Gundlach said on CNBC yesterday that he doesn't think Powell would go negative since the US is the world reserve currency and it would cause major imbalances throughout system. Over my head a bit.
Seems like it will be more large scale asset purchases instead.
Also, shouldn't be too much longer until stimulus with markets giving the finger to 5 rate cuts.
Negative rate is a tax to deposit. 0% is already bad, savers/p&c insurance reserve (heavily regulated sector) deposits earn next to nothing. Assuming Powell goes -.25 pts, at that point, people would prefer to keep cash under their mattress. WB will stack $100B cash pile from Berkshire in his garage if he does not want to pay $250M to the Fed just to keep his money in the bank. Negative rate is a bad policy - the Fed will not have a good handle of liquidity flow. They want to monitor liquidity level on daily basic so it's likely they will stop at 0 - .25 fund rate.
That's the side effect of Fed rate cut. Every time they cut rate, everyone is fleeing from corporate/junk bond market to Treasury market. They're pricing a whooping .75 pts cut for next Fed meeting. I thought 10-yr T would bottom @1.25 - it goes to .70, we could re-test .70 next week. By the time the Fed is done with all cuts, 10-yr T would be trading @.25 - @.40
Don't know bailing out corporate bonds would change anything. When the outbreak started, everyone was concerning about supply chain disruption, we now past that phase. The demand slump is a real threat. People is cancelling summer vacations/postponing major home remodeling projects, buying new cars...etc, they're switching to 'survival' mode.
This virus has already done a lot damages to airlines/cruises/hotels/casinos/theaters...it's getting worse.
Don't know bailing out corporate bonds would change anything. When the outbreak started, everyone was concerning about supply chain disruption, we now past that phase. The demand slump is a real threat. People is cancelling summer vacations/postponing major home remodeling projects, buying new cars...etc, they're switching to 'survival' mode.
This virus has already done a lot damages to airlines/cruises/hotels/casinos/theaters...it's getting worse.
Don't forget oil, oil has been gutted in this environment and that shows no signs of slowing.
I saw this late last night so didn't really have time to look into it, but it makes no sense to me....
https://www.zerohedge.com/commoditi...roys-opec-flooding-market-slashing-oil-prices
What is the goal here? Who are they gonna sell it to if demand is off a cliff? Unless they think they can finally put competition out of biz and strike while iron is hot.
I saw this late last night so didn't really have time to look into it, but it makes no sense to me....
https://www.zerohedge.com/commoditi...roys-opec-flooding-market-slashing-oil-prices
What is the goal here? Who are they gonna sell it to if demand is off a cliff? Unless they think they can finally put competition out of biz and strike while iron is hot.
Maybe they're colluding to take out US shale producers once for all. Shale players won't get a generous bailout from the Fed like they did in 2016. Russia/Saudis smell blood this time, this is their chance.
Oil stocks have been in a dumpster fire - they're pouring more gaz on them. XOM could go to lower $30s - shredding $200B of its value within 3 months.
Oil stocks have been in a dumpster fire - they're pouring more gaz on them. XOM could go to lower $30s - shredding $200B of its value within 3 months.
If you like oil stocks, next week could be a good opp to add them slowly. I would avoid high leverage co, also trying to buy a bunch of names BP/CVX/OXY/DVN/CLR/BKR...like your mini index. Incrementally buying them until your allocation runs out. There is zero trading fee everywhere - you could just buy 1 share to see how it goes, pause then buy a few more...etc.
I think you can even a buy a fraction of share on Robinhood.
I think you can even a buy a fraction of share on Robinhood.
