The Kobeissi Letter Profile picture
Dec 19 12 tweets 5 min read Read on X
Apollo with another HUGE call today:

Not only does Apollo see less rate cuts in 2025, but they are now calling for potential rate HIKES.

Today, Apollo officially said they see a 40% chance of rate HIKES returning in 2025.

Has the "Fed pivot" been canceled again?

(a thread)
The Fed officially made their 3rd interest rate cut of 2024 for 25 basis points.

This marks a total of 100 basis points of rate cuts in 2024 as inflation reaccelerates.

With all key metrics of inflation nearing or above 3%, a new question arises.

Are rate hikes coming back? Image
Apollo makes the case that the economy is strong and growth has been robust.

Over the past 2 quarters, US GDP growth has been 3.0% and 2.8%.

The Atlanta Fed expects GDP growth in the fourth quarter to be 3.2%, well above the CBO’s 2% estimate of long-run US growth. Image
Apollo notes that the strong economy, combined with the potential for lower taxes, higher tariffs, and restrictions on immigration, could spark inflation.

PCE inflation could rise by over 140 basis points due to tariffs, according to Deutsche Bank.

Higher prices are coming. Image
Recent data shows that inflation is already heading higher again.

3-month annualized core CPI inflation is now back up to an alarming 4%.

6-month annualized core CPI fell to 2.5% before rebounding back toward 3% now.

This is BEFORE tariffs and tax cuts are imposed. Image
PCE inflation, the Fed's preferred inflation measure, is trending sharply higher.

1-month annualized core PCE inflation is now at 3.5%+.

1-month, 3-month, and 6-month annualized core PCE inflation are ALL back on the rise here.

Tomorrow's data will show November's numbers. Image
Meanwhile, bond markets are trading like rate hikes already started.

In what Fed Chair Powell has called normal market "fluctuations," something does not add up.

The 10-year note yield is now up ~90 basis points since rate cuts began in September.

Markets are not convinced. Image
Meanwhile, oil prices are surging adding to the case for higher inflation in 2025.

Our premium clients bought the dip into $67, as shown in our alert below.

With inflation rebounding, we are trading.

Subscribe at the link below to access our analysis:

thekobeissiletter.com/subscribeImage
All while the US now has a record $36.2 TRILLION of Federal Debt.

Deficit spending has been highly inflationary and this is coupled with a potential government shutdown.

Treasury yields are rising as the US government is forced to issue trillions in bonds for deficit spending. Image
The Fed is clearly concerned despite the calm image they are trying to paint.

They raised their PCE inflation target from 2.1% up to 2.5% by the end of 2025.

15 out of 19 Fed officials view inflation risks weighted to the upside.

In September, just 3 officials felt this way. Image
So, what does this all mean for investors and for your portfolio?

As we have been forecasting, we expect more volatility in 2025.

These swings will be tradable.

Subscribe now at the link below to gain instant access to our alerts and analysis:

thekobeissiletter.com/subscribe
Lastly, the million Dollar question is if the labor market
can hold up with tighter financial conditions in 2025.

If not, we risk stagflation, the Fed's nightmare.

In fact, stagflation may already be here.

Follow us @KobeissiLetter for real time analysis as this develops. Image

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More from @KobeissiLetter

Dec 20
History will be made today:

As the Nasdaq is down over -6% from its high in just 5 days, there are a MASSIVE amount of options expiring today.

In fact, a record $6.6 TRILLION worth of options are expiring, based on notional value.

What does this mean exactly?

(a thread)
Total notional value refers to the to the combined value of all the underlying assets that a set of options contracts controls.

Some estimates put it as high as $6.6 TRILLION today.

Most of these options will expire worthless, but tons of volatility should be expected. Image
Even if you assume the total value is $5.5 trillion, there has NEVER been a day that was remotely close.

Here's a breakdown of all previous days with elevated notional value expiration dates.

Even September 2020 couldn't break above the $5 trillion mark. Image
Read 9 tweets
Dec 19
This is absolutely insane.

Backlash on X just crushed a BIPARTISAN spending bill to "avoid" a US government shut down.

This bill was set to cost US taxpayers $380 BILLION to keep the government open until March 14th.

What is this bill and what just happened?

(a thread)
Let us begin by stating that this spending bill is 1,547 PAGES long.

We spent hours combing through it to explain the key highlights.

In this thread, we will show how the bill could have been condensed to just 10 pages.

This bill would cost taxpayers ~$5 billion PER DAY. Image
One of the biggest components of this bill was renewing the farm bill.

This would cost ~$130 BILLION and also comes with $10 billion in stimulus for farmers.

It even includes $2 billion to "provide assistance to producers of livestock as determined by the Secretary." Image
Read 11 tweets
Dec 18
What just happened?

The Fed cut interest rates by 25 basis points which is exactly what 97% of market participants wanted.

But, the S&P 500 just posted its largest post-Fed drop since March 2020, erasing $1.8 TRILLION of market cap.

Why? Let us explain.

(a thread)
Going into the Fed decision, there was a 97% chance of the Fed cutting interest rates by 25 basis points.

Their 25 basis point cut marked 100 basis points of cuts in 2024, "continuing" the Fed pivot.

However, markets price-in Fed decisions well before they are announced. Image
In reality, today's market reaction had NOTHING to do with the rate decision.

Rather, it would about the Fed's outlook for 2025 which shifted SHARPLY in the hawkish direction.

As seen below, the Fed revised their 2025 outlook from 3 rate cuts to 2 rate cuts, a total of 50 bps. Image
Read 11 tweets
Dec 17
Why is no one talking about this?

The 10-year note yield is now up +85 basis points since the "Fed pivot" began.

Meanwhile, the Fed is setting up for another rate cut for a total of 100 basis points of cuts in 2024.

The bond market is literally fighting the Fed.

(a thread)
Since the "Fed pivot" began in September, the popular bond-tracking ETF $TLT is down ~11%.

To put this into perspective, an 11% move in ONE YEAR is considered big for $TLT, let alone 3 months.

Bond prices have moved in a literal straight line lower since rate cuts began. Image
Meanwhile, the average interest rate on a 30-year mortgage has surged from 6% to 7% in 3 months.

In a time where the Fed began rate cuts with a 50 bps cut for the first time since 2008, rates are skyrocketing.

Clearly, there is a massive disconnect between the Fed and market. Image
Read 10 tweets
Dec 15
Apollo with a HUGE call this morning:

For the first time since the "Fed pivot" began, Apollo has officially declared inflation back on the rise.

They warn of a potential repeat the 1970s as the Fed cuts rates into rising inflation.

Here's what you need to know.

(a thread)
Fed and market-implied measures of inflation are now all above the Fed’s 2% target.

We are at risk of a potential 1970s-style rebound in inflation into 2025/2026.

Apollo says the probability of the Fed RAISING interest rates in 2025 is now rising. Image
First, measures of inflation stickiness are all now well above the Fed's 2% target.

In fact, the Atlanta Fed Core Sticky CPI index has leveled off near 4%.

ALL major measures of CPI stickiness are now above 3%.

What happened to the Fed's 2% inflation target? Image
Read 12 tweets
Dec 14
What is happening here?

As stocks hit all-time highs, corporate executives are cashing-out of their stocks at RECORD levels.

In fact, there are now nearly 6 TIMES more insider sellers than buyers.

Why are insiders cashing out of the "strongest" market in history?

(a thread)
Here's a chart showing the ratio of insider sellers to buyers over time.

Not even the onset to the 2008 Financial Crisis saw insider stock sales as high as they are right now.

For every insider buyer, there are now ~6 insider sellers.

Are corporate executives calling a top? Image
Take a look at Jeff Bezos' stock sales of Amazon, $AMZN this year.

Jeff Bezos ALONE sold another $1.25 billion worth of $AMZN in November.

This brings his total insider sales in 2024 up to a whopping $12.5 BILLION.

Never has he cashed out so much stock in a single year. Image
Read 10 tweets

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