The Derivative

Saddle up everybody, because we’ve got the UrbanKaoboy on this episode, who’s ridden everything from ponies to draft horses to mustangs over his 30+ years in the investment game, doing commodities and derivatives at Goldman in the 90s, risk arb at Canyon Partners, and then opportunistic/value at his own fund Akanthos Cap Mgmt, before hanging up his spurs and focusing on running his own family office. We’re talking with Michael Kao about the credit culture in LA investment firms, trading the Goldman roll in commodities, how corporate debt = short puts and equity = long calls, the trading pits, finding long gamma in a short gamma arb strategy, convertible bonds, arb trade structures, Star Wars, pricing synthetic options, credit spreads blowing out, needing good marginability, Michael Saylor's diamond hands, the potential train wreck that is MSTR's balance sheet, and more. This was a fascinating look into the mind of an opportunistic investor. Chapters: 00:00-02:24=Intro 02:25-13:41=Drexel, LA, and the Goldman Commodity Roll 13:42-36:50=Canyon, Akanthos, and Convertible Arb 36:51-55:45=MSTR, Saylor, and the Capital Structure 55:46-01:01:19=Tokenized Residential Real Estate 01:01:20-01:08:02=Star Wars Fanboy Follow along with Michael Kao on twitter @UrbanKaoboy  And last but not least, don't forget to subscribe to The Derivative, and follow us on Twitter, and our host Jeff at @AttainCap2 or LinkedIn, and Facebook, and sign-up for our blog digest. And visit our sponsor, the CME Group at www.cmegroup.com to learn more about futures and options. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer

What is it about engineers and seeing the world through a quant lens?  We’ve talked to plenty of quants who have an engineering mindset; but this episode’s guest is an actual engineer – doing his mechanical engineering work by day and dishing on portfolio construction at night via his excellent Breaking the Market blog and @breakingthemark twitter handle. Whether it is diving deep, real deep on arithmetic versus geometric returns, comparing performance measurements to Tiger Woods major’s performances, or calling Trend hot air, Matt Hollerbach puts his thought processes for all to see on the web. He does it to not only document his journey to quantlightenment, but also to get called out by pros who are increasingly finding a familiar voice in his writings, and teach those coming into the space. Jeff and Matt talk golf, the DC area, being anonymous versus having a name, LMGTFY, mechanical engineering, rebalancing, Gold, rebalancing, expecting a miss in your portfolio construction, Bryson DeChambeau, why its never as easy as it seems to write a great blog post, a library of quant research, Renaissance, Claude Shannon, rebalancing, and more. Enjoy! Chapters: 00:00-02:05=Intro 02:06-11:26=Tweeting while Engineering 11:27-22:48=Meeting End Goals & Golf Specs 22:49-34:45=Breaking the Market 34:46-50:23=Arithmetic vs Geometric  / Trend is Hot Air 50:24-58:43=Rebalancing, it’s All About Rebalancing 58:44-01:15:52=The Strategy 01:15:53-01:24:35=Favorites Follow along with Matt on Twitter @breakingthemark and visit the blog at breakingthemarket.com. Check out his Pronghorn strategy at https://pronghornanalytics.com/ Don't forget to subscribe to The Derivative, and follow us on Twitter @rcmAlts, and our host Jeff at @attainCap2, or LinkedIn, and Facebook, and sign-up for our blog digest. And visit our sponsor, the CME Group at www.cmegroup.com to learn more about futures and options. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business or tax advice. All opinions expressed by the podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer

Our guest this episode has quickly become one of the must follows on FinTwit with his mixture of motivational messaging and market savvy. Kris Sidial is the Co-CIO of The Ambrus Group, a volatility arbitrage fund that focuses on statistical outliers in the U.S equity derivatives space. But he’s no kid, despite his bio touting his 28yr oldness, having worked on exotic options desk, prop firms, and now his own hedge fund. Kris and Jeff dive into growing up on the other side of the tracks, market microstructure, whether you can outwork others in the quant space, the belly of the vol trade, gamma hedging, GME, NYC, LIU, Penn, flow, father’s day without a dad, liquidity cascades, options books (the positions), and options books (the actual reading type books). Don’t miss this great chat with one of the good guys in this space. Chapters: 00:00-02:49=Intro 02:50-16:24=Rough Route to Wall Street 16:25-23:03=Break-through 23:04-33:12=The Exotics Desk 33:13-45:38=Starting Ambrus 45:39-52:40=Covering the Bleed & Capped vs Uncapped 52:41-01:03:04=Finding Value in Volatility/Buying the Wings 01:03:05-01:11:39=A Shift in Dealer Hedging & Loving the Game 01:11:40-01:17:54=Favorites Follow Kris (@Ksidiii) on Twitter and get more information on the funds at Ambrus Group here.    And last but not least, don't forget to subscribe to The Derivative, and follow us on Twitter, or LinkedIn, and Facebook, and sign-up for our blog digest. And visit our sponsor, the CME Group at www.cmegroup.com to learn more about futures and options. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer

There’s a new word in the financial lexicon. Transitory. And it all has to do with whether recent moves higher in prices of everything from lumber to copper to labor are the first signs of 1970s type inflation, or….as the Fed believes, is just “transitory” and will work itself out once the pandemic is over. We’re sitting down with Executive Director and Senior Economist of CME Group, Erik Norland, to discuss just what he sees in the commodity space, including a first for our pod – charts during the video portion! Erik dishes on his background, how he ended up in London, Bayesian models, if you can be an economist without slides, Trillions, the devastation in India, the massive amount of debt in China, inflationary vs deflationary pressures, the craziness that is the hedonic CPI adjustments, infrastructure plans, R&D spending <> materials spending, if Gold is in trouble, why Europe’s lagging, whether there’s enough money to buy meme stocks/crypto AND physical goods to cause inflation, what options prices are saying about agriculture markets, and much more. Join our interesting conversation. Chapters: 00:00-02:40=Intro 02:41-12:00=The CME’s Euro Step 12:01-27:09=Fiscal Stimulus & Inflation during the Pandemic 27:10-48:27=Measuring Inflation & What about Deflation 48:28-55:28=The MMT Theory & China’s Debt 55:29-58:53=How Injured is India? 58:54-01:05:02=Agriculture, Energy & The Importance of Water 01:05:03-01:13:21=Fat Tails in Agriculture 01:13:22-01:16:54=Favorites Read more of Erik’s research on CME Group’s website here: https://www.cmegroup.com/education/featured-reports/bios/erik-norland.html And last but not least, don't forget to subscribe to The Derivative and sign-up for our blog digest. You can follow our host Jeff Malec on Twitter and RCM Alts on Twitter, LinkedIn, Facebook. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer

Artificial Intelligence is a hot topic in every walk of life, and perhaps no more so than in the world of hedge funds and alternative investments. Howard Siow, Founding Principal and CEO at Taaffeite Capital, joins The Derivative to discuss how AI is used in the hedge fund world, and how everyone wants AI to predict every move in the market, but that’s not actually what AI does well. Howard talks how AI can be used as an incremental change agent, chicken farming, being a venture capitalist, the effect of human biases, the dirty little secret holding AI back, trying to solve complex problems, being an engineer, launching Taaffeite, opportunities in China, and growing up down under in Australia. Chapters: 00:00-02:47=Intro 02:48-10:51=AI = Getting the small things right 10:52-22:25=The most complex system we have? 22:26-26:49=Launching Taaffeite 26:50-47:15=The Strategy 47:16-01:10:04=Is AI getting closer to solving the market problem? 01:10:05-01:16:08=Humble Adjustments 01:16:09-01:22:47=Favorites Learn more about Taaffeite Capital and their strategies here: http://taaffeitecm.com/ And last but not least, don't forget to subscribe to The Derivative. Follow our host Jeff Malec on Twitter and RCM on Twitter, LinkedIn, Facebook, and sign-up for our blog digest. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer

Who in their right mind would name an investment strategy after cockroaches?  Well, probably the guys who view themselves as staging a mutiny against traditional portfolio construction and the investment business = Jason Buck and Taylor Pearson of Mutiny Funds.  We're digging in deep with the two wunderkids in this episode on what exactly the Cockroach strategy is, what the first year for Mutiny looked like, Jimmy Buffet lyrics, AustinTexasville, applying e-commerce process and principles to asset management, living through the largest vol crush in history (as a long vol fund), the four quadrant model, gold and crypto as fiat protection, the modern hedge fund manager as a social media personality, Pretty Woman, growth stocks, inflation, deflation, diaspora, going full Kelly, and more...  Chapters: 00:00-02:29=Intro 02:30-17:04=Jimmy Buffet & Going from 0 to 1 17:05-27:00= Playing the Orchestra Not the Instruments 27:01-36:44=The merging of Social Media and Investing 36:45-52-12=The Cockroach Fund: Nuclear Winterizing Your Portfolio 52:13-01:05:19=Solving Multi-Generational Wealth  01:05:20-01:09:04=Who in their right mind would name an investment strategy after a Cockroach 01:09:04-01:15:12=Favorites Follow along with Jason and Taylor on Twitter and learn More about the New Cockroach Strategy here = https://mutinyfund.com/cockroach And last but not least, don't forget to subscribe to The Derivative, and follow us on Twitter, or LinkedIn, and Facebook, and sign-up for our blog digest. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer

How do you get included in a Market Wizards book? How do you get a whole Michael Covel book written about you? You move from charting markets on graph paper to point and figure charts to running systematic models on an IBM computer in 1980, to running $600mm plus via Trendstat. We’re talking Havalinas and Bassanovas with none other than Tom Basso in today’s episode. Tom is a New Market Wizard as identified by Jack Schwaeger, and now semi-retired, trading his own money in between dancing and wine making. We’re covering trend following, Arizona, raising money, enjoying the ride, making money, risk management, the mistakes big investors make chasing returns and bailing on drawdowns, facebook, trading red bean futures, chemical engineering, slippage, golf, and more. Chapters: 00:00-02:18=Intro 02:19-11:09=Arizona Pastimes 11:10-20:36=Back into Trading 20:37-36:00=How the Legend Started 36:01-01:02:12=150 Meetings 01:02:13-01:08:56=Mike Covel 01:08:57-01:17:15=Favorites Follow along with Tom on twitter and on his website, https://enjoytherideworld.odoo.com/ From the episode: Aaron Fifield Interview Trend Following Mindset: The Genius of Legendary Trader Tom Basso And last but not least, don't forget to subscribe to The Derivative, and follow us on Twitter, or LinkedIn, and Facebook, and sign-up for our blog digest. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer

We’re talking with two ‘in the crypto weeds’ traders/asset managers, Ben Upward of Synchronicity and Gary Basin, about crypto’s -30% one day drop, coinbase, the most surprising (& scariest) things about the recent crypto crash, size and action in futures, options, and non-futures, “what if” bitcoin had blown up, the right to a free market, bitcoin as beta?, new Bitcoin offers (like bitcoin micros), the negatives and positives of volatility in the space, leverage upon leverage upon leverage, bitcoin as a portfolio diversifier, a VC model, Portnoy picking, risk metrics, and the future costs of production for cryptocurrencies. Chapters: 00:00-02:28=Intro 02:29-15:12=Bitcoin falls -30%, what broke? 15:13-26:30=Bitcoin Futures & Unstable Bets 26:31-39-50=Farming, Staking, Embracing Volatility 39:51-53:30=The crypto hype machine, and new tech devaluing old coins? Follow along with Ben Upward on LinkedIn and Gary Basin on Twitter at @garybasin. And last but not least, don't forget to subscribe to The Derivative, and follow us on Twitter, or LinkedIn, and Facebook, and sign-up for our blog digest. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer

From actual capital allocator to branding his book and podcast “Capital Allocator,” Ted Seides has one of the biggest banks of knowledge in the capital allocation game. He’s a well-known author of two books, host of the podcast Capital Allocators, and in his “free time” invests his own money in some of the best and brightest hedge funds around. In today’s episode, we’re talking with Ted about Capital Allocators (the podcast & the book), the transition of talking to managers for an allocation -> to talking to allocators about managers on the pod, the Yale endowment and incredible opportunity to learn from Dave Swenson, bias in capital allocation, rebalancing without emotion, illiquidity premiums, base rates, allocator’s reaction to competition, blackbox of quants, portfolio construction, “Netflix” allocator selection, and Ted’s favorite guests & favorite quotes. Chapters: 00:00-01:42=Intro 01:43-28:16=Learning from David Swensen 28:17-48:55=Is Private Equity Too Big? 48:56-57:47=Base Rates, AI advancements & Fees 57:48-01:09:20=The Show or Allocators Podcast 01:09:21-01:22:23=Part of the Equation 01:22:23-01:28:39=Favorites (The Buffet Bet) Follow Ted on Twitter at @tseides, listen to Ted’s podcast on your preferred platform here, and purchase his books here. And last but not least, don't forget to subscribe to The Derivative, and follow us on Twitter, or LinkedIn, and Facebook, and sign-up for our blog digest. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer

Nigol Koulajian is the Founder and CIO of Quest Partners, a systematic trading firm with $1.8 billion in assets under management. In this engaging conversation, he discusses his transition from engineering to futures trading and the critical role of mindfulness in high-pressure investments. Nigol shares insights on managing tail risk, leveraging positively skewed trades, and the complexities of the financial industrial landscape. He also emphasizes the importance of meditation for better decision-making and clarity, all while showcasing his journey through the unique challenges of Wall Street.