'Whatever They Say, The Opposite Happens' - Fed Meeting Reaction With Nancy Davis

Nancy Davis, founder and portfolio manager of Quadratic Capital Management, joins The Julia La Roche for episode 166 to react to the May Fed Meeting and the Federal Reserve's decision to keep rates unchanged.
In this episode, Nancy shares that inflation is a persistent issue that cannot be easily resolved. However, she sees this as an opportunity for investors, as many people do not have inflation-protected bonds or exposure to the rates market in their core bond portfolios. Nancy notes that during the last period of high inflation in the 1970s, people often turned to commodities and cyclical equities because the interest rate derivative markets, rates market, and even the inflation-protected bond market did not exist at that time. She adds that investors now have more options to protect their portfolios against inflation compared to the past.
Links:
IVOL: ivoletf.com/
Quadratic Capital: quadraticllc.com/
Twitter: / nancy__davis
0:00 Intro and welcome Nancy Davis
0:59 FOMC reaction
1:22 Fed allowing mortgages to run off
2:30 Volatility, explained
3:15 Fed interest rate policy
5:19 Be really careful about not focusing too much on consensus and looking more at what's priced in.
5:59 Rate cuts this year/ inflation exposure in investor portfolios
7:36 Opportunity in rates
10:49 IVOL (Quadratic Interest Rate Volatility and Inflation Hedge ETF)
15:48 Rates market a leading indicator for you
18:04 Macro picture
19:47 Inflation protected bond market
22:45 Inverted yield curve
24:13 Bonds a good buy?
25:18 Will the Fed cut this year? Will they cut before the election?
26: 22 Assessment of the Federal Reserve/ stagflation?
29:03 Nancy's background
32:40 Parting thoughts
#inflation #investing #interestrates

[@hardoc2988]

"We are both blonds." That hairflip got me. She made that interview kinda funny.

[@TheJuliaLaRocheShow]

We do have more fun!

[@hardoc2988]

@@TheJuliaLaRocheShow Yes you do. I was like "did she just flip her hair?" I actually had to stop the player and rewatch haha

[@25Soupy]

Well...not real blondes.

[@tactileslut]

7:48 as blonds you _do_ live in make believe Barbie world. If you are seen on a sidewalk, bleach and clothing intact, you'll get much better treatment than would someone with dark hair or God forbid a Y chromosome. Way to flaunt your privilege.

[@brinstar]

Lady Gaga sure knows a lot about money

[@PCGamer77]

She's made enough of it...

[@michaelstock9351]

She is so knowledgeable that I had to stop and rewind several times. Great interview

[@mswald]

found this tremendously informative. Thanks Nancy Davis for these interesting takes on the confusing times/market in which we operate.

[@detectiveofmoneypolitics]

Economic investigator Frank G Melbourne Australia is following this content cheers Frank

[@rivendell67]

In my opinion, since I started watching your show, I have thoroughly enjoyed it. I'm not the sharpest tool in the shed, but it is great to listen to so many different people in every spectrum of the financial sector and markets and hearing their side of the story. Your line of questioning is spot on and really makes the conversations worth listening to. Thank you. Blessings.

[@leslieindenver716]

Probably my favorite Nancy Davis interview, well done

[@CK-ie4hp]

Yup very reliable strategy to follow, the opposite is always true

[@bradleyqueen3879]

Been that way for a few years.

[@CK-ie4hp]

@@bradleyqueen3879 agreed

[@lesleyjohnson8488]

I went right out and bought IVOL after watching this!! This was the exact ETF I’ve been looking for. Thanks a million for the interview with this amazing human ❤

[@bilbobaggins4462]

First comment! Thanks for all you do Julia!😊😊

[@TheJuliaLaRocheShow]

You are so welcome!

[@AK-pg2ud]

Right on Bilbo Baggins

[@fredcrossman5133]

Wow, is she smart. And very humble. Dont see that combo very often. Great interview. Great guest.

[@byronfuentes1281]

Spoiler alert, inflation volatility introduced 33 minutes into the vid... we get to peek behind the kimono., and it is so beautiful. Great interview Julia

[@davidcpugh8743]

Well, this person definitely likes bond volotility. She also reminds us that the Fed has problems of consistency.

[@vallmak]

Two pretty blonde girls talking finance. This is life!

[@ivanfig1]

I thought she was saying eyeball. Didn't realize she's saying ivol.

[@jamesbowman1767]

Smart guest. And pretty. Why can't I find someone like her in real life?

[@dazedhavoc]

Stocks only go up.

[@bradleyqueen3879]

For now.

[@tactileslut]

I trust well managed companies to grow faster than whatever the gov offers directly; they have to outpace or die. Gov has no incentive to perform.

[@thehungergames8918]

❤❤

[@Zanzan8]

Beautiful smile Host

[@TheJuliaLaRocheShow]

🥰

[@kameskettles7233]

Julia and Amy Nixon are still my favorite blonde Duo

[@TheJuliaLaRocheShow]

Hey everyone! I hope you enjoy this episode featuring Nancy Davis, founder of Quadratic Capital Management. Please join me in the comment section with your feedback. Also, shoutout to Patrick for recommending Nancy as a guest. Who else would you all like to see on the show? Let me know! 💙Julia

[@dannypowers4995]

These interest rates are normal, not high at all . People got spoiled with rates near or at zero.

[@jimsullivanyoutube]

OMG I find her so hard to understand. I need an interpreter. She's so smart. I wonder if she could dumb it down a lottle for dolks like me.

[@jcgoogle1808]

You give her far too much credit. Either this lady is 1. clueless and just has the company script memorized or 2 she's just absolutely terrible at explaining things. About 24:00 for example She says you wouldn't want to own longer duration bonds at 4% and change if you can get T bill for 5.4%. Well no,.. not if you don't understand how bonds work. You buy the longer durations bonds if you think interest rates will go lower in the future. When they do go lower, they will drop faster than you can react to it. When they do go lower, you make a huge profit on the bond price. I'm not going to go into details and examples,.. but a Zero Coupon Bond Price, which changes with changes in yield is mathematically,.. not just a guess or an approximation, but a hard mathematical fact equal to; Bond Price = Face Value / (1 + yield ) ^ Term. To anyone who isn't a victim of an inner city K-12 public edumacation system and/or didn't get one of those waste of time liberal arts degrees from one of those far left university indoctrination diploma mills,,. you can play around wit the equation and see how yield and duration impact bond prices. It will show how much you can profit off the change in bond price with a very small 20 bps to 100 bps drop in yield. We know we're at peak rates,.. it's just a matter of time before rates are dropped. Even if it takes a year or 2,.. collecting nearly 5% on a no risk 20 year bond is about 3/4 ths the amount of the average the S&P 500 returns per year with very high risk and volatility. I mean it could drop by 50%. Of course there is risk if the yields rise on the bonds,.. but the whole world is waiting on the time for the Fed to proactively drop rates or with the higher for longer reactively dropping rates when they break something. For this lady to say you don't want to own bonds is just a very myopic or clueless statement.

[@jimsullivanyoutube]

@@jcgoogle1808 Thank you! Any suggestions on how a newb could learn more about bonds?

[@johns4412]

@@jcgoogle1808 Or you're clueless

[@johns4412]

@@jcgoogle1808 Have you any idea of this lady's background. Nancy was Head of Credit, Derivatives and OTC Trading at Goldman and yet you question her understanding of bonds! Her IVOL product gives exposure to changes in long-term interest rate movements via options on rates. I suspect this strategy is well beyond your understanding so maybe keep your dumb commentary to yourself

[@lesleyjohnson8488]

Read Nassim Taleb’s book Antifragile. It will help you understand. Follow that by Mark Spitznagel’s incredible Dao of Capital.

[@acornsucks2111]

Jerome is trying to save the dollar from the Dems spending.

[@Horatio1886build]

Yes exactly. Splain

[@bootcamptrader]

less jargon

[@carlyork6024]

Nancy’s a tough watch w underperforming products she doesn’t explain well

[@timothyrday1390]

The Fed should just be bold and cut at this point. The economic data is already showing weakness and the Fed will be behind the curve yet again.

[@acornsucks2111]

Did you ever hear of inflation?

[@user-kl8jx5qe2p]

Julia, love your show, but this just difficult to listen to. Some people, like danielle dimartini booth, they have so much in their head, so they start a new thought process while they have already started a sentence. makes is hard to follow.

[@leeburnes3116]

IVOL might be the worst performing asset out there. Why buy IVOL when you can buy SVOL... Simplify, much better asset management firm

[@jimscherer8072]

Too much ag and vol

[@rudeawakening3833]

Actually Jerome Powell said - “ I’m not thinking about thinking about cutting rates “ But I love this show , and you two are totally HOT !

[@BlackMan614]

Is that like "think about what you think about"? Two geriatrics who belong in the nursing home - not leading a hapless country.

[@user-ly8zk5gw9x]

She says “right” and “like” too often.

[@jcgoogle1808]

Either this lady is 1. clueless and just has the company script memorized or 2 she's just absolutely terrible at explaining things. About 24:00 for example She says you wouldn't want to own longer duration bonds at 4% and change if you can get T bill for 5.4%. Well no,.. not if you don't understand how bonds work. You buy the longer durations bonds if you think interest rates will go lower in the future. When they do go lower, they will drop faster than you can react to it. When they do go lower, you make a huge profit on the bond price. I'm not going to go into details and examples,.. but a Zero Coupon Bond Price, which changes with changes in yield is mathematically,.. not just a guess or an approximation, but a hard mathematical fact equal to; Bond Price = Face Value / (1 + yield ) ^ Term. To anyone who isn't a victim of an inner city K-12 public edumacation system and/or didn't get one of those waste of time liberal arts degrees from one of those far left university indoctrination diploma mills,,. you can play around wit the equation and see how yield and duration impact bond prices. It will show how much you can profit off the change in bond price with a very small 20 bps to 100 bps drop in yield. We know we're at peak rates,.. it's just a matter of time before rates are dropped. Even if it takes a year or 2,.. collecting nearly 5% on a no risk 20 year bond is about 3/4 ths the amount of the average the S&P 500 returns per year with very high risk and volatility. I mean it could drop by 50%. Of course there is risk if the yields rise on the bonds,.. but the whole world is waiting on the time for the Fed to proactively drop rates or with the higher for longer reactively dropping rates when they break something. For this lady to say you don't want to own bonds is just a very myopic or clueless statement.

[@acornsucks2111]

Take all the time you need.

[@kameskettles7233]

Don't forget to set the table

[@lesleyjohnson8488]

Wow. Not sure you understand nuance. Watch that again. Notice how she is talking about ‘spreads’. That should help.

[@jcgoogle1808]

@@lesleyjohnson8488 WOW! Nuancegirl. Are you blonde too? LOL It wasn't about "spreads". Let me help you out. 24:15 and 25:00 "Not getting compensated for buying a bond" paying 4.9% (with huge convexity vs 5.4% with no convexity)????? Are you serious? Not once does she mention "spreads" in this part of the discussion. Do try to keep up.

[@jcgoogle1808]

@@TheJuliaLaRocheShow You're the host whose job is to get useful information out of the guest. You're not supposed to be the expert. The guests are supposed to be the experts and able to communicate and explain without everyone saying "huh?" when they're done. When you interview Jim Bianco and others like Danielle DiMartino, Alf Peccatiello, Hugh Hendry (aka the Mick Jagger of economics), even Steve Hanke, a disciple of QTM who believes M2 is the sole driver of inflation .. all really sharp top experts,.... the viewers (and you) aren't left with the thought,... "wait,.. what did they say?" especially after you ask to have them clear it up.