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Music Hello

1:00

and welcome to another episode of

1:02

the Odd Lots podcast. I'm Joe

1:04

Weisenthal. And I'm Tracy Alloway. Tracy,

1:07

U .S. exceptionalist. Like, to my

1:09

mind, the big question. for

1:12

investors is like, we've had this 15

1:14

year plus run of where it's

1:16

like the only game in town has

1:18

been you invest in the US.

1:20

You did not get paid for diversification.

1:22

Arguably, you didn't even get paid

1:24

for diversification within the US because you

1:26

should have just been in tech

1:28

stocks the entire time. But I really

1:30

feel like this is the moment

1:32

where people are asking like, Is

1:35

this one trade that's worked out so well?

1:37

Is it coming to an end? You know

1:39

what I really like? I like

1:41

talking about U .S. exceptionalism in

1:43

markets because no one immediately starts

1:45

debating like the definition of U .S.

1:47

exceptionalism. That drives me crazy. Right.

1:50

Because in the broader realm of

1:52

like just politics or society

1:54

or life, like is the U

1:56

.S. But in markets, it's unambiguous.

1:58

Yes. In markets, it's unambiguous that

2:00

U .S. assets have just

2:02

been. where you want to be for a long

2:04

time. So not only have U .S.

2:06

equities outperformed recently, but they've really come

2:08

to dominate the market as a

2:10

whole, like as a proportion of the

2:13

market. So the entire world, you

2:15

know, even with U .S. stocks falling

2:17

recently, the entire world basically still has

2:19

an overweight on America. The world is

2:21

overweight. No, I mean, it's true.

2:23

And if you're a global manager and

2:25

your benchmark is the MSCI, AWS

2:27

or whatever, you know, it's still in

2:29

large part of U .S. trade. By

2:31

the way, I was looking at

2:33

the Bank of America fund manager survey

2:35

today, which is one of my

2:37

favorites. And after two straight years of

2:39

long MAG7 being identified by fund

2:41

managers as the perceived most crowded trade

2:44

in this most recent month was

2:46

gold. which was really interesting. Oh,

2:48

so it's finally changed. That was

2:50

the thing, because for years and years

2:52

and years, everyone was like, oh,

2:54

fangs, big tech, so crowded. And

2:56

the suggestion was, don't even bother

2:58

buying, because the valuation is just so

3:00

eye -watering at the moment. But in

3:02

actuality... If you wanted to not

3:04

even outperform, but like meet your benchmark,

3:07

that was the only trade was buy tech.

3:09

This is the true pain trade, right? Because

3:11

it's like everybody is long tech. Everybody is

3:13

overweight tech. How could you make money buying

3:15

tech? And yet you still had to buy

3:17

tech just to keep up. And so now

3:19

there's the question of is the pain trade

3:21

reversed? Because if there's so many people are

3:23

so into tech and so into the US, can

3:26

they actually make the risk and take the

3:28

move of like, you know what? I'm

3:30

going to overweight Germany or I'm going

3:32

to buy. Chinese stocks or whatever it

3:34

is. And these are, I think, this

3:36

is the moment where you have to get

3:38

this call right. And this is the

3:40

call of the moment. And you haven't really

3:43

had to do that before. Now things are

3:45

getting interesting. Right. We all know the backdrop. of

3:47

all this. So we don't really have to

3:49

do that in the intro. But I'm very

3:51

excited about our guest. We're still here in

3:53

London. We are going to be speaking with

3:56

Ozan Tarman. He is the vice chair of

3:58

Global Macro at Deutsche Bank. And he talks

4:00

and thinks about all of these questions with his

4:02

clients all the time. So we're going to get

4:04

a slice of what he's thinking about. Ozan, thank

4:06

you so much. Great to be here with you

4:08

in person. Wonderful to be here. Honestly,

4:10

I'm a big fan. I listen to you guys

4:12

all the time. My clients and friends are big

4:14

fans. So it's great to be here in my

4:17

hometown. This is very important to

4:19

us when guests say this on

4:21

the episode. We hate when they say

4:23

it before the recording starts because

4:25

that was a total waste. Do you

4:27

agree with the premise that I

4:29

set up, that this is essentially the

4:32

big question that everyone has to

4:34

grapple with right now in markets? Without

4:36

a doubt, and quite tiringly. Sorry

4:39

to exhaust it. We're exhausted too.

4:41

I mean, even we're very exhausted

4:43

after the liberation day, but even

4:45

before all that, we're exhausted from

4:47

how wrong the whole Jan 2,

4:50

Jan 20 consensus went. Everybody

4:52

and their brother were believing S &P

4:54

would go anywhere between 7 ,000 to

4:56

6 ,000. Tiva

4:58

US 10 -year would go to 5%. It

5:00

kind of did, but for all the wrong

5:03

reasons. And then Eurodollar,

5:05

right? And everybody who's saying parity,

5:07

believe me, politely, deep inside,

5:09

they were believing 0 .95, that

5:11

dollar CNH would go to 8.

5:13

I can go on and

5:15

on. And why, right?

5:17

First of all, this US exceptionalism, we

5:19

can go into tech as well. But

5:21

first and foremost, it was about fiscal

5:23

expansion. U .S. was the

5:25

one, the big one, printing

5:28

the most, especially after Omricon.

5:30

And on top, yes,

5:33

the Magnificent Seven, the

5:35

wonderful Silicon Valley story,

5:37

and the belief that

5:39

Germany, Europe, and China,

5:41

for different reasons, would

5:43

never match the same

5:45

fiscal ambitions. All these

5:47

three things I mentioned are completely

5:49

turned on their head. To

5:52

Germany's 1, in fact, 1

5:55

.1 trillion. To China,

5:57

holding on to their currency and

5:59

choosing more fiscal. All

6:01

the consensus trades and views are

6:03

thrown into the water. It is

6:05

true. In January, we recorded that

6:07

episode with the ECB's chief economist.

6:10

And it was basically about all

6:12

the challenges facing Europe. And then

6:14

like two months later, European stocks

6:16

are surging. Everyone's getting very excited

6:18

about that market. What

6:21

I imagine might be a difficult

6:23

question, but maybe it's not for you.

6:25

How much of this has to

6:27

do with things being really bad in

6:29

the States versus things actually going

6:31

well in Europe? I really like that

6:33

question. It's not a difficult question,

6:35

actually. It's a key question. At

6:37

the very beginning of the year, it was

6:40

more about the rest of the world doing much

6:42

better than expected. Germany's

6:44

step is a huge step. After

6:46

the election, I held a

6:48

micro dinner. In Frankfurt, as you

6:50

do. And both our big

6:52

cheeses and some of our key

6:54

clients really did not see

6:56

this coming. Maybe 300 billion, maybe

6:58

400 billion, mainly on defense

7:00

after the shock in Munich. But

7:02

infrastructure, health, education was hardly

7:04

mentioned. Something like 1 .1 trillion. My

7:07

head of rates trading was throwing

7:09

that out as an idea, which was

7:11

quickly pushed back. Then the Hamburg

7:13

local elections happened. And right away, MERS

7:15

came up with that number. And

7:18

before the new parliament sets in,

7:21

sometimes these words, hyperboles are used too

7:23

much, but that was a historic

7:25

step. On top, China, deep seek, that

7:27

was a big, big development. I

7:29

mean, I was jumping up and down

7:31

on my Bloomberg on Saturday and

7:33

Sunday of that weekend. Whatever you

7:35

want to believe. I mean, maybe they'll do it

7:38

for five, maybe they do it for 50. They

7:40

definitely don't do it for 2 billion or 1

7:42

trillion, right? So deep seek will change. a

7:44

world for Magnificent Seven and

7:46

all of us consumers. But then

7:48

to trace his question, recently

7:50

it's becoming more about U .S.

7:52

hurting itself, U .S. hurting its

7:55

soft power, U .S. creating a

7:57

confidence crisis in a way. With

7:59

full respect to Scott Besant,

8:01

who's been a dear client friend

8:03

as well, who's been to

8:05

some of my New York macro

8:07

dinners, when he says what

8:09

Mac Seven goes through, has

8:12

got nothing to do with mega. It's

8:14

more about a deep seek issue. I

8:16

would kindly disagree with that. Of course, deep

8:18

seek, as I told you, has got

8:20

many factors to do with

8:22

it. But tariffs, much more

8:24

than people expected, ended

8:26

up shooting US on its own

8:28

leg. Is deep seek about deep

8:30

seek or is it a metonym

8:32

for the rise of competitive Chinese

8:34

tech? I think more for the

8:36

latter. But my friends that I

8:38

do trust in beyond Market

8:41

mine yours. From the

8:43

start, believe that it was real.

8:45

Some things it did much better than

8:47

ChatGBT. And I think US, since

8:49

it has given me my education as

8:51

well, the first reaction to it

8:54

was the US I know. This is

8:56

for real. It may help all

8:58

of us. Let's compete. So in that

9:00

sense, it was good for humanity

9:02

as well. But yes, that was the

9:04

first step in this year in

9:06

which China said, hey, I'm here. Then

9:08

the second big step was last

9:10

Wednesday. I mean, Joe and Tracy, last

9:12

Wednesday, unfortunately, five, six hours before

9:14

this, when I woke up to see

9:16

the China fix to see if

9:18

they devalued big or not, and when

9:20

I was leaving to see they

9:22

haven't, then I looked at US 10

9:24

-year, as you do, and Eurodollar, and

9:26

then... didn't, unfortunately, sleep. Why? I

9:28

didn't sleep that night either. I was

9:30

on my couch updating my Bloomberg

9:32

app on my phone, just looking at

9:35

10 -year yield. Imagine if we did

9:37

this one week before, because U .S.

9:39

10 -year had gone to 4 .55,

9:41

and at the same time, dollar was

9:43

weakening. So even that Sunday, three

9:45

days ago, I kind of knew this

9:47

was the vibe. Some people were

9:49

really worried about it, but I didn't

9:51

see. I didn't see in two

9:53

days. Dollar melting like that. And at

9:55

the same time, U .S. long end

9:57

being basically lost 10 and 30

9:59

years. That is my terroir. I grew

10:01

up in emerging markets. My first

10:03

responsibility was emerging markets. Again,

10:05

no hyperbole. That was emerging markets

10:07

like trading. That stage, you

10:09

know, I almost wanted to shout

10:11

out responsibility. Like almost like

10:13

an emcee to the market. Somebody

10:16

needs to blink. Somebody needs

10:18

to come. I thought it could

10:20

be Fed. and write that

10:22

afternoon presidents blinked for the

10:24

first time. Yeah. You know what else

10:26

was very emerging markets -y that week?

10:28

You know, having policymakers calling for

10:30

rate cuts when the dollar was falling

10:32

and yields were going up. Like,

10:34

that is classic EM, right? Well, I

10:36

was thinking that if we were

10:38

classic EM, wouldn't the IMF peoples be

10:40

calling for rate hikes and not

10:42

rate cuts in that environment? Would they

10:44

say, oh, you know, you need

10:46

an independent central bank that, like, is

10:48

committed to sort of orthodoxy. You

10:50

got to hike in these environments. That,

10:52

my friends. You guys are in

10:54

London. We're honored. That, unfortunately, is the

10:56

trust moment. We went through that

10:58

in this island just three years ago.

11:00

But even then, at the height

11:03

of the panic, when quite justifiably some

11:05

were calling for a hike, Bank

11:07

of England instead chose QE.

11:09

At that time as well, people

11:11

said, oh, that may be

11:13

inflationary at the end, etc. But

11:15

that ended up calming things

11:17

down. I do believe, first of

11:19

all, last week, if President...

11:21

blink, and 10 -year and 30 -year continue to sell

11:23

off with the dollar selling off, EM style, I

11:26

think Fed would have come, definitely, and the

11:28

QT. I mean, we can talk about that. I

11:31

think they will do that right away in

11:33

May anyway. But I think they would do QE

11:35

as well. Not cut. I think Powell really

11:37

doesn't want to cut because of all the inflation

11:39

growth dynamics. But they

11:41

would have done that. And I

11:43

don't agree with some of my dear

11:45

client friends who say even QE,

11:47

inflationary, wouldn't long -hand react to that

11:49

even more. Maybe they are kindly talking

11:51

their book. If we go through

11:53

that kind of episode, a QE may

11:56

calm things down. But Trump blinked

11:58

two or three times. So I'm not

12:00

too sure. Famous last

12:02

words. We'll go through that

12:04

Fed QE stage. Now there's a

12:06

big, big, big debate already

12:08

in the market. Even though my

12:10

dear friends are tired and

12:12

wounded. Do you play for the

12:15

next leg to come? one

12:17

more quote -unquote attack towards 450

12:19

and higher in US 10 -year,

12:21

much more importantly 5 % and

12:23

higher in 30 -year? Or

12:25

do recession worries and growth

12:27

worries always outweigh? Is it now

12:29

when worries peak, is it

12:31

now time to receive? I kind

12:33

of have a lean towards

12:36

this, the latter, and it has

12:38

won by 25 basis points

12:40

as I speak. So something may

12:42

have begun. KPMG

12:59

makes the difference by

13:01

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13:03

insights that help drive

13:05

M &A success and embedding

13:07

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13:10

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13:12

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13:14

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13:16

transparent outcomes. Brighter insights,

13:18

bolder solutions, better outcomes. It's

13:20

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13:22

difference every day. KPMG,

13:24

make the difference.

13:26

Learn more at

13:28

www .kpmg .us slash

13:30

insights. Thrivent

13:34

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13:36

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13:38

community you love. What makes

13:40

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13:43

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13:45

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13:49

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your finances with confidence. Visit Thrivent.com

14:00

to learn more. Thrivent, where

14:02

money means more. One of

14:04

the reasons we wanted to talk

14:06

to you is because you are

14:08

constantly speaking and arguing over these

14:10

trading ideas with your clients. And

14:13

I guess I'm curious. I like

14:15

the arguing. Yes. I guess I'm

14:17

curious. Is anyone buying the Trump

14:19

administration argument that like, OK, we're

14:21

taking some short term pain? in

14:23

exchange for longer term, better economic

14:25

growth? Is that something that people

14:27

like are actually positioning for? Is

14:29

that resonating at all with your

14:31

clients? Again, very good question. Up

14:34

until mid -February, end of February,

14:36

a lot of them did. Now

14:38

we don't think about it, but

14:40

you know, euro at 1 .13, 1

14:42

.15, back then to talk even

14:44

1 .10 euro. was like, come on,

14:46

calm down, etc. Because people did

14:48

believe tariffs have to be inflationary.

14:50

Market is not believing. Market is

14:52

not pricing it. That's why it's

14:54

not happening, etc., etc. Then

14:56

credibility started to become an issue.

14:58

When you start with Canada and

15:00

Mexico, and you don't mention China

15:02

that much, then you decide to

15:04

do something on Canada and Mexico,

15:06

even though market and most economies

15:08

are revolting, you immediately step back.

15:11

Delayed for one month. You start

15:13

losing credibility. Then people start relaxing

15:15

about the Liberation Day. You come

15:17

up with this big sign with

15:19

very, let's say, creative way of

15:21

calculating it. And you hit China

15:23

and Asia the most. Then people

15:25

say there is a credibility issue

15:28

here. Actually, this reminds me because

15:30

you and I met for coffee

15:32

in New York City like three

15:34

or four weeks ago. And I

15:36

think one of the comments at

15:38

the time, and now that this

15:40

seems like ancient history. But

15:43

the thinking at the time was like,

15:45

oh, it's interesting. Trump is hammering Canada and

15:47

Mexico a lot more rhetorically than he

15:49

has China. Maybe he's going to go easy

15:51

on China. And I had forgotten that

15:53

that was actually in the discourse even like

15:55

three weeks ago. I do remember our

15:57

conversation as well. And you made me think,

15:59

too, because when I said I still

16:01

believe like, look, I think for this year,

16:03

this. your US exceptionalism trade

16:05

is here to stay. It's not just a

16:07

one -quarter thing, because that I heard a lot

16:09

as well. Ozan, good call. We like your

16:11

blue mega hat, but this is just one

16:13

month. This is just two months. This is just

16:16

three months. Now it's 1 .15, etc. But

16:18

then you told me, look, China...

16:20

doing a lot better in EV

16:22

and solar. They're starting to do

16:24

better in tech, in fiscal. So

16:26

maybe we are not that exceptional

16:28

after all, you had told me.

16:30

And then also on that going

16:32

easy on China, he was trying

16:35

to hide his cards. Then he

16:37

went seventh gear. But

16:39

China is playing a good one.

16:41

If a lot of people, back

16:43

to that Wednesday when we didn't

16:45

sleep, a lot of people fear

16:47

that either that Wednesday or that

16:49

Thursday, China would devalue big. To

16:51

be fair to both my research

16:53

and trading, Perry, Malika, we really

16:55

believe that people shouldn't exaggerate. They

16:57

would hold the ground and it

16:59

was to their advantage to choose

17:01

fiscal more. So far, so right.

17:03

And that also proving making things

17:05

quite difficult for the president. Like

17:07

even this morning, right? I opened

17:09

up, okay, it's more colorful for

17:11

Tracy and Joe. Not wonderful, but

17:13

S &P down 70, Nasdaq down

17:15

350. And then as I was

17:18

walking to the tube... China may

17:20

talk to you guys if you

17:22

show respect. Immediately, S &P Realty is

17:24

70 points. By the way, for

17:26

listeners, we are recording this Wednesday,

17:28

April 16th. It is 10 .58

17:30

London time, 5 .58 New York City

17:32

time. We always have to get

17:34

these in in our market conversations.

17:36

so funny we actually have to

17:38

include the exact time now, which

17:40

we didn't have to do before.

17:42

We used to just do dates.

17:44

I like that. Before ECB, before

17:46

Paul speaks in Chicago. Yeah, exactly.

17:48

Well, okay, so on the tech

17:50

front, One thing I don't get

17:52

is so much of the American

17:54

exceptionalism trade has been about AI

17:56

enthusiasm and this idea that America

17:58

has a head start and no

18:00

real competitors, at least up until

18:02

the unleashing slash arrival of DeepSeek.

18:04

In Europe, we still haven't really

18:07

seen. a real contender in

18:09

the AI space. I think that's

18:11

fair to say. And there has been

18:13

this long running disappointment that Europe

18:15

is just not where other places like

18:17

the US and China are when

18:19

it comes to cutting edge technology. That

18:21

hasn't changed as far as I

18:23

can tell. But it seems like investors

18:25

are kind of willing to overlook

18:27

that or maybe they think that U

18:29

.S. isolationist political policy and the idea

18:32

that Europe is going to have

18:34

to come together to fight Russia and

18:36

make up for a less active

18:38

U .S., maybe that's going to be

18:40

the thing that sparks technological advance? A

18:42

bit of both. I think, first

18:44

of all... Especially Germany, but Europe can

18:46

reinvent itself. That's going to take

18:48

a little bit of time. In

18:50

the meantime, things like

18:53

our NVIDIA, so things like LVMH,

18:55

Hermes have to carry us, which

18:57

didn't happen yesterday because of what's

18:59

going on with China. So it

19:01

will need time. At the moment,

19:03

Europe... does AI, but does the

19:06

chips, like the part of the

19:08

chips that helps the ASMLs and

19:10

the TSMCs of the world. Germany

19:12

doesn't necessarily have its own ASML.

19:14

But at the same time, this

19:17

is a country, at least a

19:19

country, Germany, but overall continent that

19:21

has shown that it can reinvent

19:23

itself. It's not going to happen

19:25

in two, three months, but all

19:27

these for the past, all these

19:30

unforced errors America is making. is

19:32

giving the old continent some time. Europe

19:35

is arguably now

19:37

the leading, I

19:39

mean, clearly the most advanced

19:41

place in the world for

19:43

aerospace technology. And we had

19:46

those headlines today, or sorry,

19:48

yesterday about China halting deliveries

19:50

of Boeing. Already Boeing

19:52

was falling behind Airbus

19:54

largely due to operational problems.

19:56

There is clearly still

19:58

some just sort of like

20:00

classical industrial might. on

20:02

the continent, much of

20:04

it aerospace, probably engines,

20:06

other parts that feel like

20:08

areas for potential further

20:10

growth. Agreed. Look, I

20:12

go back and forth between

20:14

three categories, two categories really. Category

20:17

one is after having a

20:19

great four months, I'll be wrong.

20:21

U .S. exceptionalism will be fully

20:23

back. This was all a

20:25

joke. America, America. Category two, for

20:27

reasons like you outlined, Europe,

20:29

European industrialism, China will continue to

20:31

lead the pack. To be

20:33

honest, it's going much better than

20:35

I would have thought. This

20:38

much outperformance didn't happen since 1980,

20:40

etc. It's going to continue

20:42

the team. And Category 3, USA

20:44

Inc., America will take everything down. It

20:46

will be such a serious confidence

20:48

and market crisis that with all the

20:50

respect to European aerospace, this, that, the

20:53

Danish... True global recession. No place

20:55

to hide. I go back and...

20:57

How can you not? You

20:59

go back and forth these

21:01

three or two categories. My gut

21:04

feel and reasoning still is

21:06

that category two, the broad team

21:08

of 2025 will win. Because

21:10

why? I think the president will

21:12

continue to blink. And also,

21:14

I have a backstop now. I

21:16

do believe if things get

21:18

very ugly, 5 % and more

21:20

U .S. 30 -year ugly in U

21:22

.S., Fed will come with QE

21:25

at least. Collins, last Friday.

21:27

She gave a hint. She said

21:29

the one more word. We

21:31

are ambitious. She didn't just say

21:33

watching. She

21:35

was the first one to give most investors

21:37

belief that they could come with more

21:39

steps. And then Waller. I know that now

21:41

Waller, people are half joking about is

21:43

he really saying it or is he lobbying

21:46

for the job? he interviewing? Yeah, yeah. But

21:48

I think he does believe it.

21:51

He's a respected man. And he did

21:53

hint that cuts can be front

21:55

loaded. if things get uglier.

21:57

So first of all, I believe blinks

21:59

will continue from the White House.

22:01

But even if they don't, I think

22:03

we have the backing of the

22:05

Fed. You know, I mentioned in the

22:08

intro this idea that the world

22:10

is sort of de facto overweight. the

22:12

U .S. just because of the market

22:14

size and it's waiting in a

22:16

bunch of different benchmarks. Does that provide

22:18

like some cushion for U .S. equities

22:20

selling off? Like the fact that

22:23

you do have index investors, passive investors

22:25

that have to be hugging a

22:27

certain benchmark, which happens to be filled

22:29

with a lot of American equities. Completely

22:32

agreed. Exactly. Tracy, in a simple way

22:34

of putting it, I was discussing with

22:36

a senior colleague yesterday. This

22:38

is great because let's go right into that

22:40

reallocation, the big team, right? If

22:43

big players were really in the

22:45

big sense of the word with

22:47

a big R reallocating away from

22:49

the US, there will be a

22:51

lot of circuit breakers in S

22:53

&P. I don't want to sound,

22:55

but that is, you know, it

22:57

would be, I'm not sure how

22:59

S &P would open tomorrow morning. So

23:01

there's a difference between even these

23:03

big real money, so well funds.

23:06

trading in their own time zone

23:08

and making much bigger, much

23:11

longer -dated decisions. So I think

23:13

this latter, it's more, we do

23:15

want headlines, especially us emerging

23:17

markets, FX people, we do get

23:19

excited. But through,

23:21

through, through big reallocation, I don't

23:24

think we're there yet. That

23:26

being said, there are trades. It's

23:28

not just my wonderful hedge

23:30

fund friends, fast money, getting,

23:32

what's the word Trump

23:34

used, queasy. Yippee.

23:38

It's more serious than that. Yeah. No,

23:40

Tracy wrote a great note about

23:43

that. Yesterday or the day before, I

23:45

can't track. It was like real

23:47

money, real money actually moving away. You

23:49

know, everyone looks for

23:51

analogies to past. experiences.

23:53

Is this like great financial crisis?

23:55

Is there like a run element?

23:57

Is this like COVID where a

23:59

supply shock element? Is this like

24:02

the Liz Truss moment where I

24:04

don't really like the term because

24:06

I don't like insulting people, but

24:08

you hear that term more on

24:10

risk premium exist. The

24:12

other, you know, when you describe,

24:15

okay, what if the Fed comes

24:17

into backstop? Another possibility is a

24:19

Brexit analogy in which there's not

24:22

an immediate crisis really, is just

24:24

the start of a slow degradation

24:26

of the economy. It sounds like

24:28

when you're in that number two

24:30

spot where it's like, okay, there's

24:32

some blinking going on, there's some

24:35

Fed backstopping going on, that maybe

24:37

that is the analogy perhaps that

24:39

we should be thinking of. Spot

24:41

on. I mean, soft power is

24:43

being eroded. My alma mater, I'm

24:45

biased on the issue, but Harvard

24:47

headlines, right? That doesn't help the

24:50

global perception, whatever your politics is.

24:52

So in that sense, in fact,

24:54

when I was trying to get

24:56

some sympathy from some clients forwarding

24:58

around the Harvard headlines, one of

25:00

them did say, immediate answer, U .S.'s

25:03

Brexit moment, to your point. So

25:05

for it to get more serious,

25:07

uglier, and GFC like that, than

25:09

that, Is the big

25:11

word. DM credit. DM

25:13

credit. That needs to shake for

25:15

it to become, you know, God

25:17

forbid, more OA to online like.

25:19

What's the trade? Because we can

25:22

all sit here and talk about

25:24

these big macro themes like American

25:26

exceptionalism. But like, you know, given

25:28

some of the restrictions on large

25:30

investors and given the reality of

25:32

trading in certain markets like, you

25:34

know, Chinese assets, what exactly do

25:36

you do here? I think,

25:38

look, first of all, I do

25:40

believe 48 -50 in S &P

25:42

may have been a base, a

25:44

floor. Even if I'm wrong

25:46

on that, if we go down

25:48

towards that very fast, more

25:50

Fed blinking and QE will come very fast.

25:52

So I think we'll bounce very, very fast.

25:54

I will forget that I was wrong. I

25:57

continue to believe Europe and China

25:59

has a lot of fiscal room.

26:01

So I feel at the moment

26:04

quite confident that DAX... MDACs, the

26:06

medium caps and China Tech will

26:08

continue to weigh out for outperform

26:10

US. On race, we

26:12

had started discussing with Joe. I

26:14

do have sympathy that receivers

26:16

from here on the long end

26:18

will work. That may be

26:21

a big trade actually. Talking

26:23

about despite tiredness

26:25

and wounds, a

26:27

crowded trade, steepness, still crowded

26:29

because... paper, it does make

26:31

sense, you know, for different

26:33

reasons for US and Europe.

26:36

But, you know, short end may

26:38

stay lower and long end may

26:40

get sold off more. On that

26:42

one, so I think

26:45

flatteners at certain stages may

26:47

give pain to people. ECB,

26:49

for example, okay, she will cut

26:51

tomorrow. But I don't think there's

26:53

so many unknowns, right? How the

26:55

tariff negotiations will go, etc. On

26:58

June, she will not blink. She will not give

27:00

you the hint that this will continue on June.

27:02

And if people started getting worried about a June

27:04

skip, there you go. That's not going to help

27:06

your steepener. Our official call

27:08

is that terminal rate in Europe is

27:10

all the way down to 1 .5. My

27:12

excellent chief economist Mark Wall does get

27:14

pushback from that in Spain's and Italy's

27:16

of the world, even before the recent

27:18

developments and even before euro went to

27:20

1 .13. Soft dollar,

27:22

look, we're talking big levels

27:25

on euro, on yen.

27:27

on Swiss, on gold, but

27:29

my bias is still to sell

27:31

any dollar rallies. So we're talking about

27:33

that Wednesday night when dollar was

27:35

selling off. Morning, Wednesday morning. Last Wednesday

27:37

morning. Actually, for me, it was

27:39

Tuesday night. I mean, it sort of

27:41

depends. Your Tuesday night. It was

27:43

my Tuesday night. We all know what

27:45

you're talking about, so it's fine.

27:47

Yeah, yeah. Lucky are you. Yeah, yeah.

27:49

I was up. That was the

27:51

Tuesday night. I didn't get any sleep.

27:54

It was that day. And as

27:56

you said. This is you're like

27:59

this is EM style trading, right?

28:01

When you see all three equities,

28:03

treasuries and the dollar going down.

28:05

If we were actually talking about

28:07

the U .S. as an EM, if

28:09

you're an analyst as a, you

28:11

know, there would be

28:13

a lot more, you know, there'd

28:15

be a lot of talk about.

28:17

Politics and how politics works and,

28:19

you know, what is it? Is

28:21

there an independent central bank, et

28:24

cetera? Like how much of the

28:26

conversation is really becoming about stability

28:28

of just like the sort of

28:30

internal workings of U .S. political

28:32

order? Institutional strength. Again, very,

28:34

very relevant. I mean, in that

28:36

kind of sense, if we half

28:39

revisit that your Tuesday night. And

28:41

if president sends five more

28:43

tweets about Fed should cut right

28:45

away, not good. Some people

28:47

even believe on the Friday speech,

28:50

I don't know now, two

28:52

weeks before. It's okay, we've all

28:54

lost track of time. If

28:56

president didn't tweet five minutes before

28:58

the guy spoke, I

29:00

mean, conspiracy theory, but maybe

29:02

he wouldn't prefer inflation that

29:04

much over growth. So if

29:06

you create that kind of

29:08

Fed independency question mark, It's

29:11

not going to help your

29:13

trade. At this moment, talking about

29:15

EM, if this thing goes

29:17

like this, America needs friends. America

29:19

finance needs friends. Powell and

29:21

Besant, when they auction, need friends.

29:25

So... Talking about EM, right?

29:27

These days, things can change.

29:29

He's a very successful political

29:31

person, needless to say. But

29:33

as of now, whatever the

29:36

topic is, from tariffs to

29:38

Powell to Harvard, when he

29:40

talks and writes too much

29:42

about an issue, it doesn't

29:44

help with Tracy's capital allocation

29:47

situation. Real money sells dollars, mathematics.

29:50

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29:52

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money means more. I'm

31:16

not going to say that the U .S. is

31:18

an emerging market, but I am going to ask

31:20

you, with all of your emerging market experience, what

31:22

advice do you have for people who are trying

31:24

to trade the U .S. at the moment? Watch

31:28

the three key

31:30

people. Trump, Powell,

31:32

Xi. Who's going to blink when?

31:35

I think that would be my advice even a week ago. Trump

31:38

already showed that maybe he has

31:40

less cards. He's blinking. Then the

31:42

second thing is, you know, I

31:44

mentioned Collins, I mentioned Waller. Not

31:47

cuts, but I do believe

31:49

that QE is out there. So

31:51

I think we have the

31:53

backing of the Fed. And then

31:55

finally, Xi, even though... he

31:58

has the cards, but this is

32:00

not good, right? So at some stage,

32:02

they need to talk. Even the

32:04

basic, what we quote -unquote expected after

32:06

the president rallies last year, 10 %

32:09

for everyone else, 60 % China, even

32:11

that's much better than this. So at

32:13

some stage, there will be that

32:15

summit between them and we will be

32:17

at a better stage. So this

32:19

all makes sense. That's why I'm not

32:21

category three. That's why I'm, you

32:24

know, we will be okay. Maybe 48,

32:26

50 will hold. but the rest

32:28

of the world and Europe will do

32:30

better. If I believe that Trump

32:32

wouldn't blink because of ideology, whatever, if

32:34

I believe that Powell would say,

32:36

your problem, not even QE, and if

32:39

I believe that China would play

32:41

even a tougher hand, then I would

32:43

fear Brexit or 08 seems more.

32:45

I don't. I just have one

32:47

last question. It's kind of a curveball,

32:49

and I'm certainly not asking you to

32:51

make your call or a trade. You

32:54

know, one thing that I've noticed,

32:56

though, over the last couple of weeks

32:58

is that Bitcoin has not actually

33:00

been as tech stock like as it

33:02

used. I used to joke that

33:04

Bitcoin traded like three tech stocks in

33:06

a trench coat. And I'm wondering

33:08

when you talk to people, we all

33:10

know it's a speculative trade, whatever,

33:12

that's not my point. But when you

33:14

talk to people, particularly in EMs,

33:16

do you get the sense that people

33:19

take it for real as a... monetary

33:21

asset that they want to have

33:23

some allocation to it that's separate from

33:25

all of this can i answer

33:27

that and then add one more team

33:29

that i want to yeah so

33:31

bitcoin answer is It was about to

33:34

become even more serious in a

33:36

good sense. It was becoming even more

33:38

of a digital gold. Not just

33:40

some of my dear client friends and

33:42

their big PA portfolios, but some

33:44

institutionalization was taking place because of what

33:46

they believed Trump would bring to

33:48

the table. But then my answer to

33:50

Tracy on credibility, there's a reason

33:52

why. If

33:54

he did these China -Canada tariffs on Gen

33:56

20, we would probably want to trade

33:58

first at 102 euro dollar. Now we're

34:00

trading at 115 because credibility is gone.

34:02

A little bit similar now with the

34:04

whole Bitcoin situation. Back of the

34:06

class, if you're a big believer on

34:08

a big bounce in the market, maybe you

34:11

would trade it in your own portfolio,

34:13

etc. But some of the funds getting

34:15

buy and sell side, getting more serious about it

34:17

as an asset in an institutional side, I think

34:19

that took a hit. This

34:21

other team that I want to bring

34:23

up so that I don't regret, tax

34:25

cut. Oh, yeah. So, you know, that,

34:27

again, talking about a big veteran, you

34:29

know, one of us, big market

34:31

player, there's a reason why he's saying,

34:33

literally saying to your colleague, this whole year

34:35

has been tariffs, tariffs, tariffs. We need

34:37

to talk, you know, we need to talk

34:40

tax cut, tax cut, tax cut, deregulation,

34:42

deregulation. Well, you're the man, you're the man

34:44

to change the narrative to that. So

34:46

he's claiming that they're moving fast on that,

34:48

like in Trump 1 .0. That's going to

34:50

be important. Whether it's going to be

34:52

just the extension of the existing tax cuts

34:55

or will he, you know, beyond tips

34:57

and stuff, will he bring something new to

34:59

the table? We can discuss whether that's

35:01

good or not, whether this economy needs more

35:03

fiscal easing. But yes, if they, beyond

35:05

words, if they can succeed on changing the

35:07

narrative from tariff madness, to

35:09

more, the house, tax cut, the regulation,

35:11

how fast it's passing, can it be

35:14

done before July 4th, etc. And

35:17

that's going to help the very, not

35:19

what the screens are telling you now,

35:21

but that would help S &P and

35:23

Nasdaq. Even there, though, we're getting confused,

35:25

mixed signals, right? We had a story

35:27

overnight where the Trump administration was said

35:29

to be looking at tax hikes for

35:31

people earning more than a million dollars

35:33

a year. So I can see why

35:35

people... have forgotten like that part of

35:37

the narrative because it is a little

35:39

bit confusing at the moment. completely agree

35:42

you. Look, for Trump 2 .0, it has

35:44

been, for the economic team, it has

35:46

been a stumbling start. Like they haven't.

35:48

A stumbling start and a stumbling start.

35:51

Exactly. It hasn't been understatement. It

35:53

hasn't been a Michael Phelps

35:55

start. Ozan Tarman, thank you

35:57

so much for coming on Outlast. This was

35:59

like the moment, perfect guest. Really appreciate

36:01

it. Thanks so much. That was fun. was

36:03

a lot of fun. That

36:18

was a fun conversation. I

36:20

like the sort of the

36:22

three scenarios that he laid

36:24

out. You know, unlike

36:26

everyone else, you know, I changed my

36:28

view. Not that anyone should ever listen

36:30

to my view because I've never gotten

36:32

anything right. But whatever I'm feeling usually

36:35

like changes by the hour at this

36:37

point. Yeah, which I think is fair,

36:39

right? Like that's the reasonable response to

36:41

the flood of news headlines that we're

36:43

getting. I feel like we should just

36:45

add odd thoughts does not provide any

36:47

trading advice. This is our disclaimer. But

36:49

that said. I do like one thing

36:51

that seems certain to me really is

36:54

the higher term premium in the treasury

36:56

market and the idea of a steepener.

36:58

Also, because like I think the U

37:00

.S. is just going to have to

37:02

issue like even more short term over

37:04

time for a variety of reasons, one

37:06

of which could be foreign investors stepping

37:08

away from the treasury market more than

37:10

they have already been doing. So

37:12

that's one to watch. And then just on

37:15

the Bitcoin point that you were making. I've

37:17

been thinking about this, too, over the

37:19

past couple of weeks. Like I have

37:22

been eagerly waiting to see what the

37:24

next big Bitcoin talking point is, because this

37:26

is one of the one of the

37:28

real strengths of Bitcoin is it always

37:30

comes up with a new narrative. Yeah.

37:32

Right. And like, well, it can't be tariffed.

37:34

Yeah. It's kind of people have called

37:36

it gold. Kind of digital gold. And it's

37:38

actually people should look at the chart.

37:40

It's not trading as bad and as

37:42

NASDAQ like as it had been. Yeah.

37:44

Which makes me wonder if it's a little

37:47

bit acquiring some of those safe haven

37:49

properties people supposedly claim. Yeah. But it

37:51

needs something like pithy for Trump tariff

37:53

world. And we're still waiting for that. And

37:55

but I'm sure there are people working

37:57

on it right now. You know, the

37:59

other thing is when I think about

38:01

all of these. So there's two things that

38:03

I think about. There

38:05

is this scenario that I don't think

38:07

gets talked about as much, which is

38:09

like the global depression trade or the

38:11

global recession trade. Right. And so the

38:14

idea that it's so disruptive and the

38:16

U .S. is so important that the idea

38:18

of it just being like a sort

38:20

of U .S. recession, which many people

38:22

obviously think it actually not that it

38:24

actually is something. Which seems like a

38:26

realistic possibility. Europe

38:35

and US is maybe shooting itself in

38:37

the foot and there are limits to

38:39

the degree to which anyone can really

38:41

invest in China. It's not surprising that

38:43

gold is now perceived like that's the

38:45

one thing, right? Like the one thing

38:47

that will be there for you is

38:50

if you have. a yellow shiny metal

38:52

in your safe. And it's not surprising

38:54

that that's railing. Plus gold is just

38:56

shiny, as you say. really nice. Yeah,

38:58

it has that physical attraction, that sense

39:00

of comfort in times of uncertainty. Well,

39:02

you know, we went to the jewelry

39:04

store, I guess that was like February

39:06

or March or whatever. And I would

39:09

try it on that $75 ,000 gold

39:11

necklace. Do you regret not buying it?

39:13

Yeah, I feel really dumb not buying

39:15

it because A, a bunch of people

39:17

told me it looked good on me.

39:19

But B, more importantly, they'd be like

39:21

an idiot. $25 ,000 gold necklace today. Joe,

39:23

you know, we're not that far from

39:25

one of London's jewelry districts. We can

39:28

go shopping right after this. It's about

39:30

10 minutes away. I'm really underweight gold,

39:32

Tracy, so I might have to do

39:34

that. All right. Shall we leave it

39:36

there? Let's leave it there. This has

39:38

been another episode of the All Thoughts

39:40

Podcast. I'm Tracy Alloway. You can follow

39:42

me at Tracy Alloway. And I'm Joe

39:44

Weisenthal. You can follow me at The

39:47

Stalwart. Get more of Ozan's thoughts. Check

39:49

out his LinkedIn, Ozan Tarman. Check him

39:51

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