Speaker 1: Hello, and welcome to another episode of the Onlocks podcast.
Speaker 1: I'm I'm Tracy Alloway. Tracy, remember like last year when
Speaker 1: we used to start off episodes of our show complaining
Speaker 1: about all the lack of volatility and markets. Yeah, that's
Speaker 1: kind of a classic beware of what you wish for
Speaker 1: kind of thing, isn't it, Because now, of course we've
Speaker 1: had too much volatility at various times this year. Well,
Speaker 1: I'm not really complaining. I mean from our from the
Speaker 1: perspective of what you and I do, and probably from
Speaker 1: the perspective a lot of market practitioners. It has been
Speaker 1: a very different year. But yeah, absolutely, a lot of
Speaker 1: those intros they just don't apply anymore. No, It's true
Speaker 1: we have been blessed by news flow when it comes
Speaker 1: to markets this year. Of course, we had the big
Speaker 1: vol apocalypse in February that we spoke about, and since
Speaker 1: then we've had some more interesting moves in markets, most
Speaker 1: recently caused by some of the trade tensions, which we've
Speaker 1: also talked about on the show. Well, I think it's
Speaker 1: interesting that you say caused by the trade tensions, because
Speaker 1: I think one of the fascinating aspects of this year
Speaker 1: has been the difficulty sort of disentangling news stories from
Speaker 1: the actual results. So sometimes I think it looks like
Speaker 1: trade stories are weighing on markets, and then other times
Speaker 1: not so much. Or sometimes it looks like the president's
Speaker 1: tweets are hitting markets, and then you see the companies
Speaker 1: he's tweeting about hitting new highs. So it's been a
Speaker 1: really tricky market environment to navigate. And so we that
Speaker 1: all this volatility, all this news flow, and we just
Speaker 1: haven't really gone anywhere. Yeah, you're absolutely right. I mean,
Speaker 1: in markets, to some extent, it's always a bit difficult
Speaker 1: to disentangle the narrative from the price action that you're seeing. Right,
Speaker 1: Sometimes it's tempting for us as journalists to just say
Speaker 1: there are more buyers than sellers, or more sellers than buyers,
Speaker 1: and that's really the explanation. But I think you're right
Speaker 1: that this year has been trickier than a lot of
Speaker 1: other years because not only do we have volatility coming back,
Speaker 1: we also have a really complicated political narrative, and it's
Speaker 1: difficult for investors to price in the unpredictability of someone
Speaker 1: like the U S. President Donald Trump. That's exactly right.
Speaker 1: So today we're gonna do something a little bit different
Speaker 1: than we don't normally do on the show, which is
Speaker 1: sort of really talk about markets right now. Obviously listeners
Speaker 1: know we like to find the odd lot stories that
Speaker 1: you know, some obscure old bubble or financial regulatory thing
Speaker 1: or something arcane about market structure. Today we're sort of
Speaker 1: going to try to really keep it present tent and
Speaker 1: actually uh talk with an active market practitioner who's seen
Speaker 1: a lot of different environments to gain some understanding of
Speaker 1: what's going on right now in markets. I will do
Speaker 1: my best to keep at present tense, but I think
Speaker 1: we're having someone on that we've actually had on before
Speaker 1: right to talk about essentially the opposite of what we're
Speaker 1: going to talk about today. Yeah, that's right. So, without
Speaker 1: further ado, we will be speaking to Peter Boris. He's
Speaker 1: a chief strategist at the Quad Group, a real market veteran.
Speaker 1: He was on one of our very early episodes and
Speaker 1: we talked about some of the history and markets and
Speaker 1: some of the patterns that historically repeat throughout markets, and
Speaker 1: so hopefully he'll be able to walk us through what
Speaker 1: he's seeing right now and apply some of that experience. Peter,
Speaker 1: thank you very much. For joining us. Always a pleasure
Speaker 1: and I do very much joy be on the show
Speaker 1: so we can drill deeper right before we talk about
Speaker 1: what's going on right now. And as Tracy and I mentioned,
Speaker 1: there are there are a lot of threads to pull
Speaker 1: on these days. For those who may not have listened
Speaker 1: to our older episode with you, and they really should
Speaker 1: go back and listen to it. Tell us a little
Speaker 1: bit about your background and sort of your general approach
Speaker 1: that you've devised over the years and uh trading markets. Well, thanks,
Speaker 1: I've been very fortunate and lucky. I finished graduate school
Speaker 1: and wow with long time ago two, I went to
Speaker 1: the New York FED. I happened to start the first
Speaker 1: month that SMP futures began trading, and then some young
Speaker 1: guy out of the floor of the Cotton Exchanged by
Speaker 1: the name of Paul Tutor Jones recruited me out of
Speaker 1: there and the first month of crude oil futures trading.
Speaker 1: So I've been in the industry really since the beginning
Speaker 1: of the financial futures derivative markets that have had a
Speaker 1: long arc and it's a perfect segue to today because
Speaker 1: if you think about the late nineteen eighties, November nine,
Speaker 1: the Berlin Wall came down. If you think about our
Speaker 1: president today and you think about the fan of all Republicans,
Speaker 1: President Reagan, his role was tearing down walls that led
Speaker 1: to an ear of the free flow of capital, people,
Speaker 1: and ideas. And it didn't start right away on November tenth.
Speaker 1: At markets and meaningful change take place slowly over time.
Speaker 1: Turns out November nine, two sixteen, we elect a new
Speaker 1: president of the United States who is now building walls,
Speaker 1: and that is preventing the free flow of markets, capitals,
Speaker 1: and ideas, and that is likely to usher in a
Speaker 1: much longer cycle. Just as President Reagan's did in terms
Speaker 1: of growth and opportunity in the nineties, We're gonna have
Speaker 1: a much different cycle today. So if you just start
Speaker 1: from that perspective of the beginning of my career in
Speaker 1: the late eighties to really short of I hate to
Speaker 1: say more towards the end of my career now, uh,
Speaker 1: these two presidents bookend the best of what America can be, too,
Speaker 1: demonstrating to the rest of the world some of the
Speaker 1: risks that happens when you move in a direction all
Speaker 1: by yourself. So, Peter, before we I'm very conscious that
Speaker 1: I promised Joe, I would try to keep this present.
Speaker 1: It's OK. Before we we get into what's been happening, now,
Speaker 1: can you just give us a snapshot of your approach
Speaker 1: to thinking about financial markets, because I know you're very
Speaker 1: much into cycles and you're very much into looking at
Speaker 1: financial market history, and I think that's going to be
Speaker 1: key to the conversation we have. Well with all that
Speaker 1: I just said, I think and I mentioned this, uh
Speaker 1: when I was on what did you miss? If I
Speaker 1: can give a shameful plug for that. I need to
Speaker 1: be very mindful and separate my fundamental political thoughts from
Speaker 1: the actual work that one needs to do to participate
Speaker 1: in the markets, and the combination of the markets of
Speaker 1: the analysis of data and combining that with the technical analysis.
Speaker 1: So the key for us in terms of trading and risk,
Speaker 1: and this is very difficult point to get across, is
Speaker 1: that you want to vary your trading size with respect
Speaker 1: to the opportunity when things line up fundamentally technically, then
Speaker 1: you can take a bigger position. There's no shame to
Speaker 1: having a smaller position or not participating when there's a
Speaker 1: lot of conflicts. So, if we go to our central theme,
Speaker 1: we've been saying. We look at two stocks in particular,
Speaker 1: Visa MasterCard as the rent of the consumer. So if
Speaker 1: you're shopping on the couch or you're going to a store,
Speaker 1: they are benefiting. Just yesterday they made both of them
Speaker 1: made new all time highs. So that's in the back
Speaker 1: of our minds saying, hey, you can listen to what
Speaker 1: I just said and say, wow, things aren't going to
Speaker 1: be going well. But that's not today, So you have
Speaker 1: to separate that from the cycle of going forward. When
Speaker 1: there's confirmation of things not going well from a technical
Speaker 1: and fundamental then we will be getting much larger. On
Speaker 1: the short side, it's not now. Do I think it's
Speaker 1: going to be sometime soon. I do, but the weight
Speaker 1: of the evidence has to tell us that. So two
Speaker 1: things real quickly, just for listeners sake, We are recording
Speaker 1: this on Wednesday, July eleven, So you made that reference
Speaker 1: to Visa and MasterCard hitting all time highs yesterday, just
Speaker 1: so if people want to go back and line that
Speaker 1: up with the episode. But I think this is really
Speaker 1: key the point you made here, which is that you
Speaker 1: can simultaneously hold two ideas in your head. One is
Speaker 1: that we are perhaps on the cusp of a fundamental
Speaker 1: change to the economy and market, as you say, due
Speaker 1: to the sort of book ending of the opening of
Speaker 1: the world and the fact that we're building walls again.
Speaker 1: But the other thing you can hold in your mind
Speaker 1: is that even while seeing that if the market is
Speaker 1: not confirming that you can't just jump on that. That
Speaker 1: if you see stocks that you consider to be Billweathers
Speaker 1: hitting all time highs, you really need to wait for
Speaker 1: that to break down before this idea that um things
Speaker 1: are changing becomes actionable. No question, our job is to
Speaker 1: try to make money. It's not to try to be right.
Speaker 1: And part of this difficult process for me as a
Speaker 1: strategist is to try to think rationally when a lot
Speaker 1: of the activities are irrational. So as a perfect example
Speaker 1: of where we add a bad trade. So the President
Speaker 1: comes back from North Korea all gung ho about you know,
Speaker 1: we're gonna have a deal and so forth and so on,
Speaker 1: and we think, okay, that means that he's going to
Speaker 1: need China's support and therefore he's not going to say
Speaker 1: anything negative about China for a few weeks. Our time
Speaker 1: horizon is, you know, a few weeks to a few
Speaker 1: months That's how we look at things and said, this
Speaker 1: is a good opportunity to go in that direction. If
Speaker 1: you look at sort of where the Shanghai Index was,
Speaker 1: where the e M was, this is an interesting time
Speaker 1: to put on that kind of spread. So we get
Speaker 1: along those particular markets and guess what happens. It's almost
Speaker 1: like they're out to get me. And you always have
Speaker 1: to be very defensive in this business because they are
Speaker 1: out to get you. We put on all these positions
Speaker 1: and then he comes out and says, hey, I think
Speaker 1: we're going to raise the Harris on China from fifty
Speaker 1: billion to two. So for me as a strategist, I
Speaker 1: am totally wrong. I try as hard as I can
Speaker 1: to find other people to blame, but in this case,
Speaker 1: I could not do that. And what do we have
Speaker 1: to do? Risk management is paramount the information, the story,
Speaker 1: and the markets. So if they all these markets had
Speaker 1: gone up on this negative news, that would have been fine,
Speaker 1: because again I'm more interested in making money than being right.
Speaker 1: But they did not. They hit our stop levels. We
Speaker 1: get out when you're wrong. You have to reevaluate, and
Speaker 1: you're seeing this across the board because that means a
Speaker 1: greater uncertainty, which translates naturally, and you have to trade smaller,
Speaker 1: so we're seeing less volume. So these things have impacts
Speaker 1: on the entire business and the nature of the markets.
Speaker 1: So you're thinking to yourself, huh, we're trading smaller. I'm
Speaker 1: gonna talk to other people. They're trading smaller. There's more uncertainty. Wow,
Speaker 1: I'm gonna be looking at the trading firms that benefit
Speaker 1: from this activity because remember volume is fully leveraged. You
Speaker 1: need the same staff. Basically, if you're trading a hundred
Speaker 1: chairs or a thousand shares, m all right, I'm not
Speaker 1: gonna be as favorable towards the larger money center banks.
Speaker 1: Maybe that's an opportunity to be short at the XLF
Speaker 1: and be along the regional banks KRI So you're always
Speaker 1: every single action one takes you need to think about
Speaker 1: it from an analytical framework, is how's that going to
Speaker 1: translate into your trading of the markets. And one of
Speaker 1: the things I'm fond of saying is trading is a
Speaker 1: little bit like you know, you play the wheel of
Speaker 1: fortune and somebody's there turning over the pictures. If you
Speaker 1: try to put your risk on too early, you're likely
Speaker 1: to lose. If you wait until you can see everything clearly,
Speaker 1: then it's too late. So we see that all the time.
Speaker 1: I mean for somebody to coming in today and going, Wow,
Speaker 1: these tech stocks have been doing great, I should buy them.
Speaker 1: There's no risk reward. You can't buy it because where
Speaker 1: do you put your stop? That's very far away. You
Speaker 1: can't short it because why should one be sitting there
Speaker 1: trying to uh get in front of a speeding bullet.
Speaker 1: Now you may think they're coming down, but trading is
Speaker 1: about risk, reward and opportunity, so you have to stay
Speaker 1: on the sidelines. That means there's going to be less trading. Oh,
Speaker 1: by the way, Amazon at anyone that's trading that is
Speaker 1: trading less than they're trading when it was trading a thousand,
Speaker 1: just by the definition of risk reward and money available
Speaker 1: to you. Huh okay, So how does that translate into volume?
Speaker 1: On the nastaic, we look at the February case of
Speaker 1: volatility in the breakdown of x I V. Huh okay,
Speaker 1: what does that do to the cbo E futures track?
Speaker 1: Because that was arbitrage. So every action, forget the political ramifications,
Speaker 1: you need to be thinking in terms of where is
Speaker 1: a trading opportunity for me? Peter, I want to press
Speaker 1: you on this point because I think it's really important.
Speaker 1: You're talking about time horizons and you're talking about how
Speaker 1: do you balance fear and greed? Right? You know you
Speaker 1: want to make money clearly, so you might be tempted
Speaker 1: into a crowded trade where everyone else is making money.
Speaker 1: But at the same time, you don't want to be
Speaker 1: caught out and you don't want to be last to
Speaker 1: the exit. So what are your actual, like concrete suggestions
Speaker 1: for people trying to gauge how much longer those things
Speaker 1: are going to continue? People trying to follow those sorts
Speaker 1: of trends. I suggest everybody that they put a big
Speaker 1: sign on their wall, which says, what is the definition
Speaker 1: of a quandary? Do I stay out of a market
Speaker 1: and watch everyone else make money? Or do I get
Speaker 1: in and thereby cause it to immediately crash? And that
Speaker 1: is the conundrum of participating in markets. So you need
Speaker 1: to make your own independent decisions, but you have to
Speaker 1: have a framework and a discipline associated with that of
Speaker 1: what happens if I'm wrong. This is a business where
Speaker 1: if you survive, you win. You want to live for
Speaker 1: another day. You can't listen to other people and make
Speaker 1: decisions based on that. It's all inputs into your own
Speaker 1: decision making. And as I said at the very beginning,
Speaker 1: when there are opportunities that seem to work or line
Speaker 1: up from a technical fundamental perspective, then you can go
Speaker 1: for it. The test of an experienced trader is when
Speaker 1: they don't understand anything, they don't participate. That's hard to do.
Speaker 1: It's very, very hard to do. And we always have
Speaker 1: risk management. Every time I buy something, I only buy
Speaker 1: it because I don't think we're ever going to see
Speaker 1: that price again. And in theory, I buy it and
Speaker 1: I'm gonna hold it for fifty years, and that lasts
Speaker 1: about forty minutes. And the same thing if I wouldn't
Speaker 1: sell it if I thought the price was going up.
Speaker 1: My you have to know your own personality. I'm not
Speaker 1: one of these guys that averages things. If it's sell
Speaker 1: it and if it goes up, sell a little more,
Speaker 1: or vice versa, by it if it goes down by
Speaker 1: a little more. I was grown up in the Paul
Speaker 1: Tutor Jones philosophy of trading discipline before vision and Losers.
Speaker 1: Average losers because averaging down works until the one time
Speaker 1: when it doesn't, and then you're out of business. You
Speaker 1: mentioned that definition of a quandary where you're watching everyone
Speaker 1: make money and you feel sort of intuitively that the
Speaker 1: moment you jump onto the trend, that that's got to
Speaker 1: be the end of it. And I feel like everyone
Speaker 1: probably in trading feels that to some extent. Nonetheless, I
Speaker 1: am thinking about sort of this incredible multi year tech
Speaker 1: stock run that we've had, and so you could certainly say, oh, yeah,
Speaker 1: if I buy Netflix here, it's got to be the
Speaker 1: top because that's when I'm capitulating and buying. But on
Speaker 1: the other hand, you could have just as easily felt
Speaker 1: that at the beginning of and it looked just as
Speaker 1: extreme perhaps then. But if you had bought then you
Speaker 1: would have made a fortune. So what is a better
Speaker 1: way to answer the question? I mean, this is what
Speaker 1: everyone's sort of wrestling with. Okay, Netflix, it's going up
Speaker 1: or whatever it is, rather than just sort of being
Speaker 1: in this mindset where I'm gonna jinx myself or I'm
Speaker 1: going to drink the market if I jump in. Is
Speaker 1: there a better question to ask at the beginning or
Speaker 1: a better way to think about that, because you know,
Speaker 1: you know, sometimes it pays to get on top of
Speaker 1: or jump on a shooting rocket. You have to trade
Speaker 1: your own personality. Sometimes you miss it. It's a market
Speaker 1: of stocks, it's not a stock market. Hey, I missed it.
Speaker 1: Congratulations to them. They're all gonna make money. But I
Speaker 1: can assure you I don't have any idea from what level.
Speaker 1: But Netflix will have a forty year fift decline, just
Speaker 1: as it's had before an Amazon and Microsoft? Is it today?
Speaker 1: Is it from two thousand on Amazon? I have no idea.
Speaker 1: The discipline is saying, okay, I've missed it. What happens
Speaker 1: when it goes back down? Am I willing to buy it?
Speaker 1: So let's take a recent example of a stock that's
Speaker 1: in the news and everybody loves the trade, which is Tesla.
Speaker 1: So you know, at two fifty you were an idiot
Speaker 1: if you weren't short, and at three sixty you were
Speaker 1: an idiot if you weren't long, which is fine because
Speaker 1: I'm a natural idiot, so I was probably short that
Speaker 1: and long up there. But no, if you don't understand it,
Speaker 1: it's okay not to participate the trading world, and the
Speaker 1: purchasing of stocks, and even in our business. So if
Speaker 1: we have a hedge fund, which we do of course,
Speaker 1: and we're up, you know, mid teens, three years in
Speaker 1: a row, and then I'm wrong this year, as I
Speaker 1: said earlier about some of the strategic stuff, and we're
Speaker 1: down five or six percent, everybody freaks out. Where if
Speaker 1: it's an individual stock, they'll say, huh, okay, it's down
Speaker 1: a little bit, I'm gonna buy it. But the funny
Speaker 1: thing is buyers are higher in this business and sellers
Speaker 1: are lowered. So if a stock's down thirty, everybody's a seller.
Speaker 1: If it's up, everybody wants to buy it. I don't
Speaker 1: see that in any other business. If I go into
Speaker 1: a store and I'm like, hey, you know what, Joe,
Speaker 1: I really like that tie, and you go AT's. You know,
Speaker 1: it's a hundred and five bucks, but you look wealthy,
Speaker 1: I'm gonna charge you a hundred and fifty. I'm gonna
Speaker 1: be like, I'm not buying that. And if it's at
Speaker 1: seventy five, I'm like, what a great deal I might
Speaker 1: get too. We don't do that in the stock market world.
Speaker 1: There's a different mentality, there's a different approach as an
Speaker 1: individual and as a participant in the markets. That's where
Speaker 1: you want to take that approach, and that's why I
Speaker 1: refer to the combination about tactical and fundamental. You don't
Speaker 1: want to be the one that sits there and try
Speaker 1: to catch as the falling knife, because if it misses you,
Speaker 1: from a risk management point of view, it might land
Speaker 1: in your heart, which puts you out of business. So
Speaker 1: be patient, wait for it to stabilize, wait for it
Speaker 1: to bounce, and you don't have to jump on board
Speaker 1: that exponential rise because it will pull back. I e.
Speaker 1: Our friendly neighborhood cryptocurrency Bitcoin. Oh gosh. I could ask
Speaker 1: some questions on bitcoin, but I'm kind of keen to
Speaker 1: get back to uh some of the political discussion that
Speaker 1: we started out with. I feel like markets historically, or
Speaker 1: investors historically, have had difficulty when it comes to pricing
Speaker 1: in political developments, and I feel like maybe that's become
Speaker 1: even trickier now that we have an unpredictable president, let's
Speaker 1: say um in office. Maybe I'll disagree with me on
Speaker 1: that one. How do you think investors have been approaching
Speaker 1: the Trump administration and how do you think they should
Speaker 1: be approaching him, so I tend to disagree. I think
Speaker 1: the president has been very predictable. He's made these campaign
Speaker 1: promises and one by one he's ticking them off. He
Speaker 1: has no interested in expanding his base. He feels that
Speaker 1: he needs to coddle his base. I do think that
Speaker 1: every time there's an external force on him that is
Speaker 1: potentially negative, he goes back and then tries to rev
Speaker 1: up his base. I also feel that he's a master
Speaker 1: at deflecting. So we have this basic crash and soy beans,
Speaker 1: which I've been talking about for a long time. Literally,
Speaker 1: if you want to plug Twitter, you can see that
Speaker 1: he tweeted this morning at the conference blaming the crash
Speaker 1: on story beans for fifteen years of bad economic policy,
Speaker 1: where just not that long ago we had beans and
Speaker 1: the teens. And so when you think about the politics now,
Speaker 1: you get back into the longer cycle of where we
Speaker 1: are now. I'm an outlier. So this morning, again we're
Speaker 1: talking current markets. The pp I number was strong. Joe
Speaker 1: was on there at eight thirty three tweeting about trucking
Speaker 1: and its largest UH increase, and it goes to you,
Speaker 1: Joe is a lot like me, and and spending too
Speaker 1: much time thinking about esoteric things into markets rather than
Speaker 1: trying to have a real life. And that could be
Speaker 1: a whole other odd lots cast But Tracy, Tracy thinks
Speaker 1: about those two except she's actually doing her job and
Speaker 1: doing the management and editing responsibilities she's supposed to be.
Speaker 1: I have those responsibilities too, but I'm wasting my time
Speaker 1: tweeting charts on trying on the cost of trucking. No,
Speaker 1: you're not. So that is a very sort of short term.
Speaker 1: But what the president is doing here in terms of
Speaker 1: building these are massive deflationary pressures that are building up
Speaker 1: across the system, and that is the biggest risk that
Speaker 1: we have, and we the change of technology. So if
Speaker 1: we start from this notion that the Internet is the
Speaker 1: greatest deflationary machine ever built and we're just learning to
Speaker 1: use it. And technology enhances the ability to produce at
Speaker 1: any level. And we also, and people tend not to
Speaker 1: focus on this enough, we also use it much more efficiently.
Speaker 1: So at any given level there's less demand and at
Speaker 1: any given level there's more supply that puts downward pressure
Speaker 1: on these prices. Again, yesterday that was the chart of
Speaker 1: the century that I should have copyrighted this, But What
Speaker 1: I like to say is the things that you don't
Speaker 1: really need have gone down in price, and the things
Speaker 1: that you do need have gone up in price. People
Speaker 1: tend to think that price increases by themselves are inflationary.
Speaker 1: They're not, because they're substitute herbal effects associated with them.
Speaker 1: The other favorite economist of going back into the seventies
Speaker 1: of eighties, Milton Freedman, They talked about monetary policy being inflationary.
Speaker 1: We don't have an inflationary monetary policy. The real cruc
Speaker 1: so the matter is going to be on this deflationary
Speaker 1: side is what happens to energy prices, and to me,
Speaker 1: they are heading towards that also deflationary cliff. It's the
Speaker 1: unintended consequences of some of these policies, which is we're
Speaker 1: going to push more and more supply on the market
Speaker 1: by lowering regulations, by making it easier to pump energy. Now,
Speaker 1: of course, we have the international aspect associated with the
Speaker 1: question of Iran and Saudi Arabia in terms of pulling
Speaker 1: out of the nuclear agreement. But I could argue that
Speaker 1: the US being such a large exporter now of energy
Speaker 1: that some of these Iranians they could start pumping more
Speaker 1: and more oil to try to drive down the prices,
Speaker 1: and that would hurt Texas, it would hurt a lot
Speaker 1: of red states. So to try to really think about
Speaker 1: all these dynam a mix from a political perspective. To me,
Speaker 1: I always go back, what's the market, what's the trading opportunity?
Speaker 1: So I look at Exo Mobile, I look at Chevron.
Speaker 1: They have not outperformed on this energy rally. I try
Speaker 1: to listen to the markets and have discipline, and they're
Speaker 1: telling me that there's definitely an issue with regard to
Speaker 1: some of these stocks. Look at Valero, which has come
Speaker 1: off significantly from its highs. So there's gonna be a
Speaker 1: lot of opportunities, a lot of fun. But I as
Speaker 1: a strategist, we are in the potential spreading of the
Speaker 1: deflationary camp. That's what's going on as we build these walls. Yeah,
Speaker 1: I'm kind of annoyed that you brought up the Trump
Speaker 1: soybean tweet because I was about to ask you about that,
Speaker 1: because Peter is definitely the only guest we've ever had
Speaker 1: on TV. Right at four PM, the market closes, everyone
Speaker 1: wants to like talk about the SMP and the the Nazzac
Speaker 1: computer comes on. The show and talks about what soybean
Speaker 1: prices did that day. But obviously, I think as long
Speaker 1: as we've been talking, and we've we've uh you know,
Speaker 1: done multiple interviews together and now on this and TV,
Speaker 1: you have talked about soybeans probably more than anyone else.
Speaker 1: Why you Why is that like a bell Weather deal?
Speaker 1: It's a bell Weather because it encompasses everything that we
Speaker 1: just talked about, the ability to produce more right, the
Speaker 1: American farmer is the most productive at supply. China has
Speaker 1: a very large demand for soybeans. Uh, it's a very
Speaker 1: healthy product. In fact, part of the thought process is
Speaker 1: that the strong growth of the second quarter was front
Speaker 1: loaded by Chinese purchasing a tremendous amount of beans before
Speaker 1: the implementation of terrors. So now I'm thinking about this.
Speaker 1: We don't live in a closed society. So who's going
Speaker 1: to benefit from terrace on US soybeans? Brazil? So China
Speaker 1: will go to Brazil and buy that and then maybe
Speaker 1: and that's why prices go down. So now if I
Speaker 1: produce something I can't it's you know, I can't put
Speaker 1: it in a closet and store it. Yeah, there are
Speaker 1: storage bins, but there are limits to that, I've got
Speaker 1: to go sell it on the open market. That's what
Speaker 1: the futures markets tells you. What's the forward price. Wow,
Speaker 1: there's gonna be a lot more supply on these things
Speaker 1: because once you start growing, you have two choices. You
Speaker 1: harvest it, you sell it, or you plowed into the ground. Well,
Speaker 1: plowing into the ground versus getting a non zero price
Speaker 1: is not a very good option. So it's a very
Speaker 1: liquid sensitive markets and it's a good reflection of geopolitical
Speaker 1: Now again as a trader, so I'm thinking about, huh,
Speaker 1: what's going on with qual calm and an x p I. Right,
Speaker 1: that's a big political issue. So today right with this,
Speaker 1: soybeans aren't down that much. I look at that spread
Speaker 1: between qual Calm and n xp I and I'm like,
Speaker 1: all right, I probably we shouldn't be selling n xp
Speaker 1: I today because my favorite leading indicator is not that weak.
Speaker 1: Just for those who aren't familiar claw comms buying an XPI.
Speaker 1: But it needs approval from the Chinese government, that's correct.
Speaker 1: And so one of the theoretical ways that China could
Speaker 1: retaliate for what it doesn't like Trump doing is it
Speaker 1: could block mergers get more aggressive about preventing US companies
Speaker 1: from buying Chinese ones. And what you're saying is there
Speaker 1: is an opportunity. Theoretically, if you're long n xp I
Speaker 1: and the deal goes through, that's a big win. Uh.
Speaker 1: And so the soybean market is telling you, in other words,
Speaker 1: that the risk to that deal may not be as
Speaker 1: big as what people think today today, because yeah, you know,
Speaker 1: my crystal ball gets foggy really quickly, and that's why
Speaker 1: we try to have risk management. So I can think
Speaker 1: in terms that we started at the very beginning of
Speaker 1: these long term cycles and where we are and it's changing.
Speaker 1: And oh, by the way, we've been in a long
Speaker 1: term bull market. Nobody lives forever. So the only definition
Speaker 1: is I don't know if it's ended today, ended January.
Speaker 1: I can make a strong argument for that, but I
Speaker 1: just know that every day it's one day closer to
Speaker 1: the end by definition. So that's going to get my
Speaker 1: antenna up. That's going to get us more risk adverse
Speaker 1: on things that were on the long side. Peter, lots
Speaker 1: of people clearly concerned about the end of the cycle,
Speaker 1: the economic cycle, the bull market, as you just mentioned,
Speaker 1: what do you advise people to watch out for, and
Speaker 1: do you have a favorite leading indicator for late cycle signs? Well,
Speaker 1: as I said very early on, the one of our
Speaker 1: leading indicators is really we were looking at Visa and
Speaker 1: MasterCard as the strength of the consumer. It's still a
Speaker 1: consumer driven economy. We look at each of the components
Speaker 1: of G D P right C plus I plus G
Speaker 1: plus X minus M X minus M. Now that exports. Wow,
Speaker 1: that's full of uncertainty. As we've spent a lot of
Speaker 1: the time discussing UH, investment is strange because there is
Speaker 1: far more uncertainty as you're doing your economic forecast. That
Speaker 1: could really slow down as well. Government spending M. We've
Speaker 1: got a fiscal year coming up at the end of October,
Speaker 1: right into a mid term election. I can really see
Speaker 1: Congress passing all those appropriation bills on time with no
Speaker 1: issues whatsoever. Probably not, so that's gonna be. That's why
Speaker 1: I talk about inflation uncertainty there, government spending X M.
Speaker 1: So the only thing which is a majority is C,
Speaker 1: which is consumption. If we see that starting to slow,
Speaker 1: then that would be the to us the sign that
Speaker 1: the cycle is right about at the end. And as
Speaker 1: I was saying that the issue for investors is trying
Speaker 1: to look forward towards an uncertain future and not saying, hey,
Speaker 1: the stock market has been up for the past ten years,
Speaker 1: I'm going to be in an index. If I will
Speaker 1: just say that, at the beginning of a bull market,
Speaker 1: everybody wants to be a trader because there was a
Speaker 1: lot of altility, and by the end everybody wants to
Speaker 1: be an investor because the worst thing that anyone can
Speaker 1: have in a bull market is risk management, because time
Speaker 1: bails you out. But when that changes, you win because
Speaker 1: you have that discipline and you have that risk management.
Speaker 1: This is a business where it's all about surviving. It's
Speaker 1: not about being right all the time. It's about being disciplined.
Speaker 1: If I want to keep harping on that, because as
Speaker 1: Joe was talking about Netflix, and we all like to
Speaker 1: do that that you know, we want to go to
Speaker 1: the next event and say, hey, you know, I bought
Speaker 1: so and so at five and now it's at fifty,
Speaker 1: but nobody talks about the stocks that they bought at five.
Speaker 1: Peter Borish of the Quod Group, thank you very much
Speaker 1: for joining us. Always great to get your perspective. Thank
Speaker 1: you so Tracy. I thought that was really helpful in
Speaker 1: terms of understanding some of the different dynamics at play
Speaker 1: right now. I really liked Peter's answer to your question
Speaker 1: about Trump's unpredictability because I think the way he framed
Speaker 1: that that there is a level of predictability very base
Speaker 1: focused and very focused on taking the boxes of his promises,
Speaker 1: sort of has a clarity of characterization of this administration
Speaker 1: that I think is a sort of often missing from
Speaker 1: the Marcus discussion. Well, I think I quite liked the
Speaker 1: more step back philosophy, which was this idea of listening
Speaker 1: to the market is actually telling you because a lot
Speaker 1: of people when they approach investing, they're going to try
Speaker 1: to outsmart the market, right, They're going to be contrarian,
Speaker 1: They're gonna look for opportunities that they think the majority
Speaker 1: of people are missing. And Peter's point is to not
Speaker 1: ignore the market. You don't really want to fight it.
Speaker 1: You want to be listening to it. And then you
Speaker 1: want to try to be disciplined, as he kept repeating
Speaker 1: at the same time, so following the market, but not
Speaker 1: in a completely stupid way. Yeah, And to his point, uh,
Speaker 1: and he identified this directly one of the big questions
Speaker 1: that we've seen is we've seen oil prices do very well,
Speaker 1: US prices pretty close to seventy a barrel on West
Speaker 1: Texas Intermediate, but a lot of these oil stocks haven't
Speaker 1: done that well. And there is this sort of conundrum
Speaker 1: or people thinking there's an opportunity because of the market
Speaker 1: is miss pricing them, and who knows, maybe there is.
Speaker 1: But it's also worth sort of stepping back and saying, wait,
Speaker 1: could the could be telling us something about these companies
Speaker 1: and about what's about to happen that we should be
Speaker 1: listening to. Yeah, some of the connections that he draws
Speaker 1: are really really interesting, and I have to say I
Speaker 1: really like the reading soybean prices idea in order to
Speaker 1: figure out the perspective for a cross border merger. That's
Speaker 1: a really nice instance of the sort of old fashioned
Speaker 1: connection soybean prices as a for merger arbitrage traders. I
Speaker 1: have to imagine there aren't a lot of people in
Speaker 1: that space for whom the first thing they do is
Speaker 1: check the price of soybeans. But you know, you gotta
Speaker 1: get your edge where you can get it. Yeah, maybe
Speaker 1: that will change. This is the ad thoughts value proposition.
Speaker 1: You find connections you never thought of before. Exactly? All right, Well,
Speaker 1: this has been another episode of the All Thoughts podcast
Speaker 1: on Tracy Alloway. You can follow me on Twitter at
Speaker 1: Tracy Alloway and I'm Joe Wisenthal. You can follow me
Speaker 1: on Twitter at the Stalwart, and Peter is on Twitter.
Speaker 1: He tweets occasionally at Peterborough. And you should follow our
Speaker 1: producer tofor Foreheads at Foreheads T, as well as the
Speaker 1: Bloomberg head of podcast, Francesca Leavy at Francesco Today. Thanks
Speaker 1: for listening.