More than the threat of inflation, the Federal Reserve is really concerned about unemployment and underemployment, said Bill Baruch, president of Blue Line Futures. "[The Fed] doesn't really expect inflation, that doesn't give them reason to move but they do want to see full employment," Baruch said. "The U3 rate is about 6%. It's the U6 rate that is 11% right now, and that's the underemployment, so people that have fallen out of the work force, and that's what worries the Fed and that's one of the reasons why they should remain dovish."
We're focusing on trading, following your own Powells statements from last night, bill Baruch, president of blue line futures joins us today to talk about the trades he's putting on bill. How are you rating? The markets yields are up past 1.7 1.73 is the latest I'm reading I'm on the 10 year. It's a whatever gains we've had in the golden equities markets.
Last night seemed to be reversed today. Yeah. Yeah. It's, you know, it was definitely surprising to see everything turn. Um, wasn't really that surprising to see another nosedive in, in the bonds. Not really, I guess. I mean, I I've been thinking that we're going to bottom out here and, you know, ultimately it just, it just hasn't stopped.
And this is the bond market treasury market for that matter is, is one of those that when it starts to move and, and the flood Gates open, it's tough one to stop. And so there's a number of narratives around it. I mean, the fed don't get me wrong. Ben was very dovish yesterday, but the problem with just being dovish, it's not enough anymore.
And you know, you look back a couple of weeks ago when fed chair Powell was doing an interview with the wall street journal, it came up with as your yield curve control and they weren't thinking about have your little curve control yet. So. What'd you see, you saw the, the longer end longer duration bonds in the tenure as well.
Dove, lower yields spikes, and, uh, and some panic. And in the equity markets, tech is, is one that's getting hit the hardest. Um, yesterday though he covered the underemployment and the very big emphasis on some of these jobs, how they're never going to come back. That that in and of itself is dovish. You look at some of the data that they put out, uh, the PCE, uh, in 2.0, to 2.2, up through 2023, they don't expect any inflation that in of itself is dovish.
Uh, but there are some other things that, that the bond market wants to see at this point and really. That's the, the SLR, the leverage ratio for banks and banks own treasuries right now that don't count against their equities. And that exemption is, is, uh, up, uh, at March 31st. They haven't extended yet.
Maybe they shouldn't extend it, but that's an argument for another conversation that encourages some selling because the banks now got to raise cash for their equity. Uh, and then, and then the yield curve control, of course. So there's number of reasons why the, the bonds were not satisfied with it. And as they went lower overnight due to Norway central bank being a bit more hawkish, uh, there were hike rates later this year news at the bank of Japan is going to potentially let rates trade more freely, which means higher rates as well.
So all this is. As been bearish for the bond market and it's digesting that here. And so you've got the reversal that you talked about here. Uh, tech sharply, lower stocks overall lower in the metals reverse pretty sharp. Is this a technical correction or is it complete shift in sentiment from last night to today?
Listen. I mean, as, as a futures trader that trades leverage, I mean, these, these are volatile markets, but you know, on the equity side as a, as an investment advisor, I mean, there's, they're, they're not, they don't seem as volatile as a, as, as they do as a futures trader. I think it's, you know, if you have, you have a good game plan on the equity side, I mean, there's, there's definitely money to be made in different areas and the same with the futures, but, you know, Inter day, these are some vicious moves we've been seeing in the future.
It's like what gold has done. And you're training up to, um, you know, in the 1750s and then back down below 1720 and all, all within less than 12 hours. So yeah, there's definitely some volatility out there, but I, I do think there's some good opportunity if you have that. Okay. So let's focus on bonds and the yields.
Now you were. You were calling for higher yields for quite some time. I remember we spoke a couple of months ago and we followed up. So you you've made that correct call. I mean, people at the time didn't, uh, didn't really believe you because no one, no one expected yields to rise when they were low. But now of course we've seen what happened.
What's your sentiment. Now, any can have run even higher. Yeah, well, I do think we're within a peak area, at least in the intermediate term and, and don't get me wrong. I am a, a bond bull I've have been for a very long time and we've done very well. Being a bond bowl for a very long time. I called it this in September, October when I started to change how I felt about the treasuries in the intermediate term, I call this an intermission.
So I, I, you know, 60 basis points, I was looking for one and a half percent. And, and we, we got there and the fear that I was sort of putting out there at that point was. A fast high velocity move from one in a quarter to one and a half or just above one and a half is what's going to spook the markets a little bit.
And that's what we're seeing play out. Now. It has continued to go higher. I do think this region one 75, let's call it even one six is historically a very big area in the yields. Many lows were put in between one, four and one six going years back. And that, that was a very big area. So I think that.
Everybody's looking for 2%. I don't think we quite get there. So I think I'm not, I guess I am called the tap in the Hills. I guess I am calling a bit of a bottling process here in the bonds. I think we're closer to the end than the middle of this, uh, of this move in the, in the bonds to the downside where yields.
Yeah. We're going to talk about your trades in just a minute. So just to sum up, you think yields are going to come back down from here. That could be good for both equities and the precious metals, right? Absolutely. I think the yields pull back just a little bit. Um, and, and it's know they settle in. I don't think the, the move over the law over this intermediate term is not necessarily done.
So explain that a minute. I think, I think what we've seen here now, This move up to one 75 and the tenure. I think we're in the very later innings of this move. I think we pull back and maybe somewhere the yield talk of, of one in a quarter and settle in and that's going to be very bullish. Uh, but as we look to turning into 2020.
What two at this point later this year, at that point, I do think that, uh, you know, we, we could see the yields rev up one more time because they're going to have to talk about tapering. And I think at that point too, gonna have a, more of a better picture on, on the reopening, a better picture on the jobs and what jobs are coming back.
And where is inflation at that point? And what the, what are the tailwinds that the fed has right now is there is no inflation by the metrics that they use. We all know that inflation is out there from lumber prices to energy prices, to agriculture prices. It's real, it's their housing prices. So the fed has, has submitted a Goldilocks situation on their hands for them to remain.
Dovish, but at the same time, that's why the bonds keep going lower. The, the, the longer data cause that inflation is going to show up. And then they're also printing fiscal policies. They're printing new money that has to supply the bond market. And, uh, and that demand to buy those bonds is not, is not meeting that supply right now.
Yeah, I think they were, you know, the way I see that they're trying to avoid the same mistakes that perhaps some other central banks made in the last financial crisis raises rates too soon because they think inflation's coming and that didn't work out very well for the markets. Well, exactly. That's what they got in front of last year.
It was the symmetrical inflation targeting. There were allowed inflation run as hot above 2% as a, as it was below. So they're looking again to 2.0, to 2.2 inflation range for PC that's the preferred inflation indicator core PCE, uh, by 2023. So there's no inflation. They don't really expect any inflation that doesn't give them a reason to move, but they do want to see full employment.
And that's where it really comes in. And that U three rate. Is about 6%. It's the U six rate that is 11% right now. And that's, that's the underemployment. So, uh, people that have fallen out of the workforce and that's what, that's, what really worries the fed. And that's, that's one of the reasons why they should remain dovish.
Okay. So, uh, yeah. Perfect segue. And I'm just going to read a part of Jerome Powell statements from last night, people were asking him about his conditions for liftoff. We've relayed out what I think is very clear guidance. On liftoff. And it's really three things, labor market conditions that are consistent with our estimates of maximum employment.
And as I mentioned, we consider a wide range of indicators in assessing labor market conditions, not just the unemployment rate inflation that has reached 2% and not just on a transitory basis and inflation that's on track to run moderately above 2% for some time. Well, any of that happened anytime soon, you think.
Listen, I, I, I was thinking we would see CPI PCE really move, you know, through 2% and first quarter I was wrong there. I, I did get the, the, the treasury, the, the rate story. Right. But, and that's what mattered really. That's where you're invested. You're not invested into a CPI indicator. And I I'm surprised, I am surprised that we haven't seen it.
And, um, you know, it, it gives me the idea that we may not really see it by the measures that we actually feel it. And, and where our pocket is. So I think that's, that's a, you know, we'll find out, but I, I would not be surprised to see it contained the way they are. Listen, the fed has done a terrific job.
There's a lot of fed haters out there. They'll pick and choose little things that they've done wrong along the way. They've done a terrific job I handed to them. Bravo. Yeah. So you think that, so based on what you said, you think they're going to keep rates low for quite some time then. Yeah. Yeah. I mean, it wasn't even half of the, uh, the committee members that, that, uh, would expect to see a rate hike in 2023.
I think it was seven out of 18 members. So I think there's gonna be some work to do to even get them, you know, halfway there. Okay. Let's talk about trades. Now. Let's start with the future side. How are you positioned now given, given the statements from last night? Listen, I, I like holding some gold. Um, I don't, I don't overleverage one of the ways I positioned in, in futures is, is I, I like to say that I don't have to be right right now.
So the CME micro contracts are great and you can pick up a few of those for a hundred thousand dollars, uh, and, and kind of hold those be patient with them. So I do like metals exposure. I love seeing how the metals are able to battle. Uh, higher here, even as the treasuries go down, these, these, uh, legs, lower and treasuries, as we saw last Friday, as well as, uh, you know, through this week and then gold sort of, kind of elevates up.
I think there is some, you know, rare earth magnetism there, I guess. So to speak that that's, uh, palladium, what has done just some, a massive run this week, dragging drag gold up, or really dragging silver up and then silver dragon gold. Silver is performing better. So I like, I like. Silver and platinum. And I do hold the fact that I do think silver and platinum will continue to out perform gold this year.
I like both of those on actually trading it. You know, platinum is, is a tough one to manage risk with sometimes. So it's it's, as you do, gotta be a little careful. Um, but I, I do think they're all going to perform better. And then there's some of the ways I I'm cautiously trying to pick a bottom in the treasuries, uh, some, some different ways you could look to do that.
I mean, uh, you know, by some just manage risks, call spreads. Uh, you know, use a stop in the tenure. So I am playing to the upside, looking for the treasuries to rebound sometime over the next 30 to 60 days. And there's some of the positions and then energies as well. And this crude oil is just getting clobbered.
I think it's down more than 6% right now. It's it's the day of reckoning that, that, uh, crude has been sort of. No, it was good. It was around the corner and it usually happens after these contract expirations or options expiration. So the April, April, uh, options expired yesterday. And, uh, you're, you're getting that sort of roll over right now.
Yeah, there could be some fundamental news that that's, that's moving it over. There always is. But this is, this I think was, was a positioning, um, move in. And we've been talking about being short April as the market got a little frothy. We've been bullish crude, but being short, the April contract and being logged the December contract, cause there's been a really steep backwardation you've seen the.
The April contract trading at about as much as a $5 premium to the December. W we do, we do believe that that comes in today. That's down to two 40. So that's something that we're playing with. I even, I even had talked about earlier in the week in some of my write-ups, uh, rolling that short April into a short may contract, but now that we're down at our target is, has been to 30 to 40.
We're moving into the close to we're probably sort of close that out today. And then, uh, look to reestablish it back to closer to $4. We want to be buyers in crude oil though. Uh, so we're going farther out a month wise, potentially looking like a September contract and look to position maybe coming out of the weekend or may buy some call spreads ahead of the weekend.
Just so we don't manage risk. I don't want to see any news in the weekend that could slam this market lower and really, you know, gap lower and on future. So one of the better ways to do that would be. Buy some call spreads, you know, your risk is out there and, uh, you avoid any in any crazy moves in the market or news.
Okay. Let's talk about the equity side. Now, the S and P 500 is still up year to date, but just on the last 30 days now built the last month has gone. Nowhere. It's been flat. What's happening now. Yeah. It's, it's, it's a push and pull yeah. Tech, you know, down sharply. And then as the NASDAQ is, and then, you know, which NASDAQ got up to 13,900 and it's, it's fallen sharply.
It's been with us a little about 12,200 and, and it's struggling to regain 13,000. So you got the NASDAQ. Uh, what does that six, five, six, 7% from its, from its record high at maybe maybe more or, you know, you've got the S and P that's at record highs set in record high last night. And, um, you know, I, I think, you know, push and pull here, the Dow Jones is actually higher today.
So industrials are doing well. Energies again and having a bad day to day, but energies have been on fire banks have been on fire. So you got some good leadership in the market overall, and it's just, we're at a time where it's not all about tech. I do think tech will, will have its day and that's, that's where, you know, active portfolio management becomes very, very important and, and know, trying to figure out what's going to be the next year, next, the cycle rotation.
What sectors do you like now then? Listen, our, our largest positions have been and continue to be in, uh, the, the small caps. Uh, we use IJR, uh, KRE good regional bank, just broad exposure, avoided idiosyncratic risk. Um, so those are, those are two that we like a lot, but. We love industrials that include things like Raytheon and Kansas city Southern.
And, uh, but you know, as, as we've seen weakness and, um, and some of the tech I've been, been buying Apple and Google. And so I think it just kind of staying diversified, but again, our larger positioning right now is, is, uh, looking at these banks continue to go. And the small caps tending to go until there's a reason that that tells us that they're not.
And again, that could come any day, any week. And that's why we're always vigilant. Perfect. Thank you for your update bill. Appreciate it. Thank you. And thank you for watching Kitco news. Don't forget to subscribe. I'm David Lynn. . .