Why Initial Jobless Claims Could Blow Up the Stock Market | TCAF 194

Summary

• De-dollarization: Guest outlines a structural shift as global investors reduce US exposure, initiate FX hedges, and gradually reallocate away from dollar assets.
• Dollar Weakness: Expectation of a gradually weaker dollar driven by policy uncertainty, budget concerns, and changing portfolio flows beyond traditional Fed and growth cycles.
• Gold: Highlighted as a key alternative for US investors seeking anti-dollar exposure, with China's Shanghai Gold Exchange expanding global avenues to hold and transact in gold.
• Crypto: Institutions now widely trade crypto; discussed as an alternative to the dollar with policy dynamics supporting broader adoption without posing an immediate existential threat.
• Non-US Assets: Evidence of flows favoring non-US (notably European) bonds while US long-duration safety is questioned; reallocation expected to be slow but persistent.
• Tariff Policy: Tariffs seen as a dial, not a switch; likely path includes a 10% minimum and 30–40% targeted at China plus sectoral levies (autos, metals, semis), sustaining uncertainty.
• Consumer Impact: Retail commentary (Best Buy, Walmart, Ross) suggests tariffs are pressuring demand; services and travel data mixed, reinforcing caution.
• Labor Market Watch: Initial claims and continuing claims are key triggers; a spike above ~255k could rapidly shift Fed expectations and market pricing.

Transcript

What's the dog's name? Ru. Ru. Is that Is that short for roulette? Sure. I hate roulette. Is that short for Rubenstein? What's the name? What's the name? Where did the name come from? Somebody had said, "Hey, what about Ru?" And I said, "Yeah, I like that name." Really? We couldn't think of a name. I could have helped you with that. I'm sure you could have. Ru is not bad. Does a dog respond? Yeah. All right. You a dog guy. Cat. My My daughter is begging for a dog. You're going to have to give seven. Yeah. You're going to have to give in. How old? She's eight. Yeah. Yeah. It's time. You're going to lose. Do it. I saw um You know whose dog I love? Justin and Robins. It's a Burmese mountain dog mixed with a poodle. Oh, those are great dogs. Burmadoodle. Yeah, it does. Bernadoodle. Bernadoodle. Adorable. It looks like a stuffed animal. It's one of the cutest dogs I've ever seen. Uh Baxter. It's a good name, right? Oh, it's uh that's Burgundy's dog. Oh, really? Yeah. You think they did that on purpose? Of course. Okay. I don't believe in coincidences. All right. Um so, yes, Michael got dressed up for this. That is his best Knicks uh that is his best Knicks outfit. So, uh well, I was trying to think what Nick Knicks gear have had good outcomes this year. I wore this I wore this to Memphis when OG had a winning shot. Wore my Knicks hat then. Next time. Next time. Um you a basketball fan? It's nice to see them, I have to say. Yeah, that's a good venue. Great venue. All right, so what else is going on? There's a little bit going on in the market every day. It was pretty busy on our client chat last night. I can tell you that. Oh, yeah. What was your I think I got What happened? I think I got 100 100 questions, maybe. Well, what was like uh what was everyone's reaction? Cuz I thought the Dow was was going to have a plus 500 point day. Could you believe this guy still talks in Dows and points? Not really. Yeah. Well, I saw the Dow futures last night up 550 after that news and I assumed that maybe a little bit of it is Nvidia. Yeah. But I assume most of it was, oh, the tariffs are done and then this morning people woke up and said that's not actually how it works. Yeah. Okay. Is that was that was that how you were answering people's questions last night? Yeah, kind of. They like to be honest what what we've seen with these terrorists is that they've done some stuff that any kind of attorney thought okay that's not really possible what they've done. Yeah. So they're actually going back to what we thought was going to be the path in January, right? That they're going to use some other legal maneuvers, right, to fill the gaps from what they lost last night, right? If you want the numbers, we can do that. 122 230. Yeah. Yeah. But so they they basically said all of this is national security. Is that is that and then the court said no not not really. Yeah they and it's all there's a whole legal battle about like okay how much presidential power do we have relative to Congress right so some push back against the Supreme Court might have a different take on that. Yeah. Uh but I think the bottom line is that we we can't have a situation where uh China is having you know same tariffs as United Kingdom. It doesn't make sense that the best deal that is offered the United Kingdom suddenly other like China has the same deal right so they will need to adjust that now when you say makes sense what does it have to do with anything well I think um the whole the whole where there was most consensus in terms of like how should we use tariff policy was around China right you can ask Marco Rubio you can ask Scott Besson you can ask JD Vance you can ask Navaro tomorrow everybody would agree okay we should have significant tariffs on China national security big picture politics and so forth right so from that perspective I think the threat is seen by most people as mainly from China right so we had the highest ch we we had 145% not that long ago right so there's a reason for that so go having that go to zero doesn't make a heck of a lot of sense then zero is not going to be where this where this falls up. No, of course not. Certainly not versus versus versus China. Like if China has zero, then it doesn't make any sense to have have terrorists on anybody else. Uh Nicole, let's let's get the headphones and let's get the let's get the microphone. Make sure we get everything Yens has to say. Is it a stretch to say that the market was right that it we knew that it was all [ __ ] and not going to be enforced and not going to last? Which part of it? tariffs in general. Um because I guess maybe a week or two into the bounce, I was saying I don't get it. You're telling me that things are as good in through the lens of the stock market as they were two weeks ago before the [ __ ] show started. And it turns out that maybe maybe in fact it's looking like the market did get it right. The market said uh the stock market got it right. Not the bond market. The stock market. the stock market has been more right about the tariffs than the bond market is one way of thinking about it. Do you agree with that or not really? So I think the way I think about it is and this is what we've done in our research as well. We try to think okay where we going to end up in 3 months okay instead of trying to say okay what headline is going to come out tomorrow like what what is really sort of a sustainable steady state we're going to end up with right and 145% on China is definitely not sustainable there's lots of stuff we get only from China lots of small businesses rely only on stuff from China right they'll be done right so 145 was not sustainable so that was relatively easy to predict right yeah Um, so I think where we're going to end up is a situation where we probably have that 10% minimum, okay, put in place through another legal route. We probably have a workable tariff on China 30 40% something like that above and beyond the 10 or in in incorporating the 10. Yeah, I say 30 to 40 so that you can pick Yes. Right. Um and and then we're going to have these sectoral tariffs, right? Autos we have already, right? Um metals we have already when we're going to have some farmer coming soon and some semiconductor stuff, right? Um and it's going to add up to something significant, but it's just going to be a little bit more complicated to go get it done because it's going to be you done through the normal processes that actually take a little bit more time. But in relation to China, they already have done these investigations. That is part of the process. Okay, you need to have the reason you're doing the tariffs. And they've already done those investigations. So now there's actually no further delay now. They can do it tomorrow if they wanted to, right? And so then it just becomes like how well is the dialogue going between the two countries? So it like do they do they need to shock the market again and say things things are not progressing or do they want to come out and say we're getting closer? Like that's that's what the market will react to. To to be honest, I think about it a little bit differently. Okay. Like they um they made a mistake on April 2. Yeah. A certain group of advisers who you don't see anymore. Don't see much anymore, right? Came up with this poster. Yeah. uh with with some numbers that really were quite shocking and people didn't expect, right? And now the the poster is effectively cancelled. First they canled them themselves, right? They said, "Okay, let's put on hold." And now the court has canled the poster. So the poster has been cancelled. All those numbers on that poster are out the window now. Yeah. Out the window. So it's almost like we're starting from scratch. I think we're starting from scratch, right? And we have a new team. Uh Scott Besson is doing all the the a Asia deals, right? So he's like when when he did the the Geneva meeting, right? Like even the president said, "Okay, Scott is going to decide." Said up to Scott. Yeah, that's what he tweeted. What a waste of time and energy this all was. Uh before that, I think it's it's fair to say it was a mistake, but I'm I'm glad uh I'm glad Scott uh taken the lead. I think it's going to be analytical approach. I've known Scott for many years. He was one of my very first clients when I launched Exante Data, right? and uh like you everybody has their own political opinions, but I think it's fair to say that there will be a sound analytical process behind what is happening now and they're going to get to they're going to get to a sustainable level of tariffs pretty soon. Obviously now they have to navigate this legal hiccup they had overnight, but I I think we're not going to get to 45% again, right? But we're also not going to have uh they cannot allow the tariff on China to go to zero even in the short term because if it goes to zero in the short term we're going to have all this front loading crazy amount of imports coming in and they will lose all the negotiating leverage because the inventories are stocked up and it will only buy you'll have a pull forward that negates that negates the whole point of the tariffs. That's right. Okay. Uh we're going to start the show. You ready? Three claps. All right. Thank you, Nicole. Lad, ladies and gentlemen, Nicole [Applause] [Music] [Applause] [Music] S. Today's show is sponsored by Public. On that platform, you can invest in almost everything. Stocks, bonds, options, crypto, ETFs, whatever you want. You know what's great, John? It's been a while that we've had these juicy yields in our cash, and they're still here. At Public, you can get 4.1% in their cash account. 4.1%. Liquid is the ocean. So, leave your clunky, outdated platform behind. Public was designed in the 22nd century. That's how far ahead they are. The experience is clean, intuitive, modern design. What else do you need? Find out more at public.com/compound. That's public.com/compound. Paid for by public investing. Full disclosures in podcast description. All right. Long Beach's own Nicole S. Those of you who are coming to the live in Chicago next week, we'll get to meet Nicole, John, Daniel, you coming? All right. Daniel, Duncan, whole gang. All right, ladies and gentlemen, welcome to the very best investing podcast in America. Some would say North America even. Um, we have a very special guest. It's his first time here. We're super excited to talk with him. His name is Yens Nordvig. And Yens is the founder and CEO of Xanti Data, a financial services company specializing in data analytics and market insights for institutional investors. Are you mystified by the sounds and what's going on here? This is a little bit new. It's different from Blue Book. Yeah, it's not Bloomberg. Although although huge fan of Tom Keen, uh I'll tell you right now, uh previously Yens was a managing director at Goldman Sachs, a senior investment assoc uh associate at Bridgewater, and head of fixed income research and global currency strategy at NORA Securities before founding Xanti Data in 2016. Yens is also the co-founder and CEO of Market Reader. We're gonna talk about um we're going to talk about both Xanti and Market Reader. Uh but before we before we go down that road, I just want to on on the on the tariff ruling, just because we're we're in the middle of this conversation, my friend Neil Da said uh in an email missive this morning with all caps, of course, um have to these days, tariffs are not a are are a dial. They're not an on andoff switch because a lot of people I think read those headlines or a lot of let's say a lot of trading algorithms read those headlines and they said up no tariffs not how it works and Neil says if you think the judiciary gets to be the one to turn the knob seek help. He also said I am not a trade lawyer but the ruling allows the president to pursue his tariff agenda through other means. were trading a decline in the effective tariff rate which is good for a prolonged bout of policy uncertainty which is bad. Um this will weigh on business investing investment and hiring. It's like more uncertainty. Great. At the margin this puts some pressure back on the Fed. I'd argue this puts less emphasis on the near-term inflation data and more weight on employment. When I read that I said that's exactly what I think about this. I almost think it would be better to have a slightly higher than hoped for tariff and just have that be the end of the conversation. A lot of a lot of now what's going to happen with courts and rulings and uh tweets, it seems like it's we're in a worse place than we were a week ago. What do you think? What do you think about that idea? I think we have to we have to look through all the noise, all the court mumbo jumbo, all the different threats that are coming through and just think about, okay, what's the sustainable level of tariffs that we we're going to be reaching in a couple of months that achieves some of the policy goals that the Trump administration has, the ad advisers are having and and what the economy can take. What are the policy goals, do you think? So, fentanyl. Uh, no I don't think so. I don't either. I think I think the key policy goals has to do we want to protect certain industries. Okay, we want there's certain industries we we want to make sure we have domestic supply chains certainly stuff that's related to the military but beyond that as well national security also depends on AI right so we need to make sure those supply chains are protected so that's sort of the insuring aspect of it and then there's the second aspect that has to do with revenue like the budget is in trouble right we've we've just had a big budget debate the numbers came out last week and it looks like 6 to 7% of of GDP deficits forever, right? So, if we can get some revenue in from the tariffs that maybe can can get that to be on a slight uh you know slightly declining deficit path would be a lot better than than widening deficits. So, that's the second $30 billion in tariff revenue last month. Is that the number that's pissing into the ocean? That's like sounds like a joke. I think how do we get to a trillion dollars? It it it changes it changes every day, right? because we we have this table that we put in front of clients or where we add up all the different tariffs before the announcement yesterday that this sort of tax effect was in the region $650 billion per year. So like call it 2% of GDP. Uh and then if we if we you know read the headlines without looking through the noise but believe the headlines right we'll be down to 200 billion right so it's a huge change right in the end we're going to end up in a situation where they're going to fill the gap i.e. they're going to find other legal ways to get something similar done. You know, 10% minimum on pretty much all countries and something that's aimed at China. Uh so I think we're going to get close to to the 2% of GDP tax effect again. Uh and uh that that will have some some meaningful impact on the budget. They they need it. They need it for the budget, right? Do you think uh we've seen the worst of the market reaction to tariffs at this point? Yeah, we might. We might have a bumpy road as developments happen, but probably not the level of shock that we live through in April. You think that's right? How did it feel around April 2nd? Not great. Not fantastic, right? It was it was pretty wild time. So, I have I have this one chart that I've been staring at where I say, "Okay, what what happens to the yield curve when um the equity market is down a lot?" Yeah. So, what normally the yield curve when the equity market's down a lot, you just have all yields all yields going down. That's normal. Sometimes you have a situation like in 2022, right, when it's actually the yield curve shifting higher that takes the equity market down. So, that can also happen, right? But the combination we had in April never happens with with equities going down, the front end yields going down, and the long end yields going up. That was scary [ __ ] And dollars falling. That was that was a weird environment. That happened, too. Yeah. But we said earlier that the stock market got it right. Actually, the bond market bond market got it right, too. Specifically, credit spreads. They really they went up a little bit in early April, but like kind of nothing with nothing. So, they saw through it, too. Yeah. Well, I think the market is getting a lot smarter looking through the headlines and I think that the price action we've had around this court ruling is the same, right? The the dollar move for a couple of hours gave back essentially the whole move and uh yeah, Euro dollar is now up. Gold is up, right? So market is getting totally desensitized to to these moves. We've seen it in relation to Mexico as well. If the market believed at any point through this that Mexico was gonna have, you know, big tariffs on totally toast, right? And it never happened. I agree. Avocado toast. Am I right? Hey, you you mentioned uh the sustainable levels a few times for the economy. What economy are you talking about? So I I think about like obviously there's a kind of political debate about what the tariffs are going to do, right? But mostly for me it's like consumption tax, right? the consumer is going to eat most of it. And don't say that. Uh that's just that's just uh so uh you know this is going to be public, right? People are going to hear this. Um so so if you have a big tax effect, right, most of it's going to be something that essentially limits the the purchasing power of the consumer, right? So real consumption is going to go down and there's a there like we can already see the GDP numbers that we had the revised GDP numbers today, right? So now we're close to 1% consumption growth in Q1, right? So how much more damage to real spending power can we take? Not that much. We heard from Best Buy today, which is the largest electronics retailer in America, pretty like I would say a a pretty representative kind of consumer brand where it's almost it's the whole gamut. It's vacuum cleaners and toasters, but it's also computers and f uh cell phones and, you know, flat screen TVs. And uh stock got pancake today. They came out and said straight up pricing related to tariffs um resulted in I I guess uh lower demand from the consumer. And I don't know how much of that is cyclical. like the consumer might have done all they're buying for Christmas and they're just not in the stores this spring and they're blaming it on tariffs or the prices that people are encountering when they walk into Best Buy are stopping them from buying as much as they used to buy. And uh it's not even political. You either believe that that's happening or you don't. And if you don't, well, what's your story to explain why Ross Stores just had a horrible outlook? why Walmart is so afraid that they're going to like start publishing the the the tariff impact so consumers can see it's not their fault. Like you kind of have to believe that this is already a problem. Yeah. I think um for it's when you analyze the target like how could like how could somebody how could somebody say this is not going to be a consumer problem? All of the biggest companies that interface with consumers are saying no it is and it's right now. It's not next year. Yeah, I think you you can see it in a lot of different things. Yeah. The the hard the hard part uh when you crunch data, which is what I do for a living, is that you have these front-loading effects as well, right? So, you have, for example, car purchases, right, were actually very strong in March when people were looking forward fearing the the tariffs in April. Um so that that it's hard to look at the data. So like what we're trying to do is we try to look at the pieces of consumption where you get you don't have the front loading kind of contaminating the data. So I think services consumption is actually where you look at the trend. Oh people don't frontload services. No it's like if uh like the stuff that have tariffs on it right could have the frontloading effect but like for example the domestic services like holidays and so forth shouldn't have any frontloading. Yeah. And I think that has that has been weak as well. You can see it in some of the airlines. You can see it in um yeah like bookings and and so forth. So the data is so noisy. Yeah. Like for every Best Buy and this bad service I can give you Disney World. Sure. Which just said that they expect 7% growth in Q3 and Q4 to the parks. I was like really like that surprised the hell out of me. Yeah. I don't I it's uh I have this week one of my main focuses has been to just crunch all like the real time data we can get our hands on. What's it telling you? It's a just a mixed picture to be honest. Yeah. Like if only there were like this clear-cut narrative, but it just isn't. It's not. And I think it's also um like us consumers are famous for being very Brazilian buyers. They they certainly don't collapse from one day to the other, right? And we we saw that all the way back in 2007, right? It takes a long time before any kind of credit constraint starts to bite. I think credit is flashing yellow orange like there's consumer credit looks like it's getting stretched but if if if if people are in the period where people are maxing out it can still sustain the consumption so that tipping point is important um and obviously the labor market is is really important so I was going to ask you I was going to ask you about exactly that what if we just ignore the consumer data entirely y and just asked this question every week. Can people get a job or not? Y are are more or less people working this month versus last month? Y that seems to be the most obvious way. I don't know about predicting a shift, but to know for a fact that a shift is taking place in consumers like they will not stop spending until they literally don't have a job. You're right. Just look at initial claims. That's it. There's nothing there. Well, you can you can see how sensitive the market is to initial claims. Yeah. Right. So I one of the questions I got on our institutional chat was like how how come the market has so much beta due the initial claims? Well, it makes a lot of sense. We're all searching for whether the economy is about to flip and claims historically is one of the earliest thing to to flip, right? So we had 240 today. If we have two So hold on for the listener. So we hit 242,000 initial jobless claims. So that's for last month. Mhm. Yeah. Is it a week or should be last week? So, so 242,000 people over the last week have filed for unemployment insurance. Those are newly laid off or fired people or people who have quit a job. Y Okay. But the continuing claims is ticking higher. Yeah. And that and that's indicative of they're not getting a new job as quickly as they were even six months ago. That's right. Okay. So, which of those is more important to follow or are you looking at both? and trying to discern like if there's a real trend there. I I I think the the continuing claims is less noisy like it's accumulation, right? So that one moving out of the range. Um it's a weekly series, right? So it's going to be more noisy than a monthly series. There's always like holiday effects. We had Memorial Day. Some of those have an impact. But I'll tell you this. If we go to 255, like just 15,000 more next week. So it looks like on initial or on initial, okay, the market will go bananas. So I remember it takes so little and this inflection point. Wait, wait, wait. Bananas up or down? Down. It will start to really worry about growth resetting lower. The Fed will have to cut like and the Fed will cut. If initial claims are shifting up, we will very quickly, you and I agree there, we will very quickly get to a point where, you know, a July cut is is back on the table. And yesterday was totally priced out. Last fall, we were on the show and I remember I think it was with Sam Row. We were like, when did the market ever care about initial claims this much again? It was an event every week because last October we ticked up to 259,000 and it looked like there was a breakout coming. If you could use technical analysis on weekly claims, I don't recommend it. Well, you said Yeah, you said hang on. Josh said once claims start leading higher, they normally don't slow down. And they did. And they did. Yeah. Um, so we also have to talk about which part of the job market, which part of the economy, because this is a very bifurcated consumer. And Josh and I were talking about this on Tuesday. Sevita has this great stat where she said the US has a higher proportion of low-income consumers than almost every other OECD OECD nation. However, its contribution to total consumption is low and its contribution to S&P 500 earnings has declined to an estimated two percentage points. That's wild. Only 2%. Yeah. So, so um like I'm a kind of data nerd, right? So um when I look at the labor market, we have a tool that aggregates literally all data we can get our hands on into one kind of index of what's the strength of the labor market. Last summer when the Fed was cutting rates, it was a bit puzzling why they were cutting rates because the NFP numbers, the payroll numbers were weak for a couple of months, but everything else was looking better. Yeah. And maybe claims was weak for a couple of of weeks, right? But the overall labor market data was never really that weak. Um, so now now it's a bit different, right? Because there are a bunch of labor market indicators that look softer. There's the government side, right? Where we know there's quite a few layoffs going on in the government sector and the people who have research grants, NOS's and so forth, right? So there's some weakness there. We know also there's new stuff going on with immigration, right? So all the hiring that was related to that is probably different. So I think it I think it makes sense to be hyper sensitive to the claims. That's that's what the market is doing. The rolling the rolling four-week average I think on initial is like two more like 225 which is not bad. Nothing. No, that's okay. All right. But you think one aberant weekly print above 250 is going to get everyone's attention. If we have 255 next week, uh the yield curve is going to move a lot. Okay. And the equity market is probably going to move a lot. How often does it happen? You get just like out of nowhere like whoa that that was high. We we've we've we've we we have um high frequency indicators that we used to forecast claims for exactly that reason that you we want to be ahead of it. All right. Cover the mic. What's it look like next week? Yeah. No. Have you been have you been close this year on forecast for for claims? We don't get every single one. Nobody does. Yeah. But, uh, yeah, we want to we want to get a it doesn't matter whether we write every single one, but with if there's a big spike, that's when we want to get it right. Okay. I want to back up a little bit for people. So for for people who are um for people who are familiar with you for the most part, they probably know you. You had this position at Goldman Sachs where you the head of currency strategy and there were some pretty big events during your tenure there and you made some pretty big calls and I want to just kind of um give people an idea of how you ended up in that post um as the currency strategist at Goldman. Uh and then we'll talk about some of those calls because I remember like trading equities through some of these events and I remember reading your you know uh headlines where your calls are in those headlines. That's impressive. That's a good memory. No, I do. I know zero about currencies like like if people ask me questions like what do you think of the dollar? I don't know. What do you think? That's literally my answer. Um, so this is but this is I think becoming more important for investors to understand even if they're not acting on it. So, um, you go to Goldman Sachs in 2004. Um, not a native New Yorker. I don't think you're from Jersey originally. Tell tell us, uh, tell us how you you landed there. Yeah. So, uh, I I was working um at Goldman in in in London. I got a job there that I applied for in the Economist newspaper. Okay. And then uh a couple of years in there was a guy called Jim O'Neal. Yeah. Him him we know that uh yeah he he invented this bricks concept. So he's pretty pretty famous guy. Bricks. So he actually invented a research concept that is a thing now. It's pretty rare. Turn turns out terrible investing strategy but politically pretty uh pretty pretty amazing. But uh so he he came over and he he tapped my shoulder. uh one day in in 2004 and he said um do you want to go to New York? He said, "I have a I have a job for for you." And that was like the they call it death strategist, the the the strategy set together with the traders. And it's actually a job he used to have. Um it's a job that John Hutches who still go used to have. Uh and he said, "Why don't I think about it for a couple weeks?" And then I looked at I don't need to think about it. Let's let's just do it. You were you were ready to give it a shot. I was ready. Yeah. I always love New York, so it was like a dream come true. And that's 21 years ago. You're still here. Still here. Yeah. It was supposed to be a couple years, but it been extended. So the desk strategist is the guy or girl who sits on the end of the trading desk. And when something is moving, the traders could say, "Yo, Yens, why is I don't know the German Bund doing what it's doing?" And then you have to give them something that they The world has changed a little bit. So u so uh in 2004 uh it used to be the case that we had the turret system right uh and when you're the death strategist the when there's important numbers coming out you have to shout into the turret whether you thought it was good or bad. Um so you just have to look at all the numbers as a human right and conclude whether it was good or bad and the traders would just trade it uh try to be like one millisecond quicker than anybody else. just take your your reaction as gospel and trade. Uh, most of the time. Yeah. Wow. Okay. What was it like if you if you called one wrong? You say just kidding. I I remember there's there was a they misheard you one of the the head of of rates trading. Uh she was she was very famous for she would often ask L a question uh on the turret that everybody on the trading floor would hear and then you had to answer immediately and it was often like a kind of math question. So, if you got the math wrong, you are in trouble. My god. But but uh but uh that's very Goldman. It was uh you have to be focused because if you couldn't get the math for her question lines, you'll be very disappointed. So uh but uh we don't do that anymore, right? Because we have high frequency traders that essentially do that. So that part of the job doesn't exist. I'm not on the trading floor anymore where like it's a long time ago since we did that. It's only high frequency. Was it fun? That was fun. Yeah. I love I love being on the trading floor there. Okay. Um, here are some of the things that uh here are some of the things that I think were highlights of like just the currency uh era that you were the strategist for the Euro crisis. So, this is I I think probably a lot of the people who were sitting in your seat were Americans at the other firms and you're a European. Do you think that gave you an added perspective that maybe the other uh strategists didn't uh necessarily have? I I think so. I think so. Um it was funny that I was um I was at a meeting um a client meeting um last week where a guy I have not seen uh for like more than a decade. He said yeah still remember your paper about the future of the euro. Right. So sometimes when you write something people really remember it forever if it's unique. Right. So I wrote this paper like a kind of semi-academic paper about how you actually how would you go about breaking up the euro if you had to break it into pieces. Yeah. And it's complicated. You call that redenomination risk. So all of these European countries have to adopt their own currencies again. Yeah. Okay. And that was an influential thing. Yeah. Like it was actually a little bit scary because um I'm kind of I'm supportive of the EU myself, right? got adopted by all these different political movements that wanted to break the EU apart as well in France, Italy and so forth. Um Oh, they said look according to this guy Yens, we could do it. Yeah, exactly. But um that's okay. It was it was again it was a piece of work could be used different ways. It's better to be prepared analytically than just going into these things without any thought put into it. Are you surprised that the euro has uh managed to hold together? Not really. Uh I um I wrote a book about it that was published in 2013. Uh which I still stand by. Right. So the Euro is a political project. Um I agree a little bit with our president. The euro was created to avoid war in Europe mostly. Uh and um if if there's a political will to keep it together, it'll be together. you've been credited with giving the early warning to the investor community about the yuan and Chinese outflows. Um I think you were talking about the yuan depreciation risks and then that actually ended up being a really big moment for I know I know you referenced this a lot. That was you you son of a [ __ ] No, he didn't do it. We had a 20% S&P correction in six weeks over the Yuan devaluation. And I think you were early to that, right? You know, I was at lunch with Jason's wagon, Barry, and I was couldn't get off my phone. I was like, "Guys, we're really eating lunch right now. I got to go." Right. H how are you how are you able to uh see that coming or do you get too much credit for that? So, uh I I've always been very focused on like capital movement. So, when there's something happening with capital movement, this is kind of what what I've been doing through my career. And sometimes when there's capital moving in unusual new ways, the correlations in the market break. So if you analyze the capital flow and the correlation breaks together, that often gives you conviction. So I think that's what we started to see in in China when we launched Exxante data in 16. Literally the first quant tool we had was a a daily intervention indicator for China like told you how much was how much were they spending on essentially propping up their currency. Yeah. So we had a nice uh daily estimates of that and it was a fantastic business. We could just sell that model and we can sit on the couch and do nothing until China had imposed capital controls and they didn't have to do anything and the model was dead. Then we had to get back to work again. Okay. And then you built a COVID mobility tracker in 2020. Yeah. And I think um that was yours too. This guy's everywhere. I remember that. He didn't start co to be clear. He built the he bu uh that turned out to be a big thing. It it was an incredible thing. I I I remember I got a call from one of our clients in in hedge fund client. Yeah. In the middle of January. Okay. And he asked me, was it Bill Aman? I'm not going to give names. Oh my god, it was but uh Okay, say more. But he said like, "How come these uh how come these stocks are moving so much in in China?" Cuz hell is coming. Have you seen what's happening in in Wuhan? And I had not. That was and Milan. That was Yeah, that was in the middle of that was in the middle of January. Yeah. And then I remember we had a client call a couple of days later when we kind of figured out what was happening. Uh where we said, "Uh, okay, this is a big thing. is probably going to be moving the market the whole year. And we had half of the team did CO forecasting from I think January 20 was when the first time we did CO forecasting and we're not doctors or anything like that. Your data you're data people it it the amazing thing was it was actually extremely easy to forecast like compared to economics it was very easy to forecast the spread the spread and the peaks. Okay. So so tell us about that. What was the what were the inputs for you to figure out the spread the degree of the spread the speed where it was going like how did you you mentioned Milan right I I mentioned who Milan Italy right so so they had a horrible outbreak in Milan right there the first strain the ski resorts right yeah okay and then so we just got data down to each municipality in Italy from the government and then you figured out okay what was what was the municipality where they had the first case and then you could look at the trajectory in that specific little county right and you could see okay it's actually already over here it's going to be over in Milan and the rest of the country within a certain number of weeks so if you just broke down the data into the little atom atoms like and it it it was actually pretty easy if you analyzed at a country there was too many things going on but at the micro level it was very easy always moved in the same code and then you had news agencies calling you like it. I remember it becoming like a I was pretty busy back then in those days. So, but I don't think most people know that that was you that created that. I didn't know. Were health officials using it to try to get ahead of there was a there was a Imperial College in London published some academic papers where they used the data we had collected to to look at the the spread and then how the mobility right so they used it for advising whether you could safely reopen. All right. I was so I was using Governor Cuomo data so I didn't do as well as you did. He had a chalkboard. I don't know if you remember. And every day he would update the chalkboard on uh on television at 2:00 in the afternoon. All right. That was a really big deal though. Like that was I I'll I'll tell you a secret. So we we wrote a paper uh at the end of February. Yeah. Where we analyzed how many hospital beds we had in New York. And it's one of the few papers that I've written that we ended up not publishing. Why is this scary? I didn't want to scare people because you because you would have you would have shown that we could never handle the amount of people without all the, you know, expanded capacity and so forth. There wasn't enough beds in New York. That was a that actually could have caused in that moment that could have caused the hysteria. We didn't publish it. Okay. You just Thank you. You just like sat on it and said nobody needs to hear this right now. Yeah. Okay. Um, I like I like that you did that. All right. In less dark in less darkness. After the GFC, the global macro traders were like the kings of the world, right? If you could see that coming and you got that call right and then they spent the next decade, they in general, it was just it just became really difficult. Yeah. Borderline impossible. Yep. Is it because I mean conflicts? I'm sure it's it's a million different things. Do we have too much data? is is it uh the ZERP environment screwed everything up? Like what was it that made it impossible? Yeah. To accurately assess where markets were going. To your point, I think global macro is the worst category of hedge fund over the last like 15 years. By the way, I think intuitively makes sense. How should anyone be able to it's 19 dimensional trend. It just seems too hard. It seems ridiculous. I think I think it has a lot to do with what what asset classes actually provide any opportunities. So exactly like you said like we had many years right with effectively zero interest rates in most countries like we got to two and a half in the US in the 9 18 uh move right but we effectively had zero interest rates in the whole world right so the asset class that macro traders typically take the most risk in is interest rates and they were gone so I think from that perspective makes a lot of sense that there were no good macro returns and guess when interest rates started to move 22 they killed we there were a lot of funds that had 50% 60% cuz they were short bonds on leverage short bonds in those years right and it was pretty easy um like we created this simple thing where uh we call it like like a a hiking pressure scorecard like where do the central banks need to do a lot right and we was like looking all these places where like the hiking pressure was like something we never ever saw. And the central banks were still saying, "Oh, we're going to be on hold for 2 years, 3 years." They were saying that with 8% CPIs. It was just nuts. So, that must have been easy for you guys. Like, you must been licking your chops. That was one of the times where you could just just put on the trades that were in the model because they were so asymmetric. The rates were already zero. How much lower are they going to go? Um, yeah, that was that was incredible. So I I think there are two other explanations for the UN I'm a macro tourist. Okay. So I'm stating that now. But from as an outsider looking at that world, it strikes me that when you make a huge call and you have a huge windfall trade or a series of trades in a in a moment like the 2008 to 2012 period, of course you want that to happen again. But you don't always get a strike right down the middle. Yeah, you have to wait for your pitch and you could become impatient because when you're the hero that was buying the credit default swaps and shorting stocks and shorting the banks and you're the person that pulled off the quote unquote greatest trade ever, which a lot of these guys did. You want that feeling again two years later. You don't want to wait. You don't want to wait 20 years. Yeah. So, you you start pivoting. You start saying, "Oh, for my next trick, I think the municipal bond market is about to collapse." Yeah. And then that doesn't work. Okay, here's my new trick. Here's a bubble basket. I remember that one. Okay, here here's the 50 best stocks in America. They're all a bubble. That's my next trick. That I mean, we watched this play out. Uh you had bond managers making stock market calls. Sure. Um so I think there's a restlessness when you've had a huge home run. Sure. Now you have endless money. Yeah. So it's no longer about money. You want to have fun. There's there's a famous hedge fund quote that says that the the hardest thing to do is to do nothing. Who I forgot who said it's a Buffett or a Munger. It's it's important. Yeah. Um because if you feel like you have to do some big trade every month, it's not going to happen. And I think also there's a lot of the successful and this goes back to the yield curve again. It's a lot easier to deliver 10% plus returns if your T bills are five and you just have to get 5% extra as opposed to generating 10% from nothing. Yeah. Right. A lot of these guys trade on leverage, right? And they can get the the the 5% carry in the portfolio without doing anything and then they just have to use the leverage to get the next five, right? So having some interest rates like really makes everything a lot easier for but what about also the idea of too much data, too much competition. This is a plug for you. I remember I don't know what year it was. When did the Oh, they have they have um satellites looking at foot traffic in the malls like that was like novel in 2014 or whatever. Yeah. How granular like how much forward-looking data is available these days and people are paying out the ass for it for obvious reasons. Yeah. To be honest, this is a part of a of of the challenge we have in our business. So, we have like a a data platform, right, that has, you know, 400,000 time series on it. I remember I was I was out numbers. I was I was out in California and I I met this old old uh contact that I have as a PM now to big big fund in California and said, "Yeah, like it's fantastic. We have all this data. I think we have uh have like several hundred thousand data series on a platform said yens I'm not interested at all when you have so much data like and it's on the one hand obviously I disagree but on the other hand it is really important in our business that when we generate value from the data it comes from us having access to a lot of data and insights knowing how to interpret it right and then like zooming in on what really matters, right? There's no way you can get insights from all 400,000 time series at the same time, you're just going to end up with nothing, right? But if we can have a system where we use technology to weirdly zoom in on when there's interesting things going on and then communicate that narrative because most money is managed with by humans still like how much is managed by AI quant that's very small. So we need to essentially put the conclusions in front of people and that's also what we see in our business right we will send the conclusions to the CIO right and there might be an analyst that crunches the numbers double checks and so forth but the CIO CIO wants the the conclusions you made you made two fairly high-profile tactical calls on the dollar in recent years and we'll we'll we'll use this as a segue to get back to now you were bullish on the dollar in 2022 um based on the tightening that I guess seemed obvious to you for most of the market that cycle was a shock. I don't I don't think people thought we would have to get to 5 1.5%. Uh Fed funds to see inflation finally break. Um yeah, people were just continually surprised at how high we went. And you also saw like fragility just generally. I I don't know if the wars played played into that at all, but um then you shifted neutral to bearish in 2023 on the dollar. Um, and I think that's like played out well for you. It took took a while, but like you got it. Um, what do you think? What do what are you telling people now who are trying to get a handle on, you know, does the dollar gets significantly weaker going forward? Have we seen the the the worst of the drop there? I I think for corporate earnings, a gradually declining dollar is really good. Might be the thing that saves us actually. Um, but what what do you think's happening? So I think that the big picture is the following, right? If you if you look at how the dollar has been behaving over the last 20 years, you can capture a lot of what's happened with the dollar with with two variables. I'm simplifying a little bit, but I want 700,000. So the two variables that are most important is what's happening with kind of the cycle of global growth. Okay? when global growth is strong tends to be the period where the dollar doesn't do so well because people push into kind of global growth assets. Most obvious example of that was before the global financial crisis when like global equities did very well. The bricks era bricks era that yeah the reason I'm here um investors wanted to invest anywhere but in the United States Chinese stocks, Indian stocks, so forth. That's right. Um the other variable has to do with monetary policy the Fed right. So if the Fed is very tight dollars get support from that that framework needs to be expanded this year I think because now there's something going on with portfolio flows asset allocation that is I think unprecedented. What is that? So what we have seen happening in the last couple of months has questioned the safety of the long bond in the United States in a way that I don't believe we've seen before. Okay. And uh we can see some in our data we can start to see some new trends which I think is separate from glob global growth separate from what the Fed is doing. And really what's happening is that after essentially a a 10-year bull run for the dollar, right, and people being loaded with US equities, loaded with US fixed income, uh international investors are are scaling back. It doesn't mean that the they the abandoning the dollar doesn't want to have any exposure but I think it is a structural theme that they want to get exposure reduced and this is new right because people were extremely comfortable with the dollar being the dominant currency and it has many elements so obviously the the tariff situation has shocked people and who has it shocked the most people always say oh is China selling treasuries I don't I don't I think that's the the key thing. The key thing is that the closest allies of the United States have been shocked by what's happening with tariffs. Canadians, Canadians and Europeans, UK. And by the way, the Canadians and the Europeans hold way more bonds than China does. That's right. Way more. Right. So, they're much more important. China hasn't really been buying any US bonds since 2014, the crisis we spoke about earlier. Yeah. And um where is that money going? like if it were to leave the US long bond uh for they selling 20-year treasuries they buy a 20 equivalent yield or or equivalent maturity in Germany. Yeah. So so what we've what we saw in April was that bond fund flow in in US instruments got very negative in the middle of of April and it stayed quite positive in European bond funds. There was a switch there. But this is something that's hard to see in data because the portfolios we're talking about are very big portfolios and think about if somebody has a credit portfolio, right? Where they have, you know, 100 billion in in US credit. Can you get rid of 100 billion in US credit? Slow leak. You can't sell it all. No. So what they do first is that they do some currency hedging because you can do 20 billion of of currency hedge in a day if you wanted to, right? And how would you how would you currency hedge a a portfolio with a lot of US treasuries? You buy you buy the basket versus the dollar or so no. So so um so if you're a European investor, right? Yeah. you're just going to sell your dollars forward. FX forwards incredibly liquid, right? So maybe do 10 billion of that, 20 billion of that. If you're a Canadian investor, you will sell dollars forward by Canadian dollars forward. Uh and I think we speak to a lot of chief investment officers from pension funds, insurance companies, and so forth around the world. Uh our clients and our network, right? And I I've we're getting a pretty consistent message that there's been a bunch of that FX hedging. that's very hard to see in the data, right? It doesn't really get reported very well. Uh but I think it's also clear that the FX hedging comes first and then the underlying assets shifts later. Yeah. So I think we're in that process now. So but it's a long uh Rebecca Patterson was here uh 3 weeks ago. Yeah. Know Rebecca um and she was saying much the same that that you're saying. Yeah. She said it's not a it's not a bang a big bang. It's not an explosion. It looks more like a drought, but it's but it's so slow that it's imperceptible. I'll just I'll give an example from last week. So, what kind of stuff did I had in my calendar? So, I had um I was speaking to uh some executives from a private bank in Singapore. They're worried about their dollar exposure, right? I spoke to a central bank governor. I'm not going to say from which country, right? they're worried about uh what's happening with the dollar could be relevant for their FX reserves as well and um it's just a very broad theme and different players move at different horizons very it's very tempting to say oh Citadel moved already uh and they can shift their portfolio in a couple of days or or quicker maybe right but there's this long tale of of real money investors that have investment committee meetings only quarterly and they don't like to change their asset Like there's the wealth managers, right? Where uh you're in that business, right? But you'd have different clients and you have to go through maybe different ones. I know your structure is a bit special, right? But for a lot of them, they have to go through they're not used to taking in the US, people are not used to taking any foreign currency risk at all. Yeah. Why would they? Yeah. But like the dollar has been on a bull run for a long time, right? And yields have been higher. Uh I I'll give you one stat. There's 1.7 trillion of fixed income ETFs issued in the US. 95% of them have only US securities in them. I would have guessed that if you if you look at who actually has, you know, open currency exposure actually have some non-doll assets, it's less than 1%. Yeah, we effectively have with rounding 100% home buyers in US fixed income ETFs, right? So, so there's no tradition for taking that risk. So, in order for those all those portfolios to actually have some other exposure. It's just going to take a while. So, what's the So, what though? I want to I want to before we move off this um this is so fascinating to me. So I want to ask you uh if you so do you agree that international portfolio managers once they decide to do something they don't do it right away but they don't change course two weeks later and what are they more nervous about? Is it the um the spontaneity of the things Trump is doing on international trade and the the chaos and the unpredictability or is it just the overall level of indebtedness and deficit? Or is it some combination? Like if I ask you why did the 30-year Treasury yield break above 5% last week for the first time in 17 years? Give me a percentage breakdown of what the the reason for that was. Is it 60% trade, 40% debt, or do I have that reversed? It's kind of like an accumulation of forces, right? Okay. The allies don't like you can't disentangle them from each other. I think it's all of them together. Like that the the allies don't like to be treated like non-allies. They feel, okay, rules the rules are out of the window. We have to prepare differently. They don't like that. Um they don't like there's a fight between the White House and the Supreme Court. Okay. They don't like that there's talk about taxing foreign capital. Yeah. And we we we it used to be a working paper that Steve Miran wrote that people were concerned about and don't believe should have been written. But now there's actually something in the budget called section 899 that talks about taxes on foreigners. Right. So now it's getting pretty concrete. Investors don't like that. Okay. There's a lot of things that are happening that are kind of real break from history that global investors don't like and the natural response is to get a bit more cautious. Does Scott Besson understand this as well as you're laying it out? He must. I I think uh Scott Besson is uh extremely well positioned to take a balanced approach to these issues, but he's facing a tough situation. He has a lot of conflicting goals. He's not the president. Yeah. And then the the last bit of the accumulation has to do just with the budget constraints, right? We've been running it. I think it's so interesting, right? We've been running for so long and operating in an environment where fiscal stimulus actually was bullish for risk assets, bullish for the dollar. And it feels like we've reached this turning point where more if the if the Senate comes out and say we want to have more stimulus in the budget than the House, right, the market is not going to be loving it. Yeah, we don't want that. No. All right. I'm I'm sorry. I'm sorry. I just wanted to make sure we we nailed that on the last question. You covered it. Okay. Um what what uh what do you make of the reserve currency uh debate happening these days? And just for people that aren't fully aware, um, what's what's his tweet? This is an actual Besson quote or this he said. I mean, this is tough. He he said, "Other countries currencies are rising. The dollar isn't falling." Uh, that's a tautology, is it not? Maybe I won't comment on that one. Um, but but but let me let me put it this way, right? Are you worried about the dollar losing its reserve currency status within our lifetime? I I I don't don't really think about it as a binary thing like it's not oh it's the recur reserve currency or it's not the reserve currency like dial the question is whether it's getting any competition right so we had a long period of time where we had some yield in the United States not much we had some yield right and we had nothing anywhere else so that was the period including before co right and the dollar just didn't have any competition really and China has capital controls, right? A lot of people are still very uncomfortable investing in China. You don't whether you get your money out. You don't know where the equity market is controlled. You don't know whether you can pay yourself dividends and so forth, right? So, China is is not a real competition. The renb is not going to be a reserve currency for traditional sense. Not in a traditional sense. Okay. But yeah, you speak to a lot of important people, policy makers and and such. Is anybody even mentioning Bitcoin as an alternative? So I think from from a US investor perspective, we just talked about this thing that there for regulatory reasons there's no tradition of currency trading in United States and the fixed income picture has no foreign currency element to it. Right? So if people want to be anti in United States, they really have two options, gold or crypto. Both of which are mooning. Yeah. Okay. It it it changes from week to week which one is moving the most. Um but um it's it's definitely on the on the move. But has it entered your conversations? I think uh if if you look at all institutional clients that I have uh the majority of them trade crypto now, okay, in some form. It's a huge change. It's a huge change compared to just two years ago. Massive massive change. Why do you think the administration is so pro crypto? If one of the singular stated goals from the outset from the Satoshi paper is to replace the dollar, what? Like it it it seems like it's rhetorically crazy to be the president of the United States and and be fullthroated supporter of something that was invented to supplant the dollar and to almost accelerate the pace of of of that supplanting if it if it were to happen. It it just seems so inongruous. Do we believe in a strong dollar and America having this benefit of being the reserve currency or do we want to destroy it? And if so, why? What's the prize? What do we get? We have uh we have a lot of examples of of conflict in goals. We talked about it in connection with trade policy and we have it in connection with crypto as well, right? So on the one hand, if you wanted to just protect the dollar, you wouldn't want to be supporting crypto. But we had different elements to the election campaign and one of them was being pro- crypto is a one way to get support from a certain constituency and I think it's just a matter of of living up to that election promise. I don't think it's more complicated than that. So okay so they don't have a secret plan where oh no wait actually this is good for 10% of the transactions in the economy to run through Bitcoin. I don't think so. Okay. I mean Bitcoin can be bigger and not an existential threat to the dollar. I mean gold's not a threat to the dollar. Nobody's saying gold is a reserve currency. No, I think um I think the main the main thing people look at globally is whether China is going to really be a threat and China's doing interesting things right now in terms of being a new type of competition to the United States. For example, in terms of the exchanges they have. I thought you were going to say dumplings. They're wonderful. Wait, what what what do you mean by exchanges? So, the Shanghai Gold Exchange is getting to be very important. It's brand new. They're putting a lot of effort into global financial market participants getting comfortable taking their risk listing in China. So, this is literally about if if I think that think about the following. If if China wants to do their trade in remni which they want and more and more countries are executing trade in China in Chinese currency right then it's helpful if China offers a kind of financial market where okay once you've accumulated those CNY balances you can maybe move some of them into into gold that is held in China right so if China offers more and more uh alternatives to trading engaging in fund management market that doesn't touch the dollar at all. Yeah, it becomes more and more of a competition even if it doesn't have the typical capital mobility. Well, there are a couple of countries where there's an urgency to this. I think Russia and Iran would love the ability to hold their FX reserves in Chinese denominations and do financial market activities in Chinese yuan terms. Russia doesn't have any dollar reserves anymore, right? Right. So, okay. Um, but you don't think that that's something that's like on the front burner for people to worry about like we're going to all of a sudden lose this overnight. We're going to wake up one day and they're going to announce, hey, it turns out the dollar stripe is the stripe is going public in China. No, I don't I don't think the dollar is going to lose its reserve currency lessening status instantly. But okay, we we we can't be chilled out here, right? that the the debt dynamics in the United States are out of control. I believe the reason Scott Besson took the job as Treasury Secretary is that he wants to have a positive influence on the debt trajectory. That is problematic. There's another dude called Elon Musk, right, that been talk about the Oh, no. He retired uh today, but he tried for a couple weeks. They're going to hang his jersey up though, I'll tell you. So, he put up some big numbers. The question marks around the dollar getting bigger. doesn't mean it's going to collapse from one day to the other, but the the question marks are real have to be taken seriously. And that's another reason why like this idea of of not being all in on the dollar that a lot of global investors were increasingly over a decade that's what's retracing. Um would it surprise you if I told you foreign tourism to the United States has been dropping precipitously since uh the inauguration? Wouldn't be shocked. Um here this is stat spending from foreign visitors to the US is poised to fall by 8.5 billion this year as negative perceptions tied to trade and immigration policy lead overseas tourists to look elsewhere. That's Oxford economics. They say international arrivals to the US are expected to fall 9% this year. And um one more number. The World Travel and Tourism Council said this month it expects the US economy to lose a staggering 12.5 billion in spending from international visitors in 2025. Quote, "A direct blow to the US economy overall impacting communities, jobs, and businesses from coast to coast." When you hear that, doesn't it doesn't it sound like it rhymes like what we're talking about with international capital flows? Like I think those numbers are too low. You think they're low? Let's say you know better than they do. What are the numbers? Yeah, I think I think uh tourism is a tricky thing because it's like what we normally think about tourists that are running down on Fifth Avenue, but it's also like tourist um the students that are spending in US also in in the stats often get recorded as sort of tourism spending. Yeah. Um and it's both and they're trying to and they're trying to ban international students right now. Absolutely. So like even if it's like a couple of ten of GDP which would be like 60 billion that that would be more in the ballpark I think. Okay. So this do you think that this ties into the the uh lack of interest in owning US assets amongst global portfolio managers? It's like uh yeah it's another symptom of the same the same thing right where there was a certain regime where students tourists were always comfortable going to United States never had any concerns uh like a lot of countries rightly or wrongly have kind of travel warning now right so so there's there's stuff going on this year that we've never seen before and it's changing behavior and that's going to have an impact on the capital flow we discussed that in detail but it's also going to have a GDP impact, right? Because the tariffs are going to have an impact. The tourism gonna have an impact. The investment uncertainty that you started out was going to have an impact. So, if you add up all those shocks, S&P down 3% from the all-time high. Yeah. Does that sound about right? Is that the craziest part of this whole thing? It is. It is. Um but but let's say the S&P is flat this year, right? Yeah. Which would be a good outcome relative to what we a great outcome. We'll take it. But even that would actually be less of a wealth effect boost of what have been used to in 23 and 24 where actually that wealth generated some extra consumption that we may not get this year. That's enough with the extra consumption. We're not getting that. Uh Robert Frank at CNBC put out a report this morning about rentals in Nantucket and the Hampton's and I know this affects 0.001% of the population but it's emblematic of not having that wealth effect from stocks. Um they said Hampton's rentals are down 30% versus the same time last summer. And now they're all hoping for like a last minute uh wave of of rentals. Otherwise, you're going to have a lot of properties just sitting there. And that's I think a direct effect of tariffs, uncertainty, and the stock market not doing what it did over the last couple years. Yeah, makes sense. Um what what haven't we before we get into Xanti um and we'll finish with asking you about Xanti and um market reader, what haven't we asked you about that you think is important for investors going into the second half of this year? Well, I think really it's it comes down to what we talked about in the labor market, right? We've had this debate where okay, the confidence was bad and then the real data was okay. So I think we we have to be hyperfocused on what's happening with the real data in the next two months. Is that the most important economic data point to follow? Anything related to employment? Yeah, anything to that is giving a pulse on the underlying trend in the economy. Could be services consumption. It could be the labor market. Okay. Or maybe credit itself. Do any of your models incorporate sentiment analysis or you just done with it? Just so noisy. Yeah, we don't do a lot of sentiment analysis. Like sometimes we use as a kind of complement to positioning indicators, right? It's just another way to kind of capture positioning. Uh but we wouldn't use it as a fundamental read. If if you did these days, you'd be trading every two days. I've never seen sentiment uh swing the way that it does from the absolute lows to the absolute highs. The the report we got this week, highest jump in conference board um expect future expectations component. Yeah. In four years. What the Yeah. I thought a week before everybody thought the world was about to end. Yeah. How I mean for from my perspective, not that I ever use sentiment. Well, I don't really know how to do that, but it just seems impossible now. Yeah. Well, um like if you're using as a tradable indicator, like once a lot of people start to trade a certain indicator, like it typically becomes useless, right? So, we we probably have that. But if you look at that consumer confidence level sentiment, right, we had an incredible drop. Yeah. Once the the tariff concern was the most intense and now we had this incredible bounce, the level is still low even after the incredible bounce, right? So the overall consumer sentiment is low. It was it it fell off a cliff in April, right? So even after the bounce we had in the latest reading, the level is is not a good level. Okay. Um, so but in the end it's gonna depend on what the real real activity is showing and um it will be strange if we don't have a substantially weaker year for consumption. It would be strange. That's my expectation and I so I'm not looking at data obviously to the extent you are but I'm paying a lot of attention to commentary from CEOs. Sure. That's kind of like the way I do sentiment and it's totally anecdotal. I'm not collecting any data on it, but it's one company after another saying almost the same thing now. And it wasn't like that in during the last earning season. No, now it seems more uniform. How do your clients work with you? Are you one-on-one with them or do you have reports that you put out dashboards? What is what is the experience like of a Exantic client? Well, so we have a we have a global team. So, we're about 20 people in my team, right? So, uh, a bunch of those people are writing research reports or we have a chat system, right, where we chat with our clients when there's something important going on and then we have some people who code, right? So, we have a data platform where we essentially put our forecasting tools on the data platform so people can access them. So, it's sort of a holistic riskmanagement service that we provide. I'm guessing not a lot of retail clients given the sophistication of we don't have retail clients for this service. Are more of your uh institutional clients are more of them looking to use your tools or are more of them saying okay skip all that just give me the answer or is it kind of a mix of both? Yeah, kind of it's we when we service an institution, we want to make sure we have multiple touch points, right? And the chief investment officer wants something different from the first year analyst, right? Oh, okay. That's interesting. So, so the chief investment officers t typically get the the sort of big picture conclusions from our research and if you have a strategist or an analyst that engages with our service, they would engage at the sort of number crunching level. Tell us about um you told me about so tell tell Michael in the audience about uh market reader. Yeah, I was gonna try to explain it but I made a mistake to run two companies but uh that's I want you to check this thing out. It sounds awesome. So So market reader is a piece of software that explains in real time what is happening in the market. Like why is Meta down? Why is Google up? Uh why is Sounds like a desk analyst actually. It it kind of is. It's kind of uh it's kind of trying to replicate what was happening with human on a hedge fund desk and looking at flows looking at the calendar looking at the price action all markets together obviously news and then synthesizing that using AI to give like a brief precise explanation of what's happening in real time. I love that. Yeah. You should be buying it. I re strongly recommend that you buy it here at at Brits. That would be Mario. So, so that's more of a retailwealthmanagement driven product offering. Yeah. People that is they're not running a hedge fund, but they have to be up to speed on what's they go like Yahoo Finance and you might get nothing or or an AI generated [ __ ] article. That's right. There's the like even if you go to a lot of people try to Google what's happening, right? And all the results are now contaminated by some low low quality AI. I love this. When did you start it? So we launched this uh company three years ago and we've been sort of really delivering. It's quite difficult to build. So it took two years to build and we've been engaging customers for long. So the customers that are using it are they logging in each day for like a summary. Here's what's moving the markets this morning or that's also that's how I use it, right? So I can absorb more information by like looking like so for example when Silicon Valley Bank was cracking, right? Yeah. Then I just had a screen with all the regional banks and I'll get all the actual moving parts in the regional banks world that I don't know any of those names, right? But it will tell you what is important. Like so you don't even know which tickers to put in to a Yahoo. It will tell you what is moving the most. So it will like tell you the epicenter of what's going on and and and tell you those stories. So, I think for me it allows me to absorb more information, but it could also be like if there's um portfolio manager that want to inform their clients about what's going on in their portfolio, it could be a very succinct way of doing that. I like it for that. Love that. Uh which which LLM is it built on? It's mostly based on on Open AI structure. Okay. Yeah. Um, and it's pretty lightweight for you to run and provide to people like it's it's going to look lightweight to the people who get the results, but there's quite quite a bit of compute going on today. There's a lot happening there. All right, that's awesome. Um, so we would encourage people uh, of course, check out Xanti if you are a professional investor and um, if you're not a professional investor but you want to inform yourself, market reader is pretty cool tool. So, I'm going to start incorporating this into my debt. We'll see. We'll see. We'll see what what the ways in which I use it. I appreciate that. Yeah, I'm using like generic chat GPT, like just the $20 a month thing. And uh I have it doing this custom thing for me each day when I log in. So, it knows what I do for a living now. It knows how I use information. I've talked to it enough that it knows what to serve me. Still sort of dissatisfied because I could tell that it's not built to do this by market people. It's not real time. It's And then it shows me the sources. Y and I see the source and I'm like, "Oh, I don't go to that site." That's where you're getting data from. So anyway, it's that's a whole thing, but we'll we'll check it out. Um, yes. Did you have fun on the show today? Absolutely. The the the clapping and the funny noises, they're definitely different from Bloomberg as soon. So, good to do something new. So, uh, we always end the show by asking people what they're most excited for in the future or what they're most looking forward to. So, we know for you initial jobless claims is a big thing. What are you really in real life most uh looking forward to? I think uh when you buying a dog when you're when you're involved in with with markets it can be kind of all consuming. Yeah. So, like I think my my goal for the future is to really have um proper down time and that could be could be downtime for my family and so forth, but it could also be downtime in the sense that you have blocks in your week where you can meditate, really think about longer term issues as opposed to dealing with this kind of tactical stream that's going on. So I think um being more organized about actually inserting these meditative you're going to try to do that this summer. I it should be it should be it should should not be for a period. It should be a thing where you have a shift where it gets just a part of the normal way of operating your week that you have those periods. If you figure out how to do that without because you run two companies now. I run one company. I can't figure If you figure out how a way to put a block in and then not violate it when somebody asks you to jump on a call or do a thing like to actually be able to say, "No, this is my block where I'm thinking and breathing." If you figure out how to do that, tell me cuz I need to do the same thing. I I I'll write you a letter about it because I don't want to interrupt your meditation. Uh Michael, what are you looking forward to? You got game five on tap? I have game five on tap. Um I'm looking forward to Chicago. We're going to Chicago next week. We have our second HQ grand opening. We're bringing 50 employees out there. Good. And we have 58 Red Holds employees. It's the largest gathering of all of our PE. We have more employees. We have 74 overall. 58 of them will be together for the first time since like we've never had that many of us. It's fun to see the growth, right? It's crazy actually. Um, but we've never had that many of us all in one place. Got to memorize the names before. I know everybody's name. Um, I don't know the I don't know all the spouse names and all the the pet names and the kid names. I don't At this size, I don't even know if that's possible. The dogs are probably going to be less offended than the humans. Yeah. Yeah. Do you like Chicago? I think Chicago is a great city. That's one of my favorite cities in the country. So, uh, we're going to be we're going to be out there next week. We're doing a live version of this podcast. Our guest is Canal Kapoor. uh CEO of Morning Star. So, you must you must have run into Morning Star and you're in the data game now. Yeah. Okay. Uh anyway, we're super excited about that. I want to say thank you so much for joining us today. Uh Yans, we really appreciate it. I know you don't do a lot of podcasts. You don't do a ton of interviews. So, this is really meaningful for us to have you here and uh we hope to have you back again sometime. Sound good? Looking forward to it very much. You want to come back next week? No. All right. Uh, ladies and gentlemen, Yens NordVic and check him out at Xanti and uh, Market Reader. Great job this week on the show. All the Compound uh, crew, we appreciate you guys so much. Too many of you to name. Uh, but you know, we love you guys. Thanks for listening. Please leave us a rating and review. We'll be back soon. Thanks again. Have a great weekend. [Applause]