The Macro Trading Floor

Alf and Brent reflect on the massive bond market rally and the explosive move in the Japanese Yen - what’s next for macro?

To contact Alf: send him an email at [email protected] or contact him on Bloomberg (Alfonso Peccatiello)

To contact Brent: ping him on Bloomberg (Brent Donnelly) or go on http://www.spectramarkets.com/

Brent’s piece on positioning: https://50in50.substack.com/p/trade-11-sentiment-and-positioning

Transcript: https://www.spectramarkets.com/the-macro-trading-floor-transcript-02-august-2024/

This week, Alf and Brent discuss the brutal equity market sell-off: is it due to macro tectonic shifts, a reassessment of political risks or an unwind of crowded trades?

The duo digs deep trying to connect the dots, and they also discuss a trading framework around this large volatility events.

Alf and Brent look into various ''Trump trades'' now that the odds of a Trump election and Republican sweep have increased: is there still juice left? And where? Specifically, they also reflect on the use of options as macro traders.

Want to see Alf's Cheap Optionality Monitor?

Ping him (Alfonso Peccatiello) on Bloomberg

And take advantage of Brent's course offer!

Think Like a Market Professional:

www.spectramarkets.com/school - use code JULY24 for $500 off

Stuff mentioned during the podcast:

GS piece on AI    https://www.goldmansachs.com/intelligence/pages/gs-research/gen-ai-too-much-spend-too-little-benefit/report.pdf?ref=wheresyoured.at

Ed Zitron pieces on AI

https://www.wheresyoured.at/pop-culture/

https://www.wheresyoured.at/put-up-or-shut-up/

White House statement on Biden (find the spelling error)

https://www.whitehouse.gov/briefing-room/statements-releases/2024/07/17/statement-from-press-secretary-karine-jean-pierre-3/

Alf and Brent discuss the interesting market reaction to the weak US CPI report, and they dig deep into the '''Trump trade'': how would you trade a Trump victory and why? They also talk about the US Dollar and bond markets.

Want to chat with Alf on Bloomberg? Ping him (Alfonso Peccatiello)

You can find Brent's work on Spectra Markets or ping him on BBG (Brent Donnelly)

Transcript of the episode: https://www.spectramarkets.com/the-macro-trading-floor-transcript-12-july-2024/

Elm Toin Coss experiment: https://elmwealth.com/coin-flip/

In this episode, Alf invites Cem Karsan to discuss what's going on in option markets. Cem does a great job at explaining what's the dispersion trade, how big it has become, and how it might unwind wreaking havoc across asset classes. Alf and Cem also discuss macro and how to use options to structure good risk/reward trade ideas.

Visit Cem's website: https://www.kaivolatility.com/

A big macro week is behind us: the combination of CPI and PPI releases provide us with solid information on where the disinflation trend stands. Alf and Brent also discuss Powell’s press conference + change in dots and the European political risks.

Want to get in touch with Alf or Brent?

Ping Alfonso Peccatiello on Bloomberg

Ping Brent Donnelly on Bloomberg

Alf and Brent discuss the ECB and Bank of Canada cuts, and reflect on the big bond market moves seen recently coupled with carry trade implosions. The discussion focuses around risk management principles to prevent bad left tail outcomes when running carry trades, and how to identify positive expected value trades in macro.

Alf is offering a 2-weeks free trial to his institutional research: ping Alfonso Peccatiello on Bloomberg to get in.

Brent just launched Spectra School: www.spectramarkets.com/school

Transcript of this episode: https://www.spectramarkets.com/tmtf-transcript-07-june-2024/

Paper about the real value of gold: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4807895

The Signing of the Boob: https://x.com/donnelly_brent/status/1798055339881107626

Free Trial to Alf's Institutional Research?

Ping Alfonso Peccatiello on Bloomberg for more info!

In this podcast, Alf invites Peter Farac (aka @countdraghula on Twitter) to the show.

Peter brings a wealth of experience running money and has specific skills in rates and vol markets.

Alf and Peter discuss where the US business cycle actually is, how markets are positioned, and talk shop: how do we actually trade these markets?

Follow Peter @countdraghula on X, Free Newsletter: www.macroisdead.com

Want to meet Alf and Brent in person?! Fill in this 30-second survey so we can make this happen:

https://www.eSurveysPro.com/Survey.aspx?id=ad4fe049-95b7-40ef-a46b-f1bdc509b256

In this episode, Alf and Brent discuss how markets are becoming quickly complacent with realized and implied volatility collapsing across asset classes.

The only surprises are still coming from bond markets, while something interesting is brewing in China which could have a meaningful impact for macro going forward.

Plus, they discuss the odds of a Trump win and its implications.

Useful link: https://polymarket.com/event/presidential-election-winner-2024

https://www.semafor.com/article/05/21/2024/imprisoned-ex-trump-aide-peter-navarro-predicts-ouster-of-fed-chair-jay-powell

(Links mentioned in the podcast are in the show notes below: check them out!)

Alf and Brent discuss the soft patch the US seems to be going through and the CPI number released this week. If markets are going to continue with this low-vol grind higher, how do you trade macro now? Also, China seems to be cooking something big this time.

- Contact me (Alfonso Peccatiello) on Bloomberg to check out the Crowded Trades Indicator

- Link to Bill Bishop piece on China: 

https://sinocism.com/p/putin-in-china-reactions-to-us-tariffs

- Link to the interview with Paul Tudor Jones: https://www.linkedin.com/posts/alfonso-peccatiello-72156a6a_paul-tudor-jones-market-wizards-activity-7196033190011060226-jDKp?utm_source=share&utm_medium=member_desktop

The Bank of England pre-announced a rate cut in June, the Swedish Riksbank cut interest rates, and there are a few early signs of weakness emerging in the US as well.

Is the market ready for a regime switch?

Alf and Brent also discuss how they approach trading into volatile events, breaking long-term correlation, and the structural USD strength.

Links mentioned in the show:

https://www.spectramarkets.com/amfx/cad-v-wti-divortium/

https://www.atlantafed.org/cqer/research/gdpnow#Tab3

Descrizione: Nominal growth is showing some early signs of fatigue, while economists' expectations remain elevated and market pricing still quite hawkish. Alf and Brent discuss potential opportunities arising from this setup, and spend time arguing whether Powell just announced a new Fed Put this week. 

Link to Brent's favorite podcast this week: https://pod.link/1594407589/episode/48072fb61a2a4cd1bf4fbbf9dff7e555

US Q1 Real GDP printed below expectations but still at a respectable 1.6%, and core inflation was hotter than analysts forecast: more fuel on the fire of the reflation theme? Alf and Brent present a contrarian macro thesis instead, and also discuss the odds of a Chinese devaluation and more. Finally, they talk about the pros/cons of using stop losses in tactical macro trading. Enjoy the show!

The Fed is all of a sudden opening up to the possibility of hikes: what now? But most importantly: have you ever thought about the possibility of Fed hikes being stimulative? And finally: do you have any idea why every Central Bank in the world is targeting exactly 2% for inflation?

Alf and Brent discuss this and much more in today's episode - have fun!

And also take a look at Brent's piece on safe havens through different macroeconomic environments: https://www.spectramarkets.com/amfx/acute-shortage-of-safe-assets/

This week Alf and Brent discuss how markets seem to be on the lookout for a release valve for the combination of a Fed talking about cuts while nominal growth doesn't call for them: commodiites, bond markets, and the US Dollar seem to be all brewing under the surface. But what will actually break markets?

Markets are in reflation mode with commodities getting bid all over the place: not only gold and crude oil, but also silver, copper, zinc, you name it. Also, the US Dollar is showing signs of topping and it all starts to closely remind one of the most volatile macro periods ever. So: what's the next big trade? Find out in the show! 

Alf welcomes back Brent to the show, and the co-host duo discusses macro data, Fed's Waller speech, Japan and China. But most importantly they share thoughts and observations about the current low volatility market regime, how to approach it trying to avoid the most common macro traders' mistakes, and how to think of risk/reward when looking at insurance trades.

Here are some non-trading and investing reads that are useful for traders and investors.

https://www.philgalfond.com/articles/variance-beyond-the-surface

The Inner Game of Tennis by Timothy Gallwey

My System by Aron Nimovich

This week Alf welcomes Dario Perkins to the show. Dario discusses how we got here with much more benign inflationary dynamics without a big damage to labor markets - hint: Central Bankers were lucky more than skilled. Dario and Alf discuss the path ahead for economies and monetary policy, and a trade idea. Alf opens and closes the show with his thoughts on the big Central Bank events of the week. Go and follow Dario on Twitter (@darioperkins). And share the word about TMTF with a friend!

The bond market is waking up to the idea that inflation might be a bit stickier and the Fed's hands are tied. Alf and Brent discuss what this implies for global macro asset classes, and highlight a few trade ideas. 

Sign up for the free waiting list for Brent's upcoming Spectra School course: https://www.spectramarkets.com/school/

Alf and Brent discuss how animal spirits seem to be running loose in several asset classes. Signs are evident not only in stocks but also in gold, Bitcoin and option markets. They also focus on Japan and the potential tectonic shifts in the Bank of Japan monetary policy stance.

Alf and Brent discuss the outlook for the US economy, and how bond markets have adjusted their pricing to reflect the odds of a soft landing. Is there a trade maybe? They then move their focus to Canada, Europe, New Zealand, China: a tour around the world searching for macro opportunities. Two trade ideas and the most useful/stupidest thing they heard this week to top up the comeback episode of The Macro Trading Floor!

Link to the Kelly Criterion article: https://capitalgains.thediff.co/p/bankroll

The Macro Trading Floor is back! And there are quite some surprises...