Sycamore's Okada on the Dollar, Tariffs, Japan Trade

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00:00Well, the market's open, the market's active, the market's priced pretty high.

00:03We just finished about $50 billion in new issue in high-yield bonds alone in the month of September.

00:10And so that's a four-and-a-half-year high.

00:13So you can see that the market's very active.

00:14It's open, but spreads are tight.

00:16And there's not a whole lot of risk premium within the market.

00:20But there certainly is an appetite for yield product, given the fact that rates are still a bit high.

00:25And so I think that's fueling a lot of the interest in the asset class.

00:29However, we're at a time when spreads aren't great, pricing is tight.

00:34Let's face it, the credit market is being driven by the equity market.

00:39That's what's going on.

00:40So in the credit market, what are you looking at right now?

00:43What do you pay the most attention to?

00:45So this is the time, Julie, when I think it's very difficult to do my job.

00:49My job at Sycamore Tree is really to look at risk.

00:53And with risk, we spend time thinking about what's signal and what's noise,

00:57what makes sense to us that's going to move the market, and what should we ignore.

01:02And there's certainly a very difficult time doing that.

01:05And a lot of the signals that we look at, GDP, CPI, the inflation data, the jobs reports, right,

01:14that's very topical, have been not trustworthy.

01:17The revisions in those numbers have been massive.

01:20And so if you can't really get super comfortable about some of the signals

01:24that tend to drive the markets, what do you look at?

01:27I've been spending a lot of time focusing on the largest signal

01:31and the one that I think is more trustworthy, and that's the U.S. dollar.

01:36And so that's what you're paying attention to the most right now.

01:38Absolutely.

01:40You know, there was uncertainty in the earlier rounds of tariffs.

01:43The president has now said there's more on the way.

01:45This week, tariffs announced on timber, furniture, films made outside of the U.S.

01:50So let's talk about that and how you think that will affect the economy.

01:54Sure.

01:54So if we look at the policy of the administration and what's happening with tariffs

02:01and a lot of other things, coming into the election, the dollar was zooming up

02:07in anticipation of growth.

02:09We were going to have deregulation.

02:11We were going to have pro-growth.

02:12We were going to have fiscal spending.

02:13We'll probably have higher interest rates.

02:15That was very supportive of a strong dollar.

02:18What we got was something very different, right?

02:20We got a lot of tariffs, to your point.

02:22We got really a pretty strong desire to restructure almost every institution that we understand,

02:31whether it's geopolitics or trade policy, universities, government, research.

02:37All across the board, we're seeing a lot of potential change.

02:40And that, I think, is really reflecting itself in the dollar.

02:45The dollar has gone straight down since then.

02:46The dollar has moved in a very rapid manner down another 10% to reflect all of this uncertainty

02:52in the world.

02:53And that increase in the cost of capital has been a pretty important thing for the United

02:58States, right?

02:59The dollar is your store of value.

03:00So, Julie, I think from here, thinking about things like the new tariffs we got this week

03:07or next week, or who knows what we're going to get, right?

03:09It seems to happen all the time.

03:11The dollar will be a great place to look and see whether this is really going to matter.

03:15The dollar has kind of bottomed out since June.

03:18And it's been kind of bouncing around here around 97, 98 on the DXY.

03:23Watch that.

03:24Pay attention to where that goes, because I think that will really signal.

03:27If it starts going back up again, I think we're going to see something that would support

03:32risk assets, that would be more stimulative and support the valuations we see in credit

03:37and equities.

03:38If it goes the other way and keeps going down, I think we're in for some trouble.

03:42This month, we saw the collapse of subprime lender Tricolor.

03:46Do you think this is a one-off or something that you really need to pay attention to right

03:50now?

03:50Tricolor is really just a one-off.

03:52I mean, this was a company that has some questionable finances and had grown too fast.

03:58And, well, you know, that's certainly not something that is a good situation, but not tied to

04:06any of the macro things that we've been talking about.

04:08Talking about global business, you've helped orchestrate the 2026 Japan-Texas Economic Summit.

04:13This will be in Arlington.

04:15You know, what are you hoping comes from this event as somebody who's had business here in

04:19Texas for a long time?

04:20Sure.

04:20Well, part of the trade deal with Japan, for example, is a $500 billion commitment for

04:26foreign direct investment.

04:28You've got Sun doubling that with another $500 billion.

04:32So where's all that money going to go, right?

04:33That investment of that foreign direct investment goes to where it's going to be treated well.

04:38And Texas is a great place for that.

04:40We've seen that trade with Japan and Texas is over $3 billion.

04:45The amount of jobs that Japanese companies have created here is over $75,000.

04:51So Japan has a huge footprint here already in Texas.

04:54We want to create a space for that to be well-treated, that capital that's come, and also create more

05:02capital, more relationships.

05:03So I'm super excited.

05:04We're going to bring over 400 leaders in government, industry, finance, investments.

05:10And we're going to get together and convene once a year starting next May.

05:15And we'll be doing that every year to kind of build that ecosystem so that capital will be well-traded here in Texas.

05:20You know, when we talk about Texas, it's often about the companies that are moving here.

05:24Now there will be the Texas Stock Exchange, New York Stock Exchange, NASDAQ, increasing their presence.

05:30What do you see, though, as the biggest financial movement in the state?

05:34Well, I think Texas represents a place where capital is treated well.

05:40I mean, I moved my company here 31 years ago from California.

05:44And I got here initially because I thought, oh, the time zone and the taxes and travel were going to be better in Texas.

05:52But, Julie, we all know the secret of this place is we stay for the people.

05:56The people of Texas are amazing.

05:57The resources here from a human capital standpoint, I put them up against any state in the country.

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