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Healthy Eating

Those regional differences from the ideal are eye-opening!   Source: Nature         The post Healthy Eating appeared first on The Big Picture. Those regional differences from the ideal are eye-opening!   Source: Nature         The post Healthy Eating appeared first on The Big Picture......»»

Category: blogSource: THEBIGPICTURE12 hr. 3 min. ago Related News

MiB: Luis Berruga, CEO, Global X ETFs

   This week, we speak with Luis Berruga, the chief executive officer at Global X ETFs. Before joining Global X, which has $42 billion in assets under management, Berruga was an investment banker at Jefferies. We discuss some of his favorite themes and ETF tickers. Berruga explains how the firm’s deep research bench allows… Read More The post MiB: Luis Berruga, CEO, Global X ETFs appeared first on The Big Picture.    This week, we speak with Luis Berruga, the chief executive officer at Global X ETFs. Before joining Global X, which has $42 billion in assets under management, Berruga was an investment banker at Jefferies. We discuss some of his favorite themes and ETF tickers. Berruga explains how the firm’s deep research bench allows them to test new ideas and their investment strategies for investment performance, liquidity, and conviction. We also discuss some of their more popular themes and their tickers: Founder-Run Companies BOSS Interest Rate Hedge RATE Variable Rate Preferred PFFV Nasdaq 100 Covered Call QYLD Cybersecurity BUG Lithium & Battery Tech LIT Wind Energy WNDY Clean Water AQWA To clarify the audio — which was edited for brevity — when I mention I really like a specific Global X ETF on the show, I was referring to their themes and/or wacky ticker symbols; these are not “Buy” or “Sell” recommendations. (Disclosure: RWM does not own any of these). A list of his favorite books is here; A transcript of our conversation is available here Tuesday. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here. Be sure to check out our Masters in Business next week with Kathleen McCarthy, Global Co-Head of Blackstone Real Estate. Blackstone is the world’s largest owner of commercial real estate globally with a $565 billion portfolio and $319 billion in investor capital.     Luis Berruga’s Current Reading Man’s Search for Meaning by Viktor Frankl   Atomic Habits: An Easy & Proven Way to Build Good Habits & Break Bad Ones by James Clear The post MiB: Luis Berruga, CEO, Global X ETFs appeared first on The Big Picture......»»

Category: blogSource: THEBIGPICTUREDec 3rd, 2022Related News

2023 Toyota Prius

It is amazing to think about how Toyota blew its enormous lead in Hybrid tech, failing to launch any substantial push into EVs. The chart below shows exactly how much sales have fallen for the first hybrid EV America has fallen into — and then out of love with. The Prius today badly lags the… Read More The post 2023 Toyota Prius appeared first on The Big Picture. It is amazing to think about how Toyota blew its enormous lead in Hybrid tech, failing to launch any substantial push into EVs. The chart below shows exactly how much sales have fallen for the first hybrid EV America has fallen into — and then out of love with. The Prius today badly lags the RAV4, its sister crossover, in Toyota hybrid sales. But the latest design is a handsome reboot, and should help sales pick up. Here are the 2023 Prius hybrid specs we know so far: Up-to 57 MPG combined fuel 37 miles range on battery alone 195 horsepower and at 220 hp 2.0L engine, 0-60 mph in 7.3 seconds On-Demand AWD system 2023 in LE, XLE and Limited grades The 2023 Toyota Prius pricing is expected to range from $27,000 for LE. the  XLE ~$30,000, and the top-of-the-line Limited will be at $34,000.   Source: Car and Driver   Source: Toyota   Source: Chartr   The post 2023 Toyota Prius appeared first on The Big Picture......»»

Category: blogSource: THEBIGPICTUREDec 3rd, 2022Related News

November 2022: Stand Up with Pete

  This was a fun conversation with my buddy Pete about all the media madness these days — it was as I was recovering from C19, and while I felt fine, my voice sounds pretty gravelly. If you find that kind of thing tolerable, people seemed to really like this discussion. Lots more details here.… Read More The post November 2022: Stand Up with Pete appeared first on The Big Picture.   This was a fun conversation with my buddy Pete about all the media madness these days — it was as I was recovering from C19, and while I felt fine, my voice sounds pretty gravelly. If you find that kind of thing tolerable, people seemed to really like this discussion. Lots more details here. Enjoy!   The post November 2022: Stand Up with Pete appeared first on The Big Picture......»»

Category: blogSource: THEBIGPICTUREDec 3rd, 2022Related News

Bottoming?

  As we have been discussing since May of this year, there are increasing signs we have been groping for a bottom in the equity markets. This “Process” is not a single event but rather, a series of events the totality of which increasingly weighs the probability towards that positive resolution. I use the word… Read More The post Bottoming? appeared first on The Big Picture.   As we have been discussing since May of this year, there are increasing signs we have been groping for a bottom in the equity markets. This “Process” is not a single event but rather, a series of events the totality of which increasingly weighs the probability towards that positive resolution. I use the word probability because this outcome is not pre-ordained, but rather, subject to future events which have yet to unfold. When investors look forward, we (collectively) make probabilistic bets as to the odds of events occurring and the impact of those future events once they do occur. Some are known and already priced in, more are ambiguous, not fully reflected in market prices, and some are random surprises that by definition markets have not accounted for. Hence, I have caveats. My thinking is any bottoming process is partially dependent on future FOMC actions. I have been fairly vocal that inflation has peaked, the Fed has already overtightened, and they run the risk of doing too much economic damage fighting a demon that has already been exorcised. But my job is not to give the Fed policy advice, it is instead to provide clients with insight and investment advice. The best way I can accomplish that is to recognize the ambiguities created by none of us knowing if the FOMC will be very right, a little wrong or very wrong. Those three options will determine whether or not the equity and bond markets make a bottom now, at some point in 2023, or at some future date beyond. My take on these probabilities looks something like this: 1. The Fed gets it precisely right: Yay! Inflation is vanquished, the economy makes a soft landing, rainbows and sprinkles and unicorns! Inflation comes down to 2-3%, Unemployment never goes above 4%, and GDP stays around 2%. It’s Goldilocks as far as the eye can see. It’s nothing but 10% gains a year forever — all hail the U.S. central bank! (20% chance) 2. The Fed gets it a little wrong: The Fed takes rates over 5% and keeps them there way too long. Parts of the economy suffer – notably residential real estate, new job creation, and consumer spending. U3 unemployment goes from its current 3.7% to closer to 5%. New job creation falls to under 100k per month. GDP is flattish to slightly positive. Given these headwinds, the overall economy remains fairly resilient, with falling savings rates and a lack of wage gains offset by falling inflation. Maybe this economic slowing results in a mild shallow recession, maybe not. Markets go sideways through Q1 perhaps even into Q2, then take off. (50% chance) 3. The Fed totally blows it: The Fed tightens and keeps tightening, straight through 5% towards 6%. Ignoring the deflation in goods and focusing on the inflation in services, especially ren (which they are causing) they stay too tight for too long. GDP goes negative, Unemployment goes above 5-6%, house prices fall 10-15%, and Consumer spending crashes. (30% chance) If the Fed was the only game in town, our task would be easier. But I do not assume that the Federal Reserve is the only significant market input or economic factor. Investors need to recognize: The economy has thus far remained resilient; Corporate Profits have remained robust; Consumers are still spending; Households and corporate balance sheets are healthy; Valuations have become more attractive; Seasonal patterns are positive (see chart above via JC). This is why I put a 50% probability of markets finding a bottom sometime between October 2022 and March 2023. If you are a long-term investor, I would suggest considering Value and Small Caps. Financials have held up well also, as they generate better profits when rates are not at zero. And I never like to bet against tech, especially after it has fallen substantially. I would be more cautious with single stock risk, specifically, those circumstances where there are problematic business models, mercurial CEOs, and/or increased competition. I acknowledge there are lots of ways all of the above can go south. I remain — hopeful? Constructive? Engaging in wishful thinking? Perhaps all three. YMMV.     See also: Jerome Powell Signals Fed Prepared to Slow Rate-Rise Pace in December (November 30, 2022) U.S. gas prices plunge toward $3 a gallon as demand drops worldwide (November 30, 2022)   Previously: Big Moves: Bears & Bottoms (November 11, 2022) Groping for a Bottom (October 14, 2022) 7th Inning Stretch (September 30, 2022) Countertrend? (August 15, 2022) Big Up Big Down Days (May 5, 2022) Too Many Bears (May 3, 2022) End of the Secular Bull? Not So Fast (April 3, 2020) Bull & Bear Markets   The post Bottoming? appeared first on The Big Picture......»»

Category: blogSource: THEBIGPICTUREDec 1st, 2022Related News

Transcript: Boaz Weinstein (Live!)

     The transcript from this week’s, MiB: NAME, TITLE, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ ANNOUNCER: This is Masters in Business with Barry… Read More The post Transcript: Boaz Weinstein (Live!) appeared first on The Big Picture.      The transcript from this week’s, MiB: NAME, TITLE, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio. BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, I have an extra special guest and a funny story about how this podcast came about. I interviewed Boaz Weinstein back in May of 2022. It was one of the most popular podcasts we did this year. And when the folks over at the Bloomberg Invest Conference came to me and said, “Hey, we’re looking for somebody who’s a little out-of-the-box thinker and kind of interesting, who might you suggest as an interviewee?” That was easy, I said, “We just did this interview with Boaz six months ago. Everybody seemed to really like it. He’s very much an outside-the-box thinker, covers everything from credit derivatives to SPACs, to stocks and bonds, but from an unusual perspective, not your typical investor.” For example, he’s been an investor in SPACs because he looks at it as a guaranteed fixed income return in a time of zero, with potential upside. So he’s done that really, really successfully. He’s one of the five largest SPAC investors in the world. In case you don’t know who Boaz Weinstein is of Saba capital, he’s the person who made the bet against the London Whale, and then went to JPMorgan Chase and presented at one of their conferences and said, “By the way, you guys, you have this person in London that’s sucking up all of the energy options. It’s a wildly lopsided bet and it’s going to blow up. Oh, and PS, I’ve bet against him.” And lo and behold, when the London Whale blows up six months later, Saba Capital nets $300 million or $400 million on the trade. Just an amazing story and incredible ability to look at risk and figure out when it’s a fair bet, or when it’s an asymmetrical bet, where, hey, if we lose, we lose a little bit. But if we win, it’s a giant homerun. So he’s really an intriguing person. We did the interview at the Bloomberg Invest Conference. So when you hear the audio of this, it’s a live event. You’ll hear the audience. You’ll hear people rustling papers. It’s not the usual, hey, we’re in a studio that’s pristine and you don’t hear anything other than the two of us speaking and breathing. So this was a live event. But it was so well received, and it was so interesting. And he just is such a fascinating investor, we thought it would be perfect for the holiday weekend. So with no further ado, here is my live interview with Saba Capital’s Boaz Weinstein at the Bloomberg Invest Live Conference. So this is the first time I’m wearing a suit and tie, and I don’t know how long. And I’m glad– BOAZ WEINSTEIN, CHIEF INVESTMENT OFFICER, SABA CAPITAL MANAGEMENT LP: He didn’t tell me about the tie. Sorry, guys. RITHOLTZ: So we previously had a conversation. Was it early this year? Last year? I can’t even tell anymore. And there were a lot of really interesting things that came up. I think this audience would love to hear an update on what’s happened since then. But I have to start by asking, you were a highly-ranked chess player as a young kid. You have a reputation as a killer poker player and dangerous blackjack player. These involve making probabilistic assessments about an inherently unknowable future, seems like you’ve been setting yourself up for tail risk and derivatives and trading since you were a kid. WEINSTEIN: You’re giving me a lot of credit for having planned everything since I was 5. I think the only tail risk I would think then when I was 5 was pin the tail on the donkey, to be quite honest. So you know, really, I enjoy games of strategy. And it turns out that Wall Street is the ultimate puzzle and challenge and so, yeah, I’ve been working on Wall Street since I was 15. And I think, at a young age, I’ve already seen a lot. RITHOLTZ: So let’s talk about what’s going on right now. We’ve discussed and you’ve brought up how different this bear market has been from recent bear markets. What are the similarities? What are the differences? What makes 2022 so unique? WEINSTEIN: Yeah. So when you think about not only what’s happened, but even the investor behavior that it engenders, a lot of the tail events that I’ve lived through, I was trading while 9/11 happened. I was at the New York Fed the weekend that Lehman was failing. A lot of those events, not all of them, but a lot of them were bolts from the blue. COVID, you’ve kind of had a month from when people knew it’s a thing before the market started falling. But there were bolts in the blue, and if you had not done anything about it, you had plenty of air cover to say who knew this would happen? What could I have done in advance? Whereas this one has been so telegraphed, at least, the initial part of it about inflation being transitory, and then transitory and then transitory. They’re not transitory. So there was a lot of time in 2021 to get worried, and very little places to hide, to say, you know, it was not reasonable to have thought what if this 40-year bull market in bonds not only comes to an end, but does a sharp reversal. Those were things that we and other managers were talking about, where the 60/40 plans that were using Treasuries as their antidote to a sell-off, it turns out the Treasuries were the poison. And so, you know, this has been different in that respect. It’s also been different because you have so many different problems swirling around, some of them in conflict with each other. So solve one at the expense of the other. And then the number of new things showing up, whether it’s, you know, maybe untoward rumors about Credit Suisse, or what’s happening in the U.K. gilt market. It just makes the number of balls in the air enormous in terms of things, known unknowns that could really cause more than a sell-off, but more like a crash. RITHOLTZ: So let’s talk about that. You’ve discussed multiple problems in multiple areas taking place at the same time. How do you distinguish between what’s a genuine risk, what’s a known risk, and what’s truly an unknown unknown? WEINSTEIN: So usually, you have your known unknown, like, something is bad, we just don’t know how bad and you can respond to it. So, you know, 9/11 happens, it’s not a good time to buy airline stocks. You know, COVID happens, it’s not a good time to buy airline stocks. ’08 happens, probably you should derisk from financials, even like the moment after it happened. And here, you just don’t know exactly what to do. So normally, for example, European investment grade trades 5 basis points lower than U.S. investment grade. Now, it trades 30 basis points higher, 25 basis points higher. Is that enough? Europe is going to have a much more severe recession, according to those that pontificate. And so whether or not you underweight or overweight, Europe is all about what do you think happens with Ukraine? Is there a chance it gets asymmetric? What can be done to mitigate? And then at the same time, you have these other theaters, whether it’s zero COVID policy in China may be extending well past the Party Congress, continuing to cause disruption in the economy. So really, what’s happened is people just feel risk all over. They felt it now for 10 months, and they’re derisking the things that are in their book. And that has led to some things that I don’t view as particularly risky, blowing out as much as things that I do view as risky, and that’s created some interesting distortions, interesting opportunities. RITHOLTZ: So let’s talk about those opportunities. What has been overly derisked? What are looking attractive after investors throw the baby out with the bathwater? WEINSTEIN: Right. So not knowing where to focus your arrows, and instead just focusing on derisking. And the comments that Jamie Dimon made about bracing for a hurricane, and another CEO said bracing for a tornado, and someone else mentioned some other weather disaster. You know, like, what did they actually mean when they do that? How do they actually brace other than like, you know, a physical brace? What are they doing? They’re a bank. They have loans. They go to their loan portfolio hedging group, and they say, “Please increase the amount of hedging.” So what does the bank do? It looks at the loans that it’s made, often to the best companies in America or in the world, and derisks where the risk is. And so we did a number of trades with banks, where they’re coming to us to say, “In the middle of all this, we want to buy protection on Coca-Cola, on Johnson & Johnson, on Home Depot, on Walmart, you know, AT&T, Verizon,” these big companies that have a lot of debt outstanding in terms of revolvers, and not relative to their balance sheet, but relative to just the quantity of debt. And so there are a bunch of names, in fact, I think everyone I mentioned, where if you look at where it is today, it’s above the worst day of COVID. So those names that are not even candidates for discussion about could they run into trouble as credits are above their worst day of COVID. Whereas the index that they sit in is only trading at two-thirds of the worst day of COVID. Why would those names be worse? Why would they be at the widest levels and the average be only at two-thirds? It’s because of this technical in the market, and I think technicals are the biggest force in the credit market now, much more than fundamentals, much more than any time in my career, where if somebody has something to do, which is to buy billions of dollars of Verizon one year or two year CDS, that’s going to move the price to levels that just doesn’t make sense from a fundamental point of view. And so what we’ve been doing is going long those names, selling that insurance to fund protection on companies with a history of blowing out, if actually there is a real recession or some other kind of crisis. And so that would be found usually in consumer finance companies, economically-sensitive company, cyclicals, steel, shipping, paper. And so we found it very interesting in the middle of this problem to be able to find attractive long/short trades because of the technical distortion. RITHOLTZ: So are you looking at the fundamentals of these equities? Are you looking at the technicals of how they’re trading? Or are you looking at the credit spreads and saying, hey, people are way too frightened beyond what they should be? WEINSTEIN: Yeah. So we probably more than most, on the credit side, do look at equities for clues. And sometimes there is one market above, faster or slower than the other. But we’re sourcing the tail protection that we provide our investors, which is one of the main things we do through the credit market. And we’ll get to that I’m sure. And we’re paying for it because there are many investors that want it paid for. They don’t want to just leave the negative carry through some of these, I view as ultra-low risk trades in Verizon or Coca-Cola. (COMMERCIAL BREAK) RITHOLTZ: So do we want to get more specific? Is it strictly an equity bet, or is it equity combined with some derivative? How are you putting together these paired trades? WEINSTEIN: So you could look at their history. And first, you could use common sense and say, is this the kind of company that could run into trouble? Is it not? And the price is not efficient compared to the past, where fundamentals were the biggest driver. We’re looking at the credit, a little bit about the fundamentals, but the fundamentals are sort of not in question on the long side. It’s really, have these served us well and investors well as tail hedges in the past? We look at ’08 and 2000, 2012 and say, is this the kind of company that regularly blows out from 100 basis points to 400 basis points? Take General Motors, for example, they defaulted in ’08, problems with the UAW behind them, they’ve still been enormously volatile as a credit, as a company, super exposed to the U.S. economy and global economy, and pressures. The credit in 2020 went from 100 to 700 back to 100. And it’s had that kind of roller coaster. And so we looked at and said, that’s a really volatile credit. And when it’s low, that’s really asymmetric. You could buy protection. And if things change, it might move out a lot. Right now, it’s at 250. It has moved out a lot more than the index. And so we’re looking at histories to give us a clue. We’re looking at forward-looking models, equity, vol, fundamentals. But what we’re, at the end, also doing and I should make sure I say this, is we’re providing liquidity to the banks that need it. And if they come and say they want to buy protection on Pepsi, or LVMH, or Nestle, that’s amazing. You’ve now given me the ammunition I needed to go and fund protection and companies that really may run into trouble. RITHOLTZ: So let’s talk a little bit about history. You mentioned ‘08 and 2020, we can also mention 2000 in the same sentence, that were fairly rapid and disorderly dislocations. Maybe 2020 might be the exception. You’ve described 2022 was sort of a slow motion implosion, and yet it’s still been very orderly. What makes this year so unusual compared to previous collapses that really seem to make a bottom and snapback pretty abruptly? WEINSTEIN: Yeah. So first, the market is still trying to figure out what it should most worry about. And so, you know, it’s like just when you think of something, maybe we’re at peak inflation past us, maybe the supply chain problems are coming down, but then you have new things. And so there’s just been this sell-off that continues to find new rationale. And then you have the Fed leaning on the market, actually. And when Powell sounded too dovish, you know, first, all of his peers came out to say, “No, no, you know, the market, we’re going to keep going.” And they’ve continued to say that, Kashkari, most recently. So you have the Fed kind of intent on showing that they mean what they say. And so they’re probably liking that the market is going down on an orderly way, even if it’s created some disorder in other markets. Look what’s happening in the U.K. And so I’m used to, and we’re all used to sell-offs that are fairly quick, that we know even ’08 was five or six months from Lehman to the lows of March ’09, where at the end of it, you can kind of wonder, is there an all clear sign? We have the Fed behind us, quantitative easing. Now, we don’t really know who the savior is because at the end of all of this, we’re still going to have quantitative tightening and shrinking the balance sheet. Whereas a lot of sell-offs were just a prelude to a bull market one or six months later, you know, this has the feeling to me, like, we’re going to be worried about some number of these things, or new things for potentially quarters and maybe even years to come. RITHOLTZ: So no capitulation yet, no flash which gives us that all clear signal. How much of that is based on truly not knowing what the Fed is going to do? Or is it we don’t know which potential problem is real and which is fake news? WEINSTEIN: These things are so hard to predict. I even want to be cautious about, you know, opining too much because it’s just such a confusing market. And there hasn’t been a single thing to say, okay, this is why 20% is not enough, it should be 40. Let’s take inflation, if you look at its forward inflation, it’s expected to come down a lot. So you could look at tomorrow’s CPI print, if it comes in a 10th or below or high, and get excited about it. But the market is still telling you inflation is not going to be the problem that it is one year from now. Now, if a few months from now, that conviction is shaken, then we’re going to have a real strong sell-off. If somehow Russia, heaven forbid, becomes more asymmetric, we’re going to have a real problem. And so we just don’t know we’re in a fog, and we should not rely on the lessons that people learned maybe incorrectly for this environment, that we’re good between ’08 and 2022, which was the Fed is your put, don’t fight the Fed, and dips should all be bought, and being short is fighting the Fed. You know, this really does not feel like that environment, in particular, because of where the central banks are versus then. RITHOLTZ: But the one lesson that should carry through sounds like continue not to fighting the Fed when the Fed reverses their position. WEINSTEIN: I’m glad you said that, Barry, because about nine years ago, I had a prospective investor in my own office. We’re long vol funds. One of our main products is long volatility. And I don’t know if he didn’t quite know that because he kind of wagged his finger at me and said, you know, he’s like, “Sonny, didn’t someone ever tell you don’t fight the Fed?” Just to be long volatility, when Mario Draghi said, “Trust me and I’ll do whatever it takes. But that psychology of don’t fight the Fed, don’t be short is, in my opinion, a lazy person’s way of saying, “Let’s always be long.” Because if that person was around today, I don’t exactly remember who he even was, to make that call back and say, “If you really believe in don’t fight the Fed,” how much of your risk did you take down when the Fed said that they really meant business and we’re going to be selling assets for years to come? And plus all of these problems that when you add up the number of problems in different theaters, I can’t think of a corollary that, you know, to me, it does feel worse in many respects than any other experience in the market I’ve had. RITHOLTZ: So you hinted at U.K. gilts and what’s going on over in London. The strength of the dollar is another factor. How do you think about those when you’re considering tail risk and volatility? WEINSTEIN: So we’re not experts in foreign exchange. But I look at the gilt market, for example, and you see like the U.K. half a percent bond of 2061. Somebody, you know, in 2021, bought a 40-year bond that was going to pay, not someone, a lot of people is going to pay half a percent a year for 40 years. And at the end of all, that the most you could possibly make was half a percent times 40, minus some inflation. And so that would be 20 points without discounting, without inflation, the thing is down 73 points. So when you think about boundary conditions, you know, and what I like to do in the derivative markets is look at boundary conditions and say, how much can I make? How much can I lose? And where is there some asymmetry? And by the way, we were not short any U.K. bonds, to be clear. But there are a lot of trades that looked like this kind of, I can only lose a little bit. But just in case, it’s not transitory, or just in case, there’s an unknown unknown that is really problematic. You might be able to make 8 to 10 or 20 times when you might have lost. And to see this move, and it may continue of higher rates, whether it’s the U.S. or Europe, where the investor loses three or four times what they could possibly make, at the end of the day, with bonds. I think it reminds me of how investors don’t really think about fixed income and equities in the way that I do, which is, you know, equities give you this unbounded upside. So it could be Tesla. It could be Faraday Future or Fisker. But you know, you’re minus 100 and you’re plus 20,000 and that’s the range. But in fixed income, often there’s so little to earn that when I see my peers talk about high yield at 5% is amazing because it used to be at 3%. I feel like, wait a second, how many defaults do we expect this year? There’s a lot of companies in that index that are going to run into trouble. So how excited can we really get just because high yield has, you know, widened by 2 percentage points. And so I think fixed income can end up effectively being an option, but people don’t look at it as an option. And I view it often as asymmetric short, and that’s one of the guiding principles of our tail hedge strategy. (COMMERCIAL BREAK) RITHOLTZ: So let’s talk about another credit-related issue. A couple of weekends ago, people were talking about the widening credit defaults on Credit Suisse. And surprisingly, you came out and said, “Everybody, catch your breath. Credit Suisse isn’t Lehman Brothers. Just look at various ratios.” What made that so attractive to shorts and what led you to the conclusion that Credit Suisse was more or less okay? WEINSTEIN: Yeah. I didn’t start out thinking I want to say something public. I basically have zero Twitter followers before this. Then all of a sudden, you know, it became a thing. I noticed that people with hundreds of thousands of followers were saying Credit Suisse spreads are out there decade high. It’s an imminent default according to secret sources. And when you see like people with 100 followers saying that’s fine. But, you know, kind of at the same time, you could almost read that it was the same person sending it from accounts or team with hundreds of thousands of followers, that this sounds like scare-mongering. It sounds like someone is trying to make something about it. And well, what do I know? I know that this quote, it’s a decade high, you know, can be used as fake news to say, therefore, it’s going to default. But if you look at the spread at the time the five-year credit spread of CS was 2.5%. Now, if it defaulted back to our boundary conditions, it could go to zero, it could go to 50. You’d be like 2.5 to lose or make, to make or lose 50 to 100. It’s still priced like 25 to 1, right? And– RITHOLTZ: Low probability. WEINSTEIN: Very low probability, but it’s discussed as something that’s about to happen. And so I kind of took offense to it. I am supposed to know a thing or two about CDS. So I wrote a little bit about it, and then I posted, “Coca-Cola, by the way, also a decade high, better stock up on Coca-Cola.” And you know, articles come out saying that I was saying Coca-Cola may go to business, which, you know, reminded me about sarcasm and how it doesn’t naturally translate to at least some of the users. But this point of, you know, some things that a decade widest level, therefore crisis, I took offense to it. And I don’t have any special connection to Credit Suisse, but I felt like weighing in. RITHOLTZ: And so far, Credit Suisse is still hanging around, right, has yet to default. WEINSTEIN: I did get some very nice messages from the fine folks at Credit Suisse. So, yeah. RITHOLTZ: So since we’re talking about tail risks, let’s talk a little bit about that and hedges. Why have equity puts or VIX calls so disappointed this year as insurance? WEINSTEIN: Oh, that’s a brutal question, actually. Because there are people, you know, it’s like if you say, look, I didn’t study hard for the test. I didn’t do well on the test. Okay, mom, dad, whatever, study harder. But when you study hard and you say, I’m going to be prudent. I’m going to buy tail protection. I was there, I was there in January to buy it. And then it doesn’t work. It’s like, you know, tail hedges have to be reliable because they serve a greater purpose. It’s not just how did this manager do unto themselves? It’s, “I was counting on this tail hedge to do me some great service in my portfolio.” And I think the really interesting thing is that the VIX is cited all the time as the barometer of fear. Well, so I remember and probably many of you remember that in the period, let’s say, 2012 to 2019, we even talked about there was a single digit day for the VIX. It went below 10. It was often between 10 and 12 in good times. But something happened after 2020 which is, you know, we had COVID. And that enormous volatility, it actually destroyed the people picking up nickels in front of the steamroller, aka the short volatility crowd. They were no longer there after March 2020. And then came a new breed of investor that love to buy options, whether it was options on meme stocks, and you saw the volatilities go nuts there. SoftBank set up unit to buy options on short, you know, in tech stocks. And culturally, I think in this country, on the investing side, things became fast. Think about, you know, when someone, when your friend, because it wasn’t me, would tell you that some NFT went up by 10x. And you’d say 10x, I would like 1x in five years. I’d be really excited about that. And everything became fast, and options are way to get there fast. So the long-winded way to say when we came into 2022, the VIX, by prior measures, was already at a 4 alarm fire. We were at like 22 to 28 on the VIX, and that kind of number would have been a bear market, the prior decade. But we were at the peak for the S&P. So tail protection through equity options was incredibly expensive and it has served investors very poorly. Whereas credit spreads came into the year near the lows that they were pre-COVID. They’ve widened and they’ve done their job, even if there’s still a lot of widening potentially to come. RITHOLTZ: So let’s dive a little deeper into that. So the end of 2021, peak bull market and the VIX very, very high. So how are investors supposed to put two and two together? What did that signify? WEINSTEIN: It meant that if you said I’m going to spend a certain amount of premium, like you think about with your car insurance or home insurance and say, I have this much premium, I’m going to buy a put, struck 5% out of the money or 10% on the money. If I’m right, if this insurance was good to buy, what kind of payoff profile would I get? And you were getting nothing like you would get not just pre-COVID, but, you know, over the past let’s say 20 years, you were getting pretty miserable payouts for a bull market. When times are rough and vol is high, you understand why you have to pay a lot. But coming into this year, vol was stubbornly high, and so equity options were extremely expensive. We did a webinar for our clients, where we showed that basically across assets, a bank, Bank of America put out some neat research that had the S&P and the Nasdaq as literally out of 50 assets, the two worst you could get interesting payouts from. And so those things are not necessarily undecipherable. But credit in every sell-off, credit has blown out, whether it’s the credit crisis, of course, but even the flash crash. I remember being surprised that the flash, I was trading during the flash crash, May 2010, maybe I’ll get the date wrong by a little bit. And credit spreads, because of a glitch in the New York Stock Exchange, moved that day almost as much as they did the day of 9/11. So credit is an option. This low spread thing can move a lot. You can get an option like payout being short, or be exposed to the loss being long. And it is, in my view, a much more reliable tail hedge that’s been backed up in academic research. And it also stands to reason that, you know, credit as an option, whether you look at an emerging model, or you just think about, I’m taking this little spread in return for exposing myself to a wider credit spread environment or defaults. And this is why I feel very fortunate that my sandbox where I grew up in the credit sort of market, you know, is a really viable forum for tail hedging. RITHOLTZ: So I have the last question before we go to audience questions in the last few minutes. Given where we are, how wide have credit spreads gone? And if the put side wasn’t attractive on equities at the top in the market, how does the call side look on equities today? WEINSTEIN: So credit spreads today are like in absolute terms, they’re slightly elevated. Like, let’s say it this way. Remember December 2018, Trump and Xi were having a skirmish. The Fed was, you know, was being tough on the market, while growth was faltering. That seems like a walk in the park compared to now. And credit spreads then were roughly the same as they are today. So maybe they shouldn’t have been that wide then, or maybe they’re too low now. But spreads now are elevated, but in my view, nowhere near what the risks, the hidden risks and observed risks are in the marketplace now. In terms of call options, you know, there’s moments where credit falls enough that it isn’t asymmetric, that it’s symmetric, or it looks like if you locked it away in a box, you’re going to get a high return compared to defaults. We’re not near that yet. And I still believe equities are much more attractive long, even though there’s going to be this sort of technical of people looking with loving eyes at a, you know, 5% yield or 6% yield. And you can find in some investment grade corporates, 7% or 8% yields if you go out far enough from the curve. And so there will be probably some people saying I want the certainty of that yield. But that also comes with plenty of interest rate risk. RITHOLTZ: Yeah, to say the very least. All right, a couple of questions from the audience, starting with, where do you see the largest realignments of capital coming in the next 5 to 10 years? I don’t know if that’s really your sort of question. But– WEINSTEIN: I don’t even know what’s going to happen in the next five months, so five years, with respect, I really don’t know. But what I do believe is that the QT world, when all this is behind us, there’s still a giant balance sheet. There’s a headwind to the market. It’s going to be really brutal for investors that have survived the QT. RITHOLTZ: Meaning $4 trillion in Fed assets that have to come off the balance sheet? WEINSTEIN: Just in the U.S., and maybe they’ll go slow or less low. But I think this is going to be a period of much higher volatility than the last decade was. RITHOLTZ: So future volatility is going to increase; whereas it was modest, but not low over the past decade? WEINSTEIN: Yeah. There were punctuated moments, but there was a long period of very low volatility. And it seems like that may be behind us because even if some of the problems go away, you still have the undoing of QE, which is more than just no QE, it’s the opposite of QE is I think a really underrated continuous headwind. RITHOLTZ: And final question and I’m going to modify this, given where 10-year Treasury yields are today, what does that mean for future GDP growth? What does that mean for the possibility of a recession, either mild or more significant? WEINSTEIN: So, you know, until March, there really weren’t any banks calling for a recession as the most likely case. It was around then, maybe one or two banks. Obviously, Larry Summers and others did speak out. I think that these kinds of forecasts are really folly. Literally, we’re standing in a thick fog, trying to like play tennis and we can’t even see the ball. And by the way, that’s a great question you asked. But, like, when people answer it, I kind of shutter, so I’m going to try to not shutter on myself and say who knows, but what I know is that we should be aware that this is not the market we were in. And still, I can feel this thinking of, you know, as soon as CPI misses, as soon as we come in at 7 something, okay, it’s going to be off to the races with the market. Firstly, I think it’s a sell the rally market because people are not yet accustomed to all of the issues hanging over us. And anyway, that’s my two cents. RITHOLTZ: Thank you, Boaz, for being so generous with your time. We have been speaking with Boaz Weinstein, founder of Saba Capital. If you enjoy this conversation, well, be sure and check out any of the 400 previous ones we’ve done over the past eight years. You can find those at iTunes, Spotify, wherever you find your favorite podcasts. We love your comments, feedback and suggestions. Write to us at mibpodcast@bloomberg.net. Follow me on Twitter @ritholtz. Check out my daily reads at ritholtz.com I would be remiss if I did not thank the crack team that helps put these conversations together each week. Mohamad Rimawi is my audio engineer. Sean Russo is my head of Research. Paris Wald is our producer. Atika Valbrun is our project manager. I’m Barry Ritholtz, you’ve been listening to Masters in Business on Bloomberg Radio. END   ~~~   The post Transcript: Boaz Weinstein (Live!) appeared first on The Big Picture......»»

Category: blogSource: THEBIGPICTURENov 29th, 2022Related News

Coincident State Indexes (October 2022)

Source: Federal Reserve Bank of Philadelphia   The Coincident State Indexes for October 2022 snuck out last week right before Thanksgiving. You might have missed it during the holiday week, but it’s worth reviewing. The specifics are noteworthy: -Over the past month, the indexes increased in 20 states, decreased in 22 states, and remained stable… Read More The post Coincident State Indexes (October 2022) appeared first on The Big Picture. Source: Federal Reserve Bank of Philadelphia   The Coincident State Indexes for October 2022 snuck out last week right before Thanksgiving. You might have missed it during the holiday week, but it’s worth reviewing. The specifics are noteworthy: -Over the past month, the indexes increased in 20 states, decreased in 22 states, and remained stable in eight, making a one-month diffusion index of -4. -Over the past three months, the indexes increased in 36 states, decreased in 11 states, and remained stable in three -The 3-month diffusion index is 50 (breakeven) The economy is slowing, and some states are doing great, some okay, some less so. The coincident index can show you exactly where: Texas, North Dakota, Pennsylvania, New Jersey, and Massachusetts are all booming. California, Washington, Utah, Colorado, New Mexico, South Dakota, Louisiana, Florida, Georgia, North Carolina, and Virginia are all expanding. The down states: Montana, Wyoming Oklahoma, West Virginia, Maryland, Connecticut, and Maine are all contracting; slowing (a little less) are Kansas Arizona, and Mississippi. The FOMC increases are having an impact.     Previously: Signs of Softening (July 29, 2022) Why Recessions Matter to Investors (July 11, 2022) Soft Landing RIP (July 25, 2022) Coincident Index by States (May 22, 2008)   The post Coincident State Indexes (October 2022) appeared first on The Big Picture......»»

Category: blogSource: THEBIGPICTURENov 28th, 2022Related News

Rich Yamarone CUNY Scholarship

  5 years ago, a dear friend unexpectedly passed away. Once his crew recovered from our initial shock, we decided to establish the Richard Yamarone Memorial Scholarship in Economics at Brooklyn College.*  The driving force behind the scholarship was TBP Invictus. Art Cashin shared a reminder today: “Many of us were deeply saddened (5 yearsa… Read More The post Rich Yamarone CUNY Scholarship appeared first on The Big Picture.   5 years ago, a dear friend unexpectedly passed away. Once his crew recovered from our initial shock, we decided to establish the Richard Yamarone Memorial Scholarship in Economics at Brooklyn College.*  The driving force behind the scholarship was TBP Invictus. Art Cashin shared a reminder today: “Many of us were deeply saddened (5 yearsa go today) to learn of the sudden passing of Rich Yamarone at age 55 of complications of a cardiac event. Rich was a key economist at Bloomberg and years ago served as chief economist as Argus Research. Not only was he a brilliant and articulate economist but a witty and talented man. He was a key feature at Camp Kotok, the celebrated annual meeting of economists and journalists in Maine. He would charmingly debate economic issues into the evening and then reach for his guitar and entertain the crowd with his rich baritone voice. His resume looked like it was written by a novelist. Economist, raconteur, guitarist, vocalist, opera singer, a ranked athlete, gourmet chef and accomplished pilot. But, with all that Rich was humble and said he hoped that people saw him as just a kid from Staten Island that they would like to have a beer with. In my case, it was several glasses of Dewars. In review, I am reminded of the point in Shakespeare’s Julius Caesar where, upon the death of Brutus, Mark Antony says, “His life was gentle and the elements so mixed in him that nature might stand up and say to all the world “This was a man!” So was it with Richard. Ave Atque vale (Hail and Farewell) Lots of the Yammy scholars have shared their experiences. This one is typical:     If you want to make a donation, please use this link: Yammy CUNY Brooklyn Fund. *Memorial Gift needs to be toggled with Richard A. Yamarone as “in memory of.”       Previously: RIP: Rich Yamarone (November 29, 2017) Richard Yamarone Memorial Scholarship in Economics at Brooklyn College (April 17, 2018)   The post Rich Yamarone CUNY Scholarship appeared first on The Big Picture......»»

Category: blogSource: THEBIGPICTURENov 28th, 2022Related News

MiB: Boaz Weinstein Live!

  This week, we speak with Boaz Weinstein, the chief investment officer of Saba Capital Management LP, which Weinstein founded in 2009 as a lift-out of Saba Principal Strategies. Prior to founding Saba, Boaz Weinstein was co-head of global credit trading at Deutsche Bank, where he oversaw approximately 650 professionals. We discuss why being long… Read More The post MiB: Boaz Weinstein Live! appeared first on The Big Picture.   This week, we speak with Boaz Weinstein, the chief investment officer of Saba Capital Management LP, which Weinstein founded in 2009 as a lift-out of Saba Principal Strategies. Prior to founding Saba, Boaz Weinstein was co-head of global credit trading at Deutsche Bank, where he oversaw approximately 650 professionals. We discuss why being long volatility in an era of Fed tightening is so challenging, and why so many funds that hedged have disappointed this year. He explains how credit has become the most volatile asset class, far more than equity. A transcript of our conversation is available here Tuesday. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here. Be sure to check out our Masters in Business next week with Luis Berruga, CEO of Global X. The firm manages $40 billion dollars across nearly 100 thematic ETFs.   The post MiB: Boaz Weinstein Live! appeared first on The Big Picture......»»

Category: blogSource: THEBIGPICTURENov 27th, 2022Related News

Behind the Balance Sheet

(You may think this caricature is goofy, but I find it generous in its depiction)   I recently sat down to chat with Stephen Clapham, who hosts the Behind the Balance Sheet podcast. Audio is at Spotify and iTunes. Normally during podcasts, I am trying to keep the ratio of the guest to me at… Read More The post Behind the Balance Sheet appeared first on The Big Picture. (You may think this caricature is goofy, but I find it generous in its depiction)   I recently sat down to chat with Stephen Clapham, who hosts the Behind the Balance Sheet podcast. Audio is at Spotify and iTunes. Normally during podcasts, I am trying to keep the ratio of the guest to me at ~3 to 1 or so. The focus is supposed to be on the extra special guest who I am interviewing.  So it’s always fun when I can open up and yammer on and on. We discuss what motivates my work and thinking, how the firm blog and podcast, and RWM developed. It’s long-form, and I made it even longer. Hope you like it…     The post Behind the Balance Sheet appeared first on The Big Picture......»»

Category: blogSource: THEBIGPICTURENov 27th, 2022Related News

Grinch: Ignore Black Friday Retail Forecasts

  It’s Black Friday and you know what that means: Lots of promotional sales and lots of holiday retail spending forecasts. You can rely on the latter being ubiquitous and wrong; some by a little, most by a lot. At least, that’s what the statistically likely outcome is. As we have seen historically, holiday sales… Read More The post Grinch: Ignore Black Friday Retail Forecasts appeared first on The Big Picture.   It’s Black Friday and you know what that means: Lots of promotional sales and lots of holiday retail spending forecasts. You can rely on the latter being ubiquitous and wrong; some by a little, most by a lot. At least, that’s what the statistically likely outcome is. As we have seen historically, holiday sales forecasts tend to be a reflection of people’s mood at the moment — not an actual measure of intended holiday spending. They are typically wrong by substantial amounts. I’ve been tracking this nonsense for nearly two decades and it’s been shockingly consistent. Rather than bore you with (yet another) analysis of why the forecasts always seem to get it wrong, you can check out our collection of pre-pandemic Black Friday #Fails and run through the history yourself. The annual NRF foolishness is out: “NRF forecast earlier this month that holiday sales during November and December will grow between 6% and 8% over 2021 to between $942.6 billion and $960.4 billion. Last year’s holiday sales grew 13.5% over 2020 and totaled $889.3 billion, shattering previous records. Holiday retail sales have averaged an increase of 4.9% over the past 10 years, with pandemic spending in recent years accounting for considerable gains.” Mark your calendars: We will revisit this in January when the official data comes out. In the meanwhile, here are a few lol headlines about the shopping season. Holiday Shopping will be great! Or terrible! Or anything in between: High Inflation to Tamp Down Gift Giving: Black Friday (Bloomberg November 24, 2022) Black Friday kicks off an unpredictable holiday season. (NYT, November 25, 2022) Shoppers expected to spend on Black Friday, despite inflation (CNN, November 25, 2022) Inflations weighs on Black Friday shoppers (AP, November 25, 2022) Why Black Friday Shoppers Aren’t Finding Door-Buster Deals This Year (WSJ, November 25, 2022) but see Black Friday Deals Arrived Early for Many Shoppers This Year (WSJ, November 14, 2022) Lots more out there if you care to search for it…   See also: Record 166.3 Million Shoppers Expected During Thanksgiving Weekend (NRF, November 17, 2022) Previously: Black Friday #Fails   The post Grinch: Ignore Black Friday Retail Forecasts appeared first on The Big Picture......»»

Category: blogSource: THEBIGPICTURENov 25th, 2022Related News

Behavioral Hacks to Keep Your Thanksgiving Civil

How to Talk to a Fox News Viewer Those on the Left need to stop ignoring the science of Influence & Persuasion TBP, November 22, 2018       As noted in 2018, I enjoyed playing with this concept so much that I created several versions of it. Below is my favorite “no holds barred”… Read More The post Behavioral Hacks to Keep Your Thanksgiving Civil appeared first on The Big Picture. How to Talk to a Fox News Viewer Those on the Left need to stop ignoring the science of Influence & Persuasion TBP, November 22, 2018       As noted in 2018, I enjoyed playing with this concept so much that I created several versions of it. Below is my favorite “no holds barred” variation on a theme, just in time for Turkey day. Enjoy.      The midterms are over, Presidential elections are 2 years away, and Thanksgiving Day is here. If your family is anything like mine, you have a few Fox News viewers in the crowd. Rather than allow politics to ruin your Turkey Day, some timely advice might help save your holidays. Stop rolling your eyes: Fox News continues to be the most watched cable news channel in America. It is extremely influential, even if – or perhaps, because – its viewers are so much less informed than those who watch other channels or watch no news at all. Fox News misinform as it entertains, so much so that it has garnered its own Wikipedia page of controversies and errors. Laugh all you want, you smug, Ivy League-educated, coastal elites! Your own arrogance is preventing you from using the latest advances in influence and persuasion sciences to affect the Q-Anon crowd’s belief system. Of course, it’s ridiculous, but so is wasting your breath.* Your rejection of academic research makes you no better than the anti-vaxxers and global warming denialists, who also ignore Science with a capital “S.” You read that right: I just compared America’s liberal elite to the mouth-breathing flat-Earthers. Why? Trump proved to us that at least 30% of the electorate deeply believes things at odds with reality. You so-called Elites continue to snidely wag your fingers as you condescendingly lecture them, having precisely zero influence over their beliefs. Behavioral Economics has taught us the ways cognitive psychology can help.1 Our task of bringing reality to our family members is made easier by this scholarly research. Start out by recognizing the immense difficulty of changing a person’s mind. Improve your odds by understanding how people, regardless of ideologies, create their own subjective model of the universe. Follow this advice, and all will have a more pleasant holiday – no matter what news channel they watch: 1. Understand Cognitive Dissonance: The mechanism that allows people to ignore facts inconsistent with their ideology or worldview.2 Psychologists know how much time and energy3 go into creating each person’s model of the world. Given that huge investment, we are extremely reluctant to change our models. It is a species-wide exercise in the “sunk cost fallacy.” Your worldview includes your self of sense, ideology, and conceptualizations of your tribe. Anyone who bluntly challenges this naturally encounters fierce resistance.4 To persuade your Crazy Uncle Murray, it’s best to not require him to renounce views he has held most of his adult life. A more effective approach is one that allows his giant investment in creating his model to be (mostly) preserved. 2. Beware the Backfire Effect: When a dependable lifelong belief set is presented with contradictory facts, what happens is the Backfire Effect. Academic research has found that merely presenting info that challenges our worldview serves only to harden those previous positions. Not only aren’t our beliefs “corrected” by fact-checking, but the attempt at “correction actually increases misperceptions.” President Trump understands this all too well. When he gaslights the public — Toronto Star and the Washington Post have tracked thousands of the specifics — he relies on the media and all you silly elites to finish the job for him. Every correction simply extends the news cycle another day; each new fact check only convinces the folks who heard the original false statements that they were accurate. It is astonishing but true: when your deepest convictions are challenged by contradictory evidence, your beliefs get stronger. Facts may be stubborn things, but minds are even more stubborn. Former President Gaslight understands this all too well. 3. Let Socrates Help: OK, you now know lecturing people won’t help. If you want to actually change someone’s mind, follow the script first laid out 2,400 years ago by Socrates, the founder of Western philosophy. Never one to sermonize his students, Socrates led them through a structured argumentative dialogue instead. He asked them questions. He helped them consider their underlying beliefs and knowledge. The process forced students to think critically about their own belief systems. It led them to better hypotheses by helping to identify and eliminate those that were weak or problematic. The benefit of this cooperative dialogue is that when individuals reach a conclusion on their own, it more easily modifies their model of the world. Therein lay the difference. The Socratic method avoids both the Backfire Effect and Cognitive Dissonance. Finding the answers by yourself, even with that assist from Socrates, allows new conclusions to be incorporated into models more easily. The only drawback is that it requires thought, preparation, and patience. 4. Emphasize Your Tribe: Famed psychologist Robert Cialdini, author of the best-selling book “Influence: The Psychology of Persuasion,” and all around expert on persuasion (see our MIB interview here) notes how important it is to emphasize you are of the same tribe. He calls it the Convert Communicator: “I used to believe what you do – I was against the ACA. But then this happened to me, and it changed my mind.” Cialdini uses the example of a healthcare issue to an opponent of ACA (Obamacare). “I was in your shoes, I believed what you do – until my child got sick, and but for the pre-existing coverage mandate of Obamacare, we would not have gotten treatment. That experience led me to change my views.” It is hard to reject somebody who shares your beliefs. People are more willing to be open to a person who used to believe what they do, but life events changed that perspective. Cialdini is surprised that the two major parties have not deployed this systematically. 5. Never Argue from Outliers: Trump has fringe followers who are clearly racist; he has a long history of issues with race; his sexism and misogyny have all been well documented; (his dog whistles to anti-semites are more complicated). However, be cautious when making assumptions about all of the folks who voted for him. When we analyze why people vote for a given candidate or party, political science informs us the biggest drivers are economic and/or security priorities.5 A Pew Research Center poll found that for “Trump supporters, 90 percent call the economy very important to their vote.” That suggests that other factors (no matter how uncomfortable) are not the key determinant of individual voting. This is true across parties and drives many voters. Other factors simply have a lower priority and are either downgraded or ignored. I know that my sister is not racist and that my brother is not anti-semitic – yet they both voted for Trump in 2016, primarily because of their economic priorities. What compounds this is the Availability bias: “That which comes readily to mind is more representative than is actually the case.” Given how much coverage was garnered by the Access Hollywood tape or the Charlottesville White Supremacists march, it is very easy to paint Fox News viewers and Trump Voters with the horrible attributes of those groups’ worst members. Don’t make that assumption. It’s both lazy and ineffective. There are ways to raise this issue without accusing family members of being anti-semites or misogynists. “I wish his rhetoric was less encouraging to the worst elements in society” is a much better phrase than “All Trump voters are racists.” For a better holiday dinner, try giving your family members the benefit of the doubt . . . ~~~ Whether you believe, as I do, that America has a Fox News problem or not, there is no reason for politics to ruin your holiday get-togethers. Use what we have learned from behavioral economics to enjoy your family get-together. Happy holidays!     Previously: MiB: David McRaney on Belief, Opinion, and Persuasion (October 1, 2022) What Is In Your Control? (September 27, 2022) When Narratives Collapse (November 18, 2022) The Uncertainty Monster (July 21, 2022)     _________ 1. As we have shown, Investors who have a faulty model of the world or believe in alternative facts end up quickly punished in the markets; politicos who buy into falsity may lose an election two or four years down the road. The key difference between investing and politics is the speed of the feedback loop. Investors who believe “Fake News” go broke pretty quickly, while some who believe in magical thinking never seem to suffer the consequences of their foolishness.  I am looking at you Arthur Laffer! 2. Note: I have held the title of “Director of Twitter Cognitive Dissonance” since 2009 3. By Energy consumption, I mean literally: The brain only weighs about 3 pounds but it consumes 20 percent of the energy of the body. 4. A variation of this is the Upton Sinclair quote: “It is difficult to get a man to understand something, when his salary depends upon his not understanding it!” 5. Health care and “Senior’s issues” (including Social Security and Medicare) all made the top four issues regardless of party affiliation. These are arguably also economic concerns.   ~~~   This was originally published TBP, November 22, 2018. A shorter, less snarky version of this was published at Bloomberg, November 20, 2018. All of my Bloomberg columns can be found here and here.      ______ *. To quote Robert Heinlein: “Never attempt to teach a pig to sing; it wastes your time and annoys the pig.” The post Behavioral Hacks to Keep Your Thanksgiving Civil appeared first on The Big Picture......»»

Category: blogSource: THEBIGPICTURENov 25th, 2022Related News

15% Yield Was Never Credible

Barry Ritholtz, Ritholtz Wealth Management Chairman & CIO and “Masters in Business” Bloomberg Radio & Podcast Host, discusses crypto contagion and the volatile price swings in bitcoin.   Yield Hogs Are Always Problematic   Source: Bloomberg     The post 15% Yield Was Never Credible appeared first on The Big Picture. Barry Ritholtz, Ritholtz Wealth Management Chairman & CIO and “Masters in Business” Bloomberg Radio & Podcast Host, discusses crypto contagion and the volatile price swings in bitcoin.   Yield Hogs Are Always Problematic   Source: Bloomberg     The post 15% Yield Was Never Credible appeared first on The Big Picture......»»

Category: blogSource: THEBIGPICTURENov 24th, 2022Related News

Transcript: Marcus Shaw

    The transcript from this week’s, MiB: Marcus Shaw, CEO of AltFinance, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ ANNOUNCER: This is Masters in… Read More The post Transcript: Marcus Shaw appeared first on The Big Picture.     The transcript from this week’s, MiB: Marcus Shaw, CEO of AltFinance, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio. BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, I have another special guest. His name is Marcus Shaw. He has really a fascinating career and a focus these days. He really began as a traditional engineer/finance person working at IBM as a network engineer before he got his MBA at Duke. And from there, he did the usual research and investment banking gigs throughout a lot of Wall Street before the opportunity came to help entrepreneurs develop and grow their businesses in places like Alabama and Tennessee, which ultimately led him to participate in the founding of a new firm called AltFinance, which was created by really a group of, for lack of a better word, finance royalty. It’s Howard Marks of Oaktree Capital. It’s Tony Ressler of Ares, Marc Rowan of Apollo Global. These three gentlemen said we’re lacking the ability to tap into a very rich, diverse talent pool, including historically black colleges and universities. Venture capital, private equity, just were not recruiting for those spaces. And so they stood up a firm called AltFinance, whose main purpose was to help alternative asset managers tap into that rich pool of potential hires. Marcus Shaw works with them, and he’s the CEO of AltFinance. I found this to be really a fascinating conversation about how to access the most skilled partners and employees, what can be done to shake up a relatively staid industry that has lagged behind its peers in terms of recruiting and other things, and really how to help have a major impact in the world of finance. And I found this conversation to be fascinating and I think you will also. So with no further ado, my interview with Marcus Shaw. MARCUS SHAW, CEO & PRESIDENT, ALTFINANCE: Barry, thank you so much for inviting me. RITHOLTZ: I’m excited to chat with you. So let’s talk a little bit about Wall Street and diversity. Wall Street has been pretty bad at recruiting black talent. It’s been a stated objective for decades. Why is finance so bad at this? SHAW: Barry, I think that it’s a complex question that requires actually a complex solution and a multifaceted solution. I would say the most general issue here is that folks don’t have the networks and the access to careers in finance from across the country. Right? So if you grew up in New York, yeah, you’ll probably know some people that worked in the industry and you may have some relationships. You may go to school with somebody. Your parent may work there. And that’s whether you’re white or black. All right. But if you don’t, if you grew up in a market, where there’s not an investment bank, there’s nothing other than a branch bank for one of the multi-dimensional financials, then you’re not really going to have an understanding of what that career looks like at a young age. And so as you get ready to go to college, and you start thinking about what your career going to look like, it’s going to be primarily academic for you. And so I think that’s always a challenge that they’re not a ton of people that are in the seats, that are getting access to, in this case, black students from across the country. They’re giving them a look and this is what a career could look like for you. This is what an opportunity could look like for you. Here’s what the realm of possibilities is. And this primarily is how you get there, here’s a path to get there. That’s the biggest challenge. RITHOLTZ: So tell us about AltFinance, what is its mission? And why is this a better mousetrap than the way things have been done before? SHAW: So AltFinance is focused on building diversity in the alternative investment industry. RITHOLTZ: Alternatives being venture capital, private equity, anything else? SHAW: Private credit, real estate investing, hedge funds, everything kind of outside of traditional stock and bond investment, right, the things that are more private and market-driven often. And so our goal is to increase diversity in that space by working with partnerships at historically black colleges and universities, by providing students from HBCUs opportunities to have co-curricular programming, understanding, you know, exactly what you need to know to be successful in that role. Also to provide mentorship for students so that they’re not operating in a vacuum, so that when they have questions, there are people in the business, people that have experienced in the business that they can talk to. And also by working and partnering with schools to provide financial support to help increase capacity not only for students, but also for the institutions themselves. RITHOLTZ: So let’s talk a little bit about how AltFinance was initially funded and created. You have Howard Marks of Oaktree Capital, Marc Rowan of Apollo, Tony Ressler of Ares. These are like three heavy hitters at giant legendary firms. That’s a heady group to work with. What led them to say we need help accessing black talent, and we’re not getting it from anywhere else, we have to do it ourselves. SHAW: What I think all three gentlemen, you know, Howard, Marc, and Tony all recognize is that relationships help drive value. And so you got to have relationships with the schools and the places where there is a lot of black talent, and I think they saw HBCUs as an opportunity for that. I think what’s important, though, and what’s key is that we found ourselves at a very interesting point in time, in 2020, in the wake of George Floyd, in the middle of COVID. And so I think, everybody around the world, business leaders from across multiple industries were trying to think about how can we make the world a better place? How can we address racial equity in a way that’s specific to the businesses that we operate in? And I think that’s the key, right? This was not just about, you know, going out and being philanthropic, right, and making one time gifts. This was about how can you be strategic in building partnerships over the long term, that are going to have a systemic impact in the industry in which you operate. And that’s where I really think that the three firms led by, again, Howard, Tony, and Marc really found something that was special and something that was, you know, a better solution to a question that Wall Street has been dealing with for years. RITHOLTZ: So is it safe to say that Wall Street, in general, but alternatives like private equity and venture capital, were not recruiting at historically black colleges and universities? Was that void out there forever? SHAW: I think that it was not systemic, right? There was no systemic recruiting at HBCUs, in a way that was going to be sustainable, right? And I think that a lot of that was driven by needing to take some time and figure out how do we engage with these universities. We know we’ve got talent there. We’ve got density of talent, which is the important thing. And so I think giving us time to reflect on what had happened over the past few years was a really strong case for let’s go, let’s be direct and intentional. Let’s work with presidents of these universities. Let’s work with the deans, let’s work with the students to develop a strategy together, that’s going to rise the tide for everybody. RITHOLTZ: So I want to get into the details of what you guys actually do with students. But before I get there, you mentioned Tony, Howard and Marc, what led them to say, hey, let’s stand up some entity so we can set up an institution to correct just a recruiting shortfall we’ve had for years and years. Like that’s an unusual group of guys to get together and say “Let’s see if we can dent the universe a little bit.’ SHAW: Yeah. So I think there are two factors. Number one, and I think they both reflect strong leadership at the firms. Number one, you had, you know, somewhat of a groundswell from within the firm, certainly at leadership that said we need to figure out a way to do something. And I think as great leaders do, I think Howard and Tony and Marc were receptive to that. And also, it was perfect timing because they were thinking, how can we drive impact? How can we impact and affect change in our own way? And so it starts off with senior leaders at the firm and you know, these heads of industry working together to figure out, what can we do? Then you bring the relationships together. So Howard, Marc and Tony have known each other, but also many of their senior leaders have known each other as well. RITHOLTZ: Right, right. SHAW: And so the main thing that you have to do is say we want to take down any competitive barriers in which we operate during our standard business. And we recognize that what we’re trying to solve for is bigger than our individual company. It’s really about the industry. And if you can get to that point, which they did, very quickly, I mind you, then you can instantly start to put together something as powerful as AltFinance. And that happened, and it happened fairly quickly. But I think it took a lot of time and a lot of vulnerability, and a lot of transparency. And I think that’s really symbolic of what AltFinance represents. RITHOLTZ: So now let’s drill down a little bit and talk about what you exactly do with students. Do you guys provide coaching or mentorship? What do you do to help kids who probably aren’t all that familiar with what private credit is, and put them on a career path until alternative investments? SHAW: So there’s a framework that I use, I use it with entrepreneurs, I use it with talent anywhere I see it. First, you identify really good talent, right? Kids that have an interest in investing. Although they may not know the nuance of what investing asset class that they’re most interested in, or, you know, they’re young, they may not have the experience of understanding multi-cycles in the market, but they have an interest in investing. They have academic strength, right, some real intellectual rigor and horsepower. And so you look at kids that perform well, no matter what they do. You know, the kid can be a philosophy major, they can be a finance major, but they’re doing well in the pursuit that they’re following. And then we look for students that are coachable, right? RITHOLTZ: Coachable? SHAW: Coachable. Coachable is key. RITHOLTZ: Really? SHAW: It’s an apprentice model business. You know, there’s nobody that comes into this business, and comes in right out of college as a partner. Even if they’ve got all the resources in the world, nobody is going to come in as a partner. By and large, most people start this business as an analyst and they work with associates, and those associates working with VPs and principals, and managing directors and so forth. So you need people that are going to be willing to work through the apprenticeship model, that are willing to come in, you know, well compensated, a great network of people that they’re going to be around, but they’re still going to have to listen and be coached up in order to benefit the team in the company. And so we look for those things, people that have an interest in investing, people that have intellectual horsepower, and people that are coachable. RITHOLTZ: That’s really intriguing. So it’s not so much specific qualifications that are needed as qualities that will allow the students you select to succeed going forward? SHAW: Yeah. I think by and large, I mean, I would say that those qualities, you know, we recognize them through qualifications, right? So I look for people who have strong GPAs, and people that are taking some rigorous coursework, even if that coursework is not in finance. I look for people that have done extracurricular work, or you know, manage their own little portfolio, or have stock ideas or businesses ideas that they want to pitch. And then I look for people who also have references that say, “You know what, this young man, this young woman has been really coachable in the time that I’ve had them in school.” RITHOLTZ: So generally speaking, alternative assets, that’s a tough gig to get into regardless of where you go to school. Private equity, venture capital, hedge funds, real estate, down the whole list, not easy, how much harder is it to get into that space if you’re coming from an HBCU? SHAW: I think it can be difficult, and not because of anything that’s attributable to the student themselves. I think it can be difficult because no matter where you’re coming from, you need to know somebody to get into this business. And so the first key is how can you create networks that allow HBCU students to have mentors, to have advocates that are in the industry, that learn and know them well, know their strengths, know their weaknesses, know, you know, their ambition and their aspirations, and can speak to that and help guide them to certain careers inside of alternatives where they can be successful. RITHOLTZ: Really intriguing. Let’s talk a little bit about some of the work you’ve done, start with CEO of The Company Lab, what was CoLab’s mission and why Tennessee? SHAW: My wife and I decided to move to Tennessee back in 2016. She joined a practice down there and we had family in Tennessee, and it was really a unique opportunity to move around. We’ve moved around a bunch and have enjoyed all the different places that we lived in the country. Chattanooga is a fascinating city, really steeped in some rich history, but also a city that faces some challenges as they grow from a very small city to a more significant city in the U.S. economy. When I moved down there, I was still working with MLT, and then an opportunity came up to take a pretty significant role within the community as a CEO of The Company Lab. The Company Lab was the entrepreneurship and economic development center for Chattanooga and the surrounding areas, which include North Georgia, North Alabama, and Southeast Tennessee. It was incredible to really focus on local opportunities for entrepreneurs, for investors. for economic development, and really see how the fabric of a city with, you know, about a couple of hundred thousand people can develop, when you have people that are really dedicated to fostering that growth. RITHOLTZ: Was this like a private public partnership? Tell us a little bit about the structure of that. SHAW: It was a private public partnership. It was set up as a nonprofit that had some funding coming from the state, some funding coming from foundations, and then some funding coming from corporate entities that also found economic development in the region very important RITHOLTZ: What’s some of the economic sectors within that area? What is Chattanooga known for? SHAW: So Chattanooga is known for a couple of things, right? Key brands, number one, Coca-Cola Bottling is the company that really helped to jumpstart the city. And so Jack Lupton was kind of the patriarch of that company, and sold that company back to Coca-Cola in the mid-90s. RITHOLTZ: They were two separate companies for a while. SHAW: That’s right. So, yes, there were a number of bottling companies that would bottle Coca-Cola product and distribute it throughout the country or throughout the region. And the one in Chattanooga, Coca-Cola Bottling was one of the larger ones in the mid-century. Again, it was sold back to Coca-Cola as they consolidated those businesses, and left a pretty strong economic footprint in Chattanooga. Chattanooga was also the home of Moon Pie and Little Debbie, right? And a number of consumer products that are very familiar brands that we know about, but did not know that they were from Chattanooga. And so what I saw in Chattanooga was a rich history around entrepreneurship that necessarily hadn’t found its way into the modern day, right? We didn’t see a lot of great companies coming out of Chattanooga in the late ‘90s during the tech bubble, and so forth. RITHOLTZ: So what did you accomplish when you were there? Do you feel like you moved the needle at all? SHAW: Well, we moved the needle tremendously. You know, there were some companies that were there when I took the seat, companies like Bellhop, that’s a tremendous company and kind of operates in the Uber of moving, right. So you have fantastic moving company and a fantastic culture. There was a company FreightWaves that has done fantastic work. People kind of equate it to the Bloomberg of trucking. And so they’ve got a — RITHOLTZ: FreightWaves? SHAW: FreightWaves. FreightWaves. RITHOLTZ: W-A-V-E-S? SHAW: That’s correct. And Craig Fuller who’s the founder and CEO down there was a good friend, but also a really strong business person who’s done some great work. We brought Steve Case in Rise of the Rest to Chattanooga. RITHOLTZ: Sure. SHAW: And FreightWaves was actually the investment that they made in Chattanooga, and has done great work. The company has grown. They’ve employed hundreds of people with meaningful salaries. And that’s what it takes to move the needle in a place like Chattanooga, and there are hundreds of cities like that around the country. RITHOLTZ: So how do you go from Tennessee to Alabama at the Montgomery TechLab? SHAW: So as I was leaving CoLab, in Tennessee, I saw what was going on in Montgomery, and I saw that Montgomery had great leadership. The mayor down there, Steven Reed, has done a fantastic job in Montgomery. I also saw that they had some really unique assets. They’ve got a fantastic Air Force installation down there. They’ve got the state capitol there in Montgomery. They got a really diverse population. And so what I really did was take the thesis that we were working with in Chattanooga, and adjust it so that it applied to Montgomery. And so in a couple of years down there, we’ve been able to bring some really incredible companies to Montgomery, to see the type of value that they have there. But we’ve also, in this most recent cohort, and the team down has done an incredible job, helped grow companies that are there in Montgomery, focusing on tech solutions and tech services, to help them expand and recognize assets even outside of the region. RITHOLTZ: So you mentioned tech, I tend to think of the West Coast as the, you know, center of tech in the U.S. The Northeast is the center of finance. The Southeast, how should we think about that in terms of the business sectors that they should be known for? SHAW: So I think there are a couple of things. Number one, manufacturing has been strong in the Southeast for a number of years. RITHOLTZ: A lot of car companies really, right? SHAW: A lot of car companies. There’s a lot of pro-business environment for companies with big labor forces in the Southeast. You’re able to operate at a more efficient standard of living in terms of cost. And so you see a lot of car manufacturers operating down there. Also, transportation and logistics, Chattanooga was probably one of the biggest hubs for transportation logistics in the country. Anything that’s coming through the Southeast via truck is coming through either 81 or 75 or 24. All of that comes through Chattanooga. And so that was something that we saw. You’ve got companies like U.S. Xpress and Covenant that operate in Chattanooga. RITHOLTZ: Didn’t FedEx or UPS have a big logistics center? SHAW: So FedEx is out in Memphis, Tennessee, so on the other side of the state. But those trucks, again, will all come through Chattanooga. And so when you think about, you know, the south and you think about industries that are moving, it continues to be manufacturing and logistics. Also, healthcare is really popping up. Nashville and Atlanta are two very large healthcare hubs. Some of that is due, unfortunately, to demand, right, where you have health outcomes that are probably a little more severe in some of the Southeastern states in the United States. And so you need strong healthcare to meet the needs of the population. RITHOLTZ: It’s interesting we’re talking about different parts of the country. A lot of the bigger firms want to see the end of remote work or hybrid work. But I would imagine that that creates opportunities for parts of the country like Chattanooga, and Nashville, and Montgomery, where there are a lot of big companies that may not be located there, but they want to tap the pool of talent that’s there. SHAW: So we’ve seen that, and talking with leaders in a number of cities throughout the south, and even throughout other areas in the middle of the country that have not traditionally had the type of talent there, or the draw to those cities. You definitely saw a surge of people, I would say, during the COVID period, that were moving to cities where there was a lower cost of living, but a strong quality of living, and they could work remote. And so I think there’s been a benefit to those cities, and that you’re getting people that are moving. You know, Nashville had a ton of people that were moving to Nashville primarily from California, and that really strengthened the work or the labor force in Nashville. What you do see on the other side of the coin, though, is that for companies that are there locally, it can be a detriment because you have people that are there in the city and may take jobs outside of the region instead of taking jobs there in the region. And so there’s a delicate balance, right, to the impact, particularly for small to mid-size markets, where you have a labor force that’s needed in the market, that’s finding opportunities outside of the market, even if they continue to live. RITHOLTZ: Let’s spend a little time going over some of your history. Your family is from Mississippi, but you grew up a little bit of a military brat? Tell us about those experiences. SHAW: Yes. So my dad is actually from Mississippi. My mom was from North Carolina. My dad was a naval officer who retired shortly before I was born. So I spent most of my time growing up in Maryland, right outside of D.C. RITHOLTZ: So you didn’t do the whole army brat travel around the country? SHAW: I didn’t do that. But I did hang out on military bases a lot. So all my friends would change every three years when they PCS, right. So I had kind of the opposite side of the travel, which is being the friend that was always left behind. RITHOLTZ: Right. That’s really intriguing. What did your dad retire from doing? What was his — SHAW: So my dad had two careers in his life. He grew up in Mississippi. He’s picking cotton, believe it or not, when he was 7 years old. He was born in 1929. RITHOLTZ: Seven? SHAW: 7 years old. Right. RITHOLTZ: Wow. SHAW: We talk about skipping generations. He went into the Navy in 1945, and spent 27 years in the Navy. He retired and went to work at the Library of Congress as personnel. He was able to get his undergrad, master’s, PhD all through the GI Bill while he was in the Navy. RITHOLTZ: Wow. SHAW: But I always say my father is a real hero of mine because he truly did skip three generations in one lifetime. RITHOLTZ: Wow. That’s really impressive. Was mom working? Was she a homemaker? SHAW: My mother was a 50-year school teacher and taught public school in D.C. for 50 years — RITHOLTZ: 50. Wow. SHAW: — and really was an inspiration for the way I think about learning and understanding the value of education. RITHOLTZ: So let’s talk a little bit about education. You went to Sidwell Friends School, that’s some rarefied company, isn’t it? SHAW: There’s some good people that have gone there. RITHOLTZ: Yeah. Who did you go to school with? Any famous names that you know of? SHAW: Marcus Shaw is one. But, no, I had great, great folks in my class. Baratunde Thurston, who you may have heard of, author and producer that spent time with The Daily Show; Jon Bernthal who’s a great actor; Tommy Kail who was the director of Hamilton and some other big plays. RITHOLTZ: Wow. SHAW: But you know, everybody in our class was phenomenal. Also, folks like Chelsea Clinton, and later, the Obama girls went to Sidwell. So some rarefied air indeed, but a great group of students and a great group of friends. RITHOLTZ: So you go from there to get a mathematics degree from Morehouse College, then onto Georgia Tech for an electrical engineering degree, with little football mixed in. Tell us a little bit about your academic career in college. SHAW: So when I went to Morehouse, I was excited. I went down there with a few friends. It was a great mix to be able to go to a school, like Sidwell, and then go to an HBCU as esteemed as Morehouse was. It was really a great opportunity for me to have a bunch of different experiences. My story around playing football is probably my great interview story. I was playing cards with a bunch of guys right at the beginning of the school year, and made a bet that I could kick a 50-yard field goal. So we go out on the field, we jumped the fence, I lined up, take about 20 steps back, kick a field goal from 50 yards. One of the coaches comes out and yells at us to get off the field. We’re trespassing. As we’re leaving, he tells me to come out to the walk-on tryouts at the end of the week. RITHOLTZ: How close did you come to a 50-yard field goal? SHAW: Oh, I knocked it down. RITHOLTZ: No kidding. SHAW: I made it, man. He didn’t want me to come out because I missed it. He wanted me to come out because I made it. And you know, I went on to play four years in Morehouse and had some strong accolades there. But really, even that experience was about building great friends that I played football with. And many of those gentlemen have gone on to do incredible things as well. RITHOLTZ: Why is it not surprising that a math nerd is also a placekicker? It seems to be like the field goal seems to be one of the most mathematical parts of football. SHAW: Well, it’s pure geometry. RITHOLTZ: Right. SHAW: So 1.3 seconds from the snapper to putting the ball down and getting the ball off the ground, the angle that has got to come up, you know, is pretty significant in terms of your probability of making it. So I looked at it as an exercise in physics, geometry, you know, a little bit of chemistry, depending on the texture of the football. So I thought I was a natural. RITHOLTZ: That’s really intriguing. And then you go on, get your master’s at Duke School of Business. What led you in that direction, given the mathematics and electrical engineering undergraduate? SHAW: So I went to IBM after completing my undergrad degree at Georgia Tech in electrical engineering. I had a great time there, learned a lot, but really wanted to understand the way that we were selling business, right, understanding more about the business of IBM, and how we thought about the products and services that I was delivering as an engineer. Not to mention one of my, you know, very good friends that played football with me in Morehouse, was a year ahead of me in business school, he said, “You’re pretty smart, you should check out business school.” And fortunately enough, I had a great school in Duke that was right there in Durham. My wife was in med school at UNC. And I didn’t have to move to go to a great business school, which was really refreshing. And it was a great experience, and I learned a lot about business there and kicked off a new career. RITHOLTZ: From there, you ended up going into a decade of equity research and investment banking at shops like Bank of America, Piedmont, others. What led to that aspect of finance? SHAW: So I always tell folks this is one of the great turning points in my life. When I went to business school, I was pretty confident that I was going to come out of business school and go back to IBM. I was going to stay an engineer, wanted to learn more about marketing and you know, some operations around technology. There was a point right before the start of my first year in business school, so this is 2003, I had an opportunity to go to a camp, two-day camp at Goldman, that was focused on providing insights in investment careers for people that did not have an investment background. And you know, they fly you up, you’re a smart kid, put you up in a nice hotel. And I met a woman who covered enterprise software at Goldman, and she gave me really great insight into how I could leverage the industry knowledge that I had developed at IBM. And so, really, it was one person on an off-conversation, you know, down on Broad Street, 20-plus years ago, that led to my career. She said, “Equity research is a great place where if you know a lot about the business, and you learn a lot about finance, you can be impactful. You can earn a good living. You can really understand the markets and meet great people.” RITHOLTZ: As opposed to the opposite which is knowing a lot about finance, and then having to learn a whole industry from the outside, it’s a very different perspective than starting with the industry knowledge from the inside. SHAW: That’s right. And that perspective is something that I think we’ve got to learn to embrace more because, you know, finance is challenging, but it’s not difficult, right? It requires putting in work and getting reps in order to start to understand patterns and be able to anticipate things that you will see in the market, or things that you’ll see at a company. But really understanding the core of industry is what makes a master of business, right? I mean, that’s how you really start to hone the skills that you need in order to make true alpha out in the market as an investor. RITHOLTZ: So tell us what you did it at shops like Bank of America, what was your focus? SHAW: So I covered telecom services at Bank of America. During my time at IBM, I worked on several telecom networking projects and really understood the industry, things like spectrum and things like wireless that were coming of age at that time, I understood pretty deeply. And you know, through my understanding of finance, I was able to say, these are businesses that I think will do well. these are businesses that are positioned to do well. And once the market understands that, the stocks will perform. I had great mentors at Bank of America, a great team that I worked with, and really set me up for a great start in finance. RITHOLTZ: So you have a little bit of a health scare when you’re relatively young, and it changes your career trajectory. Tell us what led you to stepping off of the merry-go-round? SHAW: Yeah. Barry, it’s an incredible story and one that I think also defines a lot of where my life has led. So you know, I was at a firm in D.C. and covering tech media telecom, a bunch of regulated industries as well, and was having some chest pain. And a bunch of traders had, you know, what we call walking pneumonia, but it takes everything to get a trader off the desk, right? I mean, the whole desk will get pneumonia before they leave. And I was pretty sure that’s what I had and was coughing for a few days, and had some pain in my chest, go to the hospital. They take an X-ray. They see that I’ve got some swelling and a little bit of cloudiness there in my lungs, and they gave me a Z-Pak, an antibiotic. They think that I might have had pneumonia. My wife who’s a physician, as I shared with you before, you know, comes to the hospital, to the emergency room. She asked me what they said, I said, you know, as an equity research guy, I think I know it all, “I’ve gotten pneumonia. You know, they saw it on the X-ray.” What I didn’t– RITHOLTZ: It’s like, “Let me see those films.” SHAW: She’s like, “Let me see what’s going on.” Exactly. RITHOLTZ: She didn’t buy it? SHAW: Well, she didn’t buy it because she’s a doctor and she’s very good at her job. Like, I say all the time. I’ve got a great wife, but I got the best doctor that anybody could have in their house. I had some leg pain earlier in the week. RITHOLTZ: Left side? SHAW: Yeah, left side. RITHOLTZ: Ooh. SHAW: So we know where this is going, right, Barry? RITHOLTZ: All right. Yeah, you can just ignore that. That will sort itself out. SHAW: I thought it was a charley horse. RITHOLTZ: Really? SHAW: I played a little basketball with buddies. This was right at the end of a Thanksgiving holiday. And I got a group of buddies, lifelong friends, we always play basketball together. And I thought it was a charley horse. Pain in the leg went away. A couple of days later, I’m having this pain in my chest and I take myself to the hospital. She goes, “Did you tell them about your leg?” And I said, “No.” She goes into the head of the emergency room’s office. RITHOLTZ: Really? SHAW: The guy comes back out and he says, “How come you didn’t tell me about your leg?” I said, “Well, my leg doesn’t hurt anymore. It’s my chest. I got pneumonia. That’s what X-ray said.” This is where equity research guys talk themselves into a hole. They think they know more than they do. RITHOLTZ: Right. SHAW: I know a lot about telecom. I know nothing about healthcare. All right. So the guy comes out and he says, “Well, we got to give you what we call a D-dimer.” Right. There’s a test for blood clots essentially. RITHOLTZ: Right. SHAW: They do the tests. I am at this point, the second sickest person, highest priority in the emergency room. RITHOLTZ: Wow. SHAW: They rolled me in. They gave me an MRI. They see the blood clots in my lungs. They see some remnants in my leg. I’m immediately, you know, brought into the hospital and I’m there for several days. They gave me blood thinner. They want to make sure that these clots don’t — RITHOLTZ: So no bypass or anything crazy like that? SHAW: No, no, no, no, no. So what I had was a blood clot, right? So I did not have a heart attack. I’m in the stroke center there at the hospital in D.C. And for me, it was really a point where you start thinking about your life in a different way. RITHOLTZ: It had to be terrifying when your wife comes in and the head of the ER says, “Stat. Let’s get this guy taken care of immediately.” SHAW: It is, but not as scary until you realize what’s really happening. And that, you know, there’s things that they call the widow-makers, which are these bilateral blood clots that you get across the aortic valve. And I mean, you just go away. RITHOLTZ: You’re done. Right. SHAW: You’re done. Right? As somebody that kind of steeped in mathematics, probabilities, investment, you’re always thinking about the future. And you know, my great story from that is that I actually upgraded a stock Pandora Media from the ICU in the hospital. RITHOLTZ: I bet they loved that. SHAW: Yeah. To which my wife responded, you know, “If you die writing a research report, I’ll kill you.” Right. So this is where you start putting it together, you put a little bit of life together, and you start thinking like an investor, and you start investing in yourself and thinking about, you know, how are you going to measure the return in your life? And for me, I’ve done well as an analyst. You know, we did well. And I said I really I want to find ways that I can impact and help others with the years that I have left because it could have gone away right then in there. RITHOLTZ: So is that what led to Management Leadership for Tomorrow, and then AltFinance? Tell us about what took place when you got out of the hospital? SHAW: Yeah. So got out of the hospital, stuck around for a few more months at the firm that I was working. And then decided to do some other things, and that included doing some work with small- to medium-sized businesses, providing some outsourced CFO type of service, to really understand how some of these small businesses worked. An organization that I looked at doing some work with was Management Leadership for Tomorrow. And John Rice and the team at MLT do a great job. They have absolutely moved the needle and changed the trajectory for thousands of Black, Latino and Native American students over 20-plus years. I knew John a little bit and knew about the work that he had done. I had written recommendations for mentees of mine into that program. And John asked me to come out and you know, “Can you help raise some money, right, running business development?” And for me, that was a step away from the industry. And what I recognized is I got tremendous fulfillment out of seeing young people that were, you know, 10, 20 years younger than myself, but helping them get to the next level, helping give them the opportunities that that woman gave me from Goldman, when she said, “Here’s the path you should think about taking.” RITHOLTZ: Quite interesting. (COMMERCIAL BREAK) RITHOLTZ: I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio. We’re talking to Marcus Shaw. He is the CEO of AltFinance, a firm which seeks to increase diversity across alternative asset management firms. So we’ve been talking earlier about the lack of recruiting and the lack of diversity, historically, on Wall Street. But let’s talk about the other side. You often speak to groups of smart college kids, and you ask them, hey, what do you guys know about private equity, or credit, or venture capital? What sort of answer do you get when you ask those college students those questions? SHAW: So the most interesting thing that I’ve seen in assessing college students and talking to them is that students generally have very little knowledge of the companies that are operating in the private equity, private credit markets, real estate. They know some of the venture capital firms because I think venture capital has done a great job of a PR over the past 10 years or so. I mean, everybody wants to be a venture capitalist and an entrepreneur. I always attribute that to a low interest rate environment where — RITHOLTZ: Oh, no, go back to the 1990s when venture capitalists were rock stars also. SHAW: That’s right. That’s right. Well, also, though, you know, a period there where you had the Fed being a little accommodative, right? I think that by nature and by design, many of the firms that operate in private equity and private credit space don’t want to be known. But our students know many of the holding companies, right. And that’s what’s really interesting, that they know the publicly-traded companies, they know the private companies, but they don’t know the holding companies for the private companies. RITHOLTZ: You use the example, and I think it’s fascinating, Rihanna partnered with a private equity firm for her fashion line. The students know who Rihanna is and they know how wildly successful she’s become, but they don’t know who the financers are. SHAW: That’s right. That’s right. RITHOLTZ: And how do you get them to look behind the curtain and/or under the hood and see that capitalist is what’s driving the business? SHAW: I think the key to that, and we check for this when we’re interviewing students for our program, is intellectual curiosity, right? That’s the key to being an investor. Are you always thinking about peeling back another layer to the onion? You go in a store; you see a great product. Hmm, where is that product made? Who’s the company that owns that? Is there’s several different pieces to the product? Where are they getting the components from? Where are they sourcing them from? Who owns that company? Who finances those companies? That’s the way we’re teaching students to think because that brings about the type of intellectual curiosity that you need to have when ultimately, you want to put some capital behind a company that you really like. RITHOLTZ: So let’s go back to first principles. Why are companies interested in diversity? What’s in it for them? SHAW: So I think there are a number of reasons why companies are and should be interested in diversity. We have hundred million students out here, coming through, you know, K through 12, and university system that are operating at a higher level than we were 20 years ago. Students are very smart, independent of their color, their background, their religion, their gender orientation, right? What we know is that students are being educated at tremendous levels today. They have so much more access, that their intellectual curiosity is going to be really fueled by a lot more information that’s delivered in a more equitable way. If I’m hiring for talent, I want access to all of that. I want to know the brightest kid from every corner of the country, boy, girl, gay, straight, black, white, it doesn’t matter. I want to know that student because that student can help me. That student can help me build and invest, and find opportunities and generate alpha, and bring more clients into my business. And so if I’m a senior leader at a company, I think that’s the business operative, right? I’ve got to have the brightest talent, the talent that’s most differentiated and intelligent, and also helpful. I think the social part of this is that, you know, a lot of these dollars are public dollars, that companies are managing. My mother, again, a 50-year school teacher who put money into her retirement for 50 years. It would benefit her, and it would benefit the other teachers and firefighters and police officers that represent diverse communities, to have people who are investing their money look like them as well, RITHOLTZ: Really interesting. So this is more than just a checkbox on any list. Companies are actually looking to expand their diversity and inclusion practices because they see a genuine benefit to both their decision-making process and their businesses. SHAW: I think that’s the obvious answer. And that’s why with AltFinance, you know, this is a long-term plan. We’ve got a 10-year commitment from our three initial partner firms. And so this is not about checking the box; this is about changing the paradigm for recruiting talent in this industry. RITHOLTZ: So this industry has been notoriously laggard when it comes to diversity. But there are lots of other industries, technology has been accused of having a diversity issue. Medicine, law, pretty much wherever you look, United States has its own history, with some of its dark pockets. What other sectors could benefit from an organization like AltFinance, or what else can we focus on? SHAW: Yeah. I think there are a number of sectors that could benefit from this strategy, even sectors like tech that have already developed some strategies. I think, again, we’re focused around education, exposure and experience, the three elements that are going in to preparing students for careers. This is not just about scholarships, right? You give a student a scholarship, but then you don’t really give them access to the people at your firm that are going to help that student not only get a job at that firm, but feel a sense of belonging, right, once they get to that firm, so that they maximize their individual output. That’s what you’re trying to go for. Right? I’ll tell you a story about a student. So we have a student in our program. And when you talk about counseling and coaching, it was a phenomenal story. A student, very bright student who had the ability to graduate in three years, and worked last summer at a fairly reputable consulting company. And I asked the student, I said, “Why are you in a hurry to graduate? You students got a pretty good scholarship package.” Student comes from a background where, you know, he’s having to support family still at home. I mean, you know, a tough situation, and he wanted to get out in the workplace where he can earn. I said, “Trust me, if you stay for your full four years, you’ll have the opportunity through this program, to get access to a career in alternatives. You had a great opportunity last summer. You’ll come out. You could make 2x, even 3x if you stay and pursue this opportunity in alternatives.” So the young man stayed, had multiple opportunities, selected one. But here’s the real power of the network. As he’s making his decision to which role he’s going to take and you know, at one of three mega funds, he calls up his mentor who is not at one of the firms that he has an offer from. And he says, “Well, what do you think I should do?” In the course of that conversation, not only does he get guidance from the mentor, the mentor connects him with another gentleman who used to work at one of the firms, in the same group that he was going to. Now, he has a decision that he’s made, that’s been informed by two people that he did not know a year ago. That’s the dinner table. RITHOLTZ: And we will take those conversations for granted if specially someone grown up in a New York area, where you know people who work in finance or people’s parents were in finance, that network just doesn’t develop elsewhere without focused exposure to it. SHAW: That’s right. RITHOLTZ: That’s really intriguing. So you’re at Bank of America a decade ago. You had some important teams you worked with, and you led some groups. How do you see Wall Street having changed over the past 10 or 20 years? Were the signs on the road that things were getting better? Were they ripe for moving in the right direction? Or is Wall Street just calcified and needed to really be shaken up? SHAW: Well, Barry, I think that question really highlights something that’s amazing to me. Number one, that I’ve been in this business, you know, a long time. RITHOLTZ: It goes by quick, doesn’t it? SHAW: It goes by very fast. And number two, how much things change, you know, in a fairly short amount of time. You know, when I started my career in finance, I was the only black person in my group, in my division. Okay. Another young woman came shortly after. We had a great relationship. In fact, she’s been a lifelong friend. And I, you know, was a mentor to her. And — RITHOLTZ: Was that something that was very consistent? You were the only black guy working at the other shops you worked at, or at least the only person in the department? SHAW: Well, for a couple of firms. I also did work at a minority-owned firm down in North Carolina, and it was refreshing. I mean, actually, you know, some of the brightest people that I ever worked with, and much of my investment philosophy and the thesis, the way I think about investing was developed there, amongst an incredibly diverse group of investors who had, you know, tremendous experience and success. RITHOLTZ: Really intriguing. So given that you were at some big firms early 2010s, you know, what was it that led Wall Street to finally being ripe to accept changes? SHAW: I think there is an inevitable pressure from society that helps drive change. And I think Wall Street, while we talk about it, in this compartmentalized concept of its Wall Street. It’s in New York. It’s, you know, the bull down on Wall Street, right? And it’s the movies that we see. In reality, the funds that Wall Street is managing, the capital that it’s managing is coming from all over the country. RITHOLTZ: Right. SHAW: It’s coming from people that look like me. It’s coming from people that look like you. It’s coming from people that look like our parents and our children. So at the end of the day, and I think we saw this in 2008, I think we saw it again during COVID, that at the end of the day, these companies are accountable to the people, right, and to the people that are their investors, their LPs, and entities that their LPs represent, and their clients. And so I think that what we’ve evolved into is a more human Wall Street that is more inclusive by nature. And I do believe that what we’re seeing now, right, we will continue to see because we’ll have people that come through AltFinance, but also people more senior that are at the table and helping make decisions on where and how we invest in people, and where and how we invest in companies. RITHOLTZ: So that leads me to a pretty straightforward question, which is, first, how do you measure your own success with AltFinance? And second, how to people like Oaktree, Apollo, and Ares, how did they ask you to track your progress? What metrics do they look at, to say, hey, we’re getting our money’s worth for standing up this company and giving them a decade long horizon? SHAW: So I’ll address the latter first, right. Number one, so I came in in September. We started our first cohort of our fellowship in January. We now have the second cohort. I’ve got 75 students from HBCUs that are now building relationships, getting education, getting exposure, and ultimately getting experience to the alternative investment industry. That is fascinating. We’ve got students in our program that have their first full time offer with alternative investment firms, that will graduate in 2023, in May. So we’re already in a few months really hitting the cover off the ball. That’s the quantitative element, right? Those are the KPIs up on the dashboard that are saying, you know, how many students are you getting to exposure to these jobs? How many students are getting these jobs? What I also measure and this is through the conversation with students, how many students are building confidence, skills, and relationships that will help improve their wealth and economic mobility as they grow? How many students are having a conversation around the learning session that we do on interest rates, and then calling mom or dad at home and saying, “You know what, you know, what’s the interest rate on your credit card? Did you refi your house? How should I think about my student loans?” Right. They are really taking an active position in the way that they think about their personal finance, but also the way they think about investing. And I hear those conversations and have those conversations with students almost on a daily basis, and that’s what fulfills me and lets me know we’re moving in the right direction. When I look down the road in 10 years, I believe that I will have hundreds of students that are actively working in alternative investments, but I’ll have thousands that are knowledgeable and have relationships with people in this business, and are better off for it. RITHOLTZ: So we’ve been talking a lot about alt investments. Are there parallel entities to AltFinance for traditional asset management, investing banking, stocks, bonds, IPOs, et cetera? It seems like there should be something similar to what you’re doing for that space as well, which arguably, is even bigger than AltFinance. SHAW: So I think there are some organizations that have, you know, been active and providing similar opportunities for students for traditional banking, right. I mean, when you think about what Reginald Lewis did, you know, almost 30 years ago, and breaking grounds for blacks in investment banking. I think that we’re doing some of that today in the alternative space. Remember, we had our first group of fellows. We had 33 fellows in our first cohort. RITHOLTZ: What year was that? SHAW: So this is January of 2022. This is just, you know, a few months ago, right? And I asked the students, all right, how many of you know Morgan Stanley, Goldman, Citigroup? Everybody raises their hand. They all know it. They see the commercials. They get the commercials on the Internet. I asked, how many of you know Ares, Apollo, or Oaktree? One student, so roughly 3%. These students are brilliant, all high performers, all strong academic performers. I mean, they will not fail to get a job. They could get a job doing anything. But they did not have the awareness of how the pathway to enter one of the most rewarding careers in investing. RITHOLTZ: Really? SHAW: And that’s a key. And so when I look at other industries, and what other organizations are doing, we are squarely focused on helping move the needle in the alternative investment space, places where people can help do deals, be long-term owners. It’s not about, you know, the transactional element of investment banking, right? Be an owner, a direct owner of a brand that you know, but you never knew who the holding company was. I have 75 students now that can answer that question of what’s the pathway. RITHOLTZ: How much larger can you expand this to be? SHAW: So Barry, we will expand the fellowship program ultimately to be round 100 or 120 students, and you know, each year, about 40 or so in each class. We are also partnering with the Wharton School of University of Pennsylvania to develop an institute, the Wharton AltFinance Institute, which will be an online community and platform providing, again, curriculum and content and community, as well as resources to help students at any HBCU gain access to again education, exposure, and opportunities for experience in the space. And so through the institute, we’ll be able to scale some of the best parts of our fellowship, which is a real high touch part of our programming. But we will scale that to the students that are at HBCUs that we don’t partner with directly. RITHOLTZ: Really, really quite fascinating. I know I only have you for a couple of minutes more. So before I let you go, I want to ask the standard questions that I ask all of my guests, starting with, what have you been streaming these days? What’s been keeping you entertained post lockdown? SHAW: Yeah. So Barry, I would say I tend to read a lot and follow a lot obviously in news channels on finance. On podcasts, I mean, I love Howard Marks, The Memo, and I read his memos that he puts out. But I love what he’s doing in the podcast format that he’s developed. But I listened to a lot of sports. I’m a huge Jalen & Jacoby fan. I love what those guys are doing in terms of sports and entertainment. And so, you know, probably not as heavy as some of the other answers you get. But I love sports talk radio. RITHOLTZ: That’s interesting. Tell us about some of your early mentors who helped shape your career. SHAW: So, you know, a couple of the mentors that I had, there was a woman named Stacy Gorin who hired me actually at IBM. And it’s amazing to think this is over 20 years ago. Stacy was a long-term executive at IBM and has now moved to a consulting firm. But what she really helped me focus on early in my career was continuous improvement, right. You think about it as an engineer a lot, right, kind of the Kaizen principle, right, that Toyota use. But personal improvement of yourself, right, how do you continue to develop as a person? If you’re strong technically, how do you develop into a person that people feel comfortable managing others, and feel comfortable being managed by. And so as I developed into an executive and then CEO, I always reflect on those lessons that she gave me early on, about being vulnerable, and being coachable, even being coached up, right. So having somebody that reports to you have the ability to coach you up on things where you can be more helpful for your organization. RITHOLTZ: You mentioned books and you like to do a lot of reading, tell us what some of your favorites are and what are you reading right now. SHAW: Yeah. So you know, a book that I go to often and I reread this probably once every couple of years is Peter Bernstein’s “Against the Gods.” RITHOLTZ: So good. SHAW: It’s fascinating to think about this concept of risk, and how it’s affected us since the very beginning of time, right. And then, really how we have taken risk from something that was deified, right, kind of this religious concept, and turned it into an economic tool that we can arbitrage for personal gain. Unbelievable, well written, I love the historical context and bringing into the future. And so that’s one that I go to often. I’ll tell you a book that I want to pick up and the title here is John Mack’s new book. And I thought it’s interesting because, you know, John is somebody that I don’t know, personally, but I’ve always respected kind of the way that he organized and ran businesses. And you know, it’s of note that he’s dealing — you know, I think has talked publicly about the aging process that he is going through himself. And I found that particularly endearing because it’s something that I’ve dealt within my family. And to recognize that, you know, in this business, we’re still human and we’re not excluded from the human process. And so that’s the book, John Mack’s new book is one that I certainly want to pick up. RITHOLTZ: “Up Close and All In: Life Lessons from a Wall Street Warrior” is that it? SHAW: That is it. That is it. RITHOLTZ: Yeah. That’s a hell of a title. SHAW: Hell of a guy. RITHOLTZ: This is kind of a funny question because I ask this to everybody, but essentially, I’m asking you a question which is what AltFinance does, but I’ll ask it anyway. What advice do you give to a recent college grad who was interested in the career in either investments or alternative finance? SHAW: So there are two things that I tell all of our students. Number one is bigger picture and probably pretty simple, you’ve got to have intellectual curiosity. You can never run out of questions. I mean, you run incredible podcasts. You can never run out of questions. You’ve always got to have something that you’re thinking about in terms of what’s the next layer. How can I think about in a different perspective? How can I put myself in somebody else’s shoes and think about it? And how does that change the value of what I’m looking at? Right? I think that’s critical to being successful as an investor. Number two is something that somebody shared with me and that’s actually John Rice who runs MLT and is a partner and a great friend, and really one of the great leaders in the D&I space. When you’re young and you’re bright, you’ve got to take risk early in your career. And in fact, not taking risk is actually the riskiest thing you can do. It’s a little bit of a parable, right? But — RITHOLTZ: When you’re young, you can recover from failure. You don’t have that same luxury when you’re older. SHAW: It’s so hard to appreciate that when you’re, you know, 20 or 21. When you’re — RITHOLTZ: You’re afraid of failure. SHAW: When you’re afraid of failure, when you should actually be seeking failure. Right? You should not be doing anything when you’re 22 or 20 or 21 that you can’t fail it. RITHOLTZ: Right. Playing it safe is risky. SHAW: It is risky. RITHOLTZ: That’s really interesting. And our final question, what do you know about the world of investing and AltFinance today you wish you knew 20 or so years ago when you were really exploring the field in its earliest days? SHAW: So the biggest thing I would say procedurally that I see in the investment hiring cycle is that you got to be ready for the gig before you get it, which means that the recruiting process for alternative investment, even if you’re going to investment banking as an analyst, it may start before you actually start that job. There may be people that are reaching out to you, trying to assess your interest, and what you’re going to do after banking. And that was, you know, I say, one of the secrets of the industry that, you know, I was well into my career before I knew that’s how people were getting recruited into the industry. And so you got to have your ear to the ground, right? You got to know who’s who, where the players are, who you should be expecting emails and calls from. And when you get those emails and calls, you got to be ready for it. RITHOLTZ: Really interesting answer. We have been speaking to Marcus Shaw, CEO of AltFinance. If you enjoy this conversation, well, be sure and check out any of the previous 400 or so we’ve done over the past eight and a half years. You can find those at iTunes, Spotify, YouTube, wherever you get your podcasts from. We love your comments, feedback and suggestions. Write to us at mibpodcast@bloomberg.net. Sign up for my daily reading list at ritholtz.com. Follow me on Twitter @ritholtz. I would be remiss if I did not thank the crack team that helps put this conversation together each week. Justin Milner is my audio engineer. Atika Valbrun is our project manager. Paris Wald is my producer. Sean Russo is my researcher. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio. END ~~~   The post Transcript: Marcus Shaw appeared first on The Big Picture......»»

Category: blogSource: THEBIGPICTURENov 22nd, 2022Related News

Which is Worse: Inflation or Unemployment?

  You may have missed this wonderful Josh Zumbrun column in the Wall Street Journal last week: “Inflation and Unemployment Both Make You Miserable, but Maybe Not Equally.” It’s one of those things that are so obvious no one ever stops to think about it – and so we have overlooked this for decades.1 Stop… Read More The post Which is Worse: Inflation or Unemployment? appeared first on The Big Picture.   You may have missed this wonderful Josh Zumbrun column in the Wall Street Journal last week: “Inflation and Unemployment Both Make You Miserable, but Maybe Not Equally.” It’s one of those things that are so obvious no one ever stops to think about it – and so we have overlooked this for decades.1 Stop for a moment and consider the original Misery Index formula as invented by the economist Arthur Okun: add the 3.7% unemployment rate (BLS NFP) to the 7.7% inflation rate as measured by the consumer price index (BLS CPI). The total is 11.4%, which as you can see on the chart above, is pretty high. Or is it? Should it be? The Misery index dates to the 1970s, which was a period of high inflation AND high unemployment. And it was a miserable economic time, with both of these elevated measures together creating a period of unhappy people that the Misery index neatly captured. People were miserable, so directionally, the index was correct. But what about amplitude? As Zunbrun observes, “The Misery Index, as commonly constructed, doesn’t adequately capture how overall economic conditions affect attitudes.” We have previously been asking an abstract question: Which is worse, higher inflation, or higher unemployment? The two components of the Misery Index were treated equally, but we should be asking: Should they be? It turns out we never really considered this question. Today, with only one of these two measures elevated, we should. Forget the academic abstract query, and instead ask a person individually which set of circumstances they would prefer: Do you want to pay more for goods and services or would they prefer to be unemployed? Interesting question about the components of the Misery Index: Inflation + Unemployment Which would you prefer? — Barry Ritholtz (@ritholtz) November 21, 2022 I had never considered this until now, but once you do, the answer is terribly obvious: Of course people don’t want to lose their main source of income. However you may describe Inflation, it sucks: A loss of buying power, a tax on consumers, a decrease in the value of savings, and a drag on GDP. These are all annoyances of greater or lesser proportion to various people. But now consider the other half of the index: What happens when you are unemployed? It’s a horrific experience, that crushes a family’s budget, gets people evicted, makes people reconsider their own career choices, and second-guess their worth; it can even lead to crime. Zunbrun cites University of Warwick professor Andrew Oswald’s 2001 paper surveying 300,000 people living in the US. Oswald discovered: “A 1-percentage-point increase in the unemployment rate had an equivalent impact on happiness as a 1.97-point increase in the inflation rate. Mr. Oswald said that if he were to construct a Misery Index, he would make a simple modification: Multiply the unemployment rate by two and add it to the inflation rate.” (Emphasis added). Two for one is a huge adjustment. Professor Danny Blanchflower (a friend and occasional fishing buddy) looked at this question in 2013-14; what they discovered was closer to 5-to-1 difference: “We find, conventionally, that both higher unemployment and higher inflation lower well-being. We also discover that unemployment depresses well- being more than inflation. We characterize this well-being trade-off between unemployment and inflation using what we describe as the misery ratio. Our estimates with European data imply that a 1 percentage point increase in the unemployment rate lowers well-being by more than five times as much as a 1 percentage point increase in the inflation rate. (Emphasis added) That is an even bigger difference than the original Misery Index or professor Oswald’s survey found. The ramifications of the Misery index being accurate directionally but inaccurate amplitude-wise showed up in the recent elections. As I noted the day after the midterms: Inflation? Less Important: The rise of inflation as issue #1 in surveys? The election results strongly suggest that this was incorrect. Inflation matters but so too does the overall economy — the unemployment rate, wage gains, and fiscal stimulus during the pandemic. In other words, it’s complicated and nuanced, something surveys manage poorly.” The Misery Index is a perfect example of one of those things we take for granted – we too often just assume something is correct; we fail to consider the details closely. It is a timely reminder about easy it is to be wrong about broad topics or fool ourselves via motivated reasoning. Always return to first principles…     UPDATE: November 21 2022 Here is what it looks like if we play around with the ratios, both 2-to-1 and 5-to-1; click ratios for FRED charts; click images below for larger charts 2 to 1 Unemployment to Inflation (Oswald)   5-to-1 Unemployment to Inflation (Blanchflower) charts by Invictus         See also: The Happiness Trade-Off between Unemployment and Inflation (JSTOR, Vol. 46, October 2014) Economic Discomfort and Consumer Sentiment (SSRN Apr 2000)     Previously: When Narratives Collapse (November 18, 2022) Unconventional Wisdom (November 9, 2022) What’s Driving Inflation: Labor or Capital? (November 7, 2022) Behind the Curve, Part V (November 3, 2022) When Your Only Tool is a Hammer (November 1, 2022) Who Is to Blame for Inflation, 1-15 (June 28, 2022)   Source: Inflation and Unemployment Both Make You Miserable, but Maybe Not Equally By Josh Zumbrun WSJ, November 18, 2022 ___________ 1. Like the arrow in the FedEx logo – but once you have it pointed out, you can never unsee it.   The post Which is Worse: Inflation or Unemployment? appeared first on The Big Picture......»»

Category: blogSource: THEBIGPICTURENov 21st, 2022Related News

When Narratives Collapse

  Every now and again, we reach a moment in time when the scales fall from our eyes, and reality is revealed to us. We are now at one of those moments when the stories we tell ourselves have fallen apart. The dominant narratives are failing. Not their irresistible appeal to our deep lizard brains,… Read More The post When Narratives Collapse appeared first on The Big Picture.   Every now and again, we reach a moment in time when the scales fall from our eyes, and reality is revealed to us. We are now at one of those moments when the stories we tell ourselves have fallen apart. The dominant narratives are failing. Not their irresistible appeal to our deep lizard brains, but rather, their ability to lead us by telling a compelling story. Longtime readers know this is a favorite issue of mine.1 The written word, barely a few millennia old, mattered very little for most of human history. But for the past century, the vast majority of people were illiterate; even today, a shocking percentage are innumerate. And so we developed story-telling to share information amongst ourselves, to pass down through the generations: When certain animals were around for the hunt; what poisonous snakes to avoid and mushrooms not to eat; when to plant crops, the changing of seasons, how to avoid dangerous weather, and more. Good narratives kept you alive, and good stories were easy to remember and share. During most of human history, the stories we told ourselves were less important than the survival information they contained. Today, it is the narratives that compel people to action, rather than the importance of which deadly toxin they should avoid. I started creating a list of the narratives which have fallen apart this year; I had to confine myself to 10 from 2022, otherwise, the list would have become too long and unwieldy to manage. I don’t believe I need to expound on each of these 10 bullet points. I am confident that you, dear reader, understand what the prior dominant narrative was for each, why those fables failed, and the subsequent chaos that those failures created. 2022 Narrative #Fails The Billionaire Genius SBF, FTX & Alameda Research Tech Dominance & the New Economy The Fed Put 60/40 is dead DeFi Will Replace Regulations Russian Military Might A Red Wave is Coming The Inevitable Triumph of Trump/MAGA How About Those Mets? Following each of these failures will be a new dominant narrative, many of which will subsequently be revealed as failing, too. Multiple lists of 10 could be easily created. As to my 10, you can quibble around the edges for any of them. Each of these was a dominant market/media/populace belief for a substantial measure of time before the story was revealed as flawed. Time and again, reality intrudes to collapse these narratives. As the Truth is revealed, there are only so many falsehoods we can cling to rather than embrace reality as it is. We must revel in these moments when they occur, for they are infrequent and all too brief; soon after, they will be lost to our memories, which tend to fail us soon after. Once the crisis passes, we return to our previously false source of comfort. Perhaps some of these might rise again; many of their adherents have the red-hot belief of zealotry, whether it’s politics or assets or sports. Remember, the word “Fan” is an abbreviated version of the word “Fanatic.” Reality – aka The Truth – frequently puts us back on our heels. This is especially true when reality conflicts with our cozy narratives. The comforting lies we tell ourselves can only last so long in the face of overwhelming evidence to the contrary. The P&L does not lie…     See also: The Glamour Of Sam Bankman-Fried Joshua (Reformed Broker, November 16, 2022) Why the Investing Pros Were Such Suckers for FTX (WSJ, November 18, 2022)     Previously: Six Degrees of Separation (November 14, 2022) Unconventional Wisdom (November 9, 2022) Misunderstanding Narratives: The Hero’s Journey (September 22, 2021) Once Again, The Narrative Fails (March 19, 2014) The Narrative Fails (July 19, 2013) The Dangers of Non-Modeled Narrative Story Tellers (December 3, 2012) Narratives       ___________ 1. “Narrative” as an evolutionary development is one of my personal narratives.   The post When Narratives Collapse appeared first on The Big Picture......»»

Category: blogSource: THEBIGPICTURENov 21st, 2022Related News

MiB: Marcus Shaw, CEO of AltFinance

   This week, we speak with Marcus Shaw, the chief executive officer and president of AltFinance, a $90 million initiative to encourage students at historically Black colleges and universities to pursue careers in the alternative investment industry. Prior to joining AltFinance, Shaw founded Montgomery TechLab, an organization to support inclusive economic growth in Montgomery, Alabama,… Read More The post MiB: Marcus Shaw, CEO of AltFinance appeared first on The Big Picture.    This week, we speak with Marcus Shaw, the chief executive officer and president of AltFinance, a $90 million initiative to encourage students at historically Black colleges and universities to pursue careers in the alternative investment industry. Prior to joining AltFinance, Shaw founded Montgomery TechLab, an organization to support inclusive economic growth in Montgomery, Alabama, and was CEO of The Company Lab (CO.LAB) in Chattanooga, Tennessee; he has also spent more than a decade working in equity research and investment management. He received an MBA from Duke University’s Fuqua School of Business. We discuss how the firm was stood up by Tony Ressler of Aries, Howard Marks of OakTree, and Mark Rowan of Apollo – legendary investors who were seeking to access a deep talent pool that Wall Street had been ignoring for decades. He explains that AltFinance is an apprenticed-model business. He looks for students that are “coachable” — people who are willing to work through the apprenticeship structure, with an interest in investing,  intellectual horsepower, and the ability to listen and be coached up. He also explains why he looks for students with rigorous coursework even outside of business and finance, as well as interest in extracurricular work. Shaw tells the story of his college football career. On a bet, he kicked a field goal from the 50-yard line on the campus field — “its all geometry!” — which was witnessed by an assistant coach. He became a walk-on placekicker for the Morehouse College football team. A list of his favorite books is here; A transcript of our conversation is available here Tuesday. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.       Marcus Shaw’s Favorite Books Against the Gods: The Remarkable Story of Risk by Peter Bernstein   Up Close and All In: Life Lessons from a Wall Street Warrior by John Mack   The post MiB: Marcus Shaw, CEO of AltFinance appeared first on The Big Picture......»»

Category: blogSource: THEBIGPICTURENov 21st, 2022Related News

Climate Trace: Tracking Emissions

  A comprehensive look at CO2 emissions around the world and their specific sources: “Today, the Climate TRACE coalition released the most detailed facility-level global inventory of greenhouse gas (GHG) emissions to date, including emissions data for 72,612 individual sources worldwide. The 70,000+ individual sites — including specific power plants, steel mills, urban road networks,… Read More The post Climate Trace: Tracking Emissions appeared first on The Big Picture.   A comprehensive look at CO2 emissions around the world and their specific sources: “Today, the Climate TRACE coalition released the most detailed facility-level global inventory of greenhouse gas (GHG) emissions to date, including emissions data for 72,612 individual sources worldwide. The 70,000+ individual sites — including specific power plants, steel mills, urban road networks, and oil and gas fields — represent the top known sources of emissions in the power sector, oil and gas production and refining, shipping, aviation, mining, waste, agriculture, road transportation, and the production of steel, cement, and aluminum.” If this is the sort of data dive that interests you, it’s a rabbit hole you can get lost in. —Half of the 50 largest sources of emissions are oil and gas production fields and their associated facilities.  —The top 500 sources represent less than 1% of the total Climate TRACE inventory but account for 14% of global emissions for 2021 – more than the annual emissions of the United States. —Globally, emissions from oil and gas production are significantly underreported, with Climate TRACE data showing that of the countries required to report regularly to the UNFCCC, emissions are as much as three times higher.  —Climate TRACE’s comprehensive country-by-country data — now updated to include 2021 annual information — provides timely emissions inventories for every party to the Paris Agreement. The post Climate Trace: Tracking Emissions appeared first on The Big Picture......»»

Category: blogSource: THEBIGPICTURENov 21st, 2022Related News

Supply Chain Is 40% of Inflation

  There is a new 60/40 in town, and it is the contribution to inflation from consumer demand for goods and the pandemic-broken supply chain. That is according to a study by Julian di Giovanni, who publishes at the NY Fed’s blog Liberty Street Economics. Over the summer, he posed a fascinating question: How Much Did… Read More The post Supply Chain Is 40% of Inflation appeared first on The Big Picture.   There is a new 60/40 in town, and it is the contribution to inflation from consumer demand for goods and the pandemic-broken supply chain. That is according to a study by Julian di Giovanni, who publishes at the NY Fed’s blog Liberty Street Economics. Over the summer, he posed a fascinating question: How Much Did Supply Constraints Boost U.S. Inflation? Short answer: 40%. The longer answer is based on detailed research out of the FRBNY, ECB, and Harvard. Most observers of the economy assumed the answer to his question was “some amount,” but I believe di Giovanni and his co-authors are the first to quantify it: “Our analysis of the relative importance of supply-side versus demand-side factors finds 60 percent of U.S. inflation over the 2019-21 period was due to the jump in demand for goods while 40 percent owed to supply-side issues that magnified the impact of this higher demand.” This raises the obvious question as to what increasing FOMC rates are going to do to fix the 40% that is supply-chain-related problems. The honest answer: “Nothing, we are aiming at the 60% that is the goods demand side.” My job is not to give policy advice to the Fed, but to interpret what they are doing and its most likely impact on our portfolios. To paraphrase Ray Dalio, it is the role of the investor to see embrace reality and deal with it as it is. Still, I cannot help but observe that the FOMC response to pandemic-induced inflation is blunt, excessive and unnecessarily painful to the middle and lower economic earners. The Fed could learn from the Hippocratic oath: “First, do no harm.” They did harm by remaining on emergency footing of zero for way too long, and then missing the initial rise of inflation straight through their 2% target. Now, they are massively overcompensating by chocking off the economy to the point of recession. Jerome Powell and the FOMC should ask themselves three questions: 1. How much of the supply chain issues are resolving by itself organically? 2. How much of the demand side is reverting back to prior balance between goods and services? 3. How much is the FOMC itself causing OER to rise by making housing purchases unaffordable? Bloodletting, leeches, trepanation, and even Mercury were forms of “medicine” used by doctors who had little idea as to how the human body worked and did not know what was actually wrong with patients, but “did harm” anyway. The Fed should learn from those ancient medical mistakes. Rant over.     See also: Glenn Hubbard: Post-pandemic fiscal spending bears much of the blame for US inflation (FT, November 14, 2022) Challenges for monetary policy in a rapidly changing world (ECB Forum, June 2022) How Much Did Supply Constraints Boost U.S. Inflation? (Liberty Street Economics, August 24, 2022)   Previously: What’s Driving Inflation: Labor or Capital? (November 7, 2022) Behind the Curve, Part V (November 3, 2022) When Your Only Tool is a Hammer (November 1, 2022) How the Fed Causes (Model) Inflation (October 25, 2022) Why Is the Fed Always Late to the Party? (October 7, 2022) Who Is to Blame for Inflation, 1-15 (June 28, 2022)   The post Supply Chain Is 40% of Inflation appeared first on The Big Picture......»»

Category: blogSource: THEBIGPICTURENov 17th, 2022Related News

Light Posting Due to C19…

So, the whole house is down with Covid. I had some minor symptoms I assumed were vaccine side effects, but I kept testing negative. By the time I tested positive it was way too late for Paxlovid. I isolated to keep everyone else safe. Too late! Mrs. Big Picture went from no symptoms to full-on… Read More The post Light Posting Due to C19… appeared first on The Big Picture. So, the whole house is down with Covid. I had some minor symptoms I assumed were vaccine side effects, but I kept testing negative. By the time I tested positive it was way too late for Paxlovid. I isolated to keep everyone else safe. Too late! Mrs. Big Picture went from no symptoms to full-on flu 2 days after me. Paxlovid helped her dramatically — she went from worse than me to much better in 24 hours. I initially blamed the Bivalent booster vaxx last Tuesday as causing symptoms that night; but it was full-on flu by Wednesday, and that was my first positive test. Thursday was the worst of it, and by Friday I felt much better — maybe 80%. More improvements over the weekend (no fever), but it is that last 10% which has been slow in coming. I lost my voice, a few coughs and sneezes here and there — a little brain fog and fatigue late afternoon — but that seems to be it. I missed 2 podcast recordings and a client I was super excited to meet! Meetings with the Futureproof team and a big RWM announcement tomorrow I may miss as well (I keep testing positive and it’s only day 8). Just waiting to stop testing positive. I am glad we are both fully vaxxed and boosted — this would really be no fun without that. Imagine, some people voluntarily eschew the miracle that is vaccines. . . .     The post Light Posting Due to C19… appeared first on The Big Picture......»»

Category: blogSource: THEBIGPICTURENov 16th, 2022Related News