30 Year Treasuries weakening...

[ricket]

Re: 30 Year Treasuries weakening...

I know, I know, - absent some commie scheme to tax idle cash -separate topic and extremely unlikely

Isnt this called "inflation"? It's essentially a tax on idle cash --use it or lose it (through devaluation)

[Prazak]

Re: 30 Year Treasuries weakening...

I think during the next market crash there will be a flight to safety, again. So, I'm betting now is not the time to short Treasuries.

Absolutely. Between the prospect of Bernanke unleashing his printing press at the long end of the yield and the prospect of another severe downdraft in global equities markets, it's too soon to put serious money into this trade, in my view. With Option ARMs and Alt-A mortgage resets peaking in 2010 and 2011 you can bet we'll be facing a Fed determined to keep rates down and to induce banks to lend. Now consider the tenuous position of Europe's banks with their 50:1 ratios and their exposure to the economies of Eastern Europe. Those are just two places where another sh*tstorm could appear and send capital flying back into Treasuries. And there are plenty more places that could well cause another round of panic. It's not a question of if, it's a question of where and when.

I agree with Faber, it will be the trade of the decade. But it will more likely be the trade of the 2010s, not the 2000s.

[coolhand]

Re: 30 Year Treasuries weakening...

Fred-

You made mention of "rumors of disastrously low tax receipts" or something to that effect...do you have any more color on that point? That to me seems to be of critical importance...thanks!

[Jim Nickerson]

Re: 30 Year Treasuries weakening...

http://jutiagroup.com/2009/05/06/if-...to-lose-money/

A discussion of income loss from the long bond's rate appreciation, which as of the close last night was a 67% increase in yield from the 12/18/08 yield lows.

And here are a couple of videos of Faber from 5/7/09 and the accompanying introduction. http://commoditybullmarket.blogspot....year-bear.html

Here's Dr. Doom himself, Marc Faber, giving one of his usual insightful and thought provoking interviews for Bloomberg.

What really caught my ear was around the 4:30 mark, he proclaimed the bull market in long dated bonds to have ended as of December 18, 2008. (He also pinpoints the start of the bull market at September 21, 1981). Faber believes we're now in the beginning of a long term bear market for these bonds, which he expects to last 15-20 years.

This really is a fantastic interview - be sure to check out Faber's answer to how Geithner and company can locate the bad apples in the financial system...I'll save the punch line for you. It's around the 7:20 mark.

Other quick notes:

• Gold "could" dip back down to $750-800 (before heading higher)
• He likes the Canadian, Australian, and Singapore dollars better than the US dollar

[rogermexico]

Re: 30 Year Treasuries weakening...

Isnt this called "inflation"? It's essentially a tax on idle cash --use it or lose it (through devaluation)

LOL - I meant, once they have taxed us through actual taxes and the inflation tax at only x% CPI or whatever, they could make real negative interes rates even more negative by, say, taxing cash balances not held in treasuries or other US govt. approved assets they want us to hold.

Not really taxes, IMO.

To a minarchist or anarchocapitalist austro-libertarian, taxes on income and assets and central bank counterfeiting and engineered negative interest rates punishing savers are all the same thing:

THEFT

[rogermexico]

Re: 30 Year Treasuries weakening...

Absolutely. Between the prospect of Bernanke unleashing his printing press at the long end of the yield and the prospect of another severe downdraft in global equities markets, it's too soon to put serious money into this trade, in my view. With Option ARMs and Alt-A mortgage resets peaking in 2010 and 2011 you can bet we'll be facing a Fed determined to keep rates down and to induce banks to lend. Now consider the tenuous position of Europe's banks with their 50:1 ratios and their exposure to the economies of Eastern Europe. Those are just two places where another sh*tstorm could appear and send capital flying back into Treasuries. And there are plenty more places that could well cause another round of panic. It's not a question of if, it's a question of where and when.

I agree with Faber, it will be the trade of the decade. But it will more likely be the trade of the 2010s, not the 2000s.

I actually agree with both of you, short term, there will be huge pressure to cover the coming ARM resets, capping the 10 year at under 4%.

I have mostly traded the ten year, and I agree the time to take larger positions will be with the next market downdraft or other panic.

That said, I do think a short position held with conviction for the next 3 years may be just as reasonable a bet as holding gold through the very likely last spasms of deflationary fear we may see.

The question is, how much can the FED actually control the bond market? Did they engineer yesterday's shitty auction of the 30-year on purpose?
Do they want the 10 year at 3.25 rather than the 2% it was at last fall?

This may not be the perfect time, but gravity is on our side.

[rogermexico]

Re: 30 Year Treasuries weakening...

If this is the way Itulip is going, then I would love a "how to do inverse futures on treasuries."

You open a futures account, and where it says, buy or sell you click sell. You are now short the contract amount, analogous to buying a call option vs a put option. The contract has a settlement date, but there is no time premium like an option. Interest rate futures settle in cash, but any time the market moves your way, you can reverse the trade buy buying whatever contract you sold.

I find futures much less tricky and lower in friction than options and much better than ETFs. The down side is the contract sizes can be large.

I use optionsexpress and they are great. I can hold futures, options, equities, bonds and FDIC cash all in one account.

[rogermexico]

Re: 30 Year Treasuries weakening...

http://jutiagroup.com/2009/05/06/if-...to-lose-money/

A discussion of income loss from the long bond's rate appreciation, which as of the close last night was a 67% increase in yield from the 12/18/08 yield lows.

And here are a couple of videos of Faber from 5/7/09 and the accompanying introduction. http://commoditybullmarket.blogspot....year-bear.html

Here's Dr. Doom himself, Marc Faber, giving one of his usual insightful and thought provoking interviews for Bloomberg.

What really caught my ear was around the 4:30 mark, he proclaimed the bull market in long dated bonds to have ended as of December 18, 2008. (He also pinpoints the start of the bull market at September 21, 1981). Faber believes we're now in the beginning of a long term bear market for these bonds, which he expects to last 15-20 years.

This really is a fantastic interview - be sure to check out Faber's answer to how Geithner and company can locate the bad apples in the financial system...I'll save the punch line for you. It's around the 7:20 mark.

Other quick notes:

• Gold "could" dip back down to $750-800 (before heading higher)
• He likes the Canadian, Australian, and Singapore dollars better than the US dollar

Thanks, Jim. Just what I was looking for.

[BiscayneSunrise]

Re: 30 Year Treasuries weakening...

I'm not the best on searching for old posts here. I remember, faber was on a video interview that was posted here about 2-3 months ago. I found it so hopefully this will be the link.

http://www.itulip.com/forums/showthr...ber+treasuries

Otherwise look for the thread "Marc faber on CNBC -Dec 29, 2008"

[Southernguy]

Re: 30 Year Treasuries weakening...

I think treasuries have only one way to go: down. Thatīs why: Their natural way to go is down, because of huge fiscal devficits. But, you can argue, Fed can buy ts to bouy price....well, on the very short run that works, but once they do it past some point, the dollar is battered, both against other currencies, but mostly because of inflation. And once inflation sets up, ts. begin to suffer again, nobody wants to be creditor in a devaluating currency.
Of course, there can be ups and downs, and there are surely going to be. But the tendency si down and only down.
I think gold is more or less the same play, but for the short rate terms in which ts. can grow you may somehow level your accountīs numbers, at least for oneīs spirit itīs tranquilizing.
One last comment: inflation is the only lasting way out of this mess. Once inflation sets, and wages begin to go up along with prices, debts deflact, and that is the only real solution.
That solution is some years away because of political reasons.
I see at least another bout of deflation coming.

[cjppjc]

Re: 30 Year Treasuries weakening...

Great thread. Thanks to all. Rogermexico, I don't have the funds necessary to implement your advice. I'm with you when you say

I do think a short position held with conviction for the next 3 years may be just as reasonable a bet as holding gold through the very likely last spasms of deflationary fear we may see.

[Prazak]

Re: 30 Year Treasuries weakening...

Rog, is that avatar John Cleese circa Fawlty Towers? :cool:

[rogermexico]

Re: 30 Year Treasuries weakening...

Great thread. Thanks to all. Rogermexico, I don't have the funds necessary to implement your advice. I'm with you when you say

I do think a short position held with conviction for the next 3 years may be just as reasonable a bet as holding gold through the very likely last spasms of deflationary fear we may see.

I use futures for my commodities positions and when I feel like speculating on the broad market. There are "mini" contracts for the stock indices, for some metals including gold, silver and copper, but unfortunately none for interest rates.

If you like to trade gold (I don't) comex gold contracts are great with little friction - To me gold is my "sominex" and trading anything these days does not help me sleep - I had plenty of that in the late nineties.

For shorting treasuries, you could just allocate half as much to one of the 2x inverse etfs and get close to the same effect, but less efficiently.

Also, to be clear, I do not have big (percentage-wise) short position yet. I just think it's something else to consider once you have your PMs and whatever commodities you favor.

[rogermexico]

Re: 30 Year Treasuries weakening...

Rog, is that avatar John Cleese circa Fawlty Towers? :cool:

When I was having a "discussion" with Lukester recently, I felt like the character played by Michael Palin in "the argument sketch". A Monty Python fan since 1973, I always liked Cleese the best, hence the avatar.

http://www.youtube.com/watch?v=k3HaRFBSq9k

[Sharky]

Re: 30 Year Treasuries weakening...

What are you hearing regarding the "rumors of disastrously-below-estimate tax receipts?"

California state personal income taxes are down 43% in Apr 2009 vs Apr 2008. Lots of ugly stats along those lines here:

http://sco.ca.gov/Press-Releases/2009/05-09summary.pdf

BTW, this seems to support the idea that the bounce in consumer spending / PCE in Q1 was at least partly based on tax refunds and/or reductions in withholding.