- No BS. Just Bullish.
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- No BS. Just Bullish.
No BS. Just Bullish.
Steeper | Toxic
The Wall Street Skinny
September 26, 2024
This Week on The Floor
A huge “THANK YOU” to everyone who attended our first LIVE MASTERCLASS yesterday! We couldn’t believe how many of you were logging in from all over the world, and we will definitely be doing more of these in the future.
If you missed your chance, we are making the replay available here for another 24 hours!
We are also celebrating the 100th episode of our podcast with this gem, one of our most fun episodes to-date.
Price action post-Fed: what does it mean when the yield curve steepens?
What to do about a toxic coworker?
Week 1 of learning to read financial news
Markets Recap / Deal News
Interviewing this week? Here’s some content for your conversation.
Last week, the Federal Reserve unexpectedly cut its key interest rate by 0.50%, or 50 basis points.
I’ve been in the real estate world for over a decade, so I immediately saw hundreds of emails rolling in saying:
“The Fed cut rates! Mortgage rates are going to go down, so it’ll be cheaper to buy a house! Come see my million dollar listing!”
And I rolled my eyes 🙄.
Why?
Because the yield curve actually BEAR STEEPENED after the Fed’s announcement.
Longer rates SOLD OFF (meaning: moved higher) vs. shorter rates
What does that mean?
To find the shape of the yield curve (the term structure of interest rates), you simply subtract the shorter rate (in this case, the yield on the 2-year US Treasury) from the longer rate (in this case, the yield on the 10-year US Treasury).
So if 2-Year USTs are yielding 3.50%…
And 10-Year USTs are yielding 3.80%…
The 2s10s curve = 3.80% - 3.50% = 30bps
Mortgage rates are much more closely tied to 10-Year rates than to the Federal Reserve’s target rate, which is an OVERNIGHT rate.
After the Fed’s announcement, short term rates did very little. But long end rates sold off (went higher), steepening the shape of the curve.
In finance jargon, being “bearish” on something means having a negative outlook. And when bond yields go up, it means their prices have gone down.
So when the curve steepening is led by the long end selling off (as opposed to the short end rallying), it’s called a “bear steepener”.
For a quick primer on curve trades, check out our video here:
What do I do about a toxic coworker??
Some coworkers treat the floor like a cage match instead of a team
We’ve been asked by MANY of you: “how do I deal with a work bully?”
I had one of these.
Another Associate and I were hired into the same group at the exact same time.
The company line was: “the more the merrier!”.
She took it as: “there’s only room for 1 of us.”
And the truth of the matter was, she was way better than I in a lot of ways!
She was more knowledgeable about a lot of complex products, had a politically well-positioned boyfriend at a big hedge fund client, and was just naturally more bubbly and outgoing than I.
But she was also a passive-aggressive bully.
If my boss gave me an assignment that she overheard, she’d rush to deliver it first.
When we’d go out to client events, she’d physically maneuver me out of position next to clients, senior managers, traders etc….literally boxing me out.
Word on the street is…someone’s playing a dangerous little game
But ultimately she outmaneuvered herself.
She applied these same tactics to everyone around her, including trying to upstage another MD in front of her clients.
So she was “recommended” for a transfer to a satellite office.
She knew she’d played herself, and quit before the transfer was finalized.
Not worth it in the long run…
After she quit, she called me and we split a bottle of wine. She admitted how shitty she’d been, and I admitted not-so-secretly hating her for it.
She felt pressure to compete with me, when in reality we should have been teaming up.
So when it comes to bullies, my strategy is like the slogan of Survivor: outwit, outplay, and outlast.
This Week in the Markets
This coming month, we’re helping you learn to read the financial news. So your mission, should you choose to accept it, is as follows for week 1:
Pick a financial news source. Bloomberg, WSJ, FT, CNBC, whatever you like!
Commit to reading at least 5 articles over the next week from that source on ANY topic related to finance — whatever grabs your eye — from start to finish.
Write down any words you don’t know. Physically write them on a piece of paper.
Spend the time to look them up - and write down those definitions in your own words.
And that’s it.
We’ll be back next week with your next assignment!