Last updated on October 12, 2022
Jordi Visser, president and chief investment officer at Weiss Multi-Strategy Advisers, joins the podcast to discuss his reasons for optimism during this trying time for global financial markets.
Content Highlights
- The environment is constructive for risk assets (2:26);
- Focus has moved from inflation. Investors are too negative (3:50);
- The Fed is raising interest rates. Inflation is coming down — a lot faster than people think (4:41);
- What sectors and why? (9:53);
- No, you don’t need unemployment to increase for inflation to come down (13:22);
- The bullish case for biotech (15:12);
- The blockchain will have profound impact on labor markets (19:42);
- Background on the guest (25:13);
- Clean energy and how that fits in (29:14);
- Oil should move higher, but watch out for global trade (36:47);
- Web 3.0 and cryptocurrencies: here too there are reasons to be bullish (39:48);
- Beta has started to outperform profitability. A final reason to be optimistic (51:45).
More About Jordi Visser
- Website: GWeiss.com;
- Twitter: @JVisser_Weiss;
- Video on inflation after the CPI print;
- Weekly podcast: In Search of Green Marbles.
Quick Video Highlights From Our YouTube Channel
Transcript
Nathaniel E. Baker 0:36
Jordi Visser of Weiss Multi-Strategy Advisers. Thank you so much for joining me on the contrarian investor podcast today. Great to have you on the show.
Jordi Visser 0:47
Thanks for inviting me.
Nathaniel E. Baker 0:48
Yeah, thanks for coming on. And we have your views here, which are, dare I say optimistic? Which is these days enough of a contrarian thing to kind of focus in on so you’re actually think the environment is constructive for asset prices? And not just for asset prices? But for risk assets like stocks? Is that fair?
Jordi Visser 1:12
That is fair.
Nathaniel E. Baker 1:14
So tell me about that.
Jordi Visser 1:15
Let’s start with the first thing that you said. And I know this is the contrarian podcast. You’re dealing with a scenario that when you when it’s contrarian to be positive, think about the fact that stocks are up 80% of the years and a fairly high number of the quarters. So when you’re starting from a perspective that most people are negative, to me that’s always an opportunity to look at more closely at what’s happening. And the way that I equate it is when people get this bearish, it’s kind of like people started talking about who’s going to win a football game. Without looking at the spread. A lot of the stuff that people are negative about has been going on for some time. The s&p 500 as of when we got on here today is unchanged since February of 2021. Nasdaq, the NDX is unchanged, believe it or not, for over two years now, August of 20.
Nathaniel E. Baker 2:09
Wow
Jordi Visser 2:10
So a lot of the things that people are worried about, in my opinion, are already discounted in the market. And last year, my focus was completely on inflation, really, for the last two years. And now I think inflation, which has been a driving factor behind most of the the weakness in assets, and the movement in the central bank, has left us in a position where not only are allocators extremely negative, but something else I use for a lot of my decision making since we manage a hedge fund here is what’s happening with hedge fund leverage and hedge fund leverage is down and very, very low level. So you have allocators underweight stocks, and you have hedge funds with very low leverage. And that just sets up a situation where you know, someone’s favored by 17 points. And I kind of like the underdog here.
Nathaniel E. Baker 2:54
Interesting. Yeah. So basically, we’ve been range bound, then for a couple of years, at least in tech stocks, I didn’t realize that there was that that dire. But the like you said a sentiment is bad and the Fed is still tightening, do you think that needs to change for the market to shift or not?
Jordi Visser 3:11
I don’t think the tightening needs to change. I agree with where the market is priced right now, where the tightening will continue into next year. But inflation is coming down. And I think, you know, everyone kind of sees now that inflation is peaking. So the only real debate with inflation peaking is where plateaus. And most of the things that I look at and spend time on there pointed sharply downward and mtwo in particular, is only up 1% for the year, weekly deposits which make up 85% of them too. And as a more timely indicator. We just had a big negative print last Friday. So money supply is being drained from the system. So inflation should come down, the Fed should keep tightening because nominal GDP in the most recent quarter was still up near 9%. top line revenue for companies was double digits year over year. So the economy is still fine. Inflation has peaked. And the real debate I think for people is how long are how far down inflation is gonna go. And I just think it’s going to come down much sharper than what most people think
Nathaniel E. Baker 4:17
Yeah. So that’s another contrarian thing, because people seem to think that it’s going to be, you know, citing Ben Bernanke and everything that it’s just gonna it’s gonna stay high for a level. Do you have any forecasts on inflation for the next year?
Jordi Visser 4:31
Well, let’s I mean, if I just use where the fixings are as of today for headline year over year CPI, and just use the market estimates, I mean, the market has it down at you know, sub 4% By May of next year. The Fed funds rate is expected to be over 4% By May of next year, which means right now where the market is priced in terms of where they expect headline CPI to be year over year in May well already Have what could be deemed somewhat restrictive monetary policy, it doesn’t get to the Feds target. But if you’re going from over 9%, headline year over year CPI, down to sub 4%, all within a year, that’s a pretty good move lower. I think if you use that just as a gauge, you can be more optimistic. But the reality is the last two months of headline CPI came in at point 1%, and zero, or minus point one and zero. So what we have basically is if you get point for the rest of the year, the annualized six month, CPI will be sub 3%. So I think no matter how you look at it, it’s coming down probably sharper. So I’m going to go with where the market is right now. And basically say that, you know, a year from now, headline, CPI will be somewhere around 4%. Now, the most important component of that is, is gas prices, or oil prices. And that’s one of the things that has changed for me really since May, June, where I really thought by June of this year, oil would be well above 150. This is before vision of Ukraine, but we’ve had a few changes structurally around the globe that I don’t think you’re going to unwind quickly, that have had an impact on the way oil and gas at the pump have actually gone and most people still believe oil is going sharply higher. So if oil doesn’t go sharply higher, I think you could actually see, you know, a fairly easy sub 4% year over year CPI by the time we get a year from now.
Nathaniel E. Baker 6:25
Hmm, all right. That’s, that’s, that’s constructive. Now, the you are multi strategy, but it sounds like this in this environment where inflation is coming in a bit. And eventually the Fed is too it might make a more more conducive for bonds than stocks but you you prefer stocks?
Jordi Visser 6:43
Well, investment grade yields are now above 5%. And I actually just tweeted something out today that showed the earnings yield on the s&p and remember the earnings yield the s&p because the P e’s are under under 20. Now, we’re dealing with an earnings yield off this year’s earning somewhere around 5.8% Depending on where you have the end of year earnings, and investment grade yields around 5.2%. So right now stocks are giving you 60 basis points more before dividends and before buybacks, which is what I kind of compare back to IG yields. Now. It’s been a long time since IG yields were above s&p earnings yield, you have to go back to 2002. There were a couple periods during the great financial crisis where they got in. But really since 2002, you’ve had stocks look more attractive than than bonds the issue comes in is if you think inflation is going to stay a little bit higher, but come down a little bit. I think at that point bonds might outperform for for a short period of time, but because stocks have already had a significant fall. And I’ve talked to you about where the s&p has been since Feb of 21. If you take it since 2019, the s&p has only been up about eight and a half percent, annualized during the period from the end of 2019. So and we printed so much money that I think we’ve taken the air out of most of these bubbles, and I think bonds have suffered a lot. But I’ll take the fact that stocks will outperform in a slightly higher inflation world.
Nathaniel E. Baker 8:17
Fair enough. And you have some specific sectors that you’re a little more bullish on you always like innovation. Talk to me about that, and some of the some of the forces that are going on the way you see things.
Jordi Visser 8:29
Yeah. And to kind of segue into that I want to make sure. You know, we’ve been in when we when we talk about a recession, or something big, I think we’ve been in an investor recession, the way that I kind of think of recessions is you have to have job losses, and we have a labor problem. So a lot of the innovations that I’m focused on have to do with a labor shortage. It’s not just us, it’s global. And the primary driving force behind that is structural, which is demographics. The bulk of the world is getting older, we’re nearing the peak in the labor force globally, because more people are basically turning 60 than being born. And so you’re not replacing the people, particularly in the developed markets that you had. So most of the innovations are focused for me on the labor situation. But to deal with the labor problem, we have to remember that we were in a three year period where we had COVID. For two years, we’ve only really, I’d say come out of COVID. And from a business perspective in September, and then this year was about the tightening in the inflation side. So when you add $6.5 trillion into the system, as we did with them to growing six and a half trillion, and so far, we’ve spent about 3.53 point 6 trillion through the last quarter in nominal GDP. You’re left with a situation at this point that with inflation coming down. Most of the driving factors like the bottlenecks, the things that were related to the pandemic are gone, the money supply is now declining and people are a lot more scared. So you’re not going to see the excess spending of people coming out. That’s the primary driver for inflation comes down. But we’re still going to have a labor shortage coming out of this. And I don’t see a chance that we’re not going to have it. Primarily because it’s getting harder and harder to find teachers as they retire, it’s getting harder and harder to find nurses, it’s getting harder and harder to find truck drivers, and demographics are impacting all of these, because we’re not finding the people to replace them. So on the one side, you have my favorite innovation theme, which is the transition from increasing lifespan, which was really been going on for the last 200 years where we’ve been able to take the life expectancy up. But in the last couple of decades, what hasn’t really gone up as much as life expectancy is health expectancy or the ages to where people are healthy, which obviously hurts the labor situation, because it’s 63, if you’re not no longer able to work, but you can live by taking pharmaceuticals that keep you alive, then you can go there, but you’re not very productive in the economy. And I think one of the things that happened during COVID that has gotten lost is messenger RNA and how quickly we were able to take the sequence genome that that China sent out. And then two days later, we had a vaccine from moderna that was done. And then it had to go through the process, the fact that that took two days from a company that was not focused on viruses, this will add to the ability for us to basically have software for the body, whether it’s through CRISPR, or messenger RNA technology, which will allow us to increase the healthy side of people going forward. And that’ll allow them to work longer in the workforce. And that should help. So there’s two others. But I’ve spoken a lot here with this, the first one and the major one for me is the transition from lifespan and health span. And I think that’s going to show up in biotech.
Nathaniel E. Baker 11:45
Okay, I want to ask you about that a little more. But let’s real quick going back to inflation, the so you don’t you don’t buy that we need unemployment, to increase employment to come down for there to be any real progress and inflation.
Jordi Visser 11:58
Now, here’s one of the problems I have Nathaniel and then as you get to know me on this podcast, I’m really not big on people taking four or five historical data points spread over 100 years and saying this needs to happen for this to happen. There’s absolutely positively no proof that inflation can’t come down. Without the unemployment rate going up. I mean, I think people have missed in fact, I nobody talks about this. But in 1990, Core CPI in the US was 5.2%. It gradually went down over the next decade to 2%. At the same time, tenure rates were 9% in 1990. And it took the entire time to get them down below 5%. They never got below four and a half percent over that decade. Today’s tenure rate is 3.6%. So when people say this has to happen for this to happen, 1990 to 1999 was a pretty bullish TIME FOR US stocks. It was also a time where people didn’t worry about inflation or unemployment, because we didn’t lose any jobs during the period from 1991. On. So I don’t there’s nothing that says this has to happen. I do think wages are going to stay strong. That’s one of the things that feeds into the blockchain, which I think is going to have an impact on the ability for for labor to get back some of the money they’ve lost over the years from the capital side or from the company side. But that’s a different story.
Nathaniel E. Baker 13:24
Yeah, let’s talk about the biotech one real quick. So CRISPR. And what was the other on Messenger? RNA sequence? Are you able to talk to us through that, in general, in very general terms?
Jordi Visser 13:37
Well, let’s just say that what’s going to happen is, and this, most people, I think, had heard at some point, nanotechnology. So getting down to the molecular level of things is a big part of the next 25 to 50 years. Getting down to the molecular level has a lot of ability to do the things that we did with messenger RNA and CRISPR. If you go back and think about the Human Genome Project, which was something that went on from the 90s, into 2003, which was the first sequencing of the human genome, that allowed us to go down to the molecular level, it’s taken us a while, you know, another 10 years since then, starting in 2013, to really get advancements in CRISPR, which allows you to get at the gene level and think of it as editing genes, so controversial for people. But the main thing is, you’re starting to get to the point where these advancements will help with a lot of a lot of things, particularly cancer, and places where they’re hoping to solve more problems until you got to the point that you couldn’t see what would happen with your DNA. You actually couldn’t make the changes. So the advancements that we’re going to see from everything that I know I’m not I’m not an expert, I just talked to people that come in and pitch us on on these types of things. You’re gonna see a similar type exponential move in terms of life expected See, through health, in the same way that we saw with when the App Store came out, and how many people got iPhones and just the exponential move in software. And you saw what that did to technology stocks, I think we’re going to be solving problems in the health in on the health side. And it’ll probably go faster than we all think just like the iPhone sped everything up. I think certainly over the next decade, when you’re looking for innovations and themes. The easiest way to kind of think about it is when we came out of the great financial crisis, the focus was on software, because we had high unemployment, businesses were having trouble making money, there was no nominal GDP. So the advancements were in saving money, it was trying to run your business more efficiently. And now we’re at a different stage where for companies, they need more employees, they need people to be there. And the baby boomers are constantly turning 6063, every single day is about 10,000 every day. And so the money and the dollars, which are controlled by the baby boomers are going towards their health, and that’s going to lead to more advancements. So it’s a it’s a, it’s a combination, a powerful combination of the technology, which was kind of set up from 2003 with sequencing DNA, and then the dollars that are available because the baby boomers are in high demand for those types of things at this point.
Nathaniel E. Baker 16:17
Are there any particular I guess, parts of that companies or ways to play that? And we can, we can talk about stocks?
Jordi Visser 16:24
Well, so biotech and all the life sciences side, they’re going to expand, you’re gonna get more and more companies. And I think one thing about if I was trying to think of the most bullish scenario for people, because at the end of the day, what moves stocks, I mean, stocks make all time highs every decade, that it’s very hard for them not to, to me, it’s just a measurement of the advancement and innovation. So as long as technology is going up, and productivity continues to show up somewhere, we keep getting new highs. I think the most important thing is the fact that if you believe in this transition from lifespan and healthspan, you should be thinking about how bullish it would be that people are going to live longer if we have a cancer cure, it cites an enormous amount of people because everyone has been impacted by cancer, most people start to get really scared as they get older, because they’re getting closer getting cancer or any kind of diseases. And if you’re saying to them, we’re going to have cures for it, it means they’re going to live longer. And there has to be more risk taking there has to be more money into stocks for retirement because you’re extending the retirement side. So I would focus on life sciences, anything in the healthcare sector side, I think it’ll look a lot like the technology side did for the past decade.
Nathaniel E. Baker 17:35
That’s interesting. But yeah, that will absolutely set up a problem of employment and having too many. Well, actually, I guess you would you would have, yeah. And unemployment problem, like you said at the start. And you think that the web 3.0 can help can help with that. But blockchain
Jordi Visser 17:55
Yeah. So here’s the thing about the blockchain. Aside from, you know, a world of less centralization, the best way to think about the blockchain and the impact that it will have on labor, is the elimination of the middleman. And the easiest scenario to think about is if you’re going to have an authenticated transaction every single time, there are so many people involved with any kind of transaction, if the easiest one for people to see is if they buy a house, how many people need to get involved before the House closes between the lawyer, the realtor, the insurance, people, everything along those lines. And if everything can be done through technology, you eliminate the middleman. And really, that’s what has been happening in technology. It wasn’t that long ago. And this is the irony of kind of people’s fears or what they worry about. So right now, people are worried about over the next 10 years, inflation is gonna stay higher. I think it was 10 years ago, almost to the day that I spoke on a panel and professor was on talking about how robots were going to replace all people and nobody was gonna have jobs. That was a decade ago. Now we’re talking about a labor shortage. So the reality is we talk about these things and go through it, the blockchain will eliminate the middlemen, those people will have to go out and get other jobs. If you want to take this even further. When I spend my time talking about crypto and the blockchain for people, capitalism effectively to some degree started, based on a technological innovation in the 11th century, the plow, the plow allowed people to not have to farm their own food. And we could now farm for massive quantities, which means if you had a town with 1000 people, and each person, each family had to plow their own food, or had to farm their own food that nobody can run to the big city and go become a lawyer. And so once you got the prop, the ability for the plow to have one family feed the entire town then all of those kids could go off and that’s where capitalism kind of got its beginning. The first fiat currency occurred in China in the 11th century at the same time, the capitalist system has been going on in some way and it’s always been this This game of the middlemen filling out this stuff, if you eliminate the middleman job, then what you have is the ability for those people to go out and go get a different job. And that’s what will happen is we’ll start to get rid of these excess jobs, just like an ATM replace bank tellers. We need to get a lot of these different things. It can’t help in the nursing side, it can’t help on the hotel side, there’s a bunch of other places where certain jobs can’t, can’t be fixed. But you certainly will get some benefit from the blockchain, which will show up just from eliminating the middleman.
Nathaniel E. Baker 20:32
I must say a future where there are no real estate agents is plenty not to insult anybody who’s real estate agent, but having gone through that process, or car salesman. Wow, exactly. Yeah, that’s interesting. All right. Geordi. Visser, I want to take a short break and come back and ask you some more questions about yourself about the firm. And finally about some other some more about your views on markets. But let’s first take a quick break. If you are a premium subscriber, don’t touch the dial, you do not get the break. We’ll be right back. In fact, we already are.
Nathaniel E. Baker 21:03
Welcome back, everybody here with Jordi Visser of white — Weiss multi strategy advisors, I wrote down white, which is the translation of Weiss. But anyway, this is the segment of the show where we ask our guests to tell us a little bit more about themselves personally, and professionally, how they came to investing in the first place and how they came to this station in their career. So take us away, take us back as far as you like. And you tell us your origin story.
Jordi Visser 21:29
Well, I grew up in, in New Jersey, and I’m a fan of the Knicks jets, Mets Rangers. So I’ve had a lot of disappointment in my in my lifetime and have not seen too many championships. So I always like to start there, because it kind of sets the framework for a world of disappointment. But I hated school growing up. And I usually say that when I go speak on anything, just because I truly could not stay. It was the most boring thing. I still I have nightmares when I think about having to go back to school. But I’m an insatiable learner, I love learning new things, I just get bored by bad content. And school to me was bad content. And I don’t like memorizing things. I like connecting dots. And that’s the creativity that came in. So I finally did graduate with good grades from college. And I joined Morgan Stanley, and was in the coding and risk management and controllers area, built some systems right out of school and then left there and started trading. In 1994. I traded emerging markets throughout the 90s, which was a great learning curve, just because that was a pretty horrible period from 1994 to 2000, I actually opened the office for the firm in Sao Paulo, Brazil. And I came back to the states in in January of 99, about a week after the devaluation in Brazil. And then I came back and I started trading some some more of the books there, I was always on the equity derivatives side. So I was a derivative person. And in this case, I came back to trade the s&p book. And then I left to start my own hedge fund in 2003, as a macro fund, and did that for two years, and then joined Weiss in 2005. And brought a good portion of my team over here, which There’s still three of us from that hedge fund that are still here in various positions. And then I managed the macro portfolio here for about a decade. And then I transitioned to where I’m now the president of the firm, and the CIO. And I spend most of my time, you know, managing the PMS. We’ve built that a lot of similar technology, in terms of behavioral analytics and things that I did at Morgan Stanley in the early 1990s. And that’s really been the bulk of the career. So a lot of the investors stuff that I spend time on is really thinking about the future. It’s trying to find areas that are I don’t want to say contrarian, but I do try to find areas where I have a different view than most people. Most of them usually have to do with this belief that if you if you think about where innovation is going to be, there is a math, whether it’s Moore’s law, whether it’s what I described on CRISPR, and messenger RNA, that these things accelerate, they reach a point where they start to accelerate cryptos and other one where I got very interested finally in 2020, and then 2021, was another big time for, for me focused on it and most now of the presentations that I give and our podcasts in search of green marbles, they do it on there as well. What we talked about and I spent a lot of time with is just how the blockchain energy independence and healthcare is going to impact the way people think, in the future, and why inflation is just a distraction right now for when people are thinking about longer term investments.
Nathaniel E. Baker 24:55
Hmm, fair enough. And we spoke about the life expectancy In full employment and a little bit about the blockchain earlier in the first half, we didn’t talk too much about clean energy and how that all fits in. Tell me about that.
Jordi Visser 25:09
Yeah, that’s an interesting shift. And you know this, Nathaniel, the good thing about a podcast or I’ve been doing content now via videos, in terms of webinars and writing for well over a decade, is that my views are out there. So if I’m wrong, I’m wrong. If I’m right, I’m right. The good thing is, I get to talk about it. So last year, Ed Hyman who who’s an economist at ISI, we just did a fireside chat yesterday. And a year ago, he and I did this whenever when the focus was transitory. We were both on the side of this is not transitory. This is structural and inflation is going to be here. Now, one of the main reasons for me was the fact that I think I thought that the underinvestment in the energy sector due to ESG was going to have oil basically trend higher until it got to a level that was high enough to hurt global demand and to actually force governments to move towards energy independence, and that this whole plan for clean energy spread out over 20 years was was not going to work out well. And that we were going to see a massive spike in energy crisis. So that was where I thought last year and at the beginning of the year, one of my surprises was that oil by the time we got to June would be 150. So Russia invades Ukraine. And all of a sudden, now, a lot of stuff has changed.
Jordi Visser 26:34
In my opinion, we’ve now kept oil. And one of the main reasons is because from a contrarian basis with Russia invading Ukraine, the initial reaction was, oh, this is going to spike energy that’s going to be off the market. And really, what it seems to be doing is getting Europe focused on the fact that they can’t depend on energy from Russia. And it’s going to speed up their movement towards clean energy, they had been closing nuclear plants, they had been focused on a lot of things, assuming that they would have the ability of doing fossil fuels at a declining rate in a very slow fashion. And what this did is speed it up at the same time, the US which at the time was very focused on not doing fracking anymore, and going through it, well, energy oil production is going back up. And it’s probably going up faster than I thought it would. And I think this all fits in with the world kind of looking at what was happening. The US was also in the middle of what I thought would be a long term housing boom. But that assumption is now was that rates were going to stay lower for longer and instead, the Fed raised rates far more aggressively. They use the their their jawboning to get mortgage spreads wider. And so now we’ve taken fixed 30 year fixed rate mortgages up to the highest level in almost 20 years. And so the housing market is now weak. And I don’t see any chance without rates coming down sharply, which I don’t think is going to happen because Fed Funds are moving up, and we’ll get up to four and a half. So I don’t think you’re gonna be able to get mortgage rates back down, which means the housing market is no longer going through a structural bull market, you got a lot of people trapped, you got a lot of people that can’t afford the house. And what people don’t realize is you use a lot more energy when people are living in houses because they’ve got more space, they’re buying more physical stuff. And by shipping that stuff around, it uses more energy. And that feeds into the other thing that changed dramatically to hurt the energy side for this year and force energy independence, which was China and China’s zero COVID policy, and their inability to get their housing going. I think they’re in a period that’s going to be very similar to the US where they’ve lost confidence in the locals in making long term purchases. And the housing market in the US left people in from 2010 to 2020 was very, very weak, we just never got to pick up some of it because we had negative equity but also because of demographics. And in China, we have a demographic issue. So they’re having trouble getting their housing market going. Year over year fixed asset investment in real estate is down 5% on the most recent reading. And there’s a direct overlay between energy prices and fixed asset investment in real estate in China. So I’ve become someone now that has gone the other direction. It’s not that I think that oil is going down. But I think the energy independence and move to clean energy was compressed. And that’s going to happen faster than what people think. And what that does is that takes the linear move of energy out. The other thing which I don’t think people fully grasp today’s PPI in Germany came out year over year was 45%. The dominant part of that is energy, meaning their power prices have gone through the roof. So when you try to convert where power prices in Germany have gone this year, it almost equates to where I thought oil needed to go in the US and I was thinking oil prices needed to go to about 500 to do the demand action. What’s happened in Germany as we saw synthetically about a $500 equivalent in energy prices for their power slash natural gas prices inside the country. So what Russia did is actually speed up the the move to clean energy and the dollars have been flowing and the government’s are doing And what that says to me is that oil over the course of the next five years, will probably stay range bound between 75 and 125. That’s kind of my guess. And if that’s the case that has that has another impact on, on inflation staying lower, but one thing is certain, it’s going to increase the amount of dollars that flow into the clean energy space. And so you want to be focused on those areas. Because clean energy and biotech have one common thread. When we saw mega cap tech sell off, and we saw the technology companies sell off in the US, it also took down all of these small beta companies in sectors purely because they were beta, it is not the same thing for a sought for a for Door Dash to go down. As a biotech company. I don’t see those as being similar. And what I see differently is that biotech and clean energy companies will continue to get dollars while these other companies that were being driven by the multiples in the in the private markets, I don’t think those are coming back. So I again, I focus on clean energy, and biotech and life science and those types of companies, I think they’re going to do phenomenally well, when they break away from what’s happened with tech.
Nathaniel E. Baker 31:06
any particular stocks that you can mention?
Jordi Visser 31:08
I really, as a macro person, I leave the bottoms up analysis to my PMS, they can join your show at some point
Nathaniel E. Baker 31:16
Actually we had one on but yeah, cool. Okay. But on clean energy, that what do you make of the argument that you you still need oil to make to produce clean energy to get the infrastructure in place to do all this stuff. And, you know, every solar panel takes how much lithium and how much cobalt, and all these other things that get what do you make of that?
Jordi Visser 31:36
I agree, this is not a things I mentioned. So the housing market in the US is no longer a bull market, which means we’re going to see less goods being shipped around. So World Trade is going to come back down to where it was in the prior decade, which was very, very low. At the same time, China’s housing situation completely new thing, and then rushes in invasion of Ukraine is going to spend more dollars in the energy side. So there’s a difference between building out the energy infrastructure and having advancements in what is needed. So if we go to 2010, again, and we talk about why inflation for that decade was low, there’s a lot of different reasons. But two of the technologies that had a huge impact on this were obviously the software boom, using the iPhone using the app store. But then the other thing was fracking, fracking didn’t leave as the technology it I mean, it came out and oil had been 150 before. And then fracking really didn’t become something that I think everyone focused on until after 2010. And maybe even as late as 2012, then you saw oil prices break down, I think what’s going to happen is that oil is going to continue to move higher because of what you said, which is there will be more need for fossil fuels. Second thing is we definitely have a supply issue that’s out there. So I think it’s going to move higher, I just think the movements that we’ve seen, I mean, we had seen sharp moves from the time COVID went through, forget the negative price. But we went from 20, all the way up to 131 35. During the peak this year, I just think we did a lot of the move. And now we’re going to kind of settle into a range. And if we settle into a range, that’s actually very positive.
Nathaniel E. Baker 33:08
Yeah. You mentioned trade coming down. Do you think that there’s opportunities with that, like we’ve had a whole reshoring thing from China investment going on for a while to see that as a secular trend as well? And could that maybe help the employment like so we can have full employment? I don’t know. Yeah,
Jordi Visser 33:25
There’s no doubt that the reshoring or the onshoring end, I don’t care if you know, Blackstone has been making major investments in kind of logistics, you know, localized logistics warehouses. So the whole thing that Amazon brought, we’re trying to shrink the amount of distance that trucks need to drive and shrink the amount of distance that ships need to go from China to the US. If global trade doesn’t grow. That is a major, major thing of oil demand. Because you’re you’re going to see if we grow at 0% a year, and during the decade of 2010 to 2020, global trade remain very, very low. If that happens again, and that has already started where we’ve seen global trade start to move lower. If you get into that situation, again, I just don’t see how that doesn’t add pressure, put a cap on oil. And those are the types of things that if you’re going to play them, from my perspective, you can watch them on. I think the most recent trade numbers came out in June of last year, you’re obviously getting freight rates and stuff collapsing at this point. I mean, we had the largest freight rate decline last week since COVID. They’ve been coming down sharply. I think the last three weeks are down 8% and 5%. Down 5%. And then you saw FedEx kind of confirm that things were weaker when they came out with their news last week that things had fallen off sharply in the last month. I think global trade and this reshoring onshoring is something that we forgot about because when COVID happened, we put so much money into the system. The housing boom was going everyone was leaving their office and moving out and doing work from home. Well if that doesn’t happen The same way. And we’re not shipping things as much across the country across the waters, which really just started from the tariff war, which happened before COVID. I think your points valid, I think this is another reason why people shouldn’t be as optimistic on oil. I’ve heard people. I think you had a guest on recently in July, who was talking about $200 oil?
Nathaniel E. Baker 35:18
Yeah, he was. Yeah,
Jordi Visser 35:19
I think and I’ve heard people say 300 to 500. In private conversations, I just think we’re at a situation where that was a a more likely scenario before what happened this year when three typings were built in by the end of the year. And now we’re talking about four and a half percent by by May of next year.
Nathaniel E. Baker 35:36
All right, finally, web 3.0. Yeah, tell me about that. Because that’s something we haven’t really had on this, this podcast and cryptos in general, because the problem is, it’s such a binary people who love cryptos, or they hate them. They both have valid points. And they’re both very passionate. And so other than just reinforcing those. But you’re somebody who has, you know, comes from much more of a traditional financial background, but you’d like web 3.0 and blockchain and even cryptos. Yes.
Jordi Visser 36:07
So this is probably the most interesting macro theme I’ve ever rabbit hole through three or four years ago, I had no way I thought it was, it was in the hype cycle stuff, it was still way too early. And the blockchain was a great concept. And I thought once they figured it out, and they got the energy efficiency side down, that may be by 2025, or something, it was going to be time to focus on it. So whenever I hear of a new innovation, let’s just say, we’ve all been waiting for autonomous vehicles. Now for the last five years to be dominating the roads. We’ve all been waiting for 3d printers, like you get a technology, you hear about it, and then you go back and you see that, hey, we’re not having 3d printers replace every human. We’re not having any of this stuff go on with the blockchain and accelerant happen. And just to give you an idea, because people I get asked this because I’ve been bullish openly about crypto this year. And so whether it’s in Twitter, whether it’s anywhere people love to like you said they’re binary on crypto since 2019. The s&p As I said, is annualized about 8%, it’s up 25%, NASDAQ is up about 35%.
Jordi Visser 37:19
Bitcoin is up almost 200%. So with the fall we had in the last few days, let’s say it’s 175%. So if you bought Bitcoin at the end of 2019, you’re up 175% Aetherium, you’re up about 1,000%. And everyone gets focused on it goes up, it goes down. This stuff has been compounding for a long time, just like the s&p 500. And I think the problem is with it, they get caught in this world that well, it’s going down and it’s now down 70%. Well, here’s the reality, the total market cap of the crypto world is about a trillion trillion dollars, the total market cap of the TRad fi or the fiat system right now, total assets is about $425 trillion. So I view the $1 trillion of crypto as basically a new country being formed a less centralized country. And I say country, because Bitcoin is the currency of that country. Aetherium is basically the programming language or the technology of that country. And that country is attracting talent, and capital a very fast pace. And it’s attractive in the same way that America was attractive for freedom for getting away from this most big companies in the traditional finance world. On the tech side. As far as I’m concerned, any of the platforms will be disrupted by web 3.0. Web 3.0 Is the borderless internet. It allows for the owners and the users, the content creators to own their own content. And right now you’re doing a podcast, I don’t know how much you’re making off the podcast. But I know it’s not as much as you think you should be getting off it because everyone that has a podcast, if you’re doing good content, and you’re getting viewers or listeners, you’re not getting as much as you think now there’s the one offs where people do, but web 3.0 is going to continue to accelerate because as people learn that Uber can be disrupted with web 3.0 that Justin Bieber didn’t have to sign the contract that he signed initially, like American Idol people, if they already had a million viewers, why can’t they just issue an NFT with their first album for $1 apiece, taking the million dollars and give royalties through the smart contract to the people who are the are the supporters. That’s what made Justin Bieber Justin Bieber never would have been found except for the listeners and the viewers and the likes that he had, which allowed them to go find him. This is what this is going to do. And by being borderless, it allows people in Brazil, people in Africa people in Venezuela to actually participate in the global economy. We saw that with xe infinity and the movement that it had, I believe in the Philippines were created its own little economy and allowed people there to make real dollars. So I think web 3.0 is the most interesting and most disruptive force that I’ve seen, it will have an impact on large cap Tech, I believe it leads to small cap outperforming large cap because small cap companies will not be disrupted as much. The big targets on this will be the mega cap platforms, which obviously is what has led to the US outperforming the rest of the world. So when I think of web 3.0, and I think about what’s going to happen, I think people should be taking advantage of Bitcoin and etherium down here, they should fall, Bitcoin and Aetherium. And the crypto world should fall if tech is falling, Fiat assets are falling. And in particular, if the speculative innovation that’s out further is falling, well, that’s what’s happened, they’ve just outperformed all that arc, which is a popular ETF, during that period from 2019, it’s down 14%. So during the entire time of COVID, it’s down and Bitcoin and Aetherium, I gave you the numbers, so if people are going to invest in it, I think it’s Bitcoin and Aetherium that will make up the majority of the market cap. And I do want to give you one more and just finish it on that in 2013. When I thought it was a joke that everyone was investing in Bitcoin, there were 66 cryptocurrencies. As of today, there are 20,000 cryptocurrencies, about 10,000 of them are active. And when I spoke with this, I said, what’s happened is we’ve gone from a currency, which was Bitcoin, then we got into the Aetherium, which exploded the amount of tokens, the tokens to me are mainly representative of companies. In the global economy, there are about 50,000 public companies, there are now about 10,000 active cryptocurrencies, most of them representing some form of a company, some business that issues the token, and then the users and the people that believe in it by the tokens, that’s going to expand. And that’s why what we’re seeing now is the organic growth and expansion of the crypto world in the amount of people that are focused there. I think, personally, out of all the three that I talked about lifespan and health span energy independence, the easiest one, in my opinion for the common investor to make money on is web 3.0. And I would just go out and buy crypto and just hold on to it for the next five to 10 years. And if it falls again, as other assets do, sell some of those assets and buy buy crypto because they’ve fallen down and the fiat system has fallen, this has fallen down, you’re getting an opportunity to make a transition into the southern world.
Nathaniel E. Baker 42:25
Interesting. That’s a very interesting views. There are crypto just to question on that just a tiny bit, that you mentioned that this is a country etc. I mean, that it’s still not really a stable form of exchange Bitcoin. I mean, if you have something like something that moves 5% a day, that’s not even the origin team, whatever the Argentina currency is now like, and if the US dollar move 5% in a day, the world would basically end? I mean, it wouldn’t. But you know what I’m saying? Like, so what do you? I mean, is that is that going to come in? You think? Is that volatility going to become more stable? And what are the actual use cases for this? Can you just use Fiat for these currencies, these type of blockchain things?
Jordi Visser 43:05
Well, here’s the thing as ecosystem grows, just like a country, think of Bitcoin as the currency for that country, if you want to enter that country, you have to transmit, you have to move your money into Bitcoin. And then you can use the Bitcoin to buy the companies of the other shares, which is going to be the other tokens. So to me, no matter what goes on, you’re going to have to have you, the founder of our firm recently went in to buy some to buy an NFT. The hardest part for him was to take his fiat money and convert it into a world where he could make the transaction and that’s the problem for most people. As time goes on, I don’t think that’s any different than when people started didn’t use Uber. I don’t know when you first use Uber Nathanial. But it certainly was when it first came out. And I remember, I finally heard people saying, you have to use Uber, it’s 80% cheaper than a cab in New York. Well, that forced me to do it. what will eventually happen is it’ll get easier and easier for people to make the transaction make the transition from the fiat system into this other system. It’s going to happen, I don’t there’s not even a question to me as to how or if it’s gonna happen. It’s just the speed of it. I thought NF TS last year when that’s what really got me interested in spending the time when I read more and more about NF T’s and I saw more and more Trad fi people that I respected tremendously. In fact, if you go look at the Shark Tank, people that are in this world now have NF T’s. They’re heavily involved in it. And they started explaining to me how these use cases will be going off for almost everything that we do in our daily lives. Universities are doing it as proof of your resume. So if you’ve taken a class at Duke was the first one that did this, you’re gonna get an NFT to prove that it’s authenticated that you did this. So I agree with most people that say, well, it’s too volatile. Yes. And that’s what keeps most people out. It’ll get less volatile. It’s hard to have transactions there. Yes, it’s Not ready, we have zenergy and efficient Well, the merge just happened. And that reduces the energy usage by 99.9%. So if that actually is happening, and if these things are going positive, the next time the fiat system goes up, so if I’m right about assets trading higher over the course of the next six to 12 months, if that happens, I think the Fiat the crypto web 3.0 World will go up at a much faster pace than the Fiat world as it has over the course of the last five to 10 years.
Nathaniel E. Baker 45:30
Yeah, that’s that’s a fair point. Yeah, fair argument. Very good. All right. Geordi. Visser, thank you so much for joining me contrarian investor podcast today. Very interesting conversation. Maybe in closing, you could just tell our listeners how they can find out more about you on the internet, and elsewhere. And I will put those links in the show notes as well for ease of use. Well, first
Jordi Visser 45:50
of all, thanks, Nathaniel, for inviting me. I do like these conversations. And I do I do like listening to the work that you do. So thanks. They can find me on Twitter at J Visser underscore Weiss. That’s the stuff I kind of tweet out four or five times a day with the charts and the themes that I think are the most important. The website gyc.com is where all of my content is the writings. I do videos of charts about twice a month, or whenever anything big is going on. And then people can certainly connect with me on LinkedIn as well. And the podcasts are in search of green marbles. And it’s once a week, about 20 to 25 minutes based on whatever topic is happening in the market that we think is the most important for people to to get some insights into
Nathaniel E. Baker 46:42
in search of green marbles. What’s the reference there? I guess green marbles are the more rare?
Jordi Visser 46:47
Yeah. So my, for years I was asked by I look at a lot of data. I’m a data analytics freak. I grew up my father taught me how to handicap horses at a very young age. And so I’ve always been horse racing is like, the handicapping is like the original thing of taking a lot of old data, and then trying to come up with your own odds on what should go on. So I was doing that at a young age. And I always looked at kind of data, when you’ve got a million kind of data points, you want to find the 15 to 20 that are the most important and the visual that I always had was trying to find the green marbles out of a group of marbles that have been dropped on the ground. So when I approach markets, I’m trying to find the ones that either people aren’t looking at. And I’ll just give you an example right now, the thing I’m telling our teams are we have 20 portfolio managers, the s&p 500 has started to fall again, as two year rates started to move higher. But this time beta is outperforming profitability. And today, the 100 day rate of change on beta over profitability went above zero. That’s the second derivative. The last time that we’ve seen a scenario like this was in 20. And the one before this was May, it was April of oh nine. And the reason I say that is because when the markets going down, people are migrating to quality balance sheets, profitable companies, and they’re getting out of beta. Well, beta has been outperforming and it has been correlated with the s&p all year. So when I find something where the s&p is close to the lows of the year heading into the Fed meeting, but beta is not following what it did in the beginning part of the year. That suggests to me that there’s risk taking happening under the surface. And just like if I was at the racetrack, and I did my handicapping. And I looked and said, Well, I think the odds on the horse should be four to one. But the odds out there even money, I’m looking for value. But what I also look for is where the late money is coming. And factors to me offer me a green marvel of kind of the late money or the smart money, because that money to me is related to quants, and a lot of the quant strategies, particularly the ones using AI, I think have an edge on seeing where data is going. So I see something right now that’s a green marble, I post about it, I talked about it, it may end up being wrong. But again, I’m just in the game of probabilities and trying to find situations where something other than what the favorite is going to win. And in this case, I think there’s a really, really good chance that after we get through the Fed, if everything is as expected, we start to get some of the inflation prints that are on the lower side. I think we already saw what can happen in markets from June to August before Jackson Hole. Now we’ve gone back down. The factors are telling me that there’s a pretty good chance that if we get through this and everything’s stable, that you’re going to see assets start to trade higher, primarily because positioning and sentiment has really bad odds on the market going down.
Nathaniel E. Baker 49:32
Hmm. That is a nice optimistic way of closing the podcast. Thank you again gave us a lot to think about here. And with that we conclude today. Thanks for listening. We look forward to speaking to you again next time.