Abundant Options: Small Risk-Big Reward

“The world is big and I want to have a good look at it before it gets dark.” — John Muir

The BIG Idea… (Yes, global macro is back!)

The short-immediate term bond rally and how we take advantage of it.

Why I keep saying that this will be short lived is because inflation is just under the surface. This is a cycle. This does not mean that bonds wont ever rally again. I just think it will be a long time before we see zero rates again.

Let me illustrate.

From the civil war in the 1860s. To the wars to get a central bank in the united states in the early 1900s bond yields have been on a 40(around 40) year cycle.

At the end of WW2 in the 1940s yields bottomed and then we saw a blow off top in 1982 at the height of stagflation. Since 1982 we have moved down year after year until that major low in 2020. If you were one of my subscribers back then, you got to see me call that in real time. We said that we saw that top in bonds for the next ten years. You guys know me very well, when the hell do I say things like that. I NEVER DO. Except for when we have a cycle and universal model that we follow…

What is even more interesting is that the cycle is following the 1970s cycle perfectly. This is around the time that everyone starts saying that we won the war on inflation and bond yields start to fall and the Fed follows.

Globally, monetary policy is easing.

The dollar falling so swiftly is also easing conditions.

The Dollar is breaking down hard here. That 101-99 zone is one that we have been targeting for awhile. The game changes when we break down past that level. If we don’t see a bounce here, the dollar has a lot further to go.

If you have not taken advantage of our currency trades, you might want to look in to that one if we break that level. The dollar could move down to the 92-94 zone.

Here’s where it gets fun!