This must be one of the shortest bear markets in history.
As the daily chart below shows, bond prices blasted through resistance and are consolidating at higher levels.
WEEKLY PRICE ACTION
The chart below is weekly price action and shows clearly that we've surged through the price levels we saw in March.
The bear market is over.
TACTICS
- Continue money market arbitrage.
- Cover long term liabilities with longer term assets
- Prepare options and futures programs for price volatility
- Warn the board and senior management
STRATEGY
In a climate of uncertainty, it's best to be prudent, and this is a time like that. Do not overplay the end of the bear market.
Reduce the warning level to neutral, and let the subject sit for a few months. The Fed is in no hurry to lower rates, and will probably do nothing till 2007, when signs of slower economic growth might arise.
The money numbers tell us the future of the economy is sound.
Gold prices tell us inflationary expectations are crushed.
Bank's are lending on commercial real estate, which contains no prepayment option, thus locking in long-term yields.
There will be powerful profit opportunities in futures and options. Educate senior management and the Board, and prepare them for some hedging. Contact outside consultants on this issue.
