“One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do… I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up… I wait for a situation that is like the proverbial ‘shooting fish in a barrel.” ~ Jim Rogers
In this week’s Dirty Dozen [CHART PACK], we look at what’s going on in rates, the setup in BTCUSD, and some deep value on offer in PGMs, plus more…
1. BofA’s latest Flow Show Summary.
2. BTCUSD is one of the most compelling setups, in my opinion. The technicals are solid, with it trading near the upper range of its 7-month consolidation. Positioning is short. The CCP is expected to announce a sizable fiscal package on November 8th, along with a probable Trump win. Both of which will be tailwinds for crypto (we are long).
3. BTCUSD Large Spec positioning is near its 10th percentile, and sentiment is at its 0th percentile.
4. Apollo on what Household’s will do with their Treasury holdings: “US households are savvy. When the Fed funds rates was zero, the number of households with a TreasuryDirect account, where you can buy and sell US government bonds, was about 700,000, see chart below. But once the Fed started raising interest rates, the number of households with a TreasuryDirect account increased to 4 million. Even before the Fed started cutting, the number of accounts started declining.
“Combined with the $6.5 trillion currently in money market funds, the key question is what households will do with their Treasury holdings and money market holdings as the Fed continues to cut interest rates.
“The most likely outcome is a steeper curve whereby households will withdraw money from the front end of the curve and put it into credit and other higher-yielding fixed income assets.”
5. More signs of a softening/normalizing labor market via RenMac: “According to the Conference Board’s Q4 2024 CEO Confidence Survey, 26% of survey respondents see a net reduction in the workforce over the next 12 months. This is the highest level since Q4 2020.”
6. UST yields (black line) have risen over the past month and a half, while our yield leads diverge lower.
7. This rise in yields is partly driven by the rising probability of a Trump win. Here’s the following from Verstand Global Macro: “The five-day rolling correlation between changes in the 10-year Treasury yield and changes in betting market odds of a Trump win strengthened when rates recently rose. Higher interest rates in this election scenario are consistent with Trump scenarios.”
8. There’s also a bit of a circular component between rising yield volatility and deteriorating liquidity. Simon White of BBG notes that “the volatility of yields is the most important factor affecting Treasury liquidity. The MOVE index, a measure of implied yield volatility with approximately a 1-month horizon, has jumped higher in recent weeks as the election moves into the horizon window. The MOVE has a very close relationship with Treasury-market liquidity, as proxied by the Bloomberg Treasury Liquidity Index in the chart below. Liquidity risks are rising.”
9. The bearish bond narrative is starting to feel a bit consensus though. This BofA chart projects CTA positioning will hit -1std next week, so maybe instead of a further selloff, we get a bottom around election time.
10. For the past six months, we’ve been tracking a potential bottom in PGMs. Both platinum and palladium have relative valuations in the 0th %tile.
11. Palladium.
12. To express this view we got long the Sprott Physical Platinum and Palladium Trust (SPPP) the other week. The weekly chart gives us a large technical double-bottom base.
Thanks for reading.
