November 10, 2023

The Massive Bond Short | “Recession Denier” Jonny Matthews (ex-Brevan Howard) On The Duration Bubble, Correlation Trades, and Variance Swaps

1 hour 22 minutes

Jonny Matthews, founder of Super Macro and former portfolio manager at Brevan Howard and managing director at Citi & Saloman Brothers, joins Forward Guidance to share his view on markets and the economy. Having netted a near 100% return in 2022 with a very large short in Treasury bonds, Matthews has been a proud “recession denier” for several years. While he is now concerned with some worrisome data in the U.S., Matthews continues to believe that an imminent recession in the U.S. is unlikely.

Matthews and Farley also discuss the dangers of correlation trades, the challenges of currency trading, the severe slowdown in Europe, and the perils of variance swaps in 2008 and Long-Term Capital Management. Filmed on November 2, 2023.

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Timestamps:

(00:00) Introduction

(02:34) Jonny's Massive Trade Shorting Bonds

(07:18) Analyzing Bond Demand Is Too Hard: Jonny Prefers To Track The Economy

(11:47) Concerning Changes In Recent Economic Data

(17:29) Pushing Back Against Jonny's "Recession Denier" Thesis

(21:13) Manufacturing Can Enter Recession While Overall Economy Is Not In Recession

(22:53) Excess Savings Indicate American Consumer Still Flush With Cash

(26:59) Jonny's Macro Trades As Of November 2023

(29:41) Real Rates Are Unlikely To Go Much Higher

(31:55) Curve Will Likely Re-Steepen When Fed Cuts Rates

(39:39) Economy in Europe Is "Much Much Weaker"

(41:33) Views On The Dollar & The Euro

(42:55) Bank of England & Inflation In the U.K.

(47:47) View On British Stocks

(50:16) China & Japan

(01:00:22) Trading Volatility Is Different Than Trading The Underlying Asset

(01:03:08) The Danger of Correlations Trades: Ghosts of 2008

(01:05:40) Long-Term Capital Management (LTCM) Blow-up

Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.

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