Minyanville Interview With Lee Adler: What to Expect From Treasuries, Central Banks, Politics in 2012

Recently I was in New York and met with the staff of Minyanville at their offices. They invited me to sit for a video giving my opinions for 2012. Here’s the video and transcript of the interview. My thanks to Todd Harrison and all the Minyanville staffers for their hospitality! 

Lee Adler is the editor and publisher of the Wall Street Examiner and the Wall Street Examiner Professional Edition, a proprietary service for professional investors and sophisticated individual investors. A frequent contributor to Minyanville, he recently sat down with us to discuss his views on the treasury market for 2012, the election and the role of central banks on the market.

His thoughts on yields? “The technicals always come first,” he said, “but I think that the conditions are right now for the beginnings of a turn.”
Click on the video below for more.

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TRANSCRIPT:

What’s the big story for 2012?

I think that finally this’ll be the year that Treasury yields begin to rise.  A lot of people, a lot of smart people have been bears on Treasuries and have been wrong about it.  The technical work that I do has said that they will continue to go lower, but things are beginning to change here and the last few weeks we’ve seen the 2% area get kind of sticky and I think this is a base for return.  So I think people will be surprised by the end of next year how much higher yields are going to be.

Would you be bearish on yields?

I would be bearish in yields, but there are certain technical levels that I would want to keep an eye on.  Always.  I mean, in terms of forecasting and trading is two different things.  And as a trading advisor, I always want to keep in mind the key technical levels such as, for example, 210 right now.  If we get above 210, we’re going to ratchet up to the next level and so on.  And, on the down side, there are levels that are equally important, like 190.  If we break 190, then we probably are going to go down and retest the low and possibly take a new low.

So the technicals always come first, but I think that the conditions are right now for the beginnings of a turn. So we’ll keep an eye on the key technical levels as we go forward, week to week.

How will the elections affect the market?

I think that Romney can beat Obama. The question is, will the Republicans nominate Gingrich or Romney or some other third person that we don’t know about yet. I’m not a political analyst, so obviously I don’t know how it’s going to turn out. I know people are very unhappy with the current administration. But I think that Gingrich has some real weaknesses. He’s essentially a moral pygmy and the Right, there are people on the Right that won’t vote for him. And that’ll be a liability for him, because the Republicans obviously need to keep the Right solid and they need to carry the middle, too. And the only candidate that can do that for them would be Romney. So, if Gingrich is the nominee, I think that Obama will have a chance to sneak in again.

I think it’s important from the standpoint of the—mostly from the standpoint of the Supreme Court, because we have a Supreme Court now that has said that corporations are people and money is speech. And if there’s another Republican administration, that conservative majority on the Supreme Court will be further enhanced for possibly another generation, so there’ll be little hope of any change in that attitude of corporations being people and money being speech. So, as long as that’s the case, we’re going to have a political economy that is controlled by the corporate interests.

What is everyone else missing in the markets?

I don’t know that everyone is missing any one particular thing. I mean, there is such an information flow today. Sites like yours, like Minyanville, and like mine, the Wall Street Examiner, bring up issues 24 hours a day that, at one time when the media was controlled strictly by the Wall Street Journal and CNBC, a lot of these issues would not have come to the fore.

But today there are so many alternative media sites and bloggers like myself and others who are bringing up these issues 24 hours a day, there’s really no excuse for people to be surprised. The one thing we always have to be aware of, obviously, is that these markets are manipulated by the central banks and, if you’re not trading 24 hours a day, you’re liable to wake up in the morning and have your positions wiped out because of a European Central Bank action or a surprise action by the Fed at 7:30 in the morning.

So, I think that people need to be more aware of the fact that central banks use the equities market as an instrument of policy and those of us who are trading from the short side are their cannon fodder.  So it’s necessary to be aware of that and, if you can’t stay up 24 hours a day and trade the futures on a 24-hour basis, which none of us can, you need to have a partner in Europe and Asia to help you with those instances.  And, either that, or you don’t leave any positions open overnight.

How will Europe play out?

I think we’ll see more of the same. Ad hoc crisis response. Obviously, I have no clue how it’s going to turn out. The policy makers don’t know what they’re doing. They are reacting out of fear and panic most of the time. So there’s, from my perspective, I can’t predict how it’s going to turn out.  But I think there will be more chaos, more ad hoc crisis management. Clearly, a lot of people who are a lot smarter about the issue know that Greece is going to default and the question is which domino falls next and is there some way to prevent that? I don’t know, but I would say this, until we face the music and take the losses, take the haircuts, recognize that what’s gone is gone and stop trying to prop up a system that’s hollowed out, we will just go from crisis to crisis to crisis.

Random thought?

In all honesty, I would hope that, my wish would be that the politicians and those on the Right and the Left can come together a little bit more in the center so that we can solve some of these terrible issues that we’re facing. If that doesn’t happen, we face a very bleak future. That’s my happy thought for next year.

Originally posted at: http://www.minyanville.com/businessmarkets/articles/presidential-election-treasury-yield-crisis-management/12/13/2011/id/38350#ixzz1gdHdrWqd

I just want to express my apologies to the Pygmy people for my insensitive comment likening them to Newt. They may be short, but I assume that their morals are beyond reproach, unlike Newt. I should have called him a moral “cretin” instead of insulting an entire race of people.