SI420: The Market Might Be More Fragile Than It Looks ft. Cem Karsan

Cem Karsan (0:02)

We have a deal.

Two weeks, it's going to be signed. Meanwhile, Iran, everybody else is like, what are these guys talking about? It's all a charade, guys. It is all very orchestrated, and the V-bottom is a feature. It is not a bug. You guys are hedge fund managers. He's literally saying, I'm the house.

SPEAKER_2 (0:25)

Welcome to Top Traders Unplugged. In markets, success doesn't come from predicting what happens next. It comes from being prepared for what you can't predict.

In each episode, we go deep with some of the world's most thoughtful minds in investing, economics, and beyond to understand how they think, how they prepare, and how they decide, and the experiences that shaped how they see the world. No noise, no short cuts, just real conversations to help you think better and invest with confidence.

Alan Dunne (0:58)

Welcome back to Top Traders Unplugged, where each week we take the pulse of the markets from the perspective of a rules-based investor. It's Alan Dunne sitting here in for Niels again, and a lot to be joined by Cem. Cem, how are you doing? How's it all in Chicago?

Cem Karsan (1:12)

Great. Good to be here in Chicago in the fall. We just had a Monday Night Football Bears victory. The Cubs and the White Sox are in the playoffs. So when sports are going well in Chicago, there's the Midwest.

People are very happy. So things are good here.

Alan Dunne (1:32)

Good stuff. Well, it sounds like a good time to be in the Windy City.

We have, as usual, loads to talk about. We're recording a little bit earlier this week. We're recording on Tuesday ahead of Saturday release. So there could be plenty of market movement, but this comes out, so keep that in mind. But as ever, there is a lot to get through. We do like to start off by asking, what's been on your radar of late?

Cem Karsan (2:00)

Man, there are times when you're radar, you look and there's nothing in the sky.

This is like, I feel like we're air traffic control. It's like that every two seconds, there's a new military jet, new freight, something new coming into the monitor constantly. But maybe the biggest new thing coming onto the radar, in my mind, is not just what the bond market's doing, but what the percent is starting to signal.

I think there is a boiling of the frog situation happening, that really, you know, the 3, 6, 9 billion of buybacks really doesn't move the needle, and he knows it. It is a really important signal that, like, they will do whatever it takes to hold down that long end of the curve, ultimately. And so I think that's the thing that people whistled by the graveyard on. Generally, it will take a tantrum right before the bazooka comes out. He doesn't want that tantrum to happen yet. But I would prepare, and I think we'll get into this more as we get back to the show, for a tantrum and a response. Okay.

Alan Dunne (3:22)

Interesting. Yeah. Well, for a long time, we talked about the big bazooka in Europe. I think it was Mario Draghi who was rolled at the big bazooka first. But that's certainly one too.

Cem Karsan (3:30)

He didn't say, I'm the house now. He didn't say, I'm the house now.

Alan Dunne (3:33)

No, no.

Cem Karsan (3:34)

But some more energy.

Alan Dunne (3:36)

Whatever it takes were his immortal words. But good stuff. Well, listen, we have a lot of macro themes to get through. So I think maybe it naturally makes sense to just to give a quick update on performance in the trend following space before we get to that. As I say, we are recording a little bit earlier this week. So as of the 25th of September, which is still the end of last week, SoxGen's CTA index is up 4.2% and up 15.8% on the year, and SoxGen Trend up 4.45% and up 16% on the year. So obviously, playing out to be a very good year in the trend space, and this month, very much the story has been short positions across the fixed income space, not just the long end and not just the US, but very much across the whole universe, and the short end, significant repricing there. So that's very much been the story of performance in the last couple of weeks. So not a whole lot to add there in terms of performance, but suffice to say, shaping up to be one of the stronger years for the index in the last, I was chatting to Nick Baltus, I think he was making the point, it was maybe the third strongest in the last 10 years or so. So all good from that perspective, but you did mention the bond market, and obviously, we've continued to hit new highs in terms of yield today, the trend is very much intact, and if anything, the momentum is increasing.