Are Traders Front-Running Trump’s Announcements?

Hello and welcome back to the Market Maker podcast. It's the end of the week and yeah, busy week, both markets and for AmplifyMe. But in this conversation, going to touch on really two major themes. One is I saw on Friday a headline, $200 barrel of oil, here we come. So that sounds punchy, but Piers, I know you're always one to say the press like to sensationalize this, but I want to know why people are talking 200. And in fact, it's not just sell-side banks pushing 200 here. It sounds like there's a little bit of stress testing going on at the White House here, which also feeds then into our second story, which is more about communications, comms leakage, perhaps in regards to how markets can move to sensitive information. And there certainly was a very interesting move that happened in the commodity market earlier in the week. And then why don't we start from the top? What's just been happening in general summary of market conditions? 'Cause I know there's been some, what otherwise theoretically would be some unusual movement.

Yeah. I mean, like, well, we're kind of heading into obviously the end of the trading week here. We're like about 12 minutes off European close on the Friday here. So yeah, obviously one of the key markets for kind of monitoring this whole situation is obviously crude oil. And actually, just as I'm speaking, it's edging another new high for the session. We're actually just about to test $112 for Brent, which actually, that's quite notable because we actually haven't seen $112 since March 23rd now. So yeah, really the end of last week, I would say, right? So we've got this scenario where obviously we've had wild swings. We'll talk a bit about it obviously through this episode, but wild swings up, and down as we're getting escalation of this situation and panic that the Straits of Hormuz is going to stay shut for a long period. Then you're getting Trump threatening XYZ, but then you're getting him rein in and say, okay, actually fine, I'll back off that threat. Then you get a couple of ships getting through the straits and there's all this back and forth, which is creating a huge amount of volatility. But what's happened this week, I would say, or certainly the second half of this week, we've had a more steady, less volatile, but just a more steady climb. We, you know, $100 has been a really, really key support level over the period of this week. It's been tested on a number of days and has held pretty firm. And ever since really Wednesday, we've had a pretty steady move to the upside from $100 now to $112. Be interesting to see where we get to into the close because the, you know, The top is about $119 we got to off the back of this initial flare-up a couple, well, 3 weeks back now.

Just on that point of the price activity as you described, you as a trader before sitting on the desk, how would you be thinking then going into the weekend?

Yeah, I'd be, well, you do not want to be short this market going into the weekend would be my strong advice to anybody who's listening to this because Who knows, right? Who knows what might or might not happen over the weekend? Now, Trump has pushed his deadline to Iran out to the 6th of April. We'll get into the details of that in a minute. But obviously the 6th of April isn't, that's another couple of weeks, right? Or at least 10 days or whatever it is. But anything can happen. So over the weekend there could be a strike of some oil production infrastructure, for example, that's kind of what you're looking at. And if something like that occurs, we could open, you could open anywhere. On Monday, this price could open, well, yeah, maybe $200. It's not beyond the realms of possibility. So you don't want to be short that thing. Yeah, I'd be well out of that market. I mean, you could say, well, oh, why shouldn't you be long then going into the weekend if you think there's potential for a big spike higher? The problem is you're also at the mercy, you know, you're one Truth Social post away from a $20 drop. So it could go either way, right? So yeah, it's incredibly unpredictable. But look, it's not just oil, obviously natural gas. I mean, all these markets up and down, up and down, but they are finishing the week up. So crude oil, it doesn't sound very sensational, but actually Brent crude is finishing up. If we closed right where we are now, it would be up 3.5% on the week. That's it. That seems quite steady. It's just been wild gyrations. But again, natural gas is closing up, but 2.6%, not not particularly much, but obviously it's up 30, 40, 50% over the course of the last few weeks. But then look, it's not, obviously it's not just the energy markets. Then step away and have a look at stock market, global stock markets into the end of this week have come under some real pressure. And again today, so the S&P 500 is down about 1% today. NASDAQ's down 1.1%. That's adding to losses from yesterday. So you actually got down weeks here. And look on the month, and remember that this situation kicked off back in week 1 of March and here we are about to close out the month. Well, on Monday I guess, but the stock stocks are down 7%, US stock indices are down 7%, which I don't know, doesn't seem a huge amount to be quite frank. But the problem we have, or the problem investors have, if you are like a long only portfolio manager, the problem is that stocks are down, but also bond markets are down. And so you go and look at US bonds, UK bonds, all these government bonds and a lot of corporates as a result are also down. And so we got this quite unusual situation because out there in the investment world, we often talk about this concept of a 60/40 portfolio. This is like what you call a balanced investment portfolio. And this is considered to be a nice diverse set of investments that over the long term, you're talking 5, 10, 20 years, whatever, that kind of mix, that blend of assets in your portfolio is considered to be optimum. And so here, generally speaking, you know, you've got an inverse correlation between stocks and bonds ordinarily. And so whilst you have a big major crisis blow up and stocks get dumped, well, normally you're protected or at least hedged a little bit 'cause the bond markets go up and kind of, that kind of offsets some of that losses you're taking in the equity portion of your portfolio, right? Also that fixed income side that's generating income as well. But look, 60/40 thing is long-term thought to be the, the best mix. The problem is both are down. So this is unusual. We had this in 2022. 2022 was a nightmare year for kind of asset managers, and we've just had a big dose of a reminder of what that's like in this month. And so this comes with a particular mix of situ— of scenarios where you are getting economic risk, but also inflation risk, right? So it's the inflation risk that's creating the economic concern. So when you have that, you get this double whammy. So the, you know, on the stock side of your portfolio, it's a bit more obvious if the economy's going to slow, companies would expect sales to drop because consumers are spending less. And then that feeds into less profits. And so you should expect share prices to drop, right? That's obvious. But if it's an inflation-driven crisis, well, if inflation's on the way up, which is what we're worried about now, remember, because energy prices have spiked and how that's going to feed through not only into energy costs directly, but then as we were discussing on previous episodes, the cost of stuff like fertilizer, which might then feed into the cost of food and stuff. So we're worried about inflation going up. So there then the central banks might have to hike rates. And in this hawkish situation where inflation's up, maybe interest rates go up, well then bond yields rise and bond prices fall. So it's this one particular setup where you get bonds and stocks down. And so we had this through 2022 when we had the post-COVID inflation crisis, and we're getting a big dollop of it again right now.

So from a reality then, let's say I'm on the desk or you are on the desk and let's role play and say I'm the client.

Mm-hmm.

I'm your rich half-Chinese Irish oligarch going, Mr. Curran, Why is my portfolio just dropped 7%? Is this a period where the asset manager's job to offset outflows, i.e., me just saying, right, I want out, or something dramatic, is there is no real immediate antidote to this other than try to soothe my investor concerns? Is that the approach?

First, as you are my client, the makeup of your portfolio that I am managing, firstly, we go through that kind of KYC process, know your client, and we figure out what you want from your investment. So actually we start with, you know, so, you know, how old are you? And well, actually, actually, hang on, wasn't there a birthday? Wasn't there a big birthday yesterday? Or sorry, was it yesterday or Wednesday? Yesterday, wasn't it? Mm-hmm. Certain Mr. Anthony Cheung. Oh yeah. Yeah. Big birth. Well, actually, I'd like to put this out to the listeners. If you're watching this on Spotify, and actually, and if you can just turn your head to the left. Yeah, you see there's a little bit of grayness going on there.

I know, I've got to trim the sides because I thought this question might be coming. So I've hidden the grays.

I'd like to put the question to the listeners. How old did Anthony Cheung turn? On Thursday. On Thursday. That wasn't a spoiler.

That was a spoiler.

That wasn't a clue, by the way.

I wish I was 30.

Get it in the comments. I'm very interested. Anyway, based on where you're at in life, your income requirements, your liquidity requirements, based on a whole load of stuff, right? We build your portfolio. Fine. You're phoning me up going, oi, where's my money gone? Because your portfolio has just dropped in value. Okay. And actually, on average, I think I was like, did I give you the stats? I think we're down like 7% stocks. And it's about 4% down on the bond market side of your portfolio, right? So you are like, what, what's going on? Obviously you would be monitoring the general news flow. So it's not like clients aren't aware obviously of what's going on. So it's just a matter of two things I would say. Firstly, explaining the mechanisms, you know, it's really translating what is happening in the Persian Gulf and how does that translate through basically what we do on this podcast. How does that translate through to market reaction? So I'd be explaining that to you. Then it's about just reassuring you that the 60/40 thing, whilst it hasn't worked in the last 3 weeks, look, just stick with us. You know, the long-term data tells us that this is the appropriate and correct setup for you over the long term, right? And we're not just punting around your money for a few weeks. You are going to be our client for a decade. 'Plus.' So bear with us, you know, there's always volatility and turmoil, but stick with it.

Who, I don't know if you know the answer to this question, but who would be the actual person that would be having that conversation with me? Is it a salesperson? Is it a, do you have client relationship account manager or is it the PM? Who's communicating that? And how are they communicating? Is it dependent on the net worth of the client's investment depends on what type of treatment they would get. And is there then more broad comms that would go on a research basis going, this is what's happening, trying to hit the mass market almost of the bigger client base.

And then, so there's a multi-pronged attack here. And look, for these asset managers, don't forget it's not just high net worth individual clients. We'll, we'll also have institutional clients, which might be charities or pension funds or sovereign wealth funds, right? So It's different, the communication flow, depending on if you're an institutional client or a high net worth. But let's just say on a high net worth basis, it's the portfolio. Yeah. And again, obviously the more money you've got under management, well, the more one-on-one, you know, what you might call white glove service you'll obviously receive, which of course makes sense. But generally it's the portfolio manager that will be looking to try and communicate to clients, obviously as as often as possible, which will be one-on-one. They'll definitely want to do a one-on-one meeting at least once a year. Okay. Because they might be running, you know, 100 portfolios, right? So, you know, there's only a certain amount of time in the day. But I was asking one of my friends who's a portfolio manager, he kind of very broadly said about 40% of his time. So he's a PM, 40% of his time is talking to clients. Which I was always quite shocked by. But when you break it down, if you've got 100 clients and they're all needy, especially when this, what's going on in the last couple of weeks, it's a lot of time to service that. Obviously there'll be support and help. So from the wider team and we'll be sending out communication, general communication. So the asset management firm will be sending macro updates and market reports, and that could be once a month or definitely once a quarter. So that's kind of going out and that's just obviously explaining what's happening in markets, but talking about why we have the strategy in place that we do and that kind of stuff. So there's that general thing going on and then you'll have relationship managers, maybe there'll be email newsletters and all that kind of stuff, right? But I would say in the end, whilst they're consuming that information flow, you know, ultimately, especially when your money's going south, then yeah, they're going to be on the phone, right? And this is where the portfolio manager is going to be earning their crust by just soothing, laying concerns and explaining the situation.

Yeah, I can definitely validate that split, proportional split of your job because it was really interesting. We had a guest, Alfonso Picatelli, I think his surname is. I always get it, don't get it quite right, but he was the guy that he was a PM at ING. And he said actually he just spent increasingly more amounts of time talking and not managing his portfolio.

Right.

To the point he actually spun out and started his own fund, of which he's now growing. But I guess it almost feels like a natural life cycle. The more AUM you have, probably the more you have to be somewhat of a frontman talking about it and explaining the rationale.

Yeah.

So it's an interesting cycle. One other tip for anyone listening, obviously one of the big players in the market, BlackRock, you can in the public domain just punch into Google BlackRock weekly market commentary. It basically sits within BlackRock's Investment Institute, which is a publicly open platform, right?

It's not behind a paywall.

It's no, no paywall. And every week they give you their latest insights in like a really compact little 5-page PDF.

That's a great hack. I like it.

Yeah. So good for investors, but also good for students, obviously. But look, let's go back then and talk a little bit about this oil story because we started at the top talking about oil potentially hitting $200 a barrel. So where I saw this was Macquarie Group said they're looking at a, I love this. This was like the, a rule that I was reading once. There was a book about politics. And how politicians, the data suggests that whenever they have a policy, it's like the 60% rule or the 40% rule. It's kind of, it's non-committal in either direction. And if you get it right or wrong, you can claim that you were on the sort of right side of the argument. It felt a little bit like that when I was reading this. And Macquarie said that they're looking at a 40%, 40%, 4-0, 40% probability of $200 a barrel of oil if, so condition, the Strait of Hormuz remains shut through June.

Yeah.

I mean, that seems almost pessimistic, not overly bullish. I mean, if it was shut for that long, yeah, I mean, surely, I don't know, my initial thought would be it'd be a lot higher than that, but—

Well, it's hard. Well, this is the problem you have as a trader. How do you even begin to guesstimate? Because let's be honest, that's what it is. How do you guesstimate where price might go to? There is some precedent here, right? So back in 2008, like just before the financial crisis kicked off, it was actually June 2008, right? And many will remember that the '08 crisis, the credit crunch, the financial crisis really It was coming for a while, but the real catalyst was Lehman's going bankrupt. That was the last weekend in September 2008. Just go back, literally a few months to June, and oil was smashing and spiking through the highs. We were worried at that. The panic then was about this concept about peak oil. I won't go into the details, go and Google it if you're interested. But it was essentially, we thought we were at the moment where demand for oil was basically outstripping supply globally and looking into the future. Anyway, there was a big panic. And it got to $145.66. Okay. So look, we're not there yet, obviously, and we might not get there. The peak so far is $119.50. Okay. So $145.66. However, that was in 2008. So you gotta inflation adjust that. And basically if you inflation adjust it, then you're looking at 1.45 in 2008 is basically equivalent to $216 a barrel in today's money. So that right there is a, and look, there's lots of people doing this very basic back of the envelope math, right? Going, well, where might oil go to? And I can definitely tell you $216 is a number that's written down on a lot of notepads. Okay. Which means then from a behavioral point of view, that becomes a real target.

Okay.

I'm talking Brent crude here. So that becomes a real target. It wouldn't surprise me if And it might not happen, right? But let's say we did get a wild spike to the upside. 145 is key cuz that was the '08 high. Then it's 216 because that's the inflation-adjusted '08 high. So those are two really key numbers I would say on the way up.

Can I ask for some clarification on something? Cuz one thing I read in the research was this terminology demand destruction.

Right.

What do they mean by that in simple English?

Well, it basically means that price, this is the thing, the price of energy cannot just keep going up. So if you go, ah, it's going to hit $216, but then it'll hit $300, then it's going to be $500, then it's going to be $1,000. No. And the reason no is because there's two sides of the equation for the price of energy and the price of anything. and that is supply versus demand. Okay. And ultimately here, what we're talking about right now is a supply problem. We have supply risk and there obviously the relationship with price is inverse. So if supply drops or if the risk of supply drops, right? Well, then price goes up. That's where we're at. But what about the demand side? So at the moment we're assuming demand's going to stay constant, but if oil goes to 200, 300, 500, demand ain't gonna be constant because we won't be able to afford it anymore. So what it'll do is it will drive a sharp recession, and that sharp economic recession will mean demand for energy drops, which then is a natural counterbalance to the supply dropping. And so ultimately there is, and I don't know what the number is, I'm not clever enough to pretend, but there's a tipping point with price where at some point the higher it goes, well, it can't, you hit a ceiling where you get that point where, yeah, any higher than demand destruction becomes the dominant force, which ultimately brings the price back down.

Well, look, there's a couple of other layers to this onion, as I heard you say in a session earlier this week. So let's get onto some of those, 'cause that will further help, I think, unpack what we're talking about. And one of those was the news that's happened this week, which was the White House announcing that Iran allowed 10 boats through as a goodwill gesture. And then also the fact that Trump extended the deadline for striking Iran's military infrastructure. He's done it twice. There's a new date. Are we in taco time yet?

I mean, look, he keeps backing off. Is it right to call it taco? I mean, I'm not quite sure how you've missed it if you haven't heard of the taco thing, but this is Trump always chickens out. Kind of goes back to the tariff sort of situation nearly a year ago now. In fact, actually, there you go. It's the anniversary of Liberation Day next week. 2nd of April, if I'm not mistaken. Anyway, this is where Trump threatens everything. And then ultimately, as soon as markets react negatively to the idea that this threat is going to be carried out, that Trump backs off. Basically, as soon as the markets basically, he uses markets as a keeperometer, right? And if markets dump, he is like, all right, fine, I won't do that kind of thing. So this is that kind of taco thing, right? But so with him extending the deadline for Iran to open the Straits of Hormuz. You know, he's extended it, I think, 2 or maybe even 3 times now. I can't remember. So it becomes a little bit of a, you know, it obviously diminishes the threat surely in the Iranians' eyes if the deadlines aren't actually deadlines.

Do you think that there's quite a lot of confrontation you would imagine probably happening between two different camps close to Trump at the moment. There's probably one who are thinking more of the political side of it and the military side of it. And then there's others thinking more around the economic implications of this. 'Cause one of the leaks, and we're going to talk about different types of leaks this week, was that the Treasury Secretary, Was reportedly, and again, this is when you get the kind of sources comments from the financial media, was reportedly said to be worried about the growth rate and the $200 spike in the price of oil, as we discussed. That quite swiftly got denied and called fake news by the White House spokesman. But there's, there's very rarely is there smoke without fire and not to cause, you know, the alarms to go off, but it would be prudent planning, right? That's the role of the Treasury Secretary to be running these forecasts with his teams, surely. But do you think then that it would seem a bit odd though that they would be expressly doing that and it's public knowledge whilst Trump's trying to push quite a hard stance? So there's obviously some concern there.

Well, this is why it's so difficult for Trump. Even though Iran in and of itself, and given what's happened from a military perspective, that's not a fair fight, right? US versus Iran. But the leverage Iran has is obviously the Straits of Hormuz and the energy supply to the world. So Iran has an economic weapon. And ultimately here's Trump's problem because yeah, those The defense guys in the White House are like, right, why are you kind of backing off these deadlines and why are you making concessions? This is undermining our kind of position of strength. Whereas then you've got the Scott Bessant Treasury Secretary going, hang on a sec, look, the price of oil at the pump, at the petrol pump, and actually this week it got back above $4 a barrel. This is like a really key psychological, really negative political situation when You know, consumers are turning up to fill up their cars and it's $4 a barrel. If you, if you've got a diesel engine, it's $5 a barrel now. Right. And this is like political suicide.

We're talking gallons here.

Yeah. This is gallons. Yeah. Yeah. Yeah. Yeah. Not, not, not $5 a liter.

I thought you said barrels.

That would be a real problem.

I was like, I'll buy some barrels if they're going for $4.

Oh, I see barrels.

Yeah.

You wish.

I was like, where are those? I'll grab a few.

So yeah, obviously there's this, he's gotta tread this tightrope between being, obviously playing that strength card, which is the military clout, but also then obviously not derailing their own economy.

You did mention earlier that $100 has been holding and you said that there's kind of, there's a huge amount of risk to holding short positions, but equally, just given the statistics, 15 million barrels of crude, 5 million barrels of refined products moving through the Strait daily when it's operational. So you can't get around geography. We talked before, I think it's, is it the Yabu port on the east side on the Red Sea of Saudi? And they've increased their pumping. I think they've like doubled it, right? Going from east coast to west so they could go through the sewers. But that has a limitation to it because they would normally pump what, the best part of 9 million on a daily basis. So if you're going to destroy infrastructure, you can't just turn infrastructure back on. It needs to be rebuilt. And in a country like Iran, that's not a straightforward thing where, you know, in terms of, you know, the financial capital to make that a reality. So once that's gone, And which a lot of it's already gone, right? It's been destroyed or disrupted at least. So is that going to set a new floor just generally speaking? Because Iran's not huge, but it's certainly what, top 4 in OPEC's pecking order or was before.

Well, this is the game theory, isn't it? If you are Iran, you are like, there's no way the US are going to destroy our energy infrastructure because they're basically just going to be harming themselves. Yeah, obviously infrastructure takes time and in some cases huge amounts of time, months if not years. And so the longer this goes on, obviously it's the closure of the straits and preventing ships from coming out, but the longer it goes on, the more damage that gets done to infrastructure. And it's not just Iranian, right? Obviously Iran are targeting infrastructure over in Saudi and Qatar and Kuwait, right? And so the longer this goes on, the infrastructure damage increases, which then, yeah, absolutely puts a floor on price. I mean, forget about going back below 100. Yeah.

So, and I guess the thing that you could easily forget here is that whilst this is all going on and it sounds very confrontational, there is dialogue actually happening, right? And so this week, well, this is why you've had this little pickup going into the end of the week in price because Iran and Israel exchanged missile fire and Tehran was targeting several Gulf states on Friday morning. And that came after hours after Trump just pushed back his deadline, the 10-day extension, as you said. But this is all amid what was an Iranian response to a 15-point US peace plan, and then the counter-proposals that they had made. So there is dialogue happening here, and one would imagine at some point something does come together. But in the meantime, is it right in that There's a few interesting other things going on here, i.e., on the Iranian side, particularly on how they're behaving with the management of the choke point that is the Strait of Hormuz. So, so what's going on there?

It's very interesting where like that in their mind, they're Iran are trying to essentially monetize the Straits of Hormuz, like, like permanently. They want the end of this conflict, but then to have this mechanism where, you know, essentially they can charge a toll. For every boat that goes through the straits. I was looking into this. There is a precedent here. You gotta go back a long way, but there was a thing called the Sound dues. Okay. D-U-E-S. This was my little history corner for today's episode. This goes back to the 1400s. Basically Denmark put a toll on boats going through the kind of narrow strait between Denmark and Sweden. And that narrow strip, and it kind of, again, it just narrows to a couple of kilometers. All right. And this is the, you know, the passage between the North Sea and the Baltic Sea. And they charged a transit fee. Okay. So any foreign ship that would come through there, they'd have to stump up and pay. And actually this was in place for over 400 years. This thing was then in the 1800s, Wow, traffic volume was so high, everyone was so annoyed with Denmark that they ultimately came to an agreement and basically Denmark got a massive payoff upfront and then they agreed to stop charging a toll. And obviously ever since the 1800s, obviously it's been free, right? But I don't know if Iran have been whipping out the history books here, but essentially they're proposing the same thing where they're saying ongoing, that's one of our kind of bullet points on our terms to end this conflict. We want to start charging people to try to to ship stuff through there on a permanent basis. And they're talking about $2 million.

What's the anticipated charges there?

I don't know. I mean, right now, mid-crisis, apparently they're charging $2 million. Now, obviously we're right in the middle of a war and there's a lot of rockets flying around and there's huge risk. I don't know whether that is a price point that's sustainable outside of a conflict zone, but that's what we've got to go on at the moment. So $2 million and they're basically saying they're doing the math and Iran are thinking, right, we can get $70 to billion sorry, $70 to $80 billion a year, like revenue off tolling that strait. So that's kind of one in their minds at the moment. It's one of their strategies to kind of, yeah, benefit from their geographical sort of location around this incredibly significant choke point.

The other thing that I thought was quite interesting was that was the economic benefit that they could engineer. The other was how they could use this to set about it as a weapon to cause further division amongst the unity of the West, which has always been a fairly well-trodden path where you've had the likes of the alignment, whether through trade relationships, funding between relationships that exist. So China, Russia, and so on and so forth. And here, what I thought was really interesting was a few weeks ago, you'll remember The Spanish PM Pedro Sánchez came out and was really outspoken about the US-Israeli strikes where everyone's really nervous talking about it at the risk of offending America and the consequence that would have, but he wasn't. And apparently Iran specifically has signaled receptiveness to Spanish ships going through the strait.

Yeah.

And it's just so interesting how, although that might seem like, okay, yeah, Spain goes through, gets their ships, it's much more than that. Yeah. Because from a, I guess, a tactical point of view in diplomacy, it's about trying to cause some further division amongst the allies in the traditional West. But I thought that was a really interesting angle I saw flagged.

Yeah, absolutely. Political gamesmanship, you know, you've got to use any kind of potentially weaponizing politics in a way there as well. So, but also a lot of Pak— well, not a lot, some Pakistani ships are coming through. Apparently there's a little trick you can do now if you reflag your ship and put a Pakistani flag on it, then Pakistan are more aligned to Iran and in some ways are playing a little bit of a broker in this negotiation period. But if you reflag your ship as Pakistani, apparently that gives you a better chance to trying to get through. But look, they've only allowed 10, right? They're charging $2 million, right? They've only allowed 10 boats through. And bear in mind, pre-war, we, the traffic volume was 135 ships per day. Okay. So 10 boats is nothing. So that's a 97% drop in, in kind of volume. So yeah, we'll see. Look, there's, there's talk and that's apparently happening, but in the meantime, there's also war going on. So that's why ultimately infrastructure damage is right at the top of the agenda if you're an oil trader. And like that can happen at any time, including over the weekend. Weekend when the markets are closed?

All right, well look, it's a good segue to stick with commodities, but maybe we could take the angle of really two things. One, I could probably speak to news dissemination and how as an analyst on a desk in my old job, I'd think about the type of fluidity of the news flow that we're seeing at the moment. Then the other thing, which probably you would be better informed about, 'cause I know you were with Citadel earlier this week with their engineers and traders and researchers talking about lots of different things, doing lots simulations was how mathematics can come into some of this as well when it comes to trying to think about these things from that perspective of how to set up these systems. So the catalyst for this discussion or this part was that traders apparently, according to the FT, traders placed $580 million in oil bets ahead of Donald Trump's social media post on Iran talks. And so thousands of Brent WTI contracts changed hands, and importantly, that happened 15 minutes before Trump then posted on Truth Social, which dramatically moved the market. So just making that really simple to understand, someone seemed to appear to have known something ahead of time.

Yeah. Well, yes, I saw this in your notes. I'm going to counter you here.

Okay.

I'm going to come back with a counterargument. I think, you know what generally my opinion is, but I think this is a bit of sensationalism from the Financial Times. I did a bit of digging. So look, 6,200 contracts traded in one minute. 6,200. Do you know how many trade on average per day? Talking about— wait, wait, 1 million contracts trade per day? Right.

So you're one of your $1 million stat, what time of day are you taking that from? Are you taking it from 6:49 to 6:50 AM Eastern?

I'm glad you asked because 6:49-6:50 AM, that's 11:49 to 11:50 AM in the UK at lunchtime in the UK right now. You're getting a little bit of early volume coming in from those hitting the desks early doors over on the East Coast. Obviously you've got Europe fully at it. APAC, fine, it's a bit late for them, but they might still be around their desks, especially at this time when obviously lots of stuff is kicking off. Right? So yes, it's a bit early, but I don't think this is outlandish. So that's my view. Although there's another thing that kind of triggers it, right? And it might not be sinister like insider information. It could be that fine, there's a bit of volume and, and there's a little bit of sharp movement and actually that can then just trigger algos. So algorithms that are just sat there sniffing, waiting for a momentum alert to trigger somewhere. Okay. And they're looking at standard deviation moves and volume, sorry, standard deviation volumes and Basically, they're looking for any signal where there's a momentum jump and then they're just in buying or selling anything. The fact it's oil is irrelevant. It's a financial asset that's seen a momentum shift that's alerted their algo to trade, which is then following that momentum, right? So then that just exacerbates a move. So it could, I don't think that volume of 6,200 is that, I don't think it's that outlandish. I think really the FT are kind of just trying to find a story here.

I guess what I would have as a validation point that I'd ask my quants is what's the normal sizing of trades? Over what frequency do they happen? Like if it's one big chunk of say two clips of 3,000 contracts apiece, right? I'd be like, okay, yeah, that's suspicious. If it's other activity happening and then you see a bit of a momentum buildup, as you said, the automated systems kick in. Well, okay, fine. That could be something else. So it'd be interesting.

Yeah, that's a good point. I don't know how big these clips were. Yeah. You could, but, and actually if it's a really massive clip, that, that again suggests it's a bit of a, that would be suspicious. 'Cause then it's someone who's got maybe a bit of insider information who doesn't really know what they're doing, who just piles in with a massive order size and moves the market. You know, if you're a clever, sophisticated operator in a market, you're not gonna just dump a massive order at market in one go. You're gonna be using some clever functions, iceberg orders and all this kind of stuff to try and feed in a large position without overly impacting the price. So yeah, I don't know. I don't know what the clip sizes were, but it's a good point.

So one thing I was interested to do was, 'cause I did this before during the first term, but in a very manual way, and I don't, not as connected as I used to be to markets these days. So I just used some AI tools. And I just asked it, can it scan through and try to do some backward-looking analysis on True Social, Twitter behavior, first term, over term one, difference of behavior of Trump to try and isolate some specific time windows and align it to categories of what type of information he's likely to share. And then as the next level, well, predicted time, because you've talked before many times about lots of clever mathematical modeling to try and predict future price levels.

Yeah.

My thinking would be, well, if we feed the dataset, given the guy tweets, you know, frequently, the more he tweets, well, the more informed—

Oh, he told me the other day, what was the stat?

I can't remember, it was something crazy like—

Like 50 tweets a day.

So let me run it for through. So there's different segments of the day, and then I can go through some other things to look out for if you were tracking this stuff. At least I'm not saying you should go away and start deploying these timeframes, but I guess it's a way of thinking. Because when I did my old job, you could sit there and just read the news as it comes out, or you could add value by trying to predict what might come out and where to prepare a trade here. So there's kind of 4 major windows here. And there's an assignment that the AI gave me of like, kind of low, medium, high times of day. So the first time of day is 5 AM to 8 AM. So this would be US time, activity high. And this is very consistent with what I had when I was mapping this stuff manually in the past, which because Trump tends to wake up and tweet. So his most active period—

This is Eastern time, right? 5:00 AM to 8:00 AM. Like, yeah.

So one thing, so one variable you do have to factor in, there used to be websites that you could go to that would give you the president's whereabouts on a daily rolling schedule. So as an analyst on the desk, when you would ask me, I would have to understand like, where is he going to be in what time zone? Because the president does move around a lot and that will then change the output of when you're expecting him to say something or tweet something. And so here, activity tends to kind of peak either. I mean, the funniest thing was the data would suggest 10:00 PM to 2:00 AM is what they've coined the frenzy period, where sometimes this is where his behavior would suggest posting sprees. Which sometimes can be north of 50+ posts in one period of time. And they, the correlation to subject matter, because not all subject matter, you know, is important. When he's tweeting about at the moment or sharing intel about Iran and what he's going to do, it's highly market sensitive. Most of the time he's not sharing information like that.

Yeah.

The ones that have 2 AM jobs, they tend to be grievance-based. Yeah. Or conspiracy-based. Rage posting. And like, look, I'm not even joking. This is the pattern of the data from these tweets. So it's really interesting. And the reactions in the morning, what it tends to be connected to or correlated to is whatever he's done the day before. The journalists write their stories and release it first thing in the morning. He wakes And I'm assuming he must receive some sort of digital media pack highlighting the headlines about him, that what's going on and across the mainstream media. And then he typically would react. And so hence the peak and trough. So yeah, some really interesting things I thought that were coming out.

So what are you saying then? So I need to be, so between 10:00 PM and 2:00 AM, so that, what's that? UK time, that's 3:00 AM to 7:00 AM UK time. We need to be monitoring his rage posts on Truth Social to then get a sense of where markets are going to go that day.

Okay. So I had same thinking as you and I thought, okay, so let's probe this a bit further. So then I had a look at, okay, so if he does a number of clustered tweets, How many tweets does it have to tip over before then it's correlated to mean something sensitive to markets? And there's actually a statistical bit there where if he does a sudden flurry of 20+ retruths or sharing links of the same magnitude, what can often follow up is that that's almost like, it's almost like a drip feed teaser warmup. And then he drops a major statement. So actually he shows a pattern of where he kind of excites the market with a tease and then he drops a big one rather than he just comes out and says something really big. So if I was on the desk, I would be monitoring, even though he could have 20 unrelated things where he's saying all sorts, it's almost like that's when you'd have to be on high alert once it gets to the 20+ category.

Strap in. Strap in.

And then the other thing that the research showed was that when he posts after 11:00 PM Eastern, his tone the following morning is statistically more likely to be aggressive or angry, which often correlates with policy disruptions. So the more angry he is, the more he might say something as well. So yeah.

And that's 'cause he hasn't slept, 'cause he's up all night. Apparently he doesn't sleep right. It's a crazy stat. I can't remember. He only has like 3 or 4 hours sleep a night apparently. Anthony. Yeah. Okay, interesting. So I need to set up my, I need to tweak my algo here. So I need to be basically, I need an alert when the number of Truth's posts breaches 20 in a, like, let's say within a 60-minute period, that's going to be my alert. And then I'm ready to go for a major tweet that's going to really shift markets. So we're Anthony Cheung.

So to visualize it, when I used to work on my old desk, we had 30 computer screens and I can't possibly manage to look at every single conceivable thing. So yes, there would be 3 of us sat at that kind of U-shaped desk, but I would do exactly what you said. You find the pattern and then you automate and generate a signal when certain conditions are met. And this would be a very simplistic way of explaining exactly what, like what the quants are doing, but in a much more advanced sense on a much more bigger set of data, for example. So yeah, it worked the same. I, you would only want to be alerted once these defined conditions have been met and then you're interested in that way. So yeah.

Yeah. Interesting. Well, just on an aside, I'm just looking at my favorite new toy, which is Polymarket. Troops on the ground. Well, I, hang on, we've gotta, well, hang on. We've always, we've gotta do an update on will Jesus Christ return before it's 4.7 before for our favorite, for our favorite one. As listeners know, it's actually just flatlined at 3.9 actually. Okay. Nothing going on. Boring, boring there.

Hasn't been any breaking news.

Troops on the ground by the 30th of April, US forces enter Iran by the by the 30th of April is up to 61% now. And the chances by the 31st of December is only 70%, which kind of makes sense, right? In the, if you think it's gonna happen, it's gonna happen soon. But now, yeah, 61% chance.

That's, is there a market for him extending the extension?

I mean, that's, that's gotta be, that's the taco market. Yeah. How much is a Trump taco these days? All right.

Well, look, we could go on and on with that, but great. Well, look, let's wrap it up. Hopefully people found that interesting in lots of different types of ways. I think when we talk about this stuff, it's kind of more to explore just a way to think that people in research on desks, traders or asset managers, it's funny, we've talked about probably 5 or 6 different types of market participants all involved in the same narrative, all facing completely different challenges.

Yep.

Yeah. All right, cool. We'll end it there. I wish everyone a good weekend and a great week ahead. Thanks very much, Piz.

Thanks, everyone. Cheers.