Why I’m Still Hot for T-Bonds

What are the most pressing economic concerns of the day? I was asked for my opinion on this recently by SDR Future, which bills itself as “the first full SDR service for retail investors”. Here are the three questions they asked, along with my answers:

What are you currently noticing in the markets based on your experience and analysis?

Because my instincts have occasionally failed me at important turning points, I have come to rely increasingly on a proprietary forecasting system that I call the Hidden Pivot Method. It provides no basis at this time for asserting that a Mother of All Tops is imminent. However, my instincts are screaming otherwise, and so I split the difference, shorting every promising intermediate-term rally target that I am

able to identify. Right now, that means shorting the E-Mini S&Ps near 2138.50, a Hidden Pivot resistance of major degree that coincides with another of somewhat lesser degree at 2138.00. Together they imply “double stopping power,” and this will allow me and my subscribers to lay out speculative shorts risking as little as five ticks ($62.50) per contract on the trade. I don’t expect to catch THE Top, but it’s hardly inconceivable if I keep trying. It costs me little to do so in any event, especially since a tradable pullback from, in this case, 2138.50 is a good bet on its own, regardless of whether the pullback gives way to a bear market. Of course, I trade the rallies as well, since any target that looks juicy enough to short will offer an equally juicy opportunity to get long on the way to it.

Is there anything that is particularly worrying you – which could affect the stability of a retail investors portfolio, whether professionally or personally managed?

Over the last several month, the supposed smart money has massively unwound a long T-bond position on the assumption that the Fed will raise rates. I have been predicting otherwise – so far correctly for several years. I continue to predict – make that, shout from the rooftop – that the Fed will NEVER raise rates. I am being only somewhat facetious when I say this. For no matter what the Guvmint’s spinmeisters would have us believe, the supposed economic recovery – by far the weakest of the post-War period — will not abide even a token rate hike.

My strong gut feeling is that the massive unwind of T-bond positions will reverse very sharply when: 1) the bull market in U.S. stocks ends; and/or 2) something, anything goes badly wrong in Europe; and/or 3) something, anything goes badly wrong in the geopolitical world; and/or 4) “flight-to-safety” re-emerges as an investment theme; and/or 4) renewed strength in the dollar demonstrates to Fed believers and other fools that the central banks, even acting in concert, cannot counter the deflationary force of an imploding quadrillion dollar derivatives market.

Of course, if you believe, against all of the possibilities listed above, that we will instead have inflation, then go ahead and short the dollar and T-bonds aggressively. But don’t say you weren’t warned.

A run down on what benefits Rick’s picks can offer to those who would like to better navigate the current and upcoming market volatilities for the stocks and bonds component of their portfolio?

I am best known for the unusual accuracy of my short- and intermediate-term price targets. I offer them each day for such popular trading vehicles as the S&Ps, Diamonds, T-Bonds, precious metals, tech stocks, equity options and commodities, most particularly crude oil and natural gas. However, my macro forecasts have been significantly better than most because so many pundits and gurus are obsessed with the wrong set of facts — if not to say, the wrong threat. For it is not inflation that will do in the global financial system, but deflation and a strong dollar. Does this seem counterintuitive? If so, then understand the incipient power of deflation by reducing it to its chief symptom: an increase in the real burden of debt. Anyone who believes that debtors will be allowed to evade this burden via the mechanism of hyperinflation is ill-prepared for what’s coming.

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