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Speaker 1: This is Master's in Business with Barry Ridholds on Bloomberg Radio.

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Speaker 2: This week on the podcast, Oh, I have an extra

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Speaker 2: special guest, Peter Borsch, founding partner number two at Tutor Investments,

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Speaker 2: where he worked directly with Pull Tutor Jones, most famously

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Speaker 2: helping him put on a very aggressive short position heading

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Speaker 2: into the eighty seven crash and then covering not in

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Speaker 2: the mayhem of that Monday, but pretty close to the

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Speaker 2: bottom tick on Tuesday. Really just a fascinating career, a

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Speaker 2: unique perspective on markets. Not only did he serve on

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Speaker 2: the Brady Commission looking at the eighty seven crash, but

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Speaker 2: his history of investing, in trading and public service both

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Speaker 2: at the FED and the Chicago Board of Trade and

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Speaker 2: Treasury Department really unparallel, as well as just a pretty

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Speaker 2: amazing track record as an investor and trader and as

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Speaker 2: a philanthropist, one of the co founding trustees at Robin Hood.

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Speaker 2: Really a fascinating character. I found this to be a

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Speaker 2: master class in a humble approach to markets and being

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Speaker 2: aware of your own limitations in order to obtain the

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Speaker 2: best possible results as a trader and investor. Borish is

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Speaker 2: a legend on Wall Street, and I'm thrilled to have

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Speaker 2: the opportunity to sit down with him and discuss his

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Speaker 2: career and his just approach to investing and trading and philanthropy. So,

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Speaker 2: with no further ado, my conversation with former director of

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Speaker 2: research at Tutor Investments.

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Speaker 3: Peter Borish, thank you so much. It just goes to

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Speaker 3: show I can't hold a job.

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Speaker 2: That's right. That's right. You are constantly onto the next gig.

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Speaker 2: So I'm familiar with your work, but I bet a

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Speaker 2: lot of younger listeners may not know of your infamy

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Speaker 2: and what took place at the eighty seven crash. We'll

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Speaker 2: get to that. Let's start out with just your background.

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Speaker 2: What got you interested in markets and trade?

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Speaker 1: Well, I guess it's sort of fortuitous.

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Speaker 3: So when I finished graduate school, I always begin at Michigan,

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Speaker 3: because I'm a Michigan man. I went there for undergraduate

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Speaker 3: and graduate school, and I finished graduate school in eighty

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Speaker 3: two in what was really the real recession under President Reagan,

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Speaker 3: and I was very fortunate to get a job at

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Speaker 3: the Federal Reserve Bank of New York doing what so

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Speaker 3: I was doing at that point. If you recall, it

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Speaker 3: was the LDC right the Mexican crisis, and they were

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Speaker 3: talking about, well, if Mexico increases a supply of oil,

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Speaker 3: will get a lot more revenue. I, being stupid, raised

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Speaker 3: my hand and said, yeah, but if they increased the supply,

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Speaker 3: isn't that got to put down with pressure on prices?

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Speaker 3: And they're kind of like, you know, you should be

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Speaker 3: sort of thinking about research macroeconomic models. And that's really

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Speaker 3: where it went. And at that point, foreign exchange and

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Speaker 3: futures and derivatives were just starting. Nineteen eighty two was

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Speaker 3: a year that SMP futures started. So I went down

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Speaker 3: into that group and did some research, and being a

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Speaker 3: little gearheady, I worked on the sort of internal Black

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Speaker 3: Scholes model for the FED. And that's how I got

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Speaker 3: fortunate and started my career. As I say, Wall Street

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Speaker 3: is littered with former FED people, that's a good.

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Speaker 2: Way of describing it. Littered with former FED people because

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Speaker 2: the FED is a giant employer of economists and other

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Speaker 2: technical researchers, and very often they leave the FED and

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Speaker 2: go to big shops. You didn't go that way after

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Speaker 2: you left the FED. Tell us about your next career move.

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Speaker 3: So it's nineteen eighty five. I've been there three years.

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Speaker 3: It's about the time you start looking for a job.

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Speaker 3: And I had some job offers from, you know, sort

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Speaker 3: of white shoe Wall Street firms, and then through a acquaintance,

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Speaker 3: I met this guy that was coming off the Cotton

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Speaker 3: Exchange by the name of Paul Tudor Jones, and he

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Speaker 3: asked me to help him out because he was chairman

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Speaker 3: of the Financial Exchange, of the subsidiary of the New

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Speaker 3: York Cotton Exchange, and they wanted to start trading some

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Speaker 3: futures contracts. And I'm like, look, I'm young, I'm single,

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Speaker 3: what a dynamic personality, great person. I'm going to give

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Speaker 3: it a shot. And that's how I started out at Tutor.

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Speaker 2: So Tutor Investments launches eighty five.

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Speaker 3: Eighty all started in September of eighty four. I came

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Speaker 3: on in the beginning of eighty.

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Speaker 2: So literally number two at the firm is is that what?

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Speaker 3: Well, there were people and support staff, but sort of

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Speaker 3: I was the first real sort of research professional.

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Speaker 2: So tell us a little bit about what you guys

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Speaker 2: were doing in eighty six eighty seven, what were you

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Speaker 2: trading and what was he looking at?

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Speaker 3: So one of the geniuses of Paul, and really understanding

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Speaker 3: futures markets in general is that most of the innovative

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Speaker 3: risk management approaches came out of the futures markets because

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Speaker 3: of the embedded leverage using margin.

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Speaker 2: There's no room for error. You can't just let's see

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Speaker 2: if it comes back. It's not how you can trade futures.

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Speaker 1: No, not at all.

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Speaker 3: And so with the advent and the development and the

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Speaker 3: starting of new financial futures markets, he was taking his technique,

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Speaker 3: his approach, his discipline and applying that to the new

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Speaker 3: futures markets and his commitment. And this I think people

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Speaker 3: have to realize because what one can do today, right,

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Speaker 3: I have the FRED app on my phone. I can

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Speaker 3: download massive amounts of data in hundreds of a second. Right,

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Speaker 3: You couldn't do that there. And he had a huge

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Speaker 3: commitment through me for data. We would hire summer interns

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Speaker 3: to put data into spreadsheets, build models, work he was

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Speaker 3: willing to and literally on the weekends we would be

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Speaker 3: on our hands and knees taking out floppy drives, putting

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Speaker 3: in hard drives, updating computers, and we were applying all

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Speaker 3: that to the new markets with the discipline and approach

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Speaker 3: that he had towards trading.

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Speaker 2: So that's an interesting difference about pul Tudor Jones regarding

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Speaker 2: his process. Very quantitative driven, very mathematical, But there's another

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Speaker 2: side to his approach, which was way ahead of its time,

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Speaker 2: very behavioral. Tell us a little bit about the psychological

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Speaker 2: approaches that he brought to both looking at markets but

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Speaker 2: also managing himself.

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Speaker 3: So the strength of Paul at that time and even

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Speaker 3: today still is that because he had always traded on

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Speaker 3: the floor and understood that most market moves come in

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Speaker 3: extremes fairly quickly. Market spent a lot of time doing

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Speaker 3: nothing and then they reprice. So you have to have

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Speaker 3: that discipline, you have to have that patience, and if

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Speaker 3: you think it's going to be an acceleration point, then

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Speaker 3: you try to get larger, but you have to have

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Speaker 3: a really tight stop. It's such a contradictory approach because

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Speaker 3: people want to be right all the time, and the

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Speaker 3: way that you probe and trade is understanding that that's

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Speaker 3: not the case. And he would always say, Okay, they

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Speaker 3: got me today, but I'm going to get him back

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Speaker 3: with one hundred percent interest.

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Speaker 2: So people also should realize, for those of you who've

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Speaker 2: never traded futures, It's not like options where essentially you

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Speaker 2: could put up your losses in advance and all they

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Speaker 2: could do is go to zero options. You're on the

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Speaker 2: hook no matter where it goes. It's not like it's

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Speaker 2: not like, well, we'll just see how this trades. If

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Speaker 2: it keeps going against you, you're fully responsible, and hence

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Speaker 2: the commitment to tightstop losses and a discipline approach to

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Speaker 2: managing the downside.

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Speaker 3: Yes, and the thing about futures is you must maintain

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Speaker 3: your discipline. One of the problems I think with rookie

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Speaker 3: options traders is that because if you're buying them, all

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Speaker 3: you can do is lose your premium. So if you

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Speaker 3: have a belief in the market and you buy your

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Speaker 3: premium and then it starts to go against you, you go, well,

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Speaker 3: I still believe in it, and I still have premium left.

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Speaker 3: So a lot of times when you're doing that, you

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Speaker 3: put the trade on and you're meant to accepting the

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Speaker 3: fact that you're going to lose all your premium, put

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Speaker 3: up your losses in it, and in the future's world

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Speaker 3: that you don't do you don't. You can't lose your

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Speaker 3: discipline because the market will discipline you regardless.

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Speaker 2: Yeah, no, it makes it makes a lot of sense.

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Speaker 2: So you've said, and as long as we're talking about

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Speaker 2: discipline and management of trades, one of your quotes that

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Speaker 2: I really like is trading and risk management are inherently

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Speaker 2: unnatural characteristics. Explain what that means with pleasure.

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Speaker 3: So, first of all, we always said discipline before vision,

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Speaker 3: and by that it means we can talk and I

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Speaker 3: can think, and we can gossip and the market's going here.

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Speaker 3: You know, it's kind of like gossiping about sports. That's

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Speaker 3: not really trading. It's a discipline, rigorous approach. And so

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Speaker 3: when I say it's an unnatural feeling, is because we all,

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Speaker 3: most of us I'm used to it by now, want

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Speaker 3: to be liked, and so you want to be there going,

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Speaker 3: oh you're long apple, I'm long apple. Oh we're all

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Speaker 3: so smart. But you have to have that discipline to say,

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Speaker 3: wait a second, it's over the move, is there? So

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Speaker 3: think about it this way. You've got one hundred people

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Speaker 3: in a subway car who are all along something. If

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Speaker 3: I get out and go into the other car where

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Speaker 3: I'm on the short side, I'm the one person in there.

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Speaker 3: If I'm disciplined and.

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Speaker 1: I get stopped out.

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Speaker 3: You can always squeeze one more back in the subway car.

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Speaker 3: But when it turns if I'm the only one there

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Speaker 3: and they all come running out, that's why markets go

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Speaker 3: down faster than they go up. So it has to

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Speaker 3: be in a logical sense, the ability to take the

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Speaker 3: other side of the trade. Now, that doesn't mean you

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Speaker 3: should be contrarian for contrarian's sake. And that's the difference

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Speaker 3: in all these different approaches. So there's the trend following,

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Speaker 3: which is go with the trend. There's the wave strategy,

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Speaker 3: WHI says we're going to try to find inflection point here.

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Speaker 3: They're all good strategies, but if you don't have a

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Speaker 3: disciplined risk management on top of it, you're not going

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Speaker 3: to make money.

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Speaker 2: The challenge is the crowd is right most of the time.

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Speaker 2: If you want to be a contrayon, you have to

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Speaker 2: capture that two three four percent where the whole crowd

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Speaker 2: is wrong and get out before everybody heads for the doors.

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Speaker 3: Yes, you have to be very mindful of inflection points.

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Speaker 3: And I go through this all the time. People are like, oh,

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Speaker 3: you know, the market goes up over time and it's

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Speaker 3: a straight line.

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Speaker 2: And that's the trading that's investing.

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Speaker 3: Yes, But even then, and I asked people, I said, well,

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Speaker 3: you know, you think I look any older today than

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Speaker 3: I did yesterday?

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Speaker 1: And they go no.

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Speaker 3: I go, well, you think I'm going to look any

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Speaker 3: older tomorrow than I did today?

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Speaker 1: And they go no. I go great, two points a line.

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Speaker 3: I'm never going to get old, which is fantastic.

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Speaker 2: So let's talk a little bit about eighty seven. Market

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Speaker 2: had a huge run from eighty two through the beginning

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Speaker 2: of eighty seven. Tell us a little bit of how

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Speaker 2: you guys were positions heading into that year.

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Speaker 3: Let's step back for a second, because nothing markets don't

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Speaker 3: go up in a straight line, right they think about Yes,

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Speaker 3: the low was in August of eighty two, but there

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Speaker 3: was a serious correction in eighty four and then even

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Speaker 3: in nineteen eighty six, there were some really harrowing corrections,

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Speaker 3: particularly after July fourth, eighty six and the September expiration

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Speaker 3: of eighty six. So it was really January of eighty

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Speaker 3: seven when it started to take off. In that first

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Speaker 3: part of the year.

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Speaker 2: Now upwards like a strong rally.

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Speaker 3: An incredibly strong rally. I think by the time we

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Speaker 3: got to the high in August, right, it was up

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Speaker 3: over thirty percent on the year. And again going back

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Speaker 3: to what I just said earlier, Paul gave me the

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Speaker 3: opportunity to take my sort of creative research imagination and

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Speaker 3: spend it on some data. And we started being very

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Speaker 3: early on collecting real time data and also modeling. And

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Speaker 3: I mentioned that we hired people, so we took people.

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Speaker 3: And back then there was a book right the Now

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Speaker 3: from eighteen ninety seven to present, and we had to

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Speaker 3: type that data in the spreadsheet.

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Speaker 2: It was very complicating it but well there.

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Speaker 3: Was You couldn't download it, and you had to check it,

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Speaker 3: and of course when people are putting in a lot

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Speaker 3: of numbers, there's typo, so you had to have charts

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Speaker 3: just to see all those different things. And we started

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Speaker 3: modeling and thinking given where we were with the new

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Speaker 3: financial futures markets, and if you think about financial futures

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Speaker 3: in general or new markets, we always sort of think

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Speaker 3: about it as if you have a kid and they're

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Speaker 3: five years six years old. You think you could talk

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Speaker 3: to them. You can think they're rational, but they're not,

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Speaker 3: and they do throw tantrums. And that's happened a lot

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Speaker 3: in derivatives by the time you got to eighty seven,

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Speaker 3: right the futures were five years old. People thought there

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Speaker 3: was going to be portfolio insurance, that there's going to

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Speaker 3: be this massive always liquidity, that you could stay longer

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Speaker 3: stocks and that you could sell futures against it, and

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Speaker 3: there was this assumption of continuity of liquidity. So at

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Speaker 3: the same time, we understand that there's potential technical flaws

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Speaker 3: underneath the model, underneath the markets, and we're building this

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Speaker 3: model which is really tracking what happened from the low

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Speaker 3: of twenty one, which we corresponded sort of to the

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Speaker 3: low of eighty two, and what was going to happen.

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Speaker 3: And when I first built this model, I really thought

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Speaker 3: that the top was going to occur in early eighty

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Speaker 3: eight rather than August, and the secondary top in October

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Speaker 3: of eighty seven. But then the technicals came together with

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Speaker 3: the fundamentals, and Paul, being the great tradery was really

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Speaker 3: had the opportunity to take advantage of that.

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Speaker 2: So before we get to Black Monday, around what time

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Speaker 2: of the year did you start seeing cracks in the

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Speaker 2: underlying market? At what point were you looking at this

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Speaker 2: and saying, hey, we have you know, some time to go,

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Speaker 2: but you could see the beginning of the end was coming.

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Speaker 3: Up when the market started to pull back in August

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Speaker 3: and into September expiration. Remember back then there was only

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Speaker 3: quarterly expirations, so there was a lot more activity around

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Speaker 3: that and when we saw and part of research is

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Speaker 3: being able to replicate things. So you had always you

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Speaker 3: had holidays, and you see that, so you had labor day,

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Speaker 3: you had three day a weekend, so you could line

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Speaker 3: these things up in terms of price activity, volume, and

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Speaker 3: the likely And if you go back to the twenty

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Speaker 3: nine scenario, you also saw what happened post labor Day.

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Speaker 3: Right the top was September third, twenty nine. Then you

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Speaker 3: had the correction, then you had the rally. So would

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Speaker 3: you sort of had the technical lining up with the

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Speaker 3: fundamentals because of the issues that were taking place globally

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Speaker 3: at that time. And at the same time, believe it

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Speaker 3: or not, we had a new chairperson in Greenspan at

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Speaker 3: the FED that had just come in. So here's a rookie.

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Speaker 3: Now you had Volker prior and as I like to say,

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Speaker 3: you know, young guys have all the moves, but old

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Speaker 3: guys win championships. And so he was in the sense

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Speaker 3: challenged what to do with regard to that, and that

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Speaker 3: was something that we thought post crash, that he was

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Speaker 3: going to be very aggressive in reducing interest rates, which

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Speaker 3: he did.

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Speaker 2: Well, let's roll back pre crap. So Friday before Black Monday,

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Speaker 2: how were you positioned? How was Tutor Investment's position heading

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Speaker 2: into that weekend?

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Speaker 3: So the analog really like, was you know, ringing a

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Speaker 3: red red bell sort of on that Wednesday, right, there

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Speaker 3: was a decline, you got to technical levels, you had

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Speaker 3: a bounce and then and then you failed a.

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Speaker 2: Week bounce that just had no nothing behind it, right.

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Speaker 3: And then on that Friday, we felt that it was

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Speaker 3: there and and we were short.

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Speaker 2: A little short, a lot short.

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Speaker 1: Well, I think.

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Speaker 3: People have to give perspective. Remember we at that time

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Speaker 3: were not a particularly large firm, so for us.

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Speaker 1: We were large short. Uh.

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Speaker 3: And then over the weekend, with the news that was

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Speaker 3: taking place and also the fact of the sentiment, there

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Speaker 3: were still people that were very sort of bullish and

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Speaker 3: people that felt that they could be protected. And this

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Speaker 3: is where most of these models, right, assume consistency twenty

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Speaker 3: four hour trading, you're gonna be okay, and you can

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Speaker 3: even go to ninety eight right with long term capital

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Speaker 3: where that was also part of their problem. But on

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Speaker 3: weekends that's not the case. So you had a gap situation.

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Speaker 2: Monday morning market gaps down pretty substantially. There's no bids

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Speaker 2: to be found. There, can't get people on the phone

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Speaker 2: tell us what that day was like as an actual

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Speaker 2: trader short a collapsing market.

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Speaker 3: So, you know, it's a very very interesting perspective because

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Speaker 3: when you think about it, and it's also one of

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Speaker 3: the advantages of why I say that it's so important

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Speaker 3: to have all these different markets. When you're short something

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Speaker 3: and it goes down, you're a natural buyer, right, So

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Speaker 3: people think shorts are bad.

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Speaker 2: No, they're good throws buyers in any crisis.

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Speaker 1: Yes, yes.

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Speaker 3: And so then the question is, and as I like

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Speaker 3: to say, here's my definition of a quandary. Do you

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Speaker 3: stay out of a market and watch everyone else make

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Speaker 3: money or get in and thereby cause it to immediately crash.

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Speaker 2: So but you were on the right side.

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Speaker 1: We were on the right side.

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Speaker 3: So there are a lot of people there that are

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Speaker 3: in that quandary position because the market had been so

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Speaker 3: strong and without discipline. The irony of markets as buyers

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Speaker 3: are higher, sellers are lower, right, everybody loved bitcoin at

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Speaker 3: sixty thousand, they all hate it at twenty.

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Speaker 2: You know, that's just that's human nature.

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Speaker 3: Yes, so in this case, they didn't know what to do,

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Speaker 3: but then panic sets in and they were selling. So

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Speaker 3: we learned from our experience.

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Speaker 2: Tell us about that, because I recall you saying that

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Speaker 2: historically when you've looked at other crashes and the best

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Speaker 2: opportunity to is not the day of the crash, but

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Speaker 2: the next day, tell us that game.

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Speaker 3: That's correct, because when I mentioned earlier about nineteen eighty

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Speaker 3: six and July, in September, we were short actually, and

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Speaker 3: then we covered on that Monday, and the market continued

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Speaker 3: to go down until midday Tuesday. It also did that

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Speaker 3: in September. I think it was September thirteenth. It's a

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Speaker 3: long time.

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Speaker 2: So, but generally speaking, the bad day and people the

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Speaker 2: next day in the morning like just let me yes.

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Speaker 3: And that's changed a little bit now because of twenty

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Speaker 3: four hour trading, and so sometimes the extreme you do

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Speaker 3: close on the low and extreme and there isn't that

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Speaker 3: much follow through the next day, but then there was

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Speaker 3: definitely follow through.

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Speaker 1: So we waited and we were.

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Speaker 3: Patient, and we were one of the buyers on that

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Speaker 3: Tuesday the twentieth, and so we performed a function. I

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Speaker 3: think that exactly what you want in the marketplace, right

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Speaker 3: shorts were covering, were being buyers. I'd like to think

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Speaker 3: that knock on would that maybe you know, some of

355
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Speaker 3: our buying helped.

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Speaker 1: Put in the low. But what we really did that it.

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Speaker 3: Wasn't just stock index futures. We felt and that the

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Speaker 3: FED and undergreen Span was going to be massively cutting

359
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Speaker 3: interest rates. Remember the tenure today is what three seventy

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Speaker 3: three seventy just un before yep, and back then it

361
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Speaker 3: was well over six. I think it was closer to seven,

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Speaker 3: and that historically you know, by the way has thrown

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Speaker 3: in the market today, I think the risk rewards we're

364
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Speaker 3: going more likely to there then back down to where

365
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Speaker 3: we are.

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Speaker 2: You're not buying it. We'll talk later about yes, everybody

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Speaker 2: predicting lower rates, We'll circle back to that. But not

368
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Speaker 2: only were you short equities, what was your income position.

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Speaker 3: We started buying a lot of fixed income futures all

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Speaker 3: across the curve, and particularly at that point one of

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Speaker 3: the most liquid markets was the year dollar futures, and

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Speaker 3: we felt that the FED was going to provide liquidity,

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Speaker 3: which they needed to do, and they did do. And

374
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Speaker 3: the irony of that whole situation is it was after

375
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Speaker 3: that crash that we started the Robin Hood Foundation, thinking

376
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Speaker 3: that the you know, those who were less fortunate in

377
00:22:13,000 --> 00:22:17,200
Speaker 3: New York were really going to be affected by the

378
00:22:17,760 --> 00:22:21,640
Speaker 3: downturn in the markets. But the Fed, Yes, the Fed

379
00:22:21,680 --> 00:22:26,160
Speaker 3: stepped in. They provided liquidity the market. The economy wasn't

380
00:22:26,200 --> 00:22:30,080
Speaker 3: as dependent on the equity markets as necessarily as it

381
00:22:30,160 --> 00:22:33,119
Speaker 3: is today as we saw a post or eight, and

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Speaker 3: who knows what's going to happen now.

383
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Speaker 2: So for those people who may not have seen it,

384
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Speaker 2: there is a famous documentary I believe it's called The

385
00:22:43,200 --> 00:22:48,159
Speaker 2: Trader that follows pull Tudor Jones around. If you haven't

386
00:22:48,160 --> 00:22:52,639
Speaker 2: seen it, it's on YouTube and vimeo and elsewhere. How

387
00:22:52,680 --> 00:22:56,919
Speaker 2: did he manage the chaos of eighty seven? What was

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Speaker 2: his day like?

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Speaker 3: Well, it was a life changing day really for both

390
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Speaker 3: of us. And you know, there are good people and

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Speaker 3: there are great people, and Paul is one of the

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00:23:12,680 --> 00:23:16,040
Speaker 3: great people in my mind, not just as a trader

393
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Speaker 3: but as an individual. And why you're so committed to

394
00:23:18,880 --> 00:23:24,320
Speaker 3: New York City and philanthropy so there's always a little

395
00:23:24,359 --> 00:23:29,680
Speaker 3: bit of sadness in the sense that when you are

396
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Speaker 3: short something and it goes down and there are a

397
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Speaker 3: lot of other people that may be getting hurt. So

398
00:23:35,600 --> 00:23:39,840
Speaker 3: that's one reason as well. Do you go in and

399
00:23:39,880 --> 00:23:42,639
Speaker 3: you intellectually think, okay, yeah, maybe we're going to crash

400
00:23:42,680 --> 00:23:46,960
Speaker 3: and we're going to do something, but emotionally you're like, wow,

401
00:23:47,280 --> 00:23:50,240
Speaker 3: at some point, that's it. We don't want we're not

402
00:23:50,280 --> 00:23:52,320
Speaker 3: going to benefit, we don't want to participate. We are

403
00:23:52,359 --> 00:23:57,120
Speaker 3: not going to be short anything more. After that next day,

404
00:23:57,160 --> 00:23:59,840
Speaker 3: we're going to wait, we're gonna see and we want

405
00:23:59,880 --> 00:24:05,520
Speaker 3: to the supportive of the markets and the economic system.

406
00:24:05,600 --> 00:24:09,800
Speaker 3: And to me, again, we're relatively young, and Paul's five

407
00:24:09,880 --> 00:24:13,560
Speaker 3: years older than I am. But you know, that's a

408
00:24:13,560 --> 00:24:15,879
Speaker 3: lot of wisdom and that's something I learned from that for.

409
00:24:16,200 --> 00:24:19,959
Speaker 2: A thirty year old and for those people who weren't

410
00:24:20,200 --> 00:24:23,840
Speaker 2: actively trading in eighty seven, the irony is so not

411
00:24:23,920 --> 00:24:26,760
Speaker 2: only is Black Monday down twenty two percent and change

412
00:24:27,240 --> 00:24:30,800
Speaker 2: on the Dow, markets finished the year, you know, flat

413
00:24:30,840 --> 00:24:34,280
Speaker 2: to up one percent. It wasn't a horrible year considering

414
00:24:34,880 --> 00:24:38,359
Speaker 2: and eighty eight things just kind of took off again.

415
00:24:39,520 --> 00:24:44,240
Speaker 2: Turns out we were early days of a long bull market.

416
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Speaker 2: And you've talked that very often. You get that test

417
00:24:48,920 --> 00:24:52,359
Speaker 2: early in a long secular bull phase. Tell us a

418
00:24:52,359 --> 00:24:55,159
Speaker 2: little bit about what the thinking was going to be

419
00:24:56,119 --> 00:24:59,360
Speaker 2: post eighty seven crash, what it looked like a decade out.

420
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Speaker 3: Well, there was one of the best divergences technical buys

421
00:25:06,400 --> 00:25:12,040
Speaker 3: in nineteen eighty eight. I think maybe the S and

422
00:25:12,119 --> 00:25:13,960
Speaker 3: P made new lows or the Dow or the Dow

423
00:25:14,040 --> 00:25:20,440
Speaker 3: transports and it was unconfirmed, and sentiment was so negative.

424
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Speaker 3: And this is where you have to be flexible as

425
00:25:24,280 --> 00:25:28,240
Speaker 3: a trader, because you're like, Okay, the world is coming

426
00:25:28,240 --> 00:25:30,560
Speaker 3: to an end. And then I think we realized early

427
00:25:30,600 --> 00:25:35,520
Speaker 3: on that it's probably not coming to an end, or

428
00:25:35,520 --> 00:25:39,720
Speaker 3: at least not today. And so now you have to

429
00:25:39,760 --> 00:25:43,439
Speaker 3: look for your opportunities because remember you're managing other people's money.

430
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Speaker 1: You got to get rid of your own opinion.

431
00:25:45,520 --> 00:25:47,800
Speaker 3: Get you shake your head out of that you sort

432
00:25:47,800 --> 00:25:50,600
Speaker 3: of intellectual fog that you're in, and say, here's what

433
00:25:50,640 --> 00:25:53,399
Speaker 3: the markets are telling me. I need to listen to

434
00:25:54,200 --> 00:25:59,600
Speaker 3: the markets. And that was nineteen eighty eight and when

435
00:25:59,600 --> 00:26:03,640
Speaker 3: it really took off. And if you if you think

436
00:26:03,640 --> 00:26:08,040
Speaker 3: about you know, cycles and period and going into ninety

437
00:26:08,119 --> 00:26:15,880
Speaker 3: one with what happened in Iraq under Bush one and

438
00:26:15,920 --> 00:26:19,000
Speaker 3: again the same thing, Oh my god. And and that

439
00:26:19,200 --> 00:26:23,600
Speaker 3: was also a very interesting lesson because that was the

440
00:26:23,640 --> 00:26:25,920
Speaker 3: first time in history we had a pre announced date

441
00:26:26,000 --> 00:26:28,199
Speaker 3: to start a war. So now what do you do

442
00:26:28,280 --> 00:26:32,119
Speaker 3: with risk management? Right, you've got models, do you trade

443
00:26:32,119 --> 00:26:33,919
Speaker 3: through it? Do you not think it's going to happen?

444
00:26:34,000 --> 00:26:36,080
Speaker 3: Do you not have risk on going into that?

445
00:26:36,280 --> 00:26:39,080
Speaker 2: You're talking about Bush two and the Iraq war in

446
00:26:39,920 --> 00:26:43,879
Speaker 2: three one, So there was a deadline.

447
00:26:43,359 --> 00:26:46,560
Speaker 3: And right, and then they he went in and the

448
00:26:46,600 --> 00:26:48,639
Speaker 3: markets took off after that.

449
00:26:50,240 --> 00:26:51,359
Speaker 1: You know, there's a lot of.

450
00:26:53,200 --> 00:26:59,919
Speaker 3: Good supportive you know, material fundamentally technically around that time,

451
00:27:01,040 --> 00:27:06,240
Speaker 3: because you were still recovering from the eighty seven and

452
00:27:06,680 --> 00:27:09,880
Speaker 3: people tend to remember the last thing that happened to them.

453
00:27:10,320 --> 00:27:13,600
Speaker 3: So they're always afraid because they think that the market's

454
00:27:13,640 --> 00:27:15,960
Speaker 3: going to go down, just as now they're afraid they're

455
00:27:15,960 --> 00:27:19,000
Speaker 3: going to miss out because the market was up. And

456
00:27:19,040 --> 00:27:22,359
Speaker 3: I'm not so sure that they should be afraid of

457
00:27:22,359 --> 00:27:22,880
Speaker 3: missing out.

458
00:27:23,040 --> 00:27:26,200
Speaker 2: Let's stick with eighty seven. We'll circle back to today's market later,

459
00:27:26,720 --> 00:27:29,920
Speaker 2: So post more TOM eighty seven you get tapped by

460
00:27:29,920 --> 00:27:33,639
Speaker 2: the Treasury Department to serve on the US Presidential Task

461
00:27:33,680 --> 00:27:38,360
Speaker 2: Force on Market Mechanisms head by Brady. It became them

462
00:27:38,359 --> 00:27:41,240
Speaker 2: as a Brady Commission. What did you find? What was

463
00:27:41,280 --> 00:27:44,120
Speaker 2: the process like of looking at what caused the eighty

464
00:27:44,160 --> 00:27:45,920
Speaker 2: seven crash?

465
00:27:46,000 --> 00:27:48,000
Speaker 3: So, first of all, it was an honor, and of

466
00:27:48,040 --> 00:27:50,320
Speaker 3: course I was the youngest person there, and I'm still

467
00:27:50,320 --> 00:27:53,639
Speaker 3: friends with the number of the people that were staffers.

468
00:27:53,640 --> 00:27:56,320
Speaker 3: But I can just tell you in summary that we

469
00:27:57,280 --> 00:28:00,919
Speaker 3: Tutor were so far ahead of every other firm on

470
00:28:00,960 --> 00:28:03,440
Speaker 3: Wall Street we didn't even know. But all the data

471
00:28:03,480 --> 00:28:05,919
Speaker 3: in the report right there's a chapter on the market break.

472
00:28:06,280 --> 00:28:08,760
Speaker 3: All that data came from us. None of the other

473
00:28:08,840 --> 00:28:12,040
Speaker 3: firms had it, whether it was JP, Goldman, m Mess,

474
00:28:12,200 --> 00:28:15,760
Speaker 3: bear Stearns, you name it. And that's a credit to Paul,

475
00:28:15,840 --> 00:28:19,760
Speaker 3: as I said, the ability to not only want to

476
00:28:19,800 --> 00:28:22,680
Speaker 3: do it, but also to spend the capital to invest

477
00:28:23,160 --> 00:28:26,040
Speaker 3: in data in computing at that time.

478
00:28:26,680 --> 00:28:28,840
Speaker 1: And the real conclusion.

479
00:28:28,280 --> 00:28:30,720
Speaker 3: Of that is where we are today, that all these

480
00:28:30,760 --> 00:28:34,280
Speaker 3: markets are linked. You know, New York wanted to blame Chicago.

481
00:28:34,840 --> 00:28:37,520
Speaker 3: There was the options markets and they all were sort

482
00:28:37,560 --> 00:28:40,160
Speaker 3: of disconnected. And that's where the joint task force with

483
00:28:40,240 --> 00:28:42,760
Speaker 3: the Treasury, the CFTC.

484
00:28:42,120 --> 00:28:42,880
Speaker 1: And the SEC.

485
00:28:43,600 --> 00:28:46,600
Speaker 3: And that was also where we put in the circuit breakers,

486
00:28:47,120 --> 00:28:48,920
Speaker 3: you know, sort of price limits. There was no price

487
00:28:49,000 --> 00:28:50,960
Speaker 3: limits in eighty seven, so that.

488
00:28:51,280 --> 00:28:54,360
Speaker 2: When stuff falls, hey, down twenty two percent, that's just

489
00:28:54,400 --> 00:28:56,800
Speaker 2: the market. Now, what is it seven percent?

490
00:28:56,960 --> 00:28:58,840
Speaker 3: Yes, there's a three and a half. I think a

491
00:28:58,920 --> 00:29:02,120
Speaker 3: seven and a fifteen. And the point is there's a

492
00:29:02,200 --> 00:29:05,280
Speaker 3: timeout because we just mentioned a moment ago about emotion

493
00:29:05,640 --> 00:29:09,520
Speaker 3: in markets, and you need to step back, and futures

494
00:29:09,560 --> 00:29:12,200
Speaker 3: markets have always had price limits from.

495
00:29:12,000 --> 00:29:13,640
Speaker 2: The lost limit down, that's what.

496
00:29:13,680 --> 00:29:14,080
Speaker 1: We can do.

497
00:29:14,400 --> 00:29:19,400
Speaker 3: And by the way, sometimes in the short run, right

498
00:29:19,480 --> 00:29:22,600
Speaker 3: that limit becomes a little bit of a magnet because

499
00:29:22,600 --> 00:29:24,560
Speaker 3: if the limit and storybeans is thirty five cents and

500
00:29:24,600 --> 00:29:27,280
Speaker 3: you're down thirty three, do you really want to take

501
00:29:27,320 --> 00:29:29,040
Speaker 3: a long position home overnight?

502
00:29:29,120 --> 00:29:29,959
Speaker 2: So you might do it.

503
00:29:30,000 --> 00:29:32,719
Speaker 3: But now you sit back and you have in the

504
00:29:32,720 --> 00:29:35,440
Speaker 3: case of the equities, it's just a timeout.

505
00:29:35,840 --> 00:29:36,760
Speaker 1: Let's get it together.

506
00:29:37,240 --> 00:29:41,320
Speaker 3: Let's see what's happening there, market makers. And it's been

507
00:29:41,880 --> 00:29:46,960
Speaker 3: knock on wood effective right even in eight where you

508
00:29:47,600 --> 00:29:48,200
Speaker 3: reach that.

509
00:29:49,120 --> 00:29:51,800
Speaker 2: Well, the flash crash in twenty ten and twenty eleven,

510
00:29:51,840 --> 00:29:52,760
Speaker 2: we had those.

511
00:29:52,720 --> 00:29:56,760
Speaker 3: Yes, so we time out, we bounced, and now, of

512
00:29:56,760 --> 00:29:58,880
Speaker 3: course I look at some of those things, and I

513
00:29:58,880 --> 00:30:02,640
Speaker 3: look at the data as potential interesting technical indicators.

514
00:30:02,640 --> 00:30:04,560
Speaker 1: But that's for another day.

515
00:30:04,760 --> 00:30:09,200
Speaker 2: So let's stay with the concept of interrelated markets. I

516
00:30:09,280 --> 00:30:14,240
Speaker 2: recall reading Tim Metz's book Black Monday, and he talked

517
00:30:14,280 --> 00:30:17,680
Speaker 2: about how I think it was the New York Stock

518
00:30:17,760 --> 00:30:23,400
Speaker 2: Exchange put the Chicago Futures Index up on the wall

519
00:30:23,560 --> 00:30:27,960
Speaker 2: so traders could actually see what was going on in

520
00:30:28,040 --> 00:30:31,920
Speaker 2: index futures, and it took a while before people realized

521
00:30:32,400 --> 00:30:36,960
Speaker 2: all the specialists were lowering their bids because they were

522
00:30:36,960 --> 00:30:41,520
Speaker 2: looking at the index futures. How interrelated are all of

523
00:30:41,560 --> 00:30:42,320
Speaker 2: these markets.

524
00:30:43,280 --> 00:30:47,560
Speaker 3: They're completely interrelated because the key for liquidity is the

525
00:30:47,600 --> 00:30:51,080
Speaker 3: ability to arbitrage. And you had risk managers, so this

526
00:30:51,680 --> 00:30:54,000
Speaker 3: S and P five hundred stocks, or at that time

527
00:30:54,080 --> 00:30:58,280
Speaker 3: you had a smaller index, which was about twenty eight

528
00:30:58,320 --> 00:31:02,560
Speaker 3: of the Dow contract, and so you could buy all

529
00:31:02,600 --> 00:31:05,640
Speaker 3: the underlying you could sell the futures or vice versa,

530
00:31:06,280 --> 00:31:08,960
Speaker 3: or you could spin it any way you wanted. If

531
00:31:09,000 --> 00:31:12,120
Speaker 3: you liked twenty seven of them, you could do that

532
00:31:12,240 --> 00:31:16,280
Speaker 3: and sell the futures and be implicitly short the one instrument.

533
00:31:15,880 --> 00:31:16,720
Speaker 1: That's not there.

534
00:31:17,080 --> 00:31:21,360
Speaker 3: So this stuff is all linked and that is important

535
00:31:21,840 --> 00:31:25,000
Speaker 3: because to have a successful market you need investors, You

536
00:31:25,080 --> 00:31:28,920
Speaker 3: need speculators. Of course, you need natural buyers and hedgers,

537
00:31:29,400 --> 00:31:33,440
Speaker 3: but you need market makers and arbitragers to tighten the

538
00:31:33,480 --> 00:31:36,880
Speaker 3: market up so that there's plenty of liquidity on both

539
00:31:36,920 --> 00:31:37,400
Speaker 3: sides of it.

540
00:31:37,800 --> 00:31:40,280
Speaker 2: So you mentioned a lot of the changes that were

541
00:31:40,320 --> 00:31:45,600
Speaker 2: put in place post eighty seven. We're still enjoying that.

542
00:31:46,480 --> 00:31:49,000
Speaker 2: What was the fallout from eight oh nine. Are we

543
00:31:49,240 --> 00:31:53,360
Speaker 2: still dealing with the aftershocks of that event? I mean,

544
00:31:53,680 --> 00:31:57,840
Speaker 2: obviously twenty twenty and twenty one and twenty two we're

545
00:31:57,880 --> 00:32:01,360
Speaker 2: still in the midst of But is there still an

546
00:32:01,400 --> 00:32:04,880
Speaker 2: echo of eight o nine today?

547
00:32:05,800 --> 00:32:08,120
Speaker 3: I don't know if I would say it's an echo.

548
00:32:08,240 --> 00:32:13,880
Speaker 3: There's always a learning process when it comes to markets

549
00:32:13,920 --> 00:32:18,760
Speaker 3: and liquidity events, and it's always in the short run.

550
00:32:19,480 --> 00:32:23,200
Speaker 3: All markets moved because of supply and demand for money,

551
00:32:24,080 --> 00:32:28,680
Speaker 3: and in eight there was issues, needless to say, but

552
00:32:28,720 --> 00:32:32,560
Speaker 3: there was also some things which have been recently sprung up,

553
00:32:32,560 --> 00:32:36,360
Speaker 3: for example, regulators saying, oh no, we shouldn't be allowed

554
00:32:36,360 --> 00:32:40,080
Speaker 3: to short financial institutions. Now, if you remember part of

555
00:32:40,120 --> 00:32:44,320
Speaker 3: the chaos in eight was associated with that because they

556
00:32:44,360 --> 00:32:45,360
Speaker 3: banned short selling.

557
00:32:46,160 --> 00:32:46,360
Speaker 1: Right.

558
00:32:46,600 --> 00:32:49,360
Speaker 3: It was incredibly smart, I guess on the part of

559
00:32:49,400 --> 00:32:52,680
Speaker 3: the regulators doing it right before an expiration. So you

560
00:32:52,880 --> 00:32:58,719
Speaker 3: had this massive covering of eliminating short positions, but then

561
00:32:58,760 --> 00:33:00,800
Speaker 3: you got rid of the market maker. Some of these

562
00:33:01,360 --> 00:33:05,160
Speaker 3: financial stocks had you know, ten year ranges in twenty

563
00:33:05,200 --> 00:33:09,479
Speaker 3: four hours. That's going to eliminate a lot of liquidity, right,

564
00:33:09,600 --> 00:33:11,920
Speaker 3: and then the market's going to find its own natural level,

565
00:33:12,640 --> 00:33:14,960
Speaker 3: which at that point was a lot lower.

566
00:33:15,280 --> 00:33:18,920
Speaker 2: Right. You want people stepping in as buyers to cover

567
00:33:18,960 --> 00:33:23,040
Speaker 2: those short positions. You don't want whisper campaigns mentioning companies

568
00:33:23,040 --> 00:33:25,760
Speaker 2: are going out of business when they're not. So that

569
00:33:26,360 --> 00:33:30,080
Speaker 2: not shorting financial institutions kind of brings us forward to

570
00:33:30,160 --> 00:33:32,400
Speaker 2: what's been going on in the regional banks in twenty

571
00:33:32,520 --> 00:33:35,960
Speaker 2: twenty three. How do you look at the first republics

572
00:33:35,960 --> 00:33:39,240
Speaker 2: in Silicon Valley banks? Are these one offs or is

573
00:33:39,280 --> 00:33:43,320
Speaker 2: this part of something that's more systemic or is this

574
00:33:43,600 --> 00:33:46,840
Speaker 2: just the FED raising rates so quickly that they're breaking things?

575
00:33:48,200 --> 00:33:54,520
Speaker 3: Wow, So that's such an interesting question. So is it systemic?

576
00:33:55,280 --> 00:33:57,880
Speaker 3: I don't think it's systemic. I think that it has

577
00:33:57,920 --> 00:34:00,320
Speaker 3: a lot to do with the way that at the

578
00:34:00,440 --> 00:34:05,800
Speaker 3: management of these companies we're running them. SVB was a

579
00:34:05,920 --> 00:34:10,080
Speaker 3: particular case because you had this massive inflow of VC

580
00:34:10,320 --> 00:34:14,520
Speaker 3: capital and the problem is those are always naturally getting

581
00:34:14,520 --> 00:34:18,200
Speaker 3: taken out because you're investing. At the same time, they

582
00:34:18,239 --> 00:34:21,759
Speaker 3: decided to go as a FED is embarking on a

583
00:34:21,840 --> 00:34:25,839
Speaker 3: rate high campaign, not to have a risk manager, so

584
00:34:26,000 --> 00:34:26,520
Speaker 3: you can.

585
00:34:26,440 --> 00:34:28,959
Speaker 2: But they did have hedges on in twenty twenty two.

586
00:34:29,600 --> 00:34:32,440
Speaker 2: They just decided, hey, these are so profitable, we should

587
00:34:32,520 --> 00:34:33,000
Speaker 2: ring the bell.

588
00:34:33,840 --> 00:34:38,880
Speaker 3: Well, yeah, that's always if you're hedging, you're hedging for

589
00:34:38,960 --> 00:34:41,240
Speaker 3: a reason, and are you hedging to trade.

590
00:34:41,920 --> 00:34:43,200
Speaker 1: There's a difference, right.

591
00:34:43,080 --> 00:34:46,240
Speaker 2: Well, they're a bank, so one would assume they're hedging

592
00:34:46,440 --> 00:34:50,960
Speaker 2: interest rate duration risk. They just saw the win and said, hey,

593
00:34:51,040 --> 00:34:53,680
Speaker 2: let's everybody, right, but everybody's going to get a good bonus.

594
00:34:53,719 --> 00:34:56,279
Speaker 3: Right, But then they move from hedgeres to speculators, right,

595
00:34:56,360 --> 00:35:03,400
Speaker 3: and if that's not your professional job, that becomes extraordinarily challenging.

596
00:35:03,600 --> 00:35:05,120
Speaker 2: As as we we learned.

597
00:35:05,360 --> 00:35:10,720
Speaker 3: And you know First Republic, which was a different type

598
00:35:10,719 --> 00:35:16,480
Speaker 3: of institution, and you know they they were basically in

599
00:35:16,920 --> 00:35:18,520
Speaker 3: think of that in the old days, right, they were

600
00:35:18,560 --> 00:35:22,799
Speaker 3: giving away the toaster to try to get accounts, and

601
00:35:22,840 --> 00:35:28,000
Speaker 3: then when rates started to go up. So think about this, right,

602
00:35:28,960 --> 00:35:33,080
Speaker 3: the tenuere at its low and twenty was, you know,

603
00:35:33,160 --> 00:35:38,120
Speaker 3: twenty basis points. Now we're at three seven, but historically

604
00:35:38,160 --> 00:35:41,719
Speaker 3: three seven isn't very high. And it goes back to

605
00:35:41,760 --> 00:35:45,920
Speaker 3: my earlier statement that people anchor to sort of the

606
00:35:46,200 --> 00:35:49,200
Speaker 3: high or the low, so they assume it's going back there.

607
00:35:49,600 --> 00:35:53,440
Speaker 3: That's a big risk management mistake to make that assumption.

608
00:35:53,800 --> 00:35:59,680
Speaker 2: Let's talk a little bit about computerized trading, helping traders

609
00:35:59,680 --> 00:36:03,520
Speaker 2: become better at their jobs and hiring traders. Let's start

610
00:36:03,560 --> 00:36:07,120
Speaker 2: with that. What sort of traits should hedge funds be

611
00:36:07,360 --> 00:36:11,160
Speaker 2: looking for if they want to hire a successful trader?

612
00:36:13,280 --> 00:36:17,799
Speaker 3: If you're referring to a discretionary trader, right, so that's

613
00:36:17,840 --> 00:36:21,920
Speaker 3: one bucket versus sort of a model based quantitative trader

614
00:36:22,400 --> 00:36:25,560
Speaker 3: where you're looking at at their track records.

615
00:36:25,600 --> 00:36:26,480
Speaker 2: Tell us about both.

616
00:36:26,680 --> 00:36:29,040
Speaker 3: Well, So I'm going to start first with the quantitative.

617
00:36:29,320 --> 00:36:33,600
Speaker 3: It's a little easier. I've never had a quantitrative trader

618
00:36:33,680 --> 00:36:37,320
Speaker 3: come to me with a bad simulated track.

619
00:36:37,120 --> 00:36:39,759
Speaker 2: Record, right, Models are always fens.

620
00:36:39,600 --> 00:36:41,440
Speaker 3: Right, I'm waiting for the guy to come in with

621
00:36:41,480 --> 00:36:43,200
Speaker 3: a minus two sharp going height.

622
00:36:43,640 --> 00:36:44,680
Speaker 1: It can only get better.

623
00:36:45,760 --> 00:36:48,200
Speaker 2: But by the way, what back test ever is best?

624
00:36:48,280 --> 00:36:48,480
Speaker 1: Yes?

625
00:36:48,640 --> 00:36:52,759
Speaker 3: Yeah, well I'm super I can predict yesterday perfectly. I'm

626
00:36:52,840 --> 00:36:54,799
Speaker 3: very good at that. I try to, you know, come

627
00:36:54,840 --> 00:36:57,880
Speaker 3: on here, I'll tell you what happened, No problem.

628
00:36:58,200 --> 00:37:00,839
Speaker 2: Who has a better track record than heinz PS Capital, Yeah,

629
00:37:00,840 --> 00:37:01,359
Speaker 2: they're the best.

630
00:37:01,600 --> 00:37:04,759
Speaker 3: Yeah, and it's the hedge fund is there. But it's

631
00:37:04,800 --> 00:37:08,640
Speaker 3: why in seriousness that you know the first line of

632
00:37:08,680 --> 00:37:12,640
Speaker 3: every disclosure document his past performance is non indicative of

633
00:37:12,719 --> 00:37:16,040
Speaker 3: future results. But everybody looks at past performance. So on

634
00:37:16,080 --> 00:37:20,120
Speaker 3: the quant side, you have to look at real time

635
00:37:20,200 --> 00:37:24,760
Speaker 3: data and you also have to segment it to sort

636
00:37:24,800 --> 00:37:29,120
Speaker 3: of the it's strategy relative to market. So if you

637
00:37:29,160 --> 00:37:32,399
Speaker 3: look at last year, a lot of CTAs and trend

638
00:37:32,480 --> 00:37:35,919
Speaker 3: followers did really well, and you'd have a great real

639
00:37:36,000 --> 00:37:37,319
Speaker 3: time track record.

640
00:37:37,200 --> 00:37:39,920
Speaker 2: Because you had a defined move in a specific direction

641
00:37:40,000 --> 00:37:40,880
Speaker 2: that was sustained.

642
00:37:41,160 --> 00:37:43,920
Speaker 3: Yes, So there's two things about that. One they'll come

643
00:37:43,920 --> 00:37:45,440
Speaker 3: to me and to go, oh man, man, we just

644
00:37:45,480 --> 00:37:48,839
Speaker 3: had the best year since Wait another year where there's

645
00:37:48,880 --> 00:37:52,239
Speaker 3: a lot of dislocations, and I'm like, man, that's fantastic.

646
00:37:52,280 --> 00:37:55,080
Speaker 3: Once every fifteen years, do me a favor come back

647
00:37:55,120 --> 00:37:58,080
Speaker 3: in thirteen. I don't want to be late. But the

648
00:37:58,160 --> 00:38:00,759
Speaker 3: reality is, if you want to dig deeper in that,

649
00:38:01,120 --> 00:38:03,960
Speaker 3: then you start looking at, well, what markets did you trade,

650
00:38:04,400 --> 00:38:08,000
Speaker 3: Why did you do that? Why did you exclude Coco? Well,

651
00:38:08,040 --> 00:38:10,480
Speaker 3: Coco's not a good trend following market. How do you

652
00:38:10,560 --> 00:38:14,520
Speaker 3: know that? Well, then you've overoptimized. So you really have

653
00:38:14,560 --> 00:38:19,879
Speaker 3: to start digging deep, asking very very tough questions. When

654
00:38:19,960 --> 00:38:25,120
Speaker 3: it comes to these quantitative strategies, frequency of trading, volatility,

655
00:38:25,719 --> 00:38:29,200
Speaker 3: draw downs's and all. This is more of an art

656
00:38:29,360 --> 00:38:32,360
Speaker 3: than it is a science. And that also applies on

657
00:38:32,440 --> 00:38:36,160
Speaker 3: the discretionary trading side. But on the discretionary trading side,

658
00:38:36,520 --> 00:38:39,279
Speaker 3: you have that other element that you have to put

659
00:38:39,320 --> 00:38:43,360
Speaker 3: on top of that, which is the emotional.

660
00:38:43,360 --> 00:38:45,120
Speaker 1: And the psychological.

661
00:38:45,840 --> 00:38:48,120
Speaker 3: And one of the things I always say is that

662
00:38:48,200 --> 00:38:52,560
Speaker 3: every successful trader has a near death experience. I just

663
00:38:52,600 --> 00:38:56,080
Speaker 3: hope they have it before we've allocated to them. And

664
00:38:56,160 --> 00:38:59,560
Speaker 3: so it's not that they've had it, it's how you

665
00:38:59,600 --> 00:39:03,320
Speaker 3: recover from it. And so it's one of these things

666
00:39:03,320 --> 00:39:07,160
Speaker 3: that math works. And so sometimes there's a trader and

667
00:39:07,400 --> 00:39:09,839
Speaker 3: he'll come into my office and I'll go Pete. I

668
00:39:09,840 --> 00:39:12,520
Speaker 3: can't believe it. I just had my worst day ever.

669
00:39:13,640 --> 00:39:16,200
Speaker 3: And I'm like, well, I've got good news and bad

670
00:39:16,239 --> 00:39:18,040
Speaker 3: news for you, and he.

671
00:39:18,040 --> 00:39:19,919
Speaker 1: Goes, well, what's the good news?

672
00:39:20,000 --> 00:39:23,120
Speaker 3: I go, well, you're still within your risk parameters. You

673
00:39:23,160 --> 00:39:26,480
Speaker 3: didn't violate any of our trading rules, so you still

674
00:39:26,480 --> 00:39:28,960
Speaker 3: have a job. And they go, well, then what's the

675
00:39:29,000 --> 00:39:31,200
Speaker 3: bad news? I go, If you're in business long enough,

676
00:39:31,280 --> 00:39:34,520
Speaker 3: you're going to have a worse trade, because that's just

677
00:39:34,600 --> 00:39:39,000
Speaker 3: the law of large numbers. Records are made to be broken.

678
00:39:39,320 --> 00:39:40,399
Speaker 1: If I told you.

679
00:39:40,320 --> 00:39:43,000
Speaker 3: Twenty years ago that someone was going to break Kareem

680
00:39:43,160 --> 00:39:50,080
Speaker 3: scoring record in basketball, unbelievable. Are Lebron James did it

681
00:39:50,120 --> 00:39:52,080
Speaker 3: this year? All the credit in the world for him.

682
00:39:52,080 --> 00:39:54,839
Speaker 3: But it's a little bit like trading options. So if

683
00:39:54,880 --> 00:39:58,760
Speaker 3: you continually buy premium thinking a record's going to be broken,

684
00:39:59,120 --> 00:40:01,640
Speaker 3: you probably run out of money before it does. And

685
00:40:01,719 --> 00:40:04,520
Speaker 3: if you continually sell premium thinking the records are never

686
00:40:04,600 --> 00:40:07,200
Speaker 3: going to be broken, you go broke when it is broken.

687
00:40:07,640 --> 00:40:10,600
Speaker 3: So you have to have that discipline, and it's an

688
00:40:10,680 --> 00:40:12,760
Speaker 3: extraordinarily tough business.

689
00:40:12,440 --> 00:40:15,120
Speaker 2: To say the very least. Let's talk about a quote

690
00:40:15,120 --> 00:40:19,200
Speaker 2: of yours that I havepen to really like fundamentals aren't wrong,

691
00:40:19,800 --> 00:40:22,040
Speaker 2: you are. Explain what that means.

692
00:40:23,040 --> 00:40:28,120
Speaker 3: It means that the market is the scoreboard, and if

693
00:40:28,160 --> 00:40:32,040
Speaker 3: you think you're right and you think the fundamentals are wrong,

694
00:40:32,080 --> 00:40:34,080
Speaker 3: you're going to take a small loss and turn it

695
00:40:34,120 --> 00:40:39,160
Speaker 3: into a large loss. Trading works best when the fundamentals

696
00:40:39,239 --> 00:40:44,839
Speaker 3: and the technicals intersect. Too often, one just looks at

697
00:40:44,960 --> 00:40:49,040
Speaker 3: either one or the other. So we could say today, well,

698
00:40:49,080 --> 00:40:51,960
Speaker 3: we think the fundamentals are deteriorating. There's no way the

699
00:40:52,040 --> 00:40:54,920
Speaker 3: S and P should be at forty two hundred. I'm

700
00:40:54,960 --> 00:40:58,360
Speaker 3: going to get short, but there's no technical indication in

701
00:40:58,400 --> 00:41:00,919
Speaker 3: the markets today that you should be short.

702
00:41:01,320 --> 00:41:03,680
Speaker 2: Right, the number of fifty two glows is falling. The

703
00:41:03,719 --> 00:41:06,320
Speaker 2: breath is pretty good, and when you look, especially outside

704
00:41:06,320 --> 00:41:10,400
Speaker 2: of the US, a lot of positive up trends. People

705
00:41:10,480 --> 00:41:12,760
Speaker 2: have a tendency to ignore that and they're just focused

706
00:41:12,800 --> 00:41:15,120
Speaker 2: at what's going on. Look at the Russell small cap

707
00:41:15,120 --> 00:41:17,640
Speaker 2: in the US. It's doing terrible. We're due to crash.

708
00:41:18,680 --> 00:41:19,400
Speaker 1: That's correct.

709
00:41:19,640 --> 00:41:22,520
Speaker 3: So what you do for me in that case, I'm

710
00:41:22,560 --> 00:41:25,040
Speaker 3: looking for if you want to look to sell it

711
00:41:25,080 --> 00:41:26,880
Speaker 3: and pick a level, then you look for the Russell

712
00:41:26,960 --> 00:41:31,279
Speaker 3: to start doing better. And reaching key technical levels and

713
00:41:31,400 --> 00:41:35,839
Speaker 3: then you can probe and you look for divergences all

714
00:41:35,880 --> 00:41:38,319
Speaker 3: the time. So you look at the transports which have

715
00:41:38,440 --> 00:41:43,000
Speaker 3: been lagging for today. But these are all signs. They're

716
00:41:43,040 --> 00:41:46,880
Speaker 3: not things in which you should be taking action. You

717
00:41:47,080 --> 00:41:49,520
Speaker 3: have to be patient. And a lot of times you

718
00:41:49,600 --> 00:41:52,399
Speaker 3: talk about traders and discretionary traders in particular, and I'll

719
00:41:52,400 --> 00:41:57,880
Speaker 3: speak to them not trading is a trade right, and

720
00:41:58,480 --> 00:42:01,880
Speaker 3: just because you're sitting in front of them screen doesn't

721
00:42:01,920 --> 00:42:07,640
Speaker 3: mean you have to do something. And that takes tremendous discipline,

722
00:42:07,840 --> 00:42:10,880
Speaker 3: because particularly if you get paid to share of the

723
00:42:10,880 --> 00:42:14,640
Speaker 3: profits and you're like, there's nothing going on now. Some

724
00:42:14,680 --> 00:42:17,960
Speaker 3: of the best traders I know, they'll be like, Okay,

725
00:42:18,440 --> 00:42:21,720
Speaker 3: I did something. It's ten thirty, I've made some money.

726
00:42:22,280 --> 00:42:26,399
Speaker 3: I'm out of here for the day. And that's fine.

727
00:42:26,920 --> 00:42:30,719
Speaker 3: However you do it, however you force your own self discipline.

728
00:42:31,080 --> 00:42:34,560
Speaker 3: But just trading to trade is a terrible strategy.

729
00:42:34,760 --> 00:42:38,279
Speaker 2: That's the great Warren Buffett quote. Unlike baseball, there are

730
00:42:38,280 --> 00:42:41,120
Speaker 2: no Colt strikes and markets. You could sit there with

731
00:42:41,200 --> 00:42:43,680
Speaker 2: a bat on your shoulder and just wait for your pitch.

732
00:42:44,360 --> 00:42:45,040
Speaker 1: That's correct.

733
00:42:45,440 --> 00:42:46,440
Speaker 2: So let's talk a lot.

734
00:42:46,480 --> 00:42:48,359
Speaker 3: A lot of people are into business because they love

735
00:42:48,400 --> 00:42:49,960
Speaker 3: the action and sitting.

736
00:42:50,160 --> 00:42:52,719
Speaker 2: Oh well, we're all junkies. We're all looking for you

737
00:42:52,840 --> 00:42:53,560
Speaker 2: that dopamine.

738
00:42:53,600 --> 00:42:55,359
Speaker 3: So sitting with your bat on your shoulder is really

739
00:42:55,360 --> 00:42:55,920
Speaker 3: tough for somebody.

740
00:42:56,000 --> 00:43:00,160
Speaker 2: Yeah, yeah, absolutely. If I'm always surprised at traders who

741
00:43:00,160 --> 00:43:02,400
Speaker 2: are also gamblers, like to go to Vegas, like to

742
00:43:02,440 --> 00:43:06,440
Speaker 2: play play blackjack. It's like, don't you get enough excitement traders.

743
00:43:06,719 --> 00:43:10,520
Speaker 3: I don't gamble at all. I don't bet on I'm

744
00:43:10,520 --> 00:43:12,640
Speaker 3: a fan, right, So I'm a Michigan fan. I'm a

745
00:43:12,719 --> 00:43:15,600
Speaker 3: nick fan. God, I'm a Jets fan. I'm a Mets fan.

746
00:43:15,680 --> 00:43:18,720
Speaker 2: So we can you you are a glutton for punishment.

747
00:43:18,320 --> 00:43:20,000
Speaker 3: Yes, we can have a whole psychological well.

748
00:43:19,880 --> 00:43:23,319
Speaker 2: At least at least Michigan has been doing. Football has

749
00:43:23,320 --> 00:43:23,960
Speaker 2: been doing better.

750
00:43:24,040 --> 00:43:27,480
Speaker 3: Yes, and they had a good run in basketball. But

751
00:43:28,440 --> 00:43:30,640
Speaker 3: I'm a fan. I enjoy I never bet on sports.

752
00:43:30,880 --> 00:43:34,800
Speaker 2: Let's talk about betting on natural gas. We have had

753
00:43:35,040 --> 00:43:38,160
Speaker 2: a kind of wild market and energy over the past

754
00:43:38,239 --> 00:43:43,400
Speaker 2: couple of years, not just the Russian invasion of Ukraine,

755
00:43:43,960 --> 00:43:47,480
Speaker 2: but all the things that have been happening in both

756
00:43:47,560 --> 00:43:52,240
Speaker 2: oil and gasoline and natural gas. You're a natural gas trader,

757
00:43:52,280 --> 00:43:54,719
Speaker 2: how do you look at what's going on in that

758
00:43:54,840 --> 00:43:57,840
Speaker 2: market and tell us where the price of energy is

759
00:43:57,840 --> 00:43:59,880
Speaker 2: going to be in a couple of weeks or months.

760
00:44:01,080 --> 00:44:04,520
Speaker 3: So for everybody that's listening, whatever I do, do the

761
00:44:04,560 --> 00:44:09,840
Speaker 3: opposite and you may have a chance of success. So

762
00:44:10,000 --> 00:44:14,879
Speaker 3: natural gas, in terms of how it's behaved, it's had

763
00:44:14,920 --> 00:44:19,520
Speaker 3: a round trip. So where the prices today is close

764
00:44:19,640 --> 00:44:22,960
Speaker 3: to where oil was when it was zero in April

765
00:44:23,480 --> 00:44:25,560
Speaker 3: of twenty just to give you a sense.

766
00:44:25,920 --> 00:44:26,880
Speaker 1: So natural gas.

767
00:44:27,200 --> 00:44:30,920
Speaker 2: Also round trip, and gasoline is almost a round trip, right.

768
00:44:31,040 --> 00:44:35,360
Speaker 3: But not nearly to the extent. So this again becomes

769
00:44:35,840 --> 00:44:40,319
Speaker 3: listen to the markets, don't listen to the gossip. And

770
00:44:40,719 --> 00:44:43,480
Speaker 3: so where we are right now, in my mind in

771
00:44:44,160 --> 00:44:48,000
Speaker 3: natural gas, which is different than crude, is a little

772
00:44:48,000 --> 00:44:53,360
Speaker 3: bit counter cyclical. Because we've had warmer than normal weather,

773
00:44:53,440 --> 00:44:57,000
Speaker 3: we had extra storage and that put downward pressure in winter.

774
00:44:57,520 --> 00:44:59,520
Speaker 3: Now it looks like that's going to reverse and we're

775
00:44:59,520 --> 00:45:02,759
Speaker 3: going to have a sort of really hot summer. And

776
00:45:02,840 --> 00:45:06,280
Speaker 3: you can ascribe that to climate change.

777
00:45:06,400 --> 00:45:09,440
Speaker 2: Or al Nino and stuff.

778
00:45:09,960 --> 00:45:13,560
Speaker 3: You know, you can decide whatever you want to call it,

779
00:45:13,600 --> 00:45:16,120
Speaker 3: but the facts are the facts. Right, If it's hot,

780
00:45:16,160 --> 00:45:17,800
Speaker 3: and we're going to be burning and you're going to

781
00:45:17,880 --> 00:45:22,120
Speaker 3: need to be cooling at the same time. A lot

782
00:45:22,160 --> 00:45:25,560
Speaker 3: of this thought that, you know, natural gas and the

783
00:45:25,640 --> 00:45:29,279
Speaker 3: economy was going to weaken, and in general, we were

784
00:45:29,719 --> 00:45:32,560
Speaker 3: taught to try to buy low and sell high. We

785
00:45:32,719 --> 00:45:35,200
Speaker 3: just talked earlier how most times in the markets, buyers

786
00:45:35,239 --> 00:45:38,040
Speaker 3: are higher and sellers are lower. So we're sitting there

787
00:45:39,080 --> 00:45:43,760
Speaker 3: trying to put a position on sort of spreading summer

788
00:45:44,080 --> 00:45:47,279
Speaker 3: natural gas and hedging it a little bit by being

789
00:45:47,400 --> 00:45:49,080
Speaker 3: short winter next year.

790
00:45:49,400 --> 00:45:51,720
Speaker 2: So we're recording this at the end of May twenty

791
00:45:51,760 --> 00:45:56,239
Speaker 2: twenty three. How do you look at macro events? The

792
00:45:56,320 --> 00:46:00,319
Speaker 2: Russian invasion of Ukraine just being one example, Does that

793
00:46:00,440 --> 00:46:03,279
Speaker 2: affect the way you look at what the market is

794
00:46:03,280 --> 00:46:06,960
Speaker 2: telling you? Or is that just gossip? By the time

795
00:46:07,520 --> 00:46:09,560
Speaker 2: it's in the newspaper, it's already in the price.

796
00:46:09,760 --> 00:46:10,680
Speaker 1: No, you have to.

797
00:46:11,040 --> 00:46:12,640
Speaker 3: Look at all these things, and I think there's an

798
00:46:12,680 --> 00:46:18,239
Speaker 3: important lesson here. When there's tremendous amount of market uncertainty,

799
00:46:18,680 --> 00:46:23,600
Speaker 3: you need to trade smaller, right, because that's what kills you.

800
00:46:23,520 --> 00:46:25,719
Speaker 3: You know, periods of low volatility, which we're in now,

801
00:46:25,800 --> 00:46:29,319
Speaker 3: then tend to be followed by higher volatility. A lot

802
00:46:29,360 --> 00:46:32,960
Speaker 3: of models are predicated on looking backwards over recent volatility,

803
00:46:33,400 --> 00:46:37,239
Speaker 3: and then you're trading too large. And I really want

804
00:46:37,280 --> 00:46:40,760
Speaker 3: to distinguish because there's people talk all the time about

805
00:46:41,040 --> 00:46:44,400
Speaker 3: black swans and they go, oh, this black swan could happen,

806
00:46:44,480 --> 00:46:46,920
Speaker 3: or that black swan could happen, and I'm like, if

807
00:46:46,960 --> 00:46:49,960
Speaker 3: you're talking about it, it's not a black swan. That's

808
00:46:50,080 --> 00:46:54,040
Speaker 3: risk management, that's smart. A black swan is when you

809
00:46:54,120 --> 00:46:57,320
Speaker 3: wake up in the morning and a condo in Florida

810
00:46:57,360 --> 00:46:59,400
Speaker 3: has collapsed, or you wake up in the morning in

811
00:46:59,480 --> 00:47:03,759
Speaker 3: Abe's assassinated. These aren't things that you put into your

812
00:47:03,800 --> 00:47:05,000
Speaker 3: risk management models.

813
00:47:05,040 --> 00:47:06,799
Speaker 1: But if you.

814
00:47:06,760 --> 00:47:09,879
Speaker 3: Survive, you win, so you should really probably at these

815
00:47:09,880 --> 00:47:12,560
Speaker 3: periods of uncertainty, So is there going to be a

816
00:47:12,640 --> 00:47:16,160
Speaker 3: Ukrainian offensive? What is that going to do? And how

817
00:47:16,239 --> 00:47:19,880
Speaker 3: is that going to affect the situation with Russia?

818
00:47:20,000 --> 00:47:21,520
Speaker 1: Are they going to be threatening?

819
00:47:21,960 --> 00:47:25,320
Speaker 3: They are a nuclear power? Is that just a threat

820
00:47:25,320 --> 00:47:29,560
Speaker 3: to try to keep them or God forbid, something worse happens.

821
00:47:30,239 --> 00:47:33,920
Speaker 3: I have no idea. I don't think anybody can have

822
00:47:34,000 --> 00:47:36,520
Speaker 3: that idea because you can't get into the head of

823
00:47:36,560 --> 00:47:40,880
Speaker 3: the leaders of Russia decide how they're going to act,

824
00:47:41,280 --> 00:47:46,120
Speaker 3: But from a trading perspective, I think that you need

825
00:47:46,160 --> 00:47:47,080
Speaker 3: to trade smaller.

826
00:47:47,200 --> 00:47:47,480
Speaker 1: Now.

827
00:47:47,880 --> 00:47:50,200
Speaker 3: One of the things that I find really interesting right

828
00:47:50,239 --> 00:47:53,799
Speaker 3: now this time of year is that because if there

829
00:47:53,840 --> 00:47:57,319
Speaker 3: is climate change and you have grain prices that are

830
00:47:57,560 --> 00:48:02,880
Speaker 3: pre pandemic levels, it could be really fascinating and exciting

831
00:48:03,200 --> 00:48:07,400
Speaker 3: to have sort of a summer rally in soybeans and corn,

832
00:48:07,760 --> 00:48:10,600
Speaker 3: and the risk reward of buying them right here is

833
00:48:11,120 --> 00:48:14,640
Speaker 3: fantastic because you've had a wet period of time. If

834
00:48:14,680 --> 00:48:19,640
Speaker 3: you get dry and you don't have good growing conditions

835
00:48:19,680 --> 00:48:21,719
Speaker 3: in the Midwest here. At the same time, you have

836
00:48:21,840 --> 00:48:26,000
Speaker 3: uncertainty in the Ukraine, which is a large producer of

837
00:48:26,080 --> 00:48:29,799
Speaker 3: grains basket. So yeah, so this could be And there's

838
00:48:29,880 --> 00:48:34,160
Speaker 3: nothing more fun than a summer bull market in greens.

839
00:48:34,680 --> 00:48:38,680
Speaker 2: So I've never quite heard that sentence before, nothing more

840
00:48:38,760 --> 00:48:40,880
Speaker 2: fun than a bull market in the summer in grains.

841
00:48:41,520 --> 00:48:47,120
Speaker 2: You've pointed out the psychology and self discipline. How can

842
00:48:47,160 --> 00:48:51,000
Speaker 2: you teach traders to manage their emotions and to not

843
00:48:51,719 --> 00:48:56,279
Speaker 2: allow their either their enthusiasm or despair to affect their

844
00:48:56,320 --> 00:48:57,160
Speaker 2: trading behavior.

845
00:48:59,800 --> 00:49:07,000
Speaker 3: The best teacher, unfortunately, is failure and how you deal

846
00:49:07,080 --> 00:49:11,680
Speaker 3: with that failure. So many times people would come into

847
00:49:11,680 --> 00:49:14,120
Speaker 3: my office after a really bad day. They sit down,

848
00:49:14,200 --> 00:49:17,480
Speaker 3: they put their hands on their head, and they go, oh,

849
00:49:17,680 --> 00:49:21,480
Speaker 3: why the hell am I in this business? Now what

850
00:49:21,560 --> 00:49:23,920
Speaker 3: you can do and we've all done this. If you

851
00:49:24,000 --> 00:49:28,120
Speaker 3: get out of all your positions, you emotionally cleanse yourself.

852
00:49:30,040 --> 00:49:32,760
Speaker 3: But are you able to get back in the game.

853
00:49:33,239 --> 00:49:36,960
Speaker 3: Because you can emotionally cleanse yourself and leave the game

854
00:49:37,360 --> 00:49:39,080
Speaker 3: and you'll never be able to make your money back.

855
00:49:39,120 --> 00:49:42,040
Speaker 3: So how do you handle that adversity?

856
00:49:42,800 --> 00:49:47,160
Speaker 1: Success? Okay, most people enjoy success, but it doesn't teach

857
00:49:47,200 --> 00:49:49,160
Speaker 1: you anything correct.

858
00:49:48,840 --> 00:49:52,279
Speaker 3: In the trading business. It's how you deal. What did

859
00:49:52,320 --> 00:49:55,440
Speaker 3: you do? And you have to really be self aware.

860
00:49:55,520 --> 00:49:58,560
Speaker 3: Did I hold on to the position too long? Was

861
00:49:58,600 --> 00:50:03,040
Speaker 3: I too big? Was I gossiping with other people? And

862
00:50:03,120 --> 00:50:07,800
Speaker 3: I lost my discipline? You really have to break it down.

863
00:50:08,120 --> 00:50:11,520
Speaker 3: And it all comes back to the fact that you

864
00:50:11,719 --> 00:50:16,920
Speaker 3: have to admit that it's my fault as the trader.

865
00:50:17,600 --> 00:50:19,480
Speaker 3: I'm the one that's grewed up.

866
00:50:19,600 --> 00:50:22,120
Speaker 2: Well, you mean it's not the fed's faults. Because I've

867
00:50:22,440 --> 00:50:27,799
Speaker 2: spent the past decade listening to managers and economists and

868
00:50:28,200 --> 00:50:30,719
Speaker 2: traders tell me, well, my P and L would be

869
00:50:30,800 --> 00:50:34,400
Speaker 2: much better. But this QE and the FED doing this,

870
00:50:34,960 --> 00:50:36,719
Speaker 2: how can anybody trade in that environment?

871
00:50:36,840 --> 00:50:41,040
Speaker 3: Yeah, I've as the years have gone on, I've gotten

872
00:50:41,400 --> 00:50:44,760
Speaker 3: a lot better at taking credit for success and blaming

873
00:50:44,800 --> 00:50:49,560
Speaker 3: others for my failure. And yeah, it's a good way

874
00:50:49,560 --> 00:50:53,319
Speaker 3: to go. But you're living in Lola Land if that's

875
00:50:53,320 --> 00:50:57,840
Speaker 3: how you think you are, what your track record is.

876
00:50:58,280 --> 00:51:03,080
Speaker 3: And it's the sports scenario. If you're playing baseball and

877
00:51:03,160 --> 00:51:05,560
Speaker 3: the team gives you a shot and you're batting one

878
00:51:05,719 --> 00:51:10,000
Speaker 3: fifty and they take you out of the lineup, it's

879
00:51:10,040 --> 00:51:11,480
Speaker 3: not the manager's fault, it's.

880
00:51:11,360 --> 00:51:15,839
Speaker 2: The umpire, the umpires calling those outside pitches strikes. How

881
00:51:15,880 --> 00:51:18,040
Speaker 2: can anybody get a fair shot at the plate with that?

882
00:51:18,040 --> 00:51:20,840
Speaker 3: That's true, But if he is, just like in the markets,

883
00:51:20,880 --> 00:51:23,200
Speaker 3: you got to you have to adjust, Yes, you have

884
00:51:23,280 --> 00:51:24,040
Speaker 3: to adjust.

885
00:51:23,760 --> 00:51:26,480
Speaker 2: To That's exactly right. So let's talk a little bit

886
00:51:26,600 --> 00:51:29,880
Speaker 2: about robin Hood. It could be one of the more

887
00:51:30,680 --> 00:51:36,319
Speaker 2: famous Wall Street based philanthropies in New York, especially giving

888
00:51:36,360 --> 00:51:40,799
Speaker 2: its longevity. How did the idea come about? How big

889
00:51:40,840 --> 00:51:43,600
Speaker 2: a factor was the eighty seven crash in the creation

890
00:51:43,680 --> 00:51:44,360
Speaker 2: of Robinhood.

891
00:51:46,320 --> 00:51:51,040
Speaker 3: So it's probably of all the things something I'm most

892
00:51:51,080 --> 00:51:56,080
Speaker 3: proud about being associated with that since the beginning, and

893
00:51:56,719 --> 00:52:03,640
Speaker 3: again really kudos to Paul for his leadership in doing that.

894
00:52:03,960 --> 00:52:04,880
Speaker 1: So, as I said.

895
00:52:04,680 --> 00:52:07,360
Speaker 3: Earlier, we really thought that there could be some economic

896
00:52:07,440 --> 00:52:15,200
Speaker 3: struggles following eighty seven. And one of the things about

897
00:52:15,480 --> 00:52:19,719
Speaker 3: trickle down, and I need to fully disclose, yeah, I'm

898
00:52:19,760 --> 00:52:23,640
Speaker 3: a Democrat that believes in markets, is that when things

899
00:52:23,760 --> 00:52:28,200
Speaker 3: go bad, it's those at the bottom that get hurt first.

900
00:52:29,520 --> 00:52:34,000
Speaker 3: And we've seen that repeatedly. And so when we thought

901
00:52:34,040 --> 00:52:37,760
Speaker 3: about helping New York. Now you have to realize nineteen

902
00:52:37,840 --> 00:52:42,000
Speaker 3: eighty eight we gave away sixty five thousand.

903
00:52:41,640 --> 00:52:45,120
Speaker 2: Dollars, not exactly a huge amount of money.

904
00:52:45,120 --> 00:52:49,160
Speaker 3: No, last year we gave away one hundred and thirty million.

905
00:52:49,480 --> 00:52:53,000
Speaker 2: That's a chunk of change. Yes, and you guys have

906
00:52:53,040 --> 00:52:55,160
Speaker 2: been doing this every year for thirty five years.

907
00:52:55,239 --> 00:52:57,560
Speaker 3: Yes, And the model was different. And why did we

908
00:52:57,600 --> 00:53:01,359
Speaker 3: start it because Paul's an entrepreneur and the one thing

909
00:53:01,440 --> 00:53:04,680
Speaker 3: and we're market people, and we said, you know what,

910
00:53:04,800 --> 00:53:06,560
Speaker 3: if we do a good job, we'll be able to

911
00:53:06,600 --> 00:53:09,239
Speaker 3: raise the money. And I don't want people to give

912
00:53:09,320 --> 00:53:11,160
Speaker 3: us money in us not spend it.

913
00:53:11,719 --> 00:53:13,719
Speaker 1: So we have two rules.

914
00:53:14,280 --> 00:53:17,160
Speaker 3: One is if you give us a dollar, we're going

915
00:53:17,200 --> 00:53:19,360
Speaker 3: to put it out the door in the next twelve months.

916
00:53:20,000 --> 00:53:22,400
Speaker 1: And two we're paying.

917
00:53:22,160 --> 00:53:25,319
Speaker 3: For the overhead the board. So if you give us

918
00:53:25,320 --> 00:53:26,359
Speaker 3: a dollar, it's getting paid.

919
00:53:26,400 --> 00:53:27,120
Speaker 1: It's not being one.

920
00:53:27,080 --> 00:53:30,600
Speaker 2: Hundred cents on the dollar goes out from donated cash.

921
00:53:30,680 --> 00:53:31,440
Speaker 1: That's correct.

922
00:53:32,280 --> 00:53:35,440
Speaker 2: And who are the donors to the robin Hood Foundation.

923
00:53:35,600 --> 00:53:39,760
Speaker 2: Besides you and Pull Tutor Jones and that original.

924
00:53:39,360 --> 00:53:44,160
Speaker 3: Crew, there's literally thousands and after nine to eleven and

925
00:53:44,239 --> 00:53:50,080
Speaker 3: Sandy and during the pandemic, tens of thousands of donors

926
00:53:50,080 --> 00:53:54,440
Speaker 3: from all different sizes. Now we're sitting here in Bloomberg

927
00:53:55,000 --> 00:53:58,360
Speaker 3: and Mayor Mike through the Bloomberg Philanthropies is one of

928
00:53:58,360 --> 00:54:02,719
Speaker 3: the largest donor and supporters of New York. Now Robinhood

929
00:54:03,080 --> 00:54:09,080
Speaker 3: focuses on sort of the overriding goal is mobility from.

930
00:54:08,920 --> 00:54:12,920
Speaker 2: Poverty, meaning economic motibility, the ability to pull yourself up

931
00:54:12,960 --> 00:54:14,000
Speaker 2: from a bad condition.

932
00:54:14,320 --> 00:54:15,320
Speaker 1: That's correct.

933
00:54:15,400 --> 00:54:19,120
Speaker 3: And within that, you know, we're we were the first

934
00:54:19,120 --> 00:54:21,440
Speaker 3: funders of charter schools in New York City. We're the

935
00:54:21,520 --> 00:54:25,759
Speaker 3: largest funders of food pantries. You have to have a

936
00:54:25,800 --> 00:54:28,320
Speaker 3: holistic approach, and if you walk around New York and

937
00:54:28,360 --> 00:54:30,600
Speaker 3: if you love New York City. What are the four

938
00:54:30,640 --> 00:54:36,240
Speaker 3: issues right you see them. There's homelessness, there's mental health,

939
00:54:37,440 --> 00:54:43,920
Speaker 3: there's food insecurity, and there's immigration and that together. If

940
00:54:43,960 --> 00:54:48,360
Speaker 3: you could do that through job training, through education, through

941
00:54:48,520 --> 00:54:52,839
Speaker 3: support systems, and we do that also we have try

942
00:54:52,880 --> 00:54:56,640
Speaker 3: to use technology to help that, to put people on

943
00:54:56,760 --> 00:55:01,240
Speaker 3: a path of a better life. Is it a challenge, absolutely,

944
00:55:01,600 --> 00:55:03,880
Speaker 3: But we go back about the trading business and talking

945
00:55:03,960 --> 00:55:07,399
Speaker 3: about how bad a day can be. But the thing

946
00:55:07,480 --> 00:55:10,200
Speaker 3: that keeps it always in perspective. No matter how bad

947
00:55:10,239 --> 00:55:15,040
Speaker 3: a day I have, the people that we're helping, their

948
00:55:15,120 --> 00:55:18,280
Speaker 3: days are far worse. And if you keep that in perspective,

949
00:55:18,320 --> 00:55:21,960
Speaker 3: you're going to help others who are less fortunate.

950
00:55:22,520 --> 00:55:26,040
Speaker 2: How do you measure success for a charity? As a trader,

951
00:55:26,080 --> 00:55:28,439
Speaker 2: you get a P and L. You know exactly whether

952
00:55:28,440 --> 00:55:31,600
Speaker 2: you're right or wrong. How can you tell the impact

953
00:55:31,719 --> 00:55:35,160
Speaker 2: of your dollars whether or not they're successful or not.

954
00:55:36,120 --> 00:55:39,480
Speaker 3: So that's a really outstanding question, and that's something that

955
00:55:39,760 --> 00:55:46,320
Speaker 3: Robinhood has been particularly innovative in in trying to measure metrics.

956
00:55:46,600 --> 00:55:49,920
Speaker 3: So if it's a job training program, it's not just

957
00:55:50,000 --> 00:55:52,160
Speaker 3: a number of people that are in there. For example,

958
00:55:53,280 --> 00:55:57,800
Speaker 3: how once they graduate, where's their starting salary relative.

959
00:55:57,400 --> 00:55:58,600
Speaker 1: To where they were beforehand?

960
00:55:59,000 --> 00:56:02,399
Speaker 3: Do they still have that job a year later? Are

961
00:56:02,400 --> 00:56:05,560
Speaker 3: they making more money? Are they at some percentage above

962
00:56:05,600 --> 00:56:11,960
Speaker 3: the poverty level? If you're funding charter schools, where are

963
00:56:12,000 --> 00:56:14,840
Speaker 3: they are the kids graduating? Are they going to college?

964
00:56:14,920 --> 00:56:19,560
Speaker 3: Are you tracking them? Are they getting employment? So it's

965
00:56:19,719 --> 00:56:24,080
Speaker 3: all very data intensive and metric intensive. Now, there are

966
00:56:24,080 --> 00:56:30,200
Speaker 3: some things right you're if unfortunately, if you're a woman

967
00:56:30,239 --> 00:56:33,759
Speaker 3: and you've been battered and you have kids, before they

968
00:56:33,800 --> 00:56:38,360
Speaker 3: can go to job training or education, they need to

969
00:56:38,400 --> 00:56:41,520
Speaker 3: have a safe place to say. So, we fund shelters

970
00:56:42,080 --> 00:56:44,560
Speaker 3: and where we are, and we do food support because

971
00:56:44,560 --> 00:56:49,680
Speaker 3: it has to be a holistic approach, this movement from poverty,

972
00:56:50,200 --> 00:56:54,520
Speaker 3: and as a parent, just as you're dealing with your

973
00:56:54,560 --> 00:56:58,240
Speaker 3: own children, that's what you're doing. It's a holistic approach.

974
00:56:58,400 --> 00:57:01,640
Speaker 3: It's not okay, here's one magic bullet. I wish that

975
00:57:01,680 --> 00:57:05,359
Speaker 3: were the case, but it isn't. And like any organization,

976
00:57:06,280 --> 00:57:10,080
Speaker 3: the key is not me, not Paul, not the other

977
00:57:10,360 --> 00:57:11,080
Speaker 3: board members.

978
00:57:11,480 --> 00:57:12,960
Speaker 1: It's the quality of the staff.

979
00:57:13,000 --> 00:57:18,760
Speaker 3: And we have committed, innovative staff that has really pushed

980
00:57:18,960 --> 00:57:22,120
Speaker 3: robin Hood along the way, and that started you know,

981
00:57:22,200 --> 00:57:26,600
Speaker 3: with our leaders and president, from David Saltzman to Wes

982
00:57:26,600 --> 00:57:29,560
Speaker 3: Moore who's now the governor of Maryland, to our newest

983
00:57:29,560 --> 00:57:32,840
Speaker 3: one rich Bury, and so we're really fortunate to have

984
00:57:33,040 --> 00:57:34,080
Speaker 3: excellent team.

985
00:57:34,280 --> 00:57:36,640
Speaker 2: You mentioned charter schools. Tell us a little bit about

986
00:57:36,640 --> 00:57:40,840
Speaker 2: the Kip charter school in the Bronx and why Robinhood

987
00:57:40,880 --> 00:57:46,080
Speaker 2: has been so active in promoting and developing charter schools

988
00:57:46,560 --> 00:57:49,520
Speaker 2: in some of the poorer neighborhoods in New York City.

989
00:57:51,080 --> 00:57:54,960
Speaker 3: Well, we're markets people, so we think that competition is

990
00:57:55,000 --> 00:57:58,480
Speaker 3: a good thing. We know that charter schools aren't going

991
00:57:58,520 --> 00:58:01,840
Speaker 3: to be a replacement for all public schools. But if

992
00:58:01,880 --> 00:58:07,240
Speaker 3: you think about technology in general, right, it's innovation and change.

993
00:58:07,840 --> 00:58:12,400
Speaker 3: And if you think about the KITP model, it's really

994
00:58:12,520 --> 00:58:15,760
Speaker 3: like a parent. So if you have a child and

995
00:58:15,800 --> 00:58:18,640
Speaker 3: they're not doing well, what do you do? You give

996
00:58:18,680 --> 00:58:22,920
Speaker 3: them extra resources, You give them extra homework, and so

997
00:58:23,000 --> 00:58:26,880
Speaker 3: they may come home from school and you're working with them. Now,

998
00:58:26,920 --> 00:58:30,840
Speaker 3: if you have parents who are working the overnight shift

999
00:58:30,920 --> 00:58:33,919
Speaker 3: in a hospital, they don't have that ability to give

1000
00:58:34,040 --> 00:58:38,160
Speaker 3: their children that extra time because they're working.

1001
00:58:38,560 --> 00:58:43,920
Speaker 2: So these schools do that and meaning extended hours tutors exactly.

1002
00:58:44,320 --> 00:58:48,200
Speaker 3: They're providing the resources and the opportunities for those students

1003
00:58:48,640 --> 00:58:52,720
Speaker 3: who they wouldn't normally have in a traditional public school model.

1004
00:58:53,160 --> 00:58:56,440
Speaker 2: Let's talk about what you guys do at Robinhood for

1005
00:58:56,600 --> 00:59:01,360
Speaker 2: Public Schools. Tell us about Math for America that seeks

1006
00:59:01,360 --> 00:59:04,280
Speaker 2: to improve math education in US public schools.

1007
00:59:04,360 --> 00:59:06,680
Speaker 3: So Robinhood Foundation of Math for America. Those are the

1008
00:59:06,680 --> 00:59:09,120
Speaker 3: two non for profit boards that I sit on. And

1009
00:59:09,160 --> 00:59:14,320
Speaker 3: I've been blessed really because Math for America was started

1010
00:59:14,320 --> 00:59:17,080
Speaker 3: by Jim Simons, and we all know what a legend

1011
00:59:17,200 --> 00:59:20,440
Speaker 3: Jim science is in the hedgephone world. In the education space,

1012
00:59:20,600 --> 00:59:24,520
Speaker 3: that model was predicated in how do we keep better

1013
00:59:24,600 --> 00:59:29,439
Speaker 3: math and science teachers in public schools? The assumption being

1014
00:59:29,480 --> 00:59:34,320
Speaker 3: which isn't rocket scientists even though he had more, well, yes.

1015
00:59:34,080 --> 00:59:35,920
Speaker 2: Given for the students resources.

1016
00:59:35,960 --> 00:59:38,400
Speaker 3: If you have really good teachers, you're likely to have

1017
00:59:38,480 --> 00:59:41,680
Speaker 3: better outcomes. So how do you keep really good teachers

1018
00:59:41,720 --> 00:59:44,520
Speaker 3: in schools when there's a lot of competition for them?

1019
00:59:44,920 --> 00:59:46,960
Speaker 3: So we've done two things at Math for America. We've

1020
00:59:47,080 --> 00:59:52,480
Speaker 3: established a community of master math science teachers where they

1021
00:59:52,520 --> 00:59:56,960
Speaker 3: can come together and learn and teach. And also we

1022
00:59:57,040 --> 01:00:00,479
Speaker 3: provide them a stipend, so there's an incentive for them

1023
01:00:00,520 --> 01:00:04,760
Speaker 3: to stay in their schools. And it's really fascinating because

1024
01:00:05,120 --> 01:00:07,280
Speaker 3: even though all the teachers in the schools aren't there,

1025
01:00:08,040 --> 01:00:10,920
Speaker 3: a good captain, a good player makes the players around

1026
01:00:10,960 --> 01:00:13,560
Speaker 3: them better. And so what they're doing and what they've

1027
01:00:13,600 --> 01:00:16,120
Speaker 3: taken back from you know, coming down to math for

1028
01:00:16,160 --> 01:00:19,360
Speaker 3: America for these sessions and bringing it back to school,

1029
01:00:19,360 --> 01:00:22,280
Speaker 3: I think helps all the teachers, which helps all the students.

1030
01:00:23,160 --> 01:00:26,800
Speaker 2: Before we get to our favorite questions, let me throw

1031
01:00:26,840 --> 01:00:31,280
Speaker 2: a curveball at you, which I find intriguing. You like

1032
01:00:31,400 --> 01:00:36,560
Speaker 2: to quote Captain E. J. Smith who famously said quote

1033
01:00:36,600 --> 01:00:39,400
Speaker 2: when anyone asked me how I can best describe my

1034
01:00:39,560 --> 01:00:45,520
Speaker 2: experience in nearly forty years at sea, I merely say uneventful.

1035
01:00:45,880 --> 01:00:47,840
Speaker 2: Why is that quote so intriguing to you?

1036
01:00:49,520 --> 01:00:51,400
Speaker 3: Well, not only did he say that, but he said

1037
01:00:51,400 --> 01:00:54,800
Speaker 3: it sort of just before the launching of the Titanic.

1038
01:00:55,280 --> 01:00:57,240
Speaker 3: And I think if you've listened at all time, and

1039
01:00:57,320 --> 01:00:59,400
Speaker 3: he was the captain of yes, he was the captain

1040
01:00:59,440 --> 01:01:03,800
Speaker 3: of the titan If you listen to anything or taking

1041
01:01:03,880 --> 01:01:08,880
Speaker 3: anything out of this podcast, is that complacency in anything,

1042
01:01:08,920 --> 01:01:16,320
Speaker 3: but particularly in the markets, is extraordinarily dangerous, and one

1043
01:01:16,400 --> 01:01:20,040
Speaker 3: should take away from that that bad things can and

1044
01:01:20,120 --> 01:01:25,360
Speaker 3: will happen in the markets. So that means trade smaller,

1045
01:01:25,960 --> 01:01:30,840
Speaker 3: have really good risk management, and don't believe your success

1046
01:01:31,320 --> 01:01:32,680
Speaker 3: when you're trading successfully.

1047
01:01:33,040 --> 01:01:36,080
Speaker 2: Let's jump to our favorite questions that we ask all

1048
01:01:36,120 --> 01:01:40,440
Speaker 2: of our guests, starting with tell us what you've been

1049
01:01:41,240 --> 01:01:44,040
Speaker 2: entertaining yourself with. What are you listening to or watching,

1050
01:01:44,560 --> 01:01:46,760
Speaker 2: be it Netflix or podcasts or whatever.

1051
01:01:47,560 --> 01:01:51,680
Speaker 3: Ah well, so we have a sort of group consideration

1052
01:01:51,720 --> 01:01:55,040
Speaker 3: at home. Of course, we're finishing succession right, there's two

1053
01:01:55,440 --> 01:01:59,480
Speaker 3: upright and at the same time, Barry and Ted Lasso.

1054
01:01:59,560 --> 01:02:02,120
Speaker 3: So those post Memorial Day, I think we're gonna have

1055
01:02:02,160 --> 01:02:04,520
Speaker 3: to find some new things.

1056
01:02:04,600 --> 01:02:07,640
Speaker 2: I'll make a recommendation to you. It's only eight episodes

1057
01:02:08,160 --> 01:02:12,000
Speaker 2: and I'm only halfway through it. But the Diplomat, Yes,

1058
01:02:12,040 --> 01:02:15,640
Speaker 2: that's next, that's next. On our really well done, really

1059
01:02:15,960 --> 01:02:18,040
Speaker 2: fascinating characters. I'm really I'm really enjoying it.

1060
01:02:18,120 --> 01:02:20,560
Speaker 3: And when I'm sitting around and trying to clear the

1061
01:02:20,640 --> 01:02:26,000
Speaker 3: head and reading, I try. I like historical novels.

1062
01:02:26,240 --> 01:02:28,000
Speaker 2: Well, we're gonna come up to books in a moment,

1063
01:02:28,360 --> 01:02:30,920
Speaker 2: so put a pin in that. Tell us about your

1064
01:02:30,920 --> 01:02:33,160
Speaker 2: early mentors who helped shape your career.

1065
01:02:34,440 --> 01:02:37,440
Speaker 3: Well, I was very very fortunate, as I said, being

1066
01:02:37,720 --> 01:02:41,800
Speaker 3: at at the FED and UH and the research people there,

1067
01:02:43,400 --> 01:02:48,320
Speaker 3: and of course there's Paul, who was a mentor, and

1068
01:02:48,400 --> 01:02:52,480
Speaker 3: because we're together on the border of the Robin Hood Foundation,

1069
01:02:53,360 --> 01:02:58,640
Speaker 3: is still a mentor because I think you can always

1070
01:02:59,120 --> 01:03:04,040
Speaker 3: learn different things and and believe it or not, a

1071
01:03:04,080 --> 01:03:06,720
Speaker 3: lot of the mentors now are are people I read

1072
01:03:06,800 --> 01:03:10,600
Speaker 3: and listen to. And for example, I had the opportunity

1073
01:03:10,640 --> 01:03:13,720
Speaker 3: to be here at Bloomberg Philanthropies a few weeks ago

1074
01:03:14,040 --> 01:03:19,919
Speaker 3: and listen to Mayor Mike, and I try to take

1075
01:03:19,960 --> 01:03:24,840
Speaker 3: away things that I find insightful. And sometimes I run

1076
01:03:24,880 --> 01:03:27,400
Speaker 3: into people and I'll say to them, you know, you

1077
01:03:27,480 --> 01:03:29,760
Speaker 3: may not remember this because to you it was a

1078
01:03:29,800 --> 01:03:32,960
Speaker 3: throwaway line, right, But it had a lot of meaning

1079
01:03:33,040 --> 01:03:36,480
Speaker 3: to me. And I probably stole it and didn't give

1080
01:03:36,520 --> 01:03:37,480
Speaker 3: attribution to it.

1081
01:03:37,880 --> 01:03:39,080
Speaker 1: But I try.

1082
01:03:39,240 --> 01:03:42,080
Speaker 3: It doesn't matter who it is across the board, and

1083
01:03:42,120 --> 01:03:46,280
Speaker 3: it can be from uh, you know, a ted Lasso,

1084
01:03:46,480 --> 01:03:48,680
Speaker 3: It could be from a book, It could be from

1085
01:03:49,680 --> 01:03:52,080
Speaker 3: a politician, It could be from anybody.

1086
01:03:52,800 --> 01:03:55,040
Speaker 2: Let's talk about books. What are some of your favorites

1087
01:03:55,080 --> 01:03:56,280
Speaker 2: and what are you reading right now.

1088
01:03:57,280 --> 01:04:00,000
Speaker 3: So, as I mentioned, I read a lot of history

1089
01:04:00,040 --> 01:04:04,680
Speaker 3: oracle novels, and there's an author by the name of

1090
01:04:04,760 --> 01:04:11,400
Speaker 3: David Liss who writes about England and coffee trading and

1091
01:04:11,480 --> 01:04:14,840
Speaker 3: those type of markets in the eighteen hundreds, and that's

1092
01:04:14,920 --> 01:04:18,280
Speaker 3: kind of what I'm reading right and now, because the

1093
01:04:18,360 --> 01:04:23,280
Speaker 3: psychological aspect even then applies to today.

1094
01:04:23,840 --> 01:04:25,920
Speaker 2: What else have you read recently that you enjoyed.

1095
01:04:26,560 --> 01:04:28,760
Speaker 1: I'm going to read Michael Lewis's new book of course.

1096
01:04:29,120 --> 01:04:34,040
Speaker 2: I'm excited Sam coming out in September October something like that. Yes, yeah,

1097
01:04:34,080 --> 01:04:37,080
Speaker 2: that's gonna be that's gonna be great. So our final

1098
01:04:37,120 --> 01:04:39,920
Speaker 2: two questions, what sort of advice would you give to

1099
01:04:39,960 --> 01:04:43,600
Speaker 2: a recent college grad who was interested in a career

1100
01:04:44,240 --> 01:04:47,760
Speaker 2: in either trading or running a fund.

1101
01:04:48,680 --> 01:04:53,200
Speaker 3: So I think all college grads, all all young people.

1102
01:04:53,480 --> 01:04:57,280
Speaker 3: You have to be willing to pay your dues. But

1103
01:04:57,880 --> 01:05:01,000
Speaker 3: the trading aspect the hedge fund asked, It's a lot

1104
01:05:01,040 --> 01:05:04,280
Speaker 3: like sports. The chances of being.

1105
01:05:04,080 --> 01:05:05,640
Speaker 1: A pro.

1106
01:05:06,960 --> 01:05:11,720
Speaker 3: Is a low probability, So you should try and then

1107
01:05:11,880 --> 01:05:14,600
Speaker 3: if you have a chance of success, continue, but if not,

1108
01:05:15,280 --> 01:05:18,880
Speaker 3: then you need to pivot because what you don't want

1109
01:05:18,960 --> 01:05:22,720
Speaker 3: to be doing is, you know, saying, Okay, I'm going

1110
01:05:22,800 --> 01:05:27,200
Speaker 3: to be a lifetime player in the Triple Ace and

1111
01:05:28,000 --> 01:05:31,880
Speaker 3: so you know, as in the minor leagues. But if

1112
01:05:31,920 --> 01:05:33,680
Speaker 3: you want to pursue it, you have to pursue it.

1113
01:05:33,760 --> 01:05:37,240
Speaker 3: But do your own work right coming in And I

1114
01:05:37,280 --> 01:05:39,760
Speaker 3: do a lot of global macro and risk assulting, and

1115
01:05:39,760 --> 01:05:41,400
Speaker 3: I always tell them, I go, you're not paying me

1116
01:05:41,520 --> 01:05:45,320
Speaker 3: to read you the Wall Street Journal or from Bloomberg.

1117
01:05:45,600 --> 01:05:47,400
Speaker 3: I go, if you want to have story time, it's great.

1118
01:05:47,480 --> 01:05:49,760
Speaker 3: I'll pull up all the Bloomberg articles you want and

1119
01:05:49,840 --> 01:05:53,120
Speaker 3: I'll read them to you. So don't rehash other things

1120
01:05:53,120 --> 01:05:55,760
Speaker 3: that people can easily get and think you're being innovative.

1121
01:05:56,240 --> 01:05:59,520
Speaker 3: Do your own work, and you really need to be analytical.

1122
01:06:00,240 --> 01:06:02,640
Speaker 2: And our final question, what do you know about the

1123
01:06:02,680 --> 01:06:05,840
Speaker 2: world of trading and investing today? You wish you knew

1124
01:06:06,440 --> 01:06:08,880
Speaker 2: fifty years or so ago when you were first getting

1125
01:06:08,880 --> 01:06:13,080
Speaker 2: started fifty or forty forty year.

1126
01:06:13,040 --> 01:06:14,479
Speaker 1: Yeah, let's let's say forty.

1127
01:06:14,520 --> 01:06:17,600
Speaker 2: Yeah, I just put a decade on you. So forty

1128
01:06:17,680 --> 01:06:20,240
Speaker 2: years ago when you graduated in the eighties, What do

1129
01:06:20,280 --> 01:06:22,160
Speaker 2: you wish you knew then that you know now?

1130
01:06:23,920 --> 01:06:28,920
Speaker 3: I think it's always the same. I wish we didn't

1131
01:06:28,920 --> 01:06:33,400
Speaker 3: go through our own near death experiences. We had that,

1132
01:06:34,440 --> 01:06:37,320
Speaker 3: As I said, every successful traders, we had big volatility

1133
01:06:37,400 --> 01:06:41,520
Speaker 3: and eighty six a Tutor that I mentioned earlier, I

1134
01:06:41,600 --> 01:06:45,920
Speaker 3: wish I knew how difficult it would be running my

1135
01:06:46,040 --> 01:06:49,080
Speaker 3: own CTA. So when I left Tutor, they seated me.

1136
01:06:49,200 --> 01:06:50,880
Speaker 3: I bought the team of research. It was sort of

1137
01:06:50,880 --> 01:06:55,600
Speaker 3: the first quant trading on the street and the whole

1138
01:06:55,680 --> 01:06:59,680
Speaker 3: business aspect of raising money compliance. I wish I had

1139
01:06:59,720 --> 01:07:04,040
Speaker 3: a better understanding of that because it's just not your

1140
01:07:04,080 --> 01:07:07,400
Speaker 3: track record. And that's another big problem for graduate today.

1141
01:07:07,440 --> 01:07:09,640
Speaker 3: I think, oh I have a great track record. This

1142
01:07:09,760 --> 01:07:12,959
Speaker 3: isn't field the dreams. If you build it, they don't come.

1143
01:07:13,520 --> 01:07:16,240
Speaker 3: You need to have a really really important process, and

1144
01:07:16,280 --> 01:07:19,720
Speaker 3: I wish I was better at that at that time.

1145
01:07:19,880 --> 01:07:24,640
Speaker 2: My colleague Ben Carlson calls that organizational alpha, and I

1146
01:07:24,720 --> 01:07:25,480
Speaker 2: love that phrase.

1147
01:07:25,680 --> 01:07:26,600
Speaker 1: It is a great phrase.

1148
01:07:26,720 --> 01:07:30,400
Speaker 2: Right. Thank you, Peter for being so generous with your time.

1149
01:07:30,560 --> 01:07:34,640
Speaker 2: We have been speaking with Peter Borsch, founding trustee at

1150
01:07:34,720 --> 01:07:39,360
Speaker 2: robin Hood and formally director of research at Tutor Investments.

1151
01:07:39,960 --> 01:07:43,160
Speaker 2: If you enjoy this conversation, well check out any of

1152
01:07:43,200 --> 01:07:46,200
Speaker 2: the previous five hundred or so we've done over the

1153
01:07:46,240 --> 01:07:49,439
Speaker 2: past eight and a half years. You can find those

1154
01:07:49,560 --> 01:07:54,440
Speaker 2: at iTunes, Spotify, YouTube, wherever you find your favorite podcasts.

1155
01:07:55,040 --> 01:07:57,600
Speaker 2: Sign up from my daily reading list at Rid Halts

1156
01:07:57,640 --> 01:08:01,120
Speaker 2: dot com, Follow me on Twitter at Ridholt's follow all

1157
01:08:01,200 --> 01:08:05,680
Speaker 2: of the Bloomberg Fine Family of podcasts at Podcasts, I

1158
01:08:05,720 --> 01:08:07,840
Speaker 2: would be remiss if I did not thank the crack

1159
01:08:07,920 --> 01:08:12,040
Speaker 2: team who helps put these conversations together each week. Robert

1160
01:08:12,080 --> 01:08:16,320
Speaker 2: Bragg is my audio engineer. Attika Vlbroun is our project manager.

1161
01:08:16,920 --> 01:08:20,720
Speaker 2: Paris Wald is my producer. Sean Russo is my researcher.

1162
01:08:21,439 --> 01:08:25,240
Speaker 2: I'm Barry Ritolts. You've been listening to Masters in Business

1163
01:08:25,760 --> 01:08:26,880
Speaker 2: on Bloomberg Radio.