Summary – A top-down review of interesting calls and comments made last week in Treasuries, monetary policy, economics, stocks, bonds & commodities. TAC is our acronym for Tweets, Articles, & Clips – our basic inputs for this article.
Editor’s Note: In this series of articles, we include important or interesting Tweets, Articles, Video Clips with our comments. This is an article that expresses our personal opinions about comments made on Television, Tweeter, and in Print. It is NOT intended to provide any investment advice of any type whatsoever. No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Macro Viewpoints & its affiliates expressly disclaim all liability in respect to actions taken based on any or all of the information in this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerance.
1. Markets This Week
We said last week that “buying calls that expire around Thanksgiving seems sensible“. Who knows about Thanksgiving but this past week alone was made for buying calls. Whatever we quoted in our “What’s Next?” section last week may well pan out later but no one cared this past week.
US Indices:
- VIX down 22%; Dow up 2.2%; SPX up 1.9%; RSP up 1.7%; NDX up 2.2%; SMH up 2.4%; RUT up 2.5%; MDY up 2.3%; XLU down 20 bps;
International Stocks also celebrated:
- EEM up 1.7%; FXI up 1.4%; KWEB up 2.7%; EWZ up 2.6%; EWY up 4%; EWG up 51 bps; INDA up 11 bps; INDY up 24 bps; EPI up 48 bps; SMIN up 16 bps;
The rally in Big Bank stocks was a key factor in last week’s rally and Mag 7 kept up despite earnings disappointment in one:
Key Stocks & Sectors:
- AAPL up 4.2%; AMZN up 4.2%; GOOGL up 2.6%; META up 3%; MSFT up 2%; NFLX down 8.7%; NVDA up 1.7%; MU up 8.2%; BAC up 2.5%; C up 1.8%; GS up 4.4%; JPM up 97 bps; KRE up 3.6%; EUFN up 96 bps; SCHW up 30bps; APO up 3%; BX down 1.1%; KKR up 3.1%;
Interest Rates were bit down to unchanged and Fixed Income ETFs did ok:
- 30-year Treasury yield down 1.2 bps on the week; 20-yr yield down 1.4 bps; 10-yr down 0.6 bps; 7-yr up 0.6 bps; 5-yr up 1.4 bps; 3-yr up 1.9 bps; 2-yr up 2.1 bps; 1-yr up 3.3 bps;
- TLT up 27 bps; EDV up 49 bps; ZROZ up 36 bps; TMF up 61 bps; HYG up 45 bps; JNK up 51 bps; EMB up 57 bps;
That brings up the big event of the week ahead – FOMC meeting on Wednesday 29th October & the Powell presser. And they got good news this past week with core inflation slowing a bit. Neal Dutta of RenMac made the succinct observation in their weekly clip that “the fact that inflation number slowed and that inflation is a lagging indicator, that means the Fed was already too tight“. He added,
- “big news is core-services inflation is cooling off; primarily a function of what’s going on in the rental market; we had very very weak growth in rents; … if market-based rents are slowing, that means CPI is probably lagging that; so probably more disinflation in rents is in the pipeline; … also saw weakness in food-away-from-home inflation – it tends to be more labor-sensitive than commodity-sensitive; … restaurant menu prices are slowing meaning demand is weak?”
All this Neal said “cements an October cut“. Later on in the clip, Neal addressed the labor market:
- “I would point out that, in the last week, Amazon, Nestle, GM, Charter Communications, Target, Applied Materials, a bunch of companies last week talked about layoffs & going thru the plans for layoffs … I think the labor market is not out of the woods… so it would be interesting to see what happens with consumer confidence – because obviously stocks are at records, gas prices are gown .. so consumer confidence should have every reason to go higher; the fact that it hasn’t been so is interesting; that means what? the labor market, right?”
And he added in a CNBC clip that he sees more risk in 2026 & that makes him “more bullish on the long end of the Treasury curve“.
Back on Aug 10, 25 we had highlighted a call from the Strazza Letter saying:
- “If I’m going to buy bonds, I’m going to buy the ones I think will go up the most. … You want the Zeros. The Pimco 25-Year Zero Coupon Treasury Fund $ZROZ is the highest beta and longest duration of all the funds in our bond universe.”
Their chart showed that the ZROZ was sitting at a double-bottom at that time. Yeah, but who cares about Treasury bonds, those too zero-coupons of 25-yr maturity, right? Especially when we are in a melt-up type stock market. So ZROZ might be up but nothing compared to the S&P, right? Actually ZROZ was at 65.52 at Friday, Aug 8 close. It closed this past Friday at 70.12, a gain of 7%. SPY, which closed at 637.18 on August 8, closed this past Friday at $677.25, a gain of 6.3%. So in a market that guys like Yardeni rave about, Treasury 25-yr Zero-coupon ETF beat the SPY by 7% to 6.3%! And despite the fact that no one buys Treasury zeros ETFs for their dividend yields, ZROZ’s dividend yield is 4.65% while SPY only pays 1.09% dividend yield.
Now think where ZROZ might get to if the economy slows down with the labor market & inflation with the Fed ready to cut 2 times in 2025! We keep hearing about melt-ups in stocks but no one says “melt-down” in Treasury yields. Is this a time for a newbie 50-50 portfolio focused on Semis-techs and Treasury 25-yr zeros?
One of the reasons we turned buy-calls bullish late last week is history of what happens after a fear-led drawdown. Think back to the blowup of Bear Stearns Hedge Funds back in July 2007. After that fallout subsided & Bernanke cut rates, what happened? A big stock rally to new highs in October 2007. In a similar vein, we thought the problems at Zion, Western & the risk to other regional banks would lead to a fast, powerful rally. And it did.
2. Another bankruptcy & another rally?
On October 22, 2025, Bloomberg reported that PrimaLend Capital Partners filed for bankruptcy in a latest sign of stress in a pocket of the US Economy catering to low-income consumers. On the same day, WSJ Pro wrote Bankrupt Telecom Accused of Fraud in Receivables Financing in an article by Soma Biswas. The article says “may be half a billion of invoices that were pledged as factor collateral were simply made up“.
In other words, the collateral put up for the loan consisted of invoices the payments on which would support the loan. That’s fine, right? Until you read the words of Bryan Alsobrooks, president of factoring company Phoenix Capital at FreightWaves Festival of Freight Conference (minute 7:31):
- “We’ve seen a number of shippers that have just unilaterally decided to extend from Net 30 (days payment) to net 45 days to net 75 days to net 90 days even some to net 120; so they are trying to play the cashflow game”
Since the Fed meeting is coming up, take a look at the Bloomberg article on October 12 titled “From Tricolor to Saks, Bonds are now crashing with breathneck speed“. Frankly that changes the picture, right? Companies can go kaput, job losses might be in thousands but that is par for the course in the US Economy, right? BUT when Bonds start crashing and that too at “breakneck speed”, that’s totally different!
That’s why we like the pristine quality of U.S. Treasuries, otherwise referred to by us & presumably others as “God’s own paper”. Think of the Fed’s expected lowering of rates and the weakening state of low-quality credit with loss of jobs, don’t long duration Treasuries look good? And none of the above issues apply to Semiconductor companies involved in the AI buildout financed mainly by huge corporate machines generating their own cash. We could be totally wrong & unaware of internal dynamics, but the Semis-ZROZ portfolio does seem appealing at least to simple-minded folks like us.
And note that Tom Lee himself appeared on CNBC Overtime this week and, in contrast to nervous nellies, Tom said we could see a 10% rally from here. Now that’s a consummation devoutly to be wished. Or to paraphrase a well known saying – “put your trust in Tom and keep your powder dry“. And what could serve as more reliable dry powder than 25-yr Zero-Coupon Treasuries, otherwise known as ZROZ?
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