Introduction

The speaker greets the audience and talks about recent events, including a basketball game and the debt ceiling resolution.

Recent Events

• The speaker greets the audience and mentions recent events, including a basketball game.

• The speaker talks about the three-day weekend and mentions the debt ceiling resolution dominating the news.

Economic Data

The speaker discusses strong job numbers and economic data from last week. They also mention their previous comments on big six stocks.

Strong Economic Data

• The speaker discusses strong job numbers and PCE number being warm.

• The speaker mentions big six stocks but does not repeat their previous comments.

Debt Ceiling Resolution

The speaker talks about the debt ceiling resolution likely to pass and its potential economic impact.

Debt Ceiling Resolution

• The speaker says that the debt ceiling resolution is likely to pass.

• They mention that they will make comments if anything changes regarding this issue.

• The speaker discusses the minimal impact of the debt ceiling resolution on GDP.

• They talk about additional spending caps in 2024 but say that it is minimal.

Bond Market Analysis

The speaker analyzes bond market trends, including long-term bonds, short-term rates, and inflation.

Bond Market Trends

• As a deal looked more imminent, long-end bond yields stopped going down.

• Futures trading over the weekend saw bond yields go down slightly.

• The speaker talks about a tradable range on long-term bonds and mentions looking at short-term rates.

Conclusion

The speaker concludes by discussing the potential impact of the debt ceiling resolution on the economy.

Potential Impact

• The speaker says that the economy will be stronger than expectations based on this debt ceiling resolution.

• They mention that it is not a favorable bond long-term bond position but should impact the front end.

Purpose of Treasury Buyback Program

In this section, the speaker discusses the purpose of the Treasury buyback program and its impact on monetary policy.

The Purpose of the Buyback Program

• The 2024 buyback program is designed to replace off-the-run five-year bonds with on-the-run five-year bonds to save a little interest for taxpayers.

• The other purpose is for cash management, in which they issue a 15-day bill if they need money today but don't have it yet.

• They do a buyback when they have extra money that they don't need, knowing that they will not have enough money when they need it to pay that bond.

Impact on Monetary Policy

• If the Treasury wants to pursue monetary policy, it can reduce the amount of ten-year notes sold by $20 billion in a quarter and increase bills' amount by $20 billion. This does exactly the same thing as going into the market and buying $20 billion of tens and selling $20 billion of bills.

• They can pursue monetary policy with composition by issuing a trillion and a half dollars worth of bonds and bills every quarter to refinance existing debt and fund deficits.

Dollar Performance Against Euro and JPY

In this section, the speaker talks about how higher rates are good for the dollar's performance against Euro and JPY.

Higher Rates Good for Dollar Performance

• Higher rates are good for dollar performance against Euro and JPY.

• Speaker bought USD/JPY claw spreads at 135/140 levels, which he expects will continue.

• Negative gold as the belly of the curve 10-year notes and real interest rates rise on higher for longer.

Gold Performance

In this section, the speaker discusses how gold is negatively impacted by rising real interest rates and uncertainty around debt ceiling crises.

Factors Negatively Impacting Gold

• Removing the uncertainty of a debt ceiling crisis where we can't get paid at the fault of the United States is negative gold.

• Real interest rates rising on higher for longer is negative gold.

• Gold has taken a big hit and has broken the level where he said he was a buyer.

Gold, Commodities, and Equities

In this section, the speaker discusses their thoughts on gold, commodities, and equities.

Thoughts on Gold and Commodities

• The speaker does not see a reason to own gold due to uncertainty regarding the government after the vote occurs.

• Commodities are in free fall and are not expected to go anywhere particularly.

• The trend for assets is down.

Equities

• Equities should go up on a stronger economy until interest rates get high enough that they actually drag equities down.

• The speaker is looking to sell rallies on most assets.

• The six stocks are at all-time highs and the speaker cannot play them.

• If the Fed doesn't hike 50 basis points higher in 10-year notes or if anything else makes it look like the FED has given up, then the speaker will protect with gold tips and equities.

Short-term Moves

In this section, the speaker discusses short-term moves in trading.

Trading Short-Term Moves

• Nick thinks 365 on qqqs and 43.50 on SPX but the speaker can't get there.

• Upside calls are well bid on these stocks and indexes that are most representative of them.

Out of Money Calls

In this section, the speaker discusses out of money calls.

Positioning Some Out of Money Calls

• The speaker thought about advising suggesting or actually positioning some sort of out-of-the-money calls on NASDAQ or looking at the 350 375 call spread but can't get there.

• It's a 50/50 chance only if you get up to 375 do you make much money.

Sustainable Equity Rally

In this section, the speaker discusses sustainable equity rallies.

Thoughts on Sustainable Equity Rally

• The speaker wrote a long thread on what it takes to have a sustainable equity rally and would love some feedback on what they're missing.

• The bubble in Tech was fueled by low interest rates and a strong economy an accommodative Financial monetary policy this is the opposite.

Strong Dollar and SPX

In this section, the speaker discusses the impact of a strong dollar on SPX.

Impact of Strong Dollar on SPX

• The speaker doesn't think the dollar is going to move that much to have a big impact on SPX.

• Domestic demand and supply are going to be much bigger deals than international demand for US goods sold in their countries.

Conclusion

The speaker concludes by saying that they wish they could be constructive on equities but can't. They will stay out for now but if all this keeps going, they will be making money on bonds. There's no cause for an asset rally here in any way valuation money flows even animal spirits.

Short Bonds vs. Chasing

In this section, the speaker discusses how being short bonds can be a successful strategy even in a bubble-like environment.

Short Bonds Strategy

• Being short bonds is a successful strategy that has made significant money.

• Chasing may cause dislocations.

• Even in a bubble-like environment, being short bonds can continue to be successful.

Bubbles and Stock Market Predictions

In this section, the speaker talks about bubbles and their history of inflating and falling over two years. They also discuss whether or not current stocks will remain at their high levels.

Bubbles and Stock Market Predictions

• Bubbles have a reliable history of inflating and falling over two years.

• There is no reliable historic history for current stock market predictions.

• Two years from now, it is unlikely that stocks will remain at their current high levels.

Long Stock Short TLT Trade

In this section, the speaker discusses an interesting trade idea involving long stock and short TLT (iShares 20+ Year Treasury Bond ETF).

Long Stock Short TLT Trade

• Long stock short TLT is an interesting trade idea.

• It is similar to jumping on the H4L bandwagon.

• The ratio of TLT versus stocks has been wild this year with intense reversals between them.

• The volatility of this trade makes it unappealing.

Choosing Between Long Both or Short Both

In this section, the speaker discusses choosing between long both or short both when cash yields five percent.

Choosing Between Long Both or Short Both

• When choosing between long both or short both, it is important to consider monetary policy easing.

• With cash yielding five percent, the speaker prefers short move.

• There are four chances when you have two assets: log on both, be short on both, or long one and short the other.

Short Equities Long Bonds Trade

In this section, the speaker discusses a trade idea involving short equities and long bonds.

Short Equities Long Bonds Trade

• Short equities long bonds is beginning to look interesting.

• The ratio of bonds to stocks has gone to such an extreme that it makes sense for it to reverse during an actual recession or change in sentiment.

• The speaker does not see monetary policy easing.

TLT ETF Expression and Options Chains

In this section, the speaker talks about TLT (iShares 20+ Year Treasury Bond ETF) as an expression of higher for longer thesis and options chains.

TLT ETF Expression and Options Chains

• TLT is not the thing to trade for the higher for longer thesis at all.

• Fives twos sulfur is the best one for that but does not have options.

• There are no ETFs that provide levered short end exposure that are liquid and have options chains.

Impact of TGA Refill on Equities

In this section, the speaker discusses how $1.2 trillion dollars of assets being sold can impact equities in the coming months.

Impact of TGA Refill on Equities

• It's not TGA refill that bothers the speaker; it's $1.2 trillion dollars of assets being sold to people who don't want them.

• This should have a negative headwind and is a combination of bills and coupon bonds.

• The whole impact is heavy on assets, which informs why the speaker prefers to be short TLT and SPX (S&P 500 Index).

Fading the Fed

In this section, the speaker discusses whether to catch or fade a 3-4% move and how the pressures of the Fed balance sheet can be headwinds. The speaker also talks about generating lending or borrowing using box spreads.

Catching or Fading a 3-4% Move

• The decision to catch or fade a 3-4% move is up to the individual.

• The pressures of the Fed balance sheet are not crash generators but rather headwinds.

• It's better to have these headwinds at your back when shorting essence leading into equity and leading economic indicators.

Box Spreads

• Box spreads using S&P index options or any option for that matter can generate either lending or borrowing in whatever term you want.

• Using liquid options is preferable.

• The speaker will write more about box spreads if people think it's worth doing as their sofa trade.

Political Pressure on the Fed

In this section, the speaker talks about political pressure on the Fed and whether jobs would be an election issue. They also discuss who would benefit from inflation reduction act and what would happen if there were negative NFP prints.

Political Pressure on the Fed

• There's a broad question about whether the Fed will give up at some level, but they'll never actually say that they'll just say they think inflation will come down to target.

• If there were an election today, jobs wouldn't be an election issue, but inflation would favor Republicans because they win on prices being too high thing due to inflation reduction act.

• It's too hard to judge what will happen with political pressure on the Fed even if you're short sofa at three and a half percent because it's premature to presume that it will happen.

• If there were negative NFP prints, then there would be pressure on the Fed to do something.

Inflation Reduction Act

• The Republicans would pound the irony of the inflation reduction act that they didn't get but even though they had to accommodate minimal changes to that just to not default but blame blah blah blah blame, but that's tough.

• The speaker thinks they win on inflation lies and prices being too high thing due to the inflation reduction act.

Balancing Act Between Mandates

In this section, the speaker talks about a potential financial stability mandate problem and how there's no conflict with the jobs mandate right now. They also discuss whether the Fed will address a financial stability mandate that may contrast with their inflation mandate.

Financial Stability Mandate Problem

• There's a potential for a financial stability mandate problem, but right now, there's no conflict with the jobs mandate.

• If it's bad enough, they will address a financial stability mandate that may contrast with their inflation mandate.

• During election time, unless there's a crisis, they tend to avoid making political action in the last few months.

• It's too hard to judge what will happen if we're even in the vicinity of a tough balancing act between mandates.

The Federal Reserve and Interest Rates

In this section, the speaker discusses the Federal Reserve's decision-making process regarding interest rates and its impact on the United States economy.

The Importance of Stable Prices and Full Employment

• The speaker believes that what is good for the United States is stable prices and full employment.

• If three percent becomes the new stable price, it may be acceptable, but it is unlikely to happen until either they achieve two percent or after the election has passed.

• Five percent rates are not good for the US economy.

T-Bill Projections

• The T-bill projections should be taken with caution as they come from members of the long-only part.

• Jeff Gunlock or someone from DoubleTree was representing on the T-back. He would say that it will be lower whether he has a financial interest or not.

• It is essential to be careful with these tea bag projections as they may not always be accurate.

SCP in June

• We will start hearing more about SCP (Summary of Economic Projections) in June.