March 13, 2012

Buy Stocks – Sell Bonds

From what I can gather, to begin 2012, the public continued to POUR money into Bond funds while on balance they have been taking money out of stocks. As I pointed out in January, public investors have been (and apparently continue to be) MASSIVE buyers of the bond market during the past 5-6 months….with ALL of that buying taking place at the highest bond prices in over 50 years…and I firmly believe they will ALL end up losing money on those purchases…

Conversely, the Dow hit its highest level in over 4 years today…and I am still consistently able, every day, to read comments galore,  like, “Stocks feel toppy” or “The market looks tired”. Sure, there are people out there saying the market looks OK, but in general, there is still a TON of doubt be expressed everywhere.

I CONTINUE TO BELIEVE THE STOCK MARKET IS ABOUT TO EXPLODE ON THE UPSIDE AND CONTINUE TO RECOMMEND OWNING EITHER THE DOW, S&P 500, OR NASDAQ FUTURES INDICES.

I LOOK AT THE FOLLOWING CHART AND HONESTLY WOULD NOT BE SURPRISED TO SEE THE DOW PUSHING 15,000 WITHIN THE NEXT 3-5 MONTHS…THIS MAY SOUND CRAZY BUT ANOTHER 2000 POINTS FROM HERE WOULD STILL ONLY REPRESENT A 15% MOVE, WHICH IS NOT AT ALL UNCOMMON FOR STOCKS WHEN THEY ARE ON THE MOVE.

Treasury Bond futures dropped about 1 ½ points today ($1500 per futures contract) and could now be on the move…

The Fed met today…here is a quick note I sent a few people this morning before their statement was published…I’ve just copied it to avoid having to think anymore today…

Every time stocks make a new high, I think the odds go up that a rip snorting leg is in the works…that we do something like go straight up (instead of the crawl we’ve been in) to and through 14000 on the Dow…and Bonds get plastered…a la the Gold market’s beginnings of a top in September, when it dropped $200 in 4 days…Maybe it’s wishful thinking but I think the guys who aren’t there in bonds will be wondering how to get on after they drop 5-7 points in a few days?

I’d suggest that today’s Fed announcement is the last one where the idea of further easing is even thought about…I don’t care what the “language” of the announcement is…I believe we are on the edge of an economic boom and we are on the cusp of when we finally start to hear faint musings of “when the Fed starts raising rates”, and Treasuries, as is their norm, will be running WAY ahead of the Fed…falling like the proverbial rock.

Buy Stocks-Short Bonds.

Give me a call if you want to talk about this or any of the markets…I think a lot of big things are just BEGINNING to happen.

Thanks,

Bill

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