Trying to Read the Stock, Bond, Commodity Tea Leaves

They say on Wall Street, that if stocks and bonds point to different directions, bonds are usually right.

Bonds are pointing to a Great Depression 2.0. No doubts here. Treasuries are at GD levels, corporate bonds are too and selling new bond issues is almost as hard as in 1930s.

Stocks? I don't understand where are they pointing. The market is down big for the year. We had a local bottom, with obvious capitulation, on November 20. The market is up since then, but S&P didn't break 900 and trading in a 800-900 range. It can go either way from here.

The strangest thing right now is behavior of commodities, including gold. The fall of the dollar is strange as well. Last week, the commodities market was screaming "Inflation!". The dollar confirmed. But Treasuries yields don't predict any significant inflation. More like deflation.

What's in future? Stocks don't say. Bonds say we are in GD 2.0 already. Commodities say inflation and recovery. Last year, when commodities and stocks were pointing to growth and bonds to recession, bonds were right. If they are right now, that's bad news for us.

My crystal ball is all misty. The only thing I know is that the dollar falling this week doesn't make any sense to me. If it continues to fall, I probably will buy (DRR), to play on dollar recovery.

I opened (TBT) position, as a way of shorting Treasuries. I'm also looking at ProShares UltraShort Lehman 7-10 Year Treasury ETF (PST).

Full disclosure: At the time of publication author had a long position in TBT and no positions in PST or DRR. Positions can change any time.

Comments

[taojaxx:]

No offense intended but, is that meant to be an article? Any content?

2008 Dec 14 06:03 PM

[AMC:]

Seems more like a blog post. Where's the meat N potatoes?

2008 Dec 15 11:15 AM

[AMC:]

Reads more like a blog post. Where are the meat N' potatoes??

2008 Dec 15 11:16 AM

[k9s-4-k8:]

Dollar dropping seems strange? How bout reversal of Yen carry trade. U.S. creditors like China and Japan decreasing treasury buys to focus on domestic infrastructure.

2008 Dec 16 10:40 AM

[gorge:]

nice article and i interested about your information

Feb 09 10:26 AM