May 19, 2025 • 69 mins
In this episode of The Blunt Dollar, we’re joined by George Lagarias, Chief Economist at Mazars, for a thought-provoking conversation on financial crises, economic cycles, and the elusive search for stability in global markets.
With over 20 years of experience navigating economic turmoil from Athens to London, George offers a deeply reflective and honest perspective on the past, present, and future of capitalism.
We kick off with George’s personal experience of living through the Greek and Cypriot debt crises, uncovering how they left generational scars on institutions, job markets, and societal optimism.
But this isn’t just about Greece. George unpacks why crises are hardwired into capitalism, how human psychology fuels financial bubbles, and why there’s no such thing as a perfect system.
Tune in as we explore:
📉 Why financial crises are inevitable in capitalism
🇬🇷 The true economic and social cost of Greece’s debt crisis
🎢 Regulation, deregulation, and the constant pendulum swing
🧠 How fear, greed, and behavioral finance shape markets
🎯 What being a Chief Economist actually entails
🛠️ Why storytelling is more important than models in economics
🔍 The most useful indicator George relies on monthly
💥 His best and worst market calls, and what he learned from them
🎯 Why predictions are more about probabilities than certainty
⚠️ What risks we don’t see coming… and why they matter
🌍 How energy innovation and digital currencies could reshape the world
🧠 And whether AI will ever replace human economic thinking
George doesn’t sugarcoat, and that’s exactly what makes this such a fascinating listen.
Oh, and if you haven't already... subscribe to The Blunt Dollar for more raw and honest finance conversations.
New episodes drop every other week! Available on Spotify, Apple Podcasts, and wherever you get your podcasts.
And last, but not least, don't forget to follow me on LinkedIn: https://www.linkedin.com/in/ignacio-ramirez-moreno-cfa/
Enjoy the episode!
Disclaimer: This podcast is for informational and educational purposes only. It does not constitute financial, investment, or legal advice. Listeners should consult a qualified financial professional before making any financial decisions.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
The more developed your financial system.
The more developed your bankingsystem, the more crisis prone
it is.
So what more developedcountries have done is they
empower banks to do that, andthat's why their systems are a
little bit more prone to bankingcrisis.
Speaker 2 (00:15):
Today we have George Lagarias, the chief economist at
Forbes Mazars.
With 20 years of experience infinancial markets 9 in Athens
and 11 in London George hasbuilt an amazing career,
offering a wealth of knowledgein economics and investment
strategy.
Speaker 1 (00:30):
The boom and bust cycle apart, a parcel with
capitalism.
The other choice is to have acentrally planned economy, but
that means just leaving thegreed and the gloom to the
government bureaucrats insteadof people.
There is no perfect system.
What I learned was a demandshock is not the repercussion of
an election, and demand shockhappens when there is
(00:51):
uncertainty.
Speaker 2 (00:52):
If you had to predict one major transformation in
global finance over the nextdecade.
What?
Speaker 1 (00:59):
would it be?
There are two things that I see.
The one is Two things that Isee.
Speaker 2 (01:06):
The one is this is the Blonde Dollar with Ignacio
Ramírez.
Quick disclaimer the views andopinions expressed in this
podcast are those of thespeakers and do not constitute
financial investment or legaladvice.
This content is forinformational and educational
(01:27):
purposes only and should not berelied upon as a substitute for
professional advice.
Always do your own research andconsult a qualified advisor
before making any financialdecisions.
All investments involve risk,including the potential loss of
capital.
And now let's get started withthe episode.
Welcome everyone to a newepisode of the Blunt Dollar.
Today, we have the privilege ofspeaking with George Lagarias,
(01:50):
the chief economist at ForbesMazars.
With 20 years of experience infinancial markets 9 in Athens
and 11 in London George hasbuilt an amazing career offering
a wealth of knowledge ineconomics and investment
strategy.
His career trajectory is bothdiverse and impressive.
He held roles in variousfinancial institutions,
(02:12):
including positions as aninvestment analyst, as a fund
manager and as an investmentwriter.
Since joining Mazars WealthManagement in 2016, he's been
instrumental in shaping thefirm's macroeconomic
perspectives and investmentstrategies.
His previous roles includepositions at Close Brothers
Asset Management, efg AssetManagement and Marfin Asset
(02:35):
Management, where he managedmulti-asset class funds and
equity portfolios.
George holds an MBA and aBachelor of Science in
Accounting and Finance, and isIMC and CF30 certified.
So quite a legend and very,very strong technical background
there, george.
Welcome to the Blunt Dollar.
(02:56):
Nice to meet you, nacho, sovery, very excited to have you
here with us today.
Obviously, a lot of theconversation is going to evolve
around your job as a chiefeconomist, but not only.
But I'd like to start with thatand to me, when I think about a
(03:16):
chief economist job, for somereason, the first thing that
comes to mind is how aneconomist navigates financial
crisis and, given that you'reGreek, I wanted to start
directly asking tough questionsis how an economist navigates
financial crisis?
And, given that you're Greek, Iwanted to start directly asking
tough questions.
I want to talk about the Greekdebt crisis, which you obviously
experienced firsthand, so youwere in the front lines of the
(03:39):
industry during all that period.
Obviously, a lot of people sawthe headlines, but you, as a
Greek, obviously lived itprobably closer than most of us.
For context, the Greek crisishappened in the aftermath of the
global financial crisis of2008,.
On the year after mostly, andsince then, I mean, there's
(04:00):
different stats, but what I'veread is that, yeah, the Greek
economy suffered the longestrecession of any advanced mixed
economy to date and become, orbecame, the first developed
country whose stock market andratings also were downgraded to
that of an EM back in 2013.
And, as a result, many thingshappened the Greek political
(04:22):
system was appended, socialexclusion increased and hundreds
of thousands of well-educatedGreeks left the country.
So my question for you is whatwas it really to experience the
debt crisis in Greece from theinside?
Speaker 1 (04:42):
So not only did I work in Greece, but also I
worked for a bank that failed.
That was Marfin.
It was later absorbed byanother bank and because it was
a Cypriot bank, the pain wascompounded because I also lived
through the Cypriot blow-up aswell.
And the answer is when you askhow it feels, the answer is when
(05:08):
you ask how it feels, theanswer is it's not something
that you think will ever happento you.
Even as it happens, youmaintain the optimism and you
say, okay, surely it will not beas bad as that.
You see, it's very easy to bepessimistic about others.
Extremely difficult to bepessimistic about oneself.
(05:29):
Okay, humans are built like that.
We think of death as somethinghappening to others.
Okay, when you contemplate yourown mortality, you have a
midlife crisis, so it's notsomething that terrifies you
because your mind keep pushingit, keeps pushing it away as
something that happens to othersgenerally, and you maintain an
(05:53):
optimistic stance.
Okay, and ultimately, at theend of the day, it is a
financial crisis.
Yes, it's not a war, it's notdeath and destruction.
You can always rebuild.
Speaker 2 (06:07):
So how would you say that the crisis affected the
mindset of the country?
Because obviously, behind everycrisis there's millions of
people dealing with thisuncertainty.
Do you feel it left some scars,or people have always been
pretty much forward?
Speaker 1 (06:27):
looking and it's something they don't really
think about anymore.
No, no, the crisis hasdefinitely scarred the country.
It scarred our economic andpolitical system.
To this day, greek debt isowned by foreign governments,
not markets, who require a 2%primary surplus every year,
which means that fiscal policiesare, and will remain tight.
(06:49):
If you know anything about theeconomy, maintaining consecutive
fiscal surpluses is somethingextremely painful.
Okay, the job market remainsfrozen.
So, although unemployment hasfallen to very high single
digits, the job market is frozen.
(07:12):
Okay, and that creates thisfeeling of especially to the
younger generations, a feelingof despair, that they're not
going anywhere.
So most of them, once they gettheir degree, they also grab
their passport and leave, whichis a very smart thing to do,
because if you leave at the ageof 33, like I do, you still have
to start from scratch.
(07:33):
Okay, that's what happens whenyou leave your country.
Okay, you can build up againquickly if you have the
knowledge base, but you stillhave to start from scratch or
thereabouts anyway.
But you still have to startfrom scratch or thereabouts
anyway.
Speaker 2 (07:54):
So, young people, have mostly given up.
That's the answer.
That's quite unfortunate.
It's the famous brain drainthat we hear so often.
Speaker 1 (08:01):
No, no, no, no.
The brain drain is one thing.
So the brain drain is okay.
You can argue that some of themore educated have left, but you
can't argue that those who haveremained are the weakest links.
It doesn't have to do with thebrain drain, because there are
young people here, but they'refrozen in time.
(08:21):
They're not going anywhere.
In the last few years, I hadcertain offers since I moved
back to Athens, I had certainoffers that I ended up rejecting
all of them, and the reasonbehind this is that the frozen
leaderships, no one, is goinganywhere, so there's no mobility
(08:46):
, and that is pretty much what apost-crisis country looks like,
especially if that crisis neverreached the end resolution,
which they never do.
You know, look, don't forgetGreece.
You know special situation, howit was saved.
Look at Argentina.
Pretty much a similar mindset.
(09:07):
Young people leave and thosewho stay back, they, they fight
against very difficult odds.
Okay, so once the default cyclestarts, it the tallest
generations.
Speaker 2 (09:20):
so yeah, maybe taking a step back from from g, back
from Greece, and talking aboutcrisis in general.
Because what is the dot-combubble, the global financial
crisis of 2008, the recentcrypto collapse, you name it.
Like financial history seems tobe on repeat with these things,
(09:40):
these things.
So why do markets keep makingthe same mistakes in every
crisis?
Is it just human?
Speaker 1 (09:55):
nature.
Why do we keep getting to thesevery tough situations?
First of all, we have todiscern between financial crisis
and debt crisis.
Big countries, g7 countriesgenerally speaking, they are
past their debt crisis cycle.
A lot of them have had debtcrisis in the past, but that was
up until the beginning of the20th century.
(10:16):
Okay, so debt crisis can have avery long and lingering and
generational effect on a countryand its economy.
Okay, financial crisis.
On the other hand, literatureshows that no country is exempt
from them, especially the moredeveloped ones.
So the more developed yourfinancial system, the more
(10:38):
developed your banking system,the more crisis prone it is.
I know that sounds a little bitcounterintuitive, but that's
what literature teaches us.
So what more developedcountries have done is, yes,
they have more stable governmentfinancing, but because growth
needs to come from somewhere,they empower banks to do that.
Okay, and that's why theirsystems are a little bit more
(11:02):
prone to banking crisis, are alittle bit more prone to banking
crisis, and because it's a bigcountry, they tend to export
that to the smaller countries,who are also faced with their
own fiscal crisis, and thatcompounds their problem.
Now why do we keep making thesame mistakes?
It is going back to the samefeeling and the same sentiment.
(11:22):
This will not happen to me.
It's optimism.
This time is different.
Speaker 2 (11:27):
The four most dangerous words in finance, as
they say.
Speaker 1 (11:30):
And we forget.
Case in point, in the past fewmonths it's all been about
deregulation.
Fine, we'll kickstart growthwith deregulation, because we
need to, because we cannotsaddle government debt anymore,
so we need credit to substitutegovernment debt.
But down the line, we're goingto pay for it with a new
(11:52):
financial crisis, which is beingwritten as we speak.
It might be in two years, inthree years, in five years, in
one year, in 10 years you neverreally know but it is its first.
Pages are being written as wespeak know, but it is.
Speaker 2 (12:09):
Its first pages are being written as we speak.
And what role does fear andgreed play in all of this?
Because, if I hear you like, itseems that that financial
markets and this crisis arefundamentally built on cycles.
Um, but yeah, what?
Which role does behavioralfinance play in all of this?
And is there a way to preventthese extremes?
Or you think we're pretty muchdoomed?
Speaker 1 (12:35):
I think I wouldn't use doomed.
It is part and parcel ofcapitalism.
Capitalism is prone to cycles,as you say, and we've known this
ever since the 17th century,when the Dutch East India
Company sorry, west IndiaCompany issued the first shares.
Okay, capitalism has been proneto crisis ever since the tulip
(13:02):
mania in Holland four centuriesago.
Okay, we know this.
There are ups and downs.
So it's not that we're doomed.
We have to embrace this.
Okay, cycles end and cycles.
We have an excess because ofgreed, what you call greed.
For some, it's an opportunity.
If somebody puts money in frontof you and says, okay, now it's
(13:24):
just easy to take it.
You will only incur a smallrisk, then you take it.
And if you can pass the bill tosomebody else, then you likely
will.
Okay, the boom and bust cycle apart and parcel with capitalism
.
The other choice is to have acentrally planned economy, but
(13:45):
that means just leaving thegreed and the gloom to
government bureaucrats insteadof people.
So there is no perfect system.
We've known this sinceantiquity system.
We've known this sinceantiquity.
Speaker 2 (14:06):
So you don't see this crisis as a failure of
regulation, you don't thinkgovernments and central banks
are responsible for it.
It's just like a natural partof financial markets, really.
Speaker 1 (14:24):
Even what you call failure.
Regulation is a cycle in and byitself.
We regulate, then weoverregulate, we strangle the
economy.
We make the government take onmore debt.
The government cannot take onmore debt.
We need to use the banks.
We deregulate banks so thatbanks can create credit.
(14:45):
Excesses happen.
New cycle no, we'll never do itagain.
And half a generation or ageneration later, it's the same
thing.
Speaker 2 (14:55):
So really it's not like there's anyone being
responsible for this crisis.
It's not the result of badpolicy or irresponsible
investors or things like that.
Speaker 1 (15:05):
It's just like part of a healthy financial market at
the end of the day, A badpolicy, an irresponsible policy
is part of the deregulatoryeffort, or a bad policy can be
the result of overregulation.
You can never get it quiteright.
You can never get anythingquite right.
(15:25):
You can never get anythingquite right, okay, sometimes you
need more state, sometimes youneed less state.
So Plato tried to find aperfect system.
Thomas More, in his Utopia,tried to find a perfect system.
There is no perfect system.
There is a system that is agood system for that time.
(15:46):
But as times change, andbecause human nature is in
itself malleable and changeable,that means that the perfect
system will always remainelusive.
More state, less stateSometimes we need more state,
sometimes we need less.
Sometimes we need more,sometimes we need less, okay,
(16:14):
and then you have an electoratethat's just trying to stop the
pendulum at just the right point.
Okay, you will find wisdom inthe masses, there, to be fair,
but still, development willalways be one step ahead of you,
because just when you think yougot it nailed down, the world
is moving on.
So no, there is no perfectsystem.
There cannot be in nature.
Ever heard of Kurt Gödel?
Speaker 2 (16:39):
well, just superficially, but not as much
in depth as what you're about totell me, I guess.
So his incompleteness theorem.
Speaker 1 (16:51):
along with Heisenberg's uncertainty
principle and Einstein's theoryof relativity, which shaped the
early 20th century, hisincompleteness theorem added
about 25 centuries ofphilosophical search for a
perfect algorithm that wouldsimply explain everything,
(17:13):
because the perfect system isone way or another.
It's a perfect algorithm, okay,but now we know, even
mathematically that's impossible.
Even in mathematics,mathematical axioms tend to
sometimes clash with each other,and that's what Kurt Kedl
showed, and he ended a25-century dream of finding an
(17:37):
optimal algorithm that will helpexplain and will keep things
always balanced.
Balance is something that isvery, very short-term in nature.
Okay, entropy I'm still goingback to physics.
Entropy teaches us that thereis only a very small probability
(17:58):
that the system will stayperfectly balanced and in every
other occasion it's going to beimbalanced.
That is human nature, and in ademocracy, I would argue that
this is even compounded, becausedemocracies are much more
energetic and and you knowvibrant than other systems,
which means that they are morechangeable.
(18:19):
So you go from here to here,from here to here, here to here.
What is the perfect system forall of these?
Speaker 2 (18:26):
So, going back to markets, then if I hear you like
you're saying, I mean, it's notabout whether you know who's
responsible or not, but it'sjust a part of how the world
operates.
So could there be a case to meBate that financial crisis?
So could there be a case to methat financial crisis, while
(18:52):
painful, are actually a naturalpart of capitalism and that they
even could help economies overthe long run in some way?
Speaker 1 (18:58):
I'm not sure they can help economies.
I'm saying that they are asinevitable as the bill at the
end of a lunch Okay, there areno free lunches and the more
again.
Philosophical question is Nacho, would you go to a party
knowing that you'll get ahangover, but still go because
you want to have a good time?
(19:19):
Or would you avoid the partyaltogether so that you'll never
get a hangover?
Speaker 2 (19:24):
Depends depends on who's going.
That's my answer.
Speaker 1 (19:30):
Depends on whether you have children.
Exactly when do I have to wakeup?
Speaker 2 (19:31):
tomorrow morning?
That's my answer.
Whether you have children,exactly when do I have to wake
up?
Tomorrow morning?
Speaker 1 (19:36):
This is how markets operate and you know what, most
of the times people like to goto the party.
That's a good analogy when theparty is there, you're going to
join it.
Say, nvidia trading 100 timeswhich it was about a year ago,
100 times its forward earnings,or what have you?
You want to go to the party,you want to make the profits,
(19:57):
you want to buy that house, andwe'll see what the future brings
.
Speaker 2 (20:01):
Interesting.
Okay, so we've been digging alot on this crisis topic, which
is a little bit almost I meanvery harsh I wouldn't say
depressing because it's part ofthe world and our history, but
maybe I should have started witha more cheerful part.
(20:22):
So let's maybe take a step backnow, because I have the feeling
that we jump straight intoeconomics, but let's talk a bit
about you actually and what youdo.
So you are the chief economistin a major financial institution
.
I guess a lot of people don'treally know what chief economist
(20:45):
actually does.
Sounds like a very big title,but it's probably unclear to
many what it actually means dayto day.
So, in your own words, what doesyour role as a chief economist
at a major financial institutionreally entail?
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(21:09):
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Speaker 1 (21:33):
I'm still trying to figure that one out myself.
Details of you, no more and noless.
People want your view oncertain issues.
How will the economy play outwhen consumers are at Anything
that is present and current orhistorical?
It's very easy to answer.
(21:53):
You just dig into the numbers,create a chart, blah, blah, blah
, and you know exactly wherethings are, almost about a month
at least ago, because that'sthe most recent data that we
have, and some models can tellyou, maybe, where you are right
now.
They're called nowcasts.
And some models can tell youmaybe where you are right now.
They're called nowcasts.
(22:16):
But the chief economist, chiefinvestment officer, I would
argue, chief executive officer,chief technology officer, even
CFO, is never about the present.
Anyone can do that.
Anyone can tell you the currentstate of affairs.
Anyone can tell you the currentstate of affairs.
The chief is a person who, toquote Jeremy Irons in Margin
(22:38):
Call, listens to the music andtries to figure out whether the
music is playing, whether it'splaying louder, whether it's
playing softer and when it hasentirely stopped.
This is the only thing a chiefof any kind is supposed to do.
Speaker 2 (23:00):
Great movie, great book, by the way, for those of
you that haven't read or seen it.
So what is the most difficultpart of being a chief economist
than, like, trying to listen tothis music and really figuring
it out when the tune or therhythm changes?
Or is it something elsecompletely?
Speaker 1 (23:21):
Well, you listen to the music.
The hardest part, I think, isto get people to overcome their
own biases and listen to youwhen you have something to say
that they don't like.
To overcome their own biasesand listen to you when you have
something to say that they don'tlike.
If you say the economy is notin a good place, people don't
like to hear that.
If you say that market risksare now excessive, people don't
(23:42):
like to hear that either.
People like to hear the goodnews.
They never want to hear the badnews.
Okay, and that is the hardestpart, that about half the time
the news is bad.
Speaker 2 (23:55):
So actually that was a follow-up question that I had.
How do you approach situationswhere the news you have to
deliver your economic outlook,for example isn't what people
want to hear?
How do you deliver those badnews?
Speaker 1 (24:12):
20 years of experience.
That's how I deliver it.
I've done it for many years.
People know who I am.
They know that I don't alwaysprophesize doom and gloom.
The deregulatory efforts we'vebeen talking about them for two
years.
You've seen my attitude onparties.
It's better to go than not to,okay, but the hangover will come
(24:33):
and so will the bill, okay.
So, um, I approach it with, uh,knowledge of history, with some
gravitas that 20 years ofexperience bring.
If people want to listen to it,that's fine.
If people don't want to listento it, that that's fine.
If people don't want to listento it, that is fine too, because
(24:54):
I don't always get it right.
Speaker 2 (24:58):
I heard a good way of delivering bad news is called
the sandwich theory.
A good friend of mine told methis, which is you start with a
bit of not so bad news, or maybeeven neutral or good news.
You end with some neutral orgood news and you put the big
bad, negative stuff in thecenter, and that way it's a
(25:22):
little bit easier to digest forthe people hearing them.
What do you think about that?
I think it's cultural.
Speaker 1 (25:30):
I'm not sure where sandwiches fit into all that,
but I find big differences inculture.
Greeks, french people they wantthe bad news straight off the
bat.
They want to hear it, okay.
English people I work in aBritish company they want it
delivered in a very carefullanguage.
(25:50):
Okay, one that will notnecessarily upset people.
So Italians may not listen tothem at all.
Greeks, may you know, they mayattack you for the bad news.
Okay, kill the messenger.
It's very, very cultural.
(26:12):
How do you deliver bad news?
Okay, kill the messenger.
Um, it's very very cultural.
How do you deliver bad news?
Okay, but also in in my.
So I'm not.
I'm not a newspaper person, Idon't deliver news, I deliver
opinions, and that is the coolpart, because an opinion is
never really bad news in and byitself.
It might be an opinion thatpeople find, um, uh you, that
(26:34):
they don't necessarily agreewith, or they find it too
pessimistic, and that's fine,okay, it's up to them, it's up
to the decision makers to takethat opinion and leave it or
come back for another if theyfeel that worked out.
You see, so I don't haveanything to worry about.
Well.
Speaker 2 (26:52):
I kind of disagree about the fact that opinions are
I mean they're not necessarilybad news because it's just an
opinion, because I meanobviously there's the
velibability, the credibility ofthe person delivering the
message.
So, if I have George giving mean opinion which is a bad view
on an economy or somethinghappening, given how much you
(27:15):
know about the market, yeah, Ido acknowledge, I know that
there's a chance that you're notgetting this right and what
you're saying is never going tohappen, but there's a very big
chance that that may actuallymaterialize and hence, even if
it's just an opinion, I'll be ohdamn, I'm not happy to hear
this.
Speaker 1 (27:35):
Well, so make no mistake, it has cost me a few
relationships, those morepessimistic opinions, and it
probably has cost me a couple ofpromotions too, but I don't
think about these things for asecond.
People ask me for an opinionand I'm going to give it to them
and I will do my homework andI'm going to give it to them as
(27:56):
honestly as I can.
After that, zero regrets, Okay,and I could change my opinion
if the data changes.
I'm going to swiftly change myopinion about everything, Okay,
but because I know how much workI put into every opinion before
I open my mouth.
See, that's the important stuff.
(28:17):
If I have done my homework, ifI have done my thinking not my
homework, not my reading, but mythinking then I am serene in
delivering good news or bad news.
And again, it's up to theperson how they receive it, but
that's their struggle, it's notmine.
Speaker 2 (28:35):
So how much is it about data and how much is it
about the actual message?
Because obviously a greateconomic analysis needs to be
accurate, but if decision makersand clients don't understand
what you're trying to say, it'suseless.
So, in your experience, it'suseless.
So, in your experience, what'smore important for a chief
(28:58):
economist?
To be precise with the data orto be persuasive in how you
communicate the message?
Speaker 1 (29:05):
Ever heard of the University of Michigan Sentiment
Index Very popular in themarket, right, of course.
So this is a sentiment indexfor US consumers, out once a
month, twice actually, becausethere is the interim index as
well.
So they used to have this greateconomist called Richard Curtin
and he would look at the data,the consumer data, and he would
(29:27):
give you a story around it.
Now, eventually, after 30-oddyears, I think, curtin changed
and he was replaced, and hissuccessor, I think it's Zhou
Anshu.
I need to double-check.
That is more telegraphic aboutdelivering numbers.
This is what actually happened.
Now, as an economist, I findboth useful to be honest.
(29:51):
Now, as an economist, I findboth useful to be honest, but as
somebody, if I were somebodywho was not in the trade, then I
would prefer the story, andthis is the way I prefer to
deliver anything through stories, which is pretty much what
(30:11):
we're doing right now.
You see, stories have, storiesremain Okay, stories are stored
in other people's heads.
Numbers are not, technicalitiesare not, but stories, people.
That's how we learn, so that'swhat people can relate to.
Look, I think you have children.
The first thing you do is tellthem stories.
This is how our brain develops,since we're very young, so I
(30:36):
know my complex theory ofeverything, but if I cannot put
it into a short and cohesive andinstructive story, then I'm
questioning my knowledge and thebreadth of my knowledge first.
Questioning my knowledge andthe breadth of my knowledge
first, and then, even if I dounderstand everything, I still
have a problem.
If I cannot deliver it, thenthat knowledge is lost.
(30:57):
It needs to be digestible justenough so that it doesn't lose
any important truths.
Speaker 2 (31:07):
Yeah, and I mean, I 100% agree.
How is?
this really to make itdigestible, by the way, I 100%
agree with what you're saying,but I also feel like making
compelling and good stories isso much harder than just
delivering numbers right,because obviously you can invent
some stories that don't reallymake sense, but the really good
(31:28):
ones, the ones that stick inpeople's brains and really make
a difference, they're not alwayseasy to find, it's a lot of
work, well, so here's mypersonal secret sauce is reading
, and a lot of my reading isaround history.
Speaker 1 (31:47):
So there's always a historical analogy I can use,
and there is always aninteresting story around that
historical analogy, because fora story to remain around for
centuries, there must besomething interesting with it.
So I have found history as thebest way to weave in my
predictions.
Speaker 2 (32:05):
That's good.
Is there a specific period inthe history of humankind?
Speaker 1 (32:22):
that has more parallels than others to what
you're witnessing on financialmarkets as of today, before the
end of the 19th century, when JPMorgan essentially moved the
locus of US businesses fromPhiladelphia to New York.
Before that, business historyis not very well documented, not
(32:46):
very well written, and very fewparallels we can draw.
But from that time on, from JPMorgan's appearance in the
United States, his move fromLondon appearance in the United
States, to today, there areplenty of financial paradigms.
But again, I don't thinkhistory as just a financial
(33:08):
history, I don't just usefinancial history examples, I
use actual history examples.
You see, a problem, nacho, isthat we teach children and I
think that's a huge problem weteach children only history of
war, but there is the history ofart, history of diplomacy,
history of economics and so onand so forth.
Every aspect of human life hasits own history threads weaved
(33:30):
in, okay, and they all run inparallel.
So when I talk I rarely invokethe history of war, but I will
invoke the history of diplomacyor the history of economics.
You know, I will find relevantexamples and I will try to use
history as a guide to the future.
(33:52):
Very few things are entirelynew.
History never repeats itself,but it rhymes.
So part of that prediction istrying to find the rhyme.
Speaker 2 (34:05):
So you're a poet as a chief economist, listening to
the music and trying to find therhyme.
Speaker 1 (34:13):
Yes, what I'm definitely not and I do want to
get this out of the wayimmediately is I'm not what they
call a quantitative economist.
So there are people out therewho believe a lot in the power
of models, financial models.
Some of them, the simpler ones,can be really useful.
(34:34):
Okay, but first of all, I'm afund manager by trade, so I
can't construct any good ones,and because I'm aware how models
are constructed, ultimately youget either too simplistic
models or overfitted models,neither of which can tell you
anything about the future.
(34:59):
And I'm also extremely carefulof projecting the present into
the future, which is what mostmodels do.
You take A that is recent, bthat is more recent, and then
you draw a straight line or evena curve and you say, okay,
that's the future going forward.
And then you have a newgovernment in the us and the
global order is unbalanced.
(35:19):
Then you start all over again.
Okay, so you need to to besanguine about everything, and
that is why I understand I takemodels for their analytic
capabilities, but for myprojections, generally speaking,
I don't put in too much trustin them.
I do put a lot of trust in thephilosophical way of thinking.
Speaker 2 (35:43):
So, talking about models and metrics and without
getting into too much detail,but if you had to single out one
economic indicator that you'rea super big fan of and that you
keep looking at to assess thestate of the global economy or a
(36:04):
specific economy, which onewould it be and why?
Speaker 1 (36:08):
PMIs definitely.
I do my reading every month foryears now.
So purchase manager indicesthey come out once a month, they
cover all the major economiesand some smaller ones, and it's
interviews with purchasingmanagers either in plants or in
the services sector.
So you have the manufacturingand the services one and it is
(36:31):
because exactly it's notquantitative Market publishes
those two pages for everycountry every month and you get
a lot of information when youread it about the state of a
particular sector and an economy.
So, exactly because it's notvery quantitative in nature, I
(36:52):
like it because it has a ton ofinformation about new orders,
about employment, about pricespaid.
Just for the US, I don't usethe market ones, I use the ISM,
which is the original inventorof PMIs.
So they do it better in the US.
Everywhere else in the world Iuse the market stuff.
So if I had to choose one, I'dsay PMIs.
So they do it better in the US.
Everywhere else in the world Iuse the market stuff.
(37:13):
So if I had to choose one, I'dsay PMIs.
Speaker 2 (37:16):
That's a good one for sure you get a lot of color
with that.
So going back to the callsyou've made along your career,
some economic calls are easy.
Some others obviously havemassive implications for
investments and even for yourpublic trust.
(37:36):
I would say what's the mostdifficult or high stakes
economic call you've ever had tomake and what was the outcome?
Speaker 1 (37:46):
The end of 2022, I saw that bonds were not really
worth much.
They were yielding 1%, half apercent, and we had an inflation
wave and we had the Fed sayingthey're going to hike rates and
we had the market in disbelief.
So I just talked to my CIO.
(38:07):
I said if we cannot erase bondsfrom our CIO?
I said if we cannot erase bondsfrom our portfolios, then we
need to zero out duration asmuch as we can and we need to go
underweight.
And we need to do this becauseespecially defensive portfolios
are going to suffer, which iscrazy because if you have market
tumult, you expect theaggressive portfolios to do
worse.
But it was, in essence, a bondbear market Okay.
(38:33):
So we needed to do somethingabout that.
Bonds were no longer the safeasset Okay.
So I'd say that that was themost high stakes call I've made,
at least that I can remember.
I don't keep track of all ofthem and I don't keep trophies.
To be honest, every day for meis new.
Speaker 2 (38:52):
I learn from my mistakes and I focus a lot more
on them than my wins 2022 wasdefinitely a terrible year
Double digit returns across manyasset classes, negative returns
across many asset classes andit was nowhere to hide, really.
Speaker 1 (39:13):
No, but my call was at the end of 2022 because,
again, at that point, bonds wereyielding less than 1% and you
had the rate hikes, and you hadthe inflation, and you had the
generation that has forgottenhow to invest in bonds.
Speaker 2 (39:28):
So, talking about the calls you've made, obviously
you said you made some goodcalls, you made some bad calls,
that you're not really keeping asuper close record of all of it
.
But what's the worst market oreconomic call you've ever made
and, most importantly, what didyou learn from it?
(39:50):
Hey there, quick ad break.
Do you work in the financeindustry and have a genuinely
interesting story to share?
I'm always on the hunt forgreat guests who bring raw,
unfiltered insights to the table.
Or maybe you know someone witha story worth telling?
Please put us in touch.
You can reach out to medirectly via LinkedIn.
I'd love to hear from you.
(40:12):
And now back to the show.
Speaker 1 (40:20):
Yeah, in terms of economic calls, the one I really
got bad was after Brexit, whenI thought that we would see a
demand shock and we did not, andthat explained to me a lot
about democracy and demandshocks.
So currently we have a demandshock in the us.
Okay, so the people voted forbrexit, they got brexit and that
(40:45):
you know.
All the fears of the rest of uswhat the hell would happen on
the day after didn't materializebecause people still went to
the shops and shop.
Now, compare and contrast thiswith the demand shock that we're
currently seeing in the US.
You've seen the numbers thathave turned sharply down right
Consumption numbers, the AtlantaFed indicator.
(41:07):
They all suggest that we mighteven see a small recession in
the beginning of 2025.
So why did this happen?
Why did we get a demand shockin the US?
Because when Brexit was votedfor, yes, there was uncertainty,
but you had the government thatsaid, okay, we'll figure this
(41:27):
out.
Okay, they tried to smooth theimplications of what brexit
would become, and you knowbrexit did lower trend growth in
the uk, but did not happen, asa shock came more gradually.
Compare, contrast with what ishappening today.
The present government of theunited states apparently has a
strategy to shock both marketsand, you know, trade partners.
(41:51):
That has also shocked consumers, however.
Okay, so that's a demand shock.
So what I learned was a demandshock is not the repercussion of
an election.
A demand shock happens whenthere is uncertainty.
Shock happens when there isuncertainty.
(42:15):
What Varoufakis once calledcreative how did he call it?
Creative vagueness.
There might be a better Britishterm for that, because he uses
English a lot, but it translatesas being creatively vague.
That's the sort of thing thatmarkets and businesses hate.
Okay, so vagueness, uncertaintyis something that governments
(42:43):
and policy makers best avoid.
So that's how you get demandshocks too much uncertainty.
That's how you get demandshocks Too much uncertainty.
Speaker 2 (42:54):
That's a good one, yeah, I mean.
Another thing I wanted to askyou related to all of this is
because we're talking a lotabout forecasting, about the
calls we get right, the calls weget wrong, what we learn from
(43:16):
it.
But I think a lot of peoplebelieve that economies have a
relatively bad track record whenit comes to predicting
recessions and market moves.
I don't know if it's because wetend to focus more on the
negatives than on the positives,as we were saying before, but I
mean.
The example that comes to mindwas when, a couple of years ago,
everyone thought that there wasa hundred percent chance that
(43:38):
the US would enter into arecession, and I think Bloomberg
surveyed many economists and ahundred percent of them
forecasted a recession.
That never really happened inthe last couple of years, in the
last couple of years.
So why do economies, even thebest ones, so often get their
calls wrong?
Speaker 1 (44:00):
I'll reason this out.
No, you see, first of all weneed to get to understand how to
read calls and, to be perfectlyhonest, it comes with the whole
idea of stories andoversimplification.
And that is the risk.
An economist first of all, the100% thing I would never say to
anything.
So if you asked, here is thething let's say, 100% of
(44:25):
economists predicted a recession.
But if you ask them how certaineach and every one of you argue
that that the recession willcome.
Maybe they were 60, maybe theywere 70 certain.
So, whereas you say, well, thatis 100 chance of recession
there, if you look down andcalibrate those questions
(44:46):
because that's what appropriateforecasting is then you might
see a 70% certainty of recession, even if the headline said 100.
And that's how data isoversimplified.
So economists are never certainabout anything.
That's why Harry Trumanfamously said get me a
one-handed economist, becausewhenever he asked an economist
(45:08):
they would go on the one handthis and on the other hand that.
So Harry Truman said get me aone-handed economist.
I think that in their need forcertainty, very often the
audience of economists tends totake the prediction and never
(45:30):
ask for a degree of certainty,and that makes all the
difference.
So I often try to communicate adegree of certainty.
I do it verbally, or sometimesI do it quantitatively.
I am 70% certain, I'm 80%certain.
Natural, I have never been 100%certain of anything, including
the idea that the sun will risetomorrow.
(45:52):
Okay, everything and anythingis changeable.
Speaker 2 (45:58):
That's a good point.
So yeah, going a little bitBeyond the headline and trying
to get a little bit moregranular Because you're going to
get, that's where you'll findmuch better answers Than the.
Speaker 1 (46:11):
Did economists get it right or did they get it wrong?
Because we all got jobs.
None of us got rich doing this.
So when you're pushed into acorner, yeah, but what do you
think?
What do you really think?
Will we get a recession or not?
Yes, yes, fine, fine, I thinkthere is a higher probability of
a recession.
That's not?
Oh, yeah, okay, we'll get arecession, and that's what the
press wants to hear, that's whatyour colleagues want to hear,
(46:35):
that's what your boss wants tohear.
They want to hear your viewcrystallized into one thing.
But if you're an investmentanalyst, you have to say okay,
if there is a 100% probabilityof a recession priced in and I'm
only 70% certain well, that'sactually a buying opportunity.
So you're talking about, interms of probabilities, in terms
(46:56):
of forecasts.
Speaker 2 (46:57):
Yeah.
Yeah, I agree, nothing is 100%certain.
Yeah, I agree, Nothing is 100%certain.
(47:24):
So, talking about economies andthe job, many economies are
notoriously known for stickingwith the consensus, very rarely
making bold or contrarian calls,whilst others are obviously a
little bit more out there andcontrarian.
I would say but I see why thishas happened, because being
wrong alone can hurt yourreputation quite a lot and can
end your career, whilst ifyou're being wrong with everyone
else, it's just more sociallyacceptable.
Let's put it that way.
So do you think economies avoidmaking or some economies make
(47:48):
avoid making outlier forecastsbecause there's too little
upside and too much career riskin going against the consensus?
Speaker 1 (47:58):
There is definitely that.
But also, we're all looking atthe same data.
What you say consensus we'relooking at the same data and
we're reaching pretty muchsimilar conclusions.
Okay, what I'm saying now thatthere is a danger to US growth
is what every other economistout there is saying.
After looking at the same datalike I did, okay, if you look at
(48:20):
the same data, you will reachsimilar conclusions.
If we get better data or moreproprietary data, maybe we will
reach different conclusions.
I am more aware of the peoplewho consistently go against the
grain, because there are twotypes.
There are the so-calledhedgehogs.
Sorry, let's put the hedgehogsaside.
Let's talk about the people whomake very few calls and they
(48:48):
only talk when they seesomething that's not priced in.
Okay, they might do so once ortwice or three times every
decade.
I have huge respect for that.
It's a very difficult place tobe.
I'm not talking about anything.
Consider me consensus until Isee something that sticks out
like a sore thumb, and then Iwill raise my hand and say, okay
(49:11):
, this is where the marketopportunity is, right after I've
invested in it.
Of course, now, huge respectfor these people and we always
need need them.
But there are the hedgehogs.
The hedgehogs I don't know ifyou ever heard the term that
analysts are either foxes orhedgehogs.
It comes from an old Chineseproverb that foxes know many
(49:34):
things and hedgehogs know onebig thing.
So Hedgehogs are the sort ofanalysts, the sort of
forecasters, economists, whathave you who are either always
out of consensus they alwaysspeak gloom, for example, think
Black Swans, nicholas NassimTaleb or Dr Gloom Rubini.
(49:59):
Okay, if you talk to Rubini,you know that a recession is
just around the corner and, likea broken clock, is going to be
right twice a day.
Okay, but that does not makeone a forecaster.
Having a certain way that yousee things and sticking
ideologically to that view,either that it's all going south
(50:22):
always, or that you know, orbeing very optimistic, markets
will always go up, whatever.
I don't have to subscribe tothose opinions because they are
extremes and there are peoplewho make a living out of being
out of consensus.
(50:44):
If I'm out of consensus which Isometimes am about smaller
things, but I am I might be morevocal about it because I know
it will generate some goodmarketing, to be honest, and it
will also raise some awareness.
Guys, you're not thinking aboutthis the right way.
Okay, deregulation I've beentalking about it for three or
four years.
Honestly, I initially I thoughtthat Biden would not stand in
(51:07):
the way of it, but it did.
He did, but I think it was along time coming, okay, and
that's another nature offorecast.
By the way, you might get theforecast right, you might get
the timing wrong, okay.
So the point I'm making is thatif I don't think that there are
(51:30):
people who are always inconsensus because, okay, there
is a rank and file that mightthink like that, most of them
either have a few big calls andthe real outliers, a lot of them
, just do it for the marketingIf you're consistently
contrarian, then you just expectthe one time you get it right,
(51:52):
but what about the nine timesyou got it wrong?
Speaker 2 (51:55):
Yeah, yeah.
You lose a lot of credibilityright, like if you're always
contrarian and you're nine timesout of 10 wrong.
It doesn't matter if you'reright once.
Well, I guess it's aboutsequencing.
If the one time you're right isthe first one, that's great.
Speaker 1 (52:12):
But if it's like the fifth or sixth or 10th one then
no one is going to listen to you.
They know that the one timethey will get it right, they
will get the following.
They right, they will get thefollowing.
They will become gurus.
That's what they bet on.
But that's a marketing gamethat I don't partake.
Speaker 2 (52:27):
Um, I want to change topics, although obviously still
talking super closely aboutmodels and markets.
Uh, I want to talk about, uh,the notion of risk.
Um, I'd love to to get yourthoughts on that.
So the the finance industry hasbuilt entire models around risk
using VAR, b-tab, volatility.
(52:48):
I mean many different things,but real world financial
disasters often come from risksthat no one really accounted for
.
You were talking about theblacks once before, but not only
.
You were talking about theblacks once before, but not only
.
So my question for you is Doyou think the financial industry
Truly understands risks, or dowe just measure what's easy to
(53:12):
quantify?
Speaker 1 (53:15):
And of course it's a leading question, because the
latter is the answer.
Look, you have to think how thefinancial industry Came to be
Before the 1930s.
The financial industry came tobe.
Before the 1930s, the financialindustry was all about the
broker's office, okay.
And then the Great Depressioncame.
You know you would get stocktips, yeah, you should buy this,
you should sell this, blah,blah, blah.
And then it was completelydiscredited after the Depression
(53:38):
, a because nobody had any moneyto invest and B because they
drove the world into a great bigrecession, the outcome of which
was World War II.
So it was not until the early1950s that Harry Markowitz got a
Nobel Prize for this, madeinvestment sensible again, and
(53:59):
the way he did it was byquantifying risk.
He said, okay, what is risk?
Well, risk is something that'snot.
Is things going really north orreally south?
Risk is unpredictability.
And then he quantifiedunpredictability as volatility.
Now, over the years, wequestioned two things.
(54:21):
One, we questioned the normaldistribution, which is a
statistical notion that you canactually put a number of those
upside and downside risks,Because we know now markets
don't move in what is known as anormal distribution.
They're not that predictable.
Benoit Mendelbrot proved thatthe Dow Jones has fat tails.
Prove that the Dow Jones hasfat tails.
(54:47):
And the second thing that wedid is we developed all sorts of
ratios, like the Sertino ratiothat certainly looks at downside
risks, or VAR value at risk.
So here is my view on risks.
There are two worlds, nacho.
There is the world where thingsgenerally tend to move within
so-called two standarddeviations, your normal world.
95% of days fall into thatworld and 95% of the times those
(55:12):
risks are predictable.
Along with our models, alongwith our normal distribution, or
at least the idea of a normaldistribution, is appended, and
(55:35):
then things get weird.
And that is when you need tothrow all models out of the
window.
And you need to throw allmodels out of the window Again,
going back to the job of the CEO, the CFO, the CIO, the chief
economist, whatever you want tocall them.
If they hear that the music hasstopped playing, or where you
had classical music, now youhave heavy metal, then you need
(56:07):
to know that your assumptions ofrisks are at this point wrong
and the first thing you need todo is turn to your risk manager
and have a very honestdiscussion and the risk manager
will tell you okay, things havechanged.
Yes, so my models.
I cannot throw them in thetoilet completely, but, for good
measure, add risk.
So where I thought my VAR was1,000 pounds, let's make it
(56:29):
2,000 pounds, okay, and thatwill get you much closer to
reality.
And then that is the job of theC-level, that is the job of all
these chiefs.
If they do not do this, thenwe're not doing our jobs.
And that is how you deal withrisk.
There is risk on a normal dayand there is extraordinary risk.
(56:52):
The chiefs are supposed to knowwhich day of the week it is.
Speaker 2 (56:57):
And remaining nimble and adjusting as fast as
possible when you get to thatpoint then, yes, it's, it's not,
it's, it's, it's beingactionable.
Speaker 1 (57:07):
It's, uh, it's not allowing inertia to um to take
hold.
Oh yeah, it will all be fine.
It's one of those things.
Okay, case in point uh, one ofthe things I I famously got
wrong in february 2020, I wasbeing asked about COVID and
whether it would be a thing, andI said look, we got over SARS,
(57:29):
historically in the last 150years.
We got over with the exceptionof the Spanish flu, for which we
didn't have antibiotics, by theway.
We got over each and every oneof these pandemics without major
upheaval in the world.
A month later, we were inlockdown the first in human
(57:51):
history.
That was a black swan, by theway a global lockdown.
Okay, did I get completelywrong?
No, I spoke of the world.
I knew, okay, could I haveknown in retrospect that
European countries would followChina's example to complete
lockdowns?
I'm, even then, not able to seehow, but on the first hour of
(58:16):
the lockdown, when I walkedaround a little bit and I saw an
empty neighborhood and all thestores closed and it was very
visible to me, then I said, ohshit, and I knew our world had
changed.
So clients called me becausethey saw exactly the same thing
as I did.
It was very visible that one toeveryone.
(58:37):
It was not a financial crisis,it was the other sort.
And they asked me should I beafraid?
I said, look, your stocks aregoing to take a hit, your bonds
are going to take a hit, butlet's wait for the Fed to see
what they do.
And that's the other way tothink about risks.
Risks can materialize.
Remember the 2023 bankingcrisis in the US, which, by the
(59:01):
way, came after deregulatoryefforts from the Trump
government.
A few years before that, weknew that the Fed would
intervene.
So risk is only part of thequestion.
Will somebody save us on asystemic basis from a systemic
risk?
It's the other.
It's not just what you do.
(59:23):
You need to think is there asafety net for this?
And, by the way, when it comesto the world of finance, central
banks are always at the otherside of the risk equation.
Are they doing anything aboutall of that?
Because, if they are, maybe Ishould not be afraid.
Maybe I should just take thehit and invest more.
They are.
Maybe I should not be afraid.
Maybe I should just take thehit and invest more.
Speaker 2 (59:43):
That's what a lot of people famously call.
In the case of the US, the Fedput no.
Speaker 1 (59:55):
Yes.
So that is when you talk aboutfinancial risk.
Is the central bank, the Fed,the ECB, whatever put active?
That is the next question.
When you hear that the tune haschanged or that the music has
stopped altogether, will thecentral bank do something about
it?
And if the answer is no, runfor the hills.
If the answer is yes, just waitfor it and maybe buy some on
the downside.
(01:00:15):
That is being greedy whenothers are fearful and fearful
when others are greedy.
Speaker 2 (01:00:19):
Warren Buffett, not George fearful when others are
greedy Warren Buffett, notGeorge.
What's the type of risk thatkeeps you up at night that you
think people are not payingenough attention to?
And I'm not just talking abouta market crash or inflation.
I'm talking about maybe biggerthings like cyber threats,
social unrest and things likethat social unrest and things
(01:00:47):
like that.
Speaker 1 (01:00:48):
The only thing I'm 46 , natural the only thing that
keeps me at night is when mydaughter comes to her bed and
kicks my face, um, which happensmore often than you would think
, by the way.
Um, so, yeah, she's doingmartial arts now, so she has a
stronger kick.
Um, I don't lose sleep overanything.
You see, I did go through afinancial crisis.
(01:01:09):
I stopped um, pasta.
I ended up eating, um, you know, still pasta for the next two
years that my wife was purposelyfeeding, just as a lesson there
, nothing keeps me up at night.
Life will happen.
Losing sleep over it, losinglife over what might happen, is
(01:01:32):
not any way to go about things.
That's what I've learned.
I only lose sleep when somebodypushes me out of the window
sorry of the bed, or whenPanathinaikos is playing late,
and then I can lose sleep whensomebody pushes me out of the
window sorry of the bed, or whenPanathinaikos is playing late,
and then I can't sleep, and thatsort of thing.
I do not lose sleep over theeconomy, finance, trump, biden,
(01:01:53):
mitsotakis, whoever In the past10, 15 years.
I lose sleep to none of them.
Why?
Because I'm a veteran of LehmanBrothers, the Greek crisis, the
Cypriot crisis, brexit, thepandemic.
I'm a veteran of many crises,so, no, I lose sleep over
nothing.
Everything is something we dealwith and that's what we
(01:02:15):
professionals need to do andwhat we need to communicate to
our clients.
Okay, you don't need to loseany sleep over it to our clients
.
Okay, you don't need to loseany sleep over it, and that we
don't lose any sleep over it,because we're professionals, we
know how to deal with thesethings.
Speaker 2 (01:02:29):
That's a good answer.
We're soon running out of time,so I want to squeeze in one or
two last questions.
We talked a lot about the pastand the present, but maybe
focusing on the future.
On the present, but maybefocusing on the future.
Finance is changing fast andsome shifts obviously are bigger
than others.
(01:02:50):
If you had to predict one majortransformation in global
finance over the next decade,what would it be?
And I left this questionintentionally very open, but I'm
curious to hear what you say.
Speaker 1 (01:03:05):
There are two things that I see.
The one is digital currencies,which I think will probably
append the unrecorded economies,which means that a lot more tax
receipts and probably fairertaxation across the board,
especially for countries thatdon't have particularly fair tax
(01:03:27):
systems, and the other one isenergy.
So, although this is more of ascience project you see, in all
the tariff wars and all of thatthe news that was missed a
couple of days ago was that inFrance, a reactor called West
(01:03:52):
has managed to increase fusionplasma for 30% more than its
previous test.
Why is that so important?
That will change everybody'sfuture.
So those reactors West or ITER,tokamak reactors are trying to
create energy from fusion.
(01:04:13):
It's not fission, which isnuclear.
You take a plutonium which hasa lot of atoms and then you
start smashing it and you getyou know so many million
reactions and you generate powerout of it.
Hydrogen is the exact opposite.
You take two hydrogens and youfuse them into a helium, okay,
(01:04:36):
and that generates a lot ofenergy.
And if you manage to controlthis, that's how hydrogen bombs
work, by the way.
And if you manage to control it,that's how hydrogen bombs work,
by the way, and if you manageto control it, which is what
hydrogen bombs don't do.
If you manage to control thereaction, then you can get a lot
of energy just using water as araw material Hydrogen.
(01:04:59):
You know the thing that isdefined in this planet more than
anything else.
Um, I think the world, which isdesperate for a new energy
paradigm and no, it's not goingto be policies that save us,
it's going to be technology oncemore in human existence I think
the world should pay attentionto that stuff way more than it
(01:05:22):
pays attention to all the tradestuff, cheap energy, change,
finance and the world entirelyin the next 15 or 20 years.
Speaker 2 (01:05:32):
Interesting.
And one last question that Ithought you were going to go in
that direction but you didn't.
Ai obviously a big buzzword atthe moment.
Ai obviously a big buzzword atthe moment.
How do you think AI is going tochange the way we forecast the
economy in the future?
Speaker 1 (01:05:54):
your job as a chief economist and, more broadly,
finance in general.
Okay, good one.
I got asked the same questionyesterday.
I will answer with the samething.
Why do you ask me?
Why don't you ask an AI?
And I'm not being facetioushere.
The reason you ask me isbecause you're interested in my
opinion, not Chad GPT's opinionon the subject, right.
(01:06:16):
And why are you interested inmy opinion?
Because the viewers of yourpodcast are human.
Anyone can ask that question toan AI and they can give you an
answer.
The reason you're asking GeorgeLagares, chief economist at
Forbes Mazza, is because youtrust another human being.
Remember the robot viruses thatwere all their age and now
(01:06:38):
they're not anymore.
People don't trust their moneyto models.
They don't trust.
If you go to a hospital, youwon't trust a computer.
You won't see a doctor, okay.
So you trust.
For the important stuff.
Humans trust other humans.
Humans look for answers toother humans.
(01:07:01):
We can use AI as a tool, butthose of us long in finance know
that even the best AI, at theend of the day, is a model with
biases.
So there is never amoney-making machine, and if it
is, it's going to be kept a hellof a secret and as long as
(01:07:25):
humans are running globalfinance.
Ai has a part to play, but it'sauxiliary, because you would
never entirely trust your moneyto a computer, would you
naturally trust your money to abank solely run by AI and not
humans?
Speaker 2 (01:07:41):
So my answer is not today, but the thing is that I
cannot even imagine how AI isgoing to look like 5, 10, 20
years down the road.
So I'm a bit biased.
If I could see how it's goingto look like in 20, 30 years, I
suspect the answer would be yes.
But if you ask me, would you doit today?
The answer is no.
Speaker 1 (01:08:03):
Well, so I'm saying that, based on the data we have
today, AI will be auxiliary.
If consumers and people whohave budgets are AIs, then AIs
will trust other AIs and we'llwrite ourselves out of the
global economy altogether.
But as long as the decisionmakers, your consumers, the
(01:08:25):
people who listen to yourpodcast are humans, then trust
will go to humans.
Maybe fewer humans to runorganizations to be sure and
more efficiently, but thedecision making will be human,
not mechanical.
Speaker 2 (01:08:44):
That's a great way to put an end to this podcast,
George, this conversation hasbeen nothing short but amazing.
You spilled some value bombs inthere, like so much gold dust.
Thank you so, so much for allof those views.
For all of you that are notfollowing George on socials,
(01:09:05):
please make sure to follow himon LinkedIn, where he publishes
very high quality content on aregular basis.
George, thank you so much forcoming to the show.
It's been an incrediblepleasure and best of luck
listening to the music andtrying to identify when the tune
(01:09:25):
of it changes this year.
Thank you very much for havingme, Nacho.
The Blunt Dollar is written,produced, hosted and edited by
me, Ignacio Ramirez.
Everything you hear conceptscript, sound design and
production comes straight frommy desk and occasionally, my
kitchen table.
Sound design and productioncome straight from my desk and
(01:09:45):
occasionally, my kitchen table.
Thank you so much for listeningand join me in the next episode
of the Blunt Dollar for moreraw, honest finance
conversations.
The more developed your financial system.
The more developed your bankingsystem, the more crisis prone
it is.
So what more developedcountries have done is they
empower banks to do that, andthat's why their systems are a
little bit more prone to bankingcrisis.
Speaker 2 (00:15):
Today we have George Lagarias, the chief economist at
Forbes Mazars.
With 20 years of experience infinancial markets 9 in Athens
and 11 in London George hasbuilt an amazing career,
offering a wealth of knowledgein economics and investment
strategy.
Speaker 1 (00:30):
The boom and bust cycle apart, a parcel with
capitalism.
The other choice is to have acentrally planned economy, but
that means just leaving thegreed and the gloom to the
government bureaucrats insteadof people.
There is no perfect system.
What I learned was a demandshock is not the repercussion of
an election, and demand shockhappens when there is
(00:51):
uncertainty.
Speaker 2 (00:52):
If you had to predict one major transformation in
global finance over the nextdecade.
What?
Speaker 1 (00:59):
would it be?
There are two things that I see.
The one is Two things that Isee.
Speaker 2 (01:06):
The one is this is the Blonde Dollar with Ignacio
Ramírez.
Quick disclaimer the views andopinions expressed in this
podcast are those of thespeakers and do not constitute
financial investment or legaladvice.
This content is forinformational and educational
(01:27):
purposes only and should not berelied upon as a substitute for
professional advice.
Always do your own research andconsult a qualified advisor
before making any financialdecisions.
All investments involve risk,including the potential loss of
capital.
And now let's get started withthe episode.
Welcome everyone to a newepisode of the Blunt Dollar.
Today, we have the privilege ofspeaking with George Lagarias,
(01:50):
the chief economist at ForbesMazars.
With 20 years of experience infinancial markets 9 in Athens
and 11 in London George hasbuilt an amazing career offering
a wealth of knowledge ineconomics and investment
strategy.
His career trajectory is bothdiverse and impressive.
He held roles in variousfinancial institutions,
(02:12):
including positions as aninvestment analyst, as a fund
manager and as an investmentwriter.
Since joining Mazars WealthManagement in 2016, he's been
instrumental in shaping thefirm's macroeconomic
perspectives and investmentstrategies.
His previous roles includepositions at Close Brothers
Asset Management, efg AssetManagement and Marfin Asset
(02:35):
Management, where he managedmulti-asset class funds and
equity portfolios.
George holds an MBA and aBachelor of Science in
Accounting and Finance, and isIMC and CF30 certified.
So quite a legend and very,very strong technical background
there, george.
Welcome to the Blunt Dollar.
(02:56):
Nice to meet you, nacho, sovery, very excited to have you
here with us today.
Obviously, a lot of theconversation is going to evolve
around your job as a chiefeconomist, but not only.
But I'd like to start with thatand to me, when I think about a
(03:16):
chief economist job, for somereason, the first thing that
comes to mind is how aneconomist navigates financial
crisis and, given that you'reGreek, I wanted to start
directly asking tough questionsis how an economist navigates
financial crisis?
And, given that you're Greek, Iwanted to start directly asking
tough questions.
I want to talk about the Greekdebt crisis, which you obviously
experienced firsthand, so youwere in the front lines of the
(03:39):
industry during all that period.
Obviously, a lot of people sawthe headlines, but you, as a
Greek, obviously lived itprobably closer than most of us.
For context, the Greek crisishappened in the aftermath of the
global financial crisis of2008,.
On the year after mostly, andsince then, I mean, there's
(04:00):
different stats, but what I'veread is that, yeah, the Greek
economy suffered the longestrecession of any advanced mixed
economy to date and become, orbecame, the first developed
country whose stock market andratings also were downgraded to
that of an EM back in 2013.
And, as a result, many thingshappened the Greek political
(04:22):
system was appended, socialexclusion increased and hundreds
of thousands of well-educatedGreeks left the country.
So my question for you is whatwas it really to experience the
debt crisis in Greece from theinside?
Speaker 1 (04:42):
So not only did I work in Greece, but also I
worked for a bank that failed.
That was Marfin.
It was later absorbed byanother bank and because it was
a Cypriot bank, the pain wascompounded because I also lived
through the Cypriot blow-up aswell.
And the answer is when you askhow it feels, the answer is when
(05:08):
you ask how it feels, theanswer is it's not something
that you think will ever happento you.
Even as it happens, youmaintain the optimism and you
say, okay, surely it will not beas bad as that.
You see, it's very easy to bepessimistic about others.
Extremely difficult to bepessimistic about oneself.
(05:29):
Okay, humans are built like that.
We think of death as somethinghappening to others.
Okay, when you contemplate yourown mortality, you have a
midlife crisis, so it's notsomething that terrifies you
because your mind keep pushingit, keeps pushing it away as
something that happens to othersgenerally, and you maintain an
(05:53):
optimistic stance.
Okay, and ultimately, at theend of the day, it is a
financial crisis.
Yes, it's not a war, it's notdeath and destruction.
You can always rebuild.
Speaker 2 (06:07):
So how would you say that the crisis affected the
mindset of the country?
Because obviously, behind everycrisis there's millions of
people dealing with thisuncertainty.
Do you feel it left some scars,or people have always been
pretty much forward?
Speaker 1 (06:27):
looking and it's something they don't really
think about anymore.
No, no, the crisis hasdefinitely scarred the country.
It scarred our economic andpolitical system.
To this day, greek debt isowned by foreign governments,
not markets, who require a 2%primary surplus every year,
which means that fiscal policiesare, and will remain tight.
(06:49):
If you know anything about theeconomy, maintaining consecutive
fiscal surpluses is somethingextremely painful.
Okay, the job market remainsfrozen.
So, although unemployment hasfallen to very high single
digits, the job market is frozen.
(07:12):
Okay, and that creates thisfeeling of especially to the
younger generations, a feelingof despair, that they're not
going anywhere.
So most of them, once they gettheir degree, they also grab
their passport and leave, whichis a very smart thing to do,
because if you leave at the ageof 33, like I do, you still have
to start from scratch.
(07:33):
Okay, that's what happens whenyou leave your country.
Okay, you can build up againquickly if you have the
knowledge base, but you stillhave to start from scratch or
thereabouts anyway.
But you still have to startfrom scratch or thereabouts
anyway.
Speaker 2 (07:54):
So, young people, have mostly given up.
That's the answer.
That's quite unfortunate.
It's the famous brain drainthat we hear so often.
Speaker 1 (08:01):
No, no, no, no.
The brain drain is one thing.
So the brain drain is okay.
You can argue that some of themore educated have left, but you
can't argue that those who haveremained are the weakest links.
It doesn't have to do with thebrain drain, because there are
young people here, but they'refrozen in time.
(08:21):
They're not going anywhere.
In the last few years, I hadcertain offers since I moved
back to Athens, I had certainoffers that I ended up rejecting
all of them, and the reasonbehind this is that the frozen
leaderships, no one, is goinganywhere, so there's no mobility
(08:46):
, and that is pretty much what apost-crisis country looks like,
especially if that crisis neverreached the end resolution,
which they never do.
You know, look, don't forgetGreece.
You know special situation, howit was saved.
Look at Argentina.
Pretty much a similar mindset.
(09:07):
Young people leave and thosewho stay back, they, they fight
against very difficult odds.
Okay, so once the default cyclestarts, it the tallest
generations.
Speaker 2 (09:20):
so yeah, maybe taking a step back from from g, back
from Greece, and talking aboutcrisis in general.
Because what is the dot-combubble, the global financial
crisis of 2008, the recentcrypto collapse, you name it.
Like financial history seems tobe on repeat with these things,
(09:40):
these things.
So why do markets keep makingthe same mistakes in every
crisis?
Is it just human?
Speaker 1 (09:55):
nature.
Why do we keep getting to thesevery tough situations?
First of all, we have todiscern between financial crisis
and debt crisis.
Big countries, g7 countriesgenerally speaking, they are
past their debt crisis cycle.
A lot of them have had debtcrisis in the past, but that was
up until the beginning of the20th century.
(10:16):
Okay, so debt crisis can have avery long and lingering and
generational effect on a countryand its economy.
Okay, financial crisis.
On the other hand, literatureshows that no country is exempt
from them, especially the moredeveloped ones.
So the more developed yourfinancial system, the more
(10:38):
developed your banking system,the more crisis prone it is.
I know that sounds a little bitcounterintuitive, but that's
what literature teaches us.
So what more developedcountries have done is, yes,
they have more stable governmentfinancing, but because growth
needs to come from somewhere,they empower banks to do that.
Okay, and that's why theirsystems are a little bit more
(11:02):
prone to banking crisis, are alittle bit more prone to banking
crisis, and because it's a bigcountry, they tend to export
that to the smaller countries,who are also faced with their
own fiscal crisis, and thatcompounds their problem.
Now why do we keep making thesame mistakes?
It is going back to the samefeeling and the same sentiment.
(11:22):
This will not happen to me.
It's optimism.
This time is different.
Speaker 2 (11:27):
The four most dangerous words in finance, as
they say.
Speaker 1 (11:30):
And we forget.
Case in point, in the past fewmonths it's all been about
deregulation.
Fine, we'll kickstart growthwith deregulation, because we
need to, because we cannotsaddle government debt anymore,
so we need credit to substitutegovernment debt.
But down the line, we're goingto pay for it with a new
(11:52):
financial crisis, which is beingwritten as we speak.
It might be in two years, inthree years, in five years, in
one year, in 10 years you neverreally know but it is its first.
Pages are being written as wespeak know, but it is.
Speaker 2 (12:09):
Its first pages are being written as we speak.
And what role does fear andgreed play in all of this?
Because, if I hear you like, itseems that that financial
markets and this crisis arefundamentally built on cycles.
Um, but yeah, what?
Which role does behavioralfinance play in all of this?
And is there a way to preventthese extremes?
Or you think we're pretty muchdoomed?
Speaker 1 (12:35):
I think I wouldn't use doomed.
It is part and parcel ofcapitalism.
Capitalism is prone to cycles,as you say, and we've known this
ever since the 17th century,when the Dutch East India
Company sorry, west IndiaCompany issued the first shares.
Okay, capitalism has been proneto crisis ever since the tulip
(13:02):
mania in Holland four centuriesago.
Okay, we know this.
There are ups and downs.
So it's not that we're doomed.
We have to embrace this.
Okay, cycles end and cycles.
We have an excess because ofgreed, what you call greed.
For some, it's an opportunity.
If somebody puts money in frontof you and says, okay, now it's
(13:24):
just easy to take it.
You will only incur a smallrisk, then you take it.
And if you can pass the bill tosomebody else, then you likely
will.
Okay, the boom and bust cycle apart and parcel with capitalism
.
The other choice is to have acentrally planned economy, but
(13:45):
that means just leaving thegreed and the gloom to
government bureaucrats insteadof people.
So there is no perfect system.
We've known this sinceantiquity system.
We've known this sinceantiquity.
Speaker 2 (14:06):
So you don't see this crisis as a failure of
regulation, you don't thinkgovernments and central banks
are responsible for it.
It's just like a natural partof financial markets, really.
Speaker 1 (14:24):
Even what you call failure.
Regulation is a cycle in and byitself.
We regulate, then weoverregulate, we strangle the
economy.
We make the government take onmore debt.
The government cannot take onmore debt.
We need to use the banks.
We deregulate banks so thatbanks can create credit.
(14:45):
Excesses happen.
New cycle no, we'll never do itagain.
And half a generation or ageneration later, it's the same
thing.
Speaker 2 (14:55):
So really it's not like there's anyone being
responsible for this crisis.
It's not the result of badpolicy or irresponsible
investors or things like that.
Speaker 1 (15:05):
It's just like part of a healthy financial market at
the end of the day, A badpolicy, an irresponsible policy
is part of the deregulatoryeffort, or a bad policy can be
the result of overregulation.
You can never get it quiteright.
You can never get anythingquite right.
(15:25):
You can never get anythingquite right, okay, sometimes you
need more state, sometimes youneed less state.
So Plato tried to find aperfect system.
Thomas More, in his Utopia,tried to find a perfect system.
There is no perfect system.
There is a system that is agood system for that time.
(15:46):
But as times change, andbecause human nature is in
itself malleable and changeable,that means that the perfect
system will always remainelusive.
More state, less stateSometimes we need more state,
sometimes we need less.
Sometimes we need more,sometimes we need less, okay,
(16:14):
and then you have an electoratethat's just trying to stop the
pendulum at just the right point.
Okay, you will find wisdom inthe masses, there, to be fair,
but still, development willalways be one step ahead of you,
because just when you think yougot it nailed down, the world
is moving on.
So no, there is no perfectsystem.
There cannot be in nature.
Ever heard of Kurt Gödel?
Speaker 2 (16:39):
well, just superficially, but not as much
in depth as what you're about totell me, I guess.
So his incompleteness theorem.
Speaker 1 (16:51):
along with Heisenberg's uncertainty
principle and Einstein's theoryof relativity, which shaped the
early 20th century, hisincompleteness theorem added
about 25 centuries ofphilosophical search for a
perfect algorithm that wouldsimply explain everything,
(17:13):
because the perfect system isone way or another.
It's a perfect algorithm, okay,but now we know, even
mathematically that's impossible.
Even in mathematics,mathematical axioms tend to
sometimes clash with each other,and that's what Kurt Kedl
showed, and he ended a25-century dream of finding an
(17:37):
optimal algorithm that will helpexplain and will keep things
always balanced.
Balance is something that isvery, very short-term in nature.
Okay, entropy I'm still goingback to physics.
Entropy teaches us that thereis only a very small probability
(17:58):
that the system will stayperfectly balanced and in every
other occasion it's going to beimbalanced.
That is human nature, and in ademocracy, I would argue that
this is even compounded, becausedemocracies are much more
energetic and and you knowvibrant than other systems,
which means that they are morechangeable.
(18:19):
So you go from here to here,from here to here, here to here.
What is the perfect system forall of these?
Speaker 2 (18:26):
So, going back to markets, then if I hear you like
you're saying, I mean, it's notabout whether you know who's
responsible or not, but it'sjust a part of how the world
operates.
So could there be a case to meBate that financial crisis?
So could there be a case to methat financial crisis, while
(18:52):
painful, are actually a naturalpart of capitalism and that they
even could help economies overthe long run in some way?
Speaker 1 (18:58):
I'm not sure they can help economies.
I'm saying that they are asinevitable as the bill at the
end of a lunch Okay, there areno free lunches and the more
again.
Philosophical question is Nacho, would you go to a party
knowing that you'll get ahangover, but still go because
you want to have a good time?
(19:19):
Or would you avoid the partyaltogether so that you'll never
get a hangover?
Speaker 2 (19:24):
Depends depends on who's going.
That's my answer.
Speaker 1 (19:30):
Depends on whether you have children.
Exactly when do I have to wakeup?
Speaker 2 (19:31):
tomorrow morning?
That's my answer.
Whether you have children,exactly when do I have to wake
up?
Tomorrow morning?
Speaker 1 (19:36):
This is how markets operate and you know what, most
of the times people like to goto the party.
That's a good analogy when theparty is there, you're going to
join it.
Say, nvidia trading 100 timeswhich it was about a year ago,
100 times its forward earnings,or what have you?
You want to go to the party,you want to make the profits,
(19:57):
you want to buy that house, andwe'll see what the future brings
.
Speaker 2 (20:01):
Interesting.
Okay, so we've been digging alot on this crisis topic, which
is a little bit almost I meanvery harsh I wouldn't say
depressing because it's part ofthe world and our history, but
maybe I should have started witha more cheerful part.
(20:22):
So let's maybe take a step backnow, because I have the feeling
that we jump straight intoeconomics, but let's talk a bit
about you actually and what youdo.
So you are the chief economistin a major financial institution
.
I guess a lot of people don'treally know what chief economist
(20:45):
actually does.
Sounds like a very big title,but it's probably unclear to
many what it actually means dayto day.
So, in your own words, what doesyour role as a chief economist
at a major financial institutionreally entail?
The unfiltered takes, thestories and the laughs.
(21:09):
The easiest way to support theshow is by tapping that
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finance talk that's engaging,insightful and worth your time.
Thanks so much for being hereand let's keep these great
finance conversations going.
Speaker 1 (21:33):
I'm still trying to figure that one out myself.
Details of you, no more and noless.
People want your view oncertain issues.
How will the economy play outwhen consumers are at Anything
that is present and current orhistorical?
It's very easy to answer.
(21:53):
You just dig into the numbers,create a chart, blah, blah, blah
, and you know exactly wherethings are, almost about a month
at least ago, because that'sthe most recent data that we
have, and some models can tellyou, maybe, where you are right
now.
They're called nowcasts.
And some models can tell youmaybe where you are right now.
They're called nowcasts.
(22:16):
But the chief economist, chiefinvestment officer, I would
argue, chief executive officer,chief technology officer, even
CFO, is never about the present.
Anyone can do that.
Anyone can tell you the currentstate of affairs.
Anyone can tell you the currentstate of affairs.
The chief is a person who, toquote Jeremy Irons in Margin
(22:38):
Call, listens to the music andtries to figure out whether the
music is playing, whether it'splaying louder, whether it's
playing softer and when it hasentirely stopped.
This is the only thing a chiefof any kind is supposed to do.
Speaker 2 (23:00):
Great movie, great book, by the way, for those of
you that haven't read or seen it.
So what is the most difficultpart of being a chief economist
than, like, trying to listen tothis music and really figuring
it out when the tune or therhythm changes?
Or is it something elsecompletely?
Speaker 1 (23:21):
Well, you listen to the music.
The hardest part, I think, isto get people to overcome their
own biases and listen to youwhen you have something to say
that they don't like.
To overcome their own biasesand listen to you when you have
something to say that they don'tlike.
If you say the economy is notin a good place, people don't
like to hear that.
If you say that market risksare now excessive, people don't
(23:42):
like to hear that either.
People like to hear the goodnews.
They never want to hear the badnews.
Okay, and that is the hardestpart, that about half the time
the news is bad.
Speaker 2 (23:55):
So actually that was a follow-up question that I had.
How do you approach situationswhere the news you have to
deliver your economic outlook,for example isn't what people
want to hear?
How do you deliver those badnews?
Speaker 1 (24:12):
20 years of experience.
That's how I deliver it.
I've done it for many years.
People know who I am.
They know that I don't alwaysprophesize doom and gloom.
The deregulatory efforts we'vebeen talking about them for two
years.
You've seen my attitude onparties.
It's better to go than not to,okay, but the hangover will come
(24:33):
and so will the bill, okay.
So, um, I approach it with, uh,knowledge of history, with some
gravitas that 20 years ofexperience bring.
If people want to listen to it,that's fine.
If people don't want to listento it, that that's fine.
If people don't want to listento it, that is fine too, because
(24:54):
I don't always get it right.
Speaker 2 (24:58):
I heard a good way of delivering bad news is called
the sandwich theory.
A good friend of mine told methis, which is you start with a
bit of not so bad news, or maybeeven neutral or good news.
You end with some neutral orgood news and you put the big
bad, negative stuff in thecenter, and that way it's a
(25:22):
little bit easier to digest forthe people hearing them.
What do you think about that?
I think it's cultural.
Speaker 1 (25:30):
I'm not sure where sandwiches fit into all that,
but I find big differences inculture.
Greeks, french people they wantthe bad news straight off the
bat.
They want to hear it, okay.
English people I work in aBritish company they want it
delivered in a very carefullanguage.
(25:50):
Okay, one that will notnecessarily upset people.
So Italians may not listen tothem at all.
Greeks, may you know, they mayattack you for the bad news.
Okay, kill the messenger.
It's very, very cultural.
(26:12):
How do you deliver bad news?
Okay, kill the messenger.
Um, it's very very cultural.
How do you deliver bad news?
Okay, but also in in my.
So I'm not.
I'm not a newspaper person, Idon't deliver news, I deliver
opinions, and that is the coolpart, because an opinion is
never really bad news in and byitself.
It might be an opinion thatpeople find, um, uh you, that
(26:34):
they don't necessarily agreewith, or they find it too
pessimistic, and that's fine,okay, it's up to them, it's up
to the decision makers to takethat opinion and leave it or
come back for another if theyfeel that worked out.
You see, so I don't haveanything to worry about.
Well.
Speaker 2 (26:52):
I kind of disagree about the fact that opinions are
I mean they're not necessarilybad news because it's just an
opinion, because I meanobviously there's the
velibability, the credibility ofthe person delivering the
message.
So, if I have George giving mean opinion which is a bad view
on an economy or somethinghappening, given how much you
(27:15):
know about the market, yeah, Ido acknowledge, I know that
there's a chance that you're notgetting this right and what
you're saying is never going tohappen, but there's a very big
chance that that may actuallymaterialize and hence, even if
it's just an opinion, I'll be ohdamn, I'm not happy to hear
this.
Speaker 1 (27:35):
Well, so make no mistake, it has cost me a few
relationships, those morepessimistic opinions, and it
probably has cost me a couple ofpromotions too, but I don't
think about these things for asecond.
People ask me for an opinionand I'm going to give it to them
and I will do my homework andI'm going to give it to them as
(27:56):
honestly as I can.
After that, zero regrets, Okay,and I could change my opinion
if the data changes.
I'm going to swiftly change myopinion about everything, Okay,
but because I know how much workI put into every opinion before
I open my mouth.
See, that's the important stuff.
(28:17):
If I have done my homework, ifI have done my thinking not my
homework, not my reading, but mythinking then I am serene in
delivering good news or bad news.
And again, it's up to theperson how they receive it, but
that's their struggle, it's notmine.
Speaker 2 (28:35):
So how much is it about data and how much is it
about the actual message?
Because obviously a greateconomic analysis needs to be
accurate, but if decision makersand clients don't understand
what you're trying to say, it'suseless.
So, in your experience, it'suseless.
So, in your experience, what'smore important for a chief
(28:58):
economist?
To be precise with the data orto be persuasive in how you
communicate the message?
Speaker 1 (29:05):
Ever heard of the University of Michigan Sentiment
Index Very popular in themarket, right, of course.
So this is a sentiment indexfor US consumers, out once a
month, twice actually, becausethere is the interim index as
well.
So they used to have this greateconomist called Richard Curtin
and he would look at the data,the consumer data, and he would
(29:27):
give you a story around it.
Now, eventually, after 30-oddyears, I think, curtin changed
and he was replaced, and hissuccessor, I think it's Zhou
Anshu.
I need to double-check.
That is more telegraphic aboutdelivering numbers.
This is what actually happened.
Now, as an economist, I findboth useful to be honest.
(29:51):
Now, as an economist, I findboth useful to be honest, but as
somebody, if I were somebodywho was not in the trade, then I
would prefer the story, andthis is the way I prefer to
deliver anything through stories, which is pretty much what
(30:11):
we're doing right now.
You see, stories have, storiesremain Okay, stories are stored
in other people's heads.
Numbers are not, technicalitiesare not, but stories, people.
That's how we learn, so that'swhat people can relate to.
Look, I think you have children.
The first thing you do is tellthem stories.
This is how our brain develops,since we're very young, so I
(30:36):
know my complex theory ofeverything, but if I cannot put
it into a short and cohesive andinstructive story, then I'm
questioning my knowledge and thebreadth of my knowledge first.
Questioning my knowledge andthe breadth of my knowledge
first, and then, even if I dounderstand everything, I still
have a problem.
If I cannot deliver it, thenthat knowledge is lost.
(30:57):
It needs to be digestible justenough so that it doesn't lose
any important truths.
Speaker 2 (31:07):
Yeah, and I mean, I 100% agree.
How is?
this really to make itdigestible, by the way, I 100%
agree with what you're saying,but I also feel like making
compelling and good stories isso much harder than just
delivering numbers right,because obviously you can invent
some stories that don't reallymake sense, but the really good
(31:28):
ones, the ones that stick inpeople's brains and really make
a difference, they're not alwayseasy to find, it's a lot of
work, well, so here's mypersonal secret sauce is reading
, and a lot of my reading isaround history.
Speaker 1 (31:47):
So there's always a historical analogy I can use,
and there is always aninteresting story around that
historical analogy, because fora story to remain around for
centuries, there must besomething interesting with it.
So I have found history as thebest way to weave in my
predictions.
Speaker 2 (32:05):
That's good.
Is there a specific period inthe history of humankind?
Speaker 1 (32:22):
that has more parallels than others to what
you're witnessing on financialmarkets as of today, before the
end of the 19th century, when JPMorgan essentially moved the
locus of US businesses fromPhiladelphia to New York.
Before that, business historyis not very well documented, not
(32:46):
very well written, and very fewparallels we can draw.
But from that time on, from JPMorgan's appearance in the
United States, his move fromLondon appearance in the United
States, to today, there areplenty of financial paradigms.
But again, I don't thinkhistory as just a financial
(33:08):
history, I don't just usefinancial history examples, I
use actual history examples.
You see, a problem, nacho, isthat we teach children and I
think that's a huge problem weteach children only history of
war, but there is the history ofart, history of diplomacy,
history of economics and so onand so forth.
Every aspect of human life hasits own history threads weaved
(33:30):
in, okay, and they all run inparallel.
So when I talk I rarely invokethe history of war, but I will
invoke the history of diplomacyor the history of economics.
You know, I will find relevantexamples and I will try to use
history as a guide to the future.
(33:52):
Very few things are entirelynew.
History never repeats itself,but it rhymes.
So part of that prediction istrying to find the rhyme.
Speaker 2 (34:05):
So you're a poet as a chief economist, listening to
the music and trying to find therhyme.
Speaker 1 (34:13):
Yes, what I'm definitely not and I do want to
get this out of the wayimmediately is I'm not what they
call a quantitative economist.
So there are people out therewho believe a lot in the power
of models, financial models.
Some of them, the simpler ones,can be really useful.
(34:34):
Okay, but first of all, I'm afund manager by trade, so I
can't construct any good ones,and because I'm aware how models
are constructed, ultimately youget either too simplistic
models or overfitted models,neither of which can tell you
anything about the future.
(34:59):
And I'm also extremely carefulof projecting the present into
the future, which is what mostmodels do.
You take A that is recent, bthat is more recent, and then
you draw a straight line or evena curve and you say, okay,
that's the future going forward.
And then you have a newgovernment in the us and the
global order is unbalanced.
(35:19):
Then you start all over again.
Okay, so you need to to besanguine about everything, and
that is why I understand I takemodels for their analytic
capabilities, but for myprojections, generally speaking,
I don't put in too much trustin them.
I do put a lot of trust in thephilosophical way of thinking.
Speaker 2 (35:43):
So, talking about models and metrics and without
getting into too much detail,but if you had to single out one
economic indicator that you'rea super big fan of and that you
keep looking at to assess thestate of the global economy or a
(36:04):
specific economy, which onewould it be and why?
Speaker 1 (36:08):
PMIs definitely.
I do my reading every month foryears now.
So purchase manager indicesthey come out once a month, they
cover all the major economiesand some smaller ones, and it's
interviews with purchasingmanagers either in plants or in
the services sector.
So you have the manufacturingand the services one and it is
(36:31):
because exactly it's notquantitative Market publishes
those two pages for everycountry every month and you get
a lot of information when youread it about the state of a
particular sector and an economy.
So, exactly because it's notvery quantitative in nature, I
(36:52):
like it because it has a ton ofinformation about new orders,
about employment, about pricespaid.
Just for the US, I don't usethe market ones, I use the ISM,
which is the original inventorof PMIs.
So they do it better in the US.
Everywhere else in the world Iuse the market stuff.
So if I had to choose one, I'dsay PMIs.
So they do it better in the US.
Everywhere else in the world Iuse the market stuff.
(37:13):
So if I had to choose one, I'dsay PMIs.
Speaker 2 (37:16):
That's a good one for sure you get a lot of color
with that.
So going back to the callsyou've made along your career,
some economic calls are easy.
Some others obviously havemassive implications for
investments and even for yourpublic trust.
(37:36):
I would say what's the mostdifficult or high stakes
economic call you've ever had tomake and what was the outcome?
Speaker 1 (37:46):
The end of 2022, I saw that bonds were not really
worth much.
They were yielding 1%, half apercent, and we had an inflation
wave and we had the Fed sayingthey're going to hike rates and
we had the market in disbelief.
So I just talked to my CIO.
(38:07):
I said if we cannot erase bondsfrom our CIO?
I said if we cannot erase bondsfrom our portfolios, then we
need to zero out duration asmuch as we can and we need to go
underweight.
And we need to do this becauseespecially defensive portfolios
are going to suffer, which iscrazy because if you have market
tumult, you expect theaggressive portfolios to do
worse.
But it was, in essence, a bondbear market Okay.
(38:33):
So we needed to do somethingabout that.
Bonds were no longer the safeasset Okay.
So I'd say that that was themost high stakes call I've made,
at least that I can remember.
I don't keep track of all ofthem and I don't keep trophies.
To be honest, every day for meis new.
Speaker 2 (38:52):
I learn from my mistakes and I focus a lot more
on them than my wins 2022 wasdefinitely a terrible year
Double digit returns across manyasset classes, negative returns
across many asset classes andit was nowhere to hide, really.
Speaker 1 (39:13):
No, but my call was at the end of 2022 because,
again, at that point, bonds wereyielding less than 1% and you
had the rate hikes, and you hadthe inflation, and you had the
generation that has forgottenhow to invest in bonds.
Speaker 2 (39:28):
So, talking about the calls you've made, obviously
you said you made some goodcalls, you made some bad calls,
that you're not really keeping asuper close record of all of it
.
But what's the worst market oreconomic call you've ever made
and, most importantly, what didyou learn from it?
(39:50):
Hey there, quick ad break.
Do you work in the financeindustry and have a genuinely
interesting story to share?
I'm always on the hunt forgreat guests who bring raw,
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Or maybe you know someone witha story worth telling?
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(40:12):
And now back to the show.
Speaker 1 (40:20):
Yeah, in terms of economic calls, the one I really
got bad was after Brexit, whenI thought that we would see a
demand shock and we did not, andthat explained to me a lot
about democracy and demandshocks.
So currently we have a demandshock in the us.
Okay, so the people voted forbrexit, they got brexit and that
(40:45):
you know.
All the fears of the rest of uswhat the hell would happen on
the day after didn't materializebecause people still went to
the shops and shop.
Now, compare and contrast thiswith the demand shock that we're
currently seeing in the US.
You've seen the numbers thathave turned sharply down right
Consumption numbers, the AtlantaFed indicator.
(41:07):
They all suggest that we mighteven see a small recession in
the beginning of 2025.
So why did this happen?
Why did we get a demand shockin the US?
Because when Brexit was votedfor, yes, there was uncertainty,
but you had the government thatsaid, okay, we'll figure this
(41:27):
out.
Okay, they tried to smooth theimplications of what brexit
would become, and you knowbrexit did lower trend growth in
the uk, but did not happen, asa shock came more gradually.
Compare, contrast with what ishappening today.
The present government of theunited states apparently has a
strategy to shock both marketsand, you know, trade partners.
(41:51):
That has also shocked consumers, however.
Okay, so that's a demand shock.
So what I learned was a demandshock is not the repercussion of
an election.
A demand shock happens whenthere is uncertainty.
Shock happens when there isuncertainty.
(42:15):
What Varoufakis once calledcreative how did he call it?
Creative vagueness.
There might be a better Britishterm for that, because he uses
English a lot, but it translatesas being creatively vague.
That's the sort of thing thatmarkets and businesses hate.
Okay, so vagueness, uncertaintyis something that governments
(42:43):
and policy makers best avoid.
So that's how you get demandshocks too much uncertainty.
That's how you get demandshocks Too much uncertainty.
Speaker 2 (42:54):
That's a good one, yeah, I mean.
Another thing I wanted to askyou related to all of this is
because we're talking a lotabout forecasting, about the
calls we get right, the calls weget wrong, what we learn from
(43:16):
it.
But I think a lot of peoplebelieve that economies have a
relatively bad track record whenit comes to predicting
recessions and market moves.
I don't know if it's because wetend to focus more on the
negatives than on the positives,as we were saying before, but I
mean.
The example that comes to mindwas when, a couple of years ago,
everyone thought that there wasa hundred percent chance that
(43:38):
the US would enter into arecession, and I think Bloomberg
surveyed many economists and ahundred percent of them
forecasted a recession.
That never really happened inthe last couple of years, in the
last couple of years.
So why do economies, even thebest ones, so often get their
calls wrong?
Speaker 1 (44:00):
I'll reason this out.
No, you see, first of all weneed to get to understand how to
read calls and, to be perfectlyhonest, it comes with the whole
idea of stories andoversimplification.
And that is the risk.
An economist first of all, the100% thing I would never say to
anything.
So if you asked, here is thething let's say, 100% of
(44:25):
economists predicted a recession.
But if you ask them how certaineach and every one of you argue
that that the recession willcome.
Maybe they were 60, maybe theywere 70 certain.
So, whereas you say, well, thatis 100 chance of recession
there, if you look down andcalibrate those questions
(44:46):
because that's what appropriateforecasting is then you might
see a 70% certainty of recession, even if the headline said 100.
And that's how data isoversimplified.
So economists are never certainabout anything.
That's why Harry Trumanfamously said get me a
one-handed economist, becausewhenever he asked an economist
(45:08):
they would go on the one handthis and on the other hand that.
So Harry Truman said get me aone-handed economist.
I think that in their need forcertainty, very often the
audience of economists tends totake the prediction and never
(45:30):
ask for a degree of certainty,and that makes all the
difference.
So I often try to communicate adegree of certainty.
I do it verbally, or sometimesI do it quantitatively.
I am 70% certain, I'm 80%certain.
Natural, I have never been 100%certain of anything, including
the idea that the sun will risetomorrow.
(45:52):
Okay, everything and anythingis changeable.
Speaker 2 (45:58):
That's a good point.
So yeah, going a little bitBeyond the headline and trying
to get a little bit moregranular Because you're going to
get, that's where you'll findmuch better answers Than the.
Speaker 1 (46:11):
Did economists get it right or did they get it wrong?
Because we all got jobs.
None of us got rich doing this.
So when you're pushed into acorner, yeah, but what do you
think?
What do you really think?
Will we get a recession or not?
Yes, yes, fine, fine, I thinkthere is a higher probability of
a recession.
That's not?
Oh, yeah, okay, we'll get arecession, and that's what the
press wants to hear, that's whatyour colleagues want to hear,
(46:35):
that's what your boss wants tohear.
They want to hear your viewcrystallized into one thing.
But if you're an investmentanalyst, you have to say okay,
if there is a 100% probabilityof a recession priced in and I'm
only 70% certain well, that'sactually a buying opportunity.
So you're talking about, interms of probabilities, in terms
(46:56):
of forecasts.
Speaker 2 (46:57):
Yeah.
Yeah, I agree, nothing is 100%certain.
Yeah, I agree, Nothing is 100%certain.
(47:24):
So, talking about economies andthe job, many economies are
notoriously known for stickingwith the consensus, very rarely
making bold or contrarian calls,whilst others are obviously a
little bit more out there andcontrarian.
I would say but I see why thishas happened, because being
wrong alone can hurt yourreputation quite a lot and can
end your career, whilst ifyou're being wrong with everyone
else, it's just more sociallyacceptable.
Let's put it that way.
So do you think economies avoidmaking or some economies make
(47:48):
avoid making outlier forecastsbecause there's too little
upside and too much career riskin going against the consensus?
Speaker 1 (47:58):
There is definitely that.
But also, we're all looking atthe same data.
What you say consensus we'relooking at the same data and
we're reaching pretty muchsimilar conclusions.
Okay, what I'm saying now thatthere is a danger to US growth
is what every other economistout there is saying.
After looking at the same datalike I did, okay, if you look at
(48:20):
the same data, you will reachsimilar conclusions.
If we get better data or moreproprietary data, maybe we will
reach different conclusions.
I am more aware of the peoplewho consistently go against the
grain, because there are twotypes.
There are the so-calledhedgehogs.
Sorry, let's put the hedgehogsaside.
Let's talk about the people whomake very few calls and they
(48:48):
only talk when they seesomething that's not priced in.
Okay, they might do so once ortwice or three times every
decade.
I have huge respect for that.
It's a very difficult place tobe.
I'm not talking about anything.
Consider me consensus until Isee something that sticks out
like a sore thumb, and then Iwill raise my hand and say, okay
(49:11):
, this is where the marketopportunity is, right after I've
invested in it.
Of course, now, huge respectfor these people and we always
need need them.
But there are the hedgehogs.
The hedgehogs I don't know ifyou ever heard the term that
analysts are either foxes orhedgehogs.
It comes from an old Chineseproverb that foxes know many
(49:34):
things and hedgehogs know onebig thing.
So Hedgehogs are the sort ofanalysts, the sort of
forecasters, economists, whathave you who are either always
out of consensus they alwaysspeak gloom, for example, think
Black Swans, nicholas NassimTaleb or Dr Gloom Rubini.
(49:59):
Okay, if you talk to Rubini,you know that a recession is
just around the corner and, likea broken clock, is going to be
right twice a day.
Okay, but that does not makeone a forecaster.
Having a certain way that yousee things and sticking
ideologically to that view,either that it's all going south
(50:22):
always, or that you know, orbeing very optimistic, markets
will always go up, whatever.
I don't have to subscribe tothose opinions because they are
extremes and there are peoplewho make a living out of being
out of consensus.
(50:44):
If I'm out of consensus which Isometimes am about smaller
things, but I am I might be morevocal about it because I know
it will generate some goodmarketing, to be honest, and it
will also raise some awareness.
Guys, you're not thinking aboutthis the right way.
Okay, deregulation I've beentalking about it for three or
four years.
Honestly, I initially I thoughtthat Biden would not stand in
(51:07):
the way of it, but it did.
He did, but I think it was along time coming, okay, and
that's another nature offorecast.
By the way, you might get theforecast right, you might get
the timing wrong, okay.
So the point I'm making is thatif I don't think that there are
(51:30):
people who are always inconsensus because, okay, there
is a rank and file that mightthink like that, most of them
either have a few big calls andthe real outliers, a lot of them
, just do it for the marketingIf you're consistently
contrarian, then you just expectthe one time you get it right,
(51:52):
but what about the nine timesyou got it wrong?
Speaker 2 (51:55):
Yeah, yeah.
You lose a lot of credibilityright, like if you're always
contrarian and you're nine timesout of 10 wrong.
It doesn't matter if you'reright once.
Well, I guess it's aboutsequencing.
If the one time you're right isthe first one, that's great.
Speaker 1 (52:12):
But if it's like the fifth or sixth or 10th one then
no one is going to listen to you.
They know that the one timethey will get it right, they
will get the following.
They right, they will get thefollowing.
They will become gurus.
That's what they bet on.
But that's a marketing gamethat I don't partake.
Speaker 2 (52:27):
Um, I want to change topics, although obviously still
talking super closely aboutmodels and markets.
Uh, I want to talk about, uh,the notion of risk.
Um, I'd love to to get yourthoughts on that.
So the the finance industry hasbuilt entire models around risk
using VAR, b-tab, volatility.
(52:48):
I mean many different things,but real world financial
disasters often come from risksthat no one really accounted for
.
You were talking about theblacks once before, but not only
.
You were talking about theblacks once before, but not only
.
So my question for you is Doyou think the financial industry
Truly understands risks, or dowe just measure what's easy to
(53:12):
quantify?
Speaker 1 (53:15):
And of course it's a leading question, because the
latter is the answer.
Look, you have to think how thefinancial industry Came to be
Before the 1930s.
The financial industry came tobe.
Before the 1930s, the financialindustry was all about the
broker's office, okay.
And then the Great Depressioncame.
You know you would get stocktips, yeah, you should buy this,
you should sell this, blah,blah, blah.
And then it was completelydiscredited after the Depression
(53:38):
, a because nobody had any moneyto invest and B because they
drove the world into a great bigrecession, the outcome of which
was World War II.
So it was not until the early1950s that Harry Markowitz got a
Nobel Prize for this, madeinvestment sensible again, and
(53:59):
the way he did it was byquantifying risk.
He said, okay, what is risk?
Well, risk is something that'snot.
Is things going really north orreally south?
Risk is unpredictability.
And then he quantifiedunpredictability as volatility.
Now, over the years, wequestioned two things.
(54:21):
One, we questioned the normaldistribution, which is a
statistical notion that you canactually put a number of those
upside and downside risks,Because we know now markets
don't move in what is known as anormal distribution.
They're not that predictable.
Benoit Mendelbrot proved thatthe Dow Jones has fat tails.
Prove that the Dow Jones hasfat tails.
(54:47):
And the second thing that wedid is we developed all sorts of
ratios, like the Sertino ratiothat certainly looks at downside
risks, or VAR value at risk.
So here is my view on risks.
There are two worlds, nacho.
There is the world where thingsgenerally tend to move within
so-called two standarddeviations, your normal world.
95% of days fall into thatworld and 95% of the times those
(55:12):
risks are predictable.
Along with our models, alongwith our normal distribution, or
at least the idea of a normaldistribution, is appended, and
(55:35):
then things get weird.
And that is when you need tothrow all models out of the
window.
And you need to throw allmodels out of the window Again,
going back to the job of the CEO, the CFO, the CIO, the chief
economist, whatever you want tocall them.
If they hear that the music hasstopped playing, or where you
had classical music, now youhave heavy metal, then you need
(56:07):
to know that your assumptions ofrisks are at this point wrong
and the first thing you need todo is turn to your risk manager
and have a very honestdiscussion and the risk manager
will tell you okay, things havechanged.
Yes, so my models.
I cannot throw them in thetoilet completely, but, for good
measure, add risk.
So where I thought my VAR was1,000 pounds, let's make it
(56:29):
2,000 pounds, okay, and thatwill get you much closer to
reality.
And then that is the job of theC-level, that is the job of all
these chiefs.
If they do not do this, thenwe're not doing our jobs.
And that is how you deal withrisk.
There is risk on a normal dayand there is extraordinary risk.
(56:52):
The chiefs are supposed to knowwhich day of the week it is.
Speaker 2 (56:57):
And remaining nimble and adjusting as fast as
possible when you get to thatpoint then, yes, it's, it's not,
it's, it's, it's beingactionable.
Speaker 1 (57:07):
It's, uh, it's not allowing inertia to um to take
hold.
Oh yeah, it will all be fine.
It's one of those things.
Okay, case in point uh, one ofthe things I I famously got
wrong in february 2020, I wasbeing asked about COVID and
whether it would be a thing, andI said look, we got over SARS,
(57:29):
historically in the last 150years.
We got over with the exceptionof the Spanish flu, for which we
didn't have antibiotics, by theway.
We got over each and every oneof these pandemics without major
upheaval in the world.
A month later, we were inlockdown the first in human
(57:51):
history.
That was a black swan, by theway a global lockdown.
Okay, did I get completelywrong?
No, I spoke of the world.
I knew, okay, could I haveknown in retrospect that
European countries would followChina's example to complete
lockdowns?
I'm, even then, not able to seehow, but on the first hour of
(58:16):
the lockdown, when I walkedaround a little bit and I saw an
empty neighborhood and all thestores closed and it was very
visible to me, then I said, ohshit, and I knew our world had
changed.
So clients called me becausethey saw exactly the same thing
as I did.
It was very visible that one toeveryone.
(58:37):
It was not a financial crisis,it was the other sort.
And they asked me should I beafraid?
I said, look, your stocks aregoing to take a hit, your bonds
are going to take a hit, butlet's wait for the Fed to see
what they do.
And that's the other way tothink about risks.
Risks can materialize.
Remember the 2023 bankingcrisis in the US, which, by the
(59:01):
way, came after deregulatoryefforts from the Trump
government.
A few years before that, weknew that the Fed would
intervene.
So risk is only part of thequestion.
Will somebody save us on asystemic basis from a systemic
risk?
It's the other.
It's not just what you do.
(59:23):
You need to think is there asafety net for this?
And, by the way, when it comesto the world of finance, central
banks are always at the otherside of the risk equation.
Are they doing anything aboutall of that?
Because, if they are, maybe Ishould not be afraid.
Maybe I should just take thehit and invest more.
They are.
Maybe I should not be afraid.
Maybe I should just take thehit and invest more.
Speaker 2 (59:43):
That's what a lot of people famously call.
In the case of the US, the Fedput no.
Speaker 1 (59:55):
Yes.
So that is when you talk aboutfinancial risk.
Is the central bank, the Fed,the ECB, whatever put active?
That is the next question.
When you hear that the tune haschanged or that the music has
stopped altogether, will thecentral bank do something about
it?
And if the answer is no, runfor the hills.
If the answer is yes, just waitfor it and maybe buy some on
the downside.
(01:00:15):
That is being greedy whenothers are fearful and fearful
when others are greedy.
Speaker 2 (01:00:19):
Warren Buffett, not George fearful when others are
greedy Warren Buffett, notGeorge.
What's the type of risk thatkeeps you up at night that you
think people are not payingenough attention to?
And I'm not just talking abouta market crash or inflation.
I'm talking about maybe biggerthings like cyber threats,
social unrest and things likethat social unrest and things
(01:00:47):
like that.
Speaker 1 (01:00:48):
The only thing I'm 46 , natural the only thing that
keeps me at night is when mydaughter comes to her bed and
kicks my face, um, which happensmore often than you would think
, by the way.
Um, so, yeah, she's doingmartial arts now, so she has a
stronger kick.
Um, I don't lose sleep overanything.
You see, I did go through afinancial crisis.
(01:01:09):
I stopped um, pasta.
I ended up eating, um, you know, still pasta for the next two
years that my wife was purposelyfeeding, just as a lesson there
, nothing keeps me up at night.
Life will happen.
Losing sleep over it, losinglife over what might happen, is
(01:01:32):
not any way to go about things.
That's what I've learned.
I only lose sleep when somebodypushes me out of the window
sorry of the bed, or whenPanathinaikos is playing late,
and then I can lose sleep whensomebody pushes me out of the
window sorry of the bed, or whenPanathinaikos is playing late,
and then I can't sleep, and thatsort of thing.
I do not lose sleep over theeconomy, finance, trump, biden,
(01:01:53):
mitsotakis, whoever In the past10, 15 years.
I lose sleep to none of them.
Why?
Because I'm a veteran of LehmanBrothers, the Greek crisis, the
Cypriot crisis, brexit, thepandemic.
I'm a veteran of many crises,so, no, I lose sleep over
nothing.
Everything is something we dealwith and that's what we
(01:02:15):
professionals need to do andwhat we need to communicate to
our clients.
Okay, you don't need to loseany sleep over it to our clients
.
Okay, you don't need to loseany sleep over it, and that we
don't lose any sleep over it,because we're professionals, we
know how to deal with thesethings.
Speaker 2 (01:02:29):
That's a good answer.
We're soon running out of time,so I want to squeeze in one or
two last questions.
We talked a lot about the pastand the present, but maybe
focusing on the future.
On the present, but maybefocusing on the future.
Finance is changing fast andsome shifts obviously are bigger
than others.
(01:02:50):
If you had to predict one majortransformation in global
finance over the next decade,what would it be?
And I left this questionintentionally very open, but I'm
curious to hear what you say.
Speaker 1 (01:03:05):
There are two things that I see.
The one is digital currencies,which I think will probably
append the unrecorded economies,which means that a lot more tax
receipts and probably fairertaxation across the board,
especially for countries thatdon't have particularly fair tax
(01:03:27):
systems, and the other one isenergy.
So, although this is more of ascience project you see, in all
the tariff wars and all of thatthe news that was missed a
couple of days ago was that inFrance, a reactor called West
(01:03:52):
has managed to increase fusionplasma for 30% more than its
previous test.
Why is that so important?
That will change everybody'sfuture.
So those reactors West or ITER,tokamak reactors are trying to
create energy from fusion.
(01:04:13):
It's not fission, which isnuclear.
You take a plutonium which hasa lot of atoms and then you
start smashing it and you getyou know so many million
reactions and you generate powerout of it.
Hydrogen is the exact opposite.
You take two hydrogens and youfuse them into a helium, okay,
(01:04:36):
and that generates a lot ofenergy.
And if you manage to controlthis, that's how hydrogen bombs
work, by the way.
And if you manage to control it,that's how hydrogen bombs work,
by the way, and if you manageto control it, which is what
hydrogen bombs don't do.
If you manage to control thereaction, then you can get a lot
of energy just using water as araw material Hydrogen.
(01:04:59):
You know the thing that isdefined in this planet more than
anything else.
Um, I think the world, which isdesperate for a new energy
paradigm and no, it's not goingto be policies that save us,
it's going to be technology oncemore in human existence I think
the world should pay attentionto that stuff way more than it
(01:05:22):
pays attention to all the tradestuff, cheap energy, change,
finance and the world entirelyin the next 15 or 20 years.
Speaker 2 (01:05:32):
Interesting.
And one last question that Ithought you were going to go in
that direction but you didn't.
Ai obviously a big buzzword atthe moment.
Ai obviously a big buzzword atthe moment.
How do you think AI is going tochange the way we forecast the
economy in the future?
Speaker 1 (01:05:54):
your job as a chief economist and, more broadly,
finance in general.
Okay, good one.
I got asked the same questionyesterday.
I will answer with the samething.
Why do you ask me?
Why don't you ask an AI?
And I'm not being facetioushere.
The reason you ask me isbecause you're interested in my
opinion, not Chad GPT's opinionon the subject, right.
(01:06:16):
And why are you interested inmy opinion?
Because the viewers of yourpodcast are human.
Anyone can ask that question toan AI and they can give you an
answer.
The reason you're asking GeorgeLagares, chief economist at
Forbes Mazza, is because youtrust another human being.
Remember the robot viruses thatwere all their age and now
(01:06:38):
they're not anymore.
People don't trust their moneyto models.
They don't trust.
If you go to a hospital, youwon't trust a computer.
You won't see a doctor, okay.
So you trust.
For the important stuff.
Humans trust other humans.
Humans look for answers toother humans.
(01:07:01):
We can use AI as a tool, butthose of us long in finance know
that even the best AI, at theend of the day, is a model with
biases.
So there is never amoney-making machine, and if it
is, it's going to be kept a hellof a secret and as long as
(01:07:25):
humans are running globalfinance.
Ai has a part to play, but it'sauxiliary, because you would
never entirely trust your moneyto a computer, would you
naturally trust your money to abank solely run by AI and not
humans?
Speaker 2 (01:07:41):
So my answer is not today, but the thing is that I
cannot even imagine how AI isgoing to look like 5, 10, 20
years down the road.
So I'm a bit biased.
If I could see how it's goingto look like in 20, 30 years, I
suspect the answer would be yes.
But if you ask me, would you doit today?
The answer is no.
Speaker 1 (01:08:03):
Well, so I'm saying that, based on the data we have
today, AI will be auxiliary.
If consumers and people whohave budgets are AIs, then AIs
will trust other AIs and we'llwrite ourselves out of the
global economy altogether.
But as long as the decisionmakers, your consumers, the
(01:08:25):
people who listen to yourpodcast are humans, then trust
will go to humans.
Maybe fewer humans to runorganizations to be sure and
more efficiently, but thedecision making will be human,
not mechanical.
Speaker 2 (01:08:44):
That's a great way to put an end to this podcast,
George, this conversation hasbeen nothing short but amazing.
You spilled some value bombs inthere, like so much gold dust.
Thank you so, so much for allof those views.
For all of you that are notfollowing George on socials,
(01:09:05):
please make sure to follow himon LinkedIn, where he publishes
very high quality content on aregular basis.
George, thank you so much forcoming to the show.
It's been an incrediblepleasure and best of luck
listening to the music andtrying to identify when the tune
(01:09:25):
of it changes this year.
Thank you very much for havingme, Nacho.
The Blunt Dollar is written,produced, hosted and edited by
me, Ignacio Ramirez.
Everything you hear conceptscript, sound design and
production comes straight frommy desk and occasionally, my
kitchen table.
Sound design and productioncome straight from my desk and
(01:09:45):
occasionally, my kitchen table.
Thank you so much for listeningand join me in the next episode
of the Blunt Dollar for moreraw, honest finance
conversations.
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