Hi Again,
2025 is going to be exciting! Chaos create opportunities!
Most Wall Street experts have been comparing the past few years to the “roaring 20s”- too much euphoria. Smoot-Hawley Tariff Act of 1930 sparked trade wars in the 1930s. The act was a protectionist trade policy that increased tariffs on imports to the United States. In response, other countries raised their tariffs on U.S. exports, which made it harder for the U.S. to recover from the Great Depression. Will history repeat itself? We are sure to have chaos and that is not a bad thing. Chaos create opportunities. On 1/8/25, the CEO of Global Capital stated that he expects the rate of inflation to rise up to 3.5% in 2025 (from 2.5% in 2024). On 1/10/25, the Chief Economist of Appollo Global stated that the Federal Reserve might raise rates in 2025
Mohamed Abdullah El-Erian is an Egyptian-American economist and businessman. He is President of Queens' College, Cambridge, and chief economic adviser at Allianz, the corporate parent of PIMCO where he was CEO and co-chief investment officer. Per Mr. El Erian, the US Dollar keeps rising as the US economy is doing better than all other countries. Growth is higher than expected and inflation is stickier than expected. Oil (Brent) is over $80 due to Russian sanctions.
Over the past few years, NVIDIA was the best performing stock and all market experts believed that it would go up endlessly. A few weeks ago I did some profit taking and as a hedge bought some put options on NVIDIA. On the hedge, I did not expect to see a ‘paper gain” till the end of 2026. My hedge- NVIDIA, expiry date : 1/15/2027. Strike price : $50. At that time NVIDIA was trading at $149 so I expected it drop by about 2/3 by January 2027. Amazingly, on 2/3/25, after a mere 74 days, I have a “paper gain” of 47%. I am not selling my hedge but I am buying more stocks. As Warren Buffet states, “ When others are fearful, get greedy: and when others are greedy, get fearful”. Warren Buffet has been selling stocks for the past few months.
Jessica Inskip, Director of Investor Research at StockBrokers.com, has been immersed in the world of finance since July 2009, accumulating 15 years of expertise in the field. Formerly the director of education and product at OptionsPlay, Jessica's insights have made her a sought-after guest and commentator at financial outlets such as CNBC, Fox Business, and Yahoo Finance. On 1/10/25, Jessica stated:
Technology stocks (ticker: XLK) made bearish crossover sell signal on 1/10/25.
SPX (S&P 500) turned negative as of 1/10/25.
“Magnificent 7” will be resistant to higher bond yields and they will do better than the other 493 stocks.
Prior to 1/1/25, especially prior to 12/1/24, all market experts were extremely bullish on retail stocks (SPDR S&P Retail ETF). To me that was confusing. Trump has been warning that tariffs are coming so I bought some put options on XRT to short-sell XRT. My options expire in January 2026 and I bought them on 11/27/24, and on 1/14/25 (in 48 days), I sold those puts (strike price $65) with a gain of 41.57%.
Keep an eye on Bitcoins and Cryptos. Bitcoin prices fluctuate wildly. This is a very good “play ground” for disciplined traders. As Warren Buffet states, “ When others are fearful, get greedy: and when others are greedy, get fearful”. Five years ago Bitcoins were at $6,000 and now it is hovering over $100,000. Since the election, all have been too euphoric about Bitcoins so I am ready to see at least a mini crash in the future. That would be a buying opportunity. Interactive Brokers is one of the best brokerage firms in the US. On 1/21/25, the CEO of Interactive Brokers stated that he is extremely concerned about the “crypto bubble” and margin buying is at a dangerous level. The Federal Reserve look at the commodity market to figure out what to expect from inflation. Carley Garner is an American commodity market strategist and futures and options broker and the author of Trading Commodity Options with Creativity, Higher Probability Commodity Trading, and A Trader's First Book on Commodities, published by DT publishing an imprint of Wyatt-MacKenzie. On 1/27/25, Carly Garner stated that corn, cattle are red hot. Expect high inflation and higher rates.
Plantir Tech! Plantir! Over the past few months all experts were saying that Plantir has a great future but it is extremely overvalued. On 1/7/25, I bought a few shares and my strategy was to buy more as it went down in the future. As it has happened to me many times, Plantir kept moving up. On 2/4/25, what I bought on 1/7/25 was up by 50% (in just 28 days)! This is a win-win strategy- if it goes down , I buy more and if it keeps shooting up, I enjoy the ride. This depends on the stock/company. With companies like Intel and Boeing, it will not work. Also it is important to have 50% in cash at all times. Those who are 100% invested will suffer when we have a big crash.
On 1/29/25, Fed Chair Powell made the decision to keep interest rates unchanged. It was very much expected. Powell stated:
Our economy is strong. The labor market has cooled. Inflation close to their target of 2%. Labor market solid. Unemployment rate has stabilized at 4.1%.
The Labor market is not inflationary.
He had no contact with Trump.
Short end bond market shows inflationary pressures.
Will watch fiscal policy changes and react accordingly.
Will wrap of “monetary policy review” by the end of summer 2025.
Still believes diversity in the work place translates to the success of US companies.
Looking at 12 month inflation to avoid seasonality.
Rental/housing inflation is coming down.
Job hiring rate has come down but if you have a job, you are doing okay.
Flow of labor has come down significantly.
No comment to the comment made by some that the Federal Reserve is overstaffed.
Will not comment on tariffs. Has a wait and see attitude.
Jeffrey Gundlach was formerly the head of the $9.3 billion TCW Total Return Bond Fund, where he finished in the top 2% of all funds invested in intermediate-term bonds for the 10 years that ended prior to his departure. As he always do on “Fed Day”. On 1/29/25, Jeffrey made the following observations about the Federal Reserve:
Rate of inflation is going up.
The Feds on hold (when it comes to rate changes) till rate of inflation goes down.
Do not expect rate cuts.
Very concerned about the re-evaluation of bond risks by rating agencies. This is what led to the financial crisis of 2007/2008.
Probably one rate cut in 2025-maximum 2.
Except of California, housing inflation will go down.
“Meaningfully, above the neutral rate”.
Rates have not peaked.
Mortgage rates (tied to the 10 year bond) have been around 7% for the past 18 months.
Inflation will not go down to 2%.
Feds use the commodity market prices to figure out future inflation trends and it looks bad right now.
Avoid long end bonds.
During “Trump 1.0” tariffs did not lead to inflation but we had a very different economy at that time. Covid and supply side limitations caused inflation for the first time since the 1980s.
Budget deficits will not go down with tax cuts.
Jeffrey likes cash- can get 6% easy.
Stocks are overvalued.
Gold is close to peak.
Per market analyst/astrologer, Merriman, 2/9/25:
The market volatility, along with geopolitical uncertainty and disruptions may not let us next week. We are still under the astrological “retrograde chaos”.
Financial markets may be caught by surprise, leading to sudden and sharp price fluctuations both ways. This is not a favorable market for those who are not nimble.
The change most people want is for a stable system they can rely on for the purpose of personal planning for years, not months. Just as Democrats misread this over the past four years, Republicans may be doing the same now that they are in power. Change that does not provide stability is not the ticket for support.
Right now, the “sweet spot’ seems far away as the pendulum swings back and forth at the extremes in 2025-2026. In turn, equity markets are apt to fluctuate wildly, with mora than one 10% or greater selloff- which has not happened since 2022.