Market Structure is Distorting Reality as Inflation Builds | Weekly Roundup

**Quinn** (0:00)
This is wartime allocation of capital. And this isn't just about the Iran situation, this is about what's been building for three years, four years, five years. It just favors scarce resources you can't print.

**Felix** (0:12)
Oil prices aren't high enough for demand destruction, but they're high enough for inflation. You can make the argument, it's actually almost better for it to go higher. Then you get the demand destruction, like the central bank's gonna actually do something. We're stuck in the corridor of everybody's frozen.

**Quinn** (0:26)
The incentives here point to inflation, and inflation is really bad for risk assets because it sends bond yields higher and equity multiples lower. I think the outlook is horrendous.

**Felix** (0:38)
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All right, what's going on, everybody? Welcome back to another round of edition of Forward Guidance, and we are back with the trio. We're back at home, no more conference, no more sick Tyler. The boys are back, the trio's back. Kind of feels like we didn't miss anything. Oil stole out a hundred bucks. It's like nothing's changed in the last week. So I guess we didn't miss anything in that whole time.

**Tyler** (1:33)
What was that? 110 now. Do you guys notice I'm a little more svelte from my week long hiatus from food?

**Quinn** (1:43)
You look so good, dude.

**Felix** (1:44)
It's not the real truth, you're not on the GLP.

**Tyler** (1:48)
I lost like 10 pounds from that virus. I couldn't eat for like six days. It was terrible.

**Felix** (1:54)
That's brutal.

**Quinn** (1:55)
Yeah, it is kind of Groundhog Day-esque because when I look at the Russell, we're closed basically smack dab where we were on Friday, March 6th. So it's like we just chopped everybody to shreds over the course of the month.

**Felix** (2:08)
That's my whole thing is just like burning at the stake of put premium, even call premium, just premium everywhere is just getting smoked as we just chop around. Like it's just brutal out there.

**Tyler** (2:20)
You know what is so fascinating is like from an index basis, things not much happens, but underneath the hood, if you look on like a sectoral basis, everything happens and that's really where all the alphas generated. But you even notice from the like you said, the indexes are unchanged, but some of the hedge fund performance numbers came out and some of these multi-platform funds got absolutely rocked. Even in, you know, because single stock vols super high in factor volatilities.

**Felix** (2:50)
Yeah, the pot shops are all down like 4% over the last month or something, which is kind of nuts. You know, you know who I saw was at the top, that was Pierre Anderand, the French oil trader. He's up 30% month over month, which, yeah, even though I mean, he was down like 50% last year. I don't know his ratio. I don't even know.

**Quinn** (3:08)
Yeah, you're in stomach, dude.

**Tyler** (3:12)
We were talking about that is like, it's pretty incredible. Like you have to consistently manage risk to get to that point of success to then have enough of your LPs to stick with you through that volatility. Like it's not like you're going to get like a billion dollars if you're that volatile at the start of your career. So you have to be doing something right to take those drawdowns. And anyway, it's just kind of.

**Felix** (3:35)
Yeah, it is an interesting comparison compared to the Podshot model where their drawdowns are pretty limited, honestly, past that 4% because if you max out your risk limits there, you just get fired. So there's probably a whole new cohort at the Podshops for April. The rest of those guys who are down 4% have all been fired. So it's a new cohort in and just roll the dice once again.

**Tyler** (3:58)
Absolutely.

**Quinn** (3:59)
That must be the most stressful job in the whole entire world in this market. If you can't have any.

**Felix** (4:04)
Yeah.

**Tyler** (4:05)
Anyway, you're doing 4% this week.

**Felix** (4:07)
You're like, oh, getting smoked by Trump tweets and then you just get carried out of your pod. Like, man, I, yeah, you know, I know it's the cool place these days, but that's, that's a lot to handle.