Erik: We also spoke specifically about the European banking system, you observed that Spanish banks were at all-time lows back in September and nobody was talking about it except for you perhaps. We were looking at negative rates still at that time and of course you pointed out that Deutsche Bank's derivatives book was just out of control. So any update in terms of what you see there of course the negative rates have eased off so maybe that's not going to last. But how do you see the rest of the picture developing?

Raoul: Some of the Spanish banks still keep falling, nothing has been resolved there, there’s no news flow, there's nothing positive, the increase in bond yields takes the pressure off a little bit, it's not necessarily negative rates in places like Spain or Italy because they didn't really see them it's just the insolvency of the banking system overall. The positive yield curve has helped, I think the very flat yield curve was more of a problem but the steeper yield curve has helped take a little bit of the pressure off.

But my question always is, is how the hell do these guys get through the next recession? In good times with reasonable economic growth it's OK but if you have a recession then who's going to get wiped out in this? It's almost everybody so it seems and that's what I can't get my head around people ignore that because everyone is so quick to take a snapshot of here or now, you know the economy is growing or whatever it's OK therefore the banks are OK. We have to live in the future as investors and particular in the macro world is, OK what happens in a recession? What are the dominoes that fall over and how does that affect everything else?

Erik: One of the risk factors that we discussed last time was this crazy VIX contango trade where basically people are shorting VIX futures because each time they roll that contract forward they capture the contango by being short and they see it as a way to produce income. Of course you know that's not just picking up nickels in front of a steamroller, that's pennies being pried out from under the steamroller and so far a big downdraft in equity prices has not happened which was the big risk that you saw there. You described how if there was a sudden downward move in equity prices it could really blow up in these guys' faces. Is that risk still in the system, is that trade still on or have people wised up and gotten out of it?

Raoul: No that trade still goes on to this day and it reminds me a lot of the portfolio insurance stuff around 1987 or some of the kind of spread trade Low Vol trades that happens around 1998 people go over their ski tips with this stuff. They think it's all manageable and they think that OK we can sell VIX and if we lose money on that, we'll use this as an opportunity to buy stock because we've been taking in premiums but they don't realize the rate of change of the VIX can be so extraordinary that the losses can mount up massively and super quickly.

So I worry about that position. I worry about a whole world that sets up for low volatility when you've got a new administration that is almost unquantifiable. We don't know what kind of volatility should be under an administration like this but a relatively aggressive administration should create more volatility overall so at which case the generalized level of volatility should rise.