Black Swan or Odd Duck at hand below???
Interest rates and Base metals had a very high degree of correlation until the first of June at (1) above. Since then, rates have fallen hard and DBB is up 30% in 4 months! Yields have for sure broken above a falling channel, DBB is testing resistance at the top of a bearish rising wedge.
I am not going to even attempt to explain what is happening here! Message from the patterns right now… As ODD as this Black Swan message might be….Short Bonds and Harvest Metals at (2) in the above chart!
BOM should move!
All this is pretty hard for anyone to understand me included but clearly we live in a low demand environment and we will do until debt level are brought down and developing world incomes are brought up.
Interest rates looking like they could rise and base metals looking like they are poised to fall. Meanwhile we have tightening in China and threats of quantitative easing in USA. According to the pundits I listen too China has a massive real estate and Capital Investment bubble. Significant tightening in China should see base metal prices start to fall. The Fed threatening to print raises the spectre of inflation hence interest rates rise. However what we seem to get in fact in a fiat monetary system where printing money does not actually result in it being spent is low interest rates and low inflation.
How about harvest bonds and short base metals? Could be a lot safer if European debt acts up again, or some new black swan occurs. In those cases I most definitely wouldn’t want to be short Treasuries.
Jeff…LOL per the Duck throwing money out of a helicopter!
For anyone that didn’t see the Rosenberg/Grant debate…go to you-tube and enjoy! I thought both of them made a great case, per their beliefs. Rosenberg, so far the clear winner!
As you know Jeff, I don’t care about being right, I just desire to see all of our portfolios go up in value, regardless of market direction or silly actions by ducks and swans.
Plausable explanation:
In the beginning of 2010 there was a great debate regarding whether rates were going up or down. This was personified in the Rosenberg vs. Grant debate on March 23,2010.
Since then, it has become apparent that there would be no Fed action to undo ZIRP, and then the term “QE2” entered our vocabulary. Chris’ Odd Duck photo could have the little critter in a helicopter dropping money out of the window.
However, I have been unsucessful turning these observations into winning trades and now defer to the Power of the Pattern.
I am long SMN and TMV. Thanks, Chris.
Best Regards,
JB
Chris…I’m in with the (EUM)…
emerging markets turnover baby and way we go!!!