Tepper says beginning of the end of the bond rally

Junkster

http://www.businessinsider.com/david-tepper-calls-end-of-bond-rally-2014-9

Not sure if this has been posted. Unlike all the other wrong way Corrigans who have been making this prediction in the past, Tepper is not a pundit or talking head. I will say things have smelled a bit in Treasuryville since Labor Day. Any other time this year on news like we saw of of Europe this week and today's employment numbers Treasury prices would be screaming higher and yields lower. Today Treasuries are barely higher and may close lower before it's all over.

Edit: I should probably add that as well respected as Tepper is (and deservingly so) his ability to predict or forecast is no better than you, me, or the man in the moon.

Dex

@junkster
The article doesn't say why he thinks it is over.

I agree more with Jeff Gundlach who thinks it will go lower.

I think the 10 year treasury could go to 1% before it goes over 3%. Take a look at today's employment info - tepid hiring gets worse - not a cause for higher rates.

Those high yield muni funds probably can go higher with the lack of supply in the market. A large fund recently closed to new investors because of it.

Junkster

Dex, if the 10 year goes to 1% before 3% send my your address and I will send you a check for $500. In no way, shape or form do I see that occurring but would be thrilled and the $500 would be a small pittance to what I would make on such a move.

MOZART325

On May 15, Tepper was nervous about stocks and said "don't be too friggin long". If you listened to Tepper then you lost out on a lot of stock market gains:

http://www.finalternatives.com/node/27056

I think Tepper feels he is trapped in momentum stocks and needs an exit strategy. He is trying to induce the public to stampede out of bonds into equities so he can unload some of his overpriced equity positions.

Junkster

>>>If you listened to Tepper then you lost out on a lot of stock market gains:<<<<

Anybody that listens to anybody...... well, we don't want to go there. Maybe that is why only one in 20 U.S households have over $1,000,000 in investable assets because they are always listening to someone else.

Dex

Junkster said:

Dex, if the 10 year goes to 1% before 3% send my your address and I will send you a check for $500. In no way, shape or form do I see that occurring but would be thrilled and the $500 would be a small pittance to what I would make on such a move.

@Junkster
I'm bookmarking this thread and will be sending you an email when it happens.

Look at European rates - Germany below 1%, Spain 2.06%!!!!!! and others heading that way.

Just as stocks have been surprising to the upside the US 10 year will do the same.

Many are looking for an uptick in inflation. I just don't see it. And I don't see an environment for inflation - for about 5 years. The financial challenges for individuals is too great.
Young - just out of school - college debt, and no jobs
Workers - losing benefits, wages stagnant
There are things like food costs going up but workers don't have any power so they have to cut spending to survive. Look at cable TV companies - losing viewers.

scott

Junkster said:

>>>If you listened to Tepper then you lost out on a lot of stock market gains:<<<<

Anybody that listens to anybody...... well, we don't want to go there. Maybe that is why only one in 20 U.S households have over $1,000,000 in investable assets because they are always listening to someone else.</p>

Few people want to sit and try to understand investing. They'd rather listen to someone else or pay someone else to do it.

heezsafe

@Junkster Yes, that was unexpected, the response to Europe news. Ts should have shown at least some response upward. But then, today I see that Draghi essentially came in with some (more) QE--- although the ECB is quite reticent to call it that--- so perhaps the lack of response in Ts was because all the market makers were tipped off to it, if not "briefed" on it, and we of course were not. C'est la vie in the Kabuki! My hunch (though my 9 mo. of patience on the play is becoming rather taxing) is that the 10Y will go to 2% before 3%; if so, does that mean you'll send me a check for $250?

rjb112

@Dex, @heezsafe: What effect do you think the end of QE in October will have?
And the expected raising of the Fed Funds rate at some point in 2015, sounds like you must doubt that?

Junkster

heezsafe, I am in a generous mood today, must have been that mountain air last week. Last deal I will make. Yes, will gladly send you $250 if the 10 Year hits 2% before 3%. But that will have to be closing basis, not intraday. Junk corporates got hit a bit today most likely because of super heavy supply that has come since Labor Day. Junk munis on the other hand where there is a shortage of supply were all pretty much up. I have a bunch of articles going back months and months about the low issuance in muniland. By the way, I am a man of my word so you don't have to worry about me vanishing from the board should rates tick down. If they hit 2% I am counting on the ever continuing run in my junk munis to pay my due bill. I would be pleased as punch to pay you. Not sure about how happy I would be ponying up for Dex because 1% Treasuries could mean some real awful stuff happening out there.

MikeM

Junkster junkster junkster. Never make a one sided bet. Give heezsafe 10 to 1 odds at least so he pays up something if you are correct. Let him pay you $25 if his bold prediction is wrong. Heezsafe - man up.

heezsafe

@MikeM Who am I to begrudge another man's generosity, even when it comes less from a new-found agape for mankind and more from a residual EPO-like high that's lingering from his recent jauntings in the Appalachians?

rjb112

heezsafe said:

@MikeM Who am I to begrudge another man's generosity, even when it comes less from a new-found agape for mankind and more from a residual EPO-like high that's lingering from his recent jauntings in the Appalachians?

MFOers, EPO is not the latest greatest exchange traded fund.
From Wiki: Erythropoietin, (/ɨˌrɪθrɵˈpɔɪ.ɨtɨn/) also known as EPO, is a glycoprotein hormone that controls erythropoiesis, or red blood cell production

Old_Skeet

Hi Junkster,

I sure hope you don't have to make pay off on these wagers ... not because you might not be able to afford to do so ... I just hate to see interest rates fall to these levels. Is it possible, perhaps; but, I'd sure hate to see it though.

In addition, I understand that the presence of bears in the hunt for food have recently closed some of the Appalachian trail to hikers ... any knowledge of this? Some of my friends that were planning to recently hike part of it this week said they were forced to cancel their plans due to the bears in hunt for food. And, a couple of the shelters they had planned to sleep over in were now closed by the park service.

I believe if I were to be going for a walk in these woods ... I'd at least be packing my sidearm. Better to have it and not need it than to need it and not have it. After all, there are more than bears out there including packs of wild dogs, wild boars, snakes ... and, more.

I know I carry mine when I am out rock prospecting. Came upon a pack of wild dogs that I am sure would have attacked had I not of fired a warning shot. With that they turned and moved on. And, I have killed a snake or two that had sought shelter in the rock piles I was prospecting in around Spruce Pine, NC.

Seems there is more than falling interest rates than one might need to be concerned about.

Old_Skeet

Junkster

Old-Skeet, I would love to have to pay up and 2% isn't out of the question. 1% I think is a total, complete, and utter impossibility, but then I have been wrong many times before.

This year I have been hiking primarily along the Mountains-To-Sea Trail and in the Black Mountain range and not the AT. On one of our hikes in a remote area we had a bear hunter and his hunting dogs tag along, albeit it's not hunting season yet and he was along more as a guide. He was packing so we didn't give bears a thought with him around. Bears are becoming a bigger and bigger problem in some of the communities just outside of Asheville.

Spruce Pine I know well, and even better north of there around Boone/Banner Elk. I tell people to put on their bucket list the drive on the Blue Ridge Parkway from Asheville up to Boone and vice versa - just spectacular scenery. Snakes I see all the time around home here at Mammoth Cave National Park. The rattlers usually always let me know they are around before I see them. Plus the ones around here are absolutely huge. The copperheads are another story as they are sneaky things. We have packs of coyotes that worry me a bit especially when I am off trail and alone (as I usually am in the winter) The wild boars are in eastern KY and sure wouldn't want to run into any of them. I may become a North Carolinian like you someday or might just buy a vacation home there. Being a rabid UL and UK basketball fan it might be hard to become a permanent resident there.

Dex

rjb112 said:

@Dex, @heezsafe: What effect do you think the end of QE in October will have?
And the expected raising of the Fed Funds rate at some point in 2015, sounds like you must doubt that?

@Junkster
A couple of point.
1 - QE has been winding down for awhile and the end is priced into the market.
2 - Fed increase - I doubt it will happen - couple of reasons - weak recovery, velocity of money declining and the possibility of a strong dollar making exports expensive

http://research.stlouisfed.org/fred2/series/M2V

http://research.stlouisfed.org/fred2/series/M1V

http://research.stlouisfed.org/fred2/series/MZMV

Deflation in the EU is the fear and the reality. That could spread to the USA.

I think we all will be surprised how long this low interest rate/inflation period lasts.

I think/hope your HY mini bonds will do well - the supply is drying up and they are off their highs. The HY corps are near their peak and usually track with stocks.

hank

Seems to me rates in Japan went negative in some loan sectors for awhile. Some car loans in particular carried negative interest rates. Total cost to buyer was actually higher if he paid for the car up front instead of over time.

Explains why the BOJ has been fixated on rekindling inflation in recent years. I don't know where we're headed, but deflation would bring on much hardship and a popping of all asset bubbles (except U.S. government backed bonds).

Good discussion by all.

Dex

@hank,
These days there are bubbles all around. I don't think the deflation issue will become an issue for stocks until people start at least talking about it. Then it would have to be factored into stock prices. Look at Japan and Europe - it hasn't hurt stocks. It could help stocks as people look for anything paying a dividend.

Even the HYD - HY muni has many revenue backed bonds. So, it should do well.

Look at Autozone AZO - forget about APPLE - people hold onto their cars longer and need to maintain them. But it looks toppy.

Stocks like Home Depot might do well.

I don't own any stocks at this time.

-----
If you want to learn something from Japan - they have a high Gov't debt, as does the USA. They instituted a VAT and recently increased it from 5-8% at a time they want to stimulate consumer spending.
http://www.bbc.com/news/26830486

Eventually, the USA will follow.

Dex

http://www.marketwatch.com/story/japan-revises-down-gdp-but-result-within-expected-range-2014-09-07?link=MW_home_latest_news

JohnChisum

Japan is planning to raise that same tax again next month.