The Case Against Treasury Bonds

Uncle Sam

My friend, Texan money manager Mike Robertson, asked me the other day if there was one asset class that I truly despised. I didn’t hesitate: bonds. In fact, fixed income investments are about to regain the nickname they earned during the 1980’s: “certificates of wealth confiscation.” That leaves me within a hair’s breadth of pulling the trigger on some new short positions in … [Read more...]

The Liquidity Crisis Coming to a Market Near You

Mohamed El-Erian

I had the great pleasure of having breakfast the other morning with my long time friend, Mohamed El-Erian, former co-CEO of the bond giant, PIMCO. Mohamed argues that there has been a major loss of liquidity in the financial markets in recent decades that will eventually come home to haunt us all. The result will be a structural increase in market volatility, and wild … [Read more...]

How the Markets Will Play Out This Quarter

Fox Hunt

I think I have figured out the course of the global financial markets over the next few months. We are currently transitioning from an economic data flow from Q1 that was very weak, to the second quarter, which will almost certainly deliver us a robust set of numbers. This is on the heels of a white hot Q1, 2014. Hot, cold, hot; this is a trader’s dream come true, as it gives … [Read more...]

Mad Hedge Fund Trader Hits 10% Profit in 2015

John Thomas

I am sitting here at the Lone Eagle Grill in Incline Village, Nevada, enjoying a rare solo lunch. No one is asking me about the future of interest rates, if there is any gold inside Fort Knox or if the aliens really landed at Roswell, New Mexico. My table overlooks majestic Lake Tahoe, and a brace of mallard ducks has just skidded across the smooth surface for a landing. My … [Read more...]

The Crash Coming to a Market Near You

Bank for Int'l Settlements

I’m sure that most of you are spending your free time devouring the utterly fascinating pages of Fifty Shades of Gray these days. I, however, am reading slightly different subject matter. As obscure, academic and abstruse the “Global Dollar Credit: Links to US Monetary Policy and Leverage” may sound, published by the Bank for International Settlements, it has been an absolute … [Read more...]

Why Are Bond Yields So Low?


Investors around the world have been confused, befuddled and surprised by the persistent, ultra low level of long term interest rates in the United States. At today’s close, the 30 year Treasury bond yielded a parsimonious 2.01%, the ten year, 2.62%, and the five year only 1.51%. The ten-year was threatening its all time low yield of 1.37% only two weeks ago, a return as rare … [Read more...]

Throwing in the Towel on the Bond Market

John Thomas

Here are the long-winded, feeble bunch of excuses I promised you. I have broken every rule in my trading book hanging on to my position in the (TBT) for the past four months. I ignored my own stop losses. I listened to the morons on TV saying interest rates were about to spike up. I took the pile of charts that were telling me there was no bottom in sight, and deliberately … [Read more...]

Mad Day Trader Jim Parker’s Q1, 2015 Views

Jim Parker

Mad Day Trader Jim Parker is expecting the first quarter of 2015 to offer plenty of volatility and loads of great trading opportunities. He thinks the scariest moves may already be behind us. After a ferocious week of decidedly ‘RISK OFF” markets, the sweet spots going forward will be of the “RISK ON” variety. Sector leadership could change daily, with a brutal rotation, … [Read more...]

2015 Annual Asset Class Review


I am once again writing this report from a first class sleeping cabin on Amtrak’s California Zephyr. By day, I have two comfortable seats facing each other next to a broad window. At night, they fold into bunk beds, a single and a double. There is a shower, but only Houdini could get in and out of it. We are now pulling away from Chicago’s Union Station, leaving its hurried … [Read more...]

The November Nonfarm Payroll Report is a Game Changer

Rosie the Riverter

Finally, the economy is starting to deliver the blockbuster numbers that I have been predicting all year. The 321,000 gain in the November nonfarm payroll on Friday wasn’t just good, they were fantastic, truly of boom time proportions. It was the best report in nearly three years. The headline unemployment rate stayed at 5.8%, a seven year low. It vindicates my ultra bullish … [Read more...]

10 Reasons Why I’m Wrong on Bonds

John Thomas

I have never been one to run with the pack. I'm the guy who eternally marches to a different drummer, not in the next town, but the other hemisphere. I would never want to join a club that would lower its standards so far that it would invite me as a member. On those rare times that I do join the lemmings, I am punished severely. This is one of the times. Like everyone and … [Read more...]

How to Trade the Rest of 2014

johnthomas transparent

“Be Fearful When Others Are Greedy, and Greedy When Others Are Fearful.” That is one of my favorite quotes from Oracle of Omaha, Warren Buffet, and it was never more true than during the past 30 trading days. It turns out that the lowest risk day to buy stocks in 2014 was October 15, when we saw a giant, capitulation, spike low in the S&P 500 (SPY) down to $182. That … [Read more...]

Japanese Yen Melts Down to 12-Year Low!


Those who woke up early Friday morning may be forgiven for blinking at their screens quite a few times. The Japanese yen (FXY), (YCS) was down by an incredible 3%, the Dow Average futures were trading at an all time high of $17,400, and the S&P 500 was just short of a new peak at $202. The Japanese stock market blasted 5% to the upside, taking the Wisdom Tree Japan Hedged … [Read more...]

The Bottom Building Process Has Begun

John Thomas - Young Man - Armed

I have an arrangement with several large hedge funds where they pay me a small fortune every month for the privilege of calling me one day a year. Wednesday was that day. It was a day when the $20 billion hedge fund waited on hold while I got off the phone with the $100 billion hedge fund. And that’s not including urgent calls from the White House, the office of the Joint … [Read more...]

Mad Hedge Fund Trader Tops 30% Gain in 2014

John Thomas

It looks we are going to have to start watching the appalling Zombie shows on TV and in the movies. That is so we can gain tips on how to survive the coming Apocalypse that will unfold when the Ebola virus escapes Texas and spreads nationally. I’m not worried. I’m actually pretty good with a bow and arrow. Thank you United Airlines! I happy to report that the total return … [Read more...]

The Structural Bear Case for Treasury Bonds

Uncle Sam

If you want to delve into the case against the long-term future of US Treasury bonds in all their darkness, consider these arguments. The US has not had a history of excessive debt since the Revolutionary War, except during WWII, when it briefly exceeded 100% of GDP. That abruptly changed in 2001, when George W. Bush took office. In short order, the new president … [Read more...]

She Speaks!

John Thomas

Like a deer frozen in a car’s onrushing headlights, markets have been comatose awaiting Federal Reserve governor Janet Yellen’s decision on monetary policy and interest rates. Interest rates are unchanged. Quantitative easing gets cut by $15 billion next month, and then goes to zero. Most importantly the key “considerable period” language stayed in the FOMC statements, meaning … [Read more...]

The Bond Crash Has Only Just Started

Grandpa Thomas

When I was a little kid in the early 1950’s, my grandfather used to endlessly rail against Franklin Delano Roosevelt. The WWI veteran, who was mustard gassed in the trenches of France and was a lifetime, died in the wool Republican, said the former president was a dictator and a traitor to his class, who trampled the constitution with complete disregard. Candidates Hoover, … [Read more...]

The Euro Breaks Down

Mario Draghi

You usually don’t expect US housing data to cause the collapse of a foreign currency. But that is exactly what happened this morning. The announcement by the Census Bureau that new home stats for July came in at a breathtaking 1.09 million, up 15.7%, blew away even the optimistic forecasts. Earlier figures for June were revised up substantially. New building permits for July … [Read more...]

Why I’m Selling Short Treasury Bonds


This has really been one of those incredible, jaw dropping, knock your socks off kind of years. It seems like every asset class is doing exactly the opposite of what it should do. A slowing economy delivered a huge move up in bonds, which is fine. The extent of the damage the harsh winter wrought on the economy was confirmed this morning, with a full one-point drop in Q1 … [Read more...]

Three Corrections for the Price of One


I love this market action. For me, it means that we are setting up ideal entry points for a broad range of asset classes that will deliver another +67% year. It will set up for you too, if you continue to read this letter. What the market is in fact doing is giving us three corrections for the price of one. Remember the traditional September swoon that never happened, the … [Read more...]

Selling Bonds Again


You all know well my antipathy to the bond market, which I believe hit a 60-year peak on August 18, 2012 at 10:32 AM EST. I managed to catch the exact top of the one-month post taper bond market rally, and sent the Trade Alerts to sell bonds showering upon you. I quickly closed all of those out for nice profits. We have since seen a $2.24 dead cat bounce in the (TLT) that … [Read more...]

Mad Hedge Fund Trader Blasts to new All Time High

TA Performance YTD

The Trade Alert service of the Mad Hedge Fund Trader has posted a new all time high in performance, taking in 46.05% so far in 2013. The three-year return is an eye popping 101.7%, taking the averaged annualized return to 35%. That compares to a far more modest increase for the Dow Average during the same period of 19%. This has been the profit since the groundbreaking trade … [Read more...]

The Run in Bonds is Over

The End is Near-sign

This is a bet that the ten-year Treasury bonds, now trading at a 2.50% yield, don’t fall below 2.40% over the next 14 trading days. It has to make this move on top of an unbelievable decline in yields from 3.0% to 2.50% since September. And it has to do it quickly. The Federal Reserve on Wednesday to consider whether they should raise rates, lower them, or leave them … [Read more...]

Why I’m Buying the Treasury Bond Market


The Fed’s decision not to taper, and therefore keep interest rates lower for longer, gave a great flashing green light to the bond market. It has been off to the races ever since, with the iShares Barclays 20+ Year Treasury Bond Fund (TLT) blasting through resistance this morning to new two month high. As this is off a double bottom on the charts that has been unfolding since … [Read more...]

The Bond Crash Has Only Just Started

Grandpa Thomas

When I was a little kid in the early 1950’s, my grandfather used to endlessly rail against Franklin Delano Roosevelt. The WWI veteran, who was mustard gassed in the trenches of France and was a lifetime, died in the wool Republican, said the former president was a dictator and a traitor to his class, who trampled the constitution with complete disregard. Candidates Hoover, … [Read more...]

Welcome to the Sack of Rome


Let’s face it, the carnage in the bond markets in May outdid the sack of Rome. Not only did the Treasury bonds (TLT) get hit. The entire high yield space was slaughtered, including corporates (LQD), junk bonds (JNK), REITS (VNQ), master limited partnerships (KMP), municipal bonds (MUB), and high dividend equities. Anything that looked and smelled like a bond got … [Read more...]

Five Stocks to Buy for the Second Half

Market Pit

Take a look at the chart below for the S&P 500, and it is clear that we are at the top, of a top, of a top. How much new stock do you want to buy here? Not much. Virtually every technical trading service I follow, including my own, is now flashing distressed warning signals. Maybe we really were supposed to “Sell in May and go away.” All RSI’s are through the roof. We … [Read more...]

Why I’m Covering My Bond Shorts

Wave - Silkscreen

I am going to bail on my (TBT) position at close to cost. For me, it is amazing that we got a 350-point rally in the Dow and ten-year Treasury bond yields only manage to eke out a gain from 1.68% to 1.72%. I scoured the bond trading pits in Chicago yesterday, and the answer came back the same everywhere. Overwhelming Japanese buying is pushing up the prices of not just … [Read more...]

The Bond Crash Has Only Just Started

Grandpa Thomas

When I was a little kid in the early 1950’s, my grandfather used to endlessly rail against Franklin Delano Roosevelt. The WWI veteran, who was mustard gassed in the trenches of France and was a lifetime, died in the wool Republican, said the former president was a dictator and a traitor to his class, who trampled the constitution with complete disregard. Hoover, Landon, and … [Read more...]

The Nationalization of the Bond Market


I was as stunned as anyone when the yield on the ten year Treasury bond (TLT), (TBT) plummeted to 1.42% two weeks ago. Predictions that long dated government paper would reach subterranean Japanese levels, considered loony as recently as a few months ago, are now donning the mantle of respectability, and even plausibility. Where will this end? With yields at 1.25%, 1%? … [Read more...]

Time to Pick up Some (TBT)


This is the year of the one way move. That has been the harsh lesson of the marketplace since trading commenced at the New Year. We have seen this in Apple, the S&P 500, the Japanese yen, bank shares, natural gas, the volatility index, and now it looks like the Treasury bond market. Once a move starts, it continues in a straight line. There are no pull backs, … [Read more...]

When Sterilization is Not a Form of Birth Control


I received a flurry of inquires the other day when Ben Bernanke mention the word “sterilization” in his recent congressional testimony. And he wasn’t giving advice to the country’s wayward teenaged girls, either. Sterilization refers to a specific style of monetary policy. Sterilized policies seek to manipulate the money markets without changing the overall money supply. The … [Read more...]

The Looking Glass Market


If you feel like this market has sucked you down a rabbit hole, you have plenty of company. I have never seen such a profusion of contrary cross market indicators. Traders are running up shares prices while companies are cutting earnings forecasts. Economists are raising GDP forecasts as rising energy prices are taking them the opposite direction. Natural gas is crashing as … [Read more...]

2012 Annual Asset Class Review


I am writing this report from a first class cabin on Amtrak’s California Zephyr en route from Chicago to San Francisco. The majestic snow covered Rocky Mountains are behind me. There is now a paucity of scenery, with the endless ocean of sage brush and salt flats of Northern Nevada outside my window, so there is nothing else to do but to write. My apologies to readers in Wells, … [Read more...]

Bond Market Crash Sends Macro Millionaire to New All Time High

Picture 4

The abject failure of yesterday’s seven year Treasury bond auction and the crash that ensued has enabled the year-to-date return for my Macro Millionaire trade mentoring program to soar to a new all-time high of 43%. The 30 year bond plunged a staggering six points from the previous day’s high. Yields on ten year government paper have ratcheted up 50 basis points in just a few … [Read more...]

Winging My Way Back From China

Screen shot 2011-10-26 at 10.30.13 AM

I am writing TO you from my first class seat on Singapore Airlines, winging my way the 12 hours from Hong Kong to San Francisco. While most airlines jettisoned their first class sections years ago as a cost saving measure, Singapore carried on to maintain its reputation as the best airline in the world. The small section at the front of the bus is populated with a few Chinese … [Read more...]