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Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast.

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Speaker 1: My name is Mike Reagan. I'm a senior editor at Bloomberg,

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Speaker 1: and I'm val Donna, Higher, across asset reporter with Bloomberg.

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Speaker 1: This week on the show. Well, obviously this is not

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Speaker 1: an easy environment to invest it. Stocks are up big

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Speaker 1: one day, down big the next day. Bond prices are

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Speaker 1: rising some days but following most days. So what are

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Speaker 1: the right asset classes to be in right now? While

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Speaker 1: the Federal Reserve is fighting inflation with both fists. We'll

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Speaker 1: get into it with an executive who focuses on multi

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Speaker 1: asset portfolios and hedges at a major hedge fund firm.

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Speaker 1: But first of all, Donna, I have to confess, um,

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Speaker 1: if I drift off into outer space during this podcast

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Speaker 1: and you have to bring me back hurt, it's only

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Speaker 1: because I'm going on vacation in less than twenty four hours.

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Speaker 1: I'm going to southern Californy. Yeah, because I hear that

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Speaker 1: they have some beaches in southern California that are almost

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Speaker 1: they do, almost as nice as the Jersey Shore. So

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Speaker 1: I'm gonna look into that almost as nice. New Jersey

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Speaker 1: is always number one, right, at least for me and

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Speaker 1: you and a lot of our listeners. Maybe we'll see.

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Speaker 1: We'll see. It depends if they have ski ball or

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Speaker 1: not on these these so called California beaches. I think

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Speaker 1: that's that's an important Where are you going in California.

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Speaker 1: We're going to Santa Monica and uh for like three days,

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Speaker 1: and then San Diego and the whole Reagan clan, all

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Speaker 1: three kids, my wife, we're all we're all flying out

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Speaker 1: in about twenty four hours. We're big ski ball players,

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Speaker 1: so that lot's going to ride on how good the

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Speaker 1: ski ball tables are out there. I don't know. You're

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Speaker 1: gonna have a really great time. San Diego is my

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Speaker 1: my number one favorite city, I think, is it? Yeah?

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Speaker 1: I love it because it's sunny, like three hundred sixty

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Speaker 1: four days of the year or something. You're well more

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Speaker 1: traveled than me. I've I've been there once and it

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Speaker 1: was I don't remember much of it, but maybe when

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Speaker 1: you were there, you're you're a big jet setter, and

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Speaker 1: so you gotta find someone to fill in for me

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Speaker 1: next week? All right? Yeah, I do heads up for

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Speaker 1: all the listeners. Mike won't be around. I'm gonna have

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Speaker 1: fun on your behalf. I'm sure probably make fun of you.

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Speaker 1: I can. I can feel the roasting already. Yeah, I

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Speaker 1: do want to bring in our guests this week, and

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Speaker 1: maybe he can enlighten us on where he's calling us from.

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Speaker 1: But welcome to Peter van doye Ert. He's the managing

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Speaker 1: director of Multi Asset Solutions at Man Group. Welcome to

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Speaker 1: the show, Peter, thanks so much, thanks for having me on.

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Speaker 1: I'm in New York for what it's worth. Um, oh

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Speaker 1: there you go. Well, some some ugly beaches maybe best. Yeah,

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Speaker 1: But Peter, maybe just to start off, can you tell

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Speaker 1: us about your role at Main Group. Sure? So I

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Speaker 1: sit inside Man Solutions and I worked pretty closely with

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Speaker 1: clients who whatever problem they might have. For example, it

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Speaker 1: starts off typically as I have a bunch of risky assets,

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Speaker 1: how do I go about hedge them? And then it

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Speaker 1: kind of morphs into this inflation thing scares me? So

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Speaker 1: what do I do about that? And you know, maybe

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Speaker 1: I should get out of bonds. So we spent a

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Speaker 1: lot of time talking about risk mitigating portfolios, but we

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Speaker 1: also spend a lot of time just talking about asset allocation,

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Speaker 1: whether it's risk based, technical, asset allocation or you know,

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Speaker 1: something broader like strategic asset allocation. Just for some background

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Speaker 1: on the firm, Man Group is a hundred forty billion

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Speaker 1: dollar hedge fund manager UM. In terms of assets center management,

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Speaker 1: we do a lot of different things. We have discretionary managers,

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Speaker 1: we've got systematic UH in form of c t A resparity,

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Speaker 1: those sorts of things, and we've got a countimental kind

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Speaker 1: of long only firm called Numeric. So we do a

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Speaker 1: lot of different things, and all of those different things

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Speaker 1: come to bear to this sort of market where it

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Speaker 1: takes more than one one way to figure out what

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Speaker 1: to do, more than just discretionary, more than just systematic,

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Speaker 1: And I think that's what Man Solutions tries to help

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Speaker 1: clients with, how to access different approaches to what seems

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Speaker 1: to be a really big problem, you know, developing the

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Speaker 1: market with a FED and what to do with bonds

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Speaker 1: and those sort of things, Peter. It seems like especially

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Speaker 1: tricky time to be involved in risk parity. You know,

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Speaker 1: if you're if you're used to having a balanced portfolio

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Speaker 1: of stocks and bonds and maybe even levering up one

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Speaker 1: side or the other, how are risk party strategies reacting

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Speaker 1: to this environment. Are they sort of abandoning their old

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Speaker 1: uh playbooks? Are they? Are they thinking outside of the box?

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Speaker 1: I mean, I don't know how much. You know, Uh,

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Speaker 1: it's sort of coded into their DNA that they can't

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Speaker 1: sort of stray too much from the main stocks and

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Speaker 1: bonds strategy. But what's some of the discussions going on

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Speaker 1: around risk parity these days? Yeah, I think there's It

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Speaker 1: depends a little bit how you manage it, and it

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Speaker 1: depends what the risk parity fund is set up with.

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Speaker 1: So you know, for our own risk parity funds, they

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Speaker 1: actually have waiting in commodities. So you start off the

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Speaker 1: year if you're a sixty four manager and you're stuck

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Speaker 1: with bonds and equities, they both went down the first corner,

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Speaker 1: and what are you supposed to do about that? And

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Speaker 1: it turns out if you have if you diversify your

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Speaker 1: bonds and equities, And that's what risk parity tries to do, right,

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Speaker 1: It tries to diversify first between bonds and equity, so

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Speaker 1: it takes more bond risk. I think that's what you're

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Speaker 1: alluding to. Problematically, Um, Secondarily, we might look at other

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Speaker 1: asset classes. We do use tips for inflation we have commodities,

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Speaker 1: and I think a lot of our peers as well,

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Speaker 1: so there's a bit of you know, the huge spike

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Speaker 1: up and commodities has been a big benefit for risk parity.

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Speaker 1: So I don't think you see a substantially horrible underperformance

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Speaker 1: versus say sixty forty UM. And it also goes about

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Speaker 1: how you risk manage it. You know, there are very

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Speaker 1: passive versions of this where you just own bonds and

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Speaker 1: equities and you own too many bonds. The more actively

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Speaker 1: you manage it, you start looking at correlations among these things. Right,

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Speaker 1: what if it turned out that all of my assets

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Speaker 1: were correlated and they all went down together, then my

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Speaker 1: risk parity matrix is a bit wrong. Right, I'm trying

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Speaker 1: to target at ten vall or kind of a consistent

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Speaker 1: volatility in my fund. If everything goes down together, I

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Speaker 1: have no diversification. That's problematic. So you know, firms like

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Speaker 1: ours we have correlation overlays to help mitigate this. So

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Speaker 1: between correlation and trend overlays, things that take you out

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Speaker 1: of basically assets that aren't working. And I think in

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Speaker 1: a way that's what man Solutions is about too, and

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Speaker 1: how we talk to client. We take some of those

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Speaker 1: approaches that we see in our disparity fund and say,

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Speaker 1: why don't you start applaying this to your own portfolio.

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Speaker 1: Even if you don't do it a risparity approach, you

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Speaker 1: at least have something going on that, Hey, bonds and

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Speaker 1: equities are correlated. They're not supposed to be correlated. That's

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Speaker 1: bad for me. I'll cut some risk here and that's

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Speaker 1: and that's that's that's how risparity. If you're if you're

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Speaker 1: taking that approach, you're surviving. Um, you're probably in line.

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Speaker 1: Nobody wants to be in line. But after years about performance,

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Speaker 1: that's not bad. And maybe we'll talk about it a bit.

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Speaker 1: You know, bonds are at a level where they might

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Speaker 1: be useful again, and that's probably not in everyone's mindset

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Speaker 1: because right now, I mean we've had clients, you know,

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Speaker 1: last year, clients would say, you know, our bonds still

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Speaker 1: any use Should we get rid of them? What should

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Speaker 1: we do this year? Two basis points higher in bonds?

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Speaker 1: Or should I just get rid of these? Should I

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Speaker 1: sell these? There's a bit of a little panicky feeling,

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Speaker 1: and I would say they're dead wrong. But when I

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Speaker 1: see a CPI print of eight and a half percent.

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Speaker 1: You can't blame them, right, there's a there's a little

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Speaker 1: something that that you know, makes you feel awkwardly uncomfortable

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Speaker 1: about that. Well, speaking of the sell off that we've

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Speaker 1: seen in bonds and stocks, we've heard a lot of

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Speaker 1: people say that sixty is dead and I'm wondering what

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Speaker 1: you make of that and and actually where you might

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Speaker 1: recommend people find diversification. Yeah, you always hate to say

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Speaker 1: dead because then like next year we'll be back. And

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Speaker 1: you guys, so you said always dead, And did you

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Speaker 1: see the returns on sixty four last twelve months? And

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Speaker 1: so I'm not gonna say dead just for others, But yeah,

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Speaker 1: I guess my question is, you know, was it ever

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Speaker 1: really alive in a sense that it was a It

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Speaker 1: was kind of a random to begin with. I mean,

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Speaker 1: if you think of waiting sixty equities and bonds on

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Speaker 1: a risk basis, you're like equities most of the time, right,

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Speaker 1: Occasionally bonds sell off, usually equities go up most of

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Speaker 1: the time. For the last thirty years, you've just wanted

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Speaker 1: to own a lot of equities, and that's what sixty

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Speaker 1: pretended to let you do. So I think where we

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Speaker 1: are now is a bit different. We're in a universe

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Speaker 1: of equities and bonds going down together. There feels a

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Speaker 1: lot there's a lot of instability. We could talk about

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Speaker 1: evaluations and the interplay with bonds in a bid, I guess,

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Speaker 1: but that instability is disconcerting if they're both going down.

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Speaker 1: I need to find things that don't behave like bonds

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Speaker 1: and equities, which means commodities. And so it's always great

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Speaker 1: when a person like me tells your investors, you know,

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Speaker 1: you feel, buy a bunch of commodities because that's diversifying.

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Speaker 1: And your investor will say, but you know, crude was

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Speaker 1: like a hundred and thirty two weeks ago, and it

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Speaker 1: was minus fifty two years ago. So where am I

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Speaker 1: supposed to live with that asset? I don't have any

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Speaker 1: reasonable way to use it. But the truth of the

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Speaker 1: matter is, if you're going to get out of this

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Speaker 1: is sixty dead conundrum, or at least find a place

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Speaker 1: to stay, you know, while you figure out what you're

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Speaker 1: gonna do with sixty bonds, it's got to be multi asset,

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Speaker 1: whether it's multi asset via commodities or real assets, infrastructure,

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Speaker 1: hedge funds. You know, I work for hedge funds, so

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Speaker 1: I have to say hedge funds. But you know, these

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Speaker 1: sort of things, you need to find different ways to

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Speaker 1: make money that aren't just beta and bonds and beta

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Speaker 1: and equities. And I think that's the challenge that are

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Speaker 1: in faced with right now. Is there anything popping out

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Speaker 1: of you in that real asset space? Uh, you know,

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Speaker 1: that's to a tractive in this environment, you know. So

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Speaker 1: for us, we tend to focus on the liquid part

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Speaker 1: of the curve of the asset classes. So you know,

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Speaker 1: perhaps buying an airport works, um, but that's not what

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Speaker 1: we do. So we're very much we take we we

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Speaker 1: invest in liquid assets, we risk manage them, and we

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Speaker 1: find ways to make them fit in portfolios, and using

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Speaker 1: the risk control, we try to suck something more out

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Speaker 1: of them. Right. So, last time I was on we

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Speaker 1: had the bond problem conversation. We talked about using tail hedges,

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Speaker 1: which are relatively cheaper than to hedge an equity portfolio.

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Speaker 1: Instead of doing six just go all equities and hedge

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Speaker 1: it pretty aggressively, and you kind of get rid of

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Speaker 1: your bond risk and and you isolate what you're really

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Speaker 1: after high yield and equities. It's kind of a risky

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Speaker 1: portfolio today's universe. I think you do have to live

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Speaker 1: in commodities. It's just you have to have some approach

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Speaker 1: to it, right, There has to be some how do

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Speaker 1: I get out of this? One of my you know,

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Speaker 1: one of my is it as simple as a stop loss? Maybe? Right?

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Speaker 1: You know you can stop in and out of position.

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Speaker 1: I don't find that a very satisfying answer. So the

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Speaker 1: way we tend to look at it is on two

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Speaker 1: basic is one and a trend format. And that's something

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Speaker 1: you should expect from Man Group. We have a big

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Speaker 1: trend following firm. But it turns out in these big

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Speaker 1: regime shifts, where markets go through six twelve month regime shocks,

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Speaker 1: you have very long moves in asset classes. So we've

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Speaker 1: seen it in bonds of steadily sold off. We've seen

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Speaker 1: commodities steadily rally. Admittedly there's a bit of a war

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Speaker 1: premium that's built in there, but that's a starting point

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Speaker 1: of how you might go about using that. Now, maybe

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Speaker 1: use trend or maybe use some other lead lag models. Right.

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Speaker 1: It turns out when commodities start to go down aggressively

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Speaker 1: before a big market correction, it's kind of a good

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Speaker 1: signal that equities could be in trouble. So if you

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Speaker 1: look back to COVID, commodities went down first and then

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Speaker 1: equities tank. So the more you can deal cross asset

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Speaker 1: and the more you can take signals from these cross assets,

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Speaker 1: whether it's from emerging market to warn you about commodities

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Speaker 1: or FX to warn you, the more integrated your portfolio

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Speaker 1: can be. And into some extent it takes an asset

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Speaker 1: manager to do it because you really have the time

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Speaker 1: to chase all this stuff, right, are you gonna wake

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Speaker 1: up tomorrow and say, so, where is this lattis today

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Speaker 1: or where is the re I? And is that working

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Speaker 1: for me? I think that's quite difficult, And so trend

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Speaker 1: kind of goes after that by getting you not just

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Speaker 1: multi asset commodities, but the FX markets are really fascinating, right,

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Speaker 1: you know people have gotten accustomed to so I most

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Speaker 1: of my career as of all, guy in a tail heager.

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Speaker 1: Before before this role, people loved owning the end for

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Speaker 1: every crash and so all of those yn options and

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Speaker 1: we own some ourselves because you know, we're agnostic were tailhages.

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Speaker 1: We don't try to outsmart the market. We just try

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Speaker 1: to find cheap hedges, and you know, we struck them

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Speaker 1: at one twelve and one thirteen in in in in

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Speaker 1: the end and Jan Feb and the ends at one

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Speaker 1: right now and just keeps going the wrong way. If

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Speaker 1: you're invested kind of naively like us, we just say

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Speaker 1: I lost very little premium. It's a good, you know,

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Speaker 1: explosive tailheage. If you're someone who says, I'm an investor

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Speaker 1: in the nique, but in a way that the yen

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Speaker 1: helps me out, so I'll kind of dollarize my investment.

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Speaker 1: You've been pretty shocked because the nique is down and

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Speaker 1: the end is down, so it's just not working. And

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Speaker 1: so those are the things where trend can help you

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Speaker 1: out a lot, where you just simply say there's something

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Speaker 1: new in the market. It's a re team that I

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Speaker 1: don't understand. So when I see this kind of thing,

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Speaker 1: I'll get out of the way, or I'll change my

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Speaker 1: focus to be tighter. I guess, right, Bill, do I

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Speaker 1: cancel my plans to buy an airport? I was thinking

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Speaker 1: about buying an airport, But where would your airport? New Jersey? Yeah,

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Speaker 1: that's the that's the other problem with it. Yeah, I

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Speaker 1: don't know. I don't know where I would put it

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Speaker 1: where it's It's pretty fascinating what people will ask you too.

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Speaker 1: They'll say, can you model our portfolio? You know, see

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Speaker 1: how your approach might change things. So what we often

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Speaker 1: do is say, look, you have some liquid assets, We'll

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Speaker 1: take some index proxies, like there's a private equity index

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Speaker 1: proxy and really in the in the public markets, we

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Speaker 1: can use rates for real estate, and there's an infrastructure

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Speaker 1: index that uses all kinds of public empity proxies. So

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Speaker 1: we tried to do that for a client. We just

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Speaker 1: couldn't match the result. It turned out about eight of

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Speaker 1: their infrastructure assets were in airports and travel, and so

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Speaker 1: it's tricky to pick that up after COVID. We I'm

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Speaker 1: not sure what we're missing because everyone's still you know,

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Speaker 1: use a highway between now and the next six years

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Speaker 1: and so pretty good. Yeah, the following questions you get

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Speaker 1: like from that, is there anything I can do to

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Speaker 1: hedge that? And you're kind of left non blust and Peter,

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Speaker 1: just to wrap up that conversation we were having about

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Speaker 1: bonds earlier, I think you wrote recently that for the

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Speaker 1: first time in my career, I have investors increasingly asking

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Speaker 1: me if they should be shorting bonds as part of

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Speaker 1: their asset allocation. And I'm wondering what you tell them,

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Speaker 1: So I'm I'm a bit reluctant to say short bonds

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Speaker 1: as part of an asset allocation. So there's some there's

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Speaker 1: a difference between tactical and strategic, right, So the first

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Speaker 1: thing you're gonna get is fired by your board if

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Speaker 1: you take a strategic bet short bonds. And there's the crash, right,

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Speaker 1: So we know that bonds have a lot of benefits

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Speaker 1: of the crash at these yields. I mean, if you

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Speaker 1: hate bonds today at to seventy five, then I'm not

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Speaker 1: sure why you like them at one fifty before COVID

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Speaker 1: And admittedly there's a totally different inflation paradox. I'm not

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Speaker 1: trying to be too glib about it, um. So I mean,

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Speaker 1: I look at trend you know, most systematic managers inside

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Speaker 1: trend funds are probably short bonds. Um. I don't think

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Speaker 1: there's any secret there. You can see the open interests

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Speaker 1: in some of the futures, So I think it's the

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Speaker 1: right position. I just worry that, you know, people are

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Speaker 1: going to manage it right, right, So when when that

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Speaker 1: when bonds start to kind of you find a level

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Speaker 1: and then you sort of get out of these trend positions.

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Speaker 1: So there's some kind of process to getting out of

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Speaker 1: it when you're maybe wrong or the the lack of

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Speaker 1: utility has gone. For me, I'm much more focused on

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Speaker 1: the correlation, and right now does seem like bond equity

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Speaker 1: correlations aren't working well. So the idea of short bonds

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Speaker 1: isn't crazy, right, it seems to be stabilizing your portfolio,

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Speaker 1: but you need to do it in a pretty tight way.

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Speaker 1: So I, you know, my general senses, is a bridge

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Speaker 1: too far for a lot of passive managers. Right if

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Speaker 1: you're if you have a big pension board with twelve

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Speaker 1: fifteen trustees who are of mixed background, and you know

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Speaker 1: between industries and hedge funds and finance, you're gonna get

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Speaker 1: some really nasty questions and probably the terrific examples that

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Speaker 1: the big pension that stuff tail hedge. You know, they

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Speaker 1: caught a lot of flak in the press for that,

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Speaker 1: but there are a lot of good reasons they have

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Speaker 1: done it right to have tail hedges, and a lot

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Speaker 1: of good reasons not to tail hedge. So people make

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Speaker 1: kind of intellectual decisions. It's a question of how badly

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Speaker 1: you get second guests. And I guess my example of

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Speaker 1: that is you don't want to be the guy who says, well,

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Speaker 1: what happened was this right? Because once you're saying that too,

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Speaker 1: and I see you're sort of you know, you're already

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Speaker 1: in trouble, just like if you said it to your spouse,

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Speaker 1: you know you're in trouble with what happened was you know,

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Speaker 1: a commentary? And so I think, you know, I think

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Speaker 1: it's the right technical house at allocation. If you put

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Speaker 1: some risk around it, great. If you can rely on

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Speaker 1: a trend type manager, another type of you know, as

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Speaker 1: a manager who has some clear quantitative signals around it,

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Speaker 1: that probably helps you a lot more too, and it

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Speaker 1: gives you some coverts saying you know what, the way

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Speaker 1: they think about it is right. I like the signals

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Speaker 1: they use, and it should keep me out of some

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Speaker 1: big trouble if some big trouble comes up. Because after all,

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Speaker 1: bonds were ballast for you for thirty years. So to

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Speaker 1: turn around and say I'm not going to use it,

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Speaker 1: I'm gonna go the opposite way. You know, most of

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Speaker 1: the people you talk to aren't going to have experienced that,

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Speaker 1: and including me, right, I'm not going to have experience

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Speaker 1: to say, yeah, bonds are lethal, you know, get out

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Speaker 1: of the way, no matter what real rates are. As recommener,

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Speaker 1: I'd like to unpack the notion of trend trend following

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Speaker 1: a little bit. You know. It's one of those um

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Speaker 1: things that sounds simple enough on the surface, you know,

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Speaker 1: but by it go along when the price is going up,

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Speaker 1: short when it's going down. Um, you know, and typically,

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Speaker 1: you know, if you're talking about trend following in a

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Speaker 1: hedge fund context, you're talking about c t A s

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Speaker 1: like you guys managed commodity trading advisors that are pretty

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Speaker 1: much only involved in the futures market. Um. But I'm

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Speaker 1: wondering about a year like this where we saw, you know,

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Speaker 1: an obvious down trend inequities and then a quick snap back,

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Speaker 1: and then now we're back to the down trend. I mean,

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Speaker 1: does your typical ct A trend following strategy is it

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Speaker 1: able to ride both of those trends or is it

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Speaker 1: you know, the the quick snap back. Is that something

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Speaker 1: you just take on the chin and and just hold

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Speaker 1: on longer for the down trend? You know? I guess

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Speaker 1: it all depends on on sort of how fine tune

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Speaker 1: the strategy is. But you know, what's what you're thinking

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Speaker 1: on that, you know, is it is that sort of

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Speaker 1: sure snap back rally something you can actually you know,

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Speaker 1: flip sides on and take advantage of or not. So

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Speaker 1: it depends who you are and your speed. So it's

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Speaker 1: a bit like saying I bought a one year tail

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Speaker 1: option to hedge my portfolio, and another guy bought a

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Speaker 1: three month one. If the market crashes in the first

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Speaker 1: three months, he wins because he spent less money. So

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Speaker 1: on the trend side, if you're a super fast trend guy,

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Speaker 1: so you react to these kind of quick rebounds and

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Speaker 1: then you chase the trend quickly, then you might pick

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Speaker 1: up the sharp reversals very very quickly. You did well,

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Speaker 1: you'd find in COVID and you've got the bounce back

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Speaker 1: in COVID very well. The problem with fast trend guys,

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Speaker 1: which is not a I shouldn't say problem, the thing

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Speaker 1: there's a tradeoff. The tradeoff is that sometimes you make

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Speaker 1: a mistake and you know, you know, a bunch of

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Speaker 1: dealers come out in February, all these strategists trying to

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Speaker 1: call the bottom and say we love stocks here. You

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Speaker 1: should pile in, and then the trend reverses quickly. That's

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Speaker 1: the faster guy might chase it, and so he may reverse.

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Speaker 1: And then it turns out strategists are just trying to

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Speaker 1: be on CNBC, so you know they're call to buy

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Speaker 1: stocks wasn't a good one, and it all went down again,

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Speaker 1: so you turned. On the other hand, if you're really slow,

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Speaker 1: you missed Covid entirely. You started to sell COVID went

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Speaker 1: to zero, and then you started selling on the way

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Speaker 1: back up, which feels all backwards. And if you're in

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Speaker 1: the middle, um, you can guess we're in the middle,

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Speaker 1: because I'm gonna sound more friendly. If you're in the middle,

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Speaker 1: you kind of try it to navigate that course. What

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Speaker 1: I think is interesting about trend though, you know, there's

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Speaker 1: mighty to be made in equities. There's no question it's

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Speaker 1: a decent risk tool for controlling how your portfolio runs.

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Speaker 1: You know. So if you have a lot of equity

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Speaker 1: risk and you decide i'll trem it as trends you know,

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Speaker 1: seem to be negative, it's probably reasonable and maybe it's

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Speaker 1: a reason to rebalance at certain low levels in the market.

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Speaker 1: But what's really valuable about is the fact that it's

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Speaker 1: multi asset, so it's chasing things and doing things that

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Speaker 1: you aren't going to be doing. And so when you

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Speaker 1: look at what is it diversifier to my portfolio, Is

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Speaker 1: it a trend program that trades only bonds and equities. Maybe,

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Speaker 1: but it may go the same direction. If trends are up,

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Speaker 1: it's gonna make me long everything, And that was what

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Speaker 1: it would look like, and say two thousand matine long everything,

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Speaker 1: you know, great, perfect world. And then other times it

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Speaker 1: might be short of bonds like two eighteen and long equities,

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Speaker 1: which feels very risky, and then you know, sometimes it

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Speaker 1: might just be like now, kind of short of both.

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Speaker 1: Depending on your speed, you're either short you're probably short

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Speaker 1: bonds no matter where you are, and you're probably in

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Speaker 1: between one equities anywhere on the map. But all the

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Speaker 1: other asset classes are the really the fascinating ones. Because

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Speaker 1: you don't have a view on nack, why shouldn't say,

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Speaker 1: maybe you do have a view on that gas because

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Speaker 1: you eat your home. But other than being piste off

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Speaker 1: about it, your view is I don't know what it's

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Speaker 1: gonna do, but I wish I had hedged it somehow.

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Speaker 1: And so this is what trend is useful for, right,

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Speaker 1: is to to develop a multi asset framework trading assets.

427
00:19:40,320 --> 00:19:42,840
Speaker 1: There's nothing complex about it, right. You know, if you

428
00:19:42,920 --> 00:19:46,240
Speaker 1: have great trading infrastructuring of good models, you should be

429
00:19:46,320 --> 00:19:50,240
Speaker 1: able to develop something rudimentary. Um. You know, every every

430
00:19:50,240 --> 00:19:52,520
Speaker 1: really great trend manager has a few other pieces that

431
00:19:52,800 --> 00:19:55,720
Speaker 1: they think are uniquely There's maybe crossovers and things like that,

432
00:19:55,920 --> 00:19:59,000
Speaker 1: but it's the access to those kind of asset classes,

433
00:19:59,040 --> 00:20:02,200
Speaker 1: like the end going from one talented I have yet

434
00:20:02,240 --> 00:20:04,520
Speaker 1: to find a person who in that move was like, no,

435
00:20:04,640 --> 00:20:06,840
Speaker 1: this is totally logical. Now it's totally logical at one.

436
00:20:07,800 --> 00:20:09,399
Speaker 1: And then everyone has a narrative and I think this

437
00:20:09,440 --> 00:20:11,679
Speaker 1: is you guys face the same challenge, right, how do

438
00:20:11,680 --> 00:20:14,000
Speaker 1: I put a narrative around something so wacky that it

439
00:20:14,040 --> 00:20:16,359
Speaker 1: can't be explained? Right? Like, there was a day I

440
00:20:16,359 --> 00:20:19,159
Speaker 1: remember I came in and like, futures down as you know,

441
00:20:19,280 --> 00:20:23,280
Speaker 1: Russian invasion of Ukraine intensifies. The market recovered and it

442
00:20:23,320 --> 00:20:27,359
Speaker 1: says futures higher as Russian invasion intensifies, and then it

443
00:20:27,440 --> 00:20:31,440
Speaker 1: finally settled on you know, futures unchanged and I think

444
00:20:31,400 --> 00:20:34,080
Speaker 1: it was mixed as well as futures mixed. And so

445
00:20:34,160 --> 00:20:35,680
Speaker 1: at that point you're kind of like, Okay, let's stop

446
00:20:35,680 --> 00:20:38,280
Speaker 1: making narratives. And trend kind of doesn't bother with narrative.

447
00:20:38,320 --> 00:20:40,480
Speaker 1: It doesn't think about it. What it might do is

448
00:20:40,560 --> 00:20:42,560
Speaker 1: just misfire, like it might see a trend and that

449
00:20:42,600 --> 00:20:44,679
Speaker 1: trend reverses and just gets out of the way. And

450
00:20:44,720 --> 00:20:46,960
Speaker 1: so if you look at the last two years, the

451
00:20:47,000 --> 00:20:50,080
Speaker 1: inflation universe for trend has been phenomenal, like it's you're

452
00:20:50,119 --> 00:20:52,640
Speaker 1: picking up on commodities, you're picking up on ffex crosses,

453
00:20:53,280 --> 00:20:55,920
Speaker 1: all changes in regimes that we haven't seen in a really,

454
00:20:55,960 --> 00:20:59,760
Speaker 1: really long time. Yeah, finally someone that feels our pain

455
00:20:59,840 --> 00:21:02,960
Speaker 1: and trying to trying to annail that daily market narrative.

456
00:21:04,200 --> 00:21:05,920
Speaker 1: I was I was going to say those headlines were

457
00:21:05,960 --> 00:21:12,040
Speaker 1: probably mine Bomberg Markets wrap. In my defense, we only

458
00:21:12,040 --> 00:21:14,200
Speaker 1: met today, so I didn't I would have filtered otherwise.

459
00:21:15,880 --> 00:21:21,879
Speaker 1: Really great reporters suggested that are mixed. It just had

460
00:21:21,920 --> 00:21:24,879
Speaker 1: a sense of like, I assume it's somewhat AI ish, right, like,

461
00:21:24,920 --> 00:21:27,160
Speaker 1: as this thing gets changed again and again and again,

462
00:21:27,280 --> 00:21:30,439
Speaker 1: maybe maybe I'm overcrediting AI and undercrediting you guys. But

463
00:21:30,480 --> 00:21:32,840
Speaker 1: I could just see the machine going, you know, screw this,

464
00:21:33,960 --> 00:21:36,320
Speaker 1: just I can't deal with this anymore. It was definitely

465
00:21:36,359 --> 00:21:39,520
Speaker 1: it was definitely an editor pool I don't I don't

466
00:21:39,520 --> 00:21:42,400
Speaker 1: belong to, so we can can blame people like Mike

467
00:21:42,440 --> 00:21:52,399
Speaker 1: for those. Yeah. Actually, I'm really glad you brought all

468
00:21:52,440 --> 00:21:54,040
Speaker 1: of this up because I wanted to ask you how

469
00:21:54,080 --> 00:21:59,480
Speaker 1: difficult it's been to discern a message from the market recently. Yeah.

470
00:21:59,480 --> 00:22:03,000
Speaker 1: I think that's that's really a great question because I think,

471
00:22:03,760 --> 00:22:06,399
Speaker 1: you know, some people have mockingly said about us in

472
00:22:06,440 --> 00:22:10,840
Speaker 1: finance that you know, in there were thousands of experts

473
00:22:10,880 --> 00:22:14,080
Speaker 1: on virology, and then you know, in one there are

474
00:22:14,119 --> 00:22:18,959
Speaker 1: tons of experts on inflation. There are you know, geopolitical

475
00:22:19,080 --> 00:22:21,720
Speaker 1: and war experts and know exactly how all these things

476
00:22:21,720 --> 00:22:24,320
Speaker 1: play out. And you get plenty of emails and maybe

477
00:22:24,320 --> 00:22:26,199
Speaker 1: we're guilty of it at Man Group. I hope not,

478
00:22:26,240 --> 00:22:28,800
Speaker 1: but we get plenty of emails for strategists saying I

479
00:22:28,840 --> 00:22:30,800
Speaker 1: think this is how it plays out, and you think, yeah,

480
00:22:30,960 --> 00:22:32,960
Speaker 1: it really never ever plays out like you think it

481
00:22:33,000 --> 00:22:35,760
Speaker 1: does in these sort of you know, kind of broad

482
00:22:35,800 --> 00:22:39,240
Speaker 1: based geopolitical issues. So if you go back. I remember,

483
00:22:39,280 --> 00:22:41,840
Speaker 1: like Hurricane Katrina, oil was a driver of the market.

484
00:22:42,440 --> 00:22:44,159
Speaker 1: Stocks went down. When oil is going up, I mean

485
00:22:44,160 --> 00:22:47,439
Speaker 1: it's laughably forty dollars barrel, I think done. And so

486
00:22:47,600 --> 00:22:49,200
Speaker 1: you kind of knew what you're supposed to look at.

487
00:22:49,640 --> 00:22:52,080
Speaker 1: COVID You maybe you looked at case counts. There's some

488
00:22:52,160 --> 00:22:54,520
Speaker 1: things to kind of some signal you could look at,

489
00:22:54,520 --> 00:22:56,080
Speaker 1: but mostly for me, I like to look at, you know,

490
00:22:56,119 --> 00:22:58,560
Speaker 1: which assets are moving. And so in the GFC we

491
00:22:58,600 --> 00:23:00,639
Speaker 1: looked at, you know, kind of funding spreads, like is

492
00:23:00,640 --> 00:23:03,080
Speaker 1: there stress in the market? Our banks able to borrow?

493
00:23:03,119 --> 00:23:05,880
Speaker 1: So we have all these metrics we look at. This

494
00:23:05,920 --> 00:23:08,480
Speaker 1: one kind of defies that, right. You know, there's a

495
00:23:08,480 --> 00:23:10,520
Speaker 1: little period where oil was going up and then rates

496
00:23:10,520 --> 00:23:12,359
Speaker 1: would sell off and the equities would sell off, and

497
00:23:12,400 --> 00:23:14,679
Speaker 1: it was kind of a ripple each time, right, and

498
00:23:14,720 --> 00:23:17,639
Speaker 1: then March just blew your whole theory out of the water. Right,

499
00:23:17,680 --> 00:23:19,600
Speaker 1: there's this big run up in rates at the end

500
00:23:19,600 --> 00:23:21,440
Speaker 1: of March, along with a big run up in equities,

501
00:23:21,880 --> 00:23:23,680
Speaker 1: and you don't know how to grapple with that if

502
00:23:23,720 --> 00:23:26,000
Speaker 1: you're trying to make a narrative, right, you know, the

503
00:23:26,119 --> 00:23:27,960
Speaker 1: narrative that came out of the end of March, which

504
00:23:28,520 --> 00:23:32,000
Speaker 1: felt a little contrived, was stocks are not so bad

505
00:23:32,000 --> 00:23:35,520
Speaker 1: in inflation really because they have pricing power. And so

506
00:23:35,600 --> 00:23:38,600
Speaker 1: the people who are spreading that narrative, you know, it's

507
00:23:38,680 --> 00:23:41,520
Speaker 1: there's some there's some rationality behind it. But you know

508
00:23:41,520 --> 00:23:43,639
Speaker 1: how many of those were saying last year, you know,

509
00:23:43,840 --> 00:23:46,480
Speaker 1: with yields this low, you have to own stocks because

510
00:23:46,520 --> 00:23:49,240
Speaker 1: they have earnings yield and so that's spread to the

511
00:23:49,240 --> 00:23:51,880
Speaker 1: treasury is really valuable, and you know they should trade

512
00:23:51,880 --> 00:23:54,359
Speaker 1: into multiple that's more in line with treasuries. To me,

513
00:23:54,440 --> 00:23:56,800
Speaker 1: that's also laughable because if are of stocks making a

514
00:23:56,800 --> 00:23:59,800
Speaker 1: four percent earnings yield with treasuries at fifty basis points

515
00:23:59,880 --> 00:24:03,000
Speaker 1: is I mean, I should use the fifty basis point reference.

516
00:24:03,040 --> 00:24:04,840
Speaker 1: And so if I own a hundred, you know, of

517
00:24:04,920 --> 00:24:08,280
Speaker 1: treasury bonds, I can afford to own stocks all the

518
00:24:08,280 --> 00:24:10,280
Speaker 1: way up to a hundred and pay up to a

519
00:24:12,200 --> 00:24:14,639
Speaker 1: you know, something absurd like that. That doesn't really make

520
00:24:14,640 --> 00:24:16,800
Speaker 1: a lot of sense. So I think that's the challenge

521
00:24:16,800 --> 00:24:20,399
Speaker 1: of this market is getting your hand head around that

522
00:24:20,480 --> 00:24:22,960
Speaker 1: there isn't a single line item what we can look at,

523
00:24:23,119 --> 00:24:25,320
Speaker 1: and I think that's a it's a change from what

524
00:24:25,359 --> 00:24:28,040
Speaker 1: we're kind of used to COVID was just unknowable, and

525
00:24:28,320 --> 00:24:31,080
Speaker 1: we all made panicky, bad traits, even you know, the

526
00:24:31,200 --> 00:24:34,399
Speaker 1: really brilliant man solutions people made some you know, some

527
00:24:34,600 --> 00:24:37,320
Speaker 1: part rates um and that's about kind of dealing with

528
00:24:37,400 --> 00:24:40,240
Speaker 1: risk and surviving it. Now it's it's a little bit

529
00:24:40,320 --> 00:24:43,280
Speaker 1: you know, head scratching. So the more you can diversify,

530
00:24:43,440 --> 00:24:46,000
Speaker 1: the less pain you get, as long as you understand

531
00:24:46,000 --> 00:24:48,040
Speaker 1: the totality of the diversification, and you don't sit there

532
00:24:48,040 --> 00:24:50,399
Speaker 1: and look at I told you not to buy that zinc,

533
00:24:50,880 --> 00:24:53,920
Speaker 1: and you know, everyone looks around like, did you don't

534
00:24:53,960 --> 00:24:57,600
Speaker 1: remember you saying anything about nickel? You always And then

535
00:24:57,600 --> 00:24:59,440
Speaker 1: you know, you look at an email. You know, it's

536
00:24:59,480 --> 00:25:02,000
Speaker 1: like a line somewhere on like page forty six of

537
00:25:02,040 --> 00:25:07,280
Speaker 1: someone's deck that says, be cautious around real zinc and nickel.

538
00:25:08,440 --> 00:25:12,560
Speaker 1: You know, Peter I Um. The narrative seems to have

539
00:25:12,680 --> 00:25:16,160
Speaker 1: really shifted away from COVID. You know, it's like mission

540
00:25:16,200 --> 00:25:18,880
Speaker 1: accomplished with COVID. And then you know, you look out

541
00:25:18,880 --> 00:25:21,840
Speaker 1: around the world and you've got this situation in Shanghai,

542
00:25:22,119 --> 00:25:26,600
Speaker 1: uh with the city, you know, in a pretty long lockdown.

543
00:25:27,240 --> 00:25:31,400
Speaker 1: I'm reading yesterday Philadelphia is bringing back the mask mandates.

544
00:25:32,080 --> 00:25:34,960
Speaker 1: Um are we done with COVID? Do you think is

545
00:25:35,000 --> 00:25:36,919
Speaker 1: it still is that a tail risk or is that

546
00:25:37,000 --> 00:25:39,640
Speaker 1: a regular old risk? How would how would you think

547
00:25:39,640 --> 00:25:43,040
Speaker 1: about the risk of COVID And you know, sort of

548
00:25:43,119 --> 00:25:45,960
Speaker 1: where would you rank it among our our the big

549
00:25:46,080 --> 00:25:48,760
Speaker 1: risks out there? And what is that risk exactly? I

550
00:25:48,760 --> 00:25:52,480
Speaker 1: mean it's me It's sort of raises the specter of

551
00:25:52,560 --> 00:25:54,960
Speaker 1: this deflation story that you hear. You know, if if

552
00:25:54,960 --> 00:25:58,000
Speaker 1: the supply chains in China are messed up, uh, and

553
00:25:58,040 --> 00:26:00,640
Speaker 1: we still have war in Ukraine and Russia's and wheels

554
00:26:00,680 --> 00:26:02,760
Speaker 1: over a hundred, you know that that's me sort of

555
00:26:03,320 --> 00:26:08,880
Speaker 1: adds to the um stagflation risk that that a lot

556
00:26:08,880 --> 00:26:10,879
Speaker 1: of people talked about. Is it as simple as that

557
00:26:11,080 --> 00:26:14,080
Speaker 1: or how are you thinking about it? Well, I'll hearken

558
00:26:14,119 --> 00:26:16,280
Speaker 1: back to my previous comment that I'm not a virologist,

559
00:26:16,520 --> 00:26:18,760
Speaker 1: so I'm not gonna I'm not going to pretend to

560
00:26:18,920 --> 00:26:23,040
Speaker 1: understand China's particular approach. But I think we're concerned a

561
00:26:23,040 --> 00:26:25,440
Speaker 1: little bit that there's gonna be a supply chain disruption again.

562
00:26:25,800 --> 00:26:27,640
Speaker 1: And what's funny is in the old day, supply chain

563
00:26:27,680 --> 00:26:30,040
Speaker 1: disruptions were just bad for companies trying to make money,

564
00:26:30,200 --> 00:26:32,119
Speaker 1: but now they're really bad for the inflation narrative, so

565
00:26:32,119 --> 00:26:35,199
Speaker 1: that the market really doesn't need any more inflation stories.

566
00:26:35,600 --> 00:26:37,560
Speaker 1: I mean, if I have to read more people talking

567
00:26:37,560 --> 00:26:39,879
Speaker 1: about used car prices and then the impact on the

568
00:26:39,880 --> 00:26:42,959
Speaker 1: federal reserves thinking because of used car prices, I mean,

569
00:26:43,000 --> 00:26:45,359
Speaker 1: I can't believe Jake Powell was shopping for used car.

570
00:26:45,440 --> 00:26:47,080
Speaker 1: But maybe he's got a grand kid or something that

571
00:26:47,840 --> 00:26:51,080
Speaker 1: he's looking for, you know, somewhat beat up Nissan of

572
00:26:51,160 --> 00:26:52,840
Speaker 1: some sort that he can get them and just can't

573
00:26:52,880 --> 00:26:55,639
Speaker 1: get his hands on it. Um. So the COVID pieces

574
00:26:55,680 --> 00:26:59,240
Speaker 1: a bit like that. You know, we I think that

575
00:26:59,359 --> 00:27:01,800
Speaker 1: the real issue, and I think you you're sort of

576
00:27:01,840 --> 00:27:04,320
Speaker 1: alluding to the idea I want to use commodities because

577
00:27:04,320 --> 00:27:07,320
Speaker 1: of inflation, and I'm worried about bonds because of inflation.

578
00:27:07,880 --> 00:27:10,879
Speaker 1: But then this Ukraine war thing, I thought war bad,

579
00:27:11,080 --> 00:27:14,320
Speaker 1: so bonds good. And so if we figure out some

580
00:27:14,359 --> 00:27:17,000
Speaker 1: way of kind of dealing with the energy shock, you know,

581
00:27:17,200 --> 00:27:18,879
Speaker 1: does that mean bonds have a place or what if

582
00:27:18,880 --> 00:27:21,840
Speaker 1: the energy shock is so extreme that you know, it

583
00:27:21,920 --> 00:27:24,840
Speaker 1: causes some recession, Like let's start pricing two fifty barrel

584
00:27:24,880 --> 00:27:27,720
Speaker 1: for whatever reason, I can contrive a scenario that comes

585
00:27:27,800 --> 00:27:30,400
Speaker 1: up that way between an attack and Saudi and and

586
00:27:30,400 --> 00:27:32,879
Speaker 1: and the Ukrainian war, and the same might be for

587
00:27:32,960 --> 00:27:35,159
Speaker 1: COVID and and I'll say we got it in a

588
00:27:35,200 --> 00:27:38,840
Speaker 1: sense wrong. In our trend funds. We were basically position

589
00:27:38,880 --> 00:27:41,560
Speaker 1: and inflationary looking assets in November when a Macron hit,

590
00:27:42,160 --> 00:27:45,280
Speaker 1: and it was a very big, fast deflationary shock, right,

591
00:27:45,600 --> 00:27:48,320
Speaker 1: And so we do what we do systems, just close

592
00:27:48,440 --> 00:27:50,720
Speaker 1: risk when it doesn't fit and and then rebuilds it.

593
00:27:50,760 --> 00:27:52,760
Speaker 1: So you know, it looks a bit like that was

594
00:27:52,800 --> 00:27:54,720
Speaker 1: a bit you know, quick to judge there on a

595
00:27:54,760 --> 00:27:57,400
Speaker 1: on a half day Friday after Thanksgiving. But that's kind

596
00:27:57,400 --> 00:27:59,359
Speaker 1: of how it risk managed itself, so you kind of

597
00:27:59,400 --> 00:28:01,920
Speaker 1: know what what it's gonna do, you know. I think

598
00:28:01,960 --> 00:28:03,480
Speaker 1: in the back of your mind, if you're an investor

599
00:28:03,480 --> 00:28:05,160
Speaker 1: and you're saying I want to go from long bonds

600
00:28:05,160 --> 00:28:08,600
Speaker 1: to short bonds, you probably need to have someone play

601
00:28:08,640 --> 00:28:11,919
Speaker 1: that Devil's advocate piece and say, you know what, I

602
00:28:12,000 --> 00:28:14,080
Speaker 1: hear you, but what about this COVID bit? You know,

603
00:28:14,119 --> 00:28:15,919
Speaker 1: what about the war bit? What if what if the

604
00:28:15,920 --> 00:28:19,280
Speaker 1: war expands into anything? You know, even an accident the

605
00:28:19,440 --> 00:28:22,719
Speaker 1: accidents happen, right, and so what if that accidental bit happens.

606
00:28:23,000 --> 00:28:25,920
Speaker 1: So I don't know why China so aggressive relative to

607
00:28:25,960 --> 00:28:27,960
Speaker 1: everyone else. Sometimes I wonder if they know something about

608
00:28:28,040 --> 00:28:30,920
Speaker 1: COVID redoubt in terms of the fifty year plan um.

609
00:28:31,200 --> 00:28:33,320
Speaker 1: But at the end of the day, that's their approach.

610
00:28:33,680 --> 00:28:35,440
Speaker 1: And so there may be some supply shocks. And we've

611
00:28:35,440 --> 00:28:37,840
Speaker 1: certainly seen China growth numbers look different from ours, right,

612
00:28:37,880 --> 00:28:41,280
Speaker 1: And so that's another interesting aspect of how the world

613
00:28:41,360 --> 00:28:45,160
Speaker 1: is sort of developing, that we're now all on different cycles.

614
00:28:45,480 --> 00:28:47,200
Speaker 1: You know, it used to be everyone went into deflation

615
00:28:47,240 --> 00:28:49,760
Speaker 1: shocked together, and everyone kind of came out together more

616
00:28:49,880 --> 00:28:51,840
Speaker 1: or less. You know, Now we definitely I don't know

617
00:28:51,840 --> 00:28:54,320
Speaker 1: if it's a bipolar tripo or whatever. However, polls there

618
00:28:54,360 --> 00:28:57,000
Speaker 1: are on on lots of bipolar Earth, But however many

619
00:28:57,000 --> 00:28:59,480
Speaker 1: poles you want to stick in the world. UM. You know,

620
00:28:59,560 --> 00:29:02,080
Speaker 1: there is a definite difference in the economic cycle in

621
00:29:02,080 --> 00:29:06,080
Speaker 1: in China UM and versars. They're looking to stimulate demand

622
00:29:06,160 --> 00:29:08,000
Speaker 1: and you know, we're trying to do the opposite. So

623
00:29:08,120 --> 00:29:11,480
Speaker 1: there's there's some natural friction among uset classes. And I'm

624
00:29:11,480 --> 00:29:14,880
Speaker 1: thinking that has to go into how you manage all that. So, yeah,

625
00:29:14,880 --> 00:29:16,680
Speaker 1: it's not none of this is easy like that. You know,

626
00:29:16,680 --> 00:29:18,080
Speaker 1: I'm supposed to come on and tell you it's all

627
00:29:18,080 --> 00:29:20,760
Speaker 1: really easy. You call us, call us up, this is

628
00:29:20,800 --> 00:29:22,920
Speaker 1: what you should do. It just isn't. So in some

629
00:29:22,960 --> 00:29:24,640
Speaker 1: ways I feel like a therapist of times. So people

630
00:29:24,640 --> 00:29:26,280
Speaker 1: will tell you this is what you think, and you

631
00:29:26,360 --> 00:29:28,560
Speaker 1: kind of just listen to people struggle through it all

632
00:29:28,880 --> 00:29:30,760
Speaker 1: and say, look, this is kind of what we think about.

633
00:29:30,800 --> 00:29:33,520
Speaker 1: You know, take a few deep breaths, use this, use this,

634
00:29:33,640 --> 00:29:35,520
Speaker 1: use this, and and then if you can develop that

635
00:29:35,560 --> 00:29:38,600
Speaker 1: framework at least, then you have something that's working for you.

636
00:29:38,680 --> 00:29:40,479
Speaker 1: So you can stop waking up at you know, four

637
00:29:40,520 --> 00:29:43,200
Speaker 1: am and say, wow, the eight rs are down right now,

638
00:29:43,840 --> 00:29:46,720
Speaker 1: or you know this social media company is down right now.

639
00:29:46,760 --> 00:29:48,760
Speaker 1: That's an ellion dollar company. Can that happened to an

640
00:29:48,760 --> 00:29:52,320
Speaker 1: eight D billion dollar company? And the answers yes, like

641
00:29:52,400 --> 00:29:56,840
Speaker 1: can you know so? So, Peter, if you're trying to

642
00:29:56,880 --> 00:29:59,880
Speaker 1: decide at this point whether you should be long tread

643
00:30:00,000 --> 00:30:04,440
Speaker 1: areas or short them, it does at all basically hinge

644
00:30:04,600 --> 00:30:07,239
Speaker 1: on whether or not you believe the Federal Reserve when

645
00:30:07,280 --> 00:30:09,600
Speaker 1: it comes to quantitative tightening, or whether you think they're

646
00:30:09,600 --> 00:30:12,800
Speaker 1: gonna sort of get scared away from the path that

647
00:30:12,840 --> 00:30:15,600
Speaker 1: they're on and and and sort of readjust their plans

648
00:30:15,640 --> 00:30:18,320
Speaker 1: for QT and and not be as aggressive. I mean,

649
00:30:18,360 --> 00:30:20,960
Speaker 1: is that is that the only variable to worry about

650
00:30:21,800 --> 00:30:24,920
Speaker 1: when you're long or short ponds at this point? You know?

651
00:30:25,000 --> 00:30:28,560
Speaker 1: I I guess so for me, the FED is the

652
00:30:28,800 --> 00:30:30,680
Speaker 1: conversation around the FED has been very much like last

653
00:30:30,760 --> 00:30:32,600
Speaker 1: year is like, Wow, they might do something next year,

654
00:30:32,640 --> 00:30:33,920
Speaker 1: and then by the end of the year, maybe three

655
00:30:34,000 --> 00:30:36,480
Speaker 1: or four. Now it's nine. Now they're gonna start running

656
00:30:36,520 --> 00:30:38,800
Speaker 1: off the balance sheet. So it feels like they've been

657
00:30:38,840 --> 00:30:42,720
Speaker 1: pretty behind. The market has accepted them being pretty behind.

658
00:30:43,160 --> 00:30:45,480
Speaker 1: I mean where we are in equities and bonds right now.

659
00:30:45,560 --> 00:30:47,080
Speaker 1: Maybe it felt like a bad start to the year,

660
00:30:47,120 --> 00:30:51,120
Speaker 1: but it's not catastrophically bad, right, We're not talking catastrophically bad.

661
00:30:51,560 --> 00:30:54,280
Speaker 1: So I kind of look at the wings of the problem,

662
00:30:54,640 --> 00:30:56,520
Speaker 1: you know, the far out tails, right and left tail

663
00:30:56,560 --> 00:30:59,040
Speaker 1: to the problem, and if the FED can pulled off

664
00:30:59,160 --> 00:31:01,880
Speaker 1: soft landing, that's probably a pretty good right tail, right.

665
00:31:02,080 --> 00:31:04,280
Speaker 1: I don't think the market at this point is probably

666
00:31:04,360 --> 00:31:08,280
Speaker 1: confident of a soft landing, whereas in two thousand eighteen,

667
00:31:08,320 --> 00:31:10,360
Speaker 1: if you remember, you know, Yelling and Bernanke were on

668
00:31:10,480 --> 00:31:12,840
Speaker 1: stage and you know Powell, I guess had no choice

669
00:31:12,840 --> 00:31:15,320
Speaker 1: but to listen and turn from hawk Is to dublish

670
00:31:15,400 --> 00:31:17,959
Speaker 1: really fast. And so two thousand nineteen was you know,

671
00:31:18,200 --> 00:31:20,440
Speaker 1: all bets are on every empiles and you were confident

672
00:31:20,480 --> 00:31:23,040
Speaker 1: the FED had your back COVID. You know, it wasn't

673
00:31:23,040 --> 00:31:24,720
Speaker 1: easy to be confident, but the FED had your back.

674
00:31:25,040 --> 00:31:27,600
Speaker 1: Here it's definitely different, right, the FED doesn't have your back.

675
00:31:27,640 --> 00:31:30,000
Speaker 1: You don't know where the FED put is. So there

676
00:31:30,080 --> 00:31:32,800
Speaker 1: is that chance if inflation just keeps printing these kind

677
00:31:32,840 --> 00:31:35,120
Speaker 1: of numbers, and the job market stays tight, and we

678
00:31:35,160 --> 00:31:38,200
Speaker 1: see wage inflation, house inflation, all of this, it is

679
00:31:38,240 --> 00:31:40,280
Speaker 1: going to be pretty hard for them to have your back.

680
00:31:40,720 --> 00:31:43,840
Speaker 1: And so you know, your confidence in bonds, well, if

681
00:31:43,880 --> 00:31:46,360
Speaker 1: they have to hype ten, twelve, thirteen times and they

682
00:31:46,400 --> 00:31:49,240
Speaker 1: really run off the balance sheet, I'm certainly not confident

683
00:31:49,240 --> 00:31:51,320
Speaker 1: about thirty year bonds that you know a hundred fifty

684
00:31:51,320 --> 00:31:54,960
Speaker 1: bass point and you know kind of uh, the difference

685
00:31:55,000 --> 00:31:57,600
Speaker 1: to the front year to the two year. So there's

686
00:31:57,600 --> 00:31:59,680
Speaker 1: a lot of moving pieces to it, and I think

687
00:31:59,680 --> 00:32:02,200
Speaker 1: it just keeps going back to, you know, running your

688
00:32:02,240 --> 00:32:04,640
Speaker 1: portfolio with some active risk management. That's just when it's

689
00:32:04,680 --> 00:32:07,480
Speaker 1: not working, step away, and when it starts to work again,

690
00:32:07,840 --> 00:32:10,240
Speaker 1: you know, sometime after the next fed hyke, you say, Okay,

691
00:32:10,240 --> 00:32:12,040
Speaker 1: it's starting to stabilize. It makes sense to me. I

692
00:32:12,120 --> 00:32:14,560
Speaker 1: kind of see where things are going. You might miss

693
00:32:14,560 --> 00:32:16,920
Speaker 1: a few percent, right, but you miss a few percent

694
00:32:17,000 --> 00:32:18,600
Speaker 1: on the way up. It's better than getting hit with

695
00:32:19,280 --> 00:32:21,560
Speaker 1: on the way down. And I think that's by enlarge

696
00:32:21,600 --> 00:32:24,760
Speaker 1: the challenge I think investor's face, because you're all benchmarked.

697
00:32:25,240 --> 00:32:27,040
Speaker 1: You have to make as much as your peers make,

698
00:32:27,480 --> 00:32:29,280
Speaker 1: and they may not always make the right decision. And

699
00:32:29,320 --> 00:32:32,120
Speaker 1: so some of our systematic strategies I feel like, you know,

700
00:32:32,160 --> 00:32:34,320
Speaker 1: it shouldn't really be cutting risk here. It seems fine

701
00:32:34,320 --> 00:32:36,360
Speaker 1: to me, like and and the other. I guess the

702
00:32:36,400 --> 00:32:38,760
Speaker 1: analogous piece I have to that, and a lot of

703
00:32:38,800 --> 00:32:40,800
Speaker 1: people will say after the yield curve inverts, it's not

704
00:32:40,840 --> 00:32:43,400
Speaker 1: a sign that you should sell. It's a recession signed.

705
00:32:43,400 --> 00:32:45,800
Speaker 1: Everyone's got this blanket kind of thing, and then everyone

706
00:32:45,920 --> 00:32:47,880
Speaker 1: rolls out for the next twelve months. You tend to

707
00:32:47,920 --> 00:32:50,840
Speaker 1: make money in stocks, but the path of some of

708
00:32:50,840 --> 00:32:53,719
Speaker 1: those twelve months, I mean, you know, depends what kind

709
00:32:53,720 --> 00:32:55,520
Speaker 1: of roller coaster you like to ride, right, some of

710
00:32:55,520 --> 00:32:58,000
Speaker 1: those twelve months were like, no, a nice uphill to

711
00:32:58,040 --> 00:32:59,200
Speaker 1: the top and you get off at the top of

712
00:32:59,240 --> 00:33:03,480
Speaker 1: the roller coaster and was nice. Others weren't exactly like that,

713
00:33:03,800 --> 00:33:05,600
Speaker 1: And it seems to just ignore that. If you just

714
00:33:05,680 --> 00:33:09,400
Speaker 1: take any random day, right, like I took Thursday and

715
00:33:09,440 --> 00:33:11,920
Speaker 1: added twelve months, equities tend to be up. And so

716
00:33:12,040 --> 00:33:14,280
Speaker 1: it's not a very useful benchmark to just tell me

717
00:33:14,720 --> 00:33:18,200
Speaker 1: usually this happens because you know, I know a lot

718
00:33:18,240 --> 00:33:21,120
Speaker 1: of us can't survive the stomach churning, you know, of

719
00:33:21,240 --> 00:33:24,320
Speaker 1: minus on the way to up two percent at the

720
00:33:24,400 --> 00:33:28,320
Speaker 1: end of the year. Yeah, especially with such an unusual

721
00:33:28,400 --> 00:33:30,400
Speaker 1: environment that we're in, there's really not much of an

722
00:33:30,400 --> 00:33:33,440
Speaker 1: analog in history to draw one and one you know,

723
00:33:33,600 --> 00:33:38,280
Speaker 1: in action exactly yeah, exactly right. You know, Can I

724
00:33:38,280 --> 00:33:41,360
Speaker 1: actually ask you to describe what you see are some

725
00:33:41,440 --> 00:33:44,840
Speaker 1: of the factors behind the renewed equity sell off we're

726
00:33:44,880 --> 00:33:48,800
Speaker 1: seeing in April, and how some of those factors or

727
00:33:49,280 --> 00:33:52,480
Speaker 1: what's different between now and the first couple of months

728
00:33:52,520 --> 00:33:54,560
Speaker 1: of the year, and whether or not we're continuing to

729
00:33:54,640 --> 00:33:57,800
Speaker 1: see that valuation we set that everybody was talking about

730
00:33:57,840 --> 00:33:59,960
Speaker 1: at the start of the year, or if it's more

731
00:34:00,040 --> 00:34:04,160
Speaker 1: of growth scare in your view. Yeah, so there's a

732
00:34:04,200 --> 00:34:07,120
Speaker 1: lot to unpack there actually. Um, you know, it depends

733
00:34:07,160 --> 00:34:10,120
Speaker 1: what you think April ones valuation, whether it made sense

734
00:34:10,239 --> 00:34:12,000
Speaker 1: or not relative to March, and so I think there's

735
00:34:12,040 --> 00:34:14,520
Speaker 1: some liquidity issues in the market. I think this year

736
00:34:14,560 --> 00:34:17,000
Speaker 1: has been very much defined by liquidity. So we see

737
00:34:17,120 --> 00:34:20,680
Speaker 1: days where very low volume up a lot, recently high

738
00:34:20,760 --> 00:34:23,760
Speaker 1: volume down a lot, but there's never a really confident

739
00:34:23,880 --> 00:34:26,919
Speaker 1: update with very high volume. It's often down a lot

740
00:34:27,040 --> 00:34:29,360
Speaker 1: and then back to flat with tremendous volume. Now you

741
00:34:29,400 --> 00:34:32,239
Speaker 1: feel like, okay, there's some logic, there's some real buying there. Um.

742
00:34:32,280 --> 00:34:35,279
Speaker 1: I think the end of March kind of equities have

743
00:34:35,400 --> 00:34:39,200
Speaker 1: this cool inflation hedging potential. It felt a little bit

744
00:34:39,239 --> 00:34:41,799
Speaker 1: like just an excuse. Retail was maybe piling, and we

745
00:34:41,800 --> 00:34:43,600
Speaker 1: certainly saw money flowing in. So there are a lot

746
00:34:43,600 --> 00:34:46,520
Speaker 1: of different forces pushing the market up and maybe overshade

747
00:34:46,560 --> 00:34:48,600
Speaker 1: a little bit right because you know, some systematic strategy

748
00:34:48,640 --> 00:34:50,640
Speaker 1: are short. There are people like us who run hedge

749
00:34:50,640 --> 00:34:54,399
Speaker 1: mandates for clients who are monetizing hedges, taking profits kind

750
00:34:54,400 --> 00:34:56,640
Speaker 1: of right sizing. So a lot of different things can

751
00:34:56,719 --> 00:34:59,360
Speaker 1: kind of feed into that, you know, what caused the

752
00:34:59,400 --> 00:35:01,560
Speaker 1: market to round, and so then you end up looking

753
00:35:01,560 --> 00:35:04,239
Speaker 1: for a narrative what's caused April to start weekly? Well,

754
00:35:04,440 --> 00:35:06,680
Speaker 1: rates have moved up a lot again, so you know,

755
00:35:06,800 --> 00:35:09,520
Speaker 1: the big bug a boo of the market isn't really

756
00:35:09,560 --> 00:35:11,200
Speaker 1: the war. The big bug a move of the market

757
00:35:11,239 --> 00:35:14,719
Speaker 1: is is rates and valuation and multiples. And you've seen

758
00:35:14,719 --> 00:35:17,319
Speaker 1: it in the growth stocks, right. Aztec still really hasn't

759
00:35:17,320 --> 00:35:19,719
Speaker 1: gotten off of its own way just yet, and I

760
00:35:19,760 --> 00:35:37,440
Speaker 1: think that can be heavily attributed to rates. Peter, one

761
00:35:37,520 --> 00:35:40,400
Speaker 1: last thing before we get to our our crazy things

762
00:35:40,400 --> 00:35:42,759
Speaker 1: of the week. In the notes you center I sent over,

763
00:35:42,800 --> 00:35:46,160
Speaker 1: I noticed you said, uh, you know, cash isn't completely

764
00:35:46,239 --> 00:35:50,040
Speaker 1: unattractive right now, which is kind of interesting to me

765
00:35:50,080 --> 00:35:51,840
Speaker 1: because I don't know how many people we talked to

766
00:35:51,960 --> 00:35:54,319
Speaker 1: who are who are like, whatever you do, you can't

767
00:35:54,320 --> 00:35:56,640
Speaker 1: be in cash earning nothing. But but what is it

768
00:35:56,680 --> 00:35:59,680
Speaker 1: about cash right now? Is it just waiting for you know,

769
00:36:00,200 --> 00:36:03,080
Speaker 1: for all the selling in the other asset classes to end,

770
00:36:03,200 --> 00:36:07,320
Speaker 1: or is it finally those money market rates or start.

771
00:36:08,440 --> 00:36:10,560
Speaker 1: It's it's not so much that cash is going to

772
00:36:10,640 --> 00:36:12,560
Speaker 1: make you a lot just not gonna lose you anything, right,

773
00:36:12,560 --> 00:36:15,000
Speaker 1: So yeah, I think others would say you're just waiting

774
00:36:15,040 --> 00:36:17,040
Speaker 1: for gott oh if you think you're to buy other

775
00:36:17,080 --> 00:36:20,440
Speaker 1: assets on the cheap um. I just think people need

776
00:36:20,520 --> 00:36:23,280
Speaker 1: to sit back and say, Okay, if I sell something,

777
00:36:23,840 --> 00:36:26,920
Speaker 1: must I buy something? And so when a client comes

778
00:36:26,920 --> 00:36:30,200
Speaker 1: to us and says, hey, you know, I'm i'm equities

779
00:36:30,280 --> 00:36:32,600
Speaker 1: right now, what do you think they're my first nature?

780
00:36:32,600 --> 00:36:35,640
Speaker 1: Because I'm a tailored guy, my first reaction is like, oh,

781
00:36:35,800 --> 00:36:39,879
Speaker 1: you've been pretty lucky for the last years, so maybe

782
00:36:39,880 --> 00:36:42,480
Speaker 1: it's time to feel less lucky and sell some Like well,

783
00:36:42,480 --> 00:36:43,920
Speaker 1: what am I gonna buy? I should I should buy

784
00:36:43,960 --> 00:36:46,319
Speaker 1: private equity? Like well maybe I don't know, but that

785
00:36:46,360 --> 00:36:48,520
Speaker 1: doesn't seem like it's all that different from equity. And

786
00:36:48,560 --> 00:36:51,040
Speaker 1: you get into these conversations where I don't want to

787
00:36:51,040 --> 00:36:54,120
Speaker 1: own bonds. Okay, you don't want to own bonds, I don't.

788
00:36:54,160 --> 00:36:56,280
Speaker 1: I don't know how to trade commodities. I can't trade commodities.

789
00:36:56,280 --> 00:36:58,840
Speaker 1: Oils at minus forty at least equity goes to zero.

790
00:36:59,280 --> 00:37:00,840
Speaker 1: And so at some point you can just say, you

791
00:37:00,840 --> 00:37:03,279
Speaker 1: know what, put in cash? The right answer for me

792
00:37:03,320 --> 00:37:05,360
Speaker 1: as a as an employee of men Group is just

793
00:37:05,400 --> 00:37:07,400
Speaker 1: put in hedge funds because they can make lots of money.

794
00:37:07,680 --> 00:37:10,200
Speaker 1: But the easy answer that doesn't require a lot of

795
00:37:10,239 --> 00:37:13,000
Speaker 1: thought is put in cash and figure out where you're going.

796
00:37:13,040 --> 00:37:14,799
Speaker 1: It's not meant to make you a ton of money.

797
00:37:14,840 --> 00:37:17,319
Speaker 1: It's to simply say I don't understand everything that's going on,

798
00:37:18,000 --> 00:37:21,319
Speaker 1: and the absence a brilliant scenario, I mean, I can

799
00:37:21,360 --> 00:37:23,840
Speaker 1: give you our list of best ideas, you've got to

800
00:37:23,840 --> 00:37:26,120
Speaker 1: go to an ic and I c has ten people.

801
00:37:26,480 --> 00:37:28,960
Speaker 1: One person wakes up in a bad mood and just says,

802
00:37:29,000 --> 00:37:30,759
Speaker 1: you know what, I'm don't want to do that, and

803
00:37:31,080 --> 00:37:32,719
Speaker 1: so you end up in a muddle. And I think

804
00:37:32,840 --> 00:37:35,120
Speaker 1: sometimes on the risk management side, people spend too much

805
00:37:35,160 --> 00:37:38,400
Speaker 1: time reallocating because you need to beat your benchmarks and

806
00:37:38,480 --> 00:37:41,920
Speaker 1: meet your peers. And you know, maybe cash isn't a

807
00:37:42,000 --> 00:37:44,440
Speaker 1: terrible terrible thing. You know what it's worth. And now

808
00:37:44,440 --> 00:37:47,000
Speaker 1: the counter argument to that is if you plan to

809
00:37:47,040 --> 00:37:49,239
Speaker 1: do that for a really long time with this kind

810
00:37:49,239 --> 00:37:52,200
Speaker 1: of inflationary environment, you will look like an idiot. And

811
00:37:52,280 --> 00:37:54,799
Speaker 1: so so you know, my my note there is too

812
00:37:55,560 --> 00:37:57,840
Speaker 1: It doesn't matter what you buy next. If you're worried

813
00:37:57,840 --> 00:38:00,600
Speaker 1: about de risking d risk first, and then about where

814
00:38:00,640 --> 00:38:04,200
Speaker 1: to put it right. And one I worked for stam Drug,

815
00:38:04,239 --> 00:38:06,160
Speaker 1: a miller way back when, and he had a line

816
00:38:06,160 --> 00:38:08,560
Speaker 1: once when he wanted people to de risk. He had

817
00:38:08,600 --> 00:38:11,239
Speaker 1: some thoughts that the market might go down, and he

818
00:38:11,280 --> 00:38:13,560
Speaker 1: said him, by d risk, I don't mean sell a

819
00:38:13,560 --> 00:38:16,200
Speaker 1: bunch of stuff you don't own to make yourself market flat.

820
00:38:16,239 --> 00:38:18,960
Speaker 1: I mean sell what you own so that you don't

821
00:38:19,000 --> 00:38:21,319
Speaker 1: have any issue. Right, Just de risk, get rid of

822
00:38:21,320 --> 00:38:24,520
Speaker 1: your lungs and your shorts, cut everything back down. And

823
00:38:24,600 --> 00:38:26,120
Speaker 1: there are times where you should just do that. And

824
00:38:26,400 --> 00:38:29,399
Speaker 1: I think that the desperate fear of you know, I'm

825
00:38:29,400 --> 00:38:31,640
Speaker 1: not earning enough to match inflation or not, you know,

826
00:38:31,880 --> 00:38:35,040
Speaker 1: getting caught out missing bonds, missing this missing that. You know,

827
00:38:35,080 --> 00:38:37,520
Speaker 1: from a risk control standpoint, it isn't always a legitimate

828
00:38:37,880 --> 00:38:42,880
Speaker 1: argument capital preservation over capital appreciation. I guess yeah, But

829
00:38:42,880 --> 00:38:44,960
Speaker 1: it makes me a very unpopular person if you don't.

830
00:38:45,160 --> 00:38:47,440
Speaker 1: I imagine, I imagine a rate dal You always say

831
00:38:47,560 --> 00:38:50,600
Speaker 1: that guy's an idiot. It's very easy for him to

832
00:38:50,640 --> 00:38:53,239
Speaker 1: allocate your assets because he's you know, and for us too,

833
00:38:53,760 --> 00:38:56,200
Speaker 1: it's just harder sometimes when you have a different group

834
00:38:56,239 --> 00:38:59,719
Speaker 1: of constituencies inside your framework that just have a different view,

835
00:38:59,800 --> 00:39:02,080
Speaker 1: like the dollar is worthless, No, the dollar is king.

836
00:39:02,200 --> 00:39:03,799
Speaker 1: And he's like, Okay, what do I do with that?

837
00:39:05,960 --> 00:39:09,719
Speaker 1: Good stuff? Good stuff, Peter. Always a pleasure to catch

838
00:39:09,840 --> 00:39:11,840
Speaker 1: up with you. But now we got to take you

839
00:39:11,840 --> 00:39:13,799
Speaker 1: out of your wheelhouse and get to the crazy things

840
00:39:13,800 --> 00:39:17,520
Speaker 1: of the week. Here, Uh, what's the craziest thing you

841
00:39:17,520 --> 00:39:20,439
Speaker 1: saw this week? Well, I was going to go with

842
00:39:20,680 --> 00:39:24,799
Speaker 1: the whole Twitter elon Musk drama where he was going

843
00:39:24,880 --> 00:39:29,440
Speaker 1: to join the board. Then he rescinded and everybody was

844
00:39:29,480 --> 00:39:33,280
Speaker 1: tweeting about the drama, and he's been he's been asking

845
00:39:33,280 --> 00:39:37,239
Speaker 1: people about changes he should be making for Twitter. But

846
00:39:37,560 --> 00:39:41,080
Speaker 1: I actually had a call in from our friend Max Kachman,

847
00:39:41,280 --> 00:39:43,960
Speaker 1: who was on the podcast just a couple of weeks ago,

848
00:39:44,480 --> 00:39:47,680
Speaker 1: and Mike, I'm sure you you know what the board

849
00:39:47,719 --> 00:39:51,560
Speaker 1: apes are. The board ape. So the company behind the

850
00:39:51,600 --> 00:39:55,640
Speaker 1: board apes it's called Yuga Labs, and Max went through

851
00:39:55,960 --> 00:39:59,000
Speaker 1: their pitch deck. He was looking through it, he noticed

852
00:39:59,040 --> 00:40:01,880
Speaker 1: one slide that has financials sort of like a breakdown,

853
00:40:02,040 --> 00:40:06,360
Speaker 1: a pie of all the financials breakdown and the components

854
00:40:06,719 --> 00:40:10,800
Speaker 1: are the craziest thing. So board Apes is one component

855
00:40:11,440 --> 00:40:15,120
Speaker 1: land Sales is another, and then there's two sections, one

856
00:40:15,200 --> 00:40:21,120
Speaker 1: for goblins and one for mechanical dogs land land sales,

857
00:40:21,760 --> 00:40:24,720
Speaker 1: land sales, I think in the metaverse, Oh oh, of course,

858
00:40:24,800 --> 00:40:27,600
Speaker 1: of course, yes, But it's a goblins and the mechanical

859
00:40:27,640 --> 00:40:31,319
Speaker 1: dogs that are they n f T projects too? I

860
00:40:31,400 --> 00:40:33,880
Speaker 1: don't know, We didn't know. So it was just really

861
00:40:33,920 --> 00:40:36,920
Speaker 1: really interesting because the company raised four hundred and fifty

862
00:40:36,960 --> 00:40:42,319
Speaker 1: million dollars. Peter, if someone brings you a pitchbook like that,

863
00:40:42,600 --> 00:40:44,480
Speaker 1: I'm sure you're all in, right, and we were all in.

864
00:40:44,520 --> 00:40:46,319
Speaker 1: We we find it very easy to invest in things

865
00:40:46,320 --> 00:40:53,239
Speaker 1: that can only go up, so it's quite straightforward. That's great. Goblins,

866
00:40:54,000 --> 00:40:57,640
Speaker 1: We've got to figure out how what allocation percentage to goblins.

867
00:40:57,800 --> 00:41:00,759
Speaker 1: Uh one must go. But that pretty good build down.

868
00:41:00,800 --> 00:41:02,440
Speaker 1: I like that one. How do you, Peter, you see

869
00:41:02,440 --> 00:41:04,600
Speaker 1: anything crazy this week? You know, I was kind of

870
00:41:04,600 --> 00:41:06,000
Speaker 1: at this point. I didn't get to do the Academy

871
00:41:06,000 --> 00:41:07,880
Speaker 1: Awards week because you know, I like hockey and I

872
00:41:07,880 --> 00:41:10,600
Speaker 1: didn't realize how how fun they could be the award shows.

873
00:41:10,640 --> 00:41:12,879
Speaker 1: But you know, I'm gonna go back a touch. It's

874
00:41:12,920 --> 00:41:15,600
Speaker 1: been a weird year where liquidity is all about random

875
00:41:15,600 --> 00:41:17,400
Speaker 1: moves and every week day you kind of wake up

876
00:41:17,400 --> 00:41:20,399
Speaker 1: with a random thing. And so the whole industry years

877
00:41:20,440 --> 00:41:23,520
Speaker 1: ago had a short vol et F and it implode,

878
00:41:23,560 --> 00:41:27,360
Speaker 1: exploiting miraculously, just beautiful fashion destroyed itself and you know,

879
00:41:27,480 --> 00:41:30,560
Speaker 1: went from hundred to fifteen and disappeared. There's also a

880
00:41:30,600 --> 00:41:34,000
Speaker 1: long Volley t F which also managed to implode over

881
00:41:34,040 --> 00:41:36,520
Speaker 1: ten years and go to zero. So we've created, as

882
00:41:36,520 --> 00:41:38,640
Speaker 1: an industry of all industry, a product that could be

883
00:41:38,680 --> 00:41:40,480
Speaker 1: long and short the exact same thing, and both of

884
00:41:40,520 --> 00:41:43,120
Speaker 1: them go to zero. So I thought that was impressive,

885
00:41:43,400 --> 00:41:45,640
Speaker 1: but I found someone who did it faster, and so

886
00:41:45,680 --> 00:41:47,799
Speaker 1: there was an Italian e t F on Nickel. It's

887
00:41:47,800 --> 00:41:50,680
Speaker 1: absolutely fascinating how it turned out. It turns out if

888
00:41:50,680 --> 00:41:53,919
Speaker 1: you close the exchange on the way up, the three

889
00:41:54,080 --> 00:41:56,759
Speaker 1: x short Nickel et F gets liquidated. You close the

890
00:41:56,800 --> 00:42:01,000
Speaker 1: exchange for whatever reason, you close the exchange, do you

891
00:42:01,040 --> 00:42:04,399
Speaker 1: reopen it, it collapses. The three x long vault long

892
00:42:04,520 --> 00:42:06,520
Speaker 1: Nicol e t F also goes out of business. So

893
00:42:06,560 --> 00:42:09,080
Speaker 1: within a period of two weeks, the long et F

894
00:42:09,120 --> 00:42:11,239
Speaker 1: and the short et F with the exact same underlying,

895
00:42:11,480 --> 00:42:13,239
Speaker 1: you know, with three x leverage, managed to go out

896
00:42:13,239 --> 00:42:15,440
Speaker 1: of business in two weeks. It took us about ten

897
00:42:15,520 --> 00:42:17,600
Speaker 1: years to do that in the ball industry. So I

898
00:42:18,239 --> 00:42:20,000
Speaker 1: give some credit to the Italians for being ahead of

899
00:42:20,040 --> 00:42:24,200
Speaker 1: the game. Um, but maybe a slight warning to people

900
00:42:24,280 --> 00:42:26,840
Speaker 1: using three X leverage that you probably want to just

901
00:42:26,880 --> 00:42:29,319
Speaker 1: double check that the underlyings can't go negative or can't

902
00:42:29,320 --> 00:42:32,880
Speaker 1: go up in a couple of hours. Oh my gosh. Absolutely,

903
00:42:32,960 --> 00:42:35,480
Speaker 1: that's really good. That's really good. I think he wins.

904
00:42:36,120 --> 00:42:40,080
Speaker 1: That's pretty good. Anytime you mix three X with anything

905
00:42:40,080 --> 00:42:42,440
Speaker 1: traded on the LAMI I think, uh, I think you

906
00:42:42,560 --> 00:42:45,040
Speaker 1: got a crazy thing. Yeah, I think that by definition

907
00:42:45,080 --> 00:42:47,879
Speaker 1: that those days are over. But every time we say

908
00:42:47,960 --> 00:42:51,479
Speaker 1: this won't happen again, you have someone who can't count

909
00:42:51,520 --> 00:42:53,719
Speaker 1: the the open interest in the v x X note

910
00:42:53,760 --> 00:42:58,040
Speaker 1: and says we're over my fifteen billion. And as Matt

911
00:42:58,120 --> 00:43:03,600
Speaker 1: Levine wrote, like who's running that spread cheek exactly? Yeah,

912
00:43:03,640 --> 00:43:05,840
Speaker 1: I think he said possibly it was an intern and

913
00:43:05,960 --> 00:43:08,560
Speaker 1: they stopped tracking and and nobody else took it over.

914
00:43:08,960 --> 00:43:10,879
Speaker 1: I think emailed it. I think, I mean, having worked

915
00:43:10,880 --> 00:43:14,720
Speaker 1: in big places, it does have that sad feel of yeah,

916
00:43:15,320 --> 00:43:17,400
Speaker 1: and it's like and then the three X nickel e

917
00:43:17,440 --> 00:43:19,960
Speaker 1: t F was just handed off to some new junior trader, Like,

918
00:43:20,000 --> 00:43:21,439
Speaker 1: all you have to do is just do this every

919
00:43:21,520 --> 00:43:24,040
Speaker 1: day and then you know, this should be fine. Nothing

920
00:43:24,080 --> 00:43:26,640
Speaker 1: should happen. Yeah, as long as the exchange is open,

921
00:43:26,680 --> 00:43:28,719
Speaker 1: we'll be fine. We'll be fine. What could go wrong?

922
00:43:28,760 --> 00:43:31,640
Speaker 1: As long as price doesn't go negative. It's like okay, yeah, yeah,

923
00:43:31,800 --> 00:43:33,600
Speaker 1: it's not gonna go negative. Like no, no, that's good.

924
00:43:33,600 --> 00:43:37,120
Speaker 1: It's cool. It's cool. You think I've got you you

925
00:43:37,320 --> 00:43:39,719
Speaker 1: the intern this portfolio, if it has any serious risk

926
00:43:39,760 --> 00:43:45,719
Speaker 1: to it, that's hilarious. That's so good. All right, well

927
00:43:45,719 --> 00:43:47,560
Speaker 1: that is a good one. I think I might have

928
00:43:47,600 --> 00:43:50,720
Speaker 1: to concede defeat to tow the three x uh nicole

929
00:43:50,719 --> 00:43:52,520
Speaker 1: et F. But I'll give you mine. Of course. I'm

930
00:43:52,520 --> 00:43:55,239
Speaker 1: gonna make you to play prices right with me? Here,

931
00:43:56,239 --> 00:43:58,920
Speaker 1: I had two crazy things. I couldn't decide which one

932
00:43:59,040 --> 00:44:01,719
Speaker 1: was better. So instead I'm gonna make you decide which

933
00:44:01,719 --> 00:44:04,560
Speaker 1: one it gets a higher bid. And there are two

934
00:44:04,600 --> 00:44:09,480
Speaker 1: pieces of very very important gen X memorabilia. So I

935
00:44:09,520 --> 00:44:11,520
Speaker 1: don't know if if gen X, if you're comfortable with

936
00:44:11,560 --> 00:44:14,400
Speaker 1: the gen X uh uh, you strike me as more

937
00:44:14,440 --> 00:44:19,440
Speaker 1: of a millennial memorabilia type. All your memorability exists in

938
00:44:19,480 --> 00:44:22,800
Speaker 1: the metaverse, but for jend X, our memorability is really

939
00:44:22,840 --> 00:44:25,560
Speaker 1: there in the real world. So we've got two pieces

940
00:44:25,600 --> 00:44:27,960
Speaker 1: of of jend X memorabil Before you say that, I

941
00:44:28,000 --> 00:44:30,239
Speaker 1: note that you didn't have a millennial comment for me,

942
00:44:30,360 --> 00:44:34,600
Speaker 1: or you assume that I'm a generation I just I

943
00:44:34,640 --> 00:44:40,520
Speaker 1: take small offense for that. It's it's that maturity and

944
00:44:40,560 --> 00:44:43,880
Speaker 1: wisdom isn't there disclaiming the use of the pronouns we

945
00:44:44,160 --> 00:44:50,600
Speaker 1: are isn't necessarily we share the same view. That's exactly exactly. Well,

946
00:44:50,640 --> 00:44:53,359
Speaker 1: let's see, Peter, maybe maybe you're you'll get the small

947
00:44:53,480 --> 00:44:55,799
Speaker 1: one wrong too. Uh. Well, that it's not bad at

948
00:44:55,800 --> 00:44:58,520
Speaker 1: the price is right, all right. Two pieces of memorabilia. One,

949
00:44:59,440 --> 00:45:03,680
Speaker 1: it's the Tonic blue guitar that Kurt Cobain rocked out

950
00:45:03,719 --> 00:45:08,000
Speaker 1: with in Nirvana's nineteen nineties smash. It smells like teen

951
00:45:08,160 --> 00:45:11,560
Speaker 1: spirit music video. So that one's coming up for auction,

952
00:45:12,040 --> 00:45:17,080
Speaker 1: uh by Julian's Auctions. So keep this in mind when

953
00:45:17,120 --> 00:45:19,120
Speaker 1: you're pricing this is we only know what the auction

954
00:45:19,160 --> 00:45:21,680
Speaker 1: house hopes to get for that item. We don't know

955
00:45:21,719 --> 00:45:24,360
Speaker 1: what it's sold for. But it is a nineteen sixty

956
00:45:24,440 --> 00:45:28,239
Speaker 1: nine blue Fender uh Mustang guitar. I believe it is

957
00:45:28,800 --> 00:45:31,440
Speaker 1: UH seen in the smells like teen Spirit, the famous

958
00:45:31,480 --> 00:45:36,160
Speaker 1: Nirvana breakthrough video in the nineties. That's coming up for sale.

959
00:45:36,200 --> 00:45:39,640
Speaker 1: So what do you think the auction house UH is

960
00:45:39,640 --> 00:45:42,959
Speaker 1: hoping to get for that? And the other one has

961
00:45:43,000 --> 00:45:45,640
Speaker 1: already gone up for sale, and it is Tiger Woods

962
00:45:45,680 --> 00:45:49,839
Speaker 1: golf Clubs that he used in the Tiger Slam. Now, VA,

963
00:45:50,000 --> 00:45:51,799
Speaker 1: if you're not familiar with the Tiger Slam, what that

964
00:45:51,920 --> 00:45:54,640
Speaker 1: was is typically if you win a Grand Slam and

965
00:45:54,719 --> 00:45:57,319
Speaker 1: golf it means you want all four majors in one

966
00:45:57,400 --> 00:46:01,040
Speaker 1: coun calendar year, and it's incredibly difficult thing to do.

967
00:46:01,160 --> 00:46:04,160
Speaker 1: But what Tiger Woods did is he won two in

968
00:46:04,200 --> 00:46:06,359
Speaker 1: one year and then the first two in the next year,

969
00:46:07,040 --> 00:46:09,560
Speaker 1: so four in a row, but not in one calendar year,

970
00:46:09,640 --> 00:46:12,280
Speaker 1: so they called it the Tiger Slam. Still still very impressive.

971
00:46:12,840 --> 00:46:16,360
Speaker 1: So the Irons and Wedges, titlists irons and Wedges he

972
00:46:16,480 --> 00:46:20,879
Speaker 1: used to win all four actually did go up for sale, UH,

973
00:46:20,920 --> 00:46:23,320
Speaker 1: And so we know the the we have price discovery

974
00:46:23,400 --> 00:46:26,200
Speaker 1: on the actual bid for that. So well, Donna will

975
00:46:26,200 --> 00:46:29,879
Speaker 1: start with you, what do you think deserves a higher bid?

976
00:46:30,200 --> 00:46:35,520
Speaker 1: The Kurt Cobain's guitar for Tiger Woods is irons and wedges,

977
00:46:35,920 --> 00:46:40,080
Speaker 1: and as as a tiebreaker, give me the bid of

978
00:46:40,120 --> 00:46:45,959
Speaker 1: the higher christ item the guitar. For sure, I'm going

979
00:46:46,040 --> 00:46:48,720
Speaker 1: with four and a half million. We're a half million

980
00:46:48,960 --> 00:46:52,279
Speaker 1: for the guitar. The data says with great confidence, Peter

981
00:46:52,360 --> 00:46:56,480
Speaker 1: at atwater our confidence, uh Guru guests would be very

982
00:46:56,480 --> 00:47:00,680
Speaker 1: proud of the confidence with which you uh stated that, Peter,

983
00:47:00,719 --> 00:47:02,719
Speaker 1: how about you. I just want to say, for the record,

984
00:47:02,760 --> 00:47:04,560
Speaker 1: I didn't see her hands to see what you know

985
00:47:04,680 --> 00:47:08,120
Speaker 1: is in her hands. These questions were being asked. She's

986
00:47:08,640 --> 00:47:12,359
Speaker 1: showing me them now this is the podcast. So she's

987
00:47:12,400 --> 00:47:15,480
Speaker 1: a fast gourgler. She's a fast gurgler. So I will

988
00:47:15,520 --> 00:47:19,359
Speaker 1: say my offer on the guitar was substantially below four

989
00:47:19,400 --> 00:47:22,279
Speaker 1: and a half, which is problematic. My logic was, you know,

990
00:47:22,400 --> 00:47:25,160
Speaker 1: golfers have lots of money they pay for things like this,

991
00:47:26,160 --> 00:47:29,760
Speaker 1: but it wouldn't be interesting if they were worth more

992
00:47:30,040 --> 00:47:32,040
Speaker 1: than the guitar. So I'm gonna lean with the guitar.

993
00:47:33,320 --> 00:47:35,200
Speaker 1: I guess I only have to be a penny below

994
00:47:35,239 --> 00:47:39,600
Speaker 1: her to win if in that case, but I'll be

995
00:47:39,719 --> 00:47:42,520
Speaker 1: less jerky about it and we'll make it like three

996
00:47:42,560 --> 00:47:47,320
Speaker 1: million UM pay on paper here is not that number

997
00:47:47,360 --> 00:47:52,440
Speaker 1: of digits. Now, what I should do is make you, guys,

998
00:47:52,640 --> 00:47:54,959
Speaker 1: turn off the other person's answers. I feel like hearing

999
00:47:55,000 --> 00:47:57,160
Speaker 1: the other person's answers. So it's totally fine that you

1000
00:47:57,200 --> 00:47:58,759
Speaker 1: had let her go first. I have a lot more

1001
00:47:58,800 --> 00:48:01,240
Speaker 1: dignity because now I just look kind of a finance journey,

1002
00:48:02,520 --> 00:48:05,600
Speaker 1: just kind of undercut the price and that sort of

1003
00:48:05,640 --> 00:48:09,279
Speaker 1: thing like improving the opinion the general population house of

1004
00:48:09,320 --> 00:48:14,879
Speaker 1: people like us. So Tiger's clubs went for five point

1005
00:48:14,920 --> 00:48:21,319
Speaker 1: two billion, five two million, excuse me, Hill, they come

1006
00:48:21,320 --> 00:48:24,160
Speaker 1: with a certificate of authenticity, and not only that, they

1007
00:48:24,200 --> 00:48:27,640
Speaker 1: come with a polygraph test results from the guy at

1008
00:48:27,680 --> 00:48:31,840
Speaker 1: titlist who Tiger gave him back to at the end. UM.

1009
00:48:31,880 --> 00:48:34,480
Speaker 1: Now where you might be tripped up is that again,

1010
00:48:34,960 --> 00:48:37,440
Speaker 1: Kurt Cobain's guitar hasn't actually gone up for sales, so

1011
00:48:37,480 --> 00:48:40,319
Speaker 1: it very well could go up for more than what

1012
00:48:40,400 --> 00:48:45,360
Speaker 1: they expect, but they're only expecting eight hundred thousand. Basically,

1013
00:48:46,120 --> 00:48:49,120
Speaker 1: the reverse contrariant was the way to go there. Yeah,

1014
00:48:49,400 --> 00:48:52,800
Speaker 1: everything instead of just instead of just answering. The golfers

1015
00:48:52,840 --> 00:48:57,120
Speaker 1: have money and they spend money like idiots. Sometimes Trazer,

1016
00:48:57,280 --> 00:49:01,200
Speaker 1: you know something, Um, I was so, but I will

1017
00:49:01,239 --> 00:49:04,040
Speaker 1: say I do think Uh, Kurt's guitar is going to

1018
00:49:04,120 --> 00:49:07,839
Speaker 1: go more for more than that. His acoustic uh is

1019
00:49:08,040 --> 00:49:10,600
Speaker 1: that already went up for sale. Is the most expensive

1020
00:49:10,640 --> 00:49:13,320
Speaker 1: piece of rock memorabil you ever sold it like five millions,

1021
00:49:13,320 --> 00:49:15,319
Speaker 1: So you all I all I really need to do

1022
00:49:15,400 --> 00:49:17,680
Speaker 1: is find out if Elon Musk is a fan. And

1023
00:49:19,320 --> 00:49:25,000
Speaker 1: although we're right, I still lose. So so you had

1024
00:49:25,000 --> 00:49:27,719
Speaker 1: the lower end, So I think I lose either way,

1025
00:49:27,960 --> 00:49:30,560
Speaker 1: unless lower on the price. But if if if we're

1026
00:49:30,560 --> 00:49:34,200
Speaker 1: write an Elon less space whatever, If you can pay

1027
00:49:34,280 --> 00:49:39,279
Speaker 1: nine billion for a small social media steake, you can

1028
00:49:39,320 --> 00:49:42,120
Speaker 1: s a guitar. Yeah, hopf ever know one. You need it.

1029
00:49:42,120 --> 00:49:44,239
Speaker 1: It's handy to have around if you want to serenade someone.

1030
00:49:44,320 --> 00:49:48,000
Speaker 1: So that's true, that's true. Grimes his his uh, his

1031
00:49:48,080 --> 00:49:50,120
Speaker 1: lady friend Grimes might be able to write a you

1032
00:49:50,120 --> 00:49:52,560
Speaker 1: know and inflationary times he does. It's bring a full circle.

1033
00:49:52,560 --> 00:49:55,879
Speaker 1: It's a real asset, it's a real assets. Do really well.

1034
00:49:56,400 --> 00:49:59,920
Speaker 1: Absolutely absolutely. I was surprised by I was surprised for

1035
00:50:00,160 --> 00:50:02,560
Speaker 1: five million for Tigers Clubs. But I mean, you know,

1036
00:50:02,800 --> 00:50:04,960
Speaker 1: I think to your point, there's a lot of golfers

1037
00:50:05,000 --> 00:50:08,080
Speaker 1: with money out there, and uh, just someone just has

1038
00:50:08,160 --> 00:50:10,360
Speaker 1: to have it, if you just have to have it, Yeah,

1039
00:50:11,080 --> 00:50:13,440
Speaker 1: it was probably it was probably Phil Mickelson. Who will

1040
00:50:13,560 --> 00:50:18,719
Speaker 1: who will scalp them down break his knee. But with

1041
00:50:18,760 --> 00:50:21,759
Speaker 1: that said, Peter, always such a great opportunity to catch

1042
00:50:21,840 --> 00:50:23,319
Speaker 1: up with you. I hope we can have you back

1043
00:50:23,320 --> 00:50:27,120
Speaker 1: again soon. Um, I really appreciate your insights on everything

1044
00:50:27,160 --> 00:50:29,200
Speaker 1: going on it man. Yeah, thanks for having me. It's

1045
00:50:29,200 --> 00:50:40,279
Speaker 1: good fun. So yes, What Goes Up We'll be back

1046
00:50:40,280 --> 00:50:42,239
Speaker 1: next week. Until then, you can find us on the

1047
00:50:42,239 --> 00:50:46,440
Speaker 1: Bloomberg Terminal website and app or wherever you get your podcasts.

1048
00:50:47,239 --> 00:50:48,879
Speaker 1: We'd love it if you took the time to rate

1049
00:50:48,920 --> 00:50:51,600
Speaker 1: and review the show on Apple Podcasts so more listeners

1050
00:50:51,640 --> 00:50:53,720
Speaker 1: can find us. And you can find us on Twitter,

1051
00:50:53,960 --> 00:50:56,960
Speaker 1: follow me at Rea Anonymous, about a Hirich is at

1052
00:50:57,040 --> 00:51:00,640
Speaker 1: Valbanna Hierrach. What Goes Up is produced by Stacy want.

1053
00:51:00,960 --> 00:51:04,960
Speaker 1: The head of Bloomberg Podcasts is Francesco Levi. Thanks for listening.

1054
00:51:05,000 --> 00:51:05,799
Speaker 1: To see your next son