ALEX GUREVICH: Hi. I'm Alex Gurevich, and this is Real Visionaries.

Gote. This is a term, this is a Japanese strategic term from the game Go. And what it means is through move, which in other words, it's a move which is not flash, and not something that leads to rapid victory, but something which is most correct move which gives the best results in the long run.

And this is what I'm focusing on, long-horizon investments, trades that have very high probability working over a long period of time, and not being too caught up on short term noise and volatility. And making an objective not performance on a given month in a year, but the objective is to do well over a long period of time.

I was born in St. Petersburg, Russia, and I grew up there, left in the middle of college. Really, from a very early age, I was geared to be a mathematician. Since I was four years old, I was saying who I want to be. I said always, I'll be a mathematician, that was obvious. That's what I wanted to build on my life. And I did end up getting a PhD in mathematics over here in America.

But there was another side to my passion for analysis. And I also had a passion for strategy. It started with me playing chess and other strategy games. Of course, it's such a clich. I'm Russian, I played chess when I was young. But I played numerous other games even more seriously than chess later in my life, including the game Go which is hence the origin of this company name.

I played poker, I played breach, I play a whole bunch of strategic resource management games. But also, I did a lot of academic competitions when I was young. So, for me, competing and strategizing was a natural way of thinking about things.

I have always delineated the difference between strategic and analytic thinking. Analytic thinking, whether it's an economist or a mathematician thinking about thinking, they're trying to come up with a solution, trying to come up with an answer. Well, strategy is not an answer. It's a system of responses. So, strategy is what you need when you don't actually know what's going to happen on the market.

You might not want to have an opinion on what's going to happen to the market, you just develop an idea how you're going to build a portfolio in such a way that it has good results, and how you're going to respond to various market moves, which may or may not happen in the future. So, that is a very different way of thinking. And I feel that there are not many people, it might be arrogant of you to say, but there is not many people who are good at both analysis and strategy.

And that was my oldest advantage that I had those two passions well interwoven. So, going into financial markets was very natural for me. I remember in the 1980s, when I was a teenager, I saw the movie Wall Street, they showed that actually in Russia, the movie Wall Street, and I was so obsessed with it. There is a paradox of that movie that it was meant as a cautionary tale. But instead, of course, it was a huge inspiration for a whole generation of traders. Because they made it like they focused on the side of the game, which was cheating, but they really also introduced the actual game of it.

And you realize you can win this game without cheating. And why would you want to cheat? Because if you want to prove that you're the best player, why would you want to completely devalue your own success by cheating? When I went to Wall Street, I was not interested in doing research. I didn't want to be a quant, what they say quant. I had zero interest on that. In every juncture when an idea of me something like this doing was raised, I absolutely refused. I wanted to trade.

That decision was not easy to go into Wall Street at the moment when I graduated, when I got my degree because I had a lot of really good academic offers. And at that point, I was on a juncture of what I want to go on with careers, become a math professor or whether I'm going to fulfill my other passion. And I think what decided me that I felt I already found the measure of my success in mathematics, I found how good I am roughly, what I can accomplish in my lifetime, but I will still get to test myself against the markets.

There are two separate motivations for writing any book in some sense. One of them is the content of a book and another the actual process on the idea of writing something down. When I was a teenager, I started to get really interested in fantasy and science fiction. And I read everything I could lay my hands on when I was young, growing up in Russia, whatever was translated, eventually I started to be able to read an English as well.

But because there was not so much available, of course me and my friends had to start make up our own stories. Because I made insane amount of various science fiction fantasy plots, even while I was in high school, most of them were in my head. Because I actually always hated the process of writing. I started to think like, okay, well, I have all those ideas, I need to get them down on the page somehow. And there were really bottlenecks around that.

But first I had to dictate my writing to write anything, then I have to basically learn to write which is a skill, it's a craft. I took some classes, I got a writing coach. The origin of my strategic approach probably goes back to the 2002 when it was more or less formulated back. In fact, you could go even back earlier, I started in Wall Street 1997. But my strategic approach, while it was pretty clear to me, was still somewhat intuitive in my head, it was not very well articulated.

I articulated some things but not articulate them comprehensively. I did some presentations internally in JPMorgan with ideas like risk parity, and other ideas relevant to my strategic approach, but it was still a little bit like an intuitive idea in a young person's head. And then as years passed, I came to the point that I realized that I could articulate my principles much more clearly. The seeding conversation maybe for my first book was a conversation that happened back at JPMorgan when one of my coworkers said, what if look [?] there are 100 trades a year?

Look at all those trades, what if we did just five of those best trades and drop the other 95? How well would it perform? And then I decided to [?] to decide what are the good trades. And I articulated in my first book, which is called, The Next Perfect Trade, with a subtitle, A Magic Sword of Necessity. I formulated this series of strategic principles. So, just qualitative from this book, they became much more quantitative in the more recent years.

But it's how do I select what are the superior trades? How do I abstract away from speculative arguments and opinions and can formulate objective criteria, which make trades more likely to make money than lose money? And that became the core of my strategic system, building a balanced portfolio of superior trades, each of which has positive expectation, but they cover different economic outcomes.

And really, that is the essence of my book. I spent a lot of my first book talking about bonds, specifically being long US Treasury bonds as one of the greatest trades ever over the last 40 years. I call it the one trade. I have a poem about the bond trade, which is a Tolkien inspired poem. I did a lot of things like this. Of course, in my first book, because of my passion for fences, it has a sword on its cover because the subtitle was a magic sword of necessity.

And I always felt that, well, I'll probably write a sequel at some point. And the sequel would be called, The Next Perfect Portfolio, A Magic Show of Sufficiency. Because for a mathematician, the word necessity and sufficiency are complementary words. I don't think many people, like the lay people think about those terms. But sufficiency is the opposite of necessity in mathematical logic. However, COVID pandemic came, and I realized that there is a whole different way to think about things. And then March 2020 happened, and every day felt as long as a month. And I realized that there was just so much material in just what happened in that one specific month. And I have a lot of records to capture it, and what I could do, I could take the lessons and the ideas from my first book and see how they apply in the crisis environment. There are several things I wanted to accomplish with the trades of March. People were actually asking me, is that a history book, or is it a strategic guide? It's a little bit of both. It is a book about the history of the pandemic, but it is also a guide to how to navigate the crisis.

But I also wanted to tell a faithful personal story of how a money manager fares during a crisis, not just in terms of portfolio and P&L, but also the psychological journey. What stresses you go through? How does it interact with your personal life? And in that way, I think it could appeal to a broad audience because whatever professional you're in, You might deal with crisis in your professional life. And that doesn't stop your personal life, and COVID was just such an interesting juncture that everybody was affected on a personal level.

I was interested how can you present it in the most faithful way? How can I lead readers to be a fly on the wall when the amazing events actually happened? And give reader a chance to interpret things on their own. And what I realize is that what is unique nowadays that probably people didn't have before, and especially with remote work, we've had a complete transcript of our trading chatter. And the trading chatter is very revealing because people say things like, oh crap, what's going on? Unbelievable. I've never seen anything like three. Or what do you mean sanctions had actually given us an offer, even a better offer? No, they're not willing to make us a market. Well, how can the bank not be willing to make us a market, things like this. What do you mean we're low on cash? We're making money. Well, I cant even build on cash, we have margin calls everywhere going around. So, things like that, like the reality of experience. And I feel that without that really exact and faithful experience, aspiring traders would never know what it is really like in the trenches when the war is on, when the battle is on. I really, honestly think that there was no other exposition as faithful that could tell aspiring traders what it is really like to sit in the cockpit as a financial manager.

The caveat, of course, I do one particular strategy, it's one particular fund then other people may act very differently. Maybe they curse more, maybe they work more individually, or maybe vice versa, work as a team. They're like, for example, in my book, you could see a lot of me working with my team on how to interact. Maybe other people don't interact the same way.

Yet at least it's one account. At least it's one faithful look in the situation around. And I wrote enough of my own comments in text to explain things and make things accessible and to rationalize my thinking and derive strategic lessons, yet there is still enough in there to have that situation fill in book. The subtitle to my second book is, A Shield Against Uncertainty. And of course, if I had sold my first book, there has to be a shield. Even though I changed a little bit the title from my original file, instead of calling it A Magic Shield of Sufficiency,

Even though I changed a little bit I ended up calling it A Shield Against Uncertainty. But that particular subtitle and that particular idea can be of interest to broader audience, to people who are not in finance, because people face uncertainty in their life. And I think COVID pandemic taught us more than anything, even the personal life, like all along, nobody knew how bad it's going to be, when it was going to be open, when it's going to be shot, am I going to get it? How sick I'm going to be?

And then it spills into your professional life decisions. Whether you're managing a hedge fund or a liquor store, you have to make those decisions. And what I tried to focus on this book is explaining that you can operate in the environment of complete uncertainty. And you can abstract out of things which are uncertain and really focus on what it is that we do know, and make calculated risks based on that.

In my book, I focused on the fact that when you do things throughout pandemic, in one way or another, the pandemic will be resolved. And we'll probably emerge on the other side of it with a reality which is possibly somewhat altered, but some kind of new normal. And the other thing that I knew that central banks and governments will provide as much liquidity as needed until there will be too much liquidity. They'll keep providing money 'til there'll be more than enough money for everyone.

Those are the certainties. What was not certain is how bad it's going to be, how long it'll take for the money to be provided. And then with all those uncertainties, I talked about how I could formulate my strategy to navigate it. I discussed this, I made a comparison of the book talking about black hole and while hole, how the market was just totally ruptured by the black hole and everything was distorted, all the timelines, all the market actions, all its products for trading has just joined fashion.

But on the other side of this black hole, once you fall into it, you cannot come back out of the black hole. Black hole singularity is your only future. Once you fall into the black hole, you cannot turn around. Not because singularity is ahead of you, but because it's in your future. It's really hard to understand this logic, but what happens is that going into the black hole is the only future you can have because the time flows there, not just space. But then you come on the other side. So, that kind of COVID singularity, the rupture in the market was almost unavoidable.

But then on the other side is the Fed was adding money, the government was stimulating. There is a white hole, an explosion of wealth on the other side. Once you pass through a new universe, and it could happen even in people's personal life. I'm not going to be doing personal life therapy here on this venue, but I think people who face personal crisis and get to the point of no return can see at some point, well, there is actually a white hole, an explosion of success or positive energy on the other side.

So, what we're talking about with this little visionary series that we might do a complement to the book and expand it a little bit by bringing a few more perspectives that have a story to tell of how the crisis challenge their framework, how they've navigated it. And what went wrong, what went right, what were the hits or misses. For example, at the end of my book, one of the last chapters is called, Hits and Misses, where I do a recap what mistakes I made, and what we did really right.

And I wanted to hear other people to listen to, what is their ratio of hits and misses. What was their batting average in March 2020? And honestly, starting this interview, even those people I know well, I did not start it with knowing exactly what they did during that year. I don't know exactly if they made a loss that year. I had some ideas, but in many ways, I've had to start from scratch. And that's okay.

Where were you going into this? What was your feeling before the crisis started? What was your side guide end of 2019? What was your moment of like, oh, wow, this pandemic is serious? What did you do about it? And how did you come out of it. So, that was the structure.

I interviewed Brent Johnson, who is a long-term friend of mine, and will often talk about macro markets. He probably doesn't need an introduction to Real Vision viewers because he shows up a lot. And he's very articulate and entertaining. And he is the author of well-known Milkshake theory about milkshake dollar theory, which I really wanted to discuss with him. Because there was a lot of swings and interesting situations for the dollar and liquidity happening. And we not always had the same views over the years and more recently, he was more right than me.

BRENT JOHNSON: When I look at the last 25 years, whenever there's been a crisis, the dollar has gone up. Now, that's not a guarantee that the next time there's a crisis, the dollar will go up. But it's a good indicator. And based on my understanding of the monetary system, it's very hard to have a crisis, a global crisis without the dollar going up.

ALEX GUREVICH: And also, because his framework is very different because of his partial focus of wealth management, it's a very different framework, what he starts from from a macro fan like me, so it's interesting to see, okay, how does he deal with this? Then I talked to Mike Green, who also needs absolutely no introduction to Real Vision viewers.

Again, needless to say, he has a very broad and very precise philosophical frameworks. And he's a real erudite. He studies everything. He knows everything. He really formulates his ideas in a very thoughtful and articulate manner. But also, he was working a lot within a quantitative framework, and how do you deal with managing a quantitative framework?

MIKE GREEN: Calibration of an algorithmic strategy is always very difficult when you face unprecedented events, right? And so, rules that you might have in place that here's how far I let something run, or how far in the money or what type of moneyness strike that I use in terms of either a call option or a put option, those become challenged in that type of environment. And so, I would just say that the general difficulty of using an algorithmic versus a discretionary strategy is one that I found frustrating in that environment.

ALEX GUREVICH: It is interesting that his first reaction to my book, he was one of the early readers, and his first reaction was, this book gives me a PTSD again from the time of March 2020. And I was like, yes, I accomplished my goal. So, I think it really resonated with them. And I was interested in seeing what he thought were big successes and failures during that time, and it was interesting how he formulates his framework going forward.

So, back in that while hole discussion on how he formulates his framework going forward, what came out on the front end from his perspective. And I interviewed also the person I know for many years, who is very well known in the financial world. I think he's new to Real Vision, Jim Leitner. He has been one of the people featured in the book inside the house of money. So, he's a very well-known and experienced macro trader.

Interestingly, some of his background is also from Bankers Trust as mine. But I think he was before me. He has a very interesting long term and a very distinct long-term framework. He liked a lot of conversations about using options and trading. And I was looking forward to talk to him about that and talk about how to use how to use options for navigating environments.

JIM LEITNER: Digital options are the ones that pay out if your underlying is above or below a certain price that you have set, and it pays out a certain amount of par 100. And you pay for that some percentage, and therefore, that's the probability that the market signs to that event happening.

ALEX GUREVICH: And