Don’t tell Julian…

Published on: April 21st, 2018

Raoul thinks that US Bonds are getting close to a buying opportunity. He also updates us on a few of his trades…


  • sh
    said h.
    21 April 2018 @ 11:22
  • RI
    R I.
    21 April 2018 @ 15:11
    The first page indicates that Raoul would update us on a few of his trades; this report is lacking there so perhaps that was just an editorial error. More importantly, how would a stagflationary outlook (CPI to exceed expectations; GDP to miss expectations) over the remainder of the year change your view (if at all) regarding lower yields in 2H18?
  • JM
    Joeri M.
    21 April 2018 @ 15:57
    Regarding positioning, as someone put it on twitter: "This is why I can ignore speculative positioning. There have been $2 Trillion of inflows into fixed income mutual funds over the last 10 years. That dwarfs the $33 Billion in net notional speculative shorts in the 10 year contract." I think it is also very telling that yields didn't decline during the 10% stock market correction. This is the first time since the gfc that yields aren't acting as a safe haven.
    • JM
      Joeri M.
      21 April 2018 @ 17:27
      But in these years before the gfc we didn't have the DeMark top signals, and we do have them now. I agree we are at a critical juncture and I am looking forward to see how this is going to play out. Thanks Raoul for the piece Raoul.
    • JM
      Joeri M.
      21 April 2018 @ 17:17
      Also, if you look at the chart Raoul uses on positioning of fund managers, it seems useless. They were extremely underweight bonds for three (!) years before the gfc.
    • JM
      Joeri M.
      21 April 2018 @ 16:24
      I went back and checked the chart of the us household allocation to bonds that Raoul used in a piece last year to suggest positioning is low. According to that chart it is indeed low, however, during the late '60s and '70s, positioning was even lower, and we all know what happened to yields in that period.
  • BR
    Bernard R.
    21 April 2018 @ 21:02
    So Julian is right...until yields approach 2013's high which on the UST 30 yr were 3.974%... Last Friday the UST 30yr reached we still have a lot of work on the downside before reaching that target. Then heck yes...I agree with Raoul that a quasi 4% on a 30 yr UST could be the opportunity of a lifetime. I am pretty sure that even Julian will agree with that. Yes I would love to buy TLT around its 2013 low of 102ish. You guys are GREAT! Thanks for your fantastic hards work!
    • BR
      Bernard R.
      22 April 2018 @ 12:47
      Oil prices might be the key to the next major turn in UST prices. Combine reports that the glut is not as bad as it was as oil tanker storage is reduced and most importantly ...the timing of the Aramco IPO. If oil prices starts to drive inflation/UST prices, then the Aramco IPO might become a turning point and a buying opportunity for bonds.
  • GM
    Gerald M.
    21 April 2018 @ 21:06
    What happened to the update on open trades as stated in the opening comments? Please don't leave us hanging. Regarding bonds, this piece is a very convincing argument. Timing is critical though. Raoul has been looking for yields to fall since his Eurodollar recommendation which hasn't worked. Is this time different? It's had to tell. We have two smart people with opposite views leaving us subscribers to wander in between. ~\( '-' )/~
  • SR
    Steve R.
    22 April 2018 @ 00:00
    I don't think you can say the ISM has topped out just yet, it's too early to tell, you've only had one print lower than the last, and historically it can go higher. The Prices component is still rising and can continue to do so for quite a while after the ISM tops out if you overlay the Prices component on top of the ISM itself over the past few decades. Oil is also continuing to rise with its inherent inflationary pressures across the board (as we head into the US driving season). And look at the price of Lumber - huge inflationary cost for housebuilders, and its still going up with no sign of any change of trend (yet). Don't get me wrong, you could well be right, but (IMHO) I believe the inflation story could easily run for a few more months before any potential change because as you say inflation is a lagging indicator. My own personal conclusion is, I think Julian is right for the next couple of months, and then you could well be right thereafter. I personally feel there is the potential for a sharp spike in yields before we get any reversal just to wrong foot the market. As you often say, it's all about your time horizon. Would be interested in any updated views on USD and Gold - as according to Peter Brandt, gold is at a very important inflexion point, plus Silver could be about to break higher.
  • MW
    Marco W.
    22 April 2018 @ 03:01
    Very likely Julian and you are both right. Bond yield surge past 3% towards 3.5% in Q2 then reverse to 2% in recession. Starting this year secularly it is "every nation for itself", the deflationary effect from technology and globalisation will reverse and go into secular decline. Less deflation will benefit the elderly (i.e. savers). The demographics secular deflationary trend will decrease (if not reverse). Probably secularly the bond bear market has started.
    • RP
      Raoul P. | Founder
      23 April 2018 @ 11:19
      Yes, I was being cheeky but that is a scenario that we would both agree on.
  • CS
    C S.
    22 April 2018 @ 12:23
    Not wanting to seem a 'gold bug', and also not wanting to imply there might be more not to tell Julian about than first meets the eye, but how would you expect gold to fair given the above scenario, Raoul? Is the market shorter 5 year Treasuries, or 20+ year Treasuries, and does this matter?
    • RP
      Raoul P. | Founder
      23 April 2018 @ 11:18
      Gold will eventually do well. It just requires a weak dollar and a weak economy. I used 5 yrs because the 20+ is mixed in with a lot of curve bets so it confused the picture.
  • JB
    Jason B.
    22 April 2018 @ 20:02
    Raoul, while the ISM has just started to tick downwards, Jeff Gundlach showed a pretty good correlation with the ISM leading CPI by 18 months. If that pattern holds, we would see CPI rise for the next year and then tick down like the ISM is now. I'd be very curious to know your thought process there. Thanks, Jason
    • RP
      Raoul P. | Founder
      23 April 2018 @ 11:17
      The point being is that it is expect and thus mainly in the price.
  • MG
    Miguel G.
    23 April 2018 @ 11:59
    LMAO love the title!
  • RP
    Roberto P.
    23 April 2018 @ 20:44
    Raoul, I think a missing fact in your analysis for GT10 going higher is USD weakness. When Trump got elected USD and GT10 went up breaking the pattern USD up GT10 down because higher USD was deflationary. (So ttrong economy was priced in at that moment). Then in the first half of 2017 we saw core PCE going down, so USD fell and rate fell. (Deflation again in the market). But after a little bounce in USD, in october 2017 begun another leg down for USD, but this time rates went up. My point is that global market are concern about US fiscal deficit and are avoiding USD despite record diferential rate between US and Europe or US and Japan, This would lead to more USD weakness, higher US rates and higher commodities prices without necesserily have wage increases. I think a more stagflationary outlook.
    • CY
      C Y.
      24 April 2018 @ 14:23
      Roberto I have no opinion on USD but as a trader I can tell you that at the end of this month for the very first time since early 2017 I'm finally buying the USD. I'm a rules based investor which I think helps one avoid getting glued to one's opinions. Just a thought that what has been occuring might be coming to an end with dollar weakness.
  • CY
    C Y.
    24 April 2018 @ 14:24
    I loved this piece. I've been waiting for you to take a crack at Julian as you've held your tongue in conversations between the two of you. I love the idea of a back and forth dialogue even when you don't agree.
  • JJ
    Jay J.
    15 May 2018 @ 21:22
    Raoul, Did spike in yields today change your thoughts on this set up...The 10-yr. jumped about it's previous high in 2014, so does this invalidate this trade idea for you?
  • DY
    Dmytro Y.
    17 May 2018 @ 05:25
    Hi Raoul, I just shorted TLT on the advise from Julian :) Jokes apart, rates are 3.10 today. it broke out of the trend line. are you changing your view on this advise about rates (probably not, seeing your Demographics view and video on RT)