For a while now I’ve been saying it was time to be in TBT (and by implication, out of bonds). On Friday, TBT took a nice jump. How nice can be seen in this graph.
As it is based on the US Treasuries, it tends to move over long periods of time (as the Fed changes directions) and at odd times (as Treasury Auctions happen or as folks do various things globally … like invade countries).
One of the questions to be asked when it makes a jump, like this one, is “Where is the money going?”. Are folks selling bonds? Then they are putting the money into something else. Another currency, perhaps, or gold or ????
So this chart looks at the major currencies and gold (and the UUP US Dollar UP fund) to see if something else moved up. And nothing did.
This is not a run from the US Dollar to Yen, or Swiss Francs, or Gold….
At this point, there are two possibles. Someone needed to dump bonds to fund some activities and it’s not shown up in the data yet (i.e. they have not bought the Yen or Francs or… yet) or it was simply that there were very few buyers showing up for bonds. It is also possible that the buyer was not using one of the major reserve currencies. For example, if Egypt were cashing in a load of US Treasuries for US Dollars then using them to prop up the Egyptian Pound, you would see it in the Egyptian Pound, but not in the Yen… nor would it show in the US Dollar / Yen / Euro crosses…
So what I see in this chart is a general slide of the US Dollar (UUP) fund, but not a large climb in the other currencies, and the move of the dollar on the “spike” day is not correlated.
There is a general move out of US Dollars and into other assets (that we need to find…) but it’s not just a run from the dollar to other currencies. More likely it’s an “assett allocation” away from bonds. This next chart looks at some semi-random choices of “country funds” and finds Australia having the most corrolated rise in that tail bit (but all of them rising).
To me that says the “Short bonds, long stocks” thesis is dominate right now.
TBT – Bond “shorting” fund
SPY – S&P 500
QQQQ – Nasdaq 100
EWW – Mexico
EWC – Canada
EWA – Australia
EWQ – France
All of which leaves me to wonder if “The time to buy is when blood is running in the streets” is being applied to Australian assets?
I also note a more general allocation toward France who will gain some competative advantage from their nuclear power base as oil rises over $100 / bbl in Europe.
Clearly I need to do a broader “WSW” type “look around”, but for now, the trend is “short bonds / long stocks”. Not on the chart, but a “teaser”: RSX – Russia is moving up nicely. Gee… who owns oil…