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Ajouté : 2026-05-30

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[00:07:33]All right, that's a pretty good transition in music. Now, let's find a page.

[00:07:40]Seems like it's ending just perfectly.

[00:07:43]All right. Well, why don't we get going?

[00:07:49]Good, mate. How are you? How's your mom?

[00:07:52]Hey, welcome to Forex. Today, the YouTube community of more than 21,000 almost 22,000 foreign exchange traders.

[00:08:04]Let me remind you that trading is risky, not appropriate for everyone.

[00:08:09]Past performance, good or bad, is not necessarily indicative of future results. Please stay small, stay humble, focus on the long term, and never risk money you cannot afford to lose.

[00:08:52]Oh. Oh. Huh. Huh. What do you think?

[00:08:55]Looking all right. Got it. Damn, boy.

[00:09:00]Let's get the light on. Huh? Is that too bright? Yeah, that's the weird glow.

[00:09:05]Anyways, good morning.

[00:09:08]Have to go to a private hedge fund conference this morning. I'm supposed to be there right now, but I'm with you cuz you are my sweet baby. But I got to zip over there and then I got to zip back.

[00:09:20]I'll probably have to do my uh 4:00 uh up there in Buckhead. But anyways, good to see you. We got some time to go through the charts. We already have a question. Hey, how do you predict future interest rates?

[00:09:35]Yeah. Well, we have the data and we have the intel.

[00:09:40]We got the filter. I taught Aiden, our artificial intelligence, how to do that.

[00:09:45]And so, he does it for us visually. But I programmed it. I developed it. It's my brain. This is not Chad GPT, son.

[00:09:57]So anyways, uh yeah, we can go through that and uh and so on and so forth. So thank you for subscribing.

[00:10:05]Would you please leave a comment on the recording? Click the thumbs up. Uh I don't know what do YouTubers say.

[00:10:13]What's up YouTube, whatever. Um thank you for being part of the community of serious traders. So yes, that's what I say.

[00:10:26]Thank you for being here. It is an honor to be a servant leader. So I will lead the discussion. You can guide it by asking questions but I am here to serve you. Now Forex.Tday is a collaboration between trade and trader way. Tradars for your analytical platform and analysis and coaching and AI.

[00:10:52]Trader Way is for a wonderful trading platform and fast execution and low spreads and an ethical service, trustworthy service. So anyways, thank you for being here. Uh let's go.

[00:11:12]All right, so we have a question right off the bat now. Where is my YouTube?

[00:11:19]What? I killed my YouTube.

[00:11:22]Looks like I killed my YouTube. Really?

[00:11:25]How the heck did I kill my YouTube?

[00:11:28]All right. Well, hang on. Uh, I got to bring up the YouTube chat again.

[00:11:39]And so, I'll answer the the question.

[00:11:41]It's a really good question and it's something that we all deal with. This is finance.

[00:11:51]YouTube.com or sorry yeah YouTube.comextoday there there we are okay so um yeah so in finance we all deal with this question what will let's say the Fed now it could be any central bank but what will interest rates be in the future So we go uh fundamentals, econ rates, radar.

[00:12:28]So let me show you how uh the finance world does this. Um let me get my drawing tool.

[00:12:42]Waiting. Waiting. Got to load my drawing tool.

[00:12:48]still hasn't loaded. Sometimes I have Oh, there it is. Good. All right. So, let's do some math. Let's do some finance. You're going to buy a bond that's five years expires 5 years from now. So, let's do some bond math. What is the value of a fiveyear treasury?

[00:13:10]Okay. The present value equals the cash flow, right?

[00:13:17]So, uh, we will do, um, uh, well, I guess it's a treasury, so it'll work slightly different. So, you get zero cash.

[00:13:31]Okay. One over I, which is 3.75.

[00:13:39]Uh, 37. Oops.

[00:13:43]Nice. 375.

[00:13:45]Now you do you would actually do it write it down right slightly different but I in this case is equal to one.

[00:13:54]So, what this is saying is in the first year, well, I guess I'll put this there just so you have um in the first year, so we we put uh let's say $1,000 into a 5-year Treasury. In the first year, you'll get no cash flow because you get paid at the end.

[00:14:20]Okay? over 1 + I which is the interest rate 3.75 for the first year plus a zero cash flow over 1 + okay now what is I next year Okay.

[00:14:51]For the second year plus okay wait. We get annual payments. Sorry.

[00:15:03]Sorry. Sorry.

[00:15:06]We get annual payments. Uh so we whatever uh uh on a thousand bucks on a 100 bucks it's five. So on a th000 bucks you get let's say the interest you locked in. So you get $50 the first year, $50 the second year plus $50 the third year over Okay, one plus now we don't know what I is. My mouse is really fighting me.

[00:15:39]That's a question mark to the three plus uh I'm running out of room. 50 Uber 1 + okay question mark I two my mouse is really fighting me four okay and this is important I get my $1,000 investment back plus 50 so I get a th000 okay over 1 plus uh in the interest rate 5 years from now over five.

[00:16:28]Okay, so we have variables now. You guys following me? Am I on? Is my mic working?

[00:16:39]We know the first variable.

[00:16:43]Okay.

[00:16:47]Okay. So, one question, how and where do you get the present value and future value? Well, we're calculating the present value of future cash flow. So, if we invested $1,000 and we and uh right and it was paying us 5%, let's say that's $50 a year.

[00:17:12]Okay, for five years. These are all the variables for five years plus at the end you get your $1,000 back. Now, treasuries don't actually work this way. This is why I kind of had a brain fart, but this is traditional bond math. It it it's actually any cash flow. It could be rent from a uh from an apartment building, whatever. It's the present value of future cash flows.

[00:17:39]Okay, this is a a okay a DCF, discounted cash flow. So, we're creating the value because there's an assumption $1,000 in five years from now is worth less than the $1,000 in your hand right now.

[00:17:59]Okay, but anyways, like for example, would you like your $1,000 in two year? Like let's say you mowed my lawn and so you a kid mows my lawn and I say, "Yeah, I'll pay you u 20 bucks." I know I'm a cheap bastard, but he's a kid. So I say, "Okay, I'll pay you 20 bucks." So the kid mows my lawn, comes back, and he's like, "I'm done, sir. Could I have my $20?" I'm like, "Yeah, I'll pay you in a year."

[00:18:30]You're like, "What? In a year?" Okay.

[00:18:33]No, I'd rather be paid now. Now, this is because there could be inflation. So, 20 bucks in a year could be worth less, less purchasing power. Or the kid could invest it in the stock market and double this money and say, well, I have an opportunity cost here. Plus, there's just a desire, I need the money now, um um for whatever reason, right? So anyways, so now what the variable that's missing, okay, we know what the interest rate is now this year. What will the interest rate be in? Okay, and this is why we can express it instead of in year one in in in year 27. Okay, so the cash flow in 2027, let's just put 27. Come on. Okay. The cash flow in 27 you'll get paid 50 bucks. That's your interest. And you'll get in 28 you'll get your 50 bucks.

[00:19:38]In 29 you'll get your 50 bucks. And five years from now you'll get your 50 bucks plus your $1,000 back. Okay. So now we're only d down to one variable in this negotiation because you would have negotiated this or you you did the math and you accepted this. But um what is the in your opinion?

[00:20:06]What will it the interest rate be in 2027?

[00:20:11]In your opinion, what will it be in 28?

[00:20:14]These are question marks by the way.

[00:20:16]very poorly done point, right? What will it be in 29 and what will interest rates be in 30?

[00:20:27]So, if you did some math, okay, let's change the variable now.

[00:20:37]Okay.

[00:20:39]And you said, well, let's do this in a blue color. Uh, next year they raise once, then they um pause, then we're back to 375, and then here we're down to uh 325.

[00:21:03]Okay, so let's say this is your math.

[00:21:07]This is your guess.

[00:21:14]This is what you believe is right.

[00:21:21]This isn't dictated by a government.

[00:21:23]This is a deal. This is an offer.

[00:21:27]How much would you pay for a five-year Treasury?

[00:21:34]What is that 5-year Treasury worth?

[00:21:36]You're figuring out the price.

[00:21:39]What would you Right. What do you need to be compensated for a 5-year investment?

[00:21:48]So, you say, "Well, I'll give you my opinion what the Fed is going to do."

[00:21:54]Now, you might be wrong, you might be right. You mean you might be high, you might be low. But we're doing this now for millions of treasuries by very very smart people that have these models and know how to do them, have teams, have computers, have AI. They're they're all doing this same math.

[00:22:21]And yes, if it's a 30-year, you got to go out, you got to do this 30 times.

[00:22:27]So you do you run the math.

[00:22:31]So you're going to get your $1,000 plus 50 plus 50. So 1,100 + 50 plus. So is it worth $1,250 bucks?

[00:22:43]Because that's how much cash you're going to earn. You get your,000 bucks back plus the 250.

[00:22:51]Is that a good deal?

[00:22:54]Well, it depends on what you believe the interest rate will be because the money in the future, if you do this math, the money in the future versus the money now is worth less. So, I know for sure, this is why they call it discounted, the future value is lower than the current value. So, it's going to be less than this.

[00:23:23]If you did the math, let's say it's closer to $100 cheaper. Let's say you believe based on your math, it's 1,150 because yeah, the 50 bucks 5 years from now, you're just like, well, I don't think the 50 bucks, you're like 50 bucks 5 years from now is going to be worth if I have to wait 50 bucks versus right now, just give it to me right now.

[00:23:49]So, you could reverse the logic and say, well, right, what would you pay for 50 bucks in the future? Like, well, I'll give you $25 now and in five years you can pay me back 50 bucks. I'll wait 5 years to double my money. You You see? So, $50 in the future is not the same as it's less than, right? So, this is why we're saying, well, what is this cash flow five years from now worth today? What is this cash flow four years from now worth today? What is this cash flow 3 years from now worth today? What's the cash flow 2 years from now worth today? And really, you want to think about it as opportunity costs?

[00:24:31]Well, I could just without any risk at all, you know, lend it to the government, earn 4%.

[00:24:41]here I could lend it to the government for 3.75%.

[00:24:45]So it changes the value of that cash flow in the future. So you add it all up and let's say the number says okay 1,150 bucks that's what that's worth. So if you could pick it up for that amount of money, you get exactly what you're looking for because this might be what you need to achieve your goals. So you could even instead of inflate uh interest rate here, you could put your opportunity cost. If if someone offers you a deal that you can earn 5% a year on some other kind of investment opportunity, then that you could put that in there in your opportunity cost.

[00:25:27]Well, if I'm going to lend money to the government, I need to it's got to be better than this other deal, right?

[00:25:33]That's why it's a variable.

[00:25:35]So, we're doing interest rates here and we calculate 1,150 and the government issues this bond and it's more than 1,150. You don't buy it.

[00:25:54]It's not good enough for you.

[00:25:57]It's not worth it to you. You can do better.

[00:26:02]So, you wouldn't buy it.

[00:26:09]If it was $1,150 or less, you would buy it because it's a good deal. It either meets your expectations or it beats your expectations. You say, "Oh my god, look at this treasury. It's mispriced. We calculate it to be worth $1,150 and it's selling for $1,100.

[00:26:32]That's a good deal. Buy it.

[00:26:36]Okay. This is happening millions of times.

[00:26:45]Millions of times. But because we understand the math and we can get the price. Now the price I pull from the government.

[00:26:55]So the question is how do I get all this data? I pull it from the government directly from the government.

[00:27:02]Directly from the treasury in well to be more precise uh I believe this data we might get it directly from the Treasury but I think we're getting it from the Federal Reserve economic database that pulls it from the Treasury.

[00:27:20]Okay, this is run by the St. Louis Fed.

[00:27:24]I've been I've I've been to the Fed tw uh St. Louis Fed twice. I spoke and I taught economic professors how to teach economics um at the St. Louis Fed. Yeah. Which was really cool. But I also met the people that work and design and develop and make and run and administrate the Federal Reserve economic database. So we're like friends. So I'm actually plugged directly in to the that database and in that database I can get the data of what is let's say the median or if you want average what is the average price today uh of a 5-year Treasury.

[00:28:10]What's the average price tomorrow for a 5-year Treasury? Right? Or 10 years ago.

[00:28:18]10 years ago today, what was the average price of a 10-year Treasury? Okay. So, I can get this average price and because I know the price, I can reverse engineer.

[00:28:31]Now, I can do it. I can do this math.

[00:28:34]You can do this math, but you have to do it every day. But you can derive the interest rate.

[00:28:45]Now you can't derive the you know the interest rate for year 1, year two, year three, year four, year five. You can you only know the price that the purchase price of all these investments with these calculations put in. So what we can do is say well what if we looked at the one month the right the three month the six month the one year the 2year the fiveyear the 10year uh I think we'd even do 20 but then let's just jump to 30 years okay so now you have the curve the full duration okay and we have all the prices so now you have to do this.

[00:29:37]Okay. And then instead of to the one to the 1112th to the 212ths to the 312ths to the 41 12ths to the 512ths if you're you know to the 61 12ths if you're doing this one and then the one year and then the two and then you this is a five that we just did and then you have to do it all the way out to 10 and yes you do it all the way out to 30.

[00:30:00]Here's what I'm getting to.

[00:30:04]Through reverse engineering of all these calculations on millions and millions and millions, trillions and trillions and trillions, tens of trillions of dollars, we can derive this data right here.

[00:30:30]on. Okay.

[00:30:34]What does the market think the interest rates will be on December 8th of this year?

[00:30:48]Okay, that's the mean. So, there's highs to this. Some think it'll be higher, some are lower, but on average that's the calculation of right.

[00:31:01]And then we can look at the skew.

[00:31:07]Now let's get into it. The skew.

[00:31:11]Um, okay.

[00:31:16]This is a normal distribution.

[00:31:19]Okay. And you have fat tails and skinny tails over here. And what we'll look what we want to see is how many people think it'll be higher than that. So let's say how many of of this data set.

[00:31:37]Now besides the mean how what percentage of the population in this data set has priced interest rates higher than 3.87 that again would derive that th that population the subset of the data set have interest rates at essentially at 4.0 know, which would be a hype. And in this time frame, okay, what we're looking at is a distribution like this.

[00:32:19]Okay.

[00:32:23]Okay. So, right in September, we're here. By December, we're here.

[00:32:32]Okay. and it's shifting to the right.

[00:32:36]Okay, we were here, but now we're here.

[00:32:39]We're shifting to the right, which again based on the math, which is derived from the pricing, and the pricing is derived from future interest rate expectations.

[00:32:53]We can tell you that there probably isn't an interest rate in December.

[00:32:58]There could be some 33% of the market is pricing that in but 66.6 is not.

[00:33:12]Okay.

[00:33:14]The next meeting late January very very close very very very very close to an interest rate cut. March very very very close and definitely by May yes the market has priced in a hike.

[00:33:33]So now when we look at this where are we now? May June no hike. July no hike. September no hike. October no hike. December getting close.

[00:33:51]Okay. When do we get into serious territory?

[00:33:55]Okay, you see how this gets a little higher. One hike and then pause there for a while.

[00:34:04]And maybe, right, and maybe cuts in the future. Okay, look at this.

[00:34:11]Um, this drop here might just because it's such a brand new treasury, it's so far out, it's not getting enough cash flow.

[00:34:20]But this this will likely change over time and and we're tracking that.

[00:34:27]Okay.

[00:34:32]Okay.

[00:34:34]So, maybe I'll have him draw a 4.0 line here so we can track that.

[00:34:45]Okay, that's how we do that.

[00:35:03]So you simply do uh a thousand calculations. It's no big deal and you do it uh multiple times a day.

[00:35:13]>> No big deal.

[00:35:14]>> Good morning. I am Aiden and let us get you up to speed on the evolving market landscape. Today's sentiment is currently flat and indecisive as reflected by the daily risk score marking a clear divergence from the broader risk on trend seen over the last month. While long-term momentum has been positive, the current session is being weighed down by a 1.2 basis point drop in the US 10-year yield to 4.481% 481% and a rising US dollar index which is stifling typical risk on flows in the >> all right we'll pause him I see the other question again show us how to get those bed average present value future value okay oops over here we go Okay.

[00:36:14]If you land, let's do uh five years. Okay.

[00:36:25]In our example, we were trying to to say, well, what would I pay for a five-year treasury?

[00:36:36]And you'd say, well, it depends on the cash flow.

[00:36:41]And it depends on what I think interest rates will be in the future. Again, like an opportunity cost.

[00:36:50]So, in $1,000, how much do you earn per year?

[00:37:02]What's the future cash flow?

[00:37:50]Oh, wait.

[00:38:32]What's the future cash flow?

[00:38:35]You earn 4.21% per year. Every year you get 4.21% on your $1,000. What's What's your future cash flow?

[00:39:39]Okay, look, I don't know why you guys are silent, but if you lend this institution, in this case, it's government.

[00:39:55]Okay.

[00:39:58]Or it could be a corporation, whoever's either way. It's a government bond or a corporate bond, right? They say, "Lend us a,000 bucks and we'll pay you $4210 a year."

[00:40:20]Okay? This is all public data, guys.

[00:40:23]This is the yield on the three-month Treasury.

[00:40:30]That's what the government is paying right now. They're selling people treasuries.

[00:40:40]This is the actual what they're offering. Lend us a,000 bucks for three months. We'll pay you the annualized.

[00:40:51]Okay. The annualized of 3.68.

[00:40:55]Lend us money for a year, we will pay you 3.82. This changes every day. These are auctions.

[00:41:02]This is the Treasury market. The Treasury issues government bonds and they sell them to Americans and to foreigners.

[00:41:17]If you're going to lend the government money, okay, you're going to get paid if you lend it to them for two years. They'll pay you 4.07.

[00:41:31]If they can't find loaners, because remember lenders, if you buy a bond, you're giving the government money.

[00:41:38]You're lending the government money. So, if they can't find it, if 4.07 07 isn't good enough. Tomorrow they'll try to pay more 4.8 4.9 4.10 cuz they need to borrow the money. These are auctions.

[00:41:58]We can derive okay the price because everyone says like why will why will you not lend the government money for 2 years if they guarantee you right $40.70 a year guaranteed because you're like well that's not good enough why I don't know I have better deals out there.

[00:42:27]So they have to raise, right? They have to raise the rate.

[00:42:37]So th this is just these are we're not making up that. That's it. Go to government treasury website and buy a a 30-year bond. This is what the the the yield is right now.

[00:42:54]Okay, we reverse engineer it to figure out what the interest rate the implied interest rate is.

[00:43:06]So I I can do another example.

[00:43:10]Okay, two years. What's the math? The present value of these cash flows $40.70 is equal to okay that uh one over the interest rate right now is 3.75 plus next year's cash flow which is your $1,000 back plus the $40.70 for next year's cash flow interest rate payment.

[00:44:00]Okay.

[00:44:02]Equals 1 + to the two.

[00:44:12]All right.

[00:44:13]So, tell me, what is the interest rate for next year?

[00:44:22]I'd like everybody to answer. What do you think the Fed will do? Do you think they'll cut interest rates, keep interest rates the same? I'm talking two full years now, not just next year.

[00:44:35]We're talking basically June of next year.

[00:44:38]What will interest rates be June of next year?

[00:44:44]Everybody give me your answer.

[00:44:47]There's no right or wrong. Just tell me your opinion. I don't care if you're just making it up, assuming a YouTube guru said something, a CNBC guru said something, or you flipped a coin. Doesn't matter. What will interest rates be next year? 3 and a half or 4.0?

[00:45:09]It's a cut or a hike. Let's go.

[00:45:13]Give me a number. Give me a number. Give me a number. Hello.

[00:45:22]Okay, we have a cut.

[00:45:27]We have a hike. We have the same. We have a cut.

[00:45:38]Hello.

[00:45:41]We have 30 or we have 25 terrified, frightened people that can't make a guess on YouTube.

[00:45:50]Can't even flip a coin.

[00:45:54]Wow.

[00:45:56]Trading must be terrifying. All right.

[00:45:59]So in this case you plug in your number and you get a value.

[00:46:10]Okay? You get a value and therefore you have determined whether it's a good deal or not a good deal.

[00:46:22]Some of you will invest the money, some of you will not because remember this all comes down to a price.

[00:46:30]This is the price right now. So if you thought this was because remember you're giving up money today to get paid two years from now. So some of you might say well the value of this is 1,100.

[00:46:47]Some of you might say the value of this is 1,200.

[00:46:51]Okay. So if it was selling for 13 none of you would buy it.

[00:47:01]If it was selling for 900 bucks, all of you bought would buy it. If it was selling for 1,111, some of you will buy it and the others will not.

[00:47:13]So, you put in what you think and we we won't all agree. We never all agree. But if there was a million of us that made this decision, we can determine what that industry that decided at what price to make the investment.

[00:47:36]Okay? So, if you think it's worth a,000 bucks and it's selling for 900, you're going to pick it up. You're going to buy it.

[00:47:46]If it's selling for 900 bucks, but you think it's worth 750, it would be dumb.

[00:47:52]You're like, well, whatever. You see what I mean? So, it just comes down to logic and I can derive because we know the math of what you decided next year's interest rate will be. We know what this year's is, but what about next year? So I could say well on average um you know we think more than 3.75 and you know of that if most people think it's more than 3.75 we can then say well how much of that average which is the skew to say well there's a 36.9% chance that we hiked to 4 right?

[00:48:43]Or cut to 3.5. You see, it's just math.

[00:48:48]We can just derive is the you know what is the median and what is the skew? Does it fat tail right or fat tail left? Left meaning cuts or uh right tail meaning hikes.

[00:49:09]Okay.

[00:49:10]So it's this is not guessing by trade.

[00:49:20]This is the actual price and today this will change. Remember the markets are not open yet. And I believe this drops below 5.0 0 today based on what's happening um uh after hours, which is great because look at the psychological levels we're dealing with.

[00:49:44]4.0 on the 2-year, 5.0 on the 30-year, 4.5 on the 10-year. These are all psyches. 4 and a/4 on the 5year. Right? So four, four and a quarter, four and a half, and five.

[00:50:00]These are all incredibly important psychological levels, but remember if you do the math, they're not necess they're not just psychological levels on the yield because they're figuring out, well, what's my future cash flow need to be?

[00:50:21]But you have to also remember that these are yields that derive price.

[00:50:32]Aha.

[00:50:34]So if these are if this is falling the price is rising which means people are buying it because they think if you have 5% and and let's say a week ago I think this was like almost 5.1.

[00:51:00]So let's say you bought you lent the government $1,000 for 30 years. And you did your math and you're like, "Hey, man. I think that's a good deal because it it creates price." This went all the way to 5.1, which means the bond market was falling.

[00:51:21]And now it's so cheap. You're like, "Hey, I'm going to lock in that money.

[00:51:32]Okay, I'm going to buy that treasury, which is you buy the treasury. So, the government gives you a piece of paper that says they owe you 5.1%.

[00:51:43]Every year for 30 years, and then they give you the money back. Now, what you did is you did the math and say, "Well, what's the value right now?"

[00:51:54]Remember the value right now based on the future value of all cash flows based on your assumptions of future inflation rates or interest rates and you do all the math in this case you got to do it all you got to do it out 30 years and you say well this is worth 850 bucks and but right now nobody's lending the government money that's why it went all the way to 5.1.

[00:52:25]They're trying to entice lenders. Come on, guys. We need the money. Hey, hey, hey, hey, hey, hey, we'll pay you 5.0.

[00:52:33]Everybody says, "No." Whoa, whoa, whoa, whoa, whoa, whoa. Okay, how about this?

[00:52:37]We'll pay you 5.1.

[00:52:40]And somebody says, "Yeah, okay."

[00:52:44]So, you do the math and it comes out the present value 850 bucks.

[00:52:51]And but today you could go to the Treasury and buy it for $840.

[00:52:59]You see that it's cheap. You see that it's a good deal. You think it's worth $850. You can buy it right now directly from the government for $8.40. And you buy it and now you own a piece of paper that says you're again at 5.1. Now it's dropped to 5.03 03 today, which means people did buy that deal, you know, from a week ago of when it was 5.1. So now they have this piece of paper that says they'll earn, okay, $51 a year, every year for 30 years, and then get their $1,000 back discounted based on future inflation or interest rates. And you derive a price. Then you look at the the actual selling price and you see that it's either a good deal or a bad deal. And then behavioral finance kicks in. If you think it's a good deal, you buy it. If you think it's a bad deal, you don't.

[00:53:56]And now who lends the government for 30 years? Well, if you're an insurance company and you're insuranceing somebody's house or mortgage, which is a 30-year risk, and you have to insure them for, uh, insure the house for fire, for flood, for hurricanes, for tornadoes, um, and all kinds of other things.

[00:54:22]Okay? You need to ha have all this locked in because you're sitting on all this now cash flow every month people pay their insurance policy and every month out of a million insurance policy holders uh what um a hundred have their house burned down or damaged by whatever. Okay. So, you know, onetenth of a percent, actually it's even less than that, right? So, a hundred per million um file claims and say, "Hey, you need to rebuild my $500,000 house.

[00:55:08]Meanwhile, everybody else is just fine."

[00:55:12]So now they have a risk that they need to cover plus inflation that they need to cover and they have their magical number based on their payouts per million versus the cash flow per million. All of this gets put into a pile and then they say their risk is 30 years. So now they have their magical number. what do they need to do to hit break even on all of this risk and all of this cash flow in cash flow out?

[00:55:49]And the insurance company can then do the same discounted cash flow analysis that you and I and everybody else does and they say, "Hey, well, to cover our assets, we need to lock in a certain rate.

[00:56:07]We need to hit at least five for the next 30 years based on our inflation expectations but also interest rate expectations which is future opportunity cost versus um um a diminishing of purchasing power.

[00:56:28]So they do all their own math and they derive to offset all our risk we need 5%.

[00:56:40]And the government is going through a tough time attracting money recently. So the government says we'll pay 5.1 insurance company buys it. They're done.

[00:56:50]So, no matter what happens now, the insurance company doesn't lose money unless, well, I shouldn't say no matter what happens, unless unless the uh the payouts go from 100 per million to a,000 per million. Uh, now their math has changed because for whatever reason there's more tornadoes, there's there's more earthquakes, there's more floods, uh, there's more golf cart fires because more people have golf carts in their garage. Yeah. Um, all the all kinds of stuff, right? And now their math would change. And now what used to be a good deal at anything above five, buy it. And that's how they think, by the way. Anything over our magic number, just buy it. lock it in and risk for five years.

[00:57:45]Okay, they don't need as much over five years. So, and they're like, "Well, on the 5year, anything more than four and a quarter, just buy that. Buy it." Because remember that means it's cheap. The price falls. And just buy it. We offset our risk. We're golden. Because now they just live on the positive cash flow of everyone else that didn't have a house that burned up.

[00:58:06]What do they do with that cash? they invest it.

[00:58:10]So insurance companies are really just buying treasuries and the stock market with free money from all their invest from all their policy holders. That's how Warren Buffett got filthy stinking rich, by the way.

[00:58:26]Okay. A million people pay a monthly payment, 100 have their house burned down. Well, what do they do with all the other money? Yeah, good question.

[00:58:36]They invest it in the stock market. Once they have their risk offset, there's still a pile of cash. They invest it and that's where they make their money.

[00:58:46]Insurance companies don't make money on your insurance policies.

[00:58:51]It's called a float. All that extra cash laying around they use to invest or like I said, they've done the math. Remember, we're talking about $100 billion, right? Um they did the math. If they offset all their risk with by locking in a treasury guaranteed by the government, anything above 5.0, they know they have zero risk. No, but if they bought the treasury at four uh 5.1, that 0.1 is profit, but on a hundred billion dollars, you're like, "Yeah, so you know, 10 million a year in free money, dude. Shut the back door."

[00:59:47]Well, actually, on 100 billion, we're talking about hund00 million. So now now imagine no matter what happens that government, you know, based on their treasury purchases, the insurance company has hedged off all the risk and guaranteed $100 million in positive cash flow.

[01:00:12]We can derive what that price was. What did they pay for that treasure?

[01:00:18]And so right now over the last 30 days a little a little has come out of the market.

[01:00:25]Okay. Now this used to be I think -1.5.

[01:00:28]So this used to be much worse.

[01:00:31]So there was a time when this was closer to 5.1 or or higher. Now it's just barely above five and I think today it's going to drop below five. It's going to get to 4.98.

[01:00:45]Okay.

[01:00:48]It used to be 4.96.

[01:00:52]So now this is going to drop. This red bar is going to go to about zero. And if more, which means it used to be much more negative. Now it's less negative.

[01:01:02]What does it mean? Money's been flowing in to the 30-year Treasury because people hit their magic number. 5.1 was good enough. that ended up being a bottom of the price. The price has been rising for several days and even though it's still negative versus 30 days ago, it's a heck of a lot less negative. And I think what we're going to find is in the future um that uh this will be green and lots of smart institutional investors locked in. And remember, I was like tap dancing when we were getting near five and a 5% and above. I was screaming bloody murder to make sure you saw this.

[01:01:56]and all and it seems like institutional investors said, "You know what? I'm buying it."

[01:02:08]Yeah.

[01:02:10]And of course, we can figure out what all this means. And it's like, well, some people, okay, a certain percentage of the market believes there's one interest rate hike, so they're going to need a higher interest rate here to offset that.

[01:02:29]Okay? You see guys, it's simple logic with uh what we call in finance a [ __ ] ton of discounted cash flow analysis.

[01:02:41]But we can reverse engineer the whole thing. And this is what AI is really good at. I mean, I can do it and I've done it and I have manually by hand done 30-year bond um calculations sucks because you got to do this out 30 years and the variables and all whatever. It just takes time though, okay? You just grind through it is what we say in finance. Now, of course, now if you work at a bank or uh whatever, um you have models that do this, right? So, it'll just say what do you think the interest rate will be here, here, here, here, here, and then it goes this is the value.

[01:03:23]But the thing is, we all have a number.

[01:03:26]I derived that number and I can show you what it means.

[01:03:33]Now, we're doing that for US treasuries, but this is the really cool thing.

[01:03:39]You're like, "Well, what about the interest rate in Australia one year from now?" Yeah. Yeah, we got that, bro.

[01:03:50]Okay. 4.55.

[01:03:56]Okay.

[01:03:59]Okay. So we get September 26, we get definitely by then we'll be at 4.5 and then we'll sit there.

[01:04:11]Okay.

[01:04:17]Isn't that cool? Oops.

[01:04:20]So what does this mean? You're like, Wayne, how do you do that?

[01:04:25]We do exactly the same thing, but now we have to pull from the Australian government real time interest rates or yields and real time prices. Well, no, we have to derive that real time interest rates throughout the entire yield curve every day and then reverse engineer the discount of cash flows for the implied interest rate to once we figure that out. Okay, because we know the price, we can we can derive that interest rate because we just change the math around.

[01:05:08]So now the variable is well what was the interest rate?

[01:05:13]So we do that math and we and then we can then aggregate the math and tell you the the median and the skew and dude you understand like it's crazy math, isn't it? Like the amount of math is crazy and we do it for the you know the major currencies that you care about. So each one of these possibly could be thousands of calculations and we do it multiple times a day. Yeah, you're welcome.

[01:05:50]Okay, so we're at 4.1.

[01:05:53]They've been raising. The last move was nothing and we're looking ahead 13 meetings and there's probably uh one to two more in here. So, we're at 410.

[01:06:07]Then we have a hike in June to and then we have another one at the end of the year and then we're paused.

[01:06:17]And that's not an opinion, not our opinion. That's the opinion of millions of sophisticated large institutional investors.

[01:06:33]Dude, it's ridiculous, right?