First, a quick review of the fundamental facts, which we have discussed at length in this space.
On October 19, we outlined 7 Reasons to Short US Treasuries - and then we promptly went short long-dated US Treasury Bonds - both via the futures markets, and via ETF's.
Then on November 12th, we were pleased to read a separate analysis about shorting treasuries from Market Folly, one of our favorite sources of financial information, that came to the same conclusion - namely that interest rates are going to the moon.
Everything looked good, and even our buddy Jim Rogers was on the same side of the trade. We were so excited, we shorted a second contract quickly, dreaming of pyramiding our way into riches.
But a funny thing happened on the way to the penthouse - the financial world as we know it temporarily ended, and US Treasuries soared to all-time highs!
So what happened to our master plan? We had to cover our short position - before we ended up in the outhouse - and even Jim Rogers had to cover his!
All because a historic flight to safety sent the world heading for the cozy confines of US Treasury Bonds!
A big hat tip to Tom Dyson at DailyWealth, who made a very prescient call on November 24th that it could take some time for Treasury bonds to actually fall.
So what now? Today I took a quick peek at the 10-Year Treasury Note chart, and was delighted to see - dare I say it - a potential peak forming?
Is this the beginning of a historic collapse - and shorting opportunity? Or will the flight to safety continue into the 1st half of 2009 - propelling Treasuries to even greater heights!Has anything changed in this short case fundamentally, since our original thesis was formed? Well, let's see:
- The US Federal Reserve started printing money as fast as it can - can you spot the trend in this chart?
- And we've been bailing out every incompetent US company, to the tune of $8.5 Trillion!
Of course, the market is always the final arbiter of who's right and who's wrong. So, we wait. For 10-year chart to break one way or the other - thus we're not short - just yet!
Editor's Note: You can also read and discuss this article on Seeking Alpha.
2 comments:
thanks for the plug, appreciate it!
I've been monitoring the action carefully like yourself and currently only have 10% of my end desired position in TBT. I'm worried that this will take much longer to play out than we think, given we have such an active fed who has been thinking outside of the box and using various tools.
don't get me wrong i'm still on the thesis, but i think i'm adding slower to the position than i planned on initially. can be extremely painful to be early sometimes haha. the action lately is definitely constructive though.
Well said my friend - being early sure is painful - I heard Dennis Gartman say once "we were early...or we were wrong...is there a difference?"
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