1 00:00:02,520 --> 00:00:08,639 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Michael Purvas. He's a 2 00:00:08,680 --> 00:00:11,119 Speaker 1: founder and CEO of Talbacan Capital Advisors. 3 00:00:11,320 --> 00:00:13,480 Speaker 2: Michael, what are the conversations you're having with your clients 4 00:00:13,520 --> 00:00:14,000 Speaker 2: these days? 5 00:00:14,040 --> 00:00:15,920 Speaker 3: Is we all were going into week three of this 6 00:00:16,480 --> 00:00:20,599 Speaker 3: Iran issue here, and it's been such a volatile time 7 00:00:20,640 --> 00:00:23,079 Speaker 3: for financial markets, starting with the commodities markets. 8 00:00:22,880 --> 00:00:25,400 Speaker 2: What are the conversations you're having with your clients these days. 9 00:00:25,760 --> 00:00:28,800 Speaker 1: Well, one thing I think is that's I've certainly been 10 00:00:28,800 --> 00:00:30,920 Speaker 1: doing is standing back and looking at sort of some 11 00:00:31,000 --> 00:00:34,320 Speaker 1: of the cross asset correlations and how those are moving, 12 00:00:34,600 --> 00:00:36,479 Speaker 1: because I think there was good clues as to what 13 00:00:36,560 --> 00:00:41,720 Speaker 1: type of risk environment we're we're we're we're edging into there. 14 00:00:41,720 --> 00:00:43,519 Speaker 1: And so one of the interesting things here, you know 15 00:00:43,760 --> 00:00:46,200 Speaker 1: Thomas referencing the VIX at twenty one, which is really 16 00:00:46,240 --> 00:00:49,040 Speaker 1: not that high a level there, that's right line with 17 00:00:49,040 --> 00:00:52,800 Speaker 1: its long term average there. But at the same time, 18 00:00:53,880 --> 00:00:57,480 Speaker 1: you know, you're seeing very high cross process of correlations 19 00:00:58,560 --> 00:01:02,760 Speaker 1: the for example, like Crude's correlation with the VIX right now, 20 00:01:02,840 --> 00:01:06,200 Speaker 1: over the last several days really since this attack, these 21 00:01:06,200 --> 00:01:08,640 Speaker 1: attacks began, it's in the top two percent of all 22 00:01:08,680 --> 00:01:10,720 Speaker 1: readings going back a decade. If you look at crude 23 00:01:10,760 --> 00:01:14,800 Speaker 1: correlations with high yield spreads, those are also in the 24 00:01:14,800 --> 00:01:17,039 Speaker 1: top two percent. And what's interesting about that is that 25 00:01:17,360 --> 00:01:21,360 Speaker 1: high yield is now correlating with the VIX, which it 26 00:01:21,400 --> 00:01:24,840 Speaker 1: had kind of decorrelated. It's supposed to be positively correlated, right, 27 00:01:24,880 --> 00:01:27,840 Speaker 1: you know, spreads back up that kept you know, when 28 00:01:27,959 --> 00:01:30,880 Speaker 1: risk off happens. That correlation kind of broke down over 29 00:01:30,880 --> 00:01:33,920 Speaker 1: the last eighteen months for all sorts of interesting reasons. 30 00:01:34,080 --> 00:01:37,240 Speaker 1: But now that correlation's coming back now as it relates 31 00:01:37,240 --> 00:01:40,680 Speaker 1: to the VIX. What's interesting also is that, you know 32 00:01:40,720 --> 00:01:43,040 Speaker 1: the fix of twenty one, Yes it's been correlating with 33 00:01:43,200 --> 00:01:47,880 Speaker 1: the crude prices, but the across stock correlations are still 34 00:01:48,080 --> 00:01:49,920 Speaker 1: really kind of muted. They've gone up a lot over 35 00:01:49,920 --> 00:01:52,800 Speaker 1: the last couple of weeks, but they're not really high here, right, 36 00:01:52,840 --> 00:01:55,200 Speaker 1: and you're still staying on any given day, one stock 37 00:01:55,240 --> 00:01:56,760 Speaker 1: can be in the green and a bunch of other 38 00:01:56,760 --> 00:01:58,560 Speaker 1: stocks and be in the red there, So we're not 39 00:01:58,640 --> 00:02:00,480 Speaker 1: really in the sort of you know, sort of risk 40 00:02:00,520 --> 00:02:03,520 Speaker 1: off environment, but we're you know, crude is clearly driving. 41 00:02:03,200 --> 00:02:03,920 Speaker 2: The possum mark. 42 00:02:04,200 --> 00:02:06,360 Speaker 1: So I think that gets to you know, sort of 43 00:02:06,360 --> 00:02:09,040 Speaker 1: begs the questions about how are you really trying to 44 00:02:09,040 --> 00:02:12,880 Speaker 1: contextualize what's been happening here? I think again you have 45 00:02:12,919 --> 00:02:14,519 Speaker 1: to step back a little bit and just think. Look, 46 00:02:14,600 --> 00:02:16,000 Speaker 1: you know, we had a great year last year in 47 00:02:16,000 --> 00:02:18,760 Speaker 1: the equity market. A late winter malaise is kind of 48 00:02:18,800 --> 00:02:23,000 Speaker 1: normal without iran, right, that's something that could be expected. Here. 49 00:02:23,120 --> 00:02:26,640 Speaker 1: We had a bad jobs rapport with some really important 50 00:02:26,720 --> 00:02:30,440 Speaker 1: questions that were begged by the complex the complexion of 51 00:02:30,480 --> 00:02:33,240 Speaker 1: what jobs were being dropped, particularly in the you know, 52 00:02:33,320 --> 00:02:38,200 Speaker 1: sort of those pillars of job growth the today. 53 00:02:38,440 --> 00:02:39,040 Speaker 3: What do you do? 54 00:02:39,240 --> 00:02:45,480 Speaker 1: I mean, Yeahully artfully dodged as many questions as you 55 00:02:45,520 --> 00:02:48,200 Speaker 1: get to get off the stage. But seriously, I think 56 00:02:48,200 --> 00:02:52,359 Speaker 1: it's it's interesting. I mean, Thomas referencing your your rea prices, 57 00:02:52,360 --> 00:02:56,040 Speaker 1: solfare prices, helium prices, all these things will impact producer 58 00:02:56,120 --> 00:02:57,959 Speaker 1: prices that will sort of weave its way. 59 00:02:58,120 --> 00:02:59,120 Speaker 2: WHOA did you have. 60 00:02:59,120 --> 00:03:01,480 Speaker 4: In organic chemist three freshman year in college? 61 00:03:02,400 --> 00:03:03,760 Speaker 2: Did you go down in flames? 62 00:03:03,840 --> 00:03:11,120 Speaker 3: Like I continue on, UEA, we need more methy continuous? 63 00:03:11,120 --> 00:03:13,920 Speaker 1: Oh god, well so so. But all those things do 64 00:03:14,440 --> 00:03:16,920 Speaker 1: you know, raise questions about I think what the FED 65 00:03:17,000 --> 00:03:20,200 Speaker 1: has to deal with today is what I call inflation complexity. 66 00:03:20,320 --> 00:03:25,560 Speaker 1: So you're gonna see you're gonna see producer producer prices 67 00:03:25,639 --> 00:03:29,720 Speaker 1: right are once again, you know, in some way similar 68 00:03:29,760 --> 00:03:32,639 Speaker 1: to post Ukraine, some some different, but those are going 69 00:03:32,680 --> 00:03:36,040 Speaker 1: to linger and creep into into the inflation metrics we 70 00:03:36,040 --> 00:03:38,320 Speaker 1: see a few months from now, right, and and maybe 71 00:03:38,360 --> 00:03:40,800 Speaker 1: longer than that, we don't know, uh there. But at 72 00:03:40,800 --> 00:03:44,000 Speaker 1: the same time, you've got companies laying off a whole 73 00:03:44,040 --> 00:03:47,040 Speaker 1: bunch of workers with AI right, right, So that's that's 74 00:03:47,080 --> 00:03:50,280 Speaker 1: part of the inflation complexity that the FED has to 75 00:03:50,320 --> 00:03:52,920 Speaker 1: deal with. And then of course the other dimension of 76 00:03:53,600 --> 00:03:55,800 Speaker 1: the FED has to contend with. There is this sort 77 00:03:55,800 --> 00:03:58,320 Speaker 1: of K shaped economy and in a way, the auron 78 00:03:58,400 --> 00:04:00,920 Speaker 1: attacks almost worse than you know, you have to rather 79 00:04:01,000 --> 00:04:04,120 Speaker 1: than think about you know this, this this situation is 80 00:04:04,200 --> 00:04:07,800 Speaker 1: like straight's on, Straight's off. It's really not that binary. 81 00:04:07,840 --> 00:04:10,240 Speaker 1: Nor is the fact that is a procession on procession off. 82 00:04:10,240 --> 00:04:12,600 Speaker 1: You if you understand that in terms of the K, 83 00:04:13,280 --> 00:04:15,880 Speaker 1: you know there there will be many things that magnify 84 00:04:16,560 --> 00:04:17,680 Speaker 1: the economic divergence. 85 00:04:17,760 --> 00:04:20,839 Speaker 4: Michael Purvis with his charm besides a twelve vvacation in 86 00:04:20,880 --> 00:04:25,480 Speaker 4: the summer, is he really truly mixes in analysis of equities, bonds, 87 00:04:26,000 --> 00:04:29,960 Speaker 4: currencies and commodities. So I've plotted Aussie yen is a 88 00:04:30,000 --> 00:04:32,960 Speaker 4: specific rim proxy. 89 00:04:32,240 --> 00:04:38,760 Speaker 3: Back thirty years observation one, two, three, four, five, Six 90 00:04:38,800 --> 00:04:43,200 Speaker 3: times in thirty years we've had two standard deviation plus 91 00:04:43,240 --> 00:04:45,800 Speaker 3: strong Australia week yen. 92 00:04:46,640 --> 00:04:48,719 Speaker 2: And the word I use is stochastic. 93 00:04:48,960 --> 00:04:52,760 Speaker 4: They're point, they go up their stress and they turn 94 00:04:52,800 --> 00:04:54,120 Speaker 4: around and come down. 95 00:04:54,240 --> 00:04:55,680 Speaker 2: Why is this time any different? 96 00:04:55,839 --> 00:04:58,640 Speaker 4: Where this is the mother of all opportunities at two 97 00:04:58,680 --> 00:05:02,440 Speaker 4: point two standard devia and a long trend and you 98 00:05:02,560 --> 00:05:04,000 Speaker 4: go against this. 99 00:05:03,960 --> 00:05:06,080 Speaker 2: Gloom, this zite guide that's out there. 100 00:05:06,120 --> 00:05:08,920 Speaker 1: Now, well, I'm going to pivot that back to the 101 00:05:09,120 --> 00:05:12,479 Speaker 1: to maybe dollar yen and and dollar euro. I think 102 00:05:12,880 --> 00:05:16,120 Speaker 1: one thing that's really apparent here is that when you 103 00:05:16,160 --> 00:05:20,520 Speaker 1: look at relative hydrocarbon vulnerability that isn't obviously today the 104 00:05:20,600 --> 00:05:22,279 Speaker 1: United States very different than it was in the nineteen 105 00:05:22,320 --> 00:05:25,120 Speaker 1: seventies here, right, So we're not a petro currency the 106 00:05:25,240 --> 00:05:28,279 Speaker 1: US dollar, but relative to the end and relative to 107 00:05:28,320 --> 00:05:30,600 Speaker 1: the Euro, we are. And I think what you're referencing 108 00:05:30,600 --> 00:05:33,320 Speaker 1: in Australia some version of that theme here, right, And 109 00:05:33,360 --> 00:05:35,680 Speaker 1: so what have you seen you've seen? You know, I 110 00:05:35,839 --> 00:05:38,279 Speaker 1: was before Iran, I was waiting for the Euro to 111 00:05:38,279 --> 00:05:40,559 Speaker 1: break one twenty maybe go to one twenty five, worked 112 00:05:40,560 --> 00:05:44,919 Speaker 1: out big til Iran right there. And now you're seeing 113 00:05:44,920 --> 00:05:48,800 Speaker 1: that now if you measure say the US dollar relative 114 00:05:48,839 --> 00:05:53,000 Speaker 1: to the Canadian dollar, that's really been very stable right there. 115 00:05:53,080 --> 00:05:56,599 Speaker 1: So there are sort of petro currency and I don't 116 00:05:56,640 --> 00:05:58,960 Speaker 1: like the term, but there are petrocurrency dynamics that are 117 00:05:59,000 --> 00:06:01,120 Speaker 1: that are that are in that and it's also being 118 00:06:01,160 --> 00:06:02,960 Speaker 1: reflected in the in the equity markets. 119 00:06:03,000 --> 00:06:04,840 Speaker 2: I gotta wrap this up, but you're a young guy. 120 00:06:05,160 --> 00:06:10,719 Speaker 2: Can you just state that usually these tensions are stochastic 121 00:06:10,880 --> 00:06:16,000 Speaker 2: and they repeat and reverse always almost. 122 00:06:16,000 --> 00:06:19,880 Speaker 1: The question is is yeah, classic golf oil spikes, you 123 00:06:19,920 --> 00:06:22,280 Speaker 1: know their temporary. You know, gold shoots up, shoots back 124 00:06:23,320 --> 00:06:26,359 Speaker 1: right right, the Australian dollar shoots up relative to the 125 00:06:26,440 --> 00:06:30,520 Speaker 1: end and and falls back. But the the the the 126 00:06:30,720 --> 00:06:33,279 Speaker 1: question we don't know is is and he saw this 127 00:06:33,360 --> 00:06:36,320 Speaker 1: by the way in SPX options where the three months 128 00:06:36,320 --> 00:06:38,479 Speaker 1: football ski finally caught up with a one month SKW 129 00:06:38,800 --> 00:06:41,800 Speaker 1: just the other day there that this may be not 130 00:06:42,000 --> 00:06:45,279 Speaker 1: a two week thing. Maybe they're this tension will persist 131 00:06:45,360 --> 00:06:49,480 Speaker 1: for you know, a few months here and so following Ukraine. 132 00:06:49,720 --> 00:06:52,039 Speaker 1: You know that was not a sort of straights on, 133 00:06:52,120 --> 00:06:54,480 Speaker 1: straights off type of dynamic that just come to kept going, 134 00:06:54,720 --> 00:06:57,799 Speaker 1: and yet it drove a lot of problems, for example 135 00:06:57,800 --> 00:07:00,320 Speaker 1: within the Eurozone. Right relative to the S. 136 00:07:00,440 --> 00:07:03,120 Speaker 2: Right, did you survive St Patrick's thing? 137 00:07:03,320 --> 00:07:07,200 Speaker 1: Uh? Mostly putting together charts and I did have a 138 00:07:07,240 --> 00:07:08,039 Speaker 1: green bagel though. 139 00:07:08,080 --> 00:07:12,640 Speaker 4: So Michael Purvis, tall back and thank you so much, 140 00:07:12,680 --> 00:07:13,680 Speaker 4: greatly appreciate it.