In this episode, Alfonso Peccatiello, a renowned macro investor, joins the ReSolve team to delve into the macro end game, the impact of leverage on the financial system, and the potential paths forward. They also discuss the role of politicians in managing fiscal interventions and the increasing volatility in the macro environment.

Topics Discussed

• The concept of the macro end game and the unsustainability of the current financial system

• The role of leverage in offsetting dwindling structural growth and its implications for the global economy

• The impact of central banks' decisions to stimulate economic growth by lowering interest rates

• The wealth illusion effect and its implications on the U.S. economy

• The potential paths forward considering the high levels of debt and low interest rates

• The shift from anti-cyclical to pro-cyclical use of fiscal policy by politicians

• The need for a global macro framework in asset allocation considering the current high-leverage, high-interest rate environment

• The launch of Alfonso's global macro hedge fund and its strategy to navigate the increasing macro volatility

This episode is a must-listen for anyone looking to understand the complexities of the global financial system, the role of leverage and fiscal policy, and strategies to navigate the increasing macro volatility. Alfonso's insights provide valuable strategies for navigating the uncertain financial landscape and understanding the potential paths forward.

This is “ReSolve’s Riffs” – published on YouTube Friday afternoons to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.

So in 2022, we saw the rise, I think, or the comeback,

2

I should say of trend strategies.

3

So these are strategies that, you

know, basically make money when

4

there is a clear breakout in prices.

5

And when does that happen?

6

Well, when there is a lot of macro

volatility, you would expect that

7

there are more convex reactions in

prices and therefore trend strategies

8

can actually benefit from this a bit.

9

And you can see that trend strategies

tend to do pretty well during inflationary

10

bouts exactly for this reason, because

you need to restructure the way

11

you think about interest rates and

equity sectors and commodity prices.

12

And so you have a lot of trends

developing and you can benefit

13

from an allocation to trend.

14

Mike Philbrick: All right, welcome to

another episode of Resolve Riffs where

15

we have today one of our most popular

guests that we have on a regular basis.

16

Alfonso Peccatiello is joining us today,

otherwise known as at MacroAlf on Twitter

17

and is the publisher of the Macro Compass.

18

Alfonso, welcome back to Resolve Riffs and

it's great to have you joining us today.

19

Alfonso Peccatiello: One of my

favorite shows, regular listener.

20

So always a pleasure to be here.

21

Mike Philbrick: Love it.

22

You have been a busy beaver

as they say in Canada.

23

I know you've got a fund you're working

on that looks like it might be an idea

24

that might be coming to fruition in Q4

and you have been continually writing,

25

as eloquently as you do and as, I think

you have such great explanatory power

26

in your narratives and things like that.

27

So let's jump in and talk about

You know, how did we get here?

28

The fiat system and the end game, you

released a video just today, actually,

29

which I thought was a wonderful way

to sort of set the table of what

30

we've been going through over the

last 50 years, you know, contextually,

31

maybe in a broader sense of how

fiat currencies have come about, how

32

they've developed and you coined a

phrase, the wealth illusion paradigm.

33

Which I thought was a really,

really interesting concept.

34

So why don't we start there, talk through

that recent piece you had, and then we'll

35

continue through the, through the rest of

the show and we'll get to, the fund you're

36

working on and how it's going to position

itself within that framework and how asset

37

prices might respond and all that stuff.

38

Alfonso Peccatiello: All

right, let's do that.

39

So the piece was called the macro

end game, because I think, you know,

40

macro investors in general, investors,

we're always inundated with daily

41

news and noise and data, and now

that the market is pretty boring, we

42

can maybe take a step back, right?

43

We take a step back and we can look at.

44

The big picture, answering the

million dollar question, you

45

know, what is the macro end game?

46

Because I think it feels a bit

unsustainable for many looking at the ways

47

we have structured our financial system.

48

When you look at wealth inequality,

when you look at asset prices, it often

49

gives you that feeling that it's not

really a very sustainable equilibrium.

50

Right.

51

It's a bit what Minsky would

say, artificial stability breeds

52

instability in the system.

53

That's how many people feel about it.

54

That's why maybe they want to have some

gold or for, you know, more, digital

55

age oriented people, maybe Bitcoin.

56

that's the feeling I think.

57

Right.

58

And I wanted to try and

explain how did we get here?

59

Why do you have this feeling and

whether this system can actually be

60

resistant or whether it actually breaks?

61

And if it breaks, what's

the macro end game?

62

That was the idea behind the piece.

63

And so it all starts, in 1971, when

Nixon ends the, gold pack, right?

64

It basically, collapses the gold standard.

65

And what he does back then is it

basically ends the convertibility

66

of gold into dollar at the fixed.

67

exchange rate.

68

And what happens back then is basically

that all banks and governments

69

in the world that were creating

new money, and I will explain in

70

a second what I mean with that.

71

They were also creating new money

72

limit, a hard peg to this because

you would create dollars out of thin

73

air like a government or a bank does.

74

But then there will be a fixed

price at which you could convert

75

these dollars back into gold.

76

And so you had to be careful

with the amount of fiat money

77

you would create, right?

78

There was a balancing

mechanism in other words.

79

And after 1971, that's

not the case anymore.

80

So in our system, it's not central

banks that create inflationary money.

81

And that comes as a news for many, but

it's government via fiscal deficits

82

and banks via lending that create

the inflationary form of money.

83

We can actually spend and how it works.

84

It's pretty simple.

85

The government is the

issuer of the currency.

86

So the United States government

issues dollars, they control issuance

87

of the dollar and what they do when

they do fiscal deficits is they

88

decide to basically, let's say,

blow a hole in their balance sheet.

89

So reduce their net worth around

deficits and inject this net

90

worth into the private sector.

91

So in 2020.

92

You could open your mailbox and

find a 5, 000 check from the United

93

States that had become basically

the issuer of this 5, 000 for you.

94

And you became richer because you could

cash in 5 thousand dollars at J.P.,

95

Morgan and have this spendable money

now all of a sudden to spend without

96

having a liability attached to it.

97

You didn't have any debt,

any mortgage, any loan.

98

Nothing.

99

So your net worth went up because

the United States government decided

100

that its net worth had to go down.

101

So it's a simple balancing mechanism

where the government decides to blow a

102

hole in their balance sheet, issue new

spendable dollars, and you as the private

103

sector will be the beneficiary of it.

104

And the second way is bank

lending, where you want to buy

105

a house of a million dollars.

106

You don't have a million dollar

cash in your bank account,

107

but what you have is a job.

108

Or a business.

109

So you will produce cash flows over time.

110

And therefore a bank can look at

your future purchasing power and

111

give you credit against that now.

112

So basically credit your bank

account by a million dollar

113

money you didn't have before.

114

And now you can go and buy a house

with the newly created million

115

dollar from the bank, right?

116

And the seller of the house will now

have a new bank deposit of a million

117

dollar who he didn't have before.

118

So the creation of credit.

119

Basically allows the balance sheets

to grow and it injects money into

120

the system, although it comes with

debt as well, because you have a

121

million dollar, but you also have

a mortgage of a million dollar now.

122

So that's a bit the difference,

but it still allows you to spend

123

more all of a sudden to have more

inflationary spending power than before.

124

And after 1971, both the banks

and the governments were more

125

free to actually create new fiat

money without having to convert.

126

Or check the convertibility of this new,

of the quantity of the fiat money versus a

127

dollar because the gold peg was basically.

128

Gone.

129

And when you look at

this, you say, okay, cool.

130

But the fact that they can,

doesn't mean they will create a

131

bunch of new fiat out of nowhere.

132

And this is true because if you think

about why would government run a lot

133

of deficits or the private sector

demand a lot of credit from banks,

134

you would do this if the organic

growth in the private sector, if the

135

structural growth of the private sector.

136

So if you see your structural ability

to generate growth going down, what you

137

will be doing is look for an offset.

138

And that offset is credit,

deficits, more money being created

139

to offset your inability to

create strong structural growth.

140

And that inability started

to surface in the 80s.

141

Because the inability, and I can

share the screen here to show what

142

are the drivers of long term economic

growth, And they're pretty intuitive.

143

One of the re the ways that you

can create organic growth in an

144

economy is through demographics.

145

Pretty simple.

146

If you have more people working

productively, then your structural

147

GDP growth will be higher.

148

So one of the ways to create

strong organic GDP growth

149

is through demographics.

150

So pretty simple.

151

If the amount of working age population

as a percentage of total increases,

152

so you have more people actually

contributing to your working, to your

153

labor force, then you can have more.

154

Structural growth.

155

Vice versa, if your working age population

shrinks, then you will have less people

156

contributing to active economic growth,

and your organic growth will also shrink.

157

And as you can see from this chart,

whether you take the United States

158

or even Japan or Germany or Italy,

up until the 80s, the amount of

159

working age population was increasing.

160

So you add basically a demographics boom

in the post second world war era that

161

led 20 years later, because to make a new

worker, you actually need 20 years, right?

162

They need to be eligible to work.

163

in the eighties, you had the peak

of this working age population

164

growth as percentage of total.

165

So you had.

166

happen.

167

So All countries basically ranging

between 65 and 70 percent of working

168

age population as percentage of total.

169

But in the eighties, we peaked,

basically demographics peaked.

170

They remained healthy between the

171

growth, the marginal benefit from

better demographics had exhausted.

172

And if you look at the next 10 to 20

years, of course, this projection, these

173

projections look blicker and blicker.

174

So in the eighties, you had

demographics peaking, and you also had.

175

The second factor that stands behind,

structural growth, you had productivity

176

also peaking because at the end of the

day, you can have better demographics, but

177

if those workers aren't productive and if

the use of capital isn't productive in the

178

economy, you're still going to struggle.

179

Now, the good news is, as you can see

from this chart, that if you look at the

180

decades, like the fifties, the sixties

and the seventies, and all the ways until

181

the eighties, Productivity growth on a

10 year rolling basis was increasing.

182

So you were becoming.

183

more productive year after

year, and the marginal rate of

184

productivity was also increasing.

185

But once you reach the eighties and

the nineties, this productivity growth

186

was still there, but it started to

decline on a second derivative basis.

187

So you were still more productive,

but the productivity growth

188

benefits were mostly exhausted.

189

And so what happened basically is that by

the eighties and the nineties, you were in

190

a situation where the gold peg was gone.

191

You could create new money.

192

without having a hard pack to gold

and your structural growth forces.

193

Driven by demographics and

productivity were declining.

194

And so politicians had to basically

find an offset, a way to offset this

195

dwindling structural growth to make

GDP growth socially acceptable again.

196

And how would, how were they going to eat

their 3 percent real GDP target each year?

197

Well, with the use of leverage.

198

And therefore they said, you know what,

we are going to start doing it and we're

199

going to lever up the system because we

don't have a hard peg anymore and we can

200

create as much fiat money as we want.

201

And so you go into a situation, as you

can see here, where whatever country

202

you actually put, you can use the US

or Europe or Japan or China, as you can

203

see in this chart, as long as you look.

204

At the total leverage in the system.

205

So you look at the private sector,

as we said, bank lending, private

206

credit, and the public sector combined.

207

If you look at the use of leverage

you can make throughout the economy,

208

all biggest economies in the world

went through the same process

209

between the eighties and 2020.

210

They all levered up their economies

from about a hundred, 150% of

211

GDP, all the way to 300, or in

Japan case, even 400% of GDP.

212

Yeah.

213

Mike Philbrick: right.

214

Wow.

215

So that's public and private data as

a percentage of GDP that you've got on

216

this and you can just see, in particular

what's striking is that, that run in

217

China from, you know, sort of post

218

to 300, just sort of catching up to

the rest of the developed nations in

219

the world, truly, truly staggering.

220

Alfonso Peccatiello: Yeah,

it's quite impressive.

221

I mean, China caught up to the game.

222

They had demographics, tailwinds

a bit later than the others.

223

so they, they lasted a little bit longer.

224

They had a big productivity boom by

joining the WTO so they could gain

225

share on the global manufacturing

market and the global trade market.

226

They became more productive.

227

But all these exhausted for

them, let's say 10 to 15 years

228

later than it did for the others.

229

So somewhere around 2005, 2010, they

actually had to lever up and they did.

230

So very,

231

Mike Philbrick: did they ever,

232

Alfonso Peccatiello: they, they went

ballistic, you know, in basically 15

233

years, they covered the ground for

three decades when it comes to leverage.

234

And so basically you went

to a situation where.

235

Politicians had found the fix.

236

The fix was, well, if demographics

are coming down and if productivity is

237

coming down, we're going to do leverage

and everybody's going to be fine.

238

Now, one issue with leverage is that it

makes a system, of course, a bit more

239

fragile and also to be used as a recurring

system, more leverage and more leverage

240

and more leverage, you need to make sure

that the next guy who's levering, the next

241

generation who's levering is able to do

so at a marginally cheaper interest rate.

242

So if you lever up the

system more, more and more.

243

And your salaries aren't increasing

in real terms and your structural

244

growth is not that strong.

245

The only way to sustain, to basically

have a servicing, ability for this

246

high level of leverage is to make

servicing costs pretty low, is to make

247

interest rates as low as possible.

248

And so you went into a situation

where the system got more leverage,

249

often unproductive to be frank.

250

So this leverage went into

real estate and asset prices.

251

It wasn't really used to.

252

generate innovation and structural growth.

253

So you had this system, these lowered

economic activity as the entire

254

economy was basically burdened by that.

255

And so central banks decided to stimulate

economic growth and make the system more

256

sustainable by lowering interest rates.

257

This was the trick to continue

levering up the system.

258

Without having effectively the leveraging

episode like we had, for example, in

259

Japan, a system which was highly leveraged

to the real estate market in the eighties.

260

And when the bank of Japan, Japan raised

rates, you then had a deleveraging

261

episode who lost it for decades.

262

So the West didn't want that.

263

And they said, well, you know what?

264

We're going to cut rates and

accommodate this process as we speak.

265

And that's what we did.

266

Mike Philbrick: Yeah.

267

And so that it obviously, well, it's

unlikely that that can go on forever.

268

but maybe also walk through the steps

of the wealth illusion effect that

269

you talk about and how that continues

to go through maybe the stepwise

270

example that you used in the house

purchase and to let people sort of

271

get their minds wrapped around that.

272

Alfonso Peccatiello: Yeah, correct.

273

So one chart before we walk through the

example to visualize what I just said.

274

If you look at the U.

275

S.

276

and you look at government and private

sector debt as percentage of GDP,

277

which is in blue on this axis inverted.

278

So the lower you go, the more private

and public sector debt in the U.

279

S.

280

right.

281

We were at 180 percent in 1998 in the U.

282

S.

283

Real interest rates in orange.

284

On the right hand side, were at about 4%.

285

So with the US running 180% of private

and public sector data, percentage of GDP,

286

we could run in the US with about three

and a half to 4% real interest rates.

287

Okay, let now, as the US became more

and more leveraged and more and more

288

leveraged, let's say all the way

until today with the US running 250%.

289

of private and public sector, that as

percentage of GDP, real yields have been

290

for the last decade, somewhere around

1%, roughly 50 basis points to 1%.

291

Now the Federal Reserve has hiked

interest rates much further in this

292

specific economic cycle, which makes the

system Arguably a bit fragile, right?

293

Because what you're having is a decent

level of leverage in the system with

294

real interest rates that are higher than

what the equilibrium of the last 30 years

295

between these two variables would suggest.

296

But real, really, the other effect

of doing this is boosting house

297

prices or asset prices in general.

298

So I'm now sharing part of the article

I wrote just to make people visualize

299

as well the figures that I'm using.

300

If you bought a house in the US, let's

say in the early nineties, right?

301

let's assume for a second that the

bank would have lent you a hundred

302

percent of the purchase value.

303

That's not standard, but please bear with

me just for the sake of the assumption.

304

Okay.

305

So let's say, In the nineties,

you wanted to spend 1, 000 a

306

month in mortgage installments.

307

Okay.

308

And let's say that in the nineties,

the actual third year mortgage

309

rate back then was about 10%.

310

Okay.

311

So you had to pay a 10 percent

nominal mortgage rate for 30 years.

312

And with a 1, 000 mortgage installment

budget per month, that meant at these

313

interest rates that you could buy a

house worth about 120, 000 a month.

314

dollars back in the nineties.

315

Okay.

316

Now let's bring this back

30 years for, forward.

317

Okay.

318

And let's go specifically to 2021.

319

I just want to show you the

peak euphoria of this, wealth

320

illusion paradigm, as I call it.

321

Let's say that you are in 2021 and you

still want to spend a thousand dollars

322

a month in mortgage installments.

323

That's your budget.

324

But your 30 year mortgage is now 3%.

325

So you do your cocks and all of a sudden

you can afford a house worth 240, 000.

326

This is double the price in the nineties.

327

So effectively by lowering nominal

interest rates over time, you

328

have allowed another generation to

lever up more and more and more.

329

Specifically to double the amount of the

90s and be able to afford the same price.

330

And so what you have achieved is a

continuous use of leverage and injection

331

of leverage into the economy, which makes

not only the new buyer feel like he can

332

afford new credit simply because interest

rates have gone down, specifically the

333

old buyer, particularly happy because

his house price is now doubling price.

334

and still can find a buyer

because interest rates are much

335

lower than they were in the 90s.

336

So the combination of lower interest rates

and injection of credit into the economy

337

makes this offsetting effect basically,

or what I call the wealth illusion

338

paradigm, actually go further and further.

339

And the reason why I call it the

wealth illusion paradigm is that

340

where you're forced to rapidly reverse

this interest rate story and move

341

back from 3 percent to 7 or 8 10

percent and stay there for a while.

342

So find a new equilibrium borrowing

rates, a bit like it happened in Japan

343

in the nineties, you're facing the risk.

344

Yeah.

345

That you have to reverse this

wealth effect and basically

346

deleverage the entire system.

347

Mike Philbrick: So how do you see, what

are the potential paths forward on this?

348

I mean, we've got the

tremendous amount of debt.

349

I'm sure the other thing that

comes to mind for me too is

350

the initial conditions, right?

351

So again, you started with that many

years ago with very low interest rates.

352

much lower debt across both

public and private sectors.

353

So you've got this space in

front of you to lever up.

354

You've got high interest rates

going to low interest rates.

355

So you have this sort of perfect

storm of opportunity to create

356

the wealth illusion effect.

357

What happens going forward from here?

358

When we're at 5 percent interest rates,

do we need a massive productivity growth?

359

are we going to see, you know, some sort

of, the classic, there's three ways out

360

of it, you know, debt, you can be austere.

361

Nobody likes to do that.

362

Nobody gets elected.

363

You can default, or you can sort of

debase the debt and inflate it away.

364

So those are kind of the three

paradigms that people talk a lot about.

365

How do you see us resolving this

in the past forward, given the

366

current set of circumstances?

367

Alfonso Peccatiello: I mean, what, what

politicians are doing right now is while

368

the central bank is trying to act somehow

responsible by raising interest rates

369

to fight inflation, that puts a lot of

burden on a highly leveraged system.

370

And so what's happening on the other

side is that governments are coming

371

in with fiscal injections, right?

372

They're being much more friendly on

the fiscal side, hoping to basically

373

balance out this tightening from The

Federal Reserve and other central

374

banks and come in support in the

private sector on the other hand of it.

375

Now, can this work?

376

Again, yes, it's a fragile equilibrium

as long as bond vigilantes and markets

377

don't start questioning this gigantic

use of fiscal stimulus in a pro cyclical

378

way and start wondering, you know,

let's put a premium on long bonds.

379

Let's see what happens there, for example.

380

So this could be a release valve

for how the system becomes all

381

of a sudden very, very fragile.

382

But going forward, let's even assume.

383

that we go back to a situation where

you have a perfect soft landing, it's

384

disinflationary, so the Federal Reserve

can cut rates all the way to 2%, right?

385

So we go back on this treadmill basically

of let's try to put new leverage

386

at cheaper interest rates, okay?

387

Even if we go towards that, okay?

388

There are limitations because as you said,

the private sector is much more leveraged

389

than before in general, not specifically

in the United States, but if you look

390

around the world, that is the case.

391

you are in a situation where

you then slowly, but surely move

392

back towards low interest rates.

393

So your ability to lower

interest rates further.

394

Right.

395

So there are obvious limitations

and this is why I think people

396

feel uncomfortable with the system.

397

Right.

398

They feel it needs to crack.

399

So then my, my, the piece was there

to try and answer the question,

400

what is the macro end game?

401

What are the solutions to this?

402

Right.

403

So I see three.

404

The first one is.

405

Politicians would show up and say, sorry,

guys, we're going to clean up the mess.

406

So we're going to go with

a gentle deleveraging.

407

They would like to be gentle, but with

a deleveraging process, I think that's

408

pretty much politically unviable because.

409

You would have to deleverage a wealth

illusion effect system and a levered up

410

system that has benefited two generations.

411

That will be a disaster.

412

And even if it's true that let's say

413

voters isn't going to be The boomers

or the people who benefited most

414

from this still, they would account

for like 40 percent of the voters.

415

So I'm not sure that any

politician would volunteer to

416

actually deleverage the system.

417

Would you agree with me?

418

Mike Philbrick: Yeah.

419

And I think that the

political system in the U.

420

S.

421

is quite unique with all of these,

baby boomers and even older generations

422

holding positions of power politically.

423

And you have this massive voting

group called the millennials

424

and why are they going to endure

austerity for their grandparents?

425

Like, what, what's the motivation

for them to eat this particular shit

426

sandwich so that, that older generation,

which is clinging to power in a

427

political sense and driving the bus

still, and still votes predominantly

428

much more than the millennials vote.

429

it's a very unlikely scenario where

we get the, you know, austerity

430

deleveraging without some sort of,

War, some sort of call to action

431

that, you know, sort of solidifies

the population across the generations.

432

So I agree.

433

Alfonso Peccatiello: I think you're right.

434

And specifically China has recently

tried to deleverage a bit their

435

system and they're not doing

particularly well as a result.

436

I mean, the Chinese real estate

market was valid at I think

437

trillion dollars at the end of 2021.

438

That's bigger, a bigger market

cap than the U S stock market.

439

And then Xi Jinping said, well, you

know what, that's a bit too much, right?

440

Should we try to deleverage this sector?

441

And China, which is a centrally planned

economy, still got a lot of backlash from

442

this, you know, attempt at deleveraging.

443

So it's very hard in general to

deleverage a very leveraged system.

444

And on top of it, it wouldn't really

benefit the status quo, I would argue so.

445

Politically unviable, low, low likelihood.

446

What's the second solution?

447

The one we were suggesting, hinting at

before, which is wealth redistribution.

448

So what you do there is you don't try

to necessarily deleverage the system,

449

but you simply try to shuffle around

basically the wealth distribution.

450

So you do targeted fiscal policies to

make sure that some of the wealth that

451

has been allocated to a certain cohort of

the population gets moved around basically

452

to another cohort of the population.

453

So wealth redistribution.

454

That's it.

455

In my opinion, this is more politically

viable simply because the majority of

456

voters will be very happy with wealth

redistribution, let's be frank, but

457

it is also a very volatile outcome

because when you redistribute wealth,

458

you're also changing basically the

consumption patterns in the economy.

459

So you're moving money

towards the right direction.

460

the higher core, the cohorts

of the population that are the

461

more, they have the highest

propensity to consume basically.

462

So what you're doing there is you're

really applying tectonic shifts at

463

our economic resources are allocated.

464

That's a very volatile

outcome, which I think is still

465

politically viable and likely.

466

And what this does is it brings

more vol, more inflation risks, more

467

stagflation risks to the economy.

468

So I think this is an

outcome where this could be.

469

The macro endgame or a step

towards the macro endgame.

470

And I think that investors aren't

necessarily prepared in their

471

portfolio for more periods of inflation

vol, more periods of stagflation.

472

I think this could be one of

the most likely solutions.

473

What do you say?

474

Mike Philbrick: Yeah.

475

I think that, that was also talked

about a little bit in the, fire and

476

ice by HL man piece, if anyone wants

to look that up, where they looked at

477

inflation volatility previous to sort of

478

today, and, you know, correct me going

from memory, but inflation volatility

479

has been post 1990 has been half of

what it was in the previous period.

480

So, you know, you had a couple of world

wars, you had a great depression, you

481

didn't have quite the coordinated central

bank efforts, and you didn't have this

482

wonderful starting place where you'd

ratcheted rates up to 18 percent to purge

483

the system of debt, and then set the stage

for a wonderful, levering of the economy.

484

So, you know, yeah, I think that's,

that is, that's An interesting scenario.

485

What always triggers my thoughts in

this is the really rich seem to figure

486

out ways in which to work around

a lot of these, these situations.

487

So, you know, as much as you have smart

people in government trying to think

488

through ways in which to, make the tax

system more fair and redistribute wealth,

489

at the same time, you have very wealthy

individuals who have, you know, legions

490

of lawyers and tax structures set up.

491

To simply counter, counteract those

policies and programs, but it's

492

not to say that it's not possible.

493

It's just, you know, you kind of

have to have buy in from everybody

494

that we're going to do this.

495

and then you've got, you know, the

geopolitical side of things where,

496

nations are competing with one another.

497

You have the Japanese scenario

where you've got the yen falling

498

through the floor, making that

particular economy pretty competitive.

499

And then what are the, What's the game

theoretic of all the economy economies

500

of the world trying to redistribute

wealth at the same time, but also

501

trying to compete with one another.

502

Alfonso Peccatiello: I

think you're totally right.

503

It's much easier said than done.

504

Nevertheless, a potentially likely

outcome or more likely than the first one.

505

The third

506

Mike Philbrick: Well, there's

going to be levers, right?

507

I don't think any one of these,

is going to be the thing.

508

The other thing is it's probably going

to be a combination of, some of these

509

three things together in some way, shape

or form, but definitely more of this one.

510

Alfonso Peccatiello: the third one is

simply kick the can down the road, right?

511

So pretend that nothing's going on and

have the system lever up a bit further,

512

maybe try to cut interest rates or try

to control the situation like today

513

where interest rates are high, but fiscal

deficits are trying to pick up the slack.

514

And I think that's what this is.

515

politicians probably go the most

for because their objective number

516

one is to preserve the status quo.

517

So as you said, there are like three,

ways to face this going forward.

518

And I think number three, preserving

the status quo is what politicians want.

519

but it's going to be a bit more, you

know, interval by, step number two,

520

which is wealth redistribution policies

to try and gain more voters and try to

521

make the system a bit more balanced.

522

So what I'm looking at is situations

where if you think about how to.

523

Positioning a portfolio

for something like that.

524

There's a chart in the article that

shows the, LCTM, NAV, the net asset

525

value of a dollar invested there.

526

and, you know, if you would understand

527

doing was basically, levering up on,

on illiquidity and relative value,

528

that really was more illiquidity,

illiquidity premium than anything else.

529

You would say, look, if these guys

keep doing this, At some point,

530

they're going to blow up, right?

531

There's going to be a situation

where they're going to blow up and.

532

You had to wait four years

until that payoff came, right?

533

There is a chart that says you can

basically mirror it if you're trying to

534

bet against them and you will lose money,

lose money, lose money, lose money,

535

lose money for four years, and then

you would make a ton of money, right?

536

And then I say, look, if you

want to Time or trade the micro

537

end game as a binary outcome.

538

Basically what you're looking

at is potentially a few decades

539

of under performance on the

performance on the performance.

540

And none of us are in the business of

underperforming for more than actually

541

a few quarters, unfortunately, how the

financial industry is set up nowadays.

542

So, so we have to find ways

to incorporate, I think, these

543

probabilities into a framework,

into a portfolio so that.

544

You can build something that is

relatively well balanced that doesn't

545

necessarily underperform while you

preserve some convexity towards a

546

scenario where one of the, of this macro

end game solution actually pops up.

547

Right.

548

And I think that's the aim.

549

And it's important to pass

it through as a message.

550

Don't binary trade something, which is

potentially decades to go because it's

551

going to cost you a fortune to do that.

552

And maybe the payoff comes way

too late for you to actually

553

be able to benefit from it.

554

Mike Philbrick: Exactly.

555

and there's a lot in that.

556

so LTCM, the Thai bot, the Russian

ruble, and then the Fed's decision

557

by Greenspan to loosen because the

financial global system was in jeopardy

558

was probably one of the causes of

559

Right.

560

We have the correction in 98.

561

LTCM gets worked out.

562

There's a massive injection

of global liquidity.

563

And then you have a technology bubble

that is to some degree what the U.

564

S.

565

may be facing yet again, in that if

we have something that causes a global

566

breaking of something, and then the U.

567

S.

568

has to decide whether prioritizes

the global stability over.

569

The U.

570

S.

571

inflationary stability.

572

So how much will the U.

573

S., if it had to loosen rates

because something breaks globally,

574

what are the implications for an

inflationary situation for the U.

575

S.

576

population?

577

And for those, that large swath of voters

that isn't rich, you know, if you're

578

living paycheck to paycheck, 25 percent

increase in the cost of living is, is

579

extremely difficult and is heartfelt.

580

And you have a vote in that.

581

So there's lots of, Unintended

consequences that come from the central

582

bank's interventions and these three

levers that they're trying to work

583

through, kick the can, slightly de lever,

redistribute wealth in a world where

584

inflation volatility goes up dramatically,

which then of course, I think as you're

585

alluding to, and I will, second is that

now you need a framework that considers

586

all of those issues, that considers

the implications to asset prices.

587

How are you going to

balance those exposures?

588

How are you going to?

589

Add a global macro framework to

your asset allocation system because

590

we are not today starting at 18

percent interest rates going to zero.

591

We're not sitting at a

very lowly levered economy.

592

We're sitting at, you know, high

rates at a high levered economy.

593

Sure.

594

We've got some ability to cut, but that is

what makes global macro so popular or so

595

potentially profitable in thinking through

how you might balance your exposures.

596

And as you say, you don't want to bet

on these things in a binary fashion.

597

You want to think through the

probabilities of them and probability

598

weights, some of your thinking, and

you probably need a base portfolio

599

to think through, to think about bets

against a base portfolio as well.

600

Alfonso Peccatiello: Yeah, so I would

say the first step to do here is to

601

say, if I get somewhere along the

road, a higher probability of one

602

of these macro end game outcomes to

become more likely, how is my portfolio

603

going to react to a mental stress

test basically of one of these, right?

604

So let's say that, for example, let's not

even talk about the macro end game, but

605

the simple situation where inflation picks

606

and 2021, not wealth redistribution, but

simply fiscal interventions to make sure

607

that, you know, that the system could

continue to exist during the pandemic.

608

And so the result was

inflation because the U.

609

S.

610

ended up doing too much and there were

supply bottlenecks and so on and so forth.

611

So what happened back then?

612

Well, as my friend Dan Rasmussen from

Verdat Capital, he has a very good chart

613

where he goes back, I think, 150 years

and looks at the three year rolling

614

correlation between bonds and stocks.

615

Right.

616

And then he looks at, that

level of correlation pending.

617

or conditional of the level of core

inflation that is prevailing, right?

618

And then it's a very simple

chart where you see this negative

619

correlation existing, mostly in

periods where inflation is between

620

one and two and a half percent.

621

You know, when inflation is between

one and two and a half, bonds and

622

stocks are negatively correlated.

623

It makes all the sense in the world

because if something goes Poor, let's

624

say in earnings or in the real economy,

the central bank will cut rates.

625

You know, they have inflation at

their target level with actually

626

even maybe lower, so they can

and will cut the interest rates

627

and this will benefit bonds.

628

And therefore this negative

correlation exists very, very well,

629

very well documented through decades

when core inflation is between

630

one and two and a half percent.

631

But the chart also shows how,

the correlation turns positive.

632

when core inflation is above 3 percent

and particularly when it's very

633

volatile, you know, and ranging between

two and four and three and five, and

634

then the correlation becomes positive.

635

And that's exactly what

636

So stress testing your portfolio mentally

would basically bring you to a situation

637

where if you're running only bonds and

stocks, I'm sorry, but you have two items.

638

They're both going to go

down at the same time.

639

And I'm going to, I'm going to also say

that the 60 40 portfolio is 85 percent

640

equity ball in the first instance.

641

And so, you know, your job is also

somehow correlated to the business

642

cycle and to equity and to earnings.

643

And so if everything is falling down

and your job is more at risk and

644

your portfolio is facing a 20 percent

drawdown, I'm going to argue that is not

645

necessarily a robust framework to invest,

especially if you think these vol events.

646

So let's say wealth redistribution, fiscal

deficits, high inflation, low inflation,

647

more volatility is going to pop up, right?

648

You need something else.

649

You need to mental stress your

portfolio before we even talk about.

650

Sources of uncorrelated returns, so

alphas like carry or trend or global

651

macro, we first need to fix the beta.

652

Like do you have exposure to, different

beta elements that will contribute

653

to stabilize your returns if the

macro environment is not what you

654

have seen for the last, 10, 15 years.

655

So this inflationary growth driven

by the U S if you have any other

656

outcome, which is maybe inflationary

growth or deflation or growth outside

657

the U S is your portfolio from a beta

perspective, prepare to really benefit

658

from this environment, different lenses.

659

Mike Philbrick: So, so, so right on

the mark there, Elf, the way you get to

660

the current situation we're in is you

have this positive reinforcement, this

661

recency bias where investors have been

treated so well by a disinflationary

662

growth environment, market cap

weighted strategies are now way over

663

in the disinflationary growth camp.

664

If we take the S& P 500

and say, well, okay.

665

You know, we use a lot of

energy in our global economy.

666

And, you know, it's said that an

AI search now takes 17 times more

667

energy than a Google search once did.

668

So we have a very energy intense economy.

669

Yet, if you look at the S& P

500 at the moment, 4 percent

670

of the S& P 500 is energy.

671

2 percent is materials.

672

So what is your hedge in the

situation where we get into a

673

stagflationary environment where

the cost of inputs to production

674

energy and so on are rising rapidly?

675

That takes profits out of the rest

of the 96 percent of the S& P 500.

676

And you've got nothing in your portfolio

that is adding positive returns if

677

you're in a stagflation environment

where growth is threatened by maybe the

678

cost of inputs or debt or other things.

679

So you have a totally

imbalanced portfolio.

680

You're basically letting the

maniacs run the asylum here, right?

681

But it feels okay right now.

682

2022 was just like a little

appetizer in that scenario.

683

So, I mean, people have this recency bias.

684

What has been the, you know,

sort of Pavlovian or habit based

685

response that they've had over

the last 20 years, they've been

686

trained very well to buy the dips.

687

I think, you know, you probably get a

Pavlovian response in a growth, threatened

688

environment where bonds do rally.

689

In some way, but I don't think that

rally is going to be what it has

690

been in the past because if you're

injecting that stimulus, then on the

691

other side of the equation is, okay,

well, who's going to pay off the bonds?

692

Like how do we pay off all

this debt that's accumulated?

693

And what's the credit

rating on those bonds?

694

So how do you fill out the portfolio?

695

Like we have this, you know, largely sort

of, maybe we've reached peak passive, peak

696

market cap, which has been dominated by a

disinflationary growth environment, which

697

means largely US equities are the largest

piece of any sort of market cap portfolio.

698

How do we protect ourselves going forward?

699

What do we need to incorporate?

700

And what do we do in a global macro

framework from your perspective

701

in order to round this out?

702

Alfonso Peccatiello: Look, I

think on the betas, your most

703

famous betas are equities bonds.

704

And I would say there is commodities

as well as a beta you can try to

705

achieve and potentially the dollar,

which is an interesting beta as well.

706

And then you can, you know, just look

at, for example, on equities, you can

707

do a internationally diversified to

protect you against the outcome that

708

growth comes from outside the U S.

709

you can do, equal weight rather than

market cap weighted to make sure

710

that, you know, you have a broader

exposure to the equity market.

711

And on bonds, you know, you can do.

712

different points of the curve.

713

So especially through futures, you

can use very little cash to get your

714

bond exposure and get, a certain

amount of volatility out of the bonds

715

because often, you know, in the 60,

40, you will target intermediate bonds.

716

They have very low duration, very low

sensitivity to move to interest rates.

717

And therefore you will need a ton

of them to make sure that they

718

contribute actively as a defender

in this inflationary environment.

719

So again, through futures, you

can structure that in a more

720

interesting way than just targeting

your five or seven year bonds.

721

And then you have commodities.

722

And then we go towards the

more defensive side of things.

723

Okay.

724

What if there is inflation, for

example, so how do we work around that?

725

If there is inflation, you can think

of commodities, but you can even think

726

of strategies that actually benefit

from inflationary environments.

727

So in 2022, we saw, the rise,

I think, or the comeback, I

728

should say of trend strategies.

729

So these are strategies that, you

know, basically make money when

730

there is a clear breakout in prices.

731

And when does that happen?

732

Well, when there is a lot of macro

volatility, you would expect, right,

733

that there are more convex reactions in

prices and therefore trend strategies

734

can actually benefit from this a bit.

735

And you can see that trend strategies

tend to do pretty well during Inflationary

736

bouts exactly for this reason, because

you need to restructure the way

737

you think about interest rates and

equity sectors and commodity prices.

738

And so you have a lot of trends

developing and you can benefit

739

from an allocation to trend.

740

So we are now moving from the structuring

the beta in a smart way, sizing it

741

correctly through futures, looking

at international diversification

742

into more Let's say the alpha

side of things or the uncorrelated

743

stream of returns or the defenders.

744

And so when you look at defenders,

I think trend does a great job

745

at being a potential defender.

746

And then there are strategies

that are a mix of defenders and,

747

uncorrelated stream of returns.

748

And I think global macro is in that

category because a good global macro

749

strategy, what it does is it looks at.

750

idiosyncratic opportunities

popping up around the world

751

because of macro volatility.

752

So it doesn't necessarily need a trend

to develop somewhere, but it needs a set

753

of idiosyncratic opportunities available.

754

These might be in the

shape of the yield curve.

755

You know, interest rates are priced

between countries, maybe Europe versus the

756

US, maybe in equities versus each other.

757

So Chinese equities versus US equities.

758

It just needs a set of idiosyncratic

opportunities that are popping up.

759

because of more global

macro volatility, right?

760

And so it's a strategy that can do well,

let's say in normal times, but it's

761

expected to do particularly well when

there are clusters of volatility, right?

762

And that's, it's a mix between a

relative value, neutral type of

763

strategy and a defensive payoff,

which tends to do well, particularly

764

when macro volatility is picking up.

765

So you think of all this potential

stream of returns and you guys with the

766

return stacking concept are popularizing.

767

That worked very well, I think,

because you basically are very

768

optimal in how you spend your cash

to obtain your beta, your SMP, your

769

bonds, your standard beta, right?

770

You obtain that with little cash,

and then you all of a sudden freed up

771

some of your notional to invest in the

strategies, which you, as you correctly

772

say, you can stack on top of your betas.

773

And then you have your standard balance

portfolios betas, plus your SMP.

774

Your new attackers, your new uncorrelated

strategies, your new defenders in an

775

alpha format because you have freed

up the cash to allocate to those.

776

Mike Philbrick: Love that.

777

And so for those who might be listening

that aren't sure or don't know what

778

managed futures are and that sort of

thing, there is on the Return Stack

779

portfolio solutions, webpage, we published

a managed futures trend following sort

780

of a educational piece to help, you

know, elucidate some of the things that,

781

that, ALF's talking about here as well.

782

And the other thing in trend is

that you can be long or short.

783

And I think that's another thing

that benefits as well as the position

784

sizing you talked about, right?

785

So it's, you know, it's not

a, capital allocation of 40%.

786

You do it on a risk allocation.

787

So you can size your bonds to

have an impact on your portfolio.

788

That's beneficial during those dark times.

789

One other string I want to pull back

into this to make it very clear for

790

people out is we were talking about

inflation volatility previously.

791

When you have very low inflation

volatility and you have a stable

792

environment from the late 80s

793

a lot of these dislocations.

794

They just occur less often, and it

makes those types of managed futures

795

and trend following strategies,

they just have less opportunity.

796

But if you look outside of those periods,

797

get are these dislocations created by

fiscal policy, central bank policy, the

798

realities of debt and leverage in the

system, where these types of strategies

799

that Alf was talking about Actually

have more of an opportunity to import

800

that important value to the portfolio.

801

So not only do you need to structure

your beta thoughtfully to think

802

through all of the allocations and

the different regimes that may occur,

803

but then your hedge or your explore

portion of your portfolio that that

804

attackers and defenders actually has more

opportunity to provide greater value.

805

In this current paradigm.

806

Alfonso Peccatiello: Yeah.

807

Also the reason why I am launching

my global macro hedge fund as well

808

in the fourth quarter of this year.

809

If you look at how politicians are

using fiscal, it used to be actually a.

810

anti cyclical, lever, right?

811

I mean, politicians would

look at the economy.

812

If it would weaken, they

would do more fiscal deficits.

813

It would, if it would strengthen,

they would pull a little bit back.

814

Now it's not the case.

815

It seems to be more a feature than

a bug or an anti cyclical tool.

816

It's just all over the place.

817

And this increases the chance that there's

going to be more macro ball down the road.

818

And if you look at changing demographics

and you look at, you know, the green

819

transition, there are so many moving

parts out there for which I think.

820

Macro vol is going to increase.

821

And so you look, if you have this

view that macro vol is going to

822

increase, then as you said, you

not only have to look at your betas

823

very carefully, but also consider an

allocation to other strategies, more

824

on the alpha side, let's say that

are able to diversify your return.

825

So global macro, for example,

826

a year, which was very, very

volatile for macro in general.

827

And then it saw your betas

do particularly poorly.

828

So that's bonds and equities.

829

They did particularly poorly

and global macro did very well.

830

If you expect more years ahead that

are as volatile potentially, then you

831

need stabilizers in your portfolio.

832

I personally expect a lot of macro

vol, and that's the reason why my

833

macro hedge fund launches in Q4.

834

Mike Philbrick: Yeah.

835

And let's talk about how you've

thought through the structure there.

836

We've got about 10 minutes left to

kind of sit and explain to us how

837

you've thought through your betas.

838

And well, first of all, are you

stacking betas and alphas together?

839

How are you thinking

through the beta side?

840

How are you thinking

through the alpha side?

841

And then how are you combining the two?

842

And I think if you can, you know,

enlighten everyone on that and then

843

Obviously, if you do see this and you

are interested in, in what MacroAlf is

844

talking about for later this year, make

sure you get in and send them a DM or,

845

you know, get on Substack and get on

the macro compass and let them know.

846

and, yeah, make sure you're in line

for when, when the launch occurs.

847

But yeah, take us through the structure.

848

Alfonso Peccatiello: Yeah.

849

So, so for me, the aim is the following.

850

If I launch a global macro strategy,

do you need me to run beta for you?

851

The answer is no, you don't.

852

You don't need me to run beta for

you because I'm not paid for that.

853

You can achieve beta, for example,

to return stacking products in a very

854

cheap and efficient way or in any other

way you prefer, but it's generally

855

pretty cheap to get intelligent

exposure to beta, I would say.

856

So, I instead am running

strategies that are market neutral.

857

They try to have a filter for S& P

500, treasury beta, the standard beta,

858

to have as little beta exposure as

possible in the fund, and to instead

859

deliver a stream of return, which is

positively skewed as we would define it.

860

And it benefits the most during

clusters of macro volatility.

861

So this is a strategy that Basically

looks at idiosyncratic opportunities.

862

It looks at interest rates, at equity

markets, at currency markets, at commodity

863

markets from a global perspective, and

it tries to identify this location.

864

We think in probabilities.

865

So we always look at different scenarios.

866

We have various models that look at.

867

Scenarios and how markets are pricing them

in probability terms where consensus is.

868

And we try to look at potential

catalysts for these locations.

869

We say, look, if the market, for

example, from let's take a look

870

at the Fed funds today, right?

871

And what the market is thinking about

the distribution of these returns

872

of these outcomes for the Fed.

873

I think it's a good example

for how we think about it.

874

So if you take a look at this chart

right here, it shows the distribution

875

of probabilities, the top chart here for

Fed funds future in 12 months from today.

876

So we're looking at what the market thinks

Fed funds will be in 12 months from now.

877

But instead of looking at

one number, we're looking at

878

the probability distribution.

879

Okay.

880

So I derive this by looking at options

that are underlying the future contracts.

881

And what it's telling me now, if you

look at the summary table here, is

882

that the recession in the U S or cuts

that are in line historically with

883

the recession in the U S are priced by

the market at a 5 percent probability.

884

5%.

885

So what do I think about that probability?

886

Well, historically you have

a recession in any given year

887

with about a 10 percent chance.

888

You have a recession

every 10 years in the US.

889

Okay.

890

So now you're getting this tail

price at the 5 percent probability.

891

That's relatively cheap, I would say.

892

And also you, you start thinking

like, I don't think the U.

893

S.

894

will be in a recession necessarily

in one year, but if you think in

895

probabilities, you just need this

distribution to shift a bit over

896

time your way and you can structure

option payoffs that will pay very

897

handsomely if that transition happens.

898

And then you look at this and you

say, Hey, the modal outcome of this

899

distribution, the most observed

outcome is actually zero cuts.

900

So the market is fully gone in

now on the idea that the Federal

901

Reserve will not cut interest rates

at all over the next 12 months.

902

Actually, there is even a

tail right here for hikes.

903

So now the market is starting to price in

a relevant probability that the Federal

904

Reserve might hike rate, a modal outcome

of no cuts at all, and an only 5 percent

905

probability of a recession going forward.

906

So now how do you think about this?

907

It's like, okay, if I need

to take a position here.

908

Then I can think of an, of a

structure that might bet on the idea.

909

The economy may be weakens

a little bit going forward.

910

It doesn't need to end in a recession,

but as long as this distribution shifts

911

to the left over time, shifts towards

more cuts, you can benefit from it,

912

even if ultimately you don't have

a recession, just by understanding

913

our consensus position, how the tail

surprised and thinking in probabilities.

914

That's what we do a lot in the macro fund

and in the framework we have created.

915

Mike Philbrick: Right.

916

And you're doing that across, I'm

assuming, the rates, some stocks,

917

but not, not in a correlated sort

of beta buy and hold type of thing.

918

All the commodity space,

919

Alfonso Peccatiello: Currencies.

920

Correct.

921

So, so we trade mostly futures because

it's the most liquid way to do that.

922

We will then do swaps and other

derivatives where it's the most

923

optimal way to express this, but

we will do it correct across asset

924

classes and across geographies.

925

And the idea is to identify

these dislocations and see how

926

the market is, the consensus

is pricing certain distribution

927

finds this dislocation and get in.

928

So if there is macro ball, if there

are these classes of volatility,

929

you have positions on that might.

930

Allow you to benefit from it and

actually You serve the role in the

931

client portfolio and the role is, and

when your betas are not working because

932

of that cluster of volatility, you are

there to offer them diversification

933

benefits and actually upside returns.

934

Mike Philbrick: And then last question,

I know because we're running out of time

935

here, but how do you think about the

assembly of that, sort of, set of trades?

936

So you're going to see some

stuff in the rates world.

937

You might see some opportunities

in commodity space and then a

938

currency trade or two, something

in, in equity vol world or.

939

You know, relative value or

whatever, whatever it comes up.

940

How are you thinking about positioning

those trades across the entire portfolio?

941

Alfonso Peccatiello: So what we do

is we apply a inverse volatility

942

mechanism to size the trade.

943

So we are looking basically at having

a set of uncorrelated trades in the

944

portfolio, all contributing the same

amount of risk and volatility to the fund.

945

And the idea is very simple.

946

You never know when you're

right and you'll never know

947

when you're wrong, right?

948

You only set positions on based on your

initial idea that your expected value

949

is positive, but ex ante, we're going

to see what's positive or what's not.

950

So the idea is you size them all in a

way that they contribute equally to the

951

risk of the portfolio because As a macro

manager, you are right 50 to 55 percent

952

of the times, unless you're selling

volatility, which is not what we do.

953

You are right.

954

50 to 55 percent of the times.

955

So what you want is that when you are

right, actually, the specifically,

956

sorry, when you're wrong, each

of these uncorrelated trades can

957

contribute Only to a maximum capped

amount of loss in your fund, right?

958

But when you are right, you have

strategies in place, either through

959

an option payoff or a trailing,

profit strategy to be able to extend

960

the right side of your returns.

961

And so by doing this, even being right,

only 50 percent of the times, as long

962

as the portfolio construction and the

risk sizing process is accurate, you

963

actually can get positive, positively

skewed returns at a fund level.

964

Mike Philbrick: absolutely.

965

And that's a bit of an ensemble as

well, where you're taking many, many

966

sources of information and sources

of return, combining them together.

967

You get the noise canceling out,

you get some signal in there,

968

you get some positive returns.

969

And, and you've got a very diversified

portfolio that is quite different

970

from traditional betas that make

it so complimentary in a portfolio.

971

Alfonso Peccatiello: Yes.

972

And for me, it's really simple.

973

I'm a, an open book over to being

on social media through research.

974

So also for this,

adventure, pretty simple.

975

If anyone is interested, they can shoot

me an email, fund at the macro compass.

976

com is the address.

977

The macro compass is the symbol

that you see there on my back.

978

So you can't miss it.

979

Fund at the macro compass.

980

com.

981

You send me any message,

I will take a look at it.

982

We can have a chat.

983

I'm very open.

984

Part of the diversification, I

would say of this fund is that.

985

I will be the opposite of your

standard macro manager who you only

986

hear during tax season, maybe, and

through some investment letters.

987

I'm very open to discuss the ways

I can help potential investors.

988

So just send me a message

and I'll pick it up.

989

Mike Philbrick: Amazing.

990

Thanks so much, Alf, for your time today.

991

And, as he said, the Macro Compass

on Substack, as well as, at MacroAlf

992

on Twitter is where you can find

this, brainiac of the macro world.

993

And one of our favorite guests, I'll

thanks so much for joining us again today.

994

And, we look forward to

chatting in the future.

995

Alfonso Peccatiello: It's been a pleasure.

996

Thanks again.