The Compound and Friends - Why Initial Jobless Claims Could Blow Up the Stock Market

Episode Date: May 30, 2025

On episode 194 of The Compound and Friends, ⁠⁠Michael Batnick⁠⁠ and ⁠⁠Downtown Josh Brown⁠⁠ are joined by Jens Nordvig, Founder and CEO of Exante Data to discuss: the latest on tariffs, the significance of jobless claims, the dollar's reserve currency status, the collapse in foreign tourism, and much more! This episode is sponsored by Public. Discover why NerdWallet gave Public five stars for its ease-of-use
and investment selection by visiting: http://public.com/compound Sign up for The Compound Newsletter and never miss out: ⁠⁠thecompoundnews.com/subscribe⁠⁠ Instagram: ⁠⁠instagram.com/thecompoundnews⁠⁠ Twitter: ⁠⁠twitter.com/thecompoundnews⁠⁠ LinkedIn: ⁠⁠linkedin.com/company/the-compound-media/⁠⁠ TikTok: ⁠⁠tiktok.com/@thecompoundnews⁠⁠ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of ⁠⁠Ritholtz Wealth Management⁠⁠, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here ⁠⁠https://ritholtzwealth.com/advertising-disclaimers⁠⁠. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: ⁠⁠https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

What's the dog's name? Rue. Rue. Is that short for roulette? Sure. I hate roulette. Is that short for Rubenstein? What's the name?

Where did the name come from? Somebody said, hey, what about Rue? I said, yeah, I like that name. Really? We couldn't think of a name. I could have helped you with that. I'm sure you could have. Rue is not bad.

Does the dog respond? Yeah. All right. Your dog guy? Cat? My daughter is begging for a dog. You're going to have to give in. 24-7, yeah. You're going to have to give in.

How old? She's eight, yeah. Yeah, it's time. You're going to lose. Do it. I saw, you know whose dog I love? Justin and Robin's. What do they have?

It's a Burmese Mountain dog mixed with a poodle. Oh, those are great dogs. Burma Doodle? Yeah, that's a nice dog. Burnadoodle. Burnadoodle. Oh, those are great dogs. Burma Doodle.

Yeah, that's a nice dog. Burnadoodle. Burnadoodle. Adorable. It looks like a stuffed animal. Yeah. It's one of the cutest dogs I've ever seen. Baxter's.

That's a good name, right? Oh, that's uh, that's Ron Burgundy's dog. Oh, really? Yeah. You think they did that on purpose? Of course. Okay. I don't believe in coincidences.

All right. So yes, Michael got dressed up for this. That is his best Nick's outfit. So... Well, I was trying to think what Nick's gear have had good outcomes this year. I wore this to Memphis when OG had a game-winning shot. I sure wore my Nick's hat then. Next time.

Next time. You a basketball fan? It's nice to see them, I have to say. That's a good venue. Next time. Next time. You a basketball fan? It's nice to see them I have to say. Yeah. That's a good venue. Great venue. So what else is going on? There's a little bit going on in the market every day. It was pretty busy on our client chat last night I can tell you that. Oh yeah? What was your? I think I got. Wow what happened? I think I got a hundred questions maybe. What was like, uh, what was everyone's reaction? Cause I thought the Dow was going to have a plus 500 point day.

Could you believe this guy still talks in Dow's? In points. Not really. Yeah. Well, I saw the Dow futures last night up 550 after that news. And I assumed that maybe a little bit of it is Nvidia. But I assume most of it was, oh, the tariffs are done. And then this morning people woke up and said

That's not actually how it works. Yeah. Okay. Is that was that was that how you were answering people's questions last night? Yeah, kind of they like to be honest what what we've seen with these tariffs is that they've done some stuff that any kind of Attorney thought okay, that's not really possible what they've done Yeah, so they're actually going back to what we thought was gonna be the path in January right that they're gonna use some other legal maneuvers right to fill the gaps from what they lost last night. Right. If you want the numbers we can do that 122 230 Yeah. So they basically said all of this is national security. Is that and then the court said no, not really?

Yeah. Okay. And it's all there's a whole legal battle about like, okay, how much presidential power do we have relative to Congress, right? So some pushback against the Supreme Court might have a different take on that. Yeah. But I think the bottom line is that we can't have a situation where China is having, you know, same tariffs as United Kingdom.

That doesn't make sense that the best deal that is offered to United Kingdom suddenly other, like, China has the same deal, right? So they will need to adjust that now. When you say makes sense, what does that have to do with anything? Well, I think where there's most consensus in terms of like how should we use tariff policy was around China, right? You can ask Marco Rubio, you can ask Scott Besson, you can ask JD Vance, you can ask Navarro. Everybody would agree, okay, we should have significant tariffs on China, national security, big picture politics and so forth. So from that perspective, I think the threat is seen by most people as mainly from China.

So we had the highest chives. We had 145% not that long ago. So that was a reason for that. So having that go to zero doesn't make a heck of a lot of sense. Zero is not going to be with this where this falls out. No, of course not. Certainly not versus versus China. Like if China has zero, then it doesn't make any sense to have to have tariffs on anybody

else. Nicole, let's let's get the headphones and let's get the let's get the microphone. Make sure we get everything. Yen's has to say, is it a stretch to say that the market was right that it? We knew that it was all bullshit and not going to be enforced and not gonna last which part of it tafs in general Cuz I guess maybe a week or two into the bounce. I was saying I don't get it You're telling me that things are as good in

through the lens of the stock market as it were two weeks ago before the shit show started and I was saying, I don't get it. You're telling me that things are as good through the lens of the stock market as they were two weeks ago before the shit show started. And it turns out that maybe, in fact, it's looking like the market did get it right. The market said- The stock market got it right, not the bond market. The stock market.

The stock market has been more right about the tariffs than the bond market is one way of thinking about it. Do you agree with that or not really? So, I think the way I think about it, and this is what we've done in our research as well, we try to think, okay, where are we going to end up in three months? Instead of trying to say, okay, what headline is going to come out tomorrow? Like, what is really the sort of a sustainable steady state

we're going to end up with, right? And 145% on China is definitely not sustainable. There's lots of stuff we get only from China. Lots of small businesses rely only on stuff from China, right, they'll be done. Right, so 145 was not sustainable. So that was relatively easy to predict, right? Yeah.

So I think where we're gonna end up is a situation where we probably have that 10% minimum. Okay. Put in place through another legal route. We probably have a workable tariff on China. 30, 40%, something like that. Above and beyond the 10. Or incorporating the 10. Yeah, I say 30 to 40 so that you can take. Yeah, yeah, yeah. Right. And then we're going to have these sectoral terrors, right?

Autos we have already, right? Metals we have already. We're going to have some pharma coming soon and some semiconductor stuff. Right. And it's going to add up to something significant, but it's just gonna be a little bit more complicated to get it done because it's gonna be done through the normal processes

that actually take a little bit more time. But in relation to China, they already have done these investigations that is part of the process. Okay, you need to have the reason you're doing the tariffs. And they've already done those investigations. So now there's actually no further delay now they can do it tomorrow if they wanted to right and so then it just becomes like

How well is the dialogue going between the two countries? So it like do they do they need to shock the market again and say things things are not progressing or Do they want to come out and say we're getting closer? things are not progressing or do they want to come out and say, we're getting closer? Like that's what the market will react to. To be honest, I think about it a little bit differently. Okay. Like they made a mistake on April 2. Yeah. A certain group of advisors. Who you don't see anymore. Don't see much anymore, right? Came up with this poster. Yeah. With some numbers that really were quite shocking. Yeah. And people didn't expect, right, came up with this poster. Yeah. With some numbers that really were quite shocking. Yeah. And people didn't expect, right. And now the poster is effectively cancelled.

First they cancelled them themselves, right. They said, okay, let's put it in a hole. And now the court has cancelled the poster. So the poster has been cancelled. All those numbers on that poster are out the window now. Yeah, out of the window. It's almost like we're starting from scratch. I think we're starting from scratch, right? And we have a new team. Scott Peston is doing all the Asia deals, right? So he's like when he did the Geneva meeting, right? Like even the president said, okay, Scott is going to decide.

He said up to Scott. Yeah. That's what he tweeted. What a waste of time and energy this all was. Before that, I think it's fair to say it was a mistake, but I'm glad Scott's taken the lead. I think it's going to be an analytical approach. I've known Scott for many years. He was one of my very first clients when I launched the Xante data, right?

And like everybody has their own political opinions, but I think it's fair to say that there will be a sound analytical process behind what is happening now and they're gonna get to it. They're gonna get to a sustainable level of tariffs pretty soon. Obviously now they have to navigate this legal hiccup they had overnight. But I think we're not gonna get to 45, 145 percent again, right? But we're also not gonna have, they cannot allow the tariff on China to go to zero even in the short term. Because if it goes to zero in the short term, we're going to have all this front loading, crazy amount of imports coming in and they will lose all the negotiating leverage because the inventories are stocked up and it will only bite several months later. You'll have a pull forward that negates the whole point of the tariffs. That's right

Okay, we're gonna start the show. You ready? Thank you Nicole ladies and gentlemen Nicole s Long Beach is oh, all right Long Beach is on Nicole s Whoa, whoa, whoa stop the clock. Here's a word from our sponsor. Today's show is sponsored by Public. On that platform, you can invest in almost everything. Stocks, bonds, options, crypto, ETFs, whatever you want. You know what's great, John? It's been a while that we've had these juicy yields in our cash. And they're still here. At Public, you can get 4.1% in their cash account.

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Full disclosures and podcast description. Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Those of you who are coming to the live in Chicago next week, we'll get to meet Nicole

and John. Daniel, you're coming? All right. Daniel, Duncan, whole gang. All right. Ladies and gentlemen, welcome to the very best investment podcast in America. Some would say North America even. We have a very special guest, it's his first time here. We're super excited to talk with him. His name is Jens Nordvig and Jens is the founder and CEO of X Anti-Data, a financial services company specializing in data analytics and market insights for institutional investors.

Are you mystified by the sounds and what's going on here? This is a little bit new. It's not for us. It's different from Bloomberg. Yeah, it's not Bloomberg, although a huge fan of Tom Keen's, I'll tell you right now. Previously, Jens was a managing director at Goldman Sachs, a senior investment associate at Bridgewater, and head of fixed income research and global currency strategy at Nomura Securities before

founding Exante Data in 2016. Yance is also the co-founder and CEO of Market Reader. We're going to talk about both Exante and Market Reader, but before we go down that road, I just want to, on the tariff ruling, just because we're in the middle of this conversation. My friend Neil Dutta said in an email missive this morning with all caps, of course. Yeah, half through these days. Tariffs are a dial. They're not an on and off switch. Because a lot of people I think

read those headlines, or a lot of, let. Because a lot of people, I think, read those headlines or a lot of, let's say a lot of trading algorithms read those headlines. And they said, oh, no tariffs, not how it works. And Neil says, if you think the judiciary gets to be the one to turn the knob, seek help. He also said, I am not a trade lawyer, but the ruling allows the president to pursue his tariff agenda through other means. We're trading a decline in the effective tariff rate, which is good for a prolonged bout of policy uncertainty, which is bad. This will weigh on business investment and hiring.

More uncertainty. Great. At the margin, this puts some pressure back on the Fed. I'd argue this puts less emphasis on the near term inflation data and more weight on employment. When I read that, I said, that's exactly what I think about this. I almost think it would be better to have a slightly higher than hoped for tariff and just have that be the end of the conversation. A lot of now what's going to happen with courts and rulings and tweets, it seems like we're

in a worse place than we were a week ago. What do you think about that idea? I think we have to look through all the noise, all the court mumbo jumbo, all the different threats that are coming through and just think about, okay, what's the sustainable level of tariffs that we're going to be reaching in a couple of months that achieves some of the policy goals that the Trump administration has, the advisors are having, and what the economy can take? What are the policy goals, do you think? So- Fentanyl?

No, I don't think so. I don't either. I think the key policy goals has to do, we want to protect certain industries. There's certain industries, we want to make sure we have domestic supply chains, certainly stuff that's related to the military, but beyond that as well.

National security also depends on AI, right? So we need to make sure those supply chains are protected. So that's sort of the insuring aspect of it. And then there's the second aspect that has to do with revenue. Like the budget is in trouble, right? We've just had a big budget debate. The numbers came out last week and it looks like six to seven percent of GDP deficits forever, right? So if we can get some revenue in 7% of GDP deficits forever, right? So if we can get some revenue in from the tariffs that maybe can get that to be on a slight,

what, you know, slightly declining deficit path would be a lot better than widening deficits. So that's the second- 30 billion dollars in tariff revenue last month. Is that the number? That's pissing into the ocean. That sounds like a joke. I think-

How do we get to a trillion dollars? It changes every day, right? Because we have this table that we put in front of clients Oh where we add up all the different tariffs before the announcement yesterday That this our tax effect was in the region six hundred fifty billion dollars per year So like I called two percent of GDP And then if we if we you know read the headlines without looking through the noise But believe the headlines, we'll be down to $200 billion.

So it's a huge change. In the end, we're going to end up in a situation where they're going to fill the gap, i.e. they're going to find other legal ways to get something similar done, 10% minimum on pretty much all countries and something that's aimed at China. So I think we're going to get close to the 2% of GDP tax effect again. And that will have some meaningful impact on the budget. They need it. They need it for the budget. Right. Do you think we've seen the worst of the market reaction to tariffs at this point? Yeah, I think absolutely.

We might have a bumpy road as developments happen, but probably not the level of shock that we lived through in April. You think that's right? Yeah. How did it feel around April 2nd? Not great. Not fantastic. Right.

It was pretty wild time. So I have this one chart that I've been staring at where I say, okay, what happens to the yield curve when the equity market is down a lot? So normally the yield curve, when the equity market is down a lot, these have all yields going down, that's normal. Sometimes you have a situation like in 2022, right? When it's actually the yield curve shifting higher

that takes the equity market down, so that can also happen right but the combination We had in April never happens with with equities going down The front end yields going down and the long end yields going up that was that was scary shit and dollars falling That was that was a weird invite into yeah But we said earlier that the stock market get it right actually the bond market got it right to specifically credit spreads They really they went up a little bit in early April, but like kind of nothing with nothing.

So they saw through it too. Yeah, I think the market is getting a lot smarter looking through the headlines. And I think that the price action we've had around this court ruling is the same, right? The dollar move for a couple of hours gave back essentially the whole move. And yeah, your dollar is now up, gold is up, right?

So market is getting totally desensitized to these moves. We've seen it in relation to Mexico as well. If the market believed at any point through this that Mexico was going to have big tariffs on it, the peso would be totally toast, right? And it never happened. I agree. Avocado toast, am I right? And it never happened. I agree. Avocado toast, am I right?

Hey, you mentioned the sustainable levels a few times for the economy. What economy are you talking about? So I think about, obviously there's a kind of political debate about what the tariffs are going to do, but mostly for me it's like consumption tax. The consumer is going to eat most of it. And don't say that.

That's just, that's just El Salvador. So, you know, this is going to be public, right? People are going to hear this. So, so if you have a big tax effect, right? Most of it is going to be something that essentially limits the purchasing power of the consumer, right? So real consumption is going to go down. And there's like, we can already see the GDP numbers that we have to revise GDP numbers today, right?

So now we're close to 1% consumption growth in Q1, right? So how much more damage to real spending power can we take? Not that much. We heard from Best Buy today, which is the largest electronics retailer in America. Pretty, like I would say, a pretty representative kind of consumer brand where it's almost it's the whole gamut. It's vacuum cleaners and toasters, but it's also computers and cell phones and, you know, flat screen TVs and stop that pancake today. They came out and said straight up pricing related to tariffs resulted in, I guess, lower demand

from the consumer. And I don't know how much of that is cyclical. Like the consumer might have done all their buying for Christmas and they're just not in the stores this spring and they're blaming it on tariffs or the prices that people are encountering when they walk into Best Buy are stopping them from buying as much as they used to buy. And it's not even political. You either believe that that's happening or you don't.

And if you don't, well, what's your story to explain why Ross stores just had a horrible outlook? Why Walmart is so afraid that they're going to start publishing the tariff impact so consumers can see it's not their fault. You kind of have to believe that this is already a problem. Yeah, I think for... When you analyze the... Target.

How could somebody say this is not going to be a consumer problem? All of the biggest companies that interface with consumers are saying, no, it is. And it's right now. It's not next year. Yeah. I think you can see it on a lot of different things. Yeah. The hard part when you crunch data, which is what I do for a living, is that you have these front loading effects as well. Right. So you have, for example, car purchases, right, were actually very strong in March when people

were looking forward, fearing the tariffs in April. So it's hard to look at the data. So like what we're trying to do is to try to look at the pieces of consumption where you don't have the frontloading kind of contaminating the data. So I think services consumption is actually where you look at the trend. Oh, people don't front load services. No, it's like if, like the stuff that have tariffs on it, right, could have the front loading effect.

But like, for example, the domestic services like holidays and so forth shouldn't have any front loading. Yeah. And I think that has been weak as well. You can see it in some of the airlines, You can see it in bookings and so forth. The data is so noisy. For every Best Buy and this bad service, I can give you Disney World, which

just said that they expect 7% growth in Q3 and Q4 to the parks. I was like, really? That surprised the hell out of me. I have this week, one of my main focuses has been to just crunch all the real-time data we can get our hands on. What's it telling you? It's just a mixed picture, to be honest. Yeah. If only there were this clear-cut narrative.

No, it's not. It's not. And I think it's also... Like, US consumers are famous for being very resilient buyers. We don't stop. They certainly don't collapse from one day to the other, right? And we saw that all the way back in 2007, right? It takes a long time before any kind of credit constraint starts to bite. I think credit is flashing yellow, orange, like there's consumer credit looks like it's getting stretched.

But if people are in the period where people are maxing out, it can still sustain the consumption. So that tipping point is important. And obviously, the labor market is really important. So I was going to ask you, I was going to ask you about exactly that. What if we just ignore the consumer data entirely and just ask this question every week. Can people get a job or not? Are more or less people working this month versus last month? That seems to be the most obvious way.

I don't know about predicting a shift, but to know for a fact that a shift is taking place in consumers. Like they will not stop spending until they literally don't have a job. You're right. Just look at initial claims. That's it. There's nothing there yet. You can see how sensitive the market is to initial claims. Yeah. So one of the questions I got on our institutional chat was like, how come the market has so much beta to do the initial claims?

Well, it makes a lot of sense. We're all searching for whether the economy is about to flip. And claims historically is one of the earliest thing to flip, right? So we had 240 today. If we have 250... Hold on for the listener. So we hit 240, 2000 initial jobless claims. Yeah. So that's for last month. Yeah. It's a weekly reading. Oh,000 initial jobless claims. So that's for last month. Oh, it's a weekly reading. Oh, excuse me, last week. So 242,000 people over the last week have filed for unemployment.

Those are newly laid off or fired people or people who've quit a job. Okay, but the continuing claims is ticking higher. And that's indicative of they're not getting a new job as quickly as they were even six months ago. That's right. Okay, so which of those is more important to follow or are you looking at both and trying to discern

like if there's a real trend there? I think the continuing claims is less noisy, like it's accumulation, right? So that one moving out of the range. It's a weekly series, right? So it's going to be more noisy than a monthly series. There's always like holiday effects. We have Memorial Day. Some of those have an impact.

But I'll tell you this, if we go to 255, like just 15,000 more next week, so it looks like- On initial or continuing? Yeah, on initial. Okay. The market will go bananas. So I remember- Like it takes so little, and this inflection point-

Wait, wait, wait, bananas up or down? Down. It will start to really worry about growth resetting lower. The Fed will have to cut, like, and the Fed will cut. If initial claims are shifting up, we will very quickly. You and I agree there. We will very quickly get to a point where, you know,

a July cut is back on the table, and yesterday was totally priced out. Last fall, we were on the show, and I remember, I think it was with Sam Rowe, we were like, when did the market ever care about initial claims this much? It was an event every week, Because last October we ticked up to 259,000 and it looked like there was a breakout coming, if you could use technical analysis on weekly claims. I don't recommend it.

Well, you said, you said, hang on, Josh said once claims start leading higher they normally don't slow down. And they did. And they did. Yeah. start leading higher, they normally don't slow down. And they did. And they did. So we also have to talk about which part of the job market, which part of the economy, because this is a very bifurcated consumer. And Josh and I were talking about this on Tuesday.

Savita has this great stat where she said, the US has a higher proportion of low income consumers than almost every other OECD nation. However, its contribution to total consumption is low. And its contribution to S&P 500 earnings has declined to an estimated two percentage points. That's wild. Only two percent. So, like I'm a kind of data nerd, right?

So, when I look at the labor market, we have a tool that aggregates literally all data we can get our hands on into one kind of index of what's the strength of the labor market. Last summer when the Fed was cutting rates, it was a bit puzzling why they were cutting rates because the NFP numbers, the payroll numbers were weak for a couple of months,

but everything else was looking better. And maybe claims was weak for a couple of weeks, right? But the overall labor market data was never really that weak. Now it's a bit different, right? Because there are a bunch of labor market indicators that look softer. There's the government side, right? Where we know there's quite a few layoffs going on in the government sector and the people who have research grants, NGOs and so forth, right. So there's some weakness there. We know also there's new stuff going on with immigration, right. So all the hiring that was related to that is probably different. So I think it makes sense to be hyper sensitive to the claims. That's what the market is doing. The rolling four week average, I on initial it's like two more like 225 which is not bad nothing that's okay yeah all right but you think one aberrant weekly print above 250 is

gonna get everyone's attention if we have 255 next week the yield curve is gonna move a lot okay and equity equity mark is probably going to move a lot. How often does it happen you get just like an out of nowhere like, oh, that was high. We have high frequency indicators that we use to forecast claims for the exact reason that we want to be ahead of it. Alright, cover the mic. What's it looking like next week? Yeah. No, have you been closed this year on forecasts for claims? We don't get every single one right.

No, nobody does. Yes, but yeah, we want to get a, it doesn't matter whether we write every single one, but if there's a big spike, that's what we want to get it right. Okay, I want to back up a little bit. For people who are familiar with you for the most part, they probably know you,

you had this position at Goldman Sachs where you the head of currency strategy, and there were some pretty big events during your tenure there and you made some pretty big calls and I want to just kind of give people an idea of how you ended up in that post as the currency strategist at Goldman and then we'll talk about some of those calls because I remember like trading equities through some of these events and I remember reading your you know headlines where your calls are in those headlines. That's impressive.

I know you have good memory. No I do. I know zero about currencies. Like if people ask me questions like what do you think of the dollar? I don't know what do you think? That's literally my answer. So this is but this is I think becoming more important for investors to understand even if they're not acting on it. So You go to Goldman Sachs in 2004

Not a native New Yorker. I don't think you're from Jersey Originally tell us tell us how you landed there. Yeah, so I Was working? At Goldman in London. I got a job there that I applied for in the Economist newspaper. And then a couple of years in, there was a guy called Jim O'Neill. Yeah, him we know.

That, yeah, he invented this BRICS concept. So he's a pretty famous guy. BRICS, he actually invented a research concept that is a thing now. It's pretty rare. Turns out terrible investing strategy. Politically pretty amazing. But so he came over and he tapped my shoulder one day in 2004 and he said, do you want to go to New York? He said, I have a job for you. And that was the, they call it death strategist. The strategist is set together with the traders.

And it's actually the job he used to have. It's a job that John Hutchers, who is still a go-man, used to have. And he said, why don't you think about it for a couple of weeks? And I looked at him and I said, I don't you think about it for a couple of weeks? And then I looked at him, I don't need to think about it, let's just do it. You were ready to give it a shot.

I was ready, yeah. I always loved New York, so it was like a dream come true. And that's 21 years ago, you're still here. Still here, yeah, it was supposed to be a couple of years, but it extended. So the desk strategist is the guy or girl who sits on the end of the trading desk,

and when something is moving the traders could say yo Yes, why is I don't know the German Bund doing what it's doing And then you have to give them something that the world has changed a little bit. So I understand so in 2004 It used to be the case that we had the turret system, right? Yeah, and It used to be the case that we had the turret system, right? And when you're the death strategist, when there's important numbers coming out, you have to shout into the turret whether you thought it was good or bad.

So you just have to look at all the numbers as a human, right, and conclude whether it was good or bad. And the traders would just trade it, try to be like one millisecond quicker than anybody else. They would just take your reaction as gospel and trade? Most of the time, yeah. Wow, okay. What was it like if you called one wrong?

You say, just kidding. I remember there was a- You say they misheard you? One of the head of rates trading, she was just very famous for she would often ask them a question on the turret that everybody on the trading floor would hear. And then you had to answer immediately. And it was often like a kind of math question.

So if you got the math wrong, you were in trouble. But, but, but it was, you have to be focused because if you couldn't get the math for her question lies, you'd be very Goldman. It was, you have to be focused, because if you couldn't get the math for her question, I'd be very disappointed. So, but we don't do that anymore, right? Because we have high frequency traders that essentially do that. So that part of the job doesn't exist. I'm not on a trading floor anymore,

where I like, it's a long time ago since we did that. It's only a high frequency trader. Was it fun? That was fun, yeah. I love being on the trading floor there. Okay. Here are some of the things that, here are some of the things that I think were highlights Was it fun? That was fun. Yeah. I love being on the trading floor there. Okay. Here are some of the things that I think were highlights of just the currency era that you

were the strategist for. The euro crisis. So I think probably a lot of the people who were sitting in your seat were Americans at the other firms. You're're European. You think that gave you an added perspective that maybe the other, uh, strategist didn't, uh, necessarily have? Uh, I think so.

I think so. Um, it was funny that I was, um, I was at a meeting, um, a client meeting, um, last week where a guy I have not seen for like more than a decade, he said, yeah, still remember your paper about the future of the euro, right? So sometimes when you write something, people really remember it forever if it's unique, right? So I wrote this paper, like a kind of semi-academic paper about how you actually, how would you go about breaking up the euro if you had to break it into pieces?

Yeah, and it's complicated you call that Redenomination risk so all of these European countries have to adopt their own currencies again Yeah, okay, and that was a influential thing. Yeah, like it was actually a little bit scary because I'm kind of I'm supportive of the EU myself, right? So it got adopted by all these different political movements that wanted to break the EU apart as well, France, Italy, and so forth. Oh, they said, look, according to this guy, Jens, we could do it. Yeah, exactly.

Okay, got it. But that's okay. It was, it was again, it was a litical piece of work could be used different ways. It's better to be prepared analytically than just going into these things without any thought put into it. Are you surprised that the euro has managed to hold together? Not really. I wrote a book about it that was published in 2013, which I still stand by, right? So, the euro is a political project. I agree a little bit with our president. The euro was created to avoid war in Europe.

Yeah. Mostly. And if there's a political will to keep together or be together. You've been credited with giving the early warning to the investor community about the yuan and Chinese outflows. I think you were talking about the Yuan depreciation risks. And then that actually ended up being a really big moment for, I know, I know you referenced this a lot.

That was you, you son of a bitch. No, he didn't do it. We had a 20% S&P correction in six weeks over the yuan devaluation. And I think you were early to that. But you know, it's fine. I was at lunch with Jason's, Wagon Barry, and I was like, couldn't get off my phone. I was like, guys, we're really eating a lot of tuna.

I gotta go. Right. How are you able to see that coming? Or do you get too much credit for that? So I've always been very focused on like capital movements. So when there's something happening with capital movement, this is kind of what, what I've been doing through my career. And sometimes when there's capital moving and unusual new ways, the

correlations in the market break. So if you analyze the capital flow and the correlation breaks together, that often gives you conviction. So I think that's what we started to see. In China when we launched Exante data in 2016, literally the first quant tool we had was a daily intervention indicator for China, like told you how much was, how much were they spending on essentially propping up their currency. Yeah. So we had a nice daily estimates of that.

And it was a fantastic business. We could just sell that model and we can sit on the couch and do nothing until China had imposed capital controls and they didn't have to do anything and the model was dead. And we had to get back to work again. Okay. And then you built a COVID mobility tracker in 2020. Yeah. And I think, uh, that was yours too. That's guys everywhere.

I remember that. He didn't start COVID to be clear. He built the, uh, that turned out to be a big thing. Uh, it was an incredible thing. I, I, I remember I got a call from one of our clients in, in. Hedge fund client. Yeah. In the middle of January.

Okay. And he asked me, was it Bill Ackman? I'm not going to give names. So yeah, but, uh, but he said like, how come these, uh, how come these stocks are moving so much in China? Have you seen what's happening in Wuhan? And I had not, that was in the middle of January. And then I remember we had a client call

a couple of days later when we kind of figured out what was happening, where we said, okay, this is a big thing, it's probably gonna be moving the market the whole year. And we had half of the team that COVID forecasting from I think January 20 was when the first time we did COVID forecasting. And we're not doctors or anything like that.

Your data people. The amazing thing was, it was actually extremely easy to forecast. Like compared to economics, it was very easy to forecast. The spread. The spread and the peaks. Okay, so tell us about that. What was the, what were the inputs for you to figure out the spread, the degree of the

spread, the speed, where it was going? Like how did you figure all this out? So you mentioned Milan, right? I mentioned who? Yeah. Milan, Italy. Yes. Right.

So they had a horrible outbreak in Milan, right? There's the first strain. The ski resorts, right? Yeah. Okay. And then, so we just got data down to each municipality in Italy from the government. And then you figured out, okay, what was the municipality where they had the first case?

And then you can look at the trajectory in that specific little county, right? And you could see, okay, it's actually already over here. It's going to be over in Milan and the rest of the country within a certain number of weeks. So if you just broke down the data into the little atoms, like, it was actually pretty easy. If you'd analyzed that at a country,

there was too many things going on, but at the micro level, it was very easy. We always moved in the same curve. And then you had news agencies calling you. I remember it becoming like a really big thing. I was pretty busy back then. Yeah, yeah. But I don't think most people know that that was you

that created that. I didn't know. I'm the culture. Were health officials using it to try to get ahead of? There was an Imperial College in London published some academic papers where they used the data we had collected to look at the spread and then how the mobility rights they used

it for advising whether you could safely reopen. So I was using Governor Cuomo data so I didn't do as well as you did. He had a chalkboard I don't know if you remember and every day he would update the chalkboard on television at 2 o'clock in the afternoon. Alright, that was a really big deal though. Like that was... I'll tell you a secret. So we wrote a paper at the end of February where we analyzed how many hospital beds we had in New York.

And it's one of the few papers written that we ended up not publishing. Why, is it scary? I didn't want to scare people. Because you would have shown that we ended up not publishing. Why, is it scary? I didn't want to scare people. Because you would have shown that we could never handle the amount of people. Without all the expanded capacity and so forth, there wasn't enough beds in New York. That actually could have caused, in that moment, that could have caused the hysteria. We didn't publish it.

Okay. Thank you. You just like sat on it and said nobody needs to hear this right now? Yeah. Okay. I like that you did that. All right. In less darkness, after the GFC, the global macro traders were like the kings of the world,

right? If you could see that coming, you got that call right. And then they spent the next decade, they in general, it just became really difficult. Board of line impossible. Is it because, I mean, our conflicts, I'm sure it's a million different things. Do we have too much data? Is it the ZERP environment screwed everything up?

Like what was it that made it impossible to accurately assess where markets were going? I think to your point, I think global macro is the worst category of hedge fund over the last like 15 years since then. By the way, I think intuitively makes sense. How should anyone be able to... It's 19-dimensional chart, it just seems too hard, it seems ridiculous.

I think it has a lot to do with what asset classes actually provide any opportunities. So exactly like you said, like we had many we had many years with effectively zero interest rates in most countries. We got to two and a half in the US in the 1918 move, but we effectively had zero interest rates in the whole world. So the asset class that macro traders typically take the most risk in is interest rates, and they were gone. So I think from that perspective,

it makes a lot of sense that there was no good macro returns. And guess what? When interest rates started to move, 22. They killed. There were a lot of funds that had 50%, 60%. Because there were short bonds on leverage. Short bonds in those years, right? And it was pretty easy.

Like we created this simple thing where we call it like, like a hiking pressure scorecard, like where do the central banks need to do a lot, right? And we were like, looking at all these places where like the hiking pressure was like something we never ever saw and the central banks were still saying, oh, we're going to be on hold for two years, three years. They were saying that.

With 8% CPIs. It was just nuts. So that must have been easy for you guys. Like you must have been licking your chops. That was one of the times where you could just put on the trades that were in the model because they were so asymmetric. The rates were already zero.

How much lower are they gonna go? Yeah, that was incredible. So I think there are two other explanations for the owner. I'm a macro tourist. Okay. So I'm stating that now, but from, as an outsider, looking at that world, it strikes me that when you make a huge call and you have a huge windfall trade or a series of trades in a moment like the 2008 to 2012 period, of course you want that to happen again.

But you don't always get a strike right down the middle. You have to wait for your pitch and you could become impatient because when you're the hero that was buying the credit default swaps and shorting stocks and shorting the banks and you're the person that pulled off the quote unquote greatest trade ever, which a lot of these guys did, you want that feeling again two years later. You don't wanna wait 20 years.

So you start pivoting, you start saying, oh, for my next trick, I think the municipal bond market is about to collapse. And then that doesn't work. Okay, here's my new trick. Here's a bubble basket. I remember that one. Okay, here's the 50 best stocks in America.

They're all a bubble. That's my next trick. I mean, we watched this play out. You had bond managers making stock market calls. So I think there's a restlessness when you've had a huge home run now you have endless money Yeah, so it's no longer about money. You want to have fun? There's there's a famous hedge fund quote that says that the the hardest thing to do is to do nothing Who I forgot who said it's a Buffett or a monger. It's it's important. Yeah

Because if you feel like you have to do some big trade every month This is not gonna happen and I think also there's a lot of the successful, and this goes back to the yield curve again, it's a lot easier to deliver 10% plus returns if your T-bills are five and you just have to get 5% extra as opposed to generating 10% from nothing. Yeah. Right?

A lot of these guys trade on leverage, right? And they can get the 5% carry in the portfolio without doing anything. And then they just have to use the leverage to get the next five, right? So having some interest rates, like really, makes everything a lot easier for that man. But what about also the idea of too much data,

too much competition? This is a plug for you. I remember, I don't know what year it was. When did the, oh, they have satellites looking at foot traffic in the malls. That was like novel in 2014 or whatever. How granular, like how much forward-looking data is available these days and people are paying out the challenge we have in our business. So we have like a data platform, right, that has, you know, 400,000 time series on it. I remember I was out in California and I met this old contact that I have as a PM now, Big Fun California, and said, yeah, like it's fantastic. We have all this data. I think we have like several hundred thousand data

series on a platform who said, Jens, I'm not interested at all when you have so much data. And it's on the one hand, obviously I disagree, but on the other hand, it is really important in our business that when we generate value from the data, it comes from us having access to a lot of data. And insights. And knowing how to interpret it. And then like zooming in on what really matters. There's no way you can get insights from all 400,000

time series at the same time. You're just going to end up with nothing. But if we can have a system where we use technology to really assume in on when there's interesting things going on and then communicate that narrative, because most money is managed by humans still. Like how much is managed by AI quant? That's very small. So we need to essentially put the conclusions

in front of people. And that's also what we see in our business, right? We will send the conclusions to the CIO, right? And there might be an analyst that crunches the numbers, double checks and so forth, but the CIO wants the conclusions. That's what we try to do. You made two fairly high profile tactical calls

on the dollar in recent years. And we'll use this as a segue to get back to now. You were bullish on the dollar in 2022 based on the tightening that I guess seemed obvious to you for most of the market. That cycle was a shock. I don't think people thought we would have to get to five and a half percent Fed funds to see inflation finally break. Yeah, people were just continually surprised to how high we went.

And you also saw like fragility just generally. I don't know if the wars played into that at all. But then you shifted neutral to bearish in 2023 on the dollar. And I think that's like played out well for you. Yeah, nailed both of those. Took a while, but like you got it. What do you think, what are you telling people now who are trying to get a handle on, you know, does the dollar gets significantly weaker going forward?

Have we seen the worst of the drop there? I think for corporate earnings, a gradually declining dollar is really good. Might be the thing that saves us actually. But what do you think is happening? So I think the big picture is the following right if you if you look at how the dollar has been behaving over the last 20 years You can capture a lot of what's happened with the dollar with with two variables. I'm simplifying a little bit, but I want 700,000 So the two variables that are most important is what's happening with?

Kind of the cycle of global growth. Okay. When global growth is strong, tends to be the period where the dollar doesn't do so well, because people push into kind of global growth assets. Most obvious example of that was before the global financial crisis, when like global equities did very well. The Bricks era. Bricks era, that's the reason I'm here. Investors wanted to invest anywhere but the United States.

Chinese stocks, Indian stocks, so forth. That's right. The other variable has to do with monetary policy, the Fed, right? So if the Fed is very tight, dollars get support from that. That framework needs to be expanded this year, I think, because now there's something going on with portfolio flows, asset allocation, that is, I think, unprecedented.

What is that? So, what we have seen happening in the last couple of months What we have seen happening in the last couple of months has questioned the safety of the long bond in the United States in a way that I don't believe we've seen before. Okay. And we can see, in our data, we can start to see some new trends, which I think is separate from global growth, separate from what the Fed is doing. Really what's happening is that after essentially a 10-year bull run for the dollar and people being loaded with US equities, loaded with US fixed income, international investors are scaling back. It doesn't mean that they are abandoning the dollar,

doesn't want to have any exposure, but I think it is a structural theme that they want to get exposure reduced. And this is new, right? Because people were extremely comfortable with the dollar being the dominant currency, and it has many elements. So obviously the tariff situation has shocked people.

And who has it shocked the most? People always say, oh, it's China selling treasuries. I don't think that's the key thing. The key thing is that the closest allies of the United States have been shocked by what's happening with tariffs. Canadians. Canadians and Europeans.

UK, Europe. And by the way, the Canadians and the Europeans hold way more bonds than China does. That's right. Way more, right? So they're much more important. China hasn't really been buying any US bonds since 2014, the crisis we spoke about earlier. And where is that money going? Like if it were to leave the US long bond, for example, they're selling 20-year treasuries,

they buy a 20-year equivalent yield or equivalent maturity in Germany. So, what we saw in April was that bond fund flow in US instruments got very negative in the middle of April, and it stayed quite positive in European bond funds. There was a switch there, but this is something that's hard to see in data because the portfolios we're talking about are very big portfolios. And think about if somebody has a credit portfolio, right, where they have, you know, a hundred billion in U.S. credit,

can you get rid of a hundred billion in U.S. credit quickly? It's a slow leak, you can't sell it all. No, so what they do first is that they do some currency hedging because you can do 20 billion of currency hedge in a day if you wanted to. Right. And how would you how would you currency hedge a portfolio with a lot of US treasuries? You buy you buy the basket versus the dollar or so So, no. So, if you're a European investor, right? Yeah. You're just going to sell your dollars forward. FX forward is incredibly liquid, right? So,

maybe do 10 billion of that, 20 billion of that. If you're a Canadian investor, you will sell dollars forward, buy Canadian dollars forward. And I think we speak to a lot of chief investment officers from pension funds, insurance companies, and so forth around the world, our clients and our network. And we're getting a pretty consistent message that there's been a bunch of that FX hedging. That's very hard to see in the data.

It doesn't really get reported very well. But I think it's also clear that the FX hedging comes first, and then the underlying assets shift later. Yeah, so I think we're in that process now. So but it's a long Rebecca Patterson was here three weeks ago. Yeah, Rebecca. And she was saying much the same that that you're saying. Yeah. She said it's not a it's not a bang, a big bang. It's not an explosion. It looks more like a drought,

but it's so slow that it's imperceptible. I'll give you an example from last week. So what kind of stuff that I had in my calendar. So I was speaking to some executives from a private bank in Singapore. They are worried about their dollar exposure, right? I spoke to a central bank governor. I'm not going to say from which country, right?

They are worried about what's happening with the dollar. Could be relevant for their FX reserves as well. And it's just a very broad theme. And different players move at different horizons. It's very tempting to say, oh, Citadel moved already and they can shift their portfolio in a couple of days or quicker maybe, right? But there's this long tail of real money investors that have investment committee meetings only quarterly and they don't like to change their asset location.

Like there's the wealth managers, right? where you're in that business, right, but you'd have different clients that you have to go through, maybe different ones. I know your structure is a bit special, right, but for a lot of them, they have to go through. They're not used to taking, in the US, people are not used to taking any foreign currency risk at all. Yeah, why would they? Yeah, but like the dollar has been on a bull run for a long time, right?

And yields have been higher. I'll give you one stat. There's 1.7 trillion of fixed income ETFs issued in the US. 95% of them have only US securities in them. I would have guessed that. If you look at who actually has, you know, open currency exposure, actually have some non-dollar assets, it's less than 1%. Yeah.

We effectively have, with rounding, 100% home buyers in US fixed income ETFs, right? Yeah. So there's no tradition for taking that risk. So in order for those, all those portfolios to actually have some other exposure, it's just going to take a while. So what's the... So what though? I want to, before we move off this, this is so fascinating to me.

So I want to ask you, so do you agree that international portfolio managers, once they decide to do something, they don't do it right away, but they don't change course two weeks later. And what are they more nervous about? Is it the spontaneity of the things Trump is doing on international trade and the chaos and the unpredictability? Or is it just the overall level of indebtedness and deficit?

Or is it just the overall level of indebtedness and deficit or is it some combination? Like if I ask you why did the 30-year Treasury yield break above 5% last week for the first time in 17 years, give me a percentage breakdown of what the reason for that was. Is it 60% trade, 40% debt? Or do I have that reversed? It's kind of like an accumulation of forces, right? The allies don't like to be... You can't disentangle them from each other. I think it's all in together.

The allies don't like to be treated like non-allies. They feel, okay, the rules are out of the window. We have to prepare differently. They don't like that. They don't like there's a fight between the White House and the Supreme Court. They don't like that there's talk about taxing foreign capital. It used to be a working paper that Steve Moran wrote that people were concerned about and don't believe should have been written, But now there's actually something in the budget

called section 899 that talks about taxes on foreigners. So now it's getting pretty concrete. Investors don't like that. There's a lot of things that are happening that kind of real break from history that global investors don't like. And the natural response is to get a bit more cautious. Does Scott Besson understand this

as well as you're laying it out, he must? I think Scott Besson is extremely well positioned to take a balanced approach to these issues, but he's facing a tough situation. He has a lot of conflicting goals, he's not the president. And then the last bit of the accumulation has to do just with the budget constraints, right? We've been running.

I think it's so interesting, right? We've been running for so long and operating in an environment where fiscal stimulus actually was bullish for risk assets, bullish for the dollar, and it feels like we've reached this turning point where more, if the Senate comes out and say we want to have more stimulus in the budget than the House, the market's not gonna be loving it. We don't want that. No. All right, I'm sorry, I'm sorry, I just wanted to make sure we nailed that on the last question. You covered it. Okay. What do you make of the reserve currency debate happening these days?

And just for people that aren't fully aware, what's his tweet? This is an actual Bessam quote or this is what he said? I mean, this is tough. He said other countries currencies are rising, the dollar isn't falling. That's a tautology, is it not? Maybe I won't comment on that one. But let me put it this way. Are you worried about the dollar losing

its reserve currency status within our lifetime? Don't really think about it as a binary thing. Like it's not, oh, it's the reserve currency or it's not the reserve currency. It's a dial just like the tariffs. The question is whether it's getting any competition, right? So we had a long period of time where we had some yield in the United States. Not much. We had some yield, right?

And we had nothing anywhere else. So that was the period including before yield, right, and we had nothing anywhere else. So that was the period, including before COVID, right? And the dollar just didn't have any competition really. And China has capital controls, right? A lot of people are still very uncomfortable investing in China. You don't know whether you get your money out. You don't know whether the equity market is controlled. You don't know whether you can pay your self-dividends and so forth, right?

So China is not a real competition. The renminbi is not going to be a reserve currency for the Western Hemisphere. Not in a traditional sense. Okay. So, yeah, you speak to a lot of important people, policymakers and such. Is anybody even mentioning Bitcoin as an alternative? So I think from a US investor perspective, we just talked about this thing that for regulatory reasons,

there's no tradition of currency trading in the United States. And the fixed income picture has no foreign currency element to it, right? So if people want to be anti-dollar in the United States, they really have two options, gold or crypto. Both of which are mooning. Yeah. Okay.

It changes from week to week, Not an accident. Which one is mooning the most. Yeah. But it's definitely on the move. But has it entered your conversations? I think if you look at all institutional clients that I have, the majority of them trade crypto now.

In some form. It's a huge change compared to just two years ago. Massive, massive change. Why do you think the administration is so pro-crypto if one of the singular stated goals from the outset, from the Satoshi paper, is to replace the dollar? It seems like it's rhetorically crazy to be the president of the United States and be full-throated supporter of something that was invented to supplant the dollar

and to almost accelerate the pace of that supplanting if it were to happen. It just seems so incongruous. the pace of that supplanting if it were to happen. It just seems so incongruous. Do we believe in a strong dollar and America having this benefit of being the reserve currency or do we want to destroy it? And if so, why? What's the prize?

What do we get? We have a lot of examples of conflicting goals. We talked about it in connection with trade policy and we have it in connection with crypto as well, right? So on the one hand, if you wanted to just protect the dollar, you wouldn't want to be supporting crypto, but we had different elements to the election campaign. And one of them was being pro crypto

is one way to get support from a certain constituency. And I think it's just a matter of living up to that election promise. I don't think it's more complicated than that. So, okay. So they don't have a secret plan where, oh, no, wait, actually, this is good for 10% of the transactions in the economy to run through Bitcoin. I don't think so. Okay. I mean, Bitcoin can be bigger and not an existential threat to the dollar.

I mean, gold's not a threat to the dollar. Nobody's saying gold is a reserve currency. No, I think the main thing people look at globally is whether China's gonna really be a threat. And China's doing interesting things right now in terms of being a new type of competition to the United States, for example, in terms of the exchanges they have. I thought you were going to say dumplings.

They're wonderful. What do you mean by exchanges? So the Shanghai Gold Exchange is getting to be very important. It's brand new. They're putting a lot of effort into global financial market participants getting comfortable taking their risk. Who is listing in China? So this is literally about,

if I think that, think about the following. If China wants to do their trade in renminbi, which they want, and more and more countries are executing trade in Chinaminbi, which they want, and more and more countries are executing trade in China and Chinese currency, right? Then it's helpful if China offers a kind of financial market where, okay, once you've accumulated those CNY balances, you can maybe move some of them into gold that is held in China, right?

So if China offers more and more alternatives to trading, engaging in financial market that doesn't touch the dollar at all, it becomes more and more of a competition, even if it doesn't have the typical capital mobility. Well, there are a couple of countries where there's an urgency to this. I think Russia and Iran would love the ability to hold their FX reserves in Chinese denominations and do financial market activities in Chinese terms. Russia doesn't have any dollar reserves anymore. Right. So, okay. But you don't think that that's something that's like on

the front burner for people to worry about. Like we're gonna all of a sudden lose this overnight. We're gonna wake up one day and they're gonna announce Hey, it turns out the dollar stripe is going public in China No, I don't think the dollar is gonna lose its reserve currency. It's good lessening status instantly Okay, we can't be chilled out here, right that the debt dynamics United States are Out of control. I believe the reason Scott Besson took the job as treasurer secretary is that he wants to have a positive influence on the debt trajectory. That is problematic.

There's another dude called Elon Musk, right? That been talked about the same stuff. No, he retired today. I know, but he tried for a couple of weeks. They're gonna hang his jersey up though, I'll tell ya. So, he put up some big numbers. The question marks around the dollar getting bigger doesn't mean it's going to collapse from one day to the other, but the question marks are real, have to be taken seriously.

And that's another reason why like this idea of not being all in on the dollar that a lot of global investors were increasingly over a decade, that's what's retracing. Would it surprise you if I told you foreign tourism to the United States has been dropping precipitously since the inauguration? You wouldn't be shocked. Here, this is that. Spending from foreign visitors to the US is poised to fall by 8.5 billion this year as negative perceptions tied to trade

and immigration policy lead overseas tourists to look elsewhere. That's Oxford economics. They say international arrivals to the US are expected to fall 9% this year. And one more number. The World Travel and Tourism Council said this month it expects the US economy to lose a staggering 12.5 billion in spending from international visitors in 2025. Quote, a direct blow to the US economy overall impacting communities, jobs, and businesses from coast to coast. When you hear that, doesn't it sound like it rhymes like what we're talking about with international capital flows?

Like... I think those numbers are too low. You think they're low? That's what you know better than they do. What are the numbers? Yeah, I think tourism is a tricky thing because it's like what we normally think about tourists that are running down on Fifth Avenue, but it's also like tourist, the students that are spending in the US also in the stats often get recorded as sort of tourism spending.

And it's both. And they're trying to ban international students right now. Absolutely. So like, even if it's like a couple of tens of GDP, which would be like 60 billion, that that will be more on the ballpark, I think. Okay. So this, do you think that this ties into the, the lack of interest in owning US assets amongst global portfolio managers? It's like, it's another symptom of the same thing. It's part of the same thing, right? Where there was a certain regime where students,

tourists were always comfortable going to the United States. They never had any concerns. Like a lot of countries, rightly or wrongly, have kind of travel warning. Yeah. Right, so there's stuff going on this year that we've never seen before and it's changing behavior. And that's going to have an impact on the capital flow. We discussed that in detail. But it's also going to have a GDP impact, right?

Because the tariffs are going to have an impact? Because the tariffs are gonna have an impact, the tourism gonna have an impact, the investment uncertainty that you started out was gonna have an impact. So if you add up all those shocks. S&P down 3% from the all-time high. Yeah. That's not about right.

Is that the craziest part of this whole thing? It is, it is. But let's say the S&P is flat this year, right? Yeah. Which would be a good outcome relative to what we looked at. It'd be a great outcome. We'll take it. But even that would actually be less

of a wealth effect boost of what it had been used to in 23 and 24 where actually that wealth generates some extra consumption that we may not get this year. That's enough with the extra consumption. We're not getting that. Robert Frank at CNBC put out a report this morning about rentals in Nantucket and the Hamptons and I know this affects 0.001% of the population, but it's emblematic of not

having that wealth effect from stocks. They said Hamptons rentals are down 30% versus the same time last summer. And now they're all hoping for like a last minute wave of rentals, otherwise you're gonna have a lot of properties just sitting there. And that's, I think a direct effect of tariffs, uncertainty in the stock market, not doing what it did over the last couple of years.

Yeah, makes sense. What haven't we, before we get into Xante, and we'll finish with asking you about Xante and Market Reader, what haven't we asked you about asking you about Xanti and market reader. What haven't we asked you about that you think is important for investors going into the second half of this year? Well, I think really it comes down to what we talked about in the labor market, right? We've had this debate where, okay, the confidence was bad and then the real data was okay.

So I think we have to be hyper focused on what's happening with the real data in the next two months. Is that the most important economic data point to follow anything related to employment? Yeah, anything that is giving a pulse on the underlying trend in the economy. Could be services consumption, it could be the labor market, or maybe credit itself. Do any of your models incorporate sentiment analysis or are you just done with it? It's just so noisy. Yeah, we don't do a lot of sentiment analysis. Sometimes we use it as a kind of complement to positioning indicators.

It's just another way to kind of capture positioning, but we wouldn't use it as a fundamental read. If you did these days, you'd be trading every two days. I've never seen sentiment swing the way that it does, from the absolute lows to the absolute highs. The report we got this week, highest jump in conference board, future expectations component in four years, what the f***? I thought a week before,

everybody thought the world was about to end. I mean, from my perspective, not that I ever used sentiment well, I don't really know how to do that, but it just seems impossible now. Yeah, well, like if you're using it as a tradable indicator, like once a lot of people start to trade a certain indicator, like it's if it becomes useless, right? So we probably have that. But if you look at that consumer confidence level sentiment, right? We we probably have that. But if you look at that consumer confidence level sentiment, right, we had an incredible drop. Yeah. Once the tariff concern was the most

intense and now we had this incredible bounce, the level is still low, even after the incredible bounce, right? So the overall consumer sentiment is low. It was it fell off a cliff in April right so even after the bounce we had in the latest reading the level is is not a good level okay so but in the end it's gonna depend on what the real real activity is showing and it will be strange if we don't have a substantially weaker year for consumption it'll be strange. That's my expectation and I so I'm not looking at if we don't have a substantially weaker year for consumption. It would be strange. That's my expectation.

So I'm not looking at data, obviously, to the extent you are, but I'm paying a lot of attention to commentary from CEOs. That's kind of like the way I do sentiment, and it's totally anecdotal. I'm not collecting any data on it, but it's one company after another saying almost the same thing now.

And it wasn't like that during the last earnings season. Now it seems more uniform. How do your clients work with you? Are you one-on-one with them or do you have reports or that you put out dashboards? What is the experience like of a Exaunti client? So we have a global team so we're about 20 people on my team right so a bunch of those people are writing research reports or we have a chat system right where we chat with our clients when there's something important going on and then we have some people who code, right? So we have a data platform where we essentially

put our forecasting tools on the data platform so people can access them. So it's sort of a holistic risk management service that we provide. I'm guessing not a lot of retail clients given the sophistication of what we do. We don't have retail clients for this service. Are more of your institutional clients,

are more of them looking to use your tools, or are more of them saying, okay, skip all that, just give me the answer? Or is it kind of a mix of both? Yeah, kind of. When we service an institution, we want to make sure we have multiple touch points, right? And the chief investment officer wants something different from the first year analyst, right?

Okay, that's interesting. So the chief investment officers typically get the sort of big picture conclusions from our research. And if you have a strategist or an analyst that engages with our service, they would engage with sort of number crunching level. Tell us about, you told me that, so tell Michael and the audience about Market Reader. Yeah.

I was gonna try to explain it, but you'll do it better than I can. I made a mistake to run two companies. Okay. But that's- I want you to check this thing out. It sounds awesome. So, Market Reader is a piece of software that explains in real time what is happening in

the market. Like, why is Meta down? Why is Google up? Why is... Sounds like a desk analyst, actually. It kind of is. It's kind of trying to replicate what was happening with humans on a hedge fund desk and looking at flows, looking at the calendar, looking at the price action,

all markets together, obviously news, and then synthesizing that using AI to give like a brief, precise explanation of what's happening in real time. I love that. Yeah. That's very cool. You should be buying it.

I strongly recommend that you buy it here at Ritz Hall. That would be my... So that's more of a retail slash wealth management driven product offering. Yeah. For people that is... They're not running a hedge fund, but they have to be up to speed on what's going on. I thought they go to like Yahoo Finance and you might get nothing or an AI generated bullshit article. That's right.

There's like even if you go to... A lot of people try to Google what's happening, right? And all the results are now contaminated by some low quality AI. I love this. When did you start it? So we launched this company three years ago and we've been sort of really delivering. It's quite difficult to build. So it took two years to build and we've been engaging customers for a lot of years. So the customers that are using it, are they logging in each day for like a summary? Here's what's moving the markets this morning?

Yeah. That's how I use it. Right? So I can absorb more information by like looking at like, so for example, when Silicon Valley Bank was cracking, right? Yeah. Then I just had a screen with all the regional banks and I'll get all the actual moving parts in the regional banks world that I don't know any of those names, right?

But it will tell me what is important. You don't even know which tickers to put into a Yahoo! It will tell you what is moving the most. So it will tell you the epicenter of what's going on and tell you those stories. So I think for me, it allows me to absorb more information but it could also be like if there's a portfolio manager that want to inform their clients about what's going on the portfolio it could be a very succinct way of doing that. I like it for that. Which LLM is it built on? It's mostly based on open AI structure. Okay. Yeah. And it's pretty lightweight for you to

run and provide to people like it's... It's gonna look lightweight to the people who get the results, but there's quite a bit of compute going on. There's a lot happening there. Yeah. All right. That's awesome. Um, so we would encourage people, of course, check out Xanti if you are a professional investor and if you're not a professional investor, but you want to inform yourself, Market Reader is a pretty cool tool. So I'm going to start incorporating this into my day. We'll see what the ways in which I use it.

I appreciate that. Yeah, I'm using like generic chat GPT, like just the $20 a month thing. And I have it doing this custom thing for me each day when I log in. So it knows what I do for a living now. It knows how I use information. I've talked to it enough that it knows what to serve me. Still sort of dissatisfied because I could tell that it's not built to do this by market people. It's not real time. And then it shows me the sources. And I see the source and I'm like, oh, I don't go to

that site. That's where you're getting data from. So anyway, that's the whole thing. But we'll check it out. You guys, did you have fun on the show today? Absolutely. The clapping and the funny noises, they're definitely different from Bloomberg. I seem to see. So good to do something new.

So we always end the show by asking people what they're most excited for in the future or what they're most looking forward to. So we know for you, initial jobless claims is a big thing. What are you really in real life most looking forward to? I think when you are... Buying a dog. When you're involved with markets, it can be kind of all-consuming. I think my goal for the future is to really have proper downtime. And that could be downtime for my family and so forth, but it could also be downtime in the sense that you have blocks in your week where you can meditate, really think about

longer term issues as opposed to dealing with this kind of tactical stream that's going on. So I think being more organized about actually inserting these meditative. You're gonna try to do that this summer? It should be, it should be, it should not be for a period. It should be a thing where you have a shift where it gets just a part of the normal way of operating your week that you have those periods.

If you figure out how to do that without, because you run two companies now. I run one company. I can't figure. If you figure out how to wait to put a block in and then not violate it when somebody asks you to jump on a call or do a thing, like to actually be able to say, no, this is my block where I'm thinking and breathing. If you figure out how to do that, tell me. Because I need to do the same thing. I'll write you a letter about it because I don't want to interrupt your meditation. Michael, what are you looking forward to?

You got game five on tap? I have game five on tap. I'm looking forward to Chicago. We're going to Chicago next week. We have our second HQ grand opening. We're bringing 50 employees out there. Good. And we have 58 Red Holtz employees. It's the largest gathering of all of our people. We have more employees. We have 74 overall. 58 of them will be together for the first time since like we've never had that many of us.

It's fun to see the growth, right? It's crazy actually. But we've never had that many of us all in one place. Gotta memorize the names before. I know everybody's name. I don't know all the spouse names and all the pet names and the kid names. At this size, I don't even know if that's possible anymore. The dogs are probably going to be less offended than the humans. Yeah. Do you like Chicago?

I think Chicago is a great city. That's one of my favorite cities in the country. So we're going to be out there next week. We're doing a live version of this podcast. Our guest is Kunal Kapoor, CEO of Morningstar. So you must have run into Morningstar and you're in the data game now. Yeah. Okay. Anyway, we're super excited about that. I want to say thank you so much for joining us today, Jens. We really appreciate it. I know you don't do a lot of podcasts. You don't do a ton of interviews, so this is really meaningful for us to have you here. And we hope to have you back again sometime. Sound good? I'm looking forward to it very much.

You want to come back next week? Ladies and gentlemen, Jens Nordvig. And check him out at Xanti and Market Reader. Great job this week on the show. All the Compound crew. We appreciate you guys so much. Too many of you to name, but you know we love you. Guys, thanks for listening. Please leave us a rating and review. We'll be back soon. Thanks again.

Have a great weekend. All right, so that was the warm up. I just wanted you to get a feel for how we do things. No? All right, we'll use that one. Let's go. How would you... No?