Mastering Risk Management In A Rotational Market | Weekly Roundup
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What's gone on? Everybody, look back. Another epo de of the round of petition of four guidance. Here we are again, recording again. What's going, guys?

Well, do well.

yeah. Queen in some european soca. My name is queen 点 萨克 林。

Now I, this is my .

that's back team yeah did yeah .

i've got to represent, got the pink look at my background. Look that guy purging yeah, babies. Is that they're office. Yeah, miami season for .

for the trade. Five folks. I have no idea what that is.

We are looking at an N. F. T. collection. Yes, those are still alive and there's a couple of projects that did survive. And yeah.

everybody who's listening to this to be like all here we go again. The macro guys talking about any of it's over yeah.

I ve been done this week at my feet where just you know just feels like microstrip gy is just like taking the hold of the common narrative. And you know every every trade five person that I follow has been talking about microstrip gy this week. IT just feels, I guess, really just taking hold of things and it's it's drive me everybody insane. I do good or bad.

I don't know. Yeah it's one of the most like the coin itself is just I think maybe people warmed up to bit coin a little bit more. But let is say cyp to as a category, it's two.

One of the things just gets such visceral reactions in either direction. And it's like it's an asset like everything else. You can love you.

You can either. You can just try to make money off IT. Like here are playing the same game.

No, my favorite love me right now is the the guy with the patoo of s in the language. Felix, it's felix. Like, I found you have fun of your microstrip.

Gy, down twenty percent to 啊。 好好好。 And so because I have.

like my profile fixture twitters like a suit to, people say so when I treated the microscope, es top people so I replied with that they like, yeah, I would CEO like.

it's pretty good. You want to packed a little IT because you got you got to got a little shift for that when yesterday or was that yesterday? But yeah, talking microstrip. Gy.

did you what I good? I mean, IT was just a fever pitch. I mean, we had like you could just I mean, also you could see that in the chat right is going parabolic and in those are got calls and stuff but and people and then when what gives you more conviction is when you eat something that like bad and you get hundreds of replies that are just like coming at you from every angle. And when I do that Normally, I wasn't shorting IT that he was a small ban observation for fun was like i'm not stupid trying i'm trying to play a long game but those are types like if if you tweet like a long, this is like that, you get that reaction or sometimes i've gotten that from, you know, talking about shorting e and things you double down like, you know you know that if it's that evokes that sort of emotion and people are not counter machine .

ever yeah make people are pop in your tires. You Better .

check yourself I I was yeah I was technically, I guess, a little barry. And one of the things I need to maybe cheat, sometimes this is delivering high conviction, long form views, is probably Better use of my time verses. Now that I have more followers, when is only like twenty people that listen to me, you could kind of narrow things in real time.

And people didn't get there on these.

And may I, vince? Every disagreement on twitter comes down to just like a difference in time horizon and just like people never understand IT. Like it's it's like I know sometimes, like you know maybe a little bar short term and you know like last week, we were talking a lot about taking profits.

Even there were still mostly bullet from like a medium to hide term future. But it's just like when you see what's going on, when you see like the president of assab or like p nl flexing his big going gains like you got to be sent to a little bit. They are come out.

I think we talked about last week and I got maybe framed incorrectly, was taking profit doesn't mean go to all cash IT means yeah or short .

you know when I sometimes put put out like like cautious post and people like a hundred percent short and show your portfolio ah that's the .

hard part about talking to the public is like when you say sell, sell, sell the rips by the dips, that's like that's what you supposed to do in in a bull market because some of the most vicious draw downs happen in bull markets and vice versa. Some of the vicious sell offs happen, sorry, some of the most vicious cells were marked in in in bear market. Some of the vicious ralles happen in their markets. And and that's being able to psychologically know when the tide is turning is really, really hard.

There percent and know there's a lot of different ways approach. And and like i've we had we had the options launch this week on the bicky E T S, which has been really great. I'm looking forward to that for a long time as somebody who has who is doubled previously, messing around with options in more like you know sometimes just for a rate leverage on calls or something, but also just for different means of risk management.

So i've been avoiding gypt options pretty much as entire time because either on chain options just have terrible spreads or you know rabbits OK, but I know just wasn't that interesting in IT. Um but now that we have these ebit options and every other T F, it's been really great. So you know I know we've had some chance this week throughout just seeing like what are some of the different ways that you can actually still remain bush but also takes some profits and risk manage, know? So there's a lot of different interesting approaches.

So you know like question is to if if you had a big holding of of the big in E E T F spot shares, you know you can you can sell a good chunk of that and then potentially replace that with just some sort of far out out of the money call or something just to be able to capture that complexity if that happens, but still secure. And then you know maybe you is a premium and that's fine, but you still realize partial gains. Or you know on the same main, if you have a bunch of shares and it's implied volatility gets gets way hard, you can potentially do like a covered calling, which you know I definitely recommend understanding what that actually is a lot deeper before you go potentially doing you. But just to show a couple of examples, you know there's there's a lot of different risk management approaches. And you know I want to hear from from both of you guys like is actually like no fun trade is just some high of thoughts, like getting a little bit more tactic and what are some different ways that you know you can still have directional like positive exposure, but also making sure that he takes the winds off the table.

You know yeah I mean, not speaking in for tea, but I think we prove things fairly similar in our funds Mandates or or directly similar in a sense with their macro funds. They're not long moon boy or token crypt to fund that. Just sit in these assets through plus ninety minus.

And so my whole thing and it's something I explained to investors and really transparently and spend a lot of time when I chat about market, is, is you your objectives in the market are different, right? The retail ten thousand dollar punter, okay, sure. Yeah, you're going to be like doing you know high risk reward things in mean points.

But when you're running large sums of money and have a lot more focused on capital preservation, no, i'm trying to make money in all environments, right? So we're sitting here. It's october, september, october, and we're pounding the table on the upside potential of bitcoin and in some, some other assets.

But know, we talked about the minors when some of these stocks were half of what they are today. We talked about bitcoin when I was at sixty. We were calling the bottom of bitcoin on september six, and it's up huge from that, like fifty three.

And so you're looking at things through a risk reward spectrum, right? So like okay, at fifty three, at sixty, i've had the view that we're going to go to one hundred. And if you that I ve had the view that fifty kind of was the bottom, so let's say you are sixty and you're willing to rest turn down to fifty to make fifty know that's an unbelievable risk reward.

And then in a matter of two months, is one of the most prolific a market cap nominal gains in one of the shortest time spans we've seen in backing in history. And just extrapolate to what I rather ripped as you want that's meaningful. And and if you're not forward looking right at in in september, october was pounding the table trust going to win get long these assets because it's it's a really good rest reward, okay.

But if you're still shouting at the mountain tops the same thing right now, right? Or how could you be more cautious? You know, we're not even the inauguration yet, but in trumps going to fire gaza and this in that and it's like guys that's in the that's in the review, right? Like that happened.

Notice the day a yesterday against a resigning coin base stock was down eight percent. So what's going on or that's supposed be there d like the company with the most to gain from, again, a new, new icc r and the stock was down on the day that's called its Price in. And so you have to be looking and now we're looking at a hundred k on BTC, and you're like, okay, we could easily go back down to eighty or seventy five.

So I D know I got twenty or twenty five k downside and I don't know. I believe that there are some gravity in these markets and things don't get lude Christly stretched for too long. So if you think upside is like to one twenty or one fifteen in the near term, one, two and five, you know that's a one to one rist reward or or less.

That's not a five to one risk upside. And and see, i'm trying to take big fat swings at you, really good rest rewards and and take my profits and then find the next one and and it's not i'm not trying to be the last guy the party at two thirty am, you know, waiting for everyone else to leave and oh, it's time. I guess I should go home too. You know, i'd like to be early and early.

Similarly, in one of world of things i've bed that is the most value added, as if you can get a little bit of derivatives background. Which I didn't have early in my career. I was like you get run over if you don't understand the derivative positioning.

So you for something with you know can't name a specific stock, but for something is a really high implied volatility. That means your range of outcomes is plus minus a lot more. So say like know if the market on is the probability is saying this week this stock will trade plus or minus thirty percent over the month, it's gonna trade plus or minus eighty percent.

That is a high employed voluntier ity. In that case, that means that you know it's it's if we talk about the hurricane aloe, if the hurricanes coming towards florida, your insurance premiums are gonna be skyrocket even before IT hits. And so that range of potential outcomes is is wide. So you race to buy insurance.

In that case, once the hurricanes getting really close and that range of probabilities is really wide and the insurance premium are really high, you're probably Better off selling the which means you sell puts like you have a high conviction in a stock and that the employed volatility is really high. You can lock in buying that stock at a really great Price and you have to have the cash. But you know you can if you don't, the yield you can get on a monthly is like, you know fifteen, twenty percent depending on what strikes you write.

So like and realized that is like a hundred and fifty percent per year just for selling puts deep out the money puts. So like I try to dance around this, but you should essentially be selling, selling insurance when the premiums are high. So that's just on single stocks, but in advice versa.

In this weird on a understand that when volatility is low on the fix, you that your overall macro theme, that liquidity probably pumping global collateral is very soluble ious and healthy and liquidity is good. And so you you should be you should be more risk. Ford credit spreads are down.

You should be more risk for d on your bets. If those things go higher, the vick is higher, the range of probabilities is a lot wider, and the unknown become more unknown. So that's where you can only rain IT IT. You don't have as much edge that um but that's that sort of the general thesis .

of how well well said, I feel like you know that just are getting at here is I like risk manager is not in on an off switch. It's a spectrum and there's a lot of different things you can do. You know I just for another example of something that I have A I have a lot more at openness to be able to talk as i'm just managing my pa.

But like for example, I was able to buy some, some ibt puts actually even though I also have some some cause, but I I bought some far of the money puts because if you look at the volatility smile to imply ball, it's almost like a positive Carry put. Because as as the Price increases, veg is also increasing. Um and then you also have the delta like downside exposure. So even though I morning these puts, i've barely lost any money on them because as the Price has been going up imply about that been going up, yes, I got a free .

Carry put like interesting because you a lot of a lot of people understand when high volatility in the hundreds percent tile, you can get some makey things. You could buy some puts for downside and you lose money because that stock drops forty percent along with private link. And that's like the worst feeling in the world. So that's what I mean is you're much Better of selling selling the insurance yeah .

that's what happened to game stop. You know people thought they're smart and you know by puts on game stop and they lost money even though the .

stock cut yeah because the insurance company is the house makes the the be Better along with the house, you know and so you know what else thing is like the over the election, everyone's like you can't have a you you can't have an end on the election of these slap tic, you know risk management guys on twitter and it's like you you can actually have an age because the probabilities are are favor you.

The the vicks was so ridiculously high and if he looked out a month two buying vix pots at that point, was that was the right plague as you're heading into the seasonality. We talked about this for months as like the victim was basically inverted, doesn't say inverted that long and you can look out and say that's the best risk reward trade you have. Harris had one the election or trumpet at one the election saying you have no edges is acting like you're smart, but you're not really that smart because you're not looking at the probabilities of the outcome. Anyway.

that's my reform today. I know it's so true. I mean, you you protection markets in every other class to move the vix oil gold, every volatility metric was at like year to date highs Price for like world war three and everything like if you get world or three, oil goes not eight up and stacks go out like.

yeah I always say in that case, what's money going to mean anyway?

Yes and so you you have nuclear war .

s will be I be my bunker over here because you .

need a view like like ninety percent. My view was that you really need a view on on the outcome and and if you did and get IT, that is anyway.

my view is everyone had the same view and everybody .

as soon do we'd have a repeat like a contention and yeah um so I want to tell you know me we can be a little bit more to the traffic world here. But now we've seen the dollar just broke out to like the highest, and I think at least the last year and in a half and in same with yields are just continuing to saw higher.

I'm curious, like we've been talking about this idea of getting cuts into what is a resilient economy or even like a responding economy, pretty much very level signs of of a recession as a stand right now. But I don't know. I I just viewin Michael cow yesterday and the interview will be coming out next week.

And we were talking about a few interesting things where you know you look at what's what's been pricing IT feels like there's a lot of inflation fear that's Price in right now. You just have them again, look at those like long bond yells and the dollar, right? And then you start to think about a few things that are actually to be likely coming through you in the next year.

So you know you you have this doge thing from from elon and in the back in terms of you know trying to find some sort of cocotte measure, efficiency measures. You know what does that do to the depth that there's a question there? Um and then you know you have you have the energy Mandate of of increased the oil production as well.

Um he was a pretty big oil bear there and he knows the all markets really, really well. So that was interesting to me. Um you have a labor market that's still cool.

You know you have job openings that are just like completely different from two years ago. So i'm cares what you guys to take like when I start to go through these different things. Um and then another one is like the deportation thing that might happen next year.

Um no terms of immigration, like one of the the biggest pressure is on rent and shelter inflation has just been like the huge amount of rents because these immigrants are there germany ally not buying houses, they are renting places um and that has reflective and this has been a pretty big squeeze on shelter inflation. So if that reverses, um you know we could see some some cooling off on children inflation too. So I don't know. I keep going through these different things and I just feels like we've Priced a lot of inflation fear digg, I agree with that.

I think there's how I see the inflation world is, is between the the the structural secular kind of inflation and in which you would probably put housing and just like agricultural goods and uh, things that are just wages in summer respects like they're coming down broadly, but but sort of stopping, i'd say they're decent. And then you have to like cyclicals, which you can just kind of summarize as oil and in in energy commodities.

And I think it's two different stories that you can also split these in the goods of services, which we know services have been sticky and goods have been very in the gutters. But I kind of agree, I mean, a lot of the defect action knowledges, what we're seeing now is what they believe to be the right trend. They keep harping on IT, but a an increasing month over month rate would you can only write off for so long and to say it's base effects, it's it's bad base effects and they might do that in december again and cut uh and then take a pause.

I think I think the markets right to be proximate fifty, fifty because I don't think there's a lot of data we're yet to receive. So I don't think it's too much pressed in either direction today. I don't know which metric are up, but oil at the bottom of the range, you know, if that breaks out, then I start to kind of my ten as rise a little, but more neck gas looked a little perky this week.

In agriculture, I think kind of just continues to trend up like it's I think it's decent, like appropriately Priced. I think what what gets confusing is when you combine that with the bond market is like, is the bond market properly pressed these things in? On the one hand, eventually the strong dollar and yields starts to crip growth, but obviously with the recent dollar correlation stacks up, risk assets of dollar up, small caps up, that's a big change, right?

I could and see you view that on mars like, wow, I guess you know europe just reported some week dated today. Its its capital flowing into U S. assets.

We want user sets. We ve got to pay up for the dollar. And that's a lot different than o shit like world's going to hell and sell everything, but we want dollars instead of our our currency. So I think the bull case, in my opinion is the dollar is strong on every metric. You're starting to hit all these you know technical utd and demarch and every you the novels and the the javins these technical indicators.

And so you are saying at stretch, but IT doesn't need to be doing the dollar doesn't to reverse for really bad reason, right? IT can be like, IT can be like, okay, or stretch the us resiliency at the way. And if the fed does cut again, you you might get people say, okay, like. They want to bring the dollar down and the rest of world is going to start to boom and goes out. And so I mean, I forgot we called IT last week the small cap rate, but everyone is coming to in the chat like yeah and yeah and I was like, I do you put the trade on so like dummling, but that's that's been A A benefactor I would go .

to say similar arly to your point. So this this was a headline. Swiss national national bank chairman, nobody loves negative interest rates, including the S, N, B, but we're ready to implement them again if needed. And then E, C, V governing castle mario uh, centeno said larger reductions and interest rates can be debated, is some of the dangers to the regions economy come to pass.

So you have the euro, just like rolling out of bed and this is I didn't think this was onna happen, but we might be seeing sort of like a hundred and ninety eight asian financial crisis in europe where money left asia and their currencies got anio later and that money came here and I created a boom, uh, for the U. S. And similarly, if if europe is on investible and they need negative interest rates to to get their economies doing again, you know that's I think that's why you're seeing U.

S. Growth surprise to the upside and the dollar strong. But like at some point, the dollar becomes globally distinct lation ary or deflationary.

And you it's what's happening outside the U. S. We could be having, you know some inflationary impulses here. But if oil is is falling globally because the demand and europe is falling off a Cliff, that's something we got to take into account too.

So I don't know we we could really be in a goldie c scenario if those works out like if they think I should, I don't I don't know. It's gonna as clean cut is to go there and say, oh, this departments gone, this departments gone, this depart and then you just have like you know, reduction of all these people. You have to have a way to fun all the amount of those government employees to the private sector.

And I just don't think it's going to be as clean as we think. But if IT, if IT is somewhat clean, you could have yields come lower, U. S.

Growth go higher, inflation come down, and you have this golden ox scenario in the U. S. Maybe the dollars stay strong in that. And they can even lower rates to kind of be at a more neutral level.

And I know that that could be like a whole new nineteen and ninety eight bloom, like similarly today at asian, a financial crisis analogy. So that's a possibility. Now I don't I think the world in some senses in this interm period is getting a little geopolitically, Harry.

And you know, we see russia firing missile. There's going to be some stuff that goes on. It's not going to be as clean as we think.

So I don't know. But seasonality wise, we're heading into the worst period. Volatility ring the dick should be coming down here, and I have a chart to show that at some point .

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okay. So here we're looking at you seasonality of the vx for the past five years. October is down novembers down. December is down on average. But just check out the the the last two columns.

November is usually massively down and then december minus, you know, pandemic, you knock that out and it's usually the victims usually falls too. So you're in this low volume, slow ground, lower and volatility, which causes the risk parity funds as the vics falls. The guys that managed to var um volatility, just a risk they have to release their their a books in lever up in equity.

So we could see if there is no geopolitical event. I think I have a ground up higher here for the next month than a half, that sort of my baseline scenario. Where about you quit?

I go back at fourth because you know the seasonality stuff has been interesting this year. I mean, it's it's it's a condition and it's it's it's not a base your views of, but IT is real for the volatility and underlying the fundamental reasons, calendar and flows and sentiment, right? Like it's been a good year.

Um you have in in twenty twenty two, if you remember um you had a big IT might be honor that is in december twenty twenty two right after that bear fog gear, everybody was pounding a sales into into the year end on taxi harvesting and you try try to real gesture basis and stuff and and then you have this rip in the january twenty three, which shows up here also in risk and vicinity. Thing is, as these assets got way oversold in these environments, there's a different theological thing, which is taxes, and that's twelve thirty one as well. So what i've also come across as is people have a lot of gains, right? Everybody's up, everybody's Green.

One, you don't want to give the gains back, you want to keep up with benchmark into there's chase, but also there's a hesitancy to recognize sales, three, twelve, thirty one, depending on you know type of investor, which is interesting. So uh, I I can see IT, i'm open. I'm trying to kind of just really watch the tape in the macro indicators that I watch.

Uh, but I think you have to respect some of these flows in the short and holiday weeks and you're seeing IT, right? I an even this week felt like holiday volumes and in many asset classes. And you know who who wants who wants to, you know put a big short on some of these arc. Kathy wood type stocks like that are breaking out like insane inverse head and shoulders patterns .

like just kind of mention rocket labs because I went to to everything way you just keep go IT up I don't I don't know IT but I watch IT .

IT I i've that all that .

we oit this is alpha like I mean the .

square chart i've seen posted around, i've seen you. I mean, we talk about these stocks like when we've been watching, I mean, they look like the most dead left for dead, beaten down things that caught life and are squazing. And you got probably, you know, all the redit is brows rich off their crypto indoors in everything and they're bidden these things into the know they're hung ver black friday and set you know drunk on thursday and there are bidden these things and who's going to step in front that you i'm not like who's going to do that like some big podcast that's already gotten blown up on on the long short in july and again here like so there's real factors.

especially this time a year either like I just I don't know the more and more every every year I go through these events. IT just feels more and more like just the seasonality thing and like I just threw this child here of like just the season only from where we are right now into the end of year. Like I don't know, man, I don't want .

to fate that also people forget I posted to charge in my twitter. But the the activity passive management is crossing where positive has more assets, the systematic investors are way more and get this this is from scope rubber golden, he says we currently estimate ninety five percent of accept corporate are in the open window for byblus. We now estimate that the next black out window will begin on twelve twenty three.

On the authorization front, twenty twenty four year to date authorization stand at one point one zero five trillion of seventeen percent from twenty twenty three year to date authorization ation. So the bybee bid is huge, especially a low volume tape, low vex tape. It's going that's like the baseline of what's happening here. And I think that wasn't going to change in the election.

I read that this morning and I just getting more bullish, even any other key takeaway from now, even one IT off here as well on IT because I I think mind blowing jane.

january, I mean, this guy is this guy is the emails incredible. Go you if the pain going for IT. So just just fii, but um they're january inflows. January is the largest month of the year for inflows. After two pots, twenty twenty years for this and pay, I could see restore getting the sidelines, getting stuck in.

So you have a lot of cash have been talking about the money market, seven, twenty and money markets and and then you have this giant inflow of money generally season in january anyway from, you know whatever whatever systematic funds that is. So there's lots of bullish ed stuff. Here is what's even more interesting.

And this is not from him. But if you go to slide uh, twenty two, you'd expect market near like all time highs. You would expect that the ball to bear spread, you be the raging balls and it's not if fell last week.

And then this is either Better go to slide seventeen. And I think this is golden chart. This is um the prime books. So this is all the heads funds net exposure to the they massively reduced their exposure.

And couldn't I ve been talking about this and feel x youtube about like the concentration in the mag seven and now that under performing and it's going to I W M, like we said. Know over the past couple months. But yeah, I I was holding .

out on the past of bit into the tech thing, but I got admit i've been capitulating on IT. And like you know, you look today, like the you are flat and I do is like a what almost like two .

percent something yeah yeah and like banks thanks on fire, you a lot of different sectors that are really doing well. And that rotation keeps the, I think, the overall bullish ous because people are confused. I gow like facebook can meter and netflix aren't you know up every single day and google google that up every day what the hacks going on. So you don't have the ephor a, which makes me a little bit more bullish, no longer term that this isn't the of the cycle on on that point.

You know it's like interesting anette is no typically going we had no video earnings or end video earnings h this week. And Normally what you see there is like get up in fall because for so long, IT was the only reason that equity were doing well. So you know there's a lot of there's a lot of volatility had been going into that.

But you know this week, we didn't really see any of that. And you know sort of like they beat on guidance, they beat on earnings. Um but you just didn't see IT have this like market moving event like it's had over the past year. And I think it's a lot to do. You know just this this increasing of breath.

Where are you you going to say, yeah I want to touch on that point. We've mentioned IT a ton on here, but we said member in june and into july, early july before the big rotation. Everybody who's pulled in their hair out, who whose a bit coin investors like the hell.

The video, you know you had everybody duncan, I am duncan on twitter, the a traditional kind of micro taxes of, or look at this point, I can even rise and it's a three x levered. The video and video is going to whatever, and we're seeing the exact opposite. And these are like jm carsons, who you just had on talk about these, when you have this voltige ity supply that pint, the index and in video reports of media quarter, whatever the market there, maybe a good quarter.

The market um already had high expectations in IT. Just kind of men ders or your false and something else in the index kind of goes up. And so um you're seeing these locations.

And what I would just note to people, as you don't usually see tops when it's these rotational markets, right? It's IT feels healthy in some respects where it's like, okay, you know trumps Better for main street, denise, wall street and might be Better for energy than tech and might be Better for a you know you on mosques businesses than he is for big farmer okay uh, innovation, right? So uh, you're seeing that these rotations and usually to our point of like you don't want to really step in front here, Normally people try to step in front of this skinned had of itself, Tyler's AI ball bear index.

People start, and everyone kind of little by little, week by week, gets too. Barrasso, too early, has to close until at the end, everyone's like are thrown the towel. I tried, I tried to I can't take IT anymore um because it's just a forced to be recommend this market.

Um you usually end with everything going up together in in summer specks verses just you know this this vocational market is what I would say. So IT doesn't feel like we're at that. No, despite these pockets feeling really juicy IT IT usually culminates in everything rising together, and we just haven't seen IT.

I think this is so good for active management too. Is all the sectors that were left for dead and didn't get passive inflows are are ring. And so if your active manager and you can buy banks and what whatever you like, energy or stuff that didn't do well when the fans were ripping.

And now think about the performance drag of all the the big pass of etf that have outflows here for, I mean, could be years, honestly, and that we might be seeing a secular shift. And I think, you know that is is like was really fascinating in me, is we we we cross this correlation. Everyone is like, oh, bitcoin is you? The same thing is tech and tech has been sold in bitcoin has rose.

So I think we're moving from a world of centralization to decentralized. And trumps win was a definite, you know, on the surface, the narrative is trump bails out his big business boys idio. ta.

He's not for, but he is. If you look at some of the policies like this is not a political statement, but he's more that he is not pro labor, way more pro labor. And that's why the teamsters and support the left last time. But there could be he might be more pro labor than pro capital, but people don't really realize IT and those sectors that were a you really beneficial to pro capital, which is like large cap tech, they want low inflation so they can innovate. Those things are kind of shifting here, which is the irony, the whole thing .

yeah I mean, I think you know you look at some these appoints too, right? And I kind of like to follow the ones that don't get such headlines, everyones open arms about this treasury gnome and look at, know he picks this energy department, energy guy from the private sector, who I can only imagine you comes from. I think it's an E N P. company.

It's pretty probably yeah and then you see who he picks for the was an fcc chair, whatever regular, you know whose whose been outspoken about near these tech monopoly? And yeah, I was balls long mag seven because that's what worked for the first half year and I was lazy and kind of kept the longs like I don't care what quarter these guys are post in. Yeah, i'm probably I mean, there's some some arguments from around like amazon or google, right, that the sum of the parts were more than a whole.

So it's not all bad. But yeah, he is more labor, very capital is more main street, wall street and things we've been hard and you know you don't need like it's it's a dispersion market. So like not everything else arrive together and if IT can .

be healthy, totally great. Yeah, you guys care if I bring up I mean, that's kind of interesting, which is this this global collateral, this changing in global collateral, if slight night. I've heard during this ball market, a lot of baby boomers have been leg.

I talk about bitt coin in there like bitcoin, so stupid it's bitcoin. And this is what I I saw this. This was from the amErica us. Treasury on the on course for the third loss in four years.

So you have twenty twenty one treasury, or down four percent twenty, twenty two thousand seventeen percent twenty twenty three, up four percent twenty, twenty four thousand percent. I don't know exactly which treasuries are what they did, but that looks like IT was an inflatable lation adJusting to, but relatively to these returns. How can you sit in treasury bonds? And i'll say this to the cows come home, what millennia or genes is investing in a treasury bond right now.

So there's a psychological shift of of what a reserve asset is here. And i'm happy that boomers still want to own treasury bonds because IT keeps our ratified and sing low. But like with a seven percent deficit and you they they Better hope trump es in there and takes all the government crap out so they actually get a return.

But if they don't, you're sitting in in an asset that is just eating away to me, the global, the petra gallery, investing of of U. S. Assets into treasuries.

Why aren't you put your incremental dollars in the bitcoin? I think that's actually what's happening here. And why is disconnected? I think that's the overarching biggest thing in the market, right?

But I love I I love this point because you see I i've seen you know criticisms of, like why do we need a strategic bitcoin reserve central bank? I have billions and billions of dollars and in foreign change reserves, right? Well, yeah, because they're being stuffed fields that are just getting hammer, you know like why would you if your phone exchange reserve manager, like are you doing your for duty duty, if you're just getting clip like ten percent on duration like that? Like yeah, that's just like, no, that's not the world we live in anymore.

You know we've been living in this world of forty years of declining interest rates. So IT was a positive Carry foreign exchange reserve managers, right? Like there. They're gaining on the duration, but does not the world we live in anymore.

So you know you have to start to think about, okay, well, if I don't want to be owning that duration, what I want to old, old, you know that makes sense. I own some gold, of course, you know that makes sense. I own on some other commodities, but no other currency that is, uh, you know, hiding from this issue. So then you start to think about some alternative and you like, okay, well, maybe having one percent of big point isn't such a bad idea in the face of such duration pain because rates probably won't go much lower than .

they are right now. Yeah, I mean, it's something right. I mean, like you look at this fuck in first to be the safe favor and you're just getting smoked and and you have to also measure these things at this number. I believe Taylor is nominal. So you slap on the twenty, twenty one, twenty, twenty two, twenty, twenty two, twenty four for the ten percent inflation in twenty twenty two years, you're down thirty percent, down thirty percent of real.

Yeah I don't know what what they're probably averaging the duration. I don't know where that is, but either way, they're down.

yes. I mean, yeah yeah pick your inflation metric, pick m two or pick your cpa. Have somewhere in the dd.

I mean, this is horrific, right? So like it's not just your portfolio down these number, it's it's your purchasing power. And I think that's something i'm actually writing in this current note. I'm i'm putting to investors like just keep keep pounding home. Look at the world in real terms now and in people you know a lot of people I speak with whose like the fixing communications are married to this yield component in this coupon, in this cash for uh, income component. And I can't have enough as like that's worth way less today than I used to be and evaluate everything in this real like congrats. Get a four percent payment every year ah but that's just kind of keeping up with inflation in your reals based zero uh or as gold you look at the gold division d vivid T A, you you just see in the chart who what global countries are using as the reserve asset and at a treasuries. So ah you got to rethink your portfolio in a first principles.

the one. The opposite point to this, I want to bring up out. And if you guys got my interview, Stephen ran, where he was hashing out different like terrific ideas, potential impacts and something that he brought up, which was, you know basically force force stuffing of other countries with duration bonds and exchanged for protection from the international american security apparatus.

So effectively, what he was pointing out is that OK know, maybe what we can do moving forward is offer century bark bonds, like a hundred year duration bonds, to these countries that they hold. And likely, if you agree, or in the secularly high inflation, that's a pretty big duration hit you might be hitting. So you know what if we also offer like A B, T, F, P I type facility where the central bank protects those bonds at par. So even though you're taking out of a twenty percent haircut on the century bond, we will happily back stop that twenty percent duration hit would like a backstop facility. One of my getting at that sounds a lot like yellow curve control .

doesn't IT because IT is yeah yeah well, fully paid back for us. Buying the australian hundred year bond was at twenty twenty when I was like now it's at fifty cents .

on the that was genius. Like why did amErica do that?

This this is what I I was asking. I was at Frankland table ten at the time, and there is you could issue bonds for a negative view. They paid you.

And i'm like, why don't we do that? And for they had some likes, you know, issue where they can do. And born of IT did IT two, like two weeks later.

But and IT was so footy. And then you know our asset, this is what so bad about asset management is our asset managers. If you go look up that bond i've never could do right now, but I think it's like T O. And actually two, it's a vangy ard and blackrock or the top oders of that one still like nobody know us retire knows that they own that thing.

And I took a .

fifty percent haircut .

because they're going to opt for on the they got to they .

have got .

to deconstruct that problem.

It's because they're going to hold the thing for fuck one hundred years .

but you know .

yeah that that's why didn't we hear about about a big macro manager shorting that thing like that. The freest money, I mean by buffet just tap in the capital markets basically did or if you if you took out a mortgage in twenty twenty.

But some of these trades, when you look back at the the just third level of of, I mean, that is just so much you know, one of the things actually I should have put this in the question is for for Steven moran feel like one of the things I actually look back at, at the trump presidency, and it's very probably minor overall. But manucho was floated the idea of one hundred year us. Bond, at least of fifty.

And this was when twenty twenty rates were absolutely at the at the ground and as like in an high side, obviously twenty twenty, but that would have been a killed trade, right? Your printing these hundred year, fifty year bonds at zero percent of in, you think that they hate a yellow. What I had if he had that much flexibility.

you know, that's the thing. Know like actually Denny day and like friend of the shows on a couple times of that, like you know, I think one of the biggest, mrs. Yelena was not trying to turn out that like they chose to run up the T G. A. And if you tried and a half and t bills at the time when rates word the lowest they've ever been in the last hundred years, I got a great good issue duration.

You know, look look at slide twenty one. There's a great chart of this. This is from mcDonald bear traps report, actually got great stuff.

Um this is that look at this, the short term issues of treasuries. Look at how to change over time. The blue is yet short term two years, and under medium term is a red long term twenty year.

So you're spot on like we just miss the boat when we we could have when globalization was at as peak, we should have been issuing so much dead. But I don't know. Maybe the argument is well, the argument is the argument is that .

came at a time where they are trying to compare the exact, exact upset. They were absolutely flooding the system with liquidity. And that would have been a massive detraction. And so I would have gone against there have gone against all .

of bt part of the bond to create the demand though.

Yeah but but we track down like what know these trickles are starting to roose now because we've been talking about you, everybody looks a tea back every court now in the Q R. A. And this is why is because we're get into this point now where you know percentage of bill of of total issuance like for bills is just skyrocketing.

Um any know whoever is gonna the treasure secretary next year is has a lot to deal with. You know there is there is a lot of bills. They haven't changed the the maturity duration composition.

And so now they've got a nighttime on their hands. I hope that no trump choose to somebody who's gonna effective in solving that. But you think about the original cause is, what we're talking about here is that they just two trillion and balls and just flooded the system of liquidity.

But wouldn't you, if you game theory behind that, what do you just lower rates on the front end if you have control of them?

That's that's what I said in the the fog guide in telegram was just like yesterday was just like trip, just four rates to zero issue to shit. None of hi you have dead again. And then, I mean.

it's not the easy thing in more, more tune did yellow of control? No, I now you have so much, you have more debt now than then. They're gonna have to do all myself.

And I think the smart people know that they pointed the release vw for all this. And it's another day like that's that all, all roads is there. And so fast, amy, is that I ve got more, you know, old, older people calling this a bubble, which makes me think it's not a bubble.

And then I also get a lot of calls being like, crap, you know, what a mistake should I buy in here? And so they have to got IT yet. So when IT across as a husky, we will see we get that. Get off.

please, baby. I think I think what you mean to say teller is a IT is above al and IT is a centrally planned in ordinated and manufactured one and .

is a bad market bubble.

Yes, what's the bigger bubble? I always like, would you rather hold the treasury? Is that the bubble?

Is that that's the bubble? Then bitcoins also a bubble, but you're you're controlling that bubble. So this bubble is like .

you stop this I posted that fa and I don't know everybody got IT, but I don't know bit coin looks like upon sy scheme, i'd rather own long duration government bonds. Now I was I wasn't saying they're trying to be safer. I'm saying they are choose in the pound scheme that are .

comfortable with yeah I mean, if they like work with me free you know who knows .

what what happened but who who uh you know who um David is a David judge or god what is I think it's too IT IT it's not drug like I think David judge his name but the guy he sits in singapore and Wright, he writes a monthly peace and he's all about long wall and he's like, you know you have to just fundamentally look at the world differently, right?

Because either either you're comfortable taking inflation on the chin and just seeing your your your fixed income returns in, your five percent as A B returns in and you're just stomach king. This is basically private equity. You you're seeing on paper something that looks but you your real return suck or you say, no, i'm okay.

I know what game is being played. It's it's a very inflationary game, debasing the currency game and I need to play high wall. And yes, that's going to be more painful and volatility on the surface.

And so i'm going to see these swings that look more painful are crazier. But in a real term, that's the release. That's what you have to be playing .

in that my is a big macro theme for me, which is if you think about this when you know how I started and I think about this all day, but warn buffer created the risk of justice return. He sold insurance. And you're all you're doing is you're just shorting volatility over generation.

And when you short volatility over generation, you and I late middle class and now middle class is saying we don't want that. And that's why things with long wall are working. That's why certain guys with stock that they can sell convertible bans to with really high of wall are very good investments now. And maybe that's the opposite cycle of four years, cycle on wind ing from short ball along ball. So interesting .

volatility is vitality as that person says .

that you look to yeah and you're at this point, you've in secular stagnation. It's it's risk parity, all these strategies that perverted investment because boomers we're getting older and they wanted risk adjusted returns. It's notifies growth of real investment. You also do financial engineering.

And what is that? Financial engineering really do. You're just kind of stealing money from a different pocket or a different asia of the social structure. You're not really creating anything new. It's like the buying Russell Clark talks about boeing.

We're like instead of actually innovating in investing in the future, they just showed to do financial engineering and then all the center of this moment where and your stock just sucks because you chose to do all these other things instead of actually innovate. And so that's that's sort of we were at and now you're forced to innovate, you're forced to go long volatility. Otherwise you're going to be smoked. And everyone thinking they are investing in treasury ban the risk adJusting returns, you're just going to slowly it's going to deaf by a thousand cuts when all these cyp to brows are making IT a shit on the money and they will have fun getting.

yeah I I really like the AI people just like, yeah you know risk is coming back you know like I know what one little signal for me is just how much appetite this humanity ity have to explore space. And, you know, we've talked about that before. You brought that up a couple times time. But like, you know, we lost this well, to dream someone, you know, and to take on a risk and try something. It's like, no, we'd rather just sit in the middle of Normal distribution instead and put those .

sharp yeah ahead.

I thought, well, I didn't interview political philosopher this week, which we may or may not air.

But very good. So I think .

I this stuff because I really we talk about like what IT means, what IT means to be human in the past, like forty years of modernity, we've just stop thinking about like doing cool things as human race. It's like we just kill ourselves that entertaining ourselves, video games and porn and all is like dumb things instead of trying to solve problems for humanity. And I think that's really where we're going here is we're going in this space. Space dogs are telling you that's what's happening. And also see if he keeps guy, there could always be a war or something I do real IT, but that's I think generally .

the micro backtrack yeah I think uh interesting analogy. Something maybe won't be explained well because the first time of tag wb, but commodities are cyclical. The business cycle cycle and every everything in in nature. So life, physical and historically markets, people are used to these big booming bust oil and gas commodity cycles, right where the economy runs super hot, everything's booming and you need more more because that's that's what the world runs on, his energy on oil and you'd get these big bubbles, big burst because supply demand, it's a psychoses sing, know you built to many houses, know something tips, know you drill too much oil, something tips. And ah I would say think about the world moving to like that.

But liquidity, if we ve moved away from a requiring natural resources as much because of efficiency, productivity, technology, gc gains in the electricity, energy world, and now that kind of shifted to the women bus cycles, are liquidity women bus? And what's the commodity to protect yourself against liquidity women bus that either being in bitcoin or out bitcoin and its a piece form of protection against monetary debasement. And yes, there are it's just like old commodity cycles where you're flying high and you're getting crushed.

But in a world where we .

don't in a world where we don't have any more goods, natural resources inflation because technological productive ity gains, you have the debt cycle of liquidity cycles, and that's kind of taken over the business cycle. And it's what's rain is the most important. And I tell people I used to do a lot of all and gas stuff, bitcoin, it's just like another commodity, but it's it's just a different use case then what oil is or what natural gases. But it's still cyclical and it's that's just how markets work. But if you've start to think in these like non traditional angles, I don't .

like disrupt, turn, take off your paddles of age of the .

age of the .

techno crowd is over, baby.

No thanks. risk.

He says we realized it's all my sense and that makes sense. Yeah 对。

but you to to Carry out that we can change our opinion if there's war or some supply chain issue will try to keep our I F for IT。 We're not dogmatic in these views.

No, you're right. So guys, there's a lot of fun really like really like the big epsom. That's great.

I'm going to i'm going to get cozy and listen popcorn and listen to tile. Is political philosopher one that's going to be a banger?

I've tellyou this guy. He's he's pretty good, is pretty good. IT might be a little .

bit out there .

and I think people couple and glass.

Now we did IT with uh, these lovely children's paintings in the background.

So I guess .

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