In a discussion, Rick Santelli, a financial commentator known for his "Tea Party" rant, shares his views on the current state of the economy and financial markets. He begins by expressing regret that he can't provide a detailed chart due to a lack of equipment. He then reflects on the significance of anniversary dates and the all-time high closing yield in September 1981.
Santelli argues that it's crucial not to go against a market that's moving upwards but to pause if it seems like it's going to retreat. He believes that rates are heading higher in the long term. Despite the poor quality of his charts, he explains the concept of a high-low perpendicular midpoint, emphasizing its importance in determining key spike and bottom levels.
He discusses the potential for the 10-year treasury rate to reach 13.5% in the next seven years, but warns against jumping in too early. Santelli suggests that if the week closes under 4.375% and the high yield close remains in the 460s, it might be a good time to buy the market, expecting a retracement to potentially get back down to 4.25% to 432.
Santelli also touches on the potential consequences of the Federal Reserve continuing to use quantitative easing (QE) and the impact of the Bank of Japan's actions. He believes that the presumption is that QE is done and that the Fed needs to be disciplined to maintain its course.
In response to a question about the potential for high interest rates to crush the economy, Santelli suggests that when equities get really ugly, the treasury complex starts to do better. He notes that the signals being distorted have changed to some extent and it's going to have to get much uglier to get the attention of the bond market.
He concludes by stating that his big call for the night is that yields will be north of 13 in the next 10 years, based on long-term monthly charts.
1. The speaker is discussing the impact of government spending on inflation and the markets.
2. The speaker believes the economy is out of control due to a two trillion dollar deficit.
3. The speaker refers to the example of Milton Friedman, a famous economist, to explain the relationship between inflation, government spending, and the markets.
4. The speaker discusses the potential for a "pop" in the treasury yield to 13.5% within the next seven years.
5. The speaker advises caution and suggests looking for a retracement in the market before buying.
6. The speaker refers to the concept of "quantitative easing" and its impact on the market signals.
7. The speaker discusses the potential for stagflation if rates continue to rise.
8. The speaker suggests that rates will likely come back down after a period of rising rates.
9. The speaker emphasizes the importance of understanding the long-term trends in the market, not just short-term fluctuations.
10. The speaker believes the market will likely consolidate before moving higher again.
11. The speaker advises not to try to pick market tops and to let the market tell you when to buy or sell.
12. The speaker predicts that rates will likely rise to north of 13% in the next 10 years.
13. The speaker refers to the "grand scheme of things" to explain his outlook on the market.