No, it is neither Batman nor Ralph Kramden sending anyone to the moon. It is going to be the sound of the biggest bubble bursting since the Cotton panic of 1836. It is the 2010 US Treasury market!
In my thirty years of trading, I have never seen a bubble forming this big. In 2008 it was excusable, after all, the world was coming to an end. The US Treasury said OK….. We are the safest place in the world and if anyone wants to lend us money for 30 years at around 3.25% (nominal price of 141 in the thirty year bond) we will take it.
The world is a little safer now, but the Treasury (hint Fed) is bound and determined to be the bully on the block. All short sellers in this market are taking a whipping like few have ever felt, well at least since 2008! This market is bigger than all of the stock markets in the world put together. When someone blinks, the dominos will come tumbling down. A change of interest rates to a level of thirty year rates, that are still below the 50 year moving average will cause a loss of capital that few have ever seen. Mom and Pop (bond funds) have backed this market for the past 25 years and have been dead right. US treasury Bonds have outperformed every class of investment over this period of time. It is time to change.
If you own long term bonds take your profit and shorten your maturities. If you don’t, do yourself a favor and go short term. I know the yield is miniscule, but at least you will have the capital to reinvest when the roof caves in.
Keep those stops tight
Todd “Bubba” Horwitz
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