When they are yelling I’m selling, when they are crying I’m buying

A lot of people are throwing in the towel and the curve needs to steepen” – the fund managers are throwing in the towel and dumping the long-term treasury bonds.

I see it as a buying opportunity. Why?

The theory says that commodities must top after stock market. Sometimes they top at the same time, but that’s exception from the rule. This time commodities topped in May 2006 and we are way down the ski slope now. And the stock market top is unclear yet, though the June 1st peak could be that maximum.

You know the classic example when commodities topped well ahead of the stock market?

It was 1929.

The reason is that the deflationary pressure is so big that the events are coming out of sequence. I’m not that sure that we are indeed entering another deflationary 1929 crash, but if we do, then sub-1% Fed rates are in front of us and the current sell-off is an amazing buying opportunity.

If it’s not 1929? As mortgages are priced to 10-year yield, the current jump in rates is enough to put us in a very serious slowdown. The normal reaction to that slowdown will be an inversion of the yield curve. So maybe big profits in treasuries are not guaranteed, but at least the risk/reward is perfect

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