Speaker 1: Scrap on your parachute. It's time for What Goes Up
Speaker 1: with Sarah Ponzick and Mike Reagan. Hello, and welcome to
Speaker 1: What Goes Up, a Bloomberg Weekly Markets podcast. I'm Sara Pont,
Speaker 1: reporter on the Cross Asset team, and I'm Mike Reagan,
Speaker 1: a senior editor at Bloomberg. This week on the show,
Speaker 1: a year ago, global markets were reeling from the COVID crisis.
Speaker 1: Now stocks are surging, meme stocks are a near daily phenomenon,
Speaker 1: and bond yields are taking higher on Wall Street. It
Speaker 1: almost feels like a different world. Well, our guests last
Speaker 1: joined the show in the summer to discuss the very
Speaker 1: trade that delivered a double digit return duringsh So now
Speaker 1: he's going to join us and he'll share how is
Speaker 1: from his position to capitalize on the recovery, and of
Speaker 1: course we will close out the episode with our tradition
Speaker 1: the craziest thing I saw in markets this week? And
Speaker 1: if you saw something crazy, please do give us a
Speaker 1: call on the Bloomberg Podcast hotline at six four six
Speaker 1: three two four three four nine, oh and leave us
Speaker 1: a voicemail and maybe we'll play it on the show.
Speaker 1: Of course, can also tweet in our general direction. We're
Speaker 1: at the handle at podcasts are Bloomberg podcast Handle and Sarah.
Speaker 1: I gotta say, for the crazy things I've sworn off
Speaker 1: of n f T s, I'm done with the n
Speaker 1: f T s there were I have plenty of n
Speaker 1: f T s to offer, and I did bring one
Speaker 1: non n f T crazy thing as well, because I
Speaker 1: know we've discussed n f T s the past couple
Speaker 1: but come on, there were just a couple of this
Speaker 1: past week that you couldn't ignore. I know, I know,
Speaker 1: but there, I feel like they're jumping the shark now there.
Speaker 1: There there were fun when no one had ever heard
Speaker 1: about an n f T. Now it's just get it's
Speaker 1: getting everywhere, very commonplace. We're minting n f T millionaires
Speaker 1: and probably billionaires soon. You know. I it makes my
Speaker 1: head spin, But I look forward to your crazy n
Speaker 1: f T things. But before we get to that, let's
Speaker 1: welcome back our guest. He is the chief investment officer
Speaker 1: at Reminiscent Capital in Australia. His name is David Adams. David,
Speaker 1: welcome back to the show. Thanks guys, great to be here,
Speaker 1: and yeah, I guess it was nine months ago that
Speaker 1: we last caught up. So thanks for having us back
Speaker 1: on the show. It was fun last time. Right right now, David,
Speaker 1: I know you made some trades that that worked out
Speaker 1: pretty well during COVID. Luckily for you, what goes up
Speaker 1: we allow for victory laps, So so we will allow
Speaker 1: allow a victory lap. Remind us about what worked for
Speaker 1: you in your trading strategies, what didn't work during COVID.
Speaker 1: Catch us up on and you know sort of how
Speaker 1: you handle the whole situation and kind of where things
Speaker 1: stand now as far as how you're looking at opportunities. Sure, yeah,
Speaker 1: so we sort of, um we we I mentioned last time,
Speaker 1: we've we've been lucky enough that we're on lucky in
Speaker 1: some ways, had been through four crises previously, and so
Speaker 1: there was a certain sort of playbook when you've been
Speaker 1: been there. All a little bit to front, but they
Speaker 1: have an underlying kind of similarity. So we sort of
Speaker 1: rolled out that playbook um in Q one of last year,
Speaker 1: and it was essentially, you know, bonds and then FX
Speaker 1: involved in equity downside, and then margin as people kind
Speaker 1: of have to post margin. We sort of went went
Speaker 1: through that and uh and and it played out much
Speaker 1: like the prior prior crisis had done. So we're fortunate
Speaker 1: enough to sort of capture that and avoid avoid trouble
Speaker 1: and make money for investors in Q one. And I
Speaker 1: think when we caught up was around July from memory
Speaker 1: on the show, and and then what we were describing
Speaker 1: was what we thought was giving the opportunity possibly for
Speaker 1: the next couple of years, is a handover from the
Speaker 1: developed markets um into the ear market, especially Asia. So
Speaker 1: what I mean that specifically is UM for for for
Speaker 1: for countries like China, India and Japan to extent, and
Speaker 1: and and one or two others in Asia to play
Speaker 1: a big catch up to the likes of the SMP
Speaker 1: and the NASDAC. And I was just against some some
Speaker 1: note last night, and this is an anecdote. UM you've had.
Speaker 1: China since we last caught up peaked up at thirty
Speaker 1: eight point nine percent gained from that July level, India
Speaker 1: up at forty six point six, Japan the NICK up
Speaker 1: at thirty five point six, and meanwhile the SMP put
Speaker 1: up a healthy yame it was only twenty two point eight.
Speaker 1: So that's the sort of seventeen and a half PERCENTUM
Speaker 1: kind of relative catch up that Asia is starting to do,
Speaker 1: and a lot of that actually came in the fourth quarter.
Speaker 1: So if we just take beta, you know, the beta
Speaker 1: of the market out for a second, you know, this
Speaker 1: is just starting to happen now. So this this sort
Speaker 1: of relative catch up which we started in a fourth
Speaker 1: quarter is beginning. I think last time on the show
Speaker 1: we described that could be as much as a sixty
Speaker 1: relative catch up. So it's definitely not too late for
Speaker 1: investors out there. And I'll talk in a minute about
Speaker 1: kind of opportunities for this year and how we're positioning
Speaker 1: to sort of participate in that. It's quite interesting because
Speaker 1: UM equity markets had a strong start, but had you
Speaker 1: piled in so late jan mid web, you'd be sort
Speaker 1: of eighteen percent off side with this pullback that we've had.
Speaker 1: We'd have described how we avoided that UM. So that
Speaker 1: was one of the main things we were talking about
Speaker 1: as an opportunity UM that relative catch up for Asian equities,
Speaker 1: which is starting to occur, and we'll expand on that
Speaker 1: maybe a little bit later in the show. That was
Speaker 1: one thing, and then we had a bit of an
Speaker 1: anecdote that I spoke about Mr Bunny and Terry age
Speaker 1: of turbulence book. But I'm pleased to say there's been
Speaker 1: no no books eaten since then. Probably probably probably you know,
Speaker 1: probably tells us this probably a little bit of smooth
Speaker 1: sailing a head still for a while. However, Um, we're
Speaker 1: seeing some stuff in our process that's very concerning, that's
Speaker 1: actually very interesting as well, and we'll talk to that
Speaker 1: a little bit later. Um. So yeah, that just brings
Speaker 1: us up to speed. So I definitely want to get
Speaker 1: into what you said is possibly concerning. But you mentioned
Speaker 1: the pullback that we have seen in particularly in Asian equities.
Speaker 1: I was just pulled up the CSI three D. We
Speaker 1: recently saw fourteen percent pullback. Granted we've seen a pullback
Speaker 1: in US equities and other equities around the globe as well,
Speaker 1: but more pronounced any um in Asian equities to We've
Speaker 1: spent a lot of time over the last couple of
Speaker 1: weeks discussing with guests this cyclical rotation that we've seen,
Speaker 1: but mostly focused on US equity is talking about growth
Speaker 1: to value or the move that we've seen into energy
Speaker 1: and financials. Where does this rotation that we have seen
Speaker 1: from developed to emerging markets currently stand and even considering
Speaker 1: the pullback that we have seen in recent weeks, would
Speaker 1: you say that there is more room for a catch
Speaker 1: up and why would that be? What what will do
Speaker 1: here is I'll draw on you know what it typically
Speaker 1: in my career has been a north star and UM
Speaker 1: is very worthwhile paying attention to. I think we spoke
Speaker 1: about it last time. It was analogous back in February March.
Speaker 1: UM been in many ways in the opposite direction. That
Speaker 1: was the bonde market, the rights market, UM. And you know,
Speaker 1: when when she wakes up and speaks, we should definitely listen.
Speaker 1: And last year I think I'm just bribed some of
Speaker 1: the intricacies of you know, dollar block funding. We spoke
Speaker 1: about how the informational value at the front end. You know,
Speaker 1: she definitely knows what's going on. We spoke also about,
Speaker 1: you know, the type of price section whereby last year,
Speaker 1: when we're going into the crisis mode, UM, you know,
Speaker 1: very large percentage of the of the price section was
Speaker 1: happening on the offense side of futures are either we're
Speaker 1: getting bought with no pullbacks and that that tells you something.
Speaker 1: UM this time around is actually the opposite UM. So
Speaker 1: the so the bond market has woken up and shaken
Speaker 1: her tail. It's not the front end I you risk
Speaker 1: off and rates lower, it's the back end rates higher,
Speaker 1: and in some way they won't call it a risk on.
Speaker 1: I'll describe in a minute when I think is going on. Um.
Speaker 1: And the opposite to the price section was relentless selling
Speaker 1: of bonds and fixed income and fixed income futures kind
Speaker 1: of across the board. Um. Okay, that's really interesting and
Speaker 1: and what's happening there. So my humble belief is that
Speaker 1: the central banks have completely overcooked this. There's way too
Speaker 1: much kind of stimulus globally. Now granted that's probably not
Speaker 1: helping the real economy, but the financial asset reflation UM
Speaker 1: and some of the exuberant behavior, whether it's game stop
Speaker 1: or other anecdotes we want to choose from for people
Speaker 1: have been around for a while, it really is kind
Speaker 1: of um reminiscent to plug the name of you know,
Speaker 1: sort of uh overcooking, overcooking of of a stimulus. And
Speaker 1: I think, you know, um, I don't think if you
Speaker 1: look at Stanley Drugconen was recent interviewed. He gave a
Speaker 1: fantastic interview and he quotes some really interesting stats about
Speaker 1: the extent of um kind of stimulus that was that
Speaker 1: was that was handed out in the first three months,
Speaker 1: something on the lines of it equal the prior three
Speaker 1: q q E episodes. Has been quite phenomenal. Now compliments
Speaker 1: of the Chinese, they've really matured out in terms of
Speaker 1: their approach for for crisis management. It would be much
Speaker 1: more prudent, frugal um they didn't have to do anywhere
Speaker 1: near as much kind of disbursement of stimulus. And in
Speaker 1: addition to that, they've been quite prudent on commenting. They've
Speaker 1: had the bravery taken out to a comment on some
Speaker 1: sort of perspectative bubble like behavior in their equity market.
Speaker 1: Now they have suffered as a result, but just remember
Speaker 1: I mentioned this last time. They're getting very very good
Speaker 1: at managing They've got a lot of leavers to manage
Speaker 1: their economy and their stock market. And we saw this
Speaker 1: recently on the recent pullback. You know, they had the
Speaker 1: ability to sort of um we were there was we
Speaker 1: were led to believe that the national team or there
Speaker 1: was some national support for their stock market that sort
Speaker 1: of halted the decline and started to recover a bit.
Speaker 1: So I don't feel like they're not until after they
Speaker 1: came out and said that assets looked over price. I mean,
Speaker 1: granted they were talking about Chinese equities, but correct, yeah, yeah, correct.
Speaker 1: So so so going back on on the on point
Speaker 1: is UM. The bond market move that we had in
Speaker 1: February UM is a very important signal. And essentially what
Speaker 1: it's saying as the bondom market is saying, you know,
Speaker 1: to the center banks, you're wrong. There's you've gone a
Speaker 1: little bit too far. And whether it's you know, reflationary
Speaker 1: assets through copper equity prices, UM. You know, they're also
Speaker 1: speaking as well. UM. So, so that's important. I'm also
Speaker 1: seeing some really interesting signs leads I've seen in the past.
Speaker 1: You know, if you think about the G ten. Oddly enough,
Speaker 1: we mentioned before in New Zealand for whatever reasons, partly
Speaker 1: is a small open economy and juxtaposed between EM and
Speaker 1: d M M is speaking as well. You know, they're
Speaker 1: they're over there in New Zealand recently they had UM.
Speaker 1: The New Zealand government essentially's turned around to the central
Speaker 1: Bank and said, you know, you need to take house
Speaker 1: prices into account in your mandate. Your wire is this
Speaker 1: This is because it's very similar in the G ten um.
Speaker 1: The policies that are being deployed helping the top ten
Speaker 1: percent get richer. House prices are going up, equity prices
Speaker 1: are going up, but real folks, you know, they're real
Speaker 1: jobs that don't necessarily have any of those things, are
Speaker 1: not benefiting from that. And your places like New Zealand
Speaker 1: and Australia to extended quite equalitarian. And then they said,
Speaker 1: you know, central bank policies not helping are our voters,
Speaker 1: constituents and and and they paid a lot of attention
Speaker 1: to that. So what does that mean? That means in
Speaker 1: some of these detaining countries where you've had property go up,
Speaker 1: stocks go up, but people are not necessarily benefiting from that. Perversely,
Speaker 1: you could have say, what what what New Zealand could
Speaker 1: be sort of hinting at here is um you might
Speaker 1: need to raise rates, you know, to just cool down
Speaker 1: some of these asset prices. That's very different from where
Speaker 1: we were just three six months ago. And you know,
Speaker 1: whilst people might say that's just that's New zeal it's
Speaker 1: not not applicable here. That won't happen in the US.
Speaker 1: Let's see, you know, I've been through many, many rate
Speaker 1: cycles up and down, and I'll get a lot of
Speaker 1: pushback on this, with a lot of that indemics, it
Speaker 1: will tell me why that's not going to happen. But
Speaker 1: I wouldn't be surprised we continue at going at this
Speaker 1: rate of commodity prices, asset prices, property prices, that the
Speaker 1: conversation gets brought way forward as to potential when rate
Speaker 1: backs can happen. Now, why is that worrying? Well, in
Speaker 1: the real economy, um, you know, and in a very
Speaker 1: leveraged world that we're in now, I don't think markets
Speaker 1: will be able to take rate hugs all that well.
Speaker 1: And people say that, well, nor it's reflation that you
Speaker 1: can have higher stocks, you can have higher commodities, you
Speaker 1: can have higher rates, because it's all it's all in
Speaker 1: the recovery mode. Now, the first thirty basis points of
Speaker 1: that in rates is true, and we saw this in
Speaker 1: the recent hundred basis points sell off. The last thirty
Speaker 1: basis points is not. Um whereby that started to really
Speaker 1: puncture things like long duration assets like tech. So you know,
Speaker 1: around at a minute, but what I'm saying, I think
Speaker 1: we're entering into a very kind of dangerous spiral in
Speaker 1: the later stages of and you can see a lot
Speaker 1: of that because retails participation is very high. Whereby m
Speaker 1: as we had that kind of nasty sell off in
Speaker 1: bonds that started to prick things like the Nasdaq. Central
Speaker 1: banks had to come in and calm down verbally, and
Speaker 1: initially bond markets you could get what we're getting now,
Speaker 1: which is yields of calm down, you'll start to go
Speaker 1: back down, and you probably get equities rip higher again,
Speaker 1: and then you're back to the same problem whereby the
Speaker 1: bond market maybe two three months from now, we'll start
Speaker 1: to go We'll hang on. We're back into a reflationary
Speaker 1: situation here, and I wouldn't be surprised if you make
Speaker 1: fresh significant highs and yields well up above two percent
Speaker 1: in U S tens for example, And that then puts
Speaker 1: us in the precarious situation of how assets going to
Speaker 1: be able to take that, things like tech. So it's
Speaker 1: gonna be a very interesting year, I think from that Bally,
Speaker 1: You know, David, it's good to get someone on who
Speaker 1: sounds even more worried than I am about how all
Speaker 1: this stuff is going to shake out. You didn't even
Speaker 1: get into n f T price inflation, which which we
Speaker 1: we won't even go there. But I'm curious how um
Speaker 1: break evens fit into your thinking with all this. You know,
Speaker 1: at least in the US, if you look at UM
Speaker 1: five year break evens uh less I checked something like
Speaker 1: two and a half percent ten years, or at something
Speaker 1: like two point three roughly. Um, is this sort of
Speaker 1: just uh indicator of exactly what you're talking about? That
Speaker 1: maybe the central banks have put a little too much
Speaker 1: whiskey in the punch pole, so to speak, or is
Speaker 1: there something you know, I'm just curious how much faith
Speaker 1: you put into the break evens as sort of a
Speaker 1: fortune teller when it comes to inflation, or is there
Speaker 1: anything about market structure and sort of this exuberance and
Speaker 1: massive risk taking mood that we see that would allow
Speaker 1: them to send a false signal? Perhaps? Yeah, that's a
Speaker 1: good question. Um, good questions. So there a few components
Speaker 1: of that. One would be just in the very short run,
Speaker 1: you know, we're not actually seeing inflation. Yes, CPI called
Speaker 1: last last this week was not particularly stellar seven or
Speaker 1: something I think, Yes, yeah, and slightly underkindawhelmed intom x
Speaker 1: X energy. So it's not turned up yet number one. UM.
Speaker 1: Number two would be that UM as we described, underlying
Speaker 1: within many of the economies, even just the US, for example,
Speaker 1: despite all the hype, if you look at the U
Speaker 1: s um that the small medium enterprises with five or
Speaker 1: less employees from memories something like forty center of the
Speaker 1: entire employment workforce, and they're not doing so well. In fact,
Speaker 1: many of them are actually going out of business or struggling,
Speaker 1: So that that detracts a little bit from this UM
Speaker 1: feared kind of wage inflation and inflation that people think
Speaker 1: is coming UM and they're not. Also, in addition to
Speaker 1: if you look at China, you know their data is
Speaker 1: slowing somewhat. If you look at some of the charts
Speaker 1: of what the Chinese aggregates are doing, they're very very
Speaker 1: much in contrast to the likes of Copper and commody.
Speaker 1: And then one the biggest UM one of one of
Speaker 1: the biggest consumers of energy and commodities in the world,
Speaker 1: if not the biggest, depending which ones you look at.
Speaker 1: And so that's that's painting a very different picture and
Speaker 1: kind of the real economies UM. So those two things
Speaker 1: make me sort of look at the world in the
Speaker 1: following way. And that is, Um, there's asset price reflation
Speaker 1: just anticipation and kind of flows and money flooding into
Speaker 1: various markets, and then there's kind of real actual inflation.
Speaker 1: Now will it work in the end if we kept
Speaker 1: on at this rate and starts to create more jobs
Speaker 1: and get more confidence feeds back into economy and you
Speaker 1: start to get in certain pockets by all means, I'm
Speaker 1: sure if you look at the safe exams restaurants when
Speaker 1: they reopen in New York and things like that, Um,
Speaker 1: you get demand for waiters and labor and things that
Speaker 1: you probably will start to actually get some actual inflation
Speaker 1: further down there down So the you know, the break
Speaker 1: evens and such are probably a relatively decent predictor given
Speaker 1: where we are now. It's a long way of from
Speaker 1: the future, and a lot can change between now and then.
Speaker 1: So I think it's one of those that I need
Speaker 1: to think about asset price reflation, what actual inflation is
Speaker 1: doing now, what it could do further down the track.
Speaker 1: For me to sit here and think I've got a
Speaker 1: view on where it could actually be five years from now,
Speaker 1: it's not that relevant because, um, you know, what is
Speaker 1: more relevant is letting the market speak okay, and in
Speaker 1: the in the in the in the investiable time wherese
Speaker 1: we're looking at, which is say, for example, this year, Um,
Speaker 1: what what's relevant by which we can make money for investors?
Speaker 1: And it probably as follows, you know, as your real
Speaker 1: rates in the US go up a lot um what
Speaker 1: what what starts to happen then is you look at
Speaker 1: a world where say six months a year ago, there's
Speaker 1: very little yield, people having to chase the last little
Speaker 1: um a few basis points of returns, whether it's crunching
Speaker 1: in high yield credits or trying to receive that last
Speaker 1: little bit of five or ten year yields, or being
Speaker 1: an emerging market FX where there's a little bit of
Speaker 1: extra carry and pick up money just chases that has
Speaker 1: been doing for quite some time. And that that bond
Speaker 1: market wake up call and and real rates going higher
Speaker 1: in the US means that um a lot of manage
Speaker 1: managers out their investors out there start to scratch their
Speaker 1: heads and say, do I really want to be in
Speaker 1: you know, um, some of these emerging markets currencies where
Speaker 1: I get very little from pick up for all of
Speaker 1: that additional risk. So that's the interesting bit to me
Speaker 1: is you know, when if the market is speaking and
Speaker 1: real rates are going off in the US, you know,
Speaker 1: where are the monkey's going to run? As it was
Speaker 1: an expression people used to use, and um, you start
Speaker 1: to see little bit of a sign of that. Um
Speaker 1: just recently with money coming out of tech. Um some
Speaker 1: E M f X getting hit. How your credit getting hit? Um?
Speaker 1: I think it's probably just an early wake up call
Speaker 1: for what can happen sort of later in the year. UM.
Speaker 1: So if that moves, it's to some talk points on that.
Speaker 1: When you say real rates moving up by a lot,
Speaker 1: I mean what exactly quantifies a lot? I mean, certainly
Speaker 1: we have moved a lot. We were negative one point
Speaker 1: one uh percent, Now we're closer to negative sixty five,
Speaker 1: negative seventy basis points or so. But when you say
Speaker 1: a lot, I mean what do you expect? Are you
Speaker 1: talking positive? By chance? Yeah? I mean so in the
Speaker 1: great scheme of things, the moves not been to that
Speaker 1: secen different the speed of it has been. UM. So
Speaker 1: it's it's it's speed matters as well, because it can
Speaker 1: people can extrapolate and start to start to get concerned
Speaker 1: that you carry out at that sort of rate. UM.
Speaker 1: I think things will obviously um get dislodged. So so
Speaker 1: the speed of the moves obviously in February was important.
Speaker 1: UM So further down the track, if you know, if
Speaker 1: we go to the example of um what I described,
Speaker 1: whereby after maybe some pullback in yields lower, if the
Speaker 1: reflationary story kind of gather steam again and yields dislodge
Speaker 1: later in the year, we get up above two two
Speaker 1: and a quarter in U s tens. You know, I
Speaker 1: guess bottom to top that would be a move of
Speaker 1: a hundred hundred and fifty basis points and starting to
Speaker 1: push positive. And you know, positive is an important rubicon
Speaker 1: to cross because much like we've seen in European assets
Speaker 1: when they went negative, people just allows to individuals, allows
Speaker 1: to pay away native rates that that obviously starts to
Speaker 1: become relevant. UM So I would say crossing crossing over
Speaker 1: positive and don't have hundred fifty plus basis point It
Speaker 1: was mean you don't need to be chasing that last
Speaker 1: basis points in a very high yield bond structures or
Speaker 1: an emotion markets maybe quite vicarious. It's fun to talk
Speaker 1: with you, David, because I know we can jump from
Speaker 1: asset class to asset class and you'll you'll jump along
Speaker 1: with us, which is nice. So I know, you know,
Speaker 1: as a hedge fund manager you must keep sort of
Speaker 1: at least one eye or half an eye on volatility
Speaker 1: markets to some degree. I think what's been amazing to
Speaker 1: me is this continued grind higher inequities. Yeah, we had
Speaker 1: a little bit of a correction in the last month
Speaker 1: or so, but you know, continued grind higher, and yet
Speaker 1: the VIX just does not seem like it wants to
Speaker 1: go below twenty. It seems gets found a floor around twenty.
Speaker 1: I'm curious, you know what you're thinking about that and
Speaker 1: why that might be. I mean, my theories are are
Speaker 1: perhaps people are are worried about some of the things
Speaker 1: you're talking about about. Maybe value valuations have gotten ahead
Speaker 1: of themselves, and if rates do perk back up, there
Speaker 1: could be another another dip. Also, maybe so many people
Speaker 1: got burned by selling volatility a few years ago that
Speaker 1: they're sort of gun shot to do it again. Um,
Speaker 1: how are you thinking about it? If you are at all?
Speaker 1: I mean, am I am I crazy for thinking that
Speaker 1: maybe that there's still a little bit of a hangover
Speaker 1: from that that short volatility trade that blew up a
Speaker 1: few years ago. That's that's gonna make it tough for
Speaker 1: the VIX to come back down blow twenty. Okay, sure,
Speaker 1: good question. The US equity VOLS specialists will will be
Speaker 1: um much more granular their answer than myself. Um, I
Speaker 1: pretty deferred to them. However, what I can give you
Speaker 1: from like a macro manager kind of response is is
Speaker 1: drawing on and forget the gentleman's name, but there was
Speaker 1: a two hour podcast given my VOLT specialist and his
Speaker 1: because I was quite curious that question myself a few
Speaker 1: months ago, about two months ago, and his response, which
Speaker 1: I'll sort of repeat here, was that there is still
Speaker 1: quite large portfolio hedging. Um, so to folks out there
Speaker 1: purchasing out of the money puts to portfolio hedge. That's
Speaker 1: keeping aggregate vole high. And the shoulder vols is kind
Speaker 1: of short dated at the money volve where you know,
Speaker 1: things aren't moving necessary all that much apart from last month.
Speaker 1: As you said in many periods of the past of
Speaker 1: a couple of quarters, a slow grinding, sensible rally, that
Speaker 1: shoulder vols being sold as in the short dated vole
Speaker 1: at the moneys, you know, is not particularly expensive. Um
Speaker 1: after after a recent pullback. Of course, it spikes up
Speaker 1: and then slowly settles back down. But that was the
Speaker 1: gist of it was portfolio um insurance kind of hedging,
Speaker 1: keeping aggregate vols still quite high. I suspect prove if
Speaker 1: we continued in this environment that would continue to come
Speaker 1: so gently come down. But that's that's the that's the
Speaker 1: reason's high than otherwise we'd be stand clear of the
Speaker 1: craziest things we saw in markets this week. You know
Speaker 1: exactly what time it is, Mike. All right, all right, David,
Speaker 1: I'm sure you came prepared with the craziest thing you
Speaker 1: saw in markets. Let's start with Sarah. Sarah tease that
Speaker 1: she's got a lot to deliver this week, so let's
Speaker 1: let's get her going. So I actually believe that we
Speaker 1: have a voicemail, so I was hoping and thinking we
Speaker 1: should play that one first. Oh yeah, so I couldn't
Speaker 1: help myself. An entire choir actually called in to wish
Speaker 1: you a happy birthday. Mike was gonna say that with
Speaker 1: the Vienna Boys choir called in to the hot last week.
Speaker 1: Mike gave us all the gift of his nickname, So
Speaker 1: this week it's Mike birthday, So happy birthday. Thank you,
Speaker 1: I will say that. Uh, And Sarah, don't bust me
Speaker 1: for repeating this joke a few times. In the Rigging family,
Speaker 1: we have a tradition. If it's funny the first time,
Speaker 1: it's funny the next four or five times too. But
Speaker 1: what I've been saying is, uh, you know, I share
Speaker 1: the exact birthday, day and year with Johnny Knoxville. I
Speaker 1: don't know if you know who that is Johnny Knoxville,
Speaker 1: so it's debatable who the bigger jackass is. But thank you.
Speaker 1: I appreciate it. Big one for me number I'm not
Speaker 1: happy about it. But what are you gonna do, Dave?
Speaker 1: You know, now, give us a real crazy thing, Sarah, Okay,
Speaker 1: now I'll give you. Now, I'll give you a real
Speaker 1: and I'll give you a real one. So I'll stay
Speaker 1: away from the n f T s first one. This
Speaker 1: was just a survey that was put out by Business
Speaker 1: in Cider and they ordered up thirty seven percent of
Speaker 1: American investors in a recent survey say they've made trades.
Speaker 1: Based on an Elon Musk tweet, seven percent of all
Speaker 1: Americans seems really high to me? Is that just me? Americans?
Speaker 1: Who actually actively trade were I mean, to be honest,
Speaker 1: I didn't really think either. Is just very very high,
Speaker 1: very absolutely astounding, especially when he's pumping stuff like doge coin,
Speaker 1: you know, right, I mean honestly, I could say I
Speaker 1: know people who, on a personal basis have have bought
Speaker 1: doge after Elon must tweeted about it. So I guess
Speaker 1: I know people who are contributing to the very high
Speaker 1: share of respondence to survey. That is pretty good. That
Speaker 1: is pretty good, Sarah, you came you delivered with that one. Well,
Speaker 1: I have I have two n f t ones because
Speaker 1: you can't, you can't ignore them. One just that Jack
Speaker 1: Dorsey selling the first tweet ever as an n f
Speaker 1: T and there have already been bids up to two
Speaker 1: and a half million dollars. But the best one is
Speaker 1: on Thursday, Digital artwork and n f T sold for
Speaker 1: sixty nine million dollars. I mean, how crazy. I can't even,
Speaker 1: as the kids would say, I can't even David, I
Speaker 1: know you keep an eye on bitcoin and crypto. What
Speaker 1: do you think of all this n f T stuff. Well,
Speaker 1: I think we spoke last something becomes of eight thousand.
Speaker 1: I was sort of mentioning there was an angle whereby
Speaker 1: you know, folks wanted to essentially high it worse than
Speaker 1: such what might want to have their money, you know,
Speaker 1: in other assets like crypto and that it could do
Speaker 1: very very well. And it sort of looks like that's happened.
Speaker 1: There's there's also been much more of another victory lap
Speaker 1: for you, by the way, congratulations. Well no, I mean,
Speaker 1: you know things, but I mean we don't do it
Speaker 1: for the fun. It was more just think we were
Speaker 1: talking thing. But the investors are probably okay with that,
Speaker 1: I imagine, so that you're you're not you're out out
Speaker 1: there putting their money in the cryptough I would guess, well, yeah,
Speaker 1: it's it's not with a strategy at this stage. Um.
Speaker 1: But but what I was going to say is that,
Speaker 1: um a lot more homework has been done by high
Speaker 1: it Worse and superannuation funds and pension funds around the world,
Speaker 1: and it really does look like it's getting adopted as
Speaker 1: a sort of you know, one to three percent of
Speaker 1: your portfolio. That's a huge number. And you know, the
Speaker 1: more you look into these things that there's some great,
Speaker 1: great protocols and products in there. So UM, I can
Speaker 1: only see one way traffic, I would I would suspect
Speaker 1: that within three years, Um, we've got something like three
Speaker 1: point six billion people have phones. I'd say a third
Speaker 1: of those. I'd say within three years a billion people
Speaker 1: have some sort of digital currencies on their phone. And
Speaker 1: that's up from where we are now I think sixty
Speaker 1: six million million wallets. So it's just phenomenal kind of inflowers,
Speaker 1: I thank you coming. Um. So, so that's what I
Speaker 1: would say with regard to that, And my sort of
Speaker 1: crazy thing for the week would be which is a
Speaker 1: combination of everything. So this is Mr Bunny's owner, my
Speaker 1: my eleven year old daughter, Holly. This is all of
Speaker 1: the monetary and fiscal and kind of liquidity that's out there.
Speaker 1: A little Holly turned around to me because I talked
Speaker 1: to a little bit about finance. She keeps reminding me
Speaker 1: how I never bought Apple every day. Um, and she's
Speaker 1: a big gamer, so Minecraft and Fortnite all that sort
Speaker 1: of stuffiens hours on there and it hits me up
Speaker 1: on my credit card for skins and swords and all
Speaker 1: that sort of stuff. And you know, she she she's
Speaker 1: she's because I've talked a little bit about cryptize stuff
Speaker 1: and the punchline was she said, Dad, you should buy
Speaker 1: this coin engine E n j I n Jin said,
Speaker 1: why is that? Well, you can smelt down your sword
Speaker 1: and then move it to a new game when you
Speaker 1: decide you want to be in a new game and
Speaker 1: use that credit in a new game. And um, interesting enough,
Speaker 1: this is a two hundred and fifty billion dollar business gaming,
Speaker 1: you know, worldwide, if not, if not more. Japan's just
Speaker 1: to prove this coin. And so Holly takes surprise her
Speaker 1: her trade idea investment if you will as up something
Speaker 1: like jeez, I think it's well of a two thousand
Speaker 1: percent in about six weeks. Already two in six weeks,
Speaker 1: she sounded. You know, we're pretty dull in comparison to
Speaker 1: what the young kids are doing. That's pretty good. That's
Speaker 1: pretty good. Well, I'm going back to old school commodity
Speaker 1: markets for mine. And this one is courtesy of our
Speaker 1: chief Crazy Things correspondent, vil Donna Hirich, who's so as
Speaker 1: she's earning her keep again with a crazy thing. She
Speaker 1: pointed out this story Bloomberg story by Andy Hoffman. Uh,
Speaker 1: there's a commodities trader called Mercuria Energy Group, and they
Speaker 1: bought thirty six million dollars worth of copper from a
Speaker 1: counterparty in Turkey. One problem is when the copper arrived
Speaker 1: for delivery, Um, it turned out it was a bunch
Speaker 1: of painted rocks, a bunch of rocks painted copper color. Uh.
Speaker 1: And it's the nightmare. It's big scandal. Thirteen people apprehended
Speaker 1: by authorities in Turkey over this. And to give you
Speaker 1: an old man movie reference, Sarah Midnight Express from back
Speaker 1: in my day about a Turkish prison, not the prison
Speaker 1: you want to be in. Trust trust me on that, um.
Speaker 1: But I also wonder if it turns out they were
Speaker 1: paving stones that someone painted a copper color, uh, and
Speaker 1: somehow switched them out in in in transit between one
Speaker 1: party to the counterparty. So David, I'm wondering if someone's
Speaker 1: probably awaiting a delivery of paving stones, maybe your neighbor
Speaker 1: whose house is being un construction, writing a delivery of
Speaker 1: painting stones, and gone, there you go, there you go.
Speaker 1: You figured it out. David's got construction going on next door,
Speaker 1: and we managed to squeeze this whole thing in before
Speaker 1: the before the jackhammers and whatnot started, Uh make a noise.
Speaker 1: So I'd call that a success, I would agree, but
Speaker 1: we we still have to get David's crazy things though. Yeah, wow,
Speaker 1: I was. I was so into it, was so into
Speaker 1: the n f T conversation, just having a real, real conversation. Yes,
Speaker 1: actually I pulled out my phone and I started buying
Speaker 1: to courtesy of your daughter. So that's the truth of
Speaker 1: it all. But no, it's It's been an absolute pleasure.
Speaker 1: I'm so glad that we were able to have you
Speaker 1: on the show again. David Adams thinks so much for
Speaker 1: coming on the show. Thanks for much for having us.
Speaker 1: Thanks David, that was great. What Goes Out We'll be
Speaker 1: back next week. Until then, you can find us on
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Speaker 1: Podcast is Francesco Levie. Thanks for listening, See you next time.