David Neubert Homepage

After seeing Friday's blog entry, my friend, hedge fund portfolio manager at George Weiss and ex coworker from Morgan Stanley (Sao Paolo and New York), Jordi Visser sent me the following information:

___________________________________________________________
 

“Comparison of the 1994-1995 tightening to the 2004-2006 tightening (today):  These are numbers counted from the close of the month prior to the first tightening and the final one (assuming this is the final) then today

YEAR                                                  1994/1995       2004/2006
German Bunds (10 year) Yield:             +1.75%             - 0.40%
Japanese JGBs (10 year) Yield:            +0.63%            + 0.05%
British Gilts (10 year) Yield:                  +2.33%            - 0.40%
US Treasuries (10 year) Yield:              +1.80%            + 0.35%
Year over year US wage increase:        + 2.6%             + 3.8%
Unemployment rate:                              5.50%               4.80%
Chicago Commodity Index:                   +3.00%            + 32%
Barrel of Oil in Dollars:                           +20%               + 100%
Ounce of gold                                       +0                    + 68%”

________________________________________________________________

What Jordi’s interesting information tells me is that the US and global economy is in decent shape compared to last time (low unemployment, wage increases). It also tells me that this round of rate increases has happened in the face of increasing prices (Gold, Oil, Commodity Index and without other non-us central banks really following along much (no significant rate increases in Europe, UK or Japan).  Thus, the rest of the globe has room to raise rates.  This is bad for the dollar as foreign rates increase.  A declining dollar is inflationary as foreign goods become more expensive and US workers are paid less relative to the rest of the world.

A good economy also means that the Fed CAN increase rates further.  After all, the Fed’s first responsibility is to price stability (low inflation) not to managing the economy.

Another reason I have to stay short US treasury futures.  Luckily, I made enough off of the natural gas futures trade (buy here - sell here)  to offset my recent losses (due to delclining long term interest rates) in treasury futures.

Disclosure:
My speculative futures positions benefit from a rise in long term US interest rates.

I am short ten year ECBOT US treasury futures and have various options positions that enhance a short position in US Treasuries. (ZN DEC 06), ZNZ6, ZNU6,

I am short 30 year ECBOT treasury futures and have various options position that enhance a short position in these futures positions. (

Disclaimer:
Nothing in this blog is meant to be specific financial advice or a recommendation to buy or sell.  I do not give investment advice.  Do your own research.  Do not rely on anything in this weblog to make investment decisions.  I do not log all my trades here. I only describe or mention those that I think might be interesting. Consult an investment professional familiar with your specific financial situation before buying or selling any security.