August 24, 2010
DO WHAT NOBODY ELSE IS DOING. BUY QUALITY STOCKS AND HOLD THEM FOR THE LONG TERM.
SELL BONDS. YOU ARE PROBABLY LOOKING AT THE HIGHS IN TREASURIES FOR YEARS TO COME.
(even if the Fed will be buying them)
Fear of a sliding economy is everywhere and today’s Existing Home Sales number, “the worst ever”, down 27.2 % in July, is a classic piece of news that only reinforces everyone’s fears and aversion to the stock market. All the predictions of another recession looming has the public so worried about the economy and their own financial well being that they don’t care if that 27% drop is VERY much attributable to the fact the just ended tax credit program for homebuyers had a June 30th closing date, which would naturally infer there would be dramatically less activity in July…
Equities have NOT disappeared as an investment vehicle and the “rules” of the game dictate that unless you want to be anything other than market fodder, you HAVE to do what no one else is doing…and NOBODY is buying, nor have they been. Instead, you must have seen the astounding numbers as to how much money is being extracted from Stocks and poured into Bond funds…The figures are astronomical and almost so one sided as to be unbelievable.
Treasury Bond Futures are now back within 6 points of their all time highs made several years ago, specifically on December 18, 2008…VERY importantly, I would point out those highs were made when there were MAJOR fears the financial system was actually about to collapse…Lehman Brothers had folded and various other financial concerns were in danger of following suit, TARP was being created, bailouts were everywhere…I repeat, the masses really were afraid the system was about to go under…and those EXTREMELY rare and terrifying circumstances created the security seeking atmosphere that drove Treasuries as straight up as any market has ever traded (see chart below), skyrocketing over 30 points in just six weeks time.
Today, even though there are marked worries about the economy, I would offer that today’s conditions are NOTHING compared to what the world dealt with in late 2008…and therefore, with Treasuries now just 6 points under that all time high, my guess is, THIS IS AS FAR AS THE BOND RALLY IS GOING. The system is NOT in danger of falling apart, and in a sense, BONDS “have no business” being where they are, and in truth, I would almost conclude we are seeing the highs in Treasury Bond prices, and lows in yields, for many years to come.
I CONTINUE TO BELIEVE EQUITIES ARE A SCREAMING BUY AND BONDS HAVE NOW BECOME A MAJOR SHORT.
Again, Bonds are within 6 points of their extreme highs made several years ago, and today’s conditions are NOTHING compared to what
In Bonds, I am selling futures and buying puts…Here’s one option to consider…
Here's a possibility in the Dow Jones...
Talking to my brokerage houses contacts, I can tell you that “nothing” does not even describe what the public is doing in equities (or anything lately really). This tells me SOMETHING BIG is coming…and with seemingly every economist/analyst there is leaning towards another recession, among many other factors, I absolutely think you are supposed to be buying…As stated in my recent monster newsletter, in my 30 years in this business, I have NEVER seen the economic crowd predict a downturn until long, long after it was underway.
BUY STOCKS, SELL BONDS…NOW.
Give me a call if you’re interested…