YouSaid · the spoken record

James Aitken

lines on the record: 117
first: 2018-06-25
most recent: 2018-06-25
sittings or episodes: 1
sources: podcast

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“Doesn't mean there won't be mistakes from time to time, but you look at the new leadership of the People's Bank of China. They're very sophisticated when it comes to the plumbing. And while the People's Bank of China's balance sheet has been coming down, which I think has been underreported from my trip to China last year, number one takeaway is I will never understand this. I just can't. I just can't get my head around the enormity of it. I just want to be less wrong. So we're told for years that all these Chinese property companies and Chinese corporations have borrowed dollars. The dollar goes up and the Fed Titans policy, they're in a well to pain. And this young man managing a Chinese bank balance sheet in Beijing casually mentions Ted that, oh, we've got our three hundred billion dollar offshore balance sheet. I'm like, stop what? Oh yeah, we've got three hundred billion dollars in our offshore balance sheet. Oh, what do you own? Oh, there's a few treasuries.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“And that's the downside of being in charge of everything of your president she. If everything goes right ta I did it, but on the other hand, if you're all powerful and in charge and anything goes wrong, it must be your fault. I don't think the Chinese economy can afford too much deleveraging.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“You have a man running the show for as long as he cares to, President Xi. Who takes a long term view? And he's trying to figure out how to rebalance the Chinese economy. No one's tried to do what he's trying to do, and if we were him, we'd probably take a lot of time to figure it out, which is why I say deleveraging with Chinese characteristics. What Chinese financial policy makers would like us to focus upon? Would be that the rate of growth in credit and shadow banking in the Chinese economy has declined abruptly, but the key thing there is that's the flow rate of growth, the stock is still rising. And perhaps I'm being simplistic, but I don't see how you ever deflate what is frankly a gigantic liquidity bubble rolling from asset class to asset class inside China without some pretty stern consequences for China's GDP.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“And this narrative that China must, would, should, they have to, this, that and the other, I think we need to be very careful with that. So the common assumption that worries me most about China is that they must have a subprime like crisis at some point. I'm not sure about that. A financial crisis, some kind of credit cycle, liquidity cycle defaults for sure. But to use that subprime mental model and apply it to something as complicated as China or anything else, I think is a bit dangerous. When it comes to, for example, shadow banking and spillovers in China, what do we not know? We've had more and more information released. We know the stock, we know the flow, we know the players, we know the cross links, we can sign up with a WeChat account and talk to bankers onshore on the mainland, but it's just one part of the puzzle.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“I am struck by the number of people who claim to be China experts, because I don't know what that means. I encounter a lot of people who are very good at a particular part of understanding China, so they'll be the person who's very good on shadow banking and wealth management products and China's plumbing. Which unfortunately tends to mean that they look at China entirely through the prism of their knowledge and unsurprisingly for the past eighteen months oh it's all going to hell you know deleveraging and then there'll be the person who's looking at the Chinese technology giants and everything's going to the moon and then there'll be the property person and everything's going to hell and you go round about Look, let's face it unless someone the Pollet Bureau Standing Committee, I'm not gonna know too much as designed, I'm just not.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm sure there's a great number of them, but of course, for me to assert that a market is faulty or the assumptions are faulty is you need to be careful that one is not too arrogant because Mr Market is not always wrong. And markets, I think, of them as a contest of ideas. So one guy working from a broom cupboard in Wimbledon needs to be careful how he...”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“James, some of the assumptions, these core faulty assumptions you talked about, you mentioned U.S. rates will stay low forever. You mentioned in a real inflationary environment the correlation of stocks and bonds changes. Are there other core assumptions that you think markets are making today that are faulty?”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“People are biased to look for what's going wrong as opposed to what could be going wrong. I think there's an opportunity to step back from the consensus narrative and focus less on what central bankers are saying because they're reacting to the exact same data. That we can see, and they're reacting to input from US and global corporations. And in this age of crowded positions, leveraged exposures, if I'm going to wait for a central banker to give me permission to reprice something, it's too late. If I'm going to wait for J Powell to say it's now okay to sell the long bond, it's too late.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“On how the US economy is, you know, oh, it's perilous or global growth is perilous or emerging markets are in dire strait. I find that difficult to reconcile with the commentary that continues to come from global corporations about order books, forward order books and everything else. And my sense is subject to revision that we're looking at late cycle asset price valuations. But shockingly, the US economy might be mid cycle. And that might be the opportunity for people who are prepared to take a step back and look at things and look to be fair. I wonder whether too many people are caught up by the first White House tweet every day. And that drives what he said now. Oh, the man's done. Oh, you know, they go on and on and on, and therefore, by looking at the world through the prism of the president.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“You would think based on that observation the probability is higher that in two thousand eighteen and twenty nineteen the US economy will run a bit hotter than it has done over the past several years. And while I think of it, out of necessity, all these morning calls around the world over the past several years, you know, these global calls have started with ambitious young women and men speaking to their colleagues on a speaker phone. It starts with which central banker said what? Who's up next? What did it mean? And then and only then do you get into discussion of what was Singapore non oil exports or what's happening in Korea or best of all what are we learning from our portfolio companies? And these global corporations are as sophisticated in their inventory management, logistics and order books as any hedge fund sitting in front of Bloomberg. The investment they've made in logistics infrastructure, whether it be Saphanna software, these guys have their finger on the pulse of the global economy. And I am struck by the disconnect between the consensus macro commentary.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“And yet no they fared their idiots, here we go, global PMIs are rolling over. Well, I need to give it more study, but when I look at global PMIs, the reason they're declining a bit is because of capacity constraints. And capacity constraints and bottlenecks don't strike me as late economic cycle they strike me as mid economic cycle issues. So there's this disconnect. So my challenge is to pay attention to the fact. I put tremendous effort into all their communications, unsurprising, tremendous effort. And they are going to be slow and gradual for a long time to come, barring a tremendous exogenous shock, and the final point I'd make is look, let's step back a bit. This has been the first occasion since nineteen sixty four when a US economy perilously close to full employment has embarked on tax cuts.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“The whole point of tightening monetary policy is to tighten financial conditions and eventually bring asset prices down. That's the point. And yet the market continues to impose and project its view on the Fed, no, they're wrong, the yield curve is inverting. Believe me, if the Fed wanted to steepen the yield curve, they could. Oh, they could. They have the power to do it. It might be quite a dramatic thing, but they can do it. But this narrative that things are going wrong, and yet the Fed is like slow, gradual, slow gradual. And what the FOMC is trying to articulate to markets who are not willing to listen. That they think that they're going to keep hiking rates for a long time to come.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“And what J Powell is trying to do is to reactivate the market mechanism. Now notice I didn't say price discovery. Price discovery to a central banker sounds a bit scary because it might go further than you think. But to be fair, J. Powell is trying to find a way to reactivate markets while avoiding a rerun of the taper tantrum. It's tricky, but far from being concerned about a further tightening of financial conditions or further increases in realised and implied volatility, to them it would be perfectly logical and expected, and Ted proved”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“It tells you that when realized inflation goes up, not implied, realized actual inflation goes up, guess what? The correlation between stocks and bonds changes. Who knew? And the correlation between stocks and bonds and credit changes, as it should. And yet the world has become accustomed to the idea that the correlation between stocks and bonds is predictable and exactly the sort of amplitude and magnitude where it is today. And it continues to change. So the point is, if you've been paying even a moderate amount of attention to the Fed from the third, fourth, even all of 2017 onwards, and especially the start of this year, there's been an awful lot of money to be made. And then the challenge was to calibrate what the spillovers might be. Where the Fed's at today is still slow and gradual, working out how to retreat from forward guidance.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“Said, look, I think this is wrong. I've sold some more Euro adults and stuff like that. And then a week later, this is how the games work, right? A week later, Bill Dudley, I'm paraphrasing a bit, rings up the FT and says, I need to speak to you, grants an interview to the Sam Fleming, who does a wonderful job covering the Fed at the FT in Washington, and goes to Sam and basically says bang, bang, bang. No, I mean it. And then you start to get a little bit of more pricing in US short-term rates. And then a week after that, we get the high inflation prints. And then two weeks after that, it's on like Donkey Kong. Now the serious point is, if you look at financial history,”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“I remember picking up the phone to one of my short-term interest rate friends and saying, am I following the wrong economy? Have I misread this speech? And he's like, we're sitting here thinking the same thing. This is like a really compared to the baseline. This is a really hawkish speech from Bill Dudley. Basically, the front end of the US term structure has moved about a basis point.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“Equity index implied volatility is no longer reacting the same way as it did previously. January eleventh Bill Dudley, who's the outgoing head of the New York Fed, very important man, for a long time the world's favourite dove, but as the data evolves and the economy evolves, so too does Bill Dudley evolve, as you and I would if we were him. We're responding to new information. He gives a speech. He talks about this rather nebulous concept of our star neutral equilibrium real interest rate and a whole bunch of gobbledog. But it's going up. And that he thought, you know, three to four hikes in twenty eighteen would be slow and gradual, and basically, you know, the economy is looking pretty robust, to say the least. Nothing happens.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then, and as this tiny bit in the words, but it's very important, I think, to understanding where the Fed's going. And then you get to January the 11th this year. Now, by the way, just as we entered the start of the year, something different started happening in financial markets, right? Now, we've been used to years of asset prices levitating and implied volatility across all asset classes coming down. But as we came through the first couple of weeks of January, asset prices are still going up, and guess what? Implied volatility stopped going down. Now that's interesting, so you just write that down the notebook and go, okay, something's changing here. Don't know what?”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“And how people were able to do very well simply by paying attention to the Fed. You had the grand total of zero point two i. e. no rate hikes priced in to the US short term rates market in all of twenty eighteen and all of twenty nineteen. Now you don't need to be a genius to think to yourself that's probably a bit pessimistic. So people who understand how the Fed's thinking and looking at the economy with a broad perspective and estimating, guesstimating the probability of Republican tax cuts said that's just silly prices. So they start tapping out a few euro dollars, putting on various curve trades, getting stuck into mid-curve futures and stuff like that. And then you get to the end of the year, and contrary to expectations, the Republicans have delivered a tax cut.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“But Janet Yellen thinks that her Federal Open Markets Committee have made it abundantly clear they're going to hike in March, and yet the Fed funds market was not willing to price it in. And they all went, the key board members, into the financial media, to say, no, no, we're actually going to do it. It was like an out-of-meeting rate hike because Marcus Like, no, it's the Fed, the Ninkam poops. They don't know what they're doing. Oh, it's the Fed. They're always wrong, which is, I think, is a little bit unfair. I mean, they're not stupid people. They just move to the beat of a different drum to the rest of us. And they managed four hikes in twenty seventeen. But let's go back a little bit to September last year”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“And if inflation does perk up, that is a high class problem to have. Given everything you've had to do, it has been the only game in town, particularly in Europe, and probably will be in most jurisdictions for a long time to come. So we can huff and puff about balance sheets, or we can say what are these people most likely to do in their seat? What are their incentives? That's the key point. The Fed gets criticized for their communication, and I have to say over the past eighteen months they have been so transparent and so clear about what they're trying to do, and yet up until recently markets were fighting it. I mean, you had this extraordinary event in march twenty seventeen.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“When I think about central bank reaction functions first and foremost I say to myself what would I do to If I was one of them That's got to be the starting point. And we know so well, Ted, that there's been this great tendency over the years by market observers and commentators to project their opinion. To central banks. They will, they must, they should, they shouldn't this is crazy. Doesn't matter. It just doesn't matter. And if you imagine what it's like to be sitting around that table when the Federal Open Markets Committee meets in Washington with Their mandate and their institutional imperatives, and not only that but everything they've had to do over the past several years, you too would be slow and gradual”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“Been more of the perspective of that's not right. Well, that's not quite right here's why here's a background paper or here's what this money market fund manager has actually said or here's what this US corporate treasurer has said or here's how banks are actually responding to US tax changes etc So it's to give people a broader perspective and I think as a phrase one of my clients like to use which I think applies to investing in general, which is the mindset of constructive paranoia Constructive paranoia. And you mention that to people, Ted, and they say, oh, you're one of them, you're one of those left-tail people. It's like, actually, no. Constructive paranoia when you're thinking about markets and asset allocation investing is as much about oh my gosh, am I overexposed to something that might go wrong as it is about oh my gosh am I under exposed to this particular opportunity that people haven't re rated yet?”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's the key. And we live in this day and age where everyone seems to be entitled to their own facts, and accusation is taken as evidence. And it applies in as much as in political discussions as it does to observations about how the financial system works or how the Fed works or how the US economy is evolving. Oh, here's two charts, and we've all seen this. Here's two lines, one advanced six months, we're going to hell. Great. That's fantastic. That's so helpful. I'm sure you and I, if we challenged each other the next five minutes, we could go onto the Bloomberg and prove that mobile subscriptions in India drive dollar funding markets in Hong Kong, but if we lag it long enough, right? I'm sure there's a link. But, you know, that's the danger. So my challenge, in fact, when I reflect on most of the advice I've been trying to impart to my clients over the past couple of years, it's...”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“To my friend who's the treasurer at XYZ and say, Am I thinking about this the right way? Or the CP guy or the swaps guy or the sturgeon say, hey, look, Have I got this broadly correct? And I find that immensely helpful. And really, Ted, if... People think of me as a plumbing expert. It's not because I know anything about the plumbing, really, seriously. It's not. It's because in my experience the plumbing of the financial system is so complicated and constantly subject to change in ebbs and flows that nobody can know it in its entirety. So if I do know anything about how this works, it's only because I never stop asking questions.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“What's actually going right? Opportunities arising from being able to lend dollars if you're a reserve manager in a sensible risk control way and earn a few more basis points very controlled way, or to lend out your treasuries, or how Japanese institutions are lending their dollars in a much greater scale, which is lubricating global money markets and increasing the float of dollars. It's a change, right? So it's not what's going wrong, but it's explaining to people how relationships have changed. There's an obvious feedback loop between post-crisis regulation and what central banks have been trying to do. In fact, you might argue they're at cross-purposes, but it's to try to help people explain how the plumbing is adapting and evolving, and I'm very fortunate to count key men and women in the plumbing as dear friends. So if I don't understand something, I can pick up the phone.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“One proves the other, look out, we're going to hell. It's like, well, no. And the key point I'd make that far from explaining to people over the past years what's going wrong in the plumbing, this notion of dollar shortages and stuff like that, which is a little bit off beam. My job is to be explained to people what's actually going right.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“We'll come to the Fed in a moment, but you've just reminded me of an important point. It's dangerous when you But it's dangerous if you come to be known as an expert because it means you might shut your mind off to new ideas, new information, and the plumbing of the financial system is an extraordinary complex, dynamic system. It's not a static system. It's dynamic. Of course it is. And yet, there's so many people out there today, Ted, putting out charts with two lines from relationships, you know, these infamous cross-currency basis swaps, or apparently the ebbs and flow of the Treasury General account, the deposits the US Treasury has at the Fed, explains everything is happening in the world today, which I think is just nonsense. And they say, oh, look, here's two lines that vaguely resemble each other.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“Let's talk about today's markets. Maybe the place to start is the epicenter, the Fed, and the US. What's going on in the plumbing? What are you talking about with your clients of things of concern and areas of opportunity?”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“And hedgehog managers more broadly have changed. They sit on your shoulder all the time, meaning that you feel you can't lose any money at all. And if you can't lose any money at all, then you don't feel terribly compelled to take any risk. So it's a pretty nasty circuit.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“To be able to use single stocks, for example, to optimize a macro view, to be able to trade exchange traded Korean derivatives if the mood gets you in its enormous liquid listed derivative market in South Korea of all places, to express a view on Japan by a particular sector or basket as opposed to on just long topics, basically to differentiate yourself from everyone else by being taking advantage of things that may not be quite as crowded. The ability to avoid all the macro roach motels is the critical thing. Secondly, in fact, it might be the most important point, you need the right clients. You need the right clients. You can't have clients who ring you up every Friday saying, what have you done this week? That is just no way to manage money. But I'm afraid that's tended to go hand in hand with a lot of the institutional allocations that macro managers”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“So what makes a good macromanager today? And, you know, of course what I'm replying from a subjective point of view. Point of view because I know a few of these guys. Firstly, it has to be a broad mandate”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“Just talking to my yogi, and you know, it's like who cares? The serious point was part of the tremendous success of the true macro pioneers was the broadness of their mandate. I will have a top down view of the world, but I will use any instrument under the sun to express it, compared to the more recent past where Macro has become institutionalized, in fact too many macro businesses have become voltagening. They take money from some asset allocator who says don't lose more than X, and you can only trade equity indices, short term interest rates and FX. Is it any wonder that people have struggled? The point being that we went from a very broad macro environment where things moved to a very constrained macro environment, which made it difficult for people to express what they wanted to express.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“First and foremost Ted What makes a great fund manager is that they are long time They are long time they are never short time they never give their time away that's the first point. The second point when we think about macro maybe we should think a bit about what macro was and then what macro became. You think about macro in the late sixties and early 70s, you know back in the day and you think about what quantum was and if you read some of those early quantum shareholder reports and you compare them to the present day you know it was like this is what we thought this is what we did this is how we did thanks very much whereas in the modern day no fund manager update would be complete without some reference to the Dalai Lama or I went to China and I saw an empty building and you know then I was there”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“But you know what? I'm going to allocate x to it, knowing that if x goes to zero, we're still the going concern as a fund manager Years later they're selling those things in the 70s and 80s and taking profit and moving on. But the lesson there is for all the smash up in the Eurozone, all the policy mistakes, the people that ended up doing the best were the people who didn't try to be sovereign debt heroes. They didn't try to short all the banks, although Deutsche Bank is the gift that keeps on giving. They didn't try to be geniuses. They said, right, we know what's happening. It's beyond our circle of competence. We understand what the spillovers are, but we're not going to change our mandate just to participate. We're going to wait, and then along comes the opportunity. What a lesson, what a lesson in investing, what a lesson in process.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm going to put you on a plane from Kennedy to Athens tonight, off you go. And she went to Athens, and she spoke to people, because not to mention her view, but to try to understand what she might be missing. And of course she wasn't the only one there. There were about a handful of people who were on to this. But again, a brilliant example of how you encourage people to speak up and think. Off she went, she triangulated what she thought she knew, she reported back to the boss, and they bought an awful lot of restructured Greek paper under English law in the teens, which turned out to be the most fantastic investment. And what happened after that was a bonus. It was the original analysis. You know, Sam Zell likes to say liquidity equals value. It was like if I'm buying the restructured Greek paper under English law in the teens, and it goes to zero, that's going to be quite humbling.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“I can find no history or no previous example of restructured sovereign debt under English law trading at a discount to the remaining stock under local law. I think there's a lot of force sellers who are missing the point, and the boss said”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“and finally they've decided to restructure Greek sovereign debt, and a young lady speaks up at the morning meeting I'm going to paraphrase only slightly to protect the people involved, but their friends of mine, and it's a brilliant example of how to think, and not to react but how to think and be reflective. And this young lady speaks up in the morning meeting and says, Boss, the restructured Greek sovereign debt under English law is trading at a discount to the existing or remaining stock of Greek debt under Greek law, and Ted, you don't need to be a sovereign debt lawyer to understand that you'd think that a restructuring in English law is somewhat of a legal upgrade. Now, don't wish to offend anyone listening, but I think that's probably true. But it was a most unusual situation. This young lady said, I've done some...”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“So you and I have encountered a few hedge funds and other institutions where the founder tends to dominate discussions. That's fine, that can work well, but all the best fund managers I know instill a culture of collaboration, where everyone from the intern to the founder to the CIO is encouraged to speak up if they spot something and they create a collaborative inclusive culture. And it's easier said than done. And let's just set the scene. Here we are in Manhattan, and it's april twenty twelve.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“And it's no secret that European policymakers, broadly speaking, have no strong like of Anglo Saxon capitalism in these things called markets, you know, not very nice people. But when you step back from it and think about who did best from that Eurozone crisis, or dare I say the first Eurozone crisis, it was investors with a broad mandate who understood what was happening, were smart enough to step back from their exposures without wanting to change their mandate, without wanting to change their process and suddenly become a currency guy or a credit guy, but they did their homework and said right, we understand what it is, we want no part of it, but we're just going to step back and avoid the worst of it, which is very smart and very disciplined. And this is the most brilliant lesson in the importance of culture.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“So stand back, be careful, think about your counterparty exposure to European banks, think about your exposure to Euro denomination. Just be careful, right? Now of course there were people out there that took advantage of it and said, I'm going to short this, I'm going to buy peripheral sovereigns, you know, the usual stuff. But there's a big, big takeaway from all of this that I think is really important. From november two thousand nine until whatever it takes from the Dragi Wizard in july two thousand twelve, we had mistake after mistake after mistake.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“And Ted, the Germans thought here's an opportunity to teach everyone a lesson, and they hit a red button that took economic and monetary union to the brink. And you knew that as soon as they injected a risk premium into Greek sovereign bonds and counterparty risk and haircuts and everything else they would start a process that would cause tremendous distress and dislocation not just across economic and monetary union but across as we saw from time to time the entire financial system. What an error It was an opportunity for me to explain in simple terms this is what is happening this is what they have done they have started something that's going to be awfully difficult to control”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“We went through all the documentation, all the derivative documentation, all the counterparty documentation, securitization documentation, not just in Greece but across peripheral Europe, all the fine print. And guess what? We get to november two thousand nine and it's all in play, and it comes back to that basic premise when you falsify the key assumption underpinning any liquidity or credit cycle you get mean reversion and then some. And the key assumption underpinning economic and monetary union, in fact to this day, is no default risk in peripheral credit of all kinds, whether it be sovereign or bank or whatever.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“Get after it, mate. We got you back. I mean, how wonderful is that And then we get to november two thousand nine and the Germans in their infinite wisdom decide to make an example of Greece. And I'm going to use that word again as luck would have it. At AIG Financial Products in London in the summer of two thousand five, when the Greeks announced that they would include the black economy in their overall GDP statistics, we can't have smelt a rat. It was most unusual thing to do to meet your debt to GDP obligations.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“Just goes to show. But look, I was very, I got to work with extraordinary people. I got to connect with extraordinary people. And of course, by the time I finally kicked off on June 1st, 2009, the world had changed. The bottom was in. And it was a very tricky time. You know, you sit there at one o'clock in the morning looking at a spreadsheet thinking, what the heck have I done? I'm out of my mind. The world's changed. I'm still writing about all this plumbing and balance sheets. It doesn't matter anymore. The fire brigade has arrived. The fiscal taps are on, the monetary taps are on. Who cares about counterparty risk or collateral? It doesn't matter. So I'm sort of digging a hole, I'm publishing every day, travelling, but loving it. And still clients are dribbling in, and they were so good to me. They said Jon't worry about it. Don't worry, just do your thing. You gave us such support during the crisis.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“divided my distribution list into people who were a slam dunk to sign up for Aiken Advisors LLP on day one, people who were fifty fifty, and then people who were no chance at all. And guess what? I start on day one and nearly the entire client basis people I had bracketed as never going to sign up.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“The intent was to help investors of all kinds understand how things work. That was the premise. And as you know so well, you know, you can start with all these whizbang ideas and slogans of what your business is, but guess what? You learn by doing. So the first premise was, can my young family and I be at least as comfortable as we are today by having a go at this? And the answer was yes we can, so let's do it. And my wonderful wife was so encouraging. And I think I'll paraphrase, but I think it was roughly what have we got to lose. And that's what you need, right? You need that domestic support, right? And I was very lucky there too. And here's the amusing bit. So I drew up had a spreadsheet of all these people who'd been receiving my inverted commas insights during the crisis.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“Were your first client? I'm like, whoa. Now it only took me four months to make up my mind, right? Look at me, you know, Mr. Risk averse. But that gave me the confidence to resign from UBS. And off I went.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“I was able to help a lot of people in two thousand seven and two thousand eight not lose money, and I was also able to help some people make a lot. And towards the end of 2008, where I was very lucky to have a job, many friends been ejected and disappearing, and there I was employed the greatest intellectual exercise of all time, the greatest, if not challenging, but certainly the greatest financial education of all time in terms of what's important, and eventually a couple of young fellows said to me, Look, come and have a chat with us in New York. And I'd had people approach me and offer me jobs. I had one sovereign wealth fund say, Oh, we'd like to give you a billion dollars to manage a long short financial fund. And I said, well, that's great, but I can't do that. I don't even know what to do. I couldn't even construct. It's just not me, but thanks very much. And eventually there's two young guys out in New York said, look, we've got your back. Set up your own business.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source
“Ted, it was entirely by accident. I have to say the idea that I'm doing what I do today and doing things like this, it's just absurd. It is totally absurd. I mean, the idea that I'm a classic case of eldest child syndrome, totally risk-averse. I'm always the kid that had to be on time, have his shoe pockets. I mean, not a risk taker at all. Look at me. I mean, it's preposterous, right? And I got to work with more and more people at UBS, really interesting investors. And look, as you can tell from what we were discussing before.”
2018-06-25 · Capital Allocators · James Aitken – Macro Strategist Extraordinaire (Capital Allocators, EP.58) · IDENTIFIED FROM THE TRANSCRIPT · source