Buying Treasurys is like "walking in front of a steamroller to pick up $1," Lee Cooperman tells...

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youngman442002 Comments (4980)
 
Its all dependent on when the punch bowl is going to be taken away..has nothing to do with economics anymore....
6 Mar, 08:00 AM Reply Like

contrarianadvisor Comments (122)
 
It is conventional wisdom that the bond market has peaked and that yields can only go up from here. The assumption is that all the QE will at some point lead to higher inflation and put upward pressure on rates. Most of the Street has been saying the same thing for three years and for three years they have been wrong. Every time we get a correction in the bond market, we hear that the bond bull market of the past three decades is over. I understand the rationale. After all, we are at historically low rates. However, I believe the consensus is wrong once again. The mistake is in failing to understand just how close we are to the first deflationary cycle in over 70 years. In fact, I think we will see a global downturn this year that will lead to 3-5% negative inflation and a worse economic and market environment than that which occurred in 2008/9. Under those assumptions, the long bond will be providing not only safety but a substantial real return at a time when most assets are delivering substantial negative returns. I am forecasting that the yield on the long bond will fall to 1 1/2% and the ten year to sub 1%, perhaps even 1/2 of 1%, later this year. In fact, I think Treasuries will likely provide the highest returns of any asset class during this bust. As a contrarian, I am used to having unpopular views at major inflection points but I don't think I have ever seen such a unanimity of opinion as currently exists regarding the Treasury market. I think the Treasury correction is over and rates are about to move lower once again.
6 Mar, 08:12 AM Reply Like

hahaha48 Comments (693)
 
contrarianadvisor,
I believe you are dead wrong in your facts.
First of all Wall street is not wrong in the past 3 years. Wall street and myself included is saying the bond market is not a free market today or in the last 3 years. It is control by the Fed or QE x. Since no one even has 5% of the fed"s money the fed can keep buying bonds and keep interest rate low. But this cannot continue forever. Once the Fed slow down interest rate will move up. Once the Fed stopped interest rate will really move up. Once the Fed unwind interest rate will jump.
I am predicting then Fed will have no choice but stop in 2 to 5 years.
You are also wrong in predicting a global downturn this year that will lead to 3 to 5 % deflation. You must have not watch what is happening in the world. You are either living in the ivory towel or at the bottom of a well. The major force is in the growth in Asia. All countries except Japan have growth rates of over 5%. Japan's problem is big import for all natural resources and high labor cost and will be in the current state for the next few years. China for example has just announce another program to control the advance of the prices for properties. Even India with all their problem is growing at over 5%. There is 0 chance for a global deflation of 3 to 5 % this year.
I hope you put your money where your mouth is. I have been shorting the weekly TBT put options in the last 2 months and plan to continue doing that. So far I have make money on every trade. Thank you and I need you and your followers.
6 Mar, 08:47 AM Reply Like

contrarianadvisor Comments (122)
 
haha, all I can say is we shall see. I understand where you are coming from. It is where most of the Street is. I'm glad you are so sure that things are on the upswing. Yes there have been some upticks of late but the risks of a bust are growing, not diminishing. What I am seeing in my work very much contradicts the current optimistic view of the consensus. There is big trouble ahead and just like at most inflection points, the consensus is looking the other way. Good luck on your short the TBT put trade. I think you are going to need it.
6 Mar, 09:04 AM Reply Like

Meatball Bob Comments (16)
 
What Cooperman and Buffett are saying isn't a prediction of the direction of Treasuries or the outcome of the economy. The argument they're making is just that at current prices, if you're wrong on your deflationary thesis, the downside significantly outweighs the upside if you're right. Both men have spent their career identifying positive expectancy bets, and bonds today do not provide an attractive risk/return/probability tradeoff.
6 Mar, 10:07 AM Reply Like

contrarianadvisor Comments (122)
 
Meatball, I understand what they are saying but it doesn't change the fact that virtually the entire Street believes that rates have bottomed and are very negative on the Treasury bond market. If I am right, the relative spread between the long bond and stock returns will be among the widest you will ever see. I think the S&P will decline by well over 50% while the long bond delivers high double digit returns. I understand why most people would think equities are the more attractive long-term investment here. I understand it. I just think that conclusion is dead wrong. We are on a deflationary cliff and could plunge over that cliff at anytime. The markets will lead the event. My work says a yurn in the markets is near at hand.
6 Mar, 10:31 AM Reply Like

Kozhany Comments (20)
 
Treasure bonds must be taken as a "cover". I think.
6 Mar, 08:56 AM Reply Like

David Cretcher Comments (44)
 
I'm still OK with long treasuries and I explain it herehttp://seekingalph... and also cover it in this article.
6 Mar, 12:29 PM Reply Like