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I’ve swapped out one anchor position for another. I dumped my DIA puts earlier today and decided to replace them with TLT September puts. As I’ve mentioned, interest rates have been defying their breakdown for months, and for a variety of reasons, I see these as headed much higher. Warsh can’t change that.
About a year ago, it looked like interest rates were on a resolute path lower. Not anymore. Across the board, they are strengthening and starting to creep up, and judging from how sickly the bond market looks, it seems to agree with my own prognosis: interest rates are moving north, and not in a small way.
America’s best days are in the past. Specifically, about twenty-six years in the past. The world is starting to clue in to the fact that America is a failing power, and an increasingly poor credit risk. Thus, U.S. bonds, formerly the pristine gold-standard of safety and security, continue to show signs of weakness.
Although rates on other instruments appear to be firming up and even rising, it seems that mortgage rates are very close to moving substantially lower. Keep an eye on that topping pattern.
It took many years, but Japan’s bond market has finally gone non-insane.
