Final 2024 Update

Alright let’s finish this year up and look at the US bond market real quick. Here is the current US yield curve for the last day of 2024. The yield curve is now back to a more normal positive slope as the FOMC rate cuts are doing their job in normalizing things:

For those that don’t understand yields and curves very much, when you look at this chart look at the yield highs and lows depicted in the Blue (yield curve highs) and the red (yield curve lows). Look at the shape of those curves and you will see how flat things were up on the highs and then how distorted things were on the lows. Now look at the final day of 2024 (white line) and you can see how things have normalized. The basic premise to this is that the cost of money should be lower vs the duration or term amount of that money. That is you should be able to borrow money for 2 years at a cheaper rate than you could say for 30 years. The differentials of these durations and yields is the game that plays out and determines various other interest rates from these US Treasury Rates, so the rate and the shape of the yield curve is very important. Obviously I am trying to keep this explanation as simple as possible but trust me, as a 20year plus Bond Arb, its much more complicated than that!

Here is another yield curve picture of the actual spreads of the various durations:

What you can see is that the trend is obvious and the FOMC is winning in this regard and forcing the curve back to a more steeper incline. The FOMC also succeeded and avoiding a 3rd straight year in negative carry land, which would have been truly unprecedented:

Ok let’s move over to the MEGA8s where we will reset the data for 2025. We will reset the equal weight basket back to $100k and the appropriate shares for each of the equities in the basket. We hope you follow us along this year as we will continue to track this group, and it will be interesting to see if this year coming up, whether or not our hedged basket beats the out-rights! The MEGA8s return this year was a massive +62.6% with the hedged basket +47.1%. We also added the actual stocks return in the last column:

Just as a pretext for the 2025 MEGA8s we will once again start the basket off at the $100k valuation with equal weights across the board which means we will take $12,500 for each individual equity, for instance the total amount of Apple shares to start 2025 will be calculated as $12,500 / $250.42 = 49.92 shares, we will round up to 50 shares. As far as the hedges we will as we always do, try to give a weekly hedge for the basket and it usually comes in the form of selling QQQ calls, or SPY calls. As always the goal is to educate you on how to hedge a long only basket, how to mix and match equities that you may think matter to you and for you to think outside the box.

As a grouping the MEGA8s are down near 9% off their most recent highs and they closed under the 21wMA:

Ok let’s move over to the Settlements page for the final tally for 2024, our returns may be different than main stream, we use a futures roll methodology based upon overall contract ticks up or down for the year:

As far as the rolling changes the Nasdaq is the biggest 5 day loser with the Energies the big winners as far as the 30 day, Nat Gas the big 30 day winner +25.3%:

Here is the overall 2024 compilation of returns Gold and the Nikkei futures the big winners and the Yen futures down -14.8%:

Ok let’s move over to the MicroStrategy tracker, we are following this because we are very very intrigued as to the mainstream push for this. We can’t fathom the backlash in the future should this whole thing come crashing spectacularly down! Anyway for those new subscribers what this tracker does is it tracks the ownership of 100 Shares of MSTR since Dec. 1st 2024 and selling 1 10% away OTM call each week on the opening of Monday’s trade. The results are then tallied for each day:

Obviously the premium collection has not kept up with the equities decline and we have also seen volatility actually fall which isn’t a good thing for this stock as we all know that Saylor’s pitching the volatility as an incentive to the convertible bond holders in return for a 0% coupon…anyway as you can see, anyone employing this strategy over the last month is now down 12.5%. We also keep track of it in a Daily Net Value format:

We believe this will turn out to be an absolute banger of a study in game theory. How far can Saylor push the public into believing that Bitcoin offers all the future value vs fiat as it does and then convince investors to accept paying 1.77x for something they can obtain themselves for $1. Its actually pretty amazing he can borrow as many billions as he has. We know his DCA continues to rise and is now at $62,500 and we also know since we have been following Bitcoin, which is since inception that it always returns to its 200wkMA! That level is $43,652, should BTC trade down there, MicroStrategy will be holding onto assets worth about $8.4Bn loss using todays holdings:

Another thing we are concerned about in 2025 is Tether…we have seen them burn about $3bn worth since the highs, but there is definitely more to this story that’s for sure:

Ok guys we will be back with the new year data for 2025 when we compile it. Thank you and Happy New Year to all of you. The world is always evolving, changing and our biggest attribute is to adapt to these changes and bring you data that you can use to make informed intelligent decisions. We hope our inputs are making a difference, we hope you continue to support our work in any way you can. What we charge per month is the equivalent is about a half a cup of Starbucks coffee a day, but we don’t deliver a short term boost of caffeine, what we deliver is so much more, we deliver a mindset. Our goal is to get you to think outside the box and our daily data exercises will do just that! So subscribe and support our work and if at the minimum, please share our work with others and give it a like!

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