Yes, you heard me. I will make this very simple.
- The Fed has been fighting the inflation for as long as we can remember.
- The rate went from near zero to historic high.
- Of course, to make that happen, the Fed sold a ridiculous amount of bonds causing the price of bonds to fall resulting in high interest rate.
- The economy cooled down, banks are in trouble (their bond holdings lost so much in value), CRE (commercial real estate) is in shambles and there are lots of signs that we are heading into a recession.
What happened as a result of it? $TLT went down almost 50%. What went down even more? $TMF. It went down over 90%. What is it? It’s $TLT on steroid. Yes, it’s a leveraged funds that we love. Why? It went down more than 90% during the same period.
The Fed saw something and got spooked. They announced that they are now going to cut rates. 3-6 in 2024. What will happen when they cut rates? The demand for bond goes up and the yield comes down. And the bond prices will go up as a result of it.
How high can it go? We don’t know. And we are not going to try to guess how high it will go. All we know is that it will go up. We started accumulating $TMF since October. And since then, it went up about 62%.
Just imagine what will happen with 3-6 cuts. This ETF can easily go up $78 or $85 by March 2024. With an aggressive cuts, we think it will go as high as $197 by end of this year. That’s what we have been loading up.
Again, do your own DD before making any investment decisions.
Here is a list of investors who are going long on bonds FYI