 Hey everyone, this is Dan. The Fed has raised the Fed funds rate by more than 5% in the last 18 months. But since August of 2023, it has kept the Fed funds rate at 5.33% because the inflation rate has come down substantially from a few months ago. Many people are saying that the Fed might be ready to start reducing interest rates soon in order to prevent a recession. Assuming the Fed funds rate and other interest rates will come down, let's talk about how we can profit from it. The Fed funds rate is the interest rate that drives the rest of the interest rates. The Fed funds rate is set by the Federal Reserve Bank's FOMC Committee. Let's see how the Fed funds rate has been trending. We can see that it was at 0.08% in February of 2022. It went as high as 5.33% in August of 2023, which was just 3 months ago. In the most recent FOMC meeting that concluded on November 1st, the FOMC members voted to keep the Fed funds rate unchanged because the inflation rate had been coming down and approaching the Fed's target of 2%. Looking into the future, we can refer to the famous dot plot published by the FOMC every quarter. Like in September of this year, the FOMC members voted their projected levels of Fed funds rate for the future. As you can see, for the rest of 2023, the median or the middle point is around where we are at 5.33% or maybe at most a quarter of a percent higher than 5.33%. For next year 2024, they expect roughly 1% of reduction for 2025, yet another percentage point of reduction. Even though the Fed funds rate has not been reduced after reaching the peak of 5.33% in August, the 20-year Treasury rate already came down since October 19, 2023. And that's because the market anticipates the Fed funds rate and the 20-year rate to come down based on what they see in the FOMC dot plot and based on the recent remarks by the Fed Chair Jerome Powell and other Fed governors. The 10-year Treasury rate has also been coming down since October, same with the 5-year rate and the 2-year rate. The profit from the expected drop in interest rates, we need a financial instrument that will go up in value when the interest rates are coming down. I've chosen TMF. TMF and its inverse-twin TMV are leveraged funds or ETFs maintained by Direction. According to the Direction definition, TMF and TMV are daily 20-plus-year Treasury bull and bear 3x shares that seek daily investment results before fees and expenses of 300% or 300% of the inverse of the performance of the ICE-US Treasury 20-plus-year bound index. TMF is a bull fund. That means when the interest rate goes down and when the value of a bound goes up, TMF goes up. How has TMF been trending since October of this year, while the Treasury rates have been going down? As you can see, TMF has indeed been going up since October. In fact, TMF has gone up 20.3% already since October 23rd, which is certainly very impressive. If you like what you've seen so far in this video, remember to click the like, subscribe and notification buttons. It will allow you to receive notifications when I post my next video. That will also help with the YouTube ranking algorithm. Thank you. We have a lot of important stuff to cover. If you look back at the value of TMF in the last 10 years, you can see that it peaked at 58.3% back in 2020. Not including the short spike in early 2020, the high level of TMF was at about 46%. Its value today is 4.61%. In other words, if it goes back to the early 2020 level, it will be a 10x gain. Even if it just recovered 1 third of its value within the next year or so, we are still looking at potentially a 3x gain, which is going to be quite impressive. For the Fed funds rate and the other interest rates to go down, several macroeconomic indicators will have to line up properly to convince the FOMC members that inflation is under control and that they won't need to increase rates anymore. If the FOMC members believe that inflation is under control and that the economy might be cooling off too much due to the rate hikes and due to quantitative tightening in the last year, the FOMC members will be encouraged to reduce interest rates. I am showing here a few economic indicators that were published this past week. I will highlight the ones that are closely related to FOMC interest rate decisions. The indicators are the Employment Cost Index. It came out to be 1.1%, which is higher than last quarter's 1%, and higher than forecast of 1%. So it's slightly alarming and slightly negative as far as helping interest rate reduction. That's why I highlighted it to be yellow. And then the ADP, Non-Farm Employment, it's 113,000, which is lower than prediction. So I highlighted green. The Joe's job opening, it was 9.553 million, and it's higher than the last month figure of 9.497 million and higher than forecast. I mean, the job market, according to this indicator, seems to be overheating a little bit. And that's red. It'll probably make the FOMC members consider increasing interest rates even more to cool down the job market. Of course, a fat interest rate decision, it was to maintain the fat fund rate at 5.5%, or between the range of 5.3 to 5.5%, which is the same as last month, the same as forecast. So that's green. And then initial jobless claim, and this number contradicts the Joe's job number to some extent because the initial jobless claim actually went up from last month. It's 217,000, as opposed to last month, 212,000 and higher than the prediction. Of course, that's green because that will encourage the FOMC members to lower rate to prevent a recession. And then unit labor cost, quarter to quarter, it's negative 0.8%. Only that's positive for interest rate reduction because the negative labor cost inflation number, that means labor cost is quickly coming down. Then the average hourly earnings, month to month is 0.2%. It's lower than forecast, lower than last month, definitely that's good for interest rate reduction. That means wage inflation is coming down and getting under control and approaching the 2% target of the federal reserve banks. Non-farm payrolls, it went down to 150,000, which is lower than last month, 297,000, lower than forecast, so that's green. And private non-farm payroll, 99,000, lower number than the previous month, and lower than prediction, so that's green. And that'll help FOMC to reduce interest rates in the future. Unemployment rate, it went up from the previous month 3.8% to 3.9%. It's unfortunate for the people who are unemployed, but it's green as far as potential interest rate reduction. As you can see, there are more greens than red or yellow on this page. That means the probability of interest rate reduction will be increasing. In addition to tracking these important economic indicators, I will also be tracking the CPI numbers and PPI numbers. There's another important piece of information that I monitor. That's the CME FedWatch tool. It is posted on the internet and it's updated continually throughout the day. This measurement is the likelihood that the Fed will change the federal target Fed funds rate at upcoming FOMC meetings, according to interest rate traders. As you can see here, the probability of the Fed funds rate on December 13 being the same as today's rate is at 95.2% according to the traders. A month ago, that probability was only 67%. That means in the last month, the interest rate traders have increasingly believed that the Fed won't increase rates. During the same period, the probability of a rate hike went from 29.8% to just 4.8%. As long as the FedWatch tool is pointing towards a strong possibility of a rate pause or even a rate reduction, TMF will be a profitable investment. So what are my strategies in light of all these? First of all, I bought TMF on November 1, 2023. The value of TMF that I bought on that day already went up 10% and I've decided to buy more TMF on November 3, 2023. Even though I expect TMF to go up in the next year, I will observe the short-term ups and downs of the chart and will swing trade some of the shares to maximize my profit. I will monitor economic data to help me predict the interest reactions by the FOMC. And I will inform my Twitter or ex-subscribers almost on a daily basis about my latest market analysis and trades. At this point, I'd like to suggest that you subscribe to my Twitter account. In addition to subscribing to my YouTube channel, my Twitter or ex-account is DanMarketL. For example, I tweeted that I bought TMF on November 11, 2022 because back then I already expected the long-term rate to eventually drop. But then three days later on November 14, interest rate actually went up a little bit and then TMF started to go down. So at that point, I sold TMF before it became negative. So I was able to realize a 0.5% gain. On November 3, I tweeted that QQQ has hit the resistance trend line. This is the trend line I'm talking about. See, it's hitting that trend line. So I predicted that QQQ was going to go down. And that's why at that point I sold half of my SOFI shares to lock in my profit at 17%. Then I tweeted most recently that I bought TMF on November 1 and November 3 because I expected the interest rates to go down. Thank you for watching All The Way To Here. Again, I'd like to remind you to click the like, subscribe, and notification buttons. As usual, I would very much appreciate your questions, comments, and suggestions. I'd like to remind you that I'm not a financial advisor. I share my stock trading strategies and analyses for educational and entertainment purposes only. If you want to buy or sell stocks, you should make your own decisions. And you should definitely consult your financial advisors before you do so. This wraps up my video for now. I will chat with you again in the next few days. In the meanwhile, I'd like to wish you the very best of luck with your financial investments.