Join our Larry McDonald on CNBC’s Trading Nation, Wednesday June 1st, at 2pm.
Pick up our latest Bear Traps Report here.
Wall St. has been lecturing us for two years to stay away from bonds. They foolishly have been far too focused on the U.S. economic outlook, as well as the Fed’s lofty (bogus) assessment as to the path ahead.
As we’ve stressed since 2013, the global economy is driving the U.S. interest rate bus, not the Fed.
Global GDP
Outside the USA: $61T
Inside the USA: $18T
The bottom line U.S. economist keep getting wrong comes down to simple global math. If $18T is growing at 1.8% to 2% a year, and $60T was growing at 5%, now 2.5%, the growth slowdown globally far over-powers the U.S. Obviously, demographics are playing a large roll as well as developed markets are aging, more savers than ever.
Pick up our latest Bear Traps Report here.
Today’s $9T of negative yielding bonds are creating a panic buy into U.S. Treasuries. As you can see below, large speculators are more bullish U.S. government bonds than ever, to us this is a near term sell signal.
In a world of negative interest rates, U.S. debt looks like a high-yielder. Hedge funds and other large speculators boosted their net long positions in Treasury Bond Futures as of May 24 to the highest level since 2005, a report from the Commodity Futures Trading Commission showed. Treasuries with maturities of 10 years and longer have returned 8.5 percent this year as inflation gauges remain below the Federal Reserve’s 2 percent target. – Bloomberg
Pick up our latest Bear Traps Report here.
