The Derivative - Debunking Trend Following’s Dead Theories with Kathryn Kaminski

Episode Date: October 22, 2020

Is trend following too big? Can managed futures do it without the bond tailwind they’ve had for 30 years? Does globalization take away diversification? We’re debunking these trend following myths/truths (?) in today’s podcast – and today’s guest is ideal to take us through the ins-and-outs of these trend following theories. We’re joined by Kathryn Kaminski, PHD, CAIA, and Chief Research Strategist & Portfolio Manager at AlphaSimplex who has written the literal book and research papers on these theories and more. We’re also talking with Kathryn about AlphaSimplex, COVID puppies, the Nashville predators, diversifying across trends,  Dr. Andrew Lo, research papers & books, pure risk premium, crisis alpha, trend following “doesn’t work” theories, alternative data, being an MIT professor, homemade Swedish meatballs, risk/volatility targeting, and being an alternatives person in a stock town. 00:00-01:43 – Intro 01:44-13:18 = An Impressive Background with a touch of Sweden 13:19-35:03 = Alpha Simplex, Trend Models, & Crisis Alpha 35:04-53:19 = Debunking Trend Following’s Dead & Inflation Environments 53:20- 01:09:51 = Risk Targeting & 2020: A year in review 01:09:52-01:13:29 = Favorites Follow along with Katy on LinkedInand check out the AlphaSimplex website. And last but not least, don't forget to subscribe to The Derivative, and follow us on Twitter, or LinkedIn, and Facebook, and sign-up for our blog digest. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer

Thanks for listening to The Derivative. This podcast is provided for informational purposes only and should not be relied upon as legal, business, investment, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations nor reference past or potential profits, and listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk

of substantial losses. As such, they are not suitable for all investors. Welcome to The Derivative by RCM Alternatives, where we dive into what makes alternative investments go, analyze the strategies of unique hedge fund managers, and chat with interesting guests from across the investment world. If you think about certain markets, they tend to speed up or slow down faster during different periods in time. So bond markets in particular, in the last two to three years, we've seen these fast accelerations as yields have gone down

much quicker than a linear process. And so with a typical linear model, you're going to be a lot slower to move into those type of movements. Whereas if you can aggregate different methodologies that are a little bit more nonlinear, you can actually be a little bit faster to move in when you see a short-term move versus a longer-term move. We see that has been a sort of one way I think about it is trying to follow the trend, but not just in a linear fashion,

but in a more thoughtful and aggregated dynamic fashion. All right. Hello, pod listeners. We're going back to our roots today with a guest who literally wrote the book on managed futures. Heard of Crisis Alpha, she coined it. Read Kaya and CFA educational materials? She's written them. Referenced any of the wonderful Alpha Simplex research papers? She's researched them. We've got the one and only Katherine Kaminsky with us, PhD, Kaya Charterholder, and Chief Research Strategist and Portfolio Manager for $5 billion plus Alpha Simplex. Welcome, Katherine, or should I say Katie? Either way, great to be here, Jeff. Nice to see you again.

Nice to see you. I don't think we've seen each other since back in in-person days down in Miami, probably at Context. Or one of the managed funds or other conferences. Exactly. Yeah. So are you excited to add guest on the derivative to that lengthy resume? Of course. I was super excited to talk to you about managed futures and trend following because that's basically what I do every day. So it's one of my favorite topics, as you can imagine. And it's been an exciting year. It's been a really exciting year. And where are you guys still work from home or what's your COVID status? We're still work from home, like many of the Boston area, but it's been sort of fascinating to see how we can still really follow our research process and how we can collaborate using modern technology. So, of course, those of us quants were talking to each other all the time. And as a systematic investor, it was something we always did everything automated, but we never managed and doing it remote. It's worked fine.

So and remind me, I don't remember. Do you have kids or no? Yeah, I have two. So they school from home. They have been they've been hybrid more recently. So it's been kind of a relief, easier to get my work done. Yeah. And they've been learning things as well. So my daughter made me a little sign says podcasting quiet, please with please misspelled that I'd put outside the guest door here when the podcast is going. That's good. If you see any puppies, children, other things coming in on this side, it will not be a surprise. Love it. Was it COVID puppy or you had a puppy before? We had a dog before we recently went for the second round, second wave of puppy.

First puppy wave was in the spring, you know, and then other people started thinking, Hey, maybe I'll go for the second wave of COVID puppy. So we have a second wave COVID puppy. I was talking to someone recently who's like, there's going to be a huge wave of like rescue dogs come like six to 12 months from now when everyone was like, get this thing out of my house. And they go back to their office and realize that somebody needs to take the dog out. Yeah, exactly.

A lot of sad dogs come once we get a vaccine. So you grew up in Nashville, but now you're based in Boston, but your husband's Swedish. So how does that all work out? Yeah, it was a long trajectory. I'm a Southerner, grew up in the South, but I went to MIT for undergrad and PhD. And after that, I ended up moving to Sweden to work at the Stockholm School of Economics before I joined Managed Futures. So I ended up meeting my husband in Sweden and both my daughters are dual citizens and were born in Scandinavia. So they were born when you were over there?

Yeah, I was in Sweden for almost a decade. And my first stint in the managed futures industry was with RPM, which is a CTA fund of funds. And that's how I really jumped in. What did you say? We've had them on the pod. Oh, yeah. Awesome. Yeah. So and I'm sure they're familiar with you guys.

I remember learning about you guys back when I was at RPM many, many years ago. I thought actually, I think the first time we met, I thought you were Swedish. Yes. I'm fake Swedish. I'm not actually Swedish. I speak Swedish. I may be Swedish, but I'm not Swedish. Can you give us a little thanks for listening to the derivative? Thanks for listening to the derivatives. Sweden. In Sweden, we love derivatives. I don't know. Yeah, no, I lived there for a long time and my husband speaks Swedish at home with the kids. So I actually know how to talk about it. We can talk about trend following in Swedish, if you like. We'll pass on that. It'll be a oneway conversation if we do that. And so on top of your research, you also still lecture at MIT? Yes, that's correct.

I've been teaching one class in the Master's of Finance program. I used to teach at the Stockholm School of Economics for many years. I loved it. And these days, I've been very fortunate to teach one course in the master's in finance program at MIT. And I just, I absolutely love getting to meet and know the students because they're just so bright and full of energy and ready to jump into new areas of our business. And what, what does MIT look like with the virus? Is it fully remote or you, what are you doing with that?

So MIT was remote when I was teaching this summer. I'll have to admit I miss the students in person because I just love getting to know them. But I tried to have chats with them on Zoom and we had different moments where we could actually interact in breakout rooms and stuff. So I think they're doing the best they can, given the situation that we have at hand. We all love to be in person. So I'm hoping one day we'll figure that out. Yeah. And what does that breakdown of those students look like? Like foreigner versus US, male versus female, it's very international, um, very predominantly international. Um, now I I've been surprised at the number of female, uh, students in the masters in finance, a very good portion of them, at least a third or more. Um, and I think you're seeing a lot of

young women going into finance in these areas. And, and it's, that's one of the reasons I love teaching because it's fun to be a female portfolio manager, especially quant because it's a little bit- One of the few, right? Have you found that- It's very rare. Have you found that hard in your career to be a female in this industry? I'd say that it has its pros and has its cons. I mean, I'd say that there's always things that are different, but I've never had a problem with it. I mean, I'd say that there's always things that are different, but I've never had a problem with it. I mean, I'd say that I sometimes forget just because I don't think about it,

but I started as a mathematician and an engineer. So it wasn't that big of a change, I'd say, even before joining the industry. There's just, sometimes I notice there's advantages. Like it's easier to remember people who are different. So people remember you. And I think there's research out there that female hedge fund managers outperform. Have you ever seen that study? Yes, I have.

And they talk about that at the CFA and some of the different environments. And my view is that different approaches outperform. So I think that anything that promotes trying to have different ways to think about things is always good. And so that's just one of those areas I'm totally in agreement on. And actually at Alpha Simplex, our CEO has been really supportive of diversity within the company. And we actually have a very sizable number relative to what we used to in terms of on the research side and women as well. It was one of the things that we did is actively work on recruiting a diverse group of individuals. So you mentioned the CEO. So we're talking Andrew Lowe. So Andrew's not the CEO of Alpha Simplex. He's the founder. He's the founder. He's my mentor. He's my thesis advisor. He is an emeritus now, and he's much more focused on healthcare finance.

He actually co-teaches a course at MIT with Harry Lodish from Biogen. He's very involved with the FDA now and involved in financing cancer research and other sorts of new frontiers in finance. So he's less involved in quant finance. He's actually very involved today in how do we incorporate finance into health. I wasn't kind of making a quant model of like an ensemble approach to solve cancer or something of those. I think I heard. Super fun type of, um, of ideas. And he's doing a lot of really cool stuff. He's actually teaching a course, uh,

in writing a book on healthcare finance last that I, um, last as of now. So that hasn't come out yet, but, um, he's very much. Well, once the book comes out, we'll lean on you to help get them on the pod to talk through what's going on there. That sounds good. It's very inspiring. He was actually your thesis advisor and your, he was teaching you. Yes. He was my thesis advisor at MIT. Um,

and we also used to co-teach some classes at MIT. He is truly an inspiration. I got the opportunity to work for him for all of my PhD. And I wrote some papers with him and have done some things with him even in the past. And his ability to see new areas of excitement in finance is really impressive. And did you know at that time, like what a hedge fund was? Obviously you were learning, but like, and that what, who and what Alpha Simplex was and wanted to get into that lane.

Jeff, that's a great, I'll tell you a funny story. So I used to have PhD meetings sometimes at Alpha Simplex. So I know the entire Alpha Simplex team since 19, wait, let's see, since 2001, 2002. Yeah. So the senior members at Alpha Simplex, they, they, most of them know me because I was a PhD student of his when the company was first formed and I spent a lot of time visiting them. And when I was doing research initially on Crisis Alpha, I was, I went to visit them to present my ideas to Andrew at Alpha Simplex and, you know, and, and, and his team. And, and it was really cool because I have this connection. I've gone back. And at the time, were they leaning on the students to like do pre-research for them,

or it was kind of a two-way street? Not exactly. It's always been very separate from MIT. I think that the people who were at Alpha Simplex, some of them were alumni from MIT and Harvard and some of the universities around here. And it was very easy to recruit great talent given where we sit. And so that was a little bit separate because the objective was very different than that. And is it weird being alternatives folks in a stock town? Yeah, not too much. You'd be surprised. There's a lot of pockets of alts. I mean, you have several large firms in the area that are not just stock, but also doing more alternatives approach with stock. And we definitely see that there's quant for sure. I mean, alternatives less so, but these days I think it's, you know,

there's, there's no, there's not a lot of, the barriers are starting to disappear. Yeah, for sure. So give us the Alpha Simplex. We mentioned them. Give us the quick elevator pitch on their, they don't have a strategy, but if you can, maybe the overall firm, and then we'll dig into their managed futures strategy. So Alpha Simplex is a quantitative investment manager. We focus on a wide range of approaches to trading markets, focusing on adapting to evolving markets over time. Our core competence is more in alternative risk premia and particularly managed futures.

But we've also been engaged in a lot of different types of strategies from the range of stat arb all the way to global macro at different times within our organization's history. Our core largest product is the fund that I'm the most intimately involved with, and that's the Managed Futures Fund. strategy, focusing on using different technical methodologies to measure where trends are going across a wide range of global futures contracts to capture what we would like to hope for is crisis alpha or uncorrelated returns with dynamic investment approaches. And how would you differentiate that program from like a pure, some other pure trend follower? So our approach has several different methodology.

It's going to be similar. Of course, all trend programs are somewhat similar, as you know, Jeff. A trend is a trend or isn't a trend, you know. We have a few methodologies that we think differentiate ourselves from some of our peers. One of it is that we focus on some faster models and we try to be a little bit more reactive in our methodologies. But we also have some more adaptive techniques, which are many of them based in the machine learning literature to try and adjust how fast or slow our systems move on the margins to adjust to changing market conditions across different asset classes. And those are generally the approaches that we're well known for.

Those are the two core methodologies we're the most well known for in the trend space. But as you know, I mean, trend following is a beta strategy. It's a strategy that has been around forever. And we always believe that the devil's in the details. It's about precision. It's about robustness of parameter sets. It's about really thoughtful and appropriate risk management. And so those are the things that we spend a good portion of our time with that program. It would be fair to say, okay, some are shorter term, some are longer term. We're more dynamic in our analysis of the timeframe and the markets. Yes. I mean, let me give you an example. Everyone's dynamic in the markets, but yeah, sure. Everybody's dynamic. Everybody's dynamic. So one of the things I found that some

of our systems have done a good job in trying to deal with is if you think about certain markets, they tend to speed up or slow down faster during different periods in time. So bond markets in particular in the last two to three years, we've seen these fast accelerations as yields have gone down much quicker than a linear process. And so with a typical linear model, you're going to be a lot slower to move into those type of movements. Whereas if you can aggregate different methodologies that are a little bit more nonlinear, you can actually be a little bit faster to move in when you see a short-term move versus a longer-term move. So we see that has been a sort of one way I think about it is trying to follow the trend, but not just in a linear fashion, but in a more thoughtful and aggregated dynamic fashion.

Like a jump theory kind of thing. I made that up, but I don't know if that's a thing. So I've used the joke on here before. I tell my 11 year old son that managed futures has been in drawdown his whole life. So you recently wrote a paper of like reflecting on your past 10 years in managed futures. So like share with us some of the insights you got in that paper and basically, yeah, your experience over the last 10 years, what it looked like then what it looks like now. Oh, that's a great question. That was a lot of fun. We had the 10th anniversary of our managed futures program.

And one of the things I felt like, you know, this is the time, it's a good time to reflect on 10 years. And I can't believe it's been 10 years. And I also have an 11 year old. So that's even harder to believe, right? That goes like, boom, it's gone. Yeah, 11 and nine. And so what was interesting about thinking about that voyage, and you know, Jeff, you've been on this voyage with me, is that we've all been on it together, is that 10 years ago, I was writing this paper on crisis alpha. And I had this really interesting situation that I was I had come up with after studying managed futures returns during crisis periods historically and being very fascinated about why is the strategy do so well in a period like 2008? And why I was so fascinated is that as an academic, we tend to be skeptical of anything that tries to time the market. So it seemed extremely counterintuitive that at the most inefficient moment in periods or in the crisis, that's when the strategy does the best. And

it was precisely that realization that brought me to realize that, wow, you know, the strategy does really well when things are really difficult, when things maybe are less efficient than they would be normally. And so I started thinking about this concept and came up with an idea and pitched it to Andrew, my thesis, former thesis advisor at this point and friend. And he was like, oh, this is interesting. That's great. You should write something about this. And so I ended up doing that. And back then it was more a question of why. I mean, I remember talking to some pension funds in Sweden and one of them was like, if you can't tell me why this works, then I don't care. I don't care that it did work. I want to know why. I want to know why. And so I remember specifically an event where I was speaking to a CEO of a CIO of a pension

fund in Sweden. And he said that to me. And I felt like if I can't answer that, then what's the point? So I went back and I wrote this paper, which I had no idea was going to lead to eventually a 500 page book on the subject. So as you can see, I really researched the topic. And when that happened, it was still very much people were not really that familiar with the strategy. They thought it was a black box. They were confused. That's not the case at all anymore. I mean, 10 years later,

we now have gotten so much more sophisticated. The investment universe has read books like mine, read other books, read the CFA and the CAIA materials. And people really understand how these quantitative strategies work, whereas they felt very opaque 10 years ago. And what we have learned is there's a couple of things I also found that was interesting is, first, the industry is not the same. Like things have changed. People have changed the strategies that they use. And, you know, yesterday's CTA isn't today's. And that is concerning sometimes for investors, me as a prior investor myself before becoming a manager. I feel like you don't buy a historical track record.

You buy a system. And the systems aren't necessarily the same as what they were before. A couple of things have changed. One, people have added more stuff, right? More machine learning, more, more non-trend strategies, more mean reversion, more other things that they figured out. So murkying the waters of whether or not you're just a pure trend follower. Okay. Sorry. I could, well, you want me to interrupt you or let you finish? Go ahead. Go ahead. Do you think those change? I've been saying this a lot on this pod and elsewhere, like, I feel like they were, Hey, we got to change or we're going to go out of business. Right. It was

like almost, we got to add more carry. We got to add more long bias. We got to go longer timeframe so that we can survive. So we're not losing 4% a year for five years. Right. They were shedding assets. People were getting bored, if not outright, like you got to perform better. So they started to add some of those convergent strategies, if you will, that were in between the periods where they're waiting for the divergent returns. No, exactly. And I mean, I think there's nothing wrong with that at all. And in fact, sometimes that can have a very good return

series. The only challenge is, you know, in periods like early this year, or whenever you have some sort of divergent environment, it can be less helpful. And so it just is, I think investors have to be aware that- Yeah, I think from an investor standpoint, I'd rather you didn't change like that and just gave me this pure risk premia. Right. But it's like, well, but then you might just ditch me because I'm you're only that pure risk premia. Yeah, no. And that that has been the, you know, the big divergence in our industry is that there's the pure trend people who say, look, we are pure trend. We stick to the trend strategy. We believe in following where

the markets tell us to go. And this strategy makes sense because things change. And in those changes, that's what you need. Whereas I think there's also been another push for, well, if you can do these other things, put them in there as well. Add carry, add other strategies. And there's nothing intrinsically wrong with that. It's just that the investor universe of who's using what is different. We find that pension funds or individuals who want to really know why you're performing a certain way, they prefer pure trend because it's much more transparent. There's less complexities of what was your challenge? Was it relative

value carry or was it trend or was it this in a month? And so I think that has pushed clients and investors into two different camps. And so that's been one of the big changes. So I got you off your train. So the first big change is there's been change, a lot of change. Migration of strategies and more multi-strategy approaches and more extended markets and more adding competencies to our typical repertoire. The second change. You're talking industry-wide, not just Alpha Simplex, right? Industry-wide. I mean, we do also do alternative risk premia and some of

those different strategies, but we have our flagship or not flagship, but our largest fund is a pure trend fund because that's something we've been very focused on for some time, but we do trade those other strategies, but not in the same vehicle. So a lot of us are very able to do, just like Alpha Simplex or other funds, able to create these type of strategies and trade them. But it just depends on what the objective of the client is and what we believe we can best deliver returns with. And then so in Corona crash here, you saw some of that play out of they didn't not pure trend didn't deliver as much crisis alpha, if you will. Yeah, you've really seen it. And I'll get to that point in a second. The second point that I wanted to point out was that we've seen slowing down.

So we saw that a lot of managers slowing down their systems. I like how you said slowing down slowly. Slowing down their systems. And it makes sense. It goes back to exactly what you just said too, Jeff, is that slower systems work better in the last 10 years. So a lot of people migrated to those. Is it a good or a bad thing? It depends, right? Yeah. And so when we looked at what happened earlier this year during the onset of this COVID crisis, we also wrote another paper looking at this as well called Corona Crisis, What's the Same, What's Different? We recently, it was just featured in PI Online this week. But what we found is that pure trends seem to outperform a multi-strategy approach during the COVID crisis. But not only that, faster systems were clearly more adaptive in this new world that we live in where things seem to be moving much faster than they were in the past. So as an example, faster trend systems were very positive during this

February to March environment, whereas slower systems just really couldn't move quickly enough to deal with how massively the markets fell. Yeah, it's way too quick. But so that's kind of counter to or to your point, maybe of like people are moving longer term, slowing it down. And then right as they do that, the faster, the quicker term is the thing that works and they're moving to multi-strat and then boom, the pure trend is what works. Yeah. And so that was very obvious this year. I mean, I'd say in a typical environment, I can't really tell as I look at, I kind of obsessively look at manager returns because of my previous role. So I like to look at returns and trying to see what's driving this.

And we look at a lot of factors and what different tilts in your system might be different on a given day. just day-to-day how pure trend was just navigating the movements a little better than more complex or perhaps more mixed approaches. Yeah. And then you even get some managers who are outright blending it with outright long equities and say like, hey, I know this is tough for you to stick with this strategy type, so I'm going to pair it with long equities. So you can basically always have it on without having to worry about it, which was, I actually think that's a good, that can be a good thing because it, it kind of blends the approach. I mean, I think that last point is both of those have the potential to have a cost in crisis alpha, just in the way that crisis alpha tends to be being able to adapt to very, you know, stressful market

environments. And those two characteristics are some of the ones that are more helpful during a crisis. And because we haven't had any crisis until this year, it actually might've been a good choice, but this year was a little bit more clear how those choices might have affected your, your, your performance. And in theory, they should be able and could be dynamic, right? I'm like, Hey, when it's, when I don't see any dangerous, right. Timing risks. But when I think I was well, maybe I shift more towards that longer term, long bias, whatever. When things start to unravel, maybe I quickly shift back to the other way. And then I can have kind of the best of both worlds.

I tend to call that trend following squared. You shouldn't trend follow the trend followers. It's really hard. The timing is super difficult. So one doesn't want to try to. If I knew how to do that or if somebody knew how to do that properly, I think we would all be very delighted. Yeah. It'd be the guys in your research room that would know how, um, but it seems logical and you'd seem like, okay, these guys are changing, but they're, you got to give them a little benefit of the doubt of like, well, that might

not mean they're always changed that way. Right. They could change back. I mean, I think, I think these days this is an advanced, you know, more sophisticated industry. Like I said, there's different strokes for different folks. Like they have like some people that want a multi-strategy approach, some people that want a pure trend approach. I personally am a pure trend follower. I believe that a pure trend following approach is the most diversifying because it is the most philosophically different. And that's something that can really add to someone's portfolio. Adding something that has more equity exposure, more convergent type of bets, it's something that we already have. It's very hard to find something different in the world.

So I tend to think about that's why I like trend following. And so back to that term crisis alpha, and I think one of the other big changes the last 10 years is there've been a lot of outflows, right? Like people have kind of been sick of waiting for that next crisis. I think part of that was my fault, your fault. The industry had been like calling it crisis alpha and like, you need this to protect against,

instead of just like, this is, can be an always on, they're waiting for it to be a crisis. But would you change anything in that view of like, to me, there's too many path dependencies on, right? It's not going to always capture a crisis. You have to come into the move, not already long, hopefully not short bonds, right? There's a bunch of. You have to come into the move, not already long, hopefully not short bonds, right? There's a bunch of things that have to line up for it to perform during that crisis. So anything you would change from crisis alpha? So I would say, I mean, I still think that crisis alpha is the right term for the right moment. And I think that a lot of things can try to capture crisis alpha, but only few have a good chance of doing it.

And I think that hasn't changed. I think the challenge I have found the most is, and I had a paper out in 2016 that tried to address this. It was called Crisis Alpha Everywhere. And what I was trying to do with this paper is clarify that a crisis is not just equity markets. A crisis is things changing. So I think that maybe the word crisis is a little polarizing. So maybe the idea is change, disruption. That's why I actually really like the concept of divergence change. So a

divergence strategy, because divergence happens all the time, just happens in different places. I mean, you and I both know very well that 2014 was a big crisis for commodity markets. Yeah, for an energy producer. But not, you know, and you could actually look at this year and say, oh, you know, there's a crisis in equities. But for anyone who alpha more as this special thing that we may try to capture, but we want to be ready for it. But we focus more on divergence because divergence is much more uniform in terms of divergence can happen in anything. Yeah, right. Like there's a crisis when cotton's at 20-year lows or something for those. Or gold this summer, if you actually were selling gold, I mean, it would be a huge move. So I think

that's divergence is a more pluralistic term for the industry. And that's why in my book, we actually focus more on that term. I still like crisis alpha though, because it defines what somebody's really looking for. And where do you go if people say, I'm going to use it as a tail hedge? I have a harder time with the tail hedge. I think that there are tail hedge properties, but anytime you use the word hedge, you may give someone false expectations. Right. And tail hedge has the implication that you're hedging a left tail equity market in particular. I like the term crisis alpha because alpha is hard to capture. Not everybody gets it. Everyone tries to get it. Tail hedge gives the suggestion

that you're going to save someone from something terrible. And you can't always know what those terrible things are. And I think, look at this year. I mean, how many of us would have ever guessed that we would be dealing with a global health pandemic? I mean, that is not one of the state spaces that we were looking at in our models. Yeah, I'm with you. Or that like Tesla and Apple would quadruple after the pandemic. I wish I knew that. That would have been great. Someone asked me today, like, what was, what would you have done different if you'd known? I'm like, I would have quadruple levered Tesla calls.

What do you mean? That would have been the best call. That's the truth. I mean, I think that's a challenge with tail hedge in general is watch tail. Right, right. I mean, you can probably protect some challenge with tail hedge in general is watch tail. Right, right. I mean, you can probably protect some tail that probably won't happen again that happened in the past. But, you know, this tail this year. Trend following Man's Futures profiles the smile, right?

So you're capturing those outliers in both sides of the tail. But not perfectly. Right, right. Never perfectly. Right, right. Never perfectly. So I want to do this little, hopefully it's fun for somebody, but go through these little trend following doesn't work anymore arguments. And you can just give me a quick little why that's dumb or why that's true. So trend following is too big. I'd have to say, I mean, I understand that point. It is big, but at the same time,

relative to the size of the cash markets and the world out there, it's not that big. If you think about fixed income futures, they're big, but so are the coffers of all the many different people that trade fixed income out there that change the prices of interest rates. I have gotten this argument many times and I often joked because I'll have reporters call me and say, the S&P is down. What did you do? And I go, are you kidding me? I say, call me. Have you noticed that that is a, like if any market said, oh, the CTAs, that was their sell stops and they're selling.

Exactly. And they say, do you have a stop? And we don't use stops. And I'll also say to them, well, maybe if you're talking about a very esoteric market where speculators or large traders are a lion's share and they're very niche, then maybe I would agree. I mean, maybe some of the agricultural markets are those that really don't have the same sort of volumes. But to be honest, our sizing is adjusted to that.

So we don't have, as CTAs, we don't have. You want to be the fly on the bull or bear, not the whip that makes it move. So too big. I mean, the truth is, is that also that trend following is a positive feedback strategy. So if we're too big, wouldn't we make the trends even bigger? Right. It'd be like this whole current argument of why the market's going up, right? Of like Robinhooders are buying calls that are making the dealer's hedge to buy, which leads to more call filing. And it's a positive feedback loop. So that's counterintuitive too. I mean, it's hard to answer that argument myself as well. I think it's a strategy that's hard to trade. It's not super high sharp ratio and it's hard to hold. And it goes counter to how we tend to like to trade. So it works well

when things are the most uncomfortable. So that's why I think it works is that people are people and they do herd and create trends when they do that. Next one, QE, Fed put, et cetera, et cetera, whatever you want to call it as broken trend following, because there's not as many outlier moves. I would have to say that that's something that I heard a lot, especially in 2011, 12, 13, 14, 15. There was a nice chart of like trend following the inverse of trend following with the like Fed balance sheets, basically. Yeah. I mean, there is some coincidence of those themes. But what I found interesting is that that's not 100% true. I think that government intervention creates different trends. Let me give an example. I mean, one of the best trading trends last year that we found

that we thought was really good was interest rates. Yeah. Now, you know, being able to capture that really interesting move last year as the US converged to the rest of the world, that was a huge trend and there's massive stimulus. So monetary policy. And even in German boons and whatnot, there was trends where they were already negative and they went more negative and you made money on that. So, I mean, there is sort of what I would say is that it does concern all of us. And we do talk a lot about stimulus and intervention and sort of what does it mean to be in a controlled marketplace where governments are intervening? I think it just naturally creates different trends

at different horizons than what we would have seen before. So the frequency, the changing of those trends is a little bit different and the features that you'll see are very different. But there's still trends somewhere. There's always a trend because there's always people occasionally hurting. One of the other one of the arguments that would be, but they capped because the Fed will is guaranteed to come in at some point. But it has made fixed income trading. I mean, it has made fixed income trading a little bit more constrained in that. How negative can we go? But look at like what I said before, is that the rates were up to three something percent and now they've come down closer to zero. Then I think this argument is getting a little bit more scary in the sense that if every interest rate is zero, what's going on? What about the leading into the next one of managed futures have had a bond tailwind for

30 years, they're not going to work when rates are lower or rising? I love that argument because the biggest trend in the last 20 years has been interest rates and we profited from that trend. So therefore we did what we were supposed to do. So, so on the other hand, my view is if the biggest trend is rates rising, we'll be ready to do that too. And most people are not ready to do that or not equipped to short in that space. So that's actually something I've been wondering about much more than the opposite, because if you take any time in history, there's huge trends. And then you say, well, that's the only trend that works. So why did you, you know, you can't work if that

doesn't work. I'll say, well, let's see what happens. I've actually looked at data over 800 years in my book, 800 Alex Kraserman. And we also looked at inflationary periods. We looked at data in the seventies and it's just fascinating because the strategy actually did well in a rising rate environment for very different reasons, But it's just that whatever trend is going to happen, we're going to find it. And so the more nuanced point there is that there's a roll cut. Instead of earning the roll yield, you're going to be paying the roll cut. So it's not going to be perfectly symmetrical on the upside. So you're going to have a different distribution. There's been some research that's done on this historically, and the distribution of how much you're going to capture on the roll is going to be different,

but there's going to be more spot price moves. So you're going to have interest rates actually govern all prices. So when you see interest rates go higher, it's actually creates more dispersion and lots of assets and can also create trends of the spot nature. So in terms of that, the prices are going to move some more too as well. So I think that's- I sometimes argue with people of like, there's also inside of trend following, just naturally you have these yield curve trades where I might be short the two year and long the 10 year. And so you create, it doesn't really matter which one's going up or whether the whole market's going up or down. You can create, capture relative value differences there. And there's also carry. I mean, for goodness sakes, who wouldn't like some carry? It's been so long since we had any carry on cash. I think that's another tailwind. If anything, I think that is the biggest tailwind that our industry has had to deal with is low interest rates. That gets conflated in that argument of you won't make money trading because I think they

say like in the 80s, you were getting 5% from just holding T-bills and that's not there anymore. So you're minus 5%. Yeah. And you have a natural cushion, which everybody unfortunately has lost now too. So I think it's, you know, having some positive carry would be a nice environment for all of us. All right. Next one, globalization, it creates too much connectedness in all these markets. It's like risk on or risk off because everything's connected now. So it

kind of takes away trend following's natural risk control, which is diversification. I'd say that that is something that I definitely think that's something we talk about. Whether or not it's enough to destroy diversification altogether, I don't know. I think CTAs have added more and more markets to deal with that problem. Because if you take the number of markets that a typical CTA uses today versus even 10 years ago, it's quite a bit more. And it's more esoteric markets and more esoteric equity markets. So I'd say that, yes, that's true. I think probably the thing that is more something I think about more is more the concentration in global equity markets in terms of the tilt towards technology. And it's very interesting because there's been some

research done and I was thinking of a study that an MIT professor did. I don't remember the exact title of it, but he was looking at innovations. And if you think about our world at sort of an inflection point right now in terms of work and business, back in the day, almost all of the S&P was railroad stocks. Right? I mean, so think about it. That would be the discussion back then. Like, well, I can't buy the index because although you couldn't really do it. But I mean, because it's just so much railroad exposure. I've got too much railroad exposure. I've got too much railroad

exposure. And today, technology takes up a very large portion of a lot of these large indices. And so I think that's something we're actually more interested in than globalization, because I think that diversification on an equity perspective has become a little bit more challenging and that world indices are much more in sync. But, you know, to be honest that that hasn't always been the case. I mean, to be honest, like I think it was 2018, the U S was behaving very differently from the rest of the world. So we do see waves of, you know, it's not time synchronized all the time. I

mean, look at this year, EM has done very differently than the US. Yeah. And it's true. I think we put this in two years ago in our managed futures outlook of like, forget trade war or interest rates. It's what's Facebook's earnings look like, how many iPhones have been sold. Like that's what's driving the market, not this stuff that used to drive the market like unemployment and whatnot. Technology is today's railroad. Literally and figuratively. So we sort of touch on as the next pan would be, it's over diversified. And like we said, you're in these esoteric markets, but if I make money in palladium, right, I'm just kind of taking that out of my left pocket and putting it in my

right, right. I lost it somewhere else. So I made it, but I lost it elsewhere. And it's a net zero. Like you really need for those esoteric markets to pay off. You need many, you need correlations going to one and everything happening at the same time. Well, I'd say that, you know, our goal is to try and diversify across trends. And these trends have different frequencies and horizons, too. So I think that's where it's not really sort of a, there's not a simple answer to that. Because if I look at the asset classes that we trade right now, I feel like they're trading at very different frequencies. Bonds were very aggressive until April, and then they've just been sitting in a range for the rest of this year. If I look at metals, they were going wild this summer at very different times and very different frequencies and very different accelerations. And equity markets, the same game, like the US has had

almost a V-shaped recovery when we were only talking about U and V and Z in the spring. And so I think it's much more complex than that, in that it's not just about whether or not the trends are all synchronized. They often have very, very different signatures in terms of when they start and when they start and when they end and how strong and how slow they are. So there is actually a lot of opportunity to do a good job at trying to manage that. And I think I would argue you can look at them as a bunch of different bets, if you will, as well. So as long as the sizing is correct and I get paid out more when it is an outlier than I lose when it isn't,

the sequencing doesn't really matter. Maybe it matters for you as an investor and you're like, I've just gone two years with flat performance, but in theory that sequencing is going to shift and then you're going to get it all at once. And, you know, trend following has always had those challenges, Jeff, you know, like those trade, those sort of whipsaw days. I mean, this last month or so has been a perfect example of that. I mean, it's a natural course of the market trying to figure out where we're going. Right. So if you take the last month or so to create a new trend. Yeah. I mean, if you take last month or so, I think since the summer, it's been this is stimulus going to work, you know, inflation tolerance, this, you know, where are we going type of recovery or not

recovery trend. And that's not a straight line. That's why this is a hard strategy, because it's not an easy thing to, you know, to resolve the market itself doesn't know the answer. If we knew the answer, then we could just go home. But it's still uncertain still uncertain i mean i think it's really really noisy erratic but so my last one sort of ties into that of its trend falling to relying on just price action when these days you have dealer flows and gamma and who knows all this sorts of stuff of like the market players instead of the market itself. This is one of my favorite questions because I was recently on a panel talking about something similar to this. We were talking about alternative data. And I love alternative data. I think it's so exciting. I think there's a lot we can learn from it. But the truth is, we also know that when there's information, people use it to

create action. So they buy and they sell when they know stuff. And so at the end of the day, the price is the first common denominator. It tells you something about where the world is going. And yes, it's not a very clear signal, but at the end of the day, the price represents the collective wisdom of many, many smart people. And many dumb ones, too. And dumb ones, too, of course. But we just need a couple smart ones, right? And then we can see where the market is moving. And particularly in these moments when we have a stress or crisis, that's when it's the most interesting to me. I mean, I think moments like the Brexit was very interesting to me, the 2016 election, the impending coming up election. Just, you know, what is the market is collective wisdom. So yes, I could do a lot of work with

alternative data and a lot of people do, but that data is out there and someone's using it to make a decision. And that decision gets incorporated into what we see on the print. Yeah. And I think you could perhaps argue like people went longer term because there was hft moving into futures markets and commodities and pushing prices around that made faster signals get in too soon or right in right when the hft was going to slam it back so both sides might be right there i mean that's a good question i think we all i mean price is just one way i mean obviously we're ignoring some other things. I always feel like what I say to clients or when I talk to investors, I say we're not asking why the market's going somewhere. We're asking where the market's going. Yeah. And so when the market knows something that you don't, it can be helpful. When you know something that the market doesn't, good luck for you, because that's hard to do, but it does happen. Then it can be harder for us. That's just the

way to think about it. It's a way that cookie crumbles. So you mentioned somewhere in there, I'll change subjects a little bit, mentioned trend following managed futures as an inflation has done well in inflation in your 800-year test. So how do you think of managed futures as an inflation hedge? There's that word again, but some people, especially today with perhaps we're going to get inflation, are thinking of it that way or trying to put it in that bucket? The challenge with inflation is that you lose a lot of value in the things that you own. So it's very scary to many of us personally. But for those of us who are thinking about it from a trend perspective, things moving a lot

is very good. So from our perspective, if you were to have reflation and commodity prices or massive moves in commodity prices for different reasons or different assets, that creates trends. And that's what we do. So in some sense, we also found that higher inflation environments were more trendy than those without as much lower inflation. And that makes sense. I mean, if things are moving, they're inflating in value, you're going to have more things move, which means that there are more trends to potentially capture. We just don't personally know how to think about inflation because we haven't experienced it. I mean, obviously our parents have and others have in the 70s, but most of us have not been around. Well, if you're in a major US city with a 10, 11 and 9-year-old

like me, you have school tuition inflation and healthcare inflation. Yeah, so that kind of inflation we all know well. That's true. Good point. I always say that. I'm like, what does inflation mean? To me, it means these property taxes, tuition, childcare, and healthcare. Healthcare, yeah. I don't care what a hamburger costs, but those things are what's inflating. To me, it's always, okay, it should. It's back to that crisis-solve-a-conversation. It should do well in a market sell-off.

It should do well in inflation, but it's not mandated to do so. That's not its main goal, but it should. I wanted to talk quickly. You did a paper, and I've argued with some people on here before, of volatility targeting, risk weighting via volatility targeting or via position sizing. So can you talk through a little bit of what you guys have found on that front and how Alpha Simplex does it? So risk targeting is a very classic methodology in the CTA space and in many more quantitative techniques. And I think the challenge with that type of approach is that

there's many ways to do it. It requires a lot of inputs and it has different results with different frequencies. So, for example, you could imagine risk targeting on a yearly basis where you change the size of your position based on what happened over the last year. Or you can imagine that every single day you measure risk in some sort of way across many different horizons to try and adjust where your risk is. For us at Alpha Simplex, we think about risk targeting as trying to have a ballpark measurement for what risk we're taking, or at least the level of risk in different assets that we trade. Now, that's actually kind of a difficult thing to do because the question is what horizon? So earlier this year, we saw massive differences in different risk targeting techniques across the space because we saw a huge spike in risk and risk changed like it usually does. So the way that we tend to think about risk is that we need to look

at risk over a wide range of different frequencies and horizons to try and understand where we are today. So not only do we look at risk in the long term, but we also look at it interday. And that was really interesting earlier this year, because I remember back in February, I'd be go and have lunch and I would come back and the market had flipped sides by a huge percentage. And then I would come back and the market had flipped sides by a huge percentage. And then I would come back, you know, 20 minutes later and your second lunch again. So I had my second lunch and it had changed again. So, I mean, I think that's something that what risk targeting and risk management is about is a trying to measure, but, trying to figure out what should you do? I mean, it's an

important technique, especially in our space where we don't trade in notional terms. So I always, one of the things that surprises me when I often teach classes on futures trading at UMass and also not at MIT, but I've taught a course on that at UMass occasionally. And just one lecture. And I always go about that we think in risk in our space because nothing is standardized. So we think about allocating risk to assets. But if you want to allocate risk, you got to know how much risk there is. So we naturally need to figure out good ways to do that. And I think the pan on volatility targeting, right, is like you're going to be lowering, lessening your position during a profitable move, increasing your position, perhaps,

as it's going against you. What are the, you know, is that the wisest thing to do? It kind of makes it more convergent than divergent, as we're talking about. Yeah. And I think it depends on how you risk target because we have more of a philosophical time varying approach in our methodology for risk targeting. It's more that we allow our position sizes to adjust with the signals. But we do measure the risk within a target range based on, obviously, how risky markets are. I do agree with you having a very strict risk target, especially if you took just an equity signal alone, would be exactly like you said, it'd be counter trend. a huge multiple inputs into a large system, then keeping the amount of risk within a range that varies within some reasonable parameters is actually not as tightly risk targeted as you're mentioning. So I think that's the problem is it's not black and white, it's very gray.

Some managers are very strict and others are more flexible in how they allow risk to time vary. And we tend to be a little more flexible in that methodology. And I argue that like the classic, if I'm gonna build a trend following strategy on my Excel, right? I'm gonna risk down to the 80 day moving average

or something. And basically that's my something. And basically, that's my risk. And then how much of that, you know, what percent of my equity do I want to divide by that number to get the number of contracts I do? So that's what you're saying. That's one way to do it one timeframe. But if you look at that over multiple timeframes, and then sync it back to how much I want to risk in that sector for that year, you can come up, it's more dynamic. Yeah. And we actually had an interesting paper where we were looking at this as well on risk variation across asset classes, because we really believe that a pure trend

approach should be much more dynamic and allocate more to where risk is best served. Now, remember, all these signals are very noisy too. So it's going to be at the margins and sort of allocating risk over time to these different trend signals. And what we found is that we tend to view that in a year where the only trend in the game that's really good is bonds, we want to have more risk in bonds. We don't want to just say, well, they're all equal opportunities. Let's just throw the to have more risk in bonds. We don't want to just say, well, they're all equal opportunities. Let's just throw the equal amount of risk in each asset class, because we don't believe that that's the way the world works. We feel like the world is very divergent. And, you

know, it's rare that all of them work at the same time. And that comes back to my, like, you're just taking out of the left pocket, putting it in the right pocket if you have the same. So in that example, if you're say the baseline is you're risking 50 basis points per trade, you might go up to 65 on the bonds in such environment and down to 45 on the other side or whatever. It'll vary depending on the environment. I mean, we saw that, especially in 2019, commodity markets were constantly being bantered by trade war discussion. So the signals were just getting whipsawed all over the place. Whereas bonds, if you look at the signals, I mean, they were extremely strong. And so we try to incorporate those views within our systems because that's what Pure Trend is about, is putting risk where risk is best served or where it's most strong in terms of the signals that we measure.

And then, and so some people would do that with an ensemble approach, overlapping signals. So, yeah, if it's that strong of a trend, I'm going to get all five of my signals fire. Then I'm in a max conviction trade versus if it's in the commodities, maybe three fire and two don't, it offsets itself. MS. And years like that, you really see it. 2019 was a year where bonds did very well and all other asset classes were challenging. MR. So what are you seeing overall on this year? What's your end of year review going to be of like, what's the, what's the bonds of this year? Gold was there.

Oh my gosh. This has been the longest year of the 10 years. Or 12 years or whatever years of trend following that happened. Yeah. We've already lived through three different cycles in my opinion. So Q1 was the COVID crisis. The biggest trades there were short energy and long bonds. And those were fantastic trends. And they actually predated the fall in equities.

So that was really, there was something eerie about those positions before the equities actually fell. So those trades were already on before the equity markets moved. Then Q2 was this, there's no way this is going to recover. And it did anyways. It was a recovery quarter. And it was very challenging for us and for many other trend followers, because obviously we're medium to long-term trend followers. And when you have this defensive theme unraveled that was very successful in Q1, it can be hard as those things pivot. So Q2 was harder in the recovery phase. And then Q3, out of nowhere, came a really strong reflationary theme. And even as you know, the Fed came out saying that they were going to be tolerant, was their wording.

Yeah, for years. Yeah. So it was interesting because the Q3 theme has really been one of reflation and weak dollar. And I think that's something that we were seeing massive signals very quickly in the weak dollar throughout the summer. And that was a very good trend as well as you had a lot of precious metals moving miraculously a lot in the summer of this year. Now moving into Q4, I was not surprised at all. As soon as September came, reality came in. Yeah. So summer holidays were over and we started to see the back and forth related to the uncertainty of the election, the resolution of the COVID pandemic situation.

And it just sort of people realizing just how serious this is. And I know, I think that what was hard is a lot of people in earlier this year, they kind of thought, you know, we'll just wait and things will get better. And I think that's, what's been hard in the fall is reality did set in and, you know, things are still complicated. And I think that, that has shown in the way that trends have been very back and forth for the last month or so. But the theme, reflationary theme, the impact of stimulus, those themes are still in the data. And I think that's what we're kind of wondering is, will we see this regardless of who wins the election, regardless of how the COVID,

will we continue on that path as so much stimulus is going to be needed to help alleviate some of the challenges that have been imposed by this pandemic. And that's the best thing is you don't need to know the right answer, right? The models will get in line with whatever happens. I like that about being a systematic trader. I don't think I could sleep at night if I wasn't because oftentimes what I think is right can go wrong. So it feels much more evident for me to just follow my process. Right. And the flip side of that is you see these trades and you're like, oh my God, it went long. No way that trade's going to work, right? And then half the time it does, half the time it doesn't. But for me, at least, there's always that of like, oh, why did it do that? It's very counterintuitive sometimes. There's been certain periods where you

go, that just seems like this doesn't make sense. And then the market goes where you don't think it's going to go. So what's next in your research? Got any new books or anything coming out? No new books right now. I do have some papers coming out. We've been studying return dispersion this year. Recently, we have a paper coming out on that soon. It's actually kind of an extension of chapter 11 of the book with Alex. And we were just, return dispersion was so high this year. Yeah. And a lot of people were starting to ask questions like, why is it so high?

Is this within- And even across what people would call trend risk premium, right? Exactly. And what was interesting in this paper so far is that we do find that return dispersion in Q1 this year was much higher than what we've seen on average over the last 10 years, but it's still not that high. I think, I think that just shows that whenever the vol increases, you get some residual vol exposure just in the, the severity of the moves that we had. I mean, just small differences in allocation, small differences in time horizons, things like that are much more magnified when you have very, very extreme moves. Yeah. And do you look at that across actual other managers? And is it

mutual funds? Is it private funds? Yeah. So we did some analysis using mutual funds because the data is readily available and can be reconstructed by anyone who wants to look at that data. And that makes it much more accessible to others. And we found that Q1 definitely had a lot of spread in terms of how different people performed. And it was very interesting because we looked at daily returns and correlations also by quarters. And it was just all over the map in terms of correlation between managers. You had some that were way down, some of the way up and just at very different times too.

So it just felt like- It's almost like ads to our marketing problem, right? Of like what, you want it to be a little tighter so people can have faith in the asset class overall. Well, I think the challenge that I already, we talked about this earlier, is that when these type of moves occurred, it became much more clear how much pure trend you were holding, whereas in normal times, it's not really that different. And then also the speed, that in normal times, the speed that in normal times, the speed doesn't matter a ton, but during this period, the speed mattered a lot. And one thing that we did was in our, in our book or Alex and my book, we discuss, um, we create these return dispersion metrics where we look at return dispersion using simulated systems across different time horizons. And that's great because

it gives you a little bed of a distribution and you can look at how the distribution of fatness, so that distribution has changed over time. And the biggest outlier that we saw in the book was 2008. And now this is again, another sort of outlier period where time horizons actually really mattered. Whereas normally they don't. And I think the managers themselves probably sell it of like, we're all going to capture those big moves. It's in the quiet times where the different things we do are going to like smooth itself out. But it's counterintuitively, it's the opposite. Yeah, when there's a really big move, it can matter very much like small differences.

And I think that is what q1 highlighted i mean and when the moves are sort of more normal but relatively large that you don't you don't have that experience but we had a very very big move and a very big move across multiple asset classes so i look at it like starting at the North pole and walking, right? Even if you're a quarter degree off after 10 feet, you're still right next to each other after a hundred miles here. I think, um, well, in my class at MIT, this was quite fun because we were studying kurtosis and I showed them a graph and I said, what's the typical move in the S&P, a one or one sigma or two sigma, two sigma move? What's the number in return space?

And it's like, I think it's like 1%, right? Yeah. So I said, okay, so we, if we move by 10%, what type of sigma is that? And they're like, oh, this is huge. And I go, exactly. So is the distribution the same? The answer is no. So, you know, it is kind of an interesting, you know, if you're studying finance right now, it's very exciting. I wrote a blog once trying to explain that by saying, uh,

Bill Gates is as tall, the more, the amount of money he has over the average person's wealth, if you take that to his height over the average person's height, he'd be 303 miles tall. Miles. Yeah. So it's like, that's hard to fathom. I think I saw someone show that with grains of sand or something like that. And it was pretty fascinating as well. Like magnitudes are hard for people to measure, especially when they're that large. Great. Well, let's wrap up here.

We'll ask you a little couple of quick fire questions like we like to do. So favorite Swedish foodish food oh meatballs meatballs from ikea or those are gross my husband's meatballs all right um boston favorite lobster roll or clam chowder? Lobster roll. All right. And where are you in Boston? Proper? Brookline. Just outside. Yeah, I know. I had a friend from. I used to be a Cambridge person when I was a student, but now I'm a Brookline person. And you used to play ice hockey, right? Yes. I played on the MIT women's ice hockey team, which is now retired, but I also played on the Sloan, uh, Sloan team as well in graduate school. So favorite, uh, hockey team ruins predators, predators. Those are fun. I went to a predators. So from, I grew up in Tennessee, so I have to be loyal. Unfortunately, I do like the Bruins too, but yeah are fun games i went a friend of a friend's in the music business we're in the sony suite and went across the street to

the palm or whatever that's a lot of fun down there uh so you speak russian english swedish and french yes although my russian is a little rusty I studied it at Harvard many, many years. Say Ruski. I only know it from the hunt from Red October. Yeah. Which one's your favorite to dust off? I like Swedish. It's so, so much easier. Russian is a lot of fun, but it's, it's, it's very masochistic language to learn because of all the declensions and then the new alphabet. And so it was, it was like a, an exercise in endurance to study Russian for several years, but it was fun. I mean, I actually thought about moving to Russia at one point and had some offers

professor jobs there. And I chose to go to Scandinavia instead. So. All right. Who knows? Good choice. Swedish pop or Nashvilleashville country swedish pop you just you just pulled all your nashville people in and then you spat them right back out other direction uh and lastly favorite star wars character oh man that's hard um okay i'll have to do something cliche and say Leah. Yeah, no, that's great. She had great buns. Great buns. We're going to end there. Swedish meat, your husband's meatballs and Leah's buns.

Great. Well, Katie, thanks so much. It's been fun. Great catching up with you. It's been a while. We look forward to seeing you in person when we're all allowed back out of the house i i look forward to that too i i can say that honestly all right thanks so much you've been listening to the derivative links from this episode will be in the episode description of this channel follow us on twitter at rcm alt and visit our website to read our blog or subscribe to our newsletter at rcmalt.com if you liked our show introduce a friend and show them how to subscribe and be sure to leave comments we'd love to hear from you