The Macro Trading Floor transcript – 6 September 2024

Alf: Benvenuti to the macro trading floor. This is Alf speaking as always every week with my good buddy, Brent Donnelly. Brent, what’s up?

Brent: Hello, Alfonso. We are in the best month of the year. September. Amazing weather leaves changing color back to school. Baseball pennant races. NFL season starts Brent Donnelly’s birthday.

It’s just a good month to be alive.

Alf: I think Brent Donnelly’s birthday is the most important one. We need to make sure we know the date so we don’t sing you a happy birthday song here because I’m terrible. Anyway, so another thing in September we have a Fed meeting and we don’t know, or at least the market doesn’t know if it’s 25 or 50 basis points.

Specifically at the time of recording the rates market is pricing 34. 5 basis points, which is basically like, I’ve got no clue, dude, if it’s going to be 25 or 50, pretty much. That’s what the market is saying. So now let me ask you, do you have any clue? I have an opinion here, but it’s not a great positive expected trade, positive expected value trade, but at least I have an idea.

Do you have an idea where there’s going to be 25 or 50?

Brent: So Like we’re doing this recording before nonfarm payrolls. So obviously there’s a lot of looking stupid risk here, but my bias is more towards 25, but I think it’s worth going through the arguments either way, because this will come out after payrolls, but also because I think it’s interesting. There’s a lot of economic aspects to it, but then there’s some weird sort of technical aspects to the decision that the FOMC has to make.

So if you start with the arguments for 50 there’s no meeting in October and then there’s the election in November. So there’s like a bit of weirdness with the timing. If they think that the economy is rolling over 25 now and then 25 in November is like nothing, right? That’s baby steps compared to what they’ve been doing, what they did on the way up. And they do, I think most people think rates are deeply restrictive, despite like what stocks and stuff are doing. According to most measures, the rates are, you know, 200 or 150 basis points through neutral.

And then given what’s going on around the world, which I guess we’ll probably talk about later, A reacceleration of inflation doesn’t look that likely from any external source. Like you don’t have enough dollar weakness. You don’t have like China inflation or German which explosion or anything that looks scary from the outside.

So those are kind of the arguments for 50 on the other side. Like I’m more on the arguments for 25 sides. So like Powell said in his speech in 2018 the reason that you do large cuts or large hikes. is either there’s an emergency or a de anchoring, which are kind of two types of emergencies. So one is like economic emergency or like you know, inflationary emergency, like there was in COVID or a de anchoring of inflation expectations, either way, whether people are looking like expecting deflation or much higher inflation, I would say none of those conditions apply now.

And There is some history of central banks turning too early and inflation reignites, obviously the 80s in the U. S. is a big one. And then, I kind of call bullshit on the November election issue because the election’s November 5th, and FOMC’s November 7th. So, I don’t know, to me, who cares? Like, if you’re meeting on November 7th, and the economy’s doing whatever it’s doing, and the election’s already happened, I mean, even if it’s a disputed election, I don’t know.

I just don’t see why that matters. And then, I mean, maybe I’ll pass the jobs market over to you. But to me, just my quick take on it is there’s a lot less hiring, but there’s not much firing. And so it’s pretty easy to argue that we’re just mean reverting to like 2017 2018 kind of economy, not falling off the cliff.

But I mean, there’s a lot of debate about that. So to me, barring like a two sigma miss on payrolls, I just think they’ll end up going 25 and it’s, it’s more of like insurance. and not an emergency.

Alf: Okay, valid arguments, and now we are going to disagree. If I have to pick something, I have to, I will pick 50 basis points.

Again, I wouldn’t trade the odds because they’re not great. 50 50 odds priced by the market, and frankly, my odds would be like, 6535, so it’s not enough of an edge to trade. But if I would have to choose, it has to be 50 basis points. And here is why. I concur and I’m going to borrow some of your reasons why it’s 50 basis points.

There is no no meeting in October. So next time you got to cut is in November. But importantly, maybe the Fed already wanted to cut in July, ex-post, given the numbers that have been published since then, it could be more than an emergency Brent. Maybe it could be just a, let’s catch up on the, on the lost ground, basically.

So we should have done 25 in July. We haven’t. So that’s why we’re going to do 50. The communication part is very important then because they need to make sure to tell you it’s 50 basis point, not because they’re freaking out. It’s 50 basis point because, well, basically they’re just catching up on July.

Right. That, that should be on the communication side. And then the other thing is this, I mean, Mr. Powell said in Jackson Hole, let me try to quote him specifically so that I am not misquoting Mr. Powell. He said something along the lines of, well, I can’t call it literally, but it doesn’t want to, to see further cooling in the labor market.

They don’t welcome further cooling in the labor market. Now the official number of the labor market that everybody watches is nonfarm payrolls. But we all know that now I’m quoting Powell, the totality of data is really what matters. I mean, they’re looking at so many data on the job market, not only just one print.

So I disagree with this obsession about nonfarm payrolls. And now if I can quote three of these numbers Brent on the labor market, I mean, for example, job openings to unemployed people, this is something that Powell has many times himself. It’s a ratio. And now this ratio is back to the lowest level in six years.

So we are looking at 2018 levels. Well, you can’t say that, you know, the job market is hot at all from that perspective, the Kansas fed labor market indicator, something you and I’ve already discussed here, which is like a variety of job market variables, all in one single index, also the weakest level in seven years. There are more there, right?

And So I don’t think that necessarily it will depend on NFPs. Of course, if NFPs are 200k, then they’re going to do 25 basis points, I guess. But with the standard outcome of nonfarm payrolls tomorrow, I would expect them to lean towards 50 just to recoup the lost ground and to make sure that, you know, they are in front of the curve and not behind the curve when it comes to labor market weakness, which they have explicitly said they don’t welcome anymore.

Brent: Yeah, I guess the biggest argument like in support of what you’re saying, other than the July thing, which I didn’t think of is that the labor market just tends to have a lot of momentum. So, like, there’s always the argument about levels versus changes, and I’m kind of saying, hey, the levels are the same as when you had a pretty decent growing economy in 2017, 2018, but at the same time, you know, you don’t usually see a lot of, like, where it dips and then rallies and dips and rallies. It just, once it starts going down, it just keeps going down. So that’s. I guess that’s a fair point.

On the communication side, it’s really interesting because the Fed sometimes strategically places speakers after events or in specific moments. I remember there was a Williams one, for example, where he went on CNBC, kind of like at the last minute, and they popped Waller and Williams in there after payrolls.

And I think that has to be all signal and no noise. I mean, that’s not a coincidence. That while we’re speaking at 11 a. m. After payrolls is at 8 30 a. m. So that’s going to be super, super interesting because you can pretty much craft two theories around it.

One is what you said, which is they want to message. They want to message 50, but they don’t want people to panic. And this notion, like the fed knows something we don’t know is just like absolute nonsense. I mean, you can compare the forecast over time, private and public and government, whatever. All the forecasts are basically the same. They don’t have, like, very much secret information other than, like, maybe about the banking system if it’s in big collapse, which it’s not.

So, I don’t know why they need to worry about that, but you’re right, they probably do. So, they could either be that, or they could be there to say, hey, listen, we don’t really know where neutral is. So, We’re doing baby steps. It’s 1995. The soft landing is on and, you know, this payrolls number, whatever it was, doesn’t change anything.

It’s within the bounds of what we thought. And we’re, you know, we’re, we’re not going to ratify this 50 beats now. Like, we’re always hoping for them to be so clear. I mean, maybe they won’t be, but I have to think that Waller and Williams, both very senior fed officials and, you know, The Fed knows what everyone else knows, which is that Waller is kind of the most respected mouthpiece these days.

So you don’t put the most respected mouthpiece two and a half hours after payrolls for no reason. So that’s going to make for a really interesting trading day. And the podcast will come out before Waller or around Waller, I guess, but where you could see some kind of weird initial reaction and then massive reversal or initial reaction and a massive continuation, depending on what, what the Fed messages at that point, because I mean, then the blackouts going to start and, and then the market’s left to its own devices.

Alf: I agree on Waller and Williams and what’s going to come there. It’s all about communication. So we disagree on a 50, 50 odd. Well, that can easily be a ground where somebody disagrees. So no surprise there.

I don’t even think that’s really going to matter that much at the end of the day. Right. I mean, for now, I think the bond market is really mostly trying to figure out the pace of cuts, how fast is the Fed going to go to terminal? And by now we’re pricing a very fast way that the Fed’s going to go to terminal, but then what is terminal rate?

Cause right now terminal rate is priced at 2. 9%, which in nominal terms, frankly, I find relatively fair. I mean, a nominal neutral rate at 3 percent or 2. 75 or 3. 25. I mean, it’s roughly a decent number. I would argue it’s higher than what it was. pre pandemic or estimated to be pre pandemic, but there are arguments for that.

I mean, pre pandemic, we weren’t assuming that five or 6 percent deficit was the norm either, right? So you can make an argument by which nominal neutral rate should be a little bit higher going forward. And barring a recession at this point, it’s also a bit hard for the front end of the bond market to rally further.

I mean, it really requires you to price an even faster way to base it to 3 percent or a much lower. neutral nominal rate, say two and a half percent. That’s like the heart of that. I think it’s a little bit high or what do you say, Brent?

Brent: Yeah. I mean, the one thing that, that maybe it does matter a little bit is that the baseline speed can be viewed differently.

Like if, if 50 is the baseline insurance cut and yeah, maybe that’s making up for July, but like still, if their first cuts 50, Then it’s just a lot easier to assume that that’s the baseline. And then you say, okay, well, if there’s a recession, you know, they’re going to be going clips of a hundred and then all of a sudden what was looked like a lot was priced in will be not that much priced in.

So, I don’t know. I think it makes a difference for psychology because it shows like what the baseline first cut is, is easily extrapolated to the other cuts, but then also this. nonsensical notion that the Fed knows something will creep into the mind of the market.

Alf: And let’s switch gears and also geographical focus because there is something going on outside the U. S. as well. And I think it’s all linked. It’s basically one bucket, but we can cover one by one. It’s China, commodities, The Aussie dollar basically one broad macro theme I’m covering here pretty much in terms of correlations, but something we should talk for a second about.

So on China first, I’m going to say a few words, something, this is an opinion of mine I’ve held for a long time, might be wrong, so far, so good at least, which is that China looking at a centrally planned balance sheet recession balance sheet recession is a situation where you de leverage a highly leveraged sector of the economy and therefore the agents are forced to de leverage their balance sheet.

Japan has done that in the nineties. In this case, it’s a bit different because, well, we have de leveraging the real estate market in China, but we are doing that in a centrally planned way, in a centrally planned economy. And so the deleveraging is much more gentle. There is nothing that is collapsing all of a sudden, but it is happening.

And then normally people expect China to have learned from Japan and therefore to react with fiscal, but well, guess what? I don’t think they plan to actually rescue this process. I think they just want to control it. They don’t want to fix it. If you ask me for what I can know about China. So they’re choosing to actually use another lever, which is the interest rate policy and the seven day reverse repo rate, which is one of the indication of money market rates or short term rates in, in, in China has now been cut to well below 2%.

And this is not the first cut they make. They’ve made a series in a row. And I think Brent, they’re going to continue with that. And if they continue with that, then it doesn’t help at all. Nominal growth in China, if nominal growth in China doesn’t pick up, then their commodity demand is lower. And places like Australia or New Zealand are also highly exposed to this narrative.

So it’s all connected to me.

Brent: Yeah. And the thing is like, it’s basically classic pushing on a string. And Leland Miller who runs China beige book has had some hilarious tweets about this because a lot of banks have been sort of playing the pre 2020 playbook, which is here comes a big stimulus and, you know, big China’s going to come and save the world and all that.

And it’s just not happening. And it just seems really clear. Like you said, that they’re just the balloon, Is slowly, slowly having it, the air let out, but they’re not going to reflate the balloon and they’re not going to let it pop. Like, they’re not going to let it go flying around the room. They’re just going to slowly, slowly let it, let the air out.

And in the end, that means that commodity demand is going to be lower than it would have been if there’s some kind of like consumer stimulus or real estate massive boom. You know, bailout fund for real estate or whatever the big bazooka results are. And then, so that kind of goes to the what’s going on now, which hasn’t been like a clear theme, but it’s definitely a theme in the last week or two is the weakness in commodities.

And oil’s kind of breaking down copper broke down. You showed me your heat map of the largest z-scores of the biggest moves in the last week and actually one that stands out which I didn’t realize is Iron Ore, which is an interesting one because back in the good old days trading Aussie at Lehman Brothers, the Iron Ore was, yeah, back in the olden days Iron Ore was like one big indicator because It was sort of the, the major export of Australia, but also it was kind of like this, this China proxy that represented steel demand and, and overall infrastructure built in China.

And I mean, to some extent that should still be true.

Alf: Yeah.

Brent: It’s, it’s not the most liquid market, but it’s still a market. And so iron ore being on the lows is bad for Aussie and it’s, it’s a good China proxy and that’s what we’re seeing. One, one just interesting thing about commodities in general that I’ve noticed this week with like some of the analysts coming out, like people that are, are real commodity guys coming out on TV or in newsletters or whatever, is that I would say quantities are the only asset class where sentiment doesn’t follow price.

So like when prices fall, people just get more bullish. Maybe Bitcoin is like that, but there’s not very many asset classes that are like that. So like the net vibe positioning isn’t always long, but the net vibe is almost always bullish. And a few of the bigger names in commodities came out this week and doubled down.

And it’s kind of ironic because like quantities are the worst asset class in the last 20 years. It’s the only asset class with negative annual returns over the past two decades. And yet, even when they’re, you know, on their knees, People can always craft some kind of bullish narrative and I guess I just don’t buy it.

Alf: Well now I think it’s the perfect time to talk about our framework risk management and trading topic of the week. We hear you guys love that, so let’s let’s talk about one of these. Long term biases versus short term trading. And so let me share my experience. I have fallen victim of this dichotomy and this mistake a few times.

So I started my career in 2014. And in 2014, 10 years ago it was literally the start of the post taper tantrum in bond markets. And after that taper tantrum, basically we had one rally big fat bond market rally all the way down. Okay. Up until negative interest rates, 10 year bonds were minus 75 basis point in yields at some point minus 75 basis points for a 10 year bond.

So that’s the world I knew. Okay. And clearly you can come up with a bunch of reasons, which are still correct in most cases you know, globalization, demographics, a decline of productivity, higher leverage in the world. And you can basically attach a narrative and say, look, we live in a low interest rate world.

And that’s it. Of course. This is a bias which you can have, any, any one of us has a bias, Brent, maybe the commodity guys, they love commodities, they think one day they’re gonna rally big times and it’s gonna be a commodity, how is it called, super cycle, super cycle, yes, something like that, fine, it’s okay, the problem is that if your time horizon when you’re trading for an institution or for yourself is one month, Your long term bias doesn’t matter shit.

And actually it’s going to be just a baggage. You have to check out the door or it’s going to hit you. It’s going to hit you. It took me way too long to shift my focus. When inflation started picking up. It took me way too long to get on the train. I finally did, but it took me way too long because of this long term bias, which in short term trading, it’s really more of a burden than anything else.

So that’s my personal experience about it, but please do share yours.

Brent: Yeah. And I think what Sometimes is that as a risk taker, you get forced to change your bias. So like you had to change at some point because the market forced you. And whereas commentators don’t always need to switch their bias. And in fact, if you’ve been bearish for four years on whatever thing, and you flip bullish, you’re going to lose subscribers and you won’t go on Bloomberg TV as much, and you have the huge risk of looking stupid.

So the switching costs for commentators can be very high, but switching costs generally for traders is low. So there’s a spectrum, right? Like, so buy and hold. You can have whatever bias you want. You think this company is going to be great. You’re going to hold it until you die and your kids are going to get the money.

Like I know people that believe that about companies and I mean, that’s totally fine. And then obviously that’s one extreme. And on the other extreme is more my time horizon, like one to 10 days trading. And if you’re trading that time horizon, even one month or two months, you just can’t get too hung up on sick, unstructural stories because Markets just don’t care about them very much.

A lot of the time, it’s just not the structural story that matters. It’s, it’s a cyclical story. And so like the person who can never be long CAD or can never be short gold or is always bearish equities. Those are just like diseases when you’re trading and they have killed so many people that I know trying to be the same way all the time.

And the irony is that sometimes they’re right, but it still doesn’t matter because They lost so much money being wrong before the thing happened. Like people that were short cross yen in 2006, 2007, you know, we’re losing their jobs in 08 before the collapse. And it’s just so much more healthy psychologically and financially to not have a directional bias in anything, honestly, I think.

And then if you do have a bias in something, Then you have to constantly be checking your priors by like, find people. If you’re bullish Bitcoin, find five people that are generally bearish right now and read their stuff. And if you can refute it, then that’s great. But what people tend to do is just climb into the echo chamber and read all the stuff that supports their view.

And then you’re not really doing anything intellectually at that point. All you’re doing is just saying like, I’m bullish and now I’m going to go read a whole bunch of bullish forecasts. Like, what’s the point? So, there’s this amazing book I’ll put it in the show notes, by Richard Heuers, he’s the head of intelligence analysis at the CIA for a long time, and he wrote this book called The Psychology of Intelligence Analysis, and chapter 8, the main topic is analyzing competing hypotheses, and I, I recommend anyone read that, it’s just a really good way of Keeping an open mind is that whatever your thing is, the more bullish you are, the more you need to analyze the bearish hypothesis and read about it and understand especially people that are generally bearish stocks or bearish dollar or any of those structural things that kind of like feel intuitive, but have been totally wrong.

Then try to go out and find, you know, find a diet of things that are going against you and, and read about, read them. And what you’ll find, I think, a lot of times, is that it tempers your view and you become less dogmatic and more agnostic. And, like I said, if I’m bullish, and then I go through all my stuff to find five people who are bearish because I want to know what their thesis is, and I read those five pieces and I’m like, okay, I disagree because of this, this is wrong, this is factually incorrect, whatever.

Then I’m like, okay, I’m, I’m really bullish in this and I feel good about it. But I think what a lot of times ends up happening is, you know, I mean, that’s the nature of confirmation bias. You just seek out things that, that agree with you and that’s super unhealthy if you’re a trader.

Alf: Completely right there.

The risk that I see in, that I hear many people going through there is analysis paralysis. So you’re bullish or bearish in something, then you’re going to go and find disconfirming evidence. And then finally, you’re never going to put a trade on because you can always find somebody smart saying something opposite.

I think that’s not the right way to approach this. It’s more about. Really keeping an open mind when considering whether the other camp could be right or could be wrong. And importantly, I think still people attach too much opinion and weight to, am I gonna be right? This is not how you make most money guys, frankly.

Brent: Yeah, that’s a great point.

Alf: You make most money by successfully deviating early enough from consensus. So when consensus moves towards you, that’s where you make most of the money. So most of the money isn’t made by being terminally right on something, right? And have this crystal ball that says whether you’re right or you’re wrong.

Make money by anticipating the move in the probability distribution of consensus towards you over time and doing that early enough. Okay. It’s a bunch of words. I get it. How do you measure consensus? Because that’s a question I get from my subscribers a lot. Like, you know, I always say you need to deviate from consensus, but where the hell is consensus in this trade?

And this is a great question to which there is not a unique answer, of course, but I’m very happy to hear how would you At least just a couple of hints on how would you look, Brent, at measuring consensus?

Brent: Sure. So it’s a, it’s a tricky one because there’s a lot of different ways and then there’s sort of the more anecdotal ways and then there’s the more data driven ways.

The thing I would say though, overarching all of this, like forgetting about specifics, is that If you’re an expert in the thing that you’re trading, you’ll know what the consensus is. Like if, if all I trade is dollar yen and all I do is talk about dollar yen with 150 hedge fund clients every day, I’m going to know what consensus is without even having to like go to the CFTC data or whatever.

So that’s why I always encourage people to try to be an expert in one thing and not like 25 different markets. So that’s kind of the starting point is just immersing yourself in the zeitgeist of whatever the thing is that you trade. And you’re just reading all the articles, you’re reading all the bank research, and you just know what the consensus is.

But in a more data driven way, I mean, I use like daily sentiment index, I use, Price follow, price, or sorry, positioning follows price type of measures like RSI’s and things like that. CFTC I do a lot of more, like, try to do more data driven things on sentiment, like, how many Bloomberg articles have been written in the past week about GPT?

So, that has been declining. And so then that’s like, okay, the narrative is kind of coming off. So there’s a lot of data driven ways, but like I said, I think if you’re immersed in your market or your markets, then generally you just know because you’re, you’re an expert and you’ve been observing it.

Alf: Yeah. I think that’s of course, one way to do this. The expertise though, it’s. Puts a lot of people off the charts, right? Because it’s like, how can I be an expert in something if I’m not an expert in something? And therefore I’m never going to be able to measure consensus until I become an expert, which means I probably have to lose a bunch of money until I’m able to measure consensus.

It’s very hard. I think you’re still right. The main way to get this is gather as many data points as possible. Do not fixate on one source of information. Say Twitter is that and therefore the market is why that’s, that’s not how it works. The CFTC positioning on bond markets is that, okay, is the CFTC telling you whether people also have a swap as a hedge to their bond position?

No, they’re not telling you that, right? So the people might be long bonds, but are they paying swaps against it? So, again, always try to gather as much information as possible from as many different sources as you can before you’re able to say something about crowdness or positioning or consensus. There is one more thing.

Brent: You know what, sorry to interrupt, but I think you made the point better than I did, is that it’s just, it’s nuanced, right? There isn’t a holy grail where you just go get the one number and it says 10 out of 10 and then, you know, everyone’s long. It’s just, it’s more nuanced and there isn’t, there isn’t a simple answer.

And that’s why. you know, my answer made less sense than your answer is, which is just, it’s just not that simple. It’s nuanced.

Alf: No, no, it’s very nuanced. I mean, some of the stuff you said I would want to use in, in an approach, but it’s clearly, it clearly has to be very nuanced. And then this is all market driven, but there is a fundamental consensus that’s much easier to track.

You can track what Bloomberg consensus analysts, for example, or economists are expecting for GDP growth and non farm payrolls and inflation and earnings growth. That’s all public information. So I would say that’s pretty simple. Build a framework where you can track these things. So you can track what the consensus for GDP growth is and inflation and earnings and what have you and on from payrolls.

Brent: Betting markets have become a good source of that too. Like you can even track non farm payrolls, expectations, things like that by those spread betting websites.

Alf: Yeah, that’s a very good point. So all these things where actually there is either a traded market or public economist group thinking type of of, of numbers out there, do track those.

But as my mentor said, and this is so important, you are, if you can track consensus and you can track macro data, but are you trading GDP futures? And think about this question. Are you trading GDP futures? No, you’re not. You are not trading GDP futures. So always remember that, which is basically a way to say, Macroeconomic data don’t always translate one on one on market reactions, or the stock market isn’t the economy, in other words, or vice versa, you can say as well.

So track that, measure consensus in data, it’s important, but also try to be nuanced about measuring consensus in market positioning, because ultimately you’re trading markets, you’re not trading GDP futures.

Brent: And actually this leads to a little bit of like a small left turn. And I know we don’t have too much time left, but all this stuff that we’ve been talking about kind of reminds me of a bunch of stuff I’ve been thinking about in crypto, which is like, there’s really not much of a narrative right now.

If you look at like spot Bitcoin ETF flows, they’re basically flat to negative. The Ethereum ETF launch and the flows are, are horrible. And. Bitcoin and crypto are a really interesting market because of the fixed supply. You essentially just are thinking about demand all the time. And demand is essentially narrative, right? In crypto, like, is there a good story and is it exciting? And like are fun things happening? If yes, price go up, if no price flat to down.

And so to me, crypto looks like dead money for awhile. There’s, there’s really no narrative. If you look at like Google searches for whatever thing you want to look at in terms of crypto, they’re all declining.

There’s not really much left for wall street to launch either. Like we have the spot ETFs, we’ve got the futures ETFs, there’s a spot Ethereum ETF. They’ll probably add options on spot ETFs, but to me, that’s a vol killer. And that’s not like a number go up. That’s a vol killer. And if you think about every big rally and a lot of the sell offs too, almost all of them were a product of some big narrative, right?

Like most, mostly institutional adoption post COVID has been like, different waves of that have been the big, the big narrative. And that ship has sailed. And I mean, unless you get like a central bank announces they’re buying Bitcoin or something like that. Now like obviously there’s all these sub narratives about Tron and Solana or whatever, but to me, a lot of things don’t look great for, for crypto right now, and I’m not talking about like structural stuff, I’m just saying, right now I don’t see, like it just looks like dead money to me for a while, like, when the Nasdaq rallies, Bitcoin’s still sluggish, yet you made an, actually an all time high in, in Nasdaq at one point, and crypto wasn’t even close, in fact, actually crypto market cap Didn’t make a new high when Bitcoin made the new all time high up there in June.

Crypto market cap didn’t, and then also gold’s at the all time highs now. Bitcoin’s trading 20 percent off. So to me, like there’s just not enough of a narrative. There’s no momentum and the flows aren’t there. So to me, I think crypto is going to be dead money for a while.

Alf: Yeah, I mean, it definitely has been.

The other thing which I found incredible is if you look, one of the reasons I want to, I want to now put something like a branch towards my crypto friends, if there are any listening to to the podcast, by the way, I see crypto as an asset class like anyone else. I don’t have religious beliefs on crypto of any sorts.

If you have, then It’s a religion. So fine for me. And anybody treats an asset class as they want. There are gold religious people. There are commodity religious people value religious people in stock markets. And also crypto can be a religion, fine by me. The thing, one of the arguments by which people always said that Bitcoin wasn’t, wasn’t going to become an institutional asset class was because realized vol was too high.

Okay, now give me a freaking break here because you guys are trading in BDI and all the indices of the world giving it to mom and pop and this thing is realizing a hundred vol for free. And, and Bitcoin is realizing like, I haven’t checked, but probably around 25 to 30 vol max. That’s my guess, looking at the price behavior every day, maybe 30, 35 vol.

But basically the argument by which Bitcoin is too volatile and therefore this is the, this is the reason why it couldn’t become an institutional asset class. Well, now it’s not too volatile anymore. So if you want to make it an institutional asset class, and maybe it already is, by the way, that argument doesn’t stand anymore.

Not sure whether this helps, but.

Brent: There’s this weird circularity too, because As it gets less volatile, it’s boring and then it doesn’t get as many headlines and then it doesn’t get as many eyeballs and then people get bored and sell. So there’s this weird circularity with Bitcoin. You, you just need like a new story and I’m sure a new story will come along at some point, you know, China central bank buys Bitcoin percent for reserves or something will happen in 2026 or something.

But for now, you know, T bills at 4 percent or Bitcoin at 57K, I think I’d rather have T bills.

Alf: Agree there too. Okay. So guys, look, we have recorded this before non farm payroll. So we probably look like idiots at this point. Fair enough. You’re used to it anyway. Hopefully you don’t listen to this to try and time market you shouldn’t.

Look, one thing I would, two things actually, the first one you should know is you’re listening to this as a podcast, but very soon we are planning as well to land on YouTube. So we’ll have at the macro trading floor, YouTube channel as well, where if you prefer, or you want alternatively to go and watch YouTube shows, you can.

And the second is Well, we, we said before that you shouldn’t subscribe or you shouldn’t. We don’t recommend subscribing to the work of people that are in an echo chamber for the last 10 years and they never change their opinions. And I stand by that really. I know one guy that changes his opinion very often based on facts.

His name is Brent Donnelly. So you should subscribe to his work, go and do that. It’s at the end at the, in the, in the description of the podcast below, you can find everything about Brent.

Brent: You’re a beautiful, beautiful man.

Alf: I’m a beautiful. I’m not sure I’m beautiful. I try to do my best to sponsor a guy that is very strong.

So go in the show notes, you’ll find a bunch of stuff. There is also a link to have a free trial to my research. If you want, you should sign up to Brent’s paid and free stuff, anything he does. And you should keep following us guys, because we love you. And I have an Italian accent. So where, where else do you find a podcast with an Italian accent?

Come on.

Brent: And if you want to sign up for Alf’s professional service and get them on Bloomberg, I do that. And I did that before I did the podcast. So unbiased observer.

Alf: I just, just paid him, just paid him a hundred bucks to say that. Okay, guys. Thanks for listening. As always. It’s a pleasure. We’ll talk again next Friday looking like idiots because we missed completely on non farm payrolls.

Brent: All right. Happy September.