• 15 hours Why The Gold Rally Flatlined
  • 21 hours The Uranium Sector Can’t Catch A Break
  • 2 days Upcoming Fed Meeting Has Investors On Edge
  • 2 days Global Gold Sector Outlines Responsible Mining Principles
  • 3 days China’s Giant Vampire Fund Loses $120B
  • 3 days McDonalds To Roll Out Robot Drive-Thru Clerks
  • 3 days Savvy Investors Are Betting Big On This Little Data Company
  • 4 days How The Government Is Wasting Tax Money This Year
  • 4 days Supply Concerns Halt Expansion On Tianqi Lithium Plant
  • 4 days The World’s Biggest IPO Is Almost Here
  • 5 days The Relatively Of Money And Happiness
  • 5 days Wall Street Unfazed By Recession Fears
  • 5 days SoftBank Urges WeWork To Pause IPO Plans
  • 6 days Anti-Aging Market To Hit $55 Billion
  • 6 days JPM, Morgan Stanley Take Advisory Roles In Aramco IPO
  • 6 days Are Bonds In A Bubble?
  • 7 days The Unknown Media Giant Taking The World By Storm
  • 7 days From Millennial To Millionaire With One Simple Trick
  • 8 days The 5 Most Expensive Art Pieces Ever Sold
  • 8 days Are Gold Stocks Overbought?
Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

  1. Home
  2. Markets
  3. Other

Bonds: 90% of You Are Herding

90% (my low-balled estimate) of you, the investing public, are herding when it comes to the bond market. You may not know it because the overwhelming psychological atmosphere is to reaffirm, not question peoples' behavior.  That is what herding is; a comforting feeling of going with the flow and being at one with your environment and the greater zeitgeist.

Now, please don't be offended by the title; you dear reader may well be one of the 10%. But out there in the financial investment realm, they are herding, BIG time, as bond yields are expected to continue rising, because... media; because... "Great Rotation, part 2" and because... the story of epic secular changes and the chance to be early and clued in to a great new market phase are so alluring.

Bonds may well be about to change to bearish, but yields (which go in the other direction) have not even hit the points that have limited them historically, so why not tap the brakes on the hysterics until such time as the great secular change actually takes place? I mean, just last summer 90% of 'you' were in full belief mode about NIRP. Think about that. You were buying the Zero and Negative interest rates story hook, line and sinker.

30-Year T-Bond Sentiment

You are now being tended by the financial media, which has never given you a bum steer before (ha ha ha... ) to believe that something that has not happened in decades is on the verge of happening now. I have reason to believe you may even be right, as that 'all-in to the NIRP!' side of the boat last summer was indeed a spectacularly emotional, potential bull-ender.  But... the public is getting all in on the rising yields story even as the 'limiter', AKA the 100 month EMA, on the 30 year yield is rapidly approaching.

30-Year Treasury Yield 1980-2016

Don't get me wrong; I believe that the bond market bull should end.  Just look at this chart and tell me how good a job the bond vigilantes have been doing over the last few decades or so. The answer is that they haven't been doing their job, because they don't exist.

30-Year Treasury Yield and Price 1980-2016

The vigilantes were a myth and have not been a reality since the Volcker era. Indeed, the expansion of credit has funded increasing prices every step of the way and through multiple regimes of both political parties.  This has been a mechanism, not a market and the mechanism has used debt to create inflation. Trump? I believe those talking about Trump as an agent of change are full of their own dogma and bias. Trump will bring some changes, but he is setting up an administration peopled by the usual suspects and the changes are not likely to benefit the 'little guy', who put him on their tired shoulders and thrust him into power.

Here is the thing; when you look at the chart above you'll see that the secular bond bull has gone hand in hand with rising consumer prices. It has also gone hand in hand with rising asset markets. Everybody consumes, while it is only the investor classes that take advantage of rising asset prices. 'Rich get richer, poor get poorer' thy name is debt-fueled inflation; which will be deflated one day, especially if yields continue to rise, thereby cutting off the funding mechanism. The disenfranchised have voted for real change and the bond market is playing along so far.

The question is, will the administration, headed by a man who has over the course of his adult life leveraged debt for great wealth, actually oversee the secular changes that so many seem to think are at hand? Again, I am not at all saying it won't. But two things here...

  1. Be careful what you wish for, because it just might come true and...

  2. A line that has not been crossed in decades has still not been crossed.  Looking at the top panel of the chart above, the bond bull market is fully intact at this writing.

 


Subscribe to NFTRH Premium for your 30-45 page weekly report, interim updates and NFTRH+ chart and trade ideas or the free eLetter for an introduction to our work. Or simply keep up to date with plenty of public content at NFTRH.com and Biiwii.com. Also, you can follow via Twitter @BiiwiiNFTRH, StockTwits or RSS.

 

Back to homepage

Leave a comment

Leave a comment