In short: "A very very interesting ETF right now because it's been hammered" — if the Fed cuts and the curve steepens, IVOL "could be up 15, 20% total return."
IVOL is not a bet on rates going up or down. It is a bet on the shape of the yield curve — the gap between short-term rates (say the 2-year) and long-term rates (the 10- or 30-year). It profits when that gap widens, which is called "steepening."
The steepening he expects happens if the Fed cuts short-term rates (because the economy is weakening) while long rates stay high (because of inflation and the flood of government and corporate borrowing). The fund has been badly beaten up — "hammered," in his word — precisely because that has not happened yet. He puts a number on the upside: "IVOL could be up 15, 20% total return if you get a good steepening."
This is the same 2s30s steepener trade he has run through IVOL since June — the difference now is that he is pairing it with outright long-duration bets rather than treating duration itself as untouchable.
34:25If the curve goes like this, the IVOL ETF could be up 15, 20% total return if you get a good steepening like that. — And so I take it there's a risk of recession out there, too. Like why this might be a place you would want to be in that. — Well, that's the tricky part of it because to the average person, it looks like there's no risk to recession.
In short: His vehicle for the 2s30s steepener (long 2-year / short 30-year): the curve flattening is "a mirage" — the Fed can't hike with $1.1T of interest on the debt, so the curve steepens a lot over the next year. Nancy Davis's "battered" IVOL plays it.
IVOL is an ETF (run by Nancy Davis) that profits when the gap between short-term and long-term interest rates widens — a "steepener." The market is currently pricing the opposite, because the Hormuz inflation shock has traders reflexively betting the Fed will hike. He calls that "a mirage": with interest on the national debt now $1.1 trillion a year (versus $300 billion before the last hiking cycle) and the consumer already wounded, the Fed simply can't hike much. Short rates stay anchored while long rates rise with inflation — the curve steepens "a lot over the next year," and the beaten-down IVOL is his retail-accessible way to own that view.
26:35famous Ival ETF founded by Nancy Davis. IVOL. — Okay, let's move on now to page eight which is year-over-year inflation and the Bloomberg Commodities Index. What's this comparison telling us? — This is a blood curdling chart for the love of God. You've got all this data center spending two trillion bucks and another 5.4
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