•  Unconstrained bond funds promise gains in any rate environment
• $21 billion in redemptions show investors aren’t convinced yet

The 2017 Bond Strategy Backed By Goldman and BlackRock

For the world’s biggest bond managers, 2017 might just be the year that unconstrained funds finally live up to the hype.

Although the bond funds — long marketed for their potential to shine in any environment — have failed to deliver consistently over the years, bond managers are convinced they’re about to have something of a moment. Donald Trump’s election has reignited the prospects for inflation and growth both in the U.S. and abroad, which will likely lead to higher interest rates and spell the end of the bond market’s three-decade bull run.

…read more HERE

Nothing makes sense anymore. The markets keep going up like it is going out of fashion Trump’s honeymoon period or not. Trump might be getting a strong cabinet around him and have good ideas to stimulate the economy…though you first have to spend money (increasing debt) before you make money, which takes time.

….continue reading HERE

…related from Martin Armstrong: 

Bewared of Bond Funds

We are entering a phase of rising interest rates, so bond funds will do poorly. We are not yet at a stage where U.S. government bonds would default or be swapped. Therefore, my recommendation has only to do with rising rates. What you should do is stay short-term, like 90-day paper or less, be it corporate or government. This is just an interest rate play moving into 2018.

As we move into 2018....continue reading HERE

….related: 

Treasury Bonds Are ‘Contrarian’ Mega Bullish

“In short, markets were overly skittish into the election and the big flush on election night cleared the way for what the presidential cycle forecast should happen; and that is for the last 2 months of the election year to be bullish.  And here we are, complete with dumb money eating up stocks and puking out bonds.”

It is the last sentence that is of interest for this week’s eLetter.  Overly sensational subject line aside, long-term Treasury bonds are making a contrarian setup when viewed from a sentiment perspective. 

Sure, T bonds are in bearish technical trends and appear to be a fundamentally unsound asset class, given the decades old debt-for-growth regime and the would-be inflationary plans of the new administration; but when looking strictly at sentiment, long-term Treasuries are a ‘buy’ and a good, risk ‘off’ way to hedge stock positions while paying out monthly income (unlike shorting stocks). 

Let’s first look at public sentiment toward the 10 year Treasury.  Do you remember last summer?  That would be the time frame that global NIRP (negative interest rate policy) was being promoted in the financial media.  What happened last summer?  Why, people herded into Treasury bonds in a risk ‘off’ frenzy, bought bonds at ridiculously low rates of interest and then got blown up for their herding behavior.  The bond has dropped ever since as the new promotion, rising interest rates, took hold.  Last summer was a time to get risk ‘on’ (during Brexit) as we noted at the time.

That is what the dumb money is doing.  Now what about those considered the smart money, the Commercial Hedgers?  Why, there they are taking the other side of the trade once again.  After positioning net short during the NIRP/Brexit hysterics, they are now in a strenuously bullish alignment:

The above comparisons not only work for the shorter-term, post-NIRP/Brexit period but they also hold true on a longer-term scale.  Today the media are promoting the “Great Rotation, Part 2” (out of bonds and into stocks) once again, and the public is sucking on this story as they do all such stories coming out of the mainstream financial media.  In 2013, something very similar happened as the media promoted the first “Great Rotation”.  Looking at the late 2013 time frame on the graphs above, you see that dumb money took the bearish bait and smart money was positioned for a bullish outcome.  The 10 year bond then rallied for 2 years out of that contrary setup. 

Last week I made a post at nftrh.com showing the media in full promotion mode, as it cherry picked one lone trend line drawn by Louise Yamada and blared to the world…

The green dotted line is the ‘Yamada line’.  As I noted in the post, the bond bull may well have ended last summer as every last dumb money unit bought the bull during the NIRP hysteria.  But technically, on this big, multi-decade view of the 10yr yield, the bond bull is not over.  It is 100% intact and will be intact until the yield a) exceeds the (red) monthly EMA 110 (currently at 2.69%), which has limited all previous rises in yields and b) makes a higher high above the late 2013 “Great Rotation” promotional high of 3%. 

Bottom Line

While under great price pressure on shorter time frames, the long-term bond bull market is 100% intact, technically speaking.  The NIRP buy-in did seem like the type of sentiment event that could end a big bull market, so we can remain open to that outcome.  But first, it appears that legions of dumb and smart money are aligned for an interim bullish outcome in Treasury bonds. 

If the above is the type of analysis you seek, consider that the bond market is just a small slice of the full range of markets covered each week in the well-rounded NFTRH premium service.  Remaining on the right side of policy-stoked, dynamic markets requires consistent viewing from many different angles, while cross referencing different asset classes and indicators. 

Consider an affordable premium subscription to NFTRH.

“By the way, you do good work.  Like your service.  Hope you keep it going.”  –Charles B  11.30.16

Biiwii.com and NFTRH.com do not recommend that any trading or investment positions be taken based on views expressed in this eLetter. If you speculate or invest it is suggested that you consult a financial adviser qualified in your area of interest.  See full Terms of Service (ToS) above.

…related: Trump’s Financial Revolution!

Trump’s economic plans will increase national debt!
A Ticking time bomb!

Currently, U.S. debt stands at a mammoth $19.8 trillion and will continue to increase under President-elect Trump considering his lenient tax cuts and plans for infrastructure spending:( http://www.usdebtclock.org/).

The proposed tax cuts, inclusive of accrued interest and macroeconomic effects will increase the national debt by $7 trillion, over the next decade, and by $20 trillion within the next two decades, according to Forbes. There are no details on how the President-elect plans to finance these tax cuts.

‘Protectionism’ has no winners!

President-elect Trump has radical plans to tear long-standing trade agreements like NAFTA and levy taxes on Chinese imports, etc.

However, in a highly global world, every action that President-elect Trump takes will have an equally strong reaction in an already highly leveraged global economy which is already struggling with anemic growth. This global trade war is unlikely to benefit either the U.S. or the global economy.

It is not clear whether the U.S. public embrace paying higher prices for imported goods: Economist. After all, offshoring has also given a boost to American corporations which have managed to bring down their cost of production; (i.e.:  costlier iPhone is most likely to reduce the demand for the product, both at home and abroad).

Investors have taken cheap money and used it to buy stocks and property.  The “real economy” is where the money was intended to go. Trump economic disaster is a train wreck waiting to happen.

I must remind you that nothing has changed in our economy since the Trump market rally: (http://www.zerohedge.com/news/2016-12-09/dont-be-fooled-trump-rally-not-sign-economic-health).

President-elect Trump has been critical of Chairperson Dr. Yellen views as she understands that the economy cannot afford higher rates. The economy will collapse if monetary rates rise, as was evidenced over the past few years. Low rates will continue against the expectations of the experts who are calling for a very sharp increase in rates. When President-elect Trump takes office, he is going to need FED Chairwoman Dr. Yellen on his side, however, he has yet to realize this!

Businesses have not invested large amounts in new capital projects but rather have invested only in buying back their stocks. In addition, they hire labour only on a part-time basis. As there is nothing particularly ‘meaningful’ supporting the markets, it is my opinion that the rise in stocks and property represents a “ticking time bomb”.

The world has been living in a low-interest rate environment for many years now. This environment came about following the global financial crisis of 2008 and has dominated global money transfers. Consequently, it must maintain that status quo. If interest rates rise, the continued huge sell-off U.S. Treasuries and the international bond markets will continue in anticipation of higher yields.

Without knowing the finer details of the proposed policies, the stock markets have run up far ahead of themselves while leaving a very small margin of error!

Therefore, it is prudent for you to be ready to buy gold, in large quantities for the long-term.  The bullish seasonally for gold will begin next month in January of 2017.

Gold is one of the best solutions that can maintain the world’s stability as well as your own future wealth when things start to crumble. Follow my lead as the markets oscillate through 2017 and beyond.

Also: Key Points From Fed Rate Increase