Maria’s Note: Maria Bonaventura here, Rogue Economics’ senior managing editor.
Recently, Nomi spent a few days at our offices in Delray Beach, Florida. Our schedules were packed with closed-door strategy meetings. But I also had a chance to sit down with her and pick her brain.
What followed was a fascinating conversation. I learned so much about our new editor – from her career on Wall Street… to her family history…
I shared the first part of that conversation with you yesterday. In it, Nomi told us about how her father’s experiences in World War II influenced her outlook on life… and her career.
Today, she gives us a glimpse into the cutting-edge models she developed on Wall Street. And she shows us how her background shaped the strategies she now shares with us in these pages. Read on…
Maria Bonaventura: Nomi, you mentioned your dad had a huge influence on your career. I know there’s more to that story… And it affects everything you do for readers today. Can you tell us more about the role he played in how you see the world?
Nomi Prins: My dad was a world-renowned statistician. He worked at IBM when they were just starting to develop what we now know as semiconductors. And later on, he worked on forecasting models with many scientists around the world.
He always asked, “What will happen if this happens? And what will happen if that happens?” We would often talk about his work at the dinner table. And when my dad was in his office at home, I would watch him work.
He taught me how to program code when I was nine.
And you’d often find 5,000-piece puzzles strewn across our dining room table. He taught me how to put the puzzles together in my mind before I started putting the actual pieces together.
So that sense of looking ahead and considering the bigger picture was a part of my formative years.
My dad also had an inherent distrust of authority. You can easily imagine why. As I mentioned, he grew up in hiding, and fearing for his life, during World War II.
He instilled in me that you can’t trust what other people say. You have to find out the truth for yourself.
Numbers have a truth, but so do experiences. Being on the ground helps you find that truth. And so, I think all that was just inherent to me.
Even when I started out on Wall Street, I would talk to my senior managers about how I believed things should go. They didn’t always agree with me, but I was confident in my opinions because they were based in fact. That’s been a part of my personality from an early age.
Maria: And how has that shaped your investment strategy?
Nomi: I always try to find the thing that other people aren’t talking about or seeing. It’s just in my nature to look where others aren’t looking.
For every recommendation I make for subscribers, and everything I write to readers, I consider what’s going on and what people are talking about.
I look at what’s obviously relevant at the time. But I also look at things in my own way.
Maria: That’s something that goes back to your time on Wall Street, right?
Nomi: That’s right. During my career on Wall Street, I was always involved in developing new analytics.
The teams I managed created new models under my direction. Then, I worked with major companies and central banks around the world, explaining those new models to them. So I always had a sense of pushing that envelope. And I did that for nearly two decades.
For example, in the 1990s, I was a Senior Managing Director at Bear Stearns in London. I ran a 30-person expert analytics team. While I was there, we had the Asian crisis in 1997 and the Long-Term Capital Management Crisis in 1998.
For both of those crises, I created models to evaluate the impacts of crisis in the financial markets. And I created investing instruments that my team and I then discussed with our big corporate clients and central banks.
The models I developed helped me analyze something I knew I needed to know. But it usually didn’t exist yet on Wall Street and in the international investment banking world.
Earlier, I did the same thing at Lehman Brothers, where I also developed a new model. That model made it possible for Lehman Brothers to sell central banks more U.S. Treasury bonds in an innovative way.
Lehman sent me to speak with central banks around the world about the model. That was my first big central bank tour.
My job at the time was to look at how we could combine and blend different types of securities. And to explain it to central banks in a very simple way.
Central banks could have exposure to U.S. government bonds and the dollar in a lot of different ways. But the central banks I worked with had no idea.
For that first big trip, I arrived in Kuala Lumpur in Malaysia, got off the plane, and went straight to a meeting with the central bank of Malaysia.
Then I went to Singapore, the Philippines, China, Taiwan, Japan – all throughout Asia. And I explained this model to central bankers, who were looking to fill a need.
At Bear Stearns, during the spate of 1990s debt crises, I created models that enabled us to capture the risk of credit crises before they happened.
Before that, a lot of the securities were just about interest or exchange rates. “Are rates going up or down? Are foreign exchange rates going up or down from one currency to another?”
They didn’t factor in what happens if there’s a default in the country. Or what happens if there’s what we call a “credit event.”
So I modeled everything we did to include adverse credit scenarios.
At the time, including credit events in modeling tools was unheard of. I was the first one to do it. It’s one of the achievements of which I’m most proud, analytically speaking, from my banking career.
Maria: Nomi, I think it’s safe to say that a big part of your success on Wall Street came from your ability to look beneath the surface. And to see important things that others couldn’t, even though they seemed obvious to you.
How does that translate into what you do for Rogue Economics readers today?
Nomi: Well, for me, it’s always been about taking what I know and figuring out a way to make it into a strategy. Or into something systematic. But not something so rigid that I can’t see what else might happen.
And that’s what I do for my readers. I ask myself, “Where are we in the markets? Where are we going? And how can I present a cohesive strategy that makes sense for that?”
Staying flexible is important to me. That way, if things change, I can recalibrate that strategy for my readers. So there is a framework, a strategy, but it isn’t set in stone.
Now, I will never change the strategy on a whim. Instead, in our Distortion Report advisory, I’m always watching for new information that could affect our model portfolio.
That’s very important, particularly in choppy markets or markets that are battered about – whether it’s by politics or a virus. Whatever it is, and whatever comes out of it, I can use that big-picture view to recalibrate the strategy for our subscribers.
Maria: I know you’re cooking up some exciting things on that front, Nomi. You’re even working on a new model exclusively for Distortion Report subscribers.
I’ve had a sneak peek at it, and it’s unlike anything I’ve ever seen before.
Nomi: Yes! My paid-up Distortion Report subscribers can look forward to that in their inboxes next Wednesday.
But in the meantime, I’ll be sharing plenty of wealth-building opportunities in these pages, too.
Maria: Looking forward to that, Nomi. Thanks for chatting with me today.
Maria’s Note: Nomi will unveil her exclusive new investment model in the February issue of Distortion Report, due out Wednesday, February 23. If you haven’t subscribed yet, follow this link to find out more about a subscription to Nomi’s new Distortion Report advisory.
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