Friday, December 19, 2008

The Latest Bubble...

I've got lots of work to do in terms of formatting this blog, writing up the background of "Rotten Investments", putting together a blanket disclaimer page, etc., but I wanted to at least kick out an observation of what is the most recent financial asset bubble to grace our markets.

The yield on the 30 year Treasury bond is now flirting with 2 1/2%. This is the BEST opportunity to short the Treasury bond I have ever encountered in my two+ decades of working in the securities industry. And I can't think of a time when I've seen such a great opportunity to take a short position in a security with such little down-side.

This bet may take a while to pay off. I don't know when the return to normalcy in our markets will materialize, but when it does, Treasuries on the far end of the yield curve will not be trading with yields of 2 1/2%. What we're seeing in this market right now is an incredible set-up for a fixed income crash, probably before the summer of 2009. And when it crashes this time, it will dwarf the bond market crash of 1994.

*Disclaimer: I am short 30 year Treasury bond futures.

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