Here’s What the Heck Is Going On With the S&P 500

[] Forward this to everyone you know… To view this email as a web page, go [here.]( To view this email as a web page, go [here.]( [] [] [] Learn how to find dirt cheap options at 1 p.m. ET on Thursday with Roger Scott — [save your seat here!]( What the Hell’s Going on With the S&P 500? What The Hell’s Going On With the S&P 500? Dear Fellow Trader: “What is happening?” That’s a question I get often from people on the street. This morning, I spoke to three well-dressed men in a coffee shop for 35 minutes about the recent downturn — the market’s off 5.5% in three weeks. They invested. They were smart. But they couldn’t understand how — all of a sudden — the 10-year bond has taken off like a rocket ship. In addition, they didn’t understand why this sudden rise in long-term bonds weighed on the stock market. Today, I want to explain — very simply — what’s going on. Do me a favor… Forward this to everyone you know. A Primer Before we get to today, we must travel back in time. In 2008, the global financial system collapsed under the weight of a housing bubble, rampant speculation around financial derivatives, and immense leverage. The latter means people took on debt to increase their bullish bets by 20x to 30x. Then, these bets imploded… forcing a massive bailout of the system. At the time, Lehman Brothers — one of the top financial shops — cratered due to its mortgage books and risky bets on the housing market remaining stable. But before the crisis, Lehman owned a lot of “safe assets” like Treasury bonds. They bought them at elevated interest rates, and when the Fed cut interest rates heading into the recession, the value of those bonds went UP. When rates fall, bond prices go up. When rates rise, the value of bonds goes down. The reason is tied to the yield itself. If you own a bond that pays 2% annually for the next decade, it’s worth less than a bond that now pays 5% per year. And it’ll be worth less than a bond that might pay a higher rate due to increasing rates, which is important in today’s crisis. So, keep this in mind…. Heading into that crisis, Lehman’s good assets were increasing in price — more in a moment. Second, the Federal Reserve aggressively slashed interest rates after the 2008-09 crisis and started buying assets like U.S. bonds and mortgage-backed securities — the very things that helped fuel the crisis. The goal was to stimulate the economy. However, while stimulating the economy and trying to prevent deflation, the Fed fueled a massive bubble in assets ranging from stocks and homes to cryptocurrency and venture capital valuations. A low interest-rate environment allowed companies to borrow lots of cheap money. All the while, the Fed pumped capital into the system, which ultimately found itself in the equity markets. Effectively, cheap money allowed investors to borrow for little and then leverage that money into the stock market. That debt snowballed, but so too did the equity market gains. Third, after COVID-19 hit, the Fed panicked. It cut interest rates to ZERO and pumped trillions of dollars MORE into the system. This further inflated assets like stocks in late 2020 and early 2021. Then inflation started to impact the economy, while interest rates started to rise. But as we moved later into 2023 — markets are paying very close attention to the national debt, which has increased by nearly $20 trillion in little more than a decade. And that’s where this sudden jolt has emerged. Wake Up, Mister Bond Market The party can’t go on forever. And the punch bowl is finally going away. The bond market is now waking up… to the fact there will likely not be any interest rate cuts in 2024…. And waking up to the end of the quantitative easing era that saw interest rates under 2%... and massive capital injections from the central bank. It’s waking up to a paradigm shift. The bond market is no longer accommodating… It’s angry that congress doesn’t seem to care about the economic damage it’s causing. When the 10-year bond goes higher… stocks often face pressure as investors seek the relative safety and higher fixed returns of bonds. There are three specific reasons why this equation exists. 1. When the yield on the 10-year increases, interest rates in the broader economy are rising. This makes bonds more attractive to investors because they can get a higher return from bonds with less risk than stocks. However, there is a caveat here. You see, when bond yields rise sharply, the price of bonds drops as well. So, buyers may hesitate to load up on bonds for longer durations. As a result… yields move higher, which weighs further on the equity markets. 2. These higher yields have a dramatic impact on the corporate environment. Higher bond yields can increase the cost of borrowing for companies, impacting their profitability and growth potential. This can lead to reduced stock prices as investors anticipate lower corporate earnings. But it can also extend beyond earnings, as speculation — the desire to buy for a dollar and try to sell for two — is muted in these rising rates. 3. Finally, discounted cash flow models heavily influence stocks’ valuations, which consider the present value of future earnings. As interest rates increase, the discount rate used in these models also rises, which leads to lower present values for future cash flows and lower stock valuations. The Real Problem: A Reverse Lehman Brothers For the last 12 years, we’ve lived in a world of low-interest rates despite massive capital injections, bubble-style economics, and huge increases in our U.S. debt levels. Now, we’re realizing that the Fed is running out of bullets, Congress will continue to take us off the cliff, and only the bond market will properly reflect the realities of what lies ahead. But UNLIKE the Lehman Brothers event — where their safe assets went up in price… the exact opposite is happening this time. You see, banks, institutions and more bought a lot of long-term bonds in recent years to capture 1.5% to 2% in low-interest rate environments. Today, their long-term bonds have cratered in value, weighing on the quality of their collateral to borrow or hedge in this market. It turns out that safe assets in Treasuries from recent years are now capital traps for so many institutions. They can’t sell these bonds without taking a massive loss. And in some cases, these firms may even go insolvent should they sell those assets — see what happened in March to dozens of banks that had to borrow massive amounts of money from the Fed. This isn’t over… And the reaction could be a sharp repricing of risk and traditional assets — from stocks to housing. The good news is that our momentum indicator went negative in mid-September, and we’ve largely avoided the damage. For now, we wait for the dust to clear. [] Chat soon, Garrett {NAME} *This is for informational and educational purposes only. There is an inherent risk in trading, so trade at your own risk. [] [] _________________________________________________ [] Ditch the Pricey Options and Go With This Bargain A [newly discovered pricing mismatch]( has shown to pay out MASS gains from small 1% moves in the underlying share price of a stock. Gains like 41%... 46%... and even as big as 51% or more... And it’s been 41 times better than the S&P 500 over the last 10 years! So it's time to drop overpriced options and tap into the power of this “pricing mismatch” — it’s a bargain! [Get the Full Details Here]( [] _______________________________________________ [] Market Momentum is RED Equity momentum is now red across the board, with all sectors in sell-off conditions. We will continue to show patience in this environment without forcing any trades. *This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk. [] _______________________________________________ [] Want to get a link to my TradingPub articles as soon as they post? I’ve got you covered! Telegram is an entirely free messaging app and getting access is as easy as 1… 2… 3… 1. Download Telegram on your mobile device (Before you can add Telegram to your desktop computer, you must download the application on your phone and create your account: To download to your iPhone, [click here](. To download to your Android device, [click here](. After the download is complete, please create an account. NOTE: You can manage your privacy settings by clicking “Settings,” and then “Privacy & Security.” 2. Download Telegram on your desktop: Once you’ve downloaded Telegram onto your mobile device and created your personal account, you can download it onto your desktop computer. To download onto your PC, [click here](. To download onto your MacOS, [click here](. 3. Then add the TradingPub channel and you’re done: [9_jjnFuAvno0MjNh]( See you there! Garrett [] [] [] Learn how to find dirt cheap options at 1 p.m. ET on Thursday with Roger Scott — [save your seat here!]( What the Hell’s Going on With the S&P 500? What The Hell’s Going On With the S&P 500? Dear Fellow Trader: “What is happening?” That’s a question I get often from people on the street. This morning, I spoke to three well-dressed men in a coffee shop for 35 minutes about the recent downturn — the market’s off 5.5% in three weeks. They invested. They were smart. But they couldn’t understand how — all of a sudden — the 10-year bond has taken off like a rocket ship. In addition, they didn’t understand why this sudden rise in long-term bonds weighed on the stock market. Today, I want to explain — very simply — what’s going on. Do me a favor… Forward this to everyone you know. A Primer Before we get to today, we must travel back in time. In 2008, the global financial system collapsed under the weight of a housing bubble, rampant speculation around financial derivatives, and immense leverage. The latter means people took on debt to increase their bullish bets by 20x to 30x. Then, these bets imploded… forcing a massive bailout of the system. At the time, Lehman Brothers — one of the top financial shops — cratered due to its mortgage books and risky bets on the housing market remaining stable. But before the crisis, Lehman owned a lot of “safe assets” like Treasury bonds. They bought them at elevated interest rates, and when the Fed cut interest rates heading into the recession, the value of those bonds went UP. When rates fall, bond prices go up. When rates rise, the value of bonds goes down. The reason is tied to the yield itself. If you own a bond that pays 2% annually for the next decade, it’s worth less than a bond that now pays 5% per year. And it’ll be worth less than a bond that might pay a higher rate due to increasing rates, which is important in today’s crisis. So, keep this in mind…. Heading into that crisis, Lehman’s good assets were increasing in price — more in a moment. Second, the Federal Reserve aggressively slashed interest rates after the 2008-09 crisis and started buying assets like U.S. bonds and mortgage-backed securities — the very things that helped fuel the crisis. The goal was to stimulate the economy. However, while stimulating the economy and trying to prevent deflation, the Fed fueled a massive bubble in assets ranging from stocks and homes to cryptocurrency and venture capital valuations. A low interest-rate environment allowed companies to borrow lots of cheap money. All the while, the Fed pumped capital into the system, which ultimately found itself in the equity markets. Effectively, cheap money allowed investors to borrow for little and then leverage that money into the stock market. That debt snowballed, but so too did the equity market gains. Third, after COVID-19 hit, the Fed panicked. It cut interest rates to ZERO and pumped trillions of dollars MORE into the system. This further inflated assets like stocks in late 2020 and early 2021. Then inflation started to impact the economy, while interest rates started to rise. But as we moved later into 2023 — markets are paying very close attention to the national debt, which has increased by nearly $20 trillion in little more than a decade. And that’s where this sudden jolt has emerged. Wake Up, Mister Bond Market The party can’t go on forever. And the punch bowl is finally going away. The bond market is now waking up… to the fact there will likely not be any interest rate cuts in 2024…. And waking up to the end of the quantitative easing era that saw interest rates under 2%... and massive capital injections from the central bank. It’s waking up to a paradigm shift. The bond market is no longer accommodating… It’s angry that congress doesn’t seem to care about the economic damage it’s causing. When the 10-year bond goes higher… stocks often face pressure as investors seek the relative safety and higher fixed returns of bonds. There are three specific reasons why this equation exists. 1. When the yield on the 10-year increases, interest rates in the broader economy are rising. This makes bonds more attractive to investors because they can get a higher return from bonds with less risk than stocks. However, there is a caveat here. You see, when bond yields rise sharply, the price of bonds drops as well. So, buyers may hesitate to load up on bonds for longer durations. As a result… yields move higher, which weighs further on the equity markets. 2. These higher yields have a dramatic impact on the corporate environment. Higher bond yields can increase the cost of borrowing for companies, impacting their profitability and growth potential. This can lead to reduced stock prices as investors anticipate lower corporate earnings. But it can also extend beyond earnings, as speculation — the desire to buy for a dollar and try to sell for two — is muted in these rising rates. 3. Finally, discounted cash flow models heavily influence stocks’ valuations, which consider the present value of future earnings. As interest rates increase, the discount rate used in these models also rises, which leads to lower present values for future cash flows and lower stock valuations. The Real Problem: A Reverse Lehman Brothers For the last 12 years, we’ve lived in a world of low-interest rates despite massive capital injections, bubble-style economics, and huge increases in our U.S. debt levels. Now, we’re realizing that the Fed is running out of bullets, Congress will continue to take us off the cliff, and only the bond market will properly reflect the realities of what lies ahead. But UNLIKE the Lehman Brothers event — where their safe assets went up in price… the exact opposite is happening this time. You see, banks, institutions and more bought a lot of long-term bonds in recent years to capture 1.5% to 2% in low-interest rate environments. Today, their long-term bonds have cratered in value, weighing on the quality of their collateral to borrow or hedge in this market. It turns out that safe assets in Treasuries from recent years are now capital traps for so many institutions. They can’t sell these bonds without taking a massive loss. And in some cases, these firms may even go insolvent should they sell those assets — see what happened in March to dozens of banks that had to borrow massive amounts of money from the Fed. This isn’t over… And the reaction could be a sharp repricing of risk and traditional assets — from stocks to housing. The good news is that our momentum indicator went negative in mid-September, and we’ve largely avoided the damage. For now, we wait for the dust to clear. [] Chat soon, Garrett {NAME} *This is for informational and educational purposes only. There is an inherent risk in trading, so trade at your own risk. [] [] _________________________________________________ [] Ditch the Pricey Options and Go With This Bargain A [newly discovered pricing mismatch]( has shown to pay out MASS gains from small 1% moves in the underlying share price of a stock. Gains like 41%... 46%... and even as big as 51% or more... And it’s been 41 times better than the S&P 500 over the last 10 years! So it's time to drop overpriced options and tap into the power of this “pricing mismatch” — it’s a bargain! [Get the Full Details Here]( [] _______________________________________________ [] Market Momentum is RED Equity momentum is now red across the board, with all sectors in sell-off conditions. We will continue to show patience in this environment without forcing any trades. *This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk. [] _______________________________________________ [] Want to get a link to my TradingPub articles as soon as they post? I’ve got you covered! Telegram is an entirely free messaging app and getting access is as easy as 1… 2… 3… 1. Download Telegram on your mobile device (Before you can add Telegram to your desktop computer, you must download the application on your phone and create your account: To download to your iPhone, [click here](. To download to your Android device, [click here](. After the download is complete, please create an account. NOTE: You can manage your privacy settings by clicking “Settings,” and then “Privacy & Security.” 2. Download Telegram on your desktop: Once you’ve downloaded Telegram onto your mobile device and created your personal account, you can download it onto your desktop computer. To download onto your PC, [click here](. To download onto your MacOS, [click here](. 3. Then add the TradingPub channel and you’re done: [9_jjnFuAvno0MjNh]( See you there! Garrett [] A TradingPub Publication ABOUT US: We believe that the opportunity for financial literacy and freedom belongs to all people, not just those who already have years of investing experience. TradingPub provides an array of educational services and products that will help you navigate the markets and become a better investor. Trading is made simple through our online forum full of trading techniques to give you the best tools to kick-start your investing journey. We offer collaborative webinars and training; we love to teach. No matter the opportunity, we bring together a strong community of like-minded traders to focus on analyzing market news as it’s presented each day. DISCLAIMER: FOR INFORMATION PURPOSES ONLY. The materials presented from TradingPub LLC are for your informational purposes only. Neither TradingPub nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational purposes intended is at the user’s own risk. DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. TradingPub is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions. Please visit for our full Terms and Conditions. [Unsubscribe]( This email was sent to {EMAIL} by TradingPub 101 Marketside Ave, Suite 404 PMB 318 Ponte Vedra, Florida 32081, United States [] A TradingPub Publication ABOUT US: We believe that the opportunity for financial literacy and freedom belongs to all people, not just those who already have years of investing experience. TradingPub provides an array of educational services and products that will help you navigate the markets and become a better investor. Trading is made simple through our online forum full of trading techniques to give you the best tools to kick-start your investing journey. We offer collaborative webinars and training; we love to teach. No matter the opportunity, we bring together a strong community of like-minded traders to focus on analyzing market news as it’s presented each day. DISCLAIMER: FOR INFORMATION PURPOSES ONLY. The materials presented from TradingPub LLC are for your informational purposes only. Neither TradingPub nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational purposes intended is at the user’s own risk. DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. TradingPub is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions. Please visit for our full Terms and Conditions. [Unsubscribe]( This email was sent to {EMAIL} by TradingPub 101 Marketside Ave, Suite 404 PMB 318 Ponte Vedra, Florida 32081, United States