Rally Continues Unabated
Low Rates is The Way
Alright so we sent out the subscriber only data yesterday and today we will post this one for everyone. The FOMC once again cut rates and despite being the 25bp variety we continue to believe they will stay this course. There is too much at stake and the post fiscal inflationary money drop has most certainly made its way into the hands of the upper percentages by now.
We feel global demand and the uncertainty of how much President Elect Trump will shake things out is yet to be determined. One thing we are certain is that Trump being a leveraged real estate mogul, insures that short term interest rates will continue to fall. As the Disney Mandalorian character motto states,
“This is the WAY!”
In fact low rates and QE have always been the way and we don’t believe that will change anytime soon. Yes we have had high rates but that was a direct response to the fiscal monetary spigots post Covid. Well that is over and now we will see the cycle back down. Yes the FOMC can slow walk for now and we believe that is the correct response for now, because you can’t be as obvious as cutting rates while asset prices continue higher and inflation is quasi sticky now can you. So it was the right response.
However as time moves forward we believe the higher rates will continue to destroy leverage and the FOMC will have to act to stem the collapse of interest cost margin compression. We also know that the FOMC will be under the Trump microscope to get the US Treasury interest costs down and Trump as you know never backs down till its done. Yes Powell can say they operate outside the sphere of political influence, but that is BS. They do not!
Alright we will post all the data from today’s markets this weekend and we leave you with the MEGA8s and the settlements from yesterday. The hedge this week cut into the overall baskets performance, but that is what it is designed to do, hedges aren’t there to add alpha! We can’t be Monday morning QBs rather we must diligently hedge accordingly especially when subject to 100% market directional risk. This is a lesson learned long ago and all you new traders and investors, this is a lesson we all must learn. As we stated in our subscriber post yesterday, any hedge has an auto 3x max limit and it was hit yesterday. However as we noted it ate into the synthetic long only basket performance but it did not take away all the upside. You can see a long only basket of these equities this year is +51.15% and the hedged book is +37.61%, not optimal in regards to giving up 14% but versus the entire book and versus the overall SP500 this way of trading and creating baskets of investments does offer a lot more than just static long only. This is what this MEGA8s was designed to do, offer readers a educational purpose only sample of how to construct a basket of stocks and how to potentially hedge directional risk:
As far as the MEGA8s, well they put in a new market cap high:
As far as our Bond market yesterday, the belly of the curve saw the bulk of the buying:
As far as the settlements page you can see the weekly and monthly positive performers and that is our continued sentiment in those markets accordingly but you can tell, especially in the metals, the monthly gains have been eaten into by this weeks performance:
Alright guys, we don’t want to talk politics, but since Arizona can’t count 3m ballots in due fashion, when our fine state of FL was done with 11m votes by 10pm, we had to comment. What is strange about Arizona is the fact that the Democratic Senate candidate Gallego has more votes than US Presidential candidate Harris! Also Republican Senate candidate Lake has 130k votes LESS than TRUMP! Let’s just say oddities continue to run…
Ok, we hope you enjoy our work, we hope you continue to learn, explore and enhance your trading minds. We will bring more technical charts over the weekend, but honestly the bulls have the control here till next year and nothing seemingly will change that. We would expect bouts of year end profit taking, but lets just see how December NFPayrolls looks, what the FOMC final meeting looks like and then make some judgment. For now, its steady as she goes. Please subscribe, give a like, or at least share so we can grow the base, we are so close to 500 subs and we would love to hit it this month! Cheers