Trade of the Decade Update

Breaking news: Our New Trade of the Decade Is Off!

Well, half of it…temporarily.

“This is what we got dead wrong,” Rob Parenteau candidly admitted on the top floor of the Fairmont Hotel Vancouver last night, where we gathered for the second annual meeting of the Richebacher Society.

“Capital flight out of the eurozone this year has been a huge benefit for the US Treasury market,” Rob continued. “Though temporary, demand for low default risk has suppressed Treasury yields, and could continue to do so through the end of the year.

“Some fear a double-dip recession forming in 2011,” Mr. Parenteau told the attendees, “when taxes climb higher. There are also people talking about more quantitative easing from the Fed, too, which I find unfathomable, but you never know…those guys [the Fed] are lunatics.

“All this has bond bulls foaming at the mouth. But I would not short Treasuries until the end of the year.”

OK, it is the “Trade of the Decade.” Rob is comfortable shorting US debt over a 10-year period…just maybe not right this second. Still, with the yield on a 10-year note still below 3%…it is tempting.

Ian Mathias
for The Daily Reckoning