The End of "Buy the Dip": Felder's Bear Market Warning

The End of "Buy the Dip"? With Jesse Felder (YouTube link)

The discussion between Maggie Lake and Jesse Felder, founder of the Felder Report, aired on April 15, 2025, explores why the “buy the dip” strategy is failing and signals a bear market. 

Key points:

• “Buy the Dip” Dead: Felder cites a Wall Street Journal stat showing 2025 as the worst year for “buy the dip” in a century, with last week’s strong rally resembling bear market bounces, not reversals.
• Bear Market Signals: Massive insider selling in 2024 (e.g., Bezos, Huang) at high valuations (Magnificent Seven at 50x free cash flow) predicted a slowdown. Insiders remain cautious, with no significant buying.
• Economic Outlook: Corporate leaders anticipate a recession, with earnings revisions driving stock declines. Felder sees a slow, painful grind down, akin to the dot-com bust, not a sharp 2008-style crash.
• Tariff Uncertainty: Trump’s tariffs (e.g., 145% on China) add unpredictability, but insiders’ bearishness predates them, reflecting broader slowdown fears.
• Capital Flight: Money is flowing out of U.S. assets (stocks, bonds, dollar), with gold surging as a safe haven, signaling potential dollar devaluation, reminiscent of 1971’s gold standard exit.
• Warning Signs: Key indicators include dollar weakness, bond market stress (10-year Treasury yields nearing 5%), and a 7% fiscal deficit during expansion, raising debt crisis fears (echoed by Ray Dalio, Scott Bessent).
• Fed Dilemma: Persistent inflation (median CPI at 3.5%) limits Fed action, with “transitory” rhetoric risking credibility. Tariffs and a weaker dollar could fuel secular inflation.
• Investment Shifts: Felder is bullish on commodities (e.g., oil, energy stocks), citing low prices, bearish sentiment, and insider buying (e.g., Buffett, Icahn). Emerging markets and Europe may offer value, but U.S. recession risks temper optimism.
• Risks: A mishandled trade war or debt crisis could spiral, with modern factors (401k exposure, rapid information flows) amplifying panic compared to the 1970s.

Felder urges diversification into real assets and international markets, warning of a debt-driven crisis if policy missteps occur.

Navigating Market Chaos: Bonds, Volatility, and Global Shifts

More Pain Ahead? With Jared Dillian (YouTube link)

In the discussion between Maggie Lake and Jared Dillian, they analyze the chaotic market conditions as of April 11, 2025, focusing on several key points:

1. Bond Market Turmoil: Dillian highlights the bond market's instability, suggesting China might be selling U.S. bonds in retaliation to Trump’s tariffs, causing yields to spike despite deflationary economic data (e.g., CPI, PPI). He favors going long on bonds into the weekend, anticipating a potential U.S.-China deal that could rally bonds.
2. Market Volatility: The VIX surged to 60, indicating extreme volatility, but has since dropped to 38. Dillian has been selling S&P puts, capitalizing on high option prices, and warns against buying expensive options in such conditions.
3. Stock Market Dynamics: Stocks rallied (NASDAQ +2%, S&P +1.5%), but Dillian believes the market may retest recent lows before a potential rally to 5600-5700, comparing this week’s action to the post-9/11 market in 2001 (sharp drop, consolidation, then a bear market).
4. Dollar Weakness: The dollar has seen a sharp decline (five standard deviations), which Dillian views as oversold. He expects a short-term bounce within weeks but remains bearish long-term (2-3 years), citing tariff policies favoring a weaker dollar.
5. Gold and Commodities: Gold’s rally is linked to financial instability and possibly China buying gold with dollars from bond sales. Dillian sees this as early-stage, advising to buy despite new highs. He’s cautiously optimistic on copper, expecting resistance at $4.73-$4.74.
6. Liquidity Concerns: Bond market liquidity is severely strained, with even small trades moving prices significantly, signaling high volatility and cautious trading.
7. U.S. Asset Confidence: Dillian notes damaged confidence in U.S. assets (stocks, bonds, dollar), likening the situation to emerging market dynamics. He advocates for international diversification (40-50% of his portfolio is non-U.S.).
8. Federal Reserve Outlook: He dismisses QE in the near term, predicting a recession might not hit until fall, potentially prompting rate cuts later in 2025. However, a Fed rate cut now could steepen the yield curve, raising yields further.
9. Trade Deal Speculation: Markets may be anticipating U.S.-China trade deal announcements, but Dillian focuses on asymmetric opportunities (e.g., bonds) rather than betting on specific outcomes.

Overall, Dillian advises caution, emphasizing experience, diversification, and strategic trades to navigate the volatile, uncertain market landscape.