GUY WAS JUST SAYING YOU RODE SHORT STOCK AND BONDS TO
ENORMOUS SUCCESS. EASILY ONE OF THE TOP HEDGE
FUNDS LAST YEAR. SO WHAT NOW, DO YOU STAY SHORT?
>> UNTIL THE MARKET TELLS ME OTHERWISE.
UNTIL MARKETS STOP BEING ON A 45 DEGREE ANGLE TO THE DOWNSIDE
THE PRICE ACTION IS THE BIBLE. WE ARE IN A MAJOR BEAR MARKET.
I THINK INVESTORS FAIL TO REALLY SEE THE FOREST THROUGH
THE TREES AND THAT EVERYTHING, ALL ASSET PRICES GO DOWN.
STOCKS, BONDS, A CRYPTOCURRENCIES WHATEVER YOU
WANT TO GIVEN THE CHANGE IN THE POSTURE TOWARDS LIQUIDITY FROM
THE LIQUIDITY INFUSION POSTURE WHICH THEY HAD BEEN IN FOR THE
PAST DOZENS YEARS IN RESPONSE OF THE GLOBAL FINANCIAL CRISIS
AND TO THE COVID PANDEMIC, THAT HAS CHANGED 180 DEGREES FOR
LIQUIDITY EXTRACTION POSTURE. DANI: TO PLAY DEVIL'S ADVOCATE
BECAUSE GUY, ALIX AND I SPEAK TO PEOPLE WHO SAY THE FED IS
ABOUT TO PAUSE IF NOT PIVOT. THE ECONOMY IS WORSENING.
INFLATION HAS PEAKED. SO THE WORST IS OVER IN THE
MARKET WILL IMPROVE. WHAT ARE THEY GETTING WRONG?
NEAL: I DON'T KNOW IF THEY ARE GETTING ANYTHING WRONG.
I'M NOT IN THE PRODUCTION BUSINESS OR THE GETTING IT
RIGHT BUSINESS. I'M IN THE MONEYMAKING BUSINESS.
THE MARKET IS GOING DOWN AND IF THINGS CHANGE, I'M GET A CHANGE.
BUT RIGHT NOW I THINK THE BIG STORY IS CENTRAL BANK LIQUIDITY
CLOSED BECOMING A HEADWIND AGAINST ASSET PRICES WHERE'S
THEY WERE, SO I CAN PREDICT THAT IS GOING.
JAY POWELL DOESN'T EVEN KNOW. SO I THINK IT'S A FUTILE
EXERCISE TRYING TO PREDICT THAT. I'M JUST TRYING TO MAKE MONEY.
THAT'S WHAT I'M TASKED WITH ON BEHALF OF INVESTORS.
>> I PROMISE I WOULD NEVER TRY TO PREDICT THAT MYSELF.
SO WHEN DO YOU KNOW THE WORST IS OVER?
WHEN YOU ABANDON SHORTS.
>> I THINK I HAVE TO LOOK AT MIKE AT PRICE ACTION.
IT'S NOT SOMETHING THAT WILL HAPPEN ON THE INDIVIDUAL DAY OR
MONTH, WHEN YOU SEE TIME WHEN MARKETS CEASE TO BE ON A 45
DEGREE ANGLE TO THE DOWNSIDE WITH STOCKS, BONDS, WHATEVER HE
WANTED TURN TO. AND THINGS GO TO A SIDEWAYS
PATTERN OR TOWARDS AN UPWARDS PATTERN IN THE RETURN OF MONTHS
OF DAYS OR WEEKS. AS THAT CHANGES MY POSTURAL
CHANGES. THE MARKET IS DONE NOTHING
RIGHT SO TO SPEAK AND DONE NOTHING TO NEGATE THAT
CONTINUED DOWNWARD MOVE. I THINK INVESTORS HAVE TO
RECOGNIZE WE ARE IN THE MIDST OF A MAJOR BEAR MARKET IN ALL
ASSET CLASSES. UNTIL THAT CHANGES I WILL PLAY
IT THAT WAY. I PERSONALLY DON'T GET INVOLVED
IN SHORTING INDIVIDUAL NAMES. I PLAY MORE IN THE INDICES, SO
I HAPPEN TO BE SHORT S&P FUTURES, EURO STOCKS, BONDS, 10
YEAR NOTES.
RECENTLY STARTED PUTTING ON SHORTS IN JAPAN IN RESPONSE TO
THE BANK OF JAPAN BLINKING WITH THEIR ALLOWING THE CEILING OF
JT B'S ARISE WHICH I THINK WILL CONTINUE.
SO I'M SURE THAT PRETTY MUCH EXPRESSES WHAT I NEED TO
EXPRESS IN THE MARKET AND I DON'T NEED TO GET MORE FANCY
THAN THAT.
>> YOU ALSO RUN A FUND AND A LOT OF HEDGE FUND MANAGERS ARE
INVOLVED WITH PRIVATE CAPITAL. THEY HAVE PRIVATE ELEMENTS IN
THEIR PORTFOLIOS. YOU ARE VERY MUCH FOCUSED ON
THE LIQUIDITY SIDE. WE ARE SEEING WITHDRAWALS OF
LIQUIDITY, I'M WONDERING WHERE YOU MOST THINK THE RISK LIES
SURROUNDING THE LIQUIDITY WITHDRAWAL.
IS IT PUBLIC OR PRIVATE MARKETS? >> THE NICE THING ABOUT PRIVATE
MARKETS IS YOU NEVER KNOW HOW MUCH YOU ARE LOSING.
ALTHOUGH EVERY DAY IT IS SWINGING YOU DON'T SEE THOSE
LOSSES AS YOU DO IN THE PUBLIC MARKETS AS YOU SEE THE STOCK
MARKET MOVE UP AND DOWN DAILY. BUT NONETHELESS PRIVATE EQUITY
BY DEFINITION HAS THE WORD EQUITY IN IT.
SO PRIVATE EQUITY IS LIQUID.
BUT I SEE THEM BOTH SUFFERING SLOWLY AS LIQUIDITY FLOWS OUT.
>> TO THAT POINT YOU SAID FOLKS MIGHT BE TOO OPTIMISTIC ABOUT
WHERE THAT STOCK MARKET GOES, THAT THEY DON'T REALIZE AND
BOND MARKET FOR THAT MATTER WE ARE IN THE MIDST OF A MAJOR
BOND MARKET. DO THINK FOLKS ARE TOO
OPTIMISTIC ABOUT PRIVATE EQUITY GIVEN THE FACT IT'S NOT MARKET
TO MARKET.
>> I THINK THAT THERE'S NOTHING MAGICAL ABOUT PRIVATE EQUITY.
THERE IS A THOUGHT THAT THERE IS A LIQUIDITY PREMIUM FOR
INVESTING IN MORE ILLIQUID ASSETS BECAUSE NOT EVERYBODY
CAN DO THAT. BUT THERE'S TRILLIONS OF
DOLLARS IN EQUITY FUNDS. THE TAP THAT MARKET.
SO THE WESLEY PRIVATE EQUITY AND NONMARKET -- MARKABLE
SECURITIES IS VERY SIMILAR TO THE WAY I SEE PUBLIC EQUITIES.
I LIKE TO SAY YOU NEVER KNOW HOW MUCH YOU ARE LOSING.
>> IGNORANCE IS BLISS PERHAPS. SO YOU MENTIONED YOU PUT ON
POSITIONS AROUND THE BANK OF JAPAN, A SHORT JGB'S COME ALONG
YEN. WE TALKED ABOUT THIS ALL DAY
THE FACT NEGATIVE YIELD IN DEBT NOMINALLY WENT FROM 18 TRILLION
TO NOW ZERO. NOW THE JAPANESE DEBT IS NO
LONGER GIVING YOU A NEGATIVE YIELD.
BESIDE THE JAPANESE MARKET ITSELF HOW BIG OF A CHANGE IS
THIS YOU HAVE THE BOJ DO SOMETHING THAT LOOKS LIKE THE
BEGINNING STAGES OF TIGHTENING.
>> THE BOJ IS FOLLOWING ALONG WITH THE REST OF THE WORLD, THE
REASON WHY IT'S A BIG DEAL IS THE YEN CARRY TRADE IS SUCH A
HUGE TRADE IN THE MARKET AND ITS ULTIMATE UNWIND AND IT
WON'T HAPPEN IMMEDIATELY. IT WILL BE GRADUAL OVER TIME.
THE UNWIND HAS MASSIVE IMPLICATIONS FOR GLOBAL BOND
MARKETS AND EVEN ITS NEGATIVES IN THE JAPANESE STOCK MARKET
WHICH WOULD BE NEGATIVE TO OTHER MARKETS.
AND IT'S POSITIVE FOR THE YEN. THE CENTRAL BANK OF JAPAN WILL
MOVE GRADUALLY AND PROBABLY RAISE THIS TO 75 BASIS POINTS.
BUT AS JAPANESE RATES START TO BECOME MORE CONSISTENT WITH
OTHER INTEREST RATES, THAT CARRY TRADE WILL CONTINUE TO
UNWIND.
IT WILL BE BORROWING IN A LOWER YIELDING COUNTRY AND INVESTING
IN HIGHER-YIELDING COUNTRY, SO THAT UNWIND IS VERY SIGNIFICANT.
>> TO CONCLUDE AND IT KIND OF GOES TO THE CONVERSATION WE'VE
BEEN HAVING. 2023, WHAT IS IT LOOK LIKE FOR
MICROMANAGERS? 2022 WE'VE SEEN BIG NAMES DO
WELL. IT'S 2023 CAN LOOK THE SAME.
>> GUILTY UNTIL PROVEN INNOCENT. INNOCENT UNTIL PROVEN GUILTY.
THERE'S NO REASON TO EXPECT THOSE WILL CHANGE.
MACRO INVESTING IN MACRO TRADING IS VERY ENVIRONMENT
INDEPENDENT. YOU GET A FEW YEARS AND TIME
WHERE MARKETS ARE ON THE MOVE WE ARE IN THE MIDST OF THAT NOW.
I SEE THE ENVIRONMENT AS BEING FERTILE FOR 2023 AND POSSIBLY
BEYOND UNTIL THE MARKETS ADDRESS OTHERWISE.