October 4, 2023

Buy Treasury Bonds and Notes

Long Term Rates go DOWN from here…

As I frequently point out, my very definite opinion is that ALL of the markets are more affected by mob psychology opinion, combined with trillions of sloshing dollars, than anything else. I don’t care if it’s a real product, like Corn or Oil or any other commodity, or a piece of paper, like Stocks or Bonds, the ever changing “value” of those markets, AND their fundamental supply vs demand equations, are unilaterally impacted by what is out there in the media…And that furthermore, in today’s Information Age, with every iota of news related to everything being instantly and unrelentingly blasted out to the world, the effects of that mob psychology opinion are even more pronounced than they used to be.

Along the same lines, my observation has long been that when a particular market becomes THE headline…THE biggest current story in the media…almost without fail it comes AFTER significant market movement has occurred, and as the squawking internet yakheads pile in with their Monday morning quarterbacking opinions, usually loudly predicting (again, AFTER the fact) that there is “more to go!”, the next thing you really see is either sideways, or a reversal...NOT an immediate continuation of the move that has lately attracted everybody’s attention and brilliant analysis.

And that IS where we are with Bonds and Stocks today…especially the Treasury Bond market…with headlines galore as to “rates heading higher!”, when, in fact, they have already made a monstrous move that, I assure you, has yet to have its intended effect on the real economy…and at the very definite risk of inflicting MUCH more than just a slowdown, I’D SAY THAT THE FED IS BASICALLY DONE, AND THEY KNOW IT…And that whether they raise rates another quarter or not is essentially irrelevant to the Stock and Bond markets, which have already accounted for all of the negative impacts of rising rates, and will both now start climbing again…TOGETHER.

Back on August 8th I wrote:

This is a stupid statement to make…But I think this trade is pretty much a gift…With my first option trade of my career having been buying Treasury Bond calls in the spring of 1984, and through the ensuing almost 40 years of Bond Bull Markets, if you have followed me through these decades, you will know that I pretty much “proved” over and over that I know what a Treasury Bond bottom looks and feels like…AND THAT IS WHAT I AM 150% CERTAIN WE ARE LOOKING AT HERE…

And yeah, that was stupid…or really just WRONG…with Bonds having dropped about 13 points since then…But being wrong in this business is sometimes just being  EARLY, and not from some desire to defend my “stupidity,” that is exactly the way I see it. Believe me, during all those 40 years of Bond Bull Markets, my timing was not always exact…but many, many times it was spot on…and many times after being “early” by 2-3 months.

And right now? I’ll just say that, even more so than back on August 8^th, I THINK TREASURY BONDS ARE A ROARING SCREAMING BUY HERE…and yeah, right here, right now, while ALL THE TALK IS ABOUT “HOW HIGH” RATES MIGHT GO.

I HAVE BEEN HERE BEFORE…

Everybody is still talking about inflation but it has been reversed…And again, the impact of the most recent rise in rates has STILL not been reflected in these two most important inflation gauges.

And then there’s this other BIG STORY of late…which often has a definitive opposite correlation with Bonds…CRUDE OIL.

Let’s get real…In May, 2022, with the war starting, with Crude at $130 a barrel, just about every genius energy analyst on the planet was bullish Crude Oil, this is what I wrote:

MAY 18, 2022  CRUDE OIL…maybe the loudest and most persistent bullish “story” out there. Seems like EVERYBODY on Wall Street is madly in love with energy.

I KNOW that with everything you hear, the idea of $75 (or lower!) Crude just sounds absurd...but that IS the way this market moves...

And what happened? Six months later Crude was at $75…and was hanging in the $60-$65 area until this past June…WHEN…all those same previously bullish analysts and all of the talking heads had gone full blown bearish with ALL of them were talking “Recession, Recession, Recession!” Remember that? And now? Here we are 3 months later with Crude having rallied $35 (until today) and those same people are now yelling, “$100 Crude!” and with it, “Inflation!”, and with that, “Rates going higher!

What’s the point?

This chart…

I could give you more…but will leave it with this: If you have any feel for the how the markets work, you have to know that the theme that I am forever pushing, that the OVERWHELMING majority of opinion generators in the investment industry ARE perennially on the wrong side of what is happening…that just as one measly example (among 1000’s) NONE of those guys said get out of stocks in January, 2022…and then last October, with the Dow having fallen 8000 points, they were all screaming, “Recession coming! Sell!”, right before it was headed back up from 29000 to 35,500!??? Not out of some ego thing in which I am saying, “I am smart and they are stupid,” but simply because that IS the way it works. Those herds of so called “strategists” and “analysts” ARE forever just piggybacking what their cohorts are thinking…and ARE…as a whole, just a pack of well spoken, well dressed, overpaid SHEEP that are fantastic at explaining what HAS happened…but HORRIBLE at predicting what comes next…AND YOU MUST KNOW THAT WHAT THOSE MASSES ARE NOT SAYING HERE IS, “BUY TREASURY BONDS.”

US TREASURY BONDS ARE THE SAFEST PIECE OF PAPER ON PLANET EARTH…AND FRANKLY, I’D SAY THAT ANY FIXED INCOME INVESTOR WHO WOULD ACTUALLY SELL THE REAL INSTRUMENT HERE, AFTER AN 80 POINT SELL OFF, IS A MONUMENTALLY “STUPID” FOOL…AND SHOULD BE FIRED FOR DOING SO. THIS IS WHERE YOU BUY TREASURIES.

BUY TREASURY BONDS HERE…AS A FANTASTIC LONG TERM INVESTMENT…AND SPECULATIVELY, HERE IN THE FUTURES MARKETS.

I would also add that with the congressional debacle going on, right now the LAST thing the Fed is going to do is step up their “talk tough” rhetoric…making this, I think, the perfect window for Bonds to just lift off from here…yeah, right here. Right now.

BUY FUTURES AND/OR BUY CALL OPTIONS.

Here are my specific recommendations…

And one more possibility…with more time.

For those of you who were with me on my Eurodollar trade 3 years ago? I urge you to consider this…

Contact me if you’re interested…

Thanks,

Bill

770-425-7241

866-578-1001

All option prices in this newsletter include all fees and commissions. All charts, unless otherwise noted, are by Aspen Graphics and CRB.

The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Treasury Bonds, Treasury Notes