1. Lehman Brothers: 18 Years Later
18 years ago today, Lehman Brothers collapsed.
At that time, I was actively trading (very new to the market), and I got to see events that supposedly only happen once in 100 years.
The lessons learned during that time, in my opinion, can’t be learned just by reading about what happened. Being there made things much more real.
The biggest things I learned: in the midst of uncertainty, you get the most amazing opportunities. It is certainly hard to see straight when everything is breaking apart, but the last thing you can do is panic when everyone is panicking.
2. Yields Are Soaring
Yields are soaring.
As I write this, the yield on the U.S. 10-year Treasury stands at 5%.
You could argue all day long that “in the ’80s, yields were higher,” but don’t be so naïve.
We have a lot more debt now, and tons of leverage out there.
If yields continue to go higher, there will be victims. Who will it be? Will it be private credit? Will it be pension funds? Banks? Governments? You, the average person? Businesses?
3. Fed Day Is Tomorrow
Fed day is tomorrow.
It doesn’t really matter if the Fed cuts or hikes by 25 bps. You know the bond market has already hiked rates, right?
Also, for stocks, today is likely to be choppy and remain that way until the announcement.
Remember: the initial move following the Fed announcement can be wrong. The real trend comes Thursday and Friday.
Bonds and currency markets will be watching the Fed very closely too.
4. Oil and Yields Are Moving Together
The correlation between oil and the U.S. 10-year yield has become almost perfect.
There are some serious escalations happening in the Middle East and in the Russia-Ukraine war.
If we look at the headlines and nothing else (that’s what oil is reacting to these days), oil could go a lot higher. There’s a supply crunch, and it’s getting worse.
So, does that mean yields go much higher?
There’s lots of war premium in energy markets. Just remember that a headline about peace, a ceasefire, etc., will drag oil prices lower quickly. Know what you own and allocate wisely.
5. Gold, Japan, Europe and Bitcoin
Gold is testing its 50-day moving average. A break below it could bring more sellers. Higher yields aren’t helping here, just FYI. But there’s not much hate against it. Once again, $4,300 is a big level to watch for the near term.
The Japanese yen has increased roughly 6% against the USD since around late July. The Japanese 10-year bond yield is at 3.04%. Nothing to watch here, right?
Watch Europe. There’s potential for an energy crisis there. The West can’t supply fast enough, while eastern supply is becoming limited.
A break below $76,000 on Bitcoin could potentially mean a rapid move down to $70,000.