About Me

Retired chief investment officer and former NYSE firm partner with 40 years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Wednesday, May 23, 2012

Long Treasury -- Priced for US / Global Recession

I have been priced out of the long side of the 30 yr. Treasury for many months. The bond, now
trading in the high $140s, is a country mile above my current preferred entry level of $115 -120.
With a yield now well inside 3.0%, the bond is priced for a deflationary recession in the US
and capital flight to the US to reflect a stronger dollar and a global economic environment that
has turned less secure. Since I turned bullish on the long Treasury in late 1980 when yields
went above 13% and have traded long umpteen times over the past 30 odd years, I am going to
leave all the remaining price upside to others. A long guy at $135 (3.50% ytm) is my absolute
upper limit.

Is this sayonara for the Treas? Nope, because there is the short side, too. I've been there a number
of times over the years. The chart shows the bond is overbought on RSI and MACD. $USB chart
Also, trader advisory sentiment is now too bullish. For example, MarketVane shows Treas. bond
bulls at 78% in their survey. Over the long term, readings of % bullish that run above 76% on
this survey generally spell trouble for those who are long the bond in the months ahead. 

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