Are you late to the party, per buying inverse bond ETF’s? Pattern would say , NO!
I have received a few emails from viewers, feeling like they missed out, by not buying the inverse bond ETF (TBF). Two weeks ago I ran a couple of posts, reflecting that interest rates were on LONG-TERM SUPPORT and had created BULLISH FALLING WEDGES (per yields) (see 30-year post) (see 5-year post)
Below is an update on the yield opportunity that is at hand in the 10-year note…
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Below is the VERY FIRST chart dshort posted of my work. Thank you Doug! Appreciate and am humbled that you saw something of value in my work.
The chart reflected that yields were UP AGAINST RESISTANCE/PRICES WERE ON KEY SUPPORT of a 17-year falling channel and that investors should BUY BONDS at yield resistance. (see post here)
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Did I know yields would collapse and Bond prices would increase by more than 15% in the following months? NO! Did I have faith in the “Power of the Pattern” and that a great opportunity was at hand ? YES!!!
Just an opinion based upon the “Power of the Pattern”…..Investors that would like to take advantage of owning a inverse bond etf…. it is not too late! Another good opportunity is at hand, AGAIN!
Chris…if the equity market is going down why would bonds go down also? I always thought there was a perfect inverse correlation. I trust your opinion and have made money with your ideas so far and will go with what you say regarding TBF but just wondering why this is happening.
By the way, did you work for Sir John or sell his funds or what? I read “…Madness of Crowds” years ago but will try to find it and re-read. I guess if making money in the market was easy everyone would be millionaires.
Chris & KY,
Yes, you are both obviously right about the market, and the psychology.
The way I can see using Chris’s work is to time trades that do fit into my preconceived view of things. So, for instance, I would cover my shorts that last week of August and allow my long positions to be mostly unhedged. But to take an agressive net long position when I see this as being a leg in a great bear market would be pretty tough.
Yes until high yield mutual fund prices break down. I have posted for months how quality the price action has been (See archives-high yields).
Their price action, for me is KEY in MANY WAYS! As I shared earlier this week, I prefer the funds over the ETF’s, because volume doesn’t seem to push fund prices around, like it seems to do the etf’s.
If this market starts tanking, ETF’s move quickly, funds we can sell at the end of the day, without as much damage…been that way in the past at least!
Short (inverse ETF) government bonds, still long hi-yields?
I have a business and a psychology degree…for 30 year I have wondered which degree is more important to have in the investment business.
In my opinion, prices reflect “fear and Greed!” So if fear and greed are part of decision making and are reflected in prices…hence patterns…why not follow price/patterns.
Sir John Templeton said “other than the bible, the book he learned the most from was…”the extraordinary popular delusions and the madness of crowds” by Charles McKay.
Even though he was one of the best fundamental investors in history (my bias opinion of course) what book did HE MAKE EVERY PORTFOLIO MANAGER read???? This one!
Book is 100% about “FEAR AND GREED!” Hard read, yet a great book. I have an original copy from Sir John’s publishing company and got him to sign it for me…a great treasure in more ways than one!
Hey bob in ma.
I understand what you’re saying.
I don’t get why prices sometimes follows patterns or respect uncle fib,
But I think patterns are inclusive of human emotion/psychology, which fundamental analysis ignores.
Emotion plays just a big a role as valuations in driving price, and Pattern analysis is the best way to profit from herd psychology.
Also pattern analysis takes the emotion out of trading bc it plays on odds, like how poker should be played. You play the hands that give you 66% odds, bail out when it’s not working, or ride it all the way to rake in the huge pot.
But in fundamental analyses, there’s alot more pride involved, more “I put the hard work in to valuate the market, I know I’m right, the market will catch up to me.
Market overvalued? My Sir John Templeton fundamental teachings suggest YES! No disagreement there!!! It is this issue, “potential overvaluations” that causes me to “rent” positions not own them. I hope the world is fine, yet as we both know, HOPE IS NOT A STRATEGY.
Tools exsist to take advantage of “renting and momentum.” 8 months ago yesterday was my first post on dshort. Regardless of me NOT knowing where the economy is headed, I “hope” people have been able to see, that they can “inflate a portfolio regardless of market direction.”
The problem right now is that there isn’t even the pretense of a value justification. In April the market was zooming because valuations seemed low based on expectations of a near v-shaped recovery. They were wrong in their assumption, but at least there was some reasoning behind their conclusion.
Now the markets are priced on some complex set of assumptions about Fed actions, inflation, decoupling, etc., etc. And each time I hear someone articulate these arguments, they are somewhat different, and often contradictory.
You clearly no your business and there’s no arguing with success, and I can wholly understand that valuations can be ignored by markets for long stretches of time. But I have a very hard time clicking the buy button if I don’t at least understand the rationale.
Right now, you are short Treasuries and long junk in a market that seems to be totally momentum driven. I don’t have the stomach for that.
I bought TBF the day after it was recommended. It went down from there but has rallied back – so definitely not too late to buy it.
Bob in MA…Well said “effect without a cause!”…great!
As a really bright friend of mine says…”valuations matter, in the long-term!!!”
One aspect of this that is almost comical is that bonds started to fall while commodities were still rising.
If the rationale for buying commodities is that the Fed will stoke inflation by driving Treasury yields lower, and Treasury yields are rising because the market expects the Fed to fail, we have the effect without the cause.
I posted this to get people to think about all possibilities, hence title “mission possible/impossible!”
I don’t do a good job of it, yet I desire for people to look at each piece on its own! Correlations work until they don’t. If we bank on correlations always working, in my opinion that isn’t a strategy it is HOPE.
I had a good question sent to me this morning…will grains keep going up if the Dollar rallies? History/correlations would say no. I own DBA, based upon DBA’s price breakout and have a larger than normal trailing stop in play.
Too many macro variables for me(I stopped at a million different potentials)…patterns are straight forward enough me.
I know its boring…yet for me it works.
What you said about States/Fed and unfunded if for sure spot on. Its effects and when? I am surprised we have seen a greater impact already.
Was thinking ……. not sure that falling bonds would mean rising stocks. Couldn’t falling bonds just mean that yields are rising because the US is borrowing too much and that could be a bad thing for stocks (ie. PIIGS of Europe). Most States are broke and the Fed has Trillions $ of unfunded Liabilities. I guess we’ll let the charts tell us!