Masters of Risk | Season 3 Ep. 1: Trends in the Market: A Deep Dive with Cameron Dayne

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Stewart Webster   00:00:47

Welcome to Episode 17. I'm your host, Stewart Webster. Today, we're meeting with an all-American athlete expert. Cameron Dayne has Managing Director-level experience at major banks covering interest rate risk and currency risk management. He leads interest rate risk strategy across the United States, including California, Texas and Michigan. He has a finance degree from the prestigious Morehouse College and is also a Board member at Alexander Children's Foundation. Cameron, thank you for joining the podcast today.

Cameron Dayne   00:01:21

Thanks for having me.

Stewart Webster   00:01:23

Absolutely. So we're definitely in an interesting time in the risk management space. I know, as a risk analyst myself, we've been -- it's been very active nowadays. And it seems like the economic landscape, it feels quite uncertain, right? So when we look at the equity market, we see a lot of volatility. I look at the volatility index, it's been heightened for some time now. The dollar index was below $99. So that's showing some precarious activity in the market. And the last time I checked my -- last time I left my desk rather, crude oil futures were below $60 per barrel and then also policy shifts are on the horizon, especially with tariffs. So it seems like all of these macro pressures are starting to converge. So I'm just curious from your point of view, how would you describe the current economic environment? And why does risk, particularly interest rate risk and currency risk, deserve more attention from corporates now?

Stewart Webster   00:02:16

Yes. I mean you hit the key word there, uncertainty.

Cameron Dayne   00:02:19

And I would say that uncertainty is an understatement in the current market environment. We don't know what's going to happen tomorrow. I mean we heard about the -- as we talk right now, the U.S. and the U.K. agreed to a trade deal, and there are apparently more to come. But the biggest one I would say is from China. That's the biggest one, and we don't have any certainty around that. What does the tax policy look like and how does that affect folks? We're looking at tariff policies and things like that. But like you said, it's affecting all markets. It's affecting every asset class, equities, rates, currencies, commodities, all the way to crypto markets. And so you don't know which way to -- when you don't know which way to go, when you're -- you never know exactly where that next grenade is going to hit. It makes sense, in my opinion, for corporates to look at gaining certainty where they can gain certainty. I always tell people, especially like where do you feel the most safe? -- you feel the most safe when you have certainty, when you know that the alarm on, when you know that the door is locked, that's where you have that certainty. And when you have questions about that, it makes you jittery. And so I use that analogy with corporates as well. It's like as a CFO, as a CEO, as just a corporate controller, what do you prefer when you've got to wear all of these different hats where you've got to worry about even now with -- and I know we'll talk about it later, but artificial intelligence, AI and all those different things, how are you managing all -- to keep all those different balls in the air. And it's -- in my opinion, you gain certainty where you can't. And one of those places or a couple of those places or a few of those places, I'll say, is with interest rates, currencies and commodity prices. yes, you can lock in the price of crude oil. You can lock that in for the next 12 months or 24 months. You can lock in the price of copper. You can lock in the value of the dollar versus the euro as it is today or on a forward basis. And of course, you can lock in on a fixed rate basis, your interest rate risk on a go-forward basis. So I think that it does deserve more attention right now because there's just so much uncertainty. And when there's so much uncertainty around you, the best course of action is to gain certainty where you can.

Stewart Webster  00:04:44

Absolutely. No, that makes a lot of sense. And it seems like now we're risk managers, but it seems like we're also being therapists as well, right? So I guess when advising clients in highly volatile markets, is there a specific framework that you have? So what's your framework for helping them stay calm and make sound risk decision in this type of environment?

Cameron Dayne   00:05:03

Yes. I've been in this business across 3 different decades. So I've seen how folks look at specifically interest rate swaps after the global financial crisis. I know how some corporates see that as swap is a 4-letter word, but they see it as a different 4-letter word. Just thinking about what the risk was when locking in, in the early 2000s and doing longer-term fixed rates and seeing rates fall down and seeing those early termination penalties. I understand the fear around it. But you've got to look at hedging as a muscle rather than a monster. It's not a situation where you can just -- where you should be playing based on what's happening in the economy. Again, even presidency in the last presidency, any presidency before, you don't know exactly what's going to happen tomorrow. You never know when a geopolitical issue is going to arise. You never know when there's a black swan event that occurs. And so because of that, when you choose -- when you operate it as if it's a muscle, meaning you're instituting a program, it's easier to look back and say, we're doing this because it matches what we expect our debt portfolio to look like. When we are looking at interest rates and saying, okay, we want to make sure that we have at least 60% of our debt on a fixed rate basis. when you execute -- when you fall below that 60% and you execute another swap that gets you back up to 60%, you don't look back at it and say, well, rates came down after you locked in that rate. And so it was a bad decision. No, you operated your company based on that particular muscle of saying we're going to have 60% of our debt on a fixed rate basis. We're going to lock our future equipment purchases on every single deal that we have when we purchase something from Germany. Those are the things that we're looking at is like you clarify the objective. Are you protecting cash flow? Are you managing debt covenants? Are you reducing earnings volatility? Have that muscle in place and have that framework in place because that reduces, okay, we've got to time this market, right? Or if we do it today and rates come down tomorrow, are we going to feel like we made a bad decision. no one can time the market, especially in 2025. And you see people who are trying. But volatile markets don't call for panic. They call for preparation and precision. And so when you have a program in place, and I know there's a lot of Ps, you have a program in place, a framework that allows clients and corporates to really look back at those decisions and saying, hey, this is just what we are aligned with. This is what we've established as a program as a framework, and that's how I present it to my clients because, again, control where you can control, but do not try to predict the markets, prepare for the market.

Stewart Webster   00:08:13

Wow, that's good. You're making me feel comfortable now. I never heard someone compared to markets to muscles and human anatomy. So we're definitely seeing your athletic experience come out there. But I kind of want to shift to your leadership experience now. So you've led risk across California, Texas and Michigan. Now of course, all of these states are within the same country. But do you see regional nuances in how companies perceive or manage risk based on where they're at geographically?

Cameron Dayne 00:08:42

A little bit, yes, just because of the type of companies that are in each place. I mean, Texas is going to be a lot more energy-oriented. California and Texas do border Mexico. And so you're going to see some differences with especially on the currency side with how goods are moved back and forth. But even in Michigan, that border is Canada. So you're seeing some of those international flavors as well. But generally speaking, I think it's more industry-based. Manufacturing and industrial companies tend to want more certainty. Again, especially when you're dealing with -- in 2025, a lot of different issues associated with what's happening internationally and the uncertainty that's associated with that, again, you want to gain certainty where you can gain certainty. Those cash heavy, those tech companies tend to be more risk takers. They say, "Hey, we're fine with going with the markets. And so you don't see a lot of them locking in their risk. You see a lot of those folks just taking the risk. It's hey, we want to be nimble. We want to remain nimble. But those California corporates, Texas corporates, Michigan corporates that are a lot more mature and have tighter margins tend to want that certainty. And so not necessarily by any specific region that you see more folks, it's more, I would say, industry-based and age-based. Those -- like I said, those mature companies that have tighter margins that aren't looking at those 30%, 40% so looking at 3%, 4%, 5%, 6%, 7%, they're going to be a lot more keen to say, I don't want to take the swing of what's happening with the economy, especially when you're looking at a Fed that's data dependent, but also politically conscious. Why take that risk with those -- with that kind of a market environment just again. if you can manage your margins right now where rates are, then you should lock it in or then you should consider locking it in on a go-forward basis rather than playing against the market.

Stewart Webster   00:10:51

Absolutely. And you just spoke about the Fed being data dependent, and that's something that Chairman Jerome Powell mentioned yesterday in the press conference. So I want to get your take on, I guess, the Federal Reserve and monetary policy going forward. To me, it seems like the path forward has been anything but clear. It seems like the Fed could be stuck between the rock and the hard spot, just given their dual mandate. They have to keep unemployment low. They also have to keep inflation low. However, the tariffs do appear inflationary. And then to combat that, they would have to raise interest rates. But if they raise interest rates, that would stymy economic growth and could increase the unemployment rate. And then on the flip side, if we drop interest rates that would spur economic growth, but then that would help inflation rear its ugly head again. So it seems like they're in a precarious situation, too. So I guess, how are clients weighing policy on predictability? And how do you see Fed independence playing into risk right now?

Cameron Dayne   00:11:52

Yes. Like I said, most of my clients, if they listen to, again, looking at it as a muscle, not a monster, stop trying to game the Fed, stop trying to bet against the Fed and figure out and read all the different -- you've got so many different members and so many different speakers on the FOMC, the Federal Open Market Committee that you're going to have some doves, you're going to have some hawks and a dove is going to speak to you one day and a hawk is going to speak against you or vice versa. So trying to game the Fed and trying to realize or trying to execute a hedge based on whatever the Fed is going to do again, it's betting more than anything because the Fed is just essentially a group of economists and economists are subject to change their projections and forecast according to what they're seeing. And right now, we're seeing this environment where we could be heading into that word we don't like to say that word stagflation that describes exactly what you were saying, potentially higher inflation and weaker growth and lower unemployment or higher unemployment. That puts us -- puts my clients in a situation where we don't know what the Fed is going to do. They're going to have to pick one. And right now, the pressure is on rates going down. I like to tell folks, too, I'm like, I think there's a risk to rates going higher again if they do go lower. One thing I also say is don't forget the lessons that you learned. Remember the lessons that you learned in 2020, 2021 and basically saying, hey, we -- when the market was saying the Fed can't hike rates more than 2x and then more than 3x in 2022. And then we got basically 500 basis points of rate hikes over the course of that 16-month period, trying to gain the Fed and figure out what's going to happen becomes more difficult. If you remember the lesson of the Fed and the market saying, "Hey, the Fed has left the punch bowl out for way too long, remember those terms. We're forgetting all of that by just hoping for a little bit of rate relief, hoping that, that hits the markets. But again, it puts us in a situation where we could reverse course significantly in the other direction of rates going significantly higher if the Fed does appease the President appease the market who wants lower rates. But again, we just came out of what a modern day hyperinflationary scenario, are we willing to risk that once again just because of -- just to get a little bit of a jolt here. I'm not sure that's a prudent outlook, especially because I don't want to see rates going up to -- prime rate going up to 10% again. And I think that you're at risk of that if you do reduce rates that far low. And when we talk about stagflation and we're talking about the independence of the Fed, I do think that it's very important that they are independent. Powell's status or his post comes up in 2026. So I think he will stay in place until then. The independence of the Fed will be at risk when there's a new Fed chair that's put in place. But those countries where the Fed isn't -- or the Central Bank isn't independent, you look at Hungary, you look at Turkey, those countries have risked higher inflation and significantly higher inflation and therefore, higher rates. Turkey especially was in the 10% range for their target rate. Now you're looking in the 40% range. And I'm not saying we go to those levels, but those are the risks that you have when you don't have an independent central bank. And so I do think that, yes, there are risks to rates going down lower, but there's also risk to not having an independent central bank. That plays into risk strategy, especially. Yes, we could see rates come down if you execute today and the Fed appeases the President and appeases the market and says, "Hey, we're going to give the market a little bit of jolt for by bringing rates down. But again, the flip side of that is if inflation comes back, it may come back higher and harder. And by doing that, we don't just go back up to 5.5%. You've got to get the market's confidence back again and how to get the market's confidence back. you have to overextend the same way they had to overextend last time. And like I said, you could see Fed funds rate in the 6s and 7s potentially in that scenario.

Stewart Webster   00:16:22

Wow. So the pendulum is definitely swinging there. And I definitely echo your sentiment as well. One of our all-star analysts at S&P, Standard & Poor's is Sam Stoval. And historically, he wrote a book called the 7 rules of Wall Street. And one of the rules was don't fight the Fed. And that's exactly what you're alluding to here. The Fed is a group of economists, like you said, they're highly data dependent. They don't have any feelings, right? So don't fight the Fed, as you mentioned. Kind of want to shift to innovation in the future. Especially last year, we saw the rise of artificial intelligence, large language models, a lot of GPTs. How do you see technology evolving in the financial markets? And are there any tools or trends that you're especially excited about?

Cameron Dayne   00:17:10

In the banking sector, I think the banking sector has been a little bit slower to adopt AI just because of being on the private side and being able to see a lot of folks' information. We don't want that information to get out. I do think there have been some engines that have allowed there to be a little bit of a barrier for protecting that information. But I do see artificial intelligence and technology as the wave of the future. It does make us all a lot more productive, being able to look through data and parse through a 10-K or a 10-Q or a set of 10-Ks and 10-Qs and be able to say, and I'm not sure that folks are doing this as much. I think that it's coming. But being able to look through and be able to say, okay, well, what's their fixed rate debt mix? What's across the industry of these 10 companies that are in manufacturing, -- what's their fixed rate debt mix? What does -- what is the trend for the industry, being able to take that to a smaller client that's not necessarily trading in the S&P 500 that have -- that doesn't have to file with the SEC. What does that look like when you're presenting a strategy to them? Because, again, we want it to be a muscle, not a monster. -- not just trading on, okay, hey, rates have come down 30 basis points, I think now is the time to do it because what happens if rates come down 20 more basis points. They're going to feel like they made a bad decision. But if you say rates came down 30 basis points, I think this is an opportune time just because of where we've seen from the markets, but this also aligns with where the market is and where the companies that we use as comps for you where they're trading at 70% of debt, then you execute based on both of those things. You don't have just -- you're using your context to gain clarity. And so I do think that technology will have a role in making us more productive in how we present things that is not just like you said before, like we're more advisers than just establishing where -- or selling the idea of where to do risk. We're therapists more than anything rather than, hey, this is what's happening in the market, and this is what you should do. It's more like a, hey, based on what we're seeing elsewhere, here's what the data is saying, there is no right or wrong answer. If there was, I would be a multimillionaire on my boat right now, I'd be filming this from there and everybody will be paying me for this information. But none of us knows what's going to happen. None of us knows the exact debt mix that folks should have. No one knows when the best time of action is to lock in the dollar or something like that. So things like that technology can help with to say, here's what happened historically. But since we don't know the future, this is what it also aligns with in the industry. And so I think that technology will help with that in recommending tools that don't just show exposure, but suggest...

Stewart Webster   00:20:12

Absolutely. And Cameron, you're saying that you're not on the boat, but if our audience could see you, they would see that you're definitely yacht ready right now, you're short. Yes, so you're right in terms of artificial intelligence and advanced technology, it's -- the banking industry has been slow to incorporate that as well as the investment industry and kind of rightly so because we're a highly scrutinized industry. We're also highly regulated as well. And then oftentimes, we act as fiduciaries. So we want to make sure that the confidentiality is there. As someone who has a mortgage, would you want your FICO score out there or your social security number through all these different systems. So I think you're right in terms of why the banking industry hasn't started incorporating AI as fast as we thought it would be. And then you mentioned the risk adviser, right? So it seems like everything is changing rapidly, whether it's technology, new risks like geopolitical risk, new markets. So how do you see the role of a risk adviser evolving over the next 5 to 10 years?

Cameron Dayne   00:21:16

At least for me individually, I can't speak for anyone else. I'm very customer oriented. I'd like to see it from the point of view of how can we help each other. Obviously, helping me is by executing a deal with me, but it's not just education anymore. It's how this transforms your entire organization. How can I help you not only by executing the hedge, how can I help you with your Chief Strategy Officer? What does the strategy look like for the next 5 to 10 years. How does that work along with operations? How does that work along with accounting? And if I don't know the answer, at least hopefully, I have the resources that allow you to find that answer. I can be a hub. I can run as a quarterback for your entire organization. An interest rate or currency hedge, while historically, it has been a onetime -- well, not necessarily currency hedge, but interest rate hedges, it's like we do this 1 or 2 times within the course of that particular debt piece, and then we just let you know what the value is and things like that. But there isn't -- we're not doing a lot of the strategy associated with it or we're not talking about the operations associated with it. So I think that the role of a risk adviser is going to evolve beyond a markets or derivatives expert. You're going to be more of a translator between finance, operations and strategy. And so -- and not only that, adding in tech, how does tech associate with this. And so like I said, advisers need to understand the context. And so you need to step into the role of the context builder and the narrative shaper, explaining to CFOs and treasurers and controllers the risk decisions, making sure they understand, but then also making sure that you're taking that a step further and saying, okay, the Board, the investors, your credit partners, do they understand the value of this interest rate hedge and why we have -- why you have instituted a program of 70% of your debt on a fixed rate basis, 60% of your debt on a fixed rate basis. And so -- and then also because it's not just a fixed rate, you've got all types of structures. You've got option space structures and things like that. while you can have more different -- more products that associated with, it's less about the product, but it's more about the partnership. We're not just recommending a hedge, we're coaching you on the risk. So we're risk coaches rather than risk advisers.

Stewart Webster   00:23:54

Absolutely. And I guess let's just shift to your personal experience, I guess, personal risk and leadership, I would call it. So from track and field all American to Capital Markets Managing Director, what lessons from Athletics have shaped how you lead teams and handle pressure?

Cameron Dayne   00:24:09

High pressure really doesn't scare me because I've trained for it. I've always trained for it. Those moments on the national stage, it teaches you those lessons that every inch matters. Every hair of a second matters. When you're on the start line of 100-meter dash, like that start, yes, you can make up for it, but you lose it if you have a slower start than someone else. So when you're looking at every second mattering, every inch mattering, especially in the triple jump where, yes, you get 3 different chances at a jump, but if your foot placement is off by a centimeter, it could cost you the whole meat. And you don't get another chance. Like there is no, hey, we're just going to measure where your foot hit. you've got to hit it right on that -- on or behind that line. And so that attention to detail has helped. The discipline to train for that perfect moment has shaped how I lead in capital markets. That ability to say, okay, I'm going to work hard behind the scenes. I'm going to make sure I do all the research and all the work so that when I show up to the table, I have the information that I need. And then not only that I operated under this guise of pressure of being able to say, I can handle the questions that you're going to have because I prepared. that work ethic, that ability to deal with pressure, that understanding that every inch matters, that's how I approach my leadership in capital markets. Small decisions compound. So it's whether you're willing to wake up at 6:00 a.m. or 5:00 a.m. out here to even though you don't have any East Coast clients or something like that or none of your East Coast clients need anything, making sure that I wake up early and leave the office late. That's how I approach my leadership to capital markets because your clients are depending on you. They're depending on you to be the expert, at least that's how I want them to depend on me. They don't need to be an expert in derivatives markets, swap markets, currency markets or interest rate markets. Use me, use your resources as experts or use your experts as resources. And so if that's who I want to be, if that's how I want to lead, I've got to realize that every inch matters every minute, every second matters, and I've got to maximize those. So that's how my athletic accomplishments have -- which are now over 20 years old are still affecting me and leading me in my leadership in capital markets.

Stewart Webster   00:26:44

Absolutely. And that's definitely inspirational. And I'm sure that strong worth ethic is what has transformed you into a successful Managing Director over that 20-year period. I've always admired the track and field athletes because especially the track athletes, the sprinters are training for years just to shed that time by 1 second, 0.5 seconds. So definitely inspirational. I know you have to follow your diet, like you said, wake up early, always be ready to train, so on and so forth. And I guess, lastly, what's the risk you took in your career that really paid off -- and what did you learn from it?

Cameron Dayne   00:27:20

I've changed firms a couple of times. And I didn't change firms necessarily because they were bad firms. I changed firms for -- again, to see if I could take my career to the next level. So far, knock on wood, those risks have paid off. But I've left comfort. I've left comfort of role specifically. I've left comfort of people who are around me. I think I was reading somewhere that people leave companies because they leave managers. And that was never the case for me. I've worked for great managers. I've kept in touch with each of them because it wasn't about that. It was about the opportunity that to take a risk on myself. And so when you leave that comfort, when you leave a place where it's like, hey, I know these people. I've worked with them for 10 years, and they know me back and forth. They know how I operate. They know my work ethic. I don't have to prove anything to them. If there's a down year in the markets, we're not looking at me and the things that saying, "Hey, Cameron is not doing what he's supposed to be doing. They know I'm doing what I'm supposed to be doing that it's just a matter of the markets. And having to leave that and go somewhere new and reestablish that, it's -- those are huge bets. -- that you're making. But it's forced me to walk into situations once again with humility and know I need to listen more. To be honest, I mean, there is a side of me that not necessarily takes the foot off the gas 100%, but you might not have it floored necessarily. But when you go to that new organization and you're trying to establish that reputation going back to the athletic lessons, you push the gas, you push it down fast. And so you make sure that you establish that reputation that allows you to build trust fast. And these moves have accelerated my career and deepened my impact across different industries. I'm here right now in my opinion, based on some of the risks that I've taken, and I appreciate you all for giving me the opportunity on master risk to even have this. But part of this has been because I've taken those risks in my career. So the biggest risks that you take are often the ones that stretch your identity, not just your resume. And while they have improved my -- these risks have improved my resume and accelerated my career and deepen my impact, they have taught me a lot about myself. And so I've learned that I am a hard worker. I am one that's willing to work harder than anyone else or just as hard as anyone else out there. But it also has taught me, hey, there are different folks in different ways and different styles. You can learn from a lot of different -- and you can affect a lot of different people differently. And so those are the things that it's worked on me not just from a resume perspective, it's worked on me as a man in teaching me how to go into new situations, how to go into foreign territory and win people over, gain that trust. And I've done that a few times, and I value that ability to this day. And I just learned a lot about myself. And I can also, from that point, mentor others when they're asking me, "Hey, should I take this risk? I've been here for 10 years and the people know me what led you to take that risk. I mean sometimes you just got to -- and I think in athletics, too, sometimes you just got to get up to the line and just when the gun goes off, it doesn't matter who's around you. You got to run that race and you run your race the way that you can run your race. And if you run your race the hardest and you -- at the end of the day, you can look back at it and sometimes you win, sometimes you lose. But if you -- if you run that race your heart, you won in your heart. And so that's what I've learned significantly in taking these risks of moving to different firms. Another risk I would say I took is I do have a LinkedIn, and I do videos on there, market videos, market-based videos that just give a little bit of an update, and that was a risk that I took. I don't feel like -- I never felt like I've been a person who's in front of the screen, but it's -- you just got to press record. And that information that's markets based. I've got one that I'm trying to record here shortly based on the Fed's decision yesterday. If I wait till next week, that's pretty much stale. You've already got the U.S.-U.K. trade deal and it's probably affecting the markets more than the Fed decision yesterday today. So it caused me and force me to, one, be on top of my things, but also get that information out there in front of people who want to see -- we would rather see video rather than reading a different post on LinkedIn. So just continuing to take risk. I think that that's paying off. It's not paying off financially and not to look -- not to see that I want it to pay off financially, but it is making me a lot more of a resource to folks than just everyday folks than I would have thought before. And so that's paying off for me as well.

Stewart Webster   00:32:55

Absolutely. Well, this has definitely been a grand slam session. Cameron, it's been a real master class in risk from the macro shifts shaping today's economy to the human resilience behind bold decisions. What you shared reminds us that risk isn't just something to manage. It's something to understand, to lean into and when done right, to turn into opportunity. And to our listeners, whether you're navigating the volatility of global markets or leading teams through uncertainty, remember what Cameron said, clarity, calm and preparation turn risk into a strategic advantage. That's it for this episode of masters of risk. If you found value in today's conversation, be sure to subscribe, share and leave us a review. Until next time, stay smart, stay resilient and keep mastering risk.