Jay:  This week’s show guest is Chris MacIntosh, founder of Capitalist Exploits, an investment community with over 30,000 members dedicated to finding asymmetric risk-reward investment opportunities. Chris founded and built several multi-million-dollar businesses in the investment arena, including overseeing the deployment of over $30 million US dollars into venture capital opportunities and advising family offices internationally. Prior to this, Chris built a career in Invesco Asset Management, Lehman Brothers, JP Morgan-Chase, and Robert Flemmings. Let’s get on to the show.

Hey, Chris. Thanks so much for joining us. We’re eager to hear your perspectives on global investing, so thanks for coming on.

Chris:  You’re welcome, Jay. I appreciate the outreach, and I hope we can bring something to the table.

Jay:  Absolutely. I think you have a unique perspective that a lot of our audience members will appreciate. Maybe you can give us a quick background on who you are and how out came up.

Chris:  People often ask me, “Where you from,” or, “What are you?” I guess I’m a thoroughbred mongrel at this point. I’ve lived in seven different countries. I grew up in South Africa. When I look back and think, “What are some of the formative things that took place in my life,” one of those was my upbringing. I grew up in a middle- to upper-class environment, and I say that with respect to the schooling that I went to. However, my parents were decidedly not middle- to upper-class. There was always this disconnect between my peer at school and what we were experiencing at home. My parents didn’t ever have any money. They seemed to be completely broke all a time.

That was actually one of the best gifts that I’ve ever had — this realization early on that I needed to get my own sh*t together, and there wasn’t going to be anything there to get me through college or anything of that nature. And a strong desire to try to figure out the world was always deep in my mind.

I left Africa two weeks after I finished high school. I was fortunate enough to have a foreign passport, so I went and worked in London. The reason I went there was two-fold. One was because I had a desire to figure out the rest of the world, and the second was being I needed some money, and I also wanted to study. I studied law, but I couldn’t afford to do so staying in South Africa. The starter student loans, unlike much of the Western world, are structured — I don’t know what they’re like now — but they were structured in such a fashion that they were just like any other loan where you pay back every month. So I was in a situation where I would have to borrow a whole heap of money, and within four week’s time, I’d need to be paying back that loan.

Interest rates at the time were exceeding 20%. I did the math, and I realized very quickly that this was just not an option.

On the other hand, going and working in the UK, I had the ability to earn strong currency, and I could still study via correspondence. So I would basically work all day and then study until 1 or 2:00 every morning at night by correspondence. And I could pay for all of my education in… I can’t remember exactly what it was, Jay. I paid for an entire semester — all my studies, all my books, everything — with like maybe a week’s pay. It might have been even less than that. So financially I was on the up and you’re young. When you’re young, you don’t need to sleep.

I did that, and then I was very fortunate to actually be at a juncture in history that was fortunate for anybody that was involved in finance. I had this belief or this idea that I wanted to do law. And that was actually just on the back of reading too many John Grisham books when I was a teenager, which I then realized that wasn’t quite what I was after, and I became very interested in the finance and economics and history side of things.

And then I got involved and managed to get some work in the investment banks which, at the time, remember this was mid-to-late ’90s when we were really just getting into that dot-com boom. The banks were printing money, and they were hiring pretty much any idiot. And I was one of those idiots. So I managed, without a tertiary education — halfway through it — to be employed in the banks. I worked my ass of there.

I was quite fortunate with a mentor who realized the potential and took me under his wing. I went from Lehman’s to what was called RF & Co, which was the last-standing British investment bank which was then subsequently swallowed by Chase Manhattan, which was then swallowed by JPM, and they became JPM-Chase. So I went through that whole transition with all those banks with one boss, essentially, and got promoted all the way through very, very quickly. That was how I got involved in financial markets.

But for over 15 years I’ve been an entrepreneur. I’ve been doing my own thing. And that came on the back of that very same boss literally turning around and saying to me, “Chris, you really shouldn’t be here.” What he was saying there was that my mindset was one that was not going to work in a corporate environment. I always questioned everybody. I don’t care if they’re close to the big boss. I wasn’t trying to be a belligerent little snot. It was just that I had curiosity, and I had a desire to figure out to truth.

I also realized a lot of things in that space. We were working with fund management. RF & Co were one of the major fund managers, especially in emerging markets. So I was dealing a lot with fund managers all around the world. One thing that really struck me was that in the institutional space, there is this outsourcing of responsibilities that takes place. And I think it’s just prevalent in many large corporate cultures where people basically act like sheep.

We’ve got valuations, we’ve got all sorts of things that don’t necessarily make sense, and you question them. These guys literally just look to following the herd, and they justify their positions according to what everybody else is doing. You understand it because come Thursday night, everybody goes to the same publ. It doesn’t matter if you’re at Deutsche and Joey down the read is at Lehman’s and Freddie up the road is at Bear Sterns. They all basically congregate in the same little pool of pubs. At least that’s what it’s like in London.

So the thinking process tends to be very similar, and you get a herding mentality. I always had this belief that in-depth research was done, which sort of is but not to the way that you think it is. And that’s also why you have these market events where people get called out. And you look and you think, “Sh*t. That was Goldman Sachs, and they just got hammered. How did that happen?”

The reason behind it is because the fund managers in it often are needing to present quarterly results, and if they don’t get those quarterlies out and they’re not beating the market on a quarterly basis or at least track the market, then they get redemptions of capital, so they just end up being trend followers as opposed to actually trying to identify real opportunities because you’re forced into that bucket. It’s not just an institutional problem. At least you’ve got a fund like the fund I run now, is basically small money that I know, so the guys don’t redeem, and they know what the strategy is. So that’s cool.

But when you’re dealing essentially with bigger pools of capital where you don’t have that relationship with your LPs, they’re comparing you to everybody else, and they’re just going to pull their money if you have a quarter that’s not as good as they want it to be. So you’re forced into basically following everybody else just so that you don’t fall out of favor.

That was an interesting education for me around that space, and that’s one of the reasons that for many, many years, I refused to set up a fund, and I preferred to just run my own capital.

But the thing that got me really involved in what I’m doing now was this event back in ’98. I think I was at Lehmans, and all of my spare time I was studying markets, and I came across the oil market. And I was researching and diligence-ing in depth until the early hours of the morning and then discussing these markets with oil traders and things like that at the bank, and I came very much hard down on the idea that oil was massively underpriced. I was as convinced of this trade in my own head as the pope is that there is a Christian God or that Hillary Clinton is that Russian hackers stole her election. I was convinced.

And this is important because I was in my late 20s, and I took my entire life savings, which at that point was just a few thousand pounds — because remember I was still paying for education and so on. I took all of that, and not only did I just invest it in an oil ETF, but I invested in option contracts.

You have to understand how option contracts work. They expire worthless unless you were right. So I was putting everything on the line. And then I had the absolute worst thing happen to me. It was actually the best thing that happened to me.

Oil, if you remember, back in ’98, was trading at around $20 a barrel, and in August of 1998, it bottomed at around $17. I bought two-year call options deep out of the money, two-year call options — deep out of the money staggered across different strikes but all maturing on a two-year timeframe. I did that when oil was between 20 and $22 a barrel. I think it was July I placed the trades. It August it hit just under $17, and then it did nothing but go straight up. I bought within a whisker of its all-time lows. If you go back and have a look, at was the decade  trade. From late ’98 through 2008 when we had the GFC, it ran from $17 to about $156. And obviously you’ve got leverage with options, and the deeper out of the money you are, the more leverage you have.

So my options were two years. And if you go back and have a look, two years, we got to about $46 to $48, and I let them run to expiry. It was almost like two years bang on. Come August it peaked. There was an intermediate peak. September-October it dropped back down, and then it carried on. Obviously, my time frame was literally August to August.

The long and short of it is that I took a few thousand pounds, and I turned it into six figures. I turned around and I was like “Clearly I’m a genius.” It worked out. It was a spectacular trade. Absolutely spectacular.

At the time, I was living in a house with a whole bunch of backpacker. I think we had 13 people living in it with five bedrooms. It was one of these extremely cheap accommodation things because that’s what I could afford at the time. Many of my roommates were pouring pints in the public and things like that. I never said anything to anybody because I didn’t quite know how to go home and explain to people that… I could have actually, at the time, bought a nice beautiful apartment in the Docklands, which I should have done. And I didn’t because I was clearly a genius.

So then the inevitable happened. Hubris took hold, and I lost 100% of that money. All of it. And spectacularly quickly. What I learned in the whole process was that position sizing matters. Firstly, I position sized incorrectly in that first year clearly, because it’s one every now and then that you get it completely right, and if you look, I could have had the same thesis two years earlier, and I would have been right that the bull market in oil was coming, but if I bought those two-year pulls, I would have lost 100% of that money because I would have bought at like $24, and two years later, it would have been at $24, thereabouts. And time and value would have eroded, and I would have lost all my money. So it was really important when I went back and analyzed the whole thing that I realized that I had just been completely lucky, and I completely over-positioned in that trade. It was just a really good lesson.

It was a fundamental lesson to make all that money and lose 100% of it, which just destroys you, and you sit there and think, “What is going on? Why am I so bad at this?”

Those were some really super important lessons for me in my early 20s around a couple of things. I learned that homework pays off. If you do your homework, it was pay off. Position sizing is really crucial. And then structuring the trade… I could have structured that trade, again, two years earlier, but if I had position sized correctly and then put on a trade where I didn’t have a time problem — because you can identify a trade and an opportunity, but none of us actually know when that’s going to turn. You can use charts, and you can use all these things that can help guide you as to when you have a turning point in the market, but I’ve been doing this long enough to know that there is no crystal ball. So you want to try to run a proper portfolio.

What I should have done is probably put a much, much greater percentage into something like an EFT, and I would have made a killing. I still would have run from 20 to 150, and I could have had stops and that kind of risk management in place, and I would have caught this massive trade, which you literally only need one trade like that through any cycle, whether it be a business cycle or credit cycle, and you can do extremely well.  I learned a lot of lessons in that.

And then I left the corporate world. I went off and built a real estate business. I saw opportunities in that space. Again, I was just looking at these trends and credit markets and valuations and all sorts of stuff. I literally leveraged the hell out of my balance sheet

Jay:  Which countries were you looking at real estate in?

Chris:  Australia, New Zealand, where I’m sitting right now, were the main places, a few dabblings elsewhere, but those were the critical places because I was on the ground, and I could manage what I was doing. And then I began trading.

I realized in the real estate market you could just trade it like any other contract, like I had been doing at the banks. So I would create option contracts. As I could see a boom taking place — I’ll give you a quick example.

Any time you’ve got a large land mass, if you chop up that land mass, you create more liquidity. Take Hong Kong. Let’s say Hong Kong Island was completely uninhabited. It didn’t have anything built on it. That would be worth a particular figure. Let’s just pluck a number and say it’s a trillion dollar. That’s probably quite close.

You could chop that up and you chop it up into 1000-square meter plots of land which can now be built on and you can have tower blocks and all that kind of stuff. The aggregate of all of that is much, much more than a trillion because you’re actually just creating liquidity because you and I can’t go in and buy Hong Kong Island. It’s too expensive. Who can buy? You’re talking about big, big money, sovereign wealth funds — all this kind of nonsense. However, when you chop it up into smaller pieces, we can go “Oh, yeah, we can buy that.” Or we can clump together some buddies and we’ll go develop a particular piece of land. Then it creates much, much more liquidity. I was identifying growth trends of that nature.

I would go out and essentially go out and do all my due diligence on a particular area, where infrastructure was going in, and I’d try to front-run infrastructure and then go in and speak to farmers, for example, and say, “Hey, I want this particular piece of land, this paddock that you have cows grazing in, and what would you give it to me for?”

Then instead of just putting down all the capital the buying 20 acres of land, I would say, “How about you give me the option to buy that land over the next five years. Instead of me paying you $500,000, I will pay you $20,000 upfront, or 25, for the next two to three years. If I don’t settle on a deal, you get to keep the 25 grand, and if I do, then I agree to buy it for $500,000.”

So then I do that, and then I go off and I’d get developers. I had basically done all the development work, so I knew what the metrics on that land looked like from the developer’s perspective, so I knew how they would value it. And then I would just go and pull them in. I’d go, “Hey, guys. I just found this piece of land,” and then I’d auction the contract to them, and I would sell it to them for like 800 or $900,000.

So I was doing as well as building up a portfolio, assets, and things like that. And then I liquidated the entire lot in mid-to-late 2006 and went back to just spending time thinking about the world, thinking about global macro markets, which I had always loved and I’d gotten away from because I was just so busy doing my stuff.

Jay:  Is the reason you stepped back from the real estate thing, you were just bored with it, tried of it, too much work, or you just wanted to step back and focus on just markets and the world.

Chris:  It was more just a matter that the opportunities were just much, much more difficult to come by. It was a three-year fun. I’ll give you an example. When I first started, I was going out and buying what I call sh*t-box houses — just these little three-beddie things. I could buy them, rent them out, and cover all of my expenses just for the rental income. On a yield basis, that’s buying stuff between a 12 and 15% cap rates. Finance rates are about six, six and a half points. So I was cashflow positive on all the stuff, and I would just keep refinancing. So I had huge leverage, but my cashflows were strong. So I could weather the cashflow problems. At the same time, I would trade like the example I gave you. And then I’d take that capital that I made from trading and just dump it in, reduced it. So I was building a lot of equity and increasing cashflows all the time and just keep kept recycling.

From my upbringing, I saved diligently, and I’ve literally always done that. I’ve always saved between 50 and 80% of everything I’ve earn. I saved. I just loved to make sure that I could live on 20% or between 20 and 50%. It keeps you growing your wealth much, much more quickly, and it also keeps you humble.

I live in a very nice area, but the people around me have all got million-dollar mortgages. They drive Porsches and things of that natural, but there is a huge amount of debt. I like a Porsche, but I don’t have a Porsche yet. I just want to make sure that… If I can keep all of that at that level where I’m only spending 20% and I’ve got no debt, then I feel much more secure with that. And I know that all of my capital is going towards making me stronger and wealthier as opposed to just buying stuff.

Jay:  Depreciating assets.

Chris:  And it gives you that temporary boost, and you feel good. It’s like an ice cream. That was really good, and then you get fat.

In the real estate market, the cap rates essentially went from 12… I was buying them net 12, gross 15 often, and they went all the way down, Jay, to four. And that was because real estate literally up three or four times in value. So my equity had risen, but my cashflows hadn’t gone anywhere. The cashflows were still doing about the same.

At the end of that… Cashflow is king. So I couldn’t find that many opportunities in terms of actually buying to hold anything. I stopped and I thought, this doesn’t make sense. This no longer makes sense. And then I had gone into commercial, and I’ve seen commercial investors buying commercial real estate with finance rates because, remember, finance rate in commercial are much, much higher than on residential. And your leverage ratios are more stringent. And I was seeing stuff going out the door at four, four and a half for not prime commercial. And finance rates on commercial were seven, seven in a half.

And I was like “Who the f*** is buying this stuff?” Of course, it’s been the ol’ game of it’s going up 10% a year, so it’s going to keep going up 10% a year. That might be the case, but you’re taking on risk and, again, position sizing. I just felt, something is wrong here.

I went to an event which was put on by one of these so-called gurus in real estate. A friend said, “Oh, you should listen to this guy.” I went up there and I listened to what he had to say. He stood up on a stage and he said, “We will never again, in this country, experience cashflow real estate.”

And I just sat there and I thought, “That is the most asinine comment I’ve ever heard,” because this guy has just hasn’t read any history. I literally drove back home, and on the way I contacted brokers, and I just put everything on the market. I liquidated an entire portfolio — millions and millions of dollars of real estate — within about six months.

Then I sat on the beach going, “Okay, what do I do with my time. I can’t play golf. I’m sh***y at golf, and I don’t want to retire, so what am I going to do?”

I spent a lot of time researching, reading, traveling. And then I realized that there was this shift of capital going from the public markets into the private for a whole host of reasons. One of those was regulatory. There were a bunch of reasons. And I wanted to participate in that. So I started off doing a bunch of angel investments, early-stage stuff. I did that for like two or three years, and then eventually I got to the point where I bumped into another guy was got introduced to me. He was a marketing dude. He basically said, “Wow, I love what you’re doing. This sounds fantastic. I could sell what you’re telling me.”

I was like, okay, what does that look it? So that was the beginning of the blog which I set up. Originally I wasn’t going to do anything. I was just going to do my thing, and then the marketing guy was going to market it. I come from the investment banking world. I had problems with the investment banking model because it’s very opaque. You often don’t actually know the underlying contracts that are in place sitting in private equity space. Who is getting paid what? Why? Who’s got a bias? Who’s got an interest, where, and how?

I had an unfortunate experience in a deal… I got involved in a deal where there was an investment banker that was helping raise capital for the deal, and the structuring of all the contracts and the part of the management of equity and share options and all that kind of stuff, he would need to handle that, and he didn’t really have that much expertise in it. The long and short is that I did all that work. I structured all the deals. I helped raise capital. I did all the stuff, and the deal worked out really well, and I made about three times my money within about two and a half years. But the investment banker more money on the deal that I did, and he never put a cent in. And that just pissed me off.

Then I was like if I’m going to do something, I’m not going to do the investment banking model because it’s like the old deal. Like “You bring me a deal, Jay. That sounds like a good deal. How much are you putting in? Oh, no. I’m not putting anything into this.” You’re not putting any money, why the f*ck should I put my money in?

So I didn’t want that model.

I set up a business where I said I’m putting my capital at work. What I want to have is a situation where I can bring more capital to the table because it gives me leverage. Let’s take that piece of real estate in Hong Kong that we want to develop. And I’ve got a million bucks. You’ve got a million bucks. But this thing is going to cost us 20 million. We’ve got to pluck people together.

If we go to the owner of the real estate at the moment, we could ask him for terms and finance and all this kind of stuff, and it might cost us $20 million, but if we can come in with a cash offer and we can do a whole lot of other stuff, we’ll get it for 18. We just saved ourselves two million dollars. That’s worth doing.

So if we can pluck together that money, we can get ourselves a better deal for all of us.

That was the premise that I built a venture capital business on. We did that for a number of years. I exited that back at the beginning of 2016. I had seen a whole lot of things taking place. We were financing deals at a beginning, kind of apples-to-apples, five-million-dollar pre-money. Today those deals are 25, 30. It’s the same deal. So valuations have just gotten wacky, especially in the Silicon Valley space. So for me to get a return… We’d look at really risky stuff. So you’re going into early stage VC, you’re realizing that 60 to 70% of these things are just going to vaporize. It doesn’t matter how good they look, they’re going to go away.

Jay:  I think that’s even generous. It’s probably higher.

Chris:  And that’s doing your homework. Then I needed to have a really decent return. And if I’m investing in a company at 25 million pre or 30 million pre and I don’t really have the going idea… I’m like, for me to get a ten X, this has got to become a 100 to $200 million company. Is that realistic? You start doing the math and you’re like “This doesn’t make any sense.”

So I wanted to transition that whole business, which is too difficult, with the way it had been originally structured. I had already begun doing a lot of the stuff that I’m doing now, and so I slowly transitioned, and then I just cut it off. I said, okay, no more of that, and I literally gave the business away to the guy that I founded it with, which kind of shocked him at the time, but I needed to do what I wanted to do.

So I set up a fund around now, and then about a year later, I set up the advisory service that I’ve got, and it’s really just trying to identify these major trends. If I go back and look at what has been successful and what has been unsuccessful in my career, I realize that one of the things that I managed to do, luckily, was identify major trends and get behind them. Because you can be lazy. You can really cop out and still make money if you’re behind a massive trend. You’re not that salmon swimming up-water.

That’s one of the things that we target now — looking for these massive structural shifts and trends and looking for asymmetry where the perceived risk is much higher than the actual risk, and then just positioning early and ensuring that you structure a new position size so I’m not like that kid when I was 20 buying oil contracts. You can buy oil contracts, but you do it with 1% of your portfolio, not 100%.

Jay:  Thanks for sharing your story. You’ve had a pretty wild and diverse background and experience. It kind of brings you full circle back to where you are now. Just a few comments. We were talking about fund management before. I absolutely agree with you, being at a fund now, the way they structure it and the need for quarterly, monthly returns — even annual returns — that time frame, putting a constraint on that, it really is counter to the craft of investing because you shouldn’t actually have a gun to head and be told “You have to make returns in this amount of time.” And that’s essentially what institutional investors are doing.

Human psychology is the same whether you’re a retail guy or you’re a large institution. You’re still chasing the same thing. That is one of the frustrations I have found working in the institutional asset management space.

Secondly, now that you’ve come full circle and are back to looking at trends and opportunities — I know you write a lot about it over at your blog and you say you have your fund — maybe you can share with the audience anything exciting that you’re looking at right now. Are there any opportunities that excite you within Asia that might be worth talking about?

Chris:  There is a long and short answer to that question. Let me try and go mid-stream. Without a doubt, I think the biggest anomaly that we’re sitting with today is that the last decade we’ve had, we’ve had central bank policies going directly against economic trends in motion. I guess the question you’ve got to ask is… The way that I think about it is what happens when you have monetary policy… Because monetary policy is affected at a political level. So if we go back and we have a look at the period post-GFC, one of the most significant — which is easily one of the most anomalist periods in central bank history — we had the US central bank, the British central bank, Japan, Australia, Canada — literally every developed-world central bank acted in unison and in coordination. That was, and still is, unprecedented in history.

So you had this period of time where central bank coordination and policy was essentially the same thing. We can debate about what brought that about. One of the main things that brought it about was if you look at the political leadership in those countries, it was fairly benign. The rhetoric coming out at the political level was quite muted across the world. The only one that I could say was probably not muted in that respect was China and Xi and Abe in Japan who are both strongmen.

But the interesting thing was that what Abe and Kuroda were doing anyway just happened to be the same thing that the rest of the central bank wanted to do, which was easy monetary policy. The opening of swap lines, all of those policy measures took place in an environment which basically everything went down the same route. That has led us to this bubble in sovereign-fixed income. You’ll remember back in July of 2016, the Swiss 50 went negative, and we had 13 trillion trading at negative yields.

And all of that was this environment which is very much conducive to one strategy. One of the things that I’ve been talking about a lot is looking at things outside of just monetary policy. We know what that looks like. Every analyst out there — all of your guys, all of my guys, all of my friends that I talk to running $100 billion funds, all that stuff — we all know what the mechanics of that look like. Poured over fed statements and all that kind of stuff… What people, I think, have been neglecting to look at is how a political shift which often comes on the back of shift, on the back of a populous that is actually simmering and building discontent underneath that political framework, how that then changes that political framework and then how that political framework then as a consequences changes the dynamics of monetary policies.

So if we go back and look at that, you have today political leadership which is not accommodative. It’s not accommodative in any way, shape, or form like it used to be. All you’ve got to do is think about the UK and Europe. It’s not what it used to be. We’ve had Brexit, which was something I wrote about. People were like, how did you identify that that was a real possibility? It was all these non-monetary type… It’s not something that you were going to pull up a statistic and go “Oh, yeah. Okay.” This is what it is.

If you look at the US and Europe, it’s not at all the same thing. Europe and Russia, it’s not at all the same thing. From literally five, ten years ago. The US and Russia — so you get the picture. That political environment is fragmented, and it’s been “strong” leadership that has been elected to power.

What happened in Brexit was they were actually looking for strong leadership. When I say “strong,” I’m using that as a term for… We can debate whether it’s actually strong or not. Hitler was a strong leader. Napoleon was a strong leader.

When a social structure is under pressure and it’s looking for alternatives, one of our major faults as human beings is that we look for a savior. We look for a god. We look for an individual — a man on a white horse. We look for — not a collective — but for something that’s strong, something that’s extremely decisive and often can be polarizing. That’s essentially what’s getting elected into power.

In your neck of the woods, you’ve got Duterte. Duterte is a perfect example of that. He’s a comedic one. Xi is a strongman. Abe is a strongman. Obviously Trump is a strongman. LePen…. Brexit, same thing there. They were looking for that. There isn’t currently anybody that you could look at the say, “Hey, that’s a strongman,” but that’s essentially what the society was willing to take and elect, and that environment gave them a ability to go, “Hey, we want some big changes. We want something dramatic.” And they elected it. At the time, there wasn’t anybody standing there who was saying, “I’m going to take up that mantle, and I’m going to run with it.” There is Nigel Farage who led that charge but then stepped back from it because he’s not wanting to be that strongman to run the country or anything of that nature, but he was the part of the leadership that was saying, “We want a change.”

So you’ve got these political structures which are changing the dynamics, and nobody is really paying much attention to the knock-on effects, the secondary effects of that. And so if you think about that sovereign-debt market and how it’s actually being held today, any time there has been any problem, there has been swap lines, there has been coordination. There has been policy incentives that have held it together. And I believe that world’s ended.

So the next time we see pressure on a system, it’s going to be a different outcome. So we’re very much focused on saying, “What takes place?” We’re looking for these events that could take place, that could have that breaking of the structural system that we have today and then saying, “What are benefits, and what doesn’t benefit? And how could we position accordingly?”

And then you dig into sectors, and you dig into areas. And sometimes they’re overvalued, and then you can’t play. You say, “Okay, that sector could probably do well, but valuations are really high at the moment, so it’s not going to give us the asymmetry that we’re looking for.”

But there are many other sectors where you look at it and you go, “Wow, that’s actually quite an interesting area.”

My head trader, he comes at things from a very different angle. He’ll look at sectors that are out of favor, and he’ll look at these markets. And I come at it from a different angle. Often where the two collide, he’ll be coming in from just saying, “Look at this space. This is crazy. This market is down 90%. It’s got this, that, and the other thing.” And we start getting my guys to research the fundamentals of it.

And I’m coming at it from that geopolitical macro framework. And often where those collide is where we see opportunity and huge asymmetry. So that’s how I think about it.

To your point on Asia, I’m convinced that my generation, my kids’ generation, there is only one place that you really need to be focused on, and that’s Asia. It’s got so much going for it socially, politically, economically. It is absolutely definitely the place to be. From a long-term trend perspective, that seems like a no-brainer to me.

I do believe that as we go through the next event horizon, I think that there is going to be a huge opportunity to buy growth in those markets because I think there is going to be a sucking sound that comes out of them, not because they’re not valuable and not because they don’t present value but just by sheer dynamics of capital flows.

I’ll give you an example. I’ve got a friend that works at Temasek. He was explaining to me — probably about a year ago now, maybe more — where he’s moving capital in new cash markets. And he’s got to move like four billion or something like that, and he needs it settled, like now.

He said to me, “It’s euro-yen-dollar. You can’t by Norwegian krone. He can’t buy New Zealand dollars. He can’t buy any of these currencies because he’s going to move the market too much. So he’s forced into shifting between these three ugly girls on the stage and trying to pick one of them to take home for the month. And that entire dynamic is what has actually held a lot of this together. When that breaks, at some point — and I’m leaning towards thinking that we’re going to have a huge problem in debt markets in Europe which will then force capital to start picking, and we’ll see… I still believe that there is a high probability that capital is going to shift into the dollar. All the dollar bears and your typical newsletter writer that’s selling fear and “the US is going to die” and all this kind of stuff… Forget about all that. Just look at capital flows and why capital flows and liquidity.

I think you’re going to have a shift of capital going back into the deepest liquid pool, which is US markets and treasuries. I think the next crisis brings that. In that environment, emerging markets and Asia, a lot of that could potentially come under pressure. But that will be the time when you want to have a shopping basket and you want to buy for the long haul because that’s where you need to be for the next… You want to put your kids through college. For starters, you should probably put your kids in college in Asia. That’s how I think about stuff.

Jay:  Cool. Thanks, Chris. I think the audience is going to get a lot out of your thoughts and your insights. Thanks for sharing your thought process and your backstory. We appreciate your time.

Where can our audience members find you, follow you, connect with you, maybe read some of your work that you’re doing?

Chris:  Obviously there is the blog that I set up, which is CapitalistExploits.com or dot-AT. So that’s just CapitalistExploits. They can follow me on there. The funds closed. At some point we’ll open it, and it’s only opened to accredited investors. So that’s just by the side. There is nothing to follow there, but you can follow the work that I do on the blog and the research advisory where we do macro research advisory. We’re dedicated towards trying to find asymmetry. You can find that on the blog as well.

Jay:  Cool. Advisory, is that more geared towards institutions or can it be for individuals as well?

Chris:  We’ve got both in it. There are quite a few asset managers, hedge funds, and it runs the gamut — guys with $700 million under management to guys that have got $20,000 to invest and just looking for those sorts of opportunities.

It’s not intended to be an entire portfolio. It’s a portion where you would take a portion of your portfolio and say, “I’m looking for these asymmetric opportunities, and I’m going to dedicate this bucket, if you will, to these particular opportunities.” So the whole timeframe behind that, which is pretty much mirrored in the fund, is more like a five-year timeframe. I don’t really care about noise in the market over the next six months or anything like that. I’m looking for these major, major trends.

You have the oil example. If I’d done that trade two years earlier, how do you do that where you actually position size it properly? You take the right, you start to trade, you correct, so you can actually get that trade right. Reserach Advisory will provide a whole lot of different strategies because everybody is different. So your hedge fund manager has got hundreds of millions of dollars, he will probably have the ability to take a portion of that and do some futures trading and maybe options or whatever it is, and then another portion into a number of equities or whatever it might be.

But if you’re managing a smaller pool of capital — 20, 30,000, 100,000, something like that — then you’re probably, “I’m not going to go and put into options necessarily. I’m just going to look for something that will give me longevity. I don’t have to worry about time horizons as much. I’m not going to get the same upside, but I’m hitting these trends.”

So we try and cover all of that in the Advisory. It’s quite cool. I just built a community as well. People come in, and they all talk to each other. Look, I don’t pretend to have all the answers, maybe not even half the answers. I’ve got some ridiculously smart clients who are specialists in their own sectors, and so seeing that interplay of trade ideas is really quite cool within the community.

Jay:  Awesome. We’ll definitely check that out. Thanks again, Chris. I appreciate your time. We’ll get your site and everything linked up down below. Appreciate your time.

Chris:  Thanks, Jay. Take care.

Jay:  Alright.

Chris:  Bye now.

Jay:  Take care.