[Music] welcome to the me favor show where the focus is on helping you grow and preserve your wealth join us as we discuss the craft of investing and uncover new and profitable ideas all to help you grow wealthier and wiser better investing Starts Here meth bber is the co-founder and chief investment officer at Cambria Investment Management du to Industry regulations he will not discuss any of Camry's funds on this podcast all opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of camber investment or its Affiliates for more information
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survey findings and get 20% off your initial white charts professional subscription when you start your free white charts trial and tell them that Meb sent you for new customers only I've used white charts for years we love it so be sure to check it out our guest today is Doug greenig Doug is the CEO CIO of floring Court Capital Diversified systematic manager he's been involved in markets for over three decades most recently man AHL Chief risk officer head of portfolio Management Group Doug flooring Capital 2017 with a focus on Tren fing you know we love
it we're going to spend a lot of time on that and other topics today Doug welcome to the show well hello thank you for having me where do we find you today well I am in Abu Dhabi what's the vibe there this is the first live podcast we've done from Abu Dhabi we just did one in Lake KO what's going on how's things over there well it's a little quiet during the summer but in general Abu Dhabi UAE and the are growing by leaps and baps it's a very very exciting part of the world a
lot of hedge funds iwth individuals are located here and the economy here is it's fantastic perfect well we're going to get into all sorts of stuff you have had a storyed career with a lot of famous names Goldman man when did you get bit by the trend following bug where in the timeline would that have been it was relatively late actually and so if we go back I think it was about 2012 2015 a man AHF was looking to bring in some fresh blood someone with a lot of experience in different parts of business and
as I took the bill the area where I arguably La special expertise was their field the CTA space and the trend Fallen space and when I got there it was very exciting for me because it was so different from the work that I had done discretionary training fixed income art all the different things I've done over the year credit you know I've seen a lot of different things and the trend following space is different but coming at it with that background that I did would be a little bit like returning to college with the of
wisdom and experience you might have as an adult you would read mly differently you'd listen to the history class and it would be different for you I was able to look at the trend following World and think about it with a fair bit of sophistication but also the open eyes that you have from not having been indoctrinated into it I if you can ask the question why do we do things this way instead of that way what if you did the opposite and so on like one of the things I learned very early on it
became apparent to me is that Trend followers trade volatility every bit as much as they trade true because we volatility this is true for almost all traditional ctas you scale volatility relatively rapidly you're always adjusting position sizes to be proportional to signal strength and that means that when ball doubles while else equ will you cut positions off Fe in half but you're doing that at a very rapid time scale in many cases a more rapid time scale than the trend signals themselves and so question is what happens if you don't do that well you lose
about half of your sharp okay what's this mean well I connected this up in my mind with kind of a Minsky framework so narratives develop in markets trends occur you see big Market moves and then at a certain point The Narrative begins to change there's new information maybe positions are too gra and at that point there will often be a burst of volatility as a new narrative emerges and Trends change direction and by scaling volatility rapidly that burst of volatility is sort of a signal to get out and that Insight that came to me as
I looked at how CTA approached the world do you remember what really struck you about the strategy maybe is sort of like the status quo at the time so from not an outsider but from someone who is kind of really digging in as particularly interesting but also particularly like huh I wonder why they do it this way or frame The Narrative this way maybe they should be thinking about YZ anything come to mind from those earlier days well one of the interesting questions is portfolio construction so we know Trend followers in general understand how to
Trend follow individual markets whether you're talking about people in the David Harding tradition or the tradition of the US ctas and so again you're looking at Trend signals either oscillators breakouts or related kinds of signals and then you're looking at volatility scaling but then how do you put a portfolio together what's the best way to put a portfolio together and that is a very very interesting topic and by the way there aren't there aren't so many definitive answers a Flor in court we sort to favor a maximum diversification apprach portfolio construction let's talk a little
bit about that because y'all do this a little differently or a lot differently depending on what you're comparing it to may maybe tell us a little bit about the base overview of Floren and what what yall do because it's a pretty fascinating departure from kind of I feel like most of the CT or Trin followers understand this very key concept but you guys have like taken the dial and and turned it up to 11 or 12 imagine you start with five or six assets and you're trying to Trend follow those assets with typical ct8 models
and by the way these models tend to be pretty highly correlated with each other once you control for frequency on aage 20day holds five day holds or 200 day hes so these the different Trend models that one might use tend to be pretty related to one another at the end of the day terms of the correlation so you start with these markets and what you will notice is your Shar ratio isn't very high it's not very high on the individual markets and it's not going to be terribly high on five markets unless you happen to
piit Coco B here or you choose the right moment to short the end Trend follow the end and that's the because Trend following is a low conviction strategy you're going with the flow you're going with the trend when things get more volatile you C risk when things get less Vol you expand risk and so it's a sort of a relatively low sharp ratio world that you're living in up with an excellent positive skew and some good correlation characteristics but you go from five assets to 25 things improve a lot then you go from 25 to
50 in general you get a fair bit of improvement and most developers Market CTA trade about a 100 assets mostly Futures and F effect forwards dollar Yen B Futures S&P futures crude all the standard stuff that you could think of they are about hundred of them and a natural question which arises is can you add more uncorrelated assets because if you can the famous was it Ron KH and Richard renold fundamental theorem of portfolio management this risk adjusted performance is bread times scale and if you increase diversification all else equal same level of skill things
improve things basically go up with the shark the square root of the number of independent vs Shar sare independent bets you have so following it was an idea that certainly was very welldeveloped in AHL but other people had it as well that what about adding more markets creating new kinds of markets trans Trend and roddam that thinks about things like this you know CGA think about it so with Floren Court what we did is we tried to say we're going to create a maximum diversification portfolio with as many alternative markets as we can trade and
we're going to just do those because anybody who invests with us probably is already invested in a developed market Standard CTA and so we're going to add in the way diversification to B allocators portfolio we're going to diversify they're diversifier and so we now trade close to 500 alternative markets ranging from Turkish interest rates to onshore Chinese Commodities like methanol to California carbon emissions to Chinese container Freight to Chinese base Metals credit default swap Industries it's quite the list of markets and then if you're going to try to do this in all these markets then
can structure portfolio in a maximum diversification sort of way to get the maxim full benefit only smart I know you love all your children equally and as a TR Quant trenow you got to be somewhat agnostic but do you have any special part in your heart for any of these particular weird and esoteric markets where you're like looking at this portfolio you're like you know what I just really love California power whatever it is are there any where you're just like this is one that speaks to me I don't want to sound fickle in my
affections okay over the years power markets electricity carbon emissions natural gas they've been very very exciting markets that move a lot and this has a lot to do with the elasticity of supply and demand and for example 20121 and 2022 those were spectacular years the Ukraine work by Wellness in terms of really profound huge Trends in the power Market you also get special things like EDF electricity trance will sometimes shut down parts of its nuclear Fleet uh to maintenance then you'll have a spiking and then a decline in fresh electricity prices so power markets historically
have been very interesting right at the moment they're a little bit quiescent we've actually returned in some respects to pre Ukraine war sorts of levels you know um at the moment however the carbon emission Market are very very interesting California carbon emissions are interesting the freight markets historically been quite interesting and diverse the different routes are different for example Chinese containerized freight was one of our best markets this year due to the disruption in the Red Sea of shipping traffic and how that's played out I'm always liked crypto a great deal we were involved fairly
early is not a huge part of our portfolio which is a part of very bit of affection for in part because fundamental value so elusive Trend following is particularly well suited for a world where fundamental value is elusive where there's an underlying instability in the economic environment political environment and international relations is sort of very well suited for this kind of postmodern world that we're in where we can't really be sh very much the next few months actually not even that as you look across adding or subtracting these new markets I mean that's order magnitude
more than many traditional managers will Target with their gold and oil and Yen I know they're kind of two sides of the same coin but when you look at them is this the magical non-correlation is that the main thing you're kind of thinking about as you add these because as a trendall you kind of come to this with the belief that there is the potential expected returns at some point on something that may Trend but it seems odd that more people wouldn't come to the same conclusion that you have I guess is the way I'm
trying to think about this more being better it's a good point but it's a lot of work it's not necessarily fun work don't watch the show billions and think that's not life instead there's just a lot of heavy operational lifting my two partners David Dennison and Tony ganitsky are doing a lot of heavy lifting when we add 30 or 40 new markets in the year the entire team is working very very hard on that now in some ways it may be less sexy than making some tweak to a model right trying some slight variation of
the system that you used maybe you can get a slightly better back test but it's my claim that is lower anging fruit I don't mean to mix matter Force but everybody's trying to ring Alpha out of like this towel damn Tow and one thing you can do is just squeeze harder and harder and harder and try more and more different models and by the way you can get arbitrarily good back tests if you if you do enough over fitting and things like that but it's a different orientation to say I'm going to take the tried
and true models that worked well and I'm gonna apply it over here to California carbon emissions I'm GNA apply it over here to Freight markets where I'm going to do the work so I can trade Turkish interest rate swaps and sort of go through this whole process we were one of the very early people involved in trading onshore Chinese commodity markets with offshore money and so we did the work to do that properly and legally appropriate and so I think one issue is it's just a lot of work number two there's not that much capacity
you do all this work and our capacity for what we do is going a neighborhood of $3 billion okay you're not going to be able to do a$2 billion fund with all of these alternative markets and have them count because you want each market to be moving the needle you don't want window dressing where you say well these 100 markets don't really count the these 50 are the main ones that that defeats the purpose of this diversification I think you're almost there rare are the days where investors will talk about capacity and actually cap it
you're pretty close man a very common question that I get from allocators particularly those who are new to the CTA space is what would you do in the CTA space and I said there are several good alternative market ctas and we think that we're one of the very best it's good to have some of that get yourself a good developed Market CTA for a certain part of your risk maybe even look at one of the highspeed ctas to add to the positive convexity than the develop markets you care about that's probably about the best you
can do okay we have the higher sharp r isue in our experience because of the greater diversification and the fact that the markets that uh we traded seem to be somat le less efficient to Trend a little better we believe that our sharp ratio is closer to one than to half whereas I think the regular ctas are somewhere about half as much or something and then of course higher speed ctas T to Great skew but they give up some sure but if you put it all together you get something really to it an additional benefit
in my mind thinking about all these markets is you have the position sizing that you reference that if you do have a headache the headache is smaller I'm thinking of like sort of the lme Fiasco of a couple years ago I don't it's three four years ago I don't even know at this point but thinking about some of these markets and some of these being esoteric and it's same for me like we talk a lot about Angel Investing on this podcast and very similar Dynamics where I got a lot of friends that that will do
Angel Investing but they may only invest in five or 10 companies and I say you really need to get up above a hundred to even feel remotely comfortable in my mind but I've kind of Taken what you guys have done but to the extreme there and so for me it's been personally over 400 because I'm like to get some of these big Winners the math helps you when you get to be a higher size of these different opportunities and I think this year on the traditional CTA Trend world this became apparent with when you reference
Coco where it's something that most people traditionally wouldn't think of as they're focusing on the Yen they're focusing on gold and then you get all of a sudden all these returns from something that's esoteric same thing with y'all with California power or Turkish who knows what what tends to be the biggest disqualifier when you're looking at new markets is it capacity is it just pain in the butt of operations there of having to trade some of these what are the main things that kick them out we take a perverse pleasure in overcoming operational challenges which
is kind of sad commentary on us I think no it's more the case first ter all is it needs to be different from what we have having an IL a slightly less liquid version of what we already do some other Market that's not desirable sometimes we'll take a market we'll throw it out and go into this close cin which is more liquid and better behavor so we can do that so some of the while we might be net adding 35 markets in the year might be a total of 50 being changed and some cases switching
from one to another so we're looking for something that's diversifying different as adequate liquidity because we need to be able to do it enough size that matters now our standard in that regard is is a little different because we have a relatively flaven even portfolio allocation across 500 markets by the way you're observation about a portfolio of venture positions and and how it pays to have a large number of options so that you can experience those tail events okay it's very insightful and quite correct in my opinion and that's exactly what we're doing in a
certain sense what you said is what we do in the CTA that's a nice way to put it you got to get a little bit of a philosopher hat too read a bunch of your writings and so let's say you're hanging out in London or Abu Dhabi or somewhere and you're talking to a pension fund or a family office who historically hasn't been in the trend falling space and they say okay I got two questions for you and I'm sure you've answered these a thousand times similar to kind of how we have the first question
is I don't get why does this work help me out I'm a traditional equities person I do endowment style portfolio but I really like this idea of Tren falling but it sounds kind of Arcane to me what's your answer for this well my answer is in some ways it is a little mysterious in our op it's not the same was F but one of the profound behavioral VI biases that we can't get over it's just so hard it's anchoring bias and what that means is our sense of where things ought to be is too heavily
shaped by where they were I remember in I think it was the was it 2009 2008 okay when interest rates had already dropped a great deal due to the financial crisis a very very experienced smart investor I know asked the question at that time Doug do you think the 10e can get below two and a half% or something I forget the exact number but it was a number that subsequently ended up seeming very high compared with where things got subsequent years but the reason the person is thinking that say take where we've been and then
they say okay let's take 50 bips off that or 75 bips that's kind of where things can go I remember people asking it short and this is a good question black discussion when we worked together in 93 we're having a debate whether interest rates could go negative including policy rates and this came up in the ISS of derivatives pricing because you had a choice of using a normal model for the short rate or a l normal model or there's a square root model that's kind of in between I think model and the question is is
okay can use the normal model because that would potentially allow negative short-term interest R and fiser and I both thought that it was possible and I think everybody thought we were crazy including us okay so weiz a little bit out there but that anchoring bias is very powerful and it tends to prevent things from moving perhaps as far as they should there will be people who fight some powerful Trend based on where things have been in the past it doesn't flow naturally to some new level now you might say but how do you know the
right level well that's partly why you got anchoring bias you don't so you rely a lot on the past and so anchoring bias I think is a big factor and once you see anchoring bias and you understand it and talk with your friends talk with you see it everywhere like it's you can't unsee it indeed by way see this with the way Equity analysts approach their forecast they'll sort of take where you've been you know project up or project down but within a kind of certain range and I'm not saying and by the way mark
my words I'm not saying I can do better because it's hard but I'm saying it affects the behavior markets and it creates Trends you think in terms of you listen to your friends about the stock you told me to at 100 it's down to 80 I'll just sell it when it gets back to 100 there's so so many of these sayings you hear from people or and I feel like people are much more fearful with their profits you buy something 100 it goes up to 120 15 like oh my God I can't believe how much
money I made I got to sell it and in no scenario do you think of the possibility that that could eventually be a 300 500 ,000 5,000 stock and people just listeners just start to pay attention to some of these anchoring ideas and then once you hear them see them everywhere housing is a big one certainly for people and as they think about housing oh yeah that's a lovely example you're putting out a lot of great examples there of it so that's one now here's another one leverage Cycles think about the deleveraging that took place
in the US housing market and the way there was a feedback Soros used to refer to the best macro trades as having reflexivity positive feedback but those positive feedback loops often involve either leverage or the opposite D leveraging okay and you see that both at the level of big Market moves like housing boovs or crashes but you also see it at the level of individual trades where more and more people start subscribing to the idea let's say using the end as a funding currency and okay I'm gonna buy some nice juicy Latin American currency the
nice High real yield people get into that and then the thing Twitches the wrong way and there's the trend up then the trend down okay so that's another source of these Trends leverage cycles and reflexivity and reflexivity in general and then last but not least we don't really know what fundamental value is this ties in with the anchoring issue and you have to almost kind of let it play out the markets that Trend the best are the market markets where no one is quite sure what it tends are really worth things that don't trend well
are F funds futures for one or two meetings after that's just an Actuarial game did you know what I'm saying of course it mve sometime you really need to go out to like the one year out or two years out EUR a dollar where you start getting into some real expectations about the future we're just talking about the next fed meeting that we'll have this kind of the characteristic it doesn't Trend According to some narrative like higher for longer or real interest gr are too high right now so the second followup question there all right
dou we hear you we like you we like this concept of Tren falling how much should we slot in to our very traditional endowment style portfolio for allocation so not just to you guys but but Trend as a whole what do you think the bar Optimizer would say how much should we uh allocate to this as a strategy well it kind of depends on what you're trying to accomplish what your goals are and there's one role that Tren can play which is a risk mitigation mod in which case you want to favor faster Trend following
programs you want more skewness in the program I there are number of programs I think really excellent out there and we provide some or there are other people that can actually give you a nice solid sharp ratio and some of the skewness and some diversification so what I generally would encourage people to do is I give them some of my returns and let their analysts put their portfolio together with what I'm doing and then sort of let them try to decide what return and profile they want because we don't exist in isolation but then again
no investment assist in isolation you always want to try to look at this thing together and so I try to give people a good recommendation on what they're trying to accomplish if they're trying to be a protection against the S&P going down then we're certainly uncorrelated where we're not a t protection product against the S&P although if the world ends we probably do PR well partially ends on the other hand if you'd like a trend following program that's pretty uncorrelated what you're doing now not have correlated with existing tring program and hopefully continues to deliver
a sharp ratio close to one which is very high for CH fing program you do a lot of writing and on the macro environment how much of that is like curiosity because it's in depth and it's well thought out how much of it is sort of happy hour going on a walk with friends chat because what I'm what I'm leading into is how much of this is describing the lay of the land versus working its way into how we think about about portfolios or how you actually Implement any of the systems most of this is
for my interest and pleasure like you I think of myself as a student of markets and a student of investing and many of our clients like to have some interesting insights to take into investment committee meetings and and just some thoughts that they can batter around but I enjoy having those okay and it just so happens that a lot of the ways I do think about the world tie out with the general desirability of having a more long volatility perspective I was thinking about what basic aspect of my worldview is a little bit different from
other people and so I started thinking about who's a guy name or is a guy name Francis and she's sort of an neol liberal icon like the ultimate in a way Doos man maybe I'm being unfair foris I apologize if I am he wrote a book called the end of history and the last man in 1992 and this was on a moment of American triumphalism America was the absolute relative Peak and we and the general he was the West we have it all figured out we know the kind of political system and economic system that
we need by the way I think the US in the mid 90s was actually running select budget surpluses at least we weren't running big deficits was a point things were going very very well and my basic view of the world is the exact opposite I don't think we have very much figured out and the older I get the less I see to know my sense is our political system and our system of governance has flaws that I one don't not fix they're very structural short election Cycles but we need to make policy for five 10
20 years not the next news cycle I think about how inequality is increasing randidly it's not because the Democrats or because the Republicans it's because we're living in a world where technology and globalization amplify talented people there'll probably be somebody watching this podcast later in like charta but hopefully they'll get some value out of it but but the point is if you have something to say if you have something to offer whether you're Taylor Swift or much less known figure the point is that reach and amplification creates tremendous inequality the differences are just much greater
and that's creating an unstable Dynamic and of course we're in a multipolar world there's going to be great power competition the way we hav't seen and so I'm looking at a world filled with instability and uncertainty none of these things are probably forign to you at all the fact of the matter is how are you supposed to invest in the world that is so uncertain unstable Dynamic and non-stationary that's so I think this a very good case for thinking about had to deal with the tals with trends that you couldn't even imagine how many people
thought in video become what it has some did but certainly it was not anything more like the market consensus and it's it's back to almost knocking on all-time highs here in late August I think that stock is what three tril now so who knows but it's been fun to watch that's for sure it's extraordinary and I'm not analyst of the value of invidious stock but people are correctly perceiving that the world is changing they very deep way AI is absolutely amazing we have a very close relationship with the mded University of artificial intelligence here in
ABAB which has just an amazing faculty and they're doing really really interesting work so the world is changing in all these way so to your main point point we are systematic My Views about the world do not really influence how these models work it can influence some of the markets that I look at so I'm very very interested in the energy transition so if I can add markets that are involved in energy security and energy transition that's an area that's very exciting obviously the Chinese commodity markets are incredibly important as well frame Market markets there
are a lot of things that the world that I've described impact and so that shows up in our very extensive Market list but we're fully systematic and the views that I express are more for my benefit the benefits of the reader also people who are interested in the question how do I trade a non-stationary world is dynamic one of the things you've said is when narratives change there tends to be a burst of volatility I think the world not too long ago maybe saw some of this with Japan this summer some pretty quick Jiggles in
a few different directions that seems to have subsided a little bit but could you maybe elaborate on that concept or maybe even give some examples on how you kind of think about that narrative shift and then all of a sudden the burst of volatility and what that implies in the case of Jaan I would say the issue there is it became quite apparent over time the Japanese monetary cost is out of alignment with the RIS and it's out of alignment for two reasons one is that inflation has been falling steadily okay with some chiness in
the US and in most European countries but you can see the Dynamics behind inflation by examining for example the Vim for money supply which is now pretty well behaved we had this monetary expansion inflation and now things are pretty much back on the trend line and so with inflation coming down and policy rates as high as over 5% real interest rates are very high so the fall of inflation sort of caused real interest rates to look higher then you go to Japan and seemingly out of nowhere after three decades Japan sing of inflation I I
think the Japan Japanese inflation is running over 2% policy rate at zero so that disjunction gave rise to a very big carry trade the real thing was just the sudden recognition that madebe the bank of japat is not to sit there and just let this happen Okay so they when they popped up interest rates and talked about reducing their bond buying and it shock people out of their position I would say that one place where the change in the world has become quite apparent has even shown up a little bit in the markets is the
US does not have the omnipotence to control that it once did I want you to consider operation Prosperity Guardian where the US tried to reopen the Red Sea when the hotis made the decision that they wanted to squeeze Israel by shutting down Red Sea shy traffic as the US formed this Coalition and you have to remember Y is a poor country this is not Russia or something and yet operation Prosperity Guardian in the view of most military analist has been pretty much a resounding failure and that ended up really causing some significant shifts and shipping
rates so this is an example of I think people were surprised by how ineffective this military operation was and the fact that shipping was as sced as it has been that would be an example privately we're going to see this issue that U the US is not being able to call the shots the way that it wants to we're going to see more of this in the coming years with potential impact on specific markets you talk about grey rhinos what are those I like GRE Rhyman so you have this bestiary so that the right term
of all these different kinds of risks you happen to see till that who introduced the concept of the Black Swan and is certainly an interesting character a great rhal risk is a risk that is just sitting right in funny and it's there you know it's there and you know really do he said about it for example the size of the US debt the fiscal position of the US I don't know if you've taken a look at Congressional budget office estimat of where things are going to go or the pen Borton budget model which is a
similar thing and it is absolutely frightening where the debt to GDP ratio in the US is headed this is not a false alarm and REM the right term I'm not being a Cassandra this is the serious thing and we're going to have great difficulty great great difficulty addressing it because almost all the solutions will be politically unpopular and therefore will not happen austerity is not going to happen putting up taxes will be very very difficult it is a very very serious situation already interest payant on the on on the debt exceed the combination of the
defense and intelligence budgets right now and if they dump them off by the tiniest of the M we're approaching trillion dollar a year that's in Ray RH climate Chang right now it is happening slowly but surely and I believe that quite firmly it's not just some left wi conspiracy it would be a wonderful thing if it were about but actually read V needles of how the world really works it's a great book on energy climate there were scientists a hundred years ago who more or less worked at the trajectory putting all this carbon in the
atmosphere so it's just that it's happening so slowly that we don't quite know what to do about it there isn't enough urgency and it's hard to get that urgency because it's a problem not for tomorrow and nobody wants to slow the economy down at least I I'm certainly in favor of capitalism and growth all the good stuff that that makes our lives nice and so you don't want to interfere with that at the same time you look at what the consequences are likely to be just on a precautionary basis a lot of our big cities
are right there at sea level I was there when a hurricane Sandy flooded New York doesn't take much more to create a lot TR so that's another great writer I know there are people who disagree with me and we say Doug don't buy it that's actually one of our usual closing questions but since you mentioned it let's chat about it now but investing belief you go sit down with a group of peers doesn't have to be Trend followers or quants just people in the investing world what's a belief that Doug would say that it's got
to be the vast majority 75% of people would disagree with you about or shake their head you say this at lunch tomorrow and they're like what is he talking about he's cra crazy I would say one view is I'm more bullish on China by far in the long run than other people and I reject most of the standard arguments but of course there's the demographic issue but what China is attempting to do is essentially through the Bel and Road initiative and other things tap into a huge pool of inexpensive labor in the global sth and
climb the value chain very very hard China graduates more highly qualified Engineers right now than the rest of the world combined China invests okay as percentage of GDP they're investing it's about 40% it's so multiple of what it is in Western countries including the US and I realize there are difficulties in the Chinese political system but already China is leading in the publication of papers and very high quality journals in a variety of subjects the quality of the academic and Engineering work out of China it's rising and Rising fast I'm not necessarily frightened by it
because I see myself as kind of a bable person and I want everybody to do well including the Chinese doesn't have to be the case but I think the vast majority of Western investors do not appreciate how successful China will be over the next 20 years and I don't think it's necessarily A Bad Thing by the way it's already happened in electric vehicles you go back five or 10 years how many people would have predicted where we are now was it 90% 95% of all Green Tech investment some huge percentage is done in China I
feel like people people get stuck in just focusing on Chinese equities they look at Chinese equities and they kind of just they go up and they go down they go up and they go down currently more down than up but they haven't really gone anywhere in a certain amount of time and that's what they extrapolate as the progress as the success of what's going on over there now they're really cheap now certainly relative to where they have been but just the scale and numbers is often hard to comprehend and we love talking on this podcast
about certain things that really frame it and go back to anchoring but talking about things like popularity outside our shores of certain things soccer is the most obvious example but even things like talking about Cricket in India and other places like UK where there's like more fantasy cricket players uh people to do fantasy sports than there is in the US of like total fantasy users right so like it people focus on their little world and then learn things like this and it's fascinating but China just being so and India too obviously being so big the
numbers and the scales is almost hard to comprehend I know my dad was a midwesterner from Oklahoma was in the Navy then went to Columbia business school and I'm a diing the wool American right Harley David motorcycle in the English Countryside slowly and carefully the country roads and and so have a very American View and I think we have an amazing quality of life in America it's wonderful it's a wonderful amazing country but I'm saying there is a little bit of ins Solarity people don't understand how transformative Global South is and how China is in
particular they're a country that's working on like UA and I on a five year 10 year 20 year 30 year plan and it's not about an election cycle they're turning out an extraordinary number of fantastic scientists and Engineers we argue that they don't consume enough we did argu they need to be like us they need more consumption less investment and probably they do need less residential investment although it's probably the real estate lest probably down 30% or something like that's what it was I make an argument that all of this investment has created a tremendous
infrastructure there and it's turning out a huge amount of human capital and I think it's an exciting and good thing for the world so i' say my my nonconsensus view is I reject both the complacency and the negativity that people feel I China about China I know China of course has a real estate recession that problems what's been your most memorable M probably been thousands of trades in your career this could be personal it could be with work it could be good it could be bad anything come to mind seared into your brain one memorable
moment was early on 1994 and this was at the end of the tightening cycle and there was still another 200 250 basis points of tightening built into the FED funds curve the curve and I asked my because this was in early experiences very memorable I asked this a question if the central point of the distribution is 200 200 more tightening after all the tightening they've done are we sorted can we assume some slight symmetry are we saying that 300 and 100 are sort of equally likely 40 it's too high when if you have to assume
that which symetry by the way this applied recently remember when the FED we were pricing six gr Cuts this year something like this this is back in like was it January Fe cut six times so you're sort of saying cutting eight times and nine times is equally likely versus three times to you oppos symmetry so at the time I bought year dollar features then and I remember there was a weak retail say in early 95 and it's just that whole hump to the curve just CS that was very memorable when I was a grinage capital
we had a lot of very successful trading and mortgage derives like inverse iOS whack iOS Nims and again these are effectively interest rate derivatives that have essentially have bets on curves and and typically a lot of spread so you're trading essentially a package of options so I always enjoy trading options and so I like synthesizing the moon along side it's a trend follower it is a uh optionality has always been of great interest and I think in the world we're living in now optionality from synthesizing involved to Trend following this particular guy it's been super
fun today Doug thanks so much for joining us thank you very much podcast listeners will post show notes to today's conversation at mefa.org podcast if you love the show if you hate it shoot us feedback at the mebf show.com we love to read the reviews please review us on iTunes and subscribe the show anywhere good podcasts are found thanks for listening friends and good investing [Applause]
