The chart pattern on the TLT, a proxy for the long Treasury, looks marvelous. The angle of the ascent is much greater than the gentle slope of the downtrend, which on the descent from the high in price in December 2008 (low in yield) was much sharper.
Given that the Asian markets are collapsing and that risk assets such as silver and platinum are down while gold is up, it is easier and easier to look at the analogy of the dollar breakout against the Euro against general skepticism and project a counter-trend bull market in Treasuries.
Meanwhile, the S&) 500 volatility index (VIX) is nearly at 25, a level which a simple review of the long-term VIX chart suggests is average for turbulent periods. Much above 25 presents the intrepid stock picker a tradeable entry point.
The evils of too much debt and too much financial complexity are making themselves obvious. Gold continues to shine, dully, in this sort of environment.
Postings continue light due to travel and will resume normally in a week or less.
Copyright (C) Long Lake LLC 2010
Showing posts with label long T bond. Show all posts
Showing posts with label long T bond. Show all posts
Wednesday, May 5, 2010
Wednesday, December 23, 2009
Is the Hated Long Bond Ready to Rally?
The 10-year Treasury bond's yield advantage over the 2-year and the 3-month T-bill is at or near record amounts in absolute terms. Other similar spreads were seen in spring 1992, August 2003, and June 2009. All cases were positive for the bond market as well as the stock market.
What matters is not only the absolute yield differential but the ratio of yields. In 1992, Treasuries were yielding almost 7%, so the ratio of the 10-year to a short-term yield was not nearly so great as now. Taking this to an absurd case, what if the short term rate were 100% and the 10-year were 105%? That would be an even greater spread, but the yield curve would be flat.
Contrarians can once again buy long bonds for a trade. The Gallup hiring/not hiring difference just went to negative 6. This is consistent with a jobless recovery and is of a piece with recent non-seasonally adjusted unemployment claims (rising) and Q3 GDP downward revisions X 2 (old "news" of limited importance to be sure).
Whatever complacency about the course of this recovery exists-- with some very high GDP numbers for the quarter just now ending and early next year in the ether-- and with the VIX under 20, a lot of fear is for certain out of the market, any excuse to take profits may do. A weak jobs report next month could be that excuse.
Copright (C) Long Lake LLC 2009
What matters is not only the absolute yield differential but the ratio of yields. In 1992, Treasuries were yielding almost 7%, so the ratio of the 10-year to a short-term yield was not nearly so great as now. Taking this to an absurd case, what if the short term rate were 100% and the 10-year were 105%? That would be an even greater spread, but the yield curve would be flat.
Contrarians can once again buy long bonds for a trade. The Gallup hiring/not hiring difference just went to negative 6. This is consistent with a jobless recovery and is of a piece with recent non-seasonally adjusted unemployment claims (rising) and Q3 GDP downward revisions X 2 (old "news" of limited importance to be sure).
Whatever complacency about the course of this recovery exists-- with some very high GDP numbers for the quarter just now ending and early next year in the ether-- and with the VIX under 20, a lot of fear is for certain out of the market, any excuse to take profits may do. A weak jobs report next month could be that excuse.
Copright (C) Long Lake LLC 2009
Tuesday, September 29, 2009
Nike A-Go-Go Though Results Not Even So-So
All the money-printing has produced a sameness to the financial news that is likely deceptive. The news continues to be almost relentlessly upbeat. I liked it much better in the winter and spring of 2003 when the obvious recovery from the recession of 2001 was loudly doubted on CNBC, with everyone waiting for another terrorist attack or some imminent disaster in Iraq. For example, Nike came out with news after the closing bell today that does not sound "so hot":
Revenue fell 12 percent to $4.8 billion -- narrowly missing analyst expectations of $4.9 billion.
OK; in a "normal" market, a miss on revenues is considered at least as important as a hit on earnings, as it is harder to game sales than earnings. How were earnings:
Nike Inc. on Tuesday reported its profit was practically unchanged in its fiscal first quarter while revenue fell sharply as consumers around the globe limited their spending.
Well, perhaps guidance was really good?
The company's future orders, a key measure for the company that indicates what retailers and other customers are planning to have delivered for the coming season -- fell 6 percent compared to last year.
OK then. Perhaps their Chinese operations are going great guns. Well, maybe not:
Nike's sales fell around the globe, with particular struggles in Europe and China.
Perhaps Nike has a truly new and exciting repositioning? This is what the company says about its revitalization:
Nike executives said while consumers remain cautious, the company is focused on long-term growth and it will push harder than ever for innovative products to help it grow.
"Nike is not a wait-and-see company," its CEO Mark Parker said.
Whatever that means.
Given the above, the ending of the article might be a bit surprising:
Investors were cheered by the company's ability to perform in the tough economy and sent Nike's shares up $2.70, or 4.5 percent, to $62.79 in after-hours trading Tuesday.
It's perhaps churlish to report that before this marvelous corporate report, Nike's stock traded at 20X trailing earnings with a dividend yield of 1.7% with a market value of 1.5X sales and 3.5X book value. The stock was already near all-time highs, only 10% off its 12-month high and over 50% up from its 12-month low.
While of course individuals are responsible for their actions, it is the Fed that is responsible for this manic speculative behavior. Just as most dieters cannot resist that piece of cake on the table, how can a trader resist the chance to "make" 4.5% overnight when that 4.5% equals 4.5 years of the 1% interest rate his/her bank is paying to borrow that speculator's money?
Nike's stock looks as if it is being moved by momentum players. Any remaining shorts are afraid, and the bulls are feeling their oats. Anyone who believes stocks are trading as if Armageddon were in the recent past or might be in the near future is mistaken. For many stocks, the go-go days are here.
Meanwhile, approximate 12-month total returns for gold, the S&P 500 and the long T-bond as judged by the 'TLT" ETF are:
Gold: 14%
S&P: -6%
TLT: 9%.
Remember this is after having lapped the Lehman Bros. collapse.
Copyright (C) Long Lake LLC 2009
Revenue fell 12 percent to $4.8 billion -- narrowly missing analyst expectations of $4.9 billion.
OK; in a "normal" market, a miss on revenues is considered at least as important as a hit on earnings, as it is harder to game sales than earnings. How were earnings:
Nike Inc. on Tuesday reported its profit was practically unchanged in its fiscal first quarter while revenue fell sharply as consumers around the globe limited their spending.
Well, perhaps guidance was really good?
The company's future orders, a key measure for the company that indicates what retailers and other customers are planning to have delivered for the coming season -- fell 6 percent compared to last year.
OK then. Perhaps their Chinese operations are going great guns. Well, maybe not:
Nike's sales fell around the globe, with particular struggles in Europe and China.
Perhaps Nike has a truly new and exciting repositioning? This is what the company says about its revitalization:
Nike executives said while consumers remain cautious, the company is focused on long-term growth and it will push harder than ever for innovative products to help it grow.
"Nike is not a wait-and-see company," its CEO Mark Parker said.
Whatever that means.
Given the above, the ending of the article might be a bit surprising:
Investors were cheered by the company's ability to perform in the tough economy and sent Nike's shares up $2.70, or 4.5 percent, to $62.79 in after-hours trading Tuesday.
It's perhaps churlish to report that before this marvelous corporate report, Nike's stock traded at 20X trailing earnings with a dividend yield of 1.7% with a market value of 1.5X sales and 3.5X book value. The stock was already near all-time highs, only 10% off its 12-month high and over 50% up from its 12-month low.
While of course individuals are responsible for their actions, it is the Fed that is responsible for this manic speculative behavior. Just as most dieters cannot resist that piece of cake on the table, how can a trader resist the chance to "make" 4.5% overnight when that 4.5% equals 4.5 years of the 1% interest rate his/her bank is paying to borrow that speculator's money?
Nike's stock looks as if it is being moved by momentum players. Any remaining shorts are afraid, and the bulls are feeling their oats. Anyone who believes stocks are trading as if Armageddon were in the recent past or might be in the near future is mistaken. For many stocks, the go-go days are here.
Meanwhile, approximate 12-month total returns for gold, the S&P 500 and the long T-bond as judged by the 'TLT" ETF are:
Gold: 14%
S&P: -6%
TLT: 9%.
Remember this is after having lapped the Lehman Bros. collapse.
Copyright (C) Long Lake LLC 2009
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