Trade Alert: Buying some more protection
A few not-so-random thoughts about the election results.
A sweeping majority for the Republicans means that big business is likely to get whatever it wants for the next four years. With Treasury rates still at historically low levels (currently under 2% as I type this), Fed rates still near 0%, corporate rates at historic low levels too — well, if the cost of money stays this low, you can expect the government and corporations to borrow trillions more dollars, pulling ahead decades more of generational wealth and likely fueling more near-to-mid-term asset bubbles.
On the other hand, the big overnight spike in Treasury rates from 1.76% to 1.96% might be signaling the beginning of the end of the historical low rate cycle. And you guys know that I’ve long said that the most probable catalyst for the next economic/financial/stock market meltdown is when the market itself takes rates higher. The Fed will chase rates higher if it ever actually raises rates again at all.
Meanwhile, the market hates uncertainty and nobody is sure what Trump will be, what he will do, what he will say next.
I do think the path of least resistance for the stock market for the near-term is probably lower. I’m not turning bearish overall but I do want to hedge my longs a little bit more here. So I’m going to go ahead buy a few more puts today. With January epxiration dates, I’m buying QQQ puts with strike prices around $115-116 and DIA puts with strike prices around $177-180.
