YouSaid · the spoken record

Tian Yang

lines on the record: 99
first: 2023-01-23
most recent: 2023-01-23
sittings or episodes: 1
sources: podcast

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“Well, I think on a lot of the more structural models, I think the upside is fairly clear. So typically VIX and credit spreads are highly correlated. They basically move together. And so what typically leads credit spreads is fundamental deterioration. So when corporate cash flows go negative relative to the stock of the outstanding, that usually leads to credit spreads widening. So that's basically been happening. So that's kind of suggests fundamentally the VIX is biased higher. But obviously in terms of dynamics trading day to day, yeah, I mean, your gas is good as mine, right? I've seen lots of theories last year, you know, from, you know, all the negative gamma is pinned here, it's pinned there, people over hedge. Who knows what the truth is, right? But I would say from a fundamental point of view, things are a lot more in place now to support a wider credit spreads, which is basically the opposite side of the coin to the VIX, right?”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“There we go. Yeah, my final question for you is I think it's about the biggest disappointment of trades in 2022. I say the biggest disappointment of 2021 was being long gold, biggest disappointment of 2022 was being long volatility. The S&P 500 was down 20%. I mean, probably a little less than that in 2022. The VIX, you know, sometimes it went up to high 30s, but it immediately went back down and volatility really did not perform as an asset class. And also with the VIX, remember, you can't, you know, of course, you can't buy the spot VIX. You have to buy VIX futures, which are frequently in Contango. So like if you look at UVXY, you lost a ton of money. So volatility was not a good hedge. Options on the index did not do well because of, I guess, low correlations between assets. Obviously, some options on individual stocks like Carbana did extremely well. But yeah, do you think the VIX, as we approach into a recession, will finally...”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Does that make sense? So I think it's more a, you know, I think of as hopefully like a resource to answer a lot of investment questions. The portal essentially came from us figuring out a better way for our internal analyst team to use our tools better and to access it a bit easier. So yeah, so essentially I would describe as we basically write reports based on our tools, but we also provide access to the tools. And so that's kind of the full service, really. We tend to target ourselves in more institutional clients. And Follow us on Twit”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so we think of ourselves as essentially offering investment portal to speed up your investment process. So we offer a lot of our tools and reports via the portal. So you can look up our lead indicators, you know, keep on top of which of our signals are triggering. The company has been around for more than a decade, right? So we've been building various models over the past decade. So it's just accumulated models for the economy, for trading different asset classes. And so at this point, we think of ourselves as more just a full stack kind of model. So there's some way you can go check, right? So, you know, if someone pitches you, I don't know, like a short on a European paper company, you can go on that, you can go and look up, you know, what does VP's capital cycle, longer-term models say? Is that a good long-term short, right? You know, someone pitches a euro dollar trader, you might want to go look up inflation.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Close to it, and then obviously end of the year, you had some of the buy signals triggered on a lot of the tech names. So I think that's why the bear market rally can potentially go for a little bit more. But obviously, as that sucks, the flows back in, like already this year, I would say we've recovered more than 50% of the outflows already, right? In terms of the dollar notional value. So, you know, we're probably getting not far away from then sucking all the money back in. And then obviously from there, then no more marginal buyers again. And so, yeah, that's probably the point of more vulnerable equity.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Warren I like that. They just said, right? So tons of volume will trade and the price won't move, right? So you can observe that so you can attribute that the trades, most of the trades that day to the fact that there was a lot of patient money in the market. Conversely, when more speculative guys come in the market or people who basically have shorter term horizons, they need to get their trade on, right? So they're going to crossbid offer. Obviously, even the actor crossing bid offer means that they're causing more intraday volatility when they trade, right? So that's how you can differentiate. So I think it's more when you look at it in September, not only dollar value-wise did you see a lot of outflows, you also saw quite a lot of speculative selling in terms of the price action. So that's why on our models, you're getting down to like a contrarian level. It wasn't as bad as June or October, but, you know.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so I mean, we're tracking. So, there's a couple of ways we track flows, right? One is we're looking at just the dollar value traded and up and down stocks every day within all the indices, right? And you can look at the cumulative differences that would be one. You can also proxy for what is a speculative outflow versus patient capital. So obviously when patient guys trade in the market, what tends to happen is they tend to sit in the sit in the order book on the bid offer. And then when lots of volume goes through, the price doesn't move right. So i.e., so you can observe this because essentially intraday liquidity goes up, intraday volatility goes down.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“But yeah, I would say if it was more like soft landing seems quite a popular opinion. So therefore, equities are bottom. So you should buy S&P. I feel like that's actually becoming a lot more prevalent as a theme. Like I said, I think it'll work for next month or two because the flows were so bad. Our flows were so bad in December. But if the economy data deteriorates as we think by March, February, March, then obviously there's more downside from there.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“I think this comes back to the leading versus lacking data, right? So, for example, the unemployment rate is one of the most lagging indicators. So obviously if you plot it against recession bars, you'll see the unemployment rate peak basically after the recession is over. So people keep getting fired even when the economy is turning up again. So I think that's probably a part of it driving the divergence.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, well, soft landing, I mean, sort of four months ago, if you asked me about a soft landing, everyone who I talk to who I know and have respect for the opinions of, most of them, with the exception of a handful of people, thought soft landing was just, you know, it's something you say if you're on TV, but it's no one actually believes in the soft landing. But I think that economic data, you know, I mean, at least in the US, has been very resilient. I mean, the unemployment rate's at 3.5% and it's continued to even go lower. So, yeah, I mean, why is the soft landing unlikely, do you think?”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“I don't know, do you have some problems? I guess like soft landing mild recession, that feels like a majority opinion right now, mild, mild.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“So you said the Brazil, long Brazil, you thought of it, and other people who I respect also thought of it. But now it's become consensus. It's a victim of its own success. Brazilian stocks, I think they had one of the best returns for countries in terms of this equity market in 2022. What do you think is the most overrated macro opinion now? What's the most crowded trade? However you want to put it?”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“To buy bonds is when the economy is doing badly but starting yields are high, right? That's the perfect combination because there's room to cut. And so I think in Latin in Brazil, right, for example, it's looking like a very attractive setup. So that's why I think E.M. Bond's, you know, you're going to get the benefit of the cuts basically.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“So it's more linked to the fact that in pockets of EM, they front loaded the hiking cycle in 2020-21. So they hiked much earlier. They really was a much more positive inflation lead indicators in some countries like Brazil have sharply rolled over. Obviously, that was our top trade, one of my favorite trades last year, although I think it's quite consensus now, it feels like. I think you pitched quite a lot in quite a lot of places, but that doesn't change the dynamics, right? Inflation rolling over hiking cycles are peak, there's room to cut. And the best time.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it's a medium overweight, but if you read the text, I think the point is technically you should be, but I would say it's a low conviction and there's a lot in the price because The dynamics I described.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Also, why technically you probably don't want to just go out and mega short the dollar right now, but it probably won't actually do that much, right? And if the dollar doesn't do that much, we have all these things on gold, then actually being on gold makes a ton of sense.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Well, I mean, on dollar and gold, that is probably worth talking about because that's probably a lot more nuance. So on dollar, technically dollar does historic, well, statistically it goes up during recessions, right? But the reason it goes up is because the safe haven inflows into the US because it's a safe haven and there's inflows from Europe, from China, wherever else. The tricky thing this time is that safe haven inflow already happened last year, right? Because Europe and China went into recession before the US. In normal cycles, it's the US that leads and then causes the recession the rest of the world, which then sucks money into the US as a safe haven. But because China chose to lock down themselves into a recession, right? Obviously the war drove Europe itself into more of a recession. So they already had a recession first. You had the safe haven money inflow into the US. So you probably won't get as much of a dollar move rally this time, even if there's a recession, just because it's kind of already happened. So I think that's.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Tian, what is a view that you have on asset allocation that would surprise me given my knowledge of your economic thing? So, you know, you like bonds, you like the, if you told me you like bonds and you don't like equities, I could presume you'd like the dollar, right? Because it's a risk-off thing. But is there something that's sort of weird or most people don't follow that you're either long that would is kind of contrary to your macro view or you're short contrary to your macro view, you know?”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“And so, and is it just shortages all the time? So that is something that, again, can pop up wages potentially. So those are probably some of the moving parts. Basically, you have to break down the cyclical versus structural. I still think most of structural factors suggest that we are in a more inflationary environment, but it's just more the cyclical factors in terms of relief versus last year just look so big that you should get more of a downwave this year in inflation.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Growing season, right? So, like the USDA put out surveys on soil moisture conditions and all of these things. And there's been quite a lot of bad readings. So there's some stored up stress for food potentially, right? But obviously the tricky thing is you don't know about the exact impact because it depends on how much food there is and whether the inventory for food gets drawn down. So yeah, I would say if it happens food probably more likely than energy just given weather disruption. On the good side, I think it's pretty unequivocal. Most of the science for goods is rolled over. And then services will be the one thing where labor shortages continue potentially. So that services inflation wages just hold up even if the economy slows down, right? And I'm in the UK. And based here, there's been, we've just had strikes constantly for the past few months, even though the economy is doing badly, interest rates gone up a lot, people still struggle.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, it's anyone's guess, right? For sure, given the supply constraints, then yeah, if there's a move, then clearly it's inelastic, right? That can move. There's risk from food prices going up. I mean, right now, all signs that food prices are peak should roll over, you know, fertilizer prices, a lot of these other things linked to food inflation, food manufacturing costs, right? A lot of those things are”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Is it safe to say that if your view, which is increasingly becoming the mainstream view on inflation, that inflation will continue to fall at a brisk, fast pace, if your view isn't right and inflation goes back up, is it safe to say that the most likely reason it does go back up is because there's another oil shock or another natural gas coal shock.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“The tricky thing is that in real terms, things might only just get back to trend, right? If you look at things like transportation, actually we're a bit below trend, even in the US after so long when reopening, because obviously there's legacy effects, people work from home, right? Some of those things, you know, the expenditures might not actually get back up to the same level. So yes, it will be higher, but it's probably, as of right now, probably not enough to support the overall kind of demand picture for oil, right? What I would go back to is that policy stimulus chart, well, we talked about earlier where the US policy stimulus, and this is across both credit and fiscal policy, is so negative that at the moment it looks like it's going to overwhelm the positive China data so far. So, you know, if that changes, then that's probably going to be more optimistic for oil. As of right now, it hasn't, but that could change in the coming months.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think you're going to struggle to probably find data given how sad is probably quite geopolitically a sensitive topic. But if you take a step back, you have to imagine they're going to be stockpiling, right? If we're in an environment where China and the US obviously have poor relations and there's going to be a lot of geopolitical competition, it's going to be important to secure resources, right? That's going to be needed to keep your country stable or let alone for whatever competition you want to do for semiconductors, renewables, whatever else. So you have to imagine there's a lot of stockpiling going on, even though we probably can't see the data. But like I said, on the reopening, even just looking at the US experience,”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Right, okay. And so this chart that we're looking at right here is key. It's the capital scarcity cycle for energy. So when the bottom is capital, that's capital abundance. The top is capital scarcity. So there still is a scarcity of capital in the energy sector, but that's on the supply side. On the demand side, you just think there's demand destruction and stuff like that. Yeah, my question is about China. When China, people say, oh, China's reopening, they're going to be using a lot of oil. But then I also hear people saying, but they've been buying oil and their inventories are very, very high. And I actually have not been able to find, I'm sure the data exists, but I haven't been able to find that Chinese inventory data. So how do you think China's reopening, if it does happen, will affect oil demand?”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Basically, the growth outlook basically can't get any worse. Now, the good news is if it can't get any worse, the next marginal move is just going to get better, right? You can't have US, Europe, China all in recession, and all the LEIs being so bad. But the problem is I just don't know the timing. So that's kind of one I'm waiting for. And obviously everyone's very focused on China. So I'm trying to see when our China models start to shift. And right now it hasn't shifted. So I'm just waiting for that as a potential catalyst. And then that'll be a sign to try and revisit.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“I think that timing is being pretty good. So I think the message remains from what it was whenever we spoke last summer. Structurally, from a capital scarcity point of view, clearly the ball case remains for oil and gas, for energy. But you just cannot ignore how severe the cyclical headwinds have been. Now, obviously, with the China shift, we are clearly on high alert to see if some of the models start to shift. And as you mentioned, a lot of industrial metals rally quite a lot off the lows. And there's clearly some other elements with potentially countries trying to just stockpile build up inventories, right? So there's some of those elements in place. So I would say right now it's a bit more neutral. Again, for me, to really get back on the trade, I just want to see some signs of relief on the growth front, right? Because right now,”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Well, I think that was the timing when I last came on the podcast, right? When we said the time to get out. So I think that has right.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Right. And since writing that, I think that trade has worked well, which makes me nervous because that's close to 200 basis points of cuts are hiked in from the terminal rate in the spring of this year till the end of 2024. So it's just like how much more you expect it to go. So you're betting against Powell, basically, by doing this trade. And yeah, if you don't know about this trade, I mean, I would say don't do it. It's for advanced trade for advanced investors. I'm not an advanced investor. I've never done a trade like this. So just a warning from my audience. Now let's move into commodities. So UTN and your firm variant perception, very early for calling for a commodity super cycle during 2020 when everyone was so bearish and thought that interest rates would go to negative 2%. You pretty much stood alone. I mean, there were others, calling for a commodity supercycle. And that has turned out so beautifully Tien that.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“So that's the basic idea here. You can see on the chart, right? The implied probability that we'll be at 2% in the mid of 2024. Is very low, and so that there's scope for that to go up.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“So, this is a way to level up the recession view with cap downside. If we're right on recession, then obviously by June 2024, that's plenty of time for that to be evidence of the economy slowing down. And right now, obviously, there's not, you know, the policy rate is still discounted to be quite high. So you can lever that up by doing a core spread. So you're factually betting that the Fed's going to cut, but you'll get a very asymmetric payoff if they do cut, essentially. That's the idea. Obviously, this is moving around a little bit, but the idea is that this is a cleaner way to bet that there's a recession and that the Fed's going to cut, but you don't have to deal with a lot of negative carry things, right? This is just like, you just pin the euro dollar, June 24 future. You just buy the courseware where it's trading, right? And that's your fixed amount you pay up front. You don't have to worry too much about the carry and the things swinging around. And you're just trying to hold it. And you just hold it so that if there's a deeper recession, they will cut and it'll just pay out.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“So first of all, that's the scenario for a recession, right? So that's obviously assuming, so the way we guess that number is we input a lot more numbers that you see at the depths of recession into the model. And that's what spits out too. On the trailing basis, I think 3 to 325 is more where a fair value is based on trailing numbers, but obviously on the forward looking basis, assuming we're right on the recession, that's basically how low it can go. In terms of the timing, I think you're absolutely correct, right? It's only going to move when policy rates move, right? And so there's going to be, that's why in the first half of this year. And that's going to really drive it. I think that's the, and you get the bull sticking basically the entire curve or yields come off. So now let's”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Right, okay. So now we're showing in this chart your fair market value for the 10-year bond is 1.7 or 1.8%. Again, this report is from December of 2022. Maybe it's higher or lower now that we're recording in January. And right now the tenure treasury is about 3.5%. So buying the 10-year treasury note would, if you're right, would have positive returns. The only question is when. So what is your outlook based on timeline of when bonds are going to rally? Yeah, I mean, do you think they stay flat for six months and then explode higher? Do you think that they start grinding higher?”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Is kind of what's going on right now. Like the basic short answer is you want to be starting to look at putting steepness on, right? Because you should be putting steepness on on the eve of a recession usually. Because basically what's going to happen from here is the economy data gets worse. Eventually everybody realizes and there's a lot of stress and then policymakers are used. The tricky part is just the carrier isn't great today.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, and a lot of this is basically discounted into basically the swaps curve. So you can look at basic where spot yields trade, but you also look at where the forwards are. And basically there's a huge gap. And I think that's the tricky part when you ask that question today. Because if you look at twos, tens, one year, two, or four, right? They're a lot less inverted than where the spot is. And I think that's the tricky part where I think timing is going to be quite important. So you almost need to, that's, you know, this is what links back to what we were talking about earlier with the Fed. You almost need to probably just sit on the sidelines for a little bit. Let's get a bit closer to kind of the February, March point, right? The point at which the Fed funds and the CPR are going to cross. And then that's a much more comfortable point where you don't have to have as much negative carry to get your position on. And hopefully, right. I think that that in my mind is.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Sorry, sorry. Let me say if you're a levered investor, you borrow short term to buy overnight in the repo markets to buy a 10-year treasury note. And if the 10-year is yielding 3.5%, but the repo rate, the overnight rate is 4.5%, you're losing 100 basis points annualized every single day. So it's a negative carry position, right?”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“From a direction point of view, this is the time you should really be thinking about putting steepness on. So I think this is where the”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“So I think it depends if you are leveled or unleveled investor. So if you're just a cash investor, at this point you've given away yields are, you've got quite a lot of protection from your carry, right? No matter which part of the curve you pick, right? Obviously, if you go for lower duration, you're going to struggle to not make money, right? Because if your duration is like, say, two, if you're buying like two years, three year, then you're going to pick up your 4% for the year in carry. And then you would need like a really big movie yields for you to lose that from capital gains. So I think for the most part, if you're unleavered, it's not that it's actually fine, right? It's not going to make a huge difference to you. I think it's a reasonable time just to allocate. The trickier question is more like if you're a level player, if you're a swap trader, what do you do? Right. And this is why right now it's quite a tricky environment because if you're a swaps trader, the carry for steepness is incredibly negative right now.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Yes, the key point is that it's not just about inflation, it's about real yields, it's about real yields and nominal yields and the economy. It's not just inflation on its own. It's just one of the pieces going into it.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“That goal is going to do well on the forward looking basis. And you basically just had all that line up in January. So I think that's probably like an interesting shift right now”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Actually, the one thing that's changed now is I think we've gone overweight gold. I think we've had incredibly rare setup for some of our gold fundamental models. I suggest it's probably the start of a new gold bull market right now. So the condition of the finding in place. I think a lot of our stuff wasn't that positive on gold last year, but you're kind of finding it the sweet spot because I think there's a misconception that gold's supposed to be an inflation hedge and it does well when inflation is high. But even in the 70s when inflation was super high, you still had like 40% crashes in gold, right? And actually what we found is the optimal time to buy gold is when real yields are peaking, when policy rates are peaking, when economy is about to turn down, and when gold miners are basically being underperforming, the gold price for a while. That's actually a much better combination of what.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“Right, so just to simplify your asset allocation, underweight equities, and high yield, you like bonds, you like cash, and you like US rather than emerging markets, you like the dollar. Let's now move on to, let's see, sorry.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“So that's a very long term indicator, but it's been quite reliable historically. So, again, it's just a way to confirm that prices are down. Obviously, there's a limit to what indicators you can pick because we want to take this back to the 60s. And there's not that many data series back to the 60s. So that's really why it's on there. But if you ask me, I would highlight the really important things to pick out is that you've had a sustained period of selling and then a fair policy pivot and then the bond market confirms it. That in my mind is even simpler way to kind of go about it really.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“So that's basically a technical indicator. I think it was like a priest a long time ago who invented it. And the idea was that he said bear markets are a little bit like a grieving process where you go through the various stages of grieving. And what he noticed was that in his role as a priest, it took people 11 to 14 months to get over the grieving process. So he essentially used 11 months and 14 months as inputs into this indicator to proxy for the kind of morning process people go through when asset prices go down.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“So, for you to become bullish on stocks and for you to think that there's a market bottom, you need to see all of the things that are currently marked no in the 2022 category happen. So you need to see positive shift in monetary policy, aka Fed pivot. You need to see a bond rally reversal because bonds rally during a recession. And you need to see the RSI relative strength index on the 18th month below 30. What is a COPOC near zero?”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“It's a callpock, these are kind of using monthly measures. It's looking at very, very long term oversold conditions essentially. So essentially what this is telling you is that yes, from a price action point of view, we are somewhat close to a bottom, but you're missing kind of the policy pivot, right? I said earlier that the policymaker panic, right? That's usually the safest thing because that's like a catalyst in a way. And yes, they might ease and you start rallying. But then even if you buy in 10, 15% off the highs, I think you can feel a lot more comfortable that once they start an entire chain of events that that sets into motion. Two plus years, right? So this is a difference for you.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“So the checklist is basically intended to be when can I just close my eyes and buy equities and forget about it for the next two, three years, right? That's kind of how I think about this. It's kind of when all the longer term things are lined up. And so I think the key point is that top line where usually our major bear market bottoms, the Fed has been easing, right? And because the Fed's been easing, you've had the curve ball steepened. So you've always had curve steepening. And so that's the key missing piece this time around. And I think that's a very critical piece. The Bond Rally reversal is basically a similar idea, right? Where usually there should be a big recession scare where bonds rally, a huge fight to safety. And then you start to recover from that fight to safety because of essentially fairly easing, right? So that's why you have the initial bond rally and then the reversal. That's kind of what it is. And then the 18 months RSI is similar.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“And tell us, you've got this great bottom checklist for when you're in a bear market, stocks are going down. This is a checklist you look at where if a lot of things are checked as in they're green and they say yes in this case, that means you might be close to a market bottom, i.e. it's time to buy. Yeah. So right now, I'll just take a look. So over six months of net selling, yes, over 20% decline in the S&P ratio to the Dow Jones, yes. COPOC near zero. I don't know what that means, but it says yes. Plunge in consumer confidence. Yes. Expectations over current or positive? Yes. So those are things that would suggest at the bottom, but then you have several other things that are not yet checked. So tell us about this.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“So I think this is a really interesting thing about the current environment where essentially what we're doing is two aspects. One is you're trying to analyze what we would call fundamentals. That would be understanding the business cycle, understanding the earning cycle, understanding the capital cycle. And then the second piece is why we'll probably say playing the game and playing the game is all the trading stuff, right? Your trading tools, your flows, your positioning, you know, the crowding measures, what are funds holding, right? So it's about violating the two. And I think what a lot of what you're seeing right now is that from a playing the game point of view, there's certain areas that are very, very bombed out. That's probably got a lot less kind of selling pressure, right? Because it's been sold very hard already. So I think it's more the playing the game aspect of the market that that's leaving you to those areas. And obviously from a fundamental point of view, they're clearly not going to do.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT
“And so you can see on the right hand chart that's got the Russell 3000. So obviously capturing most of the market and the distribution is a lot closer to what it looks like at the bottom, right? Whereas on the left-hand chart, it's got the S&P. And you can see the red lines, that was obviously December. It won't have changed that much. So you can see the distribution. You don't have that fat tail on the left, which you should expect to see if it was a genuine kind of washout bottom moment. you know there's more relative value in probably small caps international names if you go and do the work and look right and those are probably like evaluation low enough you can hold it and kind of hold through I think it's just more SP, large cap names. I think that's where even though it was bad last year, it probably won't get better this year.”
2023-01-23 · Forward Guidance · Dusting Off The Recession Playbook | Tian Yang · IDENTIFIED FROM THE TRANSCRIPT