Hey guys, welcome to another edition of the Magnelibra Markets. Today’s episode #64 is entitled “Assets Are Well Supported”
Quick Disclaimer: The following podcast is for educational purposes only. This is not a solicitation to buy or sell commodity futures or options. The risk of trading securities, futures and options can be substantial and may not be appropriate for all listeners.
Hey everyone, we saw the latest CPI numbers this morning hitting right on the button as expected.
Core CPI rose 0.3% MoM (0.3% Exp) which pushed Core CPI to 3.3% YoY. Everyone thinks that 3.3% is 1.3% above the FOMCs actual target rate, however as you guys all know, the data that Magnelibra consistently tracks, shows that the actual FOMC inflation target has been 2.98% over the last 25 years. This is an annualized figure we have compiled using the FOMC asset base increase as our core target base money by which all other nominal values are derived using of course leverage. We post that chart from time to time and will post it again once 2024 closes out.
So for us at least the inflation rate is close to their real mandate even though they state it as much lower down at 2.0%! We know better. As far as why the FOMC will continue to lower their rates, well, the trend is obvious:
We also heard David Kelly this morning on Bloomberg he is head of JPMAM chief global strategist and he sums it up best,
At the end of the day what we have is RICH AMERICAN inflation and we got poor world DEFLATION
This hit the nail right on the head and its very consistent with the monetary fiscal response post covid where time eventually funnels all that excess distributed capital which initial went to everyone, finds its way into the economy and end up in funding asset price growth.
This is the problem with fiscal monetary stimulus, if you don’t change the underlying structural imbalances that are pervasive and detrimental to a well balanced economy, no matter how much capital you dish out to the base units of an economy, it will always end up in the hands of the very few. This is so obvious to me, should be obvious to you guys now and its been proven time and time again, that there are indeed no free lunches! Marxism, Socialism, Communism are all redistribution mechanisms that do not regulate the structural imbalances that ultimately lead to a disproportionate distribution of wealth in an economy.
The world doesn’t have a money problem, it doesn’t have a debt problem, it has a regulatory structural problem by which governments in coordination with the ultra wealthy or oligarchy end up monopolizing and gaming the system in their favor. Now look, we don’t want to misled you, their are anthropological reasons as to why this occurs, not everyone is a doer, not everyone can take risk, not everyone grows up with a silver spoon, not everyone is lazy, not everyone takes the initiative to struggle and learn. So this is a multifaceted problem. A problem that I believe will be solved in the future with the assistance of decentralized platforms of governance and a focus on resource and skill based education. The alternative is a dystopian hell by which humanity will consistently be under the oppressive nature of too much debt and too much inflation, which ultimately leads to revolutions. Hopefully we rectify these things sooner rather than later.
Ok onto the markets, post CPI the equity and bond markets are rallying:
The SP500 bull line now is 6042 and we are trading above it at 6082 +36 points and the Nasdaq bull line has now moved up to 21283 and today the Nasdaq is trading 21681 +274 points on the day:
The US Govt 10Y is -1.6bp and the bull line on the yield charts now is 4.291% the area we want to see yields stay below to continue the path lower:
Ok so let’s take a look at our MEGA8s real quick, the hedge is set for this week as the 525 Call at 4 or better and this morning it did trade above this level, so for now that is the hedge till Fridays close as the MEGA8s continue to push into new market cap ATH:
We do not expect this train to be derailed, this momentum is obvious and the fundamentals of a slowing global economy will not show up, well until they do. For now the demand for assets continues.
We also know that risk is obviously well in vogue as MicroStrategy continues to play the volatility game and with that said, we have decided to track this strategy for you guys. The basic strategy is quite simple, this will be purchasing 100 shares and selling on Monday’s open the 10% above OTM call option. Since these are covered calls the risk is losing your position to a move greater than the call strike by which your 100 long MSTR will be netted vs your Short Call position, thus you become flat in your overall position. Since this is a trade many are deploying now, we will expect volatility to compress over time and remove the vig on this thing slowly. For those following at home we have been tracking this since December 2:
We are tracking this for educational and display purposes only and our starting point for MicroStrategy Stock is $380 per share. We will continue to track this to monitor the viability of the strategy and to see if volatility starts to compress to give us a better idea upon a possible change in investor sentiment.
Alright lets get to the settlements from yesterday and Monday
The DAX and Metals are the early 5 day net change winners:
Ok that is it guys, thank you to all our subscribers, we are getting close to 500 and we hope you can contribute, share our work, or just give it a like if you can, till next time. Cheers!
DISCLAIMER: For educational purposes only. This is not a solicitation to buy or sell commodity futures or options. The risk of trading securities, futures and options can be substantial and is not for everyone. Such investments may not be appropriate for the recipient. The valuation of futures and options may fluctuate, and, as a result, clients may lose more than their original investment. Nothing contained in this message may be construed as an express or an implied promise, guarantee or implication by, of or from Magnelibra Capital Advisors. Magnelibra the Commodity Trading Advisory and its proprietary long/short commodities, futures and options managed accounts may hold long and or short positions in the various futures and markets that Magnelibra covers. We will never claim that you will profit or that losses can or will be limited in any manner whatsoever. Past performance is not necessarily indicative of future results. Although care has been taken to assure the accuracy, completeness and reliability of the information contained herein, we make no warranty, express or implied, or assume any legal liability or responsibility for the accuracy, completeness, reliability or usefulness of any information, product, service or process disclosed. If you are interested in opening an individual managed futures and options account to compliment your overall investment portfolio you can visit our website at https://magnelibra.com for more information. We are implementing a new trading program launching at the start of the new year, which will include access to Bitcoin futures and options. Please contact or make inquires directly to our introducing broker Capital Trading Group, please contact Nell Sloane at nsloane@capitaltradinggroup.com
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