Three months ago I wrote:
"Bonds, stocks, and dollar have made another run since 2010-11 while gold and commodities have crashed. I think reversals are close at hand. What is up will go down, and what is down will go up.
"I am lightly net short in stocks but long intermediate term VIX's (VXZ). I am still long US Treasurys but am anticipating a final run up there and converting to TBills and short term TIPs. I am just starting to buy gold and silver (CEF and physicals) and selected oil and gas stocks (mostly US trusts) and commodity funds (RJI and GCC)."
Since then the US dollar is virtually unchanged in an extended consolidation between 95 and 100. Gold was just beginning its low point then and is now much higher. Crude oil was just starting another crash from about $45/barrel down to $27.30 basis WTIC spot on February 10, an 81% decline from its high in 2011. US stocks have been up and down and all around and are down rather modestly for all the volatility to date. I am modestly short the Euro.
I was selling my EDV (30 year US Treasury strips) on spikes up and sold the rest on Friday. This has been a very good trade. With the 30 year T bond breaking an important uptrend line, there is the possibility of a larger break. I'm not ready to announce a bond bear market since so many bond bear markets have been prematurely paraded out over the past 30 years. I know of only one person who has never made that error, and that is Gary Shilling, to whom I owe my own modest success. Van Hoisington and Lacey Hunt have also been bond mentors, and all three are still bond bulls. I could rejoin them later, but my plan is and has been the same as three months ago: to use the bond proceeds to get long in 1-5 year inflation protected T-notes and cash.
My other good gain has been in gold and gold stocks, primarily CEF (gold and silver in storage) and ASA, historically the first ever US-listed gold stocks fund. Nearly all of both were sold off this week for reasons partly visible in the chart below, resembling the one for the bonds. I did also buy some TGLDX, probably still the best gold mutual fund, and VGPMX from Vanguard whose record has improved with its newer management. These two I am keeping. I will add back CEF and ASA at some point, since I think gold has probably made its low.
I have made modest profits on my long position in VIX (VXZ) due to the stock market drop. This could be reduced or sold out in the coming week depending on events. I don't think the stock markets have bottomed yet, but I could be wrong. The Dow Industrials (INDU) make the best case for a lot more downside. But I am not an "Armageddonista".
My big loser was in oil where I got stopped out in early December for losses. I started scale down buying in oils and gas stocks again in later January. The nice bounce of the past few weeks has largely bailed me out, but I have cut back while waiting to see what happens next.
My longer term views have been clouded by the length of the commodity slump and the bond and dollar bull markets. I still would like to believe that the Long Wave upcycle from the 1999-2003 bottoms is still operative, and that the crises interventions from 2002 on have prolonged the bond bull market and exacerbated the commodity corrections and stock booms and busts. If this is somewhere close to being correct, I would expect fairly early confirmation of a bond top and a gold bottom and that other commodities would begin to carve out and confirm bottoms this year and next. Also I would expect stocks to rise before long and eventually make much higher new highs over the next decade and perhaps until 2030.