Hi Again,
Last month the Federal Reserve, as expected, cut the interest rate by 50 BP but amazingly the
bond market kept raising rates! They are not going to get the desired effect. Mortgage rates are
linked to the 10 year treasury so mortgage rates have been rising too. The most popular ETF for
Treasuries is TLT- iShares 20+ Year Treasury Bond ETF (TLT). On 9/16/24 TLT was at $101
and by 10/4/24 it was at $95- 5.94% reduction in 18 days.
Carley Garner is an experienced futures and options broker with DeCarley Trading, a division
of Zaner Group, in Las Vegas, Nevada. Her commodity market analysis is often referenced on
Jim Cramer’s Mad Money on CNBC and she is a regular contributor to TheStreet.com and its
Real Money Pro service. Garner is also a regular on the speaking circuit and can be found at
TradersEXPOs and MoneyShows throughout the country. On 10/4/24 (CNBC), Carly stated
that most bond market professionals have a net short position on the 10 year Treasury as short
contracts increased by one million. Bloated budget deficits expected under Trump and Harris is
making bond gurus nervous. Carly expects these people to get hurt in the future as it is never a
good idea to “fight the feds”. When these people run to cover their shorts, we could see yields
going lower in a big way.
I sent my last newsletter on 9/2/24, and on 9/3/24 my predictions came true. On 9/3/24,
S&P500 was down 2%, Nasdaq was down 3% and the volatility index (aka Fear Index) was up
by 5%! My VIX call options were up by 21% in one day. Some of my put options on the
Nasdaq (QQQ) were up by 64%. On 8/16/24, I bought some call options on the VIX, expiring
June 2025, with a strike price of $20; and in 1 days, on 9/4/24, I sold them with a gain of 124%!
On 9/6/24, per Carter Worth (Carter Braxton Worth, a 35-year Wall Street veteran, is
the CEO/Founder of Worth Charting LLC. He was Head of Technical Analysis at Cornerstone
Macro Research beginning in 2016. Prior to his role at Cornerstone, he was Chief Market
Technician at Sterne Agee and at Oppenheimer Holdings Inc.) stated that the dollar has been
going down and oil has been going down and now the stock market will go down. He also
stated that Nividia is a good buy at this time and on a PE basis, it has not been this “cheap” in
about 2 years.
With the expected slow down in the economy and due to other factors (except for the 2 wars),
oil prices are expected to drop in the future. Saudis warned that if OPEC members cheat on
their contractual agreements, Saudis will bring down the price to $50. If China finally
stimulates domestic consumption, that could be bullish for oil traders. Most US experts believe
that oil will drop to $70. It is a triple top in the 5-year chart. High for the past 6 months was $82
and in 2020, it dropped below $25.
On 9/18/24, Fed Chair Jerome Powell stated:
The economy is strong
Inflation is at 2.2% (up to August 2024)
The labor market had cooled
Inflation has eased substantially
Goals on inflation/employment is balanced now
Now going to normalize rates without giving up on inflation (dual mandate)
Consumer remains resilient
Will make future decisions based on data (month to month).
Not in a hurry to reduce rates
Long term inflation expectations are well anchored
All 19 members of the Fed Reserve wanted 3 more cuts in 2024
The time to support the labor market is when the labor market is strong or else it is too
late.
In the future, will not go down to 0% or negative rates.
Mr. Jeffrey Gundlach is CEO of DoubleLine. In 2011, he appeared on the cover of Barron's as
"The New Bond King." In 2013. After every Fed decision, Mr. Gundlach appears on CNBC and
this is what he had to say on 9/18/24:
The Feds should have cut rates in July 2024
Long end bond rates are up after the Fed cut as they are afraid that inflation might re-
ignite.
Buy gold
The Fed Fund rate will get to 3.5% prior to December 2025.
They might cut another 50% in November (after the elections)
They do not care about elections
Job reports are about 75,000 overstated (per the Fed Reserve)
Private Capital is in a bubble
Expect weaker economic reports in the future
Future evidence will show that a recession started in September 2024
Powell quite confident of the future trend of inflation
Powell does not expect a recession
Long term bond yields will continue to rise
Feds will lower rates by another 75 BPS
No one knows what would happen to the housing market
Long term Treasuries are the best hiding place for investors.
Inverted to de-inverted yield curve is predicting a recession
As the dollar is going down, buy foreign stocks. Gundlach is bullish on India
3
Long bonds will not rally in the future
Recession will be good for long bonds
Rents are going lower but it will take time
Private markets are bad as they do not have “market to market’ valuations
Russell 200 will benefit more than the S&P 500.