WEBVTT - Stocks Pause Amid Valuation Concerns 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.320 --> 0:00:28.080 Joining us right now. 0:00:28.200 --> 0:00:31.760 Terry Wise, from Director Global Currencies Interest Rate Strategy at 0:00:31.840 --> 0:00:32.720 mcquarie Terio. 0:00:32.760 --> 0:00:34.680 I feel like we're at bear Stearns years ago. 0:00:34.720 --> 0:00:37.839 I get right to the dollar and once again consensus 0:00:37.840 --> 0:00:38.520 is hammered. 0:00:38.680 --> 0:00:39.720 What happens in. 0:00:39.680 --> 0:00:43.640 The foreign exchange market when everybody gets it wrong, Well, 0:00:43.680 --> 0:00:44.720 it depends how they're positioned. 0:00:44.760 --> 0:00:46.040 I suppose if a lot. 0:00:45.920 --> 0:00:47.519 Of people were betting week. 0:00:47.360 --> 0:00:51.640 Dollar, absolutely, as have we been betting in the medium. 0:00:51.400 --> 0:00:53.600 In long term. Absolutely, you're going to stop the show. 0:00:53.840 --> 0:00:57.760 We have the Harvard football coach on Yesterday to night 0:00:57.880 --> 0:01:02.279 Friday Night Football, Harvard Cornell Big Read, Bloomberg ninety two 0:01:02.360 --> 0:01:05.039 nine FM, Boston Weisman years This anta where the yell 0:01:05.120 --> 0:01:07.920 at just straight. I guess an offsprings at yell or 0:01:07.959 --> 0:01:11.640 something good morning offspring of Terry Weisman killing it at yell, 0:01:11.720 --> 0:01:14.960 and biology continue on the bet. 0:01:14.720 --> 0:01:16.680 That was made in weekness. The bet that was made 0:01:16.680 --> 0:01:18.000 in the well. 0:01:18.040 --> 0:01:20.080 The bet that was made in the strong dollar throughout 0:01:20.080 --> 0:01:21.800 most of this year was a bet made on the 0:01:21.840 --> 0:01:25.320 premise that policy uncertainty would continue in the US, that 0:01:25.360 --> 0:01:28.520 you would see reserve managers rotate out of the dollar, 0:01:28.600 --> 0:01:31.200 that this would be followed by private asset allo cators, 0:01:31.200 --> 0:01:33.959 including fixed income allocators with out of a dollar. It 0:01:34.000 --> 0:01:35.959 was also predicated on the richness of the dollar. We've 0:01:35.959 --> 0:01:37.759 seen a real appreciation of the dollar for the past 0:01:37.760 --> 0:01:39.840 thirteen years, and that was a great story, and I 0:01:39.880 --> 0:01:42.600 think people made a lot of money betting on that 0:01:42.720 --> 0:01:45.040 weakness and the dollar until until the last few weeks. 0:01:45.120 --> 0:01:46.680 What's happened in the last few weeks I think is 0:01:47.240 --> 0:01:50.800 not unusual. I think what has happened is that people 0:01:50.840 --> 0:01:53.640 have realized, traders have realized, Hey, there's just as much 0:01:53.680 --> 0:01:56.160 political uncertainty and policy uncertainty in the rest of the 0:01:56.200 --> 0:01:58.000 world in some of these key markets as there is 0:01:58.040 --> 0:02:00.280 in the US. And the case in point of. 0:02:00.040 --> 0:02:00.960 Course has been Europe. 0:02:00.960 --> 0:02:04.360 With these with this, with this, the prospect that we 0:02:04.440 --> 0:02:08.160 may see a socialist become the Prime Minister of France, 0:02:08.160 --> 0:02:10.920 that we may see delay to pension reform, that we 0:02:11.000 --> 0:02:14.200 will see France not solve its its deficit and debt issue, 0:02:14.320 --> 0:02:17.760 and of course now Japan as well, with concerns over 0:02:17.800 --> 0:02:21.880 whether or not this ruling coalition will will will maintain 0:02:21.960 --> 0:02:24.640 power and whether we go to early elections there potentially 0:02:24.680 --> 0:02:27.600 all the mental elections. So look, as long as the 0:02:27.720 --> 0:02:30.160 US look to be the only source of uncertainty, it 0:02:30.280 --> 0:02:32.120 was a week dollar story. Now that the US is 0:02:32.160 --> 0:02:34.480 not the only source of uncertainty, it becomes a strong 0:02:34.520 --> 0:02:35.360 dollar story. 0:02:35.120 --> 0:02:38.359 Because a US dollar retrace that eight nine percent declients. 0:02:38.760 --> 0:02:39.600 I don't think so. 0:02:39.840 --> 0:02:42.960 Although it's hard to predict the headlines coming out out 0:02:43.000 --> 0:02:44.520 of the rest of the world, in part because the 0:02:44.600 --> 0:02:47.360 nature of uncertainty is that it becomes hard to predict. 0:02:48.080 --> 0:02:49.880 But I will tell you that the dollar had gotten 0:02:49.960 --> 0:02:52.800 so rich over the last thirteen years, and had gotten 0:02:52.800 --> 0:02:55.200 to a point nine months ago where it was probably 0:02:55.680 --> 0:02:59.040 a level on sustainability in its valuation. I just don't 0:02:59.080 --> 0:03:03.360 see it getting back levels of February in March of 0:03:03.360 --> 0:03:03.800 this year. 0:03:03.960 --> 0:03:09.280 Explain to those across America listening and watching, why would 0:03:09.280 --> 0:03:11.320 we should care about Japanese yet? And I saw a 0:03:11.320 --> 0:03:14.040 couple of really good essays on this yesterday, But I 0:03:14.080 --> 0:03:15.520 think it needs to be repeated. 0:03:15.600 --> 0:03:18.480 Yes, Look, if you're a stock market investor, and let's 0:03:18.520 --> 0:03:21.480 take its perspective, not a policy maker, but an investor, 0:03:21.520 --> 0:03:25.119 because I want to appeal to the readership here. If 0:03:25.160 --> 0:03:27.640 you are invested in Japanese stocks, and a lot of 0:03:27.639 --> 0:03:31.799 these stocks are multinational stocks, they sell, you know, very 0:03:31.880 --> 0:03:34.320 high value added industrial products of the rest of the world. 0:03:34.680 --> 0:03:37.480 Their margins, they're operating margins benefit from a weekend. So 0:03:38.200 --> 0:03:40.320 that's one reason why you need to pay attention to this. 0:03:40.360 --> 0:03:42.000 In fact, with the weakness of the sorry, with the 0:03:42.000 --> 0:03:43.520 weakness of the end that we've seen in the last 0:03:43.520 --> 0:03:46.760 few few days since the political turmoil, the stock market's 0:03:46.800 --> 0:03:49.280 done fantastically, which which seems to suggest to me that 0:03:49.520 --> 0:03:50.760 the weakness in the end is not so much a 0:03:50.800 --> 0:03:55.040 fundamental thing as much as it is a predilection on 0:03:55.080 --> 0:03:57.200 the part of the investors to wonder what is the 0:03:57.240 --> 0:03:59.720 central bank going to do? It's not about a weakning 0:03:59.760 --> 0:04:01.080 of the of the Japanese economy. 0:04:01.120 --> 0:04:03.320 I was tackled by a Morgan Stanley guy yesterday and 0:04:03.360 --> 0:04:05.440 we were talking about this Dan Skelley. He's a big 0:04:05.520 --> 0:04:07.760 Van Dan Skelley fan. I thought Dan was on last 0:04:07.760 --> 0:04:11.840 time was great and the guy said to me, he said, 0:04:12.000 --> 0:04:15.600 this yen is hugely distabling. In the heart of the matter, 0:04:16.360 --> 0:04:20.800 their wages have disappeared. They're like England in nineteen thirty 0:04:20.839 --> 0:04:21.400 in terms of. 0:04:21.360 --> 0:04:24.800 Real way terry. We got a government shutdown here in 0:04:24.800 --> 0:04:28.159 the United States. Is that going to affect our Federal 0:04:28.200 --> 0:04:29.760 Reserve here over the next several meetings? 0:04:29.760 --> 0:04:30.280 Do you think? Yeah? 0:04:30.279 --> 0:04:30.839 I don't think so. 0:04:30.920 --> 0:04:32.800 I mean, if what you're referring to is the premise 0:04:32.839 --> 0:04:34.960 that because of a lack of official data, the Federal 0:04:35.000 --> 0:04:37.440 Reserve will not know what to do, I would take 0:04:37.480 --> 0:04:40.560 issue with that. There's plenty of third party data. The 0:04:40.560 --> 0:04:44.440 Federal Reserve itself conduct surveys, it collects data. It will 0:04:44.480 --> 0:04:46.720 have that at hand when the meeting takes place in 0:04:46.760 --> 0:04:49.360 October twenty eighth and twenty ninth to make an informed 0:04:49.400 --> 0:04:53.159 decision about where the economy is going. It doesn't rely 0:04:53.520 --> 0:04:55.279 just on official data. To say that you're a data 0:04:55.320 --> 0:04:58.359 dependant does not mean that you're officially data dependent. It 0:04:58.440 --> 0:05:01.719 means that you're just data dependent. So I think they'll 0:05:01.760 --> 0:05:04.159 have enough data. Look, my view on the FED is 0:05:04.200 --> 0:05:08.799 that there is a sufficient reason to believe that interest 0:05:08.839 --> 0:05:12.720 rate policy in the US right now is not overly restrictive. 0:05:13.480 --> 0:05:15.720 If it were, we wouldn't be seeing the stock market 0:05:15.760 --> 0:05:17.960 at new highs. We wouldn't be seeing gold ripping, we 0:05:17.960 --> 0:05:21.279 wouldn't be seeing corporate bond spreads as narrow as they've gotten. 0:05:21.480 --> 0:05:22.960 I think the Fed needs to take all of that 0:05:23.000 --> 0:05:25.920 into consideration. If they do cut, it will be a 0:05:26.040 --> 0:05:29.440 very reluctant cut. I think, in view what the financial 0:05:29.440 --> 0:05:30.200 markets have been doing. 0:05:30.800 --> 0:05:32.960 So, I mean, is the cadence here of the Fed? 0:05:33.160 --> 0:05:36.479 Is it meeting by meeting? Do they you think they 0:05:36.560 --> 0:05:38.560 have a strategy of let's cut a couple times this year, 0:05:38.600 --> 0:05:41.200 then cut early next year, then we'll sit back. 0:05:42.160 --> 0:05:46.640 If that I mean, Jay Powell said on September seventeenth, 0:05:46.720 --> 0:05:49.040 I mean practically admitted that the cut they made in 0:05:49.080 --> 0:05:51.560 September was an insurance cut. That seems to suggest that 0:05:51.560 --> 0:05:54.600 they're not necessarily on a path cut two or three 0:05:54.640 --> 0:05:58.000 more times in wait. It really does suggest that the 0:05:58.040 --> 0:06:02.360 cut was only intended to strike a balance between the 0:06:03.080 --> 0:06:05.400 two mandates within the dual mandates a little bit better, 0:06:05.680 --> 0:06:09.400 and it does not imply a long and profound series 0:06:09.440 --> 0:06:10.039 of right cuts. 0:06:10.120 --> 0:06:13.279 We are fortunate at Bloomberg Surveillan staff Terry Weisman with 0:06:13.320 --> 0:06:17.040 this this morning from Acquary with all of his experience, 0:06:17.120 --> 0:06:20.800 these headlines out. This is CNBC driving the story for 0:06:21.200 --> 0:06:25.200 the President's FED chair candidates list. It's narrowed down to 0:06:25.320 --> 0:06:29.000 five by the Secretary of Treasury. 0:06:29.520 --> 0:06:32.400 The list here is it sounds like these guys are good. 0:06:32.400 --> 0:06:36.800 They played Crossby Stills in Nash Great Bowman, Waller, Hassett, 0:06:37.240 --> 0:06:42.200 Wassh writer of Blackrock in the final five, and I 0:06:42.240 --> 0:06:46.480 would suggest none of those are surprise within the fed. 0:06:46.240 --> 0:06:49.040 Derby zeite guys. I defer to Mike McKeon. 0:06:48.560 --> 0:06:50.840 That Terry Weisman, is this the way to pick a 0:06:50.920 --> 0:06:55.040 chairman bye by headlines and interviews? 0:06:55.200 --> 0:06:56.039 No, no, you don't. 0:06:56.080 --> 0:06:58.560 You don't need these trial balloons. I don't think that's right. 0:06:58.920 --> 0:07:01.400 I think that that's because disconcerning for the market, especially 0:07:01.400 --> 0:07:03.800 when there's so many choices that they are looking at. 0:07:04.000 --> 0:07:06.120 Look personally, I think that Chris Waller would be a 0:07:06.120 --> 0:07:10.360 great choice, not because he's ideologically aligned with the administration. 0:07:10.400 --> 0:07:12.440 In fact, he's not, which is one reason why I 0:07:12.440 --> 0:07:15.520 think it would be a good choice. He is dubvish, 0:07:15.800 --> 0:07:18.320 and I think that aligns him temporarily or short term 0:07:18.320 --> 0:07:20.280 with the administration. But Chris Waller has had a long 0:07:20.400 --> 0:07:24.120 history of publications in which he espoused and exhorted the 0:07:24.160 --> 0:07:26.960 autonomy of the Federal Reserve, so he prevent He provides 0:07:27.000 --> 0:07:30.800 a very good balance. I think willing to be dubbish 0:07:30.880 --> 0:07:32.680 right now because he has his eye on the job 0:07:32.720 --> 0:07:35.520 market and the prospect that employment gains are diminishing, but 0:07:35.600 --> 0:07:38.400 at the same time not willing to be structurally dubbish. 0:07:38.440 --> 0:07:41.640 I think that's what's needed right now in a FED 0:07:42.320 --> 0:07:43.200 Chairman Love it. 0:07:43.080 --> 0:07:44.520 Has taken notes, Terry. 0:07:44.560 --> 0:07:47.560 I'm going to be speaking with Governor Waller at the 0:07:47.600 --> 0:07:50.240 Council on Foreign Relations October sixteenth. 0:07:50.320 --> 0:07:51.920 Can you be in the front row so I can 0:07:52.040 --> 0:07:54.680 have you ask a smarter question. I'd love to enjoin you, Tom, 0:07:54.760 --> 0:07:57.200 just to see a call with McCarry. We'll have to 0:07:57.240 --> 0:07:59.680 see on that. Stay with us. 0:07:59.720 --> 0:08:02.960 More from Bloomberg Surveillance coming up after this. 0:08:10.200 --> 0:08:13.800 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:08:13.840 --> 0:08:17.000 weekday afternoons from seven to ten am Eastern Listen on 0:08:17.080 --> 0:08:20.760 Applecarplay and Android Auto with the Bloomberg Business app, or 0:08:20.920 --> 0:08:22.400 watch us live on YouTube. 0:08:22.720 --> 0:08:23.360 Joining us in now. 0:08:23.480 --> 0:08:26.480 Kati Kaminski, Chief first her strategist Alpha Simplex for an 0:08:26.560 --> 0:08:28.400 ample discussion here. 0:08:28.520 --> 0:08:29.720 The mathematics is. 0:08:29.720 --> 0:08:33.440 Just prodigious, all of it based on the trend of 0:08:33.520 --> 0:08:37.280 the moment. The late Martin's wig over to FED policy 0:08:37.280 --> 0:08:40.280 and economics would say, the trend is your friend in 0:08:40.360 --> 0:08:43.840 the stock market right now with the I would say 0:08:43.880 --> 0:08:47.120 weekend panic, AI, we're all going to die. CAPEX, We're 0:08:47.160 --> 0:08:51.319 all going to die in that define the equity trend right. 0:08:51.160 --> 0:08:55.440 Now, Katie, the equity trend is very strong. Signals have 0:08:55.600 --> 0:08:59.760 continued to strengthen, especially since the summer, and there's really 0:08:59.840 --> 0:09:02.439 no and what's challenging as a trend foiler, you need 0:09:02.480 --> 0:09:06.160 to see that resistance to pull back and all systems 0:09:06.160 --> 0:09:07.480 seem to be going right now. 0:09:07.440 --> 0:09:09.920 Well, Paul allowed me to go NERD twice in this interview. 0:09:09.920 --> 0:09:11.320 I'm going to do that right now and then shut 0:09:11.400 --> 0:09:14.320 up and let Paul drive it. Okay, So you have 0:09:14.360 --> 0:09:17.319 a setup, folks, and I'm going to take SPX, take 0:09:17.320 --> 0:09:20.480 what NDX, whatever you want, and I'm going to take 0:09:20.520 --> 0:09:24.120 out a two standard deviation trading envelope and then I'm 0:09:24.120 --> 0:09:26.760 going to run it logarhythmic on the y axis to 0:09:26.840 --> 0:09:31.120 show percentage change, not an arithmetic access. And then I 0:09:31.160 --> 0:09:34.560 have exponential moving averages, and I look at the curve 0:09:34.920 --> 0:09:38.680 of them, the first derivative and even second derivative. And 0:09:38.720 --> 0:09:41.840 when you hear me say log convexity, that's what we're 0:09:41.880 --> 0:09:44.880 talking about. The equity market has not giving up a 0:09:44.880 --> 0:09:46.960 bull market. Log convexity has it. 0:09:47.520 --> 0:09:48.720 No, not at all. 0:09:48.760 --> 0:09:52.040 And I think depending on if you use exponential moving averages, 0:09:52.120 --> 0:09:54.680 I mean that is going to get rid of some 0:09:54.720 --> 0:09:56.719 of that ball that you're seeing in the first part 0:09:56.760 --> 0:09:59.640 of the year, So you're seeing signal strengthening and you're 0:09:59.640 --> 0:10:01.920 losing some of the concern. 0:10:01.720 --> 0:10:04.040 Pro to Paul, I do this on a weekly chart. 0:10:04.160 --> 0:10:06.040 Is a rule of thumb. Of course, it goes daily, 0:10:06.400 --> 0:10:07.679 and I go to a week ago. 0:10:07.480 --> 0:10:08.840 Week with no question about that. 0:10:08.880 --> 0:10:11.200 Lisa's nodding her head. She knows. She goes log on 0:10:11.360 --> 0:10:15.200 on a weekly basis, Gold up fifty one percent, spots, 0:10:15.240 --> 0:10:19.400 silver up seventy three percent year to date commodities. That's 0:10:19.440 --> 0:10:19.920 a trend. 0:10:20.280 --> 0:10:22.800 Are you guys on that exactly? I mean, that is 0:10:22.800 --> 0:10:25.240 the other really interesting big trend. And we're getting a 0:10:25.240 --> 0:10:29.240 lot of questions from investors about it because from both 0:10:29.240 --> 0:10:32.480 a fundamental perspective, buying gold. It seems to be your 0:10:32.880 --> 0:10:35.400 any precious metals seems to be that go to safe 0:10:35.400 --> 0:10:36.080 haven trade. 0:10:36.520 --> 0:10:39.360 When the dollar's been weaker. You're looking at the yen now. 0:10:39.360 --> 0:10:43.240 Weakening, so the precious so it's buy gold and buy 0:10:43.280 --> 0:10:44.040 the stock market. 0:10:44.080 --> 0:10:45.600 I mean, that's kind of an interesting combo. 0:10:45.679 --> 0:10:48.520 But how about the dollar. The dollar again, it folks 0:10:48.520 --> 0:10:51.120 that traded off about eight nine percent from that early 0:10:51.200 --> 0:10:55.280 early twenty twenty five levels. Now what's kind of stabilized? 0:10:55.320 --> 0:10:58.200 It seems like, so is the sell off over? Is 0:10:58.240 --> 0:11:01.760 the trend? Is that self trend kind of over for 0:11:01.800 --> 0:11:02.280 the dollar? 0:11:02.640 --> 0:11:04.160 That is an interesting question. 0:11:04.280 --> 0:11:07.480 We have seen some idiosyncratic movements in the dollar, so 0:11:07.520 --> 0:11:10.600 you're seeing certain currencies like the Swedish kroner, the Turkish 0:11:10.600 --> 0:11:14.240 lira kind of gaining some ground on the dollar. My 0:11:14.440 --> 0:11:16.760 view on this is it's a trend that is sort 0:11:16.760 --> 0:11:19.079 of petering out, so it's losing some of its strength. 0:11:19.600 --> 0:11:23.400 And part of this is there's been so much, so 0:11:23.559 --> 0:11:26.640 much backing for that weaker dollar, so much hedging demand 0:11:26.760 --> 0:11:30.360 against the dollar that has built up. We also have 0:11:30.480 --> 0:11:33.120 rate cuts on the horizon, which is also very negative 0:11:33.160 --> 0:11:36.040 for the dollar. So I'm not saying that I'm positive 0:11:36.040 --> 0:11:38.840 on the dollar yet because of that. But it is 0:11:38.880 --> 0:11:42.120 a trend that, as Tom would say, losing some of 0:11:42.160 --> 0:11:43.320 its convexity. 0:11:43.400 --> 0:11:45.520 He's in steam, I would put. 0:11:45.360 --> 0:11:47.679 It, but he's lost convexity. 0:11:47.880 --> 0:11:49.040 That's right exactly. 0:11:50.200 --> 0:11:52.840 So what's the What are the trades you guys are 0:11:53.280 --> 0:11:54.480 looking at these days? 0:11:54.679 --> 0:11:55.760 So the biggest. 0:11:55.360 --> 0:11:57.800 Trades that you're seeing in the market is clearly equities 0:11:57.800 --> 0:12:01.240 and precious metals. But interestingly enough, you haven't seen a 0:12:01.240 --> 0:12:05.120 lot of movement at fixed income. It's been long and short, 0:12:05.200 --> 0:12:07.360 and it feels like that's an area we're going to 0:12:07.480 --> 0:12:11.559 have some change in the next few months, but the signals. 0:12:11.120 --> 0:12:11.920 Are really weak. 0:12:12.120 --> 0:12:15.160 You guys short in the market right now. 0:12:15.160 --> 0:12:16.640 We're not short in the US. 0:12:16.640 --> 0:12:19.360 We're seeing short positions in Europe, so you're seeing things 0:12:19.400 --> 0:12:21.719 like jgb's also and and. 0:12:21.720 --> 0:12:25.400 You know the UK, but the US has remained long. 0:12:25.520 --> 0:12:28.720 To be clear on your short JGB, your short price. 0:12:28.960 --> 0:12:31.479 Yes, price down, yield up, correct. 0:12:31.320 --> 0:12:34.760 More worse, worser, as they say. Katie Comminsky with us 0:12:34.760 --> 0:12:36.840 for a good chat. This is for Global Wall Street. 0:12:37.040 --> 0:12:39.920 We welcome all of you across America around the world 0:12:39.960 --> 0:12:43.960 on YouTube. Subscribe to Bloomberg Podcast Paul. 0:12:44.200 --> 0:12:48.120 So governments shut down people like you. Do you care 0:12:48.160 --> 0:12:48.520 about that? 0:12:49.160 --> 0:12:50.880 I mean, I obviously care about. 0:12:50.640 --> 0:12:52.240 It because I got to fly home today, you know 0:12:52.280 --> 0:12:56.600 what I mean. But you know, but what's really interesting 0:12:56.720 --> 0:13:00.400 is the markets are seeing through it, and they're focus 0:13:00.440 --> 0:13:03.040 on growth, and they're focused on let's not miss out 0:13:03.040 --> 0:13:06.880 on this AI bubble or potential rally, whichever you want 0:13:06.880 --> 0:13:07.640 to call it. 0:13:07.720 --> 0:13:09.320 So it's not moving on that. 0:13:09.880 --> 0:13:10.880 Okay, what we're gonna do. 0:13:10.880 --> 0:13:15.199 Now, folks, it's my second dose of nerd Friday Nerds Show. 0:13:15.280 --> 0:13:16.400 We welcome all of you. 0:13:16.920 --> 0:13:21.280 What a privilege years ago to interview at length Ed Thorpe, who. 0:13:21.240 --> 0:13:22.360 Invented so much of this. 0:13:22.520 --> 0:13:27.959 He basically, folks, took Las Vegas into the classroom, which 0:13:28.000 --> 0:13:33.080 was at the time scandalous, and brought Las Vegas. How 0:13:33.120 --> 0:13:37.480 do I not lose money over to the stock market? 0:13:37.760 --> 0:13:42.360 How do I not lose money? Katie Kaminski, My religion 0:13:42.720 --> 0:13:46.920 is anti Martingale theory. Folks, the stock you buy it 0:13:46.960 --> 0:13:49.400 at one hundred, it goes to ninety. I think I'll 0:13:49.400 --> 0:13:53.920 double up. That's what most people do. At Thorpe saying 0:13:54.040 --> 0:13:56.640 by it at one hundred and only add to the 0:13:56.720 --> 0:14:02.480 portfolio if it goes up anti Martin gill a policy 0:14:02.960 --> 0:14:04.600 out of COVID and forward. 0:14:04.880 --> 0:14:05.880 How has it been working? 0:14:06.280 --> 0:14:07.880 So it's had its moments. 0:14:08.000 --> 0:14:10.440 I think what's really exciting about that is he talks 0:14:10.480 --> 0:14:12.880 a lot at Thorpe talked a lot about Kelly betting, 0:14:13.200 --> 0:14:16.200 and this is the idea that your conviction is a 0:14:16.240 --> 0:14:19.080 function of the strength of the trend of your position, 0:14:19.160 --> 0:14:21.640 and it works very well in poker and in other 0:14:21.680 --> 0:14:24.440 areas as well, and for people who are not familiar 0:14:24.440 --> 0:14:27.400 with Kelly betting, it's about this idea that you measure 0:14:27.640 --> 0:14:28.800 the strength of the. 0:14:28.600 --> 0:14:30.760 Probability of your bet, and when. 0:14:30.560 --> 0:14:33.440 Your bet strength is stronger than you take more risk. 0:14:33.880 --> 0:14:36.240 And that's sort of what trend falling is really trying 0:14:36.280 --> 0:14:39.880 to do, is trying to adjust positions as a function 0:14:39.960 --> 0:14:42.480 of the conviction of the markets and how they move. 0:14:42.560 --> 0:14:45.520 And it works very well in a world where the 0:14:45.560 --> 0:14:47.680 headline risks don't run the show. 0:14:48.160 --> 0:14:51.320 So the fact that government shutdown is not causing noise. 0:14:51.800 --> 0:14:54.960 You're seeing those trends being quite profitable for trend falling 0:14:55.000 --> 0:14:57.760 in the last two to three months because that consistent 0:14:57.800 --> 0:15:01.240 approach of measuring and adjusting is working pretty well. 0:15:01.400 --> 0:15:04.760 One of those trends slash potentially bubble risk for a 0:15:04.760 --> 0:15:07.600 lot of people is just this whole AI narrative in 0:15:07.640 --> 0:15:10.400 the market. And it got maybe to a fever pitch 0:15:10.440 --> 0:15:13.400 over the last week to two weeks when we saw 0:15:13.680 --> 0:15:16.600 investments by these big tech companies like Nvidia into these 0:15:16.960 --> 0:15:19.960 private companies platforms like open Ai, and then they would 0:15:20.000 --> 0:15:24.720 then commit to buy chips and this circular trade. People said, boy, 0:15:24.760 --> 0:15:28.040 this doesn't feel right or it feels a little fishy, 0:15:28.200 --> 0:15:31.960 but boats are rising on this trade. How do you 0:15:32.000 --> 0:15:32.800 guys think about that? 0:15:32.920 --> 0:15:35.360 So the way we think about bubbles as a trend 0:15:35.360 --> 0:15:38.880 follower is it's really about measuring. It's very hard to 0:15:38.920 --> 0:15:42.160 pick tops and bottoms of any sort of trend, and 0:15:42.240 --> 0:15:44.800 so what you want to think about is a trend 0:15:44.840 --> 0:15:48.280 can actually go much longer than you would expect. And 0:15:48.320 --> 0:15:50.680 that's this idea that Tom was talking about about the 0:15:50.720 --> 0:15:53.840 Kelly wedding. So you continue to trade into it and 0:15:54.160 --> 0:15:56.680 sometimes it could take months. I mean, just because we 0:15:56.800 --> 0:15:59.640 are worried, it doesn't mean that the market will react. 0:15:59.880 --> 0:16:02.960 We wait till the market reacts to confirm that hey, 0:16:03.280 --> 0:16:06.440 this is actually you know, something that's going against us. 0:16:06.600 --> 0:16:10.080 What's the biggest let me make this personal. What's the 0:16:10.120 --> 0:16:14.960 biggest mistake Lisa Matteo's kids make sitting on a couch. 0:16:15.080 --> 0:16:16.320 Trading through Robin Hood. 0:16:16.640 --> 0:16:20.000 I want you to speak to our audience, and particularly 0:16:20.000 --> 0:16:23.240 our audience with kids that are learning. They don't have 0:16:23.360 --> 0:16:26.840 your mathiness. They don't know who Andrew Lowe is. Okay, 0:16:27.120 --> 0:16:30.200 what's the biggest mistake the trading crew is making today? 0:16:30.760 --> 0:16:34.560 I think, and this is a personal view, emotions and 0:16:34.640 --> 0:16:35.840 moving on your emotions. 0:16:35.840 --> 0:16:38.680 That's why we have a diligent process. Is where you 0:16:38.760 --> 0:16:40.000 make the biggest mistakes. 0:16:40.000 --> 0:16:42.640 And actually some of the research that Andrew low did 0:16:43.360 --> 0:16:48.080 looking at investor behavior, they find that it's precisely those 0:16:48.240 --> 0:16:51.600 panic cells, those sort of emotions where you kind of say, 0:16:52.360 --> 0:16:55.120 you know, things go down and panic that actually costs 0:16:55.120 --> 0:16:57.520 you the most. So I think this idea that your 0:16:57.520 --> 0:17:01.800 emotions connected to what you decide is actually the dangerous part. 0:17:01.640 --> 0:17:04.160 Of a line. A lot of the math, A lot 0:17:04.160 --> 0:17:08.359 of the research shows returns are generated over a longer 0:17:08.359 --> 0:17:12.040 period of time and a relatively few discrete time periods. 0:17:12.200 --> 0:17:15.000 So it goes to Tom's point, you need to be 0:17:15.119 --> 0:17:17.879 in the market if you try to time the market. 0:17:19.000 --> 0:17:21.200 I don't know that just seems like a way tough game. 0:17:21.359 --> 0:17:23.480 It's just you kind of have to just be in 0:17:23.560 --> 0:17:27.480 the market, you know, otherwise you're just going to miss it. 0:17:27.520 --> 0:17:29.400 I think, yeah, I mean who knows. I mean, look 0:17:29.440 --> 0:17:31.440 at the equity markets now, it could be months. 0:17:31.760 --> 0:17:33.199 Jim Kramer and I've talked about this. 0:17:33.280 --> 0:17:35.159 Jim has been very good about it in speeches and 0:17:35.200 --> 0:17:38.200 that there's a huge baseball analog here and that if 0:17:38.240 --> 0:17:41.560 you line up, you know, to keep it conversational. Ten trades, 0:17:42.440 --> 0:17:44.960 all of your alpha comes out of two or three winners. 0:17:45.280 --> 0:17:48.959 Let's expand that out to a lifetime of trade. You've 0:17:48.960 --> 0:17:51.879 got to retirement plan. Folks, you're wick a conservative and 0:17:51.920 --> 0:17:54.000 you're playing a speculative portfolio. 0:17:54.520 --> 0:17:58.160 If you do one hundred events, how many of those 0:17:58.400 --> 0:18:01.640 really create alpha? I'm going to say eighteen out of one. 0:18:01.600 --> 0:18:05.480 Hundred, So it depends for trend falling, it's much more 0:18:05.560 --> 0:18:08.320 of like a fifty to fifty ratio where your hits 0:18:08.440 --> 0:18:10.840 and the hit rate and the win is higher on 0:18:10.880 --> 0:18:13.199 that fifty to fifty. So that actually shows you that 0:18:13.800 --> 0:18:16.680 trading in the markets, it's very difficult and the edge 0:18:16.720 --> 0:18:20.280 is small, and so it's the diligence that actually matters. 0:18:20.320 --> 0:18:23.719 As opposed to kind of picking that specific winner. 0:18:23.880 --> 0:18:25.000 You can't be there the winner. 0:18:25.040 --> 0:18:28.200 You can pick a set of winners. But I think 0:18:28.240 --> 0:18:32.280 the industry is weaned that everything can be a winner. 0:18:32.320 --> 0:18:33.680 You can win sixty. 0:18:33.359 --> 0:18:35.479 Paul sixty percent, seventy. 0:18:35.640 --> 0:18:39.280 This is there's no evidence of that within the Vanderbilt 0:18:39.400 --> 0:18:40.040 is lead on this. 0:18:40.320 --> 0:18:41.800 That's why Damien's nuts like. 0:18:41.800 --> 0:18:45.800 Issue is they did great research at Vanderbilt, but I mean, 0:18:45.840 --> 0:18:49.840 you just don't have that. It's not Munger's brilliant on this, 0:18:49.920 --> 0:18:52.480 the late Charles Munger. Yeah, absolutely brilliant on. 0:18:52.440 --> 0:18:52.920 This, Katie. 0:18:52.920 --> 0:18:54.879 How do you guys decide to sell a winner? 0:18:55.880 --> 0:18:57.480 So the way that we think. 0:18:57.280 --> 0:18:59.520 About it's like winners philosophical. 0:19:00.240 --> 0:19:03.159 So the way to think about winners is when winners 0:19:03.160 --> 0:19:05.960 are becoming losers, you know what I mean. So we're 0:19:05.960 --> 0:19:08.919 always thinking about the sizing. So for example, if you 0:19:08.960 --> 0:19:11.000