For Jordi Visser, market crisis events inevitably result in regime shifts.  The pandemic of 2020 – a shock to the economy, deterioration in asset prices and an overwhelming response from the government and Central Bank – is no exception.  In his role as Chief Investment Officer at Weiss Multi Strategy Advisers, Jordi is dispassionate in his assessment of risk and reward, relying on hard data rather than the common narratives often proffered.  In today’s set of market prices and data, Jordi sees opportunities in that beaten down factor called value, as it is associated with cyclical industries that produce goods.  As supply chains are moving onshore, price increases are occurring as a result of production bottlenecks.  And at the same time, Jordi sees changes in demand, especially from millennials, who are shifting to consume “things” like autos and housing and focusing less on experiences in a post-pandemic world.  On balance, Jordi see relative value opportunities in value versus growth and EM versus DM. We talk as well of Jordi’s upbringing and the important impact his father has had in helping him think about odds.  Looked at through the lens of horseracing, betting on the trend is about laying significant odds to bet on the favorite. And market disruption events are inevitably tied to the shattering of a widely held consensus where too much capital was invested in the favorite.  In this context, and given his career experience, Jordi has plenty of insight to share on the derivatives markets, hedging and the price of tail risk.  Please enjoy this episode of the Alpha Exchange, my conversation with Jordi Visser.

When it comes to obvious asset class similarities, crypto and crude might seem to have little in common.  But for Rich Rosenblum, there are linkages between them upon closer inspection.  Seeing similarities in the diversifying characteristics of both assets in broad portfolios, Rich also notes the tendency for digital assets and crude to experience phases of investment and then value extraction from that investment.  The net result is volatility.  On this episode of the Alpha Exchange, it was a pleasure to solicit the insights of Rich, the former global head of oil derivatives at Goldman Sachs and, for the last 7 years, a co-founder and head of trading at GSR Markets, focused on delivering trading and investment product solutions to the crypto space.  Our conversation explores the financial attributes of bitcoin – its correlation to risk markets, its periods of strong price momentum and how it may perform during the chaos that investors are especially worried about right now.  We also discuss the expanding market for options on bitcoin and the manner in which the vol surface is priced both across strike and time.  The increasing degree of liquidity in this market provides new opportunities to gain exposure to both the upside and downside movements in the largest cryptocurrency.  Please enjoy this episode of the Alpha Exchange, my conversation with Rich Rosenblum.

In the words of former FOMC Governor, Kevin Warsh, “If you’ve seen one financial crisis, you’ve seen one financial crisis”.  The uniqueness of shocks makes this so and the result is that policymakers need to constantly innovate in their response to episodes of heightened uncertainty. Now a visiting scholar at the Hoover Institute, Kevin shares with me his perspective on the pandemic of 2020, evaluating the mix of forces that brought the VIX to a new time high even as the Treasury market nearly imploded. Kevin’s experience on the FOMC during the global financial crisis has taught him lessons about the institutional realities of crisis firefighting: in the moment, a central bank may be left with few good options and be forced to use controversial measures to restore market functioning. In Kevin’s rendering, what’s more important is the set of reforms pursued by a central bank between crisis events that matters most and here the Fed may not have done enough in the decade between the GFC and the pandemic. We end on an optimistic note, with Kevin expressing confidence that the US will get it right and the dynamism that characterizes the economy will again emerge. I hope you enjoy this episode of the Alpha Exchange as much as I did, my conversation with Kevin Warsh.

Widely considered one of the most gifted central bankers of the modern era, Raghuram Rajan is a highly prominent voice on monetary policy and the global macro economy and it was my distinct privilege to bring his insights to the Alpha Exchange.  Now the Katherine Dusak Miller Distinguished Professor of Finance at Chicago Booth, Dr. Rajan was head of the Reserve Bank of India from 2013-2016, stewarding the country’s economy and financial system through a precarious time punctuated by a violent currency sell-off and a challenging bout of inflation.  Our conversation covers monetary policy, episodes of financial crisis, the fallout from Covid-19 and that pesky conundrum, inflation.  Dr. Rajan gives the Powell Fed high marks on its forceful response to the pandemic, crediting it with staving off a self-reinforcing asset price sell-off.  At the same time, he worries that, as the Central Bank becomes more interventionist, it risks being captured by markets and will find it difficult to extricate itself from extraordinary accommodation.  Lastly, we discuss Dr. Rajan’s most recent book, “The Third Pillar”, an important contribution to how policymakers should think about the interaction between the state, markets and local communities.  I hope you enjoy this episode of the Alpha Exchange as much as I did.

From Latin America in the 80’s to South East Asia in the 90’s, the history of emerging market dust ups is rich. And for Jay Pelosky, the co-founder and CIO of TPW Investment Management, these episodes of instability provided critical early training on the “never say never” world of EM. On this episode of the Alpha Exchange, Jay recounts his days at Morgan Stanley, trained under Barton Biggs, and responsible for allocating capital across asset classes and countries. We reminisce on the Internet bubble that imploded as the century began and pivot to today’s post Covid markets: dominated by tech, propelled by low rates and preoccupied by a certain event coming in November. Jay’s framework views the world as tri-polar, with the US, Asian and European economies vying for global leadership and with a non-consensus view that Europe may finally turn a corner. We talk as well about the sudden stop of Coronavirus and the unique way in which the asset price reaction was so immediate, leaving a backdrop of substantially low yields and a need generate carry. As a result, in today's environment, Jay sees a need to underweight government bonds but overweight credit and as the US continues to fight Covid resulting in ongoing dollar weakness a need to underweight US equities. Lastly, in terms of potentially overlooked risks, Jay worries that a narrowing of the polls between Trump and Biden is something to watch for as some controversial election outcome could derail market sentiment. Please enjoy this episode of the Alpha Exchange, my conversation with Jay Pelosky.

Michael Pettis is no stranger to episodes of financial crisis.  Trading through multiple Latin American debt crises in the 1980’s, the Southeast Asia currency debacle in 1997 and, in its aftermath, the capital flight that engulfed Brazil, Michael has developed a rigorous framework for the how and why of these disruption events.  Central to his approach is Hyman Minsky’s focus on the balance sheet and the relationship between assets and liabilities both for individual entities and across the system.  Driving financial fragility, in Michael’s rendering, is a specific type of mismatch in which the payments on the liability side are vulnerable to sharply increasing when conditions become less favorable.  Our conversation considers these events in the context of China, a country that Michael moved to in 2002 and has become a renowned expert on.  Seeing China on an unsustainable debt path as early as 2007, Michael argues that the conditions for financial crisis are less obvious given the closed nature of the Chinese banking system and the powerful ability of the regulators to be able to force the creditors to restructure.  Michael has plenty to share on a number of other important topics including MMT and his recent, important book, “Trade Wars are Class Wars”, in which he lays out the impact of globalization on wages and the resulting shifting of political tides in the US and abroad.  Please enjoy this episode of the Alpha Exchange, my discussion with Michael Pettis.

Trading through big FX macro events in the 1990’s, Mike Novogratz is no stranger to market instability and the Central Bank response that is ultimately required to restore order. Our conversation is a retrospective on the long ago period when firmly positive interest rates were a thing and when market prices were discovered through supply and demand. In Mike's rendering, today's world looks a lot different. Central Banks have taken an increasingly activist role in guiding interest rate markets and preventing unwind events from becoming self-reinforcing. The result, stable prices in some asset markets but increasingly speculative characteristics in plain sight in others. Our conversation covers a lot of ground, and Mike has much to say about bonds, bubbles, bitcoin and even bail. About the latter, he has founded the "bail project", a passionate effort focused on creating a more humane pre-trial bail system. Lastly, we discuss Mike's founding of Galaxy Digital Holdings and his investments in various aspects of the crypto value chain. On bitcoin, he says both simply and emphatically, "we value it because we say its valuable." And in a world where money-printing has accelerated, bitcoin may still be in the early innings of a tail outcome resulting from the change that has been thrust upon us all.

Within financial markets, derivatives have always been the stomping grounds of those inclined to entertain probabilities and models.  Delving further within this space, you will find simpler vanilla products like listed options but also a realm of considerably greater complexity where counterparties engage in the transfer of alternative risk exposures.  For French banks like BNP, derivatives innovation  has always been an important part of the value proposition.  And as Head of Sales for the Americas at BNP, Nathalie Texier Guillot has been a driver of the bank’s mission to help clients solve complicated problem.  My conversation with Nathalie considers the current state of the risk recycling business in light of the explosion of volatility during March of 2020.  She provides insights on the need to properly size trades, her observations on dislocations that emerged earlier this year and the types of trades she and her team are spending time on now.  We also discuss the challenges in leading a team during the work from home era and how technology is being used to enhance the experience.  Lastly, we discuss the important mission of advancing the careers of women in finance and Nathalie’s views on how to best advocate for the cause.  I hope you enjoy this episode of the podcast as much as I did and thanks for listening.

As our crisis series of the Alpha Exchange continues, I was pleased to have the opportunity to engage with Jens Nordvig, the founder and CEO of Exante Data.  After stints at both Goldman Sachs and Nomura, Jens launched his independent firm in 2016 with an eye towards using a highly data driven approach to help institutional clients make sense of global economic developments and position portfolios accordingly.  Our discussion focuses broadly on the notion of nonlinearity as it applies to asset markets, a key part of the investment philosophy Jens utilizes to evaluate risk and highly applicable to the current landscape of virus centric uncertainty.  Harnessing new and extremely real-time data sets, Exante Data was decidedly early in understanding that Covid19 was going to be a big deal, globally, and that markets were failing to appreciate the risks.  This disconnect and the potential troubles that lie ahead owe to the difficulty in appreciating the growth in processes like a virus that are exponential in nature.  I think you will really enjoy this episode of the Alpha Exchange, my discussion with Jens Nordvig.

The explosion in market volatility that resulted from the Covid crisis was all-consuming in March.  Massive one-day moves in broad equity indices, correlations that approached 100% and a breathtaking crash in the price of oil were factors that left investors unable to consider much more than the wreckage in front of them.  But for Jake Doft, the founder and CIO of Highline Capital, the crisis has provided a truly unique opportunity to step back and contemplate change and the investable implications thereof.  The crisis has forced businesses and consumers to adapt, not just accelerating trends already in place, but also providing exposure to new technologies, new approaches to supply chain management, new ways to interact socially and potentially new preferences on where to live.  My discussion with Jake is a compelling look into how an investor can “skate where the puck is going to be”, evaluating the long term opportunities that emerge from this challenging time.  I hope you enjoy this conversation as much as I did.  Please be well.