Happy Easter!
The war rages on and the private capital/credit problem keeps getting bigger.
Private Credit/Capital problem is growing. It could threaten all markets. Blue Owl has a dividend yield of 10%-which is a red flag. On 4/2/26, CNBC reported that Blue Owl Technology Fund redemption requests were at 42%! They want to get out but they are not allowed to get out. Many investors thought it was a great deal to get in to these funds through 401K and other pension plans as only the very rich were in these funds. Big mistake! With public funds we have transparency and market to market pricing at any given time.
On my last newsletter I mentioned that if the price of oil shoots up, I will short sell oil through the ETF known as USO (US oil). The very next day, oil shot up but I was too late. I still believe that oil might go up to about $200 as Iran promises to do. Russia is the biggest beneficiary. All over the world, countries are turning to Russia. Iran too is benefitting as they are charging $2million per ship to cross the Strait of Hormuz. That is a few billion dollars (in Chinese currency only) for Iran. I feel confident that this will lead to a huge global recession. US will do okay but other countries (India, Philippines, China, Bangladesh, Pakistan etc.) are already facing severe hardships. Just because we have a big celebration for “mission accomplished”, it will not take us back to the pre-war days. Remember when George Bush went on a navy ship to announce, “Mission accomplished’? The war went on and many died. Listen with your intuition and not your ears. President Reagan used to quote a Russian quote against the Soviets and say, “Trust but verify”. Good advice!
On 3/31 when oil went down, I felt like buying (going long) on oil but I wimped out. Next day oil shot up back by 13%.
3/18/26 was “Fed decision” day. The Feds left rates unchanged with a 11 to 1 decision. They stated that economic activity was solid and expected a rate of inflation of 2.7% in 2026.
At the news conference held by Jerome Powell, Fed Chair stated the following:
· Rate of unemployment remains unchanged.
· Impact from the Iran war is uncertain.
· Economic activity expanding at a steady rate.
· 2026 GDP growth expected at 2.4%.
· Job gains are slow.
· PCE inflation rose to 2.8%.
· Due to Mid-East crisis oil prices are rising.
· There are risks to inflation and unemployment at the same time.
· We are a net exporter of oil, so these high energy prices are helping US oil companies.
· Important to get rate of inflation to 2%.
· He will stay as Chairman of the Fed Reserve Board till the new Chair gets approved by the US Senate.
· He will stay as Governor till his legal case is resolved.
· The Fed Board discussed the possibility of raising rates to curb inflation.
· Consumer spending has been resilient.
Jeffrey Edward Gundlach is the CEO and CIO of DoubleLine Capital, a mutual fund company he co-founded that manages $91 billion in assets. He's known as the "Bond King" and is an expert in fixed income and bond investments. On 3/23/26, as he has done in the past, he made the following comments about the “Fed Decision”.
· VIX is the ticker symbol and 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. Gundlach was surprised that the VIX did not go over 40 with the current market turmoil.
· This is a good time to buy gold. (I disagree)
· The Feds have an unrealistic expectation of inflation.
· The 2 year bond rate is higher than the Fed Rate so that implies that we would get higher rates in the near future.
· 3.5% rate of inflation expected in 2026.
· There will be no rate cuts in 2026.
· Private markets- Investors want to get out but they are not allowed to get out. One private market fund was marked down by 19%.
· CCC rated bank loans are doing badly.
· Not enthusiastic about stocks or bonds at this time.
· Private credit problem not limited to the software industry lending.
On 3/31/26, market after going down for many days, the Dow went up by 1100 points in one day. CNBC Jim Cramer made a good comment; he stated that when the market was going down hundreds of people asked if they should sell all their stocks so Jim said, “All those people should sell right now when the Dow is up 1100. You do not sell in to a correction and if you cannot stomach a correction, the stock market is not for you”. I totally agree! Severe corrections and crashes are great opportunities to buy in to good stocks. "Buy when there's blood in the streets, even if the blood is your own" is a famous contrarian investment maxim attributed to 18th-century Baron Rothschild. It advises buying assets during moments of extreme market panic, fear, or steep declines, suggesting that the worst times for the market often present the best profit opportunities.
At all times I carry some put options on the index S&P500 (SPY) as ‘insurance’ against a major crash (not for minor corrections like we had a few days ago). I never expect to gain from these as I do not want to see a crash but when they go up in value, that is an indication that we could go in to a crash. The SPY index hit 695 around 2/2/26. My put options have a “strike price around” $200. Theoretically, for me to “exercise’ my options, the “market” (S&P500) has to go down by 70% yet on 3/27/26, with the market down only 9%, my put options had a paper gain of 45%! This shows the fear factor in the market. These people should not be in the stock market.