Who are the idiots buying bonds for 1% interest?

[The Big D]

Hmm, something funny happened in the 2s today

Something to note: the 2s have outperformed the 10s on the short side - the 10s are above the 8/11 highs, whereas the 2s are near the 8/11 lows. Taking the position in 2s rather than 10s captured an additional day's worth of movement. This is because there were still non-speculative buyers for the 10s (as pensions etc. move out the curve) but the non-speculative buying for the 2s died two weeks ago. And for all the unjustified crap I got in this thread for taking my position before the market broke, I got a better price than I would have had I waited.

As previously stated, we now have a contract full of speculative longs and non-speculative shorts intending to deliver. And every single long initiated in the last week is now under water.

The ball is now rolling.

 

[Kassz007]

Quote from Martinghoul:

For the record (as mentioned before in another thread), I believe bone is perfectly legit. While I am not one of his clients and I haven't done any due diligence, what he says and how he says it suggests to me that his background and track record are, in fact, as he states.

For what it's worth, I would agree.

 

[The Big D]

Also, if you compare the chart for the Sep 2s vs. the Dec 2s, you will see a substantial contraction of the spread over those two weeks. Note the Dec 2s make new highs both today and yesterday, whereas the Sep 2s did not. That spread should in essence stay fixed in the absence of rate changes, and yet rates are higher now than they were when I opened the position and the spread has still steadily closed.

In other words, there now even more evidence for my comment that speculative longs are being rolled forward, but shorts are not (because they're not speculative). While this is not actually that relevant to the outcome of my trade, it makes what's happening MUCH more clear.

 

[bone]

The incredibly difficult feat about pure market timing is that two very powerful elements - time horizon and capitalization, really conspire against the trader. For me, at least, my preference would be to initiate a short once there is a couple solid daily closes below that trendline. I know you don't like to hear about experience and you hate my guts, but honestly, if you can exchange some range in return for better risk/reward skew then in my book that's the smart money.

Jack Schwaeger did not do the freshly initiated or egocentric any favors. You can burn through a ton of capital timing a market.

 

[The Big D]

Quote from bone:

if you can exchange some range in return for better risk/reward skew then in my book that's the smart money.

If that were indeed the tradeoff, I would wholeheartedly agree. But the whole point of this trade was

1) the lack of non-speculative buying
2) the speculative frenzy had already put all the speculators long

and those two effects together put in the top. By waiting for both to occur, risk was (and still is) very contained. Were I to wait longer (say, entering my position at today's close), the distance the position could move against me due to the whims of speculation would actually be larger. The longer I waited, the worst the risk/reward would be.

 

[bone]

August 25: "and those two effects put in the top"

August 19: "I expect the recent trading range plus a little to serve as a measure for the move down so I would expect we might break below the late July lows. Call it 109'080 as a target. Timeframe is before expiration. If it does that really fast (say, by the end of the month), I'd expect a second similar move. Conversely, if we start trading above Weds/Today's highs, the trade is invalidated."

Well, either your trade has been invalidated per your 08/19 manifesto, or every day this thing rallies is the top.

 

[bone]

When you print a couple of good solid closes below that trendline, then by all means please declare victory. But that condition has to be satisfied before you have the legitimate standing to having called a top. You can't make broad macroeconomic directional market calls, wax eloquently about rates, (what's a few hundred basis points between friends) and then declare victory when the market comes off a few tics. The good news for you is, that will indeed happen at some point in the future.

 

[The Big D]

If you want to keep arguing this, you're just going to keep losing. But by all means go long. You're being offered a nice attractive price to do so now.

Maybe someone will come along and buy some coaching so you can put on the trade

 

[bone]

Substantial long September positions getting rolled into December in the exchange-supported calendar spread. This is the most cost-effective way for large positions to extend their exposure in the marketplace. This spread does not trend sharply lower if the September longs are substantially liquidating without taking a long December position.

 

[The Big D]

For someone who claims to be a "spread professor" it's rather embarrassing how poorly you grasp what's going on here.

That long is waiting for you, just as soon as you find some capital