Russell, thanks so much for joining us again on the program. Last time we had you on was back in May of last year. At that time, you told us that it was likely that there would be continued weakness in the Treasury bond market because, for the first time in many, many years, private savers had to finance what had become a situation of central banks being net sellers of Treasuries.
And, needless to see, we did see a big move up in Treasury yields since then, all the way up to 3.25%. Now it’s started to turn around. And I remember you also cautioned us – you said a lot of people really were convinced of an inflation prognosis. You said you thought that was not going to last.
So, as I see bond yields turning around, does that mean that the market is catching up with your expectation that deflation rather than inflation would rule the day? And where do you see Treasury yields going from here?
Erik: Joining me next on the program is Charlie McElligott, the man who both called the Christmas massacre event and was very outspoken in telling people that his CTA model was expecting a dramatic increase in the pace of selling if certain levels were hit, which they were. And, then right afterwards, called for there to be a relief rally, which is exactly what’s happened.
So, Charlie, congratulations. You are knocking it out of the park with the calls you’ve been making lately.
I want to start with China, because that’s what’s on everybody’s mind with the trade talks and so forth. Give us an update.
And also, we do have a chart deck from you. Listeners, you’ll find the download link in your Research Roundup email – or next to Charlie’s picture on our home page if you’re not yet registered.
Why don’t we jump into your chart book and talk about China? What is driving the situation, and how China is going to play into market action as this whole trade talk thing gets resolved in the next several weeks or months?
Chris, thanks so much for joining us on the program. Listeners, I really want to encourage you to listen to Chris’s interview from January 2018 on the alchemy of risk because we’re going to be assuming your knowledge of the short-vol trade, both implicit and explicit, as was described in great detail in that interview. You’ll find the link to play that interview in your Research Roundup email or on our home page next to Chris’s picture at macrovoices.com.
Chris, welcome back. When we had you on before, you explained the short-vol trade and where the risks were in both the explicit and implicit short-vol trade. That was before the February event.
So why don’t we start with what happened in February? What broke and what didn’t break? And, perhaps, if it’s applicable, what is still left that might break in the future?
Erik: Joining me next on the program is natural resource guru, Marin Katusa. Now, as many of you know Marin was our most requested guest speaker for MacroVoices Live. Unfortunately, we couldn’t get him on the schedule because Marin is one of the sponsors of the Vancouver Resource Investment Conference (which starts the very next day) and has a lot of responsibilities. The tradeoff was we were able to get him on the show a couple of weeks ahead of time.
So, Marin, thanks so much for taking time out of your busy schedule to join us on the program today.
Marin: It’s a pleasure, Erik, always a pleasure.
Erik: The first time that I interviewed you on this program, you described an opportunity to buy Nevsun on speculation because you thought it was a takeover target. And you became something of a rock star in the eyes of many of our listeners because that stock just shot up like 50% two days after your interview.
I want to start with your overall view of the market, because you take a different approach than other people. You apply systems analysis to financial markets. What specifically do you mean by systems or system thinking? And how does that play into the way that you approach markets generally?
Daniel: Thanks, Erik. Basically, the majority of us are trained, when we go through university or even in a lot of the more conventional and institutional sort of career paths of fields of study, especially economics and finance, to think effectively in quite a linear, reductionist-type mechanical sort of manner.
When we talk about a systems view of the world, what it is doing is shifting our view of the world from the world operating as a machine towards the world operating as a living ecological-style adaptive system. So it’s drawing on a lot of lessons from complex adaptive system theory and trying to better understand the interconnectedness, how everything fits together, and the knock-on effects, the relationships – the adaptive nature of all of these relationships and things and how it all transitions.
Instead of looking at, for example, a subsystem or a company or – in this case we’re going to be talking a little bit about banks. Instead of looking at a bank in isolation through a reductionist mechanical view of the world, where we’re trained to basically look at capital adequacy ratios and all of this sort of thing, at the bank in isolation.