Don Martin's  Instablog

With a dearth of other derivative candidates to short, one must wonder, why not short Treasuries at these levels? The December T-Bond contract is back up to nearly 120 after putting in a low just above 110 back in June. The long-term fundamentals for Treasures are awful. And I don't expect to see them trade above 130 again this fall.

But the money supply numbers have given me pause. I was comfortable shorting bonds earlier this year in large part because of the surge we saw in M-2. Now M-2 has hit a wall... again. In fact, the preliminary numbers for July have shown a contraction in the money supply. While the Fed continues to fan the flames of monetary expansion, there continues to be enough capital destruction, in the form of these ongoing bank failures, that's keeping a lid on the money supply.

This is a tough place to be as a trader who's become accustomed to finding so many mispriced securities to trade this past year, but sometimes the best trade to make is no trade at all. I continue to remain focused on the airlines, as I feel there must be another round of restructuring that will wipe out the current equity of the less flexible carriers. And I continue to hold positions against a number of companies (REIT's and banks) that I feel are over-exposed to commercial real estate.

It is a shock in the commercial real estate sector that I expect to add one final, decent spike to Treasuries. If that happens, and that December contract ends up in the high 120s, then I'll be taking a large position against T-bonds. If we break 121 on the December contract, I might write a few out-of-the-money calls if the premiums are attractive. But for now, I'm content to watch.

Expect tech, of all sectors, to weather the next wave of disruptions to our country's financial base. Intel Corporation shares are cheap, even with diminished growth prospects for the rest of the year.

Just shorted the July $15 put on INTC at $0.33.