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☕ DrinkCoffeeAndProfit
Smart money moves before breakfast
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Inspiration Quote for the Day
“An investment in knowledge pays the best interest.”
Benjamin Franklin
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The Morning Ritual
The Number That Moved in Your Account Yesterday Was Not a Share Price.
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Polls closed Tuesday night and the result is everywhere this morning. This letter is not about who won.
It is about a figure that printed while the counting was still going on. At Tuesday’s close the yield on the ten year Treasury note stood at 4.95%. That was up about 6 basis points on the day.
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What moves money, reliably, is the price of money itself. The message below is from a partner, on that question.
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· · · From Our Partners · · ·
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Democrats took the House and the Senate on Tuesday. The Federal Reserve chair was not on the ballot, and what follows is not about the election result.
According to Wall Street Legend Larry Benedict, the greatest wealth-building event in nearly 20 years is coming.
Larry has been trading around Fed moves for 40 years.
The last time the Fed made a shift this significant, 2022, Larry went 11 for 11 on winning trades while the S&P lost nearly 20%.
One trade alone returned 117% in under a month.
He says what’s coming now could be even bigger than that.
He’s recorded a free briefing where he names the one ticker he believes will capture billions of dollars. Position correctly and you could see huge gains.
But you need to act now.
Best wishes,
Lauren Wingfield
Managing Editor, The Opportunistic Trader
P.S. Larry says the “Trump Fed Takeover” is one of the biggest opportunities he’s seen in his career. But to take advantage, you need go get positioned right now.
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The claims above are the advertiser’s own.
THIS IS AN ADVERTISEMENT
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In One Sip
► The ten year Treasury yield closed Tuesday at 4.952%, up 0.058 on the day
► It traded between 4.894% and 4.968% across the session
► Over the past year the same yield has ranged from 3.956% to 5.364%
► Vanguard’s total bond index fund keeps an average maturity of between 5 and 10 years
► A bond fund never matures, so no day arrives on which it hands your principal back
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Why It Matters for Your Money
Most people who own bonds do not own bonds. They own a fund, usually inside a 401(k) or a target date fund that holds one for them.
A fund has a single number governing how it behaves when yields move. It is called duration, and the fund company prints it on its own page.
The rule is close to arithmetic. A fund with a duration of six loses roughly 6% of its value when yields rise a point. It gains about as much when they fall.
Run that against the past twelve months. The ten year travelled 1.4 points between its low and its high. On a six duration fund that is near 8% of principal, each way, with no headline attached.
An individual bond ends. Hold it to maturity and the issuer returns the face value, whatever happened in between. A fund has no such date. That gap is the whole reason duration matters more to a fund holder than to a bondholder.
None of which says Tuesday’s move had anything to do with the vote. Yields moved, as they do most days. The cause gets assigned later, by people writing after the fact.
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Dates on a calendar are what bond markets actually trade. A partner takes up a different one below.
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· · · A Word From Our Sponsor · · ·
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The Pentagon wants $46 billion for a “sovereign AI Arsenal.” Bigger than Golden Dome.
A stopgap law has frozen every dollar of it until December 11.
The Arsenal runs on Elon’s AI. And Elon’s AI hinges on one tiny company he couldn’t build around.
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THIS IS AN ADVERTISEMENT
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The Coffee Break Move
Open the page for whichever bond fund you hold and look for the line marked average duration. It is one number and it takes about a minute to find.
Multiply it by one. That is roughly what a one point move in yields is worth to you, in percent, and it works in both directions.
Then decide whether that is a figure you can sit through. If it is, you are finished. If it is not, the conversation is about duration, not about Tuesday.
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Some numbers move with the news. The partner below argues for one that does not.
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· · · Paid Partnership · · ·
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In 1976, Chevron tapped an energy source powerful enough to run a city. No fuel costs. No carbon.
They proved it worked. Then they killed it.
Unocal proved it. Killed it.
Texaco proved it. Killed it.
All 3 buried the results for the same reason. It would have destroyed their core business.
Now one company has spent 60 years perfecting what Big Oil refused to touch. Google locked in 15 years. Gates invested $100 million.
And on August 18th, the government hands it an edge Big Oil can’t kill.
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THIS IS AN ADVERTISEMENT
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☕ Key Insight:
Your bond fund does not know who won. It knows only what yields did, and it has been saying the same thing all year.
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One Last Sip
Whatever the final board looks like, the arguments about it will be confident and they will run for weeks. Most of them will be written by people who already knew what they thought.
Very little of that will change the duration of the fund sitting in your account.
That number was true last week and it will be true next week. On a morning like this one, it is the rare figure nobody has to call.
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