iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
19,441 Blog Posts

How Long Can This Shit Last?

When I say “shit” I mean bond yields going down while the market goes up, naturally.

This is not unheard of — but it certainly is unusual. I suspect, judging by previous runs, the bond market is not trying to warn of us something. Instead, by divine right, the Nasdaq shall thrust forward, mangling all in its path. Eventually the bond nerds will see they are no match for the Nasdaq and acquiesce, sending yields the fuck higher.

I am long both TLT and TMF and I like them…for now. But the better plays are in tech, oil, and gold.

I had a good day. I am starting to feel a little bit better. I have been amused by the shares of HUNT late in the day. What a time to be alive.

Good day.

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10 comments

  1. it is showtime

    Your faux bull market running the formula today.
    Induced-redhot open.
    So called bull market
    that needs a booster seat & freeload headstart.

    They get leapfrogged futures with a nikkei that’s lit up like a fricken plutonium rod

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  2. edge

    Everything is bid up. Everything. Old bicycles, you name it.
    Do you want bid up bonds or bid up stocks? Fear is starting to percolate, so some money will start flowing through bonds- bid up bonds. Some won’t be able to tolerate the yield so they’ll buy bid up stocks. Or hold cash, which is out of style. I don’t think that there are any good options, except that shiny useless yellow stuff.
    People will go more and more to safety this year; they should.

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  3. teslawasright

    The Le Fly – The Fed will cut rates no? Perhaps you will walk the entirety of the Appalachian Trail in the coming decade no?>

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  4. numbersgame

    On a Technical basis, I’m no pro – I mainly look for horizontal price supprt/resistance. The above analysis seems sound on that basis. However, trends that long in the bond market have more than Technicals behind them.

    Case 1, 2nd half of 2016: change was obviously due to the trifecta victory of the People’s party (keeping in mind that 5 of 5 Conservative SCJs ruled that that corporations are people). Was the Nov 2016 spike was a coincidence?

    Case 2, late 2017: reason for turnaround: Tax Cuts and Jobs Act of 2017

    Case 3, early 2019: reason for turnaround: TBD.

    Now consider this headline from last week:
    “Senate GOP budget ignores Trump, cuts defense”
    As we all know, nobody wins votes for cutting spending. Democrats Tax and Spend, Republicans Spend and Spend. Usually bdugets are a compromise, as in: we’ll vote for your spending icnreases if you vote for ours. This hardline starting point indicates that the Republicans have decide to instead force hard decisison, which means that you can’t count on the Federal goverenment for a GDP boost anytime soon. Combine this with the Democratic desire to rescind some of the 1% tax breaks, and that means the governeemtn will more liekly be a headwind to GDP (and corproate profits) as opposed to the tailwind investors have gotten used to.

    TLDR: don’t bet againt the bond nerds

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    • edge

      Yeah. They can’t even agree on saving themselves.
      Monetarily and fiscally, world governments are constrained. Not a positive.
      But for whatever reason, there is a bid to be found. With the right earnings and happytalk we can see a new run. To records.
      Obviously, this can’t go on forever.

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  5. irma vep

    I just want to state this on my favorite blog: Revenge is not a dish best served cold; It’s best served and eaten like warm cracked oatmeal with melted butter and real maple syrup.

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  6. irma vep

    Could the inverted yield curve effect be a result of Corporations hoarding cash?

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    • edge

      Books have been written about inversion, so my comment will be too short. In the past inversion was a symptom of an over-heated economy. The Fed attempted to slow growth by raising rates on the short end, which would eventually effect rates on the long end. Short term the lower end raised faster than long term, and when investors became fearful of a Fed-induced recession they ran to the safety of long dated bonds which could re-inforce the inversion.
      Today it’s a little different. Basically, in this country at least, too much cash is chasing investable assets. People are feeling a need for safety so too much money is going to the long end. It is not the reliable sign of recession that it used to be since the Fed is not actively trying to choke off growth.

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    • numbersgame

      The FED has alwasy had a stranglehold on the short end of the curve. Quantative easing (a relativiely new phenomenon) gives the Fed influenece over the long end as well. They buy long bonds, increasign demand and dropping long rates.

      Low rates make it easier for corporations to raise cash. Supply-side econmics says that this cash will go towards expanding prodcution, thus juicing the economy, However, waht Conservative economists (such as the fool Trump just put on the FED board) don’t seem to understand, is that companies won’t expand production if they dn’t anticipate increasing future demand. The 1% tax break has the same effect (puuting more cahs in the hands of corporations and Investors). So “hoarding” cash isn’t the right word, as it implies a *desire* to hold cash. In reality, the excess cash was pushed upon corporations by Fed and Republican policies.

      Contrary to 5 out of 5 conservative SCJs, corporations aren’t really people. However they are run by people, peopel that own a lot of stock. So while it is possible that the large coprorate cash holdings go towards Treasuries, the larger portion go into Dividends and Stock buybakcs (whihc directly benefit the Executives making the decisisons).

      In some case, the investemtns actually go into other stocks. Take a close look at Berkshire Hathaway’s assets: it is actaully less a conglomerate, and more like a mutual fund.

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  7. irma vep

    Nice Vivaldi. I think he was the earliest of ambient music artists a la Brian Eno.

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