Phil Wool, Rayliant - Active EM Investing & Factor Strategies

Speaker A: You. I'm gonna always be on the screen. Uh, because otherwise, maybe I can change that. We'll see. Uh, folks, give me a second. I want to make sure, as always, that we are streaming live. Hold, uh, on one second. One second. I just did a, uh, podcast with Mr. Luke Oliver, so screen shares day.

Speaker B: Uh, here.

Speaker A: I love Luke. Luke's a good dude.

Speaker C: Lulu's a very good guy, and a great, you know, ETF centric career for them.

Speaker A: Yes, yes. Well, just like you. I mean, you've been. You've got a storied career yourself.

Speaker C: Uh, I'm trying to get out.

Speaker A: You know, we all are. It's called retirement. That's like, make as much money as you can as quickly as you can. Uh, all right, well, that's funny.

Speaker C: I was just with someone who. Uh, the firm, you know, so he. And, uh, he's probably closer to your. Your age. Michael versus mine or 73.

Speaker B: How old do you think I am?

Speaker C: Uh, but. But he was like, oh, like, I'm not quite able to retire. I'm like, really? Like, that was. Even on the.

Speaker A: First of all, we're in New York. Um, we ain't never retiring, uh, with these taxes.

Speaker C: Yeah, yeah. You know, Henry Timmons, he was at Richard Bernstein Advisors.

Speaker A: Sounds familiar.

Speaker C: So, yeah, he was kind of the. You know, a part of the. You know, part of their investment committee and picking etfs. Um, but, yeah, they got bought by Janice Henderson.

Speaker B: I saw that.

Speaker A: Uh, so Henry's out there, and he still can't retire. Is that what you've seen?

Speaker C: I don't think he was quite high.

Speaker B: I think that was what Brandon was getting at.

Speaker A: Ah. Uh, but Henry's a great guy.

Speaker C: He's out there looking if. You know, uh, as a husband and a dad, I feel obligated when some. You know, when some of these guys are out there, you're like, man, if. You know, I've never been through that, but if. You know, if I feel obligated to try to help Henry. He's a good guy.

Speaker A: There you go, folks. We are live. Thanks, everybody, for watching. Starting to tune in on X, YouTube, LinkedIn. Uh, as always, uh, I can see your comments and post that, whatever. If you want to engage, we can see your comments. Hopefully, uh, you enjoyed this conversation, uh, at a nice conversation with Mr. Luke Oliver. Now we're gonna go to Mr. Brendan Ahern, who I've known. Gosh, it's 2012, I want to say. Pre Crane chairs days, I think it is. And, uh, uh, Mr. John McNamara from Hedgeye and Some of you may be wondering why in the world is Hedgeye, uh, here with Cream Shares? Uh, and I wonder that myself because I just found out about an hour ago. So, so what we're gonna do, what we're doing here is first I want, I want, uh, uh, you, Brendan, kind of introduce yourself to those that are watching, listening. Same thing for you, John, and then explain exactly how the two of you are, Are collaborating. So go ahead.

Speaker C: Yeah. So, uh, Brendan Hearn. I'm the chief investment Officer here at Crane Shares Exchange Traded Funds and you know, had the pleasure getting to know Michael, you know, during my long tenure, uh, here in the ETF industry is

Speaker A: not the right word for knowing me, just

Speaker C: uh, but I've been in the ETF industry for call uh, it 25 years now. So as part uh, of Barclays, uh, Global Investors when they started iShares and then subsequently part of BlackRock and uh, yeah, just um, you know, working with people like Michael Love, love the idea of doing something entrepreneurial. So, you know, 13 years ago, as part of starting, uh, Crane shares with

Speaker A: John CR training and Mr. John McNamara. I said John, yeah, I don't know anything about you. Please.

Speaker B: Yeah, absolutely. Well, I will say this. It is always fun going to ETF conferences with Brandon because you walk around and it's as though you're with a celebrity. I mean, I guess, you know, he is a celebrity in the ETF industry. So it is part of that is very funny.

Speaker A: That's because he looks a little bit like, like a Superman type of guy. He's got kind of the hair and the.

Speaker B: You might be onto something. But yeah, I think, uh.

Speaker C: Can we patch my wife in? Dissenting opinion.

Speaker A: I have big reach. I don't know if I kind of reach, but no.

Speaker B: Yeah, well, I, well, anyway, so I, uh, I joined uh, Hedgeye um, back in 2018. I had a, you know, very traditional, uh, Wall street career. Started off at a bank, then, you know, did the buy side thing and basically the, the last, um, job prior to joining um, Hedge I itself actually, um, was a hedge fund where Hedge I was our largest research, um, input. So you know, at that time, you know, really felt like we had um, you know, really kind of flushed out, you know, how to utilize the research in an asset management capacity and you know, approached Hedgeye about launching an asset management business. Fast forward, I mean, coming up on eight years now, here we are. Uh, but you know, met M. Brendan, I think back in um, 2019 or so. Uh, and you know, we was, was really keen to um, you know, try to help get us into the ETF industry, which obviously now we've, um, you know, we've formally made a foray into both through Crane chairs, but also, you know, in our own right. Um, and, you know, basically have. Have flushed out a bunch of ideas with Brendan over the years, I think. Uh, you know, the. The product that, um, we have with Crane shares, which is Case by kspy, um, you know, it's kind of the one that. That stuck. And, um, you know, we think we're kind of, um, you know, playing into a lot of important, uh, themes that are going on in markets right now with it. Um, and, you know, excited to, uh, to be here today to talk about it. So.

Speaker A: All right, so, uh, I'm going to share the, uh, the street here. And, um, uh, some of you on X might know that I was on a cruise not too long ago, and it, uh, was a creed summer of 99 cruise. Uh, and actually, you will see not. Not purposely, that what Michelle actually has. Oddly enough, uh, one of the tabs here is Creed Higher. Just because literally Luke was saying, like, I don't remember. I don't know who Creed was. I ended the stream. M. I'm like, come on.

Speaker D: You don't Creed.

Speaker A: Is it British? Like, you must know the songs I play Higher. Um, but speaking of creating and can you take me higher, let's talk about the growth of buffer ETF A1. I'm trying to make a transition, folks. It's not really working that well.

Speaker B: Um, I got it. Can you take me higher? I see it. I get it. I see what you're doing here.

Speaker A: Are you picking up what I'm putting down, whatever the expression is. All right, so. So first of all, um, yes, it's true. Buffer ETFs have been all the rage. I don't quite understand why that's. There's a lot of things that just conceptually have problems with. I think it's a very good sales story. But first of all, I'm showing this because I want to use this as an example of showing that there's a lot of demand for products that cut off some downside. Right. That are hedging. So, uh, let's first talk maybe, John, because you've been, you know, on the research side for a while. Let's talk about exactly what buffered ETFs are. Okay? And. And what do you think is driving the demand? And maybe more importantly, why is that demand maybe misplaced?

Speaker B: Yeah, I mean, I think first and foremost, um, you know, what, what's driving demand is um, is a, a lot of assets are, are in the hands of folks who are you know either at near or in retirement. Um and you know want to kind of have that ability to participate at least to a degree in market returns but also sleep at night. I mean you know just look at what's going on, you know live on the screens here.

Speaker A: Dude, I, I, I, I slept at 3:15am M and it's not buffered. ETFs are not gonna help me.

Speaker B: Well I think you, maybe you have

Speaker A: a different problem then but there's many

Speaker B: problems this um, but, but you know I do think that you know particularly given and Brendan talks about this all the time just you know the, the, the equity market you know has basically just been a one way trade for you know, the better part of the last 20 years and you know people are sitting on tremendous gains and you know they've kind of baked in um, you know, either that continued you know, uh, move higher or you know at least being at a level um, you know from an asset perspective, you know, where they are today going forward. So you know I think that certainly has played into a lot of the growth um in, in the category obviously you know when we look at it we extend it out to both the, the hedged equity as well as the buffer um, um space which you know I think I, you know there was a splashy headline from BlackRock out maybe this time last year that said that they thought that you know, the space could get to 650 billion by 2030. Obviously they're highly biased because they're heavily involved in the space but you know, certainly you know having a voice like that, you know out there mentioning you know, that large of growth is, is eye opening on the flip side. And you know Brendan, we've, we've discussed this at length before. I mean you have um, you know the folks at AQR out there basically saying hey, these things aren't worth, you know, the paper they're written on. And you know actually funny enough we've had actually with a very ah, long dialogue with one of the largest holders of case by and basically his argument was look, I can replicate you know, the return stream of a traditional buffer strategy through you know, an asset allocation of um, fixed income versus equity. You know, why would I pay somebody you know, 70 basis points to do that? And you know really what we're trying to bring to the table here with case by is um, you know, a much more dynamic um, you know, means for deploying, you know, what is a very well defined and you know, blazed trail in terms of the strategy. And you know, really the way that we do that is through the utilization, um, you know, of the intellectual property that's coming out of Hedge eye. So you know, certainly a very, you know, well known, well defined, you know, well blazed trail in terms of um, you know, the strategy. But you know, I think we have a really unique and differentiated approach which I'm sure will, we'll dive into in this conversation.

Speaker A: So, so, so let's, let's take a step back.

Speaker C: Um,

Speaker A: there's qualitative research and there's quantitative research and of course there's a blend. Right? When you talk about the research that you're doing, um, the research that underpins, you know, the foundations of case by

Speaker B: which is it quantitative. So you know, basically hedge, I, uh, I think they're probably best known for their um, macroeconomic research which is obviously headed up by the founder and CEO Keith McCullough, uh, which, you know, Keith founded the firm back in 2008 after um, you know, a long and successful career as a hedge fund manager himself. Actually the name Hedgeye, uh, you know, was, was named. You know, basically if you could look into a hedge fund on a daily basis, what would you see? Hence the name Hedgeye. Um, you know, and, and really what the, the macroeconomic research is. You know, the, the two primary pillars of uh, are you know, their, their quad framework which is basically measuring and mapping ah, rates of change of growth and inflation across a uh, myriad of economies. That kind of gives you, you know, your um, asset allocation liens from an overweight, underweight, longer, short perspective. And also, you know, where you want to be from an economic perspective globally. China's pretty bullish right now. I know Brendan likes that. Um, so, but then you know, the, the second. Sorry, go ahead.

Speaker A: Um, was that like just intuition that Brendan likes that or was it.

Speaker B: I mean, you know, I think uh, when I, when I look at the, the offering of, of Crane shares, you know, I think it uh, it is uh, it is firmly underpinned by uh,

Speaker A: I mean the AUM distribution.

Speaker B: Right, exactly. That's, that's exactly what I'm getting at. So, but anyway, so that's um, the, the quad framework is really the, you know, the first and primary pillar. And then you know, equally important is um, you know, what we refer to as the price signals, um, which we refer to as um, you know, a quantitative risk management framework to augment fundamental views. So you know, basically if we're going to have an asset allocation, overweight or underweight or long versus short. It has to check, you know, first and foremost the quad, uh, framework, but you know, uh, secondly and probably equally as important, uh, the price signal framework. And basically you know what that price Signal framework is based on is a proprietary algorithm that Keith McCullough developed, you know, throughout his career as a hedge fund manager and obviously has further um, you know, honed and perfected uh, you know, through the hedge risk management. Uh is you know, basically a price volume and volatility, um, you know, framework like I said, for you know, uh, having a quantitative augmentation, you know, for fundamental views. And the way that we basically utilize that uh, in case by uh, is what we refer to as risk ranges which uh, are basically price entry and exit points, um, you know, for a myriad of assets. Obviously for case bytes for The S&P 500, um, you know that uh, basically provide a you know, a three week duration window, um, you know, you know, for those, those buy and sell levels. And basically you know we utilize that in case by, to determine um, you know, what option strategies we're deploying and at what strikes. Um, so you know that's kind of uh, the secret sauce, um, you know that, that built the product uh, is those risk ranges, um and then you know, how we, how we deploy it, uh, and you know, how kind of um, the strategy works in practice. Um, you know, obviously adds as a further layer of differentiation which we can get into, I'm sure. Yeah.

Speaker A: And Brett, I'm gonna go to you in a second but um, uh, when I think about products like this, I think about up capture, down capture, right. And up capture tends to be less than 100 with something that obviously hedges because otherwise you'd have the perfect product.

Speaker B: Yep. Right.

Speaker A: Well the down capture is less than the up capture and of course if you have enough, you know, down cycles that cumulatively makes a lot of uh, uh, you know, alpha out performance potential. Um, the problem of course, as you know, is that if your strategy inherently thrives on down capture, you need to be in an environment where there's downside to capture. Yep, right. Uh, which you know, other than these momentary glimpses of the COVID crash tariff, you know, tantrum and then 2018, uh, volume again, uh, and the end of year uh, decline in 2018, you don't really have too many of those junctures. We haven't really had any, any kind of real sustained decline where the down capture can, can kind of accumulate.

Speaker B: You can bank the Alpha. Yep.

Speaker A: So, so talk to me a little about, um, from a, a product positioning perspective. Three Ps. Um, how exactly do you get people to, to think in those terms? Because let's face everyone's condition to think markets go up into the right and that's it.

Speaker B: Well, I think that's, I'm sorry, Brandon, are you gonna jump in? But I think just the chart that we started off by showing in terms of the growth of the assets in the, in the product category, you know, speaks for, for itself. And, and listen, I didn't, you know, start off by conversations with Brendan on, hey, how can we, you know, build a better buffer or ah, you know, a better hedged equity strategy? It kind of just came, came naturally. And, and you know, certainly the, the growth in the, in the assets, um, you know, kind of, you know, moved our hand in that direction. Um, and you know, just the knowledge that we had, you know, these risk ranges that are, you know, powerful tools, uh, on our end, uh, you know, that was kind of a, a powerful sauce. But maybe I'll let Brendan, uh, you know, chime in.

Speaker C: Yeah, I mean, I mean, I think, uh, an element of the industry is selling greed and fear and that, that's, that's not what, that's not what we're, we're attempting to do. Uh, we're simply saying that um, you know, as, as people have benefited even for a component of that, of that, that assets your total wealth, shouldn't some of that be somewhat protected? And you know, I think a lot about, you know, someone like my mother in law who's a widower and you know, she's at a point where she can't, she, you know, she can't with, she maybe doesn't have the time horizon to make up from some of these, you know. Oh, uh, you know, if you get a drawdown, you can make it back up over time. Well, not, not, not everyone has that benefit. And then, I think, you know, an element of, of our efforts, you know, we spent a lot of time outside of the United States and you know, there are markets, you know, you know, you think about Japan from 89 to 2012, um, you know, you know, MSCI Chile is up like not even 200% over the last 17 years. You know, you know, it's underperformed em, it's underperformed acqui x us. It's underperformed MSCI China. And this is the most economically stable, uh, politically stable country in South America arguably. And, and I think something that we've noticed Is, you know, we talk a, you know, you might say, well the S p was up 18 last year. Well if I'm a Europe, if I'm a euro denominated investor, I didn't make 18% last year. You know, if I'm denominated in Swiss francs, I didn't make 18% and got, you know, you know you got a real problem if you are Norwegian or Swedish krona denominated because then you actually took an 18% and turned it into a negative return. And so, so this is more of just, you know, you don't, you don't, you don't want to buy, you know, house insurance when your house is already on fire. Um, and, and you know at the same time we love conceptually the idea of buffered, you know it makes sense but, but the problem, there's all sorts of issues just because where that product launches, where it receives funds, you know, the vix, the price of that protection could be really elevated. And that's where you have this dispersion of returns that are completely out of your control as a shareholder. And I think that's where what John and the HedgeEye asset management team are able to do is just say we've got this rational way to try to participate in the upside but also give ourselves some downside protection and something in a strategy that we've been doing for you know, well, you know, well more than a decade. And, and I think that that was kind of the fruition of case by um, you know, it's just this trying to think a little bit smarter and yeah, yeah, I think it's ah, you know, as a shareholder it's, you know, you know I've benefited from the US equity markets return at the same time, you know, I've, I've got, you know, and days like today, you know, I'm, I've got some nice downside protection. We'll be back after a quick break.

Speaker A: Hello listeners. Michael Guy had here from Lead Lag Live. Are you ready to take a deep dive into market trends, risk management and investment strategies? Then you need the Lead Lag Report. Our uh, in depth analysis helps you understand the financial markets like never before. And guess what? We're giving you a chance to experience it at a discounted rate. Visit the Lead Lag Report, slash Lead Lag Live and get an exclusive 30% off on your subscription. Don't miss out. Level up your investment game with the Lead Lag Report. And now back to our discussion. How did this even um, come about? I mean claim shares is a fund issuer with their own funds. This is a collaboration with Hedgeye. I don't know if that many people are aware of Sub Advisor, Advisor Dynamics and things like that. But, but talk about, how did this even come out, Come about? Was it like, you know, Keith, Brendan, you're like, hey, uh, you guys, I

Speaker B: mean, that's it, right? That was kind of the start.

Speaker C: Well, a little bit. I mean, I think, um, I think

Speaker B: one, uh, you were both on the

Speaker A: set of Superman Returns right, When you were auditioning. Is that what it was?

Speaker C: I, I can't hold a candle next to Keith. Uh, but no, you know, you know, we, we, you know, we, you know, we were not a white label third party. Uh, you know, we originally, you know, got to know Nancy Davis of Quadratic, uh, Capital, and you know, she wanted to etfize her hedge fund strategy and we so believed in her strategy that we're like, yeah, you know, we can, we can, we can work together. And that led to relationships with Mount Lucas, uh, which is a managed, ah, Futures, a CTA firm. Uh, we've worked with Man Group, um, and then more, you know, then, you know, we, I mean, I know Keith, but, but we became actually a research client and, and that led to conversations of like, wow, like, you know, you know, a lot of what you're doing, you know, it's just hard as a advisor, as an investor to do that every day, right? To uh, you know, you don't want to marry your screen. And um, you know, the idea was, you know, is, is there an area of opportunity to work together and um, you know, to work with John and leverage the, that Hedge Eye engine to provide this solution? Um, you know, just, I think a lot of people that you buy into Keith's research methodology, it's just, do I have that dedication to invest my time and effort into learning it and then the time and dedication to every day, you know, the markets are open, I'm gonna have to. So that, that's the area of, you know, you're kind of outsourcing, uh, that belief in Keith and the team's work and you know, you're putting John and the Hedge Eye asset management team to work. So it's been, it's been, it's been a great collaboration.

Speaker A: All right, let's, let's, um, uh, I don't know how accurate this is, so let's see if AI is hallucinating. Let's uh, do a little real time on this. Oh boy. Uh, yeah, right. It's like, uh. And again, As a reminder, folks, I still have the Creed hire tab open on. See, it even shows up when I do that. Oh, you see like Scott Snap right there. Boom. Um, how Casefire works. All right, so you kind of alluded to this. Uh, let's see, like I said, when you look at this, uh, chart, John, uh, is this something you have to go through, go through compliance to review? Like what, how accurate is this?

Speaker B: I would leave that up to Brendan, but uh, you know, this does look fairly, you know, fairly close. Um, you know, I think, uh, I think we might have a, we might have it a little bit cleaner in some of the marketing materials, but this is enough to get, you know, good enough for government work as they say. Right, so it's terrible, no? Um, yeah. So, you know, basically the. Like I said, the secret sauce here is, is the risk ranges. Um, and the traditional hedged equity and or buffer strategy deploys uh, constantly, what's referred to as a put spread collar. So basically they write a call, uh, an upside call to fund the purchase of a put spread. So we also, um, deploy that strategy. Uh, however, um, we basically only deploy it when The S&P 500 is within the bounds of what we refer to as the risk ranges. And again, the risk ranges are basically just a uh, quantitative uh, tool to help augment fundamental views where basically you're providing uh, an entry and an exit point in the form of what we refer to as the buy risk range, uh, and the sell risk range. So basically, uh, since Keith started publishing those risk range signals in 2015, the S P500 is closed within its daily published risk range 83% of the time. So you know, I refer to the, you know, the, the way the strategy works as being in regimes, uh, where you know, you have that within regime where we're deploying that put spread collar that, you know, the incumbent players are, are also deploying. Obviously the differentiation there is that we're utilizing those risk range levels to determine, um, the strike prices on the options. And also we're targeting uh, you know, the three weeks, three week out options given the risk range duration of three weeks or less. But that's basically, you know, the, the um, the regime that you would expect to see the strategy in the majority of the time given that 83%. Now, you know, within that regime you can actually see some fairly significant uh, moves in portfolio exposure just based on, you know, the delta of the options and what's going on, you know, in the, the options, um, you know, mechanics. But that's, you know, that's where you would expect to see the strategy the majority of the time. And like I said, that's, you know, that's the same strategy that the incumbent players are deploying where, you know, we get really differentiated. And, you know, was on the left and the right side of that chart, uh, on the options payouts, uh, is in the above and below risk range regime, uh, which, you know, are very high conviction environments, where we're effectively expecting to see, you know, an immediate term counter, uh, trend move. So, you know, if you're above the top end of the risk range, you're expecting to see, you know, a move lower, uh, in the immediate term. On the flip side, if you're in the, you know, you're below the buy risk range, you're expecting to see an immediate term, uh, you know, move higher. So, you know, how do we take advantage of that? And you know, what really differentiates the strategy is basically, you know, the adjustment of the options positions based on, you know, those differentiated regimes. So, um, and, you know, to steal a line from the. The sales team at Crane Shares, which they came up with, which I think is brilliant, basically all we're doing is we're trying to maximize, you know, uh, the ability to participate in market returns when conditions are optimal and minimize them when they're adverse. And, you know, the way that we do that is, you know, if you're above the top end of the risk range, we're writing an at the money call and buying that, the money put. Uh, you know, so we're not selling that, that downside put anymore. And you know, as you can imagine, that basically gets the, the exposure in the portfolio to around zero. And then on the flip side, uh, you know, when you're below the low end of the risk range, we don't sell that upside call. Uh, and, you know, to steal a line from Keith, which I'm guilty of doing all the time, you know, markets tend to crash from oversold levels. So we do still want to have a level of hedging, you know, in the product, uh, despite expecting to see an immediate term move higher. So we still buy a put spread. But like I said, we don't sell that call. That basically gets the exposure of the portfolio up towards, um, somewhere approaching 100%. So that's kind of how the strategy works. Like I said, we're targeting options that are three weeks out in expiration. We don't hold options in the week that they expire. That's based on work that I've done in my Career strategy rotates. Anytime that risk range regime, as I like to refer to it, changes. So, you know, if we're going from within to above, within to below, below to above, above to below, we're going to flip the options book. And then like I said, we don't hold options in the week that they expire. So, you know, basically trading, uh, at least once every three weeks. Um, so that's kind of a, you know, that's a quick overview. So that's how it works. Know, it's, it's designed to be significantly more dynamic than these incumbent players. And obviously, you know, there's a myriad of reasons why, you know, why that is the case, which, you know, we kind of just ran through.

Speaker A: So is there, is there something about the, um, the regime methodology that is unique to the US or can it apply to international markets? I say that because, you know, it's like the old saying that us, you know, sneezes or coughs.

Speaker B: Right.

Speaker A: And rest of the world.

Speaker C: Yeah.

Speaker A: So, so, you know, now granted, you know, you have a period like 2000 to 2002, 2003s p sucked fun. Like this would have probably done quite well. China did well. Right. It's like that's the ideal scenario for creating shares. Basically like a, us both working. Right. It's like, let's face it. But, but, um, but talk to me about sort of how, how the implications of these regime shifts, uh, could.

Speaker B: Well, you know, they're generally very quick. Um, so, you know, I mean, you know, if you, if you see, you know, multiple, multiple day stretches, um, you know, in the above or below, you know, regime, it's, it's gonna be, you know, an environment of fairly extreme volatility. And you know, I try not to simplify the, the um, you know, what, the risk ranges are too much, A, because I like my job and, and B, because, uh, you know, obviously it doesn't do it justice. But, you know, if you just think in very simplistic terms, you know, how the risk ranges fluctuate. In environments of high volatility, you're going to expect to see a very wide risk range. And environments of low volatility, you're going to expect to see a very narrow risk range. So, you know, just thinking of, you know, from a regime framework, you know, and you know, admittedly, so, you know, just given the ability for this, uh, strategy to, you know, to move so rapidly, you know, we do tend to, you know, really excel in environments of high volatility. Um, you know, particularly just given the ability to flip around that exposure so actively. Um, but you know, I think from the specifics of the, the regime that the strategy is in, I would say there's less so of a, of a, you know, a, uh, you know, a gleam for the rest of markets and I would say more so of what's going on from a volatility perspective. Obviously the price, volume, volatility, that's the backbone of what makes up, um, the secret sauce for the product. But I think when you see volatility really spike, like we've seen kind of to start this year, like you said, the US Uh sneezes, everybody else gets sick. Um, I think there is a read to be made there and um, obviously you brought up particular environments where, you know, we haven't seen the rest of the world get sick. But certainly, you know, being mindful of what's going on in, in you know, US volatility I think is very important for, you know, making allocation decisions around the world.

Speaker A: So, so let's talk about, let's get Macro here for a bit. Um, uh, because, uh, let's face it, uh, China has done well, emerging markets have done well in general. I, I, When Trump got elected, I said, um, unpopular on X. I said on unpopular opinion, uh, China will outperform the US during the Trump, uh, presidency. And I was saying that purely because the starting valuations are so starkly different. Right. Between the US and China. Um, first of all, where are we in terms of relative valuations of Brendan when it comes to the allocation decision of domestic versus international?

Speaker C: Yeah, I mean, uh, Chinese equities, I mean, uh, we've had a little bit of a, of, you know, we had A, you know, January 2024 was really the bottom in Chinese equities where you had this derivative induced meltdown and the market has been kind of grinding higher. Um, it lost a little steam, uh, at the end of Q3 of last year. Um, and I think, I think just as money was reallocating, there was a little bit of this, A Rica moment where people realize that the Mag 7 Cap X was going to show up on the income statement of tsmc, sk, Hynix and Samsung. So, so I think, you know, that you had this China rally and then some of that money pivoted into this, I call it the AI picks and shovels trade. And, and I think we're back at a point where um, the Chinese equities look, look very, very inexpensive. You know, we're on the Precipice of Q, uh 1 earnings. We actually had One of our first first names report today that you know, you know, knock on wood beat. But uh, we also have uh, you know, the implementation of the, the 15th Five Year Plan which is heavily focused on technology self reliance and raising domestic consumption. And there's a lot of skeptical, particularly on the latter. But yeah, we anticipate, hopefully we'll see some, some further policies implemented over the course of this year. And then I, I think the big thing Michael, for us is you have President um, Trump's visit to, to China to meet with President Xi. And uh, we're a little bit non consensus in that we're, we're constructive on the outcome. I mean this is uh, kind of reading the tea leaves of you know, potentially some further uh, corporate partnerships. Obviously um, you're going to have the Boeing airplanes and soybean purchases, potentially Nvidia chip purchases. But you know, ultimately what President Trump really wants is people to manufacture here in the United States. And um, it's hard, it's hard for a lot of countries globally to buy US stuff because you know, we don't make a lot of stuff that people want. You know, we have lots of services. But this is a goods trade war. And ultimately that's why I think, you know, what, what President Trump really wants is for you know, for foreign countries to lean on their companies to manufacture here in the US either you know, solely or in partnership. And I think that explains why you see uh, TSMC in Arizona, know Softbank, uh, from Japan and I think you know there's areas where you have some very, very good Chinese companies and you know, electric vehicle hybrid technology, battery technology, you know, why not allow them to partner with us auto companies? So, so we see some real catalysts out there on the horizon.

Speaker A: From um, from the hedgeeye perspective, um, where are we in, in regimes and, and cycles and you know, what, what, what's it going to take, man? It's like I guess I gotta tell you, I, I um, I think Trump has purposely gotten the market numb. Um, it's like, I mean you can argue that's why he's constantly changing his mind. He's just basically you know, whipping around all the senses. So just ignore what he has to say. That's, that's really what I think. He's, he's kind of gotten the market too. Um, AI is supposed to be disinflationary, I think um, maybe even deflationary. Probably not going to have so much starting debt. Right. I never personally bought the stagflation argument that much because I think it's very hard to have stagflation when your government debts $40 trillion. The system kind of doesn't work that way, folks. Um, so where are we?

Speaker B: Yeah, well, I mean, I would say, uh, particularly starting from a China perspective, I mean, you know, we, we do see a lot of, um, you know, bullish things on, on the horizon. Uh, you know, particularly as you get out to the back half of this year. I'm just looking at, at our expectations and I mean, you know, we basically see, you know, real deep GDP accelerating, you know, throughout, throughout this year, which is obviously a pretty bullish setup for equities. And then on the flip side, or you know, kind uh, of complementary, uh, at least out to the back half of the year, you know, we see a, a deceleration of inflation in, in China, which, adding kind of fuel to the fire, if you will, on the bull case for equities. So you know, that's what we refer to as, as quad one, bringing it back home, you know, to the U.S. you know, certainly in the near term, you know, we can see, you know, some constructive, um, constructive elements. But you know, I think as you start to get out towards um, you know, 2Q, uh, I'm sorry, uh, 3Q and 4Q 2H. Um, you know, there are, there are some concerns, particularly from our perspective on the inflation front with, you know what I mean, just look at what's happened in energy. Um, you know, we are seeing some, some real, um, you know, some real uh, headwinds, uh, from the perspective of inflation. Um, and you know, we'll see what happens with the Fed. I think it's kind of anybody's best guess at this point, but you know, I feel like I've said this, you know, for the better part of my career. It feels like the Fed has kind of backed themselves into a corner again. Um, you know, and we'll see what happens, um, you know, from that perspective, particularly given, you know, our expectation at least of you know, some acceleration inflation as we see the back half of this year.

Speaker A: So, um, when you're in interest rate cycles that are uncertain like this one, does history suggest that there tends to be more go forward volatility, which makes the case for case by even stronger.

Speaker B: I mean, I certainly think that that's, you know, that is the case. That's um, you know, particularly given, you know, uncertainty around, um, you know, the Fed. I think Fed uncertainty is definitely a, a cause if not a leading cause for equity market volatility. Um, so, you know, certainly the, I think the case could be made that you know, if, if we are going to you know, see continued Fed volatile fed, uh, you know, uncertainty, uh, you know there's a case to be made for you know, equity market volatility. And obviously that's you know, that's not a bad place to have you know, case by as a, you know, as a core holding.

Speaker A: So.

Speaker C: Yeah, it's interesting. I don't know if you. Some. It's, you know, the Philippines raised interest rates today. Uh, that you know, the Philippines is, is highly dependent. I uh, mean virtually all of their oil comes out of the Middle east. And um, you know they, they. They've got, they've got a real energy shortage put problem. I mean just from a supply. I mean the obviously are dealing with very. And, and I think, I think those are narratives that um, you know, this US centric market is really kind of ignored. But you know, again, when you spend a lot of time outside of the U.S. you know, this situation, uh, you know, wealthy countries have oil reserves. You know, the US is very blessed you were energy independent. But it doesn't mean we're immune to high oil prices. And then uh, there's a lot of countries that you know, a lot of their electricity generation is oil and lng. And for those countries that don't have reserves that they're just not wealthy enough or their government didn't prepare for an event like this, it's going to be. This could be a real problem. And, and I think you know, in a not very too distant future. And I'm not, I'm not being overly negative. I'm just saying these are, these are things that really don't get any news here in the United States. Um, I'm a little bit shocked. A little bit. Um, you know, there's a lot of kind of Donnie. Danny Kahneman, you know, Donnie Kahneman, uh, you know, thinking fast and not a lot of thinking slow of doing analysis but. But these are you know, I think kind of concerns for the global economy which you know, in fact China vex the affects the United States. But um, you know, um, it's just things that, that we kind of see out there with our foreign focus a lot of time.

Speaker A: You know, it's a world of system one to use Danny Conrad's mindset. M. Um, okay, so, so, um, for those who want to learn more about uh, Hedge eye case buy and then Queen shares, let's go over all three. Uh, John, talk about make, make a quick pitch for, for uh, Hedgehog here and then obviously let's talk about fund and then we'll wrap up there.

Speaker B: Yeah, I mean you know, I think look, um, you know, hedge, obviously the research speaks for itself. Um, you know, the macro framework like I said, you know I was a user of, prior to working, you know, behind the curtain if you will. Uh, and you know certainly, um, you know the value proposition is there and then you know what we're basically trying to do at HedgeEye Asset Management is take that research and um, you know, generate asset management products, you know, based off of it. And obviously you know that's the, the premise of the, the partnership with Crane Shares. Um, you know, just packaging um, you know what is uh, you know, from our perspective, you know really an institutional grade strategy. Something that you would traditionally see in a, in a private fund or an sma, uh, in an ETF that's accessible to the masses. So um, you know that, that's kind of the, the quick on.

Speaker A: So. And uh, Brendan, Crane Shares has a bunch of funds. Which one's your favorite? No, don't want Crane Shares in the light up please.

Speaker C: Yeah, I mean I think the, the roots of the firm were uh, based on giving investors exposure to growth elements of China's economy and capital markets. That some of this narrative of you know, China hasn't performed in 15 years is, is nonsense. That you know, if you're, if MSCI China is 50% financials and energy, it's probably not going to grow very fast. And Chile and the Middle east, there's a whole, whole host of countries that you know, they're basically value betas, value factors. And the roots of K of craintures really aren't giving people that growth factor For China with KWEB and uh, but we've also taken what we've seen in China trends. We see not just China but broader Asia, things like humanoid robotics, global electric vehicles. These are things that we saw happening in China uh, today that we think you know, it's going to have a real effect globally. Um, and then we've worked with you know, third party managers like Hedgeye Asset Management to uh, help bring their strategies uh, to the marketplace. Uh, I think you know again the roots of the firm are all remain on research. You know we want to endeavor to earn the trust of investors through our research. And I think uh, that's very true. You know, if you go to craneshares.com backslash Kspy, you know there's a wealth of information and no different on any of our funds. Um, now that's really where we spend the majority of our time is on the research side.

Speaker A: That's a good place to wrap up. Appreciate those that watch this live this being edited podcast probably by next week available. Uh, learn more about case by learn more about Crane shares and keep watching Lead like live. Uh, thank you buddy.

Speaker C: Thank you, Michael.

Speaker B: Thank you.

Speaker A: Cheers. Okay, hold on.

Speaker D: The content in this program is for informational purposes only. You should not construe any information or other material as investment, financial, tax or other advice. The views expressed by the participants are solely their own. A uh, participant may have taken or recommended any investment position discussed, but may close such position or alter its recommendation at any time without notice. Nothing contained in this program constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in any jurisdiction. Please consult your own investment or financial advisor for advice related to all investment decisions. Don't forget to follow at Lead Lag Report on X Instagram threads and YouTube and check out the Lead Lag Report at www.leadlagreport.com. use promo code PODCAST30 for two weeks free and 30% off to get access to award winning research and anticipate stock market crashes, corrections and bear markets.