The Pomp Podcast - #864 Investing During Macro Uncertainty w/ Anastasia Amoroso

Episode Date: March 15, 2022

Anastasia Amoroso is the Chief Investment Strategist at iCapital Network. In this conversation, we talk about the market bottom, the price of oil, inflation, and future fed interest rates. ======================= LMAX Digital - the market-leading solution for institutional crypto trading & custodial services - offers clients a regulated, transparent and secure trading environment, together with the deepest pool of crypto liquidity. LMAX Digital is also a primary price discovery venue, streaming real-time market data to the industry’s leading analytics platforms. LMAX Digital - secure, liquid, trusted. Learn more at LMAXdigital.com/pomp ======================= The Pod Pro Cover by Eight Sleep is the most advanced solution on the market for thermoregulation. It pairs dynamic cooling and heating with biometric tracking. Go to https://www.eightsleep.com/Pomp to check out the Pod Pro Cover and save $150 at checkout. Eight Sleep currently ships within the USA, Canada, and the UK. ======================= The world's 2nd largest crypto exchange, OKEx, has dropped the "E" to become OKX, reflecting its evolution from a traditional crypto exchange to a comprehensive, cross-platform crypto services provider. With OKX's decentralized platform and Web3 wallet, MetaX, you have full custody over your crypto. Explore DeFi, NFTs and play-to-earning gaming with the world's most powerful crypto exchange. Visit OKX.com to learn more. =======================

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now, let's kick this thing off. Anastasia Amoroso is the Chief Investment Strategist at iCapital Network. In this conversation, we talk about calling the bottom of markets, what the price of oil is likely to do from here, the Federal Reserve, interest rates, and how that impacts inflation, along with much much more i really enjoyed this conversation with anastasia and i hope you do as well before we get in this episode though i want to quickly talk about our sponsors first up is lmax digital the number one institutional crypto exchange they offer clients the deepest pool of crypto

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learning about crypto, you're a seasoned DeFi degen, an NFT enthusiast, or a pro trader, you're all invited to a better future. Go check it out today and let me know what you think. All right, let's get in this episode. I hope you guys enjoyed this one. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement

to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. We got a lot of questions about the macro environment. it's probably the number one thing that people keep writing to us, tweeting at us, asking us questions. So we have a very special guest. Anastasia Amorso is joining us from iCapital. Anastasia, how are you? Good. How are you guys doing? We're doing fantastic. I have a lot of questions for you. So I figure I'm just going to start throwing them out there and you do your

best to help us figure out what the hell is going on in the market. Let's start first with inflation. We saw last week 7.9% inflation. How accurate is that number in your opinion? Well, look, I think it's as accurate as we're going to get. But the challenge with it is this number was supposed to be going down now for months. It was actually supposed to peak last month. But as we continue to see, the inflation pressures are just continuing to build. And so as a result, anywhere you look across the streets, more and more economists are penciling it in, more and more inflation for this year.

Now, at the end of this year, the forecast was supposed to subside for inflation to three, maybe three and a half percent. I looked at it just yesterday, and now the forecast for inflation is still calling for it to be at five percent by the end of the year. So that's a challenge. And, you know, when I look, Anthony, at inflation number from last week, it's just everywhere. You got seven point nine percent headline inflation. You got seven point nine percent food inflation. you still got used car prices that are running at 41% higher than they were the year before that there's energy, there's shelter, and so on and so forth. So it's a real problem is that it's just we can't point to one factor that's driving this, it's a multitude of things. So a lot to unpack there. And that's why it's such a challenge for the Fed. And frankly, it has to be a challenge for

the governments as well. The Fed can't just tackle this alone. Yeah, I think it's a great point. One of the themes that we've talked about a lot over the last, you know, six, eight months is just, if you don't have good data, you can't make good decisions, right? Just inherently, if you're looking at bad data or flawed data, you're going to lead to bad decision making. And you mentioned shelter. And I think that's probably one of like the biggest questions that people have had as we've looked at the data, which is shelter is showing, you know, four or 5% increase in price over the last 12 months, but rent prices in America are up, you know, 18, 20% home prices are up 18, 20%. And so when we start to think of that

as just one of many, many examples across kind of the makeup of the CPI, it makes up 33% of the basket, give or take. And so like, how do you think about the methodology that goes into calculating the number? And are people misplaced in their concerns around how that is being calculated? Or do you think actually, maybe we should be looking at that, you know, especially in an environment where there's such high inflation, and everyone's trying to figure out what the actual numbers are? Well, I think you bring up a really good point. And that is that your CPI basket, my CPI basket, and somebody else's CPI basket are probably not apples to apples. They're in fact quite different. And so the challenge right now, you brought up shelter and, you know,

I brought up food and you've got energy transportation costs and you've got electricity costs. When I look at those four things right there, they account for 94% of spending of the low-income consumer. And so that's a real challenge. So if you were having to pay that much more for shelter and food and everything else that crowds out some of the other spending. So while, for example, somebody in the top one, two or whatever percent of their spending bracket, they're not feeling the pinch from shelter inflation. Many, many consumers are. And so I take your point that the Fed looks at this one CPI indicator and tries to make a decision based on that. But I do think they also look at a variety of different measures. I think there's 19 different inflation indicators

they look at, and they must be looking at the segments because inflation certainly does not hit everybody to the same degree, the same proportion. The concern is increasingly hitting more and more consumers. Take a look, for example, at the consumer confidence index, and that is at the lowest it's been in 10 years, which is kind of surprising, right? Because here we are venturing out of COVID and things are supposed to be getting better, but consumer confidence is at that 10% 10 year low. The reason is inflation 7.9% wages are not wages are growing at maybe five or 6%. So in real terms, more and more consumers unfortunately are seeing their earnings power go down. Yeah, we obviously know that whether you look at official or

unofficial inflation numbers, look at wage growth, like all these things, like there's a lot right again, maybe 50% of Americans that are being pushed into worse and worse financial situation. And so that then begs the question of like, what can the Federal Reserve actually do, right? Historically, they've basically had these two tools, which is the manipulation of interest rates, and then the expansion or contraction of the money supply. How do you think about what they can do in these situations? And then also, like, what do you think they're going to do as we look forward? Yeah. Well, the first thing they can do and they should do is they should get away from being behind the curve to actually being proactive about this. And I'll tell you, you know, in their defense. Right. I think the Fed probably would have thought about hiking rates back in the summer of last year. Maybe then again, you know, in the fall of last year. But the challenge is you have the Delta variant and, you know, that wreaked havoc with the supply chains. Then you have the Omicron variant and they had to pause for that as well. So finally, it seems like they have an opening for them to finally to catch up.

If you think about what's happened is you still have rates that are pegged at zero, inflation at 7.9%, but the economy had essentially a two-month recession. It was a very deep recession back in 2020, but we're well past that. So this is why I say that's why the Fed needs to get back from being behind the curve, because if you look at a 30, 40-year chart of monetary policy, where we are today, and inflation, there has never been such a big divergence. So they know this. And this is why in the face of tighter financial conditions globally and the war, the tragic war in Russia and Ukraine, they're still saying they're going to hike rates this week, at the meeting this week.

I think they're probably going to pencil in six rate hikes for the rest of the year as well. The reason why they probably have the latitude to do that is because that's what the markets expect. That's what's currently priced into the market. So that wouldn't be too shocking. And that would get them, I think, a good step forward in order to not be behind the curve. So if they do that, we're going to be looking at the Fed funds rate of 1.8%, give or take, by the end of the year, and we'll likely get to two and a quarter next year. So that's what they're going to do. Does it fight inflation?

Does it stop inflation in its tracks? I don't think that does by itself. But what I suspect happens over the course of the next few months to a year is monetary policy is going to get more restrictive. And at the same time, commodity prices are still likely to stay elevated. And that negative wage pressure is going to start to build. So I do think we're going to see some demand destruction, unfortunately, come in sectors of housing, for example, and some of the other cyclical parts of the economy. So the Fed is going to tighten. Demand is going to slow down a little bit. And that's why more and more people now are worried about if a growth slowdown and or recession is on the horizon.

So one of the big things that people keep asking is, do we have to pick our poison? Is this a have inflation or raise rates to address inflation and get a recession? Like, is that the framework or the tradeoff decision? Or do you evaluate it some other way? Could we have a recession and inflation at the same time? Could we actually not have a recession and no inflation? Like, how do you evaluate what the impact of a hiking of rates actually ends up being? Yeah, I think the unfortunate part is in the next few months, we're going to be in this challenging time period where the Fed is going to be hiking interest rates into a slowdown.

And I'm not saying that the recession is imminent and we're going to plunge right into it. But if you look at historically what the Fed, when the Fed typically raised interest rates is when they kind of was strong and potentially getting stronger. But because they haven't done it this time around, they're now going to be hiking into a global growth slowdown. So we look at a variety of different growth indicators. But, for example, you look at the manufacturing indices and the manufacturing activity has already peaked late last year and is slowing down. And that's a phenomenon globally. You've got the housing market that's already slowing down as well. And that's what the Fed is hiking into. So, you know, again, it's not that we go from, you know, low unemployment rate to five or six percent overnight.

And it's not that we have negative sequential GDP growth, but it's just that growth sequentially is going to be slower as the Fed hikes rates. And hopefully eventually they get inflation under control, perhaps by the end of the year. So what that means, however, is for the markets, this is not a positive picture, because if the economy slows and the cost of capital goes up, then equity markets have to adjust for that two ways. First of all, if you look at the earnings for the S&P 500 right now, consensus is penciling in 230 bucks for S&P 500 earnings for the next 12 months. Well, does that 230 hold if the economy starts to slow down? So my suspicion is that it doesn't. And we're going to start to see some of those downgrades. So just over the weekend, we had Goldman and several others that actually did downgrade

their earnings estimates. And so when I look at the time series of earnings estimates over time, we are now out of a period where there are more positive upgrades versus downgrades. We're now getting into that negative territory. So that historically does not bode well for markets, or at least in terms of generating significant positive performance. And then you got the Fed that is hiking rates, meaning the cost of capital is rising and the multiple, therefore, on the S&P 500 may also need to adjust. So it's about 18 and a half times today. Does it go back to 17, like 17 and a half, like it was before the pandemic? That's possible. So unless you have a significant resolution, let's say in Russia and Ukraine, unless you have a significant growth catalyst from somewhere else, I just think the returns for the markets are going to be subdued, if not negative.

So when we look at something like, let's take the NASDAQ, right, which is down, I don't know, 15 to 30% right now, depending on the day, from the high back in November of 2021, how much further can it fall? Like, are we potentially able to see something that would be seen as like the risk assets? Could they fall another 30, 50 percent? Like, what is the thought process around risk assets specifically, given that we've got kind of a slowdown underway? We've got inflation out of hand. The Fed has to raise interest rates in order to address some of this stuff. It's usually much later in the kind of problem that they would like to raise those interest rates. And so the risk assets already kind of took a beating at just them talking about raising the rates.

once they start to do it could it get cut in half again or like how do you think about this yeah uh that's the question and after i think making a pretty bearish case for risk assets here i want to maybe talk a little bit in a positive light about this so we have priced in a lot of those things i would say at least the first degree of them i think we've priced in higher commodity prices uh we have not priced in the second round effects but you're right the NASDAQ is down about 15%. The S&P is down 12 or so. And so I would say we're about 40% of the way to pricing in a recession event. So the average correction, the average bear market in stocks in the S&P at least, it's about 24%. That's the median, I should say. That's the median drawdown.

So we're down about 12%. So again, almost 50% of the way there. That's frankly what I would like to see happen. I would like to see a little bit more of a correction here, perhaps not to price in the full recession probability, not to be down 25% or 30%. But I want just a little bit more fear to be priced into the markets. Because everybody's talking about this recession outcome and the red flags that are there. But people are kind of not penciling that in. They're not really materially raising those probabilities. But once they do, and once we can say that a great deal of recession risk is in the price, that's when I think the market becomes a screaming buying opportunity because we've priced in the worst and we just haven't yet. So, you know, from here, I could

see potentially another pullback of 10% if some of these recessionary dynamics truly do develop. And it's not to say that you wait on the sidelines and you just wait for this pullback. I would just say it's not an all in or nothing approach. I think there's things that you can do in the meantime. There are things that you can buy on a pullback. But again, for a broad market to be a screaming buy, I think higher recession probabilities and perhaps another 7% to 10% would be warranted. How do you decide, okay, now is the screaming buy? Is there a metric that you look at? Is there a data point? Do you just go on Twitter and everyone thinks the world's ending, so that feels like a good time to buy? How do you evaluate as close to you can as the market bottom

or kind of, okay, now's the time to get aggressive? Well, that's funny you mentioned that because it is one of the pretty good data points is what is the sentiment out there? And how bearish exactly is it? Is everyone a bear yet? Not only is it that, but is everybody positioned like a bear?

So over the years, I've kind of developed this easy formula. And I say easy, of course, nothing is easy. But my formula is valuation plus positioning plus a catalyst. And it works both ways, on the bullish side and the bearish side. And so if we get to a point where valuations are back to pre-COVID levels, as I mentioned, they aren't there yet.

They're at 18 and a half. They could get to perhaps 17. If we get to the valuations that are increasingly pricing in recession, that's one thing. The second thing is positioning. As I mentioned, the sentiment actually feels pretty bearish out there. the percentage of bears, I think recently it was about 50, 55%, and that was back to 2013 level. So people have been talking pretty bearish, but when we look at the fund flows, you actually still see a lot of money going into the equity market, and especially prior to this, going into the global equity market. So I would love to see that turn, and I would love to see that further capitulation to say that positioning has been clear. Now, there's many indicators of positioning.

to watch. There's the retail investors, there's the fund flows, there's institutional investors, and then there's also the hedge funds. So that's a little bit of the silver lining here. And some good news is that we have seen a major de-risking, de-grossing from the hedge fund community. So their leverage ratios are now back down to November of 2020 levels. So I think a lot of the selling pressure that has been sweeping through the markets has been because of that. So that's why I might tell you if we have a positive resolution in Russia and Ukraine, I could see the stock markets bounce just because of how the leverage the hedge funds have gotten. But to see full capitulation and to say this is it, this is the moment, I would need to see more

investors that have been still allocating to equities. I would need to see those pull back. And the last thing is the catalyst. This is a tough part right now. I will say in April, in March of 2020, it was kind of easy in a way to call for a market turnaround because you've priced in the worst case scenario, and you've got the Fed and the federal government that was adding an extreme and unprecedented amount of accommodation. So that was a major catalyst for a turnaround at that point. Right now, that is what we're waiting for. We need to see a positive catalyst before we can declare an all clear. Now, that positive catalyst could be progress in Russia and Ukraine. It could be, this would probably be the most important one,

could be the peaking of supply chain bottlenecks and the peaking of inflation, which we have not yet seen, or it could be some other growth catalyst. Let's say China did away with a zero COVID policy. Again, that's not on the horizon currently, but I would need to see that positive catalyst to stay with conviction that we've priced the worst case scenario in, but now we have room to the upside. So for now, I would say selectivity and patience is what investors should be doing. You mentioned earlier commodity prices. And I think that one of the surprising things in real time,

but in hindsight makes sense, is the explosion in oil, wheat, nickel, et cetera. We've been joking that they're essentially trading kind of like shit coins, right? Where they just are kind of going at normal growth levels. And then all of a sudden you just see a material move upwards and you kind of scratch your head like, why did that happen?

Now there was the Russian invasion of Ukraine And obviously, natural gas, oil, wheat, a number of these commodities, these countries or that region are heavy producers of them. But oil has been fairly volatile even before that. I mean, it was a negative futures contract price back in May, I think, of 2020. That was a screaming buy. Yeah, I mean, that was a pretty simple one, it seemed like. But then you start to unpack why and the whole idea of custody and storage, and you begin to understand it. But now we turn around and oil's hitting $120, $130, $140 price points.

And so to see that level of volatility in a 24-month period I think is surprising to people. How do you think about commodities moving forward and how much of it is being in tune with geopolitics or some of these kind of more event-driven stuff versus there's a relationship to monetary and fiscal policy that people should be paying attention to? Yeah. So here's the good and the bad news about commodities right now is the good news is I do think that we've priced in a lot of worst case scenarios from the Russia-Ukraine situation. And so here's how we look at it. We looked at the current spot of some of these commodities that you mentioned, nickel and wheat and copper and so forth and oil. And we looked at what the street is saying the price target would be if we had a worst case scenario. For example, if we didn't buy all of five million barrels of oil from Russia or if all of the wheat production from Russia and Ukraine got completely disrupted, what would happen to the prices of those commodities? And obviously they would spike. But the way that the spot prices already spiked accounted for a large degree of that worst case scenario. Last week, I think wheat was trading at 1350 per bushel. The worst case scenario was about 1000 or 1100.

So we've priced that in and then some. Nickel, even if we had a complete disruption, $800,000 is what the price should have been. And we've essentially priced in that before it halted trading. So that's the good news, that we've priced in a lot of that worst case scenario. And if we do see some sort of resolution in Russia and Ukraine, you could see a pretty significant give back in those commodity prices. You can see inflation expectations potentially come down. Maybe that bodes well for the Fed and so on and so forth. So that's the good news. The challenging news is that the world is actually short of commodities. And I'm going to comment specifically on oil. If you look at oil inventories that are well below their five year averages. And if you look at the oil balances, we're going to get back to consuming 100 million barrels a day in the next few months as the economy rebounds. And yet we're not pumping in the full 100 million barrels a day. We're pumping less than that. And if you take Russia out of the equation, then it's going to be even less than that as well. So Russia or not, the oil markets are incredibly tight as they are. And so we would still expect 90 to 100 dollar barrel of crude oil to persist. And again, herein lies the challenge is it may not be a problem for some of the consumers, but it is a problem for a good many of them. So, yes, we might see some give back in commodity prices, but Bloomberg Commodity Index is still up 26%.

And again, I just don't see commodity prices derating meaningfully from here. I've got my two brothers here with me. What questions do you guys have? Hannah, Stacey, I'll go first. My question would be around what's happening in Ukraine. Obviously, this is somewhat of a loaded question with kind of the uncertainty that's involved in it. But Russia has been sanctioned. They've essentially been cut off from the financial world. As for individual investors and retail investors, like how should they be thinking about this? How should they be thinking about trades? How should they be thinking about kind of the duration of what we'll see? yeah uh thank you for the question and um you know it's interesting i was doing this presentation in uruguay of all places a couple of weeks ago and i you know i was on stage and i was talking about how this is going to be a series of incremental escalations by prudent and a series

of incremental escalations in return from from sanctions in in the u.s clearly i was terribly wrong about that and this is not incremental but this is an uh all-out invasion and all-out set of sanctions. So again, there's a good and bad about everything. So the good news is that Russia is going to be financially cut off from the West for the foreseeable future. However, that shouldn't in itself change the trajectory of the U.S. economy or European economy. We looked at, for example, at the financial linkages between Russia and the U.S., and they're really minimal as percentage of GDP. And we did the same for all the European economies as well. It's for most of them, it's less than 1% of GDP that is tied to Russia. So even if every single corporate in

Russia and every single bank and the sovereign government, let's say worst case scenario, defaulted on their debt obligations due to the West, I would venture a guess the economies would still be fine even with some pain in the banking sector. So that's kind of the first impact to consider. The second one, of course, is the commodity prices, but I think we've talked through that. The third thing I will say is what's happening today in Russia and Ukraine versus U.S. and the West, I think fundamentally changes certain policies that we're going to pursue. For example, I don't think ever, never, ever again will the West want to rely on Russia or maybe even any other economy on their commodity flows. So Germany and others may not

reduce their current commodity purchases from Russia, but you bet they're going to pivot and pivot pretty significantly in terms of their future supply. And so speaking of an investment angle here, I think U.S. is going to be a pretty significant beneficiary of that. Instead of buying natural gas from Russia, Europe is likely to pivot to buy natural gas, liquefied natural gas, LNG from the United States. And if you look at some of the terminal LNG terminals that are being built down in Texas, we will see significant expansion of their capacity in the next few years to come. And so I think that's going to be a really, really key trade relationship change that whether Russia pulls away from Ukraine or not, that's going to

happen as it is. The other one I would give you, well, maybe a couple of others, obviously, energy independence. And yes, we need to accomplish the ESG. We need to ensure energy independence. So we might prioritize our domestic energy production. But also in the U.S., I think there's going to be a more significant push towards clean energy as well. So you've seen clean energy, for example, do really, I mean, hold up really well and rally significantly on certain days because clearly a part of the energy independence mix has to be secure and clean energy capacity as well. And then the last one I'll say is kind of a takeaway from this is coming back to your space, which is crypto and Bitcoin. And last year was a breakout year for crypto in

terms of performance, you know, before some of the pullback and consolidation. But I might argue that this year might be a breakout year for crypto in terms of validating some of the use cases. And what's happening in Russia today is similar, if not worse, than what happened in 1997, when you had a default, a devaluation, a ruble collapse. Today, the ruble is devalued. It's down 50%. You couldn't get money out of the ATMs. Those are the reports. You couldn't get your hands on the foreign currency. There's potential capital controls that could be widespread as well. So what do you do when you can't reliably transfer your wealth, your assets, and when you can't access them in the centralized financial system? So obviously, Bitcoin and cryptocurrency solutions

is part of the answer to that. And I think this Ukraine and Russia conflict is going to remind a lot of people that when you can't rely on a central government, a central authority or central financial institution to give you access to your money and be able to move that money, it is very important to have an alternative. And, you know, in a way in the U.S., you know, we worry about Fed printing too much money. We worry about QE. But most people in the U.S. have never actually experienced that, not being able to take money out of the bank and, you know, transfer money elsewhere. But a lot of the people in emerging market economies have experienced that and lived through it. And so that's why I think the world, especially the emerging market world, will

probably, as a result of this, embracing Bitcoin and cryptocurrencies a lot more than before. That was a long-winded answer to a question, but there's clearly a lot of investment implications from this. No, that was fantastic. Thank you. John, what do you got? And Susie, yeah, thank you for coming on. You talk a little bit about the U.S.'s and the U.S. economy's trajectory coming in the future months. What do you think is going on with the Fed right now and how they're talking about a rate hike versus where the economy sits currently? Yeah, I mean, the Fed, as I wrote in one of my recent posts, is between a rock and a hard place. There is no debate that they have to catch up from where they have been. I think the Biden administration wants them to. The consumers

want them to. But they also have to find this very careful and cautious path. Obviously, they couldn't hike rates 50 basis points, given what's happening in Russia and Ukraine with the commodity index, but they still have to move forward. So they're going to have to navigate this very, very carefully. The thing that concerns me, I think concerns a lot of market participants out there is U.S. financial conditions have tightened. Equity markets have deteriorated. Liquidity has deteriorated. Credit spreads have started to wind out. That is typically not the environment the hike rates into. And that's just in the U.S. If I look at this global financial conditions indicator that we track, it is surged to the levels last seen in 2015 amidst the global

commodity meltdown at that point. So that's going to be a very challenging path for the Fed, frankly, to navigate. And I would say the markets like certainty. The market wants a clear path. If it's 25 basis points, every single meeting tell us that. Unfortunately, I don't think Fed Chair Powell is going to be able to pre-commit to any sort of frequency or cadence given the situation. So, you know, for all of us in the markets, it means that every Fed meeting is live and we're going to be talking about this for, you know, the better part of this year. Anastasia, when you think about Bitcoin and cryptocurrencies, you guys obviously have a ton of different customers and clients that you work with. What are they talking about here? Are they

interested in the investment case? We talked a little bit about kind of censorship or seizure resistance for these technologies, but what about the investment case and what's the demand look like there? Yeah. So there's a lot of interest in the crypto space from a variety of clients. And I would say more and more of them are understanding some of the use cases, but more and more of them are trying to figure out where exactly to position in the crypto space. Because as you know, there's 4,000 different coins out there, if not more, probably more by the day. And there's also a ton of money, relatively speaking, that has gone into funding various blockchain cryptocurrency related solutions. So our clients are really trying to understand where

some of the better places to allocate. And obviously that's part of our job. So I would say first, there's a huge demand for education and understanding all the various cryptocurrencies and their use cases, what's real, what's not, what's a valid protocol, what's yet to be proven. So that there's a lot of interest in understanding that. And the second one I would say is understanding the whole ecosystem. Clearly, Bitcoin is the predominant currency in the space, but you look at the VC capital, for example, and the VC funding for blockchain-based companies, I think last year it was $26 billion of VC inflows into that. So that's a ton of money, relatively speaking, to the last five years. In fact, that's probably more money than the

cumulative five years received in blockchain funding. So what's being built? What are the solutions? Is it some of the automated market makers? What are some of the other decentralized apps that are being built on that? What's all this Web 3.0 communication? What's smart contracts being built? So I would say our clients, first and foremost, are interested in understanding the entirety of the crypto ecosystem and identifying some of the best solutions, be it cryptocurrencies themselves or be it some of the applications. And Anthony, the last thing I'll say on this subject is that at iCapital, we also see, we obviously see a ton of merit in decentralized ledger solutions. And as you will know, it doesn't just apply to one industry vertical or one

industry applications, but there's so much that you can do across the financial services and more. So at iCapital, for example, we're leading a consortium, we're leading several other industry participants in building out a decentralized ledger solution to improve how clients access alternative investments, how they access it, how they keep up with it, Um, how, how do they service it? So, um, so again, whether it's cryptocurrencies themselves or these applications, that's where we're trying to help our clients navigate. Awesome. Uh, one of the questions that, uh, I think everyone has is like, you have such a wealth of knowledge across these various, uh, uh, kind of verticals of the economy

of investment assets, uh, and also spend a lot of time thinking tactically as to what people can do. what should people be doing right now? Like what are the tactical things that they can do in their portfolio? Obviously not investment advice, but like what can they do right now to either protect themselves or to benefit given the environment that we're in? Yeah. Like I said, it's not an all or nothing approach, right? Even though I said the market is not a screaming buy per se, yet in my view, there are things that you can do. So I am always going to like the technology sector. And yes, I get it that it's challenged given where the Fed is headed. But I think when we merge on the other side of it, which is going to be slower cyclical growth from cyclical parts

of the economy, it's going to be back to what is the secular growth and the megatrends that are sweeping the world. So it's going to be back to the software, most likely, that is facilitating digital transformation, which is cloud, which is artificial intelligence, which is more. It's going to be back to cybersecurity spending, which actually has to rise given the new cybersecurity threats that we face. It's probably going to be back to semiconductors where you need more semiconductor content in an electric vehicle versus a traditional car, I think to the tune of five times more, more semiconductor content in a smartphone, which is 5G than not. So I think it's going to be back to those types of ideas. And, you know, frankly, I've liked buying these

things on a pullback, but it hasn't worked yet because we have not seen that market bottom. However, I don't think we should not, I think we can nibble on some of those ideas, but maybe do that by also writing some covered calls on it. So one of the tactical ideas that I like is if you look at the volatility, the VIX index is at 30. And if you look at a call option and writing a call option that's 5% or 10% out of the money, and maybe you do it for three months, the volatility on that is going to be in the 90th percentile over the last five years, meaning the volatility is rich relative to 90% of observations in the last five years. So that means the premium you collect for selling that option is actually really rich and nice relative to history.

So maybe your stock goes down another 10%, 15%, but if you can collect a 5% or maybe even more percent premium, that helps protect some of the downside. Or if the stock goes up and you get to that strike price, you get to add that premium on top of it. So this is a very actionable way to meet a position in this environment where you still want to nibble a little bit, but give yourself a little bit of that downside cushion by writing a call option. Dividend paying stocks. That was not the place where people have looked. I think that's where we have to look today. And I'll broadly group this category as anything that gives you an income. You know, if you were in cash, maybe that's better than, maybe that's been better than the stock market, but inflation is 7.9%.

You know, to me, cash is not an option except for maybe risk managed. So investing that in dividend paying stocks, investing that in real estate, Anthony, you mentioned shelter inflation and, you know, apartment, you know, real estate inflation is rising. Well, why not invest in that? Why not invest in some of those multifamily apartments and get, you know, 4% or 5% income for it. Private credit, it's been a pretty tough year for fixed income markets. Anything but leveraged loans has been down. But private credit, actually, most of that is floating rate securities. So 85% of that is floating rate securities. So if the Fed hikes rates, that should be supportive for that sector as well. So those are the two broad things of ideas, I would

say. Buy a little bit today, nibble a little bit, write a cover call option on top of it, and then make sure that you have a yield bucket in the portfolio so that inflation doesn't just completely erode your cash. Yeah, that's, that's fantastic. And it feels like as more and more people understand the nuances of the financial system, it becomes less about how much money can I make and in these environments, how much money can I prevent myself from losing tends to be a pretty good strategy, just as much. Before I let you go, I ask everyone the same question. One of our sponsors is eight sleep, they've got this thermoregulated mattress that allows it to be super hot, super cold. I love it because I make it ice cold, freezing cold and used to sleep like

six hours now, sleep at least eight and feel way better. Do you have like a sleep routine or any sort of routine either at night or in the morning in terms of preparing for the day or kind of unwinding after a day? I wish I slept eight hours a day. I think all of us aspire to that. That's probably not the case. It's essential. Come on. We got to get you to eight hours. I think I sent you a message this morning at 5 45 or something like that so uh one of my routines for the day is i do like to be up early and i like to be up where most of the people are not and that gives me prep for the day that gives me the clarity the peace of mind um you know to knock out some of the things that i don't want to do if i'm really ambitious i might fit in a workout before six

o'clock when you wake up what do you check first that's actually like a great way to understand like what you think is important. Is there a website? Is there a specific, uh, price of an asset, a specific chart? Like what do you look at first? Uh, it actually is Twitter. Uh, it didn't used to be the case, but, uh, Twitter is the first app that I check. And I usually wake up to a number of Twitter, um, notifications and the new slow that breaks overnight. So that is the best place. And, uh, that's how I start my day. Got it. And you're looking for news specifically there. uh yes like what's got what's happened in the last uh four hours that i've slept rather than eight yeah yeah exactly four hours um yeah it's incredibly helpful and uh you know can give

you a very quick pulse of the sentiment and the new slope that's going to be important for the day and as you know it's a 24 7 market it never sleeps and um i find that that's one of the better applications to uh to catch you up on some of the key developments yeah i i tend to do the same thing. Although I read that it's not good for you to do that. Yeah. Like the first thing you do is check, but, uh, but I do the exact same thing. Uh, where can we find, uh, find or send people to find you on the internet, uh, or where can they find more about iCapital? Uh, so obviously I am on Twitter, uh, Anastasia Amoroso underscore one, not any others, just this one, Amoroso underscore one. Uh, and I do, uh, publish a lot of the commentary, some of the topics that we

discussed today, which you could find at iCapitalNetwork.com, insights and research. And you can find us covering a lot of the topics that we discussed, whether it's in public markets, privates, or some of the tactical trade ideas as well. Awesome. And for anyone who's watching or listening, I just dropped her Twitter account into the chat. So make sure you go and follow her there. The best way to get rid of the scammers, we got to get you verified so that we can get rid of all the scammers who are probably asking people for Dogecoin. John gets those all the time, reach on. If I, if you get a DM from me asking some crypto question or asking, you know, to send me crypto, that is not me. Please block them. And yes, that is definitely. You're not, you're not

saying send one Bitcoin. I'll send you two back. We thought that was you. I will not be saying that to you. Awesome. Well, thank you so much, Anastasia. This was fantastic. We really enjoyed it. I learned a ton and I think a lot of people got a, got value out of this. We'll definitely to uh to bring you back and then talk about this as uh kind of the economy continues to do its thing and uh hopefully everyone stays kind of alert and educated as to as to what's happening thanks so much guys all right bye take care thanks so much for listening to today's episode i really hope you guys enjoyed this one make sure you're subscribed on apple spotify or your favorite podcast player and if you're looking to try to transition to get a new job in the bitcoin or

crypto industry we've got you covered head over to palms crypto course.com we've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week time period. Go to palmscryptocourse.com to learn more and I'll meet you guys for the next episode.