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November 8, 2005
Buy Treasury Bonds
As of today, Treasury Bonds are down about 2 1/2
points from where I recommended buying them on October 7th. I still
think they are a buy and still think we are right in front of at
least a 10-12 point rally that will take them into new contract
highs.
I CONTINUE TO LOOK FOR FALLING LONG
TERM INTEREST RATES, AND RISING BOND PRICES.
I believe:
The bull market in energy has ended and with it
any whiff of inflation we have seen in the last year has peaked out.
Maybe not that soon, but I think we'll see $35 oil before we see $70
again. Even with the inflation numbers seen this year (which is
bearish for Bonds), the Bond market is still exactly where it was
when the year began. This indicates there are other factors besides
inflation at work in the interest rate market.
Even with the Fed having raised short term rates
at every meeting they've had, Bonds are still exactly where they
started the year. This has befuddled a lot of people, including the
Fed. Same as with inflation, this firmness in the Bond market is a
sign of underlying strength.
The constuction and automobile
industries are the backbone of our economy, both of them combined
being directly related to creating more jobs in this country than
anything else there is.
The housing market IS slowing,
and if the housing stocks, which have been generally falling
dramatically (20% to 40%) since August, are any indication of what's
coming in the industry, the news going forward won't be good. It had
to come sooner or later, when those gazillions of new houses we've
all seen popping up everywhere start to sit without buyers and the
"For Sale" signs start multiplying, and with the slow down,
construction industry jobs start disappearing....As for the
automobile business, all you need to know is that GM and
Ford are both in such sorry shape they are dealing with bankruptcy
rumors....Bottom line? If these two
industries are in trouble, all of those ideas about rates going up,
up, up (!) are going out, out, out the window...
I keep saying it....There is a lot of talk about
long term rates going higher, but for that to happen, you've got
to have willing sellers...and it is my very strong opinion that
there simply aren't "any"...Bonds are instruments that pay interest
for a long, long time and investors who already own Bonds are most
likely just not interested in selling them...As an example, if in
November, 1990, you had bought a 30 Year US Treasury Bond, you would
own an instrument that has been paying you 8.35% interest for the
past 15 years and still will pay you 8.35% for another 15
years...Would you sell it? I doubt it....and neither would anyone
else....As I've said all year, I believe there are no
natural sellers in our Treasury market, just the usual backwards
thinking interest rate analysts who keep yelling "Sell!", and
speculators who keep trying to do so.....
On the buy side, aside from the fact United
States government paper is still considered the safest long term
instrument on the planet, and will CONTINUE to attract foreign
buyers at EVERY auction we have, there are the Bond Positive
Demographics of the Baby Boom. As all of
the Boomers approach and enter retirement, secure interest bearing
instruments like US Treasury Bonds will become a larger and larger
part of their savings and retirement accounts...As
opposed to the 1990's when all the retirement account money was
being thrown at stocks, as we go forward, more and more of those
funds will now find their way into Bonds...the point being,
this will represent a steady influx of buyers to the Bond market.
To simplify then: No natural sellers + steady
influx of buyers = higher bond prices (and lower long term rates).
I'm curious. If you have actually read this,
please call your stock broker or financial advisor and ask him what
he or she honestly thinks about buying long term Treasury Bonds....HERE
AND NOW. Then give me a call or email. I'd love to put
together a survey of your responses, even though I'm pretty sure I
already know what the answer will generally be...that is, "No way,
Jose!".
If I know anything at all about this
market, I can tell you they generally will turn up BEFORE the Fed
finishes its tightening campaign. I can also almost promise you they
will turn up when absolutely everybody is CERTAIN they are going
lower. I think we are "right there" in both cases.
If you've ever been in this market with me
before, you'll know what I mean....It's time to step up.
Give me a call....
Buy March Bonds. Buy March
Cotton. Two Great Trades.
Charts Follow....Thanks,
Bill Rhyne
800-578-1001
770-514-1993
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