6% Yields By Year-End, 9% Mortgages—Stocks Get ‘Rug Pulled’ | Todd Horowitz

Sandisk

• Todd "Bubba" Horwitz · BubbaTrading.comBearish

  SanDisk looks overbought and bubble-like, though he won't fight the momentum.

  He says SanDisk, which makes memory, is overbought at current levels and in bubble territory. He is not willing to fight the rally, and expects FOMO buying to end at some point, with traders who wait for a better price missing the exit. He says there will be plenty of opportunity to sell or short when the time comes. The view rests on price action and his judgment of bubble territory, not on an analysis of SanDisk's fundamentals.

  “I think they're overbought. I think we're in bubble territory, but, you know, look, I'm not gonna fight what's going on.”at 21:54

Bitcoin

Across the shows: 9 speakers in other episodes, 3 bullish and 5 bearish calls, past 30 days

• Todd "Bubba" Horwitz · BubbaTrading.comBullish

  Bitcoin is a good place to park money; adoption is rising and it is independent of the Fed.

  He has been buying Bitcoin between $75,000 and $80,000 and says it is a good place to park money. Adoption is growing: more companies are adopting it, and even casinos in his area accept it as payment. He says people are starting to recognize that the Federal Reserve is not doing well for the population, while Bitcoin and Ethereum are not controlled by the Fed, which drives demand. Higher rates do not raise its cost because buyers are not borrowing to buy it. He sees a base near $60,000 and a range of $80,000 to $90,000 for now, and calls a $100,000 target only a strong maybe that depends on equity volatility.

  “you're not borrowing money to buy Bitcoin, so it really isn't a cost of interest. ... I think more people are adopting it. I think more companies are adopting it. I mean, even the casinos out here now take Bitcoin as payment.”at 23:40

Oil & fuels

• Todd "Bubba" Horwitz · BubbaTrading.com

  Oil will fall below $70 by year-end; he remains short and sees a glut of crude.

  He sees a glut of oil that is not being refined, and says producers have held prices high, as shown in Exxon and Shell profits. About a month before the election, he argues Republicans need lower oil and fuel costs and a resolution in Iran to bring inflation down. He says about 80% of the economy runs on fossil fuels, from driving and trucking to plastics and farming, so fuel costs feed inflation and could prompt more Fed hikes, which would pressure oil further. He dismisses the EIA's stockpile-shortage view as talking its own book. He is short oil and has sell orders at $95. He says an Iran flare-up could push oil back into the nineties in the short run, and he expects $85 this week.

  “I'm looking for oil to be below 70 before the year is out. Now in the next couple of weeks, we could go anywhere.”at 4:57

US Treasuries & yields

• Todd "Bubba" Horwitz · BubbaTrading.com

  Sees a good shot at 10-year yields hitting 6% before year-end as money demand and deals push rates up.

  He called 5% by September in the summer and now sees a strong chance of 6% before year-end. Heavy demand for money and a large pipeline of deals will raise the cost of borrowing. Inflation stays a problem unless oil drops sharply. He says interest rates are fairly priced and probably a little cheap, and that they must rise to cool an economy where inflation runs far above official readings. He is short bonds: he sold the 30-year at 114, now around 102, and the 10-year at 109, now around 104.

  “I think we're gonna see a good shot at 6% before year end. You know, we talked in the summer. I said we get 5% by September. And I think we have a really good shot to get to 6% because there's a [lot] of demand for money”at 8:07

US inflation

• Todd "Bubba" Horwitz · BubbaTrading.com

  Official inflation understates reality; true US inflation is closer to 10%, driven by the Fed.

  He says the last CPI print of 3.4% or 3.7% is far below actual inflation, which he puts closer to 10%. He calls it Fed-driven rather than supply-and-demand driven. Since about 80% of the economy runs on fossil fuels, high fuel costs flow through to prices across driving, trucking, plastics and farming. He argues rates must keep rising to cool the economy and these prices. The Fed has already hiked once, and he thinks a couple more hikes are possible if prices do not come down. Oil would need a precipitous drop to ease the pressure.

  “I would say that inflation is much closer to 10% than anywhere near 3.7%.”at 9:07

US rates & the Fed

• Todd "Bubba" Horwitz · BubbaTrading.com

  Warsh seems legitimate and sees the economy clearly; free markets could support higher rates.

  He is an anti-Fed investor who says the Fed has manipulated rates since Alan Greenspan took office about 46 years ago, building bubbles and suppressing rates below where a free market would set them. He says the Fed's chair, Warsh, appears legitimate, understands the economy, and is laying out that the information the public was fed for decades was wrong. He thinks markets can handle higher interest rates. He sees the real problem as jobs, a lack of capital and heavy consumer debt.

  “You had the Fed build these bubbles... But you have a guy in place now, Warsh, who seems to be legitimate, and he seems to understand the economy.”at 12:21

US consumer

• Todd "Bubba" Horwitz · BubbaTrading.com

  US households are deeply indebted; delinquencies are rising and rate hikes will squeeze the middle class.

  He says many people are deep in debt. Credit card borrowers pay around 30%, and by his figures about 19% of credit card balances are 90 days past due, 9% of auto loans are in default, and 8% of mortgages are in default, with more to come. He argues that rising rates will slow sales, as intended to fight inflation, and will also slow the housing market. He says this is busting the middle class, which pays most of the taxes and does most of the work.

  “You have people that are paying 30% on credit cards, and right now there's 19% are ninety days past due on their credit card.”at 13:06

US housing

• Todd "Bubba" Horwitz · BubbaTrading.com

  Mortgage rates could reach 9% as housing slows on high rates and weak jobs.

  He says a 9% mortgage is possible. Free-market peer-to-peer lenders charge 14% to 18% for ordinary borrowing, so 9% would not be too high on pure market pricing; his own first mortgage was 14%. He points to Las Vegas, where over 10,000 homes were newly listed for the first time in about forty years, as evidence that houses are not moving. He attributes the slowdown mainly to a lack of good jobs and partly to high rates. He expects rising rates to slow sales and the housing market.

  “I could see a 9% mortgage. Now again, remember, I'm old. So my first mortgage was 14%.”at 14:13

Gold & precious metals

• Todd "Bubba" Horwitz · BubbaTrading.com

  Gold and silver are good places to park money; gold should rebound after a 35% drop.

  He is an investor who has been buying gold around $4,100 to $4,200 and silver at $60. Gold has fallen 35% from its highs, so he expects it to move higher again. He argues that markets have already priced in higher rates, which explains part of gold's selloff, and that inflation is not yet priced in, which should help gold. He says the dollar is rising because foreign countries are buying dollars out of fear, yet gold has held above $4,000 despite higher rates and a stronger dollar. He concedes that metals may have more room to fall in the short run.

  “I have been buying gold all along here down around the [$4,100], 4,200 level. I've been buying silver at 60.”at 15:23

US dollar

• Todd "Bubba" Horwitz · BubbaTrading.com

  Dollar is bullish; the euro could fall below parity as Europe struggles and countries buy dollars.

  He says Europe has a lot of trouble, and the euro, trading near $1.12, has a chance to fall below parity. He argues that countries, not investors, are buying dollars out of fear about their own economies, and that the flawed fiat system is adding pressure. He points to the failed yen intervention as evidence of the strain. He sees the dollar reaching 104 to 105 or higher.

  “I'm bullish on the dollar because I think that the Europe's a lot of trouble. In fact, I believe the euro currency has a chance to go below par.”at 17:48

AI bubble & tech valuations

• Todd "Bubba" Horwitz · BubbaTrading.com

  AI is in a bubble, and the large off-balance-sheet AI debt is not being accounted for.

  He says AI is in a bubble and that the market is not accounting for the debt built up around AI. He cites what he gives as over $1,000,000,000 in off-balance-sheet debt. He has lived through similar markets as a floor trader in the 1990s and says it will pop at some point, though he cannot say when. He separates the stock question from the company question: a good company that makes money is still a good investment, but he is looking to get short the market and is in no hurry to do so.

  “I do think we're in a bubble. I think AI is in a bubble. I think we're not accounting for all the debt that's out there in AI.”at 22:29

US stock market outlook

• Todd "Bubba" Horwitz · BubbaTrading.com

  Stocks face a major meltdown; the rally is retail-driven on thin volume and rising rates.

  He expects a major meltdown and says the market is poised for a rug pull, although it may keep rallying first. He argues the rally lacks participation: volume is about 50% of normal, big banks and firms are not trading, and the rally is retail-driven. The Dow and Russell 2000 sit well below support, while the Nasdaq and S&P are breaking out. He says stocks sell off when rates rise, and a 6% yield could be the catalyst that pushes the market over the top. He is hedged with options and says he would short the S&P if it reached 8,000, but he will not short until the market signals a top.

  “but they're about ready to see the rug pull from underneath them. And I think that that's a much bigger problem.”at 26:56