When Things are Nuts

When Everything is Strong

When Everything is Strong, Redux

It Would Have Happened Already

It Would Have Happened Already, Redux

Four recent posts of mine.  They warn against assuming that trends will continue.  This past week, we gained some evidence that trends won’t continue.  I’m not talking about the upset in commodities, led by silver and crude oil.

Those matter little compared to the low yields for Treasury bills and notes (from Bloomberg.com).

3-Month0.00008/04/20110 / .01-0.005 / -.00505/06
6-Month0.00011/03/20110.06 / .060 / -.00005/06
12-Month0.00005/03/20120.16 / .16-0.01 / -.01005/06
2-Year0.62504/30/2013100-04+ / .550-01½ / -.02405/06
3-Year1.25004/15/2014100-29¾ / .930-01¾ / -.02005/06
5-Year2.00004/30/2016100-21½ / 1.860-03 / -.02005/06
7-Year2.62504/30/2018100-20 / 2.530-02 / -.01005/06
10-Year3.62502/15/2021104-00 / 3.150-01 / -.00405/06
30-Year4.75002/15/2041107-24½ / 4.29-0-17 / .03005/06

These low rates threaten the repo market and money market funds.  They also force people into riskier investments.

This is why I view the commodity market weakness as a hiccup.  Speculators, those that follow momentum, got ahead of themselves.

But there is weakness in Europe that should not be ignored.  Will Greece be tossed out of the EU or not?  Given past actions, the answer is no, but who can tell for sure?

We face cross-currents here, there is no yield for savers, which makes many speculate.  But speculation in commodities has blown up recently.  What to do?

Personally, I would edge into commodities, and commodity-related stocks.  When one-year Treasury rates are so low, it is an incentive to buy stuff/commodities.  Why should I hold a worthless dollar when I can hold a lump of copper?

This is a guess, and it is only a guess, but I would favor commodity strength over the weakness in short-term bond yields.  Play it carefully, and wait for strength before joining in.