Charlie McElligott on How Long the Stock Market Rally Can Go

Stocks plunged after the April 2 "Liberation Day," in one of the worst drawdowns in the market's history. Since then, however, we're basically back to all-time highs and things have been pretty calm in the market. On this episode, recorded live onstage at our June 26 event in New York, we speak to Nomura cross-asset strategist Charlie McElligott, about what's been driving the rally. He says he's seen "relentless" selling of volatility as investors who sold back in April chase the rally. That's culminated in some weird market dynamics. The question, of course, is how long this can continue and what it would take to unsettle things from here. Only Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox — now delivered every weekday — plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlotsSee omnystudio.com/listener for privacy information.

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• 0:00Speaker 00

  Finance is increasingly being built on digital rails. But as the adoption of virtual assets, tokenization and stable coins grows, can regulation not only keep pace but help accelerate it? Find out more later in the podcast.

• 0:16Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 0:58Speaker 01

  and hiring practices, but according to recruiters, advisors and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates quote "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.

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• 2:29Tracy Alloway?

  Hey there, Odd Lots listeners. You are about to hear a very special episode of the podcast. This was recorded live at our June 26 event in New York. We are talking with Charlie McGillicuddy. He is, of course, Managing Director and Cross Asset Macro Strategist for the Global Markets America's Business over at Nomura. We talked to him about volatility in the market. What else?

• 2:51Joe Weisenthal?

  Yep, it's been a kind of extraordinary couple of months with stocks basically at all-time highs despite so much going on in the world. What actually explains what's happening? Charlie does a pretty good job, so take a listen. Thank you so much, Charlie, for being here.

• 3:06Speaker 06

  Awesome to be here. Awesome to see you guys.

• 3:08Joe Weisenthal?

  So I didn't actually see where the market closed today, but like we're pretty close, like either we're at record highs or very close to it. I didn't actually see. But it's crazy to me, all that's happened in 2025 and like we're sitting here at all-time highs. It's not intuitive. You have to admit, it's kind of weird.

• 3:26Speaker 06

  The, you know, I think the message, I'm trying to remember the last time I was with you guys, but probably the message I was communicating at that time was the fixation and kind of the dooming with the left tail scenarios.

• 3:39Joe Weisenthal?

  Yeah.

• 3:40Speaker 06

  And as so often is the case, when people are not incentivized to see the world burn, which might be debatable to some.

• 3:49Joe Weisenthal?

  Sure.

• 3:50Speaker 06

  But and you start seeing, especially with regard to negotiating tactics and things like that, where you start getting that not quite as bad as feared scenario. Oftentimes, there's an impact, certainly with the mechanical stuff that we so often talk about, and you really underprice the less bad outcome. And there's a mechanical impact, there's a lot of vol distribution stuff, and it creates second order impacts, second order flows. I think the most Fascinating two points that I would say outside of the, you know, the mechanical flows that we talk about and the volatility component of this is two things. I think back to 2022,

• 4:32Speaker 06

  where we had our first kind of inflation-driven macro bear case, right? We just started the tightening cycle. I think there was nine or 10 months in a row of inflation upside surprises with CPI. And, you know, the macro bear case for equities at that point was this earnings recession where due to this price shock, it was going to impact consumption, top line sales go lower, and, you know, so on and so forth. What ended up happening is ironically because of the health of the consumer and tight, tight, tight employment with wages at 40-year highs, you ended up actually getting a dynamic where the corporate world operates on aggregate consumption. They operate in the nominal GDP world. And

• 5:14Speaker 06

  that inflation perversely for the bears was the earnings catalyst. And all those folks got stopped out in 2023. There is an element of that still to this day right now as it relates to earnings, even though like nominal GDP is in a different place to a certain extent, still kind of 5%-ish. But the other point too is that as it relates to the capex spending uncertainty story, right? If, you know, corporates don't know what they're supposed to do with their cash because of the, you know, the kind of range of outcomes with regards to, you know, where they, where these, you know, tariffs are going to end up, the sand in the gears of the global economy. Well, the thought was of course, you know, if corporates

• 5:59Speaker 06

  don't know what to be spending on, and consumers are feeling that impact as well, you're going to get this eventual drag with regards to consumption, you're going to have corporates in a bad place. You either lose the top line sales because consumers are paying through the roof, or you have to absorb those costs and your margins go lower. But what corporates have instead done have taken authorized buybacks to all-time highs. So we're not spending on, you know, R&D, we're not spending on hiring or building that new plant, we're going to buy- Back more stock than ever before year to date.

• 6:31Joe Weisenthal?

  Interesting.

• 6:32Speaker 06

  And that, you know, if you look at corporate buyback flows as a source of demand for equities over the past 10, 15 year period, it's a magnitudes, six, seven, eight times magnitudes, largest source of demand. So you've had these two kind of unintuitive dynamics in the market that have actually kept us higher on top of all those kind of vol scaling things that we like to talk about.

• 6:53Tracy Alloway?

  All right. So the other thing that's happened is people are back to actually selling vol. So basically betting that, you know, things will stay relatively calm. Why is that happening? It seems like a weird time to bet against volatility.

• 7:06Joe Weisenthal?

  There are so many headlines. Yeah.

• 7:07Speaker 06

  I think, I think selling vol has become a new form of fixed income. In a world where bonds are no longer a risk free asset. Now that, you know, can go wrong so many ways. In this case, the proliferation of like premium income overriding strategies within the ETF world, exotic structured products. And kind of, you know, more, I would say, you know, complicated, you know, vol selling strategies like dispersion, things like that. The number of vol suppliers out there, very short dated, it gets dealers stuffed on gamma, I always like to say. And in that sense, you know, particularly with the amount of short dated volatility selling,

• 7:52Speaker 06

  you know, when dealers are stuffed on gamma, it compresses the distribution of outcomes, right? If market's moving higher, you're selling into that. Market's moving lower, you're shock absorbing. The thing that I would say, back to that point about, you know, selling volatility is some sort of kind of fixed income product. Back in 2022, with that tightening cycle and all the, the bear dooming with regards to, you know, we're going to break something. You know, such a, such a powerful, you know, ultimately over 500 basis points of type of hikes. The, the trick was that, okay, you, the Fed is telling you to be short assets. You need to be able to sleep at night. Cash was an asset again. So, you know, market was down thirty some percent. Bonds were down simultaneously.

• 8:34Joe Weisenthal?

  Didn't it really sell off that much?

• 8:36Speaker 06

  Yeah, S and P and NASDAQ was, you know, you know, even bigger than that, obviously, because remember it was like this tech centric growth kind of unwind. But what ended up happening was that, you know, the Fed was trying to create a negative wealth effect. We've talked about that before. Because they couldn't impact supply side disruption. They could only impact demand side. And by telling you to be in cash, you could sleep at night. Well, guess what? The next year, you missed a fifty percent rally in the NASDAQ. So what really smart marketers have done is say, well, I'm going to give you price appreciation of equities. Just capped. And off the back of that too, we're going to sell out of the money calls against this. And you get this like little premium income thing and it's, you know, they're never telling you you're shorting options.

• 9:18Speaker 06

  The good news is with a lot of these products nowadays, like you're not shorting crash. You're not shorting downside, but also too, sometimes they're they're contributing to their own demise in this kind of grinding market. Where you're stopping into the calls that you've been selling.

• 9:32Joe Weisenthal?

  There's so much going on. I totally forgot that we had such a big sell off in 2022. I totally forgot that there was like a fifty percent. Like all of these things like, oh, that actually happened. Um, zooming out, big picture. Like it seems objectively true. You've been trading a long time. Like there are so many headlines these days and they're always changing and there's just so much to talk about. What is the trading like? And how do you know, does it feel different these days when there's just, we're just facing this constant wall of news? Is there something that changes in the sort of complexion of how people trade?

• 10:07Speaker 06

  Well, there's, there's certainly different like risk appetite regimes, risk sentiment regimes, you know, where,

• 10:14Speaker 06

  you know, there was a period of time I remember in those early discussions on like zero DTE options where generally speaking at that time, coming off the back of like, you know, meme coins and [BLEEP] and that whole like YOLO phenomenon. You know, the speculative excess peak of that kind of 2021, you know, STEMI check driven madness. That was a very different world where people were kind of like, you know, buying, you know, optionality, creating gamma squeezes, the Reddit boards, Wall Street Bats, all that jazz. Now that you're kind of settling into this world, we've been conditioned, we've been conditioned for 15 years of moral hazard, right? Central bankers intervening, obviously politicians now intervening, and this is like, you know, party agnostic with regards

• 10:54Speaker 06

  to the fiscal stimulus, where it has become conditioned into traders, both retail and institutional, you know, this dynamic where you have to, this is the expected behavior. The buy the dip reflex. You have to buy that dip and sell that vol. Right. Right. So you're constantly trying to like, kind of triangulate and kind of sanity check yourself with regards to this reflexivity. And, you know, like, August 5th, August 2nd, August 5th last year were really interesting experiment, because August 2nd, we finally got that first glimpse at what our market will eventually do this time again, huge VAR event, and, you know, within the fixed income space certainly, and then trickle down into all asset classes from there. It was the first time that labor, it looked

• 11:36Speaker 06

  like labor was cracking. And we had that, you know, 4Z score miss and the U rate and 2 and 1/2 Z score miss and the non-farm payroll print. And that was after a week of already soft labor data. And that was the holy [bleep] moment. Once the consumer goes, this whole, you know, economic miracle goes. And what that then created was this, you know, was this massive dynamic where at the end of that day, everybody said, okay, risk is dicey right now. There's going to be a lot of deleveraging off the back of this realized volatility shock. I want to go home short Delta, like, short the market, but I don't want to be short vol, because vol squeezed, vol exploded that day. That was both clients and options dealers. The problem was, because of all these second order impacts

• 12:18Speaker 06

  and deleveraging impacts, and was that Nikkei on Sunday night opened down 12%.

• 12:25Speaker 06

  So that short vol position was going to be so smart because we always reflexively sell that, you know, and you've got to monetize your hedges in like two hours before people start leaning in all that vol supply, the back test says the higher vol goes, the more I have to sell. And that's that sell the vol rip by the dip. Well, those people got their arms blown off, you know, by eight in the morning. And that was the famous like VIX index, right? Which is a theoretical calculation based on like fake bid and offers from dealers, basically, you know, printed 63 or whatever it was, not an actual ticking price. But then the VIX future was traded at 38, which is like realistic. But, you know, those are those scenarios where that conditioning is how things go really wrong, because you think

• 13:08Speaker 06

  you got it figured out, you don't. The most recent example, of course, has been, you know, this, this Trump collar dynamic where the market finally figured out what was the human VIX, as I call him, you know, who, who, you know, the volatility of volatility.

• 13:22Tracy Alloway?

  You're the only one who calls him that. I love it.

• 13:24Speaker 06

  I need it on my coffee mug. You know, I have these like Nomura coffee mugs with some of my favorite sayings, like human VIX would have been a good one to trademark.

• 13:32Joe Weisenthal?

  We'll trade you an Odd Lots mug for a human VIX Nomura mug.

• 13:35Speaker 06

  That's done. That is done. But like, you know, he hasn't, he views himself as having a mandate to disrupt the status quo of 80 years of Pox Americana. Like, and that's clearly like the, the approach here, right? So the prior distribution of outcomes is now out here. The, the quick learning from the market, however, after these initial series of vol shocks, was that, okay, we found a pain point. You know, market sold off to such an extent, the interest rate volatility, particularly in the long end, not just stocks. All right. You know, we've activated the Trump put. However, upon those compromises, the market rallies back, it increases his, you know, willingness to then lean back in from a negotiating ploy. So he's basically selling the call to fund the put. And when you have that collaring effect, you get the opposite dynamic, right? You get this realized

• 14:20Speaker 06

  vol compression, which is frankly, a large part of what the past two months has been. So you're constantly reassessing how everybody thinks you're going to think, which is like you're anticipating the anticipators.

• 14:50Speaker 00

  What's next for virtual assets? I'm Jacob Rees, host of Economy Scale, a series exploring growth in key global sectors. And in this episode, we're diving into the digital forces shaping finance. Sean McHugh from Dubai-based Virtual Assets Regulatory Authority has this to say.

• 15:06Speaker 07

  We're seeing a lot of institutional players come in, digital asset dedicated hedge funds, high-frequency traders and that sort of thing, and folks who service institutional clients.

• 15:15Speaker 00

  As more capital enters the market, adaptive regulation is likely to become increasingly key. Reese Merrick of Ripple says.

• 15:22Speaker 07

  A lot of regulators globally would like to keep the industry at arm's length. That's the opposite here. I think also what you'll find is that regulation and frameworks can come out, but some of them are maybe a slight iteration on some 80-year-old policy and not actually in line with what the technology can do and offer. And again, that's very different in Dubai.

• 15:42Speaker 00

  Listen to the full episode wherever you get your podcasts. This series is brought to you by Bloomberg Media Studios and the Dubai Department of Economy and Tourism.

• 15:52Speaker 01

  This is the Bloomberg Tech Minute, brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 16:34Speaker 01

  and hiring practices, but according to recruiters, advisors and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including. And job ads that candidates quote must be willing to work extended hours and weekends as needed. One major perk for all that hard work employees access to equity either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by chat GPT. Get started at chat GPT.com.

• 17:15Tracy Alloway?

  So Joe asked you for basically color on the complexion of the market nowadays. And I know you just got back from weren't you on some sort of crazy epic travel schedule where you flew around the world? What are you hearing from clients? Like, what kind of questions are they asking you?

• 17:30Speaker 06

  People are so consensually macro bear, you know, on that stagflationary outcome.

• 17:38Speaker 06

  You know, and I think like that's, that's one of the tricks. Like it's, you know, at first it was like, okay, you know, let's, let's expect, you know, these early return. Like, mind you, you know, Smoot Hawley terrifies, like 90 year terrifies, right? We, you know, prior to the, the Trump 2.0, the effective rate was 2.4%. We're 17.3% right now as it stands, right? So like, you know, how does that not bleed through to this, you know, eventual price shock or margin compression, all this stuff that hits, you know, consumption? And, you know, initially it was okay, midsummer. I think part of what's happening right now is that, you know, from a corporate perspective, as it relates to the consumer, is that taco has changed their behavior too. Like why, you know, I'm not going to blow up my top line sales and, you

• 18:22Speaker 06

  know, rush to, you know, price shock my clients at a time. You know, so I think there's been a lot of holding off too, as far as or willingness to even absorb a little bit of that, the price, you know, increases that are coming through. And, you know, so it's been getting increasingly uncomfortable. All these left tail most acute outcomes have, have certainly been mitigated away and compromised away and kind of handed away. The market starts rallying in your face. You're expecting this very bearish outcome. It's starting to hurt. You've underpriced the right tail. You get a fiscal deal seemingly close to being done, even just today, right? Late in the day, section 899, which is this kind of like, you know, completely

• 19:00Joe Weisenthal?

  Tracy wrote a bunch about it. Yeah.

• 19:02Tracy Alloway?

  Now it's gone.

• 19:03Speaker 06

  The revenge tax, right? Is there anything worse than like getting a bunch of work done and then having to trash it?

• 19:07Tracy Alloway?

  All I'll say is it's good for content.

• 19:10Speaker 06

  Yes.

• 19:10Tracy Alloway?

  There we go.

• 19:11Speaker 06

  Yes, it is.

• 19:11Tracy Alloway?

  You talk a lot about hypotheticals over the past couple of months.

• 19:15Speaker 06

  For sure. Yeah, you know, you're well educated with your scenarios. But like in this case, you know, that was another, you know, this revenge tax escalation will all of a sudden now, you know, cooler heads prevail. That increases the likelihood that the digital tax, you know, stuff with Europe that was an impediment for deals goes, you know, right way. So you've just had like left tails turn right tails and nobody has the exposure on. There's just so much chronic macrobility. Now, perversely, you're seeing it with stocks. People are getting stopped in. You're buying the highs. You're having to take up your exposure, having to take up your nets. After fighting it, kicking and screaming and grossly under capturing the rally. This is when it sets the table for crash. And that's why as you're forced to get longer, you have to start hedge. You have to start hedge.

• 19:58Joe Weisenthal?

  Do you think right now, I mean, I remember, well, like right now today, would you say there's still a lot, there's a lot of discretionary money where people feel like they're underway at the market, where they feel like they're still fighting this dynamic?

• 20:13Tracy Alloway?

  They're chasing it.

• 20:14Joe Weisenthal?

  And they're still feeling, oh, man, every day the stock market goes up, I don't have the exposure I wish I had right now.

• 20:20Speaker 06

  Those are the classic buyers are higher.

• 20:22Joe Weisenthal?

  Yeah.

• 20:22Speaker 06

  You know?

• 20:23Joe Weisenthal?

  And that's still out there. They haven't, they haven't fully capitulated yet.

• 20:27Speaker 06

  But it's, you know, what you're seeing with the market grinding higher every day. And by the way, through the straddle, like this is the interesting thing. I always say like, we can't crash until skew is steep. Skew is a relative measure of kind of downside demand versus upside demand, you know, put skewed, you know, demand for out of the money downside versus out the money downside. Both of those metrics in the past week have hit 100 percentile over the past year. The past year's had a lot of [BLEEP] going on, right? So, you know. People are hedged because they are back getting long where things get spicy. And when you're hedged, that means dealers are short downside. They're going to be short gamma and short Vega into a sell off. That's accelerant flow. That feeds into the prevailing market momentum. The lower that we go, the more spot equities you have to sell.

• 21:12Speaker 06

  The higher the vol goes, the more vol you have to buy. Bad scenario. It's an accelerant flow in this case. The trick now that's starting to happen, and this is why I feel like we're probably getting closer to a crescendo, is that now you're getting spot, the market up, vol up and vol of vol going up. And what that's telling me is that, okay, people are actually now being forced to chase into upside. Right? And right now, part of that-

• 21:37Joe Weisenthal?

  That's our chart for the newsletter tomorrow.

• 21:39Speaker 06

  Yeah.

• 21:39Joe Weisenthal?

  Stocks, VIX and vol of vol.

• 21:41Speaker 06

  Spot up, vol up, V vol up. And what that means is that people are being forced to grab into the upside. And that's also feeding this short gamma move to the upside because dealers are short calls now. And this, as we hit 6150, 6200, things like that. Ultimately, I always like to say, when you get spot up, vol up in and of itself, it creates kind of like a melt up, like some sort of kind of, you know, squeezy rally on the way up that collapses under the weight of its own delta. Like collapses under the weight of the mechanical buying on the way up, the mechanical dealer hedging on the way up. Because you need to keep fulfilling that need and demand. People are getting longer. You know, you're finally seeing that dynamic where people are getting longer.

• 22:23Speaker 06

  That creates the potential de-risking flow on the way down. Especially once you're talking about systematic vol scaling strategies, that as vol goes higher, they have to just sell, you know, unemotionally.

• 22:34Tracy Alloway?

  But what would be a reasonable catalyst for that to happen?

• 22:38Speaker 06

  Well, I think the near term one has been, you know, the fact that, you know, July 8th, the original kind of reciprocal delay that, you know, and you saw a bunch of headlines today saying like, that's flexible, morally flexible. You know, I think that-

• 22:51Joe Weisenthal?

  Big surprise.

• 22:52Speaker 06

  Yeah, no, no. Let's make a deal. I would say that right now, that's kind of like the most obvious, you know, one out there that, you know, there's still some element of hardball. My view is- That that's somewhat overstated, that that is somewhat overstated because he needs to get one big beautiful bill passed first before that and then potentially you can play the game. But the fact that this 899 was removed tells me that they know that getting a deal with Europe is probably, you know, a larger, you know, impediment to what they're trying to do. And that there still is now this new conditioning in the market where instead of like increasing the rhetoric at the highs, you know, Trump is capitulated back into Trump 1.0, which is like, you know, run hot, right?

• 23:37Speaker 06

  He's now, and they are, best in himself with the headlines out at the end of the day, they're, they're trying to squeeze this thing higher. And financial conditions are easing, the dollar is moving lower, long end yields have started rallying ironically because the market is sniffing, you know, a dovish turn within the Fed, you know, including recent comments from people that I don't think would have anticipated necessarily outside of Waller, who's auditioning for the Fed job. And, you know, why are they beginning to turn like that? Yes, there's a normalization dynamic with regards to where inflation is now. We think Jerome Powell is already at two dots, you know, for the end of the year. And there's just this modest turn, but they're turning for a reason. They're turning because, you know, quits rates and claims, you know, are starting to get a little wonky.

• 24:20Speaker 06

  And as I said, the whole American economic miracle goes wrong when the consumer cracks and the consumer cracks is what, you know, becomes of, you know, the labor market. And, and that's starting to look, you know, precarious to the best. So I think, I don't think it's going to be a tariff headline necessarily. I think it's going to be, you know, good old fashioned data, a nasty NFP print, you know, that type of a thing. Is that an acute risk now? Probably not, probably, you know, safe to say, you know, within by August, you know, we could be getting spicy and I think there's real delta, not just of like the first cut in September, but, you know, if that happens, you know, it's not just going to be, you know, 25 bips, right? So.

• 25:01Tracy Alloway?

  Everyone needs to keep shopping, I guess.

• 25:03Joe Weisenthal?

  Yeah.

• 25:04Tracy Alloway?

  To maintain the rally.

• 25:05Speaker 06

  Do your duty.

• 25:06Joe Weisenthal?

  So, the thing is, though, this is what bothers me, is everyone sees some of these dynamics. We talk about the labor market weakness all the time. We talk about the fact that due to the tariffs and other factors, the Fed might be a little bit gun-shy or less inclined to cut, like, than it otherwise would have given the set of economic conditions. And I think Powell has sort of hinted at it before, that there are conditions, like, we all can see this. Like, and yet, like, and yet, people keep buying. Like, it's sort of, there's something intellectually unsatisfying about the entire environment, to me.

• 25:40Speaker 06

  Well...

• 25:40Joe Weisenthal?

  Because, like, all this seems very true. There, all this, like, the stagflation risk, there is going to be a cost of tariffs, there is this cyclical slowdown, and yet...

• 25:49Speaker 06

  You know, it goes back to those, you know, kind of counterintuitive observations that we started off with, you know, where you get so fixated on, like, the left side that, you know, perversely, the corporate spending uncertainty becomes the biggest source of demand for stocks.

• 26:04Joe Weisenthal?

  Yeah.

• 26:04Speaker 06

  You know?

• 26:04Joe Weisenthal?

  Right.

• 26:05Speaker 06

  And especially to the market structure stuff, which is just what I always come back to. Like, once those puts start roasting, because the worst-case scenario doesn't happen, and dealers got to start buying back that short delta, and then people start squeezing that short delta, as the market starts rallying back, start buying short-dated calls, and dealers get short those calls and go short gamma the other way. You know, those flows, and, frankly, you know, a world of, you know, not just this market structure that feeds momentum, right, with leveraged ETFs, you know, the prevalence of options trading, the tail wagging the dog.

• 26:39Joe Weisenthal?

  Yeah.

• 26:39Speaker 06

  And I don't even know if I can say tail wagging the dog now, I just think it is the dog.

• 26:43Joe Weisenthal?

  I like that, that's good.

• 26:45Speaker 06

  You know, options are the dog, yeah. You know, those type of real and synthetic gamma effects in the market are, you know, very high impact, and I think at the end of the day, a lot of this is just about career preservation.

• 26:58Joe Weisenthal?

  Yeah.

• 26:58Speaker 06

  And when you've kind of missed badly on a call, people, it feels good, you know, in the macro space, like, you know, I'm super sensitive to this idea. You know, you feel smart to make a bear call, because it's rare. Stocks go higher.

• 27:14Joe Weisenthal?

  Yeah, that's right.

• 27:15Speaker 06

  When you run a back test, you know, and back testing, I know is like a four-letter word, but when you run a back test, you know, this, this happens in contingent on this, and you actually get negative forward returns over a series of average, you know, over a real number of sample set, you know, it's an outlier. The problem is like sitting in a negative stance when again, goes back to that point, people are not really incentivized to see the world burn, you know, that's going to be a tough thing. So you've got to be dynamic and pragmatic, I think, about these things.

• 27:43Tracy Alloway?

  All right. Well, Charlie, let me just say, thank you for giving us a couple of swear words to bleep out. It really helps keep our producers on their toes.

• 28:02Tracy Alloway?

  This has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

• 28:08Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at the Stalwart. Follow our producers, Carmen Rodriguez at Carmen Armin, Dashell Bennett at Dashbot, and Kell Brooks at Kell Brooks. For more Odd Lots content, go to Bloomberg.com/oddlots, where we have a daily newsletter and all of our episodes, and you can chat about these topics 24/7 in our Discord, discord.gg/oddlots.

• 28:29Tracy Alloway?

  And if you enjoy Odd Lots, if you like it when we do these live recordings, then please leave us a positive review on your favorite podcast platform. Thanks for listening.

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