YouSaid · the spoken record

Jonny Matthews

lines on the record: 102
first: 2023-11-10
most recent: 2023-11-10
sittings or episodes: 1
sources: podcast

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“And it was quite an easy year last year. This year has been a bit tougher. And that's reflected in the note. And that's reflected also in the fact that I really don't have much on at the moment, particularly now the way things are.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, well, at times I would stop out of part of the trade. Other times I had upside calls, short dated upside calls to protect me. And certainly as the trade kind of matured as we came into this year, I certainly made much greater use of calls to protect the position from a retracement. So that was the main trade in 2022. But also I had a short position in the S&P 500. I did have long footsie short S&P. didn't really work out that well. You know, it's just to be honest with you, the FTSE leg of it was kind of a waste of time, you know, at the time it was best to just be short the S&P. And I did use options from time to time.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it's like I said, you know, you can get too clever thinking. At relative value, should I do the 30 year? Should I do the 10 year? Should I do a combination of fives and tens? You kn Very simple just treasury futures, which are well, really it's a seven to ten year bond is deliverable, but just Treasury futures very, very easy, just short the hell out of those. And that was the trade.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“I've got to be honest with you, I just had no doubt in my mind these yields were going up. There was not a shadow of doubts that something was going to drive the yields back down to zero. And so the portfolio was leveraged five times at the start of 2022 to short duration.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Of value and trades that I think are worthwhile doing. And I also, I've kept in that. I also talk about the trades that I actually have. So, you know, I tell the readers what I'm going to do. These are not trade recommendations. Let me just say that. It's just what I'm doing. And I update them on the results of that. So, you know, for 2022, of course, that was a massive year. My little portfolio made close to 100%. And then this year, it's been difficult. The portfolio is just slightly ahead for the year. But I'm honest, you know, I don't say, oh, yeah, by the way, we covered that. Sorry, I didn't tell you about that.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Yes, well, Know, I started this writing about three or four years ago, but it was only for institutional investors. And now we're trying to, we're going to give it a broader audience, retail and private investors. The note is basically a very brief summary of what happened in the market the prior day. And I'm not just talking about, you know, S&P went up and this went down and this happened and that happened. It's the macro news and its impact on markets and some kind of opinion often an opinion from me for what I think the implications are. So that's the daily then once a week on the weekend I do a more in-depth analysis where I'll kind of summarize what's gone on in the week and talk about what I think is going to happen. And then I do a deeper dive into the markets to look for where there's pockets of”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so when you do some kind of historical correlation between these sectors and try to look for a relationship with interest rates, you're running the risk of just looking for the wrong thing.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Absolutely. I mean, I look like the financial sector within stocks. And 10 years ago, they had a lot of regional banks. It didn't have technology companies like Visa and Mastercard that are eternal compounders. And the weightings and composition of indices totally changed. And yeah, I mean, I think Apple's a tech star. I think in the technology sector. But I would say, look, going on the subway, everyone has an iPhone. So maybe it's a consumer staple.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, you're in good company there, Jack. You kn It's often the case, you can see very strong historic correlations. Then something changes. Then it just breaks down. It doesn't work anymore. Same kind of thing, you know, if you look at value versus growth stocks and the shape of the yield curve, that kind of stuff. It worked for years. And then suddenly doesn't work anymore. Things change. Not only that, you know, the categories of stocks, stocks that are categorized as value or growth or consumer discretionary or, you know. The stocks. Stucks that are in those categories change their own characteristics. You know, it's very difficult to really trade on that basis, trying to trade those correlations”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Yes, and talk about there being certain correlations and then the correlations change as last year, if bonds sold off long duration tech stocks, unprofitable tech stocks would crash that day. And I went into this year assuming that that would be the case, but it's not. Bonds sold off for most of this year, but tech stocks have done really well”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“I'm more macro, but my view was wrong anyway. I mean, I never thought, I never thought these highly valued tech stocks could carry on growing at the pace they're growing. And, you know, the rally just astonished me this year. But I've been wrong about that. Without a doubt, I've been wrong. And you look at the valuations of these stocks extremely, extremely high, you know, 30, 40, 50, 60 PE is whatever. It hasn't seemed to matter. And it hasn't seemed to matter for two reasons. One is investors don't care. They want to own them, but also the earnings growth has been incredibly strong. And of course, we don't know what AI will do. It's going to be a great productivity enhancement, but we just don't know. So there is that unknown additional upside to the stocks. And I guess people are happy to pay a premium for that.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“It's not a systemic risk in that respect, unless and commercial property, sure, it's a big, it's a much bigger proportion of their loan books, but in the whole, it's not a massive exposure, besides which commercial real estate, it covers a number of things. It's not just office blocks, it's apartment reads, it's construction loans, it's a number of things. And if it's just office blocks, yeah, then that's a problem, but it's not.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“You're absolutely right, there will be these regional blow ups, but then again, you know. Most years there's a few banks that fail, you know, and the FDRC is really brilliant at going in on a Friday, putting someone else's name above the door. And then, you know, comes Monday, you can go to the ATM and still get your cash out. It's business as usual with a different, under a different owner. So those regional banks do disappear quite frequently”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“The US of the big banks, you're right. Of the big banks, yeah. And all this, you know, JP Morgan. Yeah, you're absolutely right. So those banks won't fail, won't be systemic. But the regional banks, which, you know, if you're in Ohio, you probably have a bank that on Wall Street we would call a regional bank. You live in that region”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“It's always difficult in advance to know exactly where this stuff is hidden. It's only after the event when the bodies float to the surface. You can say, oh yeah, yeah, yeah. That's what was the problem here. So at the moment, nothing springs to mind. That doesn't mean to say there isn't something out there. I mean, Know people point their finger at commercial real estate, but I'm doubtful about that. It's quite a small part of the bank's loan books.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“So, you know, there's always, when the world blows up, there's always little things that happen to relative value trades or really complex derivatives that Didn't expect to happen, so you've got to be very careful if you're just trading purely relative value trades. There are little risks that are not obvious. And when things become discontinuous, you can find yourself exposed to something that you never expected.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“I mean, maybe there are uncapped variant swaps that are still done today, but from what I saw before. When I was still actively doing these kind of things, it was all capped. And the cap, interestingly, presents its own challenges. There were some that were capped prior to 08. And let's say you had a variant swap at 20 with the cap at 50. The implied volatility goes to 30. So you want to buy something back. So you buy the variance swap for 30 with a cap at 75, you know, at two and a half times. Now you've got a little call spread on volatility going between 50 and 75. And prior to 08, you would think, well, you know, that's never going to happen anyway. We don't have to worry about that. But after 08, during 08 to 09, it did. It went up to these extreme levels.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Partly you're right, it's into the hedge fund community, but those risks have been repriced. We've seen what can happen. Variance swaps back in the day prior to 08 were done on an uncapped basis. So the losses were not only in theory limitless, but they also had that accelerating profile, you know, that just really, really accelerated as ball went higher. Well, now typically variant swaps are done with the cap. So, you know, if the strike on the variant swap, if you're selling vol, let's say 20, the strike will be at two and a half times that.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Stop your question about the banks. If you look at banks' return on total assets, it's very low. It's sub 1%. So they have this massive portfolio of assets supported by a relatively small slice of equity. Now, prior to the financial crisis, they over leveraged themselves in risky assets with a very small cushion of equity to generate a much higher return on equity. Well, that way of operating has been closed down to them. So now the returns on equity of the banking sector are nothing like they used to be. And they probably won't get there again. So as you rightly say, those kind of risks that the banks were taking have to go somewhere else.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“There's a kind of convex payoff to it. And the higher the volatility goes, the bigger your exposure. And so you're kind of chasing your tail trying to get out of this trade. And so, you know, just coming back to the oh, they're a horrible, horrible instances during the financial crisis with variant swaps that just, you know, just catastrophic losses at some of the banks.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Yep, yep, yep. Just replicated the whole lot. So, you know, in fixed income, there are these on the run, you know, going long, the off the run bonds versus the on-the-run bonds to try and capture a basis point, yeah, a basis point or two per year of interest rate differentials leveraged up hundreds of times. There were short long-term. swaps which is it's a type of volatility product so you can say well okay five year realized volatility on an equity index never been higher than 30 shall we say so you know implied volatility for five years is trading at 28 30 we'll sell the hell out of it and then it goes to 31 sells some more and then 32 and even though realized volatility isn't going to get there they got squeezed out of the position in fact yeah”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“And I remember it very well because we had at the time it was still Salomon's, we had a big fixed income arb desk who were involved in pretty much all the same trades as LTCM.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah. I mean, if you look at mortgages, you know, and, you know, the AAA tranche was supposed to be super, super safe. Nothing could happen there. And people would trade the, you know, the subprime against the super senior tranche. And these correlations broke down. Everything went to hell and then people wouldn't get out the trade. And then you find that things get even worse. You know, there is no exit door. We saw a similar sort of thing during the LTCM crisis where”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“And so this correlation tended to trade within a band. But in 2008, of course, everything just went down, you know, down, down, down, downtown. So the correlation went close to 100 or went to two extremes, the lights of which we'd never seen before.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“In 2008, well, there are so many correlations. You could do a Correlation, you know, it can't go above 100. But when you look at a basket of, if you take all the stops from an index You can back out an implied correlation. These stocks, the daily movements. Using a portfolio of options because you can say, well, okay, I think the implied correlation is very high And like I said before, I'll sell the index volatility and I'll buy each individual component stock volley. And then, if correlation is high, you're going to lose a lot of money. If correlation is low and the stocks are moving around up and down in opposite directions, and the index kind of flat lines, you'll make the money.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Sell thee the options and hedge them to the death. But these, you know, we're getting into more complex things. The bottom line is, yeah, it helps when you know all these technical aspects of relative value and implied volatility and so on. It helps to get a better structure for the trade. But you've got to have the right idea in the first place. You've got to get your big macro view has got to be correct because otherwise, you know, this tinkering at the edges won't count for anything.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“To cool spreads, put spreads, or whatever. Look at the implied volatility. I'll try to find the best structure to give me the best payoff, the best bang for the buck. And if implied volatility is low and I have a particular directional view, I'll buy some out the money options if implied volatility is very, very high. I might sell. and some calls or some puts or whatever, or I might just trade the volatility. In other words, sell.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“And I used to do a lot of relative value trades in volatility, trading a basket of stocks against the index. So it's kind of a correlation trade. You know, you want the stocks to be volatile, but not the index. You want the stocks to move in different directions and be super volatile, moving all over the place, but the index to stay relatively calm. That's the idea of that trait. I've done all these kind of relative value trades. But one thing I learned after the financial crisis is that these relative value trades, you can just forget them. Just they go out the window. You've got to get the big picture right. You've got to get the big picture macro view correct. Otherwise, you're just going to get blown out the water. Now, what I do these days is any trade that I want to put on, I look at doing it through options.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“That's a great question because I started my career at Salomon's as a derivatives trader. So I was trading options, which, you know, you know, the option price is determined by this magic number that you put in, the implied volatility. So I have, you know, well, a couple of decades of experience of trading vol.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean Try to be quite selective with what I do in FX, and Dolly Nangle was really kind of a volatility play, expecting some kind of pickup. We did have a pickup in realized volatility. We had some pretty big moves in the last couple of days. Know it's to me, just looking at the screen today, it looks like we're going back into this to and fro where speculators will try and push the currency through 150 and the Ministry of Finance will put out a bit of verbal intervention, a warning of intervention and people will back off, will look to cover.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“And I just recently took it off. I did expect the volatility to pick up more than it has. It's picked up a bit, but I'm out the trade. At some point, this will get messy. I'm sure we're going to have a discontinuous move at some point. But then, you know, if you'd have asked me 10 years ago, I'd have said the same thing. Somehow the authorities seem to be keeping the plate spinning.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“No, it's the Ministry of Finance that is responsible for managing the currency And really up to now, because in the past they would come in and do these occasional interventions that would drive the drive Dolly Yen down two or three figures. All they have to do, all they have been doing is warning of intervention. And that's enough for traders to think, ah, you know, I've been burnt before. I'm not going to pile into this Dollyen trade. And if you look at implied volatility in Dollyen, it's incredibly low under the circumstances, considering what's going on at the moment. I did have a trade on in a Dollian strangle.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“And I think it's a very dangerous situation trying to keep all these plates spinning, particularly when the two, you know, the two, you've got the Ministry of Finance that's trying to push back against what the BOJ is doing. The BOJ is trying to keep rates low, and the Ministry of Finance is trying to stop the currency going into free fall. The two strands of government, if you like, are pushing against each other.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“They really have failed to live up to what you might expect from in a Phillips curve framework where you have the economy is doing okay, inflation is high, demand for labor, and yet pay growth still lags inflation. That said, of course, you know, these are becoming increasingly difficult for Japan to keep all these plates spinning. You know, they're trying to avoid rapid decline in the value of the currency. If the currency goes, you know, down the toilet, then imports are going to cost a lot more. It's going to impact inflation. But by the same token, they're trying to control the yield curve. They're still doing effectively. They're doing quantitative easing by stepping into buy JGBs whenever the yield goes above or comes close to their new reference point.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“I agree. I agree. That is the one hope. That is the one hope of those that are going to be brave enough to go and short JGBs again. I'm not one of them. Just tried it once. I'm not going to try it again. You're right. It's surprising, though, that that was my expectation as well. You know, you've got restricted supply of labor. You've got inflation that's running at about core inflation running at about 4%. We expected, we, you know, other people I speak to expected wage growth to pick up much faster than it did. We had a disappointing round of wage negotiations in April. You know, there's these annual wage negotiations in Japan. And we're looking at the statistics of labor earnings.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“You could see if you have any faith in the Phillips curb at all, you could see a dramatic increase in the rate of inflation because demand for labor while not high is very high relative to the supply of labor.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“So you're just not going to see a dramatic increase in the pace of growth. Japanese growth is always going to be pretty slow.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“I think there's a graveyard full of traders who've tried this trade, you know, really. It is And the circumstances have seemed like it was the right time or many previous occasions. And now where we are now. Does it make sense to set the JGB with a yield that's close to 1% now? Well, you know, the Japanese economy is very different. You know, the demographic challenges that they have will keep growth lower than we used to in the US and Europe. There just isn't the supply of labor. Know growth is a economic growth is a combination of increasing the size of the workforce and productivity growth. Japan, you know, it's very difficult to increase the size of the workforce. I mean, there just aren't enough people. The population is declining. Japanese unemployment is something like 2%. Well, 2.6%.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“And you don't really know what you're guessing when you invest in these stocks. So they're cheap for a reason. And I think to me China seems like one of those places that I wouldn't want to invest my money.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Because of that, I think, first of all, I think the government, the government is in a reasonably strong position in that their debt to GDP ratio is much lower than anything that, you know, like we have in Europe or the US. So the government may take over some of the debt from local governments, which would help the situation, it will provide additional stimulus to help get things going. But I just think that although the growth trajectory looks like it's on target to hit the 5% target this year. Not sure how easy it will be for China to continue growing at that pace. So, okay, you know, you've got these cheap looking Chinese equities, but the standards of corporate governance in that country are nothing like in the US or Europe”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Now, as I'm sure you know, Chinese saviors don't have quite the same access to the capital markets that we can enjoy. We can invest in anything we like. There's all kinds of savings products for Chinese households. The property market has been a great way for them to save. And now that's taken one heck of a whack and it's going to be challenged for, I would think, Many, many months, maybe years.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Well, as far as the property market is concerned, you know, there was a huge amount of excess leverage in the property market. We're seeing these property companies that are effectively defaulting on their loans. What concerns me is the impact that this could have on the banks. And the hit that some of the banks could take to their capital as a result of this, the bonds of some of these Chinese companies trading at 10 cents on the dollar, the equities are worthless. So there is a huge amount of restructuring to take place in the real estate market”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Struggling. I don't know how China gets through this property crisis quickly. I think it's going to be a very drawn out process. So the mining stocks have their own challenges. The oil companies, well, We saw some earnings. I didn't pay close attention to BP and Shell, but there were sharply lower. We've got tobacco stocks, and that's just a dying industry. So there's a lot of these old economy stocks that are, they look great. They look great on paper, but in reality, you know, it is a value trap. And I've made the mistake of thinking, wow, these indexes, whether in Europe or the UK, these look like great value compared to the high flying, you know, the lights of the Nasdaq on these crazy valuations. I was wrong, and I'm out of that trade, and I really don't particularly want to get back in.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah, I do, actually. I mean, I made the mistake of thinking, well, you know, you look at the valuations in UK stocks and you think, wow, you know, this is unbelievable. The PE is so low, the dividend yield is so high. And the dividend yield is four, four and a bit percent or whatever it is. But the index is comprised of some real old economy stocks. You've got oil companies, you've got banks, you've got mining companies. The banks, the banks are challenged by tighter regulations, increased capital requirements and so on. And, you know, they blew themselves up during the financial crisis. They're not going to be given another chance to do that. So the return on equity is much lower. They're much less leveraged than they were at the time. The mining companies, you know, if you look at commodity prices, they've come down a long way. China.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Makes sense. So on a valuation front, you're not that that's the main lens through that you look at things, but you referenced equity risk premium earlier. I know that British stocks, the FTSE 100, is very cheap, but I also know that it's been cheap for a long time and that people have been saying did so cheap its value, but that it may have been a little bit of a value trap. Do you have a view on why British equities are so cheap and why they may continue to be very cheap or they actually are very undervalued now and they are good value?”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“China And Know certainly in Europe, you know, if you look at the big companies that comprise the equity indices, most of their, you know, their exposure is to the global economy. You know, I think something like 90% of the earnings from the FTSE come from outside the UK. To look at a specific country index and say, well, okay, you know, I think the growth is going to pick up in this country. I'm going to buy the FTSE. That would be a mistake. There's too many other factors there.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“If you look at equities, they're not very well correlated with growth. A country's equity market is not very well. The performance of a country's equity market is not very well correlated with its growth.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“Sorry, the first cards, yes, the first cart until the summer. But it should be quite clear that inflation is, you know, it's lower anyway to start with and it's going to carry on declining next year. And growth has been tepid already. You know, you look at the PMIs in Europe, you look at signs of weakening labor demand, and you look at whatever forward-looking indicators you choose to pick up on. The outlook is pretty dismal for Europe. I hope things change, but it doesn't look good for Europe. I've got to be honest.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“And so looking at the Of England curve, yeah, Sonia, or your eyor curves. Does you see any opportunities there? Are they roughly make sense? Like you look at the curves and you think, yeah, I think that's right. That's probably what the ECB is going to do.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT
“The market this is what they were going to do, they were going to start hiking. They needed to put a much faster pace of hikes in place.”
2023-11-10 · Forward Guidance · The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps · IDENTIFIED FROM THE TRANSCRIPT