Speaker 1the macro trading floor with me alfonso peccatillo founder of the macro compass and former head of investments at the large european bank and
Speaker 2i am brent donnelly president of spectrum markets i've been a portfolio manager day trader and market maker at the biggest commercial and investment banks in the united states i'm also the author of alpha trader and the art of currency trading if you want to know what's going on in markets and where they're going you found the right podcast hi everybody
Speaker 1and welcome back to the macro trading floor brent and alf with you as always or i should say nostradamus donnelly and alf with you because the guy shorted the nasdaq he picked the top he took profit and now we can rally again ciao brent why don't you teach us how to make money please what
Speaker 2should we do next yeah it's um that was a good trade i mean i don't honestly like i'm always happy when i make um money and when i do good trades and this one was a bit more public because it was on twitter and um and i got some quite a lot of negative feedback on it so it in a way it does feel good for i guess my ego but in the end i also know after collecting data for 20 years i make money 50 to 55 of my trades and you know so i made money on this one you know if you roll a die and it comes up four five six you know how excited should you get i don't know not that excited i feel like i have a pretty good ability now after so many years you know after so many emotional ups and downs to return to the middle space pretty quick so anyways thank you i'm glad i made money and um you know it's good to be right but also i know that i'm wrong all the time so moving right along um i think the interesting thing about this week is it's just a completely different dynamic right that it's it's not you know the theme has been iran diesel oil up yields up all that kind of stuff and it's a completely different theme now we have yields are are moving the opposite direction so you have some protection from bonds for the first time in a long time and i mean i'll give my thesis which i think is pretty consensus so i don't think it's it's rocket science but the u.s economy is more and more this one-legged stool which is ai capex pushing up growth pushing up stocks the wealth effect from stocks creates more uh consumer strength consumers buy more because the top of the k has all the money you know 80 of the people or 20 of the people buy 80 of this stuff so they see the stock market going up the stock market going up create creates revaluation of earnings for mag7 because mag7 has a lot of cross-ownership and every time you're buying a stock you're going to have a lot of cross-ownership and every time you know open ai and claude do or anthropic does around does an up round they take an earnings benefit which pushes their stocks up which creates more wealth effect meanwhile all the ai capex is squeezing the um is crowding out every other industry in like a dutch disease kind of process where housing and everything else is getting squeezed out by higher yields but no high no level of higher yields will squeeze out ai if you think that the forward returns on ai investment are infinite or at least you know 25 a year or 50 a year then your funding at six seven or eight doesn't really matter however that's just all in theory and that in reality there is a point where the whole thing is built on faith right like we don't have any visibility as to whether these companies are going to make money whether open ai will go bankrupt and anthropic will succeed i think would be like a reasonable theory but we have no idea and then you know how will it impact the real economy also no idea you know will it be i think the initial theory would be it's a demand shock because you need a lot of workers and a lot of stuff and then it's a supply shock later because you get this glorious productivity boom but you know that's all tbd and then also can any of these companies make money selling a commoditized product product that's potentially open source and free coming out of china where we've invested a trillion dollars to try to charge people 20 bucks a month to to make the money back so there's so many things that all work in the same direction and are pro-cyclical but then i think everyone kind of knows that it all rests on faith which is and that faith is that this stuff will somehow have payback in the future and everybody also knows that everybody knows that there's a lot of people worried about the all the financial interconnections and and um circular financing and all that stuff so when now when ai wobbles bonds are rallying which is something new and i think that's kind of exciting for someone like alf because you know there's potential to to have a nicer portfolio instead of you know for a while it's just you had to be short bonds and short stocks or or long bonds and long stocks and you know i think that's and um or sorry you had to be short short i'm sorry you had to be short bonds and long stocks for ages and now maybe there's some way that you can do some more interesting things and not just stare at the price of
Speaker 1oil indeed it's a lot so now i was trying to think where should i pick it up next so um the thing that has impressed me the most is that bonds have been energy for a bit and now bonds are not energy anymore bonds are cospi basically that's what's going on here so if the cospi sells off then bonds rally and before it used to be foil cells of the bond sell-off and so on and so forth now this is good and bad i would say for portfolio construction the good thing is that uh bonds are tiny bit positive carry compared to the ball they have it's not really a big positive carry contribution but a bit of positive carry is there and they act as a hedge against equities because equities tend to also i mean the cospi goes down means equities goes down and it means bonds rally so that's a good thing you know to have a pro something in the book with positive carry and hedging properties i'm trying to go back and look through this wobble uh in uh because the broadcom ceo said that this is a casino i mean if i try to analyze what's happening i always like to take a step back and look at my very long time horizons and understand if something fundamental is happening here and what i see happening is that the broadcom ceo said that this is a casino and that there is some recurring chinese news that they might be able to do everything that entropic is doing for no cost but this is like a recurring thing it's a headline it comes you know every few months and if i look at this against the fundamental macro data that i look at stacking up i still don't see brent how we are not going higher in the market i'm not going higher in bond yields i don't see how nominal growth is deteriorating i don't see how we have we have reached the new equilibrium in rates by which credit becomes a problem growth becomes a problem i don't see it and yesterday there was this chart from um what's his name i think richard clarida uh he used to be at the fed and he's now at pimco as an advisor and he was looking at something i look at also closely which is the core component of gdp growth uh you can use a few series the ones that i like the most are consumer spending and final sales to private domestic purchasers those are generally very stable and very reflective of us domestic consumer spending and he was looking at it in nominal terms so the real part plus let's say a core pc or a gdp deflator take an inflation number you want the nominal run rate of that last quarter has been six and a half percent which is the strongest quarter since 1996. some of it is also lifted of course by spending in tech equipment and stuff that's correct but six and a half percent nominal growth guys core nominal growth i i don't see how raising interest rates is passing through the u.s consumers mortgages i don't see how the ai credit cycle is hampered yet by these things earnings are growing at thirty percent twenty percent thirty percent and only in borrowing rate for an investment grade tech company is something along the line of seven percent in the five to ten year area so if i'm borrowing at seven my balance sheet looks incredibly good if i'm most companies not if i'm core weave or oracle it's always easy to pick the worst of the worst in terms of leverage but if i take my average hyperscaler my balance sheet looks very solid i'm borrowing at seven percent in the belly of the curve and i'm printing earnings twenty percent plus i i i can't just can't see how we have reached the new equilibrium yet in rates brand so i want to be the guy that says yes there was a wobble the nasdaq has gone down the rates have rallied and i think we are ready to restart again the macro fundamental trend which is rates higher new equilibrium is found and
Speaker 2so i'm just looking at the chart of tens it actually looks like five percent now is it probably decent pivot that was kind of the the level for a long time that people were like if yields go above five percent you know all the buildings will fall down and everyone will die and you know we went i guess to 5 30 so would that be reasonable do you think like if yields went below say 4.9 would you start to get worried that maybe something different is going on or you just think the markets could be wrong and maybe we overshoot down to 480 the
Speaker 1markets the markets are never wrong uh i would say like i look at big weekly resistances and supports i mean i'm a long-term guy so for me daily charts don't make much sense but weekly charts do and yes five was a big pivot for the breakout to 535 so i would say if we have a weekly close well below five then i have to assume that i'm not seeing something right i have to assume that something is going wrong so far it's friday morning and 10-year thresholds are actually uh moving up a bit in yields maybe 510 at the moment it seems we're comfortably above the five line at least for the time being in general brent the part that makes me the most anxious is that we're not seeing anything wrong and we're not seeing anything wrong and we're not seeing anything wrong so i would say that's one of the things to keep in mind is that as a macro manager a lot of shorter market moves but also long-term market moves will depend on the ai cycle right and that is a fact i mean you can't say no that's not true guys we are debt funding this thing with a trillion and you can't just say you know i always compare it inflation adjusted to the housing uh credit market boom in the u.s in 2005 2006 2007 back then we used to create a lot of debt funding and we used to create a lot of debt funding and we used to create about a trillion of new mortgages or credit product about a trillion of new mortgages or credit product to support the housing boom in the u.s to support the housing boom in the u.s to support the housing boom in the u.s every year inflation adjusted to today every year inflation adjusted to today every year inflation adjusted to today the credit the debt funded part is going the credit the debt funded part is going the credit the debt funded part is going to be about four five hundred billion to be about four five hundred billion to be about four five hundred billion next year so that's half the credit let's next year so that's half the credit let's next year so that's half the credit let's say created by say created by say created by um by the mortgage boom in the united um by the mortgage boom in the united um by the mortgage boom in the united states time so even half the pace of the states time so even half the pace of the states time so even half the pace of the credit creation of 2006 2007 can lead to credit creation of 2006 2007 can lead to credit creation of 2006 2007 can lead to very bad consequences very bad consequences very bad consequences or can lead to or can lead to or can lead to another major fantastic capex cycle next another major fantastic capex cycle next another major fantastic capex cycle next year that boosts earnings by another 25 year that boosts earnings by another 25 year that boosts earnings by another 25 year on year i mean the outcomes are both year on year i mean the outcomes are both year on year i mean the outcomes are both possible right brandon those outcomes possible right brandon those outcomes possible right brandon those outcomes are hugely defining on where equity is are hugely defining on where equity is are hugely defining on where equity is you know i know that i don't know much you know i know that i don't know much you know i know that i don't know much about this but i need everybody needs to about this but i need everybody needs to about this but i need everybody needs to learn and have a view on this you can't learn and have a view on this you can't learn and have a view on this you can't just hide under the desk
Speaker 2just hide under the desk just hide under the desk well i think that's the problem too is well i think that's the problem too is well i think that's the problem too is that the that the that the current fundamentals are strong but then current fundamentals are strong but then current fundamentals are strong but then the sort of potential fragilities are the sort of potential fragilities are the sort of potential fragilities are large so people are trying to get ahead large so people are trying to get ahead large so people are trying to get ahead like silver gate or whatever like silver gate or whatever like silver gate or whatever where where where core weave i'm not saying this is going to core weave i'm not saying this is going to core weave i'm not saying this is going to happen but core weave could go under happen but core weave could go under happen but core weave could go under and it actually wouldn't matter like i and it actually wouldn't matter like i and it actually wouldn't matter like i think the current think the current think the current sort of view in the world is either we're sort of view in the world is either we're sort of view in the world is either we're gonna have like a financial crisis gonna have like a financial crisis gonna have like a financial crisis from this ai you know too much from this ai you know too much from this ai you know too much overbuild similar to 2000 but worse overbuild similar to 2000 but worse overbuild similar to 2000 but worse than 2000 in some ways because the than 2000 in some ways because the than 2000 in some ways because the financial side of it may be a little bit financial side of it may be a little bit financial side of it may be a little bit more more more enron-like and a little bit less you enron-like and a little bit less you enron-like and a little bit less you know uh cisco-like in that there's a lot know uh cisco-like in that there's a lot know uh cisco-like in that there's a lot of interconnections and all the money of interconnections and all the money of interconnections and all the money is essentially owed by two creditors is essentially owed by two creditors is essentially owed by two creditors which is open ai and and anthropic which is open ai and and anthropic which is open ai and and anthropic and so if they can't ipo because and so if they can't ipo because and so if they can't ipo because confidence is low and core weaves going confidence is low and core weaves going confidence is low and core weaves going bankrupt and or core weaves you know bankrupt and or core weaves you know bankrupt and or core weaves you know yields you can't core we can't borrow or yields you can't core we can't borrow or yields you can't core we can't borrow or et cetera et cetera et cetera et cetera et cetera et cetera does the whole thing kind of start to does the whole thing kind of start to does the whole thing kind of start to fall down or you know maybe you just fall down or you know maybe you just fall down or you know maybe you just weak like the la so australia actually weak like the la so australia actually weak like the la so australia actually has a decent amount of participation in has a decent amount of participation in has a decent amount of participation in the in this whole ai capex story the in this whole ai capex story the in this whole ai capex story uh like relative to gdp they're they're uh like relative to gdp they're they're uh like relative to gdp they're they're in the like top of the top five or in the like top of the top five or in the like top of the top five or whatever countries whatever countries whatever countries in terms of just like actual data in terms of just like actual data in terms of just like actual data center activity relative to gdp center activity relative to gdp center activity relative to gdp and the largest ipo there which i think and the largest ipo there which i think and the largest ipo there which i think it would have been the largest one it would have been the largest one it would have been the largest one maybe ever or in the last 20 years or maybe ever or in the last 20 years or maybe ever or in the last 20 years or something anyways there was supposed to something anyways there was supposed to something anyways there was supposed to be a huge ipo in australia and it got be a huge ipo in australia and it got be a huge ipo in australia and it got cancelled because of market conditions cancelled because of market conditions cancelled because of market conditions and and and it does kind of make me wonder it does kind of make me wonder it does kind of make me wonder and then charter or sorry character.ai and then charter or sorry character.ai and then charter or sorry character.ai went bankrupt as well i think this week went bankrupt as well i think this week went bankrupt as well i think this week or last week or last week or last week so so so there is like a little bit of evidence there is like a little bit of evidence there is like a little bit of evidence that it's not just core weave like there that it's not just core weave like there that it's not just core weave like there is a little bit of is a little bit of is a little bit of wobbliness out there like why wobbliness out there like why wobbliness out there like why with everything basically near the with everything basically near the with everything basically near the all-time highs all-time highs all-time highs and you're trying to do an uh an ai cap and you're trying to do an ap x ipo ap x ipo ap x ipo and market conditions aren't good enough and market conditions aren't good enough and market conditions aren't good enough to do it like i don't know that stinks a to do it like i don't know that stinks a to do it like i don't know that stinks a little bit like i don't know little bit like i don't know little bit like i don't know why that would would be the case um so why that would would be the case um so why that would would be the case um so i do feel like i do feel like i do feel like there's a couple of things going on like there's a couple of things going on like there's a couple of things going on like to me it's not like all these red flags to me it's not like all these red flags to me it's not like all these red flags and like oh my god it's 2008 but and like oh my god it's 2008 but and like oh my god it's 2008 but i do think it's not just core weave like i do think it's not just core weave like i do think it's not just core weave like i think i think i think there is this whole sort of there is this whole sort of there is this whole sort of i don't want to say house of cards i don't want to say house of cards i don't want to say house of cards because that implies it's definitely because that implies it's definitely because that implies it's definitely going to collapse going to collapse going to collapse um but there is this sort of um but there is this sort of um but there is this sort of very very tall tower that's been built very very tall tower that's been built very very tall tower that's been built with a lot of debt and with a lot of debt and with a lot of debt and it is wobbling a tiny little bit and it is wobbling a tiny little bit and it is wobbling a tiny little bit and you know so i do think people asking you know so i do think people asking you know so i do think people asking questions and maybe repricing a little questions and maybe repricing a little questions and maybe repricing a little bit makes sense bit makes sense bit makes sense but maybe the problem is which i think but maybe the problem is which i think but maybe the problem is which i think is kind of what it comes down to is kind of what it comes down to is kind of what it comes down to is it is quite binary and and that's is it is quite binary and and that's is it is quite binary and and that's kind of the difficulty that you're kind of the difficulty that you're kind of the difficulty that you're describing which is describing which is describing which is there i'm describing some middle ground there i'm describing some middle ground there i'm describing some middle ground where like okay maybe core weave goes where like okay maybe core weave goes where like okay maybe core weave goes under and under and under and you know maybe that nvidia buys all you know maybe that nvidia buys all you know maybe that nvidia buys all their stuff at a discount and life goes their stuff at a discount and life goes their stuff at a discount and life goes on or whatever on or whatever on or whatever but i think it feels a lot more binary but i think it feels a lot more binary but i think it feels a lot more binary than that it feels like than that it feels like the entire world is all in when you're the entire world is all in when you're the entire world is all in when you're calling things an arm race and we have calling things an arm race and we have calling things an arm race and we have no choice and no choice and no choice and you know half the people in america don't you know half the people in america don't you know half the people in america don't even want this technology but we have to even want this technology but we have to even want this technology but we have to build it because otherwise china will build it because otherwise china will build it because otherwise china will you know there's a 10 chance it'll you know there's a 10 chance it'll you know there's a 10 chance it'll destroy humanity destroy humanity destroy humanity and we're war gaming for the inevitable and we're war gaming for the inevitable and we're war gaming for the inevitable rogue scenario rogue scenario rogue scenario but we're but there's no regulation but we're but there's no regulation but we're but there's no regulation around it we're just gonna around it we're just gonna around it we're just gonna assume that there's gonna be rogue assume that there's gonna be rogue assume that there's gonna be rogue scenarios and scenarios and scenarios and and then deal with it after you know and then deal with it after you know and then deal with it after you know it's kind of like the old fed it's kind of like the old fed it's kind of like the old fed motto of like let the crisis happen and motto of like let the crisis happen and motto of like let the crisis happen and mop up after mop up after mop up after instead of actually being proactive and instead of actually being proactive and instead of actually being proactive and so i think there's a lot of angst in so i think there's a lot of angst in so i think there's a lot of angst in society about it and then that makes it society about it and then that makes it society about it and then that makes it feel like this big binary bet in feel like this big binary bet in feel like this big binary bet in financial markets financial markets financial markets and so and so and so to me that play to me that play to me that play is more riding that they're surfing is more riding that they're surfing is more riding that they're surfing those narratives of confidence or those narratives of confidence or those narratives of confidence or overconfidence or fear and panic and overconfidence or fear and panic and overconfidence or fear and panic and and you know so i i think right now we're just in like a sort of right now we're just in like a sort of right now we're just in like a sort of like a brief wave of panic you could like a brief wave of panic you could like a brief wave of panic you could call call it like the deep seek thing or call call it like the deep seek thing or call call it like the deep seek thing or whatever but underlying i think there is whatever but underlying i think there is whatever but underlying i think there is some some some there is some reason to be a little bit there is some reason to be a little bit there is some reason to be a little bit worried because worried because worried because there are more than there is more than there are more than there is more than there are more than there is more than one thing going on and one thing going on and one thing going on and to me like open ai's commitments to me like open ai's commitments to me like open ai's commitments relative to their ability to ever make relative to their ability to ever make relative to their ability to ever make money in you know commoditized thing money in you know commoditized thing money in you know commoditized thing where there's 25 competitors all where there's 25 competitors all where there's 25 competitors all creating the same thing the second one creating the same thing the second one creating the same thing the second one of them adds a feature the other 24 all of them adds a feature the other 24 all of them adds a feature the other 24 all add the same feature add the same feature add the same feature just seems like in the long run they're just seems like in the long run they're just seems like in the long run they're all going to converge all going to converge all going to converge you know the the people on the other you know the the people on the other you know the the people on the other end of those commitments
Speaker 1end of those commitments end of those commitments i uh welcome your opinion brent i would i uh welcome your opinion brent i would i uh welcome your opinion brent i would like to have such a an elaborated one like to have such a an elaborated one like to have such a an elaborated one too i don't but you know these bubbles too i don't but you know these bubbles too i don't but you know these bubbles basically force you to look at this as basically force you to look at this as basically force you to look at this as as a macro manager you either are uh as a macro manager you either are uh as a macro manager you either are uh looking at tails only so you look at looking at tails only so you look at looking at tails only so you look at credit uh you know buildups and credit uh you know buildups and credit uh you know buildups and imbalances and you try to basically make imbalances and you try to basically make imbalances and you try to basically make an assessment of this only as a an assessment of this only as a an assessment of this only as a i'm only gonna act on tails basically i'm only gonna act on tails basically i'm only gonna act on tails basically uh or you try to have a very informed uh or you try to have a very informed uh or you try to have a very informed opinion i invite everyone to to look at opinion i invite everyone to to look at opinion i invite everyone to to look at it very very closely including myself it very very closely including myself it very very closely including myself let me talk about something i'm looking let me talk about something i'm looking let me talk about something i'm looking a bit more closely about i might have a bit more closely about i might have a bit more closely about i might have some ideas here and there some ideas here and there some ideas here and there um which is about uh the the fed and the um which is about uh the the fed and the um which is about uh the the fed and the october meeting and the cpi that just october meeting and the cpi that just october meeting and the cpi that just printed printed printed so we have had a uh so we have had a uh so we have had a uh core cpi and the ppi components that core cpi and the ppi components that core cpi and the ppi components that feed into core pce feed into core pce feed into core pce by my calculation we're going to be at by my calculation we're going to be at about about about 0.33 if i remember correctly for core 0.33 if i remember correctly for core 0.33 if i remember correctly for core pc which is quite a number if you're pc which is quite a number if you're pc which is quite a number if you're trying to target two percent inflation trying to target two percent inflation trying to target two percent inflation point 33 is the equivalent of 3.6 point 33 is the equivalent of 3.6 point 33 is the equivalent of 3.6 inflation if repeated every month inflation if repeated every month inflation if repeated every month but when you plug it in a year-on-year but when you plug it in a year-on-year but when you plug it in a year-on-year number that would come out of core pc or number that would come out of core pc or six month analyze you get anywhere around three to three point one okay so the number the fed is going to be looking at is these inflation prints moves the core pce to 3.1 let's say something like this on a year-on-year basis right so it's a small bump higher in the wrong direction of course in the wrong direction and it's very interesting to me brand that the market has decided that october is not a hike i mean we're pricing now i think less than five or six basis points because walsh this morning didn't talk about the hike in his last interview before the blackout period yeah that was weird right that was uh that was that was quite interesting like it's kind of a
Speaker 2weird reaction considering like no one was considering the venue and all that what you know why was anyone expecting him to say anything yeah but
Speaker 1But then it really makes me think about the path of nominal growth and core inflation really looks to be the one that, you know, nominal growth is going to stay at six and core is going to remain around three. It's very hard to basically bring down core to 2% unless you generate proper tightening of financial conditions. And then I looked at the financial condition index that the Federal Reserve itself generates, which I have to assume is the financial condition index they're using right now. And then also Walsh mentioned in this first interview where he talked finally about this framework, which was Jackson Hole, right, where he refers to all these things he's looking at to assess how financial conditions are today. And I asked my new analyst called Claude, and we had a chat about it before, because this index is published monthly with quite a delay. So the last publish is end of August, but I wanted to know how does it look today? How does the financial condition index of the Fed looks today after the sell off, the move higher in year? So Claude basically updated it to today and because it's, you know, it's public methodology, you can look it up on the Federal Reserve board website and the result is that on a one year and on a three year look back, the financial condition index after the sell off, after the dollar rally and after bond deals are higher, is still net a commodity.
Speaker 2Now, is part of that just because, like, people don't still, people still realize that the Fed is not serious about inflation? Like, look at that. It just came out and then people are, you know, so the three month annualized people are all back in their holes, you know, because it doesn't suit and the Fed is back in their hole because, you know, the Nasdaq dropped 3%. I don't know. I find it, it's interesting what you're saying because it's true, you know, that people just don't take the Fed seriously anymore. And so you have these strong inflation numbers and actually the dollar's lower after those, both of those inflation numbers. The dollar rallied and then sold off more than it rallied and, you know, after we can talk about FX, but there's some really interesting stuff going on in terms of just bad or good news, bad price for the dollar.
Speaker 1When I look at the conjunction of all these things and I see that the Fed itself assesses their financial condition index to be still lose against a higher printing core PCE, they might not hike in October. It's likely they don't at this point. Right. Right. I still can't see how the Federal Reserve doesn't understand that if they really want inflation at 2%, conditions have to get tighter. By their own approach to the problem, you need to tighten financial conditions to get inflation down. Rates have to go higher. There is no other way. Rates have to go higher until you are at an equilibrium point in which aggregate demand slows down enough to bring core inflation to a path towards 2%, which you are not at the moment. So I still believe they might. Actually, it's. Actually, skipping October, to be honest, Brent, it's counterintuitive to this message. It's pretty counterintuitive to this message. Yeah. And I don't know. I mean, Walsh will try to sound as hawkish as he can, but he has Williams coming to the wire saying, I don't see a need for any hike in 2027. Okay. Like, guys, sorry, but you are, you know, you made a bit of a step, but you're still behind the curve if that's your stance. If you want to be credible, you need to slow aggregate demand and aggregate demand is way too strong in the United States. To be consistent with 2% core inflation at the moment. So I still see this as the main paradigm I'm using. I still think ultimately the Federal Reserve has to hand it over to the market and has to tighten financial conditions, which means they have to have a stronger dollar. They have to hike faster. Yields have to be higher. And to be frank, equities will. Yeah, probably, you know, they they will do OK if the hiking isn't crazy enough to be ahead of the curve. But. There will be some wobbles along the way, so I think that the easy money, especially in high beta stocks, has been made and now it's more about, you know, managing the cycle. Basically, the direction for me is higher yields and higher dollar doesn't have to be bad for equities, but it has to be managed the way that one looks at equity exposure these days. Want to talk about the facts for a bit to close it off?
Speaker 2Well, so the interesting thing is I'll use dollar CAD as the example. Because it's the most egregious, but dollar CAD, Canada's economic data. So there's a problem with Canada's payroll data, which is normally they don't properly seasonally adjust for the teachers when they come back in September. So 21 of the past 24 Septembers have been strong in Canada. So, you know, everyone's leaning for a strong because people know that. And then it came out super weak. So the Canadian dollar got smoked. Dollar CAD goes up to 143 and fails. Then CPI and PPI come out. Dollar CAD rips again, obviously higher dollar again, up to 143 and fails. So you had like essentially the worst possible setup for the Canadian dollar or the best setup for dollar Canada. And we're trading 141.50 right now. And you can kind of apply that across most of the currencies like Euro went down to 111.10 or something on the CPI. Now we're 112.60. So I think it's a pretty interesting. It's a pretty interesting good news bad price setup for the dollar where the dollar tried to rally really hard. And I think a part of it is positioning. Our metrics showed last week that the dollar is in the kind of danger zone of too many longs. So it doesn't necessarily mean that, you know, Euro is going back to the highs. But I think what it does mean is the French stuff was priced in and you need something new. And next week we're going to get on the 20th. We're going to get. We're going to get. We're going to get the French budget vote, which will probably fail. And so it'll be interesting to see the price action around that. And then we'll get the Moody's on Friday, the 23rd. And they're going to downgrade France. But that's expected as well. So you kind of have two bad news events that are both kind of expected and priced in. So it'll be super interesting to see what the Euro does, because, you know, these are well-known things. And to me, it looks like maybe French spreads hit their peak at 160. Two Fridays ago and maybe this whole French thing is kind of done for a while. I mean, the elections in April, I think people are kind of bored of the French story. So I'm I'm constructive on the Euro for for now or in short dollar CAD. I have been for a few days and I think we're going to get another leg lower in the dollar next week simply because the price action and because you got all the good news you could have possibly hoped for on the dollar and the dollar is lower. And usually that means that it's it's in trouble for. For the short term, in the in the bigger picture, you know, maybe we'll see how the winter goes for for the energy story in Europe, because that's still a huge concern. Absolutely. Yes, also. And don't trade dollar yen, it's impossible.
Speaker 1Fair point on Japan. On the dollar, the interesting thing was that the Federal Reserve was supposed to be this new hawkish central bank. And now we have core PCE pointing in the wrong direction. And there are no signals. Okay. Well, that's a good point. And I think that's a good point. advice. Seek independent professional consultation in the form of legal, financial and fiscal advice before making any investment decision. Always perform your own due diligence.
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