Counter Consensus Investor – Liran Blum

Featuring Liran Blum

In the last ‘Travels with Jawad’ episode, Liran Blum introduced some fascinating thoughts on the outlook for the US economy under President Trump. Here, in an extended interview with Jawad Mian, the Blue Helm Capital Management CIO, shares the thinking behind his investment framework and trading philosophy, spanning his time at Nomura and SAC Capital. In an epic discussion, Liran outlines his positive view on Brazil, a bearish take on the dollar and a more optimistic outlook for Europe, with a truly individual approach to investing. Filmed on January 24, 2017, in New York.

Published on
20 February, 2017
Topic
Macro, US Economy, Portfolio Management
Duration
86 minutes
Asset class
Currencies, Equities, Bonds/Rates/Credit
Rating
25

Comments

  • PS

    PD S.

    11 6 2017 01:18

    0       0

    great interview as always by jiwad...

  • FC

    Freddie C.

    28 3 2017 10:13

    0       0

    He did not take into account what J Snider explained. Since the Greenspan onshore dolar market is no longer relevant driver of dolar price because the eurodollar market has tremendously outsized onshore dolar.

  • GM

    Greg M.

    28 2 2017 17:36

    1       0

    I really enjoyed the interview. The first half is a must listen for anyone who wants to work in finance.

  • dg

    darius g.

    27 2 2017 19:35

    1       0

    Very interesting interview despite my differing opinions on many aspects. Also good interviewing; questioning Liran's thoughts vs the common narratives out there. Would be interesting to get his reasoning on why he's less positive on the CHF vs the JPY in a global risk-off period. Both CBs are way out on a limb in terms of what they are doing with their balance sheets - and although I agree that JPY would appreciate in a risk-off event, I have a hard time taking that position given the country's debt to GDP even though the SNB's balance sheet is larger vs GDP compared to the BOJ's.

  • SB

    Sam B.

    22 2 2017 13:44

    4       1

    The fact that a guy this smart and accomplished in the hedge fund world doesn't understand how to observe the global dollar short speaks volumes. Now to Mr. Blum's credit, he recognizes that being long USD against the EUR or JPY is an incredibly crowded trade that's predicated on multiple Fed "rate hikes." In that sense, I'd agree that he's probably on the right side on that trade, especially near term. However, spot cross rates between the USD and other DM currencies actually tell us fairly little about the dollar shortage. It is the lack of bank balance sheet capacity which explains the dysfunction in the global eurodollar system. Steeply negative CCY & IR swap spreads are the most screaming examples of this phenomenon. RV, please bring back Jeff Snider or Paul Mylchreest for an interview with Raoul (the resident dollar bull). Zoltan Pozsar would be another huge pull. Eurodollar contraction is THE story in modern finance and only a tiny handful of guys ever seem to discuss it.

  • jh

    john h.

    21 2 2017 16:55

    2       5

    The part of the discussion that covered portfolio construction and risk management were very good. The dollar shortage discussion was just embarrassing. He can't find evidence of a dollar shortage??? Really??? How can you run an EM book without understanding this?

  • FC

    FRED C.

    21 2 2017 14:51

    1       0

    terrific interview...good to see the conviction/ thinking re themes /timeframes etc...
    do think that he is totally missing the overriding dissatisfaction with the status quo esp in europe. i think the chances of grillo, le pen, wilders and the anti merkel are even money and with an outbreak or two we can see a complete overhaul of eu politics.......that would be my bet and i would love someone to help me understand the best way to play that vis a vis investments.............

  • gb

    gabriel b.

    21 2 2017 07:52

    15       0

    Very much enjoyed this interview. There were a lot of interesting thing discussed, but one of my favorite tidbits was the discussion"what's your edge?" I have played poker for a living my entire adult life and subscribe to real vision as a hobby that will hopefully lead to profitable endeavors in the future. In poker, unless there is a game theory optimal solution for the game you are playing (which only exists for one format with only 2 players) the most profitable strategies depend on what your opponents do and how they value their hands. People with static strategies and views of the game stand little chance of actually manufacturing large edges and when certain variables change they can't adapt accordingly to continue to extract a similar edge. Having a flexible strategy that changes based on your opponents behavior is a pre-requisite to playing the game at a high. In investing terms how people on the other side of trades react inefficiently to variables is what you are trying to exploit. I find that kind of dissection constructive and liked that about this interview. Hopefully one day I can get as good at weighing those variables as some of these real vision contributors!

  • MN

    Mark N.

    21 2 2017 05:57

    1       0

    Compelling interview. Haven't seen options explicitly framed as alternatives to stop losses before. Although he must be constantly fighting against the negative theta, I find it interesting that the roll-over decision forces him to reevaluate his value investment thesis. Does anyone know why there are no 13-F's for Blue Helm Capital?

  • DS

    David S.

    21 2 2017 01:34

    0       2

    By looking inward the US is already giving China the edge in international trade and expansion. If China is upset with any of Trump policies, it could simply sell a portion of its US treasury bonds - in excess of a trillion dollars - and cause the US interest rates to rise. China would be happy to build more infrastructure so that all roads, railroads and canals lead to Beijing. DLS

  • DS

    David S.

    21 2 2017 01:19

    2       0

    Excellent Interview. The title is Counter Consensus Investor. We cannot expect a consensus view. There is always a buy narrative and a sell narrative within a term structure for any trade. Mr. Blum develops his narratives to find hidden value on either the buy side or the sell side. If the facts change, he is willing to say he is wrong and change the trade. It was interesting to follow his thought process. His "stops" are the derivative term structure - very smart. Above my abilities, great stuff. DLS

  • T~

    Tshort63 ~.

    20 2 2017 21:04

    2       0

    Cut me off :-( **But, ** he is an expert and I am an observer so can't support my disagreement other than it feels wrong.

  • T~

    Tshort63 ~.

    20 2 2017 21:03

    4       0

    Enjoyed the interview, I disagree with some of his conclusions and it seemed at times he would backtrack his narrative and then add a dimension of time that leaves him an out. I was right about the result but was wrong about the timing. **

  • as

    andrew s.

    20 2 2017 20:02

    0       0

    Nice well balanced view. Short of a surprise shock his views are a likely outlook. The French election outcome could surprise, but the rest of europe i think will keep/prefer the status quo.

  • bs

    bernard s.

    20 2 2017 19:43

    1       0

    i would say that is more due to regulations rather than USD shortage per se. if there was true USD shortage, well the USD wouldn't be here.....

  • IF

    Ian F.

    20 2 2017 19:32

    12       0

    Inconsistencies in either my or his understanding of the balance of payments at the 28:30 mark - he stated that if Trump imposes a down the board tariff on Chinese goods, China's response could be a taxing of holding USD assets. This strategy makes no sense to me. If the US is running a current account deficit, the US also has to be running a mirror surplus on the capital account side (and thus be in balance). This means that for every dollar of bilateral trade deficit that the US runs with China, China would also have to hold a dollar of US assets. If China were to tax these USD assets in retaliation they would effectively be penalizing Chinese exporters and further discouraging the trade-able goods sector. Not to mention Chinese exporters aren't likely to hold USD assets anyhow as these are effectively exchanged for RMB and thus accumulated at the PBOC.

  • IJ

    Ian J.

    20 2 2017 19:32

    9       0

    Fantastic interview. I completely disagree with the idea that the recent political developments around the world are idiosyncratic. Politics will challenge (and destroy, imo) the global govt and CB cooperative bail-out/insurance regime that has evolved post GFC.

  • IJ

    Ian J.

    20 2 2017 17:44

    15       0

    Negative CCY basis swaps are an indicator of a dollar shortage