The Oil Shock That Caught Hedge Funds Off Guard

Hello and welcome back to the market maker podcast and what a week it's been so far. It is Thursday. I'm conscious that by the time this goes out, there is one final remaining trading day of the week. So by the time this hits your ears, it could well be way out of date, but we'll do our best to turn this around. And in this conversation, we're going to talk less about the whole political side of things as we normally try to stay clear of. But many things have happened, including the international energy agency offloading a huge volume of crude onto the market, which is something we were highly anticipating if you listen to our previous macro episode. We'll also have a look at the US's contribution to that and a bit of the historical precedence of how things have shaken out after they've done these types of actions before in the past. The other things then are implications from a macro perspective on central bank monetary policy expectations. And subsequently then that's a nice segue into how that's burned a number of the largest macro hedge funds on the street. And we'll look at some of the general tactics that they deploy in the market and how this latest bout of unforeseen volatility has really hurt them as we come into the final part of Q1. But first of all, Piers, what do you make just generally? You've been in the market since 2001. How does this compare to some of those other periods of uncertainty that you've been part of? Yeah, unfortunately, my first response is unfortunately geopolitical flare-ups are not uncommon. So on the one hand, I've seen many of these again, unfortunately. I mean, the most recent being, of course, the Russia invasion of Ukraine. And people kind of even figure like, I don't know, memories are very short in markets. But people forget, I mean, that was only four years ago, right? And the oil price movement then in many ways was the same because we were trading, I'm looking at Brent, that the Brent crude oil chart and coming into the end of 2021, we actually dropped down, we traded about $70, then the Russia Ukraine situation unfolded, which presented huge oil supply risk as well as other commodity supply risks, given the fact that Russia and both and Ukraine actually have major producers of lots of different commodities. But anyway, the price of oil went from $70 to actually peaks at 120. Those numbers might sound familiar because that's basically what's just happened. This week's marketable actually, now you say that. Yeah, because we went, I think the high that we've hit this week, which was the beginning of the week on this period has been $1950. Yeah, it's gone from basically 70 to 120. I mean, that's not a fluke, by the way, that's not like coincidence. Oh my god, it's almost exactly the same. It's the same because that's what happened last time. There's a muscle memory in markets, which is shaped and driven by human behavior, and it's shaped and driven by humans building algorithms to do the job for them. And so those ranges are kind of holding as they were last time. Obviously, we're right in the moment and clearly from a humanitarian point of view, this is a disaster. I think from a market's point of view, yeah, people, I think if all you do is, if you're new to markets or if all you do is read the kind of mainstream media, then wow, this is like the biggest thing that's ever happened, but unfortunately, it isn't. But that said, there are a hell of a lot of differences between this situation. Just purely from a supply risk perspective, it's different supply risk than the Russia Ukraine situation, which just kind of makes it a little, I'd say it's a bit more complex and we're going to try and dive into some of that complexity today. But yeah, look, in the main, we've seen this lots of times before, but what I've maybe finished with and now passed back to you, one stat that, and it kind of maybe ties into, you mentioned some of the hedge funds kind of got whacked. So crude oil futures, right? Well, actually, here's your quiz question number one for the day and so on. When, what year did crude oil futures as a kind of financial product? How long have they been trading for? What year did crude oil futures become a thing and a tradable product? Was your reckon? Well, after the 70s, probably they created that instrument to then take about two-chofe future price spikes. So early 80s. Sput on. 1983. Oh, the year I was born, baby. I should know that. Come on. All great thing. Minion crude oil futures. We're like that. We're like brothers and arms. Well, my stat is that last week, crude oil futures spiked 36% up in a week. And actually that puts it at the largest ever weekly percentage increase in the history of this financial product. So whilst I said before, we've seen this all before kind of thing, I mean, actually the kind of, it's the speed. So we went from $70 to $120 last time, but it took weeks. This time it took seconds. So you're getting the same kind of overall move. It's just the speed of it. It's just wildly increased. And here's my favorite stat. If you want to get into your statistics. And this is what a lot of hedge funds will be doing. This was what the size of the move based on normal average volatility levels. Okay. This size, it was a, what's called a six sigma event, assuming a normal distribution. Okay. Now statistically, a six sigma event is only supposed to happen once every four million years. So that's how statistically unlikely last week's move was, which I think's why it caught out these hedge funds will come onto a harrow in a sec. But yeah, so we've seen it all before. But it's just happened a lot faster because markets are more efficient and they just move more quickly. There's obviously algorithms that are all over this. And it's just speed everything up. It's interesting because yeah, you talk, when you talk about that, that level of market movement, you do think algorithms, you do think of these kind of the manipulation of how the market has constructed that can cause these dramatic price shifts. But I was talking to Joseph in our commodities team who very much works closely with, obviously we have simulations more in early careers, but we do work with some commodity trading houses with their traders. And he was saying he was catching up with them. And I was like, oh, what's the vibe then? This is one of the biggest commodity trading firms. He was like, yeah, it's interesting because yeah, the traders are literally sleepless nights. They're on it permanently in this current state. And your mind goes to, well, you look at some of the profits they were reaping during that Russian Ukraine situation when it first happened. And you just say, oh, it must be easy money. But actually, he was saying, it's so stressful because we talk about it in a, I guess, an derivative sense. They're talking about it from a physical trade perspective. And he was saying, you know, you've got a client who you promised to deliver a cargo container full of energy products or gas. And then your client saying, well, you need to fulfill your obligation of your contract to deliver. And so you're scrambling your cargo ship is costing you money. It's sat there in the straight at the moment. You can't do anything. You can't get insurance for it. But your client still needs to receive either sippen of the hard tangible product. And so they're trying to scramble to find oil here there and everywhere. And he was saying like sometimes with gas, like we talked about the squeeze last week in Europe and how, you know, you're going to Italy and you're trying to pick up some from France. And just to meet tomorrow's needs, otherwise business can't actually resume. So yeah, interesting for me, I guess a career perspective, you're thinking about these sort of different trading seats. If you're sitting there in a higher frequency, more electronic trading role at a buy side hedge fund compared to a trading house, like a physical trading house on the commodity side completely different, right? Yeah. And as you know, you said that in terms of kind of scrambling to try and find any supply. I was looking at some stats with regards to traffic coming into and out of the streets of Hormuz. And so obviously when this kind of first broke as a situation a week ago, like normally like pre this situation, you were maybe getting 90 to 100 vessels, like entering the neck of the streets of Hormuz per day, okay? Then that kind of dropped right off to about 10 for about a week. Then it kind of popped back up to about 50. This is this is boats going out, right? Going trying to get out of the golf, the Persian golf. It jumped up to about about 50, and now overnight, it's obviously escalated again with some container ships and some oil tankers being directly targeted and hit with various missiles, right? So it's now dropped back to virtually zero again. So the problem with the Straits of Formuz, or should say the problem with the Persian golf, it's a colder sack. You know, if you go in, there's only one way out and that's an in and out, it's through the Straits of Formuz, as we've been saying on the last episode. Ships are trying to get out, and now it's gone back to basically zero again, 'cause what happened overnight, but ships going in is basically dropped to zero and is staying at zero. Now what's happened is, if you think about Saudi Arabia, which actually on their kind of east coast, borders the Persian golf, right? Typically, of the seven million barrels per day that Saudi Arabia export, almost all of it goes out through the Persian golf and through the Straits of Formuz. Now they did build an east to west pipeline, right? Which can get some of that supply piked to the west coast on their west coast is the Red Sea, okay? So actually what you've got happening right now, I was really thinking about it this morning, there are 30 oil tankers that are bombed around the kind of the south of like Oman and Yemen and are bombing up through the Red Sea to try and hit this place called Yambu, which is where that kind of east-west pipeline fetches up, okay? Now the Saudi Aramco have said that they're looking to try and pivot and send five million barrels per day through the pipe across to the west coast. So you've got thirsty ships charging up to this Yambu port. Normally that Yambu, and I don't know if the infrastructure is gonna take it because normally that port only has about two ships per month who turn up. There's 30, there are about to hit the place at the same time and you've got Chinese ships, you've got Greek ships, you've got lots of, but most of this stuff is for picking up oil and each tanker can hold about two million barrels of crude oil. Now there is the Houthi risk going round that core in the corner of Yemen. The Houthis have stepped back from bombing vessels going up through the Red Sea since the Gaza ceasefire. Who knows whether that's now a risk, I mean it definitely is a risk, right? So that's something that they've got to try and navigate. It's not like that's a completely safe route in a bit self. And if they pick up at Yambu, I mean what do they do then? 'Cause this oil's going to Asia, so they need to turn around and come back out, but do they then go through the gauntlet, the Houthi gauntlet again? Or there is another route 'cause the Red Sea's not a cold or sat thanks to the Suez Canal. So you could bomb up Suez Canal, but then you've got to go out through the med, down around Africa, you know, that's going to add weeks and weeks to your journey to China, let's say. So I don't think that's a particularly attractive option. But yeah, we talked about last week how a lot of that Persian Gulf crude is actually going eastbound servicing India and China. As that isle this morning was Japan actually imports 90% of its crude from the Middle East. Yeah. And of it, of it's like 70% goes, comes through the Straits of Four Moves. They're actually the easily, or that, they're in South Korea actually. South Korea about 50 to 60% of their crude comes through the Straits of Four Moves. So those two way above every other country are most exposed to the kind of Straits of Four Moves channel. So just going back to the volatility deck, because earlier in the week what happened was prices came off quite quickly. And there was some sort of, I guess, de-escalation type rhetoric coming out of Trump. I'll be willing to talk to Iran, you know, all these sorts of noises. But one of the things that happened on the Iranian side was, of course, that they've appointed now their new Supreme Leader. So who's the new Supreme Leader? And what's the general consensus over what that means as far as de-escalation is concerned? Yeah, well, the new leader is the son of the old leader. So Kamenny's son is basically an absolute shoe in here from their perspective and has got very strong ties with the kind of revolutionary guards. And, you know, it's an absolute successor in the waiting. And it's thought to be even more hard-lined if anything than his father, with one little, not little at all, one added kind of motivation here, because in those original day one strikes where Kamenny was taken out, along with a lot of other very senior people in the administration. So the younger Kamenny obviously his father got killed in that strike, but also his mother got killed and his wife and his son got killed, all in those day one strikes. So, yeah, I mean, Trump's thing about this, we're almost done and the White House kind of signaling an off ramp and look, we're ahead of schedule. And I mean, there is zero, zero, zero evidence to suggest that any of that is anywhere near remotely true, because, you know, history, if you think about Iraq, Iraq, Iraq, too. Now, I think after the kind of first Iraq war, they were kind of, you know, it went very quickly to start with in the first week, pretty much job done and everyone was like, "Well, hey, brilliant." And then the talk out of the White House was, you know, "This is perfect." You know, now there'll be a democratic election and democracy will rule and we'll have a phenomenal new democracy, you know, in the Gulf region. You know, obviously fast forward. What are we now? 20? 20? No, sorry, 35 years later. And that ain't the case. Afghanistan, Syria, I mean, this is like Iran would be like Syria plus plus. So, you know, the idea that somehow this situation is going to quickly resolve itself in some amazing Iranian democracy, you know, stability in the region. There is absolutely zero, zero evidence that that's going to be the case. So, but if you look at the price of oil, I mean, some people are believing it. And look, there's two things here. It's Trump kind of giving it that big one about, "Wow, we're nearly done. This is almost over." But then, obviously, you've also got the International Energy Association, you know, coming out with what they're saying is they're kind of big game changer, releasing, you know, a record breaking number. So, 400 million barrels of oil are being released, I should say. I think the release happened today or overnight. So, you've got 400 million barrels of strategic reserves hitting the market. You've got Trump saying, "Guys, we're almost done." And so, oil having hit 120 bucks on the 9th of March. Actually, if we talk about overnight on the sort of 10th into the 11th of March, it got all the way back, I'm talking about Brent Crude, got all the way back down to 83. So, we basically went from roughly that, I mean, pretty much unwind most of the move. We were trading around 83 just before, you know, if you take the first week of March, where oil had ticked up a little bit in anticipation, because there was a lot of, you know, a massing of military force from the US into the Persian Gulf, something's going on here. So, oil went from 70 to 83, right? That's pre the original strike. So, we're at 83. Then the strikes happened and bang, it went to 120. Then it came all the way back to 83. So, actually, reversing all of that original kind of move off those initial strikes. What was a lot of that due to the fact that you mentioned there, of record breaking, so 400 million barrels. So, that dwarfs what we had in response to the, I think it was the Biden double tap. So, I think this is just the sixth time that this has been been done in terms of this lever being pulled so quick. We've gone from chemistry to geography to now history in terms of hot podcast lessons. So, those other five times apart from now, so the first one, actually, you kind of were talking about just a moment ago. So, 1991, the first Gulf War Operation Desert Storm. Then you had 2005, Hurricane Katrina, the disruption of the Gulf of Mexico production. Then the Libyan Civil War in 2011, and then you had a marked April double tap, an initial and secondary responses to the Russian Ukraine outbreak. So, was it that the market in the first instance was just like, wow, that's a lot because we were talking last week about the US, although it's being refilling, almost due oil coffers, it was running a little dry and did they really want to fire that bullet to that magnitude just yet? Because they might then, the market might call their bluff that they can't react in kind next time should there be one. So, yeah, and maybe we could talk a little bit about the US's contribution because like all things, I think, when you talk about a global order or global collective, whether it's NATO and defence budgets and it's like, how big is your country in the country? economy and how much do you contribute? And so here, what's interesting is Trump has said, this was as of yesterday, so midweek that the administration would release 172 million barrels from the US strategic portrayal reserve. That's in conjunction with the IEA, the International Energy Agency. So their contribution is pretty much half of that of that oil. But I was looking into this, and I was like, because in my head, all sounds great. And I was just thinking about, well, what's the actual kind of mechanics of that? What's the economics of that? And they come up a couple of interesting things. So one was the Republicans 2025 budget reconciliation package included just $171 million. $171 million? That's a lot of money, but that's not a lot of money at all when you're talking about this sort of volume. And that was for future SPR purchases. That's enough for roughly 20 million barrels at a $60 price. So don't forget, the US have just committed here $172 million barrels from the SPR. They've already budgeted for roughly 20 million at a price significantly lower than the current price. The next thing that I was reading, which was interesting, was, you know, you kind of naively in your mind's eye, you just think of like a warehouse, like a Costco, full of barrels of oil. Well, I think I do. And it's just like, you open the door. The guy comes out, he opens the door for you, you know, yeah, I'll take a couple barrels, please, put it on the back of the car and off you go, it's just that on scale. But actually, logistically, apparently it's far more difficult in terms of replacing barrels and releasing them. And actually, there was some, there's a body called Sarah or CERA. And their analysis found that even a fully funded SPR refill effort, fully funded, because we've just said it's woefully funded at the moment. At its fastest potential speed, it would be four million barrels per month. So given the timelines we're talking here with what the US are doing, you'd be talking well into the 2030s to replenish this. So, yeah, to replenish just just this, the 171, 172 million barrels, don't forget, the SPR had already been plundered by Biden over the last sort of half decade, meaning that the emergency reserves are half empty already. So it's always tempting to obviously, I always feel like the intellectual argument is the weakest hand against Trump when it comes to this sort of thing, because I can, I've just explained to you here why in reality, what he said is absolute nonsense in terms of that, but that doesn't matter, right? I mean, that's, you need to park those kind of feelings, and it's, he's saying this for the reason of taking action, right? I mean, that's exactly why administrations do this. And Biden was no different during the Russian Ukraine period, right? Absolutely. Yeah, I mean, look, so overall, if you think about it, 400 million barrels being released from emergency reserves, sounds like, sounds like a lot isn't, is not a lot. In fact, if you want to put it just purely in Persian Gulf kind of disruption volumes, that basically offsets 12 days of Persian Gulf disruption, 12 days, okay? It's, it's, it's like a drop in the ocean. So again, it all comes back to how long is this going to last? So fine, if the Straits for Four Moves are back open and fully operating in 12 days time, we'll, we'll find that maybe that was enough, but I mean, what's happening at the moment to kind of compound all the problems? Because talking about price, it's a back-to-brank crude, remember, it went from 80, 80 odd spike to 120, collapsed back to 83 because of these emergency reserves, you know, being tapped and trumps rhetoric, right? But overnight, it's spiked back briefly over $100 and that's because these, some of these ships have directly been targeted in the Straits, or in the Persian Gulf, I should say. It's kind of dropped back to about 96, as I speak, but the problem is with, with targeting infrastructure and targeting ships from a legal contract perspective, this enables the producer or the shipper to call what's called a force-major declaration, which actually means then, you know, this is a situation that's wildly out of their control and actually releases them from their legal obligation to deliver oil to China, for example. And so what's happening? These ships are obviously now, again, just parked doing nothing. Then it becomes a storage capacity problem. So if you think about Saudi Arabia, producing 7 million miles a day, Bosch, Bosch, Bosch, great, will normally, goes on to the boats, gets shipped off, right? There's obviously a storage facility between underground where the oil is and then getting it out, and then they put it in the storage facility on the port, and then the boats come in and fill up and find, right? But what happens if the boats aren't filling up? Well, the storage facilities increasing in terms of its capacity level and it's now at capacity. So the problem is that Saudi Arabia, they can't put it anywhere. Fine, they have this pipe, East-West pipeline, but can they? I mean, I'm not sure I believe that can cater for 5 million barrels a day, right? So actually, you're getting production cuts. Just when we need production increases to try and bring the price back down, we're getting production cuts because there's nowhere to put it now because the ships aren't able to, you know, unload the storage facilities and ship it over to the customer. So you've got production cuts right in the mix here. So you're getting spikes back up to $100, despite the fact that IEA is saying, look, we're going to tap them out. The reserves for 400 million barrels. I was just having a quick look at floating flotillas, which is the, because it was something I remember during COVID, because if you remember during COVID, obviously, literally overnight, well, just grounded to a halt. And so the most famous flotilla that occurred during that April 2020, just when the globe went into shutdown in March of that year, volumes peaked around 300 million barrels. So what this means is that, you know, you mentioned like you storing the oil underground, it comes out, fills the ships. This would be like basically storing them on sea, invests, yeah, it was, but obviously this is a big, you know, COVID. There's no one around where it's now that would be, you know, that would be the perfect target, right? So as much as targeting infrastructure, and a remaining perspective, you would target, so that rules out, I guess, the use of that, and the original require more defensive measures, I guess, which then just further draws down on your own military, I guess munitions in that sense. So, yeah. And you're right, has that ace card of Trump and the IEA? How have they played their ace card? Right. It is 400 million barrels. If that doesn't work, as in the states of hallmuzers still closed in two weeks, well, then what, each time they play that ace card again, it will reduce in terms of the impact it's going to have on the price of oil. And of course, there's so many ace cards they've got in the deck, because obviously there's a finite capacity to these reserves. And like the worst, worst, worst, worst, worst case scenario is these reserves get completely empty deck. Then we're in a whole new world. I don't know where price goes then. I mean, I'm not suggesting this is going to happen. There is, there is reserves still there, but if there isn't the whole point of these reserves that were started back in the, you know, 70s and 80s, from the following that oil crisis, it was to never allow the price of oil to get out of control again. But if the reserves are gone, I mean, pick a number, $200 a barrel, $300 a barrel, I don't know. So that's kind of your worst case scenario from a global economic sort of impact perspective to this situation. But look, that's a way down the track. We hopefully don't get there, but that's a risk. Well, I won't open Pandora's box and get into the history and geopolitics and so forth, because that's not what we're here for. But one thing we are here for though is then let's translate a lot of what we've talked about into. We've specifically talked mainly about how this is impact in energy prices. But how does energy prices impact as we've sort of touched on before, inflation, and therefore rate expectations, and therefore how asset managers have been positioned for this sort of thing. And where does this bring in then the hedge funds and their exposure to this level of market movement? Well, and so one point to make maybe because everyone focuses on crude oil, right? But there is the natural gas element to this in Europe as highly exposed. But it goes way beyond energy, right? Because one of the components following post-refinary of crude oil, one of the components, and again, a bit of chemical, a chemistry lesson. in here, after cracking crude oil, one of the components is naptha, which I'm sure you've heard of, but many people might not quite understand what's the use case for naptha. Well, it's basically, it's the main feedstock used to make the basic chemical building blocks of plastics. Now, a lot of China's export industry is products that contain plastics, right? And so if you've got no crude oil, you don't have any naptha, you ain't got any plastics. So this, I mean, long term, this goes way beyond energy priced spikes. It could feed into basically the entire sweet physical products that you can think of. I mean, what doesn't have plastic these days, right? So that's something to consider. So when you kind of feed this through to an economic perspective, well, this is an inflation risk situation. And so clearly, I mean, the ECB, we're already pricing a rate hike from the ECB. We discussed this last week. The Bank of England are basically on hold. If you go and look at mortgage rates here in the UK, mortgage rates have spiked above 5% again for a short term two year mortgage. The last time that happened was the Liz Trust crisis and like mortgage providers are pulling mortgage products off the market. And there's proper kind of panic mode going on. And you know, from a fed perspective, well, then, you know, you basically at the moment we're thinking, forget any more cuts. We were pricing two rate cuts in the second half of 2026 to forget that, right? If this situation continues, you know, for even another two weeks, people are going to start to reconsider how long this is going to take. And then that's going to feed straight through to forget rate cuts. We may be even talking hikes, right? Such was the mishandling of the inflation crisis in 2022 when Biden, or well, not Biden, Powell, I should say, well, I'm Biden kind of missed it and said, look, it's transitory. It's not a problem. And they didn't hike rates to contain inflation. And then inflation became a massive issue. So there's that. That's in the back of everyone's mind. Let's not make that mistake again. So I wonder whether if central banks are going to be a little bit more trigger happy on rate hikes if this situation continues, right? So look, there's all that backdrop going on. Now, normally when you get these macro swings, and these are definitely macro swings, right? Normally hedge funds, yeah, this is like perfect hunting ground for them where you're getting, you know, wild gyrations in markets. And you know, this price action is where they're living and operating and generating a lot of their profits. But, but, but, but the speed of some of this move has gone even beyond them, as I was saying, with that six sigma event on the oil price move, right? Actually hedge funds have been really burnt last week. So here are some kind of names everyone will have heard of like Citadel and Millennium and 0.72 and Ballyasne and Exodus Point. All these lock got really hurt last week. So if you think about Millennium, so Millennium Management, they manage $86.7 billion. They've lost around about 1.5 billion last week. Now, that sounds like a lot of money and it is, but they're still up on the year. So right, well halfway through March, right? And even what, you know, a huge whack for them in such a short space of time, they're still up on the year though. They're up 0.75% for the year, right? So, you know, it could be worse. 0.72, they lost about 1.5 billion Citadel's main Wellington fund lost 1 billion. That's part of their kind of fixed income on macro business. Ballyasne, they lost 1 billion. That included 700 million in their fixed income business. So hang on, I'm starting to talk about fixed income here. What is this an oil price situation? Well, there's kind of two schools of thought here about, because look, they're very secretive. You never quite know what these strategies, how they're constructed, but you know, we can guess. And there's a couple of schools of thought as to how this kind of shot loss might have happened. So one's, one's centered around what was called the reflation trade, right? So heading into March, a lot of these macro funds were positioned where they were long oil. So they were betting on a price rise. Well, that seems to have been a phenomenal position, right? Well, right when it's going up, don't forget it hit 120 and then it crashed to 83 again. So we've actually had massive downside moves over the last few days. But long oil, but then short bonds, okay? Short bond prices because they're expecting an inflation, a reflation. So inflation to go back up. So that tends to lead to bond yield rising and bond prices falling. So that's how they were, they were kind of set up. So then when the I, so this was like a perfect trade, right? Or maybe they put it on as this crisis was beginning and unfolding and right, your position well then until stuff like the IEA announced 400 million barrel release and Trump signals the war might end very soon. And suddenly the price of oil goes 120 to 80. That's where they've been really killed. They were in the right trade. They just weren't expecting the reverse so soon and the issue is with these trades. They're quite systematic. So as soon as they start triggering some of their stops, well then they get out. But of course getting out of the trade then just exacerbates the reversal. So I think one of the reasons why you've had such a wild ride on crude oil is because of hedge fund market impact as they get into the trades and then they get stopped out from those trades very quickly. There's one thing, another trade was a bit more technical and purely in the fixed income space, which is a curve steeper trade. So this is looking to try and go long and short bonds of different durations to try and play how the yields at different durations behave relative to one another. So for a steeper and you'd be buying short term bonds, all right? Because you're expecting yields to drop and this is because what if you think rate cuts, right? We're going to cut rates another two times this year. So maybe you're long that short end, long price so that you're profiting when yields drop and prices go up as you get cuts, right? And then you're short the long end, okay? So long the short end and short the long end. But then of course what's happened here with this oil situation is that suddenly rate cuts are off the table, hikes are back on. So short end yields have gone up sharply, okay? That means prices have dropped and that's where they're long, bad news, losing money. But also you're getting a flight to safety into that long end of the curve, which is driving up prices and yields down. So you've got a curve flatener in response to this when a lot of these hedge funds were positioned for curve steepening. Is there no way to have an element of some volatility hedge in play with those trades? Or is it just the cost of holding the hedge over a period which is obviously this has happened, you cannot determine when these things specifically from a time perspective will occur. So the cost implication outside of these are anomaly events, it just wouldn't make sense. Yeah, I don't, yes, I think look, I mean I'm sure there are clever, hedged strategies. The issue you've got is if your main trade is in some of the absolute most liquid markets on the planet, right? Where you can really leverage up and you can have monster sized positions which are hedged in of themselves. Don't forget. So if you're long the two year and short the ten year, you're, that's a relative value trade, you're your market neutral. So that's hedged in of itself. But because it's so liquid and you can put on so much size, I wonder whether these funky extra little hedges on the side are the liquidity in those products is probably not there to kind of get on a full hedge I imagine. Yeah. So is it chicken in the egg then? So as you described it then, that leverage and they are trading such big unprecedented size because these hedge funds are bigger than they've ever been, it's perhaps what's leading to the six sigma move them. Yeah, that's right. Exactly. So the direction of travel for the future is history would say the two political storm will pass the all volatility will pass the hedge funds will get bigger. So the magnitude of future shocks will get greater. Yeah. And that, well don't forget the order currently, the order of magnitude of this shock is not greater. It's the same as Russia Ukraine. 80 to 120. It's the speed. Right. All right. Well, look, let's wrap it up there. I'm sure there's going to be plenty of questions. So if there is, then please do drop us a comment. If there's a point of view or some information you'd like to contribute and share, just drop it in the comments, whether it's on Spotify or YouTube. And don't forget to subscribe to the channel if you're new or you're a consistent watcher, but not subscribed. We've got more of these coming out on a weekly basis and an M&A segment at the start of every week as well. So, peers, a pleasure as always. Thanks so much.