February 24, 2016
Treasury Bonds are Toast
Maybe I’m wrong, but this is my opinion…my VERY strong opinion…
As I noted in a previous newsletter, BONDS HATE INFLATION...and an important factor in taking Treasuries up to their current stratospheric prices was that the CPI (chart following) had dropped to ABNORMALLY LOW levels...which WILL change, and in fact, as can be seen with last week’s updated number, is already beginning to do so…
I believe we WILL get back to the OVER 2.5% inflation rate that has been the norm the past 50 years...And believe me, when/if this becomes the case, NOBODY IS GOING TO WANT AN INSTRUMENT THAT IS ONLY PAYING A 2.5% INTEREST RATE...ESPECIALLY WHEN THAT INSTRUMENT COULD EASILY LOSE 20-30% OF ITS FACE VALUE…WHICH IS PRECISELY WHY I CONSIDER BONDS TO BE THE WORST PAPER INVESTMENT ON THE PLANET.
You tell me…Does 150 look like a big move? And DO note how hard and fast they have sold off, over and over, for the past 35 years.
They basically went from 150 to 170 in less than 2 months...I can see them coming right back down...EVEN FASTER…It’s just the NATURE OF THE BEAST…REALLY.
And to once again give you an idea of how quickly and big Bonds have tended to top, here are charts of EVERY bond top since 1981.
So the SMALLEST downturn has been 10%...which would equate to 17 points in today’s market…And to be honest, with the market as ludicrously high as it is, I’d say that to be looking for a “smallest” sort of move would be a big mistake.
I MAY BE DEAD WRONG BUT I THINK THIS IS AN ENORMOUS TRADE…AND I STAND BY MY EARLIER NEWSLETTER STATEMENT THAT I THINK THIS IS THE BEST BOND TRADE I’VE EVER SEEN.
If you think this is a solid idea…Don’t sit on your hands…Don’t “watch it”…Get on the phone and talk to me.
All option prices in this newsletter include all fees and commissions.
The author of this piece currently trades for his own account and has financial interest in the following derivative products mentioned within: Treasury Bonds