The Pivot and The Pendulum

Published on: April 12th, 2019

Julian has written numerous times that he believes Powell’s reaction to Q4’s equity weakness was highly significant. Weak data seem to validate the policy response. Nevertheless, it is still unclear the Fed has done enough to repeat their reflation trick of 2016. Yes, they have pivoted, but has the pendulum turned?

Comments

  • MG
    Miguel G.
    12 April 2019 @ 15:49
    Julian, your forward indicators are showing a continued slow down in the United States which I agree with. My question is in regards to flows and earnings moving forward. Wallstreet seems to think this is a shallow slow down in earnings and I think what isn't being priced in is the legitimate possibility of an earnings recession in 2019. If earnings go from being more than a slow down and a profit recession develops, what do you think that means for buybacks the remainder of the year? Looking over your flow info it seems like buybacks are responsible for a big chunk of this move since Dec. is it realistic to assume a profit recession will take the fire power out of buybacks the rest of the year and we are left with a more clear picture of what kind of demand there really is for stocks?
    • JB
      Julian B. | Contributor
      22 April 2019 @ 12:47
      Hi Miguel My bet is management won't change their plans on Buybacks. Don't forget as the most leveraged members of the capital structure (they mostly own options) they have the most to gain from higher stock prices and will do all they can to keep the game going.
  • JL
    J L.
    12 April 2019 @ 17:55
    Hi Julian would you mind commenting in future how you see the different scenarios impacting real estate? And I don't just mean Connecticut villas but also standard 2-3 bed flats in good city locations that I think the millennial population of MI will be interested in. I've been very positive on real estate where I live (tier 2 UK city) and been right for now but am particularly scared about the impact of potential higher rates (politics headwinds to me are an absolute given but also somewhat discounted). Many thanks for your insights
    • JB
      Julian B. | Contributor
      22 April 2019 @ 12:44
      Hi EF The only issue facing real estate is affordability, which is a combination of higher prices, muted wage growth and since 2016 higher rates. Solve this equation and the demand is certainly there. So IF you can buy property at the right price and lock in the debt you should be fine. That said Brexit certainly makes the UK story more complex than elsewhere.
  • MW
    Marco W.
    13 April 2019 @ 01:58
    Simply brilliant! But I don't see any noticeable movement in USD and yields. To make a reflation trade, maybe it would be better to short USD, EUR, JPY, CNH (and gold) against any reflation instrument one prefer after research.
    • JB
      Julian B. | Contributor
      22 April 2019 @ 12:39
      No FX dead. But as you've observed, to keep this reflation game going we need $ weakness. I'm watching but nothing so far
  • MG
    Miguel G.
    13 April 2019 @ 14:45
    The equity rally from the Dec lows have been incredible. In your opinion and after listening to the fed min from April’s tone, do you believe the feds lack of dovish tilt in April’s minutes has Powell a little nervous as to a speculative bubble the fed is helping induce? Is it possible Powell is getting nervous about the excess he is perpetuating since the Dec fed putt and maybe he wants to attempt to cool it down?
    • JB
      Julian B. | Contributor
      22 April 2019 @ 12:37
      I think they are rightly concerned by froth in the markets. That said they are more concerned by the risks if deflation and that will dominate policy decisions
  • KH
    Kyubeom H.
    21 April 2019 @ 08:11
    Financial conditions are getting eased as real rates have fallen since last winter. Market implied real rates are where they were in 2017 when Dudley kept telling “Financial conditions eased”. This risky asset rally have showed real rates are below natural(or neutral) interest rate. As long as market rates keep suppressed by recession fears without any meaningful commodity price retracement, risk asset rally will be going on, I believe. Dovish pivot from the Fed will support low interest rates of the short end of the curve while inflationary pressure keep pushing up long end of the curve with still expansionary fiscal support. But I am concerned that coming inflationary pressure will end this risk rally badly.
    • JB
      Julian B. | Contributor
      22 April 2019 @ 12:34
      You are absolutely right to be concerned about inflation but not until late Q4 early Q1 of 2020
  • SD
    S D.
    21 April 2019 @ 02:06
    We just had a reporter assassinated in Derry by teenagers. That was a targetted killing, looks like, although the police won't say so. And it occurred while Pelosi was in Dublin, poncing about next to the grinning idiot Varadkar. Remember the little green men of Ukraine? There are things going on in Europe now that I think are extremely concerning. Pity the police, and don't blame them when they start distributing skull fractures.
  • SD
    S D.
    21 April 2019 @ 02:02
    Farage has tapped into a deep and longstanding vein of public anger that is shared right across the West. I think there are a lot of people looking for a fight these days. The police get it. The politicians don't.
  • SD
    S D.
    21 April 2019 @ 01:58
    Have you actually seen what's going on in Paris right now? And mainstream media ignores it in favour of reporting Macron's arrogant verbal diarrhea? This is full-on police thuggery and insurrection. I think Deutsche Bank is absolutely critical and nobody's saying a word. It's like none of this is actually happening. instead we get this nonsense about the Fed. This is the type of situation that goes along for a while, and then suddenly the entire world shifts on its axis. Something happens. I think something is about to happen.
  • SD
    S D.
    21 April 2019 @ 01:42
    Here's an example: when is anybody going to confront the reality of a second Trump term after Mueller, and what they means for the China relationship and thus the USD? Nobody, also, is talking about what Mueller means for mainstream media. You guys are constantly shit talking about disrupting financial media. Hullo??
  • SD
    S D.
    21 April 2019 @ 01:37
    I think you guys need to get more political. All this is all very well, but what about the Eurodollar? And can you talk more about what's going on with Deutsche Bank? These policy manouevres are being increasingly directed by political prerogatives and I think Raoul has indirectly referred to this in the past but the issue with the USD is far broader than you've implied or explained thus far.
  • VD
    Viknesh D.
    16 April 2019 @ 10:25
    Super thumbs up!
  • HO
    H2 O.
    15 April 2019 @ 04:24
    Just doesn’t seem like things are set to break in either direction yet. US financial conditions have continued to ease, and not really because of equities. Mortgage rates are down ~80 bps from Jan levels and HY spreads are down by ~50+ bps from the start of the year. The growth outlook in the US and China looks set for relative mediocrity, and both are eating Europe’s lunch for different reasons. In other words, both are holding up half of the sky, and much of ROW is wallowing below in the mud. This can go on for a long time, much as I would like a big dislocation to force a major repricing. Powell will not be in charge of this. The institutions behind the extra USD ~4 trillion in mobile capital hanging out in the US with nothing better to do, for now, will collectively determine the outcome IMO.
  • se
    scott e.
    14 April 2019 @ 20:38
    Fantastic Julian!
  • LD
    Lance D.
    14 April 2019 @ 16:09
    Nice 1 Sherlock
  • SN
    Sean N.
    13 April 2019 @ 20:03
    Great summary ...agree with everything here.... the path of least resistance seems to be most likely reflation running to major inflation... Could also make for a hell of a stock market run over the next few years..

Mark Yusko

Morgan Creek Capital Management, Co- Founder, CEO, & CIO

Mark Yusko is the Founder, CEO and Chief Investment Officer of Morgan Creek Capital Management. He is also the Managing Partner of Morgan Creek Digital Assets.

Morgan Creek Capital Management was founded in 2004 and currently manages close to $2 billion in discretionary and non-discretionary assets. Prior to founding Morgan Creek, Mr. Yusko was CIO and Founder of UNC Management Company (UNCMC), the Endowment investment office for the University of North Carolina at Chapel Hill. Before that, he was Senior Investment Director for the University of Notre Dame Investment Office. Mr. Yusko has been at the forefront of institutional investing throughout his career. An early investor in alternative asset classes at Notre Dame, he brought the Endowment Model of investing to UNC, which contributed to significant performance gains for the Endowment. The Endowment Model is the cornerstone philosophy of Morgan Creek, as is the mandate to Invest in Innovation.

Mr. Yusko is again at the forefront of investing through Morgan Creek Digital Assets, which was formed in 2018. Morgan Creek Digital is an early stage investor in blockchain technology, digital currency and digital assets through the firm’s Venture Capital and Digital Asset Index Fund.

Mr. Yusko received a BA with Honors from the University of Notre Dame and an MBA in Accounting and Finance from the University of Chicago.

Anthony Scaramucci

SkyBridge Capital, Founder & Co-Managing Partner

Prior to founding SkyBridge in 2005, Scaramucci co-founded investment partnership Oscar Capital Management, which was sold to Neuberger Berman, LLC in 2001. Earlier, he was a vice president in Private Wealth Management at Goldman Sachs & Co. In 2016, Scaramucci was ranked #85 in Worth Magazine’sPower 100: The 100 Most Powerful People in Global Finance. In 2011, he received Ernst & Young’s “Entrepreneur of the Year –New York” Award in the Financial Services category. Anthony is amember of the Council on Foreign Relations (CFR), vice chair of the Kennedy Center Corporate Fund Board, a board member of both The Brain Tumor Foundation and Business Executives for National Security (BENS), and a Trustee of the United States Olympic & Paralympic Foundation. He was a member of the New York City Financial Services Advisory Committee from 2007 to 2012. In November 2016, he was named to President-Elect Trump’s 16-person Presidential Transition Team Executive Committee. In June 2017, he wasnamed the Chief Strategy Officer of the EXIM Bank. He served as the White House Communications Director for a period in July 2017. Scaramucci, a native of Long Island, New York, holds a Bachelor of Arts degree in Economics from Tufts University and a Juris Doctor from Harvard Law School.

Michael Saylor

MicroStrategy, Co-Founder

Mr. Saylor is a technologist, entrepreneur, business executive, philanthropist, and best-selling author. He currently serves as Chairman of the Board of Directors and Chief Executive Office of MicroStrategy, Inc. (MSTR). Since co-founding the company at the age of 24, Mr. Saylor has built MicroStrategy into a global leader in business intelligence, mobile software, and cloud-based services. In 2012, he authored The Mobile Wave: How Mobile Intelligence Will Change Everything, which earned a spot on The New York Times Best Sellers list.

Mr. Saylor attended the Massachusetts Institute of Technology, receiving an S.B. in Aeronautics and Astronautics and an S.B. in Science, Technology, and Society.

Alex Saunders

Nugget's News, Founder & CEO

Alex Saunders is the founder and CEO of Nugget’s News, a digital media company focused on all things crypto. Alex has been captivated by cryptocurrency since 2012 and in 2017 he began educating globally on the benefits of cryptocurrency and how to safely acquireit. Nugget’s News has been listed as a top-20 podcast by Business Insider, ShapeShift and Lifehacker and has over 120k YouTube subscribers with 9 million total views.Alex is also heavily focused on his cryptocurrency education platform Collective Shift which currently serves over 4,500 members. provides his unique perspectives by utilising his expertise in fundamental analysis, technical analysis and market sentiment. He is working towards his mission of making it easier for everyone to understand the financial world.

James Putra

TradeStation Crypto, Inc., Sr. Director of Product Strategy

James helped launch TradeStation Crypto’s offering which utilizes a true online brokerage model that self-directed investors and traders have come to expect for equities, futures, and foreign currency markets. He is a reputed crypto asset specialist and blockchain thought leader focused on helping people find innovative ways to participate in this space. He is active in the blockchain community with speaking engagements, TV appearances and mentoring. James has over 15 years of experience in the Fintech industry.

Raoul Pal

Real Vision, Co-Founder & CEO

Raoul Pal is the Co-Founder and CEO of Real Vision, the world’s pre-eminent financial media platform, which helps members understand the complex world of finance, business, and the global economy.

Real Vision members also have access to Real Vision Crypto, a cryptocurrency and digital assets video channel watched by over 80,000 people. In addition, Raoul has been publishing Global Macro Investor since January 2005 to provide original, high quality, quantifiable and easily readable research for the global macro investment community hedge funds, family offices, pension funds and sovereign wealth funds. It draws on his considerable 31 years of experience in advising hedge funds and managing a global macro hedge fund. Global Macro Investor has one of the very best, proven track records of any newsletter in the industry, producing extremely positive returns in eight out of the last twelve years.

He retired from managing client money at the age of 36 in 2004 and now lives in the tiny Caribbean island of Little Cayman in the Cayman Islands. Previously he co-managed the GLG Global Macro Fund in London for GLG Partners, one of the largest hedge fund groups in the world. Raoul moved to GLG from Goldman Sachs where he co-managed the hedge fund sales business in Equities and Equity Derivatives in Europe. In this role, Raoul established strong relationships with many of the world’s pre-eminent hedge funds, learning from their styles and experiences.

Other stop-off points on the way were NatWest Markets and HSBC, although he began his career by training traders in technical analysis.

Peter McCormack

What Bitcoin Did, Journalist

Peter McCormack is a full time journalist/podcaster covering topics such as Freedom, Human Rights, Censorship and Bitcoin. Peter created and hosts the What Bitcoin Did Podcast, a twice-weekly Bitcoin podcast where he interviews experts in the world of Bitcoin development, privacy, investment and adoption. Launched in November of 2017, the podcast has grown to over 100 episodes with a guest list that is a testament to the diversity of knowledge and opinions that represent the broader Bitcoin community. Expanding his growing list of human interest recordings, documentaries and films Peter has recently launched the Defiance podcast and DefianceTV.

Caitlin Long

Avanti Financial Group, Founder & CEO

22-year Wall Street veteran who has been active in bitcoin and blockchain since 2012. In 2018-20 she led the charge to make her native state of Wyoming an oasis for blockchain companies in the US, where she helped Wyoming enact 20 blockchain-enabling laws. From 2016-18 she jointly spearheaded a blockchain project for delivering market index data to Vanguard as chairman and president of Symbiont, an enterprise blockchain start-up. Caitlin ran Morgan Stanley’s pension solutions business (2007-2016), heldsenior roles at Credit Suisse (1997-2007) and began her career at Salomon Brothers (1994-1997). She is a graduate of Harvard Law School (JD, 1994), the Kennedy School of Government (MPP, 1994) and the University of Wyoming (BA, 1990).

Hunter Horsley

Bitwise Asset Management, CEO

Hunter Horsley is Chief Executive Officer of Bitwise Asset Management. Prior to Bitwise, he was a product manager at Facebook, working on advertiser products including the multibillion-dollar sponsored content ecosystem and ad breaks in videos. Before Facebook, Horlsey was a product manager at Instagram, responsible for multiple advertising products generating several hundred million dollars of revenue. He is a graduate of the Wharton School at the University of Pennsylvania, with a B.S. in economics. Recently, Horsley was named a member of Forbes’ 2019 “30 Under 30” list.

Luke Gromen

Forest For The Trees, Founder & President

Luke Gromen has 25 years of experience in equity research, equity research sales, and as a macro/thematic analyst. He is the founder and president of macro/thematic research firm FFTT, LLC, which he founded in early 2014 to address and leverage the opportunity he saw created by applying what clients and former colleagues consistently described as a “unique ability to connect the dots” during a time when he saw an increasing “silo-ing” of perspectives occurring on Wall Street and in corporate America.

FFTT caters to institutions and sophisticated individuals by aggregating a wide variety of macroeconomic, thematic and sector trends in an unconventional manner to identify investable developing economic bottlenecks for his clients. Prior to founding FFTT, Luke was a founding partner of Cleveland Research Company, where he worked from 2006-14. At CRC, Luke worked in sales and edited CRC’s flagship weekly thematic research summary piece (“Straight from the Source”) for the firm’s clients. Prior to that, Luke was a partner at Midwest Research, where he worked in equity research and sales from 1996-2006. While in sales, Luke was a founding editor of Midwest’s widely-read weekly thematic summary (“Heard in the Midwest”) for the firm’s clients, in which he aggregated and combined proprietary research from Midwest with inputs from other sources.

Luke Gromen holds a BBA in Finance and Accounting from the University of Cincinnati and received his MBA from Case Western Reserve University. He earned the CFA designation in 2003.

Meltem Demirors

CoinShares, Chief Strategy Officer

Meltem Demirors is Chief Strategy Officer of CoinShares, an investment firm that manages billions in assets on behalf of a global investor base, and is a trusted partner to investors and entrepreneurs navigating the digital asset ecosystem. Meltem oversees the firm’s managed strategies group and its New York office and leads corporate development.

Previously, she was part of the founding team of Digital Currency Group. As a veteran investor in the digital currency space, she has invested in over 250 companies in the ecosystem.

Meltem is passionate about education and advocacy, and teaches the Oxford Blockchain Strategy Programme and co-chairs the WEF Cryptocurrency Council.