Karen Finerman
speaker
87 appearances
1 recordings
1 series
first heard Apr 2025
last heard Apr 2025
Karen Finerman’s voice in public audio — every appearance, attributed to the second.
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Appearances
I wouldn't be exploring them now for the first time. I can tell you it is a wild, wild market out there. And with zero day options, I wouldn't touch those. And those are options that expire. The same day. Right.
Yeah. With probably very, very good information. Yeah. Yeah. So there's that going on. That's not luck. No. Would you want to step into that? I mean, would you follow it? Maybe. That might not be so dumb. Right? That could be like, look, I don't know what's going on, but I know that that guy does. That's... It's not an even playing field right now. It is not.
And so this isn't the time if you don't if you don't use options, this isn't the time to start trying them out. But I do. I think it's a good tool to have sort of in your, you know, your toolbox to be able to express. You can a long bet. Right. You want to know the name. But let's say there's a lot of risk. You feel like other business could be terribly damaged in a tariff war that's protracted.
Then you can buy calls instead of the stock and know, all right, here's the most I could lose. You know, with certainty, you know what they call how much you can lose. You don't know how much you can make on the upside. And, you know, really is a lot. That's great. But you know what you can lose. So certainty, again, is important.
good thing to have yeah it's insurance you know buy it yeah insurance insurance the fire right how much how much is fire insurance now it's not even available probably right yeah right exactly so same thing with hedging lock in your protection before the chaos right chaos it's very expensive and usually doesn't work out well when you buy protection in chaos
I can sort of, but honestly, I'm not sure. I can tell you sort of what's happening. So we're seeing normally when there is a crisis such as this, there is this, what's called a flight to quality. And money around the world goes to the United States because it is the safest, the biggest, the rule of law, all of the things that make the US market great.
And so people buy US dollars and they buy treasuries. They might buy short term, they might buy the 10 year, for example, and That's usually what happens in a crisis. That did not happen in this crisis. In fact, the reverse happened. So there was selling in treasuries. We saw the 10-year yield. When people sell the bonds, yields go up.
They need to, you know, if you want to entice more people to buy those bonds, you have to pay more interest. So that worked the opposite way that we would have seen. And so when you have people from around the world, let's just use the example of Chinese sellers. I don't know how much of the selling was Chinese sellers, but they own hundreds of billions of dollars of bonds, $750 billion of bonds.
So they sell their 10-year bond. You get dollars back for the bond. They sell those dollars. So you have this effect of the bonds going down and the dollar going down, which is the opposite of what you thought would happen. In addition, there was this giant levered basis trade on that had people... Buying the 10-year, selling the 30, and they have to get out.
That was sort of on top of it in a chaotic market. And then you had one more thing, the Japanese yen trade, which has been on for years, which is people... They take that money by dollars, by treasuries. Well, that started to unwind when China, when Japan started to raise interest rates and the yen appreciated. And then there's this question mark of, is the U.S. going to remain the reserve?
Is the U.S. dollar going to remain the reserve currency of the world? I think so. But the idea that that's even a question right now is scary. So... A lot of things going on. Plus one other thing, which is in the last year or so, there's been a move out of some U.S. equities into other countries, mostly Europe, because the valuation differential has gotten so huge that we talk about U.S.
exceptionalism and how great this country is to do business and rule of law and all of that great capital markets, all of that. But the EU had underperformed for so many years and the U.S. markets had done well. The value proposition changed. So money started to leave the U.S. having nothing to do with tariffs. This this predates Trump's election.
Prices go up. That's sometimes confusing if you're new to it.
And then the dollar goes up.
Was really weird. And one more thing to think about was that... The Trump administration's plan was, OK, if we slow the economy, then bond yields in the 10 year in particular will trade down. meaning the interest rate will be lower. So we know we have this enormous deficit that we need to fund. And one of the ways to fund that, you sell 10 years.
You can sell much nearer in, but then you gotta keep rolling and you don't know where interest rates will be. So it wouldn't have been a terrible thing if the 10 year traded down because there were concerns about a recession and that we were able to issue tens of billions of dollars or hundreds of billions of dollars of 10 years at a low rate. And so our interest rate costs would have gone down.
But that's not what happened. And I think that correlation breaking down is what ultimately made Trump put on the 90 day pause to cool down the things that seem to be almost breaking.
Yeah.
Your money, if you're in the U.S., buys less. So one of the things that originally the Trump administration had talked about was, well, other currencies are going to go down against the dollar because we're, you know, king of the world. And so that even if we are tariffed, that will lessen some of the blow. And that's not what happened, right? So the euro has appreciated a lot.
The pound has appreciated. The Mexican peso is about flat from when he was elected. The Canadian dollar's down a little bit, but these big moves are not happening. So that's interesting. I don't know what exactly to make of it.
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