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Speaking Of T Bonds (NFTRH 189 'Wrap Up')

|Includes: DIA, FXE, IEF, QQQ, SPY, iShares 20+ Year Treasury Bond ETF (TLT), UUP

The 'Wrap Up' to NFTRH189:

The backdrop is one of deflation, which NFTRH has always noted is the 'lever' to the next cycle, which would be inflationary if the continuum is to… continue.

The 30 year yield is breaking down from a Bear Flag by the monthly chart. It should make a 'higher low' to the 2008 low or there is likely to be much more deflationary asset unwinding in the near term. A drop down to the solid green channel line would likely bring more pain for asset owners, whether this yield is being manipulated down or not.

Still, this chart is used as something of a sentiment gauge. There were actually people calling for QE as the red arrow was being painted on the chart and inflation expectations were getting out of control. That is lazy analysis.

It is dogmatic and promotes a rigid viewpoint, which is doomed to be wrong at the boundaries of the continuum. Autopilot inflationists were wrong at the red arrow. Now we search for a limit to the deflation story currently in play.

An article I wrote apparently upset some people at Seeking Alpha last week. The article talked about dumb money having sold in May, [near] the bottom of the developing Democrat reelection year cycle and projected that there was probably still lower to go in the stock market before a bottom could be confirmed. But many comments had the tone of surety from the bearish point of view and some were unkind. Here was a succinct one.

"Gary = Dumb Investor. Simple enough."

It appeared as if a lot of bearish minded people took offense and this reminds me of the time a deflationist questioned my sanity (again, at Seeking Alpha) for writing something bullish on crude oil in early 2009. Unfortunately, the way I do this job I am actually going to appear dumb on more than a few occasions because I (and NFTRH) are going to be out of alignment with what is the popular position of the moment not only at important turning points, but often well in advance of them.

A legitimate question now would be 'are we well in advance or are we right on time with respect to a June up cycle that is due in a Democrat reelection year?'

Another question is 'will the cycle hold true?'

All we can state for sure is that the pattern is roughly in play and that should policy makers so choose to promote inflation, so too is the macro backdrop playing along. I take it as a positive for a projected plan when people on the other side of its premise get defensive. Especially people who comment at Seeking Alpha.

I understand how dangerous the effects of the euro meltdown in general, and Greece in particular can be. I have understood how dangerous the entire levered up macro construct has been since before I started a website in 2004 as a way to begin discussing it and dealing with it.

But I also understand that the next real deflation is going to be the final deflation and that thus far, the continuum has remained intact. The Matrix (if you will) has remained in operation for longer than I had imagined back in 2003, 2004, 2005… as somewhere during those years I realized that perma-anything (then it was bearish) was not a serviceable plan.

Thus we ride the cycles and attempt to a) survive them and b) capitalize upon them until there ain't no system no more. See?

All the while, getting rid of debt and saving real money and real assets as the casino rolls on. I enjoy speculating; but only after these other things have been seen to. Right now NFTRH is speculating [though I have not yet bought the broad US market] on an election year in which everyone is terrified of Greece and the euro, the stock market's technicals look bad and even gold has failed to provide peace of mind (to casino patrons who like to game it, at least).

PS: 'Smart money' and 'dumb money' are just terms used by market sentiment watchers. Based on reviewing more comments, it appears some people actually get upset with the terminology. It is nothing personal folks! It is just market jargon applied to sentiment analysis.

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