Looks like we sell now and buy back in Nov. Sornette may be right......
For Those Who Wave Lanterns At Runaway Trains...There is simply no question in our minds that the severe collapse in bond prices over the past month and one half is a reflection of the multiplicity of straining global financial and economic imbalances that exist at the moment. Imbalances that not only reinforced bond prices on the upside, but are now negatively influencing and reinforcing downside price action. Without debate, current bond market action is nothing if not a reflection of the highly levered nature of our financial markets. Financial markets that learned to increasingly be accepting of leverage in what was a one way street fixed income market of the past two decades. A street that may have just encountered a dead end. At least for a time. The bond market action of the last six weeks tells us that global and financial imbalances are knocking on the door of reconciliation. These imbalances are screaming at us that they cannot coexist indefinitely. At least not peacefully, anyway. We have the feeling that if no one is listening, they'll just knock louder as we move ahead.
But what has really been more surprising to us than not is that the significant events taking place in the globally important and sizable US fixed income markets are not creating flashing red neon screaming headlines. No covers of Business Week, Fortune or Time. Instead, such fountains of knowledge as financial Comedy Central (CNBC, etc.) have alternatively been intensely focused on the recent corporate earnings release period. After all, what could be more important to our lives than companies potentially "beating the earnings estimates", right? Three years into one of the worst equity bear markets of a generation, we are certainly well aware of how meaningful beating analyst estimates are to our collective financial future. For ourselves, the events that have transpired in the Treasury market over the past three to four months simply epitomize and reflect the incredible imbalances we face in the current global financial and economic environment of the moment. Action in the Treasury market is telling us that these imbalances may be approaching a period in which extremely heightened price volatility is suggesting that the beginnings of imbalance reversion on many fronts may be upon us right now.
