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 Last Week
We are not sure that what we said two weeks ago that “buying calls that expire around Thanksgiving seems sensible“ is still as valid as we felt last week. That is mainly due to what we wrote in our “What’s Next?” section two weeks ago reared up late this week. But first things first:
US Indices:
- VIX up 6.6%; Dow up 75 bps; SPX up 71 bps; RSP down 1.7%; NDX up 2%; SMH up 3.4%; RUT down 5.3%; MDY down 1.6%; XLU down 2.5%;
International Stocks were mixed:
- EEM up 36 bps; FXI down 2.1%; KWEB down 1.5%; EWZ up 2.3%; EWY up 5.4%; EWG down 2.11%; INDA down 99 bps; INDY down 86 bps; EPI down 35 bps; SMIN down 1%;
Both Big Banks-Financials & Mag 7 were mixed on mixed reactions to earnings:
Key Stocks & Sectors:
- AAPL up 2.9%; AMZN up 8.9%; GOOGL up 8.2%; META down 12.2%; MSFT down 1.1%; NFLX up 2.2%; NVDA up 8.7%; MU up 2.2%; BAC up 1.7%; C up 2.5%; GS up 70 bps; JPM up 3.6%; KRE down 2%; EUFN up 89 bps; SCHW up 11 bps; APO down 55 bps; BX down 5.2%; KKR down 2.4%;
Interest Rates went up and Fixed Income ETFs went down:
- 30-year Treasury yield up 7.5 bps on the week; 20-yr yield up 8.1 bps; 10-yr up 9.6 bps; 7-yr up 10.7 bps; 5-yr up 10.4 bps; 3-yr up 11.3 bps; 2-yr up 11.6 bps; 1-yr up 9.9 bps;
- TLT down 1.3%; EDV down 1.8%; ZROZ down 2%; TMF down 4%; HYG down 35 bps; JNK down 36 bps; EMB up 39 bps;
The Fed literally had zero to nil choice in delivering what they had essentially promised – they announced end of QT (act of withdrawing-reducing Bank Reserves) from December 1 and they cut the Federal Funds rate by 25 bps making the range of Federal Funds rate to 3.75%-4%.
The fact that eliminated Fed’s choice of a 50 bps rate cut was neither Powell per se nor a revised belief in the strength of the US Economy. It was simply the stunning up move of NVDIA shares in the first 3 days of last week. And $NVDA soared to a new $5 trillion+ high of $211.63 on the day Fed acted & Powell spoke.
The monstrous move up in $NVDA suggested (falsely we might add) a massive liquidity in the US Stock Market & a signal of unbridled optimism. The Fed could not, we believe, lower rates by 50 bps in the face of this crazy but false signal of economic strength. So Powell cut rates by 25 bps, announced end of QT in a month and tried to act stern by warning all that they should NOT assume another rate cut of 25 bps is a given in the December meeting.
Allow us to state explicitly that Chair Powell & his Fed are in this soup solely & exclusively due to their posture of backward looking and their sheer cowardice in not acting in April or/and July to cut rates. They termed it “data dependency” but it was sheer cowardice & inability to think forward. If, we at Macro Viewpoints, took the decisive steps to cut our ONR by 50 bps in April & again by 50 bps in the summer, why couldn’t this big committee of bookonomists & their 600-strong Ph.D. assistants?
Perhaps Milton Friedman explained it best:
We understand the Fed’s compulsion to not cut by 50 bps this past week but we fail to understand the sheer cowardice in not starting QE (Quantitative Easing – adding to bank reserves) right away.
2. Equities
Since Semiconductors were the first component of our Semis+Zero-coupon trade, let us begin with semis highlighted in a SentimentTrader email:
Per their email:
- Are semiconductors poised for another major run? Two key factors are aligning:
- • A counterintuitive Optix signal (3-day avg > 80% in an uptrend) has a 92% 1-year win rate for SMH.
- • Seasonality: The sector is now entering its most favorable historical period (TDY #206+).
- The data presents a compelling, high-potential case, but this remains a high-risk arena that demands caution.
On the other hand, the next chart is about technological momentum coinciding with weakening crude oil prices:
SentimentTrader email writes:
Strong Tech + Plummeting Oil? – A market divergence signal has been triggered. Historical data points to near-term risks, not a “Goldilocks” scenario:
• S&P 500: Under near-term pressure. 43% probability of positive performance over the next month, with a median return of -1.5%.
• Crude Oil: Weakness may persist. 43% win rate over the next month, median return -8.3%; 2-month return -12.41%.
• Technology (XLK): Also a loser. As a “relatively strong” sector, its median 1-3 month returns are also negative (though falling less than energy).
• Short-term rotation points to defensives: Energy (XLE) worst performer (-5.4% over 1 month).
Capital flows into Utilities (XLU, +2.2%), Consumer Staples (XLP, +1.4%), and Communication Services (XLC, +2.9%), all with 71% win rates.
Conclusion: This signals economic distress or deflationary pressures rather than a bullish catalyst. The near-term path points to volatility and defensive rotation.
What was the action like on Fed day?
- Subu Trade@SubuTrade – Thu – Almost 9% of S&P 500 stocks were at 52 week Lows yesterday, while $SPX was within -1% of an All-Time High. This only happened 3 times before: – Twice in December 1999 (before March 2000 top); – July 2015 (before August 2015 crash)
And,
- Subu Trade@SubuTrade – This is the most $SPX stocks at 52 week Lows, since the April crash. Not something you see every day.
The negatives above would help the ZROZ = 25-yr Treasury zeros & the positives above would help Semis. Interesting!
3. Collapse in Bank Reserves & Explosion in Emergency Repo Facility Demand
Remember what happened to Treasury Repo rates at 3rd quarter end on September 30, 2025 & two days later on Friday October 3, 2025? That was so long ago, almost a month ago, with calm during the intervening period. Presumably that persuaded the Fed to assume it was a one-time event & they kept their Quantitative Tightening (QT) on for another month in their meeting on Wednesday, October 29. (Remember that QT means reducing the Bank Reserves in the system, a deliberate move to tighten monetary liquidity).
Hmmm! Look what happened a mere 2 days later at October month-end! First at mid-day on Friday, we saw notice from Infranomics titled Repo Soars to Record $20B, Bank Reserves Plummet to 5yr Low, SOFR Show Fed is Losing Control. – The clip’s description says –
- “A CRISIS? Bank reserves are plummeting to a 5-year low, the Emergency Repo Facility soars to a record $20 billion, and SOFR spreads are blowing out above the Discount Window rate Is the Fed losing control and what’s their next move?“
So why are we acting as if that is mere “eh”? Isn’t $20 billion withdrawn using the emergency repo facility scary? Yes but not as frightening as $50 billion tapped in one day. Indeed, because
- “ANOTHER $30 BILLION got tapped in the afternoon Repo operations at the Fed, bringing today’s total emergency liquidity needs to a staggering $50 billion“
Watch this 10:11 minute clip released on Friday, October 31 afternoon titled Emergency Update: ANOTHER $30B Tapped in Afternoon Repo Operation at Fed.
The very 1st page of the clip says in Big Bold – FED’s EMERGENCY LIQUIDITY FACILITY SURGES TO RECORD $50 BILLION. At the right boundary of the page, you will see a VERTICAL Bar graphically illustrating the explosion in demand.
On the other hand, not enough of a reason for Fed to panic because at the left boundary of the first page, you see another vertical bar from June 2020 touching $110 billion. So not for the Fed to worry, right? On Friday, we were ONLY at $50 billion, half of the $110 billion demanded in the midst of COVID emergency in June 2020.
May be, that’s why the Powell Fed was content to EXTEND their QT or removal of bank reserves for another month!!!
What does this clip’s author say at minute 9:05 page of this clip?
- “we can see that has gone straight vertical. So we are certainly getting into a situation where abundant liquidity is over and we are entering a regime of scarce liquidity and of course that prior chart we can see this coincides with bank reserves uh uh plummeting going from about 3.4 trillion just a couple weeks ago when we started covering uh this particular topic to just 2.8 trillion. So, the Fed is flirting dangerously close with an accident or some sort of financial crisis. “
Frankly, we must take exception to the clip author’s description “Fed is flirting“. The clip author does NOT understand the data-dependency approach of this Fed. We have no doubt that, once the Fed sees a financial accident take place or a financial crisis happen, they will immediately have an internal meeting & calm the markets down with their plans to act once the accident becomes big or the financial crisis deepens.
If you doubt us, look at the comments of Fed’s Logan quoted at minute 7:10 of the above clip:
- “FED’s LOGAN: IF THE RECENT RISE IN REPO RATES TURNS OUT NOT TO BE TEMPORARY THE FED WOULD NEED TO BEGIN BUYING ASSETS“
But as of now, FED’s LOGAN is merely “DISAPPOINTED TO SEE To SEE TRI-PARTY REPO RATES EXCESS SRF RATE“. How dare these borrowers act in this manner to “disappoint” the august FED’s LOGAN? And note FED’s LOGAN says “DEALERS MAY NEED TO STEP UP READINESS TO ACCESS SRF“.
Now you understand why we think this FED might actually be waiting for the REPO demand to reach the June 2020 level of $110 billion!
You can also see that what happened on October 31 was bigger & scarier than what happened on September 30 (Quarter-end) and on Friday October 3. And yet Fed’s Quantitative Tightening (QT) or removal of bank reserves continues unabated until December 1. So what happens on Friday, November 29? Something progressively worse than what happened on September 30 & October 31?
But the FEDs are Honorable People & they are firmly & respectfully holding to their Data Dependent approach! It is their maxim & we must respect their adherence to it.
4. Another bankruptcy & another rally? – Part II
Recall that last week we highlighted a WSJ Pro article that wrote about a Bankrupt Telecom Accused of Fraud in Receivables Financing. That article said “may be half a billion of invoices that were pledged as factor collateral were simply made up“. This mess got deeper with this week’s WSJ article titled “BlackRock Stung by Loans to Business Accused of ‘Breathtaking’ Fraud”. :
- BlackRock’s private-credit investing arm and other lenders are trying to recover hundreds of millions of dollars after falling victim to what they called a “breathtaking” fraud, marking another breakdown in an opaque corner of the U.S. debt markets.
- The lenders have accused Bankim Brahmbhatt, the owner of little-known telecom-services companies Broadband Telecom and Bridgevoice, of fabricating accounts receivable that were supposed to be used as loan collateral. The lenders filed suit in August. They said Brahmbhatt’s companies owe them more than $500 million.
- Brahmbhatt disputes the allegations of fraud, his lawyer said.
Reportedly, the BlackRock entity involved is HPS Investment Partners, which BlackRock acquired earlier this year. But very few know of HPS & almost everybody knows of BlackRock. In our opinion, involvement of the name BlackRock changes the color of this bankruptcy & raises the possibility of serious investigations of other private equity transactions.
The other area that got into focus this week was Buy Now & Pay Later (BNPL) arrangements extended to buyers that are unable to pay, which now may account for a large number of Americans, 69% of whom are living paycheck to paycheck according to comments on Public TV by Unicus Research CEO.
The big news in this area on Friday was that New York Life, the huge insurance company, gave $750 million “OFF BALANCE SHEET” FINANCING TO AFFIRM FOR BNPL (buy now pay later) CONSUMER LOANS. The Affirm stock rallied by 10% on this news & CNBC gave an enthusiastic thumbs up to Affirm & this financing. And, as we recall, Affirm has been a favorite stock of CNBC’s Jim Cramer who has interviewed Affirm’s CEO on his show.
A MSNBC article about the same deal was not as exuberant as the above CNBC “reporting” (how weird is MSNBC being more conservative than CNBC):
- “However, this new deal with New York Life comes at a time when the lending environment is uncertain. While consumer spending remains steady and late payments are easing, investors are still cautious after recent bankruptcies in subprime auto and consumer credit. Nevertheless, the continued support from major financial partners suggests that many still believe in Affirm’s long-term potential, as it has financed over $100 billion in purchases and says that more than 90% of its borrowers return for repeat loans.”
So what happens if say 5% of Affirm’s $100 billion in purchases get delinquent? Presumably New York Life has very deep pockets & they can hold on for ever.
Interestingly we first heard of this transaction via the clip below that speaks about the above NY Life transactions & others: Their views, as described in their opening comment on their clip site:
- “AIG almost failed in 2008 (but for taxpayer bailout) because of its bets on mortgage backed securities. When the subprime borrower defaults started blowing up it triggered massive collateral calls and AIG did not have enough liquidity to cover. New York life insurance company is doing the same except instead of the CDO’s, the BNPL receivables are collateral for the loans. What happens when the BNPL consumers lose their job and stop making their payments? AIG 2.0 in the making.”
We ourselves are far less interested in Affirm than we are in NY Life & the other Life Insurer companies that are being used for this lending. We saw that approach from David McAlvany in the McAlvany Financial clip below: titled Insurance Companies Could Spark the Next Global Financial Crisis.
Fast forward to minute 10:34 of this clip:
- “Because insurance companies don’t have depositors, the captive asset portfolios at insurance companies have been prime targets for private equity & private credit. This is where these groups get to dump their trash. And the intent of these insurance companies is to continue to add private market holdings the idea is to smooth long term returns … In a BlackRock survey of 463 insurance company executives, 93% expect to increase their exposure to private equity & private credit. Only 3% said they were considering reducing their exposure; insurance companies already hold $2.3 trillion in private assets, $250 billion in CLOs; If you want to know where the next major bailout will have to be, look at insurance companies, look at the annuity powerhouses; when I say that’s where the bodies are buried, we are talking about mass graves; regulatory arbitrage – that’s the game; you can do inside insurance companies what is impermissble in scrutinized & regulated markets; … insurance companies are quickly becoming a version of shadow banks; … the Federal Reserve was writing about Insurance Companies becoming Shadow Banks as far back as 2023; this is not a news flash; it just takes time for rot to sort of fester “
Wow! Now you know why we prefer Treasuries & especially Zero-coupon 25-30 year Treasuries. If the above stuff hits the fan, these Treasuries will do very well, as they did in 2008!
See how interesting this topic has become! It began with used cars owned by subprime immigrants in the west to now BlackRock & New York Life being accused of being used as dumpsters for trash by lenders!!
But seriously this is NOT data, just supposition & conjectures. And we all know, the Fed wouldn’t even glance at it until data becomes so loud that the data-dependent Fed deigns to look at it. No wonder all these luminaries want to join the Fed, a job with all reward & zero risk.
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