Thematic Investors: A Front Row Macro Investing Seat to the World with Rob Citrone

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Vidrio saves your investment team's valuable operational time providing actionable insights like never before. Explore more at vidrio.com. All right, well welcome to the Thematic Investors Podcast. I'm your host Kirin Kavanaugh, old farm partners. Our goal is for you great investors and their things they're working on. Jerry excited today to have Rob Citrone, who is a macro hero mine and he's the founder and portfolio manager Discovery Capital. He's one of the best global macro investors in the world. He would not say that, but I will I'll go out there on a limb and say that. He runs multi-billion dollar hedge fund in the trueest sense of an open mandate. He can invest anywhere he likes and any type of security. He founded 1999 and the fund is compounded capital and low teens and it's in its 27th year. It's a true survivor and thriver. The hedge fund does a welcome Rob. Great. Thank you very much, Kirin. Thanks for having me on. It's great to see you again. Great to see you too. You know, it's quite a time we're living in and I know I'm chomping at the bit to get into what you're seeing because I know it's a lot. But you know, I'd love it if you could kick off just talk about you and your experience. Give a rundown how you got to the place you're in today. Yeah, I'm a Pittsburgh guy and I grew up there. My grandfather is a co-minor and you know, when he was when I was two years old, he was dying of black lung. So we had to move back into the home to try to help them support themselves. We baked a tiny bread and delivered to the town and that's kind of how we survived and we didn't have enough resources to have a crib. So I slept in a drawer. So I come from very modest means and it kind of early start. But you know, that's where I get my passion for Pittsburgh sports and Pittsburgh as a whole. But it was a wonderful, my dad was a sales guy and we had a nice kind of middle class upbringing from there and it was I had six brothers and sisters. So it was always a lot of fun. I was the oldest of six. So we always had something happening going on. But I went to college in a small college in Virginia called Hamden Sydney. It's a 10th oldest college in the country, a really special place and you know, I really, you know, a lot of things happened. They're very positively for me and one of the things that I did while I was there is I did a senior thesis on the Latin American debt crisis and it was myself and a professor. So, you know, I had to do all the research myself and that's really how I started getting into emerging markets. I had an economics degree and so it made sense with macroeconomics and things of that nature and went from there to work for First Boston, got into their sales and trading program and I was working with a bank analyst and at the time the biggest issue for the major banks in the US was what was happening in Latin America and all the reserves they had to put against these Latin American countries in particular, but a lot of the emerging countries and he basically said, look Rob, you've actually studied this closely. Why don't you go and help me figure out what those loans are worth in Argentina or Venezuela or Brazil and Mexico and so I spent some time traveling there and trying to figure that out and that's really how I got my start to more aggressively in emerging markets. We've got an MBA at the University of Virginia and then with the Fiddleian investments and started Fiddleian's emerging market fixing company currency group for them, but I started first as a corporate analyst looking at what they call fallen angels. So companies that were investment grade that became below investment grade. So it was really intensive credit work. In fact, I was the first sales sell analyst ever to go give a presentation to FASB. So, I know how to look at balance sheets, tarot, apart income statements, balance sheets and and look at companies very directly. So I'm very comfortable in investing world and looking at equities and very much from a cash flow and kind of growth perspective. But then when I was there, I saw this tremendous opportunity in the EM debt space was just starting. We had Brady bonds were just starting to be loans were being restructured into bonds and I got Fiddleian invested in involved in some of those and we started a great success. And so basically, I saw this great opportunity I took it and that the rest is history. So I've been investing macro and emerging markets focus really for 35 years now. And then you must have met you in coming out of Fiddleian? Yes, I was at Fiddleian and there was a gentleman at Fiddleian who had gone to Tiger, been there for a year or so and Julian was a person somebody to do emerging markets. And the gentleman said, well, the best one is Fiddleian knowing very well and you should get the know him and maybe we've hired him. And Tiger did an amazing job of hiring people. I mean, that's one of the successes of Tiger. It was a very thorough process. I mean, you had to talk to Julian for like three or four months. You know, think he wanted to see how you thought. You had to meet with that Dr. Stern who was like a psychologist that would you fit well with the firm and would Julian and you know, could you take the pressure and the all the other things? We even did like written tests you know, like almost kids at T-Tests, like see kind of the aptitude and things that nature. So it was a great process and I joined after five years of Fiddleian. I joined Tiger in January of 95. It was a great experience. The growth of Tiger was enormous during that period. I saw growth of Fiddleian also a lot and from 1990 to 95 that I was there. So I got to experience a lot. And you know, when you're at places like Tiger and Fiddleian, you get access to the best. And you know, I've one of the advantages I think we have at Discovery and it's the experience we have and I've traveled all these countries at very senior levels from a very young age. And so, you know, I don't just do it from my desk here in Connecticut or Disney World. I actually get out there and have done it for many times. So, you know, I've traveled all over the world and it's just a huge knowledge base that I can draw from. But even more than that, it's the contact that I've developed in these countries over the over time now. And most of them now are very senior people either running companies or finance ministers or central bankers or very senior people in the markets there. So, it's a huge competitive advantage. I can just pick up the phone and, you know, talk to senior people in these countries and really get a feeling for what's actually happening on the ground. And then going and visiting in places where I think the best opportunities are. I really want to get in your process more because, you know, I think that it's unique and I understand, like you can understand the implications, I think very quickly. And I'd forgotten you had a fundamental background as well. Yeah. But you, but really drew you was in macro. And was that because of how that wild period in the 90s where things were just being affected by currencies and rates? Oh, tremendous stuff happening in macro land there. And that was pretty exciting. And, you know, you kind of have to combine a lot of different skill base. But the skill base that I've developed over time that I didn't have initially is it's become clear to me that investing in macro, especially in emerging markets and really almost any country when you do country analysis, you really have to look at it's just like investing in a company. It's about leadership. Who's the leader? What are their policies and can they implement them? You know, sometimes they can't implement that they don't have the power and the Congress or whatever. So that's important. They can implement them. So, you know, when we look at our portfolio, you look at countries that, you know, we like the leadership we like what they're doing and they can implement it. And then we're kind of short countries where we don't like the leadership. We don't like the policies and or they can implement them or they can implement them and they're going in the wrong direction. So it's very interesting that politics and policy have become really the driver. A lot less the economics. The economics are second and the economies get affected so much by the politics and the policies. And if you don't get that right, forget about the economics and it doesn't matter. Well, let's go down that a little bit more if you don't mind on the process. I mean, no one, I think for a guy who manages so much capital and a substantial amount of it's your own. For a guy who gets up at three in the morning and pretty much every day. Yeah, you know, I've heard people talk about that, but you really are relentless. Yes. Tell us maybe you have to have a passion for it because you don't need to get up every day, right? I love it. I mean, I'll admit that there's some nights like, oh my god, I gotta get up. But I do, but I get up from like between 10 and 30 minutes, depending on what's going on. It's what we have to do. But what I found out is it's just a, it keeps me in tune with the rhythm of the market. One of the things when, you know, you work with George and it's Sauros and he just had a great feel for the market. And, you know, when you're following the market like a 24 hour basis, it just gives you a better feel for the market. The other thing I've noticed is for whatever reason, the US futures are always the weakest at the around the 3 3 15 time. So I get up at that time because it's the close of Asian, the open of Europe. So I want to see that and I'm giving trades and we're doing, we're doing things at that particular time. We have a 24 hour trading desk and they're also, you know, coming up to speed and they give me a rundown of what's happening and what's been happening. And so we have a huge competitive advantage. I mean, there's certain things happening. They'll call me the middle of the night. I mean, I just got up at 3 15. There's other things happening. They'll call me one or two of something's happening and we can take action. Whereas most fund managers are sleeping so they can't. So we just have a huge competitive advantage. It probably adds a couple hundred base points a year. You compound a couple hundred base points a year over 27 years. That's a big number. Yeah, well, yeah, it's funny. I almost mentioned it at the top, but like a dollar invest in your fund. Yeah, we were 21 today and probably a little more than that actually. Yeah. And it would be four dollars in the MSCI world or almost seven in the SBA. So yeah, I guess it does work. So what about more about your process? I mean, a pretty big team. I know you guys are very careful investors. You're not just traders at all. But when you get a big view, how does that, how does it play out? How's it turning into a big position for you guys? Well, I mean, we look at both the bottom up and the top down. I think we marry that very well. And that's a big strength of ours. So I have analysts who are looking company and country company and sector specific. So, Princeton technology is something we've really felt, I felt from day one was so important. So, I've always had a number of technology analysts. And I think it's given us a big advantage, not many macro. I don't know how you can invest in the macro or the hydrogen understand technology today. And it's given us a huge competitive advantage. I mean, we were very early to the AI trade. Now, part of that is because it's the contacts that I've developed over the years. I happen, this is a really interesting story, but I happen to be, it was on January 1st, 2024, and we're playing golf. We had a clock in the morning, one of the guys that lives in the neighborhood here, you know, was head of technology, one of the biggest banks in the United States. And he said to me, literally, team up and he says, Rob, you got to find a way to make money on this AI. He said, I haven't believed in this AI at all. Nothing's ever been any good, but this Chatchy BT4 is incredible. And I look at him and I said, well, I don't even know what you're talking about. He goes, I don't know, I don't know Chatchy BT4. He goes, oh, no, no, I'm demoing it. Yes, I doubt it yet. It'll be out in a couple of months, but it's incredible relative to three. It's like magnitude above. And now it's gonna make it different. I can use this to do different things. Literally, I mean, I'm like trying to play the fastest run of golf I've ever played. And I'm texting my team, say, we're having a one-o'-clock call about how can we make money in AI? This is in January, 12, 24. And literally in March or so is when Chatchy BT came out and all of a sudden the craze went crazy. But, you know, we put on some certain positions and we made money, but I didn't think it was going to explode the way it did. It helped us. We probably should have made another 10% additional. Right. It's just an example of contacts and people. And you meet over the time to just give you, you know, and I can put it in context and say, oh my God, this is a great opportunity. So, we're really looking at, you know, like I said, we do the country analysis. We do the company bottom-up analysis. But I'd say our portfolio is dominated by our macro views and the country analysis. And filling up those positions, then we try to fill them with the best areas. And we can go into currency, we can go into equities, we can go into rates, we can go to credit. It's just such a huge advantage. You better do that. It's like having so many more tools in our toolbox. And, you know, we have every wrench. And so, you know, if you're just missing off the wrench, you know, you stripped in, not there's something. But us, we get the exact wrench and we can turn it perfectly. So, it's a huge advantage for us. I get it. But on the other hand, like it must be daunting. Sometimes it's aside, what's the best expression? When you can do anything, what do you do? You know, I've learned a lot over these 35 years and 27 years of discovery. And we're the best discoveries ever been. Probably because I think I'm, you know, better than I've ever been. I think we're the best team we've ever had. We've worked together for a long time. The average analyst at the discovery was 15 years. I mean, that's so rare in the hedge fund industry. So, you know, we know how to work as a team. We have a, it's very systematic now in terms of how we think about things. So, you know, look, we're going to get things wrong and we're going to not express it the right way sometimes. But we're generally more right than we're wrong. And, you know, we can really find the opportunities in around the world that other people may not be looking at or that we see will become good opportunities. Because we've been there. Argentina is a good example. We identified a couple years ago. I mean, I've been there now over 70 times. Over 30 to 35 years. So, that's just a huge advantage. And we have amazing contacts there. But I saw this same movie in 1991. 1991, they put the convertibility program. The country had 2000% inflation. They had like $10 million of reserve, $10 million. It was a mess. But bonds were 20 cents in the dollar. They just restructured their debts. And convertibility and good economic policy led by Cavallo and President Menem. You know, the, our team is the best before we mark in the world for three years. So, fast forward to, you know, two years ago, this was the same movie, but had better actors, a better camera, a new Dolby sound system, you know, technology was better. It's just a better version of 91. So, what happened the first two years for this program, Argentina was the best performing market in the world. Now, you know, this year, last year, 25, it wasn't because you had the midterm elections and that created a lot of uncertainty. That was very important that that Malay did very well on that. And it's now opened up a chance for this country to really over the next six or seven years to become investment grade. There's a lot of reforms going to happen this year. The country's assets are going to do well. No, they were so depressed before that upside was enormous. They're not as depressed today, but they're still good valuation. You're still going to make 25% of the equity and you're going to make 15% of the debt. So, it's solid, but, you know, is it our favorite place in the world? No, not anymore. But we still like, but, you know, that brings us to the fact that, you know, policy we've talked about, that how important it is. The policy of the Trump administration now and having Rubio at the State Department, we have really adopted the Monroe doctorate again. And Latin America has become a very important focus of the US administration and Venezuela is a great example of that. What they execute in Venezuela is unbelievable. And, you know, we thought there'd be change there, but we thought Maduro would leave. You know, we thought that, you know, he would take safe passage and there'd be a change. And again, this is about management. So, we love countries where the management we like. And especially when you go from really bad management, to very good management, Argentina was the best example of that going from terrible management, some of the worst in the world to great management. Now, in Venezuela, we're going from absolutely a formal management for decades to something okay. It's not great management, but the change that dealt is so enormous that it creates value for the, for the, for the, for the, for the, for the, for the, for the, right? I'm sure in the implications for China themselves. And I know it's fascinating when you're a macro person, you can do anything, right? And you're starting at a low base, I'm sure. Yes. I don't even know how you express event as well, if you have a positive view. Well, we did it through the dollar bonds, you did as well in Pedevesa, which are liquid and they're sizable when they're trading. We started buying them a couple of years ago and there were six cents per claim. They went to about 15 cents per claim, you know, middle last year and we had to double our position because we really felt my drawer was going to be out. And now today, they're about, you know, 25 cents per claim. So, you still have, we think they'll end up at 50 cents per claim, so you still have a doubling from here. And we think that gets restructured over the next two years. We really impressed by how fast things are moving in the positive direction there. And we really feel the US government is committed. This is Rubio's baby. So it's going to be successful. You're putting tons of resources there to get it done. It is fascinating since you've gone down that road. I mean, South America in general, right? I know you've been an Argentina person for 25 years and Colombia at times, right? Brazil for sure, both sides, I think. I mean, Brazil is the most interesting one this year. Yeah, I mean, Brazil is either going to be the best performing market in 2027 and 28, or it's going to be one of the worst. And it really is that kind of production. Okay. And Lula loses. Man, Brazil is going to be a home run. If he wins, it could have a big crisis. So that's one that, you know, we don't know yet. We don't have much exposure there as a result. But as soon as we have high conviction of what's going to happen or it actually happens, then we're going to be very aggressive, either longer, short and Brazil. We haven't talked about the short side yet, but that's a very important part of what the government has. We're, you know, we short, we short, we're one of the largest borrowers of individual securities in the world. We still short individual securities. It's a big part of what we do. It's a big value ad, especially the last couple of years. I mean, we produce pretty outstanding returns in 24, 23, 24 and 25 with very low net equity exposure. Probably average 15% over that period of time. So our shorts were really value added and massive alpha generation. And in some cases, actually made money in the short side in very strong markets. I mean, it is fascinating. Actually, your colleague Malar was telling me that you're the first one around obviously for as long as it has been, but you had your best five years, the last five years. Amazing. Amazing. Yeah. Amazing. And you've had ups and downs in your career as everybody has had. Yeah, you're right. And you try to do better. And I think we, you know, we got too big at the end, in like 2017 to 19, too many people. You know, I had my analyst relied out the door. I had 40 some analysts. It was just way too many. Today, we're like a perfect size. We're like 36 people. And I got about 20 people in the investment team. It's a perfect size that we can maneuver in the markets. And make sure that I'm not diluting my expertise and that I'm also spending a lot of time. I spend over half my time talking about side contacts. They're so valuable. And that's an important process of what I do every day. And if you don't mind, we talked a little bit about it on the tech side. And if that's clearly like, does your V main event, like Pat Riley would say, make sure the main thing is the main thing, is where are we on that, if you don't mind? I'd love to get your view. I played it great for a couple of years. Yeah. We're kind of in the seventh inning now. We're not in the end. We're in the seventh inning. I think what was very interesting about 25, but even with AI and all this wonderful tech in the US, the US market in dollars was below the median return of the year of markets globally. I think that's going to happen for the next three to five years. I think the US is going to underperform the other markets in dollars. Now, part of that is a dollar is going to go down. So we've got a big tailwind investing globally now. So you need to-- and everybody-- part of the reason is also everybody is too much corporate America. Everybody globally owns corporate America. So everybody's super long. So that marginal buyer is just not there. Plus the valuations. We're working in some companies. OK, yes, the EBITDA may go up 20% more than expected. But it's 35 times EBITDA. It's very, very difficult to go forward, especially because the US market has become so contrary in those seven mag seven companies that-- I don't think those are going to do that well. And that's going to underperform. So now is an opportunity to go out globally and find opportunities. Latin America is our favorite. But there's also great opportunities in technology in China, in Korea, in Taiwan, Japan. There's so many great opportunities. And I actually think Europe's going to be great your next year, or this year. I think there's likely to be, at some point this year, peace in Ukraine and Russia. I think that's a big factor for Europe. And I think European markets are cheap. And people are under-invested there. And I think the economy's going to be fine. Now, long term, would I be in Europe? No. The next couple of years, yes. And I think 26 will be a good year in the markets in Europe. In part, a better year in dollars than in the US. Yeah. What about European growth? It's just that's always what I worry about. You know, I think it's going to be pretty anemic. We've expressed a lot of our European exposure through Greece, along Greek equities, banks, industrials, in Greece. And it's been a home run last three or four years. And we still have some exposure there. And we still like it. But we're broadening out a little bit some other opportunities. We've had a few others. We do have a few shorts. well but have worked well. I really think that if we look on a five to ten year horizon there's going to be a major change in the shift in the structure of Europe. It's not going to be the same. They can't get anything done. There's too many countries that can't decide anything. The Europe group gets nothing done. They never get anything anymore. So I think you're going to see a structuring, a restructuring of somehow. That usually creates problems and usually creates opportunities on the short side. So I think there's going to be some great short opportunities. Plus they don't have the some countries that got some pretty good leadership but most of the countries are struggling politically and the leadership. The France is a good example. What are we going to end up with in France next year? We don't know. We don't know what's going to happen. So that's not the only one but there's others. But it's just they all have different, you know, it's very difficult to get 27 countries together and agree on anything. So do you let's call even just listen to you right now? I mean your process is so holistic and I'm not trying to be solicitous but like you know so many Mac per guys they start with like sticks and come differential, you know, rate differentials and they start with you know GDP and you guys just think about the whole thing together and then come up with the right expression. Is that fair? That's right. We're like three or four steps before we get to the things they're looking at. We've already done four big steps. Yeah and I remember I also remember the access has got to be good for you and that like I remember I think it was last year you spent a day with a in Mexico with a finance minister. No one was looking at Mexico right and so they're probably having a few to talk to you and you came back and we're really interesting. Mexico for a for a while and I think the new president is is a big improvement from Amlou and I think she's going to take Mexico in the right place. Not going to be easy but I think she's off to a decent start and but it was interesting because I had never met the is a interesting story so I had never met the the new Mexican finance but I knew the previous one. In fact he had been in the private sector and and I was a client who's for many years so he did a good job really good job but the new guy had never met so he was actually was coming to New York and but he called he called my office and they said Rob will come in New York we want to meet you. I was like well that's interesting okay I love to meet you. I come in and so I had a private meeting with the finance minister and the great thing about it was he had Ruby had just met President Shine bomb the day before and this gentleman I was so impressed he was a foreign minister before he's a mayor of Mexico City. He very much thought about the world holistically and I thought about the relationship with the United States and you know he wasn't the you know he had great people around him who did all the economics and stuff and he was good at it but that wasn't his expertise. His expertise was relations and discussions and so he knew how important the US MCA isn't really negotiating that Mexico's gone a long way and approaching and already kind of pre-negotiate a lot of it so that's going to be a huge trigger for Mexico this year I think the deal is going to get done and when it gets done the Mexican and as we get it gets it gets close to getting done the Mexican evermore is going to fly but one of the things he said was there was a great meeting between Rubio and the president and they agreed on many things more than just trade they agreed on immigration they agreed on fentanyl they agreed on some of the things with the cartels so it was a holistic and I said wow this government which is surprised this government will be all in with the United States they are all in with the United States and when I when I kind of figured that out you clicked and said wow this is even more powerful we like Mexico already but it's even more powerful than I thought. That's very it's so interesting and it wasn't widely thought that of that at that time for sure right I mean I remember. No not at all. They were they're everyone's an adversary at the time. You know and I had a bunch of questions before getting into policy but I have to I think you already opened it up. I mean we've got to talk about the Trump policies I mean they're probably the most destabilized I mean it like clinically not you know negatively I mean they are to sort of global order and besides like I just I agree with you 100% on basically this hemisphere that's it's Monroe all over again but what do you think what I'd love to hear where you are right now and how the good and the bad maybe or or or where how you think these things play out I for democratic friends it's only been one year right and they've got three more years here and it's dizzying. Yeah I mean there's a real divide on on President Trump but when you can't say about him it's he does things and he gets things done right I mean he doesn't sleep much so and he doesn't like he likes always to be doing something he's getting something done so he's you know I think that what he's done on the foreign policy sides enormous I do think he's gonna be successful in getting peace in Ukraine and Russia and he'll be the big driver of that happening obviously the election is going to change and you know freeing up a millions of people to you know out of a dictatorship into hopefully into more of a democracy over time I think you're Ron my heavy change as well and I think you also be part of that as well and who knows what's gonna happen in Cuba but these changes are big and then I think he's also he's trying to get better relation with both Russian China we need to have better relation with Russian China right this is incredibly important it's not to say that we're gonna be friends but we need to have relations we need to talk we need to work out our differences we have those differences so I think he's trying to do that so what he's done on the foreign policy side I think he's really spectacular on the economic front I think we're gonna have a boom in this country now we maybe have to pay for that later but he really you know they really are trying to get investment going in this country again and that's a very good thing and I think that's what the big beautiful bill is focused on is about getting investment in the United States and I think that's what the tariffs also were probably about you know raising money that helps a little bit and but it's really about we need to invest here in the country we need there's been unfair trade no doubt about it and so he's trying to level that so I think those policies are generally pretty good and I think we'll benefit from that but you're right there's a lot of changes sometimes yeah changes is mine he changes mine all the time yeah that's good for us because we can anticipate it sometimes and in addition we can then take action because we understand what the implications of all those changes are so good examples last year where you know we saw and did a lot of work on what the tariffs would be in April when I go my god they're gonna have a base and then he each country has these big tariffs Mark is gonna hate that so we're 50% short the US market and 35% net short overall on the it's rare you ever get they told us the day and the time you wanted to be short did you were short in advance yeah yeah advance yeah yeah we figured we figured look I have a wonderful analyst Scott Evans in Washington he was spending the last 70% of his time on tariffs I was spending a third of my time on tariffs for a month right King with the conclusion we didn't know for sure but this is what we thought it was gonna be and I can remember that it was very interesting the the day that it happened you know he comes out and he unveils the tent the the 50 what was it I guess it was a base rate of 15% tariff yes for everybody and and the market sort of rally and I'm looking at yeah because he has an only piece of it so you're already 50% short but I literally you know I'm here my Orlando office and I have a direct line to the desk I hit the desk and I say look that's short 2% more the S&P this is crazy nearly 10 second later he unveiled your 27 and Cambodia's 52 and yeah Vietnam is 50 and all of a sudden the market starts tanking but I look over my screen I'm like man the market 20 down 20 points my desk said no no Rob it's down to 120 points yes it though 100 points in like a nanosecond so you know we made a very big return in April but then we saw that he's got to change his mind towards the end of April because it was going to be problematic so we started to cover a lot of our shop 5,000 in the S&P and you know didn't cover all the most but covered a good levels and so then we had a big return in April and a big return in May so that's policy and change of mind and you know it's very it's very it's hard if you're running a business man it's really difficult yeah but I think we're selling down now and I think you'll see less changes going forward and I think the US economy's going to boom this year yeah I mean I I remember you saying that last year also as a dinner I was I couldn't believe it and then I actually just saw that I don't know how accurate it's gonna be the Atlanta Fed you know that model the people fourth quarter GP that's 5% real growth I think last time we had three quarters in a row about 3% was 98 yeah amazing you might have a 7% quarter this year is that real real real real real I mean how do you see this playing out though why did you say we're but we'll pay for it later is that would that be through inflation well it's basically very sticky I think and we've got to be very careful with the Fed I mean the Fed just can't go really cutting interest rates with the new governor right right take the new governor come in probably cut once kind of insurance cut then the politically it's you know to help politically to do that but I don't think it's room to cut much at all because I think the economy will be strong inflation will be sticky the productivity stuff will help on inflation though so we'll have to see how quickly that comes in but inflation not gonna go running away but it's still gonna be in this 2.5 3% range or maybe peak at 3 2 or 3 3 which doesn't allow much for cuts but I really think that the market may struggle in the second half of year because of the midterms and it's very difficult for the current administration to win the midterms and if he doesn't win the house it's good we're gonna have essentially gridlock for the next two years and trumping gridlock don't go together so I think that will be a very very problematic time for the market potentially and the market has to adjust to that change and the valuations were at and you know and I think it's gonna come from a higher level I think get with the marks and do very well on the first part of this year I think yes be it 70 close to 77 hundred in the first four months or five months but I it could go as low as 65 or 63 in the second half I mean well this is gonna be a really volatile year in the second market so you don't want to just set yourself and be well the whole time you can't you gotta be very very nimble we're very nimble you know that April May last year was a great example would from 50% net short that 40% net long literally in a matter of a couple days and you know we caught that really well so yeah I mean I these are great markets for us it's great yeah global in nature you need to be global so many investors are not don't they're on enough exposure globally they're gonna have to adjust they have too much exposure too much private exposure in a lot of cases private credit and they have too much US corporate so I think you're gonna see people looking for global exposure and that's good I'll perform so those who have it are gonna do better than those who don't yeah ironically you know when I talked about friends in the diamonds foundations they say you know we've global portfolio you know they basically in Japan you know yes exactly right and that's a big liquid market it is funny when I read years ago you were ahead of everybody I feel on Argentina. And I went looking for Argentina funds, Argentina exposure. I could not find anyone who had a really great dedicated product to your point. And you go far, feel like we have, you talking about it. - I'm very old, but I was so bullish on Nigeria, it's incredible. - What was that, if you don't mind? - You know, the new president is really, you know, I've been looking at Nigeria for 35 years. And it has always been a basket case from a leadership perspective and so corrupt. They were stealing all the money, stealing oil revenues. This guy's come in and he's doing the right things, the corruption levels have come way down, even though oil prices have gone down, reserves are going up fashion, they've ever gone up in Nigeria. So it's about policy and the leadership and it's changed dramatically. And so after Argentina, I have to maybe write Nigeria as a second country in terms of reform since we're happening. So in nobody expects it, and nobody was in Nigeria. And you know, I spent a home run for us. We told our investors at the beginning of last year, we write our outlook every year. We said Nigeria will be one of the best performing themes for us this year. And then there was a second, we made six and a half percent overall to the fund in Nigeria alone. So in currency and dollar credit bonds and also some equities at exposure in Nigeria. - Wow, yeah, and it would be great, great for the African continents. They had a big impact. - Yes, in Africa, you know, Africa's getting a big benefit from commodity prices. No doubt about it. - Right. - Gold, silver, copper, box, everything is really helping them. And. - You know, I actually don't have the answer. Usually people ask what they, the question that they already have the answer to. - What is going on? Why is gold had had a 45 year, the best year 45 years, that's even longer new than running this one. - Yes. - So what's your take on now like from here and what's driving it? - You know, I think it's still gonna go up more. I mean, you know, we have a decent size position in gold. And I think it goes to 6,000 this year. And it's being driven by central banks globally who don't want to have, they want to have less treasury. So when they get the reserves are growing, they're putting more of it in gold and less of the treasury. It's because they don't, the sanctions and things of that nature, they don't want to be subject to those sanctions. And so they're putting more of their money in gold. And then you get others doing the same thing in investors in those countries and globally. So I think everyone also was really underweight gold. And I think they're getting closer to reason boy. But it's really the central banks driving gold. The demand from central banks is equal to or greater than the whole production of gold each year at the moment. - Wow. Do you think we've hit peak US dollar ownership globally? - Yes. - Yeah. That's not-- - I think the dollar's gonna weaken. Especially against EM. I mean, we're really bullish on a lot of EM currencies where last year as well and some of them did very well. You know, we currently are short the end. And I think the end, but we're talking about another 4% I mean, it's that we're short for a little while. It's not a lot left. But I think the end and the euro go down a little bit in the short term because our economy is booming so much. And unless we get the peace in Europe, I think the euro maybe go to 114, 1112, not much. I think that narrow range in the Europe in Europe is your 12 to 123 kind of level. It's not much gonna happen. But, you know, pretty soon the dollar will go down against pretty much every currency. The annual strength and pound of strength and euro strength and the EM will strengthen a lot. So I think the dollar like last year when down for the year was interesting. It was very weak in the beginning of the year and strength of the second half of the year against most currencies, but still ended down. And this year I think it's a little bit different. We've struggled a little bit stronger, especially against the majors early on than weak in the second half. - I mean, do you-- I remember when we actually work together a bit in 2013, 14, you mailed. I mean, you got a huge pivot point. I mean, I know we're talking a lot about trading. But you got a dollar yen hit point and you identified that. - Yeah, in fact, I convinced George and Scott Besson, the, you know, that they should have a big position as well. And they did a great job with it also. And, you know, we just, I told my investors that time to look, every 10 years of the trade of the decade comes along and dollarium was the trade of the decade. And the reason it was, it was a wonderful level of investment was at one, basically, to the dollar. They were intervening on the lower side to protect it from strengthening further. And we knew that the new, I used to go meet the central bank governor of Japan every year. As sure as Kawa was his name. And he ran very tight, probably was like a Bundesbanker. And he was in a deflationary environment and economy was crazy. But he'd want to talk to me because I could talk about the world to him. And he loved being, you know, educated on what was going on in the rest of the world. And he spoke great English. So the meeting was in English. And it was fantastic. I got to go see him once a year. But he was, I knew he was leaving in April of '14 and '13. And that was going to be a big change in monetary policy. And that was me, the reflection of policy was going to be the driver of dollarium much higher. And then Abbey was running on a reflection of policy. And he won. And we didn't know he was going to win, but that just had a fuel to the fire. So that just made an amazing trade. But then two years ago, I said Argentina. And now Argentina is the trade of the decade two years ago. And let's play it out very well. So-- Are we still-- Are we still going to be in the decade? And now I think it's a solid trade now. But when you look back, you'll say, wow, from that point forward, it was the trade of the decade. So it's still great solid returns to have an Argentina. You should definitely have exposure there. But if we look at loses in Brazil and if Tarsissio, the governor of the state of St. Paulo is the candidate, and he wins, Brazil will be the next big, big, big trade. But now they've got everything. Everything. Yeah. I mean, it's in Brazil, almost 15%. I know. Imagine you can make 500 basic points in Brazil. I mean, here we're fighting for 50 basic points in the US or Japan or Germany. I mean, not at chicken feet compared to what you can make as somebody's EM. But you can also lose the time. I mean, rates can move fast. And we were paying rates last year in Brazil. I mean, a lot of money paying rates, even when rates were 13%. And they backed up further. But again, it gums down to leadership, policy, and Brazil. If they get the right leader in there, equities will scream. The currents will rally quite a bit. Rates will come down to a tremendous amount. So you'll make-- they'll be the best rate market of the world, the best currency in the world, and the best equity market. That's a-- I'll definitely watch that one for sure. But it is amazing. I know everybody knows it. But I always think about Argentina in 1900. How it was the same GDP as the United States. Right. And what was the difference, really? Policy. Policy. Correct. Policy in leadership and system and institutions. Yeah. Yeah. Because it strikes me that the Trump administration and the destabilizing effect is having-- It's good and bad for the world. So far, we all think it's been good because of-- I don't mean it politically. I mean, more from an economic growth is definitely picking up. And so that's-- and they're all about business. And oil prices are low. And that's a policy choice. Do you think, though, that like-- I know you know Scott Besson. I know him as well. They've had this view for a long time that they're going to have this boom in high paying jobs in the United States. They're going to bring all this production overseas. That part has not played out yet. And I wonder just your opinion as an economist. Like, how do you think if this could-- I mean, it just takes time. I mean, when you go around, you talk to the industrial parks in the US. They're all sold out. And a lot of companies coming in to build. So you just can't turn it all on the dime. It takes years to get a plant in place. So example is TSMC, but they're building an Arizona. And they're going to probably double the size of that thing now. Right. The latest announcement. But it takes multiple years. So it's coming. And it just takes time. So we'll see a lot of the fruits of that this year and in '27. I'm very bullish on that. And the core direct investment coming to the US I think will be meaningful. Right. By their strong army, people are crazy. But actually, it seems like people actually want to come here. But we'll see. Well, that's a good reason to come here. But they do have a policy of trying. And keeping US companies here, too, as well. But we have to be careful. We don't overdo it. Like some of the tariffs were overdone. I think like on steel and aluminum, stuff like that. I mean, you know, I'm from Pittsburgh. And you don't have much of a steel town anymore. But there's still some roots there. And it's a boom for the steel companies. I mean, you put 50% tariffs on other people. Oh my god. Wow. Well. But they raise price. I mean, the first thing you do is raise price. And what happens is the big consumers of steel then it hurts them. And there's been a few companies. I think that's how they go overseas to produce, even though they're paying tariffs now, because their inputs, if they're still the high cost of your inputs, you can't compete. View on shift gears just a little bit. I just love to talk to you about, you know, I read one of your letters that you think the markets are getting less efficient. Yes. Prices are not discounting things until they actually happen. And why is that? And you know, we're more aware than ever. Well, first of all, a lot of passive money, right? So passive money will react. And then there's a lot of money run by machines. And that reacts, reacts to headline news. And so very few people are discounting what's going to happen and predicting what's going to happen. So it's a huge advantage for us. As I say, I think the markets are more dumb than they've ever been. You just need-- but that-- you have to have patience and you have to have staying power, because crazy things can happen. And you've got to have commitment to it if you think that's the right thing. So it creates more volatility, also, I think. But if you're one of the great things about having all the Vanessa classes and investing around the world, we can be wrong about something. But you don't even hardly notice it, because we make it up in other places. So it helps damper volatility a lot in our portfolio. By having the diversification we have, regionally, asset classes, it really becomes-- when I talked to some of my colleagues, ex-tiger colleagues run equity funds, just long and short, they're like, Rob, man, you got so many advantage or risk issues. You can see the interesting thing, a current, choose or rates. If there's nothing we can't do, we're stuck in just equity market. And you're doing it globally and we're meaning to invest. And it's just a huge advantage for us. And we'll just take advantage of it. So it's a great time for discovery. But it is another thing you have that a lot of-- I've never seen equity guys own a stock and then short it. It's very hard to do that. You guys have a very unemotional. I mean, if you're long the dollar against something, and it goes against you, and you change your view tomorrow, you don't just get out, you sometimes can reverse it. You talk about your team all the time. discovery and I know a bunch of people worked for you over the years and I'd love to hear you know how important it is and why it's important. Your consistently knows a pretty good boss. There are a lot of people who work 23 hours a day but like from top to bottom I've heard that over the years and it's a gendered a lot of loyalty and what does it give you? I mean besides being good karma. Yeah, you know as I mentioned before the average analyst has been 15 years now at discovery so you know we just know how to work well together and that teamwork is really important. You know I know what their strengths are they know what my strengths are I know what their weaknesses are they know my weaknesses and you know what like when we hire a new analyst it takes one or two years to really kind of get to a level where the productivity is what it needs to be and you're on the kind of same page and producing the kind of returns that you want to return to get so you know we have a really experienced team that's been together for a long time we've had a lot of people in discovery history who go on do something else and then come back and we just rehired Sean Kim who does semis and a lot of stuff and also in Korean Taiwan and Japan and such an important time for that area and you know I felt like well you know we need to add a little bit more technology outside of the United States and so that's what that's what we've done so and you know having known him for you know almost 20 years is huge advantage so I know what you know we immediately you know hit the ground running it just real quick because a lot of people seek out your vice-investing and I people ask me all the time I want to be a macro investor and how do I do that and I mean I have no idea right I mean it's a very circuitous path to become a macro person but I've heard you say you got to do things well you got to have passion for it what else do you think I mean because it you know it takes a lot I think you really should study economics there's no doubt about it I mean you know it's not micro and macro I mean macro for sure but micro also I think I just give you great framework to think about things and then the other thing I think you know you have to focus on politics so you want to take in an understand politics and what in policy so all those things fitting together are very helpful so actually it's crazy I think a liberal arts education is a great undergraduate education is a great way to start it and I don't know I was hoping you wouldn't say it because it's so hard they don't recur the way they did from the the English majors or the history majors to come to Wall Street I know I know but if you have economics and some history and stuff I mean it's a huge advantage especially going into macro investing we have to understand numbers and you know things of that nature as well and markets a little bit but the other great thing is that you know if you have a passion for investing you know what I got started actually is you know is as a kid having a couple of jobs working hard in high school and my dad said you should invest your money and I said what does that mean and he said well you know you should you know you should take your money and now back then when I would rates were like 15% so I just put in the money market and the but the rates are to fall I said well I'm going to take it from money market to mutual funds so put the money mutual funds and then you know I said well I like following these stocks I started buying you know a lot of money I was buying you know one share of this one and I was following the stocks back then you had to like follow the newspaper you didn't know the next day what was happening but I said well I love doing this so then I knew when I went to college I really wanted to be an investor I'm not knowing about hedge but they didn't really kind of exist back then but that's that's passion so I would recommend people to start investing whatever money they have put it in right and then curiosity you gotta have that right yeah 100% 100% and because you're learning all the time and when was the every day I learned so much and I I felt like I have a front row seat to the world it really is I mean the amount of contacts that I have globally and a kind of comfort it caught discussions I have and things we talk about are phenomenal I had these single best conversation ever I've had on Taiwan China a couple days ago she has a incredible you see a lot of people talk about different ad rules or generals or something this person man I thought wow that opened my eyes and ways that I was like wow and she knew so much about the actual specifics that I was like it scared scared me for the next the something's gonna happen there in the next five years man it is that I think we're in a bull market until China invades that one or something big else happens something big has to happen for I think that's the knock us off the the bull market which will probably last another couple years doesn't mean we're gonna have a big up and down like I think this year can be a big up and down big up and beginning and down and maybe it only ends up a little bit on the year but I think we're still on a bullish trend global sort of especially globally but I mean that's it's interesting you know you have a conversation that can change your view for a year right and that's that full core press of constantly pushing and pushing yeah yeah it is not necessarily like going to a place and talking to the cab driver and talking to a waitress and then all of a sudden getting a view it's just the consistency over time and you know talking to locals when you're in different countries you know is helpful to hear the person in the street and what they think but you can't just talk to one person you got to talk to many of them well it seems like to be macro is pretty it's it's a game on a macro that's for sure because it's kind of a gun it's going to be in the next five to ten years of really exciting opportunities macro both long and short so you know I know again we don't talk much about the short side but man this can be some great short opportunities also I mean I've seen you go net short though you don't have to I mean yeah so we most people just have it to get the feed right well Rob it's such a pleasure to talk to you and I could talk to you for another hour and learn some things you're well best to you and thanks for doing it thank you same to you happy new year and really a pleasure thank you for supporting the 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