Long term entries and exits for 20 year bonds and SP500 (via SPY) in correlation solely to FED interest rates and US inflation rate adjustments.
Here's my personal game plan going forward with this in mind- not war news.
Starting to add TMF (20 year treasury 3X) equity now.
~Sell covered calls on it until FED pivot lowering interest rates.
~Add all TMF covered call profit to equity until FED pivot lowering interest rates.
~Hold TMF equity until the following FED pivot where they begin increasing interest rates again- no matter how long that may be. Last time, that took from Jan, 2020-Oct,2021. The time before that, was April, 2007- July 2015.
As shown by the vertical blue lines on the interest rate chart, fed has previously held interest rates at 5.5% for years at a time. Specifically, from January, 1995 to April, 1998. Then, raising rates again in April, 1999 through October 2000. The tech bubble soon followed that..
If we are comparing things to then, and fed did get things right this time around and achieved the "soft landing," then we will see equities continue to do well as they did in 1995-2000. We would have potentially years worth of gains before reaching price to earnings levels anywhere near previous over valued levels... Where QQQ P/E ratio was a crazy 190 in March, 2000.
Meanwhile, today, QQQ P/E ratio is 32.88. A huge fundamental difference. Which is even an 8% premium discount in relation to QQQ's 3 year average P/E today of 30.45
In 2000, 10 year bond yields reached 6.03% As of October 16, 2023, the 10 year bond yield was 4.71%. Showing previous radical levels include much more room for todays markets.
Now., if we are comparing things to 2008 when banks were writing sub prime loans and simultaneously dealing with FED interest rates at 5.5%, the span that rates were that high was only from April 2006-April 2007.
As sited to Forbes.com, "By early 2007, the housing bubble was bursting and the unemployment rate started to rise. With the economy failing, the FOMC started reducing rates in September 2007, eventually slashing rates by 2.75 percentage points in less than a year."
In which that case we saw SPY equities lose 57% from October, 2007- March 2009.
Worldly/economic conditions are clearly different today than in 2000 and 2008. Those are simply references from similar fiscal conditions where outcomes ultimately contradicted each other.
To continue, from looking at past market reactions, I will ]continue holding TMF up until the point when FED pivots to begin increasing rates again.
Subsequently, this will not happen until US inflation rate is below the 2% target goal.
When US inflation is back down to 2% goal but not until, sell all 20 year bonds and start dollar cost averaging equal weight into:
XLG- SP500 top 50 fund paying 8.5% dividend
SVOL- Inverse vix paying 17% dividend
TQQQ- QQQ 3X
SOXL- Semiconductors 3X
As for the current technical level of SP500 (SPY)...we are currently at the level going back to October of 2021. This is when market reacted to FED starting to increase interest rates again.
To summarize, if fed were to raise rates again this coming November 1st, this support level will likely get bought up by the same buyers who bought in October, 2021 and January, 2023. Especially now that US interest rate is at 3.7% compared to the 6.7% it was in October of 2021.
When you look at the reality of that, essentially the same SPY price today is 3% less inflated than it was 2 years ago at the crazy high covid spending levels. Adding that with the current P/E levels, I genuinely don't know if that is a fair value. One thing I'm certain of, big money knows. They clearly seem to follow the interest rate pivot decisions for market bottoms and tops.
For 2024-2025, if FED lowers interest rates for any unexpected/surprising reason we haven't been notified of yet, equities price action absolutely would be on a path similar to 2000 or 2008. Essentially returning to pre covid levels. In return, bond yields would crash while the face value massively increases. Which is why my main play is TMF- leveraged 20 year bonds.
Here's my personal game plan going forward with this in mind- not war news.
Starting to add TMF (20 year treasury 3X) equity now.
~Sell covered calls on it until FED pivot lowering interest rates.
~Add all TMF covered call profit to equity until FED pivot lowering interest rates.
~Hold TMF equity until the following FED pivot where they begin increasing interest rates again- no matter how long that may be. Last time, that took from Jan, 2020-Oct,2021. The time before that, was April, 2007- July 2015.
As shown by the vertical blue lines on the interest rate chart, fed has previously held interest rates at 5.5% for years at a time. Specifically, from January, 1995 to April, 1998. Then, raising rates again in April, 1999 through October 2000. The tech bubble soon followed that..
If we are comparing things to then, and fed did get things right this time around and achieved the "soft landing," then we will see equities continue to do well as they did in 1995-2000. We would have potentially years worth of gains before reaching price to earnings levels anywhere near previous over valued levels... Where QQQ P/E ratio was a crazy 190 in March, 2000.
Meanwhile, today, QQQ P/E ratio is 32.88. A huge fundamental difference. Which is even an 8% premium discount in relation to QQQ's 3 year average P/E today of 30.45
In 2000, 10 year bond yields reached 6.03% As of October 16, 2023, the 10 year bond yield was 4.71%. Showing previous radical levels include much more room for todays markets.
Now., if we are comparing things to 2008 when banks were writing sub prime loans and simultaneously dealing with FED interest rates at 5.5%, the span that rates were that high was only from April 2006-April 2007.
As sited to Forbes.com, "By early 2007, the housing bubble was bursting and the unemployment rate started to rise. With the economy failing, the FOMC started reducing rates in September 2007, eventually slashing rates by 2.75 percentage points in less than a year."
In which that case we saw SPY equities lose 57% from October, 2007- March 2009.
Worldly/economic conditions are clearly different today than in 2000 and 2008. Those are simply references from similar fiscal conditions where outcomes ultimately contradicted each other.
To continue, from looking at past market reactions, I will ]continue holding TMF up until the point when FED pivots to begin increasing rates again.
Subsequently, this will not happen until US inflation rate is below the 2% target goal.
When US inflation is back down to 2% goal but not until, sell all 20 year bonds and start dollar cost averaging equal weight into:
XLG- SP500 top 50 fund paying 8.5% dividend
SVOL- Inverse vix paying 17% dividend
TQQQ- QQQ 3X
SOXL- Semiconductors 3X
As for the current technical level of SP500 (SPY)...we are currently at the level going back to October of 2021. This is when market reacted to FED starting to increase interest rates again.
To summarize, if fed were to raise rates again this coming November 1st, this support level will likely get bought up by the same buyers who bought in October, 2021 and January, 2023. Especially now that US interest rate is at 3.7% compared to the 6.7% it was in October of 2021.
When you look at the reality of that, essentially the same SPY price today is 3% less inflated than it was 2 years ago at the crazy high covid spending levels. Adding that with the current P/E levels, I genuinely don't know if that is a fair value. One thing I'm certain of, big money knows. They clearly seem to follow the interest rate pivot decisions for market bottoms and tops.
For 2024-2025, if FED lowers interest rates for any unexpected/surprising reason we haven't been notified of yet, equities price action absolutely would be on a path similar to 2000 or 2008. Essentially returning to pre covid levels. In return, bond yields would crash while the face value massively increases. Which is why my main play is TMF- leveraged 20 year bonds.