“This Is Insane” – Hedge Fund Manager Kyle Bass Says U.S. Rates Are Heading To 0%

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Stocks fell on the open Tuesday. The Dow traded 73 points lower, or -0.3%, while the S&P 500 dropped -0.5%, and the Nasdaq fell -0.4%.

Tech stocks led the losses this morning with Micron down -1.04%, Advanced Micro Devices down -2.07%, and Netflix down -2.82% at the time of writing. Bank shares fell as well, with Citigroup, Bank of America, and JPMorgan falling -1.31%, -1.49%, and -0.82%, respectively, as Treasury yields pulled back. The benchmark 10-year yield fell around 5 basis points to 1.545%.

Big Tech could be in for some trouble ahead. The Wall Street Journal reported that a state-led antitrust probe of Big Tech firms could begin as early as next month, putting additional pressure on companies that are already facing scrutiny on the Federal level after the U.S. Department of Justice announced its plans in July to open its own broad antitrust review. The state-led effort could “dovetail” with the Justice Department’s investigation, the Journal said. “We must ensure we protect competition, protect our economy, and protect consumers,” a spokesperson from the office of New York Attorney General Letitia James said in a statement. “The Attorneys General involved have concerns over the control of personal data by large tech companies and will hold them accountable for anticompetitive practices that endanger privacy and consumer data.” The DOJ and Federal Trade Commission have already divided oversight of the country’s four largest tech firms—Google-parent Alphabet, Amazon, Apple, and Facebook—in the Federal investigation.

One stock moving higher today is Home Depot. The stock is up just over 4% after the home improvement retailer beat analysts estimates with Q2 earnings of $3.17 per share. But it wasn’t all positive news. Revenue fell short of expectations at $30.8 billion, and Home Depot also lowered its sales outlook for the year on concerns that the trade war with China will slow consumer spending. Home Depot had previously warned that the slump in lumber prices was taking a toll on its business, as lumber accounts for around 8% of total sales. “We are encouraged by the momentum we are seeing from our strategic investments and believe that the current health of the U.S. consumer and a stable housing environment continue to support our business,” CEO Craig Menear said in a statement.

Hungry for that plant-based burger? Beyond Meat is also gaining today after JPMorgan upgraded the stock from Neutral to Overweight. The firm sees potential for Beyond Meat to acquire new customers following its secondary stock offering. “We see three primary reasons for renewed optimism: The potential to acquire new food-service customers, continued strength in measured data, and valuation,” JPMorgan analyst Ken Goldman said in a note to clients. “With cash-on-hand likely to exceed $300MM by the end of 3Q, another guidance raise potentially ahead, and the stock 40% off its high, we think the stock is appealing once again.” JPMorgan raised its price target to $189, suggesting possible upside of 22% over the next twelve months. BYND was up 7% at the time of writing.

The U.S. dollar soared to a new high for 2019, even as President Trump lamented its strength on Twitter. The dollar strengthened as investors shifted into riskier assets like stocks on Monday and away from havens like Treasuries. Apparent progress in trade negotiations between the U.S. and China yesterday and the prospect of additional stimulus in Germany both helped to buoy the sentiment. “We’ve been skeptical that Fed easing by itself would doom the dollar,” said Bank of New York Mellon currency strategist John Velis. “With other central banks expected to ease by as much or even more than the Fed, we always thought it would take more than policy differentials to weaken the currency.” Velis also noted that Boston Fed President Eric Rosengren’s statements yesterday that downplayed the need for more rate cuts “underscore the lack of downward force on the dollar coming from policy expectations.”

In other Fed talk, minutes from the July meeting where the Fed cut its benchmark rate by 25 basis points will be released Wednesday, and there has already been a lot of talk this week about what the Fed should do next. Trump raised his demands yesterday, calling for the Fed to cut interest rates by a full percentage point and to restart crisis-era quantitative easing. Meanwhile, Nobel Prize-winning economist Robert Shiller said last month’s cut caused psychological harm to the market. “I think that there is a problem with cutting rates because it shows a sense of alarm,” Shiller said Tuesday. Then hedge fund manager Kyle Bass said that global central banks are just getting started with monetary easing and that U.S. interest rates will keep falling, following global rates all the way to zero. “We’re the only country that has an integer in front of our bond yields,” Bass, founder and chief investment officer at Hayman Capital Management, said. “This is insane.” CNBC host Jim Cramer then chimed in to say that the Fed may be hard-pressed to rationalize another rate cut. “There is no recession,” Cramer said. “The hawks on the Fed are going to be gunning for no more rate cuts, which is obviously not what the market wants.”

Stocks We’re Watching

Teletech Holdings (NASDAQ: TTEC): Teletech Holdings produced an earnings beat early this month, reporting quarterly earnings of $0.34 per share, well above consensus estimates of $0.11 per share, and higher than earnings of $0.22 per share seen in the same quarter last year. This represented an earnings surprise of 209% for the outsource call center provider. TTEC is up nearly 67% year-to-date, and analysts suggest the stock could see 24% more upside over the next twelve months.

Trovagene (NASDAQ: TROV): Shares of this clinical-stage, precision medicine oncology therapeutics company have been on fire over the last week, surging a jaw-dropping 79.64%. The stock started climbing last week after Trovagene announced that new clinical data from its Phase 2 trial of onvansertib in combination with Zytiga (abiraterone acetate/prednisone) in metastatic Castration-Resistant Prostate Cancer (mCRPC), would be presented in an oral, moderated poster session at the 20th Asia-Pacific Prostate Cancer Conference on August 24.

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