How A Macro Manager Is Trading On One Of The Wildest Markets In History

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:16)

And I'm Tracy Alloway.

Joe Weisenthal (0:19)

Tracy, I don't even really know where to begin right now.

You know, the thought that keeps coming to my head was that life, at least here in the US, and the markets in general are so different than they were exactly a week ago at this time. The pace of change of what we're experiencing is almost, is just completely bewildering and unprecedented, it feels like.

Tracy Alloway (0:48)

So I know what you mean, but I am gonna say, we're recording this on March 16th, and a week ago, we were limit down on S&P 500 futures, and we were limit down again this morning. So it's Monday, therefore, we must have hit the circuit breakers. I say that with sarcasm. This is not normal. We've hit limit down, I think, like three times in the past week.

Joe Weisenthal (1:12)

Right, and I think we've hit limit up at least once or maybe twice. The volatility that we're seeing is just relentless, and the pace of change in life. Last weekend, I was still out. I took my daughter to the park.

I saw some friends at the park. I wasn't like going inside to bars or anything like that, or restaurants. This weekend, I was alone. I walked through some of the same neighborhoods that I walked through last weekend.

And to say that the vibe was different was truly an understatement. So many of the places that I saw people where they were still lining up just completely empty in what would normally be busy parts of New York on a sort of like nice pre-spring day.

Tracy Alloway (1:57)

All I'm gonna say is welcome to my world. And I think you were forewarned having listened to me complain about this for six weeks, but social distancing has been well into effect here in Hong Kong. We've had hoarding, we've had fights over a toilet paper, we've experienced it all.

So yeah, it's kind of surreal to watch the rest of the world, especially Europe and the US, now go through what we saw in Hong Kong and China and some other parts of Asia just six weeks ago.

Joe Weisenthal (2:27)

Yeah, surreal to say the least. It's also, of course, creating some very rapid changes in our own micro podcasting schedule because even the guests that we're talking about and that have scheduled, we're actually having to change the topics on the fly because the original plan, the original discussion suddenly doesn't feel as relevant as it did even say two weeks ago.

Tracy Alloway (2:56)

Yeah, it's been challenging scheduling Odd Lots episodes. And I think the sheer speed with which markets have sold off is absolutely astounding. So I saw one analysis from Bank of America, Merrill Lynch, where they were talking about how it's been the fastest bearer market on record because we've had just 21 days from the trough until we fell 20% from that.

The next fastest one was back in 1929

It's never that great to see 2020 right up against 1929 on a comparative markets chart. But I will say one thing that's remarkable about the current market sell-off, and it really puts you in mind of whether or not this is technically driven, or at least being exacerbated by technical factors, or how much of it is driven by actual fears of the economy. And to me, it could go either way, right? If you assume that big parts of Europe and the US and maybe Asia again, as we get a second wave of infections, are going to be shut down for the foreseeable future, then clearly that is a serious economic problem. But on the other hand, some of the action that you've seen in markets, these weird moves like limit up one day and then limit down the next, these sort of self-reflexive moves, do seem to indicate some sort of technical driver as well.

Joe Weisenthal (4:15)

Yeah, absolutely. So we were originally going to schedule today's guest. We scheduled it a few weeks ago because he had an interesting thesis that Senator Bernie Sanders, who's running for president, although he is a socialist, might not be as bad for pre-tax corporate profits as many people had expected. And we're like, okay, that's a contrarian viewpoint given the well-known antipathy towards Sanders and his brand of socialism on Wall Street. Yeah, how about we get a fund manager to talk about that and that will be a sort of classic Odd Lots-y, Odd Lots episode to just sort of talk about something kind of weird like that. But fast forward a few weeks, times have changed. For one thing, it appears now that Bernie Sanders has an extreme long shot to win, given the setback that he had in recent votes and so on.