Bonds Away!

Good afternoon, as you may have read I have been bearish on the US long bond for a while. I was early buying the TBT (inverse 2x TLT) on this trade and took about a 8% loss initially. Then I was lucky enough to add around $30. This trade looks like its turning at this point the TLT has recently broken major support at a hundred and is set to move lower as the bond bubble unwinds and it will. The major reason for this is there is a change in the thinking of all our  creditors, they are unhappy with our borrow and spend policy.


There has also been a lot of blame thrown on the Chinese for currency manipulation. In the nineties when the Yuan was pegged, no one said a word about it, why because back then the dollar was strong, no one cared. So know when the dollar is falling almost on a daily basis the Chinese are to blame. Even tough I believe the yuan needs to rise but only because of the fundamentals of the Chinese economy not because the US feels 10-20 percent rise in the Yuan will restore the trade surplus. This was also seen in Japan as the Yen rose 300-400 percent against the dollar and it did noting to fix the trade imbalance with the us (1970-Present)

The world is moving away from the dollar, the US may find it more difficult for people to lend us money, this isn't a one year move I think this will be a problem for 10-20 years. Think about how big the domestic economy is how the government is so set in its ways, they keep telling you they are going to keep the pedal to the metal in terms of supply. We keep spending on war, military, larger government. Print and spend baby!

So how does this relate to the bond market, take a look at the chart above I think its going to get a little support hear at the 30 and 40 wk sma and finally break down to the 89-90 level. I will re-evaluate as this plays out.

So the way to play this via the TBT:

This is a weekly chart of the TBT, i dont think you are going to see $31 any time soon but i will be adding at 32.25 or so. Doug Kass of RealMoney.com Silver feels it could be "the trade of a decade".

more to follow