May 16, 2016
We are DONE with Sideways in Stocks.
They are about to ROAR…
So, BUY in May. Don’t Sell.
And Bonds are still the WORST investment on the planet.
Interestingly, but understandably, the stock market is pretty much back on its highs but there is still an overwhelming flood of doofus prognosticators still barking that the economy is slow-to-lousy…or that “the market is only up because it is being supported by the central banks”…and that you are fool to be thinking the market is going anywhere on the upside…AND I COULD NOT DISAGREE MORE…I THINK THEY ARE SO, SO, SO WRONG…THAT THE SIDEWAYS ACTION BEGUN 15 MONTHS AGO IS COMING TO AN END…AND THE DOW HAS A GREAT CHANCE TO BE LEAPING THROUGH 19,000 WITHIN THE NEXT 4-6 WEEKS…AND HEADED FOR AT LEAST THE 20,000+ MARK LONG BEFORE WE GET TO 2017. COMMISERATE WITH THAT, I THINK THE TREASURY BOND MARKET WILL BE SUFFERING THROUGH WHAT CAN ONLY BE DESCRIBED AS A “CRASH” OF AS MUCH AS 30-35 POINTS OVER THE NEXT YEAR OR SO.
I THINK SURPRISINGLY HIGH INFLATION IS DEAD AHEAD, BOTH ON THE PRICE AND WAGE FRONTS…AND OUR CURRENT SUPER LOW INTEREST RATES, THOUGHT BY SO MANY NITWIT TALKING HEADS TO BE ALMOST A “NORM” RIGHT NOW, WILL BE A LONG GONE THING OF THE PAST (FOR OUR LIFETIMES)…AND SHORT TERM RATES, NOW ABOUT ½%, WILL EASILY BE PUSHING 2 ½ TO 3% WITHIN THE NEXT 12-18 MONTHS.
I ALSO WOULD NOT BE SURPRISED TO SEE CRUDE OIL CRACK THE $70 MARK…THIS YEAR. Since Oil bottomed at $28, there has been NOTHING but bearish news and opinion everywhere as the market has marched steadily higher…which I think is about to change…with “steadily higher” about to become “rapidly higher”.
And I don’t mean to insult anyone who thinks otherwise, but I think you are making a mistake if you buy into the idiot media’s presentation of the economy as being on weak legs…Really…Is the automobile industry slow? Or the construction industry? Or technology? Or retail? The Airlines? For sure, things are not as good as they used to be in the energy industry but it has forever been true that when the oil boys aren’t getting richer, it is ALWAYS good for everybody else…And the Oil Industry, just as it ALWAYS does, WILL come back…At any rate, and I keep saying it, but FORGET what the painted faced internet and TV yakheads are spouting…just look out your window. Hit the streets and note that things are POPPING out there.
A few charts…
And here is one more long term perspective to give you an idea of how close 20,000 really is...the Dow going back to 1900...
And think about ALL the bad news the market has seen in the last century (and yes, we did have that big Depression)...but the Stock Market, and the US Economy, just keep chugging ahead...AND WILL CONTINUE TO DO SO...especially with the globe now having gone full blown Capitalistic (with the 1990 death of Communism which began to add maybe 2 billion consumers and capitalists back into the world economy)… AND with the still exponentially expanding Technology Revolution…AND the cheapest money in our lifetimes…AND Oil prices having gone down by 80% in the past few years? If those aren't megaforce bullish influences, I don't what ever would be…So again, IGNORE all the gibberish about this bull market being longer than the average, or the junk about higher than average PE’s, or China’s problems, or Europe’s…and UNDERSTAND THAT THERE IS NOT AN ECONOMIC TEXTBOOK ON THE PLANET THAT HAS EVER DEALT WITH THE WORLD AS IS IT IS TODAY…
SO I CONTINUE TO SHORT TREASURY BONDS
I keep repeating it…Bonds HATE Inflation…and it IS coming back…
And in spite of all those genius “experts” who were spouting about $10-$20 Crude Oil…and in spite of the fact that Oil Stocks also continue to be “bearish”, this market, supported by RECORD WORLD DEMAND, is still going up…and, I believe, will continue to do so…WE ARE STILL LONG…and trading into the $65-$70 area, this year would not surprise me at all…And as I have repeatedly pointed out, higher oil prices ALSO tend to be bearish for Treasury Bonds…
And as for all the talk that the economy is growing “too slowly”? I couldn’t disagree more…
The point is, THERE IS NO REASON…AT ALL, ANY LONGER…FOR INTEREST RATES TO REMAIN AT THEIR CURRENT LOW LEVELS…AND REGARDLESS OF WHAT SUPPOSEDLY INTELLIGENT “ANALYSIS” YOU READ AS TO WHAT THE FED WILL OR WON’T BE DOING, THE MARKETPLACE IS ALREADY BEGINNING TO DRIVE INTEREST RATES HIGHER…AND BONDS LOWER…AND I THEREFORE CONTINUE TO SCREAM, “ SHORT TREASURY BONDS NOW!” I THINK THEY WILL BE GOING DOWN FOR AT LEAST THE NEXT 9-12 MONTHS…AND I LOOK FOR THEM TO TRADE, MINIMALLY, 30-35 POINTS LOWER.
There are a number of ways to do this but here is one put I LOVE here…Right HERE…right NOW.
Looking for the same sort of move we have just seen in Soybean Meal
Since early this year I have been pointing out how overwhelmingly bearish analysts have been regarding commodities, and concurrent with that observation, how MASSIVELY short speculative funds have been, specifically in the Wheat and Soybean Meal markets…with my thought being, sooner or later, those short positions (like clockwork I say) were going to blow up in their faces…which is precisely what has just happened in the Meal…and is exactly what I think is coming next (immediately so) in Wheat…There’s an old commodity adage, “Any known fundamental is a worthless fundamental’, and the fact that every existing bushel of Soybeans, Corn and Wheat has by now been counted a 1000 times ONLY verifies that we HAVE PRODUCED big supplies…and I feel confident in saying that ALL of that information has LONG since been accounted for in the low prices for these commodities…And with the fact we have RECORD WORLD DEMAND FOR WHEAT, I firmly believe the next move we’ll see is UP. And decidedly so…All of these markets go down AND up…and I absolutely think Wheat is next in line…
Here’s a replay of what happened in Soybean Meal…
And let me be clear…I THINK WHEAT IS NEXT IN LINE…ESPECIALLY WHEN YOU CONSIDER THAT THE RECORD SHORT FUND POSITION THERE IS EVEN BIGGER THAN IT WAS IN SOYBEAN MEAL. Here’s the current layout in Wheat as of Friday’s close...And I do note that RECORD longs by the Commercials is reflective of the fact that they have RECORD orders on their books for Wheat which they generally do NOT have in house…and to acquire that Wheat, for delivery on those orders, THEY USUALLY HAVE TO BID THE PRICE UP TO INDUCE FARMERS TO SELL IT TO THEM…On the other hand, the Funds are simply short because they think there is money to be made on prices falling lower…AND I SAY THEY ARE ABOUT TO GET CLOBBERED, JUST AS THEY DID IN SOYBEAN MEAL…
Here is the “1 & 1” I would do here…I think these are fantastic numbers…
Another look at the long term..
Ok, I think BOTH of these are imminent…and I may be dead, dead wrong but I also think both of these are GIANT trades…If you are one of the guys who bought into either of these trades during the past 2-3 months (especially in Bonds which have traded totally sideways), and have watched you options go to nothing, I cannot emphasize how important it is to step up and do it again…NOW…when you probably DON’T want to do it…nor should you be thinking, “He’s gonna be right but just not now. What about all this talk about ‘negative interest rates’, or China, or the Fed might be waiting to raise rates?”. I tell you, DON’T GO TO SLEEP ON THIS. DO IT AGAIN. It’s the way this stuff often works. You KNOW it.
Give me a call if you’re interested. FOR MY MONEY, I WILL NOT BE OUT OF EITHER OF THESE TRADES…NOT FOR ONE DAY…AS WAS THE CASE IN SOYBEAN MEAL, YOU NEVER KNOW WHEN THE MOVE IS GOING TO CRANK UP…NEVER.
And yes, I am STILL short the Eurodollar market…this goes hand in glove with the Short Bond trade…and like the Bonds, also has, I believe, enormous leverage and potential.
The author of this piece currently trades for his own
account and has financial interest in the following derivative products
mentioned within: Mini-Dow Jones, Treasury Bonds, Wheat