Blue chip names doing well, prefers CEO insights over economic data.
Charles
Jim Bianco
Third quarter earnings reports from financials/banks have been very optimistic.
Questions how to use high P/E ratios in day-to-day decision making.
Charles
Jim Bianco
High P/E ratios are expectation tools, not timing tools. Stocks bought at high P/Es need earnings to be through the roof over 5-10 years.
Notes everything is up (stocks, bonds, cash, commodities, gold), questions what the Fed is trying to fix by cutting rates.
Charles
Jim Bianco
SOFR is a concern because liquidity in banking system has been drained too much, causing higher short-term rates.
Notes parabolic move in gold, asks why China has insatiable appetite now.
Charles
Jim Bianco
China's gold buying might be political - moving dollar reserves to gold due to tariff negotiations with Trump, wanting protection from potential dollar sanctions.
Asks for interpretation of 2-year yield breaking resistance/support, if it adds credence to three more rate cuts.
Charles
Jim Bianco
2-year yield reflects expectation of where Fed is going with rates. It does price in three more rate cuts.
Jim Bianco
By adding more liquidity or at least stop doing quantitative tightening for starters and then possibly they've already suggested they're going to, but that would be next year maybe.
Well, yeah, they'll probably make an announcement at their meeting next week. They'll stop quantitative tightening, but it might not be until the end of the year, but they'll not announce that it's coming next week.
Charles
And this is a chart that you all one of the many charts you put up uh that that that goes along with that. And let's let's talk about the gold for a moment. Uh this is a par there's a million charts out there. They're all sort of the same. This is sort of parabolic move. China has become also all of a sudden they have an insatiable appetite after not having any appetite for a long time. All the other non you know big central banks were buying gold big time since the Russia's invasion of Ukraine. But why now with China? It might be political in that they're taking their dollar assets and they're reserving them or moving their reserves into gold because of all of the negotiations they're having with Trump over the tariffs and they want to protect themselves potentially from being either sanctioned or something with the dollar and a but what it does show this chart is that a lot of the buying of gold is coming from Asia. It's not out here in the United States. We're just eating popcorn enjoying the rise. It's the Asians that are buying gold in big numbers. Although, we got to give props to Americans who bought it at Costco a couple years ago. They're doing pretty good.
Charles
Jim Bianco
This is an expectation of where Federal Reserve is going to go with interest rates. The two years very tied to the funds rate policy.
Does this add credence to three more rate cuts or at least 75 basis points this year?
Charles
Jim Bianco
It does. It does that. It believes that there's going to be three more rate cuts, but the the caveat I would give you is we're in a government shutdown. We haven't gotten any data. When that data comes out, if it's too strong, this could change.