Notes by YBB
(My PC decided to have an update around 1:00 PM, so the posting of some FOMC Statement links via phone had an incorrect date. This was corrected where possible.)
Rates: Fed funds cut 25 bps to 4.25-4.50%, bank reserves rate to 4.40%, discount rate to 4.50%. Treasury QT continues at -$25 billion/mo, MBS QT at -$35 billion/mo.
Powell gave a long explanation to why the rate was cut today & why the pace of cuts may be slower in 2025 (maybe 2 cuts). We are closure to the neutral rate (an unknown) but it’s different for the short- & long- term. If necessary, rates may even go up but that seems unlikely now.
Inflation is sticky in the 2.50-3.00% range due to housing (via OERs) & insurance (delayed catchup), but it may be +2.5% in 2025, +2% by 2027. The Fed’s targets apply to the headline PCE, but core PCE is better for the Fed policy.
Tariffs’ & counter-tariffs’ impacts will be evaluated when they come. The expectation is that their inflationary effects will be one-time. There was a Fed study on tariffs in 2018 & that will be updated.
Mortgage & other longer term rates haven’t come down because those are affected by several other factors.
Labor market has cooled, unemployment rate is 4.2%, labor turnover is low. The public is unhappy with high prices, but lower inflation doesn’t mean lower prices. At some point, with wage growth remaining above the inflation rate, the public sentiment may turnaround. Further cooling in labor isn’t expected to make further progress on inflation.
Geopolitical risks are high but their impact on the US economy would be via the oil prices that have been weak.
There was a question about the level of the stick market, but Powell ignored it (markets fell sharply). He said that 2024 has turned out to be a good year contrary to the earlier projections and 2025 should also be good.
LINK

The FED lowers the rate by 25 bps (0.25%). The market fell…

Down is up, up is down, Bad News is Good News, Good News is Bad News.
Either that or Y-E selling has started really eagerly given the runup in recent weeks....

The FED lowers the rate by 25 bps (0.25%). The market fell…
Sticky inflation that refuses to drop to 2% target which is artificial anyway.

Super Catchup for 401k/403b from 2025
Another Secure 2.0 provision for catchups for 401k, 403b, government 457 and federal TSP kicks in 2025.
For 55+ $7,500
For 60-63 $11,250 (higher of $10,000 and 150% of regular catchup)
SIMPLE retirement plan catchups are also adjusted: 55+ $3,500, 60-63 $5,250.
https://www.irs.gov/newsroom/401k-limit-increases-to-23500-for-2025-ira-limit-remains-7000

CME FedWatch shows 97.1% chance of 25 bps cut based on fed funds trading.
https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

Lots of articles coming out about a very small rate cut in December, but possibly more of a flat environment in 2025. Floating Rate Bond OEFs tend to do well in a relatively flat environment, so it is a category to keep an eye on. I am a retired fixed income investor, so I will be watching very conservative bond oefs, including conservative FR/BL bond OEFs.

https://www.sec.gov/Archives/edgar/data/811030/000089418924007309/ottercreekottrx497ereducem.htm
97 1 ottercreekottrx497ereducem.htm 497
Filed pursuant to Rule 497(e)
File Nos. 033-12213; 811-05037
Otter Creek Long/Short Opportunity Fund
(the “Fund”)
Institutional Class – Ticker: OTTRX
Supplement dated December 17, 2024 to the Statutory Prospectus dated February 28, 2024
Effective immediately, the initial minimum investment amount for Institutional Class shares of the Otter Creek Long/Short Opportunity Fund is reduced to $2,500.
Please retain this supplement with your
Statutory Prospectus for future reference
********Initial minimum was $100K********

The -4.7% decline Monday was due to a $1.4519 dividend distribution.

MMF - checking at local bank,BMO, dropped for the second time in three months. Rate went from 2.?? -1.745 1.547.
Time to move RMD , which went there by my error!

With the inflation being sticky, it is likely the rate will stay higher and longer with fewer cuts in 2025. One pundit mentioned there may be no cut next year and one or two cut in 2026.

Right, no one can say what will definitely happen, not even the FED--- until they see what's going on. Like Gretsky: chase the puck to where it's GOING to be, next; not where it is at the moment.
I have the suspicion that inflation will be difficult to bring down much further, unless a recession occurs. In that case, fewer cuts, and stretched over a longer period of time, is what's to be expected. NOT acting upon that, but upon the simple desire to reduce risk and leave a disappointing fund, my recent switch into PRCFX (effective today, when Chucky gets around to it) has brought my equity position down to 42% of total. (Bonds = 48%. The "cash" and "other" stuff is in the hands of the Portfolio Managers of my funds.)

With the inflation being sticky, it is likely the rate will stay higher and longer with fewer cuts in 2025. One pundit mentioned there may be no cut next year and one or two cut in 2026.

Since this fall, there has been more political instability from one region to another. We have been pulling back a bit on stocks and increasing the cash position. Don’t like what we are seeing going into 2025 - high US stock valuation, sticky inflation (potentially get worse with tariffs and immigration), and increasing federal debts.
Edit: taking a page from Warren Buffet, we will be patient.

After one month of being on the edge, a new NO confidence vote today (Dec. 16) has thumped the German government. Europe is having a nasty period, too.
Article

https://www.sec.gov/Archives/edgar/data/1965454/000158064224007585/grandeurpeak_497.htm
Effective January 1, 2025, the Grandeur Peak Emerging Markets Opportunities Fund, Grandeur Peak Global Micro Cap Fund, Grandeur Peak Global Opportunities Fund, Grandeur Peak Global Reach Fund, Grandeur Peak International Opportunities Fund, and Grandeur Peak International Stalwarts Fund (each a “Fund” and collectively the “Funds”) will reopen to new and existing shareholders through all channels where the Funds are sold...
See link for other changes.
CEO letter:
https://grandeurpeakglobal.com/letters-from-leadership/ceo-letter-from-blake-walker/

Buffer ETFs gaining legitimacy
https://finance.yahoo.com/news/uconn-endowment-abandoning-hedge-funds-123026517.html

@equalizer, will you be covered through employer group health insurance plan until 65 when Medicare kicks in?
Years ago, mine did only IF I opted for pension, not lump-sum. But plans differ on this.

Yes, covered by employer till 65,

Saw Josh Brown there. Knows stuff. "Reformed Broker." And "Downtown Josh Brown." I'm instantly focused. Let's see what they all have to say..... Rieder: Focus AWAY from the noise. Dig deeper into substantial, deeper data, then make some judgments about where to put money. Makes sense. Batnick: how to separate Noise from Signal? Rieder: experience, age, learn over time who are the thoughtful CEOs.......Rieder looks at gobs of cash flow statements, too.
Whoa! Biggest 5 companies size = 407 other companies. That's nuts. And we're only 14 minutes into this...
Consumers who are driving the economy are senior citizens with no debt!? Raising interest rates just fattened their accounts...... Rieder: Inflation's not gonna fall any further.
Bonds at 6+ percent next year looks good. Brown: but the real rate would be about half of that.
Hedging: If you're worried about it, then own less. (Brown.) Echoing Rieder via Kamansky.
ETF BINC: trying to provide yield above an Index. (I just looked: 24% in derivatives. Not for me.)
https://www.morningstar.com/etfs/arcx/binc/quote
THAT was a good listen.

@BaluBalu
shifted FROM prwcx in non- taxable accounts to giroux's new fund.

I am assuming you are talking about PRCFX, which I do not own. I only own PRWCX of his products.
You can check the prospectus for both funds to see if he has unlimited flexibility or if he has any prospectus imposed limits on how low or high he can get on equity percentage.
Interestingly, in the video he mentioned the 56% equity is option adjusted equity percentage. I am not sure how he is playing the options. As of 11/30, looks like the fund is about 60% equity, similar to at 10/31. He must have reduced equities in the last two weeks. As of 11/30, he has -ve number for straight options, which I am guessing is covered calls (but I could be wrong).
https://www.troweprice.com/personal-investing/tools/fund-research/TRAIX?src=USIFundRedirect&adobe_mc_sdid=SDID=4A663477A0B547BE-4283858B3976C96B|MCORGID=D15D15F354F647770A4C98A4@AdobeOrg|TS=1732392621&adobe_mc_ref=https://www.google.com/
Rick Rieder in the other video mentioned about the fallacy of owning bonds as a hedge against equities in the current environment. His thought is that reduce equities if one thinks equity risk is too much.
If I were to extend that thought, I have to question the traditional reason why people owned 60/40 portfolios. I think one can still own the 60/40 portfolio but keep the 40 in the shorter end of the curve, which I think how many of the MFO members are playing. I hope that is how David Giroux is playing.

I did not know what NAC was -
https://www.goodhousekeeping.com/health/diet-nutrition/a44591291/nac-supplement-benefits/

Well, with either #1 or #2, you get the tax saving, but have $40 in your hands and still have $24 to soft-manage within the DAF.
Remember, $64K with large unrealized gain does have higher market risk.
Actually, a 3rd scenario (variation of #2) can be constructed so that you donate some in-kind to DAF and cash the remainder so that the net tax impact is zero. And you end up with the combo of cash in your hands plus a good chunk in DAF to soft-manage.
Money in the DAF is out of your estate.
There are also income limitations for DAF contributions,
"Overall deductions for donations to donor-advised funds are generally limited to 50% of your adjusted gross income (AGI). The limit increases to 60% of AGI for cash gifts, while the limit on donating appreciated non-cash assets held more than one year is 30% of AGI. The IRS permits a carryover for five tax years, should your charitable deduction exceed AGI limits in a given tax year."
https://www.schwabcharitable.org/non-cash-assets/publicly-traded-securities