March 1, 2016
Do you remember “PEAK OIL”, when all the Wall Street shills, otherwise known as “analysts”, were telling you the world was running out of oil? When Oil was trading at $150 a barrel? And according to those “experts”, heading for $200? And how they were also talking about $5.00 Gasoline?
DO YOU REMEMBER HOW BULLISH THEY ALL WERE?
Here’s a refresh-your-memory chart…
And this is how terribly (typically) WRONG all those brokerage house geniuses were…
My objective here isn’t to remind you that the overwhelming majority of “pro’s” are NOT market geniuses just because some Schlock and Schlock Bank or Brokerage tells them, for example, “We want you to become our energy analyst”…or “We want you to learn everything you can about” this or that market and “give people advice about it”. In reality, from what I’ve forever observed (going all the way back to my first 11 years in this biz with Merrill Lynch), 98% of these “analysts” are in the category of what I would call, “Knows EVERYTHING about the market…EXCEPT for where it’s going”…And MY PRIMARY POINT HERE IS THAT WE ARE NOW LOOKING AT ANOTHER “PEAK OIL” TYPE SITUATION, ONLY THIS TIME AROUND IT IS IN A DIFFERENT MARKET AND ACCOMPANIED BY A DIFFERENT BUZZ PHRASE THAT THE SHEEP ARE ALL NOW BLEATING…AND THAT NEW PHRASE, WHICH YOU’VE LATELY HEARD EVERYWHERE, IS, “The Fed might go to a NEGATIVE INTEREST RATE POLICY”, WITH THE UNDERLYING INFERENCE BEING “INTEREST RATES ARE GOING TO STAY LOW…OR EVEN GO LOWER”...WHICH, IN MY MIND, IS JUST UTTERLY ABSURD AND BORDERING ON WHAT I WOULD CLASSIFY AS ABSOLUTE ECONOMIC STUPIDITY.
Though I could easily do so, I am not going to write page after page here presenting my opinion as to why this is NOT going to happen here in the United States…NOT EVEN CLOSE…but will only say that WE STILL ARE THE ECONOMIC ENGINE ON THE PLANET…And everybody else follows OUR lead, not the other way around…So WHAT if Japan has gone negative…?Or Europe…? Or whomever else?...If you think back a little, YEARS ago the USA set out on a course of flooding the market with money, with the bailouts AND super low rates AND 3 QE’s, and we did so LONG before anybody else was even BEGINNING to consider duplicating our aggressive policies…So, if you now think that just because these other Foreign Central Banks have somewhat recently adopted so called NIRP’s (Negative Interest Rate Policies), that our Fed is going to follow suit and jump into that same dark hole, you are, I believe, buying into the same type media-garbage-logic that was present in 2008 with $150 Crude Oil...WE DON’T NEED LOWER INTEREST RATES, MUCH LESS “NEGATIVE” RATES. THE TRUTH IS, WHAT WE ARE MOST LIKELY GOING TO BE SEEING SOON IS HIGHER RATES, AS OUR ECONOMY (AND THE REST OF THE GLOBE AS WELL) POSITIVELY LIFTS OFF ON THE UPSIDE, and maybe six months hence, I firmly believe the headlines will be citing the “HOT Economy”…and “Inflation having heated up” as well…And by the time you are reading that sort of news, RATES ALREADY WILL HAVE GONE UP…QUITE A LOT REALLY…AND THE BOND MARKET WILL BE FAR, FAR BELOW CURRENT LEVELS.
Wake up guys. This is starting to happen…and as I’ve pointed out in previous newsletters with Treasury Bond Top histories going back to 1980, when Bonds DO start down, they tend to do so in fast, dynamic fashion…So if you are reading this, and thinking that what I have to say makes sense…and you do have the risk capital…DON’T just sit there. Do something about it.
I think you need your economic head examined if you are still buying into all the horse manure logic that suggests our economy is in bad shape…OR…even just slipping…OR…that we are going to be “brought down” by how SUPPOSEDLY bad conditions are in China, or Europe or whatever…Money is cheap (WON’T be staying that way)…Energy is rock bottom cheap…And Household Debt among the masses has been SHARPLY reduced to the BEST levels in over 35 years (as far back as I could find the data)...And as I keep saying, people are out driving everywhere, flying everywhere, and spending/consuming everywhere…I mean, look at automobile sales, just reported as the best February in 15 years…AND on top of all that, you’d have to be blind to not recognize that there are more cranes in the air and dirt being turned than we have seen in YEARS, decades maybe…The bottom line is: Our economy has been STEADILY shifting into higher and higher gears since the spring of 2009…and it is my belief that we are JUST NOW entering what I would unequivocally define as a classic economic BOOM stage...and I am telling you that one very major ramification of this STRONG GROWTH IS GOING TO BE HIGHER INTEREST RATES…I will also tell you that these rate increases will NOT be cranking up 6 months from now…And they will NOT be initiated by the Fed…The age old fact has been, THE MARKETS WILL RAISE INTEREST RATES LONG BEFORE THE FED DOES...AND I THEREFORE SAY, DEAR FRIENDS, THAT LONG TERM INTEREST RATES HIT THEIR LOW TICK ON FEBRUARY 11, 2016 WHEN TREASURY BOND FUTURES SPIKED AS HIGH AS 171 BEFORE REVERSING SHARPLY LOWER…AND THAT HIGH IN BONDS, AND LOW IN INTEREST RATE YIELDS, HAVE PROBABLY MARKED THE LOWEST RATES FOR THE REST OF MY LIFE…OR AT LEAST FOR ANYTHING CLOSE TO THE FORESEEABLE FUTURE.
MY OPINION IS THAT THE BOND MARKET IS AN OUTRAGEOUSLY BIG SALE…OR AS ONE PROFESSIONAL I RESPECT IMMENSELY WROTE TO ME, “BONDS HAVE BECOME THE BIGGEST BUBBLE OF OUR CAREERS”.
GET SHORT TREASURY BONDS NOW. I MAY BE DEAD WRONG BUT YOU WILL NEVER HEAR A STRONGER OPINION COMING FROM ME.
So, once again…Here is
TODAY’S “Peak Oil”
Here is one option I like here…
Do note that Treasuries rolled down 2 points today ($2000 per futures contract)…and hit their lowest point since the February 11th high that I think will remain THE HIGH for my lifetime…Anything can happen in this stuff but I believe the odds have gone WAY up for what an EXTREMELY fast set of DAYS that get us solidly down towards the mid 150 area…Just having seen this before, I am fully aware that we could see a string of 7-9 days with nothing but mind bogglingly lower and lower closes…We’ll see.
One more time, here’s the long term chart for perspective…
Concurrent with this Bearish Bond opinion, I also continue to recommend Buying Stocks, Buying Crude Oil, and Buying our four major row crops (Corn, Cotton, Soybeans & Wheat)…but those are all subjects for another newsletter.
And one more time, if you think that MAYBE I know what I’m talking about, pick up the phone and call me.
The author of this piece currently trades for his own account and has financial interest in the following derivative products mentioned within: Treasury Bonds