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Strategies & Market Trends : Bear!
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To: S. maltophilia who wrote (261)10/29/2025 1:57:48 PM
From: Sean Collett  Read Replies (1) of 266
 
I think rates are coming down and by natural relation all yields will fall. I see opportunity here with TLT and thus where I have my money today. If I am wrong I of course take the L and move on but have enough time to see where the chips fall.

QT basically ended a bit ago and the final remains will be halted.

Perhaps inflation is an issue still, but I challenge I see more downside risk in the nearer term than I do runaway inflation. The US money supply was in a contraction for 15 months and was flat about four months outside of that given us a total of 19 months - there is a lag effect that I believe is not taken into consideration. Current money supply has not even cracked a YoY above 5% and some economists see the fed needing 6-7% growth to support the 2% inflation target. So we had a flat/contraction for 19 months and then since June 2024 we have been between 1.3-4.8% growth which is below what's needed.

Tariffs are indeed nothing more than a tax and while the price level has gone up it's not the inflation that matters. It's moving money from your pocket into the governments - no new money is created here. As it stands the fed has held on because tariffs have changed the price level but the tightening effect is real.

2024-2025 business chapter 11 filings are highest since 2014 and this is in a world of LME's. Chapter 7 filings are on par now with 2020. AMZN cutting 14K, UPS cutting 48K, Paramount with 2K, TGT with 1.8K, Nestle with 16K, Lufthansa with 4K, GM with 1.2K. You have SNAP benefits ending Nov 1st. I am not seeing the upside risk to inflation on the demand side that existed in 2020/2021.

If long yields were to ever go wild they would move to likely cap them IMO. I see a similar playbook forming as what US treasury and fed used in 1942-1951 where they ran YCC. My longer speculation is they will push yields down and then term the debt out and then eventually let inflation rise to burn the value of the debt. This is how the US took DEBT/GDP from 121.7% in 1946 to 34.7% by 1975. There are some key differences in 2025/2026, but the game ends one way and I see this being a first pass option.

We shall see.

-Sean

EDIT: Fed just cut 25 bps and QT ends December 1st.
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