When a Little Luck and a Lot of Hard Work Pay Off

seeing myself you know doing option trading for fun in my free time was really a good reality check to be like I did get lucky because I fell into something that I loved but I also before I got to Goldman I was using options in my own portfolio I was investing in them in college you know that's kind of weird but you know I think whatever whatever floats you're about I think in life if you can find something that you love to do and try to build a career around something that you enjoy doing personally that's that's whatever it is I think that's kind of the the way to be successful because it doesn't it doesn't feel like work right it's something you actually like doing yeah hi everyone welcome to another edition of my life in four trades joining me today is Nancy Davis founder of quadratic Capital Management hi Nancy Welcome to My Life in four trades thanks for having me on Maggie it's great to see you I feel like we uh we represent spring is in the air right today yeah that's right yellow and pink I love it well before we jump into your trade so on my life with four trades we do two of your best trades two of your worst trades but before we jump in it's our tradition to learn a little bit about your background so where did you grow up and what were you like as a kid um I would describe myself as dirty and outside all the time I never wore shoes I was always in a you know spent probably a third of my life in a magnolia tree in the yard and I was always outside and running around so a free spirit were you were you into sports or were you were you always sort of into academics what were you what were your interests what were you how'd you spend your time I definitely like sports um my uh my father is a musician so I also played a lot of musical instruments growing up and I uh I was the stand-up basis for my high school's Orchestra which was pretty cool um given I'm you know petite you know I'm about five years instrument yeah um did you so that's such an that's an interesting way to start given where your career took you did you have an awareness of money from a young age or markets was that something that was discussed in your house oh no not at all my my parents were like don't know anything about markets um didn't have any ties to Wall Street I had never even been to New York until you know I started interviewing for Wall Street jobs so it was totally you know out of what I grew up with so how did it get on your radar when did you first become aware of it um well I had a uh an academic scholarship to college I was uh you know I had an academic ride and then my um a lot of my friends would you know go out and go out to dinner and I wanted to go out with other kids and so I had a job all through college um and uh through my job like once I realized I could work off campus and get paid a lot more and do something more interesting I started to um because of my job wanted to learn about derivatives because we were using a lot of swaps in I worked for a management consulting firm it was a you know as a an intern there but I was paid and I was working you know probably 40 hours my last two years and I had to learn about derivatives for for my job and that's kind of how I fell into it was uh you know then I started trading um myself um and I think I probably looked a little different when I you know I didn't know anybody I I came to Goldman Sachs right out of college I didn't know anyone at the firm I had never even been to New York I just sent my resume in on the internet so yeah back then you remember that before before LinkedIn so what did you were you in math classes in college that you were sort of working so you're in DC I think at this time right yeah I was in DC um and I took a a bunch of because I had like a day job I was taking a lot of night classes and because I was um an academic scholarship kid I was in what they call the honor program so I could take classes in any of the different universities and I ended up taking five grad classes which is kind of how I got into the derivatives markets and I just thought it was so fascinating and I was really fortunate that um one of my professors was a ex you know lbo banker and um kind of helped me a little bit about you know I remember when I was applying to these different firms he was so funny he uh you know I got an offer from Goldman he's like you should take that and I said well I have these other offers and I was going through the other firms he's like no Golden's the best you should go there so yeah you need to have guidance if you're if you're Flying Blind because this is you know this is before I remember when we were going because I have a daughter who's kind of going in the beginning of the college process now I tell her all the time we didn't know anything you know like we never visited schools we ended up there and even the job process you just did not have sort of the amount of information and social media and all these other things to fill you in so it was it was kind of like Flying Blind yeah yeah no it's uh but I think in a way it's good because then you can really listen to what people tell you who are more experienced and I think maybe now it's a little harder because you have so much information it's tough to know who to listen to because you're like information overload so yeah so that that Goldman uh interview process must have been a doozy we've we've had a couple golden alumni on um Sergio Silva was one of them who told us about his like 400 interviews that he had to go through together oh I'm exaggerating but um it's it's a pretty pretty brutal process what did you what did you make of the the your first sort of impression of of Wall Street um you know it's definitely uh I had read about the stress interviews and I kind of was like I'm great at math like bring it on you know I was sort of like uh you know in it to win it kind of mentality and um I don't know I just kind of took it in stride and I think I was always pretty self-confident um even even when I was a college student so I sort of was like I know my stuff you know but I think once I got into the firm it definitely felt a little like I wasn't from an Ivy League school I think a lot of the other analysts and even when I went through the associate program um there were you know I was kind of a an outlier in terms of you know my path getting there yeah this isn't this isn't one of your trades it's a bonus trade but I I understand that there's a um a lucky green dress that you feel like played a role in your in your golden Journey to New York for my first schoolman interview I wore this dress that I bought literally at TJ Maxx it's green and stretchy and it was great for the train and I guess I'm you know knock on wood very fortunate that I can still wear that dress because um in the middle of the uh the pandemics of March 2020 I was invited by the New York Stock Exchange to bring the closing bell and it happened to be the worst down day in the U.S Equity Market since uh the 87 crash the market was just falling and I knew it was falling when I you know left to go to the stock exchange for the clothes and so I'm looking at my closet and I'm like oh my gosh I'm gonna wear my lucky green dress so I'm very fortunate it's uh it's stretchy it can still fit me and um yeah if you Google uh it's kind of cool it's on the internet if you Google my name you know and then hottest CTF you'll see a picture of the the green dress from and then the next day it was I believe it was the middle of March 2020 the next day the New York Stock Exchange completely shut down and went all Electronics so I was actually the last person to ring the bell before they shut down which is which is absolutely crazy and crazy that you know something plays a role in both of those really pivotal times in your life you know we were joking about calling it a lucky dress but I wonder the subject of luck comes up a lot in these ingredients um how much do you think that luck plays a role and skill plays a role um I think both play a role but I I do consider myself a very lucky person um I had a tremendous of opportunities I was with the right people um I've had a lot of Support over my career over my life so I do you know feel very lucky and I know Goldman especially on the prop desk you know I joined the prop desk um uh very early on it was I spent about seven years with Goldman props about 10 years with the whole firm and in the promptest we were always very superstitious you know there was no like no red red is the color of losing money green is the color of making money hence my green dress on the worst down day in the U.S Equity Market I was like stop the nonsense this is uh overdone but yeah we uh you know no red nail polish no red ties no red pens you know I guess I've always been a little a little superstitious and somebody who believes that inherently I'm a pretty lucky person that's amazing I didn't realize there was that I'm not surprised though but I didn't realize there was that level of superstition yeah it's like gold men who Pride themselves on their skill you know so but I guess everyone I guess everyone Falls victim to that yeah um that was Eric mindich um back in the day he was the one who kind of started the like no red thing I love it I wonder if they're still doing it Goldman people call us up let us know if that's still a rule hi I'm Ralph Howell the CEO and co-founder of realvision the financial world is a complicated world right now it's a really complicated macro picture and there's a lot of risks real vision and our YouTube channel help you navigate those risks so subscribe now to the channel and never miss an update there is simply too much going on so subscribe now thank you as you were making your way through Goldman I mean that's a pretty cut through firm and we've all heard stories how did you how did you navigate that how did you find that whole experience well I had a wonderful did you end up as head of credit derivatives and and OTC trading that's not that's no small yeah thanks I you know in in um again I do feel like I was very very lucky to be in the prop desk because at the end of the day you had a number an extra name and there was it was very very flat organization there weren't a lot of politics I always I always tell other women like it's a great place to be as a Trader or a portfolio manager because you you can really cut through the the and the politics and so I was um I think it was 2003 when I was promoted to be the head of credit derivatives and OTC trading for the Goldman prop desk and I ran the group for about five years before I went to JP Morgan's hedge fund and it was just it was a wonderful place to be I had both my children at Goldman when I was uh you know came back for both of them after maternity leave and I just had a wonderful experience and uh you know I was very honored because recently Goldman um had a Women's Conference it's in London and they'd actually had me in as a speaker I was one of the few you know people outside the firm as an Alum but yeah I had a wonderful time there I loved the firm it was the best um culture and such a great training ground yeah that's it's amazing to hear because it's hard you know especially when you're when you're trying to juggle family a lot of people step out it's you know the broken the broken wrong a lot of people step out it's really hard to to kind of find your way back in so it's amazing that you did it but also that you you found that you were supported in that so so let's jump in your first trade yeah um and it was a good one and I believe this is when you're at Goldman but you'll tell us and that was in 2011 so maybe you weren't I'm not sure being on the other side of the London whale trade so set the scene for us like are you at Goldman where are you what's happening at work and at this time of your life yeah so I was not at Goldman for this I was at a uh 1940 act mutual fund and I didn't know that it was the other side of the London whale trade I had no idea that was coming or what it was but um we were you know long only credit and as you know all the credit funds had a tremendous amount of exposure to credit spreads widening and correlation increasing I was looking at the tranche market and saw you know ig9 um super senior tranches were like super cheap so you could buy protection to benefit when credit spreads widening and when correlations increased which is exactly you know as a long only mutual fund when the funds actually lost money so I was running around trying to put um ig9 super senior protection in all of these portfolios across the firm and it was pretty exciting I had to actually go and go to the board meetings change the prospectuses of the mutual fund because derivatives were not allowed and so it was definitely um a huge learning experience for me to be able to try to communicate to the board um what we were trying to do and why it was good a good fiduciary thing to do and why it was good for the fund investors and having that communication I actually still keep in touch with some of the board members actually emailed one of uh the guy who used to be the chair of the board last week and so that was you know 10 plus you know 12 years ago and so it's really cool to make those relationships and then continue them so so what was the reaction when you were going around to these boards because it sounds like you were seeing something that other people were not and you had to sort of convince them to see what you were seeing what was the reaction when you first started going to them because like people don't like change especially when you have to change like the bureaucracy of something like a prospectus yeah I mean I think what I was seeing was like look we're we're long we're long only fun and this is a way of protecting in case of recession or you know um that was when Greece was happening and the whole European crisis and so there was a lot of turbulence in the world and interest rates were still you know basically at zero and so I just I didn't know it ended up being the other side of the London whale trade but I remember going to my my boss and saying you know I I've heard these things about JP Morgan I don't I don't think they know about it can I go tell you know Jess Staley because I used to work with him when I was at JP Morgan at their hedge fund and so I knew I knew people at JPMorgan from when I was um I was a portfolio manager at their uh their hedge fund strategy so it wasn't part of the South Side it was just a private fund um but yeah it turned out I remember my boss sent me a really funny email the day that the JPMorgan news you know the one whale trade I didn't know it was called the London well trade but he said you know something I'm paraphrasing but I have egg on my face you were right I can't believe it oh my gosh yeah I mean no one that was that was for those who who may not have been around when that was happening it was shocking and also everyone thought that nothing like that could happen after all of the things that took place in the great financial crisis and in 2000 you know there were so many regulate there was so much that happened in banking that for something like that to go down was sort of I mean it sent shock waves through everything so did you have anybody who um like who doubted you or resisted you or thought like oh this is this isn't necessary did you get a lot of pushback or did people kind of come around to this idea that needed to be hedged because there's a lot of talk right now about people who are not sufficiently edged but in fact was it an easy an easy seller you know did you really have to sort of convince some people I mean it kind of depends like everybody's different um you know I definitely remember periods in my career where things were so obvious like when I worked at um JP Morgan's hedge fund I had um Volkswagen options I was long optionality uh in Volkswagen because Volkswagen ball was cheaper than dollar Yen it was like the cheapest it was a single stock ball that you could buy for single digits and I remember going around the firm I already had it in my portfolio but going around the firm specifically to the convert desk to you know by Nature convert desks are always short stocks and I was like look convert this thing into puts because the ball is so cheap and so I remember doing that and like definitely that was frustrating because a lot of people did not listen to me and they were like well it's realizing four and it's priced at six so that's a really extreme premium I was like are you crazy like 60 dollar involves 10 and this is six so I've definitely had points in my life where I've saw things and implemented it myself but trying to convince others is really a skill that I would say I'm not particularly good at I have a lot of conviction with my things but convincing other people to do things is not I'd say my skill set but in terms of the um buying super senior protection I was able to convince several portfolio managers to add it but then several others who did not so you know I think all you can do is control your own portfolio and then tell people about what they're doing and let them make their own decision yeah it's funny that you think you're describing it as something that's not your skill set because I think an awful lot of people who were early who would tell you that it is it has to do with a lot of other things as opposed to the person telling them you know sometimes people just don't want to hear things for a variety of reasons um so what do you think you're what do you think the takeaway was from this I mean first of all what did you what what was your reaction when you found out that you're on the other side of these trades because you didn't know for most of the time right no no I did I didn't know um at all uh you know kind of it's really hard in the moment to know like who's on the other side especially when you're not in a customer you know I I hadn't really been on a customer desk since like you know my early days of Goldman I was on the South Side south side but afterwards I was always on the buy side and you don't really know who the flows are you don't have that information and so I think it's more of just looking for opportunities looking for attractive convex cities looking for things that are might potentially be mispriced um and I've always been somebody who just loves buying you know cheap options and being kind of anti-consensus I guess you could say like when everybody is you know worried about something I I like to you know take the other side or vice versa and so that's kind of been I guess as somebody who focuses on you know the asymmetric part of the derivatives market so I don't use any linear derivatives like Futures forward swaps all of those go up a dollar but they go down a dollar I'm not a big fan of linear derivatives I only like the asymmetric derivatives so options specifically and I like to buy options which is which is weird in itself Maggie you know 99 of the world all they do is sell options and so I've always felt like I've had this different different way of constructing portfolios but to me it's like such a no-brainer I'm like everybody is trying to lose money with their options right if you think about it like everybody has their portfolio and then they sprinkle the options either sell them and hope they expire or they buy them for Hedges but nobody's actually trying to make money off the options so to me it seems like a you know very obvious like that's a great place to add Alpha but you know I've always thought about things a little differently yeah clearly clearly that's amazing so so and it's interesting in context of your next trade which is one of your worst and it's being short Japan and so we'll just say in both of your worst trades or trades that have frustrated you over long periods of time but let's start with Japan why does this make the list I mean there's so many reasons that you know Japan is sometimes called the Widowmaker so I've over the course of my career tried to short Japan in all sorts of ways whether it was payer swaptions in the rates Market or you know uh JPY FX options or Nikkei or dispersion you know Japan is just always frustrating because there's fundamentals and then there's Japan and Japan you know has has just been you know something that's been very hard I think you know obviously the central bank has been manipulating their markets for a long week time they've been in significant deflation for a very long period like even now it blows my mind like I look at Japan's doing still yield curve control and their yield curve is about positive 50. when you look at the twos tens jgbs or choose tens JPY swaps has of 50 where the US is like massively inverted still so to me I'm just like what in the world that makes no sense um that the US is so negative and Japan is positive but Japan's definitely been like over time just incredibly frustrating because I always want to short it and I'm never never you know sometimes you can get good carry because um depending on what currency you parrot against if you're long a higher yielding currency I guess my most success with Japan is having the carry currencies versus Japan but rates forget about it it's like so hard to make money there and then the equity Market just really is uh is distorted because of the central banks activities yeah why do you think you kept going back or you you know because it's been multiple times you've tried all different kinds of things why not just throw in the towel and say Japan forget it it's cheap ball I think it goes back to you know I like I like cheap ball and um you know it's very it gets really cheap sometimes because uh you know so owning cheap optionality is always something that is a little you know it's a little uh thing that keeps me coming back would you are you ever tempted to try again um you know I think at some point definitely but right now I'm uh I'm doing 40 act funds that have very clear prospectuses and Japan has not eaten any of our funds so not at the moment um maybe maybe in Nancy's private life one of these days it sounds like the one that got away you know you can't crack the code it's frustrating I know right so one of your other trades in in a similar fashion that ranks as your worst is gold and this is this is another one that you just been frustrated with time and time again are there similarities to the Japan trade like why what is it about gold that puts it in the worst yeah I think um you know I especially after the financial crisis really was one of those people that the FED doing QE and printing all this money is going to be very inflationary and so I've had had gold in my portfolio in my personal account for really since you know I'd say 09 and with the exception of like certain periods it really doesn't do anything and so I've had all different ways of constructing long gold I think probably the most clever was against um Swiss franc so you can actually own gold in FX form it's called xau so I had long xau um versus The Swiss franc which was a negative yielding currency so it actually made gold a positive carry position um but then the Swiss Francs uh you know the the the the the Central Bank kind of messed that up so unfortunately it was just options but you know it's um it's definitely just been one of those very frustrating trades and I actually did a lot of academic research on what is gold because some people say oh gold is an inflation hedge and I think I really did believe that um probably initially and now I'm solidly in the camp of gold is you know definitely a fiat currency trade it's definitely FX it's definitely psychology but I don't think it is an inflation hedge and I know we'll probably get lots of comments from all the gold bug and you know Bring it on I love all the hate that I get I have done the work and I would be happy to send out our papers on gold being a lot of things definitely a fiat currency definitely psychology but it's not an inflation hedge that's so interesting and you're absolutely right we get questions about it constantly in the shows we do because of the situation we're in and because people are looking for that sort of Safe Haven Harbor and they think that's the way to protect itself I'm laughing when you're like hey bring it on um I know are crazy with gold so it's like you could maybe just stop what people are crazy because if it doesn't fit into their um right now people are very tribal about whatever it is they believe in they're very they're very fixed on that but it sounds like you're really comfortable being a contrarian like you're okay with that yeah I mean I am I guess I I sort of think doing what everybody else is doing is a little boring so I uh you know I guess I like naturally enjoy you know when everybody's worried about one thing the other side is usually cheaply priced in terms of volatility and being kind of a a long option long ball person I think it plays to my personality um and something I enjoy doing I think it also gives you a lot of staying power you know when you use a long option I think of it as like a debit card you know the most that you can lose is the premium that you spend and then you have time depending you know sometimes we use really long dated options and you can wait you know you can have a lot of you know like I remember with even like with Volkswagen like the the thing everybody was shorted it ripped to the moon and then it fell but it was all about staying power so I think options give you when you're long options not short options but when you're on options you have that staying power because the most that you can lose is a premium that you've allocated to that trade yeah we're gonna have to get you to do an academy session for us Nancy because uh yeah this is something that I think a lot of people they want to use more but you know it's intimidating if you haven't been sort of you know in that market I'm curious how do you tell the difference between being contrarian and just being wrong that's a good question mayor I mean it's all timing right and I think that's one thing that you know taking a lot of a lot of Traders out there whether they're systematic or ctas or Trend followers a lot of people are doing similar things you know they buy you know to to simplify things they buy what's going up they sell what's going down but the big problem with those sorts of things is liquidity and being able to execute in a linear derivatives market like the Futures Market you're kind of relying on liquidity and so I think you know definitely with long options you can be wrong for a lot longer I think it's a lot more forgiving than something that's a linear derivative like if you think about using a feature or forward or swap it goes up a dollar but it can also go down a dollar and so you can have even like the UK they had a margin call on linear derivatives they were receiving rates um meaning basically being levered long bonds with swaps and then they got a margin call where they had to turn around and sell their collateral and so I think you can be wrong for longer if you use um long options um there definitely is pain involved in the in the meantime but I think it gives me a lot of comfort with the way that we're investing and again remember I think most people are not using options as part of their portfolio options are the periphery of the portfolio for us the options are that core piece of the portfolio and so I think it's just it's different you know it's a different way of thinking about investing yeah and and you know maybe one better luck to the professionals but I like to understand what you know even if I'm leaving it to other people I think it's it's it's fascinating to hear you talk about it because I think it's good for us to have an understanding of it I'm curious like when when I hear you talk it's almost like you see the world like this like you can see when I when I hear people talk about options in depth it's it looks like it seems to me to be a 3D map that you guys see but then the rest of us don't because we don't know how to read it does it feel like that to you like when you were at that management consulting that first job and you exposed to derivatives Did you sort of immediately understand it like is it something that was a native understanding to you or did you have to sort of work to make sense of it yeah no I took five grad classes and those um that was all transfer pricing with swaps it was all linear derivatives I just kind of as I learned more about the derivative markets and just kind of gotten more in the weeds I actually just fell in love with options I know that's like a weird thing to say but it really is a passion of mine and I knew that um you know sometimes when you when you go into a career you kind of think like oh maybe it's luck or maybe I just you know ended up here I actually was um a full-time stay-at-home mom by choice when my kids were really little um in that that zero to three bucket as an investor I really wanted to be home with them so I was a full-time stay-at-home mom for three and a half years and strangely it was actually in that period where I was like I really love options like I used to go my kids I know it's like that time that you get to like really like pause and say what do I do in my free time like how do I spend my time what like gets me fired up and it was look it was not normal like you know most most stay-at-home moms when their kids are in the twos program and they have you know you have two hours a day to yourself when they're in the little like the two-year-old program this is just like a preschool thing and um I used to go to the Greenwich Library and use their Bloomberg Terminals and I would price up Structured Products on the secondary Market which was you know all convertible bonds with options and I would trade in my like little two-hour window a day which was not normal like you know other my friends were going to Le Pan quotient to have coffee together they were playing pickleball or they were going grocery shopping or they were going to Whole Foods you know I had no interest in shopping no interest in socializing you know I like to trade my uh my Structured Products and that was weird imagine what the Librarians must have been thinking like they were like who is this person that comes sliding in I mean I I would have loved to fly on the wall yeah but I mean I think it was a nice time in my life to be like I actually love doing this because I do it in my in my very small amount of free time like when you have two toddlers and a bit you know I had a toddler and a baby it was not you know I didn't have a lot of time to myself and I I was like I really saw it as my job like I had no nannies no babysitters like I was all in being you know I guess whatever I do I like I want to do it really well like if I'm if I'm gonna cook dinner I want it to be like freaking awesome like I want everything to be perfect I guess I'm like a pretty intense person and I took the same approach to Parenting like I was like I'm not I'm not hiring babysitters I'm not hiring nannies like I'm all in but uh I think seeing myself you know doing option trading for fun in my free time was really a good reality check to be like I did get lucky because I fell into something that I loved but I also before I got to Goldman I was using options in my own portfolio I was investing in them in college you know that's kind of weird but you know I think whatever whatever floats you're about I think in life if you can find something that you love to do and try to build a career around something that you enjoy doing personally that's that's whatever it is I think that's kind of the the way to be successful because it doesn't it doesn't feel like work right it's something you actually like doing yeah and you have you really have to have that attitude if you're gonna have any sanity you must have been the only in the room a lot though I mean you know we especially for something like derivatives mean there are more and more women in Investment Banking but I cannot fathom back at that time that there were a lot of women doing derivatives yeah no definitely at the um the ball conferences um so the volatility conferences uh you know I definitely I feel like a rock star you know everybody knows who I am and you know it's it's weird like you could I think it's all your perception on how you look at things like some people could be like oh I feel really awkward because I'm the only you know blonde wearing pink Ruffles and flower earrings in a room but for me I was like yeah I just you know I always kind of was like I deserve to be here and everybody knows who I am and to me that was It was kind of cool like um but I also hired you know a lot of women and a lot of other people over the course of my career as I got more senior to build more diversity but definitely the the derivatives in ball world is pretty pretty small um but I always felt like a really big fish so yeah it was good you used it to your advantage you used it yeah yeah yeah I think it's all your mindset too it's like whether you look around and you see nobody else that is necessarily like you and whether you think you know hey I'm lucky to be here or whether you're like I don't belong for me I was always like in the uh I'm I'm happy to be here at Camp yeah and you and in in all your travels you never felt that that it was that you were underestimated or that it was somehow held against you or people doubted you your credentials more no I was very fortunate to have you know to be on Goldman's prop desk in the 2000s when we were probably the largest uh prop desk in the world and I ran the largest options book in the world so like I don't want to sound arrogant but everyone I knew who I was they better better than Madonna in the ball world they're like oh that's Nancy I never felt that way I love it I love it um so your fourth trade your fourth and final trade is one of your best and that's in 2019 the day you listed quadratics ETF eyeball so this is amazing give us a little background on this what at some point you made the decision you had been working for sort of larger for some of the largest obviously as we just discussed but large firms and Investment Banking why did you decide to make this move well I think it really goes back to when I started my career in the late 90s at Goldman it was right when the U.S treasury Department issued tips so these are treasury inflation protected securities and I remember being a young Trader and being like that is so not going to work you know there are bonds so all tips are long duration so they all lose money um even a short duration bond is still long it's just it really should be called less long so it's like tips are all long duration and then the only index which I think is really important to think about is CPI and the Consumer Price Index is not even index that the FED uses so why would you only measure inflation with CPI and so for me it was always sort of a lifelong career passion of mine to fix the tips market and so what eyeball is it takes a portfolio which is about you know 80 typically sometimes 85 percent in that type of treasury bond so we take tips and then we fix the problems with long options and so for me it was just one of those like Innovations I think there's not a lot of there's not a lot of in Asset Management a lot of the strategies are the same old thing you know plus or minus 25 basis points the same indices the same kind of group think and so for me it was really a solution and I think that that was exciting to be able to have my own firm and to say look this is a problem people don't realize that the AG index is got no inflation protection in it they don't realize that the AG index a third of it is mortgages and mortgage is are short volatility because homeowners are on the option to prepay we saw that recently when Silicon Valley Bank had those issues it was because mortgages homeowners are rational and when interest rates go higher they don't pre-pay as quickly and then the mortgage extends their duration right when the bond investor is losing more and more money as interest rates move higher so it's always the same story but I think it was it was super exciting for me to be able to see a problem in the market create a financial Innovative way of fixing it and putting it into a single qsip product I mean I think I look at the mortgage market and I'm like someone you know that had to be cuset it had to be investable and I feel like I've done that with eyeball um and quadratic has and crane my ETF partner we've innovated in this space by making a single cusa product in a market that was previously really not accessible for people because it is an OTC market yeah that's amazing by the way um Nancy and I did a whole kind of Deep dive on on this issue kind of anchored in current conditions um which I highly recommend you go back and look at because right after we talked it was so prescient because so much happened in the wake of that that really I think brought to life a lot of what Nancy's talking about more broadly here and I'm sure we'll sit down for an update on it again because um what I always like is that you're identifying sort of the risks that you saw out there that were underappreciated and this is the thing that that sort of blows everything up you know again and again what was the heart what's been the hardest part of of having your own firm and sort of giving birth to this ETF something that was hard that you didn't anticipate um you know the the ETF world is an oligopoly it's really controlled by three large firms and I think one thing I I did not appreciate or maybe I was a little naive or you know sometimes you need a little bit of rose-colored glasses and not as an entrepreneur as I didn't realize how competitive it was and how hard it is to get approved at these wealth management platforms like you actually have to go and they have to like do due diligence on you and approve you to allow people to buy an ETF like which which seems bizarre to me like I mean if it's a list of security it's listed on the stock exchange why do you need all these approvals but a lot of the firms you know are pretty um like in your face about like we only look at the largest ETF issuers we do not look at smaller firms we you know just don't bother and I think that's been I want to shake them and be like well why the hell not like what's wrong with you like why wouldn't she want something that's different that's Innovative but I think that's been the biggest frustration is kind of fighting fighting you know we are eyeball is not approved at large you know certain large wealth management firms we're still you know fingers crossed I'm hoping that you know the fun just turned four years old we paid out 30 basis points every single month since the funds started paying distributions in July 2019 and I'm hoping that you know this will be kind of the the next wave to kind of get it more you know to compete with the the bigger oligopoly firms but the ETF industry is definitely the most competitive the hardest to break into and um it's really an access problem where you need to get the wealth management firms to allow you on the platform and that has been something that's pretty pretty challenging and frustrating and something I'm still I'm still working on but I'm but I'm optimistic Maggie I think we'll get there yeah and it's it's interesting because it is the the way that sort of individuals can access things so it's sort of strange that what should be you know open to all and that was the whole idea of it has this has this sort of um traffic jam if you will in the middle um how have you found being an entrepreneur do you like that is that is that a muscle you knew you had um you know I love being an entrepreneur and I definitely have you know you know who you are I have a whole I'd say like my peeps out there that I have convinced to leave their day job start their own business and it's across Industries like I have friends that are no matter what industry that you're in if you love what you do you do things differently and you're creating a solution for people I think it all comes back to like if your solution you should do it and so I really you know had so much fun being an entrepreneur and also bringing other people onto the entrepreneurial side and I I just get a lot of um a lot of love in my life from doing that and helping others and motivating people um whether it's in finance or outside of Finance in different different venues different types of businesses but I I have absolutely loved being an entrepreneur I've actually been working for myself um since 2013. so I've actually been working for my own firm as an entrepreneur self-employed longer now than I was at Goldman Sachs so I'm very wild yeah I'm a fingers crossed for the next decade but I'm uh I'm super excited about it I love building a business I love creating a firm and I'm just I'm looking forward to the what the future holds that's amazing so we started off talking about you sort of hanging out of trees and covered in dirt all the time but are there are there people it you know family friends early in your life who look at you now and say like this is are they surprised at what you ended up doing is it is it you know hilarious to them that you end up this you know Wall Street sort of Titan and owner of your own business you know it's so funny but I honestly don't think anyone in my family is impressed with me I think they're all whatever it's a boring person you've got options I know no I I a lot of people in my family are um are Physicians they're they're doctors and I think I've always been a little bit of a disappointment to some of my family members because I'm not I'm not curing cancer I'm not helping people I'm involved in dirty things like money you know but I have to say like when I'm on uh you know if I do like the real Vision with you or television or any kind of thing like nobody watches it um like nobody cares in my family like I had to get no props from anybody but in a weird way I kind of wonder whether that's been what's Driven me because I've definitely been a self-starter like I'm not doing this to impress my parents I remember you know I I probably will not name which person this is in my family but basically I don't know it was around probably 2019 when we we had listed eyeball it was the first of its kind ETF it's the first long interest rate of all product you know in the U.S ETF Market I was you know feeling like super Pat on my back and one of my you know parents told me maybe I should go back to Goldman Sachs and get a real job you know I can't do not it's it's so it's so funny though that it's it's common um yeah it's more common than you think because um it's come up multiple times especially the physician physicianal lawyer makes the family happy and then otherwise they're like I don't really get what you do but okay but I don't really get it um but that's just probably generational yeah no it's uh it's definitely um you know people are like oh your parents must be so proud of you I was like no I don't think so but they knew that you were one name Nancy the Madonna of Finance um you may not be bearable to be in a room with so it's maybe it's good you have people keeping you down to earth I know right they keep me humble my children are so good at keeping me humble you know I I'm sure you'll appreciate this Maggie I was on um I was on Bloomberg TV recently and I am not a uh a good dresser I guess you could say like I'm just not like I don't have that fashionista about you know I'm wearing no shoes right now like I'm like no shoes are the best shoes you know I just don't have that and so I sent the video after it was on to to my son and he wrote me back he's like Mom you look like an airline stewardess like I had this scarf on and I was like thank you keep me humble I love it they're the harshest critics yeah and he's he's totally right like I absolutely did look like you know I was a flight attendant well well dressing may not be your superpower Nancy but certainly um everything else is in the investing world and we're super grateful for that and that you come on and share it with us thank you so much for being on my life in four trades thank you Maggie it's great to see you I really appreciate you having me on it's fantastic it's a fantastic journey and should be inspirational to everyone and thanks to all of you for joining as usual take care and good luck out there hey there revolutionaries to join a community sharing insights like you just watched head over to realvision.com there you will get unbiased insights and exclusive access to the very best brightest and biggest names in finance be a part of our community of lifelong Learners see you there

Channel: Real Vision Finance

Views: 2,431

Keywords: Finance, Markets, Economy, Stock Market, Investing, Trading, Financial Literacy, Recession, Interview, Conversation, Strategy, Insight, Analysis, Thesis, Short Seller, Real Vision, Equities, Raoul Pal, Inflation, Stagflation, Monetary Policy, Money, Federal Reserve, Fed, nancy davis, maggie lake, my life in 4 trades, When a Little Luck and a Lot of Hard Work Pay Off, london whale trade, short japan, japan finance, widow maker trade, long gold, gold frustrations, gold 2023, finance podcast

Id: P3ubHP4nHCQ

Length: 49min 14sec (2954 seconds)

Published: Tue May 30 2023