Interview With Head of Currency Strategy and Author Marc ChandlerO
Marc Chandler has been covering the global capital markets in one fashion or another for nearly 25 years, working at economic consulting firms and global. Read more about Marc's bio below
1) Your background isn't the traditional one in the finance world. Can you talk a little about it?
So, I have a masters in American History and a masters in International Relations. What this meant was that I didn't have the same amount of business knowledge in comparison to my peers, so I had to catch up on the quantitative business skills. However, I do think that I gained a lot of liberal arts skills, which are crucial. These skills can be fundamental abilities that can be transferred. I believe my previous work has helped me developed three abilities which are important: thinking well, writing well, and speaking well.
This is especially true now. Since the end of the financial crisis, people in the profession have realized that the Masters in Business Administration is too narrowly focused, and many top heads are modifying their courses to encourage critical thinking, as well as more "soft skills" that may prove useful.
2) What is the role of the Strategy group within your company?
The strategy role at my firm is mainly client driven; what we do is deepen and broaden client relationships. When you have one sale to one client, it's risky because if a particular client leaves, the relationship flounders, and this is bad for the firm. What we try to do is expand and develop these relationships. In a sense, currency strategy is an arm of marketing and client relationships.
We help clients manage risk. Increasingly, what we find is that people who make money in the markets don't make money because they easily predict future, or they have the information advantage, or they're always right-- but that they are disciplined risk managers. What we do is look at pivot and inflection points to calculate risk.
3) Can you tell me about your day to day role?
I tend to get up very early, and when I wake up, the first thing I do is learn what happened when I was sleeping. I do this through a combination of communication mechanisms: letters, papers, social media, etc. In reality, I spend most of my days reading, writing, and talking… and the information gathering is leverage to make sure our analysis and help is widespread. In the later part of the day, I spend most of my time talking to clients and sales people, who are really internal clients relying on our information.
So that's my day: reading-- mainly in the morning, writing in the middle part of my day, and talking to clients later in the day, learning their issues, and etc.
4) Are there any downsides to the job?
Well I think that it takes a certain type of personality or "hutzpah" to say that when everyone else is selling something, you're against them. You have to be comfortable with being wrong. In some jobs, theres nothing worse than being wrong. In our position, you will definitely be wrong at times, so the key is managing the downsides of those things.
It takes certain types of people… see, if you're not extroverted, you have to at least pretend to be and you got to have convictions, but not too much. You definitely have to be able to admit that you're wrong. I think that you have to have a large enough ego to think against a crowd, but not too large to admit you've made an error.
5) What do you think about the economy?
I think that the economy is in gradual recovery. '08 and 09 was bad, but the worst has passed. We'll see another year or maybe two years of slow growth, weak job market, etc. before things really start to get better.
6) What is the odds of a perfect storm occuring in the markets in 2013? US double-dip recession, China crash, Iran-Israel war, and EU collapse?
Well see that's hard to forecast.. to predict one of these black swans and tail risk things-- but I think we're heading in good direction. You know, politically there was the progress that was made on the fiscal cliff, and people were predicting turmoil in the US, so it doesn't look like too bad over here at this point. I'd also say that the Eurozone and european officials have shown improvements. Regarding China, it showed 7 whole quarters of slowing-- so while it hasn't shown much upside yet, at least it's stopped slowing.
I think 2013 will be a lot like 2012 in terms of the global markets, with nothing too unpredictable happening.
7) Has the supply/demand dynamic changed at all?
Well, Americans have shown an interest in fixed income over equities, esp. domestic equities. Many countries are now tightening their fiscal policies, and it's not completely clear where aggregate demand is goin to come from. I liken it to Bretton Woods-- it's broken down and doesn't seem fixable. As far as where long run aggregate demand will come from, it can't come from borrowing like in the 80's and 90's.
8) What are some assumptions people make about forex that aren't true?
There's two major things: the first is that the large US trade deficit means the dollar is overvalued. Most ppl think imports are greater than exports, so the dollar's fallen. That's a mistake. Secondly, many ppl on the political left and political right think that best days are behind us. Every generation has its declinists. I think to be fair on data, the US is one of the economies doing better now than before the crisis. You know, we're producing more goods and services than before. There are many ppl who see the US trade deficit and large import surplus, and think it's the end of the "US empire" and that we're no longer going to be number one, and I think that's a mistake.
9) Are there future opportunities in this space for young people?
Well, there's always opportunities in foreign exchange and finance, but I think that the difference is that the industry is maturing. And what I mean by that is that there's a shift in the scene that capital is substituting for workers with the advent of technology… but there's some jobs that can't be replaced. For example, currency strategists, traders, etc. So while computers take volumes, firms and the industry still need ppl who are tech savvy and can think analytically.
10) Do you believe we are in the beginning stages of the "currency wars"?
The way I've always seen it is that the international arena consists of forums where people can fight in for the interest of their nations. I believe that the currency market is one of those forums, but I don't think anything is different from the past.
You know, some people think quantitative easing may change the game, but since 1971 to Bretton Woods (and even before), currency markets are where nation states compete for the international interest. The only difference is, unlike the past, we now have circuit breaks like the World Trade Organization and other organizations. Still, we don't necessarily go from currency trade to trade wars to currency wars… I think international building has put circuit breaks to prevent us from doing so. I recently posted some information about it here.
Additional bio info:
Marc Chandler attended North Central College for undergraduate. He holds masters degrees from Northern Illinois University and University of Pittsburgh in American History and International Political Economy. Currently Chandler teaches at New York University Center for Global Affairs, where he is an associate professor.
A prolific writer and speaker he appears regularly in the press and has spoken for, and is an honorary fellow of, the Foreign Policy Association. In addition to being quoted in the financial press daily, Chandler has been published in the Financial Times, Foreign Affairs, and the Washington Post. In 2009 Chandler was named a Business Visionary by Forbes. In 2009 his book, Making Sense of the Dollar, was published by Bloomberg Press and received a Bronze Award from Independent Publishers.
You can learn more about Marc by visiting his blog at marctomarket.com.
"Money doesn't talk, it swears." - Bob Dylan