For John R. Taylor, the world is defined by cycles. There are ups—building and running a currency hedge fund that became the world’s biggest, for instance. And there are downs—specifically, presiding over its demise.
The 73-year-old former scholar of political science and European history sees that particular experience at FX Concepts LLC as just another cycle, an echo of the statistical patterns he uses to guide his predictions. “It was a 35-year round trip,” Taylor says in an interview over lunch across the street from his modest Midtown Manhattan office. “And 35 years happens to be one of my favorite cycles.”
So Taylor is in a growth phase again. He’s on to a new venture—building up a roster of clients who pay $25,000 annually for his insights. Taylor Global Vision is the latest endeavor of the man who in 1981 launched FX Concepts and oversaw it as assets climbed to a peak of about $14 billion in 2008. In the wake of the financial crisis, the firm’s predictions misfired amid heightened volatility and a dearth of trends. The business slowly crumbled as investors yanked money. About two years ago, Taylor wrapped up proceedings related to the 2013 bankruptcy of International Foreign Exchange Concepts Holdings, the parent of FX Concepts.
The quantitative models that drive Taylor Global Vision’s forecasts for currencies, commodities, and interest rates are based in part on models developed as far back as the 1970s. The firm has about 50 clients, including global and regional banks, pension funds, and traders—some of whom pay out of their own pockets for the reports.
Taylor’s success in specifying the timing of turning points has kept Prasann Patel, head of the markets group at Auckland-based family office Core Investments Group, ponying up for the research for more than a decade. “His cycles are very, very important,” says Patel, 45, whose group manages NZ$100 million ($72.6 million). “John will tell you on the day, and sometimes even at what time—New York 1 a.m. or 5 p.m. Tokyo—when the turn will happen. No one else I know from being in the market for 20 years can give you that level of precision.”
Case in point: Patel highlighted Taylor’s guidance in mid-October to stand pat on exposure to the New Zealand dollar, which went on to rally about 3 percent in the following week, generating more than enough proceeds to pay for the research.
“We were there in his best times in terms of FX Concepts and then at the worst,” Patel says. “I prefer things now. Before, the firm was too big, and every man and his dog was chasing John, so he had no time. We like the personalized advice we get now.”
Taylor bought the hedge fund’s research arm as part of the bankruptcy settlement and gave the name Taylor Global Vision to what began as FX Concepts Newsletter. He commits to putting his own cash into every recommendation.
Taylor presides over a far smaller and less lucrative operation than during the hedge fund’s heyday. From scores of employees worldwide half a decade ago, he now has a staff of three: a strategist and two sales personnel. (Marie Currim, his treasurer for the past 17 years, just retired.) Taylor’s compensation is also on a dramatically different scale: He says he pulls in about $300,000 annually, compared with making $12 million several years in a row during the halcyon days. “I’m not starving, but I also am not taking vacations at the Villa d’Este,” he says, referring to a luxury hotel on Italy’s Lake Como.
Gone, too, are other trappings of that era. He sold a Manhattan apartment for $20 million to pay off most of his liabilities related to the firm’s shuttering. The remaining obligations must be met by 2018, he says.
Even as his new venture gains traction, he acknowledges the disarray and pain that the hedge fund’s collapse left in its wake. About 20 employees, out of a peak staff of more than 70, started with the firm right out of college. “It was awful,” he says. “I felt responsible for them.”
Taylor has a bachelor’s degree in European studies and civilization from Princeton, with a minor in history and Romance languages. He started a Ph.D. in political science at the University of North Carolina at Chapel Hill before getting married and leaving the program for a job as a European political analyst at Chemical Bank—a predecessor of JPMorgan Chase & Co. He eventually shifted into currencies and in 1972 began the bank’s foreign exchange advisory service, shortly after President Richard Nixon took the dollar off the gold standard.
He’s had his share of failed recommendations. In 2010, Taylor began calling for the euro to slide to parity against the dollar as Europe’s debt crisis worsened. Yet the shared currency proved resilient, averaging $1.33 from 2010 to 2013.
His model, which uses decades of statistics to identify cycles in prices and make predictions in a way that some clients say is unique, has had the beleaguered pound in its crosshairs since Britons voted in June to leave the European Union. “Sterling is going to hell vs. the dollar,” says Taylor, who most days sits in a one-room office on Madison Avenue.
The pound has lost about 16 percent vs. the dollar since the vote, touching $1.1841 on Oct. 7, its lowest value since 1985. Taylor predicts a move to $1.15, which he calls “conservative.” On Jan. 30 it traded at around $1.25.
He’s confident about another trade—that the dollar will be the best-performing currency this year. The model signals that Intercontinental Exchange’s dollar index will rise through 2017 and won’t stall until the first quarter of 2018. The index reached a 14-year high in January, after the Federal Reserve lifted its target rate range by a quarter-percentage point in December.
Taylor isn’t leaning toward retirement anytime soon and is still wedded to the study of patterns. “I’m a believer in cycles,” he says. “And I keep applying that to my life.”
McCormick covers bonds and FX for Bloomberg News in New York. This story appears in the February/March 2017 issue of Bloomberg Markets.