YouSaid · the spoken record

Jens Nordvig

lines on the record: 87
first: 2023-05-11
most recent: 2023-05-11
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Talk a little bit about a really important one, right? If the dollars correlation to risk assets, like you can just think about it as the S&P, if the dollar starts to go down when the S&P is going down, then you really need to sit up in the chair. I'm going to do it myself, sit up in the chair. That's something that you want to pay attention to. If that's the case, right, then you need to think about risk management for your portfolio differently. So that would be sort of the one takeaway that I would stress once again.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“So it's marketreader.com. And so what I would encourage people to do is we have essentially an early access community where you can sign up. And then in a few weeks, we'll open it up for those who are on that list. And we're hoping to really get a dialogue with that early access community so they can say this is a fantastic tool, but I really would like that. And we have an extremely nimble team right now. And then we're going to try to add those features that are most in demand so that we can have a nice symbiotic relationship with our early adopters. So if you go to marketreader.com, please sign up. We would love to have engagement with you and learn from what you think will be the most useful next feature that we haven't programmed yet.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“This tool is to assist the human. It's not set up to make a trading rule and trade your portfolio without you looking at it. It's meant to give you fantastic information better than the information you can get currently, and that's going to empower you to make good risk management decisions.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so again, I would say the goal of market reader is not to use artificial intelligence and tell you what to go and put in your portfolio next year or something like that. The goal of market reader is to allow you to absorb an incredible amount of information for a large set of securities, zoom in on the securities that you are interested in, and give you the conclusion about those. And I think in this specific example, it was extremely helpful in terms of highlighting the issues early, highlighting the contagion urging. Like, for example, that evening, right, where you highlight what was happening, like we picked up all those different steps, like the initial announcement of sales of the securities, like the different VC announcements on Twitter that caused a run, right? So we could track those step by step. But in the end, the goal of...”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“And how do you model that Silicon Valley Bank fell, you know, the news itself was not fatal on that Wednesday, March 8th of they have to raise new equity. The reason it became fatal was because the stock sold off, all of these venture capitalists who were on Twitter and tweeting a lot, they noticed the stock fell off. They withdrew deposits. The withdrawn deposits caused a news release from Silicon Valley. The stock goes down more. Suddenly by Friday, it took less than two days for the entire House of Cards to collapse. Suddenly, you have a new Federal Reserve facility, you know, four days later on Sunday. How do you model that? Is it possible to be modeled where a fall in the actual share price can cause a decrease in the fundamentals and what I've been saying is if the stock of Coca-Cola fell, it's not like people would stop buying Coca-Cola. But if Silicon Valley Bank fails, people do withdraw deposits.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“So, the health sector is moving in these cycles, and we will go in and analyze, okay, is this stock moving for any company specific reasons, macro reasons or sector reasons? And it's really been a sector dimension that has been driving the ups and downs. We've not had any single names in the last few days that have had enormous moves, but the whole sector kind of moves in these two 3% cycles during the day. So that tells you a lot about short covering. playing a role. We've also had very, very high volume detected in the system, right? So now we're sort of in a behavioral finance type regime where a lot of that is driving the price action as opposed to any given single stock announcement.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“So I would say the main message over the last couple of days have been that when I go and look at each stock in the sector and we use smart screeners to do that, you can go into like the market reader handle is add market reader ink. We've sent out a number of those screenshots where we scan the whole bank.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“So I think what was very interesting there was that we could watch all the different instruments in real time, right? And we could immediately detect that, okay, first republic is being hit by this. Lots of people who manage a lot of money have never traded Silicon Valley Bank. They've never traded First Republic Bank. Those are not instruments that are on the screens, right? So being alerted to those smaller names that is actually driving the big names on the day is really important. So I would say the most helpful aspect of this was to get the early warning on Silicon Valley Bank and then the whole list of contagion effects and the system did tell you right that it is contagion from Silicon Valley Bank that is driving these other stocks. And that was a really, really helpful heads up and something that really gave you almost 24 hours on that.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“So I think the first thing I would say is that market reader is set up to in real time digest everything that's going on and explain what's happening. It's not going to give you a forecast of what's going to happen in 2030, right? So it's not like predicting everything into the future. So it's mostly about absorbing what's going on extremely efficiently and very objectively. But I would say on that day and the way I used it, and I was actually tweeting at the time, so you can go and see what's on the J Nordvik Twitter feed.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“All right, so let's say there's a human being who on Wednesday, March 8th, Silicon Valley Bank announced that it had sold essentially all of its available for sale securities and it was going to raise new equity, your former employer, Goldman Sachs, was the advisor and maybe there was some tactical mistakes there. Things could have been done better. That news item I remember seeing it. I remember the stock being down a lot. How would the machine know or how would it have a percentage of confidence that more trouble was to come? Because frequently, you know, you have Snapchat earnings are a huge disaster. The stock's down 40%. But then, you know, everything's fine. How do you know that things are going to go systemic? What were you seeing that Wednesday night that the human being was not?”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“United Airlines is moving. It's likely due to the fact that Delta Airlines has said this and that. And that is what we call supernova news, right? Because it's a different type of news. It looks at potential drivers in a much more broad sense than just, you know, company specific news. And if you think about all the gaps in the market and so forth, I think, well, our statistical analysis suggests that you can only really explain 10 to 15% by instrument specific news. If you look at the cross asset, Links news by association, you capture an immense amount more, maybe seventy percent, then the volume gets you to 80% and so forth. So with a whole list of potential explanations, you can really fill the gap in your understanding of the market in a way where traditional tools doesn't allow you to do that”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“It's impossible to know with 100% confidence, but it's possible to know with a very high level of conviction, right? So we in our system, we don't necessarily show this to the user in the first glimpse, but underlying the output, we have something that we call a causation confidence metric. So we have some fairly elaborate math, right, that generates causation confidence metric, right? So in the example you're outlining, right, you have a situation where United Airlines is moving, but really the cause of the move is that Delta Airlines set something about the man, which is clearly going to be relevant for the overall industry, right? So in that situation, we have a whole set of metrics that we look at. And our Caucasian conference might be, you know, 85%. So we will flag that to the use.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“It gives new insights. It also gives time to look at more stuff. And then we apply AI. It's almost like we apply AI to simplify things. Once all our models have run and given their conclusions about what's going on in the market, we can tell ChatGPT or whatever other AI infrastructures to optimal say, okay, why don't you summarize it for me in 20 words? And when you have all those summaries and can look at so many assets in such a succinct way, you can just save an incredible amount of time. So that's what we're building. So we have not launched yet, but within the next couple of weeks, we will launch. And we hope to help a lot of people. So this is not just for institutions. This is something we believe a huge amount of people can take advantage of. And that”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“Wednesday of that catastrophic week, like we got alerted from market reader that there's something odd going on in the aftermarket. And we started to look at what's going on. We could see it was spreading to other stocks, right? And like First Republic was down already back then. So it was a fantastic sort of early warning signal for what was going on with the banking crisis. And it's really because we can just watch so many things. Like at the moment, we have 11,000 assets in the system. We can watch big assets, small assets. We do a lot of analysis where we look at like volatility adjusted moves, right? So we know what is a normal move for every asset and we really focus on the stuff that is unusual. And I think it gives.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“What's going on with that portfolio? It can be many different things, right? Most simple type of driver of the market is a piece of news that come out like bad earnings from a company. But it could also be somebody needs to do a block trade. So it's a flow. Or it could be that, you know, Delta Airlines is picking up weak consumer demand, that that moves United Airlines. So cross-asset correlations are a huge part of what's going on. So we go through all those different dimensions and we have them programmed out and we have the robot or whatever you want to call it. Watch all assets simultaneously. And it's the simultaneous analysis of all assets that the human cannot do adds a totally different dimension. And yeah, I think it's like we've actually used this tool already in a way that I didn't expect, right?”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so I've been advising institutional investors for more than 20 years, right? When I was a Goldman, when I was at Namora Security Bridgewater and so forth, and also with an ex-ante data in my own company where we have like top macro funds and other asset managers, clients. I thought it would be really rewarding, exciting to do a piece of software that everybody can use. So the philosophy behind market reader is that we want to instantly explain market moves, right? So if there's a gap in a stock or another asset, we want to say, okay, why could that be? And we go through all the dimensions that a top trading desk at a hedge fund or asset manager will go through to.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“Last week was very interesting. Last week we had U.S. equity on the performance and the dollar was down. So there's something about the regime we're in where if it is the case that the US equity market weakness has to do with US valuations being high, with the shock being homegrown, with all kinds of global investors being overexposed to US equities, then the down move in US equities don't have to support the dollar in the same way as the historical statistics have shown, right? So again, when you analyze data, including historical correlations, right, you have to have some kind of view as to where what is the structural link in the economy that generated that correlation and does it hold up? And this is a tough call, but I think there's a chance that that correlation is. In the process of breaking.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“So, I would say my view there is that it would be strange if the US doesn't face a significant slowdown, recession, but the timing of that is crucial. Is it going to be in one quarter, two quarters, four quarters, right? And I would say it's probably a little bit further out. That's another reason why the Fed should probably just be on hold for a while. The relationship to the dollar, now it's getting interesting, right? You're absolutely absolutely right, right? Historically, not forever, but in last twenty years we've had a strong link between growth assets, S&P, and the dollar, and i.e. S&P down is generally supported the dollar. So one of the most important things to think about right now, if you have an international portfolio and from a risk management perspective, is whether that correlation has potential to break.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“So, in terms of the recession outlook, right? So there's nothing in the data right now that suggests that the recession is just around the corner. Can't see it. You can have some projections around what's going to happen in a couple quarters. Excess savings run around. Maybe there's going to be a big fiscal drag. Depends a little bit on what happens around that ceiling negotiations and so forth”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“That's been playing into actually Asian currencies for a period of time, Asian assets, right? But whether that's sort of a more tactical setback from sentiment being too elevated or whether that's a trend that's going to continue on a multi-month basis, we're going to let the data speak and we will reassess that as we get it. And I have some concerns. I have some medium-term concerns, right? Typically markets are very nonlinear, right? So it's not going to be just one trend like that.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“Well, so we have global growth views that evolve all the time. We track an insane amount of data with all kinds of alternative data on global growth, right, to see if we can have an edge on that. So it's possible I'm going to change my view on global growth next week based on all the data we track, right? So what our view has been recently was that the Chinese reopening process was running out of steam. Our alternative data tracking in China, which I believe has been very reliable through this phase, showed that that momentum kind of peaked out in the third week of March and it's been gone down. It's complemented not just by Chinese alternative data, also all the trade indicators with all the countries that trade with China. They have a similar pattern. So there's some weakness there.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“We have been in a world where debt was pretty much free, right? We have had economies where we had a kind of levering process happening. More and more debt was accumulated. It was very supportive for asset markets in a way when you look at what's going on now where we have interest rates coming up from zero to significant levels, it is actually the economies that have a lot of debt that are facing challenges. That includes China. It includes United Kingdom, includes the US to some degree. And then you have some emerging market economies that don't have a lot of debt. Doesn't make a big difference for the economy, whether interest rates are 4%, 8% economy operates roughly the same, right? So inflation changes everything. And what are the winning assets, losing assets? Clearly going to be a different environment where we have very significant interest rates.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“10, 12% yield. We have not had that since the 90s, right? So the investment landscape is so fundamentally altered compared to what we've been used to really since some would say 2009, some would say 2014, right? We're in a different world. And that's going to impact things dramatically. Like just make a very, very basic point.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“That kind of tells you something about the SKU and allocations when that's possible for a government pension fund. And I think we're going to go through a phase here in the next couple of years where people are going to say, okay, what is my risk budget? Let's make sure I have a diversified risk budget. It's not just one bet in my risk portfolio on US growth. And that's going to be a multi-year process. That could be a real drag on the dollar. It's not something that's going to take the dollar down in one day. It's not directly related to what China is doing in terms of creating alternative, but it's an important cyclical dynamic after just an incredible run for US tech dominance and these types of things. But you also have yield around the world, right? So we have lots of EM assets that have six, eight.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“So, yes, this Chinese stock market right has gone through a massive roller coaster, right? Because we had massive hype around Chinese reopening, especially in January. Into February, right? And then that hype kind of ran out of steam. So I think the Chinese story and emerging markets globally is kind of like two separate stories, right? But I think we are going through a kind of reassessment about, okay, where should I allocate my risk capital? I'll do another anecdote. So we had a Swedish pension fund that lost more than 2% of its assets, a big one, on just the free banks that went under. So have you viewed those as growth banks and it was part of the overall growth thesis, right? So last 2% of its savers money just on those banks that are out.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“In October last year, right, where we talked about merger market assets, and that was like a bunch of family offices and they came after my speech where I said, okay, there might be an IN opportunity to say, yeah, we haven't invested an EM such a long time. We actually don't know which managers to allocate to anymore. So that just shows you something about we've had like a multi-year focus on only US risk assets and that I think is coming to an end. We can see it in terms of how the US equity market is trading. Like look at how the US equity market has traded this year. We've had many weeks of underperformance, not every single week, but like this is not an unusual year European banks outperforming US banks dramatically. That's also not something that happens so often.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“The dollar cycle that we're in. We have some homegrown banking tensions that might lower what the terminal rate is going to be relative to what was otherwise be the case. So that's a dollar negative that is coming into play. And I would say from a capital flow perspective and an asset allocation perspective, like we have had a just extraordinary cycle, right, where U.S. risk assets. Was almost like the sole focus of all investing in the world, like from Tesla stock. Tech stocks more broadly, even like memes stocks, like a crazy amount of volume going into those instruments and almost no focus on other risk assets around the world. I remember I spoke at a conference.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“So it's just a matter of what kind of mechanism you think is in play, right? And it's not that I'm not taking the threat to the dollar from China seriously. Like clearly you have like another very big economy that's trying to damage the dollar effectively, right? And we have to watch that carefully. But fortunately for the US, they don't have such a great alternative to offer and very few private sector investors actually want it. The other thing we can worry about in connection with the reserve currency status is that US policymakers have this habit of trying to make a big home goal, their own goal in terms of debt ceiling discussions and so forth, right? So if there's a way to really test investors' nerves and ability to trust the dollar, that's certainly a good way to do it, right? So there's not that there's not issues, but I think the bigger issue is whether like what is the, what is...”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so those are different sides of those derivative transactions, right? And obviously from a Japanese investor, like if you just think about a life insurance company, right? So they've had, well, it can be many different types of investment, but the life insurance company that had previously had a significant part of its bond portfolio hedge where they just roll the hedge like three months forward or something like that. Now the three month forward has, you know, 4%, 5% negative carry in it. That's a lot different from when we had zero interest rates, right? So much harder to hold those. But the bottom line is that if you don't take into account derivatives and just look at capital flows in securities only, sometimes you can really miss the bigger picture.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“Right. So you hear of Japanese investors buying U.S. treasuries and hedging the currency risk, that being a favorable trade. I think about a year ago, April 2022, you saw reports of, oh, Japanese bond investors are pulling back because the hedging costs are so high. Is that the opposite side of the trade? People who are not Japanese are basically taking the opposite side of the bet, saying, hey, I'm being paid to buy Japanese yen and hedge it into dollars instead of being a Japanese investor.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“Lots of people are not aware of this, and obviously lots of central banks will not tell you what they're doing, but there are a number of central banks that actually do tell you, right? And then you say, okay, here's a sample of central banks we know those guys are doing it probably a lot more are doing it in secret like so for example the reserve bank of australia has had a very big holdings of of japanese securities in the portfolio that are all hedged into dollars right so that's an example of how that hedging policy is uh yeah distorting the data and they are doing it because they can just get a higher carry that way and uh that's the that's the logic behind it”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“So, the blue line is the percentage of central bank foreign exchange reserve allocations that are dollars of total allocations. And it looks like it's declining. The yellow line is when you're adjusting it for those swaps. And is it the central banks who have those swap positions on? I wasn't aware that central banks entered swaps for the purpose of making money. I thought they did it for the purpose of extending dollar swaps to.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“Does not take into account derivatives. It's a data set of the underlying securities, right? And for the yen specifically, the derivatives will change the picture, right? We don't know exactly how many derivatives are on top of that. And we can do a PhD dissertation about what is the right way of estimating that. But it's pretty significant, right? So if we're just for that, you can get to an estimate of what is the dollar holding within these reserves, taking into account the derivatives, that is a much flatter trajectory than if you don't make that adjustment. So it's just an example, like we have to be very careful with this data. Don't trust the headlines, right? You have to know exactly what goes into it. Otherwise, you might reach the wrong conclusion.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“And that's very strange. Why the heck would censor banks around the world really want to hold the yen when the yield is the worst of any currency in the world and it's been going down, down, down? Like, is it really such a fantastic currency? And the reason is that people might hold Japanese securities in their portfolio, but they've actually often hold them on a hedged basis because of the way the fords are lining up in the market and what the basis is in the market. You can actually generate a nice yield when you hedge into dollars. And therefore, this data is effectively distorted by that. Essentially, some of the yen in this data are dollars. It's dollars in the portfolio when you take into account the derivatives. The IMF data, and you can call them yourself and check.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so this is just another example. Like we have to be very careful when we look at the data, right? So the best data we have on how global central bank reserves are allocated in different currencies is so-called COFA data from the IMF. You can't get numbers country by country. So there's an aggregate data set that looks at all the central banks that are willing to report to the IMF and that's now almost everybody. And the blue line there that says 58.4 is the numbers that have been looked at a lot in the last couple of years, right? So we've gone down from mid 60s to 58.4. So people are saying, okay, that's a big decline. So I will just make the observation, right, that in this data set, it looks like the allocation to the yen has gone up.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“You look at the light blue line, you might say, okay, China has sold more than $150 billion of treasuries in the last few years. If you look at the dark blue line, it's like more like 20 or 30. And they might have bought something that is not fixed income, right? So it might net out to zero. It's a matter whether they sold a significant amount or really sold something that's totally immaterial. So it makes a difference to me.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“A billion in 13, a little bit more than that even. And now we're way below a trillion, right? We've lost more than 200 billion in a relatively short space of time. If you take into account that they actually hold some of these bonds in their custodial accounts in Belgium, which is the dark blue line, you can see it's much more stable, right? So obviously if you want to tell a very exciting story about, you know, the dollar is going to disappear tomorrow. The light blue line is more interesting, but it's probably the dark blue line that's closer to the truth about what China is actually doing. We're not aware of any dramatic selling by China of US securities. We triangulate all kinds of data. We believe the Belgian adjustment is something that's important to do. So this is an example of really looking at it.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so this is just an attempt to be as balanced as possible, right? So when you analyze capital flows, you have to be very careful. There's not one truth, right? So when China is buying US assets, they can do it in many different ways. The way the data is constructed is often based on where the securities are held in custody. It happens to be the case that China has increasingly used custodians in Belgium. And because Belgium has big clearinghouses, right? So what I'm just showing in this chart is that there's a blue, the light blue line is what is typically analyzed in the media where you say, okay, what is China's holdings of US debt? And when you do that, it looks like, oh, they've gone down from, you know, 12.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“CNY, right? Because they need to buy goods in other parts of the world and need the CNY for that purpose. They don't want to hold them. There's also been a story last week, right, that India has paid for the oil imports they have from Russia in INR in this currency, right? And the Russian Mavro was complaining. Yeah, actually, we don't want to hold any more of these, we don't need R&R, we can't use them for anything, right? Immediately when there's these attempts to sort of circumvent the traditional dollar based system, you run into this problem that actually the alternatives, the other local currencies are not desirable to hold and cannot be used with payments, right?”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“So, the arguments in favor of China is that China is a very big economy, depends on how you measure it, right? But some would argue that it is number two. As soon as you become number one, just in terms of its size, in terms of trade relationships, way bigger than the United States for many countries. That's the argument, right? But if nobody wants to own their assets, then you have a problem. And this is something that you're seeing around the world. Like we have very kind of like textbook examples of how you create a reserve currency or not create a reserve currency, right? So Russia, for example, at the moment is trading with India and China in local currency, right? And what do they do then? So we've had stories over the last couple of months that Russia is trying to sell.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“Yes, yeah, exactly. And so why do people think that the Chinese Yuan will be the next reserve currency if it's not a convertible currency and if they don't have open capital markets where the Chinese, they run a current account surplus, a trade surplus? So who's going to recycle their money into Yuan? And yeah, I mean, isn't it a giant problem that no one wants to own their bonds?”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“Right, so CNY is the Chinese Yuan, sometimes referred to renminbi, RMB. Earlier you referenced the DXY, the US dollar index, which I think is comprised mostly of the euro, a handful of other currencies. Interestingly, I don't believe the Chinese yuan is in that DXY.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“Serve currency debate, but it certainly makes the currency relatively less attractive. And yeah, I have clients around the world, right? So if you speak to anybody who is based in Singapore these days, like they'll definitely tell you that there's a lot of Chinese money coming to Singapore. And that's another part of the story. The domestic capital owners in China are also not that comfortable with just being exposed to China. They actually want to have exposure outside China, right? So that's sort of a latent capital outflow that China is allowing to some degree, but it's there and has not been fully allowed to realize itself.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“Though there are lots of efforts to create trading systems anchored around the CNY, there's really no evidence that the CNY is becoming a competitive reserve assets in the sense that people want to own the bonds, own other securities that are denominating CNY. And that is at a minimum going to slow this process that otherwise potentially could have been more of a problem for the dollar. Like there's lots of aspects to this, like China, despite the reopening, right, has not had any rake hikes in this cycle. Like China has one of the lowest inflation rates in the world, right? Because they have excess capacity. They've never had a capacity issue in this crisis. So on a relative basis, Chinese interest rates have gone down, right? So again, that's not necessarily linked to the”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“There is very little appetite from around the world private sector and official sector to hold their assets. And this makes it incredibly hard for them to create a traditional reserve currency. And it all comes down to, well, there's many aspects of that, but certainly one important aspect is Chinese currency is not really convertible, right? The capital account is not freely account. You can't freely move your capital in and out. And that makes everybody very uncomfortable. And on top of that, obviously, you have a political regime where there's few checks and balances on what the president can do. And that also makes people uncomfortable. So the Chinese currency is not going to become the dominant reserve currency in the world anytime soon.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“This is just extraordinary in the context of China's long term concerted efforts to create a reserve currency. Nobody wants their bonds. And you can zoom in and look at, okay, what's the demand from even the central banks for CNY instruments? And that's the one you have right there. So that's taken directly from the Exante database, right? So these are quarterly flows into CNY from central banks around the world can be Brazil, can be other places, right? And even that has turned negative. Actually, the big flows that you saw early on was when Russia tried to get rid of some of the dollars and euros and bought Chinese bonds instead. But that has also flipped negative over the last couple of quarters, right? So it's a very... Peculiar situation where despite China's dominance in many trade relations,”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“It's kind of ironic that China is doing all these things, right? And then we go and look at the data and nobody wants their asset as a reserve asset, right? So this chart here is simply showing how much money is coming into Chinese bonds from abroad, right? And we had a period up until the end of 2021 where maybe every month we got 10 billion. And then things change. Since early 2022, we've had a dramatic outflow from Chinese bonds. Nobody wants them.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“China would like to create a reserve currency and China has something to back it up in terms of trade, right? China is a bigger trading partner to Brazil than the United States is and has been for a number of years. And that's the same where you can pick many emerging market countries around the world. China is a much more important trading partner, right? So they have something to stand on in relation to trade, right? But that doesn't mean that people want to have the reserve asset, right? Can see it extremely clearly in the data.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“Because the Eurozone never had a goal of becoming a reserve currency status. In fact, embedded in the sort of Euro legal structure is we don't want to have other people pegged to the Euro around the world and so forth. So it's different. So China wants to create a reserve currency statute. And the other thing that's different is that we have a big war going on in Europe, right? And we have adversaries of the United States that kind of like cooperating. So there's some cooperation between China and Russia. Nobody knows exactly how close it is, but it's there. We have some cooperation between China and Saudi Arabia. Maybe China and Russia. Maybe Brazil is there sometimes, right? So now we're talking about a lot of big countries that potentially is a big counterforce, right? But just because...”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT
“DXY, right? DXY is 10% above its long term average now, right? So what's very interesting about this period now is that we talk about de-dollarizations, issues for the dollar, even though the dollar is strong. That I find very interesting. That in a way makes me want to take it more seriously, right? Because if we can have this debate even before the dollar has started to move, think about what the debate can get to if we actually have like a big dollar move down. So it's interesting, right? The other thing that's new is that we have a country, big country, China, that wants to create an alternative to the dollar. And you can go more broadly to the United States in general. And this is very different from the periods in which the euro was regarded as sort of the main competitor.”
2023-05-11 · Forward Guidance · Why The U.S. Dollar Could Fall Even In A Recession | Jens Nordvig · IDENTIFIED FROM THE TRANSCRIPT