on the bull market, 184 00:08:35,240 --> 00:08:37,440 Speaker 4: having been successful bearish for a long time. 185 00:08:37,800 --> 00:08:41,640 Speaker 2: So people are cursed by good luck getting bear markets 186 00:08:41,720 --> 00:08:44,360 Speaker 2: right and then ver rare haunted by that for the 187 00:08:44,360 --> 00:08:45,400 Speaker 2: rest of their career. 188 00:08:45,559 --> 00:08:46,880 Speaker 5: Very rare, very rare. 189 00:08:47,440 --> 00:08:51,160 Speaker 4: But yeah, So at Citybank, I covered emerging markets for 190 00:08:51,160 --> 00:08:53,840 Speaker 4: a long long time and switched back to global macro 191 00:08:53,960 --> 00:08:56,600 Speaker 4: a few years ago. And and as you can imagine, 192 00:08:57,000 --> 00:09:01,600 Speaker 4: it's mostly speaking to hedge fund clients, to some money clients, 193 00:09:01,640 --> 00:09:04,880 Speaker 4: some corporates. What we do a bit differently is that 194 00:09:05,040 --> 00:09:07,480 Speaker 4: I have a big quant team, So essentially we back 195 00:09:07,520 --> 00:09:09,800 Speaker 4: test everything under the sun, at least to get your 196 00:09:09,800 --> 00:09:12,040 Speaker 4: price right. Things are always lightly different, but I think 197 00:09:12,080 --> 00:09:13,760 Speaker 4: it's very important to have the right prize, and that's 198 00:09:13,760 --> 00:09:15,680 Speaker 4: what the back tests give you. So we have a 199 00:09:15,679 --> 00:09:20,120 Speaker 4: big quant effort, be a very trade sort of aggressive 200 00:09:20,160 --> 00:09:22,600 Speaker 4: and putting a lot of trades out and Martin carefully 201 00:09:23,240 --> 00:09:25,839 Speaker 4: and and I have a bigger major market angle than most, 202 00:09:25,880 --> 00:09:28,600 Speaker 4: which I still think is extremely helpful in this environment. 203 00:09:29,320 --> 00:09:31,520 Speaker 3: So since you've been around for a while, let's talk 204 00:09:31,520 --> 00:09:34,480 Speaker 3: about the two thousands dot com bubble or nineteen ninety 205 00:09:34,520 --> 00:09:38,319 Speaker 3: nine two thousand dot com bubble. Obviously people are using 206 00:09:38,400 --> 00:09:40,840 Speaker 3: that as an analogy for this period of time. But 207 00:09:40,960 --> 00:09:44,240 Speaker 3: we had someone in our discord actually shout out to 208 00:09:44,280 --> 00:09:49,280 Speaker 3: Burflyer asking, yeah, asking whether or not people were talking 209 00:09:49,280 --> 00:09:52,480 Speaker 3: about dot com stocks tech stocks being in a bubble 210 00:09:52,720 --> 00:09:56,360 Speaker 3: the way people are talking about AI stocks tech stocks 211 00:09:56,400 --> 00:09:59,920 Speaker 3: being in a bubble. Now, what's your experience? You know 212 00:10:00,120 --> 00:10:01,200 Speaker 3: more than twenty years ago. 213 00:10:01,679 --> 00:10:04,120 Speaker 4: Back then it was even clearer than now. I mean, 214 00:10:04,120 --> 00:10:06,439 Speaker 4: if you remember NaSTA when the fifty percent. 215 00:10:06,240 --> 00:10:10,120 Speaker 2: In Q four, Yeah, and. 216 00:10:10,520 --> 00:10:12,880 Speaker 4: I remember some stories and we had some analyst pictures 217 00:10:12,920 --> 00:10:15,640 Speaker 4: all the time. So there was an analyst for Nokia 218 00:10:15,720 --> 00:10:17,640 Speaker 4: who said, don't worry that we need more than one 219 00:10:17,679 --> 00:10:21,320 Speaker 4: hundred percent cell phone penetration in the world because Petsville 220 00:10:21,720 --> 00:10:23,160 Speaker 4: were cell phone like. 221 00:10:24,760 --> 00:10:26,200 Speaker 5: It wasn't wrong, but. 222 00:10:27,800 --> 00:10:31,400 Speaker 4: So you get My favorite pitch was for Akamai, where 223 00:10:31,480 --> 00:10:34,880 Speaker 4: when analyst said, you know what, the reason why the 224 00:10:34,920 --> 00:10:37,800 Speaker 4: company will do well is the only three people who 225 00:10:37,920 --> 00:10:41,960 Speaker 4: understand the formula. That's that's basically at the base of it, 226 00:10:42,000 --> 00:10:44,719 Speaker 4: and all three works for akama So I don't worry and. 227 00:10:44,720 --> 00:10:46,320 Speaker 3: No worry about it. We knew it. 228 00:10:46,600 --> 00:10:49,960 Speaker 2: It's literally there's just no one who could ever replicate 229 00:10:50,000 --> 00:10:52,600 Speaker 2: this technology because only three people who could build it, 230 00:10:52,600 --> 00:10:54,400 Speaker 2: and they got it right. 231 00:10:54,640 --> 00:10:58,400 Speaker 4: These type of things happened back then, and of course 232 00:10:58,440 --> 00:11:00,599 Speaker 4: not to pick on Akamai, but it know it. It 233 00:11:00,760 --> 00:11:02,600 Speaker 4: went up from I don't know thirty to three hundred 234 00:11:02,679 --> 00:11:04,760 Speaker 4: after the IPO and back to one. 235 00:11:05,080 --> 00:11:07,959 Speaker 5: You know this is yah. Yeah, these type of things happened, which. 236 00:11:07,880 --> 00:11:09,360 Speaker 2: That was one of the more legit companies. 237 00:11:09,440 --> 00:11:10,560 Speaker 5: Yeah you know that exists. 238 00:11:10,880 --> 00:11:13,240 Speaker 4: Yeah I don't Yeah, I'm not covering them or anything, 239 00:11:13,280 --> 00:11:14,400 Speaker 4: so I don't comment. 240 00:11:14,440 --> 00:11:15,560 Speaker 5: But yeah, yeah, yeah. 241 00:11:15,880 --> 00:11:18,240 Speaker 3: This reminds me of what you always say, Joe, things 242 00:11:18,280 --> 00:11:20,360 Speaker 3: can always get crazier, right, Yeah. 243 00:11:20,480 --> 00:11:22,800 Speaker 2: Yeah, it really does feel like you see some event, 244 00:11:23,040 --> 00:11:24,920 Speaker 2: you know, like there was that you know what I 245 00:11:24,920 --> 00:11:27,599 Speaker 2: was thinking about when Jensen wan I think it was 246 00:11:27,600 --> 00:11:30,000 Speaker 2: about a year ago now, maybe nine months ago. Remember 247 00:11:30,080 --> 00:11:33,760 Speaker 2: he signed a woman's brat, right, remember, and everyone's like, oh, 248 00:11:33,800 --> 00:11:36,320 Speaker 2: this has got to be the top, right, because that's 249 00:11:36,320 --> 00:11:40,800 Speaker 2: just one of those things. A semiconductor top signed, that's right. 250 00:11:41,679 --> 00:11:44,760 Speaker 2: You know, it's like why a CEO of semiconductor company 251 00:11:44,800 --> 00:11:47,800 Speaker 2: getting like legit rock star treatment and how much is 252 00:11:47,800 --> 00:11:50,000 Speaker 2: in video up since then? Setting aside some of the 253 00:11:50,040 --> 00:11:53,800 Speaker 2: recent wobbles, there is no point where you can definitively say, oh, 254 00:11:53,880 --> 00:11:57,000 Speaker 2: this is the people, right, There's always it could always 255 00:11:57,000 --> 00:11:57,439 Speaker 2: get weirder. 256 00:11:57,520 --> 00:11:59,840 Speaker 4: Yeah. You know what gives me sleepless nights is actually 257 00:12:00,200 --> 00:12:02,559 Speaker 4: that the two thousand episode is not the right benchmark, right, 258 00:12:02,559 --> 00:12:04,880 Speaker 4: because if you use two thousand, you could say. 259 00:12:04,760 --> 00:12:06,600 Speaker 2: Everything's fine, Yeah, everything fine, very bad. 260 00:12:06,679 --> 00:12:08,439 Speaker 4: But of course not every bubble has to get as 261 00:12:08,480 --> 00:12:10,800 Speaker 4: crazy as the two thousand one, you know. I mean 262 00:12:11,240 --> 00:12:14,080 Speaker 4: it wasn't extreme even by bubble standards, so that is 263 00:12:14,120 --> 00:12:16,440 Speaker 4: a bit of a risk if you focus too much 264 00:12:16,480 --> 00:12:17,000 Speaker 4: on that one. 265 00:12:17,080 --> 00:12:21,040 Speaker 3: Do you have a preferred historical analogy for our current period? 266 00:12:21,440 --> 00:12:23,560 Speaker 4: And I do think two thousand is probably the closest, 267 00:12:23,600 --> 00:12:26,360 Speaker 4: just because it was also very tech heavy and it 268 00:12:26,440 --> 00:12:29,240 Speaker 4: had a big CAPEX built out attached to it, so 269 00:12:29,320 --> 00:12:30,040 Speaker 4: that makes it good. 270 00:12:30,080 --> 00:12:31,559 Speaker 5: I mean, the nineteen twenty nine mines. 271 00:12:31,440 --> 00:12:33,719 Speaker 4: Of All the Mother of All Bubbles, if you like, 272 00:12:34,040 --> 00:12:37,720 Speaker 4: and that was about you know, like cars and electrification 273 00:12:37,960 --> 00:12:43,240 Speaker 4: and consumer gadgets and appliances rather, so you could use that, 274 00:12:43,520 --> 00:12:45,040 Speaker 4: and that is actually the one that people used in 275 00:12:45,040 --> 00:12:47,360 Speaker 4: two thousands. So you always go one bubble back if 276 00:12:47,400 --> 00:12:50,280 Speaker 4: you like to make your case and to argue maybe 277 00:12:50,280 --> 00:12:53,000 Speaker 4: why things can go very crazy. But I think here 278 00:12:53,040 --> 00:12:54,480 Speaker 4: the many things at rhyme. 279 00:13:10,440 --> 00:13:13,240 Speaker 2: So one thing that Tracy brought up in the intro, 280 00:13:13,320 --> 00:13:17,200 Speaker 2: which is very important, is that rates in the recent 281 00:13:17,280 --> 00:13:20,080 Speaker 2: days haven't come down that much. Today they're down a 282 00:13:20,120 --> 00:13:23,760 Speaker 2: little bit, but by and large it's not like treasuries 283 00:13:23,800 --> 00:13:26,600 Speaker 2: have been this great life preserver when the rest of 284 00:13:26,600 --> 00:13:29,439 Speaker 2: your portfolio isn't working. In fact, actually right now and 285 00:13:29,679 --> 00:13:32,319 Speaker 2: doing time stamps again, we're back at four point one one. 286 00:13:32,360 --> 00:13:35,080 Speaker 2: We were down at four point h six earlier round nine. 287 00:13:35,320 --> 00:13:37,760 Speaker 2: So even that once again we don't see this bid 288 00:13:37,840 --> 00:13:40,719 Speaker 2: into treasuries. Rates are sort of down overall for the 289 00:13:40,800 --> 00:13:42,760 Speaker 2: year a little bit, but there's not this desire to 290 00:13:42,760 --> 00:13:44,560 Speaker 2: grab them talk to us about what's going on in 291 00:13:44,559 --> 00:13:44,920 Speaker 2: that space. 292 00:13:45,200 --> 00:13:47,480 Speaker 4: I think the reason is that a lot of the 293 00:13:47,520 --> 00:13:49,760 Speaker 4: bullishness of the last three weeks was based on one 294 00:13:50,280 --> 00:13:53,640 Speaker 4: simple statement is saying, listen, we're building a bubble and 295 00:13:53,679 --> 00:13:57,319 Speaker 4: the FED is cutting into that. That never happened before it, right, 296 00:13:57,440 --> 00:14:00,360 Speaker 4: And obviously in two thousand the hike behind the seventy 297 00:14:00,360 --> 00:14:03,040 Speaker 4: five bass points, they hiked fifty basis points after the 298 00:14:03,080 --> 00:14:04,880 Speaker 4: bubble had already beaked. So I mean, you know, they 299 00:14:05,360 --> 00:14:06,719 Speaker 4: and they had inflation that it was not. 300 00:14:06,720 --> 00:14:07,400 Speaker 5: Without any reason. 301 00:14:07,440 --> 00:14:10,600 Speaker 4: But for sure, it's very unusual for the FED to 302 00:14:10,640 --> 00:14:14,160 Speaker 4: cut into a bubble, and that was a great both thesis. 303 00:14:14,240 --> 00:14:15,800 Speaker 4: And so now we're doubting that a little bit, right, 304 00:14:15,840 --> 00:14:18,200 Speaker 4: I mean, so they are basically having a feed that 305 00:14:18,280 --> 00:14:19,160 Speaker 4: might be more hawkish. 306 00:14:19,200 --> 00:14:22,720 Speaker 5: December went to fifty to fifty essentially, and so if. 307 00:14:22,560 --> 00:14:25,840 Speaker 4: You remove that plank of the argument, value should be 308 00:14:25,840 --> 00:14:28,560 Speaker 4: all in inequity, it has consequences, right, And so we 309 00:14:28,680 --> 00:14:31,000 Speaker 4: warbled a little bit for that reason. But I mean 310 00:14:31,040 --> 00:14:33,480 Speaker 4: I would also remember, I mean, the hiked one hundred 311 00:14:33,520 --> 00:14:35,600 Speaker 4: and seventy five basis points before the bubble peaked in 312 00:14:35,640 --> 00:14:38,240 Speaker 4: two thousand, right, So will it be the end of 313 00:14:38,280 --> 00:14:40,640 Speaker 4: the equitiable market if the FED doesn't go I mean, 314 00:14:40,840 --> 00:14:42,200 Speaker 4: I doubt it. 315 00:14:42,640 --> 00:14:44,640 Speaker 2: Talk to us a little bit about these doubts that 316 00:14:44,680 --> 00:14:47,680 Speaker 2: are creeping in for December. I mean, we're truly in 317 00:14:47,680 --> 00:14:50,240 Speaker 2: a fog for multiple reasons. Because even if we had 318 00:14:50,280 --> 00:14:54,119 Speaker 2: government data. I'm sure the conditions plenty of different crosswinds. 319 00:14:54,160 --> 00:14:56,560 Speaker 2: We don't have the government data, but like one thing 320 00:14:56,600 --> 00:14:58,800 Speaker 2: we do seem to know is that hiring has been 321 00:14:59,200 --> 00:15:01,200 Speaker 2: very weak and so fourth and several of the months 322 00:15:01,240 --> 00:15:03,800 Speaker 2: almost certainly that would be the case for October and 323 00:15:03,840 --> 00:15:06,600 Speaker 2: November if we had clear indications on it. What is 324 00:15:06,720 --> 00:15:09,320 Speaker 2: the reluctance right now? Why is it a coin flip? 325 00:15:09,560 --> 00:15:09,720 Speaker 5: Yeah? 326 00:15:09,760 --> 00:15:12,120 Speaker 4: I mean well, I think the single biggest thing is, 327 00:15:12,160 --> 00:15:13,520 Speaker 4: of course, all the comments were getting out of the 328 00:15:13,560 --> 00:15:16,400 Speaker 4: FED right, and we had you know that, the tweet 329 00:15:17,160 --> 00:15:18,920 Speaker 4: earlier this week, and so in the end, if you 330 00:15:18,960 --> 00:15:21,200 Speaker 4: try to forecast the FAT, you better listen to what 331 00:15:21,240 --> 00:15:21,720 Speaker 4: you're saying. 332 00:15:22,200 --> 00:15:26,240 Speaker 2: They were exactly given the weakness, so that I think 333 00:15:26,360 --> 00:15:28,440 Speaker 2: the question is of course all about the job right. 334 00:15:28,440 --> 00:15:30,240 Speaker 5: The reason is a job market inflation. 335 00:15:30,480 --> 00:15:32,720 Speaker 4: You can argue maybe tele inflation were not tr up 336 00:15:32,760 --> 00:15:35,480 Speaker 4: so far it has been way benign. Some FAT members 337 00:15:35,520 --> 00:15:37,960 Speaker 4: believe it's s throwing up, some others don't. But I 338 00:15:37,960 --> 00:15:40,640 Speaker 4: think the main crux of the question is the job market. 339 00:15:40,640 --> 00:15:41,760 Speaker 5: How week is it now? 340 00:15:41,800 --> 00:15:44,000 Speaker 4: The Dalla's FAT put a paper out arguing that if 341 00:15:44,040 --> 00:15:48,120 Speaker 4: you get slightly negative net migration. The break even NFP 342 00:15:48,480 --> 00:15:51,680 Speaker 4: is thirty k. If you get slightly positive net migration 343 00:15:51,840 --> 00:15:54,920 Speaker 4: sixty k, so that that is somewhere the range where 344 00:15:54,920 --> 00:15:57,560 Speaker 4: these days and FP should come in without there being 345 00:15:57,600 --> 00:15:59,600 Speaker 4: a problem. Right, So if you if, then if p 346 00:15:59,760 --> 00:16:04,960 Speaker 4: press and of course September we know is somewhat artificially strong. October, 347 00:16:05,120 --> 00:16:07,760 Speaker 4: if we get it, would be artificially weak due to 348 00:16:07,880 --> 00:16:12,040 Speaker 4: the government buyouts. November is a really interesting one that 349 00:16:12,120 --> 00:16:14,280 Speaker 4: might have a bit of an impact from the shutdown 350 00:16:14,360 --> 00:16:16,400 Speaker 4: and so forth, so that may really clean one. Maybe 351 00:16:16,400 --> 00:16:17,880 Speaker 4: we have to dad even longer. But let's say we 352 00:16:17,960 --> 00:16:20,720 Speaker 4: take November is as good as it gets for now. 353 00:16:21,080 --> 00:16:24,520 Speaker 4: So if that is below thirty, there'll be a cut, right, 354 00:16:24,560 --> 00:16:27,880 Speaker 4: If it's below sixty, there'll be probably no cut. It's 355 00:16:27,960 --> 00:16:30,960 Speaker 4: somewhere in between. They'll find it out. But without that data, 356 00:16:31,040 --> 00:16:35,080 Speaker 4: it's just hard to you know, reassure the market yes. 357 00:16:34,960 --> 00:16:36,320 Speaker 5: There'll be a cut, or no, there won't be. 358 00:16:36,360 --> 00:16:38,960 Speaker 4: So the job market data will be very, very important. 359 00:16:39,320 --> 00:16:41,840 Speaker 4: We've got a lot of alternative data sources. Of course, 360 00:16:41,880 --> 00:16:44,000 Speaker 4: in the meantime, by be wading, they were a bit 361 00:16:44,040 --> 00:16:46,640 Speaker 4: on the weakish side. So that's why the city call 362 00:16:46,720 --> 00:16:49,920 Speaker 4: is actually for a cut, I mean the noises out 363 00:16:49,920 --> 00:16:52,520 Speaker 4: of there from seever certainly a little bit all over 364 00:16:52,560 --> 00:16:53,880 Speaker 4: the place, so it's not that obvious. 365 00:16:54,160 --> 00:16:56,520 Speaker 3: Yeah, and a lot can still change between now and 366 00:16:56,600 --> 00:16:59,960 Speaker 3: the meeting. Okay, so if everyone I mean I realized, 367 00:17:00,120 --> 00:17:02,280 Speaker 3: not everyone agrees it's a bubble. But for the sake 368 00:17:02,320 --> 00:17:04,840 Speaker 3: of this argument, let's say we all know it's a bubble. 369 00:17:06,280 --> 00:17:09,200 Speaker 3: It seems like one of the things that happened, especially 370 00:17:09,200 --> 00:17:12,480 Speaker 3: since the financial crisis, is people stopped running away from 371 00:17:12,520 --> 00:17:15,919 Speaker 3: bubbles and started running into them, right, and so everyone 372 00:17:15,960 --> 00:17:18,080 Speaker 3: wants to make money very very quickly. So if you 373 00:17:18,119 --> 00:17:21,879 Speaker 3: see the line continuously going up, you just join the party, 374 00:17:22,720 --> 00:17:25,400 Speaker 3: and everyone assumes that they are smart enough to time 375 00:17:25,480 --> 00:17:27,760 Speaker 3: the top of the bubble and get out at the 376 00:17:27,840 --> 00:17:31,119 Speaker 3: right point. What's your take on how long this is 377 00:17:31,160 --> 00:17:33,800 Speaker 3: actually going to go on for and what are you 378 00:17:33,880 --> 00:17:36,920 Speaker 3: looking at in terms of actually spotting that top other 379 00:17:36,960 --> 00:17:38,720 Speaker 3: than sentiment, which we spoke a bit about. 380 00:17:38,840 --> 00:17:43,399 Speaker 4: Yeah, it's a big question actually even inside city USC strategists. 381 00:17:42,840 --> 00:17:45,320 Speaker 5: It's the cost believe me that it's a bubble. 382 00:17:45,359 --> 00:17:48,919 Speaker 4: But we have a definition, so'll you know, we cannet 383 00:17:49,080 --> 00:17:51,600 Speaker 4: do something. So the definition for us is it's a 384 00:17:51,640 --> 00:17:54,040 Speaker 4: little bit like the GMO one, which is essentially saying 385 00:17:54,160 --> 00:17:57,040 Speaker 4: something goes up more than two standard deviations against the 386 00:17:57,080 --> 00:17:59,480 Speaker 4: long term trend. In real terms, we call it a bubble, right, 387 00:18:00,040 --> 00:18:01,560 Speaker 4: and then whenever you have a big sell off, you 388 00:18:01,560 --> 00:18:03,480 Speaker 4: restart the clock, because when you have a big sell of, 389 00:18:03,600 --> 00:18:06,639 Speaker 4: you essentially the sentiment goes to zero, and so you 390 00:18:06,680 --> 00:18:07,399 Speaker 4: have to rebuild it. 391 00:18:07,760 --> 00:18:08,520 Speaker 5: And on that. 392 00:18:08,359 --> 00:18:11,840 Speaker 4: Framework we end up bubble territory sort of, I guess 393 00:18:11,920 --> 00:18:14,800 Speaker 4: in May June of this year. And when you do that, 394 00:18:15,160 --> 00:18:17,400 Speaker 4: the interesting thing about it is, as you point out, 395 00:18:17,440 --> 00:18:19,440 Speaker 4: it goes up. So once you end up oup the territory, 396 00:18:19,480 --> 00:18:20,360 Speaker 4: you're supposed. 397 00:18:20,000 --> 00:18:20,439 Speaker 5: To buy it. 398 00:18:21,440 --> 00:18:24,200 Speaker 4: And the only time and that didn't happen was nineteen 399 00:18:24,280 --> 00:18:24,800 Speaker 4: twenty nine. 400 00:18:24,840 --> 00:18:25,840 Speaker 5: It went straight down. 401 00:18:26,080 --> 00:18:27,920 Speaker 4: And I think the reason for that is a little 402 00:18:27,920 --> 00:18:30,840 Speaker 4: bit that the way people define water bubble is the 403 00:18:30,960 --> 00:18:33,480 Speaker 4: use nine is twenty nine, right, and so and we 404 00:18:33,520 --> 00:18:35,800 Speaker 4: did that too, and so therefore that's the only on 405 00:18:36,080 --> 00:18:37,400 Speaker 4: all the other episodes, you. 406 00:18:37,359 --> 00:18:39,080 Speaker 5: Go straight up, so you buy it when you enter. 407 00:18:39,240 --> 00:18:41,600 Speaker 4: But the interesting thing is, and clients ask me, well, 408 00:18:41,640 --> 00:18:43,360 Speaker 4: if that is true, what's the difference beween the bullmark 409 00:18:43,359 --> 00:18:45,520 Speaker 4: and the bubble you tell me it's going up. And 410 00:18:45,800 --> 00:18:48,320 Speaker 4: the difference is that if you buy it when it 411 00:18:48,400 --> 00:18:51,200 Speaker 4: enders a bubble, you will give it back eventually most 412 00:18:51,240 --> 00:18:53,480 Speaker 4: of it. Most of the in bubble gains will be 413 00:18:53,520 --> 00:18:55,800 Speaker 4: given back, so it will lar badly, right, And so 414 00:18:55,840 --> 00:18:57,760 Speaker 4: that I mean, you don't necessarily give back everything all 415 00:18:57,800 --> 00:19:00,920 Speaker 4: the time, but in most episodes give back most of it, 416 00:19:01,520 --> 00:19:05,360 Speaker 4: And so that makes it an important definition. Now, Unfortunately, 417 00:19:06,160 --> 00:19:08,199 Speaker 4: when you study that, it's not like clear how long 418 00:19:08,240 --> 00:19:10,760 Speaker 4: they last. I mean, the on average, I can tell 419 00:19:10,800 --> 00:19:15,640 Speaker 4: you the two years of above average returns followed by 420 00:19:15,760 --> 00:19:18,280 Speaker 4: below average returns, and on a ten year time horizon 421 00:19:18,280 --> 00:19:22,600 Speaker 4: your below average return. But it can vary a fair amount, 422 00:19:22,760 --> 00:19:26,800 Speaker 4: and so that makes it hard. I would say, if 423 00:19:26,800 --> 00:19:29,840 Speaker 4: you look at two thousand again as a template, if 424 00:19:29,880 --> 00:19:32,000 Speaker 4: it'll certainly not help you to look at fundamentals, right, 425 00:19:32,040 --> 00:19:34,879 Speaker 4: I mean, so what happened was Nastik broke in March 426 00:19:35,560 --> 00:19:40,600 Speaker 4: and everything still figher two thousands, okay, So and when 427 00:19:40,640 --> 00:19:44,000 Speaker 4: that happened, fundamentals road over in September, so that there 428 00:19:44,040 --> 00:19:47,720 Speaker 4: was a six to seven month period where fundamentals still 429 00:19:47,720 --> 00:19:49,600 Speaker 4: look just the way that you had looked before. 430 00:19:49,840 --> 00:19:52,440 Speaker 3: I guess because everyone was spending so much money on capex, 431 00:19:52,480 --> 00:19:54,240 Speaker 3: and like takes a while for that to roll on. 432 00:19:54,400 --> 00:19:56,600 Speaker 5: Yes, exactly, And of course it's highly circular. 433 00:19:56,880 --> 00:20:00,400 Speaker 4: But people spend on capex while the equity is going up, 434 00:20:00,560 --> 00:20:03,439 Speaker 4: so actually stops going up. They start to reconsider what 435 00:20:03,480 --> 00:20:06,560 Speaker 4: do we do next, So then everything wills over exactly. 436 00:20:06,960 --> 00:20:09,080 Speaker 4: So so if you look at an immensive, probably not 437 00:20:09,359 --> 00:20:12,080 Speaker 4: capture it, which means it will be a highly technical 438 00:20:12,480 --> 00:20:14,720 Speaker 4: thing if you want to call the top. 439 00:20:15,280 --> 00:20:17,880 Speaker 5: And it would be helpful if you get a blow 440 00:20:17,920 --> 00:20:18,320 Speaker 5: off top. 441 00:20:18,400 --> 00:20:20,560 Speaker 4: Like you know, if you get to the fifty percent 442 00:20:20,600 --> 00:20:24,040 Speaker 4: in one quarter, you know you probably have a bigger 443 00:20:24,119 --> 00:20:26,560 Speaker 4: chance to get it right. But I think it's really 444 00:20:26,640 --> 00:20:30,040 Speaker 4: quite dangerous to be early in this thing because well 445 00:20:30,080 --> 00:20:32,159 Speaker 4: you will not hit it precisely on the day your 446 00:20:32,160 --> 00:20:34,960 Speaker 4: eyes earlier either or you're late, right, And I think 447 00:20:35,200 --> 00:20:37,400 Speaker 4: if you're late, you can control a little bit more 448 00:20:37,720 --> 00:20:39,800 Speaker 4: how much money you don't make in a sense. 449 00:20:39,880 --> 00:20:40,400 Speaker 5: Right. 450 00:20:40,520 --> 00:20:42,480 Speaker 4: And so one framework that we have we call it 451 00:20:42,480 --> 00:20:45,920 Speaker 4: the general's framework, because what happens in this bubble generals 452 00:20:46,000 --> 00:20:48,760 Speaker 4: the general because it becomes very narrow, and that's a 453 00:20:48,960 --> 00:20:51,480 Speaker 4: feature of the bubble, it's not an exception, right, And 454 00:20:51,840 --> 00:20:54,960 Speaker 4: so this, this narrowness means that if the leaders start 455 00:20:54,960 --> 00:20:57,959 Speaker 4: to break down, it's a real warning sign. And so 456 00:20:58,040 --> 00:21:00,600 Speaker 4: what we look at and we just at the top 457 00:21:00,640 --> 00:21:03,040 Speaker 4: seven leaders because people are excited about max seven, but 458 00:21:03,480 --> 00:21:07,680 Speaker 4: it could be ten or basically on our numbers, if 459 00:21:07,720 --> 00:21:11,000 Speaker 4: three of the top seven breakdown, meaning they fall below 460 00:21:11,000 --> 00:21:13,600 Speaker 4: the twenty moving average, that's a really dangerous sign. 461 00:21:13,720 --> 00:21:15,639 Speaker 2: Twenty day moving day. 462 00:21:15,640 --> 00:21:18,119 Speaker 4: Okay, it will not be early, right because by the 463 00:21:18,160 --> 00:21:20,520 Speaker 4: time it triggers, the market is obviously down from the peak. 464 00:21:20,800 --> 00:21:23,560 Speaker 4: But I think following that has saved us a lot 465 00:21:23,560 --> 00:21:25,600 Speaker 4: of money on the downside when these things happen. So 466 00:21:25,640 --> 00:21:27,639 Speaker 4: that is something you can use because it will be technical, 467 00:21:27,720 --> 00:21:30,480 Speaker 4: it will not be fundamentally this happened and get. 468 00:21:30,359 --> 00:21:32,919 Speaker 2: Out this is fantastic. So let's just sort of like 469 00:21:33,520 --> 00:21:35,879 Speaker 2: just to sort of summarize this because that was actullent. 470 00:21:35,960 --> 00:21:40,000 Speaker 2: So the bubble condition has emerged when the games are 471 00:21:40,480 --> 00:21:42,320 Speaker 2: what is the timeframe we're talking about, So you say 472 00:21:42,320 --> 00:21:44,719 Speaker 2: two standard deviations above the real long term? 473 00:21:44,880 --> 00:21:45,439 Speaker 5: Yeah, exactly. 474 00:21:45,440 --> 00:21:47,680 Speaker 4: So I mean they measure the long and performance. It's 475 00:21:47,680 --> 00:21:51,359 Speaker 4: actually rolling windows. It shows every year and it's just 476 00:21:51,480 --> 00:21:54,520 Speaker 4: the linear trend that you that you put through it, 477 00:21:54,920 --> 00:21:57,080 Speaker 4: and then you can see how. 478 00:21:56,760 --> 00:22:00,720 Speaker 2: How much you go to standard deviations and trend in 479 00:22:00,760 --> 00:22:01,320 Speaker 2: real terms. 480 00:22:01,320 --> 00:22:03,960 Speaker 4: So we deflate it because in the seventies a lot happened, right, 481 00:22:04,040 --> 00:22:04,880 Speaker 4: you're in a bear market. 482 00:22:04,920 --> 00:22:08,399 Speaker 2: But the two standard deviations in like a certain period 483 00:22:08,400 --> 00:22:10,000 Speaker 2: of time or like. 484 00:22:09,960 --> 00:22:12,160 Speaker 5: How do yeah, yes, it's the yearly returns. 485 00:22:11,880 --> 00:22:16,680 Speaker 2: It, okay, and then the warning sign So in your view, 486 00:22:16,960 --> 00:22:19,200 Speaker 2: you know, if you think about sort of profit maximization 487 00:22:19,440 --> 00:22:23,040 Speaker 2: or risk minimization or whatever, the thing to look for 488 00:22:23,240 --> 00:22:26,680 Speaker 2: is when three of the seven leaders break down or 489 00:22:27,119 --> 00:22:27,880 Speaker 2: why is that? 490 00:22:27,960 --> 00:22:30,840 Speaker 4: Like yeah, yeah, I mean just in a sense, we 491 00:22:30,960 --> 00:22:34,320 Speaker 4: just back testa right, we just we realized, Okay, there's 492 00:22:34,320 --> 00:22:37,320 Speaker 4: something special about these bubbles where the leaders carry the 493 00:22:37,400 --> 00:22:40,360 Speaker 4: weight for a long time, right, And so you have 494 00:22:40,440 --> 00:22:43,720 Speaker 4: to find out, well, when the leaders break, what is. 495 00:22:43,680 --> 00:22:45,280 Speaker 5: A danger signal that actually works? 496 00:22:45,520 --> 00:22:47,639 Speaker 4: And it's always a trade off between giving you too 497 00:22:47,680 --> 00:22:50,639 Speaker 4: many signals you leave money on the table, and to 498 00:22:50,640 --> 00:22:53,240 Speaker 4: a few signals where you you take part in the 499 00:22:53,280 --> 00:22:55,919 Speaker 4: downside that you want to avoid. And so what we 500 00:22:56,040 --> 00:22:58,880 Speaker 4: found is if you use that rule for two thousands 501 00:22:59,040 --> 00:23:01,919 Speaker 4: or for others that we have in the sample, you know, 502 00:23:02,000 --> 00:23:05,240 Speaker 4: once three of them break it's becoming the odds are 503 00:23:05,320 --> 00:23:06,400 Speaker 4: not in your favor anymore. 504 00:23:06,680 --> 00:23:09,879 Speaker 2: Can you apply this framework to gold? So this is 505 00:23:09,920 --> 00:23:13,040 Speaker 2: the interesting thing, which is that we don't typically associate 506 00:23:13,320 --> 00:23:16,760 Speaker 2: booming stock markets with booming gold, especially because gold is 507 00:23:16,760 --> 00:23:19,600 Speaker 2: associated with fear and pessimism, et cetera. Talk a little 508 00:23:19,600 --> 00:23:21,760 Speaker 2: bit about what's going on. 509 00:23:21,640 --> 00:23:24,000 Speaker 4: Gold is just very very interesting. I mean, the first 510 00:23:24,080 --> 00:23:27,040 Speaker 4: leg up was essentially this whole central bank story, right 511 00:23:27,040 --> 00:23:29,199 Speaker 4: if if you think about it, all started really with 512 00:23:29,280 --> 00:23:35,040 Speaker 4: the crimea issue and put in making innocent three bets. 513 00:23:35,040 --> 00:23:37,720 Speaker 4: When he diversified away from the dollar, right, he bought 514 00:23:37,800 --> 00:23:42,040 Speaker 4: euro he bought CNY, and he bought gold, and Europe 515 00:23:42,119 --> 00:23:45,760 Speaker 4: was not a particular promising bed. In the end, CNY 516 00:23:46,119 --> 00:23:48,959 Speaker 4: was a good bed for him. But obviously China cannot 517 00:23:49,320 --> 00:23:51,920 Speaker 4: bet on the CNHY and that is gold for China. 518 00:23:52,119 --> 00:23:54,280 Speaker 4: And so the I think in the very very big 519 00:23:54,320 --> 00:23:57,639 Speaker 4: picture central banks that are very important for the gold market. 520 00:23:57,640 --> 00:23:59,240 Speaker 5: That gold market boughtoned. 521 00:23:58,880 --> 00:24:01,160 Speaker 4: In the nineties seven the Bank of England was done 522 00:24:01,240 --> 00:24:04,240 Speaker 4: selling gold, and it will probably peak when the PBOC 523 00:24:04,440 --> 00:24:07,760 Speaker 4: is done buying gold, and they still could buy a lot. 524 00:24:08,080 --> 00:24:11,159 Speaker 4: So that I have no issue with as a structural story, 525 00:24:11,160 --> 00:24:14,280 Speaker 4: long term story. What happened this year was not the 526 00:24:14,280 --> 00:24:16,280 Speaker 4: central bank buying, at least not as far as we 527 00:24:16,320 --> 00:24:18,760 Speaker 4: can help from the official data. It was much more 528 00:24:19,040 --> 00:24:22,240 Speaker 4: this whole debasement fears that trapped into gold. And the 529 00:24:22,280 --> 00:24:26,520 Speaker 4: first leg was very easy for micro guys to understand 530 00:24:26,600 --> 00:24:28,800 Speaker 4: and participate in. That was just you know, the Fed 531 00:24:28,880 --> 00:24:31,399 Speaker 4: is going to cut, and whenever the Fed cuts, you know, 532 00:24:31,440 --> 00:24:33,840 Speaker 4: the dollars sold off into the first cut, rates fell 533 00:24:33,880 --> 00:24:35,400 Speaker 4: into the first cut, and gold went up. 534 00:24:35,440 --> 00:24:37,239 Speaker 5: So that is as it should be. 535 00:24:37,640 --> 00:24:40,240 Speaker 4: Now, then what happened if you remember after the first cut, 536 00:24:40,359 --> 00:24:43,120 Speaker 4: rates went up, the dollar went up and gold cut 537 00:24:43,160 --> 00:24:46,440 Speaker 4: going up, right, And that was roughly the time and 538 00:24:46,560 --> 00:24:49,920 Speaker 4: Stephen Marin talked about the third mandate for the Fed 539 00:24:50,000 --> 00:24:52,320 Speaker 4: and things like that, and so the debasement fears became 540 00:24:52,320 --> 00:24:55,919 Speaker 4: more acute and that propelled go higher. Now, the interesting 541 00:24:56,000 --> 00:24:59,360 Speaker 4: issue is that it was really not that much the 542 00:24:59,400 --> 00:25:02,840 Speaker 4: institution investors right, because all the other debasement trades didn't work. 543 00:25:03,000 --> 00:25:05,680 Speaker 4: I mean, the curve did not steepen, break evens did 544 00:25:05,720 --> 00:25:08,359 Speaker 4: not rise, the dollar did not fall. So it was 545 00:25:08,400 --> 00:25:13,720 Speaker 4: a retail driven debasement fear, and you saw people lining 546 00:25:13,760 --> 00:25:16,480 Speaker 4: around the RBA in Australia trying to get physically gold 547 00:25:16,520 --> 00:25:19,440 Speaker 4: out of the vault. Right, so it was it became 548 00:25:19,480 --> 00:25:23,119 Speaker 4: a memestog almost for a while. And so while it 549 00:25:23,400 --> 00:25:28,080 Speaker 4: hasn't actually triggered our bubble levels, if we apply the 550 00:25:28,119 --> 00:25:32,080 Speaker 4: same methodology, it certainly I think became too dangerous. And 551 00:25:32,119 --> 00:25:35,080 Speaker 4: so we actually got out of gold a little while ago. Now, 552 00:25:35,920 --> 00:25:40,240 Speaker 4: the debasement story is an interesting story. It could come back, right. 553 00:25:40,280 --> 00:25:43,400 Speaker 4: You saw gold consolidated for a while and then when 554 00:25:43,440 --> 00:25:47,440 Speaker 4: Trump discussed two thousand dollars for everyone, then gold started 555 00:25:47,440 --> 00:25:49,560 Speaker 4: to take off again because people start to think, well, 556 00:25:49,560 --> 00:25:51,240 Speaker 4: maybe that we have to trade the basement again. 557 00:25:51,800 --> 00:25:53,520 Speaker 5: And that's a very big call. 558 00:25:53,600 --> 00:25:57,560 Speaker 4: And personally I think the new AFMC will be more 559 00:25:57,600 --> 00:26:00,720 Speaker 4: domash than the old one, right, I mean, we don't. 560 00:26:00,480 --> 00:26:04,320 Speaker 5: Know quite yet who will be the head of the FMC. 561 00:26:04,760 --> 00:26:07,160 Speaker 4: It's likely to happen, and so the debasement story could 562 00:26:07,160 --> 00:26:09,520 Speaker 4: come back, but you have to time it fairly well 563 00:26:09,560 --> 00:26:12,479 Speaker 4: because you have a lot of retail in it and 564 00:26:12,560 --> 00:26:15,119 Speaker 4: it already moved a lot. Right, So in the debasement feres, 565 00:26:16,000 --> 00:26:17,919 Speaker 4: I think it might be next year's story run this 566 00:26:18,040 --> 00:26:21,639 Speaker 4: year's story. The central bank story will come back eventually, 567 00:26:22,119 --> 00:26:26,960 Speaker 4: but it's I mean, China loves to buy pullbacks rather 568 00:26:27,000 --> 00:26:30,119 Speaker 4: than the high, so I'm not quite sure how that 569 00:26:30,240 --> 00:26:33,280 Speaker 4: then they will come back. But structure, I think gold 570 00:26:33,400 --> 00:26:36,480 Speaker 4: is likely still okay. In the short term, we're a 571 00:26:36,520 --> 00:26:37,159 Speaker 4: bit more cautious. 572 00:26:37,480 --> 00:26:40,920 Speaker 3: Well, if gold is off the table for now, and bonds, 573 00:26:40,960 --> 00:26:43,119 Speaker 3: no one really knows what they're going to do. How 574 00:26:43,160 --> 00:26:45,800 Speaker 3: are people actually hedging and what are you recommending? 575 00:26:46,040 --> 00:26:47,639 Speaker 5: Yeah, very good question. 576 00:26:48,080 --> 00:26:50,719 Speaker 4: What people typically do, which is actually dangerous in a bubble, 577 00:26:50,840 --> 00:26:53,840 Speaker 4: is that just buy some put spread in the SMP. Now, 578 00:26:54,720 --> 00:26:57,760 Speaker 4: the issue is in a bubble, if you first go 579 00:26:57,880 --> 00:27:00,760 Speaker 4: up another thirty percent, the strikes so far out of 580 00:27:00,800 --> 00:27:02,199 Speaker 4: the money that it will just not help you. 581 00:27:02,359 --> 00:27:04,800 Speaker 3: And we saw Michael Burry who was like the poster 582 00:27:04,920 --> 00:27:08,320 Speaker 3: boy for calling the AI bubble closes fun this week. 583 00:27:08,359 --> 00:27:11,720 Speaker 4: So yeah, so I think so the obvious thing actually 584 00:27:11,800 --> 00:27:14,800 Speaker 4: became harder to do in a bubble. The other issue 585 00:27:14,880 --> 00:27:18,560 Speaker 4: is can you use currencies? And that is also very interesting, 586 00:27:18,640 --> 00:27:20,720 Speaker 4: right because the correlation between the dollar and there s 587 00:27:20,800 --> 00:27:23,960 Speaker 4: MP changed somewhat, and it changed in April. It used 588 00:27:23,960 --> 00:27:25,720 Speaker 4: to be the case when there's some pieces off, the 589 00:27:25,720 --> 00:27:29,960 Speaker 4: dollar goes up that correlation flipped on us in April, 590 00:27:30,920 --> 00:27:34,400 Speaker 4: and while there's a lot of debate whether the correlation 591 00:27:34,520 --> 00:27:38,119 Speaker 4: will move back to positive or stay negative, I think 592 00:27:38,280 --> 00:27:41,560 Speaker 4: if we are talking about a bursting bubble, that would 593 00:27:41,560 --> 00:27:42,680 Speaker 4: be done a negative, right. 594 00:27:42,720 --> 00:27:45,560 Speaker 5: So there are structures that allow you. 595 00:27:45,680 --> 00:27:49,240 Speaker 4: Cheap adges if you're fitting to bed on SMP lower 596 00:27:49,800 --> 00:27:52,320 Speaker 4: and at the same time dollar weeker, right, so that 597 00:27:52,560 --> 00:27:55,040 Speaker 4: might work. What we have actually recommended is to do 598 00:27:55,080 --> 00:27:58,760 Speaker 4: something in credit because the way I see it, I mean, either, 599 00:27:59,560 --> 00:28:02,480 Speaker 4: you know, the AI bubble continues to move higher and 600 00:28:02,520 --> 00:28:04,480 Speaker 4: then credit will not benefit very much from it, and 601 00:28:04,880 --> 00:28:06,760 Speaker 4: there's no you know, there's not that much a I 602 00:28:06,880 --> 00:28:10,160 Speaker 4: related credit in the indsease, and in any case, people 603 00:28:10,200 --> 00:28:13,320 Speaker 4: start to worry about credit on the I front and 604 00:28:13,480 --> 00:28:16,160 Speaker 4: spreads e extreme tight. Of course, on the other hand, 605 00:28:16,480 --> 00:28:18,880 Speaker 4: if the US has a bigger problem than we're thinking 606 00:28:19,000 --> 00:28:22,960 Speaker 4: and the labor market falls through trapdoor, and then you know, 607 00:28:23,000 --> 00:28:26,240 Speaker 4: to credible to protect you really well, So so credit 608 00:28:26,320 --> 00:28:27,160 Speaker 4: is something to look at. 609 00:28:43,200 --> 00:28:45,840 Speaker 2: Let's talk about your em background. This is one of 610 00:28:45,840 --> 00:28:48,040 Speaker 2: those things that I think, I don't know, maybe it 611 00:28:48,120 --> 00:28:50,200 Speaker 2: started as a joke. It's like, you know, people are 612 00:28:50,240 --> 00:28:52,600 Speaker 2: joking the US is becoming an em and then it 613 00:28:52,760 --> 00:28:56,320 Speaker 2: sort of gets a little more oh haha, oh oh, 614 00:28:56,680 --> 00:28:59,960 Speaker 2: and then suddenly it feels less and less not funny. Yeah, 615 00:29:00,040 --> 00:29:03,400 Speaker 2: it's not really funny anymore. A do you like buy 616 00:29:03,480 --> 00:29:07,320 Speaker 2: this premise that you know there is something about em governance, 617 00:29:07,520 --> 00:29:10,920 Speaker 2: et cetera that is applicable to thinking about the US 618 00:29:11,000 --> 00:29:11,840 Speaker 2: right now, I. 619 00:29:11,760 --> 00:29:14,640 Speaker 4: Think people made the case in its first of all 620 00:29:14,680 --> 00:29:16,440 Speaker 4: the questions, how you defined in them is actually a 621 00:29:16,480 --> 00:29:19,520 Speaker 4: harder question, you think, because traditionally people do it just 622 00:29:19,560 --> 00:29:22,160 Speaker 4: looking at GDP per ahead and then obviously right, it's. 623 00:29:22,000 --> 00:29:24,600 Speaker 3: A MSCI gets paid a lot of money to do this, 624 00:29:25,240 --> 00:29:25,720 Speaker 3: that's right. 625 00:29:26,200 --> 00:29:28,520 Speaker 4: And so by putting that aside, I mean I think 626 00:29:28,520 --> 00:29:33,360 Speaker 4: for trading the right definition is a little bit whether 627 00:29:34,200 --> 00:29:37,720 Speaker 4: your bonds rally that's when the VICS goes up or 628 00:29:37,760 --> 00:29:40,960 Speaker 4: they don't. Right, And on that definition, which is the 629 00:29:41,000 --> 00:29:45,040 Speaker 4: trading centric definition of emergent markets, you actually find China 630 00:29:45,120 --> 00:29:48,200 Speaker 4: is not emergent market because CGB is rally when there 631 00:29:48,400 --> 00:29:50,840 Speaker 4: is a risk off, and and Korea is an emergent market. 632 00:29:50,840 --> 00:29:53,760 Speaker 4: So it's a much more sensible definition for traders than 633 00:29:53,920 --> 00:29:55,840 Speaker 4: the definition right. 634 00:29:56,240 --> 00:29:57,720 Speaker 5: And so in the this. 635 00:29:57,840 --> 00:29:59,600 Speaker 2: Is uncomfortable because we're about to get to what the 636 00:29:59,680 --> 00:30:04,000 Speaker 2: US A bond have been doing during this volatility exactly so. 637 00:30:04,280 --> 00:30:07,760 Speaker 4: And of course the initial headline was for the UK 638 00:30:08,160 --> 00:30:11,840 Speaker 4: right when the list trust issue happened and the pound 639 00:30:12,040 --> 00:30:15,320 Speaker 4: sort of and then Gill sold off, and so people said, oh, yeah, 640 00:30:15,360 --> 00:30:18,080 Speaker 4: the UK is moving in that direction. 641 00:30:18,600 --> 00:30:21,360 Speaker 5: And for the US again you can argue a little bit. 642 00:30:22,000 --> 00:30:26,040 Speaker 4: I would say though, that what will likely happen is 643 00:30:26,200 --> 00:30:29,800 Speaker 4: that if that should become a problem. So if you 644 00:30:29,880 --> 00:30:33,800 Speaker 4: see US rates selling off during risk a version, maybe 645 00:30:33,840 --> 00:30:36,800 Speaker 4: because of fiscal voice or something like that, I do 646 00:30:36,840 --> 00:30:40,680 Speaker 4: think the FED will come in and hammer rates back down. 647 00:30:41,080 --> 00:30:43,880 Speaker 4: And I think they can do that as instance, they're 648 00:30:43,880 --> 00:30:44,760 Speaker 4: physically able to do it. 649 00:30:44,800 --> 00:30:47,320 Speaker 5: I bet they could. The Treasure could phase out the 650 00:30:47,320 --> 00:30:47,960 Speaker 5: twenty year. 651 00:30:47,800 --> 00:30:49,920 Speaker 4: Bond if they wanted to, They could do more buybacks, 652 00:30:49,960 --> 00:30:52,200 Speaker 4: and yes, it will beaken the dollar for you, But 653 00:30:52,280 --> 00:30:54,960 Speaker 4: it's not that they run out of rope in the 654 00:30:55,000 --> 00:30:58,640 Speaker 4: way merger market would when these things happen, right, because 655 00:30:58,680 --> 00:31:02,080 Speaker 4: in the sense of it happens in Brazil, it's not 656 00:31:02,240 --> 00:31:05,160 Speaker 4: that the government can control or that the Center Bank 657 00:31:05,240 --> 00:31:07,920 Speaker 4: is able to keep the bond yield at a certain level. 658 00:31:07,920 --> 00:31:11,000 Speaker 4: The US has many tools that they have at these 659 00:31:11,080 --> 00:31:11,920 Speaker 4: post that they could use. 660 00:31:11,960 --> 00:31:15,200 Speaker 3: I think, since you're in the trading space, or you 661 00:31:15,280 --> 00:31:18,360 Speaker 3: pay very close attention to it, are you seeing anything 662 00:31:18,440 --> 00:31:21,440 Speaker 3: in terms of positioning that could make a sell off 663 00:31:21,560 --> 00:31:25,720 Speaker 3: either more extreme or unexpected or volatile in the current setting. 664 00:31:25,720 --> 00:31:27,920 Speaker 3: And the reason I ask is, you know, we had 665 00:31:27,920 --> 00:31:32,200 Speaker 3: a few episodes about the dispersion trade and people selling volatility, 666 00:31:32,760 --> 00:31:35,280 Speaker 3: and I was having lunch with someone in the market 667 00:31:35,360 --> 00:31:38,720 Speaker 3: yesterday and they were very clear that a lot of 668 00:31:38,720 --> 00:31:41,600 Speaker 3: people are still doing the dispersion trade, which kind of 669 00:31:41,600 --> 00:31:42,160 Speaker 3: surprised me. 670 00:31:42,400 --> 00:31:43,000 Speaker 5: Yeah, no, it's true. 671 00:31:42,960 --> 00:31:46,160 Speaker 4: I mean that many crowded trades. I would say again, 672 00:31:46,840 --> 00:31:51,000 Speaker 4: broadly speaking, we never found us acquity position all that heavy, 673 00:31:51,080 --> 00:31:53,280 Speaker 4: but it certainly and people own it. 674 00:31:53,360 --> 00:31:53,560 Speaker 5: Right. 675 00:31:53,960 --> 00:31:57,320 Speaker 4: Gold was on our survey of these as that okay, 676 00:31:57,320 --> 00:31:59,520 Speaker 4: this gold was for a long time to stand out. 677 00:32:00,080 --> 00:32:01,200 Speaker 5: It came back a little bit. 678 00:32:02,000 --> 00:32:05,120 Speaker 4: One other trade that people really quite like is the 679 00:32:05,160 --> 00:32:08,400 Speaker 4: emcry trade, and that is a bit link to the 680 00:32:08,480 --> 00:32:12,000 Speaker 4: volatility trade because it works levant volatility is low, right, 681 00:32:12,080 --> 00:32:16,000 Speaker 4: and so that is a very heavily owned trade. It's 682 00:32:16,080 --> 00:32:19,240 Speaker 4: very hard to forecast volatility spikes. I told you I'd 683 00:32:19,240 --> 00:32:21,840 Speaker 4: have a quantitum, and we back test a lot of 684 00:32:22,240 --> 00:32:25,720 Speaker 4: potential strategies that we think are credible, and we did 685 00:32:25,760 --> 00:32:29,600 Speaker 4: not find a good rule to say volatility is low 686 00:32:29,720 --> 00:32:33,440 Speaker 4: enough by volatility or volatility has been low enough for 687 00:32:33,520 --> 00:32:36,800 Speaker 4: extremely long time by volatility. On average, you're obviously meant 688 00:32:36,840 --> 00:32:40,480 Speaker 4: to sell volatility because implies are higher than realized and yes, 689 00:32:40,600 --> 00:32:43,800 Speaker 4: they're unpleasantly low right now, I would say, but on average, 690 00:32:43,800 --> 00:32:44,520 Speaker 4: it's just not right to. 691 00:32:44,480 --> 00:32:47,320 Speaker 5: Buy volatility in these circumstances. So what do you do 692 00:32:47,360 --> 00:32:47,800 Speaker 5: about it? 693 00:32:48,120 --> 00:32:50,680 Speaker 4: I think what you can do is you can find 694 00:32:50,800 --> 00:32:54,360 Speaker 4: rules that essentially tell you, well, volatility has started to 695 00:32:54,400 --> 00:32:58,240 Speaker 4: move up by x, and it's probably a good idea 696 00:32:58,240 --> 00:33:01,520 Speaker 4: to get out because when it's it's positive recoridated, right, 697 00:33:01,560 --> 00:33:03,560 Speaker 4: So if it starts to move, it can move a lot. 698 00:33:04,080 --> 00:33:06,960 Speaker 4: So we have one particular volatility index that is actually 699 00:33:07,400 --> 00:33:09,800 Speaker 4: the sort of maximum Z score, if you like, of 700 00:33:10,280 --> 00:33:13,920 Speaker 4: all the various different volatilities publicare about the move index, 701 00:33:14,040 --> 00:33:18,280 Speaker 4: VIX index, two, ten, implied wall INDEXAM implied wall index, 702 00:33:18,320 --> 00:33:19,280 Speaker 4: and high it spreads. 703 00:33:19,320 --> 00:33:21,880 Speaker 5: And but we take the maximum. 704 00:33:21,320 --> 00:33:24,240 Speaker 4: Of that, not the average, which is a bit different 705 00:33:24,280 --> 00:33:26,000 Speaker 4: than than other people do. And the reason is that 706 00:33:26,280 --> 00:33:30,720 Speaker 4: no matter what goes wrong, EMFX will not like it. Right, 707 00:33:30,800 --> 00:33:33,080 Speaker 4: So if the stress comes from US rates and the 708 00:33:33,120 --> 00:33:34,920 Speaker 4: move index, it will not like it. If it comes 709 00:33:34,960 --> 00:33:36,640 Speaker 4: from VIX, and there's some people also not like it. 710 00:33:36,720 --> 00:33:40,320 Speaker 4: So and and that volatility indicator so far is still 711 00:33:40,480 --> 00:33:43,360 Speaker 4: relatively well behaved. And again I'm glad you you keep 712 00:33:43,400 --> 00:33:47,240 Speaker 4: mentioning when exactly recording this, because it could could. 713 00:33:48,760 --> 00:33:50,520 Speaker 5: And if we have constructed I mean. 714 00:33:52,200 --> 00:33:54,960 Speaker 2: We'll look for it in your in your report. All right. 715 00:33:55,000 --> 00:33:57,480 Speaker 2: I just have one last question, So I actually I 716 00:33:57,800 --> 00:34:01,320 Speaker 2: really like this definite This is very useful mission of EM. 717 00:34:01,400 --> 00:34:05,080 Speaker 2: Do your government bonds rally and a volatility spike? I 718 00:34:05,080 --> 00:34:07,720 Speaker 2: guess what that implies is are your bonds safe havens 719 00:34:07,760 --> 00:34:08,440 Speaker 2: or are they credits? 720 00:34:08,520 --> 00:34:08,640 Speaker 3: Right? 721 00:34:09,320 --> 00:34:11,719 Speaker 2: So you have this experience in them, et cetera. Are 722 00:34:11,719 --> 00:34:15,279 Speaker 2: there any other bitter lessons if all sort of US 723 00:34:15,280 --> 00:34:18,279 Speaker 2: investors are to some extent increasingly a little bit more 724 00:34:18,640 --> 00:34:21,319 Speaker 2: trading in an EM space, you have any lessons for 725 00:34:21,440 --> 00:34:24,480 Speaker 2: them from the EM world that we should all know about. 726 00:34:24,760 --> 00:34:27,480 Speaker 4: The strong lesson used to be that don't assume you 727 00:34:27,560 --> 00:34:31,440 Speaker 4: get these sort of fairly well behaved politics that you 728 00:34:31,480 --> 00:34:32,680 Speaker 4: get in the US and other countries. 729 00:34:32,680 --> 00:34:35,080 Speaker 5: But that less of course noticed somewhat on my mind. 730 00:34:35,320 --> 00:34:36,200 Speaker 5: But you know, the. 731 00:34:36,239 --> 00:34:38,680 Speaker 4: Main issue is really politically risk and we have a 732 00:34:38,719 --> 00:34:41,239 Speaker 4: lot of elections coming up, especially in that time right 733 00:34:41,239 --> 00:34:43,719 Speaker 4: if we have Chile, we have Columbia with brazila and 734 00:34:43,920 --> 00:34:48,239 Speaker 4: so these things can really make a I used to say, 735 00:34:48,320 --> 00:34:50,360 Speaker 4: much much bigger difference than in the US, although that 736 00:34:50,400 --> 00:34:51,680 Speaker 4: is more debatable at this stage. 737 00:34:51,719 --> 00:34:54,120 Speaker 2: That's interesting, all right, Dirk Villa, thank you so much 738 00:34:54,200 --> 00:34:56,120 Speaker 2: for coming on odd large, thank you for bringing us 739 00:34:56,160 --> 00:34:58,200 Speaker 2: this book, and I'll have to have you back sometimes. 740 00:34:58,239 --> 00:34:58,800 Speaker 2: It's fantastic. 741 00:34:58,920 --> 00:34:59,839 Speaker 5: The new book is coming soon. 742 00:35:00,040 --> 00:35:02,279 Speaker 3: Okay, so what's the new book on. 743 00:35:02,760 --> 00:35:06,080 Speaker 4: It's the same idea about the global macrowat well, we'll 744 00:35:06,120 --> 00:35:06,520 Speaker 4: read it. 745 00:35:06,640 --> 00:35:22,080 Speaker 2: Thank you so much, Thank you, Tracy. I like getting 746 00:35:22,080 --> 00:35:25,880 Speaker 2: a sort of mathematical, precise definition of what a bubble is. 747 00:35:25,920 --> 00:35:26,279 Speaker 1: I find it. 748 00:35:26,320 --> 00:35:26,520 Speaker 5: Look. 749 00:35:26,600 --> 00:35:29,799 Speaker 2: I mean, obviously there are aspects of bubbles that are 750 00:35:29,880 --> 00:35:33,880 Speaker 2: very sentiment driven, and I think pop culture driven. Just 751 00:35:33,920 --> 00:35:35,920 Speaker 2: how much people talk about extra y and these are 752 00:35:36,040 --> 00:35:38,959 Speaker 2: useful things to discuss, but it's also nice to think about. Okay, 753 00:35:39,040 --> 00:35:41,799 Speaker 2: let's just come up with some rules that tell us 754 00:35:41,800 --> 00:35:45,040 Speaker 2: when these things, what constitutes a bubble? And when it's over, 755 00:35:45,239 --> 00:35:46,200 Speaker 2: precision is good. 756 00:35:46,600 --> 00:35:47,840 Speaker 3: I hope Derk will tell. 757 00:35:47,719 --> 00:35:50,480 Speaker 2: Us he's got to send us. 758 00:35:50,440 --> 00:35:52,480 Speaker 3: In the email, at least tell his clients, and we'll 759 00:35:52,480 --> 00:35:53,040 Speaker 3: see the note. 760 00:35:53,040 --> 00:35:54,040 Speaker 2: Hopefully we'll see the note. 761 00:35:54,080 --> 00:35:56,839 Speaker 3: I mean, I do think the message. It's a very 762 00:35:56,880 --> 00:36:00,960 Speaker 3: realistic message in some respects because the problem with bubbles 763 00:36:01,280 --> 00:36:04,320 Speaker 3: is you can't sit them out. If you're a money manager, 764 00:36:04,440 --> 00:36:06,160 Speaker 3: or even if you want to make more money, right, 765 00:36:06,200 --> 00:36:08,399 Speaker 3: your clients are going to be really really angry if 766 00:36:09,000 --> 00:36:10,840 Speaker 3: the S and P five hundred is going up twenty 767 00:36:10,840 --> 00:36:13,560 Speaker 3: percent and you've been bearished for two years. And again 768 00:36:14,120 --> 00:36:17,719 Speaker 3: Michael Burry has turned into a really good example of this. 769 00:36:18,320 --> 00:36:21,120 Speaker 3: But on the other hand, everyone wants to get out 770 00:36:21,320 --> 00:36:24,160 Speaker 3: precisely at the top because we want to maximize our 771 00:36:24,200 --> 00:36:26,520 Speaker 3: profits as much as possible. And I think when Dirk 772 00:36:26,560 --> 00:36:28,120 Speaker 3: says like, well, you know, you kind of have to 773 00:36:28,200 --> 00:36:30,120 Speaker 3: ride the bubble and then you kind of have to 774 00:36:30,120 --> 00:36:32,120 Speaker 3: wait a little bit for it to start popping, and 775 00:36:32,200 --> 00:36:34,880 Speaker 3: you just have to kind of figure out how much 776 00:36:35,480 --> 00:36:38,440 Speaker 3: money or loss you are willing to take. 777 00:36:38,600 --> 00:36:41,480 Speaker 2: Except that you're not going to time the top. 778 00:36:41,320 --> 00:36:44,600 Speaker 3: Perfectly right exactly, and that reality, Yeah. 779 00:36:44,400 --> 00:36:47,440 Speaker 2: I think that's sort of an interesting approach to the 780 00:36:47,480 --> 00:36:51,200 Speaker 2: bubble problem, and so just don't worry about nailing the time, 781 00:36:51,360 --> 00:36:54,400 Speaker 2: but come up with some rules. And it is interesting 782 00:36:54,480 --> 00:36:58,799 Speaker 2: these consistent patterns of the leadership narrows, et cetera. You know, 783 00:36:58,840 --> 00:37:01,440 Speaker 2: one thing I've been thinking about. Ask about this, but 784 00:37:01,520 --> 00:37:03,920 Speaker 2: one thing I've been wondering about. You know, people look 785 00:37:03,960 --> 00:37:07,080 Speaker 2: back at those two thousand analogies all the time, and 786 00:37:07,239 --> 00:37:09,560 Speaker 2: one of the things that people say is that, well, 787 00:37:09,640 --> 00:37:11,680 Speaker 2: this isn't a bubble like that, because you know, we 788 00:37:11,719 --> 00:37:13,759 Speaker 2: don't have the pets dot com. We don't have like 789 00:37:13,800 --> 00:37:18,080 Speaker 2: this proliferation of non profitable tech companies soaring. And I 790 00:37:18,160 --> 00:37:20,600 Speaker 2: guess that's true. But I think one of the problems 791 00:37:20,600 --> 00:37:23,640 Speaker 2: I have with these analogies is private markets are so 792 00:37:23,760 --> 00:37:28,040 Speaker 2: much bigger now, and so you look at these megavaluations 793 00:37:28,040 --> 00:37:31,239 Speaker 2: that private companies are raising at and you know, it 794 00:37:31,239 --> 00:37:33,799 Speaker 2: feels like there's like momentum trading almost going on in 795 00:37:33,840 --> 00:37:36,280 Speaker 2: private markets, et cetera. Yeah, and it would be nice. 796 00:37:36,440 --> 00:37:38,560 Speaker 2: You know, you can't really get an apples to apples 797 00:37:38,640 --> 00:37:42,719 Speaker 2: comparison because so much of the bubbly activity appears to 798 00:37:42,719 --> 00:37:44,840 Speaker 2: be happening away from this S and P five hundred 799 00:37:44,920 --> 00:37:47,839 Speaker 2: or away from the Nasdag. And so these charts about 800 00:37:47,880 --> 00:37:50,319 Speaker 2: what percentage of companies are or aren't making money that 801 00:37:50,360 --> 00:37:52,760 Speaker 2: only look at public markets, I think are a little 802 00:37:52,760 --> 00:37:53,960 Speaker 2: bit unsatisfying. 803 00:37:54,000 --> 00:37:54,200 Speaker 5: Right. 804 00:37:54,200 --> 00:37:56,200 Speaker 3: Well, I would add on to that that, you know, 805 00:37:56,280 --> 00:38:00,640 Speaker 3: the companies themselves might be profitable, but the business itself 806 00:38:00,800 --> 00:38:04,080 Speaker 3: is as yet not generating positive cash flows and everyone 807 00:38:04,280 --> 00:38:05,120 Speaker 3: just expects it to. 808 00:38:05,400 --> 00:38:08,640 Speaker 2: Yeah at one point, right or the spending is simply 809 00:38:08,680 --> 00:38:12,520 Speaker 2: not sustainable, and that's another fact. Anyway, super interesting conversation. 810 00:38:13,320 --> 00:38:15,759 Speaker 2: We've had them on Karthvik Center. And also likes that 811 00:38:15,880 --> 00:38:19,719 Speaker 2: definition of em which is are your government bonds credits 812 00:38:19,840 --> 00:38:22,520 Speaker 2: or are they save havens? And they don't love how 813 00:38:22,560 --> 00:38:25,400 Speaker 2: in this recent volatility we haven't seen more of a 814 00:38:25,440 --> 00:38:26,840 Speaker 2: bid into treasures. I don't love that. 815 00:38:27,280 --> 00:38:30,480 Speaker 3: Nope, not a good sign on that happy note. Shall 816 00:38:30,520 --> 00:38:31,000 Speaker 3: we leave it there? 817 00:38:31,120 --> 00:38:32,200 Speaker 2: Let's leave it there, all right. 818 00:38:32,239 --> 00:38:34,680 Speaker 3: This has been another episode of the Odd Thoughts podcast. 819 00:38:34,760 --> 00:38:37,960 Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Alloway. 820 00:38:37,680 --> 00:38:40,400 Speaker 2: And I'm Jill Wisenthal. You can follow me at the Stalwart. 821 00:38:40,640 --> 00:38:44,400 Speaker 2: Follow our producers Carmen Rodriguez at Carman Arman, Dashel Bennett 822 00:38:44,400 --> 00:38:47,960 Speaker 2: at dashbod and Keilbrooks at Keilbrooks. More odd Lots content, 823 00:38:48,000 --> 00:38:50,279 Speaker 2: go to Bloomberg dot com slash odd Lots with the 824 00:38:50,360 --> 00:38:52,879 Speaker 2: daily newsletter and all of our episodes, and you can 825 00:38:52,920 --> 00:38:55,040 Speaker 2: chat about all of these topics twenty four to seven 826 00:38:55,080 --> 00:38:59,160 Speaker 2: with fellow listeners in our discord Discord dot gg slash. 827 00:38:58,800 --> 00:39:01,759 Speaker 3: Out Lots And if you enjoy all Lots, if you 828 00:39:01,920 --> 00:39:04,080 Speaker 3: like it when we talk about whether or not AI 829 00:39:04,200 --> 00:39:06,400 Speaker 3: is in a bubble, then please leave us a positive 830 00:39:06,400 --> 00:39:09,600 Speaker 3: review on your favorite podcast platform. And remember, if you 831 00:39:09,640 --> 00:39:12,279 Speaker 3: are a Bloomberg subscriber, you can listen to all of 832 00:39:12,320 --> 00:39:15,359 Speaker 3: our episodes absolutely ad free. All you need to do 833 00:39:15,520 --> 00:39:18,360 Speaker 3: is find the Bloomberg channel on Apple Podcasts and follow 834 00:39:18,400 --> 00:39:36,000 Speaker 3: the instructions there. Thanks for listening.