YouSaid · the spoken record

Andy Constan

lines on the record: 74
first: 2024-05-06
most recent: 2024-05-06
sittings or episodes: 1
sources: podcast

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“Yes, and your trading process, as I understand it, is trading. I mean, you are an investor, but you're a trader and you get in and out of things. So if someone listened to, oh, but at the last podcast, he said this, that wasn't your long-term view. You probably changed your mind a few weeks after that.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“And our Twitter product, DS Reed, is designed to have a look at that. And, you know, at the same time that I provide my hedge fund clients with information and research, I provide you with that same stuff. And we can discuss it and you can benefit from or challenge me if you think I'm wrong and do it in a very high touch way. It's really designed for people who really want improve their understanding of investing broadly in alpha generation in particular in a very active way. So someone who has committed, is willing to commit a lot of time to that effort.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“Sure, two great beards is really designed for people who have 20 minutes a week to think about their investments. So someone who has a financial advisor who they speak to from once a year to once a month, and every time they talk to them, they don't know what the hell they're saying. And so can ask good questions about their allocation. Don't know if their financial advisor knows what they're talking about. With 20 minutes a week watching a video that Nick and I distill what's going on and what matters and what to do about it in the portfolio, we manage, that's what two gray beards is about, to help you have better conversations with your financial advisor. Damp Spring offers a long lonely focus too, but our principal focus at Damp Spring is providing hedge funds and large institutions with high quality macro research and strategy.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“Except that they think it's their principal lever is what drives the economy. And many people now recognize that with long-term interest rates locked in by a lot of participants and an economy that is much more services oriented than goods oriented and longer-term debt levels and other wealth measures like stock prices have a bigger impact than the short-term interest rate that the Fed seems to want to twist”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“And the way they do it is they actually sell bonds in marketplace instead of allowing their bonds to mature and have the treasury then decide the impact of quantitative tightening. If they had just sold bonds to begin with, particularly if they had sold mortgages, they would have cooled the inflation off quickly. And that would have been a much more sensible outcome. And I've been calling for that for as long as I can remember, as long as they mentioned quantitative tightening. I've been saying do more. So it's curious to me why they're doing less.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“So, who the hell knows? I mean, the one thing that I would say is when they taper QT, the next question is when are you going to stop? So, you know, if they thought they might not stop, they might not have tapered. So you have to increase the conditional probability in some sense that stopping is the next destination. But I don't see any need for it. And the RRP will end up, they're concerned about the RRP heading towards zero. The RRP will be supported by this action. They have time. The thing that bothers me most, and I'll rant a bit. The thing that bothers me most about the whole policy is if they had just done quantitative tightening like the BOE.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“And so, you don't think that this tapering changes the ultimate level of the size of the Fed's reserve balance sheet? In other words, you take Powell at his word when he said this is changing the speed, but not the destination.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“A buffer for banks and others that need financing in sort of more stressful periods. This was all about the Fed trying to continue to reduce the balance sheet such that reserves end up around $3 trillion, maybe a little lower in the banking system. You know, we still have $750 billion to go, which should have meant QT for another full year. But tapering now and doing it for 18 months instead of not tapering and doing it for a year, I don't see a big difference.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“That was inevitable. Something I predicted in my last damp spring report. I thought it was possible they wait till June to decide, but 30% you have pretty decent coin flip chance they go today. They went a little bigger than I expected. I expected 30 billion. They did 35 billion of tapering. And so I think it was fairly widely expected because, so the implication of that is that the treasury is going to be able to issue less to pay the Fed back than they had otherwise issued. And we know they're not changing the amount of coupons because they've announced what those will be. And so those will still weigh on those who buy coupons. But what they will do is they will issue fewer bills and fewer bills means that some of the money that would have bought that is going to end up staying in the RRP and that's going to give”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“called the Year of the Dragon and one of my Byron Wayne things was that the Asian stock market, the Chinese stock market was going to outperform the NASDAQ. Looked pretty bad for a while. But yeah, I mean, I think it's very difficult to invest in China. But at the same time, I think the point of the year of the dragon dance report was to really describe how out of favor it had become and really a classic contraposition, how far it goes, they can choose to have it fall 10% tomorrow. So I've gotten out of that position, but I am looking to get back in.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“The The only country that stimulated as much, issued as many tea bills that now need to be refinanced, did as extensive QE. And so we're going to have to issue a lot of bonds. Other countries have shown more fiscal restraint, Europe by sort of mandate and that they can't really do much with unbalanced budgets. And Japan and China, which didn't really stimulate. So, yeah, we've got the debt to refinance and we're going to have the biggest impact.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“I don't think the pressure's on global interest rates are going to emanate from the United States and are going to impact the globe. But when you look at swapping U.S. treasuries through all of the hedging mechanisms necessary to get it to literally be like a U.S. Treasury fully priced in yen, it's not like you get a bargain in the United States when you do all that hedging, you end up with basically the same yield as you've got in Japan. And so I don't think that rate is particularly interesting, but it's probably going to rise a little bit.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“And so I think they did that. And I think they, when will they end? Hopefully the day after I sell some to them. But as of yet, I haven't done any positioning in that.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“My view is that they haven't gone far enough. And in order to maintain the progress they've made, they are likely to need a yen that's continued to go lower, not radically lower, but continue to depreciate. And so then the question is, why are they intervening, which they are doing? And they did during the Golden Week holiday, which is typical when markets are illiquid for maximum impact. And they've appeared to have done it twice, so it's not confirmed yet, the second time today after doing it on Sunday, I think it was Sunday, I expect them to, what they're doing there is they also think that the end needs to go down, but they don't like it to go down fast and they like to burn the speculators.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“So, my strongest feeling has been, and this has been one of my core views for a while now. I don't remember how long, but it feels like forever, that the end needs to go lower to. Japan and get that economy. On its feet. How far that has to go? That's a different question. But”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“And also, what I've also noticed is that these pressures on the yen to weaken are being offset now. The pressures on the Yuan are still significant, but the flows into gold are seem to be slowing, like the buying that was associated with that has slowed. And there's also some changes in lately, very recently. There's been some changes in margining of owning gold. And that has taken some of the legs out of the gold rally. So, you know, it's a trade.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“Shorted around 2420 and intend to hold it to 2100. But I love gold. I think gold provides certain things in portfolios that no other asset can. Crypto more so lately, but no other real asset can. And so, you know, I'm renting a short position in gold and I'm expect to cover it and go long again.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“People buy gold and that makes it good for gold in dollars. And so to me, the dollar rally in gold is not that interesting. The dollar rally in gold is caused by the yen rally in gold and the yuan rally in gold. And then there's this other idea, and I'm not sure how much credence to play in it, which is this reserve balance and the central bank's buying gold to potential weaponization of the US dollar, which we saw with Russia. And there's also a period of time when gold sort of started to take off as various enemies of the United States may have thought, let's get out of US dollar assets and fleet a gold during the since October in the Middle East. But the disconnect between real rates in the US and gold prices is pretty significant. And so right now I'm short and I...”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“I think what's happening is other countries have. Not even abandoned. They're trying to manufacture inflation. And so if you look at Asia in particular, Japan and China, you can see that those countries are trying to reduce real interest rates in a meaningful way by allowing inflation to run hot in Japan, for instance, even though they're raising rates, they're still essentially getting real offsetting real rates going lower. And that's good for gold in yen. And certainly the Chinese are trying to as carefully as possible and slowly and deliberately are trying to get the economy back on its feet. And, you know, that's trying to get real interest rates lower, and that's good for gold in one. And when things are happening, they're good for golden wine and good for gold in yen.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“Well, I'm short bonds as much as I could possibly be in a world in which inflation, the inflation mandate is given up on.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“And let the economy run hot. You can't own bonds. Those you just cannot own. But you certainly can own gold and crypto and stocks because they're going to do well if the economy is let to run hot. And so there was a period of time in late March, I think, where I flipped and said, you know what? Central banks may have given up on inflation. Their actions appear to be inconsistent with what the way I see the economic data evolving. And that indicates they may have given up. And I overweighted in my beta portfolio, I overweighted equities and commodities and gold and underweighted nominal bonds. And the last month has helped me out get back out of that position and into a position that's more balanced. But yeah, I'm. I'm all in on equities if central banks give up on inflation.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“So lower price would certainly do it. And then I guess the last thing is, and maybe we're getting this. I don't know. Some people say we are. I don't personally believe them. But if you think that Fed is going to change its inflation target.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“So there's some good reasons and some bad reasons. The good reasons would be price and expectation that earnings were going to be stronger than expected, which would be a combination of very strong productivity, which could be things like AI. So lots of reasons why I could have been convinced that earnings are going to be better than expectations. Now, they're very high already, so it would take a lot, but I guess I could be convinced that earnings are going to be far in excess of expectations. Now, what would do that the best would be a very strong economy? And that's why I think about bonds, which is for me to get bullish on stocks, I have to be bearish on bonds. The other thing is price. Obviously, if I'd love to buy some stocks at sixteen multiples, but they're not offered there.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“So, anyway, the point is there's been changes in that distribution, and I imagine that I haven't looked today, but I imagine that Potential for a hike has dropped given what Pal said I do think he took it off the table for the time being, but you know, you get a hot CPI number, it goes back on the table.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“Would be an arbitrage, meaning there could only be one distribution of prices, and if you guarantee me that it is a normal distribution of prices, I can tell you that skew is provides an arbitrage because the idea is that the distribution would look not like that if you took the prices and implied a distribution instead of setting a volatility that has a normal distribution. So by using option prices, you can get what is called an implied distribution. It has different characteristics. So, you know, when you do that, you can then figure out what the probability of a cut is and a hike is more accurately. And so that's what we do with that stuff. It's old technology. I remember doing it in the 90s. But implied distributions are a standard toolkit for most. The CME just can't do that, it's”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“But I don't want to get into the weeds on that. But the options market will price a implied distribution. What is an implied distribution? All of us who have taken statistics or traded options or whatever know about log normal distributions and they look like the classic bell curve. If that were true that that was the distribution of future prices, option skew, meaning different implied volatilities.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“Can I explain what I think you meant? Because I think so, even people will be confused by that. So let's say if they're just making it up, December 2024 is 94.5, that's implying a rate of 5.5. The CME Fed funds probability is going to calculate a symmetrical bell curve distribution around that, whereas options will...”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“So, what it is is saying that if you use the Fed tracker tool, you're going to get a probability of cuts and hikes over the course of many meetings that is going to use the spot level of the future's curve to determine that distribution.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“I think I know who you're referring to. And if he is off Twitter, I'm actually very sad. Yeah. Exactly. So I don't really look at options pricing on Fed funds or stuff at all. Tell me about that space. I know in the equity market almost all the time there is put skew. So higher implied volatility for out of the money puts than calls because the market tends to elevate her down, stairs up. What about in the interest rate world? What is the various SKUs, what are the expensive options? What is the optional market pricing in?”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“Of course, I mean, it gives you some information, it just doesn't give you accurate odds past the first a period of time when there is a hike or a cut priced. Unfortunately, a guy I've been following for a long time seems to have disappeared off Twitter, but he would regularly post that distribution for all of us to see. I do it myself, but it's very nice that he was doing that and that made it so easy to see. So hopefully somebody picks up that story.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, okay. So I know that much superior and much more accurate way is using options. I don't have that level of skills. But so the CME Fed funds probability calculator, I know it's flawed, but I still look at it, of course. Yeah.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“I mean, but again, now you're asking me to pick a side of a coin. It's like the odds are right now it's 50 50. So if you ask me which way the coin's going to flip, I'm going to say not cut, but it's not a good bet.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“They got to cut one day By the way, that's important to notice there's only one cut priced into, well, after today, there's almost two, but one and a half cuts priced into year end. So betting on two years is betting only 100 basis points for the whole for 13 meetings. If you buy two year notes right now, the Fed has to not hike. Sorry, not cut over 13 meetings. Seems like a lot to me. Particularly if they want to expect inflation to end. Because if they expect inflation to end, and they're right, regardless of the script, that inflation just magically ends up at target, they're going to cut. And so to me, there's more downside than that. So I like two-year notes. But if you put a gun to my head, I would say that they're not going to cut.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“Up. So I think there's a lot of possibilities right now. When I made that claim, Was in December, and there were seven cuts priced in. So I feel a little better about that guess. But right now it's a toss up whether they hike or cut, probably won't hike, probably won't cut.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“I put a list together that's reminiscent of what Byron Ween did at the end of the year where he would predict a bunch of things that are priced very unlikely but may happen and the one I picked was one of the one of the ten I picked was that the Fed was going to hike more than it cut in 2024 I'm still there. I'm still there. I think there's the smallest of small chants that they do anything at all. I think the odds are that they'll won't do anything in 2024 unless of course my script plays out and then they'll start cutting. But I'm not sure my script will play out. I'm not sure the supply of bonds will necessarily keep long-term interest rates high. And if they don't and interest rates long-term interest rates fall and the stock market makes new highs, the Fed's going to hike. It's going to have to because the economy is going to heat.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“And Powell remarked that he thought it was unlikely that the next move would be a hike instead of a cut, somewhat taking hikes off the table. Did you ever seriously think that there would be further hikes after the Fed indicated that it was, you know, the next move would be an easing stance and it did three dot plots, three cuts in the dot plot?”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“It's tough to be the Fed chair. Four months ago when inflation data was cold and they said, well, we're not going to cut right now. He got Destroyed by the questions are well, what evidence do you need to cut? Look at all this. It's obvious that you should cut. Apparently, and he did nothing. And so did nothing for like three, four meetings, right? And so this meeting, he said, we're not going to change rates. And, you know, well, we're data dependent. We may cut. And they said cut, why wouldn't you hike? Look at all this data My observation is that reporters would like the Fed to say something that they could then say this was the mistake. We asked him when he didn't why he wasn't hiking and look we knew and he didn't they're always playing that gotcha game and it's it was just more of the same yesterday”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“Well, it's mostly real growth, but because I do think inflation's going to be sticky, but nominal growth will slow too by the component that's real.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“Slow, you would expect, which would be bad for stocks, you'd expect the supply causing yields, long-term yields to stay high, which is bad for the discounting of stocks. But you'd also see inflation coming in, which may allow the Fed to cut, which will help two year bonds a lot, but not necessarily help stocks but could hold stocks up. And so when you play those sort of situations out, that's the bet you make. And right now that's the bet I'm looking at, which is expanding term premiums, slowing growth, sticky inflation.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“Know that's where I'm at. I might be wrong, of course, but that's my expectation because I think the driver is those. Now, if I thought the driver was growth, like we've had some pretty solid growth. If growth were to stop accelerating and start heading down, well, that would be good for bonds, but it would be particularly good for two year notes and okay, good, but not great for tenured bonds. But it would really be bad for stocks because the growth is something that stocks are directly correlated with. And so if you had a view that we've peaked in terms of nominal growth, bond yields, long-term bond yields have pressure from supply. And as we enter into a slower growth, a little growth slower, and I'm not talking about a Depression or a recession. I'm just talking about a little growth slowdown. You would expect earnings to”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“Bond yields and stock. Bond yields rise and stocks fall. That would be, that's what my outlook is. That's the bet I'm making. And so I'm expecting those correlations, which is a positive correlation for prices, bonds and stocks both going down at the same time.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“I think they have been lately, certainly the month of April. You've seen stocks peak and now they're selling off. Are they selling off a lot? I don't know. It depends on where you look. There seem to be selling off and bond yields seem to be rising. And so that's what's happening. I think what's happening is term premium expansion. Because of a variety of things, but mostly the supply is my principal view of that. And in that case, you would expect the correlations that are occurring now, which is rising bond yields and falling stock prices. My outlook is for more of the same. Where”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“What is your view on the correlation between stocks and bonds going forward? Sounds like you think. Interest rates bond yields will go up, and your bearish stocks. Do you think the correlation will flip? And at some point, the high bond yields will be a drag on the markets”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“That's not a bet. That's saying we have an uncertain outcome which could cause correlations to go in whatever way they go. How does one position? But you have a view that has expected return on it. How risky is that view depends on how volatile the correlations are and how you then size it depends on your risk management? So I happen to have a risk management strategy. I've published it on my Twitter account many times, but I'm unwilling to take meaningful tail risk. I'm willing to take a drawdown, but I'm not willing to take an unlimited drawdown. And so that is one of the reasons I get comfortable doing trades that may have volatile correlations.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“Growth bullish stocks and inflation, it depends it depends on whether the inflation is top line allowing companies to raise prices without experiencing significant cost increases, meaning wages aren't going up or the opposite where they're unable to now increase prices, but wages are increasing and that's squeezing margin. What I've just done there is just broken down the drivers of all these things. And that helps you have an edge if you have a way of judging what growth expectations are going to do, the inflation expectations, and term premium expectations, that helps. And then there's positioning, which is the last of my framework. But I think your question goes to a different thing, which is, we don't know how these things are going to play out. We don't know how the correlations are going to go. And that's a risk management.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“This third thing, which is well, what's term premium doing? And so what I would say in the case that we're describing, you have earnings expectations, bullish stocks. You have until recently term premiums bullish both, because term premiums were contracting, bullish both. And you have growth and inflation bearish bonds. For stocks, you have”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“I think that's a good place to start with that question, which is the way I do it, and anybody can do it however way they want, the way I do it is I think about what the drivers are. And for instance, in an environment where, well, the economy, the nominal GDP, the real GDP, earnings are rising, you would expect stocks and bonds to bond yields to go up because growth is rising and you would expect stocks to go up because earnings are going up. And there's a discount rate issue there, which is generating a negative correlation, and there's an earnings stream that's generating a positive correlation between yields and stock prices. And the question is how important is it and which one do you wait more?”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“Change, for example, Act 3 multiple compression, higher yields, take the legs out of the equity market, and that is the same thing, that higher bond yields will make the future cash flows of the stock market worth less. And sometimes that definitely works like in 2022 as interest rates shot up, the market sold off, but sometimes they have a different correlation where in March 2020, interest rates were collapsing and the stock market crashed alongside that. Likewise, over the past six months interest rates have risen or bond yields have risen alongside the stock market. So, I mean, are you just tracking these correlations every single day as well as a more specific question, what have you made of the fact that the market has risen alongside yields, i.e. stocks go up as bonds go down?”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“And a lot of what you said hinges on correlation between other assets. I own bonds and they're going to be a hedge against stocks. How do you manage the fact that these correlations change? And the VIX will almost always go up when stocks have a sharp sell-off. Almost always, you know, obviously there are exceptions. But when you look at, for example, the correlation between”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT
“Okay, what does that add up to? Is that a 52% bet? That may be worth taking. And so the question is, when you look at what prices stocks and you try to break that down, you say, okay, A is bullish. B is bearish. Z is one that I have an edge on and it's bearish. And X and Y are the same and they're bearish. But, you know, I add up all these things and I have indicators on whatever I can and a bunch of things I don't know. And then you have to assume what's the odds that you're wrong or right on things you don't know anything about? And the answer is it's decent assumption that it's just random. And so all it creates is your variance. It doesn't create your, it doesn't have a negative or positive expected value.”
2024-05-06 · Forward Guidance · Andy Constan: The Bond Market Will Take The Stock Market Down With It · IDENTIFIED FROM THE TRANSCRIPT