30 Year Treasury

The market is back to being excited and bullish. Yesterday’s announcement out of Europe was underwhelming, but no one cares as a Greek PSI announcement is expected any moment.  It will be interesting to finally find out how many bonds sign on at the time of the agreement and who the potential holdouts are. More importantly, once again LTRO is the talk of the town.  Talk is that the demand will be €1 trillion or more (as ZeroHedge discussed here first over two weeks ago).  It will be interesting to see if the number approaches that or is far smaller.  We continue to believe that banks are using it to prefund redemptions and not as cheap financing to start a new round of asset gathering.  All the talk about the “carry” trade makes it sound like something new that the banks have just figured out, when it is the exact trade that got them in trouble in the first place.  Why did banks sell naked CDS on companies and countries (write protection)?  Because they got carry with no funding worries. Listening to the “chatter” you would think the market is on fire, yet S&P is barely up in almost 2 weeks (it closed 1308 on the 18th).  For the past couple of weeks, fading rallies has been working well, and we don’t see that changing as more and more people become convinced that “Europe is priced in” and ignore that strong earnings were priced in and aren’t really materializing.

A major inflection point?

This collapse will come in waves, and the CRE wave hasn't even started yet. When it does come, it will crash against the Sovereign defaults and rate storms to combine with a derivative malaise that will collapse much of the banking system. Ok, now for the bad news...

Retail sales, producer prices and business inventories. Also get the final of this week's bond auctions in the form of a $13 billion 30 Year

What are the chances rate volatility, excess supply from a burst bubble and insolvent banks causes a CRE crash on both sides of the Atlantic? Yeah, if only all test questios were that easy...

In this relatively quiet night (no major central bank interventions... yet, just one downgrade warning of the United States, Fed "other assets", mostly of the 30 Year Treasury calls variety, at fresh record high), we are delighted to present our readers with the latest edition of Abe Gulkowitz' fabulous newsletter: "The PunchLine" which in our humble opinion succeeds in doing in 18 pages what Kiril Sokoloff's 13-D does in 80 (both being the best 3rd party research one can get about economic developments). So for everyone curious about what has been happening in the US in the past few months, or what is sure to happen, TPL is your one stop shop for unvarnished information, most typically presented in easy to digest, chart format.

Last night, I spent an interesting time with the esteemed and world reknown macro economist, entrepreneur, NYU professor and strategist, Dr. Nouriel Roubini. Nouriel is a very, very bright guy. He has to be, he agrees with many of my viewpoints :-) On a more serious note, this article is the first installment of the valuation of real world, real assets and properties that are actually up for sale. I plan to walk my readers through the potential absurdity that is investing in a bubble that has not finished popping.

The “RISK OFF” trade could deliver a huge flight to safety for Treasury bonds. Is shorting short dated bond puts the best play?

I said it! Bill Gross said it (and put his money where his mouth was by selling off all US treasuries)! Common sense says it... Central Bank manipulated interest rates are too low. They will rise. What happens when they rise during a supply glut of real estate, foreclosure issues and a slow economy??? Put it this way... What made the markets crash in 2008: unemployment, slow economy, snow... Or real estate prices getting in touch with reality?

This has to be one of the biggest "I Told Ya So's" of the year! JP Morgan is forced to come clean on the legal liabilities that I have been pounding the table about for two years as Wall Streets sell side coterie and JPM management have managed to underplay for about as long. Now, it looks as if the chickens are coming home to roost...

A significant extension to my 3 minute Q&A on CNBC's Fast Money show yesterday that, in my opinion, provides irrefutable evidence that commercial real estate is about to enter a cyclical bear market. Then again, what do I know...

Gold and silver have given up a small bit of yesterday’s strong gains in all currencies (especially the euro – see chart below) but are up more than 1% and 3% respectively on the week. Asian equity indices were higher overnight and are higher for the week, except for India where there are growing concerns about surging inflation and interest rates. European indices are higher today and most are up by some 1.5% to 2% on the week – as are US indices...Gold’s price surge yesterday was likely a combination of short covering, the very bullish demand figures out of China, accommodative monetary policy sounds from Trichet and Bernanke. The geopolitical situation in Egypt and the Middle East likely also led to buying.

Cherry picking the best money management techniques that have evolved over the last 30 years, and discarding the dross. Sophisticated hedge fund management for the little guy.Benchmarking performance to an arbitrary index, such as the S&P 500, has been consigned to the dustbin of history. Buy and hold is dead. Security in the wake of the Madoff affair. No more black boxes, homemade account statements, or a “need to know” basis. Scouring the world for only the cream of investment opportunities. An exclusive interview with Lee O’Dwyer of 5T Wealth Management on Hedge Fund Radio. (CU), (DBA), (CORN), (PHO), (GLD), (SLV), (FXC), (FXA), (IDX), (TUR), (ECH), (EPOL), (TBT), (YCS).

The 3 1/2 point sell off in the futures for the 30 year Treasury bond (TBT), at the end of last week was the sharpest drop in 18 months. All it took to set was for Q2 GDP to come in at 1.6%, and for Ben Bernanke to remain silent about any plans to flood the markets with more liquidity. After yields bottomed in 1956, bonds suffered negative returns for 30 years! Here come the 18% mortgages. One more equity puke out in September could easily give us the real thing. (TBT), (TMV), (TIPS).