Five Charts to Rule Them All: A Telling Week for Bonds

Here is a statement for discussion. "The only change of trend between the major asset classes appears to be in the US treasury market". We say this as the equity, commodity, real estate, and currency markets are all well within their respective trends that are now some 10 months old.

From our viewpoint, this is going to be a rather telling week for the bond market with record auctions in store for the market – so much for living within one’s means! Anyway that is a story for another day. To us, lending money to the US Government for some 4.4% return p.a. over 30 years, seems like .. well.. indescribable really.

Notice how the Vanguard Total Market index (VTI) has held up above its previous low in early October. Until we see evidence of a lower low or lower high we will remain on the bullish side.

Is this the start of a move that will take long dated US Treasuries to a multi-week low (i.e. TLT below the 87 level)? We wouldn’t be surprised!

The commodity market has been a little frustrating for commodity bulls but at least broad based commodity indices remain above support. We think that the weakness as of late is merely profit taking. There is too much evidence of rising inflationary expectations to support lower commodity prices.

Despite what we are led to believe by popular opinion the real estate sector has been one of the strongest as of late and is only a few percent away from a multi-week high. Is the performance of the real estate sector telling us something? We think it maybe hinting of inflationary pressures!

As much as the USD Index is in an oversold condition something tells us that it will remain that way for longer than the average trader could ever anticipate! Something also tells us that someone is increasing the supply of money at an unprecedented pace! These are not “normal” conditions.

We were somewhat amused by Geithner’s remarks today regarding the US Dollar. As reported by Bloomberg he said “I believe deeply that it’s very important to the United States, to the economic health of the United States, that we maintain a strong dollar”.

Of course if one were to believe his comments then I guess you could believe that aliens built the pyramids of Egypt! Actions speak louder than words and the action of the USD Index suggests that further downside is a near certainty and Geithner is either clueless or is dumb enough to think that we can be hoodwinked!

Disclosure: Long VTI, DJP, UDN, TBT, IYR.

Comments

[logicalthought:]

>>We were somewhat amused by Geithner’s remarks today regarding the US Dollar...“I believe deeply that it’s very important to the United States, to the economic health of the United States, that we maintain a strong dollar”.<<

Geithner, being too dumb to work on Wall street, instead became Wall Street's lap dog. As demonstrated by statements like that, he's so full of shit, he makes me want to puke.

Nov 11 08:19 AM

[The Geoffster:]

"I guess you could believe that aliens built the pyramids of Egypt!"
www.outerworlds.com/li...

Nov 11 09:09 AM

[JudeJin:]

we have to admire these actors, geithner, benanke, et al, they played their roles full-hearted. you and i won't be able to say these things so consistently day in day out.

Nov 11 09:17 AM

[Genesis:]

If you want to buy real estate, there are many insolvent banks, homeowners, and businesses that would be more than happy to sell some to you. That's a very crowded trade on the long side.

Nov 11 09:38 AM

[Gtarras:]

i think its a mistake to look at funds like TLT or TBT for technical picture. instead look at ^TNX or ^TYX. they have not broken their trends yet.

Nov 11 10:47 AM

[ryanclarke:]

The people Geithner works for have ten to twenty million in the bank ... own their house with no mortgage as well as their summer home ... and have a boat to boot to go to the Caymans whenever they so choose ... as well as a stock, commodity, and bond portfolio ... which might take a hit with some extreme inflation ... but would leave them on top of the pile nevertheless.

Nov 11 01:58 PM

[untrusting ...:]

It looks like the same aliens have moved to Goldman Sachs to run their 95+% winning trades system, as no know statistical or mathematical trading systems have ever been able to do that in previous stock market history.


On Nov 11 09:09 AM The Geoffster wrote:

> "I guess you could believe that aliens built the pyramids of Egypt!"
>
> www.outerworlds.com/li...

Nov 11 03:35 PM

[Moon Kil Woong:]

Yes it is deeply important to keep a strong dollar but the Treasury couldn't care less not the Federal Reserve. And they wonder why people are mad at the Federal Reserve. Gee with all this monopoly money going to banks I couldn't tell you why. Look for them to throw more at FMA and Freddie Mac in the near future. This cycle never ends.

Nov 12 12:00 AM

[elwind45:]

Control of AIG, fannie and freddie provides the income to continue this madness. It is as if the Fed has both the tap and the drain working full time. Draining money from these three private(?) income producers allows Timmy and Lassie to keep a straight face whilst debasing the dollar. It would be a better question to ask "whats the music" than, do we have enough chairs? Suspending "mark to market" means "nobody will hit the floor when the tune stops" or did anybody ever trust the Central bank in the first place? This situation reminds me of the third frame in a wild wild west episode!

Nov 12 03:22 AM