Keith Dicker of IceCap on USD and BTC ahead of election 2020

0:01i'm ashton addison from eventchain for investmentpitch media and fintech news network and today on blockchain interviews we have keith dicker the chief investment officer of icecap asset management keith welcome to the show and thanks for taking the time to be here hi ashton uh it's great to be here today so let's have a great conversation yeah i'm really looking forward to this

0:20i love if you could kick off you know i know you have a lot of years in the financial industry but just give us a little bit of your background and finance and your recent focuses at icecap yeah sure thing so uh i've been in the business now for uh almost 30 years so it's been a while but i started off with a one of the big canadian banks as a portfolio

0:40manager and then i was offshore for about a decade and when i was offshore i was running a multi-strategy multi-currency desk uh so it's just a terrific experience and what's important about that was because when you're offshore you completely have no home country bias if you don't see the world as a canadian or see it as as as an american or aussie whatever you just see it for what

1:03it is and uh as we get going now i have a good conversation here you'll get to see how important that really is but after 10 years offshore my family and i came back to canada and that's my launch to icecap asset management so we're uh we're based here in nova scotia but we are a a complete global macro firm and uh we manage long-only portfolios for

1:24uh like any kind of portfolio fly you can imagine uh as well as you also manage for hedge fund and a special purpose vehicle so uh two of those together we have investors literally from around the world and uh like today is a global macro world we haven't seen this for a long time markets move in big secular flows and uh i think the conversation about global macro plus crypto currency

1:51you name it everything is coming together at this one point in time and those that can see it or you know they should have a pretty good experience with it uh those that don't see that um you know it you know they they could have something that they're not expecting yeah i really like that perspective keith because there's a lot of people that have been interested in investing in the

2:11markets throughout 2020 and it's really easy to just get caught up in what's in north america and there is a whole global market that many people don't even notice but you know the trends everything affects one another and there is so much to talk about in terms of the american markets so i do want to touch on some of that stuff as well and you know right now throughout 2020

2:29at least the federal reserve's been printing more funds because of the pandemic there's been a stimulus and debt and with more printing of the dollar comes the potential of inflation or hyperinflation or movements to the dollar can you talk about where you see the american dollar standing right now and currently with everything that's happening in the market you know how you

2:50project it and moving yeah absolutely um maybe i'll just show you a chart first to give you an idea what we expect to happen that'd be great then we could yeah then we could just flow on from there so let's see here is that good with you guys that's great okay so first of all in the fiat currency world we expect the dollar to uh have the opportunity or a very high probability

3:17that it can absolutely surge and the reason for that is not because you know the americans are any better at running their economy or finances than anyone else it's really a function of the way the global financial system is put together and it's become completely dependent upon capital flows into and out of the dollar so uh we believe so strongly and in this

3:41view that our our strategies are managed towards that uh super long only we avoid markets we think will not do very well and vice versa and uh but we've also actually set up a fund to benefit specifically from this strong dollar uh perspective uh and then in the crypto world what you see here in the chart it's really like the next movement beyond the dollar and um so

4:05going from left to right i think what we've already experienced the bond market uh getting rescued to a lot to a mainly degree back in march of this year uh for so right now investors should prepare next for risk to re-emerge in the uh the emerging market space so uh we have a lot of positions in that space on the short side uh specifically turkey as well as hong kong

4:28and then as stress comes out for that market then you'll see that moving to the major currencies uh including canadian dollar for anyone here from canada uh then you have yet coming through and then by that time there's so much money flowing into the dollar that that's really when you get the moment of truth coming up so anyone who's in in crypto or gold for that

4:47matter as well when you see the dollar rise so that the next tail that we're looking for in the market to say even if it's uh next week after the election but when we get a significant surge in the dollar we want to see what happens with golden and crypto so if for example say you know round numbers everything else is down ten percent uh just say golden crypto or flat or

5:10down one or two percent in that environment relative to the dollar then that then that is telling us that okay well yeah we're you know we're ready for liftoff here and then that will open opportunities in that space as well but uh it's important to recognize if you're in the global macro space like we are um it it's important to see how capital is going to flow from one market

5:34to the next and uh this is the path that we laid out and so far it's playing out and you know it just so happens the covert crisis that has really started to accelerate uh this that's super interesting um and what implications are what effect has the the stock market the equities market in america rising and the increased stimulus had on now you're saying that the dollar is

5:58going to continue strengthening um and some people think that because they're just printing more than it just equates to a weaker dollar because there's more dollars so if you could elaborate on that yeah so we'll go to so i'll just come back to that in a second and then the other thing that sort of preface the whole you know global macro world how to

6:18really better grasp it we like to explain that right now we're getting this collision taking place so it's a messy world today so we're getting a collision across uh social political economic fiscal and monetary factors so uh you know you just describe the monetary factor side of it uh the world some people say the world is not crazy it's fun it's insane but you know there are a lot

6:45of unhappy people out there for a number of different reasons regardless of what your view is towards anything that is happening at the exact moment in time where we're getting this this turn in the financial world so uh you know most people uh if they're studying you know the financial history they're aware of bretton woods and a lot of people say you know

7:07brentwood's collapsed back you know back when the dollar came off the gold standard um there were five main decisions from bretton woods so after world war ii all the allied leaders got together up in new hampshire and they created the world bank they created the imf they pegged all the currencies to the dollar they paid the dollar to gold and then the last one

7:28that is still standing is the only thing that's really still standing because the world bank imf are largely ineffective today is that the whole western world has adopted kinesian economics to run their economies in central banks so what that means is that when there's a bad time out there you you're going to lower interest rates or you're going to borrow and spend more

7:50money so this one's back to you so you have that taking place at the exact moment time when hey you know people are a bit they're not happy with different things out there the reason this is such an incredible moment right now in markets because as you just mentioned hey you know the americans you said the printing money uh but you know what the europeans were actually expanding

8:11their balance sheet faster than the americans the japanese are already there the chinese are doing it from a different perspective they're just simply increasing credit in their economy uh every central bank in the developed world right now rather at zero percent for overnight rates for their negative and everyone at the same time they're using qe to try to control the yield

8:36curve and things like that so it's it's important not to look just at the americans in isolation you have to look at everyone together and it really is now sort of just race to the bottom and so when you go across a period of say 30 years from the early 80s to today where rates used to be say 20 percent uh now down to zero monetary policy and fiscal policy has

9:03now become ineffective it's impotent it doesn't work anymore so we've created this environment where oh wow like if interest rates even go up a smidgen on the long end of the curve this is completely going to throw someone's finances out of work so for example in canada so canada has spent uh more money under deficit this year than any other of the countries combined as a

9:27potential gdp it's just astronomical what we've done up here at the same time in canada we're spending as much money on interest interest expense of a year or a debt burden that we're spending on health care as well as education yeah it's again it's just crazy stuff so to pick on the us on its own or canada it's largely not the correct thing to do so circling back to your question then

9:54you're talking about ethnic markets and stuff like that going in um we are asset class agnostic so in our portfolios being rest we invest across cash across currencies credit duration equities commodities as well as volatility across any of the markets uh we want to allocate where we think we can make money short other markets we will make money in that way or avoid them if it's the

10:20long it's on the uh long-running strategies with uh what's happened with equities uh around the world especially in the u.s market over the last seven months uh there's been a pretty good disconnect between you know the real world and then financial markets and uh what's what we're looking at right now in the equity world uh we are more cautious than that

10:43positive absolutely uh in the institutional world language you know we're underweight equities so we're in our uh hedge fund strategy where we're short equities for some positions in that market but the rate of recovery now from an economic perspective it's slowing it's starting to roll over and the big problem that the world is going to win wanting to know very quickly is that all

11:09of these temporary losses that uh originated due to the shutdowns earlier this year now now we have this mad race taking place the longer we go without a fast recovery these these temporary losses will become permanent losses and the more permanent losses we have that that's extremely deflationary for the system so when we look at the whole you know what's going on inflation

11:34and stuff like that uh inflation can come from three different ways from a supply issue and we we think that yeah we're headed for a supply issue especially across the commodity spaces over the next uh 18 months uh so we think that is a that is a source of inflation coming up uh the demand side is going to be weaker so that is deflationary and then the

11:57third source of inflation comes from the currency side so for example if you look at turkey today uh the currency is down about 40 to 50 percent now and uh that will be they will be importing inflation into turkey so when you come back to you know balance sheet expansion does that create inflation the answer is no we don't we don't feel it that way at

12:18all creation is uh inflation is going to be created as soon as foreign investors they lose confidence in your market and they decide hey we're no longer going to buy canadian debt all of a sudden rates are going up the currency starts coming down and creates all sorts of problems so uh what one of the key markets we see coming up for uh that you want to be long in is

12:42volatility markets uh especially fixed income and um in terms of on the short side of the marketplace uh we are we are significantly positioned to benefit from stress re-emerging in the uh in the developing market world yeah super interesting keith and you talked about a bunch of different countries but you mentioned canada as well having you know their balance

13:10sheet has gone astronomical um and with the interest rates being low and other countries internationally they actually have negative interest rates first of all do you see that happening in north america and um yeah i guess let's start with that is that is that a possibility and how does that impact you know everyday consumers in north america it's absolutely coming um so uh

13:36the bank of canada they they've already stayed that they said we have we have negative rates in our toolkit uh the japanese are already there eurozone is there uh you're going to see the you know the entire developed world try to go with negative uh caution everyone though towards the fed going negative with overnight rates it's at the moment they do that

13:58they just effectively kill the money market market that that's out there that means commercial paper is no longer an effective way to raise capital uh so the whole the whole economy shuts down instantly as soon as they do that uh so the fed is extremely reluctant to go negative if they do it's you know that the chart i showed earlier we're going in that direction

14:21because remember when when financial conditions um deteriorate money flows into the dollar for safety and protection this is the only market you know big enough and deep enough to restore that capital uh but yeah you can see negative rates go around uh at overnight rates as well as you'll see the yield curve going negative so in the u.s you see the two

14:43years ago negative uh that will happen when that happens um it's not so the reason they're doing that is they're trying to stimulate the economy that's what they're trying to do but the japanese have already proven that you know they've had over 20 years of this now and you know it ain't stimulating anything in in japan uh the europeans have been you know uh

15:07doing a pretty good job at trying to do that now for uh eight years especially and you know it's not working there um but you know it's the classic definition of insanity they just keep digging and digging and digging into this they just need to stop and say hey wow like what a hole here we need to get out of this so the biggest risk again in the marketplace today it is not the us

15:33so in the developed world you look at the european banking system the european banking system it's just clogged with with bad loans in the system they they didn't clear things out 10 years ago uh it's still on their system i always chuckle when people talk about european banks being great value because they price the book you know there's a reason is for that

15:56you know because the book value is incorrect but uh it again we're we're in this precarious position where the way to escape out of this if we really knew we really do need this escape velocity with growth if we can increase growth around the world economic growth then you know we can slowly heal our way out of this at least provide you know some hope out there

16:19uh in the financial world so you use turkey as an example um the central bank now is a negative foreign currency cash position people say what the heck is that so what they've had to do to defend their currency they're selling dollars and they're buying lyra back to try to strengthen it the central bank ran out of us dollars so then they effectively they increased

16:41the capital reserve requirements for the commercial banks for foreign which was us dollars they've taken that from the commercial banks and spent that so the way for turkey to recover the same for everyone else they need the global economy to grow that means it's positive from that trade more dollars will come back into their system you know and then off we go again but uh

17:05again we have the velocity of money it's just tumbling down like this again we just cannot stress enough that you know we're we're in a pretty difficult position coming up here um so from as a money manager perspective it is what it is we didn't we didn't create it we think there are a lot of great opportunities to make money great opportunities to lose money as

17:26well but the the better you understand what's happening in this system today and then why it's happening uh you know that should help you out going forward definitely and we're running out of time keith but i do want to ask one last question um about the people that are in north america that you know they're not money managers but they're just everyday

17:46working class people and they're trying to stay ahead and preserve their wealth do you have any tips or suggestions and how what they should follow or what they should pay attention to to try and stay ahead as the economy keeps going yeah i think the main thing for everyone to do um you know what what's great today because of social media especially

18:06you're able to access you know some really great managers out there you know they're able to share with you give you something different to look at and think about but for any investor whether they're based in the u.s or australia or britain or canada uh don't look at the market from your own home country perspective you really have to elevate yourself and

18:27look around and you'll say oh wow you know thing things are kind of you know tricky everywhere right now and then as soon as you understand how money flows around the world and why you know then all of a sudden the clouds move away then the fog lifts and this thing okay now i know where this is going to move great advice and uh where can other viewers follow your work

18:52yeah so uh two sources we can you can visit our website of course which is uh icecap assetmanagement.com uh we write frequently maybe four to six times a year we get you know from twenty thousand plus readers on that so it's a global macro story flow type conversation which is uh pretty popular and then on twitter as well where we're pretty active so that is f

19:17icecap global great well i will leave those links in the description box below as well thanks so much for your time keith i really appreciate you coming on all the best with icecap and let's follow up in the near future that's great thank you ashley have a great day you