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the Bloomberg Terminal, and the Bloomberg Business app. Our team is trying to give you wonderful equity analysis of this crazy market. And all I can say is to go from Captain Kaminsky of the Massachusetts Institute of Technology to Amy Wu Silverman Instant.
Is what this is about.
She's with RBC, this interview, this conversation hugely anticipated, Amy Will, I'm gonna cut to the chase. Everyone's telling us there's massive options speculation.
On a daily basis.
Is that like portfolio insurance in nineteen eighty seven, is there a.
Real risk here because of the option roulette that's going on.
You know you would think so, Tom, But most of the activity we see in options right now is not for insurance. It's to bet on further upside. It's to perpetuate fomo, it's to beget momentum, and it is not for hedging. It is really historically out of whack with what we would expect from all that empirical data that I looked at Princeton.
This is a special treat Damian Sasawer's wheelhouse. Mister sasawur take over the interview and make it smarter.
Well, Amy, I'm gonna try and throw you ball here because you know, I'm an emerging market guy, but an emerging market fixed income guy. So I'm going to look at emerging market equities here. I'm going to look at that big MSCI E M E T F run by black Rock, and I'm going to look at the skew, all the call buying, all the bullish call buying that's been going on. I mean, should we look through that and see that as a signal that perhaps, you know, em equities are going to go up from here? I mean,
what do you how do you look at skew? How do you look at the options markets on some of these large ETFs.
I think that's a really interesting question. I will tell you I was actually in the UK a few weeks ago and I just asked investors that kind of point blank, you know, why is this call SKU bid. It's actually bid in the other ATF's proxies for China like FXI as well. And what we have heard from investors is, you know, a few years ago, the trade of the moment was China rebound. It did not happen. Folks are a little bit worried that it may never happen, but
the right tail is that it could happen. Yes, so a lot of this bid is actually a right tail hedge to the idea that we have bottomed. So I will say investors don't think that that is true, but that's certainly they're worried and they're not positioned for it yet.
I mean, I just have to cut you to our audience. You know how valuable that information is the fact that basically, I mean the China rebound trade, which you know people of poo pood now, I mean it's gone, it's forever gone, it's never going to come back. Just to play for that tail risk, I mean, makes a lot of sense, and to do it with voll at these levels, I mean, Amy, I agree completely. But you know, we were talking a little bit earlier about which volatility market we should be
most focused on. Is it equity ball, is it ratefall, is it fxfall? What do you think?
So of course I'm going to be a little biased because I'm an equity wall person. But you know, outside of rates ball, all the walls kind of look similar. It's not like you're getting anything different other than the rates ball universe. When you think cross asset, I mean, equity wall, especially on the left tail, is incredibly inexpensive. So there's only so many times a girl can cry wolf right. You know, people don't want to hear it.
They don't want to be positioned where they're far more concerned about the reach.
I was smarter in September of nineteen ninety eight than it was in July of nineteen ninety eight. And it had to do with the dreaded l word, Amy wu Silverman leverage.
And you know, we didn't know.
What fifteen to one or twenty two to one until Myron Schulz explained it to us.
What's the shadow right now? In the market. You can't tell me this is a free lunch.
Is it like a blatant leverage, an implied leverage, or is it some other mystery I can't see.
So, Tom, I'll tell you the hottest topic to debate right now and equities. It's just the idea of all the short volatility trades that we're seeing folks selling calls from harvesting, you know, volatility risk premium. If this some way implodes the way we saw from twenty eighteen's Wellmageddon, and you know this is going to sound a little party pooper, but we don't think so. Is the short answer.
The kind of leverage in the system and the kind of trades that are going on, especially if you include that delta from the stock is just dissimilar. It doesn't mean it cannot end. It's just not going to end necessarily in the same way. And I think that most volatile people would say that that is so just given the nature of these traits vall mageddon.
I mean, look, you know, for me, Amy, it's these buy right strategies and you know, these ETFs that are you know, trying to you know, get investors to you know, take advantage of that scream.
You have to be mortals listening. Okay, please, this is a third rail for me. You buy the asset and you write the option against it to bring in.
A further income. That's correct until it works. Continue exactly right now. They have ETFs that are supposed to mimic that type of a strategy. Amy, how convinced are you that that ETF is going to deliver that type of performance at the end of the day.
So it's interesting in some ways this is like one of the most bread and butter traits of the derivatives world. That's kind of for a market where you don't see substantial upside, that's another way to get a little yielded a world where rates don't give you that much yield. What I think is interesting about the success of these products is we actually had a relatively high rate yield environment, especially compared to history, and then we've obviously had a
market with certain stocks have absolutely ripped. So it works for some things, it doesn't necessarily work for others. It really depends on your underlier, right, it depends where that delta is coming from. But look, these are actually very bread and butter trades where if you have the underlying and you get stopped out. It's not really that big a deal.
We're to go mathe here right now, folks, stay with me, and we're going to do the conceit of a global Wall Street audience again with the Amy wou Silverman of RBC Capital Markets. Amy, Well, if I haven't implied log normal distribution where I go up on a slope that's not as harsh is the slope that I go down, And if I have all the different leverage, the bets and the setups within the system where we are right now,
I have parabolic charts, I got a squared function. It's incalculable in Nvidia, but particularly in something away from you. In bitcoin, do they track a log normal distribution on the way down? If Bitcoin goes down, if Nvidia goes down, in what way do they go down?
So look, Tom, this goes back to the what is it an escalator up and then an elevator down? Right? And I do think you know, this is part of the concern. That's part of the concern with what I mentioned with these short wall trades. The really interesting thing I would say about bitcoin, because you know, you can't dabble in volatility without dabbling and crypto a little, is that this has historically been a risk acid correlation that's actually been positive, even though it's been made out not
to be. However, we are actually seeing that correlation decline. So if you look three years ago, the correlation between just the simple equity market and bitcoin was fairly positive and it is still positive, to be clear, but it's actually come in a lot, and so it may actually begin to be behaving in the inflation head slash, you know, equity hedge that it was purported to be in the beginning.
That's a critical sting.
And I mean for Global Wall Street, what she just said is a huge deal.
You know. And now I'm gonna just say ask the dumbest question, Amy. I mean, I'm looking at put call open interest on Nvidia. I mean, wow, I mean, talk to us about what your takeaway is from the options market on what is arguably the highest of high flying stocks in the US equity market.
So I'll tell you, I think there's peak fomo when derivative strategists sit back and say wish I had an Nvidia all that's kind of how I felt after watching this thing, and watching this thing, Wow, what's interesting is after the recent selloff and in Nvidia, you know it's first one after a while, those calls didn't move, so meaning people weren't worried about the momentum. They went right back into it and those call skews are store at
historic level, still saying incredibly bush things. March eighteenth, there is an AI conference with Nvidia that a lot of folks that we speak to are looking to play.
Amy the Epsilon be with you, Emmy was Silverman there, folks. That was just a great call that will be feature today on our single Best Idea podcast.
All of us checked out a math class. What we did Lee Squares. Katie Kaminski kept going, We're thrilled. She joins us this morning with Alpha Simplex as well.
It's about trend, Yes, Is this bull market in equities trending normal? If you look at your work with Andrew Low at MIT back to the great trend followers, I think of Monroe, Trout and others, and quite frankly back to Gaus, is this a normal market?
Well, I think that's a great question because if you look at trend signals across asset classes, equities is one of the weaker signals in general from a time serious perspective, but right now we're seeing something like we haven't seen since twenty seventeen in terms of the strength of those trends.
When you look at the X axis, do you have a conviction and your setups, your trades, your belief in how you're going to deploy capital? On the X axis, are you thinking in minutes, days, weeks?
Do you have the courage to make a bet out a month or six months?
So we generally look at signals across multiple horizons, and when you look right now at where equities have moved, the turning point was in October and it's been I mean, look at S and P it's up almost twenty five percent since October. So pretty much over any window where you measure the strength of the trend, you're seeing a pretty strong signal that we're going straight to the moon. And so I think that's where you know, I'm surprised
at how incredibly resilient this market has been. If you told me in January that February is going to be as amazing as it was, I would have not believed you. I don't know about you, guys, but it's it's pretty incredible the strength that we see in terms of trend signals at this point in equities.
I got to ask you that.
Oh I.
Was on it wasn't Smith.
That's it. I'm done. You're not here tomorrow, Katie.
I got to ask you about for an exchange volatility here, I'm talking AUC dollar ball, Euro dollar ball, and the Stirling ball. I mean, we're talking lows to twenty twenty one lows right now, you know so. I mean yesterday we had people on here talking picking up pennies in front of a steamroll or tom I know you know what I'm talking about here, But talk to me about shorting ball and an environment like this, I mean, is
that the right player? Should? You know? Investors be looking for opportunities to get long volatility, especially in lieu of some of the data releases we're seeing over the next few weeks.
So looking at currencies, the weakest signals that we're seeing is in the currency sector, and there's a few exceptions, obviously the end is but if you look at currencies, they really have been consolidating a lot, and there's not been a clear picture because there's this wait and see
narrative to see what policy is going to do. So when you look at the technical sign they've really rained in, there's very little direction and there's not a lot of P and L in that direction either, so there's just not a lot of movement. So it's not maybe the place to be looking yet unless you have a really strong view.
Okay, I think you're about a big direction. You make a great point. You're making the point I think. I think that FX fall is following rateball, and that rate ball is the center of the universe. Now I don't know if that's true. I mean, is equity of all the center of the universe. I mean, I've been trained, you know, in my career to think, you know, it's the VIX. It's all about the VIX and everything m andate's from the VIX. But you know, is it rate ball?
Is it policy that's going to drive you know, markets over the next few weeks.
So I love this question because we've seen some very different dynamics in market prices since twenty twenty two, and the number one most important difference you're seeing is that ratefall and fixed income ball is still elevated, while currency ball has actually been dropping significantly. So you're seeing this dichotomy of there's a lot of volatility in fixed income and the stockbonk correlation is high, so AKA inflation matters right?
Good morning, YouTube and out on YouTube search Bloomberg Podcast. Peter from Chapel Hill, Thank you so much for listening. First time I ever met Peter. He set of moving averages. What a bount of hot air. I use Klimman moving averages from the legendary George Climban at marilynch a million years ago, or run an exponential How do you use moving averages is I look at the financial media misusing them every day.
So what's exciting about trend falling systems is their goal is really to measure where market is moving. So using classic tools like moving averages can actually be a very simple way to understand the direction of markets, particularly when markets are moving in directions that people don't like. So that's when trend works the best is when a simple strategy of making decisions based.
On how many moving averages you use.
I use three off climate as well. I use two nine and two nine and thirty I think is what no? Two eleven and thirty.
So we use many, many different types of strategies for trading trend One of which that you could use is moving average, and we tend to use a wide range well, we'll tend to use a wide range of depending.
On how look back windows. Tom, it's all about look back windows.
Yeah, it is no.
And then on the Bloomberg terminal, folks, there's a phenomenal look back test function, Damian.
One more questionnaire is a delightful.
I want to talk about the distribution of probabilities around the d sois figure right? I mean what I've been told is okay, fine. You know, the markets are pricing in you know, three cuts in an eighty percent or fifty percent probability of a fourth, but the dispersion around what might actually happen, it could be as much as five cuts. It could be a hike. You know, talk to us a little bit about how you how you how that factors into your equation and it's your models.
So what I think is interesting about being a trend follower is we do what the market is doing, not what the market should do. And if you ask me what the market should do and what we as trend followers are concerned about, it's that inflation doesn't go down as quickly as people like, because there's a lot of hope in financial markets. There's hope that we're gonna have cuts, there's wishes. But unfortunately hope isn't a.
Strategy and it's gonna get solved because Carl Gus is going to take over as head of the Boston Fed and then you'll get your you know, one over square to two pie and all that, you'll get your probability distribution.
You know, I wish we had more time with Katie. I want to ask her about com I want to you know, if you're building, you know, trend following book is going to be Commandie's gonna be I mean cocoa beans.
I'm not Steve Roach. I mean Kiminsky walks on water. But I'm my good friend Steve Roach. I'm not cancled. Can you come back again? Sure?
It's a long tread from from Boston.
Boston.
What do you What do you think of Spring training? You know they got any chance.
Unfortunately I've been watching more of the Ruins and the Celtics whose yeah, you.
Know, they's a boring way.
Just Kiminski, thank you so much. With Alpha Simplex. This is a great pleasure.
Is I mentioned this with Ellen Zenner of Morgan Stanley. When they're young and they're desperate. They write these really intelligent economic notes and they have a wheelhouse. You got to have an angle to get read. You know, you know this, Damien, You've lived it. Ellen Zenner owned the consumer. Tom Percelly owned wage growth. He just owned the study of what our wages our benefits. You're doing with PGM right now joining us, Thomas Percelli, Tom, what have you.
Learned about our wage growth? Is it ebbing away? Well?
Good to be with you, Good to be and Damien, love that you're sitting there with Tom.
We'll go there.
We'll have to talk about that as we're playing golf one day.
Yeah.
Look, I think that you know, wages, I think are going to really take the lead from quits and the quit rate it continues to drift lower. That that is the reality. I mean, it's it's one of the relationships that works incredibly well. And what we know is that the quit rate is now below where it was pre COVID, and you know, the trend doesn't look very friendly. So I think it's very easy to say that the direction of travel from a wage perspective is lower from here.
You know, Tom, I want to ask you about retail sales and PP I want to ask you about the Dots next week. But before I do any of that, I need to ask you about fifty five Locust Avenue, Tamarack Country Club in Greenwich, Connecticut. The second hole. They pushed the trap back on the left side of the fairway. For you long hitters out there, this is going to be a big problem. Tom. How are you going to approach the second hole of Tamarack this season?
It's going to make it easier for me.
I'm I'm not nearly as talented a golfer as you, Damien, So to me, that's the pleasant No.
But seriously, let's talk about next week. Let's talk about the FED, let's talk about the Dots. What are your expectations there? Is that going to be a market mover?
Yeah?
I mean, look, I think pl the spoke, so I think it's really hard to make the case that he's going to say anything that's sort of, you know, very different than what he just said last week. And I think you know, the idea of getting closer right that, you know, getting closer to cutting that, to me, is.
We agree with that?
I mean, we've been on that page for quite some time, you know, we've been sort of midyear cut would would be ushered in and then we'd see a couple more thereafter. So everything that's sort of unfolded thus far has been pretty consistent with with our with our broad view. I think, you know, if there's anything that I'm wondering about as it relates to the dots, it's it's the long run dot. I mean, I think that this is probably a very
big conversation that's happening with within the FED. I think most people would agree that two and a half percent is not the right not the right median for that, it's probably holding a three handle. In fact, I would say it's easily holding a three handle. I think it's just a question of when does it turn. If you look at the average of the top five dots and the average of the of the bottom five dots, they're
they're all turning up. The averages are so it's just a it's just a question of time that before the median finally shifts.
And what's important is Okill did a great job of extending the course off of the original architecture. You take Tamarack back to nineteen twenty nine.
Have they been successful? Damien had taken Tamarack to a new long game. Tom, It's Tom Purcelli's game.
Tom Porcelli. You know, Tom King made a mistake there. He looked at it. He looked up online. Nineteen twenty nine is no longer the funding year for Tamarack. They just changed that, I believe, right, So I'm not sure what the real year is. But we've gone back in the annals of Greenwich history to really find out the legacy of Tamarck. But no, seriously, and all the I mean, Tom makes fun of me all the time when we talk about auctions, we talk about treasury supply. How focused
are you on today's thirty or in auction? I mean, is there anything any anything there?
No?
I mean, look, I think I think they matter. The auctions matter in the context of people wondering, well, look we have all these big deficits that have to be paid for. You know, at what point do investors back away? And you know, our view has been but they're not back away, you know, And I think each auction, you know, shows that, yeah, you can have these tails here and there, but I think you know.
At at large.
I don't know that if you're the world's reserve currency. I think it's very difficult for people to back off in mass, and I think, you know, each auction sort of drives that point home.
So last question, I mean, where are you just in terms of the number of cuts through the end of this year? I mean, are you along with the FED or you're along with consensus. I mean we're talking three cuts and what fifty percent probability of another? I mean, talk to us a little bit about what Pigeon's thinking on this.
Yeah, Damian, So we've we've been pretty consistent on this view that we were going to see three cuts in twenty four. This has been our view since last year and it remained remains our view. I think the market really got ahead of itself when it was looking for six cuts this year. I had sympathy for six cuts, but spread out over some you know, sort of much
longer period of time. But I think as it relates to the year, you're looking at three cuts and look beyond that, I think it's going to be incredibly dependent on how the backdrop evolves. You know, I think everyone is like piled into the soft landing camp, which again is where we've been. But there are risks out there, and I think, you know, no one should delude themselves
into thinking otherwise. So a lot of ground to cover between now and you know, twenty five, But I certainly think between now and the end of this year, recuts is the right call.
Tim Personally, the great miscall has been a buoyant consumer, a better than good GDP. What will retail sales evidence tomorrow? What will we get out of the retail sales report?
Yeah, so the credit card spending DUTA that we look at, I suggest that, you know, February was a pretty reasonable month from a spending perspective, So I think you get a bounce back in February relative to that pretty soft January. I think the consumer is on balance in fine shape.
You know.
I said wave pressures are going to continue slowing, and they will. They're still slowing from a pretty high level. I do worry about sort of the balance sheet. I do worry about how the consumer is engaging in this level of spending. You know, there's a couple of things that come through really loud and clear in that regard. It's basically being driven by credit usage, and it's being driven by cutting even deeper into saving. It's not the
excess saving thing anymore. That story is long since gone. But I would argue that the consumer's now comming into saving muscle. Those two things credit and saving usage to drive Spain. They can only be sustained for so long before you do get into some sort of balance sheet challenges. So I think the year will be fine and you can bask in the globe. It will be a nice twenty four. But I think just note how it's being driven, because I don't know that that will have a lot of legs into twenty five.
Quickly, or if the day gig doesn't work out for me. Tamurreck is looking for an assistant caddy manager. Can you see me like an assistant caddymans.
We just got a new pro, Mike Ballo. Welcome to the club. We're really excited to have you. And by the way, I mean for those of you that are looking to get around and Tom Pricelly, I mean, this man knows how to play. He gets there. I'm sorry, Greg Peters, if you're listening. He doesn't play very well, he doesn't play very often. He worked really, really hard. He's in Newark every single day except on Fridays.
Tom Vercelli, thank you for the golf listen, greatly appreciate it.
You did look at the front pages around the world. She pulled it all night around the newspapers. Least, let's tall you.
We'll start at the Wall Street Journal. Have you ever looked at, I mean, really looked at when you book an uber or a lift to the airport, because they're saying there are some hidden fees in there if you do those advance reservations. So there was a Wall Street Journal reporter went out booked a fifty five dollars early morning ride to the airport in Phoenix. Nineteen dollars of that was a reservation fee, just for booking in advance.
They also charged over seven dollars for that booking fee, another five dollars for the airport search charge, plus the twenty three dollars fare, all before the tips. So they're telling people just look a little bit closer. Because both apps they only display that total price when you're booking a reserving ride.
The basic idea is it's just going up and up and up.
There it is.
I mean, I mean, I mean, you know, I only look at the black suv. I mean I don't even go this. I go right to the black suv.
I mean, for example, to Newark e w R, you have to use a the Uber because their taxicab process.
Yeah, Newark is insane. I mean it's just like long lines of incompetence.
And it's crazy.
The Uber they can't say, it's just trying to find the Uber driver when it shows up to is a little bit tougher.
The middle child says, in La there are Uber drivers that only drive to the airport.
It's so lucre.
We try to find an Uber dry in Paris, France when we go out there, Tom, it's gonna be very difficult. I try to before the multiple different levels.
Yeah, I take the taxis in Paris and religiously in London as well.
Next all right, I was going to go to this other story in the New York Times about you know, the the trees, but I got to point out this Hampton story, and I'm going to do this on the fly's audible, that's audible. This was the Bloomberg story. Hampton's open houses, they were packed this past weekend. People are lining up to go to these. They're saying, the contracts new listings are climbing, but the inventory is still tight.
People are paying, giving all cash offers. It's getting a little bit crazy.
This is great. I love this scrape for my wife. It's great for Corey SATs Hour Incorporated. I mean, she's a real estate broke up in Westchester. All that low hanging fruit is gonna come up to us. We're gonna have a great summer in Westchester and up north the same. It's the same. It's I mean, the market's back. I mean it is gangbusters.
In my opinion.
It's a transfer of equity gaines over to more tangible assets. I sat with a beverage of my choice, no cigar, my choice on Fifth Avenue yesterday and I was thunderstruck at all the new automobiles of all different price points.
I mean, I mean brand new.
All cash, no contingencies, two million down. I mean, who are these animals?
I mean the video.
But it's even in New Jersey. I went to open houses this a few weekends ago, and there were a lot You had to wait, there was a waiting line, and then you put in an offer and there's twenty other offers. So it's it's a little bit it.
Is interest rates.
Imagine the freights come down right right, it's your mortgage, pops, four point.
Wow, coming down?
Still talk about the rock or something.
I wish we're talking about Oppenheimer. The payday for Christopher Nolan, who was, you know, the director, producer, close to one hundred million dollars he could take in Variety. This is from Variety Exclusive reporting saying it's a combination of salary, his back end conversation, box office escalators, and a bonus of course for winning the two Oscars. I mean the movie was made on a budget of one hundred million, so you can.
How I heard it earned almost a billion, almost a billion.
It's at nine hundred and fifty eight million.
Wow, that's nice.
So I mean for a three hour movie. You know, usually if they.
Have a courage to do adult cinema anymore.
I just think it follows over in the next year.
In the year we're gotta get Lucas shawan on this.
But yes, I can't say enough folks about Lucasshaw's Sunday Note sign up.
I'll put it out in social sign up.
For Lucas Shaw's Hollywood Media Bloomberg note. It is truly priceless, really really good. You got anything else, or you want to do an audible.
That was a good audible though here if you don't like sharing the armrest with you and the person next to you on the flight. Budget carriers they're now starting to offer certain perks too. It's called from Frontier. It's their upfront pass. You can upgrade for fifty dollars. You get an empty middle seat, so that's the thing. You get a little extra leg room, seats right in the front of the plane. You get that benefit to be the first to kind of get that in flight er.
That's called business class, right.
But these are budget airlines are starting to do it now.
So that's a difference.
Receipts and the one in the middle is.
So that means that you guys are paying fifty dollars. It's one hundred dollars a seat. I mean that means that seats only one hundred dollars.
Yeah, I'm paying twelve hundred dollars to get a Zurich American Science to.
Do the same thing. I'm getting a.
Lot of the doors don't fly off the oh please, yeah, there's that.
I mean, Boeing is serious. We're gonna get some airline people on here to talk about the message. Is that all you have today that is a notable.
This is a Bloomberg Surveillance podcast, bringing you the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our global headquarters in New York City. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.