Let's get back to the broader markets and the outlook for the economy after consumer confidence this month did fall to the lowest level since April. Joining us this morning is Medlife Investment Management chief market strategist Drew Mattis. Been watching a lot of this stuff closely.Drew, good to see you again. >> Good to good to be here. So, Conference Board is is kind of instructive and it it does fit a little bit with the narrative being built at Amazon and GM and Paramount uh where headcount is either ...

Economic Overview - The economy is facing a "conundrum" with strong consumer spending driving growth while the job market shows signs of weakness, as noted by Bank of America economist Aditya Bhave [1] - The government shutdown has complicated economic data interpretation, leading to uncertainty in the economic outlook [5][6] Federal Reserve Actions - The Federal Reserve is expected to cut interest rates by 25 basis points to a target range of 3.75% to 4%, following a similar reduction in September [2][6] - Fed officials are divided on the approach to rate cuts, with some advocating for a cautious stance due to persistent inflation concerns [2][3][9] - Analysts anticipate the end of the Fed's quantitative tightening program by December, as liquidity conditions tighten [6][19] Market Expectations - Investors are projecting an over 87% probability of another rate cut in December, reflecting market sentiment regarding future Fed actions [12] - Despite expectations for further cuts, there is a debate among Fed officials about the necessity and timing of these reductions, indicating that cuts beyond October are not guaranteed [11][13] Inflation and Labor Market - Inflation remains a significant concern, with some Fed officials cautioning against aggressive rate cuts until inflation trends downward [10][13] - The labor market is showing signs of softening, with potential risks of a "no hire, let's fire" scenario emerging, as employers are hesitant to make new hires [14] Quantitative Tightening - The Fed's quantitative tightening program, which has reduced its balance sheet from nearly $9 trillion to below $6.6 trillion, may soon come to an end as market conditions evolve [17][19] - Ending the QT program is seen as a prudent move to ensure banks maintain "ample reserves" and prevent spikes in short-term interest rates [19][20]

We recently talked about how the Fed is going to make us rich. Now, that might be a broad statement. You might even say, "Well, Nick, that's just clickbait." However, all of the factors around what the Fed is doing currently, if we compare it to previous cycles, it has led to prices in this market going absolutely parabolic and melting faces.I don't believe that this time around is different. In fact, I do believe that we are going to see that same exact reaction but on a bigger scale. Let's take a quick lo ...

Core Insights - The Federal Reserve is facing pressure to halt the reduction of its $6.6 trillion portfolio of securities as money markets signal that quantitative tightening may have reached its limits [1][2] - Over $2 trillion has exited the financial system since the Fed began reducing its portfolio in June 2022, leading to a significant depletion of liquidity [3] - Interest rates among banks have risen, and the Fed's benchmark rate has also increased for the first time in two years, indicating tightening liquidity conditions [4] Group 1 - The upcoming Federal Reserve meeting on October 28-29 is expected to address the future of the Fed's securities portfolio, with indications that the process could end soon [5] - Wall Street strategists warn that the Fed must act quickly to prevent market distortions similar to those experienced in September 2019, when short-term rates surged due to tightening measures [6] - Major banks, including Bank of America and Deutsche Bank, have adjusted their expectations, now anticipating an end to quantitative tightening at the October meeting [7]

Core Insights - The anticipated altseason has not materialized, with capital rotation favoring Bitcoin over altcoins [1] - Bitcoin's market dominance has increased to 59.1%, while its price has rebounded to $111,000 from a low of $104,000 [1] - Ethereum ETFs experienced significant outflows, totaling $128 million, while Bitcoin ETFs saw inflows of $20.33 million, led by BlackRock's IBIT with $108 million [2] Market Dynamics - The Altcoin Season Index is at 24, indicating a strong preference for Bitcoin, as Ethereum struggles to surpass its 2021 high of $4,800 [3] - Bitcoin commands 27.17% of Binance's futures market, with trading volume reaching $543.33 billion in October, up from $418 billion in September [4] - Analysts suggest that if the current trends in funding rates and open interest persist, Bitcoin may break through historical resistance levels [5] Investor Behavior - The current market trend shows liquidity flowing into safer assets like Bitcoin before moving to riskier altcoins, consistent with previous cycles [6] - Bitcoin has surged 8.5 times from its 2022 low of $15,400 to around $126,000, while altcoins remain stagnant [7] - Expectations of three Federal Reserve rate cuts in 2025 may lead to a return of liquidity to risk assets, prompting interest in altcoins [7]

Monetary Policy - JPMorgan expects the Federal Reserve to conclude quantitative tightening next week [1]

Monetary Policy - JPMorgan expects the Federal Reserve to end quantitative tightening next week [1]

Monetary Policy - JPMorgan expects the Federal Reserve to end quantitative tightening next week [1] - Rate cuts are anticipated [1] - Money printing is potentially on the horizon [1] Market Outlook - Bitcoin is expected to rise above $100,000 [1]

Financial Data and Key Metrics Changes - ARMOUR's Q3 GAAP net income available to common stockholders was $156.3 million, or $1.49 per common share, with net interest income at $38.5 million [3] - Distributed earnings available to common stockholders was $75.3 million, or $0.72 per common share, reflecting a total economic return of 7.75% for the quarter [3][4] - Quarter-end book value increased to $17.49 per common share, up 3.5% from June 30th and 2.8% from August 8th [3] Business Line Data and Key Metrics Changes - ARMOUR raised approximately $99.5 million of capital by issuing about 6 million shares through an at-the-market offering program [4] - The company repurchased 700,000 shares of common stock through its repurchase program during Q3 [5] Market Data and Key Metrics Changes - The Federal Reserve implemented a 25 basis point cut in September, with expectations for two additional cuts by year-end, creating a favorable environment for agency MBS [7][8] - Treasury yields declined, agency MBS spreads tightened by roughly 20 basis points, and volatility fell to its lowest level since 2022 [7] Company Strategy and Development Direction - ARMOUR's strategy focuses on growing and deploying capital thoughtfully during spread dislocations while maintaining robust liquidity and dynamically adjusting hedges for disciplined risk management [15] - The company aims to pay an attractive and stable dividend, with a current monthly dividend of $0.24 per share [5][6] Management's Comments on Operating Environment and Future Outlook - Management noted that the macroeconomic environment has become more uncertain due to the federal government shutdown, but they expect continued structural demand for agency mortgage-backed securities [8][13] - The company anticipates that regulatory clarity around banking reform and a resumed easing cycle will serve as catalysts for high-quality liquid assets like mortgage-backed securities [13] Other Important Information - ARMOUR's portfolio is entirely invested in agency mortgage-backed securities, agency commercial MBS, and U.S. Treasuries, with a net duration of 0.2 years and applied leverage of 8.1 times [10] - The aggregate portfolio prepayment rates rose to 9.6 CPR in October, a 19% increase from the third-quarter average of 8.1 CPR [11] Q&A Session Summary Question: Current returns on incremental investments and hedge choices - Management expects hedged ROEs in the 16% to 18% range, slightly lower than previous quarters due to tight mortgage spreads [18] Question: Outlook for swap spreads and mortgage spreads on an OIS basis - Swap spreads are expected to normalize, providing a tailwind for the portfolio as a more effective hedge for MBS [20][21] Question: GSE deregulation and its impact on borrower rates - Management indicated that various levers could be pulled to reduce borrower rates, but there is a balance to maintain GSE attractiveness [24][25] Question: Interest rate volatility and its future evolution - Management believes that while short-term volatility may occur, medium-term volatility is expected to decline as the Fed continues normalization [32] Question: Economic net interest margin outlook - The future of the economic net interest margin will depend on the portfolio and the pace of Fed rate cuts [36][37] Question: MBS spreads and Fed rate cuts - Management noted that a pause in the easing cycle could lead to volatility, but actual cuts may unlock bank demand for MBS [42][43] Question: Stock valuation during capital raising and buyback transactions - The stock buybacks occurred at around $14.40 per share, and management is committed to being active on both sides of the equity account [45]

Core Viewpoint - A proposal by Dallas Fed President Lorie Logan to shift the Federal Reserve's interest rate target from the federal funds rate to the tri-party general collateral rate (TGCR) is gaining attention but faces challenges as the Fed's balance sheet reduction nears completion and leadership changes are expected next year [1][2]. Group 1 - Logan's proposal suggests that the TGCR, which reflects short-term loans collateralized by bonds, is a more accurate indicator of money market conditions impacting the broader economy compared to the federal funds rate [4]. - The TGCR market sees over $1 trillion in daily volumes, significantly higher than the $100 billion in daily fed funds trading, indicating a shift in market dynamics [3]. - The Fed has been reducing liquidity for three years, and as this process continues, short-term borrowing rates may become more volatile, making the timing for a change favorable [5]. Group 2 - Influential figures in monetary policy, including former Fed staffer Ellen Meade and former New York Fed head William Dudley, have expressed support for Logan's proposal, noting its technical nature and potential merits [6]. - Despite Logan's influence, the extent of support for her idea within the Fed remains uncertain, highlighting potential headwinds to implementing the change [6].