March 29, 2010

 Buy Treasury Bonds

Treasury Bond futures were down last week following passage of the Health Care Bill and Treasury Auctions of 2,5, and 7 Year Notes.

The headlines the last few days have been full of predictions that a massive bear market in Treasury Bond prices has now started, and as a consequence, long term interest rates are supposedly  now ready to rise sharply higher.Talking heads everywhere are talking about the chart “breakout” towards higher yields (rates) as though there is not the slightest possibility they may be wrong.

I think this is absurdly backwards and fairly typical of the herd of sheep mentality that is generally present in the bond market.

I CONTINUE TO THINK TREASURY BONDS ARE A ROARING, SCREAMING BUY.

I BELIEVE WE ARE QUITE POSSIBLY SEEING THE HIGHS IN LONG TERM INTEREST RATES FOR SOME YEARS TO COME.

I THINK TREASURIES WILL TRADE AT LEAST 15-20 POINTS HIGHER BEFORE WE GET TO 2011.

Yes, I know that everything you read today, and have read for months, makes the argument that “rates have to go higher”, but I think very much otherwise…and have detailed my reasons in previous newsletters which can accessed at the following links from my newsletter archives:

Jan. 10, 2010  http://www.crokerrhyne.com/newsletters/01-15-10.htm

Feb. 16, 2010 http://www.crokerrhyne.com/newsletters/02-16-10.htm

Feb. 22, 2010 http://www.crokerrhyne.com/newsletters/02-22-10.htm

For now, I’ll just give you a few charts and comments, some of which may sound a bit like nonsense, but there is no avoiding the fact that much of how the bond market actually works goes quite opposite virtually all of the “logic” you hear expressed from the talking heads who yak about this stuff…

This is a chart of the US Treasury Bond 30 Year Yields…or long term interest rates. If you note that last little blip up to 48 (4.8%) on the far right side of the chart, THIS is what has all the experts SO fired up about yields beginning to take off on the upside, meaning higher interest rates…Look like a big deal to you? Well, this is what the seeming 99% of analysts who comment on this market are calling a “major breakout”.

Just as ONE piece of evidence that argues quite the opposite, here is one bond chart I have always remembered, as, after a long sideways move, Bonds “broke out” to the upside as well. You’ll note that these charts are almost identical, and the next thing that happened (following the “break out”) was an outright crash in the opposite direction…And I think this is EXACTLY what is about to happen on the Yield Chart above…

 Here are September Bonds…Remember that this chart does the opposite of the yield chart…And I think this market is headed for 130 or so, or roughly $16,000 per futures contract from here.

And here’s a quick shot of the Soybean Oil…

 
Got high school homework to help with so this is going out unedited…Give me a call if you’re interested…And don’t misunderstand my brevity…I am beat up but I have not given up…Every ounce of my 30 years in this stuff tells me these are both monster trades…

Thanks,

Bill

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