Hi Again,

Did you go bargain hunting in the market last week? I did. Hopefully this correction will go much deeper. All Wall Street experts and the media acted like we were facing the end of the world. Not true. From the previous high of 611 on the S&P 500 on 2/20/25, it fell to 505 on 4/4/25 close – 17.35% drop. I was expecting (and still would like to see a 30% to 90% drop). At any time, Trump can send the market upwards. It is rare to get such buying opportunities. Do not “buy”, just “nibble”- in other words buy a little at a time or you will get caught to a “falling knife”. This is why I always said to have 50% in cash and also have a strategy to deal with corrections. Anyway, before you buy a stock (or the market), know why you are making the purchase, know when you might buy more and know when you might sell it. The stocks market is not a casino. The market close on 4/3/25 and 4/4/25 were the worst 2 days since March 2020. Remember March 2020 during Trump 1.0 (covid crisis)? I remember one of the best Wall Street billionaires Bill Ackman actually cried on CNBC asking Trump to shut down the economy. I intuitively felt that covid would get here so I was shorting the market and I turned $3,000 in to $40,000 in 3 months. Per market analyst and astrologer, Merriman, we are bound to have a very rocky market all through 2025. All commodity futures are lower so that is good for inflation expectations. On 4/3/25, when the Dow (DJIA) was down 1500+, all professionals were selling but retail (individual) investors were buying in a big way. On 4/4/25, when the market went for another big correction, even the “retail” investors were selling- except for me. As I took profits on some “shorts’ I had as puts or insurance, I bought more- “rolling it over”. Last week, what did I “buy” (nibble)? Super Micro, Vertiv, Broadcom, Dell, Nvidia, Reddit and the ETF “MAGS” which covers all the best 7 stocks known as the “Magnificent 7”. I am keeping my eye on 48 other stocks. That is my strategy.

VIX is the ticker symbol and the popular name for the Chicago Board Options Exchange's CBOE Volatility Index, a popular measure of the stock market's expectation of volatility based on S&P 500 index options. Here is one of the strategies I employ. When volatility is low, this index goes below 20. Then it is cheaper to buy call options on VIX. Around 1/20/25, when VIX was below 20, I bought some call options with a strike price of 25 and sold them on 3/10/25, when VIX rose to 28. I bought more (that expire in 9 months) with a strike price of 50 , expecting the VIX to go over 50. On 4/4/25, the VIX went to 45 but I did not sell my calls as I know that VIX is sure to go to 60 within 2025.

I also had some money in Treasury bond ETF known as TLT. iShares 20+ Year Treasury Bond ETF. As interest rates go down the value of this TLT will go higher. This is a nice place to keep your money. Unemployment rate is expected to move higher so if inflation is stable, Federal Reserve will lower rates. This tariff hoopla will blow over soon. I agree with Trump that we have to reverse the trend started by Reagan in outsourcing all our manufacturing and having the lowest tariff rates in the world. We get $4Trillion in imports each year. Even if we have a 10% tariff rate, that $400 billion per year-it does not matter if it gets paid by the US importers or the US consumers. US consumers are smart, they will shift to cheaper sources. Have you heard of Walmart?

Jeffrey Gundlach was formerly the head of the $9.3 billion TCW Total Return Bond Fund, where he finished in the top 2% of all funds invested in intermediate-term bonds for the 10 years that ended prior to his departure. He was fired by TCW in 2009. In the aftermath, Gundlach and TCW sued each other and went to jury trial in California; TCW alleged that Gundlach stole trade secrets (TCW prevailed, but was awarded $0 for the claim), Gundlach sued over compensation claims (Gundlach prevailed, and was awarded $66.7 Million). Soon after the Fed decision on interest rates on 3/20/25, this is what Gundlach had to say:

Word of the day- uncertainty.
Inflation was upgraded.
Expect 2 rate cuts in 2025.
Expect a lower growth rate in 2025.
Powell’s favorite word this time “inertia’.
Bond yields are going up.
Government interest expense is around $3 billion per day.
Feds are doing less quantitative tightening to reduce rates even now.
Inflation in 2025 expected at 2.75%.
Powell was downplaying the risks.
Powell may go in to quantitative easing.
Europe (and most others) have been outperforming the US market in 2025.
Powell said that tariffs are transitory. ( I agree)
Leverage is at its lowest level.
Utilities outperformed so treasuries will outperform high yields.
He prefer short term treasuries.
Balancing the US budget will lead to lower growth in the US.
50% chance of a recession in 2025.
Rate of inflation will go down but price level (what concerns people) will remain high- it is like speed remaining high but acceleration going down.
“Buy on rumor. Sell on the news”.
Keep a lot of “dry powder” (cash) for buying opportunities (my old advice for 10+ years).

Have a great month!

Fernando