I will be away until after the New Year so posting will be light to non-existent for the next three weeks. I encourage everyone to subscribe to my feeds to keep track of me:

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Thanks for your patience during my absence and I look forward to returning in January!

Treasury Bubble Talk Grows as U.S. Gets Free Money

“The 30-year bond returned 23.6 percent since September, including reinvested interest, more than it earned in any one year since gaining 34.1 percent in 1995, according to Merrill Lynch & Co. index data. Treasuries of all maturities gained an average of 11.9 percent this year, compared with a 41 percent drop in the Standard & Poor’s 500 Index and a loss of 15.3 percent in Merrill Lynch’s broadest corporate bond index.”

Why does Billionaire Gross’s hedged phrase “some bubble characteristics” remind me of “being a little pregnant”? Anyway, everyone is watching the long bond for a reversal, including me. I wouldn’t exit them or short them until the weekly trend shifts down.

Here’s a good example of a punchy headline that gets lost in translation:

The “horrific market bottom” becomes “world markets have further to fall.” I found the article useful, not for its silly guesses (”The S&P may plunge another 55 percent to 400 by 2014“), but for sentiment reasons: You don’t see pieces like this one at market tops.

XL, Bermuda’s Biggest Insurer, Is Said to Seek Buyer

“Syncora faced a wave of claims after collateralized debt obligations it insured declined in value. XL had $292.9 million in investment losses in the third quarter, took a $1.4 billion charge tied to Syncora and said unrealized losses widened to $2.59 billion.”

The market knew there was trouble at XL long ago because the stock has been underperforming the index since the middle of 2003 … you absolutely must keep an eye on relative performance. I don’t look at individual stocks anymore (purely an ETF man now), but there’s no way any chartist would be holding this stock in the run-up to the collapse, let alone after it began with the break below $60.

Treasury Bills Trade at Negative Rates as Haven Demand Surges

“The U.S. sold $30 billion of four-week bills today at zero percent for the first time since it began selling the debt in 2001. If you invested $1 million in three-month bills at today’s negative discount rate of 0.01 percent, for a price of 100.002556, at maturity you would receive the par value for a loss of $25.56.”

This is my latest electrocardiogram. Just kidding, it’s a chart of BIL, the SPDR Lehman 1-3 Month T-Bill ETF. Year-to-date total return here is +1.75% which is fantastic compared with -37% for the SPY. My system last bought BIL back in July 2008, which was pretty good timing.

Treasury Sells Three-Month Bills at the Lowest Rate Since 1929

“The bills were sold at a high discount rate of 0.005 percent, the Treasury said today in Washington. At last week’s auction, the bills drew a rate of 0.05 percent. The government received bids for the bills totaling more than triple the amount sold … The rate on three-month bills peaked at 16.75 percent in May 1981. Today’s rate was the lowest since the government began issuing the three-month bills in 1929. The return to investors is 0.005 percent for the three- month bills, with a $10,000 bill selling for $9,999.87.”

13 whopping cents!

The long bond has had a huge run of late … it’s interesting to note when my system went long various bond ETFs: it went long IEF (7-10 Year bonds) and TIP (Inflation-protected bonds) way back in November 2007. I’m watching anxiously for a reversal across all the bond ETFs I follow.

My trend-following model likes the Retail HOLDR (RTH) here. This is unusual considering how awful business reportedly is this Christmas, but we slavishly follow the system (and likely will get taken out for a loss a little ways down the road).

RTH looks a bit like the Pharmaceutical HOLDR (PPH), which the system said to buy a couple of weeks ago. You can see how unique my trend-following system is, because most chartists would say these two look like total dogs. Time will tell who’s right.

Energies really got killed this past week, so it’s another good chance for me to brag about the system’s exit of almost everything energy-related back in August. The signals for USO and DTO happened on the exact same date. DTO is a levered short fund (PowerShares DB Crude Oil Double Short ETN) that was introduced just in the nick of time. (I won’t include any levered ETFs in the core portfolio because they’re just too zany.)

This is the last freebie newsletter since I’m going away for Christmas this week and won’t be back until the New Year, so email me today to see what changes were made this past week.

If you’d like to invest in the Chinese stock market, assuming you are able to set up a local account, the China 50 ETF is a pretty good way to go. Here’s a simple introduction to and the current holdings (sorted by weighting) of the ETF. When things are down 60, 70, 80% and the mood is grim, it’s usually a good time to start systematically putting some money into stocks.

“Our most persistent and spectacular efforts are concerned not with the preservation of what we are but with the building up of an imaginary conception of ourselves in the opinion of others. The desire for praise is more imperative than the desire for food and shelter.”