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Buy Long Bonds (Another Opportunity To Fade The Fed)

Takeaway: We say keep buying Long Bonds (TLT) and ignore hawkish chatter from regional Fed heads.

Buy Long Bonds (Another Opportunity To Fade The Fed) - ust 10 5 2

 

The market is giving you another opportunity to buy LONG BONDS ($TLT).

 

Yesterday, Richmond Fed head Jeffrey Lacker said he sees a "strong case" for raising interest rates. He even suggested rates could rise a lot. The market took him at his word. The 10-year Treasury yield is at 1.69% today. 

 

As you can see in the chart below, with every rate hike freakout (rising yields) it's been a great call to buy bonds. In other words, the Fed has wanted to hike rates all year but we continue to get #GrowthSlowing data. As a result, the Fed takes rate hikes off the table and bond yields fall. (TLT is up 12% year-to-date versus 5% for the S&P 500)

 

In short, stop hyperventilating. Stick with what's worked all year.

 

More from Hedgeye:


Early Look: Golden Opportunity

Takeaway: This is a brief (complimentary) excerpt from this morning's Early Look note.

“You should acquire physical gold now and put your mind at ease.”

-Jim Rickards

 

Technically speaking (and oh boy do those “technicals” drive emotion), yesterday was the biggest buying opportunity in Gold in the last 3 years. But why the panic in something that has generated such tremendous returns during the #GrowthSlowing panic of 2016?

 

And why is it that everyone in perma bull SPY space understands the concept of buying dips in Amazon (AMZN) but can’t quite wrap their head around the investing exercise when it comes to buying either Long-term Bonds or Gold?

 

As Jim Rickards advises in The New Case for Gold: “Don’t try to time the panic; by the time it’s visible it will already be too late, and the small investor will not be able to get physical Gold. The prudent course is to buy Gold now, have it in a safe place, and when the Gold buying panic comes, you’ll be fine.” (pg 151)

 

Back to the Global Macro Grind

 

Panic? Uh, yeah. Not that memories for the Old Wall and its manic media extend beyond the most recent macro tourist headline, but I assume that the prudent Global Macro investors recalls how Gold did when most US stock market bulls panicked in JAN-FEB 2016.

 

That’s when Gold broke out...

 

Click here to continue reading (subscribe to the Early Look).

 

Early Look: Golden Opportunity - z gold


CHART OF THE DAY | Gold: Buy Or Panic?

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.

 

"... Not that memories for the Old Wall and its manic media extend beyond the most recent macro tourist headline, but I assume that the prudent Global Macro investors recalls how Gold did when most US stock market bulls panicked in JAN-FEB 2016.

 

That’s when Gold broke out."

 

CHART OF THE DAY | Gold: Buy Or Panic? - 10.05.16 EL Chart


Early Look

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4 Things To Watch On Deutsche Bank

Takeaway: “All it takes is for an external match to come in and ignite the situation.”

4 Things To Watch On Deutsche Bank - deutsche bank 1

 

Hedgeye Financials analyst Josh Steiner cut through the clutter on The Macro Show yesterday with Hedgeye CEO Keith McCullough. Steiner worries about…

 

  • Lack of Profitability: “The ECB’s negative rates have made it virtually impossible for Deutsche’s core business to make money.”
  • Counterparty Risk: Deutsche Bank’s $50 trillion (“yes, trillion with a T”) in gross derivatives which exposes Europe to a “reflexive downward spiral if fear sets in.”
  • Gravity of Situation: The bank’s derivate exposure is 14X the size of the German economy.
  • Uncertain Political Climate: “German Chancellor Angela Merkel has drawn a line in the sand” making it virtually impossible, in an election year, to rescue Deutsche without massive political backlash.

What happens next?

 

“All it takes is for an external match to come in and ignite the situation,” Steiner says. Watch him in the video below discuss.

 

 

Subscribe to The Macro Show today for access to this and all other episodes. 

 

Subscribe to Hedgeye on YouTube for all of our free video content.


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