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The End or Start of a Cycle? 🔄
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Bonds Are A Buy. Here's Why... 💰
High Returns Do Not Require High Effort, “Charlie Munger”
Upcoming Data 📈
Weekly Trading Levels
OTHER IMPORTANT TOPICS:
Last Week’s Trade Alerts Profits 💹📈
Made thousands trading /ES, $NVDA, $SQ
All About BONDS
Why Buying Bonds while the Feds Anticipate Rate Cuts Can Be Profitable
One intriguing avenue to explore is the potential profitability of buying bonds with high yields when the market is pricing in rate cuts by central banks. When interest rates rise, bond prices typically fall, and when rates decline, bond prices tend to rise. This inverse relationship is at the core of bond investing.
Here's why buying bonds with high yields when rate cuts are expected can be profitable. (Buying bonds directly or through an ETF on the stock exchange.):
Locking in Attractive Yields: Buying a bond with a high coupon rate during a period of elevated yields secures attractive returns for the bond's duration. The bond will continue to pay the high coupon rate even if market rates decrease.
Capital Appreciation Potential: As interest rates decrease, the prices of existing bonds with higher coupon rates may increase. This is because newly issued bonds have lower coupon rates, making existing bonds with higher coupons more appealing. This can lead to capital appreciation for your bonds.
Steady Income: Bonds with high yields provide a consistent income stream, which is valuable for income-oriented investors. The reliable cash flow from these bonds contributes to portfolio stability.
Risk Mitigation: High-yield bonds can help mitigate risks during uncertain market times. While they are not completely immune to market fluctuations, their relatively higher coupon payments can soften the impact of price declines.
Considerations and Risks:
Considerations and risks when buying high-yield bonds: interest rate risk, credit risk, diversification, and economic conditions. Stay informed and adapt accordingly.
First Disruption to Smartphones in 15 Years🤳
Tech Startup With Traction: Turn your phone from a cost to an income source. Intriguing idea, isn't it? This is why, we have our eyes on the launch of Mode Mobile’s Pre-IPO Offering. It’s the latest in a series of impressive raises among smartphone innovators, likely spurred by Apple’s recent $3+ trillion valuation.
Mode saw 150x revenue growth from 2019 to 2022, a leap that has made them one of America’s fastest growing companies. Mode is on a mission to disrupt the entire industry with their "EarnPhone," a budget smartphone that’s helped consumers earn and save $150M+ for activities like listening to music, playing games, and ... even charging their devices?!
Over 11,000 investors already acquired shares — and with only days remaining prior to their bonus tier closing, allocations are limited.
*Disclosure: Please read the offering circular at invest.modemobile.com. This is a paid advertisement for Mode Mobile’s Regulation CF Offering.
Bond ETFs On Watch 👀📊
$TLT
If the Federal Reserve decides to cut rates in 2024, the Bond ETF market could experience a retest to the 200-day moving average near $117.
iShares 20+ Year Treasury Bond ETF (TLT)TLT has a dividend yield of 3.71% and paid $3.25 per share in the past year. The dividend is paid monthly; the last ex-dividend date was Nov 1, 2023.
$LQD
If the Federal Reserve decides to cut rates in 2024, the Bond ETF market could experience a retest to the 200-day moving average near $115.
LQD has a dividend yield of 4.25% and paid $4.31 per share in the past year. The dividend is paid monthly; the last ex-dividend date was Nov 1, 2023.
Recap For Newbies
Types of Bonds, Bond Yields vs Bond Prices, and Their Inverse Relationship
Bond yields, often paid out as a dividend for bond ETFs like $TLT and $LQD, represent the annual return an investor can expect from a bond. Yields are determined by the bond's coupon rate and current market price.
When bond prices rise, like a $TLT’s stock price, yields decrease, and when bond prices fall, yields increase. Bond prices in the secondary market are influenced by interest rates, credit risk, and market sentiment.
Types:
Government bonds are low-risk and serve as benchmarks for interest rates. Corporate bonds carry varying levels of credit risk and typically have higher yields than government bonds.
Investing in an individual corporate bond involves purchasing a specific bond and receiving periodic interest payments and the principal amount at maturity. Investing in a corporate bond ETF involves buying shares of a fund with a diversified portfolio of corporate bonds, providing access to diversified exposure without purchasing individual bonds.
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High Returns
High Returns Do Not Require High Effort, “Charlie Munger”
Charlie Munger, the renowned investor and Warren Buffett's longtime business partner, has often emphasized the principle that "High Returns Do Not Require High Effort." This idea underscores the importance of patient and thoughtful investing rather than constant trading and effort.
Munger's philosophy suggests that you can achieve high returns without needing constant, high-stress efforts by making well-informed, long-term investment decisions based on sound principles and a deep understanding of the businesses you invest in. This approach aligns with the idea of "buy and hold" investing, where investors focus on the quality of their investments and allow them to grow over time rather than engage in frequent trading or speculative activities.
Comparing This To Our Trading Style At Simplify Wall Street
Though his point makes sense, I would add if you are patient enough, you don’t have to have a high-stress trading environment if your goal is to swing trade or day trade in cycles. The winter has a trading cycle, the summer has a cycle, and there are cycles and patterns during election years, during Fed announcements, earnings, etc.
Our point is if you want to trade every day, weekly, or monthly, it doesn’t matter. What matters is if you understand the cycle you are trading.
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NEXT LIVE WEBINAR is DECEMBER 3rd, 7:30 pm EST. PLEASE SAVE THE DATE TO OUR END-OF-THE-YEAR RECAP!
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DATA RELEASE
All About The Data!
THURSDAY, NOV 2nd
8:30 am: Initial jobless claims
Forecast: 221,000 Previous: 217,000
Fed speakers will be giving remarks all week!
NOV. 6, 11:00 am, Fed Gov. Cook
NOV. 7th, 9:15 am Fed Vice Chair for Supervision Barr
10:00 am, Fed Gov. Waller speaks
NOV. 8th 5:15 am Fed Gov. Cook speaks
9:15 amFed Chair Powell delivers opening remarks
INTRADAY SESSION PLAN
INTRADAY TRADING LEVELS
/ES is now trading at 4370.
There are a few key ranges for this week. On the downside, 4290-4300 is very important. If we can not close and open the next day below this level, bullish momentum can take us to 4370.
We have various Fed speakers this week, with jobless claims on Friday, which gives us plenty of time to spot any reversals to the upside or downside.
If the market treats this 4370-80 as support, we can trade higher into 4430s, 4480, and 4530 based on momentum, retail FOMO, and Fed remarks.
Now let us think rationally…
If you try to buy the dip at 4290, expecting 4400s to trade soon after, understand that 4270 is the next support area.
If we start closing under 4270, manage risks, and trade your account accordingly, we could see lower prices into 4160s again. If the market is looking for an area of buyers with enough interest to send us on a Christmas rally, it would be closer to 4000 /es.
In our opinion, we either trade lower and touch the infamous 4500+ in December or the market tests 4500+ early, which would lead us to prep for the market to run out of steam between now and January 2024.
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