Speaker 1: M This is Mesters in Business with very results on
Speaker 1: Bloomberg Radio. This week on the podcast, I have a
Speaker 1: fascinating guest. His name is Alexwerevich. He is a hedge
Speaker 1: fund manager and trader who has been involved in macro
Speaker 1: trading for decades since since the late nineties, and he's
Speaker 1: one of these folks that basically has managed to put
Speaker 1: together a fascinating trading history and a and a great
Speaker 1: track record. UH. In twenty UH he was positioned in
Speaker 1: a very contrarian set up heading at the end of
Speaker 1: into he was anticipating a substantial decrease in interest rates
Speaker 1: when most of the rest of the world was positioned
Speaker 1: in the opposite way. And when the pandemic hit an
Speaker 1: emergency FED cuts came in UM his funded spectacularly well.
Speaker 1: It was ranked second best performance of alledge funds in
Speaker 1: When you read his books and and his most recent
Speaker 1: one is The Trades of March A Shield against Uncertainty,
Speaker 1: you can see there is a tremendous amount of complexity
Speaker 1: and deep thought in how his portfolio was positioned. UH.
Speaker 1: They primarily trade derivatives, interest rates, swaps, UH currencies. It's
Speaker 1: not your standard stock and bond trading. It's a little
Speaker 1: more complex and sophisticated. UH. And this is one of
Speaker 1: the only books I've ever read where the slack channel,
Speaker 1: that is his trading desk, where all the trades are
Speaker 1: are given, confirmed, executed, is pretty much reprinted as it was.
Speaker 1: I would say about a third of the book is
Speaker 1: slack and following. This is really a um education and
Speaker 1: how a real world hedge fund trading desk operates. That
Speaker 1: they're located on the West coast, so they're both behind, uh,
Speaker 1: the East coast by three hours, but they're anticipating what
Speaker 1: takes place in Asia and Japan and China. And what's
Speaker 1: really fascinating about this is when the pandemic began, they
Speaker 1: were pretty much trading UM around the clock. It's not
Speaker 1: a giant firm, it's a you know, him and a
Speaker 1: number of his employees were you know, for days at
Speaker 1: a time, trading continuously and you could see it by
Speaker 1: the time stamps in in the slack channel one am,
Speaker 1: three am, five am, seven am, ten pm, eight pm,
Speaker 1: and and that's West coast time. Really fascinating conversation. He's
Speaker 1: a super interesting UM, not just a trader, but his
Speaker 1: worldview and how he looks at what drives asset prices.
Speaker 1: UH is really fascinating. So if you are all interested
Speaker 1: in the world of macro trading, um strap yourself in
Speaker 1: for an education because this conversation is fascinating. With no
Speaker 1: further ado, my interview with Alex Guerrevich of Hante Advisors.
Speaker 1: This is Masters in Business with very Rehults on Bloomberg Radio.
Speaker 1: I'm Barry Hults. You're listening to Masters in Business on
Speaker 1: Bloomberg Radio. My special guest this week Alex Guerrevic, founder
Speaker 1: and CEO of Hante Advisors. Previously, he was the head
Speaker 1: of JP Morgan's Macro book in Hante was ranked second
Speaker 1: in net return by Barclays and Guerevic was one of
Speaker 1: the top ten emerging managers as tracked by Eureka Hedge.
Speaker 1: He is the author of two books on trading, the first,
Speaker 1: the next Perfect Trade, A Magic Sort of necess City.
Speaker 1: His most recent book just came out this year, The
Speaker 1: Trades of March, A Shield against Uncertainty. Alex Vervic, Welcome
Speaker 1: to Bloomberg. Thank you very much for having me. I'm
Speaker 1: excited about this conversation as am. I. Let's let's start
Speaker 1: talking a little bit about uh, your background. You earned
Speaker 1: a PhD in mathematics from the University of Chicago. Tell
Speaker 1: us a little bit about that experience and and how
Speaker 1: you get to apply math as a fund manager and
Speaker 1: a trader. Well, first of all, I will confess the
Speaker 1: experience of being in graduate school University of Chicago was
Speaker 1: still amazing that for many years, almost decade afterwards, I
Speaker 1: suffered from nostalgia. Even while when I was a successful
Speaker 1: Wall Street trader, I was often suffering from nostalgia for
Speaker 1: my graduates school days. So that's a quick summary. I
Speaker 1: think it's pretty amazing for me, at least to be
Speaker 1: in a very small circle stuff like minded people who
Speaker 1: had even though I grew up in a different country
Speaker 1: in backgrounds are different. But interestingly, mathematicians all around the
Speaker 1: world do the same math and they played the same
Speaker 1: math games, all the same puzzles. So there was so
Speaker 1: much in common and so much fun to have in
Speaker 1: that environment. We were you ever? Were you ever planning
Speaker 1: on pursuing a career in pure mathematics or was the
Speaker 1: thinking I'll take this skill and education I I earned
Speaker 1: the Chicago and applied to Wall Street was tell us
Speaker 1: what you're thinking was when you were um in school.
Speaker 1: You know, honestly, since I was a teenager, there was
Speaker 1: kind of a double thinking in my mind. It's almost
Speaker 1: like two superposed ideas that I wasn't really clear. My
Speaker 1: natural path was always to do theoretical math. I wanted
Speaker 1: to be a mathematicians since I was four years old,
Speaker 1: but my fascination with finance industry, with strategy was already there.
Speaker 1: I remember seeing the movie Wall Street in back in Russia,
Speaker 1: and I was totally fascinated by it, and just the
Speaker 1: whole idea of like financial strategy was so exciting to me.
Speaker 1: I think someone in the back of my mind I
Speaker 1: always thought that at some point I wouldn't up on
Speaker 1: Wall Street. But at the same time I was making
Speaker 1: all emotions to pursue the career and theoretical math. So
Speaker 1: so I think I was a little conflicted about this
Speaker 1: until some point. So you mentioned you saw the film
Speaker 1: Wall Street growing up in Russia. You grew up in St. Petersburg.
Speaker 1: Did you know you always wanted to come to the West.
Speaker 1: It's hard to imagine seeing such a just like I guess,
Speaker 1: um capitalist film like Wall Street, even with good guys,
Speaker 1: bad guys and corruption in the film, even still seeing
Speaker 1: it in Russia had to be a little um you know,
Speaker 1: a little cognitive dissonance built into that. Well. I think
Speaker 1: it was very exciting and refreshing. They did show a
Speaker 1: bit of foreign always in Russia. It was not that closed.
Speaker 1: I saw Star Wars on Russia too, so there was
Speaker 1: a little bit of cultural flow. So I did always
Speaker 1: want to go to America. There was no question in
Speaker 1: my mind. Since I was six years old. I considered
Speaker 1: myself American, like it was deep in my heart that
Speaker 1: I'm belong only in one country, in the United States.
Speaker 1: That was not a negative statement on Russia at all.
Speaker 1: It was not even about politics fully like I mean
Speaker 1: I and also like I always loved Russian poetry and
Speaker 1: literature and architecture and many aspects of the culture. But
Speaker 1: I always felt that I belonged in the United States.
Speaker 1: There was never a doubt in my mind. I don't
Speaker 1: know how I knew it, but I knew knew it
Speaker 1: since I was a little kid. So so when did
Speaker 1: you move to the US. I moved in the US
Speaker 1: in the middle of college. It was eighty nine. I
Speaker 1: was almost twenty years old, and you've been here two
Speaker 1: years of college there and I had two years of
Speaker 1: college in American and I went to graduate school and
Speaker 1: so first job out of school was where Well, I
Speaker 1: went straight to graduate school. On my first job out
Speaker 1: of graduate school. That when after I got my PhD,
Speaker 1: I went to Bankers Trust in n And that's when
Speaker 1: I was a critical point of my decision, when I decided, Okay,
Speaker 1: I've already accomplished what I needed accomplished in math. I
Speaker 1: proved my metal, and now I really want to have
Speaker 1: a good opportunity. I have a good offer. I'm gonna
Speaker 1: try Wall Street. And how did you go? Um? How
Speaker 1: did you end up at JP Morgan? Well, I post
Speaker 1: at Bankers Trust and I started trading fixed and com derivatives.
Speaker 1: That's very important to understand that I most of my
Speaker 1: mathematicition friends went to do some kind of quantitative work
Speaker 1: on Wolf Street. I never did. I went straight into trading.
Speaker 1: That was my interested I always said, if I want
Speaker 1: to do research, I would stay in the in the
Speaker 1: math department, even if it pays less money, but the
Speaker 1: lifestyle would be worth it. I wanted to trade. I
Speaker 1: went to Bankers Trust, which became the trade on a
Speaker 1: swap desk, and then it bought, got bought by Deutsche
Speaker 1: Bank and a Deutsche Bank. Because of all they organizing,
Speaker 1: I was pretty Joe year at that time. They offered
Speaker 1: me a different kind of job, which was very good
Speaker 1: in terms of two trade options. It was not particularly
Speaker 1: interesting for me, but it was very educational. But I
Speaker 1: started to look for a new job soon and I
Speaker 1: got a In two thousands, I got a job at
Speaker 1: Chase basically doing basis swaps, which I did originally at
Speaker 1: banker Stas as a junior trader, but I got a
Speaker 1: senior job at Chase and then Chase merg of JP Morgan.
Speaker 1: I ended up at JP Morgan Chase running basis swop franchise,
Speaker 1: and then I launched the agency Assets w franchise also
Speaker 1: in the two thousands one, I think, and then and
Speaker 1: then by two thousand three you mentioned in the Wall
Speaker 1: Street Journal as the star trader of JP Morgan. Tell
Speaker 1: us about that. How did that feel, um being recognized
Speaker 1: for your trading skills? You know, honestly, it is interesting.
Speaker 1: At that time I did not really appreciate so much
Speaker 1: the value of publicity, and I did almost know networking
Speaker 1: and almost no publicity. So I moved the proprietary desk
Speaker 1: in two thousand two from UH. Because after I did
Speaker 1: really well with my market making businesses on two thousand
Speaker 1: one and build them up really well, there was formed.
Speaker 1: They were forming Global Currencies and Commodities Group in the
Speaker 1: merged shape Immorgan Chase Bank. By the way, this group
Speaker 1: ended up to be extremely successful going forward, and UH
Speaker 1: they offered me to shift and move a micro portfolio
Speaker 1: because my even with my client partfolios, I was more
Speaker 1: and more UH focusing on micro factors. And then that
Speaker 1: was like then I had a very successful yet two
Speaker 1: thousand two and started very successfully two thousand three, and
Speaker 1: that's when they wrote an article. The article was really
Speaker 1: based on a leak. I think somebody just told them
Speaker 1: what possessions were had and what money we're making in
Speaker 1: two thousand three, and then there was this article and
Speaker 1: it was on one and exciting and like I know,
Speaker 1: like my parents were excited about showing this article. But
Speaker 1: on the other hand, that was like a little disturbed
Speaker 1: that there's a leak and somebody knows something about my
Speaker 1: positions that they sho not interesting And I was not
Speaker 1: really seeking publicity and I was a little shy of
Speaker 1: publicity honestly, after that, I don't think it was like
Speaker 1: a bad liok. It was a very positive article. There
Speaker 1: was nothing me no negative in it, and there was
Speaker 1: nothing wrong about it. But I was just a little
Speaker 1: nervous about publicity after that because nobody I think they
Speaker 1: reached for comment, but I don't think there was. This
Speaker 1: was like an article the JP Morgan was specifically pushing, right.
Speaker 1: So but what I realized afterwards, like an early years later,
Speaker 1: when I started to raise money and around my own
Speaker 1: hedge funds, I realized, well, actually any publicity is kind
Speaker 1: of good and it's good to know people. So so
Speaker 1: let's let's look at that timeline. So this was back
Speaker 1: in two thousand and three. How much longer did you
Speaker 1: stay at JP Morgan four and when did you launch
Speaker 1: your your funds? Well, I stayed at JP Morgans in
Speaker 1: early two thousand seven and then so it's been quite
Speaker 1: a while, it's now fifteen. Is that I've been doing
Speaker 1: various things on my own, but I not always run business,
Speaker 1: as I had one fund and which actually did not
Speaker 1: work out, and I talked about as a lot in
Speaker 1: my first book, The Next Perfect Trade, about my first
Speaker 1: found and kind of mistakes that when made there and
Speaker 1: things like that. It was called Cloudy Capital, and then
Speaker 1: I for a few years basically was running my own money,
Speaker 1: and then Hunte was created around two thousands fifteen and
Speaker 1: started to take outside money around two thousands sixteen. Relatively
Speaker 1: recent battles are relatively established. Since you mentioned HUNT, let's
Speaker 1: talk a little bit about that funds. Tell us about
Speaker 1: the genesis of the name Hunte, which you described in
Speaker 1: the book The Trades of March. So, Hunte is a
Speaker 1: Japanese strategic term. It originates from the game of go,
Speaker 1: and haun means truth and means move, so it's a
Speaker 1: true move. But the context and which is used that
Speaker 1: sometimes in the game you make a move which is
Speaker 1: not the most flashy or aggressive, but what they call
Speaker 1: an honest move, like what you really have to do,
Speaker 1: even maybe not the most impressive thing to do, but
Speaker 1: that's what gives you the best results in the long run,
Speaker 1: and that's what I wanted to make. The strategic concept
Speaker 1: is symbol for how you run the fund like it
Speaker 1: a lot. Let's talk a little bit about what you
Speaker 1: do with HUNT. You went from being a trader uh
Speaker 1: to the head of JP Morgan's macrobook to launching this
Speaker 1: this hedge funds. Um tell us a little bit about
Speaker 1: those transitions. What how were you able to build on
Speaker 1: your prior experience with each new position. Yes, I think
Speaker 1: it was very important stepstone in my career that I
Speaker 1: started as a market maker. Some people who move directly
Speaker 1: into hedge fund by side business, I think missed out
Speaker 1: a little bit seeing what actually happening in the trenches,
Speaker 1: what's happening on the trading floor of the band, how
Speaker 1: the client flows work was doable and not doable. I
Speaker 1: think it was very important for my formation as a trader.
Speaker 1: I remember the crisis of and when there was the
Speaker 1: first freeze of the market that observed. That was very junior,
Speaker 1: but as it turned out, I had to make some
Speaker 1: decisions because my boss was on vacation and I had
Speaker 1: to take over some aspects of of the book that
Speaker 1: I was focusing on and deal with big hedge funds.
Speaker 1: I was like super junior trader and all this big
Speaker 1: hedge funds coming to me begging me for unwines because
Speaker 1: they were blowing up, and people would ask me questions
Speaker 1: like marketing sells. People would come and ask me questions
Speaker 1: where it's such and such trading. And I was like,
Speaker 1: what are you talking about. It's not trading. The market
Speaker 1: is frozen. There is maybe one bit and if I
Speaker 1: show any offer, my boss will fire me. That's my market.
Speaker 1: That's really interesting because there's a line in the book
Speaker 1: The Trades of March that really jumped out at me. Um,
Speaker 1: tell me about this quote. Every crisis starts with fear
Speaker 1: and ends with necessity. Explain that, see as crisis. First
Speaker 1: of all, crisis always has to be something unexpected. Crisis
Speaker 1: never happens on schedule. We know that, right, Like when
Speaker 1: people try it on scheduled crisis like white, Okay, you
Speaker 1: get no crisis. So it's always comes from unexpected direction
Speaker 1: by definition. And then it usually when there is a
Speaker 1: crisis which spills on the financial markets, people loose liquidity
Speaker 1: and then the panic starts. We need to liquidate positions.
Speaker 1: How bad things can go, and things get to the
Speaker 1: points when people are really thinking that the world is
Speaker 1: ending as we know it, and one day it might
Speaker 1: end as we know it. But in global financial crisis,
Speaker 1: people thought, okay, whole financial system will collapse. In COVID,
Speaker 1: I don't know what people were thinking. We're all gonna
Speaker 1: die or whatever. Everything is going to be shut down.
Speaker 1: I don't know what people are thinking, but clearly people
Speaker 1: are quite panicked about what things can happen. And now,
Speaker 1: of course we have other existential threats with the current
Speaker 1: war situation as recording this ah ah. So first it
Speaker 1: starts with fear, but then what happens is that because
Speaker 1: and some people act and fear, but then people have
Speaker 1: Eventually people have to act not because of the fear
Speaker 1: and not only because of the choices, but because of
Speaker 1: the decisions are forced. What happens is if you are
Speaker 1: fund and you're losing money and you're you're a u
Speaker 1: M decreases, you need to reduce your positions. This is
Speaker 1: not about fear. This is about necessity. So you have
Speaker 1: to liquidate. Some various people need to liquidate certain positions,
Speaker 1: do certain transactions because the exchanges are forcing them, the
Speaker 1: margins are forcing them, bosses are forcing them. And then
Speaker 1: the policy makers step in and they buy assets or
Speaker 1: provide liquidity. And this is also this liquidity comes in
Speaker 1: not because somebody chooses it, but because this is various
Speaker 1: unstoppable flaws that's happening in the market. And this is
Speaker 1: the necessity In the end, there is no choice for things,
Speaker 1: but to both certain ways, that makes sense. You know,
Speaker 1: it's perfect sense. We'll talk about the book later, but
Speaker 1: there are some really interesting um excerpts where you are
Speaker 1: showing your your trading in real time in the conversation
Speaker 1: you're having with your colleagues and your desk. When when
Speaker 1: you say it begins with fear and ends with necessity,
Speaker 1: can you feel that as a trader when you're plugged
Speaker 1: into the market. Are you seeing that in flows, in
Speaker 1: prices and in opportunities. Yes, and I even feel it
Speaker 1: in my own emotion. Explain to the things that try
Speaker 1: to concentrate on the book is like show the psychology
Speaker 1: of trading the more moments and I point them out
Speaker 1: on the book when I felt like deep existential dread,
Speaker 1: like what's going to happen? I feel like that those
Speaker 1: moments were like, oh, yeah, that's just cut hundred basis points,
Speaker 1: but I'm not sure that I'll do it right. And
Speaker 1: you're feeling like will everybody cut my funding tomorrow? Right?
Speaker 1: Will will there be no balance? Ship? What's gonna happen?
Speaker 1: That is when you see in those terms, you realize
Speaker 1: that the market is still ruled by fear. When you
Speaker 1: started thinking, Okay, I've reduced my positions. Now the FED
Speaker 1: is buying those assets that I'm holding, and they're rallying you,
Speaker 1: you start feeling the sense of necessity. Huh. Very interesting.
Speaker 1: So so let's talk a little bit about the trading
Speaker 1: in during the start of the COVID nineteen pandemic. In
Speaker 1: that year, your fund ranked second in net returns. You're
Speaker 1: one of the top ten emerging managers. Tell us what
Speaker 1: your thought process was in what led to so much
Speaker 1: conviction that you had position right? And I believe, if
Speaker 1: I'm reading the book correctly, you were fairly well positioned
Speaker 1: for a series of rate cuts in when much of
Speaker 1: the market was still expecting rate hikes. That did I
Speaker 1: get that right? Yes? Yes, and that definitely contributed to
Speaker 1: success in two thousand twenty. Generally, one has to realize
Speaker 1: if you're on a micro part full and there's some
Speaker 1: kind of exogenous event, you're not always will be positioned
Speaker 1: right for it. Maybe like if you always own just
Speaker 1: auptionality that are pure option funds, but even that, like
Speaker 1: events could do very different things, Like events don't go
Speaker 1: just one direction. For example, US election in two thousand sixteen,
Speaker 1: it send markets in a certain way that people did
Speaker 1: not expect at that moment. Right, But then there was
Speaker 1: September elevent global financial crisis, there was European Dead crisis,
Speaker 1: there was of course going back, there was like seven crush.
Speaker 1: There all those events you can look at which happens
Speaker 1: suddenly they'll have different flavor and you will not always
Speaker 1: be positioned right for it. So there is a little
Speaker 1: bit of an element of luck in terms of being
Speaker 1: positioned right. But there's also a little bit of an
Speaker 1: element of work if you always a little positive towards
Speaker 1: crisis premium, like if you tend to be have assets
Speaker 1: that have some balancing in your part for it that
Speaker 1: there are some assets that make positions that make money.
Speaker 1: Thinks those sideways in that particular case, I was didn't
Speaker 1: just have protection. I had a very strong view in
Speaker 1: two thousand eighteen that arate for heading and exorably zero.
Speaker 1: I think this view was ex anti undisputable. I think
Speaker 1: people who thought otherwise were just playing wrong, because everything
Speaker 1: same ways. Two thousand fourteen, I was convinced the trade
Speaker 1: for going lower, and I delineated my logic in two
Speaker 1: thousand fourteen, and my first book, The Next Perfect Trade.
Speaker 1: Even back then and then over the next few years
Speaker 1: between two thousand fourteen and two thousand twenty up to COVID,
Speaker 1: we had the situations when everything that could go wrong
Speaker 1: for bonds wetter went wrong. Like we had very robust growth,
Speaker 1: strong employment, we had US politics, fiscal boss fiscal phiscal
Speaker 1: politics and growth. Everything was actually negative for bonds if
Speaker 1: you looked at it, If you look those numbers right,
Speaker 1: and at those physical expansions and the elections and everything
Speaker 1: you will, you would think everything would be negative for
Speaker 1: US bonds. And yet they performed tremendously well, which and
Speaker 1: I had that logic and place why there was no
Speaker 1: choice for them that to perform that well. That's why
Speaker 1: I called my first book the Magic, magic sort of
Speaker 1: necessit to you, So I should like to say, sometimes
Speaker 1: a magic sort of necessities unshoot, huh. So, so how
Speaker 1: do you conceptualize all of these macro currents and cross
Speaker 1: currents and events. Do you create a model or is
Speaker 1: it really you're just putting together a lot of different
Speaker 1: ideas and trying to game out how they're going to
Speaker 1: manifest themselves in prices of interest rates and inflation and
Speaker 1: other factors that that drive markets. I think what I
Speaker 1: it's a kind of a hybrid I follow. I follow
Speaker 1: the markets just kind continuously. It's hard to say, because
Speaker 1: if you want financial markets for twenty five years without
Speaker 1: ever really taking a true break, there is a certain
Speaker 1: continuity to it. You see how things develop in the world.
Speaker 1: Of course, you can miss certain important developments, but you
Speaker 1: have a general sense what's happening to interest rate, what's
Speaker 1: happening to currencies, what is the mood of the world,
Speaker 1: and you try you form certain opinions. Now, I have
Speaker 1: a strategic system, which again delineated in my first book,
Speaker 1: but I refer to how I applied it a lot
Speaker 1: on the second book, in which I ranked trade. What
Speaker 1: I tried to do I try to select trades which
Speaker 1: x ANTI look good. And the bond trade of two
Speaker 1: thousand fourteen was the best example of this. This was
Speaker 1: the highest strength trade I ever had in my ranking.
Speaker 1: I have a numerical ranking system, and this was the
Speaker 1: highest strength trade in basically all history of financial markets
Speaker 1: that I know of. And it has been proven to
Speaker 1: work this way because just the highest strength trade that
Speaker 1: rades that make money even if everything goes against them.
Speaker 1: A right, So that is the strongest test. It's very
Speaker 1: easy to like make money on a trade if if
Speaker 1: you if the events helped you, But how does the
Speaker 1: trade perform with events don't help you? Probably the most
Speaker 1: selling and test. So UM I ranked trades based on
Speaker 1: certain factors that I believe predetermined which trades them more
Speaker 1: likely to make money. None of those as certainties. It's
Speaker 1: all about probability skills. It's all about kind of trying
Speaker 1: to shift the odds from being the player in the
Speaker 1: casino to being the casino. Interesting, when you were running
Speaker 1: macro strategy at JP Morgan's trading desk, were there any
Speaker 1: similar uh perfect trades lining up? What did you see
Speaker 1: from your macro perspective as UM low risk, high return trades. Well,
Speaker 1: I think definitely my first perfect trade and probably they
Speaker 1: are like there were two great junctions for perfect trades
Speaker 1: in my career. In the first time happened in two
Speaker 1: thousand two, and in a simple words, that trade into
Speaker 1: thousand two or risk parity here mm hmm. And back
Speaker 1: then I had no idea that some people were already
Speaker 1: doing risperraty. I think they were. It was totally independent thinking,
Speaker 1: but I didn't know of course the weather asperity. I
Speaker 1: don't I didn't know what Cliff Astness was doing, what
Speaker 1: Dalia were doing at the time. I still don't know
Speaker 1: exactly what they were doing back then. I'm not like
Speaker 1: a historian of hedge fund world, but internally a JP Morgan.
Speaker 1: In two thousand two, I gave a presentation about and
Speaker 1: looking back at this, it was exactly a rispiracy. I
Speaker 1: talked about volatility portfolio weighted by implied volatility portfolio of
Speaker 1: SMT futures, and you're adollar futures. Huh. Really interesting. Um On.
Speaker 1: One of the things that we always kind of laugh
Speaker 1: about is the people who tend to be one particular
Speaker 1: type of trader, but for whatever reason, they can't help
Speaker 1: but getting sucked into the macro trade. And I've heard
Speaker 1: various trading desks called them macro tourists. I don't know
Speaker 1: if you're familiar with the phrase. Yes, tell us your thoughts.
Speaker 1: First of all, why are people so compelled to believe
Speaker 1: they have the ability to anticipate and trade around macro events.
Speaker 1: It's it's one of the most challenging types of trading
Speaker 1: if you're not in it every day. Well, I think
Speaker 1: there are two things going on. First of all, successful
Speaker 1: people have a tendency to become ultra crepidarian, which means
Speaker 1: like they just think that they're skilled at more things
Speaker 1: than they actually are. Like if you are, and I've
Speaker 1: fallen prey to this many times in my life too.
Speaker 1: When I think like, I'm really good at many things,
Speaker 1: you try some new things and you think, well, should
Speaker 1: I'll be good at that too? Should I can apply
Speaker 1: this logic? For example, if I use my logic and
Speaker 1: apply my logic tonnelized stocks, right, individual stocks? Should I
Speaker 1: can do that? Right? My intuition. It's very easy for
Speaker 1: me to, for example, to say like, oh, this is
Speaker 1: my intuition about geopolitical developments. For example, think about this,
Speaker 1: I'm a micro trader, right, obviously my portfolio will be
Speaker 1: impacted a lot by current military whatever and political developments.
Speaker 1: Ah So, unavoidably it starts forming views about what can happen,
Speaker 1: what's the next step in the conflict? Now? Do I
Speaker 1: really have any qualification to know what the next step
Speaker 1: in the conflict is? Absolutely not. Furthermore, I don't even
Speaker 1: have qualifications to know what the next inflation release will be.
Speaker 1: I mean, I don't have any I don't know any
Speaker 1: more than thousands of other economists and analyze it. What
Speaker 1: I have qualifications for its construct trade and portfolios. But
Speaker 1: it's very easy to go into other areas which I related.
Speaker 1: Now to imagine that you as an individual stock trader,
Speaker 1: and you know that your stock is affected by interest rates,
Speaker 1: or currency or even just overall direction of economy. It's
Speaker 1: very hard not to start forming views on those things.
Speaker 1: And what I think is very hard in your mind
Speaker 1: to come partamental eyes between the areas you expert in
Speaker 1: and the areas you're not an expert in. Huh, really interesting.
Speaker 1: Let's talk about your first book first, the next Perfect
Speaker 1: Trade A Magic Sword of Necessity. What what's kind of
Speaker 1: interesting about this book is you use all of these
Speaker 1: medieval weapons, armored shields, other types of weaponry as a
Speaker 1: metaphor for trading. To tell us how you developed that
Speaker 1: sort of mindset, I think, first of all, honestly, people,
Speaker 1: when people use metaphors, they just reach to whatever is
Speaker 1: fun for them. For example, if you have found, like
Speaker 1: I hear, people a lot used, for example, baseball metaphors.
Speaker 1: I know nothing about baseball, so and I don't I
Speaker 1: don't really watch team sports, but I do like medieval warfare,
Speaker 1: and I read a lot of fantasy books which involved
Speaker 1: with so that's on my mind. So I think the
Speaker 1: idea is you want to use metaphors which are fun
Speaker 1: for you but also kind of power of all, I
Speaker 1: think going to battle as a powerful metaphor people can
Speaker 1: relate to it. You go to battle, you need to train,
Speaker 1: you need to have a weapon to attack, and a
Speaker 1: shield an armor to protect yourself. So and that is
Speaker 1: very simple kind of I think anyone can relate to it.
Speaker 1: But honestly, for me, it's just fun to write this way.
Speaker 1: So it's it's metaphors for both risk, which is um,
Speaker 1: the shield protects you, when reward, which is how the
Speaker 1: sword obtains gains. Is that a fair description. Yeah, that's
Speaker 1: a very good way to put it. Yes, huh. So
Speaker 1: I noticed in the new book which we're going to
Speaker 1: talk about, um, there's a lot of astrophysics in their
Speaker 1: accretion disks, tidal gravity, wormholes, event horizons, a lot of
Speaker 1: black hole related why the nomenclature of astrophysics. Well, that's
Speaker 1: another area which is super fun for me. I really
Speaker 1: love black holes and I love reading about them. But
Speaker 1: also I started thinking about it is a lot because
Speaker 1: of the time distortion factor. One of the reasons like
Speaker 1: why I started wherever I thought about writing this book
Speaker 1: The Trades of March twenties twenties, because the month of
Speaker 1: March was seemed like infinite. Every trading day was like
Speaker 1: a few months volume of trading every day. And that's
Speaker 1: when I said, like, at the end of that month,
Speaker 1: it's like, well, we survived March. The month of March,
Speaker 1: somebody should read write a book about this month. And
Speaker 1: then it's like, Okay, I can write a book about
Speaker 1: this month because there's so much happening and thinks that
Speaker 1: it would normally take Sometimes the trades that sometimes will
Speaker 1: take years to unfold wood unfold within hours like sudden
Speaker 1: trains would unfold so rapidly. So I'm a long term
Speaker 1: trade I tried to be patient. A lot of times
Speaker 1: I put a trade on and it's there for two years.
Speaker 1: And in March twenty a lot of trades had to
Speaker 1: be changed around quite a bit within days, and that
Speaker 1: so it felt like a time warp. And when you
Speaker 1: have this time warp stort of the time that Magaly
Speaker 1: makes me think of black hole. Sure, and then the
Speaker 1: realized not just time was worked, but the whole market
Speaker 1: structure was worked. Things were just getting really disconnected. Like
Speaker 1: one thing was trading the way one thing was trading
Speaker 1: it has nothing to do with the way the other
Speaker 1: thing was trading. And that also makes me think of
Speaker 1: like time space ruptured by a black hole. Huh, really
Speaker 1: really interesting. I think this is the first book I've
Speaker 1: ever seen that has I don't know, maybe a third
Speaker 1: of it is actual internal slack messages on on the
Speaker 1: trading desk. That that's pretty unique. Tell us why you
Speaker 1: decided to embrace that approach? Well, I realized that there's
Speaker 1: a lot of good books written about trading, and some
Speaker 1: of them are written by journalists and reviewing traders. Some
Speaker 1: of them are written by money money managers themselves. But
Speaker 1: any book, even and that includes m on my first book,
Speaker 1: any book that one reads shows a person's perspective, a
Speaker 1: person's recollection the biases they've used. And that's okay. You
Speaker 1: read that. If you read somebody's book, you want to
Speaker 1: read the views, right. I I wanted to get the
Speaker 1: closest to get writing an objective book, even though my
Speaker 1: commentary is obviously subjective. But the book that you really
Speaker 1: could not say, well, he fudged that you could really
Speaker 1: see time stamp on everything I say. And I think
Speaker 1: the value of that is what I think about in
Speaker 1: terms of safer is some reason they've been using this
Speaker 1: analogy a lot. If you think of aspiring traders and
Speaker 1: medical students, they could read an anatomy book, which could
Speaker 1: be my first book or some other trading book, or
Speaker 1: they can actually go into the operating room seeing the
Speaker 1: actual trade chatter. Well, for anyone who actually wants to
Speaker 1: be in financial markets and wondering what it's like, they
Speaker 1: can actually go and see what is happening in a
Speaker 1: hedge fund when there is a crisis. It's similarly imagined.
Speaker 1: Do you want to be interested in being like an
Speaker 1: oval office of the White House when there is some
Speaker 1: kind of military crisis developing like Caribbean crisis, a current crisis? Right? Uh? Similarly,
Speaker 1: I don't maybe like you want to be like a
Speaker 1: CDC headquarters when pandemic was unfolding. Right. It's interesting to
Speaker 1: take a pick at those places, and I fl my
Speaker 1: slack chances, let my slack records allow people to see
Speaker 1: it in a very faithful way which I cannot paint.
Speaker 1: I cannot paint myself like Kira was making all the
Speaker 1: right decisions. You could see all the confusion, all their commotion,
Speaker 1: all the mistakes. Although like we did the straight today,
Speaker 1: but you know what, would have to unwind it because
Speaker 1: it's not working at all the way we want it right,
Speaker 1: All of those things happening in real life, what it's
Speaker 1: like in the trenches. One of the things that really
Speaker 1: stood out is at least to my eye, was the
Speaker 1: attempt to make sure that there weren't simple trading errors.
Speaker 1: You would put in an order, it would get called
Speaker 1: back to you in a very specific way. Someone else
Speaker 1: was tracking the price, the time, the margin lines. You
Speaker 1: had to make sure you never went over buying power
Speaker 1: like there are a lot of move being pieces throughout.
Speaker 1: Do you think the slack channel captured all of those,
Speaker 1: because I don't know if people who aren't familiar with
Speaker 1: trading desks pick up a lot of the the complexities there.
Speaker 1: You you specifically refer to it in the text, but
Speaker 1: it goes by really quick and and a lot of
Speaker 1: the trading desk slack chatter. When you look at the
Speaker 1: time stamps, there's a ton of stuff happening in a
Speaker 1: very very short period of time. Yeah, it is actually
Speaker 1: select this trading SLAC there's only a fraction of what
Speaker 1: is happening because it does not show any of the
Speaker 1: operational talk right, and it doesn't take any of the
Speaker 1: strategy research talk, and it doesn't actually have operation talk
Speaker 1: that it's all the strade that getting checked and booked
Speaker 1: unders tons of work done by the by our middle
Speaker 1: of his people, right by operations people. So there's a
Speaker 1: lot of stuff going on in the background in terms
Speaker 1: of operations. But I did think it was important to
Speaker 1: uh particularly important to show slap chat and all its
Speaker 1: entirety without cutting this boring upper almost like boring confirmations
Speaker 1: and operational discussions, just to see what the processes. Like
Speaker 1: I always like get laughing, like when they do in
Speaker 1: TV shows and somebody says, picks up the phone and
Speaker 1: says wire five million dollars to such inside and click off.
Speaker 1: You know what happens in the real world. They'll call
Speaker 1: you back, they will confirm the they will ask you
Speaker 1: why the wire is for. They will make sure ask
Speaker 1: for your birthday, even if they talk to your hundred
Speaker 1: times before, Like there is a lot of due diligence
Speaker 1: goes into any kind of financial transactions, which I think
Speaker 1: a lot of media portrayals of the world's skips, and
Speaker 1: again there says yes, if you're an operating room and
Speaker 1: you are persforming a surgery, they cut, they cut a person,
Speaker 1: They put those little like I don't know what it's caused,
Speaker 1: pieces of gas on side and they count all of
Speaker 1: them so they don't miss one. Right, there's a lot
Speaker 1: of that going on. You can have breakdowns, right, and
Speaker 1: you could see the moments when we're finding an error,
Speaker 1: confused about something and fixing it on a commotion, and
Speaker 1: that again, it's just part of showing what it is
Speaker 1: really like to do the work. One of the things
Speaker 1: you say in the book that I thought was intriguing
Speaker 1: is people may be surprised how little time we spent
Speaker 1: discussing the stock market. Tell us a little bit about
Speaker 1: your thinking. They're well. One of the things is I've
Speaker 1: always thought that stock market is what it is, it's
Speaker 1: a fraction of financial markets. It's very important one because
Speaker 1: stock market is a really good indicator of what's going
Speaker 1: on in the world, and it's tends to be very
Speaker 1: good leading indicator of certain things. Uh. But trying to
Speaker 1: figure out on a given day, whether stocks are going
Speaker 1: to go up and down. Yes, I spent about very
Speaker 1: little time on such discussions. That's extremely rare for me
Speaker 1: to talk about whether stock market is going to go
Speaker 1: up or down to there tomorrow, has no idea and
Speaker 1: I kind of not even think in those terms. I
Speaker 1: find that stock market is an important component of the portfolio,
Speaker 1: and I mentioned earlier on that I have been involved
Speaker 1: in a disparity type of trading early in my career
Speaker 1: and I still and I look. But for me, stock
Speaker 1: market is not special. It's not like the main investable asset.
Speaker 1: Is just one of the assets. And sometimes my portfolio
Speaker 1: will not have any stock, any positions related to stock
Speaker 1: market at all, and sometimes it will be heavily positioned
Speaker 1: on some species. It could be not exactly stock market.
Speaker 1: It could be something like dividend futures. It could be
Speaker 1: any kind of stock indices around the world. Uh. For me,
Speaker 1: that it's just a component, and I don't spend a
Speaker 1: lot of time speculating on the short term direction of it.
Speaker 1: Let's let's talk a little bit about options. I love
Speaker 1: this quote, so after acknowledging my shortcomings and swearing up
Speaker 1: and down to never touch options again, in my life.
Speaker 1: What was I to do but answer the simple question
Speaker 1: and by more options. Tell us a little bit about
Speaker 1: your experience with options and why you sometimes felt you
Speaker 1: had no choice but to participate in the options market. Yes, uh,
Speaker 1: I mentioned I've talked earlier that I used to be
Speaker 1: an options market maker, and I think that gave me
Speaker 1: like a lot of I know. There's actually a pattern
Speaker 1: hedge fund managers who are options market makers in the
Speaker 1: past tend to use options much less when they become
Speaker 1: go to the buy side. The reason is that you
Speaker 1: kind of know the fallacies, all the fallacies associated that
Speaker 1: using options. Every option looks If you buy an option,
Speaker 1: it always looks great if your underlying market assumption is correct.
Speaker 1: If you think the market goes up thirty percent and
Speaker 1: you buy a call, of course the call will look great.
Speaker 1: But that kind of idea of value and called based
Speaker 1: on your original speculation that market is going to up
Speaker 1: go up is fallacious, and when you own option there's
Speaker 1: a lot of ways for them to go wrong. You
Speaker 1: could be right about the direction, but it just can
Speaker 1: move not fast enough or not far enough, or not
Speaker 1: on the timing you need, and you will end up
Speaker 1: having the correct view in a losing trade. And don't
Speaker 1: even get me started on complex options. Absolutely hate all
Speaker 1: those knocking knockouts barriers. I think that is just uh
Speaker 1: of the time, is just setting cash on fire to
Speaker 1: do complex options. There could be some exceptions. So why
Speaker 1: did you feel compelled at times to say I swore
Speaker 1: off options? But I had no choice. The trade presented
Speaker 1: itself and I had to participate with options. Yeah, I
Speaker 1: discussed in my book why what on occasion options? UH?
Speaker 1: On occasion options associately miss priced? There is no choice
Speaker 1: to use them, and usually it has not not to
Speaker 1: do with it actually directly, like what is the implied
Speaker 1: volatility of that the money option is? But sometimes option
Speaker 1: structure is totally wrong because the typical option pricing is
Speaker 1: always built on some kind of normal distribution, that there
Speaker 1: is a central scenario which is most likely, and other
Speaker 1: scenarios that get like as likely as you move away
Speaker 1: from the central scenario. And yes, people have always like
Speaker 1: fat tales skew cartosis. I don't even know all of
Speaker 1: those terms. I used to know the better twenty years ago. So,
Speaker 1: but there are all those things that just to not
Speaker 1: use classic normal distribution. But it's still the idea is
Speaker 1: that there is a certain central most likely price. Occasionally
Speaker 1: that is not the case at all, and that's what
Speaker 1: I was recognizing into thousand eighteen. There was no most
Speaker 1: like if you looked at where the interest rates should
Speaker 1: be in two thousand twenties, there was no most likely price.
Speaker 1: The safety of praise too close to three percent. The
Speaker 1: three percent was not a tiny seniest bit more likely
Speaker 1: than one percent or four percent or two percent or zero.
Speaker 1: So the forward that we had an interest rate had
Speaker 1: absolutely no, no uh prerogative in terms of the actual outcome,
Speaker 1: except that it was the forward that was there market price,
Speaker 1: but in terms of where the price will end up
Speaker 1: gave us absolutely no signal about that because we could
Speaker 1: be easing more, we could be we could be easing
Speaker 1: which I thought, what would happen, and we could be tightening.
Speaker 1: And that originated my option trades for contracts of tho
Speaker 1: thousand twenty. And what happened in two thousand nineteen that
Speaker 1: the vault just on those options trades came down so
Speaker 1: much that the trade was just undeniable, and I had
Speaker 1: to say, okay, I gave up some of my previous
Speaker 1: games and options because the vault collapse so much, but
Speaker 1: that that is not what I should be thinking about.
Speaker 1: What I should be thinking about is not what I
Speaker 1: made on what I lost. But here's where we stand now.
Speaker 1: This is the market price and this is the portfolio.
Speaker 1: I've done this before, sometimes with success. Sometimes I was wrong.
Speaker 1: Of course, I can have some petition going against me,
Speaker 1: but I say, now the levels are really good, and
Speaker 1: I'm gonna dramatically increase the position, really, really really intriguing.
Speaker 1: My extra special guest this week is Alex Kuerevic. He
Speaker 1: is the founder and chief investment officer of Hunte Advisors,
Speaker 1: a macro hedge funds which was one of the top
Speaker 1: ranked performance funds in So we're recording this when we're
Speaker 1: about to get the March Federal Reserve decision on interest rates.
Speaker 1: And one of the things that one of the things
Speaker 1: I'm gonna say that again, one of the things that
Speaker 1: struck me from the book was your line the Fed
Speaker 1: might occasionally surprise the the Fed might occasionally surprise the
Speaker 1: market with rape cuts, but they almost never surprised the
Speaker 1: market with unexpected increases. Explain that situation to us. Yes,
Speaker 1: so we're very close to the Fed and myden'mal in
Speaker 1: the studying starting to pump, and the logic is that, um,
Speaker 1: they're at case. Once FED did intermeding cuts to support
Speaker 1: UH markets to dissolve crisis, dissolve arious liquidity problems that
Speaker 1: were happening, and usually no matter how much expected, they
Speaker 1: tended to surprise by doing even more aggressive rate cut
Speaker 1: measures when UH crisis is like in two thousand one
Speaker 1: or two thousand eight or H two twenty would occur.
Speaker 1: I think they have very little upside of hiking when
Speaker 1: market doesn't expect them to hike, because tightening interest rates
Speaker 1: has a very slow effect. Whether they're gonna raise rates
Speaker 1: twenty five basis points today or extra twenty five basis
Speaker 1: points I mean today or at the next meeting they
Speaker 1: have plenty of that's not going to have any major
Speaker 1: effect on financial markets. Sorry, it's going to have effect.
Speaker 1: I apologize. They're gonna have effect on financial markets, but
Speaker 1: they're not going to have a long term economic effects
Speaker 1: that actual tightening. So it seems like a very bad
Speaker 1: risk rep word for position for if they hike more
Speaker 1: than expected and cause the stock market crush or some
Speaker 1: kind of disruption, it will all be on them. While
Speaker 1: they have plenty of time to do what the market
Speaker 1: expects them to do and then signal if they if
Speaker 1: they for the next meeting, what they actually want to
Speaker 1: do at the next meeting. Because of this mentality, there
Speaker 1: haven't been any intermeding hikes or surprised seeingly hikes and
Speaker 1: size since I believe and tell us what happened, because
Speaker 1: I think recall there was a little bit of a
Speaker 1: disruption in the bond market then, wasn't there, Yeah, that
Speaker 1: caused the bond market collapse, and I think they kind
Speaker 1: of just learned the lesson why. It's very hard for
Speaker 1: me to imagine why would they bother? So the event
Speaker 1: is to happen in four minutes and I could be
Speaker 1: proven wrong, but the market is pricing maybe like ten
Speaker 1: percent of chance of them doing fifty basis points. So
Speaker 1: how do you position yourself in anticipation of an outcome
Speaker 1: where there are only a couple of possible results. Are
Speaker 1: you positioning for all the results? Are you doing the
Speaker 1: ones that are the most miss priced that give you
Speaker 1: the best risk reward profile. I'm trying to position for
Speaker 1: miss priced results, and usually that means that I could
Speaker 1: take some losses that time wrong. I do like to
Speaker 1: have trades that go in every possible direction, but like
Speaker 1: something that will make money if this, if the other
Speaker 1: thing happens right, But it's it's not always possible to
Speaker 1: have portfolio balanced. The dichotomy that one phases on such
Speaker 1: situations when you're pretty sure which way the way will
Speaker 1: go is that, well, on one hand, you have really
Speaker 1: good outs in your favor. On the other hand, the
Speaker 1: risk symmetry is very bad. So if you make a
Speaker 1: bad for example, that the just very specific bad on
Speaker 1: on the performacy outcome that they're going to go to
Speaker 1: twenty five basis points, I might make such a bad
Speaker 1: but it would be very moderate and size because so
Speaker 1: that if they do go fifty, which would be an outlier,
Speaker 1: I cannot afford to blow up. Can It has to
Speaker 1: be a moderate manageable loss if that happens. And you
Speaker 1: also spend a lot of time betting on intermarket relationships
Speaker 1: various currencies and various interest rates around the world, tell
Speaker 1: us how you approach those sorts of trades in the
Speaker 1: face of Federal reserve action. Well, there is a strong
Speaker 1: relation obviously, relations between interest rates and interestrate differential, between
Speaker 1: currencies and UM and and actually currency performance, interest rate
Speaker 1: differentials the carrying currencies tend to be actually probably the
Speaker 1: best long term predictor of currency performance if you look
Speaker 1: at the total return, even not even the real carry
Speaker 1: but it's just simply the nominal career seems to be
Speaker 1: a very good predictor of long term performance. So, of
Speaker 1: course central bank decisions have a very meaningful impact on currencies,
Speaker 1: and sometimes this is where you can look for opportunities,
Speaker 1: like I did in two thousand fourteen. One one central
Speaker 1: bank is priced in to do all those trade hikes,
Speaker 1: but the currency is actually weaker than it should be,
Speaker 1: like dollar was much weaker than it should be in
Speaker 1: two thousand fourteen. So long dollar long bonds was a
Speaker 1: very good trade because if the FAT cut raised rates
Speaker 1: as it was projected to uh post two thousand fourteen,
Speaker 1: as fast as they projected to should it, dollar would
Speaker 1: be as stronger, even stronger than it was for than
Speaker 1: it was trading. But there was also plenty of opportunities
Speaker 1: for dollar to strength, and even without that, even if
Speaker 1: the FAT did not really raise rates as much. So
Speaker 1: those type of relationships um allow you to understanding this
Speaker 1: type of dominance that being long dollar is dominant over
Speaker 1: being shot bond, and being long bond is dominant over
Speaker 1: being shot dollar. It's it's a little difficult to grasp.
Speaker 1: You'd probably have to read the book and work through
Speaker 1: the logic to understand how this logic works. But this
Speaker 1: type relationship allow me to get a lot of edge
Speaker 1: when I get them right. Huh, really really interesting. Um,
Speaker 1: you have very significant fixed income derivative experience from your
Speaker 1: prior roles. How large of a piece of your fund
Speaker 1: strategy does that play? It does play, specifically on the
Speaker 1: fact that we're much more granular when it comes to
Speaker 1: us fixed income than other products. When we deal with
Speaker 1: products that we don't know about, we try to deal
Speaker 1: with simple liquid things like liquid. Say we go to
Speaker 1: the country, we try to see what are the liquid
Speaker 1: bond futures on that country. Okay, so the interest rate
Speaker 1: decision is twenty five, as we expected. I think the
Speaker 1: next big thing will really be waiting for their waiting
Speaker 1: for the press conference. They won't be that much happening,
Speaker 1: I think until press conference. I mean, market can do
Speaker 1: all sorts of weird things, but otherwise, now that might
Speaker 1: all be happening ntil press conference. So let's let's talk
Speaker 1: a little bit about inflation and what the Federal Reserve
Speaker 1: is doing, because this is the perfect time to bring
Speaker 1: this up. You know, on the one hand, it looks
Speaker 1: like the FED is long overdue to get off of
Speaker 1: their emergency footing and and bring FED fund rates up
Speaker 1: to at least closer to a normal level. And on
Speaker 1: the other hand, everybody's jumping up and down about inflation,
Speaker 1: but it seems like much of the inflation that's out
Speaker 1: there isn't very much going to be affected by what
Speaker 1: the FED is doing. Automobiles and and semiconductors seem to
Speaker 1: be outside of the FED. Energy prices and the war,
Speaker 1: the Russian invasion of Ukraine, FED rates aren't going to
Speaker 1: impact home prices. Really is an inventory problem and a
Speaker 1: massive surge in in pent up demand from both both
Speaker 1: the pandemic and a decade of weak household information. When
Speaker 1: you see the sort of things that are taking place,
Speaker 1: you know, what's your thought pricess as to what's really
Speaker 1: going on at a fat Yes. So one of the
Speaker 1: things that I can always repeat, and honestly, it's one
Speaker 1: of those things do as I say, but not always
Speaker 1: do is I do? I repeat this advice don't focus
Speaker 1: on what the FAT should do, focus on what the
Speaker 1: FAT will do. We'll have our opinions about policy, and
Speaker 1: I have some strong opinions about policy, but what is
Speaker 1: really important to understand, like what actually will happen. For example,
Speaker 1: I could say today I could be talking and they
Speaker 1: should not hide at all, or someone else should say
Speaker 1: they should really hide fifty basis points. But the reality
Speaker 1: is they were going to hike twenty five basis points
Speaker 1: on March and that's what they did. There was really
Speaker 1: very little doubt that that's going to happen. And you
Speaker 1: the interesting part about the discussion that you had a
Speaker 1: discussion unfold life. You've heard me my reasoning before it happened,
Speaker 1: not after it happened. Uh, it is my Yes, I
Speaker 1: totally agree with you. I think it's kind of a
Speaker 1: little insane that fat field urgency to raise interest rates
Speaker 1: to do anything about the current situation because exactly as
Speaker 1: you said, the situations that's absolutely not on their purview.
Speaker 1: You cannot fix supply bottlenecks with raising interest rates usually
Speaker 1: cannot fix them quickly. You could crush demand, but the
Speaker 1: underlying problem is already well. First of all, if you
Speaker 1: ask why is inflation even bad. Well, people are not
Speaker 1: happy that they cannot buy things, right, they don't want
Speaker 1: to right, So you make it even harder for them
Speaker 1: to buy things, inflict even more pain on people, just
Speaker 1: so that you end up inflicting even more pain on people, uh,
Speaker 1: just so the demand would go down and maybe then
Speaker 1: the price will come down. It's really ridiculous logic, and
Speaker 1: it's very slow logic. It's not gonna work very much.
Speaker 1: A lot of what we're seeing right now, a lot
Speaker 1: of inflation that wasting right now, a lot of generally
Speaker 1: economic outcomes, part of a more even part of a
Speaker 1: more general rule. Economic outcomes typically the result of what
Speaker 1: was happening a year or two ago, not of what's
Speaker 1: happening today. Right. So the inflation that we see, the
Speaker 1: economic numbers, they see the result of the result of
Speaker 1: stock market rallying over the last two years, of incredible
Speaker 1: monetary expansion, of incredible physical expansion of two thousand, two
Speaker 1: thousand twenty one. Of course, why seeing high inflation all
Speaker 1: those numbers? Now right now we have a very different environment.
Speaker 1: We're seeing relative physical contraction, we're seeing raising rates where
Speaker 1: seeing monetary contraction coming up. We're seeing stock markets no
Speaker 1: longer cooperating with people. I think that one or two
Speaker 1: years from now, we'll see a very different picture which
Speaker 1: will unwind what we see now. What the FED is
Speaker 1: doing now is not relevant to the shouldn't be relevant
Speaker 1: to the numbers where I see in today with a
Speaker 1: result of what they were doing two years ago. But
Speaker 1: I think I think this is the case. I'm a
Speaker 1: like criticizing too much, but I think this is the case.
Speaker 1: Is on political pressure and kind of the sense of
Speaker 1: site guides and the chat are blindsided them a little bit.
Speaker 1: So let's talk about Let's talk about that, because that's
Speaker 1: really interesting. And as you said earlier, if the FED
Speaker 1: really thought that they're raising rates now here in March
Speaker 1: of would do something about inflation. They could have done
Speaker 1: an increase at the previous meeting they didn't. They could
Speaker 1: have done an intermeding increase they didn't. They could have
Speaker 1: done fifty basis points they didn't. This seems to be
Speaker 1: you know, when I was on a trading desk, they
Speaker 1: used to call it throwing a virgin in the volcano.
Speaker 1: Sometimes you just have to appease the market, give them
Speaker 1: a little bit so they don't think you're too far behind.
Speaker 1: The crowd, and that's what this I don't want to
Speaker 1: put words in your mouth, is this quarter point essentially
Speaker 1: addressing that that the fact that they were surprised by
Speaker 1: the political pressure and the noise about inflation. Is that
Speaker 1: what you're suggesting something like that. Yes, I think it
Speaker 1: was the political pressure that got to them. It does
Speaker 1: not make, honestly a ton of sense to me, this
Speaker 1: whole thing, because but yeah, I think it was a
Speaker 1: political pressure that and kind of the mentality a lot
Speaker 1: of people started to get really concerned about inflation. Honestly,
Speaker 1: I was concerned about inflation, but that's a concerned about
Speaker 1: it in two thousand twenty. I'm not concerned about it now.
Speaker 1: It already happened, and I'm not concerned about inflation going
Speaker 1: forward because all the conditions point towards negative inflation going forward,
Speaker 1: not towards positive inflation going forward. So I would be
Speaker 1: now I'm concerned about deflation in the next two years.
Speaker 1: It's it's funny you say that because I pulled out
Speaker 1: this quote from the book which came out a while ago,
Speaker 1: which obviously you wrote long before that. In fact, when
Speaker 1: I realized that, if anything, the stimulus and liquidity triggered
Speaker 1: by the crisis would have long term inflationary consequences. So
Speaker 1: clearly this most recent bout of inflation you anticipated. It
Speaker 1: sounds like you're in the transitory camp. Is that is
Speaker 1: that fair statement. I'm definitely in the terms of the
Speaker 1: camp with a passion, and I just to be a
Speaker 1: bit humble about that. I anticipated the inflation, but I
Speaker 1: did not really get the past right fully. And what
Speaker 1: was I did not anticipate this reaction, So I did
Speaker 1: not anticipate, like what I was thinking that even if
Speaker 1: the events, like if you told me that the events
Speaker 1: would unfold like they were with unfold the unfolded, I
Speaker 1: would expect rates to be solidly zero now and holding.
Speaker 1: I had no idea that the fact would panic into
Speaker 1: the trade rising and the main reason why I didn't
Speaker 1: think that would happen, and I still think that, But
Speaker 1: I'm also aware of the sending opinions with me. I
Speaker 1: think that there would so much more focus on this
Speaker 1: environment reducing the balance, because when else they're going to
Speaker 1: have a chance to reduce the balance. Right now, the
Speaker 1: raise rates crush the economy, have the rollover, then they
Speaker 1: won't have never chance to sell any of the balance it,
Speaker 1: and they're stuck with this thing with the success reserves
Speaker 1: that they have paid interest on which they're currently raising.
Speaker 1: The point of this exercise makes very little sense to me.
Speaker 1: Why raise uh interest rate on reserves on trillions of
Speaker 1: those those deserves the interest rate actually paying two banks?
Speaker 1: The banks don't really need a bailout right now, So
Speaker 1: why they in the fact bailing out banks by raising
Speaker 1: interest rates? Why they could be tightening monitory conditions if
Speaker 1: so needed, by doing the much needed reduction of the
Speaker 1: balance she it so so they've already begun to roll
Speaker 1: back quantitative easing. At what point do we start to
Speaker 1: see quantitative tightening? And again this may enough be your specialty,
Speaker 1: but clearly what the FET is doing in the bond
Speaker 1: market impacts how you build a portfolio and put on
Speaker 1: specific trades. Well, we will probably know more about the
Speaker 1: quantitative tightening schedule quantitative tightening schedule UM when we look
Speaker 1: at their um post game press conference. When I look
Speaker 1: at the press press conference and probably be a lot
Speaker 1: of questions about this, I believe that they're gonna so
Speaker 1: far their own track too uh start at least running
Speaker 1: off the balunce it. But there might be a lot
Speaker 1: of and I don't think like details of how they're
Speaker 1: gonna do it at what places are the important. But
Speaker 1: I think they will start running off the balance it.
Speaker 1: I just don't know how long the time they will
Speaker 1: have to do it. What's gonna happen is they're gonna
Speaker 1: they started to raise race, they're gonna start running off
Speaker 1: the balance at the moment they see the inflation of
Speaker 1: the economy showing some cracks. They might stop raising interest rates,
Speaker 1: but stopping the runoff of the balances will be probably
Speaker 1: a little bit more of a wonderous process. Really interesting,
Speaker 1: let's talk a little I don't know, I don't so
Speaker 1: we might have like tightening still going on in the
Speaker 1: background even when they stopped tightening. That's why I'm actually
Speaker 1: so much in the camp that they're going to be
Speaker 1: easy next year. That's really interesting. Let's talk a little
Speaker 1: bit about because you trade currencies, I want to talk
Speaker 1: about cryptocurrencies and central bank digital cash. Tell us your
Speaker 1: thoughts about what you think is happening in that space
Speaker 1: and what you think the FED and other central banks
Speaker 1: are going to do about digital currency. Well, first of all,
Speaker 1: did you like when I think of digital currencies? I
Speaker 1: wrote an article about it is actually a free years
Speaker 1: a goal when I called in quest of digital gold.
Speaker 1: I don't know if I was the first one to
Speaker 1: use the term digital goal, but I used it fairly earlier.
Speaker 1: I used it a few years ago. And what I
Speaker 1: pointed out that digital currencies have different users, and Bitcoin
Speaker 1: tries to be digital goals, like a digital consistent store
Speaker 1: of value. Why is it? Uh, it doesn't have to
Speaker 1: have ease of transactions. That doesn't have to be it
Speaker 1: should not actually be easy to move it around. That's
Speaker 1: actually the fact that bitcoin is a clunky to transact
Speaker 1: as a feature, not a bug, because if you want
Speaker 1: to have store of value, you don't want it to
Speaker 1: be easily stolen. So uh, bitcoin is a heavy, ponderous
Speaker 1: store of value like gold. And then there are other
Speaker 1: currencies which could have various industrial uses like I think
Speaker 1: I call the theium digital copper. I honestly not don't
Speaker 1: really know enough to understand what all of those cryptic
Speaker 1: currencies doing, what could be the use cases? I cannot
Speaker 1: give any opinion. What I think is that bitcoin has
Speaker 1: been working really hard to accumulate the street cred as
Speaker 1: a store of value because it had multiple cv corrections,
Speaker 1: but it never really collapsed, which is not how we
Speaker 1: think and bubble trades. Many people say that bitcoin is
Speaker 1: a bubble, for example, and it trades anything, uh it
Speaker 1: tastes like anything but a bubble, because bubbles do not
Speaker 1: do this eighty percent correction then rebound eighty percent per
Speaker 1: correction rebound. You know what does that type of trading
Speaker 1: precious metals and that's exactly how cryptocurrency is trading. That
Speaker 1: trading is precious metals and alternative core uh coins trading
Speaker 1: as base metals. And that is a pattern that I
Speaker 1: recognize best based in two thousand fifteen. So for traders
Speaker 1: who want to trade cryptocurrencies, and my recommendation is look
Speaker 1: at precious metals patterns and try to understand how those develop.
Speaker 1: There are all sorts of pros and cons that could
Speaker 1: be talked about whether bitcoin will survive as a store
Speaker 1: of value, what will be the adoption levels. I don't
Speaker 1: think that government digital currencies, which a subject the jure,
Speaker 1: have threat to Bitcoin, no more than fiat currencies that
Speaker 1: currently exists are a threat to bolth. I think if
Speaker 1: every country will have its own digital currency U something
Speaker 1: that it could be like not affected by central banks,
Speaker 1: like bitcoin will actually have a use interesting how far
Speaker 1: it can go thor whether what's the fair value for it?
Speaker 1: I'm really not qualified to say really really interesting. So
Speaker 1: let's talk about your old boss when when you were
Speaker 1: a JP Morgan, Jamie Diamond was running the shop. You've
Speaker 1: been pretty uh, You've offered a lot of praise to
Speaker 1: Diamond over over the time he was there, but you
Speaker 1: also criticized his thoughts on bitcoin back in Obviously lots
Speaker 1: changed since then. Tell us a little bit about your
Speaker 1: thoughts of money center banks like JP Morgan Chase being
Speaker 1: active participants in cryptocurrencies. Well, one thing about Jamie what
Speaker 1: I know, like call how much I know him? And
Speaker 1: I'm kind of feeling awkward to stop tweeting somebody essentially
Speaker 1: by talking about somebody on podcast. But I know that
Speaker 1: he can like say things and then take them back
Speaker 1: and recognize his mistake without too much stress over that.
Speaker 1: So he's like, nobody should be trading bitcoin, And my
Speaker 1: joke was basically, what do you know about trading bitcoin?
Speaker 1: And I'm sure he could have changed his mind several
Speaker 1: times and loved at all. Right, So that's what actually
Speaker 1: makes a good manager, right, he's encouraging to people, he
Speaker 1: knows how to write, run a good bank or business
Speaker 1: success of JP more of all banks under his leaderships
Speaker 1: are so tremendous and so divergent from performance of any
Speaker 1: other banks. Like I don't think there was ever a
Speaker 1: bad illustration a better case study of how much is
Speaker 1: he all can make a difference than Jamie Diamond. I
Speaker 1: mean that is completely outlined in terms of in terms
Speaker 1: of how much different he made. If you track same bags,
Speaker 1: how they were performing, stockless, performing relatively the appears under
Speaker 1: his rule, under his leadership and without his leadership, and
Speaker 1: the divergence is just insane, really really more than one case,
Speaker 1: it's it's the case with City Bank Bank one JP Morgan.
Speaker 1: Every single time, the divergence is just out of the galaxy.
Speaker 1: How much better everything performs than to his leadership. But
Speaker 1: I also was just laughing about the fact, what do
Speaker 1: you know about bitcoin? Why do you think that bitcoin
Speaker 1: should be cheaper or more expensive or whatever? And I
Speaker 1: sometimes make laugh fun of myself that way as well.
Speaker 1: I think banks will have to uh take this into
Speaker 1: account because it's a store of value and banks are
Speaker 1: supposed to store value. I think banks have no choice
Speaker 1: to get into the business of digital volts and volts
Speaker 1: and institutional custody for cryptocurrency. Huh really really interesting. So
Speaker 1: when you look at cryptocurrencies, are they a macro factor
Speaker 1: that you have to think about? Cryptocurrencies are becoming a
Speaker 1: micro factor? I think up a certain point, it was
Speaker 1: a very esoteric trade and just this one specific asset
Speaker 1: and the only SR strategy, and you about this assets too,
Speaker 1: how to buy and hold them? And when my investors
Speaker 1: were asking about this, my answer as well, you can
Speaker 1: buy and hold them yourselves. Why should I be doing
Speaker 1: this for you and charge your money to do that?
Speaker 1: Um and let of institutional custody was part of the
Speaker 1: issue for me, But also I felt like I cannot
Speaker 1: really add value. I'm a trader. My job is to
Speaker 1: buy low and so high. Even if I have long
Speaker 1: term time horizons, I'm still quintessentially a trader. So why
Speaker 1: would I be trading if I don't. If I cannot
Speaker 1: trade cryptocurrency, why I would be holding it for for clients?
Speaker 1: I think now with institutional custody developing now, with the
Speaker 1: futures market, various et fs and various options, there are
Speaker 1: some opportunities opening up for arbitrash for various investments and
Speaker 1: various more structured investments. And also cryptocurrency is becoming to
Speaker 1: be incorporated in the global marcro pictures. So definitely we're
Speaker 1: becoming more and more open to going in the direction
Speaker 1: really interesting. Before I get to my favorite questions that
Speaker 1: we ask all of our guests, UH, let me throw
Speaker 1: a couple of curveballs at you one from the book
Speaker 1: I'd rather manage money than people explain that. Well. So
Speaker 1: my background, I'm a mathematician. I'm essentially I like playing games.
Speaker 1: I like sitting in front of screens and thinking about numbers.
Speaker 1: I like walking around and thinking about charts and relationship
Speaker 1: with in assets. I'm not the kind of person who
Speaker 1: wants to be hiring, firing, doing interviews, having a lot
Speaker 1: of chatswood employees. They're just not my strong point. When
Speaker 1: I started a fund, my important condition has to have
Speaker 1: a team. Uh, and I have a business partner who
Speaker 1: can hand who really can spearhead that side of the business,
Speaker 1: like money raising and just building the team. It's I
Speaker 1: think I do. I did always okay with my employees
Speaker 1: and relationship with my employees, and PEP seem to have
Speaker 1: worked with me, seemed to have wanted to work with
Speaker 1: me again. In fact, um one of my team members
Speaker 1: might chief risk corfus. She's started working with me to
Speaker 1: get two thousands back at a chase when she came
Speaker 1: to be my assist, like my kind of second and
Speaker 1: comment on my market making desk. And she's still with me.
Speaker 1: I mean, she hasn't been working with me all this time,
Speaker 1: but she's on the team now. So clearly I can
Speaker 1: have good relationships with people, but managing people are just
Speaker 1: not my passion. I never thought I want to hire
Speaker 1: ten thousand people and build a business of the scope
Speaker 1: of other big hedge funds. I am interested in running
Speaker 1: a strategy. Interesting and the other curveball you've talked about.
Speaker 1: You'd like to play chess, you like to play poker,
Speaker 1: but you've also described them as tools that help you
Speaker 1: with your trading skills. Tell us a little bit about
Speaker 1: the parallels. How can one transfer skills from those games
Speaker 1: into trading and investing. One thing that I like to
Speaker 1: talk at about, and this has a lot of with
Speaker 1: a mathematical background, that there is two components that go
Speaker 1: into trading, analysis and strategy. And you know when you
Speaker 1: are mus have a PhD in mathematics. People usually don't
Speaker 1: have any doubt that you're good at analysis and analysis,
Speaker 1: whether it's economic analysis of plate analysis, about plending a solution,
Speaker 1: about thinking what is the central scenario, what is likely
Speaker 1: to happen. Strategy is a very different way of thinking.
Speaker 1: You it's when you don't know what's gonna happen, what
Speaker 1: is your system of responses? How there You're gonna respond
Speaker 1: to various scenarios, and you could be one good at
Speaker 1: one thing and not necessarily good at the others, though
Speaker 1: they are somewhat connected. I think I was lucky in
Speaker 1: my preparation to Wall Street that I was really involved
Speaker 1: in a lot of strategic activities. To I, I did
Speaker 1: a lot of academic competitions which involves strategy. And I
Speaker 1: started to play chess very young, and then I switched
Speaker 1: to Go, which became more more my passion kind of
Speaker 1: throughout college and high school. So high school, college and
Speaker 1: even and I SAI. Now I still play Go, and
Speaker 1: then I've learned later many other strategy games, including poker,
Speaker 1: and that really taught me about this system of responses.
Speaker 1: You cannot just say decide what's going to happen, and
Speaker 1: that's what's gonna happen. You might must be prepared to
Speaker 1: react to things which you didn't anticipate. And I think
Speaker 1: poker specifically, but all competitive activities, but poker specifically is
Speaker 1: very good at building psychological fortitude, the ability to take
Speaker 1: a loss and move on, ability to gauge whether I'm
Speaker 1: in a good set of mind to even continue playing
Speaker 1: right now. It's never perfect. I made a lot of
Speaker 1: those mistakes both and poker and trading when I probably
Speaker 1: did not gauge my state of mind correctly. However, it's
Speaker 1: a good start. It's a good background. And I did
Speaker 1: use a lot of poker analogies in my book The
Speaker 1: Trade of March twenty twenty, which in some sense looks
Speaker 1: to an earlier men About interview when we're talking about
Speaker 1: positioning uh into March two thousand twenty one of very
Speaker 1: strong poker anology I talk I thought a lot about
Speaker 1: this over my poker days. How much better you're likely
Speaker 1: to perform if you start the night well, if you
Speaker 1: have a lot of chips in front of you on
Speaker 1: the table, you're so much likely to play better. So
Speaker 1: if you're moving into the crisis with your portfolio in
Speaker 1: a good shape, You're so much more likely to make
Speaker 1: good decisions then when you are moving into crisis, when
Speaker 1: you're Part four is under pressure. Part of it is
Speaker 1: just your risk management obviously, like if you're losing money,
Speaker 1: you're not going to be able to have space to
Speaker 1: take new positions. But part of the pure psychology, you're
Speaker 1: gonna be a little paralyzed when you're losing money, while
Speaker 1: if you're doing well, you can be very open minded
Speaker 1: and think like, Okay, I can take profits on this,
Speaker 1: I'll take off this position, I'll put this position all,
Speaker 1: I'll do this, I'll do that. Really really interesting. I
Speaker 1: know only have you for a couple more minutes, So
Speaker 1: let me jump to my favorite questions that I ask
Speaker 1: all of our guests, starting with you know, I was
Speaker 1: gonna One of the things I noticed in the book
Speaker 1: is there are long periods of time when you're working
Speaker 1: literally twenty four hours a day. There there are slack
Speaker 1: messages back and forth at one in the morning, at
Speaker 1: three in the morning, at two at five in the morning,
Speaker 1: West Coast time. UM. There were days in March of
Speaker 1: uh where the whole team was working twenty four hours
Speaker 1: a day. Days on a time, So it kind of
Speaker 1: makes my next question almost uh irrelevant, But I have
Speaker 1: to ask, you know, during the pandemic, did you have
Speaker 1: time to watch TV? Were you streaming any shows or
Speaker 1: listening to anything online? Or were you just you know,
Speaker 1: pretty much seven at the trading desk. I think the
Speaker 1: first few weeks were really funk here, the first few
Speaker 1: weeks of March, and that's what I'm writing the book of.
Speaker 1: There was not a lot of time to do many
Speaker 1: other things except dealing with like kids being suddenly remote
Speaker 1: in remote education, and dealing with markets. I generally do
Speaker 1: do a lot of things to onn wine, which includes
Speaker 1: watching TV. Uh. In the first amounts of Pandemic, yes,
Speaker 1: I started to watch TV. I was writing fiction, I
Speaker 1: was going for a lot of hikes. I would do
Speaker 1: a lot of my work, including writing this book, The
Speaker 1: Trades of march Um. Much of it was written with
Speaker 1: a laptop sitting by the ocean both and here in
Speaker 1: California and Hawaii. I did. I did a lot of
Speaker 1: those things, and I did a lot of things that
Speaker 1: many people do not think of doing. It undwinding at night.
Speaker 1: One of the things I did in Pandemic I watched
Speaker 1: the series of footy six YouTube videos which were really
Speaker 1: math videos, just discussing constructions, really really large numbers. What's
Speaker 1: the name of that YouTube channel that you were watching is.
Speaker 1: I think it's called Ridiculously a Huge Numbers And there's
Speaker 1: like fourty six video videos. And so I would be
Speaker 1: at eleven in the evening watching a video about transfine
Speaker 1: conduction and felt growing erarchies. I have my own weird ways,
Speaker 1: but I do watch quite a bit of TV. I
Speaker 1: do like I I really like good TV. I think
Speaker 1: that I don't go to movies anymore very much. I
Speaker 1: think the movies are no longer any good, but the
Speaker 1: TV shows are amazing. So give us a few TV
Speaker 1: shows you like, and uh, tell us, tell us what
Speaker 1: entertain you over the past couple of years. Well, I
Speaker 1: obviously love Billions, especially because I know in person many
Speaker 1: people it's based on. I love Game of Thrones because
Speaker 1: it's a fantasy show and I know the author and
Speaker 1: I read all these books obviously long before they came out,
Speaker 1: and it's really well done. There's been a lot of
Speaker 1: great shows over the years. Uh. Some of them were
Speaker 1: a kind of surprise shows that we're not e one
Speaker 1: made as a first uh R shows originally, like I'm
Speaker 1: a huge fan, for example, of the nineties show Puppet
Speaker 1: the Vampire Slayer. I I'm a fan of the recent
Speaker 1: show with Magicians. Oh, I love that show. Yeah, I
Speaker 1: think that was a really huge upside surprise for me.
Speaker 1: How the show were tremendous. Yeah, that's funny. It's it's funny,
Speaker 1: it's creative. It's just keeps taking into places you don't
Speaker 1: expect to be it. I was delighted show. And then
Speaker 1: there are always classic shows which are just really good,
Speaker 1: like Wire Breaking, Bad, Original Sopranos, Homeland does those kind
Speaker 1: of classic goods. True Blood and I like thru Blood
Speaker 1: as well. I'm surprised, given your proclivity for black hole metaphors,
Speaker 1: I'm not hearing any science fiction in that list other
Speaker 1: than Magicians. Is more fantasy than sci fi, you know.
Speaker 1: I love battles. I love New Battlestar Galactica. Really yes,
Speaker 1: the New Battlestar Galactica is one of my favorites. So
Speaker 1: so there are two shows I have to ask you about, um,
Speaker 1: the Expanse, which I'm up to the finale. I've watched
Speaker 1: everything except the last one has been tremendous. I don't know,
Speaker 1: if you're a fan of that sort of sci fi,
Speaker 1: you know what. I was going to be killed for
Speaker 1: my ants on this. I haven't yet gone through Expensive
Speaker 1: and I wished a few episodes. I have a particular thing,
Speaker 1: and that's probably why my I don't watch a lot
Speaker 1: of science fiction shows is I'm tend to be claustrophobic,
Speaker 1: and I'm really bothered by shows which set up all
Speaker 1: on a closed space station. Somehow Battlestar Galactica managed to
Speaker 1: circumvent it and I was able to watch it, But
Speaker 1: a space station shows that usually kind of a tough
Speaker 1: watch for me. And then there's another sci fi I'm
Speaker 1: going to recommend. There's only two seasons of it. Altered
Speaker 1: Carbon was spectacular. Yeah, it was good. I wished for
Speaker 1: season and I enjoyed it. The second season is that,
Speaker 1: you know the character human they wear people like skins
Speaker 1: so you can change bodies. They do that in the
Speaker 1: second season, and it was, you know, surprisingly good and
Speaker 1: it resolves a lot of open questions. If you like
Speaker 1: the first season, I'm going to recommend the second season.
Speaker 1: Might I might turn back to that and I probably
Speaker 1: will watch Expense. I love one of the authors writing
Speaker 1: for expense his other books, and one of my favorite authors,
Speaker 1: Daniel Abraham. We're going to circle back to books in
Speaker 1: a moment um. Let me ask about mentors who who
Speaker 1: helped to shape your career. There is actually if you
Speaker 1: look at my book at the acknowledgement page, there is
Speaker 1: a list of mentors there. They were mentors along my
Speaker 1: like they'll key people obviously along my entire life studying,
Speaker 1: from my like mask club mentors to high school teachers
Speaker 1: to UH graduate school professors to my serious advisor and
Speaker 1: people like that when you think about Wolsted. Also, there
Speaker 1: were some it's really easy for me to remember certain
Speaker 1: key moments of mentorship, like, for example, my first boss
Speaker 1: at Bankers Rush, Jeff Basmon, and I noticed he would
Speaker 1: say some things which is really register for me forever.
Speaker 1: Like I remember one of my early days on Wall
Speaker 1: Street and he's talking to broker on the shout box
Speaker 1: and he's asking about the price on something and broker
Speaker 1: is saying the prices. I think I calculated the price
Speaker 1: should be four at five, and he's like, I don't
Speaker 1: care about your calculation. I can do calculation myself. Where
Speaker 1: do you have forbid, do you have five offer? And
Speaker 1: that's kind of mentality which registered for me. It's not
Speaker 1: about what you think the market should be, it's about
Speaker 1: whether the market is there and going on forward. I
Speaker 1: had lots of those mentorship moments with my various bosses
Speaker 1: at JP Morgan. That included Evan Burnson, David Puss, Mark Sarp,
Speaker 1: John Anderson, who was probably the person I worked really
Speaker 1: closely with during my years of proprietary trading, and JP
Speaker 1: Morgan and still remained the great friend and supporter. He's
Speaker 1: currently co head of fixed and Common Commodities and Millennium.
Speaker 1: People like that were super helpful to me. Each of
Speaker 1: them said at some point some things that really registered
Speaker 1: with me. Those For example, one time, which was very
Speaker 1: criticalizing time in my career, when I came to my
Speaker 1: boss and I asked him, I told him this is
Speaker 1: the trade. I'm laying out this trade, this is my
Speaker 1: trade idea. And he said, well, if you do this
Speaker 1: what you're proposing to do, how much you're gonna make?
Speaker 1: I said, we're gonna make ten million dollars and then
Speaker 1: he said, okay, let's do twice that and make twenty million.
Speaker 1: And that was kind of an important way for me
Speaker 1: to understand you should not set your side low in
Speaker 1: financial markets. How that trade end up working out, we
Speaker 1: made ten million probably so so let's not say that officially,
Speaker 1: but well made a good amount of money on the trade.
Speaker 1: So let's talk. You mentioned some of your favorite authors.
Speaker 1: What are some of your favorite books and what are
Speaker 1: you reading now? Are you mostly think about fiction I'll
Speaker 1: fix you nor non fiction either or what do you like? Well?
Speaker 1: I mostly read fiction. I read some books I read
Speaker 1: you usually read some books related to finance with materials
Speaker 1: related to finance, or I read Oh, I read the
Speaker 1: fantasy and science fiction. Give it give us some names.
Speaker 1: So obviously my all time favorite is The Lord of
Speaker 1: the Rings. Yeah, Lord of the Rings, if you stay
Speaker 1: in fantasy. I love The Will of Time, which is
Speaker 1: recently made into a show. But by the way, I
Speaker 1: loved on Amazon Prime the Will of Time. I love
Speaker 1: all works by possibly my favorite living author, Guy Gabriel
Speaker 1: ka Um. He writes a lot of historical fantasy. I like.
Speaker 1: Another current author I really like is Naomi novic Um.
Speaker 1: Give us a book title, but my favorite book of
Speaker 1: hers is Spinning Silver. But she is also very well
Speaker 1: known for her temporary series starts with the book Her
Speaker 1: Majesty Is His Majesty is Dragon for Guy Gabriel k K,
Speaker 1: who I mentioned earlier. His earlier work is Fionova Tapestry Trilogy,
Speaker 1: but his his recent books, which are set up in
Speaker 1: any Sounds period children are The Sky and The Brightness
Speaker 1: Long Ago um I Viering. I mentioned Daniel Abraham. I
Speaker 1: really like his series The Dagger in the Coin. I
Speaker 1: already mentioned The Game of Thrones, both showing books. I
Speaker 1: probably could go on with a list of fantasy novels
Speaker 1: I love, just to switch to science fiction a bit.
Speaker 1: I like Andres Game by Orson Scott Card some of
Speaker 1: the sequels, but not too farantsticals because they get worse.
Speaker 1: The first book is terrific. Yeah. I love Andrew's Game,
Speaker 1: and it's great for I think it's great for traders
Speaker 1: and anyone interested in strategy. I like Uh. I like
Speaker 1: a lot of Hyperion series by Dan Simmons. M. Do
Speaker 1: you do you go back historically in sci fi? Any
Speaker 1: of the classics are? Have you mostly been reading more
Speaker 1: modern sci fi? Well? I read some of the classics
Speaker 1: by the necessity because I'm not a young Some of
Speaker 1: the stuff that I was reading in the teenager by
Speaker 1: now is a classic, even if it was relatively modern
Speaker 1: back then. But I did go a little back in
Speaker 1: the history back then. Now I tend to read mostly
Speaker 1: more modern stuff, and it's a little it's a little
Speaker 1: difficult a days to read, especially science fiction which was
Speaker 1: written even say in the nineties, because projections of the
Speaker 1: near future just so off and it's very hard to
Speaker 1: kind of stay in there kind of suspended disbelief. But
Speaker 1: it all depends on the texture of the science fiction
Speaker 1: some of it, like for example of novels by Den Simmons,
Speaker 1: which are stand really well regardless of what, regardless of
Speaker 1: the fact that they we're wating really long ago. Yeah,
Speaker 1: the more general they were about the day to day
Speaker 1: use of technology and the more math grow they were.
Speaker 1: I'm thinking of people like Asimov's Foundation or Larry Niven's
Speaker 1: Ring World. They didn't talk about cell phones and personal computers.
Speaker 1: It was always massive macro engineering projects. Um like the
Speaker 1: Ring World as an example, that it gave it a
Speaker 1: timelessness that that I think the people who got too
Speaker 1: involved in the day to day you know, either they
Speaker 1: were right or wrong, and if they're wrong, it's hard
Speaker 1: to get immersed in that world. Yes, and there is
Speaker 1: certain idea that there is certain talent about being a
Speaker 1: good futurist, Like there are some good writers who are
Speaker 1: just not good futurists. For example, Isaac Asimov, which is
Speaker 1: one of the most celebrated science fiction writers of all times,
Speaker 1: was an awful, horrible, atrocious futurist. I mean, he had
Speaker 1: made completely unforgivable mistakes, and his treatment of science was uh,
Speaker 1: outright fall and almost insulting, Like I felt like he
Speaker 1: was actually insulting science by the way he was treating it.
Speaker 1: And yet his novels were innovative, creative, and very readable
Speaker 1: and had a lot of great ideas, really really interesting.
Speaker 1: Our last two questions, what sort of advice would you
Speaker 1: give to a recent college grad who was interested in
Speaker 1: the career of either investing or finance. The advice it
Speaker 1: is probably similar to what I would tell anyone going
Speaker 1: into any career. First of all, if you care about
Speaker 1: financial success, you want to find a confluence of three things.
Speaker 1: Thinks that uh, thinks that rewarding financially obviously, just as
Speaker 1: I mentioned, thinks that you are good at, and things
Speaker 1: that you enjoy. So when you find the consers of
Speaker 1: those things that you can do, something that you enjoy
Speaker 1: doing it, you happen to be good at, and they're
Speaker 1: financial rewarding, then you'll have a rewarding career. And finance
Speaker 1: could very easily be that. And but even within air
Speaker 1: is so finance you need to find initia I think
Speaker 1: it is. Might be not easy, of course for a
Speaker 1: young person, but it's very important to assess, ah, well,
Speaker 1: what are you actually good at and be realistic about that,
Speaker 1: be very honest with yourself. What it is that I
Speaker 1: do better than any other person in the world, and
Speaker 1: how they capitalize on those things that I do better
Speaker 1: than any other person in the world. And then uh,
Speaker 1: and part of the reason, like, for example, I write
Speaker 1: books like my book The Trade of mar and I'm
Speaker 1: sure that are equivalent, some equivalent books, maybe different fields
Speaker 1: and sub fields, is try to actually understand what it
Speaker 1: is that people do so you have a correct idea
Speaker 1: whether you're going to enjoy this or not. Really really
Speaker 1: interesting and our final question, what do you know about
Speaker 1: the world of investing today that you wish you knew
Speaker 1: twenty five years or so ago when you were first
Speaker 1: getting started as a trader. I think The most important
Speaker 1: thing I would have liked to know back then that
Speaker 1: I will still be here now. The importance of that
Speaker 1: is to understand that this is a long game, and
Speaker 1: very often it's very easy to get impatient and think
Speaker 1: somewhat uh, and think somewhat short term, like think like, oh, well,
Speaker 1: if when you're twenty five years old, events that will
Speaker 1: happen when you're forty five or fifty years old seems
Speaker 1: so remote you almost don't care about. But the actual
Speaker 1: reality is that you do care about them. Huh. Reality
Speaker 1: is that you will when you're fifty years old, you
Speaker 1: still weren't gonna want to be healthy, you still aren't
Speaker 1: gonna want to have money, and you're still gonna have
Speaker 1: fun in the world, right and some of those seeds
Speaker 1: will be planted at your earlier age. So understanding that
Speaker 1: this is a long game that you if I'm knowing
Speaker 1: back then, that I will still be in this game
Speaker 1: twenty five years later and I'll still enjoy it, would
Speaker 1: probably alleviate a lot of stress and pressure on me
Speaker 1: back then. Really really interesting, Alex, thank you for being
Speaker 1: so generous with your time. We have been speaking with
Speaker 1: Alex Guarevich. He's the founder and CEO of Hante Advisers
Speaker 1: and the author of the Trades of March, a Shield
Speaker 1: against Uncertainty. If you enjoy this conversation, well be sure
Speaker 1: and check out any of the previous four hundred discussions
Speaker 1: we've had over the past eight or so years that
Speaker 1: we've been doing the show. You can find those at iTunes, Spotify,
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Speaker 1: I'm Barry Ritolts. You've been listening to Masters in Business
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