What Do ‘Warning Shot’s Look Like in Financial Markets…Today! …and the Bondocalypse!

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  • on February 25th, 2013

The markets have climbed a beautiful ‘Wall of Worry’ since the death of Europe and the death of Facebook and Social Media last summer.

Lately we are getting big big warning signals that investors SHOULD worry again.

Keeping it short:

1. Divergences

2. Deterioration on Momentum Stocks – Stocktwits50 is the BEST at surfacing warnings

3. Bloomberg screaming all clear in housing!

Elsewhere:

Obviously Apple has been a mess technically for a while.

Google and Amazon are eating so many business models.

Europe really IS A MESS!

Facebook $FB has now rallied quite well and has much to prove going forward.

My biggest worry is one I have no idea how to time or truly hedge against…but we will be dealing with it…the ‘Bondocalypse’.

As Andy Kessler notes in his most recent article for WSJ:

On May 13, 1981, the three-month Treasury bill rate was 17.01% and the Dow Industrials were just under 1000. Today, three-month rates are under 0.12% and the Dow is headed south from 14000. What should interest rates be? In January, the Consumer Price Index rose 1.6% year over year. In a normal economy with a normal Fed, short rates should be 2%-3%.

Investors beware: The unwind is going to be bumpy. The entire U.S. bond market is over $30 trillion. Any sudden increase in interest rates means current holdings would be worth less and might create turmoil from runs or even “breaking the buck” at money-market funds. Gold is already down over 15% from last year’s October peak, anticipating this Fed move.

No one wants to be the last guy at the Bond party, but everyone is still in the room.

I am not a bear because the world should have ended with 1999, 2008, the Mayans….

Furthermore as Andy points out in his piece, the 1995-2000 bull run followed the bond-market massacre.

I also like seeing that the people I trust the least have a lot less leverage than in 2008 (Welcome Scott to our Blog Network as well).

Anyways, I don’t think you need to be a hero here or chase what’s working. Chime in as always.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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