SI425: Passive Investing Is About to Face a Real Test ft. Cem Karsan

What happens when the system holding global markets together begins to reach its breaking point? In the wake of the US midterm elections, Niels Kaastrup-Larsen is joined by Cem Karsan for a conversation about the powerful forces converging beneath the surface of the global economy. Mounting debt, rising populism, geopolitical confrontation and the battle for control of the US dollar are creating pressures that Cem believes cannot be contained indefinitely. He lays out a provocative scenario in which a financial crisis becomes the catalyst for a historic transformation of economic policy. As the old rules begin to unravel, the conversation turns to a question every investor must confront: how do you prepare for a world that may look radically different from the one we've known?

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Episode TimeStamps:

00:00 - Introduction and the limits of passive investing

02:23 - Market developments and early-November CTA performance

05:23 - Volatility strategies, dispersion and pressure on hedge funds

08:45 - What the US midterm elections could mean for markets

12:40 - The four structural pressures threatening the US economy

19:44 - The US dollar, geopolitical power and the future of monetary policy

26:19 - Print money, buy stocks and the case for aggressive intervention

30:49 - Inflation, populism and the economic implications of AI

37:22 - The generational pendulum driving political and economic change

44:46 - Why Cem believes a crisis may be necessary