Buffett says U.S. Treasury bubble one for the ages

I day trade the treasuries ... never hold long term positions.

I don't think Buffett is right about this. It seems like price action is showing it to be coming off its highs.

The 10-Year Treasury Note yield has been steadily creeping up.
 
Quote from LincolnArmy:

Granted Buffett has made a shitload of money and was one of the legends of the bull market. There is no knocking his record, until the stock market turned.

And here we are. How bad has he been over the last 18 months? How wrong has he got it? About as wrong as Jim Cramer? As wrong as stocktrad3r? Has anyone lost any more money than Buffett? Well I'm sure there are a few contenders but the fact is that he has been spectacularly bad. Phenomenally bad.
Wasn't he calling a bottom 3000 points ago?


Do you trade treasuries harkm? After the price action at the end of last year I called it a bubble, but right now it sure doesn't feel like one.
Time will tell, but if you are so confident that Warren Buffoon has finally got it right, then put your money where your mouth is.
No, please don't -I suspect you'll get ripped a new arsehole.
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Give me a break. Yes, I trade treasuries via TBT. The key word here is TRADE. I am not married to it. I am only agreeing with Warren Buffet on this subject. I believe the jig is up but can change my mind like any trader does. And please get rid of the "put your money where your mouth is" rhetoric like you are some big swinging dick trader.
 
Quote from scriabinop23:

I've the counterpoints here:

http://acrossthecurve.com/?p=3451#comments

and..

http://scriabinop23.blogspot.com/2009/01/buy-treasuries.html

The 'foreigners control US treasuries notion is overused' and I believe their impact on prices is perhaps overestimated, versus the alternate of who would likely be buying treasuries if we weren't a net importer from China and Japan. If we weren't buying foreign goods, those dollars would be staying inside the country, savings would be higher, economic activity lower, and thus we'd be able to buy more treasuries internally. These scenarios don't operate in a vacuum... There are counteracting forces to every single trade balance (or imbalance).

Also -- trade deficits with China where China buys treasuries represents deferred buying of US goods. Eventually they will use that money (versus sticking it in treasuries) to purchase goods in the future. Otherwise, besides political leverage, their reserves in US dollars are worth very little.
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Forget about foreigners for a minute. What happens to bonds if inflation ticks up just a little. What if oil rises 10 dollars in a week? I believe bonds are factoring a never ending deflation(like Japan) and imo that just isn't going to happen.
 
Quote from harkm:

Are you long treasuries? I notice you are protecting this position in most of your posts.
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Actually not... (In fact, quite the opposite) I am long stocks, long TBT, and long precious metals. None of these are short term trades.

I agree fundamentally long term. Being short treasuries here = long the stock market... Going long TBT here is a MAINSTREAM view.. It is so in vogue, any 'trader' worth his salt should be suspicious. And given most people don't understand the nature of trade/savings/etc flows, I wouldn't trust mainstream.

that said, I'm the type of guy who'd buy the s&p here because it seems to present a great 'value' since operating earnings are still around $50 for 09 (despite guys like Mauldin using the $28 as reported.. which is a distortion since writedowns won't continue forever and someday will become writeups) .. and long term yields being at 3% = 33 PE justified. The guys who say 10 PE is justified forget last time stocks did that, bonds of all maturities were at 15%. Dumb dumb...

But hey, that makes a market. And as well, makes me a long term buyer of S&P a fool, right?

But as we've seen, demand (for assets) is precisely the problem.. I'm personally straddling the fence... have some new variable debt (under 3%) I assumed when buying some really awesome cashflowing foreclosures -- and am offsetting that risk by being long assets that should do well in a real inflationary environment. I can lock long at any time .. So the TBT is a meaningful hedge until I've locked, and a proxy stock market long...

But if I had money to lever up on something in the intermediate term (3-6 months) (which I've given up on... I'm now relegated to be an 'investor' since in the last few years I've not figured out any meaningful way to make $$ short term), I think 30 yr is going back to 2.5%.... so ZB calls are what I'd be buying...

The news out there is horrible and the CB's of the world are too slow to print. There is a ton of cash 'on the sidelines'.. as they say. And who wants to buy long term eurobonds when some say Germany is about to threaten the euro by printing money to aid eastern europe ? (and/or it is near its demise.. showing failure with respect to satellite nations)

Gold makes the most sense... The US treasury 'bubble' is nowhere near that. otoh, I think short JGB long ZB is a great trade.
 
Quote from scriabinop23:

Actually not... (In fact, quite the opposite) I am long stocks, long TBT, and long precious metals. None of these are short term trades.

Go figure that one out.
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So you are just disagreeing with the overused term 'bubble'? I am also long precious metals but I just can't get this bond situation out of my mind. Clinton goes to China and pretty much begs for the status quo and Geitner is labeling them a currency manipulator? The US is borrowing more than ever and at the same time China isn't going to have the same USD to invest? Something has to give.
 
Quote from harkm:

So you are just disagreeing with the overused term 'bubble'? I am also long precious metals but I just can't get this bond situation out of my mind. Clinton goes to China and pretty much begs for the status quo and Geitner is labeling them a currency manipulator? The US is borrowing more than ever and at the same time China isn't going to have the same USD to invest? Something has to give.
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Something will give. The fed will monetize (and they have a license to with the dollar's strength) to offset what Americans and the world don't buy. And China ain't selling... The only thing they've sold are agencies (which they just shifted into treasuries).

But I tell you the fundamentals are setting up to increase demand... We need another $2T TARPed (funded by money creation, not government bond creation) to fix our problem. TALF will help, but won't fix it.

My assertion is that it will not be an epic blowup everyone is talking about - not until employment is well on its way towards 5% again.

PS: people talk as if government deficit spending just leaves the economy. Foolish. Those government salaries and profits from government dollars spent become savings, savings to buy treasuries (whether it be by pension fund managers, retail, etc) -- or to buy the stuff that is deflating right now.

When people start buying the presently deflating stuff with their savings (creating inflation), the goal is achieved and we can turn down deficit spending... Self fulfilling.
 
Quote from scriabinop23:


When people start buying the presently deflating stuff with their savings (creating inflation), the goal is achieved and we can turn down deficit spending... Self fulfilling.
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Even at a 20-30% decline in real estate prices, we are still no where near true market values. These valuations were driven up in a parabolic manner, the market gapped down, and you are left with an illiquid market. Once we accept that foreclosure valuations are real market values we will bottom.

The same principles can be applied to numerous other asset classes.

The way out of this is to create an atmosphere that encourages savings. Until this happens, capital markets are fubared.

Once our creditors obtain the proprietary technology they want they will kick us to the curb.

We are still reaping the benefits of being the world's reserve currency. Who knows when this paradigm shift will take place but when it does it will be too late.
 
Don't forget that at the same time we're planning to issue trillion after trillion of new debt, this administration is also planning to raise taxes on investment and savings and inhibit our future growth, which is to say our ability to pay the debt back.
 
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