TheBRRR’s GM

We have an FOMC meeting today, but volatility is not expected as markets expect Jay Powell’s Fed to leave interest rates unchanged through at least the rest of the year.

That’s not preventing Janet Yellen from tightening conditions herself, as the Treasury has continued to issue new debt at an alarming pace, which has squeezed yields higher.

The recent rise in yields has tightened conditions significantly, with Goldman Sachs calling the rise to the equivalent to “four rate hikes”.

In other news, tech stocks have rallied to start the week with strong bounces from Meta, Amazon, Tesla. leading the charge after mixed earnings reports.

Tesla has suffered a 30% drawdown from its YTD highs set earlier this year with concerns over Cybertruck delivery challenges and their aggressive price-cutting strategy that has diminished margins.

Meta and Amazon are only down single digit % from their YTD highs as strength in their ad businesses and perceived AI dominance has supported their narratives.

In observance of Halloween and the 15 year anniversary of Bitcoin’s whitepaper, Gary Gensler celebrated with an ominous tweet:

And finally, we pour one out for WeWork, the former prized Softbank-backed startup, as it announces its plan to file bankruptcy (again?).

The co-working giant and largest commercial real estate tennant in Manhattan achieved a $47 billion valuation as recently as 2019 has seen its shares plummet by 99% since its stock-market debut in 2021.

Could this be the first major domino to fall in the commercial real estate market, triggering a banking crisis? We’ll see.

The newsletter’s 10-asset portfolio is still up 25.6% since launching in March ( vs 14% for the Nasdaq, in part thanks to our strong bets on Bitcoin, Uranium, and Nvidia. To unlock the full list and get real-time trade alerts, you’ll need to upgrade for $3/month or $15/year.

Market News

Treasury Tease: 7% on the Horizon?

Ned Davis Research has issued a warning to investors that long-duration Treasury yields could reach as high as 7% if the U.S. manages to avoid a recession.

The benchmark 10-year Treasury yields are currently near a 16-year high of 5%, influenced by increasing U.S. federal deficits and the Federal Reserve's commitment to maintaining high rates until inflation is under control.

This situation has had a negative impact on stock market valuations and has resulted in higher borrowing costs for companies and consumers.

• Impact of Inflation on Yields: The PCE price index shows a 3.4% increase in inflation compared to last year, slightly above its historical average. The neutral rate of interest also seems to be higher than its 2% benchmark. These factors could drive Treasury yields to 7.2%, making the current 5% yield appear conservative.

• Navigating the Market: In light of the potential for a continuing Treasury sell-off, Kalish advocates for investing in gold, maintaining a slightly underweight position in bonds, and preferring large-cap equities over small-cap stocks.

• Anticipating the Next Moves: Ned Davis Research does not expect the Federal Reserve to raise its benchmark rate in its upcoming meeting, but sees a 50-50 chance for one more rate hike before year-end. (As does CME Fedwatch tool)

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To participate, subscribe below and email us about the best thing you’ve learned from them by November 15th. Only 1 submission so far - you’ve got great odds to win. 👇

Macro News

Druckenmiller: Yellen Should Be Fired

Hedge-fund titan Stanley Druckenmiller has criticized Treasury Secretary Janet Yellen for her financial decisions during the near-zero interest rates induced by the COVID-19 pandemic. “We are spending like drunken sailors.”

Druckenmiller argued that Yellen should have issued more long-dated Treasury bonds instead of opting for short-term options, accusing her of the most significant blunder in Treasury history.

He emphasized the long-term financial consequences, showing increased interest expenses as a percentage of GDP and drawing parallels with Americans and corporations taking advantage of low mortgage and debt rates to refinance.

• Suboptimal Decisions: Druckenmiller criticized Yellen for issuing short-term 2-year bonds at 15 basis points rather than opting for longer 10-year or 30-year bonds at 70 and 180 basis points respectively during low-interest rates. He emphasized the missed chance to secure more favorable long-term rates, contrasting with individuals and corporations who refinanced to save money.

• A Looming Fiscal Challenge: By 2033, he projected a 4.5% GDP interest expense, ballooning to 7% by 2043, which he equated to 144% of current discretionary spending. Druckenmiller warned that promises of no entitlement cuts are misleading given these rising expenses.

• Deserves To Be Fired: “I literally think if you go back to Alexander Hamilton, [Yellen’s approach represented] the biggest blunder in the history of the Treasury…I have no idea why she hasn’t been called on this. She has no right to still be in that job,” said Druckenmiller.

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Today’s Reader Poll

Wondering your opinion for AI in the future. Do you see it as a net benefit or detriment?

Here’s your thoughts on the AI (r)evolution so far. More positive than negative:

AI Art of The Day

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The BRRR is meant for informational purposes only. It is not investment advice. Please consult with your investment, tax, or legal advisor before making any investment decisions.