Why Today’s Market Is Unique But Signals a Coming Recession (w/ Tony Greer and Nick Sofocleous)

TONY GREER: I was hesitant to bring you out
here on camera because I like to have my closest
confidant in the stock market to myself, or
at least as to myself since I can get you.
Nick, I want to thank you.
You’re one of the guys that I don’t make a
major move in my portfolio unless I check
with Nick.
I don’t put on a size position unless I have
spoken with Nick in the last 24 hours.
And that has to do with your experience in
the markets.
I want to thank you for coming down today
and sharing this with us, man.
NICK SOFOCLEOUS: Well, thanks very much for
having me.
It’s a pleasure to be here.
So, let’s start right at the beginning.
August of 1987, when you got your start in
the markets.
Take it away from there, man.
The S&P at 340.
Gold under 500.
And US 10 Year Yields at 9%.
NICK SOFOCLEOUS: So, yeah, fun times in in
So, teenager, coming out of school.
TONY GREER: How old?
TONY GREER: 17, right onto a desk.
NICK SOFOCLEOUS: Yeah, well, not quite but
But as close as you can get.
And it wasn’t on a desk and you weren’t on
the phones because there weren’t enough phones
for everybody.
You weren’t in front of screens, because there
weren’t enough screens for everybody.
So, you had to work your way up.
And that was post-Big Bang in London.
There was some real jobs and real people in
London in those mid80s.
TONY GREER: And you get started right in the
buy side, correct?
NICK SOFOCLEOUS: I did get started on the
buy side.
I was very lucky.
And there was some people that decided to
take a bit of a punt from someone that was
fairly good with numbers.
That happened to be me.
Yeah, it was a really fun time.
The 25th of August 1987 was peak market, pre-crash
of October ’87.
I knew absolutely nothing.
And everybody around me was busy.
And they were busy learning.
They were busy trading, they were busy assets-allocating.
And then after August of ’87, in October of
’87, we came up with a bit of a crash.
And those days were amazing.
Because when you know nothing, you learn everything.
So, through the days in London, there was
the hurricanes in ’87.
Lloyds of London was basically was touching
go whether they were going to be around, they
had massive losses, the crash of ’87 in the
US stock market.
And there was one particular day, I remember
I turned around to a colleague of mine, really
senior, great, great asset manager.
And I turned at him and said, so, yesterday
we were buying, but today we’re not.
Can you explain that?
And he politely asked me to sit down and mind
my own business for a minute.
TONY GREER: Stay out of the way for a bit.
NICK SOFOCLEOUS: That’s right.
That was right.
So, it was ’87.
TONY GREER: So now, you’re in the middle of
the firing lines, there is a market crash
that takes the S&P down 22% or so and we probably
wallowed around those levels for the next
year or two before I guess the S&P broke out
again in 1990.
But what stuck with you from back then?
What lessons did you pull away from being
in such a volatile market with such little
education at the time?
Because I know all of that gets flipped on
its head to where we are today.
That’s really interesting.
What do you learn from ’87?
You learn from really smart people in ’87
to keep calm that if you can keep your head
while all about are losing theirs, you’re
going to be just fine.
And that’s really difficult to do in high
volatility environments.
But that’s what I learned from ’87.
TONY GREER: That’s a very good point.
So, from there, you started making observations
on markets, taking it very seriously and picking
up some tools into your toolkit as you grow
as a trader.
So, into the early ’90s, we kicked the decade
off with a war in the Gulf, we start moving
into the very, very beginning of the internet
boom, the infancy stages, I would say in the
early ’90s, ’92, ’93.
Tell me about your experience on the buy side
as a young, now, someone in your early 20s
going into that experience.
NICK SOFOCLEOUS: So, 1990, you’ve got Gulf
War I.
And the experience from ’87 takes you into
Gulf War I.
Because when we started to rise in volatility
in 1990, you could turn around today and say
I’ve seen worse.
So, all of a sudden, you weren’t panicking
anywhere near as much as you were in ’87.
Fast forward into now, you’re catching a bit
of a wave of a bull market from ’91 through
two, three and into ’94.
So, now you’re into ’94.
And you start getting an IPO calendar that
is taking flight.
So, every day, every week, you’ve got these
red herrings coming through the post, and
you’re having to read these red herrings,
there’s no email, and you’re placing orders
to buy these IPOs.
And every day, there’s more IPOs.
Now, history has told you if you could sit
through ’87, through 1990 and ’91, you were
in a bonanza situation in ’94 and into ’95.
Fast forward, you start getting into the Fed
cheap money, Greenspan doing everything that
he can do to calm everybody.
Then Greenspan turns around and says irrational
And you think the bubble is burst?
Far from it.
TONY GREER: Yeah, exactly.
So, we keep going.
NICK SOFOCLEOUS: And we keep going.
We’re into 97- TONY GREER: Amazon is delivering
everything to your house already.
Starting with books and CDs, but we’re getting
But then the real trades are, if you can hang
on to the bull market in the US, your real
trades are being driven by currencies and
being driven by rates.
So, with Russia having its troubles in ’97,
the US didn’t care, as in the US stock market
really didn’t care.
Fast forward, ’98 and LTCM blows up.
So, the lesson of ’97 into ’98 is as much
as you think it matters in Russia, it doesn’t
matter until it’s on your doorstep.
And your doorstep was LTCM in ’98, which was
another episode of if you can keep your head
while all about are losing theirs, you were
in great shape.
Because then you rode late ’98 into ’99 into
early 2000s.
TONY GREER: So now, were you actively- do
you recall yourself thinking about your first
days as a trader and the stock market sort
of crashing back then, back in October of
Are you worrying about this the whole time?
Are you seizing your opportunities on all
the tips and stuff?
NICK SOFOCLEOUS: It’s so funny you should
say that, that’s so true.
In your first experiences, you always think
they’re going to be replicated very soon.
And it’s good to have that as a mental record.
But it’s fatal for being able to trade correctly,
because you miss your opportunities.
And that’s when you try to gauge when you
have opportunities.
Are you in a bull cycle?
Are you in a bear cycle?
Are asset prices going up?
Are asset prices basically going down?
By the way, asset prices going down might
mean asset prices are just flat, which is
what we have now.
TONY GREER: So, the markets are rallying ferociously
into ’98, ’99, toward the dot-com bubble,
which we haven’t gotten to yet.
But in 1999, I know you made a tremendous
life decision to change time zones, life centers,
and everything.
Tell me what was that about?
How did you pick yourself up from being so
entrenched in the markets in London and saying,
okay, we’re going overseas?
NICK SOFOCLEOUS: Yeah, that’s interesting.
So, early ’99, I get a call from the company
in New York, Sanford Bernstein.
And they basically asked me, do you want an
adventure, and I thought to myself, I’ve traded
US now for ’99- probably eight years.
I’ve been observant of the market now for
If you want to be in the lion’s den for US
equity trading, you have to be in New York.
So, I said, I’d love to be part of that adventure,
they were kind enough to say we’d love to
have you.
And off I came from London to New York.
Now, the interesting thing about moving countries-
and a lot of your viewers will see this, a
lot of people will understand what I’m saying
is it’s damn difficult.
TONY GREER: I can imagine.
NICK SOFOCLEOUS: It’s damn difficult.
So, the people that you thought that you knew
well in a city of any time, could be 24 million
people, you can note that 12 million here,
24 in the tri-state area, you actually don’t
know anyone, it can be the loneliest experience.
So, what that teaches you is take everything
one step at a time, don’t cross bridges you
don’t need to cross until you’re asked to
cross them.
Because there’s too much to take on board.
It’s a big city, you’re being asked to be
a professional in a professional firm, in
a professional setting, where quite frankly,
you’re the underdog.
And you have to understand you’re the underdog.
And you have to fight again and again, not
only with the market, but with the people
that are in New York, it’s you- you almost
feel it’s you versus the world.
But you can’t take on the world at once, you
have to do it one step at a time.
It was a huge life lesson.
It’s one step at a time.
Trying to do anything well take steps.
And that was a huge lesson for me.
TONY GREER: Well, I would imagine it was a
huge challenge, both shifting sides of the
pond, but you’re also shifting sides of the
business, from the buy side to the sell side.
You’re going from making decisions that affect
the portfolio to make sure that you’re making
money, or at least protecting yourself to
now, establishing client relationships, figuring
out how to protect your clients, figuring
out how to educate them.
Were you ready to go on the sell side with
your sort of bag of market tricks?
Or was it very much a process of saying, oh,
this is a totally different job now, I’ve
got to really learn everything from scratch.
What was it for you?
NICK SOFOCLEOUS: No, it wasn’t relearn everything.
What you did is you took your information
that you’ve gathered in previous years, you
took your personal stats that you looked at
on your screens that you made yourself, because
they worked for you in how you looked at things,
and then you applied it to the job at hand.
And what you tried to do in those days, and
it’s the same for today, is help.
You try to help.
You try to use that information to help so
that other people could maybe be successful
using your tools.
They may not find those tools to be helpful
at all.
But invariably, they did.
And invariably, they became as successful
as they wanted to be.
And you were part of that success, which was
TONY GREER: Yes, I know.
I have some remembrances of that from being
on the sell side on a sort of later date.
But it was very rewarding to be able to say,
look, this is what I’ve learned in the markets,
you guys have got to look at this and to point
out a blind spot to somebody and have them
say, oh, that was really helpful.
You have got a seemingly endless number of
market tools that you use to look at to formulate
your views.
When you and I speak on the phone, there’s
a sort of recurrence of let’s look at this
And let’s look at this again.
And where are we in cyclical versus non-cyclical?
And what just happened in the tick index?
And what has gone on with green to red days
or red to green days?
Can you tell me how that became part of your
vernacular in any way?
It’s amazing, really.
Because when you’re in a bull market, when
your growths are going bottom left, top right.
And you’ve missed the first move.
How do you get in?
You know you’re in a bull market, how do you
get in?
So, I’ve tried to figure out how there were
these consecutive down days.
And this all took me- I don’t know- probably
took me two or three years to understand that
when you had consecutive down days, sometimes
at the end of that, it was the right time
to buy, but nobody could tell me why it was
the right time to buy.
Why would they have these consecutive down
Why were there three or four or five?
Or in the crash, there was eight?
Or nine?
Why would they be this amount?
And what was the difference between why there
was three, or five?
So, if I bought on the end day of the third
consecutive down day, why did it go down on
day four?
Was I wrong on day three?
If I was wrong, day three, why was I wrong
on day three?
So, I needed something that gave me an indicator
of that’s a waterfall, that’s everybody selling
at the same time, so that I could then go,
I will take the other side to that trade,
because I know that that usually marks somewhere
near the zenith of a move.
So, I found this index, the tick index, and
it is the amount of stocks that have just
moved higher than the last price versus lower
than the last price.
And then I had to find a number that equated
to the bottom of the waterfall.
TONY GREER: When was the selling the most
Whatever was holding the market up, when did
that go?
When did the floor fall out?
And if I was bullish, I wanted to catch the
bottom of the waterfall.
I didn’t want to catch everything going down.
That’s a falling knife.
Neither did I want to wait to see if it worked
out sometime later.
Because then, all of a sudden, you don’t get
that wonderful V and your great entry points.
TONY GREER: At the bottom, they’re near the
NICK SOFOCLEOUS: That’s right.
So, the tick index was something that I looked
at, and when I might be able to use that.
And then it was a case of what’s the number?
What’s the negative number of that?
TONY GREER: How intense of a reading do you
have to get on the downside or the upside,
obviously, but we’re talking about getting
in on a waterfall.
So, I’m assuming it’s down.
NICK SOFOCLEOUS: Absolutely right.
That took me another three years to figure
out because I was using 1000, negative thousand.
And then I would find that there was too many
days that you’d had negative 1000.
And it wasn’t timing anything.
TONY GREER: They weren’t determinable?
It was just noise.
So, then I went to 1100.
And then I had to wait for the days to see
if 1100 worked.
1100 didn’t work.
So, then I went to negative 1200 going look,
at some point, I’m going to get the number.
1200 didn’t work.
And then I had to wait for another set of
And by the way, you only get three consecutive
down days about 15 times a year.
You only get four, therefore, eight, five,
six and you’re at seven, eight, nine.
You just read, you don’t see a lot of.
So, always having to wait to prove whether
this was right, or this was wrong.
So, I came up with this number 1300.
And I remember the first time it worked and
within a bull market.
And as soon as it worked and as soon as we
bounced, a light bulb went off.
It was an utter light bulb moment.
And then it had to be proven.
And I was in a bull market.
So, the cardsTONY GREER: You’re getting the
chances to prove it.
NICK SOFOCLEOUS: The cards were stacked in
my favor.
And I knew that, so that you did want to buy.
So, you had the most important function of
I want to be a buyer, now, was a function
of trying to find where I could get as close
to an entry point as I wouldn’t get stopped
I found this negative 1300.
I also had a rule of it had to be three consecutive
down days.
NowTONY GREER: Discipline is being applied.
That’s all.
NICK SOFOCLEOUS: That’s what I’m doing.
There’s going to be days when you have negative
1300 ticks and you go, what just happened?
But that’s not an entry point.
That’s a place to ask a question.
I ended up finding this negative 1300 tick
on at least the third consecutive down day.
And during a bull market, it’s bulletproof.
Now subsequently, I’ve learned that something
gets triggered within the market to pull some
either strategies that otherwise would be
applied, they’re not allowed to be applied.
Because you see the whole screen go slower.
It’s like a go slow market as soon as you
hit that negative 1300 tick in a bull market.
The last 18 months, we’ve seen this.
On October last year, we saw that that negative
1300 tick was applied, was triggered.
And then we had negative 1400.
TONY GREER: That’s where we had several days
below that.
Reading the mood, eight or 10.
NICK SOFOCLEOUS: Now, this is where it gets
You say, well, that rule applies.
Yes, in a bull market.
So, why did it break?
Well, because we broke the market in October,
and it manifested in December.
That was brilliant information from the first
week of October for me.
And I looked at it and went, we got a broken
market and discussed it with you, discussed
it with friends, discussed it with other market
And then we get to Christmas Eve.
And you go, wait a minute, we’re doing something
very strange here.
What all we’re doing is going down, going
down, there’s going to be a divergence and
sure is X is X, Christmas Eve boxing day we
got that divergence.
And you knew at that point, with that divergence,
with those amount of panics that something
somewhere wasn’t right.
TONY GREER: Don’t fade the Fed, immediately
jumped in your face when Steven Mnuchin reached
out to six banks.
We don’t want to fight the Fed after a 500-point
slide either.
NICK SOFOCLEOUS: If you learn anything from
2008, when the Fed are involved in walking
up the steps of the Capitol, you owe phone
calls to liquidity providers.
Yeah, you don’t want to fight back.
And, look, we all do because we all go, this
is a bigger problem.
But it’s not a bigger problem until it gets
to be a bigger problem.
TONY GREER: That’s what’s been so interesting
in why I wanted to get you in here approximately
10 years since the day I met you, roughly.
Now, if we look at that, that has been over
the recent 10 Year bull market, the recent
10 Year recovery.
But what was so amazing about calling Nick
up on the phone when the market would dip,
I would call you up and be like, is this the
one or what?
And you would give me the parameters.
No, we haven’t got the 13.
And then you’d say you call me back after
two or three down days, we’d get the tick.
And you’d be like that was it.
That’s what we were looking for.
That was it right there with 100% certainty.
And it’s because you tried the theory over
the last 20 years.
And because you knew where we were, but I
think mainly because you had identified the
type of bull market that we were in, which
was going to be at that point from ’09 to
call it ’15 was essentially a Fed QE-driven
And you knew we were in a bull market.
So, you got the tick readings.
And every time I spoke to you, it was like,
yep, this is the reading right here, boom,
let’s go, we’re going back up.
And to guys like me, who are looking and seeing
things break down below moving averages, and
you’re starting to see oscillators just starting
to curl over and things like that.
I’m a momentum guy so I’m looking for this
to continue.
And you saved me about 100 times in the last
10 years, saying, nah, this isn’t the one
because we’re still within the context of
this bull market.
And that was a really educational experience
for me.
NICK SOFOCLEOUS: So, we’ve had plenty of discussions.
But when people say to me, the bull market
started on March 9 th, 2009, I’m like did
it really?
Okay, prices went- that was the closing the
low of the S&P.
But does that mean that 1972 was the start
of the bull market in the ’70s?
I don’t know anybody that lived in the ’70s
that thought they were living in an equity
bull market bearing in mind that Baron’s had
the end of equities in 1982.
Because nobody was in a bull market in the
’70s when it came to equities, you’re in a
commodity bull market.
So, fast forward to 2009, I can apply the
same action from March 2009 as 1972 when you
read some of the articles written in 1972.
And you say, well, was it really the start
of the bull market?
And my answer to that is I don’t think it
So, then someone will ask, well, when was
the start of the bull market?
And I will say it’s the fourth of October
TONY GREER: Why that date?
NICK SOFOCLEOUS: So, we’ve gone through 2010,
2011 QE forever.
We just had the debt downgrade in the July
into the August.
So, August, I think was August 3 rd , 4th,
it was the Friday that we had the debt downgrade.
And none of us knew what was going to happen.
None of us knew what was going to happen to
Now, Treasuries became bid only.
And they just got downgraded.
But you do have something then that’s on your
doorstep again.
It’s LTCM.
So, you go back and take your LTCM playbook
and go, what happened then?
It’s now one of those debt.
We didn’t care of a debt downgrade in European
Didn’t matter to us.
We were like, oh, that’s a shame.
Doesn’t matter.
It’s not on our doorstep.
Now, it’s on our doorstep.
What do we do?
LTCM was on our doorstep.
What did we do?
And then you look for times when you start
discounting bad news, which is what you said
earlier about the trade from red to green.
You get a really bad jobs number on the fourth
of October 2011.
It was a stinker.
And we went down to 1075 intraday, and it
was awful.
And everybody threw their toys out the pram,
and then we started to rally.
And then your ears perk up and your eyes become
glued to the screens.
And all of a sudden, you’re green, at the
end of the day, on the worst non-pharm payroll
print, you can imagine.
TONY GREER: Right, that’s the signal.
NICK SOFOCLEOUS: At that point you go, we’ve
just discounted bad news.
TONY GREER: That’s it.
TONY GREER: That’s your ego moment.
NICK SOFOCLEOUS: The cycle, at that point,
for me, was the yield curve.
Because it had done everything you should
have done.
TONY GREER: Flat like a pancake.
NICK SOFOCLEOUS: Well, it had steepened all
the way from 2009, all the way into 2011.
You’d steepened it dramatically.
You’d cut rates, you’d had QE forever, that
was still ongoing, rates were at zero.
And then all of a sudden, you had 225 basis
points of curve.
And if you want to look at anything, 225 basis
points of curve, somebody is going to get
TONY GREER: And that’s what happened.
NICK SOFOCLEOUS: And that’s what happened.
And so, all of a sudden, if you can reflate
your financial system, which is they were
quite successful in doing it, whether we like
it or whether we don’t, they were quite successful
in doing it.
And then you had the curves on your side,
financial systems on your side, Fed’s on your
side, who are you fighting against?
And invariably, you’re fighting against yourself.
TONY GREER: We know that answer.
Because it’s very difficult to pay a new high,
it’s very difficult.
NICK SOFOCLEOUS: It’s very difficult.
Until you do, and you get rewarded for it.
And you go you know what?
Nicely done.
Because nobody gets the first trade consistently.
You can go like, you know what?
I just missed that.
I’ve missed that one.
But if I’m thinking about this correctly,
I’m going to be okay getting involved.
TONY GREER: There’s the lesson that you taught
me ultimately, is that you don’t have to be
afraid if you miss the first five minutes
of a bull market, correct?
You don’t have to be afraid because it’s going
to have nine innings and there are going to
be nine innings that you can make money in.
And if we play it all right and we stick to
our guidelines and stick to our discipline,
it’s okay to miss the first five.
That’s why when all these other markets have
sprung to life, like crypto and cannabis,
I just got very patient.
And we’re able to say, all right, we’re going
to get a chance to get in here.
We’ll get a chance, we’re going to wait for
everybody to throw the towel in.
NICK SOFOCLEOUS: Applying all of those lessons.
It’s just deciding are going to be bullish
crypto and cannabis, or we’re going to be
And we decided to be bullish, we applied those
lessons and have had a number of opportunities.
So, that’s why I feel like that is the most
valuable trading lesson that you’ve taught
And I’ve been in off for 10 years about it.
So, but like you said, things started to change
October last year into December.
Let’s get up to speed now and talk about where
the markets are versus where they are in the
NICK SOFOCLEOUS: So, there’s a couple of things
that in the last 18 months, that you can just
look at, and it could be price appreciation,
the global growth momentum going into the
start of 2018.
And people forget how great January 2018 was,
we were almost parabolic.
Almost parabolic.
And at that point, I was like, oh, these are
usually the ends of moves not start of moves.
This is when everybody’s in the same boat
and on the same side of the boat.
And that can continue for a period but still
worth making note over.
And then for some reason, still tricky to
We hit a bit of a speed bump in that February,
we blew up the VIX ETN.
And then we rebounded.
And then through the summer, the broader market
was rebounding.
But for me, we weren’t being led by those
wonderful cyclicals.
In a great bull market, you want to be led
by the cyclicals.
Those are the high growth earners where you
are going to be well rewarded.
TONY GREER: That gives you confidence that
there’s going to be more to follow.
NICK SOFOCLEOUS: That’s absolutely right.
So, we started being led by some safer havens.
The more that we were going up, the more we
were being led by the safer havens.
And the more cyclicals were being left in
the dust.
So, all of a sudden, the hairs on the back
of your neck go up.
And you go, wait a minute, what’s happening?
And you couldn’t really figure it out.
Couldn’t really figure it out.
The Fed were raising rates, the numbers were
But if your GDP numbers are okay and your
growth numbers are okay and your PMIs are
okay, why aren’t the cyclicals running?
Fast forward into September, and we start
dislocating some currencies, and we start
dislocating some bond markets because they’re
pricing for cuts, because they see something
around the globe that isn’t global growth.
So, all of a suddenTONY GREER: First time?
NICK SOFOCLEOUS: For first time in eight years.
First time in eight years, they don’t see
global growth.
They don’t see global growth, bond market
starts to sniff out a Fed cut.
And yet, the Fed are like, no, we’re going
to raise.
Then we get a very decent PMI in August, September-
probably the first week of September.
And the bond market dislocates.
10s go from 280 up through 3%.
And quickly go up to 320.
Now, there’s no problem with having 10 Year
paper trading from 280 to 320.
If I told you that was over the next 25 years,
you’d be like it’s not a problem.
Going 280 from 320 in three weeks, yeah, you
have a velocity issue.
You’re going to have a problem somewhere with
And you’re going to have a problem somewhere
with equities.
And that’s what we found in October, all of
a sudden, something broke in October.
No one’s entirely sure what it was.
But we could see it.
We had the trigger of Khashoggi disappearing
and oil coming apart.
That was one slight trigger that started.
NICK SOFOCLEOUS: Entirely plausible.
Just an idea.
Maybe it wasn’t, maybe it was, who knows,
but the timing is similar.
NICK SOFOCLEOUS: It’s all part of the tapestry.
It just stitch.
And you will have your triggers that are on
your screens and I will have my triggers that
are on my screens.
And all of a sudden, we might come to the
same conclusion.
But looking at different things.
And when that happens you’ve got something.
It’s always the same.
Somebody comes from the left, you come from
the right, you come to the same conclusion.
And you go, can you talk me through how you
got there?
And I’ll talk you through how I got there.
And that’s where we find ourselves.
TONY GREER: That’s where we find ourselves.
And we find ourselves I think, in an increasingly
uncertain position due to the President.
For the first time, we’ve got a White House
that is barking like a dog at the Fed Chairman,
floating stories about trying to decide whether
or not they can legally remove the Fed Chairman.
It’s a new paradigm, and it has become the
focus of the markets.
How’s the White House and the Fed are interacting?
Are they getting along?
Is Powell going to listen?
Is Trump going to win?
What’s going to happen?
Clearly, the markets have won over a lot of
fans into thinking that the President is really
going to have a serious control over the Fed.
We just went from pricing in four rate hikes
to pricing in three rate cuts in a year.
And I feel like the Fed is compromised now.
But what do you think?
NICK SOFOCLEOUS: It’s entirely plausible.
I think that this is an environment where
none of us have seen.
I think it’s an environment where history
doesn’t teach us too much.
And you really don’t want to jump the gun
and say, the current environment reminds you
of early ’70s with Nixon and his then Fed
I’m not entirely sure that I’m in that camp.
I think- and this is, again, this is new for
I do believe that the Fed don’t have a choice
in cutting rates.
I think that the market was ahead of itself
last September, got caught offside, the dark
plots of the Fed just came down by 50 basis
points for the end of 2020.
These are facts, these are- we know.
TONY GREER: Known knowns.
NICK SOFOCLEOUS: I think when you’re dealing
with the White House, you have to take the
information, try to distill what your screens
are reacting to.
And once you are able to distill that, which
is very difficult, and none of us know the
answers because this is a different White
It’s a different Fed chair.
This is not Janet Yellen.
It’s not Alan Greenspan.
It’s not Ben Bernanke.
You were able to understand the environment
that they were working in.
This environment is different.
The White House has made this environment
a little bit different.
Powell is a different man entirely.
I did have a bit of an issue with how easy
it looks to him in late 2018.
I was like, it’s never that easy.
If it was that easy, this would have been
done already.
TONY GREER: He was a hot beaming with confidence.
TONY GREER: And they’re coming, we’re going
to raise rates, we’re going to do what the
country deserves kind of thing.
NICK SOFOCLEOUS: We’re on autopilot.
I don’t know about you, but autopilot- not
the best of strategies when you’re the Fed
We’ve basically got a Fed that is going to
cut rates.
If they don’t, there will be a dislocation
And that is again on our doorstep.
I think the market’s pricing at 160 in end
of 2020.
And at the moment, the Fed is significantly
above that.
To tank.
So, you’ve got a real issue.
10 Year papers trading at what, two or three
TONY GREER: Give or take.
The curve’s at 25 basis points, give or take.
And there’s no doubt in my mind that that
curve has to steepen.
There’s no doubt in my mind.
And the trouble with a bull steepening curve
is you can count the days ’til you have a
dislocating equity market.
You think so?
TONY GREER: Or do you think we’re going to
have strong data that comes out?
NICK SOFOCLEOUS: No, I think we’re going to
have- Okay, this is that’s really interesting,
strong data, as opposed to what?
Weak data?
TONY GREER: Yeah, I’m just thinking strong
data potentially dislocating the bond market
So, manufacturing data right now is appalling.
It’s terrible.
Consumer data is very good.
The unemployment data is very good.
Consumer confidence is very good.
The homebuilders index seems to be fine.
New Home Sales seem to be fine.
And as do with the consumer, she was not massively
The balance sheets look pretty fine.
That’s terrific.
And then you look at the manufacturing data,
and you go, this is tricky.
This looks really bad.
It looks a bit like 2050 when we had the earnings
recession driven by energy of which you know
only too well.
So, then you end up with, so what data am
I looking at?
Am I looking at the manufacturing data?
Or am I looking at the consumer data?
Because the consumer data is okay, but the
manufacturing data stinks.
TONY GREER: How do we work out of it?
NICK SOFOCLEOUS: How do we work out of it?
I don’t know, I really don’t know.
You don’t ever want bad things to happen.
Nobody wakes up in the morning and go, you
know what?
I really hope today bad things are going to
But at this point, we’re going to have to
manage our way through softer manufacturing
data and okay consumer data.
And what you don’t want to see is more of
the White House, more of China, more of the
tariff, more of the trade talks, more of that
uptick in rhetoric affecting the consumer
data, because it’s already affected the manufacturing
Now, it might not only be that there might
be several other estimates.
Those are fair observations.
NICK SOFOCLEOUS: This is where it triggers.
So, does a weaker manufacturing data trigger
some weaker consumer data?
Or does the consumer data, being very good,
help to mitigate and pull up some of the manufacturing
And I don’t have an answer to that.
And I’m trying to find those answers every
day, I’m trying to find has the market sniffed
out that the consumer data is going to help
the manufacturing data?
At the moment, all of those cyclical cross
currencies are not saying that’s the case.
TONY GREER: Right, that’s true.
NICK SOFOCLEOUS: The Chinese data, the base
metals are not saying that’s the case.
Crypto, for interests of knowledge is not
saying that is the case.
You want copper to trade well.
You want China to trade well, but China goes
up because they stimulate.
China goes up because they’re issuing credit.
And you go, okay, I understand that you need
to do that.
But that’s really not a fully-fledged bull
Then you go back to, okay, what did 2009 teach
It taught me it wasn’t a fully-fledged bull
What did 2007 teach me?
Well, it taught you that we were all offside
all the way up into basically October of 2007.
Because we were like, there is trouble.
But the market kept going up.
Now, what happened in 2008 is you could look
at 2007 and say, I told you so.
Well, great.
Good for you.
How do you trade it?
You have to be really careful.
If you want to trade that on the long side,
you know that your trades are shallow.
If you want to trade it on the short side,
now, it’s going to cost you money.
Because every now and again, you’re going
to get a short squeeze.
And that is going to hurt.
And I do find that right now in 2019.
Just fast forward into 2019.
That’s where we’re at.
Those short squeezes can be brutal.
And the leadership is less than stellar.
TONY GREER: Panic buying into highs on steep
high magnitude game days, likeNICK SOFOCLEOUS:
Right, and the one great sector right now
is software.
There’s data galore saying people are buying
software for productivity gains.
But at some point, you start pricing that
as well today, little bit weaker on software.
A lot of people asking questions, no normal
What did the market do?
Market really didn’t do too much.
It was a few ups, a few downs.
Oil was okay.
Gold was at 1420.
I know what caught my eye.
A little bit bad on software, a little bit
better in gold and precious metals.
Well, let’s speak to that right now.
Gold’s clearly staging a potential breakout.
Technically speaking, we haven’t been above
1400 in about three or four years.
It’s obviously a direct reaction, in my opinion,
to the negative yield pool starting to expand
again into the 12 and 13 trillion area.
What are your thoughts on gold?
Do you think gold has legs this time or?
NICK SOFOCLEOUS: So, I was lucky.
Like you, I played the precious metal trade
from 2009 throughactually, into 2011 when
I found that equities were going to be a little
bit better for me.
Thankfully, you don’t have to catch the bottom.
You don’t have to trade the top.
But there’s an awful lot of things that look
similar in regards to why you would own precious
metals, you’ve got interest rates that are
going lower.
You got manufacturing that’s down.
Your only numbers that aren’t deteriorating
are in the consumer.
Well, gold doesn’t care about the consumer.
Gold is, for want of a better word, a store
of value.
You might not like that value and you might
not agree with what that value is, you might
think that value is lower.
That’s okay.
But it’s still a store of value to many.
For me, it’s a ticker symbol on the screen.
And if it trades well, I can get my head around
why it’s trading well, that’s fine.
That’s fine.
I don’t have to marry it.
But I do have to own it.
There’s always a bull market somewhere.
You just need to be able to see it, and you
need to be able to play it.
TONY GREER: That is a great point.
That’s a great point.
And with 30 years, or 30 years plus of your
history, I have a lot of respect for you saying
coming into the situation right now and saying
totally different, something we haven’t seen
That’s to me a sign that your eyes are wide
open, and that this is a very different paradigm.
And then you’re not willing to just go back
and compare it to something that happened
20 or 30 years ago, because to me, that was
a scary comparisons as well, because the world
is so much different.
NICK SOFOCLEOUS: I would be very interested
to have been around during something like
the Cuban Missile Crisis.
Where every day you woke up to a headline
going, we’re three minutes away from pressing
big red buttons.
Right, good grief.
That and all we can do is read about those
But it does seem to me as though as much as
we think this is a really bad situation, it’s
2019, it’s not the early ’60s.
We’re not quite there.
So, as much as people say, this is terrible.
This is a disaster for the country.
I think some of those comments need to be
tampered slightly.
TONY GREER: Yeah, yeah, that makes sense.
What’s amazing is that they would have called
Trump as a tremendous war hawk as he entered
into office.
And it seemed like he’s been at least, maybe
not in the best of class, but he’s been sort
of globally pretty careful.
Within the last week, we’ve seen the drone
go down.
And there was no air strike for whatever reason.
TONY GREER: Right, following a Japanese tanker
blowing up.
Right yesterday.
NICK SOFOCLEOUS: So, without knowing all the
facts, all we know is these headlines.
So, for someone to just turn around and say,
all he wants to do is go to war.
I’m like, well, that doesn’t look it to me.
Because he hasn’t done that yet.
Now, do I think that his international diplomacy
is top class?
No, I do not.
But that’s just an opinion.
What matters to me is markets.
How do we react?
How did we react to that drone?
How did we react to the tanker?
But I thought the oil markets reacted perfectly
to an increase in stress in the Middle East.
TONY GREER: Yeah, that’s about it.
It took them a little while, but the price
rallied 10% or so.
And that the oil market respected at the gold
market I think is respecting that among other
There is certainly a good reason to be sort
of looking into buying commodities on the
We like precious metals.
Oil seems to be trading okay off the lows
Most importantly, I wanted you to sort of
define- you were really great.
And I just want to wrap this equity portion
up, you are outstanding in identifying the
bull market from 2011 to 2015 as this is going
to be a sort of Fed-assisted slow growth period
that the S&P is going to be happy with.
Then from ’15 to ’18, or soNICK SOFOCLEOUS:
Well, ’15 to ’16.
We were raising rates, the economy was growing,
we had global growth.
So, that was the premise of the market, higher
rate, stronger economy.
The S&P is okay with that.
NICK SOFOCLEOUS: So15, you had your energy
issue, where we started to go down, but the
larger picture was you’re going to get an
opportunity, because the cycle isn’t over.
And that was when you could buy S&Ps at 1835.
If I told you right now, you could have bought
S&P at 1835, what would you say?
Thank you.
You’re 2950 and you say, okay.
1835, you’re good to go.
TONY GREER: So, where are we in the cycle
NICK SOFOCLEOUS: Oh, we’re really late, because
we just changed.
We just had the Fed- the Fed have just changed
the cycle.
Because now, we’re in a lower rate environment,
we’re in a cutting rates environment.
And the only time that the Fed have cut rates,
and it’s worked out well, was late ’94 into
Difficult to see this being 1995.
It’s just more like ’08, ’09 where they cut
rates and the market wouldn’t take it.
NICK SOFOCLEOUS: Right, because you had deteriorating
economic numbers and the productivity gains
just- with the internet, that was amazing.
You just don’t have that now.
You have business investment, business investment
is not accelerating now.
Back in ’94, ’95, business investment was
as a percentage of GDP, was going through
the roof.
And you can see that, anyone can see that
on their charts, you just need to know how
to calculate it and you’ll be able to see
And it’s a beautiful chart to show you the
And if you overlay that with a curve, you
really are 50% on the way to figuring out
what does the cycle look like?
TONY GREER: Well, I want to keep moving.
Because we covered a lot of ground in the
markets, we covered a lot of market history.
And we let a couple of your tricks out of
the bag, which was fun to do.
But I want to sort of take a worldly view
back, because our viewers have been enjoying
me asking guys the question, if you are a
young person in the markets today, and you
see all these super traders and Masters of
the Universe on television and you wanted
to become one, what would your first step
be into the financial markets?
What do you think is available, whereas you
and I could try to get a job at a big investment
bank working on a desk of 30 guys, or men
and women.
Today, what are the opportunities for somebody
that wants to become a trader?
So, the environment has changed from when
you and I decided that financial markets were
where we wanted to be.
Financial services have changed.
There’s a couple of places that I would look
at, first of all.
One is deciding what my skill set was at this
You’re 23, 24.
What’s my skill set at 23, 24?
You’ve probably got boundless energy.
Do you like the markets?
If your answer is yes, and you want to test
yourself against them, terrific.
And you need to find yourself a seat, there
are companies that will allow you to do so-
whether it’s using their capital, using your
Those aren’t the large banks anymore, because
we know that doesn’t exist.
But they do exist in a smaller environment,
in a collegiate environment in different companies
right now.
TONY GREER: So, getting a job managing risk?
NICK SOFOCLEOUS: Managing your own risk.
And you can be taught by people, and there
are plenty of well-versed, very successful
people that would gladly have you on their
team if you are successful.
If you’re a successful trader in front of
your own screens, people will like to have
you on their team.
Trying to find those companies is quite tricky
because it’s a new set of ventures for people.
As the banks lost to people, these new trading
rooms did start up.
That’s one avenue.
I think that’s a very high risk avenue.
I think that you need a counselor.
You need somebody to teach you.
And you need that constant because a lot of
that is about confidence.
The second thing is always- it’s something
on the wealth management, you can help people
within the wealth management business, and
being involved in markets.
And be hugely successful while helping other
That’s a good gift.
That’s a terrific gift to have.
So, it really does depend, I think, on how
you perceive yourself at a given age within
your cycle.
Your personal cycle.
TONY GREER: Yeah, that’s a good point.
If you are beaming with confidence, and you
want to give it a try, and you’re single,
you could probably get a job trying your own
day trading operation somewhere.
It’s not out of the question.
NICK SOFOCLEOUS: It’s not out of the question.
I wouldn’t advocate that.
That’s a high risk strategy where you don’t
even understand what your own risks are and
how many risks you want to take and when.
But there are plenty of operations when you’re
looking to get into that type of market.
Trying to be within financial markets, trying
to get into a hedge fund.
There are hugely successful hedge funds.
Super smart people.
They are a joy to work with.
They are a joy to work with.
Not everybody’s on TV.
Not everybody shouts from the rooftops.
Sometimes, really, the best people, they’re
around, you need to listen to them.
Do your homework.
Some of these guys will take the best of the
TONY GREER: Yeah, that’s true.
I like the wealth advisor idea too, because
you can sort of swap your interpersonal skills
and be wildly helpful to a wealth advisor
operation and use that as your platform to
learn about the markets rather than having
them at your fingertips.
NICK SOFOCLEOUS: Absolutely right.
TONY GREER: Yeah, that’s a really good point.
There’s a reason why family offices have grown.
There’s a reason why the very large, historically
large Wall Street firms want wealth management
There is growth in wealth management.
And it’s okay to understand this.
Well, there’s growth in wealth management.
That’s okay.
TONY GREER: So, even as the landscape changes
quite a bit over the decades that there’s
still entry level opportunities for people
that want to be in this business?
NICK SOFOCLEOUS: Absolutely right.
TONY GREER: Yeah, that’s a fair point.
That’s a fair point.
All right.
Well, I want to get way off of the business
cycle and the business topic for a minute
and ask you, Beatles or Stones?
TONY GREER: That was an easy one, huh?
TONY GREER: You didn’t think twice about it?
TONY GREER: What was your earliest turn on
from the Beatles?
When did they hook you?
Family had their records.
TONY GREER: Oh, yeah.
It was all there before you.
NICK SOFOCLEOUS: Oh, my goodness.
And also, they had melody.
So, my record collection is nowhere near as
vast as yours.
It’s not really my thing.
But as I got older, the Stones- you started
listening to some of the Stones and going,
oh, these guys were good.
These guys were good.
So, nobody’s bad here.
It’s just a preference.
TONY GREER: That’s for sure.
Like the Beatles or Stones call you- the lesser
of two greatness.
You know what I mean.
So, you can [inaudible]- NICK SOFOCLEOUS:
Light blue, dark blue?
Which one’s your preference?
TONY GREER: You look great in both.
That’s perfect, man.
Well, we covered a lot of ground.
I really appreciated you sharing a lot of
your trade secrets, your history.
All of this is so helpful, even for me to
go over in an interview, and hopefully for
the people that are watching to get your sea
legs in the market and learn how to do that
and learn how to survive.
So, I can’t thank you enough for taking the
time today, Nick.
NICK SOFOCLEOUS: Absolute pleasure.
TONY GREER: Great job, my man.
TONY GREER: Brilliant.


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