Gold and the next Monetary Reset

[00:00:45.14] - Speaker 1
Hi, everyone. Welcome to this exciting live session. Today we have a very special guest with us and I'm going to introduce very shortly. Today we're going to talk about gold, the new monetary policy situations. But together we are here with Luke Croman, founder and president of the Forest for the Trees and of course our macro expert team. Luke, I'm very excited to have you. We've been talking on X for a few weeks. I want to give you the chance to introduce yourself and then we're going to start going into the presentation and the discussion for today.

[00:01:24.20] - Speaker 2
Yeah, thanks for having me on. Fabio FFT founder and president and essentially I connect dots for investors to try to help identify developing economic bottlenecks because in my experience that's where excess returns have accrued to different sectors when they either benefit from or are hurt by developing economic bottlenecks. So thanks for having me on.

[00:01:52.22] - Speaker 1
All right, Tim, I don't know if you want to also introduce yourself for those who don't know you.

[00:01:58.07] - Speaker 3
Yeah, hello, ladies and gentlemen. I connect dots as well, but more on the trade side for the community and mentor Q and also for my. Yeah, obviously personal life, trading life. And yeah, usually we have like a weekly small webinar about recent Metro developments and what you might can expect from your markets in like one or two weeks out. But yeah, today it's a little bit different with Luke here. I think we have kind of an expert we can, yeah, lure into some questions he can answer us. And yeah, I prepared a few slides. Of course we will talk about, yeah, recent developments. We have to talk about the tariff stuff. It's still something that yeah, has the market in his grips sort of like that. And as Fabio said a little bit about dollar gold. We also look a bit outside of the US Other countries, how they might perform, what might happen over there and yeah, also a little bit over monetary policy and yeah, defect fomc. What can we expect from them? And yeah, Luke, if you're cool with it, I would just go through the slides. We'll yeah, address, announce a few stuff that's written on there and yeah, then I will ask you some questions or you can always interrupt me and say, oh no, that's wrong or that's right.

[00:03:27.08] - Speaker 2
Okay, excellent.

[00:03:29.09] - Speaker 3
Yeah, nice. Okay, yeah, maybe let's start with this. I'm pretty sure most of us are, yeah, kind of well informed all the day reading financial news on the Internet on a newspaper. But I tried to make a little bit of a slide. What has happened since the beginning of April, kind of a ample Style over here. What happens after the announcement from Donald Trump with the so called Liberation Day? Some historical moves in markets. Rate of change in different asset asset classes was pretty high. Most of you think, I think are familiar with the moves in the bond market with the yields we had the 1020 year yield nearly trading up to 5% in like two and a half weeks. That's a pretty violent move for this market. Also dry liquidity and equities with SPX trading down 5,000 bottomed around 4,800. And all these moves. Yeah, some of them, some days we not have seen them like in one or two decades people knew joining the market after covet people. I'm pretty sure that was very exciting at least or experience for you. But that's what happens if the market gets maybe wrong footed. And yeah, that's my question to you Luke.

[00:05:09.05] - Speaker 3
Was you caught off a little bit from Donald Trump and from his announcements?

[00:05:15.17] - Speaker 2
I'm sorry, what was the about the Trump with the announcements? What'd you say? What was my reaction to it? Yeah.

[00:05:21.08] - Speaker 3
Or was it a surprise to you or did you caught off wrong with it?

[00:05:26.10] - Speaker 2
No, I, I, I, I was surprised at the degree of the tariffs. With that said, I was not surprised at the reaction and in particular is not surprised by the, the combination of dollar down, bonds down, stocks down. In fact we had written for clients at the end of January a report that both Trump and Bessant had essentially said they wanted to change the global monetary system, the flows of capital as they had existed for 50 years. When they both said hey, we're going to put these tariffs in, we're going to finance more with tariffs than income tax. That's essentially a reversal. That's basically them saying we want to change the structure of the US dollar's reserve status as it has been for 50 years. So we wrote that for clients at the end of January in February, February 21, late at night Trump came out and they published this America first investment policy memo which essentially said China and other foreigners take your money and go home. We don't want, we don't want your money in US Financial assets anymore and you're welcome to invest in our factories and our infrastructure, but otherwise get out.

[00:06:47.09] - Speaker 2
And we turned very negative on NASDAQ in particular shortly before that and then really reiterated it with that in February 21st. And so when they did the tariffs, you know, I understood initially and actually was, was, you know, two days before the tariffs gave an interview where I said look, initially you're going to get, you're Going to get a sell off in stocks and then you're going to get bond yields, a 10 year treasury yield down a little bit at first and people say look, this is, this is the plan, this is what Bess has been trying to do. I said and then you're going to get the dollar start to decline, you're going to get 10 year yields start to rise and everyone's going to panic and you know, knock on wood, they don't always go that way. But you know, with, with, with, with humility I, I got it pretty right in that case pretty much dead on. And so then that brings us to today where or to yesterday where we get this walk back. And I think it's still so early it's tough to know what the walk back really means.

[00:07:50.23] - Speaker 2
I think there is the trading aspect and then I think there's a more structural aspect and I think everyone's trying to digest the trading aspect but I think once they get around to thinking about the more structural aspect, I think it raises some very interesting questions that nobody's asking yet but I think they will.

[00:08:08.25] - Speaker 3
Yeah, you mentioned a very, very exciting aspect on it. It's like one month ago and we had this little relief in the bond market, right. And you were mentioned the fact, look, the tenor, the ten year yield is coming down, it's working. Right. But this was like the market. Yeah. Driving like car for the, you, you're just seeing the stuff that's right in front of you and you are not seeing stuff that's maybe 50 yards away, 50ft, whatever. And I remember we wrote some stuff for the community and we also did it here on YouTube on X. If the bonds, if the bun yields are starting to climb again we may have a problem in the whole market again because they sniffed out plan isn't working right. So and we have seen this a little bit and you also mentioned the walk back and what's also pretty interesting is like the middle period, I call it the vacuum because it's like a vacuum. The market is just trading around. It's trading around with like big, big realized and implied volatility. But that's due to position. That's really technical and for all the guys are listening.

[00:09:24.27] - Speaker 3
If you remember like two weeks ago the announcement of 90 day tariff delay from Donald Trump SPX10 up. That's not normal, right. That's a sign something is bigly bigly broken. It's not like your favorite meme coin that you have that can search 15 or 25% if the SPX do this. Something is really, really broken. And we have spent a little bit of time in this environment. Right. Also, very, very non supportive headlines. Who remembers that a president wants to fire a fat chair? Right? I mean, he said basically he's a loser. Okay. That's a big thing, to be honest. And I think you agree this is not trustworthy for investors, right?

[00:10:20.14] - Speaker 2
Yeah, I think it's a sign of the times, of, of the, just the, the way the Fed, the look, the, the, if we take a step back, the Fed is running what is known as a quasi fiscal deficit for the first time in its history. It began basically the Fed is losing hundreds of billions of dollars every year cash out because they're upside down on their portfolio. This has never happened in U.S. history. The Fed has been around since 1913. It had never run a quasi fiscal deficit until 2022, the last U.S. central bank to run a quasi fiscal deficit. My understanding is it was the Confederate central bank during the Civil War and the Confederate dollar hyperinflated. I'm not saying the US Dollar is going to hyper inflate. What I'm saying is, is that historically the only places you see central banks with quasi fiscal deficits in the last 30, 40 years have been in Latin America. They have been in Latin American banana republics, et cetera, where you get extremely high rates of inflation and extremely low levels of central bank and political credibility. And so I think it's important to take a step back, you know, see the forest for the trees.

[00:11:44.17] - Speaker 3
Makes sense. Sam?

[00:11:46.00] - Speaker 2
Yeah, like, like to me, like, how can the world not be surprised that we're having this type of stuff like this, this is us, people. You know, there has been a change. You know, if you really take a look back and look at what we have done as a country over the last 25 years, we've not been a very serious country. We haven't been, We've, we've, we've run up a lot of debt. It's had to have been monetized by the Fed. We've played political favorites. We've bailed out Wall street, not, you know, multiple times, not, not the Main Street. And so kind of here we are. And so it's, it's, there's, there's, you know, when you start going down the path towards a destination, don't be surprised when you arrive if you don't change your course. And so we've been walking down the path towards rewards. You know, you play emerging market games, you're going to get emerging market outcomes. And you know, We've hollowed out our defense base. We've aggregated wealth at the 1% and 0.1% levels. We've all these things. And now like I said, first time in 113 years the Fed is running a quasi fiscal deficit.

[00:12:52.20] - Speaker 2
That's an emerging market phenomenon. That is not a developed economy. It's certainly not a reserve currency issuer deal. And so like I look at the, the back and forth between Trump and, and Powell and, and I think it's. Yeah, in this again it's. There's the short run which is what everyone wants to focus on, which is it's not helpful for confidence. But the bigger picture is like why do you have confidence in us in the first place? They can't, they can't like people this whole debate around the treasury market, like we can't make ends meet without either cutting benefits to our entitlements or we're printing the money. So like we're getting emerging market outcomes because we played emerging market games.

[00:13:37.06] - Speaker 3
Well, I always had confident in the US especially in the federal FMC because stuff like the COVID crisis. Right. Unlimited buying of assets, massive qe. That's always a feeling that someone has your back. Right. If your understanding is not really proper of all this stuff, you might ignore the risks that can emerge out of this stuff. But I'm more trader than an investor. Right. I'm not like investing 15 or 20 years and stuff. It's a little bit short time framed. But yeah, obviously a big, big change since 2020. I think we can agree in that. And yeah, now we have the problem. I have to deal with it a little bit. I think still people want to look for some sort of relief in the current problem. Especially with the developments from this week with the walk back from yesterday. But I think you mentioned it a little bit earlier. I'm not that sure about. I mean it's just, yeah. Small science that things can maybe happen or change. But overall, yeah. With the terrorist China is still in my opinion the elephant of the room. Let's keep it like that. You mentioned.

[00:14:55.15] - Speaker 2
I think that's right.

[00:14:56.06] - Speaker 3
Yeah. Yeah. Okay, cool. So dollar and reserve currency status for the world. There is chatter at least few years with bricks and all this stuff and like let's call it systems or ideas colliding. Try to. Yeah. Get the pace. Be the first in the world of this. Do you think with. We can also talk about the market movements? I mean this chart here shows our dollar index versus gold. Massive selling dollar index like 10% in one or two weeks, that's, that's massive. Right? That's almost a little bit of panic. And those moves are pretty, pretty rarely. Do you think if you watch markets like that, all these first signs of problems, that people are losing more trust or start to realize it?

[00:15:52.12] - Speaker 2
I think there has been an element of a bit of a, of, of of a panic bidding gold. And so I wouldn't be surprised if we do get a bit of a sell off here. But I think the real story in.

[00:16:04.17] - Speaker 3
Gold.

[00:16:06.28] - Speaker 2
Is that gold is just about the, not just about. For the moment it is the only asset that can solve the problem, which is to say America wants to be more competitive. America wants the world to stop recycling as many of our deficits into our stocks and our bonds, our financial assets because it's bidding up the dollar and making us uncompetitive. And the way you do that is you get capital out of the us where else can that capital go? And the answer is there's nowhere else to go but gold. So gold I think, I think we are in the very early days of a phase transition for gold where gold is being crowned the new neutral reserve asset. Central banks have been buying gold and not buying treasuries for 11 years now. But I think we're going, we're seeing it come into the system more broadly as a solution to the issue. And so I, I think ultimately gold's going much higher than anybody thinks possible at the moment.

[00:17:22.16] - Speaker 3
Yeah, yeah, agree with that. You mentioned like capital allocations, switches. I mean we can also argue that you can invest in other countries but the problem is if you have like a risk off scenario born out of US assets, the US market, it does not have to mean that other markets are performing incredibly good or well. Right. You can still have like spillover effects, something like that. I mean we have seen this the last weeks after the US trading day was closed. China opens eight Asia and then they start selling. Right. It's yeah, like a self fulfilling prophecy I always call it. Oh, stuff is looking so bad. Let's yours yours for equities. I don't want to have exposure in here. Yeah, but gold is pretty unhinged to the stuff, right? I mean we have seen two weeks ago pretty, pretty down days in goat like two or three days. Some say it was due to. Yeah, make some margin free because your books may have equities on and you need a little bit more liquidity. So you sell gold because that's a trade that may have run good in your books. Yeah, but I agree on that.

[00:18:43.08] - Speaker 3
Gold also for me, demand and supply, right. It's still a commodity that is actually physical around people can buy it. And what also is a point to me, the average retail investor, he also sniffs out, sniffs out maybe problems and starts to buying gold. And if few millions of people are doing this, it will wait on the price too. Right?

[00:19:08.01] - Speaker 2
Yeah, I think I, and I think you're seeing, you know, it's interesting you're seeing that in China there's been massive buying of physical gold. In China. America, it's starting to a bit. But I think America will be the last to really buy gold as retail en masse, just at the size that its economy would otherwise dictate simply because gold has kind of been lost. The importance of gold has been lost in America after the last 50 years.

[00:19:39.29] - Speaker 3
Maybe because the stock market performs so well.

[00:19:43.04] - Speaker 2
Yeah, stock market performs well. Yeah. And, and you know, we've, we forget, we, we by having the reserve currency, you know, we, we have deficits without tears. And what the Trump administration is trying to do is modify this deal a little bit where there may be deficits with some tiers, in which case you're going to want to have some gold. But Americans just don't understand that because we've been, we've been on this system for so long.

[00:20:09.22] - Speaker 3
Do you, do you think like the buy the dip mentality is something that plays into that as well? Because sometimes you read on Bloomberg research like inflows in like leverage tech ETFs are the highest ever. Do you think this has to be put into consideration as well?

[00:20:29.29] - Speaker 2
Oh yeah. I think the American, American retail investor is very much trained to do that. And you know, some of that's been a capital flow. But again is, is to me this is the $64,000 question as we say here, about markets going forward, which is if we are making a change where capital flows are being diverted away from US stocks as a matter of national security, and that is my base case, buying the dip is going to be a losing proposition for retail for a while still. US is what 70 US equities are 70% of global equity market cap. That number probably has to go under 50%, maybe lower as a rebalancing, you know, and you're hearing our government say we want to rebalance, we want to rebalance. So now if this walk back or whatever we want to call is basically the Trump administration going back to the prior system, you know, where China is going to basically, you know, buy up our, our companies with our deficits, then I Think the buy the dip mentality probably pay off. So you know ultimately it will pay off. You know to get away from the very short term is ultimately I think the Fed's going to have to buy a lot of the bond market with printed dollars but that's still, you know, that's still on the calm so you know we'll see from there.

[00:21:59.28] - Speaker 3
Yeah there for me it was always like the last five, six years at least some sort of China environment. There is no alternative to yeah US Risk assets and it's kind of switching. We seen the lights flashing in the Chinese market like one year China does also a lot of stuff to prop up the equity market. We had short selling bands, we had liquidity injections, deregulations for foreign investors I guess was around last year in May and if people are watching the infamous like FXI K web stuff like that they are starting outperforming since at least the beginning of this year. So for me there's also a little bit of a shift and people are start acknowledging there's stuff outside the US that is investable and that will yield better in the future. Right?

[00:23:02.24] - Speaker 2
Yeah, I think there's. Yeah absolutely. I think there's been some, some capital allocation to other countries and that makes, you know, that makes sense given what we're seeing because again I don't think a lot of traders have internalized why the US Wants to do this. This is not. This is the United States Pentagon, this is the Defense Department. This is the problem is, is that Russia out produced all of NATO 4 to 1 in Ukraine. NATO lost in Ukraine and they lost because we have gotten too financialized. And so this is not some sort of you know there's noise around Trump as. As there tends to be in volatility but this is I think a much more structural shift than. Than than markets realize. It started under Biden some of the industrial policy etc but to really do, to really make happen what needs to happen there needs to be a move a redirection of capital out of U S financial assets into U S real assets and. And a weakening of the dollar Et be tricky at best.

[00:24:18.19] - Speaker 3
Yeah, yeah that's true but not just for the trader also for the investor it's always worth to look a little bit outside. Well we will come later to it a little bit. I have prepared some tickers maybe worth of interest but yeah it seems you are advising to your investors or clients also to look a little bit outside. That's always good asset diversification. It's not the worst strategy let's keep it like that. I guess so. Yeah, it's getting now a little bit technical but still very interesting especially if you heard this stuff for the first time. And in the end it hopefully gives you a little bit of a conclusion because Luke mentioned capital flows. Well that's usually something broad based. Several countries, several markets. But we are looking now at some charts and those charts are CTA positionings. What is the CTA short introduction Trading futures. Most of the time they are trend following. They are active here at various assets from gold, crude oil, of course, stocks as well. And we can make a little bit of a picture out of this how the state of the market is. We already discussed this massive.

[00:26:03.12] - Speaker 3
Saying hurled doing tariff announcement. Crude oil especially has seen some big, big selling because the tariff stuff had waited on global GDP outlook, global GDP growth. My question for you, is this a market you are observing as well, apart from gold like crude oil or other industrial components?

[00:26:29.13] - Speaker 2
Yeah, we pay very close attention to oil and ultimately I think oil, what we've been saying for over two years now has been oil's going to be kept in a range between originally it was $70 and $90. Now I think it's $65, $85 because below $65 US shale production begins to go offline and the world starts to have supply problems and that problem fixes itself and above $85 it starts to create dysfunction in the US treasury market. And that is also a red line for the US and things are done. So you know, to me I think, you know, oil's probably a better buy here. But I don't, you know, I think the days of buying oil at 65 and having it go to 120, I think those days are over. I think the release valve now I think gold is, or excuse me, I think Goyle has kept $65 to $85 range. And I think the release valve, the liquidity which from call it 1980s to just a few years back was oil. I think the liquidity release valve is now gold. And we're seeing that if you look at the gold to oil ratio, the gold oil ratio is over 50 now.

[00:27:50.20] - Speaker 2
I think it continues moving higher over time.

[00:27:56.00] - Speaker 3
Yeah, true for crude oil. It was always yeah kind of this range in the last market last year like 2024 and it was almost boring to trade this right. Because there was no further development in this market and people have been yeah, without a clue what happens next over there. But to me it was really interesting to see those dips in oil like the last two weeks and they get bought. Right. And equity markets. Yeah. Have some sort of lag. Usually there's a little bit of a correlation. You mentioned also the US treasury market, if oil markets are going higher as well. That's also true. But brings us to the next topic, US Equities. I mentioned that they are getting traded by the CDAs as well. And we have seen some very, very big shifts in positioning. And if you are an investor and we have talked about buying the dip is maybe not the best strategy anymore. You always want to see stuff like exhaustion to the downside. Right. No one is selling anymore. It's hard to gage how will you predict it. Right. I mean you can look at the chart, but that's just time and numbers, isn't it?

[00:29:17.07] - Speaker 3
You need data for it. But what we can see in the positioning over here in cta, that the selling was brutal, but it stopped in one time. And for me to gain a little bit of a longer outlook, you need these guys stop doing things. Let's keep it in this direction because as an investor from my side, maybe you can agree on that. You will need, let's call it a tradable bottom. Right. That markets are done. That we are seeing. Yeah. Trust is building in risk assets that they are going up again. And I don't know if you are, if you guys are doing. You work in equity markets as well? I think so, yes. Yeah. And yeah. How do you try to make the investors a little bit a clearer picture that the bottom is maybe in or not.

[00:30:14.29] - Speaker 2
For me, I'm looking more at macro fundamentals and where I think those are going and, and where sentiment is. And so sentiment is clearly less positive than it was a couple of months ago. So I think sentiment has caught down to where we were a couple of months ago. Could we get a bounce here? Yes, I think going forward, it depends a lot over the next three to six months about what happens I think in, in, in trade dynamics. And to me, I have a hard time getting super excited about US equities without either the Fed really injecting liquidity, whether that is interest rate cuts or whether that's some sort of, you know, bond market in injection, whatever that looks like. I think that would be good for equities. But I otherwise I need to see more investors appreciate and, and discount. In other words, sell stocks around what is starting to become the reality, which I think, you know, we were talking offline. The, the walk back. The US doesn't have the leverage that markets think they do. And I think is that it becomes understood vis a vis China. I think that's negative for stocks unless the Fed is.

[00:31:47.06] - Speaker 2
Is already involved by with stimulating. So those are things I'm watching. I'm not really excited about the S P even here. I'm, I'm not excited about the NASDAQ here. I just, you know it's. Maybe there's a trade but I need, I would rather wait for the Fed to get involved or, or some sort of clarity on the downside regarding U s actual leverage in these negotiations or some sort of systemic change and I'll chase it up. I would rather chase it up than, than, you know, try to catch a falling knife here because I just, I don't think markets appreciate, you know, the severity there. Let me phrase it a different way. I don't think markets appreciate that the gap between the reality of the U S bargaining position and their perception of the U S bargaining position is still miles wide. It's miles.

[00:32:44.21] - Speaker 3
That's a very good point. Yeah, completely true because that's just my view. It also has a little bit to do with how was your life as a. Yeah. Average U.S. investor over theized from global financial crisis like up 8% on average. Right. Yearly clear waters, no big problems. The so called Covid crisis was the solution was there on like one month. Right. That's nothing. And then the massive asset bubble bloating up begins and I think people have to realize and have to appreciate that prices can also fall. Okay. And you might see a SPX with negative returns over a year. And that's I think is a new concept for some people. At least that's my point.

[00:33:42.18] - Speaker 2
Yeah, especially the other part of that new concept is the S P falls for any real period of time U S bond yields are going to rise. 10 year yields will rise. That is a mathematical. Pretty much a mathematical certainty. But it is fascinatingly still a very variant perception. There's still this view that if we crash stocks enough yields will go down. They might go down for a second like we saw. Right Besson, that was the plan if we remember. The plan was. Besant's a markets guy, he understands markets. Yellen didn't. If you take stocks down that will create a bid where the US can term out its debt. Stocks went down. 10 year yields did go down for a little bit but once stocks went down for about two weeks, 10 year yields bottom and started going up. They've not returned to where they were and they're probably not gonna for any sustained period of time. And that's the new reality. The US Has a fiscal problem, a very bad fiscal problem and there's a, you know, that's what I mean, there's just this level of denial around this in terms of the perception the reality again the Fed can paper over this at any time and then the release valve, you know, the dollar will look like the S and P chart rather and you know, dollar down, stocks up, bond yields will probably be, you know, flattish in that case because it'll be de facto yield curve control.

[00:35:09.00] - Speaker 2
But yeah, I, excuse me, I, I think, I just think there is a lot of complacency around what we just witnessed and, and what it's telling us.

[00:35:18.18] - Speaker 3
Yeah, good, good take it wasn't part of the presentation but maybe let's address it really quickly the next qia it's around the corner, isn't it? Do you think something material will change there in the issuance of depth from the US now that we have a new secretary and he may not will do the same thing as Janet Yellen, I mean he did last time, but maybe stuff is changing a little bit.

[00:35:45.17] - Speaker 2
You know that is another big I think sort of risk point as you look at that, you know, perception versus reality in the S P perception is that he's, you know, he's Scott Besant and so he'll be able to term out U S debt whereas Janet Yellen couldn't. Math is the math. Right. So the plan here in America is to come to you guys in Europe and say you're gonna buy 50 year bonds from us and we're going to pay you 2% and then we're going to inflate 8%, 10%, 12% and if you don't like it, we're going to pull our troops. So I mean you guys are in a better position to tell me if you think that's actually going to happen. Maybe, you know, maybe, but it's, I don't think that's an environment that is necessarily great for stocks and I don't know that. So my, you know, to answer your question, I don't think he's going to be able to do anything different. Ultimately I think your leaders are going to go eh, and you've already started to see Europe pull capital out of the US Say we're going to build our own army that creates a whole different set of issues if you can actually do it, etc.

[00:37:01.08] - Speaker 2
Etc. But the view is that he's going to do that consensus, you know, the price in the price of the S and P Today is the conviction that he's going to be able to term out the debt. If he can't, you know, either the Fed prints it and then the S P goes up or I think the S P goes lower.

[00:37:25.10] - Speaker 3
Yeah, I mean it's, it's, it's a massive job. And you can't expect from Scott Besant that one quarter apart to another QA stuff will material change. Right. Because it's, it's like, it's like a big deal. Right. You are dealing with the US debt and you are dealing with the issuance of the steps. But sometimes stuff like QA is watching from market and then people are start talking about the social media. Usually they have bad takes about it because it's very niche and a little bit nerdy. Right. Because it's maths basically as you said. But yeah, with Scott Bezant, I usually watch this stuff and I just wanna have a little bit more of color from you from that side. Next, charges for our listeners. Little reminder, asset allocations outside of the U.S. that's just a chart from 2025. Yes. Yearly performance, a few ETFs. Because some people, yeah. The opinion that U.S. stocks performing really, really bad this year since the inception of the tariff announcement. That's not true. Right. We have seen other stuff outperforming. Like I don't know if you guys are familiar, familiar with eza, that's the South African ETF for example, performing exceptionally good of course get hit by the tariff announcement because that stuff that matters for the whole world.

[00:38:56.20] - Speaker 3
Right. If you have see the panel from Donald Trump with all the tariff numbers on it. But we can say the rest of the world is outperforming a little bit. I think we can agree on that. And yeah, we have discussed the drivers behind it. We also have discussed stuff that has to change a little bit. And yeah, I think you addressed this to your investors as well. I don't know if you have anything particular to say about that.

[00:39:29.03] - Speaker 2
No, it's a really interesting chart. I mean especially the China versus US equities. Right?

[00:39:33.20] - Speaker 3
Yes. Yeah, yeah. Or the. What is it? Argt, that's Argentinian etf. Right. Who have thought about that, that they are performing this well. And if you scale the chart a little bit back 24, it's even better. It's. Yeah, it's amazing. And just advice. This is all listed at the ARCA or CME or whatever else. It's tradable guys. So look a little bit outside of the system. It's sometimes the better way yeah. Last but not least, FOMC Fed rate hikes or rate cuts. First question. Do you think Jerome Powell cares about all this stuff or is he gaslighting us that he cares, but he isn't.

[00:40:25.29] - Speaker 2
I think he care. I think he cares.

[00:40:28.18] - Speaker 3
Yeah.

[00:40:29.27] - Speaker 2
I think he is attempting to do the best job he can in a difficult situation. I think like so much of modern politics outside of China, it's all focused on. He's too short term. He should have let inflation run higher for longer in 2022 and 2023 if he wanted to sort of do the right thing, if he wanted to be do the brave thing. But he didn't because of political realities and, you know, needing to, you know, needing to not lose a lot at midterms in 2022 and then, ETC. So is he political? Of course he's political. Everybody is to a certain degree. The Fed certainly is. So I think they're trying to, you know, I think they're trying to maintain some credibility for their institution while trying to prevent the economy from falling apart, while trying to prevent inflation from running. And the reality is, is they need inflation to run away for a bit to prevent the economy from falling apart. But that is anathema to the Fed. So, you know, it's a little bit of a, you know, it's almost like a Greek tragedy. I mean, he's, he. If I was him, knowing what I know, I would have, I would have ridden off into the sunset at the end of 2021.

[00:41:59.19] - Speaker 2
I would have said, okay, I'm gonna go spend more time with my family. And I would have handed this whole pile of flaming problems to whoever was going to follow. That's what I would have done if I was him.

[00:42:12.07] - Speaker 3
Yeah, and I would have never cut 50 basis percent last year, I guess, because I think that's some sort of a political move or was a political move. It was a FOMC before the elections. And yeah, maybe a little bit of conspiracy theory here, but I think the 50 basis cut was some sort of a mistake, right?

[00:42:38.08] - Speaker 2
I think it was, yeah. The optics were terrible. But I think, and, and I wrote it at the time. I think that was about the treasury market. I think the treasury market was having problems again. And ultimately, you know, that was about preventing political. Yes, but I think it would have, there would have been a crisis. I think they were preempting a potential crisis months before the election. So it was political from that standpoint. But to me the bigger message is, is the US had and has had and continues to have an acute fiscal and debt problem that that has been basically been managed by trying to keep, you know, keep putting more duct tape on the leaks. And you know we've. We basically. We're running out of. We're running out of duct tape.

[00:43:29.25] - Speaker 3
Yeah, that's good. Yeah. And what did the clever bond trailer after the 50 basis hike, they sold bonds again. Right. It was the infamous sell the news scenario. And yeah. But was obviously this time, especially during the tariff chaos, direct traders and I trade a lot of software which is securing overnight final trade futures. And here I put on a little bit of a comparison between the last dot plot from the FOMC from the 19th of March and today's pricing of set Q futures. Federal funds versus federal fund futures. And we already see some mispricing because for this year in the end we have a corridor out of the dot plot. 375 to 4% but the actual future is trading around 3.5%. So already below. So we can say at least for direct markets the tariff chaos was bullish. Right?

[00:44:37.14] - Speaker 2
Yeah, I think that's the message of that. I I'm ultimately, you know, I think that'll. We'll see what that is, how that is resolved because we're starting to see the soft inflation data take off in the U. S so that'll be. That'll be interesting to see, but I think that's the right conclusion.

[00:44:55.07] - Speaker 3
Yeah. I mean you mentioned it. You can't bring down inflation sustainably without crashing something in the economy. Right. I mean at this point the sticky inflation is also some sort of good news. Right. Because the economy is doing kinda well and nothing crashes. So.

[00:45:17.22] - Speaker 2
Yeah, yeah, no, that's right. The only thing keeping the US government solvent is inflation that they're trying to fight.

[00:45:24.18] - Speaker 3
I mean in the end Jerome's job is like. Yeah. Steering a big container vessel by viewing the real mirror. Right. It's always a look into historical data and they are not forward looking. And yeah, it's. It's a hard job sometimes I can imagine. But if you want to trade rates pretty cool, do it. And yeah, the last thing because I think we may have in the audience traders and investors. I mainly trade stuff. So for me volatility is usually a good thing. Sometimes it's a bad thing. Depends where it moves. I mainly do cross asset stuff sometimes also. Yeah. Thematic baskets where I invest over a longer time horizon, like two or one months. But the investor, Luke, and that's here your side. Let's say you have a portfolio of equities where You, Yeah. Want to hide during these times. What is your approach?

[00:46:39.02] - Speaker 2
You know, it's probably, if I wanted to hide, it'd probably be sort of, you know, the standard safety plays of, of, you know, tobacco and pipelines and you know, sort of bond like dividend, like stuff, utilities, things like that is, is where I would be if I wanted to hide.

[00:46:58.10] - Speaker 3
Yeah. And stuff like T bills, maybe short term debt, like.

[00:47:02.22] - Speaker 2
Yeah, for sure. T bills, absolutely. T bills, yeah. I wouldn't go any further than that, but yeah, for sure, sure.

[00:47:08.12] - Speaker 3
Like one year, I think, or even six months.

[00:47:11.02] - Speaker 2
Yeah, one year and less. One year and less for me. Yeah. It's. I, the fiscal situation in the U.S. i, I would not loan them money for more than a year.

[00:47:22.14] - Speaker 3
I love the outlook. That's good. One year. Oh, no, no, don't, don't do this. Yeah, yeah. But at the end, folks, if you're running. Yeah, let's call it a book. In situations like this, they are maybe new to some of you. If you're in the markets like let's say five, six, seven years, always have patience. During this time, I think we can agree no one really knows what happens in the next months. Right. It's so hard to gain a picture. And on the other side, I love this phrase hedging doesn't hurt you. It's basically a lot of mathematical stuff. But yeah, if you have equities, you can hatch this with stuff. A lot of stuff out there on the Internet. I don't know if you guys are doing this or it's maybe a little bit more strategic and not tactical, I don't know.

[00:48:22.13] - Speaker 2
No, we definitely do it. Yeah, we've, you know, we, we, we definitely do do tactical stuff when we see it. So for example, we were telling people to buy puts on NASDAQ S and P and bitcoin in February when we saw what we were talking about earlier.

[00:48:38.25] - Speaker 3
Sure, that's good. Yeah. And so far we covered all the stuff. I prepared a little bit. I don't know.

[00:48:50.13] - Speaker 1
I have a question for you, Luca, because obviously there's a lot of talks about bitcoin as a potential reserve for the future. And I think it's becoming more relevant into the asset allocation also of like large institutions. Can you give us your take maybe on bitcoin short term, medium term and long term on your view? Because I think a lot of our users are probably very interested in the crypto spaces especially.

[00:49:17.05] - Speaker 2
Yeah, I think bitcoin is in the short run. It trades with nasdaq. It's maybe starting to break down and diverge from that a bit. I think ultimately it will completely diverge from Nasdaq because at its core, in my view, Bitcoin is a neutral, neutral reserve asset with an energy link via the proof of work algorithm, if you will. And ultimately I'm, I'm super bullish on Bitcoin as, as a, as a hard currency at a time when the US and global debt picture can't be resolved without either significantly negative real interest rates for a sustained period of time or some sort of productivity miracle which will make consumer debt loans, consumer loan markets unrepayable. Right. A bunch of robots come out, it's a productivity increase, but everyone's going to lose their job. And when they lose their job, they're not going to pay their mortgage, they're not going to pay their student loans, they're not going to pay their credit cards. And then central banks will either have to let banks collapse or print all the money and buy all the consumer loans. So I look at Bitcoin as, you know, in the short run it trades with Nasdaq and like I said before, we were tactically bearish Bitcoin when we saw what we thought was coming and, and did come for the Nasdaq over the last two, three months.

[00:50:42.01] - Speaker 2
But ultimately super bullish Bitcoin, can it become a neutral reserve asset or can it become a, a global reserve asset? I don't think it's big enough yet. It needs to become a lot bigger in terms of its market cap. It's probably price. I think that will happen over time, the price increase. We've seen some marginal buying of, of, of, of Bitcoin by sovereign wealth funds. I think we saw it out of Abu Dhabi maybe a couple months back. We'll see if it continues. There's discussions around it. So I, I really like Bitcoin. I think it's, I think it's a, a good long term asset holding it. I think you just, every investor needs to understand the implied volatility of Bitcoin is still very high and, and scale their position size appropriately for themselves.

[00:51:31.06] - Speaker 1
Makes sense.

[00:51:31.24] - Speaker 3
But that's a good point. With the volatility it will go lower. That's my take. The more institutional money pours in. Right. Because think about it like 5, 6 years ago, 7, 8% on the day in bitcoin it was a normal Monday. Okay. Because it was the assets. Yeah. Not that traded by larger desks and institutions. But you mentioned it already, the inflows. And I think it's still in A period of transition. Right. That big money pours in already and appreciation starts for Bitcoin as a real asset.

[00:52:13.04] - Speaker 1
Yeah. All right, let's see if we have question, guys. Let us know, please send us a comment. I don't know if Luke, if you. There's anything that we didn't cover that you want to cover?

[00:52:29.23] - Speaker 2
No, no, I'm. I. I think, you know, it covered. Covered a lot of ground.

[00:52:38.10] - Speaker 1
All right, so I'm gonna let us know, guys, if you have questions. I think having Luke here is the definitely amazing and we want to make the most of it. So please send us your comments. I'm going to share your links again, Luke, for the audience so they can. They can find you. So your website is here, and of course, you have really nice and large Twitter account where you post a lot of really great content. So please don't miss. Don't miss that as well, guys. I'll just share it here. And. Yeah, and I don't know, Tim, if there's anything else from your side, but I think it was a very amazing session and hope to have you very soon, Luke as well.

[00:53:20.11] - Speaker 3
I think we did the best in one hour. I mean, those topics, you can talk, like the whole day. That's the main problem behind it.

[00:53:27.22] - Speaker 1
Absolutely. All right, thank you, guys. And thank you, Luke, for being with us. Look forward to see you soon. And thank you, Tim, as well. And see you guys tomorrow and next week.

[00:53:39.10] - Speaker 3
Yeah, thank you. And look. Really appreciate it. And yeah, have a good week.

[00:53:43.27] - Speaker 2
Likewise. Thanks, guys.

[00:53:45.27] - Speaker 3
Thank you. Bye. Bye.