11 21 20025

Episode Transcript

Speaker 1 (00:00):
Good morning. This is Chris Klein. You're listening to the
Care for My Wealth podcast, which will be pretty short.
I just like to go through three things of importance.
But before I do that, I think our world is
in a stage that needs encouragement at every turn. I
believe that all of us, as human beings walking God's

(00:23):
creation here on Earth, need encouragement. And I think a
reading that I run ran across this morning, I think
would be really valuable. It's from Isaiah forty three, verse two.
When you go through deep waters, I will be with you.
When you go through rivers of difficulty, you will not drown.
When you walk through the fire of oppression, you will

(00:44):
not be burned up. The flames will not consume you.
I find that to be incredibly encouraging at a time
where I know there are a lot of people today
who are hurting, who are in need, who find themselves
in many cases being crushed by the cost of inflation
here in America, by living under the depreciating value of

(01:06):
its currency, the overwhelming difficulties that governments are applying to people.
You name it. There are tons of things that are
causing people problems, despair, and discouragement. And I can't change
any of that, But what I can do is encourage you.

(01:26):
And I want to encourage you to take time and
sit back and speak life into yourself in any way
that you can. I happen to be Christian. I happen
to try very hard to follow the Jesus Way, even
though I know I fail at it more times than
I want to admit. But in doing that, I have
learned that if you can speak life into yourself, if

(01:48):
you can claim the great I ams I am healthy,
I am joyful, I am patient, I am peaceful, I
am good, I am kind, I am loving, I am generous,
I am self controlled all what would we would call
the fruit of the spirit. If you can do that,
that would be great. You'd speak encouragement into yourself and

(02:11):
maybe take some burdens away from your day to day
and who knows, maybe help take some burdens away from
somebody else that you meet along the way. So with
that said, totally off a maybe normal path for what
you would expect from a financial podcast, But hey, I
think all of us need prayer and why not take

(02:33):
the time to just ask God for guidance and continue
to follow Jesus's example, in generosity and giving to those
who are around you, not just in material needs, but
also in emotional needs. When we continue to work through
this economic environment that just is well a bit volatile.

(02:54):
With no further ado, here are your top three things
you know. I don't talk about Japanese yields very much,
but they are important to the macroscape due to what's
called the carry trade. And for those of you that
have never heard of the carry trade before, it's just
essentially borrowing in cheap yields like what Japan had for
a very long time. We've seen that yield increase quite

(03:17):
a bit recently, but you would basically borrow in cheap
yields like Japan had and then reinvest in higher yields
in another country. Big, big, big traders will do this,
and they'll do it in the form of currency trading,
which means they'll use massive amounts of leverage. And in Japan,
when those yields start accelerating, it causes the carry trades

(03:38):
to unwind or blow up. Since basically late twenty twenty one,
the Japanese thirty year yields have been rising, and since
just the beginning of this month in November the Japanese
thirty year yield has ripped higher from three point zero
five percent to a high of three point four percent
yesterday mid day. That's a huge move in a very

(04:01):
very short period of time and could very well have
triggered these carry traders into liquidation mode. I've had five
days of cell signals on our indicators for the Japanese
thirty year yield, and yesterday it reversed intraday, and so
far this morning is down about five basis points to
three point three two percent. That could be very good

(04:23):
for the macro trade to allow these carry traders to
heal and perhaps unwind without being forced into liquidation. So
we'll see how that goes and continue to monitor it.
One of the things that's dovetailing that it's also very
important is something called the move index, which is bond volatility.

(04:44):
And I've mentioned how important bond volatility is to capital markets,
especially stocks and bonds. Given the fact that the bond
market is massive, elevated bond volatility isn't anything that any
market likes. This last week, on Wednesday, I wrote to
our client, it's about the move index again, the bond
volatility indicator, giving us a cell signal and that the

(05:06):
probability of bond volatility decelerating was starting to increase. Well,
it looks like we got our answer yesterday because the
move Index dropped seven hundred and seventy two basis points
in a day. Now, that's a lot, and it's the
most since April ninth, when it dropped seven hundred and
ninety basis points. Now think about that for just a moment.

(05:29):
It could be a very significant indicator in that April
nine also coincided with the stock market bottoming and from
its mid February through April cell off. It would be
a very welcome signal to both bonds and equities if
bond volatility can just continue to settle down. If you're
looking at the move index, the seventy five level is
going to be an important area for the move to

(05:51):
get through, and internal indicators that I follow every single
day suggests that we should see that over the coming
days and weeks. We'll continue to monitor it and be
cognizant of bond market volatility. On top of that, we've
got equity volatility basically signified by the VIX. VIX front

(06:12):
month vixed pricing closed higher than its October closing high yesterday,
and today we get the first cell signal on our
internal indicators on the VIX. Since wait for it, April seventh,
could we get a few more days of volatility dealer
hedging as they buy protection buy the VIX. Yeah, sure,

(06:32):
of course that happened back at the market's bottom in
the April seven to ten timeframe. Two front month VIX
is still above the October close as of this morning's trading,
but it's also starting to trade down some too, so
it'll be important to see how it trades today. Some
important levels for the VIX to close through will be
twenty five point three zero, twenty four point seven zero,

(06:55):
and twenty three point one four. The VIX futures curve
is still in what we call backwardation. To spot spot
is just the current VIX price, and that just means
that the current price is higher than the first and
second month futures prices, which suggests traders expect less volatility
over the next couple of months, which would be a
good thing. So look one day at a time. But

(07:17):
the S and P five hundred has support at sixty
five hundred. If the S and P five hundred and
the vix are both down on the same day. It
would be a signal that the selling is getting exhausted
and is close to ending. The macro picture, as we
know it is still intact with January expecting a growth
ree acceleration along with an inflation deceleration. So maybe the

(07:39):
S and P five hundred can move back above the
low end of its trend range, which it cut through yesterday.
Yesterday was day one of being below trend, but as
you know from listening to me, day one of anything
below a trend level isn't an issue. It's got to
stay there for longer than a hot minute, like we
like to see at least a three confirmation below in

(08:02):
an important area of trend before we get too excited
about making an adjustment to any of our allocations and positioning.
So that's that, And if you have any questions, feel
free and reach out Chris at CAREFROMIWALF dot com or
if you'd like to chat the old fashioned way the
phone still works, which is eight sixty six five nine

(08:23):
six ninety eight eighty six. Thanks so much, hope you
have an amazing weekend. God bless Take care,