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All right, back to the show. Welcome back to another episode of Forward Guidance. And joining me today is Tony Greer of The Morning Navigator and longtime veteran trader. I've been a longtime listener, get to be the first time caller today. Tony, great to have you on the show.
What's going on? Felix, thanks for having me on, man. It's great to be here.
Yeah, yeah. Great to have you here as well. It's been an exciting Tuesday here in markets.
We had an interesting morning. Really, you know, nobody else I want to talk to that would be better at unpacking this. So we had an interesting morning where we had equities, you know, look.
to be pretty good. Then we got a few interesting headlines around the semis trade. ASML came out with some sales revenue figures that were pretty in the dumps and basically just dropped all guidance.
And that sent them down 16%. And with that, the Q's down over a percent from here. This is just off the back of what was looking like a pretty positive week to start for tech and semis.
We had NVIDIA that looked like it was just about to break out to new all-time highs. So just starting off the top here, I just want to get your high level. perspective on equities as a whole, and then also some of the sectors that you've been looking at. Yeah, sure.
Man, Felix, there's a lot to unpack there. But I think we can start with the semi sector and work backwards since you mentioned that. It was interesting to see NVIDIA trying to break out to new all-time highs and then get rejected by this headline, which sounds like the Biden administration is discussing capping sales of advanced AI chips from NVIDIA and other American companies. So- Obviously, there's the knee-jerk reaction to that that takes about 10% off the price. It also puts a kind of scary false breakout up at the top of the chart.
So maybe this is a turning point in NVIDIA where it gets one last run up to the highs and then it maybe struggles a little bit. I think that the bond market is key to keep an eye on here. The big guys, Druckenmiller's short, Jared Dillian's still a chest-pounding short in treasuries. It feels like we could be set up for that policy error where we wind up stoking a little bit more headline inflation because of cutting rates so aggressively. You know, I don't, it seems like there's going to be a big rotational change as that happens, right?
Like the stock market survived the look into lower rates and the rate cut, the first 50 basis point rate cut and wants to keep going. And it feels like that's the direction that we're going to be heading in in stocks. But it does feel like, like I said, we just got decent non-farm payroll data last week.
We got decent inflation data that was just a little bit hotter last week. So it feels like the market can accept that because the economy isn't so bad and the stock market can stay on its feet. And I think that we still see a rotation into more.
of the commodity trade and, you know, the hard assets that were all thrown out with the baby in the bathwater for that growth scare that we just lived through that, you know, started over the summer and just recently ran right to the, basically into the Fed's rate cut. So that seems like perfect timing for me to be an inflection point where maybe we see a little bit less, you know, we had nothing but semiconductor and tech leadership. Now maybe, you know, gold miners are starting to creep into the leadership.
picture on the year and they've been posting strong gains behind gold. And I think the rest of the commodity sector has a chance now. I think it got way oversold.
I think funds are still short energy, expecting a weaker economy and a really well-supplied market. So I guess I'm looking for the commodities to come to life a little bit and maybe the technology sector to fade a little bit, especially if bonds are a sale and rates are going to trade back up. I don't know that we're in that rotation where everybody has to pile out of tech and into commodities because of headline inflation scares.
That was the 2022 trade, I think it was, where rates were going higher, commodities were going higher, technology was getting beat up because of higher yields and the growth companies were suffering, stuff like that. So I don't know if it's going to be that powerful of a sea change, but it feels like we're getting a little bit of that. where base metals can come to life and kind of catch up with precious metals a little bit.
You know, the dollar had been in a sort of pretty steady path lower into the rate cuts and then kind of reversed after the rate cuts. So that's something to keep an eye on. And, you know, with the dollar reversal.
We've seen some good headwinds in the commodity trade, so it's been kind of difficult to navigate. But I think that's kind of one place that you have to keep your eye if you're in this commodity trade. And that's kind of how the interest rates and the dollar continue to interact with each other.
So if bonds are going to go down, the dollar is going to go up. You're going to struggle with the commodity trade or I'm going to struggle with the commodity trade and sort of have to be on my toes for that. That's kind of how I'm looking at the world right now. You know, I'm still pretty bullish stocks for the fourth quarter.
It seems like there's a lot of liquidity. In the world, the price of Bitcoin is hanging in. NVIDIA is right to the highs. The S&P is carving new highs right up until this morning. So, I mean, that is very constructive price action.
We're trading off of headlines now in the semi-sector, and that's fine. And the market will digest that as well. And like I said, but maybe this is the opportunity where some of the material sectors are just playing a little bit of catch up to the semiconductor sector that's in the lead.
What's interesting though, to me is the week that we got headline inflation that last week come in a little bit hotter. The key move, like the obvious move last week were that a few subsectors of tech broke out to new all-time highs. Cybersecurity, cloud computing, software, they all broke out to new all-time highs kind of simultaneously right as we got through the rate cuts.
So yeah, it's pretty amazing. So to me, it's like, man, you know. We also just had a week where transports rallied 5%.
They're trading at all-time highs. Industrials are breaking out to new all-time highs. So, man, if you want to be short and bearish the S&P, good luck with that, man.
You know, like to me, this thing's firing on all cylinders. It seems like nothing wants to hold it down. And I'm glad he brought up that comparison of what tech did.
Because if we rewind it to 2022, you'd probably get the opposite story on a hot inflation period. We'd see tech down, but tech soared. So it's interesting.
I mean... It feels like, like you said, if you're an equity bear, you're struggling here. There's the dynamic of, okay, we got a lot of rate cuts.
We got a 50 bps cut, but that's going to drive a pump in bid and equities here. But we've also seen over the last week that you mentioned is that probabilities of a 50 bps cut, say in November, have actually been going down. The economy has been stronger than expected.
Long bond yields have been going higher than expected. You would think that that would drag equities lower. But then you have, as you say, you know, it's this economy is better than expected dynamic.
It feels like, I don't know, like it's sort of a win-win scenario in equities, don't you think? Yeah. Well, the rotation, I'm just turning my head to look at the year-to-date rotation because that's really important to me, Felix. You know, we've got semiconductors up at the top of the sector leaderboard up 42%.
But then we've got home builders, gold miners, utility, home construction, financials, all of that's up over 25% on the year. So, man, you know, I mean, you know, we're chasing the semiconductor sector, but it's hard to keep an index down when financials and gold miners and industrials are breaking out like they are. Right.
It's like a cyclical plus tech plus tech rotation with energy lagging. You know, if that's going to happen, the S&P is going to go a lot fucking higher. Yeah, I mean, totally. Especially because, like, you know, the first part of this year was such a narrow rally in these, you know, specific semis. And there was concern that it was just a super narrow rally and was going to fade lower.
But we've actually seen the opposite where the. The baton has been passed and we've seen the rally broaden out. Yeah. So if we look in the rear view mirror, we had the triple growth.
We had the triple scare earlier in the year where there was the yen carry unwind. Nvidia had peaked and backed off after splitting. And the yield curve was steepening into positive territory. So with that triple whammy, the S&P sold off really sharply to 5,200, rallied right back to the highs, right? And then we had the sort of rate cut sell off thinking that.
if the stock market was going to continue rallying while we were raising rates, that it might be reversing and be a sale while we're cutting rates if the economy is weakening. And it turned out we only dipped to 5,600 on that dip and then went right back to the highs again. So you got to look in the rear view mirror and have a lot of respect for the S&P technically for what it has done this year and how it sets up for the fourth quarter.
I think that's a really key. maybe observation to say like, look in the rear view mirror, we just held a steep dip to 5,200 that held the 200 day moving average. Then we held a shallower dip to 5,600 or whatever it was.
And then we just blasted to 6K. I mean, that's a freaking bull market. That is a raging bull market.
And that's, I think, the way that you have to play it. I've been in and out of the S&P a couple of times this year. I wrote it for 10 months on the long side from November 23 to about August.
got out and then got back in again at the, I guess, in the middle of September as we got through the rate cut. And it looked like things were getting back on their feet again. And I'm going which way the market tells me. And when I see cyclical sectors and technology breaking out at the same time, man, the S&P is an easy long for me.
Yeah, 100%. You know, as you mentioned, it sets things up really nicely for the fourth quarter. Obviously, one of the key event risks of that fourth quarter is the election that we're about a month out from here.
So I want to get a few things to unpack from you around this Trump trade and just a level set here on what's been going on is that we've seen, you know, betting markets like Polymarket, I just looked at Trump's at 57% and Kamala's at 43%. That is very different from a week and a half ago where they're almost split. And we've seen some pretty interesting moves in some of the Trump trade.
type of equities. His stock himself, DJT, is up almost 200% off the low. So how are you navigating that dynamic?
And what are you seeing in terms of this Trump trade being priced in right now? And what's driving it? I like to try to stay neutral on elections, especially while they were polling in neutral territory. It looks like the Kamala facade is burning down. a little bit.
And I think that people realize that she's actually campaigning against her own administration's actions kind of thing. So I think that she keeps writing her own Trump commercials, right? And Walz is writing his own Trump commercials saying we can't have four more years of this, right?
So obviously she takes a nosedive in the polls and the market says, wow, the S&P almost doubled under the last Trump administration. We should probably pay attention to that. And I definitely think that that's partially responsible for the next leg, this last leg up here in the S&P.
You know, it sounds like that if Trump does get elected, that it's going to be another low regulation, smaller government, low rate admin. The stock market is going to love that. Like, I think the S&P might go to 7000 under a second Trump administration with a lot of relief that we won't be going down the. the Kamala Harris, you know, unrealized capital gains tax route and, you know, all the other bullshit that she's trying to sell people to get votes and things like that.
So I think that'll be a great relief. And it feels like we're pricing that in now, you know, the, the thing that's not being priced in is, you know, lower yields. I guess we kind of, you know, we kind of just saw that with the most recent treasury rally where we priced in this huge growth scare.
Um, so that, that kind of rhymed with Trump trade stuff, cause he's definitely going to keep rates low. That's if he can keep inflation under check. Right.
I was going to ask about that around inflation, like, you know, long bond yields. I've heard some talk that, you know, we might see those significantly higher under a Trump admin and due to potential, you know, tariff dynamics and inflation. Do you think that's a warranted concern?
Yeah. You know, I do think it's a warranted concern. I think that this, you know, this Biden administration has been spending money like, you know, like a drunken sailor.
like all of their predecessors, right? Like, so we've increased the deficit massively. We've increased credit card debt massively.
You know, we just lowered rates, which could be a potential policy error. You know, we could get back into that scenario like we discussed just a few minutes ago, where it's 2022 again, and the risk of headline inflation being a lot worse than expected becomes the dislocation risk in the bond market. meaning dislocation lower when yields rally in response to inflationary data.
So I think that that, you know, I have that in the back of my mind for things that could take place, you know, next year. But I think that it's going to be overridden by the sort of emotion that will be involved with the Trump victory if that happens for the markets. You know, I think that that was really that was that was his signature move, you know, where he took the markets, the S&P from like, man, where was it like? like 12 or 1300 to like 3000 during his administration, you know, and it was really, really unbelievable move.
And like we said before, something that the markets are starting to telegraph as he takes a new lead in the polls, you know, three weeks out from today. So I guess that's significant. Yeah.
So I'm curious as a trader, how you navigate these major events, you know, navigating what we've been talking about, about what's priced in versus not what's priced in, but also just looking at, I don't know, I was looking at the VIX contracts a month. out. And, you know, they're pretty juiced. There's a lot of people that are pretty hedged here. So, you know, how do you balance these two dynamics of, okay, it's looking like we're waiting towards actually pricing in some Trump trades here.
But there's also a lot of people that are hedged on the other side, you know, with implied volatility just being juiced that much leading into the event night. Do you see a sell the news? Do you see a rally regardless just because hedges are being unwinded? How do you navigate all this? Yeah, you know, I'm looking, I navigate it.
Felix, by looking at reactions, right? And every day and every week is a market reaction to something, right? So the way that I navigate it as a trader is last week, as I see it developing, the CPI is out, hotter than expected, right?
The bond market and stock market can tolerate it. And look what's breaking out, software, cloud storage, right? So what I do is I navigate right into those. positions while they're kind of telegraphing a breakout into.
CPI, PPI, we get CPI and PPI out of the barn, that unknown is removed. And now we've got some nice follow through in those tech sectors. So that's just like one very small example of how I try to navigate this market.
And it's all about taking the trade the market's giving you, right? And if we're going to have these three sectors simultaneously break out through technical resistance to all time highs, that's a trade that I've got to be in. for my clients, right?
So I can jump into that trade and manage the risk because I noticed that something just responded to what happened in the markets, right? And it was a first inning response, right? These three sectors, internet, software, excuse me, cloud computing, cybersecurity, and software, they've largely been consolidating all year, right? They're trailing semiconductors in the tech hierarchy. They're up kind of 15, 20% on the year, maybe 20 something percent on the year, but they've been trailing and now they just had a fresh breakout.
So when I look back at that and I say, okay, we made it through the inflation data, rates are a little bit higher, the stock market can tolerate it and these sectors are breaking out, like I'm in, right? So I've re-added the S&P to my view matrix. I've added the software sectors as a new long to my view matrix.
And now we're just managing that risk. I understand they may back off and these may be the highs, but I'm a trader and I got to be in this. And if it backs off, I'm going to sell it and get out and do something else smarter.
But I have no problem with being in these trades, especially the way the market's been this year, the way the breakouts have been working. The market is just as perfectly functional as it can be right now. Yeah.
And it really feels like it's a trader's market right now. Oh, it's glorious. It's glorious.
I mean, you could. You could have shorted Nvidia up against the old highs and made money. You can buy the software breakout into strength and make money.
You can get long financials as they're roaring into earnings and make money. I mean, this is great trader stuff. You know, it doesn't get any better than this. I think that point about reacting and seeing how markets react to specific events is super key. So I want to shift gears a little bit to what we've been seeing with the Fed and macro.
You had mentioned earlier in the show that there was potential for this 50-bit, Scott, have been a polymorph. policy mistake. And what I find really funny is that, you know, we got a 50 bips cut, but in a way, we actually saw financial conditions somewhat tightened because the long bond has been just, you know, the yields have been surging, mortgage rates have been surging since that cut, which just really shines a light on how important, you know, positioning and where the market is versus what actually occurs.
So do you want to unpack that idea of potential for a policy mistake here on going 50 versus 25? And what's your view on that? Yeah.
And I don't like to go too deeply into this stuff because I'm not an economist. I'm not an economist. Right. I'm a trader and I am a Fed watcher.
So I do have the idea that, you know, seeing them, you know, we were just bad. You know, the last battle that we had was getting inflation from 9% back into the bottle at two and a half, 3%. Right. That took a Herculean effort by the Federal Reserve. Right.
They did an unbelievable job managing interest rate expectations. We rose Fed funds to five and a half percent. leveled them off.
The stock market tolerated it. And in my opinion, the Fed did an unbelievable job battling that headline inflation data. Like unbelievable.
That's why when people say that Fed lost control of the markets or something like that, I kind of quietly laugh hysterically. When you control interest rate expectations and money supply, I doubt you're ever out of control. Yeah. Five-year inflation expectations never got unanchored, really.
Yeah, no, they were totally, totally within range. And so I think that they did a good job with that. And now on this side of it, you know, we priced in a whole rack of rate cuts, right, starting with the first one of September 50 bips, and then we had nine priced in after that, or whatever we wherever we were at the peak, you know, to me, to me, that looked like the overshot, right?
It's like, wait a minute, the economy is weakening, but it's not like one of those scenarios where I've got friends losing jobs left and right, you know, like, it's not that. If that's the scenario and they're cutting rates, and now all of a sudden you see after a 50-bip rate cut, the first upside surprise in employment data in I don't know how many series of data, that's just worth noting. They just cut 50 basis points, and last week we got a non-farm payroll data that was way better than expected.
And you're like, wait a minute, if they're cutting rates this aggressively into the bottom of the growth scare. then they may ignite inflation again and kind of cause that problem to reemerge, right? Where we have the bond market tanking and things like that.
So it's risky. I'm not going to say that they've made a policy error yet. I'm just saying that there are a few. signs out on the landscape that say that that's something maybe we should look out for. And if that's the trade, if that is the policy error and rates are going to go higher and inflation is going to creep back into the picture, then we're back to being long the commodity stocks and basic materials and natural resources and things like that.
Yeah, totally. Well said. Definitely want to unpack your view on commodities further in a minute. But before we do, I just want to quickly talk about fixed income and the expression of what we talked about in terms of macro and Fed rate cut pricing.
in the bond market, avoiding the questions about, economist questions of our star and things like that. But just looking at, again, the long bond yield we've been saying has surged since this actual 50 bps cut. Are you seeing any opportunities anywhere on the curve there for a trade or what's going on there?
Well, the most important thing I think to watch is watch the curve. Like you said, right? There's been a lot of volatility in the last couple of days. The curve, let's talk twos, tens to keep it generic, right?
We had that pinned in negative territory for a record amount of time. Now it's starting to, well, it has begun steepening. It's just into positive territory from a level of like, call it minus 30, minus 40, minus 20 bps for the whole year kind of thing. So with the change in Fed rate expectations, we've got a steepening of the yield curve, right, which makes total sense.
And we're going to hope that it steepens at a reasonable pace that the equity market can deal with. Because what you see a lot during the steepening yield curve and what we saw when we had that big sell-off in the S&P back down to 5,200 earlier this year, what happens is the VIX responds to that. The VIX sees the yield curve steepening out of negative territory where we're predicting recession.
And the VIX says, wait a minute, there is an interest rate change afoot. The VIX says, I don't know what that means for equities yet. We just saw the VIX trade from a sort of median price of 13 up to a median price of call it 19, 20 right now.
So we've got the S&P at the highs, but we're in a higher vol regime because the volatility markets are pricing in. Well, first of all, there are people that are maybe hedging some of the S&P gains. And then we've got just volatility trading higher, possibly. preempting the sell-off from higher levels.
So we're in a little bit of a higher volatility regime. The stock market can handle it. And the bond market is going to be data dependent and very emotional now, where I feel like we're one cut into a cycle, but I feel like weak economic data makes the market say, oh man, the Fed's got to cut a lot more. We're going to go on these big dovish easing trades now. And better economic data says, oh, well, maybe the Fed can take their foot off the gas.
And now we do the growth trades and things like that. So there's a lot of opportunity here. And it's all happening within this really aggressive rotation that's taking place right now. Yeah, look, you've got a lot more years under your belt than me. Has it always been like this in terms of just the back and forth between like, oh, my God, recession prices versus, oh, my God, inflation is coming back and just the volatility in the bond market?
Is this a new phenomenon? Yeah, it always has been. You know, it's always that argument. You know, it always starts with that argument of, you know, is the Fed OK? You know, what does the Fed have to do?
Are they being forced to do something? You know, and it all starts with that. And then it starts with watching the Fed and see how they manage rate expectations and then watching the bond market to see how far ahead of expectations the market actually is. You know, like we got a pretty clear. I guess we got that clear hardcore rally in the bond market when we were pricing.
We were at the highs of it when we were pricing in the most rate cuts. And then we started pricing in less rate cuts because the data changed, et cetera, and treasuries backed off hard. So that's kind of the generational push and pull. And now we'll see what happens in history.
What we've seen is the Fed will continue to cut rates a couple more times. We'll see a little more headline inflation. We'll see the data get better.
And the market's going to say, oh, shit, that's the end of the Fed rate cuts. And the bond market probably sells off. So that's always been the push and pull.
It's the read between the Fed, the bond market, the market's expectations, what the S&P is doing. But one of the factors in the S&P that's like, I don't mean to take it back to stocks again, but one of the strengthening factors in the S&P is like S&P earnings are trending hard up and to the right. you know like they're constantly they're doing better they're rallying you know it's like it's really hard to keep the index down when it's built for success like that right kicking out losers and adding bigger winners and things so yeah totally and at the same time you got analysts that keep downgrading earnings expectations just to make sure they come in line i saw that uh earnings expectations have been just on a downtrend which sets us up for an easy beat coming up here Yeah, exactly.
Exactly. Everybody lowers their expectations to in line with prices and then everybody's got a new upside target. And so we'll start the whole game all over again. Yeah, totally. Cool.
I want to shift gears into, it is really fun, into commodities and what we've been seeing there. So just a level set on the background here over the last few weeks, looking specifically at oil. We saw a pretty big juicing of geopolitical risk premium into the oil markets off the back of some Middle East concerns that were occurring. We saw oil get up to 80 bucks.
And we've seen that refer pretty significantly. We're back down to the range lows of roughly $70. What are you looking at in the oil market?
And where are you at in terms of geopolitical Middle East concerns? Do you see much premium baked into it? Or where are we at?
That's a good question. I don't think that the markets are... I don't see much of a Middle East risk premium in the markets at $70, $75, or $80, right? I consider risk premium like we saw when... Russia pushed back on NATO's Ukraine invasion, right?
And oil prices went to $130. Like that's oil premium to me. That's like, nobody knows which way the next 20 bucks is, right? That's why oil trades with a premium. At $75, I think it's pricing in precisely no activity between Israel.
The market to me is saying, Israel, you say you're striking Iran and their refineries, bullshit. That's what the market is saying right now. It's saying bullshit.
No, you're not. You're lying. You're talking up a big game. Oh, here comes another surprise attack that you're going to advertise in the newspaper. Okay, I doubt it.
So that's what the market's saying now. I haven't been extremely bullish in oil. I haven't, like it's the one sector that's been the drag because it seems so well supplied, right?
It's kind of this, you know, there's plenty of liquid supplies, diesel fuel, gasoline, like those are the fuel is actually what's leading the oil complex lower. There's plenty of diesel fuel, spreads are loose, refiners are well positioned. They have more diesel fuel coming out than they know what to do with and that price is dragging lower, kind of keeping the oil market very, very much capped. There's no rush for refiners to buy early because there's plenty of supply in the markets and the inventory data continues to show that.
So, we're kind of in this push and pull between a well-supplied market and an economy that's not booming. And, you know, maybe there's maybe maybe the Middle East tension is keeping the prices in the mid 70s rather than into the high 60s or something like that. That's kind of pulling a little slide on the downside.
So maybe oil likes these prices around here, you know, and I'm not going to fight it much. I still think that there's a lot of opportunity in the oil stocks. I think that if Donald Trump gets elected, that the XLE sector is going to be one to own, because I think that. I think that there will initially be a knee jerk reaction lower if Trump gets elected because he's a drill baby drill guy. Like we might get a 15 we might drill 15 barrel, 15 million barrels a day under a Trump administration that would likely send the price of gas lower.
Even where, you know, the economy really thrives with dollar 50 a gallon gasoline. I could see that scenario happening, but I would imagine that the energy companies are going to kind of back off with that. And then absolutely take off because they're so set up for success right now, you know, with really clean balance sheets.
And they've been saving up money by not doing any IT spending because they're in an administration that hates the industry. So they're not going to go invest in it during this administration. They got their hands in their pockets and they're going to wait it out.
And then if, you know, God forbid, there's a second Trump admin, I would imagine that they're going to open the floodgates on IT spending and really, really improve their. you know, earnings efficiency and things like an operational capacity and things like that. And I'm just, I get really bullish that sector.
Yeah. Would you go as far as doing something like a long XLE and short crude and just like a play on profitability of these companies as they get friendlier to, from a friendlier administration? Yeah. You know, only because it sets up for that sell-off in crude oil.
If we do get a Trump win, you know, that I would imagine that people are going to expect gas prices to go lower because that's the way he rolls and rates to go lower. And so. Yeah, I do think that that might be an okay trade. I usually try not to get that cute with the markets. Like, you know, like I'd probably just put on the XLE long and try to manage it against the way crude oil is trading.
But I totally think there's opportunity there. There's opportunity there just like in base metals and we'll go whichever direction you want. So how do you manage in other countries in terms of their impact on oil, specifically China? So we see that, you know, China's trying to stimulate their economy.
To me, it feels like a lot of the... upcoming price action in oil is going to be dependent somewhat of what actually happens in China. Do you think about it in those ways? Yeah, you got to have your eye on them.
Obviously, they're one economic data point away from moving the oil market a couple of percent, right? A strong number is usually good for oil, a weak number is usually bad. It's the same as us, where the two 800-pound gorilla economies out there that one sneezes, the other one catches a cold, so you kind of have to be. kind of have to have half an eye on China at the very least to see if their data is just coming in in line and how the economy is doing in terms of trading commodities, since they're one of the biggest consumers.
But like I said, the market feels kind of boring and balanced right now. That's the one commodity that's really not exciting me. Yeah. Okay. So what is exciting in the commodities landscape?
Gold, man. Gold. Gold is fucking bull market. It's been a beautiful breakout. Yeah.
I mean, we've tacked a thousand dollars almost onto that breakout through 1800. It has been so orderly that if you bought the breakout, you're never out of the money and you sleep like a baby at night, right? Like the gold, if it pulls back, it pulls back to 20 and 50 day moving averages, right? Not even to 200 day moving averages. It's a trending bull market. Central banks are buying.
Saudi Arabia is buying on the sneak. There is nothing but fiat currency debasement everywhere you look. With our deficit flying to new highs, Europe spending like drunken sailors, the case for fiat currency losing buying power never goes away. And it's even stronger today than it's ever been. And now you feel like as a guy that's been bullish gold for years, you're like, oh, finally, everybody gets the trade.
Yeah, yeah. Meanwhile, I think it should go to 5,000, but I'm probably really early and way too optimistic with that idea too. That's fair.
So, you know, what's your time horizon on gold? Is it just, you know, riding it for the entire global Fed easing cycle? Or what's your perspective there? Yeah, I think gold is still breaking out beautifully.
You know, it's spent so many years consolidating that it's going to probably spend as many years rallying now. And I think that every analyst on the street has a price target that's too low, right? Like if we're blowing through anybody's price targets, people tend to put super price, super conservative price targets on gold.
And because they only think it can rally $100 in a year. And I tend to think that we may get to a point where gold starts rallying like Bitcoin in 2020 and just starts going up faster the higher it goes. And I don't know, maybe that's a tail event and maybe that's not entirely likely, but with the way that it's trading, the price action is perfect. The reaction to headlines is perfect.
And that could go on for a really long time. And that's kind of the mode that I'm in now with gold, where I think I have really high hopes. I think it gets above 3000, maybe by the end of this year, you know, or at least early next year, and then we'll see what happens.
But I think that there's going to be a day in gold when it's trading like panic buying at the top of this rally. And then eventually we'll get to a point where that gets way over its skis and it's a sale. But I think we're going to see that first.
I really do. How much do you think is baked into the gold price in terms of concerns for U.S. and the fiscal situation? As you mentioned at the start of the show, Druckenmiller short bonds for similar reasons.
How much do you think is that? How much is it just like Asian markets? I know I've been bidding it pretty hard.
Yeah, I think it's the kind of Druckenmiller trade where he's expecting in either administration, and he made this comment when they were neck and neck in the polls, but he made the comment that either admin and we are heading towards massive. fiscal irresponsibility. And so I guess he's thinking about low rates, money printing, the whole thing. And that's why he's short treasuries, which to me is a pretty good scenario for gold.
So I still think that gold's best days are ahead of it. I try not to do too much cheerleading about it because that usually means that I should be making a sale. But I don't have a, I have only, all I have on is a core position in gold that I've had on for years and it's not likely to change much.
I, I, I, from time to time, upsize it and trade out and upsize and trade out, but I have not, I haven't upsized out. I have traded out of my last upsize at like 2,200 or 2,300 and I haven't upsized again since then. So it hasn't given me a real chance to dig my heels in, in terms of a dip in price. So I haven't been able to get big again.
And so I'm just kind of riding with a core position. That's not going to, it's kind of something I don't trade. So.
Yeah, nice. I'm just rooting for it to go up, yeah. Yeah.
I probably already know the answer to this question, but I'm going to ask it anyway. If you had to choose between the Druckenmiller short bonds trade or the buy gold trade, which would you choose if you had to only pick one? It depends on what time frame, certainly. But I think that there might be some real bang for the buck in the short bond trade.
And it might happen a lot faster than a gold rally. It just feels like the bond markets are coming from a place where they were mispriced on the upside. Yeah. Right.
Rates were too low. We were pricing in way too much of a growth scare. Like it was like a growth shit your pants, you know, like it was everything was going to stop. And that's just not the case in the U.S. economy. So since I feel like we're set up for that policy error where we may be back in the scenario where we're watching headline inflation data for a number that's.
hotter than expected and could derail the bond market, I think I'd probably go towards that trade a little bit more, quite honestly. Interesting. Okay. That was not what I expected.
So I appreciate that. I'm unpredictable. I'm totally unpredictable.
There you go. Love it. What are you seeing on the other metals, silver and copper? What are you seeing there?
Are you as bold up there? Silver, I have a very specific view, and that is that it's a long for the gold ride. Silver is to me much more of an industrial than precious metal than it used to be.
Now that it's such a huge component in solar panels and some of the other alternative energy, and it's just way more of an industrial metal for its uses than it is precious. And everybody that I talk to is also long and bullish silver and upset and want a reason for why it's not keeping up with gold. So that kind of tells me that everybody is kind of long silver, like, oh, gold's raging. Silver is going to eventually rage. And I think that...
while it may make sense to old own some upside calls or something that won't get you killed in silver it's not the trade that i'm chasing it's not the trade that i'm chasing down i'm chasing the gold trade down and if silver goes great but silver's 32 bucks and silver was 32 bucks when gold was 2 000 yeah so you know where's the trade there you know if if silver was keeping up it would be a 50 item right now and it's not so that's my view on silver that it may pop through this kind of triple top that we've developed now, but the trade is gold in precious metals. And in terms of copper, copper is like a read on the Chinese economy and not much more to me lately. You know what I mean?
It's also got a huge dollar tailwind to it. When the dollar sells off, copper rallies. When the dollar rallies, copper sells off. It's kind of the front base metal that leads the charge in whichever direction. I lean bullish because I suppose that I feel like we just spent a long time pounding support in commodities and especially in base metals.
I feel like the dollar trajectory is most naturally lower and that that means higher base metals as well. So that's another reason that I can get on board. And if we're kind of at the bottom of a growth scare in the economy for the US and in China, and there's any upticks there, then that should be good for copper too.
We're kind of in the upside of the copper range where it can actually get exciting and bust through LME 10K. And if it does that again, we just banged our head on it and back and filled a little bit in the last couple of weeks. But I think if it gets through 10K, it's going to keep cruising.
And if we stay in this scenario, in this range with rates in the dollar, I think that that's what will happen. You mentioned that you feel like the US dollar is destined to go a little bit lower. But it's been interesting that ever since that 50-bits cut, the Dixie's just been going higher and higher here. At the same time that we've seen some marginal dovishness coming from Bank of Japan, which has been leading to the yen to begin to weaken again as well. Do you have any perspectives and forecasts on FX or do you think, you know, the big moves have been made in terms of the yen and it's just sort of in the doldrums from here?
Yeah, you know, FX trading, those are speedometers on my dashboard. Those aren't risk categories for me, right? I'm just kind of watching the dollar and the euro and versus the one kind of seeing the general direction of the dollar.
That kind of gives me. the indication as to whether I should step on the brakes or step on the gas of my commodity trades. So if I see the dollar is vulnerable, I'm probably going to try to piece together a little bit more commodities in my portfolio. And if I feel like it's going to short cover, I'm probably going to get out of some of those quick, especially the mining and sensitive stocks like that.
But that's it. That's it. I have to say that I'm being very opportunistic and short-term with them. You know, it's funny.
I want to circle back. You mentioned this story about the gold versus silver and gold is the pure trade but people want to get excited and you know get some higher beta and go chase silver but it's just not doing what it should do that makes that sounds a lot like what we're seeing in crypto and i know you've been in and out of some trades there but when i look at at bitcoin and ethereum bitcoin is the classic you know currency debasement type trade but then people want to get excited and want to chase and bait and go buy ethereum but ethereum is quite similar to silver just has not done the run that many have expected Where are you at in that world? Are you interested?
Are you just on the sidelines? Where are you at? Yeah, I've got a close eye on Bitcoin, technically, I would say. Just from a perspective of this thing was left for dead on the table twice and came back to life. And so that leads me to believe that it is not going away.
And in my Slack channel, we pay really close attention to the flows. And the corporate inflows are... unbelievable in no uncertain terms, right? So they're serious, serious players making serious commitments.
to cryptocurrency. Broadly speaking, it looks like they are definitely a risk asset in the US where when liquidity is high and pumping and Nvidia is on the highs, like Bitcoin is on the highs and things like that. So I have respect for it there. And it looks like to me, it's coiling up for a huge move.
We had that initial explosion to 70K the second time, right? And then we... consolidated between 50 and 70 but the longer this thing consolidates up near the highs the more i want to buy a breakout into new high territory it's interesting because i know you're looking at and it was i was looking at it the same way as it looked like those first two moves was kind of painting a bit of a batman signal that was not looking very good and i was in your camp dude i was like oh man this looks like a failed breakout um but it seems like instead we've just been painting this flag pattern so it sounds like you're you're sort of evolving your view on that perspective Yeah, you know, it goes along with the idea of, you know, my permaview on fiat currency debasement and weakness, right?
And so Bitcoin seems to be reacting well against that as a hedge to that. And I think, you know, just like we said, technically speaking, it's been consolidating for so long that when it breaks, it's going to break and go. And so it just seems like if it can go from 70 to 150k or something like that, that that's a trade I want to be a part of.
That's for damn sure. Okay. Tony, my last question for you as we wrap up here, we've been pretty bowled up on a lot of different sectors. Is there any substantial bearish arguments slash, you know, what would you be looking for to turn bearish here on any of the aspects we've talked about? I'm with the bigger guys like Druck and Jared Dillian in their sort of bearish bond camp.
You know, like I said, it feels like we may be set up for that policy era where we see more inflation and bonds can back off. So you can call me a bond, cautious bond bear. That's fine. I still think the AI.
craze is going to kind of, you know, I feel like we're pricing in like the finest moments of AI now and maybe that can back off. Like, especially if this run, this NVIDIA run to the highs is squashed by this headline and that turns out to put another top on the chart, like the whole semiconductor sector can kind of deflate a little bit. And if we're going to see that kind of scenario where we have higher yields and a sell-off in bond market.
then that's going to be the center of the breakdown in technology if rates go higher, if you ask me. There's still a lot of retail length in NVIDIA. There's still a lot of length in semiconductors.
Obviously, it's the best performing sector on the year. So those are two things that I kind of have in mind for the next, kind of looking through into the next quarter and seeing maybe we get that point of headline inflation, bond sells off, rates go higher, the tech market gets beat up a little bit, cyclicals can survive. That's kind of the way that I'm looking for this to pan out in the fourth quarter. Nice. Yeah, fair enough.
I think that's a super solid framework. It's really great to get you on the show, Tony. Where can people go if they want to find out more about you? Yeah, sure, man. I'm on Twitter at TG Macro.
TGMacro.com is where I have some examples of my newsletter. I do a great podcast with Jared Dillian called the Macro Dirt Podcast. You guys are the best on that. Big fan.
Thank you. Thank you, man. I appreciate that.
I really do. We're getting really rave reviews and we're grateful. to people that are commenting and being so encouraging to us.
Like we've got people telling us that it's their favorite podcast already. And I'm really humbled by that. But Jared and I work really hard on our trade. Like we both watch every single episode. We prepare for each episode.
We take notes. We put, you know, we have graphics. We have discussions about what we're talking about. And we're trying to do a really good job.
So that's a good place to kind of get to know us and, you know, see if you want to get a feel for our newsletters, which are knock on wood doing great. And, uh, I would say that's it. If any of your subscribers want to email me, you can just email me direct at Tony at TG macro.com. I'd be happy to answer any questions anybody has about any of my products. And I've got a great Slack channel of TG macro members, and we've got about 150 red blooded hungry traders in there.
And, um, that's been a great addition to my portfolio of kind of business offerings. I've got a lot of great people in there putting in a lot of really useful information during the course of every day and it never stops. So that's been.
Really, really cool part of the business development this year. Nice, man. That's awesome. Yeah, communities are where it's at. Well, look, it's great to get you on the show.
That was a ton of fun. Thanks for joining us. Great interview, Felix.
You did a great job with that, man. Thank you very much. Thanks, man. Appreciate that.