The Macro Trading Floor transcript – 10 April 2025

Alf

Hi everybody, welcome back to The Macro Trading Floor. Alf speaking here as always with my friend Brent. Do you feel liberated Brent?

Brent

I feel liberated. I feel excited. I can’t believe what’s going on. When I first started, before I started trading, Citibank brought this simulation game to my school and they put teams into all these separate class or little study rooms at the school. And they ran this simulation where they would feed you crazy headlines and news and stuff. And then you had to trade these fake currencies.

And it feels like that’s what’s going on right now. These headlines are so insane, like 104 % tariffs. And like the top advisor to the president calls the other advisor a moron. And like all this stuff that just feels like we’re in a simulation, but it’s actually real.

Alf

Yes. So the amount of volatility, lack of liquidity that I saw in bond markets, it’s just even in some cases beyond what I traded in March 2020, which is unbelievable to say.

Brent

Yeah. And some of the correlation breaks are really interesting too. I don’t know if you want to just fly straight into that, but I think one of the most interesting things going on right now is we’re seeing a little bit of what I’m calling Trussification in memory of Liz Truss, where you see the currency selling off and the bond market selling off at the same time. And that’s extremely unusual in the U.S. Like normally dollar yen and U.S. yields should be correlated.

And what we’re actually seeing is higher US yields and lower dollar yen, which really has never been a thing. Like it might be a thing for a day or two here and there, but this feels like more of a regime shift where money is getting out of the US and it’s getting out of bonds, it’s getting out of stocks, and it’s getting out of dollars. So it’s quite a different regime. And it’s a little bit scary because usually you see this pattern in emerging markets, not in developed markets. And when you see it in developed markets, it usually is a sign of that something bad is happening.

So like we saw it in the UK when Kwarteng announced the mini budget and sterling was selling off and the long end of the UK was selling off. And it didn’t end until they intervened and the Bank of England, even though they were doing QT, actually ended up buying bonds at the same time as they were doing QT. And they stabilized it, but actually yields are still higher there.

So in the end, I think this is potentially a pretty dangerous situation for the US. And obviously Trump and Bessent recognized it yesterday and got scared. And so they pulled back. But I don’t know if it’s as bullish as the market thinks. What do you think?

Alf

So I would summarize this by saying there was one correlation break that I was lucky enough to identify early, which is that the dollar could go down alongside the S&P. And we have seen this happening, right, Brent? And the correlations at our price and these option markets are still not fully convinced about the breakup. So you could structure trades – 20X payoff, for example – where you would buy the euro and sell the S &P together, right? We talked about it bilaterally, privately a couple of weeks ago.

But that is one thing. It has already happened, Brent, like very rarely, say 2001, 1998, first half of 2008. And what all these periods have in common is that there is a US idiosyncratic generated problem. So a tech bubble burst, housing bubble in the US before it turns into a global financial crisis, that is. And then it makes sense, right? You can have people selling the dollar and selling equities at the same time.

But now, Brent, you’re talking about something different that I have never, ever, ever seen. And actually, it’s basically never been seen in substantial ways since 1970s, basically, which is everything sells off in the US. So then you’re talking about effectively a bond vigilante like trader. So you’re talking like an emerging market rejection of policy making in all assets, in the FX, in rates, and in equities.

Brent

Yeah. And I think there’s an economic component and then there’s a political component. Because if you’re, let’s say you’re a huge government pension fund in Netherlands or Canada or whatever, and you’ve been overweight the US and you’ve been kicking ass and in Canada specifically, the trend has been away from hedging because of the correlation. So basically the idea was that if stocks sell off, then dollar Canada goes up. So the dollar provides a hedge for your portfolio. So there’s no reason to be short dollars against your US equity exposure because the currency gives you a proper hedge.

But if Dollar Canada goes down, and stocks go down, then that’s a bit of a problem. And that’s what we’re seeing. So Swedish, Norwegian, Dutch, Canadian, all those pension funds that were overweight US now have their board of directors saying, hey, this country is trying to attack us and we’re overweight their assets, that makes no sense.

Let’s at least get to benchmark or maybe even get underweight because when it comes time to report our positions, we don’t want to be overweight the US when the US is trying to annex us like it is in Canada. That’s what’s happening in Canada. So you get the very unusual situation where dollar Canada is going down, but also stock prices or NASDAQ is going down.

Alf

And let me report some anecdotical conversations with my clients. I mean, one is an allocator into the hedge fund and the other ones are research clients. We’re talking about large foreign institutions. So outside the US that own a lot of US assets, okay? So I asked them, how are you guys thinking about your US allocation? And the answer is, we’re not adding to something that for the last 15 years has worked wonderfully, right? To be long US assets and to only partially hedge your currency, because you made money both right? On the dollar up and on your NASDAQ up.

So they say we are not adding to this anymore. No way. A few months ago, some of them had preliminarily discussed the idea of diversifying away, but this was because Europe was rallying, right? So it was because of animal spirits that they wanted diversification. And it was heavily rejected as an idea, right? Because it’s a career risk, Brent, for them to deviate from something that has worked so wonderfully for 15 years. Who’s gonna take the responsibility at this institution to do something like that?

And then we had a chat about it yesterday and they said, you know, the discussion is now not rejected anymore. It’s a live discussion, but it still comes with a career risk stigma to do that. Which I found very interesting. Which basically means that they are thinking about it, they are considering it, they have done some small adjustments for sure. So for example, Canadian pension funds might have increased their currency hedge. For example, like small trimming adjustments here and there, but you haven’t yet seen them take the responsibility for changing something that has worked so well for 15 years.

So that’s the anecdotal evidence. I could be completely wrong on like big picture data because those are not public yet. This is just anecdotal evidence I have.

Brent

Yeah, I think that’s right, that they’re going from overweight and they’re trying to get to benchmark, but then they could actually end up underweight by the end of all this. Because really this started in 2012, but it really accelerated in 2017. So if you look at the starting point now of like the TINA trade, the “there is no alternative to the US” trade. If you look at the starting point now of where we’ve come from and where we’ve gone in terms of the NASDAQ and things like that, and not just valuations, but also prices, there’s so much room for reduction if people want to.

And it’s interesting, you said at the top, so one theme that’s been really important, I think this week is the struggle to find safe havens. So if the US bond market’s not a safe haven and the US dollar’s not a safe haven, money still has to go somewhere when it comes out. So it’s gotta go, if you’re selling US, you gotta put your money somewhere. And so obviously cash is one, but then the euro is actually trading like a safe haven this week.

So if you overlay the VIX with Euro CAD or Euro Aussie, so Canada and Aussie are considered more cyclical currencies, and then euro is kind of usually in between. It’s not really a safe haven, but it’s not really a risky asset either. The properties of the euro are changing because if you take your money out of the US and you want to put your money somewhere safe, then you’ve got to start thinking about, okay, well, where am I going to put it? And the Euro actually is starting to perform that function.

In the old days, the yen normally would, and it kind of is, but it’s very hard to buy yen when US rates are going up. So people are struggling with that right now. But at some point, mean, maybe the trade is simply short dollars, short bonds. I don’t know, what do you think about bonds? I know generally you’ve been more bullish because of the economic outlook, which makes sense to me because collapsing confidence and a sudden stop in global trade is bad for growth and eventually bad for prices and also collapsing commodity prices are deflationary.

So to me, like the bullish bond thesis on paper makes sense, but then you have the issue of capital flight from the United States because of isolationist policy. Because I think that’s the interesting or kind of bizarre aspect of this is that the U.S. is singling out China 100% and trying to send a message and maybe even destroy China the way they beat the Soviet Union, the way Reagan beat the Soviet Union. Maybe Trump’s trying to do that with China. But at the same time, they’re also still attacking all the allies as well, like Canada and Mexico and Europe and I mean every single country, Vietnam, whatever.

So the capital flight story makes an interesting setup where you could almost be like short stocks, short bonds, short dollars. And obviously you got to pick your entry points in stocks because of the short squeeze risk like we saw yesterday. And just to timestamp this because we’re recording at all different times these days, it’s 6.30 AM on Thursday, right before CPI.

Alf

Yeah. So Brent, my thought on bonds is this. As my partner in the hedge fund says, it’s always good in these episodes to unlearn what you learned in the last 10 plus years in markets. And I could keep an open mind only as long as considering dollar down equities down. Okay. So I’m proud that I could keep an open mind there, but I couldn’t keep an open mind on the US turning into an emerging market basically, which again, again, it’s a few trading sessions. We shouldn’t extrapolate necessarily. Right?

But nevertheless, it has surprised me. So the answer is, you know, I’ve made some money in bonds this year, but not as nearly as I should have done if the past was to be repeated, but it just didn’t repeat. So then what do I think here, is that we can go a lot into the plumbing story. And yeah, well, you buy my research. So tomorrow you’re gonna read the deep dive that I’m gonna publish on that.

But in short, there are some signs in the plumbing that I look at that are suggesting that things are slightly disorderly, but there is nothing that says full panic yet in plumbing – that is not only in price action, but in plumbing. The problem I see is, Brent, that if you’re right in the sense that the capital outflow starts to include long end bonds as well. Long end bonds are the ones with more duration. They are the more risky assets. They’re the most volatile asset. If they don’t serve as a hedge for your portfolio anymore, those are the easiest that only to kick out because they only absorb risk, but they don’t deliver the performance they’re supposed to. Right?

So if a few of these investors decide that this asset isn’t necessarily the best one to have alongside with leverage, traders that use these bonds for various strategies. I mean, the basis is very famous, but actually the basis hasn’t shown any material sign of stress in my plumbing indicators. But what about swap spreads? So asset swaps or swap spreads, depending if you’re European or US, basically trading bonds versus swaps. That’s also another popular strategy. And that one has suffered, suffered very largely. Right. And that basically means you buy a bond and you pay a swap against it. And when you want wind, yeah, you have to sell your bonds.

And then in the repo market, you’re gonna find some stress there because most of these trades are funded in the repo market. In general, the combination of leveraged trades getting unwound simply because vol is too high, Brent, vol is too high for being able to run these trades smoothly alongside with real money that are seeing empirically that bonds aren’t really helping. It makes me think that the path of least resistance might be that the long end doesn’t rally. And if that is the case, then you are really looking at the trifecta here, right? It just makes things so much more convex.

The other thing I look at in bond markets is credit. So the all-in 10-year borrowing yield for a double B rated US corporate. So if you’re looking like a US firm, like double B, they need refinancing, they need access to leverage to survive. This thing has gone almost to 8%. 8% borrowing rate is the highest level that we have seen in 2018 when the market completely froze in credit. If you remember in the fourth quarter, there was like complete freeze. Or that we have seen in 2022 and 2023.

So we are already at levels that are quite prohibitive to refinance. And if the long end doesn’t catch a bid, Brent, if equities don’t sustainably rally back, you’re not going to get a relief there, neither from credit, nor from interest rates. And I don’t know how long can this very fragile equilibrium last, honestly. So I’m a bit skeptic. I think to get short risk, you need to be a sniper here. You need to be really like waiting for the right moment to get in. And the short dollar trade is a little bit safer.

If I need to choose amongst the three in terms of risk reward, being short dollars, being short risk or being short bonds, I think that short dollar is quote unquote the safest, but the market has caught up to that Brent because the euro is rallying during risk offs and dollar Swiss is just going ballistic. Take a look today or dollar Japan is starting to behave as it’s supposed to behave.

So it’s a very, it’s something I’ve never seen in my life that you’re facing so much of these convex cliffs ahead of you involving all three asset classes. And actually the long end of the bond market for once might not be able to provide you the relief that you’re used to.

Brent

And you know what, think there’s something to be said for being flat too. If you believe the economic story is negative and that’s lower yields and commodities is lower yields, but then the credit and capital flight story points to higher yields. I mean, I guess it’s okay to just be flat bonds. And I agree with you on out of those three, like short dollars, short bonds or short equities, short dollars does seem like the cleanest trade.

I mean, even yesterday we saw 12% rally in the NASDAQ and Euro went down and now it’s back to where it was. So even in a 12% equity rally, the dollar actually didn’t, well, it went up for about two hours, but net-net now it’s actually not up. So to me, that probably says something. And then in the bond market too, like even if you look at two years or so for… the moves yesterday were absolutely stupid. Two-year yields went from 3.7 to 4.0, which is kind of ridiculous. So when you have that much volatility, it also makes it kind of harder to trade, especially if your conviction isn’t that high.

You know what, since I have you, I want to ask you a question because I look at swap spreads as an indicator of stress, but it’s so far outside of my wheelhouse. Like I don’t know what I’m doing. I just bring the thing up and I see it’s went from 92 to minus 92 to minus 99. But why does that show that the market is under stress? Like does that thing only widen when people are forced to do something or like what’s the mechanics behind why that matters? Like I know it matters, but I don’t really know why.

Alf

Let’s do some small plumbing lesson. No, I absolutely don’t mind. But that’s why we do the podcast. And by the way, lesson, I don’t want to sound like a guy that knows everything about it, but I have traded a lot of this stuff at ING and I still do it today in the fund.

So, okay. What is a swap spread trade? First of all, it involves transacting a cash bond and a swap. And basically it is, you can see it as a spread because what you’re doing is you are often buying the bond and then you are hedging the interest rate risk Brent. So you are paying an interest rate swap against it. So the bond makes you long duration and the swap makes you short duration against it. What you are left with is the spread between the bond yield and the swap rate. Okay. And that spread is called asset swap or if you invert it and you make the difference on the other side is called swap spread.

So swap spreads are negative because bond yields are higher than swap rates in the United States. Now, if you think about it, why would the treasury yields be higher than swap rates? I mean, treasuries are not gonna default. They don’t really carry inherent credit risk. And nevertheless, they reward you a higher rate than the swap rate.

So if you are somebody without a mark to market P&L, imagine that nobody’s marking you to market every day. You could just buy the treasuries, the thirty year treasuries at 475. You could pay the third year swap against it, which is trading at like 383.90. And you would pocket about 90 basis point a year of pretty much risk-free carry from a credit perspective. Okay. That’s like risk-free. You’re just going to pocket it. If you can wait the volatility out, that’s your money to be taken. Okay.

Why does that exist? I you should ask yourself, why are people selling this stuff at 90 basis points? Okay. So who’s the seller of this trade? Well, that’s the treasury department. Every time they issue a bond, they’re basically looking to find new buyers. They’re willing to buy this stuff, right? So they are the natural seller. And then who’s the buyer of this thing? Well, everybody that can look through the mark to market P&L and pocket the carry. And this is historically banks.

Okay, so banks and other institutions like pension funds in some cases, they can just pocket this difference. So normally speaking, the treasury yields are not much higher than the swap rates. You’re talking like 20, 30 basis points. You need to give banks some incentives to buy, let’s say, but not 100 basis points. So why did we get all the way there? Yeah, we got all the way there because the issuance of bonds has been very large and because banks have been crippled by regulation.

So when you own a treasury on your balance sheet and you are a US bank, you actually have to pay some capital charges for owning that, which is completely ridiculous. I mean, owning treasury is not like lending money, right? There is no inherent credit risk. And nevertheless regulation makes it expensive for you as a bank to own these treasuries. So the so-called warehousing capacity, both at bank treasuries and at market makers, by the way, which have been completely slashed by regulation. It’s not like when you used to be a market maker, Brent, I mean, you could take a little bit more risk than these guys these days. They really can’t. So they want to get paid to onboard all this risk on their books.

So the reality is that there is a constant seller of this thing, which is the treasury, which is doing deficits and then therefore selling a lot of these bonds, a lot of this duration. And on the other side, the buyers are very much constrained. And so who comes in as an equilibrium buyer is hedge funds. Because hedge funds do have the mark to market P&L every day. Just ask me. Yes, we do. But if you pay me big enough Brent, I might want to be in the trade. Okay. So I might want to get this 70-80 basis points.

Problem. How do hedge funds fund this trade? How do hedge funds buy the swap and buy the bond and pay the swap against it without having to put a hundred million all up front into the transaction? They do it by a repo market. Okay. So mechanically it means that you buy the bond and then you basically fund the transaction in the repo market, which effectively makes it that you have to put only a small haircut, a small margin ahead. And then you pay the swap, which is a derivative. And that also requires very, very little margin.

So you can own economically a very large amount of notional in this position. It doesn’t really cost you much. Like an FX forward or something like that. Same story, basically. So now we, the hedge funds own this thing, right? And they are the provider of liquidity, if you wish, to the Treasury Department. That’s how you should think about it. They are the guys that, yeah, okay.

Well, at some point, if the hedge funds start seeing volatility picking up everywhere, okay, so they have, imagine they have some Chinese selling. We should talk about it because the Chinese don’t own 30-year bonds, okay? Just killing one myth here. Chinese people are not selling 30-year bonds, but okay. Imagine you have some Canadian pension fund doing some rebalancing. They basically start seeing some flows against them, right? And they funded this thing in repo and they are very much leveraged, exposed to this trade. Of course, they’re gonna be the first ones to get out of the door because they do have a mark to market problem.

And so this is a measure of how much stress there is in the bond market that is rattling leveraged investors, hedge funds in this trade, while there is no buyer of last resort because the banks are constrained by regulation. So they cannot. This is a barometer of nervousness, I would say. And then it’s a self-fulfilling mechanism, lastly, Brent. Because what happens is when this happens, a lot of people that have funded a trade in repo will need to pay more in repo to fund the trade because everybody is basically trying to get out from a very thin door.

And so the repo market gets under stress and then it’s basically lights out, effectively. And I think this is also one of the reasons why yesterday Bessent might have convinced Trump to act.

Brent

Right. Well, that’s a really good explanation. So I completely get it. It’s kind of like a synthetic short vol in a way. So then speaking of Bessent and then the backtracking from Trump yesterday, I guess that’s really like the most important thing now is how you want to answer the question: Does this actually change anything, and is it a change of strategy? Or is it simply a continuation and they got nervous because of swap spreads and because of a 10 year yields going to 450? And really it’s just game on and they’re gonna continue to introduce as much policy uncertainty as possible in order to make CEOs completely stop investing and hiring.

Not on purpose obviously, but the unintended consequence of policy uncertainty usually is that people just freeze and wait for certainty. And now you’ve got, so I guess I’ll just give my answer because now you’ve got another 90 days of uncertainty. You still have 10% tariffs on, on all the countries, 25% on some other products, 104% on China. And none of that stuff is going away.

And so to me, I still feel like it’s very difficult to know what’s priced in after some, after an announcement like this, but I feel like the economic data and the supply chain freezes and the earnings revisions and the lack of hiring and lack of investment that we’re going to see over the next three to six months will be pretty horrible and we’ll end up taking risky assets to new lows. But like we said before, I mean, being short equities, again, similar to being short bonds is just your timing has to be really, really good.

Alf

Yes. So basically you have a lot of people who are forced to deleverage here, either they have already or they are about to anyway. So you would say that it’s really, really hard now to recycle the risk with conviction. And you also have these economic forces, which frankly haven’t gone away. If you are a CEO of a company, how the hell are you supposed to plan investments and hiring over the next month or two? I mean, frankly, it’s impossible.

So I think it’s obvious you get a relief rally because the worst possible tail has been temporarily cut, right? So you always to be short risk premium, to be short equities, you always need consistently worse news, right? To deliver at some point. And now that tail has been cut. So it’s completely reasonable. You got to relief back, but it’s going to be very hard to have these structural problems go away. And that might include Brent, by the way, the long end of the bond market. That might still remain a problem.

Maybe not as bad, but the situation is this. What if equities just you know, range around a little bit and credit spreads remain 450 basis points and the long end yields don’t come down? I mean, for how long do you think corporates can go on and borrow at 7, 8%? I mean, it’s extremely expensive for them. So it becomes more of a time problem for how long can conditions be so tight, for how long can uncertainty cannot drag the economy down.

And unless there is a proper resolution to this problem… I don’t even know what is a proper resolution. What do we expect, China to come and agree to everything Trump wants? I don’t think so.

Brent

Well, the thing is too, is if you, it’s easy to forget, but if you think about where we were before liberation day, we were kind of experiencing a stagflation problem already. So that is also going to get worse. And then on the idea of there’s going to be all these trade deals with 70 different countries and all that, two comments on that.

The first one is that USMCA was one of the quickest negotiations of any trade deal ever. And it took 13 months. EU UK negotiations was an emergency negotiation after Brexit, that took 12 months. So this idea that you’re just going to call up some couple of guys in Vietnam and or in Japan and sign a trade deal is a little bit unrealistic. I mean, sure, they could go fast, but fast in the context of these things traditionally has meant 12 months. So, okay, sure. Maybe you can hammer something out in six months.

But then a side note on that. The Japan thing I think is super interesting because if Bessent and Japan can make a deal, that deal will probably involve a stronger yen because that’s something that both the US and Japan want. And speculators want it too because everyone’s long yen. So I think when they announced the date of that meeting, the yen is going to absolutely rip because whether it happens or not, there’s going to be at least this fantasy that we’re going to get Plaza Accord Part Two or whatever where Japan and the US agree to strengthen the yen in exchange for lower non-tariff barriers and lower tariffs.

So I think that’s something to watch. I think until the meeting is set, it’s tricky. The market’s playing long yen and it’s like kind of not really working, but it’s not not working. I think you could see a pretty epic move if they do come to some agreement. Which I think actually is realistic because it’s just like an easy shared priority that both the US and Japan can easily stomach. And it’s a, you know, creates a victory for Trump. It creates a victory for Japan.

And I would say Japan is actually one, probably one of the most pro-American administrations. And so again, the way that that Trump’s attacking Canada. It’s kind of amazing that he’s attacking Japan too, one of the most important allies. But anyways, that’s neither here nor there.

Alf

No, absolutely. I think what you’re saying is completely reasonable. Also here, despite, as we said before, dollar being probably the best risk reward way to express a medium term macro theme, better risk reward in terms of vol that you have to face probably than being long bonds or being or short bonds, whatever you prefer, and short equities.

Nevertheless, can you imagine a situation where the long end sells off again, for example, Brent, and then the dollar Japan goes up 148 back again? It’s three big figures in your face. So you need to be able to still here, I think, withdraw and withstand quite some volatility against you. Although I do agree.

Brent

That’s a good point, I think, is that really when you’re looking at these trades, it’s like, okay, first of all, is this a regime shift? Which I think it is. I think that US asset selling is going to continue. It doesn’t matter whether they rejig these tariffs now. At this point, nobody trusts that putting their money in the US, like foreigners aren’t going to trust that it’s safe to have money in the US. Especially countries like China, where you don’t know if this is going to go from, you know, tariff wars and trade wars to financial wars where your money’s getting taxed on the way out or capital controls or whatever.

So to me, first of all, you got to decide, is this a regime shift? Which yes, I think it is, which is a shift to capital flight out of the US similar to like 2002 to 2008. Most of those years was money leaving the U S. And then the second thing you got to decide is what’s going to be the best Sharpe. Because like you said, the volatility of being short bonds and short stocks is just so difficult unless you’re just tactically finding entry points and all that. But if you’re just sitting there, short stocks or short bonds, the Sharpe is probably going to be pretty shitty even if you make money.

Whereas I could see the sharp of short dollars actually being really good because to me, think Euro might just go to 115 in a straight line pretty soon.

Alf

Yeah, that’s actually quite, I think your remark is broadly correct. Just trying to warn people towards the fact that even there the road might not be as easy and straightforward.

Brent

What, it’s not a free money trade?

Alf

No, but actually some statistics that I want to share because this is interesting. Trend strategies, CTAs are down on average 8 to 10% year to date. There is a broad dispersion, course, depending on your trend strategy. But the reason why I’m mentioning this is that this environment doesn’t really allow for medium term trends to emerge or hasn’t allowed Brent. You basically are chopped out all over the place every time effectively, right? And this is making CTAs suffer a lot.

So one basically needs to sharpen his pencil, I think, and be very, very smart if you want to capture a dollar trend for example you need to be very very smart about when do you enter what do you enter, right? And just try to be a sniper pretty much and it’s much easier said than done. But if you apply the usual sizing the usual time horizons of three to six months that for example the macro strategy can take, yeah you risk being chopped out exactly like a CTA has been chopped out.

So traders with shorter time horizons, but also traders with more discipline about their entries and more patient, I think, on when to pull the trigger, are probably the ones that will get rewarded more. That’s just a general comment.

Brent

Right. And I mean, it’s a well-known fact, like I’m not saying anything too interesting here, but you don’t get 10% rallies in the stock market in a bull market. Those are things that only happen in bear markets. So if you’re not dead when that 10% rally happens, you know, selling rips in oil, for example, or in equities, as opposed to just buying puts and sitting there for three months and watching them decay. I think selling rips in things like oil and and stocks is a much better strategy.

Because the reason the trend following doesn’t work is because, or hasn’t been working is because there’s just these insane moves that are counter trend. And so if you can take advantage of them, whether it’s in the dollar, selling dollars, selling stocks, or maybe selling bonds, but that one I’m not as sure about. If you can get engaged on the counter trend rallies instead of just sitting there short all of 2025, I think you’ll be a lot better off.

Alf

Yes that’s correct, and also please be careful when you use options because now that implied vol and realized vol have jumped to the roof it’s going to be very hard to find options that are not overly expensive.

Because of course this is a natural inclination one has, right? If you get chopped away, why don’t I just use options so I can look through basically my chopping period? Yeah, sure, but you’re gonna have to pay for that. I think this is another year where investors, including me or any investors, learn that you need to have a lot of arrows that you’re able to shoot. You cannot be a one trick pony in this type of market.

Even if you are a medium-term investor, you still need to figure out ways so that you don’t get chopped, effectively. If you’re an option heavy user, you also need to know about the skew and vol right now and try to figure out if you can maybe do some linear trades instead with the specific setup.

So it’s just a great learning environment, I would say, and very happy to be able to do the podcast. We should actually try to do it once a week, but I mean, you guys will understand if sometimes we cannot record in a week like last week I think I could barely shower, so didn’t have much time to record a podcast.

Brent

And speaking of which, I gotta go to work, so I guess we better cut it off here.

Alf

All right. Talk to you guys next week. Ciao.

Brent

Great, thanks a lot, Alf. Thanks, everybody. Thanks for listening. Ciao.