The Fairyland Triplets

Here we are two days before Thanksgiving, and the three Fairyland trades are quite euphoric and maybe thankful that craziness prevails.  These three are Bit Coin, the Stock Market, and the T-Bond market.  I am only involved in being long one of these triplets, T-Bonds.  The reason is simple, I think the T-Bond trade will implode way later than the other two by months, maybe years.

In all this Gold is the ironic trade, it kind of reacts to the fundamentals and sits in a wait and see mode for the bubbles to burst, it is a fear trade, not an inflation trade.

The real question which I allude to above, is what will make the markets blink and I think the answer is layered in two diametrically opposite views of where the economics/ tax change plan takes us over the coming period, ie. “what makes them blink ?”.

1. One View, and no doubt the predominant view, is that the key factor will be interest rates, that they will rise as the economy accelerates, and so just watch rates and that will tell you when to get out of the speculative markets.

2. The other View is also quite simple, the tax change/trickle down plan has already seen its economic effect with the economic ramp up already in place, and from here a stifled consumer and International Trade market will close their pocket books. This will lead to an inside – out implosion of speculative vehicles, and the interest rate black hole, flattening yields will accelerate into negative territory. When that ends, we will get out of our Long-T-bond/Long Gold trade.

Our Risk Offset Portfolio at Marketocracy (Fund EXTH) is holding its own in this 10 month consolidation period with a strong Alpha /low Beta number forecasting dramatic returns on a breakout.  This is the Long T-Bonds, Long Gold, Short Commodities, and Short Stocks portfolio.